03 Report
03 Report
CHAPTER I
INTRODUCTION
Therefore the main purpose of the profitability analysis is to utilize the past
profitability of the organization to make better in the future use. Another purpose to
find of the identify problem's solution which arise in the analysis of the profitability
of the organization. Bank is financial institution where financial services are broadly
offered and performed. So, bank can be said a financial supermarket. In general sense,
bank is a kind of business, which deals in money by accepting deposits, advancing
loan and rendering other financial services. In a board senses, bank can be defined as
the financial intermediary between depositors and entrepreneurs. ‘Bank’ was
originated from the italic language Blanco means bench or chair. People do all
transaction of money by sitting on the chair, in the Italy. So this types of business is
been called bank. The word bank mainly indicates commercial banks. Generally, the
organization, which activates money and credit, is a bank. But nowadays, the bank’s
functions are not limited. It has various functions. Thus any organization which is
included in exchange of money is called bank (Baxley, 2015).
In Nepal, the history of banking started on 17 th century, when Raja Gunakamdev took
loan from the public for the reconstruction of Kathmandu valley. Later on, the use of
different types of coins started in the periods of Malla rulers. In 1933, at the period of
Ranodip Singh, TejarathAdda was established in Kathmandu, which aimed to provide
the facilities related to loan for the public. It then established many branch offices in
different places of Nepal to provide facilities to more people. Thus this TejarathAdda
is considered to be one of the most important traditional milestones in the banking
system of Nepal. Then in 1989 B.S., when TaksarBibhag was established, since then
coins were created scientifically.
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The modern banking system in Nepal started on 1994 B.S. Kartik 30 th, where Nepal
Bank Limited was established. This was the effect of First World War, after which the
new revolution and industrialism developed all over. Then in 2012 B.S. Baishak 14 th,
Nepal Rastra Bank was established, which is the central bank in Nepal. It issued the
Nepali note in 2015 Falgun 7th for the first time. Then in 2022, the government
established another commercial bank named RastriyaBanijya Bank. After this, the
banking activities continued to increase and thus in the last 3 to 4 years, the number of
banks and finance companies are increased rapidly.
Laxmi Laghubitta Bittiya Sanstha Limited holds the distinction of being the pioneer
microfinance subsidiary of Laxmi Sunrise Bank Limited. As a national-level
microfinance institution, it operates under the licensing of Nepal Rastra Bank, the
central bank of Nepal. Notably, it achieved the milestone of becoming the first
microfinance institution in Nepal to be registered as a subsidiary of a commercial
bank. LS Capital Limited, established on January 9, 2024, through the fusion of
Laxmi Capital and Sunrise Capital, stands as a wholly owned subsidiary of Laxmi
Sunrise Bank. This innovative venture combines over three decades of unmatched
expertise, solidifying its role as a pioneer in Nepal’s capital market and paving the
way for the future of finance in the nation.
Vision
“Laxmi Sunrise will be the most trusted and respected Bank, empowering households,
businesses, and communities to achieve shared & sustainable prosperity, together.”
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Mission
We celebrate Diversity and embrace Equality as the cornerstones of our Inclusive
approach. We will offer the best Customer Experience through an empowered team,
delivering smart, simple and secure banking. We will thrive by harnessing the powers
of technology, robust risk management practices, and strong corporate governance.
We will value relationships over transactions in how we engage and serve our
customers and stakeholders.
Our customers touch us through 254 branches, 318 ATM 28 Extension Counter
located in 59 districts across the country, complimented by more than 1,000
remittance payout agents and 700 mobile banking business correspondents who
support our access to finance initiatives. Laxmi Sunrise bank contribution is to
improve meaningful financial inclusion. Complimenting this expansion, we continue
to strengthen and improve our existing digital banking channels – ATMs, internet and
mobile – keeping up with the demands of the rapidly urbanizing, mobile and
connected customers.
Understanding the factors influencing the profitability of Laxmi Sunrise Bank Limited
is essential for developing strategies to improve financial performance and achieve
sustainable growth. This study aims to analyze the bank’s profitability by examining
key financial metrics, such as net interest margin, return on assets, return on equity,
and cost-to-income ratio. Additionally, it seeks to identify the underlying causes of
profitability fluctuations and propose actionable recommendations to enhance the
bank's financial outcomes.
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The study of the analysis of profitability position of Laxmi Sunrise bank Limited
plays vital role in the managerial decision. Every organization has to analyse its
financial performance in the every step of its operation, promotion, and expansion.
There should be an appropriate equilibrium between the earning and non-earning
assets. Commercial banks are always guided by the objective of profitability. All
financial decisions of commercial banks are for the betterment of shareholders wealth.
There should be an effective system of funds allocation in order to safeguard the
banks from the danger of illiquidity. An appropriate level must be achieved between
them. The study ponders to find out whether commercial banks are alert or not in this
regard. This study helps to enhance the profitability position of concern organization.
This study is a valuable document for academicians, students, teachers and
practitioners in the help of accounting and finance. This study enlightens the
shareholders, financial agencies, stock exchange, stock trader, customers, depositors
and debtors who can objectively identify the better banks to deal with.This study
analyses and stales to maintain balance between principalities of liquidity and
profitability. This study helps to the bank too in analysing its practices on trade-off
between liquidity and profitability.
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A literature review is more than the search for information, and goes beyond being a
descriptive annotated bibliography. All works included in the review must be read,
evaluated and analyzed. Relationships between the literatures must also be identified
and articulated, in relation to your field of research. "In writing the literature review,
the purpose is to convey to the reader what knowledge and ideas have been
established on a topic, and what their strengths and weaknesses are. The literature
review must be defined by a guiding concept (e.g. your research objective, the
problem or issue you are discussing or your argumentative thesis). It is not just a
descriptive list of the material available, or a set of summaries.
The existing literature on the concept of profitability analyzed and also reviewed the
journals and articles. Review of literature comprises upon the existing literature and
research related to the present study with a view to find out what had already been
studied. Review of literature is thus, an essential part of all research studies .it is the
way to discover what other research in the area of uncovered problems. It also helps
to avoid the investigating problems that have already been definitely answered. The
literature review helps to know about the profitability of the banking by various
sources.
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Broadly speaking, a Bank draws surplus idle money in the hand of public in the form
of deposits and supplies that money in the form of loans to those who are in a position
to utilize the same for some productive uses. Bank provides benefits to depositors by
paying fixed interest and borrower gets chance to improve business or other work by
getting financial support. The bank helps people in every sector of economy like
trade, industry, agriculture etc. Not only has that now had a day’s bank also helped in
education sector too. Bank provides education loans in a reasonable interest rate.
Therefore we call a bank as a social institution also. A bank simply carries out the
work of exchanging money, providing loan, accepting deposits and transferring
money (Gupta, 2004).
Grubisic (2022) examined the relationship between profitability and market power of
commercial banks that operated in Serbia and Montenegro, covering the period from
the first quarter of 2010 to last quarter of 2019. Determinants of profitability are
separated into internal and external. Selected ratios were used for market power.
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Sixteen panel regression model were used, eight for each country. The results indicate
that variations of return on assets and return on equity in Serbia can be explained by
the variations of the ratio of concentration and the results of banking sector in
Montenegro does not give enough argument to support such explanation.
López (2022) examined the “Effects of a negative interest rate policy in bank
profitability and risk taking: Evidence from European banks”, to evaluate the effect of
a negative interest rate policy (NIRP) on profitability and risk taking of the European
banking sector and whether this effect is differentiated according to the bank business
model. Using a dataset of 2596 banks from 29 European countries over the period
2011–2019 and applying a static modeling approach. The results indicate that the
implementation of NIRPs lowers the net interest margin and the return on assets of a
representative bank by 14.5 basis points and 18.5 basis points. Also conclude that a
decrease in the short-term interest rate lowers the net interest margin when interest
rates are already negative.
Shakya (2022) conducted a study on Liquidity and Profitability of the Selected Joint
Venture Banks, had set the following objectives:
To examine the comparative financial strengths and weakness of the selected
Banks.
To analyze the liquidity and profitability of sampled banks.
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1.7 Methodology
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Research method describes the methods and process applied in the entire study. In the
other words, research method is the systematic process to approach any research
problem and explore it objectively. Research method are the strategies, processes or
techniques utilized of the collection of data or evidence for analysis in order to
uncover new information or create better understanding of the topic. The rationale
behind the study is to evaluate and assess the Profitability position or performance of
bank Laxmi Sunrise bank Limited. Thus, this chapter includes those methods and
techniques used for finding out the required data. Hence this topic includes research
design, source of the data, population and sample, data collection tools and data
analysis tools.
source are mainly used to get the information related to the subject matter/topic.
Secondary data is a type of data that has already been published in books, newspapers,
magazines, journals, online portals etc. The sources of the data are collected from the
annual report of the Laxmi Sunrise bank Limited from FY 2021/22 to 2023/24.
i) Primary Data
The data, which are originally collected by an investigator or an agent for the first
time for the purpose of statistical enquiry, are known as primary data. The primary
data are collected personally through the questionnaires, observation and interviewing
method.
Financial Tools
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Financial Tools is the process of evaluating data using analytical and statistical tools
to discover useful information. In this report financial tools will be used to examine
the profitability ratios of the Laxmi Sunrise bank Limited. Following profitability
analysis ratios are used for the study:
Dividend per share (DPS) is the sum of declared dividends issued by a company for
every ordinary share outstanding. The figure is calculated by dividing the total
dividends paid out by a business, including interim dividends, over a period of
time by the number of outstanding shares issued. It is calculated by:
Net Interest Margin (NIM) is a profitability ratio that measures how well a
organization is making investment decisions by comparing the income, expenses, and
debt of these investments. The NIM ratio measures the profit a company makes on its
investing activities as a percentage of total investing assets. Banks and other financial
institutions typically use this ratio to analyze their investment decisions and track the
profitability of their lending operations. This way they can adjust their lending
practices to maximize profitability. It can be calculated by:
Statistical Tools
The analysis identifies and interprets the relationship between the two or more
variables mean, standard deviation etc.
Statistical tools are the measures or the instruments to analyze the collected data from
the different sources. In statistics, there are numerous statistical tools to analyze the
data of various natures. In this study, the following statistical tools have been used to
analyze the data.
i) Mean
Arithmetic mean is the most popular and frequently used measure of central tendency.
It is the sum of all observations to the number of observations. Arithmetic mean of a
given set of observations is their sum divided by the number of observations (Silwal,
2017).
Mean (π) =
first the arithmetic average is calculated and the deviation of various items from the
arithmetic average are squared.
S.D ( ) =
CHAPTER-II
RESULTS AND ANALYSIS
This topic is very important for the research. This part of the study focuses n
presentation and analysis of the data. The result of the secondary data is discusses in
this section regarding the profitability analysis of the Laxmi Sunrise bank Limited.
The discussion and analysis of the result is given below:
previous years. This trend suggests that after a temporary setback, the bank managed
to enhance its operational efficiency and generate higher returns from its assets.
The table 2 presents the Return on Common Equity (ROE) of Laxmi Sunrise Bank
Limited over three fiscal years from 2021/22 to 2023/24. ROE measures the bank's
ability to generate profit from its shareholders' equity. In 2021/22, the ROE was
relatively low at 1.04%, indicating modest returns for equity investors. However,
there was a significant increase in 2022/23, with ROE rising sharply to 5.98%,
suggesting improved profitability and more efficient use of shareholders’ funds. This
upward trend continued dramatically in 2023/24, where ROE reached 19.07%,
reflecting a strong growth in the bank’s capacity to generate returns for its equity
holders, highlighting enhanced operational performance and financial strength over
the period.
lower earnings or a higher number of outstanding shares. The figure clearly shows
how the bank’s per-share profitability fluctuated across the period.
Figure 4 shows the Dividend Per Share (DPS) of Laxmi Sunrise Bank Limited over
three years. In 2021/22, the bank distributed a healthy dividend of NPR 8.29 per
share. However, in 2022/23, the DPS dropped significantly to just NPR 1.73,
reflecting a more conservative payout policy or lower distributable profit. In 2023/24,
the DPS partially recovered to NPR 5.56, indicating a moderate return to
shareholders. This figure highlights the changes in the bank’s dividend distribution
strategy across the years.
Table 7 shows the Earnings Yield Ratio of Laxmi Sunrise Bank Limited over three
consecutive fiscal years. In 2021/22, the earnings yield stood at 7.64%, reflecting a
moderate return for investors based on the bank’s earnings relative to its share price.
The ratio increased significantly to 9.82% in 2022/23, indicating improved
profitability or a lower market price, both of which make the stock more attractive to
value-focused investors. However, in 2023/24, the earnings yield dropped to 6.06%,
suggesting either a decline in earnings or a rise in the bank’s market valuation,
potentially signaling reduced investor returns or increased investor optimism despite
lower earnings. This fluctuation highlights changes in market perception and the
bank’s profitability over the period.
Table 9
Consolidated Ratios of Laxmi Sunrise bank Limited
Ratios
2021/22 2022/23 2023/24
Year
Return on Assets 1.13 0.64 2.58
Return on common equity 1.04 5.98 19.07
Earnings per share 16.03 19.64 12.86
Dividend per share 8.29 1.73 5.56
Market value per share 210 216.7 212.30
Price earnings ratio 9.64 10.18 16.51
Earning yield 7.64 9.82 6.06
Net Interest margin 2.77 1.89 4.53
Return on Common Equity (ROE) indicate fluctuating efficiency, with ROA rising
from 1.13% in 2021/22 to 2.58% in 2023/24, and ROE increasing sharply from 1.04%
to 19.07%, suggesting improved management of equity. Earnings per Share (EPS)
shows inconsistency, peaking at 19.64 in 2022/23 before declining to 12.86.
Similarly, Dividend per Share (DPS) dropped drastically in 2022/23 to 1.73 but
recovered slightly in 2023/24 to 5.56, indicating variable dividend policy. The Market
Value per Share remained relatively stable, with slight changes year-over-year. The
Price-to-Earnings (P/E) Ratio increased from 9.64 to 16.51, implying higher investor
expectations or overvaluation. Conversely, the Earnings Yield, which is inversely
related to P/E, decreased in 2023/24, showing lower returns per rupee invested.
Lastly, the Net Interest Margin (NIM), a key profitability indicator, dropped in
2022/23 but rebounded strongly in 2023/24 to 4.53%, reflecting improved efficiency
in interest-generating operations. Overall, the table reflects a dynamic financial
performance with significant shifts in profitability and market perception over the
three-year period.
Market value per share remained relatively stable - fluctuated minimally between
NPR 210-216.7 across the three years with very low coefficient of variation
(1.31%), indicating consistent market confidence.
Price-to-Earnings ratio increased significantly - rose from 9.64 in 2021/22 to
16.51 in 2023/24, suggesting growing investor optimism and willingness to pay
premium for future earnings.
Earnings yield showed inverse relationship to P/E ratio - peaked at 9.82% in
2022/23 but declined to 6.06% in 2023/24, indicating reduced current returns as
market expectations increased.
Net Interest Margin (NIM) demonstrated strong recovery - dropped from 2.77%
in 2021/22 to 1.89% in 2022/23, then surged to 4.53% in 2023/24, showing
improved efficiency in core banking operations.
Significant changes in asset structure - total assets varied considerably,
particularly in 2023/24 where assets were substantially lower, suggesting possible
restructuring or business model changes.
High variability across most financial metrics - most ratios showed coefficients of
variation above 35%, indicating significant fluctuations in bank performance
year-over-year.
Strong performance recovery in 2023/24 - most profitability indicators improved
significantly in the final year, suggesting effective management interventions or
favorable market conditions.
Inconsistent dividend policy and earnings distribution - wide variations in
dividend payments and earnings per share indicate potential challenges in
maintaining steady returns to shareholders.
Growing market confidence despite operational volatility - stable share prices and
increasing P/E ratios suggest investor optimism about future prospects despite
historical performance fluctuations.
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CHAPTER-III
SUMMARY AND CONCLUSION
3.1 Summary
This study examined the profitability analysis of Laxmi Sunrise Bank Limited
through a comprehensive evaluation of key financial performance indicators over the
period from 2021/22 to 2023/24. The theoretical framework for this analysis was
grounded in fundamental banking profitability metrics that provide insights into
operational efficiency, shareholder value creation, and market performance.
The analysis employed eight critical financial ratios as primary indicators of bank
performance. Return on Assets (ROA) and Return on Equity (ROE) served as core
profitability measures, evaluating the bank's efficiency in utilizing its total assets and
shareholders' equity respectively. These ratios are fundamental in assessing
management's effectiveness in generating profits from available resources and provide
crucial insights into operational performance trends.
Earnings Per Share (EPS) and Dividend Per Share (DPS) were analyzed to understand
the bank's capacity to generate returns for shareholders and its dividend distribution
policy. These metrics are essential for evaluating shareholder value creation and the
sustainability of the bank's earnings distribution strategy. The study revealed
significant fluctuations in both measures, indicating variability in the bank's earnings
management and dividend policy over the analysis period.
Net Interest Margin (NIM) was analyzed as a key operational efficiency indicator,
measuring the bank's ability to generate interest income from its asset base. This ratio
is particularly crucial for commercial banks as it reflects the core profitability of
banking operations through the spread between interest earned and interest paid.
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The study utilized descriptive statistical measures including mean, standard deviation,
and coefficient of variation to analyze the consistency and variability of performance
indicators. These statistical tools provided insights into the stability of the bank's
performance and helped identify periods of significant fluctuation.
The findings revealed that Laxmi Sunrise Bank Limited experienced considerable
performance volatility during the study period, with 2022/23 representing a
challenging year followed by significant recovery in 2023/24. The bank demonstrated
particular strength in equity returns and net interest margin improvement, while
showing inconsistency in earnings per share and dividend distribution. Despite
operational fluctuations, market indicators suggested sustained investor confidence in
the bank's long-term prospects.
3.2 Conclusion
The profitability analysis of Laxmi Sunrise Bank Limited demonstrates the critical
importance of comprehensive financial ratio analysis in understanding banking sector
performance dynamics. This study validates the theoretical framework that
profitability assessment requires a multidimensional approach, examining various
indicators to gain meaningful insights into institutional financial health.
The study reinforces the theoretical principle that banking profitability is inherently
cyclical and subject to significant volatility due to external economic factors,
regulatory changes, and internal strategic decisions. The observed fluctuations align
with established banking theory regarding the sensitivity of financial institutions to
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The theoretical implications extend to dividend policy theory, where the observed
patterns support the signaling hypothesis that dividend distributions communicate
management confidence and financial stability to the market. The variability in
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dividend payments reflects the complex balance between retaining earnings for
growth and rewarding shareholders.