MB Subba 

The five banks and non-banking lenders recorded a net profit (after tax) of Nu 1.63 billion (B) at the end of the first quarter 2021, according to the financial sector performance report of the central bank.

This is an increase of Nu 1.625B from a meagre profit of Nu 4.7 million (M) at the end of the first quarter of last year.

The quarterly review report highlights the performance of the Bhutanese financial sector based on the reports submitted by the financial institutions.

The interest income of the financial institutions increased from Nu 2.979B to Nu 6.045B during the period. The financial institutions’ interest expenses increased slightly from Nu 2.022B to Nu 2.514B.

One of causes of the increase in the profit was the increase in the loan amount that the financial institutions had disbursed to stimulate economic activities amid the Covid-19 pandemic.

An official said that the financial institutions had come up with various credit products to boost the economy and to offset the impact of the pandemic and that the non-performing loan (NPL) had also decreased during the past one year. “The financial institutions have launched various products like short-term loans to local industries for import of raw materials to deal with the impact of the pandemic.”

The total loan at the end of the first quarter increased to Nu 169.8B from Nu 158.928B at the end of the first quarter of last year.

However, NPL decreased from Nu 28.162B to Nu 24.754B during the period. The amount of NPL decreased by 12 percent while the gross NPL ratio decreased from 17.72 percent to 14.58 percent. 

Figures show that out of the total loans, the service and tourism sector has the biggest chunk of the loan with Nu 44.7B (28 percent) followed by the housing sector with Nu 41.368B (26 percent) and trade and commerce sector with Nu 19.9B (12 percent).

An analysis of the loan portfolio shows that the financial sector has loans highly exposed towards the service sector with an NPL ratio of 29 percent. This is followed by trade and commerce sector, and production and manufacturing sector with NPL ratio of 19 percent each.

The capital fund of the financial institutions stood at Nu 22.948B in March 2021 as compared to Nu 21,065B in December 2017.

The capital fund is the main source of financial support and acts as a buffer that enables financial institutions to absorb a level of losses without the interest of creditors and depositors being adversely affected and protects the interest of the creditors and depositors in the event of liquidation.

Besides absorbing the unanticipated shocks, the capital fund also signals that the institution will continue to honour its obligations.

Edited by Tashi Dema