KATHMANDU, AUG 17, 2012
Contrary to the expectations of most of the bankers, the net profit
of the majority of the commercial banks grew reasonably at the end of
the last fiscal year, suggest un-audited financial highlights released
by the commercial banks.
Until a few months back, bankers were predicting a poor result owing
to problems like large volume of idle funds due to suppressed credit
demand, poor recovery of the real estate loan, increasing provisioning
for the possible loan loss and ‘squeezed spread rate’ between the
interest rates of deposit and credit. But once the banks started
publishing their financial highlight, the result was completely
different to what was being expected.
Twenty-one out of the total 27 commercial banks that have published
their financial highlights has recorded a growth in net profit in the
fiscal year 2011-12 compared to corresponding period in the last fiscal.
While some of the banks have realised a phenomenal growth in profit,
others have only enjoyed a marginal growth.
The Agriculture Development Bank has topped the chart, posting a
whopping Rs 1.86 billion in net profit—a significant climp-up from last
years’ Rs 1.57 billion. Similarly, the financial highlights of Bank of
Kathmandu, Standard Chartered Bank and Nepal SBI Bank, among others
suggest that they have attained only a marginal growth in their net
profit.
There have been mixed reactions to the financial highlights, with
some of the bankers attributing the recovery in capital market as life
line to banking industry.
“There was recovery in the share market and also the transaction in
real estate was not as poor as it was in the past,” said Anil Gnawali,
CEO of Nabil Bank which posted a net profit of Rs 1.71 billion—a
phenomenal growth compared to Rs 1.33 billion in the previous year.
BN Gharti, DGM of the Kist Bank which saw its net profit rise to Rs
100.23 million from the previous fiscal’s Rs 54.07 million, said that
increase in loans and advances by the commercial banks during the last
quarter of the fiscal year was instrumental in increasing their profit.
“Commercial banks were aggressive in lending during the fourth quarter
of the fiscal year 2011-12,” said Gharti. “The cost of fund also
decreased during the period allowing the banks to reduce the interest
rate.” A majority of the commercial banks did not renew the high cost
fixed deposits they collected a year back.
Some other bankers, however, have indicated that a majority of the
banks were involved in faulty account management in order to post a
higher profit. “The profits of the banks are inconsistent to that of the
third quarter of the fiscal year,” said Ashoke Rana, president of the
Nepal Bankers’ Association. “It is really surprising how they managed to
post such a large profit within a quarter,” he said, adding that this
rise in profit is unsustainable.
NIC Bank CEO Sashin Joshi also expressed doubt over the
sustainability of such profit in the current economic scenario. There is
also suspicion that the banks used ‘window dressing’ by lending out
surplus amount to clients to serve interest to their previous loans.
This way, not only have the banks projected old loans as good ones but
have also counted interest as real income. “Such a growth in profit
became possible as a majority of the banks were involved in window
dressing,” said a CEO of a commercial bank seeking anonymity.
“Historically, the commercial banks were making high profit and were
under severe pressure in the last fiscal too to show high return in
their books,” said the banker. “But this will not sustain. We will be
able to see a clearer picture by the end of the first quarter of this
fiscal year.”
Even, NRB’s Annual Supervision Report 2011 has pointed out the
tendency of making loans ever green as a big challenge facing the
banking sector. Nevertheless, all the bankers agreed that banks will
have a tough time in coming days as Janata Bank CEO Bijay Pant says:
“The country has come to standstill and business environment has not
improved at all.”
Source: The Kathmandu Post
