NPF Microfinance profit rises 7.7% as surging borrowing costs hit margins

NPF Microfinance Bank Plc recorded a profit before tax of N3.20 billion for the six months ended June 30, 2026, up 7.7% from the prior year. Profit after tax rose 5.68% to N2.04 billion, lifting basic earnings per share to 34 kobo. The results, filed with the Nigerian Exchange Group on July 24, show a lender growing its top line but struggling to translate that expansion into bottom-line momentum.

Gross earnings increased 21.17% to N11.18 billion, driven almost entirely by interest income. Interest-earning activities generated N10.18 billion, a 25.15% increase that accounted for 91% of total gross earnings. However, this revenue engine is showing clear signs of friction. Net interest income grew a more modest 17.36% to N8.83 billion as the cost of funding accelerated sharply.

Interest expense more than doubled, surging 121.19% to N1.35 billion. This squeeze on net interest margins was compounded by rising overheads. Personnel expenses climbed 11.89% to N2.82 billion, while other operating costs increased 18.22% to N3.38 billion. Higher depreciation and a jump in income tax expenses further ensured that profit growth significantly lagged the 13.96% rise in total revenue.

The balance sheet details behind this earnings growth warrant closer scrutiny from credit analysts. The bank expanded its loan book aggressively, with advances to customers jumping 33.29% to N48.13 billion. Loans now represent 78% of total assets, which reached N61.70 billion. To fund this rapid credit expansion, NPF Microfinance Bank leaned heavily on wholesale funding. Borrowings skyrocketed 616.10% to N2.34 billion, up from just N327.17 million a year earlier. Customer deposits grew at a comparatively tame 11.02% to N38.74 billion.

This aggressive asset allocation has taken a severe toll on liquidity. Cash and cash equivalents plummeted 58.03% to N4.12 billion. The shift from a highly liquid balance sheet to one dominated by illiquid loans, funded partly by a sudden surge in borrowings, exposes the microfinance bank to standard refinancing risks. Total liabilities rose 16.66% to N47.08 billion, outpacing the 13.37% growth in shareholders' equity to N14.62 billion.

Equity investors have largely looked past these balance sheet dynamics so far in 2026. The stock closed at N5.10 on July 24, reflecting a 37.47% year-to-date gain that ranks it 64th on the NGX. The share price peaked at N5.74 in May before shedding 17.25% in June. It has since recovered 7.37% in July. Sustaining this valuation will likely require the bank to demonstrate that its surging borrowing costs are under control and that its heavily expanded loan book is not generating future credit losses.