Look at comparison of major indicators of development banks based on second quarter report; Muktinath Bikas Bank maintains lead

Sun, Feb 16, 2020 4:05 PM on Exclusive, Financial Analysis,

Development Banks are class ‘B’ BFI’s approved by the NRB to carry out banking business around the country. These development banks are classified into national level, operating in 4-10 districts and regional level based in 1-3 districts it is currently functioning in. As per the regulation of the NRB minimum paid up capital requirement for national level development banks is Rs.2.50 Arba while that of regional level is Rs.50 Crore. Similarly, minimum threshold for development banks operating in 4-10 districts is Rs.1.20 Arba.

As banks have been on a spree to merge and reduce the number of BFIs in the country, some commercial banks have acquired development banks while two or more development banks have merged as well. NMB Bank and Prime Commercial Bank successfully merged with Om Development Bank and Kankai Bikas Bank Limited respectively. Similarly, Purnima Bikas Bank and Bhargava Bikas Bank merged with Shine Resunga Development Bank to upgrade to National Level Development Bank and Nepal Community Development Bank has started joint transaction after merger with Tinau Mission Bikas Bank. Apart from those undergoing merger, Karnali Development Bank has not published second quarter report and Sahara Bikas Bank’s report had some errors.

The remaining development banks have been compared on the basis of major indicators from the second quarter report. The development banks have been segregated into two categories, national level (red colored cells) and regional level (purple colored cells).

Deposits and Loans

In terms of both loans and deposits, Muktinath Bikas Bank leads the industry with both loans and deposits above Rs.40 Arba. The deposits till the end of second quarter stood at Rs.48.23 Arba while the loan worth Rs.45.20 Arba were provided. Among regional banks, Tinau Mission Development Bank stood ahead with deposits of Rs.14.17 Arba and loans of Rs.12.31 Arba.

Net Interest Income

The net interest income is the main source of income for the banks. It is calculated by deducting interest paid on deposits from interest received on borrowings. MNBBL has posted the highest net interest income of Rs.1.09 Arba by the end of the second quarter. TMDBL stood ahead in among regional level development banks with Rs.33.21 Crore as net interest income. Corporate Development Bank posted the lowest net interest income in the industry at Rs.1.91 Crore.

Net Profits

MNBBL also posted the highest profit in the industry at Rs.47.25 Crore till the second quarter of FY 76/77. Only seven development banks posted net profit below Rs.10 Crore. The lowest profit in the industry was posted by Green Development Bank and Sindhu Bikas Bank at Rs.1.04 Crore each.

EPS, Net Worth per Share and PE Ratio

The earnings per share has been annualized and PE ratio derived on the basis of annualized EPS. Highest EPS was posted by EDBL at Rs.29.71 followed by Miteri Development Bank at Rs.28.55. Two banks with lowest EPS in the industry were Green Development Bank and Sindhu Bikas Bank.

EDBL posted the highest net worth per share at Rs.167.68 followed by Sahayogi Bikas Bank at Rs.160.68. The lowest net worth per share stood at Rs.106.31 posted by Green Development Bank.

The lowest PE ratio in the industry stood at 8.25 times posted by Corporate Development Bank while the highest stood at 30.72 times posted by Sindhu Bikas Bank, both regional level development banks. The PE ratio of national level development bank varied between 14.10 times (MNBBL) and 9.51 times (KBBL) by the end of the second quarter.