Performance Analysis of Commercial Banks- Ashad 2082

Analysis -1: Loans and Advances

What does Loans and Advances mean to Bank? Loans and Advance is the Balance Sheet items classified under Assets side of the Bank’s Balance Sheets. Loans and Advances includes Loans provided to normal customers by the Bank as well as institutional loans provided by Banks to BFIs

Year-on-Year (Y-o-Y) growth of Loans and Advances of Commercial Banks stood at 8.09% as of Ashadh 2082. Most of the banks managed to expand their credit portfolio during the review period. All banks except Kumari Bank, NIC Asia Bank, and Standard Chartered Bank reported positive growth compared to Ashadh 2081. Global IME Bank leads the chart with the largest loan portfolio of Rs. 428 Billion, reflecting a 12% increase from last year. Nabil Bank follows with Rs. 427 Billion, up by 11%, while NIMB Bank secured the third position with Rs. 342 Billion, growing by 8%.

The most notable growth was recorded by Everest Bank Limited, achieving a strong 20% Y-o-Y growth to reach Rs. 223 Billion. Other significant performers include RBB (+18%), NMB (+18%), and Prime Bank (+15%). On the other hand, NIC Asia Bank witnessed the sharpest decline, with its portfolio dropping by 17% to Rs. 234 Billion, while Kumari Bank (-1%) and Standard Chartered Bank (-1%) also reported contraction in credit growth.

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Analysis -2: Deposits

What does Deposit mean to Banks? Deposits if the total fund collected by the Bank from its customers. Deposit is shown in liability side of Bank’s Balance Sheet which consists of “Due to Bank and Financial Institutions” and “Deposit from Customers”. Banks normally collect deposit in a form of Fixed, Saving, Current, Call, Margin, Recurring accounts.

Deposit Performance Analysis:

Commercial banks continued to maintain a strong liquidity position, with overall deposits growing by an average of 13.60% Year-on-Year (Y-o-Y) as of Ashadh 2082 compared to Ashadh 2081. Global IME Bank holds the highest deposit portfolio at Rs. 575 Billion, marking a 13.90% growth, followed closely by Nabil Bank at Rs. 533 Billion (+13.75%) and Rastriya Banijya Bank (RBB) at Rs. 503 Billion (+16.73%). In terms of Y-o-Y growth, the highest expansion was achieved by Everest Bank Limited (EBL) with a remarkable 29.04% growth, followed by NMB Bank (+26.35%), Prime Commercial Bank (+21.12%), and Agricultural Development Bank (+20.64%). On the other hand, NIC Asia Bank was the only commercial bank to witness a contraction in deposit volume, declining by 9.93% to Rs. 326 Billion. At the lower end of the spectrum, Standard Chartered Bank Nepal maintained the smallest deposit base of Rs. 127 Billion, though it recorded a healthy 10.96% growth compared to last year

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 Analysis -3: Net Interest Income (NII)

What does Net Interest Income (NII) mean to Banks? Interest Income is recognized on interest bearing advances and financial assets whose income is booked to statement of profit or loss under interest income, whereas Interest Expenses is booked on interest bearing deposits or financial liabilities whose expenses is booked in statement of profit or loss under interest expenses. The net difference between these income and expenses is referred as Net Interest Income (NII).

Net Interest Income (NII) Performance Analysis:

Net Interest Income (NII) continues to remain the major contributor to commercial banks’ revenues, but pressure from declining lending and deposit rates has reflected in a negative industry average growth of -1.08% in Ashadh 2082 compared to Ashadh 2081. Global IME Bank reported the highest NII at Rs. 16.71 Billion, despite a marginal contraction of 0.85% from the previous year. Nabil Bank followed closely with Rs. 16.33 Billion, maintaining a flat growth of 0.06%. Nepal Investment Mega Bank (NIMB) secured the third spot at Rs. 14.13 Billion, though it faced a notable decline of 6.54%. On the growth front, Everest Bank Limited (EBL) led the industry with a strong 19.36% growth, increasing its NII from Rs. 7.65 Billion to Rs. 9.13 Billion. Nepal Bank Limited (NBL) and Machhapuchchhre Bank Limited (MBL) also posted impressive growth of 16.82% and 15.41% respectively. Conversely, Prabhu Bank witnessed the steepest fall, with its NII plunging by 39.47% to Rs. 7.20 Billion from Rs. 11.89 Billion last year. Similarly, Standard Chartered Bank Nepal (SCBNL) reported the lowest NII among peers at Rs. 4.49 Billion, down 12.56% from the previous year. Overall, while some banks managed to expand their NII through improved asset-liability management and loan book growth, the majority faced downward pressure, keeping the industry average in the negative zone.

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Analysis -4: Net Fee and Commission Income (NFCI)

What does Net Fee and Commission Income (NFCI) mean to Banks? Net Fees and Commission Income is supplementary source of revenue in addition to Net Interest Income of the Bank consisting of charges, fees or commission on products or services offered by the Bank. Bank’s normally collect loan administration fees, renewal fees, digital banking fees, card issuance fees, remittance commission among others.

Net Fees and Commission Income Performance Analysis:

During the review period, Nabil Bank reported the highest Non-Fund Based Commission Income (NFCI) of Rs. 3,416.16 million, reflecting a growth of 5.38% compared to Ashadh 2081. Global IME Bank closely followed with NFCI of Rs. 3,222.04 million, registering a strong increase of 20.12%. In terms of growth momentum, Rastriya Banijya Bank recorded the most remarkable rise, with NFCI soaring by 72.88%, from Rs. 726.05 million to Rs. 1,255.23 million. Similarly, NMB Bank and Kumari Bank also posted significant double-digit growth of 30.18% and 27.44%, respectively. On the other hand, some banks reported contractions in NFCI. NIC Asia Bank experienced the sharpest decline of 37.74%, dropping from Rs. 1,968.06 million to Rs. 1,225.30 million. Agricultural Development Bank and Standard Chartered Bank Nepal also posted negative growth of 7.21% and 3.63%, respectively. At the lower end, Himalayan Bank collected Rs. 1,151.35 million, representing a moderate growth of 10.86%, while Nepal Bank Limited posted NFCI of Rs. 1,174.99 million, up by 6.07%. Overall, the industry average NFCI stood at Rs. 1,776.30 million, reflecting an average growth of 11.43% during the review period.

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Analysis -5: Impairment Charges

What does Impairment Charges mean to Banks? Impairment Charges are charges recognized as expenses by Banks when Bank expects that they will not recover full amount of expected cash flows of loans. Impairment Charges are reversed if the expected cash flows are lateral realized. Banks try to minimize their Impairment Charges to increase their profitability through stronger recovery actions.

Impairment Charges Performance Analysis: 

During the review period, impairment charges of the overall commercial banking industry contracted significantly, recording an average decline of 54.79% compared to the previous year. Global IME Bank reported the highest impairment charges among peers, standing at Rs. 4,305 Million, an increase of 19.05% from the previous year. NIC Asia Bank ranked second with impairment charges of Rs. 4,145 Million, up by 6.63%. On the other hand, several banks witnessed substantial reductions. NIMB and Himalayan Bank reduced their impairment charges drastically by 88.76% and 70.85%, respectively, while Kumari Bank and Nepal Bank Limited booked major declines of 59.13% and 76.12%. Prabhu Bank reported one of the most notable swings, recording impairment reversal of Rs. 2,512 Million, a fall of 153.21% compared to last year. Standard Chartered Bank Nepal also reported a reversal of Rs. 336 Million, down by 255.60%, while Everest Bank booked a reversal of Rs. 162 Million, reflecting a decline of 157.27%. On the positive growth side, Citizen Bank posted the highest Year-on-Year increase in impairment charges by 55.11%, followed by NSBI (58.65%), and Sanima Bank (31.80%).

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Analysis -6: Personnel Expenses (Excluding Bonus)

What does Personnel Expenses mean to Banks? Personnel expenses includes expenses related to employees of the Bank. Personnel Expenses mostly include staff’s salary, allowances, pension, gratuity, contribution to provident fund, training expenses, uniform expenses, insurance, staff bonus, finance expense under NFRS etc. Banks are required to create provision for staff bonus which is a mandatory requirement under the requirement of the Bonus Act, 2074. Amount of bonus is not included here under analysis.

Personnel Expenses (Excluding Bonus) Performance Analysis: 

Laxmi Bank reported the highest personnel expenses of Rs. 5,446 Million as on Ashadh 2082, followed by Nabil Bank at Rs. 5,228 Million and Global IME Bank at Rs. 4,862 Million. On the other hand, Standard Chartered Bank Nepal (SCBNL) recorded the lowest personnel expenses of Rs. 1,554 Million, followed by Citizen Bank with Rs. 1,975 Million. In terms of growth, Himalayan Bank posted the highest year-on-year rise in personnel expenses at 20.92%, followed by Machhapuchchhre Bank (19.22%) and NMB Bank (16.93%). Conversely, NIC witnessed a decline of 17.35%, while SCBNL and Citizen Bank also recorded slight contractions of 2.72% and 0.62% respectively. Overall, the banking industry’s average personnel expenses increased by Rs. 260 Million to Rs. 3,541 Million in Ashadh 2082, reflecting a 7.93% year-on-year growth.

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Analysis -7: Operating Expenses

What does Operating Expenses mean to Banks? Operating expenses of the Bank includes day to day operation related expenses and consists of Personnel Expenses, Depreciation and Amortization and other operating expenses of the Bank like Operating Expenses consists of Administration Expenses, Audit Fees, Lease Expenses among others.

Operating Expenses Performance Analysis: 

Standard Chartered Bank Nepal (SCBNL) reported the lowest operating expenses of Rs. 531 Million as on Ashadh 2082, showing a decline of 4.10% compared to the previous year. On the other hand, Global IME Bank incurred the highest operating expenses of Rs. 2,475 Million, increasing by 10.26% year-on-year. In terms of year-on-year growth, Everest Bank posted the highest rise of 14.24% in operating expenses, followed by Nepal Bank Limited (13.77%) and Citizen Bank (13.16%). Meanwhile, NIC Asia Bank achieved the sharpest reduction in operating expenses, decreasing by 9.49%, followed by Prabhu Bank (-6.32%) and Kumari Bank (-5.52%). Other notable banks managing to reduce costs were Standard Chartered Bank (-4.10%) and Himalayan Bank (-1.53%). Overall, the industry’s average operating expenses grew moderately by 3.28% year-on-year.

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Analysis -8: Loan Write-offs

What does Loan Write-offs mean to Banks? Loans are written off by the Banks when Bank’s consider loans to be uncollectable even after necessary recovery efforts from the Bank. Written off loans are removed from Bank’s Balance Sheet and are booked as expenses under non-operating expenses of the Bank reducing Bank’s profit.

Loan Write-offs Performance Analysis: 

During the review period, three commercial banks - Nepal Bank Limited, Rastriya Banijya Bank, and Agricultural Development Bank - reported no loan write-offs. The remaining 17 banks wrote off varying amounts of loans and advances. The highest loan write-off was reported by Himalayan Bank, amounting to Rs. 3,363 Million, followed by NIC Asia Bank with Rs. 1,079 Million and NMB Bank with Rs. 659 Million. Among banks showing significant year-on-year growth, NMB Bank’s loan write-off surged by 3,038.28%, Nabil Bank by 543.35%, and Standard Chartered Bank Nepal by 528.63%. In contrast, a few banks managed to reduce their loan write-offs, including Sanima Bank (-54.39%), NIMB (-22.35%), and Rastriya Banijya Bank (-100%). Overall, the industry’s average loan write-off expenses rose sharply by 127.94% year-on-year, reflecting heightened stress in asset quality across several institutions.

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Analysis -9: Net Profit After Tax (NPAT)

What does Net Profit After Tax (NPAT) mean to Banks? Net Profit After Tax (NPAT) means the final profit  after deduction of all the expenses and taxes of the Bank. Net Profit helps to judge the profitability healthiness of the Bank. Higher the NPAT better is the bank’s performance in terms of return to shareholders.

Net Profit After Tax Performance Analysis: 

Average Net Profit After Tax (NPAT) of commercial banks increased by 43% year-on-year, rising from Rs. 2,494 Million in Ashadh 2081 to Rs. 3,576 Million in Ashadh 2082, reflecting a strong recovery in the sector’s profitability.

Nabil Bank reported the highest net profit of Rs. 7,128 Million, followed closely by NIMB Bank with Rs. 6,757 Million and Global IME Bank with Rs. 6,205 Million. Prabhu Bank achieved the highest Y-o-Y growth in NPAT, surging 965% from Rs. 511 Million to Rs. 5,443 Million, largely driven by significant impairment reversals. Remarkable growth was also observed in Nepal Bank Limited, whose profit increased from Rs. 28 Million to Rs. 3,773 Million (13,176% increase), and Kumari Bank, which jumped from Rs. 5 Million to Rs. 2,116 Million (45,822% increase). On the other hand, NIC Asia Bank reported the steepest decline, with net profit falling 77% to Rs. 162 Million, while Standard Chartered Bank (-8%), Nepal SBI Bank (-10%), and Citizen Bank (-2%) also experienced decreases in NPAT. Overall, the sector demonstrated a strong rebound in profitability, with top-performing banks benefiting from operational efficiencies and reversal of impairments, although a few banks continued to face challenges in maintaining profit levels.

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Analysis -10: Distributable Profit and DPS

What does Distributable Profit and DPS mean to Banks? Distributable Profit (DP) means the final profit which is available for distribution to shareholders. If the same distributable profit is divided by number of available shares with Bank then Dividend Per Share (DPS) is derived which shows how much dividend a share will generate. Higher the distributable profit and DPS better will be the Bank from Shareholders perspective.

Distributable Profit and DPS Performance Analysis: 

Majority of commercial banks reported positive distributable profit as on Ashad End 2082 except 4 Banks. Global IME Bank managed to remain at top position with distributable profit of Rs. 5379 Million with DPS of Rs. 14.1 per share followed by Everest Bank Limited with distributable profit of Rs.4954 Million with DPS of Rs. 38.3 per share. Significant raise in distributable profit was reported by Global IME Bank Limited with raise in Distributable profit from Rs. 507 Million to Rs.5379 Million. NBL, Kumari, HBL and NIC Asia Bank reported negative DPS of Rs. 3.1, 10.7, 32.8, 34.9 respectively. Industry average DPS remained at 6.30 as on Ashad End 2082.

Analysis -11: Non-Banking Assets (NBA)

What does Non-Banking Assets (NBA) mean to Banks? If a loan provided is defaulted, then Bank may sell the collateral held and recover the dues of borrower from such collateral sales. However, sometimes the collateral may not be sold and Bank may have to itself take such assets. Such assets are Non-Banking Assets to the Bank, which are shown under Investment Property under Balance Sheets.

Non-Banking Assets Performance Analysis: 

Standard Chartered Bank Nepal which reported zero Non-Banking assets as on Ashad 2082. Besides, Global IME Bank booked Rs. 6058 Million as Non-Banking Assets followed by Himalayan Bank with NBA of Rs. 5665 Million. Himalayan Bank booked additional NBA of Rs. 3,250 Million during Ashad End 2082 as compared to Ashad 2081. Machhapuchhere Bank disposed of NBA by Rs. 608 Million. Overall Industry’s NBA increased by 42% during the review period.

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Analysis -12: Base Rate

What does Base Rate mean to Banks? Base Rate is the floor rate upon which premium is charged by Banks to derive lending rate. Base rate consists of Cost of Fund, Cost of CRR, Cost of SLR and Operating Costs of the Bank. Higher base rate means Banks are obtaining funds at higher rate and lower base rate means banks are obtaining funds at lower rates. Higher Base rate also means expensive lending rates and lower base rate means cheaper lending rates.

Base Rate Performance Analysis: 

During the review period Industry average base rate remained at 6.02%. As compared to earlier year, Base rate of all the commercial banks have decreased due to falling cost of deposits. RBB has the lowest Base Rate of 4.78% whereas NIC ASIA Bank’s base rate of 7.04% is the highest amongst peer.

Analysis -13: Earning Per Share (EPS)

What does Earning Per Share mean to Banks? Earnings Per Share (EPS) is the amount of profit earned by the Bank equivalent to each of its share. Higher the EPS, better it is and vice versa. It is computed by dividing Net Profit by total number of shares of the Bank.

Earnings Per Share Performance Analysis: 

Everest Bank has the highest EPS of Rs.37.99 per share followed by Standard Chartered Bank with Rs.30.17 per share. Industry Average EPS is Rs 19.44.  10 banks have their EPS below industrial average, whereas 10 banks have their EPS above industrial average.  NIC ASIA Bank has the lowest EPS of Rs. 1.08 per share as on Ashad 2082.

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Analysis -14: Non-Performing Loan (NPL)

What does Non-Performing Loan mean to Banks? Non-Performing Loans (NPL) are those loans which are classified under Doubtful, Substandard and Bad as per the NRB provisions. Higher Non-Performing Loans ratio means higher probability of loan defaults, so Banks try to maintain NPL as low as possible.

Non-Performing Loans (NPL) Performance Analysis:

Industry Average non-performing loan (NPL) of overall industry remained at 4.22% as on Ashad 2082. Higher NPL triggers increased risk of credit defaults and lower changes of credit recovery, so bank’s try to restrict their NPL as low as possible. During the review period, Everest Bank managed to keep its NPL at 0.38% which is lowest amongst peers, followed by Standard Chartered with 1.47% NPL. Highest NPL was reported by Himalayan and Kumari Bank with NPL of 7.28% and 6.42% each as on Ashad 2082. Considering Y-o-Y growth, NPL of Himalayan Bank grew by  2.30 % from 4.98% to 7.28% being the highest increment amongst the peer.

Analysis -15: Cost of Fund

What does Cost of Fund mean to Banks? Cost of Fund means the cost incurred by the Bank to obtain funds in a form of deposit or borrowings. It includes cost of local currency deposit and borrowings obtained by the Bank.

Cost of Fund Performance Analysis: 

During the review period lowest cost of fund was of Standard Chartered Bank at 3.22% followed by Rastriye Banijya Bank with 3.33%. This means these banks are soliciting funds at lower costs than peers. However, cost of fund of Prime Commercial Bank remained highest amongst peer at 5.21% followed by Nepal SBI of 5.18% as on Ashad 2082. Industry average cost of fund remained at 4.38% as on Ashad 2082.

Analysis -16: Capital Adequacy Ratio (CAR)

What does Capital Adequacy Ratio mean to Banks? Capital Adequacy Ratio (CAR) measures the sufficiency of Bank’s capital in terms of its credit, operation and market or liquidity risk weighted exposures. It indicates the sufficiency of Bank’s capital commensurate to risk pertaining to business growth, gross income and open position. NRB has mandated banks to maintain CAR of at least 11% in line with Capital Adequacy Framework, 2015.

Capital Adequacy Ratio (CAR) Performance Analysis: 

Industrial average CAR remained at 13.05% as on Ashad 2082. Standard Chartered Bank managed to remain at top with CAR of 17.82% whose Y-o-Y CAR increased by 11.38% as compared to earlier year followed by NIC Asia  Bank with CAR of 14% a raise of 26.93% from earlier year. Lowest CAR was reported by Himalayan Bank Limited of 11.64% followed by Prime Commercial Bank of 11.64%.