ADBL readies for largest public issue

Agriculture Development Bank Ltd (ADBL) has appointed Ace Development Bank Ltd as the issue manager for its mega initial public offering (IPO) of 96,00,000-unit shares worth Rs 960 million.
Janak Raj Shah, chief executive officer (CEO) of ADBL, and Siddhanta Raj Pandey CEO and MD of Ace Development Bank Ltd signed an agreement on behalf of their respective organisations here today. The agreement paves the way for ADBL to issue the largest ever public offering. By next month, the bank will float the primary issue.
Three issue managers -- Ace Development Bank, NMB Bank and NIDC Capital Market -- had applied to ADBL to get the post of issue manager. But Ace got selected.

"Established as a development bank, ADBL is now a commercial bank," Shah said adding that the new financial institutions (FIs) cannot match its network strength. The growing number of FIs are a concern for some economists. But Shah thinks the growing number of FIs is beneficial for the economy as they will push up the rate of interest. He was of the view that policy rethink is the need of an hour as the concentration of financial insititutions is increasing in urban areas leaving the rural areas far behind.
"More FIs are needed to monetise the whole economy," he justified adding that rural sectors are still out of reach of the banks. "The increasing number of FIs and increasing deposit indicate that the market is not saturated yet," said Shah.
The growing number of financial institutions has also led to cut-throat competition and growing consumerism which has been blamed for sub-prime loan leading to the global financial crisis.
"Banks also must face business cycle and Nepali banks will have to face it sooner or later," said Shah, who is also the president of Managament Association of Nepal (MAN). He added that competition would bring good results. "FIs will be selective in investment, maintain professional ethics and culture and risk mitigation practices.
"However, as a commercial bank ADBL has also started consumer banking. Shah thinks that ADBL's case is different. "The other FIs have limitations and are forced to concentrate on consumer segment," he said, "That could lead to problems."His prescription to the central bank, Nepal Rastra Bank (NRB), is to do assessment with right policy measures and be more vigilant in mitigating risk. "The lack of a long term policy and inconsistency in policy matters have hit us and we are only into patch-up work," Shah said.
Talking about financial reform programme and privatisation, the wholly government-owned commercial bank's chief was of the opinion that Indian and Chinese experiences could be imitated. "They have not completly divested their banks but entered into partnetships," he added.Banks can be wheels of change too. "Development and commercial banks should be linked up," ADBL's first CEO Shah said. He pointed out, "Capital is key in development activities, but in Nepal the concentration of capital is in urban areas only -- that could create imbalance."