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Which bank will be in better position to provide more dividend after their capital reaches Rs 8 arba: SCB, NIB, NABIL or EBL?

- ShareSansar, March 16, 2017  on Company Analysis , Featured , Financial Analysis , Latest , Stock Market
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Standard Chartered Bank Nepal Limited (SCB), Nepal Investment Bank Limited (NIB), Nabil Bank Limited (NABIL) and Everest Bank Limited (EBL) have been considered as blue-chip companies in Nepali share market for a long time. However, not all of these banks have similar profits or similar dividend history.

Companies at a glance as of Q2 FY 2073/74

BankPaid up CapitalReserve and SurplusNet ProfitNet Worth Per Share (Rs.)Annualized EPS (Rs.)
NABIL6,183,5407,207,7011,754,021216.5656.73
EBL4,606,4274,879,236971,576205.9242.18
SCB3,749,9014,514,420740,146220.3939.48
NIB8,706,6129,299,5571,640,293206.8137.68

Rs In ‘000

Nepal Investment Bank was the first to reach the paid up capital requirement of Rs 8 arba

As part of its capital increment plan, NIB had floated 90.69 lakh units FPO shares at Rs 601 per share last year. This added Rs 90.69 crore to its paid up capital and increased it to Rs 7.25 arba. After issuance of 20% bonus share for FY 2072/73, its paid up capital reached Rs 8.70 arba, thereby meeting the minimum paid up capital requirement of NRB. After the FPO, its reserve has also grown massively, and now stands at Rs 9.29 arba. This way, it is in a very strong position to issue dividends.

Nabil Bank has proposed 30% bonus share

As per its capital plan, NABIL intends to reach the minimum paid up capital requirement by issuing 30% bonus shares. After the issuance of 30% bonus, its paid up capital will reach Rs 8.03 arba.

Assuming similar capital increments from their respective capital plans, paid up capital of EBL will reach Rs 8.02 arba in the end of FY 2073/74. Likewise, after the ongoing FPO of SCB and capitalization of premium issued from bonus, its paid up capital will reach Rs 8.01 arba.

Assuming all banks will not issue any further capital increment, we have analyzed which bank will be in a better position to issue higher dividend. Nepal Rastra Bank has projected a 20% year-on-year rise in net profit of commercial banks. If the banks are able to increase their net profit by 20% every year, NABIL will have the highest EPS of Rs 42.09 by the end of this year. SCB, on the other hand, will have the lowest EPS of Rs 19.36 only.

Net Profit (Rs in ‘000)
 FY 2072/73FY 2073/74FY 2074/75
NABIL2,819,3333,383,2004,059,840
EBL1,730,2072,076,2482,491,498
SCB1,292,4951,550,9941,861,192
NIB2,550,8833,061,0603,673,272
 Paid Up Capital* (Rs in ‘000)
 FY 2072/73FY 2073/74FY 2074/75
NABIL6,183,5408,038,6028,038,602
EBL4,606,4278,023,3008,023,300
SCB3,749,9018,011,4308,011,430
NIB8,706,6128,706,6128,706,612
 Earnings Per Share*  (Rs)
 FY 2072/73FY 2073/74FY 2074/75
NABIL45.5942.0950.50
EBL37.5625.8831.05
SCB34.4719.3623.23
NIB29.3035.1642.19

* Assuming no capital increment after paid up capital reaches Rs 8 arba, figures of FY 2073/74 and FY 2074/75 are projected

In FY 2074/75, NABIL’s EPS will rise to Rs 50.50 whereas SCB’s EPS will be at Rs 23.23 only. Thus, out of these 4 commercial banks, Nabil Bank will be able to provide more dividend after their paid up capital reaches Rs 8 arba.

Cost Price Per Share

With similar assumptions, the cost price per share of these 4 commercial banks can be calculated. If today’s latest closing price on the market is taken into account, Nabil Bank’s per share cost will be around Rs 1,107. Similarly, SCB’s cost will be around Rs 984. If the shares are acquired from FPO, the per share cost will only be Rs 645.

LTP (Rs)FPO Price (Rs)Expected Bonus Share*Right ShareCost Price Per Share (Rs)180-day average price (Rs)
NABIL1,44030%1,107.691,886
EBL1,72334%30%1,006.312,881
SCB1,9691290100%984.5 (645)2,940
NIB690690849

* Assuming no capital increment after paid up capital reaches Rs 8 arba

Conclusion

As seen from the above table, shares of all of these 4 top commercial banks can be bought at a relatively low price. The ongoing FPO of Standard Chartered Bank may be a good opportunity to grab the shares at just Rs 645 (after adjustment of bonus). However, investors should also analyze other banks which can provide more dividends in the future. The decision ultimately falls on the investor and the amount of risk they are willing to bear.

Also Read: Is it profitable to apply for Standard Chartered FPO? Know about its past performance and projections

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