Insightful Evaluation: Q3 2081/82 Performance Analysis of B-Class Development Banks Unveiled

The third-quarter reports for the fiscal year 2081/82 have been publicly disclosed by 15 out of 16 development banks. These reports provide a comprehensive overview of their financial health. Karnali Development Bank Limited has not published its report as Nepal Rastra Bank (NRB) has declared it a "problematic institution" and placed its management under direct NRB control. Share trading of Karnali Development Bank has also been suspended.

This analysis aims to meticulously evaluate the financial performance of Nepal's development banks, categorized as "B" class financial institutions, using the unaudited third-quarter reports for the 2081/82 fiscal year.

The Nepal Stock Exchange (NEPSE) currently lists 16 development banks, divided into National-level and Regional-level entities. Our focus is on assessing the performance of these "B" class financial institutions, drawing insights from the recently released quarter-end reports.

Net profit:

As per the quarterly report, Garima Bikas Bank (GBBL) has reported the highest net profit for the period, amounting to Rs. 73.35 Crores. Muktinath Bikas Bank Limited (MNBBL) comes in second place in terms of profit, which amounts to Rs. 72.49 Crores.

The third position is secured by Shine Resunga Development Bank (SHINE) with a net profit of Rs. 51.40 Crores. In terms of growth in net profit, Jyoti Bikas Bank (JBBL) achieved the highest growth margin of 101.15% for Q3 of FY 81/82.

At the regional level, Corporate Development Bank (CORBL) reported the highest growth in net profit at 103.90% for Q3 of FY 81/82.

Paid-up capital:

Muktinath Bikas Bank Limited (MNBBL) has the highest paid-up capital amounting to Rs. 7.05 Arba among all the development banks, with Garima Bikas Bank Limited (GBBL) holding the second-highest paid-up capital at Rs. 5.68 Arba.

On the other hand, Narayani Development Bank Limited (NABBC) has the lowest paid-up capital of Rs. 26.25 Crores.

Reserve and surplus:

Muktinath Bikas Bank Limited (MNBBL) reported the highest reserve and surplus, totaling Rs. 4.10 Arba. Following MNBBL is Garima Bikas Bank Limited (JBBL) with a reserve of Rs. 3.03 Arba. Lumbini Bikas Bank Limited (LBBL) holds the third position with a reserve of 2.9 Arba.

Meanwhile, Narayani Development Bank Limited (NABBC), Sindhu Bikas Bank (SINDU), and Saptakoshi Development Bank (SAPDBL) have reported negative reserves and surplus.

Deposits from Customers:

Among B-class institutions, Muktinath Bikas Bank Limited (MNBBL) leads with a total deposit of Rs. 1.13 Kharba, followed by Garima Bikas Bank Limited (GBBL) with a deposit of Rs. 85.79 Arba. The overall development banks have collected a total deposit of Rs. 5.95 Kharba.

Loans and Advances to Customers:

As of Q3 2081/82, total loans and advances of development banks reached Rs. 4.77 Kharba, with an average loan of Rs. 31.83 Arba. Muktinath Bikas Bank Limited (MNBBL) disbursed the highest loan amount, totaling Rs. 96.03 Arba, followed by Garima Bikas Bank Limited (GBBL) with Rs. 69.05 Arba. Shine Resunga Development Limited (SHINE) disbursed Rs. 54.73 Arba, ranking third.

Net interest income:

In terms of Net Interest Income, Muktinath Bikas Bank Limited (MNBBL) leads with Rs. 3.28 Arba, followed by Garima Bikas Bank Limited (GBBL) with Rs. 2.66 Arba, and Shine Resunga Development Bank Limited (SHINE) with Rs. 1.93 Arba. Out of the 15 banks, 8 reported above-industry-average net interest income.

Provisions for the period (Impairment/Reversal):

Banks have set aside funds as loan loss provisions and delayed loan repayments for several borrowers.

Total impairment charges amount to Rs. 5.07 Arba for loans and other losses. Among National Level banks, Muktinath Bikas Bank Limited (MNBBL) shows the highest impairment charge at Rs. 123.38 Crores, with Lumbini Bikas Bank Limited (LBBL) also holding high provisions at Rs. 94.89 Crores.

At the regional level, Narayani Development Bank Limited (NABBC) and Sindhu Bikas Bank (SINDU) reported a reversal in impairment charges.

Annualized Earnings per share:

Garima Bikas Bank Limited (GBBL) topped the annualized EPS list at Rs. 17.22 per share, followed by Sindhu Bikas Bank Limited (SINDU) with Rs. 18.76 per share.

Net worth per share:

The highest net worth per share is reported by Lumbini Bikas Bank Limited (LBBL) at Rs. 180.24 per share, followed by Mahalaxmi Bikas Bank Limited (MLBL) with Rs. 163.86 per share and Kamana Sewa Bikas Bank Limited (KSBBL) at Rs. 163.22 per share. The average net worth per share of the 15 banks is Rs. 133.69.

P/E Ratio:

The P/E ratio indicates how much investors are paying for each rupee of the firm’s earnings. Garima Bikas Bank Limited (GBBL) has the lowest P/E ratio at 22.99 times, whereas Corporate Development Bank Limited reports the highest P/E ratio at 422.72 times.

Non-Performing Loans:

Non-performing loans indicate credit risk for banks. Miteri Development Bank Limited (MDB) has the lowest NPL ratio at 0.78%, while Narayani Development Bank Limited (NABBC) has the highest at 44.96%.

Capital Adequacy Ratio (CAR):

Miteri Development Bank Limited (MDB) reported the highest CAR at 34.19% while Narayani Development Bank Limited (NABBC) reported the negative CAR at 1.14%.

Others:

Cost of Funds, CD Ratio, Base Rates, and Interest Spread:

Cost of Funds:  Corporate Development Bank Limited (CORBL) has the highest Cost of Funds at 7.04%, while Excel Development Bank Limited (EDBL) has the lowest at 4.21%.

CD Ratio: The Credit-Deposit Ratio shows how much deposit money has been used as loans. Garima Bikas Bank Limited (LBBL) reports the highest CD ratio of 87.95%, and Corporate Development Bank Limited (CORBL) has the lowest at 69.29%.

Base Rate and Interest Spread: The base rate, the minimum interest rate banks charge, is highest at Narayani Development Bank Limited (NABBC) with 15.51% and lowest at Excel Development Bank Limited (EDBL) with 6.92%. Meanwhile, Miteri Development Bank Limited (MDB) reports the highest interest spread rate of 4.60%, and Jyoti Bikas Bank Limited (JBBL) has the lowest at 4.01%.

The table below provides a complete picture of the major indicators of development banks as of the third quarter of FY 2081-82.