Standard Chartered Bank Nepal Reports 16% Dip in Profits Amid Shrinking Interest Margins

KATHMANDU – Standard Chartered Bank Nepal Limited (SCB) has seen its bottom line under pressure during the second quarter of the current fiscal year. According to the unaudited financial report released today, the blue-chip bank's net profit and core interest income have both registered a significant decline compared to the same period last fiscal year.

The bank’s net profit settled at NPR 1.37 billion for the first six months of the fiscal year, marking a 16.29% drop from the NPR 1.64 billion reported in the previous year's second quarter.

Drivers of the Decline The contraction in profitability is attributed to two primary factors: a squeeze in interest spreads and a rise in impairment charges (provisions for potential bad loans).

• Core Income: Net interest income, the bank's primary revenue stream, fell by 9.13%.

• Operational Profit: Reflecting the broader slowdown, operating profit also slid by 16.21%.

• Silver Lining: On a positive note, the bank demonstrated efficiency in non-interest revenue, with fee and commission income growing by 11.54%, showcasing strength in its service-based business despite a tough lending environment.

Impact on Shareholder Metrics The decline in profit has directly impacted the bank’s Earnings Per Share (EPS), which plummeted by NPR 5.32 to stay at NPR 27.35.

• Distributable Profit: The bank reported a distributable profit of NPR 912.5 million, translating to a distributable EPS of NPR 18.17.

• Valuation: As of the end of the second quarter (mid-January), the bank’s net worth per share stands at NPR 211, with a Price-to-Earnings (P/E) ratio of 23.10 times.

Conservative Lending and Strong Liquidity Standard Chartered continues to maintain a highly conservative balance sheet. While it has mobilized NPR 137 billion in deposits, its credit disbursement stands at only NPR 68.54 billion. This results in an exceptionally low Credit-to-Deposit ratio, indicating that the bank is sitting on a massive pile of liquidity but remains cautious about aggressive lending in the current economic climate. With a paid-up capital of NPR 10.04 billion and reserves of NPR 11.14 billion, the bank remains one of the most stable, albeit currently less aggressive, institutions in the country.