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23 rdANNUAL REPORT 2006/07
NABIL BANK Annual Report 2006/07 2
CONTENTS
The Bank, through its quality customer service and innovative products, has today attained a distinguished recognition in
the banking industry of Nepal. The figures in the table below enumerate its 23 year old journey:
Today Nabil stands in a position to claim that it is the technological front, the Bank has earned a reputation in
"Bank of 1st Choice" to all its stakeholders. In the span providing an array of card products and Internet /
of 23 years, it has already distributed Rs. 2.86 billion Telebanking facilities besides ATMs and Any Branch
cash dividend and the wealth of the shareholders of Banking Service.
the Bank grew to Rs. 24.8 billion as at mid July 2007.
Spectacular return on assets and return on equity even The statement 'Your Bank at Your Service' that the Bank
during a turbulent and competitive time highlight the holds on firmly is a resemblance that the Bank's
inherent strength of the Bank. stakeholders are at the core of everything it does. As for
the culture embraced by the entire Nabil team, a set of
The Bank provides a complete range of consumer, retail, Values, referred to as 'C.R.I.S.P.' in short, represents the
SME and corporate banking services through its offices fact that the bank uninterruptedly strives to be
spread across the country. Nabil is the sole banker to a Customer Focused, Result Oriented, Innovative,
multitude of large corporates, international aid agencies, Synergistic and Professional. By living these Values,
NGOs and embassies. It is the largest private bank in the individually as professionals and collectively as a Team,
country in terms of branch and ATM network. All its Nabil Bank is committed to Surge Ahead to continue to
branches are interconnected on real time basis. On the be the Bank of 1st Choice in Nepal.
NABIL BANK Annual Report 2006/07 4
DIRECTORS’ REPORT
FY 2006/07
Ladies and Gentlemen, Total imports during the year increased by 10.3% to
It gives me an immense pleasure to welcome you all Rs. 191.7 billion. Imports from India and other
to the 23rd Annual General Meeting of the Bank and countries rose by 9.9% to Rs.117.7 billion and by 11%
to present the Directors' Report of FY 2006/07 to Rs. 74 billion respectively. Major import items from
together with audited financial statements of FY India recording growth are vehicles and spare parts,
2006/07 for your approval. I consider it my privilege threads, electrical equipment, other machinery and
to be addressing this august gathering and sharing parts, hot/cold rolled sheet in coil, MS billet, cement
the Board's views on the banking scenario together and medicine. Number one import item petroleum
with highlights on your Bank's performance. products (total import volume Rs. 33.5 billion) is
however at last year's level. Major import items
To begin with, I would like to present in brief the recording negative growth are rice, chemicals and
macro economic situation of the country during the textiles. Major import items from other countries
period under review. recording growth are gold, crude soybean oil,
electrical goods, zinc ingot, transport equipments/
Gross Domestic Product (GDP) parts, telecommunication equipments/parts,
Despite an impressive growth rate of South Asia computer parts, aircraft spareparts, betelnuts,
region, our neighbours in particular, our GDP medicines and textile dyes. Major import items
recorded an estimated growth of 2.5% only in FY recording negative growth are other machinery and
2006/07. This is mainly due to conflict between parts, readymade garments, copper wire/rod/scraps,
labour-management in many industries, continuous polythene granules and textiles.
long bandhs, strikes, irregular supply of petroleum
products, shortage of electricity and drought Due to continuous rise in trade with India, India's
adversely impacting paddy production. share in total trade has increased to 63.2% in FY 2006/
07 which was 55.9% in FY 2002/03. Higher growth rate
Foreign Trade of import compared to export has widened the trade
Total foreign trade of the country reached Rs. 252.5 deficit to Rs.130.9 billion this year against Rs.113.5
billion in 2006/07, growth of 7.9% over the previous billion of last year.
year.
Balance of Payment
Total exports increased by 0.9% to Rs. 60.8 billion. BOP posted a surplus of Rs. 5.88 billion in the review
Export to India increased by 2.8% while export to year in comparison to a higher surplus of Rs. 25.6
other countries decreased by 3.1%. Major export billion in the previous year. Major reason for lower
items to India recording growth are vegetable ghee, BOP surplus this year is just 2.5% increase in workers'
textiles, thread, zinc sheet, wire, ginger, juice and jute remittance which was 49% last year. As a result,
goods, while export of polyster yarn, plastic utensils, foreign exchange reserves of the country is Rs.165
readymade garments went down. All major export billion as at mid-July 2007, similar to last year's level
items to third countries have recorded negative due to appreciation of rupees against USD. The
growth this year. Export of carpet, readymade current reserve is sufficient to cover merchandise
garments and pashmina declined by 4.1%, 16.1% and imports of 10.3 months and merchandise and service
41% respectively. imports of 8.5 months.
NABIL BANK Annual Report 2006/07 6
MR. MILAN BIKRAM SHAH MR. ACHYUT PRASAD MR. TABITH AWAL MR. MOHIUDDIN AHMED
Director BAJAGAIN Director Director
Representative of group ‘B’ Professional Director Representative of group 'A' Representative of group 'A'
shareholders shareholders shareholders
Fmr. Chief Currency Officer
General Manager & CEO, of Nepal Rastra Bank Deputy Chief Executive Fmr. Bangladeshi
Nepal Industrial Officer of Multimode Group, Ambassador to Nepal.,
Development Corporation, Bangladesh . Senegal, Sierra Leone, Ghana
Nepal Managing Director of Kay & & Gambia.
Fmr. General Manager, Que (BD) Ltd . Fmr. Director of Janta Bank.
National Trading Limited, Currently director in many
Nepal (An undertaking of organizations engaged in
Nepal Govt) insurance, real estate,
Chairman of the Board, NIDC investment and production/
Capital Markets Limited, manufacturing business.
Nepal
NABIL BANK Annual Report 2006/07 8
Your Bank's net worth grew by 9.7% this year even In the review period, your Bank had a drive in
after distributing cash dividend of Rs. 492 million. The soliciting deposits which can be profitably invested.
Core capital of the Bank stood at Rs. 1.99 billion and The efforts in that direction have yielded good results
total capital fund (including Supplementary capital of which can be seen from the growth of 20.6% (Rs. 3.99
Rs. 0.31 billion) stood at Rs. 2.31 billion as on 16 July billion). The Bank increased scarce interest free
2007. The capital adequacy ratio of 10.40% (Core deposits by almost half a billion rupees. Similarly, the
capital) and 12.04% (Total capital) exceeded the Bank recorded a growth of almost one and half billion
statutory requirement by 4.9% and 1.04% respectively. rupees in savings deposit. This growth was possible
These ratios indicate Bank's sound financial position. through attractive special savings scheme 'Nabil
Bachat'. High Fed Rate and relatively higher mix of Call
Following graph gives a trend of the Bank's capital and Fixed deposits however pushed the cost of
over past 5 years: deposits to 2.5% this year from 2.05% of previous year.
I take immense pleasure in informing you that the The Bank grew its gross loans by Rs. 2.62 billion to Rs.
market price of the Bank's share continued to rise this 15.90 billion. The Bank continued cautious expansion
year as well. As at 16 July 2007, the market price per of both business and personal loans. Mix of relatively
share reached Rs. 5,050. It is currently trading at lower risky and diversified personal loans has
around Rs. 6,000. We however feel that market reached around 25% in total loan portfolio. With the
expectation is on the higher side. due diligence that your Bank exercises while
extending new and additional loans and the efforts it
applies in recovery of non-performing loans, your
bank was able to reduce non-performing loans (NPL)
volume to Rs.178 million as at 16 July 2007. NPL to
total loans ratio has thus decreased to 1.12% as at 16
July 2007 from 1.38% of corresponding period last
year. Total provision held as of that date, Rs.357
million is 200% of NPL indicating a comfortable
cushion against non-performing assets.
9 NABIL BANK Annual Report 2006/07
Tremendous market pressure on lending rates has Foreign exchange income increased by 13.2% this year
caused decline in the Bank's yield on loans and due mainly to contribution from 13% appreciation of LCY
advances to 7.90% from 8.19%. against USD during the year. Fierce competition in the
banking has however continuously narrowed the forex
Investment volume increased by Rs 1.6 billion this spread. Fee & Other Income increased by 7.7% in
year. As a result of high Fed rate and investment in aggregate mainly due to retail business and introduction
high yielding instruments, yield of FCY investments of new sources of fee income. Staff expense increased by
this year improved to 5.27% from 4.39% of last year. 9.3% owing to salary increment at certain levels, rise in
However, low yield of Tbills and maturity of high gratuity expense due mainly to salary increment and
yielding government bonds caused decline in LCY more investment in staff training. Despite high growth
investments yield to 4.08% this year from 5.29% of of business volume, the other office operating expenses
last year. In aggregate, yield of investment has increased by 3% only during the review period. Today,
marginally improved to 4.79% during the review your Bank has the lowest amount of other operating
period from 4.75% of last year. Overall yield on expenses in the peer group.
interest earning assets however declined to 6.75%
this year from 6.95% of previous year due to The Bank, through its continued efforts, has been
decline on yield of loan which has almost 2/3rd able to recover Rs. 43.6 million from the book written
share in total earning assets. Rise in cost of off accounts. The NPA Management Cell exclusively
deposits and decline in yield of earning assets established for recovery of graded and written off
further squeezed interest spread to 4.15% from accounts has been relentlessly putting in its
previous year's 4.90%. endeavors to achieve maximum recovery.
Despite squeezed interest spread, it is satisfying to There is 10.8% growth in the fund set aside for Staff
state that your Bank increased net interest income by Bonus. Corporate tax however records growth of 22%
Rs. 79.2 million this year through growth in business due mainly to the government increasing tax rate by
volume. Moreover, interest spread of your bank is still 2% to 31.5% and payment of Rs. 6.6 million for
the best in the peer group. settlement of prior years' disputed tax.
NABIL BANK Annual Report 2006/07 10
The Bank recorded profit after tax of Rs 674 million, Similarly, we propose 4 bonus shares for each 10
return on average assets 2.72% and return on equity shares held. It gives me immense pleasure to inform
36% in FY 2006/07. These ratios are above you that your Bank has declared cash dividend of Rs.
international standard and one of the highest in the 2.86 billion in 23 years of its operations. Looking at
domestic industry. the current market capitalization and cash dividend
distributed so far with the initial investment of just
Rs. 30 million, the Bank has significantly maximized
the wealth of its shareholders.
Office Network
Kamaladi branch was shifted to United World Trade
Centre, Tripureshwor to solicit more business.
Similarly, the Bank completed entire homework in
2006/07 for opening 9 branches from Mechi to
Mahakali. These branches will come into operations
soon. In FY 2006/07, new ATMs were installed at
Kalimati, Tripureshwor and Kantipath. Use of internet-
banking is also gradually growing.
In a nutshell, I feel we should be satisfied with the
overall performance of the Bank. Your Bank has
Technology
achieved a satisfactory growth in both the top line
The Bank firmly believes that the technology is a key
and bottom line at a time when the economy of the
enabler in enhancing our service standards. With this
country is almost stagnant and competition in the
in mind, your bank has constantly been striving to
banking sector is getting tougher.
excel in this front and has introduced and expanded
a number of IT based products. Today, your bank is
Dividend forerunner in IT based products.
The Bank earned Rs.137.08 per share (EPS) in FY 2006/
07. After appropriating adequate amount for various
Industrial and Business Relations
reserves, we propose a cash dividend of Rs. 100 per
The Bank would not have come to this stage had
share.
there not been a harmonious relations between the
employees and management. The Bank has always
made endeavours to further strengthen the relations.
There is a registered authorized staff union in the
Bank. The management and staff union are in
constant touch to achieve the common goal of
becoming the Bank of the 1st Choice.
Bank has introduced many products and has built a observations/decisions, Internal Audit Department
reputation of delivering the highest quality of reports directly to the Audit Committee, comprised of
professional services in a personalized manner. As a Board Members and not to the CEO. Additionally, CEO
result, the Bank has also been able to attract a large is not allowed to be a member of the Audit Committee.
number of customers from different strata. Nabil is Similarly, Compliance unit is headed by the Company
the sole banker to the multitude of International Aid Secretary of the Board.
Agencies, Embassies, NGOs, INGOs besides a host of
corporate and retail customers. We attribute our Progress Report of the
success to the patronage of the customers and Current Year and Future Outlook
pledge to improve further the customer service The Bank's key result for the first month (up to mid-
standard. Besides the healthy growth in all respects, August 2007) of the current year (FY 2007/08) is as
the Bank is diligently complying with the follows:
international norms of AML/KYC Policies.
Figures in NPR Millions
AS AT MID AUGUST GROWTH
Corporate Social Responsibility
Nabil continues to pursue its philosophy of Corporate 2007 2006 %
Social Responsibility on three pillars; Health, Education Deposits 23,658 19,487 21.4
and Sport. In Health, it has partnership with the
Interest Bearing 19,881 16,224 22.5
Glaucoma Center at the Tilganga Eye Hospital to
Non Interest Bearing 3,778 3,263 15.8
increase overall knowledge about this blinding
Loans & Advances 16,284 13,806 18.0
disease. In Education, it has partnership with the Mary
Profit Before Bonus & Tax 123 90 37.0
Ward School to educate underprivileged children. And
in Sports, Nabil continues to give its shoulder to Nabil
Three Star Club to promote sportsmanship and Margin in interest, fee and foreign exchange income
healthy living in the country. is shrinking day by day due to ever increasing
competition. Number of banks and financial
Internal Control System institutions and their branches is constantly
Since banking business is exposed to basically credit, increasing despite very low growth rate of the
market and operational risks, it has been the policy of economy. The following statistics sheds light on the
the Bank to strengthen internal control system. The comparative number of banks and financial
Bank has put in place various policies, product papers institutions in the country:
and standard instruction manuals covering work of
almost all areas of its operations. To avoid the conflict
MID JULY 2003 MID JULY 2007
of interest, a clear demarcation has been drawn
Commercial Banks 17 20
between business generation and risk management
Development Banks 17 38
functions besides setting limits for managing all
Finance Companies 56 74
above risks. Similarly, Internal Audit Department and
Compliance Department are strengthened to ensure
compliance of all internal and external requirements. Furthermore, some banks and financial institutions
In order to ensure independent and unbiased are in pipeline.
NABIL BANK Annual Report 2006/07 12
The Bank is committed to solicit adequate and 27 July 2007. Similarly, Mr. A. P. Bazagain has been
attractive business opportunities to ensure better appointed as a professional director effective 9 July
achievements in the current year despite current 2007 in line with Bank and Financial Institutions Act
political and economic reality of the country is not 2006.
being encouraging.
I wish to place on record our appreciation of the
Future Programs contributions made by outgoing directors and
Major thrusts during FY 2007/08 will be in the welcome new directors.
following areas:
Increase interest free and savings deposits Acknowledgement
Increase quality personal and business loans The Board of Directors places on record its
Increase share of EXIM business appreciation for the continued support and
Increase Card and Remittance related incomes patronage of shareholders, customers and well
Control operating expenses wishers. The Board is thankful to Nepal Rastra Bank,
Increase recovery from written off accounts Government of Nepal and the Ministry of Finance for
Additional disclosures on the Bank as per the Company Act their support and guidance. Similarly, employees of
2006 have been given in Annex A. the Bank have put in hard work to deliver such a
good result. I take this opportunity to extend my
Board of Directors heartfelt thanks to all for their invaluable
After the last Annual General Meeting, there are few contributions.
changes in the Board of Directors. NBIL has
nominated Mr. Tabith Awal and Mr. Mohiuddin Ahmed On behalf of the Board
in place of Mr. A. Mintoo and Mr. Suraj Mehta effective Satyandra P. Shrestha, Chairman
13 NABIL BANK Annual Report 2006/07
ANNEX - A
Audit Committee
The Board of Directors of the Bank constituted an Audit
Committee on 18 February 2002 (2058.11.06 B.S.). Following 3
non-executive directors were in the Committee as on 16 July
2007:
Mr. Supriya Gupta - Convenor
Mr. A. Mintoo - Member
Mr. Milan Bikram Shah - Member
Discussion & approval of Annual Audit Plans & Directors' Credit Committee (DCC)
Programme for the FY 2006/07. Mr. Satyandra Pyara Shrestha - Convenor
Discussion on and adoption of the draft Audit Guidelines Mr. Supriya Gupta - Member
2007. Mr. Shambhu Prashad Poudyal - Member
Memorandum dated 31.05.2007 on Proposals for Mr. Dayaram Gopal Agrawal - Member
carrying out IT Audit of the Bank. Mr. Milan Bikram Shah - Member
MANAGEMENT TEAM
Mr. Anil Shah
Chief Executive Officer
Dear Stakeholders, puts us amongst the highest in the banking sector of the
Nabil Bank is delighted to continue to be ‘Your Bank @ nation. The Bank has doubled the size of its loan
Your Service’. portfolio in 5 years. As at mid July 2007 our risk asset base
had reached Rs.15.9 billion, from Rs.7.8 billion in mid July
With your support the fiscal year 2006/07 was truly an 2002. Despite such a huge growth of loan volumes, the
exceptional year for Nabil Bank, as we crossed the Rs. 1 Bank has been able to reduce NPL volume to Rs.178
billion milestone in Profit Before Bonus & Taxes, million, just 1.12% of total loans, at mid July 2007 from
registering a growth of 11% over the pervious year. Rs.557 million of mid July 2002. Similarly, the Bank has
Impressive growth in size and volume of major held loan loss provision double of NPL volume at mid
components of the balance sheet, both deposits and July 2007. We believe that this is true vindication of the
loans, yet maintaining both the mixture and quality structural change we implemented in 2004 separating
alongside, have further ascribed the year as remarkable. business generation and risk analysis and removing all
Needless to say, this achievement is a reflection of our conflict of interest therein. In terms of capital, the Bank
success in continuously striving to surge ahead to be continues to be strong and sound with our Capital Fund
the Bank of 1st Choice of all our stakeholders, even totaling NPR 2.3 billion and with our capital adequacy at
amidst the uncertainty and instability that prevailed in 12.04%, which is well above international standard.
the nation.
At this juncture when the nation is passing through a phase
Despite optimistic hopes and anticipation for the year of transition, we at Team Nabil believe that just registering
2006/07, the country did not perform well higher profits, yielding higher returns, strengthening the
economically, as instability and lawlessness seemed to financials and enhancing the books of accounts, is not
increase and the political uncertainties continued. enough in our journey to achieve our mission to be Nepal’s
Bandhs, strikes and extortion in various parts of the Bank of 1st Choice. Therefore beyond these traditional
country including Kathmandu valley crippled daily life parameters, the Bank has embarked on a journey to surge
on numerous instances over the year. At a time when ahead together with the people of Nepal across the nation
our neighboring countries registered impressive building new relationships of mutual benefit and playing
economic growth, we have managed a meager the role of a catalyst in the economic growth of the nation.
growth of 2.5% in the year. Regardless of this, Nabil In our efforts of adding value towards building a ‘New
Bank experienced a successful year and delivered Nepal’, the Bank has opened nine new Branches spanning
excellent results, and elucidating this to you our the entire length of Nepal, from Mechi to Mahakali. We are
partner in this success, gives me immense pleasure. proud of our now greater contribution towards the
upliftment of the economy through our enhanced presence
As already indicated above, Nabil Bank registered a through the entire length of the nation, enabling us to
historic Rs. 1.09 billion profit before bonus and taxes provide the highest levels of financial products and services
and Rs.674 million profit after tax in the year 2006/07. to various communities and different segments of the
The 100% cash dividend along with 40% stock society.
dividend that the Bank has distributed this year was a
record high in the annals of banking history in Nepal. With the opening of the nine branches, Nabil is now able
This is in line with our commitment to increase paid-up to reach and service our customers from Mechi to
capital of the Bank to a minimum of Rs. 1.6 billion by Mahakali through the hills and terai through online
mid July 2013. Furthermore, 36% return on connectivity via VSAT, Radio modems and fiber optics. This
shareholders’ funds and 2.72% return on bank’s is a major step forward for banking in Nepal, as from now
average assets denote superior rate of profitability and modern banking
21 NABIL BANK Annual Report 2006/07
will not only be limited to the urban centers, but a larger taxes during 2006/07. The Bank’s contribution to the banking
part of the economically less privileged, remote and semi industry and the nation continues to be recognized by the
urban societies will have access to international standard community and the regulators. Federation of Nepalese Chamber
banking. At Nabil we view this as a ‘marathon’ we have only of Commerce & Industry (FNCCI) has awarded the National
just started, as the Bank plans to continue enhancing its Excellence Award to Nabil for its achievement and service as
branch network to meet the financial needs of the larger Commendations for Significant Achievement in Institutional Policy
Nepali population. Today, amongst all private banks, Nabil Planning & Commitment during the past year. It gives me
has the largest Branch and ATM networks. We have always immense pleasure to share with you that Central Bank has
been a pioneer in launching innovative products and continuously upgraded our CAMEL rating through onsite
services to meet, if not exceed our customer’s requirements inspections and regularly seek our views on crucial issues and
and now with our plans to extend our reach even further policies.
we will have the ability to truly deliver the very best
banking products and services right across Nepal. In today’s business context where competition is getting more
intense with the number of new banks and financial institutions
Nabil has earned strong market confidence, which is increasing, one of the main strengths of our Bank is our ‘People’.
clearly reflected through the enormous growth in our The consistent achievements that Nabil recorded this year was
share price. The share price that was NRs. 740 four years possible due to the team effort put up by each and every
back has soared up to NRs.5,050 on 16th July 2007, the individual member of the Nabil Team. The team which,
closing day of the fiscal year. Year end market comprises of highly skilled and talented individuals across the
capitalization was NRs. 24.8 billion, the highest in the Bank, is proud to have amongst the very best banking
banking industry. Currently Nabil’s shares are trading professionals in our high performing synergistic team.
close to NPR 6,000. An achievement that we feel is Recognizing this fact, Nabil today is amongst the highest
comprehensive evidence that Nabil’s share is a true blue paymasters and most preferred employers in not only the
chip investment for our shareholders and a lucrative industry but the nation. As always, the Bank is proud of and
opportunity to those looking for investment. thankful to the high performing individuals that make up Team
Nabil, and we are confident that we will continue to surge
The Bank has always felt responsible towards the ahead together to greater heights of success in the days ahead.
betterment of the society and the community of which we
are a part. In this regard, we continue our three pillars Finally, I reiterate my sincere commitment to our Customers,
approach to great corporate citizenship through our Shareholders, Regulators, the Community and Staff, all our
partnerships in: Health, Education and Sports. In health our stakeholders that we continue to Surge Ahead by living our
partnership with the Glaucoma Eye Center at the Tilganga Values of being C.R.I.S.P. or Customer Focused, Result Oriented,
Eye Hospital continues, in Education, the Bank has been Innovative, Synergistic and Professional everyday in everything
associated with the Mary Ward School and is sponsoring we do. As always we remain ‘Your Bank @ Your Service’. I express
the education of less privileged girl children of grades 8, 9 my gratitude to all our stakeholders for your continued
and 10. And in sports, our alliance with the Nabil Three Star confidence and support, as we Surge Ahead to build on
football club is growing from strength to strength. mutually beneficial partnerships as your Bank of 1st Choice.
Nabil continues to be among the largest tax payers in the Best regards.
industry, with the payment of NRs. 321 million corporate Anil Shah, Chief Executive Officer
23 NABIL BANK Annual Report 2006/07
During these turbulent years in financial
market, Nabil has shown its efficiency
through its proficient services and
modern facilities to prove itself to become
the first choice Bank for Thai Airways. I
hope our mutual understanding and
cordial relationship established since the
inception of Nabil in 1984 will be more
intense and fruitful in the days to come.
RISK MANAGEMENT
Taking risk is an integral part of our business. Our aim securities and other obligations in tradable form and
is to achieve an appropriate balance between risk derivatives referenced to those names.
and return based on our assessment of potential risk
developments in both normal and stressed Banks assume certain risks, especially credit and
conditions. market risks as an integral part of the business
exchanges with the clients. In this connection it is
Banking activities deal with different sorts of risk- important to manage the risks inherent in the
management to a large extent, mainly comprising business with customers in a controllable manner
market and counterparty risks, but also including and this is why bank's Board establishes maximum
liquidity and operational risks. limits for the total risk exposure at every particular
interval of the review period.
Market Risk is the risk of a rise or fall in the value
of the bank's assets and liabilities due to price Market Risk:
changes in the market. The portfolio analysis taking into account the
concentration risk the aggregate control limit, FX risk
Credit Risk (Counterparty Risk) is the risk of any limit, Individual Currency Trading Limit, Intra Day Limit,
kind of non fulfillment by customers (companies, Net Open Position Limit, the guidelines as to
individuals, banks, financial institutions, states etc) maintenance of Credit to Deposit Ratio, Liquid Asset to
of their obligations towards the bank. Most of the Deposit Ratio, Investment limits, GAP Analysis for
counterparty risk is related to credit risks. liquidity purpose and for interest rate sensitive Asset &
Liability book all the above within ALCO / Investment
Liquidity Risk is the risk for a loss due to lack of policy as approved by the Board is monitored by
liquid fund, which may force the bank to close Treasury and Finance & Planning so as to make sure
out a position before maturity, for example: The that no unwarranted surprises are to be observed.
risk arises when the mismatch between assets
and liabilities arises due to the maturity profile Strengthening Risk Control:
where the maturing assets are not enough to Credit Risk:
cater to the maturing liabilities. Credit risk is the risk of loss as a result of failure by a
client or counterparty to meet its contractual
Operational Risk is the risk for unforeseen losses obligations. It is an integral part of many of our
due to administrative or systems deficiencies, business activities and is inherent in traditional banking
which may be intentional, such as violations of products - loans, commitments to lend and contingent
laws or instructions or unintentional, within or liabilities, such as letters of credit - trade products -
beyond the bank's control. derivative contracts such as forwards, swaps, options,
repurchase agreements (Repos and Reverse Repos) and
While credit and liquidity risk may be regarded as securities borrowing and lending transactions. All
classical banking risks, the market risk - is exposure to banking and traded products are governed by a
market variables , interest rates, exchange rates , comprehensive risk management and control
equity market indices , commodity prices and factors framework, which includes detailed credit policy and
specific to individual names affecting the values of procedures which are approved by the Board.
NABIL BANK Annual Report 2006/07 26
In recent years, the Bank has organized the handling of Operational Risk:
its Credit Risk in an efficient manner through its new The risk of loss resulting from inadequate or
credit organizational structure, where the Credit Unit is failed internal processes, people and system or
responsible of implementing the credit guidelines which from external causes, whether deliberate,
are approved by the Board and also plays an important accidental or natural. It is inherent in all our
role in making evaluations of the credit decisions that are activities, not only in the business we conduct but
separate and uninfluenced from the business side that is also from the fact that we are a business- because
Business Banking Unit or Personnel Lending Unit - thus we are an employer, we own and occupy property
providing a second opinion on each credit case. and we hold assets, including information
belonging to ourselves and our clients. Every
Liquidity Risk: function whether a front end business or a
The Bank as per the approved guidelines from the control or logistic unit must manage the
Board has been maintaining Liquid Asset to deposit operational risk that arise from its own activities.
ratio and has been monitoring the same very closely. We have introduced "Total Quality Management"
The investments for liquid asset mainly comprises of (TQM) approach whereby each unit identifies the
Government Securities: Treasury Bills maturing within risk associated and monitors and escalates
364 days and Bonds. Our Central Bank as per their required information to the Senior Management.
Open Market Committee proceedings brings REPOs The Audit Committee under the direct supervision
and Reverse REPOs in the market as per the market of the Board has been strengthened which
requirement and has been letting the Banks utilize overlooks into the operational risk aspect where
the Standing Liquidity Facility (SLF) against the by we assess the implication of the External and
holding of Government Securities as the last resort Internal audit findings to implement better ways
for liquidity requirement. of mitigating operational risk.
27 NABIL BANK Annual Report 2006/07
Nabil realizes that good corporate governance is the Corporate Governance in the
very foundation for its sustainable growth and Management
therefore continues to live by the highest standards Nabil Management is a team of seasoned and
of corporate governance. Moreso, when it comes to experienced professionals who are driven by the
institutions such as banks which can not operate corporate mission and values and believe in a culture
without properly managing and mitigating several of self discipline. The senior executives and managers,
prominent risks and winning the trust of the public with their experience and knowledge, are capable of
at all times, Good Corporate Governance is of utmost maintaining an effective level of control over the
importance for them. This is why in Nabil Bank the banking operations and affairs. Policies and
following areas have always received utmost operational guidelines have been formulated which
importance as a part of good corporate governance. ensure adequate controls over all day to day
business activities and the effective management of
The Board of Directors all inherent risks.
The Board recognizes its responsibility to act
honestly, prudentially and progressively in Clear lines of responsibility and
accordance with the prevailing regulations in serving accountability
the interest of all the stakeholders of the Bank. All our Nabil has structured itself in a manner so that there is
Board Members have extensive experience in the always a clear demarcation between the business
banking industry which makes them qualified in generators and the risk evaluators. This ensures the
adding value by providing seasoned judgments practice of maker and uninfluenced checker each
independently on policy matters. There are different time a deal is put through. Each individual's duties
Board Committees headed by non-executive Board and lines of responsibility and accountability are
Members to look into different Banking affairs like clearly discussed, defined and recorded against which
planning, credit, overall performance management, their performance is monitored and evaluated.
human resource, audit and compliance.
NABIL BANK Annual Report 2006/07 30
Know Your Customer (KYC) and Anti instrument that helps banks constantly improve its
Money Laundering (AML) Policy risk management system resulting in protection of
Not limited to the guidelines issued by Nepal Rastra interest of all the stakeholders and has started
Bank on 7th April 2005 Nabil Bank has implemented measures to implement it in the Bank.
its Know Your Customer (KYC) and Anti Money
Laundering (AML) policies with approval from the Upcoming Major Challenges and Bank's
Board of Directors to have it at par with international Preparations
standards, effective 14th July 2006. The first round of Competition in the financial market is already tough
training to the entire staff of the Bank has been with the presence of large number of financial
concluded as per the mandate of the policy. The institutions including joint ventures of international
updates about Money Laundering cases around the banks. Interest spread, exchange spread etc of banks
world and its impact on the organization in part as are constantly narrowing. The competition is
well as on the country as a whole have been expected to stiffen further with the government's
disseminated to the entire staff regularly. In commitment of allowing foreign banks to open their
accordance with predefined norms and standards, branches by 1st January 2010. When international
entire transactions of the Bank have been constantly banks come, they come with large capital, modern
monitored and a system of informing the concerned technology and an array of products. Experience of
authorities has been developed in case of any our neighbouring countries suggests us not to panic
suspicious transactions observed to this end. with the arrival of international banks. We however
have decided to focus on the following areas to
BASEL II remain competitive:
With regard to Basel II implementation, Nepal Rastra Augmenting Capital Base.
Bank (NRB) has prescribed the approaches most Developing expertise in various fields:
suitable for Nepalese financial market. New capital International banks have better exposure in
adequacy framework prescribed by NRB based on treasury and credit products than local banks. The
new Capital Accord (Basel II) of Basel Committee on Bank has thus started measures for enhancing
Banking Supervision is meant for parallel run in FY skills of its human resources in these products.
2007/08 and shall come to force effective FY 2008/09. Adopting best human resource practices.
Strengthening risk management system.
Nabil is privileged to be a part of new Capital Accord Improving customer service quality.
Implementation Group formed by NRB, the Central Maximizing use of Information Technology.
Bank of the country. Nabil regards Basel II as an Product innovation and cost management
31 NABIL BANK Annual Report 2006/07
HUMAN RESOURCE
As part of our mission to be the 'Bank of 1st Choice' of members and utilize the same towards adding value
Staff, Nabil continuously strives to attract and retain to the Bank. With this in mind our training policy
high caliber talent. Being the "best" in the business focuses not only on overcoming the weaknesses of
would mean to be able to attract, develop and retain an individual, but rather building on strengths to
the best talent in the business. The Bank provides foster professionals who can help us continue to be
market driven compensation and benefit packages, a the Bank of 1st Choice of all our stakeholders. During
professional challenging environment, state-of-the- the financial year 2006/07, 68 different training
art learning opportunities and a culture built on time programs were conducted where 245 staff
tested values and beliefs. participated, 233 in local and 12 in foreign training
programs. During the year, 6 managers and 14 officers
We believe that the most important resource of the were promoted to higher positions.
Bank is its Human Resource and the talent pool we
have is one the most vibrant and energetic Teams in Our Human Resource Policy pertaining to Job
the country. We believe we must continuously enrich Descriptions and Performance Management Process
and equip our "Entire Team" members with the latest is regularly reviewed and enhanced. Performance
market developments and provide opportunities to Management Contracts that have been implemented
enhance knowledge to live up to the expectations of make sure that the performing employees are
all our stakeholders. recognized and rewarded. The HR Management
always focuses in putting the right staff in the right
Under HR Development, the basic policy is to identify job and fostering a corporate culture that rewards a
the core strengths and capabilities of individual staff forward looking and creative attitude.
NABIL BANK Annual Report 2006/07 32
The notion of Corporate Social Responsibility (CSR) Ward School affiliated with St. Mary’s High School. And
has been in Nepal dating back hundreds of years. in Sport, we have entered into a partnership with
“Giving voluntarily for greater good” has been an Nabil Three Star Club to promote the spirit of sport.
intrinsic part of the social and religious belief of the
people of Nepal. Even business houses have actively We believe CSR is closely linked with the principles of
been involved in trusteeship in their corporate sustainable development and long term partnership
traditions in their own capacities but the last few between the parties where decisions are not based
years have witnessed a notable surge in the concept on generation of profits or dividends but based on
of CSR with increasing numbers of business houses long term social consequences. CSR for us goes
and large corporate establishments promoting this beyond charity where we are merely observing the
concept. benefits generated from our initiative.
Nabil Bank since its inception in 1984 is in a unique The 30 students from Mary Ward School who appeared
position in the banking industry in Nepal carrying with for their School Leaving Certificate (SLC ) examination
it 23 years of experience. When we look forward, we all passed with 1st divisions which was a pride for us as
have a mission and vision to be the ‘Bank of 1st Choice’ well as the school and the students including their
for all our stakeholders - Customers, Shareholders, families. They are all underprivileged children where
Regulators, Communities we work in and Staff. Mary Ward School is supporting the families for their
girl child education. Not only is the Bank involved in
We have charted our set of values C.R.I.S.P to attain supporting the children but the staff in their individual
the mission statement: capacities have been supporting deprived children for
C - Customer Focused their educational needs and therefore are involved in
R - Result Oriented creating awareness in the importance of education in
I - Innovative children especially in a country like Nepal wrought with
S - Synergistic many problems; but we feel that if we in our own
P - Professional capacities can even attempt to make a small difference,
then a certain contribution has been made. This in fact
It is our belief that the differentiator when it comes to is a reflection that not only is Nabil as an institution
the CSR initiatives of Nabil Bank Ltd., a feeling that we committed to such causes but the staff too uphold this
all proudly support, would be our three pillared feeling which in itself supports the fact that CSR
strategy on “Corporate Social Responsibility” which initiatives in Nabil will have continuity and is not just a
goes deeper than just providing funds for an event or short term venture that has been undertaken.
project. Just like with all our other stakeholders, here
too we believe in building long term sustainable To add to the above, the employees of the Bank on a
relationships. Health, Education and Sports are our yearly basis also conduct blood donation programs
main thrust areas. In Health, we have partnered with where we have partnered with the Nepal Red Cross
the Glaucoma Center at the Tilganga Eye Hospital to Society (NRCS). This association with NRCS goes back
increase overall knowledge about this blinding several years and has remained a continuous process
disease. In Education, the Bank is supporting the much appreciated by them with letters of appreciation
education of underprivileged children at the Mary provided to the Bank for the initiative and support
NABIL BANK Annual Report 2006/07 34
Deposits
At Nabil, our dear depositors enjoy a good return on their
deposits, convenience of modern banking technology
and the comfort of our financial reliability, without
compromising on any of them. Nabil offers an array of
deposit products which provides interest rates quite
competitive among the banks of its class. Equipped with
several distribution channels like cards, internet banking,
largest Network of branches and ATMs and Extended
banking counters, Nabil offers its depositors the freedom
of '24 hours a day, 365 days a year' access to their deposit
accounts and an incredibly convenient banking
experience. Nabil's networth of more than NPR 2 billion,
capital adequacy of 12.04% and impressive ratio of Non-
performing Loans to Total Loans as low as 1.12% reflect
its sound financial stability and risk management skills
which give a sense of comfort to our depositors that
their dear savings will always be safe in Nabil. Therefore
Nabil is today a well established brand name that comes
Mr. Janardan Baral, lucky winner of Nabil Bachat Mega
to the minds of depositors.
Lucky draw, enjoying his prize “Toyota Echo Car”
services whereby Nabil goes to the customers'
Besides the regular deposit accounts like current, doorsteps to give them exclusive banking services.
savings and fixed term deposits in local currency as
well as in a range of other major foreign currencies,
Privilege Lounge
Nabil also offers many other special deposit schemes.
At the Privilege Lounge, Nabil's valued customers can
enjoy exclusive premium banking experience in a
NabilBachat queue-free and personal environment, whilst they avail
NabilBachat is a premium deposit scheme that reflects of the most professional of service deliveries. A team of
the value and respect Nabil gives to its depositors. Relationship Managers are always more than happy to
NabilBachat offers high interest rate on deposits, which give their customers a personalized service, offer
gets even higher as the deposited balance goes up. In financial advices and any assistance what-so-ever on
addition, this scheme offers Visa Electron Debit Card, Any their financial requirements. Nabil believes in
Branch Banking Service, internet banking service relationships for mutual growth and feels proud to have
'NabilNet', Issuance of Travellers Cheques, Issuance of grown on foundation of the relationships that Nabil has
Balance Certificate, all free of charge. built over the decades.
28 Nabil outlets and 31 units of 24-hour-operative ATMs branch locations throughout the country ensure that
are inter-connected on real-time basis. This gives the Nabil products and facilities are tailored to meet the
customers the complete freedom of operating their changing business needs of the customers.
account from any of Nabil's branches and ATMs, no
matter in which branch they maintain their account. Working Capital & Project Financings
Nabil's network of branches and ATMs is the biggest Nabil, through its wide range of flexible products like
among private sector banks in the country with its Overdraft, Demand Loan, Time Loan, Short Term Loan,
presence from Far West to Far East of Nepal. Import Loan etc, can accommodate all specific needs
for the customers' working capital requirements,
Extended Banking Hours whether the need arises for maintaining primary assets
For customers who do not find time for even small inventory, meeting operating costs, financing for
banking transactions during office hours, Nabil receivables, importing goods etc., depending on the
provides 365 days banking and evening counter nature of specific business and trade cycle.
services from selected branches through which all the Relationship Managers maintain continuous close
Nabil customers can operate their accounts. communications with customers to ensure readiness
for financing any requirements on a timely and
Internet Banking Service adequate manner. Medium and Long Term loan
For customers who do not wish to leave the comfort products having more flexible characteristics in terms
of their own home or office simply for account of time period, installment schedule etc., depending
information and fund transfer, the Bank offers on the project cash flow and borrowers repayment
'NabilNet', an internet banking solution through ability are availed for creating fixed and movable
which customers can view their account information assets required for projects under consideration.
and even transfer funds, in a secured environment.
Trade Finance
Additional Services Nabil, through its extensive domestic and international
For the Bank's deposit relationships there are other network of correspondent banking relationships, is
host of services available at Nabil, like implementing well poised to meet the needs of customers' Import
Standing Instructions on accounts, issuing Balance and Export transactions through the facilitation of
Certificates, certifying 'Good for Payment' on cheques Letters of Credit, Letters of Guarantee & Counter
and sending/receiving remittances to/from around the Guarantee, Drafts, SWIFT transfers etc., efficiently at
world through its vast network of correspondents. competitive rates. Various forms of Import and Export
Loans are availed for financing on trade transactions
Business Banking such as Transit Loans, Draft Discounting, Import and
Business Banking is a dedicated division within the Export Bill Discounting or Purchasing, Pre Shipment
Bank to serve the Bank's corporate relationships. It Loan, Post Shipment Loan etc.
facilitates business loans with its diverse and
customized offers to its wide range of customers, Priority & Deprived Sector Financing or Refinancing
from small enterprises loans to large corporate and Nabil has formulated various products to extend
multinational business loans. Highly trained and direct and indirect financing towards micro and small
dedicated Relationship Managers based in various enterprises which help increase production,
NABIL BANK Annual Report 2006/07 38
employment and income as prioritized under the NabilProperties constitutes an all purpose loan
national development plans with an objective to scheme, not limited just for education, marriage,
uplift the living standard of general public travel, equity infusion purposes only, but a wide
particularly the deprived and low income people by variety of other purposes available to fulfill varied
progressively reducing the prevalent unemployment, financial requirements just by simply mortgaging idle
poverty, economic inequality and backwardness. The property. Application is easy and loan sanction and
Bank has made equity investment in various leading delivery expeditious.
Co-operatives and Rural Development Banks to
further partake in these activities. Nabil has NabilAuto makes commuting easier and owning a
refinanced in the deprived sectors mostly through four wheeler a reality at attractive interest rates, loan
these Co-operatives and Rural Development Banks tenures and flexible repayment options with
providing Institutional Loans. financing available for a large variety of vehicles, with
special facilities to draw cash by pledging a vehicle in
Mortgage Loan the Bank's name also available under the 'Cash for
The Nabil Mortgage Loan Product provides hassle Car' scheme.
free finance facilities for individuals and corporate
bodies to meet their various needs like development NabilPersonal, an all purpose, small ticket size easy
of commercial complexes, acquisition of residential loan scheme, makes commitments comfortable by
complexes, commercial properties, repairs and providing a hassle free finance facility at competitive
renovation of residential or commercial property, or interest rate options available.
to meet business requirements, etc. by simply
mortgaging their idle properties and availing of the NabilSiksha extends easy financial solution to the
needed cash flow. students going abroad for further/higher education.
It is highly customer friendly loan available with
Personal Lending partial disbursement facility and having revolving
Nabil offers a wide range of Personal Lending feature in Education Loan category. Our financing is
Products to meet the consumer loan needs of its not restricted to the education expenses of the
customers and turn their lifetime dreams into reality. students but is also designed to accommodate other
Nabil is dedicated to cater to customers' needs with a expenses of the students viz. boarding cost, traveling
personal touch with each loan specifically tailor made expenses, consultancy fees etc.
and designed keeping in mind the specific needs of
the individual customer. This customer care can be Personal Overdraft has been designed to meet
experienced through the bank's array of Personal contingent obligations of our valued customers. This
Lending Products that the Bank offers. product helps our valued customers with easy and
fast processing of loan with easy payback feature
NabilHousing makes the dream of owning a home a and reinstating credit facility.
reality with attractive features available beyond
market offerings at competitive interest rates and Apartment Financing is an extended product of
extended loan tenures, with flexible repayment and NabilHousing, which is targeted to those customers
partial payment features. who want to purchase a residential unit or apartment
39 NABIL BANK Annual Report 2006/07
Remittance Products
Nabil Bank offers a number of remittance products to
cater the customer needs for transferring their money
in and out of the country.
and in around 25,000 ATMs. Nabil is one of the very on use of Visa Electron and Prepaid cards for cash
few banks in the country who offer 'MasterCard withdrawal from Nabil ATMs and purchase in any
International' against customers' USD Account or outlet across Nepal and India.
against Passport facility that is accepted in countless
ATMs and outlets all over the world. For convenience For a single Bank in Nepal, Nabil has the largest
of the cardholders, Nabil cards have flexible re- network of 31 ATMs and more than 800 POS terminals
payment options whereby customers can choose to spreading across the country from Birtamode to
pay any percentage from 10% to 100% of the due Mahendranagar that accepts range of card brands
amount. like Mastercard, Visa, Maestro, Cirrus, Visa Electron,
Visa Plus and SCT cards. Nabil also provides service of
Similarly, Nabil Visa Electron Debit cards and prepaid online payments through its Card Division and
cards are hassle free, readily available and simple to selected branches enabling customers to make
use. These cards are also accepted for purchases and payments like test registrations, membership fees,
in ATMs in both Nepal and India. There is no charge purchase of books, journals etc.
NABIL BANK Annual Report 2006/07 42
104 Tanka Prasad Marg
Baneshwor Height
Post Box 4414
Kathmandu, Nepal
T. R. Upadhya & Co.
Chartered Accountants Telephone: 977 (1) 4495000, 4472658
Fax: 977(1) 4474178
E-mail: trunco@ntc.net.np
We conducted our audit in accordance with Nepal Standards on Auditing. Those Standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
As per the requirement of the Company Act, 2063 and Bank and Financial Institution Act, 2063 we also report that:
a) we have obtained information and explanations, which, to the best of our knowledge and belief, were necessary
for the purpose of our audit;
b) in our opinion, proper books of account as required by law have been kept by the Bank so far as appears from our
examination of such books;
c) in our opinion, the returns received from branches of the Bank were adequate for the purpose of the audit;
d) in our opinion, the Balance Sheet, Profit and Loss Account and the Cash Flow Statement dealt with by this report
have been prepared in the format prescribed by Nepal Rastra Bank and are in agreement with the books of
account maintained by the Bank;
e) in our opinion, so far as appeared from our examination of the books, the Bank has maintained adequate capital
funds and adequate provisions for possible impairment of assets in accordance with the directives of Nepal Rastra
Bank;
f) in our opinion, so far as appeared from our examination of the books, the business of the Bank has been
conducted satisfactorily;
g) to the best of our information and according to explanations given to us and from our examination of the books
of account of the Bank necessary for the purpose of our audit, we have not come across cases where Board of
Directors or any employees of the Bank have acted contrary to the provisions of law, or committed any
misappropriation or caused loss or damage to the Bank and violated any directives of Nepal Rastra Bank or acted
in a manner to jeopardise the interest and security of the Bank, its depositors and investors.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Bank as of 16
July 2007 (Corresponding to 32 Ashad 2064), the results of operations and its cash flows for the year then ended in
accordance with Nepal Accounting Standards except for the certain matters stated in Notes to Account, Generally
Accepted Accounting Principles and comply with the provisions of the Company Act, 2063 and Bank and Financial
Institution Act, 2063.
T R Upadhyay
Senior Partner
For and on behalf of T R Upadhya & Co.
Chartered Accountants
27 August 2007 (10 Bhadra 2064), Kathmandu
T. R. Upadhyay , FCA
Bhuvan Dahal D. G. Agrawal M. B. Shah A. P. Bazgain Senior Partner
Head Finance & Planning Director Director Director T.R. Upadhya & Co.
Chartered Accountants
INCOME
1. Accumulated Profit up to Last Year 33,438,017 29,981,908
2. Current Year's Profit 673,959,698 635,262,349
3. Exchange Equalization Fund -
4. Transfer from Capital Adjustment Reserve 195,300,000 -
Total 902,697,715 665,244,257
EXPENSE
1. Accumulated Loss up to Last Year - -
2. Current Year's Loss - -
3. General Reserve 8,500,000 128,000,000
4. Contingent Reserve 1,000,000 1,000,000
5. Institution Development Fund - -
6. Dividend Equalization Fund 80,000,000 6,500,000
7. Employees Related Reserve - -
8. Proposed Cash Dividend 491,654,400 417,906,240
9. Proposed Stock Dividend (Bonus Shares) 196,661,760 -
10. Special Reserve Fund - -
11. Exchange Fluctuation Fund 11,500,000 6,400,000
12. Capital Redemption Reserve - -
13. Capital Adjustment Fund - 72,000,000
Total 789,316,160 631,806,240
14. Accumulated Profit/(Loss) 113,381,555 33,438,017
T. R. Upadhyay , FCA
Bhuvan Dahal D. G. Agrawal M. B. Shah A. P. Bazgain Senior Partner
Head Finance & Planning Director Director Director T.R. Upadhya & Co.
Chartered Accountants
PARTICULARS SHARE ACCUMULATED GENERAL PROPOSED CAPITAL SHARE CONTINGENT DIVIDEND CAPITAL EXCHANGE INTEREST TOTAL
CAPITAL PROFIT/ (LOSS) RESERVE BONUS RESERVE PREMIUM RESERVE EQUALIZATION ADJUSTMENT EQUALIZATION SPREAD AMOUNT
SHARE FUND FUND RESERVE FUND RESERVE
Opening Balance 491,654,400 33,438,017 975,000,000 74,000 7,750,000 20,000,000 300,300,000 44,200,000 2,578,000 1,874,994,417
Changes in Accounting Policy -
Restated Balance 491,654,400 33,438,017 975,000,000 - - 74,000 7,750,000 20,000,000 300,300,000 44,200,000 2,578,000 1,874,994,417
Surplus on Revaluation of Properties -
Deficit on Investments
Currency Translation Difference -
Net Gains and Losses not
recognised in the Income Statement -
Net Profit for the period 673,959,698 673,959,698
Adjustments: -
Issuance of Share Capital -
Deficit on Revaluation of Properties -
Surplus on Investments -
Cash Dividend (491,654,400) (491,654,400)
Proposed Stock Dividend (1,361,760) 196,661,760 (195,300,000) -
General Reserve Fund (8,500,000) 8,500,000 -
Contingent Reserve (1,000,000) 1,000,000 -
Dividend Equalization Fund (80,000,000) 80,000,000 -
Capital Adjustment Reserve -
Exchange Fluctuation Reserve (11,500,000) 11,500,000 -
Interest Spread Reserve -
Others (250,000) (250,000)
Closing Balance 491,654,400 113,381,555 983,500,000 196,661,760 - 74,000 8,500,000 100,000,000 105,000,000 55,700,000 2,578,000 2,057,049,715
NABIL BANK Annual Report 2006/07 48
1. Share Capital
500,000,000 1.1 Authorized Capital 500,000,000
500,000,000 a) 5,000,000 Ordinary Shares of Rs. 100 each 500,000,000
b) ………...Non-redeemable Preference Shares of Rs……….. each
c) …………Redeemable Preference Shares of Rs……….. each
491,654,400 1.2 Issued Capital 491,654,400
491,654,400 a) 4,916,544 Ordinary Shares of Rs. 100 each 491,654,400
b) ………...Non-redeemable Preference Shares of Rs……….. each
c) …………Redeemable Preference Shares of Rs……….. each
491,654,400 1.3 Paid Up Capital 491,654,400
491,654,400 a) 4,916,544 Ordinary Shares of Rs. 100 each 491,654,400
b) ………...Non-redeemable Preference Shares of Rs……….. each
c) …………Redeemable Preference Shares of Rs……….. each
% AMOUNT
A. Local
- 1. Government of Nepal -
- 2. Nepal Rastra Bank (SLF) 600,000,000
- 3. Repo Liability -
173,201,710 4. Inter-Bank and Financial Institutions 282,572,500
- 5. Other Organized Institutions -
- 6. Others -
173,201,710 Total 882,572,500
B. Foreign
- 1. Banks -
- 2. Others -
- Total -
173,201,710 Total (A+B) 882,572,500
NABIL BANK Annual Report 2006/07 52
Figures in NPR
Cont.
TRADING OTHER
Note : Companies except Rural Micro Finance Development Centre Limited, Nirdhan Utthan Bank Limited, Chhimek Samaj Bank Limited & Deprosc Development Bank
Limited have not declared and distributed dividend in the last three years.
N/L stands for not listed in Nepal Stock Exchange Limited (NEPSE).
Nabil Bank Limited
Classification of Loans, Advances and Bills Purchased & Provisioning Schedule 13
(As at 16 July 2007 ) Figures in NPR
PREVIOUS YEAR PARTICULARS LOANS & ADVANCES BILLS PURCHASED & DISCOUNTED THIS YEAR
INSURED UNINSURED
13,096,157,779 1. Performing Loans 22,429,259 1,058,512,277 14,394,754,012 6,742,413 15,482,437,961 79,816,627 162,475,193 242,291,820 15,724,729,781
13,010,864,147 1.1 Pass 22,429,259 1,057,872,750 14,309,145,741 6,742,413 15,396,190,163 79,816,627 162,475,193 242,291,820 15,638,481,983
85,293,632 1.2 Restructured - 639,527 85,608,272 - 86,247,799 - - - 86,247,799
182,624,480 2. Non-Performing Loans 9,818,925 6,198,830 160,955,585 545,558 177,518,898 239,345 535,740 775,085 178,293,983
62,665,914 2.1 Sub-Standard 1,545,331 1,749,304 116,409,964 - 119,704,599 - - - 119,704,599
29,565,952 2.2 Doubtful 310,640 665,610 13,495,396 - 14,471,646 - - - 14,471,646
90,392,614 2.3 Loss 7,962,954 3,783,916 31,050,225 545,558 43,342,653 239,345 535,740 775,085 44,117,738
13,278,782,259 A. Total Loan (1+2) 32,248,184 1,064,711,107 14,555,709,598 7,287,971 15,659,956,860 80,055,972 163,010,933 243,066,905 15,903,023,765
3. Loan Loss Provision
130,343,145 3.1 Pass 56,073 10,578,727 162,377,433 67,424 173,079,657 798,166 1,624,752 2,422,918 175,502,575
83,958,156 3.2 Restructured - 79,941 79,761,153 - 79,841,094 - - - 79,841,094
42,573,904 3.3 Sub-Standard 96,583 437,326 56,102,491 - 56,636,400 - - - 56,636,400
13,896,064 3.4 Doubtful 38,830 332,805 6,747,808 - 7,119,443 - - - 7,119,443
85,467,837 3.5 Loss 1,990,738 3,783,916 31,050,225 545,558 37,370,437 239,345 535,740 775,085 38,145,522
356,239,106 B.Total Provisioning 2,182,224 15,212,715 336,039,110 612,982 354,047,031 1,037,511 2,160,492 3,198,003 357,245,035
4. Provisioning up to previous year
108,434,222 4.1 Pass 110,558 6,751,390 120,667,099 381,133 127,910,180 846,817 1,586,148 2,432,965 130,343,145
126,911,349 4.2 Restructured 89,032 - 83,869,124 - 83,958,156 - - - 83,958,156
6,865,463 4.3 Sub-Standard 30,858 413,750 42,129,296 - 42,573,904 - - - 42,573,904
1,415,926 4.4 Doubtful 295,637 540,799 13,059,628 - 13,896,064 - - - 13,896,064
116,939,615 4.5 Loss 1,641,592 4,313,063 76,468,117 825,340 83,248,112 357,365 1,862,360 2,219,725 85,467,837
360,566,575 C.Total Previous Year's Provision 2,167,677 12,019,002 336,193,264 1,206,473 351,586,416 1,204,182 3,448,508 4,652,690 356,239,106
7,429,444 D. Written Back This Year - - 154,154 593,491 747,645 166,671 1,288,016 1,454,687 2,202,331
3,101,975 E. Addition This Year 14,547 3,193,713 - - 3,208,260 - - - 3,208,260
(4,327,469) F. Changes This Year 14,547 3,193,713 (154,154) (593,491) 2,460,615 (166,671) (1,288,016) (1,454,687) 1,005,929
12,922,543,153 Net Loan (A-B) 30,065,960 1,049,498,392 14,219,670,487 6,674,989 15,305,909,828 79,018,461 160,850,441 239,868,902 15,545,778,730
Nabil Bank Limited
Securitywise Loans, Advances and Bills Purchased
(As at 16 July 2007)
Schedule 13 (A)
Figures in NPR
BORROWER
BORROWEROR
ORPARTY
PART NON BANKING ASSETS NON-BANKING
NON BANKING ASSETS % NON BANKING ASSETS
NON-BANKING ASSETS
AMOUNT
-
Grand Total - - -
NABIL BANK Annual Report 2006/07 60
PREVIOUS
S.NO YEAR NAME & ADDRESS OF BORROWER
TYPES OF LOAN DATE OF ACQUISITION
WRITTEN OFF AMOUNT TOTAL AMOUNT
TYPE OF SECURITY BASISOF
OF SECURITY LOSS
LOANPROVISION
APPROVED BY "THIS YEAR'S
EFFORTS MADENET“
FOR REMARKS
& AMOUNT VALUATION NAME/DESIGNATION RECOVERY OF LOANS
BORROWER OR PART NON BANKING ASSETS NON BANKING ASSETS NON-BANKING ASSETS
NAME OF PROMOTER/DIRECTOR/ OUTSTANDING UP TO LAST YEAR RECOVERED IN CURRENT YEAR ADDITIONAL LENDING OUTSTANDING AS OF 16 JULY 2007
E. Shareholders - - - - - - -
1. - - - - - - -
66
2. - - - - - - -
3. - - - - - - -
Total - - - - - - -
Note: Loan given to employees as per Employees' Rules and against Fixed Deposits/Government Securities not presented above.
67 NABIL BANK Annual Report 2006/07
3. Market Value Per Share Rs. 700 740 1,000 1,505 2,240 5,050
4. Price Earning Ratio Times 12.67 8.74 10.80 14.27 17.34 36.84
5. Dividend (including bonus) on Share Capital % 30 50 65 70 85 140
6. Cash Dividend on Share Capital % 30 50 65 70 85 100
7. Interest Income/Loans & Advances % 10.34 9.83 9.45 8.70 8.29 8.14
8. Employee Expense/Total Operating Expense % 19.48 30.34 29.43 31.50 28.93 24.41
9. Interest Expense on Total Deposit and % 2.91 2.09 1.97 1.68 2.09 2.54
Borrowings
10. Exchange Gain/Total Income % 9.41 10.09 11.03 12.24 10.31 10.02
11. Staff Bonus/ Total Employee Expenses % 30.45 31.51 39.78 42.20 40.86 41.43
12. Net Profit/Loans & Advances % 3.51 5.27 5.33 5.32 5.24 4.62
13. Net Profit/ Total Assets % 1.53 2.43 2.73 3.06 3.23 2.72
14. Total Credit/Deposit % 50.31 60.34 60.55 75.05 68.63 68.13
15. Total Operating Expenses/Total Assets % 4.20 4.06 3.69 3.73 3.86 3.97
16. Adequacy of Capital Fund on Risk Weighted Assets
a. Core Capital % 10.53 11.45 12.12 11.35 10.78 10.40
b. Supplementary Capital % 3.33 1.60 1.44 1.09 1.52 1.64
c. Total Capital Fund % 13.86 13.05 13.56 12.44 12.31 12.04
17. Liquidity (CRR) % 6.78 8.51 6.87 3.83 3.26 6.00
18. Non Performing Loans/Total Loans % 7.14 5.54 3.35 1.32 1.38 1.12
19. Weighted Average Interest Rate Spread % 4.02 4.51 4.46 5.01 4.90 4.15
20. Book Net Worth Per Share Rs. 233 267 301 337 381 418
21. Total Shares Number 4,916,544 4,916,544 4,916,544 4,916,544 4,916,544 4,916,544
22. Total Employees Number 382 326 372 426 441 427
Note: Denominators of point no.7,9,12,13 & 15 above are average of last year and this year figure
Numerator of point no 7 above is interest income loan and advances only.
Liquidity (point no 17 above) is cash and bank balance to total deposits as of year end.
NABIL BANK Annual Report 2006/07 70
71 NABIL BANK Annual Report 2006/07
x) Loans and Advances including Bills provided for to cover the possible losses. Investments
Purchased in unlisted companies’ shares are valued at cost.
Loans and advances, overdrafts and bills purchased
include direct finance provided to customers. These Premiums are capitalised and amortised from the
include short term loans, long term loans, consumer date of purchase to maturity.
loans and loans given to priority and deprived
sectors. These assets are classified as per Nepal Rastra All Investments are subject to regular review as
Bank’s Directives. Loans and advances including bills required by Nepal Rastra Bank Directives.
purchased are shown net off provisions.
xv) Fixed Assets and Depreciation
xi) Staff Loans a. Fixed assets are stated at cost less accumulated
Loans and advances granted to staff in accordance depreciation.
with the rules of the Bank are shown under Other
Assets. b. Depreciation is charged to Profit & Loss Account on
a Written Down Value method over the estimated
xii) Loan Loss Provision useful lives of fixed assets. Land is not depreciated.
Provision for possible losses is made to cover the The depreciation rates applied for various asset
risks inherent in Bank’s assets portfolio. Provision for categories are as follows:
possible losses from loans, advances and bills
purchased are made at the rates ranging from 0.25%
to 100% according to classification of such risk assets NATURE OF ASSETS DEPRECIATION RATE
as per NRB directive. Provision has been made
Furniture 25%
exceeding the regulatory requirement (Nepal Rastra
Equipments 25%
Bank guideline) in some accounts to ensure a Vehicles 20%
comfortable cushion. Computers 25%
Building 5%
xiii) Write Off
Loan accounts graded ‘Bad’ in compliance with Nepal
c. In case of fixed assets purchased during the year
Rastra Bank standard are written off in the books as
and booked for more than one month, depreciation
per criteria approved by the Board and in accordance
is charged from the subsequent month of booking.
with Section 25(2)(a) of Income Tax Act 2002, without
Depreciation on fixed assets sold or disposed off
prejudice to Bank’s right to recovery.
during the year is charged up to the previous month
of such disposal.
xiv) Investments
Investments are valued at lower of cost or market
d. Leasehold improvements are amortized over the
value. Diminution in the value of investments is
period of lease.
73 NABIL BANK Annual Report 2006/07
A) Reconciliation
i. Inter-Bank Reconciliation:
Figures in NPR
Increase
Figures in NPR
E) Contingency Fund
Rs.1,000,000 has been appropriated from this year's
J) Details of Leasehold Assets
net profit to "Contingent Reserve".
Figures in NPR
PARTICULARS THIS YEAR PREVIOUS YEAR
F) Capital Adjustment Reserve
Contrary to previous capital policy, new capital 1. At Cost 22,306,839 24,159,314
policy of the central bank (Nepal Rastra Bank) a. Upto last year 24,159,314 26,009,761
requires the Bank to increase paid up capital each b. Addition this year 3,871,283 2,056,780
year to make it minimum Rs.1.6 billion by mid July c. Deduction this year (5,723,758) (3,907,227)
2013. The Bank has already submitted a capital plan
2. Amortization 8,661,291 9,844,171
to NRB in this regard and has proposed to issue this
a. Upto last year 9,844,171 8,745,213
year 40 bonus shares for 100 shares held. The Bank
b. Addition this year 4,527,141 4,991,678
has thus started utilizing capital adjustment reserve c. Deduction this year (5,710,020) (3,892,720)
created in the past to issue bonus shares in line with
the previous capital policy of NRB. 3. Remaining Value 13,645,548 14,315,143
G) Income Tax
Shortfall of Rs.46,045 in Corporate Tax provisioned
for FY 2005/06 and Rs.6,513,648 paid for settling
corporate tax of FYs 1999/2000 to 2004/05 (6 years)
have been provided for in the Profit & Loss account.
1-90 DAYS 90-180 DAYS 181-270 DAYS 271-365 DAYS OVER 1 YEAR TOTAL
Assets
Cash Balance 2,704 - - - 11,008 2,704
Balance with Banks 284 - - - 5,535 11,292
Investment in Foreign Banks 18,805 5,751 6,550 8,735 4,420 45,375
Nepal Government Securities 2,789 991 6,010 33,873 48,083
Nepal Rastra Bank Bonds - - - - - -
Inter Bank Lending 1,125 - - - - 1,125
Loans & Advances 28,626 23,855 12,723 11,132 82,694 159,030
Other Assets (Including Fixed Assets) 2,325 816 1,359 1,087 3,019 8,606
Total Assets (A) 56,685 31,412 26,641 54,828 106,676 276,216
Liabilities - - - - - -
Borrowings 8,826 - - - - 8,826
Current/ Call/ Margin Deposits/ Others 14,111 1,557 104 134 61,291 77,197
Saving Deposits 5,094 - - - 96,780 101,874
Fixed Deposits 17,811 23,022 5,301 6,814 1,404 54,352
Debentures - - - - - -
Other Liabilities/ Capital & Reserve 6,710 913 1,464 725 24,156 33,968
Total Liabilities (B) 52,551 25,492 6,869 7,673 183,631 276,216
Net Financial Assets (A-B) 4,107 5,920 19,773 47,155 (76,955) (0)
Cumulative Net Financial Assets 4,107 10,027 29,800 76,955 (0) -
ATMs
Nabil Newroad Branch | Jorpati (Gemini Supermarket) | Nabil Lalitpur Branch | Nabil Kantipath Branch ( Kp1) | Nabil Kantipath Branch
(Kp2) | Nabil Kantipath Branch (Kp3) | Tripureshwor (UWTC) | Kc Verity Store, Kalimati| Thamel (Thamel Supermarket) | Thamel (Bakery
Café) | Thamel (Ying Yang Restaturant) | Phora Durbar (Us Mission) | Us Embassy Bramha Cottage | Nabil Maharajgunj Branch| New
Baneshwor (Bakery Café) | Bhaktapur Durbar Squre | Nabil Damak Branch | Nabil Birtamod Branch | Nabil Dharan Branch | Nabil Itahari
Branch | Nabil Biratnagar Branch| Chiple Dhunga, Pokhara | Nabil Butwal Branch| Nabil Bhairawaha Branch | Nabil Narayanghat
Branch| Nabil Hetauda Branch| Nabil Baglung Branch | Nabil Ghorahi Branch| Nabil Tulsipur Branch | Nabil Dhangadi Branch | Nabil
Mahendranagar Branch
79 NABIL BANK Annual Report 2006/07
NABIL NETWORK
NABIL BANK Annual Report 2006/07 80
NOTES
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YOUR BANK @ YOUR SERVICE
ANNUAL REPORT 2006/07
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