PROFITABILITY ANALYSIS OF PRABHU BANK LIMITED A Project Work Report By Babita Kumari Rajbanshi _ TU Registration No: 7-2-0003-561-2019 Exam Roll No: Mahendra Morang Adarsha Multiple Campus, Biratnagar Finance Group SOL we 5 Submitted to ‘The Faculty of Management ‘Tribhuvan University KathmanduDECLARATION { hereby, declare that the project work entitled "Profitability Anulysis of Prabhu Bank Limited” submitted to the faculty of management, Tribhuvan University, Kathmandu fs an original piece of work under the supervision of Mr. Mohan Kumar Shrestha faculty member, Mahendra Morang Adarsha Multiple Campus, Biratnagar and is submitted in partial fulfillment of the requirements for the award of the deg of Bachelor of Business Studies (BBS). This project work report has not been submitted to any other university or institution for the award of any diploma, Babita Kumari Rajbanshi Date: iiGla wf, Botose waMFGH ya Botbow Taner Bosse Mee rer wwoouto farm TAFT Ue) araierel Boots fa fay. 800830 Ferme ua Fen/ae... NDORSEMENT We hereby endorse the project work report entitled "Profitability Analysis of Prabhu Bank Limited" submitted by Babita Kumari Rajbanshi of Mahendra Morang Adarsha Multiple Campus, Biratnagar, in partial fulfillment of the requirements for award of the Bachelor of Business Studies (BBS) for external evaluation. Dr. Udhab Pokhrel Dr. Ramavatar Sharan Chairperson Campus Chief Management Research Committee MMAMC, Biratnagar Date:ACKNOWLEDGEMENT degree of bachelor in Business studies (BBS) of Tribhuvan University. This project work is honestly done by me, The acknowledgements will be incomplete without firstly recognizing the supremacy of God, the giver of wisdom and knowledge, First, | would like to thank my supervisor, Mr. Mohan Kumar Shrestha, from the bottom of our hearts for all of his help and support during this project. Their in knowledge, perceptive criticism, and unshakable dedication have been cru determining the course and caliber of our study. | am also grateful to Head of BBS Research Committee chairman and members Dr. Udhab Pokhrel, Dr. Binod Kumar Shrestha and Dr. Siv Chandra Chaudhary and campus chief of Mahendra Morang Adarsha Multiple Campus Biratnagar Dr. Ramavatar Sharan for giving us this wonderfil chance to complete my project work report. | also thanks to Mr. Binod Kamat who provides me administrative and academic information about this report writing and all staff member of Mahendra Morang Adarsha Multiple Campus for its support, which included facilities, resources, and logistical help that were crucial to the efficient completion of this study. Finally, an honorable mention goes to my office, family and friends for understandings and supports me in completing this research report. Without helps for particular that mentioned above, I would face many difficulties while doing this. Babita Kumari Rajbanshi BBS 4° YearTABLE OF CONTENTS Title Page Declaration ii Supervisor's Recommendation... iil Endorsement iv 4 Table of Contents svi List of Tables List of Figures... Abbreviation... . CHAPTER I: INTRODUCTION 1.1 Background of the study 1.2 _ Profile of Prabhu Bank Limited .... 1.3 Statement of the Problem. 1.4 Objectives of the study 1.5 Rationale of the study 1.6 — Review oflliterature .. 17 Research Methodology .. 1.8 Limitation of the study... 1.9 Organization of the study ... (CHAPTER II: RESULTS AND ANALYSI! 2.1 Data Presentation and Analysis .. 2.2 Major Fi viLIST OF TABLES Table No. Title Page 1 Net Profit Margin 14 2 Retum on Assets 16 3 Retum on Equity 7 4 Earnings per Share 18 20 Net Interest Margin villAmt. BBS GNa EPS FY PBL No. NPM ROA ROE NIM ABBREVIATIONS Percentage Amount Bachelor of Business Studies Coefficient of Variation Earnings per Share Fiscal Year Prabhu Bank Number Net Profit Margin Retum on Assets. Retum on Equity Net Interest Margin Rupees Tribhuvan UniversityCHAPTERL TRODUCTION 1.1 Background of the Stu ly The financial institution's primary responsibility is to mobilize community savings and make sure they are efficiently allocated to high-yielding investments. At the moment, commercial banks serve as boll the Seondaile ALY and a gauge of wealth, According to historical data, ‘commercial banks grow and recognize the im portance of the whole economic activity in th ™m carlier periods of time. The main source of inspiration for this project report is “A study of profitability analysis of Prabhu Bank Limited.” The objective of any Company entity is to generate profits. Every company should make a sufficient profit to cover its operational expenses on a daily basis and ensure its long-term viability. The company’s capacity to remain efficient and guarantee a sullicient retum to investors ultimately depends on how much profit it makes, If the SomPany makes a sufficient amount of profit, it can sustain both qualities. The Profitability ratio gauges the company’s camings over a specific time period by erating Income b. Return on Assets (ROA): The ROA ratio shows the relationship between net profit and total assets. ROA is expressed as a percentage, and it varies across industries. Generally. a higher ROA is desirable, as it indicates that the company is generating more profit per dollar of assets. It can be expressed by following formula: pe __Net Profit turn on Assets = 7a c. Return on equity (ROE): The return on equation shows relationship between net profit and net share holder's equity. ROE is usually expressed as a percentage. A higher ROE indicates that a company is generating more profit with the shareholder's equi invested in the company. The ROE can be calculated as: ‘1 Net Profit Return on Equity = Shareholder Equityé Earnings per Share(Eps); Eamings per share is typi lly reported on a quarterly and annual basis and is oflen used by investors to assess a company’s profitability ona per-share bass, Higher EPS generally indicates higher profitability per share, which can be favorable for investors, Eamings per share are calculated as follows: Net Profit Earni ——_— ning Per Share [Link] Share e Net Interest Margin (NIM): Net interest margin is the difference between the interest income generated and the amount of interest paid out to lenders. It is an industry- specific profitability ratio for banks and other financial institutions that lend The ratio is calculated interest revenue less interest expenses divided by bank interest earning assets. It is calculated as under: out interest-earning asse Net Interest Income Neti i ict interest margins 7 terest warning Assets [Link]. Statistical Tools Statistical methods are the mathematical techniques used to facilitate the analysis and interpretation of numerical data secured from groups of individuals or group of observation from a ringlet individual. a. Mean In statistics, the mean is a measure of central tendency that represents the average of a set of numbers. It's calculated by adding up all the values in the dataset and then dividing by the total number of values. In this study, the data related to dividend are tabulated and drawn out average over different years. b. Standard Deviation (s) ‘ion is a measure of the dispersion or spread of a set of values in a jicates the average amount of variation or deviation of individual datats from the mean of points from the mean of the dataset, In other words, it quantifies the degree of variability or dispersion i i » oF dispersion in the dataset, The standard deviation is calculated using the following formula: c. Coefficient of Variation (Cv) The Nicient of variation (CV) is a statistical measure used to compare the Variability of data sets with different units of measurement. It is calculated by dividing the standard deviation of a dataset by the mean and then expressing the result as a percentage. The formula for the coefficient of variation is as follows: 1.8 Limitation of the Study This study is simply conducted for the partial fulfillment of the requirement for the degree of the bachelor in business studies (BBS). And only the secondary data is used and analyzed which could not disclose the actual result. And being the first endeavor, the report can comprise some mistakes which may cause to misinterpretation of the results The other limitation of the study is listed below: * The study is based on secondary data; therefore, the accufacy of results and conclusions highly depends upon the reliability of these data. + The evaluation is made through the analysis of financial statement published and presented by the bank. + As the title specifies, the study covers about profitability subject only. Other factors besides these are not studied. * This study is based on only three year data to the analyze profitability position.rf 1.9 Organization of the Study The present study is organized in such a way that the stated objectives can casily be fulfilled. The structure of the study will try to analyze the study in a systematic way. The study report has presented the systematic presentation and finding of the study. The study report is designed in three chapters which are as follows: Chapter-I: Introduction This chapter includes background of the study, Profile of the organization, statement of problem, Literature review, Research Methodology, rationale of the study, limitation of the study and organization of the study. Chapter - I: Results and Analysis This chapter consists of systematic presentation and analysis of financial statement by employing financial and statistical tools along with major findings. Chapter-III: Summary and Conclusion This chapter includes the summary, conclusion and implication of the study based on the data analysis findings. Bibliography and appendices are added at the end of this report.CHAPTER IL RESULTS AND ANALYSIS The Result and Analysis chapter of a research report is pivotal in presenting the #s obtained through the research methodology employed. This section serves 0 Provide a comprehensive examination of the collected data and offers insights derived from the analysi Here's a brief outline of what this chapter typically includes: 2.1, Data Presentation and Analysis Presentin; and analyzing data is the main focus of this chapter. Several graphical displays, statistical, and financial tools, as well as other methods, have been used in this study to examine the data that was gathered, 1, Net Profit Margin: ‘The relationship between net income (net profit after taxes) and operational income is depicted by the ratio, For any corporate concem, a higher profit mar Afler deducting interest, taxes, operational expenses, and depreciati revenues, a company's profit is calculated as net profit. The phrase is sometimes used to refer to the "bottom line” of a business; it can also mean “net earnings" or "net income." Table | Net Profit Margins Fiseal Year Net Income Total Operating Income Net Profit Margin 2077778 1720874849 6714071982 25.63% 2078/79 1902015262 7553021984 25.26% 2079/80 2802188966 12156973137 24.16% Average 25.01% Standard Deviation 2.87% Coefficient of Variation 12.07% Note: Annual Report of Prabhu Bank Limited1s 26.00% 25.50% +— | 25.00% + 24.50% 24.00% 23.50% 23.00% + 2077/78, 2078/79 2079/80 Figure 1: Net Profit Margin Above the table and figure shows that the net profit margin of Prabhu Bank Limited 'n 2077/78 to 2079/80 are 25.63%, 25.26% and 24,16respectively. The average Profit margin of Prabhu bank is 25.01%, standard deviation and C.V is 2.87% and 12.07%.The profit margin of Prabhu bani Profit margin of Prabhu is not improve in the research period, It means the bank is in decreasing trend but overall, the running in better position. So, the profit margin of Prabhu is not satisfactory to the stakeholder. 2. Return on Assets (ROA) The ratio of net income to total assets measured the return on assets after interest and taxes. This measures the profitability of all the financial resources invested in firm's assets it indicates capacity of the firm utilizing its assets on to eam a maximum profit. Return on Assets (ROA) is a type of return on investment (ROI) metric that measures the profitability of a business in relation to its total assets. This ratio indicates how well a company is performing by comparing the profit (net income) it’s generating to the capital it’s invested in assets. The higher the return, the more productive and efficient managementTable 2 Return on Assets (ROA) 2077778 1720874849 210041002513 2078/79 1902015262 232753000628 0.82% 2079/80 2802188966 347976381544 0.62% Average 0.15% Standard Deviation 0.0012 Coefficient of Variation 15.33% Note: Annual Report of Prabhu Bank Limited 0.20% 0.80% 0.70% | osox. 0s0% 0.40% | 030% 0.20% | 020% 0.00% Figure 2: Returns on Assets Above the table and figure shows that the retumn on assets of Prabhu Bank Limited in 2076/77 to 2078/79 are 0.82%, 0.82% and 0.62% respectively. The average return of Prabhu bank is 0.75%, standard deviation and C.V is 0.12% and 15.33%. Higher the return on assets is better for any bank. The return on assets of Prabhu bank is in increasing trend which indicate the growth position of profitability good in the research period but the return on assets is less than 1%.So,the profitability position of Prabhu Bank Limited is not satisfactory in terms of return on assets.3. Return on Equity (ROE): Return on equity (ROE) is a measure of financial performance calculated by dividing net income by shareholders’ equity. Because shareholders’ equity is equal to 's considered the return on net assets, ROE a company’s assets minus its debt, ROE is considered a measure of the profitability of a corporation in relation to stockholders’ equity, Return on equity shows the relationship between net profit after tax and shareholder equity. It measures the rate of return on common shareholders’ investment, Table 4 Return on Equity (ROE) Fiscal Year Net Income Shareholders’ Equity Return on Equity 2077/78 1720874849, 17111272860 10.06% 2078/79 1902015262 19147750346 9.93% 2079/80 2802188966 31352198428 9.87% Average 9.95% Standard Deviation 0.0010 Coefficient of Variation 0.98% Nore: Annual Report of Prabhu Bank Limited 9.85% 9.80% 9.75% 1 2077/78 2078/79 2079/80 Figure 3: Returns on Equity18 Above the table and figure: shows that the return on equity of Prabhu Bank Limited in 2077/78 to 2079/80 are 10.0656, 9.0354 MANO respectively. The average return Standard deviation and C.V is 0.10% and 0.98%, Increasing retura’ On: equity ts. preferablelia Hen eeTETTERettCH on equity of Prabhu bank is in decreasing trend over the felearch period. It indicates that that the return pesition of Prabhu bank is not stable WHReH IE HAE O HS Investor, So, Prabha Bank Limited profitsllity position is not aut rete iatetmi eFretur on eoulty, of Prabhu bank is 9.95%, 4. Earnings per Share (EPS) EPS is one measure that can serve as a proxy Of a company's financial health Ia of a company’s profits were paid out to its shareholders, EPS is the portion of a company’s net income that would be allocated to cach outstanding share, It is the ‘slationship between net income and number of share capital, Table 4 Earnings per Share (EPS) Fiscal Year EPS 2077778 Rs.13.54 2078/79 Rs.14.79 2079/80 Rs. 1.19 ‘Average Rs. 9.84 Standard Deviation 752 Coefficient of Variation 76.39% Note: Annual Report of Prabhu Bank Limited2078/79 2079/80 From the e c m the above table and figure shows that Earnings per Share in F/Y 2077/78, 2078/79 and 2079/80 are Rs.13.54, Rs. 14.79 and ROO 19) respectively. The average EPS of Prabhu bank is 9.84. standard deviation and C.V is 7.52 and 76.39%, The EPS is Prabhu Bank is in decreasing trend over the research period. It indicates the caming position of investor is not stable in last thres year. So, it concludes that the caming per share of Prabhu Bank is not satisfactory to the investor. 5. Net Interest Margin: Net interest margin is the difference between the interest income generated and the amount of interest paid out to lenders. It is an industry-specific profitability ratio for banks and other financial institutions that lend out interest-earning [Link] interest margin is also important tools of profitability measurement. The ratio is calculated interest revenue less interest expenses divided by bank interest earning assets.20 Table $ Net Interest Margin Fiscal Year “Fiscal Year Neti 207778 iT "come "Interest Earnlag Assets Net Interest Margin 2 ace 2078/79 fae 143253478989 3.50% oe 1902015262 2079/80 280218066 152776412669 3.75% a 2188964 Arata pe 233515747166 1.20% Standard Deviation 2.82% 0.0141 Coefficient of Variation 49.90% Note: Annual Report of Prabhu Bank Limi : 400% — se | aso | 2077/78 2078/79 2079/80 Figure 5: Net Interest Margin In above calculated figure and table, Net Interest Margin in F/Y 2077/78, F/Y 2078/79 and F/Y 2079/80 are 4.33%, 3.5%and 1.20% respectively. The average interest margin of Prabhu Bank is 2.82%, standard deviation and C.V is 0.14% and 49.90%. The net interest margin is i Lower the margin of the bank is not in better position. So, that Prabhu Bank Limited is notable to do better in the current position than the previous years. decreasing trend over the research period.2.2, Major Findings of the Study Pribhu Bank Limited is one ofthe most reputed banks of Nepal. I offers a lot more ‘0 IS clientele. The *Profiabitity Analysis of Prabhu Bank Limited" that 1 Management, yet certain ratios show a growing trend while others show a changing tendency, I have done my best to provide the main conclusions of this project work report by calculating all the components related to Profitability Position Prabhu Bank Limited, The subsequent findings are shown in the following order; servies researched has good resource The net profit margin of Prabhu Bank Limited in 2077/78 to 2079/80 are 5.63%, 25.26% and 24.16% respectively. The average profit margin of Prabhu bank is 25,019, standard deviation and C.V is 2.87% and 12.07%.The Profit margin of Prabhu bank is silently decreasing trend, * The return on assets of Prabhu Bank Limited in 2076/77 to 2078/79 are 0.82%, 0.82% and 0.62% respectively. The average retum of Prabhu bank is 0.79%, standard di n and C.V is 0.06% and 7.34%, The ROA of prabhu bank is slightly decreasing in the last three year. Prabhu Bank Limited in 2077/78 to 2079/80 are 10.06%, 9.93% and 9.87 respectively. The average retum of Prabhu bank is 9.95%, standard deviation and C.V is 0.10% and 0.98%. The return on equity of Prabhu bank is in decreasing trend over the research period. Eamings per Share in F/Y 2077/78, 2078/79 and 2079/80 are Rs.13.54, Rs. 14.79 and Rs. 1.19 respectively. The average EPS of Prabhu bank is 9.84, standard deviation and C.V is 7.52 and 76.39%. The EPS is Prabhu Bank is in fluctuating trend over the research period. + Net Interest Margin in F/Y 2077/78, F/Y 2078/79 and F/Y 2079/80 are 4.33%, 3.5%and 1.20% respectively. The average interest margin of Prabhu Bank is 2.82%, standard deviation and C.V is 0.14% and 49.90%. The net interest margin is in decreasing trend over the research period,CHAPTER-UL SUMMARY AND CONCLUSION 3.1 Summary Prabhu Bank Limited is taken as a sample in this report and profitability analysis of the bank is taken as a subject matter of study. We know that every stakeholder associated with the bank wants to know the position ofthe organization for decision making whether to invest in that company ot not, or for further other purposes. So, the situation of the bank can be analyzed using the various tools and considering the Past performance data for future forecasting, The study report focuses on the profitability analysis of Prabhu Bank Limited, Profit analysis is analyzed with the help of annual report of Prabhu bank of the financial year 2077/78 to 2079/80-This study report consists of three major chapters. They are: Introduction, Presentation and analysis of data and summary and conclusion. In first chapter we have discussed briefly about introduction, background of the study, profile of the Prabhu Bank. statement of problem, objective of the study, rationale of the study, review of literature, research method, research design, sources of data, population of sample, tools and techniques and limitation. In second chapter, the data was provided with the help of annual report of Prabhu Bankand analyzing of data further to arrive profitability position of the bank, it has been analyzing with the help of significant tolls such as: Profit margin, Return on Assets, Return on Equity, camings per share of net interest margin. In third chapter, it includes the summary, conclusion and recommendation. In this chapter the whole research for the profitability analysis of Prabhu Bank is explained with the conclusion necessary suggestions. As we know the success of the bank mainly depends of its sound performance it is also said that "The bank as brain and other money." The subject of the study is also related with the financial analysis of Prabhu Bank Limited focusing on profitability analysis, The account obtained Prabhu Bank Limited as published annual report has analyzed above in the basis on profitability ratio examines the ability of the firms to show the profitability and efficiency of the firm.