After the FY2025 analysis, the natural next question is whether Q1 2026 confirms the thesis that NLB Bank remains a strong bank, but that the extreme profit level from late 2025 should not be repeated mechanically in models. The first quarter gives a fairly clear answer: the Bank is still growing and still profitable, but the pace is much more normal.
The unaudited statements for the period from January 1, 2026 to March 31, 2026 show net profit of 732,241 thousand denars, compared with 719,468 thousand denars one year earlier. That is growth of only 1.8%. At the pretax level, profit rose 2.5% to 846,301 thousand denars. This is not a weak quarter, but it is a very different signal from FY2025, when profit jumped by nearly 50%.
Important: the income statement is compared with Q1 2025, while the balance sheet is compared with December 31, 2025. That means profit growth is year on year, while changes in assets, deposits, and capital are quarterly, relative to the end of FY2025.
The headline number is positive, but no longer spectacular
If you look only at bottom-line profit, the report appears stable: the Bank delivers further growth and remains highly profitable. But the difference versus 2025 is in the quality of the pace. Then, the story was about exceptionally strong earnings growth. Now, the story is more about preserving solid profitability in an environment where revenue growth is much more moderate and costs are applying more pressure.
In other words, Q1 2026 does not invalidate the investment thesis for NLB Bank as a quality domestic bank. But it very clearly shows that FY2025 should not be read as an automatic new baseline for quarterly earnings.
Core profitability: there is growth, but margins are under pressure
The best place to see this is net interest income. Interest income increased to 1,440,902 thousand denars, or 5.4% growth. But interest expense rose much faster, to 239,452 thousand denars, or 37.2% year on year. The result is that net interest income is almost flat at 1,201,450 thousand denars, only 0.8% above Q1 2025.
This is an important signal. The Bank is still growing in volume, but the cost of funding is already eating into part of that growth. For a bank like NLB, this is not automatically an alarm, but it is a clear sign that the earnings mix in 2026 will require more discipline than in the year when the impairment line delivered an exceptionally favorable tailwind.
The good news is that fees are stronger. Net fee and commission income reached 413,574 thousand denars, which is growth of 10.7%. That means the Bank is not dependent only on the interest margin and that the fee base is still providing important revenue stabilization.
Still, when all major revenue lines are added together, total operating income before costs grows only around 0.7%. Against that, employee costs, depreciation, and other operating expenses together grow by about 8.2%. In practical terms, that reduces pre-provision operating profit to roughly 935.8 million denars, a decline of around 4.8% versus Q1 2025.
From an efficiency perspective, this means cost-to-income deteriorates to roughly 45.2%, from around 42.1% a year earlier. That is still not a weak level, but it is a clear step in the wrong direction if the trend continues in the next quarters.
The balance sheet shows rotation, not weakness
On the balance-sheet side, the picture is not a simple story of growth everywhere. Total assets as of March 31, 2026 stand at 154,255,426 thousand denars, about 1.7% below the level on December 31, 2025. But the internal structure tells a more interesting story.
- Cash and cash equivalents increased to 25.4 billion denars, or 12.7%.
- Loans to other clients rose to 104.7 billion denars, or 2.1%.
- Investments in securities fell to 18.5 billion denars, down about 29.4%.
- Deposits from other clients declined to 116.6 billion denars, or 4.2%.
This looks like a bank reallocating part of its resources from securities toward liquidity and lending support, in a period when the deposit base is somewhat weaker than at year-end. In addition, liabilities on borrowings increased to 5.7 billion denars, up nearly 52% from the end of 2025. That shows the quarter is not only a profit story, but also a story of more active funding-structure management.
One more useful indicator is the loan-to-deposit ratio. It rises to approximately 89.7%, from around 84.3% on December 31, 2025. That is not a problematic level for a bank of this type, but it does show that loan growth is currently running ahead of deposit growth.
Capital remains strong, and Q1 looks far more normal than Q4 2025
It is positive that total capital and reserves increased to 22.77 billion denars, from 22.09 billion denars at the end of 2025. That is growth of about 3.1% in just one quarter and shows that the Bank is still building its capital base through retained profit.
From an earnings-quality perspective, Q1 2026 matters especially because it does not look like Q4 2025. The line "Impairment of financial assets and special reserve for off-balance-sheet exposure, on a net basis" remains negative at -134,990 thousand denars. That is somewhat better than -154,559 thousand denars in Q1 2025, but it is not a large positive release that would push profit artificially higher.
That is exactly why this quarter is useful for investors: it gives a cleaner view of how the Bank earns money when there is no dramatic impairment tailwind. And that picture is good, but not euphoric. There is also a positive net effect of 45,453 thousand denars from non-financial asset impairment items, but even with that, the profit profile remains much more normal than the one seen in the final quarter of 2025.
What does this mean for FY2026?
The simplest test is this: if Q1 2026 were annualized very roughly, profit would come to around 2.93 billion denars. That is almost 40% below FY2025 profit of 4.88 billion denars.
Key point: one quarter is not a forecast for the full year. But this simple test shows very clearly that FY2025 was most likely a high base, not an automatic new normal for quarterly earnings.
That does not mean 2026 will be a bad year. On the contrary, the loan book is growing, fees are strong, capital is rising, and the Bank is still generating solid profit. But if an investor expected the FY2025 profit impulse to continue at the same intensity immediately into Q1, the report shows that such a reading would have been too aggressive.
Dividend signal: the payout remains strong, but it is no longer moving higher
There is one more important piece of information that helps interpret NLB Bank more accurately on April 28, 2026. The Bank plans to propose at the upcoming Shareholders' Meeting a gross dividend of 2,571 denars per share, or 2,195,790,831 denars in total, from 2025 earnings.
Important: this is a proposed dividend, not a final approved payout. The exact amount and the dividend calendar still depend on the Shareholders' Meeting decision.
This matters because the proposed amount is slightly lower than last year's paid dividend of 2,596 denars per share. The decline is only about 1.0%, so this is not a sharp reversal. But it is still a signal that, despite the strong FY2025 profit, management is not moving toward an even more aggressive distribution policy.
If the proposed 2.196 billion denars is compared with FY2025 net profit of 4.879 billion denars, the implied payout ratio is approximately 45%. That remains a very solid cash return for shareholders. At the same time, it also suggests that the Bank is probably choosing a more balanced approach between capital distribution and preserving financial flexibility.
In the context of Q1 2026, this fits almost perfectly with the rest of the report. NLB Bank does not look weak: loans are growing, fees are strong, profit remains positive, and capital is rising. But quarterly earnings, the proposed dividend, and the calmer impairment line together point to a more normalized 2026, rather than a continuation of the FY2025 peak pace without pause.
What should investors watch next?
- Whether net interest income will remain under pressure if funding costs continue to rise faster than asset yields.
- Whether loan growth will continue to outpace deposit growth and how much the Bank will need to rely on other funding sources.
- Whether fee growth can offset the weaker momentum in the interest margin.
- Whether cost-to-income will stabilize or operating costs will continue to grow faster than core revenue.
- Whether asset quality will remain strong enough for the impairment line to stay calm and avoid negative surprises.
Conclusion
Q1 2026 does not show weakness at NLB Bank, but it does show normalization. That is the essential message of the report. The Bank remains a large, profitable, and well-capitalized institution, with loan growth and good revenue diversification. But at the same time, the quarter shows that the strong FY2025 profit should not be viewed as automatically repeatable without further questions.
For the investor, that is probably the healthiest way to read NLB Bank at this point: not as a story that is deteriorating dramatically, but as a quality bank where the market and the analysis now need to focus more on the sustainability of earnings and less on the rear-view mirror of an exceptionally strong FY2025.