Portfolio Management of Nepalese Commercial Banks

Abstract

Portfolio is collection of investment securities. Portfolio theory deals with the selection of optimal portfolio; that is, portfolio that provides the highest possible return for any specified degree of risk or the lowest possible risk for any specified rate of return. A portfolio is usually defined as a combination of asset. Hence, in this paper, an attempt is made to evaluate the portfolio management of scheduled Nepalese commercial banks in the period from 2013/14 to 2017/18. The research design adopted in the study is descriptive and analytical. Analysis is done by taking secondary data to present the position of investment, risk & return and ratios. The data have been collected from Nepal stock exchange (NEPSE), Securities board of Nepal (SEBON), and annual report of the sampled banks. This study attempts to examine the portfolio management of Nepalese commercial banks. Under the portfolio management different sector like investment on securities, loan and advance to customers, placement with banks and financial institutions and loan & advance to banks and financial institutions has been considered. The study shows that highest proportion of investment of commercial banks is under loan and advance to customers this might be result due to the higher return in this investment. Furthermore the lowest investment is made in loan and advance in banks and financial institutions. The portfolio return and portfolio risk is 6.48%, 1.20% respectively. The study shows higher correlation between placement with banks & financial institutions and loan & advance to customers whereas correlation between investment securities and loan & advance to banks & financial institutions is lowest. Overall ratio analysis indicates Standard chartered bank limited has better performance in every sector then that of Nepal investment bank limited & Everest bank limited. Commercial banks are seems to be focusing on investment on different assets class but they should be diversified their lending portfolio and emphasis should be given to small and medium sized enterprises and productive sector.