NPL soars as high as 6.96 percent while net profit declines by up to 91.50 percent
KATHMANDU, Jan 21: The soaring non-performing loans (NPLs) of the commercial banks took a toll on their net profits in the first half of the current fiscal year.
According to the financial reports unveiled by the banks, their NPLs soared to 4.33 percent on an average due to increase in bad debts. By the end of the last FY, it was only 3.66 percent. In the review period, the NPLs grew by 0.67 percentage points.
On an individual basis, the NPLs of Kumari Bank soared as high as 6.96 percent, up from 4.97 percent a year ago. Out of 20 commercial banks, 14 have their NPLs above four percent.
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According to the bankers, the banks’ NPL ratio surged due to an increase in bad debts. “The problem in loan recovery is seen mainly due to the government delaying the payment of contractors’ dues, and small and medium enterprises failing to pay back their loans on time,” said a banker.
In the review period, banks were overwhelmed with a surge in liquidity with them. On the other hand, the amount of bad debt has also been rising, perhaps with the economic slowdown that the country has been facing at present.
Due to a decline in their businesses along with a fall in returns on the government bonds, the net interest earnings of banks have been adversely affected. Overall, the net interest earnings of the banks declined by 3.71 percent.
The state-owned Rastriya Banijya Bank had the biggest fall of 22.99 percent in its net interest earning. With a decline of 22.36 percent, Agriculture Development Bank was second in the list, followed by Standard Chartered Bank Nepal with a negative growth of 17.44 percent in its net interest earnings.
As a result, the overall profit of 20 commercial banks decreased by 4.36 percent in the second quarter of the current FY, compared to the same period of the FY 2023/24. In the review period, the profits of commercial banks declined to Rs 27.43 billion from Rs 28.68 billion.
Out of the total number of commercial banks, nine have seen a decline in profits, while 11 have increased their profits. As of the second quarter, Nabil Bank had the highest profit, which increased by 1.29 percent and reached Rs 3.24 billion. The second highest profit was recorded by Global IME Bank, with a 49.51 percent increase in profit, reaching Rs 3.5 billion. Nepal Investment Mega Bank’s profit also increased by 57 percent, reaching Rs 2.83 billion.
The profit of NIC Asia Bank declined the most by 92.03 percent while Kumari Bank witnessed its profit decline by 68.21 percent.
