Huge Response for Mega Bank's IPO-Oversubscribed 15 times

KATHMANDU, NEPAL

Mega Bank´s initial public offering (IPO) is said to have been oversubscribed by around 15 times, making it one of the most successful public floatations in the recent history of Nepal.

The bank, which floated its shares on the primary market on Sunday, had raised Rs 6.33 billion till Tuesday evening, recording oversubscription of around 10 times. “We estimate the IPO to have been oversubscribed by 15 times as of Wednesday evening (the last day for public floatation), raising close to Rs 9.5 billion,” Mega Bank CEO Anil Keshary Shah told Republica. “But final results will come only tomorrow (Thursday).”

The bank had floated 6.99 million units of common stocks worth Rs 100 each. It had appointed Citizens Investment Trust, Nabil Investment Banking Limited, NMB Capital Limited and NIBL Capital Markets Limited as issue managers for the IPO.

The bank had established 133 collection centers in 40 districts from where people could file application to purchase shares of Mega.
Earlier, Mega had said the IPO would be a barometer to measure the trust and confidence of the public won by the bank since its establishment in July 2010.

“We are pleased to know that we have been able to win public´s confidence in a very short period of time,” Shah said.
He further added that share allotment process would complete within this fiscal year and extra funds raised through the IPO would be refunded within first two weeks of the start of the new fiscal year in mid-July.

Source: myrepublica, 6th of June 2013
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Global IME Bank to merge again

KATHMANDU, NEPAL

Global IME Bank has geared up for another merger — this time with Gulmi Bikas Bank.

The class ‘A’ bank signed a memorandum of understanding (MoU) with Gulmi Bikas Bank on Tuesday. Two weeks back, Global IME Bank and Social Development Bank had signed a MoU for their merger.

Global IME Bank was formed last year following a merger between commercial bank — Global Bank — and two finance companies — IME Financial Institution and Lord Buddha Finance.

After the completion of the current merger process, Social Development Bank will be the fourth entity to get merged with Global IME Bank, while Gulmi Bikas Bank will be the fifth.

At present, Global has a paid up capital of Rs 2.25 billion and has been able to earn Rs 361 million as profit in the third quarter of the current fiscal year. After the merger with Gulmi Bikas Bank, its paid up capital will increase to Rs 2.5 billion, excluding Social Development Bank.

Gulmi Bikas Bank that had started operations in September 2007, has a paid up capital of Rs 25 million. It had earned a profit of Rs 932,070 in the third quarter of the current fiscal year. However, Social Development Bank that started operations in 2010 October, has been struggling for some time.

Following signing of MoU, Global IME Bank’s share trading has been suspended by Nepal Stock Exchange until the conclusion of the merger. Gulmi Bikas Bank, that has 250,000 units of ordinary shares listed at Nepse, will also be suspended for the time being. Its shares were last traded at Rs 141 per unit.

Source: The Himalayan Times, 30th May 2013
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Price of Gold drops Again

KATHMANDU, NEPAL:

The price of gold once again dropped today to reach a year low of Rs 49,099 per tola (11.664 gram).

On the first day of trading today, the domestic market witnessed a fall of Rs 651 per tola in gold price, according to Nepal Gold and Silver Dealers’ Association. On Friday, the precious yellow metal was traded at Rs 49,750 per tola in the domestic market.

The gold price is fixed in

the domestic market on the basis of international market price. “A drop of $20 per ounce today in the international market has pulled the price down in the domestic market,” the association added.

The international market is expected to witness a fall in gold price to $1,320 per ounce, which will further bring down the price in the domestic market, it said, adding that the strong dollar has also contributed to the lowering of the price of gold.

The price started to drop from mid-April. On April 15 and 16, prices dropped by Rs 6,300 per tola — on April 15 it dropped by Rs 3,300 and on April 16 it further plunged by Rs 3,000 — due to prices decreasing in the international market. The price of the precious yellow metal had touched a record high of Rs 62,000 per tola in the domestic market on September 14, 2012.

Source: The Himalayan Times, 20th May 2013

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Nepal's foreign reserves rises to over Rs.474 billion

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Nepal's foreign reserves rises to over Rs.474 billion

KATHMANDU: The total foreign currency reserve has increased by 7.9 per cent to Rs 474.16 billion during the first nine months of the current fiscal year, according to the Nepal Rastra Bank (NRB).

Earlier, the foreign currency reserve was Rs 439.46 billion during the same period of the fiscal year 2068/069.

Of the total reserve, the NRB owns Rs 387.56 billion which is 3.2 percent more than of the last fiscal year.

Likewise, the reserve of Indian currency reached 64.52 billion with an increase by 6.8 percent against the same period of the last fiscal year.

According to the NRB, the reserve of the foreign exchange is sufficient to import goods and service of 9.2 months.

Similarly, the revenue mobilisation of the government during the review period has reached Rs 210.47 billion increasing by 22.3 per cent, thanks to rise in exports. The revenue mobilization was Rs 172.9 billion in the last fiscal year.

Likewise, value added tax (VAT) revenue has reached Rs 60.64 billion increasing by 15.7 per cent as compared to the last fiscal year.

During the review period, customs tax contributed Rs 41.64 billion which is more by nearly 39 percent than the review period of the last fiscal year.

According to the central bank, the income tax revenue has also increased by 31.1 percent contributing a total of Rs 48.26 billion due to reform in income tax administration and positive impact of taxpayer education.

Similarly, the excise duty revenue collection has reached Rs 26.19 billion during the review period contributing 20.5 percent increase than the same period of the last fiscal year.

However, the non-tax revenue has deceased to Rs 23.82 billion in the review period against Rs 25.25 billion of the same period of the last fiscal year, according to the NRB.

Source: The Himalayan Times, 14th May 2013
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NRB has relaxed KYC provisions for small depositors

KATHMANDU,NEPAL

 The Know Your Client (KYC) provision for banks and financial institutions has been relaxed for small depositors with bank accounts of up to Rs 500,000.

The banks and financial institutions had been urging the Nepal Rastra Bank (NRB) to think on the issue stating that it is creating problems in opening new accounts and updating the existing ones. But those with deposits of over Rs 500,000 will have to provide citizenship certificate number of three generations, profession, estimated annual income and other information while opening a bank account or have to update their existing accounts by mid-June. The central bank, however, has stated that the banks and financial institutions can also seek information from small depositors if deemed necessary.

The bankers claimed that the NRB’s definition of small depositors is not practical and argued that this alternative is not suitable as even the small depositors will have to fulfill the KYC provision if they come with big deposits. “These provisions are impractical when the banks and financial institutions are already informing NRB about suspicious transactions,” a banker told Karobar. But NRB Spokesperson Bhaskar Mani Gyawali stated that the banks and financial institutions will not have any problem to expand their client base when it has already exempted the deposits of up to Rs 500,000.

The banks and financial institutions had been claiming that they were facing problems in making clients in newly opened branches due to the KYC provision. NRB had issued the KYC directive to the banks and financial institutions to discourage money laundering and financial investment in terrorism.

NRB had issued the circular as per the clause 79 of the NRB Act, 2002 which provides all regulatory authority to the central bank. NRB has also allowed Nepali commercial banks to open their branch abroad. The banks that have maintained paid-up capital as fixed by the central bank and for the past one year also maintained a buffer capital of additional one percent can open contact office abroad.

Source: Karobar Daily, April 6th 2013

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Commercial Banks in Nepal facing tighter liquidity situation

KATHMANDU-
Although the banking system usually sees higher liquidity during the last quarter of the fiscal year, commercial banks are facing liquidity tightness in recent days.

Generally, banks reduce lending, while deposit collection grows due to increased government spending in the last quarter of the fiscal year. But the government’s failure to expedite spending this year has resulted in liquidity tightness, according to bankers.

As of mid-April, Rs 57 billion has been stuck in the government’s treasury, which is Rs 16 billion higher than that as of mid-March, according to the Nepal Rastra Bank (NRB).

The banking system is facing tighter liquidity situation this fiscal after a year’s gap. After an acute liquidity crunch in 2010-11, banks enjoyed excess liquidity in 2011-12.

Besides government’s failure to spend, other factors responsible for the liquidity tightens are tax payment by banks and financial institutions and other taxpayers who withdraw deposits from BFIs and increased bank lending compared to deposit growth.

According to the NRB, bank lending grew by 16, percent while deposit growth remained at 6 percent as of mid-April. Total deposit collection of banks reached Rs 927 billion, while lending stood at Rs 723 billion. “Aggressive lending compared to deposits also brought the tightness in liquidity,” said an NRB official.

The tightening liquidity situation has also forced BFIs to increase interest rates on deposits, particularly on fixed deposits. According to bankers and depositors, interest rate on fixed deposits has crossed 10 percent.

The tightness in liquidity is also evident with the fact that the inter-bank lending rate reached as high as 7 percent last week, but has come down below 6 percent this week. An NRB official said about half dozen banks ’ credit-to-deposit ratio is above 80 percent in recent days, which also reflects the tightness in liquidity.

Banks have particularly increased interest rates for institutional fixed depositors. According to Rishi Ram Gautam, executive director of Citizen Investment Trust (CIT), one of the big institutional depositors, the CIT has been receiving three percent higher interest rate now compared to three months ago. “We received interest rate as high as 10.6 percent — up from 7.5 percent three months ago,” he said.

Bankers said they were forced to increase the interest rate on deposits in the wake of slow deposit growth and the government’s failure to spend despite huge revenue collection.

“We have increased the interest rate on fixed deposit to 9 percent,” said Sashin Joshi, chief executive officer of NIC Bank. “As the government delayed releasing the budget for completed work, it resulted in liquidity tightness.”

NMB Bank has increased interest on fixed deposit to 8.5 percent from earlier 7 percent. NMB Bank CEO Upendra Poudel said the current tightness in liquidity is momentary and a majority of banks have increased the interest rate on deposits on short-term deposits.

Laxmi Bank is also planning to increase its interest rate for individual fixed depositors.  “We are increasing the interest rate for retail fixed depositors to 9 percent. We have offered as much as 9.5 percent to institutional depositors,” said Laxmi CEO Suman Joshi.

He said it is necessary to bring individual depositors to the banking system as they were diverted to the share market and other sectors after the interest rate decreased. “With individual depositors moving away from banks , institutional depositors have been assertive to claim higher interest rates,” he said.

Given the banks ’ boards seeking higher returns at the end of the fiscal, banks have increased lending aggressively while deposit growth has remained sluggish.

Source: ekantipur.com, 7th May 2013

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Gold Price falls by Rs.800 per tola

KATHMANDU: Gold prices retreated by Rs 800 a tola (11.664 grams), today, after rising through the week in the domestic market.

Its price was fixed at Rs 52,000 a tola, which stood at Rs 52,800 yesterday. In the international bullion market, gold fell to $1,455 per troy ounce after HSBC cut its gold forecast for the coming years.

Moreover, the sudden cashing in on gold prices two weeks back has supposedly hit the safe haven appeal of the yellow metal and investors do not seem to be lured by gold at the moment.

Likewise, profit booking by investors on the eve of the US’ Federal Open Market Committee (FOMC) meeting and European Central Bank meeting also affected the price of gold. FOMC meeting will decide whether to cut back the Quantitative Easing programme and will help in gold prices further dwindling.

On April 16, the price of gold in the domestic market dropped to Rs 49,500 a tola. However, Nepali consumers were not able to take advantage of the drop as bullion traders decided to shut shop instead of selling gold jewellery at a lowered rate.

Following the closure of shops, on April 21, the Department of Commerce and Supply Management and Nepal Bureau of Standards and Metrology inspected jewellery shops in Kathmandu.

The inspection found that the weighing machines and quality of gold and silver

in many of the well-known shops were substandard.

However, gold traders affiliated to Nepal Gold, Silver, Gem and Jewellery Federation closed their shops to protest the inspection. They asked the government bodies to prepare a standard mechanism to regulate and inspect jewellery shops. They withdrew the strike on Friday after the government assured them of forming a task force to formulate regulation.

Source: The Himalayan Times, 3rd May 2013

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Merger not really a solution for all financial problems

KATHMANDU: Despite being touted as a miracle cure for all ailments troubling financial institutions, mergers have failed to improve the performance of almost a dozen financial institutions.

Among the 12 sets of mergers completed in the domestic financial sector within the last two years, only four have so far succeeded in registering profits. Likewise, share prices of half of the listed merged entities are also below face value at Nepal Stock Exchange.

“A merger does not translate to miraculous profits immediately. It takes time for the merged entity to become profitable as they have to deal with additional issues such as effectively managing human resources along with its operations,” said chief executive of Synergy Finance Rajendra Man Shakya.

Synergy Finance that was formed in November 2012 following a merger between Alpic Everest Finance, Butwal Finance and CMB Finance, has recorded a net loss of Rs 35.65 million in the second quarter of the current fiscal year.

“Problems such as low rate of loan recovery and absence of proper projects to finance remain the same even after a merger as it used to be with the concerned individual institutions before the merger,” said Shakya, who is also president of Nepal Finance Companies’ Association. “We have observed that merged companies need to be given time to recover and become profitable.”

However, Narayani National Finance, which was formed after a merger between Narayani Finance and National Finance in November, 2010, has fared well. It has earned Rs 25.74 million in the second quarter. Moreover, the company was able to earn 33 per cent more operational profit even before first year of merger was over.

But at the other end is H&B Development Bank that was formed following a merger between Himchuli Bikas Bank and Birgunj Finance in 2011. The class ‘B’ bank that was performing fairly is now in trouble due to the large scale fraud committed with the involvement of its employees.

Investors are also apprehensive about investing in shares of merged entities and their prices have taken a plunge of late. Among 10 listed merged financial institutions, share prices of only six firms are above Rs 100 — the face value.

“If the merged financial institutions are good then they will perform better and investors will also be willing to bid a higher price,” said acting president of Nepal Investors’ Forum Raj Kumar Timilsina.

Global IME Bank that was formed after merger between Global Bank, IME Financial Institution and Lord Buddha Finance, and Machhapuchchhre Bank following its merger with Standard Finance have been able to increase their profit and subsequently their share prices have also almost doubled in the past six months.

“In most cases, mergers have been taking place just to avoid the regulator’s action when the particular company’s financial health is deteriorating due to which the merger becomes forced and creates more problems,” pointed out Timilsina, adding that investors look forward to mergers between promising companies such as the ongoing merger process between NIC Bank and Bank of Asia Nepal.

According to central bank, 28 financial institutions have already got approval to merge into 13 institutions, and 24 financial institutions have received Letter of Intent (LoI) to merge into 10 institutions.

Source: The Himalayan Times,  2nd May 2013

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Nepal offers huge investment opportunities-Ambassador of UAE

Non-resident ambassador of the UAE to Nepal Mohamed Sultan Abdalla Al Owais, speaking at a programme here today, said that Nepal offers a lot of opportunity to investors.

“In the last four years of my tenure in New Delhi, UAE has doubled its trade volume with India,” he said, adding that the UAE wants to replicate the same in Nepal too.

The New Delhi-based envoy said that a team of United Arab Emirates businessmen will visit Nepal soon to explore business opportunities.

Though UAE is largely known as one of the key destinations for migrant workers, the trade volume between the two countries has also been increasing in recent years.

Nepal had exported merchandise worth Rs 326.300 million to UAE in fiscal year 2010-11, according to figures of the Trade and Export Promotion Centre (TEPC).

UAE — the 29th largest trading partner of Nepal — had exported merchandise worth Rs 13.61 billion to Nepal in the fiscal year, the data revealed, adding that Nepal’s trade deficit with UAE stood at Rs 13.28 billion in fiscal year 2010-11.

Likewise, Nepal’s exports to UAE in 2012 stood at Rs 322.99 million, whereas it imported merchandise worth Rs 37.66 billion, according to the TEPC data. “On the basis of export volume, UAE is the 19th largest export destination of the country.”

The United Arab Emirates (UAE) is the largest supplier of gold to Nepal.

Nepal imported some 87.6 per cent of gold from the UAE in fiscal year 2010-11, the TEPC data revealed, adding that the country had imported gold worth Rs 9.95 billion from the UAE, out of the total gold imports of Rs 11.35 billion.

Likewise, in fiscal year 2009-10, the country had imported 68.4 per cent — Rs 28.5 billion out of the total import of Rs 40 billion — gold from the UAE.

Besides gold, major imports from UAE include edible oil, beverage, fuel oil, petroleum bitumen, and polyethylene, whereas Nepal exports large cardamom, woolen shawls, scarves, and mufflers, among others to the UAE.

“There is a need to enhance trade relations in the interest of both the countries,” the envoy said.

Nepal and the UAE entered into diplomatic relations in January 1977.

Likewise, the then Royal Nepal Airlines started its flight to Dubai in 1985 in transit to its European destinations. Currently, Etihad Airlines, RAK Airways, and Fly Dubai are some of the airlines of UAE catering to the needs of travellers, mostly migrant Nepalis to and from UAE, which is also one of the key sources of remittance inflow to the country.

Source: The Himalayan Times (Feb 4th, 2013)

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New NRB Rule-Nepal might experience increased remittance inflows

Remittance inflow might see an increase as commercial banks can now open a liaison or representative office outside the country.

Commercial banks that have fulfilled the basic criterion according to the central bank’s rule can now open a representative or liaison office outside the country, Nepal Rastra Bank (NRB) said today.

They must, however, have minimum basic paid up capital, been maintaining one per cent more buffer capital since the last one year, have Non Performing Assets of less than five per cent for the last three years, and the central bank must not have penalized any of the directors within the last six months.

Those commercial banks that fulfill the criterion must first apply at the central bank with financials of the last three years, declaration of its capacity to abide by the regulation of the regulatory authority of the concerned country where they are willing to open a representative or liaison office, besides a feasibility study and the bank’s board decision, said Nepal Rastra Bank that will permit banks with time restriction, if the applicant fulfills all the criteria.

Commercial banks must get approval from the concerned country’s regulatory authority within six months and a final approval from the central bank to open a representative or liaison office that must come into operation within six months and they must inform the central bank.

“Commercial banks must take approval from the Foreign Exchange Department of the central bank for the foreign currency needed to open an office in a foreign country,” NRB added.

Commercial banks have been asking the government and the central bank to allow them to operate offices outside the country.

Some of the commercial banks have, even, been planning to open a liaison office in the key remittance originating countries like India to officially channel in remittance through banks. Though a World Bank report has projected remittance inflow growth rate to slow down, a large chunk of remittance inflow from India has not yet been completely utilized through formal banking channels making it difficult to track its contribution to the total remittance.


Recently, Global IME Bank had sought the central bank’s permission to open a liaison office in New Delhi, India, to channel the remittance inflow through the bank.

The Monetary Policy has also promised commercial banks to allow them to open offices outside the country, though earlier, the Unified Directives 2010 had allowed only licensed institutions established with foreign equity participation to open a liaison or representative office according to the conditions stipulated by the central bank.

Source: The Himalayan Times (Jan 31st, 2013)

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