April 29: Despite the COVID-19 pandemic, net profit of banking institutions have increased by 12.14 percent in the third quarter of the current fiscal year compared to the same period of the last fiscal year. According to the third quarterly report of the current fiscal year, commercial banks have earned a net profit of Rs 50.74 billion.

In the third quarter of this fiscal year, banks have earned additional profit of Rs 5.5 billion. Bankers state that recovery of interest provisioned as expenses earlier and income from share contributed to the increment of the net profit in the current fiscal year.

In the third quarter of the last fiscal year, the net profit of the commercial banks had increased only by 2.36 percent or Rs 1.5 billion. And the total net profit amounted to Rs 45 billion during that period.

According to the bankers, the profit amount is satisfactory in the current period compared to the last fiscal year.

The main source of income of banks is interest on loans and various service charges. As of mid April, banks have earned Rs 95.90 billion.

According to the banks’ financial statements, the total net fee income amounted to Rs 19.63 billion in the last nine months while Rs 17.75 billion was earned in the corresponding period of the last fiscal year.

Despite the increase in credit flow of Rs 6.68 billion this fiscal year, the decline in interest income of banks is attributed to differences in interest rate of loan-to-deposit ratio.

Bhuwan Kumar Dahal, president of the Nepal Bankers Association, says that the overall interest income of banks has decreased due to the decline of loan-deposit interest rate following the intense competition among banks. Interest income should have increased along with the increase in the credit flow which didn’t happen this time.

According to Dahal, who is also the Chief Executive Officer of Sanima Bank, increase in the profit has resulted due to collection of money held at provisioning. Sanima Bank has earned a net profit of Rs 18.56 billion during this period which is an increase of 14.67 percent or Rs 237 million more compared to last year.

Dahal said that COVID-19 pandemic had affected the financial progress in the last fiscal year which will be repeated this year as well with the enforcement of prohibitory orders from April 29.

According to the third quarter financial statement, Nabil Bank has earned the highest amount of profit. It has earned a net profit of Rs 3.67 billion. Nabil Bank was the highest profit earner in the review period of the last fiscal year as well.

Global IME Bank, which acquired Janata Bank, has become the second largest earner with a net profit of Rs 3.57 billion. The state-owned Rastriya Banijya Bank came in the third position with a net profit of Rs 3.27 billion. NIC Asia Bank which was leading in the credit flow however has earned the net profit of Rs 3.48 billion.

The published financial statements show that the net profit of half a dozen commercial banks has declined. Century Bank's profit has recorded a huge decline in the review period of this fiscal year by 60.89 percent to Rs 358 million. It had earned a profit of Rs 915 million in the corresponding period of the previous year. The profit of Himalayan Bank, which is in the process of merger, has shrunk by 44.45 percent in the wake of the merger. It has earned a profit of Rs 1.28 billion in the third quarter.

Nepal SBI Bank's net profit growth has declined by 38.91 percent. Similarly, Everest Bank’s profit has gone down by 35.93 percent, Standard Chartered Bank by 34.34 percent and Nepal Credit and Commerce Bank by 5.55 percent.

Despite the decline in net profit growth, banks' distributable profits have not declined. According to the financial statements released by the banks, the distributable profit of all 27 commercial banks has improved compared to the previous year. Overall, the distributable profit of commercial banks has reached Rs. 35.43 billion, an increase from Rs 12 billion from the last fiscal year.