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Detailed Financial Analysis of Commercial Banks: Profit Performance in the Second Quarter of the Fiscal Year

Author

NEPSE trading

Detailed Financial Analysis of Commercial Banks: Profit Performance in the Second Quarter of the Fiscal Year

Commercial banks in Nepal have released their financial reports for the second quarter of FY 2080, revealing a decline in overall profits compared to the same period in FY 2079. The total net profit stood at NPR 27.43 billion, down by 4.62% from the NPR 28.76 billion recorded during the same period last year.

This decline signals growing challenges in the banking sector, where out of 20 banks, 11 managed to increase profits, while 9 saw a significant drop.

Profit Comparison Table

Bank

This Year (in '000)

Last Year (in '000)

Change (%)

Nabil Bank

3,244,277

3,203,079

1.29%

Global IME Bank

3,053,489

2,042,329

49.51%

Nepal Investment Mega Bank

2,832,326

1,801,944

57.18%

Everest Bank

2,074,763

1,713,148

21.11%

NMB Bank

2,003,540

1,375,987

45.61%

Prime Commercial Bank

1,869,950

2,182,927

-14.34%

Standard Chartered Bank

1,640,630

1,726,428

-4.97%

Himalayan Bank

1,518,770

1,503,974

0.98%

Prabhu Bank

1,336,138

720,341

85.49%

Sanima Bank

1,192,311

1,138,614

4.72%

Laxmi Sunrise Bank

1,162,076

1,059,210

9.71%

Agriculture Development Bank

957,549

1,355,275

-29.35%

Nepal SBI Bank

900,281

840,541

7.11%

Machhapuchchhre Bank

807,327

805,380

0.24%

Rastriya Banijya Bank

763,033

2,015,388

-62.14%

Citizens Bank International

661,828

782,784

-15.45%

Siddhartha Bank

530,229

1,136,822

-53.36%

Nepal Bank

461,017

590,051

-21.87%

Kumari Bank

275,730

867,211

-68.20%

NIC Asia Bank

151,730

1,903,807

-92.03%

Total

27,436,994

28,765,240

-4.62%

Banks with Increased Profits

  1. Prabhu Bank (85.49% Increase)

    • Prabhu Bank reported a remarkable 85.49% increase in profit, reaching NPR 1.33 billion this year compared to NPR 720 million last year.

    • Reasons for growth: Cost reduction, sustainable investment strategies, and expanding customer base.

  2. Nepal Investment Mega Bank (57.18% Increase)

    • The bank achieved NPR 2.83 billion in profit, up from NPR 1.80 billion last year.

    • Key factor: Merger synergies and expanded lending capabilities.

  3. Global IME Bank (49.51% Increase)

    • Global IME Bank's profit surged to NPR 3.05 billion.

    • Driving factor: Increased international trade transactions and project financing.

  4. NMB Bank (45.61% Increase)

    • NMB Bank reported NPR 2 billion in profit, with significant contributions from agricultural loans and SME-focused initiatives.

Banks with Declined Profits

  1. NIC Asia Bank (-92.03% Decrease)

    • NIC Asia Bank faced the steepest decline, with profits dropping from NPR 1.90 billion to just NPR 151.7 million.

    • Key issues: High interest rates, declining loan returns, and unstable lending practices.

  2. Kumari Bank (-68.20% Decrease)

    • Profits fell from NPR 867.2 million to NPR 275.7 million.

  3. Rastriya Banijya Bank (-62.14% Decrease)

    • Profit dropped from NPR 2 billion to NPR 763 million.

  4. Siddhartha Bank (-53.36% Decrease)

    • Siddhartha Bank's profit halved to NPR 530 million.

Nabil Bank: The Top Earner

Nabil Bank remained the highest profit earner, recording NPR 3.24 billion in net profit, a modest increase of 1.29% over last year.

  • Strengths: Stability, strong customer trust, and effective management practices.

Reasons for Profit Decline

  1. Rising Interest Rates

    • Increased interest rates reduced the demand for loans, negatively impacting interest income.

  2. Economic Slowdown

    • A sluggish economy has resulted in reduced investments and banking activities.

  3. High Operational Costs

    • Failure to reduce administrative expenses contributed to declining profits for several banks.

  4. Weak Risk Management

    • Challenges in recovering loans impacted the profitability of multiple banks.

The overall decline in profits highlights the need for strategic improvements in the banking sector.

  • Banks must prioritize cost control, diversified loan portfolios, and effective risk management.

  • For investors, stable performers like Nabil Bank and growth-focused banks like Prabhu Bank and Global IME Bank are safer bets.

  • Banks undergoing mergers, such as Nepal Investment Mega Bank, should be closely monitored for their potential growth.

The next quarter's performance will reveal whether these banks can overcome current challenges and leverage opportunities for sustainable growth.

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