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Ratio Analysis

Of

Nepal Investment Bank Limited

By

MOHAMMED AZIZ
Bachelor of Business Studies
Part III

Exam Roll No: 5120003

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A Fieldwork Report
Submitted to

Tribhuvan University
in partial fulfillment of the requirements for the degree of
BACHELOR OF BUSINESS STUDIES

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Parashar College
Damauli, Tanahun

March , 2013

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TU Registration No: 7-2-512-5-2009

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Faculty of Management

TRIBHUVAN UNIVERSITY

RECOMMENDATION

Entitled

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has been prepared as approved by this Department. This fieldwork assignment report is forwarded for examination.

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Ratio Analysis Of Nepal Investment Bank Limited

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Supervisor
Head of Department

Date: March 24, 2013

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Parashar College
Damauli, Tanahun

MOHAMMED AZIZ

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This is to certify that the fieldwork assignment report Submitted by

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Acknowledgement:
I would like to extend my gratitude to Tribhuvan University for involving this skill developing practical exercise in BANKING & INSURANCE (MGT 324) which provides us first hand knowledge about the world of work and also helps us to apply the conceptual knowledge acquired in classroom to real life. It is my great pleasure to present this fieldwork report for the partial fulfillment of the requirements for the Bachelors Degree of Business Studies (BBS). I would take the pleasure of offering thanks to the staffs of Nepal Investment Bank limited, Damauli Branch for providing me the required data and information. I am indebted to all those authors and scholars whose works have directly or indirectly supported me in its preparation. I sincerely acknowledge to all the teachers and especially to Mr. Mahesh Thapa (Branch Manager for NIBL) without whom this report would not have been completed. I would like to express my sincere gratitude to the respected teachers Mr. Amrit Bhandari (Campus Chief) & Mr. Surendra Shrestha (Fieldwork report supervisor). I have been able to prepare this report only by receiving significant help in different ways from my family and friends. I would like to express thanks to all of them for their guidance, inspiration and invaluable assistance. I would be extremely delighted to appreciate the efforts of Mr. Kehar Singh Ale ( Image Digital Pvt Ltd.) for computer setting and printing of the report.

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MOHAMMED AZIZ BBS -III Parashar College Damauli, Tanahun

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Abbreviations

BOD BS EBIT eg etc FOM FY HDI i.e. Ltd No P/L ROA NPR NIBL TU NRB % Fig Ltd Pvt Dia.

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A/c BBS

Account Bachelors of Business Studies Board of Directors Bikram Sambat Earning Before Interest and Tax exempligratia (for example) etcetera (and so on) Faculty of Management Fiscal Year Human Development Index id est (that is) Limited Number Profit and Loss Return on Assets Nepalese Rupees Nepal Investment Bank Ltd. Tribhuvan University Nepal Rastra Bank Percentage Figure Limited Private Diagram

List of Figures

Figure
Fig.1 Shareholding Pattern of NIBL Fig.2 Earning Per Share Fig.3 Return on Asset Fig.4 Price Earning Ratio Fig.5 Valuation Highligts

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Dia.1 Trend Analysis of EPS, ROA & PE Ratio Dia.2 Bargraph of Valuation Highlights

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Diagram

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List of Diagrams

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Page
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15 15 16 16 17

Table of Contents
Acknowledgement List of abbreviations List of Figures List of Diagrams

Chapter
1. Introduction 1.1 Meaning of Bank 1.2 History of Banking 1.3 Banking in Nepal 1.4 Introduction to NIBL 1.5 Vision 1.6 Mission 1.7 Statement of Problem 1.8 Objectives of Field Report 1.9 Literatures Review 1.10 Methodology of Fieldwork 1.11 Significance of the Study 1.12 Limitation of the Fieldwork 1.13 Organization of the study

2.1.1 Earning Per Share 2.1.2 Return on Asset 2.1.3 Price Earning Ratio 2.1.4 Ratio of Net Proft to Gross Income 2.1.5 Exchange Gain to Total Income Ratio 2.1.6 Net Profit to Loans & Advances Ratio 2.1.7 Cash & Bank balance to Current Deposit Ratio 2.1.8 Cash & Bank balance to Total Deposit Ratio 2.1.9 Saving Deposit to Total Deposit Ratio 2.1.10 Fixed Deposit to Total Deposit Ratio

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2. Presentation and Analysis of data 2.1 Presentation and analysis of data

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3. Appendices Bibliography

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Page
1 1 1 2 3 4 4 5 5 6 7 8 9 10 11 11
11 12 12 12 13 13 13 13 14 14

15 18

Table of Contents
Acknowledgement List of abbreviations List of Figures List of Diagrams

2.1.1 Earning Per Share 2.1.2 Return on Asset 2.1.3 Price Earning Ratio 2.1.4 Ratio of Net Proft to Gross Income 2.1.5 Exchange Gain to Total Income Ratio 2.1.6 Net Profit to Loans & Advances Ratio 2.1.7 Cash & Bank balance to Current Deposit Ratio 2.1.8 Cash & Bank balance to Total Deposit Ratio 2.1.9 Saving Deposit to Total Deposit Ratio 2.1.10 Fixed Deposit to Total Deposit Ratio

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2. Presentation and Analysis of data 2.1 Presentation and analysis of data

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1. Introduction 1.1 Meaning of Bank 1.2 History of Banking 1.3 Banking in Nepal 1.4 Introduction to NIBL 1.5 Vision 1.6 Mission 1.7 Statement of Problem 1.8 Objectives of Field Report 1.9 Literatures Review 1.10 Methodology of Fieldwork 1.11 Significance of the Study 1.12 Limitation of the Fieldwork 1.13 Organization of the study

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3. Summary , Conclusion & Recommendations 3.1 Summary 3.2 Conclusion 3.3 Recommendations Appendices Bibliography

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01 01 01 02 03 04 04 05 05 06 07 08 09 10 11 11
11 12 12 12 13 13 13 13 14 14

Chapter

Page

15 15 16 16 17 20

List of Figures
Figure
Fig.1 Shareholding Pattern of NIBL Fig.2 Earning Per Share Fig.3 Return on Asset Fig.4 Price Earning Ratio Fig.5 Valuation Highlights

Page
17 17 18

Diagram
Dia.1 Shareholding Pattern of NIBL Dia. 2 Trend Analysis of EPS, ROA & PE Ratio Dia.2 Bargraph of Valuation Highlights

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List of Diagrams

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19

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Ratio Analysis of Nepal Investment Bank Ltd 2068-69

Chapter -1
Introduction
1.1 Meaning of Bank
Finance is the blood of trade, commerce and industry. Now-a-days banking sector acts as the backbone of the modern business. Development of any country mainly depends upon the banking system. The term Bank is derived from the French word Banco which means a Bench or Money exchanging table. In olden days, European money lenders or money changers used to display coin of different countries in big heaps (quantity) on benches or tables for the purpose lending or exchanging.

In medieval times, the knights Templates, a military and religious order not only stored values and granted loans but also arranged for the transfer of funds from one country to another. The great banking families of the Renaissance such as the Medicis in Florence (Italy) were involved in lending money and financing international trade. The first modern banks were established in the 17th century, notably the Risks bank in Sweden (1656) and the Bank of England (1694).

Functions performed by banks in present context have been carried out by individuals, merchants, families or state official at least 4000 years ago. Clay tablets dated from about 2000 BC indicates that the Babylonians deposited personal valuables for a service charge of one 60 th of their worth. Interest charges on loans ran as high as one third.

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1.2 History of Banking

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A bank is a financial intermediary that performs one or more of the following functions: safeguards and transfers funds, lends or facilitates lending, guarantees credit worthiness and exchange money. These services are provided by such institutions as commercial banks, central banks, savings banks, trust companies, finance companies like insurer and investment bankers.

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A bank is a financial institution which deals with deposits and advances and other related services. It receives money from those who want to save in the form of deposits and lends money to those who need it.

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Ratio Analysis of Nepal Investment Bank Ltd 2068-69

1.3 Banking in Nepal


Banks and banking activities have always played a prominent role in the economic prosperity of the country. The pace of the economic development of the country flourished as banks and its activities gradually developed. Ever since democracy was restored in 2007 BS the government as well as citizen felt the necessity of establishing banks in the country. Likewise, Nepal Rastra Bank (NRB) was established in 1955 AD. It was established as an apex regulatory body for the banks to be operated in Nepal. The history of banking has started after the establishment of Nepal Bank Limited (NBL) by special act in 1973 AD. The bank was established with an authorized capital of NRS 10 million. NRB worked hard to minimize the use of Indian currency in Nepal and to teach the use of money instead of Barter exchange. It was overwhelmingly successful by opening branches outside the valley. It helped a lot in raising awareness of banking. In a decade it has its offices in 7 places which afterwards turned into branches of commercial banks. As the monetary transaction got more and more complex, NRB finally suggested the movement to establish another commercial bank. As a result, Rastriya Banijya Bank (RBB) came in to existence in 1966 AD. After the re-establishment of democracy in 2007 BS, the government holds the liberal policy for the economic prosperity of a nation. As a result, various commercial banks established in a joint venture with other countries.

1. 2. 3. 4. 5. 6. 7.

Nabil Bank Ltd. Nepal Grindlays Bank Nepal Indosuez Bank Himalayan Bank Ltd. Nepal SBI Bank Nepal Bangladesh Bank Everest Bank Ltd.

S.N

Name of Bank

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Joint Venture With


Arab Emirates Standard Chartered Bank Bank Indosuez Group Habib Bank Ltd , Pakistan State Bank of India IFIC Bank , Bangladesh Punjab National Bank , India

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Likewise, there have been 32 commercial banks established so far till this date. Apart from this many financial institutions and co-operatives societies have also started contributing in the economy.

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1984 AD 1986 AD 1987 AD 1993 AD 1993 AD 1994 AD 1994 AD

Established

Ratio Analysis of Nepal Investment Bank Ltd 2068-69

1.4 Introduction to the Nepal investment Bank Limited


Nepal Investment Bank Limited (NIBL) previously Nepal Indosuez Bank Ltd, was established in 1986 as a joint venture between Nepalese and French partners. The French partners holding 50% of the capital was credit Agricole Indosuez, a subsidiary one of the largest banking group in the world. The name of the bank has been changed to Nepal Investment Bank Limited upon the approval of banks annual general meeting , Nepal Rastra Bank and Company Registrars office with the following shareholding structure. A group of companies holding 50% of the capital. Rastriya Banijaya Bank holding 15% of the capital. Rastriya Beema Sansthan holding 15% of the capital. The remaining 20% being held by general public.

NIBL has been very aggressive in innovating and offering new products and services in the financial market. NIBL started Visa Electron Debit Card for the first time in Nepal after acquiring Principal Membership of Visa International in 2003. Since then, NIBL has been pioneering other existing banks and financial institutions in the card business. NIBL has the largest ATM network in Nepal with the addition of nine more ATMs to the Bank's network. At present, NIBL has in total, seven Visa Associate Member Banks and 260 ATM outlets connected to Switch. We have also enabled recharge card options for telecom and Wi-Fi subscribers of Broadlink Ltd. to carry out top-ups through their ATMs; they are the only Bank to have enabled this feature. It has also enabled ATM-based money transfers for cardholders having multiple accounts with NIBL. Currently, it is implementing their Switch based electronic payment gateway which will enable card to card money transfer to any client within their Switch network. They are also updating their systems to be EMV compliant and to issue Smart Cards. They are currently undergoing PCI-DSS certification as well. They now have 35 Member Banks and

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Over the past 7 years, this bank has grown to become one of the biggest commercial bank in Nepal. This bank has helped to fulfill growing requirements of credit and collects deposits for the development projects and support in the business.NIBL has the highest deposit amongst the private sectors banks throughout the Nepal.

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Ratio Analysis of Nepal Investment Bank Ltd 2068-69

58 ATMs in their Proprietary Card Network called National Payment Network which began in 2009. They now have over 400,000 cardholders in their Bank and have issued 300,000 on behalf of their National Network. NIBL has also launched NIBL Mobile (SMS) banking which incorporates Fund Transfer, Bill Payments, and Nepal Telecom Prepaid PIN Purchase and inquiry services as major features. We have also made available NIBL Mobile (SMS) Banking application for Android Platform Smart Phones (2.1 and above) and Java Enabled Phones (touch and non-touch). NIBL has also recently launched Domestic e-Banking Remittance which avails customers the facility to instantly transfer money to their relatives/friends online. Financial highlights of NIBL:

1.6 Mission
They aspire to be the leading Nepali bank, delivering world class services through a blend of state-of-the-art technology and visionary management in partnership with competent and committed staff, to achieve sound financial health with sustainable value addition to all their stakeholders. They are committed to fulfilling this mission while ensuring the highest levels of ethical standards, professional integrity, corporate governance and regulatory compliance.

1.5 Vision

To be the most preferred provider of financial services in Nepal.

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No. 1 private sector bank in paid-up capital with NPR 3.01 billion Highest assets base among private sector banks of NPR 58.35 billion Topmost lender in Nepal with total loans and advances of NPR 41.88 billion Highest deposits of NPR 50.13 billion Net profit of NPR 1.17 billion Interest income of loans and advances at 13.12 percent Return on shareholders fund at 24.10 percent 25% cash dividend, 25% bonus shares Highest paid up capital among the financial institutions in Nepal at NPR 3.01 billion .The highest capital base (including debentures) with NPR 5.15 billion. Largest amongst taxpayers in Nepal.

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Ratio Analysis of Nepal Investment Bank Ltd 2068-69

1.7 Statements of Problems


The organized summary of detailed information about financial position and performance of a concern is known as financial statement. It is prepared at the end of accounting year for periodic review of the activities of organization and results achieved by it. It includes Profit and Loss account or income statement and Balance Sheet. The former shows the results of operation for a particular period while the latter indicates the financial position of the concern at the end of that period. Hence, financial statements are the condensed form of accounts. The financial statements of an organization are analyzed to dig up meaningful information about its survival, stability, profitability, solvency and growth prospect. They can be analyzed by using a number of techniques such as comparative statements, common size statements, index analysis, ratio analysis etc. Ratio analysis is the most popularly and widely used technique of financial statements analysis. A ratio is defined as the indicated quotient of two mathematical expressions. Accordingly, accounting ratios mean a relationship between two numerical variables obtained from financial statements. They are used as an important tool for analyzing the financial performance of the organization over the year. Since an absolute accounting figure on its own does not provide much meaning by itself, it has to be analyzed in relation to other figures so that significant information about the organizations financial performance can be derived. Ratio Analysis is a technique of analysis and interpretation of financial statements through mathematical expression. It determines and presents the quantitative relationship between to accounting figures. The accounting ratios can be expressed in proportion, percentage, rate, times or coefficient.

1.8 Objectives of Field Report


Since, the data given in financial statements are meaningless and unable to communicate anything from analytical viewpoint unless the heaps of figures contained in them are properly analyzed. The main purpose of the study is to analyze the absolute figures contained in Profit & Loss A/C and Balance Sheet of NIBL Ltd. to obtain a better understanding of the position of its undertaking. The following are the important objectives of the study:

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Ratio Analysis of Nepal Investment Bank Ltd 2068-69

To evaluate the liquidity and solvency position of the concern. To judge the organizations efficiency in terms of its operation and management. To ascertain earning capacity of the concern as well as prediction relating to its future earnings. To determine the liquidity ratio, profitability ratio and leverage ratio of the organization.

1.9 Literatures Review

Ratio Analysis is a popular technique of financial statement analysis which is the process of determining and presenting the mutual relationship between two accounting figures. According to Kennedy and McMullan The relationship of one term to another expressed in simple mathematical form is known as ratio. Ratio analysis revolves around the calculation of ratios, comparing them with the ratios of same firm relating to past and interpretation as well as evaluation of ratios. It makes possible to analyze business activities systematically. This fieldwork report analyses the following ratio of NIBL Ltd:

It reflects the firms ability to pay its short terms debts or claims within a period less than one year. They assess the capacity of the concern to repay its short term liabilities. The position of the concern can be measured mainly by using two liquidity ratios such as:

A. Liquidity Ratio:

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Different journal articles, literature, books, annual reports, professional magazines, brochures etc. were studied throughout the fieldwork to know what is already known on the topic and to discover the shortcomings of the previous studies so that due consideration can be given on them. In 2065, Miss Manisha Thapa , a student of Shree Projjwal Collegiate Academy had made an analysis about accounting ratios of NIBL Ltd. Her study shows that the firm is in quite good condition and profit. According to her analysis, it still needs to improve in various sectors and search for new areas of investment in order to raise profitability and mobilize deposit efficiently. She states that the organization has excess liquid assets and it needs to maintain satisfactory liquidity ratio.

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Ratio Analysis of Nepal Investment Bank Ltd 2068-69

I. Current Ratio/ Short term Solvency Ratio/ Working Capital II. Quick Ratio/ Acid test Ratio/ Liquid Ratio
B. Leverage Ratio: It is long term solvency ratio or capital structure ratio. It weighs up the ability of a firm to meet the payments associated with its long term debts. It measures the effectiveness of the long term financial position. It stands for relationship between internal and external sources of funds of a firm. The major types of leverage ratios are:

I. Debt Equity Ratio II. Debt to Total Asset Ratio III. Interest Coverage Ratio/ Time Interest Earned Ratio

1.10 Methodology of fieldwork


Fieldwork is a data-based systematic study of a specific situation in an organization. Data is the essence of all fieldwork. Data is a raw information, facts or statistics used for reference or analysis. Data can be generated from primary sources, secondary sources or both.

A. Primary Sources
Primary data refers to data collected for the first time for a specific purpose. It can be collected through interviews, observations or experimentation. The data needed for this fieldwork report was collected from

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I. Net Profit Ratio II. Return on Assets III. Return on Shareholders Equity IV. Interest on Total Assets

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It shows the overall efficiency of the concern to in terms of its sales, investments, and earnings and dividends. An undertaking without profit is unthinkable. The profitability ratio is related to profit. The following are the major types of profitability ratios.

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C. Profitability Ratio:

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Ratio Analysis of Nepal Investment Bank Ltd 2068-69

face- to- face interview with the manager of the organization Mr. Hemanta Karki and official Mr. Ram Bahadur Poudel. The respondents were asked questions through questionnaire.

B. Secondary Sources
Secondary data refers to data already available. It was collected earlier for another purpose and exists in published form. The necessary data is also gathered from the organizations financial statements Income statement, Balance Sheet and the annual report submitted in Annual General Meeting (AGM). It is also collected from published magazines, books, articles and literature about the organization. The collected data and information are edited, classified, tabulated and presented in different types of charts to serve the needs of the study.

1.11Significance of the study:

Management: Management can draw significant conclusion and determine the new policies and procedures. Owners: It lets them be acquainted with profitability and financial position of the organization. Reliable information assures them safety of their investment. Creditor: It helps them to know whether the firm will be financially able to pay their debt or not, in time.

Business results and situations can be understood properly only when relevant figures are considered together. A ratio is simply a number that shows the relationships between two financial figures. The study is important from the point of view of investors, depositors and management for analysis and interpretation of the concerns financial health. It is also useful for judging the firms operating efficiency, identifying strength and weakness of its financial standing and comparing its performance with other vying firms. Ratio analysis is helpful in financial forecasting and planning. The ratio calculation of past years works as a guideline for future. It presents the financial data in purposeful and conclusive manner to facilitate rational decision making of any financial activity. The fieldwork report is expected to serve the following purposes of the different users:

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Ratio Analysis of Nepal Investment Bank Ltd 2068-69

Bankers/ Lenders: The report can help them to determine whether their principal and interest will be paid when due. Employees: It is purposive for them to ascertain how much emoluments and bonus are possible from the profits of the organization. Researcher students: The report supplies secondary data for their research efforts.

1.12 Limitation of the fieldwork

The study depends heavily on secondary data and is not free from its limitations. It may suffer from the inherent weaknesses of the financial statements of the organization. The deadline for the submission of report restricted the depth study.

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The fieldwork report may suffer from the following pitfalls: This fieldwork report is prepared in partial fulfillment of the requirement for the degree of Bachelor of Business Studies of Tribhuvan University. It is just a case study of the NIBL Ltd. The fieldwork report is based only on the financial statements of fiscal year 2067/68 and 2068/69. It considers only liquidity ratio, leverage ratio and profitability ratio of the concern based on financial statements. The relevant information and data obtained from the concern for the study are presumed to be accurate.

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Ratio Analysis of Nepal Investment Bank Ltd 2068-69

1.13 Organization of the study


A well managed and orderly arranged scheme of the study is essential to facilitate the overall study, which is known as organization of the study. This fieldwork report encompasses three different parts as stated below: 1.13.1 Part One It is the preliminary section of the report. It consists of acknowledgement which expresses thanks to different individuals for their pivotal role to prepare this report in this existing form. It also includes lists of abbreviation used as well as lists of tables and figures. 1.13.2 Part Two It contains three chapters. It is the main text of the report. It provides a birds eye view of the report. The first chapter deals with introduction, background of the fieldwork, statement of the problems, objectives of the fieldwork, literatures review, methodology of the fieldwork, significance of the study and limitations of the fieldwork. The second chapter is the largest section of the report. It involves analysis and presentation of data by using appropriate techniques. The third chapter comprises summary, conclusion and recommendation. 1.13.3 Part Three This part incorporates bibliography and appendices. Bibliography presents an alphabetical list of books, articles, and other source materials to which references have been made. Appendices contain the materials used in the report but related indirectly and not explained in details.

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Ratio Analysis of Nepal Investment Bank Ltd 2068-69

Chapter -2
Presentation & Analysis of Data
2.1 Presentation & Analysis of Data
Presentation and analysis of data is the chief task of this fieldwork. In this chapter, the data and information gathered during the course of fieldwork have been organized in tables, charts and diagrams. The data is analyzed by using statistical tools. The analyzed data has been interpreted candidly for clear understanding of findings. It is attempted to make the presentation consistent with the objectives of fieldwork. Every presentation of data follows its analysis so that future prediction can be initiated. For the purpose of the analysis simple method of financial tools, ratio analysis is used. Ratio Analysis is widely used as a tool of financial analysis. It is defined as a systematic use of ratios to interpret the financial statement so that strength and weakness of firms as well as its historical performance and current financial condition can be defined. The main kinds of financial tools to measure the performance are: 2.1.1 Earning Per Share (EPS) It simply shows the profitability of the firm of a per share basis. It is calculated from the point of view of the ordinary shareholder. It is calculated by dividing the profit after tax by the total number of ordinary share outstanding. EPS =

Findings: The EPS trend is fluctuating, but it is clear that the EPS of NIBL is substantially high than other competitors. The average EPS of NIBL is Rs 51.77. The highest and lowest EPS of NIBL are Rs 62.57 and Rs 37.42 resp. in the FY 2064/2065 and 2066/2067. Therefore, from above analysis we can say that the earning power of NIBL is in good condition.

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Ratio Analysis of Nepal Investment Bank Ltd 2068-69

2.1.2 Return on Asset (ROA): It measures the firms return on investment of financial resources. It also helps us to provide the information of proper utilization of the resources. It is the relation between profit and total assets. Lower ROA means lower profit and higher ROA means higher profit. In the present study, this ratio is examined to measure the profitability of all financial resources in the bank assets. ROA =
()

Findings:

2.1.3 Price Earnings Ratio (PE Ratio) : In the fiscal year 2065/2066 , the PE ratio was 42.34 and further decreased up to 37.09 in the FY 2066/2067 likewise it continuously decreases in the year 2067/2068 and 2068/2069. The PE ratio is 10.54 2.1.4 Ratio of Net Profit to Gross Income In the fiscal year 2066/2067 the ratio of Net Profit to Gross Income is 16.71% but increases up to 20.26 % in the year 2067/2068. In current year 2068/2069 its ratio is 23.99

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The trend of ROA is also fluctuating; it rises in the year 2067/2068. The highest ROA was 2.20 % in the fiscal year 2067/2068 and lowest was 1.70 % in the fiscal year 2066/2067. The above table shows that the ROA is satisfactory. However the management of NIBL must keep their eyes towards the situation and mobilize their working assets more to earn more profit. The average ROA is 1.91 %.

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Ratio Analysis of Nepal Investment Bank Ltd 2068-69

Findings: In the fiscal year 2067/2068 the ratio of Net profit to Gross Income is 20.26 which are greater than last year and this year ratio was 23.99 which is more than last year. 2.1.5 Exchange Gain to Total Income Ratio

Findings:

2.1.7 Cash and Bank balance to Current Deposit Ratio In the FY 2067/2068 the ratio was 84.68 % which is less than previous year and in FY 2064/2065 the ratio was the lowest during 5 year. Thus, the bank has less liquidity in FY 2064/2065. Cash and Bank balance include cash in hand and total bank balance.

In the FY 2067/2068 the ratio was 84.68 which is less than previous year 84.78% and the FY 2068/2069 it is 136.92 which is higher than last year . The average ratio is 88.83%.

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2.1.8 Cash and Bank balance to Total Deposit Ratio (CRR) Cash Reserve Ratio In the FY 2064/2065 the cash reserve ratio is 8.12 % and later become 11.70 % in FY 2065/2066. The trend line is fluctuating it goes up and down. However cash reserve ratio should be minimum. In current year CRR is 12.33%

Findings:

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In the FY 2064/2065 the ratio of net profit to loan and advances is 2.10 % but it decreases by 0.13 and became 1.975 in the fiscal year and that it continuously increases up to 2068/2069 i.e. 2.66 %

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2.1.6 Net Profit to Loan and Advances Ratio

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In the FY 2066/2067 the ratio was 9.63 which were higher than previous year and this year 2068/2069 i.e. 8.60

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In the FY 2065/2066 the ratio of Exchange Gain to Total Income is 8.80 but it increases up to 9.63 in the year 2066/2067, after 2066/2067 it was decreasing continuously.

Ratio Analysis of Nepal Investment Bank Ltd 2068-69

Findings: In the FY 2065/2066 the cash reserve ratio is 11.70% that were higher than previous year i.e. 12.33 %. The average cash reserve ratio is 10.63 %. 2.1.9 Saving Deposit to Total Deposit Ratio Saving deposit is sorts of short term liquidity, which can be withdrawn by the depositors. Lower the ratio of saving deposit to total deposit higher the liquidity ratio. Findings: The ratio of Saving Deposit to Total Deposit are 30.83% , 30.72 %, 42.40 %, 47.03% and 42.70 % in FY 2064/2065, 2065/2066, 2066/2067, 2067/2068 and 2068/2069 resp. In the FY 2066/2067 ratio is 42.40% which is greater than FY 2065/2066 and this years ratio is 42.70 % which is lesser than previous year which indicates liquidity has increased this year. 2.1.10 Fixed Deposit to Total Deposit Ratio The ratio of Fixed Deposit to Total Deposit are 22.65%, 21.11%, 19.92 %, 22.53% and 28.60% in the FY 2064/2065, 2065/2066, 2066/2067, 2067/2068 and 2068/2069 resp. The highest ratio for the five year is 28.60 % in the FY 2068/2069 and the lowest ratio is 19.92% in 2066/2067. Findings: In the FY 2067/2068 the ratio is 22.53 which is greater than previous year. This year ratio 28.60% which is greater than previous year , which means liquidity is higher than previous year.

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Ratio Analysis of Nepal Investment Bank Ltd 2068-69

Chapter -3 Summary , Conclusion & Recommendations


3.1 Summary
This fieldwork is prepared under the format prescribed by Faculty of Management (FOM) of TU in a partial fulfillment of the requirements for the degree of BBS. This study analyzes the financial position of the Nepal Investment Bank Ltd. (NIBL) in terms of accounting ratios. A brief summary of the result of fieldwork so carried out is presented as follows: Table 3.1 Ratios FY 2067/68 FY 2068/69
1. 2. 3. 4. 5. EPS (Rs) ROA Price Earning Ratio Net Profit to Loans & Advances Ratio Cash & Bank balance to Current Deposit 6. Ratio Cash Reserve Ratio 7. Saving Deposit to Total Deposit Ratio 8. Fixed Deposit to Total Deposit Ratio 52.55 2.2% 13.42% 2.49% 84.68%

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7.68% 47.03% 22.53 %

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In table 3.1 & Appendices, the EPS trend is fluctuating, but it is clear that the EPs of EPS of NIBL is substantially high than other competitors. The average EPS of NIBL is Rs 51.77. The highest and lowest EPS of NIBL are Rs 62.57 and Rs 37.42 resp. in the FY 2064/2065 and 2066/2067. Therefore, from above analysis we can say that the earning power of NIBL is in good condition. The trend of ROA is also fluctuating; it rises in the year 2067/68. The highest ROA was 2.20 % in the fiscal year 2067/2068 and lowest was 1.70 % in the fiscal year 2066/2067 . The above table shows that the ROA is satisfactory. However of NIBL must keep their eyes towards the situation and mobilize their working assets more to earn more profit. The average ROA is 1.91 %. In the FY 2064/2065 the ratio of net profit to loan and advances is 2.4 % but it decreases by 0.13 and became 1.975 in the fiscal year and that it continuously increases up to 2068/2069 i.e. 2.66 % In the FY 2067/2068 the ratio of cash & bank balance to current deposit was 84.68 which is less than previous year 84.78% and the FY 2068/2069 it is 136.92 which is higher than last year . The average ratio is 88.83%. Thus , a bank has highest liquidity in last five years.

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48.44

2.02% 10.54% 2.66% 136.92% 12.33% 42.70% 28.60%

Ratio Analysis of Nepal Investment Bank Ltd 2068-69

3.2 Conclusion

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On the basis of the study following recommendations are forwarded to the organization: It needs to endeavor to bear low risk by increasing the proportion of financing by the owners. It has to increase its profit to more satisfactory point by proper utilization of share members fund and other available resources. It needs to endeavor to bear low risk by increasing the proportion of financing by the owners.

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3.3 Recommendations

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Ever since the establishment of NIBL is playing a pivotal role to foster in the economy of Nepal. Strong financial position of the organization is a must to survive, grow and succeed in this world passing through tumultuous changes. The crux of this fieldwork report is to analyze the financial status of NIBL with the help of Ratio Analysis. For this purpose the liquidity ratio, leverage ratio and profitability ratio were ascertained. The liquidity ratio of the concern shows calculation of leverage ratio portrays that the financial status of the enterprise is in somewhat good condition. The profitability ratio of the organization doesnt depict a favourable condition. There has been significant diminution in its net profit from FY 2067/68 to FY 2068/69. Summing up, the bank still needs to make hard efforts to achieve better outcome.

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In the FY 2067/2068 the cash reserve ratio is 7.68 % that were lower than current year i.e. 12.33 %. The average cash reserve ratio is 10.63 %. The ratio of Saving Deposit to Total Deposit are 30.83% , 30.72 %, 42.40 %, 47.03% and 42.70 % in FY 2064/2065, 2065/2066, 2066/2067, 2067/2068 and 2068/2069 resp. In the FY 2066/2067 ratio is 42.40% which is greater than FY 2065/2066 and this years ratio is 42.70 % which is lesser than previous year which indicates liquidity has increased this year. In the FY 2067/2068 the ratio is 22.53 which is greater than previous year. This year ratio 28.60% which is greater than previous year , which means liquidity is higher than previous year.

Ratio Analysis of Nepal Investment Bank Ltd 2068-69

Chapter -4
APPENDICES

Appendix I Shareholding pattern of NIBL S.N


1.1 1.2 1.3 1.4

Name
Ka Licensed Institutions Insurance Company Organized Institutions General Public

Percentage Capital in NPR


15% 15% 50% 20% 361,364,600 361,364,600 1,204,549,100 481,819,400

Fig:1 Shareholding pattern of NIBL (Source : NIBL Annual Report 2068-69)

Diagram 1 : Shareholding Pattern of NIBL Source : Appendix I

Earnings per share

2064-65 2065-66 2066-67 2067-68 2068-69

FY

NPAT in NPR No. of Common EPS in NPR Share (in No.)


501,398,852 696,731,516 900,619,072 1,265,949,588 1,176,641,031 8,013,406 12,039,154 24,090,977 24,090,977 24,090,977 62.57 57.87 37.42 52.55 48.44

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Appendix II

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Average

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Fig 2: Earning per Share
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"Ka" Licensed Institutions Insurance Company Organized Institutions General Public

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Shareholding pattern of NIBL

(Source : NIBL Annual Report 2064/2065-2068/2069)

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51.77

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TOTAL

100%

2,409,097,700

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Ratio Analysis of Nepal Investment Bank Ltd 2068-69

Appendix III Return on Asset (ROA) FY


2064-65 2065-66 2066-67 2067-68 2068-69

NPAT in NPR Total Asset in NPR ROA


501,398,852 696,731,516 900,619,072 1,265,949,588 1,176,641,031 27,590,844,761 38,873,306,084 53,010,803,126 57,305,413,482 58,356,827,501 1.82% 1.79% 1.70% 2.2% 2.02%

Average

1.91%

Fig 3: Return on Asset (Source: NIBL Annual Report 2064/2065-2068/2069)

Appendix IV Price Earning Ratio FY


2064-65 2065-66 2066-67 2067-68 2068-69

Average

Fig 4: Price Earning Ratio (Source: NIBL Annual Report 2064/2065-2068/2069)

Trend Analysis of EPS,ROA & PE Ratio


60 50 40 30 20 10 0 FY 2064-65 FY 2065-66 FY 2066-67 FY 2067-68 FY 2068-69 AMOUNT

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1729 2450 1388 705 515

62.57 57.87 37.42 52.55 48.44

27.63 42.34 37.09 13.42 10.54

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EPS ROA PE Ratio

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Diagram 2 :Trend Analysis of EPS, ROA & PE Ratio (Source: Appendices II , II & IV)

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PE Ratio

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Ratio Analysis of Nepal Investment Bank Ltd 2068-69

Appendix V Valuation Highlights


2064-65 2065-66 2066-67 2067-68 2068-69 11.36% 14.23% 16.71% 20.26% 23.99% Ratio of Net profit to Gross Income 7.5 % 8.8 % 9.63% 8.2% 8.6% Exchange Gain to Total Income Ratio 2.10% 1.97% 2.25% 2.49?% 2.66% Net Profit to Loans & Advances Ratio 94.63% 84.78% 84.68% 136.92% Cash & Bank balance to Current Deposit Ratio 43.14% 8.12% 11.70% 13.32% 7.68% 12.33% Cash Reserve Ratio (CRR) 30.83% 30.72% 42.40% 47.03% 42.70% Saving Deposit to Total Deposit Ratio 22.65% 21.11% 19.92% 22.53% 28.60% Fixed Deposit to Total Deposit Ratio Fig 5 : Valuation Highlights (Source: NIBL Annual Report 2064/2065-2068/2069)

Particulars

300 250 200 150 100 50 0 FY 206465

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FY 206566 FY 206667 FY 206768 FY 206869

Diagram 3: Bargraph of Valauation Highlights

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(Source : Appendix V)

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Fixed Deposit to Total Deposit Ratio Saving Deposit to Total Deposit Ratio Cash Reserve Ratio (CRR) Cash & Bank balance to Current Deposit Ratio Net Profit to Loans & Advances Ratio Exchange Gain to Total Income Ratio

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Ratio Analysis of Nepal Investment Bank Ltd 2068-69

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Bajracharya , BC 2009, Business Statistics & Mathematics. Kathmandu : M.K Publishers.

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www.nibl.com.np

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Shrees, Kishan 2010, Management Accounting, KFA Business School.

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Dangol, Ratna Man 2009, Accounting For Financial Analysis & Planning . Kathmandu : Taleju Prakashan.

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Agrawal, Govinda Ram 2011, Project Management in Nepal. Kathmandu: M.K Publishers.