Analysis on Commercial Banks Q3 A Comparative Study of Commercial Banks www.ShareSansar.com About Us:
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A Comparative Study of Commercial Banks www.ShareSansar.com Majors Highlights of Banking Industry: Figure In 000
3rd Quarter 2068/69 year 3rd Quarter 2067/68 year % Change Total Net Profit 9,072,115.55 10,789,879.7 -15.92% Total Operating Profit 9,227,824.32 12,701,799.52 -27.35% Total Net Interest Income 21,920,490.27 22,497,587.72 -2.57% Total Deposits 783,477,674.6 647,759,336.2 20.95% Total Loans and Advances 571,956,039.5 516,893,737.9 10.65% Total Investment 179,304,438.2 131,357,870.5 36.50% Total Provision 6,221,737.38 4,112,686.094 51.28% Average Non Performing Loan 2.88% 2.48% 16.52% Average Cost of Fund 8.24% 8.14% 1.24% Average Net Interest Spread 3.45% 3.24% 6.50% Annualized Average Earning Per Share (EPS) 21.60 31.95 -32.38% Annualized Average Return on Equity (ROE) 8.61% 10.87% -20.73% Annualized Average Return on Asset (ROA) 1.03% 1.55% -33.73% Annualized Average Price-to- Earning (P/E ratio) (Times) 21.95 15.44 42.10%
A Comparative Study of Commercial Banks www.ShareSansar.com Net Profit
Net profit of commercial banks at the end of third quarter has gone down by 15.92% compared to the same period of the previous year. The combined net profit of commercial banks was NPR 9.07 billion compared to NPR 10.78 billion in the previous year. According to the unaudited third quarter financial results, Agricultural Development Bank Limited has the highest profit of NPR 1145.94 million, up from 1012.09 million in the previous quarter.
Bank ADBNL NABIL SCB NIBL EBL RBB HBL NBBL BOK NSBI NIC Net Profit (in '000') 1,145,943 1,135,194 850,048 801,005 786,414 661,939 570,228 480,020 400,464 319,006 263,554 Market Share (%) 12.63% 12.51% 9.37% 8.83% 8.67% 7.30% 6.29% 5.29% 4.41% 3.52% 2.91%
Bank LAXMI Nepal Bank GLOBAL Prime Bank SBL Grand Bank of Asia NCCB LUMBINI Citizen Bank KBL Net Profit (in '000') 250,065 188,586 172,292 171,117.6 148,251 141,153 117,350 115,297 107,899 100,438 85,963 Market Share (%) 2.76% 2.08% 1.90% 1.89% 1.63% 1.56% 1.29% 1.27% 1.19% 1.11% 0.95%
Bank Sunrise Bank Sanima Bank NMB Janata Mega Civil Bank MBL C&T Bank Century Bank KIST Net Profit (in '000') 79,451 78,337 69,202 43,783 40,023 6,742 6,688 3,945 -36,206 -153,739 Market Share (%) 0.88% 0.86% 0.76% 0.48% 0.44% 0.07% 0.07% 0.04% -0.40% -1.69%
Table 1: Net Profit of Commercial Banks (Figure in 000)
A Comparative Study of Commercial Banks www.ShareSansar.com
During the review period, Mega Bank Limited has highest net profit growth rate i.e. 189.02 percent compared to corresponding quarter of previous year whereas Century Commercial Bank Limited shows a dismal performance, its profit decreases by 339.37 percent.
Bank Mega NBBL Janata Grand NABIL Civil Bank ADBNL EBL GLOBAL Sunrise Bank SCB Growth Rate (%) 189.02% 144.09% 83.48% 21.11% 19.64% 18.82% 13.22% 12.60% 9.22% 2.63% 1.62%
Bank NSBI NCCB LAXMI BOK HBL NIBL NIC Prime Bank MBL SBL Growth Rate (%) 0.65% -8.48% -10.80% -11.26% -14.34% -16.53% -25.95% -34.51% -35.56% -38.10%
Bank Bank of Asia Citizen Bank RBB KBL NMB LUMBINI Nepal Bank C&T Bank KIST Century Bank Growth Rate (%) -38.35% -42.38% -47.74% -52.62% -60.86% -62.29% -68.40% -77.52% -218.18% -339.77%
Table 2: Change in Net Profit of Commercial Bank Market Share (%) ADBNL NABIL SCB NIBL EBL RBB HBL NBBL BOK NSBI NIC LAXMI Nepal Bank GLOBAL A Comparative Study of Commercial Banks www.ShareSansar.com
Operating Profit: During the review period, operating profit of the commercial banks decreases by 27.35% at Rs.9.22 billion as compared to corresponding quarter of previous financial year. NABIL Bank Limited has able to earn highest operating profit among all the banks during the review period. Bank NABIL SCB EBL HBL NIBL BOK NSBI NIC LAXMI GLOBAL Prime Bank Operating Profit (in'000') 1,626,093 1,233,691 1,231,809 887,063 850,462 611,262 443,407 412,095 384,912 267,618 261,293.3 Market Share 17.62% 13.37% 13.35% 9.61% 9.22% 6.62% 4.81% 4.47% 4.17% 2.90% 2.83%
Bank SBL Nepal Bank Grand Bank of Asia LUMBINI KBL Sanima Bank NCCB NMB Citizen Bank Janata Operating Profit (in'000') 232,413 226,565 186,809 182,974 148,068 131,601 123,217 96,786 85,323 69,683 68,722 Market Share 2.52% 2.46% 2.02% 1.98% 1.60% 1.43% 1.34% 1.05% 0.92% 0.76% 0.74%
-400.00% -300.00% -200.00% -100.00% 0.00% 100.00% 200.00% 300.00% Growth Rate (%) A Comparative Study of Commercial Banks www.ShareSansar.com Bank Mega NBBL RBB Civil Bank C&T Bank Century Bank MBL Sunrise Bank KIST ADBNL Operating Profit (in'000') 62,323 28,683 17,878 10,594 6,198 -36,799 -53,682 -60,691 -154,317 -231,012 Market Share 0.68% 0.31% 0.19% 0.11% 0.07% -0.40% -0.58% -0.66% -1.67% -2.50% Table 3: Operating Profit of Commercial Banks (Figure in 000) Mega Bank Limited has a highest growth rate of 186.52% whereas Century Commercial Bank Limited suffers a significant decline in operating profit. Bank Mega Civil Bank Janata EBL NABIL GLOBAL Grand SCB HBL NSBI BOK LAXMI Growth Rate (%) 186.52% 155.13% 82.83% 12.60% 11.85% 7.90% 2.00% -2.81% -3.41% -3.47% -8.74% -11.93%
Bank NIC LUMBINI MBL ADBNL Prime Bank SBL Bank of Asia NIBL NCCB KBL Growth Rate (%) -24.04% -33.28% -33.71% -34.57% -35.80% -38.01% -38.83% -41.73% -42.95% -49.51%
Bank NBBL NMB Nepal Bank Citizen Bank C&T Bank RBB Sunrise Bank KIST Century Bank Growth Rate (%) -62.66% -66.61% -69.80% -73.96% -77.52% -98.07% -150.07% -176.58% -37,269.69% Table 4: Change in Operating Profit of Commercial Bank
Net Interest Income (NII): Net interest income (NII) is the difference between revenues generated by interest-bearing assets and the cost of servicing (interest-burdened) liabilities. The major source of earning of commercial banks is net interest income. Due to higher lending rate and subsequent increment on the yield on asset, total Net Interest Income of the banking industry has decline by meager 2.57% during the review period. This shows that despite of higher cost of funds, commercial banks have been able to maintain NII and didnt let to decline as much as of net profit. During the review period, Century Commercial Bank Limited has able to increase highest net interest income where as Machhapuchchhre Bank Limited NII declined most among all the commercial banks.
A Comparative Study of Commercial Banks www.ShareSansar.com
Bank Change In Net Interest Income (Increase) Bank Change In Net Interest Income (Decrease) Century Bank 476.03% Nepal Bank -22.15% Civil Bank 165.29% Sunrise Bank -26.55% Mega 61.87% KIST -29.32% Janata 33.63% NBBL -37.43% C&T Bank 32.19% MBL -45.24% Table 5: Change (increase/decrease) in Net Interest Income (%) of Top 5 Commercial Banks
Deposits:
The deposits of commercial banks as of third quarter of the current fiscal year have increased by 20.95% to Rs.783.47 billion compared to same period of last fiscal year. Increase in deposit figure clearly depicts that the overall banking sector liquidity problem have eased down immensely. Presently inter-bank lending rates are almost nil which again indicates that commercial banks have excess liquidity reserve with them.
Rastriya Banijaya Bank Limited has largest amount of deposits among all commercial banks whereas Nabil Bank Limited leads the race among all banks excluding government holding banks. During the review period, Century Commercial Bank Limited has the highest growth rate of deposit at 915.55% whereas as Standard Chartered Bank Limited has lowest growth rate of 1.20% among all the commercial bank.
Bank Total Deposit (Rs.) Market Share (%) Rank RBB 79,811,245 10.19% 1 NABIL 54,628,915 6.97% 2 NIBL 54,287,506 6.93% 3 NSBI 52,234,858 6.67% 4 Nepal Bank 48,917,632 6.24% 5 Table 6: Total Deposits of Top Five Commercial Banks (Figure in 000)
A Comparative Study of Commercial Banks www.ShareSansar.com
Bank Change in Deposit (Increase) Bank Change In Deposit (Decrease) Century Bank 915.55% Citizen Bank 10.26% Civil Bank 291.68% LUMBINI 7.60% Mega 174.52% Bank of Asia 3.52% Janata 173.76% MBL 3.03% C&T Bank 134.94% SCB 1.20% Table 7: Change (increase/decrease) in Deposits (%) of Top 5 Commercial Banks
Loan and Advances:
Loan and advances have increased by 10.65% at Rs.571.95 billion during the review period. As compared to increment of deposits, growth rate of loans and advances is less. This indicates that commercial banks were unable to find appropriate/required clients for lending their excess liquidity in the market. Century Commercial Bank Limited has highest growth rate in lending i.e. 4365.75% whereas Machhapuchchhre Bank Limited has a negative growth (i.e. 14.89%). Most of the new commercial banks have higher lending growth which signals that they have been aggressive than former commercial banks.
In total 3 commercial banks real estate loan exposures have stood above 20 percent which is higher than Nepal Rastra Bank set limit. Grand Bank Limited has the highest percentage of loan 0 20000000 40000000 60000000 80000000 RBB NABIL NIBL NSBI Nepal Bank A Comparative Study of Commercial Banks www.ShareSansar.com exposure in real estate sector i.e. 22.58% whereas Agriculture Development Bank Limited has the lowest percentage i.e. 0.75%. There is a satisfactory growth in long term loans (term loan) of commercial banks i.e. 8.26% compared to same period of last fiscal year. Maximum money lent for project financing like hydropower projects, industrial projects and other manufacturing and service sectors that can emphatically help in sustainable growth of an economy.
Bank Total Loan and Advances (Rs.) Market Share Rank NIBL 43,153,935 7.54% 1 NABIL 41,589,342 7.27% 2 RBB 37,391,783 6.54% 3 ADBNL 36,003,510 6.29% 4 EBL 35,340,245 6.18% 5 Table 8: Total Loans & Advances of Top Five Commercial Banks (Figure in 000)
Bank Change in Loan and Advances (Increase) Bank Change in Loan and Advances (Decrease) Century Bank 4,365.75% RBB 3.26% Civil Bank 181.76% NIBL 1.28% C&T Bank 141.07% Bank of Asia -0.24% Janata 126.40% NBBL -0.95% Mega 118.97% MBL -14.89% Table 9: Change (increase/decrease) in Loan and Advances (%) of Top 5 Commercial Banks
Bank Change in Real Estate Loan (Increase) Bank Change in Real Estate Loan (Decrease) Grand 22.58% Nepal Bank 5.52% SBL 20.67% RBB 5.06% Prime Bank 20.48% C&T Bank 3.99% NIBL 19.75% Mega 3.36% KIST 19.45% ADBNL 0.75%
Table 10: Change (Increase/decrease) in Real Estate Loan (%) of Top 5 Commercial Banks
Total Provision:
Total loan loss provisions have always been major concern for commercial banks. During the review period loss provision rose by whopping 51.28% as compared to corresponding previous quarter of last fiscal year. The total provision of possible losses stood at Rs.6.22 billion which is a worrying signal for overall banking industry. Troubling real estate sector, plunging share market, deteriorating industrial environment, etc. have made a big impact on general public capacity to pay back their principal and interest on time resulting surge in total loan loss A Comparative Study of Commercial Banks www.ShareSansar.com provisions of banks. Increased provision has led drastic decrease in net profit of commercial banks this time.
Bank Total Provision (Rs.) Highest 5* Bank Total Provision (Rs.) Lowest 5* ADBNL 1,649,827 Mega 40,278 NIBL 615,633 Century Bank 38,816 RBB 581,613 Civil Bank 33,101 NABIL 516,588 C&T Bank 25,733 KBL 266,634 Janata 23,442 Table 11: Total Provision of Commercial Banks (Figure in 000) *In Descending order
Non Performing Loan: The risks of commercial banks have increased during the review period as compared to same period of previous fiscal year. The average non-performing loans as a percentage of total loans have increased to 2.88 percent from 2.48 percent last year. Out of 32 commercial banks, 5 banks NPA stood above 4% which is considered risky while others maintained below that level. Most of the new commercial banks NPA level is low or zero.
Bank Highest 5* Bank Lowest 5* RBB 10.58% Janata 0.03% NBBL 10.32% Century Bank 0.00% ADBNL 8.44% Civil Bank 0.00% Nepal Bank 5.44% C&T Bank 0.00% KIST 4.81% Mega 0.00% Table 12: Non Performing Loan (%) of Commercial Banks *In Descending order
Earning per Share (EPS) and Return on Equity (ROE): The significance of EPS is obvious, as the viability of any business depends on the income it can generate. Earnings per share allow us to compare different companies power to make money. Decrease in net profit has badly hit the EPS of banks this time. During the review period, the annualized EPS of banking industry put up Rs.21.60 compared to Rs.31.95 on same period last fiscal year. Amongst all, only 10 commercial banks have earned above industry average. A Comparative Study of Commercial Banks www.ShareSansar.com The average return on equity stood up mere 8.61% compared to 10.87% of last fiscal year corresponding period. This shows that commercial banks have not been able to increase their profits in the ratio of growth of their paid up capital. Consequently, investors can expect less return in coming fiscal year.
Bank Annualized EPS (Rs.) (Highest 5)* Bank Annualized EPS (Rs.) (Lowest 5)* EBL 75.35 Civil Bank 0.74 RBB 75.28 MBL 0.54 NABIL 74.56 C&T Bank 0.37 SCB 70.39 Century Bank -4.46 Nepal Bank 66.10 KIST -10.24 Table 13: Annualized EPS of Commercial Banks * In Descending Order Bank ROE (Highest 5)* Bank ROE (Lowest 5)* EBL 20.16% C&T Bank 0.28% NABIL 19.90% Century Bank -3.23% SCB 18.77% Nepal Bank -4.67% NBBL 18.29% KIST -7.73% BOK 14.12% RBB -8.30% Table 14: Annualized Return on Equity (%) of Commercial Banks (%) * In Descending Order
Price to Earnings Ratio: The P/E gives you an idea of what the market is willing to pay for the companys earnings. The higher the P/E the more the market is willing to pay for the companys earnings. Some investors read a high P/E as an overpriced stock and that may be the case, however it can also indicate the market has high hopes for this stocks future and has bid up the price. The overall average annualized P/E ratio of banking industry is 15.65 which indicate that the current price of commercial banks in secondary market is correctly valued. (P/E Ratio around 10-15 is regarded as correct value as per international standard). (Note: P/E Ratio of Machhapuchchhre Bank Limited is excluded while calculating average annualized P/E ratio)
A Comparative Study of Commercial Banks www.ShareSansar.com Bank Annualized P/E Ratio (Highest 5)* Bank Annualized P/E Ratio (Lowest 5)* NBBL 4.45 NSBI 30.72 ADBNL 8.18 Bank of Asia 32.46 GLOBAL 11.15 KBL 35.54 NCCB 12.74 Citizen Bank 37.19 EBL 13.00 NMB 46.81 Table 15: Annualized P/E ratio of Commercial Banks *(Times) (In Ascending Order)
Overall Conclusion: Escalating cost of operations due to inflationary pressure, exceeding liquidity resulting in lower returns, increasing provision against loan of real estate sectors, unstable socio-political environment and growing local competition have adversely affected the growth and net profit of commercial banks as of 3 rd quarter of the current fiscal year 2068/69.
Therefore, commercial banks should continuously improve their service standards, analyze each cost component minutely to bring down their cost of operations, introduce new products to drive the market, and carry out cautious approach in business segments especially in credit risk assets.
Lacking political stability coupled with slacking economic growth, widening trade deficit, rising inflationary rate and arousing number of defaulters in the banking industry continues to remain the major challenges ahead.
A Comparative Study of Commercial Banks www.ShareSansar.com Last 5 Year Dividend distribution history of Commercial Banks S.n. Commercial Banks Particulars Indicator 2063/64 2064/65 2065/66 2066/67 2067/68 2006/07 2007/08 2008/09 2009/10 2010/11 1 Nepal SBI Bank Limited Earning Per Share (EPS) Rs 39.35 28.33 36.18 23.69 24.85 Dividend (Including Bonus Share) % 47.59 - 42.11 17.5 17.5 Cash Dividend % 12.59 - 2.11 5 5
32 Nepal Bank Limited* * Earning Per Share(EPS) Rs Dividend (Including Bonus Share) % Cash Dividend %
* Audited Financial report is due of 2067/68 fiscal year. ** Presently its in NRB control and surveillance. AGM is not held since last 10 years.
A Comparative Study of Commercial Banks www.ShareSansar.com Annexure As of 3 rd Quarter of the current fiscal year 2068/69. (Figure in 000) Bank Paid Up Capital Reserve Deposit Loan & Advances Net Profit Networth Per Share P/E Ratio Return on Asset Sanima Bank 2,016,000 181,027 9,131,282 8,324,315 78,337 108.97 0 0.68% Century Bank 1,080,000 41,812 2,983,619 2,914,527 -36,206 103.87 0 -0.87% Civil Bank 1,200,000 11,342 7,030,769 6,400,580 6,742 100.94 0 0.08% C&T Bank 1,400,000 27,277 5,309,788 4,995,863 3,945 101.94 0 0.06% Mega 1,631,000 120,551 9,506,189 8,755,825 40,023 107.39 0 0.32% Janata 1,400,000 120,658 6,887,220 6,600,675 43,783 108.61 0 0.49% KIST 2,000,000 -10,405 18,831,780 14,530,035 -153,739 99.47 -16.78 -0.71% NMB 2,000,000 281,830 14,913,361 12,356,273 69,202 114.09 46.81 0.39% Grand 2,000,000 259,037 11,953,091 10,686,246 141,153 112.95 23.91 0.97% Bank of Asia 2,000,000 271,793 13,976,373 11,955,722 117,350 113.58 32.46 0.63% Sunrise Bank 2,015,000 210,513 17,655,939 14,002,985 79,451 110.44 29.67 0.39% Prime Bank 2,245,746 413,142.8 21,134,650 18,821,506 171,117.6 118.39 26.96 0.69% Citizen Bank 2,101,840 232,505 15,289,515 13,526,518 100,438 111.06 37.19 0.53% GLOBAL 1,601,452 280,318 18,947,604 15,212,014 172,292 117.50 11.15 0.79% SBL 1,619,244 518,180 23,491,255 19,774,361 148,251 132.00 27.76 0.56% LAXMI 1,694,081 669,843 19,670,876 16,573,357 250,065 139.54 17.27 1.08% KBL 1,603,800 696,001 20,665,627 16,822,934 85,963 143.39 35.54 0.36% MBL 1,627,197 161,926 18,143,842 13,631,491 6,688 109.95 195.24 0.03% NIC 1,311,552 950,348 19,944,549 15,856,898 263,554 172.45 20.37 1.13% LUMBINI 1,430,000 527,069 7,053,476 6,892,905 107,899 136.85 25.34 1.15% NCCB 1,400,000 462,371 14,179,894 11,099,259 115,297 133.02 12.74 0.68% BOK 1,604,187 1,231,464 22,278,787 18,568,223 400,464 176.76 18.38 1.45% EBL 1,391,570 2,508,390 45,983,008 35,340,245 786,414 280.25 13.00 1.51% NBBL 2,009,396 615,120 13,556,309 10,688,930 480,020 130.61 4.45 2.71% NSBI 2,093,990 1,047,069 52,234,858 25,025,654 319,006 150.00 30.72 0.56% HBL 2,400,000 2,165,766 47,001,692 34,972,137 570,228 190.24 20.64 1.03% SCB 1,610,168 291,7657 36,143,205 18,986,670 850,048 281.20 27.02 2.03% NIBL 3,012,924 2,949,391 54,287,506 43,153,935 801,005 197.89 14.75 1.25% NABIL 2,029,769 3,673,580 54,628,915 41,589,342 1,135,194 280.98 17.46 1.77% ADBNL 9,474,300 4,861,122 41,065,101 36,003,510 1,145,943 151.30 8.18 1.69% RBB 1,172,300 -9,143,609 79,811,245 37,391,783 661,939 -679.97 0 0.79% Nepal Bank 380,383 -4,416,074 48,917,632 28,825,636 188,586 -1060.95 0 0.34% A Comparative Study of Commercial Banks www.ShareSansar.com Corporate Clients
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