Significant Decline in Siddhartha Bank's Profit: Impairment Charge as the Key Reason
Author
Nepse trading
Siddhartha Bank Limited has published its financial report for the second quarter of FY 2081. According to the report, the bank has experienced a significant decline in key financial indicators such as net profit, operating profit, and earnings per share (EPS). The primary reason cited for this decline is the substantial increase in impairment charges.
Net Profit Drops by 53.36%
As of the second quarter of the previous fiscal year, the bank had earned a net profit of NPR 1.13 billion. However, by the same period this fiscal year, the net profit has dropped to NPR 530.2 million, marking a 53.36% decline.
The bank’s impairment charge has surged from NPR 1.18 billion last year to NPR 2.27 billion, significantly impacting its profitability.
Improvement in Interest and Commission Income
On the positive side, the bank has reported:
Net interest income increased by 0.30%, reaching NPR 4.11 billion.
Fee and commission income grew by 18.68%, reaching NPR 78 million.
Despite these improvements, they were not sufficient to offset the impact of rising impairment charges.
Sharp Decline in Operating Profit
The bank’s total operating income rose by 4.40%, reaching NPR 5.27 billion. However, due to higher impairment charges, the operating profit plunged by 54.37%, limiting it to NPR 75.5 million.
EPS Declines
The bank’s Earnings Per Share (EPS) dropped from 16.18 last year to 7.53, a decline of NPR 8.65, reflecting a notable reduction in returns for shareholders.
Capital Structure and Financial Position
Paid-up capital: NPR 14.08 billion.
Reserve fund: NPR 13.89 billion.
Distributable profit: Negative NPR 361.9 million.
Credit-to-Deposit Ratio (CD Ratio): 83.78%.
Other Key Indicators
Price-to-Earnings (PE) Ratio: 39.21.
Base rate: 6.93%.
Capital Adequacy Ratio: 11.19%.
Non-Performing Loan (NPL) Ratio: 4.50%.
Siddhartha Bank's financial indicators reveal the impact of higher impairment charges, increased operating expenses, and negative distributable profit. However, the improvement in net interest income and operating income serves as a positive sign, The bank must focus on managing its impairment charges and improving profitability in the near future to stabilize its financial performance.
