Financial Analysis of NLB Bank

When a bank reports net profit growth of nearly 50% in a single year, the first question is not only \"is this impressive,\" but also \"where exactly does that growth come from?\" For NLB Bank AD Skopje, 2025 truly brings strong numbers: larger assets, faster loan growth, high profitability, and a capital base that remains solid. But if you look more deeply, it becomes clear that the large jump in profit does not come only from the core banking business, but also from a very favorable effect in impairment charges.

In this analysis, we will look at what the numbers really say about NLB Bank: how assets have grown, what is happening with the loan portfolio, what asset quality looks like, how sustainable profitability is, and what kind of financial outlook can reasonably be expected going forward.

2025 at first glance: strong growth, strong balance sheet, strong impression

According to the unaudited financial statements as of 31 December 2025, NLB Bank generated net profit of 4,879,441 thousand denars, compared with 3,294,993 thousand denars one year earlier. That is annual growth of about 48.1%.

At the same time, total assets grew to 156,931,074 thousand denars, which is growth of 19.6%, while loans and receivables from other clients reached 102,554,659 thousand denars, or growth of 21.9%. Deposits from other clients rose to 121,709,074 thousand denars, which is a year-on-year increase of 13.8%.

These figures send a clear signal: in 2025, NLB Bank not only reports accounting-wise stronger profit, but is also genuinely expanding the balance sheet, lending more, and continuing to build business volume. That is a positive base. But the question remains: how much of this profit is \"core,\" and how much is influenced by one-off or difficult-to-repeat factors?

What does the balance sheet tell us?

For banks, the balance sheet is the central story. This is exactly where you see whether growth is supported by loans, deposits, capital, and liquidity, or whether profit is arriving without a real foundation.

For NLB Bank, the structure of assets in 2025 shows a bank that is still expanding its business aggressively, but in a controlled way:

• Cash and cash equivalents: 22.5 billion denars
• Loans and receivables from other clients: 102.6 billion denars
• Investments in securities: 26.3 billion denars
• Total assets: 156.9 billion denars

Loans already make up around 65.4% of total assets, which shows that the profit engine still comes mainly from traditional banking rather than some side activity or one-off source. Investments in securities account for around 16.7% of assets, which gives the Bank an additional liquidity and flexibility buffer, but also a stable source of interest income.

On the funding side, deposits remain the dominant source of funds. This matters because banks with a strong deposit base usually have a more sustainable and cheaper funding model than banks that rely much more heavily on wholesale borrowing.

Loan portfolio: growth is real, but it also engages more capital

The most visible operating story in 2025 is the growth of the loan portfolio. Customer loans increased by 21.9% year on year, which is a strong pace for a bank of this size.

In the unaudited .xls report itself, there is no separate detailed table with a breakdown of the 2025 loan portfolio by segment, such as households versus legal entities. Still, the last officially published audited annual report shows that in 2024 loan growth was driven by both enterprises and households, with growth of 18.8% for enterprises and 9.7% for households. In addition, the Bank states in its 2025 announcement that it achieved a dominant market share in household lending.

This implies that in 2025 NLB Bank is not growing only through corporate expansion, but is likely continuing to strengthen its retail position as well. This matters from an investment perspective because a well-diversified loan book usually means more stable net interest income and better resilience to individual shocks.

On the other hand, faster loan growth always means closer attention to future cost of risk. The faster the portfolio grows, the more important it becomes to monitor whether the quality of new lending remains stable.

Asset quality and the NPL trend: a positive picture, but 2025 profit is strongly helped

Asset quality is one of the key reasons why NLB Bank looks strong. In the audited annual report for 2024, the Bank states that the share of non-performing loans declined to 2.9%. That is a low level and shows discipline in credit risk.

In the unaudited reports for 2025, the NPL ratio is not explicitly presented as a separate indicator, but the most important clue comes through the line item: \"Impairment of financial assets and special reserve for off-balance-sheet exposure, on a net basis\".

Here, 2025 brings a dramatic reversal:

• 2024: -332,427 thousand denars
• 2025: +1,374,930 thousand denars

Even more clearly, the cash flow statement shows that the released impairment allowance and special reserve amounts to 2,284,308 thousand denars in 2025, compared with 801,012 thousand denars in 2024. This means that a large part of the profit jump in 2025 comes from a very favorable development in credit risk and provisioning, not only from organic growth in revenue.

Net interest income, fees, and operating efficiency

The core business of NLB Bank is still growing, but more slowly than the headline profit. Net interest income increased from 4,640,214 to 4,945,984 thousand denars, while net fee and commission income rose from 1,547,687 to 1,649,292 thousand denars.

That is healthy growth because it shows that the Bank does not depend on only one revenue pillar. Net interest income remains the main engine, but fees and commissions provide important diversification.

From a margin perspective, the officially published indicator for 2024 shows net interest income / average interest-bearing assets of 4.6%. For 2025, in the attached unaudited report itself, this indicator is not explicitly stated as a ready-made ratio, but based on the balance-sheet and income-statement items it can be concluded that net interest income is growing, even though the balance sheet is growing even faster. In practical terms, this suggests that core profitability is good, but not dramatically stronger than in 2024.

Operating costs are also rising:

• Employee costs: 1,393,285 thousand denars
• Depreciation: 346,614 thousand denars
• Other operating expenses: 1,263,169 thousand denars

When these items are compared with total net operating income, we get a 2025 cost-to-income ratio of approximately 41.8%. For comparison, the officially published indicator for 2024 stands at 40.0%. This means that efficiency likely deteriorated slightly, although it remains at a very good level for a bank with this type of growth and investment.

Where did the Q4 FY2025 profit jump come from?

This is the most important part of the entire analysis. If we look at the cumulative reports for 2025, nine-month profit amounts to 2,505,628 thousand denars, while the full year ends at 4,879,441 thousand denars. That means the fourth quarter alone contributed around 2,373,813 thousand denars of net profit.

That is an exceptionally strong quarter. But if the income statement is broken down, it becomes clear that the core pretax earnings engine before impairment is not dramatically higher than the previous year. In substance, the largest part of the difference comes precisely from the swing in credit impairments and provisions.

In other words:

• Core interest and fee income is growing solidly
• Operating costs are also rising
• The large \"extra\" profit comes from a positive net impairment effect

This does not make the profit \"bad\" or \"fake.\" On the contrary, a release of impairments usually means that the portfolio performed better than previously expected. But from an investment perspective, it is important to understand that such a fourth quarter should not automatically be annualized as a new normal earnings level.

Capital adequacy: still a strong foundation

Capital is key for every bank, because without sufficient capital there is neither room for growth, nor comfort for dividends, nor enough protection against credit shocks.

In the audited annual report for 2024, NLB Bank reports:

• Common equity tier 1 ratio (CET1): 16.30%
• Tier 1 capital ratio: 16.94%
• Total capital adequacy ratio: 18.54%

These levels are above regulatory requirements and provide good capital comfort. In the unaudited report for 2025, there is no directly presented table with the final adequacy ratio, but total capital and reserves increased to 22,093,060 thousand denars, from 18,526,917 thousand denars in 2024.

That is growth of about 19.2% and shows that the Bank is not only growing in assets, but also strengthening its own capital base. For investors, this matters because it supports both future lending and the capacity for dividend distribution, as long as regulatory and risk conditions remain favorable.

Dividend and valuation: a quality bank, but no longer \"obviously cheap\"

NLB Bank has a reputation as a strong dividend payer, which is one of the reasons why the stock is attractive to domestic investors. The latest available dividend in the database is 2,596 denars per share.

At the same time, the stock has already gone through a strong re-rating. The average stock-exchange price in 2025 was around 58,061 denars, while the latest levels from early April 2026 are around 55,000 denars. Based on FY2025 profit, the trailing P/E is around 9.6x, which looks reasonable at first glance.

But caution is necessary here: if 2025 earnings are unusually supported by released impairments, then the trailing P/E may look lower than it really is on a normalized earnings basis. Put differently, the stock may not be expensive in an absolute sense, but it is not obviously cheap either if part of 2025 profit is not fully repeatable.

Financial outlook: constructive, but with normalization risk

The core outlook for NLB Bank remains positive. The Bank has several strong elements that justify a constructive view:

• strong loan growth
• stable and dominant deposit base
• good asset quality
• solid capital position
• high profitability and dividend capacity

Still, the most reasonable way to look at 2026 and beyond is through the idea of earnings normalization. If 2025 was a year in which impairment charges strongly helped results, then future profit will likely depend more on:

• maintaining net interest income
• the pace of loan growth without deterioration in risk
• control of operating costs
• the ability to maintain a strong ROE even without extra releases from provisions

If the Bank manages to preserve growth even with a more normal cost of risk, then the current valuation may still be justified. If, on the other hand, 2025 proves to be a peak year due to a credit-cost tailwind, then the market may become more sensitive to any slowdown in earnings momentum.

What should the investor watch?

Even with a quality bank, the investor should not look at only one number, but at the whole mosaic. For NLB Bank, the most important risks in the coming period are:

• normalization of profit if the favorable effect from released impairments does not repeat
• possible pressure on margins if the cost of funding rises faster than the yield on assets
• deterioration in cost-to-income if operating costs continue to grow faster than core income
• risks related to the economic cycle, especially if loan growth slows or the quality of new lending weakens
• limited upside from rerating if the market has already priced the good news into the stock

Conclusion

NLB Bank AD Skopje enters 2026 as one of the strongest domestic banking stories: with a large and growing balance sheet, a strong lending presence, a healthy deposit base, and solid capital support. That is not a small thing, and it explains why the Bank has a strong position with both clients and investors.

But 2025 should be read carefully. The enormous growth in net profit does not come only from an explosively stronger core business, but also from a very favorable effect in impairment charges. That means that the best way to view the stock is not through the simple question of whether it is \"cheap\" or \"expensive,\" but through the question: how much of FY2025 earnings are sustainable and repeatable?

If the answer is that most of the profitability remains strong even after normalization of the credit-cost line, then NLB Bank remains a quality long-term story. If, however, 2025 was a peak year helped by the release of provisions, then future returns will depend more on valuation discipline and on the Bank's ability to deliver stable, not only spectacular, growth.