Profit for fi­nan­cial sec­tor slumps end of sec­ond quar­ter

Business Bhutan - - Money - Dechen Dolkar from thim­phu

The fi­nan­cial sec­tor, which in­cludes banks and non­banks, recorded a profit of Nu 310.22mn as of June 2016.

Ac­cord­ing to the Royal Mon­e­tary Au­thor­ity’s (RMA) Fi­nan­cial Sec­tor Per­for­mance Re­view Re­port, June 2015-16, this was a sat­is­fac­tory per­for­mance by the fi­nan­cial sec­tor, given that the net profit of the fi­nan­cial sec­tor de­creased by Nu 272mn, from Nu 582.73mn in June 2015 to Nu 310.22mn in June 2016.

The banks earned a profit of Nu 30.39mn in June 2016 com­pared to Nu 345.90mn in June 2015. The cen­tral bank at­trib­uted the de­crease in the net profit of the banks to in­crease in op­er­at­ing ex­pense by 13% and also due to in­crease in Non Per­form­ing Loans (NPL) by Nu1.03mn, which again re­quired the fi­nan­cial in­sti­tu­tions to pro­vide high pro­vi­sion­ing of Nu1.48bn.

Com­par­a­tively, the non­banks per­formed bet­ter, record­ing a net profit of Nu 279.83mn dur­ing the pe­riod un­der re­view. The net profit of the non-banks also in­creased from Nu 236.83mn in June 2015 to Nu 279.83mn in June 2016 in­di­cat­ing an in­crease of Nu 42.99mn.

The in­crease in profit of the fi­nan­cial sec­tor was mainly at­trib­uted to the in­crease in in­ter­est in­come by Nu 891.35mn. Ac­cord­ing to the RMA’s re­port, the in­ter­est in­come in­creased from Nu 3.99bn in June 2015 to Nu 4.88bn in June 2016. This was mainly due to in­crease in in­ter­est in­come from loans and ad­vances and fixed de­posits by Nu 752.15mn and Nu 37.45mn re­spec­tively.

Sim­i­larly, the in­ter­est ex­pense also in­creased by Nu 511.09mn, from Nu1.84bn in June 2015 to Nu 2.36bn in June 2016, out of which Nu1.32bn re­lates to in­ter­est paid on time de­posits, Nu 430mn as in­ter­est on de­mand de­posits and Nu 373mn re­lates to in­ter­est on bonds and bor­row­ings.

The re­port states that though the in­ter­est ex­pense in­creased by Nu.511.09mn, the in­crease in in­ter­est in­come off­set the in­crease in in­ter­est ex­pense.

The RMA re­port states that one of the im­por­tant pa­ram­e­ters to as­sess the per­for­mance of the fi­nan­cial sec­tor is the earn­ing trends. “The con­tin­ued vi­a­bil­ity of the fi­nan­cial in­sti­tu­tions de­pends on its abil­ity to earn an ap­pro­pri­ate re­turn on its as­sets which en­ables the in­sti­tu­tions to fund busi­ness ex­pan­sion and re­main com­pet­i­tive,” says the re­port.

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