Rising provision, NPA threaten to cast shadow over banks’ profits

Though profits posted by most commercial banks for FY 2069/70 came as great news for the entire banking sector, the scenario might not be as rosy as it seems. 

Most of the banks have set aside huge amount of provision for nonperforming assets (NPA) to make up for bad loans.

Rastriya Banijya Bank (RBB) preference shares converted into ordinary shares

The special general meeting (SGM) of Rastriya Banijya Bank (RBB) on Sunday approved the conversion of 8,735,700 units of preference shares worth Rs 873.57 million into ordinary shares.
With the c onversion of the preference shares owned by the government, RBB’s paid-up capital has reached Rs 8.58 billion.
The SGM approved the capital restructuring through an amendment to the bank’s memorandum of association and regulation presented by RBB Chairman Narahari Dhakal. “The conversion has been made as per the bank’s capital plan,” said RBB Chief Executive Officer Krishna Prasad Sharma. “This will help maintain the bank’s capital adequacy ratio at 3 percent for the first time as of mid-July,” he said.

Only two public enterprises (PEs), Nepal Telecom (NT) and Rastriya Banijya Bank (RBB) paid dividend to government

Of the 37 public enterprises (PEs) operating in the country, only two -- Nepal Telecom (NT) and Rastriya Banijya Bank (RBB) -- paid dividend to the government in the fiscal year 2011/12.

The Annual Review of PEs released by the Ministry of Finance (MoF) on Friday showed the government received Rs 6.26 billion in dividends, up from Rs 5.49 billion that it had received in 2010/11.

The government received only 6.11 percent returns on the investment that it made on PEs, majority of which are in red, in 2011/12. It invested Rs 102.41 billion in shares and Rs 101.23 billion in loan in the PEs until the end of the fiscal year 2011/12. Until 2010/11, its investment in shares and loan stood at Rs 92.19 billion and Rs 95.16 billion, respectively.

Rastriya Banijaya Bank Ltd. (RBB) to sell Nepal Investment Bank's 55 Lakh worth of promoter share.

Rastriya Banijaya Bank Ltd. (RBB) is all set to divest its promoter stake in Nepal Investment Bank. RBB owns 55 lakh promoter shares of NIB, which is 15 percent of NIB’s total capital.

RBB has already formed a committee under Joint-secretary at the Finance Ministry Rajan Khanal to fix the minimum price for the shares. The shares would be sold through auction above the minimum price set by the committee.

The minimum price would be fixed within the month of Asar, 2070.

NIB’s general shares traded last at Rs 737 per unit. The bank’s promoter shares has not been bought or sold since Poush 29, when the shares were valued at Rs 410.

Normally, the price of promoter shares is half the price of general shares.

Going by the latest price at which NIB’s promoter share is trading, RBB will get Rs 2 arba, 25 crore, 50 lakh from the sale. At present, RBB’s reserve is negative by 6 arba 85 crore, which is expected to come down after the shares are sold.

RBB is planning to sell the promoter shares to big and institutional investors like Employees Provident Fund, Citizen Investment Trust and private insurance companies.

The move to sell promoter shares is in line with the Nepal Rastra Bank’s policy against cross-holding (publicly traded companies, like commercial banks and finance institutions, owning shares of similar companies).
Source : sharesansar