CHAPTER I

INTRODUCTION

1.1. CONCEPT OF BANKING:

Generally, bank is an institution which accepts deposits, makes business loans, and
offers related services. Commercial banks also allow for a variety of deposit accounts,
such as checking, saving, and time deposit. There institutions are run to make a profit
and owned by a group of individuals, yet some may be members of the Federal
Reserve System. While commercial banks offer services to individuals, they are
primary concerned with receiving deposits and lending to businesses.
In an economy the bank is regarded as one of the economic backbone of the country
for its development. Bank is a financial institution that deals in money. The basic
function of bank is collecting deposit and granting the loans. It involves in credit
creation that in related to creation of deposit and loan. In the economy, the banks
collects small saving of general people, accumulative it and lends the productive
sectors of the society for the overall economic development.

Various writers have been defined the word bank in different ways.

According to Scholars, The bank is defined as factory of money for credit where it
does not purchase goods and sells it rather produces credit inform of deposit and sells
it inform of loans.

According to C.R. Crowther,A banks collects money from those who have it to
spare or who are saving it out of their income and lends this money to those who
required it.
Thus in conclusion, we can say that bank is an organization which deals with the
monetary transactions for the mobilization of idle money or deposits in productive
sectors, is essentially essential for the development of the whole net.
1
1.2. THE BANKING IN NEPAL
In the context of Nepal, like as in other country the goldsmiths and
landlord was the ancient banker. The Nepalese people were highly exploited by shahu
mahajan by charging higher interest rate that is compound interest rate and even by
manipulating the principle amounts. If we try to see the history of banking transaction
in depth then evidence of money landing function are found in practice before
8th century in 780 B.S.

gunakamdev the ruler of Kathmandu reconstructed Kathmandu valley by borrowing

dept from the people. In 14th century tankdhari system had been running in the period
of ranodip shing inKathmandu established and office called tejarath adda. From the
office the government distributed salary to their employees and provided loan to
government employment @5% of interest against the security gold, silver etc.

Because of the development of economy activities in Nepal the above

institutions could not be fulfilled the need of people. So in kartik 30, 1994 B.S. Nepal
bank was established as one of the semi government commercial bank which had 10
million authorized capital and 842000 paid of capital. it has done the pioneering
function in function spreading the banking habits among the people. Having felt a
need of central bank to control and direct the commercial bank and help the
government for making monitory polices Nepal rastra bank was set up in 14
baishakht, 2013 B.S.

To fulfill the growing credit requirement of the country. The commercial bank i.e.
Rastraya Banijya bank was establishes in 10th bhadra 2022 B.S. this bank also
provides facility for the economy welfare of the general public. Nepal is an
agricultural country to develop agriculture system. Industry agriculture development
bank and Nepal industrial development corporation was established in 2024 B.S. 2016
B.S. respectively.

2
 The initiation of the financial sector; liberalization policy by Nepal rastra
bank, a board of joint venture banks entered with the view to accelerate the race of
development of nation. At present, there are many joint venture banks which are
running successfully in a competitive environment. His majesty government
deliberates policy of allowing foreign joint venture banks to operate
in Nepal basically targeted, to encourage local tradition commercial bank to enhance
their capacity through competitors efficiencies mechanization modernization prompt
customer service. Nepal Arab bank ltd was established in 2041 as a first foreign joint
venture bank.

Now in our country there are 31 commercial bank, 87 development bank, 79

finance company and 21 micro credit development banks after mid July 2011(licensed
by NRB) .

Introduction Everest Bank Limited

Everest Bank Ltd. Is a joint venture commercial bank with Punjab National
Bank (PNB) of India which was established in 1993 under the company act 1964.It
was operated in 1994 and listed in Nepal Stock Exchange (NEPSE) in 1995.Its head
office is located in Kathmandu .EBL has five hundred and sixty eight employees
providing services. The promoters and their holding pattern of EBL in equity is fifty
percent by Nepalese promoters, thirty percent by general public and twenty percent by
its joint venture partner, PNB, India,. It has is providing customer-friendly services
through its Branch Network. All operated thirty seven branches and thirty three ATM
within the country. The bank the branches of the bank are connected through
Anywhere Branch Banking System (ABBS), which enables customers for operational
transactions from any branches. With an aim to help Nepalese citizens working
abroad, the bank has entered into arrangements with banks and finance companies in
different countries, which enable quick remittance of funds by the Nepalese citizens in
countries like UAE, Kuwait, Bahrain, Qatar, Saudi Arabia, Malaysia, Singapore and U
3
K. Bank has set up its representative offices at New Delhi (India) to support Nepalese
citizen remitting money and advising banking related services.

The PNB, India is the joint venture partner (has holding twenty percent
equity in the bank), is the largest nationalized bank in India. With its presence
virtually in all the important centers at India, Punjab National Bank offers a wide
variety of banking services which include corporate and personal banking, industrial
finance, agricultural finance, financing of trade and international banking. Among the
clients of the Bank are Indian conglomerates, medium and small industrial units,
exporters, non-resident Indians and multinational companies. The large presence and
vast resource base have helped the Bank to build strong links with trade and industry.

The bank has been conferred with Bank of the Year 2006, Nepal by the
banker, a publication of financial times, London. The bank was bestowed with the
NICCI Excellence award by Nepal India chamber of commerce for its spectacular
performance under finance sector Recognizing the value of offerings a complete
range of services, it has pioneered in extending various customer friendly products
such as Home Loan, Education Loan, EBL Flexi Loan, EBL Property Plus (Future
Lease Rental), Home Equity Loan, Vehicle Loan, Loan Against Share, Loan Against
Life Insurance Policy and Loan for Professionals. It is the first bank that has launched
e-ticketing system in Nepal. Its customer can buy yeti airlines ticket through internet.
It was one of the first banks to introduce Any Branch Banking System (ABBS) in
Nepal. It has introduced Mobile Vehicle Banking system to serve the segment
deprived of proper banking facilities through its Birtamod Branch, which is the first
of its kind.)

EBL has introduced new product as Everest Bank Ghar- Dailo Banking Sewa,
on 17th June 2009, this service is unique delivery channel in banking services to
facilitate rural people in banking with the help of sophisticated technology. This
service is branchless banking service through point of transaction (POT) machine by
using smart cards.

4
1.2 Statement of problems
Banks hardly consider the actual end use and objectives of the projects .Banks
are mostly in the hands of big business houses and a substantial part of the credit is
given to units under their control of preferential terms resulting in the concentration of
economic power. The other problems of banking in Nepal include less investment in
productive sectors, nepotism and favoritism, overstaffing, concentration of banks in
urban areas, government instability, and cut throat competition.

The problem of the study on the issue related to the strength and weakness of EBL,
Nepal. Thus researcher is strived to find out the answer of the following questions:

1. What is the position of EBL, Nepal in terms of profitability, productivity,

financial stability and assets quality?
1.3Objectives of the study

The specific objectives of the study are as follows:

To evaluate the performance of EBL, Nepal on the basis of financial ratios i.e.
profitability indicators, stock market indicators, productivity indicators,
financial stability indicators and assets quality.
To examine the relationship between selected variables.
To make necessary suggestions and recommendations.

1.4Significance of the study

The study significance has multidimensional significance and will be useful to

following stakeholders:

The research would be useful for the investors i.e., shareholders.

The research would be useful for the management of the banks.
The research would be useful for the policy makers regarding commercial
banks.
The research would be useful for the further researchers.

5
 The research would be useful for the controlling entity of commercial banks
i.e., central bank of Nepal (NRB).
The research would be useful for the university students who is undertaking
same course.

1.5 Limitation of the study

The study is limited of the performance evaluation of commercial banks of

Nepal Since, it is not possible to take all commercial banks as sample, the thesis will
analyze on the data and information of EBL. The data and information over the period
of five fiscal years commencing from the FY 2005/06till the FY 2009/10 are used in
the study. The balance sheets, profit & loss accounts and other financial statements
are considered as basic sources of data. Thus the study is based on secondary data
collected from different sources. For the literature review various newspapers,
journals, unpublished thesis works and the internet have been referred. This study is
based on selected financial ratios due to certain constraints i.e. time.

1.6 Report structure

The structure of the report comprises a total five chapters which have been briefly
described as follows:

Chapter 1: Introduction ` `

This chapter includes the background of the study, focus of the study, introduction of
NIBL statement of the problem, objectives of the study, significance of the study,
limitation of the study, theoretical framework and problem hypothesis.

Chapter 2: Related Literature review

This chapter includes conceptual review and review of empirical works. For this
purpose various books, journals and periodicals as well as internet have been util

Chapter 3: Research Methodology

6
Research design, sample selection, sources of data, data collection procedure, tools
for analysis of the study, and limitations of the methodology have been included in
this chapter.

Chapter 4: Results and findings

This chapter is the heart of the study. This chapter includes presentation and analysis
of data using financial tools such as ratio analysis and statistical tools such as standard
deviation, mean etc of different variables.

Chapter 5: Discussion and Conclusion

This is the final chapter of the study which consists of the summary of the earlier four
chapters. This chapter tries to fetch out a conclusion of the study and attempts to offer
recommendations for the bank under review.

CHAPTER - 2

7
 LITERATURE REVIEW

Review of literature means to collect the information about the selected topic of
the research through the different sources. Review of literature helps till of the last
step of the research process. It gives knowledge about which type of process of
adopted, which type of data are collected, what are the difficulties arises in
completing the research process, which type of study had been made in the past on
that topic. So, this character highlights the literature related to the present study
available from libraries, document collection centers, studying encyclopedias,
different magazines, journals, periodicals, research articles and information managing
bureaus. Besides these this unit highlights the literature that is available in concerned
subject as to my knowledge, review of reports related to concerned bank, review of
research works, review of books, review of articles and relevant study on this topic
and review of this thesis works performed previously.

2.1Conceptual Review

According to M.Pandey,Financial analysis is the process of identifying the financial

strengths and weaknesses of the firm by properly establishing relationship between
the items of the balance sheet and the profit and loss account. Management of the
firm can undertake it or by parties outside the firm. The focus of the financial
analysis is on the key figure contained in the financial statement and significant
relationship existed. Management of the firm is generally interested in every aspect of
the financial analysis; they are responsible for the overall efficient and effective
utilization of the available resources and financial position of the firm.

The vertical and horizontal analysis could be done for the financial analysis. The
vertical analysis consists of financial Balance sheet, profit and loss Account of a
certain period time only, which is known as static analysis. Likewise, the horizontal
analysis consists of a series of statement relating to the number of years are reviewed
and analyzed. fs.
1. Selection of the information relevant to the decision.

8
 2. Arrangement or the selected information to highlight the significant
relationship of the financial yardsticks.
3. Interpretation and drawing of inferences and conclusions.
To evaluate the financial performance of a firm, the analyst needs a certain parameters
of the company by which the quantitative relationship and its position come out. The
most widely and effective used tool of the financial analysis is the ratio analysis.

Profitability Indicators

A class of financial metrics that are used to assess a business's ability to

generate earnings as compared to its expenses and other relevant costs incurred during
a specific period of time. For most of these ratios, having a higher value relative to a
competitor's ratio or the same ratio from a previous period is indicative that the
company is doing well. Following are the profitability indicators of a commercial
bank:

Return on Assets (ROA) Ratio

It is the ratio of a banks net profit after tax income divided by its total
assets.ROA is primarily an indicator of managerial efficiency. It indicates how
capably the management of the bank has been converting the institutions assets into
net earnings. It is the most important indicator of the bank's performance. A higher
ratio is an indicator of high performance and profitability. It is calculated by using
following formula:

Return on Assets (ROA) = (Net Profit After Tax Total Assets) 100

Return on Net Worth or Return on Equity (ROE)

It is the ratio of a banks net profit after tax income divided by its net worth or
equity. It indicates how the bank will have used the resources of owners. In fact, this
9
ratio is one of the most important relationships in financial analysis. The earning of
satisfactory return is the most desirable objective of a business. The ratio of net profit
to owners equity reflects the extent to which this objective has been accomplished.
This ratio is thus, of great interest to the present as well as the prospective
shareholders and also of great concern to management, which has the responsibility of
maximizing the owners welfare. . A higher ratio indicates greater profitability and
better efficiency. This enables a bank to raise more funds from the capital markets.

ROE is calculated as follows:

ROE=(Net Profit Net Worth 100)

Net Profit to Total Deposits Ratio

It is the ratio of a banks net profit after tax income divided by its total
deposits. It measures that the bank is how much efficiency to mobilize and utilize
deposits in generating profit. The formula of calculating it is:

Net Profit to Total Deposits Ratio=(Net Profit After Tax Total Deposits) 100

Return on Loans and Advances Ratio (ROL)

ROL measures the extent to which the banks are successful to utilized the
outsiders fund (total deposits) for the profit generating purpose on the loans and
advance. Generally high ratio reflects higher efficiency to the utilized of outsiders
fund and vice-versa. It can be calculated by dividing the amount of net profit by the
amount of loans and advances, which is given below:-

Return on Loans and Advances Ratio (ROL)=(Net Profit After Tax Loans&

Advances) 100)

10
Interest Income Ratio

This is the ratio of a bank's interest income to its total assets. A high interest income
ratio indicates greater profitability.

Interest Expenses Ratio

It is the ratio of interest expenses to total assets. A decline in this ratio brings greater
profitability to the bank.

Net Interest Margin Ratio

Net interest indicates the difference between interest income and interest expense. So,
it is the difference between the revenue generated by interest bearing assets and cost
of borrowed funds. A net interest margin ratio is the ratio of this net interest to total
assets. The higher the ratio is the greater the profitability and vice versa. A fall in the
ratio signals the bank to reorient its policies to earn higher yields through cheaper mix
of funds.

Intermediation Cost to Asset Ratio

It is the ratio of intermediation cost (operating expenses cost) to its total assets. A
lower ICAR is an indicator of higher profitability and efficiency.

RESEARCH REVIEW

Regmi Ashim(2015), in his study on A comparative study of the financial

performance of HBL and NBBL,has suggested NBBL is increase its current assets
because the bank is not maintaining adequate liquidity position in comparison with
11
HBL. As capital structure of both the banks is highly levered, both the banks are
recommended to maintain and improve mix at debt. And owners quality by increasing
equity share. He further suggests to HBL to improve the efficiency in utilizing
deposits in loan and advances for generating the profit, NBBL should try to maintain
present position on their regards. Profitability position of HBL is comparatively better
than the same of NBBL. So, NBBL is recommended to utilize its resources held idle,
bank faces high cost and causes the low profit margin. An idle dividend payout ratio is
based upon share holders exceptional and the growth requirements of the banks.
NBBL is suggested to increase its dividend payout ratio. Depositors aware of such
fact and think before depositing money in any commercial banks.

Amatya Sunil (2015), in his study on An Appraisal o financial Position of Nepal

Bank Limited, has indicated the liquidity position satisfactory maintained and the
bank has been found to adopt conservative financing policy that is low portion of
equity capital has been resorted to finance total assets. The bank has successfully
performed beyond the break-even point over the study period the research
recommends the use of proportionately more equity capital.

Research Gap

Research Gap refers to the areas of contradiction in a particular sector. The present
study tries to focus on financial performance of EBL, it is clear from the above
review that there was no research work on financial analysis of this banks. The
financial performance of this bank werenot cleared from the above analysis.

12
 CHAPTER-III
RESEARCH METHODOLOGY
Research methodology can be understood as a science of studying how
research has been done. This chapter contains the research design, nature and sources
of data, data collection procedure and tools and techniques of analyses.

3.1 Types of Research

Keeping in mind the objective of the study, descriptive and analytical research design
has been followed. The study is based on the wide range of variables and factors
influencing financial decisions of the banks. Different data of bank are presented in
such away so as to make the report informative to the reader. Financial tools (Ratios)
have been used to analyze and interpret the balance sheet, income statement and
other accounting information.

3.2 Population and Sample

There are twenty eight commercial banks presently operating in Nepal. Collecting the
data of all these entire commercial banks is not possible due to short time period
.Hence; EBL has been selected as sample for the fiscal year 2068/073 .Thus, the
population of the study comprises of all these twenty eight commercial banks and
sample of the study is EBL , Nepal.
3.3 Types of data

There are two types of data:-

1) Qualitative data:-

A research which is concerned with subjective phenomenon is known as

qualitative research. The main aim of qualitative research is to get depth knowledge
and explain the issue rather than finding the solution or coming to the conclusion.
2) Quantitative research:-

13
 A research which is conducted based on the measurement of quantity is known as
quantitative research. Quantitative technique of research can be used in the research
of those issues which can be measured exactly in the quantity or amount.

Among these two types of research my research is based on quantitative method

because it contains various types of data which can be measured by using different
techniques of analysis.
3.4Data Collection Process

The data which are originally collected by an investigator or an agent for the
first time for the purpose of statistically enquiry are known as primary data. These
data are collected personally through questionnaire, observation and interviewing
method. The data which are originally collected but obtained from some published or
unpublished sources are secondary data. These data are not original in character.

The data and information were collected from secondary sources. Secondary
data include the annual reports published by the EBL, Banking and Financial
Statistics and annual reports published by Nepal Rastra Bank, internet web sites,
unpublished thesis, journals, books etc. Such data information have been processed
through various processes like editing, tabulating, calculating and result have been
interpreted in the form of ratios, percentages and figures for clear view.

3.5 Techniques of Analysis

Before analyzing the data, the data and information have been presented
systematically in the formats of Tables, Graphs and Charts which will explain a lot
about the data and information collected. For the analysis of the research study, the
following financial and statistical tools are used.

Financial Tools

Financial tools are instruments that help to analyze and interpret the financial
performance of an organization. In other words, financial tools help to analyze the
strength and weakness of a firm.

14
 Statistical tools:-

The mathematical tools used to forecast the future on the basis of previous data are
called statistical tools. For our field work study following selected statistical tools are
taken to examine the economic data of Nepal Bank Ltd.

The tools used are:-

a) Arithmetic mean

Arithmetic mean
This statistical tool is used in this study to find the arithmetic average of the
variable. Arithmetic mean is the figure we get when the total of all the values in a
distribution is divided by the number of values in the distribution. It is used in this
study to calculate the average value of current, saving and fixed deposit and interpret
it.
X
N
Mathematically, =

Where, =Mean
X
= Sum total of all observations

N=Total number of observations

Ratio Analysis

Ratio analysis is one of the most commonly used techniques in the analysis of the
financial statement and evaluation of the managerial performance. Ratio analysis
points out the problems in any operational areas and provides a basis to recommend
corrective actions. Ratio analysis satisfies the interests of creditors, government

15
institutions and other to form their opinion or enable them to have guide line towards
effective decision- making.

There is variety in ratio calculation. Data contained in financial statement as the

requirement of the types of ratios are as follows:

Return on Assets (ROA) Ratio

Return on Equity (ROE)
Return on Loans and Advances Ratio (ROL)
Net Profit to Total Deposits Ratio
Interest Income Ratio
Interest Expenses Ratio
Intermediation Cost (Operating Expenses) Ratio

16
 CHAPTER-IV
PRESENTATION AND ANALYSIS OF DATA
This chapter deals with the analysis and interpretation of data following the research
methodology dealt in the third chapter .The heart of this chapter will be the ratio
analyses, which is the powerful financial tool to measure the performance of a
sample bank i.e., EBL, Nepal. The main purpose of analyzing the data is to change it
from an unprocessed form to an understandable presentation. The analysis of data
consists of organizing, tabulating and graphical representation.

Return on Assets (ROA)

Table 4.1
Analyses of Return on Assets (ROA)
NP in million TA in million ROA(%)
Year
2068/069 237.2 15959.29 1.486282

2069/070 296.4 21432.57 1.382942

2070/071 451.2 27149.34 1.661919

2071/072 638.7 36916.85 1.730104

2072/073 831.8 41382.76 2.010016

Average 491.06 28568.162 1.718907

Source: Compiled from Annual Reports of EBL

17
 Figure No:4.1

2.5

1.5

RATIO
1 ROA(%)

0.5

0
2068/069 2069/070 2070/071 2071/072 2072/073

YEAR

Return on Equity (ROE

TABLE4.2
Analyses of Return on Equity (ROE)
Net Profit in million Net worth in million ROE(%)
Year
2068/069 237.2 822.8 28.8284

2069/070 296.4 1061.5 27.9228

2070/071 451.2 1581.2 28.5353

2071/072 638.7 2205.4 28.9607

2072/073 831.8 2757.1 30.1694

Average 491.06 1685.6 28.8833

Figure:4.2

18
 30.5

30

29.5

29

RATIO 28.5
28 ROE(%)

27.5

27

26.5
2068/069 2069/070 2070/071 2071/072 2072/073

YEAR

Return on Loans and Advances Ratio (ROL)

Table 4.3
Analyses of Return on Loans and Advances Ratio
(ROL)

Year Net Profit in million Loans and Advance in million ROL (%)

2068/069 237.2 10136 2.3401

2069/070 296.4 14083 2.1047

2070/071 451.2 18836 2.3954

2071/072 638.7 24470 2.6102

19
2072/073 831.8 29156 2.8529

Average 491.06 19336 2.4607

Source: Annual Reports of EBL

Figure:4.3

ROL (%)
2068/069 2069/070 2070/071 2071/072 2072/073

23% 19%

17%
21%
19%

Analyses of Net Profit to Total Deposits Ratio

TABLE:4.4
Net Profit to Total Deposits Ratio

Year NP in million Deposits in million Ratio(%)

2068/069 237.2 13802.4 1.718542

2069/070 296.4 18186.2 1.629807

2070/071 451.2 23976.3 1.881858

2071/072 638.7 33322.9 1.9167

20
 2072/073 831.8 36932.3 2.252229

Average 491.06 25244.02 1.945253

Source: Annual Reports of EBL

Figure:4.4

2.5

1.5

RATIO
1 NP toTD(%)

0.5

0
2068/069 2069/070 2070/071 2071/072 2072/073

YEAR

Analyses of Interest Income Ratio

Table 4.5
Interest Income Ratio

Interest Income in
Year million TA in million Interest Income Ratio(%)

2068/069 903.41 15959.29 5.6607

2069/070 1444.41 21432.57 6.7393

2070/071 1548.66 27149.34 5.7042

2071/072 2186.82 36916.85 5.9236

21
2072/073 3102.45 41382.76 7.4969

Average 1837.15 28568.162 6.3049

Source: Annual Reports of EBL

The above tabled information is shown in the following figure:

Figure:4.5
Interest Income Ratio

8
7
6
5
4
RATIO 3
2 Interest Income Ratio(%)

1
0

YEAR

Interest Expenses Ratio

Table 4.6
Analyses of Interest Expenses Ratio
Year Interest Expenses in million TA in million Interest Expenses Ratio

22
2068/06
9 401.4 15959.29 2.5151

2069/07
0 517.17 21432.57 2.4130

2070/07
1 632.61 27149.34 2.3301

2071/07
2 1012.87 36916.85 2.7436

2072/07
3 1572.79 41382.76 3.8005

Averag
e 827.368 28568.162 2.8961

Source: Compiled from Annual Reports of EBL

The above tabled information is shown in the following figure:

Figure:4.6

Interest Expenses Ratio

18% 2068/069
28% 2069/070
2070/071
2071/072
17%
2072/073

20%
17%

Intermediation Cost (Operating Expenses) Ratio

23
 Table 4.7
Analyses of Intermediation Cost (Operating
Expenses) Ratio

Operating Expenses Operating Expenses

in million TA in million Ratio(%)
Year
2068/069 143.56 15959.29 0.8995
2069/070 177.55 21432.57 0.8284
2070/071 233.77 27149.34 0.8610
2071/072 292.01 36916.85 0.7909
2072/073 352.51 41382.76 0.8518

Average 239.88 28568.162 0.8463

Source: Annual Reports of EBL

24
 0.92
0.9
0.88
0.86
0.84
0.82
Ratio 0.8
0.78 Operating Expenses
Ratio(%)
0.76
0.74
0.72

YEAR

4.2FINDINGS

Based on the analysis of data, the main findings are given below

RATIO ANALYSES:

From the analysis of various ratios, the following findings can be categorized:

1) After the study of return on assets ratio (ROA), it is found that the average ratio
for five years period was 1.72 percent approximately. Per year ROA has been
increasing every year .

2)The average of return on net worth or return on equity (ROE) ratio during the
study period was approximately 28.89 percent and it has been increasing each year .

3)The net profit to deposits ratio is also another profitability indicator of the bank.
The average ratio for study period was 1.95 percent approximately .It has been
increasing per year .

25
4)The net income to loans and advances ratio is another profitability indicator of
the financial institution. The average return on loans and advances for the study
period was 2.46 percent. It has been also increasing.

5)The interest income ratio is another profitability indicator of the bank.

It is calculated by dividing interest income to total assets. Increasing interest income

ratio is favorable like above profitability ratios. The average interest income ratio for
study period was approximately 6.31 percent. I t has been also increasing every year .

6)The interest expenses ratio is another profitability indicator which shows the
relationship between interest expenses and total assets. Decreasing interest expenses
ratio is favorable. The average ratio was approximately 2.9 percent for the study
period. It decreased from fiscal year 2068/073 which shows increasing profitability.

7)The intermediation cost (operating expenses) ratio is another profitability

indicator which seems to be better if it is decreased. The average ratio was
approximately 0.8464 percent for the study period. It has been fluctuating during the
study period. On the basis of above trend it can be said that operating cost ratio is not
satisfactory.

CHAPTER-V
DISCUSSIONS AND CONCLUSION

5.1DISCUSSION
A clear financial picture of EBL can be viewed from all above presentation.
Now, some valuable and timely suggestions and recommendation can be
advanced to overcome weakness, inefficiency and to improve present
financial position of the bank. On the basis of findings mentioned above
some of recommendation have been drawn as follows:-

1)As joint venture commercial bank in private sector, EBL cannot keep its eye off
from the profit motive, so it should be always careful in increasing profit in a real
sense to maintain the confidence of shareholders, depositors and its customers. The

26
bank is strongly recommended to utilize its risky assets and shareholders fund to
increase in profit margin. Similarly, it should reduce its expenses and should try to
collect cheaper fund being more profitable.

2) Although joint venture banks are found to be profit oriented, but they should not
forget social responsibilities. So the bank should render their service in rural areas to
promote and mobilize are small investors. Mostly joint venture banks are
concentrating their focus only in urban areas, deals with big industries, corporate
houses, and multinational companies, large NGOs and INGOs and they neglect the
small depositors. Thus, the bank should expand their branches in rural areas and it
should encourage the small depositors for promoting small investors.

3) As the company has highly expanded its network by issuing loan massively. It may
create problem to the bank if it becomes failure to recover it timely. Issuing of short-
term loan doesnt carry more risk to bank but issuing long-term loan as compared to
short-term loan may sometimes lead to bankruptcy. So, it is recommended to
regarding this fact.

4) EBL has existing branches that are not sufficient to cover the banking business.
Coverage of limited areas by the bank will not boost up its campaign of deposit
mobilization and credit disbursement as desired. Therefore the bank is recommended
to open new branches at certain particular place for opening a branch, saving and
business potentially of that area should be studied well, which will be very helpful to
the bank in tapping the resources of different places.

5)The fee- based activities of bank are found to be very profitable looking at the
current trend of banking business a bank must very careful while formulating
strategies to serve customers. The marketing strategies should be innovative so that it
would attract and retain customers. It is recommended that the bank should develop
innovative approach to banks marketing for its well- being and sustain ability
business. So the bank is suggested to introduce and increase the ATM facilities, credit
card facilities, Tele banking facilities and many more in every branch.

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6) Before mobilization funds, the bank is recommended to collect a large variety
deposit through schemes like cumulative deposit scheme, price bank scheme, gift
cheques scheme, house building deposit scheme, direct finance housing scheme,
education loan scheme, vehicle loan scheme and many others.

7) It is recommended to boost up foreign investment, as EBL does not seem to be

successful in this aspect. To be successful in the investment sector, it should initiate
strong step for the recovery part too.

8) As the NPAS have been rapidly decreasing during the study period it indicates
increase in quality of assets. It is recommended to continue.

9) Even if capital adequacy ratio is a little bit above than NRB standard, it is
recommended to increase in capital fund which will ultimately increase in capital
adequacy ratio.

10) As the interest income ratio has been increasing during the study period which
indicates increase in profitability, it is recommended to invest in short term as well
as long- term loan.

5.2CONCLUSION AND IMPLICATIONS

In conclusion it can be said that the performance evaluation is the
most important part of all financial institutions .On the basis of ratio
analyses and average analysis following consideration can be taken
considered:
Profitability indicators include ROA, ROE, net profit to deposits ratio, ROL,
interest income ratio,interest expenses ratio. Out of these ROA, ROE, net
profit to deposits,ROL and net profit margin are also satisfactory due to
increase in every year expect in fiscal year up to study period. Interest
income is also satisfactory due to increase in every year.Remaing ratios
are not so satisfactory due to fluctuating in every year.
Last but not the least, this analysis is based only on the availability of an annual
report. Other necessary documents required for the total analysis could not be
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obtained due to various reasons. Likewise, an analysis based only in terms of ratios
may not be sufficient for the overall analysis of a bank. Hence, due to these
limitations this report can not be concluded as the overall and the actual analysis of
EBL. This analysis report may only be used as reference concerning the Financial
Analysis of EBL. In addition, since the bank is run by highly competent personnel,
they may have utilized the bank's assets and loans to its optimum capacity. The
research would be useful for the investors i.e., shareholders.The research would be
useful for the management of the banks.The research would be useful for the policy
makers regarding commercial banks .The research would be useful for the further
researchers.The research would be useful for the university students who is
undertaking same course.

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