PROFITABILITY DETERMINANTS OF COMMERCIAL BANKS IN NEPAL

Abstract

This study examines the determinants of profitability in Nepalese commercial banks, focusing on the interplay between Credit Deposit Ratio, Capital Adequacy Ratio, Non-Performing Loans, Earnings Per Share, and Return on Assets. The research aims to bridge the existing research gap by providing a comprehensive analysis of these key variables and their influence on financial performance in the Nepalese banking sector. The study employs a quantitative research approach, utilizing secondary data from 2014 to 2024 for a sample of five commercial banks in Nepal. The analysis includes descriptive statistics, correlation analysis, regression models, and ANOVA to examine the relationships between the independent variables and the dependent variables, return on assets and earnings per share. The study finds that the Credit Deposit Ratio, Capital Adequacy Ratio, and Non-Performing Loans have significant positive and negative impacts on bank profitability, respectively. Additionally, the study highlights the importance of these variables in understanding the financial performance of commercial banks in Nepal. The findings of this study contribute to the existing literature on banking profitability in emerging markets, particularly in Nepal, by providing a detailed analysis of the determinants of profitability in the Nepalese banking sector. The study emphasizes the need for commercial banks in Nepal to maintain a balanced Credit Deposit Ratio, ensure adequate capital adequacy, and manage non-performing loans effectively to achieve sustainable profitability.