NMB Bank profit falls as loan loss provisions surge despite strong core income

Kathmandu: NMB Bank has reported a decline in profit after a sharp rise in bad loans forced the lender to set aside substantially higher provisions for potential credit losses. The drop in earnings came even though the bank posted solid growth in both net interest income and fee-based revenue.

By the end of the second quarter of fiscal year 2025/26 (mid-January), the bank recorded a net profit of Rs 1.64 billion, down 17.71 percent compared with the same period last year. In the corresponding period of the previous fiscal year, NMB Bank had earned about Rs 2 billion in net profit.

Net interest income rose 12.18 percent year-on-year, increasing from Rs 4.25 billion to Rs 4.77 billion. Net fee and commission income also saw strong growth, climbing 21.18 percent to Rs 1.34 billion.

Total operating income increased 15.21 percent to Rs 6.55 billion during the review period.

However, provisions set aside for loan losses jumped dramatically, rising from Rs 344.8 million a year earlier to Rs 1.55 billion. The steep increase in provisioning offset income gains, leading to declines in both operating and net profit. Operating profit fell 18.05 percent to Rs 2.51 billion.

Earnings per share also dropped alongside profit. EPS stood at Rs 17.10 in the second quarter, down from Rs 20.78 in the same period last year. As of mid-January, the bank’s net worth per share was Rs 168.75, and its price-to-earnings ratio stood at 13.98 times.

Distributable profit for the first six months of the fiscal year totalled Rs 499.6 million. Due to interest income that has not yet been realized in cash, the bank transferred Rs 406.1 million into a regulatory reserve. Retained earnings stood at Rs 564.3 million.

The bank has paid-up capital of Rs 19.29 billion and reserves totalling Rs 12.81 billion.

Customer deposits increased from Rs 280.93 billion at the end of the last fiscal year to Rs 291.44 billion by mid-January. Loans and advances grew from Rs 228.46 billion to Rs 239.47 billion over the same period.

The non-performing loan ratio rose to 4.56 percent, up from 3.96 percent a year earlier. The bank’s core capital adequacy ratio stands at 8.79 percent, while the average base rate for the quarter was 5.48 percent.