CHAPTER - I

INTRODUCTION

1.1 General Background

Nepal is very small and poor country. It occupies 0.03% on the world and 0.3%on the
Asia. Bank is very important in the country like Nepal. Bank and financial institution is
the main factor for developing the economical industrial and commercial sector of
country. In a simple meaning we can say that Bank is a financial intuition whose main
function is to collect all the spread money as the deposit and to provide loan to needy
person Bank raise the fund through deposit and credit in creation in writen it pay certain
Interest to deposit holder and it provide the raising fund to others for certain time in
certain Interest charges. It also aware people to save their money.
A bank is a financial institution, which deals with money and credit. It accepts deposits
from the public and mobilizes the fund to productive sectors. It also provides remittance
facility to transfer money from one place to another .Generally, bank accepts deposit
from business institutions & individuals which is mobilized into productive sectors,
mainly business and consumer lending. Bank, is therefore, known as a dealer of money.
At present context bank is not confined to accepting deposits and disbursing loans. In
addition to this, a bank may be engaged in different types of functions such us remittance,
exchange currencies, Joint venture, underwriting, bank guarantee, discounting bill etc. In
short, the modern bank refers to an institution having the following features:
1. It deals with money; it accepts deposit and advances loans.
2. it also deal with credit; it has the ability to create credit by expanding its
liabilities.
3. It is commercial institution; it aims at earning profit.
Banks are the principal source of credit for millions of individuals and families and for
many units of government. They are among the most important financial institution in the
economy. Moreover, for small local business ranging from grocery stores to automobile
dealer, banks are often the major sources of credit to stock the shelves with merchandise.
Banks grant more installment loans to consumers then any other financial institutions.
Bank is a financial intermediary accepting deposits and granting loans. It offer the widest
menu of services of financial institutions. Banks also are among the most important
source of short term working capital for business. They have become increasingly active
in recent years in making long term business loan for new plant and equipment. When
business and consumers must make payment for purchase of goods and services, more
often they use banks provided cheques, credit or debit cards or electronic accounts
connected to a computer networks. It is banker to whom they turn most frequently for
advice and council, when they need financial information's and financial planning.

1.2 Profile of Nepal SBI Bank Limited

Nepal SBI Bank Ltd. (NSBL) is a subsidiary of State Bank of India (SBI) having 55
percent of ownership. The local partner viz. Employee Provident Fund holds 15% equity
and General Public 30%. In terms of the Technical Services Agreement between SBI and
the NSBL, the former provides management support to the bank through its expatriate
officers including Managing Director who is also the CEO of the Bank. Central
Management Committee (CENMAC), consisting of the Managing Director & CEO,
Chief Operating Officer & Dy. CEO, Chief Financial Officer, Two Senior Most AGMs,
exercises overall control functions with the help of 3 Regional Offices, and oversee the
overall operations of the Bank
NSBL was established in July 1993 and has emerged as one of the leading banks of
Nepal, with 994 skilled and dedicated Nepalese employees working in a total of 116
outlets that include 88 full-fledged branches, 19 extension counters, 7 Province offices, 1
Intouch Outlet and Corporate Office . With presence in 50 districts in Nepal, the Bank is
providing value added services to its customers through its wide network of 118 ATMs
(including 2 Mobile ATMs and 4 CRMs), internet banking, mobile wallet, SMS banking,
IRCTC Ticket Online Booking facility, etc. NSBL is one of the fastest growing
Commercial Banks of Nepal with more than 8.33 lakhs satisfied deposit customers and
over 6.50 lakhs ATM/Debit cardholders. The Bank enjoys leading position in the country
in terms of penetration of technology products, viz. Mobile Banking, Internet Banking
and Card Services. The Bank is moving ahead in the Nepalese Banking Industry with
significant growth in Net Profit with very nominal NPA. As of 31st Chaitra, 2074, the

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Bank has deposits of Rs. 83.66 billion and advances (net) of Rs. 74.05 billion, besides
investment portfolio of Rs. 17.93 billions.
State Bank of India (SBI), with a 211 year history, is the largest commercial Bank in
India in terms of assets, deposits, profits, branches, customers and employees. The
Government of India is the majority stakeholder and has controlling stake in SBI, a
“Fortune 500” entity.
Our parent State Bank of India has an extensive network, with over 22,000 branches in
India and another 206 foreign offices in 35 countries across the world.
Nepal SBI Bank has also established its wholly owned merchant banking subsidiary viz:
Nepal SBI Merchant Banking Ltd. in the year 2016.

1.3 Objectives
The main objective of this study is to analyze the financial performance and solvency
position of NSBL by using different financial ratios. This study is to analyze, examine
and interpret the policies adopted by NSBL. The main objectives of this study are given
below:
● To find out the profitability of the NSBL.
● To analyze the profitability.
● To determine factors of profitability.
● To evaluate profitability ratio of NSBL.
● To provide information of NSBL in banking sector
● To suggest and recommend some measure on the basis of the study of financial
performance evaluation for the improvement of financial performance of NSBL in
the future.

1.4 Rationale
Generally, these types of study give emphasis on the welfare of students. Such type of
study makes students active and independent and it also allows students to get practical
knowledge of what they studied theoretically. So, while preparing the field work report,
they gain knowledge through their own experience enabling them to deal with problem

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relating to their studies. This study also intends to let students know about required
information by themselves. The others importance of this study are as follow
● The BBS level would remain incomplete without this study.
● This report can be a source of secondary data for researchers.
● This study will be helpful to the management in order to analyze their own
success and failure while leading the firm in planned direction.
● It will be useful for concerned company as the study has provided suggestions.
● This field report can be used as guideline for the future students while preparing
such type of field report.

1.5 Review
A literature review is a comprehensive summary of previous research on a topic. The
literature review surveys scholarly articles, books, and other sources relevant to a
particular area of research. The review should enumerate, describe, summarize,
objectively evaluate and clarify this previous research. It should give a theoretical base
for the research and help you (the author) determine the nature of your research. The
literature review acknowledges the work of previous researchers, and in so doing, assures
the reader that your work has been well conceived. It is assumed that by mentioning a
previous work in the field of study, that the author has read, evaluated, and assimiliated
that work into the work at hand.

1.5.1 Review of Journals and articles

Vintila and Nenu(2015) on their research article entitled "Liquidity and profitability
analysis on the Romanian Listed Companies” attempted to show the relationship between
market's liquidity and the real economy, and also the effects that the banking system
could generate, as the basis of the entire financial system. This study started from the
assumption that liquidity and profitability issues of significant impact on companies
stability and development. The analysis was conducted on companies listed on the
Bucharest Stock Exchange. In order to observe the changes recorded before the crisis and
the subsequent evolution, data were collected for a period of 10 years, from 2005 to 2014.
The results showed that a decrease of liquidity level is not perceived as a risk factor for

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the Romanian companies. The study covered the period before and after the financial
crisis and confirmed a statistically significant relationship. The results confirmed the
statistically significant relationship between the analyzed variables and revealed a
negative correlation between liquidity and corporate financial performance.

Kosak and Cok(2010) wrote a paper entitled “Ownership structure and profitability of
the banking sector". The purpose of the paper was to investigate the relationship between
bank ownership and bank profitability in six South-Eastern European countries. The
profitability indicators were selected. In the first part of the analysis the profitability
differences between foreign owned and domestic banks were tested, whereas in the
second part the bank level and country level determinants of specific profitability
indicators for foreign and domestic banks were detected. The results did not reveal any
substantial statistically significant differences between profitability measures of domestic
and foreign owned banks, while the econometric tested identify several factors that are
clearly associated with bank profitability. The bank specific factors reflecting capital
strength, cost efficiency and credit risk exposure proved to be associated with
performance measures. According to prior expectations, liquidity management and bank
asset structure factors did not demonstrate any statistically significant link to performance
indicators.

1.6 Limitations
Although a great effort has been employed in order to prepare grand design of the report,
it has some limitation. The limitation of the study is as below.

● The major factor contributing to the limitation of the study is the time factors.
Since, this report had to be submitted within a limited span of time.
● The study period covers only five fiscal years from 2071/72 to 2075/76.
● The study is based on secondary data and as per information provides by NSBL
bank.
● This study does not take up the financial performance of other commercial banks.

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 CHAPTER - II
RESEARCH METHODOLOGY

2.1 Nature and sources of data

For the preparation of this report different kinds of books are followed. In this report, all
the data collected is secondary in nature. Almost all the data has been collected form
published annual reports, brochures etc. Mostly all the data are collected from the
concerned bank.
Secondary Data Source:
In this study, the main source of data is secondary which are collected from pre-published
data sources. The secondary data sources used in this study are:

Internal source
● Annual Report of the Nepal SBI Bank Ltd.
● Brochures of Nepal SBI Bank Ltd.
● Interim performance report
External source
● Book and publications
● Journals Article
● Articles from newspapers
● Previous report

2.2 Data collection Procedures

This report is prepare by using real data obtained from various sources like, financial
news, newspaper, magazine of commercial work and annual report.
For secondary data the annual report and website of the concerned bank, books, article
from newspaper is taken as the main purpose of the study. The annual report of the
concerned bank is obtained from their head office and thier websites.

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2.3 Data analysis tools
Data analysis tools means which tools the researcher used for present and analyzed the
data. In this report statistical and financial ratio tools is used for data analysis. The
collected and observed date is tabulated after adjusting necessarily amounts of each
overhead ,however for the analysis of the data following tools are used :

Financial tools
There are different types of financial tools that can applied to analyze the Profitability
Position of NSBL but in our field work report Profitability ration are used
Profitability ratios
Profitability ratios are concerned with measuring the operating efficiency of the bank.
“Profitability ratio are designed to provide answer to basically to those questions: (i) Is
the profit earned by the firm adequate? (ii) What rate of return does it represent? (iii)
What is the rate of profit for various divisions and segments of the firms? (iv) What are
the earnings per share? (v) What amount was paid on dividends? (vi) What is the rate of
return to equity holders and so on?
Profit is the ultimate output of the bank and it will have no future if it fails to make
sufficient profits. A profit is the difference between total revenue and total expenses over
a period of time. The profit and obtained by successful administration management,
credit management, operating management and risk management. Thus, a bank realize
profit as long as interest-earning assets exceeds interest-bearing liabilities.The
profitability of the bank is measured with a help of profitability ratio. Such profitability
ratios include.
1. Net Profit Margin Ratio
2. Return on Assets (ROA)
3. Return on Equity (ROE)
4. Earning Per Share (EPS)
5. Dividend payout Ratio (DPR)
6. Staff Expencess To Total Income Ratio
7. Overhead to total income ratio
8. Exchange Gain to Total Income Ratio

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 CHAPTER - III
SUMMARY AND CONCLUSION

3.1 Summary
The commercial banks are of foremost importance to a country because of their roles as a
strong pillar for the economic development of a nation. With the wave of the
globalization and advancement in technologies, without the strong base of commercial
banking platform, the economic development of a nation is bound to be paralyzed. Thus,
it would be very legitimate to say that the commercial banks are of a more importance to
a developing country like Nepal and Nepal SBI Bank Ltd. being the pioneer financial
institutions of Nepal, has undouble filled such gap to a great extent.
In Nepalese banking sector, commercial banks including ventures banks are operating at
present. In the absences of modern banking any country cannot develop the economic
activity. Therefore, it is essential to find out whether or not the banks are serving an
important contribution to develop sectors of economy. Profitability ratio is said to be
general business of fund, which shows the bank ability to meet cash requirement. In this
record, this study has been based upon the objective to evaluate the profitability ratio of
Nepal SBI Bank Ltd.

3.2 Conclusion
Financial Institution are currently viewed as the catalyst in the process of economic
growth of the country. Commercial banks are the major financial institutions and the
largest sources of finance which transfer the resources by mobilizing them from surplus
unit and lend lend funds to deficit unit.
Profitability analysis is importent for bank because Profit is the ultimate output of the
bank and it will have no future if it fails to make sufficient profits. A profit is the
difference between total revenue and total expenses over a period of time. The profit is
obtained by successful administration management, credit management, operating
management and risk management. Thus, a bank realize profit as long as interest-earning
assets exceeds interest-bearing liabilities.