The commercial banking industry and the individual commercial banks: Does the bank of your choice lie above or below the industry average? NFRS and non-NFRS

Thu, Aug 16, 2018 3:23 PM on Exclusive, Financial Analysis, Stock Market,

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The publication of financial reports created a hassle among investors due to the delay in publication. After the publication of financial reports by 27 commercial banks, the performance of these banks can be summed up from the following figure:

All these banks except Rastra Banijya Bank Limited have published their fourth quarter financial reports of 74/75 FY and thus, the article provides an analysis on their financial status. The industry average in the article is calculated referring to only 27 commercial banks.

From the viewpoint of NFRS:

As per the NFRS report, the distributable profit in the statement has helped investors identify the ability of commercial banks to distribute dividends. For instance, Nabil Bank Limited (NABIL) has the highest distributable profit of Rs 4.05 arba followed by Agriculture Development Bank Limited (ADBL) wit distributable profit of Rs 3.67 arba and finally Nepal Investment Bank (NIB) with distributable profit of Rs 3.57 arba. As per the distributable profit, the maximum return giving capacity can also be evaluated. The maximum return giving capacity is in the same alignment with distributable profit compromising NABIL and ADBL in top positions. The third position is taken by Nepal Bank Limited (NBL). In order to understand the details, please observe the tables:

Comparison of commercial banks’ performance in accordance to industry average (As per old format):

Net profit:

As per the net profit of fourth quarter of 2074/75, Nabil Bank Limited (NABIL) is in the lead with a profit of Rs 4.05 arba. Similarly, Agriculture Development Bank Limited (ADBL) has the second highest net profit of Rs 3.67 arba in the same quarter. In the third position, Nepal Investment Bank (NIB) has the net profit of Rs 3.58 arba. The bank with the least net profit is Civil Bank Limited (CBL) whose net profit amounts to Rs 0.65 arba.

The industry average net profit of the 27 commercial banks is Rs 1.81 arba. 11 commercial banks have net profit above the industry average. Remaining all banks have net profit below the industry average. Find the details in the pictures below:

(Please download and study the image in case of difficulty upon studying).

Paid up capital:

The central bank of the country has directed these “A” categorized banks to meet the paid up capital requirement of at least 8 arba. Most of the banks have met the paid up capital requirement except NMB Bank Limited, Kumari Bank Limited, Bank of Kathmandu Limited and Nepal Credit & Commercial Bank Limited. NMB Bank Limited has already conducted AGM in order to distribute the dividend to meet the paid up capital. The remaining commercial banks are also expected to meet the paid up capital requirement through dividend distribution. The bank with highest paid up capital are Nepal Investment Bank (NIB) with Rs 10.65 arba capital, Mega Bank Limited with Rs 10.28 arba and Global IME Bank Limited (GBIME) with Rs 8.89 arba paid up capital.

The industry average paid up capital stands at Rs 8.10 arba for the commercial banks. 10 of these banks have a paid up capital above this mark. Find where the bank of your choice lies.

(Please download and study the image in case of difficulty upon studying).

Reserve and surplus:

With an industry average of Rs 4.63 arba, 10 banks stand above the average range of Rs 4.63 arba in their reserve fund.

As each and every commercial bank adopted different paid up increment strategy, the impact is seen in the reserve and surplus fund of these banks. In terms of reserves and surplus, Nepal Investment Bank (NIB) has maintained its lead with a reserve and surplus of Rs 11.66 arba. Agriculture Development Bank Limited (ADBL) has maintained second position with Rs 11.54 arba reserve and surplus fund. The bank with least reserve and surplus is Civil Bank Limited (CBL) having a reserve of Rs 1.41 arba.

(Please download and study the image in case of difficulty upon studying).

Deposit collection:

In an average among 27 banks of the country, a bank has collected Rs 85.27 arba as deposit. Only 10 banks are above the average deposit collection.

In the banking sector, the deposit collection will play a major role in the upcoming days. All the banks except four banks have the same range of paid up capital which is equal or above Rs 8 arba. So, the commercial banks will go through a severe competition with each other in order to attract the deposit clients. As of the fourth quarter of FY 2074/75, NIC Asia Bank Limited (NICA) stands on top with total deposits worth Rs 1.51 kharba. NIC Asia is aggressively involved in collecting deposits from existing and prospective clients. Similarly, the bank is followed by Nepal Investment Bank (NIB) and NABIL Bank Limited (NABIL) with the collected deposit of Rs 1.40 kharba and Rs 1.35 kharba respectively. Civil Bank Limited (CBL) has the lowest deposit collection of Rs. 40.01 arba only.

(Please download and study the image in case of difficulty upon studying).

Loans and advances:

With paid up capital of almost same ranges, competition among commercial banks implies even in bringing the loan clients. As shown in the figure, the top position in loans and advances is occupied by Nepal Investment Bank (NIB) with credit disbursement worth Rs 1.22 kharba. NIC Asia Bank (NICA) has a loan and advances portfolio of Rs. 1.20 kharba. NABIL Bank Limited (NABIL) has the loan portfolio of Rs 1.124 kharba. Similarly on the other end of the rope, stands Civil Bank Limited (CBL) with the lowest loan and advances portfolio of Rs. 39.46 arba.

The industry average loan disbursed is Rs 73.37 arba. 12 commercial banks have the loan portfolio above Rs 73.37 arba. Find the details in the pictures below:

(Please download and study the image in case of difficulty upon studying).

Major indicators:

Earning per share (Annualized):

With the increment in the paid-up capital requirement, the EPS of these banks were expected to fall. However, some commercial banks have managed to maintain their EPS better than others. Nabil Bank Limited (NABIL) becomes the bank to serve investors with highest annualized EPS of Rs 50.41 per share. Agriculture Development Bank (ADBL) in the second position with Rs 43.17. Nepal Bank Limited (NBL) stands in the third position with annualized EPS of Rs 42.27 per share. Civil Bank Limited (CBL) stays at the bottom with an earning of Rs. 8.06 per share.

The average EPS of 27 commercial banks stands at Rs 21.63. 14 commercial banks still provide EPS higher than that of the industry average.

(Please download and study the image in case of difficulty upon studying).

P/E Ratio:

Nepal Bank Limited (NBL) has the least PE ratio of 6.93 times followed by Nepal Credit & Commercial Bank Limited (NCCB) with PE ratio of 7.86 times and finally Citizens Bank International Limited (CZBIL) with PE ratio of 9.70 times.

17 commercial banks have a P/E ratio lower than the industry average of 15.93 times. The average PE ratio of 15.93 times in commercial banking sector is considered as the lowest among these many years of operation.

(Please download and study the image in case of difficulty upon studying).

Net worth per share:

The highest net worth per share among these commercial banks is Rs 234.66 of Agriculture Development Bank Limited (ADBL). Nabil Bank Limited (NABIL) is in the second position with Rs 225.23. NMB Bank Limited (NMB) with an unmet paid up capital has the third highest net worth per share as of Q4 of FY 2074/75 i.e. Rs 214.40. Civil Bank Limited (CBL) has the least net worth of Rs 117.61 per share.

The industry average net worth stands around Rs 155.10 per share. 11 companies have net worth more than the industry average. Find out those companies in the table below.