Comparative Analysis: Unraveling Financial Indicators Among Commercial Banks

The fourth-quarter reports for the ongoing fiscal year 2079/80 have been unveiled by all 20 commercial banks, offering a comprehensive view of their financial performance, in line with the mandatory financial provision to make public the fourth-quarter report by Shrawan 21, 2080.

Setting aside speculative notions, this article centers its attention on the evaluation of commercial banks' profitability and business volume indicators for the Q4 period of the fiscal year 2079/80. Through meticulous comparative analysis, we aim to shed light on the nuances of these crucial metrics. Without further delay, let's immerse ourselves in a quantitative exploration of the data.

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. Whereas, Laxmi Bank and Sunrise Bank completed their merger, forming Laxmi Sunrise, on 29th Ashadh 2080.

Net profit:

As per the net profit of the fourth quarter of FY 2079/80, Nabil Bank Limited (NABIL) is in the lead with a net profit of Rs. 7.53 Arba with a growth of 51.51% as compared to the same quarter of last fiscal year. Similarly, Global IME Bank Limited (GBIME) also reported a net profit of Rs. 7.25 Arba with a growth of 39.16%, hence it stands in the second position to accumulate higher profits for the fourth quarter. In the third position, Rastriya Banijya Bank (RBBL) has a net profit of Rs 4.92 Arba. Also,  Standard Chartered Bank Limited (SCB) reported the highest growth in net profit by 55.51% in this quarter. 

On the other hand, Prime Commercial Bank Limited (PCBL) reported a net profit of Rs. 2.26 Arba which has dropped by 38.59%. 

*Note that Out of 20 commercial banks, the net profit of the newly merged banks - NIMB and LSBL is not compared with the fourth quarter of the relevant quarter. 

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 3.07 Kharba where the industry average of Rs 15.36 Arba. 

In terms of reserves and surplus, Rastriya Banijaya Bank Limited (RBBL) has maintained its lead with a reserve and surplus of Rs 38.40 Arba, Nabil Bank Limited (NABIL) has maintained the second position with Rs 31.03 Arba reserve and surplus fund and Nepal Investment Mega Bank Limited (NIMB) is in the third position with a reserve and surplus of Rs 24.04 Arba.

Deposits from Customers:

On average, commercial banks have collected Rs 2.50 Kharba as a deposit. Only 9 banks are above the average deposit collection.

As of the fourth quarter of FY 2079/80,  Global IME Bank Limited (GBIME) stands on top with total deposits worth Rs 4.26 Kharba, and Nabil Bank Limited (NABIL) has the second-highest deposits of Rs 3.96 Kharba. Similarly, the bank is followed by Nepal Investment Mega Bank (NIMB) with a collected deposit of Rs 3.54 Kharba respectively. Standard Chartered Bank Nepal Limited (SBL) has the lowest deposit collection of Rs. 1.17 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 3.56 Kharba. Nabil Bank Limited (NABIL) has a loan and advances portfolio of Rs. 3.32 Kharba. 

Similarly, on the other end of the rope, Standard Chartered Bank Nepal Limited (SCB) has the lowest loan and advances portfolio of Rs. 77.86 Arba.

The industry average loan disbursed is Rs 2.06 Kharba. 9 commercial banks have a loan portfolio above Rs 2.06 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 17.98 Arba followed by Global IME Bank Limited (GBIME) with an income of Rs 17.12 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 34.11 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 5.47 Arba followed by Nabil Bank Limited (NABIL) with a total of Rs. 3.89 Arba. In the same vein, NIC Asia Bank Limited (NICA) has the lowest of impairment charge for a loan and other losses of Rs. 39 Crores.

Major indicators:

Earnings per share:

NIC Asia Bank Limited (NICA) becomes the bank to serve investors with the highest annualized EPS of Rs 40.22 per share. Standard Chartered Bank Nepal Limited (SCB) has the second-highest EPS of Rs 37.39 per share. Everest Bank Limited (EBL) is in the third position with annualized EPS of Rs 31.72 per share.

Conversely, Kumari Bank Limited (ADBL) stays at the bottom with an Earning of Rs. 7.46 per share.

The average EPS of 20 commercial banks stands at Rs 21. Only 9 commercial banks provide EPS higher than that of the industry average.

Distributable Profit Per Share:

Everest Bank Limited (EBL) and NIC Asia Bank Limited (NICA) have unveiled their distributable profit per share to be over Rs. 30. For the former, it is Rs. 40.05 which is the highest among all commercial banks, while for the latter it stands at Rs. 32.

Conversely, only two commercial banks, Kumari Bank Limited (KBL) and Himalayan Bank Limited (HBL), have reported negative distributable profits per share of Rs. -3.23 and Rs. -3.28, respectively.

Net worth per share:

The highest net worth per share among these commercial banks is Rs 345.58 which belongs to Rastriya Banijya Bank Limited (RBBL). NIC Asia Bank Limited (NICA) is in the second position with Rs 256.41.

Nepal Bank Limited (NBL) has the third-highest net worth per share as of Q4 of FY 2079/80 i.e. Rs 248.94. Kumari Bank Limited (KBL) has the least net worth of Rs 140.47 per share.

The industry average net worth stands around Rs 191.01 per share. 7 companies have a net worth more than the industry average.

P/E Ratio:

Global IME Bank Limited (GBIME)  has the least PE ratio of 9.17 times. It is followed by Prime Commercial Bank Limited (PCBL) with a PE ratio of 10.72 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)

*Note that Out of 20 commercial banks, the PE ratio of RBBL and LSBL isn't available as RBBL is not a listed company and LSBL is a newly merged company that is yet to be listed in NEPSE.

Capital Adequacy Ratio (CAR):

In terms of the Capital Adequacy ratio (CAR), Standard Chartered Bank Nepal Limited (SCB) seems to have reported the highest CAR of 17.12%. This is followed by Agricultural Development Bank Limited (ADBL) with a CAR of 15.05%. 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 0.79% in terms of asset quality. 

Kumari Bank Limited (KBL) has reported the highest NPL of 4.77%, followed by Himalayan  Bank Limited (HBL) with an NPL of 4.57%

Others:

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

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 at 8.67%, whereas Rastriya Banijya Bank Limited (RBBL) has the lowest cost of funds at 6.11%.

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, Prime Commercial Bank Limited (PCBL) has reported the highest CD ratio of 88.72%, whereas Nepal Bank Limited (NBL) has the lowest CD ratio of 74.84%.

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. Kumari Bank Limited (KBL) reports the highest base rate of 10.90%, and Rastriya Banijya Bank Limited (RBBL) has the lowest base rate of 7.79%.

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, NABIL and NIMB have the highest interest spread of 4.99% each, whereas Agriculture Development Bank Limited (ADBL) has the lowest interest spread of 3.94% for the fourth quarter of FY 2079/80.

Aside from that, commercial banks were to stick to a 4% spread rate till the end of fiscal year (FY) 2079–80, under NRB guidelines. However, the spread rate has only been held steady at 4% by 12 banks, though. The companies who went for merger and acquisition has a provision to maintain extra 1% spread i.e. upto 5%. 

Finally, the table below shows provides a full picture of the major indicators of 20 commercial banks as of the fourth quarter of FY 2079-2080.