Kathmandu: Prabhu Bank Limited has staged a remarkable financial turnaround in fiscal year 2081/82, posting a net profit of Rs 5.44 billion compared to just Rs 510.86 million in the previous fiscal year, as per its unaudited fourth-quarter financial statement.

The bank’s recovery was largely fueled by a significant reduction in loan loss provisions. In 2080/81, the bank had set aside a hefty Rs 4.71 billion for impairment charges on loans and other losses. This year, however, it recorded a reversal of Rs 2.51 billion, directly adding to bottom-line growth. This reversal alone contributed to an almost Rs 7.23 billion swing in profitability.

Revenue Pressure Despite Profit Surge
Core income indicators reveal some pressure on revenue streams. Interest income declined by 27.1% to Rs 23.23 billion, reflecting either a slowdown in credit expansion, lower lending rates, or a shift in asset composition. With interest expenses also falling 19.9% to Rs 16.03 billion, the bank’s net interest income contracted by 39.5% to Rs 7.19 billion.

Fee-based activities provided some cushion, as net fees and commission income rose 15.8% to Rs 2.21 billion. Still, overall total operating income dropped 27.3% to Rs 10.57 billion.

Cost Control and Efficiency Gains
On the expense side, the bank managed operating costs tightly. Personnel expenses increased marginally by 4.2% to Rs 4.62 billion, while other operating expenses fell 6.3% to Rs 1.46 billion. Depreciation and amortization grew moderately by 6.8% to Rs 714.54 million.

These cost measures, combined with the reversal in loan loss provisions, lifted operating profit to Rs 6.28 billion — nearly double the Rs 3.15 billion recorded last year.

Tax Impact and Net Profit Growth
The bank’s profit before tax hit Rs 6.30 billion, but after accounting for current tax of Rs 1.43 billion and a deferred tax credit of Rs 568.93 million, the net profit settled at Rs 5.44 billion — a year-on-year growth of over 963%.

Key Takeaways for Investors

• Profit surge is largely due to reversal of loan loss provisions, not organic revenue growth.
• Decline in interest income suggests potential challenges in interest margin sustainability.
• Improved cost management and steady fee-based income are positive signs.
• Future performance will depend on credit growth, asset quality sustainability, and interest rate environment.
• With this turnaround, Prabhu Bank has reinforced its capital position and investor confidence, but sustaining growth will require balancing income recovery with prudent risk management in the coming fiscal year.