It is pleasing to note that the year under review sustained the growth momentum of last year with respect to the top line business figures, but owing to sharp decline in margins due to stiff competition on pricing and rising cost of doing business, the Bank's bottom line saw a negative growth. However, we believe that the same growth momentum will be sustained further, and shall reflect in the Bank’s performance in the future, bringing about improvement in the bottom line, thereby creating superior value addition for our shareholders.
The Bank was able to achieve a healthy business growth during the year. Deposits have touched Rs. 53 billion, and lending stood at Rs. 43 billion, a growth of 19% and 16%, respectively, despite the devastating earthquake and its aftermath, affecting about a quarter, as a whole. The Bank’s earnings per share and return on equity are Rs. 25.59 and 13.05%, compared to the industry average of Rs. 27.04 and 17.91%, respectively. The capital adequacy of the Bank stood at a comfortable level of 12.49%, which is much higher than the minimum regulatory requirement of 10%, indicating the Bank’s strong capital base, and its ability to absorb unexpected economic shocks.
The devastating earthquake that struck on April 25, 2015, and its aftershocks, caused irreparable damage on economic activities and life in the country. According to the Post- Disaster Needs Assessment (PDNA) report published by National Planning Commission, the earthquake caused a total loss of about Rs. 706 billion in the overall economy, which accounted for one third of the real GDP of FY 2014/15. More than 8,800 people lost their lives, and more than 22,000 people were injured. The Bank, along with the Board, pays deep tribute to those losing lives in the natural disaster, and prays for the speedy recovery of injured ones. The Bank contributed a sum of Rs. 2,551,000 to the Prime Minister’s National Relief Fund to support the earthquake victims, and through the NIC ASIA Foundation, the CSR wing of the Bank, it provided various kinds of support to the affected people in various earthquake affected areas.
The forecast for Gross Domestic Product (GDP) growth for the year under review was revised downward to 3.0% from the earlier forecast of 4.6%, in sharp contrast to the GDP growth rate of 5.1% of the earlier year. The targeted GDP growth for FY 2015-16 is 6.0%. However, challenges remain on the ability of the government to spend the planned capital expenditures, acceleration of massive reconstruction and rehabilitation work by National Reconstruction Authority to spur economic activities, and structural reforms to improve the investment climate and investors’ confidence in Nepal. Amid the challenges posed by the devastating earthquake, it has also opened up opportunities, as the massive rebuilding and reconstruction plan of the government means addition of new job opportunities and new business opportunities related to rehabilitation and reconstruction, besides supplementing already existing businesses, thereby spurring various economic activities.
A lot of encouragement can be drawn from the promulgation of the Constitution, which is expected to bring an end to political instability, and lead the country towards much needed economic prosperity and development.
The Monetary Policy 2015 requires banks and financial institutions to increase their minimum paidup capital by FY 2016-17. While the requirement is highly challenging, this would strengthen the capital base of the banks and financial institutions, thus augmenting their ability to do business, and create a robust financial system in the country. In line with the requirement of the Monetary Policy, the Bank's Board has approved a capital plan, and the same has been submitted to Nepal Rastra Bank.
In line with the Bank's vision and mission, the Bank has formulated a five-year strategy paper, 'Strategy 2020', which envisages a customer-centric business model enhancing customer experience and increasing customer flow; making structural changes to become the most preferred bank for Retail and Small and Medium Enterprises (SMEs); and creating robust support functions leveraging information technology and high level of corporate governance practices and culture. I believe 'Strategy 2020' shall set a new milestone in the Bank's history, and the Bank's management would leave no stone unturned to execute the strategy as per its spirit. The Bank has planned to open new branches and add proportionate number of ATMs this year to reach a larger spectrum of customers and widen the Bank's geographical presence. The Bank is also exploring alternative delivery channels in response to financial inclusiveness program of the government. At present, the Bank has a widespread network of 67 branches and 67 ATMs.
Promulgation of the Constitution, timely announcement of a growth-oriented budget, and improvement in investors' confidence, despite various challenges like lackluster economy,slackness in credit demand, abundance of liquidity, and falling margins, can be seen as broad indicators of shifting momentum towards much needed political stability that is expected to propel the country's economic growth into a higher trajectory. The Board of Directors is committed to sustain the Bank’s performance, consistent with market conditions, and we firmly believe that the Bank will continue to thrive despite all the odds.
On behalf of the Board, I would like to thank all the shareholders for their continued support and guidance. I would also like to express my sincere appreciation to our customers for their continued faith and patronage, without which we would not have reached where we are today. Likewise, I wish to convey my thanks and acknowledgement for the cooperation and support extended by the Government of Nepal, Nepal Rastra Bank, and Nepal Stock Exchange. Finally, I would like to express my gratitude to the management and staff for their unstinted dedication and commitment to their work, resulting in an outstanding performance of the Bank.
J. P. Agrawal, Chairman