Amid Liquidity Crunch And Low Credit Expansion Commercial Banks Reports Satisfactory Profit Growth In FY 78/79; A Summarised Snapshot of the Most Important Fundamentals

Sun, Aug 7, 2022 12:49 PM on Company Analysis, Stock Market, Exclusive,

Despite many speculations in the market as to how the bank's profitability will play out in the quarters to come because of the Lower Credit Expansion, Liquidity Shortage, Higher Treasury Bill rates, and inflation rates, Banks have reported improved profitability indicators yet in this quarter.

Keeping all the speculation aside, in this article, we will be focusing mainly on the profitability and business volume indicators of commercial banks as of Q4 of Fiscal year 2078/79 and doing a comparative analysis. So, let's dive into the numbers.

Profit for the period:

The Commercial Banks' net profit rises by 23.09% in FY 2078/79 from Rs 60.77 Arba in the last fiscal year to Rs 74.80 Arba in this fiscal year.

As per the net profit of the fourth quarter of FY 2078/79, Rastriya Banijya Bank (RBBL) is in the lead with a net profit of Rs. 5.21 Arba with a growth of 37.38% as compared to the same quarter of last fiscal year. Similarly, Global IME Bank Limited (GBIME) also reported the same profit (Less than RBB by a few lakhs), however, it reported a growth of 25%, hence it stands in the second position to accumulate higher profits for the fourth quarter. In the third position, Nabil Bank Limited (NABIL) has a net profit of Rs 4.97 Arba. Nabil Bank recently acquired Nepal Bangladesh Bank Limited. Likewise, the bank with the least net profit is Century Commercial Bank Limited (CCBL) whose net profit amounts to Rs 1.36 Arba. The bank was recently acquired by Prabhu Bank Limited (the Acquisition process is in the process).

The industry average of net profit of the 26 commercial banks stands at Rs 2.88 Arba.

All commercial banks except 3 banks i.e Agriculture Development Bank, Himalayan Bank Limited, and Sanima Bank Limited have declined their net profit this year compared to the same quarter of last fiscal year. 

Profit for the period:

Distributable Profit:

As per the distributable profit of the fourth quarter of 2078/79, Nabil Bank Limited (NABIL)  is in the lead with a profit of Rs 9.12 Arba. Similarly,  Agricultural Development Bank Limited (ADBL) has the second-highest net profit of Rs 3.91 Arba in the same quarter. In the third position, Everest Bank Limited (EBL) has a net profit of Rs.3.90  Arba.

Century Commercial Bank Limited (CCBL) has reported the lowest distributable profit among all the banks at Rs. 0.91 Arba.

Similarly, Everest Bank Limited (EBL) has the highest distributable profit per share of Rs 41.15, and Nabil Bank Limited (NABIL) has the second highest distributable profit per share of Rs 39.94.

*Distributable Profit includes last year's retained earnings.

* Nabil Bank Distributable Profit includes capital adjustment reserve from Business Combination.

Paid-up capital:

Paid-up capital refers to the amount of money that commercial banks have received from their shareholders through the exchange of shares in the primary market.

The bank with the highest paid-up capital is Global IME Bank Limited (GBIME) with Rs 23.80 Arba capital and Nabil Bank Limited (NABIL) with Rs. 22.83 Arba paid-up capital. 

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

Reserve and surplus:

With an industry average of Rs 10.03 Arba, 8 banks stand above the average benchmark of Rs 10.03 Arba in their reserve fund. The total reserve and surplus of all commercial banks are at Rs 2.60 Kharba.

In terms of reserves and surplus, Nabil Bank Limited (NABIL) has maintained its lead with a reserve and surplus of Rs 29.75 Arba, Nepal Bank Limited (NBL) has maintained the second position with Rs 21.38 Arba reserve and surplus fund and Rastriya Banijya Bank (RBBL) is in the third position with a reserve and surplus of Rs 18.54 Arba

*Reserve and Surplus amounts include the amount of Share Premium, Retained Earnings, and Reserve.

Deposits from Customers:

On an average, commercial banks have collected Rs 1.71 Kharba as a deposit. Only 11 banks are above the average deposit collection.

As of the fourth quarter of FY 2078/79, Nabil Bank Limited (NABIL) stands on top with total deposits worth Rs 3.26 Kharba, NIC Asia Bank Limited (NICA) has the second-highest deposits of Rs 2.89 Kharba. Similarly, the bank is followed by Global IME Bank Limited (GBIME) with the collected deposit of Rs 2.77 kharba respectively. Standard Chartered Bank Nepal Limited (SCB) has the lowest deposit collection of Rs. 93.72 Arba.

Loans and advances to Customers:

The top position in loans and advances is occupied by Nabil Bank Limited (NABIL)  with credit disbursement worth Rs 3.01 kharba. Global IME Bank Limited (GBIME) has a loan and advances portfolio of Rs. 2.58 kharba. NIC Asia Bank Limited (NICA) has a loan portfolio of Rs 2.52 kharba. Similarly on the other end of the rope, Standard Chartered Bank Nepal Limited (SCB) has the lowest loan and advances portfolio of Rs. 79.17 Arba.

The industry average loan disbursed is Rs 1.53 Kharba. 9 commercial banks have a loan portfolio above Rs 1.53 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 NIC Asia Bank Limited (NICA) with an income of Rs 11.77 Arba followed by Global IME Bank Limited (GBIME) with an income of Rs 10.74 Arba and Rastriya Banijya Bank (RBBL)  with an income of Rs 9.67 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 4.28 Arba of amount has been shown in an impairment charge for a loan and other losses. Nepal Investment Bank Limited (NIBL) has the highest impairment charge for a loan and other losses with Rs 1.62 Arba followed by Rastriya Banijya Bank Limited (RBBL) with a total of Rs. 69 crores.

* - Reversal and + Provision

Major indicators:

Earnings per share:

NIC Asia Bank Limited (NICA) becomes the bank to serve investors with the highest annualized EPS of Rs 39.13 per share. Rastriya Banijya Bank (RBBL) has the second-highest EPS of Rs 34.90 per share. Everest Bank Limited (EBL) is in the third position with annualized EPS of Rs 26.89 per share. Laxmi Bank Limited (LBL) stays at the bottom with an earning of Rs. 13.88 per share.

The average EPS of 26 commercial banks stands at Rs 21.05. 11 commercial banks still provide EPS higher than that of the industry average.

Net worth per share:

The highest net worth per share among these commercial banks is Rs 248.42 which belongs to Nepal Bank Limited (NBL). Everest Bank Limited (EBL) is in the second position with Rs 239.71. Nabil Bank Limited (NABIL) has the third-highest net worth per share as of Q4 of FY 2078/79 i.e. Rs 230.30. Century Commercial Bank Limited (CCBL) has the least net worth of Rs 127.64 per share.

The industry average net worth stands around Rs 173.03 per share. 10 companies have a net worth more than the industry average.

P/E Ratio:

Sunrise Bank Limited (SRBL)  has the least PE ratio of 9.74 times. It is followed by Kumari Bank Limited (KBL) with a PE ratio of 9.91 times. 18 commercial banks have a P/E ratio lower than the industry average of 14.45 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)

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. Nepal SBI Bank Limited (SBI) reported the lowest NPL of 0.15% in terms of asset quality. SBI is followed by  Everest Bank Limited (EBL) with an NPL of 0.24%. 

Rastriya Banijya Bank (RBBL) has reported the highest NPL of 2%. Since RBB is not tradeable, Nepal credit & Commerce Bank Limited (NCCB) seems to have the highest NPL of 1.93%. 

Capital Adequacy Ratio (CAR):

In terms of Capital Adequacy ratio (CAR), Agricultural Development Bank Limited (ADBL) seems to have reported the highest CAR of 16.34%. This is followed by Civil Bank Nepal Limited (CBL) with a CAR of 16.05%.