FINANCIAL PERFORMANCE ANALYSIS

OF
STANDARD CHARTERED BANK NEPAL LTD

A Project Work Report

By

Bikesh Yadav
T.U. Registered Number: 7-2-1079-4-
2019
Takshsahila Academy

Submitted To:
The Faculty of Management
Tribhuvan University

Kathmandu

In partial fulfillment of the Requirement for the Degree

of BACHELOR OF BUSINESS STUDIES (BBS)

Takshashila Academy
Kathmandu, Nepal

April, 2024
 DECLARATION

I hereby declare that the project work entitled “FINANCIAL PERFORMANCE ANALYSIS OF
STANDARD CHARTERED BANK NEPAL LTD” submitted to Faculty of Management,
Tribhuvan University, is an original piece of work under the supervision of Mrs. Dipa
Adhikari, faculty member, Takshashila Academy, Samakushi and is submitted in the partial
fulfillment of the requirements for the degree of Bachelor of Business Studies (BBS). This
Project work has not been submitted to any other university or institution for the award of any
degree or diploma.

…………………..
Bikesh Yadav
April, 2024
 SUPERVISOR’S RECOMMENDATION

The project report entitled “FINANCIAL PERFORMANCE ANALYSIS OF STANDARD

CHARTERED BANK NEPAL LTD” submitted by Bikesh Yadav of Takshashila Academy,
Kathmandu 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
requirements for the award of the degree of Bachelor of Business Studies (BBS). I therefore
recommend the project work report for the evaluation.

………………
Dipa Adhikari
(Supervisor)
April,2024
 ENDORSEMENT

We hereby endorse the project work entitled “FINANCIAL PERFORMANCE ANALYSIS

OF STANDARD CHARTERED BANK NEPAL LTD” submitted by Bikesh Yadav of
Takshashila Academy, Kathmandu, in partial fulfillment of the requirements for award of
the Bachelor of Business Studies (BBS) for external evaluation.

Signature: Signature:
Name: Dipa Adhikari Netra Neupane
Management Research Committee Campus Chief
Date: Date:
 ACKNOWLEDGEMENTS

This project work report entitled “FINANCIAL PERFORMANCE ANALYSIS OF

STANDARD CHARTERED BANK NEPAL LTD” has been prepared in partial fulfillment for
the degree of Bachelor of Business Studies (BBS) under the course designed by the Faculty of
Management,
T.U. This study is based on the prescribed research format involving the use of financial ratios in
the banking sector.
At the time of preparing this study, I consulted with various personalities. So, I would like to
extend my sincere thanks to all whose works and ideas helped me in conducting the study.
Sincerely, I would like to pay my sincere gratitude to my project work report supervisor Mr.
………………… of Takshashila Academy who guided me through research work with
supplying valuable suggestions, supports and supervision.
Finally, I would like to offer my profound gratitude to my family members, my friends,
colleagues, and well-wishers for their encouragement and support during the entire period of my
study.

Bikesh Yadav

Date:
 TABLE OF CONTENTS

DECLARATION....................................................................................................................................ii

SUPERVISOR’S RECOMMENDATION....................................................................... iii

ENDORSEMENT.......................................................................................................................... iv

ACKNOWLEDGEMENTS............................................................................................ v
TABLE OF CONTENT..............................................................................................................VI
LIST OF TABLES.......................................................................................................................viii

LIST OF FIGURES........................................................................................................................ix

ABBREVIATIONS....................................................................................................... x

CHAPTER ONE:INTRODUCTION.....................................................................................1-14

Background...................................................................................................................................1-2
Profile of Standard Chartered Bank….........................................................................................3-5
Statement of Problem..................................................................................................................5-6
Objectives......................................................................................................................................6
Rationale.........................................................................................................................................6
Review.........................................................................................................................................6-9
Research Methods................................................................................................................... 10-14
Limitations....................................................................................................................................14

CHAPTER TWO:RESULTS AND ANALYSIS........................................................................ 15-30

Results.......................................................................................................................................15-28
Major Findings of the Study...................................................................................................29-30

CHAPTER THREE: SUMMARY AND CONCLUSION.................................................31-33

Summary…...................................................................................................................................31
Conclusion…............................................................................................................................31-33

BIBLIOGRAPHY.......................................................................................................................34

APPENDICES.............................................................................................................................36
 LIST OF TABLES

Table 1 Cash and Bank Balance to Current & Saving Deposit Ratio...........................................16
Table 2 Fixed Deposit to Total Deposit Ratio...............................................................................17
Table 3 Return on Asset.................................................................................................................18
Table 4 Return on Net Worth........................................................................................................19
Table 5 Return on Total Deposit...................................................................................................21
Table 6 Loan and Advances to Total Deposit Ratio......................................................................22
Table 7 Investment to Total Deposit Ratio....................................................................................23
Table 8 Capital Adequacy Ratio....................................................................................................25
Table 9 Earnings Per Share (EPS).................................................................................................27
Table 10 Price-Earnings Ratio (P/E Ratio)....................................................................................28
 LIST OF FIGURES

Figure 1: Cash and Bank Balance to Current & Saving Deposit Ratio.........................................17
Figure 2: Fixed Deposit to Total Deposit......................................................................................18
Figure 3: Return on Assets (ROA)................................................................................................19
Figure 4: Return on Net worth (RONW).......................................................................................20
Figure 5: Return on Total Deposit (ROTD)..................................................................................22
Figure 6: Loans and Advances to Total Deposit...........................................................................23
Figure 7: Investment to Total Deposit...........................................................................................24
Figure 8: Earnings per Share (EPS)...............................................................................................27
Figure 9: PE Ratio (Price to Earnings Ratio)................................................................................28
 ABBREVIATIONS

ICRA Investment Information and Credit Rating Agency

SCBNL Standard Chartered Bank Nepal Limited

i.e. That is

Rs. Rupees

EPS Earnings Per Share

MPS Market Price Per Share

ROA Return on Assets

RONW Return on Net Worth

ROE Return on Equity

CAR Capital Adequacy Ratio

RWE Risk Weighted Exposure

DEA Data Employment Analysis

 CHAPTER ONE
INTRODUCTION
1.1 Background

The financial stability of a firm is associated with its ability to generate profit, increase the value
of invested capital and at the same time repay its short- and long-term liabilities.

Assessment of financial performance is primarily based on various methods of financial analysis.

Financial analysis is a structural and logical way to present and analyze overall financial
information of a financial institution.

Performance evaluation is the important approach for enterprises to give incentive and restraint
to their operators and it is an important channel for enterprise stakeholders to get performance
information.

The performance evaluation of a commercial bank is usually related to how well the bank can
use its assets, shareholders’ equities and liabilities, revenues and manage expenses.
In the practice of financial analysis, financial ratios are mainly used for their simplicity and
additional information value. Financial ratios are the most popular and most widely used
methods of financial analysis also because they can be used as input data of more complex
mathematical models.

Van Horne & WachowiczJr (2005) stated that,” To evaluate a firm’s financial condition and
performance, the financial analyst needs to perform “check-ups” on various aspects of a firm’s
financial health. A tool frequently used during these check-ups is a financial ratio, or index,
which relates two pieces of financial data by dividing one quantity by the other”.
One can employ financial ratios to determine a firm’s liquidity, profitability, solvency, and
adequacy used financial ratios to show the financial position and performance analysis of Bank.
To assess the results and to predict the future financial development of a firm it is necessary to
connect data from financial analysis and other information that the firm itself presents mainly in
its annual report. Annual reports also present the company’s managerial priorities. To calculate
this, quantitative data from bank’s financial statement and other sources is looked for.

(Pandey, 2004) James pointed out that financial ratios are used by bankers, creditors,
shareholders and accountants to evaluate data presented to an entity financial statement.
Depending on the results of the evaluations, bankers and creditors may choose to extend or
retract financing and potential shareholders may adjust the level of commitment in a company.
The evaluation of a firm’s performance usually employs the financial ratio method because it
provides a simple description about the firm’s financial performance in comparison with
earlier periods and helps to improve its performance of management (Lin et al., 2005).

With this increase of competition in the banking industry, every bank is trying to provide their
customers with better services as much as possible to ensure maximum satisfaction
(Uppal,2010). Evaluation of a bank’s performance from time to time helps them to know how
well they are satisfying their customers and becoming successful.

If efficiency is gained in the banking sector, it will make the country domestically and
internationally more competitive and capable of generating more income and employment
opportunities. A proper evaluation of the performance of selected banks requires a range of
financial, operational and economic indicators to be applied (Chowdhury,2002).

Foreign and national experts have undertaken numerous studies to assess the performance of the
Nepalese banking sector, focusing on aspects like financial inclusion, efficiency, profitability,
risk management, regulatory compliance, and its overall contribution to economic growth. All
these studies provide a great insight to evaluate bank financial performance by using ratio, trend,
correlation; the easiest way to evaluate the performance of a firm is to compare its present ratio
with the past ratio. It gives an indicator of the direction of change and reflects whether the firm’s
financial performance has improved, deteriorated or remained constant overtim
 1.2 Profile of Standard Chartered Bank Nepal

Standard Chartered Bank Nepal Limited has been in operation in Nepal since 1987 when it was initially
registered as a joint-venture operation. Today, the Bank is an integral part of Standard Chartered Group having
an ownership of 70.21% in the company with 29.79% shares owned by the Nepalese public. The Bank enjoys
the status of the only international bank currently operating in Nepal. It is also the only Bank in Nepal
accredited with ICRANP-IR AAA rating by ICRA Nepal as the safest bank regarding timely servicing of
financial obligations.
Globally, we are a leading international banking group with a 160-year history in some of the world’s most
dynamic markets. Our heritage and values are expressed in our brand promise, here for good. Our operations
reflect our Purpose, which is to drive commerce and prosperity through our unique diversity. With 85,000
employees, we are present in 59 markets and are listed on the London and Hong Kong Stock Exchanges. There
are 124 nationalities, and 100 ethnicities present in our workforce and 174 languages / dialects spoken by our
colleagues across the Bank.
With 14 points of representation across the country and more than 504 local staff, Standard Chartered Bank
Nepal Limited is serving its clients and customers through a strategic domestic network. In addition, the global
network of Standard Chartered Group enables the Bank to provide truly international banking services in Nepal.
Standard Chartered Bank Nepal Limited offers a full range of banking products and services to a wide range of
clients and customers including individuals, mid-market local corporates, multinationals, large public-sector
companies, government corporations as well as the development organizations segment comprising of aid
agencies, multilateral entities, non-government organizations and international non-government organizations.
The Bank has been the pioneer in introducing client-focused products and services and aspires to continue its
leadership. It is the first Bank in Nepal to implement the Anti- Money Laundering policy and to apply the
‘Know Your Customer’ procedure on all the customer accounts.
In 2018, the Bank launched new Valued Behavior’s , to help us become more ‘Human’ and bring our Purpose
to life. Since then, we have applied them to everything we do – how we work, how we lead and how we make
decisions. These three valued behaviours are a shared understanding of how we relate to one another, our
clients and our communities.
The Bank believes in delivering shareholder value in a social, ethical, and environmentally responsible manner.
Standard Chartered throughout its long history has played an active role in supporting those communities in
which its customers and colleagues live.
“Futuremakers by Standard Chartered” is our global sustainability initiative to tackle inequality by promoting
greater economic inclusion in our markets. Futuremakers supports disadvantaged young people, especially girls
and people with visual impairments, to learn new skills and improve their chances of getting a job or starting
their own business. Globally we set out to fundraise and donate USD50 million for Futuremakers between 2019
and 2023 to empower the next generation to learn, earn and grow. The Bank is also actively engaged with the
local communities in raising awareness around Financial Literacy, Environment, Health and Education
including conducting rehabilitation activities for communities affected by the COVID 19 pandemic.
Over the last six years, we’ve demonstrated that we can be a profitable, purpose-led company that is Here for
good. We’ve laid a strong foundation (Chapter 1) and returned to growth (Chapter 2). We believe our unique
history, core capabilities, diverse footprint and international reputation gives Standard Chartered the potential to
be a leading disruptor, innovator, and champion of change. The world is facing unprecedented challenges,
which is why there has never been a more important time for the Bank to lean into this moment and accelerate
change and transformation. To this end, we kicked off the next phase of our transformation journey (Chapter 3)
in 2021, taking a stand for climate change, wider inclusion and greater globalization, by partnering with our
regulators, clients and the industry. By accelerating our ongoing transformation to deliver our Stands, we are
taking the lead in driving meaningful change and getting future-ready.

1.2.1 Board of Directors details of Standard Chartered Bank Nepal:

Zarin Daruwala - Chairperson

Rino Santodiono Dono Seputro - Director

Sidhhant Raj Pandey - Director

Mr. Bharat Kunwar – Director

Mr. Anirvan Ghosh Dastidar – Director and CEO

1.2.2 Capital Structure

Share Capital and

Ownership As on 31

Ashad 2077

Particulars Amount (Rs)

Authorized Capital
(100,000,000 Ordinary shares of Rs. 100 each) 100,000,000,000
Issued capital
(94,294,539 Ordinary shares of Rs. 100 each) 9,429,453,895
Subscribed and paid-up capital
(80,114,306 Ordinary shares of Rs. 100 each) 9,429,453,895
Total 9,429,453,895
 Particulars Amount (%)

Domestic ownership 29.79

Nepal Government
"A" class licensed institution
Other licensed institutions
Other Institutions 1.58
Public 28.21
Other
Foreign ownership 70.21
Total 100

1.3 Statement of Problem

Financial statement analysis can be an especially useful tool for understanding a firm’s
performance and conditions. However, there are certain problems and issues met in such
analysis which call for care, circumspection and judgement.
In Nepal, the profitability rate, operating expenses and dividend distribution rate among the
shareholders have been found different in the financial performance of the bank in different
periods of time. The problem of the study will ultimately find out the reasons for difference in
financial performance. A comparative analysis of the financial performance of the bank over
different time periods would be highly beneficial for pointing out its strengths and weaknesses.
Although commercial banks are considered efficient, how far are they efficient? This question
does arise in the banking sector. At present we have twenty-two commercial banks. Despite
rapid growth, some indicators show performance is not much encouraging towards the

service coverage. In such a situation, this study tries to analyze the present performance of the
bank, which would give the answers to following queries:

a) What is the comparative liquidity, profitability and activity ratio of the bank over
 different time periods?

b) Is the trend of different ratios of the bank satisfactory over different time periods?

1.4 Objectives
PRIMARY OBJECTIVE:

To analyze the financial performance with reference to Standard Chartered Bank Nepal ltd.
To evaluate the financial position in terms of profitability, activity, and earnings ratios.

1.5 Rationale
Report writing is very significant to students as it helps to broaden their mind by studying
directly without another proper guide. The case of the study is related with the financial
performance of Standard Chartered bank Nepal ltd. The analysis will be helpful to know the
financial strength of the bank. It is hoped that the study will help to improve the performance of
the bank in future. Lastly, it becomes the most suitable literature for future study.

1.6 Review
1.6.1 Conceptual Review
Ahuja (1998), “Financial Performance analysis is a study of relationship among the various
financial factor in business as disclosed by a single set of statement and a study of the trend of
these fact as shown in a series of statements. By establishing a strategic relationship between the
item of a balance sheet and income statements and other operative data, the financial analysis
unveils the meaning and signification of such items.”
Pandey (1997) has defined as “The finance statement provides a summarized view of the
financial operation of the firm. Therefore, something can be learnt about a firm and careful
examination of the financial statements as invaluable documents or performance reports. Thus,
the analysis of financial statement is an important aid to financial analysis or ratio analysis which
is a main tool of financial statement analysis.”

According to Metcalf and Tatar (1996), “Financial Performance analysis is a process of

evaluating the relationship between components parts of a financial statement to obtain a better
understanding of a firm’s position and performance.”

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

In the word of Horne (1994) “Financial ratio can be derived from the balance sheet and the
income statement. They must be analyzed on a comparative basis. Ratio may also be judged in
comparison with those of similar firms in the same line of business and when appropriate, with
an industry average and we can look to future progress in this regard.”

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

profitability, liquidity position, earning capacity, efficiency in operation, sources and use of
capital, financial achievement and status of the companies. This information will help to
determine the extent of efficiency and effectiveness of the company in respect of deploying
financial resources in the profitable manner.

Brigham and Houston (2004) views that financial profitability lies in a firm’s ability to generate
revenues in excess of its costs: for either long or short term. In the long run, a firm should be
able to maintain the value of invested capital and able to yield a profit, which exceed the
opportunity cost of cost of capital meaning that the yield generated by the firm should exceed the
opportunity cost of capital.
Elumilade et al. (2006) described investment decision as one of the most significant decision
Areas that affect the future profitability either because it might result in an increase in revenue or
because it can cause an increase in efficiency and reduction in costs.

A tool used by individuals to conduct a quantitative analysis of information in a company’s

financial statements. Ratios are calculated from current year numbers and are then compared to
previous years, other companies, the industry, or even the economy to judge the performance of
the company. Ratio analysis is predominately used by proponents of fundamental analysis
(Investopedia)

1.6.2 Review of Previous Work

Prior to this study, the several researchers have found various studies regarding financial
performance of commercial and joint venture banks. In this study, only relevant subject maters
are reviewed.

Oberholzer & Van der Westhuizen (2004) investigated the efficiency and profitability of ten
banking regional offices of one of South Africa's larger banks. This study demonstrates how
conventional profitability and efficiency analyses can be used in conjunction with DEA.
Although their study concentrated on banking regions; their findings confirm those of Yeh
(1996) that DEA results as an efficiency measure have a relationship with both profitability and
efficiency ratios. The conclusions were that there are significant relationships between
conventional profitability and efficiency measures and allocative, cost and scale efficiency and
no significant relationship with technical efficiency.

Cronie (2007) who employed the DEA method and a sample of 13 South African banks to
provide a measure of the efficiency of the South African banks. His findings show that out of the
13 banks, the three largest banks are efficient and serve as a standard for the banks classified as
inefficient.
The fourth largest bank showed a slight inefficiency. Overall, seven banks were classified as
inefficient, and the article recommends target areas for the banks to improve their efficiencies
with guidelines that bankers in inefficient banks could use to increase their sustainable
profitability.

UK where Drake (2001) & Webb (2003) found the larger banks less efficient. This difference
could be attributed to the differences in operating environment as South Africa is an
emerging economy with a different political and economic history while UK is a developed
country.

Ncube (2009) who uses the stochastic frontier model to analyze the cost and profit efficiency
of four large and four small South African banks. The results of the study show that South
African banks have significantly improved their cost efficiencies between 2000 and 2005 with
the most cost-efficient banks also being most profit efficient.

The measurement of bank performance particularly commercial banks is well researched and has
received increased attention over the past years (Sei ford and Zhu, 1999). There have been a
large number of empirical studies on commercial bank performance around the world (see Yeh,
1996; Webb, 2003; Lacewell, 2003; Halkos and Salamouris, 2004; Tarawneh, 2006).

Traditional accounting methods primarily based on the use of financial ratios have been
employed for assessing bank performance (Ncube, 2009). However, the limitations of this
method coupled with advances in management sciences have led to the development of alternate
methods such as non-parametric DEA and parametric Stochastic Frontier Approach (hereafters)
(Berger and Humphrey, 1997).

Shrestha (2003) Profitability in future is sound for the commercial banks in Nepal. Since the only
15 years old commercial banks are selected as a sample and weighted interest rate is used as
discounting rate; the result should not be generalized from this study.
In the Samad (2004) investigated the performance of seven locally incorporated commercial
banks during the period 1994-2001. Financial ratios were used to evaluate the credit quality,
profitability, and liquidity performances. The performance of the seven commercial banks was
compared with the banking industry in Bahrain which was considered a benchmark. The article
applied a student’s t-test to measure the statistical significance for the measures of performance.
The results revealed that commercial banks in Bahrain were relatively less profitable, less liquid
and were exposed to higher credit risk than the banking industry, in which wholesale banks are
the main component.

1.7 Research Methods

1.7.1 Research Design

Research design is the task of defining the research problem. In other words, "A research design
is the arrangement of conditions for collection and analysis of data in a manner that aims to
combine relevance to the research purpose with economy in procedure. In fact, the research
design is the conceptual structure within which the research is conducted. General objective of
this research is to examine and evaluate the financial performance of joint venture bank
especially that of Standard Chartered Bank Nepal. In order to achieve this objective, descriptive
research design has been followed. Also, the research is based on historical research design (uses
of historical data for analysis).

1.7.2 Population and Sample

The population for this study comprises of 20 ‘A’ class commercial banks currently operating in
the country. The sample consists of one judgmentally selected bank- Standard Chartered Bank
Nepal ltd. The bank's 700,000 users are equivalent to 14% of the bankable population.

1.7.3 Sources of Data

The present study is based on secondary data. The necessary data is obtained from published
Annual report containing Statement Of financial position, Statement of Comprehensive Income
and other related statements of the bank. Likewise, other relevant information’s are also obtained
from various sources such as various publications, business magazines, journals and newspaper.
According to the need and objectives, secondary data are compiled, processed and tabulated in
time series. In order to judge the reliability of data provided by the bank and other sources they
were complied with the annual reports of the bank. The data used in this study is mainly based
on the annual reports of Standard Chartered Bank Nepal ltd.

1.7.4 Data Collection Strategy

The study is based on secondary data from the annual financial report of SCBNL. It relies on
both published and unpublished reports that relate to this study. The conclusion is based on the
financial statement of SCBNL.

1.7.5 Tools of Data Analysis

Data Analysis tools are those that are used for the analysis and interpretation of financial data.
These tools are fruitful in exploring the strengths and weaknesses of financial policies and
strategies. In the study various financial tools have been used, which are as follows.

Liquidity Ratios:

Cash and Bank Balance to Current & Saving Deposit Ratio.

The ratio shows the ability of banks’ immediate funds to cover their deposit. The higher the ratio
shows higher liquidity position and ability to cover the deposits and vice versa. The ratio is
computed by dividing cash and bank balance by current and saving deposits. Cash and bank
balance to current and saving deposits ratio.

= Cash and Bank Balance

Current and Saving Deposit
Fixed Deposit to Total Deposit Ratio
The ratio shows what percentage of total deposit has been collected in form of fixed deposit.
High ratio indicates better opportunity available to the bank to invest in sufficient profit
generating long-term loans. A low ratio means banks should invest the fund of low cost in short-
term loans. It is calculated as follow:
= Fixed Deposit
Total Deposit
Profitability Ratios:
Return on Asset
The ratio is calculated by dividing net profit after tax by total assets on the bank.
= Net Profit After Tax
Total Assets
Net profit refers to the profit deduction of interest and tax. A total asset means the assets
that appear in the asset of balance sheet.
It measures the efficiency of a bank in utilization of the overall assets. High ratio indicates
the success of management in overall operation. A lower ratio means insufficient operation
of the bank.
Return on Net Worth
The ratio is computed by dividing net profit after tax by net worth.
= Net Profit After Tax
Net Worth
The ratio is evaluated to see the profitability of the owner's investment "reflects the extent
to which the objective of business is accomplished".
Return on Total Deposit
The ratio is computed by dividing net profit after tax by total deposit.

= Net Profit After Tax

Total Deposits

The ratio shows the relation of net profit earned by the bank with the total deposit accumulated.
High ratio is the index of strong profitability position.
Turnover ratio:

Loan and Advanced to Total Deposit Ratio

The ratio is computed by dividing total loans and advances by total deposit liabilities.

= Loans and advances

Total Deposit
High ratio means the greater use of deposits for investing in loans and advances. However, very
high ratio shows a poor liquidity position and risk in loans on the contrary; too low ratio may be
the causes of idle cash or use of fund less efficiently.

Investment to Total Deposit Ratio

The ratio obtained by dividing investment by total deposits collection in the bank.

= Investment
Total Deposit

The ratio shows how efficiently the major resources of the bank have been mobilized. High ratio
shows managerial efficiency about the utilization of deposits. A low ratio is the result of less
efficiency in the use of funds.

Other Ratios:
Capital Adequacy Ratio

The capital adequacy ratio (CAR) is a measurement of a bank's available capital expressed
as a percentage of a bank's risk-weighted credit exposures. The capital adequacy ratio is
used to protect depositors and promote the stability and efficiency of financial systems
around the world.

= Total Capital
Total Risk exposure

= Tier 1 Capital
Total Risk exposure
Earnings Per Share (EPS)

It is obtained by dividing the earnings available to common shareholders by number of

equity shares outstanding.
= Earnings available to Common equity Number of
Equity Shares outstanding
Earnings per share refers to the income available to the common shareholders on per share basis,
it enables us to compare whether the earning based on per share basis has changed over past
period or not. The investors favor high EPS. It reflects the sound profitability of the bank.

Price-Earnings Ratio (P/E Ratio)

= Market Value per Share

Earnings per Share
P/E ratio is widely used to evaluate the bank's performance as expected by investors. It measures
how the market is responding towards the earning performance of the concerned institution.
High ratio indicates greater expectation of the market towards the firm.

1.8 Limitations of the Study

a.The major limitations of the study are as follows:
b. Limited variables have been selected.
c.This Study is based on secondary data only. It ignores the qualitative aspects.
d. Only selected financial and statistical tools and techniques have been used. This study
only covers the data of the past five years only.
 CHAPTER TWO
RESULT AND
ANALYSIS
2.1 Results
The report mainly focuses firm on its profitability, liquidity, turnover, capital exposure and PE
ratio. These are important tools used to measure the financial performance of an entity. In the
Report, Profitability ratios are used to determine efficiency and performance. Profitability ratios
are two types: margins and return. Only the relevant return type is used in our report. It
shows the overall efficiency of firm in generating returns for its shareholders. It provides
stakeholder a measure to judge a company’s ability to make profits and be considered a worthy
investment. Liquidity ratio is used to measure ability of bank to meet its short-term obligations.
However, Higher ratio indicates idle fund with the bank and inefficiency of its utilization. It
hurts the profitability and financial performance of the bank. Turnover ratio is used as an
indicator of the efficiency with which the bank is using its assets to generate revenue. The higher
turnover ratio, the more efficient the bank is at generating revenue from its assets. Conversely, if
the bank has a low turnover ratio, it indicates it is not efficiently using its assets to generate
revenue. Capital adequacy is measured in order to see legal compliance with unified directives
issued by NRB. More is the capital adequacy ratio; more is the buffer provided to depositors and
creditor from risk exposure.PE ratio is used in order to analyze whether the bank is expected to
perform well in future or not. It shows expectations of the investors in the market toward the
bank. High PE ratio indicates high expectations and hence high growth potential. Low PE ratio
may indicate low market expectations or sometimes.it is the case of undervaluation if measured
in relative terms with peer companies.
2.1.1 Liquidity Ratios:
Cash and Bank Balance to Current & Saving Deposit Ratio

The ratio is computed by dividing cash and bank balance by current and saving deposits. It can
be shown with the help of table below:
Table 1
Cash and Bank balance to Current & Saving Deposit Ratio

CASH AND BANK CURRENT AND SAVING

YEAR BALANCE DEPOSIT RATIO
38,946,538
2079/80 5,529,456,550 ,581 0.14
47,522,43
2078/79 10,283,518,502 8,603 0.22
6,633,679 58,674,32
2077/78 ,556 1,634 0.11
4,528,050 50,736,99
2076/77 ,578 0,877 0.09
5,602,056 55,117,31
2075/76 ,235 3,203 0.10

The highest ratio is 0.83(83%) during the year 2019/20. The ratio shows decreasing trend from
2016/17 to 2018/19. The ratio follows increasing trend from 0.32 in 2018/19 to 0.83 in 2019/20.
The increase in the ratio in the first year and final year shows the increase in ability of the bank
to meet short term obligations. However short-term liquidity position is affected in year 2017/18
and 2018/19. Highest ratio in the year 2019/20 indicates idle cash and bank balance with the
bank. Such idle cash and bank hurts profitability and financial performance of the bank.

Cash and Bank Balance to Current & Saving Deposit

0.25

0.20

0.15

0.10

0.05

0.00
2075 2076 2077 2078 2079

Figure 1: Cash and Bank Balance to Current & Saving Deposit Ratio
Fixed Deposit to Total Deposit Ratio
The ratio is computed by dividing fixed deposit by total deposits. It can be shown with the
help of table below:

Table 2

Fixed Deposit to Total Deposit Ratio

YEAR FIXED DEPOSIT TOTOAL DEPOSIT RATIO

2079/80 1,398,835,000 151,378,009,400 0.0092
2078/79 1,987,391,000 123,355,710,487 0.0161
2077/78 2,434,665,000 114,738,762,936 0.0212
2076/77 2,189,898,000 116,438,273,521 0.0188
2075/76 1,549,987,000 93,264,183,123 0.0166

The highest ratio is 0.45(45%) during the year 2016/17. The ratio then follows decreasing
trend from 2016/17(0.45) to 2019/20 (0.25). The ratio is lowest in the first year which is
0.06.

The trend indicates the portion of total deposit occupied by fixed deposit is in decreasing trend.
The bank is not able to lock funds in long term profitable investments.

Fixed Assets to Total Deposit

60.00

50.00

40.00

30.00

20.00

10.00

0.00
2075 2076 2077 2078 2079
 2.1.2 Profitability Ratios:
Return on Asset
The ratio is calculated by dividing net profit after tax by total on asset on the bank. It can be
shown with the help of table below:

Table 3: Return on Asset

YEAR NPAT TOTOAL ASSETS RATIO
2079/80 3,465,329,975 151,378,009,400 43.6836
2078/79 2,255,934,327 123,355,710,487 54.6805
2077/78 2,230,656,000 114,738,762,936 51.4372
2076/77 3,152,794,000 116,438,273,521 36.9318
2075/76 3,860,752,000 93,264,183,123 24.1570

Noted from Annual reports of SCBNL

In the first year, the ROA was 0.01935(1.93%). From 2015/16 to 2017/18 it follows increasing
trend. But in from 2017/18 to 2018/19 it increases slightly and thereafter reaches to
0.0170(1.70%) in the year 2019/20 which is again in decreasing trend.

The trendline in figure 3 show increasing trend up to first four years and thereafter the trend
declines in last year. The decrease in ROA during the year 2019/20 shows inefficiency in
utilization of assets of the bank. Further, the performance of the management is less satisfactory
in the year 2019/20 in comparison to previous four years.

NAPT to Total Assets

60.00

50.00

40.00

30.00

20.00

10.00

0.00
2075 2076 2077 2078 2079

Figure 3 : Return on Assets (ROA)

Return on Net Worth/Return on Equity
The ratio is computed by dividing net profit after tax by net worth. It can be shown with the
help of table below:

Table 4Return on Net Worth

Year NPAT Net Worth ROE

2015/16 1,264,684,000 7,736,209,000 0.1635

2016/17 1,549,986,963 12,379,792,867 0.1252

2017/18 2,189,898,090 13,925,502,179 0.1573

2018/19 2,434,664,521 14,927,074,559 0.1631

2019/20 1,987,390,942 15,102,495,274 0.1316

Noted from Annual reports of SCBNL

The return generated by the equity during the year 2015/16 is highest (16.35%) which indicates
better financial performance during the year. The return declined in the next year to 12.52% and
again spiked and followed increasing trend up to year 2018/19 reaching 16.31%. The RONW
again decreased in the year 2019/20.
The highest RONW during year 2015/16 indicates effectiveness of utilization of funds
contributed by equity including cumulative retained earnings. The bank ability to covert equity
funds into net profit (earnings) is found to be higher during the year 2015/16 and from 2016/17
to 2018/19. It shows better financial performance of the bank in terms of profitability during
those years. However, there is decrease in RONW during the year 2016/17 and 2019/20.This
shows volatility in profitability indicating volatility in financial performance of the bank
indicating negative trend in return to shareholder’s equity.

RONW
0.1800
0.1600
0.1400
0.1200
0.1000
0.0800
0.0600
0.0400
0.0200
0.0000

2015/16

2016/17 2017/18 2018/19 2019/20

Figure 4: Return on Net worth(RONW)

Return on Total Deposit

The ratio is computed by dividing net profit after tax by total deposit. It can be shown with the
help of table below:

Table 5
Return on Total Deposit
ROTD
Year NPAT Total deposit

2015/16 1,264,684,000 55,727,178,456 0.023

2016/17 1,549,986,963 59,694,608,671 0.026

2017/18 2,189,898,090 67,061,046,522 0.033

2018/19 2,434,664,521 75,731,527,432 0.032

2019/20 1,987,390,942 95,020,841,249 0.021

Noted from Annual reports of SCBNL

The highest ratio is 0.033(3.3%) during the year 2017/18. The return generated by Total
deposit follows increasing trend from year 2015/16 to 2017/18. After that, the return on total
deposit follows decreasing trend up to year 2019/20.

ROTD
0.0350
0.0300
0.0250
0.0200
0.0150
0.0100
0.0050
0.0000
2015/16 2016/17 2017/18 2018/19 2019/20

Figure 5 : Return on Total Deposit (ROTD)

The chart in figure 5 shows fluctuating return on total deposit especially during the year 2018/19
and 2019/20. It means the ability of banks total deposit to generate revenue or income is low
during those years. The decrease in the revenue generated by asset is hurting profitability and
hence performance of the bank is in decreasing trend.
2.1.3 Turnover ratio:
Loan and Advances to Total Deposit Ratio:
The ratio is computed by dividing total loans and advances by total deposit liabilities. It can
be shown with the help of table below:
Table 6
Loan and Advances to Total Deposit Ratio

Year Loans and advances Total deposit Ratio

2015/16 50,419,575,666 55,727,178,456 0.90

2016/17 40,044,317,000 59,694,608,671 0.67

2017/18 46,696,179,867 67,061,046,522 0.70

2018/19 55,633,581,545 75,731,527,432 0.73

2019/20 56,935,754,731 95,020,841,249 0.60

Noted from Annual reports of SCBNL
The highest ratio is 0.90(90%) during the year 2015/16. It decreases to 67% in the year
2016/17 and thereafter follows increasing trend up to year 2018/19. The ratio again decreases
from year 2018/19 to 2019/20.

Loans&Advances to Total Deposit

1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
Figure 6 : Loans and Advances to Total Deposit
2015/16 2016/17 2017/18 2018/19 2019/20
The figure 6 shows that the conversion of deposit into loans is decreasing in the first year
and it increases up to year 2018/19 and again decreases. The banks’ ability to attract and
retain customer is volatile over past five years. The bank is earning more from year 2016/17
to 2018/19. In total, the banks’ ability to cover unexpected withdrawals and loan losses is not
compromised.

Investment to Total Deposit Ratio

The ratio obtained by dividing investment by total deposits collection in the bank. It can be
shown with the help of table below:

Table 7
Investment to Total Deposit Ratio

Year Investment Total deposit Ratio

2015/16 402,477,960 55,727,178,456 0.01

2016/17 4,810,675,143 59,694,608,671 0.08

2017/18 4,660,992,993 67,061,046,522 0.07

2018/19 11,538,225,160 75,731,527,432 0.15

2019/20 13,058,680,842 95,020,841,249 0.14

Noted from Annual reports of SCBNL

The highest ratio is 0.15 during the year 2018/19. The investment to total deposit ratio is lowest
in the first year and it follows increasing trend up to year 2018/19. Thereafter the ratio decreases
from the year 2018/19 to 2019/20.

The bank is utilizing its deposit in the form of investment in different sector in the first 4
years. However, there is less utilization of deposit in investment activities of the bank during
the last year.
 Investment to Total Deposit
0.16
0.14
0.12
0.10
0.08
0.06
0.04
0.02
0.00
2015/16 2016/17 2017/18 2018/19 2019/20

Figure 7 : Investment to Total Deposit

2.1.4 Other Ratios:

Capital Adequacy Ratio

The capital adequacy ratio (CAR) is a measurement of a bank's available capital expressed as
a percentage of a bank's risk-weighted credit exposures. It can be shown with the help of table
below:

Table 8
Capital Adequacy Ratio

Year 2019/20 2018/19 2017/18 2016/17 2015/16

 83,299,506,13 76,051,928,65 60,838,819,52 56,801,993,00 47,485,471,00
Total RWE(B) 3 0 4 0 0
RWE due to 74,924,511,75 68,087,413,28 54,179,644,26 50,192,675,00 41,402,347,00
credit risk 4 5 2 0 0
RWE due to
market risk 1,378,548,499 1,536,868,035 1,380,549,380 1,330,724,000 1,155,729,000
RWE due to
operational risk 6,048,974,948 5,491,535,583 4,598,925,881 4,598,926,000 4,350,273,000
Capital
Core Capital 14,033,589,28 13,926,067,63 13,034,300,35 11,119,338,00
(Tier 1) 1 9 7 0 6,684,918,000
Paid up Equity
Share Capital 8,011,430,667 8,011,430,667 8,011,430,667 4,005,715,000 2,812,426,000
Proposed
Bonus Equity
Share 0 0 0 4,005,715,000 937,475,000
Share Premium 0 0 0 0 0
Statutory
General
Reserves 4,504,238,725 4,106,847,847 3,619,827,633 3,181,848,000 2,897,529,000
Retained
Earnings 1,517,919,889 1,807,876,436 1,403,042,058 9,786,000 115,368,000
Un-audited
current year 0 0 0 0 0
Other Free
Reserve 0 0 0 0 0
Less: Deferred
Tax Assets 0 0 0 83,726,000 77,880,000
less: Fictitious
Assets 0 0 0 0 0
Supplementar
y Capital (Tier
2) 1,388,345,459 1,044,922,315 952,545,226 855,763,000 1,094,490,000
General loan
loss provision 852,161,527 549,599,930 486,039,696 411,953,000 333,114,000
Exchange
Equalization
Reserve 536,183,931 495,322,385 466,505,530 438,422,000 413,839,000
Subordinated
Term Debts 0 0 0 0 0
Deductions
from capital 0 0 0 0
investment
adjustment
reserve 0 0 0 5,388,000 347,537,000
Qualifying 15,421,934,73 14,970,989,95 13,986,845,58 11,975,101,00
Capital (A) 9 4 3 0 7,779,409,000
 27

Capital Adequacy Ratio

Total capital
to Total risk
exposure 18.51% 19.69% 22.99% 21.08% 16.38%
Tier 1 to Total
risk exposure 16.85% 18.31% 21.42% 19.58% 14.08%
Noted from Annual reports of SCBNL

As per Unified directives issued by Nepal Rastra Bank, Banks shall maintain a minimum
total capital (MTC) of 8.5% of total risk weighted assets (RWAs) i.e., Total capital to risk
weighted exposure and 6% of Tier 1 to Total risk exposure.

The adequacy of capital provides buffer to risk exposure and protects depositors, creditors as
well as helps to increase public confidence in the banking system. Table 8 above shows
adequate compliance of the bank towards capital adequacy ratio over past five years.

Earnings Per Share (EPS)

It is obtained by dividing earning available to common shareholders by number of equities
shares out-standing. It can be shown with the help of table below:

Table 9

Earnings Per Share (EPS)

Year EAE No of Shares EPS

2015/16 1,264,684,862 23,130,903 45.96

2016/17 1,549,986,963 34,031,848 35.49

2017/18 2,189,898,090 80,114,307 27.33

2018/19 2,434,664,521 80,114,307 30.39

2019/20 1,987,390,942 80,114,307 24.81

Noted from Annual reports of SCBNL
During the study of EPS, it is found that the EPS is in peak in the initial year i.e.,
2015/16.Afterward, it is continually decreasing during the next two years. However, the trend is
increasing from 2017/18 and thereafter EPS again follows decreasing trend from year 2018/19
to 2019/20.

By the analysis of the figure 8, it is seen that EPS is continually decreasing. It reaches to RS
24.81 in 2019/20 from Rs 30.39 in the year 2018/19 which shows EPS to be in decreasing
trend. The earnings of each shares of the bank is in decreasing trend. Since, EPS in its
absolute term reflects very less about financial performance it is better suited and used with
PE ratio as shown in the next section.

Earnings Per Share

50.00
45.00
40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
2015/16 2016/17 2017/18 2018/19 2019/20

Figure 8 : Earnings per Share (EPS)

Price-Earnings Ratio (P/E Ratio)

It is computed by dividing market price per share by earnings per share. It can be shown with
the help of table below:

Table 10
Price-Earnings Ratio (P/E Ratio)

Year EPS MPS PE ratio

2015/16 45.96 3600 78.33
2016/17 35.49 2295 64.67
2017/18 27.33 755 27.63
2018/19 30.39 682 22.44
 2019/20 24.81 645 26.00
Noted from Annual reports of SCBNL

The PE ratio is highest during the year 2015/16. The ratio decreases to 22.44 times in the year
2018/19.After that, PE ratio increases to 26 times in the year 2019/20.

The expectation of the market towards the bank is in decreasing trend during the first four years.
People are willing to pay less every year up to 2018/19 for each rupee value of the stock.
However, the expectation of market increases in the final year (2019/20). It shows growth
potential of the bank and expectations of the market.

PE Ratio
90.00
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
2015/16 2016/17 2017/18 2018/19 2019/20

Figure 9 : PE Ratio (Price to Earnings Ratio)

Major Findings of the Study

The major findings of the study have been summarized below:

The Liquidity ratio (cash and bank to current & savings deposit ratio) is 0.83(83%) during the
year 2019/20. The ratio shows decreasing trend from 2016/17 to 2018/19. The ratio follows
increasing trend from 0.32 in 2018/19 to 0.83 in 2019/20. Also, the fixed deposit to total deposit
ratio shows decreasing trend from 2016/17(0.45) to 2019/20(0.25). Therefore, this fluctuation
shows idle cash and bank balance not properly utilized. It hurts financial performance.

The ROA of bank from year 2017/18 to 2018/19 increases slightly and thereafter reaches to
0.0170(1.70%) in the year 2019/20 which is again in decreasing trend. The decrease in ROA
during the year 2019/20 shows inefficiency in utilization of assets of the bank. The performance
of the management is less satisfactory in the year 2019/20 in comparison to previous four years.

The ROE showing the banks’ ability to covert equity funds into net profit(earnings) is found to
be higher during the year 2015/16 and from 2016/17 to 2018/19. It shows better financial
performance of the bank in terms of profitability during those years. However, there is decrease
in ROE during the year 2016/17 and 2019/20.This shows volatility in profitability indicating
volatility in financial performance of the bank indicating negative trend in return to
shareholder’s equity.

The return generated by Total deposit follows increasing trend from year 2015/16 to 2017/18.
After that, the return on total deposit follows decreasing trend up to year 2019/20. The decrease
in the revenue generated by asset is hurting profitability and hence performance of the bank is in
decreasing trend.

Loans and advances to Total deposit ratio shows decreasing trend in the first year and
increasing trend up to year 2018/19 and again it shows increasing trend. The banks’ ability to
attract and retain customer is volatile over past five years. In total, the banks’ ability to cover
unexpected withdrawals and loan losses is not compromised.

Investment to Deposit ratio follows increasing trend up to year 2018/19. Thereafter the ratio
decreases from the year 2018/19 to 2019/20. This shows volatility in utilisation of deposit for
investing activities over past years.

Capital adequacy ratio shows adequate compliance of the bank towards capital adequacy
requirement issued by NRB over past five years.

It is seen that EPS is continually decreasing. It reaches to Rs 24.81 in 2019/20 from Rs

30.39 in the year 2018/19 which shows EPS to be in decreasing trend. Therefore, the
earnings of each shares of the bank are in decreasing trend.
By analysis of PE ratio, the expectation of the market towards the bank is in decreasing trend
during the first four years. People are willing to pay less every year up to 2018/19 for each rupee
value of the stock. However, the expectation of market increases in the final year (2019/20). It
shows growth potential of the bank and expectations of the market to be rising.
 CHAPTER THREE
SUMMARY AND
CONCLUSION

3.1 Summary

The research work entitled financial performance analysis of Standard Chartered Bank Nepal
Limited. The research work should have reached the destiny where we satisfy with the queries of
research problems which were specified in the statement of the problem in introductory chapter.
To conduct the research work, the researcher consulted mainly the secondary sources of data
such as documents published by concerned bank. Before presenting and analyzing the data, there
was also need to review of related books, prior research on the topic, Obviously, it helped the
researcher to construct conceptual framework and to analyze and interpret the secondary data
according to objective set forth previously. Then the research work was analyzed and interpreted
by financial tools such as profitability ratios, turnover ratios, liquidity ratios, capital adequacy
ratios, EPS and PE ratio. In this way, the researcher analyzed and presented the second chapter
which was the main body of the research work.

On the basis of data analysis and presentation, the researcher extracted some major findings. It
has been explained along with the data analysis and presentation. So, on the basis of major
findings the researcher reached in the conclusions keeping in the previously set objectives in
mind. To know the real performance of the bank, the researcher observed and analysed the
performance analysis of the bank for five years period. It is hoped that the financial performance
analysis of the bank will give a rational result and represent the overall banking scenario in terms
of performance analysis.

3.2 Conclusion

By analysing the liquidity ratio of SCBNL, we can see that it is in fluctuating trend. The bank
is not maintaining stable liquidity position. It indicates short term liquidity risk to meet short
term obligations, which in turn hurts profitability. Therefore, the performance of bank in
terms of liquidity is not satisfactory over different periods.
The decrease in ROA over past five years indicates that the company is not making enough
income from the use of its assets. It may be due to low-income efficiency and poor
management. The bank is not using its total asset to generate maximum revenue. The rate of
ROA indicated inefficient management at using its assets to generate earnings. Therefore, the
performance of bank in terms of ROA is not satisfactory over different periods.

By analysing ROE, we can see that it is fluctuating over past five years. It means the
management team is not managing the equity properly that the shareholders have contributed
to the company. Therefore, the performance of bank in terms of ROE is not satisfactory over
different periods.

By analysis of Loans and advances to Total deposit ratio, we can see that it is volatile over
past five years. This may hurt the banks’ ability to attract and retain customer over long
period of time. Therefore, the performance of bank is not satisfactory over different periods.

By analysis of Compliance of the bank towards capital adequacy requirement issued by

NRB, we can say bank is maintaining proper buffer for overall risk exposures.

The EPS is gradually decreasing. However, the number of outstanding shares is relatively
similar over five years but there is fluctuation in net income of the bank. It shows the
company has to reduce fixed expenses to increase the net profit.

By analysis of PE ratio, we can see that people are willing to pay less every year up to
2018/19 for each rupee value of the stock. However, the expectation of market increases in
the final year (2019/20). It shows growth potential of the bank and expectations of the
market to be rising. Therefore, the performance of bank is expected to rise in future.

Report writing is very useful for reader to know about the financial state of Standard
Chartered Bank Nepal limited. The case of the study is related with the profitability position
and the capital structure of the bank. The analysis of the presented data will be helpful to
know the financial strength of Standard Chartered Bank Nepal limited. It is hope that it will
become the most suitable literature for future study.
If in future same research is conducted, the researcher shall consider more ratios which
indicate the financial performance of bank.
Through the current research, the investor can take decision about investment on commercial
bank.
By above analysis, the shareholders will know about the current position of SCBNL in terms
of profitability, liquidity, Turnover and PE ratio.
The above research can be a reference to stakeholders to know about the current condition of
other commercial banks also.
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Websites:

https://www.sc.com/np/
www.nrb.org.np
https://www.simplilearn.com/financial-performance-rar21-article
https://www.investopedia.com