Analyst Checklist

-  Which entity?      Bank standalone  _      Group  _
                      → NRB regulates the BANK
                      → dividends come from the BANK
                      → the Group shows the footprint

-  Which period?      This Quarter  _      Upto This Quarter (YTD)  _
                      → use YTD for performance

-  Which quarter?     Q1 _  Q2 _  Q3 _  Q4 _
                      → Q4 absorbs every year-end true-up

-  Units confirmed?   NPR '000 _   ! SEGMENT NOTE IS NPR Mio. _

-  Audited?           Audited _   Unaudited (interim) _
                      → interim figures are provisional

-  Comparatives restated?  Check for "regrouped/rearranged"

-  Bonus issue in the period?  If yes, prior-year EPS must be restated

-  1. Assets = Liabilities + Equity
-  2. Effective tax rate ≈ statutory [R], or explained
-  3. OCI pre-tax ± tax = OCI net of tax
-  4. EPS reconciles (and prior year restated for bonus issues)
-  5. Cash flow CLOSING cash = balance sheet cash
-  6. Cash flow OPENING cash = prior-year balance sheet cash
-  7. Operating cash flow subtotal re-derives arithmetically
-  8. SoCE "Transfer to reserves" row NETS TO ZERO
-  9. SoCE "Bonus shares" row NETS TO ZERO
- 10. SoCE closing equity = balance sheet total equity
- 11. SoCE OCI row = OCI statement net figure
- 12. Distributable profit regulatory adjustments = SoCE regulatory
      reserve transfer
- 13. Distributable profit appropriations = SoCE reserve transfers
- 14. Segment PBT total = P&L PBT; segment assets = total assets;
      intersegment nets to zero

-  Management Analysis section read
-  * "PROBLEMS AND CHALLENGES" section read — internal AND external
-  "Strategy" section read — does it respond to the challenges?
-  Details of Legal Action — all three questions clean?
     - Cases by/against the institution
     - Cases against promoters or directors (law/criminal)
     - Financial crime cases against promoters or directors
-  CEO responsibility statement present and signed
-  Note any issue management names that the numbers do not obviously show

-  Decompose the profit growth:
     - Did interest INCOME grow, or only NII?
     - Interest expense change — rate cycle or volume?
     - Fee income growth — durable?
     - Trading income share — volatile?
     - Impairment change
     - Operating expense change

-  ONE-OFFS identified and quantified:
     - Employee-benefit reversals (VRS, Day 1 difference)
     - Deferred tax credits
     - Impairment reversals (check for NBA takeovers)
     - Non-operating income
     - Any item appearing once only

-  Cost-to-income computed BOTH reported and one-off-adjusted

-  Non-operating expense: does it RECUR? If yes, put it in the
   operating cost base

-  * Is the growth REPEATABLE? Write one sentence saying why or why not

-  The trio, all three, together:
     - NPL ratio          ____%   (prior ____%)
     - Coverage           ____%   (prior ____%)
     - Net NPL            ____%   (prior ____%)

-  * COVERAGE NORMALISATION computed:
     Gross loans × NPL% × (prior coverage − current coverage)
     = NPR ________  =  ____% of pre-tax profit

-  Credit cost = impairment ÷ average gross loans = ____%
   (prior ____%)

-  Watchlist balance from the classification note — next year's NPL

-  Group NPL vs Bank NPL — which is worse, and why?

-  Investment property (NBA):
     - Balance rising?
     - Purchases of investment properties (cash flow)
     - ! DISPOSALS — nil disposals + rising NBA = escalating
       provisions ahead [R]

-  "Interest Capitalised Term Loan" (Part 7.17) rising?
     → construction lending or forbearance? Read alongside NPL
       and Watchlist

-  Stage 1 / 2 / 3 migration from the annual report's staging note

-  Part 7.10 "Short loan loss provision in accounts" = NIL?
     → if not, the higher-of rule may not be applied correctly

-  All three ratios recorded:
     - Capital fund to RWA   ____%   (prior ____%)
     - Tier 1 Capital to RWA ____%   (prior ____%)
     - * CET 1 Capital to RWA ____%  (prior ____%)

-  Structure derived:
     AT1    = Tier 1 − CET1 = ____pp
     Tier 2 = Total  − Tier 1 = ____pp

-  * Did CET1 RISE or FALL?
     → if headline CAR rose while CET1 fell, the improvement
       was BOUGHT with AT1/Tier 2, not earned

-  Capital raised in the period? Cash or bonus?
     → bonus shares do NOT change total equity or CET1

-  Debenture maturity profile checked
     → Tier 2 recognition AMORTISES before repayment [R]

-  Growth headroom: how much RWA can be added at current CET1
   before the minimum [R]?

-  Goodwill and DTA quantified — both deducted from CET1 [R]

-  CD ratio ____%  (prior ____%)  — headroom to the cap [R]?
-  Liquidity ratio (NLA) ____%  (prior ____%)
-  Cost of funds ____%  (prior ____%)
-  Base rate ____%  ·  Interest spread ____%

-  Deposit growth ____%  vs  Loan growth ____%
     → which is faster? That determines margin pressure ahead

-  Deposit MIX from the note — CASA ratio computed?

-  Interbank borrowing (Due to BFIs) — rising or falling?
     → falling = improving funding quality

-  Due to Nepal Rastra Bank — any balance?
     → a period-end SLF/repo balance can signal a shortfall

-  * LIQUIDITY STRESS TEST:
     Net liquid assets ≈ NLA% × total deposits = NPR ________
     Top-20 depositors                          = NPR ________
     Coverage                                   = ______×

-  * Interest received ÷ Interest income = ____%  (prior ____%)
     → widening gap = deteriorating collection

-  * Operating cash flow BEFORE changes vs Operating profit
     → within what %? This answers "is the profit real?"

-  Cash payment to employees vs Personnel expenses — the gap
   explains accruals and one-offs

-  Net operating cash flow DECOMPOSED:
     Reported ________ + loan growth ________ + placements ________
     + NRB balance ________ = adjusted ________
     → negative because of GROWTH, or genuinely weak?

-  * Group vs Bank operating cash flow — how big is the gap?
     → a large gap means the subsidiaries are cash-hungry

-  Investment securities: purchases NETTED against sales
     → what is the REAL deployment?

-  Capex vs depreciation — is the asset base ageing?

-  SoCE reconciliation traced line by line

-  * Appropriation rate = transfers to reserves ÷ profit = ____%

-  * Regulatory reserve transfer = NPR ________ = ____% of profit
     → the single best earnings-quality number in the report

-  Which regulatory adjustment drove it? Rank them:
     - Interest receivable
     - Short loan loss provision
     - NBA short provision
     - Deferred tax assets
     - Goodwill / bargain purchase gain
     - Actuarial loss
     - Interest capitalised

-  * Distributable profit per share ____  vs  Basic EPS ____
     Ratio = ____%   (prior ____%)

-  * DIVIDEND COVERAGE:
     Total distribution (cash + stock) = NPR ________
     Net profit available for distribution = NPR ________
     → COVERED?  Yes _  No _

-  Cash payout ratio ____%  ·  Total payout ratio ____%

-  Opening retained earnings — how deep is the buffer?
     → a thin or negative opening balance means no smoothing capacity

-  Segment PBT table built, ranked by contribution to the change:

     Segment          This yr    Last yr    Change    Share of Δ
     ______________   ________   ________   ________  ________
     ______________   ________   ________   ________  ________
     ______________   ________   ________   ________  ________

-  * How many CUSTOMER-LENDING segments declined?

-  * How much of the improvement came from "OTHERS"?
     → if comparable to the total change, the improvement is
       UNEXPLAINED — ask why

-  Segment yields computed: external revenue ÷ segment assets
     → any segment with assets growing and yield collapsing?

-  Return on segment assets ranked
     → is asset growth going to the most or least profitable segments?

-  Retail funding surplus = Retail liabilities − Retail assets
     → the internal capital market

-  Total external revenue growth vs total profit growth
     → flat revenue with rising profit = a cost-side story

-  * CREDIT CONCENTRATION — use the GROUP basis, not individual:
     Top-20 exposure (group)     NPR ________ = ____% of loans
     Top-20 exposure (individual) NPR ________ = ____% of loans
     Ratio between them          ______×
     * Top-20 ÷ Total equity     ______×
     At 50% LGD → ____% of capital consumed

-  * DEPOSIT CONCENTRATION:
     Top-20 deposits  NPR ________ = ____% (prior ____%)
     Rising or falling?
     → falling while deposits grow = broad-based growth 

-  BORROWING CONCENTRATION:
     Top-10 lenders as % of deposits = ____%
     → immaterial if the bank is deposit-funded

-  * "Loans and Advances extended to Promoters" = NIL?
     Yes _  No _ → if not nil, check terms, limits [R] and approval

-  Board meetings ____  ·  Committee meetings ____
-  Audit / Risk / HR committees chaired by non-executives?
-  Independent director(s) on the board?
-  Related-party transactions with subsidiaries reviewed
-  Parent lending to a microfinance subsidiary — how large?
     → real credit risk that vanishes on consolidation
-  Dividends upstreamed from subsidiaries ÷ subsidiary profit = ____%
     → Group EPS overstates dividend capacity by the shortfall

-   NPL rising while coverage falls
-   CET1 flat or falling while headline CAR rises
-   Interest received well below interest income, and widening
-   Distributable profit per share falling while EPS rises
-   A large regulatory reserve transfer
-   Loan growth much faster than deposit growth
-   NBA rising with nil disposals
-   Interest capitalised rising alongside NPL
-   "Others" segment moving by ≈ the total profit change
-   Large-borrower concentration exceeding total equity
-   A recurring material "non-operating expense"
-   Any related-party lending to promoters or directors

-   Negative operating cash flow → decompose before judging
-   Cash balance halving → check where it went (securities?)
-   Trillion-rupee gross securities purchases → net them
-   Large gross derivative assets AND liabilities → check the net
-   A lumpy Q4 → annual actuarial + year-end true-ups
-   "Investment in subsidiaries: nil" in the Group column
      → it means they were consolidated

-  [R] Every threshold verified against the Unified Directives in
      force for THIS reporting period:
        - Capital adequacy minimums and buffers
        - Loan classification thresholds and provisioning rates
        - CD ratio ceiling
        - NLA minimum
        - CRR / SLR
        - General reserve appropriation %
        - Deprived sector minimum %
        - CSR and training fund %
        - Single-obligor and related-party exposure limits
        - NBA provisioning schedule
        - Corporate tax rate for BFIs (Income Tax Act + Finance Act)

-  [R] ICAN CARVE-OUT position checked for the period
      → an IFRS answer is not automatically the Nepali answer

-  [R] EIR transition: are "old term loans" still on Gross Interest
      Rate? Does it affect period comparability?

-  [R] FATF listing status for Nepal verified as at the reporting date

-  Can you state, in ONE PARAGRAPH:
     - How much of the profit growth is franchise?
     - How much is cycle?
     - How much is one-off?
     - Is asset quality improving or deteriorating, and by how much
       in rupees?
     - Is the capital position genuinely stronger, or purchased?
     - What is the real dividend capacity?
     - Where is the concentration risk?
     - What constrains the bank next year?

-  Have you separated:
     - What NFRS says the shareholders EARNED (EPS)
     - What NRB says they may RECEIVE (distributable per share)

-  Have you stated your conventions?
     - Group or Bank
     - Average or closing balances
     - Net NPL denominator
     - Which EPS basis for PE

-  * THE FINAL TEST:
     Have you found at least ONE material thing that the
     headline numbers do not show?

     If not, you have not finished.

┌──────────────────────────────────────────────────────────────────────┐
│  COMPARE FREELY                        NEVER COMPARE WITHOUT CHECKING│
├──────────────────────────────────────────────────────────────────────┤
│   CET 1 ratio                           ! Total CAR alone             │
│      Net interest, fee and commission   ! NII or fee income separately│
│     income                                (EIR classification differs)│
│   Credit cost (÷ average loans)      ! Absolute impairment            │
│   Cost of funds                         ! Cost-to-income across the   │
│   Base rate (mandated formula)          NFRS 16 boundary              │
│   CD ratio, NLA (NRB definitions)       ! PE ratios (Group vs Bank    │
│   Distributable profit per share        EPS basis differs)            │
│     ÷ EPS  ← the quality ratio          ! Segment margins (definitions│
│                                            differ by bank)            │
│                                         ! NPL (check Group vs Bank,   │
│                                            and write-off policy)      │
│                                         ! Coverage (collateral profile│
│                                            and NPL grade mix differ)  │
└──────────────────────────────────────────────────────────────────────┘