FACE TO FACE: NBB share sale process in final stage

KATHMANDU, MAY 29 -

Gyanendra Dhungana is the chief executive officer of Nepal Bangladesh Bank (NBB). Under his leadership, the bank’s financial status has improved considerably, which is reflected in the bank’s financial indicators. The process of acquiring Nepali promoters’ shares in the bank by Bangladeshi promoter International Finance Investment and Commerce (IFIC) Bank is also making progress. Given this context, The Kathmandu Post talked to Dhungana about the bank’s financial situation, progress made in the share sale process and the bank’s future plan. Excerpts

Tell us about the financial status of NBB?

Ever since I joined this bank as chief executive, the bank has improved notably, which is reflected in the financial indicators. The bank’s non-performing asset has come down to 3.5 percent, credit-to-deposit ratio stands at 75 percent, while it earned a net profit of Rs 490 million as of the first nine months of the current fiscal year. The bank’s deposit mobilisation stands at Rs 15 billion and credit flow is at Rs 13 billion. We gave second priority to increasing our business, and focused more on loan recovery to solve long-standing problems of our bank.

What are the challenges that you are facing in the bank’s recovery process?

When I began, NBB’s financial situation was not sound. Capital was eroding and regulatory compliance was poor. Staff members were not happy with the bank’s status as they were worried about their future. My first priority was to ensure regulatory compliance and recovery of loans. As a part of improving corporate governance, the board of directors was reshuffled with a view that Bangladeshi promoters would hold a majority stake in the bank in the near future. It is a tough task to bring back troubled bank on track.

The bank’s recovery particularly hinges on the recovery of loans that went to directors. What progresses have been made on this front?

After of sale of Nepali promoters’ shares to Bangladeshi investors, recovery of director-related loans will be possible. After the share sale process is closed, a total of Rs 1.44 billion will be received which will be used for recovering the loans. The amount will not only be sufficient to recover our loans, but also to clear liabilities the directors have with other banks and financial institutions. We have to recover around Rs 700 million, including the liability of Rs 500 million transferred from Nepal Sri Lanka Merchant Bank after its merger with NBB. Recovery of old loans contributed to 40 percent of the bank’s net profit as of the third quarter this fiscal year. We will be in a position to distribute dividend to our shareholders in the next fiscal year once the share sale process completes.

Why has been the share sale process delaying?

It is in the final phase and we are awaiting final approval from the Bangladeshi central bank. Central banks from both the countries have given approval in principal to the share sale process and the two parties have agreed on all issues, including the value of shares. I hope the Bangladeshi central bank will give the final approval to the Bangladeshi partners to purchase the shares soon. Payment from Bangladeshi investors will be made in three phases — around Rs 700-800 million in first instalment, around Rs 200-220 million in second and Rs 400 million in third instalments.  I hope the first instalment will be received within the current fiscal year.

Why the payment is being made in three phases?

It is because the sale of all promoters’ shares will not take place immediately. First, shares under the ownership of the company will be sold. In the second phase, shares under individual ownership, excluding immediate directors, will be sold. And in the third phase, shares of the immediate directors will be sold. As per the law, directors cannot sell their shares within a year after their exit from the board. That’s why the payment will take place in three phases.

The Bangladeshi partners want a 51 percent stake in the bank. When will it be ensured?

It has already been ensured. A further purchase agreement was signed for 1,621,000 units of shares about two weeks ago. It means the Bangladeshi investors will have a 51 percent stake in the bank after the completion of the entire share purchase process. As investor confidence has increased after the process began, Bangladeshis have agreed to purchase the shares at Rs 275 per unit in the last purchase agreement. Earlier, the price was fixed at Rs 260.

What are your future plans?

We will expand our outreach with expansion of branches, and launching branchless banking where opening a branch is not feasible. We are also launching our debit/credit card. For this, we have taken associate membership of Visa through Himalayan Bank. We will probably launch these cards in July. We are also starting our own remittance product which we plan to introduce in the next fiscal year.

Source: The Kathmandu Post