LIQUIDITY ANSLYSIS OF VITIZIN BANK LTD

A Project Work Report

Submitted By:

Dabbla Bahadur Bohara

T.U. Roll no: 1770068

T.U. Registration No: 7-2-0177-0223-2013

Kanchan Vidya Mandir Samudayik College

Submitted To:

Faculty of Management

Tribhuvan University

Kathmandu

In Partial Fulfillment of the Requirements for the Degree of

Bachelor of Business studies (BBS)

Mahendranagar, Kanchanpur

2074

DECLARATION

I hereby declare that project work entitled "Liquidity Analysis of Citizen Ban Ltd."
Submitted to the Faculty of Management, Tribhuvan University, Kathmandu is an
original Piece of work under the supervision of Mr. Rajesh Bist, faculty member,
Kanchan Vidya Mandhir Samudayik College, Mahendranagar, Kanchanpur, and is
submitted in partial fulfillment of the requirements for the degree of Bachelor of
Business Studies (BBS). This project work report has not been submitted to any
other university or institution for the award of any degree or diploma.
Signature:

Lokendra Bdr. Bohara

Date:…………………….

RECOMMENDATION

The project work report entitled "Liquidity Analysis of Citizen Bank Ltd."
submitted by Lokendra Bdr. Bohara of Kanchan Vidya Mandir Samudayik College
Mahendranagar , Kanchanpur, is prepared under my supervision as per the
procedure and format requirements laid by the Faculty of Management, Tribhuvan
University, as partial fulfillment of the requirements for the award of the degree of
Bachelor of Business Studies (BBS). I, therefore, recommend the project work
report for evaluation.
Signature:

Mr. Rajesh Bist

Kanchan Vidya Mandir Samudayik College

Date…………………

s~rg ljBf dlGb/ Phone: 099-521129(Chief)

;fd'bflos sn]h 099-522135(Acc.Sec)

(KVM College)

Mahendranagar , Kanchanpur, Nepal 099-521392(Hostel)

Date: ……….

ENDORSEMENT

We hereby endorse the project work entitled "Liquitity Analysis of Citizen Bank
Ltd. " submitted by Lokendra Bdr. Bohara of Kanchan Vidya Mandhir Samudayik
College, Mahendranagar, Kanchanpur, in partial fulfillment of the requirements for
award of the degree of Bachelor of Business Studies (BBS) for external evaluation.

Signature: Signature:

Suresh Bhatt Dr. Raj Kumar

Saud
Head of Management Research Committee Campus
Chief

Kanchan Vidya Mandir

Samudayik College

Date………………… Date…………………

ABSTRACT

The Report was conduct as partial requirement of TU for BBS program. This report
was "Liquidity Analysis of Citizen Bank Ltd. "Questionnaires were developed to
perform the survey and distributed among the sample size. The data collected from
the questionnaires were coded and dada presentation and analysis was performed
with the help of SPSS. The data were presented in the tabular form in percentage,
mean and frequency. Various statistical testing such as ANOVA, t-test and
correlation was done to predict the result.

In conclusion, the present reporter has suggested the "Liquidity Analysis of Citizen
Bank Ltd. ". They should be efficient and effective in paper handling and claim
settlement process which helps to maintain the customer's trust on the company.

The overall life insurance industry should increase the tax benefit amount to gain
more customer.
 ACKNOWLEDGEMENTS

I would like to express my sincere gratitude to each and every individual and
organization who contributed in completion of this Field report in every possible
manner. Firstly I am grateful to Tribhuvan University for implementing Field report
in the course outline of BBS program which provides an opportunity to have deep
knowledge in the area of Field report. The main objective of this kind of project
report is to acquaint the management student to undertake independent analysis of
the situation. In this report, I have chosen "Liquidity analysis of Citizen Bank Ltd "
for my project report

I am very thankful to Mr. Suresh Bhatt Sir, HOD of Management stream for
supporting us with essential recourse for Field report; I owe my deep regards to our
instruction and guidance for preparation and completion of this Field report.

I also extent my sincere thanks to all the respondents for providing their valuable
time and information without which the Field report would not have been possible.

Lastly, I appreciate my colleagues and family member for their support and
encouragement during the report.

Thank You

Lokendra Bdr
Bohara

Kanchan Vidya Mandir Samudayik College

 TABLE OF CONTENTS

Title page…………………………………………………………..i

Declaration…………………………………………………………..ii

Supervisor's Recommendation……………………………….……..iii

Endorsement………………………….………………….………….iv

Acknowledgement……………………………….……………….….v

Table of Constants…………………………..………………………vi

List of Tables……………………………………………………….vii

List of Figures………………………………………………………viii

Abbreviations……………………………………….………………ix

CHAPTER ONE INTRODUCTION

1.1 Background of the Study 1

1.2 Statement of the Problem 2

1.3 Objective of the Study 3

1.4 Significance of the Study 3

1.5 Organization of the Study 4

CHAPTER TWO REVIEW OF LITERATURE

2.1 Conceptual Review 5

2.2 Review of Past Studies 6

2.2.1 Review of Articles 6

2.2.2 Review of pervious study 7

2.3 Research Gap 8

CHAPTER THREE RESEARCH METHODS

3.1 Research Design 10

3.2 Population & Sample 10

3.3 Type of Data 11

3.4 Data collection Techniques/procedure 11

3.5 Data analysis Techniques 17

3.6 Limitation of study 20

CHAPTER FOUR RESULT & FINDINGS

4.1 Presentation and Analysis of Data 22

4.2 Major Finding 32

CHAPTER FIVE DISCUSSION & CONCLUSION

5.1 Discussion 34

5.2 Conclusion & implementation 34

Reference

Appendices 37

LIST OF TABLE

Table No. List of Table Page No.

4.1 Participation of the all the deposit in the total deposit liability: 22

4.2 Saving deposit to total deposit ratio 23

4.3 Fixed deposit to total deposit ratio 24

4.4 Cash and bank balance to current deposit ratio 25

4.5 Cash and bank balance to total deposit ratio 26

4.6 Cash and bank balance to total deposit ratio (excluding fixed deposit) ratio 27

4.7 Balance with NRB to current and saving deposit ratio 28

4.8 Balance with NRB to fixed deposit ratio 29

4.9 Total investments to total deposit ratio 30

4.10 Liquidity assets to total deposit ratio 31

LIST OF FIGURE

Table No. List of Figure Page

No

4.1 Participation of the all the deposit in the total deposit liability: 22

4.2 Saving deposit to total deposit ratio 23

4.3 Fixed deposit to total deposit ratio 24

4.4 Cash and bank balance to current deposit ratio 25

4.5 Cash and bank balance to total deposit ratio 26

4.6 Cash and bank balance to total deposit ratio (excluding fixed deposit) ratio 27

4.7 Balance with NRB to current and saving deposit ratio 28

4.8 Balance with NRB to fixed deposit ratio 29

4.9 Total investments to total deposit ratio 30

4.10 Liquidity assets to total deposit ratio 31

LIST OF ABBREVIATIONS

BBS Bachelors in Business Studies

HRD Human Resource Development

CTZBL Citizen Bank Limited

IMF International Monetary Fund

NEP Non-Performing Loan

SEC Securities and Exchange Commission.

BB Bangladesh Bank

CEO Chief Executive Accountant

ATM Automatic Teller Machine

GDP Gross Domestic Product

IT Information Technology

TIN Tax Payer's Identification Number

SWIFT Society For Worldwide Interbank Financial Telecommunication

 CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

The circular flow of money in a modern economy is maintained smoothly by the

national financial machine having now main wheels.

i) Money market:

Mainly for short-term Finance to provide working capital to industry and

commerce; and

ii) Capital Market:

Prime for long-term finance to provide block or fixed capital to business. These two
markets work together and are closely inter dependent. In fact, money market and
capital market are the components of one market called market of credit.

The growth of industries and planned industrialization depends upon the

development of both capital market which satisfies long-term finance and money
market, which fulfills short-term finance. Banks provide both short-term finance as
well a long term finance. The development of banking system is a must for the
overall development of the economy of country. Banking system can be considered
as the life blood of the economy. In short banks are extremely necessary for the
healthy and prompt progress of country, its citizens and the societies it has. Banks
create and mobilized the capital, render several financial service that help boost the
domestic and international trade. Bank exercise considerable influence on the level
of economic activity though their ability to create money in the economy.

Banking system is necessary to offer institution service of promotion undertaking,

finance & investment for the economy utility functions performed by banks
ofgreaeconomic significance for the economy which can influence the course and
direction of economic activity within the economy. The pool together the saving of
he community and arrange of their productive use by providing short as well as long
term loans in different forms necessary for the trade and commerce. They discharge
various functions on behalf of their customers and in turn they paid for services.
Modern commercial banks perform various functions like the payment of
subscriptions, insurance premium, rent etc. And collection of chique, bills, salaries,
pensions, devidends, interest etc. On behalf of their customers by charging certain
amount of commission for the services. In addition, they purchase and discount bill
of exchange promissory notes and exchange foreign currency. Further more,
commercial banks also arrange to remit money from a place to another at very low
fees by means of cheques, drafts, SWIFT, etc. They buy and sell shares and
securities on behalf of the customers act as the custodian of the valuable such as
jewellery, documents of title to goods, securities etc. Belongings to the customers.

1.2 Statement Of the problem

liquidity is the status and part of the assets which can be used to meet the obligation
liquidity can be viewed in term of liquidity stored in the balance sheet and in term
of liquidity available through purchased found. The degree of liquidity depends
upon the relationship between cash assets plus those assets which can be quickly
turned into cash and liquidity awaiting payments

Bank needs to maintenance some seasonable level of liquidity to fulfill different

commitments such as provide money to depositors when they demand for
administrative expenses for maintaining cash reserve ratio in the central bank etc.
So liquidity is defined as the bank's capacity to pay cash in exchange of deposits.
Liquidity is crucial in the business like banking. Because if the bank has the high
liquidity it can no on a desired profit and if bank has the shortfall of the liquidity it
can not satisfy its coustomers. Inadequate liquidity may lead to collapse of the bank
while excess liquidity is determinant to bank's profitability in order to remove
demerits associated with maintaining inadequate and excess liquidity, bank should
maintained and optimum level of liquidity. This possible only when bank,s liquidity
need is correctly predicet. Prediction covers inflows and outflows, bank should plan
where to invest so that income can be increase. Bank attach great imporatance short
terms and long terms predictions. Prediction of liquidity need should be in the from
of primary and secondary reserve so that bank generates income and at the same
time dose not compromise to liquidity. Banks got failure because of wrongly
analyzed liquidity position and wrongly predicated liquidity requirement and
management police of liquidity. Thus to gain the trust of the customers and be
success on the optimum level of bank should maintain and forecast the liquidity
based on the past liquidity position.

This study had aimed to find out to the following question:

1 What is the liquidity position of citizen Bank Ltd?

2 Are they maintaining sufficient liquidation position?

1.3 Objective of the study

The main objective of the study is to analyze the citizen bank,s liquidity position.
Based on the analyzed liquidity position, the study will suggest the liquidity need
and its management for the current year.

Other objectives can be listed below.

1 To find out the liquidity position of the citizen Bank Ltd.

2 TO analyze the financial performance.

1.4 Rational of the study

This report is prepared to analyze the liquidity position of citizen Bank Ltd. This
report comprises the date from 2005 to 2010. This would help the bank to observe
the trend of the liquidity position hold in those period. Besides that, this study also
evaluates the role of short term obligation and the bank ability to pay the currently
maturity obligation. Moreover, the study will cheek the profitability of the bank. this
will help the bank to take the corrective actions if there are any errors on the past
performance and the study aims to recommend correcting the division if the
standard has not been met.

1.5 Organization of the study

This study has been organized over altogether five chapters. Starting from
Introduction, Review of Literature, Research Methodology, Presentation &
Analysis of Data and Summary, to Conclusion & Recommendation as get of the
entire study. A brief outline of this chapter has been outlined as under.

The first chapter entitled "Introduction" introduces the subject; present the
research problem, reason for studying, objective of the study, along with
limitation.

The second chapter entitled "Review of Literature" concerned with the study
of financial performance have been reviews & presented.

The third chapter discussed the "Research Methodology" used in the study. It
comprises research design, nature & source of data, data gathering method and
analytical tools used.

The fourth chapter deals with the "Presentation & Analysis" of data & scoring
the empirical finding out the study through definite course of research
methodology.

The last chapter i.e. "Summary conclusion and recommendation" of the study,
which is followed by the basic conclusion of the study based in the fourth
chapter on the basic of these conclusion and recommendation has also been
presented for consideration.
 CHAPTER TWO

REVIEW OF LITERATURE

Review of literature is an essential part of all studies. It is a way to discover what

other research in the area of our problem has uncovered. Scientific research must be
based on past knowledge. The previous studies cannot be ignored because they
provide the foundation to the present study. In other words, there has to be
continuity in research. This continuity in research is ensured by linking the present
study with the past research studies.

2.1 Conceptual Review

The word investment sounds very good & attractive that is why every individual
in the world is interested in it. In Layman's sense, there is always a return if there is
investment. This may be favorable as well as unfavorable to the investor's stand
point.

Investment brings forth vision of profit, risk, speculation & wealth. For the
uninformed, investing may result in disaster. In general sense; investment means to
pay out money to get more. But in the broadest sense, investment means the
sacrifice of current money for future money. Two different attributes are generally
involved time & risk. The sacrifice takes place in the present and is certain. The
reward comes later, if at all, and the magnitude is generally uncertain (Sharpe,
Alexander & Baily; 2014:1).

Shrestha (2012) write investment as utilization of saving for something that is

expected to produce profit or benefits. Investment is employment of funds with the
aim of achieving addition income or growth in value. It involves the commitment of
resources that have been saved or put away from current consumption, in the hope
that some benefits will occur in the future. Investment generally involves real assets
and financial assets. Real assets investment involves some kinds of tangible assets
such as building, land, machinery; factory etc. and financial assets investment are
pieces of paper representing an indirect claim to real assets held by someone else.
Real assets are generally less liquid than financial assets.

According to Reilly " Investment is the current commitment of funds for a period of
time to derive a future flow of funds that will compensate the investing unit for the
time funds are committed, for the expected rate of inflation and also for uncertainty
involved in the future flow of the funds."(Frank & Reilly; 2012:1)

2.2 Review Past Studies

It has found that there are no more studies performed in this topic. However, there
are some which is related to this conducted for the partial fulfillment of Master's
Degree in Tribhuvan University.

2.2.1 Review of Article

'Nepalese capital market got a proper structure only in the year 2014. In this year
securities board was established as regulator and stock trading commenced
through the member brokers adopting upon outcry auction system. Stock exchange
in its usual role was their expected to develop as a powerful mechanism to mobilize
savings for long term investments." Kafle D.R.( 2014)

In order to check the growing non-performing asset problems of commercial banks

and financial institutions and to maintain the financial health of these institutions by
preventing risky investments, RBB on September 18, 2003 issued several directives
tightening its earlier blacklisting procedures. As per the new provisions: All financial
institutions are required to disclose the name of the loan defaulters every six months;
financial institutions have been barred from lending any amount to the blacklisted
defaulter or any of his family members. Credit Information Bureau (CIB) can
blacklist the firm, company, or an individual who fails to clear the debt within the
stipulated period. If they fail to clear the debt amount in time, or is found misusing the
loans, among others, the creditor can be blacklisted. The proprietor along with the
proprietorship firms, and partners would also be blacklisted. Furthermore, the

shareholders holding 10% or more shares would also be blacklisted, if the public
limited company fails to clear the dues.

During the recently held meeting of the World Bank and the International Monetary
Fund, the donor community has strongly raised the issue of slow pace of loan
recovery by the defaulters of the bank. Consequently, the government has vowed to
take harsh measures, which includes seizing the passports of willful defaulters, if the
concerned line institutions make formal request through the NRB essential to recover
loans from defaulters to ensure the success of financial sector reforms. Due to the
tendency of non-repayment for loans, the risk of taking the provision has increased
thereby lessening the possibility of reducing the interest rate between deposit and
lending. Taking into consideration these adversities, Debt Recovery Act, Debt
Recovery Tribunal and the Umbrella Act related with banking have been in
operation.

2.2.2 Reviews from Previous Studies

Massive changes and developments have taken place during the past two decades
in the financial sector. Amidst all these changes, for economic growth and
development of New Nepal, Liberalization, Privatization and Globalization in this
sector has given birth to the largest commercial bank, "Citizens Bank International
Ltd". The Bank is located at Sharada Sadan, Kamaladi, Kathmandu, the heart of
financial sector of the country. It is promoted by eminent personalities/business and
industrial houses and reputed individual having high social standing. It is
managed by a team of experienced bankers and professionals.

Ojha (2016), has conducted a research on "Financial Performance and Common Stock
Pricing". The main objectives of his research were;
 To study and examine the difference of financial performance and stock
prices. To examine the relationship of dividends and stock price.

To explore the signaling effects in stock price.

Nepalese stock market is in infancy stage, in general it is very new and just started to
develop. Dominance of banking sector is prevalent in the market due to other
industries including finance companies, insurance and manufacturing is not
encouraging. Corporate firm with long history have a relatively stable profitability
parameters that the firm established after the economic liberalization. Older firms
have been issuing bonus share more times than the new one. Dividend per share is
relatively more stable than the dividend payout ratio. That's why payout ratio and
dividend yields have been highly fluctuating. Due to lack of proper investment
opportunity most of the investors have directed their saving towards the secondary
stock market. There is significant positive correlation between the dividends paid and
stocks prices of banking and manufacturing industries. All other industries have not a
perfect correlation between the dividends paid and stock prices. There is a positive
correlation between the net worth per share and stock prices of banking, airline and
hotel industries, there is no perfect correlation between the net worth per share and
common stock price."

2.3 Research Gap

There is a certain gap between the present research and the past research. Previous
research generally presents a comparative financial analysis of two banks in more
simple way. These analyses express all items in the statement in the form of
amount the previous researches did not disclose the practical comparative analysis
which is practiced by the commercial banks. Thus to full fill this gap the present
research is conducted. It covers the study of deposit and loan of three commercial
banks. This analysis is based on expressing all items in the statement as a percentage. It
is modern approach to evaluate performance analysis. Most important point to
remember about performance analysis is that every financial measure should be
compacted across time and across over same line of companies to be meaningful.
The world is becoming more dynamic and subject to rapid changes. This research
will be based upon the modern approaches to financial analysis in which
comparable group approaches to

financial analysis in which comparable group approach and include consideration of

economic and strategic factors where feasible. Thus, this research will be a concern
to a wide range of its stakeholders and other government regulatory authorities. This
study studies the performance evaluation of top two commercial banks in systematic
manner which might be more effective than other studies previously done by different
researchers.

CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Research Design

A research design is the arrangement conditions, for the collection and analysis of
data in a manner that aims to combined relevance to the research purpose with
economy in procedures.

This study aims on the financial analysis of the Citizen bank Ltd. This study is mainly
based on primary data and secondary data.

The primary data, which are collected directly from the question answer, direct
interview with customer and office staffs.

The secondary data are collected from respective annual reports especially from the
Citizen bank's web sites and various other journals and from security bond Nepal
(SUBO) and Nepal stock exchange (NEPSE).

3.2 Population & Sample

This study has been totally confined to the institutions listed in the Nepal stock
exchange.

All commercial bank operated in Nepal are population and among them Citizen
Bank are taken as sample for study purpose.

Technique of Analysis

To achieve the objective of the study, various financial and statistical tools have been
used. The analysis of data will be done according to the pattern of data available.
Due to limited time and resources, simple analytical statistical tools such as
percentage, graph, and Karl Pearson's coefficient of correlation are used in this
study. Likewise,

some financial tools such as ratio analysis and trend analysis have also been used for
financial analysis.

The various calculated results obtained through financial and statistical tools are
tabulated under the different headings. Then they are compared with each other to
interpret the results.

3.3 Types Of Data

 12
Data analysis tools means which tools the research used for present and analyzed the
data. The main tools of analysis are mathematical and statistical tools. In this reports
statistical and financial ratio tools is used for data analysis. Mean and correlation is
calculated for analysis the data as statistical tools.

3.4 Data Collection Techniques/procedure

An arithmetical relationship between two figures is called ratio. It is the most

useful and analytical tools to evaluate in respect to one variable over another. Here,
for our purpose, only the liquidity related ratios are calculated.

Financial Tools

Financial tools are used to examine the strength and weakness of banks. In this study
financial tools like ratio analysis and financial statement analysis have been used.

Ratio Analysis

Financial ratio is the mathematical relationship between two accounting figures. Ratio
analysis is a part of the whole process of analysis of financial statements of any
business or industrial concern especially to take output and credit decisions. Thus
ratio analysis is used to compare a firm's financial performance and status to that of
other firm's to it overtime. The qualitative judgment regarding financial
performance of a firm can be done with the help of ratio analysis.

A. Liquidity Ratios

Liquidity ratios are used to judge the ability of banks to meet its short- term
liabilities that are likely to mature in the short period. From them, much insight can
be obtained into present cash solvency of the bank and its ability to remain solvent in
the event of adversities. It is measurement of speed with which a bank's assets can
be converted into cash to meet deposit withdrawal and other current obligations.
i. Current Ratio

The current ratio is the ratio of total current assets and current liabilities. It shows the
relationship between current assets and current liabilities.

Mathematically it is represented as:

 Current ratio — Total Current Assets
Total Current Liabilities

Where,

Current assets include cash and bank balance, money at call or short-term notice,
loans and advances, investment in government securities and other interest receivable
and miscellaneous current assets where as current liabilities include deposits and other
accounts of short-term loan, bills payable, tax provision, staff bonus, dividend
payable and miscellaneous current liabilities.

The widely accepted standard of current ratio is 2:1 but accurate standard depends on
circumstances in case of seasonal business ratio.

ii) Cash and Bank Balance to Total Deposit Ratio

Cash and bank balance are the most liquid current assets of a firm, cash and bank
balance to total deposit ratio measures the percentage of most liquid assets to pay
depositors immediately. This ratio is computed dividing the amount of cash and bank
balance by the total deposits. It can be presented as,

Cash and Bank Balance to Total Deposit Ratio — Cash & Bank Balance

Total Deposits

Where, total deposits consist of deposits on current account; saving account; fixed
account, money at call and other deposits.

iii) Cash and Bank Balance to Current Assets Ratio

This ratio measures the percentages of liquid assets i.e. cash and Bank balance
among the current assets of a firm. Higher ratio shows the higher capacity of firms
to meet the cash demand.

Cash & Bank Balance to Current Assets Ratio — Cash & Bank Balance
Current Assets

Hence, cash and banks balance includes cash in hand, foreign cash and foreign
banks.

iv)Investment on Government Securities to Current Asset Ratio

This ratio is used to find the percentage of current assets invested on government
securities, treasury bills and development bonds. This ratio can be calculated
dividing the amount of investment on government securities by the total amount of
current assets and can be stated as follows,

Investment of Government securities = Investment on Government Securities

To current Asset Ratio Current Assets

v) Loan and Advances to Current Assets Ratio

Bank's major earning source is loan. Loans are also taken as current assets as most of
them are maturing within a period of one year and represent short term
disbursement. A Bank should not allocate all funds in loan and advances so it must
maintain in an appropriate level. In order to calculate the proportion of loan and
advances to total current assets, the ratio is obtained by dividing loan and advances
by current assets.

Loan & Advances to Current Assets Ratio — Total Loan & Advances

Current Assets

B. Assets Management Ratios (Activity Ratios)

Asset management ratio is used to indicate how efficiently the selected banks have
arranged and invested their limited resources .The following financial ratios related to
investment policy is calculated under asset management ratio and interpretations are
made by these calculations.

i)Loan and Advances to Total Deposit Ratio

This ratio is calculated to find out how successfully the selected banks and finance
companies are utilizing their total collections/deposits on loan and advances for the
purpose of earning profit.
 Loan & Advances to Total Deposit Ratio — Total Loan and Advances

Total Deposit
ii)Total Investment to Total Deposit
Ratio

Investment is one of the major sources of earning money. This ratio includes how
properly firms' deposits have been invested on government securities and shares and
debentures of other companies. This ratio can be computed diving total amount of
investment by total amount deposit collection, which can be shown as;

Total Investment to Total Deposit Ratio — Total Investment

Total Deposit

iii)Loan and Advances to Total Working Fund Ratio

The main element of total working fund is loan and advances. This ratio indicates the
ability of selected banks and finance companies in terms of earning high profit from
loan and advances. Loan and advances amount by total working fund. That is
formulizing as;

Loan & Advances to Total Working Fund Ratio — Total Loan & Advances

Total Working Fund

Where, total working fund include total amount of assets given balance sheet
which refers to current assets, net fixed assets, total loans for development banks
and other sundry assets except off balance sheet items i.e., letter of credit, letter
of guarantee etc.

iv)Investment on Government Securities to Total Working Fund Ratio

Investment on government securities to working fund ratio shows how much part
of total investment is there on government securities in percentage. It can be
obtained by;

Investment on Government Securities — Investment on Govt. Securities

Total Working Fund

v)Investment on Shares and Debentures to Total Working Fund Ratio

Investment on shares and debentures to total working fund ratio shows the
investment of Banks and finance companies on the shares and debentures of
obtained dividing on shares and debentures by total working fund. That can be
calculated as;

Investment on Shares and

Debentures toTotal Working Fund Ratio — Investment on Share & Debenture
Total Working Fund

C. Profitability Ratios
Profitability ratios are calculated to measure the efficiency of operation of a firm
on term of profit. It is the indicator of the financial performance of any institution.
This implies that higher the profitability ratio, better the financial performance of
the bank and vice versa. Profitability position can be evaluated through
following different way.

i) Return on Total Assets

This ratio establishes the relationship between net profit and total assets. This ratio
is also called 'profit to assets ratio'. It is calculated dividing return on net profit/loss
by total working fund and can expressed as;

Net Profit After Tax

Return on Assets —
Total Assets

ii)Total Interested Earned to Total outside Assets

This ratio shows the relationship between interests earned amount and total outside
assets borrowed by the Bank. Total interest earned is that amount which is earned
investing in different sectors by the Bank in an accounting year. Whereas, total
outsiders assets include loans (short term as well as long term), borrowings and bond
amounts. This ratio is calculated as follows;

Total Interest Earned to Total Outside Assets — Total Interest Earned

Total Outside Assets

iii)Return on Loan and Advances Ratio

Return on loan and advances ratio shows how efficiency of the Banks and finance
companies have utilized their resources to earn good return from provided loan and
advances. This ratio is computed to divide net profit/loss by the total amount of loan
and advances. It can be mentioned as;

Return on Loan & Advances Ratio — Net Profit or Loss

Total Loan & Advances

iv)Total Interest Earned to Total Working Fund Ratio

Total interest earned to total working fund is calculated to find out the percentage of
interest earned to total assets. Higher the ratio indicates the better performance of
financial institutions in the form of interest earning on the better working fund. This
ratio is calculated diving total interest earned from investment by total working fund
and is mentioned as below;

Total Interest Earned

Total Interest Earned to Total Working Fund Ratio —
 Total Working Fund

v)Total Interest Paid to Total Working Fund Ratio

This ratio measures the percentage of total interest expenses against total working

fund. A high ratio indicates higher interest expenses on total working fund and vice-

versa. This ratio is calculated by dividing total interest paid by total working fund.

Total Interest Paid to Total Working Capital Fund Ratio = Total Interest Paid

Total Working Fund

vi)Return on Equity Ratio (ROE)

The ratio measures how efficiently the banks have used the funds of the owners. The
ratio is calculated by dividing net profit by total equity capital (net worth). This can be
started as,

Return on Equity (ROE) — Total Equity Capital

I went to the branch office of Citizen bank ltd. Mahendranagar, Kanchanpur, and get
the important information. I collected the main annual reports of this bank directly
from the web site. And other various articles and journals from various publication
and some others from the SEBO, NEPSE and previous field reports are also taken in
to accounts.

3.5 Data Analysis techniques Mean

In mathematics, mean has several different definitions depending on the context.

In probability and statistics, mean and expected value are used synonymously to
refer to one measure of the central tendency either of a probability distribution
or of the random variable characterized by that distribution.

The arithmetic mean of a population, or population mean, is denoted u. The sample

mean (the arithmetic mean of a sample of values drawn from the population) makes a
good estimator of the population mean, as its expected value is equal to the population
mean (that is, it is an unbiased estimator). The sample mean is a random variable,
not a constant, since its calculated value will randomly differ depending on which
members of the population are sampled, and consequently it will have its own
distribution.

Standard deviation

In statistics, the standard deviation (SD, also represented by the Greek letter
sigma a or the Latin letter s) is a measure that is used to quantify the amount of
variation or dispersion of a set of data values. A low standard deviation indicates
that the data points tend to be close to the mean (also called the expected value) of
the set, while a high standard deviation indicates that the data points are spread out
over a wider range of values.

The standard deviation of a random variable, statistical population, data set,

or probability distribution is the square root of its variance. It is algebraically simpler,
though in practice less robust, than the average absolute deviation. A useful
property of the standard deviation is that, unlike the variance, it is expressed in the
same units as the data. There are also other measures of deviation from the norm,
including mean absolute deviation, which provide different mathematical properties
from standard deviation.

Coefficient of variance

In probability theory and statistics, the coefficient of variation (CV), also

known as relative standard deviation (RSD), is a standardized measure of
dispersion of a probability distribution or frequency distribution. It is often
expressed as a percentage, and is defined as the ratio of the standard deviation to
the mean (or its absolute value, ). The CV or RSD is widely used in analytical
chemistry to expres

the precision and repeatability of an assay. It is also commonly used in fields such
as engineering or physics when doing quality assurance studies and ANOVA gauge
R&R. In addition, CV is utilized by economists and investors in economic models
and in determining the volatility of a securities.

Correlation of coefficient
A correlation coefficient is a number that quantifies some type of correlation and
dependence, meaning statistical relationships between two or more random
variables or observed data values.[II

Types of correlation coefficients include:

 Pearson product-moment correlation coefficient, also known as r, R, or

Pearson's r, a measure of the strength and direction of the linear relationship
between two variables that is defined as the (sample) covariance of the variables
divided by the product of their (sample) standard deviations.
 Intraclass correlation, a descriptive statistic that can be used when quantitative
measurements are made on units that are organized into groups; describes how
strongly units in the same group resemble each other.
 Rank correlation, the study of relationships between rankings of different
variables or different rankings of the same variable
Spearman's rank correlation coefficient, a measure of how well the
relationship between two variables can be described by a monotonic function
Kendall tau rank correlation coefficient, a measure of the portion of ranks that
match between two data sets.
Goodman and Kruskal's gamma, a measure of the strength of association of
the cross tabulated data when both variables are measured at the ordinal
level.

Tjend analysis

Trend analysis is the widespread practice of collecting information and attempting

to spot a pattern, or trend, in the information. In some fields of study, the term
"trend analysis" has more formally defined meanings.

Although trend analysis is often used to predict future events, it could be used to
estimate uncertain events in the past, such as how many ancient kings probably ruled
between two dates, based on data such as the average years which other known
kings reigned

In statistics, trend analysis often refers to techniques for extracting an underlying

pattern of behavior in a time series which would otherwise be partly or nearly
 completely hidden by noise. A simple description of these techniques is trend
estimation, which can be undertaken within a formal regression analysis.\

3.6 Limitation of the study

This study is simply conducted for the partial fulfillment of the requirement for the
degree of the bachelor in business administration (BBA). And only the secondary
data is used and analyzed which could not disclose the actual result. And being the
first endeavor, the report can comprise some mistakes which may
cause to misinterpretation of the results.

The other limitation of the study is listed below:

i.Data contains mostly of the annuals reports of the bank through fiscal
year2009/2010 to 2013/2014.
ii.Only five years observation covering from fiscal year 2009/2010 to 2013/2014 is
analyzed.
iii.Analysis is based on the ratio and trend lines of the corresponding ratios
only.
iv.For the forecast of the liquidity requirement, daily and monthly data is needed.
But due to time and cost constraints, only the annual data is used for analysis.
v.Only the secondary data is used.
vi. . The study is only fulfill the requirement for the degree of bachelor in
business Study (BBS), which can not cover all the dimension of the all subjects
matter and resource and time period is also limited.
 CHAPTER FOUR

RESULT & FINDINGs

4.1 Presentation And Analysis of Data

Analysis means to find out something and give opinion about the
presented data. Presentation means the presentation of the collected data
through table; figure etc. presentation is the process of understanding the
study or the report and calculating the opinion. An analysis of a data
means the process where the statement or the report gets resolve by
breaking them into simple statement.

Table no 4.1
Particiation of tha all the deposit in the total deposit liability.

Fiscal year Curren Saving deposit Fixed deposit Total deposit

t
2009/10 1705668495
deposit 8081980512 5412969595 15200618592
2010/11 2175020657 10742331625 7516686866 20424048148
2011/12 3138669428 13688766549 7944232558 24771668535
2012/13 3756570350 17066252467 11633380218 32456203035
2013/14 4025820180 14324255897 16825148284 35175224361
Source: - "annual report of Citizen bank ltd. Figure no 4.1

vii.
60
%
50 t5 Current Deposit
% at Saving Deposit
40
% Fixed Deposit
30 viii.
%
 2009/10 2010/11 2011/12 2012/13 2013/14"

In the above table and chart, we see that, in fiscal year 2009/10, the current deposit
account occupied 11%, saving deposit account 53%, fixed deposit account 37%.in
fiscal year 2010/11 the current deposit account occupied 10%, saving deposit
account53%, fixed deposit account 36% occupied. In fiscal year 2011/12 the
current deposit account occupied 13%, saving deposit account 53%, fixed deposit
account 37% occupied. In fiscal year 2012/13 the current deposit account
occupied 13% saving deposit account55%, fixed deposit account32% occupied.
In fiscal year 2013/14the current deposit account occupied 11%, saving deposit
account42%, fixed deposit account occupied 48%.

Table no 4.2
Saving deposit to total deposit ratio

Fiscal year Saving deposit Total deposit Ratio

2009/10 8081980512 15200618592 0.53
2010/11 10742331625 20424048148 0.53
2011/12 13688766549 24771668535 0.55
2012/13 17066252467 32456203035 0.53
2013/14 14324255897 35175224361 0.41
Source: - "annual report of Citizen bank ltd."
 Figure no 4.2

0.6 •
0.5

0.3

0.1
0
2009/10 2010/11 2011/12 2012/13 2013/14
 From the above table and trend line chart, the ratio is fluctuating state.
In the fiscal year 2009/10, the bank has the saving deposit of 0.53 times
of total deposit liability. And 0.53, 0.55, 0.53, 0.41 times of total deposit
liability in fiscal year 2010/11, 2011/12, 2012/13, 2013/14 respectively.

Table no 4.3
Fixed deposit to total deposit rati

Fiscal year Fixed deposit Total deposit Ratio

2009/10 5412969595 15200618592 0.36
2010/11 7516686866 20424048148 0.37
2011/12 7944232558 24771668535 0.32
2012/13 11633380218 32456203035 0.35
2013/14 16825148284 35175224361 0.48
Source:- "annual report of Citizen bank ltd."

Figure no 4.3

0.
6
0.
•
5
0.
4
0.
1
0

Category 1 2010/11 2011/12 2012/13 2013/14

From the above table and trend line chart, the ratio is fluctuating in
increasing and decreasing trend. The highest ratio is 0.48 times in year
2013/14 and lowest ratio is 0.32 times in fiscal year 2011/12. And 0.36
 times, 0.37 times and 0.35 times in year 2009/10, 2010/11, and 2012/13
respectively.

Table no 4.4
Cash and bank balance to current deposit ratio

Fiscal year Cash and bank Current deposit Ratio

balance
2009/10 810454736 1705668495 0.48
2010/11 1060162644 2175020657 0.49
2011/12 1934935533 3138669428 0.62
2012/13 3578672803 3756570350 0.95
2013/14 3506870807 4025820180 0.87
Source:- "annual report of Ctizen bank ltd."

Figure no 4.4

0.
8
0.
6
0. 2009/10 2010/11 2011/12 2012/13
2013/14
From the above table and trend line chart, the ratio is fluctuating in not normally.
In fiscal year 2009/10, the bank has the liquidity against current deposit is 0.48
times.

And the bank has the liquidity against current deposit are0.49, 0.62, 0.95, 0.87times
in year 2010/11, 2011/12, 2012/13, 2013/14 respectively.
 Table no 4.5
Cash and bank balance to total deposit ratio

Fiscal year Cash and bank balance Total deposit Ratio

2009/10 810454736 1520061859 0.05
2010/11 1060162644 20424048142 0.05
2011/12 1934935533 24771668538 0.08
2012/13 3578672803 32456203035 0.11
2013/14 3506870807 35175224365 0.10
Source: - "annual1 report of Citizen bank ltd."

Figure no 4.5

0.
12
0.
1
0. —0-- Ratio
08
0.
06
2009/10 2010/11 2011/122012/13 2013/14

From the above table and trend line chart, the ratio is fluctuating. In fiscal year
2009/10, the bank has the liquidity for total deposit in the ratio of 0.05 times. And
in fiscal year 2010/11, 2011/12, 2012/13, and 2013/14, the bank has the liquidity
for the total deposit in ratio of 0.05, 0.08, 0.11 and 0.10 times respectively.

Table no 4.6
Cash and bank balance to total deposit ratio (Excluding fixed deposit ratio)
Fiscal year Cash and bank Total deposit Ratio
balance
2009/10 810454736 9787648997 0.08
2010/11 1060162644 12917361282 0.08
2011/12 1934935533 16827435977 0.11
2012/13 3578672803 20822822817 0.17
2013/14 3506870807 18350076077 0.19
Source: - "annual report of Citizen bank ltd."

Figure no 4.6

0.2
0.18
From
0.16
the above table and trend line chart, the ratio is fluctuating in increasing state.
In 0.14
fiscal year 2009/10, the bank has the liquidity against current and saving
0.12 account deposit account liability in the ratio of 0.08 times. And in fiscal year
deposit
0.1
2010/11, 2011/12, 2012/13, and 2013/14, the bank has the liquidity against current
0.08
and0.06
saving deposit account liability in the ratio of 0.08 times, 0.11 times, 0.17
times
0.04and 0.19 times respectively.
0.02

2009/10 2010/11 2011/12 2012/13 2013/14

 Table no 4.7
Balance with NRB to Current and Saving Deposit Ratio

Fiscal year Balance with NRB Current + saving Ratio

2009/10 1526066660 9787648997 0.16
2010/11 1381351556 12917361282 0.11
2011/12 1820006035 16827435977 0.11
2012/13 4411133083 20822822817 0.16
2013/14 3237217030 18350076077 0.18
Source: - "annual report of Citizen bank ltd.Chart 7

Figure no 4.7

0.
2
0.1
8
0.1
6
0.1 —4— Ratio
4
0.1
2
0.1
0.0
2009/10 2010/11 2011/12 2012/13 2013/14
From the above table and trend line chart, the ratio has been maintained in fiscal year
2009/10 by 0.16 times. And the bank has been maintained its ratio in fiscal year
2010/11, 2011/12, 2012/13, 2013/14 by 0.11 times, 0.11 times, 0.16 times and
0.18 times respectively.

Table no 4.8
Balance with NRB to fixed deposit ratio

Fiscal year Balance with NRB Fixed deposit Ratio

2009/10 1526066660 5412969595 0.28
2010/11 1381351556 7516686866 0.18
2011/12 1820006035 7944232558 0.23
2012/13 4411133083 11633380218 0.38
2013/14 3237217030 16825148284 0.19
Source: - "annual report of Citizen bank ltd."

Figure no 4.8
 0.4

From z
0.35 the above table and trend line chart, the ratio is fluctuating. In fiscal

year0.32009/10, the bank has the balance with NRB against fixed deposit liability
0.25
in the ratio of 0.28 times. And in fiscal year 2010/11, 2011/12, 2012/13,
0.2
2013/14, the bank has the balance with NRB against fixed deposit liability in
0.15
the 0.1
ratio of 0.18 times, 0.23 times, 0.38 times and 0.19 times respectively.
0.05

0
2009/10 2010/11 2011/12 2012/13 2013/14

Table no 4.9
Total investment to total deposit ratio

Fiscal year Total investment Total deposit Ratio

2009/10 5602808649 15200618592 0.37
2010/11 6505679987 20424048148 0.32
2011/12 6874023625 24771668535 0.28
2012/13 7399811700 32456203035 0.23
2013/14 8635530125 35175224361 0.25
Source: - "annual report of Citizen bank ltd.

Figure no 4.9
 0.4
From
0.35 the above table and trend line chart, the ratio is fluctuating. In fiscal year
0.3
2009/10, the bank has invested 37% of the deposit in investment. In fiscal years
0.25
2010/11,
0.2 2011/12, 2012/13, 2013/14, the bank has invested 32%, 28%,—4— 23%Ratio
and
25%
0.15of the deposit in investment respectively.
0.1
0.05

2009/10 2010/11 2011/12 2012/13 2013/14

Table no 4.10
Liquidity Assets to total deposit ratio

Fiscal year Liquidity assets Total deposit Ratio

2009/10 4068425766 15200618592 0.26
2010/11 5203482662 20424048148 0.51
2011/12 5403444347 24771668535 0.51
2012/13 5561846381 32456203035 0.50
2013/14 5683996571 35175224361 0.48
Source: - "annual report of Citizen bank ltd."

Figure no 4.10
 0.6
0.5
From the above table and trend line chart, the ratio is fluctuating slightly except
0.4
fiscal year 2009/10 in fiscal year 2009/10; the bank has invested 26% of the
0.3
deposit in the liquid assets. In fiscal year 2010/11, the bank has invested 51% of
0.2
deposit in liquid assets. In fiscal year 2011/12, 2012/13 and 2013/14, the—4—Ratio
bank has
0.1
invested 51%, 50%, and 48% of the deposit in the liquid assets respectively.

0
2009/10 2010/11 2011/12 2012/13 2013/14

4.2 Major Findings of the Study

Having completed the basic analysis required for this study, the final and the most
important task of the researcher is to enlist the findings. This will give meaning to the
desired result. A comprehensive summary of the major findings of this study is
presented below. The main findings of the study derived from the Liquidity
analysis of Citizen Bank Ltd.

1.From the table no 4.1 and figure no 4.1 saving deposit of CBL in the study
period are higher then other current and fixed deposit so it can conclude that
financial position is strong in respect report to deposit collection.
2.From the table no 4.2 and figure no 4.2 Highest ratio of the table and figure
was 0.55 in the fiscal year2011/2012 and the lowest ratio was 0.41 in the
fiscal year 2013/2014.
3.From the table no 4.3 and figure no 4.3 Highest ratio of the table and figure
was 0.48 in the fiscal year2013/2014 and the lowest ratio was 0.32 in the
fiscal year 2011/2012
4.From the table no 4.4 and figure no 4.4 Highest ratio of the table and figure
was 0.95 in the fiscal year2012/2013 and the lowest ratio was 0.48 in the
fiscal year 2009/2010
5.From the table no 4.5 and figure no 4.5 Highest ratio of the table and figure
was 0.11 in the fiscal year2012/2013 and the lowest ratio was 0.05 in the
fiscal year 2010/2011
 6.From the table no 4.6and figure no 4.6 Highest ratio of the table and figure
was 0.19 in the fiscal year2013/2014 and the lowest ratio was 0.08 in the
fiscal year 2010/2011
7.From the table no 4.7 and figure no 4.7 Highest ratio of the table and figure
was 0.18 in the fiscal year2013/2014 and the lowest ratio was 0.11 in the
fiscal year 2011/2012
8.From the table no 4.8 and figure no 4.8 Highest ratio of the table and figure
was 0.38 in the fiscal year2012/2013 and the lowest ratio was 0.18 in the
fiscal year 2010/2011.

9. From the table no 4.9 and figure no 4.9 Highest ratio of the table and figure
was 0.37 in the fiscal year2009/20110 and the lowest ratio was 0.23 in the
fiscal year 2012/2013.
10. From the table no 4.10 and figure no 4.10 Highest ratio of the table
and figure was 0.51 in the fiscal year2011/2012 and the lowest ratio was 0.26
in the fiscal year 2009/2010.

CHAPTER FIVE
DISCUSSION & CONCLUSION

5.1 Discussion

Nepal is one of the least developed countries of the world. For most of the developing
process, it is financially depending upon the foreign countries. It is economically too
weak. Thus, the economic condition of the people is weak. In Nepal 85% of the
people are depended upon agricultural sector which is unable to provide full
employment to the people. Nepal government has to activate people in the nation's
development through overall industrialization of nation. For this purpose,
development of sound banking system is essential.

In Nepalese banking sector, commercial banks including ventures banks are

operating at present. In the absences of modern banking any country cannot
 35
develop the economic activity. Therefore, it is essential to find out whether or not
the banks are serving an important contribution to develop sectors of economy.
Liquidity is said to be general business of fund, which shows the bank ability to
meet cash requirement. In this record, this study has been based upon the objective
to evaluate the liquidity position of Citizen Bank Ltd.

5.2 Conclusion & Implementation

a) The saving deposit account is nearly const+ant trend. The highest ratio is 0.55
times in fiscal year 2011/12 and the lowest ratio is 0.41 times in fiscal year
2013/14. But the ratio is not satisfactory due to the last year ratio was decline.
b) Fixed deposit is fluctuated. The lowest ratio is 0.32 times and highest ratio is
0.48 times. It is decrease up to fiscal year 2011/12 and grows up then. And it is 0.48
times on 2013/14. It is satisfactory. Bank made good ratio after 2011/12.
c) From the cash and bank balance to current deposit liability is fluctuating. The
ratio is moving around between 0.48 times to 0.95 times. It is satisfactory.

d)Cash and bank balance to total deposit ratio is fluctuating. But the ratio is
somehow satisfactory even though the ratio is higher than the central banks
prescription. The ratio is moving around the between 0.05 times to 0.11 times.
e)Cash and bank balance to total deposit (excluding fixed deposit) ratio is
fluctuating in increasing state. The ratio is satisfactory. It is moving around
between 0.08 times to 0.19 times.
f)The ratio of balance with the NRB to current and saving deposit has been
fluctuating. The ratio is declined in year 2010/11 and constant in 2011/12 and
then it is grow up. so, the ratio is satisfactory.
g)The balance with the NRB to fixed deposit ratio is fluctuating. It is moving
around between 0.18 times to 0.39 times.
h)The investment to total deposit ratio is fluctuating adversely. Since the ratio is
fluctuating the bank has unsatisfactory result. However the investment from source
of deposit is higher. It will give a higher return without risk only if the ratio is
stabilized.
 36
i)The liquid assets to total deposit ratio is fluctuating slightly except fiscal year

2013/14. However the ratio is higher and somehow may be considered

satisfactory.

Implimentation

a) The overall results are satisfactory. But in some case the Citizen Bank should
take
certain steps to improve the bank current financial condition. Therefore some
recommendations are being put forward for its improvement along with its
development of the country.
b) The proportion of the saving deposit account is high in total deposit liability.
So, it
is recommended that the bank should utilize the amount collected from the
saving deposit account carefully. It should be invested in the higher yielding
areas.
c) The cash and bank balance in the Citizen Bank is satisfactory. It is higher a
bit
though. Bank should analyze the opportunities for short term investment.
d) Balance with NRB to current plus saving deposit should be maintained at the
below than 0.11 times.
e) Investment to deposit ratio is fluctuating adversely. It may harm the operation of
the bank. So, the investment from the deposit source should always be aware of
liquidity need and keep in mind to maintain the optimum liquidity.
f) Bank should not spend too much in the fixed assets because it yields only a
nominal portion, almost no yield.

References

Bajracharya, B.C. (2053), Business statistics & mathematics, M.K. publishers and
Wistributors.

Brigham, Weston, Essentials of Managerial Finance", Eleventh Edition, University

Publishers, USA.
Kothari, C.R., Research Methodology", Mc. Grow Hill Company, second Edition.

Shekhar and Shekhar "Banking Theory & Practice", Eighteenth Revised Edition,
1996.

Nepal Rastra Bank, Banking and Financial Statistics,

Citizen Bank Ltd., "annual report 2009/2010

Citizen Bank Ltd., "annual report 2010/2011
Citizen Bank Ltd., "annual report 2011/2012
Citizen Bank Ltd., "annual report 2012/2013
Citizen Bank Ltd., "annual report 2013/2014

Appendies
Net Profit
Return on Equity (ROE) =
Total Equity Capital
Cash & Bank Balance
Cash & Bank Balance to Current Assets Ratio = Current Assets
Net Profit After Tax
Return on Assets =
Total Assets
Current Ratio = Total Current Assets
Total current Liabilities Total Interest Earned
Total Interest Earned to Total Working Fund Ratio =Total Working Fund
Total Loan & Advance
Loan & Advances to Total Working Fund Ratio =
Total Working Fund

Net Profit Or Loss

Return on Loan & Advances Ratio = Total Loan & Advance