LIQUIDITY, LOAN PORTFOLIO AND PROFITABILITY COMMERCIAL BANKS IN NEPAL

Abstract

This research focuses on the profitability and liquidity position of commercial banks in Nepal, examining the relationship between liquidity and profitability. Research methodology is a systematic approach to solving research problems, encompassing plan, design, sample description, instrumentation, data collection, validity, reliability, and analysis. The study analyzed the liquidity ratio (CRR) and loan loss (LR) data of five banks, revealing that GBIME consistently maintains a high proportion of loans to assets. The study also found a moderate return on equity (ROE) percentage for five banks, with GBIME having a moderate ROE and higher ROA values. The study highlights the importance of optimizing financial strategies, risk management procedures, and compliance initiatives to improve shareholder returns and overall financial performance. The study analyzes financial ratios of 5 banks to assess their operational performance and financial health. The Return on Assets (ROA) and Return on Equity (ROE) metrics indicate profitability, while the Loan-to-Deposit Ratio (LR) and Total Loans to Total Assets (TLTA) ratios show liquidity and risk exposure. The Credit risk ratio (CRR) reveals regulatory requirements affecting banks' profitability. The study also finds that CRR negatively impacts ROE, indicating stricter regulations. TLTA shows a negative relationship with ROE, suggesting higher exposure to loans reduces profitability. Future research could explore additional factors and economic environments to improve banks' financial performance.