literature review of nabil bank

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Research report of nabil bank limited

Strategic management (gem 302), tribhuvan vishwavidalaya.

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Liquidity and profitability analysis of nabil bank, a project work report.

Prajwal Bhusal

T. Registered No.: 7-2-271-112-

Symbol no.: 702710093, people’s campus, paknajol kathmandu, submitted to, the faculty of management, tribhuvan university, in partial fulfillment of the requirements for the degree of, bachelor of business studies, kathmandu, nepal, february, 2022, declaration.

I hereby declare that the project work entitled LIQUIDITY AND PROFITABILITY ANALYSIS OF NABIL BANK LIMITED submitted to the Faculty of Management, Tribhuvan University, Kathmandu is an original piece of work under the supervision of Rajendra Raya, faculty Member, People’s campus Paknajol Kathmandu, and is submitted in partial fulfillment of the requirements for the degree of Bachelor of Business Studies (BBS). This project work report has not been submitted to any other university or institution for the award of any degree or diploma.

........................

Prajwal Bhusal date:

ENDORSEMENT

We hereby endorse the project work report entitled LIQUIDITY AND PROFITABILITY ANALYSIS OF NABIL BANK LIMITED submitted by Prajwal Bhusal of People’s Campus, Paknajol, Kathmandu, in partial fulfillment of the requirements for the degree of the Bachelor of Business Studies (BBS) for external evaluation.

................................ .................................

Gopal Krishna Shrestha Chhatra Mangal Bajracharya Chairperson, Research Management Committee Campus Chief Date: Date:

ACKNOWLEDGMENTS

I would like to express my sincere gratitude to several individuals and organizations for supporting me throughout my research study. First, I wish to express my sincere gratitude to my supervisor, Sabin Shrestha, for his enthusiasm, patience, insightful comments, helpful information, practical advice and unceasing ideas that have helped me tremendously at all times in my research and writing of this report.

I would also thank my friends for helping me throughout the study with their guidance and support.

REFERENCES ............................................................................... ..

Appendices .............................................................................., list ot tables.

• Table 1 Current ratio..............................................................................
• Table 2 Cash and bank balance to current assets ratio.......................................
• Table 3 Cash and bank balance to total deposit ratio.........................................
• Table 4 Earning per share........................................................................
• Table 5 Return on Assets........................................................................
• Table 6 Return on equity.........................................................................
• Table 7 Net profit to loan and advance ratio...................................................
• Table 8 Correlation coefficient between cash balance and deposit........................

ABBREVIATION

AGM : Annual General Meeting CCD : Cash Concentration and Disbursement EPS : Earning Per Share NGIB : Nilgiri Bikas Bank Limited NIBL : Nepal Investment Bank Limited POL : Position Of Liquidity ROE : Return on Assets ROA : Return on Equity

INTRODUCTION

Background of the study

Liquidity is the word that the bankers use to describe his ability to satisfy demand for cash, in exchanging of deposits. Liquidity simply means money less. It is characterized by the use of converting an asset into money at a little cost. In the assets side of the balance sheet of the commercial bank, will be liquid assets, which can be easily converted into cash- such assets are called liquid assets. In another words, a liquid assets is one which can easily expendable, marketable (transferable) and has capital certainly. Hence, managing and maintaining sufficient degree of liquid assets is termed as liquidity. Liquidity can also be defined as the bank’s ability to meet immediate maturing liabilities. Liquid assets mainly include, Money at call and short deposit, Investment in government securities such as treasury bills, development bonds, saving bonds etc. Among these, first two are the most liquid assets and next two are termed as near-liquid assets. But both of these assets are maintain to meet the liquidity needs of bank. But, however, one difference among these is that, the most liquid assets don’t earn same returns whereas the near-liquid asset does.

According to Nepal Commercial Bank Act 2031, 1 (f), “Liquidity is supposed to include bank cash in vault, amount deposited in current account, amount deposited in Nepal Rastra Bank and those assets which are specified as liquid. The liquidity management function of a bank is regular one. Each and every bank attach with great importance of liquidity for maintaining confidence of customer and its survival. The importance of liquidity is considered very sensitive because if it can’t maintain the liquidity, it has to pay fine. The commercial banks and financial institutions should keep the stock of liquid assets in the ratio of their deposit liability, as fixed by the Nepal Rastra Bank. For the bank, the words liquidly and profitability come again and again. They are in no possibility of profitability without liquidity and also there is no growth in liquidity

CCD ratio stands at a tight 76 percent. Its paid up capital now stands at Rs 8 arba with a reserve of Rs 8 arba. Its annualized EPS has now reached Rs 46, net worth per share at Rs 209 with P/E ratio of 21.

Nabil, the first foreign joint venture bank of Nepal, started operations in July 7, 1984. Nabil was incorporated with the objective of extending international standard modern banking services to various sectors of the society. Nabil provides a range of commercial banking services through its 74 points of representation across the country and over 170 correspondent banks across the globe. It was earlier known as Nepal Arab Bank Ltd. It has its head office located at Nabil Center, Durbar marg, which is also a premium location of the capital. It has the largest staff among private commercial banks of Nepal. Nabil bank limited, the first foreign joint venture bank of Nepal, started operations in July 1984 AD. Nabil was incorporated with the objective of extending international standard modern banking services to various sectors of the society. Pursuing its objective Nabil provides a full range of commercial banking services through its 19 points of representation across the kingdom and over reputed correspond banks across the globe.

Nabil as a pioneer in introducing many innovative products and marketing concepts in the domestic banking sector represents a milestone in the banking history of Nepal as it started as an era of modern banking with customer satisfaction measured as a focal objective while doing business. Nabil provides a full range of commercial banking services through its outlets spread across the nation and reputed correspondent bank across the globe. Moreover, Nabil has a good name in the market for its highly personalized services to the customers. The Head Office of NABIL Bank Ltd. is located at NABIL House, Kamaladi, and Kathmandu, one of the main cities in the capital of Nepal. Nabil Bank Limited is the nation’s first private sector bank, commencing its business since July 1984. Nabil was incorporated with the objective of extending international standard modern banking services to various sectors of the society. Pursuing its objective, Nabil provides a full range of commercial banking services through its 74 points of representation. In addition to this, Nabil has presence through over 1500 Nabil Remit agents throughout the nation.

Nabil, as a pioneer in introducing many innovative products and marketing concepts in the domestic banking sector, represents a milestone in the banking history of Nepal as it started an era of modern banking with customer satisfaction measured as a focal objective while doing business. Operations of the bank including day-to-day operations and risk management are managed by highly qualified and experienced management team. Bank is fully equipped with modern technology which includes international standard banking software that supports the E-channels and E-transactions. Nabil is moving forward with a Mission to be “ 1st Choice Provider of Complete Financial Solutions ” for all its stakeholders; Customers, Shareholders, Regulators, Communities and Staff. Nabil is determined in delivering excellence to its stakeholders in an array of avenues, not just one parameter like profitability or market share. It is reflected in its Brand Promise “ Together Ahead”**.** The entire Nabil Team embraces a set of Values “C.R.I.S”, representing the fact that Nabil consistently strives to be Customer Focused, Result Oriented, Innovative, Synergistic and Professional.

Statement of the Problem

As like many other commercial banks in Nepal, Nabil bank also has fluctuating financial performances over past few years. So, the study will be carried out in order to know what has affected the financial performance of the Nabil bank. Similarly, the aim of the study is to know about the structural position of Nabil with the help of various ratios. Along with that, this study will help in knowing the causes of various such problems which had been leading Nabil bank’s financial performance over past few years.

Objective of the Study

As per NABIL Act, NABIL related to the commercial banking system has its own objectives for the welfare of the general people of Nepal. The main objectives of NABIL Bank Ltd. are as follows:

• To examine the profitability position i. EPS, ROE and ROA.
• To assess out the ‘Position of Liquidity’ i. current ratio and quick ratio.
• To assess the condition of cash movement in NABIL Bank Ltd

Conceptual review

According to M. Pandey, ”Financial analysis is the process of identifying the financial strengths and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account. Management of the firm can undertake it or by parties outside the firm.” The focus of the financial analysis is on the key figure contained in the financial statement and significant relationship existed. Management of the firm is generally interested in every aspect of the financial analysis; they are responsible for the overall efficient and effective utilization of the available resources and financial position of the firm. The vertical and horizontal analysis could be done for the financial analysis. The vertical analysis consists of financial Balance sheet, profit and loss Account of a certain period time only, which is known as static analysis. Likewise, the horizontal analysis consists of a series of statement relating to the number of years are reviewed and analyzed. It is also known as dynamic analysis that measures the change of the position or trend of the business over the number of years. In this study, the horizontal analysis has been adopted to find out the financial indicator of the NBL and NABIL over the period of FY 1997/98 to 2001/02. The steps of analysis are as follows:

• Selection of the information relevant to the decision.
• Arrangement or the selected information to highlight the significant relationship of the financial yardsticks.
• Interpretation and drawing of inferences and conclusions

To evaluate the financial performance of a firm, the analyst needs a certain parameters of the company by which the quantitative relationship and its position come out. The most widely and effective used tool of the financial analysis is the ratio analysis. The financial ratio is the measurement of relationship between two accounting figures, expressed in mathematical way or the numerical relationship between two variables expressed as (i) percentage or, (ii) fraction or (iii) in proportion of numbers.

Review of journals and articles

Further R .Sayers in his book Modern Banking Writers, “Ordinary banking business consist of changing cash for bank deposits and bank deposits from one person to

corporation (one depositor to another) giving bank deposits in exchange for bill of exchange, government banks recurred and unsecured promises businessmen to repay.“

Erich A. H. in his book has described financial analysis as “analytic and judgmental process that helps to answer the questions that have been properly posed to and therefore, it is a mean to an end. We can stress enough that financial analysis is an aid that allows those responsible for results to make sound decisions.”

I. Pandey says, "A firm should ensure that it does not suffer from lack of liquid. And also that it is not too much highly liquid. The failure of a company to meet its obligations, due to lack of sufficient liquidity will result in bad credit image. Loss of creditor’s confidence, or even in low suits resulting in the closure of the company. A very high degree of liquidity is also bad; idle assets earn nothing. The firm’s funds will be unnecessarily tied up in current assets. Therefore, it is necessary to strike a proper balance between liquidity and lack of liquid.

Liquidity is measured by the speed with which a bank’s assets can be converted into cash and other current obligations. It is also important in view of survival and growth of a bank.

Review of thesis

Various thesis works have done in different aspects of commercial banks such as lending policy, interest rate structure investment policy, resource mobilization, and capital structure etc.

Mr. Pragun Shrestha in his study ,”A comparative Analysis of Financial performance of the Selected commercial Banks”, Concluded that many of the banks are of the view that political instability in the country is mainly responsible for the decline of the lending opportunities. Few banks ascribed it to the economic crisis that occurred in Asia pacific region .No one felt that higher rates on interest on lending to be a major factor. At one time, it should target not only the urban sector, it should go to the rural sector also. They have to explore all the potential sectors like tourism etc. in order to generate high rate of profits.

Source of Data

The source of data means the place or materials from which the required data have been found. There are mainly secondary data’s are available for study for student i. the main source of data is Balance Sheet of the concerned bank. Beside this the sources from where data can be found out one as follows:

Secondary Data

The source of secondary data is those, which has been collected by other people. Here the secondary data include AGM’S report of NABIL Bank Ltd. Covering fiscal year 2013/ to 2017/18 publish by various institutions.

Internal Source

• Annual reports of NABIL
• Interim performance report

External Source

• Book publications
• Articles from newspapers

Tools Used for Data Analysis

The collected and observed data is tabulated after adjusting necessarily amounts of each overhead. However, for the analysis of the data, following financial tools were used.

Financial tools

Under financial tools, the study has used two different types of ratios in order to know about liquidity situation and profitability situation of the institution. The two ratios and further sub-divided into multiple branches. They are as presented below:

Liquidity Ratio

 Current Ratio  Cash and Bank balance to current assets Ratio  Cash and bank balance to total deposits Ratio

Profitability Ratio

 Earning Per Share (EPS)  Return on Assets (ROA)  Return on Equity (ROE)  Net profit to loan and advance ratio

Statistical Tools

 Mean  Standard Deviation  Coefficient of variation

Limitations of the Study

• The study period will cover only from 2016/17 to 2020/21.
• Because of the one- month time, it is different to make a study in depth.
• The main focus is given to the quantitative aspect rather qualitative aspect.
• The case study is confined to only on organization, which is NABIL Bank Ltd.
• The case study is mainly based on secondary data through annual report of bank brochure and newspaper. So, validity of the finding depends on the reliability of those data.
• Multiple Choice

Course : Strategic management (gem 302)

University : tribhuvan vishwavidalaya.

• Discover more from: Strategic management gem 302 Tribhuvan Vishwavidalaya 209   Documents Go to course
• More from: Strategic management gem 302 Tribhuvan Vishwavidalaya 209   Documents Go to course