Prabhu Bank Profit Analysis Q2 Financial Performance

28th January 2026, Kathmandu

Prabhu Bank Limited has officially released its unaudited financial statements for the second quarter of the fiscal year 2082/83, corresponding to mid-January 2026. The report unveils a period of significant consolidation and financial pressure, with net profit experiencing a double-digit decline. While the bank’s core revenue streams like net interest income remain relatively stable, a sharp surge in non-performing loans (NPL) has necessitated higher provisioning, directly impacting the bottom line.

Prabhu Bank Profit Analysis

For the first six months ending Poush 2082, Prabhu Bank earned a net profit of Rs 1.01 billion. This represents a 24.06 percent decrease from the Rs 1.33 billion reported during the same period in the previous fiscal year. This downturn is reflective of the broader challenges within the Nepali commercial banking sector, where sluggish economic recovery has translated into increased loan defaults and stricter regulatory oversight.

Core Revenue Streams: Resilience in Interest Income

A bright spot in the Prabhu Bank Profit Analysis is the resilience of its core lending operations. Net interest income, which is the difference between interest earned on loans and interest paid on deposits, grew moderately by 2.47 percent. The bank recorded Rs 4.98 billion in net interest income, up from Rs 4.86 billion in the previous year.

This growth suggests that despite the profit dip, the bank has maintained a healthy interest spread. Stable deposit mobilization and a disciplined approach to loan pricing have helped offset the lack of aggressive credit expansion. However, the modest nature of this growth indicates that the bank is being selective in its lending to avoid further exposure to high-risk sectors.

Operating Performance and Rising Costs

Total operating income for the half-year stood at Rs 6.69 billion, showing a marginal increase from the previous year’s Rs 6.66 billion. Despite this stability in top-line revenue, the operating profit told a different story. Operating profit fell from Rs 2.52 billion to Rs 1.96 billion, a significant drop that highlights rising administrative costs and, more importantly, the heavy burden of impairment charges.

When loans are classified as non-performing, banks are required to set aside a portion of their earnings as a “buffer.” The Prabhu Bank Profit Analysis shows that these risk-related costs have become a primary drag on the bank’s efficiency, eating away at the gains made through interest and fee-based income.

Asset Quality: The Challenge of Rising NPLs

The most critical metric in the current financial report is the surge in the non-performing loan (NPL) ratio. Within a single year, Prabhu Bank’s NPL ratio jumped from 5.06 percent to 7.94 percent. This level of bad debt is significantly higher than the industry average and represents a serious challenge for the bank’s management.

The rise in NPLs is primarily attributed to:

Economic Slowdown: Continued sluggishness in the construction and retail sectors, which are traditional strongholds for bank credit.

Liquidity Constraints: High borrowing costs in previous quarters making it difficult for small and medium enterprises (SMEs) to service their debts.

Regulatory Strictness: Increased scrutiny by Nepal Rastra Bank (NRB) regarding loan classification and asset quality.

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This spike in bad loans directly reduces the bank’s lending capacity and forces it to focus more on recovery rather than growth.

Investor Indicators: EPS and Net Worth

The decline in profitability has naturally affected the bank’s shareholder metrics. Annualized earnings per share (EPS) dropped from Rs 11.35 to Rs 8.62. For an investor, this means the bank is generating less value per share than it was a year ago.

However, the bank’s intrinsic value remains solid. The net worth per share stands at Rs 146.17, indicating that the bank possesses a strong asset base relative to its liabilities. While the current market sentiment may be affected by the NPL spike, the bank’s fundamental book value provides a degree of safety for long-term holders.

Capital Position and Balance Sheet Growth

Prabhu Bank remains one of the largest and best-capitalized banks in Nepal, a result of its various successful mergers over the years.

Paid-up Capital: Rs 23.54 billion.

Reserves and Surplus: Rs 14.22 billion.

Total Deposits: Rs 340.73 billion.

Total Loans and Advances: Rs 227.32 billion.

The high volume of deposits indicates that public trust in Prabhu Bank remains intact despite the profit fluctuations. The bank’s primary task now is to utilize its massive capital base to effectively clean up its loan book and pivot back toward sustainable growth.

Conclusion

The second-quarter results of Prabhu Bank Limited serve as a “reality check” for the institution. While core revenues are holding steady, the 7.94 percent NPL ratio is a clear signal that the bank must prioritize asset recovery and risk mitigation in the coming quarters. With a solid capital foundation and a vast branch network, Prabhu Bank has the tools to navigate this rough patch, but returning to its previous profit levels will require a disciplined and aggressive approach to managing its loan portfolio.

For More: Prabhu Bank Profit Analysis