PROFITABILITY ANALYSIS OF MUKTINATH BIKAS BANK LIMITED

A Project Work Report

By

ASHIM GHIMIRE
T.U.Reg.No.:7-2-0542-0017-2019
Roll No.:705420016
Mark International College
Ghorahi, Dang

Submitted to
Faculty of Management
Tribhuvan University

In partial fulfillment of the requirement for the Degree of

BACHLEOR OF BUSINESS STUDIES (BBS)
Ghorahi, Dang
July, 2024
 Declaration

I hereby declare that the research work entitled “PROFITABILITY ANALYSIS OF

MUKTINATH BIKAS BANK LIMITED” submitted to Mark International College
Ghorahi Dang, Faculty of management, Tribhuban University, is my original work done in
the form of partial fulfillment of requirement of Bachelor of Business Studies (BBS) under
the supervision of Mr. Sandeep Neupane of Mark International College Ghorahi Dang.

Signature:
Ashim Ghimire
Date: July, 2024

ii
 Supervisor’s Recommendation

The project work report entitled “PROFITABILITY ANALYSIS OF MUKTINATH

BIKAS BANK LIMITED” submitted by Ashim Ghimire of Mark International College
Ghorahi, Dang, prepare under my supervision as per the procedure and format requirements
laid by the faculty of Management, Tribhuban University, as per partial fulfillment of the
requirement for the award of degree of Bachelor of Business Studies (BBS). I therefore,
recommendation the project work report for evaluation.

Signature:
Mr. Sandeep Neupane
Date: July, 2024

iii
 Endorsement

We hereby endorse the project work report entitled “PROFITABILITY ANALYSIS OF

MUKTINATH BIKAS BANK LIMITED” submitted by Ashim Ghimire of Mark
International College, Ghorahi, Dang in partial fulfillment of the requirements for award of
the Bachelor of Business Studies (BBS) for external evaluation.

Signature: Signature:
Mr.Naula Bahadur Khadka. Mr. Lalmani Basel
(Chairman, Research Committee). (Campus Chief)
Date: July, 2024. Date: July, 2024

iv
 Acknowledgement

This study attempts to examine the Profitability Analysis of Muktinath Bikas Bank
Limited with special reference to analysis with available data and information. It also deals
with problem identification besides this field study to acquire the reality of banking operation
of MNBBL. For easier study of the data that has been presented by tables a graph it has been
interpreted by using various statistical methods. This report tries to focus on the study of
MNBBL.
We express my gratitude to Mr. Sandeep Neupane and entire teachers of this college for
guiding and inspiring me to do this field words.
Similarly, I am equally indebted to all the lecture of Mark International College, who help me
to prepare this report.
I am grateful to all the friends for motivating us to prepare this report. I would like to extend
my sincere thanks to the staff of MNBBL Ghorahi Branch for providing the related data,
information and support in various way to analyze profitability of MNBBL.
Finally, I want to thanks my colleagues for their continued moral support.

Ashim Ghimire
Date: July, 2024

v
 Table of Content

Title Page....................................................................................................................................i
Declaration................................................................................................................................ii
Supervisor’s Recommendation.................................................................................................iii
Endorsement.............................................................................................................................iv
Acknowledgement.......................................................................................................................v
Table of Content........................................................................................................................vi
List of Table.............................................................................................................................vii
List of Figure..........................................................................................................................viii
Abbreviation..............................................................................................................................ix
CHAPTER I : INTRODUCTION...........................................................................................1
1.1Background of study.........................................................................................................1
1.2 Profile of Organization.....................................................................................................2
1.3 Objectives of the study.....................................................................................................4
1.4 Rationale..........................................................................................................................5
1.5 Literature Review.............................................................................................................6
1.6 Research Methodology.....................................................................................................9
1.7 Limitation of the Study..................................................................................................16
CHAPTER II : DATA PRESENTATION AND ANALYSIS............................................17
2.1 Data Presentations..........................................................................................................17
2.2 Analysis of Results.........................................................................................................17
2.3 Findings..........................................................................................................................32
CHAPTER III : SUMMARY AND CONCLUSION..........................................................34
3.1 Summary........................................................................................................................34
3.2 Conclusions....................................................................................................................34
BIBLIOGRAPHY
APPENDIX

vi
vii
 List of Table
S.N. Page No.
Table NO. 1 Showing the Capital Stracture 4
Table NO. 2.1.1 Showing the Analysis Of Profit 10
Table NO. 2.1.2 Showing the Return Of Assets 11
Table NO. 2.1.3 Showing the Return Of Equity 12
Table NO. 2.1.4 Showing the Earning Per Share 13
Table NO. 2.1.5 Showing the Price Earning Ratio 14
Table NO. 2.2.1 Showing the Corelation Between Market Value & EPS 15
Table NO. 2.2.2 Showing the Corelation Between ROA & ROE 18

viii
 List of Figure

S.N. Page No.

Figure No. 1 Showing the PieChart of Capital Stracture 4
Figure No. 2.1.1 Showing the Diagram of Profit Trend 11
Figure No. 2.1.2 Showing the Diagram of ROA 12
Figure No. 2.1.3 Showing the Diagram of ROE 13
Figure No. 2.1.4 Showing the Trend of Earning Per Share 14
Figure No. 2.1.5 Showing the Trend Line of Price Earning Ratio 15

ix
Abbreviation

MNBBL Muktinath Bikas Bank Limited

Ltd Limited
L/C Letter of Credit
ATM Automatic Teller Machine
VAT Value Added Tax
SWIFT Society for Worldwide Inter-bank Fund Transfer
SMS Short Message Service
PEST Political, Economic, Social, Technological
SWOT Strength, Weakness, Opportunity, Threats
CSD Customer Service Department
FD Fixed Deposit
NPR Nepales Rupees
BOD Board of Director
CACD Credit Administration and Control Department
PI Profitability Index
NPV Net Present Value
ROTA Return on Total Assts
ROE Return on Equity
EPS Earning per Share
FY Fiscal Years
S.D. Standard Deviation
C.V. Coefficient of Variance
PE Probable Error

x
 1

CHAPTER I:

INTRODUCTION
1.1Background of study
Banks are the most important financial institution in the economy and essential for business
in thousands of local towns and cities. A Bank is an organization whose primary functions are
concerned with accumulation of ideal money from surplus units and advancing loans to
individuals, traders, industries and business houses for expenditure. Generally, the banks
collect money from general public for which it should pay interest regularly. The money thus
accumulated can be invested in different sectors such as business, foreign trades, agriculture,
industry and social work for which it charges certain percentages of interest which is higher
than interest paid by the bank to accumulate fund. Charges on advancing loan is the major
revenue source of the bank by which it can bear administration expenses incurring in the
process of operating its activities. Thus, the bank is a good mediator between depositor and
loan takers.
Some definitions about bank
According to Nepal Commercial Bank Act.2031 B.S. “A commercial Bank refers to such
type of bank which deals with money exchange, accepting deposits, advancing loans and
commercial transaction except specific banking related to cooperative, agricultural and
industries and other objectives.”
According to Oxford Dictionary- “A bank is an organization or place that provides a
financial service.”
According to Ken- “A bank is an organization whose principal operations are concerned
with the accumulation of the temporarily ideal money of the general public for the purpose of
advancing to other for expenditure.
According to Findley Shires- “A bank or banker is a person, firm or company having a
place of business where credits are open by deposit or collection of money or currency or
where money is advanced or loaned.”
In conclusion, a bank is an institution, which deals with money and monetary assets and
credit by accepting deposits from business and institutions and individuals which is mobilized
into productive sector mainly business and consumer lending.
 2
1.1.1 Concept of Profitability
The term "Profitability" is composed of two words 'profit' and 'ability". There are two main
concepts with regards to the word profit economic and accounting. According to Adam Smith
(The father of economics), “profit is the sum remaining after the payment of all wages in
economics includes payments to officers of corporations, to proprietors, to partners and to
farmers as well as to what we today term labor and rent of the unimproved value of land, as
the return to capital. Under the mathematic of capital of accountancy, the final accounting
profit of such corporations includes two elements, a return representing economic rent on the
value of land and a return on capital. However, there is not even a faint idea as to what part of
accounting profit is representing by each of these two economic elements. ME Murphy aptly
remarks, "Business cannot exist without profits, an economy cannot without sound business.
Profit must be something for all to be proud of they should not be suspect." As a matter of
fact, the overall efficiency of a bank is reflected in its profits. Profit has been universally
recognized and accepted as a measure of business efficiency. Thus, the larger the profits, the
more efficiency and profitable the bank is deemed to be. This criterion has the greater
advantage that it provides a common Standard of measuring the efficiency if different bank.
The profit motive remains on the main springs of an enterprise and spur to efficiency. It is
clearly the desire to make profit which inspires the search for more efficient methods,
reduced unit costs, better organization and greater turnover.
Banks today are under great pressure to perform to meet the objectives of their stockholders,
employees, depositors and borrowing customers, while somehow keeping government
regulators satisfied that the bank's policies, loans, investment are sound. As other type of
business entity, commercial banks are inspired by the profit. The main objectives of the
commercial banks are to maximize profit. Profit earned by the firm is main financial
indicators of a business enterprise.

1.2 Profile of Organization

Muktinath Bikas Bank Limited (MNBBL) was established on 19th Paush 2063 B.S. (i.e 3rd
January 2007 A.D.). The Bank is licensed by the Central Bank of Nepal to operate as a "B"
Class National Level financial institution with its Central Office at Kamaladi, Kathmandu,
Nepal. Today, Muktinath Bikas Bank is known as the leading Development Bank of Nepal
with a history of its own.
 3
The citizens of Syangja District (a hilly district with tough geographical terrain) were starved
for financial needs and the local people were undoubtedly had to travel to Pokhara (the only
nearby metro, with approximately 38 Kilometer mountainous road linkage) for petty
transaction such as withdrawal of mere NPR 5,000/-(approximately $50). The cost of
travelling and other involved security risk, hectic involvements and more costs thereon. Then,
the need for an immediate solution to these problems vat felt and a seed for the same was
cultivated. The like-minded group of innovative local intellectuals from various sectors
joined hands together to establish a local private sector bank to resolve the issues being dealt
by people of Syangja District.
Likewise, on January 3, 2007, (We) the proposed Bank got license from the Central Bank of
Nepal (i.e., Nepal Rastra Bank) to operate Banking Business initially in three districts namely
Syangja, Kaski and Tanahun of then Western Development Region (currently Gandaki
Province) as a "B" class financial institution.
Since inception, the Bank has been adopting the deep-rooted values of financial inclusion of
the community and core principle of "Janata Bank ma Hoina, Bank Janata ma Janu
Pardachha." i.e. "People should not come to the Bank, Banks should go to the doors of
people". The Bank prioritized opening branches in the rural areas where in the absence of any
financial institution, people were in dire need for Banking services. The customer friendly
products, services and door-to-door facility are the major factor for the Bank's popularity and
success among the local people of the area Within one and half years of operations in the
month of April 2009, the Hank started a Microfinance Program in its host of services with
starting a dedicated department at central office and branches to serve low income but high
potential people with high productivity. The Bank was the first "B" class Bank with 3 pillars
strategy of Modern Banking, Rural Banking & Micro Banking for serving low-income people
with dedicated departments for the same.
At Present
The Bank has a noticeable Balance sheet size of NPR 101.09 billion (equivalent to USD 852
Million) as of Ashad End 2078 (July 2021) with 950,000 happy customers from different age,
communities, societies and ethnic groups as of July 2021. The Bank has a large footprint of
178 branch outlets with 22 ATMs (and still counting) spread across the country as of date.
Vision
Be the most preferred robust Bank in Nepal while uplifting socio-economic status of people.
 4
Mission
Become a leading, financially viable, socially acceptable, regulatory complaint, environment
friendly, inclusive financial services provider for all the stakeholders’ wellbeing.

Values
 Goal Focused
 Result Oriented
 Ownership in the tasks
Table 1
Capital Structure of Muktinath Bikash Bank Ltd.
Particulars Amount
Authorize Capital 8 billion
Issued Capital 7.05 billion
Paid-up Capital 7.05 billion

Figure 1

Capital Stracture of MNBBL

Authorized Capital Issued Capital Paid-Up Capital

Source: From table 1

 5
1.3 Objectives of the study
Development banks are providing a large contribution to different sectors through trade,
industry, commerce, agriculture, tourism etc. They have now become the base for the
development of Nepal. So, activities of such sector should be studied and evaluated time to
time and this field work is also based on the same objective. Moreover, the other main
objectives of the present study are: -
 To examine the trend of profitability position of Muktinath Bikash bank Limited.
 To analyze the correlation of net profit to total operating profit.
 To evaluate the various relationship of profit with various financial aspects

1.4 Rational
Slowdown of economic sector have definite impact on banking sector too. Globalization and
accession to World Trade, SAFTA, and BIMSTEC membership have invited more challenges
as well as opportunities. In addition, branches of foreign companies are allowed for insurance
and wholesale banking from jan1 2010.
At this situation, the development banks should be more competitive. They should be
financially healthy and must have growth potential. In this situation, this study tried to
analyze overall financial health of development banks whether they are able to compete
challengers and grab opportunities. So, the study is basically concerned with development
banks failing under same strategic group to be more meaningful.

1.5 Literature Review

1.5.1 Conceptual Review
The modern financial evaluation has greatly affected by the role and importance of financial
performance. Nowadays, finance is best characterized as ever changing with new ideas and
technique. Only efficient manager can achieve the set-up goals. If a bank does not maintain
adequate equity capital, it must use more debt that has high fixed cost. So, any form must
have adequate equity capital in their capital structure the main objectives of bank are to
collect deposit as much possible from the customer and to mobilize into the most profitable
sector. If bank fails to utilize its collected funds it cannot generate revenue. Resource
mobilization of bank includes resources collections, investment portfolio, loan and advances,
working capital, fixed assets management etc. it measures the extent to which bank is
successful to utilize its resources. The sustainability of bank's performance depends mainly
 6
on its ability to find most durable sources of funds and to find most appropriate opportunities
for loan investment.

1.5.2 Review of previous works

This information benefits the banks in future dealing with the clients. The more proprietary
information a bank has the greater its advantage over other banks. Therefore, the largest the
market share a bank attains the better its advantages. This gives incumbents an advantage
over new banks and acts as a barrier to entry leading to a concentrated banking sector. It also
provides a large incentive for incumbents to complete strongly for market share. This put
downward pressure on leading rates even in the absence of a large number of banks. (Dell
Aricia 2002).
Branch banking tends to export competition in dense urban markets to outlying areas. Thus,
branch banking tends to increase the effective size of banking market. (Calm and Nakamura
2005).
For the development of the country the banks have played the great role. This bank is
providing new technology for sustainability. Among them one technology is ATM service
also. ATM network provides an alternative, lower cost way to establish a physical delivery
system, thereby reducing sunk costs and barriers to entry. (Berger 2003).
Financial Statement is prepared with the help of financial transaction which have taken place
during the financial year. It is prepared to provide the financial information that helps to take
decision. The information provides the financial statement is useful in making decision
through analysis and interpretation. This analysis is process of identifying financial strengths
and weakness of the firm. There is various method used to analyzing financial statement. One
of them is the ratio analysis which is regarded as most powerful tools of financial analysis.

1.6 Research Methodology

1.6.1 Research Design
Research design is the plan, structure and strategy of investigations conceived so as to obtain
answer to research question and to control variances. It is the arrangement of conditions for
collection and analysis of data. To achieve the objective of this study, descriptive cum
analytical research design has been used Some recent financial tools along with statistical
tools have been applied to examine facts and descriptive techniques have been adopted to
evaluate the profitability of Mahalaxmi Bikas Bank Limited.
 7
1.6.2 Population and sample
All development banks of Nepal fall under the population of this study. Overall study of all
elements of this population could not be possible due to several reasons. Therefore,
Siddhartha Bank Ltd. is selected as the sample of this study using judgmental sampling
technique.
1.6.3 Sources of Data
This study is conducted on the basis of secondary data. The data required for the analysis are
directly obtained from the balance sheet and profit and loss account of concerned bank's
annual reports. Supplementary data and information are collected from numbers of
institutions and authorities like NRB, security exchange board, Nepal Stock Exchange Ltd.
Ministry of finance, budget speech of different fiscal years, economic survey. All the
secondary data are compiled, processed and tabulated in the time series as per the need and
objectives. Likewise, various economic data are collected from the economic journals,
periodicals, bulletins, magazines and other published and unpublished reports and documents
from various sources.

1.6.4 Data Analysis Tools

Data analysis tools means which tools the research used for present and analyzed the data.
The main tools of analysis are mathematical and statistical tools. In this report statistical tools
and financial ratio tools are used for data analysis. Mean and correlation is calculated for
analysis the data as statistical tools.

a) Financial Tools
Financial tools are used to examine the financial strength and weakness of bank. In these
study financial tools like ratio analysis has been used.

• Ratio Analysis
Financial ratio is the mathematical relationship between two accounting figures. Ratio
analysis is a part for the whole process of analysis of financial statements of any business or
industrial concern specially to take output and credit decisions. Thus, ratio analysis is use to
compare the firm's financial performance and status to that of other firm's or to itself over
time.
 8
The qualitative judgment regarding financial performance of a firm can be done with the help
of ratio analysis. Even though, there are many ratios used in various studies to evaluate
different aspects of a business entity, the ratios are of different importance and used
differently in various industry base. For example, it is no significant to analyze the quick ratio
or current ratio in the context of commercial banks. Further, in the context of commercial
banks the insider and outsider fund base cannot be interpreted as per the standard of
production units since financial institutions are by virtue highly levered by outsider's fund.
Similarly, in the banking industry, there is no significance to say deposits are current
liabilities or some of the studies have considered time deposits as fixed liabilities. Both of the
interpretations are not viable since these liabilities should be considered as per their maturity
schedules. In this study, various ratios from newly developed empirical studies have been
used just to see the profitability position of commercial banks. This study contents following
ratios:
 Profitability Ratios
Profitability Ratios are used to measure the efficiency of operation of a firm in terms of
profit. It is the indicator of the financial performance of any institution. This implies that
higher the profitability ratio, better the financial performance of bank and vice versa.
The profitability of Siddhartha Bank Ltd is evaluated through following different ratios:
 Analysis of Profit Trend (AOPT)
 Return on total assets (ROTA)
 Return on equity (ROE)
 Net profit margin (NPM)
 Net interest margin (NIM)
 Earnings per share. (EPS)

b) Statistical Tools
Trend analysis is one of the statistical tools used for forecasts. Among various methods of
trend analysis, a very popular least square method has been used in this study which has been
used to analyze the trend of net profit and interest income of net profit and interest income of
Nepal Bank Ltd 2011 to 2016. Similarly, other statistical tools are used in this research, these
are as following.
 Mean
 Standard deviation
 9
 Coefficient of variance
 Correlation of coefficient
1.7 Limitation of the Study
This study covers Profitability analysis of Muktinath Bikas Bank Limited through various
profitability analyses only for past five years. The main limitations of this study are;
 The study is confined only on the Profitability analysis of Muktinath Bikas Bank Ltd.
 This study does not cover the comparative Profitability analysis between joint venture
banks.
 The profitability is generally calculated from past financial statement during five years
and these are no indicators on future
 The data taken from the balance sheet and income statement (annual report) of
Muktinath Bikas bank ltd to make the interpretation of ratios.
 It is difficult to decide on the proper basis of interpretation and recommendation as the
profitability are calculated for only one bank.
 The result shown by profitability analysis is not fully dependable. It must understand
that these ratios are the symptoms. It required further investigation for pinpointing the
underlying factor.
 10
CHAPTER II:

RESULT AND ANALYSIS

This chapter is basically concerned with the presentation and analysis of data. This figure of
data is in rupees. Amounts are approximately in thousand or million or in crores. All the
important financial variables have been analyzed to give my project realistic and meaningful
touch. I have gathered data and applied various means of analytical tools and result is taken
out and comparison is done.

2.1 Data Presentations

Profitability ratio measures the overall performance of the firm by determining the
effectiveness of the firm in generating profit. The following ratios are used to measure the
profitability position of MNBBL

2.1.1 Analysis of Profit Trend

Table 2.1.1
Profit Trend of MNBBL
Fiscal Year Net Profit % Increase
2075/76 856 -
2076/77 707 (17.40)
2077/78 1156 63.50
2078/79 1342 16.08
2079/80 1248 (7.004)
Source: Annual Report of MNBBL (2079/80)

The trend of profit is in fluctuation trend. The profit is highest in the FY 2078/79 and lowest
in the FY 2076/77 with Rs. 1342 and Rs. 707 million respectively. There is decrease in profit
trend from the FY 2075/76 to 2076/77. But in 2078/79 profit is increase with 16.08%. So, we
can say that the profitability position of MNBBL is efficient.
 11
Figure 2.1.1
Diagram showing Profit trend of MNBBL

Chart Title
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2076/77 2077/78 2078/79 2079/80

Net Profit 856 % Increase -

Source: From Table 2.1.1

The above figure shows that the profit trend is normally decrease first from fly 2074/75 to
2075/76 then increase in FY 2077/78 then decrease to FY 2078/79. It is highest in the FY
2077/78 and lowest in the FY 2076/77. There is increment trend of the net income.

2.1.2 Return on Assets (ROA)

This ratio establishes the relationship between net profit and total assets. It can be ascertained
with the help of following formula:

Net Profit After Tax

ROA =
Total Assets

Table 2.1.2
Return on Assets of MNBBL
Fiscal Year Net Profit Total Assets ROA
2075/76 856 51,991.39 1.65%
2076/77 707 66,384.09 1.06%
2077/78 1156 101,126.81 1.14%
2078/79 1342 121,083.46 1.11%
2079/80 1248 131,611 0.95%
Source: Annual reports of MNBBL (2079/2080)
 12
The trend of ROA is in fluctuating trend. It has increased by 1.65% in the FY 2075/76 then
decrease. From the FY 2075/76. ROA has decrease slightly and reached to 1.06. The higher
the ROA implies the more available source and tools ate employed efficiently. Since the ratio
of MNBBL, is in fluctuating trend, we can say that the management of MNBBL is not able to
mobilize their available source and tools efficiently.
Figure.2.1.2
Diagram showing ROA of MNBBL

ROA%
140000

120000

100000

80000

60000

40000

20000

0
2075/76 2076/77 2077/78 2078/79 2079/80

Net Profit Total Assets ROA

Source: From table 2.1.2

The above figure shows that the trend of ROA is normally fluctuating. The ratio is positively
highest and lowest in FY 2075/76 and FY 2079/80 with 1.65% and 0.95% respectively. In the
current year ROA has decrease as compared to the previous year.

2.1.3 Return on Equity (ROE)

Return on equity is the ratio of net income to common equity. It is also known as the rate of
return on stockholders’ fund. ROE can be calculated as follows:

Net Profit
ROE=
Total Equity
 13
Table 2.1.3
Return of Equity of MNBBL
Fiscal Year Net Profit Equity ROE (%)
2075/76 856 4,449.50 19.24%
2076/77 707 5,818.46 12.16%
2077/78 1156 6,826.66 16.94%
2078/79 1342 8,076.59 16.62%
2079/80 1248 9362.34 13.33%
The ROE ratio is in fluctuation trend. Since ROE indicates how well the resources
contributed by the owners are utilized. So, from the ratio above we can say that the owner's
contribution is not effectively utilized. Higher the ratio, the more efficient the management
and utilization of shareholder's fund will be. So, we can say that the management of MNBBL
is not well efficient.
figure 2.1.3
Diagram showing ROE of MNBBL

ROE%
10000
9000
8000
7000
6000
5000
4000
3000
2000
1000
0
2075/76 2076/77 2077/78 2078/79 2079/80

Net Profit Equity Ratio (%)

Source: From table 2.1.3

There is fluctuation trend of ROE of MNBBL. It is positively highest and lowest in the FY
2075/76 and FY 2076/77 with 19.24% and 12.16% respectively. It has decreased and reach to
13.33% in the FY 2078/80. This ratio shows not efficient management of MNBBLI.
 14

2.1.4 Earning Per Share (EPS)

The profitability of common shareholder's investment can be measured in many other ways.
The income of per common share can be known from the Earning per Share.

Table 2.1.4
Earning per Share of MNBBL
Fiscal Year Net Profit No. of share EPS (Rs.)
outstanding
2075/76 856 31 27.94
2076/77 707 43 16.56
2077/78 1156 48 24.03
2078/79 1342 57 23.72
2079/80 1248 64 19.44

The trend of EPS is in fluctuating trend but current year is in decreasing. It has increases from
FY 2078/79 with Rs. 23.72. The lower per share return is 26.56 in FY 2076/77. It is not
excellent thus the trend does not shows the good condition of EPS in MNBBL.
Figure 2.1.4
Trend of Earning Per Share of MNBBL

EPS
1600
1400
1200
1000
800
600
400
200
0
2075/76 2076/77 2077/78 2078/79 2079/80

Net Profit No. of share outstanding EPS (Rs.)

Source: From table 2.1.4

 15
The EPS is positively highest and lowest in FY 2075/76 and 2076/77 with 27.94 and 16.56
respectively. The average EPS is Rs. 22.33.
2.1.5 Price Earnings ratio (P/E ratio)
This ratio shows the relation between market value per share and earning per share. It is
closely related to the earning yield. This ratio is drawn out by dividing the market value per
share by earning per share. It can be calculated as: -
Market value of share
P/E Ratio =
Earning per Share

Table2.1.5
Price Earnings Ratio of MNBBL
Fiscal Year Market Value Earnings Per Share P/E Ratio (%)
2075/76 856 27.94 13.24
2076/77 707 16.56 18.84
2077/78 1156 24.03 27.34
2078/79 1342 23.72 18.55
2079/80 1248 19.44 20.94
The trend of P/E ratio is in fluctuating trend. The P/E ratio is positively highest and lowest in
the FY 2077/78 and FY 2075/76 with 27.34% and 13.24% respectively.

Figure 2.1.5
Trend line of Price Earnings Ratio
 16

P/E%
1600
1400
1200
1000
800
600
400
200
0
2075/76 2076/77 2077/78 2078/79 2079/80

Market Value Earnings Per Share P/E Ratio (%)

Source: From Table 2.1.5
The diagram shows that the P/E ratio is decreased from FY 2074/75 to 2075/76 initially and
then in an increased trend in the FY 2076/77 to FY 2079/80.

2.2 Statistical Analysis

Calculation of mean, standard deviation, coefficient of variation, co-variance, coefficient
correlation and probable error.

Table 2.2.1
Calculation of correlation between Market Value and Earning Per Share of MNBBL
Fiscal MPS(X) EPS (Y) x= X -X y= Y -Y x2 y2 xy
Year
2075/76 370 27.94 67.18 (5.602) 4513.15 31.38 (376.342)
2076/77 312 16.56 125.18 5.778 15670.03 33.38 723.29
2077/78 657 24.03 (219.82) (1.692) 48320.83 2.862 371.93
2078/79 439.90 23.72 (2.72) (1.382) 7.39 1.90 3.7590
2079/80 407 19.44 30.18 2.898 910.83 8.39 87.4616
Total 2185.9 111.69 0 0 69422.23 77.912 810.1038

Mean
 17
It is the sum of all observation divided by the number of observation or value. Mean is the
arithmetic average of total observation or values.
∑X
Average MPS ( X )=
N
2185.9
= = 437.18
5

∑Y
Average EPS (Y )=
N
111.69
=
5
= 22.338

Therefore, the average MPS of MNBBL for the last five year is NRs.437.18 Million and the
average of EPS of MNBBL is NRs. 22.338.
2
∑ ( X− X )
Standard deviation (s.d) (MPS) sx = √
n−1
0
=√
5−1
=0

2
∑ ( Y −Y )
Standard deviation (s.d) (EPS) sy =
n−1
0
= √
5−1
=0
Coefficient of Variation
The coefficient of variation of dispersion based on standard deviation multiplied by 100 is
known as the coefficient of variation (c.v). It is independent of unit.

x
C.V(MPS) =
X
0
=
437.18
=0
 18
y
C.V(EPS) =
Y
0
=
22.338
=0
Co-Variance between MPS and EPS
∑ xy
COVxy =
n−1
810.1038
= = 202.52
5−1

Karl Pearson’s correlation between MPS and EPS

One of the widely used mathematical methods of calculating the correlation coefficient
between two or more than two variables is Karl Pearson’s correlation coefficient. It is also
known as Pearson’s correlation. It is denoted by “r” or simple’r’ and is defined by;
∑ xy
Correlation coefficient (r) =
√ ∑ x 2. ∑ y 2

Where, x = X -X
y=Y -Y
The value of 'r' always lies between +1 and -1. When r = +1, it means there is perfect position
correlation between the variables. When x = - 1, there is perfect negative correlation between
the two variables. Similarly, when r=0, it means there is no relation between them.

∑ xy
Correlation coefficient r =
√ ∑ x 2. ∑ y 2
810.1038
=
√ 69422.23 ×77.912
= 0.3483

The correlation coefficient between MPS and EPS in 0.3483 This calculation shows the
positive relationship between these two components MPS and EPS. It means when MPS of
MNBBL increases, EPS of MNBBL increases.

Probable error (PE)

 19
We can use the probable error to measure the reliability. Probable amor of the correlation
coefficients is applicable for the measurement of reliability of the computed value of the
correlation coefficient, r. The probable error (PE) can be defined as: -

Where,
r = correlation coefficient
n = no. of observations
If r< 6 x P.E, the value of r is not significant. i.e. there is no evidence of correlation between
the variables. If r >6 x P.E, the value of r is significant. i.e. correlation is certain.

2.2.2 Correlation between ROA and ROE

The two variables whose degree of relationship to be measured is Return on Assets (ROA)
and Return on Equity (ROE).

Table 2.2.2
Calculation of correlation between ROA and ROE of MNBBL
Fiscal ROA ROE x= X- X y= Y-Y x2 y2 xy
Year (X) (Y)

2075/76 1.65 19.24 0.468 3.07 0.21 9.4249 1.43676

2076/77 1.06 12.16 (0.122) (3.49) 0.014 12.18 0.42578
2077/78 1.14 16.94 (0.042) 1.29 0.0017 1.6641 (0.0542)
2078/79 1.11 16.62 (0.072) 0.97 0.0051 0.9409 (0.0698)
2079/80 0.95 13.33 (0.232) (2.32) 0.053 5.38 0.53824
Total 5.91 78.29 0 (0.48) 0.2838 29.5899 2.27676

∑x
Mean ( X ¿ ¿= = 1.182
n
 20
∑y
Mean (Y ¿ ¿=
n
= 15.65
2
∑ ( X− X )
Standard deviation (S.D) x = √
n−1
=0

2
∑ ( Y −Y )
Standard deviation (S.D) y =√
n−1
= 0.24

Coefficient of variation (C.V)

σx
C.V.(MPS) =
X
=0
σy
C.V. (EPS) =
Y
= 0.066

2.3 Major Findings

The flow of information is based on the hybrid system i.e., the overall system is partially
computerized. Besides, some of the departments are based on manual system. The bank has
tried to keep pace with the technology change but has not been successful so far. The major
findings can be listed as follows:
1. Net profit of Muktinath Bikas Bank limited, is more variable rather than investment of
Muktinath Bikas Bank Ltd. In the other words net profit is a change in 10.46% and
investment changes in only 10%
ii. Earning Per Shares of Muktinath Bikas Bank Ltd is fluctuated. It is 20.45 o FY 2074/75,
after that it is decrease to 16.56 on FY 2076/77. After that it is highly increased to 23.72 on
FY 2078/79.
iii. NPM of Muktinath Bikas Bank Ltd. There is 37.17% on FY 2075/76 after that it is
increased to 63.5% on FY 2077/78. After that it is decreased on last years to 16.08%
 21
iv. The return on equity ratio of Muktinath Bikas Bank Ltd. isn't consistent, it is 15.87% on
FY 2074/75, after that it is decrease to 12.16% on FY 2075/76, 16.94 on FY 2077/78, in FY
2078/79 it is 16.62%. According to the above table ROE of Muktinath Bikas Bank Ltd is not
constant

CHAPTER III:

SUMMARY AND CONCLUSION

This Chapter deals with the summary, findings and result of the analysis done in the above
Chapter of presentation of data. In this Chapter, we cover the main findings of the
profitability position of MNBBL and then draw an overall conclusion of whole study and
research.

3.1 Summary
MNBBL wants to be a leader among the banks of its age in Nepal by fulfilling the interest of
the stakeholders and also aims to provide total customer satisfaction by way of offering
innovative product and by developing and retaining highly motivated and committed staffs.
This has not only helped the Bank to constantly improve its service level but also has
prepared the bank for future adaptation to new technology. The bank already offers various
services such as debit/ATM card service, safe deposit locker, evening banking, holiday
 22
banking, ABBS, Internet banking. Remit service to customers and will be introducing more
services like these in the near future. Muktinath Bikas Bank firmly believes customer focus is
a core value, shareholder prosperity is a prime priority, employee growth is a commitment
and economic welfare is a sincere concern. Its vision is to be financially sound, operationally
efficient and keep abreast with technological developments.
From the above analysis, profit trend is in increasing trend. It shows that MNBBL is able to
maintain the increasing ratio of profit each year. The trend of ROA is in fluctuating trend
which shows that the management of MNBBL has not been able to maintain the net profit in
respect to total assets. The ROE ratio is in increasing trend so we can say that the
management of MNBBL is efficient to utilize shareholder's fund.
Similarly, EPS is in fluctuating trend. It maintains it trend in a positive way and is being able
to maintain the increasing trend of MNBBL., profitability position. There is decreasing trend
of Net Profit to Total Loans & Advances. However, in the recent years, it has slightly starting
increasing which shows some positive chances of the position of the bank being good.

3.2 Conclusions
The following conclusions were found during this research: -
1. The trend of profit is in increasing trend. There is also positive increment in the profit in
the FY 2074/75 to 2075/76.Thus we can say that the profitability position of MNBBL is
efficient.
2. The profitability position of MNBBL is satisfactory. Even though the ROA is normally in
fluctuation trend but it has maintained the positive position. But it can increase its level of
ratio more. We think MNBBL must mobilize the total assets even more.
3. The ROE ratio is in fluctuation trend. Since ROE indicates how the resources contributed
by the owners are utilized. So, from the ratio above we can say that the owner's contribution
is not effectively utilized. Higher the ratio, the more efficient the management and utilization
of shareholder's fund will be. So, we can say that the management of MNBBL is not efficient.
4. EPS is normally increasing in first three years and increased in FY 2074/75 year with Rs.
26.60. It is quite satisfactory. But the MNBBL has maintained bad position of EPS. After the
increase in the FY 2078/79, MNBBL has maintained bad position in other fiscal years.
 23
5. The ratio of interest income to loan has decreasing in the all-Fiscal Years. So, we can say
that MNBBL is not earning more interest income from loan.
6. The Net profit to Total Loans & Advances ratio's fluctuation trend doesn't show the good
position of MNBBL. However, in the recent year the increment shows some positive chances
of the position of the bank being good.
7. The correlation coefficient between ROA and ROE is 0.066. This figure shows the positive
relationship between these two components ROA and ROE. It means when ROA of MNBBL
increases, ROE of MNBBL also increases. Since, r < 6 x P.E, the value of r is not significant
i.e. the correlation between the variables ROA and ROE is uncertain.
 BIBLIOGRAPHY

Books

Bhandari, D. R., (2003), Principle and Practices of Banking and Insurance,

Asia Publication, Baghbazar, Kathmandu.

Chettri, K. (2008). Fundamentals of Corporate Finance", Asmita Publication,

Bhotahiti, Kathamandu.

Chaudhary, D. (2008). Business Statistics and Mathematics, Variety Printers Pvt

Ltd., Kuleshwor, Kathmandu.

Nabar, R. (2011). Statistical Methods, Khanal Books Prakasan, Minbhawan, Kathmandu,

(2nd edition)

Bhandari, D. R., (2003). Principle and Practices of Banking and Insurance,

Asia Publication, Baghbazar, Kathmandu.

Bhandari, D. (2059). Financial Markets and Institutions, Asmita Publication, Bhotahity,

Kathamandu, (2nd edition).

Nabar, R. (2011), Statistical Methods, Khanal Books Prakasan, Minbhawan, Kathmandu,

(2nd edition)

Peter, M. (1997). Essentials of Managerial Finance, The Dryden Press, Orlando, U.S.A., (8th

edition).

Websites:

www.muktinathbank.com

www.nrb.org.np

www.nepsealpha.com
APPENDICES