| Title : | Determinants of profitability in Nepalese commercial banks | | Material Type: | printed text | | Authors: | Neeta Karki, Author | | Publication Date: | 2016 | | Pagination: | 98p. | | Size: | GRP/Thesis | | Accompanying material: | 6/B | | Languages : | English | | Descriptors: | Business enterprises
| | Class number: | 338.709 | | Abstract: | The banking system plays one of the major roles of transferring funds from the saving units to the investing units. If a financial system is efficient, it should show improvements in profitability, increase the volume of funds flowing from saver to borrowers, and provide better quality services for consumers. The financial intermediation provided by the banking sector supports economic acceleration by converting deposits into productive investments (Levine et al., 2000). During the last few decades, advancement in technologies have allowed the banking sector to take advantage of this, showing a worldwide improvement in its profitability not only in bank-oriented countries like those in Eastern and Central Europe but also in market-oriented countries like the US (Berger & Bonaccorsi, 2006).
The major objective of this study is to examine the determinants of commercial banks profitability in Nepal. The study has the following specific objectives: to analyze the structure and pattern of dependent variables (ROA and ROE) and independent variables (NIM, CAR, NPL and credit to deposit), to find out the relationship between banks specific factors (CAR, NIM, NPL and credit to deposit) and banks performance (ROA and ROE), to examine impact of capital adequacy ratios and assets quality on financial performance of the banks and to determine the major factors influencing the performance of Nepalese commercial banks.
This study is based on secondary sources of data that are collected for the commercial banks of Nepal. The banks which are in operation from last six years have been selected as the sample of the study. There are 28 commercial banks operating in Nepal consisting 3 public sector banks, 6 joint venture banks and 19 private sector banks. Among these, twenty-four commercial banks are taken for the study to compare the performance of commercial banks. The study is based on descriptive and causal comparative research designs.
The result shows NIM and NPLTL have negative relationship with ROA of public sector banks. This indicates that higher he NIM and NPLTL, lower would be ROA. However, CDR and CAR have positive relationship with ROA of public sector banks. Similarly, capital adequacy ratio has negative relationship with the performance (ROA and ROE) of joint venture banks. However, NPLTL, NIM and CDR have
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positive relationship with the performance. The results indicated that NPLTL has a negative relationship with performance (ROA and ROE) of Nepalese commercial banks. However, NIM, CDR and CAR have a positive relationship with the performance of Nepalese private banks. The findings revealed that for private domestic banks beta coefficients are positive for CAR, NIM and CDR. Thus, the result indicates that increase in NIM, leads to higher ROA. Similarly, higher the CDR and CAR has a significant and positive impact on ROA. The regression of return on assets for private domestic banks revealed that beta coefficients are negative for NPLTL. The NPLTL is significant at 1 percent level of significance which indicates that larger the NPLTL, lower would be ROA. Finally, the result indicates that higher the NIM, higher would be the ROE. The regression of return on equity shows that beta coefficients are negative for CAR, NPLTL and CDR. The result indicates that higher the CAR and NPLTL, lower would be ROE of the Nepalese private domestic banks. Similarly, higher the CDR, lower would be ROE.
The study concludes that nonperforming loan to total loans and credit to deposit ratio are the major factors affecting the performance measured in terms of return on assets and return on equity in Nepalese commercial banks. Thus, higher the capital adequacy ratio, net interest margin and credit to deposit ratio, higher would be the performance (ROA) of Nepalese public sector banks. The study also concludes that higher the nonperforming loan to total loans, lower would be the performance (ROA and ROE) of Nepalese private domestic commercial banks. Likewise, increase in credit to deposit ratio leads to increase in performance of Nepalese joint venture banks. |
Determinants of profitability in Nepalese commercial banks [printed text] / Neeta Karki, Author . - 2016 . - 98p. ; GRP/Thesis + 6/B. Languages : English | Descriptors: | Business enterprises
| | Class number: | 338.709 | | Abstract: | The banking system plays one of the major roles of transferring funds from the saving units to the investing units. If a financial system is efficient, it should show improvements in profitability, increase the volume of funds flowing from saver to borrowers, and provide better quality services for consumers. The financial intermediation provided by the banking sector supports economic acceleration by converting deposits into productive investments (Levine et al., 2000). During the last few decades, advancement in technologies have allowed the banking sector to take advantage of this, showing a worldwide improvement in its profitability not only in bank-oriented countries like those in Eastern and Central Europe but also in market-oriented countries like the US (Berger & Bonaccorsi, 2006).
The major objective of this study is to examine the determinants of commercial banks profitability in Nepal. The study has the following specific objectives: to analyze the structure and pattern of dependent variables (ROA and ROE) and independent variables (NIM, CAR, NPL and credit to deposit), to find out the relationship between banks specific factors (CAR, NIM, NPL and credit to deposit) and banks performance (ROA and ROE), to examine impact of capital adequacy ratios and assets quality on financial performance of the banks and to determine the major factors influencing the performance of Nepalese commercial banks.
This study is based on secondary sources of data that are collected for the commercial banks of Nepal. The banks which are in operation from last six years have been selected as the sample of the study. There are 28 commercial banks operating in Nepal consisting 3 public sector banks, 6 joint venture banks and 19 private sector banks. Among these, twenty-four commercial banks are taken for the study to compare the performance of commercial banks. The study is based on descriptive and causal comparative research designs.
The result shows NIM and NPLTL have negative relationship with ROA of public sector banks. This indicates that higher he NIM and NPLTL, lower would be ROA. However, CDR and CAR have positive relationship with ROA of public sector banks. Similarly, capital adequacy ratio has negative relationship with the performance (ROA and ROE) of joint venture banks. However, NPLTL, NIM and CDR have
viii
positive relationship with the performance. The results indicated that NPLTL has a negative relationship with performance (ROA and ROE) of Nepalese commercial banks. However, NIM, CDR and CAR have a positive relationship with the performance of Nepalese private banks. The findings revealed that for private domestic banks beta coefficients are positive for CAR, NIM and CDR. Thus, the result indicates that increase in NIM, leads to higher ROA. Similarly, higher the CDR and CAR has a significant and positive impact on ROA. The regression of return on assets for private domestic banks revealed that beta coefficients are negative for NPLTL. The NPLTL is significant at 1 percent level of significance which indicates that larger the NPLTL, lower would be ROA. Finally, the result indicates that higher the NIM, higher would be the ROE. The regression of return on equity shows that beta coefficients are negative for CAR, NPLTL and CDR. The result indicates that higher the CAR and NPLTL, lower would be ROE of the Nepalese private domestic banks. Similarly, higher the CDR, lower would be ROE.
The study concludes that nonperforming loan to total loans and credit to deposit ratio are the major factors affecting the performance measured in terms of return on assets and return on equity in Nepalese commercial banks. Thus, higher the capital adequacy ratio, net interest margin and credit to deposit ratio, higher would be the performance (ROA) of Nepalese public sector banks. The study also concludes that higher the nonperforming loan to total loans, lower would be the performance (ROA and ROE) of Nepalese private domestic commercial banks. Likewise, increase in credit to deposit ratio leads to increase in performance of Nepalese joint venture banks. |
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