Race for Dashain Payouts: Six Banks Await Central Bank Nod as Everest Commands 38% Dividend Capacity

KATHMANDU: With the Dashain festival fast approaching, Nepal’s stock market is buzzing with anticipation as six prominent banking institutions queue up at the central bank to secure clearance for their annual dividend distributions. Following the completion of their mandatory external audits for the fiscal year 2082/83, Nabil Bank, Everest Bank, Sanima Bank, Machhapuchhre Bank, Kumari Bank, and the Nepal Infrastructure Bank (NIFRA) have formally requested the Nepal Rastra Bank (NRB) for pre-approval. This regulatory green light is a strict prerequisite before any bank’s board of directors can officially propose dividend rates to its shareholders.

A deeper analysis of the unaudited financial reports exposes a stark disparity in the financial health and rewarding capacity among these institutions. Everest Bank emerges as the undisputed leader in this cohort, flaunting a formidable dividend-paying capacity of 38.32 percent. This indicates a highly robust distributable profit pool, setting a high benchmark for the sector. Following at a respectable distance are Sanima Bank and Nabil Bank, which have demonstrated solid capacities of 20.85 percent and 19.1 percent, respectively.

On the other end of the spectrum, the financial buffers appear much tighter. Machhapuchhre Bank holds a modest dividend capacity of 7.51 percent, while Kumari Bank trails with a marginal 3.02 percent. However, financial analysts are quick to caution retail investors against taking these percentages at face value. A bank’s "dividend capacity" merely represents the maximum legal limit it can distribute based on its free reserves. The actual payout is often lower, shaped by the board of directors' strategic need to retain earnings for future growth, buffer against potential loan defaults, and ultimately, the NRB’s final modifications during the approval phase.

Interestingly, market insiders project a distinct strategic pivot this year: a strong preference for cash dividends over bonus shares. Historically, Nepali banks relied heavily on issuing bonus shares to meet the central bank's paid-up capital requirements. Now, with capital bases largely stabilized, banks are looking to inject actual liquidity into the hands of their investors. This shift is particularly crucial in the current macroeconomic climate, as shareholders seek immediate cash returns ahead of the country's largest festive shopping season.

The primary hurdle now is bureaucratic pacing. To get the dividends into shareholders' bank accounts before Dashain, the timeline is exceptionally tight. Once the NRB grants its preliminary clearance, the respective bank boards must endorse the proposed rates and subsequently publish a mandatory 21-day public notice to convene their Annual General Meetings (AGMs). The AGM then provides the final statutory endorsement. If the central bank expedites the file reviews, a pre-Dashain windfall is highly plausible. Conversely, any regulatory red tape will inevitably push the payouts to the post-festive calendar.

Expectations across the commercial banking sector are already running high, spurred by early regulatory clearances in the lower-tier banking segments. Kamana Sewa and Shangrila Development Bank have already navigated the NRB’s pre-approval maze successfully. For the tens of thousands of retail investors holding commercial bank stocks, all eyes are now firmly fixed on the central bank's next move.