Standard Chartered Bank Nepal: Exclusive Financial Analysis

August 6, 2019 | Investopaper

The financial analysis of Standard Chartered Bank Nepal Limited as performed by the Investopaper team is as follows:

Introduction of Standard Chartered Bank Nepal

Standard Chartered Bank Nepal Limited (SCB Nepal) came into operation from 1987. It is a joint venture company promoted by Standard Chartered Group. The Standard Chartered Group holds 70.21 percent shares in SCB Nepal. Likewise, the general public of Nepal owns 29.79 percent of the company.

Standard Chartered Bank Nepal issued 25,58,140 units share as the FPO in 2017. The bank issued FPO at a premium price of Rs. 1290 per share. Currently, the bank has the capital of Rs. 8 billion. The bank is operating through its 12 branches and 3 extension counters. SCB Nepal provides banking services through 23 ATMs across Nepal. Altogether 485 employees work under the company.

Related: Financial Analysis of Commercial Banks of Nepal [With Ranking]

Board of directors of Standard Chartered Bank Nepal

Mr. Jitender Arora is the current chairman of the board of Standard Chartered Bank Nepal. The board of directors includes five members. They are:

S.N. Board Members Designation
1 Mr. Jitender Arora Chairman
2 Ms. Karen De Alwi Director
3 Mr. Krishna Kumar Pradhan Director
4 Mr. Bharat Kunwar Director
5 Mr. Anirvan Ghosh Dastidar Director

Management team of Standard Chartered Bank Nepal

The management team of SCB Nepal is led by Mr. Anirvan Ghosh Dastidar. After the resignation of the previous CEO Mr. Joseph Silvanus, Mr. Anirvan Ghosh Dastidar took over as the current CEO. The management team includes:

S.N. Management Team Post
1 Anirvan Ghosh Dastidar Chief Executive Officer
2 Gorakh Rana Head of Global Banking & Commercial Banking
3 Michael Siddhi Head Transaction Banking
4 Adarsha Bazgain Head of Financial Markets & Financial Market Sales
5 Rajan Udas Head Human Resource
6 Gopi K Bhandari Senior Credit Officer & Chief Risk Officer
7 Suraj Lamichhane  Financial Controller
8 Sanjay Pant Head Compliance
9 Sujit Shrestha Chief Information Officer
10 Bimal Singh Head, Legal & Company Secretary

Shareholding Structure of Standard Chartered Bank Nepal

Standard Chartered Bank Nepal is a joint venture bank with foreign ownership of 70.21 percent. Standard Chartered Grindlays Ltd, Australia, and Standard Chartered Bank, UK possess 46.81 percent and 23.40 percent share of SCB Nepal. Likewise, the Nepalese citizens have ownership of 29.79 percent in the company. The ownership structure is shown in the table below:

Ownership Structure Percentage (%)
Domestic Ownership 29.79
Foreign Ownership 70.21
Total 100

Major Shareholders of Standard Chartered Bank Nepal

The shareholders owning more than 0.5 percent share in SCB Nepal are:

S.n.  Shareholders Percentage
1 Standard Chartered Grindlays Ltd, Australia 46.81
2 Standard Chartered Bank, UK 23.40
3 Shankar Lal Agrawal 0.70
4 Sashi Agrawal 0.70
5 Priyanka Agrawal 0.70
6 Komal Agrawal 0.70
7 Avinash Agrawal 0.70

Financial Analysis of Standard Chartered Bank Nepal: Last 5 Years

Paid-up Capital, Shareholders’ Fund and Total Assets

Standard Chartered Bank Nepal has increased the paid-up capital by almost four-fold from 2070/71 to 2074/75. The paid-up capital stood at Rs. 8.01 billion at the end of fiscal year 2074/75. In the fiscal year 2070/71, the bank had capital of Rs. 2.04 billion. SCB Nepal issued a 100 percent bonus share in 2073/74 to increase the capital to Rs. 8.01 billion.

Likewise, the shareholders’ fund has also almost tripled during this period. At the end of fiscal year 2070/71, Standard Chartered Bank Nepal had a shareholders’ fund of Rs. 5.09 billion. It has increased to Rs. 13.93 billion at the end of fiscal year 2074/75.

However, the total assets of SCB Nepal have grown by only 58.50 percent from the fiscal year 2070/71 to 2074/75. This is relatively slow growth as compared to the other commercial banks of Nepal. The total assets of Standard Chartered Bank Nepal stood at Rs. 84.03 billion at the end of the fiscal year 2074/75. In the fiscal year 2070/71, the total assets of the bank were Rs. 53.32 billion.

The paid-up capital, shareholders’ fund and total assets of Standard Chartered Bank Nepal in the last 5 years are shown in the table below:

Fiscal Year Paid-up Capital (Rs. ‘billion’) Shareholders’ Fund (Rs. ‘billion’) Total Assets (Rs. ‘billion’)
2070/71 2.04 5.09 53.32
2071/72 2.25 6.09 65.06
2072/73 2.81 7.52 65.19
2073/74 4.01 12.38 78.36
2074/75 8.01 13.93 84.03

Deposits and Loans & Advances of Standard Chartered Bank Nepal

SCB Nepal has remained relatively conservative in terms of deposits collection and loans disbursement in the past five years. The deposits have grown by only 45 percent in the last 5 years. However, the expansion of loans is relatively more aggressive than the deposit collection. The loans and advances surged by 71 percent from the fiscal year 2070/71 to 2074/75.

The deposits of SCB have grown to Rs. 67.06 billion in 2074/75. The bank had a total deposit collection of Rs. 46.30 billion at the end of 2070/71. Likewise, the bank has floated loans and advances of Rs. 44.56 billion until the end of 2074/75. As of 2070/71, the total loans of the bank stood at Rs. 25.98 billion.

The deposits and loans of Standard Chartered Bank Nepal in the last 5 years are shown in the table below:

Fiscal Year Deposits (Rs. ‘billion’) Loans and Advances (Rs. ‘billion’)
2070/71 46.3 25.98
2071/72 57.29 27.68
2072/73 55.73 31.3o
2073/74 59.69 38.43
2074/75 67.06 44.56

Net Interest Income, Operating Profit and Net Profit of Standard Chartered Bank Nepal

SCB Nepal has grown its net interest income by 64 percent from the period of 2070/71 to 2074/75. In the fiscal year 2070/71, the net interest income of the bank stood at Rs. 2.01 billion. It has increased to Rs. 3.30 billion in the fiscal year 2074/75.

Likewise, the bank increased its operating profit from Rs.1.98 billion in the fiscal year 2070/71 to Rs. 3.35 billion in 2074/75. The rise in operating profit has resulted in a surge of Net profit. The bank’s net profit stood at Rs. 1.34 billion in 2070/71 which has grown to Rs. 2.19 billion at the end of 2074/75.

The net interest income, operating profit and net profit of Standard Chartered Bank Nepal in the last 5 years are shown in the table below:

Fiscal Year Net Interest Income  (Rs. ‘billion’) Operating Profit (Rs. ‘billion’) Net Profit (Rs. ‘billion’)
2070/71 2.01 1.98 1.34
2071/72 1.91 1.85 1.31
2072/73 1.85 1.7 1.29
2073/74 2.33 2.38 1.55
2074/75 3.30 3.35 2.19

Return On Equity (ROE) and Return On Assets (ROA)

Return on Equity (ROE) is the measure of the profitability of the company based on the shareholders’ equity. It measures how the company performed on the fund injected by the shareholders. On the other hand, Return on Assets (ROA) is an indicator to measure the company’s profitability relative to the total assets of the company.

The ROE of SCB has gradually declined in the past five years. This is mainly due to the huge increment in the capital during this period. The bank couldn’t increase its earnings in proportion to the capital injected. The company had the highest ROE in 2070/71 which stood at 26.27 percent. It has declined to 18.66 percent in the fiscal year 2074/75.

Likewise, the ROA of SCB Nepal has fluctuated between 1.84 percent to 2.61 percent. In the fiscal year 2074/75, the bank reported the highest ROA of 2.61 percent. The ROA stood at 1.84 percent in the previous year.

The Return On Equity (ROE) and Return On Assets (ROA) of Standard Chartered Bank Nepal in the last 5 years are shown in the table below:

Fiscal Year Return on Equity (ROE %) Return on Assets (ROA %)
2070/71 26.27 2.51
2071/72 21.69 1.99
2072/73 17.18 1.98
2073/74 14.31 1.84
2074/75 18.66 2.61

Earnings Per Share (EPS) and Networth Per Share

The earnings per share of SCB has drastically declined in the last 5 years period. The company had an EPS of Rs. 65.47 in the fiscal year 2070/71. The EPS fell to Rs. 27.33 at the end of the fiscal year 2074/75. The fall in EPS is mainly due to a sharp rise in the capital.

Similarly, the Networth Per Share of SCB has fallen to the lowest in the five years. In the fiscal year 2074/75, the net-worth per share stood at Rs. 174. The net-worth per share stood at Rs.296 in the previous year.

The Earnings Per Share (EPS) and Networth Per Share of Standard Chartered Bank Nepal in the last 5 years are shown in the table below:

Fiscal Year Earnings Per Share (EPS ‘Rs.’) Networth Per Share (‘Rs.’)
2070/71 65.47 249
2071/72 57.38 265
2072/73 45.96 268
2073/74 35.49 296
2074/75 27.33 174

Non-Performing Loans (NPL) and Base Rate

Standard Chartered Bank Nepal is one of the top banks with the lowest NPL and the base rate. The NPL of the bank stood at 0.18 percent at the end of the fiscal year 2074/75. The NPL has gradually declined from 0.48 percent in the fiscal year 2070/71.

Likewise, the base rate of SCB is 7.87 percent in 2074/75. However, the base rate has increased in the last two fiscal years. This is due to the credit crunch and interest rate spike in the Nepalese economy during that period. In the year 2072/73, SCB had the lowest base rate of 4.47 percent.

The Non-Performing Loans (NPL) and Base Rate of Standard Chartered Bank Nepal in the last 5 years are shown in the table below:

Fiscal Year Non-Performing Loans, NPL ( %) Base rate (%)
2070/71 0.48 5.18
2071/72 0.34 4.92
2072/73 0.32 4.47
2073/74 0.19 6.47
2074/75 0.18 7.87

Dividend History of Standard Chartered Bank Nepal

Standard Chartered Bank Nepal has provided consistently good returns to the shareholders. However, after reaching the minimum capital requirement of Rs. 8 billion, the bank declared disappointing  17.50 percent cash dividend in the fiscal year 2074/75. In the previous year, the bank distributed 100 percent bonus share to the shareholders. The bonus share was distributed with the reserve available from the share premium of FPO (Further Public Offering). Lately, the bank is more focused to distribute cash dividend.

The dividend history of Standard Chartered Bank Nepal in the last 5 years is shown in the table below:

Fiscal Year Bonus share (%) Cash dividend (%) Total dividend (%)
2070/71 10 41.5 51.5
2071/72 25 19.21 44.21
2072/73 33.34 1.75 35.09
2073/74 100 5.26 105.26
2074/75 0 17.5 17.5

Market Price and Market Capitalization of Standard Chartered Bank Nepal

SCB is the blue-chip stock in the Nepalese stock market. Investors have always highly valued the shares of SCB. It was one of the highest-priced stocks. In the fiscal year 2072/73, SCB stock was priced at Rs. 3,600. At that price, the market capitalization of Standard Chartered Bank crossed Rs. 100 billion. However, after that period the share price and market capitalization fell. The share of SCB was priced at Rs. 755 at the end of the fiscal year 2074/75. At this price, the market value of SCB stood at Rs. 60.48 billion.

The Market price and Market Capitalization of Standard Chartered Bank Nepal in the last 5 years are shown in the table below:

Fiscal Year Market Price Per Share (MPS ‘Rs’) Market Capitalization (Rs. ‘billion’)
2070/71 2,799 57.10
2071/72 1,943 43.72
2072/73 3,600 101.16
2073/74 2,295 92.02
2074/75 755 60.48

Financial Analysis of Standard Chartered Bank Nepal: Third Quarter, 2075/76

Balance Sheet Analysis

In the third quarter of fiscal year 2075/76, SCB Nepal has paid-up capital of Rs. 8.01 billion. Likewise, the reserve and surplus stands at Rs. 6.18 billion. The reserve has grown by 14.87 percent. At the Ashad end of the fiscal year 2074/75, the reserve stood at Rs. 5.38 billion.

Similarly, the bank has collected deposits of Rs. 70.81 billion. The deposit has surged by 16.62 percent from Rs. 60.72 billion at the end of the fiscal year 2074/75. Likewise, the bank has provided loans of Rs. 53.46 billion, up from Rs. 45.18 billion last year. So, loans and advances have increased by 18.33 percent.

Headings 3rd Qtr, F.Y. 2075/76 Ashar end, F.Y. 2074/75 Percent Change
Paid-up capital (Rs. ‘billion’) 8.01 8.01 0.00
Reserve and Surplus (Rs. ‘billion’) 6.18 5.38 14.87
Deposits (Rs. ‘billion’) 70.81 60.72 16.62
Loans & Advances (Rs. ‘billion’) 53.46 45.18 18.33
Income and ratio analysis

Standard Chartered Bank Nepal has earned a net profit of Rs. 1.73 billion until the third quarter of fiscal year 2075/76. The bank had earned Rs. 1.55 billion in the corresponding quarter of the previous year. The net profit has inclined by 11.61 percent. The increase in profit is due to slight increase in the net interest income. The bank earned net interest income of Rs. 2.56 billion until the third quarter of 2075/76. Last year, the bank earned Rs. 2.40 billion as the net interest income until the third quarter.

The Annualized Earning Per Share (EPS) of Standard Chartered Bank Nepal stands at Rs. 28.87. This is the growth of 11.64 percent from the previous years’ EPS. Likewise, the Non-performing Loans (NPL) stand at 0.20 percent which is desirable. And the base rate stands at 7.74 percent. The base rate has slightly inclined by 7.50 percent.

Standard Chartered Bank Nepal has accumulated a distributable profit of Rs. 1.11 billion. This when annualized, translates into 18 percent in dividend-paying capacity.

Headings 3rd Qtr, F.Y. 2075/76 3rd Qtr, F.Y. 2074/75 Percent Change
Net Interest Income (Rs. ‘billion’) 2.56 2.4 6.67
Net Profit(Rs. ‘billion’) 1.73 1.55 11.61
Distributable Profit (Rs. ‘billion’) 1.11
Annualized Earnings Per Share, EPS(Rs.) 28.87 25.86 11.64
Non Performing Loans, NPL(%) 0.2 0.21 -4.76
Base rate(%) 7.74 7.2 7.50

Conclusion

Standard Chartered Bank Nepal, once a leading commercial bank for several years, has fallen behind. The progress of the bank has remained static for past 10 years. Due to this, it lags behind several commercial banks of Nepal, established way after SCB. The conservative banking modality of SCB Nepal, has cost its position in the Nepalese Banking Industry. Once in par with Nabil Bank, it has now half the assets size and profitability.

Major growth is seen in the past two fiscal years. The bank now seems to focus on the growth and regain its past legacy. However, it is more difficult than it looks. After losing the market share, it will be highly challenging for the bank to repossess it . But with able management and the brand name, it can turn the tables around.

Investors of SCB have awaited long for its revival. The next 3 years are more crucial to the SCB shareholders. It will determine whether the dividends will be in the increasing trend or the decreasing trend. We offer investors a ‘Wait and Watch’ strategy for now.

NOTE: Figures of FY 2074/75 and FY 2073/74 are as per NFRS  and the figures of the earlier years are as per previous GAAP. Hence, they may not be comparable.

(Investments are subject to market risks and investors are advised to do a personal homework before taking any investment decision. This material is just a guideline for the investors to do further investigations)

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