Global IME profit stalls as deposits outrun lending

Global IME Bank reported net profit of Rs 6.23 arba for the full fiscal year to Ashadh, a 0.4% rise that came from cheaper funding rather than from a bigger lending book. Why it matters: the bank added 19% to total assets and 21.5% to deposits and still barely moved its bottom line, so the coming year turns on converting that deposit base into earning assets.

A flat year on a bigger book

Interest income fell 8.3% to Rs 40.3 arba and net interest income slipped 3% to Rs 16.2 arba, holding total operating income to Rs 21.8 arba, up 2.5%. Operating profit was Rs 8.68 arba, down 1%, and net profit Rs 6.23 arba, up 0.4%. Earnings per share of Rs 16.34 were up 0.4% on an unchanged share count, and return on equity eased 0.69 points to 8.92%. The ratio that explains the year is asset quality: NPLs at 4.96% were 0.09 points worse than a year ago, and that is where the relief from funding costs went.

Where the growth went

Customer deposits rose 21.5% to Rs 669.17 arba while customer loans grew 6.7% to Rs 439.35 arba. The difference went into investment securities, up 34.2% to Rs 199.66 arba, while borrowings were cut 26.5% to Rs 9.11 arba. The credit-deposit ratio fell 7.64 points to 68.43%, cost of funds dropped 0.87 points to 3.43% and the interest spread narrowed 0.34 points to 3.29%. Capital adequacy slipped 1.29 points to 12.1%, and distributable profit of Rs 4.58 arba was 14.8% lower than a year earlier — the figure that sets the dividend conversation.

The peer set makes the growth look thin. Nabil raised net profit 10.9% on a return on equity of 10.99% and Everest 3.1% at 14.41%, against Global IME's 0.4% and 8.92%. On asset quality it sits mid-pack, with 4.96% NPLs against 4.2% at Nabil, 3.53% at Siddhartha and 8.66% at Nepal Investment Mega.

How the shares are trading

The stock added 1.04% to close at Rs 253.3 on 27 October on 261,003 shares, taking five-session gains to 1.93% and twenty-session gains to 0.97%. That is a slow grind rather than a re-rating: the price sits just under its 52-week high of Rs 257.5 and well clear of the Rs 210.48 low, and the advance held into the close rather than fading. Buyers have been willing to pay up for a flat year, which says the market has accepted the earnings base and is waiting on the loan book.

The next test

The next test is the first-quarter filing of the new fiscal year, then the annual general meeting and book closure that follow from a distributable profit of Rs 4.58 arba. What would change the picture is a quarter in which customer lending narrows the gap with deposits — a credit-deposit ratio of 68.43% leaves the room — or NPLs turning back below last year's 4.87%. If the spread holds near 3.29% while loans grow, the flat-profit story breaks; if deposits keep compounding into securities, it does not.