Banks see increased profits in 3rd quarter

KATHMANDU, MAY 20, 2013

Profits of commercial banks have almost increased by half as they have enjoyed fewer bad loans in the third quarter.

Class ‘A’ financial institutions have recorded profit growth of 45 per cent by the third quarter of the current fiscal year, according to the third quarter financials published by the banks. The cumulative profit of 32 banks amount to Rs 12.9 billion. They had recorded a profit of Rs 8.85 billion in the corresponding period last year.

Everest Bank, Nabil Bank, Nepal Investment Bank and Rastriya Banijya Bank were able to increase their profits to more than Rs one billion. Nabil is the biggest profit making bank in the third quarter with a profit of Rs 1.5 billion.

Machhapuchchhre Bank has increased its profit by 13 times in the third quarter as compared to the same period last fiscal year by generating a profit of Rs 98.3 million. Kist Bank has recorded a loss of Rs 55.01 million.

Along with increased profits, banks have also seen their non-performing assets (NPA) go down this quarter. The average NPA of the banks has come down to 2.26 per cent of the total loans in this quarter against an average of 3.02 per cent in the corresponding period last year.

The shrinking bad loans have contributed in increasing the profits of the banks. Since banks did not have to set aside a large chunk of its income to provision against bad loans, profits were less affected last quarter due to loans gone sour.

Nepal SBI Bank, Everest Bank, Sanima Bank, Janata Bank and Standard Chartered Bank are among those with NPA less than one per cent. However, Kist Bank has even overtaken the three government promoted banks in terms of highest NPA with 7.89 per cent bad loans, while Agriculture Development Bank, Nepal Bank Ltd and Rastriya Banijya Bank have reduced their non performing loans to 6.27 per cent, 5.19 per cent and 5.95 per cent, respectively.

The banks have recorded good profits this quarter as the amount of loans floated is more than deposit collection as reflected by the increased credit to deposit ratio this quarter. Their average CD ratio amounts to 76.16 in the third quarter which was less than 73 in the previous year. Even in the second quarter, the ratio stood at 75.5. The higher lending interest being charged for loans than being offered for deposits has increased the interest income of the banks further swelling their profits.

However, things might not be equally gleeful for banks as the tightening liquidity has already compelled a lot of them to increase deposit rates to attract deposits. The increased deposit rates have already pushed the base rate of 18 banks higher than what it was in the second quarter.

Source: THT