A Comparative Study on Profitability Position of Selected Commercial Banks of Nepal

Abstract

Profit maximization is one of the most important objectives of banking management because one goal of bank management is to maximize the owner's wealth. The variation of profit between banks over the years, within a country, leads to believe that internal factors play a major role in determining profits. This paper investigated the determinants of company specific factors (size of company, profitability ratio, liquidity ratio, leverage ratio, capital adequacy ratio, capital, fixed assets and growth rate) on profit represents by ROA and ROE. Profit is dependent variable while size of company, leverage, liquidity, volume of capital, fixed assets and growth rate are independent variables. The sample in this study includes three of the selected banks for six fiscal years (2070/072-2075/076). Secondary data obtained from the annual reports of selected banks, relevant articles, books and magazines are analyzed. The results of the paper show that factors such as size of company, profitability, liquidity, leverage, capital, fixed assets and growth rate are the main factors affecting the profit of banks, where the fixed assets shows the positively relationship with profit, while company size, liquidity, capital and growth rate shows the negatively relationship with profit. Keywords: Banks and financial institutions, profit, deposits, loan & advance correlations, trend analysis, returns on assets, return on equity, size of company, profitability ratio, liquidity ratio, turnover ratios, leverage ratio, capital adequacy ratios, fixed assets and growth rate.