The growth in profit of commercial banks suffered with the interest income tumbling due to slower expansion of credit, as the third quarter closed in.
The banks were able to record 14 per cent growth in their net profit by the end of the third quarter that ended in mid-April, according to the third quarter financials published by the banks. The 30 commercial banks recorded net profit of Rs 14.5 billion by the end of the third quarter of the current fiscal year, while they had earned Rs 12.7 billion in the corresponding period a year ago, which was a 45 per cent surge when compared to the figures from 2011-12.
The slump in profit growth has come as the banks’ net interest income and operating profit both failed to expand graciously. The net interest income —difference between the interest paid to depositors and interest earned from borrowers — has grown by a mere 8.6 per cent.
The net interest income was affected as the banks were squeezed due to ballooning deposits and slow credit demand. These institutions were required to shell out a relatively higher amount to service their depositors, while low lending hampered their income. The total net interest income increased to Rs 18 billion, which stood at Rs 16.8 billion a year ago.
“The income of the banks has been affected by the lowered interest rates since sometime,” pointed out CEO of Sanima Bank, Bhuvan Kumar Dahal.
“The increased competition in the market has compelled most of us to revise down the lending rates,” he added.
The average lending rates that stood above 12 per cent a year ago has come down to 11.92 per cent, constricting the income of the banks further.
During the first nine months of the fiscal year, banks saw their deposits grow by 25 per cent to Rs 1,133 billion, while lending rose by 22.5 per cent in comparison to last fiscal year’s third quarter end. In the wake of lowered rates coupled with slower growth in loans, banks’ operating profit growth also seems to have taken a hit.
The operating profit, which shows profit earned based on core banking undertakings, increased by seven per cent. The return on alternative investment, such as treasuries and interbank lending, has also been minimal for the banks as the rates have refused to rise above one per cent since more than a year.
Despite the hardships, four of the 30 class ‘A’ banks were successful in registering net profit higher than Rs one billion. Nabil Bank, once again, became the top earning bank, with net profit of Rs 1.6 billion at the end of third quarter. Nepal Investment Bank, Rastriya Banijya Bank and Everest Bank also recorded net profit of more than Rs one billion.
However, at the other end, Kist Bank recorded a sixth consecutive quarterly loss as its loss exceeded Rs 213 million. The bank is tackling non-performing assets of up to 23.72 per cent that made the bank provision Rs 663 million to cover for possible loan loss eating into profit.
Top five profit earners
Nabil Bank 1,641.95
Nepal Investment Bank 1,392.01
Rastriya Banijya Bank 1,255.65
Everest Bank 1,080.95
Standard Chartered Bank 999.45
Figures in Rs million. Source: Compiled from Q3 financials published by the banks.
source:the himalayan times,15 may 2014
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The banks were able to record 14 per cent growth in their net profit by the end of the third quarter that ended in mid-April, according to the third quarter financials published by the banks. The 30 commercial banks recorded net profit of Rs 14.5 billion by the end of the third quarter of the current fiscal year, while they had earned Rs 12.7 billion in the corresponding period a year ago, which was a 45 per cent surge when compared to the figures from 2011-12.
The slump in profit growth has come as the banks’ net interest income and operating profit both failed to expand graciously. The net interest income —difference between the interest paid to depositors and interest earned from borrowers — has grown by a mere 8.6 per cent.
The net interest income was affected as the banks were squeezed due to ballooning deposits and slow credit demand. These institutions were required to shell out a relatively higher amount to service their depositors, while low lending hampered their income. The total net interest income increased to Rs 18 billion, which stood at Rs 16.8 billion a year ago.
“The income of the banks has been affected by the lowered interest rates since sometime,” pointed out CEO of Sanima Bank, Bhuvan Kumar Dahal.
“The increased competition in the market has compelled most of us to revise down the lending rates,” he added.
The average lending rates that stood above 12 per cent a year ago has come down to 11.92 per cent, constricting the income of the banks further.
During the first nine months of the fiscal year, banks saw their deposits grow by 25 per cent to Rs 1,133 billion, while lending rose by 22.5 per cent in comparison to last fiscal year’s third quarter end. In the wake of lowered rates coupled with slower growth in loans, banks’ operating profit growth also seems to have taken a hit.
The operating profit, which shows profit earned based on core banking undertakings, increased by seven per cent. The return on alternative investment, such as treasuries and interbank lending, has also been minimal for the banks as the rates have refused to rise above one per cent since more than a year.
Despite the hardships, four of the 30 class ‘A’ banks were successful in registering net profit higher than Rs one billion. Nabil Bank, once again, became the top earning bank, with net profit of Rs 1.6 billion at the end of third quarter. Nepal Investment Bank, Rastriya Banijya Bank and Everest Bank also recorded net profit of more than Rs one billion.
However, at the other end, Kist Bank recorded a sixth consecutive quarterly loss as its loss exceeded Rs 213 million. The bank is tackling non-performing assets of up to 23.72 per cent that made the bank provision Rs 663 million to cover for possible loan loss eating into profit.
Top five profit earners
Nabil Bank 1,641.95
Nepal Investment Bank 1,392.01
Rastriya Banijya Bank 1,255.65
Everest Bank 1,080.95
Standard Chartered Bank 999.45
Figures in Rs million. Source: Compiled from Q3 financials published by the banks.
source:the himalayan times,15 may 2014
LINK
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