Commercial banks’ profit grows by 25.03 percent

Despite a sharp surge in non-performing assets (NPA), commercial banks have managed to post healthy growth in their profits in the last fiscal year. The fourth quarter report of the 20 commercial banks shows their profit grew by 25.03 percent FY 2022/23.

Of the 20 banks that have published their financial reports, 18 reported an increase in their profits in FY 2022/23 compared to FY 2021/22. Two banks—Kumari Bank and Prime Commercial Bank have logged a decline in profits.

While banks’ net profit surged by 25.03 percent, their distributable profit declined by 26 percent as they have to set aside a significant amount for regulatory adjustment. Although the profit of the banks reached Rs 70.17bn, their distributable profit which they can distribute to the shareholders is only Rs 31.9bn.

The banks managed to improve profits after they focused aggressively in loan recovery in the last quarter of the last fiscal year. However, their NPA has surged as they failed to recover the loans as expected.  The banks’ NPA stood at 2.8 percent in FY 2022/23 compared to 1.26 percent in FY 2021/22.

With the country grappling with economic downturn, banks experienced difficulties in the recovery of loans and debt servicing in the last fiscal. While the banks' bad loans have been gradually increasing from the start of the current fiscal year, the NPA declined in the last quarter of FY 2022/23. The NPA which rose to 3.03 percent in the third quarter of the last fiscal came down to 2.8 percent in the fourth quarter. 

Bankers attribute the rise in NPA to the slowing economic activities coupled with higher interest rates, and the declining ability of borrowers to repay debts. Sanima Bank CEO Nischal Raj Pandey said that there has been some improvement in the banking sector with economic activities taking pace in the last quarter. “The borrowers generally pay back their loans in the last quarter as banks also prod them. The Nepal Rastra Bank also allowed banks to restructure and reschedule the loans of the certain sectors that have been hard hit by the economic downturn,” said Pandey.

The banks’ fourth quarter report shows two banks’ profit has crossed the Rs 7bn mark while three other banks earned above Rs 4bn in profit in the last fiscal. There are seven other banks whose profit has crossed the Rs 3bn mark in FY 2022/23. 

 

Nabil Bank has topped the chart as the bank’s profit grew by a whopping 76.94 percent in the last fiscal to Rs 7.52bn. The Global IME Bank is second on the list with a profit of Rs 7.25bn, an increment of 46.17 percent followed by Rastriya Banijya Bank (RBB) which has reported a profit of Rs 4.91bn. However, RBB’s profit grew by 14.45 percent in the last fiscal.

 

Kumari Bank reported a 24.12 percent decline in its net profit as the bank managed to earn Rs 1.95bn in FY 2022/23 compared to profit of Rs 2.57bn in FY 2021/22. Prime Commercial Bank’s net profit plunged by 18.6 percent to Rs 2.26bn in the last fiscal. 

 

Banks’ profit