Are development banks operating in 1 to 3 districts speeding up their performance? See an in depth analysis to find out who is in the right track.

Fri, May 25, 2018 5:47 AM on Exclusive, Financial Analysis,

The development banking industry is often found to be changing in today’s scenario. The influence of raised paid up capital requirement is still visible in this sector as the number of listed companies keeps on changing. The merger and acquisition process in still on the runway in this sector. Business students and investors are often confused in understanding the categorization of this industry. Here, is the overall status of companies operating as of today:

Please note that Mount Makalu Development Bank (MMDBL) and Sahara Bikas Bank (SHBL) are in acquisition process by Kabeli and Dev Bikas Bank Limited.

 The further analysis is focused on the 20 development banks operating in 1 to 3 districts and discards all the remaining banks.

Net profit:

As per the net profit of third quarter of 2074/75, Excel Development Bank Limited (EDBL) is in the lead with a profit of Rs 11.11 crore. Similarly, Sahayogi Vikas Bank (SBBLJ) has the second highest net profit of Rs 7.64 crore in the same quarter. The bank with the least net profit is Karnali Development Bank (KRBL) whose net profit amounts to Rs 0.12 crore.

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Paid up capital:

The central bank of the country has directed these development “B” categorized banks to meet the paid up capital requirement. NRB has directed development banks of national level to meet the paid up capital of at least 2.50 arba, development banks operating in 4 to 10 districts to meet the paid up capital of at least 1.2 arba and development banks operating in 1 to 3 districts a paid up capital of 50 crores.  Nine of the banks namely, Excel Development Bank (EDBL), Purnima Bikas Bank Limited (PURBL),  Mission Development bank (MIDBL), Sahayogi Vikas Bank (SBBLJ), Saptakoshi development Bank (SKDBL), Tinau Bikas Bank Limited (TNBL), Kanchan Development bank (KADBL), Kankai Bikas Bank Limited (KNBL) and Miteri Development Bank (MDB) have already met the paid up capital requirement of 50 crores. Excel Development Bank Limited has the highest paid up capital of Rs 69.27 crores. All the remaining banks have to meet the paid up capital requirement by FY 2074/75. So, investors can look forward for bonus shares and right shares from these development banks.

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Reserve and surplus:

With the changes in paid up capital, the reserves and surplus of the banks are likely to be affected. In terms of reserves and surplus, Excel Development Bank (EDBL) has maintained its lead even in reserve and surplus of Rs 22.28 crore. Sahayogi Vikas Bank Limited (SBBLJ) has maintained second position with Rs 18.18 crore reserve and surplus fund. Investors are requested to note down the bank with negative reserve and surplus is Corporate Development Bank Limited (CORBL) having a negative reserve of Rs 16.61 crores.

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 Deposit collection:

The development banks are going through an intense competition with each other. The banks have been trying their best to attract the deposit clients. As of the third quarter of FY 2074/75, just like the three indicators above, Excel Development Bank (EDBL) has established itself in the top list in deposit collection as well. It has a deposit worth Rs 454.33 crores. Similarly, the bank is followed by Tinau Bikas Bank Limited (TNBL) and Mission Development Bank Limited (MIDBL) with the collected deposit of Rs 448.36 crore and Rs 356 crore respectively. CORBL has the lowest deposit collection of Rs. 6.44 crore only.

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Loans and advances:

As shown by the figures, the positions in loans and advances are almost similar to deposit. The top three positions are occupied by Excel Development bank (EDBL), Tinau Development Bank (TNBL) and Mission Development Bank (MIDB) with credit disbursement worth Rs 421.51 crores, 379.94 crores and 321.62 crores.

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Major indicators:

Earnings per share (Annualized):

With the increment in the paid-up capital requirement, the EPS were expected to fall. However, some banks have managed to maintain their EPS better than others. The top position, is occupied by Excel Development Bank (EDBL) with an annualized EPS of Rs 21.39 per share. Similarly, it is followed by Sahayogi Vikas Bank with EPS of Rs 19.98 and Miteri Development Bank (MDB) with an EPS of Rs 19.44.

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P/E Ratio:

The development bank (operating in 1 to 3 districts) with the lowest P/E ratio as of 20th May, 2018 is Sahayogi Vikas Bank (SBBLJ) with the ratio of 10.06 times. Similarly, bank with the highest P/E ratio is Green Development Bank limited (GRDBL) i.e. 186.59 times.

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Net worth per share:

The highest net worth per share among these development banks is Rs 174.26 of Sahara Bikas Bank Limited (SHBL). Kabeli Bikas Bank (KEBL) has the second highest net worth per share as of Q3 of FY 2074/75 i.e. Rs 153.86.

 

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Market price:

After the analysis, investors willing to invest in any of these development banks can consider the following market price in descending order:

 

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A full picture:

Finally the table below provides a full picture with major indicators of the development banks as of the third quarter of FY 2074/75:

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From the table above, we can see that Excel Development Bank (EDBL) has been able to occupy the top space for 5 indicators out of 8. However, this doesn’t capture the entire picture as there are numerous exogenous factors that must be kept on mind before making any investment decision.

Please feel free to drop a comment if you have any say on the operation of these development banks.