Lumbini Bikas Bank recently shared its first quarter financial report, and the numbers tell a story that’s concerning for anyone holding this bank’s shares. The situation has changed dramatically from a year ago, and it’s worth understanding what happened.
A year ago, this bank was making money. In the first quarter of the previous year, it earned around 20 crore rupees in net profit. Fast forward to today, and the bank is now losing 35 crore rupees in the same quarter. That’s not just a small decline. It’s the difference between profit and loss, a swing of more than 50 crore rupees in the wrong direction.
When you look at earnings per share, which shows how much profit belongs to each shareholder, the numbers are even more alarming. The bank went from a positive 9.62 rupees per share to negative 9.62 rupees per share. That means the bank is now destroying shareholder value rather than creating it.
The biggest problem is a surge in bad loans. The bank’s non-performing loan ratio jumped from 3.69 percent a year ago to 7.78 percent now. This 111 percent increase shows that more customers are struggling to repay their loans, and the bank had to set aside massive amounts of money to cover these potential losses.
The bank put aside 70 crore rupees to cover loan losses. Compare that to just 5 crore rupees last year. This is the real reason the profits disappeared. The money the bank earned from its main business activities got consumed by the need to prepare for loan defaults.
Last year, the bank had 29 crore rupees in operating profit from its regular business. This year, it reported 34 crore rupees in operating losses. This reflects not just the loan problem but also the bank’s struggle to cover its expenses while managing a damaged loan portfolio.
Interest income from lending actually stayed relatively flat, declining only slightly from 45 crore 98 lakh rupees to 45 crore 38 lakh rupees. This shows the bank did collect interest payments from customers, but the growing defaults made it hard to count on these revenues.
The Return on Investment Has Gone Negative
For a bank, return on equity is a key measure of how well it’s using shareholder money. Lumbini Bikas Bank went from a positive 11.71 percent return to a negative 20.65 percent return. In simple terms, the bank is no longer generating returns for shareholders. It’s losing their money.
Return on assets also turned negative, dropping to minus 2.08 percent from a positive 2.38 percent. This means every rupee of the bank’s assets is now working against shareholders rather than for them.
What’s particularly worrying is that the bank’s deposit base and lending portfolio are both contracting. The bank collected 56 billion 14 crore rupees in deposits while deploying 46 billion 57 crore rupees in loans. Compare this to 57 billion 59 crore rupees in deposits and 47 billion 13 crore rupees in loans a year ago. The bank is attracting fewer deposits and lending less money.
When banks stop growing, it’s often a sign of declining confidence from both customers and the market. Customers may be moving money to more stable institutions, and the bank’s ability to generate new loans is shrinking.
The Distributable Profit Problem
One last figure to consider is the distributable profit, which is what the bank can theoretically pay to shareholders as dividends. A year ago, it was 31 crore rupees. Now it’s negative 17 crore rupees 34 lakh. The bank won’t be paying dividends. Instead, it’s burning through reserves.
If you own shares of Lumbini Bikas Bank, this quarter presents a reality check. The bank is facing serious operational challenges that go beyond temporary market conditions. The growing loan defaults, shrinking deposits, and operating losses suggest management has not yet found effective solutions.
The bank was already under central bank scrutiny before this quarter. Now with these results, the pressure will only increase. Shareholders need to watch carefully for the next quarterly report to see if the bank can stabilize or if this downward trend continues. For new investors, this is probably not the time to jump in. Wait to see if management can turn things around.
