1.Introduction:
Name: Nepal Bank Limited
Business: Banking
Date of operation: 15-11-1957
Co-ordinator: Mr. Maheswor Lal Shrestha
C0-ordinator of management Committee: Prof. Dr.Dev Raj Adhikari
No. Of Branches(Including H.O): 112
No. Of ATMs: 28
Head Office: Dharmapath, Kathmandu, Nepal
2.Ownership Pattern:
Nepal Government 40.49%
Class "A" Licensed Institutions 5.68%
Other Licensed Institutions 0.77%
Other Entities 2.40%
Individuals 49.94%
Others 0.71%
NOTE: The pattern of ownership is based upon latest published annual report of F/Y 2066/67.
3.List of Prominent Shareholders:
Shareholders Shareholding in %
Hitesh Golchha 0.88
Chandra Kumar Golchha 0.95
Lokmanya Golchha 0.76
Surendrakumar Golchha 0.51
Sanjay Golchha 0.51
Rewadevi Dikshit 0.51
Sundarmani Dikshit 0.52
Kamalmani Dikshit 0.55
Sridhar S. J. B. Rana 0.79
Ganga Amatya 1.06
Jharendra S. J. B. Rana 1.33
Rajendrakumar Khetan 6.93
Note: The Shareholding pattern is extracted from Annual report of F/Y2066/67.
5.Performance Highlights:
Year Deposits loans and advances Investments Interest Income Interest Expenses Operating Profit
2056/57 35,768 21230 5,462 2,478 1,957 -259
2057/58 35,619 20419 6,776 2,368 1,745 15
2058/59 34,265 19253 7,151 1,527 1,713 -526
2059/60 35,014 18132 12,464 2,200 1,586 43
2060/61 35,735 17938 11,021 1,825 1,026 511
2061/62 35,934 16866 14,220 1,987 749 688
2065/66 45,194 17615 13,398 2,690 792 146
2066/67 42,822 23561 5,784 3,068 910 -622
2067/68 46,804 26710 7,578 3735 1457 221
2068/69(Q2) 48,709 27457 9,276 - - -
6. Critical Analysis:
1. Nepal Bank Limited is the first bank of Nepal. From the very beginning, Nepal Bank was a joint venture between the Government and the private sector. Out of 25000 equity shares issued @ NRS. 100 each as face value, 40% were subscribed by the Government and the balance 60% were offered for sale to private sector. There were only 10 shareholders when the bank was first started.
2. The bank is under the control of Central Bank of Nepal, Nepal Rastra Bank (NRB). NRB has appointed a five members management committee. This management committee performs as the board of director of the bank. Prof. Dr. Dev Raj Adhikari heads the management committee as the co-ordinator of the committee.
3. The shares of Nepal Bank Limited used to trade in Nepse prior to its suspension for trading. Since F/Y 2059/60, trading of the bank’s share has been suspended for trading.
4. In regard with the core business strategy of the bank, the policy adopted by the bank doesn’t appear consistent over years.
Year C/D Ratio(%) Investment/Deposit Ratio(%)
2056/57 59.35473049 15.27063297
2057/58 57.32614616 19.02355484
2058/59 56.18853057 20.86969211
2059/60 51.78500029 35.5971897
2060/61 50.19728557 30.84091227
2061/62 46.93604942 39.57254967
2065/66 38.9764128 29.64552817
2066/67 55.02078371 13.5070758
2067/68 57.06777199 16.19092385
2068/69(Q2) 56.36945944 19.04370855
Based on analysis upon the availability of past data, we can here find that the management of the bank isn’t rigidly adhered to some core business strategy. As shown in table above, the business of the bank was a bit aggressive during F/Y 2056/57 with C/D ratio near to 60%. Thenwards the bank seem to appear more conservative with most of its funds allocated to safer assets like Investments in the later years. In F/Y 2061/62, the percentage of investment made to total size of deposit is near to 50%. However since last two years the bank is appearing more confident allocating its funds to risky asset category; minimizing size of investments and gradually increasing the size of credit.
On deeper analysis, Nepal Bank is still very conservative (or to be more précised might be frightful) to have its funds circulated in the form or credit or advances. Observing figure of C/D ratio of this bank for more than a decade, we found no occasion the C/D ratio of the bank exceed 60%, whereas the industrial average of the same for other private sector commercial banks in the F/Y 2067/68 ratio is around 77%.
5. Nepal Bank, being partially owned by Government, has the grater advantage of acquiring deposits from various other Government bodies and agencies and from many such other institutions wholly or partially owned by Government. With network of more than 110 branches across each corner of the nation has a better client base. Moreover being the oldest bank of Nepal and widely conceived as government owned bank, people believe it a trustworthy one. All these comparative advantages the Bank possess has helped the bank to have access to the much cheaper funds as compared with the cost of fund of its peers in the same industry.
6. Nepal Bank might be only bank in Nepal (at least there are no such other private sector banks) which for last three years (that came to our attention) is consistently operating with the hefty interest spread of above 5%.
Year Net Interest Spread
2065/66 6.45%
2066/67 7.59%
2067/68 6.16%
2068/69(Q2) 5.03%
Despite having advantage of such wider spread rate, the bank finds itself harder to generate profit to its shareholders.
7. Company health analysis:
Capital adequacy ratio of the bank appears negative by nearly 10%. There seems no other suitable ways other than raising its capital to maintain a positive capital adequacy or the minimum capital fund as prescribed by NRB. Based on audited financial statement of F/Y 2066/67, the accumulated profit and loss account of the bank shows loss of NRS.725.24 Cr. The net worth of the bank for last six years is presented hereunder:
Year 2062/63 2063/64 2064/65 2065/66 2066/67 2067/68
Net Worth (Rs. In 'Lacs.) -63143.51 -62382.75 -60100.45 -48688.97 -46026.29 -42242.78
8. Profitability Analysis:
Since F/Y 2065/66, the ratio of non-performing credit to total credit has fallen below 5%. This is a good indicator regarding the health of the bank. With level of NPA remaining constant for any performing year as compared to previous year, the profit margin with respect to the asset size should be near or beat the industrial average, for any financial institution in order to perpetually succeed in future periods.
With NPA remaining relatively constant since F/Y 2065/66, the return generated by the bank doesn’t appear satisfactory:
Year Profit ROA (%)
2065/66 89.42 0.19
2066/67 24.94 0.056
2068/69(Unaudited) 38.34 0.073
This symbolize that the bank isn’t as profitable as most of its industrial peers and the scale of profitability of this bank is far below the industrial average. The average ROA (expressed in %) of Nepalese commercial banks is 1.78%.
9. Nepal Bank has a total of 2378 permanent Staffs and 485 contract based staffs. Each year the bank is recognizing a heavy expenditure under the head staff expenses. The expenses created for pension and gratuity looks very heavy and even growing. Unable to address these problems, the bank might come into problem in the near future. The expenses created under this head for last three years appears as below:
Year Staff Expenses (NPR 'Cr.)
2065/66 164
2066/67 297
2068/69(Unaudited) 205
10. Return to Shareholders:
With large number of employees leading to heavy staff expenses, inconsistent core business strategy, sluggish growth in deposit, ever growing pension and gratuity provisions, slow transformation towards changing needs of the customers, and for similar other reasons we cannot expect drastic change in running profitability of the bank in coming few years. With near to Rs.700 Cr. of accumulated loss carried in the book, and return remaining relatively constant even with a moderate growth rate of around 15% p.a. in size of its balance sheet, the shareholders cannot expect return in form of dividends at least for a decade from now.
Name: Nepal Bank Limited
Business: Banking
Date of operation: 15-11-1957
Co-ordinator: Mr. Maheswor Lal Shrestha
C0-ordinator of management Committee: Prof. Dr.Dev Raj Adhikari
No. Of Branches(Including H.O): 112
No. Of ATMs: 28
Head Office: Dharmapath, Kathmandu, Nepal
2.Ownership Pattern:
Nepal Government 40.49%
Class "A" Licensed Institutions 5.68%
Other Licensed Institutions 0.77%
Other Entities 2.40%
Individuals 49.94%
Others 0.71%
NOTE: The pattern of ownership is based upon latest published annual report of F/Y 2066/67.
3.List of Prominent Shareholders:
Shareholders Shareholding in %
Hitesh Golchha 0.88
Chandra Kumar Golchha 0.95
Lokmanya Golchha 0.76
Surendrakumar Golchha 0.51
Sanjay Golchha 0.51
Rewadevi Dikshit 0.51
Sundarmani Dikshit 0.52
Kamalmani Dikshit 0.55
Sridhar S. J. B. Rana 0.79
Ganga Amatya 1.06
Jharendra S. J. B. Rana 1.33
Rajendrakumar Khetan 6.93
Note: The Shareholding pattern is extracted from Annual report of F/Y2066/67.
5.Performance Highlights:
Year Deposits loans and advances Investments Interest Income Interest Expenses Operating Profit
2056/57 35,768 21230 5,462 2,478 1,957 -259
2057/58 35,619 20419 6,776 2,368 1,745 15
2058/59 34,265 19253 7,151 1,527 1,713 -526
2059/60 35,014 18132 12,464 2,200 1,586 43
2060/61 35,735 17938 11,021 1,825 1,026 511
2061/62 35,934 16866 14,220 1,987 749 688
2065/66 45,194 17615 13,398 2,690 792 146
2066/67 42,822 23561 5,784 3,068 910 -622
2067/68 46,804 26710 7,578 3735 1457 221
2068/69(Q2) 48,709 27457 9,276 - - -
6. Critical Analysis:
1. Nepal Bank Limited is the first bank of Nepal. From the very beginning, Nepal Bank was a joint venture between the Government and the private sector. Out of 25000 equity shares issued @ NRS. 100 each as face value, 40% were subscribed by the Government and the balance 60% were offered for sale to private sector. There were only 10 shareholders when the bank was first started.
2. The bank is under the control of Central Bank of Nepal, Nepal Rastra Bank (NRB). NRB has appointed a five members management committee. This management committee performs as the board of director of the bank. Prof. Dr. Dev Raj Adhikari heads the management committee as the co-ordinator of the committee.
3. The shares of Nepal Bank Limited used to trade in Nepse prior to its suspension for trading. Since F/Y 2059/60, trading of the bank’s share has been suspended for trading.
4. In regard with the core business strategy of the bank, the policy adopted by the bank doesn’t appear consistent over years.
Year C/D Ratio(%) Investment/Deposit Ratio(%)
2056/57 59.35473049 15.27063297
2057/58 57.32614616 19.02355484
2058/59 56.18853057 20.86969211
2059/60 51.78500029 35.5971897
2060/61 50.19728557 30.84091227
2061/62 46.93604942 39.57254967
2065/66 38.9764128 29.64552817
2066/67 55.02078371 13.5070758
2067/68 57.06777199 16.19092385
2068/69(Q2) 56.36945944 19.04370855
Based on analysis upon the availability of past data, we can here find that the management of the bank isn’t rigidly adhered to some core business strategy. As shown in table above, the business of the bank was a bit aggressive during F/Y 2056/57 with C/D ratio near to 60%. Thenwards the bank seem to appear more conservative with most of its funds allocated to safer assets like Investments in the later years. In F/Y 2061/62, the percentage of investment made to total size of deposit is near to 50%. However since last two years the bank is appearing more confident allocating its funds to risky asset category; minimizing size of investments and gradually increasing the size of credit.
On deeper analysis, Nepal Bank is still very conservative (or to be more précised might be frightful) to have its funds circulated in the form or credit or advances. Observing figure of C/D ratio of this bank for more than a decade, we found no occasion the C/D ratio of the bank exceed 60%, whereas the industrial average of the same for other private sector commercial banks in the F/Y 2067/68 ratio is around 77%.
5. Nepal Bank, being partially owned by Government, has the grater advantage of acquiring deposits from various other Government bodies and agencies and from many such other institutions wholly or partially owned by Government. With network of more than 110 branches across each corner of the nation has a better client base. Moreover being the oldest bank of Nepal and widely conceived as government owned bank, people believe it a trustworthy one. All these comparative advantages the Bank possess has helped the bank to have access to the much cheaper funds as compared with the cost of fund of its peers in the same industry.
6. Nepal Bank might be only bank in Nepal (at least there are no such other private sector banks) which for last three years (that came to our attention) is consistently operating with the hefty interest spread of above 5%.
Year Net Interest Spread
2065/66 6.45%
2066/67 7.59%
2067/68 6.16%
2068/69(Q2) 5.03%
Despite having advantage of such wider spread rate, the bank finds itself harder to generate profit to its shareholders.
7. Company health analysis:
Capital adequacy ratio of the bank appears negative by nearly 10%. There seems no other suitable ways other than raising its capital to maintain a positive capital adequacy or the minimum capital fund as prescribed by NRB. Based on audited financial statement of F/Y 2066/67, the accumulated profit and loss account of the bank shows loss of NRS.725.24 Cr. The net worth of the bank for last six years is presented hereunder:
Year 2062/63 2063/64 2064/65 2065/66 2066/67 2067/68
Net Worth (Rs. In 'Lacs.) -63143.51 -62382.75 -60100.45 -48688.97 -46026.29 -42242.78
8. Profitability Analysis:
Since F/Y 2065/66, the ratio of non-performing credit to total credit has fallen below 5%. This is a good indicator regarding the health of the bank. With level of NPA remaining constant for any performing year as compared to previous year, the profit margin with respect to the asset size should be near or beat the industrial average, for any financial institution in order to perpetually succeed in future periods.
With NPA remaining relatively constant since F/Y 2065/66, the return generated by the bank doesn’t appear satisfactory:
Year Profit ROA (%)
2065/66 89.42 0.19
2066/67 24.94 0.056
2068/69(Unaudited) 38.34 0.073
This symbolize that the bank isn’t as profitable as most of its industrial peers and the scale of profitability of this bank is far below the industrial average. The average ROA (expressed in %) of Nepalese commercial banks is 1.78%.
9. Nepal Bank has a total of 2378 permanent Staffs and 485 contract based staffs. Each year the bank is recognizing a heavy expenditure under the head staff expenses. The expenses created for pension and gratuity looks very heavy and even growing. Unable to address these problems, the bank might come into problem in the near future. The expenses created under this head for last three years appears as below:
Year Staff Expenses (NPR 'Cr.)
2065/66 164
2066/67 297
2068/69(Unaudited) 205
10. Return to Shareholders:
With large number of employees leading to heavy staff expenses, inconsistent core business strategy, sluggish growth in deposit, ever growing pension and gratuity provisions, slow transformation towards changing needs of the customers, and for similar other reasons we cannot expect drastic change in running profitability of the bank in coming few years. With near to Rs.700 Cr. of accumulated loss carried in the book, and return remaining relatively constant even with a moderate growth rate of around 15% p.a. in size of its balance sheet, the shareholders cannot expect return in form of dividends at least for a decade from now.
No comments:
Post a Comment