More shares mean less return
KATHMANDU, May 27:
Despite poor performance of the share market, return of shareholders of commercial bank sub group has not dropped much.
The average return on equity ratio of the commercial banks listed in the stock exchange has dropped to a mere three per cent to 15.56 per cent, from an average of 18.52 per cent in the corresponding quarter of last fiscal year, according to the commercial banks’ unaudited third quarterly report for the current fiscal year.
“Most of the banks have issued right shares and bonus shares increasing the number of shares pulling return on equity down,” said share analyst Rabindra Bhattarai. “The profit of the banks have not increased much while the equity has increased, thus return on equity tends to go down.”
Citizens Bank International, Machhapuchchhre Bank and Agriculture Development Bank did not include return on equity in their third quarter financials, but among the 21 banks that have published return on equity in their financials, 11 commercial banks’ return on equity is above the average while 10 commercial banks’ return on equity is less than the average.
In the corresponding quarter last fiscal year, 12 commercial banks had their return on equity greater than that of industrial average.
Return on equity measures the rate of return on shareholders’ equity of the common stock owners. It is an effective tool to measure a firm’s efficiency at generating profits from every unit of net asset. The return on equity illustrates the management’s capability of using funds to generate earnings.
There are more than 417 million units of shares with the paid up value of Rs 41.78 billion listed in the secondary market belonging to 24 commercial banks. Banking subgroup — the most popular among the investors among the nine subgroups of the Nepse — covers more than 70 per cent of the total market capitalisation.
However, the performance of the subgroup has been losing its sheen since last year. In the beginning of the third quarter banking sub index stood at 367.93 points but went down to 322.75 points by the third quarter end.
In the last three months alone the banking subgroup plunged by 45.18 points. The market capitalisation of the commercial banks has gone down by 17.2 per cent in the first eight months of the current fiscal year in comparison to that of the corresponding period in last fiscal year. The market capitalisation that stood at Rs 206 million plunged to Rs 171 million by mid-March.
Among the 31 commercial banks currently in operation, 24 are listed in the secondary market. The newly opened banks like Janata Bank, Mega Bank, Commerz and Trust Bank, Civil Bank and Century Commercial Bank have yet to offer their shares to the public, while Nepal Bank was de-listed by the stock exchange due to bad governance.
However, Rastriya Banijya Bank’s total equity is held by the government itself.
Source: THT
Despite poor performance of the share market, return of shareholders of commercial bank sub group has not dropped much.
The average return on equity ratio of the commercial banks listed in the stock exchange has dropped to a mere three per cent to 15.56 per cent, from an average of 18.52 per cent in the corresponding quarter of last fiscal year, according to the commercial banks’ unaudited third quarterly report for the current fiscal year.
“Most of the banks have issued right shares and bonus shares increasing the number of shares pulling return on equity down,” said share analyst Rabindra Bhattarai. “The profit of the banks have not increased much while the equity has increased, thus return on equity tends to go down.”
Citizens Bank International, Machhapuchchhre Bank and Agriculture Development Bank did not include return on equity in their third quarter financials, but among the 21 banks that have published return on equity in their financials, 11 commercial banks’ return on equity is above the average while 10 commercial banks’ return on equity is less than the average.
In the corresponding quarter last fiscal year, 12 commercial banks had their return on equity greater than that of industrial average.
Return on equity measures the rate of return on shareholders’ equity of the common stock owners. It is an effective tool to measure a firm’s efficiency at generating profits from every unit of net asset. The return on equity illustrates the management’s capability of using funds to generate earnings.
There are more than 417 million units of shares with the paid up value of Rs 41.78 billion listed in the secondary market belonging to 24 commercial banks. Banking subgroup — the most popular among the investors among the nine subgroups of the Nepse — covers more than 70 per cent of the total market capitalisation.
However, the performance of the subgroup has been losing its sheen since last year. In the beginning of the third quarter banking sub index stood at 367.93 points but went down to 322.75 points by the third quarter end.
In the last three months alone the banking subgroup plunged by 45.18 points. The market capitalisation of the commercial banks has gone down by 17.2 per cent in the first eight months of the current fiscal year in comparison to that of the corresponding period in last fiscal year. The market capitalisation that stood at Rs 206 million plunged to Rs 171 million by mid-March.
Among the 31 commercial banks currently in operation, 24 are listed in the secondary market. The newly opened banks like Janata Bank, Mega Bank, Commerz and Trust Bank, Civil Bank and Century Commercial Bank have yet to offer their shares to the public, while Nepal Bank was de-listed by the stock exchange due to bad governance.
However, Rastriya Banijya Bank’s total equity is held by the government itself.
Source: THT
