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NRB Bank deposit mobilisation, loan disbursements exceed industry average

The 4th generation private bank making its trading debut Tuesday
Niaz Mahmud
27 Feb 2024 02:19:08 | Update: 27 Feb 2024 02:19:08
NRB Bank deposit mobilisation, loan disbursements exceed industry average

NRB Bank, a fourth-generation private commercial bank, reported a 16.6 per cent five-year compound annual growth rate (CAGR) of loans and advances from 2018 to 2022, while its deposits stood at 17.9 per cent during the same period.

These figures are higher than the industry average of 12.1 per cent and 10.1 per cent respectively, indicating higher than average performance of NRB Bank, according to an equity note about the bank by EBL Securities Ltd – a leading stockbroker firm.

Moreover, NRB Bank maintained its growth in loans and deposits at 15.1 per cent and 12.7 per cent respectively, during the first nine months of 2023.

The bank’s operating income rose by 29.1 per cent in 2023 [9 months annualised], driven primarily by higher interest income, through increased interest rates on bank loans following the uplifting of the interest rate cap and shifting to a market-based reference lending rate.

Its cost-to-income ratio also decreased to 60.4 per cent in 2023 [9m annualised] from 66.9 per cent in 2022.
Meanwhile, NRB Bank will make its share trading debut on Tuesday on the Dhaka and Chattogram stock exchanges under the 'N' category.

The private sector lender issued 10 crore ordinary shares, and raised Tk 100 crore from the primary market under the fixed method system. The IPO subscription was held between January 28 and February 1 this year.
This bank had received regulatory approval from the Bangladesh Securities and Exchange Commission (BSEC) on November 9 last year.

NRB Bank reported a net asset value per share of Tk 12.72 (without revaluation) and earnings per share (EPS) of Tk 0.27 for the period of nine months through September this year. The weighted average of the EPS for the last five years stood at Tk 0.72.

UCB Investment and Shahjalal Equity Management are jointly working as the issue manager for the IPO of the NRB Bank.

During the initial public offering (IPO) phase, general investors were granted 255 shares each, while non-resident Bangladeshis (NRBs) secured 209 shares against a Tk 10,000 deposit.

The Dhaka Stock Exchange (DSE) allocated IPO shares of the bank on a pro-rata basis. The IPO was oversubscribed by 3.61 times. NRB Bank will invest Tk 92 crore in government securities, Tk 4.17 crore in the secondary market, and Tk 3.83 crore to meet its IPO expenses.

IPO proceeds will be used for investment purposes, and 92 per cent will be invested in government securities, which will slightly improve the bank’s investment income, and also positively impact the bottom-line, said the EBL Securities equity note.

The rising trend in SMART rates, following the gradual increase in interest rates on Treasury bills, has been exerting continued upward pressure on banks’ lending rates.

Hence, NRB Bank can also improve its interest rate spread and net interest margin (NIM), provided that it focuses on minimizing the cost of funds, said EBL Securities.

According to the National Board of Revenue (NBR), fourth-generation banks enjoy a reduced tax rate of 37.5 per cent, similar to the listed banks. After getting listed, the bank will continue getting the tax benefits in the future as well, it said.

The rising non-performing loans (NPL) of the bank can be a concern for investors, as the NPL ratio abruptly increased to 6.1 per cent until the 9-month period of 2023, which was only 3.2 per cent in 2022.

The bank's amount of non-performing loans increased to Tk 350 crore as of September 2023, from Tk 160 crore recorded in December 2022, the stock broker noted. The bank had declared a 7 per cent cash dividend in 2022, while the dividend payout ratio was 74.7 per cent.

The corporate declaration of the bank for 2023 will be held soon after it gets listed on the bourses, but it is less likely for NRB Bank to declare a minimum 10 per cent dividend to be categorised as “A” category security considering the dividend payout ratio, since the Post-IPO restated EPS of the bank is only Tk 0.31 in 2023 [9-month annualised].

NRB Bank, established in 2013, launched a wide variety of products and services under different categories, such as retail banking, SME banking, NRB banking, corporate banking, and e-banking.

Until the end of 2023, the bank had 51 branches, 29 sub-branches, 51 ATM booth outlets, and 311 agent outlets across the country, according to its website.