This is a part of the recapitalization plan of the state-controlled bank through which Rs 2.23 billion is expected to be raised.[break]
“We are planning to sign a memorandum of understanding (with CIT) in this regard within this week,” Maheshwor Lal Shrestha, coordinator of the bank, said.
Although Shrestha had earlier told Republica that the process of relisting the bank on the stock market would be completed by the end of August or beginning of September, inability to perform these tasks so far indicate the recapitalization plan will be further delayed.
Nepal Bank had delisted its name from Nepal Stock Exchange (Nepse) in June 2008 on its own following its enrolment in the financial sector reform program launched by the World Bank.
To reregister its name on the stock market, it will have to pursue all the process that a company listing itself on the stock market for the first time has to follow. Once this is done, it will lay the groundwork for issuing rights shares.
The bank is issuing rights shares in the ratio of 1:9.5 to its existing shareholders at the price of Rs 100 each. This means holder of every share at the banking institution will have to purchase 9.5 additional shares.
Existing shareholders of the bank had previously agreed to inject additional capital in Nepal Bank, despite it having a negative net worth of over Rs 2.68 billion. “We will be holding another round of interaction with shareholders soon requesting them to purchase the rights shares that we will soon be issuing,” Shrestha said.
It is expected that the existing shareholders will respond positively to the management´s request as the government recently injected Rs 1.39 billion in the bank by purchasing the portion of rights shares allocated to it.
“Many shareholders have viewed this move as a positive step. This has motivated them to play a constructive role in replenishing the bank´s capital,” Shrestha said.
The government currently holds 40.49 percent stake in Nepal Bank, making it one of the major shareholders of the bank. Another big portion of the bank is held by public, who hold 49.94 percent share in the category ´A´ financial institution. Others, such as, commercial banks hold 5.68 percent stake in the bank, various organizations own 2.40 percent share and various financial institutions hold 0.77 percent stake in the bank.
Among public shareholders, industrialist Rajendra Khetan holds the highest of 263,493 units of shares, or 6.93 percent of the bank´s stake.
Established in November 1937, Nepal Bank, once a successful banking institution, saw its non-performing loan (NPL) soar to 59 percent of the total credit portfolio by 2002 due to issuance of loans without adequate security. Since then it has undergone a reform program, which has bolstered its financial condition. In the last fiscal year ended July 15, the bank´s NPL fell to 5.23 percent and generated a net profit of Rs 406.73 million.
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