Nabil Bank (NEPSE: NABIL) — Company Deep Dive

Executive Summary

Nabil Bank Limited (NEPSE: NABIL) is Nepal's largest private commercial bank by market capitalization (approximately NPR 141 billion at NPR 548 reference price, July 2026). With NPR 636.8 billion in total assets following the January 2022 merger with Nepal Bangladesh Bank (NB Bank), NABIL is the country's dominant private franchise: 44.35% CASA ratio (strict basis), cost of funds down to 3.25% (Q3 FY2082/83), and a 40-year brand that attracted counter-cyclical deposit growth (+44.8% savings deposits in a down earnings year). Against these strengths, three challenges define the current analytical context: ROE of 9.77% (FY2081/82) is structurally below the estimated cost of equity (~13.75%); gross NPL rose from 0.84% pre-merger to 4.48% (FY2081/82) — primarily from NB Bank's legacy book and the sector-wide post-COVID credit cycle — and has only begun to heal (4.37%, Q3 FY2082/83); and NABIL's unaudited quarterly earnings have systematically overstated final audited PAT (FY2081/82: unaudited NPR 7.13 billion versus audited NPR 5.92 billion, a 17% gap from under-provisioning intra-year). A non-dilutive NPR 8 billion recapitalization (NPR 5 billion perpetual non-cumulative preference shares + NPR 3 billion subordinated debentures) in FY2082/83 has rebuilt the capital buffer without diluting ordinary shareholders.

Key correction versus prior published report: An earlier version of this article incorrectly stated that NABIL merged with Prabhu Bank. The correct counterparty is Nepal Bangladesh Bank Ltd. (NB Bank), acquired in January 2022 (joint operations from 11 July 2022). (Source: NABIL FY2081/82 Annual Report, Board Statement — Primary, company self-reported.)

Business Overview

Nabil Bank Limited is a Class A commercial bank licensed by Nepal Rastra Bank under BAFIA 2073. Incorporated in 1984 as Nepal Arab Bank Limited (the country's first joint-venture commercial bank), it was renamed Nabil Bank in 1996. In January 2022 (joint operations 27 Ashadh 2079), NABIL merged with Nepal Bangladesh Bank Ltd. (NB Bank) at a 100:43 share-swap ratio (43 NABIL shares per 100 NB Bank shares), adding approximately NPR 81.5 billion in deposits and NPR 77.6 billion in loans in a single transaction. (Source: NABIL FY2081/82 Annual Report — Primary.)

The funding franchise. NABIL's primary competitive moat is its low-cost deposit base. Cost of funds at 3.25% (Q3 FY2082/83) is among the lowest in Nepal's commercial banking sector. The CASA ratio on a strict basis (current accounts + savings accounts) stood at 44.35% (FY2081/82), with low-cost funding (CASA + below-4% term) at approximately 55% of total liabilities. Savings deposits grew NPR ~61 billion year-on-year in FY2081/82 — counter-cyclical deposit inflow during a year of declining profitability, demonstrating the durability of the brand. (Source: NABIL verified financial file — Primary.)

Business lines. Retail banking, SME lending, corporate lending, trade finance, remittances, and digital banking through N-Pay and connected services. Geographic concentration: 78.6% of the loan portfolio in Bagmati Province (Kathmandu Valley and surroundings) — the highest-income but also most credit-stressed urban real estate market in Nepal. (Source: NABIL FY2081/82 Annual Report segment disclosures — Primary.)

Financial Performance

All figures NPR billions unless noted. Bank standalone. Source: NABIL audited annual reports FY2077/78–FY2081/82 via verified financial file; Q3 FY2082/83 quarterly report — Primary, company self-reported.

Five-Year Financial Summary

¹ FY2079/80 represents the first full year post-NB Bank merger (operations combined from 27 Ashadh 2079 = 11 July 2022, the final days of FY2078/79). Asset/loan/deposit levels approximately doubled due to the merger.

Source: NABIL verified financial file §§1–2, nine-indicator NRB tables — Primary, company self-reported.

Key trends:

• PAT has been on a declining trend (NPR 6.40 billion peak FY2079/80 → NPR 5.92 billion FY2081/82), despite a growing balance sheet.
• ROE fell from a pre-merger 19–20% to post-merger 9.77% — substantially below any reasonable estimate of cost of equity (~13.75%).
• The CASA ratio has been rebuilding from the 35% trough (post-merger dilution of NB Bank's higher-cost deposit base) back toward 44% as NABIL's retail brand outcompetes for savings deposits.
• Gross NPL rose from 0.84% (FY2078/79) to a peak of 4.78% (FY2080/81) and edged to 4.48% by FY2081/82. The loss category (the worst-quality NPL bucket) grew 18× over this period. (Source: NABIL FY2081/82 Capital Adequacy disclosure — Primary.)

Disclosure Quality Flag

Unaudited quarterly earnings systematically overstate audited results. FY2081/82: unaudited Q4 report showed PAT NPR 7.13 billion; audited PAT was NPR 5.92 billion — a 17% revision driven by an additional NPR 1.8 billion in impairment charges at audit. The same pattern occurred in FY2080/81 (unaudited PAT significantly above audited PAT). This pattern indicates that quarterly impairment provisioning is understated relative to what the annual audit requires — either provisioning discipline is weaker intra-year or quarterly optics are being managed. This is a material disclosure-quality flag: published quarterly earnings should be read with this systematic revision risk in mind. (Source: NABIL verified financial file, quarterly-vs-audited comparison §3 — Primary.)

Quarterly Snapshot

Bank standalone, unaudited. Source: NABIL Q3 FY2082/83 quarterly report — Primary (unaudited).

The 9M unaudited PAT of NPR 6.02 billion implies annualized earnings of approximately NPR 8 billion — materially above the FY2081/82 audited NPR 5.92 billion. Given the historical pattern (quarterly impairment undershoots the annual audit by NPR 1.5–2.0 billion), the full-year audited FY2082/83 PAT is more likely to land in the NPR 5.5–7.5 billion range (Estimate). The 9M impairment of only NPR 0.48 billion (versus the FY2081/82 full-year NPR 4.20 billion) is the specific figure to watch.

Capital structure improvement. The NPR 5 billion perpetual non-cumulative preference shares (PNCPS) were issued in FY2082/83; the NPR 3 billion subordinated debenture process is "in process." Combined, these have increased CAR to 12.51% (Q3) — approximately 150 basis points above the 11% regulatory floor — without diluting ordinary shareholders. Preference share dividends (~NPR 400 million per year) rank ahead of ordinary dividends but behind depositors, slightly diluting ordinary shareholder economics. (Source: NABIL Q3 FY2082/83 quarterly report — Primary.)

Market Position

NABIL is the largest private commercial bank in Nepal by market capitalization (approximately NPR 99 billion at NPR 548, July 2026) and third-largest by assets (behind state-owned Rastriya Banijya Bank and AGRICDB). Within the private banking peer group (GBIME, NIC Asia, Siddhartha, Sanima), NABIL is distinguished by:

1. Lowest cost of funds. Cost of funds at 3.25% (Q3 FY2082/83) competes with state banks and is the strongest private-bank structural advantage. (Source: NABIL quarterly — Primary.)
2. Highest CASA ratio among large private banks. 44.35% strict CASA is materially above sector average (~30–35% for most peers). (Source: NABIL FY2081/82 Annual Report — Primary.)
3. Deepest retail brand. The +44.8% savings deposit growth in a year of declining profitability demonstrates a brand-driven deposit franchise — "money going to the safe bank" behavior — that competitors cannot easily replicate. (Source: NABIL verified file §4 — Primary.)

IFIC Bank (Bangladesh) stake exit. IFIC Bank, a significant promoter shareholder, has initiated disposal of approximately 1.77 crore (17.7 million) promoter shares, with Chaudhary Group reportedly as the buyer. The transaction is subject to a Kathmandu District Court stay order as of the last available public data. The transition from a Bangladeshi financial group to a Nepali conglomerate as a major promoter is a governance development to track. (Source: Thrive Brokerage, The Business Standard — Secondary.)

Moat assessment. NABIL's deposit moat is widening (CASA 35%→44%, savings growth) while its credit franchise is healing (NPL 4.78%→4.37%). This is the correct direction — the deposit franchise is the long-duration competitive advantage that justifies a premium over book for franchise value, even during a credit cycle downturn.

Regulatory and Macro Context

NRB easing cycle. NRB reduced its base rate from 10% to 6% (FY2082/83). For NABIL, this has two effects: (a) deposit cost reprices down faster than lending yield on a 44% CASA base, defending NIM — already visible in cost of funds falling 148bps; (b) bank borrowers benefit from lower rates, potentially accelerating NPL recovery as real estate and SME cash flows improve.

NFRS 9 ECL carve-out. NRB has allowed Nepali banks to continue using its prudential provisioning framework (rather than full NFRS 9 expected credit loss provisioning). When this carve-out eventually ends, banks' provisions may need to increase — the magnitude of any gap for NABIL is not publicly disclosed. (Source: NABIL FY2081/82 Annual Report accounting policy — Primary.)

NRB liquidity environment. Credit-to-deposit ratio headroom: NABIL's Q3 FY2082/83 LDR of approximately 82.5% is materially below the 90% ceiling, giving 7.5 percentage points (approximately NPR 39 billion) of additional lending capacity without new deposit growth. This headroom positions NABIL to accelerate credit deployment into the recovery.

Tax dispute. A NPR 1.44 billion income-tax dispute with the Inland Revenue Department is under litigation. (Source: NABIL FY2081/82 Annual Report contingent liabilities note — Primary.)

Governance and Capital Allocation

Board and promoters. NABIL's board includes representatives from IFIC Bank (Bangladesh, major promoter), employee representatives, and independent directors. With IFIC's stake transitioning toward Chaudhary Group, the governance watch in FY2082/83–83/84 is whether any related-party transactions or group-company links emerge with the new promoter. (Source: Thrive Brokerage / Business Standard — Secondary.)

Capital allocation. NABIL has maintained an all-cash dividend policy (no bonus shares since FY2079/80), raised the cash dividend to 12.5% (NPR 12.50 per share) in FY2081/82, and executed the NPR 8 billion non-dilutive recapitalization in FY2082/83. This is a capital allocation discipline — ordinary shareholders were protected from dilution while the capital base was rebuilt.

Dividend-vs-retention. The Buffett retention test: approximately NPR 14 billion retained over four post-merger years while disclosed market cap fell from approximately NPR 162 billion to NPR 146 billion. Retained capital did not create per-share value in this window — but the credit cycle and the NB Bank integration are the clear explanatory factors, not systematic misallocation. The one-dollar test is worth revisiting when the credit cycle fully normalizes.

Related-party transactions. RPTs with Chaudhary Group entities (post IFIC transition) and with the Capital Management Firm (CFM) associated with NABIL's wealth management are disclosed as normal-course but not itemized in rupee amounts. (Source: NABIL FY2081/82 Annual Report notes — Primary.)

Key Risks

Audited FY2082/83 earnings may disappoint. The 9M unaudited PAT of NPR 6.02 billion implies a strong year. But with only NPR 0.48 billion in impairment through 9 months — a run-rate the annual audit has never honored — the risk is that audit-time provisioning adds NPR 1.5–3.5 billion, bringing full-year PAT to NPR 5.5–6.5 billion (Estimate). A fourth consecutive audited-earnings disappointment would compound the disclosure-quality concern.

ROE below cost of equity. At 9.77% ROE versus estimated COE ~13.75%, every retained rupee destroys a fraction of per-share value. Until ROE sustainably clears ~13%, the bank is trading at 2.37× book (NPR 548 / NAVPS 231) for a level of earnings that does not support that multiple under standard excess-return models. The fundamental question is when the CASA cost-of-funds advantage translates into a structurally higher NIM and NIM translates into a higher ROE.

NPL re-acceleration. The Loss category of NABIL's NPL (66% of gross NPAs, grew 18× post-merger) represents the hardest-to-recover portion of the book. Concentration in Bagmati Province (78.6% of loans) in a stressed urban real estate market means the credit recovery pace depends heavily on Kathmandu Valley property values and SME business conditions.

IFIC promoter transition. The transition of a significant promoter stake from IFIC Bank (Bangladesh) to Chaudhary Group (Nepal conglomerate) introduces governance uncertainty. If related-party lending or group-company transactions emerge in subsequent annual report notes, the "institutional governance" premium NABIL currently commands could narrow.

Analytical Perspectives

The case for the franchise. NABIL's deposit moat is the most durable competitive advantage in Nepal's commercial banking sector. A 44% CASA ratio, 3.25% cost of funds, and +44.8% savings growth in a down year are not accidents — they reflect 40 years of brand equity that competitors cannot replicate quickly. The non-dilutive recapitalization is a materially positive capital event: CAR at 12.51% removes the immediate regulatory tail risk without giving away ordinary shareholder equity. If impairment normalizes toward NPR 2–2.5 billion per year (from NPR 4–5 billion in FY2079/80–81/82), ROE could recover toward 12–13% — still below COE, but closing the gap.

The analytical tension. At NPR 548 (23 July 2026), NABIL trades at 2.37× book (Derived). The excess-return model for banks — Fair P/B = (ROE − g) / (COE − g) — yields a fair P/B of approximately 0.65× at base ROE ~11%, COE ~13.75%, g 6% (Derived, Estimate). On this framework, NPR 548 implies an ROE of approximately 24% — roughly 2.5× what NABIL has ever delivered. The gap between what the price implies and what the audited record shows is the central analytical observation. Historically, NEPSE bank stocks have traded at 1.5–2.5× book regardless of ROE (a frontier/scarcity premium), which explains the current clearing price but does not resolve the intrinsic value gap.

Valuation Context

At reference price NPR 548 (23 July 2026 — Secondary). All multiples derived.

Weighted analytical fair value: approximately NPR 260 (Estimate, blending the above methods with 40/20/40 weights). (Derived — see inputs above.)

Scenario range (Estimate):

• Bear ~NPR 200: ROE stuck ~9–10%, P/B compresses toward 1.1–1.3×, IFIC block clears at a discount.
• Base ~NPR 300 (≈1.3× book): Recovery delivers ~11% ROE, franchise premium maintained but trimmed.
• Bull ~NPR 460 (≈2.0× book): NIM expands on CASA base to ~13% ROE; impairment normalizes to ~NPR 2.5 billion.

Current price NPR 548 is above the analytical bull case. These are analytical estimates, not investment recommendations. Trailing P/E: approximately 25.0× (548 / 21.90 EPS — Derived). P/B: approximately 2.37× (548 / 231 NAVPS — Derived). Dividend yield: ~2.3% (12.50 / 548 — Derived).

What We Are Watching

1. Audited FY2082/83 impairment charge. The single most important number. If the annual audit (expected August–October 2026) confirms impairment below NPR 2 billion, it signals genuine credit cycle improvement and the quarterly earnings are credible. If impairment resets to NPR 3.5–4.5 billion, the unaudited 9M recovery evaporates and the disclosure-quality concern is confirmed for a third consecutive year.

2. NPL trajectory at the annual. Q3 NPL of 4.37% is improving from the 4.96% prior-year Q3 peak. If the FY2082/83 annual confirms NPL below 4.0%, the credit recovery narrative becomes more credible. A reversal above 5% would trigger NRB supervisory attention.

3. IFIC promoter stake transition completion. The identity of the ultimate buyer and any subsequent related-party transactions disclosed in FY2082/83 annual notes will reveal whether the governance premium that NABIL currently commands is sustained or compressed.

References

1. Nabil Bank Limited — Audited Annual Reports FY2077/78–FY2081/82, sourced from NABIL_primary_financials_VERIFIED.md and extracted annual report text files. Accessible via SEBON filings and nabilbank.com. Primary, company self-reported.

2. NABIL FY2082/83 Q1–Q3 Unaudited Quarterly Reports. Filed with SEBON. Primary (unaudited).

3. Sharesansar — "Nabil Bank Q4 FY2081/82 Net Profit NPR 7.13 Arba" (unaudited), August 2025; "Q3 FY2082/83 Profit Growth 33.92%," April 2026. Secondary (unaudited quarterly prints).

4. ShareHub Nepal / Hamroshare — NABIL market price NPR 548, 52-week range 471–563 (23 July 2026). Secondary.

5. Thrive Brokerage / The Business Standard — IFIC Bank promoter stake disposal, Chaudhary Group buyer, District Court stay order. Accessed 2026-07-25. Secondary.

6. CEIC / cbonds — Nepal 5-year government bond yield ~6.5% (December 2025 estimate). Secondary.

7. Nepal Banking Sector Analysis (May 2026), +16 Capital internal research. NRB rate cycle, sector CAR, credit growth. Secondary.