Private Sector Borrowing Hits Four-Year High: Bank Stocks in Focus

What the FY26 Private Sector Borrowing Surge Changed

Businesses in Pakistan borrowed Rs11.38 trillion from banks during fiscal year 2025-26, the highest level of private sector financing in four years, according to Finance Minister's Adviser Khurram Shehzad. That is nearly 15 percent more than the previous fiscal year. Almost 89 percent of the fresh lending went to three areas: manufacturing, wholesale and retail trade, and agriculture, with manufacturing alone taking in Rs657 billion.

The jump follows a run of policy rate cuts by the State Bank that made borrowing cheaper for companies rebuilding stock, expanding production lines, or financing working capital after several tight years. When lending to the private sector expands this fast, it shows up directly in the loan books of the commercial banks that write those loans, since interest income on advances is a core part of how a bank earns money.

Why Bank Stocks Are in Focus as Credit Growth Hits a Four-Year High

For lenders like Habib Bank, United Bank, MCB Bank, Meezan Bank and Bank Al Habib, advances, the loans a bank has issued, are one of the two main assets that produce revenue, alongside holdings of government securities. A widening pool of private sector borrowing means more advances on the books industry-wide, and advances generally carry a better spread over the cost of deposits than government paper does, which supports net interest income. This is the same mechanism monetary policy works through in reverse: cheaper policy rates encourage more borrowing, and that borrowing eventually shows up as loan growth for the banks that fund it.

this is an economy-wide number covering all banks and non-bank lenders combined, not a disclosure from any single institution, so it says more about the direction of the credit cycle than about any one bank's exact share of the new lending.

Which Stocks, and Why

Habib Bank and United Bank, Pakistan's two largest banks by assets, typically capture an outsized share of any pickup in corporate and trade financing given their branch networks and existing corporate relationships. MCB Bank and Bank Al Habib run some of the industry's leanest deposit costs, so extra advances tend to flow through to margins efficiently. Meezan Bank, the largest Islamic bank, has been growing its financing book faster than the industry average in recent years and stands to keep benefiting if manufacturing and trade financing keeps expanding. None of the five is named in Shehzad's remarks; the link here is that all of them lend into the same manufacturing, trade and agriculture segments that took in 89 percent of the new financing.

What to Watch

The clearer test of this trend will come when banks report second-half 2026 results and disclose their own advances growth and loan-to-deposit ratios, rather than relying on the economy-wide figure. Watch also for the State Bank's next monetary policy statement, since further rate cuts would likely extend the borrowing pickup, while a pause or reversal could slow it.