A STUDY ON

PROFITABILITY ANALYSIS OF AGRICULTURE

DEVELOPMENT BANK LIMITED

A Proposal of Project Work

Submitted By:
Aakriti Khanal
Roll No:
T.U Regd. No: 7-2-618-122-2019
N.R. College
Nepaltar, Kathmandu, Nepal

Group: Finance

Submitted To:
The Faculty of Management
Tribhuwan University
Kritipur, Kathmandu, Nepal

In partial fulfillment of the requirement for the degree of

BACHELORS OF BUSINESS STUDIES (BBS)

Kathmandu, Nepal
April, 2024
 TABLE OF CONTENTS

CONTENTS PAGE NO:

1.1 Background of the study...........................................................................................1
1.2 Profile of organization..............................................................................................1
1.3 Statement of problems..............................................................................................3
1.4 Objective of the study...............................................................................................3
1.5 Rationale of the study...............................................................................................3
1.6 Review of literature..................................................................................................4
1.7 Research methodology.............................................................................................5
1.7.1 Research design.................................................................................................5
1.7.2 Population and sample......................................................................................5
1.7.3 Nature and sources of data.................................................................................5
1.7.4 Data collection procedure..................................................................................6
1.7.5 Techniques of analysis.......................................................................................6
1.8 Limitations of the study............................................................................................6
1.9 Organizationof project report .................................................................................7
REFERENCES

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1.1 Background of the study
A bank is a financial institution licensed by the government which collects money
from depositors in the form of deposits and channels those deposits into lending
activities. Banks primarily provide financial services to customers while enriching
investors. Government restrictions on financial activities by banks vary over time and
location. Banks are important players in financial markets and offer services such as
investment funds and loans. According to Oxford Dictionary-"A bank is an
organization or place that provides a financial service." According to G. Crowther-"A
bank is an institution which collects money from those who have it spare or who are
saving it out of their incomes and lends these out to whom those require it."
According to Findley Shires-"A bank or banker is a person, firm or company having a
place of business where credits are open by deposit or collection of money or
currency or where money is advanced or loaned." (Pandey, 1995).
Profitability is the capacity to make profit. It is the quality or state of being profitable.
Profitability is a measure of firm's efficiency (Khan & Jain, 1998). It is also control
measure of the earning power of a firm as well as operating efficiency. Weston &
Copland (1998) described profitability as net result of a large number of policies and
decisions. Ratios are used to measure profitability and these give final answers about
how effectively the firm is being managed. Therefore, management, creditors and
owner of the company are also interested in the profitability ratio of the firm (Pandey,
1995).
In conclusion, a bank is an institution, which deals with money and monetary assets
and credit by accepting deposits from business and institutions and individuals which
is mobilized into productive sector mainly business and consumer lending. Therefore,
banking has played a very important role in the economic development of all nation of
the world.

1.2 Profile of Organization

Agriculture development bank is an autonomous organization largely owned by
government of Nepal. The bank has been working as a premier rural credit institution
since the last three decades, contributing a more than 67 percent of institutional credit
supply in the country. Hence, rural finance is the principal operational area of ADBL.
Besides, it has also been executing small farmer development program (SFDP), the
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major poverty alleviation program launched in the country. Furthermore, the bank has
also been involved in commercial banking operations since 1984.

The enhancement of the bank and financial institutional act (BAFIA) in February
2004 abolished all Acts related to financial institution including ADBN act in 1967. in
line with the BAFIA, ADBL has been incorporated as public limited company on July
14, 2005. Thus, ADBL operates as an "A" category financial institution under the
legal framework of BAFIA and the company act. The bank has a 51% share of the
Government of Nepal and 49% of the general public. Agriculture development bank
firmly believes customer focus is a core value, shareholder prosperity is a prime
priority, employee growth is a commitment and economic welfare is a sincere
concern. Its vision is to be financially sound, operationally efficient and keep abreast
with technological developments.

Having glorious history of more than 83 years the bank is one of the leading
commercial banks of the country. with its investment in agriculture, industry, trade,
commerce and household, the bank has above 1.3 million happily satisfied customers.
it is a separated all over the 7 province and 77 districts of the nation with its 278
offices. while providing comprehensive services with complete banking solution, the
bank has main motto of promoting rural agriculture, productive and deprived sectors.
The bank is committed to provide best banking services through its widespread
network and help the government from its parts to achieve the aim.

The bank wants to be a leader among the banks of its age in Nepal by fulfilling the
interest of the stakeholders and also aims to provide total customer satisfaction by
way of offering innovative product and by developing and retaining highly motivated
and committed staffs. This has not only helped the Bank to constantly improve its
service level but also has prepared the bank for future adaptation to new technology.
The bank already offers various services such as debit/ATM card service, safe deposit
locker, evening banking, holiday banking, ABBS, Internet banking, Remit service to
customers and is be introducing more services like these in the near future.
(www.adbl.np.com)

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1.3 Statement of Problems

As we know that the main objective of commercial bank is wealth maximization that
is obtained by mobilization of available resources but if the bank fails to deposit
adequate deposits then it loses profitable opportunities and hence, fails to generate
profit. If the bank is not able to collect sufficient deposits how would it be successful
to achieve overall organizational objective? Moreover how would it be able to
maintain the profitability position? If the bank is not able to maintain the position then
there is be a great question mark of its survival as a feasible institution in this
competitive environment of commercial banking sector. Besides some of the
problems to be studied in this report are:
1. What is the trend of profitability of Agriculture Development Bank Limited?
2. What is the relationship between EPS and MPS of ADBL?

1.4 Objective of the Study

The main objectives of this study are to evaluate the profitability of Agriculture
development bank are:
1. To study about the trend of profitability position of ADBL.
2. To analyze the relationship between EPS and MPS of ADBL.

1.5 Rationale of the Study

This research work is study about the Profitability analysis of Agriculture
Development Bank Limited and its relationship with profitability analysis and other
kinds of analysis prevailing in the same bank. It is due to problems, which affects the
banking transactions. The study of saving deposit mainly serves the following
significances:
1. In the context of modern economy of Nepal, concept of saving account can play a
vital role in improving the living condition, sense of security investment and
modern outlook of the people.
2. This study is help the readers to know more about Profitability analysis of
Agriculture Development Bank Limited, its objectives and policies.
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3. This study also shows the strength, weakness, opportunities and threats of
Profitability analysis of Agriculture Development Bank Limited.
4. This fieldwork report can be a good asset of library and it may help the bank itself
because some suggestions have been recommended in this report.

1.6 Review of literature

To conduct the field work a number of books and journals as well as earlier
fieldworks have been consulted whose details are given in the bibliography section of
this report. It is universally recognized that the most important problem in banking
administration is that of investing its deposit and paid up capital in various forms of
earning assets. This is also known as the profitability Analysis . The bank’s portfolio
is nothing but an arranged and digested scheme of its assets. The Profitability
Analysis of the Insurance depends on the nature of its funds. If it can acquire funds of
a more or less permanent nature, it can acquire more profitable assets. If the funds are
subject to wide fluctuations, it has to keep a large part of the funds in liquid form. It is
said that the soundness of Insurance is reflected in the distribution of its funds on
different types of assets. A good banker is one who follows a wise Profitability
Analysis which brings maximum profits to shareholders and providers maximum
security to the depositors.

No uniform rules can be laid down to determine the profitability Analysis. The local
conditions in which the Insurance operates with necessarily have a bearing on its
Profitability Analysis. The nature and availability of funds and assets differ widely
from country to country and also from region to region within the same country.
Conditions in Nepal differ considerably from conditions in countries like England,
America and Germany. Within our country, the banks in rural areas face certain
problems which are materially different from those of the banks in the urban areas. In
rural areas the demand for loans is usually less liquid and less diversified as the main
occupation of the people is agriculture. These differences naturally have their impact
on the Profitability Analysis of Insurance.

Views that financial profitability lies in a firm's ability to generate revenues in excess
of its costs: for either long or short term. In the long run, a firm should be able to
maintain the value of invested capital and able to yield a profit, which exceeds the
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opportunity cost of capital meaning that the yield generated by the firm should exceed
the opportunity cost of capital. In order to examine profitability, especially Net
present value (NPV), profitability index (PI) and internal rate of return (IRR) are
used. (Brigham & Houston 2004)
Profitability refers to the potential of venture to be financially successful. This may be
assessed before entering into a business or it may be used to analyze a venture that is
currently operating. Although it may be found that one set of factor is not likely to be
successful or has not been successful, it may not be necessary to abandon venture. It
may instead be feasible to change operational factors such as pricing or costs. There
are three basic situations that can describe a business financial situation. It can be
profitable, it can break even, or it can operate at a loss. In most cases, an
organization`s goal is to make profit.

1.7 Research Methodology

1.7.1 Research Decision
Research design is the specification of the methods and procedure for acquiring the
information needed. It deals with what information is to be collected from which
sources and by what procedures. If research design is good, it ensures that information
obtained is relevant to the research question and collected by objectives and economic
procedures. To achieve the specific objective of the study, descriptive and analytical
research has been carried out in terms of Profitability Analysis of ADBL Limited.

1.7.2 Population and sample

At present, there are twenty-seven commercial bank are operating in Nepal. They
constitute the population sample. Among them, only one commercial bank is selected
namely; Agriculture development Limited is selected for study of Profitability
Analysis. Five-year data are taken to conduct the study of from 2016/17 to 2020/21.

1.7.3 Nature and sources of data

To conduct this study, secondary data are taken from annual report of related office
and their websites. So, the major sources and types of data include these published
sources.
1. Financial statement of Agriculture development bank.
2. Annual report of the ADBL.
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3. Different previous studies.

4. Related bulletins, reports, periodically published by various government bodies.

1.7.4 Data collection procedure

Various data obtained through different sources can't be used directly for the analysis
in their original form. So, they have been rechecked, re-evaluated, edited and
tabulated to bring them into appropriate form for the analysis purpose. The researcher
made the collection data trust worthier getting them form authorized sources.
Moreover, different graph charts are presented according to necessity to interpret
visually. The data are tabulated according to subject matter and they are shown in
table in sequential way. Similarly, the profitability ratios are also used for the analysis
and interpretation of the profitability analysis of selected sample.

1.7.5 Techniques of analysis

In order to ascertain actual profitability position of any firm, various analytical tools
can be used. It is true that suitable or appropriate tools, according to the nature of the
statement and data make the analysis more effective and significant for achieving
these objectives basically two sorts of tools can be used, financial and statistical the
researcher has therefore, applied these tools extensively.

A. Financial tools
As this study is related to profitability analysis financial tools are more useful they
help to identify the financial strength and weakness of the firm in spite of various
financial tools available the research has primarily stressed on ratio analysis assuming
it the most suitable tools. These ratios include the following.
1. Profitability Ratios
a) Return on assets
b) Return on equity
c) Net profit margin

1.8 Limitations of the Study

There are some limitations in this field work study.
1. This profitability analysis will based on only one commercial bank .i.e.
Agriculture development bank.
2. This study will base on secondary data.
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3. Only five years (2016/17 to 2021/22) data are included in this report.
4. Results or conclusions are based on five years data only.
5. Those data used in study are all in a rounding figure.

1.9 Organization of project report

This whole report has been divided into three parts or chapters

Chapter I – Introduction
In the first chapter included introduction along with background, profile of
organization, objective of the study, rational of study, literature review, and limitation
etc.

Chapter II- Result and Analysis

The second chapter is main portion of the study. It will deal with analysis and
presentation data collected from different sources. The research will analyze the data
to reach closer to the result by using various necessary financial and statistical tools
and techniques.

Chapter III- Summary and Conclusion

The final chapter will provide the result of discussion and conclude the overall study.
At the end an extensive references and annexes will also include.
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References

Books;
Adhikari, D. R. (2015), Research methodology, Asmita book publisher & distributors
(p) Ltd., Kathmandu.
Gurung R. (2013). Financial institutions and markets. Buddha Academic Publication
Enterprise Pvt. Ltd., Kathmandu.
Jhosi P. R. (2012). Fundamental of financial management. Asmita publication and
distributer (P) Ltd., Kathmandu.
Paudel, R. B., Baral, K. J., Joshi, P., Gautam, R. R., and Adhikari, D. R. (2018),
Fundamentals of corporate finance, Kathmandu: Asmita book publisher &
distributors (p) Ltd.

Thapa K. (2013). Financial Institutions and Markets. Januka Publication Pvt. Ltd.,
Kathmandu.

Articles:
KC. U. (2070). A study on deposit mobilization of gandaki bikash bank ltd. GBBL.
MBS diss.
Koirala L. (2070). Deposit collection and loan investment pattern of machhapuchhre
saving and co-operative ltd.
Shrestha D. (2011) deposit mobilization of Prabhu bank and siddartha bank ltd. An
unpublished master degree thesis submitted to tribhuvan university
kathamandu.
Timilsina N. (2013) fund mobilization of Nabil, PRABHU, & SCBNL, an
unpublished master degree thesis submitted to tribhuvan university.

Websites:
https://www.nrb.org.np
https://www.adbl.gov.np