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Sunita Tamang
T.U. Regd. No: 7-2-109-82-2014
Ganesh Multiple Campus

Submitted To:

The Faculty of Management

Tribhuvan University

In partial Fulfillment of the Requirement for the Degree of


Kathmandu, Nepal

Feb, 2018


1.1 Background

Financial performance analysis is the process of identifying the financial strengths and

weakness of the firm by properly establishing the relationship between the items ofbalance

sheet and loss account. Commercial banks have experience a dynamic and competitive

environment in both nation andinternationalscenario.It also helps in short-term and long term

forecasting and growthcan be identified with the help of financial performance analysis.The

financialanalyst program provides vital methodologies of financial analysis.(Source


Himalayan Bank Ltd. is one of the pioneer private banks of the Nepalese banking industry

being established in 1993 A.D as a joint venture with Habib Bank Limited, Pakistan.Its holds

a vision of becoming a leading bank of the country and providing the customers with

premium services to give a substantial return to its stakeholder. HBL has a huge base of

customer base and especially “A” rated client which are there due to HBL’s long history of

customer satisfaction and innovation in service.(

1.2 Statement of problem

Nepal is a country which is made up of villages and rural areas mostly and where there is

predominanceof agriculture is still difficult to solve the credit problemof the country

through exitingCommercial banks.NRB has mandated commercial banks to open the

branches in urban areas.In thisRegard,this research tries to find out the answer the following

 What is the financial profit of HBL

 Is there any relationship between the banks total deposit and loan & advance

diversity advance

 What is trend of deposit &investment.

1.3.Objectives of the study

The objectives of this report are to analysis and understand the Loan management of

NepalInvestment Bank Limited.The main objectives of this report are as follows:

 To examine the performance of HBL bank.

 To evaluate the efficiency and pofitability of the HBL bank.

 To find out the relationship between total investment and total

 deposite and loan & advance.

1.4 Rationale

The following are the limitation of the present study: -

 This study is limited to the comparative study of financial performance of

venture Himalayan bank limited

 This study is based on secondary data.

 This study has analyzed and evaluated of data to the latest five years period

i.e. since 2012/13 to 2016/17 ( ie. 5 years historical data)

 In this study, only selected financial and statistical tools and techniques are

1.5Report Structure

This study is divided in to five chapters, which are:

Chapter I : Introduction

The first Chapter deal with introduction part. This chapter contains various aspects of the study.

Chapter II : literature review

The second Chapter deals with review of literature, it includes study of related books, research

works, journal and articles which are already published and conducted by different experts and

researchers in the related fields.

Chapter III : Inquiry Tools and Methodology

the Third Chapter includes the research methodology process such as research design, nature and

source of data, population and sampling of the study, methods and tools of data collection and

analysis and at last definition of key terms.

Chapter IV: Results and Findings

The fourth Chapter deals with data presentation and analysis it deals with the presentation and

analysis of relevant data and major findings from the study. Various financial and statistical tools

are used for this purpose of data analysis.

Chapter V: Discussion amd Conclusion

the Final Chapter is Summary and Conclusion. This chapter of the study presents summary,

conclusion and recommendations extracted from the study.



2.1 Conceptual Review

The modern financial evaluation has greatly affected the role and importance of
financial performance. Nowadays, finance is best characterized as ever changing with
new ideas and techniques. Only efficient manager of the company can achieve the set up
goals. If a bank does not maintain adequate equity capital, it makes the bank more risky.
If a bank has inadequate equity capital, it must be used more debt that has high fixed cost.
So any firm must have adequate equity capital in their capital structure.

The main objectives of the bank are to collect deposits as much as possible from the

customers and to mobilize into the most profitable sector. If a bank fails to utilize it's
collected resources than it can not generate revenue. Resource mobilization management
of bank includes resource collection, investment portfolio, loans and advances, working
capital, fixed assets management etc. It measures the extent to which bank is successful
to utilize its resources. To measure the bank performance in many aspects, we should
analyze its financial indicator with the help of financial statements.Financial analysis is
the process of identifying the financial strength and weakness of the concerned bank. It is
the process of finding strength and weakness of the concerned bank. It is the process of
finding details accounting information given in the financial statement.

2.2Review of Previous Works

“The finance statement provides a summarized view of the financial operation of the
firm. Therefore, something can be learnt about a firm and careful examination of the
financial statements as invaluable documents or performance reports. Thus, the analysis
of financial statement is an important aid to financial analysis or ratio analysis is main
tool of financial statement analysis.( Pandey (1997)

“Financial Performance analysis is a study or relationship among the various financial

factor in business a disclosed by a single set of statement and a study of the trend of these
fact as shown in a series of statements. By establishing a strategic relationship between
the item of a balance sheet and income statements and other operative data, the financial
analysis unveils the meaning and signification of such items.”( B.N. Ahuja (1998)

“The ratio analysis is defined as the systematic use of ratio to interpret the financial
performance so that the strength and weakness of firm as well as its historical
performance and current financial condition can be determined.”( Khan and Jain 1990)

A comparative study of financial performance is a basic process, which provides information

on profitability, liquidity position, earning capacity, efficiency in operation, sources and use

ofcapital, financial achievement and status of the companies. These information will help to

determine the extend of efficiency and effectiveness of the company in respect of deploying

financial resources in the profitable manner.

2.3 Research Gap

In this study, the major areas is to disclose the financial performance relates to Nepalese
commercial banks This type of research were done rarely. This study shows that the
unique feature of findings. Previous researches on the basis of financial performance of
commercial banks in Nepal.

But this research is about financial performance sample of Himalayan Bank Limited In
the previous research, there is no clear-cut accounting and financial performance of
Himalayan bank. The research can help the people who wanted to know about the overall
financial standard and accounting procedure of Himalayan Bank.

3.1 Type of Research

Research refers to the act of searching new knowledge through a repetitive and systematic

process. There are two types of research, they are Qualitative and Quantitative. The research

which is conducted based on the measurement of quantity is known as quantitative research and

research which is concerned with subjective phenomena is known as qualitative research. This

study is based on quantitative type of research.

3.2 Population and Sample

The entire group of people, events or things of interest that the researcher wishes to investigate is

known as population and the process of selecting the sample out of the population is called

Sampling. There are 28 listed A class Banks in NRB report and I have taken Himalayan Bank

Ltd as a sample for the study.

3.3 Type of Data

The information or facts collected through research, observation and measurement is known as

data. Data that had been collected by researcher is known as primary data and if a researcher uses

the data developed by others in the past for their own purpose is known as secondary data. This

study is based on both primary and secondary data.

3.4 Data collection procedures

This study conducted on the basis of secondary data. For this study, I have collected secondary

data and the data are collected from different sources like annual reports of related banks,

journals, unpublished thesis reports, internet, and websites.

3.5 Instruments

 Annual Reports
 Books, Journals, unpublished thesis reports

3.6 Technique of Analysis

For this purpose, several tools or techniques are used to analyze the data. For this study I have

used statistical and financial tools.Financial analysis is the process of identifying the financial

strengths and weaknesses of the organization by properly establishing relationships between the

items of the balance sheet and the profit and loss account. Ratio analysis is a powerful tool of

financial analysis. A ratio is designed as the indicated quotient of two mathematical expressions

and as the relationship between two or more things. In financial analysis, ratio is used as a

benchmark for evaluating the financial position and performance of a firm. Several ratios,

calculated from the accounting data, can be grouped into various classes according to the

financial activity and function to be evaluated.

3.6.1 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. Analysis

Ratio analysis is a most important part of financial analysis. It helps to show the quantities

relationship between two numbers. It may be expressed in terms of proportion, times or in percentage.

Ratio analysis is a technique of analysis and interpretation of financial statement .Therefore; a ratio is

used as a yardstick for evaluating the financial position and performance of a firm. Ratios help to

summarize large quantities of financial data and to make qualitative judgment about the firm’s financial

performance. Average Net Profit per Branch

It is the ratio of a bank’s net profit after tax income divided by its total number of branches at the
end of the fiscal year. It shows the branch net profit in monetary value. Higher ratio indicates the better
efficiency of the branches. The formula of calculating it is:

Average Net Profit per Branch (in rupees) =Net Profit After Tax ÷Total Number of Branches Return on Assets (ROA) Ratio

It is the ratio of a bank’s 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 institution’s 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 bank’s 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 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 bank’s 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) 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

3.6.2 Statistical Tools

Average (Mean)

Mean is the value, which represents the group of values and gives an idea about the

concentration of values in the central part of the distribution. An average gives us a point, which

is most representative of the data. It depicts the characteristics of the whole group. The value of
arithmetic mean lies in between the two extreme observations of the entire data. It is an envoy of

the mass homogeneous data. The value of the A.M. is obtained by adding together all the items

and by dividing this total by the number of items.


Arithmetic Mean (A.M.) is given by,

X= N


X= Arithmetic Mean

∑X = Sum of all the values of the variable X

N = Number of observation coefficient

Correlation is a statistical technique which is used to study the behavioral relationship between

two or more than two variables. If the values of the variables are directly proportional then the

correlation is said to be positive. On the other hand, if the values of the variables are inversely

proportional, the correlation is said to be negative, but the correlation coefficient always remains

within the limit of +1 to -1. Karl Pearson’s simple correlation coefficient (between two variables,

say X and Y) is given by,

r cov (x,Y)

rXY =
√NΣX2 −(ΣX)2 √NΣY2 −(ΣY)2


X= Deviation of the X measured from the assumed mean

Y= Deviation of the Y measured from the assumed mean

rxy = correlation between two variables X and Y

‘r’ lies always between +1 and -1. When ‘r’ = +1, there is perfect positive correlation. When, ‘r’

= -1, there is perfectnegativecorrelation. When ‘r’ = 0, there is no correlation.

3.7 Limitations

This is not a comprehensive study. The study is mainly based on secondary data, so there may be

some errors. There may be many other factors which are related to firm performance however.

The sample taken for this study is random so, it may not cover the entire population and this

study only focuses on the analyze trend of the investment policy and total deposit, and its



4.1 Presentation of Data and Figures and Their Analysis

4.1.1 Analyses of Average Net Profit

Year NP in million No. of branches average NP per branch in million

2012/13 237.2 18 Rs.13.177776

2013/14 296.4 21 14.114286

2014/15 451.2 26 17.353846

2015/16 638.7 32 19.959375

2016/17 831.8 37 22.481081

Average 491.1 18.323134

Source: Compiled from Annual Reports of HBL 2012/13-2016/17

The above tabled information is shown in the following figure

Average Net Profit





2013/14 2014/15 2015/16 2016/17 Average

The above table and figure 4.1 show the average net profit per branch in million of rupees is
increasing in different years. It was 13.178 million in fiscal year 2013/14and increased to 22.48 million
in2016/17.It shows the better efficiency of branches.

Table 4.2

4.1. 2 Analyses of Return on Assets (ROA)

Year NP in million TA in million ROA(%)

2012/13 237.2 15959.29 1.486282

2013/14 296.4 21432.57 1.382942

2014/15 451.2 27149.34 1.661919

2015/16 638.7 36916.85 1.730104

2016/17 831.8 41382.76 2.010016

Average 491.06 28568.162 1.718907

Source: Compiled from Annual Reports of HBL 2012/13-2016/17

The above tabled information is shown in the following figure:




2012/13 2013/14 2014/15 2015/16 2016/17 Average

The above table and figure 4.2 show the return on assets for study period.ROA decreased from

1.486 percent to1.383 percent from fiscal year2012/13 to 2013/14.It shows the lower profitability and

efficiency of investment in total assets.ROA Increased from 1.383 percent to2.01 percent from fiscal year

2013/14 to 2016/17.It shows the increasing profitability .

4.1. 4 Analyses of Return on Equity (ROE)

Year Net Profit in million Net worth in million ROE(%)

237.2 822.8 28.8284
2013/14 296.4 1061.5 27.9228

2014/15 451.2 1581.2 28.5353

2015/16 638.7 2205.4 28.9607

2O16/17 831.8 2757.1 30.1694

Average 491.06 1685.6 28.8833

Source: Compiled from Annual Reports of HBL 2012/13-2016/17

The above tabled information is shown in the following figure:









2012/13 2013/14 2014/15 2015/16 2O16/17 Average

The above table and figure 4.3 show the ROE for the study period. The increasing ROE shows

better performance. The ROE decreased from 28.83 percent to 27.92 percent from fiscal year 2005/06 to

2006/07 .It shows the lower profitability and efficiency. From fiscal year 2006/07 to 2009/10 it increased

from 27.92 percent to30.17 percent. It shows better performance and proper utilization of common share

holders’ equity.

4.1. 5 Analyses of Net Profit to Total Deposits Ratio

Year NP in million Deposits in million Ratio(%)

2012/13 237.2 13802.4 1.718542

2013/14 296.4 18186.2 1.629807

2014/15 451.2 23976.3 1.881858

2015/16 638.7 33322.9 1.9167

2016/17 831.8 36932.3 2.252229

Average 491.06 25244.02 1.945253

Source: Compiled from Annual Reports of EBL 2005/06-2009/10

The above tabled information is shown in the following figure:




2012/13 2013/14 2014/15 2015/16 2016/17 Average

The above table and figure 4.4 show the net profit to total deposits ratio for the study period. Higher ratio

shows better performance. It was decreased from 1.72 percent to 1 .63 percent from fiscal year 2012/13 to

2013/14.It indicates bad performance than previous year. It increased from 1.63 percent to 2.25 percent

from fiscal year 2013/014 to 2016/17.It shows better mobilization of deposits.

Table 4.5

4.1. 5 Analyses of Return on Loans and Advances Ratio (ROL)

Year Net Profit in million Loans and Advance in million ROL (%)
2012/13 237.2 10136 2.3401
2013/14 296.4 14083 2.1047
2014/15 451.2 18836 2.3954
2015/16 638.7 24470 2.6102
2016/17 831.8 29156 2.8529
Average 491.06 19336 2.4607

Source: Compiled from Annual Reports of HBL 2012/13-2016/17

The above tabled information is shown in the following figure:
2012/13 2013/14 2014/15 2015/16 2016/17 Average

The above table and figure 4.5 shows return on loans and advances ratio for the study period.
Generally high ratio reflects higher efficiency to the utilized of outsiders fund and vice-versa. It was
decreased from 2.34 percent to 2.10 percent from fiscal year 2012/13to 2013/14, which shows lower
efficiency. But, it increased from 2.10 percent to 2.85 percent from fiscal year 2013/14 to 2016/17, which
indicates higher efficiency.

Table 4.6 Calculation of Correlation coefficient( r) between net profit Rs. in

million (X) and number of employees(Y) of EBL,Nepal

Year X Y XY X2 Y2
237.2 306 72583.2 56263.84 93636
296.4 393 116485.2 87852.96 154449
451.2 449 202588.8 203581.4 201601
638.7 531 339149.7 407937.7 281961
831.8 568 472462.4 691891.2 322624
Total (∑) 2455.3 2247 1203269 1447527 1054271
Source: compiled from different issues of Annual report of HBL (2012/13-2016/17)




The correlation coefficient between net profit and number of employee of EBL, Nepal is 0.96293,

which is positively correlated. Here, coefficient is nearer to 1 which indicates that the correlation seems to

be nearly perfectly positive. It can be said that an increase in number of employees increases net profit .


This chapter is dedicated to provide conclusions after comparatively analyzing the financial

performance of HBL. It also tries to provide some recommendations to the concerned banks

from the conclusion derived from the study

5.1 Discussion

Banks, which deal with commercial activities, are known as commercial banks. These
financial institutes help to integrate every financial activity of the community. The main
objective of a commercial bank is to play a vital role in the development of good trade.

Commercial banks are mechanisms of mobilizing funds in returnable resources. They

offer financial support to all types of business through providing various types of loans
and other financial services. Commercial banks aid the economic development of the

5.2 Conclusion
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, correlation coefficient between selected research

variables and hypothesis test the following conclusions are made: Profitability indicators include net

profit per branch, ROA, ROE, net profit to deposits ratio, ROL,.Out of these net profit per branch is fully

satisfactory due to increase in every year up to study period.


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