FINANCIAL ANALYSIS OF THE LAXMI BANK LTD.

A Project Report

Submitted By: Prakash Bahadur Bohara

T.U Registration No: 7-2-179-0036-2016

Exam Roll No. 250245

Roll No: 1470
Nepal Commerce Campus

Submitted to: The Faculty of Management

Tribhuvan University, Kathmandu.

In Partial fulfillment of the requirements for the degree of

BACHELOR OF BUSINESS STUDIES (BBS)
Kathmandu, Nepal.
 DECLARATION

I hereby declare that the project work entitled A Financial Analysis of The Laxmi Bank
Limited submitted to the faculty of management Tribhuwan University, Kathmandu is an orginal
piece of work under the supervision of Mr. Murari Karki faculty member of Nepal Commerce
Campus, Minbhawan, Kathmandu is submitted in partial fulfillment of the award of the degree of
bachelor of Business Studies (BBS). This Project work has not been submitted to any other
university or institution for the award any degree or Diploma.

………………….………..

Prakash Bahadur Bohara

Nepal Commerce Campus
Minbhawan, Kathmandu
17th Jan, 2021
 RECOMMENDATION

This is to certify that the project work assignment report entitled "Financial Analysis of the
Laxmi Bank Limited" Submitted by Prakash Bahadur Bohara has been prepared under the
supervision of Mr. Murari Karki, Lecture of Ncc.

This Project work assignment report is forwarded for Examination.

..................................
Mr. Murari Karki
Nepal Commerce Campus, Kathmandu
17th Jan, 2021
 Endorsement

We herby endorse the project work report entitled A Financial analysis of Laxmi Bank Limited
Submitted by Prakash Bdr. Bohara of Nepal Commerce Campus, in partial fulfilment of the
requirements for award of Bachelor of Business Studies (BBS) For External Evaluation.

……………. -----------

……………..
Date
 ACKNOWLEDGEMENT

This Project work report has been designed for the Partial fulfillment of Bachelor Level of
Business Studies (B.B.S) 4th Year Prescribed by Tribhuwan University. Project work report is
knowledge gaining task in doing the work on project . As it is a practical works, has to motivate
to field to data and much helpful and challenging work to the students. First of all, I am also
Thankful to Tribhuwan University for including project work report.
Activity in BBS4th year. I am Also Thankful to Aspiring team of Laxmi Bank ltd. For Providing
valuable information and Data.
Initially, I am thankful to Mr. ............, Campus Chief of NCC. I would like to special thanks to
Mr. Murari Karki for his Valuable Suggestion and for his guidance. I would like to extend my
sincere gratitude to all respective teachers of NCC for giving me guidelines to prepare this project
work report.
Love and affection of family always encouraged and inspired me to perform any work intensively.
So, I am thankful to my family for their support and inspiration to pave the Path for Successful in
my Academic Pursuit.

………………….

Praksh Bahadur Bohara 17th Jan, 2021

Nepal Commerce Campus Minbhawan Kathmandu

 List of Abbreviation

A/C Account

NRB Nepal Rastra Bank

B.S Bikram Sambat

B/s Balance sheet

C.A Current Assets

C.L Current Liabilities

EBIT Earnings Before interest and Tax

LTD. Limited

LXBL. Laxmi bank Limited

NPAT Net profit after tax

P/L Profit and loss

NCC Nepal commerce campus

ROE Return on Equity

ROA Return on Assets

ROCE Return on Capital Employed

 List of Table

2.1 Five year comparative Balance sheet

2.2 Five Year comparative P/L A/C
2.3 Current ratio
2.4 Quick ratio
2.5 Debt ratio
2.6 Debt Equity ratio
2.7 Interest coverage ratio
2.8 Return on assets
2.9 Return on equity
2.10 Return capital employed

3.1 Comparative chart of findings

List of Figure

1. Current Ratio
2. Quick Ratio
3. Debt Ratio
4. Debt Equity Ratio
5. Interest coverage Ratio
6. Return on Assets
7. Return on Equity
8. Return on Capital employed
Contents
Declaration ...................................................................................................................................... 2

Recommendation ............................................................................................................................ 3

Acknowledgement .......................................................................................................................... 5

List of Abbreviation .................................................................................................................... 6

List of Table ................................................................................................................................ 7

List of Figure............................................................................................................................... 7

Chapter I........................................................................................................................................ 11

Introduction ................................................................................................................................... 11

Background of the Study .......................................................................................................... 11

Profile of the Laxmi Bank Ltd .................................................................................................. 12

Vision ........................................................................................................................................ 14

Mission...................................................................................................................................... 14

Objective of the Study .............................................................................................................. 14

Rationale of the study ............................................................................................................... 15

Research Gap ................................................................................................................................ 15

Research Methodology ................................................................................................................. 16

Research Design........................................................................................................................ 16

Population and sample .............................................................................................................. 16

Types of Data Sources .............................................................................................................. 17

Types of data used .................................................................................................................... 17

Data collection procedures ........................................................................................................ 17

Tools and Technique of Analysis ............................................................................................. 17

Tools and techniques of financial performance Analysis ......................................................... 18

Limitation of the Study ............................................................................................................. 18

 Report Structure ........................................................................................................................ 19

Chapter II ...................................................................................................................................... 19

Data Presentation and Analysis .................................................................................................... 19

Presentation of the Data ............................................................................................................ 20

Analysis of Data ........................................................................................................................ 25

Liquidity Analysis ................................................................................................................. 25

Current Ratio ......................................................................................................................... 25

Quick Ratio ........................................................................................................................... 26

Leverage Analysis ..................................................................................................................... 27

Debt Ratio ............................................................................................................................. 28

Debt Equity Ratio ................................................................................................................. 29

Interest Coverage Ratio/TIE Ratio........................................................................................ 30

Profitability Analysis ................................................................................................................ 31

Return on Assets ................................................................................................................... 31

Return on Equity (ROE) ....................................................................................................... 32

Return on Capital Employed ................................................................................................. 33

CHAPTER III ............................................................................................................................... 35

Summary and Conclusion ............................................................................................................. 35

Summary ................................................................................................................................... 35

Major Findings .......................................................................................................................... 36

Conclusion ................................................................................................................................ 36

Bibliography ................................................................................................................................. 38
 CHAPTER I

INTRODUCTION

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

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

Background of the Study

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

The bank had started in Italy in 12th century as a public bank. The Bank of Venice that was
established in 1158 A.D. was the first bank in the history of banking. Following its establishment
various banks such as Bank of Barcelona, which was established in 1401 A.D was the second bank
of the world. Similarly, Bank of Geneva (1407), Bank of Amsterdam (1609), bank of Hindustan
(1770) were established. The first central bank was the “Bank of England” which was established
in 1844 AD.
 Bank is a financial institution, which is engaged in monitory transaction. Bank has always
been the most importance and largest financial intermediates. Banks collect the scattered money
from public providing those interests and services. This collection becomes the capital for the bank
to invest. “Banking means the accepting of money for the view of lending or investment of deposit
from the public repayable on demand or otherwise and withdraw able by cheque, draft or
otherwise”, is according to Banking Regulation Act 1949 of India. World Bank says “Banks or a
financial institution that accepts funds in the forms of deposit repayable on demand or at short
notice.”

Since, the financial sector in Nepal is small, it is growing fast. At present banking system
comprises of NRB, 28 commercial bank and many financial companies, contractual, saving
institution and nongovernment organization conduction limited banking activities transaction.
The umbrella act set out regulation for licensing, supervision and cancellation of commercial bank.

Profile of the Laxmi Bank Ltd

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

Nepal Bank Limited established in 1994 BS is the first commercial bank in Nepal.
Commercial banks perform various functions. Among them, accepting various types of deposit is
the main function of commercial banks. Commercial banks are directly related with the people and
institution. The commercial bank is an important bank. Its function is very attractive for people.
Although these banks are truly inspired with the objective of gaining profit, these commercial
banks.

In Nepal the commercial bank perform the following functions. Of the many function of
the commercial bank acceptance of deposits is one of them. The bank allows for opening the three
types of accounts to accept deposit for their customers. They are current, saving and fixed deposit
account. People can collect their money in one of the three as their need. But the interest is given
to the saving and fixed account. The commercial bank performs the important function of
accepting all sorts of deposits. It earns profit by investing that money in another place.

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

• With the pledge of goods, .and pledge of gold and silver.

• With the security of immovable property
• With the security of other similar goods.

Laxmi Bank Ltd. was incorporated in April 2002 as the 16th commercial bank in Nepal. In
2004 Laxmi Bank merged with HISEF Finance Limited, a first generation financial company
which was the first merger in Nepali corporate history. Further, the bank acquired Professional
Diyalo Bikas Bank in January 2017, a class “B” development bank.

Today, through its branches and a host of IT enabled channels, the Bank serves a wide
range of customers. Despite a relatively short history, Laxmi Bank has emerged as a major player
across all business lines – retail, midmarket, corporate, infrastructure and treasury. The Bank is
widely recognized as one of the best-managed banks in Nepal with high standards of corporate
governance culture, risk-management systems and a strong technology.

Laxmi Bank’s microfinance subsidiary – Laxmi Laghubitta Bittiya Sanstha Ltd, a category
D financial institution licensed by Nepal Rastra Bank is in operation since 2012.

Similarly, Laxmi Bank’s investment banking subsidiary – Laxmi Capital Market Ltd,
licensed by the Securities Board of Nepali’s offering various merchant and investment banking
services since February 2009. Laxmi Capital also manages Laxmi Value Fund – 1 and Laxmi
Equity Fund, the two Mutual Funds sponsored by Laxmi Bank, both of which are listed and traded
at the Nepal Stock Exchange.
 The Bank closed the previous financial year 2018/19 with a balance sheet size of
NPR 102 billion that includes deposits and risk assets of NPR 86.87 billion and NPR 78.46 billion
respectively. All key financial indicators of the Bank are well within prudential and regulatory
norms.

Vision

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

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

Objective of the Study

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

 To examine the financial performance of Laxmi Bank Ltd.

 To make comparative analysis of the relationship between total deposit and total
investment, total deposit and loan and advance, total assets and net profit of Laxmi Bank
Limited.
 To examine the liquidity, leverage, capital Adequacy turnover and profitability position of
Laxmi Bank limited.
  To liquidity management, profitability position, assets management efficiency, investment
practices of the Laxmi Bank Limited.

Rationale of the study

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

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

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

RESEARCH GAP

Based on the review of the previous researches, researcher found that most of the previous
researches on portfolio management have been conducted showing the risk and return of the
stocks. Portfolio management of commercial bank’s assets basically means the collection of fund
to different components but none of the researches are done on making analysis of financial
statement of Laxmi Bank Ltd. Previous researches are not able to show the real picture of financial
analysis of Laxmi Bank Ltd. Thus, this research aims to conduct the research from the bank’s side
regarding the financial statement available of the bank for the maximization of return to the bank.
 RESEARCH METHODOLOGY

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

Research Design

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

The study report is based mostly on secondary information of Laxmi Bank . In addition to
this, reference has been made in library consult, class lectures, Related books of banking, financial
management and accounting during the preparation of this study.

Population and sample

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

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

Types of data used

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

Data collection procedures

Secondary Data Source:

In this study, the main source of data is secondary which are collected from pre-published
data sources. The financial data from the published documents and audited financial statements
were manually extracted into the computer files of Microsoft Excel program which acted as master
database file. The data was refined further into spreadsheets to carry out financial ratio calculation
and graphical illustrations through mathematical functions and Chart program of the Excel
program.

Tools and Technique of Analysis

All the collected data are tabulated and presented in the figures. For this purpose, the researcher
applied both financial as well as mathematical/statistical tools. They are as follows:

 Balance sheet
 Profit and loss account
 Table
 Chart
Tools and techniques of financial performance Analysis
The Data taken during analysis consist of previous five year i.e. from 2071/2072,
2072/2073, 2073/2074, 2074/2075, & 2075/2076 are tabulated as per mathematical & accounting
rules and regulations, here are the various factors that measure the financial performance wise
found by using different Financial and statistical procedure. They are as follows:

a. Liquidity Position
i) Current Ratio
ii) Quick Ratio

b. Leverage Position
i) Debt Ratio
ii) Debt equity
iii) Interest Coverage Ratio

c. Profitability Position
i) Return on Assets
ii) Return on Equity
iii) Return on capital Employed

Limitation of the Study

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

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

• This study is based on secondary data and such as published financial statement of
commercial bank along with other related journal, newspapers, magazines, and bulletins
etc. which are also insufficient for completion of the study.
• The study period will cover only five year fiscal years 2013/14 to 2017/18
• This research has been conducted to fulfill the requirement BBS course for a prescribe
time.
Report Structure

The Report has been structured into three Chapters. They are as follows.
Chapter I: Introduction
This is the Introductory Chapter, Which has Covered Background of study Statement of
the problem, Object of the study, and the methodology used etc.

Chapter II: Presentation and analysis of the Data

It will include Secondary Data and Primary Data presentation, Data analysis,
Interpretation, testing of the hypothesis and major findings.

Chapter III: Summary and conclusion

The last chapter summarize the whole study and recommendation. It also offers several
avenues for future research. The exhibits and bibliography and incorporated at the end of study.

CHAPTER II

DATA PRESENTATION AND ANALYSIS

The Main Objective of This Research Study is to know the financial efficiency of laxmi
bank. In order to achieve this objective the financial statement of laxmi bank Limited is analyzed
using certain accounting, financial and statistical Tools.

This Chapter Deals with Presentation and Analysis of data regarding the financial
statement of the Laxmi Bank Limited. Thus this chapter answer the research questions in order to
know the financial position of LXBL.

This Chapter is divided into two parts.

i) Presentation of Data
ii) ii) Analysis of Data
Presentation of the Data

The Presentation of data is the basic organization and classification of the data for analysis. The
included data are collected from various resources. Collected Data are tabulated, analyzed and
interpreted. The main object of analyzing the financial performance and interpretation is to
highlight the strength & weakness of the business. In in this chapter three years (2071/2072,
2072/2073, 2073/2074, 2074/2075/ 2075/2076) Comparative balance sheet and P/L are presented
below.

Table 1: Five Years (2071/ 2072 to 2075/2076) Consolidated Balance Sheet of Laxmi Bank
Limited.

Particular 2071/2072 2072/2073 2073/2074 2074/2075 2075/2076

Assets &
properties

Fixed Assets 548,648,538 1,054,836,50 1,196,248,50 1,292,398,41 1,396,668,050

7 0 1

Investment 6,387,795,06 7,362,343,62 9,302,621,07 37,488,869 37,329,666

2 9 5

A. Total 6,936,443,60 8,417,180,13 10,498,869,5 1,329,887,28 1,433,997,716

Assets 0 6 75 0

Quick Assets

Cash balance 688,342,290 1,032,453,25 1,371,229,53 6,378,030,42 10,509,370,16

1 1 8 4

NRB Balance 3,947,233,02 3,765,764,49 4,101,703,46 3,467,163,80 4,821,330,591

0 3 4 6

Bank And 317,247,637 669,183998 730,377,529 220,000,000 47,300,000

Financial
Institution
Balance

Money at 702,088,538 58,869,102 117,690,181 35,075,835 5,122,319,778

Short Call/
Notice
Loan, Advance 31,163,158,5 40,093,190,4 52,854,196,9 62,925,898,3 78,909,601,36
And Bill 72 33 81 36 4
Purchase

Other trading -------- ------- ---- 23,520,000 67,520,000

Assets

B. Total 36,818,070,0 45,619,461,2 59,175,197,6 73,049,688,4 99,409,930,89

Quick 57 77 86 05 7
Assets

C. Other 1,825,698,28 1,157,662,79 1,732,090,07 651,914741 1,238,030,403

Assets 0 5 0

D. Total 38,643,768,3 46,777,124,0 59,348,406,7 73,701,603,1 100,647,961,3

Current 37 72 56 46 00
Assets
(B+C)

E. Total 45,580,211,9 55,194,304,2 71,406,157,3 75,031,4904 102,081,959,0

Assets 37 07 30 26 16

Capital &
Liabilities

Deposit 40,154,205,4 48,513,046,2 59,190,945,9 66,435,184,3 81,374,377,36

liabilities 18 67 98 80 3

Bills Payable 5,528,477 11,088,599 24,442,098 142,566,660 97,415,525

Other 463,210,061 483,169,521 1,539,671,84 2,730,163,45 5,046,111,546

Liabilities 3 9

Proposed ------- ------- 50,096,905 -------- -----

&Cash
Dividend

F. Total 40,622,943,9 49,007,304,3 60,805,156,8 69,307,914,4 86,517,904,43

Current 56 87 44 99 4
liabiliti
es
 Long term
Debt

Debenture & 750,000,000 400,000,000 400,000,000 401,402,740 401,402,740

Bond

Borrowings ----- ------ 341,134,004 ----- ------

G. Total 750,000,000 400,000,000 741,134,004 401,402,740 401,402,740

long
term
Debt

H. Total 41,372,943,9 49,407,304,3 61,546,290,8 69,709,317,2 86,919,307,17

debt 56 87 48 39 4
(F+G)

Share Holders
Equity

Share Capital 2,893,183,19 4,799,889,94 8,219,653,20 8,221,666,95 8,920,508,642

0 6 0 1

Reserve And 1,278,395,26 925,741,301 1,509,924,58 2,224,369,24 2,342,269,781

Surplus 2 0 0

I. Total 4,171,578,45 5,725,631,24 9,729,577,78 10,446,036,1 11,262,778,42

Share 2 7 0 91 3
Holder
s
Equity

J. Total 4,921,578,45 6,125,631,24 10,470,711,7 10,847,438,9 11,664,181,16

Capital 2 7 84 31 3
Emplo
yed
(G+I)

Table 2: Five Years (2071/ 2072 to 2075/2076) Consolidated Comparative P/L Account

Particular 2071/2072 2072/2073 2073/2074 2074/2075 2075/2076

Interest income 2662,681,54 3,257,358,24 4,986,243,36 7,397,632,68 9,401,633,07
8 3 5 6 0

Interest 1,623,894,40 1,796,205,54 3,057,115,56 4,830,140,18 5,915,939,22

Expenses 4 7 4 4 1

A. Net 1,038,787,14 1,461,152,69 1,929,127,80 2,567,492,50 3,485,693,84

Interest 4 5 1 2 8
Income

Commission 229,652,893 281,873,088 339,100,237 690,907,634 873,756,884

And Discount

Other operating 160,598,544 167,146,352 227,679,124 112,686,534 666,061,270

Income

Exchange 120,381,572 145,198,062 194,086,682 630,632,212 3,236,667,89

Income 6

B. Total 1,549,420,15 2,055,370,19 2,689,993,84 3,198,124,71 4,776,486,05

Operatin 3 7 4 4 0
g Income

Staff Expenses 314,878,457 385,933,683 508,684,035 914,855,697 1,323,374,10

7

Other Expenses 345,853,947 393,503,169 523,272,784 456,774,956 666,061,270

Exchange Loss -- --- --- ------- -------

Operating Profit 888,687,749 1,275,933,24 1,658,037,02 1,987,737,13 2,599,708,55

before provision 6 5 5 0
for possible loss

Provision for 245,666,529 201,618,999 109,525,925 209,910,097 108,434,867

possible loss

C. Operatin 643,021,220 1,074,314,34 1,548,511,10 1,777,827,03 2,491,273,68

g Profit 6 0 8 3

Non-Operating 20,982,487 18,559,347 141,012,149 11,071,857 11,603,665

Income/ Loss
Loan loss 15,756,000 109,709,715 49,084,000 331,014,484 153,095,482
provision
written back

D. Profit 679,759,707 1,202,583,40 1,738,607,24 1,932,256,52 2,491,273,68

from 7 8 2 3
regular
Operatio
ns

Profit/ loss from -- 174,500 6,769,363 ------ -------

extra ordinary
activity

E. Net 679,759,707 1,202,757,90 1,745,376,61 1,932,256,52 2,491,273,60

profit 7 1 2 83
After
Includin
g All
Activitie
s

Provision for 61,240,841 108,118,186 160,922,486 200,993,675 220,878,567

staff bonus

Provision for
income tax

*provision for
current year tax 177,722,879 331,455,202 466,499,658 512,928,883 710,133,268

* Provision for
current year tax 221,977 20,639,720 ------- 531,055,296 718,071,116
*Deferred tax 4,818,344 (6,219,703) 4,422,245 (18,126,413) (7,937,848)
expenses
/(income)

Share of Non- 4,948,845 18,734,102 32,121,123 28,775,434 32,876,661

Controlling
Interest in the
profit /Loss
 Net Profit or 430,806,820 730,030401 1,081,411,10 1,232,162,62 1,730,929,73
loss 0 9 5

Source: Annual report of Laxmi Bank Ltd.

Analysis of Data

Analysis of Data is the important part of this Project work Report. The main purpose of
analyzing Data is to known the bank’s Performance in targeted field. The analysis of data consists
organizing, tabulating &performing financial & Statistical Analysis. The Data is analyzed in term
of liquidity, Leverage Profitability

Liquidity Analysis
Liquidity Ratios are calculated to ascertain term Solvency Position of the firm. It
measures the ability of the firm to meet its current obligation & established a relation
between of liquidity of firm.

Current Ratio
Current ratio shows the relationship between current assets and current liabilities. The
objective of this is to Measure the abilities of the firm to meet its short term obligation. Current
ratio is calculated by dividing current assets by current liabilities.

Table 3: Computation of Current Ratio

Fiscal Year Current Assets Current Current Ratio

Liabilities

2071/2072 38,643,768,337 40,622,943,956 0.95:1

2072/2073 46,777,124,072 49,007,304,387 0.10:1

2073/2074 59,348,406,756 60,805,156,844 0.98:1

2074/2075 73,701,603,146 69,307,914,499 1.06:1

2075/2076 100,647,961,300 86,517,904,434 1.16:1

 Sources: Annual Report of Laxmi Bank limited

The Above table shows the current ratio of Fiscal year 2071/2072 to 2075/2076. The
Standard of current ratio is 2:1. Above table shows the current ratio of Laxmi bank is lower than
the theoretical norm and it is fluctuating. The bank may face difficulties to pay its current.
Obligations in the time as when they became due.

1.4

1.2

0.8

0.6

0.4

0.2

0
2072 2073 2074 2075 2076

Current Ratio

Figure 1: Current Ratio

Quick Ratio
Quick ratio is the Ratio of quick assets & Current Liabilities, It Measures the short term
liquidity of the firm but it emphasis on the constant debts paying capacity of the firm. Standard of
the quick ratio is 1:1 i.e. quick assets equal to current assets Expect inventories and prepaid
Expenses. It can be calculated by dividing quick assets by current liabilities.

Table 4: Computation of Quick Ratio

Fiscal Year Quick Assets Current Liabilities Quick ratio

2071/2072 36,818,070,057 40,622,943,956 0.90:1

 2072/2073 45,619,461,277 49,007,304,387 0.93:1

2073/2074 59,175,197,686 60,805,156,844 0.97:1

2074/2075 73,049,688,405 69,307,914,499 1.05:1

2075/2076 99,409,930,897 86,517,904,434 1.15:1

Sources: Annual Report of Laxmi Bank limited

Quick Ratio is Very useful in measuring the liquidity position of the bank. In the above
able quick ratio is seen below the standard. Which shows that the bank’s liquidity position is not
good.

1.4
1.2
1
0.8
0.6
0.4
0.2
0
2071 2073 2074 2075 2076

Quick Ratio

Figure 2: Quick Ratio

Leverage Analysis

Leverage Ratio analysis is the long term solvency of the firm. Solvency is the Company’s
abilities to pay its long term liabilities when they become due. This ratio also shows the manner
by which the capital structure formed. Generally, following types of ratio are used for checking
long term solvency.
 Debt Ratio
This Ratio Shows the relationship between total debt and total assets, which measures the
percentage of the firm’s assets finance by creditors. It can be calculate by using following formula.

Table 5: Computation of Debt ratio

Fiscal Year Total Debt Total Assets Debt Ratio

2071/2072 41,372,943,956 45,580,211,937 0.91:1

2072/2073 49,407,304,387 55,194,304,207 0.90:1

2073/2074 61,546,290,848 71,406,157,330 0.86:1

2074/2075 69,709,317,239 75,031,490426 0.93:1

2075/2076 86,919,307,174 102,081,959,016 0.85:1

Sources: Annual Report of Laxmi Bank limited

Above table shows that the LXBL has raised more than 85% from debt capital out of its
total financing during study period. It shows that burden of high interest payment &high financial
risk.

0.94 0.93
0.92 0.91
0.9
0.9
0.88
0.86
0.86 0.85
0.84
0.82
0.8
2072 2073 2074 2075 2076

Debt Ratio

Figure 3: Debt Ratio

 Debt Equity Ratio
Debt Equity Ratio shows the relationship between debts and shareholder’s equity. The
main objective of calculating this ratio is to judge the Effectiveness of the long term financial
policy of the firm. When long term debt is divided by shareholder’s fund then it is called Debt
equity ratio. It can be calculating using following formula.

Table 6: Computation of Debt Equity Ratio

Fiscal year Total long term Total share’s Debt Equity

Debt holders fund Ratio

2071/2072 750,000,000 4,171,578,452 0.18:1

2072/2073 400,000,000 5,725,631,247 0.07:1

2073/2074 741,134,004 9,729,577,780 0.08:1

2074/2075 401,402,740 10,446,036,191 0.038:1

2075/2076 401,402,740 11,262,778,423 0.04:1

Sources: Annual Report of Laxmi Bank limited

Generally, Minimum debt ratio should be 0.51 or above. Here in the table debt equity ratio
are 0.18, 0.07, 0.08, 0.03, and 0.04, which are Decreased trend. Above ratio are below the standard,
so it is critical situation. To maintain debt equity ratio. The bank should decrease the debt and
increase their equity capital.
 0.18

0.08
0.07

0.04
0.03

2072 2073 2074 2075 2076

Figure 4: Debt Equity Ratio

Interest Coverage Ratio/TIE Ratio

It is tshe Ratio of Giving the Clear Information about the Interest coverage capacity of any
firm. This ratio Measures how much net Income before interest and tax could be declined &
provided coverage of total interest expenses. It can calculate using following formula.

Table 7: Computation of Interest Coverage Ratio

Fiscal Year EBIT Interest Expenses TIE Ratio

2071/2072 2662,681,548 1,038,787,144 2.56

2072/2073 3,257,358,243 1,461,152,695 2.22

2073/2074 4,986,243,365 1,929,127,801 2.58

2074/2075 7,397,632,686 2,567,492,502 2.88

2075/2076 9,401,633,070 3,485,693,848 2.69

Sources: Annual Report of Laxmi Bank limited

The above table shows the LXBL has more than 2 for 2 rupee payment of interest. There
is to be curried to pay the interest obligation form the view point of debt holders bank itself.
 21% 20%

17%
22%

20%

2072 2073 2074 2075 2076

Figure 5: Interest Coverage Ratio

Profitability Analysis

This ratio shows the overall efficiency of a firm. Profitability is the major factor to measure
how effectively the firm is being operated, managed. The main object of the bank is to return more
& more Profit. In order to analysis the profitability position of the bank following ratios can a
calculated.

Return on Assets
This Ratio established the relationship between net profit & total Assets. This Ratio
Measures the Profitability if all financing resources invested in the firm’s assets. Hence, the higher
ratios implies that the available sources and tools employed efficiently.

Table 8: Computation of Return on Assets

Fiscal Year NPAT+ Interest Total Assets ROA

2071/2072 2,054,701,224 45,580,211,937 4.5%

2072/2073 2,526,235,948 55,194,304,207 4.57%

2073/2074 4,138,526,664 71,406,157,330 5.79%

 2074/2075 6,602,302,813 75,031,490,426 8.79

2075/2076 7,646,868,956 102,081,959,016 7.49%

Sources: Annual Report of Laxmi Bank limited

Return on Aseets

15%
24% 2071/72
2072/73
14%
2073/74
2074/75
2075/76
28% 19%

Figure 6: Return on Assets

The ROA of Laxmi Bank Limited for 2071, 2072, 2073, 2074, 2075, 2076 are 4.5% , 4.57,
5.79, 8.79, and 7.49% respectively which is fluctuate Trend. We know that higher ratios indicates
the better utilization of its assets. Decreasing trend of third ratio indicates bad sign for the bank.

Return on Equity (ROE)

This Ratio Shows the Relation Between The net profit After Tax & shareholder Equity.
This Ratio indicates how well the firm has used the resources Contribute by the owners. It is good
for the firm to be the higher return of the investment. Higher ratio indicates the more efficiency of
management & utilization of shareholders equity.

Table 9: Computation of Return on Equity

Particular NPAT Equity ROE

 2071/2072 430,806,820 4,171,578,452 10.32%

2072/2073 730,030401 5,725,631,247 12.75%

2073/2073 1,081,411,100 9,729,577,780 11.11%

2074/2075 1,232,162,629 10,446,036,191 11.79%

2075/2076 1,730,929,735 11,262,778,423 15.36%

Sources: Annual Report of LXBL

The above shows that the ROE is in raise. Bank always maintain High ROE. High ROE
reflect that the bank using its owner’s capital efficiently and bank is able to maximize the owner’s
wealth in present. Here ROE is fluctuating order so bank should manage their ROE.

Return on Equity
20.00%
15.36%
15.00% 12.75% 11.79%
10.32% 11.11%
10.00%
5.00%
0.00%
2071 2073 2074 2075 2076

Return on Equity

Figure 7: Return on Equity

Return on Capital Employed

A relationship between net profit and capital employed is known as return on capital
employed. It shows the efficiency of the firm on the utilization of capital employed. Hence Higher
Ratio is preferable for the company’s capital cost; otherwise it indicates that the company is not
employing its capital effectively and is not generating shareholder value.

Table 10: Computation of return on capital employed

Fiscal year NPAT Capital employed ROCE

2071/2072 430,806,820 4,921,578,452 8.75%

2072/2073 730,030401 6,125,631,247 11.91%

2073/2074 1,081,411,100 10,470,711,784 10.32%

2074/2075 1,232,162,629 10,847,438,931 11.35

2075/2076 1,730,929,735 11,664,181,163 14.83%

Sources: Annual Report of Laxmi Bank limited

16.00%
14.83%
14.00%

12.00% 11.91%
11.35%
10.00% 10.32%
8.75%
8.00%

6.00%

4.00%

2.00%

0.00%
2072 2073 2074 2075 2076

Year

Figure 8: Return on Capital Employed

 CHAPTER III

SUMMARY AND CONCLUSION

Summary

This Report has been prepared for the partial fulfillment of the requirement for the degree
of bachelor of business Studies (BBS). This report is also prepared for the analysis of financial
performance of LXBL. The Study of Financial efficiency includes the study of financial statement.
In this report financial statement of LXBL is analyzed using certain financial & statistical tools in
order to know the financial performance & efficiency of LXBL. This Research Report contain
three chapters. They are Introduction, Presentation and analysis of the data & Summary &
Conclusion for the study. Chapter one deals with back ground of the study , Structure of the
organization , object of the study, Rationale of the study, research methodology, Data Collection
procedure, Tootle and technique of data analysis, Limitation of the study, Report Structure.
Chapter Three consist summary, conclusion for the study.

Chapter two is the main part of the study, which deals with data analysis and presentation
of relevant data using appropriation tools. In this Chapter various ratios are calculated for the
analysis of financial performance of LXBL. Which Are Mentioned Below.

Table 11: Comparative Chart of Findings

Particulars FY 2071/72 FY 2072/73 FY 2073/74 FY2074/75 FY2075/76

Current Ratio 0.91:1 0.10:1 0.98:1 1.06:1 1.16:1

Quick Ratio 0.90:1 0.93:1 0.97:1 1.05:1 1.15:1

Debt Ratio 0.91:1 0.90:1 0.86:1 0.93:1 0.85:1

Debt to equity 0.18:1 0.07:1 0.08:1 0.03:1 0.04:1

ratio

TIE Ratio 2.56 2.22 2.58 2.88 2.69

 Return on Assets 4.5% 4.57% 5.79% 8.79% 7.49%

Return on Equity 10.32% 12.75% 11.11% 11.79% 15.36%

Return on capital 8.75% 11.91% 10.35% 11.35% 14.83%

Employed

Major Findings

Table no.1 shows that the current ratio of the LXBL. Current assets are decreasing FY 2071/72 to
2072/73 and where increasing trend after 2073/74 to 2075/76. It shows the poor condition of
liquidity of LXBL. Standard CA is 2:1 but real CA was 1.16:1< 2:1.

Table two Shows that the quick ratio of LXBL. Quick ratios are Increasing trend 2072 to 2076.

Table three shows that the debt ratio of the LXBL. Debt equity ratio are Fluctuating trend.

Table no. 4 shows that the debt to equity ratio of LXBL. Debt to equity ratio are

2072 to 2073 decrease, increase at 2074 then decrease at 2075 and increase at 2076.

Table no. 5 shows that the return on assets of the LXBL. Return on assets are 2072 to 2076
Increasing trend.

Table no. 6 shows that the return on equity of LXBL. Return on Equity are 2072 to 2073 increasing,
at 2074 decrease and then 2075, 2075 increase.

Table no. 6 shows that the return on capital employed of LXBL. Return on Capital Employed are
2072 to 2076 increasing Trend.

Conclusion

In conclusion it is Clear Visible That LXBL is beneficial joint venture bank in the country
and its financial position is satisfactory. Some other findings of the Study report are listed below.
 Liquidity position of the bank is very weak. The Bank is liquid enough and has not
sufficient Current assets to meet the short term obligation. Quick ratio of the bank is also low
which indicates the poor liquidity position of the bank.

Solvency is the company’s ability to pay its long term debt when they became due.
Leverage position of the LXBL is not so good because it has Debt to equity ratio. It means they
didn’t meet their standard. The profile of the Bank is increasing year by year. Return on Assets,
Return on equity, & Return on Capital employed all are in increasing order. It indicates return over
the assets & equity is quick satisfactory.

Finally, the financial ratio accesses the financial performance of Laxmi bank limited. The
calculation ratio shows that the bank is secured from the investor point of view & creditor point of
view. Stock holders are also satisfied position. The LXBL has been able to satisfied. Its customer
demand and the bank is profitable. In fact we can easily say the LXBL is an important financial
institution in the economy sector of the country and the matter believes that LXBL is able to full
fill its objective for which may established.
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www.laxmibank.com

www.nrb.org.np