Citizens Bank Reports NPR 220 Million Net Loss in Q1 FY 2025/26

7th November 2025, Kathmandu

Citizens Bank International Limited has shocked the Nepali financial market by reporting a significant Net Loss of NPR 220.4 million for the first quarter of the current fiscal year (FY 2025/26).

Citizens Bank Reports Net Loss

This sharp reversal from a net profit of NPR 198.2 million in the corresponding period last year signals mounting pressure and ongoing structural challenges within the bank’s operations, warranting a closer look for investors and stakeholders.

The Core Problem: Negative Operating Profit and Surging Non-Performing Loans (NPL)
The dramatic shift from profit to loss is primarily attributed to two interconnected and critical issues highlighted in the unaudited financial statement: a negative Operating Profit and a considerable jump in the Non-Performing Loan (NPL) ratio.

Negative Operating Profit: The Profit Engine Stalls
While the bank managed to grow its Net Interest Income by a healthy 11.24% to NPR 1.66 billion, indicating an increase in its core lending business earnings, this was overshadowed by higher operational costs or substantial provisioning. Operating Profit, the key indicator of a bank’s fundamental efficiency before taxes and extraordinary items, plummeted from a positive NPR 282.9 million last year to a staggering NPR 371.8 million negative this quarter.

This negative figure suggests that the bank’s core revenue (Net Interest Income plus other operating income like fees and foreign exchange gains) was insufficient to cover its operating expenses, such as staff costs, general administrative expenses, and crucially, the Provision for Possible Losses on loans. A spike in provisioning—the amount a bank sets aside for potential losses on bad loans—is the most likely driver behind the negative operating profit, directly leading to the final net loss.

Surging NPL: A Red Flag for Asset Quality

The provisioning burden directly relates to the deteriorating quality of the bank’s loan portfolio, evidenced by the significant increase in the Non-Performing Loan (NPL) ratio. The NPL ratio climbed sharply from 5.41% to 6.84% year-on-year.

A high NPL ratio in the banking sector is a major red flag, as it means a larger portion of the bank’s assets (loans) are not generating income and are at risk of default. The increase from 5.41% to 6.84% indicates that the challenging economic environment, including high interest rates and a general business slowdown, is making it difficult for borrowers to repay their debts, forcing the bank to set aside more capital as a cushion against these potential losses. This provisioning hits the bottom line hard, transforming a potential profit into a loss. Studies on the Nepalese banking sector consistently show a strong negative correlation between the NPL ratio and bank profitability, confirming that this is the central challenge Citizens Bank must address.

Direct Impacts on Shareholder Value

The loss directly translates to a concerning performance for shareholders:

Negative Earnings Per Share (EPS): The bank recorded a negative EPS of –NPR 5.97. This figure shows that the bank’s operations lost NPR 5.97 for every outstanding share, a reversal from the positive EPS recorded in the same period last year.

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Negative Distributable Profit: The distributable profit turned negative at NPR 414.7 million. This is a critical metric, as it indicates the maximum amount of profit legally available for dividend distribution. A negative distributable profit essentially confirms that the bank cannot declare a dividend from its current quarter’s performance.

Capital and Stability Metrics
Despite the quarterly loss, the bank’s capital structure remains substantial:

Paid-up Capital stands at a robust NPR 14.76 billion.

The Reserve Fund remains positive at NPR 8.28 billion, providing a capital buffer.

The Net Worth Per Share is reported at NPR 153.30.

While the bank maintains a strong core capital base, the immediate concern is the Retained Earnings turning negative at NPR 414.7 million, reflecting the quarterly loss dragging down accumulated profits.

The Road Ahead: Focus on Asset Quality and Efficiency

Citizens Bank International Limited’s Q1 FY 2025/26 results highlight a common struggle in the current economic landscape of Nepal, where asset quality risks are materializing across the banking sector. The management’s paramount challenge will be two-fold:

Aggressive Loan Recovery and Restructuring: The immediate priority must be to tackle the soaring NPL ratio. This involves implementing more effective loan recovery strategies and potentially restructuring problematic loans to prevent further provisioning and protect the bank’s asset base.

Operational Cost Management: While the growth in Net Interest Income is a positive sign of sustained lending activity, the substantial operating loss suggests a need for stricter cost control or enhanced non-interest income generation to absorb the higher provisioning costs and restore the core operational profitability of the bank.

These quarterly results serve as a wake-up call, emphasizing the necessity of prudent risk management and efficient operation to navigate the adverse economic cycles currently facing the Nepali financial industry. A turnaround in the subsequent quarters will depend heavily on the bank’s ability to stabilize its loan quality and return its operating profit to a positive trajectory.

For More: Citizens Bank Reports Net Loss