FINANCIAL PERFORMANCE ANALYSIS

OF
NABIL BANK LIMITED

A Project Work Report

By
Saurav Shrestha
T.U. Reg. No. 7-2-0424-0070-2019
Amity College

Submitted to
The Faculty of Management
Tribhuvan University
Kathmandu, Nepal

In Partial Fulfillment of the Requirement for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Birtamode, Jhapa
February, 2024
 Declaration

I hereby declare that the project work entitled “FINANCIAL PERFORMANCE ANALYSIS
OF NABIL BANK” submitted to the faculty of management, Tribhuvan University,
Kathmandu is an original piece of work under the supervision of Mr. Uttam Parajuli, faculty
member, AMITY COLLEGE, BIRTAMODE, JHAPA, and is submitted in partial fulfillment
of the requirement for the award of the degree of Bachelor of Business Studies (BBS). This
work report has not been submitted to any other University or institution for the award of any
degree or diploma.

……………………
Saurav Shrestha
January, 2024
 Acknowledgement

I consider it is a privilege and pleasure to prepare the report “FINANCIAL

PERFORMANCE ANALYSIS OF NABIL BANK LIMITED” for the partial fulfillment of
requirement for the Degree of Bachelor of Business Studies (BBS).

I would like to acknowledge the support of Mr. Rajesh Subedi, Chairman of Research
Committee. I extend my special appreciation to respected Uttam Parajuli, supervisor.
Likewise, I would like to express warm appreciation towards Mr. Radheshyam Dhakal,
Principal.

Finally, I am highly thankful to my parents, other family members, friends and well-
wishers for their extensive support, blessings and encouragement. Had it not been the above
features, this report would not have come to this successful end. Thank you

………………….
Saurav Shrestha
 Table of Contents

Title
Page... .... ... ... .... .... . .. ... .... .....
.................,.... .. ......... ........ .........
..i
Declaration... .... ... ... .... .... ... ....
... .. .... .. ... .... ....... .. ......... .........
......ii
Supervisor’s
Recommendation... ....... .. .... .. ...
.... ....... .. ......... ........ ......iii
Endorsement.... .. ...... . .... .... .. ...
. . ........ ........ ..... . . . .. . . . ... . .
. .....iv
Acknowledgements...... . .... .... ..
.... . ........ ........ ..... . . . .. . . . ... . ..
. . .....v
Table of Contents.. ... .... .... .. .... .
........ ........ ..... . . . .. . . . ... . . . .
......vi
List of
Tables.. ...... . ..... .... . ........ ........ .
.... . . . .. . . . ... . . . ..... . .. . ..vii
List of
Figures.. ...... . .... .... . ........ ........
..... . . . .. . . . ... . . . .. . . . .. ..viii
.
Abbreviations.. ...... . .... .... .. .... ..
........ ..... . . . .. . . . ... . . . .... . . .
. ..i
Title Page... .. … … … … … … … … … … … … … … … … … … … … ... i
Declaration... ... … … … … … … … … … … … … … … … … … … … …ii
Supervisor’s Recommendation... ... … … … … … … … … … … … … … iii
Endorsement... … … … … … … … … … … … … … … … … … … … … iv
Acknowledgements... … … … … … … … …. … … … … … … … … … …v
Table of Contents... … … … … … … … … … … … … … … … … … … ..vi
List of Tables.. ... … … … … … … … … … … … … … … … … … … … vii
List of Figures… … … … … … …. … … … … …. … … … … … …. …. .viii.
Abbreviations… … … … … … … … … … … … … … … … … … …. … .ix
CHAPTER I: INTRODUCTION…………………………………….. 1
Background………………………………………………………1
Profile of Organization…………………………………………..2
Objectives………………………………………………………..4
Rationale…………………………………………………………4
Review…………………………………………………………...5
Methods………………………………………………………….7
Limitation……………………………………………………….11
CHAPTER II: RESULTS AND FINDINGS…………………………11
Data Presentation………………………………………………..11
Data Analysis……………………………………………………26
Findings …………………………………………………………27
CHAPTER III: SUMMARY AND CONCLUSION…………………28
Summary ………………………………………………………..28
Conclusions ……………………………………………………..29
BIBLIOGRAPHY………………………………………………………30
APPENDIX……………………………………………………………...31
 List of Tables

Table 1 Cash and Bank to Total Deposit Ratio…………………………..12

Table 2 Cash and Bank to Total Assets Ratio……………………………14

Table 3 Current Ratio…………………………………………………….15

Table 4 Return on Shareholder’s Fund…………………………………...17

Table 5 Return on Total Assets…………………………………………...18

Table 6 Earning Per Share………………………………………………...20

Table 7 Loan and Advances to Fixed Deposit Ratio…………………...…22

Table 8 Loan and Advances to Total Deposit Ratio………………………23

Table 9 Loan and Advances to Total Assets Ratio………………………..25

 List of Figures

Figure 1 Cash and Bank to Total Deposit Ratio…………………………..13

Figure 2 Cash and Bank to Total Assets Ratio……………………………14

Figure 3 Current Ratio…………………………………………………….16

Figure 4 Return on Shareholder’s Fund…………………………………..17

Figure 5 Return on Total Assets…………………………………………..19

Figure 6 Earning Per Share……………………………………………….20

Figure 7 Loan and Advances to Fixed Deposit Ratio…………………….22

Figure 8 Loan and Advances to Total Deposit Ratio……………………..24

Figure 9 Loan and Advances to Total Assets Ratio………………………25

 Abbreviation

CB : Commercial Bank
CEO : Chief Executive Officer
CBB : Cash and Bank Balance
CV : Coefficient of Variation
EPS : Earning Per Share
i.e. : That is
Ltd. : Limited
NPAT : Net Profit after Tax
NRB : Nepal Bank Limited
ROA : Return on Assets
ROE : Return on Equity
TD : Total Deposit
 1

CHAPTER I: INTRODUCTION

Background
Financial performance analysis is the process of analyzing a company’s financial
statements for decision making and to understand the overall health of an organization. It is a
comprehensive and indispensable process for evaluating the fiscal health and operational
efficiency of a company. In simple terms, this analysis methods means carefully looking at a
company’s papers like income statements, balance sheet, and cash for statement. This paper
give a quick look at how the company is doing financially. Financial performance analysis is
required to evaluate the financial data recorded in financial statement so that the investors,
shareholders, managers, and other interested parties can understand the information. It is a
method of evaluating the past, present, and future performance of the company. Financial
performance techniques such as vertical, horizontal, and ratio analysis are used by analyst to
measure performance metrics across financial statement. It helps to analyze whether a
company is stable, solvent, liquid or profitable enough to warrant a monetary investment.

Financial Analysis is a vital tool used to carefully examine yearly financial reports of
companies, organizations, businesses, and individuals. It gives a thorough evaluation of how
well they manage their internal operations and external financial activities. The main goal is
usually to ensure profitability and achieve broader goals that drive human ambition.
Following established rules, entities in financial activities must prepare and present these
yearly financial reports. These documents are crucial sources of information, revealing
insights into the financial health, operational strength, and strategic direction of the entity. By
analyzing these reports closely, stakeholders can understand the financial status and
performance of owners, partners, stakeholders, and collaborative efforts. This methodical
process of studying financial reports, understanding their outcomes, and drawing useful
conclusions is known as financial analysis. It's not just about looking at past financial
performance; it also guides informed decision-making, strategic planning, and sustainable
growth in the future.
 2

The banking in Nepal

Nepal Rastra Bank is the central bank of Nepal. It was established in Baisakh 14,
2013 B.S. under Nepal Rastra Bank Act, 2012. It formulates policy to control the function
carried out by the banks. At present, NRB has allowed the commercial banks to fix the
interest rate on deposit as well as credit on the basis of cost and availability of financial
resources. This policy framework has introduced an element of competitiveness in the
financial sectors. The commercial banks are contributing in the economic development.
Resources for economic development are made available by the commercial banks which
ultimately aids to the overall development of the nation. In Nepal, “Nepal Bank Limited” was
the first commercial bank established in 1994 under Nepal Bank Act, 1993. Under Banijya
Bank Act, 2021 B.S. the government launched “Rastriya Banijya Bank”. It was fully financed
by the government resources. Likewise, “Agriculture Development Bank” was established on
January 2, 1968 under full ownership of the government for the purpose of developing
agriculture sector. As per the latest data from Nepal Rastra Bank, at present, there are 20
commercial banks, 17 development banks, 17 finance companies, 65 Microfinance
institutions and 1 infrastructure development bank operating in Nepal. Currently, there are 7
joint venture banks in operation in Nepal with their branches located in different part of the
country.

Profile of the Bank

Nabil Bank Limited, previously known as Nepal Arab Bank Limited is the first
private commercial bank in Nepal which was founded in 1984. It was established with joint
venture of Emirates Bank International Limited (EBI), financial institution of Nepal and
Nepalese people with shares of 50%, 20%and 30% respectively. But later on the share of
Emirates Bank International Limited were sold to National Bank Limited of Bangladesh in
2051 BS. Nabil Bank Limited was incorporated with the objective of extending international
standard modern banking services to the various sector of society. Pursuing it objectives,
Nabil Bank Limited provides a full range of banking services.

After 11 years of active participation, Emirates Bank International Limited (EBI)

divested its 50% shareholding to National Bank Limited (NBL) Dhaka,
 3

Bangladesh. With increased economic cooperation under SAARC framework in the

field of trade commerce and induction of SAPTA agreement, the participation in National
Bank Limited of Bangladesh in Nepal seemed to be most timely. However the board of
directors has decided to release the tech Nabil Bank assistance contract with National
Bank Limited, Dhaka in May 2001 in a view to that the management of the Nabil Bank
Limited could be handled by the Nepalese employees.

Truly a pioneer in the Domestic Banking sector, Nabil Bank’s mission is to become
the Bank of the first choice of all its stakeholders- including all strata of customers of retail,
SME, corporate, state-owned enterprises, non-profit entities, multinational development
agencies, along with the Bank’s employees and shareholders. The Bank strives to be a one-
stop solutions provider by offering a complete line of commercial banking products such as
branch banking, treasury, trade, cards, remittance and investment banking. The expert team
of highly skilled professionals provides industry-specific guidance and advisory for efficient
financial management, resulting in higher customer profitability.

Nabil Bank operates through its wide network of 268 branch offices, 316 ATMs,
numerous post terminals, remittance agents spread across the nation. The Bank also has over
170 international correspondent banking relationships. The Bank operates its investment
banking arm through its subsidiary Nabil Investment Banking Limited.

The Bank understands that its role goes beyond just financial transactions and towards
the development of society as well. Hence, the bank is highly active in creating financial
literacy and providing financial access to a large section of population across the country as
part of its Corporate Social Responsibility. Extending credit to deprived sectors of the society
through micro-lending and financial priority sectors that include agriculture, renewable
energy and tourism are key areas that define the Bank’s commitment to the country’s
development initiative. Nabil Bank also established its branch offices in rural locations on the
western and far-western hills with its vision to reach the financially under-privileged
population and increase financial literacy therein.

Nabil is moving forward with a Mission to be “1st Choice Provider of Complete

Financial Solutions” for all its stakeholders; Customers, Shareholders, Regulators,
Communities and Staff. Nabil is determined in delivering excellence to its stakeholders in an
array of avenues, not just one parameter like profitability or market share. It is reflected in its
Brand Promise “Together Ahead”. The entire Nabil Team embraces a set of Values
 4

“C.R.I.S.P”, representing the fact that Nabil consistently strives to be Customer Focused,
Result Oriented, Innovative, Synergistic and Professional.

The bank has enrolled itself as SWIFT (Society of Worldwide Inter Bank Financial
Tele Communication ) member to adopt fast communication means among the member bank
of SWIFT. Messages are transmitted through SWIFT to the member banks of time which is
widely used in remittance, letter of credit and many more areas of communication as well.

Objectives

This study is carried out for the fulfillment of the following objectives:

i. To provide the necessary information required by the users for informative decision
making, assessing the current and past performance of the company, predicting the
success or failure of the business, etc.
ii. To identify the level of profitability of the bank.
iii. To know the financial position of the bank.

Rationale

Optimum utilization of fund makes better impact on economy of nation. Nabil Bank
Limited is one of the commercial Bank with highest capital infrastructure in Nepal. This
study aims to identify the significance of financial performance metrics from several
perspectives. Firstly, it examines their importance to shareholders, who rely on these metrics
to gauge the bank's profitability and potential returns on investment. Secondly, it evaluates
their significance to the bank's management bodies, providing crucial insights for assessing
overall performance and strategic decision-making. Thirdly, the study considers their
relevance to external stakeholders such as customers, financing agencies, and stock
exchanges, who use these metrics to assess the bank's stability and reliability. Additionally, it
explores their importance to government bodies and policy makers, particularly central
banks, in understanding the bank's role in the broader economy. Lastly, it addresses the
interest of various outside parties including investors, depositors, credit takers, competitors,
bank personnel, stockbrokers, dealers, and market makers, who rely on these metrics for
investment decisions, financial transactions, and market competitiveness analysis.

Review
 5

A literature review is an analysis of the body of existing research in a particular topic.

We can learn about the current state of their subject of study from the literature. Knowledge
from earlier studies serves as the basis for this one. As a result, the following sections are
examined and defined in order to define this chapter:

Origin of the Bank

The word 'bank' has its origins in several languages: in German, it means a joint stock
company; in Latin, it refers to a bench; and in Italian and French, it also means a bench. The
first public bank, the 'Bank of Venice', was established in Venice, Italy in 1401. Following
this, the 'Bank of Barcelona' was founded in 1401, and the 'Bank of Geneva' in 1407. In 1609,
the famous 'Bank of Amsterdam' came into being. Modern banking began with the
establishment of the 'Bank of England' in 1694, which became the world's first central bank
in 1844. France established the 'Banque De France' in 1807. Since then, banks have
proliferated worldwide, playing a crucial role in shaping the global financial system as we
know it today.

Theoretical Framework

The main objectives of a bank are to gather deposits from customers and invest them
in profitable sectors. If a bank fails to efficiently use its collected resources, it cannot
generate revenue. Resource mobilization management in a bank involves activities such as
collecting deposits, managing investment portfolios, disbursing loans and advances, and
overseeing working capital and fixed assets. To evaluate a bank's performance
comprehensively, its financial indicators must be analyzed through detailed scrutiny of
financial statements. These statements offer insights into how effectively the bank is utilizing
its resources and achieving its financial goals.

Financial analysis is the process of identifying the financial strength and weakness of
the concerned bank. Financial statement analysis is a method of reviewing and analyzing a
company’s accounting reports in order to examine its past, present and projected future
performance. This process of reviewing the financial statements allows for the better
economic decision making. It is performed to determine the profitability, liquidity, solvency,
and efficiency.
 6

Finance relies on three critical decisions: how a company invests its resources,
finances its operations, and shares profits with shareholders through dividends. To achieve
the highest possible firm value, these decisions must be carefully balanced and optimized,
either separately or together, to increase profits, handle risks, and ensure steady growth.
Therefore, effectively combining and managing investment, financing, and dividend
strategies is essential for long-term financial success and maximizing shareholder value.

Brigham E.F. & L.G. Gapensinki, (1992), "Financial Analysis means assessing the viability,
stability and profitability of project. It also includes technique used for determining the needs
of a business."

Ross, P.S. (2000), " Financial Analysis refers to the assessment of the business to deal with
planning, budgeting, monitoring, forecasting, and improving of all financial details
within an organization."

Tarawneh (2006) analyzed the financial statement of five Omani banks for the
financial period 1999-2003. In addition, he used simple regression to estimate the impact of
asset management, operation efficiency, and bank size on the financial performance of
these banks. The results showed that financial performance of the banks was strongly and
positively influenced by the operational efficiency, asset management, and bank size.

Almazari (2011) in his study attempted basically to measure the financial performance of
seven Jordanian commercial banks for the period 2005-2009, by using simple
regression in order to estimate the impact of independent variable represented by; the bank
size, asset management, and operational efficiency on dependent variable financial
performance represented by; return on assets and interest income size. It was found that
banks with higher total deposits, credits, assets, and shareholders’ equity do not always mean
that has better profitability performance. Also found that there exists a positive correlation
between financial performance and asset size, asset utilization and operational efficiency,
which was also confirmed with regression analysis that financial performance is greatly
influenced by these independent factors.

Haque and Sharma (2011), their research studied the hypotheses tested imply that there are
significant differences amongst Saudi banks. The financial performance of banks in Saudi
Arabia is studied on the basis of financial variables and ratios through the help of
Spearman's' rank correlation method. Although, benchmarking performance of banks is
 7

done using advanced linear programming models, this study attempts to develop an
efficiency frontier on the basis of simple linear regression.

Almumani (2014) the purpose of his study is to analyze and compare the performance of
Saudi banks that listed in stocks market for the period 2007-2011. The study is an evaluator
in nature, drawing sources of information from secondary data. The financial
performance of banks is studied on the basis of financial ratios and variables. Financial
performance was measured by two approaches; trend analysis and inter-firm analysis. It
was found that increasing of assets, operating expenses, and cost to income
causes a decrease in Saudi bank’s profitability, while increasing of operating income causes
an increase in the profitability of Saudi Banks. Analysis shows that all the variables of study
have a positive mean value and all banks are generating income. Saudi joint venture banks
proved to be more proficient in generating profits, absorbing loan losses and
dominating in ROE, while, Saudi established banks have more capacity of absorbing asset
losses and dominating in ROA.

Methods

Research is the methodical, controlled, empirical, and critical examination of

hypothesis statements regarding the assumed relationships between natural events. In other
words, it is a careful investigation or inquiry especially through research for new facts in any
branch of knowledge. This study focuses on the planned and systematic dealing with the
collection, analysis and interpretation of facts and figure. It consists of research design,
population and sample study, sources of data, data processing procedure and technique of
analyzing data. For the purpose of achieving objectives of the study, the applied methodology
will be used:

Research design

“Research design is a master plan specifying the methods and procedures for
collecting and analyzing the needed information” (Zikmund, 2007)

It is the formal plan of action for a research project or a blue print of the research
project. It has the researchers to lay out their research questions, methodologies,
implementation procedures, and data collection and analysis to conduct a research project.
The research design then focuses on the data collection methods, the research instruments
utilized, and the sampling plan to be followed. Specifically, research design describes the
 8

general plan for collecting, analyzing and evaluating data after identifying the facts and
findings.

What the researcher wants to know and what has to be dealt with in order to obtain
the required information? (Wolf and Pant, 2002)

It includes an outline of what the investigator will do from writing hypotheses and
their operational implication to the analysis of the data. Generally, a common research design
possesses five basic elements. They are:

i. Selection of problem
ii. Methodology
iii. Data gathering
iv. Data analysis
v. Report writing

Population and sample

The population refers to the entire group of people, events, or items that researchers
are interested in studying. Since it's often impractical to study every single member of this
population, researchers select a smaller, representative sample to conduct their research. This
sample consists of specific observations chosen to represent the broader population. By
analyzing this sample, researchers aim to draw conclusions that apply to the entire
population, ensuring their findings are reliable and applicable beyond the selected sample.

There are altogether 20 commercial banks functioning all over the nations and most of
their stocks are traded actively in the stock market. Here, Nabil Bank Limited has been
selected as sample for our study. Similarly, the financial statements of this bank for five years
have been taken as sample.

Nature and sources of data

In regards to the primary data, some personal views and ideas of individual
respondents are collected. But in case of entire study, secondary data which are used are
basically of the following nature:
 9

i. Most of the data taken for the analysis is collected from the material published by
concerned bank through their annual reports.
ii. Since the stock of the bank is listed in the NEPSE, the figures are almost reliable and
suitable too.

In order to fulfill the objectives of this research work, all the secondary data are collected,
processed and tabulated in time series and bar diagram. This reliability of data compiled in
the annual report of the bank is judged and confirmed by an independent auditor.

So, the major sources of secondary data used for the study are as follows:

i. Annual report of Nabil Bank Limited

ii. Official website of the bank
iii. NRB circulars
iv. NRB directives

Data processing procedures

Procedures data collected from various sources are in raw form. The method
of analysis is directed to find the actual financial performance of the bank. The obtained
data are presented in the tabular form, diagrams and figure with the supporting interpretation.
The collected data are accumulated in organized way and are grouped for calculation using
the method given by the formulas.

Data analysis tools

Data analysis and presentation are the vital aspects of any research effort. The use of
financial and statistical tools significantly enhances these processes, ensuring they are
conducted with greater effectiveness, convenience, reliability, and authenticity. These tools
enable researchers to accurately interpret data and present their findings comprehensively,
ensuring reliability and authenticity in their analyses.

The various results obtained are interpreted to portray the current position and
performance of the bank. Two types to tools have been used to achieve the certain goals:

Financial tools. Financial tools are instrumental in assessing a firm's financial strength
and weaknesses through the careful examination of relationships between various items in
 10

both the financial position and statement of profit or loss. These tools are broadly classified
into two main categories:

Ratio analysis. Ratio analysis is the powerful tool of financial analysis. “A ratio is the
mathematical relationship between two variables. It is significant for financial analysis. It
also helps to predict the future performance of a company based on the study of ratios of
earlier years” (Benerjee: 1989, 95).

Thus, ratio analysis is the part of whole process of analysis of financial statement to
make decision regarding the output and credit for any business and industry.
Quantitative relationship are established by the ratio which facilitates the qualitative
judgement to be made. They are presented below:

Liquidity Ratio.

i) Cash and bank balance to total deposit ratio

ii) Cash and bank balance to total assets ratio
iii) Current ratio

Profitability ratio.

i) Return on shareholder’s funds

ii) Return on total assets
iii) Earning per share

Assets management ratio.

i) Loan and advances to total deposit ratio

ii) Loan and advances to fixed deposits ratio
iii) Loan and advances to total assets ratio

Statistical Tools. A statistical tool refers to any method or approach used to analyze data
and derive meaningful insights or conclusions from numerical information gathered
during research or analysis. For supporting the study, the following tools have been used
under it:
 11

i) Mean
ii) Standard deviation
iii) Coefficient of variance

Limitations

Limitation tends to narrow the area of study. It is caused due to various undeniable
circumstances. The major limitation of this study are mentioned below:

i. The research is based on records of 5 fiscal year analysis i.e. from FY 2075/76 to FY
2079/80.
ii. The researcher has used only some statistical tools for presentation and
analysis of data.
iii. Most of the data used in this study are based on secondary sources mainly official
website of Nabil Bank Limited.
iv. The study is related only to the financial performance analysis of Nabil Bank Limited
and not of other banks.
v. The main focus is given to the quantitative aspect rather than qualitative
aspect.
vi. It is only for partial fulfillment of Bachelor of Business Studies (BBS).
 12

CHAPTER II: RESULTS AND FINDINGS

Data Presentation

In this chapter, data and information regarding overall financial performance of Nabil
Bank Limited are presented and analyzed. The data are presented and analyzed in different
tables to arrive at some concrete and explicit conclusion.

Liquidity Ratio

Liquidity Ration refers to the ability of a firm to meet its short term or current
obligations. Inadequate liquidity can lead to unexpected cash short falls that must be covered
at excessive costs reducing profitability. In the worst case, inadequate liquidity can lead to the
liquidity insolvency of the institution. To find out the ability of the bank to meet their short
term obligations, which are likely to mature in the short period, the following ratio are
developed under the liquidity ratios to identify the liquidity position.

i) Cash and Bank Balance to Total Deposit

This cash and bank balance to total deposit shows that percentage relation
between them. It means, liquid balance available in respect to total deposit of the
bank.

Table 1
Cash and Bank Balance to Total Deposit Ratio
(NRP in Billion)

Fiscal Year Cash and Bank Total Deposit Ratio Change

 13

Balance
2075/76 10.67 164.37 0.0649 -
2076/77 4.80 193.04 0.0249 -61.63%
2077/78 7.29 227.98 0.0320 28.51%
2078/79 11.05 329.58 0.0335 4.48%
2079/80 6.77 403.12 0.0168 -49.85%
Mean 0.03442
S.D 0.0183
C.V 53.17%
(Sources: Annual report of Nabil Bank Limited)

0.07
Cash and Bank Balance to Total

0.06

0.05
Deposit Ratio

0.04

0.03

0.02

0.01

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

Figure 1. Cash and bank balance to total deposit

The above Table 1 and Figure 1 shows that cash and bank balance to total deposit of
Nabil Bank limited is in fluctuating trend. Nabil’s cash and bank balance to total deposit is
highest of 0.0649 times in 2075/76 and lower in 2079/80 of 0.0168 times. Ratio over the
past five years in terms of percentage also reveals the fluctuation. Ratio is found
to be increase in year 2077/78 whereas decreased in the year 2078/79 and subsequently
decreased in the year 2079/80.

The average is 0.03443 which is lower than 1. It means that Nabil Bank has more total
deposit than cash and bank balance. In this situation, there is insufficient cash on hand to pay
off the deposit of the customers. This may not be bad news if the bank has the condition to
extend normal credit terms to suppliers and very little credit extended to its customers.
 14

Similarly, the standard deviation of data analyzed is 0.0183 which is lower than the
mean, it means that most of the numbers are close to average. And cash and bank balance and
total deposit are less volatile.

ii) Cash and Bank Balance to Total Assets Ratio

This cash and balance to total assets ratio shows the relation between them.
The cash flows to total assets ratio shows investors how efficiently the business is
using its assets to collect cash from sale and customers.

Table 2

Cash and Bank Balance to Total Assets Ratio

(NRP in Billion)

Fiscal Year Cash and bank Total assets Ratio Change

balance
2075/76 10.67 201.14 0.0530 -
2076/77 4.80 237.68 0.0202 -61.89%
2077/78 7.29 291.24 0.0250 23.76%
2078/79 11.05 419.82 0.0263 5.2%
2079/80 6.77 481.20 0.0141 -46.39%
Mean 0.02772
S.D 0.0149
C.V 53.75%
(Sources: Annual report of Nabil Bank Limited)
 15

0.06

Cash and Bank Balance to Total Assets 0.05

0.04
Ratio

0.03

0.02

0.01

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

Figure 2. Cash and bank balance to total assets

Table 2 and Figure 2 shows that cash and bank balance to total assets ratio of Nabil
Bank is in fluctuating trend. Nabil’s cash and bank balance to total assets is highest of 0.0530
times in 2075/76 and lower in year 2079/80 of 0.0141 times. Ratio in terms of
percentage also reveals fluctuation. Ratio are found to be increased in year 2077/78
by 23.76% and then it is decreasing each year.

The average is 0.02772 which is lower than 1. It means that Nabil will not be able to
pay off its liabilities with available cash and cash equivalents.

Similarly, the standard

deviations of data
analyzed as 0.0333 which
is lower than
the mean, it means that
numbers are close to the
 16

average. Cash and Bank

and total
assets are not volatile.
Similarly, the standard
deviations of data
analyzed as 0.0333 which
is lower than
the mean, it means that
numbers are close to the
average. Cash and Bank
and total
assets are not volatile.
Similarly, the standard deviations of data analyzed as 0.0149 which is lower than the
mean, it means that numbers are close to the average. Cash and Bank and total assets are not
volatile.
 17

Likewise, the CV shows the extent of variability of the data in relation to the mean of
population. The CV obtained here is 53.75% which reveals that the ratio of SD to mean is
high. Higher the ratio of SD to mean, worse is the risk return trade off.

iii) Current Ratio

This ratio is used to find the relation between current assets and current
liabilities of the bank. The current ratio is the liquidity ratio that measures the
company ability to pay short term obligations or those due within one year.

Table 3

Current Ratio

(NRP in Billion)

Fiscal Year Current Assets Current Ratio Change

Liabilities
2075/76 35.97 171.29 0.2099 -
2076/77 38.43 201.57 0.1907 -9.14%
2077/78 47.18 237.1 0.1989 4.30%
2078/79 73.54 327.94 0.2242 12.72%
2079/80 83.22 400.65 0.2077 -7.36%
Mean 0.20628
S.D 0.0126
C.V 6.11%
(Sources: Annual report of Nabil Bank Limited)
 18

0.23

0.22

0.21
Currrnt Ratio

0.2

0.19

0.18

0.17
2075/76 2076/77 2077/78 2078/79 2079/80
Fiscal Year

Figure 3. Current Ratio

The above Table 3 and Figure 3 shows that the current ratio of Nabil Bank Limited is
fluctuating over the past five years. Nabil Bank’s current ratio is highest of 0.2242 times in
2078/79 and lower in the year 2076/77 of 0.1907 times. Ratio over the past five years in
terms of percentage also reveals the fluctuation.

The average is 0.20628 which is lower than 1. This shows that the current asset of the
company is a bit not sufficient to meet its current liabilities.

Similarly, the standard deviation of data analyzed is 0.0126 which is lower than the
mean, it means that most of the numbers are close to the average. And volatility of current
assets and current liabilities are less.

Likewise, the CV represents the ratio of standard deviation to mean. The CV obtained
here is 6.11 percent which means that the ratio of SD to mean is low. Lower the ratio of SD
to mean, better the risk return trade off.

Profitability Ratio

Profitability ratio is a measure of profitability, it is a way to measure a company's

performance. Profitability is simply the capacity to make a profit. A profit is what is left over
from income earned after one has deducted all costs and expenses related to earning the
income. It refers to the ability of the company to use its resources to generate revenues in
 19

excess of its expenses. Profitability ratios are generally considered to be the basic
bank financial ratio in order to evaluate how well bank is performing in terms of profit.

iv) Return on Shareholder’s Funds

Return on shareholders' fund is a bookkeeping ratio that measures the rate of
return that investors receive on the capital they invest in a business. It's calculated by
dividing a company's profit after interest and assessment by the shareholder's capital
employed.

Table 4

Return on Shareholder’s Funds

(NRP in Billion)

Fiscal Year NPAT Shareholder’s ROE Change

Fund
2075/76 4.2 23 18.26% -
2076/77 3.5 26 13.46% -0.2629
2077/78 4.5 34 13.2% -0.0193
2078/79 5.2 53 9.81% -0.2568
2079/80 6.4 57 11.23% 0.1448
Mean 13.192
SD 3.2419
CV 24.5747
(Sources: Annual report of Nabil Bank Limited)

20
Return on Shareholder's Fund

18
16
14
12
10
8
6
4
2
0
2075/76 2076/77 2077/78 2078/79 2079/80
Fiscal Year

Figure 4. Return on Shareholder’s Fund

 20

The above Table 4 and Figure 4 shows that the Return on shareholders fund of Nabil
Bank Limited is in fluctuation trend. Nabil Bank’s Return on shareholders fund is the highest
of 18.26 percent in 2075/76 and lowest in year 2078/79 of 9.81 percent. Ratio over the past
five years in terms of percentage also reveals the fluctuation. The average is 13.192 percent
which means that the return on shareholders fund is 13.192 percent of net profit on average.

Similarly, the standard deviation of the data analyzed is 3.2419 percent which is lower
than the mean, it reveals that most of the numbers are close to the average. And the net profit
after tax and shareholders fund are less volatile.

Likewise, the CV represents the ratio of standard deviation to mean. The CV obtained
here is 24.5747 percent which means that the ratio of standard deviation to mean is low.
Lower the ratio of standard deviation to mean, the better the risk return trade off. A risk
averse investor expecting low degree of volatility and high degree of return, in relation to
overall market and industry may want to invest in the bank.

ii) Return on Total Assets

Return on Total Assets measures the profitability of the total investment of the
company. The ratio is computed by dividing net income after tax by average total
assets. The ratio is calculated to measure the profit after tax against the amount
invested in total assets to ascertain whether assets are being utilized properly or not.

Table 5
Return on Total Assets
(NRP in Billion)

Fiscal Year NPAT Total Assets ROA Change

2075/76 4.2 201.14 2.0881% -
2076/77 3.5 237.68 1.4726% -29.48%
2077/78 4.5 291.24 1.5451% 4.9232%
2078/79 5.2 419.82 1.2386% -19.8369%
2079/80 6.4 481.20 1.33% 7.3793%
Mean 1.53488
SD 0.3316
CV 21.6043%
(Sources: Annual report of Nabil Bank Limited)
 21

2.5

2
Return on Total Assets

1.5

0.5

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

Figure 5. Return on Total Assets

The above Table 2.2 and Figure 2.2 shows that the Return of Total Asset of Nabil
Bank Limited is in fluctuating trend. Nabil Bank’s return on total assets is highest of 2.0881
percent in 2075/76 and lower in the year 2078/79 of 1.2386 percent. Ratio over the past five
years in terms of percentage also reveals the fluctuation.

The average is 1.53488 percent which means that Nabil Bank needs to increase the
efficiency of assets utilization to increase the earning.

Similarly, the standard deviation of data analyzed is 0.3316 percent which is much
lower than the mean, it means that most of the numbers are close to the average. And the
volatility is lesser between the values.

Likewise, the CV shows the extent of variability of the data in relation to the mean of
the population. The CV obtained here is 21.6043 percent which reveals that the ratio of SD to
mean is low. Lower the ratio of SD to mean, better the risk return trade off.

iii) Earning Per Share (EPS)

EPS simply shows the profitability of the firm on a per share basis. It is
calculated from the point of view of the ordinary shareholders.
 22

Table 6

Earning Per Share

(NRP in Billion)

Fiscal Year NPAT No. of shares EPS Change

2075/76 4.2 0.0830 50.6 -
2076/77 3.5 0.0967 36.2 -28.46%
2077/78 4.5 0.1339 33.6 -7.1823%
2078/79 5.2 0.2796 18.6 -44.64%
2079/80 6.4 0.2700 23.7 27.42%
Mean 32.54
SD 12.3809
CV 38.0473
(Sources: Annual report of Nabil Bank Limited)

60

50

40
Earning per share

30

20

10

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

Figure 6. Earning Per Share

The above Table 2.3 and Figure 6 shows that the earning per share of Nabil Bank is in
fluctuating trend. Nabil Bank’s earning per share is highest of Rs.50.6 in 2075/76 and
lowest in the year 2078/79 of Rs.18.6. Ratio over the past five years in terms of percentage
also reveals the fluctuation.
 23

The average is Rs.32.54 which means that Nabil Bank shows promising return in
terms of EPS in future.

Similarly, the standard deviation of data analyzed is 12.3809 percent which is lower
than the mean, it means that most of the numbers are close to the average. And the volatility
is lesser between the values.

Likewise, the CV shows the extent of variability of the data in relation to the mean of
the population. The CV obtained here is 38.0473 percent which reveals that the ratio of SD to
mean is medium.

Assets Management Ratio

It is also known as turnover or efficiency ratio or assets management

ratio. It measures how efficiently the firm employs the assets. The asset
turnover ratio measures the value of a company's sales or revenues relative to the value of
its assets. The asset turnover ratio can be used as an indicator of the efficiency with which a
company is using its assets to generate revenue. Higher the asset turnover ratio, the more
efficient a company. Conversely, if a company has a low asset turnover ratio, it indicates it is
not efficiently using its assets to generate sales.

i) Loan and Advances to Fixed Deposit Ratio

Loan and advances are the assets of the bank and fixed deposit is the
liability. So, this is the ratio between assets and liability. This helps to show
the ratio of Loan &advances to fixed deposit. We can also conclude that what
part of the credit and advances is initiated against fixed deposit.
 24

Table 7
Loan and Advances to Fixed Deposit Ratio
(NRP in Billion)

Fiscal Year Load Fixed Deposit Ratio Change

and Advance
2075/76 133.56 64.96 2.0560 -
2076/77 153.83 78.85 1.9509 -5.1119%
2077/78 206.62 93.28 2.2151 13.5425%
2078/79 310.37 175.35 1.7700 -20.0939%
2079/80 339.41 221.52 1.5322 -13.4350%
Mean 1.90484
SD 0.2638
CV 13.8489%
(Sources: Annual report of Nabil Bank Limited)

2.5
Loan and advances to fixed

2
deposit ratio

1.5

0.5

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

Figure 7. Loan and Advances to Fixed deposit Ratio

The above Table 7 and Figure 7 shows that the loan and advances to fixed deposit
ratio of Nabil Bank is in fluctuating trend. Nabil Bank’s loan and advances to fixed deposit
ratio is highest of 2.2151 in 2077/78 and lowest in the year 2079/80 of 1.5322. Ratio
over the past five years in terms of percentage also reveals the fluctuating trend.
The average is 1.90484 which means earning of Nabil is insufficient to cover unforeseen fund
requirement.
Similarly, the standard deviation of data analyzed is 0.2638 which is lower than the
mean, it means that most of the numbers are close to the average. And the volatility is lesser
between the values. Likewise, the CV shows the extent of variability of the data in relation to
 25

the mean of the population. The CV obtained here is 13.8489 percent which reveals that the
ratio of SD to mean is low. Lower the ratio of standard deviation to mean, the better the risk
return trade off.
ii) Loan and Advances to Total Deposit Ratio
Loan and advances is the investing activities of the bank and total deposit is
the deposit amount of the bank collected from its customers. This ratio measures
the extent to which the bank is successful to manage its total deposit
on loan and advances for the purpose of income generation. A high
ratio indicates better mobilization of collected deposit and vice-versa. However,
it should be noted that too high ratio might not be better from liquidity point of
view.
Table 8
Loan and Advances to Total Deposit Ratio
(NRP in Billion)

Fiscal Year Load Total Deposit Ratio Change

and Advance
2075/76 133.56 164.37 0.8126 -
2076/77 153.83 193.04 0.7968 -1.9444%
2077/78 206.62 227.98 0.9063 13.7425%
2078/79 310.37 329.58 0.9417 3.9060%
2079/80 339.41 403.12 0.8419 -10.5979%
Mean 0.85986
SD 0.0620
CV 7.2105%
(Sources: Annual report of Nabil Bank Limited)
 26

Loan and advances to total deposit ratio 0.95

0.9

0.85

0.8

0.75

0.7
2075/76 2076/77 2077/78 2078/79 2079/80
Fiscal Year

Figure 8. Loan and Advance to Total Deposit Ratio

The above Table 8 and Figure 8 shows that the loan and advances to total deposit ratio
of Nabil Bank is increasing at the beginning and decreasing afterwards. Nabil’s loan and
advances to total deposit ratio is highest of 0.9417 in 2078/79 and lowest in the year 2076/77
of 0.7968.

The average of loan and advances to total deposit ratio is 0.85986 which means credit
management of Nabil is in good position. Similarly, the standard deviation of data analyzed is
0.0620 which is far below than the mean, it means that most of the numbers are close to the
average. And the volatility is lesser between the values.

Likewise, the CV shows the ratio of standard deviation to mean. The CV obtained here
is 7.2105 percent which reveals that the ratio of SD to mean is low. Lower the ratio of
standard deviation to mean, the better the risk return trade off.

iii) Loan and Advances to Total Assets Ratio

This ratio is determined to find out the relationship between credit &
advances to total assets. Loan and advances is the part of total assets. This ratio
helps to find out that how much proportion of credit & advances to total assets.
 27

Table 9

Loan and Advances to Total Assets Ratio

(NRP in Billion)

Fiscal Year Load Total assets Ratio Change

and Advance
2075/76 133.56 201.14 0.6640 -
2076/77 153.83 237.68 0.6472 -2.5301%
2077/78 206.62 291.24 0.7094 9.6106%
2078/79 310.37 419.82 0.7393 4.2148%
2079/80 339.41 481.20 0.7053 -4.5989%
Mean 0.69304
SD 0.0371
CV 5.35%
(Sources: Annual report of Nabil Bank Limited)

0.76

0.74
Loan and advances to total assets ratio

0.72

0.7

0.68

0.66

0.64

0.62

0.6
2075/76 2076/77 2077/78 2078/79 2079/80
Fiscal Year

Figure 9. Loan and Advances to Total Assets Ratio

 28

The above Table 9 and Figure 9 shows that the loan and advances to total asset ratio
of Nabil Bank is in fluctuating trend. Nabil Bank’s loan and advances to total asset ratio is
highest of 0.7393 in 2078/79 and lowest in the year 2076/77 is 0.6472. Ratio over the past
five years in terms of percentage also reveals the fluctuating trend. The average of loan and
advances to total asset ratio is 0.69304 which shows that the capability of utilizing the asset
of the bank is good.

Similarly, the standard deviation of data analyzed is 0.0371 which is far below than
the mean, it means that most of the numbers are close to the average. And the volatility is
lesser between the values.
Likewise, the CV shows the ratio of standard deviation to mean. The CV obtained here
is 5.35% which reveals that the ratio of SD to mean is low. Lower the ratio of standard
deviation to mean, the better the risk return trade off.

Analysis of Data

Trend Analysis

Trend analysis evaluates the bank’s financial information over a period of time.
Periods maybe measured in months, quarters, or years, depending on the circumstances. The
goal is to calculate and analyze the amount change and percent change from one period to the
next.

Deposit Growth Trend

The current deposit are very short term mature and fixed deposit at long term mature
i.e. one year or more. The efficiency deposit and its utilization in the productive sector
relating to the industry, commerce, foreign, tourism and business area ultimately contribute to
the national economy. Thus, the collection of deposit of the Nabil Bank Limited are analyzed
as follows:

(NRP in Billion)

Year Total Current Term Saving Other

Deposit Deposit Deposit Deposit Deposit
2075/76 118.275 5.71 25.18 55.21 1.05
2076/77 142.689 6.14 26.41 70.85 2.22
2077/78 163.623 30.67 26.90 56.43 0.13
2078/79 197.167 22.15 69.11 71.55 15.89
 29

2079/80 244.51 24.22 119.48 76.67 5.08

(Sources: Annual report of Nabil Bank Limited)

Investment, Loan and Advance Trend

When we say the bank , everyone thinks about the deposit and side by side the loan.
Bank’s provide loan and advances to different individuals and company. Deposit collected
from different depositors are invested by bank through different loan and advances,
investment in securities. Providing loan and advance and proper investment is the crucial job
of the bank. Thus, we analyzed the investment, loan and advances of Nabil Bank Limited to
know the trend of Nabil Bank Limited as follows:

(NRP in Billion)

Year Investment, Loan Growth Index(%) Change(%)

and Advance
2075/76 15.79 - -
2076/77 20.42 105.63 29.32
2077/78 19.89 102.88 -2.60
2078/79 22.42 115.97 12.72
2079/80 26.53 137.21 18.32
(Sources: Annual report of Nabil Bank Limited)

Findings of the Research

The followings are the findings from our study:

i. Considering the Cash and Bank balance to total deposit ratio of Nabil Bank, its
shows that total deposit of Nabil Bank is in fluctuating trend. The mean ratio is
0.06times, It shows that the bank has the condition to extend normal credit terms to the
suppliers and very little credit extended to its customers.
ii. Cash and Bank Balance to Total Assets Ratio of the bank depicts that Nabil Bank is
able to maintain satisfactory financial condition.
iii. The current ratio of the bank is 0.2077 which shows that the current liabilities of the
bank is higher than the current assets. Thus, the bank either needs to
 30

decrease its current liabilities or increase its current assets, so that the current ratio
would be equal or greater than one.
iv. Return on shareholders fund shows that the bank is earning 11.23 percent of net profit
after tax against shareholders fund on average which shows good profitability position.
v. The average of Return on total assets is 1.33 percent which means that Nabil Bank
needs to increase the efficiency of assets utilization to increase the earning.
vi. EPS of the bank has decreased significantly in the year 2076/77, 2077/78, 2078/79.
However, it has been observed that the EPS has increased by 27.42 percent in the year
2079/80, which shows that Nabil Bank has promising return in terms of EPS in future.
vii. Loans and advances are assets of the bank whereas fixed deposit is the liability of the
bank. This ratio depicts what part of the credit and advances is initiated against fixed
deposit. The average obtained is 1.90484 which means Nabil Bank is insufficient to
cover unforeseen fund requirement.
viii. Loan and Advances to Total deposit ratio measures the extent to which the bank is
successful to manage its total deposit on loan and advances for the purpose of income
generation. A high ratio indicates better mobilization of collected deposit and vice-
versa. The average of loan and advances to total deposit ratio is 0.85986 which
means credit management of Nabil Bank is in good position.
ix. Loan and Advances to Total Assets ratio helps to find out that how much proportion
of credit & advances is total assets. The average of loan and advances to total asset
ratio is 0.69304 which shows that the capability of utilizing the asset of the bank is
good.
 31

CHAPTER III: SUMMARY AND CONCLUSION

Summary

The study is mainly based on secondary sources. All data are taken from Nabil Bank
annual report, literature publication, balance sheet, profit and loss account, different website,
related books and booklets, journals and articles. After collecting data from different sources,
it is analyzed by using financial and statistical tools. Findings are drawn by applying various
financial tools viz. liquidity, profitability and assets management ratio and statistical tools:
mean, standard deviation and coefficient of variation of cash and bank balance and total
deposit. In an attempt to fulfill the objectives of the research work, all secondary
data are compiled, processed and tabulated as per necessity and figures, diagrams
and different types of chart are also used.

This study suffers from different Limitation; it considers study of only Nabil Bank
because of time and resource are the constraints of the study. For the purpose of our study,
here we have analyzed the financial performance of Nabil Bank Limited over the period of
FY 2075/79 to FY 2079/80. To evaluate the financial performance of the bank, we have
divided the whole report to different chapters. In every chapter, there are several sub-
chapters. The first introduction chapter gives background information about the project
work, introduction of Nabil Bank Limited, Review related studies etc. The second
chapter called Presentation and Analysis of Data; we tried to analyze the financial
performance of the bank. Therefore, the study may not be generalized in all cases and
accuracy depends upon the data collected and provided by the organization.

Conclusion

Major findings from the study leads to the conclusion of our study. The following are
the conclusions of our study:
 32

i. Total deposit of Nabil Bank Limited is in fluctuating trend. It shows that the bank has
the condition to extend normal credit terms to the suppliers and very little credit
extended to its customers.
ii. Current liabilities of the bank is higher than the current assets.
iii. Net profit after tax against shareholders fund on average which shows good profitability
position.
iv. Nabil Bank has promising return in terms of EPS in future.
v. Huge fluctuation does not show promising security to the shareholders in terms of
dividend.
vi. Nabil Bank is insufficient to cover unforeseen fund requirement.
vii. Credit management of Nabil Bank is in good position.
viii. The capability of utilizing the asset of the bank is good.
 33

BIBLIOGRAPHY

BIBLIOGRAPHY Almazari, F. P. (2011), Financial performance evaluation of some selected jordanian

commercial bank. International Research Journal of Finance and Economics.

Almumani. (2014), Evaluating the financial performance of bank using financial ratio- A case
study of Erbil Bank for investment and finance, Europen Journal of Accounting
Auditing and Financial Research.
Peterson P. and Fabozzi F.(1999), "Analysis of financial statements."

Gapenski, B. E. (1992). "Financial Management: Theory and practice.".United Kingdom:

Dryden Publication
Haque, I. (2011), Comparative study between public sector bank and private sector banks.
International Journal of Management and Innovation.
Joshi, P. (2073), Business Research Methods. Samjhana Publication Pvt. Ltd. Kathmandu.
Ross, P. S. (2000), "Commercial bank management”.Chicago: McGraw-Hill/Irwin.
Samad, A. (2004), Bahrain Commercial Bank's Performance during 1994-2001. Credit and
Financial Management Review.
Tarawneh, M. (2006), "A comparison of financial performance of banking sector"
International Research Journal of Finance and Economics.

Website: https://www.nabilbank.com
 34

Appendix I

Cash and Bank to Total Deposit

Fiscal Year Cash and Bank Total Deposit Ratio Change

Balance
2075/76 10.67 164.37 0.0649 -
2076/77 4.80 193.04 0.0249 -61.63%
2077/78 7.29 227.98 0.0320 28.51%
2078/79 11.05 329.58 0.0335 4.48%
2079/80 6.77 403.12 0.0168 -49.85%
Mean 0.03442
S.D 0.0183
C.V 53.17%

Appendix II

Return on Shareholder’s Fund

Fiscal Year NPAT Shareholder’s ROE Change

Fund
2075/76 4.2 23 18.26% -
2076/77 3.5 26 13.46% -0.2629
2077/78 4.5 34 13.2% -0.0193
2078/79 5.2 53 9.81% -0.2568
2079/80 6.4 57 11.23% 0.1448
Mean 13.192
SD 3.2419
CV 24.5747
 35

Appendix III

Loan and Advances to Fixed Deposit Ratio

Fiscal Year Load Fixed Deposit Ratio Change

and Advance
2075/76 133.56 64.96 2.0560 -
2076/77 153.83 78.85 1.9509 -5.1119%
2077/78 206.62 93.28 2.2151 13.5425%
2078/79 310.37 175.35 1.7700 -20.0939%
2079/80 339.41 221.52 1.5322 -13.4350%
Mean 1.90484
SD 0.2638
CV 13.8489%