Excel Development Bank Returns to Profit as Loan-Loss Reversal Lifts Earnings

Kathmandu — Excel Development Bank Limited has reported a sharp turnaround in its financial performance for fiscal year 2082/83, with net profit rising to Rs 309.4 million by the end of the fourth quarter. The bank had earned only Rs 1.35 million in the corresponding period of the previous fiscal year.

The latest profit is more than 229 times the previous year’s figure. In percentage terms, the increase exceeds 22,800 percent. However, the unusually high growth rate largely reflects the extremely low profit base recorded a year earlier and should not be interpreted as growth generated entirely through regular banking operations.

The most important factor behind the recovery was the reversal of loan-loss provisions. The bank had booked an impairment charge of Rs 172.6 million in the previous fiscal year. During the latest period, improved loan recovery enabled it to reverse Rs 194.2 million previously set aside against possible credit losses.

This reversal substantially strengthened the bank’s earnings. The amount written back was equivalent to nearly 63 percent of the reported net profit, although its precise after-tax contribution cannot be determined from the available figures alone. The result therefore indicates better loan recovery, but it also shows that a significant portion of the year’s profit came from a non-recurring accounting adjustment rather than interest income alone.

The bank’s core income nevertheless improved. Net interest income increased by 14.72 percent, rising from Rs 565.5 million to Rs 648.8 million. This suggests that the bank benefited from growth in its interest-earning assets, improved interest spreads or lower funding pressure during the review period.

Operating profit rose from Rs 112.1 million to Rs 539.5 million, an increase of about 381 percent. The provision reversal was the main reason for this sharp expansion, while the moderate rise in net interest income provided support from the bank’s regular operations.

A major improvement was also seen in the bank’s dividend-paying capacity. After remaining in a negative distributable-profit position in the previous year, the bank reported total distributable profit of Rs 179.7 million following regulatory adjustments and the settlement of accumulated losses.

Distributable profit per share stood at Rs 14.38. The figure indicates that the bank has regained the financial capacity to propose a dividend, but it should not be treated as a guaranteed dividend rate. Any distribution will depend on the board’s recommendation, final audited accounts, capital requirements and regulatory approval.

The bank’s deposit base expanded faster than its loan portfolio. Customer deposits increased by 12.63 percent, from Rs 16.49 billion to Rs 18.58 billion, while loans and advances rose by 8.82 percent, from Rs 12.11 billion to Rs 13.18 billion.

As a result, the ratio of loans to customer deposits declined from approximately 73.4 percent to 70.9 percent. This points to a relatively stronger liquidity position, but it may also mean that the bank was unable to convert all additional deposits into income-generating loans. Continued slower credit growth could restrict future interest income unless the excess liquidity is invested productively.

The bank’s total assets increased by about 12.3 percent, reaching Rs 21.32 billion from Rs 18.98 billion. Its paid-up capital remained at Rs 1.25 billion, while reserves, retained earnings, share premium and other funds together reached Rs 972.9 million. The improvement in retained funds provides the bank with a stronger cushion against future credit and operational risks.

Overall, Excel Development Bank’s latest results show a clear recovery in profitability, loan collection and dividend capacity. Growth in net interest income and deposits indicates progress in its core business, while the return to positive distributable profit is favourable for shareholders.

However, the quality and sustainability of the profit require careful interpretation. Because the impairment reversal made a major contribution to earnings, the same level of profit may not be repeated once the benefit of the write-back disappears. The bank’s longer-term performance will depend on maintaining asset quality, expanding sound lending and generating stronger recurring income without relying heavily on provision reversals.