PROFITABILITY RATIO ANALYSIS OF NABIL BANK LTD.

A Research Proposal

Submitted By:
Ranjit Khatri
Symbol No.705280027
Tu Regd. No: 7-2-528-172-2020
Group: Finance
Kathmandu College of Central State
Solteemode, Kathmandu

Submitted To:
The Faculty of Management
Tribhuvan University
Kathmandu

In Partial Fulfilment of The Requirement for The Degree Of

Bachelor Of Business Studies (BBS)

KATHMANDU, NEPAL
JUN 6, 2025
 Table of Contents

1 INTRODUCTION 1
1.1 Background of the study 1
1.2 Statement of the problem 1
1.3 Objectives of the study 2
1.4 Theoretical framework 2
1.5 Significance of the study 2
1.6 Limitations of the Study 3

2 Review of the literature 4

2.1 Theoretical Review 4
2.2 Review of the Previous Studies 4

3 Research Methodology 5
3.1 Research design 5
3.2 Nature and sources of data 5
3.3 Population and Sample 5
3.4 Data collection technique 6
3.5 Reliability and Validity of data 6
3.6 Data Processing and Analysis….…………...…………………….
………….……………………6

4 BIBLIOGRAPHY……………………………………………………... ………………………7
 1

INTRODUCTION
Nabil Bank Ltd., established in 1984, is one of Nepal's leading commercial banks, recognized for
its strong financial performance and wide customer base. A profitability ratio analysis of Nabil
Bank provides insights into the bank’s operational efficiency, financial health, and its ability to
generate returns for shareholders. Key ratios such as Return on Assets (ROA), Return on Equity
(ROE), Net Profit Margin, and Earnings Per Share (EPS) are instrumental in evaluating the
bank's overall profitability. This analysis aims to assess how effectively Nabil Bank utilizes its
resources to achieve sustainable financial growth.

1.1 Background of the study:

Profitability is a key indicator of a bank's financial strength and efficiency. In the context of
Nepal’s banking sector, Nabil Bank Ltd. stands out as a prominent institution with a long history
of stable performance. Established in 1984, it has grown significantly in terms of assets,
customer base, and market reputation. This study aims to analyze the bank’s profitability through
various financial ratios such as Return on Assets (ROA), Return on Equity (ROE), and Net Profit
Margin. These indicators help assess how effectively the bank is utilizing its resources to
generate profit and ensure long-term sustainability. The analysis provides useful insights for
investors, policymakers, and other stakeholders interested in understanding the bank’s financial
performance.

1.2 Statement of the problem:

Even though Nabil Bank is known for being one of the top banks in Nepal, it’s not always clear
how well it’s really doing behind the scenes. People hear about profits, but they don’t always
know how those numbers come about or what they mean for the bank’s future. This study asks a
simple question: How efficiently is Nabil Bank turning its resources into actual profit? By
digging into the profitability ratios, we aim to understand whether the bank is just big — or also
financially strong and sustainable. This report aims to identify the key issues in TDBL’s deposit
mobilization strategy and suggest ways to improve customer outreach, trust, and long-term
financial stability.
 2

1.3 Objectives of the study:

Specific objectives are:
 To understand how well Nabil Bank is turning its money and resources into actual
profit.
 To figure out whether the bank is using its assets and equity wisely.
 To make sense of financial terms like ROA, ROE, and EPS in the real-world
context of Nabil Bank.
 To compare the bank’s profitability over recent years and see if it’s improving or
declining.

1.4 Theoretical framework:

This study is based on the idea that we can understand how well a bank is doing by
looking at some important financial ratios. These ratios come from financial theories that
help us measure profit and performance.

Here are the main ideas used in this study:

 Return on Assets (ROA) – This shows how well the bank is using its total assets
(like cash, loans, and property) to make profit.
 Return on Equity (ROE) – This tells us how much profit the bank makes from
the money invested by its shareholders.
 Net Profit Margin – This shows how much of the bank’s total income is left as
profit after all costs.
 Earnings Per Share (EPS) – This shows how much profit is earned for each
share, which is important for investors.

These theories help us understand whether Nabil Bank is making good use of its money
and resources. By analyzing these ratios, we can see how strong and profitable the bank
really is.

1.5 Significance of the study:

This study is important because it helps people understand how well Nabil Bank Ltd. is
doing in terms of making a profit. Profitability ratios like ROA, ROE, and EPS give a
clear picture of the bank’s financial health.

The study is useful for:

 Investors – to decide whether it is wise to invest in the bank.

 Bank managers – to check how efficiently the bank is using its resources.
 3

 Researchers and students – to learn how financial performance is measured in

real life.
 Policy makers and regulators – to understand the bank’s role in the overall
financial system.

By analyzing these ratios, this study provides valuable insights that can help in making
better financial and strategic decisions

1.6 Limitations of the Study:

While this study aims to provide a thorough analysis of Nabil Bank’s profitability, there
are some limitations to consider:

1. Use of Secondary Data: The study relies entirely on secondary data from
published financial reports. Any errors or omissions in these reports could affect
the accuracy of the analysis.
2. Limited Time Period: The analysis covers only the last five years, which may
not capture long-term trends or unusual economic events outside this timeframe.
3. Focus on Financial Ratios: The study examines profitability through financial
ratios only and does not include other factors like customer satisfaction, market
share, or qualitative management factors.
4. External Factors: Changes in government policies, economic conditions, and
regulatory environments that affect the bank’s performance are not deeply
analyzed.
5. Comparative Analysis: The study focuses solely on Nabil Bank and does not
compare it in depth with other banks, which might limit the generalizability of the
findings.

Despite these limitations, the study provides valuable insights into the profitability of
Nabil Bank Ltd.
 4

Review of the literature

Many researchers and financial experts have studied the profitability of banks using ratio
analysis. Profitability ratios such as Return on Assets (ROA), Return on Equity (ROE), Net
Profit Margin, and Earnings Per Share (EPS) are widely used to measure how well banks
perform financially.

2.1 Theoretical Review:

Several financial theories support the use of profitability ratios to analyze
bank performance:

 Theory of Financial Performance Measurement: This theory emphasizes the

importance of financial ratios as tools to assess a company’s health. Profitability ratios
like Return on Assets (ROA), Return on Equity (ROE), and Net Profit Margin (NPM)
provide measurable insights into the bank’s operational efficiency and profitability.
 Return on Assets (ROA): ROA is based on asset utilization theory, which states that an
organization’s success depends on how well it uses its assets to generate profits.
 Return on Equity (ROE): This is connected to shareholder theory, focusing on
maximizing the return on the investment made by shareholders.
 Net Profit Margin (NPM): Rooted in operational efficiency theory, NPM shows the
proportion of income that remains as profit after all expenses are deducted.
 Earnings Per Share (EPS): EPS theory relates to shareholder value maximization by
indicating the profit available to each share, helping investors evaluate the bank’s
profitability.

2.2 Review of the Previous Studies:

In Nepal, previous studies on banks like Nabil Bank have found that
profitability depends not only on good management but also on economic
conditions, competition, and regulatory environment. Many studies suggest
that continuous monitoring of profitability ratios helps banks improve their
strategies and ensure sustainable growth. This study builds on these findings
by focusing on recent financial data of Nabil Bank Ltd., aiming to give
updated insights on its profitability performance. Many researchers have
explored the profitability of banks using financial ratio analysis, particularly
focusing on key ratios such as Return on Assets (ROA), Return on Equity
(ROE), Net Profit Margin, and Earnings Per Share (EPS)
 5

Research Methodology

3.1 Research design:

The research design for this study is descriptive in nature. It focuses on analyzing and describing
the financial performance of Nabil Bank Ltd. over a specific period. The study aims to evaluate
the bank’s profitability using various financial ratios such as Return on Assets (ROA), Return on
Equity (ROE), Net Profit Margin, and Earnings Per Share (EPS).

This design is suitable because it allows the researcher to systematically collect, organize, and
analyze secondary financial data from the bank’s published reports. It helps in providing a clear
picture of the bank’s profitability trends and overall financial health without manipulating any
variables

3.2 Nature and sources of data:

This study uses secondary data, which means the data is already collected
and published by other sources. The data mainly consists of financial figures
related to Nabil Bank Ltd.’s income, expenses, assets, equity, and profits.
These figures are quantitative and suitable for ratio analysis to assess
profitability.
 Annual Reports of Nabil Bank Ltd.
 Audited Financial Statements published by the bank
 Official publications and financial disclosures available on the bank’s
website
 Published research papers and articles related to the banking sector in
Nepal (for background and comparison)

3.3 Population and Sample:

The population for this study includes all commercial banks operating in
Nepal. Since the focus is on analyzing profitability, the population consists of
financial institutions whose performance is measured by profitability ratios.

For this study, Nabil Bank Ltd. has been selected as the sample bank. Nabil
Bank is chosen because it is one of the oldest and most reputed commercial
banks in Nepal, making it a suitable subject for detailed profitability analysis.
The study uses data from Nabil Bank’s annual financial reports over the last
five years to represent its financial performance.
 6

3.4 Data collection technique

The data for this study has been collected using secondary data collection
techniques. This means that all the required information has been gathered
from already published sources rather than collecting new data directly from
the bank or its customers.
The main sources of data include:

 Annual reports and financial statements published by Nabil Bank Ltd.

 Official documents available on the bank’s website.
 Financial databases and publications related to the banking sector.

These sources provide accurate and reliable financial data necessary to calculate profitability
ratios such as Return on Assets (ROA), Return on Equity (ROE), Net Profit Margin, and
Earnings Per Share (EPS).

3.5 Reliability and Validity of data:

Reliability:
The data used in this study is highly reliable because it is sourced from
official and audited financial reports of Nabil Bank Ltd. These reports are
prepared following strict accounting standards and are regularly reviewed by
external auditors, ensuring accuracy and consistency over time.

Validity:
The data is valid for the purpose of this study since it directly relates to the
bank’s financial performance. The financial statements provide authentic and
comprehensive information on income, expenses, assets, and equity, which
are essential for calculating profitability ratios. Additionally, the use of data
from multiple years ensures that the results reflect consistent trends rather
than one-time anomalies.

3.6 Data Processing and Analysis:

Once the necessary financial data was collected from Nabil Bank’s annual
reports and financial statements, the data was carefully organized and
prepared for analysis.
Data Processing:
 The raw data related to income, expenses, assets, equity, and profits
for the last five years was extracted and tabulated.
 7

 The data was checked for completeness and consistency to ensure

accuracy in calculations.
 Any anomalies or missing values were reviewed and addressed using
data from official sources.

Data Analysis
 The key profitability ratios — Return on Assets (ROA), Return on Equity
(ROE), Net Profit Margin (NPM), and Earnings Per Share (EPS) — were
calculated for each year using standard formulas.
 These ratios were then analyzed to identify trends and patterns over
the study period.
 Comparative analysis was performed to assess how Nabil Bank’s
profitability changed over time and to evaluate its financial strength.
 Graphs and tables were used to present the results clearly for better
understanding.
The analysis helps in drawing meaningful conclusions about the bank’s
profitability and overall financial health.

BIBLIOGRAPHY

[1] D. R. Bhandari. Fundamentals of financial markets and institutions. Asia

Publication, 2012.

[2] Pandey Dhrubalal Adhikari, Devraj. Business research methods. Asmita

Publication, 2017.

[3] B. Baral Keshar J. Joshi Padam R. Gautam Rishi R. Rana Surya B Paudel,
Rajan. Principal practice of banking insurance. Asmitan Publications., 2016.

[4] Nabil Bank Ltd. Annual report of nabil bank ltd. URL:
http://www.nabilbank.com.np, July 2022.

[5] Nepal Rastra Bank. Banking and financial statistics. URL:

https://www.nrb.org.np/contents/uploads/2021/06/Monthly-Statistics, 2074
to 2079.
 8

[6] A P Moghanloo N Hooshyari. Evaluating the impact of inflation on

profitability of banks arabian journal of business and management
review. Case W. Res. JL Tech. & Internet, 4.

[7] G. Abugamea. Determinants of banking sector profitability: Empirical

evidence from palestine. Journal of Islamin and Finance, pages 7–15,
2018.

[8] Aithal P. S. Mishra, A. K. Foreign aid contribution for the

development of Nepal. international journal of management,
technology, and social sciences (ijmts). 6(1):162–169, 2021.

[9] Chiu YH Yike T, Li Y. Analyzing for profit efficiency of banks with

undesirable output. 5(20):8141–8149, 2011.
9
10