PERFORMANCE PERFORMANCE ANALYSIS OF ANALYSIS OF FINANCIAL FINANCIAL

INSTITUTIONSINSTITUTIONS

SANJEEV MANANDHARSANJEEV MANANDHAR

GENERAL MANAGERGENERAL MANAGER

PRIME BANKPRIME BANK

What is Banking What is Banking Business?Business?

• Banking business is managing Banking business is managing various risks in much efficient various risks in much efficient fashion to trade off between risks fashion to trade off between risks and return;and return;

Financial market of Financial market of Commercial Banks :2065/66Commercial Banks :2065/66• Total commercial banks:26Total commercial banks:26• Total Deposits: 528 billionTotal Deposits: 528 billion• Total Loans: 433 billionTotal Loans: 433 billion• Average deposit growth: 19%Average deposit growth: 19%• Average credit growth: 24%Average credit growth: 24%

CAMELSCAMELS

• The six important areas, commonly The six important areas, commonly referred to as the “CAMELS,” for referred to as the “CAMELS,” for analysis are: analysis are:

• CCapital adequacy;apital adequacy;• AAsset quality;sset quality;• MManagement competence and anagement competence and

commitment;commitment;• EEarnings capability; arnings capability; • LLiquidity; andiquidity; and• SSensitivity to market risk ensitivity to market risk

PERFORMANCE PERFORMANCE ANALYSISANALYSIS

• Financial Status of Financial Financial Status of Financial Institutions and where it stands today Institutions and where it stands today with other Banks;with other Banks;

• Deposit market of Nepal Vis-a- vis Deposit market of Nepal Vis-a- vis Financial InstitutionFinancial Institution

• Credit market of Nepal Vis-a – vis Credit market of Nepal Vis-a – vis Financial InstitutionFinancial Institution

• Credit market of Nepal as per Credit market of Nepal as per Geographical locations;Geographical locations;

Various Risks in banksVarious Risks in banks

• Banking business, by its nature Banking business, by its nature operates under various risks:operates under various risks:– Credit Risks Credit Risks – Operational Risks;Operational Risks;– Market risks;Market risks;– Liquidity risks;Liquidity risks;– System Risks;System Risks;– Accounting Risks;Accounting Risks;– Legal Risks;Legal Risks;– Reputations risks;Reputations risks;

CREDIT ANALYSISCREDIT ANALYSIS

• ANNUAL GROWTH;ANNUAL GROWTH;• NON PERFORMING ASSETS;NON PERFORMING ASSETS;• ECONOMIC AND GEOGRAPHICAL ECONOMIC AND GEOGRAPHICAL

CONCENTRATION;CONCENTRATION;• COLLATERAL QUALITY;COLLATERAL QUALITY;• DOCUMENTATION QUALITY;DOCUMENTATION QUALITY;• RECOVERY OF INTEREST AND RECOVERY OF INTEREST AND

PRINCIPAL;PRINCIPAL;

Loan Growth of BanksLoan Growth of Banks

0

50

100

150

200

250

300

350

400

2004 2005 2006 2007 2008

TotaLoanADB/NRs in Billion

Deposit Share

NBL, 9.80

RBB, 13.59

NABIL Bank , 7.48

NIBL, 8.08

SCBNL, 6.97HBL, 7.49

SBI, 3.22

NBB, 2.55

EBL, 5.62

BOK, 3.69

NCC, 1.72

LBL, 1.34

NIC, 3.07

MBL, 2.60

KBL, 3.00

Laxmi Bank , 2.56

GBL, 1.72

ADBN, 7.64

Sunrise, 0.99NMB, 0.39

PCBL, 1.24

CBL, 1.44ADB, 0.00

DCBL, 0.69

BOA, 0.72

SBL, 2.40

NBL

RBB

NABIL Bank

NIBL

SCBNL

HBL

SBI

NBB

EBL

BOK

NCC

LBL

NIC

MBL

KBL

Laxmi Bank

SBL

GBL

ADB

CBL

PCBL

Sunrise

BOA

DEPOSIT ANALYSISDEPOSIT ANALYSIS

• ANNUAL GROWTH;ANNUAL GROWTH;• DEPOSIT CONCENTRATION;DEPOSIT CONCENTRATION;• DEPOSIT COMPOSITION;DEPOSIT COMPOSITION;

– FIXED DEPOSIT;FIXED DEPOSIT;– SAVING DEPOSIT;SAVING DEPOSIT;– CURRENT DEPOSIT;CURRENT DEPOSIT;– CALL DEPOSIT;CALL DEPOSIT;

• COST OF DEPOSIT;COST OF DEPOSIT;

Deposit structure of Deposit structure of BanksBanks

Current

Saving

Fixed

OthersSavings

192B

Fixed92 B

Current50B

Others38B

Deposit Growth of BanksDeposit Growth of Banks

LIQUIDITY RISKSLIQUIDITY RISKS

• DOES THE FINANCIAL INSTITUTIONS HAVE DOES THE FINANCIAL INSTITUTIONS HAVE PERFORMED GAP ANALYSIS;PERFORMED GAP ANALYSIS;

• DOES THE FINANCIAL INSTITUTIONS HAVE DOES THE FINANCIAL INSTITUTIONS HAVE ENOUGH INVESTMENT IN LIQUID ASSETS;ENOUGH INVESTMENT IN LIQUID ASSETS;

• DOES THE FI’S HAS REASONABLE CREDIT DOES THE FI’S HAS REASONABLE CREDIT DEPOSIT RATIO;DEPOSIT RATIO;

• DOES THE FI HAS A CAPACITY TO REPLACE DOES THE FI HAS A CAPACITY TO REPLACE MATURING HUGE FIXED DEPSOTIS AND MATURING HUGE FIXED DEPSOTIS AND WITHDRAWAL OF CALL DEPOSITS;WITHDRAWAL OF CALL DEPOSITS;

INVESTMENT ANALYSISINVESTMENT ANALYSIS

• DOES THE FI HAS ENOUGH DOES THE FI HAS ENOUGH INVESTMENTS IN TREASURY INVESTMENTS IN TREASURY BILLS AND GOVERNMENT BANKS;BILLS AND GOVERNMENT BANKS;

• WHAT ARE OTHER INVESTMENTS WHAT ARE OTHER INVESTMENTS MADE BY THE FI;MADE BY THE FI;

ANALYSIS OF INCOME ANALYSIS OF INCOME STATEMENTSTATEMENT

• INTEREST YIELD;INTEREST YIELD;• COST OF FUND;COST OF FUND;• NET INTEREST INCOME COMPARED TO RISKS NET INTEREST INCOME COMPARED TO RISKS

ASSETS;ASSETS;• OTHER INCOME vs INTEREST INCOME;OTHER INCOME vs INTEREST INCOME;• OPERATING EXPENSES vs DEPOSIT/LOANS;OPERATING EXPENSES vs DEPOSIT/LOANS;• STAFF COST vs DEPOSIT/LOANS;STAFF COST vs DEPOSIT/LOANS;• NET PROFIT vs PAID UP CAPITAL;NET PROFIT vs PAID UP CAPITAL;• GROWTH TREND OF INCOMES AND GROWTH TREND OF INCOMES AND

EXPENDITURE;EXPENDITURE;• EXTRAORDINARY ITEMS;EXTRAORDINARY ITEMS;

Good Loan share in %

NBL, 5.55RBB, 7.39

Nabil, 7.97

NIBL, 8.79

SCNL, 4.80

HBL, 8.11

SBI, 4.55

NB, 2.44EBL, 6.80

BOK, 4.66

NCC, 1.58

LB, 1.89

NIC, 4.27

MBL, 3.25

KBL, 4.55

Laxmi Bank , 3.36

SBL, 3.23

GBL, 1.57

ADB, 11.66

CBL, 1.65

PCBL, 1.14

SB, 0.43

BOA, 0.36NBL

RBB

Nabil

NIBL

SCNL

HBL

SBI

NB

EBL

BOK

NCC

LB

NIC

MBL

KBL

Laxmi Bank

SBL

GBL

ADB

CBL

PCBL

SB

248 billion good loan market

of Nepal

17

250 BILLION GOOD CREDIT MARKET

Jhapa 2.5 B

BRT 20 B

Jpur 2.5 B

BRJ 25 B

PKR 6.25 B

Sngr 8 B

NPJ 2.5 B

Mngr/Dgd3.75 B

KTM 125 B

20%

Source : NRB Reports/estimates etc.

GEOGRAPHICAL DISTRIBUTION OF LOANS

H’da 2.5 B

Where PCBL stands: Where PCBL stands: DepositsDeposits

2.2%2.0%2.3%

2.0%3.0%

2.9%

83.8%

1.7%

Prime

Citizen

BOA

Sunrise

Global

Laxmi

Kumari

Otherbanks

Where PCBL Stands: Where PCBL Stands: LoansLoans2.5% 2.1%

3.1%

2.8%

3.4%

3.7%

80.4%

2.0%

Prime

Citizen

BOA

Sunrise

Global

Laxmi

Kumari

Other banks

Growth of PCBLGrowth of PCBLParticularParticularss

PCBL PCBL GrowthGrowth

Average Average Industry Industry GrowthGrowth

DepositsDeposits 123%123% 19%19%

LoansLoans 92%92% 24%24%

Net Net ProfitsProfits

406%406%

COMPARITIVE COMPARITIVE PERFORMANCE OF OTHER PERFORMANCE OF OTHER

BANKS (2065/66) Rs in BANKS (2065/66) Rs in BillionBillionParticularParticular

s s PCBLPCBL BOABOA

20662066 20652065 GrowtGrowthh

20662066 20652065 GrowtGrowthh

DepositDeposit 11.7811.78 5.275.27 123%123% 8.88.8 3.053.05 188%188%

LoansLoans 9.89.8 5.15.1 92%92% 7.67.6 2.752.75 176%176%

Net ProfitNet Profit 0.140.14 0.020.0288

406%406% 0.060.06 0.040.0455

33%33%

PERFORMANCE OF OTHER PERFORMANCE OF OTHER BANKS (2065/66) Rs in BANKS (2065/66) Rs in

BillionBillionParticulars Particulars Nabil Nabil NIBLNIBL

20662066 20652065 GrowthGrowth 20662066 20652065 GrowthGrowth

DepositDeposit 37.337.3 31.9231.92 17%17% 46.746.7 34.4534.45 35%35%

LoansLoans 27.5827.58 21.3621.36 29%29% 36.836.8 27.5227.52 33%33%

Net ProfitNet Profit 1.031.03 0.740.74 40%40% 0.910.91 0.690.69 32%32%

PERFORMANCE OF OTHER PERFORMANCE OF OTHER BANKS (2065/66) Rs in BANKS (2065/66) Rs in

BillionBillionParticularParticulars s

KumariKumari LaxmiLaxmi

20662066 20652065 GrowtGrowthh

20662066 20652065 GrowtGrowthh

DepositDeposit 15.715.7 12.712.777

23%23% 16.0516.05 10.910.911

47%47%

LoansLoans 14.5914.59 11.311.333

28%28% 13.4613.46 9.689.68 39%39%

Net ProfitNet Profit 0.250.25 0.170.17 47%47% 0.180.18 0.120.12 50%50%