Chapter 11 · Part 11 — Other Disclosures and Exposure Concentration
Dividends, capital raising and events after the period
How a Nepali dividend is really structured, what a capital raise fixes and does not, and the NAS 10 timing rules.
14 terms. Concentration is the risk that does not appear anywhere in Parts 1–7. A bank can show a 4.91% NPL, a 12.73% capital ratio and a 28.99% liquidity ratio — and still fail, because twenty depositors hold a fifth of its funding and twenty borrowers hold a fifth of its loans. This Part is about the risk the ratios hide.
Part 11 checklist
Dividends paid (aggregate or per share) · Cash dividend / Stock dividend · Issues, repurchases and repayments of debt and equity securities · Fully subscribed, allotted and capitalized · Events after interim period · Effect of changes in the composition of the entity · Merger and acquisition · Exposure Concentration · Concentration of Borrowings · Borrowings from 10 largest lenders · Concentration of Credit exposures · Total exposure to twenty largest borrowers · Concentration of Deposits · Total Deposits from twenty largest depositors
OTHER DISCLOSURES (Notes 36–39)
Dividends paid (aggregate or per share)
Simple definition. What the bank distributed to shareholders during the period.
Technical definition. Disclosure required by NAS 34 of dividends paid, in aggregate or per share, separately for ordinary shares and other classes.
The disclosure:
Why NAS 34 requires the split by class. Because different classes have different entitlements. NMB has two classes:
ORDINARY SHARES → 5% cash + 5% stock, as declared
PNCPS (preference) → 8.25% contractual rate, time-apportioned
to NPR 122,055 thousand (Part 7.23)The full reconciliation across four Parts.
Base: paid-up ordinary capital at Asar end 2082 NPR 18,366,706 thousand
Cash dividend 5% = NPR 918,335 → Part 4.30 (cash flow)
Part 5.26 (SoCE)
Part 7.21 (distributable profit)
Stock dividend 5% = NPR 918,335 → Part 5.25 (SoCE)
Part 7.20 (distributable profit)
NOT in the cash flow statement
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Total distribution NPR 1,836,670 = 45.76% of profit
PNCPS dividend NPR 122,055 → Part 7.23
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Total to all classes NPR 1,958,725Coverage test — the analytical point.
Total distribution to ordinary shareholders NPR 1,836,670
Net profit available for distribution NPR 1,808,285
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Shortfall NPR 28,385
⇒ The bank distributed MORE than the year generated,
drawing on the opening retained earnings balance.
Sustainable once. Not sustainable as a pattern —
especially with distributable profit per share falling
from NPR 10.35 to NPR 9.08 (Part 7.25).Related terms. Part 4.30 · Part 5.24–5.26 · Part 7.20–7.25
Cash dividend / Stock dividend
The two forms, side by side.
┌──────────────────────────────┬──────────────────────────────────┐ │ CASH DIVIDEND │ STOCK (BONUS) DIVIDEND │ ├──────────────────────────────┼──────────────────────────────────┤ │ Cash leaves the bank │ No cash moves │ │ Total equity FALLS │ Total equity UNCHANGED │ │ CET1 falls [R] │ CET1 unchanged │ │ Share count unchanged │ Share count RISES │ │ Shareholder gets money │ Shareholder gets more paper │ │ Appears in the cash flow │ Does NOT appear in the cash │ │ statement (financing) │ flow statement — non-cash │ │ Reduces distributable │ Reduces distributable profit │ │ profit │ PERMANENTLY (retained │ │ │ earnings → share capital, │ │ │ which can never be │ │ │ distributed) [R] │ │ Different tax treatment [R] │ Different tax treatment [R] │ └──────────────────────────────┴──────────────────────────────────┘
Why Nepali banks pay both.
PAY ONLY CASH → shareholders happy, but capital drains and
paid-up capital does not grow. NRB sets
MINIMUM PAID-UP CAPITAL for Class "A" banks [R].
PAY ONLY STOCK → capital preserved and paid-up capital grows,
but shareholders receive nothing spendable
PAY BOTH → a return in cash AND growth in paid-up capital
⇒ the standard Nepali structureThe bonus-share reality check, restated because it is so widely misunderstood.
Shareholder with 1,000 shares before a 5% bonus: 1,000 shares × book value NPR 175.17 = NPR 175,170 Ownership: 0.000544% After receiving 50 bonus shares: 1,050 shares × book value NPR 166.83 = NPR 175,170 Ownership: 0.000544% ⇒ IDENTICAL value. IDENTICAL ownership. More pieces of paper. The market price adjusts down on the ex-bonus date.
Related terms. Part 5.25, 5.26 · Part 7.20, 7.21 · Part 3.15 (EPS restatement)
Issues, repurchases and repayments of debt and equity securities
Simple definition. What the bank raised or repaid in capital markets during the period.
Technical definition. Disclosure required by NAS 34 of issues, repurchases and repayments of debt and equity securities.
The disclosure:
The complete capital-markets activity for the year.
ISSUED PNCPS (AT1) NPR 3,000,000 thousand ← cash in Bonus shares (capitalisation) NPR 918,335 thousand ← non-cash REPURCHASED None REPAID Debt securities Nil (Part 4.26) Subordinated liabilities Nil (Part 4.28)
Why the PNCPS issue was necessary — the capital arithmetic.
RWA grew with the loan book (+10%) and with NPL formation
(higher risk weights)
│
▼
CET1 could not keep pace:
• 55% of profit appropriated to reserves (CET1-neutral)
• NPR 918m paid out as cash dividend → CET1 down
• Goodwill and DTA deductions continue [R] → CET1 down
│
▼
CET1 ratio FELL 9.05% → 8.99% (Part 6.10)
│
▼
⇒ To maintain total capital headroom, the bank raised
NPR 3 billion of AT1 — which lifts Tier 1 and total
capital but NOT CET1.
│
▼
Total capital 11.92% → 12.73%
Tier 1 9.05% → 9.90%
CET 1 9.05% → 8.99% !Related terms. Part 1.30 · Part 4.29 · Part 6.9, 6.10 · Part 8.H.13
Fully subscribed, allotted and capitalized
Three sequential milestones in a Nepali securities issue.
① FULLY SUBSCRIBED
Investors applied for the entire issue. Nothing was left
with underwriters.
→ A market-confidence signal: an 8.25% perpetual
instrument found willing buyers
② ALLOTTED
Shares formally allocated to successful applicants.
Legal ownership transfers.
③ CAPITALIZED
Recognised in share capital in the books; the funds become
part of the capital base.
→ Magh 04, 2082 — and this date drives the
TIME-APPORTIONMENT of the PNCPS dividend
(Part 7.23: NPR 122,055 thousand ≈ 49.3% of a full year)Related terms. Part 1.30 · Part 7.23 · Part 12 SEBON
Events after interim period
Simple definition. Things that happened after the reporting date but before the accounts were issued.
Technical definition. Under NAS 10 Events after the Reporting Period, events between the end of the reporting period and the date the financial statements are authorised for issue.
The disclosure:
The two categories under NAS 10 — and why the distinction matters.
┌──────────────────────────────────────────────────────────────────┐ │ ADJUSTING EVENTS │ │ Provide evidence of conditions that EXISTED at the │ │ reporting date │ │ → ADJUST the financial statements │ │ │ │ Banking examples: │ │ • A major borrower goes bankrupt shortly after year end, │ │ confirming the loan was already impaired at year end │ │ • A court judgment confirming an obligation that existed │ │ • Discovery of fraud showing the accounts were misstated │ │ • Sale of an asset showing its year-end value was overstated │ ├──────────────────────────────────────────────────────────────────┤ │ NON-ADJUSTING EVENTS │ │ Indicate conditions that AROSE AFTER the reporting date │ │ → DISCLOSE only, do NOT adjust │ │ │ │ Banking examples: │ │ • A merger announced after year end │ │ • A major new borrowing or capital raise after year end │ │ • A regulatory change enacted after year end │ │ • A dividend PROPOSED after year end — disclose, do NOT │ │ recognise as a liability │ └──────────────────────────────────────────────────────────────────┘
Why "nil" is a meaningful statement. It is a positive assertion by the board that nothing material occurred between Asar 32, 2083 and the authorisation date. Given that the report is unaudited and explicitly "subject to change upon otherwise instructions of statutory auditor and/or regulatory authorities," the nil covers the period only up to authorisation — audit adjustments may still follow.
Related terms. Part 5.13, 5.24 · Part 8.A.3 NAS 34
Effect of changes in the composition of the entity
Simple definition. Whether the group's structure changed — companies bought, sold or merged.
Technical definition. Disclosure required by NAS 34 of the effect of changes in the composition of the entity during the interim period, including business combinations, obtaining or losing control of subsidiaries, restructurings and discontinued operations.
The disclosure:
Corroborated in four places — a good example of internal consistency:
Part 4.23 Investment in subsidiaries, associates & JVs Nil Part 4.35 Cash acquired from the merger Nil Part 5.20 Transfer from Merger Nil Part 9.15 Elimination of discontinued operation Nil
Related terms. Part 8.B.1 NFRS 3 · Part 1.14 Goodwill
Merger and acquisition
The Nepali context, in brief. NRB drove a large-scale consolidation of the banking system through its Merger and Acquisition Bylaws 2073, reducing the number of BFIs substantially. The legacy is visible throughout a Nepali bank's accounts:
• Goodwill on the balance sheet Part 1.14 • "Transfer from Merger" row in the SoCE Part 5.20 • "Cash acquired from the merger" in the cash flow Part 4.35 • "Share issued to merged entity" in the SoCE Part 5.22 • The ICAN carve-out history on NFRS 3 Part 8.A.1, 8.B.1 • Goodwill deducted from CET1 [R] Part 6.10 • Goodwill blocked from distribution Part 7.14
None occurred this period. The format lines persist so that banks that do merge report comparably.
EXPOSURE CONCENTRATION (Note 40)
Exposure Concentration
Simple definition. How much of the bank's business depends on a small number of counterparties.
Technical definition. Disclosure of the degree to which credit, funding and deposit exposures are concentrated among a limited number of counterparties, indicating vulnerability to the failure or withdrawal of any one of them.
Why concentration is invisible in every other ratio.
┌──────────────────────────────────────────────────────────────────┐ │ TWO BANKS, IDENTICAL RATIOS │ │ │ │ BANK A BANK B │ │ Total loans NPR 250bn NPR 250bn │ │ NPL ratio 4.91% 4.91% │ │ Capital adequacy 12.73% 12.73% │ │ Liquidity (NLA) 28.99% 28.99% │ │ ───────────────────────────────────────────────── │ │ Top 20 borrowers 3% of loans 40% of loans │ │ Top 20 depositors 2% of deposits 40% of deposits │ │ │ │ ⇒ EVERY published ratio is identical. │ │ Bank B can be destroyed by twenty phone calls. │ │ Bank A cannot. │ │ │ │ Concentration risk is INVISIBLE in Parts 1-7. │ │ This note is the ONLY place it appears. │ └──────────────────────────────────────────────────────────────────┘
The three dimensions NRB requires.
A. CONCENTRATION OF BORROWINGS — who funds the bank wholesale B. CONCENTRATION OF CREDIT — who owes the bank money C. CONCENTRATION OF DEPOSITS — who could withdraw funding
Related terms. 11.9–11.14 · Part 6.16 Liquidity Ratio (NLA) · Part 10.8
Concentration of Borrowings
Simple definition. How dependent the bank is on a few wholesale lenders.
The disclosure.
Particulars Current Quarter Last Quarter ───────────────────────────────────────────────────────────────────────── Borrowings from 10 largest lenders 1,926,875,000 1,867,500,000 Percentage of borrowings from ten largest lenders to total depositors 0.61% 0.62%
Reading it.
NPR 1,926,875,000 = NPR 1,926,875 thousand
OK Cross-check against the balance sheet:
"Borrowing" (Bank, Part 1.22) = NPR 1,926,875 thousand
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EXACT MATCH
⇒ The bank's ENTIRE borrowing book is held by 10 or fewer
lenders. Concentration among borrowings is effectively 100%.Is that alarming? No — and here is why.
Borrowings NPR 1,926,875 thousand
Total deposits NPR 315,118,455 thousand
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Borrowings as % of deposits 0.61%
⇒ The bank barely uses wholesale borrowing at all.
99.4% of its funding comes from customer deposits
and equity.
⇒ Concentration within a tiny funding source is
immaterial. The bank is NOT dependent on wholesale
markets — which is a FUNDING QUALITY STRENGTH.Note the denominator convention. The ratio is expressed "to total depositors" — i.e. borrowings measured against the deposit base, not against total borrowings. That is NRB's prescribed presentation and it is what makes the 0.61% meaningful: it tells you wholesale funding is negligible relative to the deposit franchise.
The direction of travel.
Last quarter 0.62% Current quarter 0.61% ⇒ Marginally less reliant on wholesale funding. Consistent with "Due to Bank and Financial Institutions" falling from NPR 6,029,457 to NPR 2,856,393 thousand (Part 1.18) — the bank repaid interbank borrowing during the year.
Related terms. Part 1.18, 1.22 · Part 4.11
Borrowings from 10 largest lenders
The absolute figure: NPR 1,926,875,000, unchanged in substance from NPR 1,867,500,000 the prior quarter. Ties exactly to the Borrowing line on the standalone balance sheet.
Who these lenders are. From Part 1.22, the bank's borrowing profile is dominated by development finance institutions — consistent with NMB's FMO partnership and its Global Alliance for Banking on Values membership. DFI borrowing is typically longer-tenor, purpose- earmarked (SME, energy, climate) and relationship-based, which makes concentration among a small number of such lenders normal and low-risk.
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