CHAPTER II

DESCRIPTIVE ANALYSIS

2.1 Data Presentation and Analysis

This chapter discusses the data analysis of the research. Quantitative data has been
gathered from secondary data sources have been analyzed in this section. Data analysis
helps in the interpretation and answer the research question. Therefore, in this chapter
such data were presented by table, graph, chart, trend, etc and also such data were
analyzed by using various statistically and financial tools to draw right conclusion.

2.1.1Total assets, Total deposit, L&A, NPA, LLP and Net Profit of NBL
In this section data are collected and presented in tabular as well as in graphical from.
Analysis has been using simple statistical tools.

Table 2.1.1 Total assets, Total deposit, L&A, NPA, LLP and Net Profit of NBL

(In million)
Year Total Total L&A NPA NPA LLP Net
assets deposit (%) Profit

2074/75 133467 99831 79632 2355 2.96 2546 3216

2075/76 171515 118273 97658 2575 2.64 3023 2597

2076/77 191162 142989 109216 2696 2.47 3826 2333

2077/78 222645 163623 141959 2975 2.05 4320 2961

2078/79 197167 196076 177640 3313 1.83 5174 2923

(Source: www.nepalbank.com.np)

NBL has increasing trend in Loan and Advances. Although, it’s Total assets has
increase. Total deposit has followed the same pattern as of total assets. LLP is decrease
by 0.49% in year 2074 and after next year it’s continuously increasing. NPA in
percentage is decreasing showing the good sign in term of bank performance and also

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NPA in amount is increasing showing definite trend. Net Profit growing over the period
but it decreases by 2.34% in 2076 after the next its increase by 5.57%in year 2077.

Figure 2.1.1 Total Assets, Total Deposit, L&A, NPA, LLP and Net Profit of NBL in
different fiscal year

(In million)

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Figure 2.1.2 Total Assets, Total Deposit, L&A, NPA, LLP and Net Profit of NBL in fiscal
year 2074/75

This above diagram indicates the Total assets, Total deposit, L&A, NPA, LLP and Net
Profit of NBL in the fiscal year 2074/75. The above diagram show that total assets in
NBL rs.133467, L&A rs.79632, total deposit rs.99831, LLP rs.2546, NPA rs.2355, NPA
2.96% and net profit rs.3216.

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Figure 2.1.3 Total Assets, Total Deposit, L&A, NPA, LLP and Net Profit of NBL in fiscal
year 2075/76

This above diagram indicates the Total assets, Total deposit, L&A, NPA, LLP and Net
Profit of NBL in the fiscal year 2075/76. The above diagram show that total assets in
NBL rs.171515, L&A rs.97658, total deposit rs.118273, LLP rs.3023, NPA rs.2575,
NPA 2.64% and net profit rs.2597

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Figure 2.1.4 Total Assets, Total Deposit, L&A, NPA, LLP and Net Profit of NBL in fiscal
year 2076/77
(In million)

2076/77
250000

200000
191162

142989
150000

109216
100000

50000

2696 2.47 2333

3826
0
Total L&A Total LLP NPA NPA (%) Net Profit
Assets Deposit

This above diagram indicates the Total assets, Total deposit, L&A, NPA, LLP and Net
Profit of NBL in the fiscal year 2075/76. The above diagram show that total assets in
NBL rs.191162, L&A rs.109216, total deposit rs.142988, LLP rs.3826, NPA rs.2696,
NPA 2.47% and net profit rs.2333.

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Figure 2.1.5 Total Assets, Total Deposit, L&A, NPA, LLP and Net Profit of NBL in fiscal
year 2077/78
(In million)

2077/78
250000
222645

200000

163623

150000

141959

100000

50000

4320 2975 2.05 2961

0
Total L&A Total LLP NPA NPA (%) Net Profit
Assets Deposit

This above diagram indicates the Total assets, Total deposit, L&A, NPA, LLP and Net
Profit of NBL in the fiscal year 2075/76. The above diagram shows that total assets in
NBL rs.222645, L&A rs.141959, total deposit rs.163623, LLP rs.4320, NPA rs.2975,
NPA 2.05% and net profit rs.2961.

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 Figure 2.1.6 Total Assets, Total Deposit, L&A, NPA, LLP, and Net Profit of NBL in fiscal
year 2078/79

This above diagram indicates the Total assets, Total deposit, L&A, NPA, LLP and Net
Profit of NBL in the fiscal year 2078/79. The above diagram shows that total assets in
NBL rs.197167, L&A rs.177640, total deposit rs.196076, LLP rs.5174, NPA rs.3313,
NPA 1.83% and net profit rs.2923.

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 Figure 2.1.7 Total Assets

(In million)

In the above diagram clearly states that total assets are in increasing from 2074/75 to
2077/2078 and decrease in 2078/79.

16
 Figure 2.1.8 Loan and Advances (In million)

In the above diagram distinctly show that L&A is increasing from 2074/75 to 2075/76.
There is high increment in 2078/79 in comparison to 2077/78.

17
 Figure 2.1.9. Total Deposit

(In million)

In above diagram total deposit is also in the increasing trend. It’s increasing in similar
range from 2074/75 to 2078/79.

Figure 2.1.10 Loan Loss Provision

(In million)

In above diagram LLP is decrease from 2074/75 to 2075/76 and suddenly increase
continuously in 2076/77 to 2078/79.

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 Figure 2.1.11 Non-Performing Assets

(In million)

In this above diagram, NPA is decrease from 2074/75 to 2075/76 and from the 2076/77
to 2077/78 increasing continuously.

2.1.12 Non-Performing Assets (%)

(In Percentage)

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In above diagram shows that NPA (%) is decreasing 2074/75 to 2078/79. NPA in
percentage is decreasing showing the good sign in term of bank performance.

Figure 2.1.13 Net Profit

(In million)

In above diagram shows that net profit is drastically increase in 2074/75 and suddenly
decrease in 2075/76 to 2076/77 but from the 2077/78 increase and decrease in 2078/79.

2.1.2 Correlation between NPA and ROA

The purpose of this is to analysis the strength of relationship between two numerical
variables i.e., NPA and deposit ROA, using correlation coefficient (r). Correlation
coefficient is the measure of degree to which there is linear association between
internally scaled variables. Here NPA is the dependent variables whereas the ROA is
the independent variable. The correlation coefficient will assist to identify the relation
existing between these two variables and with the help of coefficient of determination
(𝑟2), we can measure the proportion of variation in NPA that can be explained by the
deposit liabilities. The correlation coefficient and the coefficient of determination
between the investment and deposit liabilities is calculated and interpreted below:

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Table 2.1.2 NPA and ROA of NBL

(In Percentage)
S.N. Fiscal Year NPA ROA

1 2073/74 3.22 1.55

2 2074/75 2.96 2.41

3 2075/76 2.64 1.51

4 2076/77 2.47 1.22

5 2077/78 2.05 1.33

6 2078/79 1.83 1.25

(Source: www.nepalbank.com.np)

The above given table contains the data of total NPA and total ROA if Nepal Bank
Limited over the five fiscal year period. Let's calculate the correlation coefficient
between two variables i.e., NPA and ROA.
Let's suppose the NPA be 'Y' & ROA be 'X'

Table 2.1.2.1 Correlation between NPA and ROA

(In Percentage)
Year X Y XY X² Y²

2074/75 2.41 2.96 7.13 5.81 8.76

2075/76 1.51 2.64 3.99 2.28 6.97

2076/77 1.22 2.47 3.01 1.49 6.10

2077/78 1.33 2.05 2.73 1.77 4.20

2078/79 1.25 1.83 2.29 1.56 3.34

Total 7.72 11.95 19.15 12.91 29.37

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Here, n

=5

∑X=7.72, ∑Y=11.95, ∑XY=19.45, ∑X²=12.91, ∑Y²=29.37

𝑛∑𝑋𝑌−∑𝑋∑𝑌
𝑟𝑋𝑌 =
√𝑛∑𝑋 2 −(∑𝑋)² √𝑛∑𝑌 2 −(∑𝑌)²

𝟓×𝟏𝟗.𝟒𝟓−𝟕.𝟕𝟐×𝟏𝟏.𝟗𝟓
=
√𝟓×𝟏𝟐.𝟗𝟏−(𝟕.𝟕𝟐)²√𝟓×𝟐𝟗.𝟑𝟕−(𝟏𝟏.𝟗𝟓)²

= 0.6717
Therefore, required correlation is 0.6717 i.e., there is strongly positive correlation
between NPA and ROA.

2.1.3 Correlation between NPA and L&A

The correlation between Non-Performing Assets and loans and advances is study of
degree of relationship between these two variables. When the loans and advances made
by banks or financial institutions turnout to non-productive, non-rewarding, and non-
remunerative then they will become non-performing assets. Loan and advances quality
and quantity have influence in creation or reduction of NPA. In this case, loans and
advances is the independent variable and NPA is the dependent variable. In following
table below we analyze degree of relationship between NPA and loan and advances of
sample commercial banks.

Table 2.1.3 NPA and L&A of NBL

(In million)
S.N Fiscal Year NPA L&A

1 2074/75 2355 79632

2 2075/76 2575 97658

3 2076/77 2696 109216

4 2077/78 2975 141959

5 2078/79 3313 177640

(Source : www.nepalbank.com)

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The above given table contains the data of total NPA and total L&A if Nepal Bank
Limited over the five fiscal year period. Let's calculate the correlation coefficient
between two variables i.e., NPA and L&A.

Let's suppose the NPA be 'Y' & L&A be 'X'

Table 2.1.3.1 Correlation between NPA and L&A of NBL

(In billion)
Year X Y XY X² Y²

2074/75 79 2 158 6241 4

2075/76 97 2 194 9409 4

2076/77 109 2 218 11881 4

2077/78 141 3 423 19881 9

2078/79 177 3 531 31329 9

Total 603 12 1524 68041 30

Here, n

=5

∑X=603, ∑Y=12, ∑XY=1524, ∑X²=68041, ∑Y²= 30

𝑛∑𝑋𝑌 − ∑𝑋∑𝑌
𝑟𝑋𝑌 =
√𝑛∑𝑋 2 − (∑𝑋)² √𝑛∑𝑌 2 − (∑𝑌)²

𝟓 × 𝟏𝟓𝟐𝟒 − 𝟔𝟎𝟑 × 𝟏𝟐
=
√𝟓 × 𝟔𝟖𝟎𝟒𝟏 − (𝟔𝟎𝟑)²√𝟓 × 𝟑𝟎 − (𝟏𝟐)²

=1

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Therefore, required correlation is 1 i.e., there is perfectly positive correlation between
NPA and L&A.

Again,

Coefficient of determination = r²

= 1²

=1

Therefore, the coefficient of determination is 100%, which implies that 100% of the
variation in NPA .

2.2 Major Findings and Discussion

The major findings of the study are as follows:

• There is strongly positive correlation between NPA and ROA.

• There is perfectly positive correlation between NPA and L&A.

• Loan loss provision is increasing since three years.
• Total deposit, total assets and loan and advance of the NBL are increasing
continuously over the year.
• The NPA of the bank is decreasing in every year

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 CHAPTER III

SUMMARY AND CONCLUSION

3.1 Summary of the Findings

This is the project work report entitled “Non-Performing Assets Analysis of Nepal Bank
Limited.” This study is deeply focused on the non-performing assets and different
financial indicators and the analysis and interpretation of them. All the data presented
here are of secondary data nature. The main source of the data was annual reports
published by Nepal Bank Limited. Besides it brochures, laws, guidelines, relevant
thesis, journals, books articles and different websites was taken as the source. The five
years published data of NBL are used in this study. Different methods are used in this
study to make report precious. The data analysis tools like financial, statistical tools
were used to analyze data of five consecutive years. Here the analysis was done by
comparing different variables. In the course of analysis it was cleared that banking
sector is expanding. This was justified by the increment in total assets, total deposits
and total loan & advances; further reduction in NPA and increase in net profit of the
bank. In addition correlation coefficient has been tested and it shows there is high
degree of positive correlation between NPA and Loan and Advances. And there is
moderate positive correlation between NPA and ROA. Due to the various causes like
time, data, methodology the study is bounded in certain limitations. The whole study is
divided into three chapters.

3.2 Conclusion

Nepal Bank Limited is one of the leading commercial bank in the Nepal which has been
operating smoothly over the country under the Nepalese Financial System. This study is
mainly focus on the non- performing assets of the bank and the different financial
indicators analysis and interpretation. Nepalese economy is in fragile condition and this
have a direct relationship with performance of the bank. Different types of challenges
are ahead of commercial bank like weak and fragmented legal financial environment,
ineffective accounting & auditing system and poor competition in banking sector.
Similarly the management of non- performing assets is a great challenge faced by bank
from the past. NPA symbolize good investment. It will decrease the revenue and

25
profitability of the banks, increases loan loss provision causing decrease in loan-able,
reduces goodwill and operating effectiveness of bank. The bank is conscious regarding
the Non-Performing Assets. The NBL is giving full effort to decrease and minimize the
level of NPA which are accumulated over the years. The internal management system,
pyramid shape organization, segmented market, weak legal and institutional system,
lack of corporate culture and business ethics, poor corporate governance and risk
management system, legal hurdles poor quality of credit system and lack of credit rating
agency are some reasons for growth of NPA in Nepal. Hence the management of NPA
is a great challenges and concerns for the bank. NPA is the outcome of multilayer
causes and problems that doesn’t have any specific cure. And through the testing and
analysis of coefficient of correlation, we found that there is perfectly positive
correlation between non- performing assets and loan& advances. Loan and advances
quality and quantity have influences in creation or reduction of NPA. In this study we
conclude that the NPA of NBL is decreasing over the years which is good for the bank.

26
 BIBLIOGRAPHY

Annual Report of Nepal Bank Limited 2074/75.

Annual Report of Nepal Bank Limited 2075/76.

Annual Report of Nepal Bank Limited 2076/77.

Annual Report of Nepal Bank Limited 2077/78.

Annual Report of Nepal Bank Limited 2078/79.

Available: https://www.elibrary.tucl.edu.np

Available: https://www.nepalbank.com

Dahal, U. (2013). Comparative Analysis of Non Performing Assets of Commercial Bank

in Nepal. An Unpublished Master Degree Thesis, Submitted to the Faculty of
Management, T.U.

Dhungana, B.R. (2006). NPL in the Nepalese Financial System. Kathmandu: Rastriya
Banijya Bank Souvenir.

Dhungana, B.R. (2006). Problem of NPL and Need of Financial Discipline in the Nepalese Banking
System. Kathmandu: Rastra Reen Khabarpatra.

Gautam, B. (2010). Non performing Assets Analysis of Nepal Bank Limited and Nepal
Rastriya Banijya Bank Limited. An Unpublished Master Degree Thesis, Submitted to
the Faculty of Management, T.U.

Khadka, D.K. (2004). Non Performing Assets of Nepalese Commercial Banks. An

Unpublished Master Degree Thesis, Submitted to the Faculty Management, T.U.

Pradhan, S.M. (2001). NPA Some Suggestion to Takle Them. Mirmire, Kathmandu

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