A STUDY ON

PROFITABILITY POSITION OF
NEPAL SBI BANK LIMITED

A Project Work Report

By

Abhishek shah

TU Regd. No: 7-2-444-63-2016

Symbol No: 4440001

Modern Nepal College

Submitted to

The Faculty of Management

Tribhuvan University

Kathmandu

In Partial Fulfillment of the Requirements for the

DEGREE OF BACHELOR OF BUSINESS STUDIES (BBS)

Naya Baneshwor, Kathmandu

May ,2020
 DECLARATION

I hereby declare that the project work entitled PROFITABILITY RATIO ANALYSIS OF
NABIL BANK LIMITED submitted to the Faculty of Management, Tribhuvan University,
Kathmandu is an original piece of work under the supervision of Mr. Maheswor Khanal, faculty
member, MODERN NEPAL COLLEGE , Shorakhutte, Kathmandu, and is submitted in partial
fulfillment of the requirements for the degree of BACHELOR OF BUSINESS STUDIES (BBS).
This project work report has not been submitted to any other university or institution for the
award of any degree or diploma.

…………………

Abhishek shah

May, 2020
 SUPERVISOR’S RECOMMENDATION

The project work report entitled PROFITABILITY RATIO ANALYSIS OF NABIL BANK
LIMITED submitted by ABHISHEK SHAH of MODERN NEPAL COLLEGE, Shorakhutte,
Kathmandu, is prepared under my supervision as per the procedure and format requirements laid
by the Faculty of Management, Tribhuvan University, as partial fulfillment of the requirements
for the degree of BACHELOR OF BUSINESS STUDIES (BBS). I, therefore, recommend the
project work report for evaluation.

………………..
Mr. Maheswor Khanal,
Modern Nepal College

May, 2020
 ENDORSEMENT

We hereby endorse the project work report entitled PROFITABILITY RATIO ANALYSIS OF
NABIL BANK LIMITED submitted by ABHISHEK SHAH of MODERN NEPAL COLLEGE,
Kathmandu, in partial fulfillment of the requirements for the degree of the BACHELOR OF
BUSINESS STUDIES (BBS) for external evaluation.

…………………….
……………………….

(NAME) (NAME)
Chairman, Research Committee
Campus Chief
(College)
(College)
May, 2017
May, 2017
 ACKNOWLEDGEMENT

This study attempts to examine the Profitability Ratio of NABIL Bank limited with available
data and information. It also deals with problem identification besides this field study to acquire
the reality of banking operation of NABIL Bank. For easier study, the data has been presented by
tables, graphs and have been interpreted using various statistical methods. This report tries to
focus on the study of NABIL Bank only.

I express my heartiest gratitude to ……………….. for guiding and inspiring me to do this

fieldwork. I would also like to thank …………………………….and the entire staff members for
their kind co-operation and supports providing valuable information required for the completion
of the report. Finally, I want to thank my colleagues for their continued moral support.

Abhishek shah
v
 TABLE OF CONTENTS

Title Page … … … …… … … … … … … … … … … … … … … … … … … … . … … .i

Declaration …. … … … … … … … … … … … … … … … … … … … … … … … …ii
Supervisor’s Recommendation … … … … … … … … … … … … … … … … … … …iii
Endorsement … … … … … … … … … … … … … … … …… … … … … … … … … .iv
Acknowledgements … … … … … … … … … … … … … … … …… … ………………..v
Table of Contents… … … … … … … … … … … … … … … … … … … … … … ...….vi

List of Tables … … … … … … … … … … … … … … … … … … … … … … … …. ..vii

List of Figures … … … … … … … … … … … … … … … … … … … … … … viii

Abbreviations … … … … … … … … … … … … … … … … … … … … … …..… ix

CHAPTERI:INTRODUCTION…………..………………………..……………………….1
Background ……………..… … … … … … … … … … … … … … .. … …1
Profile of Nepal Sbi Bank Ltd. … ……………. … … … … … … … … … …4
Objectives………………..… … … … … … … … … … … … … … … ….6
Rationale … … ………………. … … … … … … … … … … .6
Literature Review … … … … … … … … … … … … … … … … … … …6
Methods … … … … … … … … … … … … ... ... . …. .. … … ...12
Limitations … … … … … … … … … … … … … … … … … ...13

CHAPTER II: RESULTS AND ANALYSIS … … … … ….. … … …… … … … … ..14

Data Presentation … … … … … …… … … … … … … … … … … … ..14

Analysis of result
Findings .. … … … … … … … … … … … .. … … … … … … … … … 26

CHAPTER III: SUMMARY AND CONCLUSION… … … … … … … … … … … …28

Summary… … … … ... … …. … … … … ... … … … … … … … … … ..28 Conclusion…
… … … … … … … … … … … … … … … … … … … ...29

Page 8 of 38
BIBLIOGRAPHY
APPENDICES
List of Tables

Table No. Headings Page No.

2.1 Total Deposit Position of NABIL 20
2.2 Current Deposit Position of NABIL 21
2.3 Saving Deposit Position of NABIL 22
2.4 Fixed Deposit Position of NABIL 23
2.5 Interest Bearing Deposit Trend of NABIL 24
2.6 Non-interest Bearing Deposit Trend of NABIL 25
2.7 Interest Expense on Deposit 26
2.8 Cost Position of NABIL 27
2.9 Deposit Lending Ratio 28
2.10 Ratio of Interest Bearing Deposit to Total Deposit 29
2.11 Ratio of Non-interest Bearing Deposit to Total 30
Deposit
2.12 Ratio of Current Deposit to Total Deposit 32
2.13 Ratio of Saving Deposit to Total Deposit 33
2.14 Ratio of Fixed Deposit to Total Deposit 34

Page 9 of 38
 IV

Page 10 of 38
 List of Figures

Figure No. Heading of Figures Page No.

1 Equity Ownership Structure 4
2 Product and Services 5
2.1 Total Deposit Position of NABIL 20
2.2 Current Deposit Position of NABIL 21
2.3 Saving Deposit Position of NABIL 22
2.4 Fixed Deposit Position of NABIL 23
2.5 Interest Bearing Deposit Trend of NABIL 24
2.6 Non-interest Bearing Deposit Trend of NABIL 25
2.7 Interest Expense on Deposit 26
2.8 Cost Position of NABIL 27
2.9 Deposit Lending Ratio 28
2.10 Ratio of Interest Bearing Deposit to Total Deposit 29
2.11 Ratio of Non-interest Bearing Deposit to Total 31
Deposit
2.12 Ratio of Current Deposit to Total Deposit 32
2.13 Ratio of Saving Deposit to Total Deposit 33
2.14 Ratio of Fixed Deposit to Total Deposit 34

Page 11 of 38
 ABBREVIATION

C.A. = Current Assets

C.L. = Current Liabilities

M.S. = Marketable Securities

LTD = Limited.

NIDC = Nepal Industrial Development Corporation

NRB = Nepal Rastra Bank

Page 12 of 38
 CHAPTER 1
INTRODUCTION
1.1 General Background
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 ‘the ability of a given investment to earn a return from its use.” However, the term
‘Profitability’ is not synonymous to the term ‘Efficiency’. Profitability is an index of efficiency;
and is regarded as a measure of efficiency and management guide to greater efficiency.
However, profitability is an important yardstick for measuring the efficiency, the extent of
profitability cannot be taken as a final proof of efficiency. Sometimes satisfactory profits can
mark inefficiency and conversely, a proper degree of efficiency can be accompanied by an
absence of profit. The net profit figure simply reveals a satisfactory balance between the values
receive and value given. The change in operational efficiency is merely one of the factors on
which profitability of an enterprise largely depends. Moreover, there are many other factors
besides efficiency, which affect the profitability. (wikipedia.org)

Sometimes, the terms ‘Profit’ and ‘Profitability’ are used interchangeably. But in real sense,
there is a difference between the two. Profit is an absolute term, whereas, the profitability is a
relative concept. However, they are closely related and mutually interdependent, having distinct
roles in business. Profit refers to the total income earned by the enterprise during the specified
period of time, while profitability refers to the operating efficiency of the enterprise. It is the
ability of the enterprise to make profit on sales. It is the ability of enterprise to get sufficient
return on the capital and employees used in the business operation. As Weston and Brigham
rightly notes “to the financial management profit is the test of efficiency and a measure of
control, to the owners a measure of the worth of their investment, to the creditors the margin of
safety, to the government a measure of taxable capacity and a basis of legislative action and to
the country profit is an index of economic progress, national income generated and the rise in the

Page 13 of 38
standard of living” while profitability is an outcome of profit. In other words, no profit drives
towards profitability. (wikipedia.org) first having same amount of profit may vary in terms of
profitability. That is why R. S. Kul Shrestha has rightly stated, “Profit in two separate business
concern may be identical, yet, many a times, and it usually happens that their profitability varies
when measured in terms of size of investment”. (wikipedia.org)

Nepal is very small and poor country. It occupies 0.03% on the world and 0.3%on the Asia.
Bank is very important in the country like Nepal. Bank and financial institution is the main factor
for developing the economical industrial and commercial sector of country. In a simple meaning
we can say that Bank is a financial intuition whose main function is to collect all the spread
money as the deposit and to provide loan to needy person Bank raise the fund through deposit
and credit in creation in wrien it pay certain Interest to deposit holder and it provide the raising
fund to others for certain time in certain Interest charges. It also aware people to save there
money.

1.1.1 Concept of banking

A bank is a financial institution, which deals with money and credit. It accepts deposits
from the public and mobilizes the fund to productive sectors. It also provides remittance facility
to transfer money from one place to another .Generally, bank accepts deposit from business
institutions & individuals which is mobilized into productive sectors, mainly business and
consumer lending. Bank, is therefore, known as a dealer of money. At present context bank is not
confined to accepting deposits and disbursing loans. In addition to this, a bank may be engaged
in different types of functions such us remittance, exchange currencies, Joint venture,
underwriting, bank guarantee, discounting bill etc. In short, the modern bank refers to an
institution having the following features:
1. It deals with money; it accepts deposit and advances loans.
2. it also deal with credit; it has the ability to create credit by expanding its liabilities.
3. It is commercial institution; it aims at earning profit.
Banks are the principal source of credit for millions of individuals and families and for
many units of government. They are among the most important financial institution in the

Page 14 of 38
economy. Moreover, for small local business ranging from grocery stores to automobile dealer,
banks are often the major sources of credit to stock the shelves with merchandise. Banks grant
more installment loans to consumers then any other financial institutions.
Bank is a financial intermediary accepting deposits and granting loans. It offers
thewidest menu of services of financial institutions.
Banks also are among the most important source of short term working capital for
business. They have become increasingly active in recent years in making long term business
loan for new plant and equipment. When business and consumers must make payment for
purchase of goods and services, more often they use banks provided cheques, credit or debit
cards or electronic accounts connected to a computer networks. It is banker to whom they turn
most frequently for advice and council, when they need financial information's and financial
planning.

1.1.2 Historical development of banking system in Nepal

The history of banking dates backs to sixteenth century, However, in Nepal formal
banking system was introduce only in November 1937 with the establishment of Nepal Bank
Ltd. (NBL). Which is regarded as pioneer institution of modern banking system and served as a
sole financial institution of country for nearly two decades? Prior to establishment of this bank,
the banking needs of people were fulfilled to certain extent only by organized financial
institution the “Tejartha Adda” However, the services tit offered of high committee board
“Udyog Parishad” was indeed a landmark in opening new avenue in field of banking, industry
and commerce. Accordingly, NBL was established in November 1937 under Nepal Bank act as
joint venture between government and Private sector and replaced the “Tejartha Adda” by taking
over its operation and overcoming it limitations. To regulate issue of currency, securing
countrywide circulation Nepalese currency, achieving stale exchange rate and mobilize capital
for economic development and for stimulation of trade, industry and banking sector Nepal Rastra
Bank (NRB) came into existence in April 26, 1956 as country’s central bank. After this, NRB
diverted its attention towards development of banking system by formulating relevant polices
and procedure.

Page 15 of 38
 In this connection commercial bank, act 1963 was formulated. Hence, further shouldering
the banking services, the Rastriya Banijya Bank (RBB) was established in 1966 under RBB act
1964 with fully government owned commercial bank.
The process of the development of banking system in Nepal was not
satisfactory up to 1983. No bank was opened from during this period except
extending the branches and sub branches of the banks, which were established in
this period. Nepal was observing the events that were taking places in the world
also. Nepal was deeply studying and searching what sorts of programs, policies,
law, and regulation should be brought into practice. The country can’t change its
status by using only its own capital in the country without importing the new
technology from foreign country and accordingly, law and policy have been
enacted by the state to encourage the foreign investment on banking sector. From
this the real form to the development of the banking system started in Nepal. The
competition began to grow. The banks began to offer their valuable services to the
people through new technologies. This was the great significant event. Thus, some
banks are opened on the joint investment basis.

1.1.3 Meaning and definition of Commercial Bank

“A commercial bank is business organization that receives and holds deposits of funds from
others, makes loans or extends and transfer funds by written order of depositors”
“A commercial banker is a dealer in money and substitute for money such as cheques or bill
of exchange. It also provides a variety of financial services”
Commercial banks are those institutions which are established for purpose of promoting the
trade and business in the country by providing them the short term and midterm loan. For the
promotion of trade and business the commercial banks also provides the information about the
goods or product, technology, market and the customers attitude towards the product which help
the business by earning desired profit.

1.1.4 Commercial Bank in Nepal

Page 16 of 38
In the Nepalese context, banking sector is rather more slow evolution. In Nepalese history, a
merchant namely “SANKHDHAR”, who alone paid all the debt of the people in the country at
that time? This proves the existence of money lending function at that time. During the end of
14th century the term “TANKADHARI” i.e. moneylender were found in the course of
development of borrowing. The “TEJARATH” office established in 19 th century used to give
loans to government employees. But the banking in Nepal ha started in real sense with the
establishment of Nepal Bank Ltd. in 1937. RBB was established as a fully government owned
commercial bank in 1966.Anyhow, Nepal Bank Limited is the first commercial bank of Nepal
and was established in 1994 B.S. Then several legislation was made and other different types of
banks were developed in the country. After declaring free economy and the privatization policy,
Nepal Arab Bank (NABIL) was established in 1984 A.D. This the first modern bank with latest
banking technology. Then lot commercial bank opened in the country.

At present there are all together 32 Commercial Bank operating in the country. They are as
follows:-
Table no 1: Commercial Banks in Nepal
S.N. Commercial Banks Established Head Office
(B.S.)
1. Nepal Bank limited 1994/07/30 Kathmandu
2. Rastriya Banijya Bank 2022/10/10 Kathmandu
3. Agriculture Development Bank Ltd. 2024/10/07 Kathmandu
4. Nabil Bank Limited 2041/03/29 Kathmandu
5. Nepal Investment Bank Limited 2042/11/16 Kathmandu
6. Standard Chartered Bank Nepal Limited 2043/10/16 Kathmandu
7. Himalayan Bank Limited 2049/10/15 Kathmandu
8. Nepal SBI Bank Limited 2050/03/23 Kathmandu
9. Nepal Bangladesh Bank Limited 2050/02/23 Kathmandu
10. Everest Bank Limited 2051/07/01 Kathmandu
11. Bank of Kathmandu Limited 2051/11/28 Kathmandu
12. Nepal Credit and Commerce Bank Limited 2053/06/28 Siddartha Nagar
13. Lumbini Bank Limited 2055/04/01 Narayanghat
14. Nepal Industrial & Commercial Bank Limited 2055/04/05 Biratnagar
15. Machhapuchhre Bank Limited 2057/06/17 Pokhara
16. Kumari Bank Limited 2056/08/24 Kathmandu
17. Laxmi Bank Limited 2058/06/11 Birgunj
18. Siddhartha Bank Limited 2058/06/12 Kathmandu
19. Global IME Bank Limited 2063/09/18 Kathmandu
20. Citizen Bank International Limited 2064/01/07 Kathmandu
21. Prime Commercial Bank 2064/06/07 Kathmandu
22. Sunrise Bank Limited 2064/06/25 Kathmandu

Page 17 of 38
 23. Bank of Asia Nepal Limited 2064/06/25 Kathmandu
24. DCBL Bank Nepal Limited 2065/02/12 Kathmandu
25. NMB Bank Limited 2065/02/20 Kathmandu
26. Kist Bank Limited 2066/01/24 Kathmandu
27. Janata Bank Nepal Limited 2066/12/23 Kathmandu
28. Mega Bank Nepal Limited 2067/04/07 Kathmandu
29. Commerz & Trust Bank Nepal Limited 2067/06/04 Kathmandu
30. Civil Bank Limited 2067/08/10 Kathmandu
31. Century Commercial Bank Limited 2067/11/26 Kathmandu
32. Sanima Bank Limited 2068/11/01 Kathmandu

1.1.5 Functions of Commercial Bank

The commercial bank plays an important role in the modern economy. The accepting of
deposits from individuals and institutions and providing loans to the needy persons and
businesses are its two important functions. Besides, it performs many other functions. On
the one hand, it helps in capital formation by mobilizing savings. On the other hand it
promotes trade and industries by providing loans.

Major functions of commercial bank:

1. Accepting Deposits

The commercial banks accept deposits in different accounts. This is the first most
important and oldest function of the commercial bank. The main forms of deposit
accepted by banks are as follows:-

a. Current or Demand Deposit

The men and the institutions needing cash frequently deposit their money in current
account. The amount deposited in this account can be withdrawn by drawing cheque
without prior information. Since the bank should keep all money in reserve and cannot
make investment, no interest is offered in this account. The bank may instead, take
incidental or bank charge for the management of money. The minimum amount to be
deposited and maintained in this account is stipulated. The amount varies from bank to
bank. If the minimum amount is not maintained, the bank charges some amount of fees.
The pass book containing account and cheque book to withdraw money are issued to
depositors.

b. Saving Deposit

Page 18 of 38
The low income people and those not needing to draw money frequently deposit their
money in the saving account. The money deposited in this account can be withdrawn
only once or twice in a week or only in stipulated amount. In this account as well, the
minimum amount to be deposited and maintained are stipulated. The amount varies from
bank to bank. The pass book and cheque book’ are issued to depositors. However, at
present, the joint venture banks issue financial statement on quarterly basis instead of
issuing passbook in both the current and saving account.

If the customers draw more than stipulated amount without prior notice, the bank charges
interest on the excess amount. The bank provides interest in this account since the bank
can use money. A variant of saving account is ‘Home Saving Account’. The purpose of
this account is to encourage children and illiterate persons to save. These persons drop
money in a box supplied by the bank. The bank occasionally opens the box and the
amount is deposited in the person’s account. The interest is offered in this deposit as in
saving account.

c. Fixed or Time Deposit

The amount deposited for a fixed period is called fixed or time deposit. As the name
implies, the amount deposited cannot be withdraw before the fixed period. However, the
depositor can take loan from the bank against the security of fixed deposit receipt. The
interest rate is higher than offered by bank. Since the bank can utilize the money for a
fixed period, high interest is offered in this account. The fixed deposit in Nepal is of 3
months, 6 months, 1 year and 2 years and above. No cheque book and passbook is issued
in this account. Only fixed deposit receipt is given as an evidence of deposit.

Beside the above mentioned deposits, the banks have introduced many other types of
deposits, like marriage account, education account, and cumulative account and so on.

2. Providing Loans

The second important function of the bank is to provide different types of loans. The
bank earns profit by giving the amounts deposited with it in the form of loans. Since the
bank creates credit, with its deposits, it is called manufacturer of credit. Likewise, since
the bank earns profit by utilizing the deposits it is said “It is banker’s brain and other
people’s money”.

Traditionally, a commercial bank can grant only short-term credit. But in present time, it
also provides loan of medium and long-term nature to some extent to even industry and
agriculture. The bank charges interest on loans which are usually higher than those
offered on the deposits. Since the banks in Nepal are how free to fix interest rates, the
rate of interest on both deposits and loans varies from bank to bank.

Page 19 of 38
The main forms of loan provided by the bank are as follows:-

a. Loans and Advances

The loans and advances are provided by the bank to individuals and institutions for
various purposes. The bank provides loans only against the securities like gold, silver,
government and non-government securities which are easily marketable, stable in value
and liquid. Some banks offer the personal loans without security on the basis of honesty
and prestige of the customers. The bank charges interest on full amount of the loan. The
loans provided against the export bills are called advances.

b. Overdraft

The banks grant overdraft facilities to the honest customers. In this provision, the
customer can withdraw the amount more than deposited in his account. But the limit and
period of overdraft is stipulated earlier. The borrowers need to pay interest only on the
amount actually drawn. Generally, the bank charges more interest on it than in ordinary
loans. The bank may demand security in it as in ordinary loan

c. Cash Credit

The practice of cash credit was originated in Scotland. The importance of cash credit to
Scotland was shown by H.D. Macleod in these words “Cash credit is to Scotland what
the river Nile is to Egypt, a fertilizer”.

The cash credit is not based on personal security. It is provided against the collateral of
shares, debentures, cotton, Jute, rice etc. There is only one difference between cash credit
and overdraft. In overdraft, more amount can be withdrawn from current account for a
temporary period, whereas, a new account is opened in case of cash credit.

d. Discounting of Bills

The bank provides loans by discounting bills such as the bill of exchange. In modern
days, transactions are made with the help of credit. The sellers draw bill of exchange
making borrower to pay after some fixed time. When the seller needs money he submits
the bills in the bank. The bank discounts the rate of interest from the face value of the bill
and allows drawing the remaining amount by cheque. This is called discounting of bills.
After the maturity of the bills, the bank receives full payment of the bill. The commercial
bank can make the bills rediscounted by the central bank in case of the need of money.
The bill has the guarantee of both drawer and drawee. Hence, the loans against bills are
regarded as safe as well as liquid.

3. Investments

Page 20 of 38
Banks also invest in shares and debentures of companies. Nepalese banks have invested
on shares and debentures of Nepal Insurance and Transport Company, National Insurance
Company, Nepal Oil Corporation, Credit Guarantee Corporation, Agricultural Projects
Services Centre, Rural Development banks and so on. Similarly, banks have invested on
government securities and NRB bonds. The banks also have entered into consortium
financing. Banks earn interest by investing government and non-government securities.

1.2 Profile of Nepal SBI Bank Limited

Nepal SBI Bank Ltd. (NSBL) is a subsidiary of State Bank of India (SBI) having 55 percent of
ownership. The local partner viz. Employee Provident Fund holds 15% equity and General
Public 30%. In terms of the Technical Services Agreement between SBI and the NSBL, the
former provides management support to the bank through its expatriate officers including
Managing Director who is also the CEO of the Bank. Central Management Committee
(CENMAC), consisting of the Managing Director & CEO, Chief Operating Officer & Dy. CEO,
Chief Financial Officer, Two Senior Most AGMs, exercises overall control functions with the
help of 3 Regional Offices, and oversee the overall operations of the Bank
NSBL was established in July 1993 and has emerged as one of the leading banks of Nepal, with
994 skilled and dedicated Nepalese employees working in a total of 116 outlets that include 88
full-fledged branches, 19 extension counters, 7 Province  offices, 1 Intouch Outlet and Corporate
Office . With presence in 50 districts in Nepal, the Bank is providing value added services to its
customers through its wide network of 118 ATMs (including 2 Mobile ATMs and 4 CRMs),
internet banking, mobile wallet, SMS banking, IRCTC Ticket Online Booking facility, etc.
NSBL is one of the fastest growing Commercial Banks of Nepal with more than 8.33 lakhs
satisfied deposit customers and over 6.50 lakhs ATM/Debit cardholders. The Bank enjoys
leading position in the country in terms of penetration of technology products, viz. Mobile
Banking, Internet Banking and Card Services. The Bank is moving ahead in the Nepalese
Banking Industry with significant growth in Net Profit with very nominal NPA. As of 31st
Chaitra, 2074, the Bank has deposits of Rs. 83.66 billion and advances (net) of Rs. 74.05 billion,
besides investment portfolio of Rs. 17.93 billions.

Page 21 of 38
State Bank of India (SBI), with a 211 year history, is the largest commercial Bank in India in
terms of assets, deposits, profits, branches, customers and employees. The Government of India
is the majority stakeholder and has controlling stake in SBI, a “Fortune 500” entity.
Our parent State Bank of India has an extensive network, with over 22,000 branches in India and
another 206 foreign offices in 35 countries across the world.
Nepal SBI Bank has also established its wholly owned merchant banking subsidiary viz: Nepal
SBI Merchant Banking Ltd. in the year 2016.

Figure 2

❖ ❖ Deposits
Following types of accounts can he opened at any NABIL branches upon
completion of simple documentary requirement. All the accounts can he opened in
various currencies (against which rate are provided) subject to ruled of opening
and fulfilling the required documents.
⮚ Savings
⮚ Current
⮚ Fixed
⮚ Call

❖ Guarantees

Page 22 of 38
NABIL Bank issues guarantees and Bonds on behalf of customers to the
beneficiaries in Nepal. Upon fulfillment of requirement, NABIL also arranges
issuance of guarantees in the name of foreign beneficiaries through reputed
international banks.

❖ Credit Cards

NABIL is the first bank in Nepal to issue Rupee (valid in Nepal and India) and
international valid worldwide) Master card, cards in Nepal, a global prestigious
service to its esteemed clients NABIL is also expanding credit and facilities
issuing visa credit card very soon.

❖ Tele-banking

Telephone banking is another product provided by NABIL bank to its customers.

Under this arrangement customer can know the balance of his account through
telephone with out human assistance.

❖ Western Union Money Transfer

NABIL bank has established unique money remittance system with western union
financial service whereby money can be remitted anywhere in the world within
minutes, through online computer system funds can be transferred instantly to
about 55000 locations in 165 countries of the world. Nepali wage earners abroad
can send money to their near and dear ones in Nepal within a very short time. By
using the above services, you can now send and receive money within minutes in
165 countries in the world.

❖ SWIFT (Society for Worldwide Inter Bank Financial Telecommunication)

NABIL has started worldwide transfer of fund by this fast and efficient funds
transfer and messaging system. Messaging and fund transfers are carried through
SWIFT with minimum time and cost.

❖ Safe Deposit Locker

Page 23 of 38
NABIL provides safe deposit lockers to keep valuables safety at a minimum cost.
Presently, this facility is available at Kantipath and Kamaladi offices.

❖ Automated Teller Machines (ATM)

NABIL has launched the ATM facility to its account holders to enable fast
withdrawal of funds in account holder need not wait long hours for withdrawing
money and sign cheques anymore. A simple card with a unique PIN number
known only to the account holder will suffice.

❖ Other facilities

The bank provides the facilities for the customer like deposit services, loans and
advances, consumer finance, cash management and remittance services etc.

1.3 Objectives
The main objective of this study is to analyze the financial performance and solvency position of
NSBL by using different financial ratios. This study is to analyze, examine and interpret the
policies adopted by NSBL. The main objectives of this study are given below:
 To find out the profitability of the NSBL.
 To analyze the profitability.
 To determine factors of profitability.
 To evaluate profitability ratio of NSBL.
 To provide information of NSBL in banking sector 
 To suggest and recommend some measure on the basis of the study of financial
performance evaluation for the improvement of financial performance of NSBL in the
future.

1.4 Rationale
Generally, these types of study give emphasis on the welfare of students. Such type of
study makes students active and independent and it also allows students to get practical
knowledge of what they studied theoretically. So, while preparing the field work report, they
gain knowledge through their own experience enabling them to deal with problem relating to
their studies. This study also intends to let students know about required information by
themselves. The others importance of this study are as follow
1) The BBS level would remain incomplete without this study.

Page 24 of 38
 2) This report can be a source of secondary data for researchers.
3) This study will be helpful to the management in order to analyze their own success and
failure while leading the firm in planned direction.

4) It will be useful for concerned company as the study has provided suggestions.

5) This field report can be used as guideline for the future students while preparing such
type of field report.

1.5 Review
A literature review is a comprehensive summary of previous research on a topic. The literature
review surveys scholarly articles, books, and other sources relevant to a particular area of
research. The review should enumerate, describe, summarize, objectively evaluate and clarify
this previous research.  It should give a theoretical base for the research and help you (the author)
determine the nature of your research.  The literature review acknowledges the work of previous
researchers, and in so doing, assures the reader that your work has been well conceived.  It is
assumed that by mentioning a previous work in the field of study, that the author has read,
evaluated, and assimiliated that work into the work at hand.

1.5.1 Review of Journals and articles

Vintila and Nenu(2015) on their research article entitled "Liquidity and profitability analysis on
the Romanian Listed Companies” attempted to show the relationship between market's liquidity
and the real economy, and also the effects that the banking system could generate, as the basis of
the entire financial system. This study started from the assumption that liquidity and profitability
issues of significant impact on companies stability and development. The analysis was conducted
on companies listed on the Bucharest Stock Exchange. In order to observe the changes recorded
before the crisis and the subsequent evolution, data were collected for a period of 10 years, from
2005 to 2014. The results showed that a decrease of liquidity level is not perceived as a risk
factor for
the Romanian companies. The study covered the period before and after the financial crisis and
confirmed a statistically significant relationship. The results confirmed the statistically
significant relationship between the analyzed variables and revealed a negative correlation
between liquidity and corporate financial performance.

Kosak and Cok(2010) wrote a paper entitled “Ownership structure and profitability of the
banking sector". The purpose of the paper was to investigate the relationship between bank
ownership and bank profitability in six South-Eastern European countries. The profitability
indicators were selected. In the first part of the analysis the profitability differences between
foreign owned and domestic banks were tested, whereas in the second part the bank level and
country level determinants of specific profitability indicators for foreign and domestic banks
were detected. The results did not reveal any substantial statistically significant differences
between profitability measures of domestic and foreign owned banks, while the econometric
tested identify several factors that are clearly associated with bank profitability. The bank
specific factors reflecting capital strength, cost efficiency and credit risk exposure proved to be

Page 25 of 38
associated with performance measures. According to prior expectations, liquidity management
and bank asset structure factors did not demonstrate any statistically significant link to
performance indicators.

1.6   Method
Research methodology is the process of arriving to the solution of the problem through
planned and systematic dealing with the collection analysis and interpretation of facts
and figures. As this research entirely consider about the operation the performances of
NSBL those research methodology has been used which proves helpful to tit.
For the purpose of achieving the objective the following methodology has been to
follow which included research design, nature of data, data gathering, procedure,
presentation and analysis technique.

1.6.1 Research Design

Research design is the over all plan of the researcher for the research. It includes how
the data are collected, analyzed and output is formed by the various tools and
techniques used in research methodology. Without research design this fieldwork has
not been completed.
The study report is based mostly on secondary information of NSBL. In addition to
this, reference has been made in library consult, class lectures, Related books of
banking, financial management and accounting during the preparation of this study.

1.6.2 Nature and sources of data

For the preparation of this report different kinds of books are followed. In this report,
all the data collected is secondary in nature. Almost all the data has been collected
form published annual reports, brochures etc. Mostly all the data are collected from
the concerned bank.
Secondary Data Source:
In this study, the main source of data is secondary which are collected from pre-
published data sources. The secondary data sources used in this study are:

Internal source
4.  Annual Report of the Nepal SBI Bank Ltd. 
5.  Brochures of Nepal SBI Bank Ltd.
6.  Interim performance report
External source
1. Book and publications
2. Journals Article
3. Articles from newspapers
4. Previous report

Page 26 of 38
1.6.3 Data collection Procedures
This report is prepare by using real data obtained from various sources like, financial
news, newspaper, magazine of commercial work and annual report. 
For secondary data the annual report and website of the concerned bank, books, 
article from newspaper is taken as the main purpose of the study. The annual report of
the concerned bank is obtained from their head office and thier websites. 

2.5  Data analysis tools

Data analysis tools means which tools the researcher used for present and analyzed
the data. In this report statistical and financial ratio tools is used for data analysis.
The collected and observed date is tabulated after adjusting necessarily amounts of
each overhead ,however for the analysis of the data following tools are used :

 Financial tools
There are different types of financial tools that can applied to analyze the Profitability
Position of NSBL but in our field work report Profitability ration are used
 Profitability ratios
Profitability ratios are concerned with measuring the operating efficiency of the bank.
“Profitability ratio are designed to provide answer to basically to those questions: (i)
Is the profit earned by the firm adequate? (ii) What rate of return does it represent?
(iii) What is the rate of profit for various divisions and segments of the firms? (iv)
What are the earnings per share? (v) What amount was paid on dividends? (vi) What
is the rate of return to equity holders and so on?
Profit is the ultimate output of the bank and it will have no future if it fails to make
sufficient profits. A profit is the difference between total revenue and total expenses
over a period of time. The profit and obtained by successful administration
management, credit management, operating management and risk management.
Thus, a bank realize profit as long as interest-earning assets exceeds interest-bearing
liabilities.The profitability of the bank is measured with a help of profitability ratio.
Such profitability ratios include.
1. Net Profit Margin Ratio
Net Profit Margin is a financial ratio used to calculate the percentage of profit a company
produces from its total revenue. It measures the amount of net profit a company obtains per
dollar of revenue gained

Net Profit
Net Profit Margin Ratio = × 100
Total Revenue

2. Return on Assets (ROA)

Return on Assets (ROA) is a type of return on investment (ROI) metric that measures the
profitability of a business in relation to its total assets. This ratio indicates how well a company is

Page 27 of 38
performing by comparing the profit (net income) it’s generating to the capital it’s invested in
assets. it shows the contribution of assets on profits.Higher ROA indicates more asset efficiency.

NPAT
Return on Assets (ROA) = × 100
Total Assets
3. Return on Equity (ROE)
This ratio measures the profitability of the equity fund invested in the bank. This ratio reveals
how profitability the owner's fund has been utilized by the bank. Higher ratio reveals the efficient
use of owner's (shareholder's) investment and vice versa.

NPAT
Return on Equity ROE) = × 100
Total shareholder's fund

4. Earning Per Share (EPS)

Earnings per share (EPS) is calculated as a company's profit divided by the outstanding shares
of its common stock. The resulting number serves as an indicator of a company's profitability. It
is common for a company to report EPS that is adjusted for extraordinary items and potential
share dilution. The higher a company's EPS, the more profitable it is considered.
NPAT
Earning Per Share (EPS) =
No of Equity share out standing

5. Dividend payout Ratio (DPR)

The dividend payout ratio is the ratio of the total amount of dividends paid out to shareholders
relative to the net income of the company. It is the percentage of earnings paid to shareholders in
dividends. The amount that is not paid to shareholders is retained by the company to pay off debt
or to reinvest in core operations. It is sometimes simply referred to as the 'payout ratio.'

Dividend Paid

Page 28 of 38
Dvidend payout ratio =
Net Income

6. Staff Expencess To Total Income Ratio

It is the ratio of Staff Expenses to Net Income. This ratio is computed to compare the efficiency of
company's staffs with the staffs of peer companies, competitors and own historical records in term of
total income. The lower of this ratio indicate more efficiency of the staffs of the company.
Staff Expencess
Staff Expencess To Total Income Ratio = ×100
Total Income

7. Overhead to total income ratio

An overhead ratio is a measurement of the operating costs of doing business compared to the
company's income. A low overhead ratio indicates that a company is minimizing business
expenses that are not directly related to production.

Overhead
Overhead to total income ratio = ×100
Total Income

8. Exchange Gain to Total Income Ratio

An exchange gain/loss is caused by a change in the exchange rate of two currencies, such as
when an invoice denominated in one currency is paid in another. The exchange gain to total
income ratio measures total income and exchange gain ratio.

Exchange Gain
Exchange Gain to Total Income Ratio = ×100
Total Income

Page 29 of 38
1.7 Limitation of the study:

Although a great effort has been employed in order to prepare grand design of the report, it
has some limitation. The limitation of the study is as below.

1. The major factor contributing to the limitation of the study is the time factors. Since, this
report had to be submitted within a limited span of time.
2. The study period covers only five fiscal years from 2070/2071 to 20752076.
3. The study is based on secondary data and as per information provides by MBL bank.
4. This study does not take up the financial performance of other commercial banks.
5. The reliability and accuracy of data is based on the published annual
reports of the concerned bank.

Page 30 of 38
 Chapter 2
Data Presentation and Analysis

Data Presentation
Presentation and data analysis of data is the main body of the study. Introduction, review of
literature and research methodology is presented in the previous chapter that provide the basic
inputs to analyze and interpret the data. In this chapter, data are presented and analyzed.

Financial Analysis
Financial statement analysis generally begins with the calculation of set of financial ratios designed
to reveal the relative strength and weaknesses of a company as compared to other companies in the
same industry and to show weather the firm's position has been improving or deteriorating over time.
It helps the concerned parties to spot out the financial strength and weakness of the firm.

Ratio Analysis
Ratio analysis is the systematic use of profitability ratio information of the firm’s strength and
weakness as its historical performance, and current condition can be determined. It provides the

Page 31 of 38
trends of organization's financial performance. Ratios are very useful, essential and powerful tools to
interpret the financial performance of the company. In this report, following ratios are used:

1. Net Profit Margin Ratio

Net Profit Margin is a financial ratio used to calculate the percentage of profit a company
produces from its total revenue. It measures the amount of net profit a company obtains per
dollar of revenue gained

Net Profit
Net Profit Margin Ratio = × 100
Total Revenue
Table 1: Profit margin ratio of NABIL (in Millions)

2
F/Y NPAT Total Income Ratio in%(x) Index (%) x
2012/13 271.6 1639.1 16.57 100 274.57
2013/14 416.2 1427.4 29.16 175.97 850.18
2014/15 455.3 1426.4 31.92 192.63 1018.86
2015/16 520.1 1510.7 34.43 207.77 1185.27
2016/17 635.3 1743.5 36.44 219.90 1327.74

∑x2=4656.62
∑x=148.51
π= 29.7
σ=7.02
CV=23.64
Source: “Banking and Financial Statistics” NABIL mid July 2017

Figure 1: Profit margin ratio of NABIL

Page 32 of 38
The profit margin ratio of NABIL shows the different year ratios viz. 16.57 in 2012/13, 29.16 in
2013/14, 31.92 in 2014/15, 34.43 in 2015/16, and 36.44 in 2016/17 and the mean, standard
deviation and coefficient of variance are 29.70, 7.02% and 23.64% receptively.

15

2. Return on Assets (ROA)

Return on Assets (ROA) is a type of return on investment (ROI) metric that measures the
profitability of a business in relation to its total assets. This ratio indicates how well a company is
performing by comparing the profit (net income) it’s generating to the capital it’s invested in
assets. it shows the contribution of assets on profits.Higher ROA indicates more asset efficiency.

NPAT
Return on Assets (ROA) = × 100
Total Assets
3. Return on Equity (ROE)
This ratio measures the profitability of the equity fund invested in the bank. This ratio reveals
how profitability the owner's fund has been utilized by the bank. Higher ratio reveals the efficient
use of owner's (shareholder's) investment and vice versa.

NPAT
Return on Equity ROE) = × 100
Total shareholder's fund

4. Earning Per Share (EPS)

Earnings per share (EPS) is calculated as a company's profit divided by the outstanding shares
of its common stock. The resulting number serves as an indicator of a company's profitability. It
is common for a company to report EPS that is adjusted for extraordinary items and potential
share dilution. The higher a company's EPS, the more profitable it is considered.
NPAT
Earning Per Share (EPS) =
No of Equity share out standing

Page 33 of 38
5. Dividend payout Ratio (DPR)
The dividend payout ratio is the ratio of the total amount of dividends paid out to shareholders
relative to the net income of the company. It is the percentage of earnings paid to shareholders in
dividends. The amount that is not paid to shareholders is retained by the company to pay off debt
or to reinvest in core operations. It is sometimes simply referred to as the 'payout ratio.'

Dividend Paid
Dvidend payout ratio =
Net Income

6. Staff Expencess To Total Income Ratio

It is the ratio of Staff Expenses to Net Income. This ratio is computed to compare the efficiency of
company's staffs with the staffs of peer companies, competitors and own historical records in term of
total income. The lower of this ratio indicate more efficiency of the staffs of the company.
Staff Expencess
Staff Expencess To Total Income Ratio = ×100
Total Income

7. Overhead to total income ratio

An overhead ratio is a measurement of the operating costs of doing business compared to the
company's income. A low overhead ratio indicates that a company is minimizing business
expenses that are not directly related to production.

Overhead
Overhead to total income ratio = ×100
Total Income

8. Exchange Gain to Total Income Ratio

Page 34 of 38
An exchange gain/loss is caused by a change in the exchange rate of two currencies, such as
when an invoice denominated in one currency is paid in another. The exchange gain to total
income ratio measures total income and exchange gain ratio.

Exchange Gain
Exchange Gain to Total Income Ratio = ×100
Total Income

Page 35 of 38
 Chapter 3
Summary, Conclusion and Recommendation

3.1. Summary

A bank is an institution, which deals in money. A bank is like a reservoir. It draws

surplus money from the people who save and lend them to the people who want to
use it for productive purpose. In this process the bank earns commission. The rate
of interest paid to the depositors is generally lower than the rate charged to the
borrowers. The difference between these two rates of interest is the profit of the
bank. Deposit collection is the main function of commercial bank.

The present study has been undertaken to examine and evaluate the financial
performance of NABIL. The financial statements of five years that is from 2000/01
to 2004/05 have been examined for the purpose the study. The study has resorted
mainly to secondary data that has been first processed and analyzed comparatively.
Individual interview with the management personnel has been taken whenever
necessary. This study is exploratory as well as analytical sometimes.

NABIL was established in 12th July 1984, which was the first joint venture bank in
Nepal. Among many joint venture banks, it is a leading one, which is always
running in profit due to its proper management and good policies. Data that I have
presented is all from the secondary sources, which are in the annual reports or
other printed matters.

A customer can be account holder when he opens account. There are the numbers
of rules and procedures regarding opening different types of accounts. The interest
rates on different accounts are different.

3.2. Conclusion (Major Findings)

a) The deposit of NABIL is in increasing trend. The share of fixed deposit is

more than that of savings, current, margin and other deposits in the deposit mix of
NABIL.

Page 36 of 38
b) The trend of interest bearing deposit has been gradually increasing but there
has been more fluctuation in non-interest bearing deposits, similarly, there is also
more fluctuation in interest expenses on total deposits.
c) The trend analysis shows that the deposit of NABIL is in increasing trend. In
addition to this, the bank is being able to satisfy its customers and in providing
higher quality and newer services to them.
d) Interest expenses on deposit of NABIL during the year 2000 are also quite
high but there has been a decreasing trend of interest expenses till the year 2005.
e) Similarly, the cost of deposit during the year 2000 is also quite high but
there has been decreasing trend in the later year. So, it helps to increase the
efficiency to bank.
f) By the analysis of deposit landing we can conclude that the bank is able to
utilize its deposits a greater extent.
g) Thus, the bank’s performance is effective in profitability and towards the
customers and may attract more customers.

3.3. Recommendations

1. Although NABIL has a strong financial base and capital structure as well as
good market status and reputation in order to attract new customers and increase
deposit collection NABIL should introduce new schemes.
2. Customer services should be diversified and should further be
accommodated.
3. Interest rate on deposit should be competitive with other commercial banks.
4. The bank should aim towards increasing its customers but it must also
provide the quality services to the present customers. For this the bank must make
plans and policies keeping customers in mind.
5. Bank should also pay attention towards the priority sector and industrial
sector for lending loans to develop the economic condition of the country.
6. Bank should provide more facilities to the staff, it has to provide job
satisfaction, training and should encourage its staff.

Page 37 of 38
 BIBLIOGRAPHY

● Banking Information and Data, Annual Report of Nabil Bank Ltd.

● Weston, J. Fred Copeland Thomas, “Managerial Finance”: Dryden Press,

1986.

● Brigham, Eugene F., ‘Fundamental of Financial Management”, Holt Rincht

and Winston: The Dryden Press, 1998.

● Khan, M. Y. and P.K., “Financial Management Policy: New Delhi: McGraw

Hill Publishing Co. Ltd., 1978.

● Khan, M.Y. and Jain P.K., “Management Accounting”, New Delhi: McGraw
Hill Publishing Co. Ltd.

● S.P. Gupta,”Statistical Method”.

● Van Horn James C.,”Financial Management band Policy”: New Delhi

Prentice Hall of India Pvt. Ltd., 1986.

● Van Horn James C.,”Fundamental Financial Management”: U.S.A. Prentice

Hall Inc. Engle Wood Cliff, 1983.

Page 38 of 38