Rosy Days are gone for Banks: Lets Prepare for Second Wave

Kathmandu. With the world shut down due to the global pandemic of COVID-19, every sector of the society and the economy has been hit very badly. During these hard times, while every sector is struggling to overcome this difficultly, the banking sector of Nepal was seen to be stable during the first wave of this pandemic.

The decisions taken by Nepal Rastra Bank and all other commercial banks helped the sector to stay stable and work smoothly all based on last year’s profit. While the sector was able to sustain during the first wave, there are speculations that it may not be the case in case of another wave.

However, in these situations, the banks are seen to have been sustaining enough and providing a considerable dividend to the shareholders as well. Banks have also changed their position based on the distributable profit to be given to the shareholders in the last fiscal year.

Currently, 27 commercial banks are in operation in which Prabhu and Agriculture Development Bank have not made their financial details of the last fiscal year public. Similarly, Rastriya Banijya Bank has not issued shares to the public. So, 24 commercial banks can pay an average dividend of 11.32 from the profit of the Fiscal Year 2076/77.

Nepal Rastra Bank has also provided the facility to account for the interest income up to September from the previous year’s income so even if the interest rate goes up by September, the dividend amount will increase further. There is also a provision to pay a dividend from the profit of the previous year and also from the money kept in reserve.

As per the unrevised financial statements published by the banks till mid-July last year Nabil Bank can pay the highest dividend of 30.12 percent from last year’s profit, putting it at the first position, in terms of distributable profit. It has earned a net profit of Rs 3.56 billion last year, out of which Rs. 3.42 billion will be distributed to the shareholders.

Himalayan Bank has earned a profit of Rs 2.54 billion last fiscal year. Out of which, Rs 1.30 billion can be distributed to the shareholders, the bank can pay 13.96 percent dividend to the shareholders from the last year’s profit. Himalayan Bank dropped from eighth to the tenth position, in terms of distributable profit.

Laxmi Bank has earned a profit of Rs 1.48 billion in the last fiscal year. Out of which, Rs. 1.12 billion can be distributed to the shareholders. The bank can pay 11.41 percent dividend from last year’s profit this year. Laxmi Bank rose from twenty-first to the twentieth position, in terms of distributable profit.

Similarly, Everest Bank has the potential to pay a 19.62 percent dividend from the last fiscal year’s profit. Everest Bank had paid a 20 percent cash dividend and a 5 percent cash dividend to the shareholders from the profit of the previous fiscal year and paid a total dividend of 25 percent. Everest Bank has earned a profit of Rs 1.67 billion last year; Everest Bank came to the fourth from the sixth position, in terms of distributable profit.

Standard Chartered Bank can pay a dividend of 24.76 percent. The bank had given 22.5 percent cash profit from the previous fiscal year’s profit last year. The bank has earned a distributable profit of Rs 1.51 billion in the last fiscal year. Standard Chartered Bank came to the seventh from the ninth position, in terms of distributable profit.

Sanima Bank has earned a profit of Rs 1.70 billion in the last fiscal year. Out of which, Rs. 1.11 billion can be distributed to the shareholders so the bank can pay a 12.61 percent dividend from last year’s profit this year. Sanima Bank also dropped from twelfth to the thirteenth position, in terms of distributable profit.

NIC Asia can pay 14.83 percent dividend to the shareholders this year. NIC Asia has earned a profit of Rs 3.12 billion in the last fiscal year. NIC Asia Bank has jumped from seventh to the eighth position, in terms of distributable profit.

From last year’s profit, Bank of Kathmandu, Prime, and SBI have the capacity to pay 11 percent dividend, Century has a dividend-paying capacity of 4.02 percent while NMB can pay a 10 percent dividend. Machhapuchhre Bank has 9.61 percent, Global IME Bank has 9 percent and Citizens has 9.03 percent dividend potential, while Civil Bank has the lowest dividend-paying capacity at 3.15 percent. Siddhartha has 8.45 percent dividend potential. Kumari has a 5.67 percent dividend, Mega has an 8.45 percent dividend, Sunrise has 5.89 percent dividend, and NBL has 5.16 percent dividend potential.

In terms of distributable profit, the Agriculture Development Bank is in the fifth position and the Civil Bank is in the twenty-seventh position, Nepal Bank came second from third place, Global IME Bank came third from fourth place, Prime Bank came sixth from thirteenth  place, NMB Bank from nineteenth to ninth, Mega Bank from sixteenth to eleventh, Machhapuchhre Bank from seventeenth to sixteenth, Citizens Bank International from twenty-second to nineteenth,

Kumari Bank from twenty-sixth to twenty-first ,Century Bank remained in the twenty-sixth position, Prabhu Bank from tenth position to twelfth position, Rastriya Banijya Bank from second place to fourteenth position, Nepal SBI Bank has risen from fourteenth position to fifteenth position, NCC Bank from twentieth position to twenty-second position, Nepal Investment Bank from fifteenth position to twenty-third position, Sunrise Bank from twenty-third position to twenty-fourth position and NB Bank from to twenty-fourth position to twenty-fifth position.

These reports can show that the banking sector was able to sustain itself, rather in a comfortable way during the first wave of the pandemic that hit Nepal. The question is that can it remain unhinged if another wave is to hit?