The data is recorded on the excel sheet. All types of ration analysis are performed on the excel sheet. The analysis and the findings are based on theresults of the tests performed in the excel sheet.

In this chapter, all the details about the research methodology of the current study are given. The study topic is better provided with these methods. They are aimed at providing the current research work with the data for the existing study. For the said purpose, the nature of the data is well defined in this chapter. The design of the research study is an important part of the current chapter. The study population, the sample size, strategy for the sampling purposes, the methodology for the data collection along with the data collection and analysis tool are better defined in the current chapter. The clear the methodology of the study is the better it helps to achieve the objectives of the study. The next chapter is about the analysis and the discussion of the results.

Chapter 3: Analysis and Discussion of Analysis of profitability of banks a comparative  study of domestic & foreign banks in Saudi Arabia

1.1  Financial Ratio Analysis

To evaluate the profitability of the banks, the financial ratio analysis has been performed. The financial ratio analysis is an approach that provides brief information about the financial position of the organization. With financial ratio analysis, the liquidity, financial leverage, profitability and efficiency of the organization can be evaluated. The financial ratio analysis provides a quick overview of the management of the organization and the mange of the organization can take various financial decisions after evaluating the financial ratios. The financial ratios provide more detailed analysis when they are compared with another corporation or with the industry average. Ratio analysis will be going to help to get deep insights about the profitability of the Saudi Banks and provided trend over time.

Source: (morningstar, 2019).

1.1.1 Profitability Ratios of Analysis of profitability of banks a comparative  study of domestic & foreign banks in Saudi Arabia

The profitability ratios are among the most important financial ratios. The profitability ratios of how efficiently the organization is generating profit from the operations that it performs. The profitability ratios that are being included in the study for knowing the profitability include Profit margin, ROE (Return on Equity), ROA (Return on Asset) and Gross profit margin ratios. Through profitability ratios, one can evaluate how efficiently the organization is utilizing its assets for generating profit. Investors & Management of the organization uses profitability ratios to get deep insights regarding the profitability of the organization.

Table 1: Profitability ratios-Al Rajhi Bank

Source: (morningstar, 2019)

In the above table, the profitability ratios of Al Raji Bank are provided. If the profitability ratios of the corporation are analyzed then it can be said that the corporation is generating a significant amount of profit. In the year 2018, the net margin ratio is 59.62% which indicates that the company generates a high amount of profit. However, ROA ratios need a significant amount of improvement. The ROA ratio has shown a decline over the years and shown a slight recovery in the year 2018. The ROE ratio of the corporation has also experienced a decline in the last few years however in the year 2018 it experienced an increase. In the year 2018, the ROE ratio of the organization was 19.74%. If the overall profitability of the corporation is analyzed then it can be said that Al Rajhi bank is generating a significant amount of profit but still there is a lot of room for improvement. The corporation should utilize its assets efficiently so that higher profit can be generated. The there declining trend in ROA & ROE over the last few years should be a matter of concern for the organization and the organization must create a strategy to improve its ROA & ROE ratio.

Table 2: Profitability Ratios –BNP Paribas

Source: (morningstar, 2019)

If the profitability ratios of Al Rajhi are compared with BNP Paribas than it can be seen that BNP Paribas profitability is way lower than the profitability of Al Rajhi bank. The net margin of BNP Paribas is 13.76% which is lower than the profitability of Al Rajhi bank. The ROA and ROE of the bank are also way lower than the ROA & ROE of BNP Paribas.

1.1.2 Liquidity Ratios of Analysis of profitability of banks a comparative  study of domestic & foreign banks in Saudi Arabia

Table 3: Liquidity Ratios –Al Rajhi

Source: (morningstar, 2019).

If the liquidity ratios of the corporation are analyzed then it can be said the organization has enough cash from which it can pay its short term loans. The organization has kept sufficient cash from which it can pay its loan. However, increasing financial leverage should be a matter of concern.

Table 3: Liquidity Ratios –BNP Paribas

Source: (morningstar, 2019)

The organization has cash from which it can pay its short term obligations. If the financial leverage of the organization is analyzed critically than it can be said that the amount of debt of the organization is declining which is a good thing for the corporation.

1.1.3 Asset Management Ratios

Table 4: Asset Management-Al Rajhi

Source: (morningstar, 2019)

If the efficiency ratios of the Al Rajhi bank are analyzed critically than it can be said that the fixed asset turnover ratio has declined over the years. In the year 2011, the fixed asset turnover ratio was 3.42 which has declined significantly over the years and become 2.06 in the year 2018. The total asset turnover ratio of the organization has also declined over the years. In the year 2011 the asset turnover ratio was 0.06 which become 0.05 in the year 2018. Through declining efficiency, it is evident that the organization is not utilizing its assets efficiently for generating revenue & profitability. The organization will have to improve its efficiency so that its profitability can be further improved. 

Table 5: Asset Management-BNP Paribas

Source: (morningstar, 2019).

If the efficiency ratios of BNP Paribas are compared with Al Rajhi bank than it is evident that the efficiency or asset management of Al Rajhi bank is better than the BNP Paribas. BNP Paribas is not utilizing its assets efficiently for generating revenue. The fixed asset turnover ratio in the year 2009 was 3.14% which declined over the year and become 2.08% in 2018. The total asset turnover ratio was 0.03 in the year 2009 which become 0.02 in the year 2018. It can be said that BNP Paribas has to take measures to improve its efficiency otherwise the corporation will unable to improve its profitability.

1.1.4 Financial Leverage Ratios of Analysis of profitability of banks a comparative  study of domestic & foreign banks in Saudi Arabia

Table: 6 Financial Leverage Ratios-Al Rajhi

Source: (morningstar, 2019).

In the above table, the financial health of the corporation can be analyzed. The organization's liabilities have increased significantly over the last few years due to which the amount of debt of the organization is increasing. The assets of the corporation have experienced growth which is indicating that the business is experiencing expansion.

Table: 6 Financial Leverage Ratios-BNP Paribas

Source: (morningstar, 2019).

In the above table, the financial health of the corporation can be analyzed. The organization's liabilities have decreased significantly over the last few years due to which the amount of debt of the organization is declining. The assets of the corporation have experienced growth which is indicating that the business is experiencing expansion.

Chapter 4
2 Conclusion and Recommendations of Analysis of profitability of banks a comparative  study of domestic & foreign banks in Saudi Arabia
2.1Introduction of Analysis of profitability of banks a comparative  study of domestic & foreign banks in Saudi Arabia

This chapter explores the overall summary of this entire project. The executives and comprehensive summary for every point of the project can be entailing in this particular section of the research study. This section represents the comprehensive overview related to the profitability of the banks by considering it's with the nation of Saudi Arabia. This study discusses the various important points related to the profitability of the bank and it also analyzes the most important elements and components that are particularly utilized to analyzing the profitability analysis and overview of any firm. One of the most important things in this study is the analysis of the profitability of those banks that are operating according to the Islamic shariah. Both of these banks are well known in the economy of Saudi Arabia and these are earning good profit in this economy. One of these as; Al Rajhi bank is considered as part of the domestic market meanwhile another bank as BNP Paribas bank is not included as part of the domestic markets because of its French banks and existing on the 3^rd of world's largest banks according to its capital. This bank is also operating in the Kingdom of Saudi Arabia because it is working in the five continents around the globe. Both of these banks have good worth in the entire world but to analyze the profitability of any organization the worth is not. The analysis of the financial report is necessary to observe that what the company is earning per month per year.     

2.2 Discussions of Analysis of profitability of banks a comparative  study of domestic & foreign banks in Saudi Arabia

Overall, it can be said that corporate profitability is capable of profoundly affecting the long-term outlook and growth prospects of an organization. Even though the profitability is leading towards the growth of the firms, there is a significant chance of failure as well in case of reducing the profitability. Profitability is utilized by organizations for growing in their size and leaving their competitors behind. The urge to increase the organization with an effective asset portfolio before a competitor achieves.  The profitability makes an organization towards the smooth operations of the firm. Even the bank's performance can easily be observed by profitability.  Organizations also combine for taking advantage of economies of scale and synergies (Khan MY & Jain PK, 2007).

They also engage in acquisition and merger decisions for dominating a specific sector in which they are working as well as to enhance their profitability at a wide level. In most of the cases, integrating the functions and operations of two organizations proves to be quite difficult in practice compared to how it appeared in theory. Various particular objectives have been attained in numerous parts of the research study. All of these objectives are related to the analysis of the profitability of these banks. Few of these objectives are stated as; the research study is particularly conducted to provide the identification of the factors that help to evaluate the factors related to the bank's growth. This has observed that how to determine the parameters related to the bank's profitability. It has been critically analyzed observed what are the procedures to evaluate the financial growth of the banks under consideration. It has been observed clearly that how to identify the firm's growth based on ratio analysis.

In general, if an organization is not serious about the prospects of the other firm ad wishes to sell the assets, there is a high chance that it might prove the organization with an advantage in the market. The transactions of acquisition and merger decisions to get higher profitability sometimes are inefficient because the potential partners and corporate culture are different from each other. To analyze the profitability of both banks, the descriptive research approach was implemented for gathering the data from the individuals. In this study, both types of data were gathered which included secondary data & primary data. The secondary data was gathered by observing and analyzing the financial reports of the banks (Infrontanalytics.com, 2019).

These reports are collected from the Saudi exchange and Tadawul Saudi exchange. The descriptive research design was chosen for the study. Descriptive research is the most commonly known research approach. The purpose of descriptive research was to define why things are the way they are. The descriptive research design was appropriate for evaluating a variety of issues including the effect of profitability on the firm's performance. The secondary source of the data collection leads towards the preexisting data that has been utilized for the numerous projects that are conducted to observe, analyze and measure the profitability of both banks. The secondary source of data collection is the best approach to analyzing the financial reports of the banks.    

It has been analyzed that both of the banks are operating in the profit and that they are earning good growth in the region of Saudi Arabia. To evaluate the profitability of the banks the financial ratio analysis has been performed. The financial ratio analysis is an approach that provides brief information about the financial position of the organization. With financial ratio analysis, the liquidity, financial leverage, profitability and efficiency of the organization can be evaluated. The financial ratio analysis provides a quick overview of the management of the organization and the mange of the organization can take various financial decisions after evaluating the financial ratios. The financial ratios provide more detailed analysis when they are compared with another corporation or with the industry average. Ratio analysis will be going to help to get deep insights about the profitability of the Saudi Banks and provided trend over time. The profitability ratios of the Al Raji Bank has bee analyzed it has been approved that the Al Raji Bank is generating a significant amount of profit (Kumar, 2012).

In the year 2018, the net margin ratio is 59.62% which indicates that the company generates a high amount of profit. If the profitability ratios of Al Rajhi are compared with BNP Paribas than it can be seen that BNP Paribas profitability is way lower than the profitability of Al Rajhi bank. The net margin of BNP Paribas is 13.76% which is lower than the profitability of Al Rajhi bank. The ROA and ROE of the bank are also way lower than the ROA & ROE of BNP Paribas Hence it has been proved that the al Raji bank is earning a good amount of the profit in its entire region and it has profitability in its entire region (Tarawneh, 2006). 

2.3 Conclusion of Analysis of profitability of banks a comparative  study of domestic & foreign banks in Saudi Arabia

It has been concluded that the profitability of the organization is referred to as an essential key for the growth and improvement of the organization. The performance of the banks can only be analyzed and measured by its profitability. But the major problem is related to how the profitability of the banks can be analyzed. It is concluded that both of the banks as "Al Rajhi and BNP Paribas" are the well-known banks in the entire region of the KSA (Kingdom of Saudi Arabia). Both of these banks are playing centrally to participate in the economic development of Saudi Arabia. It is evident that Saudi Arabia is an oil-rich country in the Gulf States and its economy relies upon the oil and cartel prices. But most of the parts of the economic development of Saudi Arabia is also depends upon the Banks and their productivity.  Both banks have various statuses in Saudi Arabia because the one Al-Rajhi bank is relevant to the domestic market of Saudi Arabia meanwhile another BNP Paribas is not based in Saudi Arabia it is related to the foreign market but working in the markets of Saudi Arabia. It has been observed in the profitability ratio that Al-Rajhi is earning a good amount of profit as compared to the BNP Paribas bank.  The result of the ratio is observed as; the net margin ratio of the Al-Rajhi bank is 59.67% meanwhile the ratio of the BNP Paribas is 13.76% that is lower than the ratio of the Al-Rajhi bank. Hence, it has been observed by the profitability ration of 2018 that Al-Rajhi bank is growing in effective manners and it is earning good profit in the entire market. It has been observed that Al-Rajhi bank, in the year 2011 the asset turnover ratio was 0.06 which become 0.05 in the year 2018. Through declining efficiency, it is evident that the organization is not utilizing its assets efficiently for generating revenue & profitability. The organization will have to improve its efficiency so that its profitability can be further improved. The Alrajhi bank must focus on the asset turn over ration to makes its products more efficient.  Both banks are performing ineffective manners to enhance their productivity and the increase in productivity is required to increase the profitability of the organization. It has been proved that the Alrajhi is a bank is performing better than BNP Paribas. It is earning good profitability.

2.4  Recommendations of Analysis of profitability of banks a comparative  study of domestic & foreign banks in Saudi Arabia

It has been recommended that the BNP Paribas must focus on its products to enhance its profitability.  The profitability of the BNP Paribas is leading it towards the growth of the company. BNP Paribas' growth can enhance by enhancing profitability. It must focus on the particular strategies by which the profitability of the BNP Paribas can enhance in effective manners. It must focus on its function and activities make it more effective to perform in the market in effective manners. The BNP Paribas must follow the various techniques and approaches by which it can establish its profitability according to the domestic banking of Saudi Arabia. It has proved by this comparative study that the domestic banking market of Saudi Arabia is generating more profitability than the external operating company in Saudi Arabia such as BNP Paribas. It must employ innovative marketing strategies to grasp the customers in the Saudi markets. The Alrajhi will have to improve its efficiency so that its profitability can be further improved. The Alrajhi bank must focus on the asset turn over ration to makes its products more efficient. Because it has been observed that the asset turnover ratio of the Alrajhi bank was 0.06 in 2011 and it has become 0.05 in 2018. This reducing ration can be the cause of any stress for the productivity of the Alrajhi bank due to which its profitability can reduce as well. The Alrajhi bank must be utilized its assets in effective manners to enhance its performance because efficient utilization of the assets can enhance its profitability in effective manners.           

2.5   Future Implications of Analysis of profitability of banks a comparative  study of domestic & foreign banks in Saudi Arabia

This research study can be implied in the future in various manners but two perspectives of the future implication are considered as the most important and theses are theoretical implications and practical implications. The main research objectives of the current research work can better be achieved by following the suggestions and recommendations. The ultimate effect of the efficient use of the asset will be the increased asset turnover ratio of the Alrajhi bank by which the profitability of the Alrajhi bank will increase ultimately and automatically. The efficient use of the asset can also decrease the cost of the organization in various manners. Most importantly the operational cost can be reduced in effective manners by using efficiently to the asset of the organization.

2.6 Theoretical Implications of Analysis of profitability of banks a comparative  study of domestic & foreign banks in Saudi Arabia

As this study is conducted by using the ideas of the various author and opinions of the individual expects it means it is possible to conclude that this research has suffered from the potential subjectivity. Therefore; there must be further research that must be focusing on the more accurate data for the financial indicators. However, despite this limitation, the research may be useful for understanding the profitability of various other firms. The present research work and its findings tend to contribute significantly to the existing literature. The model is used for the existing research work can better provide the basis for future research work. The findings of the current study tend to help the management of Saudi Arabia particularly that is engaged in performing their duties in the baking sectors of Saudi Arabia. The entire banks of Saudi Arabia can be using this study to formulate effective strategies for avoiding the asset turnover ratio they can use their asset efficiency. These strategies can help the management of the banks in the kingdom of Saudi Arabia to improve the user's experience for making use of their investment in their banks.