Standard Chartered Bank Nepal Maintains Balanced Operations

9th November 2025, Kathmandu

Standard Chartered Bank Nepal Limited (SCBNL), a highly-regarded foreign-invested institution in the Nepali banking sector, has published its unaudited financial report for the first quarter of the fiscal year 2025/26.

Standard Chartered Makes Profit

The report presents a picture of balanced operations and strategic risk management, though it also shows a deceleration in profitability. The bank recorded a Net Profit of NPR 692.1 million, marking a 19.72% decline compared to the NPR 862.2 million earned in the same period last year. Despite this downturn, the bank highlights crucial operational improvements, particularly in asset quality, which underscore its commitment to long-term financial stability.

Analyzing the Profit Contraction: Why the Bottom Line Shrank

The sharp decline in net profit is directly linked to an almost identical drop in the bank’s operational performance, primarily driven by a fall in core revenue.

The Operating Income Squeeze

The bank’s Operating Profit declined by 19.66%, dropping from NPR 1.23 billion to NPR 989.3 million. This close correlation with the net profit decline signifies that the reduction in earnings originated at the operational level, rather than being caused by external or extraordinary factors.

The primary cause of this operational shrinkage is a significant decline in the bank’s core revenue stream, the Net Interest Income (NII). The NII dropped by 8.26%, falling from NPR 1.17 billion to NPR 1.07 billion.

NII Pressure: This drop in NII indicates that SCBNL faced pressure on its Net Interest Margin (NIM). This could be due to a reduction in high-yield lending, increased costs of deposits, or a strategic shift in their asset mix towards safer, lower-yielding securities.

Contraction in Loan Portfolio: The bank’s commitment to disciplined lending is evidenced by a slight contraction in its loan portfolio, with Loans at NPR 70.11 billion, down from NPR 72.89 billion last year. While loan contraction dampens interest earnings, it also minimizes credit risk, aligning with the bank’s conservative profile.

Advertisement

Investor Metrics Reflect the Downturn

The reduced profit immediately impacted the bank’s per-share performance. The Earnings Per Share (EPS) fell significantly to NPR 27.57 from NPR 36.57 last year. This 24.6% reduction in EPS is a direct consequence of the lower profit, signaling a temporary reduction in shareholder returns. However, the bank’s Price-to-Earnings (P/E) Ratio of 22.2 times suggests the market still assigns a respectable valuation multiple to the bank’s earnings, recognizing its brand value and reliability.

Asset Quality Improvement: The Key Sign of Strength ️Despite the revenue headwinds, the bank demonstrated a crucial improvement in a core measure of financial health: asset quality.

The Non-Performing Loan (NPL) Ratio improved to 1.71%, down from 1.95% in the corresponding period last year. An NPL ratio under $2\%$ is exceptionally strong, reflecting high discipline in lending practices and robust credit risk management. This low NPL ratio means the bank needs to set aside minimal impairment charges (loan loss provisions), thus safeguarding its balance sheet and providing a stable foundation for future profitability once revenue streams recover.

Furthermore, the bank maintains an exceptional level of intrinsic capital. The Net Worth Per Share remains extraordinarily high at NPR 613, a figure that towers over most local commercial banks. This substantial net worth, backed by a Reserve Fund of NPR 9.91 billion and Paid-up Capital of NPR 10.04 billion, highlights the bank’s financial prudence and stability, making it one of the most secure institutions in Nepal.

Dividend Outlook and Future Capacity

The report provides critical insight into the bank’s dividend-paying capacity, a major focus for SCBNL investors.

The Distributable Profit stands at NPR 2.41 billion, which is an identical figure to its Retained Earnings. This profit base gives the bank a dividend-paying capacity of 36.40% (calculated based on the distributable profit as a percentage of paid-up capital). While this capacity is down from the strong 57.16% capacity reported last year, it still positions SCBNL to propose a moderate and competitive dividend for the fiscal year 2025/26.

The anticipated AGM Agenda confirms that the discussion on dividend distribution will be a key focus, alongside the review of operational performance and risk management. Given the bank’s history of rewarding shareholders and its strong capital buffers, a cautious yet respectable dividend proposal is widely expected, albeit slightly lower than the previous year’s level due to the compressed profitability figures.

In summary, Standard Chartered Bank Nepal’s Q1 results reflect a conscious shift toward greater prudence. The decline in profit is a direct result of a strategic contraction in the loan portfolio and the impact of the tight interest rate environment. However, the resulting improvement in asset quality (lower NPL ratio) and the exceptionally high capital base confirm that the bank is prioritizing long-term balance sheet health and risk mitigation over short-term revenue maximization, a strategy that upholds its reputation for stability and measured growth.

For More: Standard Chartered Makes Profit