Market Watch

Commercial banks’ provisioning up in Q3

Published by Octron on May 29, 2010

The provisioning (for possible losses) of most of the commercial banks has gone up in the third quarter of the current fiscal year against the second quarter with the bankers admitting that they were facing difficulties getting timely repayment of their loans to the real estate sector. The banks made hefty net profits of as high as Rs. 10 billion in the third quarter which would have been higher if the provisioning had not been increased during the period.

Almost all the banks except Prime Bank witnessed a rise in provisioning during the third quarter compared to the second, according to the third quarterly report published by the banks. Nepal Bank has a negative provisioning of Rs. 21.5 million against a positive provisioning of Rs. 39.1 million in the second quarter. But its earlier provisioning went for write back (provisioning made for bad debts which is later reduced or cancelled after repayment of loans) which stands at Rs. 115.15 million in the third quarter.

Similarly, Lumbini Bank has also no provisioning in the consecutive three quarters of the current fiscal year due to write back of Rs. 275.26 million and Rs. 184.25 million in the third and second quarters respectively. The write back amount can be shown in profits. President of the Nepal Bankers Association Sashin Joshi said that the delay in repayment of property related loans was one of the reasons behind the increased provisioning. “Another reason is the stricter directive issued by NRB on provisioning,” he added.

As per this directive, the banks should make cent percent provisioning of non-banking assets (acquisition of collateral for not paying loans) right after acquisition although they could make provisioning gradually from 25, 50 and 100 percent in first, second and third year respectively earlier. Among the banks making higher provisioning are Nabil Bank, Himalayan Bank Limited (HBL), Machhapuchchhre Bank, Rastriya Banijya Bank (RBB) and Agricultural Development Bank Limited (ADBL). Nabil’s provisioning soared to Rs. 396.41 million in third quarter from Rs. 91 million in the second. Likewise, HBL’s provisioning went up to Rs. 334.77 million from Rs. 253.94 million, Machhapuchchhre’s provisioning soared to Rs. 161.51 million from Rs. 52.03 million. RBB witnessed the rise of provisioning to Rs. 208.72 million from Rs. 10.54 million and it rose to Rs. 1.55 billion from Rs. 1.02 million in case of ADBL.

Chief executive officer of HBL Ashok Rana said that the increase in provisioning in his bank was not due to delays in repayment of real estate loans but a factory that had received loans from HBL could not repay its loans in time due to some constraint it faced for exporting its products to India. Regarding increased provisioning of RBB, its CEO Janardan Acharya said an increase of just a rise of Rs. 98 million in provisioning was not so big for the bank as big as RBB. “The increase in non-banking assets as the bank acquired them as a recovery during the period and increase in good loans by around Rs. 3 billion doubled the provisioning,” he said. For good loans, the banks should put provisioning of 1 percent.

Source: Kantipur

Readers Rating: