Citizens Bank Profit Climbs, but Rising Bad Loans Create Fresh Pressure

Kathmandu — Citizens Bank International has recorded a strong improvement in profitability in fiscal year 2082/83, posting a net profit of Rs 2.09 billion in the fourth quarter. The bank’s profit increased by 63.05 percent compared to Rs 1.28 billion reported during the same period last year.

The rise in profit indicates a significant improvement in the bank’s bottom-line performance, but the underlying financial indicators present a mixed picture. The major contributor to profit growth was not a rise in core banking income, but a sharp decline in loan-loss impairment expenses.

The bank’s impairment charge declined by 69.05 percent during the review period, falling to Rs 829.3 million from Rs 2.68 billion a year earlier. The lower provisioning requirement provided substantial support to profitability and helped the bank increase its operating profit.

Following the reduction in impairment expenses, the bank’s operating profit increased by 81.26 percent to Rs 3.60 billion, compared to Rs 1.98 billion in the previous year. This improvement reflects better cost management and reduced pressure from credit-loss provisions.

However, the bank’s core income source showed signs of weakness. Net interest income declined by 1.9 percent to Rs 6.29 billion during the review period. The fall in interest income indicates pressure on traditional banking earnings amid lower interest rates and slower credit expansion.

The bank’s deposit base continued to grow strongly. Customer deposits increased by 9.57 percent to Rs 231.73 billion from Rs 211.50 billion a year earlier. The growth in deposits reflects continued customer confidence and the bank’s ability to mobilize financial resources.

However, credit expansion remained weak compared to deposit growth. Loans and advances increased by only 0.76 percent to Rs 170.14 billion. The slow growth in lending suggests that the bank has been cautious in credit deployment amid economic uncertainty and concerns over asset quality.

The mismatch between rising deposits and limited loan growth could affect profitability in the future if the bank fails to effectively convert available liquidity into productive lending opportunities.

The bank’s capital position showed improvement during the review period. Paid-up capital increased by 5 percent to Rs 15.50 billion, while reserves and accumulated funds grew by 19.74 percent to Rs 8.86 billion. However, retained earnings declined by 32.78 percent to Rs 523.1 million.

The improvement in profitability also strengthened shareholder indicators. Earnings per share (EPS) increased to Rs 13.53 from Rs 8.71 a year earlier. Net worth per share improved to Rs 160.51 from Rs 155.38, while the capital adequacy ratio remained stable at 12.47 percent.

Despite better profitability, asset quality remains a major concern for Citizens Bank. The bank’s non-performing loan (NPL) ratio increased from 4.89 percent to 5.88 percent during the year. Rising bad loans indicate growing pressure on loan recovery and credit risk management.

An increase in NPLs could create future challenges by increasing provisioning requirements and reducing the quality of earning assets. Although lower impairment charges supported current-year profit growth, maintaining future profitability will depend on the bank’s ability to control bad loans.

The bank has identified rising operating costs, declining net interest income, increasing non-performing loans, and technology-related risks as major challenges ahead. It plans to strengthen loan recovery mechanisms, improve credit quality, expand digital banking services, and enhance information technology risk management.

The bank has also focused on expanding banking access in rural and underserved areas, increasing deposit mobilization, and developing customer-focused digital services. Strengthening paperless banking systems and improving overall risk management remain key strategic priorities.

Overall, Citizens Bank has delivered a strong improvement in reported profit, mainly due to a significant reduction in impairment expenses. However, declining core interest income and rising NPL levels indicate that the sustainability of future earnings will depend on stronger credit management, quality loan expansion, and effective recovery of stressed assets.