Commercial banks recorded handsome profits in the first quarter of the current fiscal year as credit expansion took place at a relatively faster pace.

As of now, 15 commercial banks have published their unaudited first-quarter financial reports. The profit of these banks surged by a whopping 52.1 percent to Rs5.3 billion in the period under review compared to the same period a year ago.

While big state-owned banks like Agricultural Development Bank, Rastriya Banijya Bank and Nepal Bank Limited are yet to publish their results, private sector banks have booked good profits.

Among the banks that have published their results, Nabil Bank posted the highest net profit of Rs798 million — up 22 percent year on year.

Bankers attributed the jump in profits to rise in business volume, low amount of provisioning due to good quality of asset and proper fund utilisation.

The banks were also able to significantly boost their lending compared to last year.

“Due earthquakes and unofficial blockade imposed by India, the economic activities were pretty low in the first quarter of the last fiscal year. Hence, the lending too was low,” said Sanima Bank CEO Bhuvan Dahal. “But things have changed and banks lent aggressively during the first quarter of this fiscal year which resulted in the profit surge.”  

Sanima has posted a net profit of around Rs271 million in the first quarter of this fiscal year — up from last year’s Rs176 million profit.

Apart from increased lending, according to the bankers, the stock of quality assets with banks has gone up. “So we are allocating very little funds for loan-loss provision. This has also raised our profits,” said Global IME Bank CEO Anil Gyawali.

Global IME posted a net profit of Rs420 million in the review period compared to Rs313 million during the same period a year ago.

Also, commercial banks are required to raise their paid-up capital to Rs8 billion by mid-July 2017. This has exerted pressure on banks to also expand their business so as to be able to  continue extending dividends as in the past.

However, the profits have not increased in line with increased paid-up capital. “Although banks’ net profits have increased compared to the corresponding period of the last fiscal year, the situation is not ideal,” said Dahal. “The profits have not justified the increased paid-up capital of banks and the return on equity of a majority of the banks has gone down.”