Sebon fines four mutual fund managers

The capital market regulator has fined four mutual fund managers for parking their money in bank deposits higher than the prescribed limit, violating investment-related rules.
The Securities Board of Nepal (Sebon) move is likely to push mutual funds toward volatile stock market due to the lack of other investment scopes.
Though mutual funds are barred from depositing more than 10 per cent of total assets of their schemes in banks, the Sebon has used it discretion to define bank deposits as fixed deposits to fine them for breaching investment-related provision in the regulation. "But if the merchant bankers put the same fund in the call deposits, it is not counted as bank deposit, according to the regulator.
The Sebon – issuing a press note today – confirmed that it had fined NMB Capital, Laxmi Capital Market and CBIL Capital Market Rs 35,000 each for investing funds that are supposed to manage in bank deposits, breaching the allowed limit. Likewise, NIC Capital has been fined Rs 25,000 for breaching investment limit on bank deposit.
According to the Sebon, Citizens Mutual Fund-1 managed by CIBL Capital, NMB Sulav Investment Fund-1 and NMB Hybrid Fund L-1 managed by NMB Capital, Laxmi Equity Fund and Laxmi Value Fund-1 by Laxmi Capital and NIC Asia Growth Fund by NIC Asia Capital breached the rule on limitation of the fund.
This is the first punitive action against mutual fund scheme managers, the Sebon press note reads, adding that the regulator expects the action will help strengthen compliance among securities businesspersons and develop healthy market.
Earlier five months ago, the Sebon has sought clarifications from them over the breach of limit on investment on bank deposits from their mutual fund schemes. The fund managers – in their clarifications to Sebon in August – said that their share of fixed deposit investment crossed 10 per cent due to the fall in their value of assets.
The Nepal Merchant Bankers' Association, however, claimed that that the regulatory body should revise its regulation that bars fund managers from making their judgment on investments. The association also claimed that the regulation was introduced some eight years ago and now it's high time to review those provisions. 

NIC Asia Bank comes into operation

The first merged entity between two commercial banks NIC Bank and Bank of Asia Nepal – NIC Asia Bank – came into operation from today.

The merger between two class ‘A’ financial institutions in the history of the banking system has created an entity with a paid up capital of Rs 2.31 billion, though, its capital base – including reserve and retained earnings – is around Rs 5 billion.

“After a merger, NIC Asia Bank has now become a systemically important bank in the financial system due to its size,” central bank governor Dr Yubaraj Khatiwada said during the inauguration, here today.
The bank has also become a trendsetter in terms of merger between big institutions, he said, adding that mergers are meant to make the merged entity more competitive and able to run cost-effectively. “Its better for the banks and financial institutions, and they should not feel like they are merging for the central bank.”
The financial institutions should not keep on demanding more facilities to get merged, as merger itself provides opportunities for their own business expansion, Dr Khatiwada added. “Merger of banks and financial institutions are not like a cement industry in Souther part of Nepal that seek more benefit from the government.”
The governor, on the occasion, also informed that the time has come for the banks to increase their capital further. “Though higher capital does not guarantee better performance, it gives banks cushion and confidence.”
NIC Bank and Bank of Asia, which had started the merger procedure in May 2012, were granted Letter of Intent (LoI) for merger by the central bank on July 23, 2012.
The Office of Company Registrar granted the final approval for the two banks to merge on May 14.
Following the merger, NIC Asia Bank now has more than 270,000 customers with deposits worth Rs 38 billion and loans worth Rs 33 billion with 53 branches.
The central bank has been suggesting the banks and financial institutions to get merged if they have common directors and promoters.

“Though, the centran bank doesnot force them to merge, we suggest them to merge also for the financial stability,” Dr Khatiwada said.
The chief executive of the merged entity NIC Asia Bank Sashin Joshi said that the merger was not an easy process. “However, provided better facilities like tax breaks and clear legal provisions, mergers will be more attractive,” he said, adding that better legal arrangements will also facilitate acquisition. “The financial sector would see more acquisitions, if the central bank would bring Acquisition law," said Joshi, who was the chief executive of NIC Bank.
He also believed that the Nepal Stock Exchange (Nepse) that had halted trading of their shares due to the merger process since the last one year will resume the trading of the new NIC Asia Bank soon.
Shareholders of Bank of Asia Nepal will be issued new share certificates equivalent to one share of NIC Asia Bank for two shares of Bank of Asia Nepal as the due diligence audit of the banks had determined 1:2 share swap ratio between NIC Bank and Bank of Asia Nepal.
Coordinator of the Joint Merger Committee Rajendra Aryal, on the occasion, thanked for the support during the merger process of the two commercial banks.

NIC Asia Bank to be operational within this fiscal year

The proposed NIC Asia Bank is expected to come into operations within this fiscal year.
The first merger of two commercial banks — NIC Bank and Bank of Asia Nepal — have been approved by their respective annual general meetings held separately in Biratnagar and Kathmandu today but is subject to the regulator's final approval, which might take a couple of months.
"The integration process of the two banks will start soon after the central bank gives the final approval," said chief executive of NIC Bank Sashin Joshi. "Nepal Rastra Bank — the regulator — had erlier given Letter of Intent (LoI) for the merger of two commercial banks."
The proposed NIC Asia Bank will pave the way for merger between other commercial banks.
The joint merger committee will send today's annual general meetings minutes to the Nepal Rastra Bank within seven days, he added.
The NIC Bank’s 15th AGM held in Biratnagar has approved the merger of Bank of Asia with NIC Bank with a share swap ratio of 2:1, which means existing two shares of Bank of Asia Nepal will be converted to one share in the merged entity. Likewise the fifth AGM of Bank of Asia Nepal in Kathmandu has also approved the proposal today.
The proposed NIC Asia Bank will have an authorised capital of Rs 3.6 billion and paid up capital of Rs 2.31 billion after the merger. Similarly, Jagdish Prasad Agrawal and Sashin Joshi will continue as chairman and chief executive of the proposed NIC Asia Bank as they are currently chairman and chief executive of NIC Bank.
The board of the proposed NIC Asia Bank will have three promoters from NIC Bank, two from Bank of Asia, three from public and one independent expert director.
"The merger will be a historic event in the banking sector in the country as the first merger of two commercial banks," Joshi said, adding that the merged entity — NIC Asia Bank — will be amongst the five largest private sector banks in the country with a balance-sheet size of close to Rs 50 billion and a network of 65 branches and 59 ATMs spread from Mechi in the east to Mahakali in the far west of the country.
Earlier, the boards of both class A commercial banks had already passed the merger and share swap ratio proposal and has forwarded it to the annual general meetings for shareholders approval, according to the listed companies regulation.
Meanwhile, the annual general meeting of NIC bank today also approved a cash dividend of Rs 25 per share from the profits of last fiscal year 2011-12 subject to approval of Nepal Rastra Bank. By the fiscal year-end NIC bank had collected deposit worth Rs 22.1 billion, floated loan worth Rs 17.2 billion and posted profit of Rs 392 million, it added.
Current public directors Rajendra Prasad Aryal and Birendra Kumar Shanghai were also elected unanimously for another term by the NIC Bank annual general meeting today.


Merged Prudential starts operations
KATHMANDU: Prudential Finance has started its operations as a merged finance company between Prudential Finance and Gorkha Finance from Monday. Deputy governor of Nepal Rastra Bank Maha Prasad Adhikari inaugurated the merged entity 'Prudential Finance' in the valley on Monday. The merged finance company has a share capital of Rs 483.1 million, collected Rs 986 million worth deposit and has floated loans worth Rs 930 million, said the chairman of Prudential Finance Manoranjan Raman Sharma. Ajay Kumar Mishra is the chief executive of the merged finance company.

NIC Bank, Bank of Asia Nepal sign merger agreement

NIC Bank and Bank of Asia Nepal have signed a merger agreement.

The merger agreement was signed by the chairmen of both the banks today evening in the presence of directors, joint merger committee members, promoters, and officials of both the banks.

However, the merger is subject to approval of the annual general meeting of both the banks and regulatory authorities.

It will be the first merger between two healthy class 'A' financial institutions that will lay the foundation for a strong commercial bank, the chairmen said, adding that the signing of the agreement was the culmination of a meticulously planned merger process that started some six months ago. "The merger will create one of the largest banks in the country in terms of capital fund, balance sheet size, branch, ATM network, customers and employees," they claimed.

NIC Bank posted an operating profit of Rs 666.79 million, whereas Bank of Asia Nepal posted a profit of Rs 327.11 million in the last fiscal year. Share trading of both the banks has been halted for the last six months due to the merger process.

Both the banks have lauded their stakeholders including shareholders, promoters, regulators and staff for their excellent support and cooperation for the much anticipated merger that will not only increase the balance sheet strength but also the professionalism of the merged institution as by the time the merger is completed, the core capital, including reserves, of the new entity will be around Rs 5 billion.
The central bank has asked the banks and financial institutions with the same promoters to go for merger. NIC Bank and Bank of Asia Nepal are largely promoted by the same groups. Bishal Group and Shanghai Group hold majority stakes in both of them, whereas NIC Bank has Golchha and Golyan Groups also as promoters and Bank of Asia Nepal has promoters from Lucky Group.

Bhandari to lead NBA

Chief executive officer of Citizens Bank International Rajan Singh Bhandari was elected as the president of Nepal Bankers' Association (NBA) today. He succeeded chief executive of Himalayan Bank Ashoke Sumsher JB Rana.

Bhandari, who is a former employee of central bank, has been serving Citizens Bank International since its inception in April 2007. Currently, the bank has a network of 14 branches in Kathmandu valley and 18 outside the valley.

According to Nepal Bankers Association's rule, the president and other executive members are elected every alternate year. It has a 13-member executive committee including two vice presidents, eight members and two advisors.

The executives include Upendra Poudel as vice president. After Bhandari, who was vice president, has been elected to president, one vice president's post is vacant, which will be filled in a week. 

Similarly, the other eight executive committee members are chief executive of Nabil Bank Anil Gyawali, chief executive of Janata Bank Bijaya Pant, chief executive of Century Commercial Bank Ganesh Kumar Shrestha, managing director of Kist Bank Kamal Prasad Gnawali, chief executive of Civil Bank Kishore Maharjan, chief executive of Rastriya Banijya Bank Krishna Prasad Sharma, chief executive of Standard Chartered Bank Nepal Joseph Silvanus and chief executive of NIC Bank Sashin Joshi.

Chairman of Nepal Investment Bank Prithivi Bahadur Pande has been nominated as advisor. The post for the other advisor is vacant.

NIC Bank, Bank of Asia Nepal to merge

The domestic financial sector will witness a merger between two commercial banks for the first time with the merger of NIC Bank and Bank of Asia Nepal (BoAN).
NIC Bank and BoAN signed a memorandum of understanding today for the proposd merger which is expected to be concluded by mid-January 2013. "Both the banks had been looking for a partner to merge with in both international and domestic banks but talks did not lead anywhere," said chief executive of NIC Bank Sashin Joshi.
He stressed that after the merger, the merged entity will be one of the largest commercial banks with the highest capital base exceeding Rs 5 billion. "This is first time that any two strong class 'A' financial institutions are going to merge, and the increased capital base will allow the bank to finance large projects on its own," he added.
The banks will apply for a Letter of Intent (LoI) at Nepal Rastra Bank (NRB) and after obtaining the LoI they will conduct Due Diligence Audit that will determine the share swap ratio between the banks.
The banks have yet to decide on the name after the merger. After the merger, the bank will have 65 branches and 69 ATMs with 36 branches of NIC and 37 branches of BoAN in operation.
Likewise, its customer base will exceed 225,000 with total deposits of Rs 34 billion and loans worth Rs 28 billion. "The merged bank will have about 90,000 shareholders and 800 employees," according to Joshi. "The bank will strive to retain all its employees as the expansion of the bank will require more manpower," he added.
The banks have already corresponded with Nepal Stock Exchange to halt trading to avoid any manipulation of share prices. NIC's shares were traded at Rs 486 and BoAN shares were traded at Rs 237 at the stock exchange today. BoAN earned a profit of Rs 117 million and NIC earned Rs 263 million by the third quarter of the current fiscal year.
Since the last couple of years, NRB has been encouraging financial institutions to consolidate as the Nepali financial system is not large enough to allow space for more than 200 financial institutions to conduct business without stepping on each other's toes. Due to the central bank's insistence on mergers, there are more than 26 financial institutions that have formally applied for an approval to merge from NRB.
The central bank has already given LoI to eight sets of financial institutions with six more to go. Most of the financial institutions seeking mergers belong to class 'C' and 'B' categories. Among the commercial banks, Machchhapuchhre Bank is opting for a merger with Standard Finance, and Global Bank's merger with IME Financial Institution and Lord Buddha Finance is almost complete.

Global IME Bank to start soon
KATHMANDU: The merged entity of Global Bank, IME Financial Institution and Lord Buddha Finance will start operations as Global IME Bank from July 9, according to the bank. After the merger, the bank will have a paid-up capital of around Rs 2.20 billion and will be able to fulfill the central bank's regulation. The merger was granted final approval last week. The bank and IME Financial Institution being promoted by IME Group was asked by the central bank to opt for a merger as it will be easier and send a positive message in the market.