Other income to other expense ratio of banks up at 0.5
KATHMANDU, March 13:
How actively are the country´s commercial banks earning from activities other than sales of loans and investment in government bills? And what contribution are these incomes making in meeting various expenses of these financial institutions?
First-half unaudited financial reports of 32 commercial banks show banks earned various amount of money from fees cum commission, loan management fee and foreign exchange transaction.
For instance, Standard Chartered Bank Nepal was the top bank to generate earnings from foreign exchange transaction with income standing at Rs 249.25 million in the first half of the current fiscal year to mid-January. The amount was 16.66 percent of the total earnings of Rs 1.49 billion made by all commercial banks through foreign exchange transaction.
Himalayan Bank, on the other hand, topped the list in terms of generating revenue from sources like fees and commission. The bank earned Rs 260.45 million from this source in the first half. State-controlled Agricultural Development Bank, meanwhile, earned Rs 230.40 million-the highest among commercial banks in the six-month period-from other operating income like loan management fee.
Together, 32 commercial banks made Rs 5.69 billion from sources like foreign exchange, fees cum commission and other operating income in the six-month period, as against Rs 4.54 billion in the same period last fiscal year. These incomes are categorized as ´other income´ of banks, meaning they were generated from sources other than interest slapped on loans and investment made in treasury bills and government bonds.
In terms of ´other income´, Nabil Bank topped the league table with the amount standing at Rs 531.20 million in the first half. Himalayan came in second with ´other income´ totaling Rs 494.36 million, while Nepal Investment Bank stood third generating Rs 404.77 million.
But what contribution did these ´other incomes´ make in meeting expenses, particularly ´other expenses´, which include staff and other operating expenses.
Going through the unaudited financial reports, it becomes evident that Nabil Bank is the only bank whose ´other income´ surpassed ´other expenses´. This means the country´s second largest bank in terms of assets was able to meet its staff and other operating expenses through revenue generated from ´other income´.
The bank´s first-half unaudited balance sheet shows that it spent a total of 490.57 million in staff and other operating expenses, while its other income stood at Rs 531.20 million.
Nepal Investment Bank came second, in this regard, with the institution being able to meet 99.30 percent of ´other expenses´ through ´other income´ in the six-month period. Standard Chartered Bank was close on the heels, with ´other income to other expense´ ratio standing at 0.98, meaning the bank was able to meet 98 percent of its ´other expenses´ through ´other income´.
The worst performers, in this regard, were state-run banks like Nepal Bank Limited and Agricultural Development Bank. Nepal Bank was able to meet only 21 percent of its ´other expenses´ through ´other income´, while the ´other income to other expense´ ratio of Agricultural Development stood at 0.21 in the first-half. This was mainly because of higher staff expenses.
Agricultural Development and Nepal Bank spent Rs 1.08 billion and Rs 747.93 million on its staff in the first half, respectively, while Agricultural Development also suffered a loss of 12.47 million on foreign exchange transaction in the review period.
Among private sector-led banks Lumbini Bank was the worst performer in terms of managing ´other income to other expense´ ratio, as the figure stood at 0.30 in the six-month period. The average industry ratio of ´other income to other expense´ stood at 0.56, up from 0.51 in the same period last fiscal year.
Source: Republica
