Page |1

CHAPTER II

PRESENTATION AND ANALYSIS OF DATAS

2.1 Descriptive Analysis

The following data includes the key parameters for the general analysis of Nepal Investment
Bank Limited and Nabil Bank Limited:

Table 1:General Data for NIBL and NABIL

Particular NIBL NABIL

No Of Branches 61 55

Number Of ATMs 98 100

Paid Up Capital 9,240,378,865.00 6,185,507,000.00

Net Income After Tax 3,114,131,140.00 3,613,200,322.00

Price Earnings Ratio 26.30 26.07

Earnings Per Share 29.30 58.41

Sources: From the annual report of the NIBL and NABIL

Both NIBL and NABIL are amongst the top banking institutions in Nepal. From the above
table, we can clearly see that NIBL has a slight edge over NABIL in terms of market
coverage with more numbers of point of representations i.e. branches and ATMs. Even
though both banks are highly profitable, NABIL enjoys a higher profitability. Greater market
coverage and higher profitability, in turn, has contributed to a higher EPS for NABIL.
 Page |2

Consequently, investors associate more value to NIBL‟s stock that is evident through the
Price Earnings Ratio.

2.1.1. Analysis on the Operating efficiency of NIBL and NABIL:

Operational efficiency of NABIL and NIBL has been analyzed on the basis of the Net interest
income, Net operating income and Net income or loss after tax, which is presented as
following:

Figure 2: Banking operational efficiency of NIBL and NABIL

160,000

140,000

120,000

100,000

80,000

60,000

40,000

20,000

Investment Bank NABIL

Sources: Annual report of NIBL and NABIL

Over the 3-year period, we can witness that both banks have experience a positive trend with
significant growth in terms of deposits, loans & advances and total assets but the growth in
the banking operation of NIBL is rapid in compared to NABIL. However, looking into inter-
bank performance, we can see that NIBL has maintained higher growth as compared to
NABIL in absolute terms in all the above three variables.
 Page |3

2.1.2. Analysis on the banking operation of NIBL and NABIL:

Figure 3: Banking operational efficiency of NIBL and NABIL

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

Investment Bank NABIL

Sources: Annual report of NIBL and NABIL

The figure shows the operating efficiency of both banks over the three fiscal periods,
2071/72, 2072/73 and 2073/74. From the graph, we can see that interest income for both the
banks NIBL and NABIL is increasing continuously throughout the years. The operating
profit for both banks has been at peak at 2073/74. Finally, the net income after tax for both
banks has steadily grown over the past three periods. Based on the volume, we can conclude
that NABIL has a better operating efficiency than NIBL.

2.2. Descriptive Statistical Analysis

 Page |4

The descriptive analysis of the selected banks will be done on the basis of the CAMEL rating
and the criteria to evaluate will mainly be based on the Mean and SD of the banks that has
been derived in order to assess their comparative performance.

2.2.1 Capital Adequacy

Table 2 : Capital Adequacy Ratios of NIBL and NABIL

Capital Ratio Banks 2069/70 2070/71 2071/7 2072/73 2073/74 X́ σ

Adequac 2
y
CAR NIBL 11.49 11.27 11.90 14.92 13.02 15.65 1.50

NABIL 11.59 11.24 11.57 11.73 12.42 14.64 0.44

CCR NIBL 10.01 9.52 9.54 13.05 11.58 13.43 1.54

NABIL 9.98 9.74 10.18 10.51 11.21 12.91 0.57

Source: Worked out from the data of Appendix 1 & 2

The above table displays the observed CAR and CCR from the selected banks over the 5-year
period. It is observed that NIBL has a CAR of 15.65% with a SD of 1.50 while NABIL has a
CAR of 14.64% and a SD of 0.44. As per the direction of NRB, banks in Nepal should
maintain a 11% CAR and consequently both the banks have successfully maintained the
criteria (NRB, 2074 B.S). The mean of NIBL is higher than that of NABIL with a higher
standard deviation. Thus, it is evident that despite the fact that both the banks have upheld the
stipulated level of CAR, NIBL has maintained a higher ratio with a higher variability. Thus,
NIBL is efficient in captivating the losses mainly due to operations and determining the
capacity to withstand the losses.

Similarly, in case of CCR, NIBL mean is 13.43% with a SD of 1.54 while that of NABIL is
12.91% with a SD of 0.57. As per the requirement specified by NRB, the bank core capital
must be above 6% and it is evident that both the banks have a CCR that is higher than the
requisite number (NRB, 2074 B.S). A higher CCR has a crucial bearing on the profit margins
 Page |5

and a bank’s ability to compete. Thus, NIBL has a superior CCR than that of NABIL with a
higher variability.

A higher CAR and CCR ensures efficiency and reduces the chance of insolvency in the
banks. Thus, NIBL retains a greater capital base and therefore, maintains stability, security
and trust in the banks against the contributor’s money.

2.2.2 Asset Quality

Table 3 : Assets Quality Ratios of NIBL and NABIL

Assets Ratio Banks 2069/70 2070/71 2071/7 2072/7 2073/7 X́ σ

Quality 2 3 4

NPLL NIBL 1.91 1.77 1.25 0.68 0.83 1.61 0.55

NABIL 2.13 2.23 1.82 1.14 0.8 2.03 0.63

NPLE NIBL 15.09 13.49 10.65 6.05 5.45 12.68 4.32

NABIL 18.62 18.78 15.98 9.37 6.28 17.26 5.68

Source: Worked out from the data of Appendix 1 & 2

The above table displays the observed NPLL and NPLE from the selected banks over the
5-year period. With reference to NPLL, NIBL has a mean of 1.61% with a SD of 0.55 while
NABIL has a mean of 2.03% with a SD of 0.63. So, it can be concluded that NIBL has a
better position as its NPLL is lower than that of NABIL. The quality of credit of NABIL on
the loan portfolio has been considerably low over the years. The loan holders have failed to
meet the overdue on time due to which NABIL is inclined towards higher risk. However,
NIBL data shows a considerable decrease in the percentage of NPLL in the stipulated time
frame that signifies a better risk management system.

In terms of NPLE, NIBL has a mean of 12.68% with a SD of 4.32 while NABIL has a mean
of 17.26% with a SD of 5.68. As non-performing loan increase, chances for default increase
which has to be ultimately written off against the capital from the shareholders. In this case,
 Page |6

NABIL has high fluctuations in its NPLE ratio while NIBL’s ratio show a decrease in its
value. The mean of NABIL is 1.36 times greater than that of NIBL which shows NABIL’s
inefficiency. Thus, NIBL has superior implementation in case of NPLE with a lower
variability.

Thus, by limiting the amount of outstanding loan, the bank can improve their asset quality.
NIBL has successfully maintained a decent NPLL and NPLE ratio.

2.2.3 Management Efficiency

Table 4 : Management Efficiency Ratios of NIBL and NABIL

Managemen Ratio Banks 2069/70 2070/71 2071/72 2072/73 2073/74 X́ σ

t Efficiency
PPE NIBL 2.10 2.12 2.02 2.54 2.62 2.85 0.28

(in NABIL 2.99 3.20 2.97 3.56 4.26 4.25 0.54

millions
)

NITB NIBL 43.52 45.45 42.65 55.45 51.05 59.5 5.46

3
(in
million) NABIL 43.51 45.48 38.07 51.26 65.69 61.0 10.56
0

Source: Worked out from the data of Appendix 1 & 2

In case of PPE, NIBL has a mean of Rs.2.85 million while NABIL has a mean of Rs.4.25
million. The SD of NIBL is 0.28 whereas that of NABIL is 0.54. A higher PPE reflects a
better management quality. The PPE computes the ratio of the net income earned with that of
the total number of employees. This means that each employee at NABIL produces 4.25
million and NIBL produces 2.85 million worth of surplus Thus, in the above case, NABIL
has a greater PPE which shows greater efficiency from the management.
 Page |7

Likewise, in case of NITB, NIBL has a mean of Rs.59.53 million with a SD of 5.46 while
NABIL has a mean of Rs.61.00 million with a SD of 10.56. As mentioned earlier, NITB is
the net income earned by each branch. A higher NITB indicates an efficient and flexible
management. Thus, NABIL has a greater NITB and it is evident from the above table that the
bank has been able to sustain it over the years.

A higher PPE and NITB ratio reflects greater administrative proficiency that ensures banks
stability and strength. In both cases, NABIL proves to be at a better position than NIBL and
thus has greater management efficiency.

2.2.4 Earning Ability

Table 5 : Earning Ability Ratios of NIBL and NABIL

Earnin Rati Banks 2069/70 2070/7 2071/7 2072/7 2073/7 X́ σ

g o 1 2 3 4
Ability
ROA NIBL 2.62 2.25 1.88 1.97 2.06 2.69 0.29
(%)
NABI 3.25 2.89 2.06 2.32 2.70 3.31 0.47
L

ROE NIBL 31.65 27.63 24.75 26.01 19.12 32.29 4.57

(%)
NABI 32.78 27.97 22.73 25.61 26.65 33.94 3.69
L

Source: Worked out from the data of Appendix 1 & 2

From the above table, the ROA of NIBL is 2.69% with a SD of 0.29 while that of NABIL is
3.31% with a SD of 0.47. It is clear that NABIL has a higher ROA than that of NIBL with
higher asset productivity. This means that NABIL uses its assets effectively and efficiently
which thereby improves the financial position of the bank. Also, this ratio is deemed to be an
 Page |8

essential instrument for evaluating the banks progress through the utilization of assets and
financial quality.

Likewise, the ROE of NIBL is 32.29% with a SD of 4.57 whereas that of NABIL is 33.94%
with a SD of 3.69. This ratio is an indicator of the management’s productivity in utilizing the
shareholder funds in attaining a profit. It also computes the amount of profit made by the
organization for each unit of equity invested in the organization. Thus, it is evident that NIBL
has a greater ROE than that of NABIL.

A higher ROA and ROE demonstrates the ability of the bank to earn sustainably and
consistently and thus, determine the profitability of the banks.

2.2.5 Liquidity

Table 6 : Liquidity Ratios of NIBL and NABIL

Liquidit Ratio Banks 2069/70 2070/71 2071/72 2072/73 2073/74 X́ σ

y
CRR NIBL 16.00 19.20 12.00 7.20 10.50 16.23 4.70

NABIL 9.32 11.32 14.15 6.77 10.02 12.90 2.71

CDR NIBL 76.40 72.41 74.70 80.10 84.90 97.13 4.91

NABIL 74.90 74.55 64.43 70.49 65.38 87.44 4.93

Sources: Worked out from the data of Appendix 1 & 2

In terms of CRR, NIBL has a 16.23% mean with a SD of 4.70. On the contrary, NABIL has a
12.90% mean with a SD of 2.71. It is visible that NIBL has upheld a higher CRR. According
to the directive, all banks are supposed to maintain a 6% CRR in their accounts preserved by
 Page |9

NRB (NRB, 2074 B.S). Therefore, NABIL has a lower mean CRR but it has always
outshined NRB’s requirement.

Likewise, in terms of CDR, NIBL has a mean of 97.13% with a SD of 4.91 whereas NABIL
has a mean of 87.44% with a SD of 4.93. This ratio computes a percentage of total loans that
the bank is distributing out of the total deposit. This is a good measure of liquidity. A greater
CDR means that the bank may not have enough liquidity to cover any unforeseen fund
requirements while a low ratio implies that the bank may not be earning to its potential. Thus,
in the above case, NABIL has a comparatively lower CDR which means that it is more liquid
however; this has both benefits and drawbacks.

Hence, these ratios are crucial to assess the overall administration of the bank as they
measure the capacity with which resources can be changed over to money. Therefore, NABIL
is more liquid than NIBL.