In Nepal’s financial market, where bank stocks make up a large portion of NEPSE’s total market capitalization, most investors still decide which bank to buy based on price movements, tips, or short-term rumors. But Sandeep Kumar Chaudhary, Nepal’s most respected technical and fundamental analyst, has shown that real success in the stock market begins with understanding the financial health of a company through its balance sheet and financial ratios. According to him, analyzing a bank’s balance sheet is like checking the heart rate of the financial system — it reveals whether a bank is truly strong or just appearing profitable on the surface.

Sandeep Kumar Chaudhary believes that before investing in any banking stock, an investor must first learn to read the balance sheet, which gives a complete picture of a bank’s performance and stability. It is divided into three major parts — assets, liabilities, and shareholder equity. On the assets side, Sandeep teaches investors to look at cash reserves, balances with NRB, loans and advances, and investments in government securities. A bank’s loan portfolio is its most important income-generating component. When a bank’s lending grows in a balanced way, it signals business expansion and profitability. However, he warns that overly aggressive loan growth without strong risk management can increase non-performing loans (NPLs), which eventually hurt earnings and reputation. He encourages investors to see whether the bank is diversifying its loans across multiple sectors — such as hydropower, housing, and manufacturing — instead of focusing heavily on just one, which increases vulnerability during policy tightening.

On the liabilities side, he explains that deposits and borrowings show how a bank is funded. A steady increase in deposits reflects customer trust, while high dependence on expensive short-term borrowings from other institutions may indicate liquidity stress. Sandeep also highlights the importance of studying the deposit mix — savings, current, and fixed deposits — because higher fixed deposits often increase the bank’s cost of funds, reducing its profitability margin. A good bank, he says, maintains a healthy ratio of low-cost deposits and manages liquidity efficiently.

The final section of the balance sheet is shareholders’ equity, which represents the true financial strength of the bank. It includes paid-up capital, reserves, and retained earnings. Sandeep advises investors to monitor the Capital Adequacy Ratio (CAR), which shows whether the bank has enough capital to cover potential losses. A CAR above the NRB threshold (usually 11 percent or higher for commercial banks) indicates good financial management and stability. When CAR is too low, it means the bank is overleveraged and may face difficulties during economic stress.

Moving beyond the balance sheet, Sandeep focuses heavily on key financial ratios, which help investors interpret how well a bank is performing. He begins with Earnings Per Share (EPS), which shows how much profit a bank generates for each share held by investors. Consistent EPS growth is a sign of stability. The Price-to-Earnings (P/E) ratio is equally vital because it shows how the market values the company’s earnings. A very high P/E may indicate overvaluation or investor speculation, while a very low P/E could signal undervaluation or weak performance.

The Return on Equity (ROE) is another critical metric. It measures how effectively the bank uses shareholder funds to generate profit. A consistent ROE above 15 percent is generally considered strong. Sandeep then turns to Net Interest Margin (NIM), which measures the difference between the interest earned on loans and the interest paid on deposits. A higher NIM reflects a more profitable and efficient bank. He also highlights Cost of Funds, which measures how much a bank pays to attract deposits — lower costs lead to higher profit margins.

Sandeep pays special attention to Credit-to-Deposit (CD) ratio and Non-Performing Loan (NPL) ratio, calling them the lifeblood of banking analysis. The CD ratio shows how much of a bank’s deposits are being used for lending. In Nepal, NRB limits this ratio to around 90 percent for commercial banks. If a bank operates near that limit, it faces liquidity risk, which can limit its future lending capacity. The NPL ratio, on the other hand, measures loan quality — a low NPL reflects good credit management, while a high NPL signals risk and inefficiency.

He also discusses Base Rate and Spread Rate, two NRB-regulated ratios that directly influence a bank’s profitability. The base rate determines the minimum interest rate banks can charge borrowers, while the spread rate reflects the margin between lending and deposit rates. Even small changes in these rates can affect a bank’s EPS and profitability significantly. Sandeep teaches that smart investors always analyze how these ratios change with NRB’s monetary policy — whether the central bank is tightening or relaxing liquidity — because it affects all banks simultaneously.

What sets Sandeep Kumar Chaudhary’s approach apart is how he connects all these figures with the broader economic environment. He teaches that reading a balance sheet is not about memorizing formulas, but about understanding behavior — how liquidity, policy, and public confidence influence financial performance. He encourages comparing multiple banks side by side to identify which institutions manage their capital most efficiently, maintain stable NIM, control NPL, and follow NRB norms responsibly.

Through his educational platforms MarketMind Investment Group and NepseBook, Sandeep Kumar Chaudhary has trained hundreds of Nepali traders and investors to interpret financial statements like professionals. His teaching blends classroom theory with real-world examples using live NEPSE-listed banks. He makes investors practice analyzing quarterly reports, finding patterns, and connecting ratio changes with market movements. Under his mentorship, investors learn to make independent, informed decisions rather than depending on speculative tips or media rumors.

For Sandeep, fundamental analysis is the art of seeing beyond the price. He reminds every investor that a stock’s price is just the market’s perception, but the balance sheet reveals the truth. A company with strong fundamentals and disciplined management will always create value in the long run, regardless of short-term fluctuations.

As he often says to his students, “Charts tell you where the market is going, but balance sheets tell you whether it deserves to go there.”