FINANCIAL PERFORMANCE ANALYSIS OFNMB BANK

LIMITED

A Project work Report

Submitted By
Paras Sunar
T. U Regd. No. 7-2-927-362-2020
Exam Roll Number:
Universal College
Maitidevi, Kathmandu

Submitted to
The faculty of management, Tribhuvan University
Kathmandu

In partial fulfilment of the requirement for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Maitidevi,Kathmandu
April, 2025
 VIVA-VOCE SHEET

We have conducted the viva-voce examination of the summer project report presented.

By
Paras Sunar
Universal College
Maitidevi, Kathmandu
TU Registration Number:7-2-927-362-2020

Entitled
“FINANCIAL PERFORMANCE ANALYSIS OFNMB BANK LIMITED
We found the summer project report to be the original work of the student and written according
to the prescribed format. We recommend the summer project report be accepted as partial
fulfillment for the degree of Bachelor of Business Studie(BBS).

Viva-Voce Committee

….………………… ………………………. …….……………….

Dr. Shiba Datta Gnawali Mr. Bhupendra Jung Shahi

Chairperson Supervisor External Export

Research Commitee

Date: April,2025
 DECLARATION

I hereby declare that project work entitled ''FINANCIALPERFORMANCE ANALYSIS OF

NMB BANK LIMITED'' submitted to the faculty of management, Tribhuvan University,
Kathmandu is a original piece of work under the supervision of Mr. Bhupendra Jung Shahi ,
faculty member Universal College, Maitidevi Kathmandu and is submitted in partial fulfillment
of the requirement for the degree of Bachelor of Business Studies (BBS). This project work has
not been submitted to any other university or institution for the award of any degree or diploma.

………………………….
Paras Sunar
Universal College
Date: April, 2025
 SUPERVISIOR'S RECOMMEMDATION

The project work report entitled ''FINANCIAL PERFORMANCE ANALYSIS OF NMB BANK
LIMITED" by Paras Sunar of Universal College,Maitidevi Kathmandu is prepared under my
supervision as per the procedure and format requirement 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.

…………………………….
Mr. Bhupendra Jung Shahi
(Report Supervisor)
Universal College,Maitidevi Kathmandu
Date: April, 2025
 ENDORSEMENT

We hereby endorse the project work report entitled ''FINANCIAL PERFORMANCE

ANALYSIS OF NMB BANK LIMITED'' submitted by Paras Sunar of Universal
College,Maitidevi Kathmanduu in partial fulfillment of the requirement for the degree of the
Bachelor of Business Studies (BBS) for external evaluation.

................................. …………………………
Proff. Dr. Fatta Bdr K.C Dr. Shiba Datta Gnawali
Chair, Research Committee Campus Chief
Universal College,Maitidevi Kathmandu Universal College,Maitidevi Kathmandu
Date: April,2025 Date: April, 2025
 ACKNOWLEDGEMENT

I have great pleasure in placing this research report on the lap of teacher and really enjoying in a
deep sense of gratitude to seniors and juniors. First of all, I wish to express my profound
gratitude to respected teacher Mr. Bhupendra Jung Shahi research for their invaluable guidance
through the work. Their constant inspiration and support has result in completion of this work. I
am equally grateful to the faculty member who enables me to get opportunity to write report as a
part of course. Thanks to the campus chief, faculties, and other staffs of my Universal
College,Maitidevi Kathmandu. Thanks are due to author of books, journal and articles that were
consulted in course of the study. I also offer to all the staff of NMB Bank and constant and co-
operation.
The specially thanks go to all my friends for their regular motivation, support and help to make
this report possible. Finally, I would be great to my family members for their valuable support.
I am responsible for error in this I would like to external warm welcome to suggestion sand
comments.
Thank you!
Paras Sunar
Universal College
Date: April, 2025
 TABLES OF CONTENTS

Tittle page.........................................................................................................................................i
Declaration......................................................................................................................................ii
Supervisor Recommemdation.........................................................................................................iii
Endorsement....................................................................................................................................iv
Acknowledgement.............................................................................................................................v
Table of Contents..........................................................................................................................vi
List of Table...................................................................................................................................vii
List of Figure................................................................................................................................viii
Abbreviation....................................................................................................................................ix
CHAPTER I
INTRODUCTION...........................................................................................................................1
1.1 Background of the &tudy........................................................................................................................1
1.2 Brief Profile of NMB Bank ....................................................................................................................3
1.3 Statement of problem...............................................................................................................................4
1.4 Objectives of the &tudy...........................................................................................................................6
1.5 Significant/Importance of the &tudy.......................................................................................................7
1.6 Review of Literature................................................................................................................................8
1.7 Research Methodology..........................................................................................................................12
1.8 Organization of the &tudy.............................................................................................................13
1.9 Limitation of the &tudy.........................................................................................................................15
CHAPTER II
DATA PRESENTATION AND ANALYSIS.............................................................................................15
2.1 Financial statement analysis..................................................................................................................15
2.2 Major Finding of the &tudy...................................................................................................................28
CHAPTER III
SUMMARY AND CONCLUSION.............................................................................................................30
3.1 Summary................................................................................................................................................30
3.2 Conclusions............................................................................................................................................32
3.3 Recomendation....................................................................................................................34
BIBLIOGRAPHY
Appendix

LIST OF TABLES

Table no 2.1Liquidity Ratio...................................................................................................15

Table No 2.2Loan and Advance to Total Deposit Ratio........................................................17
Table No 2.3Total Investment to Total Deposit Ratio...........................................................19
Table No 2.4Return on Total Assets Ratio............................................................................21
Table No 2.5Return on Equity Ratio (ROE)..........................................................................22
Table No 2.6Total debt to Equity Ratio.................................................................................25
Table No 2.7Total Debt to Total Assets................................................................................27
 LIST OF FIGURES

Figure No: 2.1 Liquidity Ratio of NMB................................................................................16

Figure No 2.2 Loan and Advance to Total Deposit Ratio.....................................................17
Figure No 2.3Total Investment to Total Deposit Ratio.........................................................20
Figure No 2.4Return on Total Assets Ratio...........................................................................21
Figure No. 2.5Return on Equity Ratio...................................................................................24
Figure No 2.6Total Debt to Equity Ratio...............................................................................25
Figure No 2.7Total Debt to Total Assets...............................................................................27
 ABBREVIATION

SFCI Small Farmer's Cooperative Limited

BAFIO Bank and Financial Institution Ordinance
BS Bikram Sambat
CV Coefficient of Variation
Rs Rupees
SD Standard of Deviation.
No Number
RBB Rastriya Banijya Bank
NRB Nepal Rastra Bank
NEPSE Nepal Stock Exchange
BBS Bachelors of Business Study
TU Tribhuvan University
 CHAPTER I

INTRODUCTION

1.1 Background of Study

Financial performance is a subjective measure of how well a firm can use assets from its primary
mode of business and generate revenues. The term is also used as a general measure of a firm's
overall financial health over a given period. Financial performance analysis is the process of
identifying the financial strength and weakness of the form by properly establishing the
relationship between the items of balance sheet and profit and loss account. It also help in short
term and long term forecasting and growth can be identified with the helped of financial
performance analysis. Financial performance analysis can be considered as a heart of financial
decision. Financial performance as a part of the financial management is the main indicator of
the success or failure of the firm. There are many ways to measure financial performance, but all
measure should be taken in aggregate. Line terms, such as revenue from operating income.
Furthermore, the analysis or investor may wish to look deeper into financial statement and seek
out margin growth rates.

In the banking industry, assessing financial performance is essential to understanding a bank’s ability
to generate profit, manage risks, and allocate resources effectively. The financial health of a bank
can be gauged using key financial metrics such as profitability, liquidity, capital adequacy, and
operational efficiency. For NMB Bank, which operates in a competitive and dynamic
environment, financial performance analysis is not just about assessing current financial health
but also understanding long-term sustainability and growth potential.

The importance of studying NMB Bank’s financial performance lies in its ability to provide valuable
insights for various stakeholders. For investors, customers, and regulators, the financial analysis
serves as a key indicator of the bank’s profitability and stability. It also highlights areas where
the bank excels or requires improvement, such as managing non-performing loans, optimizing
operational efficiency, or improving capital structure.
 2

This study aims to evaluate NMB Bank’s financial performance by analyzing key financial ratios,
with a focus on profitability (Return on Assets and Return on Equity), liquidity (Current and
Quick Ratios), and capital adequacy (Capital Adequacy Ratio). These ratios will provide a clear
picture of how well the bank manages its resources, profitability, and risks. Through this
analysis, the study seeks to identify trends, strengths, and weaknesses in NMB Bank's operations,
offering suggestions for improving overall financial health.

Understanding the financial performance of NMB Bank is not only important for the bank’s internal
decision-making but also for its stakeholders who rely on financial data to make informed
decisions. The results of this study will help the management of NMB Bank refine their strategic
decisions, enhance profitability, and manage risks more effectively. Moreover, the study’s
findings can contribute to the broader banking industry by offering insights into best practices in
financial management and performance optimization.

There are many stakeholders in a company, including trade, creditors, bondholders, investors,
employees and management. Each group has its own interest in tracking the financial
performance. of a company. Analysis learn about financial performance from data published by
the annual report. The purposive of the report is to provide stakeholders with accurate and
reliable financial statement that provide an overview of the company's financial performance.
The aspect of financial performance in service from is an important one as it reflects the
effectiveness of the management of the company is essential to measure management as the
individuals and groups within the organization that contributed toward the financial objectives of
the company. The organization factors such as liquidity, leverage, assets utilization, firm size and
market share are the independent variable and financial performance is the dependent variable.
The growth and of any enterprise is directly influenced by the financial policies. There is
different person or institution that affected by the decision of the firm. Financial condition of the
bank should be sound from the point of view of shareholder, debenture holder, financial
institution and nation as whole.
The proper analysis and interpretation of financial statement are felt necessary in corporate
banks, private enterprises and similarly other organizations to find out what information are
indicated from their balance sheet and income statement as well as other necessary accounting
information. On the basis of information, it becomes easy to check out the problem faced by the
 3

corporations. A capable financial manager must select best analytical tools (such as Ratio
Analysis) to determine the Liquidity, Profitability, Turnover and capital structure the
corporation. A good investment can be effective on for the economy to attain the economic
objective directed towards the acceleration of the pace of . A good investment pattern attracts
both borrowers and lenders, which helps to increase the volume and quality of deposit, loan and
investment. The load provided by commercial bank is guided by several principles such as length
of time, their purpose, profitability, safety etc. These fundamental principles of commercial
banks investment are considered while making investment policy.. Measure indicating how well
an organization may leverage its financial resources and other assets to generate value. The
financial performance is often derived from cash flow measure and is usually reported in the
context of decision making with a long-term planning horizon. Financial statements provide a
snapshot of a corporation's financial health, giving inside into its performance, operations and
cash flow. Financial statement are essential since they provide information about a company's
revenue, expenses, profitability and debt.
The financial performance analysis is used to diagnose the strength and weaknesses in the
corporation's performance. It provides a framework for the financial planning and control. As
there has been number of joint venture banks in Nepal, the present aim is to analyze the financial
performance of NMB Bank Limited just to be assured whether they can put equal contribution
in the economic growth of the country or not.

1.2 Profile of NMB Bank Limited

NMB Bank Limited, established in 1996 as Nepal Merchant Banking and Finance Limited and
later transforming into NMB Bank in 2008, is one of the most well-established and trusted
commercial banks in Nepal. Headquartered in Kathmandu, the capital city of Nepal, NMB Bank
has grown significantly over the years, establishing a strong presence in the country’s banking
sector. With over 150 branches across Nepal, NMB Bank provides a wide range of financial
services to individuals, businesses, and institutions, offering convenience and accessibility to its
ever-growing customer base. The bank’s retail banking services include savings and current
accounts, fixed deposits, loans (personal, home, vehicle, and education), and debit and credit
card services, all designed to meet the needs of its diverse clientele. NMB Bank also provides an
 4

array of digital banking solutions, including mobile banking, internet banking, and ATMs,
allowing customers to conduct transactions seamlessly from anywhere, anytime.

In addition to retail banking, NMB Bank offers a wide variety of corporate banking services,
which include business loans, trade finance, working capital management, and foreign exchange
services, catering to the financing needs of Nepal’s growing business community. The bank also
has a strong focus on Small and Medium Enterprises (SMEs) and offers specialized banking
products and services to support their growth and success. NMB Bank has been at the forefront
of digital banking in Nepal, continuously investing in technology to enhance customer
experience and meet the evolving demands of the market. The bank was one of the early
adopters of mobile banking and internet banking in Nepal, ensuring that its customers have
access to modern banking solutions that are convenient, secure, and user-friendly.

Financially, NMB Bank has demonstrated consistent growth and stability, with strong asset
growth, increasing deposits, and a robust loan portfolio. The bank’s sound financial management
and strong capital base have earned it a solid reputation for reliability and trustworthiness, both
locally and internationally. NMB Bank has also garnered recognition for its corporate
governance practices and excellent customer service, which has helped the bank build long-
lasting relationships with its customers. Over the years, NMB Bank has received multiple
accolades for its contributions to the banking sector, particularly in areas like financial
innovation, digital transformation, and customer satisfaction.

Beyond banking services, NMB Bank is also deeply committed to corporate social responsibility
(CSR) and works to make a positive impact on Nepalese society. The bank actively participates
in various social initiatives, focusing on areas such as education, healthcare, poverty alleviation,
and environmental sustainability. By investing in these initiatives, NMB Bank seeks to
contribute to the development of the country and improve the lives of Nepalese citizens,
particularly those in rural and underserved areas.

Over the years, NMB Bank has built a reputation for sound financial management and has
consistently demonstrated strong financial performance. The bank’s profitability, as reflected in
key financial indicators such as Return on Assets (ROA), Return on Equity (ROE), and Net
 5

Profit Margin, remains robust, even amidst challenges in the competitive banking environment.
NMB Bank has successfully leveraged its strengths in retail banking and digital solutions to
drive growth and enhance shareholder value. Additionally, the bank’s capital adequacy ratio
remains healthy, ensuring that it can absorb potential financial shocks and meet regulatory
requirements.

The bank’s focus on financial inclusion has been central to its growth strategy. NMB Bank has
continuously worked to bring banking services to underserved populations, particularly in rural
areas. Through its mobile banking services and the agency banking model, the bank has helped
bridge the gap for individuals who were previously excluded from formal financial systems. This
commitment to financial inclusion is not just about expanding the customer base but also about
enabling Tanzanians to improve their financial well-being and access credit to support
entrepreneurship, education, and health.

NMB Bank also places significant importance on corporate social responsibility (CSR). The bank is
actively involved in various community-based initiatives aimed at improving the lives of
Tanzanians. Its CSR activities span across sectors such as education, healthcare, and
environmental sustainability. For instance, NMB Bank has supported numerous educational
projects, providing scholarships and supporting schools in rural areas to enhance the quality of
education. It also engages in health-related initiatives, supporting local health institutions and
programs aimed at improving public health in Tanzania. Additionally, NMB Bank has made
efforts to promote environmental sustainability through various green initiatives, ensuring that its
operations contribute positively to the environment.

The bank's success can also be attributed to its forward-thinking leadership, which has steered the
bank through periods of economic challenges and technological changes. With a strong
management team and a clear vision, NMB Bank has been able to adapt to changes in the
banking landscape, especially as digital banking continues to reshape the financial sector. Its
commitment to innovation and customer-centric services positions NMB Bank for continued
success in Tanzania’s evolving banking industry.
 6

In conclusion, NMB Bank Limited stands as a leading financial institution in Tanzania, known for its
strong financial performance, innovative banking solutions, and commitment to financial
inclusion and community development. The bank continues to expand its reach across the
country, ensuring that more Tanzanians have access to essential banking services. With a strong
focus on technology, customer satisfaction, and corporate social responsibility, NMB Bank is
well-positioned to remain a dominant force in the Tanzanian banking sector for years to come.

NMB Bank’s leadership is instrumental in driving the bank’s success and ensuring its continued
growth in a highly competitive banking environment. The leadership team is committed to
achieving the bank’s vision of becoming the most customer-centric and digitally advanced
financial institution in Nepal. They are focused on expanding the bank’s offerings, enhancing
customer experiences, and investing in technology and innovation to stay ahead of the curve. As
the bank continues to evolve, it is committed to supporting the development of Nepal’s economy,
fostering financial inclusion, and improving the quality of life for people across the country.

1.3 Statement of Problem

Financial performance is the major part for the performance of the bank. Various numbers of
commercial banks are increasing in Nepal day by day. There is high flow of money in the market
but less viable and investable projects. In the current situation there is mismatch of deposit and
investable funds of banks. Therefore, the introduction of a new bank is just sharing a cake rather
than pumping new capital or new technology, as Nepalese market is almost felt safe guarded.
Few commercial banks are continuously making profit and satisfying their shareholders and
returning them adequate profit. This has attracted the potential customers to power their money
into banks, as there are very few sectors to make profitable investment and the investors are
always reluctant to risk. They do not take initiation to invest in other sectors. There
fore,commercial banks have a lot of deposits but a very little investment opportunity.
The present study will attempt to analyze comparative study on financial performance of
Sandbank ltd. Special problem related the commercial banks in Nepal have been presented
briefly as follows:
1. What are the financial and investment position of NMB?
2. What is the liquidity, efficiency of assets management, profitability and risk position of
concerned commercial banks?
 7

3. What are the conditions of the NMB investment and collection (principal and interest)
procedure?
4. What is the condition of bank in order to fund mobilization and investment policy for
more effective and efficient?
5. What is the empirical relationship between the variables that affect financial performance
of banks?
1.4 Objectives of the Study
The basic objective of this study is the evaluation of the financial performance NMB. The
specific objectives of this study are as follows:
1.To analyze the financial performance in terms of the liquidity, activity, profitability,
leverage of NMB
2. To examine loan and advance, investment and total deposit of NMB

1.5 Significance of the Study

This study mainly filling gap the study of financial performance of concerned banks. Especially,
this study deals with comparative study of investment policy of NMB of Nepal. The NMB is
mandated by Government of Nepal to provide financial services to the rural population to
stimulate income and generate employment in remote areas. This study will find the strengths
and weaknesses of the Bank by analyzing the opportunities and threats in its overall conduct in
the real ground. This study will also be an important support to the management owner clients
and other interest groups in analyzing the Bank's economic strength and performance efficiency.
As it is a well know fact that the Banks can affect the economic condition of the whole country.
It will be helpful to the policy makers while formulating the policy regarding NMB and people
can understand how benefit is taking by them from the semi-government banks. The study is
basically confined to review the financial performance and investment policies of the banks
during the five years period. This study is expected to provide a useful feedback to the policy
maker of banks and also to the government and central bank (NRB) to formulate the appropriate
strategies for improvement in the performance of banks. Moreover, this study can also be used as
reference point by the international organization like NMB, World Bank etc.
 8

1.6 Review of Literature

The liquidity ratio is one of the most critical financial performance indicators used to assess a
company's ability to meet its short-term obligations without raising external capital. In the
banking sector, liquidity is a crucial aspect of a bank’s financial health, as it directly impacts its
ability to manage daily operations, respond to unexpected withdrawals, and meet regulatory
requirements. The liquidity ratio helps determine how well a bank can cover its liabilities using
its liquid assets, which are assets that can quickly be converted into cash.
1. Review of Thesis
2. Research Gap
1.6.1 Review of Thesis
Bhandari, B.P. (2017) in thesis "Profit Planning and controlling in NMB." To the objective, to
examine the variance between estimates and actual profit of the bank, suggestion for
improvement in the overall profitability of the bank based on study result. For the fiscal year
2080 to 2081.
Pathak, Shivraj (2071). "Deposit Analysis of Kumari Bank Ltd." For the fiscal year 2076/77 to
2080/81 to analyze deposit of Kumari Bank Itd and to show that deposit trend or major sources
of deposit.

Poudel, S.(2023) This article utilizes ratio analysis to evaluate the financial performance of
NMB Bank from 2020 to 2025. It covers key performance ratios, including liquidity ratios
(Current Ratio, Quick Ratio), profitability ratios (ROE, ROA), and leverage ratios. The study
highlights NMB Bank's strong profitability but also notes concerns regarding liquidity and
operational efficiency, recommending improvements in these areas.

Khanal, A.(2021) In this article, Khanal examines the financial performance of NMB Bank
focusing on risk management and financial stability. The paper analyzes the risk exposure of the
bank and its strategies for maintaining adequate liquidity and profitability. The study concludes
that despite facing risks related to credit and market fluctuations, NMB Bank has been able to
mitigate these risks effectively through sound management practices.
 9

Shresthe, S. (2018) in this thesis "Financial Performance Analysis of Nepal Bangladesh Bank
ltd." In this study, the analysis of data will be done according to pattern of data available.
Likewise, some financial tools such as ratio analysis have been used for financial analysis. For
the fiscal year 2019 to 2024 used.

Subba, Muna (2016) concluded a research study entitled "The comparative analysis on Financial
performance of NMB and Everest Bank Limited." With the objective of examine the relative
financial performance of NMB bank and EBL in term of different kinds of ratios. And to show
that liquidity position, ROE. The fiscal year are used 2077to 2081.

Thapa, R. (2022) This research investigates the liquidity and profitability relationship in NMB
Bank, particularly during fiscal years 2017 to 2019. The study uses various financial ratios such
as the liquidity coverage ratio (LCR) and net interest margin (NIM). It finds that NMB Bank has
maintained reasonable liquidity levels but highlights concerns about declining profitability in
certain periods, suggesting more effective management of non-performing assets (NPAs) and
interest rate spreads

Shrestha, P.(2020) This study evaluates the financial performance of NMB Bank from 2016 to
2019 using key financial ratios such as Return on Assets (ROA), Return on Equity (ROE), and
Net Profit Margin. The research aims to assess how well NMB Bank utilizes its assets to
generate earnings and how it compares to industry standards. The paper concludes that while
NMB Bank has shown solid profitability, it faces challenges related to its operational efficiency
and cost management.

Gurung, L.(2022) This article explores the influence of external economic factors like inflation,
exchange rates, and GDP growth on the financial performance of NMB Bank. The study spans
from fiscal year 2015 to 2021 and demonstrates that economic instability has a significant impact
on NMB Bank's profitability, especially in terms of interest income and non-performing loan
(NPL) ratios. The paper suggests that NMB Bank needs to adopt more proactive measures to
hedge against macroeconomic risks.
 10

Shrestha (2024) conducted a comparative analysis of financial statements of selected banks,

including NMB Bank. The study utilized financial ratios such as current ratio, quick ratio, Return
on Assets (ROA), and Return on Equity (ROE) to assess liquidity and profitability. The findings
indicated that while the banks had a strong liquidity position based on the current ratio, their
quick ratios were below standard measures, suggesting challenges in meeting immediate
obligations. Additionally, the average ROA was found to be lower, implying less efficient asset
management, whereas the ROE remained reasonable, reflecting efficient management in
maximizing shareholders' equity.
1.6.2 Research Gap
The review of above relevant literature has contributed to enhance the fundamental
understanding and knowledge, which is required to make this study meaningful and purposeful.
There are various researchers conduct on financial performance of various commercial banks. In
order to perform those analysis researchers have used various ratio analysis in the past research
topic on financial performance the researcher has focused on the limit ratios which are incapable
of solving the problems. In this research various ratio are systematically analyzed and
generalized. Past Researchers are not properly analyzed about investment aspect and
mobilization of fund and its impact on the profitability. The ratios are not categorized according
to nature. Here in this research all ratios are categorized according to their area and nature.
In this study of financial performance of NMB is measuring by various ratios and various
statistical tools as well as and financial tools are used for analyzing survey data. Since the
researcher have used data only five year but all the data are current and fact. Clearly these are the
issue in Nepalese commercial bank the previous scholar could not the present facts. This study
tries to define of financial performance by applying and analyzing various financial tools like
liquidity ratio, activity ratio, profitability ratio and Leverage ratio as well as different statistical
tools like coefficient of variation, mean. Probably this will be the appropriate research in the area
of financial performance of Bank and financial institutions.
 11

1.7 Research Methodology

This research methodology has done to fulfill the objective of comparative study of financial
performance of NMB. The research methodology adopted in this chapter follows some limited
but crucial steps aimed to achieve the objective of the research. This chapter looks into the
research design, nature and source of data, population and sample and technique of analysis.
1.7.1 Research Design
Descriptive research aims to accuracy and systematically describe a population, situation.
Descriptive research design is used to describe characteristics of a population being studied. It
does not answer questions about how/ when/ why the characteristics occurred. Analytical
research focus on understanding the cause effect relationship between two or more variables, for
example, statistics showing the fluctuation of trade deficits between the united state and the rest
of the world during 2076/77-2080/81. Comprises describe research.
Since the main objectives of this study is to analysis financial performance of the banks, all the
indicators that shows the financial performance of the banks were calculated using data obtained
from the five year end internally generated accounting records maintained by sampled Banks.
The study depends on the secondary data. Various financial parameters and effective research
techniques are employed to evaluate the financial performance of the banks. Furthermore,
various descriptive as well as analytical techniques are used. The study is designed as to give a
clear picture of the Bank's financial circumstances with the help of available data with useful
suggestions and recommendation.
1.7.2 Population and Sample
Purposive sampling is an acceptable kind of sampling for special situations. Purposive sampling
is used most often when a difficult to reach population needs to be measured. Convenience
sampling is a type of non probability sampling in which people are sampled simplify because
they are "convenient" sources of data for research. Twenty-seven Commercial banks are
operating in Nepal. All the commercial banks that are operating in Nepal are considered as the
population. It is not possible the study all the data related with all banks because of the limited
time period and showed also taken in to consideration of the partial fulfillment of the BBS. Thus
her NMB has been selected for the present study.
 12

1.7.3 Nature and Sources of data

The study is mainly conducted on secondary data relating to the study of financial performance
of selected Banks, as they are available at concerned Banks. For the purpose of the study to
collect data from annual report of NMB Bank Limited. Besides, necessary suggestions are taken
from various experts both inside and outside the bank whenever required.
1.7.4 Analysis of Financial Rations
The techniques of ratio analysis in of considerable significance in studying the financial
liquidity, activity, profitability and leverage the quality of management of the business and
industrial concerns, the important ratios that are studied for this purpose are given below..
1.7.4.1 Liquidity Ratio
Liquidity ratio measures the ability of the firm to meet its current obligations. A commercial
bank must maintain its satisfactory liquidity position to meet the credit need of the community.
Liquidity provides honor strength health and prosperity to an organization. It is extremely
essential for an organization to meet its obligations as they become due. A firm should ensure
that it has not lack of liquidity and also that it is not too much highly liquid.
1.7.4.2 Activity Ratio
Activity or turnover ratio measures the efficiency of the bank to manage its assets in profitable
and satisfactory manner. These ratios are employed to evaluate the efficiency with which the
firm manages and utilize its assets.
Under this chapter following ratios are studied.
i. Loan and Advance to Total Deposit Ratio
This ratio measure the extent to which the banks are successful to mobilize their total deposit on
loan and advances.

Loan∧ Advance
Loan and Advance to Total Deposit Ratio =
Total Deposit
ii. Total Investment to Total Deposit Ratio.
This ratio measures the extent to which the banks are able to mobilize their deposit on
investment on various securities. A high ratio indicates the success in mobilizing deposits in
securities and vice versa.
Total Investment
Total Investment to Total Deposit Ratio =
Total Deposit
13
 14

1.7.4.3 Profitability Ratio

Profitability ratio indicates degree of success in achieving desired profit level. Profitability ratio,
which measures management overall effectiveness, are shown by the returns generated on sale
and investment. A bank should be able to earn profit to survive and grow over a long period of
time. Profit is the indicator of effective operation of a bank. The banks acquire profit by
providing different services to its customer or by making investment of different kind.
Profitability ratio measures the efficiency of bank. Higher profit ratio shows higher efficiency of
the bank. The following profitability ratios are related to study in this heading.
i. Return on Total Assets Ratio
Its measures the profit earning capacity by utilizing available resources i.e. total assets. Return
will be higher if the banks working fund is well managed and efficiently utilized.
Where,
Net profit includes the profit that is left to the internal equities after all costs, charges and
expenses.
Net Profit
Return on working Fund =
Total Asst
ii. Return on Equity (ROE)
If banks can mobilize its equity capital properly, they can earn high profit. The return on equity
capital measures the extend to which a bank is successful to mobilize its equity.

Net Profit
Return on Equity=
Total Equity Capital
Equity Capital includes paid up equity, Profit & Loss Account, Various Reserve, General loan,
loss provision etc.

1.7.4.4 Leverage Ratio

These ratios are also called capital structure ratio or solvency ratio. These ratios indicate mix of
funds provided by owners and lenders. As a general rule, there should be an appropriate mix of
debt and owner's equity in financing the firm's assets. To judge the long-term financial position
of the firm, leverage ratios are calculated. This ratio highlights the long-term financial health,
debt servicing capacity and strength and weaknesses of the firm. Following ratios are included
under these advantage ratios.
 15

i. Total Debt to Equity Ratio:

Total debt is the liability of the firm and it is payable toward its creditors. Debt includes the
value of deposits from customers, loan & advances payable, Bills payable and other liabilities.
Equity is the share capital and reserves of the firm. This ratio shows the comparison in between
total debt and equity.
Total debt = Debentures & Bonds + Borrowings + Deposits + Bills Payable + Proposed &
Undistributed Dividends + Income Tax Liabilities

Total Equity = share capital + Reserve and surplus

Total debt
Total debt to equity =
equity

ii. Total Debt to Total Assets Ratio:

It examines the relationship between borrowed funds (ie. total debt) and total assets. It shows the
relative extent to which the firm is using borrowed money. A lower ratio is preferable since it
reduces the distress of the creditors by using more amount of equity on total assets. Total debt
includes both current liabilities and long term debt. Creditors prefer low debt ratios. because the
lower the ratio, the greater the cushion against creditors losses in the event of liquidation.
Stockholders on the other hand may want more leverage because it magnifies expected earnings.
It is computed as:
Total Debt
Total Debt to Total Assets Ratio =
Total Assets

1.7.5 Statistical Tools

Under this heading some statistical tool such as coefficient of variation analysis between
different variables, trend analysis of deposit, loan and advances, net profit are used to achieve the
objective of the study.

1.7.5.1 Arithmetic Mean(AM):

An average is a single value related from a group of values to represent them in some way, a
value, which is supposed to stand for whole group of which it is a part, as typical of all the values
 16

in the group. There are various types of averages. Arithmetic mean (AM, Simple & Weighted),
median, mode, geometric mean, harmonic mean are the major types of averages.
The most popular and widely used measure representing the entire data by one value is the AM
Mathematically:
Arithmetic Mean (AM) is given by,

X=
∑X
N
Where, X = Arithmetic Mean
∑ X = Sum of all the value of the variables X
N = Number of observations

1.7.5.2 Standard Deviation (SD):

In statistics, the standard deviation is a measure of the amount of variation or dispersion of a set
of value. It is called sigma (). A low standard deviation indicated that the values tend to be close
to the mean of the set, while a high standard deviation indicates that the values are spread out
over a wider range.

1.7.5.3 Coefficient of variation (c.v.):

The coefficient of variation is measures the relative measures of dispersion, hence capable to
compare two variables independently in term of variability.
σ
C .V=
X
σ = Standard deviation
X = sum of the observation
1.8 Organization of the Study
The study on the Financial Performance Analysis of NMB Bank Limited (NMB) is organized
into several key sections to ensure a thorough and structured exploration of the bank's financial
health. The introduction sets the stage by outlining the significance of the NMB sector and the
role of NBM Bank in fostering NBM Bank . It further identifies the purpose of the study, which
is to evaluate the financial performance of the bank, analyze key financial ratios, and provide
 17

recommendations for improvement. The introduction also highlights the scope, research
questions, and methodology, providing a clear framework for the entire study.

The literature review follows, exploring relevant theories and previous studies on financial
performance, particularly in the context of NMB banks. This section lays the foundation for the
study by discussing concepts such as financial ratio analysis and identifying gaps in existing
research that the study aims to fill.

1.8 Limitation of the Study

This study is about the financial performance of NMB. Every research has its own limitation,
which are as follows: this research done for Partial Fulfillment of the Requirements for the
Degree of Bachelor of Business Studies (B. B. S). The main limitations are as follows:
1. The study is mainly based on secondary data collected from the banks. Research based on
secondary data may be far from accuracy due to inherent character.
2. A whole study is based on the data of five years period i.e. from year 2076/77 to 2080/81 and
hence the conclusion drawn confines only to the above period.
3. This study concentrates on Deposit, Loan and Advances, Investment on Securities, Total
Assets, Equity Capital, Net Profit.
4. Due to the lack of time and financial resources only one NMB is selected as sample for the
study.
5. Source of data are mostly dependent on published annual report thus it is based on the
secondary data.
 18

CHAPTER II

DATA PRESENTATION AND ANALYSIS

2.1 Financial Statement Analysis

Financial analysis is done by applying various financial tools in order to clear picture on the
viability of the project. The financial analysis is done to ascertain the profitability, leverage, debt
servicing and interest servicing ability of the firm. The concept of financial statement analysis
has been already discussed in previous chapter. Here, we study and analyze the data by using
accounting tools.
2.1.1 Liquidity Ratio
Liquidity ratio measures the ability of the firm to meet its current obligations. A commercial
bank must maintain its satisfactory liquidity position to meet the credit need of the community.
Liquidity provides honor strength health and prosperity to an organization.
Table no 2.1
Liquidity ratio

Year Ratio (Percent)

2076/77 27.2
2077/78 29.15
2078/79 31.18
2079/80 23.33
2080/81 28.74
Mean 27.92
S.D 2.93
C.V 0.105
Sources: Annual Report of NMB 2076/77 to 2080/81
In above table shows that the liquidity ratio of NMB is in increasing trend. The ratios are
27.20%, 29.15%, 31.18%, 23.33% and 28.74% respectively. The average mean ratio is 27.92%
in the study period. The highest ratio is 31.18% in 2077/78 and the lowest ratio is 23.33% in year
2078/79. These all ratio shows that the bank is maintain the acceptable liquidity position of the
bank.
 19

Ratio (Percent)
35

30

25

20

15

10

0
2076/77 2077/78 2078/79 2079/80 2080/81

Ratio (Percent)

Figure no: 2.1 liquidity ratio of NMB

2.1.2 Activity Ratio:
Asset management means manage or utilization of all about of asset. It is also known as turnover
or efficiency ratio or assets management ratio. It measures how efficiently the firm employs the
assets. Turnover means; how much number of times the assets flow through a firm's operations
and into sales Greater rate of turnover or conversion indicates more efficiencyof a firm in
managing and utilizing its assets, being other things equal. There are some ratios are examined
under.
I) -Loan and Advance to Total Deposit Ratio
Credit and advances is the investing activities of the bank and total deposit is the deposit amount
of the bank collected from its customers or depositor. So, we are trying to find out the ratio
between credit & advances to total deposit. This ratio measures the extent to which the bank is
successful to manage its total deposit on loan and advances for the purpose of income generation.
A high ratio indicates better mobilization of collected deposit and vice-versa.
However, it should be noted that too high ratio might not be better from liquidity point of view.
 20

Table no 2.2
Loan and advance to total deposit ratio
Year Loan and Advance Total Deposit Ratio(Times)
2076/77 678975486 77035056186 0.0088
2077/78 562528264 87387154947 0.0064
2078/79 667933392 99816272124 0.0067
2079/80 100525112260 104216459617 0.9646
2080/81 110091965692 118884922831 0.9260
Mean 0.3825
S.D 0.514
C.V 1.3438
Source: Annual Report of NMB2076/77 to 2080/81
Above Table shows that the total loan advances to total deposit ratio of NMB is in fluctuate
trend. The highest ratio is 0.9646 times in year 2078/79 and lowest ratio 0.0064 times in year
2076/77. The average mean ratio of NMB is 0.3825 times in the study period. This means the
bank is able to proper mobilization of collected deposit. This means that credit management is in
good position of the bank. Loan advances and total deposit are presented in the line diagram.
 21

Ratio(Times)
1.2

0.8

0.6

0.4

0.2

0
2076/77 2077/78 2078/79 2079/80 2080/81

Ratio(Times)

Figure No 2.2 Loan and advance to total deposit ratio

II) Total Investment to Total Deposit Ratio
This ratio measures the extent to which the banks are able to mobilize their deposit on
investment on various securities. A high ratio indicates the success in mobilizing deposits in
securities and vice versa.
The following table exhibits the ratio of Total Investment to Total Deposit.
 22

Table no 2.3
Total investment to total deposit ratio
Year Total Investment Total Deposit Ratio(Times)
2076/77 13501077607 77035056186 0.1753
2077/78 13982297758 87387154947 0.16
2078/79 15898842009 99816272124 0.1593
2079/80 12585182524 104216459617 0.1208
2080/81 17203256016 118884922831 0.1447
Mean 0.1520
S.D 0.02
C.V 0.1316
Source: Annual Report of NMB2076/77 to 2080/81
Table shows that the total investment to total deposit ratio of NMB is in decreasing trend beside
second last year. The ratios are 0.1753, 0.1600, 0.1593, 0.1208 and 0.1447 times respectively.
The highest ratio is 0.1753 times in year 2076/77 and lowest ratio 0.1208 times in year 2078/79.
The average mean ratio of NMB is 0.1520 times in the study period. This means the bank is
proper mobilization of collected deposit. Investment to total deposit is presented in the line
diagram.
 23

Ratio(Times)
0.2

0.18

0.16

0.14

0.12

0.1

0.08

0.06

0.04

0.02

0
2076/77 2077/78 2078/79 2079/80 2080/81

Ratio(Times)

Figure No 2.3Total investment to total deposit ratio

2.1.3 Profitability Ratio
Profit is major objective of any business organization. Profit is engine that drives the business
enterprises. Profitability ratios are very helpful to measure the overall efficiency in operation of a
financial institution. Profitability ratio is calculated based on sales and investment. In the context
of banks, no bank can survive without profit. Profit is one the major indicates or efficient
operation of a bank. The banks acquire profit by providing different services to its customers or
by providing loan and advances and making various kinds of investment opportunities.
Profitability ratios measure the efficiency of bank. A higher profit ratio shows the higher
efficiency of a bank. The following ratios are calculated:
 24

I) Return on total assets ratio

Its measures the profit earning capacity by utilizing available resources i.e. total assets. Return
will be higher if the banks working fund is well managed and efficiently utilized and vice versa.
Net profit includes the profit that is left to the internal equities after all costs, charges and
expenses. Following tables shows the figure of this ratio.
Table No 2.4
Return on total assets ratio
Year Net Profit Total Asset Ratio(Percent)
2076/77 3603370808 100928514481 3.57
2077/78 2464683088 111786100812 2.20
2078/79 2565220197 126866600103 2.02
2079/80 3442323796 135419614689 2.54
2080/81 4191590635 151457730971 2.76
Mean 2.62
S.D 0.60
C.V 0.22
Source: Annual Report of NMB2076/77 to 2080/81
n above table shows that the Net profit to total assets ratio of NMB is in fluctuating trend. The
ratios are 3.57%, 2.2%, 2.02%, 2.54% and 2.76% in years 2076/77, 2077/78, 2078/79, 2079/80
and 2080/81 respectively. The highest ratio is 3.57% in 2076/77 and lowest ratio is 2.02% in the
year 2077/78. The mean ratio is 2.62%. This shows the low earning capacity through asset
utilization. In above the five-year research period net profit and total assets both are fluctuating
trend.
 25

Ratio in Percent
4

3.5

2.5

1.5

0.5

0
2076/77 2077/78 2078/79 2079/80 2080/81

Ratio (Percent)

Figure No 2.4 return on total assets ratio

II) Return on Equity (ROE)
Return in equity is a measure of financial performance calculated by dividing net income by
shareholder's equity. Because shareholders' equity is equal to a company's assets minus its debt,
ROE is considered the return on net assets. ROE is considered a measure of how effectively
management is using a company's assets to create profit. If banks can mobilize its equity capital
properly, they can earn high profit. The return on equity capital measures the some extend to
which a bank is successful to mobilize its equity.
The table below shows the ROE in different years during the study period.
 26

Table no 2.5
Return on equity ratio (ROE)
Year Net Profit Equity Ratio(Percent)
2076/77 3603370808 16224114617 22.21
2077/78 2464683088 18127314682 13.6
2078/79 2565220197 21796701399 11.77
2079/80 3442323796 26458304686 13.01
2080/81 4191590635 28352732981 14.78
Mean 15.07
S.D 4.13
C.V 0.2741
Source: Annual Report of NMB2076/77 to 2080/81
Above table shows, that ROE of NMB is in fluctuating trend. The highest Ratio is 22.21% in
year 2076/77 and lowest Ratio is 11.77% in year 2077/78. The average means. ROE of NMB is
15.07% in the study period. This shows the fluctuating profitability in the study period.
Therefore, overall performance is good position.
Earning per shares is represented in the following diagram.
 27

Ratio (Percent)
25

20

15

10

0
2076/77 2077/78 2078/79 2079/80 2080/81

Ratio (Percent)

Figure no. 2.5 return on equity ratio

2.1.4 Leverage Ratio:
These ratios are also called capital structure ratio or solvency ratio. These ratios indicate mix of
funds provided by owners and lenders. As a general rule, there should be an appropriate mix of
debt and owner's equity in financing the firm's assets. To judge the long-term financial position
of the firm, leverage ratios are calculated. This ratio highlights the long-term financial health,
debt servicing capacity and strength and weaknesses of the firm. Following ratios are included
under these advantage ratios.
I) Total Debt to Equity Ratio:
Total debt is the liability of the firm and it is payable toward its creditors. Debt includes the
value of deposits from customers, loan & advances payable, Bills payable and other liabilities.
Equity is the share capital and reserves of the firm. This ratio shows the comparison in between
total debt and equity.
 28

Table No 2.6
Total debt to equity ratio
Year Total Debt Total Equity Ratio (%)
2076/77 1840000000 16224114617 11.34
2077/78 1380000000 18127314682 7.61
2078/79 920000000 21796701399 4.22
2079/80 460000000 26458304686 1.74
2080/81 - 28352732981 -
Mean 4.98
S.D 4.56
C.V 0.9157
Source: Annual Report of NMB2076/77 to 2080/81
Above table shows the Debt to total equity ratio of NMB. The ratio is continuously decreasing
trend over the study period. The ratio are 11.34%, 7.61%, 4.22%, 1.74% and 0% in the year
2076/77, 2077/78, 2078/79, 2079/80 and 2080/81 respectively. The average mean ratio is 4.98%.
The highest ratio is 11.34% in 2076/77 and lower ratio is 0% in 2079/80 the S. D. and C.V. is
4.56% and 0.9157. Risk of liquidation is decreasing the debt is minimize. High gearing ratio may
provide high return to the equity shareholders if the bank makes profit. Ratio is represented in
figure as follow.
 29

Ratio in %
12

10

0
2076/77 2077/78 2078/79 2079/80 2080/81

Ratio (%)

Figure no 2.6 total debt to equity ratio

II) Total Debt to Total Assets:
A metric used to measure a company's financial risk by determining how much of the company's
assets have been financed by debt. Calculated by adding short term and long-term debt and then
dividing by the company's total assets. In general creditors prefer a low debt ratio & owner prefer
a high debt ratio in order to magnify their earning on one hand and to maintain their concerned
control over the firm on the other hand.
 30

Table no 2.7
Total debt to total assets
Year Total Debt Total Asset Ratio (%)
2076/77 1840000000 100928514481 1.82
2077/78 1380000000 111786100812 1.23
2078/79 920000000 126866600103 0.72
2079/80 460000000 135419614689 0.34
2080/81 - 151457730971 -
Mean 0.82
S.D 0.72
C.V 0.87
Source: Annual Report of NMB2076/77 to 2080/81
In above table show the total debt to total asset ratio of the NMB. The ratio is continuously
decreasing trend. It is found 1.82%, 1.23%, 0.72%, 0.34% and 0% from Ist to 5th year of the
study period 2076/77 to 2080/81 respectively. The highest ratio is 1.82% in 2076/77 and lowest
ratio is 0% in 2079/80. The average mean ratio is 0.82% in study period. It means almost 0.82%
of total assets is contribute by debt or outsider's funds. The portion of total debt is continuously
decreasing condition its means NMB minimizing cost and doing better performance. The S. D
and C.V. is 0.72% and 0.87 respectively. It means there is not much deviation in the ratio for the
five years study period but continuously decreasing the debt.
Total debt to total asset ratio is represented in figure as follow.