A Study On Profitability Analysis

DECLARATION
I hereby declare that project work report entitled “A Study on Profitability analysis of Prabhu
Bank” Submitted by me in the partial fulfillment of the requirement for the BBA degree of
Pokhara University, under the supervision of Prof. Dr. Gauri Raj Sharma Principal of Apollo
International College, is my original work and the Project Work Report has not formed the basis
for the award of any degree, diploma, or other similar titles.
Signature………..
Raja Ram Sah
March, 2021
i
ACKNOWLEDGEMENT
This project work report on “A Study on Profitability Analysis Of Prabhu Bank” has been
prepared in the partial fulfillment for the degree of Bachelor of Business Administration (BBA)
under the course designed by the Faculty of management of Pokhara University. This study has
been prepared to examine the analysis of Prabhu bank
First of all, I would like to thank Pokhara University for including this project report in our BBA
6th semester program. This gives us chance for gaining practical knowledge to boost our research
skills.
I am indebted to the principal of Apollo international College Prof. Dr. Gauri Raj Sharma for
being a constant source of support to me with their valued guidance and help during the
preparation of my project
Also, I am indebted to Prabhu Bank for their great support for completion of my project report.
Thanks to all those writers and researchers whose materials and methods has been review
wherever necessary during the study period as a reference.
Finally, I wish to acknowledge my gratitude to my teachers and friends of Apollo International
College who directly and indirectly help me with their valuable suggestions for completion of
this work.
Raja Ram Sah

BBA 6th Semester
Apollo International College
March, 2021
ii
ABBREVIATIONS
BBA : Bachelor of Business Administration
Ltd : Limited
P.U : Pokhara University
PLC : Public Limited Company
ATM : Automated Teller machine
BOD : Board of Director
F/Y : Fiscal Year
1st : First
2nd : Second
3rd : Third
6th : sixth
% : Percentage
& : And
i.e : That is
iii
TABLE OF CONTENTS
Contents
DECLARATION..............................................................................................................................i
ACKNOWLEDGEMENT...............................................................................................................ii
ABBREVIATIONS........................................................................................................................iii
TABLE OF CONTENTS...............................................................................................................iv
LIST OF TABLES..........................................................................................................................vi
CHAPTER 1 INTRODUCTION.....................................................................................................1
1.1 Background of the Study........................................................................................................1
1.2 Objectives of the Study..........................................................................................................2
1.3 Scope of the Study.................................................................................................................2
1.4 Limitations of the Study.........................................................................................................3
1.5 Importance of the Study.........................................................................................................3
1.6 Organization of the Study......................................................................................................3
CHAPTER- 2 LITERATURE REVIEW.........................................................................................5
2.1 Meaning of Literature Review...............................................................................................5
2.2 Objectives of Literature Review............................................................................................5
The objectives of literature review are as follows:......................................................................5
2.3 Review of Related Studies.....................................................................................................5
CHAPTER-3 RESEARCH METHODOLOGY..............................................................................8
3.1 Meaning of Research Methodology.......................................................................................8
3.2 Research Design.....................................................................................................................8
3.3 Nature and Sources of Data...................................................................................................8
3.4 Decision of Sample................................................................................................................9
3.5 Data Collection Procedure.....................................................................................................9
3.6 Data Processing....................................................................................................................10
3.7 Data Analysis tools..............................................................................................................10
3.8 Data Interpretation Techniques............................................................................................11
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CHAPTER-4 DATA PRESENTATION, ANALYSIS, INTERPRETATION AND FINDINGS12
4.1 Data Presentation, Analysis and Interpretation....................................................................12
4.1.1 Net Profit Margin (2073-2077).....................................................................................12
4.1.2. Gross Profit Margin (2073-2077).................................................................................13
4.1.3. Return on Assets (2073-2077)......................................................................................15
4.1.4 Return on Equity (2073-2077)......................................................................................16
4.1.5 Earning Per Share..........................................................................................................18
4.2 Major Findings.....................................................................................................................19
CHAPTER-5 SUMMARY AND CONCLUSION........................................................................21
5.1 Summary..............................................................................................................................21
5.2 Conclusion...........................................................................................................................21
BIBLIOGRAPHY..........................................................................................................................23
APPENDIX-1................................................................................................................................24
Appendix-2....................................................................................................................................35
v
LIST OF TABLES
Table 1. 1 Board of Directors........................................................................................................9
Table 4.1. 1 Net Profit Margin....................................................................................................14

Table 4.1. 2 Gross Profit Margin................................................................................................16
vi
CHAPTER 1 INTRODUCTION
1.1 Background of the Study
Bank is the financial institution which accepts deposits, make business loans, and offers related
services. The word “Bank” is derived from the Italian word “Banco” which refers to a Bench.
The first bank called “Bank of vence” was established in 1157 A.D, as the first banking
institution in the world. In Nepal, “Nepal Bank Limited” is the first commercial bank established
in 1937 A.D.
There are more than dozens of commercial banks in Nepal. Among them, Prabhu Bank is one of
the commercial bank that was founded in 2006 A.D and is based in Kathmandu. Prabhu Bank
Limited was formerly known as Prabhu Bikas bank Limited and changed its name to Prabhu
Bank Limited in September, 2014 A.D.
Prabhu Bank as commercial bank was established in 2016 A.D after the merger of Grand Bank
Ltd, Kist Bank Ltd, Gaurishankar Development Limited and Zenith Finance Limited, attaining
the status of ‘A’ class financial institution that is licensed and regulated by cental bank of Nepal.
Prabhu Bank Limited provides banking products and services. It offers deposits, such as fixed
deposits and saving accounts. It provides loans and advances, which includes education, home,
foreign employment, and working capital. It also offers internet and SMS banking, and
remittance services, as well as debit cards, ABBS and clearing facilities, and safe lockers. The
bank has a network of 213 branches along with 204 ATMs across the country, with customer
base of 14,00,000 among the private sector commercial banks in Nepal.
To become the leading commercial bank in Nepal by providing the finest quality in financial
product and services to their customers enhances their stakeholder’s value, contribute to the
economic prosperity of the country and to create continuous learning and growth opportunities
for the people to deliver innovative products and services of them.
To support individuals, families and business to attain financial independence and improve their
financial well-beings, Centre of career growth to employees and to maximize the shareholders’
value are its purposes.
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Table 1. 1 Board of Directors
Name Post
Mr. Devi Prakash Bhattachan Chairman
Mr. Shankar Prasad Kalikota Director
Ms. Anju Adhikari Director
Mr. Ramesh Shingh Khadka Director
Mr. Puspa Bahadur Pradhan Director
Ms. Ambika Sharma Lamichhane Director
Profitability is the ability of a business to earn profit. A profit is what is left of the revenue a
business generates after it pays all expenses directly related to the generation of the revenues,
such as producing a product, and other expenses related to the conduct of the business activities.
Profitability depends upon the relationship between income and expenditures. So, the topic has
been chosen to test the profitability condition of Prabhu Bank to find the percentage change in
different types of ratios and to evaluate the role of income and expenditure.
1.2 Objectives of the Study

 The main objective of the study is to analyze the profitability position of Prabhu Bank.
But, the supportive objectives are as follows:
 To calculate gross profit margin and net profit margin.
 To calculate Return on Assets and Return on Equity.
 To compare the profitability condition of last five years.
 To suggest on findings.
1.3 Scope of the Study
Scope refers to the area or subject matter that something deals with or to which it is relevant. The
scope of the study is that it covers the profitability condition of Prabhu Bank and suggests the
necessary measures for the improvement of the financial performance of the company. The
major scope of the study is given below:
 Stakeholders can analyze the level of profitability condition in Prabhu Bank.
 It can also be used as base for performance evaluation.
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 The study can also be used for making comparison with others.
1.4 Limitations of the Study
Limitations are the restriction that can affect the result of the study. Its limitations are those
events, things, variables, information etc. that are outside of the scope of the study. The
limitations of this project are as follows:
 Quick ratio is also a part of liquidity analysis, but here in this study quick ratio has not
been calculated as banks does not have inventories.
 For the forecast of the liquidity requirement, daily and monthly data are needed. But, here
only the annual data are used for the analysis.
 The conclusion of this study may not be applied in other banks since the study is on
Prabhu Bank.
1.5 Importance of the Study
After completing this study, it will help different groups of people and institution. However, the
major importance of this study is as follow:
To the Research Himself
Through this study, the researcher can developed their knowledge, skills and experience which
helps in problem solving, decision making and time management. This study also helped to
develop and enhance the conceptual as well as analytical capability of the researcher.
To the Bank
This study provides important information to the bank. This study shows the accurate or true
picture of the profitability condition of Prabhu Bank and provides feedback.
To the Information Seeker
This study provides relevant information to the information seekers for making investment
decision. This report provides guidelines for the people who are going to prepare report on the
related topic.
To enrich library Assets
One piece of the final report is kept in the library with other materials which helps the readers for
the further study. So, it will enrich the library assets.
1.6 Organization of the Study
Organization of the study includes the formation of the chapters. This study has been categorized
into five chapters along with the bibliography and appendix at last. The first chapter of this study
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is introduction which includes the background, objectives, scope, limitation, importance and
organization of the study.
Similarly, the second chapter of this study is literature review which presents a review of
literature, its objectives, review of related studies and relevant research associated with this
study.
The third chapter of this study is research methodology which presents the methodology,
research design, nature and sources, processing, procedures, analysis tools and interpretation
techniques used for data collection and analysis.
The forth chapter of this study contains calculation, analysis, interpretation of the data and
presentation of the results.
And finally, the fifth chapter of this study offers a summary and conclusion of the studys
suggestions, findings, implications for practice, and recommendations for future research.
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CHAPTER- 2 LITERATURE REVIEW
2.1 Meaning of Literature Review
Literature review refers to the study of previous research and documents. Review of previous
studies is very important in academic research and it helps to complete the research work. It
helps to understand our research problem better and know the methodology that is to be used in
research.
According to Walliman, “A literature review is a summary and analysis of current knowledge
about a particulars topic or areas of enquiry.”
According to Cardesco and Gatner, “A literature review is a self- contained unit in a study which
analyzes critically segment of published body of knowledge through summary, classification and
comparison of prior research studies and theoretical articles.”
According to P. Haywood and E.C. Wragg, “A literature review is the process of locating,
obtaining, reading and evaluating the research literature in the area of your interest.”
2.2 Objectives of Literature Review
The objectives of literature review are as follows:
 To know the research conducted in the chosen field.
 To identify the research gap.
 To develop theoretical framework.
 To develop research design.
 To know the method of data analysis.
2.3 Review of Related Studies
There are so many related studies conducted by previous researchers relating this topic. But, it is
quite impossible to review all these studies. Therefore, only three related studies had been
reviewed.
On study on “Profitability Analysis of Standard Chartered bank” (2017) by Subodh Kr. Karn had
the following objectives and findings:
Objectives of the Study
 To access important characteristics of SCBLN, like profitability.
 To determine the financial state of SCBLN.
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 To point out the strength and weakness of SCBLN.
 To introduce with the problems which may occur in future?
 To offer information to manager, shareholders and public who would contact for the
study of SCBLN.
Major Findings
 The leverage ratios shows that the debt financing of SCBLN is extremely high volume of
capital, the high debt equity is the risk to the creditors of SCBLN and the firm itself.
 The turnover ratios show the position of bank is positive but it is in decreasing trend.
 Profitability ratios shows the profitability position of SCBLN which is good because its
profit margin has increased in F.Y.2062/063 and al, ratios shows the investors of SCBLN
are receiving higher return on their fund.
The next study on “Profitability Of Shine Resunga Bank Limited” (2011) by Yadav B.K had the
following objectives and findings:
Objectives of the study
 To analyze the function, objectives, procedures and activities of the Shine Resunga Bank
Limited.
 To analyze the lending practices and resource utilization of SRM.
 To determine the impact of growth in deposit on liquidity.
 To examine the lending efficiency and contribution to profit.
Major Findings
 Bank has utilized most funds in the form of credit and advances. More than 70% of total
deposits of the bank forwarded to customers as a credit and advances.
 The major part of utilizing deposits and income generating sections. If bank has high
deposits, bank can provide money to its customers as credit and advances. Therefore,
there is highly positive correlation between total deposits and credit and advances of
SRB.
 Bank is providing different schemes to attract good customers. After attracting deposits
from the customers, bank deposits from the nearby area to make profit for the bank.
The next study on “Profitability Position of Himalayan Bank Limited” (2013) by Suresh Gyan
had the following objectives:
6
 To provide financial help to the general public.
 To provide safe deposit to the customers.
 To become a leading bank in the country by providing premium products and services
and then ensuring attractive and substantial return to shareholders.
 To provide various kinds of credit facilities such as home loan, education loan.
 Draw out with conclusions and suggestion based on the analysis and the interpretation of
data.
Major findings of the study are as follows:
 In this study, it is found that the bond of HBL with its customers is good because it
mainly focuses on retaining their customers.
 It leads private sector bank and have its vast range of products and availability of options
make it one of the better Bank in Nepal.
 Total assets ratio, average total deposit ratio, average fixed deposit ratio, net profit to
total assets ratio and activity turnover ratio is increasing whereas current ratio is
decreasing which has been shown in this study, whereas current ratio is decreasing.
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CHAPTER-3 RESEARCH METHODOLOGY
3.1 Meaning of Research Methodology
Research Methodology is the process of arriving at the solution of the problem through planned
and systematic dealing with the collection, analysis and interpretation of facts and figures.
Research Methodology includes a logical sequence from the study of data to its conclusion.
Therefore, it is very important as it represents the method entire research.
According to Clarke and Clifford Woody (1978), “Research Methodology is a careful,
systematic and objective investigation conducted to obtain valid facts, draw conclusion and
established principles regarding an identified problem in some field of knowledge.”
According to Mouley (1994), “Research Methodology is the process of arriving at dependable
solution to the problems through the planned and systematic collection, analysis and
interpretation of data,”
3.2 Research Design
Research Design refers to the framework or blueprint of the research. Research work is
conducted based on research design. It presents works of research serially from the beginning to
the ends in a logical way. It helps to allocate the limited resources by posing crucial choices in
methodology. There are different research design that the researcher can use. Some of them are
as follows:
 Exploratory Research Design.
 Descriptive Research Design.
 Correlation Study.
 Causal Comparative Research Design.
 Experimental Research Design.
 Quasi- Experimental Research Design.
Among all the above mentioned research design, this report is based on descriptive research
design. This research is conducted with the aim of studying the subject of research in detail and
explains the facts and characteristics related to research problem.
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3.3 Nature and Sources of Data
Data are the raw materials that help to find out accurate results. The information or facts
collected through record, observation and measurement is known as data. Mainly data are
classified as primary and secondary.
Primary Data
Data that have been collected by the researcher himself as per the objective of the researcher is
known as primary data. The field work requires generating the data.
Secondary Data
If the researcher uses the data developed by others in the past for their own purpose is known as
secondary data.
Here, published source of data that is the annual report of the bank has been used for this report.
The nature of data of this report is primary. Such data have been collected through primary
sources such as questionnaire, observation, telephone contact, group discussion interview.
For the preparation of this report, all the data has obtained from the internet i.e., all the data have
been collected from the published annual report of Prabhu Bank through their official website.
3.4 Decision of Sample
Sampling is the process of selecting samples from the large finite or infinite population. There
are mainly two methods of sampling i.e., probability sampling and non-probability sampling.
Probability Sampling
A sampling technique where every element in the population has equal chance of being selected
as sample unit is known as probability sampling. Some of the important probability sampling
techniques are simple random, systematic, stratified and cluster sampling.
Non-Probability Sampling
Sampling where there is no equal chance of selecting as sample to each unit and sampling imade
based on pre-plan is known as non-probability sampling. Some of the important non-probability
sampling methods are purposive or judgmental, quota, convenience, self-selecting and snow ball
sampling.
This report is based on judgmental sampling which is one of the types of non-probability
sampling. Here, the researcher has selected the unit as sample on the basis of his/her judgment.
This method is used when there is high limitation of time and resources.
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3.5 Data Collection Procedure
Data collection is the process of gathering information on variables of interest, in an established
systematic fashion that enable one to answer stated research question, test hypothesis, and
evaluate outcomes.
It depends upon the sources of data such as self- administered questionnaire, observation,
interview are procedures to follow when the data are primary. But journals, articles, internet etc.
are sources to collect secondary data.
As this report is based on secondary data, the data are obtained from various published and
unpublished sources. In this report the data has been collected from the source of internet
through site visit. To collect the data, annual reports and prior information of the particular
organization has been used as main source. Similarly, sample of previous report on the same
topic has been taken for reference to prepare the report.
3.6 Data Processing
Data processing is act of refining and manipulating the items of data to produce meaningful
information. Data should be processed by using specific techniques to draw the conclusion. Data
processing includes sorting, grouping and tabulation.
Sorting: Sorting is the process of segregating relevant and irrelevant data from the whole
obtained data. It is the arrangement of data in a prescribed sequence.
For this report, the relevant data i.e., balance sheet and income statement has been sorted from
the five years annual report of the bank.
Grouping: It is the process of accumulating similar items into various classes. Grouping of data
can be made under following bases:
 Similar data base
 Differential data base
While grouping is concerned, this report followed the similar data base. All the ratios calculated
have been grouped yearly.
Tabulation: Tabulation refers to the process of arranging data in a systematic manner into rows
and columns. Rows are horizontal arrangement and columns are vertical arrangement. This
report has used necessary tabulation that shows the ratio calculation and their representation.
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3.7 Data Analysis tools
The tools that are usedto0 gather, arrange, classify and modeling the data with the purpose of
gathering useful information is known as data analysis tools. Analytical tools may be financial,
statistical or mathematical tools but this design uses only financial and mathematical tools.
Financial Tools
 Net profit margin
 Gross Profit Margin
 Return On Assets
 Return On equity
Mathematical Tools
 Percentage
3.8 Data Interpretation Techniques
Data interpretation techniques are the process of applying statistical procedure to find specific
facts from a research. There are different interpretative techniques that researcher can use but in
this report only three techniques have been used.
 In first paragraph, only the calculated values are explained.
 In second paragraph, the researcher has mentioned central understanding.
 At last, what the researcher might have expected causes or reasons for improvement of
negative result and suggestions on results are included.
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CHAPTER-4 DATA PRESENTATION, ANALYSIS, INTERPRETATION
AND FINDINGS
This chapter is analytical, interpretive and descriptive in nature. This is analytical because the
collected data are calculated according to formula needed. After that tables are prepared and
calculated values are put on these tables. After that comparison is made of last five years
calculated values.
4.1 Data Presentation, Analysis and Interpretation
 Net Profit Margin
 Gross Profit margin
 Return on assets
 Return on Equity
 Earnings Per Share
4.1.1 Net Profit Margin (2073-2077)

The calculated 5 years Net Profit Margin values and their differences in values have been
presented in Table 4.1.1
Table 4.1. 1 Net Profit Margin
Years Calculated Values Increase/Decrease
2073 31.11% -
2074 29.09% -2.02%
2075 11.73% -17.36%
2076 16.59% 4.86%
2077 10.12% -6.47%
Source: Financial Statements of Prabhu Bank Ltd (2073-2077)
The table above shows the calculated values, the change in value of each five years.
The calculated value of Prabhu bank Ltd, in the year 2073 is 31.11%. The calculated value gets
decreased to 29.09% in the year 2074. Similarly, it also decreased to 11.73% in the year 2075.
But, in the year 2076 the calculated values is in increasing trend, which is 16.59% and in the year
2077 the calculated values gets decreased to 10.12%.
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The change in value in the year 2074 and 2075 are -2.02%and -17.36%. Both the years have
negative change. Similarly, in the year 2076 the change in values is 4.86%. There is positive
change in the year 2076. But, in the year 2077 the change in value is -6.47%. There is negative
change in the year 2077.
The above calculation shows that Net Profit Margin is in fluctuating trend. Net Profit Margin
decreased in 2073-2075 due to the decrease in in current deposit. NPM increased in 2075-2076
due to the increase in net profit.
The value is in fluctuating trend because of the following reasons:
 Due to increment and decrement in the interest expenses.
 Due to increment and decrement interest revenue.
 Due to high and low tax payment.
The same data is presented in the same bar graph.
35
30
25
20
15
10
0
2073 2074 2075 2076 2077
4.1.2. Gross Profit Margin (2073-2077)

The calculated 5 years Gross profit Margin values and their differences in values have been
presented in table 4.1.2
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Table 4.1. 2 Gross Profit Margin
Years Calculated values Increase/Decrease
2073 54.82% -
2074 46.15% -8.67%
2075 34.18% -11.97%
2076 40% 5.82%
2077 38.32% -1.68%
Source: Financial Statements of Prabhu bank Ltd (2073-2077)
The table above shows the calculated values and the change in values of each five years.
The calculated value of Prabhu Bank Ltd, in the year 2073 is 54.82%.The calculated values gets
decreased to 46.15% in the year 2074. Similarly, it also decreased to 34.18% in the year 2075.
But, in the year 2076 the calculated values is in increasing trend, which is 40% and in the year
2077 the calculated values gets decreased to 38.32%.
The change in value in the year 2074 and 2075 are -8.67% and -11.97%. Both the years have
negative change. Similarly, in the year 2076 the change in values is 5.82%. There is positive
change in the year 2076. But, in the year 2077 the change in value is -1.68%. There is negative
change in the year 2077.
From the above analysis, it is clear that the values are in fluctuating trend. The reason behind this
fluctuation are given below:
 Due to the increment and decrement in interest expenses (COGS).
 Due to higher and lower interest income.
 Due to increase in cost of goods sold.
The same data is presented in the same bar graph.
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60
50
40
Column2
30
Column1
Series 1
20
10
0
2073 2074 2075 2076 2077
4.1.3. Return on Assets (2073-2077)

The following table contains the value of ROA of five years.
Table 4.1. 3 Return on Assets
Years Calculated values Increase/Decrease
2073 1.63% -
2074 1.76% 0.13%
2075 0.86% -0.9%
2076 1.29% 0.43%
2077 0.71% -0.58%
Source: Financial Statements of Prabhu bank Ltd (2073-2077)
The table above shows the calculated values and the change in values of each five years.
The calculated value of Prabhu Bank Ltd, in the year 2073 is 1.63%. The calculated value gets
increased to 1.76% in the year 2074. But, in the year 2075 the calculated value gets decreased to
0.86%. Similarly, it also increased to 1.29% in the year 2076 and in the year 2077 the calculated
values decreased to 0.71%.
The change in value in the year 2074 is +0.13%. There is positive change in the year 2074.
Similarly, in the year 2075 the change in value is -0.9%. There is negative change in the year
15
2075. But, in the year 2076 the change in value is +0.43%. There is positive change in the year
2076. In the year 2077 the change in value is -0.58%. There is negative change in the year.
 Due to increment and decrement in net profit in each of five years.
 Due to increment and decrement in total assets of the bank in each of five years.
 Due to under and over utilization of fixed assets.
The same data is presented in the bar graph.
Chart Title
2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2073 2074 2075 2076 2077
4.1.4 Return on Equity (2073-2077)

The following table contains the value ROE of five years.
Table 4.1.4 Return on Equity
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Years Calculated values Differences in values
2073 17.37% -
2074 19.29% 1.92%
2075 7.69% -11.6%
2076 12.45% 4.76%
2077 7.76% -4.69%
Source Financial Statement of Prabhu Bank Ltd (2073-2077)
The table above shows the calculated values and change in values of each of five years.
The calculated value of Prabhu bank Ltd, in the year 2073 is 17.37%. The calculated value gets
increased to 19.295 in the year 2074. But, in the year 2075 the calculated value gets decreased to
7.695. Similarly, it also increased to 12.45% in the year 2076 and in the year 2077 the calculated
value decreased to 7.76%.
Similarly, in the year the change in value is -11.6%. There is negative change in the year 2075.
But, in the year 2076 the change in value is 4.76%. There is positive change in the year 2076. In
the year 2077 the change in value is -4.69%. There is negative change in the year 2077.
 Due to increment and decrement in net profit.
 Due to high/low paid of capital.
 Due to high/low debt payment.
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The same data is presented in the bar graph.
25
20
15
Column1
Column2
10 Series 1
0
2073 2074 2075 2076 2077
4.1.5 Earning Per Share

The following table contains the value of EPS of five years.
Table 4.1.5 Earning Per Share
Years Calculated values Change in value
2073 19% -
2074 27.17% 8.17%
2075 11.74% -15.43%
2076 20.06% 8.32%
2077 11.58% -8.48%
Source: Financial Statement of Prabhu bank Ltd (2073-2077)
The table above shows the calculated values and change in values of each five years.
The calculated value of Prabhu bank Ltd, in the year 2073 is 195. The calculated value gets
increased to 27.175 in the year 2074. But, in the year 2075 the calculated value gets decreased to
11.74%. Similarly, it also increased to 20.06% in the year 2076 and in the year 2077 the
calculated value decreased to 11.58%.
Similarly, in the year 2075 the change in value is -15.43%. There is negative change in the year
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2075. But, in the year 2076 the change in value is +8.325. There is positive change in the year
2076. In the year 2077 the change in value is -8.48%. There is negative change in the year 2077.
From the above analysis, it is clear that the values are in fluctuating trend. The reason behind the
 Due to the increment and decrement in net profit.
 Due to perceived risk of stock.
 Due to decrement in dividend per share.
The same data presented in the bar graph.
30
25
20
Column3
15
Series 2
Series 1
10
0
2073 2074 2075 2076 2077
4.2 Major Findings

After analyzing and interpreting the relevant data, the following findings are derived.
 The NPM of PBL of recent five years is in fluctuating trend due to the change in net
profit and sales revenue.
 The GPM of PBL of recent five years is in fluctuating trend due to the change in gross
profit and sales revenue.
 The ROA of PBL of recent five years is in fluctuating trend due to the change in net
income and total assets.
 The ROE of PBL of recent five years is in fluctuating trend due to the change in net
income and total equity.
19
 The EPS of PBL of recent 5 years is also in fluctuating trend.
 The overall result shows the average change in net income and other losses in the bank.
The management must have to be multi dynamic in nature to make better decision and
increase the net income and gross profit in bank.
20
CHAPTER-5 SUMMARY AND CONCLUSION
5.1 Summary
The project is prepared on this topic “A study on profitability analysis of Prabhu bank Limited”.
The objective of this report is to find out profitability analysis of Prabhu Bank Limited, to
dtermi8ne trend of profitability, to show the profitability condition of the bank. The basic
objective of the study is to find out the profitability analysis of Prabhu Bank Limited. Thus, this
report bri8ngs the banks objective and its visions.
After that the study talks about the literature review done for this report. It includes the
reviewing of previous working related topic. This report includes the four related studied with
their objectives and their findings to support this study such as, “Profitability analysis of
Standard chartered bank” (2017) by Subodh Kr. Karn. “Profitability of shine Resunga bank
Limited” (2011) by Bibek Pandit and “Profitability of SRB” (2012) by Anu Shrestha.
Next, the study brings the concept of research methodology. The chapter deals about the
methodology that is used for this report. It talks about the research design, source of data
sampling technique, data processing, tools, technique etc. Thus, the study uses the exploratory
research design and based on secondary data.
Lastly, the fourth chapter revolves around the data presentation analysis and the profitability
position of the bank. VARIOUS RATIOS ( NPM, GPM, ROA, ROE, EPS and P/E Ratio) have
been computed to determine the financial condition of the bank relating to profitability
management.
5.2 Conclusion
The overall results are not satisfactory and are in fluctuating trend. But in some cases, Prabhu
bank Limited should take certain steps to improve the bank’s profitability position. Therefore,
some recommendations are put forward for its improvement along with the development of the
company. Based on the analysis, data and findings, the following conclusions are made.
 The analysis of the data shows the net profit margin (NPM) of Prabhu bank Limited is
trending towards positive to negative. So, the bank should reduce the interest expenses,
increase the interest income and reduce labor and operation cost.
21
 The gross profit margin (GPM) of Prabhu bnak Limited is trending is also trending
towards positive to negative. So, the bank should increase price, limit the discounting, cut
waste, scheduled employee need, no overtime period, give bonuses when deserved.
 However, the return on assets (ROA) of Prabhu Bank limited is trending towards
negative to positive. It is a good sign, especially the growing companies. So, the bank has
to keep maintaining ROA factors.
 Similarly, the return on equity (ROE) of Prabhu Bank Limited is trending towards
negative to positive, So, the bank should maintain paid of capital, liabilities & net
income.
 Again, the earning per share (EPS) of Prabhu bank Limited is trending towards negative
to positive. So, the bank should maintain its earning ( net profit).
22
BIBLIOGRAPHY
Cardesco F, Gatner E.M (1971).Research and Report Writing. New York: Barnes and Nobel.
Clarke and Clifford Woody (1978). Using Thematic Analysis in Psychology, Qualitative
Research in Psychology. New York.
Haywood P. and Wragg E.C (1996). Eval;uating the literature: Rediguide. Nottingham
University.
Jain, S.P. and Narang, K.L. “Financial and Management Accountancy”, New Delhi: Kalayani
Publisher 2nd Edition.
Mouley S. (1994). Research Design. New York: Black Day Publishing.
Walliman N. (1982).Your Research Project: A Step by Step for the First Time Researcher. New
Delhi: Vistaar Publication.
Unpublished Reports
Bibek Pandit (2012), “Profitability of Shine Resunga Development Bank Limited”
Subodh Kr. Karn (2017) “Profitability Analysis of Standard Chartered Bank Limited”
Anu Shrestha (2012) “Profitability of SRB”
Websites
http://en.wikipedia.org
http;//prabhubank.com.np
http://google.com
Annual Report
Annual Report (2072-2073), Prabhu Bank
Annual Report (2076-20770, Prabhu Bank
23
APPENDIX-1
Prabhu Bank Limited
Balance Sheet (2073)
S. Equity and Liabilities Current Year (Rs.) Previous Year (Rs.)

N
1 Share Capital 5881402.22 3881402.22
2 Reserves & Funds 552439.41 1597707.95
3 Debentures & Bonds - -
4 Loans & Borrowing 15243.36 -
5 Deposit Liabilities 60940868.32 50000000
6 Bills Payable 47410.12 30783
7 Proposed Dividend - -
8 Tax Liabilities - -
9 Other Liabilities 900815.69 682227
Total Capital and Liabilities 68338171.12 56192120.17
S. Assets Current Year (Rs.) Previous Year (Rs.)
N
1 Cash Balance 2965460.11 1992860.18
2 Balance with NRB 7505153.80 3500000
3 Balance with Bank 1907095.03 2008546.18
4 Money at Call & Short Notice 1750000 70775
5 Investments 5827058.95 8503384.15
6 Loan 43909120.61 36620480
7 Fixed assets 2136023.97 1709288.02
8 Non-Banking Assets - -
9 Other Assets 2338266.65 1786786.64
24
Total Assets 68338171.12 56192120.17
Prabhu Bank Limited

Profit and Loss Account (2073)
S. Particulars Current Year Previous Year
N (Rs.) (Rs.)
1 Interest Income 3590979.71 3541238
2 Interest Expenses 1622497.14 1772539
Net Interest Income 1968482.57 1768699
3 Commission and Discount 109650.28 82066.90
4 Other Operating Income 292661.20 228251.27
5 Exchange fluctuation Income 153557.05 134009.25
Total Operating Income 2524351.10 2213026.42
6 Personal Expenses 700189.43 528863.59
7 Other Operating Expenses 674193.98 568911.96
8 Loss on Exchange - -
Operating Profit Before Provision for Possible 1149967.69 1115250.87
losses
9 Provision For Possible Losses -475520.34 -
10 Non-Operating Income 72717.17 6300
11 Provision For possible Written-Back 10576614.89 639307.03
Profit For Regular Activities 1804779.41 1760857.90
12 Profit/Loss From Extra-Ordinary Activities -38605.53 -
Net Profit after Considering all Activities 1744173.88 1760857.90
13 Staff Bonus provision 160561.26 160078
Net Profit after Bonus 1605612.62 1600779.90
14 Income tax Provision 488248.89 479999.20
25
15 Current Year 185426.71 185896
16 Previous Year 8938.64 -
17 Deferred tax 293883.54 294103.20
Net Profit/Loss 1117363.72 1120780.71
Prabhu Bank Limited

S.N Capital and Liabilities Current Year (Rs.) Previous Year (Rs.)
1 Share Capital 5881402224 5881402224
2 Reserves & Funds 2402884439 552439414
3 Debentures & Bonds - -
4 Loans & Borrowing 252386603 15243363
5 Deposit Liabilities 81349539828 60940868320
6 Bills Payable 38636989 47410124
7 Proposed Dividend - -
8 Tax Liabilities - -
9 Other Liabilities 1056850241 900815677
Total Capital and Liabilities 90981700323 68338171123
S.N Assets Current Year (Rs.) Previous Year (Rs.)
1 Cash Balance 3238043349 2965460108
2 Balance with NRB 9120743031 7505153799
3 Balance with Bank 1134882816 1907095030
4 Money at Call & Short Notice 1054730158 1750000000
5 Investments 11956969821 5827058949
6 Loan 59179325079 63909120609
7 Fixed assets 2149494480 2136023973
8 Non-Banking Assets - -
9 Other Assets 3147511590 2338266655
Total Assets 90981700323 68338171123
26
27
Prabhu Bank Limited
S.N Particulars Current Year Previous Year
(Rs.) (Rs.)
1 Interest Income 5492386444 3590979713
2 Interest Expenses 2957637155 1622497137
Net Interest Income 2534749289 1968482576
3 Commission and Discount 206794038 109650277
4 Other Operating Income 412307227 292661203
5 Exchange fluctuation Income 190460721 153557044
Total Operating Income 3344311277 2524351100
6 Personal Expenses 810748853 700189434
7 Other Operating Expenses 813322279 674193984
8 Loss on Exchange - -
Operating Profit Before Provision for Possible 1720240145 1149967682
losses
9 Provision For Possible Losses 1101050952 475520340
Operating Profit 619189194 674447342
10 Provision For possible Written-Back 2202664480 1057614881
11 Non-operating income 40180037 72717166
Profit From Regular Operation 2862033711 1804779389
12 Profit/Loss from Extraordinary Activities 349352333 -38605530
Net Profit After Considering all activities 2512681378 1766173860
13 Provision For Staff Bonus 228425580 160562260
14 Income tax Provision 686303245 488248886
Current Year 252072495 185426713
Previous Year 4375512 8938639
Deferred tax (Income)/Expenses 429855238 293883534
Net Profit/Loss 1597953553 1117363714
28
29
30
Prabhu Bank Limited
S.N Assets Current Year (Rs.) Previous Year (Rs.)
1 Cash and Cash Equivalent 13792337018 13155090517
2 Due from Nepal Rastra Bank 8031269133 6172041021
3 Placement with bank and Financial - 2215410511

Institutions
4 Derivative Financial Instruments 4476352355 3443263451
5 Other Trading Assets - -
6 Loans and Advances to BFIs 3931926634 3181808776
7 Loans and Advances to Customers 85821175779 72990231929
8 Investment Securities 14448530074 8035890509
9 Current Tax Assets - 38573248
10 Investment in Subsidiaries 116960880 116960880
11 Investment Property 438785936 464795000
12 Property and Equipment 2280261690 2107743392
13 Goodwill and Intangible Assets 39768799 17231105
14 Deferred tax Assets 261996224 -
15 Other Assets 4246972021 4090390035
Total Assets 137886336543 116029430375
31
S.N Liabilities and Equity Current Year Previous Year
(Rs.) (Rs.)
1 Due to Bank and Financial Institutions 7785248887 8004942439
2 Due to NRB 4794405958 797271683
3 Derivative Financial Instruments 5311757836 4393479202
4 Deposits from Customers 128740771349 105488505793
5 Borrowings 495179567 -
6 Current Tax Liabilities - 352998342
7 Provisions 23324555 23324555
8 Other Liabilities 3980515523 4505147252
9 Debt Securities Issued 998323929 -
10 Share Capital 10315506635 8892674706
11 Retained Earnings 1216498788 1520914579
12 Reserves 3855764831 3907077989
Total Liabilities and Equity 167517297856 137886336543
32
Prabhu Bank Limited
S.N Particulars Current Year (Rs.) Previous Year (Rs.)
Interest income 10765064446 8244597451
Interest Expenses 6366966309 5426594895
Net Interest Income 4398098137 2818002555
Fee and Commission Income 731924372 614140670
Fee and Commission Expenses 121956665 70963179
Net Fee and Commission Income 609967707 543177491
Net Interest, Fee and Commission Income 5008065844 3361180046
Net trading Income 366924420 341153748
Other Operating Income 227529594 54690557
Total Operating Income 5602519858 3757024351
Impairment Charges 370138025 -154551213
Net Operating Income 5232381933 3911575564
Operating expenses
Personal Expenses 1747760950 1348633800
Other Operating Expenses 986974778 617804888
Depreciation and Amortization 226914515 201131342
Operating Profit 2270731590 1744005534
Non-Operating Income 11813730 6500000
Non-Operating expenses 170417262 400056190
PBIT 2112128057 1350449344
Income Tax Expenses
Current Tax 981946463 288041198
Deferred Tax -653410944 95373302
Profit For The Period 1783592538 967034844
Earnings Per Share
Basic EPS 21.03 11.40
33
Diluted EPS 21.03 11.40
34
35
Appendix-2
CALCULATION OF PROFITABILITY RATIOS
Working for (2073)

.Gross Profit Margin=Gross Profit/Interest Revenue*100%
Here,
Gross Profit=Rs.1968482.57
Interest Revenue=Rs.3590979.71
Now,
Gross Profit Margin=1968482.57/3590979.71*100%
=54.82%
Hence, The Gross Profit margin is 54.82%
.Net Profit Margin=Net Profit/Interest Revenue*100%
Here,
Net Profit=Rs.1117363.72
Interest Revenue=Rs.3590979.71
Now,
Net Profit Margin=1117363.72/3590979.71*100%
=31.11%
Hence, The Net Profit Margin is 31.11%
.Return on Assets=Net Profit/Total Assets*100%
Here,
Total Assets=Rs.68338179.12
Now,
Return on Assets=1117363.72/68338179.12*100%
=1.63%
Hence, The Return on Assets is 1.63%
.Return on Equity=Net Profit/Total Equity*100%
Here,
Total Equity=Rs.6433841.63
36
Now,
Return on Equity=1117363.72/6433841.63*100%
=17.37%
Hence, The Return on Equity is 17.37%
.Earning Per Share=Net Profit/No. of Outstanding Shares
Here,
No. of Outstanding Shares=58814.02
Now,
Earnings per Share=1117363.72/58814.02
=Rs.19
Hence, The Earnings 0per Share is Rs.19
Working for (2074)
Here,
Gross Profit=Rs.2534749289
Interest Revenue=Rs.5492386444
Now,
Gross Profit Margin=2534749289/5492386444*100%
=46.15%
Hence, The Gross Profit Margin is 46.15%
Here,
Net profit=Rs.1597952553
Now,
Net Profit Margin=1597952553/5492386444*100%
=29.09%
Hence, The Net profit Margin is 29.09%
.Return On Assets=Net Profit/Total Assets*100%
Here,
37
Total Assets=90981700323
Now,
Return on Assets=1597952553/90981700323*100%
=1.76%
.Return On Equity=Net Profit/Total Equity*100%
Here,
Total Equity=Rs.8284286663
Now,
Return on Equity=1597952553/8284286663*100%
=19.29%
Here,
No. of Outstanding Shares=58814022
Now,
Earnings per Share=1597952553/58814022
=Rs.27.17
Hence, The Earnings per Share is Rs.27.17
Working for (2075)
Here,
Now,
=34.18%
38
Here,
Net Profit=Rs.967034844
Now,
=11.73%
Here,
Total Assets=Rs.112586166923
Now,
Return on Assets=967034844/112586166923*100%
=0.86%
Here,
Now,
Return on Equity=967034844/12570246448*100%
=7.69%
.Earnings Per Share=Net Profit/No. of Outstanding Shares
Here,
Now,
=Rs.11.74
39
Working for (2076)
.Gross Profit Margin=Gross profit/Interest Revenue*100%
Here,
Now,
=40%
Hence, The Gross Profit Margin is 40%
Here,
Now,
=16.59%
Here,
Now,
Return on Assets=1783592538/10765064446*100%
=1.29%
Here,
Now,
40
Return on Equity=1783592538/14320667275*100%
=12.45%
Here,
Now,
=Rs.20.06
Working for (2077)
.Gross Profit Margin=Gross profit/Interest Revenue*100%
Here,
Now,
Gross profit Margin=4520956977/11797450755*100%
=38.32%
Here,
Now,
Net Profit margin=1194203890/11797450755*100%
=10.12%
Here,
41
Now,
Return on Assets=1194203890/167517297856*100%
=0.71%
Here,
Now,
Return on Equity=1194203890/15387770254*100%
=7.76%
.Earning per Share=Net Profit/No. of Issued Share
Here,
No. of Issued Shares=103155066
Now,
=Rs.11.58
.P/E Ratio=Market value Per Share (MVPS)/Earnings per Share (EPS)
Here,
Market value per Share=
Earnings per Share=
Now,
P/E Ratio=
42

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A Study On Profitability Analysis

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DECLARATION

Raja Ram Sah

Table 4.1. 1 Net Profit Margin....................................................................................................14

1.2 Objectives of the Study

4.1.1 Net Profit Margin (2073-2077)

4.1.2. Gross Profit Margin (2073-2077)

4.1.3. Return on Assets (2073-2077)

4.1.4 Return on Equity (2073-2077)

Table 4.1.4 Return on Equity

2074 19.29% 1.92%

2075 7.69% -11.6%

2076 12.45% 4.76%

2077 7.76% -4.69%

Source Financial Statement of Prabhu Bank Ltd (2073-2077)

4.1.5 Earning Per Share

4.2 Major Findings

S. Equity and Liabilities Current Year (Rs.) Previous Year (Rs.)

Prabhu Bank Limited

Prabhu Bank Limited

Balance Sheet (2076)

S.N Assets Current Year (Rs.) Previous Year (Rs.)

1 Cash and Cash Equivalent 13792337018 13155090517

2 Due from Nepal Rastra Bank 8031269133 6172041021

3 Placement with bank and Financial - 2215410511

4 Derivative Financial Instruments 4476352355 3443263451

5 Other Trading Assets - -

6 Loans and Advances to BFIs 3931926634 3181808776

7 Loans and Advances to Customers 85821175779 72990231929

8 Investment Securities 14448530074 8035890509

9 Current Tax Assets - 38573248

10 Investment in Subsidiaries 116960880 116960880

11 Investment Property 438785936 464795000

12 Property and Equipment 2280261690 2107743392

13 Goodwill and Intangible Assets 39768799 17231105

14 Deferred tax Assets 261996224 -

15 Other Assets 4246972021 4090390035

Total Assets 137886336543 116029430375

1 Due to Bank and Financial Institutions 7785248887 8004942439

2 Due to NRB 4794405958 797271683

3 Derivative Financial Instruments 5311757836 4393479202

4 Deposits from Customers 128740771349 105488505793

6 Current Tax Liabilities - 352998342

7 Provisions 23324555 23324555

8 Other Liabilities 3980515523 4505147252

9 Debt Securities Issued 998323929 -

10 Share Capital 10315506635 8892674706

11 Retained Earnings 1216498788 1520914579

12 Reserves 3855764831 3907077989

Total Liabilities and Equity 167517297856 137886336543

Working for (2073)

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