Banking Sector EPS Improves, but Profit Strength Remains Concentrated

Nepal’s commercial banking sector has shown a moderate improvement in earnings during the second quarter of the current fiscal year, with the average earnings per share (EPS) rising to Rs 16.30 by mid-January. This represents an increase of nearly Rs 1.90 compared to the same period last year, reflecting a gradual recovery in sectoral profitability. The improvement comes at a time when banks are still navigating weak credit demand and lingering stress in asset quality.

The rise in average EPS is supported by an overall increase in profits across the sector. During the first half of the fiscal year, total profits of 20 commercial banks grew by around 11.5 percent, reaching Rs 30.52 billion, up from Rs 27.36 billion a year earlier. This growth indicates that banks have begun to stabilize after a challenging period marked by high provisioning requirements and subdued lending activity.

Despite the aggregate improvement, earnings performance remains uneven. Among the 20 commercial banks in operation, all but one have reported positive EPS figures. Laxmi Sunrise Bank is the only exception, posting a negative EPS due to continued losses until mid-January. As EPS reflects profit generation per share, its widespread positivity suggests system-level recovery, though not without notable exceptions.

Nabil Bank has once again emerged as the strongest performer in the sector. Its EPS stood at Rs 34.04 in the second quarter, marking a sharp increase of Rs 10.99 from the same period last year. The bank also leads in absolute profit terms, reinforcing its position as the most consistently profitable institution in the sector. Analysts view Nabil’s performance as a result of stable asset quality, controlled costs, and sustained core income growth.

Everest Bank follows closely with an EPS of Rs 30.86, though this figure represents a slight decline from last year. A similar downward trend is visible at Standard Chartered Bank, where EPS fell to Rs 27.35. While both banks remain among the top earners, the year-on-year decline highlights margin pressure and limited room for profit expansion in a tight operating environment.

A notable turnaround has been recorded at Rastriya Banijya Bank. The state-owned bank posted an EPS of Rs 22.64, more than double its level from the same period last year. This improvement reflects the impact of structural reforms, better credit discipline, and declining legacy issues. The performance of government-owned banks has improved steadily in recent years, challenging the long-held perception of their inefficiency.

Mid-tier banks such as Kumari and Sanima reported EPS above Rs 20, while several others—including Prime Commercial, Nepal SBI, Siddhartha, Nepal Bank, NMB, Global IME, Machhapuchchhre, and Himalayan—posted EPS figures between Rs 11 and Rs 20. These numbers indicate operational stability, though not strong enough to suggest aggressive profit expansion in the near term.

At the lower end of the spectrum, NIC Asia Bank recorded the weakest positive EPS at just Rs 1.77. The figure reflects pressure from high operating costs and provisioning needs, raising concerns over short-term profitability. Even more concerning is the situation at Laxmi Sunrise Bank, which posted a negative EPS of Rs 2.04. Analysts attribute this to post-merger integration challenges, rising non-performing loans, and sustained provisioning pressure.

Overall, while headline indicators suggest that the banking sector is on a recovery path, the improvement remains concentrated among a handful of strong performers. Rising bad loans, slow credit growth, and structural weaknesses continue to limit profit expansion across the sector. As a result, the current earnings recovery appears cautious rather than broad-based.

For investors, analysts stress that EPS alone is no longer a sufficient measure of banking performance. Greater emphasis is now being placed on asset quality, capital adequacy, sustainability of profits, and risk management capacity. The latest data suggest that while opportunities are emerging in the banking sector, underlying risks remain equally significant.