Nepal Investment Mega Bank Reports NPR 45 Million Profit

9th November 2025, Kathmandu

Nepal Investment Mega Bank Limited (NIMB) has delivered a jarring financial shockwave to the market with its unaudited first-quarter report for the fiscal year 2025/26.

NIMB Reports Profit

The bank reported a minimal Net Profit of just NPR 45 million. This figure represents a catastrophic 96.92% decline when compared to the substantial net profit of NPR 1.46 billion achieved in the same period of the previous fiscal year. This dramatic fall, despite the bank’s consolidated strength following its merger, highlights the extreme pressure faced by the bank due to asset quality concerns and subsequent regulatory actions.

The Primary Culprit: Massive Increase in Loan Loss Provisioning

The financial summary points to a single, overwhelming factor responsible for decimating the bank’s profitability: a significant increase in loan loss provisioning (impairment charges). This non-cash expense is the primary mechanism through which the central bank, Nepal Rastra Bank (NRB), enforces caution and financial stability in the banking sector.

The Mechanism of Provisioning

When a bank perceives or determines that a portion of its loans are unlikely to be repaid—categorizing them as Non-Performing Loans (NPLs)—it is mandated to set aside money (provisioning) to cover those potential losses. This mandatory provision is treated as an expense, which directly reduces the bank’s operating profit and, consequently, its net profit. In NIMB’s case, the increase in provisioning was so massive that it absorbed nearly all of the bank’s operating income, leading to a near-zero bottom-line figure.

This aggressive provisioning strategy suggests two critical developments:

Deteriorating Asset Quality: The bank’s loan book is likely experiencing heightened stress, forcing a higher classification of NPLs.

Conservative Stance: The bank’s management, or regulatory pressure, has pushed for a highly conservative approach to financial reporting, aiming to strengthen the balance sheet now by taking the full provisioning hit upfront.

The extent of the provisioning reveals that the bank is dealing with substantial asset quality challenges that will require sustained effort in loan recovery and restructuring over the coming quarters.

Analyzing the Core Revenue Strain

Adding to the pressure from high provisioning, the bank’s core revenue stream, Net Interest Income (NII), also experienced a noticeable contraction. NII, the engine of commercial banking, decreased from NPR 3.87 billion to NPR 3.24 billion year-on-year.

The Dual Impact on NII

Decreased Interest Spreads: While the bank’s Base Rate dropped from 7.28% to 5.69%, indicating a decrease in the benchmark rate for lending, the relationship between lending rates and deposit rates is complex. The decrease in NII suggests that the cost of funds (interest paid on deposits) did not drop fast enough to compensate for the decrease in interest earned on loans, thereby narrowing the Net Interest Margin (NIM).

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Contained Lending Growth: The bank may have adopted a more restrained approach to lending following the merger, or the overall market demand for credit was lower. Lower lending volumes, combined with pressure on margins, directly contributes to the decline in Net Interest Income.

The combination of a contracting core revenue base (lower NII) and a colossal surge in non-cash expenses (impairment charges) created a financial perfect storm that led directly to the near-total erosion of the bank’s net profit.

The Merger Context and Future Outlook
Nepal Investment Mega Bank is the result of a significant merger between Nepal Investment Bank Limited and Mega Bank Nepal Limited. Mergers of this size often lead to short-term integration challenges, including harmonizing loan portfolios and consolidating balance sheet risks.

The current financial results suggest that the post-merger integration phase may have exposed or accelerated the need to address asset quality issues inherited or developed across the expanded portfolio. This process, while painful in the short term, is crucial for building a stable, long-term foundation for the merged entity.

For investors, the minimal net profit translates into a near-zero annualised Earnings Per Share (EPS), which places immediate pressure on the bank’s valuation and its ability to distribute dividends. However, the focus must shift from the instantaneous profit figure to the bank’s underlying capital and operational stability.

The market will be keenly watching the bank’s strategy over the next three quarters, focusing on:

NPL Stabilization: Management’s ability to halt the increase in non-performing loans and reduce the required provisioning.

NII Recovery: Initiatives to revitalize the Net Interest Income through efficient liquidity management and strategic lending growth.

Operational Synergy: Successful realization of cost-saving and efficiency gains from the merger, which should ultimately boost future Operating Profit.

Despite the shocking Q1 loss, the bank’s strong market position and substantial capital base provide the resilience needed to manage this crisis. The 96.92% profit plummet is a clear indication that NIMB is taking decisive, though painful, steps to clear the decks and ensure long-term balance sheet health.

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