Comparative Analysis of Third Quarter Reports of 21 Commercial Banks; Industry Accumulates An Average Profit of 2.32 Arba In Q3

All 21 commercial banks have unveiled their third quarter report of the current fiscal year 2079/80.

Despite many speculations in the market as to how the bank's profitability will play out in the quarters to come because of the Lower Credit Expansion, Liquidity Shortage, Higher Treasury Bill rates, and inflation rates, Banks have reported slight improved profitability indicators yet in this quarter. 

Keeping all the speculation aside, in this article, we will be focusing mainly on the profitability and business volume indicators of commercial banks as of Q3 of Fiscal year 2079/80 and doing a comparative analysis. So, let's dive into the numbers.

Note: Out of the previous 22 commercial banks in Nepal,  Himalayan Bank and Civil Bank signed MoU where Civil Bank got acquired by Himalayan Bank at a swap ratio of 100:80.28. Whereas, Laxmi Bank and Sunrise Bank signed MoU for merger recently. 

Net profit:

As per the net profit of the third quarter of FY 2079/80, Nabil Bank Limited (NABIL) is in the lead with a net profit of Rs.5.12 Arba with a growth of 52.63% as compared to the same quarter of last fiscal year. Similarly, Global IME Bank Limited (GBIME) also reported net profit of Rs. 4.36 Arba with a growth of 16.96%, hence it stands in the second position to accumulate higher profits for the third quarter. In the third position, NIC Asia Bank Limited (NICA) has a net profit of Rs 4.01 Arba. Also, Everest Bank Limited (EBL) reported highest growth in net profit by 62.63% in this quarter. 

Out of 21 commercial banks, the net profit of the newly merged banks - NIMB is not compared with the third quarter of the relevant quarter. 

On the other hand, Agricultural Development Bank Limited (ADBL) reported net profit of Rs. 1.04 Arba which has dropped by 45.36%. 

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 35.77 Arba capital,  Nepal Investment Mega Bank Limited (NIMB) with Rs. 34.13 Arba and Nabil Bank Limited (NABIL) with Rs. 27.06 Arba paid-up capital. 

Note: ADBL Capital includes Rs 5.43 Arba irredeemable non-cumulative preference shares.

Reserve and surplus:

The total reserve and surplus of all commercial banks are at Rs 2.64 Kharba where the industry average of Rs 12.60 Arba. 

In terms of reserves and surplus, Nabil Bank Limited (NABIL) has maintained its lead with a reserve and surplus of Rs 27.35 Arba, Nepal Investment Mega Bank Limited (NIMB) has maintained the second position with Rs 22.82 Arba reserve and surplus fund and  Nepal Bank Limited (NBL) is in the third position with a reserve and surplus of Rs 20.86 Arba

Deposits from Customers:

On an average, commercial banks have collected Rs 2.22 Kharba as a deposit. Only 8 banks are above the average deposit collection.

As of the third quarter of FY 2079/80,  Global IME Bank Limited (GBIME) stands on top with total deposits worth Rs 4.09 Kharba, Nabil Bank Limited (NABIL) has the second-highest deposits of Rs 3.63 Kharba. Similarly, the bank is followed by Nepal Investment Mega Bank (NIMB) with the collected deposit of Rs 3.50 kharba respectively. Standard Chartered Bank Nepal Limited (SBL) has the lowest deposit collection of Rs. 1.07 Kharba.

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 3.62 kharba. Nabil Bank Limited (NABIL) has a loan and advances portfolio of Rs. 3.23 kharba. 

Similarly on the other end of the rope, Standard Chartered Bank Nepal Limited (SCB) has the lowest loan and advances portfolio of Rs. 80.07 Arba.

The industry average loan disbursed is Rs 1.97 Kharba. 8 commercial banks have a loan portfolio above Rs 1.86 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 Nabil Bank Limited (NABIL) with an income of Rs 12.10 Arba followed by Global IME Bank Limited (GBIME) with an income of Rs 11.79 Arba.

Provisions for the period (Impairment/Reversal):

Banks have set aside a certain amount in loan loss provision and have delayed the loan repayment of several borrowers. A total of Rs 31.32 Arba of amount has been shown in an impairment charge for a loan and other losses. 

Kumari Bank Limited (KBL) has the highest impairment charge for a loan and other losses with Rs 3.96 Arba followed by Nabil Bank Limited (NABIL) with a total of Rs. 3.33 Arba. In the same vein, NIC Asia Bank Limited (NICA) has the lowest of impairment charge for a loan and other losses of Rs. 24 Crores.

* - Reversal and + Provision

Major indicators:

Earnings per share:

NIC Asia Bank Limited (NICA) becomes the bank to serve investors with the highest annualized EPS of Rs 46.29 per share. Standard Chartered Bank Nepal Limited (SCB) has the second-highest EPS of Rs 36.91 per share. Everest Bank Limited (EBL) is in the third position with annualized EPS of Rs 30.74 per share. Agricultural Development Bank Limited (ADBL) stays at the bottom with a Earning of Rs. 7.90 per share.

The average EPS of 21 commercial banks stands at Rs 19.27. Only 7 commercial banks 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 248.88 which belongs to NIC Asia Bank Limited (NICA). Agricultural Development Bank Limited (ADBL)  is in the second position with Rs 242.68.

Nepal Bank Limited (NBL) has the third-highest net worth per share as of Q3 of FY 2079/80 i.e. Rs 241.97. Kumari Bank Limited (KBL) has the least net worth of Rs 140.29 per share.

The industry average net worth stands around Rs 179.53 per share. 8 companies have a net worth more than the industry average.

P/E Ratio:

Global IME Bank Limited (GBIME)  has the least PE ratio of 11.63 times. It is followed by Prime Commercial Bank Limited (PCBL) with a PE ratio of 11.96 times. 

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

Capital Adequacy Ratio (CAR):

In terms of Capital Adequacy ratio (CAR),Standard Chartered Bank Nepal Limited (SCB) seems to have reported the highest CAR of 16.63%. This is followed by Agricultural Development Bank Limited (ADBL) with a CAR of 14.83%. CAR is the ratio of a bank’s capital in relation to its risk weighted assets and current liabilities.

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. Everest Bank Limited (EBL) reported the lowest NPL of 0.70% in terms of asset quality. 

Himalayan Bank Limited (HBL) has reported the highest NPL of 4.56%, followed by Agricultural Development Bank Limited (ADBL) with an NPL of 4.35%

Others:

Cost of Funds: The term cost of funds refers to how much banks and financial institutions spend in order to acquire money to lend to their customers. The lower the cost of funds, the better because it ultimately reduces the cost of banks. As per reports, Prime Commercial Bank Limited (PCBL) has the highest Cost of Funds of 9.09%, whereas Rastriya Banijya Bank Limited (RBBL) the lowest cost of funds of 6.42%.

CD Ratio: The CD ratio refers to the credit-deposit ratio in banking parlance. It tells how much of the money banks have raised in the form of deposits has been deployed as loans. Likewise, Citizens Bank Limited (CZBIL) has reported highest CD ratio of 90.69%, whereas Nepal Bank Limited (NBL) has the lowest CD ratio of 77.74%.

Base Rate and Interest Spread:

Base rate is defined as the minimum interest rate set by the NRB below which Commercial banks are not permitted to lend to their customers. Sunrise Bank Limited (SRBL) reports highest base rate of 11.34%, and Rastriya Banijya Bank Limited (RBBL) has lowest base rate of 8.47%.

Similarly, the net interest rate spread is the difference between the interest rate a bank pays to depositors and the interest rate it receives from loans to consumers. Here, Global IME Bank Limited (GBIME) has the highest interest spread of 5.2%, whereas Citizens Bank Limited (CZBIL) has the lowest interest spread of 3.71% for the third quarter of FY 2079/80.

Also, As per NRB instructions, commercial banks need to maintain spread rate to 4 from existing 4.4%  by the end of the current FY 2079/80.

Cost of Funds, CD Ratio, Base Rates and Interest Spread: 

Finally, the table below shows provides a full picture of major indicators of 21 commercial banks as of the third quarter of FY 2079-2080.