PROFITABILITY ANALYSIS OF SIDDHARTHA BANK

LIMITED

A Project Work Report

Submitted by:
Madhu Chaudhary
P.U. Regd. No.:
Symbol No.:
Imperial Business College
Hattisar, Kathmandu

Submitted to:
The Faculty of Management
Pokhara University
Pokhara

In Partial Fulfillment of the Requirements for the Degree of

Bachelor of Business Administration (B.B.A)

Kathmandu, Nepal
November, 2019
 DECLARATION

I hereby declare that the project work entitled “Profitability Analysis of Siddhartha
Bank Limited” submitted to the Faculty of Management, Pokhara University, Pokhara is an
original piece of work under the supervision of Mr. Pratap Shakya; faculty member; Imperial
Business College; Hattisar, Kathmandu; and is submitted in partial fulfillment of the
requirements for the degree of Bachelor of Business Administration (BBA). This project work
report has not been submitted to any other university or institution for the award of any degree or
diploma.

______________
Madhu Chaudhary
Degree Candidate
Date:
 SUPERVISOR’S RECOMMENDATION

The project work report entitled “Profitability Analysis of Sidhhartha Bank Limited”
submitted by Madhu Chaudhary of Imperial Business College, Hattisar, Kathmandu, is prepared
under my supervision as per the procedure and format requirements laid by the Faculty of
Management, Pokhara University, as partial fulfillment of the requirements for the degree of
Bachelor of Business Administration (B.B.A). I, therefore recommend the project work report
for evaluation.

__________________
Pratap Shakya
Supervisor, Imperial Business College
Date:
 ACKNOWLEDGEMENTS

I would like to first thank my supervisor Mr. Pratap Shakya, Lecturer of Imperial
Business College, for his valuable guidance and help in preparing this report. This report has
been complete only because of his valuable suggestions and supervision.
Moreover, I express my sincerely thanks to Mr. Prajeet Kumar Timalsina, Principle of
Imperial Business College for helping me in many ways for preparing this report.. Likewise, I
am equally grateful to all my subject teachers and entire research committee who has provided
me valuable suggestion, inspiration and opportunity for the completion of this report.
I am also thankful to Siddhartha Bank for allowing me to collect data for my study.

Madhu Chaudhary
Degree Candidate
 Table of Contents

Title Page i
Declaration ii
Supervisor’s Recommendation iii
Acknowledgements iv
Table of Contents v
List of Tables vi
List of Figures vii
Abbreviation viii

CHAPTER I: INTRODUCTION 1
1.1 Background of study 1
1.2 Profile of Sidhhartha Bank Limited 6
1.3 Statement of problem 9
1.4 Objectives of the study 9
1.5 Rationale 10
1.6 Review of literature 11
1.7 Research Methodology 16
1.8 Limitations 20

CHAPTER II: RESULT AND ANALYSIS 21

2.1 Presentation of data 21
2.2 Major Findings 25

CHAPTER III: SUMMARY AND CONCLUSION 26

3.1 Summary 26
3.2 Conclusion 27
BIBLIOGRAPHY
APPENDIX
 List of Tables

Table 1: Return on Assets of Siddhartha Bank Ltd. over five years 22

Table 2: Return on Equity of Siddhartha Bank Ltd. over five years 23
 List of Figure

Figure 1: Percentage of Return on Assets of Siddhartha Bank Ltd 22

Figure 2: Percentage of Return on Equity of Siddhartha Bank Ltd 24
 ABBREVIATION

ABBS = Anywhere Branch Banking System

ADSL = Asymmetric Digital Subscriber Line
ATM = Automatic Teller Machine
CNBC = Consumer News and Business Channel
EBL = Siddhartha Bank Limited
EY = Earning Yield
GDP = Gross Domestic Product
IDRBT = Institute for Development and Research in Banking Technology
Ltd = Limited
NBL = Nepal Bank Limited
NEPSE = Nepal Stock Exchange
NICCI = Institute of Nepal India Chamber of Commerce
NRB = Nepal Rastra Bank
POT = Point of Transaction
PSTN = Public Switched Telephone Network
ROA = Return on Assets
ROE = Return on Equity
UAE = United Arab Emirates
U.K = United Kingdom
 CHAPTER I
INTRODUCTION

1.1 Background of the Study

The process of bank is not a new concept. It is very difficult to give a single meaning of
bank. The word ‘bank’ is used in the sense of commercial bank. But it is assumed that the term
bank was originated form the Italian word ‘Banca’, which means ‘Bench’, In the streets of
majority city of Europe money lenders used benches for acceptances, payments and exchange so
valuable and coins.
Bank of Venice of Italy established in 1157 is the bank of the world. The second banking
institution namely the bank of Barcelona Spain was established in 1402 AD. The bank of
England, which established in 1694 AD was first join stock bank and later on it has become the
first central bank of the world. The bankers of Lombardy were famous in England. However,
modern banking began with the English goldsmiths only after 1640. The bank of Hindustan was
established in 1770 is the first bank of India. By this process banking was developed first in a
Europe and then spread all over the world and come present advance firm.
As in our country, gold smiths and moneylenders were the ancient bank in Nepal, which
are known as ‘Shav Mahajan’ Tejarath adda established during the tenure of Prime Minister
Randip Singh 1993 BS was the first step towards the institutional development of the bank in
Nepal. Tejeath adda did not collect deposit from the public but gave loans to employees and
public against the bullion. (Cited in Sharesansar banking history in Nepal), the first bank in
Nepal was the ‘Nepal Bank Limited’ started in 1994 B.S. This is a major milestone in the history
of Nepal as the country entered into official financial system. After the nineteen year of
establishment of NBL, the Nepal Rastra Bank (NRB) was established in the year 2013 B.S.
Rastriya Banijya Bank and Agricultural Development Bank Ltd. were established in the year
2022 and 2024 B.S. respectively. 47 years after the first bank was established in Nepal, the first
privately owned commercial bank, Nabil Bank Ltd., was established in the year 2041 B.S. Seven
more commercial bank are added in a decade after 2041 B.S only four commercial banks were
established from the period of 2051 B.S. to 2063 B.S. There are mainly two reasons for it. In this
time, the country saw the sluggish economic growth due to the Maoist insurgency and second
reason being the reluctance on issuing license by the regulatory body, the NRB.
Now again the number of commercial banks are set to decline due to the monetary policy
of this fiscal year which requires commercial banks to have paid up capital of at least Rupees 8
Arba by the end of Ashad 2074. This short time frame given to quadruple the paid up capital
will force banks to merge with each other creating fewer commercial banks in coming years.

1.1.1 Meaning of Bank

Bank is a financial institution which deals with monetary transaction. In simple word
bank is a shop of money. Some definitions of a bank as per the scholars are as follows.
According to Kent,(as cited in Rawal and Sapkota, 2017), bank is an organization whose
principal operations are concerned with the accumulation of the temporarily idle money of the
general public for the purpose of advancing to other for expenditure.”
According to Hart; "A banker is one, who in ordinary course of his business, receives
money which he pays by honoring cheques of persons from whom or whose account he
receives.”
According to the Shirras, (as cited in Subedi, 2012), a banker or bank is a person. Firm or
company, having a place of business where credits are opened by the deposit or collection of
money or currency subject to be paid or remitted upon draft, cheque, or order or where money is
advanced or loaned on stocks, bullion, of exchange and promissory notes are received for
discount and sale.
According to Nepal Company Act 2031 B.S, “A commercial bank refers to such type of
bank which deals in money exchange accepting deposits advance loan and commercial
transactions except specific banking related to co-operative agriculture industry and other
objective.”
In conclusion, bank is financial institution, which deals with monetary transaction like;
accepting deposit, and provide loan to the customer by charging certain interest.
 1.1.2 Importance of Bank
The points below present some importance of a bank.
 It deals with money; it accepts deposits and advances loans.
 Expand its liabilities as a multiple of its reserves.
 It is a unique financial institution, which creates demand deposits and serves as a medium
of exchange. As a result, the banks manage the payment system of the country.
 It control and regulate money management and accept remittance.
 It creates employment and skill entrepreneurship.
 It helps developing industry and commerce.

1.1.3 Function of Commercial Bank

A bank performs diverse types of functions. It satisfies the financial needs of the various
sector of an economy such as agriculture, industry, trade, communication, etc. that means banks
play vital role in economic development as well as addressing social needs. Generally, the
functions of commercial banks are categorizes into primary function and the secondary
functions.
Primary function: Banks performs various primary functions some of them are given below:
 Accepting deposits
Bank accepts various types of deposits from public especially from its clients. It includes
saving account deposits, current account deposits, fixed account deposits, etc. these deposits are
payable after a certain time.
 Granting loans and making advances
Banks provide loans and advances of various forms to individuals and organizations by
charging certain interest rates. It includes an overdraft facility, cash credit, bill discounting, etc.
now days, many banks in Nepal are offering consumer loan using credit as well.
 Credit creation
Commercial banks provide loans based on the deposit collection. After maintaining
minimum balance and reserve requirements, banks advance the loans to the borrower. These
loans taken by borrower are expensed. Finally, the same amount comes back to bank as a
deposit.
Secondary function: Along with the primary functions, a bank performs several secondary
functions as well. It includes many agency functions or general utility functions. The secondary
functions of banks can be divided into agency functions and utility function
 Agency function
Banks provide number of services on the behalf of its customers as an agent. They
involve in collecting and clearing cheque, dividends, and interest warrant, paying bills for
electricity, telephone, and insurance premiums on the behalf of the customers for commission.
They arrange to remit money from one place to another by means of cheques, drafts, wire
transfer etc.
 General utility function
The general utility functions of the banks include:
 To provide safety locker (Safe Deposit Vault) facility to customers.
 To provide money transfer facility.
 To accept various bills for payment e.g. phone bills, gas bills, water bills, etc.
 To provide various cards such as credit cards, debit cards, smart cards, etc.

1.1.4 Commercial Bank in Nepal

Commercial banks are those banks which deals with all kinds of banking functions as
accepting deposits, loan and advances, agency function and credit creation. Nepal Bank Ltd. was
established in 15th November 1937 as the commercial bank in Nepal. Rastriya Banijya Bank is
the second government owned commercial bank, which was established in 23rd January 1966. By
looking history of commercial bank there were opened several commercial bank and some of
them combined with each other and become one bank. In present context the total number of
commercial bank are 28.
Name of commercial bank, which are established in Nepal, are as followed:
 Agricultural Development Bank Limited
 Bank of Kathmandu Limited
 Century Bank Limited
  Citizens International Bank Limited
 Civil Bank Limited
 Siddhartha Bank Limited
 Global IME Bank Limited
 Himalayan Bank Limited
 Janata Bank Nepal Limited
 Kumari Bank Limited
 Laxmi Bank Limited
 Machhapuchhre Bank Limited
 Mega Bank Limited
 NABIL Bank Limited
 Nepal Bangladesh Bank Limited
 Nepal Bank Limited
 Nepal Credit and Commercial Bank Limited
 Nepal Investment Bank Limited
 Nepal SBI Bank Limited
 NIC Asia Bank Limited
 NMB Bank Limited
 Prabhu Bank Limited
 Prime Commercial Bank Limited
 Rastriya Banija Bank Limited
 Sanima Bank Limited
 Siddhartha Bank Limited
 Standard Chartered Bank Nepal Limited
 Sunrise Bank Limited

1.2 Profile of Siddhartha Bank Limited

Siddhartha Bank Ltd. (SBL) “A” class financial institution licenced by Nepal Rastra
Bank, in one of the prominent bank in the country established on 24th December, 2002. It has
expanded its services across the nation from its 66 branches and 3 extension countries. So, I
personally decided to complete my summer project from Siddhartha Bank.
 Within a short span of time, Siddhartha Bank has been able to come up with a wide range
of product and services that best suits its clientele. Siddhatha Bank has been posting growth in its
portfolio sizes and profitability consistently since the beginning of its operation. The
management of the Bank has been thoroughly professional.
Siddhartha Bank has been able to gain significant trust of the customer and all other
stakeholders to become one of the most promising commercial banks in the country in less than
15 years of its operation. The bank is fully committed towards customer satisfaction. The range
and scope of modern banking products and services the bank has been providing is an example to
its commitment towards customer satisfaction. It is this commitment that has helped the bank
register quantum growth every year. The bank is confident and hopeful that it will be able tio
retain this trust and move even further towards its mission of becoming one of the leading bank
of the industry.
For me it was a tough decision to choose an organization for summer project among other
organization. Being a student of B.B.A, my preference would definitely be commercial bank.at
the present scenario, among different fields related with the financial sector one of the major
field is the banking sector.

Vision

“To be a Leading Commercial Bank with Pan Nepal presence and become a household
name, providing wide range of financial products and services under one roof”

1.4 Statement of the problem

There are many problems in Nepalese banking Industry. Some of them are identified below:

The existence of unorganized bankers, which included money lenders, merchants,

goldsmiths who do the lending business on personal basis. There is existence of traditional
banking system in Nepal. Some banks namely Nepal Bank Ltd and Rastra Banijya Bank still
operate with old lenders and in many branches computer system has not been introduced. The
largest bank namely Nepal Bank Ltd and Rastra Banijya Bank (public sector banks or
government owned bank) are unable to earn more profit as compared to private sector
commercial banks and joint venture banks. Therefore low profitability is another problem in the
banking system in Nepal. The corruption and nepotism occur mainly in public sector banks. In
such banks loans are granted and rebate on outstanding loans are given only of some benefits
to the concerned employees and political leaders. Lack of banking habit of Nepalese people can
be considered as an obstacle on banking. Bank credit is security- oriented rather than project
oriented. Banks hardly consider the actual end use and objectives of the projects .Banks are
mostly in the hands of big business houses and a substantial part of the credit is given to units
under their control of preferential terms resulting in the concentration of economic power. The
other problems of banking in Nepal include less investment in productive sectors, nepotism and
favoritism, overstaffing, concentration of banks in urban areas, government instability, and cut
throat competition.

From the above background of the study the following statement can be stated which are
given below.
 What is the Siddhartha bank financial position to meet its obligation?
 What is the profitability position of Siddhartha bank?
 What is the position of return of equity of Siddhartha bank?

1.3 Objectives of the study

The basic objective of this research is to make analysis of profitability position of
Siddhartha Bank.
Specific objective of the study are as follow:
 To measure the ability of SBL.
 To track out profitability of SBL.
 To measure the percentage of net income on total equity.
1.5 Rationale
The study will be useful to know the net income, total equity and return on assets of the
Siddhartha bank over five years. It can be useful for prediction of next year net profit and total
equity needs to run the banking activities. It helps to know the capacity of bank and useful for
the future analysis on the related topic as well for the researcher.
Hence, this case study related to be significant in showing best practice and concepts for
core activities performed by profitability to achieve the bank’s goals as well as to all financial
institutions and banks. Moreover, it may help for researchers who are interested to study related
topics further.

1.6 Review of Literature

Review of literature means to collect the information about the selected topic of the
research through the different sources. Review of literature helps till of the last step of the
research process. It gives knowledge about which type of process of adopted, which type of data
are collected, what are the difficulties arises in completing the research process, which type of
study had been made in the past on that topic. So, this character highlights the literature related
to the present study available from libraries, document collection centers, studying
encyclopedias, different magazines, journals, periodicals, research articles and information
managing bureaus. Besides these this unit highlights the literature that is available in concerned
subject as to my knowledge, review of reports related to concerned bank, review of research
works, review of books, review of articles and relevant study on this topic and review of this
thesis works performed previously.
This chapter includes conceptual review and review of empirical works. For this purpose
various books, journals and periodicals as well as internet have been utilized. Profit is an excess
of revenues over associated expenses for an activity over a period of time. Terms with similar
meanings include ‘earning’, ‘income’, and ‘margin’. Lord Keynes remarked that “profit is the
engine that drives the business enterprise.”
Profitability means ability to make profit from all the business activities of an
organization, company, firm or an enterprise. It shows how efficiently the management makes
profit by using all the resources available in the market. According to harward & Upton,
“profitability is the ‘ability of a given investment to earn a return from its use.” To evaluate the
profitability, two fold analyses is undertaken as shown below:
Profitability analysis from the view point of management
 Gross profit to net revenue ratio
 Net operating profit to net revenue ratio
 Return on capital employed ratio

Profitability analysis from the view point of shareholder

 Net profit to net revenue ratio
 Return on owners’ equity ratio
The main purpose of a business unit is to make profit. The profitability analysis is done to
throw light on the current operating performance and efficiency of business firms. (Dr. Monica
Tulsian)

1.6.1 Conceptual Review

Banks have developed around 200 years ago. The natures of banks have changed as the
time has changed. The term bank is related to financial transactions. It is a financial
establishment which uses, money deposited by customers for investment, pays it out when
required, makes loans at interest exchanges currency etc.
The term bank derives from the Italian World Bank which refers to the bench on which
the banker would keep its money for lending and exchanging. Some person tract its origin from
the Latin word Bancus which refers to the bench on which the banker would keep its money and
his record it is believed that the ancestors of modern banking system were merchants goldsmiths
and money lenders. Modern banking showed its seed in the medieval Italy despite strong
Christian prohibitions against charging interest.
According to Prof. Sayers, "A bank is an institution whose debts are widely accepted in
settlement of other people's debts to each other." In this definition Sayers has emphasized the
transactions from debts which are raised by a financial institution.
According to the Indian Banking Company Act 1949, "A banking company means any
company which transacts the business of banking means accepting for the purpose of lending of
investment of deposits of money from the public, payable on demand or other wise and withdraw
able by cheques, draft or otherwise
The first bank called the “Bank of Venice” was established in Venice Italy in 1157. Then
“Bank of Barcelona” was established in 1401 and in 1407 “Bank of Genoa” was established .In
1694 the “Bank of England” was established as a joint stock bank. The Hindustan Bank was the
first banking institution of India was established in 1779. The Nepal Bank Limited was
established in 1937 which was first modern commercial bank of Nepal.
This part concerned with the useful terms to provide background information on them.
Major terms review to analysis this report are as followed:
Net Income
It is the ratio of a bank’s net profit after tax income divided by its total number of
branches at the end of the fiscal year. It shows the branch net profit in monetary value. Higher
ratio indicates the better efficiency of the branches. The formula of calculating it is;
Average net profit per branch (in rupees) = Net Profit after Tax ÷ Total number of
branches

Return on Assets (ROA)

It is the ratio of a bank’s net profit after tax income divided by its total assets. ROA is
primarily an indicator of managerial efficiency. It indicates how capably the management of the
bank has been converting the institution’s assets into net earnings. It is the most important
indicator of the bank's performance. A higher ratio is an indicator of high performance and
profitability. It is calculated by using following formula:
Return on Assets (ROA) = (Net Profit After Tax ÷ Total Assets)100

Return on Equity (ROE)

It is the ratio of a bank’s net profit after tax income divided by its net worth or equity. It
indicates how the bank will have used the resources of owners’. In fact, this ratio is one of the
most important relationships in financial analysis. The earning of satisfactory return is the most
desirable objective of a business. The ratio of net profit to owners’ equity reflects the extent to
which this objective has been accomplished. This ratio is thus, of great interest to the present as
well as the prospective shareholders and also of great concern to management, which has the
responsibility of maximizing the owners’ welfare. . A higher ratio indicates greater profitability
and better efficiency. This enables a bank to raise more funds from the capital markets.

ROE is calculated as follows:

ROE = (Net Profit ÷ Net Worth)100

1.6.2 Review of Previous Works

Following journals related to the Profitability are reviewed for the preparation of report.
Alemu (2015) examined determinants of commercial banks profitability of eight banks in
Ethiopia from for 10 years from 2002 - 2013. The study used multiple linear regressions and the
fixed effect regression model to analyze data. The study established that size of banks; capital
adequacy and gross domestic product have a positive and statistically significant relationship
with profitability of banks. The findings of the study also revealed that liquidity risk, operational
efficiency, funding cost and banking sector development have a negative and statistically
significant relation with profitability of banks. Finally, the study found that the relationship
between efficiency of management, efficiency of employee, inflation, and foreign exchange rate
was statistically insignificant.
Abebe (2014) assessed the internal and external determinants of financial performance
Ethiopia’s banks using panel data of banks for a period between the year 2002 and the year 2013.
The study employed the fixed effect regression model. The regression results established that
capital structure, income diversification, operating cost had a significant negative relationship
with performance while bank size had a positive significant relationship with profitability
measured using ROA. The study also established that various macroeconomic variables had
insignificant effect on financial performance of Ethiopians commercial banks save for tax rate,
which had a negative and significant relationship with profitability.
Anwar (2014) evaluated the factors that improve the profitability of Islamic banks with
Keen focus on the Gulf African bank in Kenya. The study employed a survey research. In
addition, used questionnaires to collect data for the study and then employed the Chi-square Test
to establish the association between the study variables. The findings of the research established
a positive relation between Islamic banking products, Shari’ah Compliance, Customer
satisfaction and profitability of Islamic banks in Kenya. It was concluded that Islamic banking
products, Shari’ah compliance, and customer satisfaction were the major factors, which affected
Islamic banks’ profitability.
Chinoda (2014) explored the internal factors that influence bank profitability in
Zimbabwe. The study sampled five commercial banks, which were randomly selected In
addition, used secondary data from the banks financial reports. Using the general linear,
Regression model the study found that size of the bank; liquidity, gross domestic product. In
addition, inflation had a positive correlation with profitability (ROA) while operating expenses
had a negative association with profitability of commercial banks in Zimbabwe. The study
recommended that inflation control policies should be given priority to foster financial
intermediation.
Lipunga (2014) evaluated the determinants of profitability of listed banks in Malawi for a
period of 5 years from 2009 and 2012 using external (market) and internal measures of
profitability. The study employed multivariate regression and correlation analysis where Earning
Yield (EY) and return on assets (ROA) were used to determine the internal and external
determinants of profitability. Regression analysis results established that size of the bank,
management efficiency and liquidity had a statistically significant effect on return on assets
whereas capital adequacy had insignificant impact. Additionally, the research established that
earnings yield significantly influences by size of the banks, management efficiency and capital
adequacy while liquidity had an insignificant impact on earnings yield.
Kyalo (2013) examined the factors influencing profitability of banks in Kenya for a 3
years period from 2010/2012. Secondary data collected from the 44 banks in Kenya was used in
the study. Using the regression model the study established that capital invested has a significant
influence on ROE while operational efficiency, GDP, and inflation have insignificant effect on
ROE on equity. The study recommended that Commercial banks in Kenya should put more focus
both the bank specific factors and the external environment together to come up with effective
strategies to enhance their financial performance.
Sawe (2011) assessed external and internal determinants of commercial bank profitability
in Kenya. The research used a panel data approach. The research revealed that the coefficients of
capital, bank size, liquidity, expense management, inflation, market share, and loan loss
provisions were the significant factors that influenced banks profitability. The research also
established that coefficients for exchange rates interest rate, GDP per capita and market
concentration had the least influence on banks’ profitability.

1.7 Research Methodology

Research methodology can be understood as a science of studying how research has been
done. This chapter contains the research design, nature and sources of data, data collection
procedure and tools and techniques of analyses.

1. Research Design
It is assumed that a research design is the arrangement of the collecting data and
information to analysis in proper ways. This study will adopt a case study approach with
reference to Siddhartha Bank Limited and its main aims to find net profit of the Siddhartha Bank
Limited. It is based on secondary data, which will be collected from annual reports of
Siddhartha Bank Ltd. and website, journals, articles, and books from various publications &
unpublished, and some previous field reports that are related to net income to total equity.

2. Types of Research
It is said that a research is broadly classified into two categories explained below:
2.1 Basic or Fundamental Research
A research that is conducts to acquire depth knowledge on any issue or for the
development of theory is known as basic or fundamental research. The main purpose of basic
research is to generate more knowledge and understanding of the issue and build theories based
on research results.
According to P.V. Young, “Gathering knowledge for knowledge sake is termed as pure
or basic research.”
2.2 Applied or Action Research
A research that is conducts to find out a solution for an immediate problem faced by the
society or business organization is known as applied or action research. The main aim of applied
research is to find out the solution for some practical problems. (Adhikari & Pandey, 2016)
 According to D. B. Bhattacharya, “A research method that is used in social science
research which helps to contradict, alter, or modify any existing theory or theories and helps to
formulate policy is applied research.”

3. Approaches to Research
The approaches to research are broadly classified into two categories:
3.1 Quantitative Research
A research, which is conducts based on the measurement of quantity, is known as
quantitative research. Quantitative technique of research can be used in research of those issues,
which can be measured exactly in the quantity or amount. This research considers to the
measurable facts and finds out the result analyzing those facts using statistical or mathematical
tools.
3.2 Qualitative Research
A research, which is concerned with subjective phenomena, is known as qualitative
research. The main aim of qualitative research is to get depth knowledge and explain the issues
or subject rather than finding the solution or coming to the conclusions.

4. Population and Sampling

All the commercial banks of the Nepal are the population of the study. There are
altogether 28 commercial banks in Nepal. Out of them SBL is selected as sample of the study.

5. Types of Data
Information or facts collected through observation, record, and measurement are known
as data. Generally, there are two types of data. They are primary data and secondary data. Those
information or facts which are originally collected by researcher and unpublished information is
called primary data where as those information or facts which is published in before and taken by
other information in purpose of collecting information is known as secondary data. However,
this comparative study use only secondary data like, "articles, website help of other sources i.e.
literature from published in annual reports of Siddhartha Bank Limited in the various years and
its’ official website.
6. Data Collection Procedure
Generally, there are two types of data i.e., primary and secondary data. This study uses
the secondary data only. A secondary data that are needs to know about basic information about
the terms and options are obtains from literatures from various books, journals, annual reports,
thesis, articles, as well as several websites, and data that are needed for analysis the study. In
this study secondary data that has been published in the annual reports of Siddhartha Bank Ltd in
various years and its’ official website.

7. Technique of analysis
This study is based on secondary data. The relevant secondary data has been collects
mainly through the annual reports of Siddhartha Bank Ltd of fifth year. All collected raw data
are required to process and presented in a systematic way. Only after the processing, the data can
give a meaningful result. All source of data using financial ratios and statistical tools for better
analysis and consequently graphics, chart, diagrams, trend line will be using for better analysis.

8. Instrument
Instruments are the measuring tools that help to tested and analysis the raw data. The
main objective of this study is to examine the ratio of credit to total capital and credit to share
capital made by the bank during the different field over five years. For the purpose of this study
is annual report of concerned banks and its websites to acquire data.
8.1 Statistical Tools
Statistical tools are the measuring instruments that calculate by mathematical formula
like; Mean Median, Standard Deviation, Variance, and Co-variance that helps to analysis the
business condition in present and predict in next coming years.
8.2 Financial Tools
Financial tool helps to analyze the financial strength and weakness of a firm, which also
helps the management of firm to take a correct decision for making planning and policies for the
future. It includes Net Income, ROA, ROE.
Net Income
 It is the ratio of a bank’s net profit after tax income divided by its total number of
branches at the end of the fiscal year. It shows the branch net profit in monetary value. Higher
ratio indicates the better efficiency of the branches. The formula of calculating it is;
Average net profit per branch (in rupees) = Net Profit after Tax ÷ Total number of
branches
Return on Assets (ROA)
It is the ratio of a bank’s net profit after tax income divided by its total assets. ROA is
primarily an indicator of managerial efficiency. It indicates how capably the management of the
bank has been converting the institution’s assets into net earnings. It is the most important
indicator of the bank's performance. A higher ratio is an indicator of high performance and
profitability. It is calculated by using following formula:
Return on Assets (ROA) = (Net Profit After Tax ÷ Total Assets)100

Return on Equity (ROE)

It is the ratio of a bank’s net profit after tax income divided by its net worth or equity. It
indicates how the bank will have used the resources of owners’. In fact, this ratio is one of the
most important relationships in financial analysis. The earning of satisfactory return is the most
desirable objective of a business. The ratio of net profit to owners’ equity reflects the extent to
which this objective has been accomplished. This ratio is thus, of great interest to the present as
well as the prospective shareholders and also of great concern to management, which has the
responsibility of maximizing the owners’ welfare. A higher ratio indicates greater profitability
and better efficiency. This enables a bank to raise more funds from the capital markets.
ROE is calculated as follows:
ROE = (Net Profit ÷ Net Worth)100

1.8 Limitations
The study does not present detailed information about profitability analysis of whole
banks because due to the time and finance constraints the researcher is limited to undertake the
study in one branch for collecting data. The branches are opened different place of Nepal and
this has entailed transportation problem, time scarcity, and hardship. The limited of time had
significant impacts on the study.
Thus, the project work report on the investment has been drafting considering the
following limitation:
 This project work is only bases on secondary data.
 It concerned the study of Siddhartha bank’s profitability.
 The study will be concern with only Siddhartha bank.
 The whole study will refers the annual report of Siddhartha bank.
 The data will be takes as over five year’s trend.
 CHAPTER II
RESULTS AND ANALYSIS

This chapter deals with the presentation and analysis of relevant data of the Siddhartha
Bank limited in order to fulfill the objectives of the study. To find out the best result, the data of
bank which has been analysis according to the research methodology as mentioned in second
chapter.
The obligation of this chapter is to introduce to the mechanics of data analysis and
interpretation. Data analysis is the relationships or differences supporting or conflicting with
original or hypothesis should be subject to statistical test of significance to determine with what
validity data can be serves to indicate any conclusion. In this chapter, data collected procedure is
bases on secondary sources and analyses by using financial and statistical tools and its findings
have been discussed in this chapter.

2.1 Presentation of data in tables, figures and their analysis

Presentation of data in tables, figure, and their analysis helps to know the whole activities
of the organization. Presentation and analysis of the data is important for every research work.
Therefore, presentation and analysis plays the vital role to understand the condition of bank,
activities performing in the bank to the researcher and reader. This study requires some financial
and statistical tools to accomplish the objective of the study. The various results obtained from
the help of financial, accounting, and statistical tools are presenting under different heading i.e.,
tabular form and graph.
2.1.1 Return on Assets (ROA)
It is the ratio of a bank’s net profit after tax income divided by its total assets. ROA is
primarily an indicator of managerial efficiency. It indicates how capably the management of the
bank has been converting the institution’s assets into net earnings. It is the most important
indicator of the bank's performance. A higher ratio is an indicator of high performance and
profitability. It is calculated by using following formula:
Return on Assets (ROA) = (Net Profit After Tax ÷ Total Assets)100

Table: 1
Return on Assets of Siddhartha Bank Limited over five years.
Fiscal Net income Total assets ROA
Years (Rs.) (Rs.)
2013/14 700534999 40277752199 1.74%
2014/15 767080512 50647295616 1.51%
2015/16 1254918004 74402915402 1.69%
20167/17 1386175502 89901512010 1.54%
2017/18 1581702042 11986921854 1.59%
Source: Annual report of Siddhartha Bank Limited.
 1.80%
1.75%
1.70%
1.65%
1.60%
Ratio

1.55% ROA
1.50%
1.45%
1.40%
1.35%
2013/14 2014/15 2015/16 2016/17 2017/18
Fiscal
Year
Figure 1: Percentage of Return on Assets of Siddhartha Bank Limited

The above figure shows the return on assets for study period. ROA decreased from 1.74%
to 1.51% from fiscal year2013/14 to 2014/15.It shows the lower profitability and efficiency of
investment in total assets. ROA increased from 1.51% to1.61% from fiscal year 2014/15 to
2015/16. In the fiscal year 2016/2017 is decreased to 1.54%. ROA in the fiscal year 2017/2018 is
1.59% which shows the increasing profitability.

2.1.2 Return on Equity (ROE)

It is the ratio of a bank’s net profit after tax income divided by its net worth or equity. It
indicates how the bank will have used the resources of owners’. In fact, this ratio is one of the
most important relationships in financial analysis. The earning of satisfactory return is the most
desirable objective of a business. The ratio of net profit to owners’ equity reflects the extent to
which this objective has been accomplished. This ratio is thus, of great interest to the present as
well as the prospective shareholders and also of great concern to management, which has the
responsibility of maximizing the owners’ welfare. A higher ratio indicates greater profitability
and better efficiency. This enables a bank to raise more funds from the capital markets.
ROE is calculated as follows:
ROE = (Net Profit ÷ Net Worth)100
Table: 2
Return on Equity of Siddhartha Bank Limited over five years.
Fiscal Years Net income Total equity ROE
(RS) (RS)
2013/14 700534999 3000380632 23.35%
2014/15 767080512 3746080301 20.47%
2015/16 1254918004 6241794278 20.11%
2016/17 1386175502 9881108048 14.03%
2017/18 1581702042 14044651761 11.26%
Source: Annual report of Siddhartha Bank Limited.

25.00%

20.00%

15.00%
Ratio

ROE
10.00%

5.00%

0.00%
2013/14 2014/15 2015/16 2016/17 2017/18

Fiscal
Year
Figure 2: Percentage of Return on Equity

The above figure shows the return on equity for the study period. In the fiscal year
2013/14 the return on equity is 23.35%. The return on equity decreased from 20.47% to 2011%
from fiscal year 2014/15 to 2015/16. It shows the lower profitability and efficiency. From fiscal
year 2016/17 to 2017/18 it also decreased from 14.03% to 11.26%. It shows the lower
profitability and efficiency. This table shows the decreasing position.
2.2 Major Findings
 In the table 3, the above figure shows the return on assets for study period. ROA
decreased from 1.74% to 1.51% from fiscal year 2013/14 to 2014/15.It shows the lower
profitability and efficiency of investment in total assets. ROA increased from 1.51% to
1.69% from fiscal year 2014/15 to 2015/16. In the fiscal year 2016/17 it is decreased to
1.54%. ROA in the fiscal year 2017/18 is 1.59 % which shows the increasing
profitability.
 In the table 2, the above table shows the return on equity for the study period. In the fiscal
year 2013/14 the return on equity is 23.35%. The ROE decreased from 20.47% to 20.11%
from fiscal year 2014/15 to 2015/16. It shows the lower profitability and efficiency. From
fiscal year 2016/17 to 2017/18 it also decreased from 14.03% to 11.26%. It shows the
lower profitability and efficiency. This table shows the decreasing position.
 CHAPTER III
SUMMARY AND CONCLUSION

This is a final chapter of the study that consists of the summary of previous topics. This
chapter briefly explains summary, finding and recommendations on the basis of research
conducted, it also aims to give forth some suggestions that must be helpful for further
enhancement of the performance of Siddhartha Bank Limited.
Summary
Siddhartha Bank Limited (SBL), established in 2002 and promoted by prominent
personalities of Nepal, today stand as one of the consistently growing bank in Nepal. While the
promoters come from a wide range of sectors, they possess immense business as acumen and
share their valuable experiences towards the betterment of the Bank.
Within a short span of time, Siddhartha Bank has been able come up with a wide
range of product and services that best suits its clientele. Siddhartha Bank has been posting
growth in its portfolio size and profitability consistently since the beginning of its operation. The
management of the bank is thoroughly professional.
Siddhartha Bank has been able to gain significant trust of the customers and all other
stakeholders to become one of the most promising Bank in the country in less than 10 years of its
operation. The bank is fully committed towards customer satisfaction. The range and scope of
modern products and services the bank has been providing is an example to its commitment
towards customer satisfaction. It is this commitment that has helped the bank register quantum
growth every year. And the bank is confident and hopeful that it will be able to retain this trust
and move even further towards its mission of becoming one of the leading banks of the industry.
This study has conducted with the view to examine and evaluate the performance of
SBL, which is working as joint venture in Nepal by providing the quality and banking service
with latest technology. Financial sector in Nepal comprises of commercial banks and other
financial institutions like Development Banks, Finance Companies, Co-operatives, etc.
Conclusion
In conclusion, it can be said that the performance evaluation is the most important part of
all the financial institutions. On the basis of ratio analysis, the following conclusions are made:
Profitability indicators include net profit, ROA and ROE.
The study found that in fiscal year 2013/14 the return on assets is 1.74%. similarly, in
fiscal year 2014/15 the return on assets is 1.51% which means banks assets is decrease by
comparing to previous year and in fiscal year 2013/14 the return on equity is 23.35%.In fiscal
year 2014/15 the return on equity is 20.47%.which is also in increasing form. If the assets of a
bank is decrease at that case the return on equity of a bank is also decrease and vice versa. By
preparing this report we also saw that when assets is decreased equity is also in decreased. In
both return there is positive relation.
Based on this finding, the study concludes that return on assets plays a key role in
determining commercial banks profitability and lower levels of assets increase profitability of
commercial banks. The study found that assets and equity positive and significantly affects
commercial banks’ profitability.
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www.analyticsinhr.com
www.google.com/Annual report of Siddhartha Bank Limited
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 APPENDIX

Net income of Siddhartha Bank Limited over five years

Fiscal Years Net Income (Rs)
2013/14 700534999
2014/15 767080512
2015/16 1254918004
2016/17 1386175502
2017/18 1581702042

Total assets of Siddhartha Bank Limited over five years

Fiscal Years Total Assets
2013/14 40277752199
2014/15 50647295616
2015/16 74402915402
2016/17 89901512010
2017/18 11986921854

Total equity of Siddhartha bank limited over five years.

Fiscal Years Total Equity
2013/14 1921239051
2014/15 2137387737
2015/16 2742604058
2016/17 4606426899
2017/18 7732723147