Banks’ profits declined due to a surge in bad debts amid ongoing recession: Bankers
KATHMANDU, Nov 4: The profits of Nepal’s commercial banks declined 18.60 percent in the first three months of the current fiscal year, thanks to the fall in demand for loans due to the ongoing economic slowdown.
According to the unaudited financial reports unveiled by the commercial banks, they earned cumulative profits of Rs 13.47 billion during mid-July and mid-October this year. In the same period last year, they secured profits of Rs 16.55 billion.
Economic slowdown and soaring bad debts hit banks’ profits
Out of 20 ‘A’ class financial institutions operating in the country, eight were successful in increasing their profits. Of them, Himalayan Bank got a 98.35 percent raise in its profit amount. Prabhu Bank, Nepal Investment Mega Bank, Prime Bank, Machhapuchchhre Bank, NMB Bank, Global IME Bank and Standard Chartered Bank were among others to post profit.
Likewise, 11 banks had their profits declined in the review period. Siddhartha Bank had the biggest fall of 91.39 percent in its profit amount. Laxmi Sunrise Bank, Nepal Bank Limited, Kumari Bank, NIC Asia Bank, Rastriya Banijya Bank, Nepal SBI Bank, Citizens Bank, Sanima Bank, Everest Bank Limited and Nabil Bank were in this category.
Agriculture Development Bank Limited (ADBL) was the only loser in the first quarter of the current fiscal year. The state-owned bank lost more than Rs 888 million.
The profits of commercial banks were largely affected by an increase in their bad debts. As of the first quarter, these banks had their average bad debts at 3.38 percent. In the review period last year, the portion of bad debts to loans was only 1.51 percent. Out of these commercial banks, the bad debt of the ADBL was more than five percent, the largest.
Bhuvan Kumar Dahal, a former banker, said the decline in profits of commercial banks was mainly due to a surge in their bad debts. “Economic recession has adversely affected almost every sector, so is the banking business,” he said.
