Sanima Bank Profit Rises 38%, But NPL Doubles: What Investors Should Know

 

1. Company Overview

Sanima Bank Limited (NEPSE: SANIMA) began operations as a national-level development bank on 6 December 2004 and converted to a full ‘Class A’ commercial bank in 2012. It has been listed on the Nepal Stock Exchange since 17 February 2017. Sanima Bank is headquartered in Naxal, Kathmandu, and has a nationwide network of over 100 branches and extension counters. The bank is supported by two wholly owned subsidiaries, Sanima Capital Limited (merchant banking) and Sanima Securities Limited (stock brokerage).

Pawan Kumar Acharya became Sanima Bank’s Chief Executive Officer on 26 January 2026, after serving as Senior Deputy CEO. Tuk Prasad Poudel is the Chairman of the Board. Sanima also has a notable number of Non-Resident Nepali (NRN) promoters, along with domestic promoters and public shareholders.

In FY2025/26, Sanima raised NPR 2 billion through perpetual, non-redeemable preference shares to strengthen its core capital. Because preference shareholders have priority over ordinary shareholders, this NPR 2 billion is deducted from total equity when calculating book value per ordinary share. This is one reason the bank’s reported equity increased significantly during the year.

ICRA Nepal had given Sanima an A- issuer rating but placed it on ‘Watch with Negative Implications’ due to concerns about asset quality across the banking sector. In March 2026, ICRA Nepal withdrew the rating. This does not mean that Sanima was downgraded; rather, the rating was simply withdrawn. However, investors no longer have ICRA Nepal’s independent assessment of Sanima’s credit quality as a reference when evaluating the bank’s risks.

2. Sanima Bank Financial Performance (FY2016/17 – FY2025/26)

2.1 Sanima Bank's 10-Year Growth in Assets, Deposits and Loans

Sanima has expanded strongly over the past decade. Its total assets increased from NPR 63.5 billion in FY2016/17 to NPR 291.2 billion in FY2025/26, growing at an annual rate of around 18.4%. Over the same period, deposits grew by about 18.0% per year, while loans grew by about 16.1% per year.

Source: Company financial statements

The most recent year alone was solid: assets grew 10.5%, deposits grew 11.2%, and loans grew 11.0%, broadly in line with the bank's longer-run trend, and a sign that growth held up even as the wider sector turned more cautious about credit quality.

2.2 Sanima Bank Profit and ROE Rebound

After a weaker FY2024/25, when net profit fell to NPR 2.57 billion and ROE dropped to 11.17%, its lowest level in a decade, Sanima made a strong recovery in FY2025/26. Net profit increased 38.0% year-on-year to NPR 3.55 billion, lifting ROE to 13.67% and ROA to 1.22%. Net interest income grew by 10.0% to NPR 6.99 billion, so the strong improvement in profit was not driven by income growth alone. Lower loan-loss provisions and better cost control also played an important role. Earnings per share increased 36.0% to NPR 25.75

Note: ROE is independently calculated as Net Profit ÷ Total Equity for the period. Differences from the company-reported ROE arise from its use of average equity in the calculation.

2.3 Asset Quality: Better Than Peers, But Worth Watching

The main number to watch in this report is the Non-Performing Loan (NPL) ratio, which shows the portion of a bank’s loans where borrowers are no longer making payments on time. Sanima’s NPL ratio increased sharply from 1.21% to 2.87% in FY2025/26, more than doubling in a year. This is a clear sign of pressure on asset quality and is the main reason we consider the bank fairly valued rather than calling it undervalued with greater confidence.

Source: Company financial statements; Sharesansar data (industry average).Source: Company financial statements; Sharesansar data (industry average).

Two factors help put this into perspective. First, the increase in NPLs is not unique to Sanima, as asset quality has deteriorated across Nepal’s banking sector. The industry-wide NPL ratio rose from around 1.3% in 2022 to above 4.6% by mid-2025 and remained under pressure in 2026, with Nepal Rastra Bank identifying deteriorating asset quality as one of the sector’s key concerns. Despite this broader trend, Sanima’s NPL ratio of 2.87% remains well below the industry average of 5.52% in FY2025/26.

Second, Sanima’s NPL trend showed some improvement toward the end of FY2025/26. Based on media reports citing the bank’s quarterly disclosures, NPL was around 3.0% in the third quarter before falling to 2.87% at year-end. This could be an early sign that asset-quality pressure is stabilizing rather than worsening.

2.4 Per-Share Metrics and Dividends

Fiscal Year	EPS (NPR)	BVPS (NPR)	ROE	NPL	Cash Dividend	Bonus Shares
FY2021/22	18.48	149.29	12.38%	0.35%	0.98%	10%
FY2022/23	20.91	155.53	13.45%	1.30%	5.70%	9%
FY2023/24	17.65	154.06	11.46%	1.73%	5.26%	0%
FY2024/25	18.94	169.59	11.17%	1.21%	7.37%	0%
FY2025/26	25.75	188.42	13.67%	2.87%	not yet declared	not yet declared

Sanima has increasingly focused on retaining more of its profits within the bank rather than paying them out as dividends. In recent years, cash dividends have mostly remained in the mid-single digits, much lower than the double-digit payouts seen a few years ago. This suggests that the bank is choosing to reinvest its earnings to support growth and strengthen its capital position.

The dividend for FY2025/26 had not been announced when this report was prepared. However, based on distributable profit of around NPR 2.83 billion and paid-up capital of NPR 13.58 billion, Sanima could potentially support a combined cash and bonus dividend of around 20.85%. This gives it one of the highest dividend capacities among its peers, although the actual dividend may be lower.

2.5 How Sanima Compares to the Industry

Metric (FY2025/26)	SANIMA	Industry Average
EPS	25.75	18.37
Return on Equity	13.67%	8.83%
Return on Assets	1.22%	0.84%
NPL	2.87	5.52
Book Value / Share	188.42	198.11

Source: Company financial statements; Sharesansar data (industry average).

3. Sanima Bank Valuation

This report uses two different methods to value Sanima Bank. The first is a Residual Income (Excess Return) model, which estimates the bank’s value based on its expected future performance. The second is a Relative Valuation, which compares Sanima with 18 other listed commercial banks.

Using two different valuation methods helps us cross-check the results and see whether they point in the same direction. In Sanima’s case, both approaches arrive at a similar conclusion, which gives greater confidence in the valuation.

3.1 Residual Income Valuation

The Residual Income model essentially asks one question: Is Sanima earning enough to justify the risk shareholders are taking by investing in the bank?

The bank already has a certain amount of equity or book value on its balance sheet. The model then estimates what that equity is really worth by adding the present value of the future profits Sanima is expected to earn above the return shareholders require.

That required return is known as the cost of equity. In this report, it is calculated using the Capital Asset Pricing Model (CAPM). The calculation considers the risk-free rate based on the average cut-off rate of Nepal government development bonds, adjusted for tax, along with a risk premium based on Sanima's beta. Beta measures how much Sanima's share price moves compared with the broader NEPSE index. The model also uses NEPSE's long-term 22-year compound annual growth rate of 11.25%. Together, these assumptions result in a 10.77% cost of equity.

To account for different possible outcomes, the model looks at three scenarios over a 10-year forecast period. The main difference between them is how quickly Sanima's loan portfolio is expected to grow. In the Base Case, loan growth gradually slows from around 12.3% to 9% per year. The Best Case assumes stronger growth, while the Worst Case assumes slower growth. The scenarios also differ in assumptions about credit costs, how much of the loan portfolio could eventually turn bad, and the terminal growth rate, which is assumed to be between 4% and 6% after the 10-year forecast period.

Scenario	Terminal Growth	Cost of Equity	Value / Share	Upside / (Downside)
Worst Case	4%	10.77%	NPR 227.22	–38.9%
Base Case	5%	10.77%	NPR 364.95	–1.8%
Best Case	6%	10.77%	NPR 491.89	+32.3%
Average	—	10.77%	NPR 361.35	–2.8%

The Base Case valuation of NPR 364.95 is only 1.8% below the current market price, suggesting that Sanima is trading very close to what the model considers its fair value.

However, the valuation changes significantly under different scenarios. The Worst Case gives a value of around NPR 227, while the Best Case reaches about NPR 492. This wide range shows that Sanima's value depends heavily on how quickly its loan portfolio grows and how effectively it manages credit risk over the next 10 years.

In simple terms, Sanima looks fairly valued under the base assumptions, but there is still meaningful upside or downside depending on how the bank performs.

3.2 Relative Valuation Against Peer Banks

The second valuation approach takes a simpler route. Instead of forecasting Sanima's future performance, it asks: What would Sanima be worth if the market valued it similarly to other comparable banks?

To do this, the model compares Sanima with 18 other commercial banks listed on NEPSE using two common valuation ratios: Price-to-Earnings (P/E), which shows how much investors are willing to pay for each rupee of the bank's earnings, and Price-to-Book (P/B), which shows how much investors are paying for each rupee of the bank's net assets.

The analysis uses the median P/E of 17.93x and median P/B of 1.37x across the peer group. The median is used instead of the average because it reduces the impact of unusually high or low valuations from a few banks. Applying these peer multiples to Sanima's own EPS and book value per share produces two implied fair values:

Approach	Multiple Applied	Implied Value	Upside / (Downside)
Price-to-Earnings (P/E)	17.93x (peer median)	NPR 461.74	+24.2%
Price-to-Book (P/B)	1.37x (peer median)	NPR 257.23	–30.8%
Blended (average of both)	—	NPR 359.48	–3.3%

The difference between the two valuation methods tells us something important about how the market currently views Sanima.

Sanima is trading at a P/E of 14.4x, which is below the peer median of 17.93x. However, its P/B of 1.97x is higher than the peer median of 1.37x.

This combination suggests that Sanima is generating stronger returns on its equity (ROE) than many of its peers. In simple terms, investors are willing to pay more for each rupee of Sanima's net assets because those assets are producing better returns, even though the bank's earnings multiple does not look particularly expensive compared with other banks.

The table below shows how Sanima compares with all 18 peer banks included in the analysis:

Bank	EPS	P/E	BVPS	P/B	LTP (as of Shrawan end)	NPL %	Div. Cap %	vs. Peer-Implied Value
NMB	20.18	12.0x	181.15	1.34x	242.5	4.91%	9.08%	Discount
SBL	23.06	17.9x	225.17	1.84x	413.5	3.53%	26.15%	Premium
KBL	28.17	7.7x	170.80	1.28x	218.0	7.46%	3.02%	Discount
MBL	17.49	14.6x	169.90	1.50x	254.8	3.98%	7.51%	Discount
EBL	36.95	19.5x	256.47	2.82x	722.0	0.49%	38.32%	Premium
SBI	18.04	22.4x	194.73	2.07x	404.0	2.92%	11.04%	Premium
HBL	6.56	29.7x	177.48	1.10x	195.0	7.96%	0.00%	Premium
SCB	28.38	23.2x	225.80	2.91x	658.0	2.03%	19.04%	Premium
NABIL	28.36	19.4x	247.28	2.22x	550.0	4.20%	19.10%	Premium
CZBIL	13.53	15.1x	160.51	1.28x	204.9	5.88%	3.37%	Discount
PCBL	19.63	12.2x	175.80	1.37x	240.0	6.69%	9.10%	Discount
ADBL	16.11	18.9x	231.71	1.32x	304.8	4.07%	6.54%	Premium
SANIMA	25.75	14.4x	188.42	1.97x	371.8	2.87%	20.85%	Premium
NBL	30.63	8.8x	287.70	0.93x	268.7	4.18%	15.84%	Discount
GBIME	16.34	15.4x	183.14	1.37x	251.6	4.96%	12.02%	Discount
NICA	1.22	266.4x	172.32	1.89x	325.0	9.26%	0.00%	Premium
PRVU	-1.02	n/m	140.92	1.35x	190.0	15.55%	0.00%	Premium
NIMB	8.05	24.3x	197.71	0.99x	195.4	8.66%	0.00%	Discount
LSL	11.64	18.9x	177.02	1.25x	220.6	5.23%	6.79%	Discount

Two points stand out from the comparison. First, Sanima's NPL ratio of 2.87% is the third-lowest among the 19 banks in the comparison. Only EBL at 0.49% and SCB at 2.03% have lower NPL, while the peer median stands at 4.91%. Second, Sanima's dividend capacity of 20.85% is also among the highest in the group, ranking third behind EBL (38.32%) and SBL (26.15%). The peer median is just 9.08%.

Overall, Sanima remains one of the stronger banks in the peer group when it comes to asset quality and its ability to return profits to shareholders, despite the increase in NPLs this year.

4. Putting It Together: Fair Value Summary

The most interesting takeaway from the analysis is that both valuation methods point to almost the same value. One approach looks at Sanima's expected performance over the next 10 years, while the other simply compares its current valuation with 18 other commercial banks. Despite using very different assumptions and methods, both arrive at nearly the same valuation, which strengthens the case that the estimated fair value is reasonable.

Method	Fair Value / Share	Upside / (Downside)
Residual Income – Base Case	NPR 364.95	–1.8%
Residual Income – Average of 3 scenarios	NPR 361.35	–2.8%
Relative Valuation – Blended P/E + P/B	NPR 359.48	–3.3%
Combined Central Estimate	NPR 362.22	–2.6%

At NPR 371.80, Sanima's share price is only about 2.6% above the blended fair value estimate. Such a small difference is well within the normal margin of error that comes with any valuation model.

Based on both valuation methods, Sanima appears to be fairly valued at its current price. The stock does not look particularly cheap, but it also does not appear expensive when compared with its fundamentals and other banks in the sector.

For long-term investors, however, the bigger takeaway is the wide valuation range of NPR 227 to NPR 492. This shows that Sanima's future value will depend heavily on how quickly its loans grow and, more importantly, whether it can keep asset quality under control.

5. Conclusion

Sanima Bank delivered a strong recovery in FY2025/26, with net profit increasing by 38% to NPR 3.55 billion and ROE improving to 13.67%. The bank has also maintained solid balance-sheet growth, while its NPL ratio of 2.87% remains below the peer and industry levels despite the increase during the year. These factors highlight Sanima’s relatively strong position within the banking sector.

From a valuation perspective, both the Residual Income and Relative Valuation approaches point to a similar fair value of around NPR 359–365 per share. With the current market price at NPR 371.80, SANIMA appears fairly valued, with limited upside at the current level.

Going forward, the key factors to watch will be asset quality, loan growth, credit costs, and interest margin pressure. While the recent improvement in profitability is encouraging, the rise in NPLs remains the main concern. Overall, Sanima Bank presents a fundamentally sound profile with good earnings recovery and relatively strong asset quality compared with peers, but the current market price already reflects much of these strengths. Therefore, the stock appears more suitable for investors with a long-term perspective who are comfortable monitoring the bank’s credit quality and future growth rather than for investors seeking significant near-term upside.

Disclaimer & Disclosure

Disclaimer

This article is provided for informational and educational purposes only and should not be considered personalized investment advice, a recommendation, or an offer or solicitation to buy or sell any security.

The analysis of Sanima Bank Limited (NEPSE: SANIMA) is based on publicly available financial information and the author's own analysis and valuation models. Financial figures, ratios, forecasts, fair-value estimates, and scenario analyses are based on assumptions that may change over time and may not materialize as expected.

The estimated fair values presented in this analysis are model outputs, not guaranteed price targets. Valuation results can vary significantly depending on assumptions relating to earnings growth, loan growth, credit costs, cost of equity, terminal growth, interest rates, asset quality, and other factors.

Past financial performance is not necessarily indicative of future results. Investors should conduct their own research and due diligence and consider their individual financial circumstances, investment objectives, and risk tolerance before making any investment decision.

While reasonable care has been taken to ensure that the information presented is accurate and reliable, no representation or warranty is made regarding its completeness, accuracy, or timeliness. The author and publisher accept no responsibility for any investment losses or other consequences arising from reliance on the information contained in this article.

Disclosure

This analysis represents the author's independent research and interpretation of Sanima Bank's publicly available financial information. The valuation conclusions are based on the methodologies and assumptions described in the article and should not be interpreted as certainty about the future performance or market price of SANIMA.

Any views, estimates, or conclusions expressed are those of the author at the time of publication and may change as new financial information, market conditions, regulatory developments, or company-specific factors emerge.