Broad Money Supply Rises 9.5% to Rs44.3 Trillion: Positive for Bank Stocks

What the money supply increase means for the economy

The State Bank of Pakistan (SBP) data, as analysed by AKD Securities, shows that Pakistan's broad money supply, known as M2, expanded by 9.5% to Rs44.3 trillion as of June 19, 2026. This increase from Rs40.5 trillion at the end of the previous fiscal year indicates a significant rise in the total amount of money circulating within the economy. The primary drivers behind this growth were an 8% increase in scheduled bank deposits and a 13% surge in currency in circulation, which reached Rs12.05 trillion. Additionally, net domestic assets grew by 6%, largely supported by the government's continued borrowing from the banking system. While an increase in money supply can stimulate economic activity, economists have noted that sustained high growth in money supply, if not matched by a corresponding rise in economic output, could potentially fuel inflationary pressures in the future.

Why it matters for bank stocks

For the banking sector, an increase in broad money supply, particularly through higher scheduled bank deposits, is generally a positive development. Banks rely on deposits as their primary source of funds, which they then lend out or invest in government securities. A larger deposit base enhances a bank's liquidity and its capacity to extend credit to the private sector, thereby boosting its net interest income, which is the profit a bank makes from its lending activities after accounting for interest paid on deposits. The government's continued borrowing, which also contributed to the money supply expansion, means banks are likely seeing increased opportunities to invest in high-yielding government bonds, further supporting their earnings.

Which stocks, and why

The rise in scheduled bank deposits and government borrowing directly benefits commercial banks by increasing their funding base and investment opportunities. This is positive for their potential for credit growth and overall profitability.

• Habib Bank: As the largest bank, HBL stands to gain significantly from an expanded deposit base, which provides more funds for lending and investment in government securities.
• United Bank: UBL, with its strong deposit growth, will see its capacity to generate net interest income improve as more funds become available for deployment.
• MCB Bank: A larger deposit pool enhances MCB's ability to maintain its high-margin operations and expand its loan book.
• Meezan Bank: The largest Islamic bank will benefit from increased deposits, allowing it to expand its Shariah-compliant financing and investment activities.
• Bank Alfalah: This mid-sized bank will find its margins and advances growing as it has more funds to lend out to businesses and consumers.
• Bank Al Habib: A conservative bank like BAHL will see its rate-sensitive earnings supported by a larger, stable deposit base.
• National Bank of Pakistan: As a state-owned bank with a large investment book, NBP will benefit from increased government borrowing opportunities and a growing deposit base.
• Askari Bank: This mid-sized bank will also see its rate-sensitive earnings positively impacted by the availability of more deposits for lending and investment.
• Faysal Bank: Faysal Bank's advances and margins are likely to track positively with the increased liquidity in the banking system.

What to watch

Investors should monitor future SBP monetary policy statements for any indications of how the central bank views this money supply growth in relation to inflation and interest rates. Specifically, watch for Consumer Price Index (CPI) inflation data releases and any changes in the SBP's policy rate, as these will confirm whether the potential inflationary pressures materialise and how the SBP responds. Also, keep an eye on banks' quarterly results, particularly their deposit growth figures and net interest income, to see the tangible impact of this increased liquidity on their financial performance.