How NMB Capital’s principles align with the moral lessons of an American movie “Too Big to Fail”? An interview with Mr. Shreejesh Ghimire; CEO

Fri, Oct 12, 2018 11:32 AM on Exclusive, Interview, Stock Market,

-Dheerusha Tiwari

“Too big to fail”- If given a chance, no true investor/trader would miss out an opportunity to watch this movie. An American drama based on Andrew Ross Sorkin’s book “Too big to fail” revolves around the periphery of the failure Lehman Brother’s; fourth largest investment bank in US. The film is not simply about the collapse but rather about how so many people were part of the fail either intentionally or unintentionally. It is about how one failure resulted a vicious risk to the entire financial system and posed restriction on businesses of other financial and non-financial intermediaries. It’s about the failure of confidence, the failure of trust and the failure of the economy. However, what relation does a movie that surrounds US financial market hold with an interview article of one of the investment banks of Nepal? Is the author too naïve to draw a comparison between the collapsed Lehman Brothers of US and rookie NMB Capital of Nepal? It would be equivocal to compare the two extremes. Nonetheless, if we talk about principles of NMB Capital, it would not be wrong to say, one will always find an association between the founding principles on which the NMB Capital is established and the takeaways audience can attain from the movie “Too Big to Fail”. NMB Capital’s values and principles are such that the team ensures there should not be any room for a disastrous situation as “Too big to fail”.

This can be further justified by the statement of CEO of NMB Capital Limited; Mr. Shreejesh Ghimire as he says By default, we are conservative and we are proud to be one.” Mr. Shreejesh Ghimire; MBA graduate from Kathmandu University School of Management joined Bank of Kathmandu Limited and worked for nearly four years as the first step in his career. Post his experience at BOKL, he is completely engaged for more than 10 years with NMB Bank Limited. He joined NMB Bank during its transition from ‘C’ Class Bank to a ‘A’ Class Bank to set up wholesale banking unit, primarily the business arm that deals with bigger loans often tied up among the loan papers of clients, assessing, evaluating the risk and bringing in new loans, He has been undertaking the leadership of NMB Capital Limited since last seven years. On a new chapter of career as NMB Capital, Mr. Ghimire introduced two of the mutual funds NMB Sulav Fund and NMB Hybrid fund today have the highest NAV value in the industry. NMB Capital’s decision to introduce a mutual fund worth Rs 60 crore was perceived skeptical because most of the experts believed the bank had an ability to raise a higher amount of fund. The licensed mutual fund was told to be of a relatively smaller size. Understanding the depth of NEPSE, NMB Capital remained consistent in its decision. Today, NMB Sulav Fund has the highest NAV in the Mutual Fund industry of Nepal despite painfully bearish NEPSE  This is an evidence that Mr. Ghimire has created a team at NMB Capital that did not want to introduce something that could be “Too big to fail” at the time when concept of institutional investment was just emerging in Nepal.

With Mr. Ghimire’s experience in both type of banking: mainstream and investment banking, on behalf of the younger generation, the interviewer could not help initiating the conversation with the first question as:

Sir, which do you prefer: mainstream banking or investment banking? Why?

Banking sector and investment banking are two completely different areas although both of them are financial intermediaries. Banking industry in Nepal is relatively bigger and vibrant whereas investment banking is in its infancy with enormous scope to grow. Banking has gone a bit mundane and it worries me why banks are not coming up with innovation in the industry, growth is evident but changing the landscape is lacking. On the other hand, investment banking  has struggle in two key fronts. The first one is we are yet to open up  our mindset for bigger investment the overall Nepali Investment Market. A change in thought process by creating a think tank community that serves the overall  capital market of the country and lobby’s for policy level change to encourage and respect the investments. I have been a reader of The Economic Times for last 18 years, India has truly made this happen. Secondly, compared to mainstream Banking, there is a Human Resource gap in the industry due to early stage, absence of professional experts in investment banking has become a major hindrance.

Mr. Ghimire has observed Nepalese capital market very closely with his team and NMB Capital has the highest NAV in the industry, so why not ask the company’s strategy of investment:

What philosophy of investment does NMB capital choose while investing in secondary market?

Our team has a very simple strategy. It’s Hold, Grow, Exit! We decide on three things: when and what to hold, which portfolio to grow and when to exit. Moreover, we are always certain about two things: when to do stop loss and when to book our profit.

So, here is exactly, how it goes. We follow a weekly and monthly strategies put up prior to the deals of buying and selling. Until and unless, there are major macroeconomic changes that are likely to affect our regular research, we are very clear when to book our profit and stop loss. We have a system created by our own team that defines our purchase and sell. We had 17 months to test the system before we started Mutual Funds operation. The system tracks every single detail, every behavior pattern so; NMB Capital does not get carried away with any emotions. There is no one above the system not even CEO, that’s me. It’s the discipline that we follow!

As we learnt the strategy of NMB Capital, we went a bit further to understand the rationale behind completely ignoring one of the sectors of the financial system:

Along with other capitals, NMB Capital has completely ignored its investment in Finance sector. As a CEO, do you think the sector’s inclusion in the portfolio won’t make a significant difference?

Finance companies are licensed by Nepal Rastra Bank so; we can’t say there is an issue with corporate governance. The business model of a finance company is very challenging today. In the upper tier, the business of finance companies is being done by commercial banks whereas in the lower tier, the business is being done by microfinance companies. When the issue is in business model, even if it’s a priority today, there will be a challenge for growth tomorrow. Our investment decisions are based on risk return trade off and exit options, how quickly stock is bought and sold, is there a long term horizon of the stock, so probably these features are difficult for finance companies’ stocks.

SS Pro’s stock holding feature made it easier to evaluate a critical aspect of NMB Capital’s top three holdings so, the next question focuses on the same:

Since the start of Baisakh 2075, both NMB Sulav and Hybrid have uniform quantities of stocks in atleast top 3 shares: NTC, NABILPO and EBL till Bhadra 2075. Is it simply the market’s return that has guided the decision or is there any rationale that has guided this decision?

I really appreciate your effort in evaluating the numbers but I will have to be honest on this one. I really don’t look into this way. It was the decision undertaken by my team based on documented strategies. Holistically, it does not matter what you actually hold. We do not have any emotional attachment with any of the stocks. The stock that gives the best performance stays in the portfolio.

However, let me put forward my personal view- if we see from the perspective of return, growth and stability, these are the three most stable names at NEPSE. When it comes to NABIL and EBL, they are relatively stable, less volatile, with consistent growth in EPS. Similarly, let us suppose, if foreign investors are allowed to Nepalese capital market, what would their first preference be? May be NTC! If we observe the outlook of telecom industry, there is no de-growth in this particular industry for a foreseeable future. Today, we have stocks valued at one trillion dollars as Apple and Amazon. Both of these companies, in one way or other are created due to the technological boon of tele-internet communications industry. Any sensible investors would look into this sector, so are we!

NMB Bank’s stock is one of the most demanded shares in NEPSE. However, NMB Capital; as a subsidiary can’t purchase the shares. So, we tried to understand their perspective towards this:

As a subsidiary unit of NMB Bank, NMB Capital can’t invest in the shares of NMB. If we simply look the buy chart of overall mutual fund industry, NMB bank’s stock has been listed as the second top most bought in Bhadra 2075 whereas in the top 5 preference since Magh 2074-Bhadra 2075. At the end of the day, NMB Capital competes with other mutual funds of the industry. Do you think that the restriction to buy the shares of your own bank has put you in a disadvantageous position compared to other capitals?

Whenever you are a licensed institute, the first important factor is Compliance. As the proverb goes “Jun bato janu nai chaina, tyo batoko barema kina sochnu?” (Why should you think about the roads that you are not going to travel?), hence we have never questioned it. Even if there were no restrictions as such, there would have been possibility of conflict of interest. Conflict of interest does no good to anybody. Moreover, as a subsidiary of NMB, I am proud that it is in the preference of the market and the institutional investors. In last ten years, the way NMB has presented itself, brought in foreign partner in its equity base, I can proudly say, there is a lot to come from NMB. Stay prepared!

In the movie “Too Big to Fail”, there is a plot right at 1:26:30 when CEOs of top banks and companies come together to decide the fate of the people. Believe it or not, every finance enthusiasts have had goose bumps in this scene wanting to be at that table determining the fate of people. In context of Nepal, investment banks find it very difficult to bring in professional experts. However, scenarios were different as we looked into the website of NMB Capital. So, we could not help but include a question about the fund supervisors that NMB Capital recruited:

NMB Capital has fund supervisors such as Mr. Ashok Raj Pandey; Finance Professor, MBA- Harvard Business, Dr. Bipin Chandra Adhikari; Consultant/Advisor-Constitutional and Commercial Law; Doctor of Law, Delhi University; and other prominent supervisors, how did they agree to contribute to Nepalese capital market at first place? How has it been possible to retain them throughout or are they just names on website?

We have a very interesting story about our supervisors. Every month, five of our supervisors come together for a meeting, voluntarily mandated by themselves. The briefing is about 10+ long pages with a detailed presentation. To be honest, it will be a nice question to ask them: why are they with us? As far as I have the experience of working with them, the monthly meeting is a constructive session where we discuss every aspect that relates to macro-economic factors, General Banking, changes in laws and regulations, political changes and all the extremes. It’s the supervisors who discuss and it’s us who present. Major agendas are taken and recommended from our supervisors and discussed to our boards. Our supervisors play the role of trustees for our pool of investors. So, when it’s a decision that comes from an intense discussion with the best of the best industry experts, we are at least confident that the decision is taken for the sake of investors’ capital protection. I have a lot of respect towards our supervisors who have built a learning environment at NMB Capital.

Mr. Shreejesh Ghimire mentioned about the absence of open ended mutual funds, we dug in a bit deeper to figure out why:

NMB Capital has only closed mutual funds, is it planning for open ended?

We are definitely planning for open ended mutual funds. The future is all about open ended mutual fund. If we look the international arena, the closed mutual funds are almost are a rare offer. However, in Nepalese capital market, there are certain challenges to start them:

Firstly, I believe, there isn’t enough market depth on the scrips traded in Nepal’s capital market. When NEPSE was at 1800, we could see daily transaction turnover around NPR 2 Billion. However, when NEPSE was in a bearish mood, the daily turnover was far below NPR 200 million, where has the volume gone? This feature of the market can be a risk of liquidity trap to open mutual funds even if their portfolio performs well enough. For instance, if open ended mutual funds are faced with heavy redemption when there are few buyers in the market, how will the funds return their money to the clients? Given that, our market is smaller in size and shallow, it is still of a question how such funds are to be operated. Moreover, there is absence of available short term alternative instruments except fixed deposit so; portfolio reconstruction and rebalancing will become difficult for open ended mutual funds.

Now that being said, we can’t always wait for the best to happen to operate. We should initiate with smaller funds. If we begin open ended mutual funds of bigger size, it will be “Too big to manage”. So, I believe, we can try out on NPR 30 to 50 crores of fund size for open ended mutual funds.

It’s an unresolved debate when it comes to making investment decision based on NAV. So, we thought why not ask the question to the CEO who has been handling mutual funds with highest NAVs in the industry:

NMB Sulav Fund has highest NAV in the overall sector that stands at 13.54 monthly. Do you think NAV should be the primary concern while selecting a mutual fund in Nepal?

There are three major things to be looked into while deciding a mutual fund. The first is NAV. There are times when NAV can go down even if one creates a strong portfolio.  It’s like an arranged marriage. In our culture, prospective bride and bridegroom for the first time meets for 15 minutes, what do they see at the first glance? Looks, probably! It’s the same with mutual funds. Being said that, it is extremely important to understand management team and scheme document. I urge the clients and investors to read the scheme document, its objectives, and its plans before choosing. There were a lot of rumors on “NMB Hybrid allocated 54% of its fund in fixed deposit”. However, fact to be told, it was categorically mentioned in our scheme document. It was approved by the concerned authority. This Kartik, it will be two years when we decided to pile up our fund base in fixed deposit. This was the time when most of the industry experts preferred equity growth. But we the opposites looking for safe and fixed returns. Today, if we look back, it was exactly back then when NEPSE started gradually going down and interest rates in banks started rising. This shows we made one of the best forecasts. If there is a bounce back, no one can stop me from investing the piled up cash that I have. So, one should also read the schemes carefully, understand if it matches with their investment pattern and then decide upon a mutual fund. Third is undoubtedly professional management that cares your money to optimum.

With a lot of speculations being made regarding online trading, we forwarded the same question to the CEO:

Post online trading, what impact would be there in the secondary market?

Market is either principle based or sentiment based. Answer to such question is usually a guide for few whereas misguide for remaining. I am really not concerned where the market will go post online trading. I do believe online trading is a paradigm shift because it will increase the outreach of the market. Online trading will enhance the maturity of the market so; the market is expected to behave in a fairer way. The bigger fundamental issues that we are facing now are likely to be addressed. As there will be more participants in the market, it’s not few people deciding the fate promoting fairer deal. Online trading will give scope to open ended mutual funds, derivative products as futures, options and many more. It’s in the benefit of all for sure

As we understand each player is responsible to enhance outreach of secondary market, we tried to find out NMB Capital’s contribution in it:

The main issue of Nepalese secondary market is lack of investors. As an investment bank, what roles is NMB Capital playing in this regard?

The biggest reach to new investors is online trading itself. How do you reach the rural? I believe it’s through technology. For example, ShareSansar itself can be a source of large chunk of information to prospective investors. The door to door visit and one day training might not be that effective in today’s context. Moreover, investment is a choice not a need. Thus, NMB Capital has come up with ‘’, a quarterly bulletin for the market. One can subscribe to The Analyst and get a brighter perspective of the market. I am happy with the response that we get from clients of The Analyst. We normally would assume they are not likely to invest in secondary market but they do and they even read The Analyst and then comment and suggest. It’s the smallest step we undertake to make major impacts and obviously The Analyst is one of the CSR activities we intend do in inventors’ education and soon more is to come.

Wrapping up the interview, we allocated a witty question to Mr. Shreejesh Ghimire and his response was not disappointing:

“A prospective investor looking at the NEPSE display screen; scared to lose the hard earned money; confused where to put it into; yet a determination to win over the market”. If you come across this person, what would your words be?

“Mutual funds!” One stop solution.

I would love to see investors going to work, do their work, and increase the productivity of the company they work for. No company has ever hired workers so that they can spend their time on NEPSE’s screen. Investors regularly go through a lot of stress while investing and as an institute with specialized team, we manage their portfolio better. It’s just that there is a difference in dream between a portfolio manager and an individual investor. Portfolio manager manages rationally. He/she first and foremost considers what could be the maximum loss. In case of individual investors, they think more from the winning side and do not bother to calculate the losing side. In a longer term, it is proven that those who go through the Fund Management business like MF and PMS, they make a better returns.

Will the answer really be “mutual funds” or will it be “NMB’s mutual funds”?

“NMB Mutual Funds. Choose the best.” Because we have proven records. Don’t we? (wink) 


The interview undertaken with Mr. Shreejesh Ghimire was one of the most insightful interview that the team (Mr. Rachit Agrawal and Dheerusha Tiwari) had taken. We hope NMB Capital comes with more innovative products and takes investment banking to a new height. NMB’s conservative and value based principles distinguishes the brand from the rest. We hope NMB Capital will never let go their value and contribute to the financial system effectively.

Wishing Mr. Shreejesh Ghimire and NMB Capital all the luck…