21st January 2025, Kathmandu
NIC Asia Bank has announced a sharp 92% drop in its net profit for the first half of fiscal year 2025 (FY 2024/25).
NIC Asia Bank Profit Drops
The bank’s profit fell to NPR 15.73 million, compared to NPR 190.3 million in the same period last year. This significant decline in profitability has raised concerns despite the growth in the bank’s deposits and loan portfolio.
Major Decline in Net Profit and Operating Income
The bank’s net profit has plummeted by 92.03% compared to the same period last year. While the bank recorded a profit of NPR 190.3 million in the previous fiscal year, it has now dropped to just NPR 15.73 million.
This drastic reduction also reflects a decline in operating income, which fell to NPR 34.27 million, down from NPR 356.10 million in the prior year. This sharp drop in operating income has raised alarms about the bank’s overall performance.
Impact of Lower Interest Income and Increased Impairment Charges
NIC Asia Bank’s interest income has decreased to NPR 518.69 million from NPR 554.14 million last year, marking a decline. This has added pressure on the bank’s financial stability, particularly given the significant increase in impairment charges.
The bank set aside NPR 235.96 million for impairment charges, a substantial rise from NPR 48 million last year. This increase indicates that the bank has been grappling with a higher number of non-performing loans (NPLs), affecting its bottom line.
Growth in Deposits and Loan Portfolio
Despite the decrease in profit, NIC Asia Bank continues to grow its deposits and loans. The bank collected NPR 334.83 billion in deposits and provided loans worth NPR 245.13 billion by the end of the reporting period.
This marks a modest growth in both deposits and loan disbursement compared to the previous year, where the bank collected NPR 354.09 billion in deposits and issued NPR 271.25 billion in loans. These figures show the bank’s ability to maintain its lending and deposit-taking activities.
Rising Non-Performing Loans
A key challenge for the bank is the increase in its non-performing loans. NIC Asia Bank’s NPL ratio rose to 1.47%, up from 0.58% during the same period last year.
The increase in bad loans has prompted the bank to allocate larger provisions for impairment. This growing NPL ratio is a significant factor contributing to the sharp decline in the bank’s profit, making loan recovery and management a top priority for the bank.
Strong Capital Position and Reserves
Despite the profit downturn, NIC Asia Bank remains financially stable with a solid capital base. The bank has a paid-up capital of NPR 14.91 billion and reserves totaling NPR 17.41 billion.
These figures demonstrate that the bank has a robust financial cushion to absorb shocks and continue operations. Additionally, the bank’s net worth per share stands at NPR 198.92, while its earnings per share (EPS) have dropped to NPR 2.04 from NPR 25.59 last year.
High Price-to-Earnings Ratio Reflects Investor Confidence
NIC Asia Bank’s Price-to-Earnings (P/E) ratio currently stands at 125.11, suggesting that investors maintain confidence in the bank’s future prospects despite the current decline in profitability.
The relatively high P/E ratio indicates that the market continues to value the bank highly, likely driven by expectations of future growth and recovery.
Conclusion
In summary, NIC Asia Bank’s financial performance for the first half of FY 2025 reveals a concerning decline in profitability, marked by a 92% drop in net profit and an increase in non-performing loans. While the bank continues to grow its deposits and loan portfolio, the rise in bad loans and the increase in impairment provisions present ongoing challenges.
However, the bank’s strong capital reserves and investor confidence provide it with the necessary resources to navigate these difficulties. Moving forward, the bank will need to focus on managing credit risk effectively and improving asset quality to restore profitability.
For more: NIC Asia Bank Profit Drops
