NIC Asia Bank on recovery path to reclaim glorious past

NIC Asia Bank, one of Nepal's top Class A commercial banks, which previously suffered setbacks, is now on the rapid recovery phase to reclaim its strong market position.

Following its aggressive expansion, the bank is now focused on consolidation, asset quality improvement and consolidating its capital base.

Key strategies include changes in top management, speedy digitization, downsizing branches and the proposal of right shares issuance to increase capital. Early indications show that the bank is on the right track.

"Since all bank and financial institutions are facing difficulties right now due to the country's overall economy situation, our bank is no exception. However, we are working tirelessly to recover," Jayendra Rawal, the bank's Chief Information Officer.

According to him, the bank has now adopted a more defensive strategy for a sustainable growth by prioritizing loan restructuring and recovery, gradual business expansion, full-fledged digitization and portfolio diversification.

The bank has diversified its portfolios in corporate and energy sectors. It has invested millions of rupees in these sectors.

To consolidate the capital structure, maintain capital adequacy ratios and expand future business, the bank has recently proposed a 50 percent right share issuance on the basis of 2:1 ratio (one new share for every two existing shares), aiming to raise Rs 7.45 billion from the issuance of the total 74,587,835 units. Upon the completion of the issuance, the bank's paid up capital will rise from existing Rs 14.91 billion to Rs 22.37 billion. However, the proposal is subject to approve by Nepal Rastra Bank, Nepal's regulatory body for Banks and Financial Institutions (BFIs).  

Similarly, the bank has proposed to issue Perpetual Non-Cumulative Preference Shares worth Rs 5 billion at a face value of Rs 100 per unit, aiming to strengthen the bank's capital base and manage capital pressure.

"The bank's move is to inject the raised capital to boost absorbing equity and investment loans," said Rawal.

The bank is also working to go fully digitized and make its branch network effective in a bid to minimize operational costs and increase efficiency.

Bank's glorious past and challenges

The bank was formed in 2013 through the merger of NIC Bank and Bank of Asia Nepal. The first-ever merger set a precedent for future merger in Nepal's banking sector. The bank's sustained and high quality performance was recognized as the Bank of the Year Nepal by The Banker in 2007 and 2013.

Until some years ago, the bank stood out as one of the leading banks in Nepal with the expansion of over 350 branches, and over 100 extension counters. It also operated 41 branchless banking services and more than 470 ATMs.

It also pioneered in introducing digital-first services with the NIC MoApp (mobile banking) and iServe (a platform for all digital services). By 2022, It served more than 3 million customers until 2022, positioning itself as one of the best banks in terms of overall financial health.

The bank also established its subsidiaries, including NIC Asia Capital Limited and NIC Asia Laghubitta Bittiya Sanstha Limited.  

However, the bank faced challenges in recovering loans following the country's economic slowdown especially in the aftermath of Covid-19 pandemic. Alleged attacks tarnished its image, adding to its woes.

Despite these odds, the bank has maintained stability and is now on the recovery path. According to Its Q2, 2082/83 financial report, its total loans and advances to customers stood at Rs 223.98 billion while deposits from customers grew to Rs 333.78 billion, 6.33 percent up from Rs 313.91 billion in the same corresponding period of the previous fiscal year. Similarly, its reserves increased to Rs 22.06 billion from Rs 19.81 billion in the previous year. Its net worth per share is Rs 198.33.

"We have now attracted around 4 million customers now," said Rawal.