Banks see increased gains in Q2

KATHMANDU, FEB 17:

Commercial banks have reaped significant profits following the accelerated total lending growth rate that overtook deposit growth rate, in second quarter.

The increment in net interest income of commercial banks has been reflected both in inflated operating profit and net profit. Net profit of the banks has jumped by 52 per cent in comparison to the corresponding period of last fiscal year, according to their unaudited financial data for the second quarter. Their profit stands at around Rs 7.9 billion as of mid-January, which stood at Rs 5.3 billion a year back.

Along with net profit, the operating profit of the banks has grown by about 75 per cent in the period. Banks have earned an operating profit of Rs 10.8 billion in the first half of the fiscal year. Likewise, net interest income has also gone up by 35 per cent in the review period.

The increased net interest income and operating profit signal that the income of banks is generated by their core banking activities — collecting deposits and floating loans for interest. The operating profit is the profit earned from a bank’s normal business operations and investments sans any windfall gains and losses.

Despite the difficult economic conditions, lending of commercial banks went up by 21.6 per cent during the first half of the current fiscal year. Total lending has reached Rs 98 billion in the second quarter while deposit grew by 17 per cent.

Banks have become aggressive in terms of lending since the beginning of the fiscal — especially among smaller consumable loans. On the other hand, deposit growth rate has cooled down.

The smaller deposit growth on one hand and increased lending has helped in the surge of banks’ interest income.

Moreover, the higher interest being charged for lending and the deposit interest contracting has further fuelled the banks’ income. The net spread rate of the banks has increased to 4.5 per cent from 3.5 per cent in the corresponding period a year back, signifying the increasing gap between deposit and lending rates at banks.

The total credit that has outpaced deposits has even increased the credit to deposit ratio of the banks. In the second quarter, the CD Ratio increased to 75.84 per cent from 72 per cent in the previous quarter.

Among the banks, only Kist Bank has recorded a loss. Nabil Bank became the biggest profit making bank that earned Rs 1.11 billion in profits.

Likewise, Machhapuchchhre Bank that was going through troubled times last year has attained about 450 per cent growth in its net earnings at Rs 32.9 million profit.

Source: THT