Pakistani banks outperformed their Asia-Pacific counterparts in the fourth quarter of 2023, posting some of the highest stock returns in the region. A strong rally on the Pakistan Stock Exchange (PSX) pushed the local benchmark index to record highs, with Pakistani banks dominating the rankings of best-performing bank stocks, according to S&P Global Market Intelligence.
Bank AL Habib Ltd. led the quarterly ranking of the 15 best-performing bank stocks in the Asia-Pacific, delivering a remarkable total return of 89.96 percent in the three months ending December 31, 2023. Among the 11 Pakistani banks featured on the list, four occupied the top five positions.
Askari Bank Ltd. secured the second spot with a total return of 59.48 percent, followed by Habib Metropolitan Bank Ltd. and Faysal Bank Ltd., which posted returns of 51.56 percent and 48.85 percent, respectively. Indonesia’s PT Bank Jago Tbk rounded out the top five with a return of 43.56 percent.
The PSX emerged as one of the best-performing stock markets in the region during the fourth quarter, driven by improved investor confidence and economic reforms under the International Monetary Fund (IMF) loan program. The KSE-100 index surged over 35 percent during the quarter, closing at a record high of 62,451.04 points.
The rally followed the IMF’s staff-level agreement with Pakistan in November 2023 on the first review of a $3 billion stand-by arrangement. The agreement, which is subject to approval by the IMF’s executive board, unlocked $700 million in funding for Pakistan. The IMF deal, coupled with the government’s economic reform initiatives, helped reduce economic uncertainties and boost investor sentiment.
Pakistan’s economy showed signs of recovery, with GDP growing by 2.13 percent in the July-September 2023 quarter, a sharp rebound from a 2.7 percent contraction in the previous quarter, according to the Pakistan Bureau of Statistics. The IMF projects Pakistan’s GDP to grow by 2.5 percent in 2024, following an expected 0.5 percent contraction in 2023.
Awais Ashraf, director at Akseer Research, attributed the stock rally to expectations of monetary easing, a stable currency, and improved governance following the general elections. He noted that the PSX remains undervalued, with a price-to-earnings ratio of just 3.1 times. Major sectors such as energy and banking are expected to benefit the most from IMF-imposed restrictions on government spending as part of the bailout package.
In addition to the top performers, other Pakistani banks featured in the rankings included Meezan Bank Ltd., MCB Bank Ltd., National Bank of Pakistan, United Bank Ltd., Standard Chartered Bank (Pakistan) Ltd., Bank Alfalah Ltd., and Habib Bank Ltd. Two Indian banks, The Karur Vysya Bank Ltd. and CSB Bank Ltd., also made it to the list.
