PROFITABILITY ANALYSIS OF HIMALAYAN BANK

LIMITED AND EVEREST BANK LIMITED

A Project Work Report

By

Kundan Jha

Exam Roll No:

T.U Registration No:

Model Multiple College

Group: Finance

Submitted to

The Faculty of Management

Tribhuvan University

Kathmandu

In Partial Fulfillment of Requirement of the Degree of

BACHELOR OF BUSINESS STUDIES (B.B.S)

Janakpur Dham, Nepal

February, 2025
 Declaration

I hereby declare that the project work in this thesis entitled "PROFITABILITY
ANALYSIS OF HIMALAYAN BANK AND EVEREST BANK LIMITED."
submitted to the Faculty of Management, Tribhuvan University, Kathmandu, is my
original work done on the partial fulfillment of the requirement for the award of the
degree of Bachelor of Business Studies (BBS). This work is done under the
supervision of Mr. Ravi Raj Sah faculty member of Model Multiple College,
Janakpur. This project work report has not been submitted to any other university or
institution for the award of any degree or diploma.

……………………………….

Kundan Jha

Date: February, 2025

ii
 Supervisor's Recommendation

This project work report entitled "PROFITABILITY ANALYSIS OF HIMALAYAN

BANK LIMITED AND EVEREST BANK LIMITED." submitted by Kundan Jha of
Model Multiple College, Janakpur is prepared under my supervision as per the
procedure and format requirements laid by Faculty of Management, Tribhuvan
University, as the partial fulfillment of the requirements for the award of the Bachelor
Degree of Business Studies (B.B.S). I, Therefore, recommend this report writing for
approval.

………………………………..

Mr. Ravi Raj Sah

Date: April, 2023

iii
 Endorsement

We hereby endorse the project work report entitled "PROFITABILITY ANALYSIS

OF HIMALAYAN BANK LTD. AND EVEREST BANK LTD." submitted by
Kundan Jha of Model Multiple College, Janakpur in partial fulfillment of the
requirements for award of Bachelor of Business Studies (B.B.S) for external
evaluation.

……………………………….. ..
………………………….

Mr. Mohan Kumar Karn Mr. Birendra Sah

Chairman, Research Committee Campus Chief

Date: April, 2023 Date: April, 2023

iv
 Acknowledgment

This report has been prepared as the partial fulfillment for the requirement of
Bachelor of Business Studies (BBS) 4 th year program. This report “PROFITABILITY
ANALYSIS OF HIMALAYAN BANK LTD. AND EVEREST BANK LTD” under
“Financial Performance” is sectoral area management. I am benefited by this field
work report assignment as a practical knowledge in the area of commerce. The
satisfaction and euphoria that accompanies the successful completion of any task
would be incomplete without mentioning the names of the people who made it
possible, whose constant guidance and encouragement crown all the efforts with
success. I owe a debt of gratitude to all of them, who were so generous with their time
and expertise.

I am highly intended and extremely thankful to my respected teacher Mr. Narayan

Paudel, whose internal and external guidance was a constant source of guidance. I
thank everybody who helped directly or indirectly in completing the project that will
go a long way in my career; the project is really knowledgeable and memorable one,

Beyond all I would like to extend my gratitude to my family and friends who have
been a regular source of inspiration.

Thank You,
Kundan Jha
Model Multiple College

v
 Table of Contents

Title page…………………………………………………………………………………………
i
Declaration……………………………………………………………………………………..ii
Supervisor’s Recommendation………………………………………………………………iii
Endorsement …………………………………………………………………………………..iv
Acknowledgement………………………………………………………………………………v
Table of content ……………………………………………………………………………….vi
List of Table ………………………………………………………………………………….viii
List of Figure …………………………………………………………………………………..ix
Abbreviations
………………………………………………………………………………….

x
CHAPTER I: INTRODUCTION............................................................1
Background of the Study...........................................................................................1
Profile of the Organization........................................................................................3
Statement of the Problem...........................................................................................5
Objectives of the Study..............................................................................................6
Rationale of the Study...............................................................................................6
Review of Literature..................................................................................................7
Research Methods....................................................................................................11
Limitation of the Study............................................................................................16
CHAPTER II: RESULTS AND FINDINGS........................................17
Data Presentation.....................................................................................................17
Analysis of Result....................................................................................................17
Findings...................................................................................................................22
CHAPTER III: SUMMARY AND CONCLUSION...........................23
Summary..................................................................................................................23
Conclusions..............................................................................................................23
BIBLIOGRAPHY..................................................................................25
APPENDICES........................................................................................26

vi
 List of Tables

Table Title Page

Table 1: Net Profit Margin...........................................................................................18

Table 2: Return on Assets............................................................................................19

Table 3: Return on Equity............................................................................................21

Table 4: Calculation of Mean, S.D and C.V on Net Profit Margin..............................26

Table 5: Calculation of Mean, S.D and C.V on Return on Assets...............................27

Table 6: Calculation of Mean, S.D and C.V on Return on Equity...............................28

vii
 Table of Figures

Figure Title Page

Figure1: Net Profit Margin...........................................................................................18

Figure2: Return on Assets............................................................................................20

Figure3: Return on Equity............................................................................................21

Figure4: Statement of Profit or Loss of EBL...............................................................29

Figure5: Statement of Comprehensive Income of EBL ..............................................30

Figure6: Statement of Financial Position of HBL........................................................31

Figure7: Statement of Profit or Loss of HBL...............................................................32

viii
 Abbreviations

ATM: Automated Teller Machine

BAFIA: Bank and Financial Institution Act

BBS: Bachelor of Business Studies

BLB: Branches less Banking

CA: Company Act

EBL: Everest Bank Limited

FIG: Figure

FY: Fiscal Year

HBL: Himalayan Bank Limited

LTD: Limited

NIC: Nepal Industrial and Commercial

NRN: Non-Resident Nepalese

ROA: Return on Assets

ROE: Return on equity

SWIFT: Society for Worldwide Inter-bank Financial Telecommunication

TU: Tribhuvan University

ix
 1

CHAPTER I

INTRODUCTION

Background of the Study

Every firm is most concerned with its profitability. One of the most frequently used
tools of financial ratio analysis 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. If a small business has outside
investors who have put their own money into the company, the primary owner
certainly has to show profitability to those equity investors. Profitability ratios show a
company's overall efficiency and performance.
The word bank comes from an Italian word 'banco', meaning a bench, since Italian
merchants in the Renaissance made deals to borrow and lend money beside a bench.
Generally, Bank is an Institution which accepts deposits, disperses business loans and
offers related services. Bank is an organization which deals with financial transactions
and collects deposits from those persons who have surplus money and lend it to those
persons who need money for different purpose. In an economy, the bank is regarded
as one of the economic backbones of the country for its economic development. The
basic function of bank is collecting deposit and granting the loans. It involves in credit
creation that is related to creation of deposit and loan. 'In the economy' the bank
collects small saving of general people, accumulates it and lends the same to the
productive sectors of the society for the overall economic development.

A bank is a financial institution that accepts deposits from public and creates credit. It
is a financial intermediary for the safeguarding, transferring, exchanging, or lending
of money. A primary role of bank is connecting those with funds, such as investors
and depositors, to those seeking funds, such as individuals or businesses needing
loans Banks plays an important role in economic growth by providing various
banking
services to the rest of the economy. First of all, bank stimulates the habit of savings
among people by the security and interest they offer. Today, every common man has
 2

option to park his earned savings under different saving schemes of the bank.
Secondly, banking promotes investment. Banks either invests directly or bank
increases the transaction capacity of the customers by advancing loans when they
require for additional funds to finance their expanded program of business. Thirdly, it
is most through banks that foreign trade is carried on. Whether we export or import, it
is through banks that money is transferred from one country to another. For example,
bills of exchange and letters of credit are the regular ways banks use to transfer
money. Last but not the least, banks provide payment and settlement services which
are necessary for households, business and other financial institutions to settle their
day-to-day transactions. Although banks create to new wealth but their borrowing,
lending and related activities facilitate the process of production, distribution,
exchange and consumption of wealth. In this way, they become very effective
partners in the process of economic development. The banks are mobilizing the
savings of the people for the investment purposes. The savings are encouraged and
saving rates increases. If there would be no banks then a great portion of a capital of
the country would remain idle. A bank as a matter of fact is just like a heart in the
economic structure and the capital provided by it is like a blood in it.
Generally, the word Bank is used in the sense of a Commercial Bank. Commercial
Bank is the financial institutions which accept deposits from general public and
business institutions, and channel those deposits into productive sectors like business
and consumer lending. In today’s globalized technological context, Nepalese
commercial bank is confined not only to traditional banking of accepting deposits and
lending funds, but has diversified itself in e-banking. According to Commercial Bank
Act 2031, ‘A commercial bank means bank which deals in exchanging currency,
accepting deposit, giving loans and doing commercial transactions.’
Commercial Banks are profit oriented financial institutions, involved in operating
commercial transactions like lending, remittance and trade finance business.
Commercial Bank channelizes its funds in profitable sector as loans and advances by
keeping certain portion of the funds as liquid assets in order to meet the withdrawal
demands of its customers. A Commercial Bank holds liquid assets balance in the form
of currency, bank balance, marketable securities and other assets that are readily
convertible to cash. Banks are principally engaged in providing the services of
intermediation by directing flows of funds from lenders to borrowers.
 3

To determine the efficiency of bank maximum returns is not sufficient, profitability

analysis is also important for banks. Profitability analysis shows the ratio between
profit and investment which helps to motivate the organization to perform well.

Profile of the Organization

The Nepal Rastra Bank was established on April 26, 1956 A.D. (Baisakh 14, 2013
B.S.) under the Nepal Rastra Bank Act 1955 AD to regulate and systematize domestic
financial sectors. As the central bank of Nepal, it is the monetary, supervisory and
regulatory body of all the commercial banks, financial institutions and micro-finances.
The head office is located in Baluwatar, Kathmandu and it has seven district offices,
located at Biratnagar, Janakpur, Birgunj, Pokhara, Siddharthanagar, Nepalgunj, and
Dhangadhi..It supervises the commercial banks, development banks, finance
companies and microfinance institutions in Nepal and guides monetary policy. Nepal
Rastra Bank also oversees foreign exchange rates and the country's foreign exchange
reserves. Those banks are considered second types of banks. These banks are
established to improve people's economic welfare and facility, to provide loan to the
agriculture, industry and commerce and to offer banking services to the people and
the country. The commercial banks are performing all kind of banking functions as
accepting deposits, advancing loans, credit creation and agency functions. Generally,
the commercial banks are opened by any name in every country of the world.

At the end of Ashad 2079, there are currently 24 'A' class Commercial Bank, 17 'B'
class Development Bank, 17 'C' class Finance Companies, 63 'D' class Microfinance
companies and 1 Infrastructure Development bank. Altogether, there are 122 Bank
and Financial institutions currently operating in Nepal.

Himalayan Bank

It was established in joint venture with 'Habib Bank Limited' of Pakistan. Despite the
tough competition in the Nepalese Banking sector, Himalayan Bank has been able to
maintain a steady growth in the primary banking activities- Loans and Deposits.
Legacy of Himalayan Bank lives on in an institution that's known throughout Nepal
for its innovative approaches to merchandising and customer service. Products such as
Premium Savings Account, HBL Proprietary Card and Millionaire Deposit Scheme
besides services such as ATMs and Tele-banking were first introduced by HBL.
 4

Himalayan Bank Limited holds of a vision to become a Leading Bank of the country
by providing premium products and services to the customers, thus ensuring attractive
and substantial returns to the stakeholders of the Bank. The bank has 71 Branches,
121 ATM Counters & 4 Extension Counters across the country making it a very
efficient and accessible bank for its customers, anytime, anywhere.

Vision
Himalayan Bank Limited holds of a vision to become a Leading Bank of the
country by providing premium products and services to the customers, thus
ensuring attractive and substantial returns to the stakeholders of the Bank.

Mission
The Bank’s mission is to become preferred provider of quality financial services
in the country. There are two components in the mission of the Bank; Preferred
Provider and Quality Financial Services; therefore, we at HBL believe that the
mission will be accomplished only by satisfying these two important components
with the Customer at focus. The Bank always strives positioning itself in the
hearts and minds of the customers.

Everest Bank

It was established in 1994 in joint venture with 'Punjab National Bank' (PNB). The
Bank has been one of the leading banks of the country and has been catering its
services to various segments of the country. With clients from all walks of life, the
Bank has helped the nation to develop corporately, agriculturally & industrially.
Everest Bank Limited (EBL) provides customer-friendly services through its wide
Network connected through ABBS system, which enables customers for operational
transactions from any branches. The bank has 124 Branches, 160 ATM Counters, 32
Revenue Collection Counters and 3 Extension Counters across the country making it a
very efficient and accessible bank for its customers, anytime, anywhere.

Vision
To be a Leading Commercial Bank with Pan Nepal presence and become a
household name, providing wide range of financial products and services less than
one roof.

Mission
 5

Growth through Banking for all. therefore, we at HBL believe that the mission
will be accomplished only by satisfying these two important components with the
Customer at focus. The Bank always strives positioning itself in the hearts and
minds of the customers. There are two components in the mission of the Bank;
Preferred Provider and Quality Financial Services

Statement of the Problem

A problem statement is a concise description of an issue to be addressed or a

condition to be improved upon. It identifies the gap between the current state
(problem) and desired state (goal) of process or product. A statement of the problems
is used in research work as a claim that outlines the problem addressed by study. The
statement of the problems briefly addresses the question: What is the problem that the
research will address? The main purpose of the problem is to identify and explain the
problem.
On the above regard, following are the research question relating to the profitability
analysis of the banks:
1. What is the profitability position of HBL and EBL
2. How are the profitability ratios of the banks
3. Can the ratio establish the relation between net profit and total Assets
 6

Objectives of the Study

A study is conducted and report is prepared with certain objectives keeping in mind.
In the absence of specific objective, the study loss its value, the general purpose of the
study is to discuss, examine and evaluate the profitability position of Himalayan Bank
Limited and Everest Bank Limited. Thus, this study has been conducted to achieve
the following objectives:

1. To find out the profitability position of HBL and EBL.

2. To analyze profitability ratios of the banks.
3. To ascertain Total Assets and Total Liabilities

Rationale of the Study

The profit is necessary element of every business organization whether it is service

oriented or product oriented. So, every organization should systematically plan for
profit making. Profit plays a vital role in growth and development of an organization.
It also helps to achieve organizational objectives easily. Therefore, this study will be
useful for those who want to know the profitability position tool of the organization.
Also, the report of this study can be used as a source of reference for further studies
and it can be utilized by every institutional body/other as a supporting document in
their respective areas The study of profitability analysis of HBL and EBL helps to
find out the profitability position or performance of the bank. This study helps the
investor to find out the best investment strategy to invest his surplus wealth. Every
organization has to analyze its financial performance in their 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 shareholder's wealth. The study ponders to find out whether HBL and
EBL are alert or not in this regard.
This study will be helpful to enhance the financial performance of concerned
organizations. This study will be usable and valuable for academicians, students,
teachers and investors in the field 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.
 7

The main significance of this study are as follows:

1. The study helps the public to have information about the profitability
performance of the banks.
2. The study helps in analyzing the efficiency of the banks in terms of their
profitability.
3. The study assists future researchers to know how the commercial banks of
Nepal manage their profitability.

Review of Literature

Review of literature refers to the study of previous research works and books with the
purpose of knowing the research issue in detail and find out the appropriate
methodology to solve the issue. Review of literature is a basis for research in nearly
every academic concerning the research topic by himself/herself. It helps to
researchers to know what has been found about the topic and what news contribution
can be made or necessary. It supports the researcher to explore the relevant and true
facts for the reporting purpose in the field study. The review of literature is a very
important aspect at the research. This Chapter highlights upon the existing literature.
For this; several books, dissertation, reports, handout and articles published in journal
and newspaper are reviewed.

Review of literature is the process of locating, obtaining, reading, evaluating, learning

and understanding the concept of the related topic. After selecting the topic of the
research, researcher should study different materials like Books, Journals, Magazines,
Articles etc. to collect the information about the subject matter of the study. It means
to collect the necessary information about the research topic through the different
sources. The purpose of literature review is, thus, to find out what research studies
have been conducted in one’s chosen field of study, and what remains to be done.
This chapter devotes to review some of the existing literature regarding the
Profitability concepts. In this regard, various books, journals and articles concerned to
this topic have been reviewed. The first part of the chapter deals with the conceptual
framework of the study and the second part is concern with the review of previous
articles, journals and dissertation.
 8

Conceptual Review

Conceptual review provides the fundamental theoretical framework and foundation to

the present study. For this, various books, research paper, articles etc. dealing with
theoretical aspect of profitability is taken into consideration.

Central Bank
Central bank is a supreme bank of a country. It is the apex bank in a country,
which control, regulates and supervises the monetary and banking structure. In
case in Nepal, Nepal Rastra Bank is the central bank, which was established in
1957 under the Nepal Rastra Bank Act 1956. It is established under the complete
ownership of the government therefore, the management of central bank is also
control by the government financial institution in every sovereign. It regulation
and issues currency performs agency and banking services to the government and
manages the foreign currency reserve of the whole country. It also works as the
lender of the last resort, clearing house services and control credit. It is established
to develop banking though strategy on its own to issue the notes, to control the
credit, to act as the bank of banks, in each country.
Commercial Bank
Those banks are considered second types of banks. These banks are established to
improve people's economic welfare and facility, to provide loan to the agriculture,
industry and commerce and to offer banking services to the people and the
country. The commercial banks are performing all kind of banking functions as
accepting deposits, advancing loans, credit creation and agency functions.
Generally, the commercial banks are opened by any name in every country of the
world.
Profitability
Profitability means ability to make profit from all the business activities of an
organization, company, firm, or an enterprise. It shows how efficiently the
management can make profit by using all the resources available in the market.
According to Harward & Upton, "profitability is the ability of a given investment
to earn a return from its use."
Profitability serves as a measurement of efficiency, and a guide to further
improvement. It is critical in determining a firm's overall health. In terms of
 9

revenue and profit it can be defined as the capacity to generate profit from all the
aspect of a business; illustration how proficient the management is in yielding
revenue by employing available resource.

Review of Previous Work

This part consists of a review of past studies conducted by other researcher, which are
relevant to the topic.

Dahal, P. (2018) "Sales and profitability analysis of dairy products" with the
objectives:

1. To find out the dairy product production of dairy product.

2. To find out the trend of production of the dairy product in the past few years.

And his findings were:

1. Mean of company is 9669.64, 4529.91, 3008.69 and 80036.88 from 2070/071

to 2073/074 respectively.
2. ROE of company is 0.26, 0.40, 0.02 and 0.42 from 2070/071 to 2073/074
respectively.

Muktan, T (2021) “Profitability Analysis of Agriculture development bank limited

and NABIL Bank Limited” The objective of the study is:
 To find out the profitability of the agriculture development bank and
Nabil bank Limited.

The major findings of the study are,

 The growth ratio of total deposits of ADBL and NABIL are increasing
every year. Out of two banks, growth rate of total deposits of Nabil is
greater than ADBL. It shows that Nabil has increased its deposit
collection capacity.
 Capital base of NABIL has greater than ADBL. It can be said that
NABIL has been able to generate high volume of profit from operation
than ADBL.

Shrestha, S (2019) “Profitability analysis of citizen Bank Limited” The objective of

the study are :-
 10

 To understand the investment in priority sectors of citizens bank

limited.
 To understand the impact of difference in investment sector on
profitability.

The major findings of the study are,

 Return on assets has been fluctuating throughout the duration of

analysis
 Return on equity is in increasing trend throughout the duration of
analysis.

Research Gap

Research gap refers to the untouched area of contradiction of the previous research
work. It indicates the difference between previous and present day in the same field. It
is important to find out the things that have been changed in same field. Thus, it is
necessary for a researcher to find out the research gap. The review of above relevant
literature has helped to know about the fundamental understanding and knowledge,
which is needed to make study meaningful.

Research gap refers to difference in result between previous and present study in
similar field. In other words, a topic or area for which missing or inadequate
information limits the ability of reviewers to reach a conclusion for a given question .
So, to find the gap we need to study and analyze the study conducted on same topic in
different time period. There have been numerous studies conducted on the field of
working capital analysis but this report will help to find out reliable and current
results.

This study will help to describe about the profitability condition of the HBL and
EBL. There are various research articles that have been published related to financial
aspects of commercial banks but there are very few researchers available on
"Profitability analysis of EBL and HBL". Therefore, this research is focused in this
particular area. This study will be useful for the interested people, parties, scholars,
professors, student, businessman and government for academic as well as policy
purpose.
 11

Research Methods

Research methodology refers to the various sequential steps to be adopted by a

researcher in studying a problem with certain objective in view. It is the research
method used to test the hypothesis. It describes the method and process applied in the
entire subject of the study.

Qualitive Research

Qualitative research is an inquiry process of understanding based on distinct

methodological traditional of inquiry that explore a social or human problem. The
various types of qualitative research as follow:

 Analytical Method: The facts and information, which are really available, is
used and analyzed by the research to make a critical evolution of the material.
 Descriptive method: This research includes survey and facts finding enquires
of different kinds. This method does the literature review to conduct research
are survey method of all kinds, including comparative and co-relational
method.

Quantitative Research:

If a researcher used quantitative method to analyze information and data is called

quantitative research. This research is used to describe objective data and forecasting.
This method is also suitable for survey empirical research. There can be used
mathematic tools economical and statistical tools to measure data information.

Research Design

Research design is the overall plan of completing the research work. It guides the
researcher to carry out the research work effectively from the very beginning till the
end. It is simply the framework or plan for a study that guides the collection and
analysis of data. It helps to allocate the limited resources by posing crucial choices in
methodology. It helps to obtain answers to the research questions. It cycles from
problem selection, data collection, measurement, analysis and selection of method of
analysis of data, draw conclusions and generalization of findings. To achieve the
 12

objective of the study, analytical and descriptive research designs have been used.
Some financial and statistical tools have been used to examine facts and descriptive
techniques have been adopted to evaluate profitability analysis of the HBL and EBL.

Population

Population refers to the entire collection of all observation of interest i.e. people,
objects or events as defined by the researcher. A researcher must specifically define
the target population or the entire group on which they want to make the judgment.
Among different financial institution of Nepal, 21 'A' class banks are the population
of this study.

Sample

The study of the universe or entire population is costly and time consuming. Thus, to
make the study economic in operation and easy, representative portion of the
population is selected for the study that is known as sample. Therefore, from among
21 'A' class commercial banks, Himalayan Bank Limited and Everest Bank Limited
are the sample for the study.

Method of Data Collection

This study is conducted on the basis of secondary data. Secondary resources of data
have been used to collect the information about banks. Much information such as the
past financial data of the HBL and EBL, their trend of profitability, etc has been
collected from the annual financial reports of the banks. The general information and
background of the banks have been collected through banks' prospectus and their
official websites. Similarly, various data and information have been collected from
the economic journals, periodic bulletins, magazines and others published and
unpublished reports and documents from various sources. All the secondary data are
compiled, processed and tabulated in the time series as per the needs and objectives.
Also, as for the reliability of data provided by the banks and other sources, they were
compiled in the annual reports of auditors. Data are the fact and figure that have no
meaning without a context. Data can be any alphanumeric characters i.e. test, number,
symbol, etc. there are 2 types of data, they are:

I. Primary data
II. Secondary data.
 13

Primary data: It is a first-hand data which was collected by researcher for

international purpose. The researcher collects primary data based on field work
study. There can be used personal interview, telephone, observation and
questioner to collected data and information.

Secondary data: it is second hand data. A researcher collects this data from
published and unpublished sources, which was already collected by other person
or researcher for their previous and personal purpose. This study is mainly based
on secondary data, which is provided by the bank. The sluice of data is published
annual report.

Methods of Data Analysis

Various statistical and financial tools are used in this study. Wide varieties of
methodology have been applied according to the reliability and consistency of data.
Before using the analytical tools to compare the results, the data containing in the
financial statement have been grouped and re-arranged so as to make the comparison
easy. Data are collected from the various sources for the purpose of research and they
are then presented and analyzed which is the core part of the research work. The
collected data are first presented in a systematic manner and are then analyzed by
different financial and statistical tools to achieve the research objectives. Besides,
some graph, charts and tables have been presented to analyze and interpret the finding
of the study. The applied tools are:

Financial Tools

A financial tool helps to analyze the financial strength and weakness of the firm.
Financial ratio is the mathematical relationship between two accounting figures. Ratio
analysis is one of the important financial tools that have been used in the study. Ratio
analysis is a part of the whole process of analysis of financial statements of any
business or industrial concern specially to take output and credit decision. Even
though, there are many ratios to analyze and interpret the financial statement, only
those ratios are calculated and interpreted that are related to this study. The following
types of ratios have been used in this study:
 14

Profitability Ratio

Profitability ratios are a class of financial metrics that are used to assess a business's
ability to generate earning relative to its revenue, operation costs, balance sheet assets,
and shareholders' equity over time, using data from a specific point in time.

The following ratios are developed under the profitability ratio to identity the
profitability position:

Net Profit Margin

Profit margin is a measure of profitability. It is calculated by finding the profit as a

percentage of the revenue. There are 3 types of profit margins: gross profit margin,
operating profit margin and net profit margin. Gross Profit Margin is calculated as
gross profit divided by net sales. Profit margin is an indicator of a company's pricing
strategies and how well it controls costs. Differences in competitive strategy and
product mix cause the profit margin to vary among different companies.
NetProfit
Net Profit Margin =
Revenue

Return on Equity

Return on equity (ROE) is a measure of financial performance calculated by dividing

net income by shareholders' equity. Because shareholders' equity is equal to a
company's assets minus its debt, ROE is considered the return on net assets. Return
on equity signifies how good the company is in generating returns on the investment
it received from its shareholders. While average ratios, as well as those considered
“good” and “bad”, can vary substantially from sector to sector, a return on equity
ratio of 15% to 20% is usually considered good.
NetProfit
Return on Equity (ROE) = '
Shareholder sCapital

Return on Assets

The return on assets shows the percentage of how profitable a company's assets are in
generating revenue. A ROA of over 5% is generally considered good and over 20%
excellent. However, ROAs should always be compared amongst firms in the same
sector.
 15

NetProfit
Return on assets (ROA) =
TotalAssets
 16

Statistical Tools

For supporting the study, statistical tool such as Arithmetic Mean, Standard
Deviation, Coefficient of variation (C.V.) and Trend Analysis are used in the study.

Arithmetic Mean

Arithmetic Mean (Average) is the sum of collection of numbers divided by the

count of numbers in the collection. The collection is often a set of result of an
experiment or an observation study, or frequently a set result from a survey. It is
an important measure of central tendency. It is calculated as:

∑X
Arithmetic Mean (x̄ ) =
N

Where,

x̄ = Arithmetic Mean

N = Number of observation

∑X = Sum of observation

X= Data

Standard Deviation

Standard deviation is a measure that is used to quantify the amount of variation or

dispersion of a set of data values. It is an important measurement of dispersion. A
low standard deviation indicate that the data points tend to be close to the mean
(also called the expected value) of the set, while a high standard deviation
indicates that the data points are spread out over a wider range of values. It is
denoted by a Greek letter "σ " Sigma and is calculated as

Standard Deviation (S.D.) = √∑ ( X− X ) 2

Where;

x̄ = Arithmetic Mean

N = Number of observation
 17

X = Data

Coefficient of Variation

Coefficient of Variation (C.V) is a standardize measurement of dispersion of a

profitability distribution or frequency distribution. It is defined as the ratio of the
standard deviation to the mean. It is calculated by dividing standard deviation by
the mean which is shown below:

Coefficient of Variation (C.V.) = σ/x̄

Where;

x̄ = Arithmetic Mean

σ = Standard deviation

Limitation of the Study

There are some limitations of the study because this study is done only for the partial
fulfillment of Bachelor of Business Studies (BBS). The limitations of the study are
concerned with inadequate coverage of the industry, reliability of the data and some
other variables. The study is based on the secondary data. Therefore, the data
collected may not be as reliable as the primary data. The specific limitations of this
study are as follow:

The study has collected the information of the banks through website of the bank

1. The information collected is based on the data of past 5 years only.

2. The study is not able to collect information from top-level staffs.
3. The study does not consider the other areas such as liquidity, debt
management, capital budgeting, dividend policy etc.
 18

CHAPTER II

RESULTS AND FINDINGS

Data Presentation

The fundamental objective of this chapter is to systematically analyze and evaluate

the collected information or data and converted into an understandable form. This
chapter helps to see the relationship between variables and take essential decision.
In this section, raw and unprocessed data are collected from various sources and are
presented in a systematic and understandable form using various financial and
statistical tools as mentioned in the previous chapter i.e. methodology of the study .
The analysis of data consists of organization, tabulation and graphical representation
of profitability condition of the bank.

Analysis of Result

The above presented data are analyzed by using mathematical tools, they are given
below:

Net profit margin

The net profit margin is equal to how much net income or profit is generated as a
percentage of revenue. Net profit margin is the ratio of net profits to revenues for a
company or business segment. Net profit margin is typically expressed as percentage
but can also be represented in decimal form. This ratio is calculated by:

NetProfit
Net Profit Margin =
Revenue
 19

Table 1

Net Profit Margin (Rs. In ‘’00 Crores)

Fiscal Himalayan Bank Everest Bank
year Profit Revenue Profit Margin Profit Revenue Profit Margin

2074/75 2.281 5.374 42.46 2.118 4.800 44.12

2075/76 1.875 6.163 30.43 2.581 5.980 43.17
2076/77 2.763 6.73 41.06 3.054 6.996 43.65
2077/78 2.586 6.816 37.95 2.516 6.163 40.82
2078/79 2.367 7.439 31.82 2.479 6.481 38.25
Total 183.72 210.01
Average 36.39 40.20
S.D. 4.5 3.2
C.V (%) 12.24% 7.93%
Source: Annual Reports of Himalayan Bank and Everest Bank

50
45
40
35
30
25
20
15
10
5
0
2074/75 2075/76 2076/77 2077/78 2078/79

HBL EBL

Figure 1: Net Profit Margin

The above table 1 and figure 1 shows the Net profit margin of Himalayan Bank and
Everest Bank. From the analysis of table and figure it can conclude that Net profit
margin of Everest Bank is high and shows less fluctuation. The C.V indicates the
fluctuation of Net profit margin. The average net profit margin of Himalayan Bank is
 20

36.39%, C.V indicates that the net profit margin of Himalayan Bank fluctuates by
12.24% during five-year periods.

The average net profit margin of Everest Bank is 36.39% and the C.V indicates that
the net profit margin of Everest Bank fluctuates 7.93% during five-year periods.

Return on Assets (ROA)

Return on assets is an indicator of how profitable accompany is relative to its total

assets. ROA gives a manager, investor, or analyst an idea as to how efficient a
company’s management is at using to generate earning. It is calculated as:

NetProfit
ROA =
TotalAssets

Table 2

Return on Assets ratio (Rs. In ‘’00 Crores)

Fiscal Himalayan Bank Everest Bank
year Profit Assets ROA Profit Assets ROA

2074/75 1.875 118.388 1.58 2.581 144.81 1.78

2075/76 2.763 135.211 2.04 3.054 170.077 1.79
2076/77 2.586 158.250 1.63 2.516 185.023 1.36
2077/78 2.998 178.490 1.68 1.770 211.650 0.84
2078/79 2.367 220.078 1.68 2.479 225.381 0.84
Total 8.61 6.61
Average 1.61 1.37
S.D (σ) 0.30 0.37
C.V (%) 18.70% 27.20%
Source: Annual Report of Himalayan Bank and Everest Bank

Figure 2: Return on Assets

 21

2.5

1.5

0.5

0
2074/75 2075/76 2076/77 2077/78 2078/79

HBL EBL

The above table 2 and figure 2 shows the ROA of Himalayan Bank and Everest Bank.
The analysis of above figure shows that Himalayan Bank has stable rate of ROA
compared to Everest Bank.

The average ROA of Himalayan Bank is 1.61% and its C.V is 18.7% which indicates
that Himalayan Bank ROA fluctuates by 18.7% during five-year period.

The average ROA of Everest Bank is 1.37%, its C.V is 27.20%. which indicates that
ROA of Everest Bank fluctuates by 27.20% during five-year period.

Return on Equity (ROE)

Return on equity is a measure of financial performance calculated by dividing net

income by shareholder’s equity. ROE is considered a measure of how effectively
management is using a company’s assets to create profits. It is calculated as:

NetProfit
ROE = '
Shareholder sCapital

Table 3
 22

Return on Equity ratio (Rs. In ‘’00 Crores)

Fiscal Himalayan Bank Everest Bank

year Profit Equity ROE Profit Equity ROE

2074/75 1.875 14.138 13.27 2.581 16.134 16

2075/76 2.763 15.994 17.28 3.054 17.625 17.33
2076/77 2.586 17.589 14.71 2.516 18.637 13.50
2077/78 2.998 20.132 14.89 1.770 20.683 8.56
2078/79 2.367 22.010 10.76 2.479 22.795 10.88
Total 78.6 71.43
Average 14.18 13.25
S.D (σ) 2.14 3.22
C.V (%) 22.3% 24.87%
Source: Annual Report of Himalayan Bank and Everest Bank

20
18
16
14
12
10
8
6
4
2
0
2074/75 2075/76 2076/77 2077/78 2078/79

HBL EBL

Figure 4: Return on Equity

The above table 3 and figure 3 shows the ROE of Himalayan Bank and Everest Bank.
The analysis of figure shows Himalayan Bank has a higher average ROE with less
fluctuation as compared to Everest Bank.
 23

The average ROE of Himalayan Bank is 14.18% and its C.V is 22.3% which indicates
that Everest Bank ROE fluctuates by 22.3% during five year periods.

The average ROE of Everest Bank is 13.25% and its C.V is 24.87%, which indicates
that Everest Bank ROE fluctuates by 24.87% during five-year period.

Findings

 Analysis of Net profit margin shows that the average Net profit margin of
Himalayan Bank is 36.39% and average net profit margin of Everest Bank is
40.20%. This fact clarifies that Net profit margin of Everest Bank is higher
than Himalayan Bank.

 The C.V indicates the fluctuation of net profit during the study years. The C.V
regarding Net Profit Margin of Himalayan Bank is 12.24% and C.V of Everest
Bank is 7.93% which shows that the Net profit margin of Everest Bank is
more consistent compared to Himalayan Bank.

 Analysis of Return on Assets shows that the average ROA of Himalayan Bank
is 1.61% and average ROA of Everest Bank is 1.37% which shows that
Everest Bank has lower average ROA than Himalayan Bank.

 The C.V indicates the consistency of data. The C.V on ROA of Himalayan
Bank is 18.70% and of Everest Bank is 27.20%.This fact clarifies that the
Return on Assets of Everest Bank is less consistent compared to Himalayan
Bank.

 Analysis of Return on Equity shows that average ROE of Himalayan Bank is

14.18% and average ROE of Everest Bank is 13.25% which indicates that the
average ROE of Himalayan Bank is higher than Everest Bank. The C.V
indicates the consistency of data. The C.V on ROE of Himalayan Bank is
22.3%.and C.V on ROE of Everest Bank is 24.87%. This fact clarifies that the
Return on Equity of Everest Bank is less consistent than compared to
Himalayan Bank.
 24

CHAPTER III

SUMMARY AND CONCLUSION

Summary

Profitability is the ability of a company to use its resources to generate the revenues in
excess of its expenses. Profitability analysis measures the amount of profit earned due
to the efficiency of operation in a business.

In this chapter, the facts and results that we have found in the last two chapters have
been discovered. The first chapter is the introduction chapter in which general
introduction of the study has been given. The chapter include the background and
profile of the study, statement of problem, objective of study, significance of study,
review of literature, research methodology, limitation of the study and report
structure. Relevant review of literature has been made on the basis of theoretical
background of banking principles as well as previous reports. Appropriate
methodology has been used to analyze and evaluate the profitability of listed banks.

The second chapter deals with the results and findings of the study. In this chapter, the
collected data have been presented in an understandable form in table and figures as
they have been systematically analyzed and evaluated using various financial and
statistical tools.

Third chapter shows the summary and conclusion of whole research. In this chapter,
summary of study, conclusion of study, main findings and recommendation for future
studies have been included.

Conclusions

For the partial fulfillment of the requirements of degree of Bachelor of Business

Studies, I select to do report on “Comparative Profitability Analysis of Himalayan
Bank ltd and Everest Bank ltd”. Financial and statistical tools are used under this
study. Financial tools consist Net profit margin, Return on Assets (ROA) and Return
 25

on Equity (ROE). Similarly, statistical tools consist of Mean, Standard Deviation

(S.D) and coefficient of variance (C.V).

After the analysis of financial data of Himalayan Bank and Everest Bank, following
conclusion is made.

The average Net profit margin of Everest Bank is higher than Himalayan bank but the
risk (S.D) involved in Net profit margin is comparatively lower. The C.V indicates
that the Net profit margin of Himalayan Bank fluctuates more than Everest Bank.

The average ROA of HBL is higher than EBL Bank but the risk (S.D) on ROA of
EBL is higher than HBL. The C.V indicates that EBL ROA fluctuates more than
HBL.

The average ROE of HBL is higher than EBL but risk (S.D) on ROE of EBL is higher
than HBL. The C.V indicates that EBL ROE fluctuates more than the ROE of HBL.

From overall analysis, it can conclude that EBL performance is better as per Net
profit margin as it shows more consistency as well. However, when ROA and ROE
are taken into consideration then HBL shows far better performance with much lower
risk and better consistency. So overall it can be concluded from my research that the
performance of HBL is better than over the EBL.
 26

BIBLIOGRAPHY

Bajracharya, B. (2020). Business Statistics and Mathematics. Kathmandu: M.K.

Publisher and Distributors.

Bhattacharya, S., & John, D. (2018). Accountin for Management. kathmandu: Vikas
Publishing House Pvt. Ltd.

Chhetri, S. (2013.). Profitability Position of Nabil Bank Ltd. Faculty of Management,

TU.

Everest Bank Ltd. (2022). Annual Reports (from fiscal year 2074/75 to 2078/79).
Everest bank Ltd.

Hampton, & John, J. (1998). Financial Decision Making and Analysis. New Delhi:
Prontice.

Himalyan Bank Ltd. (2022). Annual Reports (from fiscal year 2074/75 to 2078/79).
Himalyan Bank Ltd.

J.L., B., & Howard, L. (1982). Management Accountig and Finance. London:
MacDonald and Evans Ltd.

joshi, A., & Raj, P. (2015). Research Methodology and Statistics. Kathmandu:
Buddha Academic Publishers and Distributors Pvt. Ltd.

Joshi, P. R. (2017). Research Methodology. Kathmandu: Buddha Academic

Publishers and Distributors Pvt. Ltd.

Kharel, S. (2018). Profit Planning of Commercial Banks in Nepal (A Comparative

Study of Everest Bank Limited, Nabil Bank Limited). Faculty of Management,
TU.

M., R., & Shrestha, S. (2006). Business Statistic and Mathematics. Kathmandu:
Manichood Prakasan Kathmandu.

Muktan, T. (2021). Profitability Analysis of Agriculture development bank limited

and NABIL Bank Limited. Faculty of Management, TU.

Munamkarmi, S. P. (2017). Management Accounting. Kathmandu: Buddha Academic

Enterprises Pvt. Ltd.

Shrestha, S. (2019). Profitability analysis of citizen Bank Limited. Faculty of

Management, TU.
 27

APPENDICES

Calculation of Mean, S.D and C.V on Net Profit Margin

Himalayan Bank = x

Everest Bank = y

Table 4

FiscalYear X ( x−x )2 y ( y− y )2

2074/75 30.43 35.522 43.17 8.82

2075/76 41.06 21.81 43.65 11.90

2076/77 37.95 2.434 40.82 0.3844

2077/78 40.69 18.49 35.11 25.91

2078/79 31.82 20.88 38.25 3.80

38.52 ΣX= Σ( x−x )2= ΣY= Σ( y− y )2= 50.82

181.95 99.14 201

 Calculation of mean
∑ x 181.95
x= = = 36.39
n 5
∑ y 201
y= = = 40.20
n 5
 Calculation of Standard Deviation

√ √
2
( ) 99.14
S.D of X ∑ x −x = = 4.453
n 5

√ √
2
( ) 50.82
S.D of Y = ∑ y− y = = 3.188
n 5
 Calculation of C.V
S .D(X) 4.453
C.V of X = × 100 % = × 100 % = 12.24%
x 36.39
 28

S . D (Y ) 3.188
C.V of Y = × 100 % = × 100 % = 7.93 %
y 40.20

Calculation of Mean, S.D and C.V on ROA

Himalayan Bank= x

Everest Bank = y

Table 5

FiscalYear X ( x−x )2 Y ( y− y )2

2074/75 1.58 0.001 1.78 0.16

2075/76 2.04 0.19 1.79 0.17

2076/77 1.63 0.001 1.36 0.0002

2077/78 1.68 0.01 0.84 0.29

2078/79 1.1 0.26 1.1 0.08

ΣX= Σ( x−x )2= ΣY= Σ( y− y )2=

8.03 0.45 6.87 0.70

 Calculation of mean
∑ x 8.03
x= = = 1.60
n 5
∑ y 6.87
y= = = 1.37
n 5
 Calculation of Standard Deviation

√ √
2
( ) 0.45
S.D of X ∑ x −x = = 0.300
n 5

√ √
2
( ) 0.70
S.D of Y = ∑ y− y = = 0.374
n 5
 29

 Calculation of C.V
S .D(X) 0.304
C.V of X = × 100 % = ×100 % = 18.70%
x 1.6
S . D (Y ) 0.374
C.V of Y = × 100 % = ×100 % = 27.20 %
y 1.37

Calculation of Mean, S.D and C.V on ROE

Himalayan Bank= x

Everest Bank = y

Table 6

FiscalYear X ( x−x )2 y ( y− y )2

2074/75 13.27 0.83 16 7.54

2075/76 17.28 9.60 17.33 16.61

2076/77 14.71 0.28 13.5 0.06

2077/78 14.89 0.50 8.56 22.03

2078/79 10.76 11.71 10.88 5.64

∑x= Σ( x−x )2= ∑y= Σ( y− y )2=

70.3 22.92 66.27 51.88

 Calculation of mean
∑ x 70.3
x= = = 14.18
n 5
∑ y 66.27
y= = = 13.25
n 5
 Calculation of Standard Deviation

√ √
2
( ) 22.32
S.D of X ∑ x −x = = 2.141
n 5

√ √
2
( ) 51.88
S.D of Y = ∑ y− y = = 3.221
n 5
 30

 Calculation of C.V
S .D(X) 2.141
C.V of X = × 100 % = ×100 % = 15.10%
x 14.18
S . D (Y ) 3.221
C.V of Y = × 100 % = ×100 % = 24.3%
y 13.25

Figure 4: Statement of Profit or Loss of EBL

 31

Figure 5: Statement of Comprehensive Income of EBL

 32

Figure 6: Statement of Financial Position of HBL

 33

Figure 7: Statement of Profit or Loss