February 5: Of late, investors seem very little interested in purchasing the shares of commercial banks. Although this segment is strong in terms of market capitalization, the shares of commercial banks are the cheapest in recent days.
The number of commercial banks currently stands at 20 following the merger and acquisition of banks. Experts say that the market price of commercial banks along with their income per share have taken a nosedive because the banks could not increase their business in proportion to the increase in their capital after merger and acquisition.
Looking at the quarterly financial statements of the banks after the merger, the key indicators seem to be weak. The banks admitted that the market price along with their income per share has gone down significantly as they could not increase their business in tandem with the increase in their capital.
Investors are not particularly attracted to shares of commercial banks even though they have the ability to significantly change the indices of the secondary market of securities. Experts say that the main reason for this is that the income of banks is decreasing day by day. As the number of shares of these companies is large, the scattering of shares in the hands of many is considered as another reason for the decline in profit. Since the shares are in the hands of many people, it is not possible to get huge capital gains by using them like shares of other sectors.
The NEPSE index reached 3200 points on August 18, 2021. Investor Kulraj Paudel, who had bought shares of Nabil Bank at Rs 1,600 per share during that period, is now panicking as the value of the shares has dropped to Rs 477. His question is - when will the share price of this company reach Rs 1600? Paudel said that even after receiving dividend for two fiscal years, he still faces losses of more than 65 percent. Along with Paudel, many other investors have been expressing their greviances on social media about the declining share price of commercial banks.
Experienced investors say that this time is suitable for short-term or long-term investments as the share prices of commercial banks have fallen to a low point.
Lately, traders have been pushing up the share price of companies with little capital. Another point to note is that banks have a lot of capital but their financial statements are not sound.
Investors do not want to hold shares for a long time. They are more attracted to the shares which gives quick profit. This is the reason why investors are not attracted to the shares of commercial bank, according to stock market analysts.
The share price of nine banks is below Rs 200. The share prices of Kumari Bank, Prabhu Bank, Citizens Bank, Laxmi Sunrise Bank, Nepal Investment Mega Bank, Machhapuchhre Bank, NMB Bank, Global IME Bank and Himalayan Bank are below Rs 200 per share. Among the commercial banks, Standard Chartered Bank, the most expensive, was trading its shares at Rs 532 per share and Kumari Bank, the cheapest, was trading at Rs 149 when the market closed on Sunday.
As of now, 12 commercial banks have declared dividends from the profits of the last fiscal year. Seven of them have decided not to distribute dividends from last year's profits.
Himalayan Bank, NMB Bank, Prime Commercial Bank, Kumari Bank, Prabhu Bank, Nepal Investment Mega Bank and Nepal Bank have decided not to give dividends to the shareholders from last year's profits. Agriculture Development Bank has not yet made a decision regarding its dividend.