Profits of banks and financial institutions (BFIs) dropped 16.05 percent to Rs 61.96 billion in the first 11 months of the current fiscal year mainly due to a decline in their businesses and soaring non-performing loans.
A report of Nepal Rastra Bank (NRB) shows that the BFIs earned profits of Rs 73.81 billion during mid-July 2023 and mid-June 2024. The amount was Rs 11.85 billion less compared to the same period last year.
According to the bankers, the profits of BFIs declined due to the heavy fall in the demand for loans triggered by the ongoing economic slowdown. “As a result, the BFIs are overwhelmed with excess liquidity while they are bound to reduce the interest rates on loans,” said a banker.
Due to having excessive liquidity, the BFIs are compelled to park their money in the NRB at just three percent interest rate under the standing deposit facility introduced by the central bank in February this year. Likewise, the BFIs have also been witnessing increased bad debts due to which they have to maintain huge amounts of their money in loan loss provision.
Meanwhile, commercial banks earned net profits of Rs 56.50 billion in the review period, down from Rs 67.23 billion in the corresponding period of last FY. In the entire FY 2022/23, the banks earned profits of Rs 70.04 billion.
In the review period, the banks secured interest earnings of Rs 618.46 billion, an increase of 3.08 percent. On the other hand, the interest expenses also increased 4.77 percent to Rs 419.80 billion. It shows that the banks’ expenses on interests grew more than their earnings from interests.
Six out of 20 commercial banks had their profits inclined during the review period. Agriculture Development Bank witnessed the biggest jump in its profits, from Rs 1.56 billion to Rs 3.02 billion. Prabhu Bank, Prime Bank, Everest Bank, Citizens Bank and Siddhartha Bank also had their profits increased.
The state-owned Nepal Bank Limited witnessed the biggest drop of 65.01 percent in profits. The bank earned profits of Rs 1.08 billion.
Although Nabil Bank was recorded as the topmost gainer with its profits amounting to Rs 6.34 billion, the bank witnessed its profits decline 10.90 percent in the review period. Global IME was in second position with profits of Rs 5.09 billion, which however was a drop from Rs 6.51 billion.
Despite an overall decline in their profits, the commercial banks were successful in increasing their profits by Rs 7.85 billion in the past one month. According to the NRB, the net profits of the banks, which stood at Rs 48.60 billion as of mid-May of this FY, rose to Rs 56.45 billion as of mid-June.
