CHAPTER-I

INTRODUCTION

Background of Study

Nepal is the developing country in the world. Most of the people are under the line of poverty.
The objective of this study was to compare the financial performance of different ownership
structured commercial banks in Nepal based on their financial characteristics and identify the
determinants of performance exposed by the financial ratios. Eighteen commercial banks for the
period 2005 to 2010 were financially analyzed. In addition, econometric model by formulating
two regression models was used to estimate the impact of capital adequacy ratio, non-performing
loan ratio, interest expenses to total loan, net interest margin ratio and credit to deposit ratio on
the financial profitability namely return on assets and return on equity of these banks.

Financial Analysis is the process of analyzing various items of financial statement of the firm to
examine its comparative strengths and weaknesses. In the company there are variety of
stakeholders like shareholders, suppliers, creditors, bankers, employees and management.

The approach to bank performance analysis is based on financial ratio analysis which basically
includes the measurement of profitability and liquidity (Ally, 2013; Ifeacho & Ngalawa, 2014;
Kumbirai & Webb, 2010).

How properly the bank can use its resources efficiently is consider as the main tool usually used
related to performance evaluation of a commercial bank. The results of efficiency analysis of
banks are essential for all parties such as investors, depositors , managers and shareholders (Jha
& Hui , 2012) 

Hajer and Anis (2016) explained several reasons covers the evaluation of a commercial bank's
performance and over a given period, this evaluation is intended to determine the general
efficacy and long-term feasibility of senior management decisions or governance as well as to
minimize.
Commercial Banks

Bank is a financial institution which deals with the monetary transactions. The major function of
the bank is to accept deposits and providing loans. The bank attract deposits from various
investors by providing certain rate of interest, and investing the accumulated funds as loans to
others who are in need of fund by charging slightly higher rate of interest than they provide to
the depositors. Bank acts as an intermediary who bridges the gap between the savers of fund and
the users of fund. Basically, banks are those financial organization that offer the widest range of
financial services especially credit, saving and payment services and perform the widest range of
financial functions of any business firm in the economy.

Different scholars have defined bank in different ways. Some definitions of bank are as follows:

According to Leaf (2012), bank is that institution or individual who is always ready to serve
money on deposit to be returned against the check of their deposits (savers).

A bank generates a profit from the differential between the level of interest it pays for deposits
and other sources of funds, and the level of interest it charges in its lending activities. This
difference is referred to as the spread between the cost of funds and the loan interest rate.
Historically, profitability from lending activities has been cyclical and dependent on the needs
and strengths of loan customers. In recent history, investors have demanded a more stable
revenue stream and banks have therefore placed more emphasis on transaction fees, primarily
loan fees but also including service charges on an array of deposit activities and ancillary
services (international banking, foreign exchange, insurance, investments, wire transfers, etc.).
Lending activities, however, still provide the bulk of a commercial bank's income.
History of Banking in Nepal

The history of banking in Nepal may be described as a component of gradual and ordinary
evolution in the financial and economic sphere in the Nepalese life. Even now the financial
system is still in the evolutionary phase. The establishment of “Kauai Toshi Khana” as a banking
agency during the time of King Prithvi Narayan Shah and “Tejarath Adda” can be regarded as
the initial steps in the direction of start of banking development in Nepal. In the context of
Nepal, the development of banks can be summarized in three phases:
Phase I: The establishment of ‘Tejrath Adda’ during the Tenure of Prime Minister Ranoddip
Singh in 1933 B.S. (1876A.D) was the first step towards the institutional development of
banking in Nepal. It was fully subscribed by the government in Kathmandu. Tejrath provided
credit loans to the general public at 5% interest rate on securities i.e. gold, silver and other
ornaments. Its objective was to provide credit or loans to the general public but it failed to accept
deposits from them.

Phase II: The modern banking in Nepal was started with the establishment of Nepal Bank Ltd.
In 1994 B.S., having felt the need of development of banking sector and to help the government
formulate monetary policies, Nepal Rastra Bank was set up in 2013 B. S. as the central bank of
Nepal. In B.S. 2022, Government set up Rastriya Banijya Bank as a fully government owned
commercial bank.

Phase III: To operate all commercial banks uniformly under single act, “Commercial Bank Act
2031” was enacted. In 2041 B.S, Nepal Government established five rural development banks
under the control and supervision of Nepal Rastra Bank.

 Eastern Rural Development Bank

 Central Rural Development Bank

 Western Rural Development Bank

 Mid-western Rural Development Bank

 Far-western Rural Development Bank.

Profile of Bank of Kathmandu Ltd

Established in 1995, Bank of kathmandu Limited is the first regional commercial bank In Nepal
that is offering a wide range of the banking solution and guided towards facing new challenges
and obtaining opportunities. Its central office is at Kamalpokhari, Kathmandu.

It is public limited company incorporated under the Bank and Financial Institution Act, 2006 and
Companies Act, 2006. It is licensed under NRB to undertake the commercial banking services
and merchant banking activities in the country. The bank has a paid-up capital of Rupees 3.21
billion, is the sixth largest commercial bank in terms of capital. The bank’s capital base has gone
up following the merger. Its hold deposits of around Rs 32 billion and maintains credit portfolio
of Rs 23.78 billion. The shares of the bank are listed at Nepal Stock Exchange Limited (NEPSE),
the only exchange in the country, as ‘A’ category share.

It has 87 branch offices, 108 ATM , 631,000 clients and 1,135 staff members. It stands for
customer’s convenience and support. It is driven by values of efficiency in operation, integrity
and a strong focus on catering the needs of every customer by offering high quality and cost
effective products and services. The professional management team along with dedicated
employees is always looking forward to serve the customers, understand their needs and design
tailored products. The bank operates in highly automated environment in terms of information
technologies and communication systems .Thus, enabling prompt quality services it has put
substantial efforts and investments in acquiring the best technologies are available to build
necessary banking infrastructures.

Objectives

The main objectives of my study are to financial performance of Bank of Kathmandu Limited.
The other specific objectives of this project work are as follows:

 To examine profitability ratios of BOK.

 To examine liquidity ratios of BOK.

 To examine capital adequacy of BOK.

 To examine stability analysis of bank.

Rationale

The research focuses on financial performance of Bank of Kathmandu. It gives the depth
knowledge of financial performance and the financial position of the bank. Bank plays crucial
role in the development of the economy. Nepal had faced many problems due to the political
instability and under developed economy whereas many financial institutions have been
operating financial activity. There is a huge competition in the banking sector. The main goal of
the bank is to maximize the wealth of the shareholders by collecting the deposits and mobilizing
them into the profitable sectors. So, to meet the goal, the bank should perform its activities
efficiently and effectively in the market. The analysis of financial performance of the bank
would be highly beneficial for pointing out their strengths and weaknesses.

This study will help the bank to improve the financial performance of the bank by finding the
strength and weakness.

1. The primary significance of the study to me is that I will be able for the partial fulfillment
of the requirement for the degree of BBS.

2. The study will help the stakeholders (shareholders, creditors, investors, general public
and others) to know the financial performance of the bank.

3. This study will help the bank administration to adapt and make the dynamic strategies to
minimize the risks and to achieve its vision of being lading one.

4. One who is eager to know about this bank can get the brief information about this bank.

Review of Literature

The previous study provides the foundation to the present study so, we cannot be ignored the
previous study. Continuity in research is crucial. Hence, continuity in research is ensured by
linking the present study.

This chapter is composed of two major parts: the theoretical framework or conceptual review and
empirical studies. The theoretical framework part presents meaning of financial statements,
Presentation of Bank Financial Statements, Meaning of Financial Statement Analysis, Objective
of Financial Statement Analysis, and Tools for Financial Analysis used in the financial
performance evaluation of banks. The empirical studies part presents various related researches
and their results. According to Pant & Wolf (2012), the purpose of the reviewing the literature is
to develop some expertise in one’s area, to see what new contribution can be made and to review
some idea for Developing research design, Pant & Wolf (2012).

Conceptual Review

Bank is a financial institution which plays a vital role in the development of the country. It is a
resource for economic development which maintains the self-confidence of segments of the
society and extends to the people. It facilitates the growth of trade and extends to people. It
facilitates the growth of trade and industry and other sector of the national economy.

A banking is one of collecting funds from the community and extending credit (making loans) to
the people for useful purpose. Banks have played a pivotal role in mobilizing money from
lender to borrowers. Banking is the profit seeking business not a community charity. As a profit
seeker. It is expected to pay dividends and added to the wealth of its shareholder.

The modern financial evaluation has greatly affected the role and importance of financial
performance. Nowadays, finance is best characterized as ever changing with new ideas and
techniques. Only efficient manager of the company can achieve the set up goals. If a bank does
not maintain adequate equity capital, it makes the bank more risky. If a bank has inadequate
equity capital, it must be used more debt that has high fixed cost. So any firm must have
adequate equity capital in their capital structure. The main objectives of the bank are to collect
deposits as much as possible from the customers and to mobilize into the most profitable sector.
If a bank fails to utilize its collected resources, then it cannot generate revenue. Resource
mobilization management of bank includes resource collection, investment portfolio, loans and
advances, working capital, fixed assets management etc. It measures the extent to which bank is
successful to utilize its resources. To measure the bank performance in many aspects, we should
analyze its financial indicator with the help of financial statements.

Financial analysis is the process of identifying the financial strength and weakness of the
concerned bank. It is the process of finding strength and weakness of the concerned bank. It is
the process of finding details accounting information given in the financial statement. It is
performed to determine the liquidity, solvency, efficiency and profitability position of an
organization. The function or the performance of finance can be broken down into three major
decisions i.e. the investment decision, the financing decision, and the dividend decisions. An
optional combination of the three decisions will maximize the value of the firm.

Currently, bank regulators commonly use the traditional method of financial indices based on the
financial statements to evaluate banks’ financial performance (Abdus, 2004).

Meaning of financial statement

. Financial statements refer to such statements, which contains financial information about an
enterprise. It is the final product of accounting work done during the accounting period –
quarterly/ half-yearly/annually (Bernstein & Wild, 2010). Financial statements are prepared in
monetary terms. Some refer to them as ‘Annual Accounts’, when they are prepared on a yearly
basis. However, interim financial statements are prepared for a shorter period, usually a quarter,
and hence called ‘Quarterly Financial Statements’.

The financial statements are prepared by the board of directors for reporting to shareholders in
discharge of their stewardship function and hence corporate law enjoins upon them the
responsibility of laying down them before annual general meeting of the shareholders so as to
give a ‘true and fair view’ of the affairs of the company.

Presentation of bank financial statements. Financial data on commercial banks are presented in
two basic documents: the Report of Condition (i.e. the balance sheet) and the Report of Income
(i.e. the income statement) (Benton & James,2015).

A balance sheet is a financial statement that summarizes a company's assets, liabilities and
shareholders' equity at a specific point in time. These three balance sheet segments give investors
an idea as to what the company owns and owes, as well as the amount invested by shareholders.

A bank’s balance sheet presents the institution’s financial condition at a single point in time.
Balance sheets are prepared on a particular date- usually the last day of a month, year or
quarter .Because balance sheets capture a condition at one point in time, it is useful to compare
data for several accounting periods. In this way, trends in the bank’s financial condition over
time can be assessed.
Assets:

Cash assets include vault cash, deposits at the Federal Reserve (primarily to meet legal reserve
requirements), deposits at other banks (for clearing purposes and also to compensate the other
banks for providing currency and coin services),and cash items in the process of collection. All
of these four categories of assets have one common feature - namely they earn no interest. As
such, bank management should attempt to minimize its investment these assets.

Liabilities

Bank liabilities consist primarily of the various types of deposit accounts that the institution uses
to fund its lending and investing activities.

Capital. Subordinated notes and debentures are actually liabilities but are shown in the capital
section because this type of debt has the characteristics of capital in terms of maturity and
permanence and can be counted as capital in meeting certain regulatory requirements. “All
common and preferred equity” capital is the par value of all common 16 and preferred stock
outstanding, surplus or additional paid-in capital (the amount by which the original sale of the
stock exceeded par value), undivided profits or retained earnings (all of the institution’s earnings
since its inception less any dividends paid), and capital reserves (a cushion used to absorb
unexpected losses on loans and securities).

Income Statement

The income statement, which shows all major categories of revenue and expenditures, the net
profit or loss for the period, and the amount of cash dividends declared, measures a firm’s
financial performance over a period of time, such as a year, quarter or month. The income
statement and the balance sheet are integrally related and both should be evaluated when
assessing bank performance.

Interest, Income, loans are the largest asset category for most bank balance sheets, and interest
and fees on loans are the primary sources of bank income. This category of revenue, which
includes all year-to-date interest and fees on loans, is presented first on the income statement.
Income from lease financing is year-to-date income derived from lease financing receivables.
Interest expenses are the largest expenses for most banks. Interest expense is allocated into
following categories:;

a. Interest on deposits.

b. Interest expense on federal funds purchased and securities sold under agreements to
repurchase.

c. Interest on note balances issued to the government treasury and on other borrowed money.

d. Interest on mortgage debt and capital leases on bank premises, fixed assets and other real
estate owned.

e. Interest on subordinated notes and debentures.

Net interest income on a tax-equivalent basis is total interest income less total interest expense.
The relationship between net interest income - the amount by which interest received exceeds
interest paid and total assets is an important analytical tool in assessing a bank’s ability to
generate profits through the management of interest earning assets and interest bearing liabilities.

Non-interest income includes all other sources of income from fiduciary activities, service
charges on deposits, gains or losses and commissions and fees on assets held in trading account,
foreign exchange trading gains or losses , loan and security guarantees, derivative securities
services and other off-balance sheet activities.

Other Expenses

Three other types of expenses are deducted from adjusted operating income to arrive at pretax
operating income. Overhead expense includes salaries and employee benefits, expenses of
premises and fixed assets (net of rental income) and other non-interest operating expenses. The
provision for loan and lease losses is the year to date amount allocated to loan and lease loss
reserves (on the balance sheet). Remember that unexpected losses are charged against the
balance sheet reserves account. Gains or losses on the sale, exchange, redemption or retirement
of securities other than those held in trading accounts are netted against pretax operating income
to determine pretax operating income on a tax-equivalent basis. Security gains and losses can be
an important element in measuring bank performance. The analyst should be aware that a bank
can influence operating profit for a period through these securities transactions.

Income tax includes the total estimated federal, state, local, and foreign (if applicable) income
taxes on operating income (including securities gains and losses).

Net Income. Income taxes are deducted from pretax operating income to arrive at net operating
income. If there are any extraordinary items, defined as transactions that are both unusual in
nature and not expected to recur, these are deducted/added, net of taxes, to determine net income.

Review of Related Studies

Poudel (2016) in his article “Financial Statement Analysis: An Approach to evaluate Banks
Performance’’ has indicated that balance sheet, profit and loss account and the accompanying
notes are the most useful aspect of the banks. It needs to understand the major characteristics of
bank’s balance sheet and P/L account. The bank’s balance sheet is to compose of financial
claims as liabilities in the form of deposit and as assets in the form of loans. Fixed assets
account forms a small portion of the total assets. Financial innovation which are generally
contingent in nature are considered as off balance sheet items. Interest received on loan and
advances and investment and paid on deposit liabilities are the major components of profit and
loss account. The other resources of income are fee, commission, discount, and service charge.
The user of the financial statement of bank need relevant, reliable and comparable information
which assists them in evaluating the financial position and performance of bank and which is
useful to them in making economic decision. The requirement of bank’s financial statement has
been expressly laid down in the concern act. The principle and objectives of analyzing financial
statement are to identify: liquidity, profitability, and solvency. Most of user of the financial
statement are interested in assessing the bank’s overall performances which are affected by
following factors:

•The structure of balance sheet and profit and loss accounts.

•Operating efficiency and internal management system.

•Managerial decision taken by top management regarding rate, exchange rate, lending policies
etc.
•Environmental changes (technology, government, competition and economy)

The other factors are to be considered in analyzing the financial statements of a bank are to
assess the capital adequacy ratio and liquidity position. In the line of adequacy, a bank is
assessed on the basis of risk weighted assets. Bank’s strength and solvency. Bank facing with
capital adequacy problem may increase capital or reduce assets or reallocate the existing assets
structure in order to maintain the desired level of capital base.

Liquidity is measured by the speed with which a bank assets can be converted into cash to meet
deposit withdrawals and other current obligations. It is also important in the view of survival and
growth of the banks.

A thesis conduct by Shakya (2015) in “Financial Performance of Bank of Kathmandu” analyzed

different ratio of BOK for the period of five years till fiscal year 2013. Here, the liquidity
position of BOK is slightly stronger. It concludes that liquidity position of this bank. BOK has
better utilization of resource in income generating activity. It seems overall profitability position
of BOK and also highly leveraged.”

According to Metcalf and Tatar (2013), Financial Performance analysis is a process of evaluating
the relationship between components parts of a financial statement to obtain a better
understanding of a firm’s position and performance.

Various studies have been conducted in different aspect of commercial bank such as leading
policy, liquidity position, interest rate structure investment policy and capital structure etc. in the
preparation process of this thesis various part of the studied. These review also help to know
about what short of research has been conducted in past and what short of research are remained
for further study. Some of the previous researchers, their main objectives and major finding of
those studies are as follows

Major Objective of the Project

The major objective of the project is to evaluate the liquidity and efficiency of assets
management position of the concern banks. It examine the area on which the banks have been
utilizing their assets through the analysis of their financial performance. It also helps to examine
and analyze the growth rates of variable components of the banks. Another objective is to
evaluate the profitability position of the concern bank. Lastly, it provides essential support to
assets funds and mobilization and investment areas of the banks which would contribute to draw
their core strength ad area to be worked on.

Research Gap

Research gap denotes the gap between previous work done and the present research work. There
has been a lot of research work and studies and studies undertaken to examine the financial
performance of commercial banks in past. However, no research has been done regarding the
study of financial performance of Bank of Kathmandu limited. More ever this study is quite
different from previous studies. Also all the previous works were basically focused in
highlighting the financial performance of the related bank in the competitive environment. They
have some how overlooked the bank’s prominent role in the economy and failed to give the
specific financial decision which directly or indirectly influence the pace of economic
development of the nation.

In this study, the major areas are to disclose the financial performance relates to Nepalese
commercial banks .This type of research were done rarely. This study shows that the unique
feature of findings on previous researches on the basis of financial performance of commercial
banks in Nepal.

But this research is about financial performance of commercial bank of Nepal with sample of
Bank of Kathmandu Limited and in the previous research, there is no clear-cut accounting and
financial performance of joint commercial banks. The research can help the people who wanted
to know about the overall financial standard and accounting procedure of commercial bank in
Nepal. There are one selected banks to find out the problem and prospects of study. Therefore,
this topic may be new as well as the researches efforts may be appreciable.

This bank is leading commercial bank of the country having the huge market share and
investment activities and also has significances impact on the developing economy of the
country. This analysis would not just reveal but in addition it would provide insight view of
relevant joint venture bank and provide information in facing the problems of this joint venture
bank. Also all of the previous research work were concentrated in improving the financial
performance of the bank in the competitive environment. It has over slight to fulfilled the
current challenges to be faced by the joint ventures commercial banks.

Therefore, this research work includes the present issues, information regarding the financial
performance of joint venture/ commercial banks. Furthermore, this research would help
researchers and students who aspire to gain knowledge about different tools and techniques
needed to conduct similar studies in future.

Methods

Research methodology is the investigation tools of certain are and it means clearly observation of
certain objectives. Research is the process of systematic and in depth study or search for any
particular topics, subject or area of investigation of relevant details or data.

Types of research

The research design is the conceptual framework within which research task is conducted. It
specifies the process and methods for defining the research problem and data collection, their
analysis and to draw conclusion. For the study of financial performance of Bank of Kathmandu
ltd descriptive as well as analytical research design has been used.

Population and sample

There are twenty-eight commercial bank are operating in Nepal in recent time. All of them are
operating in Nepal in recent time. All of them are the population for this study. Only commercial
is selected Bank of Kathmandu limited as sample out of twenty-eight commercial bank for the
study. The data is collected from the sample bank only to achieve to objective of the study.

Types of data

Secondary data are collected for the purpose of the study. They are collected from the official
publication of the bank. Also some data are gathered from websites, articles, and journals and
related to the financial analysis, previous research reports and others sources. The types of data
are

1. Annual report of the bank

2. Financial report of the bank
3. Various previous studies
4. Report published by government and their agencies and other sources such as journals,
articles etc.

Data collection procedures

The data collected from various sources cannot be deployed in the original form therefore, for
purpose of this study the data have been rechecked, verified, edited, homogeneous data have
been classified and grouped and tabulated to make the interpretation in visual form. The data
were shown in figure (table, diagram and graphs) sequential way. The financial and statistical
tools have been followed for the analysis and interpretation of the financial analysis of the
selected bank.

Instruments

For preparing this report, I have been conducted to find out the liquidity position of the bank
according to mean, co-relation and standard deviation. The main tools of analysis are
mathematical and statistical tool is used for data analysis mean and co-relation is calculated for
the data as statistical tools.

Financial tools

For preparing this report, the financial tool is the means that is used to analyze the financial
information or the financial data. To meet the objective of the study, some selected financial
tools are used to analyze the financial information on the data. The financial tools are explained
below

Liquidity ratio

Liquidity is the powerful tool to measure to the ability of the bank to meet. It establishes the
relationship between cash and other current assets to current liabilities and it’s profit quick
measure of liquidity. So, following ratio can be computed to assess the banks short term
solvency.

Leverage/Solvency ratios

Leverage ratios are calculated to evaluate the long-term financial position of the firm. It
evaluates the financial position of the firm. Debt is riskier but is advantageous to shareholders.
Following ratio have been used to evaluate leverage ratio.

debt
Debt ratio=
assets

debt
Debt to equity ratio=
equity

Debt to Total Assets Ratio

The ratio represents the basic relationship between debt and total assets. The ratio describes what
portion of debt is used in its overall capital structure greater the ratio higher the risk and vice-
versa that makers more difficult to raise fund from external source of the firm .The ratio shows
the creditors claim on that firm total assets.

Debt equity ratio

The ratio expresses the relationship between borrowed funds and owner capital. It is used to
measure the financial risk of the firm and the creditors. The shareholder’s are safe if this ratio is
high.

Profitability ratio

Profit means differences of revenue and expenses over a period of time. In other word, profit is
unlimited output of firm or company. The profitability ratio is calculation to measure the
profitability and operating efficiency of the company. Besides management of the company
creditors and owner are also interested in the profitability of the firm.

NPAT
Net profit margin=
Totalincome
 NPAT
ROE=
Equity

Net profit margin

The ratio established relationship between net profit after tax and sales (total revenue) of an
enterprise. It indicate profit% in each rupees of sales into net profit. The higher the ratio indicates
higher operation efficiency and vice-versa that makes more difficult to raise fund from external
source for the firm. This ratio shoes creditor’s claim on that firm’s total assets.

Return on assets

The ratio measure the profit as percentage of total assets in another word it is the ratio of a firm’s
net income after tax is dividend by its total assets. ROA is primarily an indicator of managerial
efficiency. It indicates how capable the management of the firm has been converting the
institution’s assets into net earnings. It can be calculated by dividing NPAT by total asset.

Return on shareholder’s equity

It is approximate net benefit that the stockholders have received from investing their capital in
the firm. It measures the rate of return flowing to the firm’s shareholder. The ROE indicates
how well the firm has used the resources of owners .The greater ratio is good for the
organization.

Turnover ratio

The ratio measures how effectively a firm is managing deposits. Turnover ratio has been
managing deposits. Turnover ratio has been used in this study to evaluate the efficiency of the
utilization of the deposits. If this ratio is higher efficiency deposit utilization is better following
ratio are used in turnover ratio.

Loan and advance to deposit ratio

The ratio shows the relationship between loan and advance to deposit investment to deposit ratio.
The ratio shows relationship between investment and deposit.
Statistical tools

Some statistical tools used here to evaluate the performance of the bank are as follows:

Arithmetic mean

Arithmetic mean calculates the average of commutated values which helps to determine the
average ratio for different fiscal year. That helps to make comparison. It can be calculate by
dividing sum of computed value by total number of computation.

Standard deviation

Standard deviation measures the risk is the volatility of the variables. If standard deviation is
high, is means there is higher risk and vice versa.

Coefficient of variation

Coefficient of variation shows the unit of risk. It is relative risk associated with computed value.
It can also be calculated by dividing standard deviation of return by average return. It helps to
identify risk and consistency.

Limitations

The study is only focused in financial analysis of Bank of Kathmandu Limited. It gives general
idea of overall financial position of the BOK.

1. Only Bank of Kathmandu Limited is taken into consideration.

2. The study mainly depends on secondary data.
3. In this study, the latest two years data (2016/17-2017/18) have been taken into
consideration.
4. In this study only selected financial tools and statistical tools are used.
5. Due to confidential nature of the banking sector, bank does not give the correct or
relevant information on some topics to maintain privacy of the bank.
6. The study conducted only for the requirement of the partial fulfillment of bachelor’s
degree of business studies.
 CHAPTER-II
7. RESULTS AND ANALYSIS
8. This chapter is concerned with presentation and the analysis of the data. Already
mentioned methodology and tables, diagrams, and gaps have been used to present and
analyze the data. The data are presented in million to reduce the difficulty in
computation.
9. 1. Analysis of Profitability Ratios
10. Profitability measures the discount rate that makes the present value of all futures can
benefits equal to the amount invested. The rate does not reflects the discount rate
investor apply to future cash flows in determining a piece rate for the stock
company’s stock. To measure the profitability of Prabhu Bank, in this report ROA
and ROE is used.
11. Table 1: Net Profit, Return on Assets and Return on Income (in
millions times)

F/Y Net Asset Equity Total Net ROA(%) ROE(%)

Profit income profit
margin

2013/14 993 11234 1100 645 43.12 1.13 -

2014/15 (290) 21205 2000 730 -39.72 -1.36 -0.145

2015/16 1018 46511 3209 1543 65.97 2.81 31.72
2016/17 1117 68388 5881 1968 56.75 1.63 0.19
2017/18 1598 90981 5881 2537 62.98 1.76 27.17

12. Note: Annual report of Prabhu Bank 2017/18