investment portfolio analysis

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MBA-III, Uniglobe College, Kathmandu, Nepal



2. CHAPTER I INTRODUCTION 3. BACKGROUND Commercial banks are organizations which normally perform financial transactions. The banks are mobilizing the savings of the people for the investment purposes. The investment portfolio should be carefully analyzed so that the investment should ensure minimum risk and maximum profit. 4. STATEMENT OF PROBLEM What is the relationship of investment with total deposit, loan and advances and total profit? What is the proportion of investment of different commercial banks? How much risk commercial banks are facing while investing in different assets? Which bank has higher investment in five years? 5. OBJECTIVES OF THE STUDY To evaluate and analyze the variation in investment structure. To analyze risk and return on investment portfolio of different commercial banks. To analyze the relationship of investment with other variables like deposit, loan and advance, net profit and size of the firm. To find out the proportion of investment of commercial banks. 6. SIGNIFICANCE OF THE STUDY The present study will be of substantial importance for: o investors, planners, researchers, students, and policy makers to meet their personal and organizational objectives by identifying the various weaknesses prevailing in the investment. It is expected that this work will be helpful to decision makers to maximize the values of their organization. 7. RESEARCH HYPOTHESIS H1: Investment is positively related to Size of the firm, Profitability and Deposits H2: Investment is negatively related with Loan and advances 8. LIMITATION OF THE STUDY Only five commercial banks are selected. The study covers only five years period. The validity and confidence of the data depends on their faith and trustworthiness of the published data. 9. CHAPTER II REVIEW OF LITERATURE 10. REVIEW OF LITERATURE Gitman and Joehnk, Investment is any vehicle into which funds can be placed with the expectation that will preserve or increases in value and generated positive returns. Weston & Brigham, A portfolio simply represents practice among investor of having their funds in more than one asset. The combination of investment asset is called a portfolio. 11. Makowitz showed that the variance of the rate of return was a meaningful measure of portfolio risk under a reasonable set of assumptions, this theory indicated the importance of diversifying the investments to reduce the total risk of the portfolio. CAPM which was developed by Sharpe and Litner, this model will allow investors to determine the required rate of return for any risky assets. REVIEW OF LITERATURE Cont 12. The study of Edward J. Kane and Stephen A. Busers in title portfolio diversification at commercial banks deals how a firm perform a useful function by holding a portfolio of efficiently price securities. According to them, it is rational for a firm to engage in prior round of asset diversification on behalf of its shareholders even when all assets are priced efficiently and available for direct purchase by shareholders. REVIEW OF LITERATURE Cont 13. CHAPTER III METHODOLOGY 14. METHODOLOGY Research methodology refers to the various sequential steps to adopt by a researcher in studying a problem with certain objective in view. 15. POPULATION AND SAMPLE S.N Name of Banks Observations 1 Global Bank Ltd. 5 2 Kumari Bank Ltd. 5 3 Nepal Investment Bank Ltd. 5 4 Nepal SBI Bank Ltd. 5 5 Standard Charter Bank Nepal Ltd. 5 Total observations 25 16. Population Size = 32 Sample Size = 5 Sample Percentage = 15.62% Cont 17. NATURE AND SOURCES OF DATA COLLECTION The main source of secondary data comprises annual reports of concerned banks, related journals, newspapers, Internet, official publication, related studies and thesis etc. 18. MODEL SPECIFICATION: Model 1: Inv= a + 1 X1 + 2 X2 + 3X3 + 4X4 + ei Where, a = Constant variable Inv = Log of Investment amount X1= Log of Deposit X2 = Log of net profit X3= Log of Loan and Advances (loan) X4 = Log of Size of bank (total assets) 19. CHAPTER IV DATA ANALYSIS AND FINDING 20. ANALYSIS OF INVESTMENT Proportion of Investment in percentage 21. Proportion of Investment (Mean) 13.61% 12.98% 32.79% 16.60% 45.54% Global Kumari Nepal SBI NIBL SCB Proportion of Investment 22. Proportion of Investment (Standard Deviation) 0 2 4 6 8 10 12 14 Global Kumari Nepal SBI NIBL SCB Proportion of Investment (Standard Deviation) Proportion of Investment (Standard Deviation) 23. MULTIVARIATE ANALYSIS Multivariate analysis (MVA) is based on the statistical principle of multivariate statistics, which involves observation and analysis of more than one statistical outcome variable at a time. 24. Summary of model 1 Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate 1 .985a .970 .964 .08896 a. Predictors: (Constant), Deposits, Profit, loan, Size 25. ANOVAa Model Sum of Squares df Mean Square F Sig. 1 Regression 5.083 4 1.271 160.583 .000b Residual .158 20 .008 Total 5.242 24 a. Dependent Variable: Investment b. Predictors: (Constant), Deposits, Profit, loan, Size Cont 26. Coefficientsa Model Unstandardized Coefficients Standardized Coefficients t Sig. B Std. Error Beta 1 (Constant) -1.298 .782 -1.660 .113 Size 2.420 1.639 1.511 1.477 .155 Profit .016 .026 .041 .612 .547 loan -1.924 .190 -1.072 -10.143 .000 Deposits .521 1.529 .332 .341 .737 a. Dependent Variable: Investment Cont 27. CHAPTER V CONCLUSION AND RECOMMENDATION 28. CONCLUSION Commercial Banks play very important role in the economic life of the nation. Standard Charter Bank has high proportion of investment than other banks with less variation. There is positive relationship of Investment with Size of the firm, Net profit and Deposit but statistically insignificant. There is negative relation of investment with Loan and advance and is statistically significant. 29. RECOMMENDATION The commercial banks must have clear investment policy on different securities. SCB must maintain present variation in investment which is less than other banks. It is recommended that Nepal SBI bank must control its variation which is very high than other banks. Commercial banks must increase its net profit and deposit in order to increase its investment.