BoK profit drops for third quarter in a row due to Melamchi debacle

ShareSansar, April 29:

For the third quarter in a row Bank of Kathmandu Limited (BoK) has reported a drop in its net profit due to a huge amount it had to provision for the possible losses following the Melamchi project row.

According to the unaudited financial report for the third quarter the Bok has published today, its net profit dropped from Rs 42.78 crore in the third quarter of the last fiscal year 2069/70 to Rs 35.49 crore by the end of the third quarter of the current fiscal 2070/71.

It may be noted that the BoK had reported 17.25 percent drop in its profit in the second quarter of the current fiscal.

As per the balance sheet of the commercial bank, which has been in trouble owing to its counter balance guarantee for an elusive Chinese company in the Melamchi Drinking Water Project row, the profit was largely stemmed by a provisioning of Rs 11.02 crore.

Its  core business has also suffered slightly as its net interest income has decreased from Rs 89.81 crore in the third quarter of the last fiscal year, down to Rs 88.76 by the end of the current third quarter.

BoK, nonetheless, mobilized Rs 29.67 arba in deposit and Rs 26.10 arba in loan as compared to Rs 24.15 arba in deposit and Rs 21.62 arba in the corresponding quarter of the last fiscal year.

An motivating thing about the bank’s balance sheet is that its non-performing loan has decreased by the end of the third quarter to 1.52 percent, down from 1.86 percent in the same period of the previous fiscal year.

Its EPS (annualized) is now priced at Rs 24.65 and its net worth per share stands at 190.59.

Notably, following an order of Appellate Court Patan earlier in January, the central bank had asked both BoK and Himalayan Bank to deposit a sum equivalent to the counter guarantee they have provided to the Chinese contractor which was fired for non-performance by the Melamchi Project.

The two commercial banks were also asked to keep one third of the amount in reserves as contingent strategy so that even if they have to maintain the provisioning of counter guarantee amount, their net worth would not be affected.

These banks had provided a counter guarantee to China Construction Bank in the form of a performance security of US$ 6.62 million and guarantee for advance payment of US$ 6.62 million and 1.4 million euros.

The Chinese bank had stood guarantee for the Chinese contractor with which the Melamchi project has terminated its contract.