Nepal Bank Profit Rises but Distributable Profit Negative
28th January 2026, Kathmandu
Nepal Bank Limited, the country’s first commercial bank, has released its unaudited financial report for the second quarter of the fiscal year 2082/83 (mid-January 2026). The report showcases a massive turnaround in profitability, with net profit soaring by over 183 percent year-on-year. While the bank’s operational metrics show signs of health, the persistence of a negative distributable profit remains a significant hurdle for shareholders looking for dividend payouts.
Nepal Bank Profit Rises
The bank’s net profit for the first six months reached Rs 1.30 billion, a sharp contrast to the Rs 461 million recorded in the same period of the previous fiscal year. This recovery is largely attributed to a strategic cleanup of the bank’s balance sheet and a sharp reduction in loan loss provisions, rather than a surge in core lending income.
The Impact of Lower Impairment Charges on Operating Profit
The most striking feature of Nepal Bank’s Q2 report is the 394.64 percent jump in operating profit, which climbed to Rs 2.06 billion. In the banking sector, operating profit is often the truest measure of day-to-day efficiency before taxes and extraordinary items are factored in.
The primary catalyst for this growth was the substantial decline in impairment charges—the money banks must set aside to cover potential loan defaults. In the second quarter of 2081/82, the bank was burdened by an impairment charge of Rs 2.52 billion. In the current review period, that figure plummeted to just Rs 479.9 million. This massive saving of over Rs 2 billion flowed directly into the bank’s bottom line, masking a minor 3.97 percent decline in net interest income, which settled at Rs 4.44 billion.
Understanding the Negative Distributable Profit
Despite the headline-grabbing net profit, investors have noted with concern that the bank’s distributable profit remains in the red at negative Rs 914.9 million. In the Nepali regulatory context, distributable profit is the amount available for dividend distribution after making mandatory transfers to various reserves (such as the general reserve, social responsibility fund, and regulatory reserve) and adjusting for non-cash incomes.
The negative status indicates that the bank is still recovering from accumulated losses and heavy regulatory requirements from previous years. Consequently, the distributable earnings per share (EPS) stand at negative Rs 12.45, even as the regular annualized EPS improved to Rs 17.76. This discrepancy highlights that while the bank is earning well now, it must first fill its existing capital “holes” before it can reward shareholders with cash or bonus shares.
Balance Sheet Strength and Key Financial Ratios
Nepal Bank continues to maintain a formidable presence in the market, with a total paid-up capital of Rs 14.69 billion. Its reserve and surplus funds have grown to a substantial Rs 23.86 billion, providing a strong buffer against economic volatility.
Key financial indicators as of Poush-end 2082:
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Total Deposits: Rs 364.87 billion (reflecting high public trust in the state-owned institution).
Loans and Advances: Rs 230.30 billion (showing a cautious but steady credit expansion).
Net Worth Per Share: Rs 262.43 (indicating a strong asset backing for every share).
Non-Performing Loan (NPL) Ratio: While the specific Q2 NPL was not detailed in the summary, the bank has been working to bring this below the 4 percent mark to align with industry averages.
Operational Efficiency and Cost of Funds
A positive takeaway from the current cycle is the bank’s ability to manage its cost of funds. By leveraging its extensive network and legacy as a government-linked bank, Nepal Bank has traditionally enjoyed a lower cost of deposits compared to newer private competitors. This allows the bank to maintain a healthy interest spread even when net interest income sees a slight dip.
The reduction in impairment charges suggests that the bank’s “recovery cell” has been active in reclaiming bad debts or that the overall quality of the new loan portfolio is significantly higher than in previous cycles.
Conclusion
The second-quarter results for Nepal Bank Limited represent a tale of two realities. On one hand, the bank is witnessing a historic recovery in net profit and operational efficiency, driven by smarter risk management and lower provisions. On the other hand, the negative distributable profit serves as a sober reminder of the long journey toward total financial health. For long-term investors, the focus will now shift to whether the bank can turn its distributable profit positive by the end of the 2082/83 fiscal year.
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