KATHMANDU, Feb 16: Commercial banks have posted solid profit growth in the second quarter of the current fiscal year.
Average net profit of 29 ‘A’ class banks jumped by 10.36 percent to Rs 14.7 billion in the first half of Fiscal Year 2015/16. These banks had logged net profit of Rs 13.32 billion in the corresponding period of 2014/15.
Financial results of commercial banks for the second quarter compiled by Sanima Bank Ltd show operating profit, before provisioning, of 29 banks also climbed up to Rs 21.44 billion in the second quarter of current fiscal year compared to Rs 18.57 billion in the corresponding period of last fiscal year.
Except Janata Bank Ltd, all 29 other commercial banks have published their financial reports of the second quarter which ended on January 14. Most of the commercial banks have registered profit growth in first two quarters of the current fiscal year. Six commercial banks, however, saw their profit fall in the review period.
Net profit of Rastriya Banijya Bank Ltd (RBBL), Prabhu Bank Ltd, Agricultural Development Bank Ltd (ADBL), Bank of Kathmandu (BoK) and Civil Bank Ltd (CBL) declined in the review period.
Nabil Bank Ltd, Nepal Investment Bank Ltd, RBBL and Nepal Bank Ltd are in the ‘billion club’ as they earned net profit of more than Rs 1 billion. Last year, only Nabil Bank and RBBL had posted profit of more than one billion rupees.
Commercial banks reported solid profit growth amid worries that Tarai unrest and subsequent unofficial economic blockade by India could afflict their earnings.
Many bankers attribute growth in profit to recent relaxation offered by Nepal Rastra Bank (NRB) for loan loss provisioning. “The current turmoil has eroded the capacity of borrowers to repay their quarterly installment which is reflected on the balance sheet of many commercial banks,” Kishore Maharjan, CEO of Civil Bank Ltd, which observed decline in its net profit, said. “Though the central bank has said that the banks can count net profits accrued in mid-January but realized in mid-February, we did not wait to include it in our report for the second quarter. Our profit looks squeezed because of this,” added Maharjan.
Net profit of Civil Bank fell by Rs 20.6 million in the second quarter.
However, there are many bankers who say that many banks are not utilizing relaxations offered by the central bank.
“If you look at results of top banks, you see they have not utilized the central bank’s relaxations. Even borrowers battered by the recent turmoil have been regularly paying interest and principal of their loans from their reserve,” Ashoke SJB Rana, former president of Nepal Bankers Association (NBA), said. “Top banks have been provisioning their loan loss in a regular way without using relaxations offered by the central bank,” Rana, who is also the CEO of Himalayan Bank Ltd, said.
HBL’s net profit climbed up to Rs 802 million in the second quarter of the current fiscal year compared to Rs 589.5 million in the corresponding period of the last fiscal year.
Bhuvan Dahal, CEO of Sanima Bank, whose NPP is at a meager 0.05 percent -- the lowest among commercial banks in the country, partially agrees with Rana. “Not all borrowers have been affected by the recent turmoil. For those who were affected, the central bank’s relaxation helped to maintain profit growth for the banks,” added Dahal, who estimates that the current turmoil will drive up non-performing loans of commercial banks by one percentage point. “The impact of current turmoil will be visible on the balance sheet of the banks in the annual report,” Dahal said.
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