PROFITABILITY ANALYSIS OF NABIL BANK LIMITED

A PROJECT WORK PROPOSAL

Submitted By
Sagar Adhikari
Exam Roll No:
TU Reg. No.: 7-2-927-362-2018
Swoyambhu International College
Group: Finance

Submitted To:
The Faculty of Management
Tribhuvan University
Kathmandu

In partial fulfillment of the requirements for the degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Kathmandu, Nepal
January 2024
 CONTENTS

1. Background of the Study

2. Statement of the Problem
3. Objectives of the Study
4. Significance of study
5. Theoretical Framework and Literature Review
6. Research Methodology
 Research Design
 Population and Sample
 Data collection procedure
 Nature and sources of data

7. Limitation of the Study

8. Organization of the Study
9. References
 Chapter 1
INTRODUCTION

1. Background of the study

Banking system and financial institutions play very significant role in the economy. In the field of
business, the concept of profit defines the objective of economic activity, that’s why the key motive
of any business organization is to maximize and make profit. In cost accounting, profitability
analysis is an analysis of the profitability of an organization’s output. There are variety of outputs
of an organization which can be categorized as products, customers, locations, channels and/or
transactions.
Profitability is a measurement of efficiency and ultimately its success or failure. Profitability is
closely related to profit; but with one key difference. While profit is an absolute amount,
profitability is a relative one. It is the metric used to determine the scope of a company's profit in
relation to the size of the business. It is the principal motivating factor for conducting business.
Study of profitability reveals the financial health of a business and its emerging problems which
helps to make framework of business plans and take the major business decisions. Therefore this
research is done to investigate about the profitability analysis of Nabil Bank, one of the reputed
commercial Bank of Nepal.
Currently Nabil Bank has 233 network of branches within the territory of Nepal . Subsidiary of
Nabil Bank is Nabil Investment Banking Limited. Nabil Bank Limited has recently acquired Nepal
Bangladesh Bank Limited.
The vision of the bank is to provide better financial services across all demographic strata and
geographic regions of the nation, constantly evolving to be better, so as to always better serve the
stakeholders. While the mission is to be the bank of first choice of the stakeholders.

2. Statement of the problem

Growing competition in financial sector, recent increase in transaction security and capital
markets,recently seen liquidity crisis in the market, high exchange rate with dollar, as well as the
taxation lead on higher deposits in banks are the factors affecting bank’s profitability. The
researcher has been watching this type scenario where the financial environment is not so stagnant.
Thus, it is important to concentrate towards better productivity management and growth of bank
in environment of tough competition and frequent changes. Profitability is the blood of every
business and is critical to company’s long term survivability.
With existence of 26 commercial banks in Nepal, Nabil Bank Limited has to face immense
competition for attracting depositors and borrowers, maintaining capital, generating profit and
ultimately surviving and growing in the competitive banking world. Hence, measuring the
profitability helps to analyze the current industry position of the bank and direction of future
strategies.
Thus, the study is an attempt to answer the following questions:
Will Nabil be profitable in future?

How sound is the operational result of Nabil in relation to its profitability?

To what extent has the bank been able to raise its profitability?

What is the Growth status of Nabil Bank?

What is the net worth of Nabil Bank Ltd?

3. Objectives of the study

This portion of report attempts to answer the statement of problem. It provides the idea of output
of the study. The basic purpose of this research is to assess the profitability of Nabil Bank Ltd. and
other specific objective are as follows:-
1) To study the operational result of Nabil Bank.
2) To understand and evaluate the financial health of the bank.
3) To study the growth in net-worth of Nabil Bank ltd.
4) To know the growth in profitability of Nabil Bank.

4. Significance of the study

Banks provides facilities for deposit and borrowing of fund. People deposit their money in the
bank in order to earn some interest which in return contributes to make increment in their capital.
This section describes and defines the various dependent and independent variables used in this
study based on the major assumptions made to carry out this study.
To analyze the profitability and other financial status of Nabil Bank Limited, this study has used
return on assets, return on deposit, Dividend payout on share capital analysis, Exchange gain to
total income ratio, Earning Per Shares analysis, Price Earnings ratio analysis, Staff expense to net
income ratio analysis, Net Interest Margin analysis, Market Valve Per Share analysis as the
different variables. This piece of research could further be developed by the continued research in
this field. This piece of study may prove important in the accounting and financial fields of
Banking and financial sector as this may be taken as reference by various groups and researchers.
Further it might prove its importance to following stakeholders: -
  Importance to investor.
 Importance to bank itself.
 Importance to researcher.

5. Theoretical Framework and Literature Review

Definition of Terminologies
The project report will consist of various terms which are necessary to describe the obtained
information about profitability analysis of Nabil Bank Limited, Some of them are as follows:

 Profit
Profit is a financial benefit that is realized when the amount of revenue gained from a
business activity exceeds the expenses, costs and taxes needed to sustain the activity. Any
profit that is gained goes to the business's owners, who may or may not decide to spend it
on the business. Profit is calculated as total revenue less total expenses.

 Return on Asset
The return on total assets (ROTA) is a ratio that measures a company's Earnings Before
Interest and Taxes (EBIT) relative to its total net assets. The ratio is considered to be an
indicator of how effectively a company is using its assets to generate earnings before
contractual obligations must be paid.
ROA= NPAT / Total Assets

 Return on Deposit
One of the major financial sources is deposit collection and deposit is mobilized for loans
and advances and is used in other investments to earn profit. This return ratio is used to
find out the profit earned using total deposit. This ratio is calculated in order to diagnose
whether the banks are well efficient or not in mobilizing its total deposits. So, corrective
action can be taken by the bank.
ROD= Net profit / Total deposit

 Earnings per share (EPS)

The profitability of a bank from the point of view of the ordinary shareholders is earning
per share. The ratio explains net income for each unit of shares. Thus, it only shows how
much is the earning of an organization and how much does theoretically belong to the
shareholder.
EPS= NPAT / Shares Outstanding
6. Research Methodology
Research is systematic investigation into and study of material in order to establish new facts and
reach conclusion. It is simply the process used to collect reliable and authentic information and
data from various sources in order to prepare report writing. In research, we use various methods
to collect, compile, present and interpret the data and information. This section explains the
methodology selected for the report.
6.1 Research design
This study is focused to evaluate the profitability of Nabil Bank. For the research work analytical
and descriptive research design has been applied.
6.2 Population and sample
There are altogether 26 commercial banks operating in Nepal have been assumed as the population
of study and among them Nabil Bank Ltd. is taken as the base for the study. The sample will be
the annual reports of Nabil Bank Limited for the past 5 years till FY 2078/79 BS.
6.3 Data collection procedure
The sources of data would be secondary sources. All the required data information would be
collected from IT magazines, publication houses, and Nabil Bank Ltd. The study would follow
description and analytical research to analyze the company’s performance. A simple interview
procedure would be adopted and other data would be extracted from the financial reports of the
company.
6.4 Nature and Sources of data
The major sources of information taken for the reference are detailed as follows :
 Annual reports of Nabil Bank.
 Bulletins and reports of NRB.
 Web sites of Nabil Bank.
 Various information from Nepal Stock Exchange.
 Reports and information from Merolagaani and Smartwealth sites
7. Limitations of study
a) Lack of time to collect the depth information and no availability of the sufficient data.
b) Respondents didn’t response questionnaires properly and unable to contact then top level
managers of Nabil Bank.
c) Coordination with bank was difficult.
d) Five years data are only presented for study.
e) The research is concerned with Nabil Bank Ltd only.
8. Organization of study
The report is divided into three main chapters. They are: Introduction, results and analysis, and
summary and conclusions.
The first chapter will be the introduction which contains general background of the study,
definition & function, introduction to the sample, statement of problems, objectives of the study,
research questions, theoretical framework, and limitations of the study.
The second chapter will be the Results and analysis. In this chapter the researcher will review the
past study and the implementation of models in different times and economy. It includes the
conceptual framework, review of articles and dissertations done in the past.
The third chapter will be summary and conclusions, which states about the brief summary of the
whole research report and conclusions. It also provides some useful suggestions and
recommendations to the concerned parties. Similarly, at the front part table of content, list of table
and figures whereas at the end part abbreviation and bibliography will also be attached along with
this report. And all the information contained will be factual.
 Chapter-2
RESULTS AND FINDINGS

In this the collected data will be presented in the desired manner through the use of table, graphs,
equations etc. and analyzed by using the methods explained in earlier chapter. This chapter is the
main body of the study i.e analysis and finding of the collected data.
 References

Brief Introduction: Retrieved from the website of Nabil Bank Limited

Souvenir published at IV Conference of Asia and Pacific Accountants, New Delhi 1965 P-143
J.F. Weston and E.F. Brigham “Managerial Finance” Illionis Rryden Press 1978 P-150
Upton “Introduction to Business Finance” MC Graw Hill Book Co. 1961 P-150
Gibson and Boyer “Financial Management Analysis” CBI Publishing Co. inc. Boston 1979 P-189