Bhutan National Bank’s (BNB) profit in 2019 was around Nu 62mn. In 2018 the bank recorded profit of around Nu 736mn.
This is a drastic decrease of 91.5% in profit from last year.
The Chief Executive officer of BNB, Sonam Tobgay said that the reason for the plunge in profit is high provision.
Provision, a large part of the money that banks run on is public money. When a loan is not being repaid, the bank has to reconstitute this money from its other sources like profit. Setting aside of money from profits to compensate a probable loss caused on lending a loan is called provisioning.
He said that banks have to keep certain provision as guided by the central bank.
CEO said that when a bank has high provision it is indication of high non-performing loan (NPL) over the year.
BNB’s 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, 6.91% which is around Nu 1.55bn, and in 2017, 5.49% which is around Nu 1.47bn.
CEO said that they could not meet the target of NPL. The target for NPL in 2019 was 5%.
BNB made a profit of Nu 1bn in 2015, making history among the other financial institutes in the country. The staff were given six months basic salary as bonus. BNB’s profit in 2016 was Nu 680.91m and in 2017, Nu 828.94m. Over the year, the bank has seen decrease in the profits. However, 2018 to 2019 saw a drastic decrease in the profit.
CEO said that when BNB made a profit Nu 1bn, the interest rate that time was higher and minimum lending rate was not introduced.
“Decrease of revenue over the year could be due to many reasons, customers’ habit of paying loan and some being unable to repay the loan,” CEO said.
CEO said that the strategy now for the bank to deal with high NPL will be to recover the loans in the future. The bank has also kept NPL target of 5% this year.
However, the bank has not declared how much dividend the bank is going to give to shareholders. There is a formula to declare the dividend.
The Royal Securities Exchange of Bhutan (RSEB) mentioned that as per the 24th AGM of BNB held on February 28, 2020, it endorsed the proposed dividend for 2019 at 0.86% or Nu 0.086 per share. The dividend proposed is however subject to RMA approval.
As a banker, CEO mentioned that the reason for the high NPL could be that banks are seeing some problems. “There is indication of some issue at macro level.”
BNB’s loans and advances outstanding in 2019 was Nu 32.92bn and deposit was Nu 35.48bn.
Dechen Dolkar from Thimphu