Chapter 4 · Part 4 — Statement of Cash Flows
Deposits, investing and financing activities
Why loan growth consumes cash on day one, why a trillion-rupee purchase figure means almost nothing, and what belongs in financing.
Increase/(Decrease) in operating liabilities
Simple definition. Cash provided (or absorbed) by growth (or decline) in deposits and other operating liabilities.
Technical definition. The net cash effect of movements in operating liabilities — customer deposits, amounts due to BFIs and NRB, borrowings classified as operating, and other operating payables.
Sign convention — the mirror image of 4.10.
LIABILITY INCREASES → cash came IN → POSITIVE (inflow) LIABILITY DECREASES → cash went OUT → NEGATIVE (outflow)
The detail. (NMB, Asar 2083, NPR thousand.)
Group Bank
Due to bank and financial institutions (3,173,064) (3,173,064)
Due to Nepal Rastra Bank − −
Deposit from customers 33,580,607 34,191,987
Borrowings (302,496) (2,060,625)
Other liabilities (4,330,702) 10,210,607
─────────── ───────────
Total 25,774,345 39,168,905The dominant item. Deposit growth provided NPR 34.2 billion of cash at the Bank — the largest single positive number in the entire statement.
The fundamental banking equation, made visible:
Deposits taken in + 34,191,987
Loans given out − 23,122,651
────────────
Net funding surplus + 11,069,336
→ The bank raised more deposits than it lent out.
→ Consistent with the CD ratio FALLING from 84.33% to 82.77%.
→ Consistent with the NPR 19bn build in investment securities:
the surplus was deployed into government paper.The Group vs Bank divergence on Other liabilities. Group shows −4,330,702 while Bank shows +10,210,607 — a NPR 14.5 billion difference. That is a very large consolidation adjustment and would warrant reading the note; it likely reflects intra-group balances between the bank and its subsidiaries being eliminated.
Related terms. Part 1.21 Deposits from customers · Part 6 CD Ratio · 4.10
Net cash flow from operating activities before tax paid
Simple definition. All operating cash flows added up, before paying income tax.
Formula.
Net cash flow from operating Operating cash flows (Increase)/Decrease Increase/(Decrease)
activities before tax paid = before changes in + in operating + in operating
operating assets/liabs assets liabilities(NMB, Asar 2083, NPR thousand.)
Group Bank
Operating cash flows before changes 6,678,860 5,936,045
(Increase)/Decrease in operating assets (41,194,667) (41,406,532)
Increase/(Decrease) in operating liabs 25,774,345 39,168,905
─────────── ───────────
Net cash flow from operating activities
before tax paid (8,741,462) 3,698,418Related terms. 4.9, 4.10, 4.11, 4.13, 4.14
Income taxes paid
Simple definition. Cash actually paid to the tax authority.
Technical definition. Cash outflows for income taxes, comprising advance tax instalments and settlement of prior-year assessments, presented within operating activities per NAS 7 unless specifically identifiable with investing or financing activities.
(NMB, Asar 2083: NPR 1,720,000 thousand for both Group and Bank, against a current tax charge of NPR 1,795,529 thousand (Bank). Close — the bank pays close to its accrued liability.)
Why it is operating. NAS 7 requires taxes on income to be classified as operating unless they can be specifically identified with financing or investing activities — which is rare.
Related terms. Part 1.9, 1.23 · Part 2.22 Current Tax
Net cash flow from operating activities
Simple definition. The total cash the bank's core business generated or consumed.
Formula.
Net cash flow from Net cash flow from operating operating activities = activities before tax paid − Income taxes paid
(NMB, Asar 2083, NPR thousand.)
Group Bank
Before tax paid (8,741,462) 3,698,418
Income taxes paid (1,720,000) (1,720,000)
─────────── ──────────
NET OPERATING CASH FLOW (10,461,461) 1,978,418
Prior year 21,192,161 8,297,342How to interpret a negative operating cash flow at a bank
This is the concept most misunderstood in bank analysis, so work through it carefully.
┌──────────────────────────────────────────────────────────────────┐ │ MANUFACTURER with negative operating cash flow │ │ → cannot collect from customers, or inventory is unsellable │ │ → GENUINE DISTRESS SIGNAL │ └──────────────────────────────────────────────────────────────────┘ ┌──────────────────────────────────────────────────────────────────┐ │ BANK with negative operating cash flow │ │ → loan book grew faster than the deposit book │ │ → OR surplus deposits were moved into investment securities │ │ (which shows up in INVESTING, leaving operating negative) │ │ → USUALLY A GROWTH SIGNAL, NOT DISTRESS │ └──────────────────────────────────────────────────────────────────┘
The decomposition test — always do this before judging.
Group net operating cash flow (10,461,461)
Add back the pure balance-sheet growth items:
Loans and advances to customers 25,092,665
Due from NRB (regulatory, forced by deposit growth) 2,221,398
Placements 3,255,587
───────────
Adjusted operating cash flow (approx) 20,108,189
→ Strongly positive. The negative headline is entirely
explained by asset growth, not by an inability to
collect from customers.But note the Group/Bank divergence, which is the real signal here.
Bank standalone: +1,978,418 (positive) Group: −10,461,461 (negative) Difference: 12,439,879
The Group consumed NPR 12.4 billion more cash than the Bank. The subsidiaries — principally the microfinance company, which lends aggressively and funds itself substantially by borrowing from the parent — are cash-hungry. This is a genuinely useful finding that neither column reveals on its own.
Year-on-year deterioration.
Group: FY2081/82 +21,192,161 → FY2082/83 −10,461,461 swing of −31.7bn Bank: FY2081/82 +8,297,342 → FY2082/83 +1,978,418 swing of −6.3bn
A very large swing. Driven by the loan book growing NPR 25bn (Group) against deposit growth of NPR 33.6bn, plus the NPR 11.7bn increase in other assets.
Related terms. 4.9–4.13 · Part 16 Financial statement linkages
INVESTING ACTIVITIES
Purchase of investment securities
Simple definition. Cash spent buying bonds, treasury bills and shares.
Technical definition. Cash outflows for the acquisition of investment securities not held for dealing purposes.
*(NMB, Asar 2083: Group NPR (1,039,009,708) thousand — over NPR 1.04 trillion.)*
Do not misread this number. It is not a NPR 1 trillion investment. It is gross turnover — the same short-dated treasury bills bought, matured and rebought many times across the year.
Purchases 1,039,009,708
Sales/maturities 1,020,219,030
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NET investment 18,790,678 ← the real economic movementThe net figure of ~NPR 18.8 billion ties to the balance sheet increase in investment securities from NPR 33,075,128 to NPR 52,160,723 thousand (a rise of NPR 19.1 billion, the small residual being accretion and fair value movement).
The lesson. Always net purchases against sales before drawing conclusions. A bank rolling 91-day treasury bills generates enormous gross flows that mean nothing on their own.
Related terms. Part 1.8 Investment securities · Receipts from sale of investment securities
Receipts from sale of investment securities
Simple definition. Cash received from selling or on maturity of investment securities.
Technical definition. Cash inflows from disposal, redemption or maturity of investment securities.
(NMB, Asar 2083: Group NPR 1,020,219,030 thousand.)
Read with 4.15. The pair together tell you the treasury book's churn rate:
Average investment securities ≈ (52,160,723 + 33,075,128) ÷ 2 = 42,617,926 Gross purchases = 1,039,009,708 Turnover ratio = 1,039,009,708 ÷ 42,617,926 ≈ 24×
The portfolio turns over roughly 24 times a year — implying an average holding period of about 15 days. That is a very short-dated liquidity-management book, dominated by treasury bills, not a buy-and-hold investment portfolio.
Related terms. Purchase of investment securities
Purchase of property and equipment
Simple definition. Cash spent on premises, equipment, computers and vehicles — capex.
Technical definition. Cash outflows for the acquisition of property, plant and equipment.
(NMB, Asar 2083: Group NPR (213,160) thousand, Bank NPR (203,336) thousand — up from NPR 126,805 / 120,497 thousand. Capex rose about 69%, but from a small base. Against a NPR 405 billion balance sheet this is modest — no major branch-expansion or systems programme.)
Related terms. Part 1.13 Property and equipment · Part 2.16 Depreciation & Amortisation
Receipt from the sale of property and equipment
Simple definition. Cash received from selling old premises, vehicles or equipment.
(NMB, Asar 2083: NPR 64,551 thousand for both Group and Bank, down from NPR 324,416 thousand.)
Accounting link. The gain or loss on disposal goes to the P&L (Other operating income or Non operating income); the cash proceeds appear here. The two figures differ by the carrying amount of the asset sold — a classic point of confusion.
Related terms. Part 1.13 · Part 2.9
Purchase of intangible assets
Simple definition. Cash spent on software and licences.
(NMB, Asar 2083: Group NPR (29,926) thousand, Bank NPR (29,731) thousand.)
Related terms. Part 1.14 Goodwill and Intangible assets
Receipt from the sale of intangible assets
Simple definition. Cash from disposing of software or other intangibles.
(NMB, Asar 2083: nil in the current year; NPR (332) thousand shown at Group level in the prior year.)
Related terms. Part 1.14
Purchase of investment properties
Simple definition. Cash spent acquiring investment property — in a Nepali bank, usually the costs of taking over collateral.
Technical definition. Cash outflows relating to the acquisition of investment property, which for a Nepali bank predominantly means non-banking assets acquired on enforcement of security.
(NMB, Asar 2083: NPR (178,093) thousand for both Group and Bank, down sharply from NPR (932,756) thousand.)
Related terms. Part 1.12 Investment property · Part 7 Short loan loss provision on Non Banking Assets
Receipt from the sale of investment properties
Simple definition. Cash from selling foreclosed property.
(NMB, Asar 2083: nil; NPR 15,650 thousand in the prior year.)
Related terms. Part 1.12
Investment in subsidiaries, associates & joint ventures
Simple definition. Cash spent buying or increasing stakes in group companies.
*(NMB, Asar 2083: nil in both years — no acquisitions or capital injections during the period. Consistent with the report's Note 39: "Effect of changes in the composition of the entity during the interim period merger including and acquisition — None.")*
Related terms. Part 1.10, 1.11 · Part 8 Business Combination
Net cash used in investing activities
Simple definition. Total cash spent on or received from long-term assets and investments.
Build-up. (NMB, Asar 2083, Bank, NPR thousand.)
Purchase of investment securities (1,038,924,753)
Receipts from sale of investment securities 1,020,219,030
Purchase of property and equipment (203,336)
Receipt from sale of property and equipment 64,551
Purchase of intangible assets (29,731)
Purchase of investment properties (178,093)
Interest received 2,561,352
Dividend received 69,366
──────────────
Net cash used in investing activities (16,421,613)Analyst interpretation. For a bank, investing cash flow is dominated by the treasury book, not by capex. Do not read a large investing outflow as heavy capital expenditure without checking the composition. Here, capex was NPR 233 million out of a NPR 16.4 billion outflow — 1.4%.
Related terms. 4.15–4.23
FINANCING ACTIVITIES
Receipt from issue of debt securities
Simple definition. Cash raised by issuing debentures.
(NMB, Asar 2083: nil in both years — no new debenture issued.)
Related terms. Part 1.27 Debt securities issued
Repayment of debt securities
Simple definition. Cash paid to redeem maturing debentures.
(NMB, Asar 2083: nil.)
Related terms. Part 1.27 · Part 12 Tier 2
Receipt from issue of subordinated liabilities
Simple definition. Cash raised by issuing loss-absorbing subordinated debt.
(NMB, Asar 2083: nil. NMB raised loss-absorbing capital through PNCPS instead — see 4.29.)
Related terms. Part 1.28 Subordinated Liabilities
Repayment of subordinated liabilities
Simple definition. Cash repaying subordinated debt.
(NMB, Asar 2083: nil — nothing outstanding to repay.)
Receipt from issue of shares
Simple definition. Cash raised by issuing new shares.
Technical definition. Cash inflows from the issue of equity instruments, net of directly attributable issue costs.
(NMB, Asar 2083: NPR 3,000,000 thousand for both Group and Bank, against nil in the prior year.)
What this is. The PNCPS issue — 30,000,000 Kitta at NPR 100 each = NPR 3 billion, fully subscribed, allotted and capitalized on Magh 04, 2082. See Part 1.30.
Dr Cash 3,000,000,000
Cr Share capital (PNCPS) 3,000,000,000Note what this line does NOT include: the bonus share issue. The 5% stock dividend of NPR 918,335 thousand involved no cash at all — it was a transfer from retained earnings to share capital. It appears in the Statement of Changes in Equity but must not appear in the cash flow statement.
CASH share issue (PNCPS) → cash flow statement OK NPR 3,000,000
NON-CASH bonus share issue → SoCE only OK NPR 918,335
cash flow statement xNAS 7 requires non-cash investing and financing transactions to be excluded from the cash flow statement and disclosed elsewhere. This is a standard exam point and a real audit check.
Related terms. Part 1.30 Share capital · Part 5 Bonus shares capitalized · Part 12 AT1
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