EQUITY SHARE ANALYSIS OF NABIL BANK LIMITED AND HIMALAYAN BANK

LIMITED

ABBREVIATIONS
% : Percentage
A.D. : Anno Domini
B.S. : Bikram Sambat
DPR : Dividend Payout Ratio
DPS : Dividend per Share
DY : Dividend Yield
e.g. : For Example
EPS : Earning Per Share
EY : Earning Yield
HBL : Himalayan Bank Limited
i.e. : that is
Ltd. : Limited
NABIL : Nepal Arab Bank Limited
P/E : Price Earning
Pvt. : Private
Rs. : Rupees

CHAPTER – I
INTRODUCTION
Introduction: -
            

Bank, a financial intermediary is playing a significant role in

accelerating the rate of economic development of the country. At present context, bank is not only
confined to accepting deposits and distributing loans but also, rendering wide range of services to the
different section of the society, to facilitate the growth of trade, commerce, industry, and agriculture sector
of the national economy. Economic development becomes slow in the absence and insufficiency of
banking and finance facilities. Hence, a bank may be called the financial supermarket providing all kinds
of monetary service, which is necessary for, the industrialization and economic development.
Bank is established for keeping money, valuable assets etc. safety
so that the money could be paid out on the customer’s order (by means of cheques). Similarly , a
definition given in encyclopedia  that a bank is a business organization that receives and holds deposits of
funds from others and makes loans or extends credits and transfers funds by written order of deposit.
Commercial banks are the financial institutions which deal in
accepting deposit from persons and institutions, provide interest formulate capitals and grant loans
against securities that help to remove the deficiency of capital, that contributes significantly in the
formation and mobilization of interest capital and development effort. They also furnish necessary working
capital according to the requirement for trade, commerce, industry and even to agriculture sector. They
also perform agencies function to make easier and play an important role in credit creation. Besides, they
also provide technical and administrative assistance to industry, trades and business enterprises. So,
they are being the means fro the upliftment of society. Their main objectives are to earn reasonable profit
as reward for their services by proper mobilization of idea & resources collected from different scattered
sources, in particular productive sectors. They help to reduce the probability of  inflation by increasing the
interest rate while economy is in boom period and reduce the interest rate so that investors are interested
for investment in case of depression period. More specifically, they collect required capital through float
(issue) of different types of securities, specially shares and debentures. According to Nepal Commercial
Bank Act 2031 B.S., “Commercial Bank is one which exchanges money, deposits money , accepts
deposits, grants loans and performs commercial banking functions and which is not a bank meant fro
cooperation, agriculture, industries or for such specific purpose.”

            BACKGROUND OF THE STUDY: -    

                                                    

1.2.1 Background of the project work

         While studying the origin of modern banking, we come to know that
Bank of Venice was established, as the first commercial bank of the world, in 1157 and in Nepal, Nepal
Bank Limited was established, as the first commercial bank in B.S. 1994. Before 1974 (B.S.2031), there
was no any existence of joint venture banks in the country, there was no provisions made in the old
Commercial Bank Act, which facilitated to the establishment of joint venture banks in Nepal. The new
commercial bank Act 1974 has however, made provisions to permit foreign banks to operate in the
country by obtaining the approval of Nepal Rastra Bank. To accelerate economic activities towards
growth, encourage proficient banking service, economic development, industrialization and growth of
nation, three joint venture banks, Nepal Arab bank limited, Nepal Indosuez Bank Limited and Nepal
Grindlays bank limited came into existence in 2041, 2042 and 2043 respectively . Similarly, when the
democratic elected government adopted the liberal and market oriented economic policy, the number of
joint venture banks has increased dramatically. Joint venture banks are established by joining different
forces and ability to achieve a common goal with each of the partners. They are efficient and effective
monetary financial institution in modern banking fields than other old type of banks in Nepalese context.
D.P. Gupta has defined the joint venture as, “A joint venture is the joining of forces between two or more
enterprises for the purpose of carrying out a specific operation (industrial or commercial, investment,
production or trade)”. In Nepal, joint venture banks are playing vital role in the economic development of
the country. They collect deposits from different sources under different accounts, create capital and
mobilize the resources in productive area.

Dividend is one of the major reasons fro which public is interested to invest
money on the shares of bank or institution. It refers to the portion of earnings that is distributed to the
shareholders in return to their investment in the shares. Normally, that business, which is running at profit,
is capable to pay dividend. The amount which is distributed as dividend should be adequate to meet the
normal expectations of shareholders. Dividend can be paid in cash, share and securities or a composition
of these. There is a reciprocal relationship between retained earning and cash dividends. So, cash
dividend payout reduces the total amount of internal financing.
Dividend policy, an integral part of the firm’s financing decisions, refers that
policy of a company on the division of its profits between distribution to shareholders as dividend and
retention for its investment. It is one of the major decisions of financial management because it affects the
value of firm’s as well overall financing decision like financing structure, the flow of funds, corporate
liquidity and investor’s attitudes. It is the work of management to adopt the appropriate dividend policy.
The important aspect of dividend policy is to determine the appropriate allocation of profit between
dividend payments and the amount to be retained in the firm. It solves the problem of how the profit
should be retained in the firm. It also determines the forms of dividend. Under this policy it is determined
that what percentage of the earnings of the firm is distributed to its shareholders and what percentage of
the earnings is retained in the firm which is desirous for the growth of the firm. Dividend policy, having a
crucial importance and being purely a policy matter, it is to be formulated with consistent approach. It is
obviously known that the dividend payout ratio depends on earnings. But net earnings may not conform
and may not be an appropriate measure of the ability of the firm to pay dividend. So, what and how much
it is desirable to pay dividend and retained in the firm for the growth of firm is always a controversial
matter because shareholders expect higher dividend but corporations ensure towards setting funds aside
for maximizing the shareholder's wealth.

The issue of how much a company should pay its stockholders as dividends
is one that has concerned managers for a longtime. It has often been pointed out that a company that
raises its dividend often experiences an increase in its stock price and that a company that lowers its
dividends has a falling stock price. These consequences suggest that dividends do matter in affecting
 stock price. It is therefore, a wise policy to maintain a balance between dividend declaration and profit
pretension.

In Nepal, only few companies are able to pay dividend. But after the
establishment of joint venture banks, they have shown new trend of paying dividend to shareholders that
has brought new hopes for productive mobilization of funds. So dividend policy is assumed as the major
decision of financial management. Thus, among the several commercial banks operating in Nepal, this
study aims to focus on prevailing practice and policies of two joint venture commercial banks namely
Nabil Bank Limited and Himalayan Bank Limited regarding payments of dividend. 

1.2.2 A Brief profile of the banks under study

The study focuses on the comparative dividend policy and practices of two
joint venture banks namely NABIL Bank Limited (NBL) and Himalayan Bank Limited (HBL).
a. Nabil Bank limited (NBL): -
Nabil Bank Limited (NBL) commenced its operation on 12Th July 1984 as the first joint venture bank in
Nepal. Dubai Bank Ltd., Dubai (later acquired by Emirates Bank Ltd., Dubai) was first joint Venture
partner of Nabil. Currently, NB (international) Ltd. Ireland is the foreign partner.
Nabil Bank Ltd. Has the official name Nepal Arab Bank Ltd. Till 31 st of December 2001. Nabil was the
pioneer in introducing many innovative products & market concept in banking sector of Nepal with 18
branches & 2 countries in all major cities. It is only bank having its presence at Tribhuvan International
Airport, only international airport of the country also; the number of outlets in the country is the highest
among the joint venture and the private operating bank in Nepal. Success of Nabil is the milestone in the
banking history of Nepal as it paved the way for the establishment of many commercial banks & financial
institutions.
     
   BOARD OF DIRECTORS
The board of directors of Nabil Bank ltd. is as follows:
1. Chairman         : Mr.Satyendra Pyara Shrestha, NB (International) Ltd.
2. Director          : Mr. Mohiuddin Ahmed, NB (International) Ltd.
3. Director           : Miss Supriya Gupta
4. Director           : Mr. Shambhu Prashad Poudyal
5. Director           : Mr.Dayaram Gopal Agrawal
6. Director           : Mr. Milan Bikram Shah
7. Director           : Mr. Abdul Awal Mintoo
8. Director           : Mr. Suraj Lal Mehta
9. Director           : Mr. A.P. Bazgain (Professional)
Shareholders in Nabil Bank Ltd.
1. NB (International ) Ltd. Ireland                                50%
2. Nepalese Public                                                       30%
3. Nepal Industrial Development Corporation           10%
4. Rastriya Beema Sansthan                                       9.6% 
 5. Nepal Stock Exchange Ltd.                                    0.33%

   Chart Showing Shareholders’ Percentage in Nabil Bank Ltd.

b. Himalayan Bank Limited (HBL): -

            Himalayan Bank Limited was incorporate in 1992 registered under Commercial Bank Act 2031 by the
distinguished business personalities with Employee Provident Fund and Habib Bank Limited, one of the
largest commercial banks of Pakistan. Banks operation was commenced from January 1993.It is the first
commercial banks of Nepal with maximum shareholding by the Nepalese private sector. HBL's  Board of
Directors, the policy making body constitutes of seven member of which one is chairman, one is
nominated from Habib Bank Limited, Pakistan  one is nominated from Employee Provident Fund and one
member is elected from public shareholders, and annual general meeting nominates three. HBL has
authorized capital Rs. 12, 00,000 issued capital. The promoter holds 5.1% of shares, Habib Bank Limited,
Pakistanholds 20% and the financial institution holds 14 % by Nepalese citizen. Himalayan Bank has
access to the worldwide Correspondent network of Habib Bank of fends transfer , letter of credit or any
banking business anywhere in the world . Habib Bank in Pakistanhas over 1700 Domestic and 65
branches covering all continents and over 1800 correspondents worldwide. Besides HBL commercial
activities, the bank also offers industrial and merchant banking.
               The bank at present has five branches in Kathmanduvalley namely Thamel, New-Road, Mahargung,
Patan and Bhaktapur. Besides , nine branches outside Kathmandu in Tandi , Narayangadh , Birgunj ,
Hetauda , Siddharthanagar , Biratnagar ,Banepa ,Dharan , and Pokhara branch . The bank is also
operating a counter in the premise of the Royal palace. The bank has a very aggressive plan of
establishing more branches in different parts of the nation in near future. Himalayan Bank's policy is to
extend quality and personalized service to its customer's as promptly as possible. All customers are
treated with utmost courtesy as valued clients. The Bank, as far as possible, offers tailor made facilities to
its clients, based on the unique needs and requirements. To extend more efficient services to its
customers, Himalayan Bank has been adopting innovative and latest banking technology. This has not
only helped the bank to constantly improve its services level but has kept it prepared for future adoption of
new technology. Himalayan Bank committed to be a "BANKING WITH A DIFFERNCE".
                
    Objectives of HBL
            The commercial banking industry has been passing through various phase of transition right from its
inception which is now operating with liberalization of  financial policies, but has given a way to some
malfunctioning misuse or fraudulent practices., deregulation in banking environment. So as to capture the
increased interest sensitivity of depositors "manage the change" has become the important management
objectives of banks are:
               1. To organize the structure to meet the challenges of changing environment,
               2. To improve customer services,
               3. To introduce new schemes,
               4. To improve customer technology in banks,
               5. To improving house keeping,
               6. To modernize office equipment,
            7. To train on an ongoing basic,
               8. To improve work ethics,
               9. To improve the quality of banking services,
               10. To improve the health of the organization,
               11. To improve value system,
               12. To improve productivity through participative management,
                     13. To improve inspection and social audit,
               14. To follow instruction and serve the community,
               15. to rise above and serve the community,
               16. To develop leadership and entrepreneurial spirit among the cadre,
               17. To motivate employees to work efficient, productively and profitably,
               18. To evolve a unique monitoring and controlling system,
               19. To improve the image and strengthen the confidence of people in system.
               20. To utilize human resources fro improving quality of life.

1.3  LITERATURE SURVEY
          The present research aims to analyze the equity shares in the
commercial bank, especially two joint venture banks viz. Nabil Bank Limited and Himalayan Bank Limited.
For this purpose, it needs to review related literatures in this concerned area which will help to get clear
ideas, opinions and other concepts. 'What others have said? What others have done? And what other has
written?' these all and other related questions are reviewed which has provided which has provided useful
inputs in this research work.
            According to Commercial Bank Act 2031 "A Bank is a bank which deals in exchanging
currency, accepting deposits, giving loans and doing commercial transaction."
               C.R. Crowther says "A Bank collects money from those who have it to spear or are saving it
out of their incomes and it lends this money to those who require it."
               Horace White says" A bank is a manufacturer of credit and machine for facilitating services."
               Oxford Dictionary defines "Bank is an organization or place that provides financial services."
               This portion of the report emphasizes about the literatures which we are concerned in these
connections.

1.4 Equity Shares: -
Fixed income securities such as bonds almost have life and upper Rs.
amount on cash payment to investors but there is another security which has no limitation on cash
payments, the security is common stock. Equity share represents equity or an ownership position in a
company which has residual claim on any payments. It means creditors and preferred stockholders are
paid before the payment to common stock holders. In bankruptcy, equity shareholders are entitled to any
value remaining after all the claims have been satisfied. Equity share are also termed as common stock
interchangeably. According to Peter S.Ross, “Equity share is a certificate of ownership in a corporation a
residual claims against both assets and earnings of a business firm.” Equity shareholders are generally
fully paid and non assessable which means that the equity shareholders may lose their initial investment
but not more.
            If the company fails to meet its obligations the stockholders can't be
forced to give the corporation the funds that are needed to pay off the obligations. Due to failure of
company, the value of the company's shares will be negligible the stock holders may lose an amount
equal to the price paid to the shares.

 1.5 Characteristics of Equity Shares: -

The equity shares of a firm have the following characteristics:

1.   Par Value   
               Par value is the quoted value or nominal value of the share which is fixed while incorporating the
firm. It is also called the face value. In Nepal, the par value of a share should be Rs. 100 according to the
Company Act.

2.      Authorized, issued, subscribed, called up & paid up shares:

       There are different phase of share capital. The corporate charter of the company    specific the
number of authorized equity shares, which is the maximum shares that the company can issue without
amending its charter.
The issued, subscribed, called up, and paid up shares are different stages of capital collection .

3.      Priority to Assets and Earnings:

               The equity shareholders have a residual claim on the earnings and the assets of the
company i.e. they are paid only after the payment of the debt and the preferred stocks.

4.                        Voting Rights:
               The owners of equity shares have the right to vote in the company’s affairs. The
shareholders can use the voting rights on the matters bought up at the company’s annual cast one vote
for the section of directors. One shareholder can cast vote for one share held.

5.      Maturity:
      The equity shares have no specified time to maturity. So the company cannot redeem in mid of the
life of the organization.

6.      Retained Earnings:
                  The whole amount of the residual earnings may not be paid by the company to the
shareholders. The company can pay certain % to the stockholders and retain the remaining portion for the
future growth of the business.

7.      Capital excess of Par Value:

                  The company may issue shares at a price more than face value which is called the capital in
excess of par value, or share premium or capital surplus or additional.

8.      The Book Value Per Share (BVPS)

                  The book value of equity shares is the amount of equity or net assets backed by the equity
shares. The book value per share is the equity per share and is calculated as follows:
BVPS= Common Equity/No. of shares outstanding
                              Or,
Net Assets for equity shares/No. of outstanding shares.

1.6 DIVIDEND DISCOUNT MODELS: -

It is widely used method because it takes into consideration the basic inputs of valuation principles i.e.
cash flows riskiness associated with the cash flows and appropriate discount rate. Under this approach
the value of the common stock is the function of expected future cash inflows and associated riskiness. It
is also called dividend capitalization approach. There are following models of common stock.

a)      Single Period Valuation:

It is applicable for the valuation of such stocks which are held for a year. At the end of which, the investor
expects to sell stock at a certain price
V0= D1/ (1+Ks) 1 +P1/ (1+Ks) 1
Where,
Vo = Intrinsic Value
D1= Year End Dividend
P1= Year End Price
Ks = Required rate of return on equity capital
P1 can be calculated as P1= Po(1+g) or, P1= Do(1+g)
                                                                                   ( KS – g )
Where, g= Growth Rate
               P0= Market Value Of Stock

b)     Multi Period Valuation Model :

          This model assumes that the investors hold the common stock for more than a year. So under this
model, the valuation formula is
V0 = D/(1+ Ks )1  + D2/ (1+Ks)2 +  Dn/ (1+ Ks)n + Pn/ (1+ Ks)n
If dividend are constant,
V0 = D(PVIFAKs,n + Pn (PVIFks,n)
This  model should be used only when the finite holding period is given.

c)      Growth Model (In Dividend):

i)                    Zero growth in dividends:
This model assume that dividends on equity share do not  grow i.e. D1= D2=D3=Dnso under  this model the
value of equity share is
Vo =  D1/(1+ Ks)1 + D1/(1+Ks) + …………+D1/(1+Ks)∞
The zero growth stock is a perpetuity.  So,
Vo=D(PVIFAKs,∞)=D/Ks

ii)                  Constant or Normal Growth:

In practice, stock grows at a certain specified growth rate because most of the companies today do not
distribute all the earnings. Some earnings are retained in the business for reinvestment purpose. Due to
this, the common stock equity and company’s earning will increase, if the number of stocks is constant.
So to find growth in dividend, the equation g= br is used, where b is retention ratio which is
b =Retained earnings/Net income
or, (1- DPR)
And r is company’s internal rate of return or return on equity.
Under this model, the valuation formula is
Vo= Do(1+g)1/(1+Ks)1 + Do(1+g)2/(1+Ks)2+Do(1+g)∞/(1+Ks)∞
=Do(1+g)/(Ks-g)
=D1/(Ks-g)
This model is also called the Gordon Valuation Model. This model is valid when IRR of Ks is greater than
g.

iii)                Variable or Non-constant or super normal growth in dividend

Most of the companies dividends grow at variable growth model provides enough grounds to adjust in the
variable growth rate. Now constant growth is the part  of the life cycle of a firm in which its growth either is
much faster or is much slower than that of the company as a whole.
Vo= D1(1+Ks) + D2/(1+ Ks)2……………+ Pn/(1+Ks)n
P3= D4/(Ks-g)=D3(1+g)/(Ks-g)

d.      Earning Per Share (EPS)

Earning per share refers the rupee amount earned per share of common stock outstanding. It
measures the return of each equity shareholders. It is also identified to measure the profitability of the
shareholders investments of the profitability of the banks by mobilizing their funds and vice versa. In other
words, higher earning per share indicates the weakness of the banks. The ratio can be computed by
dividing the earning available to common shareholders by the total number of common stock outstanding
of banks. Thus,
   EPS=Earning available to common shareholders
            No. of common stock outstanding

e.       Dividend per share (DPS)

      It measures the dividend distribution to each equity shareholders. The DPS simply shows the portion
of earning distribution to the shareholders on per share basis. Generally, the higher DPS creates positive
attitude of the shareholders towards the bank, which consequently helps to increase the market value of
the shares. And it also works as the indicator of the shares. And it also works as the indicator of better
performance of the bank management. It is defined as the result received by dividing by the total dividend
distributed to equity shareholders by the total number of equity shares outstanding. Thus,
DPS= Dividend distributed to equity shareholders
               Total number of equity share outstanding

f.       Dividend payout Ratio (DPR)

      It is the portion of the earning used payment of dividend. The dividend payout ratio is the earning paid
to the equity holders from the earnings a firm in a particular year. This ratio shows what percentage of the
profit is distributed as dividend and what percentage is retained as reserved and surplus fro the growth of
the banks. In other words, the amount of dividend that a bank pays depends upon the earning capacity of
the bank. Higher earning enhances the ability to pay more dividends and vice-versa. There is a reciprocal
relationship between dividends and retained earnings. The higher the dividend payout ratio, the lower will
be the retained earnings and hence the capacity of internal financing o the firm is checked. It is calculated
to indicate the percentage of the profit of that is distributed as dividend. This ratio is calculated by dividing
dividend per share by the earning per share.
DPS = Dividend Per share
            Earning Per Share
                           Or,
DPR= (1-Retention ratio)
Where,
Retention ratio= EPS-DPS
                           EPS

g.      Price – Earning Ratio/Earnings Multiplier (P/E Ratio)

      Price- earning ratio is also called the earnings multiplier. Price- earning ratio is simply the ratio
between market price per share and earning per share. In other words, this represents the amount which
investors are wiling to pay for each rupee of the firm’s earnings. The P/E ratio measures expectation and
market appraisal of the performance of firms. This is important to compare the market share prices of
different stocks given their earning per share. The higher P/E ratio implies the high market share price of
a stock given the earning per share and the greater confidence of investor in the firm’s future. This ratio is
computed by dividing earning per share to market price share. Thus,
            P/E ratio = EPS
                                  MPS

1.7 Objectives of the Study: -

The study primary focuses on the dividend policy and practices adopted by
the sample banks with a view to provide workable suggestion which may be helpful to the formulation of
optimal dividend policy and maximize the stock price and to take some other appropriate dividend
strategies. However, the specific objectives can be set as follows:
i.                    To highlight the equity share policies of the banks.
ii.                  To reflect (identify) the relationship between dividend per share and earning per share.
iii.                To know if there is any uniform among dividend per share, earning per share and dividend payout ratio of
the two commercial banks sampled.
iv.                To provide a possible guideline and a package of suggestion on the basis of finding and analysis to
overcome various issues and gaps.

1.8            Importance of the Study:

1)                   The study gives the clear picture about the equity share policy adopted by the banks under study.
2)                   This report provides information’s those who are planning to invest in the banks and the shareholders
about the way they are getting the dividends from the banks.
3)                   After the complete, the report will be kept in the library, which will play the role of reference to the
students making similar study in the future.

1.9  Limitation of the Study:

          No study can be free from its own limitations. So, the present study has also some limitations.
Reliability of statistical tools used and lack of research experience are the major limitations and some
other limitations can be enlisted as follows:
1)            The study covers the time period of last 5 years from fiscal year 2065/66 to 2069/70.
2)            The study is fully is based on the student’s financial resources and it is to be conducted and submitted
with in a time constraint. Further, the study is not a final study on the subject.
3)            Due to time & resources constraint only two joint venture banks, namely Nabil Bank Limited and
Himalayan Bank Limited have been select as samples in the study.
4)            The study is primarily based on the secondary data source such as annual report of concerned banks,
and other related journals, magazines, books etc. The up-to- date and complete data are very difficult to
obtain due to in ability of providing the required data are by concerned authority. Variation in the data
itself is also found when comparing with different sources. So the reliability of conclusion of the study
depends upon the accuracy of the secondary data.
  

     
CHAPTER II
 PRESENTATION AND ANALYSIS OF SECONDARY DATA

2.     Presentation & Analysis Of Data:

This chapter consists presentation and analysis of secondary data related with different variables
using both financial and statistical tools explained in 1 st chapter. The prime objects of this chapter are to
achieve the objectives, which are set in first chapter, Introduction. In order to achieve these objectives,
the gathered data are presented, compared and analyzed with the help of different tools. So it is focal part
of this study, which helps to analyze the comparative dividend decision of joint venture banks and the
management’s attitudes towards the optimum dividend decision. This study is highly supported by the
dividend distribution practice of joint venture banks.
General
             Analysis of Financial Indicators:

Earning Per Share(EPS): -

            

                            Table no. 1: EPS of NABIL & HBL

YEAR NBL HBL

2069/70 92.61 49.05

2070/71 105.41 47.91

2071/72 129.21 59.24

2072/73 137.08 60.66

2073/74 108.31 62.74

While observing the above table as presented in table no. 1, we come to
know that the EPS of Nabil Bank Limited has decreased from year 2069/70 to fiscal year 2073/74 and
reached to Rs.108.31 from Rs. 137.08. As the EPS of every year was increasing until F.Y 2072/73, it
shows the EPS is in increasing trend.

Similarly, the EPS of Himalayan Bank Limited has decreased in first year
2069/70 to 2070/71. As the EPS of the bank was Rs.49.05, it decreased to Rs. 47.91 next year and then
increased to Rs.59.24 in another year. Then after, it has increasing EPS in last two years 2071/72 and
2072/73, so that, the firm became strong and has high EPS in these years. It has EPS of Rs. 60.66 and
Rs. 62.74 in year 2072/73 and 2073/74 respectively which indicates an increase in EPS over the last
three years. It seems that although the bank was not performing good in first two years but it is getting
good from 2071/72 and this increasing trend still continues in the year 2072/73 .
In an aggregate, EPS of both the bank has been recorded in an increasing trend.
 Figure 1: EPS of NABIL & HBL

Dividend per Share (DPS): -

            

                    
Table No. 2: DPS of NABIL & HBL
Year NABIL HBL

2069/70 65 -

2070/71 70 11.58

2071/72 85 30

2072/73 100 15

2073/74 60 25

                                                                        Sources:
Appendix A
The dividend per share table 2 shows that both the banks paid some dividend in every year
except by HBL during F.Y 2069/70. The NABIL paid only Rs. 65 in year 2070/71 and Rs. 70 in year
2070/71. It has paid the higher dividend in the year 2071/72 and 2072/73 of Rs. 85 and Rs. 100
respectively. This shows that the firm has paid higher dividend in these two years than the before two
years. However, it has distributed Rs. 60 in F.Y 2073/74.
In case of Himalayan Bank Limited (HBL) the dividend is in fluctuating trend. It has paid the
highest dividend in year 2071/72. But in other years, the dividend is getting lower than previous year. In
analyzing the table we see that Nabil Bank has positive attitude of shareholders towards the bank. It
consequently helps to increase the market value of shares and also helps to indicate the better
performance of the bank’s management.
  Figure 2: DPS of NABIL & HBL

2.1.3      Dividend Payout Ratio (DPR)

                                      Table No.3: DPR of NABIL & HBL
Year NABIL HBL

2069/70 70.12 -

2070/71 66.36 24.17

2071/72 65.78 50.64

2072/73 72.95 24.73

2073/74 55.40 39.85

                                                                             Source: Appendix A
The above table 3 depicts the dividend payout ratio of the banks analyzed. The main
objective of this presentation is to show the percentage of dividend payment out of its earnings. The
importance of this type of presentation lies in its ability to state the dividend policy of the concerned banks
more obviously. According to the table, the dividend payout ratio is fluctuating in both of the banks. In
NABIL Bank the DPR in year 2069/70 is 70.12 which have decreased to 66.36 in year 2070/71. It has
again decreased to 65.78 in F.Y 2071/72. It paid 72.95% in 2072/73 and 55.40% in 2073/74.
In case of HBL the DPR is in fluctuating trend. In the year 2070/71, the bank DPR was 24.17
which has increased in the further years paying dividend of 50.64%, 24.73% & 39.85% in the year
2071/72, 2072/73 & 2073/74 respectively. The following figure shows the DPR of sample banks: -
 Figure 3: DPR of NABIL & HBL
2.1.4      Price Earning Ratio (P/E Ratio)
Table no. 4: P/E Ratio of NABIL & HBL
Year NABIL HBL

2069/70 10.8 17.12

2070/71 14.27 19.20

2071/72 17.34 18.57

2072/73 36.84 28.69

2073/74 48.70 31.56

                                                                                       Source:
Appendix A
The above table 4 exhibits the P/E Ratio of two banks viz. NBL and HBL. This presentation
helps our study by clarifying the relationship between earning per share and market price per share.
According to the table, the P/E ratio of NBL is in increasing manner in every year. The P/E ratio in year
2069/70 is 10.80 which have increased to 14.27 in year 2070/71. In the year 2071/72, 2072/73 and
2073/74 P/E ratio is 17.34, 36.84 and 48.70 respectively which is higher than last two years.
In case of HBL also the P/E ratio is increasing trend in last two years. The P/E ratio is 17.12
and 19.20 in years 2069/70, and 2070/71which is increasing in each year. But in 2071/72 the P/E ratio
has decreased to 18.57. It has reached to 28.69 and 31.56 in 2072/73 and 2073/74 respectively. The
following figure shows the P/E Ratio of NABIL & HBL: -
 Figure 4: P/E Ratio of NABIL & HBL
2.1.5      Dividend Yield Ratio (DY)
                   
                                      Table No. 5: DY of NABIL & HBL
Year NABIL HBL

2069/70 6.5 -

2070/71 4.65 1.26

2071/72 3.79 2.73

2072/73 1.98 8.62

2073/74 1.14 1.26

                                                                                       Source:
Appendix A
The above table no. 5 reveals the dividend yield ratio of the concerned banks from the year
2069/70 to 2073/74. It is clearly shown that NABIL has fluctuating trend in the dividend yield ratio. In base
year it is 6.5 where as it is 4.65 in next year. And again it is 3.79, 1.98 and 1.14 in next years.
In case of HBL, the dividend yield ratio is also in fluctuating trend. In base year it is nil and in
next four years it is 1.26, 2.73, 8.62, and 1.26 which shows that it is fluctuating every year.
  Figure 5: DY of NABIL & HBL
2.1.6                Earning Yield Ratio (EY)
                   Table no.6: EY of NABIL & HBL      (in %)
Year NABIL HBL

2069/70 9.26 5.84

2070/71 7.01 5.21

2071/72 5.77 5.39

2072/73 2.71 3.49

2073/74 2.05 3.17

Turning to the analysis of percentage return on net worth exhibited (presented) in table 7, it is
depicted (seemed) that the percentage return on net worth of NBL is decreasing in nature. In base year, it
is 9.26 which have decreased to 7.01 in next year, again it further decreased to 5.77 in third year which
shows it is in decreasing trend. Where as, in HBL it is in fluctuating trend. But, it has slightly decreased in
year 2073/74.

 Figure 6: EY of NABIL & HBL

2.2  Study Result: -
          The main purpose of the study is to know about the overall position of particular two
banks, NBL & HBL & to trace out the similarities & differences between them i.e. to compare equity share
only. It is so because equity share are also important parts, which play vital role in the existence of any
bank.
          Equity share represents equity or an ownership position in a company
which have residual claim on any payments. It means creditors and preferred stockholders are paid
before the payment to common stockholders. In bankruptcy, equity shareholders are entitled to any value
remaining after all the claimants have been satisfied. Equity share are also termed as common stock
interchangeably.
          The banking system started in Nepal from 1994 B.S. & since then the commercial banks have
been operating successfully.
1.      NBL & HBL were established with the motto to provide maximum services as promptly as possible to
its customers.
2.      Both the banks are trying a lot to provide maximum services to its customers accompanied with
modern technology & infrastructures. NBL & HBL both have equity share.
3.      After analyzing it is found that the EPS, DPS, DPR etc are increasing and decreasing in both the
bank.
4.      After identifying the two bank DPS, EPS, EY, DY and DPR we see that as the Himalayan Bank is
also good but the NABIL Bank has better result than Himalayan.
5.      But in some place the Himalayan Bank has better result than the Nabil Bank limited.
6.      In the recent year both the banks have the strong finance and the bank are giving more benefit to the
equity shareholder.

CHAPTER III
SUMMARY, CONCLUSION & RECOMMENDATION
3.1      Summary:
The major reason why people invest money in the shares and the debentures of the various
companies is for the expectation of future return in from of dividends from the companies after the
ascertainment of the profit. Similarly, is the reason why people invest in the shares of bank and other
financial institution.
So, it is a major concern for any shareholder to know the return that we obtain from the bank
by investing in it. So for this reason the dividends of the two major joint ventures banks have been taken
into consideration viz. NABIL and HBL.
In the first chapter named Introduction the brief introduction about the banks under study,
their objectives, literature reviews made for the preparation of the report, etc are mentioned. Similarly,
objectives of the field study, purposed, limitations and the importance of the data. This includes various
data such as EPS, DPS, MPS, DPR are presented.
In the last chapter headed Summary, Conclusion and Recommendations, various
conclusions drawn from the analysis of the result made are quoted.

3.2  Conclusions:
            
1)   The intrinsic value per share is constantly increasing with increasing amount of retained earning, the
shareholders equity is also constantly increasing every year. So the equity position of the banks is good.
2)   The return on the shareholder’s equity of the both banks is satisfactory.
3)   The companies have paid the dividends in the increasing trend with the increasing level of earning of the
banks.
4)   On the basis of dividend yield ratio, Nabil is more efficient with more constancy than HBL for distribution
of dividend on the basis of market price per share. Price-earning ratio analysis shows that the average
price-earning ratio of Nabil is higher with high variation than HBL. HBL has lower price earning ratio, but
has comparatively more consistency of price-earnings ratio.

3.2      Recommendations:
Based on major findings and issues and gaps found in course of this study, some
recommendations are explained below hoping that these recommendations will certainly be provide
milestone to overcome existing issues in the fields.
1.                  There is no clear – cut legal provision regarding dividend payments. So the government should
act in favor of investors and should bind through such legal provisions or distinct uses so that the profit
earning companies should distribute certain percent of their earnings as dividend.
2.                  Banks should provide a chance to their shareholders fro their interest. They should try to know
whether they (shareholders) prefer to obtain dividend or stock dividend or any forms of dividend. So,
instead declaring of cash or stock or any forms of dividend, dividend declaring should be proposed to the
annual general meeting of shareholders for their approval. Furthermore, the banks should also be careful
about informing the impact of dividends, of potential investors who know less about the matters.
3.                  The payment of dividends is highly fluctuating, which is neither static nor constantly growing.
Such inconsistency and irregularity in the dividend payment may create more confusion and
misconception about that firm. Due to high degree of risk and uncertainty, such fluctuation can’t impact
positively in the firm’s market price per share. So these banks are advised payment policy. Similarly,
according to the changing context and shareholders interest and expectation, the predetermined policies
should be reviewed.