Ahead of Dashain, dividend cheer for bank investors

KATHMANDU, OCT 14 -

Cheering investors ahead of Dasahin, commercial banks have started declaring cash dividends and bonus shares. So far, a dozen commercial banks have declared dividends, with Standard Chartered Bank Nepal and Nabil Bank topping the charts with 60 percent dividend declaration, while Janata Bank is at the bottom with 3.6 percent.

Stockbrokers say investors in the Nepali capital market always prefer bonus shares coupled with cash dividend. That’s why banks have declared both.

Also, the Nepal Rastra Bank (NRB) recently asked commercial banks to maintain a capital adequacy ratio (CAR) of 11 percent after dividend declaration. The direction came as a major hurdle for some commercial banks to declare cash dividend.

Everest Bank declared total dividend of 31.58 percent — 30 percent bonus shares and 1.58 percent cash dividend. Everest CEO PK Mohapatra said the bank had to issue such a large amount of bonus shares so as to ensure that the CAR is above 11 percent.

Nevertheless, experts say investors are happy with the way the dividend declarations are coming. “Experts, even bankers, had predicted that a majority banks would see a fall in profits at the end of the fiscal year,” said Anjan Raj Poudyal, president of the Stock Brokers’ Association of Nepal. “Investors believed and were prepared for low or no return.”

However, a majority of banks registered steady growth in profits and declared dividends accordingly. With the interest rate on deposits falling, the rate of return from the capital market is matching the interest rate offered by commercial banks on deposits.

For example, SCB declared 60 percent dividend and the bank’s shares were traded at Rs 1,725 per unit on Thursday. This means the rate of return on SCB stock is around 3.47 percent per annum, which is roughly equal to the interest rate offered by the banks on deposits.

Analysts say the dividend declaration is encouraging for investors. “If the situation prevails for a longer period, people’s attraction towards the capital market will increase,” said Nanda Kishore Mundara, a stockbroker. “However, this won’t happen overnight. It is rather a gradual process.”

Source: The Kathmandu Post