Chapter 11 · Part 11 — Other Disclosures and Exposure Concentration
Concentration of credit, deposits and borrowings
The risk that appears in no other ratio, and the two calculations that reframe a bank's liquidity and capital.
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Concentration of Credit exposures
Simple definition. How much the bank has lent to its twenty biggest borrowers.
The disclosure.
SN Particulars Current Quarter Current Quarter
(this period) (prior period)
───────────────────────────────────────────────────────────────────────────
Total exposure to twenty largest borrowers
a. As per Group (related party) 48,311,844,005 46,390,007,244
b. As per Individual customer 17,392,478,635 17,113,863,047
Percentage of exposures to twenty largest borrowers
to Total Loans and Advances
a. As per Group (related party) 18.03% 17.73%
b. As per Individual customer 6.49% 6.54%Decoding the two measures — this is the crucial part
┌──────────────────────────────────────────────────────────────────┐
│ (a) "AS PER GROUP (RELATED PARTY)" — 18.03% │
│ │
│ Exposures aggregated by BORROWER GROUP: a parent company │
│ plus its subsidiaries, affiliates and commonly-controlled │
│ entities are counted as ONE exposure. │
│ │
│ → This is the ECONOMICALLY MEANINGFUL measure. │
│ If the parent fails, the whole group typically fails. │
├──────────────────────────────────────────────────────────────────┤
│ (b) "AS PER INDIVIDUAL CUSTOMER" — 6.49% │
│ │
│ Each legal entity counted separately. │
│ │
│ → UNDERSTATES true concentration, because a business │
│ group split across ten companies looks like ten │
│ unrelated borrowers. │
└──────────────────────────────────────────────────────────────────┘
THE GAP: 18.03% − 6.49% = 11.54 percentage points
48,311,844,005 ÷ 17,392,478,635 = 2.78×
⇒ Group-level exposure is nearly THREE TIMES individual-level.
Nepal's economy is dominated by large family-owned business
GROUPS operating through many legal entities. Measuring by
individual customer would badly understate the risk.Quantifying the risk
Total exposure to 20 largest borrower groups NPR 48,311,844,005
= NPR 48.31 billion
Compare against the bank's loss-absorbing capacity:
Total equity (Bank) NPR 38,059,771 thousand
= NPR 38.06 billion
⇒ The twenty largest borrower groups owe MORE than the
bank's ENTIRE EQUITY — 1.27× total equity.
Put differently: if those twenty groups defaulted with a
50% loss given default:
48.31bn × 50% = NPR 24.2 billion of loss
against equity of NPR 38.06 billion
⇒ would consume 64% of the bank's entire capital base.The trend.
This period Prior period Direction Group basis 18.03% 17.73% ▲ WORSE Individual basis 6.49% 6.54% ▼ marginally better Absolute (group) 48.31bn 46.39bn ▲ +4.1%
Concentration on the meaningful measure increased. In a year when NPL rose from 4.11% to 4.91%, rising concentration compounds the risk.
Cross-reference to segment reporting. Part 9.4 showed Corporate assets growing NPR 16.2 billion while yield fell 165bp. Rising large-borrower concentration is consistent with that: the bank grew by lending more to large groups at thinner spreads.
Related terms. Part 1.7 · Part 6.2 · Part 9.4 · Part 10.8
Total exposure to twenty largest borrowers
The headline figure: NPR 48,311,844,005 on the group (related party) basis; NPR 17,392,478,635 on the individual customer basis.
Full analysis at 11.11.
Concentration of Deposits
Simple definition. How much of the bank's funding comes from its twenty biggest depositors.
The disclosure.
SN Particulars Current Quarter Prior period
───────────────────────────────────────────────────────────────────────
Total Deposits from twenty largest depositors
a. Group wise 69,332,976,322 70,081,302,652
b. As per Individual Customer 69,332,976,322 70,081,302,652
Percentage of deposits from twenty largest depositors
to Total Deposits
a. Group wise 21.80% 23.32%
b. As per Individual Customer 21.80% 23.32%Why deposit concentration is the more dangerous concentration
┌──────────────────────────────────────────────────────────────────┐ │ CREDIT CONCENTRATION vs DEPOSIT CONCENTRATION │ │ │ │ A large BORROWER defaulting: │ │ • Painful, but SLOW — you see it coming through arrears, │ │ downgrades, restructuring requests │ │ • Absorbed by capital over time │ │ • You can provision progressively │ │ │ │ A large DEPOSITOR withdrawing: │ │ • IMMEDIATE — the money leaves on the value date │ │ • No warning required │ │ • Must be met from LIQUID ASSETS, not capital │ │ • Can cascade: one large withdrawal triggers others │ │ │ │ ⇒ Credit concentration threatens SOLVENCY over years. │ │ Deposit concentration threatens LIQUIDITY in days. │ └──────────────────────────────────────────────────────────────────┘
The calculation every analyst should run
Deposits from 20 largest depositors NPR 69,332,976,322
= NPR 69.33 billion
= 21.80% of deposits
Liquidity available to meet a withdrawal:
Liquidity Ratio (NLA) 28.99% (Part 6.16)
Total deposits NPR 315,118,455 thousand
Implied net liquid assets ≈ 315,118,455 × 28.99%
≈ NPR 91,353,840 thousand
≈ NPR 91.35 billion
╔══════════════════════════════════════════════════════════════════╗
║ Net liquid assets NPR 91.35 billion ║
║ Top 20 depositors NPR 69.33 billion ║
║ ────────────────── ║
║ Coverage 1.32× ║
║ ║
║ ⇒ If the twenty largest depositors ALL withdrew ║
║ simultaneously, the bank's entire liquid asset ║
║ buffer would cover them 1.32 times — leaving ║
║ roughly NPR 22 billion of liquidity for the ║
║ other 78% of depositors. ║
╚══════════════════════════════════════════════════════════════════╝The good news — the trend improved.
This period Prior period Direction Concentration 21.80% 23.32% ▼ BETTER (−1.52pp) Absolute 69.33bn 70.08bn ▼ −1.1% Meanwhile total deposits GREW 13.1%. ⇒ The bank grew deposits NPR 36.75 billion while its twenty largest depositors' balances FELL NPR 0.75 billion. ALL the growth came from a broader base. ⇒ That is genuinely high-quality deposit growth, and it is the single most positive finding in Part 11.
Nepali context. Large institutional depositors in Nepal include the Employees Provident Fund, Citizen Investment Trust, insurance companies, government bodies and large corporates. These are rate-sensitive and move money between banks for yield — which makes them less sticky than retail deposits and is precisely why concentration among them matters.
Related terms. Part 1.21 · Part 6.6 CD Ratio · Part 6.16 Liquidity Ratio (NLA) · Part 10.1
Total Deposits from twenty largest depositors
The headline figure: NPR 69,332,976,322, identical on both group and individual bases, down from NPR 70,081,302,652.
Full analysis at 11.13.
Concentration: the complete picture
╔══════════════════════════════════════════════════════════════════════╗ ║ NMB BANK — CONCENTRATION SCORECARD, ASAR 2083 ║ ╠══════════════════════════════════════════════════════════════════════╣ ║ ║ ║ FUNDING CONCENTRATION (borrowings) NOT A RISK ║ ║ All borrowings with ≤10 lenders — but borrowings are only ║ ║ 0.61% of deposits. The bank is deposit-funded, not ║ ║ wholesale-funded. Structural strength. ║ ║ ║ ║ DEPOSIT CONCENTRATION ! MODERATE, IMPROVING║ ║ Top 20 = 21.80% of deposits (NPR 69.33bn), down from 23.32%. ║ ║ Liquid assets cover them 1.32× — adequate, not generous. ║ ║ ALL of the year's 13.1% deposit growth came from a broader ║ ║ base. Direction of travel is clearly positive. ║ ║ ║ ║ CREDIT CONCENTRATION ! THE REAL ISSUE ║ ║ Top 20 borrower GROUPS = 18.03% of loans (NPR 48.31bn), ║ ║ UP from 17.73%. ║ ║ That is 1.27× the bank's ENTIRE EQUITY. ║ ║ A 50% loss on those groups would consume 64% of capital. ║ ║ Rising — in a year when NPL rose from 4.11% to 4.91%. ║ ║ Consistent with Corporate assets +14.5% at a yield 165bp lower. ║ ║ ║ ╠══════════════════════════════════════════════════════════════════════╣ ║ THE SYNTHESIS ║ ║ The bank's FUNDING is getting safer — broader deposits, less ║ ║ wholesale reliance. Its LENDING is getting more concentrated, ║ ║ at lower yields, with rising NPL. ║ ║ ║ ║ Funding risk down. Credit risk up. That is the trade this ║ ║ bank made in FY2082/83. ║ ╚══════════════════════════════════════════════════════════════════════╝
Part 11 — Revision table
| Term | Meaning | NMB disclosure | Key issue |
|---|---|---|---|
| Dividends paid (aggregate or per share) | Distributions in the period | 5% cash + 5% stock | Distribution slightly **exceeded** distributable profit |
| Cash dividend / Stock dividend | The two forms | NPR 918,335k each | Cash drains capital; stock grows paid-up capital [R] |
| Issues, repurchases and repayments | Capital markets activity | PNCPS NPR 3bn issued | Fixed total capital, not CET1 — AT1 route now largely used |
| Fully subscribed, allotted and capitalized | Three issue milestones | Magh 04, 2082 | The **capitalisation date** time-apportions the PNCPS dividend |
| Events after interim period | NAS 10 post-balance-sheet events | None | Adjusting vs non-adjusting; a proposed dividend is non-adjusting |
| Effect of changes in composition | Group structure changes | None | Confirmed by four separate nil lines |
| Merger and acquisition | NRB-driven consolidation | None | Format machinery retained from Nepal's merger era |
| **Exposure Concentration** | Dependence on few counterparties | Three dimensions | **Invisible in every other ratio** |
| Concentration of Borrowings | Wholesale funding dependence | 0.61% of deposits | Immaterial — deposit-funded is a strength |
| Borrowings from 10 largest lenders | Absolute wholesale figure | NPR 1.93bn | Ties exactly to the balance sheet; largely DFI |
| Concentration of Credit exposures | Large-borrower dependence | **18.03%**, up from 17.73% | **Use the GROUP measure** — 2.78× the individual one |
| Total exposure to twenty largest borrowers | Absolute credit figure | **NPR 48.31bn** | **1.27× total equity**; 50% LGD would consume 64% of capital |
| Concentration of Deposits | Large-depositor dependence | 21.80%, **down** from 23.32% | Liquid assets cover top 20 only **1.32×** |
| Total Deposits from twenty largest depositors | Absolute deposit figure | NPR 69.33bn, falling | All deposit growth came from a **broader base** |
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