RATIO ANALYSIS OF NEPAL BANK LIMITED

A Project Work Report

By

Exam Roll No:

T. U. Regd. No:
Divyagyan College
Group:

Submitted to

The Faculty of Management

Tribhuvan University
Kathmandu

In Partial Fulfillment of the Requirement for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Kathmandu
July 2024
 DECLARATION

I hereby declare that the project work entitled RATIO ANALYSIS OF NEPAL BANK
LIMITED submitted to the Faculty of Management, Tribhuvan University, Kathmandu
is an original piece of work under the supervision of Mr.Mohan Sapkota, faculty
member of Divyagyan College, Kathmandu and is submitted in partial fulfillment of the
requirements for the degree of Bachelor of Business Studies (BBS). This project work
has not been submitted to any other university or institution for the award or any degree
or diploma.

…………………………………….

Date:

ii
 SUPERVISOR’S RECOMMENDATION

The project work report RATIO ANALYSIS OF NEPAL BANK LIMITED submitted by
g of Divyagyan College, is prepared under my supervision as per
the producer and format requirement laid by the Faculty of Management, Tribhuvan
University, as partial fulfillment of the requirement for the degree of Bachelor of
Business Studies (BBS) I, therefore recommend the project work report for evaluation.

Signature:

Name of Supervisor: Mohan Sapkota

Date:

iii
 ENDORSEMENT

We hereby endorse the project work report entitled RATIO ANALYSIS OF NEPAL
BANK LIMITED submitted by of ,
in fulfillment of the requirement for the degree of the Bachelor of Business Studies
(BBS) for external evaluation.

Signature: Signature:

Chairman, Research Committee Campus Chief

Date: Date:

iv
 ACKNOWLEDGEMENTS

This is the attempt to present the report titled RATIO ANALYSIS OF NEPAL BANK
LIMITED prepared for the partial fulfillment of the requirement for the degree of BBS is
an outcome of continuous and immeasurable cooperation and support of several hands. I
would like to express my heartfelt gratitude of all for their support.

I have great satisfaction and pleasure to express my appreciation and sincerity to my

report supervisor Mr. Mohan Sapkota of Divyagyan College , Kamaladi , TU for their
excellent and effective guidance and supervision. I will remain thankful to their
suggestions.

I would like to thanks my friends and family who supported me to prepare this project
and inspired me in many ways.

……………………

Divyagyan College
 TABLE OF CONTENTS

Title page...........................................................................................................i
Declaration.......................................................................................................ii
Supervisor’s Recommendation..........................................................................iii
Endorsement.......................................................................................................iv
Acknowledgement...............................................................................................v
List of Tables....................................................................................................viii
List of Figures...................................................................................................ix
Abbreviations...................................................................................................x

CHAPTER I: INTRODUCTION

1.1 Background of the study.....................................................................................1

1.2 Introduction to Nepal Bank Limited..................................................................2

1.3 Statement of problem.........................................................................................10

1.4 Objectives of study.............................................................................................11

1.5 Rational of study.................................................................................................11

1.6 Review of literature.............................................................................................12

1.7 Research method..................................................................................................19

1.8 Limitations of study............................................................................................25

CHAPTER II: RESULTS AND ANALYSIS

2.1 Presentation of data in Tables and Figures and their analysis.........................27

vi
2.2 Major findings....................................................................................................50
 TABLE OF CONTENTS
CHAPTER III: SUMMARY AND CONCLUSION
3.1 Summary...............................................................................................................51

3.2 Conclusions...........................................................................................................52

BIBLIOGRAPHY.........................................................................................................53

APPENDICES.................................................................................................................54

vii
 LIST OF TABLES

Title Headings Page Number

1.1 Offices of NBL.........................................................6

1.2 Board of directors....................................................7

2.1 Current ratios.............................................................20

2.2 Net Profit..................................................................22

2.3 Return on Assets........................................................23

2.4 Return on capital employed.......................................25

2.5 Earnings per share.....................................................26

2.6 P/E Ratio..................................................................28

2.7 Net worth per share..................................................29

2.8 Non- Performing Loan to Total Loan...................31

2.9 Interest Income to Loan.........................................33

2.10 Proprietary Ratio.....................................................35

viii
 LIST OF FIGURES

Title Headings Page Number

1.1 Organizational Structure of NBL.............................5

2.1 Current Ratio Trend Analysis of NBL.....................21

2.2 Net Profit Analysis of NBL.....................................22

2.3 ROA Trend Analysis of NBL...................................24

2.4 Trend Analysis of ROCE of NBL.............................25

2.5 EPS Trend Analysis of NBL........................................27

2.6 P/E Ratio Trend Analysis of NBL...............................28

2.7 Trend Analysis of Net Worth per Share of NBL.........30

2.8 Non-Performing Loan to Total Loan of NBL................32

2.9 Interest Income to Loan and Borrowings of NBL...........34

2.10 Proprietary Ratio Analysis of NBL..................................35

ix
 ABBREVIATIONS

BBS: Bachelor of Business Studies

BAFIA: Banks and Financial Institutions Act

Etc.: Et Cetera

EPS: Earning per Share

NRS: Nepalese Rupees

NRB: Nepal Rastra Bank

NBL: Nepal Bank Limited

Num: Number

P/E Ratio: Price-Earnings Ratio

ROA: Return on Assets

ROCE: Return on Capital Employed

&: And

x
 1

CHAPTER I:
INTRODUCTION

1.1 Background of Study

Ratio analysis is used to monitor economic trends, decide what financial policy to set,
make long-term plans, and pinpoint projects and companies to invest in. It can be done by
both investment finance and corporate finance companies. (B.C, 2078)
It is carried out by a financial analyst who synthesizes financial data and thoroughly
examines the financial statements of a company namely:
 Income statement
 Balance sheet
 Cash flow statement. (Garrison)
Financial data is commonly analyzed by calculating ratios extracted from the data in the
statements and comparing them against the company’s historical performance or the data
of other companies.

Financial statements are prepared by the company to check the financial position,
financial performance and cash flows of the company. It shows the relationship between
the components of Balance Sheet and Profit and Loss account and other comparatives
accounts. It unveils the meaning and significance of various item embodied in the
financial statements. Financial statement analysis helps to analyze the trends by
comparing the ratios, helps to measure the liquidity, profitability, company-wise
efficiency and cash flow. (B.C, 2078)

Banks plays a vital role in our lives nowadays. Almost all the heavy transaction needs the
help of the banks. A banking system is the group of institutions that provides the financial
services to us. They provide services like accepting deposits, providing loans, payment
services and helping with the investment service.
 2

Commercial Banks performs various activities like accepting deposits, providing loans to
business and consumer. An individual can open a current or saving account in a
commercial banks and can apply for a home loan, car loan, education loan, transfer
money, online payment or pay various expenses like electricity bills, water bills, etc.
Nowadays those banks also provide services like insurance, investment, and retirement
services. All commercial banks provide deposit facility, various loan facilities, Internet
banking with ATM facilities through their network. Most of the commercial banks are
usually chartered by the state in which they do business, but some may also be insured or
overseen by the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve
Bank.

The history of the modern financial system of Nepal began in 1937 AD (1994 BS) with
the establishment of Nepal Bank Limited as the first commercial bank of Nepal. After
that almost for two decades, no more banks had been established in the country. Nepal
Government encouraged the foreign banks for the joint venture in Nepal, after declaring
free economy and privatization of economy. After the amendment of Commercial Bank
Act, 1974 allowing private sector including foreign investment to open commercial
banks, various banks are in competition in Nepalese market after being established as per
Bank and Financial Institutions Act (BAFIA) and getting licensed by Nepal Rastra Bank
Act (NRB).

As per Nepal Rastra Bank report of Mid-July 2023, currently there are 20 commercial
banks active in Nepal. Commercial Banks refers to those “A” class Financial Institutions
classified as per Nepal Rastra Bank. They have to open their account in Nepal Rastra
Bank and have to deposit the certain amount prescribed by NRB.

1.2 Introduction to Nepal Bank Limited

Nepal Bank Limited is the first bank established in Nepal as commercial bank. It was
established in15November 1937 AD, by Juddha Shumsher, which marked the beginning
of an era of formal banking in Nepal. With the objective of providing deposits facility,
various loan facilities, advance ABBS services, etc., it was established. The bank has
 3

51% share of Government of Nepal and 38%share of general public and the remaining
11% by institutions. Most of their shareholders are customers and employees. Previously
bank was not established under any proper act at the time of establishment, but the
enactment of BAFIA took all the Banks and Financial Institutions (BFIs) under its cover
and abolished other acts. Since then, the Bank has been working as a public limited
company registered under the Companies Act, 2063 and is licensed as “A” class financial
institution by NRB.

The bank extended its saving facility under various name like, Nari Samman
Bachat Khata, Chhori Beti Kalyan Bachat Khata, Social Security Saving Account, etc.
The bank has been serving the foreign exchange service since 2058 AD.

The bank has being enjoyed the glorious history of 85 years till now. The bank is
one of the leading commercial bank of Nepal. It has creates different level of importance
in the heart of Nepalese people. It provides the collateral facility against the securities
listed in stock exchange, against gold and silver, etc. The NBL has been offering. As its
slogan ‘Nepal ko Pahilo Bank” it creates a history in banking sector. Now it is expanding
in all 7 provinces and 69 districts of the with its 217 branch offices. It has earned the total
customer of 2316869 as indicated in NBL website. With providing comprehensive
services with complete banking solution, the bank main motto of increasing the saving
amount of customer, providing collateral facility, investment facility, and so on. The
bank’s committed to provide best banking service through its widespread network and
help the government from its side to achieve the aim of “Prosperous Nepal, Happy
Nepal”.

1.2.1 The Banks Vision, Mission and

Objectives Vision statement

 Ensuring highest standard of clientele services through best application of latest

information technology, making due contribution to the national economy and
establishing ourselves firmly at home and abroad as a front ranking bank.
 4

Mission statement:

 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 as well as dimensions 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.

Objectives

 Focus on increasing the customer base and market share

 Maximize the potential or efficiency of bank’s staff
 Focus on minimizing the risk associated with the business
 Focus on providing the world class business solution

1.2.2 Share Composition of NBL

Following is the share composition of NBL as at Ashadh 31, 2080:
Authorized Equity Capital: NRs15,000,000,000
Issued and Paid- up capital: NRs. 14,694,022,927.90
 5

1.2.3Organizational Structure of NBL

The organizational structure of NBL as per fiscal year 2079/2080(2022/2023) as
published by NBL in its website is as follows:

Board of directors

Chief Executive Officer

Deputy Chief Executive Officer

Chief Chief Credit Chief

Chief Operating Officer (COO)/Financial
Asst. CEOOfficer Officer (CCO)/ Asst Administrative
(CFO)/ Asst. CEO CEO Officer (CAO)/ Asst
.CEO

Source: www.nepalbank.com.np

Figure number: 1.1Organizational Structure of NBL

A bank shall have many kinds of offices like head office, branch offices, ATMs,
Extension counters etc. Banks might also have their own training centers which they
different kinds of training to various people, to internal staff and external customers
 6

carrying the aim of providing knowledge about the banking system or any kind of
knowledge with helps them in growth of their skill, knowledge and ultimately to the
bank. Thus, to know more about the branches and offices of NBL, the following table
will help us:

Table number: 1.1

Offices of NBL

Number of offices
Head office 1
Province office 7
Branch offices 217
Total 225
Extension counters 49
ATMs 144
Source: www.nepalbank.com.np

According to the report at the website of NBL, there are total 2594 staffs are working in
NBL. They have gained the total customer number 2316869 which includes 9621 internet
banking clients, 503735 mobile banking clients.

1.2.4 Board of Directors of NBL

The Board of Directors is the apex body of the bank. It formulates the plans and policies
along with strategies and provides guidance to the management to implement the
policies. The Board must be comprises of total 7 members; 3 members representing from
Government of Nepal and 3 members representing individual shareholders and 1 member
nominated by the Board as per BAFIA. The current Board of Directors of NBL is:
 7

Table number: 1.2

Board of directors of NBL

S. NO. NAME DESIGNATION REPRESENTATION

1 Dr. Chandra Bahadur Adhikari Chairman Independent Director
2 Uttar Kumar Khatri Director Nepal Government
3 Ganga ParsadGyawali Director Nepal Government
4 SadhanaGhimire Director Nepal Government
5 Vivek SJB Rana Director Public Shareholder
6 Vishnu Kumar Agrawal Director Public Shareholder
7 Rochan Shrestha Director Public Shareholder
8 Keshab Prasad Bhandari Company Secretary
Source: www.nepalbank.com.np

1.3 Statement of Problem

This study basically focused on the ratio analysis of Nepal Bank Limited. The problem of
the study ultimately find out reasons about difference in the financial performance. To
find out actual strength and weakness of a company. Comparative analysis of
financial is most important. At the time of increasing in financial institution, it is very
important, how they are operating their financial performance. It is effective or not? At
present we have twenty commercial banks. But some research or indictors show the
service courage. In this situation, this study tries to analyze the present performance of
Nepal Bank Ltd. Which give the answers of following questions.

 What is the financial position of the bank?

 Is there profit or loss?

1.4 Objectives of the Study

This study was conducted and reported with certain specific objectives. The general
purpose of this study is to discuss, examine and evaluations of the ratio analysis of
 8

Nepal Bank Ltd. And suggest for the improvement and better performance which helps to
examine the efficiency and show the financial strength. The specific Objective of this
study are as follow:

 To analyze the financial position of the company

 To examine the profit and loss of the company

1.5 Rational of the Study

This study of ratio analysis of commercial bank in Nepal plays vital role in the
managerial decision. This comparative ratio analysis gives insight in to the relative
financial condition and performance of the Nepal Bank Ltd. Similarly, this study helps to
identify the hidden strength and weakness its performance to achieve the bank's overall
objective.
This study provide useful and variable for students, teachers and researcher in the field of
accounting and finance. This study related with the stakeholders, financial agencies, stock
trades, customers depositors and debtors who can objectively identify the better banks to
deal with.
 This study provides information about the company and financial position of the
bank.
 It summarizes various information as easy understandable form by all the
relevant parties.
 It helps to know about profit and loss of the bank during study period.
 It shows assets and liabilities condition of the bank.

1.6 Review of Literature

1.6.1 Conceptual Review

As per NAS 01 “Preparation of Financial Statements” financial statements are consists of
various components which include:
 9

 A statement of Financial Position as at the end of the year (Balance Sheet).

 A statement of Profit & Loss and other comprehensive income for the
period.
 A statement of changes in the equity for the period.
 A statement of cash flows for the period.
 Notes comprising of a summary of significant accounting policies and
other explanatory information.
 A statement of financial position as at the beginning of the earliest
comparative period when an entity applies an accounting policy
retrospectively or make a retrospective re-statement of item in its financial
statements, or when it re-classifies items in its financial statements.
(ICAN, 2018)

They are prepared under the standards issued by the accounting standard board of
Nepal which are fully converged to international financial reporting standard, and
interpretation issued by International Accounting Standard Board (IASB). They
comprises of:

 NFRS
 NAS
 IFRIC interpretation
 SIC interpretation

Financial statements are prepared primarily for the decision making. They play a very
vital role in setting and taking the managerial decision for the business. It mainly
prepared for the shareholders to know how about the company’s financial performance,
financial position and cash flow status. But the information alone provided in the
financial statements is not the end in itself as no financial as well as managerial decision
can be drawn alone from the information provided in financial statements. However, the
information provided in the financial statements is used in making decisions through the
analysis and interpretations of the information provided in the financial statements. Ratio
analysis is the process of identifying the financial weakness and strength of the
 10

firm by establishing the proper relationship between the items of balance sheet and the
items of the profit and loss accounts. There are various method used to analyze the
financial statements, such as comparative analysis, trend analysis, common size
statements, schedule of changes in working capital management, funds flow analysis and
cash flow analysis, cost-volume-profit analysis and ratio analysis, earning per share, etc.
The financial statement analysis also refers to the analysis and interpretation of financial
statements to determine the weakness and strength of the company to take the necessary
and important decisions by establishing the strategic relationship between components of
balance sheet and profit & loss account. It helps the shareholders to know how the
financial status of the company so they can take the decision related to their investment
amount. (ICAN, 2018)

According to Myers “Financial statement analysis is largely a study of

relationship among the various financial factors in a business as disclosed by single set-of
statements and a study of the trend of these factors as shown in series of statements.”

The term ‘’ratio analysis” includes both “analysis” and “interpretation”. The analysis and
interpretation of ratio analysis statements is essential to bring out the mystery behind the
figure in financial statements. Financial statement is an attempt to determine the
significance and the meaning of financial statements data so the forecast may be made of
the future earning, ability to pay interest and maturities and profitability of a sound
dividend policy. By financial statements we mean two statements:

 Profit and loss account or Income statement

 Balance Sheet or Position Statements (ICAN, 2018)

These are prepared at the end of fiscal year or a given period of time. They are the
indicators of profitability and financial soundness of the business concern. Though this
project, this study provide a comparative analysis of balance sheet of NBL and provide
my suggestions and findings regards the same.

NRB uses composition of assets, non-performing loan to total loan ratio, net non-
performing loan to total loan ratio as the indicators of the quality of assets of the
commercial banks (NRB, 2023). The maximum NPL allows by NRB for a healthy bank
 11

is 5%. Here, management plays a very important role in determining the future of the
bank because the decisions are taken on the basis of the data provided in the financial
statements which should be analyze by the independent auditor. The management has an
overview of a bank’s operations, manages the quality of the loans and has to ensure that
the bank is profitable.

For the smooth running of the financial system, there should be the appropriate
market for such system known as financial market. Financial market consists of two
market (i) capital market and (ii) money market. Capital market is related with the long-
term investments, borrowing and lending of long-term funds to the companies so they can
survive the situation. Components of capital market are stock exchange, investment
institutions, banking insurance companies etc. Money market mainly deals with the
purchase and sale of the monetary instruments. It mainly deals with the financial
instruments like treasury bills, certificate of deposit, commercial papers, etc.

Banking organizations support a wide range of activities, ranging from startup of a

business to educational program that allows people to develop their skills which are
necessary to succeed as an entrepreneur. In addition, it uses the absolute measure such as
interest income, net interest income, non- interest income, non- net interest income non-
operating income, net non-operating income and net profit to evaluate the profitability of
commercial banks (NRB, 2022). Liquidity management is one of the most important
functions of a bank. If funds tapped are not properly utilized, the institution may suffer a
huge loss.

1.6.2 Review of a Previous Work

There is an important role of banks in the economic growth and development of a
country. To achieve an ideal economic growth and development, the banks should have
strong and well-managed organization of banking system. When banking is appropriately
organized, it aids and facilitates the growth of trade and industry and hence of national
economy. In the modern economy, banks are considered not as dealer in money but as the
leaders of development. Banks are not just the storehouse of the country’s wealth but are
the reservoirs of necessary for economic development.
 12

Banking plays a significant role in the economic development of a country. Bank is a

resource for the economic development, which maintains the self-confidence of various
sectors of society and extends credit to the people. So, commercial banks are those
financial institutions mainly dealing with activities of the trade, commerce, industry and
agriculture that seed regular financial and other helps from them for growing and
flourishing. The objective of commercial banks is to mobilize idle resources into the most
profitable sectors after collecting them from scattered sources. Commercial bank
contributes significantly in the formation and mobilization of internal capital and
development effort.

Bakar and Tahir (2019) in their paper used multiple linear regression techniques and
simulated neural techniques for prediction bank performance. ROA was used as
dependent variables. They concluded that network method outperforms the multiple
linear regression method however it need clarification on the factor used and they noted
that multiple linear regression not withstanding its limitations can be used as a simple
tools to study the linear relationship between the dependent variable and independent
variables.

Varzu (2021) Banks are channels between saving surplus and saving deficit people and
thus, they are the bridge of utilized scatter fund to productive sectors. Hence, they
represent a vital role in the transmission of government economic policies (especially
monitory policies) to the economy. When bank credit is expensive, the investment slows
down and unemployment rises. Bank deposit represents the most significant component
of the money supply used by the public. Commercial banks play an important role for
economic development of the country as they provide capital for the development of
industry, trade and business by investing the saving collected as deposits from public.
They render various services to their customers facilitating their economic and social life.

Neceur (2023) using a sample of ten Tunisian banks from 1980 to 2000 and a panel linear
regression model, reported a strong positive impact of capitalization to ROA. There are
 13

number of studies, which examine the bank performance using CAMEL framework,
which is the last model of ratio analysis.

Elyor (2019) and Uzhegova (2021) have used CAMEL model to examine factors
affecting bank profitability with success. The CAMEL framework is the most widely
used model (Baral, 2018). The central bank of Nepal (NRB) has also implemented
CAMEL framework for performance evaluation of the bank and other financial
institution. CAMEL stands for capital adequacy, assets quality, management efficiency,
Earnings performance and liquidity. The capital adequacy ratio is a key a key measure to
determine the health of banks and financial institutions.

Among the various reviews of various journals pertaining to the study, the major and
most contributing to the study has been outlined below.

Many study investigations on the accounting process and its mobilization have been
carried out by various students, professionals, and scholars. Many research studies on
financial institutions and publicly traded firms with reference to reports have been found.
Some studies are comparative in nature, while others pertain to a case study of a single
organization. But it's hard to find research on accounting practices and how they affect
NBL. There are no studies on the accounting procedure and its mobilization in the
context of NBL, according to the review of related studies. Most researchers employed
ratio analysis, test of hypothesis, and regression analysis as their primary financial and
statistical methods. This study uses a variety of methods, including ratio analysis,
correlation analysis, and trend analysis. This is a different way of stating an implied gap.
Similar to this, a researcher can easily fill a gap in the literature by possessing a complete
collection. Having a research challenge where there is a conflict in the literature How
does entrepreneurial orientation (EO) impact the performance of a firm? If EO has a
beneficial or bad impact? The researcher plans to look into this because the findings
regarding EO and business performance are still up for debate. He may also infer that
there is no association, a positive relationship, or no relationship between EO and firm
performance in terms of research, research gap, and research problem. Despite the
outcome, it provides fresh information to the body of literature. Scholars may also
 14

confirm in the near future whether there is a favorable, negative, or no relationship

between EO and business performance. The research gap is then filled. A new hypothesis
can be developed whether there is a positive, negative, or no relationship. Suppose there
is a link between firm performance and entrepreneurial orientation that is favorable.

1.7 Research Methods

There are several research methodologies that can be used for ratio analysis of a bank.
Research methodology refers to the various sequential steps that to be adopted by a
researcher during the course of studying a problem with certain objectives. It tends to
solve the search problem in a systematic way. Hence, overall research method
methodologies in a greater extent and also use the descriptive part based on both technical
aspect and logical aspect. A methodology does not set out to provide solutions - it is,
therefore, not the same as a method. Instead, a methodology offers the theoretical
underpinning for understanding which method, set of methods, or best practices can be
applied to specific case, for example, to calculate a specific result.

Mostly, this study is based upon the descriptive and analytical method, to analyze the
financial of NBL. The secondary data was used for the analysis for the period of five
years, ranging from 2075/2076 to 2079/2080. The secondary data taken from the annual
report published and uploaded in the website of the bank.

1.7.1 Research Design

A research design is the arrangement of conditions for collection and analysis of data in a
manner that aims to combine relevance to the research purpose with economy in
procedure. The research design is the conceptual structure within research is conducted.
In this study descriptive research design is used which involves observing and describing
the behavior of a subject without influencing it in any way. A descriptive research studies
are those studies which are concerned with describing the characteristics of a particular
individual or of a group. The results from descriptive research can in no way be used as a
 15

definitive answer or to disprove a hypothesis but, if the limitations are understood, they
can still be a useful tool in many areas of scientific research.

1.7.2 Population and the sample

According to the data published by the Nepal Rastra Bank as on Mid-July 2023 there are
altogether 20 commercial banks, 17 development banks, 17 finance companies and 57
micro finance companies. Among them we took only one commercial bank for the study
purpose i.e., NBL. NBL was established in 15 November, 1937 AD, but this report is
based on the data and information relating to the five fiscal years only i.e., from
2075/2076 to 2079/2080.

1.7.3 Sources of Data

The study is conducted on the basis of secondary data with the collected. The data related
to the trend analysis of ratios of NBL are obtained with the help of balance sheet of NBL
from 2075/2076 to 2079/2080. The supplement data and information have been acquired
from journals published from different institutions like Nepal Rastra Bank, Nepal Bank
Limited, Nepal Chamber of Commerce, etc.

Secondary Data Collection

Secondary data refers to the data which are originally collected but obtained from some
published or unpublished sources. These data were collected after being taken from
several primary sources and synthesized or summarized in some of the ways. The main
advantage of collecting data secondarily is the saving of the time and costs of acquiring
information. This type of data is not original in character. These data consist of two
sources:

A. Internal Sources
 Annual Report of Nepal Bank Limited from 2075/2076 to
2079/2080
 Smarika of NBL
 Quarterly Reports
 16

 Brochures
 Prospectus

B. External Sources
 Books and Publications
 Journal Article
 Articles from newspapers
 Local Newspaper, etc.

1.7.4 Data Collection Procedure

Data was collected from the website of the bank i.e., www.nepalbank.com.np.

The supplementary data and performance obtained from published official records of
company, personal interviews with the bank employees, various website related to
banking sector, booklets distribute, journals of the banks, etc.

1.7.5 Reliability of the data

The data we have collected from the central bank’s statistics, annual reports of the banks
and research department can be considered as a reliable data because they all have been
passed though the proper auditing process. Similarly, the data obtained from the third-
party website can be trustworthy and unbiased as their interpretation will be independent.
However, the data obtained from the personal interviews of the personnel of the bank
may be manipulative as they are the employees of the bank, since they are under no
compulsion to provide the accurate and the correct authentic data.
 17

1.7.6 Analysis Technique

Data analysis refers to the separation of the data collected from the various sources into
various parts for the purpose of the scientific study and interpretation of those collected
data. The various statistical tools and financial tools were used for the analysis of the
ratio analysis of Nepal Bank Ltd.

1. Ratio Analysis: This method involves analyzing and interpreting various financial
ratios of a bank, such as liquidity ratios (current ratio, quick ratio), profitability ratios
(return on assets, return on equity), and efficiency ratios (asset turnover, operating
efficiency). Ratio analysis allows for a quick overview of the bank's financial
performance and helps to identify strengths and weaknesses.

2. Trend Analysis: This method involves comparing and analyzing the financial data of a
bank over a certain period of time, such as annual or quarterly financial statements. By
identifying and examining trends in key financial metrics, such as revenue growth, asset
growth, and loan quality, analysts can gain insights into the bank's performance and
potential future outcomes.

3. Comparative Analysis: This method involves comparing the financial performance of a

bank with its peers or industry benchmarks. This can be done by using financial ratios,
similar to ratio analysis, or by comparing key financial indicators such as loan portfolio
quality, deposit growth, or operating expenses. Comparative analysis helps to assess a
bank's relative performance in the industry and identify areas of improvement.

1.8 Limitations of the study

Ratio analysis is a powerful mechanism of determining financial strengths and weakness

of a firm but, the analysis is based on the information available in the financial
statements. We should also be careful about the changes in accounting policies of NBL,
the impact of the price level changes, window dressing of the financial statements,
accounting concept and conventions, and personal judgments, etc.
 18

Due to the following unavoidable and uncontrollable factors, the result might not be
accurate. Some of the problems faced while conducting the survey are as follows, time
and cost constraints were also be there. Chances of some biasness could not be
eliminated. A majority of respondents show lack of co-operation and are biased towards
their opinions. Some of the important limitations of ratio analysis are however, summed
up as, it is only a study of interim reports. Ratio analysis is based upon only monetary
information and non- monetary factors are ignored.
 19

CHAPTERT II:
RESULT AND ANALYSIS

2.1 Presentation of Data in Tables and Figures and their Analysis

In this chapter, the data are presented, calculated and analyzed. The secondary data is
used for this purpose and the data represents the duration of five fiscal years i.e.,
2075/2076 to 2079/2080. The details of calculations are shown in the respective
appendix. The important and needed ratios, which are to be calculated for the purpose of
this study as mentioned in its objectives, are mentioned:

 Liquidity Ratio
 Leverage Ratio
 Profitability Ratio

2.1.1 Liquidity Ratio

Liquidity ratio measures the firm’s ability to fulfill its short-term commitments out of
current or liquid assets. This ratio focuses on current assets and current liabilities and is
used to ascertain the short-term solvency position of a firm. The primary test of liquidity
is:

2.1.1.1 Current Ratio

A current ratio is the quantitative relationship between current assets and current
liabilities. Here, current assets are those, which can normally be converted into cash
within an accounting period. These include cash, stock, debtor, and bank balances,
prepaid expenses, merchantable securities, etc. On the other hand, current liabilities refer
to those obligations, which must be paid within an accounting period. These include
creditors, bank overdraft, bills payable, outstanding expenses, etc. It is calculated as
follows:

Current Ratio=Current Assets/ Current Liabilities

 20

Current ratio is the quantitative test of a firm’s liquidity. It does not consider the quality
of current assets. Therefore, the ratios equal to or greater than 2:1 may not be doing well
due to slow-paying debtor of less convertible inventory. But a poor ratio less than 2:1
may be performing well if it has highly liquid stock and quality debtor.

Table number: 2.1

Current Ratio of NBL

Years Current Assets Current Liabilities Current Ratio

2075/2076 128336005809 124902998179 1.03

2076/2077 132210722265 150543086325 0.88

2077/2078 169870790503 182675271931 0.93

2078/2079 193911593624 215203062695 0.90

2079/2080 271316918664 246378179322 1.10

Source: Annual report of NBL (2075/2076 – 2079/2080)

The table number 2.1 shows that the current ratio is higher in the year 2079/2080 and
lowest in the year 2076/2077. It is decreased from 2075/2076 – 2076/2077 and again
increased in the year 2077/2078 and again decreased this year 2078/2079 and again
increase this year 2079/80.
 21

Diagrammatic Representation

300000000000
271316918664
246378179322
250000000000
215203062695
Analysis of current ratio

193911593624
200000000000 182675271931
169870790503
124902998179
150543086325
150000000000 128336005809
132210722265

100000000000

50000000000

1.03 0.88 0.93 0.90 1.10

0
2075/76 20776/77 2077/78 2078/79 2079/80

Current AssetsCurrent LiabilitiesCurrent ratio

Figure 1.1: Representation of current assets and current liabilities

2.1.2 Profitability Ratio

Profitability is the measurement of efficiency. This ratio provides an incentive to achieve
efficiency. It also indicates public acceptance of the product and shows that the firm can
produce completely. In this study, mainly investment related profitability ratios are used
to analyze because of financial institutions study.
 22

Table number2.2:
Net Profit for five fiscal years

Years Net Profit

2075/2076 2596736045
2076/2077 2332888541
2077/2078 2961230329
2078/2079 2923277569
2079/2080 3437578995
Source: Annual report of NBL (2075/2076 – 2079/2080)

Diagrammatic Representation

4,000,000,000

3,500,000,000
Analysis Net Profit of NBL

3,000,000,000

2,500,000,000

2,000,000,000

1,500,000,000

1,000,000,000

500,000,000

2075/76 2076/77 2077/78 2078/79 2079/80

Net Profit

Figure 2.1: Analysis Net profit of NBL

 23

The figure number. 2.1 i.e., Net Profit of NBL was highest in 2079/2080 and lowest in
2076/2077. The following major profitability ratio of NBL has been computed and
analyzed.

2.1.2.1 Return on Assets

It measures the firm’s return on investment of financial resources. It also helps us to
provide the information of proper utilization of the resources. It is the relation between
profit and total assets. Lower ROA means lower profit and higher ROA means higher
profit. In the present study, this ratio is examined to measure the profitability of all
financial resources in the bank.

ROA =Net Profit after Tax / Total Assets for that period

Table number 2.3:

Return on assets of NBL

Years Net Profit Total Assets Return on Assets

2075/2076 2596736045 171515645958 0.0151

2076/2077 2332888541 191162816827 0.0122

2077/2078 2961230329 222645477378 0.0133

2078/2079 2923277569 260077877377 0.01047

2079/2080 3437578995 296736597837 0.0116

Source: Annual report of NBL (2075/2076 – 2079/2080)

 24

Diagrammatic Representation
Analysis of Return on Assets

0.016
0.014
0.012
0.01
0.008
0.006
0.004
0.002
0

2075/76 2076/77 2077/78 2078/79 2079/80

Return on Assets

Figure 2.3: Return of Assets

The trend of ROA shows that it is fluctuating. From the year the data taken it has been
fluctuating. It has been fluctuating down from 0.0133 to 0.0116. The above table and
figure shows that the ROA of NBL is not satisfactory. Thus, the management of NBL
must keep their eye towards the situation and mobilize their working assets more
efficiently to earn more profit.

2.1.2.2 Return on Capital Employed

Return on capital employed indicates the firm’s ability of generating profit per rupee of
capital employed. In other’s words, it indicates how well the management has used the
supplies supplied by the creditors and owners.

ROCE = Net Profit after tax / capital employed

 25

Table number: 2.4

Return on capital employed

Year Net Profit Capital Employed Return on Capital

Employed

2075/76 2596736045 46612647779 0.0962

2076/77 2332888541 40619730502 0.0557
2077/78 2961230329 39970205447 0.0574
2078/79 2923277569 44874814682 0.0741
2079/80 3437578995 46274833583 0.0743
Source: Annual report of NBL (2075/2076 – 2079/2080)

Diagrammatic Representation

0.12

0.1

0.08
RETURN ON CAPITAL

0.06

0.04
EMPLOYED

0.02

0
2075/76 2076/77 2077/78 2078/79 2079/80
AXIS TITLE

Return on Capital Employed

Figure 2.4: The trend analysis of ROCE is fluctuating

 26

The above figure 2.4 the trend analysis of ROCE is fluctuating shows that the trend line
decrease from 2075/76 to 2076/77 and increases to 2079/80.

2.1.3 Earnings per Share (EPS)

It simply shows the profitability of the firm o a peer share basis. It is calculated from the
point of view of the ordinary shareholders. It is calculated by dividing the profit after tax
by the total number of ordinary share outstanding.

EPS = Net profit after tax / number of common share

Table number 2.5:

Earnings per share of NBL

Years Net Profit Number of Shares Earnings per

Share
2075/2076 2648028845 98111480 26.99

2076/2077 2333287217 112828202 20.68

2077/2078 4899271309 126367586 38.77

2078/2079 2922958083 144059048 20.29

2079/2080 3437578995 14694022927 23.39

Source: Annual report of NBL (2075/2076 – 2079/2080)

 27

Diagrammatic Representation

45

40

35
Earning Per Share

30

25

20

15

10

5
2075/76 2076/77 2077/78 2078/79 2079/80
0
Earning per share

Figure number: 2.5 Trend analysis of EPS

The above figure 2.5 of EPS analysis shows that the bank has highest EPS in 2077/2078
whereas the lowest in 2078/2079.

2.1.4 Price Earnings Ratio (P/E Ratio)

The price earnings ratio is the ratio for valuing company that measures its current share
price relative to its per-share earnings. The PE Ratio is the most widely used method for
determining whether shares are correctly valued in relation to one another. A company
with a low PE ratio indicates that the market perceives it to higher risk or lower growth or
both compared to the company with a higher PE ratio.

PE Ratio = Market Value per share / Earning per Share

 28

Table number 2.6:

P/E Ratio of NBL

Years Market Value per Earnings per P/E Ratio

share Share
2075/2076 336 26.99 12.4491

2076/2077 249 20.68 12.0406

2077/2078 443 38.77 11.4264

2078/2079 286 20.29 14.0956

2079/2080 249 23.29 10.6913

Source: Annual report of NBL (2075/2076-2079/2080)

Diagrammatic Representation

16

14

12

10
P/E Rato Analysis

0
2075/76 2076/77 2077/78 2078/79 2079/80

P/E Ratio

Figure 2.6: Trend analysis of P/E Ratio

 29

PE ratio shows the relationship between prices to earnings of the company. The trend of
the company shows that it was high in the year 2078/2079 as compared to other years as
the market price of the share in that year was relatively high. We performed this data on
the basis of available online statement of NBL.

2.1.5 Net worth per share

Net worth is the amount by which assets exceed liabilities. Net worth is a concept -
applicable to individuals and business as a key measure of how much an entity is worth.
A consistent increase in net worth indicates good financial health conversely, net worth
may be depleted by annual opening losses or a substantial decrease in asset values
relative to liabilities. Net worth per share is calculated as follows:

Net Worth per Share = Total net worth / Total number of shares

Table number 2.7:

Net Worth of NBL

Years Total Net Worth Number of Net Worth per share

Shares
2075/2076 29281300000 98111480 298.4493

2076/2077 30031000000 112828202 266.1657

2077/2078 33215100000 126367586 262.8451

2078/2079 35463600000 144059048 246.1741

2079/2080 36522671808 146940229 248.5546

Source: Annual report of NBL (2075/2076 – 2079/2080)

 30

Diagrammatic Representation

350

300

250
Net worth per share

200

150

100

50

2075/76 2076/77 2077/78 2078/79 2079/80

Net worth per share

Figure number 2.7: Trend analysis of net worth per share

The trend of net worth per share shows that it is fluctuating. It is highest in the year
2075/2076 and lowest in 2078/2079. In the given table above, net worth is fluctuating
along with number of shares. It may be due to fluctuation in annual operating expenses or
a substantial fluctuation in assets values relative to liabilities.

2.1.6 Non-Performing Loan to Total Loan Ratio

It is the ratio of non-performing loan to total loan. It helps to know the risk loan which is
difficult to recover. Lower non-performing loan reflects better financial position.
 31

Table number 2.8:

Non-Performing Loan to Loan Ratio of NBL

Years Non–performing loan Total Loan Ratio

2075/2076 372368847169 110495206875 3.37

2076/2077 375498576930 142234309443 2.64

2077/2078 397995608464 161131825289 2.47

2078/2079 388332179284 189430331358 2.05

2079/2080 497721325432 119829164767 4.16

Source: Annual report of NBL (2075/2076 – 2079/2080)

Diagrammatic Representation

4.5
4
3.5
3
NPL to Total

2.5
2
Loan

1.5
1
0.5
0
2075/76 2076/77 2077/78 2078/79 2079/80

NPL to Total Loan

Figure 2.8: Trend analysis of Non- Performing Loan to Total Loan

 32

Internal income to loans and borrowings ratio:

This ratio is calculated by dividing interest income with loans and borrowings. It
indicates the capacity to generate interest from loans and borrowings. It shows the
income level compare to the loans and borrowings provided by the bank to their
creditors. It shows how a bank’s interest income is increasing by utilizing its revenue
generating assets.

Table number 2.9:

Interest Income to loans and borrowings ratio of NBL

Years Interest income to loans and

borrowings ratio
2075/76 11.16

2076/77 11.23

2077/78 12.22

2078/79 9.73

2079/80 10.25

Source: Annual report of NBL (2075/2076 – 2079/2080)

 33

Diagrammatic Representation

14

Interest income to loans and borrowing 12

10

0
2075/76 2076/77 2077/78 2078/79 2079/80

Interest income to loans and borrowings ratio

Figure number 2.9: Interest income to loans and borrowings

2.1.7 Leverage Ratio:

2.1.7.1 Proprietary Ratio
The proprietary ratio, also known as net worth ratio, is used to evaluate the soundness of
capital structure of a company. The proprietary ratio shows the contribution of
stockholders in total capital of the company. A high proprietary ratio, therefore, indicates
a strong financial position of the company and greater security for the creditors.

Proprietary Ratio= Stockholder’s fund / Total Assets

 34

Table number 2.10:

Proprietary Ratio

Years Shareholder's Total Assets Proprietary Ratio

Equity
2075/2076 33215146020 130226118770 0.2550

2076/2077 30030991537 133467201041 0.2250

2077/2078 29281336515 171515645958 0.1707

2078/79 35463613384 260077877377 0.1364

2079/2080 36522671608 296735597837 0.1231

Source: Annual report of NBL (2074/2075 – 2079/2080)

Diagrammatic Representation

0.3

0.25
Proprietary Ratio

0.2

0.15

0.1

0.05

0
2075/76 2076/77 2077/78 2078/79 2079/80

Proprietary Ratio

Figure number 2.10: Trend analysis of Proprietary Ratio

 35

Figure number 2.10, shows that the trend analysis of Proprietary Ratio of Nepal Bank
Limited which shows proprietary ratio is decreasing from 2075/76 to 2079/80.

2.2 Major Findings

From this research, we found the following things;

 The bank has a satisfactory liquidity position and is in growing position.

 The bank has a satisfactory level of profit.
 The capital structure of the bank is fluctuating due to fluctuating trend
of proprietary ratio.
 36

CHAPTER III:
SUMMARY AND CONCLUSION

3.1 Summary

Generally, it is difficult to determine the actual position of liquidity and profitability of

Nepal Bank Limited depending only on the result achieved by the ratio analysis. Ratio
analysis doesn’t consider the quantitative factor of the statement. It is only the analysis
tool of comparing the numeric factors. Although all of these weakness of this technique,
it has taken as a strong and powerful tool.

1. The current ratio was fluctuating. The current ratio is higher in the year 2079/80
and lowest in the year 2076/2077. It is decreased from 2075/2076 – 2076/2077
and again increased in the year 2077/2078 -2079/80.
2. The above result of ratio doesn’t satisfy the standard ratio of 1:1. The current
liabilities of institutions have seen more than the amount of current assets.
Theoretically, the result shows that the current assets are not enough to meet the
obligations of current liabilities.
3. Return on assets shows the percentage of profit earned in the assets employed by
the business.
4. Earnings per share is in fluctuating trend.
5. The book net worth of company is fluctuating.
6. Interest income to loans and borrowings fluctuating.
7. The proprietary ratio indicates the extent to which the assets of the company can
be lost without affecting the interest of the company.

3.2 Conclusion

By and large, a proper marketing plan and a better strategy and a smooth implementation
are the basics ingredients of any successful business. So, to operate any profitable
business, lots of homework should be done. Since the future program of NBL are quite
good so delay should not be made.
 37

The study is primarily aimed at accessing financial aspects of the bank. It has found that
the bank a pleasant goodwill that it has created in marketing through its operations.

The findings of analysis can be concluded as below:

Analysis ratio shows that bank has been able to perform outstanding, at least we can
conclude on the basis of annual report, not has to lament for what if couldn’t be achieved.
However, it has been growing and that it further needs improvement in its due courses of
operations to increase better future. But we cannot overlook the macroeconomics
conditions and instability of current affairs the net profit level of the banks has gone up
considerably over the last of operations, which if not tackled prudently would obviously
hamper its profitability. The bank should be able to administer and follow up the loan that
it has dispersed and evaluate the proposals and its credibility thoroughly so that the banks
would not have to face undesirable problems.
 38

BIBLIOGRAPHY

Bajracharya, B.C (2078), Business Statistics and Mathematics, Kathmandu, M.K.

Publisher and Distributor.

Bajracharya, P, Ojha, K.P., Goet, J. & Sharma, S. (2022), Managerial Accounting in

Nepalese Perspective, Kathmandu, Asmita Books publisher and Distributors.

Bhandari, D.B. & Rai K.G, (2019), Business Research Methods, Kathmandu,
SukundaPustakBhawan

Chaudhary, S. (2022), Managerial Functions for Management, New Delhi, Tata McGraw
Hill Publishing Company Ltd.

Dangol, R.M., (2078), Management Accounting, Kathmandu: Taleju Prakashan

Drury, S.K. Colin (2023), Management and Cost Accounting, USA: Business Press,
Thomson Learning

Fago, G.,(2023), Profit Planning and Control, Kathmandu: Buddha Academic Publisher
and Distributor Pvt. Ltd.

Garrison, R.H. 2020, Managerial Accounting, Texas: Business Publication Inc. Plan.

Gupta, R.L. & Radhaswamy M. (2019), Advanced Accounting, New Delhi: Sultan Chand
and Sons, Educational Publishers

Gupta, S.P. (2015) ,Statistical Methods, New Delhi: Sultan Chand and Sons.

Khan M.Y., Jain P.K. (2022), Financial Management, Eighth Edition, New Delhi;
Prentice-Hall of India Pvt. Ltd.

Pandey, I.M (2021), Analysis of financial of Banks, (2021), Eighth Edition, Vikas
Publishing House Pvt. Ltd.
 39

APPENDICES -A

List of the commercial banks in Nepal

 Nepal Bank Limited

 Global IME Bank Limited
 Rastriya Banijya Bank Limited
 Citizens Bank Limited
 Agricultural Development Bank
 Prime Commercial Bank Limited
 Nabil Bank Limited
 Laxmi Sunrise Bank
 Everest Bank
 Himalayan Bank Limited
 NIC Asia Bank Limited
 Kumari Bank
 Machhapuchchhure Bank Limited
 Nepal Investment Mega Bank Limited
 Standard Chartered Bank Limited
 Nepal Investment Mega Bank Limited
 Nepal SBI Bank
 NMB Bank
 Prabhu Bank
 Sanima Bank
 Siddhartha Bank Limited (Sources: Nepal Rastra Bank)

Although bank can be categorized into different types on the basic of its
function objectives etc., World Bank always refers to the commercial banks.
Basically the function of the bank all over the world, are same. Basic
 40

functions are various types of deposits facility namely currently saving and
fixed safety of public money remittance of money guarantee locker facilities,
letter of credit loans serving as agent of credit foreign exchange etc. The
commercial banks of Nepal also all these function.