“PROFITABILITY ANALYSIS OF NABIL BANK LTD”

A Project Work Report

Submitted By:

Prajwola Gajurel

T.U Registration No:

Exam Roll No:

Hetauda School of Management

Submitted To:

The Faculty of Management

Tribhuvan University

Kathmandu

In Partial Fulfillment of Requirement of the degree of

BACHELOR OF BUSINESS STUDIES (B.B.S)

Hetauda-04, Makwanpur

February, 2022
 DECLARATION

I hereby declare that the project work in this thesis entitled "Profitability Analysis of
NABIL Bank Limited." submitted to the Faculty of Management, Tribhuvan
University, Kathmandu, is my original work done on the partial fulfillment of the
requirement for the award of the degree of Bachelor of Business Studies (BBS). This
work is done under the supervision of Mr. Tika Prasad Sapkota faculty member of
Hetauda School of Management, Hetauda. This project work report has not been
submitted to any other university or institution for the award of any degree or
diploma.

……………………………….

Prajwola Gajurel

Researcher

Hetauda School of Management

Hetauda-4, Makawanpur

Date: February, 2022

i
 (Affiliated to TU) 🕾057-524711, 524701

Hetauda School of Management

Estd – 1995

Hetauda, Makwanpur

SUPERVISOR'S RECOMMENDATION

This project work report entitled "Profitability Analysis Of NABIL Bank

Limited." submitted by Prajwola Gajurel of Hetauda School of Management is
prepared under my supervision as per the procedure and format requirements laid by
Faculty of Management, Tribhuvan University, as the partial fulfillment of the
requirements for the award of the Bachelor Degree of Business Studies (B.B.S). I,
Therefore, recommend this report writing for approval.

………………………………..

Supervisor

Mr. Tika Prasad Sapkota

Hetauda School of Management

Date: February, 2022

ii
 (Affiliated to TU) 🕾057-524711, 524701

Hetauda School of Management

Estd – 1995

Hetauda, Makwanpur

ENDORSEMENT

We hereby endorse the project work report entitled "PROFITABILITY ANALYSIS

OF NABIL BANK LTD." submitted by Ms. Prajwola Gajurel of Hetauda School of
Management, Hetauda in partial fulfillment of the requirements for award of
Bachelor of Business Studies (B.B.S) for external evaluation.

……………………………….. ..………………………………...

Ram Pandit Khanal                                               Puran Bahadur Joshi 

Head                                                                     Principal

Management Research Committee                       Hetauda School of Management

Hetauda School of Management                            Date: February, 2022          

Date: February, 2022                                                    

iii
 ACKNOWLEDGEMENT

To provide theoretical as well as practical knowledge, T.U. has made provisions to

prepare a field work assignment for the students of B.B.S 4 th year. I would like thank
T.U for giving an opportunity to prepare field work research report.

I am highly grateful and indebted to my honorable supervision, Mr. Tika Prasad

Sapkota, Hetauda School of Management, for his scholarly and constructive
guidelines, encouragement, inspiration, valuables comments and possible help in the
smooth conduct of this study. Without his precious help, I would not be able to
prepare this report.

I am also profoundly grateful to Mr. Puran Bahadur Joshi, principal of Hetauda

School of Management, and Mr. Ram Pandit Khanal who always encourage and
motivate me in higher education.

I am also thankful to my parents who have been a regular source of inspiration for my
higher education.

Finally, I express my gratitude to all the people who directly or indirectly help and
support me in the course of preparing this report.

…………………

Prajwola Gajurel

Researcher

Hetauda School of Management

iv
 TABLE OF CONTENTS

Title page … … … … … … … … … … … … … … … … … … … … ……...I

Declaration… … … … … … … … … … … … … … … … … … … ……... II

Supervisor's Recommendation … … … … … … … … … … … … … …... III

Endorsement… … … … … … … … … … … … … … … … … … ………..IV

Acknowledgement … … … … … … … … … … … … … … … … … …….V

Table of contents … … … … … … … … … … … … … … … …. VI

List of Table ……………………… … … … … … … … … … … … …… VIII

List of Figure … … … … … … … … … … … … … … … … … … …… IX

Abbreviations … … … … … … … … … … … … … … … … …… …... X

CHAPTER I – INTRODUCTION

1.1 Background of the Study 1

1.2 Statement of the Problem 3

1.3 Objective of the Study 3

1.4 Rational of the Study 3

1.5 Review of Literature 4

1.6 Research Methodology 5

1.7 Limitation of the Study 7

1.8 Report Structure 8

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CHAPTER 2 – RESULT AND ANALYSIS

2.1 Data Presentation 9

2.2 Analysis of Results 9

2.3 Major Findings 16

CHAPTER 3- SUMMARY AND CONCLUSION

3.1 Summary 18

3.2 Conclusions 19

BIBLIOGRAPHY

APPENDIX

LIST OF TABLES
vi
Table Title of table Page

2.1.1 Net Profit Margin 13

2.1.2 Return on Assets 14

2.1.3 Return on Equity 16

LIST OF FIGURE

vii
Fig Title of figure Page

2.1.1 Net Profit Margin 13

2.1.2 Return on Assets 15

2.1.3 Return on Equity 16

ABBREVIATIONS
viii
ATM : Automated Teller Machine

FY : Fiscal Year

NIC : Nepal Industrial and Commercial

NRN's : Non-Resident Nepalese

TU : Tribhuvan University

ROE : Return on equity

ROA : Return on Assets

LTD : Limited

FIG : Figure

BAFIA : Bank and Financial Institution Act

CA : Company Act

BLB : Branches less Banking

SWIFT : Society for Worldwide Interbank Financial Telecommunication

BBS : Bachelor of Business Studies

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 CHAPTER –I
INTRODUCTION

1.1 Background
Every firm is most concerned with its profitability. One of the most frequently used
tools of financial ratio analysis is profitability ratios, which are used to determine the
company's bottom line and its return to its investors. Profitability measures are
important to company managers and owners alike. If a small business has outside
investors who have put their own money into the company, the primary owner
certainly has to show profitability to those equity investors. Profitability ratios show a
company's overall efficiency and performance. 

The word bank comes from an Italian word 'banco', meaning a bench, since

Italian merchants in the Renaissance made deals to borrow and lend money beside a
bench. They placed the money on that bench. Some person take its origin the banker
would keep its money and his records. Generally, Bank is an Institution which accepts
deposits makes business loans and offers related services. Bank is an organization
which deals with financial transactions and collects deposits from those persons who
have surplus money and lend it to those persons who need money for different
purpose. In an economy, the bank is regarded as one of the economic backbone of the
country for its development. Bank is a financial institution that deals in money. The
basic function of bank is collecting deposit and granting the loans. It involves in credit
creation that in related to creation of deposit and loan 'In the economy' the bank
collects small saving of general people, accumulative it and lends to the productive
sectors of the society for the overall economic development.

To determine the efficiency of bank maximum returns is not sufficient, profitability

analysis is also important for banks. Profitability analysis shows the ratio between
profit and investment which helps to motivate the organization to perform well.

1
1.1.1 Profile, event and activities

NABIL Bank Ltd.

NABIL Bank Ltd. is the Nepal’s first ever joint venture bank that initiated its
operation on 12th July 1984. Nepal bank (international) limited Ireland was its
joint venture partner at that time. It also received management support from
national bank of Bangladesh, Dhaka at the time of inauguration. Its authorized
capital used to have only rs.100 million at the starting time. Now it has ascended
its capital to Rs.500 million. With advancement it has 14 branches on a national
scale which is the utmost number of any joint venture bank in Nepal. NABIL bank
is distinguished for providing latest technology with vastly personalized service.
Most of its banking activities and services are done through computers. NABIL
provides different services like ATM, credit cards, tele-banking services, e-
banking services, safe deposit locker services. Besides these services
NABIL is the only bank to maneuver inside the international airport of arrival and
departure of cargoes. NABIL has drawing arrangement with 75 banks in 40
countries of the world and with the exchange companies and bank as well. The
policies of His Majesty’s Government and Nepal Rastra Bank rule and regulation
preside over NABIL.
Among different commercial bank, Nabil bank is the commercial bank which
collects money from general public and invests that amount to different productive
sector. It not accepts deposit and provides loan but also transfer money from one
place to another place or person has an agent. Nabil bank is the main agent of
Western Union Money Transfer. Nabil bank is the expanding its branch according to
need, want and market of people or public.

2
Banking Services Rendered by NABIL

Nabil has been obtaining its objectives and targets through various kinds of
banking services with a large number of facilities. The services rendered by Nabil
Bank are as follows:

1.1.1 Nabil Bank provides loan, advance and overdraft to the needy person and
customers against pledge and securities
1.1.2 Nabil Bank performs the agency services like, payment of subscription,
rent collection, dividend collection, interest collection etc. on behalf of
the customers
1.1.3 Nabil is a member of clearing house; it accepts cheque of any bank of its
customers only

1.1.4 It also exchanges the foreign currency i.e. sale and purchase of currency.

Beside these, various instrumental and modern technological services are provided
by Nabil Bank which are discussed below:-

1.1.5 Deposits

1.1.6 Guarantees

1.1.7 Credit Cards

1.1.8 Tele Banking

1.1.9 Western Union Money Transfer

1.1.10 SWIFT (Society for Worldwide Inter Bank Financial Tele-

communication)

1.1.11 Safe Deposit Locker

1.1.12 Automated Teller Machines (ATM)

1.1.13 Other facilities

3
1.2 Statement of the Problem
A problem statement is a concise description of an issue to be addressed or a
condition to be improved upon. It identifies the gap between the current (problem)
state and desired (goal) state of process or product. A statement of the problems is
used in research work as a claim that outlines the problem addressed by study. The
statement of the problems briefly addresses the question: What is the problem that
the research will address? The main purpose of the problem is to identify and
explain the problem.
On the above regard, following are the research question relating to the profitability
analysis of the banks :
1. What is the profitability position of Nabil Bank ?
2. What is the profitability ratios of Nabil Bank ?

1.3 Objectives of the Study

A study is conducted and report is prepared with certain objectives keeping in mind.
In the absence of specific objective, the study loss its value, the general purpose of
the study is to discuss, examine and evaluate the profitability position of NABIL
Bank Limited. Thus, this study has been conducted to achieve the following
objectives:

1. To analyse the profitability of the NABIL Bank Limited.

2. To analyze profitability ratios of the NABIL Bank .

1.4 Significance of the Study

The study of profitability analysis of NABIL Bank Ltd. helps to find out the
profitability position or performance of the bank. This study helps the investor to
find out the best investment instrument on banking sector. Every organization has to
analyze its financial performance in the every step of its operation, promotion, and
expansion. There should be an appropriate equilibrium between the earning and
non-earning assets. Commercial banks are always guided by the objective of
profitability. All financial decisions of commercial banks are for the betterment of
4
shareholder's wealth. The study ponders to find out whether Nabil bank Ltd is alert
or not in this regard.
This study will be helpful to enhance the financial performance of concern
organization. This study will be usable and valuable for academicians, students,
teachers and investors in the field of accounting and finance. This study enlightens
the shareholders, financial agencies, stock exchange, stock trader, customers,
depositors and debtors who can objectively identify the better banks to deal with.

The main significances of this study are as follows:

2. The study helps the public to have information about the profitability
performance of the bank.
3. The study helps in analyzing the efficiency of the banks in terms of their
profitability.
4. The study assists future researchers to know how NABIL bank manage their
profitability.

1.5 Review of Literature

Review of literature refers to the study of previous research works and books with
the purpose of knowing the research issue in detail and find out the appropriate
methodology to solve the issue. Review of literature is a basis for research in nearly
every academic concerning the research topic by himself/herself. It helps to
researchers to know what has been found about the topic and what news
contribution can be made or necessary. It supports the researcher to explore the
relevant and true facts for the reporting purpose in the field study. The review of
literature is a very important aspect at the research. This Chapter highlights upon the
existing literature. For this; several books, dissertation, reports, handout and articles
published in journal and newspaper are reviewed.

1.5.1 Conceptual Review

Conceptual review provides the fundamental theoretical framework and foundation

to the present study. For this, various books, research paper, articles etc. dealing
with theoretical aspect of profitability is taken into consideration.

5
Profitability

Profitability means ability to make profit from all the business activities of an
organization, company, firm, or an enterprise. It shows how efficiently the
management can make profit by using all the resources available in the market.
According to Harward & Upton, "profitability is the 'the ability of a given
investment to earn a return from its use."

Profitability serves as a measurement of efficiency, and a guide to further

improvement. It is critical in determining a firm's overall health. In terms of revenue
and profit it can be defined as the capacity to generate profit from all the aspect of a
business; illustration how proficient the management is in yielding revenue by
employing available resource.

1.5.2 Review of Previous work

This part consists of a review of past studies conducted by other researcher, which
are relevant to the topic.

Upreti, S. (2021) has conducted research on the topic of “Profitability analysis of

Himalayan Bank LTD and Everest Bank LTD"

The objectives of this report are :

1. To find out the profitability performance of HBL and EBL.

2. To analyze profitability ratios of the banks.

And the findings of this report are :

1. The average Net profit margin of Himalayan Bank is 22.702% and

average net profit margin of Everest Bank is 40.658%. This fact clarifies that
Net profit margin of Everest Bank is higher than Himalayan Bank.

2. The C.V of Himalayan Bank is 15.64% and C.V of Everest Bank is

25.53% which shows that the Net profit margin of Everest Bank is less
consistent compared to Himalayan Bank.

3. Analysis of Return on Assets shows that the average ROA of

6
 Himalayan Bank id 1.822% and average ROA of Everest Bank is 1.548%
which shows that Everest Bank has lower average ROA than Himalayan
Bank. The C.V indicates the consistency of data. The C.V on ROA of
Himalayan Bank is 9.18% and of Everest Bank is 28.93%.

4. Analysis of Return on Equity shows that average ROE of Himalayan

Bank is 19.428% and average ROE of Everest Bank is 16.8% which
indicates that the average ROE of Himalayan Bank is higher than Everest
Bank. The C.V indicates the consistency of data. The C.V on ROE of
Himalayan Bank is 16.68%.and C.V on ROE of Everest Bank is 39.98%.
This facts clarifies that the Return on Equity of Everest Bank is less
consistent than compared to Himalayan Bank.

Dahal, P. (2018) has conducted research on the topic of "Sales and profitability
analysis of dairy products".

The objectives of this report are :

5. To find out the dairy product production of dairy product.

6. To find out the trend of production of the dairy product in the past few years.

And the findings of this report are :

7. Mean of company is 9669.64, 4529.91, 3008.69 and 80036.88 from

2070/071 to 2073/074 respectively.
8. ROE of company is 0.26, 0.40, 0.02 and 0.42 from 2070/071 to 2073/074
respectively.

Tamang, SK.(2017) has conducted research on the topic of “Profitability analysis

of NABIL Bank Ltd”.

The objectives of this report are:

• To find out the profitability of the NABIL Bank Limited.

• To analyze the profitability

The findings of this report are:

• The gross margin ratio shows an increasing trend as compared to the base year,
which is beneficial to the bank. The min. index value is 175.97 as that of 2013/14
7
and the max index value is 219.90 as that of 2016/17.

• The exchange gain to total income ratio shows an increasing trend as compared to
the base year, which is beneficial to the bank. The min. index value is 107.23 as that
of 2013/14 and the max index value is 130.07 as that of 2015/16.

• The return on assets of NABIL shows an increasing trend and has max. Index
value of 198.05 in the year 2015/16 as compared to base year 2012/13 i.e. 100. It
shows that, NABIL is successful in deriving benefit from the assets it has used.

1.5.3 Research Gap

Research gap refers to the untouched area of contradiction of the previous research
work. It indicates the different between previous and present day in the same field. It
is important to find out the things that have been changed in same field. Thus, it is
necessary for a researcher to find out the research gap. The review of above relevant
literature has helps to know about the fundamental understanding and knowledge,
which is needed to make study meaningful and purposive. This study will help to
describe about the profitability condition of the NABIL Bank Ltd. This research is
focused in this particular area. This study will be useful for the interested people,
parties, scholars, professors, student, businessman and government for academic as
well as policy purpose.

1.6 Research Methodology

Research methodology refers to the various sequential steps to be adopted by a

researcher in studying a problem with certain objective in view. It is the research
method used to test the hypothesis. It describes the method and process applied in
the entire subject of the study.

1.6.1 Research Design

Research design is the overall plan of completing the research work. It guides the
researcher to carry out the research work effectively from the very beginning till the
end. It is simply the framework or plan for a study that guides the collection and
analysis of data. It helps to allocate the limited resources by posing crucial choices

8
in methodology. It helps to obtain the answer to the research question. It cycles from
problem selection, data collection, measurement, analysis and selection of method of
analysis of data, draw conclusions and generalization of findings. To achieve the
objective of the study, analytical and descriptive research designs have been used.
Some financial and statistical tools have been used to examine facts and descriptive
techniques have been adopted to evaluate profitability analysis of NABIL Bank Ltd.

1.6.2 Population

Population refers to the entire collection of all observation of interest i.e. people,
objects or events as defined by the researcher. A researcher must specifically define
the target population or the entire group on which they want to make the judgment.
Among different financial institution of Nepal, 28 'A' class banks are the population
of this study.

1.6.3 Sample

The study of the universe or entire population is costly and time consuming. Thus,
to make the study economic in operation and easy, representative portion of the
population is selected for the study that is known as sample. Therefore, from 28 'A'
class commercial banks, NABIL Bank is the sample for the study.

1.6.4 Method of Data Collection

This study is conducted on the basis of secondary data. Secondary resources of data
have been used by the study to collect the information about banks. Much
information such as the past financial data of the NABIL Bank, their trend of
profitability, etc has been collected from the annual financial reports of the banks.
The general information and background of the banks have been collected through
banks' prospectus and their official websites. Similarly, various data and information
have been collected from the economic journals, periodic bulletins, magazines and
others published and unpublished reports and documents from various sources. All
the secondary data are compiled, processed and tabulated in the time series as per
the needs and objectives. Also, as for the reliability of data provided by the banks
and other sources, they were compiled in the annual reports of auditors.

9
1.6.5 Methods of Data Analysis

Various statistical and financial tools are used in this study. Wide varieties of
methodology have been applied according to the reliability and consistency of data.
Before using the analytical tools to compare the results, the data containing in the
financial statement have been grouped re-ranged so as to make the comparison easy.
Data are collected from the various sources for the purpose of research and they are
then presented and analyzed which is the core part of the research work. The
collected data are first presented in a systematic manner and are then analyzed by
different financial and statistical tools to achieve the research objectives. Besides,
some graph, charts and tables have been presented to analyze and interpreted the
finding of the study. The applied tools are:

1.6.5.1 Financial Tools

A financial tool helps to analyze the financial strength and weakness of the firm.
Financial ratio is the mathematical relationship between two accounting figures.
Ratio analysis is one of the important financial tools that have been used in the
study. A ratio is simply one number expressed in terms of another and such it
express the quantitative relationship between any two numbers. Ratio can be
expressed in terms of percent and proportion. Ratio analysis is a part of the whole
process of analysis of financial statements of any business or industrial concern
especially to take output and credit decision. Even though, there are many ratios to
analyze and interpret the financial statement, only those ratio are calculated and
interpreted that are related to this study. The following types of ratio have been used
in this study:

Profitability Ratio

Profitability ratios are a class of financial metrics that are used to assess a business's
ability to generate earning relative to its revenue, operation costs, balance sheet
assets, and shareholders' equity over time, using data from a specific point in time.

The following ratios are developed under the profitability ratio to identity the
10
profitability position :

1. Net Profit Margin

Net Profit
Net Profit Margin =
Revenue
2. Return on Equity
Net Profit
Return on Equity (ROE) =
Shareholder ' s Capital
3. Return on Assets
Net Profit
Return on assets (ROA) =
Total Assets

Statistical Tools

For supporting the study, statistical tool such as Arithmetic Mean, Standard
Deviation, Coefficient of variable (C.V.) and Trend Analysis are used in the study.

a. Arithmetic Mean

Arithmetic Mean (Average) is the sum of collection of numbers divided by the

count of numbers in the collection. The collection is often a set of result of an
experiment or an observation study, or frequently a set result from a survey. It is
an important measure of central tendency. It is calculated as:

Arithmetic Mean (X) = ∑XN

Where,

           X = Arithmetic Mean

           N = Number of observation

          ∑X = Sum of observation

           X = Data

b. Standard Deviation

Standard deviation is a measure that is used to quantify the amount of variation

or dispersion of a set of data values. It is an important measurement of
dispersion. A low standard deviation indicate that the data points tend to be close
to the mean (also called the expected value) of the set, while a high standard

11
 deviation indicates that the data points are spread out over a wider range of
values. It is denoted by a Greek letter "" Sigma and is calculated as

Standard Deviation (S.D.) =  ∑X-X2 N

Where;

           X = Arithmetic Mean

           N = Number of observation

           X = Data

c. Coefficient of Variation

Coefficient of Variation (C.V) is a standardize measurement of dispersion of a

profitability distribution or frequency distribution. It is defined as the ratio of the
standard deviation to the mean. It is calculated by dividing standard deviation by
the mean which is shown below:

Coefficient of Variation (C.V.) = S.D/Arithmetic Mean

Where;

           X = Arithmetic Mean

           S.D = Standard deviation

1.7 Limitation of the Study

There are some limitations of the study because this study is done only for the
partial fulfillment of Bachelor of Business Studies (BBS). The limitations of the
study are concerned with inadequate coverage of the industry, reliability of the data
and some other variables. The study is based on the secondary data. Therefore, the
data collected may not be as reliable as the primary data. The specific limitations of
this study are as follow:

The study has collected the information of the banks through website of the bank
only.

12
 4. The information collected is based on the data of past 5 years only.
5. The study is not able to collect information from top-level staffs.
6. The study does not consider the other areas such as liquidity, debt
management, capital budgeting, dividend policy etc.

1.8 Report Structure

Chapter 1: Introduction

This chapter contains the background of the study, Statement of problems,

objectives of the study, significance of the study, review of literature, research
methodology and limitation of the study.

Chapter 2: Result and Findings

This chapter Contains the result and findings of the Study that are obtained by using
statistical, graphical and financial tools.

Chapters 3: Summary and Conclusion

This chapter contains the summary and conclusion of the study.

13
 CHAPTER - II
RESULTS AND FINDINGS

2.1 Data Presentation and Analysis

The fundamental objective of this chapter is to systematically analyze and evaluate
the collected information or data and converted into an understandable form. This
chapter helps to see the relationship between variables and take essential decision.
In this section, raw and unprocessed data are collected from various sources and are
presented in a systematic and understandable form using various financial and
statistical tools as mentioned in the previous chapter i.e. methodology of the study .
The analysis of data consists of organization, tabulation and graphical representation
of profitability condition of the bank.

2.1.1 Net Profit Margin

The net profit margin is equal to how much net income or profit is generated as a
percentage of revenue. Net profit margin is the ratio of net profits to revenues for a
company or business segment. Net profit margin is typically expressed as percentage
but can also be represented in decimal form. This ratio is calculated by:

Net Profit
Net Profit Margin =
Revenue

14
 Table No. 2.1.1

Net Profit Margin(in millions)

Net Profit
Fiscal Year Net Profit Revenue
Margin
2016/17 3702.38281 9440.03776 39.22
2017/18 3981.89295 12754.3015 31.22
2018/19 4328.85358 20371.07567 21.25
2019/20 3463.240822 18669.76184 18.55
2020/21 4527.522838 20844.94861 21.72
Total 131.96
Average 26.392
S.D (σ) 7.71
C.V (%) 29.23%
Source: Annual Report of NABIL Bank

Figure No.2.1.1

15
The above table 2.1.1 and figure 2.1.1 shows the Net profit margin of NABIL Bank
Ltd. From the analysis of table and figure it can conclude that Net profit margin of
Everest Bank is high but it fluctuate more. The C.V indicates the fluctuation of Net
profit margin.

The average net profit margin of NABIL Bank Ltd is 26.392% and the C.V indicates
that the net profit margin of NABIL Bank Ltd fluctuates 29.23% during five year
periods.

2.1.2 Return on Assets (ROA)

Return on assets is an indicator of how profitable accompany is relative to its total

assets. ROA gives a manager, investor, or analyst an idea as to how efficient a
company’s management is at using to generate earning. It is calculated as:

Net Profit
ROA =
Total Assets

Table 2.1.2

Return on Assets ratio (in millions)

16
Fiscal Year Net Profit Assets Return on Assets

2016/17 3702.38281 144017.861 2.57

2017/18 3981.89295 160978.071 2.47
2018/19 4328.85358 201138.821 2.15
2019/20 3463.24082 237680.03 1.457
4527.52283
2020/21 29106.223 1.55
8
Total 10.197
Average 2.0394
S.D (σ) 0.46
C.V (%) 22.56%
Source: Annual Report of NABIL Bank Ltd

Figure 2.1.2

Return on Assets

17
 Source: Annual Report of NABIL Bank Ltd.

The above table 2.1.2 and figure 2.1.2 shows the ROA of NABIL Bank Ltd.

The average ROA of NABIL Bank Ltd is 2.0394 % and its C.V is 22.56% which
indicates that NABIL Bank Ltd ROA fluctuates by 22.56% during five year period.

2.1.3 Return on Equity (ROE)

Return on equity is a measure of financial performance calculated by dividing net

income by shareholder’s equity. ROE is considered a measure of how effectively
management is using a company’s assets to create profits. It is calculated as:

Net Profit
ROE = '
Shareholder s Capital

Table 2.1.3

18
 Return on Equity ratio (in billions)

Shareholders's Return on
Fiscal Year Net Profit
Capital Equity
2016/17 3702.38281 16699.1839 22.171%
2017/18 3981.89295 20586.3573 19.342%
2018/19 4328.85358 23188.6124 18.668%
2019/20 3463.24082 25855.6586 13.39451%
           
2020/21 4527.52284 29805.94363
15.19%
Total 88.76551%
Average 17.753102%
S.D (σ) 3.113%
C.V (%) 17.54%
Source: Annual Report of NABIL Bank

Figure No. 2.1.3

Return on Equity

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 Source: Annual Report of NABIL Bank Ltd

The above table 2.1.3 and figure 2.1.3 shows the ROE of NABIL Bank Ltd. The
analysis of figure shows that there is high fluctuation on ROE of NABIL bank.

The average ROE of NABIL Bank is 17.75% and its C.V is 17.54% which indicates
that NABIL Bank ROE fluctuates by 17.54% during five year periods.

2.2 Major Findings

The major things that I found throughout the analysis of Profitability of Nabil Bank
Limited are as follows:

a. Analysis of Net profit margin shows that the average Net profit margin of
NABIL Bank is 26.392 % The C.V indicates the fluctuation of net profit
during the study year. The C.V of NABIL Bank is 29.23%. It shows the net
profit margin for the past 5 years in fluctuating situation.

b. Analysis of the return on total assets shows the average ROA for five years
period is 2.0394 % . The C.V indicates the fluctuation of return on assets

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 during the study year. The C.V of NABIL Bank is 22.56 %. It shows the return
on total assets for the past 5 years in fluctuating situation.

c. Analysis of the return on equity shows the average ROE for the five year
period of bank is 17.75%. The CV indicates the fluctuation of return on equity
during the study year. The CV of NABIL Bank is 17.54% . It shows the return
on equity for the past years in fluctuating situation.

CHAPTER-III

SUMMARY AND CONCLUSION

21
3.1 Summary

Profitability is the ability of a company to use its resources to generate the revenues in
excess of its expenses. Profitability analysis measures the amount of profit earned due
to the efficiency of operation in a business.

In this chapter, the facts and results that we have found in the last two chapters have
been discovered. The first chapter is the introduction chapter in which general
introduction of the study has been given. The chapter include the background and
profile of the study, statement of problem, objective of study, significance of study,
review of literature, research methodology, limitation of the study and report
structure. Relevant review of literature has been made on the basis of theoretical
background of banking principles as well as previous reports. Appropriate
methodology has been used to analyze and evaluate the profitability of listed banks.

The second chapter deals with the results and findings of the study. In this chapter, the
collected data have been presented in an understandable form in table and figures as
they have been systematically analyzed and evaluated using various financial and
statistical tools.

Third chapter shows the summary and conclusion of whole research. In this chapter,
summary of study, conclusion of study, main findings and recommendation for future
studies have been included.

3.2 Conclusions

For the partial fulfillment of the requirements of degree of Bachelor of Business

Studies, I select to do report on “Profitability Analysis on NABIL Bank Ltd”.
Financial and statistical tools are used under this study. Financial tools consists Net
profit margin, Return on Assets (ROA) and Return on Equity (ROE). Similarly,
22
statistical tools consists of Mean, Standard Deviation (S.D) and coefficient of
variance (C.V).

After the analysis of financial data of NABIL Bank, following conclusion is made.

 The overall results are satisfactory, but in some case the NABIL Bank should
take certain steps to improve the bank current financial condition.
 These ratios shows that NABIL is more efficient in mobilizing the resources
of owners and its operational efficiency is also satisfactory.
 The profitability ratios shows the profitability position of NABIL Bank is
satisfactory. It should give continuity to this growth trend in future.
 From overall analysis, it can conclude that NABIL Bank performance is better
as per Net profit margin , ROA and ROE.

23
BIBLIOGRAPHY

Upreti, S. (2021), “Comparative analysis of Profitability analysis of Himalayan

Bank and Everest Bank”.

Tamang, S.K. (2017), “Profitability analysis of Nabil Bank”

Official website of NABIL Bank “https://www.nabilbank.com.np/"

Annual report of NABIL Bank

 Appendix – 1

Proposal on "Profitability Analysis of Nabil Bank Limited

1.1 Background

Profitability is one of the major criteria for evaluating the performance of a bank. A
business cannot breathe well without profit. It may consider as a mirror of the
operating of a company. In word of Lord Keynes “profit is the engine that drives the
business enterprises”. A business needs profit not only for its existence but also for
the expansion and diversification. “A profit is the barometer of the success of the
business. It is indeed, a magic eye that mirrors all aspects of entire business operations
including the quality of output. “Profits are the soul of the business without which it is
lifeless. In fact, profit are useful intermediate become towards whish a firm’s capital
should be directed. M.E. Murphy has rightly remarked that “Business cannot exist
without profit, as an economy cannot exist without sound business. Profits must be
something for all to be proud of; they should be suspected.”

1.1.1 Profile, events and activities

NABIL Bank Limited

NABIL Bank Ltd. is the Nepal’s first ever joint venture bank that initiated its
operation on 12th July 1984.Its authorized capital used to have only rs.100 million at
the starting time. NABIL Bank has become the highest earning private banks in Nepal
for 2077/78 as per financial report .The Net profit is Rs.4.50 arba which is 30% more
than fiscal year 2076/77. It maintains its head office at its Nabil Centre , Durbar Marg
flanking the chief avenue of the capital leading to its grand palace. It has the largest
staff of private commercial banks in Nepal. Nabil Bank operates through its wide
network of 135 branch offices, 183 ATMs across the nation. The Bank also has over
170 international correspondent banking relationships. The Bank operates its
investment banking arm through its subsidiary Nabil Investment Banking Ltd.
1.2 Statement of the Problem

In order to exist in the market, commercial banks have to maintain certain level of
profit. They must make profit out of the responsibilities assigned. So the manager
should take decision very carefully to tackle with the situations. An analysis of the
profitability reveals how the profit position stands as a result of total transactions
made during a year. Such analysis is particularly interesting to suppliers of funds who
can evaluate their investment and take decision accordingly. On the other hand, profit
ratios are equally beneficial to management because these ratios reflect the efficiency
of the enterprise as whole. And the question that mentions here is how evaluating the
profitability effect in commercial banks. Various factors create problem to
profitability position of the commercial banks. The monetary policy of the
government, strong competition between the banks, strikes and political situation of
the country directly or indirectly hampers the profitability of the banks.

This study will explore following research question :-

1. What is the profitability position of Nabil Bank ?

2. What is the profitability ratios of Nabil Bank ?

1.3 Objectives of the Study

The main objective of the study is to analyse financial performance of and solvency
position of this bank through use of different ratios.

Other objective of this study are as following :-

• To analyse the profitability of the NABIL Bank Limited.

• To analyse profitability ratios of Nabil bank .

1.4 Significance of the Study

This study is helpful for all the concerned parties which add new idea and findings
about NABIL Bank Limited.

The studies that will have importance to various groups but in particular is directed to
a certain groups of people/organizations are:

1. To the investors

2. To the creditors

3. To management of the bank

4. To the customers

5. To the other parties

6. And this study will be equally useful to the other readers, students of related
subjects and other people who are concern with banking field.

1.5 Literature Review

Literature reviews are secondary source, and do not report new or original
experimental work. Most often associated with academic-oriented literature, such
reviews are found in academic journals, and are not to be confused with book reviews
that may also appear in the same publication. Literature reviews are a basis for
research in nearly every academic field. A narrow-scope literature review may be
included as part of a peer-reviewed journal article presenting new research, serving to
situate the current study within the body of the relevant literature and to provide
context for the reader. In such a case, the review usually precedes the methodology
and results sections of the work.
1.6 Research Methodology

Research methodology is the systematic way to solve the research problem with the
certain objectives. The purpose of study will to evaluate the profitability position of
commercial banks with reference to Nabil Bank Limited. Research methodology
adopted in this study includes research design, population and sample, source of data,
data collection procedure and analysis tools and techniques.

6.1 Research Design

For research activity,conceptualplan,board plan ,framework,blue print or as a whole

directional plan is called research design.After selection of research topic or issue,the
plan formulated for research activity is called research design.

6.2 Population

Among different financial institutions in Nepal,27 commercial banks are the

population of this study.

6.3 Sample

From 27 commercial bank, NABIL Bank is the sample for this study.

1.7 Limitation of Study

This study is simply conducted for partial fulfillment of requirements for the degree
of the Bachelor in Business Studies (BBS).

1. The accuracy of the study will be based on the data and the various published
documents of NABIL Bank only.

2. The data will be used from the secondary sources.

3. This study will concentrate only in the profitability measurement of NABIL Bank
only.
4. This study will be not applicable to all banks since it is concerned to NABIL Bank
only.

5. This study is only based on profit, so few measurement tools will be applied.

6. It is prepared for the partial fulfillment of bachelor degree.

1.8 Report structure

Chapter-1: Introduction

Introduction and background of the study, also statement of problem, importance,

limitation etc.

● Literature review

● Methodology

Chapter-2: Result and findings

This chapter will show the result with help of using ratio and their trend analysis and
findings of the project.

Chapter-3: Summary and conclusion

This chapter will mention the summary and conclusion of the study

APPENDIX – 2