Analysis of Financial Performance of Commercial Banks in Nepal (With Reference to CZBIL, NABIL and HBL)

Abstract

This study aims to find the Analysis of Financial Performance of Commercial Banks in Nepal (With reference CZBIL NABIL and HBL). For this purpose, three banks are selected as sample size of the study during 2012/13-2018/19. The secondary data are used to examine the analysis of financial performance of selected banks. The data used in this study are obtained from published annual reports and websites of the sample banks, and from central banks of Nepal website. The tools used on the study are statistical tools, which are descriptive statistics, correlation coefficient and regression analysis. Return on assets and net profit margin are the selected dependent variables while credit risk, liquidity risk, operating expenses, capital adequacy ratio were the independent variables. The findings of the study show, the model of the study, independent variable credit risk, liquidity risk, operating cost, and capital adequacy ratio can explain 44.8% of variation in ROA and 60.3% of the variations or changes in the dependent variable of NPM. So it can be concluded capital adequacy ratio, liquidity risk, operating cost and credit risk are the key determining factor of financial performance. Pearson correlation shows the capital adequacy ratio, credit risk and liquidity risk have the insignificant relationship with ROA and operating cost has significant correlation with ROA. And the other hand liquidity risk and capital adequacy ratio have the significant relationship with NPM. Credit risk has insignificant and operating cost has insignificant relation with NPM .The regression result for model 1 shows the independent variables capital adequacy ratio, credit risk and liquidity risk have the negative insignificant impact with ROA and operating cost has positive significant impact with ROA. The regression result for model 2 shows that, independent variable credit risk has positive significant impact with NPM. Capital adequacy ratio, operating cost, liquidity risk have negative and insignificant impact with NPM. According to the regression equation established, talking all factors into account OC, CR, LR and capital adequacy ratio measured by ROA is 5.118 and NPM is 82.488. In comparison of financial performance of commercial banks, on the basis of ROA and NPM: NABIL get the first rank it means it has efficient financial performance than the other sample banks. And on the basis of CAR, LR and CR Citizen Bank has the efficient financial performance among the other sample commercial banks.