Commercial banks recorded a significant jump in net profit for the fiscal year 2025/26, driven primarily by lower impairment charges. A study of provisional financial statements published by 20 Class A banks shows their combined net profit reached Rs 69.78bn in the last fiscal year. This represents a 32.3 percent increase compared to Rs 52.81bn in 2024/25.
Bankers have attributed high profit growth to a reduction in loss provisioning due to strong loan recoveries in the fourth quarter. The healthy surge in net profit comes amid subdued private sector credit demand and deteriorating asset quality.
Operating performance
Total net profit across the sector expanded by Rs 16.97bn during the fiscal year. Out of the 20 commercial banks, 15 reported positive growth in net earnings, while five recorded contractions or losses. Nabil Bank Ltd led the industry with a net profit of Rs 7.90bn in net profit, up 33.45 percent year-on-year. Kumari Bank Ltd (307.73 percent) and Global IME Bank Ltd (22.67 percent) followed with net profits of Rs 7.38bn and Rs 6.22bn, respectively.
Kumari Bank Ltd posted the highest net profit growth of 307.73 percent. The bank’s net profit increased from Rs 1.81bn in 2024/25 to Rs 7.38bn in 2025/26, largely due to heavy provisioning reversals in the review year. On the other hand, Prabhu Bank Ltd registered a net loss of Rs 240m in 2025/26. The bank had posted a net profit of Rs 870m in 2024/25. It was the only commercial bank in the country to fall in the red.
Agriculture Development Bank Ltd and Nepal Investment Mega Bank Ltd experienced profit declines of 29.49 percent and 36.72 percent, respectively. NIC Asia Bank Ltd, which reported a net loss of Rs 3.87bn in 2024/25, managed a slight turnaround to post a modest net profit of Rs 180m.
Net interest income
Net interest income, the core revenue stream for commercial banks, saw a modest growth of 1.29 percent during the review year. The combined net interest income of 20 commercial banks reached Rs 192.28bn in 2025/26 compared to Rs 189.84bn in 2024/25. Nabil Bank generated the highest net interest income at Rs 17bn, followed closely by Global IME Bank (Rs 16.20bn), Nepal Investment Mega Bank (Rs 12.98bn), Kumari Bank (Rs 12.01bn), and Rastriya Banijya Bank Ltd (Rs 11.96bn).
The slow net interest income growth is largely due to a steady decline in lending rates in recent years. Banks have failed to fully leverage lower funding costs to expand their net interest margins due to low credit demand from the private sector.
Despite the sharp rise in net profits, average non-performing loan (NPL) ratio of commercial banks rose by 83 basis points to 5.43 percent in 2025/26 from 4.60 percent in 2024/25. Bankers have attributed the rise in NPL levels to the expiry of regulatory forbearance and debt restructuring facilities provided by the Nepal Rastra Bank (NRB). Loans that failed to resume regular debt servicing migrated into higher risk classifications with the end of the moratorium period.
Everest Bank reported the lowest NPL ratio of 0.49 percent in 2025/26, followed by Standard Chartered Bank Nepal at 2.03 percent and Sanima Bank Ltd at 2.87 percent. On the other hand, Prabhu Bank had the highest NPL ratio at 15.55 percent, up from 7.01 percent a year earlier. NIC Asia Bank (9.26 percent), Nepal Investment Mega Bank (8.66 percent), Himalayan Bank Ltd. (7.96 percent), and Kumari Bank (7.46 percent) also reported elevated non-performing assets during the review period.
Rising NPL ratios amid declining provision expenses suggest that while recent cash recoveries relieved immediate accounting pressures for banks, legacy stressed assets continue to weigh on their balance sheets.
Out of 20 commercial banks, 16 recorded positive distributable profits for 2025/26, up from 13 banks in the prior year. Everest Bank boasts the highest dividend capacity at 38.32 percent, with a distributable profit of Rs 5.25bn. Siddhartha Bank Ltd (26.15 percent), Sanima Bank (20.85 percent), Nabil Bank (19.10 percent) and Standard Chartered Bank (19.04 percent) also have strong payout capacities. On the other hand, four commercial banks reported negative distributable profits. NIC Asia Bank has the highest negative distributable profit of Rs 14.86bn, followed by Himalayan Bank (Rs -9.84bn), Prabhu Bank (Rs -6.31bn) and Nepal Investment Mega Bank (Rs -5.08bn).
These four institutions will be unable to distribute dividends to shareholders 2025/26, as they must channel earnings toward covering deficit reserves and non-performing asset coverage.
While lower impairment charges boosted net profit of Class 'A' banks during the review period, the systemic increase in non-performing loans to 5.43 percent means more borrowers are falling behind on their payments. The economic slowdown has dampened credit absorption capacity of the private sector which has left banks with excess liquidity despite historic low lending rates.
With improved Tier 1 capital ratios (9.90 percent) and lower lending costs, banks still have the balance sheet capacity to fund infrastructure, business expansion and private investment. However, sustainable performance will depend on prudent credit underwriting, strong recovery strategies for legacy NPLs, and a revival in domestic economic activity.
