FINANCIAL PERFORMANCE ANALYSIS OF NMB BANK

LIMITED

A Project work Proposal

Submitted By
Manish Maharjan
T. U Regd. No. 7-2-788-108-2020
St. Lawrence College
Group: Finance

Submitted to
The faculty of management
Tribhuvan University

In partial fulfilment of the requirement for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Chabahil,Kathmandu
April, 2025
 Table of Contents

Title Page i
Table of Contents ii
CHAPTER I
INTRODUCTION...........................................................................................................................3
1.1 Background of the Study.................................................................................................................3
1.2 Brief profile of NMB Bank .............................................................................................................4
1.3 Statement of the problem................................................................................................................4
1.4 Objectives of the Study...................................................................................................................6
1.5 Rational of the Study.......................................................................................................................7
1.6 Review of literature..........................................................................................................................8
1.7 Research methodology................................................................................................................. 12
1.8 Organization of the Study.............................................................................................................13
1.9 Limitations of the Study................................................................................................................15
REFERENCES
 CHAPTER I

INTRODUCTION
1.1 Background of the 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.
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
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.
1.3 Statement of the 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. Special problem related the commercial banks in Nepal have
been presented briefly as follows:
 What are the financial and investment position of NMB?
 What is the liquidity, efficiency of assets management, profitability and risk position
ofconcerned commercial 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:
 To analyze the financial performance in terms of the liquidity, activity, profitability,
leverage of NMB
 To examine loan and advance, investment and total deposit of NMB

1.5 Rational 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.
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 previous studies
2. Research gap
1.6.1 Review of previous studies
Pathak (2071) To analyze the deposit trends of Kumari Bank Ltd. for the fiscal years 2076/77 to
2080/81 and identify the major sources of deposits. The study highlights the patterns of deposits
over the years and the main sources of these deposits, which include customer savings, fixed
deposits, and current accounts. The deposit growth trajectory indicates the bank’s reliance on
both retail and institutional clients.The study suggests that Kumari Bank should focus on
expanding its retail deposit base while diversifying its offerings to attract more institutional
deposits. Further, enhancing customer trust and satisfaction could help maintain and grow the
deposit base.

Poudel(2023) To evaluate the financial performance of NMB Bank from 2020 to 2025 using key
financial ratios, including liquidity, profitability, and leverage ratios.Poudel’s analysis shows that
NMB Bank demonstrates strong profitability, but there are concerns regarding liquidity and
operational efficiency. Liquidity ratios such as the current and quick ratios highlight some
vulnerabilities in meeting short-term obligations. Poudel recommends improving liquidity
management and enhancing operational efficiency. More effective management of non-
performing assets (NPAs) and optimizing cost structures could contribute to better financial
performance.
Khanal (2021) To examine NMB Bank’s financial performance focusing on risk management
and financial stability. The study reveals that NMB Bank effectively mitigates risks related to
credit, market fluctuations, and liquidity. The bank’s strategies, including maintaining adequate
reserves and hedging mechanisms, have helped ensure financial stability.Khanal suggests that
NMB Bank should continue to refine its risk management strategies, particularly in terms of
market risk and credit risk, to ensure long-term financial stability.

Shresthe (2018) To analyze the financial performance of Nepal Bangladesh Bank Ltd. using ratio
analysis for the fiscal year 2019 to 2024. Shrestha’s analysis identifies key financial trends,
including profitability, liquidity, and solvency. The bank shows solid profitability but needs
improvement in its liquidity position, especially concerning its quick ratio and current ratio.The
study suggests that Nepal Bangladesh Bank should focus on improving liquidity by reducing its
dependency on illiquid assets and enhancing cash management practices.

Subba Muna (2016) To compare the financial performance of NMB Bank and Everest Bank
Limited (EBL) from 2077 to 2081.The comparative study highlights the differences in liquidity
positions and return on equity (ROE) between NMB and EBL. NMB Bank shows stronger
liquidity ratios, while EBL has a higher ROE.Subba recommends that NMB Bank should focus
on improving its ROE by optimizing asset management and increasing profitability, while EBL
should enhance its liquidity to ensure it can meet short-term obligations more effectively.

Thapa (2022) To investigate the relationship between liquidity and profitability at NMB Bank
from 2017 to 2019. The study finds that while NMB Bank has maintained adequate liquidity
levels, its profitability has declined in certain periods. The analysis of liquidity ratios like the
liquidity coverage ratio (LCR) and net interest margin (NIM) suggests that non-performing
assets (NPAs) are a contributing factor.Thapa suggests that NMB Bank should focus on
improving the management of non-performing loans and optimize its interest rate spreads to
boost profitability.

Shrestha (2020) To evaluate the financial performance of NMB Bank using key financial ratios
such as Return on Assets (ROA), Return on Equity (ROE), and Net Profit Margin.Shrestha’s
analysis shows that while NMB Bank has demonstrated solid profitability, it faces challenges
related to operational efficiency and cost management. The bank’s ROA and ROE are
satisfactory, but its net profit margin needs improvement. Shrestha recommends that NMB Bank
should focus on improving cost efficiency and managing operational costs better to maintain its
profitability.

Gurung (2022) To explore the impact of external economic factors like inflation, exchange rates,
and GDP growth on the financial performance of NMB Bank. Gurung identifies that
macroeconomic factors such as inflation, currency fluctuations, and GDP growth have a
significant impact on NMB Bank’s profitability, especially in terms of interest income and non-
performing loans (NPLs). Economic instability worsens the NPL ratio and reduces profit
margins. Gurung recommends that NMB Bank adopt hedging strategies and prepare for
economic instability by diversifying its revenue sources and mitigating the risks associated with
external economic factors.

Shrestha (2024) To conduct a comparative analysis of the financial performance of selected

banks, focusing on NMB Bank using financial ratios. Shrestha’s study shows that while NMB
Bank has a strong liquidity position (current ratio), its quick ratio is below the standard
benchmark, indicating potential liquidity challenges. The bank’s ROA is relatively low,
suggesting inefficiencies in asset utilization.Shrestha suggests that NMB Bank should focus on
improving its quick ratio to ensure better short-term liquidity. The bank should also work on
increasing its asset turnover and optimizing its operations for better efficiency.

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.

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 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.
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..
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.

Current Assests
Current Ratio =
Current Liabities

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
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.
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.
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
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.
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
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
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.
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
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.

1.9 Limitations 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.
 REFERENCES

Books

Adhikari, D., & Pande, D. L. (2017). Business research methods (2nd ed.). Asmita Publication.

Bhandari, B. P. (2017). Profit planning and controlling in NMB. Faculty of Management,

Tribhuvan University.

Gurung. (2022). To explore the impact of external economic factors like inflation, exchange
rates, and GDP growth on the financial performance of NMB Bank.

Khanal. (2021). To examine NMB Bank’s financial performance focusing on risk management
and financial stability.

Paudel, R. B., & Joshi, P. R. (2016). Fundamental of investment. Asmita Publication.

Pathak, S. (2014). Deposit analysis of Kumari Bank Ltd. Faculty of Management, Tribhuvan
University.

Shrestha, R. (2024). A comparative analysis of the financial performance of selected banks:

Focusing on NMB Bank using financial ratios. Nepal Financial Studies.

Shrestha, S. (2018). Financial performance analysis of Nepal Bangladesh Bank Ltd. Faculty of
Management, Tribhuvan University.

Shrestha, S. (2020). An analysis of financial performance of NMB Bank Limited using financial
ratios.

Subba, M. (2016). The comparative analysis on financial performance of Nabil and Everest
Bank Limited. Faculty of Management, Tribhuvan University.

Thapa, (2022). To investigate the relationship between liquidity and profitability at NMB Bank
from 2017 to 2019.