Pakistan’s listed banking sector recorded a notable contraction in equity balances during the quarter ending March 2026, primarily driven by dividend payouts and rising secondary market yields that reduced previously accumulated investment gains.

Sector data show that aggregate equity among listed banks declined by around 9% quarter-on-quarter, as institutions distributed profits to shareholders while facing valuation losses on investment portfolios. Higher market yields lowered the surplus value of government securities and fixed-income holdings that had supported bank balance sheets in earlier quarters.

The largest equity declines were observed at National Bank of Pakistan, followed by United Bank Limited. Significant reductions were also recorded at Bank of Khyber, Bank AL Habib Limited, and Sindh Bank Limited, making them among the most affected institutions during the period.

Analysts attribute the decline largely to Pakistan’s elevated interest-rate environment. As yields increased in secondary markets, the market value of bonds and other fixed-income assets held by banks declined, reversing unrealized gains accumulated over previous quarters.

While the reduction reflects balance-sheet adjustments rather than immediate financial stress, continued pressure from high yields could limit capital growth and reduce the pace of future lending expansion if the trend persists.