Financial Analysis of The Laxmi Bank Ltd

A Propsal

Submitted By:
T.U Registration No:
Roll No:
Nepal Commerce Campus

Submitted to: The Faculty of Management

Tribhuvan University, Kathmandu.

In Partial fulfillment of the requirements for the degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Kathmandu, Nepal.
 1. Introduction
  Financial analysis is the process of analyzing various items of financial statement of
a firm analyzing statement of a firm to ascertain information above the magnitude,
timing and riskiness of future cash flows. Financial statement analysis involves in two
types of comparison; one is to compare a firm’s performance with that of other firms
in the same industry; and the other is to evaluate trends in the firm’s financial
position over time. Financial analysis is essential to understand what the firm’s
financial statement is conveying about financial performance of the firm.

Manager can identify deficiencies in financial performance of the firm and take its
comparative strengths and weakness. In other words, financial analysis involves
actions to improve the performance.

1.1    Background Of The Study

It is very hard to collect the correct information of the origin of bank. The word
“Bank” has derived from the Italian word “Banco” which means accumulation of
money of stock. It is believed that its origin is from the French word “Banque” which
means “beach” for keeping, lending and exchanging of money or coin in the market
place by money lenders or money changers. It is believed that the ancestors of
modern banking system were merchants, goldsmiths and moneylenders. Modern
banking sowed its seed in the medieval Italy despite strong Christian prohibitions
against charging interest.

The bank had started in Italy in 12 th century as a public bank. The Bank of Venice that
was established in 1158 A.D. was the first bank in the history of banking.  Following
its establishment various banks such as Bank of Barcelona, which was established in
1401 A.D was the second bank of the world. Similarly, Bank of Geneva (1407), Bank of
Amsterdam (1609), Bank of Hindustan (1770) were established. The first central bank
was the “Bank of England” which was established in 1844 AD.

Bank is a financial institution, which is engaged in monitory transaction. Bank has

always been the most importance and largest financial intermediates. Banks collect
the scattered money from public providing those interests and services. This
collection becomes the capital for the bank to invest. “Banking means the accepting
of money for the view of lending or investment of deposit from the public repayable
on demand or otherwise and withdraw able by cheque, draft or otherwise”, is
according to Banking Regulation Act 1949 of India. World Bank says “Banks or a
financial institution that accepts funds in the forms of deposit repayable on demand
or at short notice.”
Since, the financial sector in Nepal is small, it is growing fast. At  present banking
system comprises  of   NRB, 28  commercial  bank  and  many  financial  companies,
contractual,saving  institution and   nongovernment   organization   conduction  
limited   banking activities transaction. The umbrella act set out regulation for
licensing, supervision and cancellation of commercial bank.
Source: nrbbank.com             

2. Profile of The Laxmi Bank

A commercial bank is a financial institution which collects saving from many persons
and institutions and provides credit or loan facility to different industrial and
commercial business. Commercial banking business consists of changing cash into hank
deposit and bank deposit into cash, transferring bank deposit form one person or
institution to other, giving bank deposit in exchange for cheques, bills of exchange,
government securities etc.

Nepal Bank Limited established in 1994 BS is the first commercial bank in Nepal.
Commercial banks perform various functions. Among them, accepting various types of
deposit is the main function of commercial banks. Commercial banks are directly
related with the people and institution. The commercial bank is an important bank.
Its function is very attractive for people. Although these banks are  truly inspired 
with  the objective  of  gaining  profit, these commercial banks are also established 
to  accelerate   common   people’s  economic  welfare  and  facility  to  make
available  loan  to  the  agriculture, industry,  and  commerce  and  to provide the
banking services to  the public and the state. In Nepal the commercial bank perform
the following functions. Of the many function of the commercial bank acceptance of
deposits is one of them. The bank allows for opening the three types of accounts to
accept deposit for their customers. They are current, saving and fixed deposit
account. People can collect their money in one of the three as their need. But the
interest is given to the saving and fixed account. The commercial bank performs the
important function of accepting all sorts of deposits.  It earns profit by investing that
money in another place.

Another function of the commercial bank is to provide loan. A commercial bank

provide loan to a person, company and institution etc. A bank can earn a lot of profit
from it. A bank is capable of gain benefit in its banking development by receiving the
interest as pre law and its internal policies. It provides the loan by accepting the
security of debtor. A  bank  flow  the loan against  a  third  person  guarantee  or 
with  the  pledge of the third person. A bank provides the loan on basis of agreement
or deed of loan. It provides loan on basis of the following deed securities:
  ▪ With the pledge of goods, and pledge of gold and silver.
 ▪ With the security of immovable property               
 ▪ With the security of other similar goods.

Laxmi Bank Ltd. was incorporated in April 2002 as the 16th commercial bank in Nepal.
In 2004 Laxmi Bank merged with HISEF Finance Limited, a first generation financial
company which was the first merger in Nepali corporate history. Further, the bank
acquired Professional Diyalo Bikas Bank in January 2017, a class “B” development
bank.
Today, through its branches and a host of IT enabled channels, the Bank serves a wide
range of customers. Despite a relatively short history, Laxmi Bank has emerged as a
major player across all business lines – retail, midmarket, corporate, infrastructure
and treasury. The Bank is widely recognized as one of the best-managed banks in
Nepal with high standards of corporate governance culture, risk-management systems
and a strong technology.
 
Laxmi Bank’s microfinance subsidiary – Laxmi Laghubitta Bittiya Sanstha Ltd, a
category D financial institution licensed by Nepal Rastra Bank is in operation since
2012.
 
Similarly, Laxmi Bank’s investment banking subsidiary – Laxmi Capital Market Ltd,
licensed by the Securities Board of Nepali’s offering various merchant and investment
banking services since February 2009. Laxmi Capital also manages Laxmi Value Fund –
1 and Laxmi Equity Fund, the two Mutual Funds sponsored by Laxmi Bank, both of
which are listed and traded at the Nepal Stock Exchange.
 
The Bank closed the previous financial year 2018/19 with a balance sheet size of
NPR  102 billion that includes deposits and risk assets of NPR  86.87 billion and NPR
78.46 billion respectively. All key financial indicators of the Bank are well within
prudential and regulatory norms.

VISION

We will be the Bank of choice for a growing, vibrant Nepal – reaching and enriching
households, businesses and communities.

Mission

 We believe relationships are more important than transactions and will

strive to offer the best customer experience keeping our clients at the front and
center in order to realize their economic potential.
 We will expand physically and digitally to allow customers to access us
through the channel of their choice and leverage technology to help make banking
smart, simple and secure.
 We believe in responsible banking and adopt high standards of
governance, transparency, ethics and integrity across the company.
 We understand our responsibilities extend beyond financial services and
will actively invest in the communities where we operate and work towards being a
green company reducing our carbon footprint for a sustainable future.
 We will use the power of people and ideas to create sustainable value to
all our stakeholders through one engaged and empowered team.

Source: Laxmi bank wesite

3.Objective of the Study

The main objective of this study is to analyze and evaluate the study of financial
performance of Laxmi Bank Limited.

 To examine the financial performance of Laxmi Bank Ltd.

 To make comparative analysis of the relationship between investment, total deposit
and loan and advance, total assets , Return on Equity , Return on Assets , Return On
capital Employed and net profit of Laxmi Bank Limited.

 To liquidity management, assets management efficiency, investment practices of

the Laxmi Bank Limited.

4. Rationale of the study

All information regarding the banking sector is essential for the depositors,
prospective customers and creditor etc. this study will be helpful to the different
parties interested in the financial performance as well as helpful to the management
to go deep into the matter as to why the performance to the bank.

This study will give the information about Commercial bank by analyzing financial
tools and will definitely contribute to increases the financial performance of the
commercial bank. Moreover, this study will enhance to help any persons and parties
who are concerned with banking sectors such as shareholders, management of banks,
financial institutions, stocks brokers, general public and others policies making
bodies.

Commercial banks have the huge responsibility towards economic development of

country which main goal to maximize the surplus by effective and efficient
mobilization funds and resources. Commercial institutions have obligations to provide
social services oriented contribution for the social economic uplift to the country by
providing considerable loan and advanced towards less privileged sectors.

5. Literature Review
Determinants of bank profitability can be split between those that are
international and external. Determinants of bank profitability can be defined as those
factors that influenced by the bank’s management decisions and policy objectives,
policies, and actions reflected in differences in bank including profitability,
management decision specially regarding loan portfolio concertation, were an
important contribution factor in bank performance. Research frequently attribute
good bank performance to quality management.

6.Research Methodology
The Research methodology is the process of arriving to the solution of the problem
through planned and systematic dealing with the collection, analysis and
interpretation fact and figure. Research is systematic method of finding out.

6.1 Research Design

The research methodology is the process of arriving to the solution of the problems through
planned and systematic dealing with the collection, analysis and interpretation of facts and figures.
As the research entirely considers about the about “Deposit Analysis of laxmi Bank” The main
purpose of this study is to show Deposit and its utilization in laxmi Bank with its financial positions,
collection and uses of funds, its prospects and its position in context of Nepal as well as to
recommended suggestions for its improvement. Those research methodologies have been used
which proves helpful to deposit analysis. For the purpose of achieving the objective, the following
methodology is used. The data has been collected by acquiring various kinds or reposts, bulletins
and journals from the organization. Similarly data has been acquired from NRB also.
The study report is based mostly on secondary information of laxmi Bank . In addition to this,
reference has been made in library consult, class lectures, Related books of banking, financial
management and accounting during the preparation of this study.

6.2 Population and sample

The 27 commercial banks of the country laxmi Bank Ltd has been chosen and their performances
have been analyzed. Due to Lack of Penal access study mainly depends on the balance sheet
prepared by laxmi Bank Ltd, which is the secondary source. Laxmi Bank Ltd has been selected for
the present study. Financial statement of this bank for the last five years has been taken as the
sample for this purpose.

6.3 Types of Data Sources

There are two types of data Sources; Primary Data And Secondary Data The term
primary data refers to the data originated by the researcher for the first time. Secondary
data is the already existing data, collected by the investigator agencies and
organisations earlier. ... Primary data collection sources include surveys, observations,
experiments, questionnaire, personal interview, etc.

6.4 Types of data used

A main source of data is the publication from Laxmi Bank Limited which is secondary source,
and some publications of NRB, annual reports etc.

6.5 Data collection procedures

Secondary Data Source:

In this study, the main source of data is secondary which are collected from pre-published data
sources. The financial data from the published documents and audited financial statements were
manually extracted into the computer files of Microsoft Excel program which acted as master
database file. The data was refined further into spreadsheets to carry out financial ratio calculation
and graphical illustrations through mathematical functions and Chart program of the Excel program.
 6.6 Tools and techniques of analysis data
The collected and observed data is tabulated after adjusting necessarily amounts of
each overhead. However, the analysis of data as follows:

i. Financial tools:
There are different types of financial tools that can be applied to the analysis the
financial performance of Laxmi Bank for our fieldwork following portfolios analysis
tools are used;

a.      Exchange gain to total income ratio

b.      Return on assets

d.      Return on equity

e.      ROCE

f.       Earning per share

ii.       Statistical  tools:

For our fieldwork study selected statistical tools are taken to examine the economics
data of Laxmi Bank.

a.       Mean

Mean = sum of All Data points

b.      Standard Deviation

c.       Coefficient of Variation
 7. Limitation of the Study

However, there are 27 commercial banks are operating in Nepal. The research is
only focused on study of financial performance. Nonetheless this research work covers
Laxmi bank Ltd . Reliability of this study will depend upon the data and information
of bank and conclusion drawn from this will not be applicable to similar other
financial institutions. Besides this following are some limitations of the study are:

  This study examines only financial performance of Laxmi Bank Limited.

  This study is based on secondary data and such as published financial statement of
commercial bank along with other related journal, newspapers, magazines, and
bulletins etc. which are also insufficient for completion of the study.

  The study period will cover only five year fiscal years 2014/15 to 2018/19

  This research has been conducted to fulfill the requirement BBS course for a prescribe
time.

8. Bibliography

www.laxmibank.com

www.nrb.org.np

www.google.com

Adhikari.PR (2015) Fundamental of Financial Management, Kathmandu; KEC books

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