The stock market today reacted unfavourably to the unaudited annual reports of banks — the key players of the domestic secondary market — that has revealed a slowdown in the profit growth rate, and closed 2.6 points down to 397.18 from the morning's opening of 399.78 points.
Investors, who were expecting higher dividends as in the previous years, were discouraged by the slowing growth rate in profits of the banks, and pulled the banking index down by 5.72 points to 356.88 points that has dragged Nepse down, despite five sub-groups — development banks, hydropower, hotels, insurance and others — gaining in the day's trading.
Of the total 32 commercial banks, 17 banks have published their unaudited annual reports. However, only 26 banks have listed — among the 32 banks — 495,411,739 units of their shares at a face value of Rs 100 per unit at the secondary market.
The unaudited reports of the 17 banks also revealed that there are only three banks — Nabil Bank, Nepal Investment Bank and Standard Chartered Bank — in the billionaire's club with their profits shooting up over a billion.
"Though profit is not the only benchmark to gauge the performance of a sound financial institution, it will definitely have a psychological effect on the investors as they expect higher dividends," said market analyst Rabindra Bhattarai.
The banks' capacity to distribute higher dividends depends primarily on their profits, he said, adding that the banks cannot provide huge dividends in the current economic condition. "The economy has to support the growth of banks and financial institutions, otherwise they cannot sustain in the long run."
Similarly, bankers also opined that investors should not lose hope and wait, as the country is passing through a transition and lengthening uncertainty, hurting the economy. "Shareholders should be patient in the coming couple of years," said Kist Bank chief executive Kamal Gnawali. "Stronger institutions will give them good returns in the long run," he said, adding that investors should let banks grow stronger first instead of expecting returns in the short term.
Another banker said that banks have surplus liquidity but the lack of borrowers has squeezed their profits. "Entrepreneurs do not have any confidence in the government making them reluctant to borrow and that has hit profit growth apart from the ailing real estate that has tightened the profit growth rates of the banks," he added.
Annual net profit
Bank – Fiscal Year 2011-12 – Fiscal year 2010-11
Nabil Bank – Rs 1.71 billion– Rs 1.33 billion
Nepal Investment Bank– Rs 1.31 billion– Rs 1.17 billion
Standard Chartered Bank– Rs 1.16 billion– Rs 1.11 billion
NB Bank– Rs 702.90 million– (loss Rs 138.15 million)
Bank of Kathmandu– Rs 607.66 million– Rs 605.15 million
Nepal SBI Bank– Rs 475.62 million– Rs 464.56 million
Global IME Bank– Rs 353.05 million– Rs 224.97 million
Kumari Bank– Rs 275.62 million– Rs 251.23 million
Citizens Bank Int'l– Rs 222.97 million– Rs 198.35 million
Bank of Asia Nepal – Rs 220.89 million– Rs 209.88 million
Lumbini Bank– Rs 193.44 million– Rs 389.69 million
Grand Bank– Rs 183.66 million– Rs 89.07 million
Sunrise Bank – Rs 146.61 million– Rs 44.23 million
Sanima Bank– Rs 120.98 million– Rs 155.22 million
Kist Bank– Rs 100.23 million– Rs 54.07 million
NMB Bank– Rs 59.45 million– Rs 221.50 million
Machhapuchchhre Bank– Rs 10.81 million– Rs 8.92 million