Analysis of liquidity and profitability in Nepalese commercial banks

Abstract

This study investigates the Analysis of liquidity and profitability in Nepalese banks. The main objective is to explore and examine the liquidity position, profitability status, impact and relationship between liquidity and profitability of Nepalese commercial banks. The study descriptive and analytical research design has been used. Mostly secondary data have been used from the annual report statements of commercial banks in Nepal. Correlation and regression analysis has used to examine the impact and relationship between liquidity and profitability. The ROA and ROE has use to measure profitability status and current ratio, cash reserve ratio, cash and bank balance to current deposit ratio and cash and bank balance to total deposit ratio was used to measure liquidity position. The study covers four Nepalese commercial banks i.e. ADBL, Nabil, Everest and Himalyan in Nepal over a period of past five fiscal years from 2073/74 to 2077/78. The study concluded that the CAR has positive significant relationship and CASH TO CA, CASH TO TDP and CR has positive but insignificant relationship with ROA of selected commercial banks. The CASH TO CA, CASH TO DP and CR has negative and insignificant relationship and CAR has positive but insignificant relationship with the ROE. Similarly, the CASH TO TDP and CR has shows negative impact and CASH TO CA and CAR has positively with (ROA and ROE) of selected commercial banks over the study period. The study recommends that ADBL bank should control the cost and expenses associated with bank operation to increase the profit and create new investment opportunities. NABIL Bank has recommended to increase utilization of assets that drives more profits . Key Words: Current Ratio, Cash Reserve Ratio, Cash and Bank Balance to Current Assets Ratio, Cash and Bank Balance to Total Deposit Ratio, Return on Assets and Return on Equity.