Banking stocks gain momentum as dividend season begins

Dividend announcements by banks and financial institutions (BFIs) for fiscal year 2025/26 have brought renewed attention to the banking sector amid signs of recovery in the stock market. 

So far, 21 BFIs, including seven commercial banks, have announced cash and stock dividends for their shareholders, as the dividend distribution season gathers pace. 

Amongst commercial banks, Siddhartha Bank has announced the highest dividend at 20%, with 10% bonus shares and 10% cash dividend. Nabil Bank followed with 15.80%, including 5% bonus shares and 10.80% cash dividend. 

Nabil Bank recorded the highest net profit among commercial banks, earning approximately NRs 7.91 billion in FY 2025/26. This highlights that dividend decision depends not only on profitability but also on capital requirements, retained earnings and future growth plan. 

Nepal Infrastructure Bank , an infrastructure development bank has, also announced a dividend of 5.26% for its shareholders.

The dividend announcements come at a time when declining deposit interest rates are making equity investments relatively appealing to investors seeking better returns. However, investors must also consider banks’ financial strength, share valuations and ability to maintain consistent earnings. 

The recent upward movement in NEPSE has also been reflected in banking stocks. On Wednesday, the NEPSE index gained 21.33 points to close at 2,621.26, continuing its upward trend for the fifth consecutive trading session. 

The commercial banking sub-index also rose by 22.45 points (1.45%) indicating positive momentum in the banking sector amid ongoing dividend announcement. The upward trend in banking stocks continued on Friday, with the sub index gaining another 11.40 points.

According to a market analyst, expectations of improved loan recovery and interest collections have boosted investor confidence in banking stocks, with hopes of stronger profitability and higher dividends in the coming years. Meanwhile, flood damage to hydropower projects in Rasuwa has dampened sentiment toward the hydropower sector, prompting some investors to shift their funds toward commercial banks, he further adds.

The broader market also maintained its upward momentum, with the NEPSE index closing at 2,634.17, marking seven consecutive trading sessions of gains and a cumulative increase of approximately 61.81 points.

The ongoing dividend announcements may further attract investors seeking returns from banking stocks, potentially supporting investor confidence and interest in the sector. 

Looking ahead, the performance of banking stocks will depend on credit growth, loan recovery, non-performing loans (NPLs) and profitability. While dividend announcements may encourage short term investor interest, a sustained recovery in banking stocks will require stronger financial performance and improved economic conditions. 

Notes: Swabhimaan Laghubitta Bittiya Sanstha Limited (SMFBS) has decided not to distribute any dividends for FY 2025/26