Kumari Bank Reports Slight Drop in Profit

9th November 2025, Kathmandu

Kumari Bank Limited (KBL) has reported a mixed financial performance for the first quarter of the fiscal year 2025/26.

Kumari Bank’s Profit Drops

While the bank successfully grew its core revenue streams, its final Net Profit slightly declined by 2.01% to NPR 1.5 billion compared to NPR 1.7 billion in the same period last year. This marginal dip in profitability is a direct consequence of a single, yet powerful, factor currently challenging the entire Nepalese banking sector: significantly higher loan loss provisions necessitated by a rising tide of Non-Performing Loans (NPLs).

The Core Contradiction: Income Rises, But Profit Falls

The Q1 report reveals a strong operational front, where the bank effectively generated more revenue than the previous year. This growth, however, was unable to withstand the pressure of mounting credit risk costs.

The Revenue Engine is Healthy

The bank’s core business activity demonstrated impressive growth:

Net Interest Income (NII): The bank’s primary source of revenue grew by a healthy 3.93% to NPR 291 crore. NII growth confirms the bank’s successful management of its lending spreads and its capacity to generate more income from its core assets.

Non-Interest Income Surge: Fee and commission income, a critical component of diversified revenue, surged by an impressive 39.63%. This indicates successful efforts by the bank to enhance service charges, digital banking fees, and other non-lending income streams.

Total Operating Income: The combined strength of both interest and non-interest income pushed the Total Operating Income up by a strong 13.12%.This collective growth confirms that Kumari Bank’s fundamental business operations are robust and expanding, generating sufficient gross income to support its stability.

The Loan Loss Provision Barrier

Despite the double-digit growth in Total Operating Income, the Operating Profit declined by 8.11%, leading directly to the 2.01% drop in Net Profit. The key driver of this squeeze is the mandatory allocation for potential credit losses.

Provisioning Burden: Kumari Bank allocated a substantial NPR 126 crore for loan loss provisions due to the increase in inactive loans. This non-cash expense is a direct deduction from the bank’s operating income.

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NPL Ratio at 6.98%: This large provisioning is a direct response to the bank’s elevated Non-Performing Loan (NPL) ratio, which stands at a high 6.98%. An NPL ratio nearing 7% signifies that a significant portion of the bank’s loan book is failing to generate income, forcing the bank to take a conservative and prudent approach by setting aside massive funds as capital protection against these bad debts.

This scenario highlights the classic dilemma facing banks in periods of economic slowdown: strong operational growth is nullified by the necessity of higher provisioning, demonstrating how asset quality risks quickly consume profitability.

Impact on Shareholder Value and Stability Metrics

The marginal profit decline and the pressure from NPLs have a direct bearing on shareholder returns, though the bank’s core capital structure remains robust.

Earnings Per Share (EPS): The EPS saw a slight dip of NPR 0.33, settling at NPR 16.11. While the fall is minimal, it signals a reduced capacity for earnings per share compared to the previous year, which is a key metric for investor confidence.

Price-to-Earnings (P/E) Ratio: The bank’s P/E ratio is reported at 11.26 times. This moderate valuation multiple reflects the market’s assessment of the bank’s future earnings potential, which is currently being weighed down by the high provisioning requirements.

Capital Strength: The bank maintains a significant capital base, which provides stability. Paid-up Capital is strong at NPR 26.2258 billion, and the Reserve Fund stands at NPR 11.857 billion. This substantial reserve base is essential for a bank dealing with a high NPL ratio, as it acts as a buffer against potential write-offs and ensures compliance with regulatory capital adequacy norms.

Net Worth Per Share: At NPR 145.21, the net worth per share confirms a respectable book value, providing a solid foundation beneath the volatile quarterly profit figures.

Operational Scale and Future Outlook

Kumari Bank operates at a large scale, which gives it operational leverage but also exposes it to greater risk in times of economic uncertainty. The bank has successfully mobilized Total Deposits of NPR 360.40 billion and has Total Loans Disbursed of NPR 269.41 billion.

The management’s primary focus for the remaining fiscal year will undoubtedly be on aggressive NPL management and recovery. Reducing the NPL ratio from 6.98% is critical. Every percentage point reduction will directly decrease the required provisioning, allowing the bank’s robust income growth, driven by the 3.93% NII increase and the 39.63% fee income surge, to translate effectively into higher net profit in subsequent quarters. Until the asset quality stabilizes, Kumari Bank, like many of its peers, will continue to face the challenge of generating profits that fully reflect its strong operational capability.

For More: Kumari Bank’s Profit Drops