5 Best Commercial Banks of Nepal

Commercial banks have their own history in Nepal. In 1994, Nepal Bank Limited was established as the first bank of Nepal, and later Nepal Rastra Bank, Agriculture Development Bank, and Rastriya Banijya Bank were established. After the establishment of Nepal Arab Bank as a joint venture, several banks were established in Nepal from the private sector and as a joint venture.

Commercial Banks are the backbone of the Nepalese economy. They have a huge impact on a country’s economic growth. In Nepal, all kinds of banks are regulated by Nepal Rastra Bank (NRB). As per the NRB directive, there are four types of banks in Nepal, commercial ‘A’, Development ‘B’, Finance Company ‘C’, and Micro-Finance ‘D’.

Here, in this article, we more focus on the top five commercial banks in Nepal which have lower market prices and are good for investment. As compared to other sectors, the commercial banking sector is undervalued in NEPSE. A high supply of shares, less volatility, and a much transparent financial system are the major reason for being undervalued.

There are currently 27 commercial banks in Nepal. All commercial banks are making a good profit. Nabil Bank Limited and NIC Asia banks are the blue-chip stocks of Nepal. Their current market price is more than Rs 1000, so we have not listed those banks in this article. Also, Civil Bank Limited and Century Commercial Bank Limited’s performance are relatively weak compare to other banks therefore, we do not take those banks as well.

Some banks are merging with each other, and some ‘A’ level banks are acquiring other financial institutions which makes the banks stronger and more promising. So, investment in a good commercial bank’s stock is always worthful in the future. Here are the top five commercial banks of Nepal with minimal spending:

NMB Bank Limited

NMB bank limited started its business in 2008 in the Nepalese financial market. The largest shareholder of the bank is the Financiering-Maatschappij voor Ontwikkelingslanden (FMO). They have the 13.6% of bank shares. NMB was awarded by ‘bank of the Year 2017, 2018, and 2020’ by the banker, Financial Times, London. They have 181 branches and 137 ATM booths all over Nepal.

NMB bank limited is one of the best companies for beginners and long-term investors for investment. They have consistency in profit margin and dividend distribution. The major financial indicators of the NMB bank limited are as follows:

Financial headline:Company’s Performance
Category:Commercial Bank
Symbol:NMB
Paid-up-capital:16,325,961,000
Outstanding shares:163,259,610 shares
Earnings Per Share (EPS):20.55
P/E Ratio:23.63
Book Value:145.32
Cash Dividend % (last 5 years):3.20, 14, 20, 0.79, and 1
Bonus Share   % (Last 5 years):13, 21, 10, 15, and 19
Current Market Price:Rs 485

From the above data, we can assume that they are distributing consistent cash dividends and bonus shares every year. Also, the market price is still lower so if you buy and hold you will get a good return. Therefore, I recommend to the new investors to add this stock to their portfolio.

For example: if someone bought the 100 kitta shares five years ago, then today his/her number of shares will be more than 200 kitta shares. Also, during that five years, they got cash as a cash dividend as well. So, investment in NMB bank is the best for all types of investors.

Prime Commercial Bank Limited

It was established in 2007 as the 21st commercial bank of Nepal. It was established under the ‘bank and financial act’ of Nepal. Prime Bank is leading the Nepalese banking industry for a couple of years. PCBL is expanding its business aggressively in the last few years. Therefore, it is one of the best banks for long-term investors.

Financial headline:Company’s Performance
Category:Commercial Bank
Symbol:PCBL
Paid-up-capital:16,083,036,930
Outstanding shares:160,830,369 Shares
Earnings Per Share (EPS):23.36
P/E Ratio:21.79
Book Value:145.88
Cash Dividend % (last 5 years):-, -, -, -, 1.21
Bonus Share   % (Last 5 years):15, 16, 16, 27, 17.25
Current Market Price:Rs 509

All the financial headlines are perfect for investment. Although PCBL is not profitable in the short term it surely gives perfect returns to shareholders in long term. Bonus share distribution is an increasing trend and they have good reserve and provision, so it is good to stock to buy. Also, they have a dynamic and strong management team that will guarantee the security of your investment.

Bank of Kathmandu

Bank of Kathmandu was established with the vision of being the most preferred and trusted financial institution to all our stakeholders. Also, they have the mission to deliver the highest quality banking services to all the customers.

BOK was awarded by the bankers as a ‘Bank of the year in 2010’. They have a strong management team with efficient manpower. The major financial headlines are highlighted as below:

Financial headline:Company’s Performance
Category:Commercial Bank
Symbol:BOKL
Paid-up-capital:9,658,176,430
Outstanding shares:96,587,164 shares
Earnings Per Share (EPS):16.14
P/E Ratio:25.15
Book Value:165.45
Cash Dividend % (last 5 years):3, 11, 11, -, –
Bonus Share   % (Last 5 years):13, 6, 14, 13.25, 23
Current Market Price:Rs 405

As compared to other banks, BOKL has fewer EPS, but they have fewer outstanding shares as well. So, they will go for the merger, or they will acquire some financial institution in near future. Also, they have strong bonus share distribution and also, they are expanding their business in different areas of Nepal. Therefore, if you invest in this bank, you will get capital gain as well as a long-term gain.

Global IME Bank Limited

They were established in Nepal in January 2007. From 2012 to 2019, two commercial banks, four development banks, and one finance company were merged with Global IME Bank limited. The bank has 270 branches with 257 ATM points in different places in Nepal. This is one of the largest financial institutions of Nepal as per the paid-up value of the company.

Financial headline:Company’s Performance
Category:Commercial Bank
Symbol:GBIME
Paid-up-capital:21,632,503,000
Outstanding shares:216,325,030 shares
Earnings Per Share (EPS):22.05
P/E Ratio:22.01
Book Value:148.92
Cash Dividend % (last 5 years):2, 12.75, -, 10, –
Bonus Share   % (Last 5 years):14, 12.75, 16, 10, 16
Current Market Price:Rs 485

Although GBIME’s performance is strong, the market price is still undervalued. They always prove themselves as the best bank of Nepal by providing good services and return to the stakeholders. Therefore, this is a bank for the safest landing with high long-term gain. This is the bank where all investors always have an eye.  

Prabhu Bank Limited

After the merger of Grand Bank Nepal Limited, Kist Bank Limited, Prabhu Bikas Bank Limited, Gaurishankar Development Bank Limited, and Zenith Finance Limited in 2016, Prabhu Bank was established with the license of ‘A’ from Nepal Rastra Bank. Currently, Prabh bank is serving more than 15,00,000 customers with 214 branches and 189 ATMs across Nepal.

Financial headline:Company’s Performance
Category:Commercial Bank
Symbol:PRVU
Paid-up-capital:11,347,057,000
Outstanding shares:113,470,570
Earnings Per Share (EPS):24.79
P/E Ratio:19.75
Book Value:152.86
Cash Dividend % (last 5 years):0.53, 0.84, 0.42, -, –
Bonus Share   % (Last 5 years):10, 16, 8, -, –
Current Market Price:Rs 489

Within 6 years they provide the right share 4 times. They have a strong management team and dynamic promoter. This is one of the youngest commercial banks in Nepal. Also, people have positive word of mouth about the bank’s service which is the major reason for being successful within a short period of time. The current market price is still good to the buy price of PRVU’s stock.

Conclusion

Sanima Bank Limited, Mega Bank Limited, Kumari Bank Limited, and Citizen International Bank Limited is also the good company to buy the stock. But I put five best commercial banks of Nepal with minimal spending. Paid-up value, EPS, P/E ratio, and share and cash dividend distribution are the benchmark tool we use here. Finally, all commercial banks are good to buy for the long term because they are less volatile stocks of Nepal.

FAQs on 5 Best Commercial Banks of Nepal

  1. Which commercial bank is best in Nepal?

    NMB Bank, Prime Commercial Bank, Bank of Kathmandu, Global IME and Prabhu Bank are the best commercial banks in Nepal.

  2. What are the best Blue Chip Banks in Nepal?

    Nabil Bank Limited and NIC Asia banks are the blue-chip stocks of Nepal. Their current market price is more than Rs. 1000

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