The bank made a profit of Nu 1bn in 2015
While the Bhutan National Bank Limited (BNBL) recorded a profit of Nu 61.96mn, the bank profited Nu 46.63mn in 2020.
However, in 2018 the bank made a profit of Nu 736.19mn. The profit in 2020 has reduced by 24.75% due to additional provision of Nu 634.90mn for the year and interest waiver of Nu 403.76mn under the monetary measure I. There is a drastic decrease in profit, which is of 32.8% decrease from 2019.
BNBL’s Chief Executive Officer Sonam Tobgay said the reason for the decrease in profit is because of the decrease in other incomes and additional provisions in 2020.
Meanwhile, provisioning is setting aside of money from profits to compensate a probable loss caused on lending a loan. When a loan is not being repaid, the bank has to reconstitute this money from its other sources like profit. Banks have to keep certain provision, which they are guided by the central bank.
The CEO said when a bank has high provision, it is indication of a high Non-Performing Loan (NPL) over the years.
The bank’s NPL has increased to 12.98%, which is around Nu 4.56bn till December 2020. In 2019 the NPL was 8.54%, which is around Nu 2.81bn till December 2019.
In 2018 the NPL was 5.62%, which is around Nu 1.63bn, in 2016 it was 6.91%, which is around Nu 1.55bn, and in 2017 it was 5.49%, which is around Nu 1.47bn.
BNBL made a profit of Nu 1bn in 2015, making history among other financial institutes in the country. The bank then gave six-month basic salary as bonus to their employees.
BNBL’s profit in 2016 was Nu 680.91mn; in 2017 the profit was Nu 828.94m. Over the years, the bank’s profit has decreased. However, from 2018 there has been a drastic decrease in the profit.
According to the BNBL making a profit of Nu 1bn, the interest rate that time was higher and minimum lending rate was not introduced.
“Decreasing over the years could be because of many reasons – customers’ habit of paying loan and some, they were, not able to repay the loan,” the CEO said.
The CEO said that the strategy now for the bank for the high NPL will be to recover the loans in the future. The bank has also kept the NPL target for 5% for 2020.
Meanwhile, the bank has not declared any dividend to their shareholders. The BNBL annual report states that as per the directive issued by the RMA, the bank has been instructed not to make any dividend payments for the year ending 2020.
Meanwhile, the loans and advances outstanding in 2020 was Nu 35.16bn. Over 77.21% of the loans are in the housing, service and tourism, manufacturing and trade and commerce sectors.
Deposits grew from Nu 35.48bn in 2019 to Nu 38.89bn in 2020, registering a growth of 9.62%.
As of May 31 this year, 13,573 account holders of the bank are eligible for the 50% interest waiver and 12,113 account holders have applied for loan deferment for the BNBL.
A total of 12,126 accounts amounting to Nu 27.85bn opted for deferment, while 5,743 accounts amounting to Nu 5.37bn opted to continue repayments to avail 1% rebate.
“Nu 1.598bn interest support was received from the Kidu which was not only economic relief to borrowers but also helped us to avert buildup of NPLs,” states the bank’s annual report.
The bank also waived off 50% of interest accrued from April to June, 2020, amounting to Nu 403.70mn.
Dechen Dolkar from Thimphu