Garima Bikas Bank’s Profit Rises 35 Percent, but Lower Impairment Charges Do Much of the Heavy Lifting

Kathmandu — Garima Bikas Bank Limited reported a net profit of Rs 1.69 billion in fiscal year 2025/26, supported by growth in operating income and a steep decline in provisions for possible credit losses. The bank’s unaudited fourth-quarter financial statement shows that profit increased by 35.34 percent from Rs 1.25 billion in the previous fiscal year.

The improvement, however, was not driven by income growth alone. The bank’s impairment charges fell to just Rs 49 million, compared with Rs 647.06 million a year earlier—a decline of more than 92 percent. This sharp reduction substantially lowered the burden on earnings and became one of the principal reasons behind the rise in net profit.

The fall in impairment charges needs to be viewed alongside the bank’s asset-quality indicators. Its non-performing loan ratio edged up from 4.69 percent to 4.76 percent. Although the increase was limited to 0.07 percentage points, it indicates that the share of problematic loans did not decline despite the sharp reduction in provisioning expenses. The sustainability of the profit improvement will therefore depend partly on future loan recoveries and the adequacy of provisions.

Growth in the bank’s core interest business remained moderate. Net interest income increased by 5.64 percent to Rs 3.82 billion from Rs 3.61 billion. The increase was positive, but considerably slower than the growth in loans, suggesting that declining lending rates and narrower margins limited the benefit of credit expansion.

Income from fees and commissions showed stronger momentum. Net fee and commission income rose by 21.21 percent to Rs 619.27 million. As a result, total operating income increased by 7.27 percent to Rs 4.57 billion. The rise in non-interest income helped diversify revenue, although interest income continued to account for the largest share of the bank’s earnings.

Operating profit grew by 42.65 percent to Rs 2.58 billion, up from Rs 1.81 billion in the previous year. The stronger increase in operating profit compared with total operating income indicates that reduced impairment expenses and tighter cost management played a significant role in improving profitability.

Garima also recorded notable expansion in its lending business. Loans and advances increased by 13.18 percent to Rs 78.24 billion, while customer deposits rose by 9.27 percent to Rs 98.47 billion. Since lending grew faster than deposits, the credit-to-deposit ratio increased from 85.13 percent to 86.14 percent.

The higher credit-to-deposit ratio indicates more intensive use of available deposits for lending. This can support earnings when credit quality remains stable, but it also reduces the bank’s room for aggressive loan expansion unless deposit mobilisation improves. The bank will need to balance further credit growth with liquidity and funding requirements.

The bank’s base rate declined sharply from 6.94 percent to 5.26 percent, a reduction of 1.68 percentage points. Lower base rates can make borrowing cheaper for customers and support credit demand. However, the bank’s interest-rate spread also narrowed from 4.37 percent to 4.04 percent, signalling pressure on the margin earned between lending and funding costs.

Despite the narrowing spread, the expansion of the loan portfolio helped the bank increase net interest income. Maintaining this momentum may become more difficult if lending rates continue to fall faster than deposit costs. Future earnings growth will therefore require either stronger loan expansion, better fee-based income or further improvements in operating efficiency.

Garima’s distributable profit more than doubled to Rs 1.22 billion, rising by 103.26 percent from Rs 599.21 million. Distributable earnings per share increased from Rs 10.55 to Rs 20.23, strengthening the bank’s accounting capacity to recommend returns to shareholders.

However, distributable earnings should not be interpreted as a guaranteed dividend. The final dividend will depend on regulatory adjustments, capital requirements, the board’s recommendation and approval from the annual general meeting and the relevant regulator.

The bank’s earnings per share rose from Rs 21.96 to Rs 28.04, an increase of Rs 6.08. Net worth per share improved by Rs 13.09 to Rs 177.26, while the price-to-earnings ratio stood at 14.4 times.

Garima’s paid-up capital increased by 6 percent to Rs 6.02 billion. Retained earnings rose to Rs 1.22 billion, while reserves increased to Rs 3.43 billion. Combined reserves and surplus expanded by 29.84 percent to Rs 4.65 billion, taking total shareholders’ equity to approximately Rs 10.67 billion.

The capital fund-to-risk-weighted exposure ratio improved from 13.20 percent to 13.63 percent. The increase provides the bank with a somewhat stronger capital cushion, although the margin is not large enough to remove the need for disciplined credit growth and close monitoring of bad loans.

Overall, Garima Bikas Bank ended the fiscal year with stronger profit, higher lending, improved fee income and a larger distributable surplus. Yet the headline profit growth overstates the expansion in its underlying banking business because a substantial part of the improvement came from the collapse in impairment charges. Whether the performance is sustainable will depend on the bank’s ability to contain non-performing loans, protect its interest margin and maintain deposit growth alongside its expanding credit portfolio.