Second quater analysis 2071

A Comparative Analysis of Commercial Banks
About Us:
IMS Investment Management Services Pvt. Ltd. is a service provider for investing in Nepal
Capital market through its web portals www.sharesansar.com and www.commoditysansar.com.
IMS was established on 7th March, 2011 under the company act of 2063. We are committed
to the fundamental principles: Integrity, Service and Performance.
The company principal activities consist of all the clerical, administrative
and research works that are required for investing in the Nepal Stock market
for its Corporate and Individual clients on a personalized note.
Sharesansar.com is a complete financial web portal, running successfully since last 36
months in Nepal. ShareSansar.com updates your financial world related to Nepal Share
market to the general public in a most common way all over the world. Our website
caters more than 3,00,000 plus hits and 6,000 plus unique visitors on a daily basis.
We are committed to stand sharesansar.com most dependable financial web platform
for any financial news and information in Nepal. Sharesansar.com is the only updated
and seamless website covering all the major aspects of share market of Nepal.
Our main objective behind publishing this report is to aware general share market investors
about the performance of commercial banks in second quarter of fiscal year 2070/71.
Click the image above
1

2nd Quarterly Financial High-
lights of 2070/71 fiscal year
Net Profit:
Following the election of the sec-
ond Consistent Assembly, a new
ray of hope has arisen for a stable
political environment in spite of
numerous challenges. Though the
country is still in political transi-
tion phase with many challenges,
the business environment has
come to witness some improve-
ment compared to the environment
a few years back.
In spite of meagre improvement
in business environment, the lack
of harmony between the political
parties, ineffective and inefficient
use of the budget, increasing trade
deficit and growing inflation still
present obstacles for the growth of
business environment.
In midst of this entire scenario, the
banking industry, which is very
much vital for industrial growth,
has performed better in this sec-
ond quarter compared to the corre-
sponding quarter. The banking sec-
tor was able to make an increment
of 18.33 percent in its net profit
compared to the corresponding
quarter of the previous fiscal year.
The anticipation for the improve-
ment in earnings was expected
for the fiscal year 2070/71 by the
banking professionals, analysts
and investors as there was excess
liquidity in the market.
Thanks to the high gap between
the interest charged on loan and
advance, and deposits, the banks’
net interest income has increased
compared to the corresponding
period a year back. Apart from it,
the increase of credit demand from
the private sector , especially the
industrial production sector, con-
struction sector, wholesale and
retail sector, transportation, com-
munications, and public services
sector in spite of the fragile eco-
nomic condition, also backed the
banking sector, in coming out with
2
a such favorable growth.
The total net profit of the entire
banking sector stood at NPR 9.40
billion for the second quarter of fis-
cal year 2070/71 compared to NPR
7.94 billion of the corresponding
fiscal year second quarter. Dur-
ing the review period, Nabil Bank
Limited yet again was able to stand
out among the rest of the commer-
cial banks as the commercial bank
with the highest net profit.
(Figure in ‘000’)
Banks Net Profit
(Rs.)
Market
Share
(In %)
Rank
NABIL 1,066,956 10.97% 1
NIBL 940,392 9.67% 2
RBB 717,881 7.38% 3
EBL 679,119 6.98% 4
SCB 633,311 6.51% 5
Figure: Net Profit of Top Five Com-
mercial Banks
Banks Net Profit
(Rs.)
Market
Share
(In %)
Rank
NABIL 1,066,956 10.97% 1
NIBL 940,392 9.67% 2
EBL 679,119 6.98% 3
SCB 633,311 6.51% 4
HBL 544,488 5.60% 5
Figure: Net Profit of Top Five Com-
mercial Banks excluding Government
Banks
Compared to the corresponding
second quarter of FY 2069/70,
the market share of the top five
commercial banks have drasti-
cally decreased to 41.52 percent
from 48.02 percent. Among the
top five, NABIL and NIBL have
come to experience more than two
percent drop in their market share
compared to corresponding sec-
ond quarter of FY 2069/70 while
the market share of the rest has
dropped in between 1 to 2 percent.
The growing competition from
the new commercial banks and
the noticeable increase in the
number of banking and finan-

cial institution have saturated
the market share, which a few
years back used to above 50
percent, for these top banks.
In spite of the diversification of
market share, not all commercial
banks have been able to tap it as
evident from the fact that during
the review period there were banks
with negative growth also. BOK,
KBL, CTBNL, JBNL and KIST
showed a dismal performance
with negative growth rate in profit.
(In %)
Banks Change in
Net Profit
(Increase)
Banks Change In
Net Profit
(Decrease)
NBL 570.79 BOK -17.25
MBL 518.89 KBL -36.39
CZBIL 134.18 CTBNL -64.83
GBIME 117.56 JBNL -82.12
SBL 112.12 KIST -185.74
Figure: Change in Net Profit of Top
Five Commercial Banks
The oldest bank of Nepal, Nepal
Bank Limited, came to make the
highest net profit compared to the
rest this quarter. The bank’s net
profit increased by 570.79 percent,
which was mainly attributed to
its operational income and write
back of huge chuck of bad loans.
Whereas KIST Bank continued
with its degrading performance as
its profit decreased by 185.74 per-
cent.
Compared to the prior quarterly
reports, we observe that the new
commercial banks have not ranked
in the top position in this quarter.
As the most of the new commer-
cial banks’ provision for loss has
increased, their growth figure has
come down a notch. JBNL and
CTBNL, which use to be in the top
five, this quarter, have fallen under
the least five owing to the foreign
exchange loss and high provisions
for loss. Similarly, the growth rate
of CBL and CENTURY also de-
creased to 57.10 percent and 1.28
percent respectively from that of
three digit growth figure. While,
MEGA was the only one among
the five new commercial banks to
maintain a healthy growth of 98.41
percent.
As we can also see in the table
above, the top net profit earning
banks have not appeared there
which suggest that these banks’ca-
pacity of earning profit is at satura-
tion point and their growth rate is
static.
Operating Profit Before
Provision:
Operating profit before provision
is a very crucial indicator that
helps to know the real strength of
the banks as this index shows the
real profit earned by the banks dur-
ing the review period.
During the review period, total
operating profit before provision
of the commercial banks grew by
12.84 percent to NPR 16.71 billion
as compared to the corresponding
second quarter of the previous fi-
nancial year, which proved to be a
satisfactory growth.
Followed by the good growth in
operational income, the decrease
in provision and increase in write
back have also lent a positive hand
in this quarter’s growth.
This quarter too, NABIL Bank
Limited has the highest operating
profit before provision among all
the banks during the review pe-
riod i.e. NPR 1.90 billion, which
is 16.17 percent of total operating
profit before provision of banking
industry. In terms of growth, Jana-
ta Bank Limited along with Kist
Bank limited came in the bottom
of the list with negative figures
of -45.71 percent and -43.96 per-
cent respectively. Whereas Nepal
Bangladesh Bank had the highest
growth rate of 83.89 percent.
3

Banks Operatng
Profit Be-
fore Provi-
sion (Rs.)
Market
Share
Rank
NABIL 1,904,933 16.17% 1
NIBL 1,552,082 13.17% 2
ADBL 1,106,625 9.39% 3
EBL 1,102,734 9.36% 4
SCB 1,042,239 8.85% 5
Figure: Operating Profit Before Provi-
sion of Top Five Commercial Banks
(In %)
Banks Change in
Oerating
Profit (In-
crease)
Banks Change
in Oerat-
ing Profit
(De-
crease)
NBB 83.89 KBL -12.16
NICA 75.85 BOK -13.50
CBL 57.51 NCC -28.93
CEN-
TURY
52.85 KIST -43.96
MBL 48.06 JBNL -45.71
Figure: Change in Operating Profit
Before Provision of Top Five Commer-
cial Banks
Deposits:
Being an intermediary, the bank-
ing sector needs to act as a bridge
to collect the money from one
party with excess money and de-
livery this money to another with
shortage. While doing so, collect-
ing deposit becomes the one of
the primary functions of banks.
Deposit is one of the main sources
of fund available for commercial
banks to mobilize for different pur-
poses to make profit. Higher the
deposit, higher will be the chance
of making profit by mobilizing de-
posits in different profitable sec-
tor. So every bank has their own
strategy to attract deposit from the
government, other institutions and
general public. The deposit of com-
mercial banks as of the fiscal year
2070/71 increased by 20.96% com-
pared to the previous fiscal year.
Owing to the election and the
timely full budget this time, the
market came to witness excess li-
quidity which has forced Nepal
Rastra Bank to use reserve repo
tool to absorb the surplus funds
in the market. Since September,
NRB has issued reserve repo for
15 times.Attributed by such factor,
the banks were at ease to collect
deposit even at less interest rate in
this second quarter compared to the
corresponding quarter. This quarter
growth figure was near 2 percent
higher than that of the FY 2069/70
second quarter figure of 19 percent.
The overall deposit of the bank-
ing sector was NPR 1095.66
billion at the end of the second
quarter of fiscal year 2070/71.
The banks have mobilized this
large deposit at a higher interest
spread in the market which has
eventually led to higher returns.
This quarter too, Rastriya Bani-
jaya Bank had the largest amount
of deposits among all the com-
mercial banks as larger portion of
government deposits are attracted
by this bank, whereas Nabil Bank
Ltd led the race among non-gov-
ernmental banks. During the re-
view period, new commercial
banks like Century and Civil still
maintained higher deposit growth
rate like in the previous quarters.
While the merger of BOAN and
NICA has resulted in NICA with
the second highest growth figure.
Banks Total De-
posits (Rs.)
Market
Share
Rank
RBB 97,006,591 8.85% 1
NIBL 71,990,337 6.57% 2
NABIL 68,868,332 6.29% 3
ADBL 64,966,086 5.93% 4
NBL 64,325,548 5.87% 5
Figure: Total Deposits of Top Five
Commercial Banks
4

(In %)
Banks Change in
Deposit
(Increase)
Banks Change
in De-
posit (De-
crease)
CEN-
TURY
75.04 PCBL 10.46
NICA 73.64 SCB 8.03
CBL 68.02 NBL 6.46
NBB 56.91 SBI 4.34
ADBL 44.46 KIST -7.53
Figure: Change in Deposits of Top Five
Commercial Banks
Loans and Advances:
Another function of commercial
banks is to mobilize deposit funds
to deficit party in the form of loans
and advances and also to make
investment in productive sectors.
That will yield healthy revenue.
So, accessing the economic situa-
tion; they make different strategy
to increase their loan portfolio.
Compared to the corresponding
fiscal year’s second quarter sce-
nario, where the loan and advance
growth was higher than deposit,
the outcome is just opposite this
quarter. The loan and advance
were slightly lower than deposit
as it increased by 18.20 percent, to
tally at NPR 815.89 billion during
the review period.
Though the banking lending rate
has come down a notch - thanks
to the prolonged surplus funds in
the financial system of late, the
political turmoil mainly posed hin-
drance in loan floatation. As the
business fraternities are still re-
luctant to take large scale of loan
citing the political scenario, the
banks are not able to flow the ex-
cess liquidity they possess in the
form of loan.
Among all commercial banks, Ag-
riculture Development Bank Ltd
has the largest loan and advance
portfolio amounting NPR 52.69
billion whereas the merged entity
NICA bank had the highest growth
5
figure in loan and advance. Simi-
larly, new banks like Century and
Civil, still maintained the aggres-
siveness in their lending. On the
other hand, most of the old banks
had meager growth, and even neg-
ative growth, which can be seen in
the table below.This shows that old
banks are facing a stiff competition
in the market.
Banks Total Loan
& Advanc-
es (Rs.)
Market
Share
Rank
ADBL 52,698,805 7.05% 1
NIBL 52,250,959 6.99% 2
RBB 52,177,829 6.98% 3
NABIL 51,393,936 6.87% 4
EBL 47,965,162 6.41% 5
Figure: Total Loans & Advances of Top
(In %)
Banks Change in
Loan and
Advances
(Increase)
Banks Change In
Loan and
Advances
(Decrease)
NICA 78.46 GRAND 12.55
CEN-
TURY
71.13 NIBL 12.49
CBL 56.34 KBL 12.18
MBL 35.76 NBL 0.61
SANI-
MA
32.15 KIST -9.73
Figure: Change in Loan and Advances
of Top Five Commercial Banks
Investment:
Rastriya Banijaya Bank Limited
has the highest investment i.e.
NPR 37.21billion. Basically these
investments are made on risk-free
assets like treasury bills, govern-
ment bonds, foreign bonds, invest-
ment on equity share, etc.
( In Rs )
Banks Investmemt (Rs.)
RBB 37,210,960
SBI 23,416,626
NABIL 16,735,930
NBL 15,786,192
ADBL 15,506,890
Figure: Total Investment of Top Five
Commercial Bank.

(In %)
Banks Change
in Real
Estate
Loan
(High)
Banks Net
interest
Spread
(Low)
GRAND 18.43 SBI 4.00
PCBL 16.22 EBL 3.75
SBL 14.25 CEN-
TURY
3.04
CZBIL 13.25 MEGA 2.68
SRBL 12.19 ADBL 0.97
Figure: Investment in Real Estate
Loan/Total Provision of Top and Least
Cost of Fund, Net Interest
Spread and Net Interest In-
come:
The impact of excess liquid-
ity continued to be witnessed in
banks’ interest rate and loan rate in
this quarter, too. Both the rate has
come down this quarter as com-
pared to the second quarter of the
previous fiscal year. However, the
ratio of decrement in deposit rate
is higher than that of the loan rate
which is attributed to lowered cost
of fund and increased net interest
spread and net interest income of
the banking industry.
The average cost of fund that stood
around 6.09 percent in the second
quarter of the previous financial
year came down to 5.67 percent in
the second quarter of FY 2070/71
which is near 7 percent decline.
Likewise, their average net inter-
est spread has also improved dur-
ing the review period as it stands
at 4.60 percent as compared to the
rate of 4.37 percent in the second
quarter of the corresponding fiscal
year. Decrease in the cost of fund
and rise in the net interest spread
has positively affected the net
profit of the banking sector which
can be seen from the increment in
profit.
During the review period, Net In-
terest Income of banking industry
6
In comparison to the prior quar-
ters’ figures, the commercial banks
exposure to real estate loan has
decreased in this quarter. In ac-
cordance to Nepal Rastra Bank
directives, out of the 31 commer-
cial banks in the country, none
have made higher exposure in es-
tate loan i.e. above 20%. However,
among the existing commercial
banks Grand Bank had the high-
est percentage of loan exposure in
the real estate i.e. 18.43 percent,
followed by PCBL with 16.22
percent Agriculture Development
Bank had the lowest exposure i.e.
0.97%. As the real estate busi-
ness remains less attractive sector
to invest, the commercial banks
have diminished their exposure
to the sector as average banking
real estate exposure has decreased
to 8.03% compared to 10% of the
previous year.
But there have been significant
growth in loan portfolios of com-
mercial banks like margin type
loan, term loan, overdraft and
others. The highest growth was
observed in margin type loan by
46 percent which has attributed
to high turnover in the second-
ary market of Nepal in the recent
days. Similarly, term loan record-
ed the second highest growth with
35 percent. The increase in term
loan signals that more loans were
given to long-term project like
project financing for hydropower
projects, industrial projects and
other manufacturing and service
sectors. This shows that now the
banks are focusing on long-term
business by funding these kind of
projects which automatically help
in the sustainable growth of the
economy.

amplified by 11.36 percent com-
pared to the second quarter of
FY2069/70; it is mainly attributed
to the low cost of fund and high net
interest spread. Overall Net inter-
est Income stood at NPR 21.50 bil-
lion.
(In %)
Banks Cost of
Fund
(Low)
Banks Cost of
Fund
(High)
CBL 7.98 NBL 4.23
CTBNL 7.57 EBL 3.89
GRAND 7.24 NABIL 3.61
SANIMA 6.91 RBB 3.08
JBNL 6.76 SCB 1.73
Figure: Cost of Fund of Top and Least
Looking at the cost of fund list,
most of the new banks have high-
er cost whereas as the old banks
which are negligibly impacted by
the liquidity scenario of the mar-
ket have less cost of funds due to
their strong position in the market.
Among all the banks, Standard
Chartered Bank Ltd still has the
lowest cost of funds i.e. 1.73 per-
cent and Civil Bank Ltd had the
highest cost of fund with 7.98%.
(In %)
Banks Net
interest
Spread
(High)
Banks Net
interest
Spread
(Low)
SCB 8.31 NCC 3.18
ADBL 8.07 KBL 3.11
NABIL 8.00 PCBL 2.93
EBL 6.93 MBL 2.89
SRBL 6.74 JBNL 2.35
Figure: Net Interest Spread of Top
During the review period, SCB
had the highest net interest spread
of 8.31 percent whereas Janata
Bank Ltd had the lowest i.e. 2.35
percent. Similarly, NIC Asia Bank
Limited had the highest change
in net interest income of 81.42
percent whereas KIST Bank had
the negative net interest income
growth figure of 24.82 percent.
(In %)
Banks Change
in Net
Interest
(Increase)
Banks Change
in Net
Interest
(Decrease)
NICA 81.42 BOK -3.79
NBB 58.21 NCC -11.57
NBL 41.06 LBL -17.94
RBB 38.94 KBL -18.47
SRBL 31.96 KIST -24.82
Figure: Change in Net Interest Income
of Top and Least Five Commercial
Banks
Loan Loss Provision, Write
Back and Net Write Back:
Loan loss provision is set aside by
the banks to get safeguard from the
possible loan default risk. The reg-
ulatory body, Nepal Rastra Bank
(NRB), has directed the banks to
mandatorily maintain 1 percent
provision of each loan and has also
set directives to increase the pro-
vision from 25 percent to 100 per-
cent depending upon the state of
the loan. In the second quarter of
FY 2070/71, overall provision for
possible losses decreased by 26.10
percent to stand at NPR 3.59 bil-
lion compared to NPR 4.86 billion
in the second quarter of the cor-
responding period of FY 2069/70.
The decreasing loan loss provision
amount indicates that the banks
were able to minimize the default-
ers in this quarter.
Banks Total
Provision
(Rs.) (In-
crease)
Banks Total
Provision
(Rs.) (De-
crease)
ADBL 795,218 SBI 46,588
KIST 566,941 EBL 39,702
NABIL 489,489 NCC 31,675
RBB 316,517 MEGA 31,316
NIBL 287,548 SANI-
MA
26,772
Figure: Total Provision of Top Five Com-
mercial Banks
The recovering of the bad debt was
impressive in the second quarter of
FY 2071/70 as the write back in-
7

creased by 25.61 percent to stand
at NPR 2.60 billion only. The write
back from possible losses figure is
satisfactory compared to the FY
2069/70 second quarter figure of
NPR 2.07 billion.
( Figure in ‘000‘ )
Banks Write back (Rs.)
GBIME 71,642
PCBL 17,649
SBI 16,246
NCC 9,925
NMB (1,149)
Figure: Total Write Back from Possible
Losses of Top Five Commercial Banks
In spite of the decline in provision
figure and incline in write back fig-
ure, the net write back of overall
banking industry still stood at neg-
ative figure of NPR 993.25 mil-
lion. However, the decrease of net
write back figure by 64.44 percent
as compared to the second quarter
of the previous quarter indicates
that banking industry as a whole
was able to minimize the default-
ers’ risk.
Having said so, the negative fig-
ure still suggest that write back
amount is less than that of loan
loss provisioned during this review
period, which means that there is
still room for improvement as
NPR 1.80 billion on net basis was
provisioned for possible losses af-
ter deducting write back amount of
the overall banking industry.
Non Performing Loan (NPA):
Non-performing loan generally
gives us the idea of how good or
bad the overall bank’s loan port-
folio is. Non-performing loans are
simply those loans whose install-
ments are either not paid at all or
whose installments are paid late.
During the review period, the non-
performing loan of the commercial
banks was higher than the previous
fiscal year. Average non-perform-
ing loan increased to 2.96 percent
from 2.66 percent in the second
quarter. The increase of figure sug-
gests that the riskiness of overall
loan portfolio of banks is expand-
ing, which will automatically de-
grade the banking environment.
But, the improvement in provision
should also be taken into consider-
ation before coming to a final con-
clusion as it may directly impact
the NPL of the banking sector.
Out of 31 commercial banks, only
three banks’ NPA remained above
5 percent which is regarded riskier
according to the NRB directives.
Here on the list two of the govern-
ment banks’ i.e. ADBL and NBL,
NPA is more that 5 percent which
suggest that still these bank loan
portfolios are in risky state. Kist
Bank had the highest NPA among
all commercial bank with worst
performance this quarter.
(In %)
Banks NPA
(Most)
Banks NPA
(Least)
KIST 17.54 CEN-
TURY
0.91
ADBL 6.05 SCB 0.63
NBL 5.83 EBL 0.60
RBB 4.92 SBI 0.32
GRAND 4.29 SANI-
MA
0.10
Figure: NPA of Top Five Commercial
Banks
Credit Deposit (CD) Ratio:
As per the NRB directives, the
commercial banks can use up to
80 percent of the deposit amount
in form of credit flow. But look-
ing at the list, none of the banks
has come to maintain or are on par
with set ceiling. In addition, the
average CD ratio of the banking
industry has decreased to 73.73
percent in this quarter compared
to 75.56 percent of the previous
fiscal year’s second quarter. The
average figure is still far below the
optimum capacity set by NRB. Es-
pecially the older banks like HBL,
SCB, Nepal Bank, Rastriya Bani-
jaya Bank, ADBL and NBB have
8

with the growth in profit; this is
mainly due to increase in capital
size by commercial bank compared
to the last year’s second quarter.
(In Rs)
Banks EPS
(Rs.)
(Most)
Banks EPS
(Rs.)
(Least)
EBL 75.41 CEN-
TURY
7.02
NABIL 70.03 CBL 3.40
SCB 62.04 CTBNL 1.46
NIBL 45.36 JBNL 1.23
HBL 39.46 KIST -9.94
Figure: EPS of Top Five Commercial
Banks
Similarly, the annualized average
return on equity was 17.46 percent
compared to 19.55 percent of the
previous fiscal year’s second quar-
ter. Despite the growth in profit,
the ROE is less than the prior fiscal
year’s second quarter figure. This
figure depicts that the banks has
not been able to use its increased
equity in better growth prospect.
However, it is to be noted that the
return is still way higher than the
interest rate they provide. ROE is
one of the best financial perfor-
mance indicators of a company.
Among the commercial banks,
Nepal Bank Limited has highest
ROE i.e. 133.49% whereas Kist
Bank Limited’s annualized ROE is
negative i.e. 11.88%.
(In %)
Banks ROE
(Most)
Banks ROE
(Least)
NBL 133.49 ADBL 5.75
EBL 28.85 CBL 3.28
NABIL 28.30 JBNL 1.18
SCB 24.11 CTBNL 0.69
SBI 23.16 KIST -11.88
Figure: ROE of Top Five Commercial
Banks
The annualized average return on
assets was 1.26 percent compared
to 1.28 percent of previous year
which shows the quality of assets
holding is more or less static.
(In %)
less than 70% CD ratio which sug-
gests that either these banks are
not looking for expansion or they
are not finding suitable investment
opportunity; in both cases these
banks are keeping large chunk of
deposit money idle.
(In %)
Banks CD
Ratio
(Most)
Banks CD
Ratio
(Least)
MEGA 79.85 HBL 69.51
CEN-
TURY
79.75 ADBL 69.09
PCBL 79.19 NBB 60.50
EBL 78.38 NBL 60.30
SANI-
MA
78.38 RBB 52.90
Figure: CD Ratio of Top Five Commer-
cial Banks
Earnings per Share (EPS),
Return on Equity (ROE)
and Return on Assets
(ROA):
Earning per share and Return on
Equity are generally important fi-
nancial indicators for sharehold-
ers as it shows the performance of
company from the bird-eye view.
Higher the EPS, ROE and ROA
higher will be the performance of
the company in terms of investors’
point of view.
Earnings per share allow us to com-
pare different companies’ power to
make profit per share. During the
review period, the annualized av-
erage EPS of commercial banks
was NPR 23.65 which is 12.80
percent higher than the previous
year’s second quarter. Out of 31
commercial banks only 12 banks
were able to earn above industry
average.During the review peri-
od, Everest Bank Limited had the
highest annualized EPS i .e. NPR
75.41 whereas Kist Bank Limited
had the lowest annualized EPS of
negative NPR 9.94.
As we can observe that, the growth
of EPS is very less in comparison
Banks ROA
(Most)
Banks ROA
(Least)
NABIL 2.74 CEN-
TURY
0.41
SCB 2.72 CBL 0.32
NIBL 2.52 JBNL 0.14
GBIME 2.46 CTBNL 0.11
EBL 1.98 KIST -0.86
Figure: ROA of Top Five Commercial
Banks
Price to Earnings Ratio,
Price to Book Ratio and Net
worth:
The P/E ratio generally gives the
idea of what the investors’ senti-
ment is towards the company. It
simply signifies the market’s will-
ingness to pay for the company’s
earnings. The higher the P/E ratio
the more the market is willing to
pay for the company’s earnings.
The investors take the P/E ratio
as a tool to measure the price of
companies’ stock. If the P/E ratio
stands around 10-15 then it is re-
garded as correctly valued as per
international standard; above it, it
is taken as overpriced and under it,
it is taken as underpriced. The P/E
ratio also indicates the market has
high hopes for this stock’s future
and has bid up the price.
Drive by the election result, the
secondary market came to wit-
ness surge in this quarter which
have attributed to high growth in
P/E ratio of the banking industry.
The overall average P/E ratio of
the banking industry was 33 times
compared to 17.28 times of pre-
vious fiscal year second quarter
which indicates that the price of
commercial banks in the second-
ary markets is highly overpriced.
Out of 31 commercial banks, only
four companies’ P/E ratios were
above the average level. With the
formation of Nepali Congress-led
government, the market has hoped
for betterment of stock market and
the political situation of the coun-
try which has motivated investors
9

to pay higher price for the scrips
of the commercials banks and even
scrips of other sectors. (Note: the
stock price of 14th January 2014
was taken to calculate the P/E ra-
tio of commercial banks )
Price-to-book ratio is another ratio
which is used to find undervalued
securities. It is just a ratio of the
market price of a company’s shares
(share price) over its book value of
stock. Janata Bank Limited had a
highest P/B ratio of 245.84 times
whereas GBIME had the lowest
P/B ratio of 11.22 times.
(In Times)
Banks PE
Ratio
(Most)
Banks PE
Ratio
(Least)
JBNL 245.84 PCBL 21.08
CTBNL 147.71 CZBIL 20.13
KBL 36.07 NCC 19.21
LUBL 35.25 GBIME 11.22
GRAND 32.21 KIST -23.54
Figure: P/E ratio of Top Five Commer-
cial Banks
(In Times)
Banks P/B ratio
(Most)
Banks P/B
Ratio
(Least)
NBL 35.93 GRAND 2.57
NABIL 8.71 NCC 2.52
SCB 7.58 LUBL 2.16
EBL 7.39 CTBNL 2.04
SBI 6.94 ADBL 1.73
Figure: P/B ratio of Top Five Commer-
cial Banks
( In Rs )
Banks NET WORTH
EBL 299.07
ADBL 289.96
SCB 257.30
NABIL 254.76
NICA 241.92
Figure: Net worth of Top Five Com-
mercial Banks
Base Rate:
Looking at the base rate of the
banks, Standard Chartered Bank
Nepal Limited shall be the bank
to get the cheapest loan from as
its base rate is the lowest among
10
commercial banks whereas Civil
Bank Limit¬ed may be the most
expensive one, according to the
base rate data of all commercial
banks of Nepal.
SCB’s base rate stood at 5.15
per cent, followed by NABIL
with 6.07 per cent, whereas Civil
Bank’s base rate stood at 10.61
per cent. Seven banks have a base
rate lower than 8 per cent, where-
as ten banks are in between 8 to 9
per cent, nine banks between 9 to
10 per cent, and the rest above 10
per cent.
The base rate came into ef-
fect from mid-January, 2013.
The base rate alone may not be
enough for a bank to provide
cheap loans. But the base rate
gives an idea of the minimum in-
terest rate that bank could charge
on lending. Banks cannot extend
loans to borrow¬ers below the
base rate now, as it is expected
to make credit pric¬ing more
transparent. The central bank has
now made it mandatory for all the
commercial banks to fix lending
rates based on the base rate that
will set the floor for credit rates
and give borrowers a basic idea
on how cheap they can get credit
from banks. However, banks can
add a minimum premium on the
base rate depending on the qual-
ity of collateral, and the risk of
the loan and the borrower. Banks
may not add any premium if a
borrower has safe collateral like
government bonds and if it is for
priority sec¬tors identified by the
government.
The base rate will ensure the
sta¬bility of the monetary mar-
ket in the current volatile situ-
ation when the interest rates are
fluctuating, and could attain the
sustainabil¬ity and long-term sta-
bility of the financial system.
(In %)
Banks Base
Rate
(Low)
Banks Base
Rate
(High)
SCB 6.80 Sanima 10.36
RBB 6.81 Grand 10.53
EBL 7.04 CIVIL 10.91
NIBL 7.80 Century 11.07
NABIL 7.80 ADBL 12.35
Figure: : Base Rate of Least Five and
Top Five Commercial Banks
Conclusion:
Even with a very challenging busi-
ness environment, the commercial
banks still have come out to publish
an amazing growth figure. With
the growth figure of 18.22%, the
commercial banks have yet again
made a statement that with good
regulatory framework, the indus-
try can make best of it even in the
worst condition. Supported by the
high gap between deposit and loan
interest rate, from the beginning,
the commercial banks were able to
keep their cost to minimum and net
interest spread to maximum, help-
ing in a way to post a significant
profit growth.
The timely full budget and NRB’s
flexible monetary policy of lower-
ing the CRR and SLR ratio to 5%
and 12% respectively have also
helped to sustain a positive growth
of the banking industry. The banks
currently have more funds to in-
vest in sectors that yield higher re-
turns. However, the lack of politi-
cal harmony has kept the business
communities in wait and watch
situation for business expansion,
which has been the main obstacles
in loan floatation for banks.
Further, as the country is in the
process of drafting a new constitu-
tion, the business fraternities are
closely watching over the feder-
alism system that the country is
going to opt. This is surely going
to have direct impact on the ex-
pansion strategies of the business
houses, which again will affect

the loan expansion strategy of the
banking sector.
Other worrying factors for the
banking industry are the sluggish
economic condi¬tion, widening
trade deficit, high inflation rate,
unfavorable busi¬ness environ-
ment, lack of implementation and
smooth transition in big projects,
delay in the decision making pro-
cess that are not only creating ob-
stacles in businesses expansion but
also narrowing the investment op-
portunity.
Along with these, the presences
of financial institutions are high
in numbers, triggering a very stiff
competition among the BFIs. This
unfavorable and crowded scenario
is creating unhealthy practices
and increasing defaulters in banks
which are a troubling sign for the
profitability of banks in the long
run.
In spite of all these, the central
bank has been very helpful to
guide the banking sector of Nepal
to cope up with heightening com-
petition among the existing bank-
ing institutions in the small market
place like Nepal. NRB has promot-
ed merger of BFIs with an aim to
create a positive impact in the long
term for the banking industry.
After the successful merger of
NIC Bank and Bank of Asia Nepal
limited into NIC Asia Bank Ltd,
Global IME and CTBNL are in the
final process of merger, which can
be taken as another major develop-
ment. This surely will give positive
message to overall banking system
and energize more banks to merge
and become strong entities rather
than being a fish in a pond.
11

Annex
2nd Quarterly Financial Highlights of 2070/71 fiscal year
Particulars 2nd Quarter
2070/71
2nd Quarter
2069/70
Difference (In
figure)
%
Change
Total Net Profit (In Rs.) 9,399,661.61 7,943,439.70 1,456,221.91 18.33%
Total Operating Profit Before Provision (In Rs.) 16,710,192.18 14,808,396.51 1,901,795.67 12.84%
Total Net Interest Income (In Rs.) 21,501,675.39 19,308,014.94 2,193,660.45 11.36%
Total Deposits (In Rs.) 1,095,667,487.43 905,803,708.97 189,863,778.46 20.96%
Total Loans and Advances (In Rs.) 815,892,218.85 690,291,848.29 125,600,370.56 18.20%
Total Investment (In Rs.) 229,175,195.15 196,160,292.66 33,014,902.49 16.83%
Total Provision (In Rs.) 3,595,551.72 4,865,154.56 -1,269,602.84 -26.10%
Write back from possible losses (In Rs.) 2,602,296.79 2,071,788.58 530,508.21 25.61%
Net Write back (In Rs.) -993,254.93 -2,793,365.98 1,800,111.05 -64.44%
Average CD ratio 73.73% 75.56% -1.83% -2.43%
Average Non Performing Loan 2.96% 2.66% 0.30% 11.10%
Average Cost of Fund 5.67% 6.09% -0.42% -6.90%
Average Net Interest Spread 4.60% 4.37% 0.23% 5.19%
Annualized Average Earning Per Share (EPS) (In Rs.)
23.65 20.97
2.68 12.80%
Annualized Average Return on Equity (ROE) 17.46% 19.55% -2.09% -10.71%
Annualized Average Return on Asset (ROA) 1.26% 1.28% -0.02% -1.70%
Annualized Average Price-to-Earning (P/E ratio in
Times) 33.00 17.28
15.72 90.98%
Average Price to Book Ratio (P/B ratio in Times)
4.59 2.54
2.04 80.25%
Average Net worth (In Rs.)
155.10 146.72
8.38 5.71%
12

Annexure
Paid up capital
(Figure in Rs ‘000’)
ADBL 9,636,800
RBB 8,588,972
NIBL 4,146,708
NBL 3,965,524
NABIL 3,047,168
GBIME 2,780,858
HBL 2,760,000
SBI 2,650,206
PCBL 2,574,446
MBL 2,478,795
MEGA 2,330,000
NICA 2,311,552
SANIMA 2,217,600
NBB 2,210,335
CZBIL 2,101,840
JBNL 2,060,000
SCB 2,041,672
SRBL 2,015,000
NMB 2,000,000
GRAND 2,000,000
CBL 2,000,000
CTBNL 2,000,000
KIST 2,000,000
EBL 1,921,239
BOK 1,920,212
SBL 1,813,554
LUBL 1,729,728
LBL 1,694,081
KBL 1,603,800
NCC 1,470,000
CENTURY 1,126,000
Reserve
ADBL 6,271,829
NABIL 4,715,876
NIBL 3,817,069
EBL 3,585,724
HBL 3,320,963
NICA 3,280,583
SCB 3,211,595
BOK 1,634,905
NBB 1,634,199
SBI 1,607,795
LBL 1,164,474
KBL 1,127,739
GBIME 982,736
NCC 971,923
SBL 930,663
PCBL 687,179
SRBL 661,221
MBL 638,099
NMB 633,716
LUBL 515,271
CZBIL 514,346
SANIMA 400,798
GRAND 368,555
MEGA 288,469
CENTURY 178,208
CTBNL 109,384
JBNL 74,858
CBL 72,144
KIST -326,635
NBL -3,572,653
RBB -6,598,604
Deposit
RBB 97,006,591
NIBL 71,990,337
NABIL 68,868,332
ADBL 64,966,086
NBL 64,325,548
EBL 59,922,282
HBL 59,767,196
SBI 56,445,871
SCB 40,026,409
NICA 38,441,092
GBIME 36,975,765
SBL 31,409,472
MBL 31,114,276
BOK 29,317,628
LBL 28,190,101
KBL 27,401,862
PCBL 26,946,730
SRBL 25,329,556
CZBIL 24,185,687
NBB 23,700,171
NMB 22,093,652
NCC 22,017,329
GRAND 19,938,669
SANIMA 19,889,934
KIST 19,403,762
CBL 18,485,816
MEGA 15,091,596
JBNL 14,902,031
CENTURY 14,285,979
LUBL 12,542,863
CTBNL 10,684,864
Loan and Advances
ADBL 52,698,805
NIBL 52,250,959
RBB 52,177,829
NABIL 51,393,936
EBL 47,965,162
HBL 43,957,460
NBL 38,903,204
SBI 32,325,616
NICA 31,838,531
GBIME 30,116,182
MBL 25,270,091
SCB 25,116,489
BOK 24,834,223
SBL 24,720,104
PCBL 23,323,936
LBL 21,907,110
KBL 21,510,540
CZBIL 20,417,313
SRBL 20,129,918
NCC 17,607,686
NMB 17,413,134
SANIMA 17,170,783
NBB 15,982,227
KIST 15,875,132
GRAND 15,389,593
CBL 15,293,024
MEGA 13,723,096
JBNL 12,949,560
CENTURY 12,337,231
LUBL 11,044,999
CTBNL 10,248,346
13

Net Write Back
GBIME 71642
PCBL 17649.07
SBI 16246
NCC 9925
NMB -1149
NBL -12683
RBB -17105
MBL -20418
SANIMA -25812
MEGA -27252
NBB -32646
BOK -35499
EBL -39682
SCB -48348
SRBL -54508
CENTURY -56399
LUBL -60812
LBL -63173
JBNL -70899
CTBNL -73436
NIBL -74791
GRAND -91145
NICA -107187
CZBIL -116108
CBL -118149
SBL -161965
HBL -184946
KBL -200366
NABIL -244830
KIST -429256
ADBL -449131
Net Profit
NABIL 1,066,956
NIBL 940,392
RBB 717,881
EBL 679,119
SCB 633,311
HBL 544,488
GBIME 532,806
ADBL 460,079
SBI 459,045
NICA 385,355
PCBL 310,147
NBB 271,122
NBL 262,219
BOK 250,474
SBL 242,774
CZBIL 236,461
SRBL 205,832
MBL 204,037
NMB 203,884
SANIMA 194,367
MEGA 166,366
NCC 159,935
LBL 145,823
GRAND 94,393
LUBL 68,698
KBL 61,775
CENTURY 39,532
CBL 33,983
CTBNL 14,556
JBNL 12,653
KIST -198,801
Net Worth
(Figure in Rs )
EBL 299.07
ADBL 289.96
SCB 257.30
NABIL 254.76
NICA 241.92
HBL 220.32
NIBL 192.05
BOK 185.14
NBB 173.93
KBL 170.32
LBL 168.74
NCC 166.12
SBI 160.67
SBL 151.32
GBIME 135.34
SRBL 132.81
NMB 131.09
LUBL 129.79
PCBL 126.69
MBL 125.74
CZBIL 124.47
GRAND 118.43
SANIMA 118.07
CENTURY 115.83
MEGA 112.38
CTBNL 105.47
JBNL 103.63
CBL 103.61
RBB 100.00
KIST 83.23
NBL 9.91
CD Ratio
(Figure in %)
MEGA 79.85
CENTURY 79.75
PCBL 79.19
EBL 78.38
SANIMA 78.38
NICA 77.39
CTBNL 77.15
JBNL 76.75
SBI 76.64
NABIL 76.52
GBIME 76.06
SRBL 75.84
LBL 75.81
CBL 75.78
KIST 75.64
LUBL 75.63
CZBIL 75.46
SBL 75.40
BOK 75.39
KBL 74.79
MBL 74.29
NCC 74.15
NIBL 73.78
NMB 73.64
GRAND 70.91
SCB 70.72
HBL 69.51
ADBL 69.09
NBB 60.50
NBL 60.30
RBB 52.90
14

ROE
(Figure in %)
NABIL 28.30
SCB 24.11
NIBL 22.38
GBIME 22.07
EBL 28.85
PCBL 19.97
NBB 14.10
MEGA 13.53
SANIMA 14.81
NICA 13.78
HBL 18.68
CZBIL 18.08
NMB 14.46
BOK 14.50
SBI 23.16
SRBL 15.41
SBL 17.68
RBB 16.72
NCC 12.69
LBL 10.46
LUBL 7.94
KBL 9.65
GRAND 7.97
NBL 133.49
ADBL 5.75
MBL 13.09
CENTURY 6.25
CBL 3.28
JBNL 1.18
CTBNL 0.69
KIST -11.88
P/E Ratio
(Figure in Times)
JBNL 245.84
CTBNL 147.71
KBL 36.07
LUBL 35.25
GRAND 32.21
SBI 32.19
SCB 31.45
MEGA 31.18
LBL 30.32
ADBL 30.02
SANIMA 29.98
NABIL 29.49
EBL 29.31
NBL 26.73
NBB 25.48
BOK 24.69
NICA 24.41
HBL 22.56
SBL 22.41
MBL 22.35
NIBL 22.27
SRBL 21.78
NMB 21.23
PCBL 21.08
CZBIL 20.13
NCC 19.21
GBIME 11.22
KIST -23.54
CBL 0.00
RBB 0.00
CENTURY 0.00
ROA
(Figure in %)
NABIL 2.74
SCB 2.72
NIBL 2.52
GBIME 2.46
EBL 1.98
PCBL 1.96
NBB 1.85
MEGA 1.81
SANIMA 1.66
NICA 1.66
HBL 1.64
CZBIL 1.62
NMB 1.55
BOK 1.46
SBI 1.45
SRBL 1.44
SBL 1.32
RBB 1.26
NCC 1.16
LBL 0.92
LUBL 0.89
KBL 0.87
GRAND 0.80
NBL 0.70
ADBL 0.59
MBL 0.58
CENTURY 0.41
CBL 0.32
JBNL 0.14
CTBNL 0.11
KIST -0.86
15
Disclaimer:
The views expressed on this document are a general guide to the views of Share Sansar. Use or
distribution of this document by any other person is prohibited. Copying any part of these
materials without the written permission of Share Sansar is prohibited. Care has been taken to
ensure the accuracy of content but no responsibility is accepted for any errors or omissions
herein. The information and opinions in these materials have been complied or arrivedat based upon
information obtained from sources believed to be reliable and in good faith. Share Sansar accepts no
liability for any damages or any loss or damages of any kind arising from any use of the information herein.
BASE RATE
(Figure in %)
CBL 10.61
KIST 10.56
ADBL 10.52
CTBNL 10.51
CENTURY 10.20
NCC 9.96
GRAND 9.92
JBNL 9.63
SANIMA 9.54
LUBL 9.42
LBL 9.32
PCBL 9.26
SBL 9.14
NMB 9.11
KBL 9.01
MEGA 8.98
SRBL 8.98
MBL 8.84
NICA 8.69
NBL 8.55
GBIME 8.46
SBI 8.31
BOK 8.25
NBB 8.22
CZBIL 7.88
HBL 7.87
NIBL 7.07
EBL 6.77
RBB 6.28
NABIL 6.07
SCB 5.15

Second quater analysis 2071

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Second quater analysis 2071

Similar to Second quater analysis 2071 (20)

Recently uploaded

Recently uploaded (20)

Second quater analysis 2071