Net profits of commercial banks surged 24.92 percent, while distributable profits declined by 26 percent

Published On: August 6, 2023 09:12 PM NPT By: Republica | @RepublicaNepal

In FY 2022/23, banks earned net profits of Rs 70.17 billion, while they can distribute their shareholders only Rs 31.90 billion in dividend

KATHMANDU, Aug 6: The net profits of Nepal’s commercial banks increased by 24.92 percent in the last fiscal year.

According to the financial statements unveiled by the banks, they secured total profits of Rs 70.17 billion in the fiscal year 2022/23. In the previous fiscal year, the banks earned profits of Rs 56.17 billion. Profits of two banks crossed Rs 7 billion, while 10 banks earned profits between Rs 3 billion and Rs 7 billion.

Out of 20 ‘A’ class banks, 18 were successful to raise their profits in the review period. Nabil Bank secured profits of Rs 7.52 billion and was top in the list. With profits of Rs 7.25 billion, Global IME Bank was the second while Rastriya Banijya Bank earned Rs 4.91 billion and stood third.

Kumari Bank’s profit declined by 24.13 percent to Rs 1.95 billion compared to the previous year. Similarly, the profit of Prime Commercial Bank also declined 18.80 percent to Rs 2.26 billion.

Although the net profits of the majority of banks increased by a notable percentage, their distributable profits declined 26 percent during the review period. The commercial banks’ distributable amount stood at Rs 31.90 billion.

According to bankers, the distributable profits declined mainly due to a notable rise in bad debts of the banks. Last year, the ratio of bad debts of the banks rose to more than double after debtors did not turn up to clear their loans citing the ongoing recession.

As of mid-July 2022, the figure under the heading was only 1.26 percent, which jumped to 2.80 percent in mid-July 2023. The ratio however declined compared to the third quarter end (mid-April) this year, when it was recorded at 3.23 percent.

The majority of banks had a drop in their profit growth rate. Two commercial banks including Himalayan Bank and Kumari Bank posted negative growth in their distributable profits.

Despite having more than Rs 7 billion net profit, Nabil Bank has the distributable profit of only Rs 3.96 billion. Similarly, Global IME Bank can also distribute only Rs 2.71 billion of its net profit.