Kumari Bank Limited – Third Quarter Financial Report Analysis for Fiscal Year 2081/82 (2024/25)
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NEPSE trading
Kumari Bank Limited has published its third-quarter financial statement for the current fiscal year 2081/82. The report indicates significant deterioration in the bank's financial performance, particularly in net profit, operating profit, and distributable profit. Increases in Non-Performing Loans (NPLs) and impairment charges have further strained the bank's financial health. Here is a detailed analysis of Kumari Bank’s Q3 financial performance:
Sharp Decline in Net Profit
Kumari Bank earned a net profit of NPR 285.82 million in this quarter, a decline of 72.85% compared to the same period last year. In Q3 of FY 2080/81, the bank had earned NPR 10.52 billion in net profit. The main reasons for this drop were the rise in impairment charges and a decline in net interest income.
Reduction in Interest and Operating Income
Net Interest Income decreased by 6.27%, reaching NPR 7.89 billion compared to NPR 8.42 billion last year – a drop of NPR 528.25 million.
Total Operating Income fell slightly by 0.55%, totaling NPR 10.49 billion, down from NPR 10.55 billion last year.
This decline in income directly impacted both operating and net profits.
Significant Rise in Impairment Charges
Impairment charges (provisions for bad loans) rose notably:
From NPR 3.54 billion last year to NPR 5.17 billion this year – an increase of NPR 1.62 billion.
As a result, Operating Profit dropped by 23.99% to NPR 5.33 billion, compared to NPR 7.11 billion last year.
Operating and Distributable Profit
Operating Profit plunged by 75.31% to NPR 558.39 million, from NPR 2.26 billion last year.
Distributable Profit remains negative at NPR -6.50 billion, worsening from NPR -4.20 billion last year. This represents a deterioration of NPR 2.29 billion.
A negative distributable profit implies the bank is currently not in a position to issue dividends.
Paid-up Capital and Reserve Fund
Paid-up Capital stands stable at NPR 26.22 billion.
Reserve Fund grew by 11.37%, reaching NPR 15.53 billion compared to NPR 13.94 billion last year – an increase of NPR 1.58 billion.
Although positive, the overall profit decline limits the impact of this reserve growth.
Increase in Non-Performing Loans (NPL)
NPL rose from 4.95% last year to 6.98% this year – an increase of 2.03 percentage points.
This highlights growing challenges in credit risk management and long-term financial stability concerns.
Base Rate and Cost of Funds
Base Rate fell from 9.63% to 6.78%, a drop of 2.85 percentage points.
Cost of Funds also declined from 7.58% to 5.05%, a reduction of 2.53 percentage points.
While this provides some relief in loan interest rates, the drop in interest income offsets any positive impact.
Earnings Per Share (EPS) and Net Worth Per Share
EPS saw a sharp decline from NPR 5.35 to NPR 1.45, down by NPR 3.90.
Net Worth Per Share remained stable at NPR 134.43.
The reduced EPS negatively affects shareholder returns.
Deposits and Loans
Customer Deposits increased by 5.09%, reaching NPR 350.79 billion, compared to NPR 333.11 billion last year – an increase of NPR 17.68 billion.
However, Loans and Advances decreased by 1.49% to NPR 264.43 billion, down from NPR 268.43 billion – a decrease of NPR 4.48 billion.
The decline in lending has further impacted interest income.
Kumari Bank’s Q3 financial report reveals that the bank is facing substantial financial challenges:
Net profit has dropped by 72.85%,
NPL has increased by 2.03 percentage points, and
Impairment charges have risen sharply.
These issues have severely impacted the bank’s profitability and sustainability. Although there are a few positives – like an increase in reserves and a reduction in base rate and cost of funds – they are insufficient to counterbalance the major negative trends.
Going forward, the bank must prioritize NPL management, impairment charge control, and reviving interest income. Failing to do so could further erode the bank’s long-term stability and shareholder value.
