Prime Commercial Bank annual profit up 2.2% as funding costs ease
Profit inched up, but NPLs rose to 6.69% from 5.56% and dividend capacity shrank.
Prime Commercial Bank closed FY 2082/83 with net profit of Rs 4.11 arba, up 2.2% on the year, as cheaper funding cushioned a slide in interest income. Why it matters: the growth is a margin story, not a credit-quality one — NPLs rose and payout capacity narrowed, so the dividend call at the AGM becomes the test.
The year at a glance
Interest income fell 8.1% to Rs 21.62 arba, but net interest income rose 4.4% to Rs 9.21 arba because funding costs fell 1.4 points to 3.81%. The interest spread is the ratio that explains the period: it held at 3.66%, down just 0.03 points, even as the base rate dropped 1.54 points. Total operating income grew 6.6% to Rs 11.9 arba and operating profit rose 4.2% to Rs 6.83 arba. EPS fell 5.4% to Rs 19.63 on an 8% larger share count, and ROE eased 1.35 points to 11.16%.
Where the growth came from
The balance sheet grew 6% to Rs 336.07 arba. Loans to customers rose 7.6% to Rs 226.44 arba, outpacing deposits, which grew 5.5% to Rs 277.74 arba; lending to banks and financial institutions jumped 19.2%. The credit-to-deposit ratio was nearly flat at 83.36%. The uncomfortable line is asset quality: NPLs rose 1.13 points to 6.69% even as the bank added 8% to paid-up capital and CAR strengthened 1.13 points to 12.87%. Distributable profit fell 31.4% to Rs 1.91 arba — the line that anchors the dividend.
Among peers, PCBL's NPL is the second highest in the set, below only NIMB's 8.66% and far above Everest's 0.49% and Nabil's 4.2%. Profit growth of 2.2% trails Nabil's 10.9% and Everest's 3.1%, though it beats Laxmi Sunrise's -24.3% and NIMB's -59.3%; ROE of 11.16% sits mid-pack.
How the stock is trading
The stock climbed into the result: Rs 283 at the 30 October close, up 0.53% on the day, 4.16% over five sessions and 10.12% over twenty, holding just below the 52-week high of Rs 286.8. The advance has been gradual rather than a one-session push, with buyers paying up through the range as the filing approached.
Next catalyst
The next test is the first-quarter FY 2083/84 filing, which will show whether NPLs have peaked and how much of the funding-cost advantage survives as the rate cycle moves. The AGM and book closure that follow settle the dividend question, with distributable profit down 31.4%. What would change the picture is the NPL ratio holding near 6.69% while loan growth continues; a fresh rise would put the margin story and the payout under pressure.
For information only. Not investment advice.