NIMB profit drops 59.3% as bad loans rise

Nepal Investment Mega Bank reported full-year net profit of Rs 2.75 arba, down 59.3% from a year earlier as non-performing loans rose to 8.66% and weighed on earnings. Why it matters: distributable profit was negative Rs 5.09 arba, putting the focus on asset quality rather than the headline profit alone.

Earnings under pressure

Net interest income fell 8.1% to Rs 12.99 arba, while total operating income declined 3.6% to Rs 17 arba. Operating profit dropped 57.2% to Rs 4.34 arba, and earnings per share fell 59.3% to Rs 8.05. The NPL ratio increased 2.81 percentage points from 5.85%, making asset quality the clearest explanation for the weaker result. Return on equity fell 6.53 points to 4.07%, while the capital adequacy ratio declined 1.46 points to 12.27%.

The weakness was concentrated late in the year: profit in the final quarter on its own was negative Rs 39.96 crore. Retained earnings moved from Rs 49.14 crore positive to minus Rs 5.09 arba, although total equity was broadly stable, rising 0.2% to Rs 67.47 arba.

Deposits outpace lending

Customer deposits grew 11.5% to Rs 526.63 arba, but customer loans contracted 1.7% to Rs 321.34 arba. Investment securities increased 16% to Rs 160.79 arba, while the credit-to-deposit ratio fell 6.27 percentage points to 68.17%. The balance sheet therefore expanded through deposits and securities rather than loan growth, limiting the scope for a faster recovery in interest income.

Behind the sector

NIMB’s 8.66% NPL ratio is well above Nabil’s 4.2% and Global IME’s 4.96%. Its 4.07% return on equity also trails those banks’ 10.99% and 8.92%, respectively. That contrast helps explain why NIMB’s annual profit fell 59.3% while Nabil’s rose 10.9% and Global IME’s increased 0.4%.

Tape

NIMB closed at Rs 207.4 on 28 October, up 2.02% on the session, with 419,083 shares traded. Buyers paid up after the filing period, taking the stock 4.75% higher over five sessions and 5.28% higher over 20 sessions. It remains below the 52-week high of Rs 232.5 and above the low of Rs 181, so the market response has been positive even as the earnings profile remains impaired.

Next test

The next quarterly filing is the immediate catalyst, with investors looking for a lower NPL ratio, a return to loan growth and a profitable quarter after the final-quarter loss. The AGM and book closure will also clarify how the negative distributable profit affects the payout discussion. What would change the picture is evidence that asset-quality pressure has stopped worsening and that deposits are converting back into productive lending.