Ratio Analysis

Of
Nepal Investment Bank Limited

MOHAMMED
By

AZIZ Bachelor of Business

Studies
Part III

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

D i ag r am 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
D i ag r am 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
 Ratio Analysis of Nepal Investment Bank Ltd 2068-69

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
th
deposited personal valuables for a service charge of one 60 of their
worth. Interest charges on loans ran as high as one third.

In medieval times, the knights Templates, a 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
th
established in the 17 century, notably the Risks bank in Sweden (1656) and the
Bank of England (1694).

1
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.

1.11Significance 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 2067/68 and 2068/69.
 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.
 1.13 Organization of the study
A well managed and orderly arranged scheme of the study is essential to
facilitate the overall study, which is known as organization of the study.
This fieldwork report encompasses three different parts as stated below:
1.13.1 Part One
It is the preliminary section of the report. It consists of acknowledgement
which expresses thanks to different individuals for their pivotal role to prepare this
report in this existing form. It also includes lists of abbreviation used as well as
lists of tables and figures.
1.13.2 Part Two
It contains three chapters. It is the main text of the report. It provides a bird’s
eye view of the report. The first chapter deals with introduction, background of the
fieldwork, statement of the problems, objectives of the fieldwork, literatures
review, methodology of the fieldwork, significance of the study and limitations of
the fieldwork.
The second chapter is the largest section of the report. It involves analysis and
presentation of data by using appropriate techniques. The third chapter comprises
summary, conclusion and recommendation.

1.13.3 Part Three

This part incorporates bibliography and appendices. Bibliography presents an
alphabetical list of books, articles, and other source materials to which references
have been made. Appendices contain the materials used in the report but related
indirectly and not explained in details.
 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 Earning 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.

𝑵� � 𝑷 � � � � � 𝑨� � � � �𝒂𝒙
EPS = 𝑵�.��
�������
��𝒂��

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 2064/2065 and 2066/2067. 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.
𝑵� � 𝑷 � � � � � 𝒂� � � � � 𝒂𝒙 (𝑵𝑷 𝑨� )
ROA = ���𝒂� 𝑨�����

Findings:

The trend of ROA is also fluctuating; it rises in the year 2067/2068. The
highest ROA was 2.20 % in the fiscal year 2067/2068 and lowest was 1.70 % in
the fiscal year 2066/2067. 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 2065/2066 , the PE ratio was 42.34 and further
decreased up to 37.09 in the FY 2066/2067 likewise it continuously
decreases in the year 2067/2068 and 2068/2069. The PE ratio is 10.54

2.1.4 Ratio of Net Profit to Gross Income

In the fiscal year 2066/2067 the ratio of Net Profit to Gross Income is
16.71% but increases up to 20.26 % in the year 2067/2068. In current year
2068/2069 its ratio is 23.99
Findings:

In the fiscal year 2067/2068 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 2065/2066 the ratio of Exchange Gain to Total Income is 8.80 but it
increases up to 9.63 in the year 2066/2067, after 2066/2067 it was decreasing
continuously.

Findings:

In the FY 2066/2067 the ratio was 9.63 which were higher than previous
year and this year 2068/2069 i.e. 8.60

2.1.6 Net Profit to Loan and Advances Ratio

In the FY 2064/2065 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 2068/2069 i.e. 2.66 %

2.1.7 Cash and Bank balance to Current Deposit Ratio

In the FY 2067/2068 the ratio was 84.68 % which is less than previous
year and in FY 2064/2065 the ratio was the lowest during 5 year. Thus, the bank
has less liquidity in FY 2064/2065. Cash and Bank balance include cash in
hand and total bank balance.
Findings:

In the FY 2067/2068 the ratio was 84.68 which is less than previous year
84.78% and the FY 2068/2069 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 2064/2065 the cash reserve ratio is 8.12 % and later become
11.70 % in FY 2065/2066. 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 2065/2066 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 2064/2065, 2065/2066, 2066/2067, 2067/2068
and 2068/2069 resp. In the FY 2066/2067 ratio is 42.40% which is greater than
FY 2065/2066 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 are 22.65%, 21.11%, 19.92
%, 22.53% and 28.60% in the FY 2064/2065, 2065/2066, 2066/2067,
2067/2068 and 2068/2069 resp. The highest ratio for the five year is 28.60 % in
the FY 2068/2069 and the lowest ratio is 19.92% in 2066/2067.

Findings:
In the FY 2067/2068 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
Ratios FY 2067/68 FY 2068/69
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 Deposit 84.68% 136.92%
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 2064/2065 and 2066/2067. 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 2067/68. The highest
ROA was 2.20 % in the fiscal year 2067/2068 and lowest was 1.70 % in the fiscal
year 2066/2067 . 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 2064/2065 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 2068/2069 i.e. 2.66 %

In the FY 2067/2068 the ratio of cash & bank balance to current deposit was
84.68 which is less than previous year 84.78% and the FY 2068/2069 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 2067/2068 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 2064/2065, 2065/2066, 2066/2067, 2067/2068 and
2068/2069 resp. In the FY 2066/2067 ratio is 42.40% which is greater than FY
2065/2066 and this year’s ratio is 42.70 % which is lesser than previous year which
indicates liquidity has increased this year.
In the FY 2067/2068 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 favourable condition. There
has been significant diminution in its net profit from FY 2067/68 to FY 2068/69.
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.
 Chapter -4
APPENDICES

Appendix I
Shareholding pattern of NIBL

S.N Name Percentage Capital in NPR

1.1 “Ka” Licensed Institutions 15% 361,364,600
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 2068-69)

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.)
2064-65 501,398,852 8,013,406 62.57
2065-66 696,731,516 12,039,154 57.87
2066-67 900,619,072 24,090,977 37.42
2067-68 1,265,949,588 24,090,977 52.55
2068-69 1,176,641,031 24,090,977 48.44
Average 51.77
Fig 2: Earning per Share (Source : NIBL Annual Report 2064/2065-2068/2069)
Appendix III
Return on Asset (ROA)
FY NPAT in NPR Total Asset in NPR ROA
2064-65 501,398,852 27,590,844,761 1.82%
2065-66 696,731,516 38,873,306,084 1.79%
2066-67 900,619,072 53,010,803,126 1.70%
2067-68 1,265,949,588 57,305,413,482 2.2%
2068-69 1,176,641,031 58,356,827,501 2.02%
Average 1.91%
Fig 3: Return on Asset (Source: NIBL Annual Report 2064/2065-2068/2069)

Appendix IV
Price Earning Ratio
FY MVPS in NPR EPS PE Ratio
2064-65 1729 62.57 27.63
2065-66 2450 57.87 42.34
2066-67 1388 37.42 37.09
2067-68 705 52.55 13.42
2068-69 515 48.44 10.54
Average 26.20

Fig 4: Price Earning Ratio (Source: NIBL Annual Report 2064/2065-2068/2069)

Trend Analysis of EPS,ROA & PE Ratio

70
60
AMOUNT

50
40 EPS
30 ROA
20 PE Ratio
10
0
FY 2064-65 FY 2065-66 FY 2066-67 FY 2067-68 FY 2068-69
Diagram 2 :Trend Analysis of EPS, ROA & PE Ratio (Source: Appendices II , II & IV)
 Appendix V
Valuation Highlights
Particulars 2064-65 2065-66 2066-67 2067-68 2068-69
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 2064/2065-2068/2069)

300
Fixed Deposit to Total Deposit
250 Ratio
Saving Deposit to Total Deposit
200
Ratio
Cash Reserve Ratio (CRR)
150

100 Cash & Bank balance to

Current Deposit Ratio
50 Net Profit to Loans & Advances
Ratio
0 Exchange Gain to Total Income
FY 2064- FY 2065- FY 2066- FY 2067- FY 2068- Ratio
65 66 67 68 69

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

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www.nibl.com.np