Kathmandu: Citizens Bank International posted a strong 35.82 per cent year-on-year rise in net profit in the first nine months of the current fiscal year, earning Rs 1.30 billion by the end of the third quarter, compared with Rs 961.9 million during the same period last year.
The improved bottom line reflects a combination of stronger overall income growth and tighter cost management. The bank’s financial health also appears to have benefited from a decline in its base rate and cost of deposits, although pressure from rising non-performing loans remains a concern.
During the review period, Citizens Bank reported net interest income of Rs 4.67 billion, slightly lower than Rs 4.74 billion recorded a year earlier. Net fee and commission income also edged down to Rs 917.3 million from Rs 936.1 million. Despite the modest decline in both core interest and fee income, the bank managed to significantly improve operating profit, which climbed from Rs 1.33 billion to Rs 1.84 billion.
The bank posted balanced but relatively modest growth in deposits and lending over the nine months. Deposits increased from Rs 211.50 billion at the end of last fiscal year to Rs 213.47 billion by mid-April, while total loans remained almost flat, inching up from Rs 168.86 billion to Rs 169.39 billion.
Citizens Bank’s base rate declined sharply to 5.27 per cent from 6.62 per cent a year ago, while its cost of deposits fell to 3.54 per cent. Its spread rate, the gap between lending and deposit rates, also narrowed from 3.83 per cent to 3.55 per cent, mirroring the broader compression seen across Nepal’s banking sector.
However, asset quality has weakened. The bank’s non-performing loan ratio rose from 5.71 per cent to 6.82 per cent, indicating mounting stress in loan recovery. To cushion against possible defaults, the bank set aside Rs 1.48 billion as impairment charges during the period. Although this was lower than the Rs 2.16 billion provision allocated in the same period last year, it still signals continued caution over credit risk. The bank’s total loan loss provision to total non-performing loans stands at 88.26 per cent.
Supported by the rise in profit, earnings per share improved to Rs 11.42 from Rs 8.95 a year ago. The bank reported a capital adequacy ratio of 12.45 per cent and a tier-one capital ratio of 8.93 per cent, while its credit-to-deposit ratio stood at 82.18 per cent. These figures suggest that although the bank still has enough liquidity to expand lending, capital constraints may limit aggressive credit growth going forward. Net worth per share stood at Rs 155.99.
A key concern for shareholders, however, is the bank’s dividend-paying capacity. After regulatory adjustments and allocations to various mandatory reserves, Citizens Bank reported a negative distributable profit of Rs 504.4 million for the first nine months of the fiscal year. Even after accounting for retained earnings from the previous year and post-dividend adjustments, the bank remains in an accumulated distributable deficit of the same amount.
With paid-up capital of Rs 15.50 billion, the bank’s ability to declare a meaningful dividend this year will largely depend on how strongly it performs in the final quarter, particularly in improving recoveries, containing bad loans and generating additional operating income.
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