BOP sees major profitability boost from deposit repricing

The Bank of Punjab (BOP) is poised for a significant strengthening of its bottom line in the current quarter, as the full impact of a drastic repricing of its high-cost deposits kicks in, senior management told analysts in a briefing on Thursday.

The briefing, hosted to discuss the bank’s 9MCY25 performance and future outlook, provided key insights that analysts believe underpin a positive earnings trajectory.

A central point of the discussion was the bank’s successful management of its funding costs. BOP management revealed that 85% of its high-cost Time Deposit Receipts (TDRs) amounting to roughly Rs. 427 billion of a Rs. 500 billion portfolio have now matured.

Bank of Punjab showed intention to continue its growth. Clarifying that, it was noted that the bank is targeting a 27% share for current accounts in the next year and plans to expand its branch network from 900 to around 1,000 by 2027, adding 50 branches each in 2026 and 2027.

The management is also confident that a successful Kissan Card portfolio, with 85% recovery on a matured Rs. 60 billion portfolio, is projected to grow to Rs. 100 billion.

The repricing has sharply reduced the weighted average TDR cost from 16.39% to 9.65%. Since a significant portion of these matured late in the third quarter, “the full impact will be reflected in Q4 which will meaningfully strengthen the bottom line, especially in a stabilising interest rate environment” noted reknown equity house Arif Habib Limited (AHL) in their coverage of the briefing.

The management also addressed asset quality, a key investor concern. In this regard, AHL noted that BOP’s exposure to flood-affected SMEs is minimal at just 1.09% and is fully government-backed. The gross Non-Performing Loan (NPL) ratio stands at 6.5%, near the market average.

The bank’s cost-to-income ratio has improved to around 60%, and management expects to bring it below that threshold next year as returns on earlier IT investments materialize.

With the stock trading at a P/B multiple of 1.2x, the analyst briefing painted a picture of a bank that has navigated a high-rate cycle effectively and is now positioned to reap the rewards of a more efficient, lower-cost deposit base and sustained operational improvements.