Chapter 6 · Fundamental analysis
Reading a bank
Banks dominate NEPSE, and they are judged on numbers no other sector reports.
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Commercial banks, development banks, finance companies and microfinance together make up a large share of NEPSE. If you can read a bank, you can read much of the market.
| Measure | What it tells you |
|---|---|
| Non-performing loan ratio | The share of loans not being repaid. The earliest warning of trouble. |
| Net interest margin | The gap between what it earns lending and pays on deposits. |
| Capital adequacy ratio | Its cushion against losses. NRB sets the minimum. |
| Cost to income | How efficiently it runs. |
| Deposit and loan growth | Whether the business is expanding, and how fast. |
A bank growing its loan book quickly while its NPL ratio also rises is buying growth with risk. That combination has preceded most banking trouble everywhere, not just in Nepal.
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