A STUDY ON

ANALYSIS OF FINANCIAL STATEMENT OF

EVEREST BANK LIMITED

A Project Work Proposal

Submitted By:

Babita Dangol
T.U. Registration No:7-2-284-144-2018
Gramin Adarsha Multiple Campus
Nepaltar, Kathmandu

Submitted to:
The Faculty of Management
Tribhuvan University
Kathmandu

In partial fulfillment of the requirement for the degree of

BACHELOR OF BUSINESS STUDIES (B.B.S.)

Kathmandu, Nepal
2023, February

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 TABLE OF CONTENT

S.N Heading Page

1.1 Background of the study 1

1.2 Profile of Organization 2

1.3 Statement of Problems 2

1.4 Objectives of Study 3

1.5 Rationale of the Study 3

1.6 Literature Review 4-5

1.7 Research Methodology 5-6

1.8 Limitations of the Study 6

1.9 Chapter Plan 7

References

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 INTRODUCTION

1.1 Background of the Study

Since the financial crisis of the late 2000s, banks have been forced to reevaluate their
proportion of liquid assets to plan for periods of internal and external financial distress. During
the last recession banks faced serious liquidity issues, which resulted in numerous bankruptcy
filings, nationalized banks and corporate mergers and acquisitions. (Markus, Ferdinand, &
Jiang, 2014)
Liquidity risk is a critical component of all risks that affect the activities of a bank. Banks must
assess their liquidity risk at all times and during periods of economic recession in particular.
(Jasiene, Martinavicius, & Jaseviciene, 2012) This report appraises the importance of risk to
economy, its influence on the banking sector and identifies the risks that commercial banks
face. Moreover, it assesses the significance of liquidity risk, analyses ways to manage it as well
as the development of the liquidity ratio and the obligatory reserves requirement.
One of the main objectives of a bank is to choose the best ratio of risk level and profitability.
In banking, risk usually implies a threat that the bank might lose some of its resources, income,
run higher costs whilst performing some of its financial operations. However, taking risks in
the business of a bank does not always entail losses. Efficient risk management in a bank
could provide the backbone for a successful business of the bank. Every bank faces a whole of
different risks in the process of its operations, (Cooper, 2007). Liquidity risk is one of the most
important risks that banks face, since problems with liquidity may eventually lead to insolvency
issues.

Conception of Financial Performance

Financial performance analysis is the process of analyzing a company’s financial statements for
decision-making purposes and to understand the overall health of an organization. Financial
statements record financial data, which must be evaluated through financial performance analysis
to become more useful to investors, shareholders, managers, and other interested parties. It is the
method of evaluating the past, present, and projected performance of a company. Analysts track
performance measures across financial statements using several different methods for financial
performance analysis, including vertical, horizontal, and ratio analysis. It helps to analyze
whether an entity is stable, solvent, liquid or profitable enough to warrant a monetary investment.

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1.2 Profile of Organization
Everest Bank Limited is the Commercial Bank of Nepal. Which is joint venture of Punjab
National Bank, India which is India’s first Swadeshi Bank commenced its operation in 1895 from
Lahore. Punjab National Bank holds 20% equity shares of Bank. It is the first Nepalese Bank
which has Representative Office in India. Everest Bank Limited (EBL) provides customer-
friendly services through its wide Network connected through ABBS system, which enables
customers for operational transactions from any branches. The bank has 123 Branches, 157 ATM
Counters, 32 Revenue Collection Counters and 3 Extension Counters across the country making
it a very efficient and accessible bank for its customers, anytime, anywhere.

The bank has been one of the leading banks of the country and has been catering its services to
various segments of the society. With clients from all walks of life, the Bank has helped the nation
to develop corporately, agriculturally & industrially. Everest Bank Limited established with the
slogan of “Consistent, Strong & Dependable”, aims to be a household name gaining the
confidence of its shareholders, investors, depositors, and other interested parties. For this purpose,
analysis of financial performance is a must. Its vision is to be a Leading Commercial Bank with
Pan Nepal presence and become a household name, providing wide range of financial products
and services under one roof.

1.3 Statement of the Problems:

A statement of the problem is a brief description of an issue to be addressed or a condition to be

improved upon. It aims in identifying and explaining the problem.
In the present context of Nepal, commercial banks have good performance. On the basis of the
profitability and productivity of commercial banks, the public has confidence in their
performance. However, various environmental factors, the state of the economy, the structure of
capital and money market, government policies, taxation policies, and various internal factors
have influenced upon financial performance and position of commercial banks. In these
circumstances, it is highly useful to make the study on the financial statement of Everest Bank
Ltd. Thus, the main problem of the study is to inquire into the financial performance of Everest
Bank Limited.
• What is the financial performance of Everest Bank Limited?
• What is the Profitability Position of Everest Bank Limited i.e., Earning per share (EPS),
Dividend per share (DPS), and Return on Asset (ROA).?

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1.4 Objectives the study:

Each and every study is done with certain objectives. Similarly, the specific objective of this
study is to analyze the financial statements of Everest Bank Limited regarding the financial
performance and position.

• To analyze the financial performances through the use of appropriate financial and
analytical tools.

• To identify the profitability position of Everest Bank Limited i.e., Earning per share
(EPS), Dividend per share (DPS), and Return on Asset (ROA).

1.5 Rationale of the study

Every research work or study should be fruitful. This study will be beneficial for the entire person
who is interested to know about the financial performance of Everest Bank Limited. This study
suggests for a careful judgment of financial position.

It will also provide contribution to Nepalese commercial banks. The analysis of financial
performance manifests various aspects such as stability, profitability, solvency, and liquidity
position of the organization. Information regarding such aspects of financial statements not only
facilitates the users but also the bank itself to identify its strength and weakness. This will help
the Everest Bank Limited to formulate plans and policies for better operation in the future.

Analysts track performance measures across financial statements using several different methods
for financial performance analysis, including vertical, horizontal, and ratio analysis. This research
focuses on the analysis of financial statements using various tools of ratio analysis. Statistical and
financial ratios such as liquidity ratios, profitability ratios, leverage ratios, activity ratios as well
as other relevant financial ratios will be used as data analysis procedures. Therefore, this report
will portray the analysis of the financial statement of Everest Bank Limited.

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1.6 Literature Review
Review of literature comprises upon the existing literature and research related to the present
study with a view to find out what had already been studied. The purpose of the reviewing the
literature is to develop some expertise in one’s area to see what new contribution can be made
and to review some idea for developing research design.

Banking performance evaluates the overall performance of banks by implementing a regulatory

banking supervision framework. One of such measures of supervisory information is the CAMEL
rating system which was put into effect firstly in the U.S. in 1979. CAMEL rating system was
first introduced by U.S. supervisory authorities as a system of rating for on-site examination of
banking institutions. Under this system, each banking institution subject to on- site examination
is evaluated on the basis of five critical dimensions relating to its operations and performance,
which are referred to as the component factors. These are Capital adequacy, Assets quality,
Management efficiency, earning ability and Liquidity used to reflect the financial performance,
financial condition, operating soundness and regulatory compliance of the banking institution. A
sixth component relating to sensitivity to market risk has been added to the CAMEL rating to
make the rating system more risk- focused. Each of the component factor is rated on scale of 1
(best) to 5 (worst). The composite rating ranges between 1 (best) and 5 (worst), and also a certain
amount of subjectivity based on the examiner’s overall assessment of the institution in view of
the individual component assessments. (Gupta, 2014)

The ROAs of public sector banks were higher than those of joint venture and domestic private
banks due to having utmost total assets but the overall performance of public sector banks was
not observed sound because other financial ratio including ROE, CDR, CAR of most of the joint
venture and domestic public banks were found superior. High overhead costs, political
interventions, poor management and low quality of collateral created continued deterioration in
financial health of public sector banks. The values determined for the financial ratios reveal that
joint venture and domestic public banks are also not so strong in Nepal to manage the possible
large-scale shocks to their balance sheet. They concluded that the capital adequacy ratio, interest
expenses to total loan and CDR do not have any considerable effect on ROA. The CAR positively
influence the ROE but the NPL, CDR, interest assign had no significant effect on ROE. Jha and
Hui, (2012)

NSBI has been operating its business in a satisfactory way and doing better each year of the study
period except in its assets quality where the banks loss loan was found to be in increasing trend.

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 But the provisioning for its loss loan was very near to the level though not equal in some instances,

as set by the NRB. Overall, NSBI was not found to be very aggressive in profit maximization
goal though it could be smelled that NSBI in a long run strategy of “slow and steady wins the
race”. Dangol, (2012)

1.7 Research Methodology

Research methodology is the research method used to test the hypothesis. It sequentially refers to
the various steps to be adapted by the researcher in studying a problem with certain objectives in
view. In other words, research methodology describes the methods and process applied in the entire
subject of the study. Thus, this chapter focuses and deals with the following aspect or methodology.

Research design
A research design is a strategy for analyzing data to get an answer to a question. It is a framework
and blueprint of research which helps in collection, measurement and analysis of data. This research
aims to examine and assess selected bank’s profitability and effect of audit expense on it. To
accomplish the objectives of the study, descriptive research design has been used.

Data Analysis Tools:

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.

Sampling and population

The entire collection of all observation of interest that is people, objects of events involved in the
study area is known as population. Presently 26 commercial banks (including government owned,
public and joint venture) are under operations in Nepal. Due to the time and resource constraints, it
is not possible to study all of them. It would not possible to collect information and data from all
information and data from all organization during the short period . Sample is the subset of the
population. Among all the commercial banks Everest Bank Limited has been selected as a sample
for this study.

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 Data Collection and Techniques
The quantitative data are further classified as either discrete or continuous. Among the primary
and Secondary sources of data, this research is fully based on the information obtained from the
secondary data but the researcher has mainly based on only secondary data are as present.
Secondary data collection method is originally, the researcher has used secondary data only for the
preparation of project work so is presented secondary data.
• Annual Report
• Previous Research work, etc.
• Annual financial reports of Everest Bank Limited.
• Official website of Everest Bank Limited.
• Books and articles
Data Analysis Tools
The analysis of data is done according to pattern of data available and felt necessity has used.
Statistical tools and some financial tools are used to meet the objectives of the study.
• Liquidity ratio
• Earning Per Share, Dividend Per Share
• Saving deposit to total deposit ratio
• Profitability ratio
• Coefficient of variance
• Return on assets

1.8 Limitation of the Study

Although this research has reached its aim, there were some unavoidable limitations.
• The Research is based on records of 3 fiscal years’ analysis only i.e., from FY 2016/17

to FY 2021/22.
• The researcher has used only some statistical tools for the presentation and analysis of
data.
• Most of the data used in this study are based on secondary sources mainly the official
website of Everest Bank Limited.
• The main focus is given to the quantitative aspect rather than the qualitative aspect.
• The study is based on Everest Bank Limited only.
• It is only for partial fulfillment of Bachelor of Business Studies (BBS).

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1.9 Chapter Plan

This whole report has been divided into three parts or chapters.
• Chapter I - Introduction:

In the first chapter introduction along with background, Profile of organization, objectives
of the study, rationale of study, literature review, and limitation etc.

• Chapter II - Result and Analysis

The second chapter is main portion of the study. It will deal with analysis and presentation
data collected from different sources. The research will analyze the data to reach closer to
the result by using various necessary financial and techniques.

• Chapter III - Summary and Conclusion

The final chapter will provide the result of discussion and conclude the overall study. At the
end an extensive references and annexes will also include.

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 References
Books
Adhikari, D.R. & Pandey, D.L. (2016), Business Research Method Asmita Books Publisher &
Distributors (P) Ltd, Kathmandu

Bajracharya B.C. (2005), “Business statistics & mathematics” Kathmandu, M.K. Publisher &
Distribution

Bhandari D.R. (2056) “Principles and Practice of banking and insurance” 1st Edition. Asia
Publisher & Distribution, Kathmandu
Bhole, L.M. (2003), Financial Institutions and Markets Tata Mc Graw-Hill Publishing Company
Limited, New Delhi
Dongle R.M. (2070), Accounting for Financial Analysis and Planning Teluju Prakashan,
Kathmandu
Journal & Articles
Agrawal, M. (2008), “Rural Finance: A Remedial Measure for Rural Poor”, Vinimaya Gupta, K.
(1983), “Agricultural Finance in Backward Region”
Shrestha, R. (2072), “A case study on loan providing system of Gramin Bikash Bank Ltd.”

Website
https://everestbankltd.com/
Google

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