Bhutan National Bank Limited (BNB) recorded a sharp decline in profitability during the first half of 2026, despite strong growth in its loan portfolio, customer deposits and overall asset base. According to the bank’s financial statement for the six months ended June 30, 2026, BNB’s profit for the year fell to Nu 106.41 million, from Nu 541.92 million during the corresponding period last year, representing a decline of about 80 percent.
At group level, profit also dropped to Nu 114.75 million, compared with Nu 549.17 million in the first half of 2025. The decline was driven primarily by a substantial increase in impairment charges on loans and other losses, alongside a reduction in net interest income.
Loan book expands despite higher impairment
BNB’s loans and advances to customers increased to Nu 59.34 billion as of June 2026, from Nu 54.14 billion a year earlier, representing growth of about 9.6 percent. The expansion indicates continued growth in credit demand and lending activity, even as the bank faced higher costs associated with credit risk.
Impairment charges on loans and other losses rose sharply to Nu 1.17 billion, compared with Nu 749.41 million in the first half of 2025. That represents an increase of approximately 56 percent. This impacted operating expenses which increased from Nu 1.17 billion to Nu 1.72 billion, an increase of about 46 percent. The increase in impairment costs more than offset gains in other areas of the bank’s operations.
Net interest income declines
BNB’s net interest income, traditionally a major source of earnings for commercial banks, declined to Nu 1.41 billion from Nu 1.54 billion in the same period last year. This represents a decrease of approximately 8.7 percent.
However, the bank recorded stronger performance from fee-based activities. Net fee and commission income increased by more than half, rising from Nu 97.24 million to Nu 148.52 million, a gain of about 53 percent.
Other operating income, however, declined from Nu 289.74 million to Nu 258.30 million. As a result, total operating income fell to Nu 1.81 billion, compared with Nu 1.93 billion in the first half of 2025.
The figures indicate that while BNB was able to increase income from fees and commissions, the gains were insufficient to compensate for weaker net interest income and substantially higher impairment charges.
Deposits and assets continue to grow
Despite the pressure on profitability, BNB’s balance sheet expanded during the year. Total assets increased from Nu 79.86 billion in June 2025 to Nu 87.89 billion in June 2026, an increase of approximately 10 percent.
Customer deposits recorded even stronger growth. Amounts due to customers rose from Nu 46.22 billion to Nu 52.34 billion, an increase of about 13.2 percent. The increase in deposits provides the bank with a larger funding base to support lending and other financial activities.
Cash and cash equivalents also increased from Nu 6.45 billion to Nu 8.63 billion, while cash and balances with the central bank rose from Nu 7.03 billion to Nu 9.19 billion.
At the same time, placements with other banks declined significantly, from Nu 1.01 billion to Nu 475.91 million. Debt instruments held at amortized cost also declined from Nu 6.81 billion to Nu 5.79 billion.
Personnel expenses increased substantially during the period, rising from Nu 290.77 million to Nu 390.11 million, an increase of about 34 percent.
Depreciation of property, plant and equipment increased moderately to Nu 42.41 million, from Nu 40.05 million, while amortisation of intangible assets rose from Nu 20.92 million to Nu 24.89 million.
Other operating expenses also increased to Nu 91.11 million, compared with Nu 70.41 million a year earlier. Combined with the higher impairment charge, the increase in operating costs contributed to a significant reduction in profit before tax.
BNB reported profit before tax from continuing operations of Nu 95.62 million, compared with Nu 755.55 million in the first half of 2025. At group level, profit before tax stood at Nu 99.56 million, down from Nu 765.17 million.
The bank reported an income-tax benefit of Nu 10.79 million, resulting in profit for the year of Nu 106.41 million. The group recorded a tax benefit of Nu 15.19 million, resulting in profit of Nu 114.75 million.
The results present a mixed picture for BNB. On one hand, the bank expanded its asset base, increased customer deposits and grew its loan portfolio. On the other, its profitability came under considerable pressure from higher impairment charges and weaker net interest income.
BNB’s total comprehensive income fell to Nu 150.13 million for the half year, from Nu 523.14 million a year earlier. At group level, total comprehensive income declined to Nu 159.60 million, from Nu 530.99 million.
Tashi Namgyal, Thimphu
