A dozen commercial banks earned net profit of more than abillion rupees over the third quarter of the current fiscal year. 

The unaudited financial results published by 18 out of 28commercial banks in the country show that most of them registered growth intheir net profit in the review period of FY2017/18 compared to thecorresponding period last year.  

The financial results compiled by Nepal BankersAssociation (NBA) show that combined net profit of these 18 commercial banksjumped by 17.07 percent to Rs 24.07 billion over the third quarter of thecurrent fiscal year from a total of Rs 20.56 billion in the same period of thelast fiscal year. 

Almost all the commercial banks registered growth inprofit. Nepal Investment Bank Ltd topped the list in terms of profit, earningnet profit of Rs 2.84 billion. Nabil Bank Ltd was in the second position withnet profit of Rs 2.57 billion. 

Similarly, Everest Bank Ltd, Himalayan Bank Ltd, StandardChartered Bank Nepal Ltd, Global IME Bank Ltd, NMB Bank Ltd and Nepal SBI BankLtd posted impressive profit growth in the review period. Prime Commercial BankLtd, Siddhartha Bank Ltd, Sanima Bank Ltd and Citizens Bank International Ltdare other commercial banks who entered into the 'billion club' in the third quarterfor the first time by earning net profit over Rs 1 billion. 

However, profit growth rate of commercial banks hasremained low compared to the annual profit growth of the banking industry. Thenet profit of all 28 commercial banks had jumped by a whopping 26.34 percent,or Rs 9.42 billion, in the last fiscal year 2016/17 to a total of Rs 45.18billion compared to FY2015/16.

The sluggish profit growth in the third quarter isattributed to drop in interest income of the banks amid lending slowdown due toshortage of funds. The data shows that the net interest income of these 18commercial banks grew by 21.76 percent over the third quarter of the currentfiscal year from net interest income of Rs 35.44 billion in the correspondingperiod of the last fiscal year. The average annual net interest income growthwas at 24 percent in the last fiscal year. 

As banks have been offering higher interest rates toattract fresh deposits in the wake of credit crunch, their interest expenses isexpected to increase significantly in the current fiscal year. On the otherhand, the growth of credit, which draws interest income for banks, has sloweddown as most of them reached a saturation level of prudential lendinglimit. 

During the review period, many banks have even haltedtheir lending amid pressure on credit to core-capital-cum-deposit (CCD)ratio. 

Banks are not allowed to lend more than 80 percent oftheir core capital cum deposit. 
The net interest income accounts for nearly 80 percent of the banks' earnings.

Source : My Republica, 27^th April 2018