First Microfinance Laghubitta's Q3 Financial Report for FY 2081 Reflects Sharp Decline in Profitability and Loan Portfolio

KATHMANDU, NEPAL — First Microfinance Laghubitta Bittiya Sanstha has published its unaudited financial results for the third quarter ending Chaitra 2081, revealing a significant downturn in key financial indicators compared to the corresponding period of the previous fiscal year (Chaitra 2080). The report highlights a troubling decline in profitability, income sources, and loan portfolio—raising concerns over operational efficiency and asset quality.

The company's Net Interest Income has plunged by 37.94%, falling from NPR 253.06 million in Chaitra 2080 to NPR 157.05 million in Chaitra 2081. This steep drop was compounded by an 80.47% decline in Net Fee and Commission Income, amounting to just NPR 3.64 million this year. As a result, Total Operating Income fell by 40.59%, landing at NPR 161.4 million.

The decrease in income significantly impacted the bottom line. Operating Profit saw a 45.94% decrease, from NPR 187.89 million to NPR 101.57 million, while Profit for the period fell by 45.77% to NPR 70.64 million. Earnings Per Share (EPS) dropped sharply by NPR 7.08, down from NPR 14.08 to NPR 7.00. Similarly, Distributable Profitdeclined from NPR 95.09 million to NPR 51.96 million, marking a significant reduction in shareholder returns.

On the balance sheet side, the company's Deposit and Borrowings contracted by 22.37%, totaling NPR 5.41 billion compared to NPR 6.97 billion the previous year. Likewise, Loans and Advances saw a reduction of 17.92%, falling from NPR 7.41 billion to NPR 6.08 billion. These figures suggest a tightening of credit operations, possibly due to increased risk aversion or regulatory constraints.

Despite a 9% increase in Share Capital, bringing it to NPR 1.34 billion, the company experienced a notable 11.38% drop in Reserves and Surplus, indicating the strain on retained earnings and reserve buildup. Furthermore, Impairment Charges dropped significantly by 67.29%, which could imply either improved asset quality or more conservative provisioning—though the rising Non-Performing Loan (NPL) ratio, from 3.12% to 4.78%, raises red flags about credit risk management.

Other operational metrics also deteriorated. The Cost of Fund decreased slightly from 9.57% to 6.78%, and the Interest Rate Spread contracted from 2.06% to 1.08%, signaling squeezed margins. The Base Rate fell from 10.41% to 7.87%, possibly reflecting lower lending rates in a competitive environment.

Overall, First Microfinance Laghubitta’s Q3 report paints a challenging picture marked by declining profitability, weakening asset quality, and contracting lending activities. The firm will need to address its rising NPL ratio, enhance interest income generation, and reestablish stronger financial fundamentals to regain investor and stakeholder confidence in the upcoming quarters.