Century Commercial Bank Launches IPO

KATHMANDU, JAN 10 -

Century Commercial Bank launched initial public offering (IPO) worth Rs 920 million on Thursday. The bank has issued 9,200,000 primary shares priced at Rs 100 apiece.

The bank has estimated to have received applications for the primary shares worth Rs 500 million on the first day. “Based on the first day’s estimated demand, there could be an over-subscription of 5-10 times,” said Century CEO Ganesh Kumar Shrestha.

Century said it has allocated 460,000 shares for the bank’s staff, while another 460,000 units have been separated for institutional investors. Century is the latest private commercial bank to do IPO.

Except for state-owned Rastriya Banijya Bank, all commercial banks in Nepal have gone public.
Century has appointed Citizen Investment Trust, Growmore Merchant Banker, NIDC Capital Markets, Nabil Capital and Civil Capital as sales and issue managers. It has been collecting applications from 44 outlets. These include the bank’s 31 branch offices, 11 merchant banks and two finance companies, including Guheswori Merchant Banking and Finance and Sagarmatha Merchant Banking and Finance. Established two years ago, Century has 568 promoter shareholders from 43 districts.

Source:ekantipur.com, Jan 10th 2014
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Century Commercial Bank IPO for Rs.920 million

KATHMANDU, Dec 26: Century Commercial Bank Ltd (CCBL) on Thursday received the go ahead from the Securities Board of Nepal (SEBON) to issue 9.2 million units shares in an initial public offering (IPO). After getting the nod from the securities market regulator, CCBL is likely to hold its IPO on mid-January 2014, the bank said.

“The upcoming meeting of the board of directors will take the decision on the date to for the IPO. Probably, we will issue shares by the third week of January,” the bank´s CEO Ganesh Kumar Shrestha told Republica.

The bank´s paid-up capital will reach Rs 2 billion from the current Rs 1.08 billion after the IPO with CCBL looking to raise Rs 920 million from the public.

According to the Unified Directive 2013 from the Nepal Rastra Bank, the central regulatory authority for financial institutions, commercial banks are required to maintain their paid-up capital at Rs 2 billion.

CCBL would be a last among the existing commercial banks to start issuing for the public after NRB stopped issuing licenses to open new banks.

Source: myrepublica.com 26th Dec 2013
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Increase in number of loan defaulters in Nepal

KATHMANDU: The number of blacklisted names for defaulting on loans has grown with the increase in the amount of loans floated by the commercial banks.

The Credit Information Bureau (CIB) has blacklisted 210 firms and individuals for defaulting on loan repayments in the first four months of the current fiscal year. During the corresponding period a year ago, there were 175 such blacklisted firms and individuals.

“The expansion in lending of the banks has been substantial in the past couple of years which has also

increased the number of defaulters,” pointed out vice president of Nepal Bankers’ Association Upendra Poudyal.

According to the recently published first quarter financials of commercial banks, the amount of loans floated by banks has increased by 22 per cent in the past one year. The 30 banks have floated loans worth

Rs 739 billion by mid-October 2013. These banks had lent Rs 606 billion till mid-October 2012.

Nepal Rastra Bank’s data also shows that in the past 10 months, the number of credit accounts at banks has increased by 12 per cent. There were 532,135 loan accounts with commercial banks in mid-November 2012, which has gone up to 595,500 accounts by mid-August 2013.

“In the last three years, the slowdown in the real estate sector has also increased the number of defaults,” added Poudyal. In the past two years, CIB has blacklisted 25 housing developers and construction companies.

In fiscal year 2012-13, CIB blacklisted 660 firms and individuals on the recommendation of financial institutions for failing to repay loans. The content of the blacklist more than doubled in the last fiscal year in

comparison to fiscal year 2011-12, when CIB blacklisted 305 defaulters.

Though the amount of non-performing assets in the banks’ balance sheets seem to be declining, they are provisioning more for possible loan loss. The first quarter financials of the banks show that the non-performing loans (NPL) of 30 banks have reached 2.62 per cent of total loans on average. Such NPL stood at 2.9 per cent a year ago.

Despite the decline in the percentage of bad loans, the amount of provisioning undertaken to cushion against possible loan loss increased in the first quarter. During the period, banks set aside Rs 2.6 billion for the purpose which stood at Rs 2.3 billion a year ago.

“In the past years, banks might have been a bit less cautious in terms of lending which has resulted in the increased number of defaults,” pointed out Poudyal.

In addition, from November 2012, the central bank directed financial institutions to blacklist those who had defaulted on loans worth Rs one million or more from the earlier Rs 2.5 million

ceiling. The downsizing of the eligibility has pushed more individuals and firms to be blacklisted.

There are more individual names in the blacklist than institutions — almost two-thirds are individuals. Banks request CIB to blacklist any person or a firm that fails to repay loans on time. Blacklisting of defaulters most of the time helps banks recover the loans sooner.

Being blacklisted makes the borrower — any natural person or firm — ineligible for acquiring or rescheduling any new loan from any financial institution — not even a credit card.

Moreover, such blacklisted people also become ineligible to hold the post of a director of any publicly listed company or even contest in local or general elections.

source: The Himalayan Times, 18/11/2013

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Bank of Asia and NIC Bank Merge in Nepal's first CommercialBank Merger

 

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Bank of Asia and NIC Bank Merge in Nepal's first Commercial Bank Merger

KATHMANDU, NEPAL

NIC Bank and the Bank of Asia Nepal (BoAN) have combined to become NIC Asia Bank in the first ever case of a merge r between commercial banks. Nepal Rastra Bank (NRB) governor Yubaraj Khatiwada inaugurated the new entity and gave it his blessings amid a programme held on Sunday.

The two banks, promoted by largely the same group, had signed a memorandum of understanding (MoU) to come together on June 28, 2012. The central bank gave its go-ahead on April 26, 2013. NIC Asia Bank is now headquartered at the Trade Tower at Thapathali.

The merge d bank has joined the league of the top five commercial banks in the country in terms of the size of its balance sheet which is Rs 50 billion. Its total capital base including paid-up capital and reserves come to Rs 5 billion.

Addressing the inaugural ceremony, governor Khatiwada said that the bank now had a challenge to prove that the merge r has been a success. “This merge r has added responsibility to the management of NIC Asia,” Khatiwada said. “The management should be able to set an example by efficiently operating the new entity.”He added that NRB would improve the merge r directives to make it easier for financial institutions to merge . The governor also praised the bank for its success in managing issues related to employees, ownership structure and data transfer and software.

Chief executive officer of NIC Asia Bank Sashin Joshi said that the merge r had added strength to the bank, and this initiative would help to achieve newer heights at a time when the country’s economy isn’t doing so well. He expressed satisfaction that a merge r as big as the one that took place between NIC and the Bank of Asia has been possible through the use of local manpower. “Despite the merge r, there has been no layoffs and the employees from both the banks will be treated equally,” said Joshi.

Following the merge r, BoAN shareholders will be issued new share certificates on the basis of two BoAN shares for one NIC share, according to the bank. Meanwhile, a nine-member board of directors, headed by chairman Jagadish Prasad Agrawal, has also been formed at the merge d entity.

NIC Asia Bank now has 53 branches and a customer base of 270,000. NIC Bank had 36 branches and BoAN had 29. Among them, 13 branches were adjusted and a new corporate entity was added. As for ATM outlets, NIC Asia Bank now has a countrywide network of 57 ATMs. The number of shareholders stands at 90,000. NIC Asia Bank has a total of 630 employees. 

The bank’s consolidated operating profit for the first 11 months of the current year to mid-June 2013 stands at Rs 1.43 billion while the net profit stands at Rs 520.96 million. The combined deposit base is Rs 38 billion while loan issue is worth Rs 33 billion.

Banks told to keep ‘reasonable’ spread
Nepal Rastra Bank (NRB) Governor Yubaraj Khatiwada asked bankers on Sunday to keep the spread rate at a reasonable level saying that it was still on the higher side. The spread rate is the difference between the interest rates on deposits and loans.

According to NRB, the spread rate of commercial banks rose to 7.01 percent from 7 percent during the period mid-April to mid-May. The average interest rate on deposits was 5.36 percent while it was 12.37 percent on lending during the review period.

Speaking at the inaugural ceremony of NIC Asia Bank, Khatiwada asked bankers to maintain the spread rate at a level that ensures minimum profits so that industrialists would not suffer. He  asked bankers not to expect concessions from NRB for forever for implementing its directives. “Initially, NRB has been giving certain concessions, and it has been implementing the directive effectively after sometime,” he said.

Source: ekantipur,1st July 2013
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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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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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Rastriya Banijya Bank to hire young employees

KATHMANDU: Rastriya Banijya Bank is looking forward to hiring more young employees in order to transform the bank into a more competitive and modern structure.

“At present, the average employee age of the bank is 49, and the bank is planning to bring new and young manpower that will bring down the average employee age to 37 within three years,” said CEO of Rastriya Banijya Bank (RBB) Krishna Prasad Sharma during a training programme for the bank staff.

“We have to emerge as a strong and modern bank in terms of technology, financial resources and manpower,” he said.

RBB had recently hired five financial analysts, 15 deputy financial analysts, agriculture officers and

legal officers through open competition.

“When other banks are suffering from high credit to deposit ratio, ours stands at around 50 per cent,” pointed out Sharma.

“We have enough disposable financial resources to expand credit, and due to low cost of fund we can offer credit at competitive rates as well,” said Sharma, informing that RBB will

focus on quality and productive projects to finance.

RBB — a wholly government owned bank — had undergone a decade-long financial restructuring programme for being on the verge of a meltdown. The bank’ non-performing assets, which was higher than 60 per cent a decade back, has finally come down to six per cent and its net worth has become positive.

The bank, which has 141 branches, has collected

deposits worth Rs 85 billion and floated loans worth

Rs 43 billion along with

investments of Rs 24 billion till first quarter end.

Source: The Himalayan Times, 3rd May 2013

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Everest Bank slashes interest rate on Home Loans

KATHMANDU, MAY 03 -
Everest Bank is providing home loans at a minimum interest rate of 10 percent to customers planning to buy homes at the NLHDA Kantipur Real Estate Expo which started in Kathmandu on Thursday. The Nepal Land and Housing Developers' Association (NLHDA) and Kantipur Publications are  the organisers of the event.

The bank's usual interest rate for home loans is 10.5 percent. The bank said it would provide loans at 10 percent interest for up to five years, 10.5 percent from five to 10 years and 11 percent from 10-15 years. Similarly, Standard Chartered Bank Nepal is providing home loans at 9.49 percent interest during the expo with a 0.5 percent concession on the service charge.

Banks and financial institutions (BFIs) which are still reluctant to lend to real estate developers are increasing their lending to end users. Laxmi Bank, NIC Bank and Himalayan Bank, among others, all have brought down the interest rate to 10-12 percent. Under home loans, they offer credit to purchase land, construct homes or buy apartments.

"As home loans are provided based on the income assessment of an individual, there is no risk at all as long as the assessment is good," said Diwakar Poudel, corporate affairs chief at Standard Chartered. "The home loan portfolio is exciting, attractive and inspiring. We see a good future in this sector," he added. Standard Chartered currently has a 25 percent exposure to home loans.
Likewise, Everest Bank's chief executive officer PK Mohapatra said his bank had given high priority to home loans. During last Dashain, the bank provided home loans at a fixed interest rate of 9.99 percent for three years.

However, BFIs have been reluctant to lend to developers despite continued lobbying by them citing risks highlighted by the crisis in the sector in the last four years. "We are much conservative in providing loans to the real estate sector," said Mohapatra whose bank's lending to the pure real estate sector amounts to Rs 2 billion.

However, developers say that despite reluctance on the part of banks to lend to developers, home loans have helped them too. "Those wishing to buy apartments are getting loans which has helped to clear stocks of unsold apartments," said Min Man Shrestha, general secretary of the Nepal Land and Housing Developers' Association. He added that banks would have to lend to developers after all the apartments and housing units currently under construction are sold.

With the central bank increasing the threshold of realty loans to Rs 10 million, a majority of apartment projects could be sold with bank financing, according to developers. Shrestha said a majority of apartments available have price tags of below Rs 10 million which can be sold.
According to the NLHDA, from April 2005 to March 2013, around 65 apartment projects having 6,330 apartment units were implemented. Of the total, 12 apartment projects have acquired completion certificates, making 870 units of apartments ready to move in for buyers, according to realty developers. There are around 1,200 stand-alone housing projects going on currently, according to realty developers. Since the central bank capped realty lending at 25 percent, BFIs have been reducing their exposure to the realty sector.

BFIs have lent Rs 88.19 billion to the realty sector as of mid-February, down from Rs 98.81 billion one and a half years ago, according to Nepal Rastra bank (NRB). This is close to 10 percent of the total loan portfolio of BFIs. As of mid-February this year, BFIs had lent a total of Rs 882.31 billion.
Commercial banks have the highest lending to the realty sector with Rs 65.63 billion, followed by development banks with Rs 12.29 billion and finance companies with Rs 10.27 billion. "Lending to the realty sector came down due to both recovery of loans and NRB's increasing the threshold of real estate loans," said NRB spokesperson Bhaskarmani Gnawali.

Many financial institutions that landed in trouble in recent years had a history of overexposure to the realty sector besides bad corporate governance. However, Gnawali said that the situation had improved much in recent days. "The current situation of the realty sector is satisfactory. Houses and apartments are being sold after developers reduced prices," he added.

 Meanwhile, Sashin Joshi, chief executive officer of NIC Bank, said that there was no panic situation in the sector like until last year. "Borrowers have been repaying their loans by selling their other properties," he said.

Developers said that there was growing demand for low-cost apartments, and that banks' increased interest in lending to end users was helping the sector to recover. They added that they had been selling apartments with fewer facilities but at affordable prices for this reason.

"We ran after various facilities in the past which increased the cost of the apartments," said Shrestha. "Now we have realised that we should focus on affordability."

The central bank, however, had long been asking developers to slash prices so that apartments could be sold. "Apartments in the price range of Rs 1.5 million to Rs 5 million are affordable for Nepalis," said Gnawali. "The housing expo's focus on affordability is praiseworthy."

Source: ekantipur.com, 3rd May 2013

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