Nepal SBI Bank’s Annual Profit Falls Amid Higher Provisions Despite Growth in Core Operations

Nepal SBI Bank Limited (SBI) has unveiled its unaudited financial results for the fourth quarter of fiscal year 2081/82, reflecting a mixed performance. While the bank achieved healthy growth in deposits, lending, and core income streams, profitability was impacted by significantly higher impairment charges.

Profitability Declines Due to Higher Provisions
As of Ashad-end 2082, Nepal SBI Bank posted a net profit of NPR 1.80 billion, representing a 9.86% drop from NPR 1.99 billion in the same period of the previous fiscal year. The decline is primarily due to impairment charges, which surged from NPR 648.31 million in FY 2081 to NPR 1.02 billion in FY 2082 — an increase of over 58%. This provisioning directly reduced the bank’s operating profit, which fell by 3.62% to NPR 2.73 billion.

Core Income Shows Positive Growth
Despite the pressure on profits, the bank’s core operational revenues recorded steady growth. Net interest income rose by 3.72% to NPR 5.26 billion, while net fee and commission income increased by 7.55% to NPR 1.21 billion. This lifted total operating income by 5.91% to NPR 6.78 billion compared to NPR 6.40 billion last year, reflecting stronger banking activities.

Earnings Per Share and Distributable Profit
The bank’s earnings per share (EPS) decreased from NPR 18.35 in FY 2081 to NPR 16.54 in FY 2082, a drop of NPR 1.81. Distributable EPS improved slightly by NPR 0.80 to NPR 11.29, indicating that despite lower overall profit, the portion available for distribution was maintained. Distributable profit amounted to NPR 1.23 billion, up from NPR 1.01 billion a year earlier.

Balance Sheet Strength
On the balance sheet front, the bank’s paid-up capital stood at NPR 10.89 billion, an increase of 3.80% from last year’s NPR 10.50 billion. Reserves grew significantly, with reserves and surplus reaching NPR 9.65 billion, up 21.37% from NPR 7.95 billion. Customer deposits rose by 13.72% to NPR 199.60 billion, while loans and advances to customers increased by 7.13% to NPR 134.96 billion, showing sustained credit expansion.

Capital Adequacy and Asset Quality
The capital fund to risk-weighted assets (RWA) ratio stood at 13.03%, slightly down from 13.24% in the previous year but still above the regulatory requirement. Non-performing loans (NPL) were contained at 3.35%, indicating stable asset quality despite market challenges.

Cost of Funds and Interest Spread
The bank’s base rate declined from 8.30% to 6.29%, which could lower lending rates but also impact interest margins. The interest rate spread narrowed from 3.99% to 3.52%, reflecting a more competitive lending environment.

Market Valuation
Nepal SBI Bank’s net worth per share increased slightly to NPR 188.59, up from NPR 185.60. The price-to-earnings (P/E) ratio was recorded at 26.60 times, suggesting that the bank remains moderately valued in the market given its earnings performance.

Overall, Nepal SBI Bank’s FY 2081/82 results reveal a resilient core banking operation with growing deposit and loan portfolios. However, the sharp rise in impairment charges has weighed heavily on profitability, bringing down both operating profit and net earnings. The bank’s ability to manage credit risks more effectively in the coming year will be crucial to restoring profit momentum, while maintaining its capital adequacy and asset quality will remain key to sustaining investor confidence.