August 7: The net profit of commercial banks increased by almost 25 percent in the last fiscal year (FY 2022/23) despite slowdown of economic activities due to the impacts of Covid-19 and Russia-Ukraine war.

The profits of banks improved in the review year due to the increase in income from interest and the control in growth rate of bad loans. According to the financial statements published by the commercial banks for the FY 2022/23, they earned a total net profit of Rs 70.17 billion in the review year. In the previous year (FY 2021/22), the profit was Rs 56.17 billion, which is an increase of 24.93 percent last year.

Although the profit growth rate decreased in the first, second and third quarters of the last fiscal year, there was an improvement in the fourth quarter. Compared to the same period of the previous year, the profit increased by 5.94 percent in the first quarter of FY 2022/23, by 11.10 percent in the second quarter and by 11.67 percent in the third quarter. Coming to the fourth quarter, the growth in profit was more than double compared to the third quarter.

Former banker Analraj Bhattarai said that although the business expansion of banks was not significant in the last fiscal year, the increase in spread rate and the increase in income from investments made by banks in treasury bills and bonds had a positive effect on the profit.

"Last year, the spread rate was also high and the income from the government treasury was also good," he said, "Because of which the profit of the banks has been seen somewhat positive."

He says that the merger of banks had a positive effect on some banks. However, compared to the capital of the banks, this year's profit should be considered normal, Bhattarai said.

In the fourth quarter of the last fiscal year, banks also succeeded in controlling bad loans. In the previous year, bad loans of banks were 1.10 percent. However, bad loans of banks increased to 1.83 percent in the first quarter of FY 2022/23. Bad loans further increased to 2.35 percent in the second quarter while the average bad loans reached 3.03 percent by the third quarter. In the fourth quarter, banks succeeded in reducing bad loans to 2.7 percent.

Control of bad loans also had a positive effect on the profit of banks. Former banker Bhattarai says that it can be compared to the financial discipline of banks and businessmen.

Last year, Nabil Bank earned the highest net profit of Rs 7.52 billion after acquiring Nepal Bangladesh Bank which is an increase of 76.86 percent compared to the previous year. Similarly, Global IME Bank, which merged with Bank of Kathmandu, earned a net profit of Rs 7.25 billion. The profit of Global IME increased by 46.26 percent.

In the last fiscal year, the profit of Kumari Bank and Prime Commercial Bank was less than the previous year. The profit Kumari, which acquired NCC Bank, decreased by 24.14 percent compared to the previous year and was limited to Rs 1.95 billion. In the previous year, the profit of the bank was Rs 2.57 billion rupees. Similarly, the profit of Prime Bank decreased by 18.81 percent to Rs 2.26 billion.