A Study

On
Financial position of Nabil Bank
Ltd.

Project Work Proposal

Submitted By:
Suraj Gurung
Orient College
T.U. Regd. No.:-

Submitted To
The Faculty of Management
Tribhuvan University
Kathmandu

In partial fulfilment of requirements for the degree of Bachelor of Business

Studies (B.B.S)

KATHMANDU, NEPAL
February, 2017

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CHAPTER: 1 INTRODUCTION
1.1 Background of the study:

The banking system is the structural network of institutions that offer financial services
within a country where, corporate finance is concerned with the managerial decisions about
financial position of a firm. The concept of financial position has been heavily focused by
financial scholars for the past decades. Taking financial indicators of Nabil bank for the
period of 2010/2011 to 2015/2016, the study attempts to elucidate the entitys assets,
liabilities and the difference in their totals of commercial banks of Nepal. About by
controversies and unpredictability, this study concludes that commercial banks of Nepal do
not show uniform trend of financial performances. Financial performances practiced by
commercial banks of Nepal is neither fully explained by residual theory nor stable theory
with the developments of financial institutions in Nepal, they need to follow a robust method
of financial performances.
(NASC, 2017)

Nabil Bank Ltd. is the nations first private bank, commencing its banking services since July,
1984. Nabil Bank Ltd. was incorporated with the objective of extending international
standard modern banking services to all sectors of the entire nation. Nabil Bank Ltd. is
moving forward with a Mission to be 1st Choice Provider of Complete Financing
Solutions for all its stakeholders; customers; shareholders; regulators; communities and
staff. Nabil Bank Ltd. provides a full range of commercial banking services through its 52
points of representation. This bank is fully equipped with modern technology, which includes
international standard banking software that supports the E-channels and E-transactions.

1.2 Problem statement:

The study focuses on Financial Position of Nabil bank. The Researcher during the research
may found difficulty while studying on the research work. Savers and users look into a
companys capability to initiate a financial performance. A sound financial position is
important for users who value the profit stability of the company.
Does new monetary policy of NRB effect in the performance of the bank?
How far have Nabil Bank Ltd. been able to shift the monetary from savers to users?
What is the position of the bank in terms of leverage, capital adequacy, and
profitability of the banks?

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1.3 Objectives of the study:
The main objective of the study is to analyse, measure, highlight and interpret the financial
position and policy of Nabil Bank Ltd. The study focuses whether it is backward or forward
in liquidity position and fund efficiency of Nabil Bank Ltd. and to analyze the financial
stability of the bank .The prime objectives of the study are to evaluate the financial
performance of Nabil Bank Ltd. The objectives are;

To analyze the financial performance such as: evaluate liquidity, leverage, capital
adequacy, turnover and profitable position of Nabil Bank Ltd.
To evaluate the growth ratio of the cash and bank balance, loan and advances, net worth.
To discuss fund mobilization and strategy of liquidity management of Nabil Bank Ltd.
To find the future trends of total deposit, investment, loan and advances, net worth etc.

1.4 Significance of the study:

Significance of this study lies on the objectives of financial position of the bank. Some
importance of the study is as following:

This report can be a source of secondary data for researching.

It can be used as guidelines while preparing such type of report.
This report might be useful for those who are willing and curious to know about the
financial position of a commercial bank.
To provide some practical knowledge of banking transactions.

1.5 Limitations of the study:

The limitations of the study are as follows;

The financial successes are highlight with the use of charts, bar-diagram, trend-line
and financial ratios.
It contains the data of only FY (20010/2011-2012/13)
The analysis is based on the secondary data available of the bank.

1.6 Literature review:

The survey of related literature covers many studies that were done nationally and at the
international levels, here, this study covers some of them as follows: The study of Laitinen
(2006) presents a framework for the financial position of a network of small and medium-
sized enterprises. The objective is to make an approach towards a systematic network
financial position. The data for the study are drawn from the public financial statements of
the partner firms. The proportion of income statement items and balance sheet items is traced
by a simple estimation to the resources used by the network and identified by each firm.

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Virtual network income statement and balance sheet are made up of the allocated proportions.
The paper is focused on eight measurement objects that are causally related to form a
strategic map: resources; growth; concentration; productivity; profitability; mutual flows; risk
and value; and, several measures for each object are suggested. The study that has been done
by Al-Aameri and Alrikabi (2007) was focusing on one of the important techniques in
financial analysis, namely, the financial ratios, for the purpose evaluating the performance of
petroleum projects company, and to find out the main strength and weakness points, so as to
suggest the remedial actions for treatment of negative points and enhance the positive one.
The papers contains detail study for the data included in financial statements to explain the
financial performance of the company, and that will help the management for planning the
future according to the previous performance, and also contain the converting process of the
data of financial statements to meaningful information through several techniques, the
financial statement analysis among them. Maggina (2008) used the financial ratios so as to
investigate the distributional properties of financial ratios. Distributions presented in both
theory and practice such as Cauchy, chi-square, Erlang, exponential, extreme value, Gamma,
Laplace, logistic, lognormal, Student t, triangular, uniform and Weibull have been tested in
the study. Panel data of financial ratios for the time period 1974-2006 for Greek listed
companies indicate that none of the financial ratios selected in the study follows a normal
distribution. The value of test statistic (Kolmogorov- Smirnov) is relatively large and the p-
value of the test is lower than 1%. This is merely inconsistent with the literature. Malhotra, et
al (2009) investigated the credit crisis in the financial markets had led to tremendous turmoil
in the financial services industry. As a result, a substantial decline in the profitability and
liquidity of the financial services companies was seen. They analyzed the financial
Performance of thirteen leading financial services firms to evaluate their relative standing in
the industry. They illustrate the use of data envelopment analysis (DEA), an operations
research technique, to evaluate the relative financial strength of thirteen financial services
firms by benchmarking the financial ratios of a firm against its peers. DEA clearly brings out
the firms that are operating more efficiently in comparison to other firms in the industry, and
points out the areas in which poorly performing firms need to improve. Pazarskis et al (2011)
empirically, examine the impact of merger and acquisitions on the post-merger performance
of Greek merger-involved firms in the long-run perspective. The post-merger performance of
an extensive sample of acquiring listed firms is investigated with accounting data analysis.
For the purpose of the study, an explanatory set of 24 financial ratios (divided into five main
groups) is employed, in order to measure firms' post-merger performance. The results
revealed that six out of all the examined ratios had decreased and showed, in general,
deterioration in several business functions of merger-involved firms' performance in the post-
merger period. Yaseen (2011) investigates the effects of accounting principles and
accounting assumptions of the financial analysis, since the financial analysis process comes
after the disclosure of accounting system output. The research reveals that there are both
positive and negative effects of accounting principles and assumptions on the accounting
measurement process. So the research seeks how to remove the negative effects of these
principles and make the results of the financial analysis more accurate and realistic. The study
concludes that the historical cost principle was inconvenient and the organization must use
the methods such as the fair value, and to work for developing the approaches of financial

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 management and analysis to make a compromise between the accounting and economics
concepts of the organizations value. (ISSN-2222, 1697)

The statement of the financial position is another name for the balance sheet. It is one of the
main financial statements and it reports an entitys assets, liabilities, and the difference in
their totals. The amounts reported on the statement of the statement of financial position are
the amounts as of the final moment of an accounting period. The structure of the statement of
financial position is similar to the basic accounting equations. For instance, a corporation will
report amounts in the following format; Assets= Liabilities + Stockholders Equity. A non-
profit organizations format will be; Assets= Liabilities + Net Assets. The statement of the
financial position must reflect the basic accounting principles and guidelines such as the cost,
matching, and full disclosure principles. Accordingly, the statement of financial position is
more meaningful when it is prepared under the accrual method of accounting.
(Harold Averkamp, CPA, MBA,2017)

Every bank presents its annual report to its stockholders. The information given in these
reports are of two types. First, there is a verbal section, often presented in the form of
descriptive essay from the chairman, which describes the banks liquidity and profitability
position during the past years and discuss new developments that will affect the future
operation. Second, the annual report presents the economic figures in the form of financial
statements of the P/L a/c and Balance sheet. Taken together, these statements give an
accounting picture of the banks operation and liquidity and profitability position of the bank.

The P/L a/c reports the profit or loss earned during a period while Balance Sheet shows the
assets and liabilities that stand on a particular date. Both these statements cannot fully report
the real liquidity and profitability position of bank. It fails to provide useful financial data
required for making decisions by the management.

In the light of the foregoing discussion, the financial statement needs to be analyzed in order
to determine the real financial position of the bank using various financial tools. The present
study is promoted towards this objective.

1.6.1 Financial Statements

Financial statements give the financial information of a bank. It is a statement through which
accountant communicate to the management, owners, bankers, investors and other interested
parties in a summary from on the financial position of the concern and how this position has
been arrived as present. It is a summary of the accounts of assets, liabilities and capital
period.

The financial statement contains summarized information of the firms financial affairs
organized systematically

The financial statements are prepared for the purpose of presenting a periodic review or
report on the progress by the management and deal with the status of the investments in the

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business and results achieved under review. The financial statements or reports are prepared
for the purpose of external and consistent according procedures.

The financial statements or reports are prepared for the purpose of external reporting to
owners, investors and creditors, and its comprises of P/L a/c and Balance Sheet as describe
below.

1.6.2 Balance Sheet

The balance sheet is also known as the statement of financial position, statement of assets,
liabilities and capital and statement of worth. It is one of the most significant financial
statements. It is a static statement as it shows the position of business at a certain moment of
time. It is a summary of debt and credit balances of assets and liabilities to be carried forward
which reflects the financial condition of the bank.

The Balance Sheet contains information about the resources and obligation of a business
entity and about the owners interest in the business at a particular point of time.

The B/S provides a snapshot of the financial position of the bank at the close of the banks
accounting period. It can be prepared either in account from or statement from. The B/S used
for the present purpose was obtained form the annual report of the respective banks.

1.6.3 Profit and Loss Account

The second major statement of financial information is the P/L a/c the P/L a/c is also known
as income statement, statement of earnings, and statement of operation and P/L statement. It
is prepared to determine the operational position of the concern.

The profit and loss portrays a flow, the operations over/during a particular period of time.

It is a scoreboard of the firms performance during a particular period of time. The P/L a/c is
a statement of revenues earned and the expenses incurred for earning the revenue. If there is
an excess of revenues over expenditures, it will show a profit otherwise loss. Moreover, as
the P/L a/c presents the

Summary of revenue, expenditure and net income or loss of bank for a particular period of
time, it serves as a measure of the banks profitability.

1.7 Organization of the study

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Chapter I: Introduction
It includes introduction part of the study like background of the study, statement of the
problem, objectives of the study, significant of the study and limitations of the study and
organization of the study.

Chapter-II: Review of Literature

It includes review of available relevant past studies, data and information that contains the
conceptual review of the related books, articles, journals and the published and unpublished
research report.

Chapter III: Research Methodology

It describes research methodology employed for study i.e. in what size and shape research is
carried out. It includes research design, sources of date, population and sample and method of
analysis.

Chapter IV: Presentation and Analysis of Data

It is the major part of the entire report is which all collected, interpretation of relevant data
and analyzed by the help of different financial and statistical tools.

Chapter-V: Summary Conclusion and Recommendation

This chapter summarizes the overall summary of the study. It contains a proper conclusion,
recommendation and suggestions on the findings of the report.

1.8 Conceptual Framework:

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Independent Variables:

i. Liquidity Ratio

ii. Leverage Ratio.

Dependent Variables:
ii. Capital Adequacy
Ratio. Financial position

iv. Turnover / Activity Ratio.

v. Profitability Ratio.

1.9 Definition of terminologies:

This study is conducted to analyse and interpret the financial position and performance of
Nabil Bank Ltd. Statement of Financial Position helps users of financial statements to assess
the financial soundness of an entity in terms of liquidity risk, financial risk, credit risk and
business risk. It is comprised of three main components: Assets, liabilities and equity.

Assets: Asset is a resource controlled by the entity as a result of past events and from
which future economic benefits are expected to flow to the entity (IASB Framework).

Liabilities: According to IASB Framework liability is defined as follows:

A liability is a present obligation of the enterprise arising from past events, the
settlement of which is expected to result in an outflow from the enterprise of resources
embodying economic benefits (IASB Framework).

Equity: Equity is the residual interest in the assets of the entity after deducting all the
liabilities (IASB Framework).

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1.10 Research methodology:
This report has been prepared from 15th report of the Nabil Bank Ltd. The main objectives of
this report are to analyse, measure, highlight and interpret the financial position of Nabil
Bank Ltd. The data has been presented in the tables and chart to ease the study. Only
secondary data are collected and used during the study. The research methodology includes
collection of data, field visit, and observation.

Research Methodology is a way to find out the result of a given problem on a specific matter
or problem that is also referred as research problem. In research methodology, researcher uses
different criteria for solving/searching the given research problem. Different sources use
different type of methods for solving the research problems. (Disserttationhelpservice,2017)

I. Research design:

The field report is a descriptive of one bank i.e. Nabil Bank Ltd. Therefore, the whole study
undertakes for field work report is descriptive nature. Different types of ratios are calculated
in this study to analyse and interpret entire financial position of Nabil Bank Ltd. However,
comprehensive analysis is also being made in the report. The study measures different ratios
like Liquidity ratios, Leverage ratios, Capital Adequacy ratios, Turnover Activities ratios, and
Profitability ratios.

II. Population and sample:

Currently, there are 28 commercial licensed banks in Nepal. Out of total 28 commercial
banks of Nepal, Nabil Bank Ltd. is taken as sample for this report to study its financial
position and performance. Nabil Bank Ltd. is commencing its banking services since July,
1984.

1.11 References:

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 AccountingCoach, LLC 2004-2017
Investopedia, LLC, 2017
Research Journal of Finance and Accounting
www.iiste.org ISSN 2222-1697 (Paper)
Harold Averkamp, CPA, MBA 2017,
Accounting-simplified, LLC 2017

Hampton, John, 1986.

ISSN-2222, 1697.

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