Mero Microfinance Reports Mixed Q3 Results: Strong Growth in Core Income, But Distributable Loss Raises Concerns

Kathmandu, April 26 — Meromicrofinance Laghubitta Bittiya Sanstha has published its financial report for the third quarter of Fiscal Year 2081. While the company shows solid growth in core business metrics like lending and interest income, rising impairments and distributable losses have cast shadows over its profitability outlook.

Share Capital and Lending See Notable Growth

The company’s share capital increased by 7.50%, reaching NPR 1.42 billion, reflecting improved capital strength. Similarly, total loans and advances rose by 6.75%, touching NPR 14.68 billion, while total deposits and borrowings increased by 5.06% to over NPR 12.37 billion.

Operating Income Strengthens, But Commission Fees Drop

Net interest income jumped by 21.17% to NPR 738.2 million, showcasing strong growth in core lending business. Total operating income also rose by 15.52% to NPR 808 million.

However, net fee and commission income dropped by 23.13%, signaling weaker performance in non-interest based revenues.

Impairment Charges Skyrocket: Risk Management in Focus

A major red flag in this quarter's report is the surge in impairment charges, which soared by over 220%, from NPR 38.8 million to NPR 124.3 million. This massive jump highlights growing credit risk and potential weakness in loan quality.

EPS Declines and Distributable Profit Turns Negative

The company reported a quarterly earnings per share (EPS) of NPR 12.15, down slightly from NPR 12.51 last year. More critically, distributable profit fell into negative territory, showing a loss of NPR 13.4 million, compared to a positive NPR 93.7 million in the same period last year. This means the company cannot offer dividends from current earnings.

Other Key Metrics

Price-to-Earnings (PE) Ratio: Increased to 57.98 from 49.32 — indicating a relatively expensive stock.
Net Worth per Share: Slightly decreased to NPR 152.91 from NPR 153.72.
Non-Performing Loans (NPL): Increased to a high 9.49%, raising asset quality concerns.
Cost of Fund: Decreased to 7.45%, which is positive for margin sustainability.
Interest Rate Spread: Improved to 7.48% from 5.82%, reflecting healthier interest margins.