CHAPTER – II

ANALYSIS AND FINDINGS

2.1 Introduction:
Prabhu Bank Limited has shown strong financial growth in recent quarters, particularly
with a significant increase in its net profit, which rose by 85.49% to reach NPR 1.34
billion in the second quarter of fiscal year 2081/82. The bank’s earnings per share (EPS)
also improved notably to NPR 11.35, up from NPR 6.12 in the same period last year.
This growth was supported by an 11.10% rise in operating income and a notable
reduction in impairment charges. However, despite these positive indicators, several
financial ratios highlight areas of concern. The return on equity (ROE) stands at just
0.70%, and return on assets (ROA) is a low 0.07%, both of which are below the industry
average. Additionally, the non-performing loan (NPL) ratio has increased to 5.06%,
suggesting weaknesses in credit risk management. From a valuation perspective, the
bank has a price-to-earnings (P/E) ratio of 19.77 and a price-to-book (P/B) ratio of 3.03,
indicating the stock may be relatively expensive. Overall, while Prabhu Bank
demonstrates solid revenue and profit growth, its modest profitability ratios and rising
NPL levels indicate the need for strategic improvements in efficiency and asset quality
management.This chapter deals with the presentation, analysis and interpretation of
relevant data of Parbhu Bank Limited to fulfill the objective of this study. According to
the research methodology as mentioned in the third chapter of this study the data have
been analyzed competently. The purpose of this chapter is to introduce mechanism of
data analysis and interpretation. Different type of analytical methods and tools such as
financial ratio analysis and statistical analysis are used.

2.2 Financial Statement Analysis:

Financial statement analysis is the process of analyzing a company’s financial statement

for decision making purposes and to understand the overall health of an organization.
Financial analysis is done by applying various financial tools in order to have clear
picture on the viability of the project. It is the method of evaluating past, present, and
projected performance of a company. The financial analysis is done to ascertain the
liquidity, profitability, leverage, debt servicing and interest servicing ability of the firm.
The concept of financial statement analysis has been already discussed in previous
chapter. Here, we study and analyze the data by using accounting tools.
2.2.1 Liquidity Ratio:

Liquidity refers to the ability of a firm to meet its short- term or current obligations. So
liquidity ratios are used to measure the ability of a firm to meet its short-term
obligations. Inadequate liquidity can lead to unexpected cash short falls that must be
covered 5at 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 ratios are developed under the liquidity ratios to identify the liquidity position.

i) Cash and Bank Balance to Investment Ratio:

This shows the ratio between cash & bank balance to Investment. Cash and bank balance
is the outcome of deposit of customers plus other income and reserves of the bank. Bank
is liable to 20 customer to pay out upon demand of customers so we are trying to find the
comparative study between them.

Cash∧balance
Cash & Bank Balance to Total Investment =
Total investment

Table: 1
Cash and Bank Balance to Investment Ratio
(Amount in Rs.)

Fiscal year Cash and bank Total Ratio Percentage

balance Investment

2074/075 13,172,782,867 6,504,185,796 2:0 --

2076/077 25,116,482,060 15,102,674,197 1:7 -15%

2077/078 23,117,394,498 18,198,739,944 1:3 -24%

2078/079 21,383,490,030 11,964,561,347 1:8 38%

2079/080 32,295,170,501 15,554,185,400 2:1 17%

Mean 1.76
SD 0.28

CV 16%

Sources : Annual Report Of PBL

Figure :1
Cash and Bank Balance to Total Investment Ratio
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2074/075 2076/077 2077/078 2078/079 2079/080

The above Table 1 and Figure 1 reveals that the Cash and Bank Balance to Total
Investment ratio is increasing since 2078/79 and 2079/80. PBL’s Cash and Bank Balance
to Total Investment ratio is the highest of 2.1 times in 2077/78 and lowest in year
2076/77 of 1.3 times. Ratios over the past five years are found to be decreased in the year
2071/72 and 2072/73. However, the ratios are found to be increased in the year 2074/75
and 2079/80.

The average is 1.76 times which is greater than 1. Thus, it means that PBL is able to meet
the demand of current depositors during the research period.

Similarly, the standard deviation of the data analyzed is 0.28 which is lower than the
mean, it reveals that most of the numbers are close to the average. And the cash and bank
balance and total investment values are less volatile.

Likewise, the CV represents the ratio of standard deviation to mean. The CV obtained
here is 16 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) Cash and Bank Balance to Total Deposit Ratio:

This cash & bank balance to total deposit ratio shows that percentage relation between
them. It means the liquid balance available in respect to total deposit of the bank whereas
the difference between the cash & bank balance to total deposit is said as the investment
of the bank.
Cash∧Bank Balance
Cash & Bank Balance to Total Deposit =
Total deposit

Table: 2
Cash and Bank Balance to Deposit Ratio
(Amount in Rs.)

Fiscal year Cash and bank Total Deposit Ratio Percentage

balance

2074/075 13,172,782,867 6,504,185,796 0.21 --

2076/077 25,116,482,060 15,102,674,197 0.30 43

2077/078 23,117,394,498 18,198,739,944 0.25 -17%

2078/079 21,383,490,030 11,964,561,347 0.22 -12%

2079/080 32,295,170,501 15,554,185,400 0.28 27%

Mean 0.25

SD 0.034

CV 14%
 Sources : Annual Report Of PBL

Figure 2
Cash and Bank Balance to Total Deposit Ratio

0.35

0.3

0.25

0.2

0.15

0.1

0.05

0
2074/075 2076/077 2077/078 2078/079 2079/080

The above Table 2 and Figure 2 shows that the cash and bank balance to total deposit
ratio of PBL is in fluctuating trend. PBL’s cash and bank balance to total deposit ratio is
highest of 0.3 times in 2076/77 and lower in the year 2078/79 of 0.21 times. Ratio over
the past five years in terms of percentage also reveals the fluctuation. Ratio are found to
be increased in the year 2076/77 whereas decreased in the year 2077/78 and 2078/79.
However, the ratio has subsequently increased in the year 2074/75.

The average is 0.25 which is lower than 1. It means that PBL has more total deposit than
cash and bank balance. In this situation, there is insufficient cash on hand to pay off all
the deposit of the customers. This may not be the bad news if the bank has the condition
to extend normal credit terms to the suppliers and very little credit extended to its
customers.
Similarly, the standard deviation of data analyzed is 0.034 which is very much lower than
the mean, it means that most of the numbers are close to the average. And cash and bank
balance and total deposit are less volatile.

Likewise, the CV shows the extent of variability of the data in relation to the mean of the
population. The CV obtained here is 14percent which means that the ratio of SD to mean
is low. Lower the ratio of SD to mean, better the risk return trade off.

iii) Cash and Bank Balance to Total Assets Ratio:

This cash and bank balance to total assets ratio shows the relation between them. The
cash flows to total assets ratio shows investors how efficiently the business is at using its
assets to collect cash from sales and customers.
Cash∧Bank Balance
Cash & Bank Balance to Total Assets =
Total Assets

Table: 3
Cash and Bank balance to Total Assets Ratio
(Amount in Rs.)

Fiscal year Cash and bank Total Assets Ratio Percentage

balance

2074/075 13,172,782,867 70,445,082,845 0.19 --

2076/077 25,116,482,060 99,152,806,017 0.25 32%

2077/078 23,117,394,498 113,885,046,402 0.20 -20%

2078/079 21,383,490,030 116,510,445,575 0.18 -10%

2079/080 32,295,170,501 144,811,151,443 0.22 22%

Mean 0.21

SD 0.024

CV 12%
Sources : Annual Report Of PBL
 Figure 3
Cash and Bank Balance to Total Assets Ratio
0.3

0.25

0.2

0.15

0.1

0.05

0
2074/075 2076/077 2077/078 2078/079 2079/080

Table 3 and Figure 3 shows that the cash and bank balance to total assets ratio of PBL is
in fluctuating trend. PBL’s cash and bank balance to total deposit ratio is highest of 0.25
times in 2076/77 and lower in the year 2078/79 of 0.18 times. Ratio over the past five
years in terms of percentage also reveals the fluctuation. Ratio are found to be positive in
the year 2075/75 by 32 percent whereas decreased in the year 2077/78 by 20 percent and
2078/79 by 10 percent. However, the ratio has subsequently increased in the year
2079/80 by 22 percent.

The average is 0.21 which is lower than 1. It means that PBL will not be able to pay off
all its liabilities with available cash and cash equivalents. 0.19 0.25 0.2 0.18 0.22 0 0.05
0.1 0.15 0.2 0.25 0.3 2074/75 to 2079/80 Cash and Bank Balance to Total Assets Ratio
Fiscal Year 25 Similarly, the standard deviation of data analyzed is 0.024 which is much
lower than the mean, it means that most of the numbers are close to the average. And
cash and bank balance and total assets are less volatile.

Likewise, the CV shows the extent of variability of the data in relation to the mean of the
population. The CV obtained here is 12 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.

iv) Current Ratio

This ratio is used to find the relation between current assets and current liabilities of the
bank. The current ratio is a liquidity ratio that measures a company's ability to pay short-
term obligations or those due within one year.
Current Assets
Current Ratio =
Current Labilities

Table: 4
Current Ratio
(Amount in Rs.)

Fiscal year Current Assets Current Ratio Percentage

Liabilities

2074/075 63,313,902,806 64,519,090,385 0.98 --

2076/077 83,419,734,448 91,193,583,991 0.91 7%

2077/078 95,007,318,559 104,302,113,29 0.91 0%

1

2078/079 11,964,561,347 103,897,018,69 0.99 9%

6

2079/080 15,554,185,400 127,607,799,02 0.99 0%

8

Mean 0.96

SD 0.038

CV 4%
Sources : Annual Report Of PBL
Figure 4
Current Ratio
 1

0.98

0.96

0.94

0.92

0.9

0.88

0.86
2074/075 2076/077 2077/078 2078/079 2079/080

The above Table 4 and Figure 4 shows that the current ratio of PBL is fluctuating over
the past five years. PBL’s current ratio is highest of 0.99 times in 2078/79 and 2079/80
and lower in the year 2076/77 and 2077/78 of 0.91 times. Ratio over the past five years in
terms of percentage also reveals the fluctuation. Ratio are found to be decreased in the
year 2076/77 whereas no change in the year 2072/73, incensement in the year 2078/79
and again no change in the year 2079/80.

The average is 0.96 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 0.038 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 4 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.

2.2.2 Profitability Ratio:

A 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 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. 2074/75 to 2079/780 Current Ratio Fiscal Year
i) Return on Shareholder’s Fund:

This ratio, also called Return in Proprietor’s Fund or Return in Net worth. It measures the
percentage of net profit to average shareholder’s fund.
Net Profit after Tax
Return on Shareholder′ s Fund = '
Shareholde r sFund

Table: 5
Return on Shareholder’s Fund:
(Amount in Rs.)

Fiscal year Net Profit After Share holder's Ratio Percentage

Tax Fund

2074/075 1,549,698,560 5,457,147,460 28 % --

2076/077 1,574,352,443 6,890,377,025 23 % -18%

2077/078 1,730,207,025 8,514,088,112 20 % -13%

2078/079 2,006,247,780 11,544,581,880 17 % -15%

2079/080 2,581,681,778 16,134,507,415 16 % -6%

Mean 20.8%

SD 4.35%

CV 4%
Sources : Annual Report Of PBL

Figure 5
Return on Shareholder’s Fund:
 30

25

20

15

10

0
2074/075 2076/077 2077/078 2078/079 2079/080

The above Table 5 and Figure 5 shows that the Return on shareholders' fund of PBL is in
decreasing trend. PBL’s Return on shareholders' fund is the highest of 28 percent in
2074/75 and lowest in year 2079/80 of 16percent. Ratios over the past five years are
found to be decreased every year. The return on shareholder’s fund is found to be
minimum in 2079/80 at 16 percent. The average is 20.8 percent which means that the
return on shareholders' fund is 20.8 percent of net profit on average.

Similarly, the standard deviation of the data analyzed is 4.35 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 21 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) 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
Net Profit after Tax
Return on Total Assets = X 100
Total Assets
 Table: 6
Return on Total Assets
(Amount in Rs.)

Fiscal year Net Profit After Total Assets Ratio Percentage

Tax

2074/075 1,549,698,560 70,445,082,845 2.2 % --

2076/077 1,574,352,443 99,152,806,017 1.6 % -27%

2077/078 1,730,207,025 113,885,046,40 1.5% -6%

2

2078/079 2,006,247,780 116,510,445,57 1.7 % 13%

5

2079/080 2,581,681,778 144,811,151,44 1.8% 6%

3

Mean 1.76%

SD 0.00058%

CV 0.033%
Sources : Annual Report Of PBL

Figure 6
Return on Total Assets
2.50%

2.00%

1.50%

1.00%

0.50%

0.00%
2074/075 2076/077 2077/078 2078/079 2079/080
The above Table 6 and Figure 6 show that the Return of Total Asset of PBL is in
fluctuating trend. PBL’s return on total assets is highest of 2.2 percent in 2074/75 and
lower in the year 2077/78 of 1.5percent. Ratio over the past five years in terms of
percentage also reveals the fluctuation. Ratio are found to be decreased in the year
2076/77 and 2077/78 whereas increase in the year 2078/79 and 2079/80.

The average is 1.76 percent which means that PBL needs to increase the efficiency of
assets utilization to increase the earning. Similarly, the standard deviation of data
analyzed is 0.00058 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 0.033 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) Earnings 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.
Net Profit after Tax
Earning per share = X 100
No. of share

Table: 7
Earnings Per Share
(Amount in Rs.)

Fiscal year Net Profit After Number of EPS Percentage

Tax Share

2074/075 1,549,698,560 18,012,391 86 --

2076/077 1,574,352,443 20,173,878 78 -9 %

2077/078 1,730,207,025 20,173,878 86 10 %

2078/079 2,006,247,780 60,352,269 33 62 %

2079/080 2,581,681,778 60,352,269 43 30 %

Mean 65.2

SD 22.62
CV 35%
Sources : Annual Report Of PBL

Figure 7
Earnings per Share
100
90
80
70
60
50
40
30
20
10
0
2074/075 2076/077 2077/078 2078/079 2079/080

The above Table 7 and Figure 7 shows that the earning per share of PBL is in fluctuating
trend. PBL’s earning per share is highest of Rs.86 in 2077/078 and lowest in the year
2078/79 of Rs.33.

Ratio over the past five years in terms of percentage also reveals the fluctuation. Ratio are
found to be decreased in the year 2076/77 by 9 percent whereas increase in the year
2077/78 by 10 percent. Again, there has been decrease in the year 2077/78 by 62 percent
and further increase by 30 percent in the year 2079/80 as compare to the relative previous
year.

The average is Rs. 65.2 which means that PBL shows promising return in terms of EPS in
future. Similarly, the standard deviation of data analyzed is Rs. 22.62 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 35 percent which reveals that the ratio of SD to
mean is medium.

iv) Dividend Per Share (DPS):

This ratio is calculated by dividing the Dividend payable to Equity Shareholders by
Number of Equity Shares.
¿
Dividend per share = Dividend Payable ¿ Equity Shareholders No . of equity shares outstanding
X 100

Table 8
Dividend per Share
(Amount in Rs.)
Fiscal year Dividend payable No. of equity DPS Percentage
to equity share
shareholders outstanding
2074/075 920,395,772 18,012,391 51 -0 %
2076/077 141,122,877 20,173,878 7 -86 %
2077/078 106,495,939 20,173,878 5 -29 %
2078/079 110,422,513 60,352,269 2 -60 %
2079/080 1,600,000,000 60,352,269 27 1250%
Mean 18.4

SD 18.52

CV 101%
Sources : Annual Report Of PBL

Figure 8
Earnings per Share
 60

50

40

30

20

10

0
2074/075 2076/077 2077/078 2078/079 2079/080

The above Table 8 and Figure 8 shows that the dividend per share of PBL is in
fluctuating trend. PBL’s dividend per share is highest of Rs.51 in 2074/75 and lowest in
the year 2078/79 of Rs.2. Ratio over the past five years in terms of percentage also
reveals the fluctuation. Ratio are found to be decreased in the year 2076/77, 2077/78, and
2078/79. However, the ratio has highly increased in the year 2079/80.

The average is Rs. 18.4 which means that PBL has distributed favorable income as
dividend to the investors.

Similarly, the standard deviation of data analyzed is Rs. 18.52 which is higher than the
mean, it means that the numbers are more spread out. And the volatility is higher 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 101 percent which reveals that the ratio
of SD to mean is very high.

2.2.3 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.
Loan∧ Advances
Loan & Advances to Fixed Deposit =
¿ Deposit

Table 9
Loan & Advance to Fixed Deposit Ratio
(Amount in Rs.)

Fiscal year Loan and Advance Fixed Deposit Ratio Percentage

2074/075 47,572,024,207 14,528,858,311 31% 0%

2076/077 54,482,465,225 19,784,889,538 36% 16 %

2077/078 67,955,107,021 25,999,038,315 38% 6%

2078/079 77,287,764,142 36,311,502,599 47% 24 %

2079/080 94,182,247,596 54,063,678,682 57% 21%

Mean 41.9%

SD 9.2%

CV 22%
Sources : Annual Report Of PBL

Figure 9
Loan & Advance to Fixed Deposit Ratio
 60%

50%

40%

30%

20%

10%

0%
2074/075 2076/077 2077/078 2078/079 2079/080

The above Table 9 and Figure 9 shows that the loan and advances to fixed deposit ratio of
PBL is in increasing trend. PBL’s loan and advances to fixed deposit ratio is highest of
57 percent in 2079/80 and lowest in the year 2074/75 of 31 percent. Ratio over the past
five years in terms of percentage also reveals the increasing trend. Ratio are found to be
increased continuously since 2074/75 to 2079/80.

The average is 41.9 percent which means earning of PBL is insufficient to cover
unforeseen fund requirement.

Similarly, the standard deviation of data analyzed is 9.2 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 22 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.
Loan∧ Advances
Loan & Advances to Total Deposit Ratio =
Total Deposit

Table 10
Loan & Advance to Total Deposit Ratio
(Amount in Rs.)

Fiscal year Loan and Advance Total Deposit Ratio Percentage

2074/075 47,572,024,207 62,108,135,754 77% 0%

2076/077 54,482,465,225 83,093,789,957 66% -14 %

2077/078 67,955,107,021 93,735,480,708 72% 9%

2078/079 77,287,764,142 95,094,461,030 81% 13 %

2079/080 94,182,247,596 115,511,705,92 82% 1%

2

Mean 75.6%

SD 6%

CV 8%
Sources : Annual Report Of PBL
 Figure 10
Loan & Advance to Total Deposit Ratio
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2074/075 2076/077 2077/078 2078/079 2079/080

The above Table 10 and Figure 10 shows that the loan and advances to total deposit ratio
of PBL is fluctuating trend. PBL’s loan and advances to total deposit ratio is highest of
82 percent in 2079/80 and lowest in the year 2076/77 of 66 percent. Ratio over the past
five years in terms of percentage also reveals the fluctuating trend. Ratio are found to be
decreased in the year 2076/77. However, the ratios have continuously increased since
2077/78 to 2079/80.

The average of loan and advances to total deposit ratio is 75.6 percent which means credit
management of PBL is in good position. Similarly, the standard deviation of data
analyzed is 6 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 ratio of standard deviation to mean. The CV obtained here is
8 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.
Loan∧ Advances
Loan & Advances to Total Assets =
Total Assets

Table 11
 Loan & Advance to Total Assets Ratio
(Amount in Rs.)

Fiscal year Loan and Advance Total Assets Ratio Percentage

2074/075 47,572,024,207 70,445,082,845 68% 0%

2076/077 54,482,465,225 99,152,806,017 55% -19 %

2077/078 67,955,107,021 113,885,046,40 60% -9%

2

2078/079 77,287,764,142 116,510,445,57 66% 10 %

5

2079/080 94,182,247,596 144,811,151,44 65% -2%

3

Mean 63%

SD 4.7%

CV 8%
Sources : Annual Report Of PBL

Figure 11
Loan & Advance to Total Deposit Ratio
80%

70%

60%

50%

40%

30%

20%

10%

0%
2074/075 2076/077 2077/078 2078/079 2079/080
The above Table 11 and Figure 11 shows that the loan and advances to total asset ratio of
PBL is in fluctuating trend. PBL’s loan and advances to total asset ratio is highest of 68
percent in 2074/75 and lowest in the year 2076/77 of 66percent. Ratio over the past five
years in terms of percentage also reveals the fluctuating trend. Ratio are found to be
decreased in the year 2076/77 by 13 percent whereas ratio has increased in the year
2077/78 and 2079/080 by 6 percent and 4 percent respectively and further ratio has
decreased by 1 percent in the year 2079/80 .

The average of loan and advances to total asset ratio is 63 percent which shows that the
capability of utilizing the asset of the bank is good Position.

Similarly, the standard deviation of data analyzed is 4.7 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 ratio of standard deviation to mean. The CV obtained here is
8 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
 CHAPTER - III

SUMMARY AND CONCLUSION

3.1 Summary

The study is mainly based on secondary sources. All data are taken from PBL 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.

Prabhu Bank Limited has demonstrated notable financial progress in the second quarter
of fiscal year 2081/82, with its net profit reaching NPR 1.34 billion—a significant year-
on-year growth of 85.49%. This performance has been supported by a combination of
factors, including an 11.10% increase in operating income, higher interest and fee-based
revenues, and a significant reduction in impairment charges. Earnings per share (EPS)
rose to NPR 11.35, up from NPR 6.12 in the previous year, reflecting improved
profitability and stronger returns for shareholders. These developments suggest enhanced
operational efficiency and financial health in the short term.

However, despite these gains, several key financial ratios indicate underlying
weaknesses. The bank’s return on equity (ROE) stands at a modest 0.70%, and its return
on assets (ROA) is only 0.07%—both figures are well below industry averages,
indicating underperformance in utilizing equity and assets to generate profits.
Additionally, the non-performing loan (NPL) ratio has risen to 5.06%, signaling
increased credit risk and challenges in loan recovery. These issues point to the need for
stronger credit risk management and more effective asset deployment.

In terms of valuation, Prabhu Bank’s price-to-earnings (P/E) ratio is 19.77 and its price-
to-book (P/B) ratio is 3.03. These figures suggest the bank’s stock may be overvalued
relative to its current earnings and book value, making it less attractive to value-focused
investors. The bank’s net worth per share stands at NPR 144.79, which is below the
industry average of NPR 183.93, reflecting a weaker capital position compared to its
peers.

In summary, while Prabhu Bank has made commendable progress in profit growth and
earnings per share, its low profitability ratios, high NPL level, and relatively high
valuation multiples raise concerns. For sustained performance, the bank must improve its
asset quality, enhance credit risk practices, and optimize the use of its resources. Despite
short-term gains, long-term success will depend on addressing these structural challenges
and improving overall financial efficiency.

This study suffers from different Limitation; it considers study of only PBL 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 Parbhu Bank Limited over the period of FY
2074/75to 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 Parbhu 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.
3.2 Conclusion
Major findings from the study leads to the conclusion of our study.

The following are the findings from our study:

• Cash and Bank Balance to Total Investment Ratio of the bank shows the increasing
trend during the study period. The mean ratio is above 1 which means that PBL is able to
meet the demand of current depositors during the research period.

• Considering the Cash and Bank balance to total deposit ratio of PBL, it shows that total
deposit of PBL is increasing as compare to cash and bank balance. The mean ratio is 0.25
41 times, It shows that the bank has the condition to extend normal credit terms to the
suppliers and very little credit extended to its customers.

• Cash and Bank Balance to Total Assets Ratio of the bank depicts that PBL is able to
maintain satisfactory financial condition. The current ratio of the bank is 0.96 which
shows that the current liabilities of the bank is higher than the current assets. Thus, the
bank either needs to decrease its current liabilities or increase its current assets, so that
the current ratio would be equal or greater than one.

• Return on shareholders fund shows that the bank is earning 20.8 percent of net profit
after tax against shareholders fund on average which shows good profitability position. •
The average of Return on total assets is 1.76 percent which means that PBL needs to
increase the efficiency of assets utilization to increase the earning.

• EPS of the bank has decreased significantly in the year 2078/79. However, it has been
observed that the EPS has increased by 30 percent in the year 2079/80, which shows that
PBL has promising return in terms of EPS in future.

• Considering the DPS, it is seen that dividend distributed by the bank has increased
significantly in the year 2079/80 to Rs.27 per share from Rs.2 per share of 2078/79. From
the study it is known that the bank distributes favorable portion of income as dividend to
the shareholders. However, the huge fluctuation does not show promising security to the
shareholders in terms of dividend.
• Loan and Advances to Fixed Deposit ratio, 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 41.9 percent
which means earning of PBL is insufficient to cover unforeseen fund requirement.

• 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 75.6percent which means credit
management of PBL is in good position.

• 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
63percent which shows that the capability of utilizing the asset of the bank is good.
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Website: www.pbl.com.np

www.investopedia.com

Appendices
Appendix A: Key Financial Metrics (Q2 FY 2081/82)

Metric Value
Net Profit NPR 1.34 billion
Earnings Per Share (EPS) NPR 11.35
Return on Equity (ROE) 0.70%
Return on Assets (ROA) 0.07%
Non-Performing Loan (NPL) 5.06%
Net Worth Per Share NPR 144.79

Appendix B: Valuation Ratios

Ratio Value
Price-to-Earnings (P/E) 19.77
Price-to-Book (P/B) 3.03

Appendix C: Performance Comparison (Year-on-Year)

Indicator Q2 FY 2080/81 Q2 FY 2081/82 % Change

Net Profit NPR 722 million NPR 1.34 billion +85.49%
EPS NPR 6.12 NPR 11.35 +85.62%
Operating Income Growth — +11.10% —
Impairment Charges NPR 1.26 billion NPR 814.2 million -35.36%

Appendix D: Industry Averages for Comparison

Metric Industry Average

Return on Equity (ROE) ~10–15%
Return on Assets (ROA) ~1–2%
Non-Performing Loan (NPL) < 3%
Net Worth Per Share NPR 183.93