Druk PNB Bank Limited recorded a 26 percent decline in net profit during the first half of 2026, despite strong growth in lending, customer deposits and operating income, as a sharp increase in provisions for non-performing assets and bad debts weighed on its bottom line.
The bank’s net profit for the six months ended June 30, 2026, stood at Nu 128.53 million, down from Nu 173.75 million during the corresponding period last year, according to its abridged unaudited financial statement.
The decline came even as the bank expanded its core business. Loans and advances to customers rose to Nu 24.51 billion, from Nu 21.40 billion a year earlier, representing an increase of about 14.5 percent. Customer deposits also increased by 9.3 percent, reaching Nu 29.93 billion, compared with Nu 27.38 billion in the first half of 2025.
The growth in lending and deposits helped strengthen the bank’s operating income. Net interest income increased by 24.5 percent from Nu 375.98 million to Nu 468.02 million, while net fee and commission income more than quadrupled to Nu 110.05 million from Nu 27 million.
As a result, total operating income rose by 42.2 percent to Nu 589.46 million, compared with Nu 414.65 million in the same period last year. However, the improvement in operating performance was more than offset by higher expenses and, particularly, provisions associated with bad loans.
The bank reported Nu 215.27 million in NPA provisions and bad debts written off during the first half of 2026, compared with only Nu 12.63 million in the same period last year. The increase of more than Nu 200 million represented the biggest pressure on profitability during the period.
Total operating expenses rose by 19.1 percent to Nu 202.82 million from Nu 170.36 million. Staff costs remained broadly stable at Nu 93.77 million, compared with Nu 95.20 million a year earlier. General administrative expenses, however, increased to Nu 92.50 million, from Nu 62.42 million, while premises costs rose to Nu 16.34 million from Nu 12.74 million.
Consequently, profit before tax fell by 26 percent to Nu 171.37 million, compared with Nu 231.66 million in the first half of 2025. Tax expenses also declined, from Nu 57.92 million to Nu 42.84 million, but the reduction was not sufficient to offset the impact of higher credit-related provisions.
Despite stronger lending activity, the bank’s total assets increased only marginally, rising to Nu 36.34 billion at the end of June 2026 from Nu 36.15 billion a year earlier.
Loans and advances to customers accounted for the largest increase among major assets, while cash and cash equivalents declined significantly to Nu 5.86 billion, from Nu 10.44 billion in June 2025.
The bank’s equity position, meanwhile, strengthened to Nu 4.96 billion, compared with Nu 4.51 billion a year earlier. The increase in equity represents growth of nearly 10 percent over the 12-month period.
Other liabilities fell substantially, from Nu 4.26 billion to Nu 1.45 billion, while customer deposits remained the bank’s dominant source of funding.
The figures indicate that the bank has continued to expand its balance sheet and core banking activities, but the quality and cost of its loan portfolio have emerged as an important factor affecting earnings.
The sharp increase in NPA provisions is particularly significant because it occurred alongside double-digit growth in customer lending.
While the financial statement does not provide a detailed explanation for the increase in provisions, the figures highlight the financial impact of credit-risk management on the bank’s profitability.
For banks, provisions against potentially impaired loans are designed to absorb expected losses and strengthen the balance sheet against future defaults. A substantial increase can therefore reduce current profits even when underlying banking income is growing.
For Druk PNB Bank, the first-half results present a mixed picture: core income expanded strongly, but credit-related costs substantially reduced the benefit to shareholders.
The bank’s net interest income increased by nearly Nu 92 million, while fee and commission income added another Nu 83 million compared with the previous year. Yet the increase in NPA provisions alone was more than Nu 202 million.
The results come as Bhutan’s banking sector continues to expand lending to households and businesses, with banks increasingly seeking to diversify income through fees, digital services and other financial products.
Druk PNB Bank’s customer loan portfolio grew by more than Nu 3.1 billion over the year, while deposits increased by about Nu 2.55 billion.
The immediate financial picture is therefore one of stronger banking activity but weaker earnings, with the surge in bad-debt provisions emerging as the defining feature of Druk PNB Bank’s first-half performance.
Tashi Namgyal, Thimphu
