Why Do Nepal's Commercial Banks Keep Losing to the Market?
Summary
Nepal’s commercial banking sector has risen just 1% in nine years, badly lagging the NEPSE index as falling dividend capacity and rising bad loans weigh on returns. The article argues that high valuations have masked deteriorating fundamentals, with only a few banks outperforming on stronger loan quality.
Key Points
- Nepal’s Commercial Banking sub-index rose only 1% from July 2017 to July 2026, while the broader NEPSE index gained 64%.
- The main drag on bank stocks is collapsing dividend-paying capacity alongside rising non-performing loans (NPLs).
- Average dividend-paying capacity fell from NPR 17.87 per share in FY2016/17 to negative NPR 2.51 in FY2025/26 Q3, while sector NPLs climbed to 5.41%.
- Everest Bank, Standard Chartered Bank Nepal, and Sanima Bank have outperformed peers due to lower NPLs and stronger dividend capacity.
