How Exactly Did Commercial Banks Perform in the Second Quarter? A Quick Comparison of the Most Important Metrics

Every disaster can be an opportunity. Every difficult time brings out new innovation. The coronavirus pandemic has hit every sector very hard. The banking sector is no different. Even though the banks were slow to grab the opportunity in this pandemic, they increased the online services, increased third party collaboration and integration with startups. The financial performance of the bank is a reflection of how the year has gone so far. Let us find out how Nepalese commercial banks have performed in the second quarter after the pandemic.  

• Profit for the period:

As per the net profit of second quarter of FY 2077/78, Global IME Bank Limited (GBIME)  is in the lead with a net profit of Rs 2.31 arba. Similarly, NIC Asia Bank Limited (NICA) has the second-highest net profit of Rs 2.06 arba in the same quarter. In the third position, Nabil Bank Limited (NABIL) has a net profit of Rs 2.01 arba. The bank with the least net profit is Civil Bank Limited (CBL) whose net profit amounts to Rs 20 crore.

The industry average net profit of the 27 commercial banks is Rs 1.15 arba.

All commercial banks except 11 have reduced net profit this year compared to the same quarter of last year. 

The total net profit for the year is Rs 30.95 arba whereas that for the last year of the same quarter was Rs 32.09 arba. The overall industry net profit has decreased by 3.55%.

Distributable profit:

As per the distributable profit of a second quarter of 2077/78, Nabil Bank Limited (NABIL)   is in the lead with a profit of Rs 1.84 arba. Similarly,  Rastriya Banijya Bank (RBB) has the second-highest net profit of Rs 1.80 arba in the same quarter. In the third position, NMB Bank Limited (NMB) has a net profit of Rs. 1.50  arba.

Siddhartha Bank Limited (SBL) has reported negative distributable profit of Rs. 13.69 crores.

Impairment charge/(reversal) for a loan and other losses:

Banks have set aside a certain amount in loan loss provision and have delayed loan repayment of several borrowers. A total of Rs 2.07 arba of amount has been shown in an impairment charge for a loan and other losses. Siddhartha Bank Limited (SBL) has the highest impairment charge for a loan and other losses with Rs 70.60 crores followed by Nepal Investment Bank Limited (NIB) and Global IME Bank Limited (GBIME) with Rs 36.76 crores and Rs 29.78 crores respectively.

(*number presented above is in crore)

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 are Global IME Bank Limited (GBIME) with Rs 21.63 arba capital and Agricultural Development Bank Limited (ADBL) with Rs 16.42 arba paid-up capital. 

* ADBL capital includes 5.43 Arba irredeemable noncumulative preference shares

* 6 Banks (NMB, NCCB, NBB, NIB, SBI, SBL) dividend (bonus shares) for FY 2076/77 is not adjusted in Paid-up Capital.

• Reserve and surplus:

With an industry average of Rs 7.59 arba, 10 banks stand above the average benchmark of Rs 7.59 arba in their reserve fund. The total reserve and surplus of all commercial banks is at Rs 2.05 kharba.

In terms of reserves and surplus, Nepal Bank Limited (NBL) has maintained its lead with a reserve and surplus of Rs 19.34 arba. Rastriya Banijya Bank (RBB) has maintained the second position with Rs 16.45 arba reserve and surplus fund. Nabil Bank Limited (NABIL) is in the third position with a reserve and surplus of Rs 15.37 arba. 

• Deposits from Customers:

On average, commercial banks have collected Rs 1.35 kharba as a deposit. Only 11 banks are above the average deposit collection.

As of the second quarter of FY 2077/78, NIC Asia Bank Limited (NICA) stands on top with total deposits worth Rs 2.68 kharba, Rastriya Banijya Bank (RBB) has the second-highest deposits of Rs 2.41 kharba. Similarly, the bank is followed by Global IME Bank Limited (GBIME) with the collected deposit of Rs 2.34 kharba respectively. Nepal Bangladesh Bank Limited (NBB) has the lowest deposit collection of Rs. 70.08 arba only.

Banks had to decrease their interest rates on deposits. Coronavirus pandemic has hit a lot of businesses that have taken a loan from several banks. Commercial banks needed to decrease the interest rates on loans to lessen the impact of the pandemic on several businesses and corporate houses so, depositors had to compromise with a lower interest rate on their deposits during the pandemic.

• Loans and advances to Customers:

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. As shown in the figure, the top position in loans and advances is occupied by NIC Asia Bank Limited (NICA)  with credit disbursement worth Rs 2.21 kharba. Global IME Bank Limited (GBIME) has a loan and advances portfolio of Rs. 2.03 kharba. Nabil Bank Limited (NABIL) has a loan portfolio of Rs 1.70 kharba. Similarly on the other end of the rope, stands Standard Chartered Bank Nepal Limited (SCB) with the lowest loan and advances portfolio of Rs. 53.12 arba.

The industry average loan disbursed is Rs 1.14 kharba. 12 commercial banks have a loan portfolio above Rs 1.14 kharba.

The loan disbursement among banks will probably see a new modality in the upcoming quarter. For instance, new loans for sectors that might be affected by the second wave of coronavirus pandemic might not be entertained by the banks. Moreover, banks will have to focus on agricultural loans in order to support the government’s initiative to commercialize agriculture sectors. New startups will have to rethink their business model before presenting an application for a loan in banks. Banks might support a lot of hotels, restaurants, consultancies, and public transportation by rescheduling their loan payment.

• 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 Global IME Bank Limited (GBIME) with an income of Rs 4.77 arba followed by NIC Asia Bank Limited (NICA) with an income of Rs 3.94 arba and Rastriya Banijya Bank (RBB)  with an income of Rs 3.91 arba.

The industry average net interest income stands at Rs 2.29 arba. 13 out of 27 commercial banks are above the industry average in terms of net interest income.

• Total comprehensive income:

Nabil Bank Limited (NABIL) has the highest comprehensive income of Rs 3.18 arba.  Nepal Bank Limited (NBL) has the second-highest comprehensive income of Rs 2.46 arba. Rastriya Banijya Bank  (RBB) has the third-highest comprehensive income of Rs 2.43 arba.

Major indicators:

• Earnings per share:

Rastra Banijaya Bank (RBB) becomes the bank to serve investors with the highest annualized EPS of Rs 38.84 per share. NIC Asia Bank Limited (NICA) has the second-highest EPS of Rs 35.64 per share. Nabil Bank Limited (NABIL) is in the third position with annualized EPS of Rs 29.91 per share. Civil Bank Limited (CBL) stays at the bottom with an earning of Rs. 5.07 per share.

* 6 Banks (NMB, NCCB, NBB, NIB, SBI, SBL) dividend (bonus shares) for FY 2076/77 is not adjusted in Paid-up Capital. Hence, EPS will be changed once bonus shares are adjusted.

The average EPS of 27 commercial banks stands at Rs 19.87. 14 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 282.82 which belongs to Rastriya Banijya Bank (RBB). Nepal Bank Limited (NBL) is in the second position with Rs 253.18. Everest Bank Limited (EBL) has the third-highest net worth per share as of Q2 of FY 2077/78 i.e. Rs 218.40. Century Commercial Bank Limited (CCBL) has the least net worth of Rs 118.87 per share.

The industry average net worth stands around Rs 166.91 per share. 9 companies have net worth more than the industry average.

• P/E ratio:

Nepal Bangladesh Bank Limited (NBB) has the least PE ratio of 12.73 times. It is followed by Sunrise Bank Limited (SRBL) with PE ratio of 13.49 times. 18 commercial banks have a P/E ratio lower than the industry average of 22.88 times.

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

* 6 Banks (NMB, NCCB, NBB, NIB, SBI, SBL) dividend (bonus shares) for FY 2076/77 is not adjusted in Paid-up Capital. Hence, PE will be changed once bonus shares are adjusted.

• Non-Performing Loan:

In terms of asset quality, Everest Bank Limited (EBL) and Nepal SBI Bank Limited (SBI) reported the lowest NPL of 0.19%. these two companies are followed by NIC Asia Bank Limited (NICA) with NPL of 0.43%. Rastriya Banijya Bank (RBB) has reported the highest NPL of 4.23%. Since RBB is not tradeable, Agricultural Development Bank Limited (ADBL) seems to have the highest NPL of 3.14%. 

• Capital Adequacy Ratio

In terms of Capital Adequacy ratio (CAR), Standard Chartered Bank Nepal Limited (SCB) seems to have reported the highest CAR of 19.36%. This is followed by Agricultural Development Bank Limited (ADBL) with a CAR of 18.73%.

When we look at the indicators of bank, the overall picture doesn't seem so bad after the pandemic. Since central bank applied the expansionary monetary policy to limit the effect of pandemic on the whole economy, banks had to provide loans at cheaper rate which could be one of the reason for lower interest income. However, the banks have disbursed huge amount of loans which indicates that the investments in the economy is increasing. We could also see that most of the banks have collected the provision created in the prior quarters which is a good sign because it indicates that the bank overestimated the provision.

Finally, the table below provides a full picture with major indicators of the 27 commercial banks as of the second quarter of FY 207/78: