Unveiling Q4 2080/81: A Comprehensive Analysis of Leading Commercial Banks and Key Financial Insights

The release of the fourth-quarter financial reports for the fiscal year 2080/81 by all 20 commercial banks offers an in-depth perspective on their financial performance, in adherence to mandatory disclosure requirements. This analysis focuses on the profitability and business volume indicators of commercial banks during this period, highlighting the nuances of these pivotal metrics. Let us delve into a comprehensive examination of the data.

Net profit:

In the fourth quarter of FY 2080/81, Nabil Bank Limited (NABIL) led the net profit rankings, earning Rs. 7.06 Arba, reflecting a 10.23% increase compared to the same period last year.

Global IME Bank Limited (GBIME) secured the second position with a net profit of Rs. 6.02 Arba, although this marked a 10.13% decline from the previous year. Nepal Investment Mega Bank (NIMB) followed in third place with a net profit of Rs. 5.2 Arba.

Prabhu Bank Limited (PRVU) stood out with the highest growth, achieving a staggering 1499.04% increase in net profit. In contrast, NIC Asia Bank Limited (NICA) experienced the most significant decline, with a 68.91% drop 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 collective reserve and surplus of all commercial banks stood at Rs. 3.28 Kharba, with the industry average being Rs. 16.44 Arba. Rastriya Banijaya Bank Limited (RBBL) led with a reserve and surplus of Rs. 37.36 Arba, followed by Nabil Bank Limited (NABIL) at Rs. 32.51 Arba, and Nepal Investment Mega Bank Limited (NIMB) at Rs. 27.13 Arba.

Deposits from Customers:

Commercial banks collectively amassed Rs. 2.83 Kharba in customer deposits on average. Nine banks surpassed this average. Global IME Bank Limited (GBIME) topped the list with Rs. 4.87 Kharba in deposits, followed by Nabil Bank Limited (NABIL) with Rs. 4.62 Kharba, and Nepal Investment Mega Bank (NIMB) with Rs. 4.29 Kharba. Standard Chartered Bank Nepal Limited (SCB) had the lowest deposit collection at Rs. 1.12 Kharba.

Loans and advances to Customers:

Nabil Bank Limited (NABIL) led in loans and advances, disbursing Rs. 3.73 Kharba. Global IME Bank Limited (GBIME) followed closely with Rs. 3.69 Kharba. Standard Chartered Bank Nepal Limited (SCB) had the smallest loan and advances portfolio at Rs. 81.14 Arba. The industry average loan disbursement was Rs. 2.17 Kharba, with nine commercial banks exceeding this average.

Net Interest Income:

Net interest income, the net earnings from core banking activities, saw Global IME Bank Limited (GBIME) at the top with Rs. 16.64 Arba, followed by Nabil Bank Limited (NABIL) with Rs. 16.21 Arba.

Provisions for the period (Impairment/Reversal):

Banks allocated Rs. 36.96 Arba for loan loss provisions and delayed loan repayments. Global IME Bank Limited (GBIME) had the highest impairment charge at Rs. 3.74 Arba, followed by Kumari Bank Limited (KBL) at Rs. 3.56 Arba.

Major indicators:

Earnings per share:

Standard Chartered Bank Nepal Limited (SCB) provided the highest annualized EPS at Rs. 35.09 per share. Everest Bank Limited (EBL) followed with Rs. 31.45 per share, and Nabil Bank Limited (NABIL) came in third at Rs. 26.09 per share. Kumari Bank Limited (KBL) had the lowest EPS at Rs. 8.80 per share. The industry average EPS stood at Rs. 17.80, with nine banks exceeding this average.

Distributable Profit:

Nabil Bank Limited (NABIL) reported a distributable profit exceeding Rs. 3.86 Arba, while Everest Bank reported Rs. 3.51 Arba. Conversely, four commercial banks reported negative distributable profits.

Net worth per share:

Rastriya Banijya Bank Limited (RBBL) had the highest net worth per share at Rs. 338.94, followed by Nepal Bank Limited (NBL) at Rs. 257.57, and Everest Bank Limited (EBL) at Rs. 236.06. Kumari Bank Limited (KBL) had the lowest net worth at Rs. 141.47 per share. The industry average net worth was Rs. 192.91 per share, with eight banks exceeding this average.

P/E Ratio:

Prabhu Bank Limited (PRVU) had the lowest PE ratio at 8.6 times, followed by Prime Commercial Bank Limited (PCBL) at 11.40 times. These PE ratios reflect the quarter-end values, and recent market prices should be considered for current ratios.

Capital Adequacy Ratio (CAR):

Standard Chartered Bank Nepal Limited (SCB) reported the highest CAR at 17.16%, followed by Machhapuchchhre Bank Limited (MBL) at 13.83%. The CAR measures a bank’s capital in relation to its risk-weighted assets and current liabilities.

Non-Performing Loan:

Everest Bank Limited (EBL) reported the lowest NPL at 0.71%. Kumari Bank Limited (KBL) and Nepal Investment Mega Bank Limited (NIMB) had the highest NPL at 4.95%.

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 fourth 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 16.09%. Following closely behind, Prime Commercial Bank Limited (PCBL) exhibited a strong performance with an ROA of 1.40%, and Everest Bank Limited (EBL) with an ROE of 13.32%.

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, NMB Bank Limited (NMB) has the highest Cost of Funds at 7.31%, whereas Standard Chartered Bank Limited (SCB) has the lowest cost of funds at 3.84%.

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 86.20%, whereas Rastriya Banijya Bank Limited (RBBL) has the lowest CD ratio of 60.82%.

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. NIC Asia Bank Limited (NICA) reports the highest base rate of 9.19%, and Standard Chartered Bank Nepal Limited (SCB) has the lowest base rate of 6.60%.

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, the commercial banks have net interest rate spread hovering around 3.95%- 4%

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