SIGNIFICANCE OF NON INTEREST INCOME ON FINANCIAL PERFORMANCE OF JOINT VENTURE BANKS IN NEPAL

Abstract

All other income a bank receives from its on- and off-balance sheet operations is referred to as non-interest income. This category, which is significant, includes the income from fiduciary activities like service fees on deposit accounts, other gains and fees from trading assets and liabilities, other non-interest income, and income from one-time transactions like sales of real estate owned loans, properties, and fixed assets. The banks have different financial performance in different scenarios that obtained from the analysis of financial and statistical indicators of all the sample institutions. The study shows that both the financial performance indicators net profit and NII are satisfactory and is growing over the years. The study also shows that there is a significant portion of NII in the total profit of the banks and banks are continually increasing their position of NII over the years. This shows that the overall position of their exposure to risk has been decreased and this has also contributed for the overall increment in the net profit. The important note of this project is to utilize the concept of the structure of banks profit. The major contributing sources for a bank’s NII and their proportion has been closely analyzed and diagnosed. Additionally, it draws the attention of the bank examiners, who pay close attention to both the fee service incomes and credit when doing so. The range of services provided by the bank and their goodwill also plays a vital role for the NII. Banks which are in the market for relatively longer period of time are found to be higher non-interest earners in the country. The findings appear to be in line with those of DeYoung and Rice et al. (2003), who found that relationship banking tends to produce NII, large banks tend to generate relatively more of it, and some technological advancements are linked to higher noninterest income at banks while others are linked to lower noninterest income at banks. Regarding the latter, our findings imply that across the period, marginal gains in noninterest income have been correlated with greater, more variable profits.