Himalayan Bank's Mobile Mania

  6 min 50 sec to read

Himalayan Bank
 
--By Rashika Pokharel
 
Ashoke SJB Rana, CEO, Himalayan Bank Limited
Ashoke SJB Rana
CEO
Himalayan Bank Limited
While many banks and financial institutions are gearing up for merger and acquisitions (M & A), Himalayan Bank Limited (HBL) has its focus elsewhere. The HBL is in a drive to expand its mobile banking services. Ashoke SJB Rana, CEO of HBL says that the bank is making a huge investment in the expansion of its mobile banking services. However, he denied revealing the size of investment. He says that this project is more important for the bank than going after M & A. The new mobile banking project is an expansion and improvement of the existing SMS banking services. Through this service, clients will be able to money transfer, make online purchases, carry out balance enquiry, transfer between accounts and look at credit card details.
 
Prioritizing the Security 
HBL has introduced Arc Internet banking platform to ensure secure transactions and banking activities through the use of mobile devices and the Internet connection “Our Bank has come up with new Arc internet banking which offers quite secure portal. Previously, there was only internet banking system but it was not completely secure,” explains Rana, “Therefore, to ensure more secured access, the bank provides the customers with Active Identity Device, associated with the personal account which gives you a onetime 10 digit code in addition to the password.” He adds that this will help the customers to access their account in a much secured manner. And, this facility will also prevent from hacking or phishing of personal account, states Rana. The Bank also claims to be the provider of most secure internet banking transaction.
 
Merger: An Unforgotten Option
Despite the new focus on mobile banking, HBL is planning for capital expansion in near future and for this it has taken two things into consideration: merger and rights issue. For now the bank has given assignment to a consultant and also has been carrying out informal talks with finance ministry. The bank considers merger to be complicated as it dilutes the present share structure after adding another partner into it. “Merger will not be a first option. The next option is right shares. But then we have to see how much appetite the present shareholders have for right shares. However, the merger option is interesting. Since, the central bank is also quite interested in seeing the financial institutions being merged, we also have to take a look at that,” says Rana.
 
 
Financial Status

HBL has current paid up capital of around Rs 2.76 billion. The bank has declared 5 per cent bonus shares and with this the capital will go up to Rs 2.86 billion. It envisions increasing the capital to Rs 4 billion by July, 2015. Similarly, with paid up capital and reserves, the current capital base stands at around Rs 5.3 billion. The bank also has strategy of increasing deposits from Rs 65 billion to Rs 67 billion by end of this year.
 
The bank has 43 branches across Nepal. In order to meet the changing needs of society, HBL has introduced personal banking products like the Home Loan, Hire Purchase Loan, Auto Loan and Subidha Loans. Realizing the banking needs of Nepalis working abroad, especially the need for remittance services it has deputed Representative Officers to various countries in the Middle East and Malaysia. The bank has introduced an indigenous online remittance service that is Himal Remit. 
 
The results of second quarter of the current fiscal year show that the profit of the Bank has improved by 8.8 per cent as compared to the corresponding period of the previous fiscal year. The major cause behind this is increase in the loan portfolio as well as the regularization of some of the classified loan accounts and recovery of the interest suspense.
 
Explaning why only 8.8 per cent growth, Rana says, two things must be considered while analyzing this change. One is profit before provisioning and another is the profit after provisioning. In second quarter, the bank had to do some provisioning on account of some government institutions. Similarly, it had to do some provisioning due to Melamchi project because the Chinese contractor for whom the bank had issued a bank guarantee absconded without doing its job. "If you look at before provisioning, our profit level is higher," Rana adds. 
 
The Bank’s second quarterly report depicts that its ROE (Return on Equity) is 18.86 per cent, while at the same time last year it was 20 per cent. While the major reason behind the decline is provisioning, Rana says it is also because of the central bank's new directive to limit the interest rate spread to 5 per cent as it limits the banks from earning more. “On an average the bank’s ROE is within the target that had set,"  states Rana.
 
Talking about the interest rate spread of HBL, Rana gives two figures. One is 6.71 percent, which is calculated as per the rule of NRB. Another is 4.61 percent, which the bank calculated on the basis of net interest earning of the bank. The NRB calculation does not include the cost of liquidity that the bank has to park with the central bank and in the form of liquid securities. If the bank recovers a bad loan that is added to the profit which also increases interest spread. "So, we bankers have asked the central bank those unusual items like write backs should be excluded from net interest earning while calculating interest spread," he says. 
 
Likewise, as per the directive of NRB the Banks have to maintain the Credit to Deposit (C-D) ratio within the 80 percent limit so that, the remaining 20 percent of the deposit cannot be invested. "So, that should also be a factor in the interest spread calculation," argues Rana. The bankers have been suggesting the same formula to calculate interest spread to the NRB, on which the NRB officials are positive, Rana informed and hoped that the central bank will soon invite the bankers for a dialogue on this.
 
Future Plans
Himalayan Bank Limited is waiting for the government to begin its capital expenditure as the bank believes that without government spending the yields on the investment will also not go up. From the investment point of view, the bank is hoping that the government will come up with the budget and announce programmes on capital expenditure which would stimulate government borrowing.  Similarly, from the lending side, as the stock market is buoyant it is expecting  that  the investor’s sentiments would go higher and those who have deferred their investments will start implementing now.  The bank thinks that in future there will be some credit takes off.  Himalayan Bank is looking at increasing the income mainly through remittances and for this they are introducing China Union Pay prepaid Card. It is also concentrating on card business and is expanding the acquiring base.

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