A STUDY ON PROFITABILITY ANALYSIS

WITH REFERENCE TO KAMANA SEWA BIKASH BANK

A Project Work Report

By
Manju Nagarkoti
Patan Multiple Campus

TU Regd. No.:7-2-22-856-2018

College Roll no.: 358/075

Submitted to
Faculty of Management
Tribhuvan University
Kathmandu

In Partial Fulfilment of the Requirements for the Degree of

Bachelor of Business Studies (BBS)

Patan Multiple Campus

Patan Dhoka, Lalitpur

January, 2023
 Declaration

I hereby declare that the project work entitled “PROFITABILITY ANALYSIS OF KAMANA
SEWA BIKASH BANK.” submitted to the Faculty of Management, Tribhuvan University,
Kathmandu is an original piece of work under the supervision of Mr. Krishna Prasad Acharya,
faculty member of Shankerdev College, Putalisadak, Kathmandu and is submitted in partial
fulfillment of the requirements for the degree of Bachelor of Business Studies (BBS). This
project work report has not been submitted to any other university or institution for the award of
any degree or diploma.

Signature:
Manju Nagarkoti
Date:

ii
 Supervisor’s Recommendation

The project work report entitled “PROFITABILITY ANALYSIS OF KAMANA SEWA

BIKASH BANK.” submitted by Manju Nagarkoti of Patan Multiple Campus is prepared under
my supervision as per the procedure and format requirements laid by the Faculty of
Management, Tribhuvan University, as partial fulfillment of the requirements for the degree of
Bachelor of Business Studies (BBS). I, therefore, recommend the project work report for
evaluation.

Signature:

Krishna Prasad Acharya

Date:

iii
 Endorsement

We hereby endorse the project work report entitled “PROFITABILITY ANALYSIS OF

KAMANA SEWA BIKASH BANK.” Submitted by Manju Nagarkoti of Patan Multiple
Campus, in partial fulfillment of the requirements for the degree of the Bachelor of Business
Studies (BBS) for external evaluation.

Signature: Signature:

Dr. Kapil Khanal Prof. Dr. Keshav Raj Joshi

Head of research department Campus Chief

Date: Date:

iv
 Acknowledgement

I would like to express my heartfelt gratitude to all those who have helped me to prepare this
Project report. Firstly, I would like to thank Tribhuvan University for providing us the
opportunity to prepare this project report which will broaden our theoretical knowledge and
understanding into practical approach.

I would like to express my gratitude towards Supervisor Mr. Krishna Prasad Acharya who
patiently and tirelessly guided me in the preparation of this project report. Thank you very much
for your constant and consistent encouragement in the task of preparing this project even when
the going proved daunting.

I am also very thankful to my parents, friends and relatives for great support in every stage of
study like financial, internet searching and printing and for providing reference to gather
information regarding the topic. I therefore express my gratitude and regards to my friends for
their unconditional support throughout my study

………………

Manju Nagarkoti

Date:

v
Table of Contents
Title page..........................................................................................................................................i

Declaration.....................................................................................................................................ii

Supervisor’s Recommendation.......................................................................................................iii

Endorsement...................................................................................................................................iv

Acknowledgement............................................................................................................................v

Table of content……………………………………………………………………………………………vi

List of Table.....................................................................................................................................x

List of Figures.................................................................................................................................xi

Abbreviations.................................................................................................................................xii

CHAPTER ONE: INTRODUCTION............................................................................................1

Background of the study..........................................................................................1

History of Banking Sector in Nepal.........................................................................3

Introduction to Kamana Sewa Bikash Bank............................................................5

Banking Services Rendered by Kamana Sewa Bikash Bank..................................5

Overall objectives of the organization.....................................................................6

Objective of the study..............................................................................................7

Statement of Problem..............................................................................................7

Rationale/ Significance of study..............................................................................8

Literature Review....................................................................................................8

Conceptual Framework............................................................................................9

Financial Analysis...................................................................................................9

Ratio Analysis..........................................................................................................9
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 Profitability Ratio..................................................................................................11

Review of Books and Journals..............................................................................11

Review of Some Acts Relating to Banking in Nepal............................................12

Research Methodology..........................................................................................13

Research Design....................................................................................................13

Population and Sample..........................................................................................13

Nature and sources of data.....................................................................................13

Techniques of Analysis..........................................................................................14

Statistical Tools.....................................................................................................16

Research Gap.........................................................................................................16

Limitations of the study.........................................................................................17

Review of Previous Works....................................................................................17

Report Structure.....................................................................................................19

CHAPTER TWO: RESULTS AND ANALYSIS......................................................................20

Data Presentation...................................................................................................20

Service Provided by KSBB...................................................................................20

Financial Analysis.................................................................................................21

Ratio Analysis........................................................................................................22

Return on Assets....................................................................................................22

Return on Equity....................................................................................................23

Earnings per Share.................................................................................................25

Profit Margin Ratio................................................................................................27

Exchange gain to total income ratio......................................................................29

Overhead to total income ratio..............................................................................31

Staff expenses to total income ratio.......................................................................33

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 Findings………………………………………………………………………………….35

CHAPTER THREE: SUMMARY AND CONCLUSION………………………………….37

SUMMARY…………………………………………………………………………….37

CONCLUSION…………………………………………………………………………37

BIBLIOGRAPHY..........................................................................................................................39

APPENDICES...............................................................................................................................41

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 List of Table

Table No. Table Name Page No.

1 Pattern of Composition of Capital 21
2 Return on Assets 22
3 Return on Equity 24
4 Earnings Per Share 26
5 Net Profit Margin Ratio 28
6 Exchange gain to total income ratio 30
7 Overhead to total income ratio 32
8 Staff expenses ratio 34

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 List of Figures

Figure No. Figure Name Page No.

1 Return on Assets of KSBB 23
2 Return on equity 25
3 Earnings Per share 27
4 Net Profit Margin 29
5 Exchange gain to total income ratio 31
6 Overhead to total income ratio 33
7 Staff expenses to total income ratio 35

x
 Abbreviations

ABBS - Any Branch Banking System

ASBA - Application Supported by Blocked
ATM - Automated Teller Machine
BFI - Banks and Financial Institutions
BS - Bikram Sambat
EPS - Earning per Share
Etc. - Etcetera
FD - Fixed Deposit
FY - Financial Year
FOM - Faculty of Management
i.e. - That is
Ltd. - Limited
KSBB - Kamana Sewa Bikash Bank Limited
NPAT - Net Profit after Tax
NRB - Nepal Rastra Bank
NRs. - Nepalese Rupees
ROA - Return on Asset
ROE - Return on Equity
SWIFT - Society for Worldwide Interbank FinancialTelecommunication

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 CHAPTER ONE

INTRODUCTION

Background of the study

The capacity to generate a profit from all of an organization's, company's, firm's, or

enterprise's business operations is referred to as profitability. It demonstrates how well the
Management can turn a profit by utilizing all of the resources on the market. Profitability, in
the words of Harward & Upton, is "the ability of a given investment to yield a return from
its usage." Yet, the phrase

Profitability and efficiency are not the same thing. Profitability is a measure of efficiency
and is used by management to achieve higher levels of efficiency. Profitability is a crucial
metric for gauging efficiency, but it should not be viewed as a definitive indicator of
effectiveness. On the other hand, a proper level of efficiency might be accompanied with a
lack of profit. Sometimes, adequate profits can indicate inefficiency. The net profit number
only illustrates a contented balance between values received and values provided. One of the
many variables that greatly affect an enterprise's profitability is a change in operational
efficiency. Additionally, efficiency is just one of several elements that influence
profitability. (wikipedia.org)

Profit and profitability are occasionally used interchangeably. However, there is actually a
distinction between the two. Profit is a relative idea, but profitability is an absolute phrase.
12
They do, however, play different functions in business and are tightly connected and
dependent on one another. Profit refers to the total revenue generated by the business over
the defined time period, whereas profitability relates to the business's operational
effectiveness. The business's capacity to turn a profit from sales. The capacity of an
enterprise to generate a profit that is adequate to cover its costs of capital and labor.
Profitability is a result of profit, but as correctly noted by Weston and Brigham, "profit is an
index of economic progress, national income generated, and the rise in standard of living for
the country, to the financial management the test of efficiency and a measure of control, to
the owners a measure of the worth of their investment, to the creditors the margin of safety,
to the government the measure of taxable capacity and a basis of legislative action." In other
words, profitability does not require any profit. (wikipedia.org)

Businesses with the same amount of profit may have different profitability levels. The
statement made by R. S. Kul Shrestha that "Profit in two different company concerns may
be similar, yet, many a time, and it typically happens that their profitability varies when
assessed in terms of magnitude of investment" is accurate for this reason. (wikipedia.org)

A bank is a type of financial institution that issues credit and takes deposits from the general
population. Through capital markets, leading actions can be carried out directly or indirectly.
Banks are heavily controlled in the majority of nations due to their significance to the
stability of a nation's finances. The majority of countries have institutionalized the fractional
reserve banking system, in which banks keep liquid assets that are only partially equivalent
to their current obligations. Banks are often subject to a minimum capital requirement based
on an international internationally defined capital standard known as the Basel accords, in
addition to their regulation meant to maintain liquidity. (wikipedia.org)

The Latin word "bancus," the Italian word "banca," and the French word "banque," all of
which imply "a bench," are the ancestors of the word "bank." In the past, there used to be
some moneylenders who sat on benches in the marketplace to hold, lend, and exchange
money.
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A bank is a type of financial intermediary that offers loans and accepts deposits. In actuality,
a modern bank performs a multitude of tasks that are hard to pinpoint and categorize under
the overall concept of a bank.
"A bank is an establishment that makes to individuals such advance of money as may be
necessary and safely made, and to which persons entrust money when not required by them
for use," says Prof. Kinly. A bank "collects money from people who have it to spare or who
are saving it out of their wages, and then loans this money to others who require it,"
according to C.R. Crowther. (wikipedia.org)

Concept of Bank

The most significant financial entities in the nation's economy are banks. Keeping people's
money secure while using it to fund investments and loans is what a bank does. A bank is a
business that collects idle cash from the general public with the intention of lending it to
other people for use in purchases or investments. A bank is an establishment that receives
public deposits and then extends loans by generating credit.

Banks are the organizations that give the money needed to establish a business to people
who have the necessary abilities and desire, and they do so by taking deposits from those
who have the money but lack the necessary skills or time to run a firm. A bank is a resource-
mobilizing institution that receives deposits from a variety of sources and invests the
amassed funds in industries such as agriculture, trade, and business.

In other words, banks are the organizations that provide demand-withdrawable deposits and
lend money for commercial purposes. Banks provide a broad range of financial services,
including credit, savings, and payment options, among others.

History of Banking Sector in Nepal

History reveals that the citizens of our nation have been engaged in commerce and business
for a very long time. Despite the fact that the manufacturing of copper utensils had begun in
the 7th century, trade links with India could not be formed due to India's participation in the
industry. However, our country's crafts including copper, wood, and metal did much entice
the Chinese and the Tibetans, leading to the development of commercial ties with those two
countries.

14
As Nepal's first contemporary bank, Nepal Bank Ltd. It is seen as a turning point for the
nation's current financial system. In Nepal's history of modern banking, the establishment of
Nepal Bank heralds the start of a new era. This was started in the year 1937. Before Nepal
Rastra Bank was established in 1956 A.D., Nepal Bank Ltd. was the sole financial
institution operating in the nation.
To encourage Nepal's industrialisation, the Industrial Development Bank was founded in
1957 A.D.; it was eventually transformed into the Nepal Industrial Development
Corporation (NIDC) in 1959 A.D. The second commercial bank in Nepal was founded in
1965 AD with the name Rastriya Banijya Bank. Since the majority of Nepalese are farmers,
the growth of this industry is crucial to the country's economy. Therefore, a distinct
Agricultural Development Bank was founded in 1968 AD. This organization is the pioneer
in agriculture finance. (wikipedia.org)
Different types of banks operate in Nepal's contemporary financial system. There are banks
for central development, business, finance, cooperatives, and microcredit (Grameen). Based
on the required minimum paid-up capital, the NRB will categorize institutions into "A," "B,"
"C," and "D" groups and provide the appropriate license to the bank or financial institution.
Commercial banks are in Group A, whereas development banks, financial institutions, and
micro finance development banks are in Group B. In Nepal, there are now 28 commercial
banks, 57 development banks, 36 financial institutions, 48 microcredit (Grameen)
development banks, and 15 saving and credit cooperatives that have been granted licenses
by the Nepal Rastra Bank. (http://nrb.org.np/)
As of Mid-October 2020, the NRB has granted licenses to the following categories of banks
in the context of Nepal:

S.N. Classification Type Number

1 Class: A Commercial Banks 27

2 Class: B Development Banks 33

3 Class: C Financial Companies 25

4 Class: D Micro Finance Financial Institution 65

15
 5. Others Saving and Credit Co-operatives (Limited Banking) 14

6. NGOs Non-Government Organizations 24

7. Other Other institution 10

Source: Nepal Rastra Bank Website (www.nrb.org.np)

Introduction to Kamana Sewa Bikash Bank

The Kamana Sewa Bikas Bank Limited is a national-level development bank that is
supported by well-known business figures, groups, and reputable local citizens who have
achieved success in their fields of industry and profession while maintaining high standards
of moral character and social standing. Kamana Sewa Bank is dedicated to providing a
broad range of banking products and services tailored with cutting-edge technology to meet
the specific needs of every customer/client and thereby delight them by exceeding their
expectations. This is done under the direction of a reputable Board of Directors and a
professional and dynamic management team with extensive experience and a proven track-
record in the banking industry.

The Kamana Sewa Bank Team is dedicated to provide its esteemed customers high-quality
goods and services with the highest consideration and civility in accordance with the shared
goal of "Your Partner For Progress." We at Kamana Sewa think that the cornerstone for
establishing trust and boosting confidence between the client and the bank is the provision
of high-quality goods and services that are created or tailored to best meet the client's needs
through ongoing research, development, and innovation. As a result, the Kamana Sewa
Bank Team affirms its dedication to consistently working to supply cutting-edge goods and
services to all customers in order to best meet their needs. This will ensure the maximum
benefit and value addition for the consumer as well as for all other stake holders.
(https://www.kamanasewabank.com/)

16
Banking Services Rendered by Kamana Sewa Bikash Bank

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

 NBB Provides loan, advance and overdraft to the needy person and customers against
pledge and securities.
 KSBB performs the agency services like, payment of subscription, rent collection,
dividend collection, interest collection etc. on behalf of the customers.

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

 Provides other banking services such as locker services, utility payment

Along with all conventional commercial banking activities, KSBB also engages in foreign
exchange, telebanking services, trade and industry finance, consumer banking, safe deposit
boxes, corporate banking through a vast network of agencies, and correspondence banking with
other significant financial institutions around the globe. Export financing, import loans, term
loans, working capital, demand loans, contract loans, gold loans, etc. are just a few of the several
financial programs it offers.

Overall objectives of the organization

Every business organization was founded with the goal of making money. Profits are necessary
for a business' survival as well as for growth and diversification since investors, creditors, and
employees all desire a reasonable return on their investment. And only by making a profit can a
company organization fulfill its duty to diverse societal groups. The potential for the firm to
generate profits determines its continued survival, and it is also seen to be the primary element in
determining how well-known the business is. Profit also affects the business's ability to borrow
money. As a result, it is regarded as the primary variable in determining the returns that the firm
generates from the initial capital invested.

17
Profit and profitability are occasionally used interchangeably. However, there is actually a
distinction between the two. Profit is a relative idea, but profitability is an absolute phrase. They
do, however, play different functions in business and are tightly connected and dependent on one
another. Profit is a financial advantage that is obtained when the income from a commercial
activity exceeds the costs, taxes, and other expenses required to maintain the activity.
Profitability is quantified by the profit expressed as a percentage of sales, or profit margin. The
difference between total income and entire expenses is known as profit. Gaining profits is a
company undertaking's main goal. Making a profit is viewed as being crucial to a company'
existence. According to Khartik & Varghese (2011), profitability is largely dependent on how
well resources and labor are used. In order to boost profitability, not only from a cost of capital
standpoint but also from an investor's point of view, it is necessary to increase production
capacity and deploy cutting-edge technology to reduce labor costs and salary costs.
The report examines concerns about Kamana Sewa Bikash Bank Limited's profitability (KSBB).
They are the following: interest income ratio, net profit margin, earning per share, return on
equity, and return on assets.

Objective of the study

The primary goal of this study is to evaluate Kamana Sewa Bikash Bank's profitability. The
study's particular objectives are as follows:
• To determine KSBB's profitability
• To assess and examine the bank's profitability trend.
• To identify the profitability-related variables.

18
Statement of Problem

Increasing competition, deregulation, informed and demanding consumers, changing technology,

and bank globalization have all contributed to banks' current fast expansion of their financial
services. I selected Kamana Sewa Bikash Bank Limited (KSBB) for my research out of 27
commercial banks. There are many subjects that are relevant to the banking industry, but I
choose to focus on the profitability ratio of banks since this ratio position is crucial for
comparative analysis and a key approach to look at a bank's financial statements. Today, every
bank and financial institution finds it challenging to analyze ratios. Furthermore, if a bank
doesn't keep accurate records and financial statements, it damages their brand and image with
customers. To finish my research, I want to learn more about ratio analysis, including its sources,
methodology, and role in banking operations. I also want to read up on recent ratio news and
banking articles to learn more about the ratio and its significance in the banking industry.

The following topics are included in the study: 

• What is the profitability level of KSBB?

• Is the bank's profit margin acceptable?

• What aspects of profitability are influencing?

Rationale/ Significance of study

Every company organization must adhere to the profit planning procedure to obtain the highest
profit and preserve profitability. In the end, it helps an organization succeed. Profit planning is an
essential tool for reducing future risk and accomplishing its goal. The research will provide a
brief summary of some useful data that improves the awareness of the key stakeholders involved
in KSBB performance. The research provides information on return on equity, return on assets,
net profit margin, earning per share, interest income ratio, and interest expense ratio, which is
helpful to shareholders, bank management, brokers, investors, creditors, customers, and the
general public.

19
This study will look at the Kamana Sewa Bikash Bank Limited (KSBB) ratios indicated above
and determine whether or not the bank has maintained the appropriate number of ratios. The
purpose of the research is to gain a thorough knowledge of various organizational practices and
policies, as well as how the bank's overall function in the organization functions. The following
parties might be listed as those to whom this study will be useful and valuable:

 To the shareholders (shareholders)

 To the debtors (loan providers)
 The depositors, please (account holders)
 Additionally, this study will be equally helpful to other readers, students studying
relevant fields, and other individuals interested in the banking industry.

Literature Review

This chapter goes into further length and descriptive information about the theoretical
components of the issue of Kamana Sewa Bikash Bank's Profitability Analysis. For this study,
relevant publications, papers, and research reports have been examined. A few published works
that are linked to this subject must be cited. Review of several earlier reports on this subject
written by BBS students is also included.

20
Conceptual Framework

The profitability ratio of banks has been significantly impacted by current financial examination.
Today, finance is best described as being constantly evolving with new concepts and methods.
The established goals can only be met by an effective management of the business. A bank
becomes riskier if it does not have enough equity capital on hand. A bank must employ
additional debt with high fixed costs if its equity capital is insufficient. So every company's
financial structure must have enough equity capital. The bank's major goals are to deploy into the
most lucrative industry and to collect as many deposits from consumers as possible. A bank
cannot make money if it does not use the resources it has gathered. Bank resource management
comprises resource gathering, investment portfolio management, loans and advances, working
capital management, fixed asset management, etc. The degree to which a bank is successful in
using its resources is gauged by this. Financial statements should be used to assess the indication
of bank profitability in order to determine the profitability in many other areas. The technique of
determining a bank's financial health and weakness is called a profitability ratio. It is the process
of identifying the concerned bank's strengths and weaknesses.

Financial Analysis

The computation of a set of financial ratios meant to indicate a company's relative strengths and
weaknesses in comparison to other firms in the same sector and to show whether the firm's
position has been improving or deteriorating over time usually kicks off a financial statement
analysis.

Ratio Analysis

Ratio analysis is the methodical use of profitability ratio data to identify the firm's areas of
strength and weakness in order to assess its past performance and present situation.
We must compare the results of the different ratio calculations with a predetermined benchmark
before drawing any conclusions. the comparison, which Weston and Brigham categorized into
six forms;

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  Availability ratios

 ratios of leverage,

 ratios of activity,

 Ratios of profitability

 ratios of growth

 Ratios of valuation

Profitability Ratio

Profitability ratios have a connection to revenue. These ratios are intended to emphasize the
outcome of corporate operations. In the end, a company's capacity to operate efficiently and
provide a sufficient return to its shareholders depends on how much money it makes.
Profitability ratios are the benchmark for efficiency in this context. These ratios gauge the
management's general performance. It offers a motivation to develop effectiveness. The
following profitability ratios are included in this report:

22
• Return on Investment (ROA)

• Return on Investment (ROE)

• Profit per Share (EPS)

• Ratio of profit margin

• Ratio of exchange gain to overall revenue

• The percentage of staff costs to overall income

Review of Books and Journals

According to R.S. Sayers, "Ordinary banking business consist of changing cash for bank deposits
and bank deposits from one person to corporation (one depositor to another), giving bank
deposits in exchange for bill of exchange, government banks, and recurred and unsecured
promises businessmen to repay." Profitability ratio is characterized as "both an analytical and
judgmental process that helps to answer the questions that have been appropriately presented to
and, thus, it is a means to an end" by Erich A. H. in his book. Financial analysis is a tool that
helps people in charge of outcomes make wise decisions, which cannot be emphasized enough.
Another financial measure of commercial operations is liquidity. "A business should make sure
that it does not suffer from a lack of liquid," advises I.M. Pandey. Additionally, it isn't very
extremely liquid. A company's reputation will suffer if it is unable to fulfill its obligations owing
to insufficient cash. loss of trust among creditors, or even modest lawsuits that cause the business
to close. Extreme liquidity is likewise undesirable since idle assets provide no income. Funds of
the company will be excessively invested in existing assets. Therefore, a healthy balance
between liquidity and lack of liquidity must be achieved. The ease with which a bank's assets
may be turned into cash and other current liabilities is a measure of its liquidity. It is crucial for a
bank's existence and development.

Review of Some Acts Relating to Banking in Nepal

23
The purpose of the Commercial Bank Act of 2031 was to ensure that commercial banks operated
efficiently. Under the terms of this act, all commercial banks are operational. A commercial bank
is one that "exchanges money, deposits money, takes deposits, gives loans, and performs
commercial banking functions and which is not a bank designed for cooperatives, agriculture,
industry, or other specialized purpose," according to this statute.

The necessity for a commercial bank in the nation is expressly stated in the preamble of the
Nepal Bank Act of 1994. This law is hereby promulgated for the establishment of the bank and
its operation with the aim of addressing that need by providing services to the people and for the
betterment of the country because the lack of any bank in Nepal was impeding the country's
economic development and causing inconvenience to the people. According to the Company
Act, a bank must be created on the Rastra Bank's advice. With the Rastra Bank's permission, the
bank may choose the site of its main office. The bank will function as a separate corporate entity
with eternal succession. It may bring a claim or be the subject of one. The bank is permitted to
purchase, use, and sell both movable and immovable property, subject to this Act and other
applicable Nepali laws. With the NRB's consent, any bank may open, relocate, or close branches,
depots, or other offices. When a foreign commercial bank requests NRB permission to create a
branch, representative office, or liaison under the Company Act, the requirements of the Act will
be applicable to that foreign bank. Before approving anything, the NRB must get the OK from
His Majesty's Government. When granting permission, the NRB may impose requirements based
on the situation, and the foreign bank is required to abide by such terms. (http://nrb.org.np/)

24
Research Methodology

The main goal of this research is to evaluate the profitability ratio of Kamana Sewa Bikash Bank
on a micro level and to highlight the contributions of these banks' profitability ratios to the
economy on a macro level.

Research Design

The descriptive and analytical research designs were used with the study's goal in mind. The
analysis is based on a wide variety of parameters and elements affecting the bank's profitability
ratio. In order to make the report informative for the reader, comparative data banks are
presented in a certain way.

Population and Sample

Kamana Sewa Bikash Bank Limited was chosen for this study from a group of 27 commercial
banks. The most recent five years' worth of financial statements (F/Y 2071/72 to 2075/76) were
used as a sample for the examination of profitability ratio.

Nature and sources of data

Secondary data are used to perform the study. The necessary information is taken from the
annual reports of the respective banks' Statement of Financial Position (SOFP), Statement of
Profit or Loss accounts (SOPL), and various financial schedules. Additional information is
gathered from many organizations and regulatory bodies, including the Nepal Rastra Bank, the
Nepal Stock Exchange Ltd., the security exchange board, etc., as well as from relevant websites.
The historical data used for this study spans a 5-year period (F.Y. 2071/72 to 2075/76).

25
Techniques of Analysis

During analysis, data gathered from the various sources will be inserted in the tabular from
according to their homogeneous nature. They are table, graph, mean, standard deviation ratio and
percentage.
The following profitability ratios are included in this report:

Profitability Formula Remarks

ratio

Return on Assets Net Profit After Tax A ratio of net profit to total assets is known as
(ROA) Total Assets return on assets (also known as return on
investment). This ratio calculates the overall rate
of return for all of the firm's investors. A greater
ratio denotes a higher return on assets or on
investor contributions as a result of effective
capital or asset management.
Return on Equity Net Profit After Tax Return on shareholders' equity and return on net
(ROE) Total Equity
worth are other names for this ratio. It gauges the
correlation between shareholders' equity and net
profit after taxes. Finding out how well the funds
provided by the shareholders are used is the major
goal of this ratio. A higher ratio indicates greater
profitability for the stockholders, whilst a bad or
lower ratio indicates the opposite.
Earnings per Net Profit after tax The market potential ratio known as earnings per
share No. of common shares share (EPS), also known as net income per share,
calculates the net income per outstanding share of
stock. In other words, if all profits were allocated to
the outstanding shares at the end of the year, this is
the amount that each share of stock would get. One
of the most often cited numbers for publicly listed
corporations is earnings per share. It is the
distribution of net profit after tax among common
26
 shares.

Profit Margin Net Profit The profit margin ratio, also known as the return on
Ratio Total income sales ratio or gross profit ratio, is a measure of
profitability that evaluates the relationship between
a company's net income and net sales to determine
how much net income is made for every rupee of
sales produced. This ratio gauges how well a
business can turn revenues into net profits.

Dividend payout Dividend per share The amount of net income delivered to shareholders
ratio EPS as dividends over the course of a year is shown by
the company's dividend payout ratio. In other words,
this ratio demonstrates how much of the company's
profits are allocated to shareholders vs how much is
kept to finance operations.

Exchange gain to Exchange gain A change in the exchange rates of two

income ratio Total income
currencies, such as when an invoice in one
currency is paid with another, might result in an
exchange gain or loss. Total income and the
exchange gain ratio are measured by the
exchange gain to total income ratio.

Overhead to Overhead A comparison of operating costs and total

Total income Total income
revenue that is unrelated to the creation of
ratio products and services is known as an overhead
ratio. the proportion of running expenditures to
the total of the taxable equivalent net interest
income and other operating income. The
percentage of costs to total income that cannot
be used for the production of goods and services
is represented by the overhead ratio. To retain
competition in the market, a business would do

27
 all in its power to reduce these costs without
impairing the production of goods and services.

Staff expenses to Staff expenses It is determined by dividing staff expenses by

total income ratio Total income
net income. This ratio is calculated to compare
the productivity of a company's employees to
that of its peers, rivals, and previous earnings
records. The personnel of the firm are more
productive when this ratio is lower.

(http://www.myaccountingcourse.com/)

Statistical Tools

The term "statistical tools" refers to the statistics that concisely and clearly explain the data.
Statistical tools are the tools used in mathematics to predict the future based on historical data.
They aid in communicating the info.
Trend analysis is a statistical method that will be utilized for data analysis.
Trend Analysis
A trend analysis is a type of study that uses historical data to attempt to forecast future trends.
The goal behind trend analysis is to predict what will happen in the future based on what has
already occurred.

Research Gap

The stability and expansion of the economy are significantly influenced by the strength and
performance of the banks. For the bank's operations to continue over the long term, they must
run smoothly. Additionally, the bank's capacity to operate profitably and with adequate capital is
crucial. Their studies and mine were conducted at different times. Therefore, there can be a
discrepancy in our research's conclusion.

28
Limitations of the study
This study has a number of drawbacks, some of which are listed below:

a) Since just one ancient bank founded in 1994 was chosen for the study, more than a
dozen younger banks were eliminated, which constrained the study's scope.

b) Secondary data are the basis for this.

c) Five years' worth of historical data, or from F/Y 2071/72 to 2075/76, have been
gathered and examined.

d) The statistical and financial instruments employed for data analysis were sparse and
included just basic profitability ratios. The validity of study results may be hampered by
the lack of use of more advanced, scientific instruments.

Examining earlier works

In her thesis, Amandeep (1991) examined how banks have evolved into a tool for efficiently
addressing the demands of economic growth in order to bring about a complete socioeconomic
transition. It has had a negative impact on the bank operations' profitability. The spread and load
are the two key aspects, in the researcher's opinion, that decide and have an impact on a bank's
profitability. Other elements that affect a bank's profitability include its credit strategy, lending
priorities, rapid geographic development, rising setup costs, meager non-fund revenue, deposit
composition, etc. To determine the most important element determining a bank's profitability,
she has picked 11 variables to consider.
According to the report, banks should concentrate on managing spread, burden, establishment
costs, non-fund revenue, and deposit composition. In order to maximize profitability, banks must
properly charge for a variety of non-fund services (such as merchant banking, consulting, and
factoring services).
In a 1996 study, Baye & Jansen examined the profitability of banks from an economic
perspective. "Bank should attract the interest rate provided on deposits to maximize earnings,"
they write. Krishna (1996) defines profitability analysis as a rate that expresses profit as a

29
proportion of all assets or sales, or any other variable to represent assets or sales, in his work (P.
47). Depending on the measurement goal, different things should be utilized to determine the
numerator and denominator for the profit rate. The accounting measurements of costs, outputs,
inputs, revenues, profits, etc. are used in Berger & Humphrey's (1997) studies of frontier
efficiency to infer efficiency relative to the best practice within the given sample. The Return on
Asset (ROA) of MBB will be used in this research report to assess profitability performance. In
addition, there are numerous different approaches to gauge profitability success. (pp. 175-212)

An econometric examination of the performance of India's public sector banks was conducted in
2007 by Brinda and Dubey. They looked at how PSBs performed in comparison to other bank
groupings, such as private sector banks and foreign banks operating in India. They used an
econometric model to assess the effectiveness of several bank groupings based on various
profitability and efficiency metrics. They investigated the claim that public firms are inefficient
simply because they are owned by the government. To assess a bank's performance, they
employed two profitability metrics: return on assets (ROA) and operational profit ratio (OPR).
Two banks with identical OPR can differ in terms of ROA; one, to difference in the risk of their
loan portfolio; and two, efficiency measures used in their analysis are net interest margin (NIM)
and operating expense Ratio (OER). They used statistical methods including the limited
influence approach and the ordinary least square method to assess the data. They concluded that
private sector banks and foreign banks are not found to be superior to the PSBs in any of the
performance indicators, namely, ROA, OPR and OER given the present regulation environment.
Additionally, they discovered that PSBs fared well in terms of profitability compared to both
benchmarks and other Indian bank groupings (ROA),
Ramamurthy (1998) in his technical paper on the profitability and productivity in Indian banking
stated that the banking structure and profitability structure of the banking system across the
country have a bearing on the profitability of the banks. Larger banks have more potential for
economies of scale when grouped as major, medium, and small banks. Report Structure
The study has been organized into three chapters, each devoted to some aspects of the study of
capital structure. Chapter It consists of introduction, research methodology, presentation and
analysis of data, and summary, conclusions and recommendations of the study. The rationale
behind this kind of approach is to follow a simple research methodology approach.
30
Chapter One: Along with the background of the study, the problem statement, the objectives
and scope of the study, a literature review of profitability analysis in banks in light of various
scholars and investors, and the research methodology used in the study, such as research design,
nature and sources of data, and data analysis tools, it deals with the key issues that need to be
investigated.

Chapter Two: It comprises of data presentation and analysis that relate to the study's empirical
analysis.

Chapter Three: It provides the study's overview, findings, and recommendations.

31
 CHAPTER TWO

RESULTS AND ANALYSIS

Data Presentation

The study's major body consists of data presentation and analysis. The previous chapter provides
the fundamental inputs to evaluate and interpret the data through an introduction, overview of the
literature, and study technique. Data are presented and examined in this chapter.

Service Provided by KSBB

Kamana Sewa Bikash Bank Ltd. was established with an authorized capital of Rs.240 million
and Paid up capital of Rs.60 million (KSBB Annual report 1995) as a Joint Venture Bank
with International Finance Investment and Commerce (IFIC) Bank Ltd. of Bangladesh and
Nepalese promoters on 6th of June 1994. According to the agreement made between IFIC Bank
Ltd. and Nepalese Promoters, IFIC invested 50% of total investment i.e. it holds 50% of total
share, Nepalese promoters invested 20% and public invested 30%. Its Head Office is situated at
Kamaladi, Kathmandu. The bank has a network of 85 branches.
The KSB Bank’s current capital structure is represented in the table below:

32
Table 1
Pattern of Composition of Capital
S.N. Capital Amount

1 Authorized 10,000,000,000

2 Issued 8,090,250,326

3 Paid up 8,088,299,226

(Source: KSBB Annual Report 2075/76)

The main mission of KSB Bank is to offer financial services and become the “bank for
everyone" by dedicating the progress and growth of the bank to the community, customers,
employees and stockholders by fulfilling financial expectation of all level of society, providing
excellent customer services by offering personalized quality services and products, giving
reasonable returns to all related stakeholders, using the latest technology aimed at customer
satisfaction & act as an effective catalyst for socio-economic developments and maintaining high
standard corporate governance in all levels. Core Values and Code of Conduct/Ethical Principles
of KSB Bank is for achieving the vision and mission are to deliver quality and complete financial
services, provide value to the stakeholders, be accountable for delivering what we promise,
demonstrate honesty and integrity in all actions, be balanced in customer orientation and risk
consciousness and be efficient and technology oriented. The bank has a network of 81 branches,
6 Extension Counters, 5 Branchless banking and 60 ATM terminals. KSB Bank also provides
banking services through E-Banking, and mobile banking viz. KSBB SMART. Recently, the
bank signed an agreement with Khalti Digital Wallet in Nepal to facilitate digital payments to its
customers

Financial Analysis

Financial statement analysis generally begins with the calculation of set of financial ratios
designed to reveal the relative strength and weaknesses of a company as compared to other
companies in the same industry and to show weather the firm's position has been improving or

33
deteriorating over time. It helps the concerned parties to spot out the financial strength and
weakness of the firm.

Ratio Analysis

Ratio analysis is the systematic use of profitability ratio information of the firm’s strength and
weakness as its historical performance, and current condition can be determined. It provides the
trends of organization's financial performance. Ratios are very useful, essential and powerful
tools to interpret the financial performance of the company. In this report, following ratios are
used:

Return on Assets

Return on assets, is also called return on investment, which is a ratio between net profit and total
assets. This ratio measures the rate of return earned by the firm as a whole for all its investors.
Higher ratio indicates the higher return on assets or on amount contributed by investors on
account of efficient management of assets or capital.

The formula for ROA is as follows:

Net Profit After Tax

ROA=
Total Assets

The Return on Assets (ROA) of Kamana Sewa Bikash Bank Limited is as follows:

Table 2
Return on Assets
Year Net Profit Total Assets ROA (in %)
2071/72 813,976,568 39,483,572,200 2.1%
2072/73 1,198,297,230 46,801,800,468 2.6%
2073/74 1,199,704,091 57,008,219,556 2.1%
2074/75 1,144,035,276 61,377,135,953 1.9%
2075/76 1,587,960,145 76,254,493,329 2.1%
Sum (∑)     11%
34
 Count (n)     5
Mean (X)      0.02

Standard deviation ()      0.00

Coefficient of Variance      13%

(C.V)
(Source: Annual Report KSBB)
In the table 2 the level of ROA of KSBB is presented for the 5 years period. The ROA of the
bank range between 2.06% and 2.08% from the fiscal year 2071/72 to the fiscal year 2075/76.

ROA of KSBB
3.00%
2.50%
2.00%
Percentage

1.50%
1.00%
0.50%
0.00%
2071/72 2072/73 2073/74 2074/75 2075/76
Fiscal Year

Figure 1: Return on Assets of KSBB

In the figure 1 ROA of KSBB for 5 years period is shown. Fiscal Year is represented on X-Axis
and ROA (in %) is represented on Y-Axis. The above table and diagram shows that the ROA is
satisfactory. The ROA of KSBB in F/Y 2075/76 was 2.08%. In other words, every rupee KSBB
invested in the asset during the F/Y 2075/76 generated net income of Rs. 2.08. The ROA of
KSBB has increased from 1.86% in 2074/75 to 2.08% in 2075/76 which means the organization
was able to generate more net profit from the investment in asset.
From the above table we can see that the ROA in last 5 years had been at its lowest in the year
2074/75 where the net profit had decreased despite increase in total assets. Similarly, the ROA
had been highest in the F/Y 2072/73 where the net profits had increased significantly. The
Average KSBB ROA of last five years is 2.13%.

35
Return on Equity

This ratio is also known as return on shareholders' fund and return on net worth. It measures the
relationship between net profit after tax and shareholders' equity. The main objective of this ratio
is to find out how efficiently the funds supplied by the shareholders are utilized. Higher ratio
reflects the more profitability enjoyed by the shareholders, where as poor or lower ratio reflects
the reverse situation.
The formula of ROE is as follows:
Net Profit after tax
ROE=
Total Equity

The Return on Equity (ROE) of KSBB is as follows:

Table 3
Return on Equity
Year Net Profit Total Equity ROE (in %)
2071/72 813,976,568 4,892,223,335 16.6%
2072/73 1,198,297,230 6,039,333,849 19.8%
2073/74 1,199,704,091 10,800,625,608 11.1%
2074/75 1,144,035,276 11,737,106,233 9.7%
2075/76 1,587,960,145 12,418,723,266 12.8%
Sum (∑)     70%
Count (n)     5
Mean (X)     0.14
Standard deviation ()     0.03
Coefficient of Variance     18%
(C.V)
(Source: Annual Report KSBB)
The table 3 demonstrates the level of ROE of KSBB for 5 years period. The ROE of the bank
ranges from 9.75% to 19.3% from fiscal year 2071/72 to 2075/76. Here, the total equity is equals
to the equity at the end of the given year.

36
 ROE of KSBB
25.00%

20.00%
Percntage

15.00%

10.00%

5.00%

0.00%
2071/72 2072/73 2073/74 2074/75 2075/76
Fiscal Year

Figure 2. Return on Equity

The figure 2 represents the trend line of ROE of KSBB for 5 years’ time period. Fiscal year is
presented on X-Axis and ROE (in %) on Y-Axis. ROE denotes the profitability of the
organization using the resources provided by the investors and company earnings. The ROE of
KSBB in F/Y 2075/76 was 12.79%. When compared to the ROE that of last year, KSBB has
been able to generate significant return on equity investment this year (i.e. from 9.75% of ROE
to 12.79%) i.e. more profitability is enjoyed by the shareholders this year when compared to that
of last year. The average KSBB ROE of last 5 years is 14.02%.

Earnings per Share

Earnings per share (EPS), also called net income per share, is a market prospect ratio that
measures the amount of net income earned per share of stock outstanding. In other words, this is
the amount of money each share of stock would receive if all of the profits were distributed to
the outstanding shares at the end of the year. Earnings per share is one of the most quoted
statistics for publicly traded companies. It is the ratio of net profit after tax between numbers of
common share.

The formula for EPS is as follows:

EPS=Net Profit available ¿ Equity shareholders ¿

Number of Equity shares

37
The Earnings per share (EPS) of Kamana Sewa Bikash Bank Limited is as follows::
Table 4

Earnings per share

Year Net Profit available to Equity No. of Equity EPS (in

Shareholders Shares Rs.)

2071/72 813,976,568 24,314,000 33.48

2072/73 1,198,297,230 30,392,110 39.43

2073/74 1,199,704,091 72,190,590 16.62

2074/75 1,144,035,276 80,882,992 14.14

2075/76 1,587,960,145 80,882,992 19.63

Sum (∑)     123.30

Count (n)     5

Mean (X)     24.66

Standard deviation ()     5.94

Coefficient of Variance     24%

(C.V)

(Source: Annual report KSBB)

Table 4 demonstrates the earnings per share of KSBB in last 5 years. The EPS of bank ranges
from Rs. 14.14 to Rs. 39.43 from the fiscal year 2071/72 to 2075/76.

38
 EPS of KSBB
45.00
40.00
35.00
30.00
25.00
Rupees

20.00
15.00
10.00
5.00
0.00
2071/72 2072/73 2073/74 2074/75 2075/76
Fiscal Year

Figure 3. Earnings per share (EPS)

The figure 3 represents the trend line of EPS of KSBB for 5 years’ time period. Fiscal year is
presented on X-Axis and EPS (in Rs.) on Y-Axis. ROE denotes the profitability of the
organization using the resources provided by the investors and company earnings. The ROE of
KSBB in F/Y 2075/76 was 12.79%. When compared to the ROE that of last year, KSBB has
been able to generate significant return on equity investment this year (i.e. from 9.75% of ROE
to 12.79%) i.e. more profitability is enjoyed by the shareholders this year when compared to that
of last year. The average EPS of KSBB over last 5 years is NPR. 24.66. Higher earnings per
share is always better than a lower ratio because this means the company is able to generating a
significant amount of dividend for it’s investors.

Profit Margin Ratio

The profit margin ratio, also called the return on sales ratio or gross profit ratio, is a profitability
ratio that measures the amount of net income earned with each rupees of sales generated by
comparing the net income and net sales of a company. This ratio measures how effectively a
company can convert sales into net income.

The formula for Net Profit margin is as follows:

39
 Net Profit
Net Profit Margin=
Total Income
The Net Profit Margin of KSBB is as follows:

Table 5
Net Profit Margin
Year Net Profit Total Income Net Profit
Margin( in
%)

2071/72 813,976,568 2,644,191,871 30.8%

2072/73 1,198,297,230 3,449,747,412 34.7%

2073/74 1,199,704,091 4,858,327,300 24.7%

2074/75 1,144,035,276 6,578,197,276 17.4%

2075/76 1,587,960,145 8,298,759,186 19.1%

Sum (∑)     127%

Count (n)     5

Mean (X)     0.25

Standard deviation ()     0.05

Coefficient of Variance (C.V)     20%

(Source: Annual Report KSBB)

The table 4 shows the Net profit margin of KSBB for 5 years period. The net profit margin of
bank ranges from 17.39% to 34.74% between fiscal year 2071/72 to 2075/76.

40
 Net Profit Margin Trend Analysis
40.00%
35.00%
30.00%
25.00%
Percentage

20.00%
15.00%
10.00%
5.00%
0.00%
2071/72 2072/73 2073/74 2074/75 2075/76
Fiscal Year

Figure 3. Net Profit Margin

In the figure 3, profit margin for 5 years period are presented. Fiscal Year is presented on X-Axis
and Profit Margin on Y-Axis. The net profit margin has been on decreasing trend from fiscal
year 2072/73 to 2074/75. However, in the year 2075/76 the net profit margin has increased to
19.13%. The highest level of net profit margin was seen in the fiscal year 2072/73 i.e. 34.74%
and the lowest level was reported on the fiscal year 2074/75 i.e.17.39%. The average net profit
margin over the last five years is 25.35%

Exchange gain to total income ratio

An exchange gain/loss is caused by a change in the exchange rate of two currencies, such as
when an invoice denominated in one currency is paid in another. This exchange gain ratio allows
the investors to estimate the impact a change in exchange rates has on total income.

The formula for exchange gain to total income ratio is:

Exchange gain
Exchange gain¿ ¿ income ratio=
Total income

41
Table 6
Exchange gain to total income ratio
Year Exchange gain Total Income Exchange gain
income to total income
ratio(x)

2071/72 112,838,846 2,644,191,871 4.27%

2072/73 135,600,953 3,449,747,412 3.93%

2073/74 145,839,732 4,858,327,300 3.00%

2074/75 185,668,096 6,578,197,276 2.82%

2075/76 239,283,311 8,298,759,186 2.88%

Sum (∑)     16.91%

Count (n)     5

Mean (X)     0.03381

Standard deviation ()     0.00134

Coefficient of Variance (C.V)     3.95%

(Source: Annual Report KSBB)

The table 5 shows the Exchange gain to total income ratio of KSBB for 5 years period. It ranges
from 2.82% to 4.27% between fiscal year 2071/72 to 2075/76 where the mean, standard
deviation and coefficient variance of 5 years is 3.38%, 0.00134 and 0.03958 respectively.

42
 Exchange gain to total income ratio
4.50%
4.00%
3.50%
3.00%
Percentage

2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
2071/72 2072/73 2073/74 2074/75 2075/76
Fiscal Year

Figure 4. Exchange gain to total income ratio

In figure 4, we can see that the x- axis denotes the fiscal year and y-axis denotes the percentage
of exchange gain to total income. The ratio is seen to be fluctuating during the past 5 year (i.e.
F.Y 2071/72 to 2075/76). The highest exchange gain ratio was seen in the F.Y. 2071/72 where
the exchange gain to total income ratio was 4.27% and the lowest exchange ratio ration was seen
in F.Y 2074/75 i.e. 2.82%.Average exchange gain to total income ratio for 5 years was 3.381%.
Similarly, standard deviation and coefficient variance of KSBB was 0.00134 and 0.03958
respectively.

Overhead to total income ratio

Overhead ratio is the comparison of operating expenses and the total income which is not related
to the production of goods and service. By definition, the ratio of operating expenses to the sum
of taxable equivalent net interest income and other operating income. The overhead ratio shows
the proportion of expenses to total income which cannot be used for production of goods and
services. A company would try as much as it can to lower these expenses without it affecting the
production of goods and services so as to maintain the competition in the industry.

The formula for overhead to total income ratio is as follows:

43
 Overhead
Overhead ¿ total income ratio=
Total income

Table 7
Overhead to total income ratio
Year Overhead Total Income Overhead to
income ratio
(x)

2071/72 635,717,617 2,644,191,871 24.04%

2072/73 682,379,465 3,449,747,412 19.78%

2073/74 852,296,384 4,858,327,300 17.54%

2074/75 1,175,378,294 6,578,197,276 17.87%

2075/76 1,493,489,147 8,298,759,186 18.00%

Sum (∑)     97.23%

Count (n)     5

Mean (X)     0.19

Standard deviation ()     0.04

Coefficient of Variance (C.V)     18.7%

(Source: Annual Report KSBB)

Table 6 shows the overhead to total income ratio of KSBB for 5 years period, where the ratio
ranges from 17.54% to 24.02%. The mean, standard deviation and coefficient variation of
Overhead to total income ratio is 0.19, 0.04 and 0.187 respectively.

44
 Overhead to income ratio of KSBB
30%

25%

20%
Percentage

15%

10%

5%

0%
2071/72 2072/73 2073/74 2074/75 2075/76
Fiscal Year

Figure 5. Overhead to total income ratio

In figure 5, we can see that the x-axis denotes fiscal year and the y-axis denote percentage of
overhead to total income ratio. The overhead ratio of 5 years is in fluctuating trend, where the
highest overhead ratio was reported to be 24.04% on F.Y 2071/72 and lowest was reported to be
17.54% on F.Y 2073/74.

It is important for every business to maintain lower overhead ratio as it can help them with their
production. The overhead ratio has been increasing for the past 3 years. It is important the
organization curbs some overhead expenses while avoiding other avoidable expenses in order to
benefit the business and it’s returns.

Staff expenses to total income ratio

It is the ratio of Staff Expenses to Net Income. This ratio is computed to compare the efficiency
of company's staffs with the staffs of peer companies, competitors and own historical records in
term of total income. The lower of this ratio indicate more efficiency of the staffs of the
company.

The formula for staff expenses to total income ratio is as follows:

45
 Staff expenses
Staff expenses ¿ total income ratio=
Total income

Table 8
Staff expenses to total income ratio
Year Staff expenses Total Income Staff
expenses to
income ratio
(x)

2071/72 331,919,780 2,644,191,871 12.55%

2072/73 401,647,380 3,449,747,412 11.64%

2073/74 465,216,638 4,858,327,300 9.58%

2074/75 755,659,273 6,578,197,276 11.49%

2075/76 979,870,900 8,298,759,186 11.81%

Sum (∑)     57.07%

Count (n)     5

Mean (X)     0.11

Standard deviation ()     0.02

Coefficient of Variance (C.V)     16%

(Source: Annual Report KSBB)

The table 7 shows the staff to total income ratio of KSBB for 5 years period (i.e. F.Y 2071/72 to
2075/76), where the ratio ranges from 12.55% to 9.58% . The mean, standard deviation and
coefficient variance of staff expenses ratio is 0.11, 0.02 and 0.16 respectively.

46
 Staff expenses to income ratio
14%

12%

10%
Percentage

8%

6%

4%

2%

0%
2071/72 2072/73 2073/74 2074/75 2075/76
Fiscal Year

Figure 6. Staff expenses to total income

In figure 6, x-axis denotes the fiscal year and y-axis denotes the staff expenses ratio in
percentage. For the past 5 years the staff expenses ratio has been on fluctuating trend where the
highest ratio is 12.55% in the F.Y. 2071/72 and the lowest ratio of 9.58% was reported in the F.Y
2073/74. However, recently the staff expense ratio has been on increasing trend which indicates
that the staff efficiency has been on declining trend for past 2 years i.e. from F.Y. 2074/75 to
F.Y. 2075/76.

Finding

In this fieldwork report, we study about KAMANA SEWA BIKASH BANK profitability position and
we found the financial position of KAMANA SEWA BIKASH BANK is good. In compliance with
analysis, the following finding as made:
 The ROA of KSBB has increased from 1.86% in 2074/75 to 2.08% in 2075/76. This
shows that the organization has been able to better utilize the investment in assets than
compared to that of last year. During the period of last 5 years, the average ROA has
been 2.13% where the highest ROA has been reported in the F.Y. 2072/73 where the
ROA was 2.56% and lowest ROA has been reported in F.Y. 2074/75 where the ROA was
1.86%.

47
 The ROE of KSBB has increased from 9.75% in 2074/75 to 12.79% in 2075/76. This
shows that the organization has been able to generate more profit by utilizing the
investments made by the investors than compared to that of last year. Over the past 5
years (i.e. F.Y 2071/72 to 2075/76) the average ROE was 14.02% where the highest ROE
was reported during the F.Y 2071/72 which was 16.64% and the lowest ROE was
reported in the F.Y 2074/75 which was 12.79%.
 The EPS of KSBB has increased from Rs. 14.14 per share in the F.Y 2074/75 to Rs.
19.63 per share in F.Y 2075/76. This shows that the return of each equity shareholder has
increased when compared to the return that of last year. Over the past 5 years (i.e. F.Y.
2071/72 to 2075/76) the average EPS has been Rs. 24.66 where, the maximum EPS was
reported in the F.Y. 2072/73 with EPS of Rs. 39.43 and the lowest EPS was reported in
the F.Y. 2074/75 with EPS of Rs. 14.14.
 The position of net profit of KSBB over the past 5 years (i.e. F.Y. 2071/72 to 2075/76)
shows that the profit had been on increasing trend from F.Y. 2071/72 to 2073/74 before
plunge in the F.Y. 2074/75 where the profit decreased by 4.64% before quickly
improving increasing by 38.8% in the F.Y 2075/76. The average increase in net profit
over past 5 years has been 18.23%
(Note: Please refer to the appendix III for the calculation)
 The position of total expenses of KSBB over the past 5 years (i.e. F.Y 2071/72 to
2075/67) shows that the expenses has continued to increase at an average of 27.38%
where the highest increase was reported of the F.Y. 2074/75 i.e. by 56.59%.
(Note: Please refer to the appendix II for the calculation)
 The exchange gain ratio shows a decreasing trend compared to the base year (F.Y.
2071/72), which is not beneficial to the bank.
 The overhead to income ratio is in decreasing trend as well compared to the base year i.e.
F/Y 2071/72 which shows that the operational efficiency of KSBB bank is satisfactory.
 The staff expenses to income ratio shows a fluctuating trend where the staff expenses
ratio has been on increasing trend for past two years after a plunge in F/Y 2073/74.

48
49
 CHAPTER THREE

SUMMARY AND CONCLUSION

SUMMARY

This is one of the excellent, perfect, and difficult assignments that Tribhuvan University has for
BBS fourth-year students. One of the knowledge-gaining assignments given to students is to
collect data, identify issues, and discover solutions using real-world experience. As a business
student, you have the freedom to study beyond the theoretical limits; you should be familiar with
practical studies. Being a researcher and interested in studying Kamana Sewa Bikash Bank
Limited's profitability analysis aids in understanding the influence of profitability on the firm's
total value maximization.

Conclusion

One of the least developed nations in the world is Nepal. The majority of the developing process
depends financially on other nations. Its economy is too fragile. As a result, the people's
economic situation is poor. 85% of the population of Nepal is dependent on the agriculture
industry, which cannot give everyone a full-time job. The government of Nepal must engage the
populace in the industrialisation of the country as a whole. The creation of a stable financial
system is crucial for this goal.

Because they serve as a solid foundation for a country's economic growth, commercial banks are
of utmost significance to that country. Without a solid foundation in commercial banking, a
country's economic progress is doomed to stall in the age of globalization and technological
advancement. Therefore, it would be highly appropriate to claim that commercial banks are more
50
crucial for a growing nation like Nepal, and Kamana Sewa Bikash Bank Ltd., as one of Nepal's
first financial institutions, has significantly filled this gap.

Commercial banks, including venture banks, are now active in the banking industry of Nepal.
Any nation cannot build its economy in the absence of sophisticated banking. Therefore, it is
crucial to ascertain whether or not banks are making a significant contribution to the
development of various economic sectors. Profitability ratio is regarded as the overall health of
the fund, demonstrating the bank's capacity to satisfy cash needs. According to the study's
findings, KAMANA SEWA BIKASH BANK Ltd.'s profitability ratio was to be assessed.

In essence, there are many banks, there is fierce rivalry, and there is unhealthy competitiveness.
Thus, Kamana Sewa Bikash Bank Ltd. is preserving its strengths in this highly competitive
banking environment and establishing itself as a standard in the Nepalese banking sector.

Kamana Sewa Bikash Bank Ltd. is in a strong financial position, as evidenced by its financial
performance. Kamana Sewa Bikash Bank Ltd. has an improving tendency in its yearly earnings.
The bank largely complies with its desires, objectives, and objectives. In order to establish the
bank as a financially viable business, it was able to effectively overcome all economic and
competitive obstacles. The debtors of Kamana Sewa Bikash Bank Ltd. and the investors are both
delighted with the rate of return on their investments. The Kamana Sewa Bikash Bank Ltd. has
contributed significantly to the nation's financial and economic system. It has achieved the goals
it set out to achieve at the time of inception.

51
 BIBLIOGRAPHY

Aburime , T.U.(2008) Determinants of bank profitability : macroeconomic evidence from

Nigeria.

Adhikari.K, Barman.N & Kashyap.P (2014) Profitability of State Bank of India: An Analysis.
Pacific Business Review International. 6, (12), 91-97

Alper, D., & Anbar, A. (2011).Bank Specific and Macroeconomic determinants of commercial
bank profitability: Emperical evidence from Turkey. Business and Economics Research
Journal

Gizaw.M, Kebede, M.,Salvaraj.S(2015) The Impact of credit risk on Profitability Performance of

Commercial Banks in Ethiopia. African Journal of Business Management.9 (2) 59-66.

Website accessed

http://en.wikipedia.org
wiki/Bank
http://nrb.org.np/
http://www.kamanasewabank.com

Report

Annual report of Kamana Sewa Bikash Bank Ltd., 2071/72

Annual report of Kamana Sewa Bikash Bank Ltd., 2072/73
Annual report of Kamana Sewa Bikash Bank Ltd., 2073/74
Annual report of Kamana Sewa Bikash Bank Ltd., 2075/76

52
 APPENDIX I

List of Commercial Banks in Nepal

(NRP. In Core)
S. Name of Bank Operation Head Office Paid up

No Date (A.D.) Capital

.
1 Nepal Bank Ltd. 1937/11/15 Dharmapath,Kathmandu 649.95
2 Rastriya Banijya Bank Ltd. 1966/01/23 Singhadurbarplaza,Kathmandu 858.90
3 Agriculture Development Bank Ltd. 1968/01/21 Ramshahpath, Kathmandu 1037.44
4 Nabil Bank Ltd. 1984/07/12 Beena Marg, Kathmandu 618.35
5 Nepal Investment Bank Ltd. 1986/03/09 Durbarmarg, Kathmandu 870.66
6 Standard Chartered Bank Nepal Ltd. 1987/02/28 Nayabaneshwor, Kathmandu 374.99
7 Himalayan Bank Ltd. 1993/01/18 Kamaladi, Kathmandu 449.91
8 Nepal SBI Bank Ltd. 1993/07/07 Kesharmahal, Kathmandu 388.37
9 Nepal Bangaladesh Bank Ltd. 1994/06/06 Kamaladi, Kathmandu 401.18
10 Everest Bank Ltd. 1994/10/18 Lazimpat , Kathmandu 274.26
11 Kumari Bank Ltd. 2001/04/03 Durbarmarg, Kathmandu 269.92
12 Laxmi Bank Ltd. 2002/04/03 Hattisar, Kathmandu 303.92
13 Citizens Bank International Ltd. 2007/04/20 Kamaladi, Kathmandu 553.74
14 Prime Commercial Bank Ltd. 2007/09/24 Newroad, Kathmandu 489.19
15 Sunrise Bank Ltd. 2007/10/12 Gairidhara, Kathmandu 530.14
16 Janata Bank Nepal Ltd. 2010/04/05 Naya Baneshwor, Kathmandu 206.00
17 Mega Bank Nepal Ltd. 2010/07/23 Kantipath, Kathmandu 401.20
18 Century Commercial Bank Ltd. 2011/03/10 Putalisadak , Kathmandu 368.90
19 Sanima Bank Ltd. 2012/02/15 Nagpokhari, Kathmandu 530.59
20 Machhapuchhre Bank Ltd. 2012/7/9* New Road, Pokhara, Kaski 386.45
21 NIC Asia Bank Ltd. 2013/6/30* Thapathali, Kathmandu 581.96
22 Global IME Bank Ltd. 2014/4/9* Panipokhari, Kathmandu 616.43
23 NMB Bank Ltd. 2015/10/18* Babarmahal, Kathmandu 543.01
24 Prabhu Bank Ltd. 2016/2/12* Babarmahal, Kathmandu 588.14

53
 25 Siddhartha Bank Ltd. 2016/7/21* Hattisar, Kathmandu 302.21
26 Bank of Kathmandu Lumbini Ltd. 2016/7/14* Kamaladi, Kathmandu 457.69
27 Civil Bank Ltd. 2016/10/17* Kamaladi, Kathmandu 458.38
28 Nepal Credit and Commerce Bank 2017/01/01* Siddharthanagar, Rupandehi 467.91
Ltd.
*Joint operation date after merger Source: NRB Banking and Financial Statistics

54
 APPENDIX II

Calculation for the changes in the position of Expenses of KSBB

Year Expenditure Change Change %

2070/71 1,741,378,015    

2071/72 1,896,787,267 155,409,252 8.92%

2072/73 2,138,773,136 241,985,869 12.76%

2073/74 2,981,842,974 843,069,838 39.42%

2074/75 4,669,179,749 1,687,336,775 56.59%

2075/76 5,566,770,201 897,590,452 19.22%

Average 27.38%

55
 APPENDIX III

Calculation for the changes in Net profit

Year Net Profit Change Change %

2070/71 742,342,538    

2071/72 813,976,568 71,634,030 9.65%

2072/73 1,198,297,230 384,320,662 47.22%

2073/74 1,199,704,091 1,406,861 0.12%

2074/75 1,144,035,276 -55,668,815 -4.64%

2075/76 1,587,960,145 443,924,869 38.80%

Average 18.23%

56
 APPENDIX IV

Consolidated Statement of Financial Position as on 31st Ashadh 2076

57
58
 APPENDIX V

Consolidated Statement of Profit or loss for the year ended 2075/76

59
 APPENDIX VI

Calculation detail for ROA

Year Net Profit Total Assets ROA (x) x-x ¿

2071/72 813,976,568 39,483,572,200 2.1% -0.01 0.00017
2072/73 1,198,297,230 46,801,800,468 2.6% -0.01 0.00007
2073/74 1,199,704,091 57,008,219,556 2.1% -0.01 0.00016
2074/75 1,144,035,276 61,377,135,953 1.9% -0.02 0.00023
2075/76 1,587,960,145 76,254,493,329 2.1% -0.01 0.00017
Sum     11% -0.06 0.00080
(∑)

Count (n) =5

Mean (x) ∑x 0.11 = 0.02

= =
n 5
Var(x) = ∑¿ ¿ 0.0008 = 0.0002
=
5−1
Standard Deviation ()
=
√ var ( x ) =
0.0002 = 0.003
n 5

Coefficient variance ❑ 0.003 = 0.13

= =
(C.V) x 0.02

Calculation detail for ROE

Year Net Profit Total Equity ROE (x) x-x ( x−x )

2

2071/72 813,976,568 4,892,223,335 16.6% 0.13 0.02

2072/73 1,198,297,230 6,039,333,849 19.8% 0.16 0.03
2073/74 1,199,704,091 10,800,625,608 11.1% 0.08 0.01
2074/75 1,144,035,276 11,737,106,233 9.7% 0.06 0.00
2075/76 1,587,960,145 12,418,723,266 12.8% 0.09 0.01
Sum     70% 0.53 0.06

Count (n) =5

60
Mean (x) ∑x 0.7 = 0.14
= =
n 5
Var(x) = ∑¿ ¿ 0.06 = 0.02
=
5−1
Standard Deviation ()
=
√ var ( x ) =
√ 0.02 = 0.03
n 5
Coefficient variance ❑ 0.03 = 0.18
= =
(C.V) x 0.14

Calculation detail for Net Profit Margin

Year Net Profit Total Income Net Profit x-x (x−x )2

Margin( x)
2071/72 813,976,568 2,644,191,871 30.8% 0.27 0.08
2072/73 1,198,297,230 3,449,747,412 34.7% 0.31 0.10
2073/74 1,199,704,091 4,858,327,300 24.7% 0.21 0.05
2074/75 1,144,035,276 6,578,197,276 17.4% 0.14 0.02
2075/76 1,587,960,145 8,298,759,186 19.1% 0.16 0.02
Sum(∑)     127% 1.10 0.26

Count (n) =5

Mean (x) ∑x 1.27 = 0.25

= =
n 5
Var(x) = ∑¿¿ 0.26 = 0.07
=
5−1
Standard Deviation ()
=
√ var ( x ) =
√ 0.07 = 0.05
n n
Coefficient variance ❑ 0.05 = 0.2
= =
(C.V) x 0.25

Calculation detail for Earnings per Share

Year Net Profit available No. of Equity EPS (in x-x ( x−x )2
to Equity Shares Rs.)
Shareholders

61
 2071/72 813,976,568 24,314,000 33.48 33.44 1118.49
2072/73 1,198,297,230 30,392,110 39.43 39.39 1551.89
2073/74 1,199,704,091 72,190,590 16.62 16.58 275.05
2074/75 1,144,035,276 80,882,992 14.14 14.11 199.11
2075/76 1,587,960,145 80,882,992 19.63 19.60 384.12
Sum (∑)     123.30 123.13 3528.67

Count (n) =5

Mean (x) ∑x 123.3 = 24.66

= =
n 5
Var(x) = ∑¿¿ 3528.67 = 882.17
=
5−1
Standard Deviation ()
=
√ var ( x ) =
√ 882.17 = 5.94
n n
Coefficient variance ❑ 5.94 = 0.24
= =
(C.V) x 24.66

Calculation detail for Exchange gain to total income ratio

Year Exchange Total Income Exchange x-x 2

(x−x )
gain gain ratio
income
2071/72 112,838,846 2,644,191,871 4.27% 0.0089 0.00008
2072/73 135,600,953 3,449,747,412 3.93% 0.0055 0.00003
2073/74 145,839,732 4,858,327,300 3.00% -0.0038 0.00001
2074/75 185,668,096 6,578,197,276 2.82% -0.0056 0.00003
2075/76 239,283,311 8,298,759,186 2.88% -0.0050 0.00002
Sum (∑)     16.91% 0.0000 0.0002

Count (n) =5

Mean (x) ∑x 0.169 = 0.03381

= =
n 5
Var(x) = ∑¿¿ 0.0002 = 882.17
=
5−1
Standard Deviation ()
=
√ var ( x ) =
√ 882.17 = 0.00134
n 5

62
Coefficient variance ❑ 0.00134 = 0.0395
= =
(C.V) x 0.03381

Calculation detail for Overhead to income ratio

Year Overhead Total Income Overhead x-x ( x−x )

2

to income
ratio (x)
2071/72 635,717,617 2,644,191,871 24.04% 0.21 0.04
2072/73 682,379,465 3,449,747,412 19.78% 0.16 0.03
2073/74 852,296,384 4,858,327,300 17.54% 0.14 0.02
2074/75 1,175,378,294 6,578,197,276 17.87% 0.14 0.02
2075/76 1,493,489,147 8,298,759,186 18.00% 0.15 0.02
Sum (∑)     97.23% 0.80 0.13

Count (n) =5

Mean (x) ∑x 0.9723 = 0.194

= =
n 5
Var(x) = ∑¿¿ 0.13 = 0.033
=
5−1
Standard Deviation ()
=
√ var ( x ) =
√ 0.033 = 0.036
n 5
Coefficient variance ❑ 0.036 = 0.187
= =
(C.V) x 0.033

Calculation detail for staff expense to income ratio

Year Staff Total Income Staff x-x (x−x )2

expenses expenses
to income
ratio (x)
2071/72 331,919,780 2,644,191,871 12.55% 0.09 0.01
2072/73 401,647,380 3,449,747,412 11.64% 0.08 0.01
2073/74 465,216,638 4,858,327,300 9.58% 0.06 0.00
2074/75 755,659,273 6,578,197,276 11.49% 0.08 0.01

63
 2075/76 979,870,900 8,298,759,186 11.81% 0.08 0.01
Sum (∑)     57.07% 0.40 0.03

Count (n) =5

Mean (x) ∑x 0.57 = 0.11

= =
n 5
Var(x) = ∑¿¿ 0.03 = 0.01
=
5−1
Standard Deviation ()
=
√ var ( x ) =
√ 0.01 = 0.02
n 5
Coefficient variance ❑ 0.02 = 0.16
= =
(C.V) x 0.11

64