banking
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By Sandeep Chaudhary

Financial Health Report: Analyzing the Strengths and Weaknesses of Nepalese Commercial Banks in Chait 2080

Financial Health Report: Analyzing the Strengths and Weaknesses of Nepalese Commercial Banks in Chait 2080

The financial health of Nepalese commercial banks as of Chait 2080 (Mid-April 2024) provides valuable insights into the stability and performance of these institutions. Below is a detailed analysis of core capital, total capital, capital adequacy ratios, deposits and loans, credit-deposit ratio, net liquidity, statutory liquidity reserve, non-performing loans, and prescribed sector loans.

Core Capital (Tier I Capital)

Core capital, also known as Tier I capital, is a critical measure of a bank's financial strength and ability to withstand financial stress.

  • Highest Core Capital:

    • Global IME Bank Ltd.: NPR 46,744 million

    • Nepal Investment Mega Bank Ltd.: NPR 45,006 million

    • Nabil Bank Ltd.: NPR 44,562 million

  • Lowest Core Capital:

    • Nepal SBI Bank Ltd.: NPR 16,737 million

    • Machhapuchhre Bank Ltd.: NPR 13,967 million

    • Standard Chartered Bank Nepal Ltd.: NPR 18,480 million

Total Capital Fund (Tier I and Tier II Capital)

Total capital includes Tier I and Tier II capital, providing a broader measure of a bank’s financial health and risk management capacity.

  • Highest Total Capital Fund:

    • Nabil Bank Ltd.: NPR 58,795 million

    • Nepal Investment Mega Bank Ltd.: NPR 57,698 million

    • Global IME Bank Ltd.: NPR 56,538 million

  • Lowest Total Capital Fund:

    • Nepal SBI Bank Ltd.: NPR 22,130 million

    • Standard Chartered Bank Nepal Ltd.: NPR 22,185 million

    • Machhapuchhre Bank Ltd.: NPR 21,072 million

Capital Adequacy Ratios

Capital adequacy ratios are crucial for assessing the bank's capital relative to its risk-weighted assets.

  • Highest Core Capital Adequacy Ratio (CCAR%):

    • Standard Chartered Bank Nepal Ltd.: 13.96%

    • Agricultural Development Bank Ltd.: 11.36%

    • Prime Commercial Bank Ltd.: 10.54%

  • Lowest Core Capital Adequacy Ratio (CCAR%):

    • NIC ASIA Bank Ltd.: 8.25%

    • Kumari Bank Ltd.: 8.03%

    • Machhapuchhre Bank Ltd.: 8.80%

  • Highest Total Capital Adequacy Ratio (CAR%):

    • Standard Chartered Bank Nepal Ltd.: 16.76%

    • Agricultural Development Bank Ltd.: 13.03%

    • Nepal Investment Mega Bank Ltd.: 13.27%

  • Lowest Total Capital Adequacy Ratio (CAR%):

    • NIC ASIA Bank Ltd.: 11.29%

    • Kumari Bank Ltd.: 11.72%

    • Prime Commercial Bank Ltd.: 11.67%

Deposits and Loans

Deposits and loans are indicators of a bank’s ability to mobilize resources and lend to the economy.

  • Highest Total Deposits:

    • Global IME Bank Ltd.: NPR 472,868 million

    • Nabil Bank Ltd.: NPR 446,428 million

    • Rastriya Banijya Bank Ltd.: NPR 369,521 million

  • Lowest Total Deposits:

    • Standard Chartered Bank Nepal Ltd.: NPR 112,552 million

    • Machhapuchhre Bank Ltd.: NPR 152,857 million

    • Nepal SBI Bank Ltd.: NPR 174,478 million

  • Highest Total Loans:

    • Global IME Bank Ltd.: NPR 388,792 million

    • Nabil Bank Ltd.: NPR 381,128 million

    • Nepal Investment Mega Bank Ltd.: NPR 332,837 million

  • Lowest Total Loans:

    • Standard Chartered Bank Nepal Ltd.: NPR 88,435 million

    • Nepal SBI Bank Ltd.: NPR 129,022 million

    • Machhapuchhre Bank Ltd.: NPR 130,540 million

Credit-Deposit (CD) Ratio

The CD ratio measures the proportion of a bank’s deposits that are lent out. A high CD ratio indicates efficient utilization of deposits for lending, while a lower ratio suggests potential underutilization.

  • Highest CD Ratio:

    • NIC ASIA Bank Ltd.: 86.11%

    • Kumari Bank Ltd.: 85.36%

    • Prime Commercial Bank Ltd.: 85.10%

  • Lowest CD Ratio:

    • Rastriya Banijya Bank Ltd.: 68.84%

    • Nepal Bank Ltd.: 72.58%

    • Nepal SBI Bank Ltd.: 71.57%

Net Liquidity

Net liquidity is the ratio of net liquid assets to total deposits, ensuring that banks maintain enough liquidity to meet short-term obligations.

  • Highest Net Liquidity:

    • Standard Chartered Bank Nepal Ltd.: 42.53%

    • Nepal SBI Bank Ltd.: 39.75%

    • Nepal Bank Ltd.: 33.83%

  • Lowest Net Liquidity:

    • NIC ASIA Bank Ltd.: 20.44%

    • Nabil Bank Ltd.: 24.90%

    • Sanima Bank Ltd.: 24.44%

Statutory Liquidity Reserve (SLR)

SLR is a requirement for banks to maintain a certain percentage of their deposits in liquid assets.

  • Highest SLR Compliance:

    • Nepal SBI Bank Ltd.: 37.53%

    • Nepal Bank Ltd.: 31.00%

    • Rastriya Banijya Bank Ltd.: 32.41%

  • Lowest SLR Compliance:

    • Standard Chartered Bank Nepal Ltd.: 23.75%

    • Machhapuchhre Bank Ltd.: 22.93%

    • Himalayan Bank Ltd.: 22.22%

Non-Performing Loans (NPL)

Non-performing loans represent loans that are in default or close to being in default. Although specific NPL percentages were not provided, managing NPL is crucial for maintaining bank health.

Total Prescribed Sector Loan

Banks are required to lend a certain percentage to prescribed sectors such as agriculture, hydropower/energy, and Micro, Cottage, Small and Medium Industries (MCSMI).

  • Highest Lending to Prescribed Sectors:

    • Kumari Bank Ltd.: 33.26%

    • Nepal SBI Bank Ltd.: 32.29%

    • Agricultural Development Bank Ltd.: 26.06%

  • Lowest Lending to Prescribed Sectors:

    • Standard Chartered Bank Nepal Ltd.: 17.25%

    • Nepal Bank Ltd.: 18.78%

    • Prime Commercial Bank Ltd.: 20.47%

Conclusion

This detailed analysis of the key financial indicators of Nepalese commercial banks reveals that while some banks excel in capital adequacy and liquidity management, others perform well in deposit mobilization and lending. The data highlights the strengths and areas for improvement within the banking sector, ensuring a balanced and informed perspective on the financial health of these institutions.

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