Mero Microfinance Profit Growth Despite Rising NPL
2nd February 2026, Kathmandu
Mero Microfinance Laghubitta Bittiya Sanstha Limited has released its unaudited financial results for the second quarter of the fiscal year 2082 2083, highlighting a period of significant earnings recovery and operational expansion. The report, covering the six month period ending in Poush 2082, reveals a substantial rise in net profit and interest income.
Mero Microfinance Profit Growth
However, the positive Mero Microfinance Profit Growth is currently juxtaposed with a sharp increase in non performing loans, creating a complex financial outlook that has prompted careful observation from market analysts and institutional investors alike.
Strong Performance in Net Profit and Interest Income
The centerpiece of the latest report is the Mero Microfinance Profit Growth in net earnings. The institution posted a net profit of 98.5 million rupees for the first half of the current fiscal year. This represents a robust 23.83 percent increase compared to the 79.5 million rupees earned during the corresponding period of the previous fiscal year 2081 2082. This upward trajectory indicates that the company has effectively navigated the low growth environment of the first quarter, during which it had reported a temporary net loss.
The core driver of this profit surge has been a healthy expansion in interest income. Net interest income for the review period reached 544.5 million rupees, rising from 506.3 million rupees in the previous year. This 7.5 percent growth suggests that despite the challenging credit environment, the microfinance leader has managed to optimize its lending margins and maintain a steady flow of interest revenue from its rural and semi urban loan portfolios.
Operational Efficiency and Operating Profit
The Mero Microfinance Profit Growth is further validated by a 19 percent jump in operating profit. The company’s operating profit transitioned from 118 million rupees to over 140 million rupees by the end of Poush. This growth in core operational earnings is a critical sign of health, as it demonstrates that the institution’s profitability is derived from its primary business activities rather than non recurring income or one time asset sales.
Total operating income also saw an 8 percent increase, reaching 593.3 million rupees. By keeping the growth of operating expenses below the growth rate of total income, Mero Microfinance has exhibited strong operational leverage. This efficiency is particularly important in the microfinance sector, where high service costs at the grassroots level often eat into the bottom line of smaller institutions.
Asset Quality and the Surge in Non Performing Loans
While the Mero Microfinance Profit Growth paints a picture of financial success, the institution is simultaneously grappling with a significant deterioration in asset quality. The non performing loan (NPL) ratio has surged to a concerning 19.54 percent as of Poush 2082. This is a dramatic increase from the 7.78 percent NPL reported during the same period in the previous year.
The company has attributed this spike to several external factors:
Economic Hardships: Persistent inflation and slow economic recovery in rural areas have impacted the repayment capacity of micro borrowers.
Repayment Discipline: Certain social and political movements have reportedly encouraged borrowers to default on their microfinance obligations, leading to widespread recovery challenges across the sector.
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Stricter Classification: Regulatory shifts toward more stringent loan classification have also played a role in reflecting the true state of distressed assets on the balance sheet.
Impact on Shareholder Value and Valuation
Despite the NPL hurdles, the Mero Microfinance Profit Growth has successfully boosted shareholder returns on a per share basis. The annualized earnings per share (EPS) improved from 12.05 rupees to 13.88 rupees during the review period. This growth in EPS is a positive signal for investors who have remained loyal to the stock through the sector’s recent volatility.
Other key valuation metrics for Mero Microfinance as of Poush 2082 include:
Paid up Capital: 1.486 billion rupees following recent bonus share distributions.
Net Worth Per Share: 155.78 rupees, indicating a stable equity base.
Reserve and Surplus: The company maintains substantial reserves, with 644.1 million rupees in reserve funds, providing a buffer to absorb potential loan loss provisions if the NPL trend persists.
Portfolio Expansion and Deposit Mobilization
The growth strategy for the 2082 2083 period remains focused on credit expansion in underserved regions. Mero Microfinance extended its total loan portfolio to 14.73 billion rupees during the review period. Concurrently, the institution successfully mobilized deposits worth 4.24 billion rupees. The ability to grow both the loan book and the deposit base simultaneously is a hallmark of the institution’s strong brand equity and its deep penetration into the Nepali financial landscape.
Looking ahead, the sustainability of Mero Microfinance Profit Growth will depend on the management’s ability to tackle the high NPL ratio. The company has already signaled a shift toward more aggressive recovery tactics and enhanced credit appraisal standards to prevent further slippage in asset quality.
Conclusion
Mero Microfinance Laghubitta Bittiya Sanstha Limited has delivered a mixed yet resilient financial performance for the second quarter of 2082 2083. While the 23.83 percent growth in net profit and the rise in EPS highlight the company’s strong earning potential, the 19.54 percent NPL ratio serves as a critical warning sign. For investors and stakeholders, the next two quarters will be pivotal in determining whether the institution can convert its current profit momentum into long term stability by successfully managing its credit risks.
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