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5th October 2025, Kathmandu
The recent announcements by Citizens Bank International, Sanima Bank, Everest Bank, and Machhapuchhre Bank regarding their dividend distributions for the fiscal year 2024/25 provide valuable insights into the performance and capital management strategies within Nepal’s commercial banking sector.
Commercial Banks Announce Dividends
The range of dividends, from Everest Bank’s commanding 20% total distribution to Citizens Bank’s more modest 5.263%, highlights the varying degrees of profitability and reserve positions among the institutions in what has been a challenging, yet ultimately profitable, year for many banks.
Deeper Look into the Dividend Mix: Bonus Shares vs. Cash Dividend
A crucial element in analyzing these dividends is the ratio of bonus shares to cash dividends, a decision often influenced by regulatory requirements from Nepal Rastra Bank (NRB), the need to strengthen the bank’s capital base, and the management’s outlook on future growth.
Everest Bank’s High Payout and Mixed Strategy: With a 20% total dividend (6% bonus and 14% cash), Everest Bank presents the highest overall payout among the four. The substantial cash component (more than double the bonus) suggests strong liquidity and confidence in its current capital adequacy levels. This high cash-to-bonus ratio may signal a mature bank prioritizing immediate returns for shareholders who prefer cash income, though the 6% bonus shares still contribute to expanding its paid-up capital and maintaining a positive investor sentiment often associated with stock dividends in the Nepalese market. High dividends generally serve as a strong market signal of financial health and future earnings potential, in line with dividend signalling theory, which is often observed in the Nepalese stock market despite some academic debate.
Machhapuchhre Bank’s Balanced Approach: The bank’s 8% total dividend is split equally, with 4% as bonus shares and 4% as cash. This balanced approach is characteristic of banks aiming to satisfy shareholders who appreciate both immediate cash returns and an increase in the number of shares. The bonus shares will augment the bank’s capital, while the cash dividend provides tangible, liquid income. Machhapuchhre Bank’s completion of its Annual General Meeting (AGM) is a notable distinction, indicating an earlier finalization of its corporate governance process compared to the other three.
Citizens Bank’s Focus on Capital Building: Citizens Bank’s proposal is heavily weighted towards bonus shares (5% bonus vs. 0.263% cash). The minimal cash component, serving only for tax purposes on the bonus, suggests a strategic priority for capital retention and strengthening its core capital base through capitalization of profits. This strategy is typical for banks seeking to support future growth, meet regulatory capital thresholds, or simply conserve cash in a tight liquidity environment. In the context of the Nepalese market, bonus shares are frequently favored by banks as they allow for capital-building without requiring a cash outflow.
Sanima Bank’s Cash-Only Preference: Sanima Bank’s decision to issue a total cash dividend of 7.3685% and no bonus shares is the most conservative approach toward capital structure. This move emphasizes a high payout ratio from current profits to provide immediate, certain returns to its shareholders. It could indicate that the bank’s paid-up capital is already sufficiently robust, or that the management believes that the market and its shareholders prefer direct cash flow over the dilution effects of bonus shares. This strategy appeals to income-oriented investors, particularly those in higher tax brackets in a market where capital gains from selling bonus shares are common.
The Significance of Book Closure and AGM Status
The book closure date is a critical point for investors, as only shareholders recorded on that specific date are entitled to the declared dividend. For Citizens, Sanima, and Everest Banks, the ‘Not announced’ status for book closure means investors still have a window to purchase shares (before the book closure) to be eligible for the declared dividends, or sell shares (on or after the book closure/ex-dividend date) while retaining dividend entitlement. The ‘Pending’ status of the AGM for these three banks signifies that the proposed dividends are still recommendations by the board of directors and await final approval from the shareholders in the general meeting and, most importantly, from the NRB.
Machhapuchhre Bank’s ‘Completed’ AGM status, on the other hand, means the 8% dividend is finalized and distribution is imminent, providing clarity and certainty to its shareholders. The pending book closure date for Machhapuchhre Bank, even after the AGM, is likely the next administrative step to determine the final list of eligible shareholders.
Broader Context and Market Implications
These announcements mark the beginning of the annual dividend season, which typically influences trading activity on the Nepal Stock Exchange (NEPSE). Investors often engage in speculative buying of stocks with attractive dividend proposals, especially those with high bonus share components, which have historically been a primary driver of stock price appreciation in the Nepalese market due to their lower-tax nature and a perception of a company getting “bigger” in the eyes of some retail investors.
The varied dividend distributions reflect a mixed financial performance across the sector for FY 2081/82. Banks with higher profits and healthy reserves, such as Everest Bank, are able to afford higher payouts. Conversely, banks with a need to bolster capital or manage regulatory pressure on their risk-weighted assets may opt for lower cash and higher bonus ratios, like Citizens Bank. Sanima Bank’s all-cash decision is a notable outlier that challenges the prevailing market preference for bonus shares, positioning it as a potentially more stable income stock.
In conclusion, these four banks’ dividend announcements provide a microcosm of the differing strategic priorities and financial capacities within the Nepalese commercial banking landscape, each with distinct implications for current and prospective shareholders. The forthcoming announcement of book closure dates for the three pending banks will be the next key development for the market.
For More: Commercial Banks Announce Dividends