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RSDC Laghubitta's Q2 Report Shows Decline in Profitability and Key Metrics

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Nepse trading

RSDC Laghubitta's Q2 Report Shows Decline in Profitability and Key Metrics

RSDC Laghubitta Bittiya Sanstha has released its financial performance for the second quarter ending 29th Poush 2081. The microfinance company witnessed notable changes across its balance sheet and profit and loss statements compared to the same period in the previous fiscal year, Poush 2080.

  1. Shareholders' Equity:

    • Share capital remained unchanged at Rs. 944.35 million.

    • Retained earnings increased significantly by 34.77% to Rs. 131.14 million, up from Rs. 97.33 million.

    • Total reserves and surplus grew by 16.44%, reaching Rs. 304.91 million compared to Rs. 261.86 million in Poush 2080.

  2. Liabilities and Assets:

    • Deposits and borrowings surged by 14.33%, amounting to Rs. 6.13 billion compared to Rs. 5.36 billion in the previous year.

    • Loans and advances rose modestly by 3.12%, reaching Rs. 6.50 billion.

Profit and Loss Performance:

  1. Net Interest Income (NII):

    • The company recorded a decline in NII by 8.11%, falling to Rs. 112.12 million from Rs. 122.01 million in the previous year.

  2. Net Fee and Commission Income:

    • Fee and commission income saw a dramatic drop of 74.91%, standing at Rs. 2.03 million compared to Rs. 8.10 million in Poush 2080.

  3. Total Operating Income:

    • Operating income fell by 12.27%, amounting to Rs. 114.15 million.

  4. Impairment Charges:

    • Impairment charges soared by a staggering 524.99%, reaching Rs. 26.09 million, reflecting higher provisions for potential non-performing assets.

  5. Profitability:

    • Operating profit declined by 34.86% to Rs. 64.67 million.

    • The net profit for the period dropped sharply by 36.25%, totaling Rs. 44.18 million compared to Rs. 69.30 million last year.

    • Distributable profit fell by 22.68% to Rs. 36.71 million.

Earnings and Other Ratios:

  1. Earnings per share (EPS) dropped significantly by 6.58 points, standing at Rs. 9.36 compared to Rs. 15.94 in Poush 2080.

  2. Distributable EPS also declined to Rs. 7.77 from Rs. 10.79.

  3. The price-to-earnings (P/E) ratio rose to 71.6, indicating a higher valuation amidst declining earnings.

  4. The net worth per share slightly improved to Rs. 132.29, up from Rs. 131.01.

Operational Efficiency and Risk:

  1. The company’s capital-to-risk-weighted-assets ratio (Capital Fund to RWA) declined marginally to 18.02% from 15.44%.

  2. Non-performing loans (NPL) increased to 2.71%, reflecting a rise in asset quality concerns compared to the 1.82% reported in the previous year.

  3. The cost of funds improved to 7.00% from 11.08%, suggesting better cost management.

  4. The base rate declined to 7.78% from 11.90%.

  5. The interest rate spread improved to 2.18%, up from 1.78%.

The decline in profitability and operating metrics reflects challenging market conditions and rising impairment charges. While the company managed to grow its deposits and maintained a stable loan portfolio, the substantial drop in earnings and rising NPL levels highlight the need for strengthened credit risk management. The improved cost of funds and interest rate spread are positive developments, indicating some operational efficiency.

Investors may find the higher P/E ratio concerning given the declining earnings, while the stable net worth per share indicates consistency in shareholders' value.

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