BNBL profit increases by 104% in 2011 at Nu 510mn

Bhutan National Bank Limited (BNBL) made a net profit of Nu 510.3mn last year, an increase by Nu 259mn from the year 2010.

Chairperson of the board of directors, Kunzang Dechen said that apart from being “delighted”, the management has cut down on a lot of costs.

“Income from foreign exchange fluctuations amounted to Nu 104mn”, he added. The net interest income for the year was Nu 1.752bn while interest paid or expenditure on deposits reached Nu 698mn.

Therefore, gross profit made by the bank amounted to Nu 729mn of which Nu 218.7mn is its contribution to the national exchequer as corporate income tax (CIT).

The bank is poised to state a dividend of Nu 25 per share, The Bhutanese has learnt. This was proposed to the company’s annual general meeting (AGM) held on March 22. A share holder who holds about 3.5% of the total share said, “ it was proposed and subject to approval from RMA”.

A shareholder also said that the total dividend amount to be declared is Nu 168.9mn However, BNBL officials refused to comment on the dividend citing a penalty of Nu 5,000 per day by RMA. According to a share holder, BNBL’s total shares work out to more than six million and are the most traded at the stock exchange.

In 2006, the bank declared a dividend of 100% while in 2007 it declared 40% dividend. For the last four years the bank declared 28.5% dividends each. The central bank (RMA) turned down its proposal to declare a dividend of 30% in 2011.

BNBL officials said the bank made only Nu 250.8mn in 2010 owing to additional costs incurred during the year. However, a share holder is of the opinion that there was a problem with the level of provisioning. He said, “As per RMA guidelines, certain number of funds was kept as provision for industries which didn’t do well like Bhutan Comcast”. 

A shareholder said the capital adequacy ratio (CAR) for all financial institutions in the country, as mandated by the RMA, is 19% while the BNBL has about 19.55%.

CAR is a measure of a bank’s capital. It is expressed as a percentage of a bank’s risk weighted credit exposures. Almost all central banks or banking regulators require the banks to hold a certain minimum equity capital against its risk weighted assets.

One of the shareholders said the bank is looking to mobilize funds and looking out for more deposits.

Following directives from RMA, BNBL recently closed 520 non- Bhutanese accounts which decreased the deposits by Nu 538mn, a major part of which was paid in INR.

On March 20, BNBL announced increase in interest rates for fresh corporate fixed deposits to build up liquidity and lending capacity. Corporate deposits constitute almost 75 percent of BNBL’s total deposits

The new interest rates, the highest it has offered over the years ranges from 2 to 8.5 percent depending on the time period. This was done to increase deposits and enhance lending capacity of the bank.

BNBL is the fastest growing financial institution in the country with an annual growth rate of 23.4%. Kunzang Dechen said,”Despite the rupee crunch or whatever people say, BNBL has a very strong growth opportunity in the future”.

The total assets of the bank currently stand at about Nu 25bn which comes second after the country’s biggest bank, Bank of Bhutan Limited.