MCB Islamic Bank Limited was incorporated in Pakistan as an unlisted Public Limited Company on May 15, 2014. It operates under a commercial banking license with specific authorization from the SBP to conduct Shariah-compliant banking business.

The Bank commenced commercial operations in October 2015. A landmark development occurred in March 2016 when the Lahore High Court approved the demerger and merger of MCB Bank’s Islamic Banking Group into MCB Islamic, effectively transferring PKR 7.9bn in assets.

As of December 31, 2025, MCB Islamic Bank Limited operated a network of 323 branches (CY24: 303) across 134 cities, supported by more than 290 ATMs nationwide. The Bank continues to strengthen its geographic footprint and delivery infrastructure, enabling it to serve a diversified customer base across Corporate, Commercial, SME, Consumer, Agriculture, and Microfinance segments while enhancing accessibility and service quality through an expanding branch and digital network.

MCB Islamic Bank Limited is a wholly owned subsidiary of MCB Bank Limited, one of the largest banks in Pakistan in terms of deposits and asset base. As of December 31, 2025, MCB operated an extensive nationwide network of 1,401 branches, 9 branches overseas providing a strong strategic and operational foundation that supports MCB Islamic’s continued growth, financial strength, and access to the Group’s established infrastructure and market presence.

The Bank continues to benefit from strong strategic and financial support from its parent, as evidenced by periodic capital injections and access to the Group’s established operational, technological, and managerial resources. As a flagship financial institution of the Nishat Group, the parent maintains a stable and well-established ownership structure. Accordingly, the Bank’s ownership profile is considered strong and is expected to remain stable over the foreseeable future, providing a solid foundation for its ongoing growth and financial resilience.

Nishat Group is one of Pakistan’s largest and most established business conglomerates, with a strong track record of entrepreneurship, strategic execution, and prudent financial management. The Group maintains a diversified presence across key sectors, including textiles, cement, financial services, power generation, hospitality, and automotive. Its extensive industry experience, sound governance practices, and demonstrated ability to build and scale successful businesses reflect strong business acumen and provide substantial strategic strength to the Bank.

In addition to MCB Islamic Bank Limited, MCB Bank Limited maintains a diversified subsidiary portfolio comprising MCB Investment Management Limited, MCB Exchange Company (Pvt.) Limited, MCB Islamic Bank Limited, and MCB Non-Banking Credit Organization Closed Joint Stock Company. The Bank carries long-term and short-term entity ratings of “AAA” and “A1+”, respectively, assigned by Pakistan Credit Rating Agency Limited. During CY25, MCB reported a profit after tax of PKR 54.2bln (CY24: PKR 57.6bln), reflecting its continued earnings strength and robust financial profile.

The overall control of the Bank rests with a seven-member Board of Directors comprising one Chairman, one President/CEO, three Non-Executive Directors, and two Independent Directors. The Board provides strategic direction and ensures strong governance oversight through its various committees, which actively monitor management policies and the Bank’s operational performance, thereby supporting effective decision-making and regulatory compliance.

The Board of Directors of MCB Islamic Bank Limited comprises experienced professionals representing diverse expertise across banking, industry, and corporate governance. Mr. Raza Mansha, a seasoned business leader with extensive multi-sector experience and wide group-level board representation across Nishat Group companies, chairs the Board. Mr. Kashif Ali, a Non-Executive Director, brings strong expertise in banking operations, audit, and risk management, along with significant experience in leading large-scale operational transformation initiatives at MCB Bank. Mr. Ahmed Ebrahim Hasham, also a Non-Executive Director, contributes diversified industrial and investment experience across sugar, insurance, and listed entities, with a strong track record in strategic leadership and capital management. Mr. Ibrahim Shamsi provides extensive corporate and financial sector experience, particularly in governance and strategic oversight across insurance, textile, and power sectors. The independent directors include Ms. Nabeela Waheed, a seasoned banking professional with over three decades of risk management expertise, and Mr. Jawaid Iqbal, a highly experienced board member with diversified exposure across multiple industries, including banking, power, cement, and textiles. Collectively, the Board reflects a balanced mix of executive experience, sectoral expertise, and independent oversight, ensuring strong governance, strategic direction, and effective risk management.

The Board of Directors of MCB Islamic Bank Limited comprises professionals with diversified experience across banking, risk management, audit, corporate governance, and various industrial sectors, supporting balanced oversight at the governance level. The Board exercises close monitoring of management policies and the Bank’s operations through its committees, ensuring structured review of key strategic, financial, and risk-related matters. Members actively participate in Board and Committee meetings and contribute to informed discussions and decision-making processes. The inclusion of experienced executive, non-executive, and independent directors supports effective oversight, strengthens governance practices, and ensures appropriate monitoring of the Bank’s operational and control framework.

The financial reporting framework of MCB Islamic Bank Limited reflects satisfactory transparency and compliance with applicable standards. M/s A.F. Ferguson & Co. (PwC network), Chartered Accountants, issued an unqualified audit opinion on the financial statements for the year ended December 31, 2025. The Bank also maintains internal and external Shariah audit functions, with the Shariah Board confirming no material non-compliance. The internal audit function operates independently and reports directly to the Audit Committee, supporting an effective control environment.

MCB Islamic follows a functional structure, where Bank’s operations are grouped under thirteen departments. Group Head Audit & RAR and Head Shariah Compliance Department also reports to BoD’s Audit Committee and Shari’ah Board & President, respectively.

The management team of MCB Islamic Bank Limited comprises highly experienced professionals with strong expertise across banking, finance, risk, operations, and governance functions. The Bank is led by Mr. Hammad Khalid, President & CEO, a Chartered Accountant with extensive experience in financial management, regulatory compliance, and strategic leadership, previously serving as CFO of MCB Bank Limited. The executive team also includes Mr. Omer Khalid, bringing over three decades of experience in corporate and investment banking, transaction banking, and remittances, with a strong track record in asset growth and profitability enhancement. Mr. Muhammad Tariq Gondal contributes extensive expertise in audit, risk, compliance, and operations with over 30 years of diversified banking experience. Mr. M. Saeed Raja adds significant operational depth with over 36 years of experience in banking operations, controls, and process centralization initiatives. The financial leadership is further strengthened by Syed Iftikhar Hussain Rizvi, CFO, a seasoned professional and Fellow Chartered Accountant with over 40 years of experience in finance, governance, and accounts. Mr. Salman Naseer has around 20 years of experience in credit risk management across multiple banking segments. He has been with MCB Islamic Bank Limited since 2015, contributing to asset growth and portfolio quality. Overall, the management reflects strong continuity, deep industry experience, and well-rounded functional expertise supporting the Bank’s strategic and operational objectives.

The management structure of MCB Islamic Bank Limited is supported by five key management-level committees that oversee day-to-day operations and ensure effective execution of the Board-approved strategy. These committees facilitate coordinated decision-making across core functional areas, including risk, operations, credit, and compliance. The framework supports the timely resolution of operational matters and strengthens internal controls through structured oversight. Overall, the committee system contributes to disciplined execution, operational efficiency, and alignment with the Bank’s strategic objectives.

The Bank is currently using the Oracle Business Digital Experience (OBDX) platform as part of its Management Information System (MIS). This software incorporates various modules and embedded checks at multiple levels, enabling the Bank to effectively mitigate and reduce operational risks. Additionally, to strengthen its digital infrastructure and enhance system capabilities, the Bank is undertaking upgrades within the platform.

The Risk Management Framework of MCB Islamic Bank Limited is structured to ensure comprehensive identification, assessment, monitoring, and mitigation of key risks across the Bank’s operations. The Risk Management Group (RMG) comprises five dedicated units, including Credit Risk Review, Market and Liquidity Risk Management, Operational Risk and Business Continuity Planning, Fraud Risk, and IT Security Risk, covering all major risk dimensions of the Bank. The framework is further strengthened through an established Operational Risk Management Framework and an Operations Risk & Internal Control Unit, which focuses on reinforcing internal controls and ensuring compliance across processes. Overall, the structure supports a disciplined risk governance approach and contributes to maintaining operational stability and control effectiveness.

During CY25, Pakistan’s banking sector’s total assets grew by approximately 17.8% YoY, while investments surged by ~31.1% to PKR ~39.1trln (CY24: PKR ~29.8trln). Net advances of the sector declined by ~6% to PKR ~14.9trln (CY24: PKR ~15.8trln). Non-Performing Loans (NPLs) decreased by 9.7% YoY to PKR ~964bln (CY24: PKR ~1,068bln). The Capital Adequacy Ratio (CAR) averaged 20.8% (CY24: 20.6%), slightly below historical averages due to higher risk-weighted assets and a shift toward low-yield government securities, yet capitalization remains adequate to absorb potential shocks. While the Advances to Deposit Ratio (ADR) was reported at 37.5% (CY24: 49.7%), which appears higher relative to declining advances, because deposit growth outpaced lending activity. This reflects a cautious lending stance by banks in a challenging macroeconomic environment, where risk-averse behavior and liquidity accumulation resulted in slower credit deployment, pushing the ADR downwards. In a lower policy rate environment, coupled with high operating costs and reduced lending, the sector faced margin pressure, leading to moderated profitability by end-CY25, despite robust capitalization and improving asset quality. (Source: SBP Compendium). Amid the evolving industry dynamics and cautious lending environment, MCB Islamic Bank recorded strong balance sheet growth in CY25, driven by solid deposit mobilisation. Deposits increased from PKR 209bln to PKR 268.9bln, strengthening the Bank’s liquidity position and funding base. As a result, the ADR declined to 46.62% in CY25 (CY24: 57.08%), reflecting slower credit growth relative to deposits and a prudent lending stance amid subdued private sector demand and liquidity-focused strategy. The CAR also moderated to 17.5% in CY25 (CY24: 20.5%), mainly due to balance sheet expansion and higher risk-weighted assets, though it remained comfortably above regulatory requirements, ensuring adequate capital buffers. Margin dynamics were also impacted by the SBP’s Minimum Deposit Rate (MDR) framework, which increased funding costs across the banking industry and compressed spreads amid limited lending growth. Overall, MCB Islamic Bank maintained a stable and resilient profile in CY25, supported by strong deposit growth and adequate capitalization despite margin pressure and a cautious credit environment.

In CY25, MCB Islamic Bank, being a small-sized bank, continued to exhibit slow but sustainable growth. The Bank’s total deposit base increased by 28.6% to PKR 268.9bln (CY24: PKR 209.1bln), reflecting steady balance sheet expansion and improved deposit mobilisation. Customer deposits, representing approximately 83.2% of the total deposit base, grew by 17.8% to PKR 223.8bln (CY24: PKR 190.0bln). Despite the growth in customer deposits, the Bank’s market share in industry customer deposits remained stable at 0.6% in CY25 (CY24: 0.6%), indicating a consistent position within the sector.

During CY25, MCB Islamic Bank reported a decline in profit / return earned to PKR 32.6bln (CY24: PKR 45.8bln), primarily reflecting lower returns from both investment and financing portfolios amid a declining rate environment and moderated credit demand. Within this, income from investments decreased to PKR 17.8bln (CY24: PKR 27.5bln), while earnings from financing activities also declined to PKR 14.2bln (CY24: PKR 17.6bln), reflecting reduced yields and repricing of assets in line with falling market rates. Accordingly, the Bank’s advance yield compressed to 12.4% in CY25 (CY24: 17.5%), driven by the overall downward adjustment in benchmark rates and competitive pricing pressures in the Islamic financing market. However, this was partially offset by a significant reduction in the cost of funds, which declined to 6.5% in CY25 (CY24: 11.5%), supported by improved deposit mobilisation and lower rate environment under SBP policy easing.

During CY25, MCB Islamic Bank witnessed a moderation in profitability despite improvement in core non-markup income streams, primarily due to higher operating expenses and pressure on net returns. Net profit / return stood at PKR 14.7bln (CY24: PKR 17.9bln), reflecting overall margin compression in a declining rate environment and higher cost structure. On the non-markup income side, fee and commission income improved to PKR 1.3bln (CY24: PKR 955mln), supported by stronger transactional activity and enhanced banking services. Foreign exchange income also increased to PKR 579mln (CY24: PKR 418mln), indicating improved dealing performance and FX-related business volumes. However, this improvement was partially offset by higher operating expenses, which increased to PKR 12.1bln in CY25 (CY24: PKR 10bln), driven by inflationary pressures and continued investment in branch and operational infrastructure. As a result, profit after tax (PAT) declined to PKR 2.2bln (CY24: PKR 4.2bln), reflecting the combined impact of lower net income generation and rising cost base.

Going forward, the management of MCB Islamic Bank remains cautiously optimistic regarding sustainable growth prospects. The Bank aims to pursue its long-term profitability strategy by focusing on mobilization of low and no-cost deposits, improving the mix of high-yield earning assets, and maintaining strict control over operating expenses. At the same time, effective management of asset quality will remain a key priority, particularly in the prevailing challenging macroeconomic and credit environment, as it will be critical in sustaining stability and supporting future growth.

During CY25, MCB Islamic Bank recorded a moderate increase in net advances to PKR 125bln (CY24: PKR 119bln), reflecting a cautious but gradual expansion in lending activity amid a controlled risk appetite and subdued credit demand environment. The ADR stood at 46.62% in CY25 (CY24: 57.08%), indicating a relatively slower growth in advances compared to strong deposit mobilisation and a continued focus on liquidity preservation. On the asset quality side, non-performing loans (NPLs) slightly improved to PKR 2.4bln in CY25 (CY24: PKR 2.5bln), reflecting better recoveries and relatively stable credit performance. Consequently, the infection ratio showed a marginal improvement, supported by controlled slippages and prudent lending practices in a challenging macroeconomic environment.

During CY25, MCB Islamic Bank reported investments increasing to PKR 155bln (CY24: PKR 146bln), reflecting continued portfolio expansion in a relatively risk-averse investment strategy. The investment book remained heavily concentrated in sovereign instruments, with Government of Pakistan (GoP) Ijara Sukuks amounting to PKR 153bln (CY24: PKR 145bln), representing approximately ~99% of total investments. This strong tilt towards government securities significantly limits credit and market risk exposure, as the portfolio is predominantly invested in risk-free sovereign assets with minimal volatility. The Bank’s investment strategy continues to support stability, liquidity management, and low market risk profile in CY25.

MCB Islamic Bank maintained a sound liquidity profile in CY25, although the ratio of liquid assets to deposits plus borrowings (net of repo) moderated to 61.2% (CY24: 64.1%), reflecting greater deployment of funds into earning assets while remaining at a comfortable level. The Bank’s deposit mix improved significantly, supporting a more stable and cost-efficient funding base. Current accounts increased to 30.5% of total deposits (CY24: 28.7%), while savings accounts rose to 52.2% (CY24: 48.0%). As a result, the CASA ratio strengthened to 82.7% in CY25 (CY24: 76.7%), underscoring the Bank’s strong ability to mobilize low-cost deposits. Customer deposits constituted approximately 83% of total deposits, amounting to PKR 223bln out of total deposits of PKR 268bln in CY25, reflecting a stable and diversified funding structure.

MCB Islamic Bank has a paid-up capital of PKR 15.5bln. The Bank’s equity base strengthened to PKR 27.7bln in CY25 (CY24: PKR 25.9bln), supported by internal profit retention, with accumulated profits increasing to PKR 8.4bln (CY24: PKR 6.6bln). Despite the increase in equity, the Bank’s Capital Adequacy Ratio (CAR) declined to 17.5% in CY25 (CY24: 20.5%). The reduction was primarily driven by a significant rise in risk-weighted assets (RWAs), which increased to PKR 155bln (CY24: PKR 127bln). In particular, credit risk-weighted assets rose to PKR 111bln (CY24: PKR 91bln), reflecting growth in financing and investment exposures. As the growth in RWAs outpaced the increase in eligible capital, the CAR moderated accordingly. Nevertheless, the Bank’s capital position remains comfortably above the minimum regulatory requirement, providing an adequate cushion to absorb potential losses and support future business growth.