Top 5 Development Banks Listed in NEPSE

Four types of financial institutions are categorized in Nepal Stock Exchange (NEPSE). Nepal Rastra Bank symbolized Commercial bank ‘A’, Development Bank ‘B’, Finance Company ‘C’, Microfinance ‘D’ respectively. Commercial, Development and Finance company’s market price is relatively lowered than microfinance. Here, in this article, we present information about the five best development banks in Nepal for investment.

Currently, there are 20 development banks in Nepal. Among them, 8 banks are operating at the national level. The major objective of the development banks is to promote the development of industry, agriculture, and other key industry of the nation. Nepal Development Bank Limited (NDBL) is the first development bank established by the private sector.

On 13th June 2021, the development banks index is 5099.88, however, the NEPSE index is around 2900. So, we can assume that there are many development banks that are overpriced in Nepal. Therefore, here we take the best five best development banks in Nepal according to their financial performance and reputation in the market.

1. Garima Bikas Bank Limited (GBBL)

It was established with having different background people such as business, teaching, engineering, doctors, banking accounting and many more. The bank formally started on Kartik 18, 2064, however, they got a license from Nepal Rastra Bank on Ashwin 24, 2064 to operate within three districts.

GBBL was merged with Nilgiri Bikas Bank Limited and upgraded to a national level bank on Ashad 29, 2072. ‘Access to all’ and ‘Deliver wonderful banking service’ is the vision and mission of GBBL respectively.

S.N. HeadingPerformance
1Listed Shares:36,759,125
2Market Price 13th June 2021:RS 597
3Earnings Per Share:RS 24.60
4Book Value:Rs 138.92
5Price/Earnings Ratio:24.27
6Cash Dividend of last five fiscal year:-,-, 3.75%, 0.85%, 0.71%
7Bonus Share of last five fiscal year:20%, 15%, 10%, 16.15%, 13.50%
8Distributable Profit according to 3rd quarter of 2077/78:Rs 490,298,739
9Paid up Value:Rs 3,675,912,500

The last four-month average price of GBBL is Rs 357. This bank is doing in the banking sector since its establishment. So, the current market price of GBBL is overpriced. Development bank stock’s market price is increasing rapidly because of the bullish trend of the stock market.

Although all the financial indicators are strong of GBBL, I do not recommend buying this stock at the current market price. Below Rs 350 is the fair market price of GBBL.

2. Kamana Sewa Bikas Bank Limited (KSBBL)

It is one of the top five development banks in Nepal. Kamana bank is a national-level bank promoted by excellent business people and groups. It provides various services to the customers with the vision of ‘your partner for progress’. 51% promoter share and 49% public share is shareholder structure of KSBBL. Pokhara-based Kamana Bank Limited and Butwal based Sewa Bikas Bank Limited merged and formed Kamana Sewa Bikas Bank Limited and worked at the national level.

S.N. HeadingPerformance
1Listed Shares:26,519,637
2Market Price 13th June 2021:Rs 628
3Earnings Per Share:29.47
4Book Value:144.35
5Price/Earnings Ratio:21.31
6Cash Dividend of last five fiscal year:-, 6.5%, 8%, 6.80%, 0.23%
7Bonus Share of last five fiscal year:22.6%, 5.5%, 1.5%, -, 4.4%
8Distributable Profit according to 3rd quarter of 2077/78:388,897,000
9Paid up Value: RS 2,651,963,730

In recent years the financial indicator’s growth of KSBBL is so good. Before 1 year, the market price of this stock was around Rs 250. Currently, KSBBL has the highest price in the market in the development bank sector. Bullish market and share cornering is the major reason being share price high. I recommend not to buy this stock at the current market price, and buy KSBBL when the price will below Rs 300.

3. Muktinath Bikas Bank Limited (MNBBL)

MNBBL is the leading development bank of Nepal. It was established in 19th Paush 2016 BS with its head office at Kamladi, Kathmandu. Initially, the bank got the license from Nepal Rastra Bank in 2007 as a ‘B’ level bank to operate within three districts namely Syangja, Kaski, and Tanahun. Currently, the bank has a balance sheet of Rs 66.35 billion as of Ashad end of 2077. They have 155 branches across Nepal and serving more than 750,000 customers happily.

S.N. HeadingPerformance
1Listed Shares:48,115,508
2Market Price 13th June 2021:Rs 724
3Earnings Per Share:27.87
4Book Value:138.43
5Price/Earnings Ratio:25.98
6Cash Dividend of last five fiscal year:-, 1.05%, 0.96%, 0.93%, 4.26%
7Bonus Share of last five fiscal year:34%, 20%, 18.25%, 17.6%, 11.25%
8Distributable Profit according to 3rd quarter of 2077/78:828,719,000
9Paid up Value:4,811,550,800

MNBBL is so good so far. All financial indicators are very strong and they good capital as well. But the market price of this stock is relatively overpriced. With this market price, you might make a short-term profit but in long run, you will not get a good profit margin. All the financial indicators and dividend history show that below Rs 400 is good for investment in this bank for investors.

4. Shine Resunga Development Bank Limited (SHINE)

SHINE started their corporation with the slogan of ‘Shine for your Shining Life’. The shine established in Feb 2009 operating in 3 western districts of Nepal. In March 2013, shine was merged with Resunga bank which was operating in the Rupandhi district only. After merged, they got a license to operate in 10 districts with the name of Shine Resunga Development Bank Limited. This is one of the five best development banks in Nepal.

S.N. HeadingPerformance
1Listed Shares:34,084,639
2Market Price 13th June 2021:494
3Earnings Per Share:17.54
4Book Value:138.50
5Price/Earnings Ratio:28.16
6Cash Dividend of last five fiscal year:-, -, 0.93%, -, –
7Bonus Share of last five fiscal year:27%, 25%, 17.7%, 15%, 13%
8Distributable Profit according to 3rd quarter of 2077/78:308,100,000
9Paid up Value:3,408,463,910

This bank has reputed goodwill in the market. Almost all the development banks are overpriced in the market and SHINE is part of that. Therefore, I recommend investor buy this stock at below Rs 300.

5. Excel Development Bank Limited (EDBL)

In today’s date, EDBL has the highest market share price. Recently they issued the right share to their existing shareholder which is the reason for being price high. The bank got the license in 2061 under the banking and financial regulation act by Nepal Rastra Bank. The head office of the bank is located in Birtamod, Jhapa.

S.N. Heading   Performance
1Listed Shares:8,111,212
2Market Price 13th June 2021:Rs 885
3Earnings Per Share:19.36
4Book Value:157.96
5Price/Earnings Ratio:45.71
6Cash Dividend of last five fiscal year:1.31%, 1.58%, 17%, 0.90%, 0.63%
7Bonus Share of last five fiscal year:25%, 30.12%, -, 17.10%, 12%
8Distributable Profit according to 3rd quarter of 2077/78:95,708,000
9Paid up Value:811,121,220

EDBL recently issue their 30% right share to its shareholder so the paid-up value will be more than RS 1 Arba. EDBL is so much overpriced because its market price was around Rs 300 in the previous year. So, EDBL is best to buy when the price will be around Rs 300.

Conclusion

No one can predict the market 100% right so, investors should always ready for the bearish market as well. The index in development bank is too high so when the market will down it will be down so drastically. So, now invest in a development bank might be profitable but it will not good for the long term with this market price.

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