Commercial banks record low profit growth

The profit growth rate of the commercial banks has dropped in the first quarter of the current fiscal year compared to the same period of the last fiscal year, though they have posted profit as usual.
The commercial banks recorded a total of Rs 16.17 billion profit – in the first quarter of the current fiscal year – an increase by 6.25 per cent compared to the same period in the last fiscal year, according to the unaudited financial statements of the commercial banks.
During the first quarter of the last fiscal year, the 28 commercial banks collectively had recorded Rs 15.4 billion profits, revealed the statement that shows Rastriya Banijya Bank (RBB) as the top profit earner – with Rs 1.127 billion profit – in the first quarter of the current fiscal year. In the first three months of fiscal year 2018-19, the wholly-state owned bank had recorded Rs 1.119 billion profit.
Nabil Bank followed Rastriya Banijya Bank in the race to earn highest profit with Rs 1.123 billion in the first quarter of the current fiscal year. Nabil had posted Rs 1.05 billion profit in the last fiscal year’s first quarter. The third bank to be in the billionair club is NIC Asia Bank that has earned Rs 1.009 billion in the first three months of the current fiscal year 2019-20.
Likewise, Nepal SBI Bank, Citizens Bank, Siddhartha Bank, Bank of Kathmandu, NCC Bank, Nepal Investment Bank, Civil Bank and Nepal Bank profit growth rate has dropped compared to the first quarter of the last fiscal year.
Among the eight commercial banks Nepal Investment Bank had earned Rs 1.05 billion in the first quarter of last fiscal year but posted only Rs 844 million profit in the same period this fiscal year. Likewise, Nepal Bank’s profit has also dropped to Rs 581.8 million in first quarter of the current fiscal year compared to Rs 913.88 million profit in same period last fiscal year. The profit of Nepal SBI Bank has also come down to Rs 437.23 million in the first quarter of 2019-20 from Rs 489.77 million during the same period last fiscal year, whereas Bank of Kathmandu’s (BoK) earning has also been limited to Rs 383.7 million from Rs 386.82 million in the first quarter of last fiscal year.
Among, the 28 commercial banks, Civil Bank ranks the lowest in the profit earning. According to the bank’s unaudited financial statement, the bank has posted Rs 158.9 million profit in the first quarter of this fiscal year against Rs 185 million profit in the last fiscal year’s first quarter.

Deposit mobilisation slows down

Deposit mobilisation of banks and financial institutions — especially of commercial banks — has slowed down.

Deposit mobilisation of banks and financial institutions increased by 8.4 per cent (Rs 85.44 billion) in the nine months of the current fiscal year 2012-13, against an increase of 13.5 per cent (Rs 110.73 billion) in the same period of last fiscal year, according to the central bank.

"The deposit mobilisation of commercial banks, development banks and finance companies increased by 7.5 per cent, 10.9 per cent and 7.3 per cent, respectively, as compared to 15.8 per cent, 10.8 per cent and 1.6 per cent, respectively, in the same period of last fiscal year," it said, adding that deposit mobilisation of banks and financial institutions has increased by 17.5 per cent (Rs 163.30 billion) on a year-on-year basis amounting to Rs 1097.26 billion as of mid-April.

Central bank calls BFIs to mandatory shift to electronic cheque, NCHL-ECC upgrades system

The central bank has asked the banks and financial institutions to start using electronic cheque clearing from mid-December as the Nepal Clearing House Ltd (NCHL) has upgraded its electronic cheque clearing system, which has already come into use since the last week.

The new software comes with additional business functionalities making it easier for member banks and financial institutions to use the system, said chief executive of the clearing house Neelesh Pradhan.

"The performance and reliability of the NCHL-ECC system have also been improved," he said, expecting the new version to help NCHL handle increased number of memberships and thus increased cheque volume.

NCHL has already signed a membership agreement with 70 banks and financial institutions including Nepal Rastra Bank, 32 commercial banks, 19 development banks and 18 finance companies, of which, few of the newly joined members will start their NCHL-ECC service in the next couple of weeks.

NCHL expects to increase this number further in the coming days. Some of its member banks and financial institutions have also started providing electronic cheque clearing services from branches outside the valley.

NCHL has also approached other banks and financial institutions located outside Kathmandu valley for membership and the response has been positive.

NCHL, at present, clears Nepali rupees, US dollar, euro and British pound denominated cheques through its NCHL-ECC system and has processed more than 1.1 million cheques by the end of Kartik (mid-November) at an average of 8,108 cheques per day.

Mergers can help expand financial service

Complicated geo-political environment has posed a threat to the access to finance, according to the expert.
Inadequate commercialisation and slow prefessionalism coupled with low technical competency of human resources and reliability of management information are also some of the challenges to the access to finance, said Narahari Dhakal, consultant at the Finance Ministry presenting his paper at the 'Access to finance: Challenges and Opportunities, organised by the Finance Ministry, here in the Valley today.
"Despite mushrooming financial institutions in the country, only one fourth of the population has the access to finance," said senior advisor of the ministry Keshav Acharya. "There is still the problem of how to balance demand and supply contrary to the economic theory," he said, adding that not only the real sector has contracted but also 75 per cent of the finance is in informal sector that needs to be formalised.
"The money is in informal sector," agreed the central bank governor Dr Yubraj Khatiwad. "The large informal sector is growing in the forms of Dhukuti, which will be a chronic problem, if not addressed in time," he said, questioning the non-formal and semi-formal sector's contribtuion at the time when the formal sector's contribution is negligible.
In recent years, the number of financial institutions increased but their service has not yet expanded, according to him. The governor also blamed the geographic and social stigma for the delay in service expansion. "The central bank has pushed for the mergers to increase the efficiency and affordability of the credit," he said, adding that after merger, the banks and financial institutions can help sustainable development of the economy in low spread also.
The government has given incentives for the merger for the consolidation of the financial institutions, said finance minister Surendra Pandey. "Service expansion and consolidation of the banks and financial institutions is the need of the day," he said, adding that technology could be boon to the financial institutions in increasing the access to finance and formalise the informal economy.

Government fails in creating jobs
KATHMANDU: Finance Ministry Surendra Pandey admitted that the government has failed in generating employment in the country. He, however, blamed the energy crisis for not being able to create jobs. Pandey opined that the liquidity problem could be solved, if private sector could be invited to invest on some big infrastructure projects. "We can identify some highly saleble 10 projects and handover to the private sector that could ease the liquidity crunch," he said, admitting that the government can create investment room and open new window.

Access to finance increases in developing countries

Even as economies globally were contracting as a result of the financial crisis in 2009, access to formal finance in developing countries grew.
An estimated 2.7 billion people around the world have no access to formal financial services, said a report from the World Bank.
But the picture of financial inclusion is shifting, finds a new report by Consultative Group to Assist the Poor (CGAP) and the World Bank Group. Financial Access 2010 -- the second annual survey of financial regulators in more than 140 countries covering the turbulent period between 2008 and 2009 -- shows that the number of bank accounts worldwide was growing even as the volume of loan and deposit accounts dropped.
Sixty-five deposit accounts were added per 1,000 adults in 2009, representing a 4.3 per cent average growth in the number of deposit accounts, it said.
Use of credit services suffered more than that of deposit services from the financial crisis, and the number of loans per 1,000 adults was broadly unchanged between 2008 and 2009. "Access to savings and payments accounts is a basic need,” said Nataliya Mylenko, the report’s lead author.
“The fact that people were using basic deposit services more, even as world financial marketswere experiencing high volatility, confirms how essential these services are to help families manage through risky and uncertain periods," he said, adding that in conjunction with a worldwide effort supported by the Group of 20 to improve the measurement offinancial access, policy makers are committing to an agenda that promotes financial inclusion.
"As there are increasing calls for more and better data around financial inclusion, including from the G20, the annual Financial Access survey will provide key data and help monitor progress over time,” said AlexiaLatortue, CGAP’s Deputy CEO.
The report also presents the first comparable globaldata on lending to small and medium enterprises (SMEs), estimated at $10 trillion in 2009.
Financial Access 2010 shows that regulators are often hampered by a lack of resources or enforcement powers to implement policies for financial inclusion. Nonetheless, the report also shows promising trends, including the expansion of retail infrastructure and use of new technologies to deliver financial services cost effectively.
Globally, one bank branch, five ATMs, and 167 point-of-sale terminals were added per 100,000 adults in 2009. For the first time, the number of ATMs exceeded the number of bank branches in low-income countries like Nepal.
But low- and middle-income countries still lag behind high-income countries in terms of physicaloutreach. "New technologies such as mobile payments and Internet banking are likely to further reinforce this shifting picture of financial inclusion,” said Oya Pinar Ardic, an author of the report.
Whether it is countries’ commitment to policy change or the numbers of people gaining services who werepreviously unbanked, the broad patterns of financial inclusion detailed in Financial Access 2010 arepromising.
"We hope that policy makers will use this data to inform their approach as they work to close the financialaccess gap,” said Janamitra Devan, the World Bank Group’s vice-president and head of Network for Financial and Private Sector Development.
CGAP is an independent policy and research center dedicated to advancing financial access for the world’s poor. It is supported by over 30 development agencies and private foundations who share acommon mission to alleviate poverty. Housed at the World Bank, CGAP provides market intelligence, promotes standards, develops innovative solutions, and offers advisory services to governments, microfinance providers, donors, and investors.

Nepse lists over four million-unit shares

Nepse added 4.1 million unit of shares including rights, ordinary and bonus of Sunrise Bank, Sahayogi Bikas Bank and Nepal Finance during the last week before the festival of Tihar.

The secondary market saw 6883 transactions of 102 companies worth Rs 124.53 million that is 8.75 per cent higher than a week ago. Similarly, the domination of the Class-A companies in the Nepse has come down to 39.56 per cent as they saw Rs 49.2 million transation only.

However, the Nepse could not perform any better than a week ago as the Nepse gained only 0.06 point to close the market at 424.96 points from the Sunday morning's opening of 424.90 points. The sensetive index gained 0.27 point to close at 104.19 points.

Commercial banks, insurance and finance sub-groups surged but hydropower and development banks lost, whereas manufacturing, hotels, and trading groups didnot witness any changes in their indices, according to the Nepse.

Merchant Finance topped the chart with the highest transation amount and share units that saw Rs 17.5 million worth trading of its 906-unit of shares. Similarly, Agriculture Development Bank Nepal topped the chart with 906 trading.

According to the central bank, the year on year (y-o-y) Nepse has declined by 35.6 per cent to 404.43 points in mid September. It stood at 628.34 points in the same period last year.

Similarly, sensitive index (based on July 2006) stood at 98.94 point in mid September against 160.79 points in the same period last year. The float index -- calculated on the basis of closing price of August 24, 2008, as base market value -- remained at 37.15 in mid September, a contraction of 37.8 per cent compared to the same period last year.

The y-o-y market capitalisation also decreased by 25 per cent to Rs 330 billion in the first two months of the current fiscal year. "The ratio of market capitalisation to GDP stood at 28 per cent," the central bank said, adding that the ratio was 45.9 per cent in the same period last year.

Of the total market capitalisation, bank and financial institutions stood with highest share of 71.5 per cent followed by manufacturing and processing companies (2.4 per cent), hotels (1.6 per cent), business entities (0.5 per cent), hydropower (4.8 per cent) and other economic sectors (19.3 per cent).

Total paid up capital of the listed companies stood at Rs 86.34 billion in mid September -- an increase of 35.6 per cent over the period of one year. This increase was largely due to the additional listing of securities at the Nepse.

As at mid September, Nepse listed securities worth Rs 12.39 billion (ordinary share of Rs 4.62 billion, bonus share of Rs 226.5 million, right share of Rs 2.56 billion and government securities of Rs 4.99 billion). The total number of listed companies stood at 180 in mid September compared to 159 in the same period last year. Among them, 148 are banks and financial institutions (including insurance companies), followed by 18 production and processing industries, four hotels, business entities and hydropower companies each and two companies under other groups.

PM Nepal urges banks to go to rural areas

Financial institutions should go to rural areas, said Prime Minister of the care-taker government Madhav Kumar Nepal here today inaugurating the 29th commercial bank of the country -- Commerz and Trust Bank Nepal.
"Urban-centri banks will widen the gap between rural and urban populace fuelling the conflict," he said, adding that the banks should serve the rural populace, who has no capital.
Banks should make their service charges and interest rates transparent, opined central bank governor Dr Yubraj Khatiwada.
"Banks should also increase their operational skill and efficiency to be more competitive," he said suggesting them to merge to become more competitive and efficient.
New banks should bring new dimensions as without development of the manufacturing sector, the financial institutions alone could not grow, he added.
The bank that has Rs 3 billion authorised capital and Rs 2 billion paid up capital has 360 promoters, who are from various background from Non-Resident Nepalis (NRNs) to farmers.
The bank will serve the rural populace through micro finance, said CEO of the youngest bank Anal Bhattarai. "We have planned to work with Winrock Internation to serve the ruralpopulace," he said, adding that it wil also distribute the solar home systems to the 80 households immediately.
The bank will float Rs 600 million of ordinary shares to the public, according to the central bank's directive.
Including Commerz and Trust Bank Nepal 29 commercial banks are in operation in the country, though the central bank has halted 'temporarily' to provide licence for the new commercial banks.
Apart from these 29 commercial banks, the country has 79 development banks, 79 finance companies, 16 NRB-licensed Cooperatives that are undertaking limited banking transactions, 45 NRB-licensed NGOs that are undertaking micro finance transactions and 25 insurance companies.

Jyoti Bikas Bank primary issue oversubscribed

Primary shares of Jyoti Bikas Bank Ltd (JBBL) that has been oversubscribed by over six times to above Rs 1.78 billion closed yesterday evening.

"Some 121,000 applications came for the 2.92 million-unit of Jyoti Bikas Bank's Initial Public Offerings (IPOs)," according to the issue manager Ace Development Bank.

Jyoti Bikas Bank had floated 2.92 million-unit of ordinary shares to public at the face value of Rs 100 per unit on August 16. The development bank that has Rs 740 million of authorised capital will add Rs 740 million. The IPO is worth Rs 292 million. "The promoters have already paid their share of Rs 448 million," according to the bank.

Currently, 40 development banks' 88.49 million shares worth Rs 8.84 billion are listed at Nepse. Besides, 24 commercial banks, 62 finance companies and 19 insurance companiesare also listed on the stock exchange.

Development Banks' group is one of the key market propellers in the secondary market that is dominated by the financial institutions including commercial banks, development banks and finance companies apart from insurance companies. Their trading constitutes above 85 per cent of Nepse's overall business.

Nepse lists ADBL shares

Nepal Stock Exchange (Nepse) listed 30.37 million-unit shares of Agriculture Development Bank Ltd (ADBL) today.

"The ADBL shares will be traded from next Monday," according to the Securities Act 2063 that states, "Trading of shares of any companies will start after seven days of listing agreement between the company and Nespe."

ADBL is the 24th listed commercial bank in the secondary market that has a total of 178 listed companies under nine sub-groups -- commercial banks, development banks, finance companies, insurance companies, hydropower companies, trading, manufacturing, hotels and others.

Ace Development Bank -- the issue manager of the ADBL -- had floated the commercial bank's 9.6 million-unit of ordinary shares worth Rs 960 million on April 4-7. It is the largest primary issue in the history of the banking sector in Nepal. ADBL had earlier sold 4.52 million-unit shares to its existing shareholders -- the borrowers of the bank that has 16.25 million-unit promoters shares. "Nepse listed the total of 30.37 million-unit shares -- including promoters and ordinary shares -- of the ADBL today," the bank said.

On May 26, Ace had allotted 96,000-unit ordinary shares of the bank. A total of 138,436 people had applied for 28,510,303 unit shares in the Initial Public Offering (IPO) at the face value of Rs 100 per unit. The selected applicants had been allotted a minimum of 30-unit shares and maximum of 2,960-unit shares.

Meanwhile, the profitability of the banks and financial institutions -- that contributes to over 85 per cent in the total trading -- could not boost the secondary market as it has shed 0.54 point to close the daily trading at 453.7 points.

BoP deficit at Rs 22.1 billion, exports six times over than the imports, inflation at double digit

If one goes by the central bank-published current macroeconomic situation based on nine months' of the current fiscal year, nothing seems right with the country's economy.
The inflation still stands at double digit, Balance of Payment (BoP) has recorded a deficit of Rs 22.10 billion, exports have plunged and imports have gone up pushing the trade deficit up to double compared with the same period last year, and the gross foreign exchange reserves continue to declined.
Though, the government expenses has gone up, revenue mobilisation has shown poor growth in comparison to the same period last fiscal year.
The year on year (y-o-y) inflation -- as measured by the consumer price index -- moderated to 10.8 per cent in mid-April 2010 compared to 11.9 per cent increase in the same period last year, the NRB said attributing the rise in the prices of spices, pulses, grains and cereal products.
The total government spending has also increased by 30.9 per cent to Rs 140.09 billion compared with an increase of 18.5 per cent in the same period last year. "The high growth in recurrent as well as capital expenditure accounted for such an increase in the government expenditure," the NRB attributed the rise to rise in recurrent expenditure that has increased by 28.5 per cent to Rs 90.94 billion.
Nepal's merchandise exports declined by 10.4 per cent to Rs 45.67 billion in contrast to a growth of 20.3 per cent in the same period last year. Exports to India dropped by 6.6 per cent against a growth of 10.5 per cent and exports to other countries plummeted by 16.5 per cent against a growth of 40.7 per cent in the same period last year. "However, merchandise imports soared by 22.6 per cent compared to a growth of 18.2 per cent in the same month last year," said the NRB report. Imports from India grew by 37.1 per cent compared with a growth of 11.5 per cent and imports from other countries grew by 46.9 per cent compared with a growth of 49.6 per cent in the same period last year.
Total trade deficit expanded by 58.9 per cent to Rs 238.47 billion against the rise by 27 per cent in the same period last year. Trade deficit with India rose by 53.8 per cent compared with a growth of 12 per cent in the same period of last year, whereas trade deficit with other countries expanded by 65.1 per cent compared to a growth of 52.3 per cent in the same period last year.
The gross foreign exchange reserves also dropped by 15.8 per cent to Rs 235.75 billion from a level of Rs 279.99 billion at mid-July 2009 as against a growth of 29.8 per cent in the same period last year.
Similarly, the liquid assets of the commercial banks stood at Rs 170.7 billion as at mid-April 2010, revealed the report. "Of the components of liquid assets, liquid fund declined by 7.8 per cent. Another component of liquid assets, commercial bank' investments in government securities has also declined by 11.6 per cent (Rs 8.3 billion)."
Due to the higher credit disbursement relative to the deposit mobilisation, the credit-deposit (CD) ratio increased to 89.1 per cent in mid-April from 81.2 per cent in mid-July 2009. Similarly, the liquidity-deposit ratio declined to 29.6 per cent in mid-April from 34.2 per cent in mid-July 2009.
The NRB has, however, injected net liquidity amounting to Rs 90.1 billion. Similarly, the central bank injected net liquidity amounting to Rs 68.9 billion through net purchase of $923.4 million from commercial banks. A net liquidity of Rs 108 billion was injected through the net purchase of $1.4 billion in the same period last year.

Commercial banks' profit margin shrinks

The commercial banks have been facing rough weather.

The key indicators -- Profit margin, earning per share (EPS) and Return on Equity (RoE) -- to guage the performance of the listed commercial banks have slowded down.

"With the increasing number, the profit margin of the commercial banks witnesed a slowdown in the last fiscal year," according to a reserch on the sector-wise average by Securities Research Center and Services Pvt Ltd (SRCS).

In the year 2007-08, the average profit margin of the 23 listed commercial banks was 27.09 per cent but in 2007-08, it posted only 27.86 per cent.

"Cut-throat competition among the rising number of commercial banks and lack of market expansion have pulled their profit margin down," said market analyst Rabindra Bhattarai.

Currently there are 27 commercial banks in operation and some four are in pipeline making it hard to increase the profit margin.

The average profit margin was 18.32 per cent in 2004-05 when there were only 17 listed commercial banks.

Similarly, the earning per share (EPS) has also slowed down, as the market is flooded with rights and bonus shares. In 2007-08, an average EPS of the listed 23 commercial banks was Rs 35.36 but it increased to only Rs 36.74 in 2008-09. EPS is generally considered to be the single most important variable in determining a share's price.

One of the most important profitability metrics Return on Equity (RoE) has declined. The average RoE of the listed 23 commercial banks stood at 24.73 per cent in 2008-09 against the 2007-08's average of 25.22 per cent. RoE reveals how much profit a company earned in comparison to the total amount of shareholder equity found on the balance sheet.

Due to increasing rights and bonus shares Networth Per Share (NWPS) has also slowed down. In the year, 2006-07 an average NWPS -- a measurement of the net worth of the company for each share of stock that has been issued -- of 18 listed commercial banks was Rs 141.56 which went down in the fiscal year 2007-08 to Rs 140.21 as the listed commercial banks increased to 23. In 2008-09, it posted Rs 153.88.

However, the sector can heave a sigh of relief on non-performing assets (NPA), price-earning (P/E) ratio and return on assets (RoA) — the other key indicators. The average NPA was 1.98 per cent in 2008-09 against a year ago's 3.58 per cent. NPA -- an asset or account of borrower, which has been classified by a bank or financial institution as sub-standard, doubtful or loss asset, in accordance with the directions relating to asset classification issued by the central bank -- has to go down.

During the fiscal year 2007-08, the overspeculation of the investors in the secondary market have raised the shares of commercial banks' P/E ratio to an average of 65.60 times that came down to an average of 56.28 times in 2008-09.

In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story by itself.

The average RoA has, however, almost doubled in 2008-09 to 2.21 per cent from 1.76 per cent a year ago. RoA -- an indicator of how profitable a company is relative to its total assets -- gives an idea as to how efficient management is at using its assets to generate earnings.

Second edition of economic indicator

Securities Research Center and Services Pvt Ltd (SRCS) has published the second edition of 'Financial Indicator' that includes financial data of companies listed and unlisted at the Nepal Stock Exchange (Nepse).

The book has the financial statistics of twenty-five companies belonging to different sectors like commercial banks, development banks, finance companies, insurance companies and hydro power and so on.

The publisher believes that the book will facilitate share investors, students, researchers, market analysts, journalists and the regulatory board. Investors can analyze these statistics and select safe companies to invest in. "This is the only book published in Nepal that includes such financial information," said Rabindra Bhattarai, a renowned share market analyst, who has edited the book.

SRCS has already published ten books on Nepal's capital market, derivatives and banking.

Nepse lists 95 firms under Class-A category

Five development banks, two insurance companies, 10 finance companies, two hotels, National Hydropower Company and Nepal Telecom (NT) -- a total of 21 listed companies -- made it to the prestigious Class-A category in this fiscal year, according to the Nepal Stock Exchange (Nespe).
"The Nepse has listed 95 companies under Class-A category, out of the total 149-listed companies at the sole secondary market," said the sole secondary market here today.
A company that has atleast Rs 20 million paid up capital, minimum of 1,000 common share holders, operating in profit since last three years, must have floated shares to public under the by-laws 9, book value per share must not be less than its paid up value and has been submitting its financial statement within six months from the closure of the fiscal year is qualified to be listed under the Class-A category, according to the Nepse.
The number of companies listed under Group-A category has been continuously increasing since 1996-97, when there were only seven companies under the category.
"In the year 2009-10, Nepse also delisted three companies from under the Class-A category apart from adding 21 to it," the Nepse said adding that two companies merged to get entry into the prestigious category. "United Insurance, Bhajuratna Finance and Everest Finance are delisted from under the Class-A category as they didnot abide by the regulation," it added. However, Nepse listed five development banks, two insurance companies, 10 finance companies, two hotels, one hydropower company and Nepal Telecom (NT) under the Class-A companies in this fiscal year," said secondary market that has been witnessing a sluggish performance in the last three months.
Nepal Stock Exchange, according to the international norms, classifies the listed companies under the Class-A category according to their performances.
According to the Nepse, 15 commercial banks are under the Class-A category, whereas only one company each -- Unilever Nepal Ltd and Nepal Telecom -- from the manufacturing group and Others group are under the Class-A, two each from hydropower companies group and hotels group, 11 from insurance companies group, 43 finance companies, 20 development banks fall under the Class-A category.

Nepse plunges, investors nervous

Nepse this week plunged by 22.94 points to close at 578.19 points from Sunday morning's opening of 601.13 points.
Psycological pressure of book closures, fresh supply of stocks, financial institutions margin call -- due to continuous decrease in price of shares -- made investors more nervous forcing them to exit from the market.
In comparision to the new listing, the number of investors did not increase giving some smart investors a chance to sell off their shares at the current price and buy at a much lower price afterwards as according to them, the secondary market index is expected to drop further.
This week itself, primary shares of Sunrise Bank (12.5-million-units), Prime Comercial Bank (10-million-units), Vibor Bikas Bank (6.8-million-units) and rights shares of Civil Merchant Bittiya Sanstha (4,99,270-units), People's Finance (666962-units), Pokhara Finance (12,720-units), Narayani Development Bank (99884-units) and Nirdhan Utthan Bank (20,9936-units) were listed at Nepal Stock Exchange, making the total number of listed shares over 928.72-million-units, including promoters' shares, corporate debentures, bonds, preferred shares and mutual funds.
Of the total 26 commercial banks, Nepse has 23 commercial banks (with over 281.56-million-unit shares) under its banks sub-group that is the key player in the domestic market. Of the remaining three commercial banks, Nepal Bank Ltd has been delisted, Agricuture Development Bank is floating its shares worth Rs 960 million soon and Rastriya Banijya Bank is a complete government undertaking.
Thirty 30 development banks are listed at Nepse in the development banks sub-group with a total of over 66.34-million-unit shares. Sixty-two finance companies are listed at Nepse with 81,932,204-unit shares.
Though there are 18 companies in the manufacturing sub-group, the sub-group is the least traded and the weakest player in the domestic secondary market unlike the global secondary market practice.
Market pandits think that the institutional investor is the need of the hour as the existing investors are unable to hold the fresh supply of shares. Apart from the nervousness of current investors, the continuous bearish trend has repelled new investors from the secondary market as the major market player -- commercial banks sub-group -- this week also lost a whopping 34.69 points to close at 552.19 points from Sunday morning's opening of 586.88 points.
Bank of Kathmandu topped the chart in terms of transaction this week with Rs 31.19 million followed by Kist Bank with Rs 27.59 million, Nepal SBI Bank with Rs 26.20 million, Standard Chartered Bank Nepal with Rs 20.57 million and Nabil Bank with Rs 14.70 million.
In terms of number of share units traded this week, Kist Bank dominated the secondary market with its 76,000-unit of shares changing hands. Pashupati Development Bank topped the chart in terms of transaction number with 566 tradings in its kitty.
During the five-day session, 95 companies saw their shares being traded. The contribution of Group-A companies increased to 64.48 per cent against last week's 56.48 per cent while the 78-scrip sensitive index -- a barometer of Group-A companies -- also lost 7.20 points to drop to 144.57 from Sunday morning's opening of 151.77 points.
The float index -- calculated on the basis of real transactions -- also dropped by 1.22 points to slide to 56.26 points from its opening of 57.48 points.

Secondary market index at its lowest

As expected, the books closing of a bank and a finance company dragged Nepse down to the lowest yet in recent months.
All market propellors -- commercial banks, development banks, financial institutions and hydropower companies -- lost this week to pull Nepse by a whopping 55.61 points to 614.79 points from Sunday morning's opening of 660.40 points.
The hotels sub-group that did not see its shares traded while manufacturing sub-group gained by 4.41 points to reach 438.35 points from Sunday morning's opening of 433.94 points. Unilever Nepal Ltd's 10-unit shares that were traded at Rs 4,346 per unit -- making it dearer by Rs 85 per unit -- pushed up the manufacturing sub-group by 4.41 points.
Unilever Nepal has recommended Rs 450 cash dividend -- Rs 400 normal dividend and Rs 50 as commemorative dividend on the occasion of the completion of its 15 years of commercial production in Nepal -- from the profit of the last fiscal year when it registered a RS 2625.8 million turnover. The company also posted Rs 444 million net profit (after tax). It registered Rs 482.29 Earning Per Share (EPS) and 64 per cent Return on Equity (RoE) in the fiscal year 2008-09.
Though the week started in the green, gaining 2.17 points to 662.57 points on Sunday, it plunged by a whopping 55.61 points during the week.
Currently, banks and financial instituions dominate the secondary market and two institutions -- Standard Chartered bank Nepal and Nabil Bank -- are dominant players in the movement of Nepse, putting the secondary market under 'concentration' risk.
Nabil Bank's books closing -- on Tuesday -- dragged Nepse down by 27.42 points but the bank topped the chart in terms of transaction amount with Rs 67.83 million. Standard Chartered Bank Nepal followed with Rs 58.42 million, and Bank of Kathmandu (with Rs 36.49 million), Standard Finance (with Rs 34.99 million) and Nepal SBI Bank (with Rs 18.36 million) managed to come in the top five slot, respectively.
In terms of number of share units traded, Standard Finance topped the chart with 1,35,000-unit shares changing hands while in terms of number of transactions Citizens' Bank International topped the chart with 407 transactions.
The transaction amount increased by 40.08 per cent to Rs 483.89 million against last week's fall of 32.63 per cent. Group-A companies contributed 70.71 per cent as against last week's 67.75 per cent whereas the 78-scrip sensitive index -- a barometer of Group-A companies -- lost a hefty 16.20 points to drop to 157.42 points. The float index -- calculated on the basis of real transactions -- also slid down by 5.14 points to drop to 58.53 points from Sunday morning's opening of 63.67 points.

Unilever Nepal's dividends couldnot bring cheer to investors, Nabil Bank drags Nepse

The cash dividends of Unilever Nepal Ltd could not spread cheer in the domestic market as the banking sub-group dragged Nepse down by 27.42 points today to 630.11 points.
The banking sub-group lost 47.2 points to drop to 626.31 points due to major banks -- especially Nabil Bank losing heavily. Due to its books closure Nabil Bank shares dropped by Rs 1,599 per unit or over 38 per cent, forcing Nepse to suspended its transaction.
Nabil bank's 340-unit shares were traded today between Rs 2,652 and Rs 2,600. Yesterday the bank's shares closed at Rs 4,251 per unit.
"This is a market price correction to reflect the dividend and bonus shares that Nabil has proposed following the delivery of an unprecedented profit of Rs 1.03 billion in the last fiscal year," said Anil Shah, chief executive officer of Nabil Bank. Every investor, who owned shares of Nabil till that closing will receive 50 per cent bonus shares (one share for every two) and a cash dividend of 35 per cent (Rs 35 per share).
"When the market opened this morning, it was known that those who purchased shares from today forward would not receive the bonus shares or cash dividend," he said adding that therefore the market to a large extent adjusted the price of the shares.He also promised to continue to deliver unprecedented shareholder value in the years ahead in order to protect blue chip investment in Nepse.
Currently, banks and financial instituions dominate the secondary market and two institutions -- Standard Chartered bank Nepal and Nabil Bank -- with the highest share prices are playing a determining role in the movement of Nepse. "However, with the increase in the number of listed financial institutions and the depth of trading in the market this 'concentration' risk will diminish over time," Shah hoped.
Meanwhile, Unilever Nepal Ltd's 96th Board of Directors (BoD) meeting recommended Rs 450 cash dividend -- Rs 400 normal dividend and Rs 50 as commemorative dividend on the occasion of completion of its 15 years of commercial production in Nepal -- from the profit of the last fiscal year.
The company had a turnover of Rs 2625.8 million in 2008-09. It has posted Rs 444 million net profit (after tax).Unilever's BoD meeting -- held at the company head office in Mumbai yesterday -- approved the audited annual accounts of the company for the fiscal year 2008-09. It also approved distibution of Rs 325 as Interim Dividend per share out of the cash dividend of Rs 450 per share post certification of the audited annual accounts for the fiscal year by statutory auditors.

Commercial banks drag Nepse down

The good performance of others sub-group, development banks and finance companies sub-groups could not push Nepse up due to bad performance of commercial banks sub-group.
Nepse gained a marginal 2.17 points today due to a key market propeller's -- commercial banks sub-group -- negligible loss of 0.37 point. The float index -- the barometer of real transactions -- also lost 0.04 point, despite Nepse's gain.
The 2,650-unit shares of Nepal Telecom (NT) that were traded today at nine rupees higher than the last closing pushed the others sub-group up by 10.58 points to 656.77 points.
Develeopment bank sub-group gained 5.14 points and finance companies sub-group surged by 2.73 points to push Nepse up by 2.17 points to 662.57 points.
"It proves the dominance of commercial banks in Nepse," said Prof Dr Manohar Krishna Shrestha. "However, this dominance of banks and financial institutions is a temporary phenomenon," he said adding that in the long-run the real sector will dominate the secondary market for its existence.
"For the time being the concentration on banks and financial institutions will continue but it will shift slowly to the real sector," he added.
Investors prefer banks and financial institutions due to the greed for bonus and rights shares, and lack of investment in any other sector. "Investors are aware of the fact that from next year the banks and financial institutions will distribute less bonus and rights shares," Shrestha said adding that then the investors will also shift their focus.
Though the domestic secondary market is not following the fundamentals, it has started the correction. "Investors know that from next year the rate of returns will decrease and they will also not get rights and bonus shares of banks and financial institutions -- the key reason that has pushed market to its unbelievable high. The market has began the correction," confessed an investor, who preferred not to divulge his name.

The others sub-group
KATHMANDU: Of the nine sub-groups, the others sub-group has only two companies in its listing: Nepal Film Development Company Ltd (NFDC) and Nepal Doorsanchar Company Ltd (NT). NFDC has 491,285-unit shares at a face value of Rs 100 per share that makes a total of Rs 49,128,500 and NT has the largest number of shares in the seconday market of 150 million-units at the face value of Rs 100 per unit -- though it was auctioned at a minimum of Rs 600 per unit -- making it to a total of Rs 15 billion. The NT shares are traded on a regular basis, but NFDC's shares have never been traded on the Nepse floor.

Commercial banks help boost remittance

The active involvement of commercial banks in the remittance business, growing number of remittance agencies and fluctuation in the rate of dollar vis-a-vis Nepali rupee have contributed to an encouraging inflow of remittance this fiscal year.
"Commercial banks have come aggressively into the remittance business over the recent months," said Pradeep Bhattarai, assistance director at the Foreign Exchange (Forex) Department of Nepal Rastra Bank (NRB).
Unlike the remittance agencies, they do not need separate licence for remittance business. "In the past, however, they were not much involved in it," he said adding that the increasing number of remittance agencies has also helped increase the remittance as they have helped channelise remittance through banking channels. Despite the global financial crisis, remittance by the end of the eleventh month of the fiscal year 2008-09 touched Rs 188.88 billion.
Earlier, Nepalis used to send money back home through illegal and non-banking channels but the entry of new remittance agencies has encouraged Nepalis in 76 countries around the world to send home money through banking channels.According to the second Nepal Labour Force Survey (2008-09), Nepal received the largest portions of remittance of 21.3 per cent from Qatar and 19.2 per cent from Malaysia.
"The number of remittance agecnies has doubled to 48 in the fiscal year 2008-09 from a year earlier," said Bhattarai. Most of these agencies are focusing on Gulf countries and Malaysia. "The fluctuation in dollar vis-a-vis Nepali rupee has also contributed to inflow of remittance," he added.
In 2007-08, the workers' remittances increased by 42.5 per cent -- in comparison to a year earlier -- to Rs 142.7 billion. In 2006-07, Nepal had received Rs 100 billion remittance.
According to the International Monetary Fund (IMF), remittance is the sum of workers' remittances, compensation to employees and migrants' transfers. "Every remitted dollar generates an additional three dollars in economic activity in the receiving country," according to economists. However, in Nepal remittance has been used in unproductive sectors and is fuelling a price hike. Yet, it is the top contributor to foreign exchange earnings.
Remittance has increased household investment in education, entrepreneurship and health also. According to the second Nepal Labour Force Survey, every household received Rs 65,755 in 2008. More than one quarter -- 30 per cent -- of the total population has gone abroad for work.
According to the Department of Labour and Employment Promotion, the number of workers going abroad for employment increased by almost 13 per cent in 2007-08 in comparison to 2006 and in the year 2008-09, the number touched 2,19,965.

Remittance inflow in the fiscal year 2008-09
First month (mid-August) -- Rs 13.41 billion
Second month (mid-September) -- Rs 31.88 billion
Third month (mid-October) -- Rs 50.31 billion
Fourth month (mid-November) -- Rs 63.45 billion
Fifth month (mid-December) -- Rs 78.54 billion
Sixth month (mid-January) -- Rs 94.60 billion
Seventh month (mid-February) -- Rs 109.40 billion
Eighth month (mid-March) -- Rs 131.00 billion
Nineth month (mid-April) -- Rs 150.42 billion
Tenth month (mid-May) -- Rs 169.17 billion
Eleven month (mid-June) -- Rs 188.88 billion
(Source: Nepal Rastra Bank)

Shareholders loose this week, too

Shareholders of hydropower companies, commercial banks, finance companies, trading firms, development banks and insurance companies lost this week, pulling Nepse down by 16 points to 700.01 points from its opening 716.01 points on Sunday.
However, investors might get temporary confidence and the shares of existing banks and financial institutions might flare due to Nepal Rastra Bank's new policy of putting a temporary halt to the issuance of licences to Group A, B and C banks and financial institutions. Nepse has over 85 per cent dominance of banks and financial institutions.
Hydropower companies, commercial banks and finance companies sub-groups lost heavily with their indices plunging by 29 points to 948.19 points from Sunday's opening of 977.19 points, 24.07 points to 728.26 points from Sunday's opening of 752.33 points and 14.16 points to 678.41 points from Sunday's opening of 692.57 points, respectively.
The trading sub-group also lost 8.57 points to dip to 281.78 points from the opening 290.35 points, whereas development banks sub-group lost 7.33 points to drop to 741.15 points from the opening 748.48 points. The insurance sub-group slid by 5.07 points to 646.24 points from the opening 651.31 points.
Of the nine sub-groups, two -- manufacturing and hotels -- did not see any trading this week but the others sub-group became the only gainer this week with a 1.17-point gain to rise to 670.86 points from Sunday's opening of 669.69 points.
The transaction amount also decreased by 44.29 per cent to Rs 263.38 million against last week's Rs 472.82 million.Of the total transactions, Group-A companies contributed 46.75 per cent. The 78-scrip sensitive index -- a barometer of Group-A companies -- lost 5.49 points to drop to 184.97 points from the opening 190.46 points. The float index -- calculated on the basis of real transactions -- also skidded down by 1.94 points to 67.22 points from the opening 69.16 points.
This week Citizens' Bank International (with Rs 21.42 million) topped the chart in terms trading amount followed by Nepal Investment Bank (with Rs 20.69 million), Bank of Asia Nepal (with Rs 17.06 million), National Hydropower Company (with Rs 16.30 million) and Nepal Bangladesh Bank (with Rs 14.55 million).
In terms of number of share units traded, National Hydropower Company topped the chart with 1,73,000-unit shares changing hands while in terms of number of transactions Bank of Asia Nepal topped the chart with 460 transactions.

Nepse misleads
KATHNMANDU: Nepse is misleading. It does not include Sunday's index when it calculates from Sunday's closing to next Friday's opening. Sunday being the first day should be included in the index calculation for correct data. This week, the index plunged by 16 points to 700.16 points from the opening of Sunday morning's 716.01 points. But according to Nepse, it dropped by only 4.70 points because Nepse did not calculate the drop of Sunday's 11.30 points from the opening of Sunday morning's 716.01 points. Nepse said that the transaction was calculated from Friday (July 31) to Tuesday (August 4) as the stock market remained closed on Wednesday and Thursday which were public holidays. This week, Nepse witnessed trading on three days only -- Sunday, Monday and Tuesday -- instead of its regular five days -- Sunday to Thursday. But Nepse did not -- as always -- calculate Sunday's trading points and calculated only two days -- Monday and Tuesday -- and producedmisleading figures. Since its inception, Nepse has been providing misleading information.