Citizens Bank International Limited (CZBIL) has reported a 63.05% increase in net profit to Rs. 2.10 arba in the fourth quarter of fiscal year 2082/83, compared with Rs. 1.29 arba in the corresponding quarter of the previous fiscal year.

The sharp improvement in profitability was driven primarily by a steep decline in impairment charges. The bank’s impairment provision fell 69.05% to Rs. 82.93 crore from Rs. 2.68 arba a year earlier. The lower provisioning helped operating profit surge 81.26% to Rs. 3.60 arba, compared with Rs. 1.99 arba in the previous fiscal year.

Citizens Bank’s core interest income remained under pressure during the period. Net interest income declined 1.90% to Rs. 6.29 arba from Rs. 6.41 arba. Personnel expenses moved in the opposite direction, increasing 20.13% to Rs. 2.45 arba, putting additional pressure on the bank’s operating cost base.

The bank’s funding position improved, however. Customer deposits increased 9.57% to Rs. 2.32 kharba, while loans and advances grew only 0.76% to Rs. 1.70 kharba. The relatively slow growth in lending compared with deposits indicates that the bank added deposits at a considerably faster pace than it expanded its loan portfolio.

The lower cost of funding provided another tailwind to profitability. Citizens Bank’s cost of funds fell 25.17% to 3.36% from 4.49% a year earlier. This improvement came even as net interest income declined slightly, suggesting that lower funding costs helped cushion pressure on the bank’s core interest business.

Capital remained stable, with the bank’s capital adequacy ratio unchanged at 12.47%. Paid-up capital increased 5% to Rs. 15.51 arba, while reserves grew 19.74% to Rs. 8.86 arba. Retained earnings, however, declined 32.78% to Rs. 52.31 crore.

Asset quality remains a concern despite the strong earnings improvement. The bank’s NPL ratio increased to 5.88% from 4.89%, indicating that the proportion of non-performing loans has risen over the year. The sharp reduction in impairment charges therefore needs to be viewed alongside the deterioration in reported asset quality.

Citizens Bank’s earnings per share increased 55.29% to Rs. 13.53, compared with Rs. 8.71 a year earlier. Net worth per share also increased 3.31% to Rs. 160.51.

At the end of the quarter, the bank’s share price stood at Rs. 196.90, with a reported P/E ratio of 14.55 times.

Overall, Citizens Bank’s results show a significant recovery in reported profitability, but the improvement is being driven largely by lower impairment charges and cheaper funding rather than stronger core interest income. Investors will therefore need to watch whether the profit improvement can be sustained while the bank manages its rising NPL ratio and relatively weak loan growth.