Financial Report of all 8 Nepalese National Level Development Banks has been released for Q4, 2081/82. The report seems to be the mix of better, bitter and impressive performance by the Banks. In this article, we shall be looking into major financial highlights, performance indicators and major ratios of National Level Development Banks of Nepal based on their Q4 reports. 

Performance Analysis of National Level Development Banks- Ashad 2082

Analysis -1: Loans and Advances

What does Loans and Advances mean to Bank? Loans and Advance is the Balance Sheet items classified under Assets side of the Bank’s Balance Sheets. Loans and Advances includes Loans provided to normal customers by the Bank as well as institutional loans provided by Banks to BFIs

Year-on-Year growth of Loans and Advances of National Level Development Banks Bank’s grew by 3.46% on Ashad 2082. Most of the National Level Development Banks Bank’s managed to increase their credit portfolio. During the review period all Banks except Jyoti Bikas Bank and Lumbini Bikas Bank have increased their credit portfolio as compared to Ashadh 2081. Muktinath Bikas Bank leads the chart with highest credit portfolio of Rs. 99.14 Billion whose credit portfolio increased by 5.41% as compared to Ashadh 2081. Garima Biaks Bank is second in the list with Rs.73.89 Billion credit portfolio up by 7.21% from previous year followed by Shine Resunga Bank with Rs.58.26 Billion. Kamana Sewa Bikas Bank has credit portfolio of 52.56 Billion with growth rate of 7.04%.  Most significant credit growth was done by Shine Resunga Development Bank Limited with 8.37% on Y-o-Y growth.  Jyoti Bikas Bank remained sluggish in terms of credit growth rate of -7.41% as compared to previous year. Mahalaxmi has lowest portfolio size of Rs.45.85 Billion increase by 3.58% as compared to Ashadh 2081.

Billion

Analysis -2: Deposits

What does Deposit mean to Banks? Deposits if the total fund collected by the Bank from its customers. Deposit is shown in liability side of Bank’s Balance Sheet which consists of “Due to Bank and Financial Institutions” and “Deposit from Customers”. Banks normally collect deposit in a form of Fixed, Saving, Current, Call, Margin, Recurring accounts.

Deposit Performance Analysis:

Overall National Level Development Banks seem to be well liquid looking into their deposit portfolio for Q4. Year-on-Year growth of Deposits of National Level Development Banks stood at 3.75% on Ashadh 2082. Most of the National Level Development Banks managed to increase their deposit portfolio, except Jyoti Bikas Bank and Lumbini Bikas Bank which witnessed negative growth. Muktinath Bikas Bank leads the chart with the highest deposit portfolio of Rs.121.15 Billion, marking a growth of  9.61% as compared to Ashadh 2081. Garima Bikas Bank is second in the list with Rs.92.68 Billion deposits, an increase of 7.72% from previous year, followed by Shine Resunga Bikas Bank with Rs.72.49 Billion, up by 9.30%. Kamana Sewa Bikas Bank holds Rs.63.50 Billion deposits, registering a growth of 6.38%. The most significant deposit growth in percentage terms was achieved by Muktinath Bikas Bank (9.61%), closely followed by Shine Resunga Bikas Bank (9.30%). On the other hand, Jyoti Bikas Bank posted a negative growth of -8.46%, while Lumbini Bikas Bank also declined by -1.98%. Mahalaxmi Bikas Bank reported marginal growth of 0.17% with Rs.56.22 Billion, whereas Shangrila Bikas Bank increased slightly by 1.10% to Rs.56.20 Billion, the lowest portfolio among peers.

Billion

Analysis -3: Net Interest Income (NII)

What does Net Interest Income (NII) mean to Banks? Interest Income is recognized on interest bearing advances and financial assets whose income is booked to statement of profit or loss under interest income, whereas Interest Expenses is booked on interest bearing deposits or financial liabilities whose expenses is booked in statement of profit or loss under interest expenses. The net difference between these income and expenses is referred as Net Interest Income (NII).

Net Interest Income (NII) Performance Analysis:

Net Interest Income (NII) being the major source of revenue continues to remain the primary focus area for National Level Development Banks. Industry average NII posted a positive Year-on-Year growth of 4.63% as on Ashadh 2082. Out of eight National Level Development Banks, six banks reported positive growth in their NII while two banks suffered a fall. Leading in terms of highest NII is Muktinath Bikas Bank with Rs.4,557.22 Million, registering a growth of 7.50% compared to Ashadh 2081. Garima Bikas Bank followed with Rs.3,643.30 Million, up by 9.91%, while Shine Resunga Bikas Bank posted Rs.2,667.00 Million, showing the highest growth rate among peers at 13.48%. Kamana Sewa Bikas Bank also registered a healthy increase of 5.25% reaching Rs.2,244.47 Million. On the contrary, Jyoti Bikas Bank witnessed the sharpest decline with its NII falling by 11.69% to Rs.2,094.87 Million, while Shangrila Bikas Bank slipped slightly by 1.36% to Rs.1,880.90 Million. Thus, while overall industry NII remains on an upward trend, the variation among banks highlights differences in balance sheet management and interest spread optimization.

                                                                                                                                                     Million

Analysis -4: Net Fee and Commission Income (NFCI)

What does Net Fee and Commission Income (NFCI) mean to Banks? Net Fees and Commission Income is supplementary source of revenue in addition to Net Interest Income of the Bank consisting of charges, fees or commission on products or services offered by the Bank. Bank’s normally collect loan administration fees, renewal fees, digital banking fees, card issuance fees, remittance commission among others.

Net Fees and Commission Income Performance Analysis:

During the review period Muktinath Bikas Bank managed to collect highest NFCI of Rs. 557.65 Million up by 20.48% as compared to earlier year followed by Garima Bikas Bank with NFCI of Rs.510.11 Million increase by 11.78% as compared to earlier year. Jyoti Bikas Bank’s NFCI increased by hefty 40.58% during review period from Rs.152.44 Million to Rs.214.30 Million. Mahalaxmi Bikas Bank however, encountered some major negative growth with 0.44%,  as compared to Ashad 2081. In terms of lowest Lumbini Bikas Bank collected only Rs.205.80 Million from NFCI up to Ashad 2082. Average industrial growth of NFCI for National Level Development Banks remained at 12.45% during the review period.

Million

Analysis -5: Impairment Charges

What does Impairment Charges mean to Banks? Impairment Charges are charges recognized as expenses by Banks when Bank expects that they will not recover full amount of expected cash flows of loans. Impairment Charges are reversed if the expected cash flows are lateral realized. Banks try to minimize their Impairment Charges to increase their profitability through stronger recovery actions.

Impairment Charges Performance Analysis: 

Impairment Charges of National Level Development Banks decreased on average by 3.79% during the review period. Out of the eight banks, three reported a decline in impairment charges while the other five witnessed an increase.

Garima Bikas Bank saw the most significant decline, downsizing its impairment charges by Rs.1,173.09 Million (-68.56%) to Rs.537.95 Million as on Ashadh 2082. Muktinath Bikas Bank also recorded a sharp fall of 27.52% to Rs.563.03 Million, while Shangrila Bikas Bank reduced impairment charges slightly by 3.47% to Rs.344.64 Million.

On the other hand, Lumbini Bikas Bank reported the highest Year-on-Year growth in impairment charges with a surge of 188.21%, increasing from Rs.235.83 Million to Rs.679.69 Million. Similarly, Shine Resunga Bikas Bank registered an 83.48% rise to Rs.900.94 Million, and Mahalaxmi Bikas Bank posted a significant increase of 41.22% to Rs.454.14 Million. Jyoti Bikas Bank also reported an increase of 13.21%, reaching Rs.1,283.37 Million, the highest impairment charge among peers. Kamana Sewa Bikas Bank recorded a moderate rise of 16.55% to Rs.417.48 Million. Thus, while the overall industry impairment charges declined marginally, the distribution across banks remained uneven, with some managing notable reductions whereas others faced sharp increases due to loan quality and provisioning adjustments.

                                                                                                                                                                                    Million

Analysis -6: Personnel Expenses (Excluding Bonus)

What does Personnel Expenses mean to Banks? Personnel expenses includes expenses related to employees of the Bank. Personnel Expenses mostly include staff’s salary, allowances, pension, gratuity, contribution to provident fund, training expenses, uniform expenses, insurance, staff bonus, finance expense under NFRS etc. Banks are required to create provision for staff bonus which is a mandatory requirement under the requirement of the Bonus Act, 2074. Amount of bonus is not included here under analysis.

Personnel Expenses (Excluding Bonus) Performance Analysis:

Personnel expenses of National Level Development Banks increased on average by 4.29% during the review period, reaching Rs.745.64 Million as on Ashadh 2082 compared to Rs.714.96 Million in Ashadh 2081. Out of the eight banks, five reported an increase in personnel expenses while three managed to reduce their expenses. Lumbini Bikas Bank reported the lowest personnel expenses of Rs.396.68 Million, reflecting a decline of 1.91% compared to last year. It was followed by Shangrila Bikas Bank with Rs.584.03 Million, down by 4.35%. On the other hand, Garima Bikas Bank recorded the highest Year-on-Year growth in personnel expenses with a sharp rise of 26.70%, increasing from Rs.751.77 Million to Rs.952.51 Million. Muktinath Bikas Bank reported the highest personnel expenses among peers at Rs.1,406.42 Million, up by 2.77%. Thus, while the overall industry average shows moderate growth, the variation among banks indicates differences in workforce expansion, salary adjustments, and cost management approaches.

              Million

Analysis -7: Operating Expenses

What does Operating Expenses mean to Banks? Operating expenses of the Bank includes day to day operation related expenses and consists of Personnel Expenses, Depreciation and Amortization and other operating expenses of the Bank like Operating Expenses consists of Administration Expenses, Audit Fees, Lease Expenses among others.

Operating Expenses Performance Analysis: 

Out of eight banks, six recorded an increase in their operating expenses, while two managed to reduce them. Kamana Sewa Bikas Bank has lowest operating expenses of Rs 287.01 Million with growth rate of 7.53%. Lumbini Bikas Bank reported the highest Year-on-Year growth in operating expenses with a surge of 39.76%, rising from Rs.207.95 Million to Rs.290.62 Million. Shine Resunga Bikas Bank also registered a notable growth of 12.55%. Jyoti Bikas Bank managed to reduce its operating expenses significantly by 10.50% to Rs.344.81 Million, the largest decline among peers. Garima Bikas Bank also lowered its operating expenses by 4.16%, standing at Rs.461.48 Million. Thus, while the industry on average witnessed a modest increase in operating expenses, the variations reflect different cost management approaches, branch expansion strategies, and operational efficiency levels among banks.

                                    Million

Analysis -8: Loan Write-offs

What does Loan Write-offs mean to Banks? Loans are written off by the Banks when Bank’s consider loans to be uncollectable even after necessary recovery efforts from the Bank. Written off loans are removed from Bank’s Balance Sheet and are booked as expenses under non-operating expenses of the Bank reducing Bank’s profit.

Loan Write-offs Performance Analysis:

During the review period, only Jyoti Bikas Bank did not report any loan write-off, whereas all other seven National Level Development Banks have written off loans and advances. Overall industry’s average loan write-off expenses increased by 52% Y-o-Y, rising from Rs.18.07 Million in Ashadh 2081 to Rs.27.51 Million in Ashadh 2082. Lumbini Bikas Bank reported the highest loan write-off amounting to Rs.110.12 Million, a sharp rise of 354% compared to the previous year. It was followed by Shangrila Bikas Bank, which also saw a significant increase of 427%, taking its write-off to Rs.21.99 Million. On the other hand, Kamana Sewa Bikas Bank reduced its loan write-off by 27% to Rs.51.35 Million, while Muktinath Bikas Bank reported a sharp decline, with its write-off expenses falling by 95%, from Rs.26.09 Million in Ashadh 2081 to just Rs.1.29 Million in Ashadh 2082.

Million

Analysis -9: Net Profit After Tax (NPAT)

What does Net Profit After Tax (NPAT) mean to Banks? Net Profit After Tax (NPAT) means the final profit  after deduction of all the expenses and taxes of the Bank. Net Profit helps to judge the profitability healthiness of the Bank. Higher the NPAT better is the bank’s performance in terms of return to shareholders.

Net Profit After Tax Performance Analysis:

Average Net Profit After Tax (NPAT) of overall National Level Development Banks increased by 22.01%. Y-o-Y during the review period, rising from Rs.574.53 Million in Ashadh 2081 to Rs.700.97 Million in Ashadh 2082. Out of eight banks, six reported positive growth while two witnessed a decline in profitability. Muktinath Bikas Bank reported the highest NPAT among peers at Rs.1,537.43 Million, marking a strong 30.70% growth compared to Ashadh 2081. Garima Bikas Bank showed the most significant Year-on-Year improvement with its NPAT surging by 201.97% to Rs.1,310.39 Million, largely supported by reduction of impairment charges. Kamana Sewa Bikas Bank and Shangrila Bikas Bank posted healthy growths of 9.19% and 6.51%, respectively. On the contrary, Lumbini Bikas Bank reported a notable decline of 30.13%, with its NPAT dropping to Rs.379.88 Million, while Jyoti Bikas Bank registered the sharpest fall of 92.74%, with its profit plunging to just Rs.12.38 Million, the lowest among peers.

Million

Analysis -10: Distributable Profit and DPS

What does Distributable Profit and DPS mean to Banks? Distributable Profit (DP) means the final profit which is available for distribution to shareholders. If the same distributable profit is divided by number of available shares with Bank then Dividend Per Share (DPS) is derived which shows how much dividend a share will generate. Higher the distributable profit and DPS better will be the Bank from Shareholders perspective.

Distributable Profit and DPS Performance Analysis:

Majority of National Level Development Banks reported positive distributable profit as on Ashadh End 2082, except Jyoti Bikas Bank. Industry average distributable profit stood at Rs.485.97 Million, up by 181.30% Y-o-Y compared to Rs.172.76 Million in Ashadh 2081. Muktinath Bikas Bank remained at the top position with distributable profit of Rs.1,462.50 Million, a remarkable growth of 651.15% from the previous year. Distributable profit per share reach to Rs. 20.75. It was followed by Garima Bikas Bank, reporting Rs.714.98 Million distributable profit with an increase of 149.64%. Kamana Sewa Bikas Bank also recorded significant improvements of 47.71% reaching Rs.607.40 Million. On the contrary Jyoti Bikas Bank continued to remain in negative territory, reporting a distributable loss of Rs.(780.46) Million, compared to a loss of Rs.(663.43) Million in Ashadh 2081.

Distributable Profit in Million

DPS in Rs.

Analysis -11: Non-Banking Assets (NBA)

What does Non-Banking Assets (NBA) mean to Banks? If a loan provided is defaulted, then Bank may sell the collateral held and recover the dues of borrower from such collateral sales. However, sometimes the collateral may not be sold and Bank may have to itself take such assets. Such assets are Non-Banking Assets to the Bank, which are shown under Investment Property under Balance Sheets.

Non-Banking Assets Performance Analysis:

Non-Banking Assets (NBA) of National Level Development Banks increased by 39.28% during the review period, rising from Rs.355.74 Million in Ashadh 2081 to Rs.495.46 Million in Ashadh 2082. All banks except Muktinath Bikas Bank reported growth in their NBA holdings. Jyoti Bikas Bank reported the highest NBA among peers at Rs.1,032.46 Million, an increase of 49.10% compared to Ashadh 2081. It was followed by Garima Bikas Bank, which booked a sharp increase of 215.28%, taking its NBA to Rs.675.50 Million. Shangrila Bikas Bank also reported a notable rise of 83.27%, with NBA reaching Rs.528.10 Million, while Mahalaxmi Bikas Bank increased moderately by 7.01% to Rs.569.78 Million. Kamana Sewa Bikas Bank remained relatively stable, recording only a marginal rise of 0.58% to Rs.354.18 Million. In contrast, Muktinath Bikas Bank reduced its NBA slightly by 0.86%, bringing it down to Rs.428.79 Million. Thus, while the overall industry experienced a sizeable increase in Non-Banking Assets, the growth was largely concentrated in Garima, Jyoti, and Shangrila Bikas Bank, indicating higher foreclosures or asset takeovers compared to peers.

Million

Analysis -12: Base Rate

What does Base Rate mean to Banks? Base Rate is the floor rate upon which premium is charged by Banks to derive lending rate. Base rate consists of Cost of Fund, Cost of CRR, Cost of SLR and Operating Costs of the Bank. Higher base rate means Banks are obtaining funds at higher rate and lower base rate means banks are obtaining funds at lower rates. Higher Base rate also means expensive lending rates and lower base rate means cheaper lending rates.

Base Rate Performance Analysis:

During the review period Industry average base rate remained at 6.92%. As compared to earlier year, Base rate of all the National Level Development Banks have decreased due to falling cost of deposits. Shine Resunga Bikas Bank has the lowest Base Rate of 6.41% whereas Garima Bikas Bank’s base rate of 7.24% is the highest amongst peer.

Analysis -13: Earning Per Share (EPS)

What does Earning Per Share mean to Banks? Earnings Per Share (EPS) is the amount of profit earned by the Bank equivalent to each of its share. Higher the EPS, better it is and vice versa. It is computed by dividing Net Profit by total number of shares of the Bank.

Earnings Per Share Performance Analysis:

Garima Bikas Bank has the highest EPS of Rs.23.07 per share followed by Muktinath Bikas Bank with Rs.21.82 per share. Industry Average EPS is 14.35. 4 banks have their EPS positive growth rate, whereas 4 banks have their EPS with negative growth rate. Jyoti Bikas Bank has the lowest EPS of Rs. 0.28 per share as on Ashad 2082.

Analysis -14: Non-Performing Loan (NPL)

What does Non-Performing Loan mean to Banks? Non-Performing Loans (NPL) are those loans which are classified under Doubtful, Substandard and Bad as per the NRB provisions. Higher Non-Performing Loans ratio means higher probability of loan defaults, so Banks try to maintain NPL as low as possible.

Non-Performing Loans (NPL) Performance Analysis:

Industry Average non-performing loan (NPL) of overall industry remained at 4.76% as on Ashad 2082. Higher NPL triggers increased risk of credit defaults and lower changes of credit recovery, so bank’s try to restrict their NPL as low as possible. During the review period, Muktinath Bikas Bank Bank managed to keep its NPL at 2.75% which is lowest amongst peers, followed by Kamana Sewa Bikas Bank with 3.38% NPL. Highest NPL was reported by Jyoti Bikas Bank with NPL of 7.98% as on Ashad 2082. Considering Y-o-Y growth, Jyoti Bikas Bank’s grew by 2.69% from 5.29% to 7.98% being the highest increment amongst the peer.

Analysis -15: Cost of Fund

What does Cost of Fund mean to Banks? Cost of Fund means the cost incurred by the Bank to obtain funds in a form of deposit or borrowings. It includes cost of local currency deposit and borrowings obtained by the Bank.

Cost of Fund Performance Analysis:

During the review period lowest cost of fund was of Mahalaxmi Bikas Bank at 4.56% followed by Garima Bikas Bank with 4.84%. This means these banks are soliciting funds at lower costs than peers. However, cost of fund of Lumbini Bikas Bank remained highest amongst peer at 5.35% as on Ashad 2082. Industry average cost of fund remained at 4.95% as on Ashad 2082.

Analysis -16: Capital Adequacy Ratio (CAR)

What does Capital Adequacy Ratio mean to Banks? Capital Adequacy Ratio (CAR) measures the sufficiency of Bank’s capital in terms of its credit, operation and market or liquidity risk weighted exposures. It indicates the sufficiency of Bank’s capital commensurate to risk pertaining to business growth, gross income and open position. NRB has mandated banks to maintain CAR of at least 11% in line with Capital Adequacy Framework, 2015.

Capital Adequacy Ratio (CAR) Performance Analysis:

Industrial average CAR remained at 13.91% as on Ashad 2082. Mahalaxmi Bikas Bank managed to remain at top with CAR of 17.49% whose Y-o-Y CAR increased by 2.56% as compared to earlier year followed by Sangrila Bikas  with CAR of 14.41% a raise of 1.42% from earlier year. Lowest CAR was reported by Shine Resunga Bikas Bank Limited of 12.58%.

Analysis -17: Credit to Deposit (CD) Ratio

What does CD Ratio mean to Banks? Credit to Deposit (CD) ratio is the measure which shows proportion of credit and deposit mix of the Bank. Till Ashadh 2081 Banks were allowed to include 50% of their debenture as part of deposit. NRB has set maximum limit of CD ratio at 90%. Higher CD ratio means higher portion of lending as compared to Bank’s deposit volume and lower CD ration means lower portion of lending as compared to Bank’s deposit volume. Banks try to maintain optimum CD ratio by balancing between credit and deposit mix.

Credit to Deposit (CD) ratio Performance Analysis:

During the review period industrial average CD ratio remained at 84.19%. Muktinath Bank had the highest CD ratio of 85.72% followed by Kamana Sewa Bikas Bank of 85.37%. Lowest CD ratio was reported by Shine Resunga Bikas Bank Limited of 82.60%.

Summary of Key Performance Indicators (Ashad 2082)

Balance Sheet Key Indicators

************