Abstract
This study has examined the effect of internal and external variables on profitability of commercial banks in Nepal. The descriptive and causal comparative research designs have been adopted for the study. The pooled data of 13 commercial banks for the period 2014/15 to 2021/22 have been analyzed using regression model. The regression results revealed that bank size, credit to deposit ratio and inflation has significant negative effect on bank profitability whereas capital adequacy ratio has significant but positive effect on bank profitability. In addition, real gross domestic product has insignificant and negative effect on bank profitability. This study concludes that the commercial banks profitability in Nepal is mainly influenced by capital adequacy ratio. It means that capital helps take on more risky loans to increase profits.
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