Know which commercial banks are most successful in utilizing assets (loans) in generating net profit; Nepal Bank and Standard Chartered Bank tops the list

It is really high time for investors to identify the banks which have high capability to earn profit with utilization of their available resources (assets). Earning huge profit is not a big thing but earning those profits with minimum utilization of resources (assets) is a great deal for every commercial bank.

Every commercial bank creates assets to earn revenue and profit. But all banks are not capable of earning at the same rate by utilizing the same amount of assets. The total assets of the commercial banks include cash balance, money at call, investment, loans & advances, fixed assets, non-banking assets and other assets etc. Among all those assets, the bank earns the maximum amount by utilizing their funds on loan and advances.

Here we try to find out the best bank in terms of assets utilization for generating profit.

Return on Assets (ROA) is a financial ratio that shows the percentage of net profit of the banks in relation to its overall assets mobilization. It is commonly defined as net profit divided by total assets. ROA answers the question: “What can you do with the assets that are available with you?” The higher the ROA, the better the management and the company is.

Total Assets and Net Profit of Commercial Banks:

 

Rastriya Banijya Bank has highest total assets among all commercial bank and they have earend over Rs 3 arba by utilizing these assets.

NIC Asia Bank has huge assets base but its profit is too low than other commercial banks with lower total assets. Standard Chartered Bank has huge profit compared to its low total assets.

Return on Total Assets:

 

Graphical Presentation of Return of Assets:


Nepal Bank Limited, Standard Chartered Bank and Nabil Bank Limited have higher efficiency in mobilization of their assets. In other words, Nepal Bank Limited is earning Rs 3 by mobilization of Rs 100 whereas NIC Asia Bank Limited is earning just Rs 0.82 by mobilizing the same amount.

So for the rational investors, it is wise to choose company not only with high profit but also with high earning capacity with minimum utilization of resources (assets).