"The deteriorating law and order situation of the city coupled with lower than expected earnings by National Bank of Pakistan caused index to fell by more than 1 percent," said Samar Iqbal, a dealer at Topline Securities Ltd.

National Bank of Pakistan (NBP) reported on Thursday a net profit of 8.13 billion rupees ($93.80 million) for the first half of 2011, compared with a net profit of 3.86 billion rupees ($44.4 million) in the same period last year.

The result was lower than analyst expectations and NBP ended 4.98 percent lower at 43.47 rupees.

KSE 100-share index closed 1.25 percent, or 141.43 points, lower at 11,128.52.

Volume fell to 41.62 million shares from 46.33 million shares traded on Wednesday.

In the money market, overnight rates rose to 13.40 percent, compared with the previous day's close of between 10.75 percent and 11.0 percent amid tight liquidity in the interbank market.

Copyright Reuters, 2011