Banks’ profit growth slows down
KATHMANDU, MAY 21 -
A prolonged liquidity crunch, increased cost of funds, decline in deposits and squeeze in the spread rate have hit the profitability of commercial banks. Going by their third quarter reports, it is clear that they won’t enjoy the same kind of profits they did in previous years.
Nepal’s commercial banks raked in Rs 10.79 billion in net profits in Q3. Their profitability has increased only 4.65 percent. Last year, the profit growth rate was 6.72 percent. Four new banks—Mega Bank, Commerz and Trust Bank, Civil Bank and Century Commercial Bank—started operations this fiscal year. “If we exclude these four banks, the result would be much bleaker,” said Sashin Joshi, chief executive officer of NIC Bank. Bankers admit that growth in net profits would slow down by the end of the fiscal year. “The picture will be much worse than what we’ve seen in the third quarter,” added Joshi.
Rastriya Banijya Bank (RBB) was the highest earner with a net profit of Rs 1.26 billion followed by Agricultural Development Bank Limited (ADBL) with a net profit of Rs 1.01 billion.
Among private commercial banks, Nepal Investment Bank Limited (NIBL) earned the highest net profit of Rs. 959.65 million. Nabil Bank and Standard Chartered Bank are also in top five list in terms of net profits.
The third quarterly report shows that non-performing loans (NPL), provisioning and cost of funds have all increased. Bankers mainly attribute the rise in NPL to slow recovery of realty loans.
Signs of default on realty loans mean a rise in NPL and provisioning. The NPL of Nepal Bangladesh Bank (NBB) has touched almost 20 percent from 14.97 percent in the same period last year. Among the banks whose NPL has increased are Machhapuchchhre Bank, Nabil Bank, Global Bank, Nepal Bank and NCC Bank.
The banks have managed to increase their deposits by 10.46 in the third quarter. As of Q3, total deposits of commercial banks rose to Rs 647.35 billion from last year’s Rs 586 billion. As usual, RBB has the largest deposit base followed by NIBL and Nabil Bank.
Lending by commercial banks went up 10.18 percent to reach Rs 514.31 billion. NIBL was the biggest lender among commercial banks with a credit exposure of Rs 42.60 billion. Bankers say that if government spending improves in the last quarter of the fiscal year, there might be an improvement in deposits and liquidity.
Commercial Banks in Q3
(In Billion)
Particulars 2010-11 2009-10
Net Profits Rs 10.79 Rs 10.31
Deposit Rs 647.35 Rs 586
Lending Rs 514.31 Rs 466.77
Cost of Funds 8.14 % 5.13 %
NPL 2.63 % 2.09 %
Provisioning 4.11 3.69
Banks in Q3, 2010-11
Growth in net profit 4.65 percent
Growth in deposits 10.46 percent
Growth in lending 10.18 percent
Banks in Q3, 2009-10
Growth in net profit 6.72 percent
Growth in deposits 16.60 percent
Growth in lending 30.94 percent
Source: Kantipur
A prolonged liquidity crunch, increased cost of funds, decline in deposits and squeeze in the spread rate have hit the profitability of commercial banks. Going by their third quarter reports, it is clear that they won’t enjoy the same kind of profits they did in previous years.
Nepal’s commercial banks raked in Rs 10.79 billion in net profits in Q3. Their profitability has increased only 4.65 percent. Last year, the profit growth rate was 6.72 percent. Four new banks—Mega Bank, Commerz and Trust Bank, Civil Bank and Century Commercial Bank—started operations this fiscal year. “If we exclude these four banks, the result would be much bleaker,” said Sashin Joshi, chief executive officer of NIC Bank. Bankers admit that growth in net profits would slow down by the end of the fiscal year. “The picture will be much worse than what we’ve seen in the third quarter,” added Joshi.
Rastriya Banijya Bank (RBB) was the highest earner with a net profit of Rs 1.26 billion followed by Agricultural Development Bank Limited (ADBL) with a net profit of Rs 1.01 billion.
Among private commercial banks, Nepal Investment Bank Limited (NIBL) earned the highest net profit of Rs. 959.65 million. Nabil Bank and Standard Chartered Bank are also in top five list in terms of net profits.
The third quarterly report shows that non-performing loans (NPL), provisioning and cost of funds have all increased. Bankers mainly attribute the rise in NPL to slow recovery of realty loans.
Signs of default on realty loans mean a rise in NPL and provisioning. The NPL of Nepal Bangladesh Bank (NBB) has touched almost 20 percent from 14.97 percent in the same period last year. Among the banks whose NPL has increased are Machhapuchchhre Bank, Nabil Bank, Global Bank, Nepal Bank and NCC Bank.
The banks have managed to increase their deposits by 10.46 in the third quarter. As of Q3, total deposits of commercial banks rose to Rs 647.35 billion from last year’s Rs 586 billion. As usual, RBB has the largest deposit base followed by NIBL and Nabil Bank.
Lending by commercial banks went up 10.18 percent to reach Rs 514.31 billion. NIBL was the biggest lender among commercial banks with a credit exposure of Rs 42.60 billion. Bankers say that if government spending improves in the last quarter of the fiscal year, there might be an improvement in deposits and liquidity.
Commercial Banks in Q3
(In Billion)
Particulars 2010-11 2009-10
Net Profits Rs 10.79 Rs 10.31
Deposit Rs 647.35 Rs 586
Lending Rs 514.31 Rs 466.77
Cost of Funds 8.14 % 5.13 %
NPL 2.63 % 2.09 %
Provisioning 4.11 3.69
Banks in Q3, 2010-11
Growth in net profit 4.65 percent
Growth in deposits 10.46 percent
Growth in lending 10.18 percent
Banks in Q3, 2009-10
Growth in net profit 6.72 percent
Growth in deposits 16.60 percent
Growth in lending 30.94 percent
Source: Kantipur
