NIC Asia Bank's Third Quarter Financial Report: Net Profit Plunges by 91.81%

NIC Asia Bank Limited (NICA) has published its unaudited financial statement for the third quarter of the fiscal year 2081/82 (2024/25). According to the report, the bank’s financial performance has witnessed a significant decline, with its net profit dropping by 91.81% compared to the same period in the previous fiscal year 2080/81 (2023/24).

Significant Decline in Net Profit

During the first nine months of the current fiscal year, NIC Asia Bank earned a net profit of NPR 15.67 crore (156.7 million). This is a sharp decline from the NPR 1.91 billion earned in the same period last year. The primary reasons for this drop are a decrease in net interest income, a decline in fee and commission income, and a substantial rise in impairment charges.

Income and Expense Breakdown

In the review period, the bank’s net interest income decreased by 2.76%, falling to NPR 7.96 billion from NPR 8.18 billion last year. Similarly, net fee and commission income saw a steep decline of 40.66%, dropping to NPR 968.16 million from NPR 1.63 billion in the previous year.
Total operating income decreased by 10.77%, reaching NPR 9.19 billion compared to NPR 10.30 billion last year. Operating profit also plummeted by 64.40%, standing at NPR 1.29 billion, down from NPR 3.62 billion in the same period of the previous fiscal year.
Impairment charges surged from NPR 2.14 billion last year to NPR 3.05 billion this year, further pressuring the bank’s profitability.

Decline in Earnings Per Share and Distributable Profit

The bank’s Earnings Per Share (EPS) has also seen a significant drop, decreasing by NPR 15.89 to NPR 1.40. Last year, the EPS was NPR 17.29. As of the end of Chaitra (mid-April), the bank’s distributable profit stood at a negative NPR 3.56 billion, posing challenges for dividend distribution.

Other Financial Indicators

As of Chaitra-end, the bank’s Price-to-Earnings (PE) ratio is 266.64 times, a sharp rise from 22.85 times last year, indicating that the stock may still be trading at a high valuation. The net worth per share stands at NPR 199.30, slightly down from NPR 205.47 last year.
The Capital Fund to Risk-Weighted Assets (RWA) ratio improved to 13.42%, up from 11.29% last year. Non-Performing Loans (NPL) increased marginally to 1.92% from 1.76% last year. The Credit-to-Deposit Ratio (CD Ratio) is at 83.47%, down from 85.81% last year. The base rate is 7.20%, and the interest rate spread is 4.0%.

Deposits and Loan Disbursement

By the end of Chaitra, the bank collected deposits worth NPR 294.06 billion, a 16.95% decrease from NPR 354.96 billion in the same period last year. Similarly, loan disbursement stood at NPR 233.43 billion, down 13.94% from NPR 271.25 billion last year. This decline indicates a contraction in the bank’s business expansion.
As noted in our previous discussion on April 16, the NPR 1.40 billion reduction in NIC Asia Bank’s loan disbursement in Chaitra aligns with the trends observed here.

Paid-Up Capital and Reserves

The bank’s paid-up capital remains unchanged at NPR 14.91 billion. Reserves and surplus have slightly increased by 1.45% to NPR 14.81 billion from NPR 14.60 billion last year. However, retained earnings are negative at NPR 3.56 billion, worsening from a negative NPR 2.66 billion last year.

Market and Policy Impact

As discussed earlier on April 16, the uncertainty surrounding the appointment of Nepal Rastra Bank’s governor and the third-quarter financial reports have impacted the market. While the potential appointment of Dr. Gunakar Bhatta as governor has sparked some optimism, NIC Asia Bank’s weak financial performance may raise concerns among investors. Additionally, the decline in loan disbursement reflects reduced liquidity and loan demand in the market, a trend we previously highlighted in our NEPSE market analysis.

NIC Asia Bank’s third-quarter financial statement for the current fiscal year reveals significant challenges in its financial health. The drastic decline in net profit, income, and EPS, coupled with a rise in impairment charges, has strained the bank’s operations and business growth. Moving forward, the bank needs to reassess its strategies, focusing on risk management and diversifying income sources, to restore investor confidence. Failure to address these issues may further erode trust among stakeholders.