11 banks offer average dividends of 4.77 pc, nine disappoint shareholders
KATHMANDU, Jan 16: Banks and financial institutions (BFIs) are starting to feel the heat of a prolonged economic slowdown with the distributable profits of commercial banks plummeting to Rs 17.75 billion cumulatively, leading to a heavy decline in their offerings in dividends.
Of the 20 A Class banks, 11 declared marginal dividends - an average of 4.77 percent - while nine offered noughts to their shareholders.
In the last fiscal year, the commercial banks reported a decline in their net profit to Rs 64.16 billion. According to the financial reports, 11 commercial banks were successful in increasing their profits while the remaining nine banks faced a decline in their profits.
Lending slows as banks focus on recovery of loans at fiscal yea...
Similarly, the overall distributable profits of the commercial banks also declined in the review period. The average distributable profit of 20 commercial banks was only Rs 18.58 billion. The banks distributed Rs 31.90 billion in dividend to their shareholders in the FY 2022/23.
Apart from reporting a decline in their distributable profits, the banks’ profits were found to have decreased by around Rs 860 million, after the central bank tightened its supervision on the banks’ financial performance. The profit of a single bank was found to have declined by up to 25 percent, mainly after the central bank adopted a stern policy on the loan-loss provisions maintained by the banks.
Of the announced dividends, Standard Chartered Bank is providing 25.50 percent dividends, the largest among all. Siddhartha Bank is distributing dividends of four percent.
On the other hand, Himalayan Bank, Kumari Bank, Machhapuchchhre Bank, Nepal Investment Mega Bank, NIC Asia, NMB Bank, Prabhu Bank and Rastriya Banijya Bank are leaving their shareholders empty handed.
During the review period, many banks were reported to have undergone the problems of having excess loanable funds, insufficient capital adequacy fund and increased non-performing loans along with a surge in bad debts, according to bankers. With the successive decline in their business with falling demand for loans, banks’ interest rate has come down to as low as 5.5 percent in personal deposits.
According to Nepal Rastra Bank, the ratio of non-performing loans of banks had reached as high as 3.8 percent in mid-July 2024, leading to a 29.5 percent increase in their loan-loss provisions. As of mid-October this year, banks’ NPL has further increased to 4.42 percent, while the NPLs of many banks have crossed five percent. Due to the increased bad debts, non-banking assets have piled up at banks which they are unable to sell in the market.
BFIs earn net profits of of Rs 30.83 billion in five months
Banks and financial institutions (BFIs) earned net profits of Rs 30.83 billion in the first five months of the current fiscal year. The figure was less by Rs 80 million compared to the amount that they generated in the same period last year.
Of the amount earned by the BFIs, commercial banks secured Rs 37.75 billion, which was 90 percent of the total value. In the review period, 11 commercial banks were successful in increasing their profits, while nine witnessed a decline in their earnings.
In one month between mid-November and mid-December, the BFIs raised their net profits to Rs 30.83 billion from Rs 22.90 billion. This shows an increment of Rs 8 billion in a month.
