FINANCIAL PERFORMANCE OF NEPAL BANK LIMITED

Submitted By:
Bimod Bhandari
T.U. Regd. No: 7-2-927-166-2019
Swoyambhu International College
Group: Finance

Submitted To:
Faculty of Management
Tribhuvan University
Kathmandu, Nepal

In Partial fulfillment of the requirements for the degree of

BACHELOR OF BUSINESS STUDIES (BBS)
Kathmandu
January, 2024
1. Background of Study

Financial performance refers to the ability of a company to generate profits and to manage its
financial resources effectively. It is a crucial aspect of evaluating a company overall health and
growth potential (Higgins, 2012). The financial performance of bank is the function of internal
and external factors. The internal factors are the bank specific factors which are originated from
the activity of bank and reflected in the balance sheets and profit and loss accounts. Financial
performance is a subjective measure of how well a firm can use assets from its primary mode of
business and generate revenues. The term is also used as a general measure of a firm’s overall
financial health over a given period.
Profitability is a measure of a company's ability to generate profits over time. It is typically
assessed using financial ratios such as return on equity, return on assets, and gross profit
margin. A company with high profitability is more attractive to investors, lenders, and other
stakeholders. They are more likely to invest in or lend money to the company, as it has the
potential to generate significant returns.
Liquidity is another key aspect of a company's financial performance. It refers to the ability of a
company to meet its short-term financial obligations, such as paying bills and salaries. Liquidity
is measured using financial ratios such as current ratio and quick ratio. A company with good
liquidity is less likely to experience financial distress and has the flexibility to pursue growth
opportunities.
Efficiency is the ability of a company to manage its assets and liabilities efficiently. This is
measured using financial ratios such as inventory turnover and asset turnover. A company with
high efficiency can generate more revenue with fewer assets, which results in higher profits and
greater financial stability.
Solvency is the ability of a company to meet its long-term financial obligations, such as paying
off loans and debts. It is measured using financial ratios such as debt-to-equity ratio and interest
coverage ratio. A company with good solvency is less likely to default on its obligations and has
a lower risk of bankruptcy.
Overall, financial performance analysis provides valuable insights into a company's financial
health and potential for growth. By analyzing financial performance, investors, lenders, and
other stakeholders can make informed decisions about whether to invest in or lend money to the
company. The analysis can also help companies identify areas for improvement and optimize
their financial performance for long-term success.
2. Introduction to Nepal Bank Limited
On November 15, 1937 (Kartik 30, 1994), the then King Tribhuvan inaugurated Nepal Bank
Limited. This marked the beginning of an era of formal banking in Nepal. Until then all
monetary transactions were carried out by private dealers and trading center.
In that era, very few understood or had confidence in this new concept of formal banking.
Rising equity shares were not easy and mobilization of deposits even more difficult. This
 was evident when the bank floated equity shares worth NPR 2,500,000, but was successful
only in raising NPR 842,000.
The total deposits for the first year was NPR 17,02,025 where current deposits was about
NPR 12,98,898 fixed was about NPR 3,88,964 and saving was NPR 14,163. Loan disbursed
and outstanding at the end of the first year was NPR 1,985,000. In 2007, Nepal Bank
Limited appointed Mr Rohit Ghambole as chief banker.
From the very conception and its creation, NBL was as joint venture between the
government and the private sector. Out of 2500 equity shares of NPR 100 face value, 60%
was subscribed by the government and the balanced 40% was offered for the sale to private
sector. There were only 10 shareholders when the bank first started.

3. Objective Of the Study

It defines the purpose of this study. Simply, it helps to find out the answer to the questions
stated above. The general objective of this study is to analyze the financial statements of
Nepal Bank Limited regarding the financial performance and position.

Other specific objectives are as follows:

a. To evaluate the financial position of Nepal Bank Limited.
b. To analyze the financial performances through in terms of Return on assets, Return on
equity.
c. To measure the Liquidity ratio, Solvency ratio, Efficiency ratio and Net interest margin.

4. Significance of Study

The significance of the study is a written statement that explains why your research was
needed. It's a justification of the importance of your work and impact it has on your research
field, it's contribution to new knowledge and how others will benefit from it. The studies of
efficiencies of bank are very important for policy makers, industry leaders and many others who
are reliant on the banking sector. The performance of banks has been an issue of major interest
for various stakeholders such as regulators, customers, investors and general public.
Financial performance analysis includes analysis and interpretation of financial statements in
such a way that it undertakes a full diagnosis of the profitability and financial soundness of the
business. The financial analyst program provides vital methodologies of financial analysis.
 5. Review

Based on this review it appears that many previous studies have also given focus on
financial performance of the Nepal Bank Limited. However, they have not been
incorporating relationship between ROA, ROE and NIM. Therefore, this study will focus on
these matters and others several aspects of financial performance.

6. Research Methodology

The research methodology is the process used to collect information and data. The
methodology may include interviews, survey, publication, research and other research
techniques.

1. Sources of Data Collection

Data can be collected from primary sources and secondary sources. First hand data
collected through direct involvement of researcher whereas secondary data are second
hand data which are already collected by someone else and used by researcher for
his/her study. The major data used in this project report are collected through
secondary sources.

1. Secondary Data:
Secondary data are those data, that has previously been gathered and can be accessed
by researchers. Data in this project are collected from published as well as unpublished
sources. Secondary data used in this project are listed below:
 Annual financial reports of Nepal Bank Limited.

 Official website of Nepal Bank Limited.

 News papers
 Books and articles

7. Data Presentation and Analysis Tool

Various statistical as well as financial ratios are used for analysis of data obtained in the
due course of research. The obtained data is presented, tabulated and graphed to analyze
and achieve the goal of the study. The financial ratios used for data analysis are:
  Profitability ratios: Profitability ratios are financial ratios used to measure a
company's ability to generate profits. These ratios provide insights into a company's
profitability and are commonly used by investors, lenders, and other stakeholders to
assess the company's financial performance. Examples of profitability ratios include
gross profit margin, net profit margin, return on assets (ROA), and return on equity
(ROE). According to Brigham and Ehrhardt (2013), "Profitability ratios measure a
company's ability to generate earnings relative to its revenue, assets, and equity."

 Liquidity ratios: Liquidity ratios are financial ratios used to measure a company's
ability to meet its short-term financial obligations. These ratios provide insights into
a company's liquidity and are commonly used by investors, lenders, and other
stakeholders to assess the company's financial health. Examples of liquidity ratios
include current ratio, quick ratio, and cash ratio. According to Gitman and Zutter
(2014), "Liquidity ratios provide a measure of a company's short-term solvency, or
its ability to meet its current obligations."

 Assets management ratio: Asset management ratios are financial ratios that assess a
company's efficiency in utilizing its assets to generate revenue. These ratios provide
insights into the effectiveness of a company's asset management strategies.
Examples of asset management ratios include inventory turnover, accounts
receivable turnover, and total asset turnover. A higher asset management ratio
indicates that a company is using its assets more effectively to generate revenue,
Brigham and Ehrhardt, 2013), "Efficiency ratios are used to measure how effectively
a firm uses its assets to generate sales.”.

 ROA: "Return on assets (ROA) measures the amount of net income earned for each
dollar invested in assets. It indicates the efficiency with which assets are being used
to generate earnings." ROA is a commonly used financial metric by investors,
analysts, and creditors to evaluate a company's profitability and efficiency. (Brigham
and Ehrhardt, 2013).

 ROE: "Return on equity (ROE) measures the amount of net income earned for each
dollar invested by the firm's owners. It shows how efficiently the company is using
equity to generate earnings." ROE is a commonly used financial metric by investors,
analysts, and creditors to evaluate a company's profitability and shareholder value.
(Brigham and Ehrhardt, 2013).

Further, following tools have been used for data presentation:

 Tabulation: Tabulation is the process of organizing and presenting data in a table

format, with rows and columns, to make it easier to read, analyze, and draw
conclusions from the data. It involves summarizing and categorizing data into
groups and then presenting it in a structured and organized manner using a table.
 Bar diagrams: A bar diagram is a graphical representation of data using rectangular
bars or columns of equal width and varying lengths to represent numerical values. It
 is a visual tool used to compare and contrast different sets of data and identify trends
and patterns within the data.
 Pie-chart: A pie chart is a circular graph used to represent data as a proportion of a
whole. The chart is divided into slices or segments, with each segment representing a
different category or value. The size of each segment is proportional to the value it
represents, and the entire pie represents the total sum of all the values being
represented.

8. Chapter Plan
i. Chapter one - Introduction:
It deals with the introductory part. It consists of background of study, banking scenario in
Nepal, profile of the organization, statement of the problem, objective of the study, review
of literature, methods of data collection, limitations of the study and definition of terms.

ii. Chapter two – Result and Analysis:

Chapter two deals with data presentation and analysis of result and findings. It exhibits
systematic presentation of data collected and analysis of result and findings of project
work.

iii. Chapter three - Discussion and Conclusion:

Chapter three, last chapter of the study focuses on evaluating and interpreting the results
obtained. Further, it also deals with present implication of results obtained and conclusion
drawn useful for future studies.

9. Limitation of the study

The major limitations of this study are mentioned below:

 The research is based on records of 5 fiscal years’ analysis only i.e., from FY
2018/19 to FY 2022/23.
 The researcher has used only some statistical tools for presentation and analysis of
data.
 Most of the data used in this study are based on secondary sources mainly official
website of Nepal Bank Limited.
 The main focus is given to the quantitative aspect rather than qualitative aspect.
 REFERENCES

 Higgins, R. C. (2012). Analysis for financial management. McGraw-Hill/Irwin.

 Brigham & Ehrhardt (2013)

 Gitman & Zutter (2014)

 Other Websites
www.nepalbank.com
www.nrb.com.np