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ANALYSIS OF
STANDARD CHARTERED BANK NEPAL LTD
Submitted by:
Aashish Dhakal
At the
Pokhara University
Butwal
September 2023
1
DECLARATION
I hereby declare that the project work report entitled “Financial Performance Analysis of
Standard Chartered Bank” submitted for the BBA Degree is my original work and the Project
Work Report has not formed the basis for award of any degree, diploma, or other similar
titles.
………………….
Aashish Dhakal
Date: ……………
ii
Recommendation
Submitted By:
Aashish Dhakal
Entitled
Has been approved by this college. The project work report is forwarded for examination.
…………………. …………………..
Mr. Arpan Shrestha Mr. Kaviraj Khanal
(Supervisor) (Head of Department)
iii
ENDORSEMENT
…………………………
Mr. Arpan Shrestha
Date: …………………….
iv
ACKNOWLEDGEMENTS
Thank you
Aashish Dhakal
v
vi
TABLE OF CONTENTS
TITLE PAGE...................................................................................................................................i
DECLARATION............................................................................................................................ ii
SUPERVISOR’S RECOMMENDATION....................................................................................iii
ENDORSEMENT..........................................................................................................................iv
ACKNOWLEDGEMENTS............................................................................................................ v
TABLE OF CONTENT..................................................................................................................vi
LIST OF TABLES...................................................................................................................... viii
LIST OF FIGURES....................................................................................................................... ix
ABBREVIATIONS.........................................................................................................................x
Background...................................................................................................................................1-2
Results......................................................................................................................................15-28
vi
Major findings of the study……………………………………………………………………...30
Summary…...................................................................................................................................31
Conclusion…...........................................................................................................................31-33
BIBLIOGRAPHY.......................................................................................................................33-34
APPENDICES............................................................................................................................. 36
vii
Lists 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
viii
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
ix
ABBREVERATIONS
i.e., That is
Rs. Rupees
P. U Pokhara University
x
CHAPTER ONE
INTRODUCTION
Background
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
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 the
performance information (Sun, 2011).
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.
1
To assess the results and to predict 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 company’s managerial priorities. To calculate this,
quantitative data from bank’s financial statement and other sources is sought.
(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
previous periods and helps to improve its performance of management (Lin et al., 2005).
With this increase of competition in banking industry, every bank is trying to provide their
customers better services as much as possible to ensure maximum satisfaction (Uppal,2010).
Evaluation of bank’s performance from time to time helps them to know how well they are
actually 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. An appropriate evaluation of performance of selected banks requires a range of
financial, operational and economic indicators to be applied (Chowdhury,2002).
With respect to the Performances of Nepalese Banking sector, foreign and national experts
undertook number of studies. 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 overtime.
2
1.2 Profile of Standard Chartered Bank
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 a leading international banking group with a 160-year history in some of
the world’s most dynamic markets. Its heritage and values are expressed in its brand promise,
here for good. Bank says “Our operations reflect our Purpose”, which is to drive commerce and
prosperity through unique diversity. SCB is present in 60 markets and serve clients in a further
85.
The banks’ businesses serve four client segments in four regions- Europe & Americas, Africa
and Middle East, Asia & South Asia, Greater China & North Asia. Standard Chartered PLC is
listed on the London and Hong Kong Stock Exchanges as well as the Bombay and National
Stock Exchanges in India. With 15 points of representation, 26 ATMs across the country and
more than 531 local staff, Standard Chartered Bank Nepal Limited is serving its clients and
customers through an extensive 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, airlines, hotels as well
as the development organizations segment comprising of embassies, aid agencies, bilateral
entities, 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.
3
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 staff live.
Board of Directors details of Standard Chartered Bank Nepal:
Capital Structure
As on 31 Ashad 2079
4
Particulars Amount (%)
5
service coverage. In such a situation, this study tries to analyze the present performance of banks,
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 or relationship among the various
financial factor in business a disclosed by a single set of statement and a study of the trend of
these fact as shown in a series of statements. By establishing a strategic relationship between the
item of a balance sheet and income statements and other operative data, the financial analysis
unveils the meaning and signification of such items.”
6
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.
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.”
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.
7
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.
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.
8
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 whereas 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; Holko’s and Salamouris, 2004; Tarawneh, 2006).
Traditionally 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.
9
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.
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 conduct. 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 (used of
historical data for analysis).
The population for this study comprises of 21 commercial banks currently operating in the
country. The sample consists of one judgmentally selected bank- Standard Chartered Bank Nepal
ltd. This unit represents 3.70% of the total population.
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
10
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.
The study is based on secondary data from annual financial report of SCBNL. It relies on both
published and unpublished report that relate to this study. The conclusion is based on financial
statement of SCBNL.
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 the financial policies and
strategies. In the study various financial tools have been used, which are as follows.
Liquidity Ratios:
The ratio shows the ability of banks’ immediate funds to cover their deposit. Higher the ratio
shows higher liquidity position and ability to cover the deposits and vice versa. The ratio is
computed by dividing and bank balance by current and saving deposits. Cash and bank balance
to current and saving deposits ratio.
Cash and Bank Balance
¿ Current & Saving Deposits
11
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. Low ratio means bank 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 on asset on the bank.
Net profit refers to the profit deduction of interest and tax. A total asset means the assets that
appear in asset of balance sheet.
It measures the efficiency of bank in utilization of the overall assets. High ratio indicates the
success of management in overall operation. Lower ratio means insufficient operation of the
bank.
The ratio is tested to see the profitability of the owner's investment "reflects the extent to which
the objective of business is accomplished".
12
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:
High ratio means the greater use of deposits for investing in loans and advances. However, very
high ratio shows 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
= Total Deposit
The ratio shows how efficiently the major resources of the bank have been mobilized. High ratio
indicates managerial efficiency regarding the utilization of deposits. Low ratio is the result of
less efficiency in use of funds.
Other Ratios:
Capital Adequacy Ratio
13
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 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.
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.
14
The major limitations of the study are as follows:
CHAPTER TWO
RESULT AND ANALYSIS
Results
The report mainly focuses firm with its profitability, liquidity, turnover, capital exposure and PE
ratio. These are important tools used to measure financial performance of an entity. In the
Report, Profitability ratios are used to determine efficiency and performance. Profitability ratio
are two types: margins and return. Only relevant return type is used in our report. It shows
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
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
15
market expectations or sometimes.it is the case of undervaluation if measured in relative terms
with peer companies.
Liquidity Ratios:
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
The highest ratio is 0.83(83%) during the year 2021/22. The ratio shows decreasing trend from
2018/19 to 2020/21. The ratio follows increasing trend from 0.32 in 2020/21 to 0.83 in 2021/22.
16
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 2019/20
and 2020/21. Highest ratio in the year 2021/22 indicates idle cash and bank balance with the
bank. Such idle cash and bank hurts profitability and financial performance of the bank.
Figure 1: Cash and Bank Balance to Current & Saving Deposit Ratio
Table 2
Fixed Deposit to Total Deposit Ratio
17
2021/22 24,224,366,515 95,020,841,249 0.25
The highest ratio is 0.45(45%) during the year 2018/19. The ratio then follows decreasing trend
from 2018/19(0.45) to 2021/22 (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.
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:
18
2020/21 2,434,664,521 93,264,183,123 0.02611
In the first year, the ROA was 0.01935(1.93%). From 2017/18 to 2018/19 it follows increasing
trend. But in from 2019/20 to 2020/21 it increases slightly and thereafter reaches to
0.0170(1.70%) in the year 2021/22 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.
ROA
0.03000
0.02500
0.02000
0.01500
0.01000
0.00500
0.00000
1 2 3 4 5
Table 4
Return on Net Worth
19
2018/19 1,549,986,963 12,379,792,867 0.1252
The return generated by the equity during the year 2017/18 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 2020/21 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 2017/18 and from 2018/19
to 2020/21. It shows better financial performance of the bank in terms of profitability during
those years. However, there is decrease in RONW during the year 2018/19 and 2021/22.This
shows volatility in profitability indicating volatility in financial performance of the bank
indicating negative trend in return to shareholder’s equity.
20
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
Fig
ure 4 : Return on Net worth (RONW)
Table 5
Return on Total Deposit
ROTD
Year NPAT Total deposit
21
2020/21 2,434,664,521 75,731,527,432 0.032
The highest ratio is 0.033(3.3%) during the year 2019/20. The return generated by Total deposit
follows increasing trend from year 2017/18 to 2019/20. After that, the return on total deposit
follows decreasing trend up to year 2021/22.
The chart in figure 5 shows fluctuating return on total deposit especially during the year 2020/21
and 2021/22. 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.
ROTD
0.0350
0.0300
0.0250
0.0200
0.0150
0.0100
0.0050
0.0000
2017/18 2018/19 2019/20 2020/21 2021/22
Turnover 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:
22
Table 6
Loan and Advances to Total Deposit Ratio
Year Loans and advances Total deposit Ratio
The highest ratio is 0.90(90%) during the year 2017/18. It decreases to 67% in the year 2018/19
and thereafter follows increasing trend up to year 2019/20. The ratio again decreases from year
2020/21 to 2021/22.
The conversion of deposit into loans is decreasing in the first year and it increases up to year
2020/21 and again decreases. The banks’ ability to attract and retain customer is volatile over
past five years. The bank is earning more from year 2017/18 to 2020/21. In total, the banks’
ability to cover unexpected withdrawals and loan losses is not compromised.
23
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
2017/18 2018/19 2019/20 2020/21 2021/22
Table 7
Investment to Total Deposit Ratio
Year Investment Total deposit Ratio
The highest ratio is 0.15 during the year 2020/21. The investment to total deposit ratio is lowest
in the first year and it follows increasing trend up to year 2020/21. Thereafter the ratio decreases
from the year 20190/20 to 2020/21.
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.
24
Investment to Total Deposit
0.16
0.14
0.12
0.10
0.08
0.06
0.04
0.02
0.00
2017/18 2018/19 2019/20 2020/21 2021/22
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 2021/22 2020/21 2020/19 2019/18 2018/17
25
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
Supplementary
Capital
(Tier2) 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
Total
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
26
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.
Table 9
27
During the study of EPS, it is found that the EPS is in peak in the initial year i.e.,
2017/18.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 2020/21 to
2021/22.
By the analysis of the figure 8, it is seen that EPS is continually decreasing. It reaches to RS
24.81 in 2021/22 from Rs 30.39 in the year 2020/21 which shows EPS to be in decreasing
trend. The earnings of each share of the bank are 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.
Table 10
Price-Earnings Ratio (P/E Ratio)
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2021/22 24.81 645 26.00
Noted from Annual reports of SCBNL
The PE ratio is highest during the year 2017/18. The ratio decreases to 22.44 times in the year
2020/21.After that, PE ratio increases to 26 times in the year 2021/22.
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 2020/21 for each rupee value of the stock.
However, the expectation of market increases in the final year (2021/22). 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
2017/18 2018/19 2019/20 2020/21 2021/22
The Liquidity ratio (cash and bank to current & savings deposit ratio) is 0.83(83%)
during the year 2021/22. The ratio shows decreasing trend from 2018/19 to 2020/21. 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 2017/18(0.45) to 2021/22
(0.25). Therefore, this fluctuation shows idle cash and bank balance not properly utilized.
It hurts financial performance.
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The ROA of bank from year 2019/20 to 2020/21 increases slightly and thereafter reaches
to 0.0170(1.70%) in the year 2021/22 which is again in decreasing trend. The decrease in
ROA during the year 2021/22 shows inefficiency in utilization of assets of the bank. The
performance of the management is less satisfactory in the year 2021/22 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 2017/18 and from 2018/19 to 2019/20. It shows better
financial performance of the bank in terms of profitability during those years. However,
there is decrease in ROE during the year 2017/18 and 2021/22.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 2017/18 to
2018/19. After that, the return on total deposit follows decreasing trend up to year
2021/22. 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 2020/21 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 2020/21. Thereafter the
ratio decreases from the year 2019/20 to 2021/22. This shows volatility in utilization 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.
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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 analyzed 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 analyzing 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.
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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 analyzing 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.
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
2020/21 for each rupee value of the stock. However, the expectation of market increases in
the final year (2021/22). 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.
32
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33
Websites:
https://www.sc.com/np/
www.nrb.org.np
https://www.simplilearn.com/financial-performance-rar21-article
https://www.investopedia.com
https://www.sharesansar.com/
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APPENDICES
Organizational chart
Head Transaction
Banking: Michael Siddhi
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