Kathmandu. The financial condition of NIC Asia Bank indicates that instead of moving forward on the path of improvement, it is getting stuck in a more complicated turn. The financial statements for the second quarter of 83 months (July-December) have been given. Decline in profit, falling operating profit, contraction in interest income and continuous increase in non-banking assets have contributed to the bank’s financial health.
The bank has earned a net profit of Rs 13.11 crore in the first six months of the current FY. The bank had posted a net profit of Rs 15.17 crore in the same quarter last year. Accordingly, the profit of the bank decreased by 13.54 percent. While the decline in profitability is a matter of concern in itself, analysts say that the risk is further compounded by the weakening of operating and core banking indicators.
The operating profit of the bank was limited to Rs 19.77 crore as of mid-January of the current fiscal year. The operating profit was Rs. 34.19 crore in the same period of the previous year. The 42.16 percent decline in operating profit is an indication of problems in the internal performance and income structure of the bank.
Similarly, interest income has also decreased significantly. In the second quarter, the bank earned Rs 4.36 billion. In the same period last year, the interest income was Rs 5.18 billion. This is a decline of 15.87 percent. This shows that there is increasing pressure on the core banking business.
The bank’s CEO Sujit Shakya is also struggling to handle the pressure on the bank. Employees have started saying that with the new CEO, he will not be able to reduce the challenge of NIC.
Non-banking assets (NPAs) have become another challenge in improving the financial health of NIC Asia Bank. The bank’s cash flow has been under constant pressure due to the failure to convert the houses, land and buildings seized from the borrowers who have failed to repay the loans into cash on time.
According to experts, the sluggish real estate market, repeated failures of attempts to sell through auction and the overall economy are not reviving, which has made the management of non-banking assets more difficult.
Another serious sign in a bank’s financial structure is distributable profits. In the review period, the bank’s distributable profit stood at Rs 7.39 billion. In the previous year, it was negative by Rs 2.65 billion.
However, the bank’s reserves have increased to Rs 22.06 billion (Rs 19.81 billion in the previous year). However, the negative retained earnings of Rs 7.39 billion indicate weakness in the internal capital formation of the bank. The bank has a paid-up capital of Rs 14.91 billion.
During the period, the bank collected deposit of Rs 327.50 billion and extended loan of Rs 209.31 billion. The bank had deposited Rs 319.05 billion and extended loans of Rs 224.12 billion in the review period.
Meanwhile, the non-performing loan ratio of the bank has increased to 1.57 percent. The NPL was 1.47 per cent in the same period last year. Although this ratio is not high, analysts say that the increasing trend indicates that the risk may increase in the coming days.
The bank’s earnings per share declined to Rs 1.77 per share. Last year, it was Rs 2.04. The PE ratio is 188.58 times and the net worth per share is Rs 128.33. These indicators also show that confidence in the stock market is weakening.
According to banking analysts, NIC Asia Bank is currently under transitional financial pressure. Aggressive credit expansion, weak collections, the challenges of managing non-banking assets and a sluggish economy have put pressure on banks at the same time.
