Majority of commercial banks report rise in net profit

KATHMANDU, NOV 20 -

A majority of the commercial banks have registered a growth in net profit in the first quarter of the current fiscal year. The increase in profit, their financial reports suggest, is in line with the recent surge in lending although banks had complained about low demands for loans last fiscal year.

Interest is the largest contributor to the overall earning of the commercial banks . The banks managed the growth in net profit despite being forced to make increased provisioning for defaulted realty loans.

Bankers attributed increased lending due to lower interest rate as well as decrease in interest of deposits over the last six months for the boost in their profit.

“The growth in net profit is particularly due to reduction of interest rate in deposits that reduced cost of banks ,” said Sashin Joshi, CEO of NIC Bank. “The impact of reduced interest rate in lending will be reflected on financial results of the second quarter.”

Another reason for the growth in net profit, according to the bankers, is rise in banks ’ income from the foreign exchange. “The banks which prudently managed their foreign exchange made a good profit as the dollar was fluctuating against the Indian currency,” said Upendra Poudel, CEO of NMB Bank.

Bankers also said that there had been growth in business volume over the last quarter of the last fiscal year and the first quarter of the current fiscal year. Commercial banks ’ lending increased although the deposits did not rise simultaneously. Force lending policy adapted by central bank to certain sector like agriculture and energy for the commercial banks also led to the increase in the overall lending.

A higher transaction in realty sector of late has also helped banks to recover their loans from the sector, according to bankers. “Although large realty projects are struggling to find buyers, smaller properties are being sold over the last few months helping banks to recover some of their lendings,” said B N Gharti, deputy general manager of KIST Bank. “It has helped some banks to register profit.”

According to Gharti, the rise in import cost due to surge in the value of the dollar over the last few months has raised lending portfolio of banks and hence more profit.

Source: The Kathmandu Post