iCAPITAL Pvt. Ltd.

INDUSTRY ANALYSIS – COMMERCIAL BANKS

QUARTER 3 OF FY 2074/75

There are 27 commercial banks are listed in Nepal Stock Exchange. Their performance is

analyzed below using some over-looked ratios:

1. Net Loans to Total Assets

This shows how much of assets of the bank are tied up in loans. Lower this ratio, the

more liquid the bank. SCB, EBL and NBL have the lowest net loans to total assets

indicating they have good liquidity, while MBL, CCBL and JBNL have the highest

net loans to total assets.

Net Loans to Total Assets

SCB 60.95%

EBL 67.12%

NBL 69.84%

PRVU 70.09%

SBI 70.21%

NICA 71.51%

CZBIL 71.83%

NABIL 71.90%

NMB 72.43%

MEGA 72.56%

CBL 72.76%

GBIME 72.86%

NCCB 72.98%

SRBL 73.22%

NIB 73.58%

BOKL 74.40%

NBB 74.53%

SANIMA 74.88%

HBL 75.14%

SBL 75.27%

ADBL 75.44%

LBL 76.24%

KBL 76.33%

PCBL 76.57%

MBL 76.67%

CCBL 76.88%

JBNL 77.17%

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2. Non-Performing Loan (NPL) to Total Loan

This shows the quality of the loans that the commercial banks have extended. Lower

this ratio, better the loan disbursement by the bank. In Nepal, banks having more than

5% NPL to total loan are barred from distributing dividend. As per third quarter report

of 2074/75, SBI, SANIMA and SCB have the lowest non-performing loan to total

loan. CBL, PRVU and NCCB have the highest non-performing loan to total loan.

Non Performing Loan (NPL) to Total Loan

SBI 0.13%

SANIMA 0.17%

SCB 0.21%

NICA 0.22%

EBL 0.23%

MBL 0.35%

NIB 0.76%

CCBL 0.76%

MEGA 0.98%

PCBL 1.06%

NABIL 1.07%

NMB 1.10%

LBL 1.16%

HBL 1.19%

KBL 1.24%

GBIME 1.29%

SBL 1.31%

SRBL 1.45%

CZBIL 1.46%

NBB 1.77%

BOKL 1.82%

JBNL 1.95%

NBL 2.91%

ADBL 3.49%

CBL 3.74%

PRVU 3.90%

NCCB 3.97%

3. Total Loan Loss Provision to Total NPL

This shows the strength of a bank in covering its non-performing loans. Higher this

ratio, higher is the banks’ capacity to cover potential loan losses. Ideally a bank

should have at least 100% total loan loss provision to total NPL. Here again, SBI,

SANIMA and SCB have come on top indicating they are in a good position to absorb

any losses arising from non-performing loans. NCCB and PRVU have less than 100%

loan loss provision to total NPL.

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Total Loan Loss Provision to Total NPL

SBI 858.31%

SANIMA 689.32%

SCB 573.19%

EBL 533.99%

NICA 525%

MBL 371.96%

NIB 244.93%

CCBL 195.10%

MEGA 183.61%

NABIL 165.92%

HBL 158.38%

NMB 158.29%

PCBL 158.24%

CZBIL 155.64%

KBL 152.57%

LBL 149.70%

GBIME 149.27%

SBL 130.82%

ADBL 128.35%

SRBL 127.19%

BOKL 118.02%

NBB 117.69%

NBL 108.77%

JBNL 108.43%

CBL 100.34%

NCCB 93.31%

PRVU 75.53%

4. Cost of Funds

Cost of Funds shows how efficiently banks are collecting deposits. Lower cost of

funds is preferable as it indicates that a bank is in a good position to generate better

returns. NBL, SCB and NABIL have the lowest cost of funds while KBL, CBL and

CCBL have the highest cost of funds which shows they might be having difficulty

collecting more deposits.

Cost of Funds

NBL 2.97%

SCB 3.80%

NABIL 4.63%

SBI 5.25%

EBL 5.39%

NIB 6.35%

HBL 6.35%

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PRVU 6.39%

ADBL 7.15%

SANIMA 7.32%

SRBL 7.40%

NMB 7.41%

SBL 7.49%

MBL 7.53%

MEGA 7.64%

LBL 7.73%

NICA 7.84%

JBNL 7.87%

NBB 7.98%

BOKL 8.01%

GBIME 8.22%

CZBIL 8.35%

NCCB 8.52%

PCBL 8.53%

KBL 8.67%

CBL 8.81%

CCBL 8.88%

5. Net Interest Spread

Net interest spread is the difference between interest rate on deposits offered by a

banks and interest rate it charges on loans. Higher the net interest spread, higher the

profit potential of banks. As per FY 2074/75 third quarter report, ADBL, SBI and

SCB have the highest net interest spread. NCCB, GBIME and CBL have the lowest

net interest spread.

Net Interest Spread

ADBL 5.61%

SBI 5.24%

SCB 5.23%

NBL 4.99%

NABIL 4.89%

NICA 4.77%

EBL 4.75%

HBL 4.55%

MEGA 4.48%

PRVU 4.41%

NIB 4.28%

PCBL 4.28%

JBNL 4.25%

MBL 4.23%

SANIMA 4.05%

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SRBL 4.05%

BOKL 4.04%

CZBIL 3.74%

SBL 3.68%

CCBL 3.63%

LBL 3.61%

NBB 3.59%

KBL 3.20%

NMB 3.16%

NCCB 3.14%

GBIME 2.98%

CBL 2.41%

6. Return on Assets (Annualized)

Return on assets shows how effectively a company is utilizing its assets. Higher ROA

indicates better management of the assets of the bank. NBL, SCB and NABIL have

the highest ROA while NCCB, CBL and NICA have the lowest ROA.

ROA Annualized

NBL 3.00%

SCB 2.64%

NABIL 2.56%

NIB 2.34%

PCBL 1.93%

ADBL 1.90%

HBL 1.89%

SANIMA 1.87%

NMB 1.84%

EBL 1.83%

SBI 1.74%

CZBIL 1.73%

NBB 1.68%

SRBL 1.59%

GBIME 1.58%

SBL 1.54%

LBL 1.39%

BOKL 1.37%

MBL 1.34%

CCBL 1.29%

KBL 1.26%

MEGA 1.23%

JBNL 1.16%

PRVU 1.11%

NCCB 1.01%

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CBL 0.97%

NICA 0.81%

7. Return on Equity (Annualized)

Return on equity shows how effectively the company is utilizing capital invested by

its shareholders. Higher the ROE, better the company is at managing its funds. NBL,

NABIL and NIB have the highest ROE while JBNL, MEGA and CBL have the

lowest ROE.

ROE

NBL 24.42%

NABIL 22.14%

NIB 17.55%

EBL 17.22%

HBL 16.14%

PCBL 15.69%

SANIMA 15.67%

NMB 15.54%

GBIME 15.11%

SBI 15.07%

SCB 15.05%

SBL 14.07%

CZBIL 12.94%

SRBL 11.84%

NICA 11.19%

MBL 11.03%

BOKL 10.78%

KBL 10.71%

LBL 10.30%

PRVU 10.14%

ADBL 10.11%

NCCB 9.28%

CCBL 9.06%

NBB 8.49%

JBNL 8.19%

MEGA 7.62%

CBL 5.28%

8. Total Operating Expenses to Total Operating Income

This ratio shows how much operating expenses is incurred for every Re. 1 operating

income generated. Lower total operating expenses to total operating income is

preferable. SCB, SANIMA and NBB have the lowest total operating expenses to total

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operating income. CCBL, KBL and PRVU have the highest total operating expenses

to total operating income.

Total Operating Expenses to Total Operating Income

SCB 0.67

SANIMA 0.68

NBB 0.70

PCBL 0.71

NABIL 0.71

SRBL 0.73

CZBIL 0.75

MEGA 0.75

SBL 0.75

LBL 0.76

ADBL 0.76

EBL 0.77

NBL 0.77

GBIME 0.78

JBNL 0.79

NIB 0.81

CBL 0.82

SBI 0.82

NICA 0.83

HBL 0.84

NMB 0.87

MBL 0.87

BOKL 0.88

NCCB 0.89

CCBL 0.89

KBL 0.91

PRVU 0.93

9. Interest Income to Total Operating Income

This ratio shows how much interest income is contributing to total operating income.

Lower ratio indicates that there are other sources of regular income for the banks

besides interest income. SCB, NBB and NBL have the lowest interest income to total

operating income while KBL, NCCB and JBNL have the highest interest income to

total operating income.

Interest Income to Total Operating Income

SCB 75.16%

NBB 82.74%

NBL 86.07%

NABIL 86.25%

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HBL 86.74%

NIB 86.77%

PCBL 87.92%

NMB 88.06%

SBI 88.18%

CZBIL 88.37%

SANIMA 88.86%

PRVU 89.19%

LBL 89.25%

EBL 89.72%

GBIME 89.80%

SBL 89.86%

ADBL 90.02%

SRBL 90.05%

CBL 90.87%

CCBL 91.48%

MBL 91.71%

BOKL 91.84%

NICA 91.95%

MEGA 92.00%

KBL 92.27%

NCCB 92.45%

JBNL 93.19%

10. Interest Expenses to Total Operating Expenses

This ratio shows how much of total operating expenses are due to the interest

expenses. Higher ratio shows that there are not many expenses besides interest

expenses. PCBL, CZBIL and SANIMA have the highest interest expenses to total

operating expenses. NABIL, SCB and NBL have the lowest interest expenses to total

operating expenses.

Interest Expenses/Total Operating Expenses

PCBL 89.21%

CZBIL 83.39%

SANIMA 82.99%

NCCB 82.14%

SBL 81.50%

MEGA 80.98%

LBL 80.93%

NBB 79.24%

SRBL 79.07%

CBL 78.91%

GBIME 78.79%

NICA 78.78%

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JBNL 77.96%

CCBL 72.51%

KBL 72.25%

MBL 70.33%

BOKL 68.22%

NMB 67.39%

PRVU 64.83%

ADBL 64.67%

NIB 61.79%

EBL 61.74%

HBL 59.68%

SBI 59.63%

NABIL 53.37%

SCB 36.38%

NBL 33.85%

11. Provision for Possible Loss/Operating Profit before Provision

This ratio shows how much of the operating profit is eaten away by the provision for

possible loss. Lower ratio is preferable. EBL, SCB and NABIL have the lowest

provision for possible loss/operating profit before provision while NCCB, CBL and

ADBL have the highest figure in this ratio.

Provision for Possible Loss/Operating Profit before Provision

EBL 4.05%

SCB 5.66%

NABIL 5.87%

SBI 6.43%

NBL 7.80%

NMB 8.54%

SANIMA 9.72%

GBIME 10.66%

CCBL 12.19%

PCBL 12.49%

MBL 13.21%

HBL 14.45%

NIB 15.08%

KBL 16.54%

CZBIL 17.23%

LBL 17.47%

BOKL 17.79%

SBL 20.18%

SRBL 26.05%

PRVU 26.24%

NBB 28.07%

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NICA 29.89%

MEGA 34.41%

JBNL 35.19%

NCCB 40.26%

CBL 71.66%

ADBL 74.49%

12. Net Interest Income / Interest Income

The major source of income for banks is interest income. Net interest income to

interest income shows how much of the interest income is retained after paying out

the interest expenses. It can also be regarded as the gross profit margin and shows the

profit made from core business. NBL, SCB and NABIL have the highest gross profit

margin while KBL, PCBL and NCCB have the lowest gross profit margin.

Net Interest Income/Interest Income

NBL 69.52%

SCB 67.54%

NABIL 55.79%

EBL 46.94%

ADBL 45.49%

SBI 44.54%

HBL 42.36%

NIB 42.35%

SANIMA 36.50%

SRBL 35.56%

BOKL 34.64%

MEGA 34.17%

JBNL 34.00%

NMB 33.47%

MBL 33.04%

NBB 32.84%

PRVU 32.47%

SBL 31.93%

GBIME 31.71%

LBL 31.30%

CZBIL 29.51%

CCBL 29.25%

NICA 29.19%

CBL 28.91%

KBL 28.63%

PCBL 28.30%

NCCB 21.08%

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13. Operating Profit to Interest Income

This ratio is also known as operating profit margin and shows how much the company

is actually earning from its operations. Higher operating profit margin indicates better

operations of the company. SCB, NABIL and NBL have the highest operating profit

margin while NCCB, ADBL and CBL have the lowest operating profit margin.

Operating Profit/Interest Income

SCB 69.85%

NABIL 52.57%

NBL 47.19%

EBL 40.40%

NIB 38.63%

SBI 33.94%

SANIMA 32.52%

HBL 30.95%

PCBL 29.19%

NMB 26.90%

NBB 25.97%

CZBIL 23.69%

MBL 22.46%

LBL 22.41%

SBL 22.16%

GBIME 22.05%

BOKL 22.01%

SRBL 21.85%

CCBL 20.33%

KBL 18.20%

MEGA 17.97%

PRVU 16.50%

JBNL 14.68%

NICA 13.24%

NCCB 7.22%

ADBL 6.84%

CBL 5.66%

14. Net Profit to Interest Income

Net profit to interest income can also be regarded as the net profit margin. It shows

how much of the revenue is retained after paying for all expenses. Higher ratio is

preferable. As per FY 2074/75 third quarter report, SCB, NBL and NABIL have the

highest net profit margin while CBL, NCCB and NICA have the lowest net profit

margin.

Net Profit/Interest Income

SCB 45.58%

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NBL 38.87%

NABIL 34.78%

NIB 29.19%

EBL 26.04%

HBL 23.46%

NMB 22.44%

SBI 21.25%

SANIMA 21.20%

PCBL 21.02%

CZBIL 20.32%

ADBL 18.89%

NBB 18.68%

SBL 17.78%

GBIME 17.52%

SRBL 17.44%

LBL 16.21%

BOKL 15.63%

MBL 15.11%

KBL 15.06%

CCBL 15.00%

PRVU 14.80%

MEGA 13.79%

JBNL 12.43%

CBL 11.33%

NCCB 11.33%

NICA 10.20%