1

CHAPTER I
INTRODUCTION

1.1 Background of Study

Financial performance is a subjective measure of how well a firm can use assets from its
primary mode of business and generate revenues. This term is also used as a general measure
of a firm's overall health over a given period, and can be used to compare similar firms across
the same industry or to compare industries or sector in aggregation. Financial performance is
a subjective measure of how well a firm can use assets from its primary mode of business and
generate revenues. This term is also used as a general measure of a firm's overall financial
health over a given period, and can be used to compare similar firms across the same industry
or to compare industries or sectors in aggregation. Measuring the results of a
firm's policies and operations in monetary terms. These results are reflected in the
firm's return on investment, return on assets, value added, etc. There are many different ways
to measure financial performance, but all measures should be taken in aggregation. Line
items such as revenue from operations, operating income or cash flow from operations can be
used, as well as total unit sales. Furthermore, the analyst or investor may wish to look deeper
into financial statements and seek out margin growth or any declining debt.
([Link])

There are many different stakeholders in a company, including trade creditors, bond holders,
investors, employees and management. Each group has its own interest in tracking the
financial performance of a company. Analysts learn about financial performance from data
published by the company in form 10k, also known as the annual report. The 10k is a
required legal document that must be published by all public companies. The purpose of the
report is to provide stakeholders with accurate and reliable financial statements that provide
an overview of the company's financial performance. In addition, these statements are audited
and signed by the leadership of the company along with a number of other disclosure
documents. In this way, the 10k represents the most comprehensive source of information on
financial performance made available for investors on an annual basis. Included within the
10k are three financial statements, the balance sheet, the income statement and the cash flow
statement

Financial Statement Analysis allows managers, investors and creditors as well as potential
investors and creditors to teach conclusion about the recent and current status of a
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corporation. The checking of financial performance in a business deserves much attention in

carrying out the financial position. It also requires to retrospective analysis for the purpose of
evaluating the wisdom and efficiency of financial planning.

Financial performance analysis includes analysis and interpretation of financial

statements in such a way that it undertakes full diagnosis of the profitability and
financial soundness of the business. The financial analyst program provides vital
methodologies of financial analysis. The main focus of financial performance analysis is to
examine the financial performance of sampled banks in terms of loan & advance, investment,
return, interest, EPS, MPS, DPS, P/E ratio, etc. For this purpose different studies are going to
be done i.e. analyzing the overall financial position, comparing financial performance and
finding out the relationship and trend of deposit, investment, loans & advance and net profit.
For this different financial and statistical tools are analyzed.

1.2 Profile of Nepal Bank Limited

Nepal Bank Limited is the first commercial bank of Nepal. It was established in November
15, 1937 A.D (Kartik,30,1994 B.S). Which marked the beginning of an era of formal
banking in Nepal. It was formed under the principle of Joint venture (Joint venture between
govt. & general public). NBL's authorized capital was Rs. 10 million & issued capital Rs. 2.5
million of which paid-up capital was Rs. 842 thousand with 10 shareholders. The bank has
been providing banking through its branch offices in the different geographical locations of
the country.

From the very conception and its creation, Nepal Bank Ltd, was as joint venture between the
government and the private sector. Out of 2500 equity shares of NRs. 100 face value, 40%
was subscribed by the government and the balanced i.e. 60% was offered for the sale to
private sector. There were only 10 shareholders when the bank first started.

Nepal Bank limited is providing services to its customers from its 140computerized branches.
It provides deposit facility, various loan facilities, advanced ABBS service from 110
branches, Internet banking along with the ATM facilities all over the country.

Although the bank has to pass through a number of difficulties during its early years, yet it
has done pioneering work in taking the banking habit to people, who were generally used to
the traditional practices of monetary transactions in the non- monetized sector. Since NRB
was founded only as late as 1956, for a few years the Nepal Bank Limited has to manage,
 3

apart from commercial functions almost all banking transactions including those of the
government, however limited. The government to this bank also entrusted the entire business
of note exchange and related activities. Up to 1965, before the establishment of the RBB, the
bank was an authorized agent of the Rastra bank. In places where the RBB does not have
branches, it undertakes a number of activities including the foreign exchange buying and
selling business. The Nepal Bank has agencies in India, United States, Britain, Switzerland,
and West Germany. In those early years, the main functions of the bank were government
exchange, business and the advancing the money to the public against gold and silver.
Gradually, its transactions widened with expanding banking and commercial activities. The
Nepal Bank was set up a time, when banking was little known in the country, all banking
activities being limited to money lending.([Link])

1.3 Objective of the Study

The main objective of this study is aimed to evaluate the performance of the company by
using ratios as a yardstick to measure the efficiency of the company. It is also aimed to
understand the liquidity, profitability and efficiency position of the company during the study
period. This study also objectives to evaluate and analyze various fact of the financial
performance of the company and to make comparison between these ratios during different
periods. Therefore, to attain the mentioned objectives, following specific objectives have
been set:
 To examine the financial performance of NBL in terms of liquidity position and other
financial indicators.
 To analyze the profitability ratio and liquidity ratio.
 To analyze the relationship between total deposit, loan and advances and on
performing loan.

1.4 Rationale
Since of the study cover overall financial performance position of a firm, it can be a valuable
reference of its relative area. Furthermore, following points describes the significance of the
study.
 The report can be good assets of library and guidelines to fellow students and other
report writers.
 The reports help us to obtain practical knowledge regarding banking policies
regarding banking policies, financial and managerial infrastructure.
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 It can be helpful to other research regarding idea and concept of the topic.
 The report may be useful for banks as the suggestions and recommendations have
been provided.

1.5 Review
Gautam,(2061).has concluded that the mobilization of the domestic saving is one of the prime
objectives of the monetary policy in Nepal and Commercial Banks are the most active
financial intermediary for generating resources in the form of deposit of the private sector and
providing credit to the investors in different sectors of the economy.

Bambang, (2013). Conducted on “Capital Structure and financial performance :Empirical

evidence of bank listed in Indonesia Stock exchange”, published on the International Journal
of Business and Management Invention. The purpose of the study is to examine the effect of
risk on assets growth, income diversification, capital structure and financial performance and
to analyze the effect of assets growth and diversification on capital structure (debt to assets
ratio).The study found that credit risk doesn’t determine assets growth, income
diversification, capital structure and financial performance. Lower credit risk indicates higher
quality of go public bank management so they more trusted by investors(public).This study
revealed that empirical evidence shows the risk that managed effectively and actually have a
positive effect and more favorable for shareholders or investors.

Muhammad and Hafiz, (2014). had written an article “Analysis of financial performance of
private Banks in Pakistan”. This study deals with financial performance of private banks in
Pakistan. The data is collected from financial statement analysis of financial sector issued by
State bank of Pakistan. The sample size consists of top ten private commercial banks of
Pakistan. We used regression analysis and correlation technique in order to address the issue.
Bank size and operational efficiency is negatively related with ROA and positive relationship
was found with Assets management ratio. While bank size is positively related with interest
income and Assets management and operational efficiency is negatively related with interest
income.

Shrestha, (2014). in his article “Commercial Bank’s Comparative Performances Evaluation

Stresses on a Paper Risk Management” in the Economic Review depicted that adequacy
provisioning is the surest way to get relief from sinking loan after careful consideration of
portfolio risk. A clear out criteria is necessary to treat interest suspense account and it is
 5

advisable that all interest unpaid for more than six month need to treated as unearned income.
The bank should also prioritize their risk management on the aspects of credit management
The researcher further suggests regarding the risk management of the bank are any customer
having overdue loan of two years or more in his account should not be given other loan
facilities, strong provisioning or reservations are required in restructure portfolio relating to
overdue loans, all credit including overdraft should be given a maturity date and should be
subjected to revision at that time and consequently categorized as good substandard or
doubtful loans and financial credit worthiness of the borrower must be evaluated properly
before granting the loans.

Ibrahim, (2015). had published an article on “Measuring the financial performance of Islamic
Banks” measured the financial performance of two Islamic banks in United Arab Emirates
for the period of [Link] groups of financial ratios have been used to measure
the performance and make a comparison between these two banks. Although the results
showed that both banks did well, it appears that each bank has its focus on some area such as
liquidity, profitability, capital structure and stability. The findings showed that both bank
performed reasonably well during the period studied. While the bank of Sharjah benefitted by
having an overall higher degree of liquidity, profitability, management capacity and capital
structure. Dubai Islamic bank was better off in relation to share indicators performance and in
terms of overall stability.

Panta, (2017).in his article “Challenges in Banking: A Nepalese Study "states that the
banking sector of Nepal since last one decade is going through a rapid metamorphosis. The
need for sustainable growth through competition and prudent management has been the
matter of prime importance. The challenges for 2015 and beyond are evident, banks need to
refocus their strategy on strengthening their balance sheets and secure their specialized
markets. The recent changes in economic climate of the country is expected to bring peace
and stability, promoting the overall growth of the nation by focusing on industrialization and
infrastructure development. The bank should also prioritize their risk management on the
aspects of credit management and treasury operations, proactive approach in creating
specialized manpower in these areas shall enhance the efficient management. The bank shall
face more challenges in future as we are in a transformation phase to a modernized banking
from a traditional approach; it is clear that Nepalese will prove that they are productive
managers in managing the same.
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1.6 Research Methods

Research refers to search for knowledge. One can also define research as a scientific search
for pertinent information on a specific topic. In fact research is an art of scientific
investigation. The Advance Learner’s Dictionary of current English lay down the meaning of
research as “careful investigation or inquiry especially through search for new fact in any
branch of knowledge”. The research methodology that is adopted for the present study is
mentioned in this chapter which deals with research design, sources of data, data collection,
processing and tabulating procedure and methodology.

This study attempts to have an insight into the financial performance of Nepal Bank Limited.
A sound and systematic methodology is required to carry out any study, if it is to be
worthwhile.

1.6.1 Research Design

Keeping in mind the objective of the study, descriptive cum analytical research design has
been followed. The study is based on the wide range of the variables and factors influencing
financial decisions of the bank. The data of bank are presented in such a way so as to make
the report informative to the reader. Financial tools(Ratios) have been used to analyze and
interpret the balance sheet, income statement and other accounting information.
A research design is the arrangement of condition for collection and analysis of data in
manner that aims to combine relevance to the research purpose with economy in procedure.
Since the main objectives of this study is to analyze financial performance of the banks, all
the indicators that shows the financial performance of the banks were calculated using data
obtained from the five year end internally generated accounting records maintained by
sampled Banks. The study depends on the secondary data.

The study is design as to give a clear picture of the bank’s financial performance. On the
basis of financial statement and other available data and adopting this proposed research
design attempt is made to investigate into financial performance of the bank followed by
some useful suggestion and recommendations.

1.6.2 Nature and Sources of Data

Necessary data are collected from secondary sources. Secondary sources of data are the
information collected from books, journals, newspaper, annual reports. However, the major
sources of secondary data are as follows:-
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 Banking and Financial Statistic

 Annual Reports of the bank from 2017/18 to 2021/22
 Internet / Websites
 National newspaper, journals, and magazines
 Journals and other published and unpublished related documents.

Other than above mentioned sources, the information collected through verbal
communications with the staff of the related banks has also been used in the study.

1.6.3 Population and Sample

At present twenty seven Commercial banks are operating in Nepal. All the commercial banks
are considered as the population. It is not possible the study all the data related with all JVBs
because of the limited time period. Currently 21 Commercial banks are running in Nepal. The
recommendation and suggestions, which are derived from the study, by taking Nepal Bank
Limited as samples will be equally useful for the other commercial banks in Nepal.

1.6.4 Data Collecting Procedures

Various data obtained through different sources can’t be used directly for the analysis in their
original form. So, they have been rechecked, re-evaluated, edited and tabulated to bring them
into appropriate form for the analysis purpose. Due to confidentiality maintained by the bank
the researcher cannot collect all data from primary sources, but those important data which
are very necessary to achieve the objectives of this study are collected from secondary
sources. Especially the annual report of Nepal Bank and the website of concern Bank are
taken as main source of data collection for purpose of study. The annual reports of the
concerned banks were obtained from their head office and their websites. NRB publication,
such as Banking and Financial Statistics Economic Reports, Annual Reports of NRB etc, has
been collected from the personal visit of concerned department.

1.7 Limitation of the Study

None of the study can go beyond the boundary of some limitation and this study also not an
exception. The scope of the present study has been limited in terms of period of study as
well as sources and nature of data. The following are the major limitations of the study:
 The study covers the relevant data information only for five fiscal.
 The study was based on secondary data.
 Only one commercial bank was taken as sample
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CHAPTER-II
RESULTS AND ANALYSIS

2.1 Data Presentation and Analysis

In this chapter, data and information regarding overall financial performance of Nepal Bank
Limited are presented and analyzed. This analysis, attempts to throw light on various aspects
of the bank’s performance such as: deposit trend, investment, loan and advance, liquidity,
leverage, efficiency and earning power. The data are presented and analyzed in different
tables to arrive at some concrete and explicit obtained from various published and
unpublished financial statements, reports, bulletins, articles and so on. However, conclusions
have been derived on the basis of personal observation, informal interviews, and discussions
with the concerned officials and other financial experts.

Ratio Analysis
Ratio analysis is the process of determining and interpreting the numerical relationship based
on financial statements. A ratio is a statistical yardstick that provides a measure of the
relationship between two variables or figures. This relationship can be expressed as a percent.
Ratios are simple to calculate and easy to understand.

Liquidity Ratio
A liquidity ratio is an indicator of whether a company’s current assets will be sufficient to
meet the company’s obligations when they become [Link] analyzing the financial
performance of the firm, liquidity ratio is one of the powerful tools, whether the company is
able to meet its current obligation is judged by liquidity ratio. A high liquidity ratio shows the
financial strength of the firm. The following ratios are evaluated and interpreted under the
liquidity ratio:
i) Current Ratio
ii) Cash and Bank Balance to Total Deposit Ratio
iii) Cash and Bank Balance ot Current Assets Ratio

(i) Current Ratio

Current ratio represents the amount of liquid i.e. cash and near cash assets available to the
business which can be converted into cash within a year and current liability gives the
indication of the upcoming cash requirements which are payable within a year from current
assets satisfactory.
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Current Assets
Current Ratio=
Current Liabilities
Table No.1
Current Ratio (Rs in Million)
Fiscal Year Current Assets Current Ratio %
Liabilities
2017/18 59,430 59,878 0.99
2018/19 54,926 60,696 0.90
2019/20 70,891 67,787 1.05
2020/21 90,200 75,340 1.20

2021/22 99,401 75,855 1.31

(Source: Annual Report)

120,000

100,000

80,000

Current Assets
60,000
Current Liabilities
Ratio %
40,000

20,000

0
2017/18 2018/19 2019/20 2020/21 2021/22

Figure: 1 Current Ratio

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The Table 1 and Figure 1 shows the liquidity position of NBL in terms of current assets to
current liabilities. The current ratio of NBL ranges the highest of 1.31times in the fiscal year
2021/22 and the lowest of 0.90times in the fiscal year 2018/19.
The mean ratio of NBL is 1.09times that can be concluded that the bank is not meeting the
standard ratio i.e. 2:1. Although its current ratio can be considered good, as its current assets
excess current liabilities, there is increasing trend of current ratio of [Link] above analysis
indicates that the bank is in sound liquidity position. By measuring coefficient of variation,
one can draw the conclusion that NBL is more uniformity since it has CV of 13.47%.and SD
of 0.15.

ii) Cash and Bank Balance to Total Deposit Ratio

Total deposits consist of current deposit, saving deposit, fixed deposit, money at call or short
notice and other deposits. This ratio shows the proportion of total deposits held as compared
to the most liquid assets. High ratio shows the strong liquidity position of bank and vice
versa. It is calculated by dividing cash bank balance by total deposits.

Cash∧Bank Balance
Cash and Bank Balance to Total Deposit =
Total Deposit

Table No. 2
Cash and Bank Balance to Total Deposit Ratio (Rs in million)
Fiscal Cash and Bank Balance Total Deposit Ratio %
Year
2017/18 14,188 62,984 22.53
2018/19 6,660 69,338 9.6
2019/20 9,011 77,999 11.55
2020/21 15,616 89,410 17.47
2021/22 17,673 93,944 18.81
(Source: Annual Report)
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5
4.5
4
3.5
3
2.5 Ratio
Series2
2
1.5
1
0.5
0
2017/18 2018/19 2019/20 2020/21 2021/22

Figure:2 Cash and Bank Balance to Total Deposit Ratio

The table 2 and Figure 2 shows the liquidity position of the NBL in terms of cash and bank to
total deposit. The higher ratio is 22.53% in FY 2017/18 and the lowest ratio is 9.6% in FY
2017/[Link] mean ratio is 15.99% which specifies that the bank is volatile to maintain cash
reserve ratio as per NRB directives.
iii) Cash and Bank Balance to Current Assets Ratio
This ratio measures the proportion of most liquid assets i.e. cash and bank balance among the
total current assets of bank. Higher ratio indicates the bank’s ability to meet the daily cash
requirement of their customer’s deposits.
Cash∧Bank Balance
Cash and Bank Balance to current Assets=
Current Assets

Table No 3
Cash and Bank Balance to Current Assets (Rs in million)
Fiscal year Cash and Bank Current assets Ratio%
Balance
2017/18 14,188 59,430 23.87
2018/19 6,660 54,926 12.13
2019/20 9,011 70,891 12.71
2020/21 15,616 90,200 17.31
2021/22 17,673 99,401 17.78
(Source: Annual Report)
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5
4
3
Ratio
2 Series2
1
0
2017/18 2018/19 2019/20 2020/21 2021/22

Figure:3 Cash and Bank Balance to Current Assets

The Table 3 and Figure 3 shows the cash and bank balance to current assets ratio of [Link]
ratio ranges the highest of 23.87% in the FY 2017/18 and the lowest of 12.13% in the FY
2018/19.

Activity Ratio/ Utilization Ratio

Activity ratios are employed to evaluate the efficiency with which the firm manages and
utilizes its assets. These ratios are also called turnover ratios because they indicate the speed
with which assets are being converted or turned over into profit generating assets. This
includes investment to total deposit ratio, loans and advances to total deposit ratio, loans and
advances to saving deposit ratio and total income generating assets to total deposit ratio.

The following ratios are calculated under this group.

i. Loan and Advance to Total Deposit Ratio

i) Loan and Advance to Total Deposit Ratio

The ratio is calculated by dividing loan and advance by total deposits.

Loan∧ Advance
Loan and Advance to Total Deposit =
Total Deposit

Table No. 4
Loan and advance to Total Deposit Ratio (Rs in million)
Fiscal year Loan and advances Total Deposit Ratio%

2017/18 35,612 62,984 56.54

2018/19 39,035 69,338 56.30
2019/20 50,971 77,999 65.35
2020/21 61,250 89,410 68.50
2021/22 71,746 93,944 76.37
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(Source: Annual Report)

5
4.5
4
3.5
3
2.5 Ratio
2 Series2
1.5
1
0.5
0
2017/18 2018/19 2019/20 2020/21 2021/22

Figure:4 Loan and advance to Total Deposit Ratio

The Table 4 and Figure 4shows loan & advance to total deposit ratio of NBL which depicts
that the loan and advances to total deposit ratio are in fluctuating trend. In the fiscal year
2020/21 loan & advance to total deposit ratio is highest i.e. 76.37% . The average loan &
advance to total deposit ratio is 64.61% over the study period.

Credit Efficiency Ratios

This ratio has been used to evaluate managerial efficiency and proper utilization of assets for
credit management. It is necessary for every bank to control risk and reduce the risk related to
deposits. Following ratios have been made to analysis the credit efficiency of NBL.

i. Loan loss provision to loan and advances ratio

ii. Loan loss provision to Non Performing Loan Ratio
iii. Non Performing loan to Loan and Advance Ratio

i) Loan Loss Provision to Loan and Advances Ratio

This ratio indicates the amount of loan loss provision, a cushion for the possibility of defult,
to total loans and advances of a bank. Increase in loan loss provision decreases its profit and
result to decrease in [Link] low ratio signifies the good quality of assets in the volume
of loan and advances and makes efforts to cope with probable loan loss. Higher ratio implies
that the bank has the higher proposition of NPL in the bank loan portfolio. The ratio is
calculated by using following formula.
Total loan Loss Provision
Total loan Loss Provision to Total Loan =
Total Loan
Table 5
Loan Loss Provision to total loan (Rs in million)
Fiscal Year Loan loss provision Total loan Ratio %
2017/18 795 35,612 2.23
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2018/19 1077 3,035 2.76

2019/20 1462 50,971 2.87
2020/21 2022 61,250 3.30
2021/22 2121 71,746 2.96

(Source: Annual Report)

5
4.5
4
3.5
3
2.5 Ratio
2 Series2
1.5
1
0.5
0
2017/18 2018/19 2019/20 2020/21 2021/22

Figure: 5 Loan Loss Provision to total loan

The mean ratio of LLP to total loan is 2.82, which reflect the proposition of bad loan in bank
portfolio. In general practice provision for loan loss should be 100% of the total non
performing loan. Higher value of this ratio indicate the high proportion of bad loan in bank
loan portfolio and vice versa. The value of SD of LLP to total assets ratio is 0.35which
indicates the posssibility of fluctuation on mean value

ii) Loan loss Provision to Non performing ratio

Total Loan Loss provision
Loan loss Provision to NPL Ratio =
Total NPL

Table 6
Loan loss Provision to NPL Ratio (Rs in million)
Fiscal Year Loan loss Provision NPL Ratio %
2017/18 795 1535 51.79

2018/19 1077 1718 62.69

2019/20 1462 2212 66.09

2020/21 2022 2552 79.23

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2021/22 2121 4810 44.09

(Source: Annual Report)

Ratio
5

4.5

3.5

3
Ratio
2.5

1.5

0.5

0
2017/18 2018/19 2019/20 2020/21 2021/22

Figure: 6 Loan Loss Provision

The mean ratio of LLP to NPL is 60.78, which is better than that of industry average. The
ratio is 51.79%,62.69%,66.09%,79.23%, 44.09% from the year 2017/18 to 2021/22
respectively. In general practice 100% of this ratio is prefered but NBL has better position.
iii) Non Performing Loans to Loan and Advance Ratio
NRB has directed all the commercial banks to create loan loss provision against the doubtful
and bad debts. This ratio helps in minimizing the non performing loans and helps to control
the [Link] is calculated as:

Non performing Loan

NPL ¿ loan∧Advance Ratio=
Loan∧ Advance

Table No. 7
NPL to Loan and Advance Ratio (Rs in million)
Fiscal Year NPL Loan and advances Ratio %
2017/18 1535 35,612 4.31
2018/19 1718 39,035 4.40
2019/20 2212 50,971 4.34
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2020/21 2552 61,250 4.17

2021/22 4810 71,746 6.70
(Source: Annual Report)

4.5

3.5

2.5 Ratio
Series2
2

1.5

0.5

0
2017/18 2018/19 2019/20 2020/21 2021/22

Figure:7 NPL to Loan and Advance Ratio

The Table 7 and Figure 7 depicts the non-performing loan to loan and advance over the five-
year study period. The ratio of NBL ranges the highest of 6.70% in FY 2020/21and the
lowest is 4.17% in FY2019/20.

Profitability Ratio
The overall financial efficiency for the both short - term and the long - term obligations are
reflected by this ratio. The bank should be able to produce adequate profit on each rupee of
investment. The following ratios are calculated under the profitability ratios.
i. Return on Total Assets (ROA)
ii. Returns on Shareholders Equity (ROE)
iii. Net profit to loan and Advance Ratio

i) Return on Total Assets

This ratio measures the profitability of the bank with respect to total Assets. It measures the
profitability of all financial resources i.e. total assets investment in the banks. Return will be
higher if the bank’s total assets are well managed and utilized efficiently. It is calculated as
net profit dividing by total assets.
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Net Profit
Return on Total Assets (ROA) =
Total Assets

Table No. 8
Return on Total Assets (Rs in million)
Fiscal Year Net Profit Total Assets Ratio%
2017/18 792 70.776 1.12
2018/19 717 77,980 0.92
2019/20 483 88,211 0.55
2020/21 2,883 103,479 2.79
2021/22 3,118 112,057 2.78
(Source: Annual Report)

Ratio
5
4.5
4
3.5
3 Ratio
2.5
2
1.5
1
0.5
0
2017/18 2018/19 2019/20 2020/21 2021/22

Figure: 8 Return on Total Assets

The Table 8 and Figure 8 shows net profit, total assets and their ratiosof NBL from the fiscal
year 2017/18 to 2021/22 The ratio of NBL ranges the highest of 2.79% and the lowest is
0.55% in FY 2019/20 and 2017/18 respectively .

ii) Return on Shareholder’s Equity (ROE)

This ratio gives an insight of profitability of the bank in relation to shareholders fund to raise
the profit. The higher ratio represents the higher efficiency of the bank in utilizing the long-
term funds of shareholders Total shareholders’ equity consists of preference share capital,
ordinary share capital, share premium and reserve and surplus less accumulated losses.. It is
calculated as net profit divided by shareholders equity.

Net Profit
Return on Shareholders’ Equity =
Shareholders Equity
Where,
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Net profit is net profit after tax.

Table No. 9
Return on Shareholder’s Equity (ROE) (Rs in million)
Fiscal Year Net Profit Total Equity Ratio
2017/18 792 209 8.9
2018/19 717 3347 21.42
2019/20 483 3831 12.61
2020/21 2,883 6216 46.38
2021/22 3,118 4634 67.29
(Source: Annual Report)

Ratio
5
4.5
4
3.5
3 Ratio
2.5
2
1.5
1
0.5
0
2017/18 2018/19 2019/20 2020/21 2021/22

Figure: 9 Return on Shareholder’s Equity (ROE)

The Table 9 and Figure 9 shows the net profit, shareholder’s Equity and their ratio of NBL
from the fiscal year 2017/18 to 2021/[Link] this period, the average return is -46.25% which
indicates that the return on equity for the bank is not good i.e. not effectiveness of
management in earning profit.

iii) Net profit to Loan and advances Ratio

Net profit reveals the performance of the bank. It shows the efficiency of management. It
shows the capacity of management in utilizing available [Link] profit increment plays a
vital role of the bank. The ratio of net profit to total loan and advances reveals the profit in
comparison to total loan and advance disbursed.
Net Profit
Net profit to loan and advance Ratio =
Total Loan∧ Advance
The higher ratio denotes the capacity of bank for earning net profit by investing the amount
on loan and advances and vice versa.
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Table No. 10
Net profit to loan and Advance Ratio (Rs in million)
Fiscal Year Net Profit Loan and Advance Ratio %
2015/16 792 35,612 2.22
2016/17 717 39.035 1.84
2017/18 483 50,971 0.95
2018/19 2883 61,250 4.71
2019/20 3,118 71,746 4.35
(Source: Annual Report)

Ratio
5
4.5
4
3.5
3 Ratio
2.5
2
1.5
1
0.5
0
2017/18 2018/19 2019/20 2020/21 2021/22

Figure:10 Net profit to loan and Advance Ratio

The Table.10 and Figure 10 shows the net profit to loan and advance ratio and their ratio of
NBL from the fiscal year 2017/18 to 2021/[Link] ratio is the highest of 4.71% and lowest of
0.95% respectively.

2.2 Major Findings

The preceding chapter have discussed and explored the facts and matters required for the
various parts of the study. Analytical part of the study, which is the heart of the study, makes
and analysis of various aspects of the financial performance of commercial banks by using
some important financial tool as well as statistical tools. Having completed the basic analysis
required for the study, the final and most important task of the researcher is to en list findings
issues and gap of the study and gives suggestions for further improvement. This would be
meaningful to the top management of the bank to initiate action and achieve the desired
result. The objective of the researchers is not only to point errors and mistakes but also to
 20

correct them and give directions for further growth and improvement. The main findings of
the study that are derived on the basis of financial data analysis of Nepal Bank Ltd are
presented below:

 The current ratio of NBL ranges the highest of 1.31 times in the fiscal year 2021/22
and the lowest of 0.90 times in the fiscal year 2017/18. .The mean ratio of NBL is
1.09 times, that can be concluded that the bank is not meeting the standard ratio i.e.
2:[Link] its current ratio can be considered good, as its current assets excess
current liabilities, there is increasing trend of current ratio of [Link] above analysis
indicates that the bank is in sound liquidity position.
 Liquidity position of NBL is in sound condition. The cash and bank balance to total
deposit ratio ranges the highest of 22.53% in the FY 2017/18 and the lowest of 9.6%
in the FY 2018/19. The fluctuation on mean value of cash and bankk balance to total
deposit ratio is 15.99%. In this reason the liquidity position is sound and high level
compared to the directives prescribed by NRB

 The cash and bank balance to current assets ratio of NBLratio ranges the highest of
23.87% in the FY 2017/18 and the lowest of 12.13% in the FY 2018/19..The average
cash and bank balance to current assets ratio

 The loan and advances to total deposit ratio are in fluctuating [Link] has the
highest ratio of 76.37% in the FY 2021/22 and the lowest ratio is 56.30% in the FY
2018/[Link] average loan & advance to total deposit ratio is 64.61% over the study
period which is relatively low than that of standard determined by NRB i.e 80%.
however, low level of this ratio also indicates the sound liquidity position but it
adversely affect on profitability of NBL.

 The total loan to total assets ratio of NBL ranges the highest of 64.03% in the fiscal
year 2021/22 and the lowest of 50.03% in the fiscal year 2017/18. The average loan &
advance to total assets ratio is 56.28% over the study period which is relatively low
than of industry average..

 The non-performing loan to total loan ratio ranges the highest of 6.70% in FY
2021/22 and the lowest is 4.17% in FY 2020/21.
 The study shows the net profit, total assets and their ratios of NBL from the fiscal
year 2017/18 to 2021/2 The ratio of NBL ranges the highest of 2.79% and the lowest
is 0.55% in FY 2021/22 and 2020/21 respectively .
21
 22

CHAPTER–III
SUMMARY AND CONCLUSION

This chapter is dedicated to provide conclusions after analyzing the financial performance of
Nepal Bank limited. It also tries to provide recommendations to the concerned bank from the
conclusion derived from the study for more better and efficient performance of Nepal Bank
[Link] this chapter, reasercher presents the briefing of the whole study, which is
presented in two parts namely; Summary and Conclusion. So, this is gist of the whole
study.

3.1 Summary
The modern banking system that we have today has passed the several stages before reaching
the present stages. Because of the liberal economic policy adopted by Nepalese government a
number of commercial banks are operating in Nepal today. As a result,22 commercial banks
are competing with each other in their business today. Among various commercial banks,
Nepal bank limited is one of them. The role of commercial banks in economical growth of
nation can be estimated to be prominent. Thus,economic development is not possible without
the proper development of banking sector in a country, as banks are the real facilator for
mobilizing the resources.

Under this study, the researcher has tried to cover the various aspects of the selected bank
covering the period of five FY from 2017/18 to 2021/22.. Considering the importance of
sound financial performance of commercial bank, this search aimed at studying the financial
performance of selected commercial bank. Out of total population of 22commercial banks
one bank was taken assample.

3.2 Conclusion
In current scenario, the major challenge of NBL is competition among 22commercial bank
as well as development bank also. Bank needs proper handeling of several problems. In this
context,the study concluded that the financial performance of NBL is sound in recent years.
All the liquidity ratio, activity ratio, efficiency ratio and profitability ratio of NBL is better in
final year. The liquidity ratio is good and it is concluded that NBL has better solvency
position. By measuring coefficient of variation, conclusion can be drawn that NBL has
uniformity in maintaining liquidity position. The trend of liquidity ratio is increasing and that
indicate the bank is in sound liquidity position.
 23

Profitability ratio is one of the main indicators for analysing the financial performance of a
firm. A bank should able to produce adequate profit on each rupee of investment. In this
study since NBL has not effectively utilized its assets through mobilizing its deposit, it has
acquired less profit. However, the trend analysis also forecast the higher profit in future.

NBL has strong synchronization between deposit and loan and advances, loan loss provision
and loan and advances, on performing loan and loan and advances since the relationship
between them was statistically significant. The trend analysis forecast the increasing rate of
loan and advances, net profit as well as loan loss provision and non-performing loan in
[Link] will struggle for better financial performance in future. However, a good
financial performance can be expected in future as it was able to maintain continuous profits
in past years.
 24

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