Investor Information

DuPont Analysis

5 FACTORS MODEL

DuPont analysis is an approach to decompose the different drivers of Return on Equity (RoE) to gain an in-depth understanding of factors contributing to movement in RoE. For analysis, 5 factors model that covers net profit margin, asset turnover and financial leverage (also known as equity multiplier) has been used. Net profit margin has been further decomposed into Operating profit margin, Interest expense rate and Tax retention rate.

*Operating profit margin of the Bank has been calculated as Profits before income tax expenses and interest expenses on external borrowings (except deposits) such as borrowings from NRB, interbank borrowings and external commercial borrowings.

** The Bank has considered interest expenses on external borrowings (except deposits) such as borrowings from NRB, interbank borrowings and external commercial borrowings in calculation of interest expense rate.

From above table, we can understand the factors contributing to downward movement of RoE in FY 2022-23 in comparison with FY 2021-22. The Bank’s RoE in FY 2021-22 was 13.82% which decreased to 13.50% in FY 2022-23.

Downward drivers of RoE in FY 2022-23:
a. Operating profit margin : decreased by 3.31%
b. Interest expense rate : increased by 0.21%
c. Financial leverage : decreased by 0.0151

Upward drivers of RoE in FY 2022-23:
a. Average asset turnover ratio : increased by 0.0167
b. Tax retention rate : increased by 1.21%