Prime Bank Profit Decline Analysis: 14.34% Drop Amid Rising Non-Performing Loans

Prime Bank Profit Decline
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20th January 2025, Kathmandu

Prime Commercial Bank has posted a net profit of NPR 1.87 billion for the second quarter of the current fiscal year, showing a 14.34% drop compared to the same period last year.

Prime Bank Profit Decline Analysis

The bank’s profit in the previous year during this period was NPR 2.18 billion. Despite the decline, the bank managed to grow in some key areas.

Interest Income Growth Despite Decline in Profit

Even with a drop in overall profit, the bank saw a healthy increase in its net interest income, which grew by 14%, reaching NPR 4.41 billion. In comparison, last year’s interest income stood at NPR 3.87 billion. The rise in interest income reflects the bank’s ability to maintain profitability through its core operations despite other challenges.

Increased Non-Performing Loans Raise Concerns

The bank’s financial performance for the first half of the fiscal year reveals a mixed picture. The increase in non-performing loans (NPLs) is a major concern. The NPL ratio rose from 4.07% to 4.96%, signaling a slight deterioration in the quality of its loan portfolio. This uptick in NPLs suggests that some loans are becoming riskier, potentially affecting future profitability.

Strong Capital and Reserve Position

Prime Commercial Bank maintains a strong capital base, with paid-up capital totaling NPR 19.4 billion. The bank’s reserves have also grown to NPR 10.31 billion. These healthy figures suggest that the bank has a solid foundation to support ongoing operations and expansion.

Distributable Profits for Shareholders Show Solid Returns

The bank’s distributable profit amounts to NPR 1.84 billion. For its shareholders, the earnings per share (EPS) has dropped to NPR 19.28 from NPR 22.50 in the previous year. Despite the decrease in EPS, the bank’s net worth per share remains strong at NPR 162.64.

Financial Performance at a Glance

Net Profit: NPR 1.87 billion (down by 14.34%)

Net Interest Income: NPR 4.41 billion (up by 14%)

Operating Profit: NPR 3.18 billion

Non-Performing Loans (NPLs): 4.96% (up from 4.07%)

Paid-Up Capital: NPR 19.4 billion

Reserves: NPR 10.31 billion

Distributable Profit: NPR 1.84 billion

Earnings per Share (EPS): NPR 19.28 (down from NPR 22.50)

Net Worth per Share: NPR 162.64

Outlook and Challenges Ahead

Prime Commercial Bank’s performance in the second quarter highlights both successes and challenges. The growth in interest income is positive, but the increase in non-performing loans and decline in profit pose challenges. However, the bank’s strong capital base and reserve position suggest it is well-equipped to weather these challenges.

The bank will need to focus on managing the rise in non-performing loans and improving operational efficiency to ensure continued profitability and shareholder value. The coming months will be crucial in determining how well the bank adapts to market conditions and maintains its competitive edge in Nepal’s banking sector.

For more: Prime Bank Profit Decline Analysis


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