Himalayan Bank’s Profit Rebound Masks a Weaker Core Business
Himalayan Bank’s profit jumps 1,041%, but weaker net interest income, lending and operating profit complicate the headline growth.
Himalayan Bank Limited (HBL) has reported a sharp rise in net profit for the fourth quarter of fiscal year 2082/83 with earnings reaching Rs. 1.48 arba, up 1,041.16% from Rs. 12.97 crore in the same quarter a year earlier.
The headline profit growth comes alongside a weaker performance in several core banking indicators. HBL’s net interest income fell 15.74% to Rs. 8.81 arba, while operating profit declined 23.60% to Rs. 2.63 arba. The bank’s loans and advances also decreased 1.24% to Rs. 2.28 kharba, despite deposits growing 13.72% to Rs. 3.52 kharba.
The bank’s cost of funds improved significantly during the period, falling 25% to 3.63% from 4.84% a year earlier. Impairment charges also declined 22.88% to Rs. 2.90 arba from Rs. 3.76 arba, providing some relief to the bank’s bottom line.
HBL’s personnel expenses, however, increased 6.96% to Rs. 3.66 arba. With operating profit declining despite lower impairment costs and a lower cost of funds, the sharp increase in reported net profit stands out against the bank’s underlying operating performance.
The bank’s capital position improved during the year. Its capital adequacy ratio rose to 11.69% from 10.60%, while reserves increased 9.91% to Rs. 26.81 arba. Paid-up capital also increased 4.27% to Rs. 22.58 arba.
Asset quality remained a major concern. HBL’s non-performing loan ratio stood at 7.96% almost unchanged from 7.97% a year earlier. The bank’s retained loss also widened 11.13% to Rs. 98.40 crore.
Despite the large increase in net profit, HBL’s earnings per share rose to only Rs. 6.56 from Rs. 0.60, a 994.42% increase from a very low base. Net worth per share was reported at Rs. 177.48, while the bank’s quarter-end market price stood at Rs. 194.50, giving it a reported P/E ratio of 29.67 times.
The results therefore present a mixed picture: HBL has delivered a dramatic improvement in reported profit, but its core interest income, lending growth and operating profit remain under pressure. The improvement in capital adequacy and funding costs is positive, while the persistently high NPL ratio remains an important risk for investors to watch.