All 26 commercial banks have unveiled their first quarter report of the current fiscal year 2079/80.
Despite many speculations in the market as to how the bank's profitability will play out in the quarters to come because of the Lower Credit Expansion, Liquidity Shortage, Higher Treasury Bill rates, and inflation rates, Banks have reported slight improved profitability indicators yet in this quarter.
Keeping all the speculation aside, in this article, we will be focusing mainly on the profitability and business volume indicators of commercial banks as of Q1 of Fiscal year 2079/80 and doing a comparative analysis. So, let's dive into the numbers.
Note: Out of the 26 commercial banks in Nepal, Himalayan Bank signed MoU to acquire Civil Bank at a swap ratio of 100:81, Similarly Prabhu Bank is in the process to acquire Century Commercial Bank at a swap ratio of 1:1. In the same vein, Nepal Investment Bank and Mega Bank signed merger agreement at a Swap Ratio -100:90, Global IME and Bank of Kathmandu signed merged deal with each other at a swap ratio of 1:1, Also, Kumari Bank and NCC Bank signed merger deal at 1:1 ratio.
Upon the joint transaction of above mentioned all commercial banks, the total number of A class banks would reduce to 22 from present 26 in Nepal. And the listed number of commercial banks would be 21. (RBBL is not listed on NEPSE)
The Commercial Banks' total net profit rises by 5.94% in FY 2079/80 from Rs 17.71 Arba in the last fiscal year to Rs 18.76 Arba in this fiscal year.
As per the net profit of the first quarter of FY 2079/80, NIC Asia Bank Limited (NICA) is in the lead with a net profit of Rs. 1.76 Arba with a growth of 48.79% as compared to the same quarter of last fiscal year. Similarly, Nabil Bank Limited (NABIL) also reported net profit of Rs. 1.57 Arba with a growth of 41.30%, hence it stands in the second position to accumulate higher profits for the first quarter. In the third position, Rastriya Banijya Bank Limited (RBBL) has a net profit of Rs 1.25 Arba.
Likewise, 12 commercial banks have reported decline in net profit as compared to the corresponding quarter of the last fiscal year. Out of which, Sunrise Bank Limited (SRBL) reported highest decline in net profit by 61.50%, to stand at Rs. 17 Crores. In the same vein, Kumari Bank Limited (KBL) net profit rose by 85.07% in the first quarter of F.Y 2079/80.
The industry average of net profit of the 26 commercial banks stands at Rs 72 Crores, the same for the previous year first quarter was Rs.68 Crores.
Profit for the period:
As per the distributable profit of the first quarter of 2079/80, Everest Bank Limited (EBL) is in the lead with a profit of Rs 85 Crores. Similarly, Standard Chartered Bank Nepal Limited (SCB) has the second-highest distributable profit of Rs 49 Crores in the same quarter. In the third position, Sanima Bank Limited(SANIMA) has a distributable profit of Rs.53 Crores, with Rs.4.68 distributable profit per share for the period.
Out of the 26 commercial banks, 12 banks have reported negative distributable profit for the first quarter. Agricultural Development Bank Limited (ADBL) has the negative distributable profit of Rs. 82 Crores with the profit per share standing at Rs. -6.18.
*Distributable Profit includes ongoing fiscal year earnings only.
Paid-up capital refers to the amount of money that commercial banks have received from their shareholders through the exchange of shares in the primary market.
The bank with the highest paid-up capital is Global IME Bank Limited (GBIME) with Rs 23.80 Arba capital and Nabil Bank Limited (NABIL) with Rs. 22.83 Arba paid-up capital.
*ADBL Capital includes Rs 5.43 Arba irredeemable non-cumulative preference shares.
Reserve and surplus:
With an industry average of Rs 10.63 Arba, 8 banks stand above the average benchmark of Rs 10.03 Arba in their reserve fund. The total reserve and surplus of all commercial banks are at Rs 2.76 Kharba.
In terms of reserves and surplus, Nabil Bank Limited (NABIL) has maintained its lead with a reserve and surplus of Rs 30.43 Arba, Nepal Bank Limited (NBL) has maintained the second position with Rs 21.69 Arba reserve and surplus fund and Rastriya Banijya Bank (RBBL) is in the third position with a reserve and surplus of Rs 19.79 Arba
*Reserve and Surplus amounts include the amount of Share Premium, Retained Earnings, and Reserve.
Deposits from Customers:
On an average, commercial banks have collected Rs 1.72 Kharba as a deposit. Only 10 banks are above the average deposit collection.
As of the first quarter of FY 2079/80, Nabil Bank Limited (NABIL) stands on top with total deposits worth Rs 3.34 Kharba, NIC Asia Bank Limited (NICA) has the second-highest deposits of Rs 3.04 Kharba. Similarly, the bank is followed by Global IME Bank Limited (GBIME) with the collected deposit of Rs 2.79 kharba respectively. Civil Bank Nepal Limited (CBL) has the lowest deposit collection of Rs. 92.60 Arba.
Loans and advances to Customers:
The top position in loans and advances is occupied by Nabil Bank Limited (NABIL) with credit disbursement worth Rs 3.05 kharba. Global IME Bank Limited (GBIME) has a loan and advances portfolio of Rs. 2.61 kharba. NIC Asia Bank Limited (NICA) has a loan portfolio of Rs 2.59 kharba. Similarly on the other end of the rope, Standard Chartered Bank Nepal Limited (SCB) has the lowest loan and advances portfolio of Rs. 79.22 Arba.
The industry average loan disbursed is Rs 1.55 Kharba. 9 commercial banks have a loan portfolio above Rs 1.53 Kharba.
Net Interest Income:
Net interest income is the net earnings of commercial banks through their core business of collecting deposits and lending loans. The bank with the highest net interest income is Nabil Bank Limited (NABIL) with an income of Rs 3.68 Arba followed by NIC Asia Bank Limited (NICA) with an income of Rs 3.41 Arba and Global IME Bank Limited (GBIME) with an income of Rs 3.20 Arba.
Provisions for the period (Impairment/Reversal):
Banks have set aside a certain amount in loan loss provision and have delayed the loan repayment of several borrowers. A total of Rs 9.47 Arba of amount has been shown in an impairment charge for a loan and other losses. Nabil Bank Limited (NABIL) has the highest impairment charge for a loan and other losses with Rs 99 Crores followed by Siddhartha Bank Limited (SBL) with a total of Rs. 89 crores. In the same vein, NIC Asia Bank Limited (NICA) has the lowest impairment charge for a loan and other losses with Rs. 13 Crores.
12 Commercial banks have reported above average i.e more than Rs. 36 crores impairment charge for a loan and other losses for this quarter.
* - Reversal and + Provision
Earnings per share:
NIC Asia Bank Limited (NICA) becomes the bank to serve investors with the highest annualized EPS of Rs 60.77 per share. Everest Bank Limited (EBL) has the second-highest EPS of Rs 36.43 per share. Rastriya Banijya Bank Limited (RBBL) is in the third position with annualized EPS of Rs 35.77 per share. Agricultural Development Bank Limited (ADBL) stays at the bottom with an earning of Rs. 4.23 per share.
The average EPS of 26 commercial banks stands at Rs 21.35. Only 9 commercial banks provide EPS higher than that of the industry average.
Net worth per share:
The highest net worth per share among these commercial banks is Rs 258.65 which belongs to Agricultural Development Bank Limited (ADBL). Nepal Bank Limited (NBL) is in the second position with Rs 250.55. Everest Bank Limited (EBL) has the third-highest net worth per share as of Q1 of FY 2079/80 i.e. Rs 247.32. Century Commercial Bank Limited (CCBL) has the least net worth of Rs 130.52 per share.
The industry average net worth stands around Rs 179.12 per share. 9 companies have a net worth more than the industry average.
Kumari Bank Limited (KBL) has the least PE ratio of 6.83 times. It is followed by Prabhu Bank Limited (PRVU) with a PE ratio of 9.33 times. 18 commercial banks have a P/E ratio lower than the industry average of 16.99 times.
(The PE ratios are not the recent ratios but rather the ratios for quarter-end. Please look at the current market price to calculate the recent P/E ratio)
In today’s context, the concern of investors simply does not rest upon which bank has more loans. The nature of the loan portfolio equally matters. Everest Bank Limited (EBL) reported the lowest NPL of 0.33% in terms of asset quality. EBL is followed by Nepal SBI Bank Limited (SBI) with an NPL of 0.36%.
Sunrise Bank Limited (SRBL) has reported the highest NPL of 2.94%, followed by Citizens Bank International Limited (CZBIL) with an NPL of 2.89%.
Capital Adequacy Ratio (CAR):
In terms of Capital Adequacy ratio (CAR), Agricultural Development Bank Limited (ADBL) seems to have reported the highest CAR of 16.03%. This is followed by Civil Bank Nepal Limited (CBL) with a CAR of 16%.
Cost of Funds: The term cost of funds refers to how much banks and financial institutions spend in order to acquire money to lend to their customers. The lower the cost of funds, the better because it ultimately reduces the cost of banks. As per reports, Civil Bank Limited (CBL) has the highest Cost of Funds of 9.25%, whereas Rastriya Banijya Bank Limited (RBBL) the lowest cost of funds of 6.51%.
CD Ratio: The CD ratio refers to the credit-deposit ratio in banking parlance. It tells how much of the money banks have raised in the form of deposits has been deployed as loans. Likewise, Global IME Bank Limited (GBIME) has reported highest CD ratio of 90.59%, whereas Standard Chartered Bank Nepal Limited (SCB) has the lowest CD ratio of 83.98%.
Base Rate and Interest Spread:
Base rate is defined as the minimum interest rate set by the NRB below which Commercial banks are not permitted to lend to their customers. Citizens Bank International Limited (CZBIL) reports highest base rate of 11.14%, and Rastriya Banijya Bank Limited (RBBL) has lowest base rate of 8.85%.
Similarly, the net interest rate spread is the difference between the interest rate a bank pays to depositors and the interest rate it receives from loans to consumers. Here, NIC Asia Bank Limited (NICA) has the highest interest spread of 4.39%, whereas Nepal Bank Limited (NBL) has the lowest interest spread of 3.66% for the first quarter of FY 2079/80.
Cost of Funds, CD Ratio, Base Rates and Interest Spread:
Finally, the table below shows provides a full picture of major indicators of 26 commercial banks as of the first quarter of FY 2079-2080.