Everest Bank’s Profit Tops Rs 5 Billion as Fee Income and Lending Support Growth

Kathmandu — Everest Bank Limited reported a net profit of Rs 5.07 billion for the fiscal year 2025/26, supported by stronger fee income, an expansion in lending and improved distributable earnings. The bank’s unaudited fourth-quarter financial statement shows that profit increased by 4.75 percent from Rs 4.84 billion in the previous fiscal year.

The profit growth, however, was moderate rather than exceptional. While the bank earned about Rs 230 million more than a year earlier, the increase was slower than the expansion in its loan portfolio and operating income. This suggests that declining lending rates and pressure on interest margins limited the amount of additional profit generated from business growth.

Net interest income, traditionally the largest source of income for a commercial bank, increased by less than 1 percent. It rose from Rs 9.10 billion to Rs 9.19 billion during the review period. The marginal increase indicates that Everest Bank was unable to generate substantial additional interest income despite expanding its credit portfolio by more than 10 percent.

A decline in market interest rates appears to have constrained the bank’s core banking income. Lower rates can encourage borrowing and reduce repayment pressure on existing borrowers, but they also narrow the difference between the interest earned on loans and the interest paid on deposits. For banks, this compression can weaken profitability unless it is offset by higher lending volumes, lower funding costs or stronger non-interest income.

Everest Bank partly compensated for the weak growth in interest income through a sharp increase in fees and commissions. Net fee and commission income climbed by 27.23 percent, from Rs 1.53 billion to Rs 1.95 billion. The increase of more than Rs 416 million was substantially larger than the rise in net interest income.

The result points to a gradual diversification of the bank’s revenue base. Income from remittance services, cards, digital transactions, guarantees, trade finance and other banking services is generally less directly affected by changes in lending rates. Stronger fee income can therefore provide greater earnings stability when interest margins are under pressure.

The bank’s total operating income increased by 6.21 percent to Rs 11.86 billion from Rs 11.17 billion. Its operating profit stood at Rs 7.38 billion. The difference between operating income growth and final profit growth suggests that operating expenses, provisioning requirements, taxes or other adjustments absorbed part of the additional revenue.

Distributable earnings grow faster than net profit

Everest Bank’s distributable profit rose by 12.98 percent to Rs 4.58 billion from Rs 4.05 billion in the previous year. The increase is significant because distributable profit is one of the main indicators used to assess a bank’s capacity to pay dividends.

Based on the bank’s paid-up capital, the reported distributable profit is equivalent to approximately Rs 33.39 per share. This provides an indication of potential dividend capacity, but it should not be interpreted as a confirmed dividend rate. Any dividend proposal will depend on the audited financial results, regulatory adjustments, capital requirements and approval from Nepal Rastra Bank and the bank’s annual general meeting.

Despite the increase in overall profit, earnings per share declined from Rs 37.39 to Rs 36.95. The fall of about 1.18 percent reflects the effect of the bank’s expanding share capital. Paid-up capital increased by 6 percent to Rs 13.72 billion, while net profit grew by 4.75 percent. As the number of shares increased faster than profit, the earnings attributable to each share declined slightly.

This distinction is important for investors. A rise in total profit does not necessarily result in higher returns per share when additional capital is introduced. Everest Bank will need to generate profit growth above the rate of capital expansion to prevent further dilution of per-share earnings.

The bank reported a return on assets of 1.36 percent and a return on equity of 15.10 percent. These figures indicate that the bank continued to generate a relatively healthy return from its asset and capital base, although future returns may come under pressure if lending rates continue to decline or credit costs increase.

Net worth per share reached Rs 256.47. Against a reported market price of Rs 695 per share, the stock was trading at about 2.7 times its book value and 18.81 times annual earnings. Such a valuation suggests that investors are assigning a premium to the bank’s profitability, asset quality, institutional reputation and expected dividend capacity. It also means that any deterioration in earnings or asset quality could lead to greater sensitivity in the share price.

Lending expands faster than deposits

Everest Bank increased loans and advances by 10.37 percent, from Rs 213.43 billion to Rs 235.56 billion. Customer deposits, meanwhile, rose by 5.76 percent to Rs 316.01 billion from Rs 298.81 billion.

The faster growth in lending than deposits indicates that the bank deployed a larger portion of its deposit base into income-generating assets. A simple comparison of loans with customer deposits shows that the ratio increased from approximately 71.4 percent to 74.5 percent.

This is not the same as the regulatory credit-to-deposit ratio calculated under Nepal Rastra Bank’s methodology, but it provides a broad indication of balance-sheet movement. The rise suggests improved use of available liquidity, although sustained loan growth above deposit growth could eventually narrow the bank’s liquidity cushion and increase competition for deposits.

The bank’s reserves and surplus stood at Rs 15.73 billion, higher than its paid-up capital of Rs 13.72 billion. A sizeable reserve base provides additional protection against unexpected losses and supports future business expansion. It also strengthens the bank’s ability to absorb regulatory and economic shocks without relying immediately on fresh capital.

Bad loans remain low but require attention

The bank’s non-performing loan ratio increased from 0.38 percent to 0.49 percent. The rise of 0.11 percentage points appears small, and the ratio remains low in absolute terms. However, measured against the previous year’s unusually low base, non-performing loans increased by nearly 29 percent.

The increase does not indicate an immediate asset-quality problem, but it should not be dismissed. The bank expanded lending at a time when Nepal’s private sector continued to face weak demand, slow economic activity and pressure on business cash flows. Loans issued during a period of aggressive credit expansion may take time to display repayment problems.

Future financial results will therefore depend not only on how much the bank lends but also on the quality of new borrowers and the effectiveness of loan monitoring and recovery. A continued rise in non-performing loans could increase provisioning expenses and offset the benefit of credit growth.

The bank’s base rate declined from 5.36 percent to 4.25 percent, a reduction of 1.11 percentage points. The lower base rate should make borrowing more affordable and could support credit demand. For the bank, however, it also creates pressure to maintain interest spreads and profitability.

The central challenge is that cheaper loans do not automatically produce stronger credit growth. Businesses borrow when they see opportunities to invest and expect adequate returns. Weak domestic demand, delayed public infrastructure spending and uncertainty over economic policy can discourage borrowing even when interest rates are low.

Regulatory provisions exceed accounting estimates

Everest Bank said it had calculated expected credit losses under Nepal Financial Reporting Standard 9. However, the loan-loss provision required under Nepal Rastra Bank’s regulatory framework was higher than the amount calculated under the accounting model. The bank therefore maintained provisions in accordance with the central bank’s requirement.

This treatment reflects regulatory prudence. An expected credit-loss model uses historical experience, current borrower conditions and forecasts to estimate potential losses. Regulatory provisions may impose stricter minimum requirements, particularly where the central bank considers additional protection necessary.

Higher provisioning reduces profit available in the short term but strengthens the bank’s capacity to absorb future loan losses. The difference between accounting estimates and regulatory provisions also shows that reported asset quality cannot be assessed solely from the non-performing loan ratio.

The bank said it recognised interest income in accordance with Nepal Rastra Bank’s 2025 guidance on interest-income recognition. It also made regulatory adjustments relating to accrued interest on loans, employee loans, non-banking assets and interest capitalised on term loans. These adjustments are intended to prevent banks from recognising income that has not been sufficiently realised.

Strategic partnership remains significant

India’s state-owned Punjab National Bank holds a 20.03 percent promoter stake in Everest Bank and is represented on its board. The relationship provides Everest Bank with institutional and technical links to a large foreign banking organisation.

Such a partnership can support correspondent banking, remittance services, international trade transactions and technical knowledge. At the same time, related-party transactions and board representation require strong governance safeguards to ensure that decisions remain transparent and protect the interests of all shareholders.

The bank reported no significant transactions with directors, the chief executive or senior management beyond remuneration provided under its service rules.

Economic stability has yet to translate into strong credit demand

Everest Bank described Nepal’s economy as relatively stable, supported by remittance inflows, foreign exchange reserves, tourism recovery and an improved external-sector position. These indicators have reduced immediate concerns about foreign currency and balance-of-payments pressure.

However, external stability has not yet produced a strong domestic investment cycle. The bank acknowledged that private-sector credit demand remained below expectations despite declining interest rates. This reflects a broader disconnect between high liquidity in the financial system and limited willingness among businesses to undertake new investment.

Remittance-driven liquidity can strengthen deposits and consumption, but it does not automatically create productive investment. A sustained recovery in credit demand is likely to require stronger capital expenditure by the government, faster implementation of infrastructure projects, greater policy certainty and improved confidence in the private sector.

Digital expansion brings new risks

Everest Bank plans to prioritise digital banking, technology, cybersecurity and human-resource development. It also intends to expand online services, introduce new financial products, improve customer experience and control operating expenses.

Digital expansion can help the bank increase transaction volumes and fee income while reducing dependence on physical branches. It can also improve access to banking services and lower the cost of serving customers.

The strategy carries additional risks, however. Greater reliance on digital systems increases exposure to fraud, data theft, service disruption and cyberattacks. Investment in technology must therefore be accompanied by stronger authentication, real-time transaction monitoring, staff training, data protection and incident-response systems.

The bank also identified excess liquidity, slow credit expansion, rising operating costs, regulatory changes and the need to increase non-interest income as key challenges. Externally, geopolitical tensions, interest-rate volatility, cybercrime and changing international financial standards could affect operations.

Nepal’s presence on the Financial Action Task Force monitoring list may increase compliance costs for domestic banks. International correspondent institutions could apply greater scrutiny to transactions involving Nepal, making effective anti-money laundering and counter-terrorism financing controls increasingly important.

Stable performance, but pressure on core earnings persists

Overall, Everest Bank’s financial position remained strong during the fiscal year. Profit exceeded Rs 5 billion, distributable earnings improved, lending expanded and non-performing loans remained below 1 percent. The sharp rise in fee income also reduced some of the bank’s dependence on traditional interest revenue.

The underlying figures nevertheless reveal several areas requiring attention. Core interest income was almost stagnant, earnings per share declined, loans grew faster than deposits and the bad-loan ratio moved upward from a very low base. A lower base rate may support borrowers, but it is also likely to keep pressure on margins.

The bank’s next phase of growth will depend on whether it can convert abundant liquidity into sound lending without weakening asset quality. Sustaining profit growth will also require greater fee-based income, disciplined cost management, effective loan recovery and continued investment in digital security and regulatory compliance.