Financial Analysis of Finance Companies' that have published 2nd Quarter Report till now.

Kathmandu, Jan 30, 2014

This list contains Financial Analysis of Few Major Finance Companies' which have published its 2nd Quarterly Report.

Source: Abhiyan

NPL of six finance companies at alarming level

KATHMANDU, Jan 8, 2013

At least six finance companies have corroded their balance sheets with high levels of bad debts, indicating they may soon land in trouble if non-performing loans are not recovered from defaulters immediately.

First quarter balance sheets of Arun Finance, Hama Merchant and Finance, Lalitpur Finance, Nepal Finance Limited (Nefinsco), Patan Finance and Prudential Finance show their non-performing loans (NPL) hovering at up to 48 percent, meaning payments on huge chunk of credit issued by these companies have not been made.

The tendency of defaulting on debt payment poses a threat to depositors as it breaks the cash flow cycle at financial institutions. And as the problem of cash shortage becomes chronic, institutions start deferring payment to depositors, eventually making them vulnerable to runs.

“Haphazard lending practice is the root cause for the problem seen in many finance companies,” a high-ranking official of Nepal Rastra Bank told Republica on condition of anonymity, as he was not authorized to talk to the media.

“Many companies have failed to recoup significantly big chunk of loans that went to the real estate sector, which is now dormant. The same applies to most of the short-term loans, like working capital and personal, which are suspected to have eventually made their way to the realty sector.”

A snapshot of what the central bank official said could be seen in Dharan-based Arun Finance, whose NPL stood at 48.21 percent of the credit portfolio till the end of first quarter of the current fiscal year.

“The NPL level at the company is on the higher side because of failure to recoup personal loans and credit extended to the real estate sector,” Karna Bahadur Shahi, an official at the finance company, said.

Although the company´s credit portfolio shows 8.5 percent exposure to the real estate sector, it is suspected to have incurred heavy losses by extending personal loans, as its ´other loans´ segment, which includes personal loans, makes up almost 70 percent of the credit portfolio of Rs 142.94 million.

The situation is almost the same at Hama Merchant and Finance, which recorded NPL at 38.49 percent of the credit portfolio in the first quarter. Like in Arun´s case, 71 percent of the total credit issued by Hama was made up of ´other loans´. Patan Finance, which saw 25.41 percent of the total loans turning into NPL in the first quarter, too extended 66 percent of the total credit as ´other loans´. And situation was worse at Nefinsco - which accumulated 20.26 percent NPL - with 81 percent of the total credit extended as ´other loans´.

Situation at Lalitpur Finance, which is also one of the biggest bad debt holders, is a bit different though. The finance company, which reported NPL at 33.20 percent of the credit portfolio in the first quarter, was bogged down by heavy exposure to the real estate, as its real estate lending stands at 45 percent of the total credit portfolio. It also kept aside Rs 371.78 million in the first quarter to guard against loan losses, leading it to post a net loss of Rs 374.46 million in the quarter.

Prudential Finance, on the other hand, seems to be in an even deeper problem. It not only holds NPL of 32.48 percent but its loan portfolio of Rs 854.64 million surpasses deposit portfolio of Rs 663.79 million.

Source: Republica

Finance companies propose MFDB

KATHMANDU, OCT 1: 

Nepal Finance Companies Association has proposed a Rs 200 million to Rs 250 million worth Microfinance Development Bank (MFDB) that will not only help deprived borrowers get access to finance, but which will also provide technical consultation and orientation programmes, coupled with project financing for returnee migrants.

“Central bank is positive about the proposal,” said

the association’s president Rajendra Shakya, after discussions with central bank officials today.

However, Nepal Finance Companies Association is only a facilitator, he said, adding that the association has proposed a 60 per cent equity participant from commercial banks, development banks and finance companies. “Experts and technicians can also have a 10 percent equity partnership in the proposed Microfinance Development Bank that will provide both wholesale and retail lending,” added Shakya.

“Concentration of the proposed institution will be on livestock, animal husbandry and dairy, as demand for farm, livestock and dairy products has been rising lately but the country has to import most products.”

Central bank governor Dr Yubaraj Khatiwada is also enthusiastic on the proposed institution as the central bank has been encouraging banks and finance companies to go to rural areas to help in agriculture and livestock, he said, adding central bank has to, however, bring in project finance, as it currently has no such provision.

Source: THT

Finance companies deposits slump by 7%

KATHMANDU, SEP 03, 2012

Even as commercial and development banks are enjoying excess liquidity due to surge in deposit, finance companies are struggling to lure depositors, suggests a report from the Nepal Rastra Bank.

According to the central bank’s annual macro economic report, deposit mobilisation by the finance companies decreased by 7.5 percent over the last fiscal year compared to the previous fiscal. On contrary, the deposit collection by commercial banks and development banks surged by 26.7 and 34 percent respectively during the last fiscal year compared to previous year.

In aggregate, deposit mobilisation of the banks and financial (BFIs) increased by 22.9 percent to an addition of Rs 188.59 billion in the fiscal year 2011-12.

According to the report, the surge in deposit collection was the result of expansion in economic activities compared to the previous fiscal year and the rise in remittance income. However, the commercial and the development banks were the ones to benefit the most from the increased supply of fund in the financial system, not the finance companies.

According to the NRB, the major reason for the slump in finance companies’ deposit mobilisation is the fall in number of finance companies. Over the last fiscal year, the number of finance companies decreased to 70 from 78 a year earlier. Three finance companies merged with commercial banks and five others merged with development banks. “Such mergers contributed to the growth in deposit of commercial and development banks whereas there was negative growth in finance companies,” said Maha Prasad Adhikari, deputy governor at the NRB.

However, another senior NRB official was of the opinion that not only merger but also the crisis of confidence among people towards these ‘C’ class financial institutions affected deposit flow.

“The main reason behind the negative growth in deposit mobilisation is people’s lack of confidence in finance companies. The issues like bad corporate governance, concentrated credit and misappropriation of funds by the top-management and board members surfaced at various finance companies,” said the official, citing examples of some of the companies that sullied the image of the whole of the finance companies.

Finance companies, including Nepal Share Market and Finance Company, Samjhana Finance, Capital Merchant and Finance, Nepal Sri Lanka Marchant Bank faced troubled due to bad governance on the part of top management, leaving thousands of depositors in lurch.

Finance companies, however, maintain that people still have faith in them. “It’s true that a few cases of anomalies surfaced in the past have hit the people’s confidence to some extent,” said Rajendra Man Shakya, president of the Nepal Finance Companies Association. “But large chunk of withdrawal from the finance companies was done by the institutional depositors like insurance companies, Employee Provident Fund and Citizens Investment Trust among others.”

Claiming that such downfall in deposit collection has not bothered finance companies much, Shakya said almost all the companies are in comfortable liquidity position. “Currently, there is no investment opportunity at all. In this situation, growth in deposit means rise in idle fund which hits the profitability of the finance companies,” he said.      

Source: The Kathmandu Post

NRB slaps PCA on three finance companies

KATHMANDU, MAY 11, 2012

The Nepal Rastra Bank (NRB) has imposed prompt corrective action (PCA) to three finance companies—Himalaya Finance, Crystal Finance and Kuber Merchant Finance—as their capital adequacy ratio was below the regulatory requirement.

As per the NRB regulation, class ‘C’ financial institutions need to maintain a capital adequacy ratio of 11 percent. This ratio is a measure of the amount of a bank’s core capital expressed as a percentage of its risk-weighted asset. An NRB senior official said that the capital adequacy ratio of all three financial institutions was around eight percent—significantly less than the mandatory requirement.

Besides the lower capital adequacy ratio, central bank sources have also noted issues of bad corporate governance at these financial institutions, prompting the NRB to take strong action against them. “Of late, these financial institutions were even struggling to return deposits to the account holders,” said a central bank official.

According to the NRB’s PCA Bylaws 2008, if the capital adequacy ratio of financial institution fall by 2 to 4 percent, the central bank imposes restrictions like limiting lending and deposit collection, barring them from opening new branches as well as buying and leasing additional fixed assets. Likewise, they need a prior approval from the NRB before launching a new business line.

Meanwhile, the board meeting of NRB held on Thursday agreed in principle to two proposals on merger of banks and financial institutions. The central bank principally agreed over the application filed by Lord Buddha Finance to merge with Global Bank. Global Bank, which has already announced to merge with IME Financial Institution had extended hand to merge with Lord Buddha Finance. Lord Buddha’s merger plan with Global Bank comes in the wake of its failed bid with Pashupati Development Bank despite receiving letter of intent from the central bank. “We approved the de-merger request from Lord Buddha and allowed it to merge with Global,” said an official at NRB.

Similarly, Pashupati Development Bank and Udyam Development Bank also got the approval in principle from the central bank for merger.

Source: The Kathmandu Post

10 finance cos failing to hold AGM

KATHMANDU, MAY 09, 2012

Ten finance companies have been tardy in holding their annual general meetings (AGMs) and nine have not submitted their audited balance sheets to Nepal Rastra Bank (NRB) for its approval.

As per the Bank and Financial Institutions Act (BAFIA), BFIs are required to submit their audited balance sheets to the central bank within five months of the end of the fiscal year. Only after they get the okay from NRB can they present their balance sheets to the AGM.

Crystal, Kuber, Arun, Himalaya, Lumbini, Progressive, World Merchant and Finance, Nepal Share Market and Finance, People’s Finance and Capital Merchant and Finance are the finance companies that have missed the deadline to hold their AGMs.

The central bank has declared Nepal Share Market and Finance a crisis-ridden financial institution while People’s and Capital are facing action under prompt corrective action as they got into trouble due to bad governance.

“Almost all the finance companies that have failed to hold their AGMs are not performing well, and they are weak institutions in terms of paid-up capital too,” said a senior NRB official.

Raj Kumar Shrestha, chief executive officer of Kuber Finance, said they failed to prepare the balance sheet due to a liquidity crunch it suffered last year and delays on the part of the auditor. “We will submit our audited balance sheet to the central bank within two-three days.”

Crystal has also been facing liquidity pressure which is evident from its negative credit-to-deposit ratio. Its credit far exceeds deposits with credit amounting to Rs 904 million while deposits stand at Rs 605 million.

Arun Finance also has loans exceeding its deposit collection leading to tight liquidity. Its loans and advance amount to Rs 210 million while its deposit collection is Rs 157 million. Similarly, Himalaya Finance has issued loans worth Rs 676 million while it has collected deposits valued at Rs 508 million.

Lumbini’s deposit collection is Rs 1.32 billion while its loan exposure stands at Rs 1.53 billion. Regarding Progressive Finance, its deposits amount to Rs 180 million while its credit is worth Rs 225 million. World Merch-ant Banking and Finance has issued loans worth Rs 861 million while its depo-sits stand at Rs 634 million.KATHMANDU, MAY 09 -

Ten finance companies have been tardy in holding their annual general meetings (AGMs) and nine have not submitted their audited balance sheets to Nepal Rastra Bank (NRB) for its approval.

As per the Bank and Financial Institutions Act (BAFIA), BFIs are required to submit their audited balance sheets to the central bank within five months of the end of the fiscal year. Only after they get the okay from NRB can they present their balance sheets to the AGM.

Crystal, Kuber, Arun, Himalaya, Lumbini, Progressive, World Merchant and Finance, Nepal Share Market and Finance, People’s Finance and Capital Merchant and Finance are the finance companies that have missed the deadline to hold their AGMs.

The central bank has declared Nepal Share Market and Finance a crisis-ridden financial institution while People’s and Capital are facing action under prompt corrective action as they got into trouble due to bad governance.

“Almost all the finance companies that have failed to hold their AGMs are not performing well, and they are weak institutions in terms of paid-up capital too,” said a senior NRB official.

Raj Kumar Shrestha, chief executive officer of Kuber Finance, said they failed to prepare the balance sheet due to a liquidity crunch it suffered last year and delays on the part of the auditor. “We will submit our audited balance sheet to the central bank within two-three days.”

Crystal has also been facing liquidity pressure which is evident from its negative credit-to-deposit ratio. Its credit far exceeds deposits with credit amounting to Rs 904 million while deposits stand at Rs 605 million.

Arun Finance also has loans exceeding its deposit collection leading to tight liquidity. Its loans and advance amount to Rs 210 million while its deposit collection is Rs 157 million. Similarly, Himalaya Finance has issued loans worth Rs 676 million while it has collected deposits valued at Rs 508 million.

Lumbini’s deposit collection is Rs 1.32 billion while its loan exposure stands at Rs 1.53 billion. Regarding Progressive Finance, its deposits amount to Rs 180 million while its credit is worth Rs 225 million. World Merch-ant Banking and Finance has issued loans worth Rs 861 million while its depo-sits stand at Rs 634 million.

Source: The Kathmandu Post