Do you have shares of Development Banks? Find out how national level and regional level development banks performed this quarter. Muktinath and Excel in the lead

Thu, Feb 14, 2019 8:46 AM on Exclusive, Financial Analysis, Stock Market, Latest,

-ShareSansar

A good form of comparison is the one where comparison is done among the entities in the same category. There are 30 development level banks. However, not all of these fall in the same category. The development banks can be categorized within three sub categories: National level development banks, development banks operating in 4 to 10 districts and development banks operating in 1 to 3 districts. A wise investor would create a portfolio of development banks comparing their performance with the other banks falling in the respective categories.

This article will deal with two of the categories: national level and banks operating in 1 to 3 districts and compare the banks within their respective category.

Net profit:

National level:

As per the net profit of second quarter of 2075/76, Muktinath Bikas Bank Limited (MNBBL) is in the lead with a profit of Rs 40.48 crores. Similarly, Garima Bikas Bank Limited (GBBL) has the second highest net profit of Rs 27.95 crores in the same quarter. In the third position, Kailash Bikas Bank Limited (KBBL) has the net profit of Rs 27.47 crores. The bank with the least net profit is Deva Bikas Bank (DBBL) whose net profit amounts to Rs 13.30 crores.

The industry average net profit of national level development bank stands at Rs 22.96 crore. Six of these banks have net profit above industry average whereas five of them have below average. The national development banking industry made a net profit of Rs 2.52 arba in the second quarter.

Development banks operating in 1 to 3 districts:

As per the net profit of second quarter of 2075/76, Excel Development Bank Limited (EDBL) is in the lead with a profit of Rs 8.25 crore. Similarly, Corporate Development Bank Limited (CORBL) has the second highest net profit of Rs 6.46 crore in the same quarter. The bank with the least net profit is Karnali Bikas Bank (KRBL) whose net profit amounts to Rs 49 lakhs.

The industry average calculated among regional level development banks in terms of net profit is Rs 3.37 crores.

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.

National level:

Among the eleven national level banks, Lumbini Bikas Bank Limited (LBBL) is yet to meet the paid up capital requirement. The bank with highest paid up capital are Muktinath Bikas Bank Limited (MNBBL) with 3.06 arba, Mahalaxmi Bikas Bank Limited (MLBL) with Rs 2.84 arba capital and Garima Bikas Bank Limited (GBBL) with Rs 2.79 arba.

As for Lumbini Bikas Bank Limited (LBBL), the bank has paid up capital of Rs 2.18 arba paid up capital. LBBL has proposed 17.25% bonus shares for FY 2074/75 in order to meet the paid up capital requirement. The paid up capital structure of Jyoti Bikas Bank Limited (JBBL) might change after acquiring Hamro Bikas Bank Limited. Similarly, the paid up capital of Deva Bikas Bank Limited (DBBL) might also change after acquiring Western Development Bank Limited and Sahara Bikas Bank Limited.

Development banks operating in 1 to 3 districts:

Banks such as Corporate Development Bank Limited (CORBL) and Kabeli Bikas Bank Limited (KEBL) are yet to meet the paid up capital of Rs 50 crores. Kabeli Bikas Bank Limited (KEBL) is in the process of merger with Saptakoshi Bikas Bank Limited (SKDBL). In addition to this, Corporate Development Bank Limited (CORBL) was released from crisis ridden status by NRB last year.

Excel Development Bank Limited (EDBL) has the highest paid up capital of Rs 69.27 crores followed by Mission Development Bank Limited (MIDBL) with Rs 57.64 crores. These regional level banks operating in 3 to 10 districts are also required to choose there are of operation within a single province as per the directive of NRB.

Reserve and surplus:

National level:

In terms of reserves and surplus, Lumbini Bikas Bank Limited (LBBL) has maintained its lead with a reserve and surplus of Rs 1.36 arba. Kamana Sewa Bikas Bank Limited (KSBBL) has maintained second position with Rs 1.05 arba reserve and surplus fund. Mahalaxmi Bikas Bank Limited (MLBL) has a reserve of Rs 1.05 arba. The bank with least reserve and surplus is Jyoti Bikas Bank Limited (JBBL) having a reserve of Rs 46 crores.

The industry average in reserve and surplus for national level development banks is Rs 87 crores.

Development banks operating in 1 to 3 districts:

Excel Development Bank (EDBL) has maintained its lead even in reserve and surplus of Rs 34.58 crore. Sahayogi Vikas Bank Limited (SBBLJ) has maintained second position with Rs 26.53 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 3.05 crores.

The industry average of reserve and surplus within this category is Rs 10.67 crores. Only six of the banks have been able to maintain a reserve above industry average.

Deposit collection:

National Level:

In the banking sector, the deposit collection will play a major role in the upcoming days. All the banks except Lumbini Bikas Bank have the same range of paid up capital which is equal or above Rs 2.50 arba. So, the national level development banks will go through a severe competition with each other in order to attract the deposit clients. As of the second quarter of FY 2075/76, Muktinath Bikas Bank Limited (MNBBL) stands on top with total deposits worth Rs 38.14 arba. Similarly, the bank is followed Mahalaxmi Bikas Bank Limited (MLBL) and Garima Bikas Bank Limited (GBBL) with the collected deposit of Rs 28.90 arba and Rs 26.98 arba respectively. Deva Bikas Bank (DBBL) has the lowest deposit collection of Rs. 17.11 arba only.

The average deposit collected by national development banking industry stands at Rs 24.59 arba. The effect of liquidity crisis is seen among these banks as well since six of the banks have their deposit below industry average.

Development banks operating in 1 to 3 districts:

Excel Development Bank (EDBL) has established itself in the top list in deposit collection as well. It has a deposit worth Rs 6.11 arba. Similarly, the bank is followed by Tinau Bikas Bank Limited (TNBL) and Mission Development Bank Limited (MIDBL) with the collected deposit of Rs 5.17 arba and Rs 4.79 arba respectively. Corporate Development Bank Limited (CORBL) has the lowest deposit collection of Rs.11.90 crore only. The position is consistent with the first quarter of the same fiscal year.

Theaverage deposit collected by development banks operating in 1 to 3 districts is Rs 2.99 arba.

Loans and advances:

National Level:

With paid up capital of almost same ranges, competition among development banks implies even in bringing the loan clients. As shown in the figure, the top position in loans and advances is occupied by Muktinath Bikas Bank (MNBBL) with credit disbursement worth Rs 32.98 arba. Mahalaxmi Bikas Bank (MLBL) has a loan and advances portfolio of Rs. 25.36 arba. Kailash Bikas Bank Limited (KBBL) has the loan portfolio of Rs 23.55 arba. Similarly on the other end of the rope, stands Deva Bikas Bikas Bank (DBBL) with the lowest loan and advances portfolio of Rs. 15.70 arba.

The industry average loan portfolio of national level development banks stands at Rs 21.85 arba. Five of the national level development banks have their loan portfolio above industry average whereas remaining has below average.

Development banks operating in 1 to 3 districts:

As shown in the figures, the top positions in loans and advances are consistent with top position in deposit. The top three positions are occupied by Excel Development bank (EDBL), Tinau Development Bank (TNBL) and Mission Development Bank Limited (MIDBL) with credit disbursement worth Rs 5.40 arba, 4.41 arba and 4.12 arba.

Net interest income:

National level:

One of the major sources of revenue for banks is its interest income. Muktinath Bikas Bank Limited (MNBBL) has the highest net interest income of Rs 85.88 crores. It is followed by Garima Bikas Bank Limited (GBBL) and Mahalaxmi Bikas Bank Limited (MLBL) with net interest income of Rs 64.99 crores and Rs 62.58 crores respectively. The industry average in this category stands at Rs 54.31 crores.

Development banks operating in 1 to 3 districts:

The top three positions are occupied by Excel Development bank (EDBL), Kanchan Development Bank (KADBL) and Sahayogi Vikas Bank Limited (SBBLJ) with net interest income of Rs 18.72 crores, Rs 11.11 crores and Rs 10.34 crores respectively.

Major indicators:

Earnings per share (Annualized):

National level:

An earnings per share is presumed to be one of the key factors while undertaking investment decision. Muktinath Bikas Bank (MNBBL) becomes the bank to serve investors with highest annualized EPS of Rs 26.42 per share. Kailash Bikas Bank Limited (KBBL) stands in the second position with annualized EPS of Rs 21.79 per share. Lumbini Bikas Bank Limited (LBBL) has an EPS of Rs 21.57. Deva Bikas Bank (DBBL) stays at the bottom with an earning of Rs. 10.50 per share.

Development banks operating in 1 to 3 districts:

The top positions are occupied by Corporate Development Bank Limited (CORBL), which has an unmet paid up capital requirement, with EPS of Rs 35.67. Excel Development Bank (EDBL) with an annualized EPS of Rs 23.83 per share.

Net worth per share:

The highest net worth per share among these development banks is Rs 162.34 of Lumbini Bikas Bank Limited (LBBL) which has an unmet paid up capital. Kamana Sewa Bikas Bank (KSBBL) has the second highest net worth per share as of Q2 of FY 2075/76 i.e. Rs 142.09. Jyoti Bikas Bank Limited (JBBL) has the least net worth of Rs 117.64 per share.

The average net worth of national level development banking industry stands at Rs 133.74 where five banks have net worth above average.

Development banks operating in 1 to 3 districts:

The highest net worth per share among these development banks is Rs 152.05 of Sahayogi Bikas Bank Limited (SBBLJ). Excel Development Bank Limited (EDBL) has the second highest net worth per share as of Q2 of FY 2075/76 i.e. Rs 149.92. The industry average net worth per share in this category is Rs 120.02.

P/E Ratio:

National level:

Given that Lumbini Bikas Bank Limited (LBBL) has not met the paid up capital, it has lowest P/E ratio i.e. 8.02 times. Among the banks whose paid up capital is met, Garima Bikas Bank Limited (GBBL) has least P/E ratio which stands at 9.08 times. Similarly, bank with the next least P/E ratio is Gandaki Bikas Bank Limited (GDBL) i.e. 9.28 times. Since, the general rule of thumb in finance suggest, a P/E ratio below 15 is an adequate price, the national level development banks with P/E ratio below 15 are being traded in the market at a cheaper price than expected.

Development banks operating in 1 to 3 districts:

The development bank (operating in 1 to 3 districts) with the lowest P/E ratio as of is Corporate Development Bank Limited (CORBL) i.e. 2.64 times followed by Tinau Development Bank Limited (TNBL) with P/E ratio of 9.07 times.