Commercial banks profit soar 36pcIf indications are anything to go by, the profit growth of commercial banks is unlikely to take a steep fall even in the quarter when the banking sector was reeling under the shortage of loanable funds.
If indications are anything to go by, the profit growth of commercial banks is unlikely to take a steep fall even in the quarter when the banking sector was reeling under the shortage of loanable funds.
Unaudited third-quarter financial results of 20 commercial banks show profit growth of 36 percent, signalling impressive expansion in sector. These commercial banks generated a combined net profit of Rs24.4 billion in the third quarter of this fiscal year ended mid-April, compared to Rs17.9 billion in the same period a year ago. Eight commercial banks have yet to publish their financial results.
The top profit generator in the third-quarter was Nabil Bank. The bank generated Rs2.7 billion in net profit in the review period, compared to Rs2.1 billion in the same period a year ago, marking a profit growth of 28.6 percent.
Next in the line was Nepal Investment Bank, which booked a net profit of Rs2.4 billion, up 33.3 percent. This was followed by Agricultural Development Bank, which generated a net profit of Rs1.6 billion in the third quarter of 2016-17, compared with Rs1.2 billion in the same period a year ago, reflecting a profit growth of 33.3 percent.
Earlier, many were expecting a sharp fall in profit growth of commercial banks in the third quarter due to severe shortage of funds that could be immediately extended as loans. The shortage of loanable funds was triggered by a combination of deceleration in remittance inflow-which caused deposit growth to slow down-and higher demand for credit since the end of the Indian trade embargo.
“Despite this situation, banks were able to expand their businesses,” Sanima Bank CEO Bhuvan Kumar Dahal said.
Banks generate a big chunk of profit by buying money at relatively lower rates from depositors and selling the same money at higher rates in the form of loans to borrowers.
Banks that have so far published their unaudited financial reports generated net interest income-difference between gross interest income and gross interest expenses-of Rs43.5 billion in the third quarter of this fiscal year, up 33.4 percent from the same period a year ago.
Also, income from fees imposed on remittance service, card issuance and letters of credit issuance jumped 31 percent to Rs4.9 billion in the third quarter. Similarly, earnings from foreign exchange went up by 12.1 percent to Rs3.5 billion in the same period. “Among others, mergers, which allowed transfer of assets, helped banks to push up their net profit,” said Dahal.