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PROFITABILITY ANALYSIS OF NIC ASIA

BANK LIMITED

Submitted by:
Puja Kumari Shah Sonar
Campus Roll no: 155
TU Reg. No: 7-2-0003-0776-2019
Phone no: 9805346339
Batch: 2076
BBS 4th year
Group : Finance

A Project Work Proposal

Submitted to:
Management Research Committee
Mahendra Morang Adarsha Multiple Campus, Biratnagar
Faculty of Management
Tribhuvan University

In Partial Fulfillment of the Requirement for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Biratnagar, Nepal
April, 2024
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1. Background of study
The term ‘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.
Profitability analysis is a financial assessment that evaluates the ability of a business or a specific
project to generate profit. It involves examining the financial performance and efficiency of an
entity by analysing various factors that impact its profitability. The goal of profitability analysis
is to provide insights into how well a business is utilizing its resources to generate earnings.
Profitability analysis is crucial for making informed business decisions, setting realistic financial
goals, and optimizing operations to enhance overall financial performance. Businesses often use
various financial ratios and metrics to perform a comprehensive profitability analysis and
compare their performance over time or against industry benchmarks. Profit analysis is part of
enterprise resource planning (ERP) and helps business leaders to identify ways to optimize
profitability as it relates to various projects, plans, or procedures. It is the process of
systematically analysing profits derived from the various revenue streams of the business.
Sometimes profitability analysis is incorrectly assumed to exclusively rely on profitability ratios.
In fact, profitability analysis relies on both qualitative and quantitative analytics to help leaders
get the full picture. While profitability analysis does answer many quantitative questions, it is
unique in that it can also help business leaders identify which sources of information are most
factual and reliable. This is especially helpful in helping to select new enterprise resource
planning solutions as the need for factual and reliable data is paramount.

Profile of the organizations:

NIC ASIA Bank has its antecedents in NIC Bank which was established on 21st July 1998. The
Bank was rechristened as NIC ASIA Bank after the merger of NIC Bank with Bank of Asia
Nepal on 30th June 2013. This was a historic merger in the annals of the Nepalese financial
landscape as the first of its kind merger between two successful commercial banks in the
country. Today, NIC ASIA has established itself as one of the most successful commercial banks
in Nepal. Currently, NIC ASIA Bank has 360 branches all over Nepal. The head office of the
bank is located at Trade Tower, Thapathali, Kathmandu. The main them of focus on providing
innovative financial service, increase in capital base of the bank by meeting the minimum capital
requirement business growth and increase in market share. NIC Asia Bank Limited is an “A”
class autonomous organization largely owned by Government of Nepal. The bank has been
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working as a premier business credit institution since last three decades, contributing the more
than 50 % of institutional business credit supply in the country. Hence, business finance is the
principal operational area of NIC Asia Bank. Furthermore, the bank has also involved in
commercial & rural credit banking operations.

2. Statement of the problem

Nepal is a country which is made up villages and rural mostly and where there is majority of
agriculture sector. In this word study the statement of problem includes the following:-
i. What is the profitability position of NIC Asia Bank Ltd.?
ii. What is the relation of EPS, DPS, and MPS of the NIC Asia Bank?

3. Objective of the study

The main objective of the study is to fulfill the partial of T.U to complete BBS project. The
objective of this fieldwork is to analyses deposits collected in civil. This report is prepared
primarily to fulfill the partial requirement of obtaining post-graduation degree under Tribhuvan
University and to analyze the financial performance of NIC Asia Bank Limited. The Objective of
the study is given below:-
 To analyse the present profitability position of the NIC Asia Bank Ltd.
 To examine the financial relationship between EPS, DPS, P/E Ratio, Pay-out Ratio, MPS
of NIC Asia Bank Ltd.

4. Significance of the study

The study of NIC Asia Bank Ltd. May be very useful for the financial managers of the banking
sector informing policies for managing the firm’s profitability. The study is also very important
to various parties which are mentioned below:

 To help investor buying and selling decision

 To know the earning per share of NIC Asia Bank Ltd stock
 To know the current satiation of the market
 To help the information of NRB
 To the government
 To the manager
 To the creditor
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 Tax authorities
 The stakeholder
 To involve study’s the past and present market data and creating a methodology to choose
appropriate stock for trading.
 To know the dividend per share of the bank.

5. Literature review:
A literature review is a type of receive article. In this sub chapter the researcher reviews the
books related theories and conceptual framework, journals, latest previous studies on
profitability analysis. In recent years, a number of studies have been conducted to know the
profitability and performance of bank in financial system. There exists rich literature pertaining
to developed countries, on assessing bank performance using various methodologies and
productivity literature related to banking. The researcher and economists have recognized that
the measurement of profitability in banking system is necessary to give management an idea of
what a firm's investors think of its performance and future prospects. It deals with the review of
related literature about profitability and presents a conceptual framework on profitability. The
researcher has presented these conceptual framework and facts dividing into following two
segments:

5.1 Conceptual Review:

Profitability analysis is a financial assessment that evaluates the ability of a business or a specific
project to generate profit. It involves examining the financial performance and efficiency of an
entity by analysing various factors that impact its profitability. The goal of profitability analysis
is to provide insights into how well a business is utilizing its resources to generate earnings.

5.2 Previous study

In the past years, we can see many researches in the profitability analysis of the commercial
banks but no study has been in the made in profitability analysis of NIC Asia Bank. So, these
available research works regarding profitability of other commercial bank have been reviewed.

Thapa (2005) had done a research entitled “An evaluation of profitability analysis of Nepal
Electricity Authority” point out that the financial strength and weakness of Nepal electricity
authority based on its liquidity, activity, profitability and leverage ratios.
 To analyse the profitability position of Nepal Electricity Authority through financial
analysis taking relevant variables.
 To identify major weakness and strengths of Nepal Electricity Authority.
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 To find out the past and present challenges undergone by Nepal Electricity Authority.

Dhital (2017) had done research entitled “Profitability analysis of Everest Bank Limited” to
examine the financial strength and weakness and profitability based on ratio analysis.
The major objectives of the study are as follows:
 To highlight about Everest Bank Limited like objective, policy growth, etc.
 To analyse the strength and weakness of Everest Bank Limited.
 To study the trend of profitability and analyse the related financial indicators.

6. Research Methods

Research method is a way to systematically solve the research problems. It refers to the varies
sequential steps to adopt by a researcher in studying the problem with certain objectives. It
describes the method and process applied in the research design, data collection procedure and
procedures concerning analysis of data are described thoroughly.

All the information has been gathered through a systematic procedure for the preparation of
report. Most of the information has been collected through the brochures, websites of NIC Asia
Bank, and documents and through newspaper as well.

6.1 Research design

The research design is the path way or blueprint for the research which deals with at least four
problems:
What questions to study?
What data are relevant?
What data to collect?
How to analysis the result?

6.2 Population and sample size

According to the statistics of NRB, there are 17 development banks operating under its approval.
Out of these only one bank is selected as sample for the study. NIC Asia Bank limited is selected
and taken from the bank. It is not possible to study the entire bank due to the lack of time and
resources so, the sample has been taken for analysing financial statement of NIC Asia Bank.

6.3 Types of data

There are mainly two method of collecting data i.e. primary and secondary method to collect the
data.
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a) Primary data: It is that data which is collected originally and first time for statistical
inquiry by the researches or through interview with different personnel working at
various levels in the NIC Asia Bank.
b) Secondary data: Those types of data are collected by someone else earlier. Surveys,
observations, experiments, questionnaire, personal interview, etc. Government
publications, websites, books, journal articles, internal records etc.
This study is mainly focused on secondary data.

6.4 Method of data analysis

Data analysis is the process gathering and measuring information on variables of interest in an
establishment systematic fashion that enables one to answer started research question, test
hypothesis and evaluate outlooks.

6.5 Tools/Techniques for analysis of Data

Financial tools and statistical tools are to be used in the collection of data and are interpretation.

Financial tools

Financial tools are going to be analysed under common stock position of the selected NIC Asia
Bank Ltd.

a. Earnings per share – EPS

When there is no preference share:
net income after tax
EPS=
no . of equity share outstanding

When there is preference share:

net income after taxes− preference dividend
EPS ¿
No. of equity share oustanding

b. Price Earning Ratio – P/E Ratio

market price per share
P/E Ratio ¿
earning per share

c. Market to book ratio

Market price per share
Market to book ratio = Book value per share

d. Dividend per share- DPS

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¿
DPS = Dividend paid ¿ common stockholder No . of common stock

e. Payout ratio
DPS
Payout ratio =
EPS

f. Book value per share – BVPS

Common shareholder equity
BVPS =
No . of common shares

g. Price to book value ratio

MPS
Price to book value ratio =
BVPS

h. Return on Equity –ROE

net income
ROE ¿
Total equity

i. Equity Multiply –EM

Total assets
EM =
total equity

Statistical tools

Statistical tools are going to be analysed under common stock position of the selected NIC Asia
Bank Ltd.

Table

 Chart
 Graph
 Mean

Mean =
∑x
n
Where, n = number of individuals

 Standard Deviation

S.D = √∑ x 2

n
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 Coefficient of variation (C.V)

S. D
C.V =
Mean

 Correlation coefficient (r)

n ∑ UV −∑ U . ∑ V
r=
√ n ∑ U 2−¿ ¿ ¿ ¿
 Time series Analysis
∑Y= a+b∑X…………i
∑XY= a∑X + b∑ x 2………..ii
Where,
Y = the value of dependent variable
X = time variable
a = Y intercept
b = slope of trend time

7. Limitation of the study

This study is conducted in partial fulfilment of the requirement of the BBS 4 th year. So, it
possesses some limitation of its own. The study does not present detailed analysis of deposit in
NIC Asia Bank limited due to lack of time relevant data and sources.
This study has certain limitations on its part which are as follow:-
 This report is based on secondary data and information.
 Annual reports of NIC Asia Bank Ltd.
 This study covers the data of three years only for study from the year 2077/78 to 2079/80
B.S.
 This study is fully based on the student's financial resources and is to be completed
within limited time.

8. Organization of the study

The present study will be organized into 3 chapter:

CHAPTER: I
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It consists background of the study, profile of the organization, statement of problem, objective
of the study, rational of the study, method of the study, review of literature, limitations of the
study and organization of the study.

CHAPTER: II
It consists results and analysis: presentation of results and findings of project work.

CHAPTER: Ⅲ
Summary and conclusion – a brief summary of the report, and conclusion based on the findings
of the report.
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References

Adhikari, D.R. and Bhandari, D.R. (2023), Entrepreneurship. Kathmandu: Ashmita Book
Publishers and distributor (p) ltd.

Cooper, DR. and Schindler, P.M. (2006). Business Research Methods (9th ed). New Delhi: Tata
McGraw Hill publishing company.

Paudel, R.B; Baral, K.J.; Joshi, P.R.; Gautam, R.R. and Rana, S.B. (2023), Fundamentals of
Investment. Kathmandu: Asmita Books Publisher and Distributors Private Limited

Haywa, S.L., and Meerschaum, D.M. (1991), Managing Financial Institution. New Delhi: Tata
McGraw – Hills Publishing Company Ltd.

Ross, S.A., Westerfield, R.W. and Jordan, B.D. (20040 Fundamental of Corporate Finance.
New York:McGraw-Hills Irwin

www.nic.com.np
www.nic.com.np
Annual report of NIC Asia bank ltd. Gmail: info@nicasiabank.com