A STUDY ON THE PROFITABILITY ANALYSIS OF

NEPAL BANK LIMITED

A Project Work Report

By

Duni Sara Somai

Madhyabindu Multiple Campus

TU Reg. No. 7-2-568-53-2019

Exam Roll No. 23943/19

Submitted to

Office of Dean

The Faculty of Management

Tribhuvan University

Kathmandu

In Partial Fulfillment of the Requirements for the Degree of

Bachelor of Business Studies (BBS)

Kawasoti, Nawalparasi East

July, 2024
 Declaration

I hereby declare that the project work entitled “PROFITABILITY ANALYSIS OF

NEPAL BANK LIMITED” submitted to the Faculty of Management, Tribhuvan
University, Kathmandu is an original piece of work under the supervision of Mr. Mukti
Prasad Neupane, Madhyabindu Multiple Campus, Kawasoti, Nawalpur and is submitted
in partial fulfillment of the requirements for the award of the degree of Bachelor in
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.

..............................
Duni Sara Somai
Date:

i
 Supervisor’s Recommendation

The project work entitled “PROFITABILITY ANALYSIS OF NEPAL BANK

LIMITED” submitted by Miss. Duni Sara Somai of Madhyabindu Multiple Campus,
Kawasoti, Nawalpur, is prepared under my supervision as per the procedure and format
laid by the Faculty of Management, Tribhuvan University, as partial fulfillment of the
requirements for the award of the degree of Bachelor in Business Studies (BBS). I,
therefore recommend the project work report for evaluation.

……………………………

Signature of the Supervisor

Mukti Prasad Neupane

Date: July, 2024

ii
 Endorsement

We here by endorse the project work report entitled “PROFITABILITY ANALYSIS

OF NEPAL BANK LIMITED." submitted by Duni Sara Somai of Madhyabindu
Multiple Campus, Kawasoti, Nawalparasi in partial fulfillment of the requirements for
award of the Bachelor of Business Studies (BBS) for external evaluation.

Signature Signature

Prof. Bishnu Prasad Lamsal, PhD Prof. Ganeshman Giri

Chairman, Research Committee Campus Chief

Date: Date:

iii
 Acknowledgement

The project report entitled “Profitability analysis of Nepal Bank Limited” has been
completed for the partial fulfillment of the requirements for the degree of Bachelor in
Business Studies (BBS), Tribhuvan University.
It is my immense pleasure to complete this research work. I got the opportunity to visit
different sites and organizations that are working in the field of my project area. It
developed the research skill as well as interpersonal and communication skills through the
interface with the people working in. so, I would like to thank Faculty of Management,
Tribhuvan University for providing such a wonderful opportunity.
The credit for the successful completion of this work goes to multiple hands and minds
that supported me during the course of conducting research. First of all, I would like to
thank to my supervisor Mr. Mukti Prasad Neupane, for the guidance and supervising my
report, especially, campus chief Prof. Ganeshman Giri and whole team of Madhyabindu
Multiple Campus.
I would also like to extend my heartfelt appreciation to all official personnel of sample
organization who provided me required document, information, data and guidelines. I am
equally thankful to the respondents, who provided actual information regarding the
project without which the study could not be completed with the higher degree of
reliability and validity.
At last but not the least, I would like to thank my parents and friends for their consistent
support, encouragement and unconditional love to me for the accomplishment of this task.

Thankfully,
Duni Sara Somai
Date:……………………..

iv
 Table of Contents
Declaration ........................................................................................................................... i
Supervisor’s Recommendation.............................................................................................ii
Endorsement ...................................................................................................................... iii
Acknowledgement ............................................................................................................... iv
List of Tables ...................................................................................................................... vii
List of Figures ................................................................................................................... viii
List of Abbreviations ........................................................................................................... ix
Chapter I............................................................................................................................... 1
Introduction .......................................................................................................................... 1
Background of the study .................................................................................................. 1
Profile of Organization ..................................................................................................... 2
Objectives of the Study .................................................................................................... 3
Significance of the Study ................................................................................................. 3
Review of Literature......................................................................................................... 4
Conceptual Review ....................................................................................................... 4
Review of Previous Study ............................................................................................ 6
Research Methodology..................................................................................................... 7
Research Design ........................................................................................................... 7
Sources of Data ............................................................................................................. 8
Population and Sample ..................................................................................................... 8
Data Collection method ................................................................................................ 9
Tools used for Analysis ................................................................................................ 9
Limitation of the Study .................................................................................................... 9
Chapter- II .......................................................................................................................... 10
Results and Analysis .......................................................................................................... 10
Presentation and Analysis of Data ................................................................................. 10
Return on Assets ......................................................................................................... 10
Return on Equity......................................................................................................... 12
Return on Capital Employed .......................................................................................... 13
Major Findings ............................................................................................................... 15
Chapter III .......................................................................................................................... 16
Summary and Conclusion .................................................................................................. 16
Summary ........................................................................................................................ 16

v
 Conclusions .................................................................................................................... 16
REFERENCES .................................................................................................................. 18
Appendix I ......................................................................................................................... 19
Appendix II ........................................................................................................................ 21

vi
 List of Tables

Table 1 Return on Assets 11

Table 2 Return on Equity 12

Table 3 Return of Capital Employed 14

vii
 List of Figures

Figure 1 Multiple bar diagram on ROA 11

Figure 2 Simple bar diagram on ROE 13

Figure 3 Trend line on ROCE 14

viii
 List of Abbreviations

%: Percentage

&: And

ATM Automated Teller Machine

B.S Bikram Sambat

BAFIA Banking and Financial Institution Act

BLB Branchless Banking

CDM Cash Deposit Machine

E-Banking Electronic Banking

EBIT Earnings before Interest and Tax

Etc. Et Cetera

FY Fiscal Year

NBL Nepal Bank Limited

ROA Return on Assets

ROCE Return on Capital Employed

ROE Return on Equity

ix
 Chapter I
Introduction
Background of the study

Profitability means that the revenue exceeds the expenses of the business; this is
different from comparing assets and liabilities on a balance sheet to determine
financial position. A profitable business may be in weak financial position and a
business with a strong financial position may not be profitable. He adds that it must be
evaluated on both a long term and a short-term basis because business goals and
decision may differ depending on the time frame used.

There are various advantages of financial statement analysis. The major benefit is that
the investors get enough idea to decide about the investments of their funds in the
specific company. Secondly, regulatory authorities like International Accounting
Standards or not. Thirdly, Profitability statement‟s analysis can help the government
agencies to analyze the taxation due to the company. Moreover, company can analyze
its own performance over the period of time through financial statements analysis.

A profitability ratio is a financial performance metric that measures the ability of a

commercial bank to generate earnings and returns for its shareholders. It provides
insight into the bank's ability to use its assets and liabilities effectively and efficiently
to generate profits. There are several types of profitability ratios used to evaluate the
financial health of commercial banks. One of the most commonly used ratios is the
Return on Assets (ROA), which measures the bank's net income as a percentage of its
total assets. ROA indicates how well the bank is using its assets to generate profits.
Another commonly used profitability ratio is the Return on Equity (ROE), which
measures the bank's net income as a percentage of its shareholder's equity. ROE
measures the bank's ability to generate profits relative to the capital invested by
shareholders. The Net Interest Margin (NIM) is another profitability ratio that
measures the difference between the interest income earned on assets and the interest
expense paid on liabilities. A higher NIM indicates that the bank is earning more
interest income relative to its interest expenses, which is a positive indicator of
profitability. In addition to these ratios, there are other profitability ratios, such as the
Efficiency Ratio, which measures the bank's expenses as a percentage of its revenue,

1
and the Operating Margin, which measures the bank's operating income as a
percentage of its revenue.

Overall, profitability ratios provide a comprehensive view of a commercial bank's

financial health and its ability to generate earnings and returns for its shareholders.
However, it's important to consider other factors such as risk management, capital
adequacy, and liquidity when evaluating the financial health of a commercial bank.

Profile of Organization

Nepal Bank Limited, The first bank of Nepal was established in November 15, 1937
A.D (Kartik, 30, 1994). It was formed under the principle of Joint venture (Joint
venture between govt. & general public). NBL's authorized capital was Rs. 10 million
& issued capital Rs. 2.5 million of which paid-up capital was Rs. 842 thousand with
10 shareholders.
The bank has been providing banking through its branch offices in the different
geographical locations of the country. When NBL was established, it was formed
under the principle of Joint venture (Joint venture between Government and general
public). NBL's authorized capital was NPR 100 million & issued capital NPR 2.5
million of which paid-up capital was NPR 842,000 with 10 shareholders. The bank
has been providing banking through its branch offices in the different geographical
locations of the country.

Notably, Nepal Bank Limited was inaugurated by King Tribhuvan with supportive
vision of Prime Minister Juddha Shamsher Jung Bahadur Rana to institutionalize
formal banking system in Nepal. Before the establishment of NBL, all monetary
transactions were carried out by private dealers and trading centers. It was the time
when there was no trust for such formal banking system. This reflected in under
subscription of shares (OnlyRs.0.842 million could be raised out of floated capital of
Rs.2.5 million). Raising deposit and mobilizing the collected deposit was even more
difficult.

Absence of any bank in Nepal was hampering the economic progress of the country.
This was taken into consideration by Nepal Bank Limited with key focus on
overcoming such economic hamper and difficulties of general public. This was
initiated by providing banking services to people removing their inconvenience. This

2
objective got better and bigger with the time. Nepal Bank Limited has so far adopted
according to the technological changes, national economic welfare, customer
preferences in services, market competition and global financial scenarios to become
a leading, glorious and highly reputed bank of Nepal.

Nepal Bank Limited is providing services to its customers from its 217 branches. It
provides deposit facility, various loan facilities, advanced ABBS services from 162
branches, Internet Banking along with the ATM facilities through 144 ATM terminals
all over the country.

Objectives of the Study

The main objective of the study is to measure the profitability of NBL for the past 5
years. However, the specific objectives of the study are as follows.

 To assess the trend of the Return on Assets and Return on Equity of five years.
 To examine the firm‟s Return on Capital Employed by over the five years.

Significance of the Study

Banks in the modern economy are profit maximizing businesses. Banking sectors
have been one of the major contributors of national economy, enabling to boost the
GDP. Hence, the performance of this sector needs to be above the part to any other
field. The financial performance of commercial banking sector should be very much
capable in enhancing the capital markets well. This research is conclusion-oriented
research. This project will help to know the financial performance of the NBL. This
study will also be helpful as literature for the future study about the relating topics.
Apart from this, the institution and firm can allow the suggestion of this study to make
their policy and strategy more practical and scientific.
One of the most frequently used tools of financial Position is profitability ratios,
which are used to determine the company's bottom line and its return to its investors.
Profitability measures are important to company managers and owners alike.
The accounting figures presented in the financial statements relating to profitability
do not convey any meaningful understanding. It needs to be analyzed and interpreted
to know the financial position and performance of the banks. This study will be

3
beneficial to different parties concerned with this bank as well as other interested
parties. Especially it will be beneficial to:

i. Management of the bank.

ii. Lenders and Borrowers of the bank.
iii. Concerned parties and general interested parties of bank.
iv. Customer of the bank.

For most profitability ratios, having a higher value relative to a competitor's ratio or
relative to the same ratio from a previous period indicates that the company is doing
well. To be successful and remain in business, both profitability and growth are
important and necessary for a company to survive and remain attractive to investors
and analysts. Profitability is, of course, critical to a company's existence, but growth is
crucial to long-term survival. Profitability impacts whether a company can secure
financing from a bank, attract investors to fund its operations and grow its business.
Furthermore, profitability analysis helps to know the financial position of the
organization, the operational effectiveness, and helps in taking business decision.

Review of Literature

A literature review is both a summary and explanation of the complete and current
state of knowledge on a limited topic as found in academic books and journal articles.
It gives readers easy access to research on a particular topic by selecting high quality
articles or studies that are relevant, meaningful, important and valid and summarizing
them into one complete report.

Conceptual Review

The major subject of this study is concentrated in profitability analysis. Profit is the
bottom line of financial statement. Financial statements are needed to predict,
compare and evaluate a firm‟s earning ability. It is also required to aid in economic
decision-making, investment and financing decision-making. The literature review of
this study will be emphasized on the related studies on comparing and analyzing the
financial statement to know the profitability ratio.

The main purpose of a business unit is to make profit. The profitability analysis is
done to throw light on the current operating performance and efficiency of business
firms. It should be duly noted that net income figure alone is not very helpful in

4
determining the efficiency and performance of the business firm unless it is related to
some other figures such as sales, cost of goods sold, operating expenses, capital
invested etc. Thus the profitability ratios are calculated to enlighten the end result and
comparison of business firms which is the sole criterion of overall efficiency of
business concern.

Profit is an excess of revenues over associated expenses for an activity over a period
of time. Profit is the legitimate object, but it should not be over emphasized.
Management should try to maximize its profit keeping in mind the welfare of
the society. Thus, profit is not just the reward to owners but it is also related with the
interest of other segments of the society. Profit is the yardstick for judging not just the
economic, but the managerial efficiency and social objectives also.

Profitability shows how efficiently the management can make profit by using all the
resources available in the market. According to Harward & Upton, “profitability is the
„the ability of a given investment to earn a return from its use.” Profitability is an
index of efficiency; and is regarded as a measure of efficiency and management guide
to greater efficiency. Though, profitability is an important yardstick for measuring the
efficiency, the extent of profitability cannot be taken as a final proof of efficiency.
Sometimes satisfactory profits can mark inefficiency and conversely, a proper degree
of efficiency can be accompanied by an absence of profit. The net profit figure simply
reveals a satisfactory balance between the values receive and value given. The change
in operational efficiency is merely one of the factors on which profitability of an
enterprise largely depends. Moreover, there are many other factors besides efficiency,
which affect the profitability.

Dave (2012) found that profit planning efficiency is defined as outcomes of profit
planning leading to make clear operation, understand evaluating of job
accomplishment systematically and correct direction for investment. Hence, profit
planning is used to create organization goal congruence, support creativity and change
circumstances, internal processes, innovation and determine the success or failure of
an organization.

Adhikari (2015) found that profit planning efficiency is defined as outcomes of profit
planning leading to make clear operation, understand evaluation of job
accomplishment systematically and correct direction for investment. Hence, profit

5
planning is used to create organization goal congruence, support creativity and change
circumstances, internal processes, innovation and determine the success or failure of
an organization.

Muhammad (2008) illustrated that planning is the method of thinking out acts and
purpose beforehand. It is the determination of action of achieves a desired result.
Planning is the basic function of management: it may be defined as the selection from
among alternatives of courses for future actions. It is the function by which the
manager decides what goals are to be accomplished and how they are to be reached.

Review of Previous Study

Kunwar, (2023), has submitted thesis on the topic Financial Performance Analysis
Planning of Nabil Bank Limited. With the objectives of this study are as the
relationships between total investment loan and advances, deposit, net profit and
outside assets and identify the investment priority sectors of commercial Bank. The
study assesses the impact of investment on profitability. The study analyzes and
forecast the trend and structure of deposit utilization and its projection for five years
of Commercial Bank.
Popescu, A., & Grigoras, M. A. (2020) explained that as an absolute term, profit has
no relevance to compare the efficiency of a business organization. A very high profit
does not always indicate sound organizational efficiency and low profitability is not
always a sign of organizational sickness. Therefore, it can be said that profit is not the
prime variable on the basis of which the operational efficiency and financial
efficiency of an organization can be compared. To measure the productivity of capital
employed and to measure operational efficiency, profitability analysis is considered as
one of the best techniques.

R. E Carole. (2018) found that working capital management has always been a
concern for many businesses to maintain healthy liquidity and activity ratios. It is
desirable for every company to collect their money early and convert their inventory
to final product efficiently .Furthermore, payment to suppliers may be planned in a
way that the population of the company is not affected in the market.

Gautama (2011) investigated the financial analysis of Everest Bank Limited. The
study used ROA as a measure of banks financial analysis and the banks size, assets

6
management operational efficiency as three independent variables affecting the
financial analysis. The result of the study showed a strong negative correlation
between ROA and assets management ratio, and a negative weak correlation between
ROA and operational efficiency.

Eken & Kale (2011) analyzed Turkish bank branches and analyzed them under their
production and profitability aspects. They concluded that too small and too large
branches needed special attention. Muhammad (2008) measured the efficiency of
Nigerian Banks over the period of five years using DEA and Malmquist Productivity
Index (MPI). Nigmonov (2010) thoroughly scrutinized the banking sector of
Uzbekistan for the period 2000-2006; the results showed that the overall efficiency of
the banks had decreased during the period. The paper also compared the relative
performance between the private, joint-stock and foreign banks for which no
significance divergence was found.

Research Methodology

Research Methodology is the process of systematic enquiry or investigation into a

specific problem or issue that leads to new or improved knowledge for solving the
problem. It is a way to systematically solve the research problem. It may be
understood as a science of studying how research is done scientifically. The
methodology may include publication research, interviews, surveys and other research
techniques, and could include both present and historical information. The
methodologies used for this research project is categorized in the following ways.

Research Design

Research design is an overall plan of completing the research work. It presents works
of research serially from the beginning to the ends in a logical way. Research design
expresses both the structure of the research problem, the framework, organization or
configuration of the relationship among variables of a study and the plan of the
investigation used to obtain empirical evidences on those relationships. It is a road
map to start process and conclude the research work.

A research design is the logical and systematic planning and direction of piece of
research. Research design is like blue- print to the researcher. The descriptive and
analytical research designs has been used for achieve the objectives. The descriptive

7
research design has been adapted to undertake fact finding operation searching for
adequate information in the context of determinants of lending behavior of
commercial bank in Nepal. This study has also used correlation research design to
establish the directions, magnitudes and forms of the observed relationship between
different dependent and independent variables (Adhikari, 2015).

This research is undertaken to evaluate the efficiency of NBL to mobilize the

available resources and earn profit over the expenses in the form of various ratios of
profitability analysis. This is an analytical study on NBL, which attempts to see the
financial performance over five years. This research is limited in period of five areas
that the fiscal year from2075/76 to 2079/80.

Mostly secondary data are used for this study. The data shown in this reports
containing income statements and various ratios of profitability analysis are the
extracts of various sources of secondary data like magazines, journals, and websites
etc. These data are used to analyze, interpret and finalize the findings of study. Thus,
this study is conducted under descriptive and analytical research design.

Sources of Data

Data are of crucial importance for any fieldwork assignment. It is the heart of any
research project. The data gathered in this study are of quantitative type and
qualitative approach is used for interpreting the findings. The study is mainly based
on secondary data. The annual report published by NBL has stood as the major source
of data for the study. However, besides the annual reports of the concerned bank,
various journals, magazines and internet websites are also used in the respective
corner of the study. Besides the above, any kind of other sources such as assertion
interviews, articles of experts were also helpful for improvising valuable data and
conclusions.

Population and Sample

There are currently 20 commercial banks in Nepal operating in the Middle of 2024
which is the total population of study. In this project report, the researcher has
selected only NBL as a sample on the topic of Financial Position of Commercial
Banks since NBL is the largest and government owned commercial bank. Simple
random sampling methods have been used of this project report.

8
Data Collection method

The data required for this project report has been collected through the use of various
internet search engines and the website of NBL.

Tools used for Analysis

I. Financial Technique Used

In this field works study, mainly following Financial Position tools are applied to measure
the financial efficiency of NBL.

a) Return on Assets
b) Return on Capital Employed
II. Statistical Techniques Used
We have analyzed the data by using following statistical tools.
a) Multiple Bar Diagram
b) Trend Line

Limitation of the Study

Every research is performed under restriction and present study is not an expectation.
So, it has been conducted with certain limitation. Some notable limitations of this
study are as follows.

 This study is limited on secondary data, which are used to analyze for result
interpretations, so the accuracy of the finding depends on the reliability of
available information.

 Simple techniques have been used in analysis of data.

 The qualitative factors such as growth and expansion policy of the bank and
general economic conditions have not been studied.
 It has focused on a period of five years, that the results obtained may not
match the result in average of its lifetime.

 No comparison has been made with other commercial bank.

 The conclusion drawn up from this study may or may not be applicable to
other commercial bank in Nepal.

9
 Chapter- II
Results and Analysis
Presentation and Analysis of Data

Data presentation helps in adding the visual aspect to data which makes it much more
comfortable and quicker to understand. In this section, the data collected from
secondary sources are presented in the tables and trend lines. In this research project,
collected data have been presented using pictorial representation by using graphs,
charts, maps and other methods.

Data analysis forms an integral part of all academic studies, commercial, industrial
and marketing activities as well as professional practices. It is necessary to make use
of collected data which is considered to be raw data which must be processed to put
for any application. Data analysis helps in the interpretation of data and to take a
decision or answer the research question. This can be done by using data processing
tools and software. Data analysis starts with the collection of data followed by data
processing by various data processing methods and sorting it. Processed data helps in
obtaining information from it as the raw data is non-comprehensive in nature. Data
analysis in this report has been made by using different statistical and financial tools
such as correlation coefficient and various financial ratios.

Return on Assets
Return on assets (ROA), as the name suggests, shows the percentage of net earnings
relative to the company‟s total assets. The ROA ratio specifically reveals how much
after-tax profit a company generates for every one rupee of assets it holds. It also
measures the asset intensity of a business. The lower the profit per rupee of assets, the
more asset-intensive a company is considered to be. Higher the ratios, better the
profitability situation.

Return on Assets (ROA) =

10
Table 1: Return on Assets of NBL

Fiscal year Net Income Total Assets ROA

2075/76 2,596,736,044.52 171,515,645,958 1.51%

2076/77 2,332,888,541 191,162,816,827 1.22%

2077/78 2,961,230,329 222,645,477,378 0.13%

2078/79 2,923,277,569 260,077,877,377 1.12%

2079/80 3,437,578,995 296,735,597,837 1.16%

Source: Annual Report of NBL

1.60%

1.40%

1.20%
In Percentage

1.00%

0.80%

0.60%

0.40%

0.20%

0.00%
2075/76 2076/77 2077/78 2078/79 2079/80
Fiscal Year

Figure 1: Multiple bar Diagram on ROA of NBL

The Return on Assets of NBL can be analyzed clearly from the above diagram.
Though the assets are gradually increasing year by year, the net profit is fluctuating.
As a result, the ROA is also shows similar behavior as net profit. The highest ROA is
earned in the year 2075/76 which is 1.51% and the lowest in the fiscal year 2077/78
which is 0.13%.

11
Return on Equity
A metric of financial performance known as return on equity (ROE) is obtained by
dividing net income by shareholders' equity. ROE may be referred to as the return on
net assets because shareholders' equity is equal to a company's assets less its debt.

ROE is seen as a gauge of how successfully management is generating profits from a

company's assets. Any corporation can calculate its ROE in percentage form if its net
income and equity are both positive figures. Before dividends given to common
shareholders, after payouts to preferred shareholders, and before interest paid to
lenders, net income is computed.

The Formula for Return on Equity (ROE) =

Table 2: Status of Return on Equity of NBL

Fiscal year Net Income Shareholders’ Return on Equity

Equity
2075/76 2,596,736,044.52 29,281,336,515 8.87%
2076/77 2,332,888,541 30,030,991,537 7.77%
2077/78 2,961,230,329 33,215,146,020 8.92%
2078/79 2,923,277,569 35,463,613,348 8.24%
2079/80 3,437,578,995 36,522,671,808 9.41%

Source: Annual Report of NBL

12
 10.00%
9.00%
8.00%
7.00%
6.00%
5.00%
ROE in%

4.00%
3.00%
2.00%
1.00%
0.00%
2075/76 2076/77 2077/78 2078/79 2079/80
Fiscal Year

Figure 2: Simple bar Diagram on ROE of NBL

Table 2 and diagram 2 shows the Return on Equity of NBL for the period of five
years starting from the fiscal year 2075/76 to 2079/80. Analyzing the illustrations we
get to know that the ROE is fluctuating over the fiscal years. Highest ROE is in
2079/80 F.Y. that is 9.41% and lowest ROE is in 2076/77 that is 7.77%. This result
shows that NBL is improving its financial performance.

Return on Capital Employed

Return on capital employed (ROCE) is a financial position that measures how

efficiently a company can generate profits from its capital employed by comparing net
operating profit to capital employed. ROCE is a long-term Financial Position because
it shows how effectively assets are performing while taking into consideration long-
term financing. This is why ROCE is a more useful ratio than the return on equity to
evaluate the longevity of a company.

The formula to calculate the firm‟s Return on Capital Employed (ROEC) is:

ROCE =

Where, EBIT = Net profit after tax + Interest expenses + Tax

Total Capital = Shareholders‟ Equity + Long term Debts

13
Table 3: ROCE of NBL

Fiscal Year EBIT Total Capital ROCE

2075/76 30.05%
8,797,806,410 29,281,336,515
2076/77 31.58%
9,483,195,784 30,030,991,537
2077/78 27.35%
1,003,914,417 36,709,064,032
2078/79 34.99%
1,363,229,145 38,957,424,390
2079/80 50.90%
2,036,618,847 40,017,023,416
Source: Annual Report of Machhapuchchhre Bank

Table 3 shows the return on total capital employed of NBL during five years period.
As per the data shows the ROCE of the NBL is fluctuating from year to year. This is
because of the decreasing trend of EBIT and increasing trend of Capital Employed.

60.00%

50.00%
ROCE in percentage

40.00%

30.00%

20.00%

10.00%

0.00%
2075/76 2076/77 2077/78 2078/79 2079/80
Fiscal Year

Figure 3: Trend line on ROCE of NBL

Figure 3, shows, the highest return on capital employed of NBL is in 2079/80 F.Y.
which is 50.90% and the lowest is in F.Y 2077/78 that is 27.35%. However, after this
fiscal year, the ROCE is increasing.

14
Major Findings

The study is mainly focused on the Profitability ratio of Nepal Bank Limited. At last,
it is concluded that though the bank is improving its Return on Assets in comparison
to its last few years, it has not been able to make effective deployment of
shareholders‟ equity which can be seen through the analysis of ROE. However, in
today‟s competitive banking market, this firm is providing special services to its
valued customers and people are taking unlimited service like deposit, collection,
taking loans, financial guarantee, transactions such as saving and debenture,
collection of share application etc. After analyzing the profitability of NBL using
various financial tools, the following are the conditions of NBL depicted by
profitability ratios.

1. Based on the calculations using financial tools, Return on Assets trend over
the five years period is good.
2. The highest ROA is in the year 2075/76 and the lowest in 2077/78. The ROA
after 2077/78 increased rapidly.
3. ROCE is rapidly increasing in the initial phase. It got to the lowest point on
F.Y 2077/78 and then it started to rise and make a good improvement in F.Y.
2079/80.
4. The highest return on capital employed of NBL is in the current year 2079/80
that is 50.90% and the lowest is in F.Y 2077/78 that is 27.35%.However, after
2077/78, the ROCE is increasing.
5. The ROE is fluctuating over the fiscal year. The highest ROE is in current
year 2079/80 i.e. 9.41% and the lowest ROE is in 2076/77 F.Y. i.e 7.77%.
6. The higher the ROE, the better a company is at converting its equity financing
into profits. However, NBL bank has been able to generate higher ROE in the
fiscal year so, we can say that the bank is better at converting its equity
financing into profit.
7. The falling ROA also indicates the bank might have over invested in assets
that have failed to produce revenue growth.
8. The higher ROCE is, better will be the company. This is because a higher
ROCE indicates that a higher percentage of your company's value may be
returned to stakeholders as profit. ROCE of NBL goes to the down point in
2077/78 F.Y. However, it again goes up from 2077/78 F.Y.

15
 Chapter III
Summary and Conclusion
Summary

The report basically deals with finding out the Profitability ratio of NBL. It aims at
evaluating the trend of Return on Assets and Return on Equity over the years, firm‟s
capability in converting revenue to profit, the firm‟s ability to utilize assets and firm‟s
productive use of equity. Since a firm‟s profitability is mainly dependent on the
revenue generated by firms, assets are used by the firm and the amount of equity in
the firm; it treats these factors as independent variables in this study.
This project has been undertaken to fulfill the partial fulfillment of the requirements
for the degree of Bachelor of Business Studies. The topic „Profitability ratio of NBL‟
is selected with a view to analyze the general financial position of Commercial Banks
in Nepal since this bank is the largest commercial bank owned by Government of
Nepal.
The study is mainly based on secondary data and required data are collected by using
various sources. There are total of 20 commercial banks operating till today which are
the population of the study. Out of this population NBL has been taken as a sample
and collected data has been analyzed and evaluated using various financial tools for
detailed study for e.g., ROA, ROE, and Profitability trend. The data are presented in
table and graphs to ease the analysis and evaluation.
If we analyze the trend of profitability, the net profit of NBL increased rapidly in the
initial phase of the study period and it eventually diminished to the bottom level.
However, the profit has been taking an upward slope from the bottom level. This
indicates the well and improved performance of NBL. But the ROA and ROE of the
firm are not satisfactory and they should be taken into serious consideration for the
effective utilization of assets and shareholders‟ equity.

Conclusions

With the growing banking habits among people, introduction of new technologies and
services by commercial banks, stability on political frontier and government
commitment to continuously support the policy of liberalization, privatization and
globalization of national economy, it can be expected that the commercial banks will
continue to have bright future.

16
On the basis of analysis, I came to know that the bank is successfully providing good
services and facilities by launching new technologies and software in its operation. By
this, its performance will go uplift in future.

NBL has been committed to meet customer expectations in all areas of its business
through continuous improvement for overall benefit. Therefore, it can be expected
that NBL‟s overall performance with its valid mission for providing easy and
innovative banking products and services to customers will be achieved in years to
come. Thus, it is concluded that the bank will look for the benefit of the local
communities supporting entrepreneurship, social responsibility and economic
prosperity of the nation.

Upon analysis, it has been found that Nepal Bank is successfully providing excellent
services and facilities by implementing new technologies and software in its
operations, leading to improved performance in the future. The bank is committed to
meeting customer expectations and continuously improving its business to benefit its
stakeholders. With its mission to Build trusted and united customer relationship, it is
expected that Nepal Bank Limited will continue to perform well in the years to come,
benefiting local communities through support of entrepreneurship, social
responsibility, and economic prosperity.

17
 REFERENCES

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Dave, A. (2012). Financial Management as a Determinant of Profitability. South

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Eken, M.H., Kale, S. (2011). Measuring bank branch performance using Data

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Gautama. (2011). Financial Analysis of Himalayan Bank Limited. Kathmandu: An

Unpublished Thesis, T.U.

Gitman, L. J. (2013). Principal of Financial Management. Delhi: Pearson Education.

Kothari, C. (1998). Research Methodolog, Methods and Techniques. New Delhi:

Wishwa Prakashan.

Kunwar, K. (2023), Profit Planning of Nabil Bank Limited, An Unpublished Master

Degree Thesis, Faculty of Management, Office of the Dean, T.U.

Muhammad, T. (2008). A DEA Analysis of Bank Performance in Nigeria. Munich

Personal RePEc Archieve .

Nigmonov, A. (2010). Bank Performance and Efficiency in Uzbekistan. Eurasian

Journal of Business and Economics, 3, 1-35 .

Pandey, I. (2005). Finanacial Management. Kathandu: Asmita Publication.

Popescu, A., & Grigoras, M. A. (2020). Profitability Analysis - A Study Case

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Papers Series Management , 1-7.

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United States: Rational Institute of Food and Agriculture.

Annual Report of Nepal Bank Limited

18
 Appendix I

Balance Sheet of NBL F.Y 2075/76 to 2079/80

Capital & F.Y. 2075/76 F.Y. 2076/77 F.Y.2077/78 F.Y. 2078/79 F.Y.2079/80
Liabilities
Due to 1,074,497,374 1,458,866,152 809,125,108 1,090,678,643 4,105,067,655
Bank and
financial
institutions
Due to 41,843,286 23,920,613 6,062,640,951 5,888,868,046 13,000,000
NRB
Deposits 117,200,788,938 141,530,380,569 162,813,383,867 196,076,149,283 154,179,631,823
from
customers
Loan and 950,000,000 1,000,000,000 - 7,304,175,000 3,395,002,561
borrowing
Other 1,746,274,984 1,059,442,286 3,261,141,415 5,917,390,293 3,235,672,094
Liabilities
Debt - - 3,493,918,012 3,493,811,042 5,494,098,946
securities
issued
Share 9,811,148,000 11,282,820,200 12,636,758,600 14,405,904,831 10,257,155,581
Capital
Share 3,262,810,756 1,789,915,042 431,883,262 - 30,881,765
Premium
Retained 3,262,810,756 3,102,720,519.19 3,732,371,500 3,422,196,158 1,448,531,597
Earning
Reserves 13,311,684,737 13,855,535,776 33,215,146,020 17,635,512,359 4,415,217,107
Total 171,515,645,958 191,162,816,827 222,645,477,378 260,077,877,377 296,735,597,837
Capital &
Liabilities

19
 Assets F.Y. 2075/76 F.Y. 2076/77 F.Y. 2077/78 F.Y.2078/79 F.Y.2079/80

Cash in 10,418,969,105 4,971,642,414 6,528,388,522 6,391,601,653 10,623,385,826

hand
Balance 10,178,321,131 6,125,276,757 6,803,871,032 6,841,253,290 9,309,107,697
with NRB
Balance 5,427,675,000 6,117,450,000 4,319,424,975 491,033,317 1,458,314,182
with other
banks and
financial
institution
Money at 5,594,624,000 6,590,488,467 8,516,607,098 491,906,856 -
call and
short note
Investments 1,539,039,785 32,596,093,012 30,009,312,731 6,159,622,876 3,202,846,655
Loan, 92,421,637,259 103,303,752,458 135,420,466,420 171,480,501,866 1,707,802,706
Advance
and Bills
Purchase
Other - - 101,204,596 105,284,481 489,503,750
trading
assets
Current 991,499,066 1,580,923,496 1,642,265,420 1,950,389,288 774,948,142
Tax assets
Other 14,786,384,911 14,205,422,036 10,368,431,136 9,992,240,038 8,578,494,031
Assets
Total 171,515,645,958 191,162,816,827 222,645,477,378 260,077,877,377 296,735,587,837
Assets

20
 Appendix II

Income Statement of NBL

F.Y 2075/76 to 2079/80

Particular F.Y. 2076/77 F.Y. F.Y.2078/79 F.Y.2079/80

F.Y. 2075/76
2077/78

Interest 10,375,693,23 11,526,842,04 11,887,166,

16,439,950,427 19,284,514,241
Income 8.67 1 103
Interest 4,186,150,559 5,466,724,4
5,908,023,000 9,725,363,453 13,912,114,688
Expenses .19 97
Net Interest 6,189,542,679 6,420,441,6
5,618,819,041 6,714,586,974 9,406,952,635
Income .48 06
Commission
1,039,339,828
and 790,344,870 953,775,889 968,755,635 1,396,773,457
.69
Discount
Other
Operating 45,362,654.11 6,365,207,192 67,347,585, 81,812,510 252,730,753
Income
Net
interest,fee
7,183,519,854 746,388,151,5 7,306,869,9
and 7,601,530,100 6,516,442,257
.06 98 10
commission
income
Total
7,736,715,790 8,188,998,9
Operation 7,171,880,776 8,069,857,851 6,866,923,665
.07 55
Income
Personnel 2,077,398,273 2,353,459,4
2,224,846,358 2,451,901,299 2,120,527,655
Expenses .46 24
Other
549,791,982.3
Operating 668,677,567 813,078,920 787,734,063 801,938,597
2
Expenses
Depreciatio
n & 122,374,745.8
150,802,269 177,178,920 339,099,823 415,654,232
Amortizatio 3
n
Operation 4,510,047,965 4,347,660,5
3,247,920,735 3,637,463,869 2,380,543,512
Profit .79 80
Non-
101,607,885.8
Operating 327,252,050 224,759,091 219,327,299 8,931,154
5
Income
Profit
before 4,611,655,851 4,572,419,6
3,575,172,784 3,856,791,168 2,335,242,492
income tax .64 77

Income tax 1,080,433,282 1,282,812,225, 1,275,935,9 983,650,423 740,036,218

21
expenses .10 01 29
Profit of 2,596,736,044 2,961,230,3
2,332,888,541 2,923,277,569 3,437,578,995
the year .52 29

22