A PROJECT REPORT ON

Financial performance of Himalayan Bank Limited

Submitted to:

The Faculty of Management

Tribuhuvan University

Kathmandu

In partial fulfillment of the requirement for the degree of

BACHELORS OF BUSINESS STUDIES(BBS)

Submitted by:

Anjana Shrestha

Symbol No: 7030060

T.U. Registration No: 7-2-1158-6-2015

G.P. KOIRALA MEMORIAL COLLEGE

Date: may,2,2019
 `DECLARATION

I hereby declare that the project work entitled "A CASE STUDY
ON FINANCIAL PERFORMANCE OF HIMALAYAN
B ANK LIMITED " submitted to the faculty of Management,
Tribhuvan, University, Kathmandu Nepal is an orginal peace of
work under the supervision of Mr. Ganesh Khadka, G.P.
Koirala Memorial College, and is submitted in partial fulfillment
of the requirements for the award of the degree of Bachelor of
Business Studies (BBS). This project work report has been
submitted to any other university or institution for the award of any
degree or diploma.

Signature

Anjana Shrestha
Date: May ,2 , 2019
 Supervisor's Recommendation

The project work report entitled FINANCIAL PERFORMANCE

OF HIMALAYAN BANK LIMITED submitted by Anjana
Shrestha of G.P. Koirala Memorial College is prepared under my
supervision as per the procedure and format requirements laid by
the Faculty of Management, Tribhuvan University, as partial
fulfillment of the requirement for the award of the degree of
Bachelor of Business Studies (BBS). i.e. therefore recommend the
project work report for evaluation.

. . . . . . . . . . . . ..
Ganesh Khadka
 Endorsement

We here by endorse the project work report entitled Financial

Performance of Himalayan Bank Limited of Nepal submitted by
Anjana Shrestha of G.P. Koirala Memorial College, Siphal,
Kathmandu, impartial fulfillment of the requirement for award of
thee Bachelor of Business Studies (BBS) for external evaluation.

. . . .. . . . . . . . . .. ..............
Mr. Mohan Raj Rai Ms.Mina Tamang
(Ass. Campus Chief) Chair person Research
G.P. Koirala Memorial College committe

Date: Date;
 ACKNOWLEDGEMENT

My project shows my dedication and I have done full justice to this title.
This a course designed by Tribhuvan University for bachelor student of
commerce. Likewise all the fellow student I also extended a lot of pragmatic
knowledge while devising this task. I feel the excitement in each and every
span of time while creating this report.

I would like to express my gratitude to all supporters who provided me very

informative and precious as well as proper information on penmanship this
report. I would like to thank Tribhuvan University for providing a chance
and allowing for this study. I am highly appreciative to Lecturers Mr.
Ganesh Khadka and Mr. Mohan Raj Rai . Principal of G.P. Koirala
Memorial College for this assignment and proper instruction without his
help my assignment would not complete at the time.

Thank you!

Anjana Shrestha

G.P. Koirala Memorial College

Siphal, Kathmandu , Nepal

 TABLE OF NCONTENTS
Title Page ... ... ... ... ... ... ... ... ... ... ... ... ... ... .. ... ... ... ... ... ... i
Declaration .. .. .. ... ... ... ... ... ... ... ... .... .... .... .... ... ... ... ... ... ii
Supervisor's Recommendation .. .. ... ... ... ... ... ... .... ... ... ... ... iii
Endorsement ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .... iv
Acknowledgement ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... v
Teble of Content ... ... ... .... .... .... ... ... ... ... ... ... ... ... ... ... ... . vi
List of Table .. ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .... ... ... .. vii
List of Fingers ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... .... .. ...vii

Abbreviations ... ... .... .... ... .... ..... ..... ..... ..... .... .... ... ix
 CHAPTER –I
INTRODUCTION
1.1 Background of the study
It is very hard to collect the correct information of the origin of back. The bank
is kind of formal financial institution. Our financial system is dominated by
bank. The banking system in Nepal is a recent phenomenon which began only in
1994 BS as Nepal Bank Ltd. was incorporated under NBL act 2012 after
transferring 51% of share to government. The word "Bank" has derived from the
Italian word "Banco" which means accumulation of money of stock. It is
delieved that its origin is from the French word "Banque" which means "beach"
for keeping, lending and exchanging of money or coin in the market place by
money lenders or money changers. It is believed that the ancestors of modern
banking system were merchants, goldsmiths and moneylenders. Modern banking
sowed its seed in the medieval Italy despite strong Christian prohibitions against
charging interest.

The bank had started in Italy in 12th century as a public bank. The bank of
Venice that was established in 1158 A.D. was the first bank in the history of
banking. Following its establishment various bank of the world. Similarly,
Bank of Geneva (1407), Bank of Amsterdam (1609), Bank of Hindustan
(1770) were established. The first central bank was the "Bank of England"
which was established in 1844 A.D.

Bank is a financial institution, which is engaged in monitory transaction.

Bank has always been the most importance and largest financial
intermediates. Banks collect the scattered money from public providing
those interests and services. This collection becomes the capital for the bank
to invest. "Banking means the accepting of money for the view of lending or
investment of deposit from the public repayable on demand or otherwise and
withdraw able by cheque, draft or otherwise", is according to Banking
Regulation Act 1949 of India. World Bank says "Banks or a financial
institution that accepts funds in the forms of deposit repayable on demand or
at short notice".

A commercial bank is a financial institution which collects saving from

many persons and institution and provides credit or loan facility to different
industrial and commercial bank deposit into cash, transferring bank deposit
form one person or institution to other, giving bank deposit in exchange for
cheques, bill of exchange, government securities etc.

1.1.1 History of Bank in Nepal

In the context of Nepal, likes as in the other countries the goldsmith and
landlords banker. The Nepalese people were highly exploited by 'Sahu
Mahajan' by charging higher interest rate, compound interest rate and even by
manipulating the principal amount. The introducing of " tejarath Adda" during
the tenure of the Prime Minister Ranoddip Sing ((1993 B.S.) was the first step
towards the institutional development of banking in Nepal. The first
commercial bank 'Nepal Bank Limited' was established on 30th Kartik 1994
B.S. and started to perform proper banking activities. With the realization of
central banks and develop monetary policy as well as to have proper control
over commercial banks and banking sectors Nepal Rastra Bank was
established on 14thBaishak 2017 B.S. under Nepal Rastra Bank Act 2015 B.S.
Likewise, Rastra Banijya Bank under the full ownership of government was
established on Magh 2022 as per 'Rastra Banijya Bank Act 2015 B.S.'. The
growths of the where the ancient banks accelerated only after the adoption of
liberal economic policy by Nepalese Government. This has attracted many new
investors and encourage opening many new modern bank with the joint
venture of foreign banks. Nepal Arab Bank was established on 29th Ashad
subsequently following its established Nepal Indo Suez Bank France, Nepal
Grinlands Bank England on 16th Magh 2043 B.S. with the joint venture of
Grinlands Bank England, Himalayan Bank Ltd. on 5th Magh, 2049 B.S. with
joint venture of Habib Bank of Pakistan, Nepal SBI Bank Ltd on 28th Ashad,
2050 B.S. With the joint venture of state bank of India Nepal Bangladesh
Bank Ltd. on 28th Jestha,2050 B.S. with the joint venture of International
Finance investment and Commercial Bank, Everest Bank Ltd. on 1st kartik
2051 B.S. with the joint venture of the Siam Commercial Bank, Thailand.

Commercial banks perform various function. Among them, accepting various

types of deposit is the main function of commercial banks. Commercial banks
are directly related with the people and institution. The commercial bank is an
important bank. Its function is very attractive for people. Although these bank
are truly inspired with the objective of gaining profit, the commercial banks
area also established of accelerative common people’s economic welfare and
facility to make available loan to the agriculture, industry, and commerce and
to provide the banking services to the public and state. In Nepal the
commercial bank perform the following functions. Many function of the
commercial bank acceptance of deposit it one of them. The bank allows for
opening the three types of account to accept deposit for their customers. THEY
ARE Current, saving and fixed deposit account. People can collect their money
in one of three as their need. But the interest is given to the saving and fixed
account. The commercial bank performs the important function of accepting all
sorts of deposit. Its earn profit by investing the money in another place.

8th page

efficient transfer. Furthermore it can be transferred with in the country to the

following cities in Nepal directly and provide service of transferring funds to
other cities like Nepal visa its local correspondents cities like Biratnagar,
Pokhara, Birgunj, Bhaktpur, Hetauda, Bhairawa etc. Outward remittance can
also be done as part he rules and regulation of central bank. The remittance
facility from middle east the bank has also launched lottery of Rs 25000
fixed deposit and within 2 week the lottery is opened. The lottery is of
millionaire.
1.2 Meaning of Financial Analysis
Financial statement is a portion of the bank/company both at a point in a
time and its operation over some past period. However, the real value of
financial statement lies in the fact that they can be used to help others to
predict the banks future earning and dividends. From an investor’s
standpoint, predicting, financial statement is used both as way to anticipate
future condition, and more important as a starting point for planning action
that will determine the future course of action.

“Financial analysis is largely the study of relationships among the various

financial factors in a business as disclosed by one of the factors as shown in
a series”.

1.2.1 Objectives of financial analysis

Financial analysis has proved that one can explore various fact related to past
performance of the business and predict out future potentials for achieving
expected results. The major objectives of the analysis in board sense can be
stated as:

·0 Ascertain the real meaning and significance of financial data.

·1 Ascertain of potential and related risk.

·2 Financial stability concern.

1.2.2 Significance of financial analysis

Significance of this analysis lies on the objectives of financial analysis of
firm. The fact discovered by the analysis are perceived different group
associated with the concern. The facts the relationships concerning
managerial performance, corporate efficiency, financial strength and
weakness are interpreted on the basis of objectives in the hand. The parties
that are benefited from the results drawn from the analysis of financial
performance are:

·3 Top management
 ·4 Creditors

·5 Shareholders

·6 Labour union

·7 Economist

1.2.3 Technique of financial analysis

There may be various techniques of financial analysis. Some major
techniques are:

·8 Funds flow analysis

·9 Cash flow analysis

·10 Trend analysis

·11 Ratio analysis

1.3 Objective of the study

The main objective of the study is to analysis and interpret the financial state
and policy of HBL. The study focuses whether it is backward or forward in
liquidity position and its fund efficiency with respect to industry average.
The prime objectives of the study are to evaluate the financial performance
of HBL. The main objective of HBL are as follows:

·12 To evaluate liquidity, leverage, capital adequacy, turnover and

profitability position of HBL.

·13 To evaluate the growth ratios of cash and bank balance, loan and
advances, net worth.

·14 To provide suitable and useful suggestion on finding of study.

·15 To discuss fund mobilization and strategy of liquidity management of

HBL.
 ·16 To find out the future trend of total deposit, investment, loans and
advances, net worth etc.

1.6 Research Methodology

This data has been prepared from 25th annual report of HBL. The main
objectives of this study are to analyze, examine, highlight and interpret the
financial position of HBL. The data has been presented in table and charts to
ease the study.

1.6.1 Research design

This fieldwork report is a descriptive of one bank, i.e. HBL therefore; the
entire study undertaken for fieldwork report is descriptive nature. However,
comprehensive analysis is also being made for this purpose.

1.6.2 Nature and sources of data

This report is based in secondary sources obtain from the bank, library and
internet. Secondary sources used this study are listed below:

·17 Economic survey

·18 Annual report published by bank

·19 Profit and loss account and balance sheet of HBL. For 5 years.

·20 Books and magazines, internet etc.

1.6.3 Data processing

The collected data were processed for analysis. Various table an d
calculation have been shown in the study in order to come to reliable
conclusions. Finding and results are compared and interpreted. While
processing data in the table and charts following tools were used:
 ·21 Liquidity ratio

·22 Profitability ratio

·23 Activity/turnover ratio

·24 Capital structure or leverage ratio

·25 Others ratio

1.7 limitation of the study

The limitation of the study are discussed below:

·26 The financial successes are highlight with the use of charts, bar-
diagram, trend- line and financial ratio.

·27 It contains the data of only 5 years 2013-2017.

·28 The analysis is based on the secondary data available of the bank.

1.8 Organization of the study

This present research work is divided into three chapters.

Chapter – I: Introduction
Background information of the subject matter of research undertaking been
presented under this section to provide a general idea of its history. So, this
section includes a brife introduction to financial performance oh HBL. This
chapter also focuses statement of objectives of the study, research
methodology and organization of the study etc.

Chapter –II: Data Presentation and Analysis

This chapter is the one of the most important and core of the research. Since,
it consist of primary and secondary data collected from different sources are
presented in systematic formats and analysis using different analytical tools
and techniques like (ratio, mean, standard, deviation, coefficient of
variation).

Chapter –III: Discussions, Conclusion

This chapter is also important part of study where finding has been
summarixed, conclusion and recommendations suggested and conclusion.

CHAPTER – III
SUMMARY, CONCLUSION AND
RECOMMENDATION
3.1 Summary
Nepal is being and under privileged country and almost people being
semployment to all people. Government of Nepal has to actives people in
the nation’s development through overall industrialization of nation. For
which, development of banking system is necessary. Modern commercial,
economical and banking transaction. In short, banking transaction helps a
country to develop its economy swiftly.

If there were systematic and scientific program for economic

development, countries like Nepal would have developed its economy is
much as those countries, which have development the whole economy. In
addition, the today’s circle of the underdevelopment might have perhaps
narrowed down.

At present commercial banks including joint venture banks are operating in

Nepal. Any country cannot have a developed economy in the absence of
modern banking system. As any development, work needs, sufficient as to
why Nepal has been backward in developing this economy.

Therefore it is utterly important to find out whether or not the banks

are serving and import contribution to develop different sector if the
economy. Fixed deposit occupies major portion of banking income. It also
pays a vital role upgrading the rational economy.
3.2 Conclusion
It can be concluded from the observation and analysis of above data that
ratio analysis control the banks and shows the general financial strengths and
weaknesses. Similarly, it also shows the future opportunities and threats for
the banks. Therefore it is very important for the appropriate policy to adopt
with calculated various ratios. A large capital can be managed at very low
capital cost. It will encourage industrial and commercial eventually leading
to better economic growth, socio-economic development, employment
opportunity etc.

In context of HBL , it will be found more effective in the sector of

banking since its policies and the implementations are towards the great
achievement the symbolisms its need in the Nepalese economy. HBL is
going towards growth and hope it will ultimately goes for development very
soon if the political scenario and economy condition walk as its result says.

Similarly, current liabilities refers to obligation maturing within a year such

as bills payables, provision, dividend payables, outstanding, bank overdraft,
customer acceptance outstanding, etc.

Table: 2.1
Current Ratio in (Rs. 000)
Year Current Assets Current Liabilities Ratio
2012/013 29,373,640 28,813,632 1.02
2013/014 33,084,074 32,168,368 1.03
2014/015 35,486,463 34,344,633 103
2015/016 38,449,531 36,926,805 1.04
2016/017 41,743,996 40,421,046 1.03
2017/018 116,462,301 102,323,404 1.13
(Source : Annual financial report of HBL)

The above mentioned schedule can be shown by following chart:

b) Cash and bank balance to deposit ratio
This ratio is part of liquidity and is also called as cash reserve (as specified
by NRB). This ratio can be calculated by dividing cash and bank balance by
deposit liabilities of the banks. The ratio shows the proportion of cash bank
balance to deposit.

Cash and bank balance to deposit ratio =

Table:2.2
Cash band Bank Balance to deposits ratio(Rs 000)
Year Cash Balance Deposits liabilities Ratio
 2013/014 1,717,352 26,490,852 0.065
2014/015 1,757,341 30,048,418 0.058
2015/016 1,448,143 31,842,789 0.045
2016/017 1,448,143 34,681,345 0.042
2017/018 3,866,491 37,611,201 0.103
(Source: Annual financial report of HBL)
The above mentioned schedule can be shown by following chart:

2.2.2 Capital Structure/Leverage ratio

This leverage ratios are calculated to judge the long term financial position
of a firm. These ratios measure the enterprise’s ability to pay the interest
regularly and to reply the principal on maturity. Under this some ratios are
calculated.

1) Long-term Debt to Net worth ratio

Long-term debt to net worth is calculated by dividing the fixed

obligations of the banks by owners claim. It is calculated as:
 Table : 2.3
Long-term debt to net worth ratio in (Rs. 000)
Year Long-term Net worth Ratio
Debt
2013/014 504,625 2,270,801 0.22
2014/015 595,968 2,742,468 0.22
2015/016 943,178 345,6170 0.27
2016/017 500,000 3,619,881 0.14
2017/018 500,000 3,939,205 0.13
(Source: Annual financial report of HBL)
The above mentioned schedule can be shown by following chart:

b) Net worth to total liabilities ratio

 Net worth to total liabilities shows the proportion of net worth to
total liabilities of bank. It is calculated as:

Table:2.4
Net worth to total liabilities ratio in (Rs.000)
Year Net worth Total liabilities Ratio
2013/014 20,270,801 28,813,632 0.08
2014/015 2,742,468 32,168,368 0.09
2015/016 3,456,170 34,344,633 0.10
2016/017 3,619,881 36,926,805 0.10
2017/018 3,939,205 40,421,046 0.10
(Source: Annual financial report of HBL)
The above mentioned schedule can be shown by following chart:

2.2.3 Capital Adequacy Ratio

 Capital fund refers to paid- up capital, general revenue and undistributed
profit. It is also called as shareholder’s capital as well. High as well as low
capital adequacy ratio is unfavorable in term of lowered solvency. It is
calculated as:

Table:2.5
Capital Adequacy ratio in (Rs 000)
Year Capital Fund Total deposit Liabilities Ratio
2013/2014 28,813,632 26,490,852 1.088
2014/015 32,168,368 30,048,418 1.071
2015/016 34,344,633 31,842,789 1.079
2016/017 36,926,805 34,681,345 1.065
2017/018 40,421,046 37,611,202 1.075
(Source: Annual financial report of HBL)

The above mentioned schedule can be shown following by chart:

 2.2.4 Activity/Efficiency/Turnover ratio
This ratio reflects how efficiently the company is managing its resources.
Thus these ratios measure the degree of effectiveness in use of resources or
funds by a firm. Under this ratio following ratio are calculated.

·29 Interest expenses to total expenses ratio

The ratio indicates the expenses related to interest payment out of
total expenditure occurred during the period of time. It is
calculated as:
 Table:2.6
Interest expenses to total expenses ratio in (Rs.000)
Year Interest Expenses Total Expenses Ratio
2013/014 648,842 723,023 0.90
2014/015 767,411 679,452 1.13
2015/016 823,745 658,357 1.25
2016/017 934,778 925,252 1.01
2017/018 1,553,531 1,414,614 1.1

The above mentioned schedule can be shown following by chart:

2.2.5 Profitability Ratio

Maximization of profit is the main objectives of each and every business
concern. It is very necessary to earn maximum profit for the successful
running of a business concern. According to Lord Keynes, profit is the
engine that drives the business enterprises. The profit it also important to
preserve the existence of business as well as strength and expand it.
Following ratios are calculated to measure the profitability of the bank.

a)Return on Assets (ROA)

This ratio shows the return or profit generated out of total assets of firm. It is
calculated as:

Table: 2.7
Return on Assets Ratio in (Rs. 000)
Year NPET Total Assets Ratio
2013/014 457,458 30,579,808 0.015
2014/015 491,823 34,314,868 0.014
2015/016 635,869 36,857,624 0.017
2016/017 752,835 40,046,686 0.019
2017/018 508,798 43,860,251 0.012
(Source:Annual financial report of HBL)
The above mentioned schedule can be shown by following chart:
b)Return on Shareholder’s equity
This ratio can be calculated by dividing net profit after taxes by
shareholder’s equity.

Table: 2.8
Return o Shareholder’s equity
Year NPAT Shareholder’s equity Ratio
2013/014 457,458 1,766,176 0.26
2014/015 491,823 2,146,500 0.23
2015/016 635,869 2,512,992 0.25
2016/017 752,835 3,119,881 0.24
 2017/018 508,798 3,439,205 0.15
(Source: Annual financial report of HBL)

The above mentioned schedule can be show by following chart:

·30 Net interest earned to total assets ratio

The major sources of interest income are loans and advances,
overdrafts and investment in government securities. Similarly.
Sources expenses are borrowing, deosit etc. This ratio is
calculated by dividing interest by total assets.

Table: 2.9
Net interest earned to total assets ratio in (Rs. 000)
Year Interest earned Total Assets Ratio
2013/014 1,626,474 30,579,808 0.053
 2014/015 1,775,583 34,314,868 0.052
2015/016 1,963,647 36,857,624 0.053
2016/017 2,342,198 40,046,686 0.058
2017/018 3,148,605 43,860,251 0.072
(Source: Annual financial report of HBL)

The above mentioned schedule can be shown by following chart:

2.3 SOWT Analysis

Strength(S):
·31 Used modern technology

·32 Large amount of assets

·33 Huge amount of assets

·34 String management teams

 ·35 Centrally located

Weaknesses (W)
·36 Less advertisement

·37 Less investment

Opportunities (O)