Fundamental Analysis Report -NEPAL COMMERCIAL BANKS -Q2 FY 2082/83

  

NEPAL COMMERCIAL BANKS

Fundamental Analysis Report

Q2 FY 2082/83  |  All 20 A-Class Banks  |  Chaitra 2082

 

SS HOLDINGS KEY FINDING Sector in Recovery — Quality Divergence is Widening Nepal's commercial banking sector collected a combined net profit of Rs. 47.01 Arba through the first seven months of FY 2082/83, with Nabil Bank leading the pack at Rs. 5.38 Arba. However, a significant profitability gap has emerged between well-managed large banks and smaller, weaker institutions. Rising NPLs, sluggish credit growth, and high provisioning costs continue to pressure margins — but low interest rates and excess liquidity provide a supportive backdrop for selective accumulation.

 

1.  Sector Snapshot — Where Does the Industry Stand?

The second quarter of FY 2082/83, ending Poush (mid-January 2026), saw Nepal's 20 commercial banks deliver a mixed but overall improving performance. NRB's seven-month data through Magh confirms that aggregate sector profitability is on a recovery path compared to the distressed FY 2081/82, when high NPLs and heavy provisioning dragged earnings sharply lower.

The macro environment has turned more favourable: NRB's policy rate stands at 4.5%, 28-day T-bill yields have collapsed to 1.65%, and banking system liquidity is in surplus. This has reduced cost of funds across the board — a tailwind for net interest margins heading into Q3 and Q4.

 

Sector Net Profit (7M)	Top Earner	Lowest Earner	Banks Covered
Rs. 47.01 Arba	NABIL — Rs. 5.38 Arba	LSL — Rs. 24.27 Cr	20 A-Class Banks

 

2.  Net Profit — Who Is Earning and Who Is Lagging?

Profitability is the first filter for any fundamental analysis. The ranking below is based on 7-month net profit through Magh 2082. The top performers are the same large-capital banks that consistently dominate — but the gap between top and bottom has widened meaningfully in this cycle.

Nabil Bank (NABIL) reclaimed the top position, demonstrating the strength of its diversified revenue base. Kumari Bank (KBL) made a remarkable jump to third place — a notable recovery from a year ago when it was among the weakest performers due to its NPL burden.

Rank	Bank	Net Profit (7 Months)	Assessment
1	NABIL Bank	Rs. 5.38 Arba	Sector Leader — Consistent Top Performer
2	Global IME (GBIME)	Rs. 4.14 Arba	Nepal's Largest Bank by Capital
3	Kumari Bank (KBL)	Rs. 3.17 Arba	Remarkable Recovery — Up from Near-Bottom Last Year
4	Everest Bank (EBL)	> Rs. 2 Arba	Nepal's Cleanest Balance Sheet
5	Prime CB (PCBL)	> Rs. 2 Arba	Best Value in the Sector
6	NMB Bank	> Rs. 2 Arba	High CD Ratio — Growth Limited
7	NIMB	> Rs. 2 Arba	Recovery Underway — NPL Watch
⬇	Laxmi Sunrise (LSL)	Rs. 24.27 Crore	Lowest in Sector — Post-Merger Challenges Persist

 

3.  Earnings Per Share (EPS) — The True Measure of Shareholder Return

EPS is the most important single metric for NEPSE investors — it directly drives P/E valuation. Based on Q1 FY 2082/83 annualised data (Q2 bank-level EPS breakdown pending full NRB release), the trend is clear: EBL and SCB remain Nepal's EPS champions, while several mid-tier banks are catching up following their restructuring efforts.

 

Bank	Ticker	Annualised EPS (Rs.)	vs. Industry Avg	Rating
Everest Bank	EBL	Rs. 36.44	+164% above avg	Top Tier
Standard Chartered	SCB	Rs. 27.57	+100% above avg	Top Tier
Prime CB	PCBL	Rs. 26.53	+92% above avg	Strong
NABIL Bank	NABIL	~Rs. 24–26	+80% above avg	Strong
Industry Average	—	Rs. 13.80	—	Benchmark
NIC Asia Bank	NICA	< Rs. 5	-64% below avg	Weak
Laxmi Sunrise	LSL	< Rs. 5	-64% below avg	Weak

 

4.  Non-Performing Loans (NPL) — The Most Critical Risk Metric

NPL is the single most important indicator for Nepal's banking sector right now. The sector-wide NPL rose sharply from ~1.2% in FY 2079/80 to a peak above 4.8% — and while some banks have shown improvement, the divergence between the best and worst institutions is stark and widening.

Everest Bank (EBL) has consistently maintained Nepal's lowest NPL — a reflection of its conservative lending culture and strong credit monitoring. At the other end, Himalayan Bank (HBL) posted the highest NPL at 7.39% — signalling deep structural challenges. High NPL = high provisioning costs = lower profitability = lower dividends.

Bank	NPL %	Trend	Risk Level	SS Assessment
Everest Bank (EBL)	0.74%	Improving	Very Low	✔ Safe
Standard Chartered (SCB)	< 1.5%	Stable	Low	✔ Safe
Prime CB (PCBL)	~2.2%	Stable	Moderate	✔ Manageable
NABIL Bank	~2.4%	Stable	Moderate	✔ Manageable
NIMB	~3.5%	Elevated	Moderate-High	⚠ Watch
Kumari Bank (KBL)	~5.5%	Slightly Improving	High	⚠ Watch
NIC Asia (NICA)	~4.8%	Deteriorating	High	✖ Caution
Himalayan Bank (HBL)	7.39%	Worsening	Very High	✖ Avoid

 

5.  Capital Adequacy (CAR) & Net Worth Per Share

NRB mandates a minimum CAR of 11% for commercial banks. A higher CAR signals a well-capitalised buffer against loan losses. Standard Chartered Bank (SCB) leads with an exceptional CAR of 18.60%, giving it a significant safety margin.

Net worth per share is the book value of each share and is the foundation for P/B ratio analysis. RBBL holds the highest net worth per share at Rs. 339.91, reflecting its dominant state-owned capital base. The industry average stands at Rs. 203.84.

 

Bank	CAR (%)	Net Worth/Share (Rs.)	Capital Signal
Standard Chartered (SCB)	18.60%	~Rs. 230	Exceptionally Strong
Rastriya Banijya (RBBL)	> 12%	Rs. 339.91	Strong — State Bank
ADBL	> 13%	Rs. 278.73	Strong
Nepal Bank (NBL)	> 12%	Rs. 260.32	Strong
Industry Average	~12.5%	Rs. 203.84	Benchmark
Kumari Bank (KBL)	< 12.5%	Rs. 145.21	Lowest — Tight Buffer
Himalayan Bank (HBL)	11.64%	~Rs. 155	Danger Zone

 

6.  Return on Assets (ROA) & Return on Equity (ROE)

ROA measures how efficiently a bank converts its total assets into profit. ROE measures how much return it generates on shareholders' capital. In Nepal's context, a ROA above 1.5% and ROE above 12% are considered strong benchmarks.

 

Bank	ROA	ROE	Grade	Efficiency Rating
Standard Chartered (SCB)	1.71%	~14–16%	A+	Best in Class
Prime CB (PCBL)	~1.4%	14.47%	A	Strong
Everest Bank (EBL)	~1.3%	~15%	A	Strong
NABIL Bank	~1.2%	~13%	B+	Above Average
Global IME (GBIME)	~0.9%	~11%	B	Average
NIC Asia (NICA)	< 0.5%	< 5%	D	Poor
Laxmi Sunrise (LSL)	< 0.3%	< 3%	F	Very Poor

 

7.  Cost of Funds, CD Ratio & Base Rate

Metric	Best Performer	Worst Performer	Sector Implication
Cost of Funds	SCB — 2.89% (Lowest)	PCBL — 6.36% (Highest)	Low CoF = higher net interest margin
CD Ratio	RBBL — 62.39% (Most room)	NMB — 82.65% (Near ceiling)	NRB ceiling is 90%. Near-ceiling banks can't grow loans fast
Base Rate	SCB — Sub 5% (Lowest)	NICA — ~7.5% (Highest)	Lower base rate attracts better borrowers
Interest Spread	Sector Average	~3.96–4.0%	Compression risk as loan demand stays weak

 

8.  Valuation — P/E & P/B: Are Bank Stocks Cheap or Expensive?

At current NEPSE levels, commercial banks as a sector are trading at modest valuations — generally 12–25x P/E and 0.9–1.8x P/B. This is historically reasonable for Nepal's banking sector. Several banks are trading near or below book value, offering a margin of safety for long-term investors.

PCBL stands out as the single most attractive bank stock by valuation — high EPS, low P/E, solid fundamentals. NIMB trading below book value (P/B ~0.9x) offers a contrarian opportunity if NPL stabilises.

 

Bank	EPS (Ann.)	Approx. LTP	P/E (x)	P/B Est.	Value Signal
PCBL	Rs. 26.53	~Rs. 280–320	~11–12x	~1.2x	Best Value
EBL	Rs. 36.44	~Rs. 550–600	~15–16x	~2.5x	Quality Buy
NABIL	~Rs. 24–26	~Rs. 380–420	~15–17x	~1.4x	Reasonable
NIMB	~Rs. 14–16	~Rs. 180–210	~12–13x	~0.9x	Below Book
SCB	Rs. 27.57	~Rs. 700–750	~26–27x	~3.0x	Premium
NICA	< Rs. 5	~Rs. 100–130	> 20x	~0.8x	Expensive/EPS

 

 

9.  SS Holdings Investment Verdict — Bank by Bank

Based on the Q2 FY 2082/83 fundamental data — covering profitability, NPL, CAR, EPS, ROA, ROE, and valuation — here is SS Holdings' categorised verdict on Nepal's 20 commercial banks:

 

STRONG BUY

Bank	Key Metric	Reason	Entry Guidance
Everest Bank (EBL)	NPL 0.74% | EPS Rs.36.44	Nepal's cleanest balance sheet. Lowest NPL, highest EPS, consistent dividend payer. Premium justified.	Buy on dips below Rs. 550
Prime CB (PCBL)	P/E ~11x | ROE 14.47%	Best value combination in the sector. High EPS (Rs.26.53), strong ROE, low P/E. Underappreciated gem.	Ideal for value accumulation now

 

BUY

Bank	Key Metric	Reason	Entry Guidance
NABIL Bank	Net Profit Rs.5.38 Arba	Consistent sector profit leader. Solid across all metrics. Strong dividend history. Core holding for any banking portfolio.	Core holding — accumulate
Standard Chartered (SCB)	ROA 1.71% | CAR 18.60%	Best ROA, highest CAR, lowest cost of funds. Premium priced but deserves it. Institutional quality benchmark.	Buy — premium justified

 

ACCUMULATE / HOLD

Bank	Key Metric	Reason	Entry Guidance
Global IME (GBIME)	Net Profit Rs.4.14 Arba	Nepal's largest bank. Good profit growth but NPL remains a concern. Strong recovery candidate for FY 2083/84.	Buy in tranches, not all at once
Sanima Bank	Stable — manageable NPL	Consistent performer, decent dividends, manageable NPL. Safe mid-tier hold for patient investors.	Hold existing positions
NMB Bank	CD Ratio 82.65%	High CD ratio limits loan growth. Defer fresh buying until CD ratio improves below 78%.	Hold — defer new buying

 

VALUE WATCHLIST

Bank	Trigger to Watch	Reason	Entry Condition
NIMB	P/B ~0.9x — Below Book	Trading near book value. Could be a strong contrarian buy. Watch Q3 NPL data carefully.	Enter only if Q3 NPL < 3.5%
Kumari Bank (KBL)	Profit Rs.3.17 Arba (#3)	Remarkable profit jump but NPL still elevated (~5-6%). Recovery narrative emerging — track Q3 NPL.	Enter only if Q3 NPL < 5%

 

AVOID / REDUCE

Bank	Key Risk	Reason	Guidance
Himalayan Bank (HBL)	NPL 7.39% — Highest	Highest NPL in sector. CAR near minimum floor. Deep structural problems with no near-term resolution.	Reduce exposure immediately
NIC Asia (NICA)	EPS collapsed | High NPL	Sector's weakest earnings quality. High NPL with provisioning pressure unresolved. No catalyst visible.	Do not buy at any price
Laxmi Sunrise (LSL)	Lowest profit — Rs.24 Cr	Post-merger integration challenges persist. Weakest fundamentals. No near-term catalyst.	Stay away

 

10.  SS Holdings Overall Strategy — Q2 FY 2082/83

Nepal's commercial banking sector in Q2 FY 2082/83 is in a two-speed recovery. The top-tier banks — EBL, SCB, PCBL, NABIL — are demonstrating genuine fundamental strength, maintaining clean balance sheets, generating strong EPS, and rewarding shareholders. The bottom-tier banks remain mired in NPL challenges that will likely suppress earnings for at least two more quarters.

For fresh capital deployment, SS Holdings recommends a barbell approach: anchor 60% in proven quality banks (EBL, PCBL, NABIL), allocate 20% to recovery candidates (NIMB, KBL) for asymmetric upside, and keep 20% in reserve for Q3 data — which will be the decisive read on whether the sector's NPL cycle has genuinely turned.

 

Step	Action	Banks	Capital Allocation
1	Anchor — Quality Core	EBL, PCBL, NABIL	60% of total banking allocation
2	Recovery — Contrarian Bets	NIMB, KBL (conditional on Q3 NPL)	20% — buy only on NPL confirmation
3	Reserve — Wait for Q3	Hold in FD or T-bills	20% — deploy after Q3 NPL data
✖	Zero Exposure	HBL, NICA, LSL	No capital at any price until fundamental turnaround

 

SS Holdings & Investment Pvt. Ltd.  —  सूचित लगानीको लागि, विश्वसनीय विश्लेषण।

Nepal Capital Market Intelligence  |  Q2 FY 2082/83  |  Chaitra 2082