Which development bank leads this quarter? Find out more about national level development banks

Fri, May 17, 2019 4:02 PM on Exclusive, Stock Market,

-ShareSansar

There are 30 development level banks. However, not all of these fall in the same category. The development banks can be categorized within three sub categories: National level development banks, development banks operating in 4 to 10 districts and development banks operating in 1 to 3 districts. A wise investor would create a portfolio of development banks comparing their performance with the other banks falling in the respective categories.

Om Development Bank Limited is in the process of merger with NMB Development bank Limited. Jyoti Bikas Bank Limited has completed its merger with Hamro Bikas Bank Limited. Deva Bikas Bank Limited is in the process of acquisition of Western Development Bank Limited. Shine Resunga Development Bank has recently signed a MoU to acquire Purnima Bikas Bank Limited and Bhargav Bikas Bank Limited. Also, Tinau Bikas Bank Limited and Mission Development Bank are in the merger process since 18^th March, 2019. Whereas, Saptakoshi BIkas Bank Limited and Kabeli Bikas Bank Limited are in the merger process too since 17^th January, 2019. Once all the mentioned mergers and acquisition happens easily, then as per current scenario there will be 11 National Level Development Bank including Shine Resunga Development Bank Limited and 12 Regional Level Development Bank in the operation. However, many more merger and acquisition may happen anytime in the future, which may again decrease the total number of B class financial institutions.

This article will deal with national level and compare the banks within their respective category.

Net profit:

As per the net profit of third quarter of 2075/76, Muktinath Bikas Bank Limited (MNBBL) is in the lead with a profit of Rs 60.21 crores. Similarly, Garima Bikas Bank Limited (GBBL) has the second highest net profit of Rs 42.38 crores in the same quarter. In the third position, Kailash Bikas Bank Limited (KBBL) has the net profit of Rs 39.61 crores. The bank with the least net profit is Kamana Sewa Bikash Bank Limited (KSBBL) whose net profit amounts to Rs 21.21 crores.

The industry average net profit of national level development bank stands at Rs 35.23 crores. Five of these banks have net profit above industry average whereas six of them have below average.

Paid up capital:

The central bank of the country has directed these development “B” categorized banks to meet the paid up capital requirement. NRB has directed development banks of national level to meet the paid up capital of at least 2.50 arba.

Among the eleven national level banks, Lumbini Bikas Bank Limited (LBBL) is yet to meet the paid up capital requirement. The company has proposed to distribute 17.35% bonus shares to its shareholders for the fiscal year 2074/75 but yet the book closure and AGM remains to be announced. Upon the adjustment of the dividend the development bank can meet up its minimum paid up capital requirement easily.

The bank with highest paid up capital are Jyoti Bikash Bank Limited (JBBL) with Rs 3.10 arba, Muktinath Bikas Bank Limited (MNBBL) with 3.06 arba and Mahalaxmi Bikas Bank Limited (MLBL) with Rs 2.84 arba capital.

The paid up capital of Deva Bikas Bank Limited (DBBL) might change after acquiring Western Development Bank Limited and Sahara Bikas Bank Limited.

Reserve and surplus:

In terms of reserves and surplus, Lumbini Bikas Bank Limited (LBBL) has maintained its lead with a reserve and surplus of Rs 1.47 arba. Mahalaxmi Bikas Bank Limited (MLBL) has maintained second position with Rs 1.29 arba reserve and surplus fund. Om Development Bank (ODBL) has a reserve of Rs 1.15 arba. The bank with least reserve and surplus is Shangrila Development Bank Limited (SADBL) having a reserve of Rs 58 crores.

The industry average in reserve and surplus for national level development banks is Rs 99 crores.

Deposit collection:

All the banks except Lumbini Bikas Bank have the same range of paid up capital which is equal or above Rs 2.50 arba. So, the national level development banks are going through a severe competition with each other in order to attract the deposit clients. As of the third quarter of FY 2075/76, Muktinath Bikas Bank Limited (MNBBL) stands on top with total deposits worth Rs 41.80 arba. Similarly, the bank is followed Mahalaxmi Bikas Bank Limited (MLBL) and Garima Bikas Bank Limited (GBBL) with the collected deposit of Rs 30.49 arba and Rs 30.36 arba respectively. Deva Bikas Bank (DBBL) has the lowest deposit collection of Rs. 17.93 arba only.

The average deposit collected by national development banking industry stands at Rs 26.76 arba. The effect of liquidity crisis is seen among these banks as well since six of the banks have their deposit above industry average.

Loans and advances:

With paid up capital of almost same ranges, competition among development banks implies even in bringing the loan clients. As shown in the figure, the top position in loans and advances is occupied by Muktinath Bikas Bank (MNBBL) with credit disbursement worth Rs 36.45 arba. Kailash Bikas Bank Limited (KBBL) has a loan and advances portfolio of Rs. 26.54 arba. Mahalaxmi Bikas Bank (MLBL) has the loan portfolio of Rs 26.36 arba. Similarly on the other end of the rope, stands Deva Bikas Bikas Bank (DBBL) with the lowest loan and advances portfolio of Rs. 16.94 arba.

The industry average loan portfolio of national level development banks stands at Rs 23.78 arba. Six of the national level development banks have their loan portfolio above industry average whereas remaining has below average.

Net interest income:

One of the major sources of revenue for banks is its interest income. Muktinath Bikas Bank Limited (MNBBL) has the highest net interest income of Rs 129.12 crores. It is followed by Mahalaxmi Bikas Bank Limited (MLBL) and Garima Bikas Bank Limited (GBBL) with net interest income of Rs 100.27 crores and Rs 99.09 crores respectively. The industry average in this category stands at Rs 84.56 crores.

Major indicators:

Earnings per share (Annualized):

Earnings per share are presumed to be one of the key factors while undertaking investment decision. Muktinath Bikas Bank (MNBBL) becomes the bank to serve investors with highest annualized EPS of Rs 26.19 per share. Kailash Bikas Bank Limited (KBBL) stands in the second position with annualized EPS of Rs 20.95 per share. Lumbini Bikas Bank Limited (LBBL) has an EPS of Rs 20.73. Kamana Sewa Bikas Bank (KSBBL) stays at the bottom with an earning of Rs. 11.30 per share.

Net worth per share:

The highest net worth per share among these development banks is Rs 166.32 of Lumbini Bikas Bank Limited (LBBL) which has an unmet paid up capital. Om Development BankLimited (ODBL) has the second highest net worth per share as of Q3 of FY 2075/76 i.e. Rs 145.77. Jyoti Bikash Bank Limited (JBBL) has the least net worth of Rs 120.46 per share.

The average net worth of national level development banking industry stands at Rs 137.79 where five banks have net worth above average.

P/E Ratio:

Given that Lumbini Bikas Bank Limited (LBBL) has not met the paid up capital, it has lowest P/E ratio i.e. 9.55 times. Among the banks whose paid up capital is met, Om Development Bank Limited (GBBL) has least P/E ratio which stands at 10.70 times. Similarly, bank with the next least P/E ratio is Kailash Bikas Bank Limited (KBBL) i.e. 11.03 times. Since, the general rule of thumb in finance suggest, a P/E ratio below 15 is an adequate price, the national level development banks with P/E ratio below 15 are being traded in the market at a cheaper price than expected.