Ratio Analysis OF Nepal Investment Bank Limited Nepal

Exam Roll No: 5120003

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

A Fieldwork Report
Submitted to

Parashar College
Damauli, Tanahun

Tribhuvan University

in partial fulfillment of the requirements for the degree of

BACHELOR OF BUSINESS STUDIES

March , 2013
 Faculty of Management
TRIBHUVAN UNIVERSITY

RECOMMENDATION
This is to certify that the fieldwork assignment report Submitted by

MOHAMMED AZIZ

Entitled

Ratio Analysis
Of
Nepal Investment Bank Limited
has been prepared as approved by this Department.
This fieldwork assignment report is forwarded for examination.

Date: March 24, 2013 Supervisor

…………………
Head of Department
Parashar College
Damauli, Tanahun
 Acknowledgement:

I would like to extend my gratitude to Tribhuvan University for involving this skill
developing practical exercise in BANKING & INSURANCE (MGT 324) which provides us first
hand knowledge about the world of work and also helps us to apply the conceptual knowledge
acquired in classroom to real life.

It is my great pleasure to present this fieldwork report for the partial fulfillment of the
requirements for the Bachelors Degree of Business Studies (BBS).

I would take the pleasure of offering thanks to the staffs of Nepal Investment Bank
limited, Damauli Branch for providing me the required data and information. I am indebted to all
those authors and scholars whose works have directly or indirectly supported me in its
preparation. I sincerely acknowledge to all the teachers and especially to Mr. Mahesh Thapa
(Branch Manager for NIBL) without whom this report would not have been completed. I would
like to express my sincere gratitude to the respected teachers Mr. Amrit Bhandari (Campus
Chief) & Mr. Surendra Shrestha (Fieldwork report supervisor).

I have been able to prepare this report only by receiving significant help in different ways
from my family and friends. I would like to express thanks to all of them for their guidance,
inspiration and invaluable assistance. I would be extremely delighted to appreciate the efforts of
Mr. Kehar Singh Ale ( Image Digital Pvt Ltd.) for computer setting and printing of the report.

MOHAMMED AZIZ
BBS -III
Parashar College
Damauli, Tanahun
 Abbreviations

A/c Account
BBS Bachelors of Business
Studies
BOD Board of Directors
BS Bikram Sambat
EBIT Earning Before Interest and
Tax
eg exempligratia (for example)
etc etcetera (and so on)
FOM Faculty of Management
FY Fiscal Year
HDI Human Development Index
i.e. id est (that is)
Ltd Limited
No Number
P/L Profit and Loss
ROA Return on Assets
NPR Nepalese Rupees
NIBL Nepal Investment Bank Ltd.
TU Tribhuvan University
NRB Nepal Rastra Bank
% Percentage
Fig Figure
Ltd Limited
Pvt Private
Dia. Diagram
 List of
Figures

Figure Page
Fig.1 Shareholding Pattern of NIBL 15
Fig.2 Earning Per Share 15
Fig.3 Return on Asset 16
Fig.4 Price Earning Ratio 16
Fig.5 Valuation Highligts 17

List of Diagrams

Diagram Page
Dia.1 Trend Analysis of EPS, ROA & PE Ratio 16
Dia.2 Bargraph of Valuation Highlights 17
 Table of
Contents
Acknowledgement List of
abbreviations List of
Figures
List of Diagrams

Chapter Page
1. Introduction 1
1.1 Meaning of Bank 1
1.2 History of Banking 1
1.3 Banking in Nepal 2
1.4 Introduction to NIBL 3
1.5 Vision 4
1.6 Mission 4
1.7 Statement of Problem 5
1.8 Objectives of Field Report 5
1.9 Literatures Review 6
1.10 Methodology of Fieldwork 7
1.11 Significance of the Study 8
1.12 Limitation of the Fieldwork 9
1.13 Organization of the study 10

2. Presentation and Analysis of data 11

2.1 Presentation and analysis of data 11
2.1.1 Earning Per Share 11
2.1.2 Return on Asset 12
2.1.3 Price Earning Ratio 12
2.1.4 Ratio of Net Proft to Gross Income 12
2.1.5 Exchange Gain to Total Income Ratio 13
2.1.6 Net Profit to Loans & Advances Ratio 13
2.1.7 Cash & Bank balance to Current Deposit Ratio 13
2.1.8 Cash & Bank balance to Total Deposit Ratio 13
2.1.9 Saving Deposit to Total Deposit Ratio 14
2.1.10 Fixed Deposit to Total Deposit Ratio 14
3. Appendices 15

Bibliography 18
 Table of
Contents

Acknowledgement List of
abbreviations List of
Figures
List of Diagrams

Chapter Page
1. Introduction 01
1.1 Meaning of Bank 01
1.2 History of Banking 01
1.3 Banking in Nepal 02
1.4 Introduction to NIBL 03
1.5 Vision 04
1.6 Mission 04
1.7 Statement of Problem 05
1.8 Objectives of Field Report 05
1.9 Literatures Review 06
1.10 Methodology of Fieldwork 07
1.11 Significance of the Study 08
1.12 Limitation of the Fieldwork 09
1.13 Organization of the study 10

2. Presentation and Analysis of data 11

2.1 Presentation and analysis of data 11
2.1.1 Earning Per Share 11
2.1.2 Return on Asset 12
2.1.3 Price Earning Ratio 12
2.1.4 Ratio of Net Proft to Gross Income 12
2.1.5 Exchange Gain to Total Income Ratio 13
2.1.6 Net Profit to Loans & Advances Ratio 13
2.1.7 Cash & Bank balance to Current Deposit Ratio 13
2.1.8 Cash & Bank balance to Total Deposit Ratio 13
2.1.9 Saving Deposit to Total Deposit Ratio 14
2.1.10 Fixed Deposit to Total Deposit Ratio 14
3. Summary , Conclusion & Recommendations 15
3.1 Summary 15
3.2 Conclusion 16
3.3 Recommendations 16
Appendices 17
Bibliography 20
 List of
Figures
Figure Page

Fig.1 Shareholding Pattern of NIBL 17

Fig.2 Earning Per Share 17

Fig.3 Return on Asset 18

Fig.4 Price Earning Ratio 18

Fig.5 Valuation Highlights 19

List of Diagrams

Diagram Page

Dia.1 Shareholding Pattern of NIBL 17

Dia. 2 Trend Analysis of EPS, ROA & PE Ratio 18

Dia.2 Bargraph of Valuation Highlights 19

 Chapter -1

Introduction
1.1 Meaning of Bank
Finance is the blood of trade, commerce and
industry. Now-a-days banking sector acts as
the backbone of the modern business.
Development of any country mainly
depends upon the banking system.

The term ‘Bank’ is derived from the French

word Banco which means a Bench or
Money exchanging table. In olden days,
European money lenders or money changers
used to display coin of different countries in
big heaps (quantity) on benches or tables for
the purpose lending or exchanging.

A bank is a financial institution which deals

with deposits and advances and other related
services. It receives money from those who
want to save in the form of deposits and
lends money to those who need it.

A bank is a financial intermediary that

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

1.2 History of Banking

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

In medieval times, the knights Templates, a

1
 military and religious
order not only stored
values and granted
loans but also arranged
for the transfer of funds
from one country to
another. The great
banking families of the
Renaissance such as the
Medicis in Florence
(Italy) were involved in
lending money and
financing international
trade. The first modern
banks were established
in the 17th century,
notably the Risks bank
in Sweden (1656) and
the Bank of England
(1694).

2
 1.3 Banking in Nepal
Banks and banking activities have always played a prominent role in the economic prosperity
of the country. The pace of the economic development of the country flourished as banks and
its activities gradually developed. Ever since democracy was restored in 2007 BS the
government as well as citizen felt the necessity of establishing banks in the country.
Likewise, Nepal Rastra Bank (NRB) was established in 1955 AD. It was established as an
apex regulatory body for the banks to be operated in Nepal.

The history of banking has started after the establishment of Nepal Bank Limited (NBL) by
special act in 1973 AD. The bank was established with an authorized capital of NRS 10
million.

NRB worked hard to minimize the use of Indian currency in Nepal and to teach the use of
money instead of Barter exchange. It was overwhelmingly successful by opening branches
outside the valley. It helped a lot in raising awareness of banking. In a decade it has its offices
in 7 places which afterwards turned into branches of commercial banks.

As the monetary transaction got more and more complex, NRB finally suggested the
movement to establish another commercial bank. As a result, Rastriya Banijya Bank (RBB)
came in to existence in 1966 AD.

After the re-establishment of democracy in 2007 BS, the government holds the liberal policy
for the economic prosperity of a nation. As a result, various commercial banks established in
a joint venture with other countries.

S.N Name of Bank Joint Venture With Established

1. Nabil Bank Ltd. Arab Emirates 1984 AD
2. Nepal Grindlays Bank Standard Chartered Bank 1986 AD
3. Nepal Indosuez Bank Bank Indosuez Group 1987 AD
4. Himalayan Bank Ltd. Habib Bank Ltd , Pakistan 1993 AD
5. Nepal SBI Bank State Bank of India 1993 AD
6. Nepal Bangladesh Bank IFIC Bank , Bangladesh 1994 AD
7. Everest Bank Ltd. Punjab National Bank , India 1994 AD

Likewise, there have been 32 commercial banks established so far till this date. Apart from
this many financial institutions and co-operatives societies have also started contributing in
the economy.
1.4 Introduction to the Nepal investment Bank Limited
Nepal Investment Bank Limited (NIBL) previously Nepal Indosuez Bank Ltd, was
established in 1986 as a joint venture between Nepalese and French partners. The French
partners holding 50% of the capital was credit Agricole Indosuez, a subsidiary one of the
largest banking group in the world. The name of the bank has been changed to Nepal
Investment Bank Limited upon the approval of bank’s annual general meeting , Nepal Rastra
Bank and Company Registrar’s office with the following shareholding structure.

 A group of companies holding 50% of the capital.

 Rastriya Banijaya Bank holding 15% of the capital.
 Rastriya Beema Sansthan holding 15% of the capital.
 The remaining 20% being held by general public.

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

NIBL has been very aggressive in innovating and offering new products and services in the
financial market. NIBL started Visa Electron Debit Card for the first time in Nepal after
acquiring Principal Membership of Visa International in 2003. Since then, NIBL has been
pioneering other existing banks and financial institutions in the card business. NIBL has the
largest ATM network in Nepal with the addition of nine more ATMs to the Bank's network.
At present, NIBL has in total, seven Visa Associate Member Banks and 260 ATM outlets
connected to Switch. We have also enabled recharge card options for telecom and Wi-Fi
subscribers of Broadlink Ltd. to carry out top-ups through their ATMs; they are the only
Bank to have enabled this feature. It has also enabled ATM-based money transfers for
cardholders having multiple accounts with NIBL. Currently, it is implementing their Switch
based electronic payment gateway which will enable card to card money transfer to any client
within their Switch network. They are also updating their systems to be EMV compliant and
to issue Smart Cards. They are currently undergoing PCI-DSS certification as well. They now
have 35 Member Banks and
58 ATMs in their Proprietary Card Network called National Payment Network which began
in 2009. They now have over 400,000 cardholders in their Bank and have issued 300,000 on
behalf of their National Network.

NIBL has also launched NIBL Mobile (SMS) banking which incorporates Fund Transfer, Bill
Payments, and Nepal Telecom Prepaid PIN Purchase and inquiry services as major features.
We have also made available NIBL Mobile (SMS) Banking application for Android Platform
Smart Phones (2.1 and above) and Java Enabled Phones (touch and non-touch). NIBL has
also recently launched Domestic e-Banking Remittance which avails customers the facility to
instantly transfer money to their relatives/friends online.

Financial highlights of NIBL:

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

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

1.6 Mission
They aspire to be the leading Nepali bank, delivering world class services through a blend of
state-of-the-art technology and visionary management in partnership with competent and
committed staff, to achieve sound financial health with sustainable value addition to all their
stakeholders. They are committed to fulfilling this mission while ensuring the highest levels
of ethical standards, professional integrity, corporate governance and regulatory compliance.
1.7 Statements of Problems
The organized summary of detailed information about financial position and performance of
a concern is known as financial statement. It is prepared at the end of accounting year for
periodic review of the activities of organization and results achieved by it. It includes Profit
and Loss account or income statement and Balance Sheet. The former shows the results of
operation for a particular period while the latter indicates the financial position of the concern
at the end of that period. Hence, financial statements are the condensed form of accounts.

The financial statements of an organization are analyzed to dig up meaningful information

about its survival, stability, profitability, solvency and growth prospect. They can be analyzed
by using a number of techniques such as comparative statements, common size statements,
index analysis, ratio analysis etc. Ratio analysis is the most popularly and widely used
technique of financial statements analysis.

A ratio is defined as the indicated quotient of two mathematical expressions. Accordingly,

accounting ratios mean a relationship between two numerical variables obtained from
financial statements. They are used as an important tool for analyzing the financial
performance of the organization over the year. Since an absolute accounting figure on its own
does not provide much meaning by itself, it has to be analyzed in relation to other figures so
that significant information about the organization’s financial performance can be derived.
Ratio Analysis is a technique of analysis and interpretation of financial statements through
mathematical expression. It determines and presents the quantitative relationship between to
accounting figures. The accounting ratios can be expressed in proportion, percentage, rate,
times or coefficient.

1.8 Objectives of Field Report

Since, the data given in financial statements are meaningless and unable to communicate
anything from analytical viewpoint unless the heaps of figures contained in them are properly
analyzed. The main purpose of the study is to analyze the absolute figures contained in Profit
& Loss A/C and Balance Sheet of NIBL Ltd. to obtain a better understanding of the position
of its undertaking. The following are the important objectives of the study:
  To evaluate the liquidity and solvency position of the concern.
 To judge the organization’s efficiency in terms of its operation and management.
 To ascertain earning capacity of the concern as well as prediction relating to its
future earnings.
 To determine the liquidity ratio, profitability ratio and leverage ratio of the
organization.

1.9 Literatures Review

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

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

A. Liquidity Ratio:
It reflects the firm’s ability to pay its short terms debts or claims within a period less than
one year. They assess the capacity of the concern to repay its short term liabilities. The
position of the concern can be measured mainly by using two liquidity ratios such as:
 I. Current Ratio/ Short term Solvency Ratio/ Working Capital
II. Quick Ratio/ Acid test Ratio/ Liquid Ratio

B. Leverage Ratio:
It is long term solvency ratio or capital structure ratio. It weighs up the ability of a firm to
meet the payments associated with its long term debts. It measures the effectiveness of the
long term financial position. It stands for relationship between internal and external sources
of funds of a firm. The major types of leverage ratios are:

I. Debt Equity Ratio

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

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

I. Net Profit Ratio

II. Return on Assets
III. Return on Shareholder’s Equity
IV. Interest on Total Assets

1.10 Methodology of fieldwork

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

A. Primary Sources
Primary data refers to data collected for the first time for a specific purpose. It can be
collected through interviews, observations or experimentation. The data needed for this
fieldwork report was collected from
face- to- face interview with the manager of the organization Mr. Hemanta Karki and official
Mr. Ram Bahadur Poudel. The respondents were asked questions through questionnaire.
B. Secondary Sources

Secondary data refers to data already available. It was collected earlier for another purpose
and exists in published form. The necessary data is also gathered from the organization’s
financial statements Income statement, Balance Sheet and the annual report submitted in
Annual General Meeting (AGM). It is also collected from published magazines, books,
articles and literature about the organization.

The collected data and information are edited, classified, tabulated and presented in different
types of charts to serve the needs of the study.

1.11 Significance of the study:

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

 Management: Management can draw significant conclusion and determine the new
policies and procedures.
 Owners: It lets them be acquainted with profitability and financial position of the
organization. Reliable information assures them safety of their investment.
 Creditor: It helps them to know whether the firm will be financially able to pay their
debt or not, in time.
 Bankers/ Lenders: The report can help them to determine whether their principal and
interest will be paid when due.
 Employees: It is purposive for them to ascertain how much
emoluments and bonus are possible from the profits of the organization.
 Researcher students: The report supplies secondary data for their
research efforts.

1.12 Limitation of the fieldwork

The fieldwork report may suffer from the following pitfalls:
 This fieldwork report is prepared in partial fulfillment of the requirement for the
degree of Bachelor of Business Studies of Tribhuvan University. It is just a case
study of the NIBL Ltd.
 The fieldwork report is based only on the financial statements of fiscal year 2074/75
and 2075/76.
 It considers only liquidity ratio, leverage ratio and profitability ratio of the concern
based on financial statements.
 The relevant information and data obtained from the concern for the study are
presumed to be accurate.

 The study depends heavily on secondary data and is not free from its Limitations.
 It may suffer from the inherent weaknesses of the financial
statements of the organization.
 The deadline for the submission of report restricted the depth study.
 Chapter -2

Presentation & Analysis of Data

2.1 Presentation & Analysis of Data

Presentation and analysis of data is the chief task of this fieldwork. In this chapter, the data
and information gathered during the course of fieldwork have been organized in tables, charts
and diagrams. The data is analyzed by using statistical tools. The analyzed data has been
interpreted candidly for clear understanding of findings. It is attempted to make the
presentation consistent with the objectives of fieldwork. Every presentation of data follows
its analysis so that future prediction can be initiated. For the purpose of the analysis simple
method of financial tools, ratio analysis is used. Ratio Analysis is widely used as a tool of
financial analysis. It is defined as a systematic use of ratios to interpret the financial
statement so that strength and weakness of firms as well as its historical performance and
current financial condition can be defined. The main kinds of financial tools to measure the
performance are:

2.1.1 Earnings per Share (EPS)

It simply shows the profitability of the firm of a per share basis. It is calculated from the point
of view of the ordinary shareholder. It is calculated by dividing the profit after tax by the
total number of ordinary share outstanding.

EPS = PROFITAFTERTAX
Total Number of ordinary share

Findings:
The EPS trend is fluctuating, but it is clear that the EPS of NIBL is substantially high than
other competitors. The average EPS of NIBL is Rs 51.77. The highest and lowest EPS of
NIBL are Rs 62.57 and Rs 37.42 resp. in the FY 2071/72 and 2073/74. Therefore, from above
analysis we can say that the earning power of NIBL is in good condition.
2.1.2 Return on Asset (ROA):
It measures the firm’s return on investment of financial resources. It also helps us to provide
the information of proper utilization of the resources. It is the relation between profit and
total assets. Lower ROA means lower profit and higher ROA means higher profit. In the
present study, this ratio is examined to measure the profitability of all financial resources in
the bank assets.

ROA NET INCOME

TOTAL ASSETS

Findings:

The trend of ROA is also fluctuating; it rises in the year 2074/75. The highest ROA was 2.20
% in the fiscal year 2074/75 and lowest was 1.70 % in the fiscal year 2073/74. The above
table shows that the ROA is satisfactory. However the management of NIBL must keep their
eyes towards the situation and mobilize their working assets more to earn more profit. The
average ROA is 1.91 %.

2.1.3 Price Earnings Ratio (PE Ratio):

In the fiscal year 2072/73, the PE ratio was 42.34 and further decreased up to 37.09 in the FY
2073/74 likewise it continuously decreases in the year 2074/75 and 2075/76. The PE ratio is
10.54

2.1.4 Ratio of Net Profit to Gross Income

In the fiscal year 2073/74 the ratio of Net Profit to Gross Income is 16.71% but increases up
to 20.26 % in the year 2074/75. In current year 2075/76 its ratio is 23.99.
Findings:
In the fiscal year 2074/75 the ratio of Net profit to Gross Income is 20.26 which are greater than last
year and this year ratio was 23.99 which is more than last year.

2.1.5 Exchange Gain to Total Income Ratio

In the FY 2072/73 the ratio of Exchange Gain to Total Income is 8.80 but it increases up to
9.63 in the year 2073/74, after 2073/74 it was decreasing continuously.

Findings:

In the FY 2073/74 the ratio was 9.63 which were higher than previous year and this year
2075/76 i.e. 8.60.
2.1.6 Net Profit to Loan and Advances Ratio

In the FY 2071/72 the ratio of net profit to loan and advances is 2.10 % but it
decreases by 0.13 and became 1.975 in the fiscal year and that it
continuously increases up to 2075/76 i.e. 2.66 %.

2.1.7 Cash and Bank balance to Current Deposit Ratio

In the FY 2074/75 the ratio was 84.68 % which is less than previous year
and in FY 2071/72 the ratio was the lowest during 5 year. Thus, the bank has
less liquidity in FY 2071/72. Cash and Bank balance include cash in hand
and total bank balance.

Findings:

In the FY 2074/75 the ratio was 84.68 which is less than previous year
84.78% and the FY 2075/76 it is 136.92 which is higher than last year . The
average ratio is 88.83%.

2.1.8 Cash and Bank balance to Total Deposit Ratio (CRR) Cash
Reserve Ratio
In the FY 2071/72 the cash reserve ratio is 8.12 % and later become 11.70 % in FY
2072/73. The trend line is fluctuating it goes up and down. However cash reserve
ratio should be Minimum. In current year CRR is 12.33%.
Findings:
In the FY 2072/73 the cash reserve ratio is 11.70% that were higher than
previous year i.e. 12.33 %. The average cash reserve ratio is 10.63 %.

2.1.9 Saving Deposit to Total Deposit Ratio

Saving deposit is sorts of short term liquidity, which can be withdrawn by

the depositors. Lower the ratio of saving deposit to total deposit higher the
liquidity ratio.

Findings:

The ratio of Saving Deposit to Total Deposit are 30.83% , 30.72 %, 42.40 %, 47.03%
and 42.70 % in FY 2071/72, 2072/73, 2073/74, 2074/75 and 2075/76 resp. In the
FY 2073/74 ratio is 42.40% which is greater than FY 2072/73 and this year’s ratio is
42.70 % which is lesser than previous year which indicates liquidity has increased
this year.

2.1.10 Fixed Deposit to Total Deposit Ratio

The ratio of Fixed Deposit to Total Deposit is 22.65%, 21.11%, 19.92
%,22.53%and 28.60% in the FY 2071/72, 2072/73, 2073/74,
2074/75 and 2075/76 resp. The highest ratio for the five year is 28.60 % in the FY
2075/76 and the lowest ratio is 19.92% in 2073/74.
 Findings:
In the FY 2074/75 the ratio is 22.53 which is greater than previous year. This
year ratio 28.60% which is greater than previous year, which means
liquidity, is higher than previous year.
Chapter -3
Summary, Conclusion & Recommendations
3.1 Summary
This fieldwork is prepared under the format prescribed by Faculty of
Management (FOM) of TU in a partial fulfillment of the requirements for the
degree of BBS. This study analyzes the financial position of the Nepal
Investment Bank Ltd. (NIBL) in terms of accounting ratios. A brief summary of
the result of fieldwork so carried out is presented as follows:

Table 3.1
Ra FY 2074/75 FY 2075/76
tio
s
1. EPS (Rs) 52.55 48.44
2. ROA 2.2% 2.02%
3. Price Earning Ratio 13.42% 10.54%
4. Net Profit to Loans & Advances Ratio 2.49% 2.66%
5. Cash & Bank balance to Current 84.68% 136.9
Deposit 2%
6. Cash Reserve Ratio 7.68% 12.33%
7. Saving Deposit to Total Deposit Ratio 47.03% 42.70%
8. Fixed Deposit to Total Deposit Ratio 22.53 % 28.60%

In table 3.1 & Appendices, the EPS trend is fluctuating, but it is clear that the EPs
of EPS of NIBL is substantially high than other competitors. The average EPS of
NIBL is Rs 51.77. The highest and lowest EPS of NIBL are Rs 62.57 and Rs
37.42 resp. in the FY 2071/72 and 2073/74. Therefore, from above analysis we
can say that the earning power of NIBL is in good condition.
The trend of ROA is also fluctuating; it rises in the year 2074/75. The highest
ROA was 2.20 % in the fiscal year 2074/75 and lowest was 1.70 % in the fiscal
year 2073/74. The above table shows that the ROA is satisfactory. However of
NIBL must keep their eyes towards the situation and mobilize their working assets
more to earn more profit. The average ROA is 1.91 %. In the FY 2071/72 the ratio
of net profit to loan and advances is 2.4 % but it decreases by 0.13 and became
1.975 in the fiscal year and that it continuously increases up to 2075/76 i.e. 2.66
% In the FY 2074/75 the ratio of cash & bank balance to current deposit was
84.68 which is less than previous year 84.78% and the FY 2075/76 it is 136.92
which is higher than last year. The average ratio is 88.83%. Thus, a bank has
highest liquidity in last five years.
In the FY 2074/75 the cash reserve ratio is 7.68 % that were lower than current
year i.e. 12.33 %. The average cash reserve ratio is 10.63 %. The ratio of Saving
Deposit to Total Deposit are 30.83% , 30.72 %, 42.40 %, 47.03% and 42.70 % in
FY 2071/72, 2072/73, 2073/74, 2074/75 and 2075/76 resp. In the FY 2073/74
ratio is 42.40% which is greater than FY 2072/73 and this year’s ratio is 42.70 %
which is lesser than previous year which indicates liquidity has increased this
year. In the FY 2074/75 the ratio is 22.53 which is greater than previous year.
This year ratio 28.60% which is greater than previous year , which means
liquidity is higher than previous year.

3.2 Conclusion
Ever since the establishment of NIBL is playing a pivotal role to foster in the
economy of Nepal. Strong financial position of the organization is a must to
survive, grow and succeed in this world passing through tumultuous changes. The
crux of this fieldwork report is to analyze the financial status of NIBL with the
help of Ratio Analysis. For this purpose the liquidity ratio, leverage ratio and
profitability ratio were ascertained. The liquidity ratio of the concern shows
calculation of leverage ratio portrays that the financial status of the enterprise is
in somewhat good condition. The profitability ratio of the organization doesn’t
depict a favorable condition. There has been significant diminution in its net
profit from FY 2074/75 to FY 2075/76. Summing up, the bank still needs to
make hard efforts to achieve better outcome.

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

Appendix I
Shareholding pattern of NIBL

S.N Name Percentage Capital in NPR

1.1 “Ka” Licensed 15% 361,364,600
Institutions
1.2 Insurance Company 15% 361,364,600
1.3 Organized Institutions 50% 1,204,549,100
1.4 General Public 20% 481,819,400
TOTAL 100% 2,409,097,700
Fig:1 Shareholding pattern of NIBL (Source : NIBL Annual Report 2075-76)

Shareholding pattern of NIBL

"Ka" Licensed
Institutions Insurance
Company Organized
Institutions General
Public

Diagram 1 : Shareholding Pattern of NIBL Source : Appendix

I

Appendix II
Earnings per share

FY NPAT in NPR No. of Common EPS in NPR

Share (in No.)
2071-72 501,398,852 8,013,406 62.57
2072-73 696,731,516 12,039,154 57.87
2073-74 900,619,072 24,090,977 37.42
2074-75 1,265,949,588 24,090,977 52.55
2075-76 1,176,641,031 24,090,977 48.44
Average 51.77
Fig 2: Earning per Share (Source : NIBL Annual Report 2071/72-2075/76)
 Appendix III
Return on Asset (ROA)

FY NPAT in NPR Total Asset in NPR ROA

2071-72 501,398,852 27,590,844,761 1.82%
2072-73 696,731,516 38,873,306,084 1.79%
2073-74 900,619,072 53,010,803,126 1.70%
2074-75 1,265,949,588 57,305,413,482 2.2%
2075-76 1,176,641,031 58,356,827,501 2.02%
Average 1.91%

Fig 3: Return on Asset (Source: NIBL Annual Report 2071/72-2075/76)

Appendix IV
Price Earning Ratio

FY MVPS in NPR EPS PE Ratio

2071-72 1729 62.57 27.63
2072-73 2450 57.87 42.34
2073-74 1388 37.42 37.09
2074-75 705 52.55 13.42
2075-76 515 48.44 10.54
Average 26.20

Fig 4: Price Earning Ratio (Source: NIBL Annual Report 2071/72-2075/76)

Trend Analysis of EPS,ROA & PE Ratio

70
60
AMOUNT

50
40 EPS
30 ROA
20 PE Ratio
10
0
FY 2071-72 FY 2072-73 FY 2073-74 FY 2074-75 FY 2075-76
Diagram 2 :Trend Analysis of EPS, ROA & PE Ratio (Source: Appendices II , II & IV)
 Appendix V
Valuation Highlights

Particulars 2071-72 2072-73 2073-74 2074-75 2075-76

Ratio of Net profit to Gross Income 11.36% 14.23% 16.71% 20.26% 23.99%
Exchange Gain to Total Income Ratio 7.5 % 8.8 % 9.63% 8.2% 8.6%
Net Profit to Loans & Advances Ratio 2.10% 1.97% 2.25% 2.49?% 2.66%
Cash & Bank balance to Current Deposit Ratio 43.14% 94.63% 84.78% 84.68% 136.92%
Cash Reserve Ratio (CRR) 8.12% 11.70% 13.32% 7.68% 12.33%
Saving Deposit to Total Deposit Ratio 30.83% 30.72% 42.40% 47.03% 42.70%
Fixed Deposit to Total Deposit Ratio 22.65% 21.11% 19.92% 22.53% 28.60%
Fig 5 : Valuation Highlights (Source: NIBL Annual Report 2071/72-2075/76)

300

Fixed Deposit to Total

250 Deposit Ratio

200 Saving Deposit to Total Deposit

Ratio
150 Cash Reserve Ratio (CRR)

100 Cash & Bank

balance to Current
50 Deposit Ratio

0 Net Profit to Loans &

Advances Ratio

FY Exchange Gain to Total

FY FY FY FY Income Ratio
2064- 2065- 2066- 2067- 2068-
65 66 67 68 69

Diagram 3: Bargraph of Valauation Highlights (Source : Appendix V)

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www.nibl.com.np