Delving into Q3 2080/81: Performance Analysis of Leading Commercial Banks with Key Financial Insights

The release of third-quarter financial reports for the current fiscal year 2080/81 by all 20 commercial banks offers a detailed perspective on their financial performance, in adherence to mandatory disclosure requirements.

This article concentrates on assessing the profitability and business volume indicators of commercial banks during the Q3 period of the fiscal year 2080/81. By conducting a thorough comparative analysis, the objective is to highlight the intricacies of these pivotal metrics. Without unnecessary delay, let's embark on a quantitative exploration of the data.

Net profit:

In the third quarter of the fiscal year 2080/81, Nabil Bank Limited (NABIL) took the lead in net profit, earning Rs. 4.67 Arba. However, it's important to note an 8.76% decline compared to the same period last year.

Global IME Bank Limited (GBIME) secures the second spot with a net profit of Rs. 3.31 Arba, showing a decline of 24.14%. Meanwhile, Nepal Investment Mega Bank (NIMB) comes in third with a net profit of Rs. 3.28 Arba.

On a positive note, Agriculture Development Bank Limited (ADBL) stands out with the highest growth, boasting a 97.21% increase in net profit. In contrast, Nepal Bank Limited (NBL) faces a considerable setback, reporting the highest decline of 92.70% in net profit for the quarter.

Paid-up capital:

The bank with the highest paid-up capital is Global IME Bank Limited (GBIME) with Rs 36.13 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. Meanwhile, Standard Chartered Bank Nepal (SCB) has the lowest paid-up capital of Rs. 9.43 Arba.

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 3.13 Kharba where the industry average of Rs 15.67 Arba.

In terms of reserves and surplus, Rastriya Banijaya Bank Limited (RBBL) has maintained its lead with a reserve and surplus of Rs 37.65 Arba, Nabil Bank Limited (NABIL) has maintained the second position with Rs 29.33 Arba reserve and surplus fund and Nepal Investment Mega Bank Limited (NIMB) is in the third position with a reserve and surplus of Rs 24.77 Arba.

Deposits from Customers:

On average, commercial banks have collected Rs 2.68 Kharba as a deposit. Only 9 banks are above the average deposit collection.

As of the third quarter of FY 2080/81, Global IME Bank Limited (GBIME) stands on top with total deposits worth Rs 4.59 Kharba, and Nabil Bank Limited (NABIL) has the second-highest deposits of Rs 4.40 Kharba. Similarly, the bank is followed by Nepal Investment Mega Bank (NIMB) with a collected deposit of Rs 4.03 Kharba respectively. Standard Chartered Bank Nepal Limited (SBC) has the lowest deposit collection of Rs. 1.10 Kharba.

Loans and advances to Customers:

The top position in loans and advances is occupied by Nabil Bank Limited (NABIL) with credit disbursement worth Rs 3.68 Kharba. Global IME Bank Limited (GBIME) has a loan and advances portfolio of Rs. 3.66 Kharba.

Similarly, on the other end of the rope, Standard Chartered Bank Nepal Limited (SCB) has the lowest loan and advances portfolio of Rs. 79.24 Arba.

The industry average loan disbursed is Rs 2.16 Kharba. 9 commercial banks have a loan portfolio above Rs 2.16 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 Global IME Bank Limited (GBIME) with an income of Rs 13.03 Arba followed by Nabil Bank Limited (NABIL) with an income of Rs 12.55 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 39.86 Arba of amount has been shown in an impairment charge for a loan and other losses.

Global IME Bank Limited (GBIME) has the highest impairment charge for a loan and other losses with Rs 5.26 Arba followed by Laxmi Sunrise Bank Limited (LSL) with a total of Rs. 4 Arba.

In the same vein, Standard Chartered Bank Limited (SCB) has the lowest impairment charge for a loan and other losses of Rs. 25 Crores.

Major indicators:

Earnings per share:

Standard Chartered Bank Nepal Limited (SCB) became the bank to serve investors with the highest annualized EPS of Rs 34.60 per share. Everest Bank Limited (EBL) has the second-highest EPS of Rs 29.55 per share. Nabil Bank Limited (NABIL) is in the third position with an annualized EPS of Rs 23 per share.

On average EPS of 20 commercial banks stands at Rs 15.38. 9 commercial banks provide EPS higher than that of the industry average.

Distributable Profit:

Everest Bank Limited (EBL) has revealed a distributable profit exceeding Rs. 2.75 Arba. In a similar vein, Standard Chartered Bank has reported a distributable profit of Rs. 1.82 Arba.

However, contrasting this positive trend, twelve other commercial banks have reported negative distributable profits.

Net worth per share:

The highest net worth per share among these commercial banks is Rs 340.79 which belongs to Rastriya Banijya Bank Limited (RBBL). Nepal Bank Limited (NBL) is in the second position with Rs 246.42.

Everest Bank Limited (EBL) has the third-highest net worth per share as of Q3 of FY 2080/81 i.e. Rs 226.73. Kumari Bank Limited (KBL) has the lowest net worth of Rs 136.70 per share.

The industry average net worth stands around Rs 186.30 per share. 7 companies have a net worth more than the industry average.

P/E Ratio:

Prime Commercial Bank Limited (PCBL) has the lowest PE ratio of 9.6 times. It is followed by NMB Bank Limited (NMB) with a PE ratio of 10.88 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 the Capital Adequacy ratio (CAR), Standard Chartered Bank Nepal Limited (SCB) seems to have reported the highest CAR of 16.76%. This is followed by Sanima Bank Limited (SANIMA) with a CAR of 13.51%. CAR is the ratio of a bank’s capital concerning 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.

Laxmi Sunrise Bank Limited (LSL) has reported the highest NPL of 5.49%, followed by Himalayan Bank Limited (HBL) with an NPL of 4.96%.

Return on Asset & Return on Equity

Return on Asset (ROA): ROA is a financial metric that measures a company's efficiency in generating profit from its assets. It indicates how effectively a company utilizes its assets to generate earnings. It is calculated by dividing the net income by the average total assets.

Return on Equity (ROE): ROE is a financial ratio that measures the profitability of a company in relation to its shareholders' equity. It shows how much profit a company generates with the money shareholders have invested. ROE is calculated by dividing net income by shareholders' equity.

In the latest quarter, Standard Chartered Bank Nepal Limited (SCB) emerged as the frontrunner among commercial banks, boasting an impressive Return on Asset (ROA) of 2.35% and Return on Equity (ROE) of 16.57%. Following closely behind, Everest Bank Limited (EBL) exhibited a strong performance with an ROA at 1.25% and an ROE of 13.04%.

Prime Commercial Bank Limited (PCBL) also showcased notable results, securing an ROA of 1.48% and an ROE of 12.80%. Similarly, Nabil Bank Limited (NABIL) demonstrated with ROA standing of 1.17% and an ROE of 11.04%.

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 7.75%, whereas Standard Chartered Bank Limited (SCB) has the lowest cost of funds at 4.42%.

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 International Limited (CZBIL) has reported the highest CD ratio of 86.86%, whereas Rastriya Banijya Bank Limited (RBBL) has the lowest CD ratio of 70.53%.

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. Citizens Bank International Limited (CZBIL) reports the highest base rate of 11.14%, and Standard Chartered Bank Nepal Limited (SCB) has the lowest base rate of 6.53%.

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, Laxmi Sunrise Bank Limited (LSL) has the highest interest spread of 4.41%, whereas Rastriya Banijya Bank Limited (RBBL) has the lowest interest spread of 3.82% for the third quarter of FY 2080/81.

Finally, the table below provides a full picture of the major indicators of 20 commercial banks as of the third quarter of FY 2080-2081.