Know which Banks are most successful in utilizing assets to earn high profit

Thu, Aug 23, 2018 5:11 PM on Exclusive,

-ShareSansar

~Rishab Agrawal

While investing in a company, an investor looks at number of factors and indicators which may include net profit, earnings per share, net worth per share, P/E ratio, total assets etc. These indicators may give a view about the financial strength of the company and its future prospects. But what the above mentioned indicators do not tell is the efficiency of the company to earn with the given resources.

A strong company can be a company that earns most profit but an efficient company is a company that has the capability of earning most using the given resources. To check the efficiency, a key indicator is Return on Asset (ROA) which is calculated by dividing net profits with the total asset. It shows the percentage of profit earned by employing the given number of assets. For example- if a company’s ROA is 2%, it means that it can earn Rs.2 on every Rs.100 employed as asset. Hence, we can say that higher the ROA, higher is the efficiency and earning capacity of that company.

First, let us look at the total assets and net profits of all the commercial banks. These are latest figures posted by the banks in their fourth quarter reports for FY 74/75. They give the following picture:

S. No.	Symbol	Name	Total Assets (‘000)	Net Profit (‘000)
1	RBB	Rastriya Banijya Bank	206,849,737	4,328,757
2	NICA	NIC Asia Bank Limited	171,921,113	1,190,930
3	NIB	Nepal Investment Bank Limited	170,515,660	3,578,858
4	NABIL	Nabil Bank Limited	159,192,778	4,054,745
5	EBL	Everest Bank Limited	145,840,764	2,544,534
6	ADBL	Agricultural Development Bank Limited	134,652,580	3,673,293
7	GBIME	Global IME Bank Limited	127,777,163	2,156,592
8	NBL	Nepal Bank Limited	121,158,048	3,399,718
9	SBL	Siddhartha Bank Limited	119,132,261	1,854,800
10	HBL	Himalayan Bank Limited	117,956,580	2,474,590
11	PRVU	Prabhu Bank Limited	114,097,579	1,129,661
12	NMB	NMB Bank Limited	105,227,195	1,812,965
13	SBI	Nepal SBI Bank Limited	102,479,628	1,940,164
14	PCBL	Prime Commercial Bank Limited	95,768,091	1,892,039
15	BOKL	Bank of Kathmandu Limited	93,991,002	1,548,668
16	SANIMA	Sanima Bank Limited	91,831,622	1,693,662
17	MBL	Machhapuchchhre Bank Limited	85,389,009	1,210,680
18	SRBL	Sunrise Bank Limited	83,943,039	1,311,769
19	KBL	Kumari Bank Limited	83,525,391	1,001,495
20	SCB	Standard Chartered Bank Nepal Limited	82,747,325	2,073,394
21	LBL	Laxmi Bank Limited	81,401,606	1,166,342
22	CZBIL	Citizens Bank International Limited	78,725,979	1,408,454
23	MEGA	Mega Bank Nepal Limited	78,382,099	1,046,680
24	NCCB	Nepal Credit & Commercial Bank Limited	75,257,967	1,072,037
25	CCBL	Century Commercial Bank Limited	73,654,678	875,737
26	JBNL	Janata Bank Nepal Limited	72,041,379	934,747
27	NBB	Nepal Bangladesh Bank Limited	61,874,702	1,107,958
28	CBL	Civil Bank Limited	52,002,007	645,011
Average			106,690,607	1,897,439

As we can see, Rastriya Banijya Bank has employed assets worth Rs.206.84 Arba and earned net profit of Rs.4.32 Arba while Nepal Investment Bank has employed assets worth Rs.170.51 Arba and earned net profit of Rs.3.57 Arba. Similarly, NIC Asia has employed Rs.171.92 Arba as assets but only earned Rs.1.19 Arba net profit. These are the banks with the most assets but it doesn’t necessarily mean they are the most efficient.

To know the efficiency of each bank, we have calculated the ROA and they stand as follows:

S.No.	Symbol	Name	ROA
1	NBL	Nepal Bank Limited	2.81%
2	KBL	Kumari Bank Limited	2.73%
3	EBL	Everest Bank Limited	2.51%
4	RBB	Rastriya Banijya Bank	2.18%
5	NIB	Nepal Investment Bank Limited	2.10%
6	SBI	Nepal SBI Bank Limited	2.10%
7	SBL	Siddhartha Bank Limited	2.09%
8	GBIME	Global IME Bank Limited	1.98%
9	CZBIL	Citizens Bank International Limited	1.95%
10	LBL	Laxmi Bank Limited	1.89%
11	MEGA	Mega Bank Nepal Limited	1.84%
12	SCB	Standard Chartered Bank Nepal Limited	1.79%
13	NCCB	Nepal Credit & Commercial Bank Limited	1.74%
14	SRBL	Sunrise Bank Limited	1.72%
15	HBL	Himalayan Bank Limited	1.65%
16	JBNL	Janata Bank Nepal Limited	1.56%
17	CBL	Civil Bank Limited	1.56%
18	SANIMA	Sanima Bank Limited	1.43%
19	BOKL	Bank of Kathmandu Limited	1.42%
20	CCBL	Century Commercial Bank Limited	1.42%
21	ADBL	Agricultural Development Bank Limited	1.34%
22	NABIL	Nabil Bank Limited	1.30%
23	NBB	Nepal Bangladesh Bank Limited	1.20%
24	MBL	Machhapuchchhre Bank Limited	1.19%
25	NMB	NMB Bank Limited	0.99%
26	PRVU	Prabhu Bank Limited	0.99%
27	PCBL	Prime Commercial Bank Limited	0.69%
28	NICA	NIC Asia Bank Limited	0.69%
Average			1.67%

From the table above, we can infer that though RBB has the highest value of asset, Its ROA stands at 2.18% whereas Nepal Bank Limited has topped this list with ROA of 2.81% as it has employed assets worth Rs.121.15 Arba and posted a net profit of Rs.3.39 Arba making it the most efficient commercial bank in the industry. Other banks with high ROA are Kumari Bank and Everest Bank with 2.73% and 2.51% of return.

Further, we can that NIC Asia Bank, which had employed assets worth Rs.171.92 Arba posted the lowest ROA amongst all commercial banks which stands at a mere 0.69% making it the least efficient commercial bank with the lowest earning capacity. Similar to NIC Asia, Prime Commercial Bank posted a return of 0.69% while NMB Bank and Prabhu Bank posted ROA of 0.99% putting them in the least efficient zone.

Graphical Representation:

Know which Banks are most successful in utilizing assets to earn high profit

Thu, Aug 23, 2018 5:11 PM on Exclusive,

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