What’s wrong with ADBL? Nothing, say officials; shareholders not convinced

ShareSansar, August 21:

The move of Agricultural Development Bank Limited (ADBL) to set aside a staggering sum of Rs 3.35arba by the end of the last fiscal year 2070/71 as staff expense has raised many eyebrows.

The amount provisioned as staff expense is not justified when we compare it to the amount (Rs 2.38 arba) it had put under the same heading in the financial report for the corresponding quarter of the previous fiscal year 2069/70.

It may also be noted that ADBL had set aside Rs 2.20 arba in the fiscal year 2068/69 and Rs 2.56 arba in the fiscal year 2067/68.

For consistency, we have compiled all these figures for the past four fiscal years based on unaudited fourth quarterly report published by ADBL over the years.

If we take these figures into account, and also the fact that there has not been any significant hiring and firing in the bank over the past few years, it suggests that the amount ADBL has set aside as staff expenses in the last fiscal year, which is far more than the amount set aside under the same heading over the years, does raise some questions.

“Even if they had to provision the sum for the welfare of the staff they could have included a chunk of it in the balance sheet of the previous fiscal year,” says one of the major ADBL share investors, Dilip Shrestha. “Setting aside additional Rs 1 arba-plus as staff expenses in the last fiscal year as compared to the previous one suggests that there is something wrong somewhere.”

When approached, ADBL officials insist that there is nothing wrong with the financial report.

“Staff expenses became much higher this time around owing to the government’s decision to raise employees’ salary by 18 percent, and that more than 200 of the our employees also retired in the last fiscal year, considerably increasing the VRS expenses,” says an ADBL spokesperson Pratap Subedi. “On top of that we must also admit that we were also not able to write back the amount we had expected.”

But the shareholders are not convinced.

“No matter what explanation the bank come up with, one thing is clear: it has either earmarked staff expenses on ad hoc basis in the previous fiscal year or in the last one,” Shrestha argues.

“My question is: Why did the auditor of ADBL or the central bank approve the balance sheet for the previous fiscal if the bank had set aside lesser amount under staff expense. Conversely, if the previous balance sheet was ok then on what basis did the bank set aside so high staff expenses this time around?”

Some investors are very critical and doubtful of ADBL’s intention.

“The logic behind showing so much of amount as staff expense is evident. Since the bank may not be in a position to lavishly reward its staff once good governance is established following the entry of a world-class strategic partner, they thought it’s now or never,” says an investor who has invested on ADBL scrip.

No need to panic, though

It’s not that ADBL has not made a very good profit in the last fiscal year. Let us not forget that they had posted a profit of more than Rs 2 arba by Jestha – a month before the end of the last fiscal year.

Going by the trend over the years, ADBL earns most of its profit in the last two months of every fiscal year.

Despite the disappointing Q4 report, both ADBL official and major shareholders of the bank maintain that ADBL has kept aside 21 percent of its net profit in the reserve as retained earnings in the previous fiscal year alone – forget the figure for the last fiscal year.


“ADBL could have easily pledged up to 51 percent bonus for the last fiscal year alone,” says Shrestha.

Nonetheless, he was quick to add that they will seriously take up with ADBL officials the issue of ADBL’s move to set aside such a huge amount as staff expenses.  

ADBL official Subedi also said that they are planning to offer good dividend for the last fiscal year, too.