The number of commercial banks in Nepal not in a position to distribute dividends due to negative distributable profits has dropped to six by the third quarter of the current fiscal year (2024/25), down from 10 during the same period last year.

According to unannualized financial reports for the third quarter (mid-January to mid-April), six banks—Rastriya Banijya Bank, Nepal Investment Mega Bank, Prabhu Bank, NIC Asia Bank, Kumari Bank, and Himalayan Bank—reported negative distributable profits as of mid-April 2025.

Among them, Himalayan Bank posted the highest negative distributable profit, exceeding Rs 7.36 billion, followed by Kumari Bank (Rs 6.50 billion), NIC Asia (Rs 3.56 billion), Prabhu Bank (Rs 3.40 billion), Nepal Investment Mega Bank (Rs 1.10 billion), and Rastriya Banijya Bank (Rs 1.02 billion).

This marks a reversal for some institutions: in the same period last fiscal year, Rastriya Banijya Bank and Prabhu Bank had reported positive distributable profits of Rs 246.2 million and Rs 166.5 million, respectively.

Conversely, six banks that had negative distributable profits by Q3 of the last fiscal year—Machhapuchchhre Bank, Siddhartha Bank, Nepal Bank, Laxmi Sunrise Bank, NMB Bank, and Global IME Bank—have now reported positive figures.

The dividend-paying capacity of banks is assessed based on distributable profits at the end of the fiscal year, meaning these six banks still have the final quarter to improve their financial standing.

“Banks are witnessing stronger loan recoveries amid a rise in economic activity,” former banker Bhuvan Dahal told Aarthik Abhiyan, a sister publication of New Business Age. He noted that increased investments and a more stable lending environment have supported the recovery and that profits are expected to strengthen further.

Analysts also point to regulatory adjustments by the Nepal Rastra Bank (NRB) as a contributing factor. 

In its mid-term review of monetary policy, NRB reduced the loan loss provisioning requirement for performing loans from 1.10% to 1%, freeing up a portion of previously allocated funds and boosting profitability.

By the third quarter, commercial banks had earmarked over Rs 35 billion for impairment charges, compared to Rs 39.87 billion during the same period last year.

Though 14 banks have reported positive distributable profits, they might not necessarily be in a position to distribute dividends.

Everest Bank currently leads in distributable profit, having posted Rs 3.67 billion—an increase of approximately 34% year-on-year by mid-April. With paid-up capital of Rs 12.94 billion, the bank’s dividend distribution capacity stands at 28.42%.

At the other end of the spectrum, Machhapuchchhre Bank has shown significant improvement. It now has a positive distributable profit of Rs 70.7 million. However, with a paid-up capital of Rs 11.62 billion, its current dividend capacity remains modest at 0.61%.

Source: Respective Banks