Standard Chartered Nepal profit falls 5.9% as loan book shrinks

The year in numbers

Standard Chartered Bank Nepal's net profit came to Rs 2.85 arba for FY 2082/83, the full year to Ashadh, down 5.9% on year as interest income fell 11% and customer loans contracted 9.2%. Why it matters: the deposit base is swelling while the credit book shrinks, so earnings now depend on how that idle money is invested rather than on the volume of lending.

Net interest income fell 12.1% to Rs 3.94 arba and operating profit 11.6% to Rs 4.17 arba, against a 2.9% decline in total operating income to Rs 6.41 arba. Earnings per share slipped to Rs 28.38 from Rs 30.17. The ratio that explains the year is asset quality: the NPL ratio rose 0.56 percentage points to 2.03%, the one clear deterioration, while capital adequacy improved 0.31 points to 18.13%, the interest spread widened 0.24 points to 3.77% and the cost of funds eased 0.69 points to 2.53%.

A balance sheet parked in securities

Deposits from customers grew 17.8% to Rs 147.68 arba, yet loans to customers fell 9.2% to Rs 66.03 arba and interbank lending dropped 73%. Investment securities more than doubled, up 104% to Rs 27.68 arba, and total assets rose 16% to Rs 180.06 arba. The credit-to-deposit ratio slid 22.24 points to 47.24%, leaving less than half the deposit base out as customer credit — a highly liquid, low-yield deployment for a commercial bank.

Against the sector, that liquidity has not bought a cleaner book. Everest Bank, the highest-returning peer, runs a 0.49% NPL ratio and 14.41% return on equity; this bank's NPL of 2.03% sits far above that, and its 12.57% ROE is second only to Everest's even as Nabil, growing profit 10.9%, carries 4.2% bad loans.

How the tape is reading

The shares closed at Rs 679 on 16 October, up 0.15% on the session and 1.97% over five sessions, with the 20-session gain at 4.45% — a slow grind from a 52-week low of Rs 603 toward the Rs 712.6 high. Volume was thin at 11,819 shares, so the drift reads as patient buyers paying up in small size in a quiet name rather than broad sector participation.

The next test

The next test is the first-quarter filing of the new fiscal year, followed by the AGM and book closure, where distributable profit of Rs 1.91 arba, down 4.1%, frames the dividend. What would change the picture is customer credit growing again and the credit-to-deposit ratio turning back up from 47%; if it stays flat, the wider spread only holds while deposit costs keep falling.