See how much capital commercial banks need to increase by this fiscal year to reach NRB’s requirement (with projected EPS)
Fri, Dec 23, 2016 12:04 PM on Latest, Exclusive, Financial Analysis, Featured, Stock Market,
On Shrawan 21 2072, Nepal Rastra Bank issued a directive that instructed commercial banks to hike their paid up capital to Rs. 8 arba by the end of FY 2073/74. Banks have the option to raise the capital by issuing right shares, stock dividends, or by merger and acquisition. A handful of commercial banks have already reached the minimum capital requirement by offering rights and dividends, and some are underway their process of merger and acquisition.
ShareSansar has compiled a list of all the commercial banks with their current paid up capital, the offerings the banks are currently providing, and analyzed by how much they would need to increase the capital in FY 2073/74 to reach the minimum requirement. A separate analysis has been done for banks that are undergoing mergers and acquisitions, and will be published soon.
* Not yet proposed, and to be finalized only after their AGMs # FPO amount with premium is undecided
Similarly, after the proposed 23% bonus share of Bank of Kathmandu Lumbini capitalizes, it would need to increase its capital by 42%. However, its EPS is projected to be at Rs. 19.34 per share. BOKL would need to tap into its reserve or further issue right to reach the required paid up. On the other hand, Agricultural Development Bank seems to be in a comfortable position to increase its paid up capital by 35% as its projected EPS stands at Rs. 62 per share. Further, ADBL has not declared its AGM or proposed any bonus from the profit for the FY 2072/73, so the value may alter if it proposes any stock dividend this year.
Mega Bank is offering 13.25% bonus share and 65% right share for FY 2072/73, and had issued 25% right shares recently. After the adjustment of the proposed bonus and right shares, the paid up will reach Rs. 7.56 arba. With the EPS projected to reach Rs. 10.47, it seems to be in a somewhat comfortable position to increase its paid up by 5.7%. Machhapuchchhre Bank’s paid up will reach Rs. 7.38 arba after its 20.75% bonus share, and 50% and 12% right shares.
Prabhu Bank’s and Nepal Bank’s paid up will exceed Rs. 8 billion after they issue their declared 40% and 23.74% right share. Nepal Bank had endorsed the right shares on their AGM for FY 2071/72.
* Not yet proposed, and to be finalized only after their AGMs # FPO amount with premium is undecided
How projected EPS was calculated
As per our analysis, commercial banks reported a 43.6% growth in their net profit when their financial performance of FY 2073/74 was compared to FY 2072/73. Based on this year-on-year growth, their net profit earned in FY 2072/73 was taken as the base for forecasting their net profit in FY 2073/74.Commercial Banks that need to hike their capital by more than 25%
6 commercial banks will need to increase their capital by more than 25% after they have issued their offerings declared till FY 2072/73. Everest Bank will need to increase its paid up by 32.5% after its 70% bonus and 33.33% capitalizes this year. Siddhartha Bank will need to hike its paid up by 52.36%. Its EPS for the FY 2073/74 is projected to be at Rs. 34 per share.
Similarly, after the proposed 23% bonus share of Bank of Kathmandu Lumbini capitalizes, it would need to increase its capital by 42%. However, its EPS is projected to be at Rs. 19.34 per share. BOKL would need to tap into its reserve or further issue right to reach the required paid up. On the other hand, Agricultural Development Bank seems to be in a comfortable position to increase its paid up capital by 35% as its projected EPS stands at Rs. 62 per share. Further, ADBL has not declared its AGM or proposed any bonus from the profit for the FY 2072/73, so the value may alter if it proposes any stock dividend this year.
Commercial Banks that need to hike their capital by less than 25%
Altogether, 8 banks have to issue less than 25% in FY 2073/74 after their issuance of FY 2072/73 capitalize. Citizens Bank has to issue around 15.7% in FY 2073/74 after capitalizing the current endorsed 15.80% bonus and 25% right. Its EPS is projected to be at Rs. 24.41 per share at the end of the FY 2073/74.
Mega Bank is offering 13.25% bonus share and 65% right share for FY 2072/73, and had issued 25% right shares recently. After the adjustment of the proposed bonus and right shares, the paid up will reach Rs. 7.56 arba. With the EPS projected to reach Rs. 10.47, it seems to be in a somewhat comfortable position to increase its paid up by 5.7%. Machhapuchchhre Bank’s paid up will reach Rs. 7.38 arba after its 20.75% bonus share, and 50% and 12% right shares.
Commercial Banks that will have increased their capital to Rs. 8 arba
Prabhu Bank’s and Nepal Bank’s paid up will exceed Rs. 8 billion after they issue their declared 40% and 23.74% right share. Nepal Bank had endorsed the right shares on their AGM for FY 2071/72.
NMB Bank and Standard Chartered Bank coming up with FPO
Standard Chartered Bank is going to issue FPO to restructure its public-promoter ownership. As per its capital plan, it is going to issue FPO amount of Rs. 330 crore (with premium). It is unclear how much of the amount from FPO would be added to the paid up of Standard Chartered Bank. If SCB is to maintain its promoter-public shareholding ratio at 70:30, it would have to issue 26.78 lakh units as per our own interpretation. This adds Rs. 26.78 Crores to its paid up capital. After the issuance of the 33.33% bonus shares and capitalization of the FPO amount, the paid up would reach Rs. 4.01 arba. SCB would then be required to issue a further of almost 100% increase (either by right or stock dividend) to meet the paid up capital requirement. SCB, in its capital plan, has assumed to capitalize the premium collected from the FPO. NMB Bank is also coming up with FPO. Based on NRB’s requirement for the bank to have at least 20% share investment from its foreign joint venture with FMO, it had received an additional Rs. 2.35 arba investment from the foreign partner. This increased its promoter-public ownership to around 60:40, so it is going to issue FPO to restructure the promoter-public ownership ratio. As per the company secretary, the AGM will likely endorse the promoter-public ratio to maintain at 51:49, however, he stressed that this is subject to the regulatory authorities and the upcoming AGM. According to ShareSansar’s own calculation, the amount for this FPO would be around Rs. 1.14 arba (without premium) if the ownership is set to be at 51:49. As per NMB Bank’s capital plan, however, the FPO amount is set at 88.8 crores (without premium). For this amount, the shareholding ratio will be 52.76:47.24. In respect to these FPO amounts, NMB Bank will be entitled to provide only 5-9% in dividends next year to reach the minimum Rs. 8 arba.Commercial Banks that have already exceeded Rs. 8 billion in paid up capital
2 banks (RBB and NIB) have already hiked their paid up to over Rs. 8 arba and 1 (GBIME) will meet its paid up requirement by acquiring Reliable Development Bank. Global IME Bank has proposed 16% bonus share as well, which should further increase its capital. Nepal Investment Bank had issued 20% bonus share from its profit and reserve of FY 2072/73. Currently, its paid up stands at Rs. 8.7 arba with a massive reserve of Rs. 8.4 arba. Its EPS will have also reached Rs. 42 per share. Rastriya Banijya Bank’s paid up has already reached over Rs. 8 arba. A separate analysis has been done for the following commercial banks that are going under merger and acquisition (will be published soon):- Kumari Bank Ltd.
- NCC Bank Ltd.
- Janata Bank Ltd.
- Civil Bank Ltd.
- Laxmi Bank Ltd.
- Nepal Investment Bank Ltd.
- Global IME Bank Ltd.
- Century Commercial Bank Ltd.
- Prime Commercial Bank Ltd.
- Sanima Bank Ltd.
- Sunrise Bank Ltd.
