The Bhutan Development Bank Limited (BDBL) reported a significant improvement in profitability during the first half of 2026, with net profit rising by 33.2 percent despite a sharp decline in net interest income and overall revenue.
The company recorded a profit of Nu 110.62 million, compared with Nu 83.05 million during the corresponding period last year. Total comprehensive income also increased to Nu 110.18 million, from Nu 83.05 million a year earlier, representing a 32.7 percent increase.
The improvement in the bottom line was driven primarily by a substantial reduction in impairment charges on loans and other losses, which helped offset pressure on the bank’s core interest income.
BDBL’s interest and similar income increased considerably during the period, reaching Nu 2.01 billion, compared with Nu 1.33 billion in the first half of 2025. This represents an increase of about 50.8 percent.
However, the sharp rise in interest expenses more than absorbed the additional income. Interest and similar expenses climbed to Nu 1.66 billion, from Nu 872.56 million a year earlier—an increase of approximately 90.2 percent.
As a result, the bank’s net interest income fell by 24.2 percent, from Nu 457.94 million in the first half of 2025 to Nu 347.10 million in the first half of 2026.
The figures point to growing pressure on the bank’s interest margin. While the bank generated substantially more interest income, the cost of funds increased even faster, leaving less income after interest expenses.
Overall revenue declines
The pressure on net interest income was reflected in BDBL’s overall revenue. Total revenue stood at Nu 498.08 million during the six months, down from Nu 587.51 million in the corresponding period of 2025. This represents a decline of about 15.2 percent. Net fee and commission income was relatively stable, although it declined marginally from Nu 25.69 million to Nu 25.21 million.
Other income, meanwhile, increased from Nu 101.99 million to Nu 112.56 million, while the bank recorded Nu 11.39 million in net gains on the fair value of financial assets, compared with no such gain reported in the corresponding period last year. Rental income declined slightly from Nu 1.89 million to Nu 1.82 million.
Lower impairment charges provide major boost
The most significant improvement came from impairment charges for loans and other losses which fell sharply to Nu 50.64 million, compared with Nu 183.19 million in the first half of 2025. This represents a reduction of approximately 72.4 percent.
The decline in impairment costs substantially reduced the burden on operating earnings and appears to have been a major factor behind the increase in profit despite weaker net interest income. Total operating expenses consequently fell from Nu 468.87 million to Nu 356.25 million, a reduction of about 24 percent.
BDBL’s historical financial reports have also highlighted the importance of loan quality to the bank’s earnings. Its 2017 annual report, for instance, attributed a substantial loss that year to high non-performing loans and associated provisioning.
Although total operating expenses declined, not all expenditure categories moved in the same direction. Personnel expenses increased by 8.3 percent, reaching Nu 224.77 million, compared with Nu 207.49 million a year earlier.
Depreciation on property, plant and equipment rose from Nu 11.83 million to Nu 17.17 million, while amortization of intangible assets increased from Nu 4.84 million to Nu 6.36 million. Other operating expenses, however, declined from Nu 61.53 million to Nu 57.31 million.
The overall reduction in operating expenses was therefore largely driven by the sharp fall in impairment charges rather than a broad decline across all cost categories.
Despite the decline in total revenue, BDBL’s profit before tax from continuing operations increased to Nu 141.83 million, from Nu 118.64 million in the first half of 2025, an increase of approximately 19.5 percent.
Current tax expenses also declined, falling from Nu 35.59 million to Nu 31.20 million. After tax, profit reached Nu 110.62 million.
The bank’s improved profitability is being supported less by net interest income growth and more by lower credit-loss charges and other income.
The 33 percent rise in profit indicates a significant improvement in the bank’s bottom line. The sharp reduction in impairment charges suggests that credit-loss pressures were considerably lower during the first half of the year.
At the same time, the 24 percent decline in net interest income and the 90 percent increase in interest expenses raise questions about the sustainability of earnings if funding costs remain elevated.
Tashi Namgyal, Thimphu
