A Comparative Deep Dive: Analyzing Financial Metrics Across Commercial Banks Through Q1 80/81

The unveiling of first-quarter reports for the ongoing fiscal year 2080/81 by all 20 commercial banks provides a comprehensive insight into their financial performance, aligning with the mandatory disclosure deadline set for Kartik 17, 2080, by Nepal Rastra Bank. The regulatory authority granted an extension this year, pushing the deadline due to the celebration of the Dashain Festival.

This article focuses on evaluating the profitability and business volume indicators of commercial banks during the Q1 period of the fiscal year 2080/81. Through a meticulous comparative analysis, the aim is to illuminate the nuances of these crucial metrics. Without further delay, let's delve into a quantitative exploration of the data, setting aside speculative notions.

Net profit:

As per the net profit of the first quarter of FY 2080/81, Nepal Investment Mega Bank Limited (NIMB) is in the lead with a net profit of Rs. 1.52 Arba with a growth of 33.33% as compared to the same quarter of the last fiscal year. Similarly, Prime Commercial Bank Limited (PCBL) also reported a net profit of Rs. 1.51 Arba with a growth of 72.77%, hence it stands in the second position to accumulate higher profits for the first quarter. In the third position, Nabil Bank (NABIL) has a net profit of Rs 1.46 Arba. Also, Himalayan Bank Limited (HBL) reported the highest growth in net profit by 97.37% in this quarter.

On the other hand, Agricultural Development Bank Limited (ADBL) reported a net loss of Rs. 89 Crores which has dropped by 503.64%.

Paid-up capital:

The bank with the highest paid-up capital is Global IME Bank Limited (GBIME) with Rs 35.77 Arba capital, Nepal Investment Mega Bank Limited (NIMB) with Rs. 34.13 Arba, and Nabil Bank Limited (NABIL) with Rs. 27.06 Arba paid-up capital. Meanwhile, Standard Chartered Bank Nepal (SCB) has the lowest paid-up capital of Rs. 9.43 Arba.

Note: ADBL Capital includes Rs 5.43 Arba irredeemable non-cumulative preference shares.

Reserve and surplus:

The total reserve and surplus of all commercial banks are at Rs 2.97 Kharba where the industry average of Rs 14.88 Arba.

In terms of reserves and surplus, Rastriya Banijaya Bank Limited (RBBL) has maintained its lead with a reserve and surplus of Rs 40.07 Arba, Nabil Bank Limited (NABIL) has maintained the second position with Rs 31.99 Arba reserve and surplus fund and Nepal Investment Mega Bank Limited (NIMB) is in the third position with a reserve and surplus of Rs 25.04 Arba.

Deposits from Customers:

On average, commercial banks have collected Rs 2.57 Kharba as a deposit. Only 9 banks are above the average deposit collection.

As of the first quarter of FY 2080/81, Global IME Bank Limited (GBIME) stands on top with total deposits worth Rs 4.43 Kharba, and Nabil Bank Limited (NABIL) has the second-highest deposits of Rs 4.14 Kharba. Similarly, the bank is followed by NIC Asia Bank (NICA) with a collected deposit of Rs 3.63 Kharba respectively. Standard Chartered Bank Nepal Limited (SBC) has the lowest deposit collection of Rs. 1.19 Kharba.

Loans and advances to Customers:

The top position in loans and advances is occupied by Global IME Bank Limited (GBIME) with credit disbursement worth Rs 3.57 Kharba. Nabil Bank Limited (NABIL) has a loan and advances portfolio of Rs. 3.53 Kharba.

Similarly, on the other end of the rope, Standard Chartered Bank Nepal Limited (SCB) has the lowest loan and advances portfolio of Rs. 79.38 Arba.

The industry average loan disbursed is Rs 2.12 Kharba. 9 commercial banks have a loan portfolio above Rs 2.12 Kharba.

Net Interest Income:

Net interest income is the net earnings of commercial banks through their core business of collecting deposits and lending loans. The bank with the highest net interest income is Global IME Bank Limited (GBIME) with an income of Rs 4.80 Arba followed by Nabil Bank Limited (NABIL) with an income of Rs 4.17 Arba.

Provisions for the period (Impairment/Reversal):

Banks have set aside a certain amount in loan loss provision and have delayed the loan repayment of several borrowers. A total of Rs 16.77 Arba of amount has been shown in an impairment charge for a loan and other losses.

Kumari Bank Limited (KBL) has the highest impairment charge for a loan and other losses with Rs 2.18 Arba followed by Agriculture Development Bank Limited (ADBL) with a total of Rs. 2.16 Arba. In the same vein, Prabhu Bank Limited (PRVU) has the lowest impairment charge for a loan and other losses of Rs. 8 Crores.

Major indicators:

Earnings per share:

Standard Chartered Bank Nepal Limited (SCB) became the bank to serve investors with the highest annualized EPS of Rs 35.11 per share. Everest Bank Limited (EBL) has the second-highest EPS of Rs 29.19 per share. NIC Asia Bank Limited (NICA) is in the third position with an annualized EPS of Rs 27.09 per share.

Conversely, Agricultural Development Bank Limited (ADBL) stays at the bottom with a negative Earning of Rs. 18.81 per share.

The average EPS of 20 commercial banks stands at Rs 15.26. 13 commercial banks provide EPS higher than that of the industry average.

Distributable Profit Per Share:

Standard Chartered Bank Nepal Limited (SCB) has unveiled their distributable profit per share to be over Rs. 30. Conversely, six commercial banks, Siddhartha Bank (SBL), Citizens Bank International (CZBIL), Nepal Investment Mega Bank (NIMB), NIC Asia Bank (NICA), Kumari Bank (KBL) and Himalayan Bank (HBL), have reported negative distributable profits per share.

Net worth per share:

The highest net worth per share among these commercial banks is Rs 356.26 which belongs to Rastriya Banijya Bank Limited (RBBL). Agriculture Development Bank Limited (ADBL) is in the second position with Rs 276.06.

Nepal Bank Limited (NBL) has the third-highest net worth per share as of Q1 of FY 2080/81 i.e. Rs 248.46. Kumari Bank Limited (KBL) has the lowest net worth of Rs 141.33 per share.

The industry average net worth stands around Rs 192.76 per share. 7 companies have a net worth more than the industry average.

P/E Ratio:

Prime Commercial Bank Limited (PCBL) has the lowest PE ratio of 7.58 times. It is followed by Prabhu Bank Limited (PRVU) with a PE ratio of 8.93 times.

(The PE ratios are not the recent ratios but rather the ratios for quarter-end. Please look at the current market price to calculate the recent P/E ratio)

Capital Adequacy Ratio (CAR):

In terms of the Capital Adequacy ratio (CAR), Standard Chartered Bank Nepal Limited (SCB) seems to have reported the highest CAR of 17.15%. This is followed by Sanima Bank Limited (SANIMA) with a CAR of 13.77%. CAR is the ratio of a bank’s capital in relation to its risk-weighted assets and current liabilities.

Non-Performing Loan:

In today’s context, the concern of investors simply does not rest upon which bank has more loans. The nature of the loan portfolio equally matters. Everest Bank Limited (EBL) reported the lowest NPL of 0.90% in terms of asset quality.

Agriculture Development Bank Limited (ADBL) has reported the highest NPL of 5.33%, followed by Kumari Bank Limited (KBL) with an NPL of 4.89%.

Others:

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

Cost of Funds: The term cost of funds refers to how much banks and financial institutions spend in order to acquire money to lend to their customers. The lower the cost of funds, the better because it ultimately reduces the cost of banks. As per reports, Himalayan Bank Limited (PCBL) has the highest Cost of Funds at 8.72%, whereas Rastriya Banijya Bank Limited (RBBL) has the lowest cost of funds at 6.26%.

CD Ratio: The CD ratio refers to the credit-deposit ratio in banking parlance. It tells how much of the money banks have raised in the form of deposits has been deployed as loans. Likewise, Nabil Bank Limited (PCBL) has reported the highest CD ratio of 86.53%, whereas Standard Chartered Bank Nepal Limited (SCB) has the lowest CD ratio of 72.15%.

Base Rate and Interest Spread:

Base rate is defined as the minimum interest rate set by the NRB below which Commercial banks are not permitted to lend to their customers. Kumari Bank Limited (KBL) reports the highest base rate of 10.91%, and Standard Chartered Bank Nepal Limited (SCB) has the lowest base rate of 8.42%.

Similarly, the net interest rate spread is the difference between the interest rate a bank pays to depositors and the interest rate it receives from loans to consumers. Here, PRVU has the highest interest spread of 4.95%, whereas Agriculture Development Bank Limited (ADBL) has the lowest interest spread of 3.82% for the first quarter of FY 2080/81.

Finally, the table below provides a full picture of the major indicators of 20 commercial banks as of the first quarter of FY 2080-2081.