Sanima Bank (SANIMA) — Company Deep Dive

Current Price: Rs. 365.50 (Sharesansar, May 15, 2026) | 52-week range: Rs. 295–391 | Market Cap: ~Rs. 49.6 billion (135.8M ordinary shares) | Sector: Commercial Banking (Class A) | Credit Rating: [CARE-NP] A- (Is), assigned March 11, 2026

The Setup

In the nine months to April 13, 2026, Sanima Bank Limited reported net profit of Rs. 2,350 million — 91.4% of its entire FY 2024/25 annual profit in three quarters.¹ Operating profit was up 47.5% year-on-year. Cost of funds had fallen 124 basis points. Net interest income was growing at 20.5% year-on-year.

This is a bank in recovery. The question is whether the recovery is already in the price.

At Rs. 365.50 (Sharesansar, May 15, 2026)², Sanima trades at 19.3x trailing earnings (FY 2024/25 EPS Rs. 18.94) and 2.16x book value (FY 2024/25 BV Rs. 169.59 per share).³ On a forward basis — using Q3 YTD annualized EPS as the guide — the multiple compresses to approximately 16x. That is a reasonable price for a mid-tier Nepali bank on an earnings trajectory that is genuinely accelerating. It is not obviously cheap.

What makes this analysis interesting is the credit quality story running alongside the earnings recovery, and the rating agency transition that happened in March 2026 that the market has largely passed over without comment.

What Sanima Actually Is

Sanima Bank Limited is a Class A licensed commercial bank incorporated in Nepal and listed on NEPSE. It was promoted by a group of Non-Resident Nepalese (NRN) businesspersons and commenced operations in October 2004 as a National Level Development Bank. It converted to a full Class A commercial bank license in February 2012.⁴

That NRN origin is not incidental color. It shapes the governance structure: there is no identifiable parent entity or single controlling shareholder. The promoter group (which collectively holds 51% of paid-up capital as at mid-January 2026) consists of multiple individuals.⁵ The largest single named shareholder holds 7.94% of total shares.³ The two largest institutional shareholders — Sun Nepal Life Insurance Company Limited and the Employees Provident Fund — together hold approximately 8.78%.³ This is a dispersed ownership structure by Nepali standards, which reduces the risk of a single controlling party extracting value at the expense of minority shareholders.

The bank operates through four business segments: Banking (core lending and deposit mobilization, contributing 86.4% of total segment revenue in FY 2024/25), Treasury (10.7%), Digital Banking (2.4%), and Remittance (0.4%), through its proprietary "Sanima Xpress" platform active across 39 countries.³

As at January 14, 2026, the bank operated 106 branches, 128 ATMs, and 28 extension counters.⁵

The bank is led by CEO Pawan Kumar Acharya and Deputy CEO Bobby Singh Gadtaula, per the CARE Ratings Nepal press release of March 2026.⁵

The Five-Year Financial Story

Source: Sanima Bank Annual Reports FY 2080/81 and FY 2081/82, Directors' Report Section J; Q3 FY 2082/83 Quarterly Report, April 2026.³⁶

EPS for FY 2020/21 and FY 2021/22 are derived estimates using approximate weighted-average share counts; treat as directional only. Q3 YTD BV is a derived estimate: Group equity Rs. 26,386M / 135.8M ordinary shares.

There are three distinct chapters here.

Chapter one: the cycle peak (FY 2020/21 to FY 2022/23). Sanima's ROE hit 17.89% in FY 2020/21 — healthy for a mid-tier Nepali bank. Net interest income grew from Rs. 4,539M to Rs. 6,520M as the credit boom and high-rate environment amplified both volumes and spreads. Crucially, NPL in this period was negligible — 0.12% to 1.31%. The bank appeared, in those years, to be the cleanest mid-tier book in Nepal.

Chapter two: the credit cycle hangover (FY 2023/24). NRB tightened aggressively in 2022–2023. The Credit-to-Deposit ratio cap came down, working capital guidelines were introduced, and rates rose sharply. ROE collapsed to 5.26%. Impairment charges, which had been Rs. 248M in FY 2020/21, reached Rs. 1,433M by FY 2023/24 — a near-six-fold increase in three years. NPL climbed from 1.31% to 1.72%.

Chapter three: the recovery (FY 2024/25 and the nine months of FY 82/83). Cost of funds began to fall as high-rate term deposits rolled off. NII recovered. By Q3 FY 82/83, cost of funds was 3.75% versus 4.99% a year earlier — a 124 bps compression in twelve months.¹ Nine-month profit of Rs. 2,350M was already 91% of the prior full year. Annualized ROE was 13.13%.

The thing that has not recovered is NPL. Gross NPL reached 3.99% at Q3 FY 82/83 — still rising, the sixth consecutive year of deterioration.¹

The Nine-Month FY 82/83 Numbers in Detail

Source: Q3 FY 2082/83 Quarterly Report, Sanima Bank Ltd., April 13, 2026.¹

The mechanics of the recovery are clear: interest expense falling (-17%) on repricing liabilities while interest income is growing modestly (+3%), producing a 20.5% expansion in NII. Impairment charges are flat to slightly down. This is what a bank looks like when it is on the right side of a rate cycle.

But the 57 basis point increase in gross NPL over nine months is the shadow on the story. The recovery in earnings is real; the credit quality deterioration has not stopped.

The Credit Quality Question

Sanima's NPL trajectory is unmistakable:

0.12% (FY 2020/21) → 0.33% → 1.31% → 1.72% → 3.01% → 3.63% (mid-January 2026) → 3.99% (April 2026).³⁵¹

In absolute rupee terms, NPLs grew from Rs. 2 billion (mid-July 2023) to Rs. 7 billion (mid-January 2026).⁵

That is not macro alone. When a bank goes from 0.12% NPL to 3.99% in five years while the broader industry NPL rises from 2.98% to 4.44% over roughly the same period⁵, the implication is that Sanima was building credit in the boom years faster than was prudent — though it is worth noting that Sanima's NPL trajectory kept pace with or outperformed the industry average throughout.

The CARE Ratings press release of March 11, 2026 acknowledges this directly: "The Bank's Gross Non-Performing Loan (GNPL) ratio increased from 1.31% as of mid-July 2023 to 3.63% as of mid-January 2026... Despite this rise, the Bank's GNPL levels continue to remain lower than the industry averages reported over the same periods."⁵

Two factors partially mitigate the NPL concern:

First, provision coverage. As at mid-January 2026, Sanima's provision coverage ratio was 111.52% — meaning provisions exceed gross NPAs by 11.52 percentage points.⁵ The bank is provisioned beyond the NRB statutory minimum. NRB provision at FY 2024/25 year-end: Rs. 6,805M against gross NPAs of approximately Rs. 5,587M.³

Second, Stage 2 loan pool. The NFRS 9 ECL staging data from the FY 2024/25 annual report shows Stage 2 loans (significant credit deterioration, still performing) at Rs. 8,299M — 4.6% of the loan book.³ This is the pool where the next cycle of NPAs will likely originate. Its composition by sector is not publicly disclosed, which is a genuine information gap.

The Rating Agency Transition — What Actually Happened

In late March 2026, two things happened within eleven days of each other that caused some confusion in the Nepal banking commentary:

On March 11, 2026, CARE Ratings Nepal Limited (CRNL) assigned Sanima Bank an issuer rating of [CARE-NP] A- (Is) — Single A Minus (Issuer). The CARE press release describes this as a first-time assignment — no prior CARE rating.⁵

On March 22, 2026, ICRA Nepal withdrew its existing rating of Sanima Bank (previously A-/LA-), noting the bank was on negative watch.⁷

The sequence matters. CARE was brought in eleven days before ICRA withdrew. This is the characteristic pattern of a rating agency switch: a new agency is commissioned, rating is assigned, and then the prior agency relationship is terminated. The "negative watch" designation from ICRA is the standard ICRA procedure when a rated entity does not renew its engagement — it does not indicate a specific negative event. There is no disclosed regulatory action, no NRB disciplinary notice, and no SEBON investigation that would suggest the ICRA departure was adverse in nature.

The CARE A- rating itself is a mid-tier investment-grade rating. CARE's definition: "Issuers with this rating are considered to offer adequate degree of safety regarding timely servicing of financial obligations, in Nepal. Such issuers carry low credit risk."⁵ This is "adequate," not "strong" — CARE A and CARE AA ratings carry higher safety designations. The rating accurately reflects the bank's position: a creditworthy institution with acknowledged asset quality headwinds.

CARE flagged three forward sensitivities that could affect the rating: (a) the ability of the bank to improve its asset quality while managing growth; (b) maintaining adequate cushion in CET-I and overall CAR above regulatory minimums; (c) managing the impact of any NRB regulatory changes.⁵

Capital Adequacy: Comfortable but Not Spacious

Nepal's NRB requires commercial banks to maintain a minimum CAR of 11% (Tier 1 + Tier 2) and a minimum CET-I of 8.5%.

Sanima's position as at mid-January 2026, per CARE:

Source: CARE Rating Press Release, March 11, 2026, p. 2.⁵

The CET-I cushion of 82 bps above the NRB minimum is the tightest part of the capital picture. It has declined from 10.37% (mid-July 2023) to 9.32% (mid-January 2026) — a 105 bps compression over approximately two and a half years — primarily due to RWA growth of approximately 27% outpacing Tier I capital growth from Rs. 17,432M to Rs. 19,895M over the same period.⁵

The bank is addressing this through preference share issuances. SEBON approved Rs. 2,000M of 8.25% irredeemable cumulative preference shares in February 2026, which are already on the Q3 FY 82/83 balance sheet as Tier 1 capital.⁸ CARE's press release notes a further Rs. 2B of Additional Tier I instruments planned for H2FY26, and another Rs. 2B in FY27.⁵ If both execute, the CET-I buffer would improve materially.

One consequence of irredeemable preference shares: they are permanent capital that cannot be redeemed, and the 8.25% cumulative dividend obligation (approximately Rs. 165M annually on the first Rs. 2B tranche) reduces distributable profit available to ordinary shareholders.

The CASA Franchise and Funding Structure

One structural advantage Sanima has maintained throughout the credit cycle is its CASA (Current Account and Savings Account) base.

CASA ratio at FY 2024/25: 43.1% of total deposits, computed from the AR 8182 deposit note: Savings (individual) Rs. 81,733M + Current-individual Rs. 1,699M + Current-institution Rs. 13,013M = Rs. 96,445M against total deposits of Rs. 223,955M.³

A 43.1% CASA ratio means nearly half the bank's funding comes from deposits that reprice slowly or not at all with the rate cycle. As the NRB easing cycle continues, the bank's term deposit costs are rolling down while CASA funding remains cheap and sticky. This is the mechanical driver of the NII acceleration: cost of funds fell 124 bps in twelve months¹ while loan yields declined far more slowly.

The NIM in FY 2024/25 was 2.56% — confirmed by both the derived calculation from the annual report and independently by CARE Ratings.³⁵ Yield on advances declined from 12.75% (FY23) to 8.68% (FY25) as the rate cycle turned.⁵ The recovery in NIM from here depends on how fast loan volumes grow and whether the rate environment stabilizes.

Concentration: The Numbers Behind the Risk

CARE's press release discloses concentration data that the bank's own annual report does not break out separately:

Depositor concentration: Top 20 institutional depositors held approximately 16% of total deposits (mid-July 2025) and 17% (mid-January 2026).⁵ The CARE note: comfort is taken from the fact that these institutional depositors include government enterprises and prominent businesses — not flighty retail money.

Borrower concentration: Top 20 single borrowers accounted for approximately 17% (FY25) and 18% (H1FY26) of total advances. Top 20 group borrowers accounted for approximately 26% (FY25) and 27% (H1FY26) of total advances.⁵

A 27% group borrower concentration is notable. If one or two of those borrower groups face stress, the NPA impact could be disproportionate. CARE flags this as a "Key Rating Weakness" while noting that the institutional depositor quality provides some offset on the liability side.⁵

The geographic concentration adds a second layer: 78.1% of total revenue in FY 2024/25 came from Bagmati Province.³ This is not unusual for a Kathmandu-headquartered bank — the valley is Nepal's economic and credit center — but it does mean Sanima's credit quality is highly correlated with Kathmandu's commercial real estate and business cycle.

How the Bank Makes Money: Unit Economics

NIM (FY 2024/25): 2.56% (Source: CARE Rating Press Release, March 11, 2026; consistent with AR 8182 derived calculation)³⁵

Cost-to-income (FY 2024/25): 37.69% per CARE Ratings.⁵ This is efficient by Nepal commercial bank standards, reflecting a lean staff count (1,277 employees as at FY 2024/25)⁶ and limited branch expansion (105 to 106 branches in FY 2024/25).

ROA (FY 2024/25): 1.03% (Derived: Rs. 2,572M / average assets Rs. 248,683M). Q3 FY 82/83 annualized ROA: 1.18%.¹

Yield on advances (FY 2024/25): 8.68%, down from 12.75% in FY 2022/23.⁵ The rate normalization story in one number.

Sanima's share of Class A commercial bank NII in H1FY26: 3.6%. Total Class A NII was Rs. 95.6 billion in the period.⁵ This is consistent with Sanima's ~3.6% asset-market-share position among the 20 Class A commercial banks.

Valuation Framework

At the current price of Rs. 365.50 (Sharesansar, May 15, 2026):

Sources: AR 8182; Sharesansar May 15, 2026.²³

Estimate — FY 82/83 full-year EPS: Q3 YTD (Bank) net profit = Rs. 2,350M. A conservative assumption of Rs. 650–750M for Q4 (below recent run-rate, given seasonal provision-building) implies full-year profit of Rs. 3,000–3,100M, or EPS of Rs. 22.1–22.8. This estimate assumes: (a) impairment charges do not materially increase in Q4; (b) no NRB directed additional provisioning; (c) NII compression does not reverse. Invalidated by NPL spike to 5%+, directed provisioning, or sharp macro deterioration.

Residual income / P/B approach (Estimate): Using a sustainable ROE assumption of 12–14% (consistent with Q3 FY 82/83 annualized ROE of 13.13%)¹, a cost of equity of 13–14% (risk-free rate ~5.5% NRB 91-day T-bill proxy + Nepal small-cap banking equity risk premium), and a long-run growth rate of 6–8%, the P/B = (ROE - g) / (Ke - g) framework produces:

• At ROE = 12%, Ke = 13.5%, g = 7%: P/B = 0.77x BV → implied fair value ~Rs. 131 per share
• At ROE = 14%, Ke = 13%, g = 8%: P/B = 1.20x BV → implied fair value ~Rs. 204 per share
• At ROE = 13%, Ke = 13%, g = 7%: P/B = 1.00x BV → implied fair value ~Rs. 170 per share

Estimated ordinary BV/share (Q3 FY 82/83): Rs. 179.7 (Group equity Rs. 26,386M less Rs. 2,000M preference capital, divided by 135.8M ordinary shares).¹

At the current price of Rs. 365.50, the stock trades at approximately 2.03x estimated ordinary book value — above the entire residual income range in this model. That is not a unique position for profitable Nepali banks — the market routinely prices regulated deposit-taking franchises above book — but it does mean the valuation embeds an optimistic assumption about sustained ROE improvement above the cost of equity. If ROE stays at 13% and cost of equity is 13%, the residual income model suggests fair value near book value, not a 2x premium.

The key variable that would justify the premium: if full-year FY 82/83 EPS reaches Rs. 28–32 (Annualized Q3 data suggests Rs. 22.92; a stronger Q4 could push this higher), and NPL stabilizes, the forward multiple compresses to approximately 11–13x — where Nepal mid-tier banks with improving credit quality have historically attracted buyer interest.

Industry Outlook: CARE's Caution

CARE's industry outlook section (March 2026) is worth reproducing in substance:

"The major challenges currently faced by the banking sector in Nepal is centered around declining asset quality... CARs of Class A banks declined from 13.37% as on mid-July 2023 to 12.90% as on mid-July 2025 against the backdrop of deterioration in GNPL ratio from 2.98% to 4.44% over the same period... the recent political upheaval in the country has likely cut short the revival trend observed in FY25. With likely slowdown in the economy, at least for FY26, the near-term outlook for the industry remains filled with caution."⁵

This is CARE's view — not this report's independent assessment — but it is worth noting that an independent credit rating agency with access to confidential bank data is expressing explicit caution about the near-term sector trajectory. That caution is consistent with what the NPL trajectory in Sanima's own filings shows.

What Makes This Work — and What Breaks It

What makes the Sanima story work:

The bank sits on the right side of the rate cycle. CASA at 43.1% means funding costs are repricing faster than asset yields. Cost of funds fell 124 bps in twelve months; NII expanded 20.5%; operating profit grew 47.5%.¹ If this continues for another two to four quarters, FY 83/84 earnings could step materially above FY 82/83. The NRN promoter governance structure is clean — no SEBON investigation, no NRB disciplinary action, no adverse audit opinion (unqualified opinion from PKF T.R. Upadhya & Co., September 2025)³, and the CARE A- confirms the bank is creditworthy. The provision coverage of 111.52% means the NPL stock is more than fully reserved against — the balance sheet is not carrying phantom assets.⁵

What breaks the Sanima story:

NPL has risen every year for five consecutive years. The trajectory has not reversed. Stage 2 loans (Rs. 8,299M at FY 2024/25 year-end) represent a pool of credit deterioration that has not yet become NPL.³ If NPL reaches 5–6% — which requires only another 100–200 bps of deterioration from the current 3.99% — impairment charges could absorb most of the NII gains and the earnings recovery narrative would reverse. The group borrower concentration (top 20 group borrowers at 27% of advances)⁵ means a single large exposure group going wrong could have outsized impact. The CET-I cushion at 82 bps above the NRB minimum⁵ leaves limited room for further capital erosion before additional capital-raising would be required. And the CARE outlook section explicitly flags political risk and macro slowdown as near-term headwinds for the sector.

The price at Rs. 365.50 prices in most of the earnings recovery. It does not price in a second leg of credit quality deterioration. That asymmetry is the honest summary of the risk-reward.

The One Number to Watch

The full-year FY 2082/83 gross NPL, expected in the annual report (audit sign date typically September–October 2026).

If it stabilizes at or below 4.0%–4.5% — meaning the Q3 reading of 3.99% was close to the peak — the credit quality narrative turns. The earnings recovery is real, the CASA franchise is intact, and the bank is positioned for a further NIM-driven improvement in FY 83/84. That scenario supports the current valuation.

If NPL continues past 5.0%, or if the Stage 2 pool begins converting at an accelerating pace, the impairment charge will overwhelm the NII recovery. That scenario makes the current 2x book valuation look excessive for a bank whose normalized ROE may not sustainably exceed its cost of equity.

Sanima's Q3 FY 82/83 filing¹, the CARE A- rating⁵, and five years of audited financials³⁶ together describe a well-run mid-tier bank navigating a difficult credit cycle with its balance sheet and governance structure intact. Whether it is an attractive investment at Rs. 365.50 depends almost entirely on which way the NPL line goes from here.

Sources