NPF Microfinance profit sinks by 24% on high cost

NPF Microfinance Bank Plc, a financial services institution in Nigeria, has reported a 23.7 percent decline in its after-tax profit in the first half of 2024.

The bank’s latest financial statement shows that high other operating and personnel expenses drove down its profit to N793 million from N1.04 billion in the previous year.

Operating expenses or OPEX rose to N3.74 billion from N2.56 billion. A breakdown of the company’s OPEX consists of personnel expenses which rose to N1.54 billion from N1.39 billion and other operating expenses which rose to N2.2 billion from N1.17 billion. during the reviewed periods.

A further breakdown of the bank statement revealed that its interest income calculated using the effective interest method grew by 20.5 percent to N5.04 billion in the first half of the year from N4.18 billion in the same period of 2023, with interests earned on loans and advances to customers accounting for N4.5 billion of the total.

The Central Bank of Nigeria (CBN) raised the interest rate from 18.75 percent to 27.25 percent between July 2023 and September 2024 to rein in inflation and stabilise the naira. This has led to higher interest incomes for banks.

Analysts believe that the year-on-year growth in interest income was driven by both an increase in the volume of risk assets and growth in average yield due to a higher interest rate environment.

The bank’s interest expense also grew by 25 percent to N534 million from N425 million, on the back of an 88 percent increase in interest from term deposits and a 447 percent increase in interest on current deposits.

Fees and commission revenue reported by the financial institution during the period grew by 30 percent to N464 million from N356 million, other income surged to N45 million from N44 million.

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The growth in the fees and commission income was supported mainly by moderate growth in loan management fee of N105 million from N76 million, loan commitment fee of N145 million from N98 million, insurance fee of N66 million from N45 million and credit search fee rising to N10 million from N7 million.

Total assets fell by 3 percent to N40.6 billion in 2024 from N41.8 billion in the same period 2023, its total liabilities also fell to N26.8 billion from N30.5 billion.

The decrease in value experienced in the bank’s financial position didn’t impact its Shareholder funds as the bank reported an increase to N13.4 billion in H1 2024 from N11.2 billion in H1’23.

Further analysis reveals that NPF Microfinance’s cash and cash equivalent fell to N12 billion from N14 billion during the period reviewed.

Movement of cash and cash equivalent reveal that net cash flows from operating activities dipped to a negative N4.5 million from a positive N10.5 billion.

Net cash generated from investing activities dipped to N97 million from N313 million. Net cash used in financing activities stood at a negative of N700 million from N1.8 billion.