Everest Bank Achieves 21.11% Profit Growth in Second Quarter of FY 2081: A Detailed Analysis

Everest Bank Limited (EBL), one of Nepal’s prominent financial institutions, has published its unaudited financial results for the second quarter of FY 2081, showing a robust performance across key metrics. The bank’s net profit surged by 21.11% to NPR 2.07 billion, compared to NPR 1.71 billion in the same period last year (Poush 2080). This strong performance highlights Everest Bank’s effective management strategies and its ability to adapt to changing market conditions.

1. Net Profit Growth

   • The bank’s net profit rose by NPR 361.6 million in a year, driven by growth in core revenue streams and reduced costs. This marks a significant achievement for the bank, reflecting strong operational efficiency and growing customer trust.

2. Net Interest Income (NII):

   • NII, the primary revenue source for the bank, increased by 19.11%, from NPR 3.62 billion in Poush 2080 to NPR 4.31 billion in Poush 2081. This indicates better management of lending and borrowing rates and an expanded loan portfolio.

3. Fee and Commission Income:

   • The bank’s fee-based revenue also grew, with net fee and commission income rising by 14.46% to NPR 765 million, up from NPR 668 million in the previous year. This demonstrates Everest Bank’s growing ability to diversify its income sources through services like remittance, card issuance, and trade finance.

4. Operating Income:

   • The total operating income surged by 17.69% to NPR 5.29 billion, up from NPR 4.50 billion in Poush 2080, further solidifying the bank’s financial strength.

5. Reduction in Impairment Charges:

   • One of the significant contributors to the profit growth was the reduction in impairment charges, which dropped by NPR 82.7 million, from NPR 432.3 million in Poush 2080 to NPR 349.6 million in Poush 2081. This reflects improved asset quality and better risk management practices.

6. Operating Profit:

   • The operating profit rose significantly by 26.97% to NPR 3.10 billion, compared to NPR 2.45 billion last year. This underscores the bank’s ability to control expenses while growing revenues.

Key Ratios and Indicators

1. Earnings Per Share (EPS):

   • The bank’s EPS improved by 2.94, reaching NPR 32.06. This increase reflects higher returns for shareholders.

2. Net Worth Per Share:

   • Everest Bank’s net worth per share stood at NPR 225.79, indicating a solid financial base and higher equity strength.

3. PE Ratio:

   • The PE Ratio remained stable at 18.12, showing consistent valuation levels relative to earnings growth.

4. Base Rate and Interest Rate Spread:

   • The base rate decreased significantly from 8.87% in Poush 2080 to 5.84% in Poush 2081. This drop in base rate makes Everest Bank’s loans more competitive, which is likely to attract more borrowers.

   • The interest rate spread slightly decreased from 4.00% to 3.99%, indicating tighter margins on interest-based income.

Deposits and Loans

1. Customer Deposits:

   • The bank’s deposits grew by 7.80%, reaching NPR 250.43 billion, a testament to Everest Bank’s reputation and customer confidence.

2. Loan Portfolio:

   • Loans and advances increased significantly by 16.96%, totaling NPR 208.43 billion. This reflects the bank’s focus on expanding credit facilities while maintaining asset quality.

3. Loan-to-Deposit Ratio (LDR):

   • The LDR increased to 85.39%, indicating efficient utilization of customer deposits in revenue-generating loans.

Challenges Ahead

1. Declining Base Rate:

   • While the lower base rate attracts borrowers, it poses a challenge for maintaining net interest margins if lending volumes do not increase proportionally.

2. Asset Quality:

   • Although impairment charges have decreased, the bank must remain vigilant to ensure non-performing loans (NPLs) do not rise amid potential economic uncertainties.

Everest Bank’s second-quarter performance indicates strong operational resilience and strategic focus on revenue growth. The increase in core income streams like interest and fees, coupled with reduced impairment charges, highlights efficient management practices. However, the bank needs to navigate challenges such as tightening margins and competitive pressures in the lending market.

The growth in deposits and loans reflects the bank’s increasing market penetration, while improved shareholder returns, as evidenced by higher EPS, solidifies its position as one of Nepal’s leading banks. Moving forward, Everest Bank must balance growth and risk management to sustain its upward trajectory.