A STUDY ON PROFITABILITY ANALYSIS OF

NABIL BANK

A Project Work Proposal

Submitted By

Meena Sundas Pariyar

T.U. Regd. No: 7-2-406-109-2018

Group: Finance

Manamohan Memorial College

Submitted To

Research Department

Manamohan Memorial College

In Partial Fulfillment of the Requirements for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Kathmandu, Nepal

2023
 TABLE OF CONTENTS
1. INTRODUCTION.....................................................................................................................1
1.1 Background of the Study.................................................................................................1
1.2 Statement of Problem.....................................................................................................3
1.3 Objectives of the Study...................................................................................................3
1.4 Need & Significance of the Study....................................................................................3
1.5 Limitations of the Study..................................................................................................4
2. LITERATURE REVIEW.............................................................................................................5
2.1 Conceptual Review.........................................................................................................5
2.2 Review of Related Studies...............................................................................................5
3. RESEARCH METHODOLOGY..................................................................................................7
3.1 Introduction....................................................................................................................7
3.2 Research Design..............................................................................................................7
3.3 Population and Sample...................................................................................................7
3.4 Sources of Data...............................................................................................................7
Bibliography..............................................................................................................................8

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 1. INTRODUCTION

1.1 Background of the Study

Profitability analysis is a process of evaluating the financial performance of a business

or project by analyzing the revenue, costs, and expenses associated with it. (Horngren,
2019) defined profitability analysis "the process of evaluating the profitability of
different segments of a business or product lines and making decisions about how to
allocate resources to maximize profits". Profitability ratios are used to evaluate
management's ability to create earnings from revenues generating bases within the
organization. It helps to determine the profitability of a business by comparing
revenues and expenses and analyzing the net profit or loss of the organization.
Profitability ratios reveal the company's ability to earn a satisfactory profit and return
on investment. It is often used to determine the efficiency and effectiveness of a
company's management in generating profits.

The study of profitability analysis has evolved over time to include various
methodologies and techniques. These include traditional ratio analysis, cost-volume-
profit analysis, and activity-based costing, among others. With the advancement of
technology and the availability of data, newer methods of profitability analysis such
as data mining and predictive analytics have also been developed. The analysis
typically includes the calculation of financial ratios such as the gross profit margin,
operating profit margin, and net profit margin, which provides insights into a
company's profitability and operating efficiency.

Overall, the study of profitability analysis is an important aspect of financial analysis

and management, and helps business to determine its profitability and identify areas
where improvements can be made to increase profitability.

A Brief Introduction to NABIL Bank

Established in 1984 AD, Nabil Bank has carved cornerstone in the development of the
financial services industry in Nepal. The bank has always stayed true to its three
strong pillars: Service Excellence, Technology, and Product innovation. This has led
to the start of customer-centric banking culture with the development of innovative

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services and products, enriching customers' livelihoods and setting benchmarks in the
Domestic Banking Sector.

Nabil Bank operates through its wide network of 230 branch offices, 254 ATMs,
numerous POS terminals, remittance agents spread across the nation. The Bank also
has over 170 international correspondent banking relationships. The Bank operates its
investment banking arm through its subsidiary Nabil Investment Banking Ltd.

The mission of the bank is to be the 'Bank of 1 st Choice' of all their stakeholders. For
the achievement of Mission and consistently move closer to the attainment of Vision,
each and every member of Team Nabil is committed to work within their set of Core
Values. (NABIL BANK, 2023)

In this proposal, we aim to conduct a profitability analysis of NABIL Bank to

understand the bank's financial performance and identify areas for improvement.

1.2 Statement of Problem

Despite the increasing competition in the banking industry, Nabil Bank has been able
to maintain a strong market position in Nepal. However, there is a need to evaluate
the bank's profitability and identify areas where improvements can be made to
increase profitability. The problem statement of this study or proposal addresses or
includes the examining of financial performance of the bank over a certain period of
time (for the past 5 years), in order to determine its profitability. Ultimately, the goal
of this proposal is to provide valuable insights and information's about the financial
position of the bank to its wide range user and shareholders in order to take the right
decision.

Therefore the study has been stated "A Study On Profitability Position of Nabil
Bank."

This problem that this research proposal aims to address is:

i. What may be the different profitability ratios of the bank?

ii. What is the financial position of Nabil Bank?
iii. What are the factors affecting the profitability of Nabil Bank, and how can
bank improve its profitability in the current competitive environment?

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1.3 Objectives of the Study

Objectives define the purpose of this study and provide a clear direction for the
research. The main objective of this study is to analyze the financial statements of
Nabil Bank in order to determine its profitability position.

Other specific objectives are listed below:

i. To determine the profitability ratios of Nabil Bank over the past five years.
ii. To evaluate the profitability position of Nabil Bank.

1.4 Need & Significance of the Study

The main purpose of this study is to know about the profitability position of Nabil
Bank using various financial tools. Financial ratios are important tools for the analysis
of financial performance of a bank. Its importance is to all the stakeholder's of the
bank. The stakeholder's may be the management, the shareholder's and the outsiders.
Some important significance of this study has been mentioned below:

i. To provide insights for investors and stakeholders

The study can provide valuable insights for investors and stakeholders in
Nabil Bank, including shareholders, customers, and regulatory authorities, to
assess the bank's financial performance and make informed decisions.
ii. To compare the bank's profitability with its peers
By benchmarking Nabil Bank's profitability against its peers in the banking
industry, this study can provide insights into the bank's competitiveness and
market position.
iii. To identify the key drivers of profitability
The profitability analysis can help to identify the key drivers of Nabil Bank's
profitability, including factors such as revenue growth, cost management, and
risk management.
iv. To evaluate the financial performance of the bank
Profitability analysis is an important tool to assess the financial performance
of any organization. By analyzing the profitability of Nabil Bank, this study
can provide insights into the bank's financial health, efficiency, and
effectiveness.

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1.5 Limitations of the Study

Limitations of the study refer to factors that may constrain the scope, generalizability,
or accuracy of a research study. Limitation tends to narrow the area of the study. It is
an important component of any research proposal as it helps to identify potential
challenges and ensure that study is feasible and methodologically sound. Some of the
major limitations of this study have been mentioned below:

i. Though there are several commercial banks, this study will cover only one
commercial bank in Nabil Bank.
ii. This study will be concerned only for the period of five years.
iii. The study report may not be precise since almost all the data used will be
secondary.
iv. The study will be solely based on the published annual report of Nabil Bank.
v. There will be use of only some statistical tools for presentation and analysis of
data.

2. LITERATURE REVIEW

2.1 Conceptual Review

The review of literature gives a broad outlook of various research studies made in the
past and the details of such studies throw light on future studies to be made. It also
strengthens the theoretical base of the research study. In the modern day economy,
finance is any area of study that helps us get manage and invest money. Profitability is
the efficiency of a company or industry at generating earnings. Profitability is
expressed in terms of several popular numbers that measure one of two generic types
of performances:"how much they make with what they have got" and "how much they
make from what they take in."

(Paudel, Baral, Joshi, Gautam, & Rana, 2016, p. 267) Profitability is the end result of a
number of corporate policies and decisions. It measures how effectively the firm is
being operated and managed. Investors are interested to know the profit earning
capacity of the firm. So profitability ratios are calculated to evaluate the profitability
position of the firm by relating firm's net profits to its sales, assets and equity.

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2.2 Review of Related Studies

(Olawale & Ogunbiyi, 2018) performed the study on the determinants of bank
profitability in Nigeria, with a particular focus on the use of the Pooled Mean Group
(PMG) estimation method. The review highlighted the importance of factors such as
liquidity, credit risk, and capital adequacy in determining bank profitability in
Nigeria.

(Gunarathne & Pathberiya, 2017) studied the determinants of bank profitability in Sri
Lanka, with a particular focus on the use of the regression analysis method. The
review highlighted the importance of factors such as interest rates, operating
expenses, and asset quality in determining the bank profitability.

(Tang, Li, & Wang, 2020) in their study examined the impact of digital transformation on
bank profitability in China. The authors find that digital transformation positively
affects bank profitability through the impact on cost reduction, revenue enhancement,
and risk mitigation.

(Guo & Stepanyan, 2017) in their study compared the bank profitability in Asia and the
Pacific and the Euro area in the context of a low interest rate environment. The
authors find that profitability in both regions is affected by interest rates, but other
factors, such as non-interest income and cost efficiency, are also important.

(Das & Ghosh, 2021) article analyzes the impact of macroeconomic variables on bank
profitability in India. The authors find that inflation, economic growth, and exchange
rates are significant determinants of bank profitability in this country.

(Ozili & Arun, 2020) investigated the relationship between bank profitability and capital
regulation in Nigeria. The authors find that capital regulation negatively affects bank
profitability, especially for smaller banks. They also suggest that other regulatory
measures may be more effective in promoting stability in the banking system.

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 3. RESEARCH METHODOLOGY

3.1 Introduction

Research methodology of this research or study will be based on the basic or

fundamental research as it tries to fetch the depth knowledge about the profitability
position of the bank. The study will be based on secondary data. For this data, annual
report, brochures, journals, publications etc will be used. In this study, various
financial, accounting and statistical tools will be used to achieve the objectives of the
study. The study will include the data over the period of 5 years.

3.2 Research Design

Keeping in mind the objective of the study, descriptive analytical research design will
be followed. The study will be based on the wide range of variables and factors
influencing profitability ratio of the bank. Comparative data of the banks will be
presented in such a way to make the report informative to the reader.

3.3 Population and Sample

Out of 22 commercial banks (population) in its operation in Nepal during the period
of study, only the Nabil Bank will be selected or considered the sample for the present
study since the study of whole population may not be possible. A total of 5 fiscal
years will be used as sample.

3.4 Sources of Data

This study will use secondary source of data. Data will be collected through published
annual audited reports, brochures of the respected bank. Similarly, the data will be
collected and gathered by accessing to the internet and official website of the
respected bank. Collections of data will be presented by using Graphs and Charts, so
that they can be easily analyzed.

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Bibliography
Das, A., & Ghosh, S. (2021). The impact of macroeconomic variables on bank profitability:
Evidence from India. Journal of Financial Economic Policy , 13 (1), 20-38.

Gunarathne, N., & Pathberiya, G. (2017). Determinants of profitability of commercial banks

in Sri Lanka. International Journal of Scientific and Research Publications , 7 (6), 261-272.

Guo, L., & Stepanyan, V. (2017). Bank profitability in a low interest rate environment: A
comparative study of Asia and the Pacific and the Euro area. Jouranl of Banking & Finance ,
77, 1-15.

Horngren, C. T. (2019). Cost Accounting A Managerial Emphasis. London: Pearson Education

Limited.

NABIL BANK. (2023). About Nabil Bank. Retrieved March 17, 2023, from NABIL BANK:
https://www.nabilbank.com/business/company-business/introduction-business

Olawale, L. A., & Ogunbiyi, O. (2018). Determinants of bank profitability in Nigeria: A Pooled
mean group estimation approach. Journal of Economics and Sustainable Development , 9
(10), 12-25.

Paudel, R. B., Baral, K. J., Joshi, P. R., Gautam, R. R., & Rana, S. B. (2016). Profitability Ratios.
Bhotahity, Kathmandu, Nepal: Asmita Books Publisher and Distributors (P) Ltd.

Tang, L., Li, L., & Wang, Y. (2020). The impact of digital transformation on bank profitability:
Evidence from China. Journal of Business Research , 112, 34-45.

Website accessed: http//www.google.com