Prabhu Bank Limited: The Challenges of Merging with Ailing Banks

In FY2018–19, Prabhu Bank, an ‘A’ class Nepalese commercial bank, reported its operating profit of Rs1.74 billion, a significant decrease of 34 per cent from the previous year. The bank had aggressively grown through several mergers with local banks. In 2014, it merged with the problematic Kist Bank, and to everyone’s surprise, managed to recover a large amount of bad debts. In 2016, it decided again to merge with another ailing bank, which raised doubts about the health of the combined entity. The central bank of Nepal had continued to raise the paid-up capital and tighten the rules to strengthen the financial stability. Could Prabhu Bank continue to achieve its ambitious growth and profitability through such aggressive mergers?