Thriving During Liquidity Crisis In Nepal; A Quick Look At The Third Quarter Performance Of Commercial Bank's

From the low-interest rate environment affecting the overall banking industry to the liquidity crisis in the economy, we have seen all of the commercial banks go through a lot after the COVID-19. However, the banks have shown optimal efficiency of the available resources to thrive in the market.

There has been much more speculation in the market as to how the business volume and profitability will playout for the overall banking industry. Now that the bank has released their third quarterly earnings, we will carry out a detailed comparative analysis in this article. So, let's dive into the numbers.

• Profit for the period:

As per the net profit of the unaudited third quarter of FY 2078/79, Global IME Bank Limited (GBIME) is in the lead with a net profit of Rs 3.73 Arba. Similarly, NIC Asia Bank Limited (NICA) has the second-highest net profit of Rs 3.60 Arba in the same quarter. In the third position, Nabil Bank Limited (NABIL) has a net profit of Rs 3.35 Arba. The bank with the least net profit is Laxmi Bank Limited (LBL) whose net profit amounts to Rs 586 crores.

The industry average net profit of the 27 commercial banks is Rs 1.89 Arba.

Out of 27 commercial banks, 12 banks have reported a decline in their Net Profit.

The total net profit for the year is Rs 50.98 Arba whereas that for the last year of the same quarter was Rs 50.73 Arba.

Paid-up capital:

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 23.79 Arba capital and Prime Commercial Bank Limited (PCBL) with Rs 18.65 Arba paid-up capital. 

• Reserve and surplus:

With an industry average of Rs 8.61 Arba, 9 banks stand above the average benchmark in their reserve fund. The total reserve and surplus of all commercial banks are at Rs 2.32 Kharba.

In terms of reserves and surplus, Nepal Bank Limited (NBL) has maintained its lead with a reserve and surplus of Rs 20.25 Arba. Rastriya Banijaya Bank (RBB) has maintained the second position with Rs 17.93 Arba reserve and surplus fund. Nabil Bank Limited (NABIL) is in the third position with a reserve and surplus of Rs 16.70 Arba. 

*Reserve and Surplus amounts include the amount of Share Premium, Retained Earnings and Reserve.

• Deposits from Customers:

On average, commercial banks have collected Rs 1.60 kharba as a deposit. In total 13 banks are above the average deposit collection.

As of the third quarter of FY 2078/79, NIC Asia Bank Limited (NICA) stands on top with total deposits worth Rs 2.96 kharba, Global IME Bank (GBIME) has the second-highest deposits of Rs 2.69 kharba. Similarly, the bank is followed by Rastriya Banijaya Bank Limited (RBB) with the collected deposit of Rs 2.45 kharba respectively. Nepal Bangladesh Bank Limited (NBB) has the lowest deposit collection of Rs. 82 Arba.

• Loans and advances to Customers:

The top position in loans and advances is occupied by Global IME Bank Limited (GBIME)  with credit disbursement worth Rs 2.60 kharba. NIC Asia Bank Limited (NICA) has a loan and advances portfolio of Rs. 2.57 kharba. Nabil Bank Limited (NABIL) has a loan portfolio of Rs 2.21 kharba. Similarly on the other end of the rope, Nepal Bangladesh Bank Limited (NBB) has the lowest loan and advances portfolio of Rs. 76 Arba.

The industry average loan disbursed is Rs 1.48 Kharba. 12 commercial banks have a loan portfolio above Rs 1.48 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 NIC Asia Bank Limited (NICA) with an income of Rs 8.26 Arba followed by Global IME Bank Limited (GBIME) with an income of Rs 7.44 Arba and Nabil Bank Limited (NABIL)  with an income of Rs 6.59 Arba.

The industry average net interest income stands at Rs 4.08 Arba. 11 out of 27 commercial banks are above the industry average in terms of net interest income.

• Provisions for the period (Impairment/Reversal):

With the increasing interest rate, the banks have piled up the provisions to hedge against the possible losses.

Out of 27 commercial banks, 15 commercial banks have reported provisions above the industry average.

* - Reversal and + Provision

• Distributable Profit:

*Distributable Profit includes last year's retained earnings.

Major indicators:

• Earnings per share:

NIC Asia Bank Limited (NICA) becomes the bank to serve investors with the highest annualized EPS of Rs 41.56 per share. Rastriya Banijya Bank Limited (RBB) has the second-highest EPS of Rs 25.03 per share. Nabil Bank Limited (NABIL) is in the third position with annualized EPS of Rs 24.16 per share. Laxmi Bank Limited (LBL) stays at the bottom with an earning of Rs. 9.91 per share.

The average EPS of 27 commercial banks stands at Rs 18.78. 11 commercial banks still 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 240.6 which belongs to Nepal Bank Limited (NBL). Rastriya Banijya Bank Limited (RBB) is in the second position with Rs 228.62. Everest Bank Limited (EBL) has the third-highest net worth per share as of Q3 of FY 2078/79 i.e. Rs 225.32. Century Commercial Bank Limited (CCBL) has the least net worth of Rs 124.16 per share.

The industry average net worth stands around Rs 165.34 per share. 10 companies have a net worth more than the industry average.

• P/E ratio:

Nepal Credit & Commerce Bank Limited (NCCB) has the least PE ratio of 12.86 times. It is followed by Machhapuchhre Bank Limited (MBL) with a PE ratio of 13.44 times. 20 commercial banks have a P/E ratio lower than the industry average of 19.91 times.

(The PE ratios are not the recent ratios, rather the ratios for the quarter-end. Please look at the current market price to calculate the recent P/E ratio)

• Non-Performing Loan:

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. Nepal SBI Bank Limited (SBI) reported the lowest NPL of 0.14% in terms of asset quality. SBI is followed by Everest Bank Limited (EBL) with an NPL of 0.26%. 

Rastriya Banijya Bank Limited (RBBL) has reported the highest NPL of 3.07%. Since RBB is not tradeable, Agricultural Development Bank Limited (ADBL) seems to have the highest NPL of 2.32%.

• Capital Adequacy Ratio

In terms of the Capital Adequacy ratio (CAR), Standard Chartered Bank Nepal Limited (SCB) seems to have reported the highest CAR of 15.90%. This is followed by Agricultural Development Bank Limited (ADBL) with a CAR of 15.85%.

Finally, the table below provides a full picture with major indicators of the 27 commercial banks as of the third quarter of FY 2078/79: