Global IME Bank’s Profit Jumps 22.7 Percent, but Core Lending Income Remains Weak

Kathmandu — Global IME Bank Limited posted a net profit of Rs 6.22 billion in the fiscal year 2025/26, recording a 22.67 percent increase from Rs 5.07 billion in the previous year. The unaudited fourth-quarter results show a clear improvement in headline profitability, although the underlying figures present a more complicated picture of the bank’s financial performance.

The increase in profit did not come from stronger interest earnings, which form the core of conventional banking operations. Instead, lower credit-loss expenses and an increase in fee and commission income provided much of the improvement. This distinction matters because earnings generated through expanding business are generally more sustainable than profits resulting primarily from a reduction in provisions.

The bank’s net interest income declined from Rs 16.68 billion to Rs 16.20 billion, a fall of approximately 2.88 percent. The contraction occurred even as loans and advances increased during the year, indicating that a larger credit portfolio did not translate into higher net earnings from interest.

Declining lending rates, abundant liquidity across the banking system and weak demand for new credit appear to have compressed the bank’s interest margin. When banks compete to lend surplus funds, lending rates fall more rapidly, while the cost of maintaining deposits and branch operations does not decline at the same pace. This places pressure on the difference between what a bank earns from loans and what it pays for its funding.

Global IME’s impairment charge, or the amount set aside against possible loan losses, fell from Rs 5.97 billion to Rs 4.78 billion. The reduction of Rs 1.19 billion, equivalent to nearly 20 percent, was slightly larger than the Rs 1.15 billion increase in net profit.

This comparison shows that the decline in impairment expenses was the most important immediate driver of the bank’s profit growth. Without that reduction, the increase in annual earnings would have been far less significant, particularly because net interest income moved in the opposite direction.

Lower provisioning can reflect improved recovery, changes in the classification of loans or a reduction in additional credit-risk requirements. It improves reported profit in the current period, but it does not necessarily indicate that the bank’s borrowers have become financially stronger. That conclusion is especially difficult to make because the bank’s non-performing loan ratio increased rather than declined.

Fee income offsets pressure on interest earnings

The bank performed better in its non-interest business. Net fee and commission income increased from Rs 3.22 billion to Rs 3.64 billion, representing growth of around 13 percent.

Fees from cards, digital payments, remittances, trade finance, guarantees and other services are becoming increasingly important as falling interest rates weaken returns from lending. The increase suggests that Global IME is gradually diversifying its revenue sources rather than depending entirely on the spread between lending and deposit rates.

The bank’s total operating income increased by 2.61 percent, from Rs 21.25 billion to Rs 21.80 billion. Operating profit rose more sharply—by about 20 percent—to Rs 8.68 billion from Rs 7.23 billion.

The difference between the relatively modest growth in operating income and the much stronger increase in operating profit again reflects the benefit of lower impairment expenses. It also suggests that expense control may have contributed to the improved result, although the figures provided do not contain enough detail to determine the exact impact of staff, administrative and technology costs.

Distributable profit signals improved dividend capacity

Global IME Bank’s distributable profit rose from Rs 4.05 billion to Rs 4.58 billion, an increase of approximately 13 percent. The bank’s reported dividend-paying capacity consequently improved from 10.64 percent to 12.02 percent.

The improvement provides a positive signal for shareholders, but the 12.02 percent figure should not be treated as a declared dividend. The final distribution will depend on the audited financial statements, regulatory deductions, capital adequacy, approval from Nepal Rastra Bank and the decision of the annual general meeting.

The bank reported earnings per share of Rs 16.34 and a price-to-earnings ratio of 14.67 times. Its paid-up capital stood at Rs 38.12 billion, while reserves and surplus amounted to Rs 27.11 billion.

Global IME has one of the largest capital bases in Nepal’s banking industry. That scale strengthens its capacity to absorb losses and finance expansion, but it also creates a demanding profitability benchmark. The bank must generate substantial absolute profit merely to produce a moderate return for each share.

A high total profit, therefore, should not be assessed in isolation. Investors must consider earnings per share, return on equity, dividend capacity and the amount of capital required to generate those earnings.

Deposits rise three times faster than lending

The bank’s loans and advances increased from Rs 410.11 billion to Rs 439.34 billion, representing growth of 7.13 percent. Customer deposits, however, surged from Rs 550.62 billion to Rs 669.17 billion, an increase of 21.53 percent.

The bank added approximately Rs 118.55 billion in deposits during the year but expanded lending by only Rs 29.23 billion. In other words, the increase in deposits was more than four times the increase in the loan portfolio.

A simple comparison of loans with customer deposits shows that the ratio declined from approximately 74.5 percent to 65.7 percent. This is not the official regulatory credit-to-deposit ratio, which is calculated according to Nepal Rastra Bank’s prescribed formula, but it illustrates how rapidly surplus funding accumulated relative to lending.

The large deposit increase strengthens the bank’s liquidity position and reduces immediate funding risk. However, excess deposits also carry a cost. Banks must pay interest, maintain infrastructure and meet regulatory requirements even when the funds cannot be deployed into profitable loans.

As a result, excessive liquidity can become a drag on earnings rather than an advantage. The bank must either find credible borrowers, invest surplus funds in lower-yielding securities or accept pressure on its interest margin.

The imbalance also reflects conditions beyond the bank’s control. Lower interest rates alone cannot create credit demand when businesses lack confidence, consumer demand remains weak or investors are uncertain about future returns. Credit expansion depends on viable projects and the willingness of borrowers to take risks, not merely on the availability of cheap funds.

Bad-loan ratio remains close to 5 percent

The bank’s non-performing loan ratio increased from 4.86 percent to 4.96 percent. The increase was limited to 0.10 percentage points, but the level itself remains a major concern because nearly 5 percent of the loan portfolio is classified as non-performing.

Applying the reported ratio broadly to the bank’s loan portfolio suggests that more than Rs 21 billion in loans could fall within the non-performing category. This is only an indicative calculation because the regulatory NPL ratio may use a different loan base, but it illustrates the scale of the recovery challenge.

The rise in bad loans complicates the interpretation of the lower impairment charge. Ordinarily, worsening asset quality may require additional provisions rather than lower ones. The apparent divergence could reflect recoveries from previously provisioned accounts, changes in regulatory classification, collateral adjustments or sufficient provisions already recognised in earlier periods.

Without detailed movement in loan categories and provisions, it would be premature to conclude that credit risk has materially declined. A reduction in annual impairment expenses is positive for profit, but sustained improvement would require the NPL ratio itself to fall and cash recovery from troubled borrowers to strengthen.

The bank said it had calculated expected credit losses under Nepal Financial Reporting Standard 9 and compared the result with provisions required under Nepal Rastra Bank’s unified directives. It maintained whichever amount was higher.

This conservative rule provides an additional regulatory buffer. It can reduce short-term profit and dividend capacity, but it protects depositors and shareholders if borrower defaults rise in later periods.

Global IME plans to strengthen loan recovery, borrower monitoring, restructuring and risk management. Restructuring can assist businesses facing temporary cash-flow problems, but it is not a substitute for recognising permanent credit losses. Repeatedly extending repayment schedules for borrowers without viable operations can delay rather than resolve the underlying problem.

Management expects political stability to support recovery

In its management analysis, the bank linked weak credit demand partly to Nepal’s economic slowdown and a deterioration in business confidence. It also said that the Bhadra 2082 Gen Z movement and the associated human and physical losses temporarily affected the business environment.

The bank expects the formation of a government with a clear majority following the Falgun 2082 election to support economic activity. These statements represent management’s assessment rather than a guaranteed outlook.

Political stability can improve confidence, but economic recovery will depend on actual policy execution. Faster capital expenditure, timely payment to contractors, infrastructure implementation, regulatory consistency and stronger private investment will be more important than political arithmetic alone.

If government spending remains slow and domestic demand fails to recover, the banking sector could continue to face the same combination of excess liquidity, subdued lending and pressure on borrowers’ repayment capacity.

Mission 2030 places digital banking at the centre

Global IME Bank aims to transform itself into a “digital-first bank” under its five-year strategy, GIBL Mission 2030. It plans to automate internal processes, expand digital services, improve customer convenience, reduce operating costs and strengthen technology-based risk management.

The strategy is commercially logical. The bank operates one of the country’s largest physical networks, including 342 branches, 368 ATMs, 69 extension and revenue-collection counters and 147 branchless banking centres. It also has operations across all 77 districts and representative offices in Sydney, New Delhi and Hampshire.

Such a network provides strong access to deposits, remittances and customers. However, maintaining hundreds of physical service points is expensive. As customers shift towards mobile and online banking, the bank will need to determine whether all parts of its physical network remain economically productive.

Digital channels could lower the cost per transaction and provide new sources of commission income. Yet digital expansion also increases exposure to cybercrime, identity theft, payment fraud, data breaches and prolonged system outages.

Becoming digital-first will therefore require more than launching mobile features. The bank will need resilient infrastructure, continuous security monitoring, effective customer authentication, protection of personal data, employee training and a tested response mechanism for cyber incidents.

Productive-sector lending offers opportunity and risk

The bank plans to direct more credit towards productive industries, small and medium-sized enterprises and sectors that contribute to economic output. It also intends to diversify its portfolio according to risk, manage assets and liabilities more actively and control operating expenses.

The approach could help the bank deploy surplus liquidity and support economic activity. However, lending to small businesses and productive industries often requires more intensive credit appraisal and monitoring than lending against property or established corporate collateral.

An aggressive attempt to increase credit quickly could worsen asset quality. The bank will therefore need to balance growth targets with borrowers’ actual cash flows, sector-level risks and the ability of projects to generate revenue.

The central issue is not whether the bank can find borrowers, but whether it can find borrowers capable of repaying loans under realistic economic conditions.

Headline profit masks a mixed operating picture

Global IME Bank’s annual results contain several positive developments. Net profit rose by more than one-fifth, fee income improved, distributable earnings increased and the bank maintained a strong liquidity position supported by rapid deposit growth.

The figures also expose significant weaknesses. Net interest income declined, the expansion of lending remained far below deposit growth, surplus liquidity increased and the non-performing loan ratio remained close to 5 percent.

Most importantly, the increase in profit was heavily influenced by the Rs 1.19 billion reduction in impairment expenses. This makes the quality of future earnings dependent on whether the bank can prevent bad loans from rising further.

The bank’s performance in the next fiscal year should therefore be assessed through three indicators: whether net interest income recovers, whether the NPL ratio declines and whether surplus deposits are converted into sound, income-generating credit.

Until those areas improve, the 22.67 percent profit increase represents a stronger financial result—but not yet a complete recovery in the bank’s core business.