NB Bank merger by mid-March
Kathmandu, February 8:
Three troubled financial institutions — Nepal Bangladesh Bank, Nepal Sri Lanka Merchant Bank Ltd (NSLMBL) and NB Finance Ltd (NBFL) — are going to be merged soon. If everything goes well, the merger process is likely to be completed by the second week of March.
Nepal Rastra Bank (NRB) has already given a green signal for the amalgamation of these three ‘technically insolvent’ financial institutions promoted by NB Group.
Among them, the central bank took over the management of Nepal Bangladesh Bank on November 12 and running the bank by a NRB-assigned management team since then.
“The merger process is in the final stage. We expect it to be completed by March 14,” Maha Prasad Adhikari, coordinator of NRB-led management team, told this daily.
He further stated that the merger is necessary to make the bank financially viable and retain its lost credibility.
Out of four stages of merger process, three major stages — approval from the annual general meeting (AGM) and the central bank, and scheme of arrangement approval from the office of company registrar — have been already completed, informed Bhisma Raj Dhungana, coordinator of the merger committee.
“We are now finalising the revised scheme of arrangement and will submit it within a day or two to NRB and other concerned offices for the final approval,” he said, adding that the shareholders of these two finance companies will get NB Bank’s shares in two:one (2:1) ratio.
According to him, the remaining processes are the integration of balance sheets and employees. “Following the balance sheet integration of these companies, trading at stock exchange will be closed for two weeks for the final settlement. Once everything is settled, all the shares of the three companies will be traded under the NB Bank’s name in the secondary market,” Dhungana added.
After the merger, the paid up capital of NB Bank will be increased to Rs 795 million from the existing Rs 720 million, as Rs 37.5 million each will be added from the two finance companies. “All loan and investment portfolios will also come under NB Bank’s accounts,” he said.
Dhungana, however, reiterated that the employees of other two finance companies will not loss their jobs.
“Pay and perks will also remain unchanged. But their designations and responsibilities could be changed as per the nature and demand of the job,” Dhungana added.
The equity structure of the bank will also be changed after the merger, although NB Group will continue to enjoy the majority shareholding of 46.62 per cent. NB Bank’s joint venture partner IFIC Bank of Bangladesh will have 23.24 per cent and the public shareholders will have 30.14 per cent share of the total paid-up capital.
Coordinator Adhikari, however, said that the equity of the NB Group would be significantly diluted by the time of departure of NRB-led management team.
“The central bank is very cautious on the existing equity structure and firm at diluting the shares of the major Nepali promoter. Since the NB Group is all responsible for failure, NRB can not let them have the majority equity,” he added.
The non-performing asset (NPA) levels in all these three financial institutions are estimated to be at an alarming position — 34 per cent in the NB Bank and 50 per cent each in NSLMBL and NBFL.
An irony is that the main promoter of all these three companies — NB Group also happens to be the main defaulted borrower. The group’s loan accounts for Rs 1.76 billion at the Nepal Bangladesh Bank,which is almost 17 per cent of the total NPA.