FINANCIAL PERFORMANCE OF STANDARD CHARTERED

BANK NEPAL LIMITED

A Project Work Report

By
Risana Maharjan
T.U. Registration No.:7-2-0039-0400-2013
Shanker Dev Campus
Roll no.: 133/070
4th year exam symbol no.: 390560
Proposal no.: 87
Finance Group

Submitted to
The Faculty of Management
Tribhuvan University
Kathmandu

In Partial Fulfillment of the Requirement for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Kathmandu, Nepal
May, 2017
 DECLARATION

I hereby declare that the project work entitled FINANCIAL PERFORMANCE OF

STANDARD CHARTERED BANK NEPAL LIMITED submitted to the Faculty of
Management, Tribhuvan University, Kathmandu is an original peace of work under the
supervision of Dr. Kapil Khanal, faculty member, Shanker Dev Campus, Putalisadak,
Kathmandu and is submitted in partial fulfillment of the requirements for the award of 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.

RISANA MAHARJAN

Date:

i
 SUPERVISORS RECCOMANDATION

The project work report entitled FINANCIAL PERFORMANCE OF STANDARD

CHARTERED BANK NEPAL LIMITED submitted by Risana Maharjan of Shanker
Dev Campus, Putalisadak, Kathmandu is prepared under my supervision as per the
procedure and format requirement laid by the Faculty of Management, Tribhuvan
University, as partial fulfillment of the requirements for the award of the degree of
Bachelor of Business Studies (BBS). I, therefore, recommend the project work report
for evaluation.

..
Dr. Kapil Khanal
Shanker Dev Campus
Date:

ii
 ENDORSEMENT

We hereby endorse the project work report entitled FINANCIAL PERFORMANCE

OF STANDARD CHARTERED BANK NEPAL LIMITED submitted by Risana
Maharjan of Shanker Dev Campus, Putalisadak, Kathmandu in partial fulfillment of
the requirements for award of the Bachelor of Business Studies (BBS) for external
evaluation.

..
Prof. Dr. Kamal Deep Dhakal Asso. Chief Krishna Prasad Acharya
Head of Research Committee Shanker Dev Campus
Date: Date:

iii
 ABSTRACT

This project report entitled to Financial Performance of Standard Chartered Bank

Nepal Limited. The main objective of the study is is to analyze financial position of
the bank. It is the process of identifying the financial strength and weaknesses of the
firm properly establishing the relationship between the items of balance sheet and
profit and loss account. The details regarding the history and finance detail of the
bank were collected through the website of the bank. Secondary data are based on the
annual report of 2011/12 to 2015/16.

The financial tool used for the study is ratio analysis. Chart and table are used for
better understanding. Through ratio analysis the bank could understand the liquidity,
profitability, leverage and turnover position of the bank.

The bank is able to meet the short term obligation, is following the high debt to equity
and the bank is effective in generating the profit. On the other hand turnover is not
sufficient for the healthy business.

iv
 ACKNOWLEDGEMENT

This is an attempt to present project report entitled FINANCIAL PERFORMANCE

OF STANDARD CHARTERED BANK NEPAL LIMITED prepared for partial
fulfillment of the requirement for Degree of Bachelor of Business Studies (BBS) is an
outcome of continuous and immeasurable cooperation and support of several hands.

I express my sincere honor and special sense of gratitude to my academic supervisor,

Dr. Kapil Khanal, for their generous guidance, thoughtful encouragement and brilliant
insight throughout this research work.

..

Risana Maharjan

Roll no. :133/070

Faculty of Management

Shanker Dev Campus

Putalisadak, Kathmandu

v
 TABLE OF CONTENTS

Declaration i

Supervisors recommendation ii

Endorsement iii

Abstract iv

Acknowledgement v

Table of content vi

List of table ix

List of figures x

Abbreviations xi

Contents page no.

CHAPTER I: INTRODUCTION 1
1.1 Background of study 1

1.2 Problem of statement 3

1.3 Objective of study 4

1.4 Significance of study 4

1.5 Report structure 5

CHAPTER II: RELATED LITERATURE REVIEW 6

2.1 Conceptual review 6

2.1.1 Liquidity ratio 8

2.1.2 Profitability ratio 8

2.1.3 Debt management ratio 9

vi
 2.1.4 Activity ratio 10

2.2 Review of previous work 10

2.3 Research gap 13

CHAPTER III: RESEARCH METHOD 14

3.1 Research design 14

3.2 Type of research 16

3.3 Population and sample 16

3.4 Type of data 16

3.5 Data collection procedure 17

3.6 Technique of analysis 17

3.6.1 Liquidity ratio 17

3.6.2 Profitability ratio 18

3.6.3 Debt management ratio 19

3.6.4 Activity ratio 20

3.7 Limitation of study 21

CHAPTER IV: RESULTS AND FINDINGS 22

4.1 Presentation and analysis of data 22

4.1.1 Liquidity ratio 23

4.1.2 Profitability ratio 24

4.1.3 Debt management ratio 32

4.1.4 Activity ratio 36

4.2 Major findings 40

CHAPTER V: DISCUSSION AND CONCLUSION 43

5.1 Discussion 43

5.2 Conclusion 43

vii
5.3 Recommendation 45

REFERENCE 46

viii
 LIST OF TABLE

No. Content page no.

4.1 Current ratio 23

4.3 Net profit margin 25

4.2 Net operating profit to total assets ratio 27

4.3 Return on assets 29

4.4 Return on equity 31

4.5 Debt to assets ratio 33

4.6 Debt to equity ratio 35

4.7 Total assets turnover ratio 37

4.8 Fixed assets turnover ratio 39

ix
 LIST OF FIGURES

No. Figures page no.

4.1 Current ratio 24

4.2 Net profit margin 26

4.3 Net operating profit to total assets ratio 27

4.4 Return on assets 29

4.5 Return on equity 31

4.6 Debt to assets ratio 33

4.7 Debt to equity ratio 35

4.8 Total assets turnover ratio 37

4.9 Fixed assets turnover ratio 39

x
 ABBREVIATIONS

FY : Fiscal year

i.e. : That is

ROA : Return on assets

ROA : Return on equity

SCBNL : Standard Chartered Bank Nepal Limited

T.U. : Tribhuvan University

xi
 Chapter I

Introduction

1.1 Background of study

Financial performance analysis is the process of identifying the financial strength and

weaknesses of the firm by properly establishing the relationship between the items of

balance sheet and profit and loss account. It also helps in short term and long term

forecasting and growth can be identified with the help of financial performance

analysis. Financial performance analysis can be considered as a heart of financial

decision. The growth and development of any enterprise is directly influenced by the

financial policies. Financial performance as a part of the financial management is the

main indicator of the success or failure of the firm. There is different person or

institutions that affect or are affected by the decision of the firm. Financial condition

of the firm should be sound from the point of view of shareholder, debenture holder,

financial institution and nation as whole.

The proper analysis and interpretation of financial statements are felt necessary in

corporate banks, private enterprises, and similarly other organizations to find out what

information are indicated from their balance sheet and income statement as well as

other necessary accounting information. On the basis of this information, it becomes

easy to check out the problem faced by the corporations. A capable financial manager

must select best analytical tools (such as Ratio Analysis) to determine the liquidity,

profitability, turnover and capital structure of the corporation.

1
The financial analysis is used to diagnose the strengths and weaknesses in the

corporations performance. It provides a framework for the financial planning and

control. As there has been number of joint venture banks in Nepal, the present aim is

to analyze the financial performance analysis of the Standard Chartered Bank just to

be assured whether they can put equal contribution in the economic growth of the

country or not.

Background of Standard Chartered Bank Ltd Nepal

Standard Chartered Bank Nepal Limited has been in operation in Nepal since 1987

when it was initially registered as a joint-venture operation. Today the Bank is an

integral part of Standard Chartered Group having an ownership of 75% in the

company with 25% share owned by the Nepalese public. The Bank enjoys the status

of the largest international bank currently operating in Nepal.

Standard Chartered has a history of over 150 years in banking and operates in many

of the worlds fasted-growing markets with an extensive global network of over 1700

branches (including subsidiaries, associates and joint ventures ) in over 70 countries

in the Asia Pacific Region, South Asia, the Middle East, Africa, the United Kingdom

and the Americas. As one of the worlds most international banks, Standard Chartered

employs almost 87000 people, representing over 115 nationalities, worldwide. This

diversity lies at the heart of the Banks values and supports the Banks growth as the

world increasingly becomes one market.

With 15 points of representation, 23 ATMs across the country and with more than 450

local staff, Standard Chartered Bank Nepal Ltd. is in a position to serve its clients and

2
customers through an extensive domestic network. In addition, the global network of

Standard Chartered Group gives the Bank a unique opportunity 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 encompassing individuals, mid-

market local corporations, airlines, hotels as well as the DO segment comprising of

embassies, aid agencies, NGOs and INGOs.

1.2 Statement of problem

Financial management aspect is considered to be the vital and integral part of overall

management of any enterprise, ensuring financial strength through adequate cash

flow, liquidity and better utilization of assets. There is no doubt that the survival of

the existing commercial banks and other financial institutions depend upon how they

manage their assets and liabilities to maximize their profits with the minimum

exposure of assets to risk, and are guided by three important conflicting criteria of

solvency, liquidity and profitability. Therefore, the financial management is the main

indicator of the success or failure of any business firm.

This study attempts to evaluate the financial performance of the bank with the help of

various financial and statistical tools. This study also attempts to recommend some

suggestions for improvement in financial performance aspect. This study was focused

on the financial performances of standard chartered bank Nepal limited. Therefore,

this study has aimed in answering the following research question:

What is the liquidity position of the bank?

3
 What is the financial performance trend of the bank during the period?

Has the bank been used its capital efficiently?

1.3 Objective of study

The main objective of the study is to evaluate the financial performance of standard

chartered bank Nepal limited with the help of ratio analysis. Besides, the specific

objectives are to support the evaluation of the efficiency and progress of this bank:

To analyze liquidity, leverage, activity, profitability and ownership ratios of

the bank.

To access profitability situation

1.4 Significance of the study:

Analysis of financial position and statement is a crucial part of financial decision

making of business enterprise. Poor financial management affect adversely on

liquidity, turnover and profitability. It is required to measure the financial position of

the enterprise periodically is order to ensure smooth functionally and enterprise of

great national concern. Thus, the study is made to evaluating the financial position of

Standard Chartered Bank Nepal Limited.

In fact, efficient financial performance is a mirror, which shows the weakness and

strength of the banking sector. Therefore, the significant is not the establishment of

banks but how effectively they are doing their performance. Thus, the study for

purpose only takes into consideration the financial performance of the Standard

Chartered Bank Nepal Limited.

4
1.5 Research structure

This study includes five chapters are as follows:

Chapter 1: Introduction

Introduction chapter includes introduction about the topic, problem statement,

objective of the study and report structure.

Chapter 2: Literature review

It includes conceptual review, review of previous work, and research gap.

Chapter 3: Research methods

Research method refers to the various steps to adopt by researcher in studying a

problem with certain objective in view. It includes type of research, type of data, data

collection procedures and technique of analysis.

Chapter 4: Result and findings

This chapter is the main part of the research. This chapter analyzes the data related

with the study and finding of the study and comments briefly on them.

Chapter 5: Discussion and conclusion

This chapter deals with discussion and conclusion. It also deals with implementation.

5
 CHAPTER II

RELATED LITERATURE REVIEW

Review of literature the study of concepts and a crucial aspect of planning of study

i.e. developed in the area of same kind of research. This chapter highlights up on the

existing literature and research studies about the related financial performance of

different concepts. Most of the studies are of comparative type between two

commercial banks in Nepal. But this study is exclusively of Standard Chartered Bank

Nepal Limited regarding its financial performance of last five year.

2.1 Conceptual Reviews

Financial performance analysis is a study of relationship among the various financial

factor to pinpoint the strengths and weaknesses of a firm in order to forecast the

prospects for future earnings. Financial performance analysis is determines the

solvency of a business concern and the measure of efficiency of operation as

compared to similar concerns. The analysis reveals how far the dream and ambition of

the top management have been converted into reality during each financial year.

Financial performance as a part of the financial management is the main indicator of

the success or failure of the firm. There are different persons/institutions that affect or

are affected by the decision of the firm. Financial condition of business firm should be

sound from the point of view of shareholder, debenture holders, financial institution

and nation as whole.

6
Financial analysis is the process of identifying the financial strength and weaknesses

of the firm by properly establishing relationship between the items of the Balance

Sheet and the Profit and Loss Account. (Pandey, 1999:104)

Financial Statement Analysis is largely a statement of relationship among the various

financial factors in business as disclosed by the single set of statements and study of

the trend of these factors as shown in a series of statement. (Myer, 1961:102)

In financial analysis, a ratio is used as a benchmark for evaluating the financial

position. (Pandey, 1999:104)

Financial analysis identifies the financial strengths and weaknesses of the firm with

the help of basis financial statements. For these purposes, ratios help the analysts to

make qualified judgments about the firms financial positioned performances.

Ration analysis is one of the most commonly used techniques in the analysis of

financial statement and evaluation of managerial performance. The analysis points out

the problems. If there are any areas of business operation and provides a basis out the

corrective actions. There are many parties who often refer to financial ratio in order to

keep track of their investment performance of for some other reasons of their

interest. (Pradhan, 1992:35)

Ratio analysis is the process of determining and interpreting numerical relationships

based on financial statements. A ratio is a statistical yardstick that provides a measure

of the relationship between two variable and figures. This relationship can be express

as present (cost of goods sold as a percentage of sales) or as a quotient (current assets

as a certain number of times the current liabilities) (Kerlinger, F.N. 2002).

7
Much type of financial ratios, calculated from the accounting data, can be grouped

into various classes according to financial activity or function to be evaluated. For our

purpose, some selected financial ratios applied in this study are as follows:

2.1.1 Liquidity ratio

Liquidity ratio measure a firms ability to pay its short-term obligations out of current

assets. These ratios focus on current assets and current liabilities. They are used to

ascertain the short-term solvency of a firm.

Current ratio

The current ratio measures the ability of the firm to meet obligations due within one

year. This ratio assumes a regular cash flow and that both accounts receivable and

inventories can be readily converted into cash. It measures a normal liquidity of a

firm. It is computed by dividing the total of current assets by the total of current

liabilities.

2.1.2 Profitability ratio

Profitability measures how effectively the firm is being operated and managed. But a

sole profit figure cannot justify its significance. It should be compared with other

relevant figures like sales, assets, owners equity etc. The major ratio used to measure

the profitability of a firm are as follows:

8
A. Net profit margin

Net profit margin is the ratio between net profit and operating income. It shows the

operating efficiency of generating net income per operating income.

B. Net operating profit to Total Assets Ratio

Net operating profit is the profit before interest and taxes (EBIT). Net operating profit

to total assets ratio is useful to measure the profitability ratio before interest and taxes

to all financial resources invested in the banks assets.

C. Return on assets

It measures the overall effectiveness of management in generating profit with its

available assets.

D. Return on equity

It measures the return on the owners investment in the firm. The owners investment

refers to the equity capital employed by the firm.

2.1.3 Debt management/leverage ratio

Leverage ratio measures the extent to which firm is using debt financing or financial

leverage and the degree of safety afforded to creditors.

A. Debt ratio

It is also known as debt to assets ratio. It measures the percentage of the firms assets

financed by creditor.

9
B. Debt-Equity ratio

The debt-equity ratio is measures the long term financial solvency of a firm. The debt-

equity ratio is calculated by dividing total debt by shareholders equity.

2.1.4 Activity ratio

Activity ratio is also known as assets management ratio or efficiency ratios or

turnover ratios. These ratios provide the measure for how effectively the firms assets

are being managed. Activity ratios include the following:

A. Total assets turnover ratio

It measures the overall utilization of firms total assets. It includes current assets,

fixed assets and investment.

B. Fixed assets turnover ratio

It measures how effectively the firms uses its fixed assets like plant and equipment,

building and other long term assets to generate income.

2.2 Review of Previous Work

Various project works have been done in different aspects of commercial bank such

as lending policy, investment policy, financial performance analysis, resources

mobilization and capital structure. The review of some previous study, which is

10
relating to the Nepalese banking sector, is the most relevant sources and assistant for

the research.

Pudasaini (2015), conducted his study on A Study on Financial Performance

Analysis of Nabil Bank Limited

The major objectives of the study are:

To analyze the financial performance of sampled bank.

To known the liquidity position of the NABIL BANK.

To see the debt management and profitable position of the NABIL BANK

The major findings of the study are:

The trend of deposit and investment of the bank is increasing trend but the

ratio of investment is fluctuating trend.

The ratio of net profit to investment of Nabil bank is fluctuating.

Thakuri (2009), has carried out a research work on the topic A Thesis on financial

performance on standard chartered bank Nepal limited

The major objectives of the study are:

To analyze the financial strengths and weakness of standard chartered bank

To analyze the financial performance of standard chartered bank

To study about the present position of the standard chartered bank.

11
The major findings of the study are:

It is found that the bank is able to maintain liquidity position to meet the daily

cash requirement or meet its short-term obligations.

The researcher found that bank has strong position regarding the mobilization

of total deposit as loan and advances. Hence, the bank seems to be successful

in making investment in profitable sectors other than loan and advances.

Lamichhane (2009), has conducted study on a study on financial performance of

standard chartered bank Nepal limited

The major objectives of the study are:

To analyze liquidity, leverage, activity, profitability and ownership ratios of

the bank.

To assess profitability situation.

To analyze the Bankruptcy Score of the bank.

The major findings of the study are:

The current ratio analysis of the bank over the ten years period indicates that

the bank is able to meet its short-term obligations and has sound liquidity

position.

The analysis indicates that the bank has the best mobilization of its fixed

deposit in loans and advances for income generating purpose.

12
 The analysis indicates that the bank has the high debt-equity ratio, which

means the creditors have invested more in the bank than the owners.

Pokharel, (2013) has conducted a study on Financial performance analysis of

commercial banks in Nepal. He has selected EBL and BOK.

The major objectives of the study are:

To excess the financial performance of commercial banks.

To analysis the priority sector investment and financial ratio analysis.

The major findings of the study are:

The changes in percentage in all deposits are in increasing trend. But last of

the study period it is little fluctuate.

The analysis reveals that the banks attraction towards total deposit seems to be

satisfactory. Though the percentage changes are not stable, the change in ratio

is in average. In case of percentage change in credit amount, the banks

attraction towards credit amount is satisfactory.

2.3 Research Gap

The purpose of this research is to develop some expertise in ones area, to see what

contributions can be made and to receive some ideas, knowledge and suggestions in

relation to financial performance of Standard Chartered Bank Nepal Limited. Thus the

previous studies cannot be ignored because they provide the foundation to the present

study. In other words, there has to be continuity in research. This continuity in

13
research is ensured by linking the present study with the past research studies. This is

how research gap will be fulfilled.

Main objective of the study is to analyze whether the Standard Chartered Bank Nepal

Limited has the right level of profitability and liquidity. To achieve this objective,

various financial and statistical tools are used. The study can be beneficial to all

concerned parties and people as well.

14
 Chapter III

RESEARCH METHODS

Research method is a way to systematically solve the research problem. It refers to the

various sequential steps that are to be adopted by a research during the course of

studying a problem with certain objectives.

3.1 Research Design

Research design is a framework of research which helps to collection, measurement

and analysis of data. It helps to select research methods considering to limited

resources. Research design is a plan and structure to find out the solution of the

problem. It is road map to start process and conclude the research work. The design

may be a specific presentation of the various steps in the research process. This step

include the selection of a research problem, presentation of the problem, formulation

of hypothesis, conceptual clarity and methodology, survey of literature and

documentation, bibliography, data collection, testing of hypothesis, interpretation,

presentation and report writing.

15
3.2 Type of Research

The research is conducted to acquire depth knowledge about financial performance of

SCBNL. Through basic research we can generate more knowledge and understanding

of financial performance of SCBNL. So, basic research is suitable for the study.

3.3 Population and Sample

All the 28 commercial banks in 2016 that are operating in Nepal are considered as the

population for the research study. It is not possible to study all the data related with all

joint venture banks because of the limited period, hence only one joint venture bank

i.e. Standard Chartered Bank Nepal Limited has been selected as the sample for the

present study from the whole population.

3.4 Type of Data

As the present study is being undertaken to evaluate the performance of the SCBNL,

mostly the secondary sources of data are used in the study. The secondary data are the

related publications of commercial banks and central bank as well as other related

publications from financial institute and consultants. Likewise; newspaper, annual

report, periodicals, journals and unpublished thesis has been taken in account during

the study. The website of the selected bank is also used to get information related to

the study.

16
3.5 Data Collection Procedure

The required financial data and information have been collected from the balance

sheet and profit and loss account of the bank. The collected secondary data were

compiled and processed in order to achieve the objective of the study. The data are

tabulated on the following sequences:

The financial data have presented according to time series, which are of five

years starting from the fiscal year

The data were analyzed with the help of ratios, percentage, average and time

change.

3.6 Technique of Analysis

The tabulated data were analyzed with the help of various fundamental financial tools.

The following financial ratios have been used to analyze the data:

3.6.1 Liquidity Ratio

Liquidity ratio measure a firms ability to pay its short-term obligations out of current

or liquid assets. These ratios focus on current assets and current liabilities. They are

used to ascertain the short-term solvency of a firm. The two primary ratios used to test

the liquidity of a firm are current ratio and quick ratio. But here we only use current

ratio for test.

Current ratio

17
The current ratio measures the ability of the firm to meet obligations due within one

year. This ratio assumes a regular cash flow and that both accounts receivable and

inventories can be readily converted into cash. It measures a normal liquidity of a

firm. It is computed by dividing the total of current assets by the total of current

liabilities. It is calculated as:

current assets
Current ratio=
current liabilities

3.6.2 Profitability Ratios

Profitability ratios are measures of performance that indicate the amount of firm is

earning relative to some base, such as sales, assets, or equity.

A. Net Profit to Total Deposit Ratio

Net profit margin is the ratio between net profit and operating income. It shows the

operating efficiency of generating net income per operating income. It is calculated

as:

Net profit
Net profit margin=
Total operating income

B. Net operating profit to Total Assets Ratio

Net operating profit is the profit before interest and taxes (EBIT). Net operating profit

to total assets ratio is useful to measure the profitability ratio before interest and taxes

to all financial resources invested in the banks assets. This ratio is calculated as:

18
 Net operating profit
Net operating profit to Total assets ratio=
Total assets

C. Return on Assets(ROA)

Return on assets measures the overall effectiveness of management in generating

profit with its available assets. It is calculated as:

Net income
ROA=
Total assets

D. Return on Equity(ROE)

The return on equity measures the return on the owners investment in the bank. It is

calculated as follows:

Net income
ROE=
Total equity

3.6.3 Debt Management Ratios

It is also known as leverage ratios or capital structure ratio. It is the measure of long

term solvency. Following ratios fall under this heading:

A. Debt Ratio

It is also known as debt assets ratio. It shows the proportion of total debt used to

finance total assets of a bank. It is calculated as:

19
 Total debt
Debt ratio=
Total assets

B. Debt Equity Ratio

This ratio expresses the relationship between debt capital and equity capital, and

reflects the relative claim of them on the assets of the bank. It is also calculated as:

Total debt
Debt equity ratio=
Total equity

3.6.4 Activity Ratio

Activity ratio is also known as assets management ratio or efficiency ratios or

turnover ratios. These ratios provide the measure for how effectively the firms assets

are being managed. Activity ratios include the following:

A. Total Assets Turnover Ratio

It measures the overall utilization of firms total assets. It includes current assets,

fixed assets and investment. It is calculated as:

Total operating income

Total assets turnover ratio=
Total assets

B. Fixed Assets Turnover Ratio

It measures how effectively the firms uses its fixed assets like plant and equipment,

building and other long term assets to generate income. It is calculated as:

20
 Total operating income
Fixed assets turnover ratio=
Net fixed assets

3.7 Limitation of the Study

Every field of activity has their own limitation. No one can perform their activity by

ignoring this limitation. This study has attempted to evaluate the financial

performance of the Standard Chartered Bank Limited Nepal. Every study has its own

limitations. This study is also not an exception. No study can be free from its own

limitations. So, the present study has also some limitations. Reliability of statistical

tools used and lack of research experience are the major limitations. The following are

the limitation of the study:

This study has been carried out based on the published financial documents

such as balance sheets, profit and loss accounts, related journals, magazines

and books. These published documents have their own limitations.

The study has been based on the secondary data only.

The study has been focused on the financial performance of Standard

Chartered Bank Nepal Limited with the help of financial tools.

The conclusion drawn up from this study may or may not be applicable to

other commercial banks in Nepal.

This study covers only the latest five fiscal years from 2011/12 to 2015/16.

21
 CHAPTER IV

RESULT AND FINDING

4.1 Presentation and Analysis of Data

Presentation and analysis of data means to show the accurate data and perform its

presentation clearly or informatively. The main aim of this chapter is presentation and

analysis of data according to research method to attain the objective of this study. In

this chapter, an attempt has been made to analyze the financial performance of

SCBNL for its operational period of five years that is 2011/12 to 2015/16. The data

for this study are presented in tabular form and are analyzed with the help of financial

tool i.e. financial analysis which are described in chapter 3.

Financial performance analysis

Financial performance analysis is the process of identifying the financial strength and

weaknesses of the firm by properly establishing relationship between the items of

balance sheet and profit and loss account.

A ratio analysis is a mathematical relationship between two related items expressed in

quantitative form. A ratio may be expressed in proportion, in rate or items, or in

percentage. Hence, analysis of financial statement with the help of ratio may be

termed as ratio analysis. The ratios which can be used for financial position analysis

of a bank have been mentioned in brief bellow.

22
4.1.1 Liquidity Ratio

Liquidity refers to the solvency of the firms overall financial position. The following

ratio is used to measure the liquidity position of SCBNL with help of financial data of

past five years of the bank.

Current ratio

The ratio, one of the most commonly cited financial ratio, measures the firms ability

to meet its short-term obligations. It is expressed as follows:

Current assets
Current ratio=
Current liabilities

Following table shows the current ratios of SCBNL from FY 2011/12 to 2015/16.

Table 4.1

Current assets to current liabilities ratio (current ratio)

(In millions)

Fiscal year Current assets Current liabilities Ratio

2011/12 41588 37555 1.11

2012/13 45550 41014 1.11

2013/14 53255 48236 1.10

2014/15 64843 58978 1.10

2015/16 65115 57161 1.14

Average 54070.2 48588.8 1.11

Source: annual report of SCBNL

23
 Figure no. 4.1

current ratio
1.15

1.14

1.13
current ratio

1.12

1.11
current ratio
1.1

1.09

1.08
2011/12 2012/13 2013/14 2014/15 2015/16
fiscal year

Source: annual report of SCBNL

The above table 4.1 and figure 4.1 shows that the current ratio of SCBNL has always

exceeded one that means current assets of SCBNL have always exceeded current

liabilities for the study period of 2011/12 to 2015/16. The bank has the highest current

ratio of 1.14 in 2015/16 and lowest current ratio of 1.10 in 2013/14 and 2014/15 with

an average current ratio of 1.11 during the study period. In general, it can be said that

the bank is able to short-term obligations.

4.1.2 Profitability ratio

Profitability is the mirror of success for every commercial bank. There are many

measures of profitability. Each relates the returns of the firm to its sales, assets, and

equity. The profitability ratios are calculated to measure the operating efficiency.

24
A. Net Profit Margin

Net profit margin is the ratio between net profit and operating income. It shows the

operating efficiency of generating net income per operating income. It is calculated

as:

Net profit
Net profit margin=
Total operating income

Following table shows the net profit to total deposit ratios of SCBNL from FY

2011/12 to 2015/16.

Table 4.2

Net profit margin

(In millions)

Fiscal year Net profit Operating income Ratio (in %)

2011/12 1169 2638 44.31

2012/13 1218 2777 43.86

2013/14 1337 2913 45.90

2014/15 1290 2928 44.05

2015/16 1292 2885 44.78

Average 1261.2 2828.2 44.59

Source: annual report of SCBNL

25
 Figure 4.2

Net profit margin

45
40
35
Ratio (in %)

30
25
20
ratio
15
10
5
0
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal year

Source: annual report of SCBNL

The above table 4.2 and figure 4.2 shows that net profit margin of SCBNL varies

from maximum of 45.90% in FY 2013/14 to the minimum of 43.86% in FY 2012/13

with average of 44.59% during the study period of five years. The analysis indicates

that the net profit margin is fluctuating over observation period.

B. Net Operating Profit to Total Assets Ratio

Net operating profit to total assets ratio is useful to measure the profitability ratio

before interest and taxes to all financial resources invested in the banks assets. This

ratio is calculated as:

Net operating profit

Net operating profit to Total assets ratio=
Total assets

Following table shows the net operating profit to total ratios of SCBNL from FY

2011/12 to 2015/16.

26
 Table 4.3

Net operating profit to total assets ratio

(In millions)

Fiscal year Net operating profit Total assets Ratio (in %)

2011/12 1694 41677 4.06

2012/13 1862 45631 4.08

2013/14 1979 53324 3.71

2014/15 1827 64927 2.81

2015/16 1701 65186 2.61

Average 1812.6 54149 3.35

Source: annual report of SCBNL

Figure 4.3

Net operating profit to total assets ratio

4.5
4
3.5
Ratio (in %)

3
2.5
2
Ratio
1.5
1
0.5
0
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal year

Source: annual report of SCBNL

27
The above table 4.3 and figure 4.3 shows that net operating profit to total assets of

SCBNL varies from maximum of 4.08% in FY 2012/13 to the minimum of 2.61% in

FY 2015/16 with an average of 3.35% during the study period of 5 years. The analysis

indicates that the net operating profit to total assets shows increasing trend in first

year but decreasing trend in final years of observation period.

C. Return on Assets Ratio

This ratio is a useful measurement of the profitability of all financial resources

invested in the banks assets. It is calculated as:

Net profit
ROA=
Total assets

Following table shows the return on assets ratios of SCBNL from FY 2011/12 to

2015/16.

28
 Table 4.4

Return on assets ratio

(In millions)

Fiscal year Net profit Total assets Ratio (in %)

2011/12 1169 41677 2.80

2012/13 1218 45631 2.67

2013/14 1337 53324 2.51

2014/15 1290 64927 1.99

2015/16 1292 65186 1.98

Average 1261.2 54149 2.33

Source: annual report of SCBNL

Figure 4.4

Return on assets
3

2.5
Ratio (in %)

1.5
ratio
1

0.5

0
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal year

Source: annual report of SCBNL

29
The above table 4.4 and figure 4.4 shows the return on assets ratio of SCBNL varies

from maximum of 2.80% in FY 2011/12 to the minimum of 1.98% in FY 2015/16

with an average of 2.33% during the study period of 5 years. The analysis indicates

that the net operating profit to total assets shows decreasing trend over the observation

period.

D. Return on Equity

The return on equity measures the return on the owners investment in the bank. It is

calculated as follows:

Net income
ROE=
Total equity

Following table shows the return on equity ratios of SCBNL from FY 2011/12 to

2015/16.

30
 Table 4.5

Return on equity

(In millions)

Fiscal year Net profit Equity Ratio (in %)

2011/12 1169 4122 28.36

2012/13 1218 4618 26.37

2013/14 1337 5088 26.28

2014/15 1290 5949 21.68

2015/16 1292 7524 17.17

Average 1261.2 5460.2 23.10

Source: annual report of SCBNL

Figure 4.5

Return on equity
30

25

20
Ratio (in %)

15

10 ratio

0
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal year

Source: annual report of SCBNL

31
In the above table 4.5 and figure 4.5 shows the net profit to total equity ratio (ROE) of

SCBNL varies from maximum of 28.36% in year 2011/12 to the minimum of 17.17%

during the study period of 5 years. The analysis indicates that ROE of SCBNL shows

decreasing trend over the observation period. Decreasing trend is unfavorable for the

bank.

4.1.3 Debt Management Ratio

Debt management ratio or leverage ratio measures the proportion of outsiders capital

in financing the firms assets, and are calculated by establishing relationships between

borrowed capital and equity capital. A firm should have a strong short-term liquidity

as well as long-term financial position. The following ratio is used to measure the

debt management ratio:

A. Debt Ratio

Debt ratio shows the relationships between creditors funds and owners capital. This

ratio is calculated by dividing the total debt of the bank by its total assets, which is

presented below:

Total debt
Debt ratio=
Total assets

Following table shows the debt to total ratios of SCBNL from FY 2011/12 to

2015/16.

32
 Table 4.6

Debt to total assets ratio

(In millions)

Fiscal year Total debt Total assets Ratio (in %)

2011/12 37555 41677 90.11

2012/13 41014 45631 89.88

2013/14 48236 53324 90.46

2014/15 58978 64927 90.84

2015/16 57661 65186 88.46

Average 48688.8 54149 89.99

Source: annual report of SCBNL

Figure 4.6

Debt ratio
91.5
91
90.5
90
Ratio (in %)

89.5
89
88.5 ratio
88
87.5
87
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal year

Source: annual report of SCBNL

33
The above table 4.6 and figure 4.6 shows the debt to total assets ratio of SCBNL

varies from maximum of 90.84% in FY 2014/15 to the minimum of 88.46% in FY

2015/16 with an average of 89.99% during the study period of 5 years. The analysis

indicates that an average of 89.99% of the total assets of the bank financed through

debt capital.

B. Debt to Equity

The debt to equity ratio indicates the relationship between the long term funds

provided by creditors and those provided by the firms owners. This ratio is calculated

by dividing the total debt of the bank by its total equity, which is presented below:

Total debt
Debt equity ratio=
Total equity

Following table shows the debt to equity ratios of SCBNL from FY 2011/12 to

2015/16.

34
 Table 4.7

Debt to equity ratio

(In millions)

Fiscal year Total debt Total equity Ratio (in times)

2011/12 37555 4122 9.11

2012/13 41014 4618 8.88

2013/14 48236 5088 9.48

2014/15 58978 5949 9.91

2015/16 57661 7524 7.66

Average 48688.8 5460.2 8.92

Source: annual report of SCBNL

Figure 4.7

Debt to equity ratio

12

10
Ratio (in times)

4 Ratio

0
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal year

Source: annual report of SCBNL

35
The above table 4.7 and figure 4.7 shows debt to equity ratio varies from maximum of

9.91 times in FY 2014/15 to minimum of 7.66 times in year 2015/16 with an average

of 8.92 times during the study period of 5 years. The analysis indicates that the bank

has the high debt to equity ratio, which means the creditors have invested more in the

bank than owners.

4.1.4 Activity Ratio

Activity ratio is also known as assets management ratio or efficiency ratios or

turnover ratios. These ratios provide the measure for how effectively the firms assets

are being managed. Activity ratios include the following:

A. Total Assets Turnover Ratio

It measures the overall utilization of firms total assets. It includes current assets,

fixed assets and investment. It is calculated as:

Total operating income

Total assets turnover ratio=
Total assets

Following table shows the total assets turnover ratios of SCBNL from FY 2011/12 to

2015/16.

36
 Table 4.8

Total assets turnover ratio

(In millions)

Fiscal year Operating income Total assets Ratio (in times)

2011/12 2638 41677 0.06

2012/13 2777 45631 0.06

2013/14 2913 53324 0.05

2014/15 2928 64927 0.04

2015/16 2885 65186 0.04

Average 2303.8 54149 0.04

Source: annual report of SCBNL

Figure 4.8

Total assets turnover ratio

0.07
0.06
0.05
Ratio (in times)

0.04
0.03
ratio
0.02
0.01
0
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal year

Source: annual report of SCBNL

37
The above table 4.8 and figure 4.8 shows total assets turnover ratio of SCBNL varies

from maximum of 0.06 times in FY 2011/12 and 2012/13 to minimum of 0.04 times

in year 2014/15 and 2015/16 with an average of 0.04 times during the study period of

5 years. The analysis indicates that the banks total assets turnover ratio is declining

trend which is unprofitable for bank.

B. Fixed assets turnover ratio

It measures how effectively the firms uses its fixed assets like plant and equipment,

building and other long term assets to generate income. It is calculated as:

Total operating income

Fixed assets turnover ratio=
Net fixed assets

Following table shows the debt fixed assets turnover ratios of SCBNL from FY

2011/12 to 2015/16.

38
 Table 4.9

Fixed assets turnover ratio

(In millions)

Fiscal year Operating income Net fixed assets Ratio (in times)

2011/12 2638 90 29.31

2012/13 2777 82 33.87

2013/14 2913 69 42.22

2014/15 2928 84 34.86

2015/16 2885 71 40.64

Average 2828.2 79.2 35.71

Source: annual report of SCBNL

Figure 4.9

Fixed assets turnover ratio

45
40
35
Ratio (in times)

30
25
20
15 ratio
10
5
0
2011/12 2012/13 2013/14 2014/15 2015/16
Fiscal year

Source: annual report of SCBNL

39
The above table 4.9 and figure 4.9 shows the net fixed assets turnover ratio of SCBNL

varies from maximum of 42.22 times in FY 2013/14 to minimum of 29.31 times in

year 2011/12 with an average of 35.71 times during the study period of 5 years. The

analysis indicates that the banks fixed assets turnover ratio is fluctuating over the

observation period.

4.2 Major Finding

The following are the findings of the above analysis:

The bank has the highest current ratio of 1.14 in 2015/16 and lowest current

ratio of 1.10 in 2013/14 and 2014/15 with an average current ratio of 1.11

during the study period from 2011/12 to 2015/16. In general, it can be said that

the bank is able to meet the short-term obligations and has sound liquidity

position.

The net profit margin of SCBNL varies from maximum of 45.90% in FY

2013/14 to the minimum of 43.86% in FY 2012/13 with average of 44.59%

during the study period of five years. The analysis indicates that the net profit

margin is fluctuating over observation period.

The net operating profit to total assets of SCBNL varies from maximum of

4.08% in FY 2012/13 to the minimum of 2.61% in FY 2015/16 with an

average of 3.35% during the study period of 5 years. The analysis indicates

that the net operating profit to total assets shows increasing trend in first year

but decreasing trend in final years of observation period.

40
 The return on assets ratio of SCBNL varies from maximum of 2.80% in FY

2011/12 to the minimum of 1.98% in FY 2015/16 with an average of 2.33%

during the study period of 5 years. The analysis indicates that the net operating

profit to total assets shows decreasing trend over the observation period.

The net profit to total equity ratio (ROE) of SCBNL varies from maximum of

28.36% in year 2011/12 to the minimum of 17.17% during the study period of

5 years. The analysis indicates that ROE of SCBNL shows decreasing trend

over the observation period. Decreasing trend is unfavorable for the bank.

The debt to total assets ratio of SCBNL varies from maximum of 90.84% in

FY 2014/15 to the minimum of 88.46% in FY 2015/16 with an average of

89.99% during the study period of 5 years. The analysis indicates that an

average of 89.99% of the total assets of the bank financed through debt

capital.

The debt to equity ratio varies from maximum of 9.91 times in FY 2014/15 to

minimum of 7.66 times in year 2015/16 with an average of 8.92 times during

the study period of 5 years. The analysis indicates that the bank has the high

debt to equity ratio, which means the creditors have invested more in the bank

than owners.

The total assets turnover ratio of SCBNL varies from maximum of 0.06 times

in FY 2011/12 and 2012/13 to minimum of 0.04 times in year 2014/15 and

2015/16 with an average of 0.04 times during the study period of 5 years. The

analysis indicates that the banks total assets turnover ratio is declining trend

which is unprofitable for bank.

41
 The net fixed assets turnover ratio of SCBNL varies from maximum of 42.22

times in FY 2013/14 to minimum of 29.31 times in year 2011/12 with an

average of 35.71 times during the study period of 5 years. The analysis

indicates that the banks fixed assets turnover ratio is fluctuating over the

observation period.

42
 CHAPTER V

DISCUSSION AND CONCLUSION

5.1 Discussion

The present study has been undertaken to examine and evaluate the financial

performance of Standard Chartered Bank Nepal Limited. The researcher had used the

financial tools to make this study more effective and informative. This study has

covered 5 years data from 2011/12 to 2015/16 of the bank.

This project work is prepared with the objective of finding out whether Standard

Chartered Bank Nepal Limited is able to maintain its liquidity position and

profitability or not. To fulfill the objective of the research basically secondary data are

used in which includes annual report, newspaper, articles etc.

For the procedure of analysis ratio and average of the ratio for the 5 years period is

used in which table and graphs were used to obtain a clear performance of the bank.

The major finding of the study is that the profitability of the bank has been good and

increasing during the study period of 5 years and the bank has sound liquidity position

and able to meet the short-term obligations.

5.2 Conclusion

During the study period of past 5 years, i.e. from 2011/12 to 2015/16 various ratio

analyses have been performed to find out the financial performance of SCBNL. The

43
major findings of the study are listed Chapter-4, section 4.2 of this report. Based on

the findings the conclusions have been drawn.

The current ratio of the bank over the 5 years is 1.11 on an average. The current ratio

of 2 is occasionally cited as acceptable, but acceptability of the value depends on the

industry in which a firm operates. For the banks and the utility firms, current ratios of

1 or above would be considered acceptable. Therefore, the liquidity position in terms

of current ratio of SCBNL is in normal standard.

Net profit margin indicates the profit on per operating income. The result of the

analysis indicates that net profit earned in comparison to the total operating income is

in fluctuating trend. Net operating profit is the profit before interest and taxes (EBIT).

The result of analysis indicates that the net operating profit earned in comparison to

the total assets is quite low. The return on assets (ROA) of all financial resources

invested in the assets. The result of analysis indicates that the net profit earned in

comparison to the total assets is quite low. The return on equity (ROE) measures the

income on the owners investment. The result of the analysis indicates that the net

profit earning in relation with the shareholders equity of SCBNL is not in better

position. The result of the profitability analysis of SCBNL indicates that the overall

performance of the bank is effective in generating the profit.

The debt-equity ratio indicates the relationship between the long- term funds provided

by creditors and those provided by the firm's owners. The result of the analysis

indicates that the bank has the high debt-equity ratio. Total debt to total asset exhibits

the proportion of outsiders' fund used in financing total asset. The result of the

44
analysis indicates that the bank has the high debt- total assets ratio, which again

reveals that the creditors have invested more in the bank than the owners.

The result of total assets turnover ratio is declining over the observation period which

is unprofitable for the bank and the result of fixed assets turnover ratio is fluctuating

over the observation period. It is not sufficient for the healthy business.

5.3 Recommendation

By seeing various analyses, the researcher came out with the following

recommendations:

The bank has been maintaining excess liquid funds which should be reduced

and invested in earning assets.

Bank should increase its profit.

Bank should reduce debt capital and provide security to the creditors.

The bank should spread to the prime business locations all over the country,

especially in large cities.

45
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Lamichhane, P. (2009). A Study on Financial Performance of Standard Chartered

Bank Nepal Limited. An Unpublished Master Degree Thesis, T.U. Kathmandu.

Maharjan, A. (2015). A Study on Financial Performance of Standard Chartered Bank

Nepal Limited. An Unpublished Master Degree Thesis, T.U. Kathmandu.

Myer, J.N. (1961). Financial Statement Analysis. New York: Prentice-Hall. Inc.

Pandey, I.M. (1999). Financial Management. New Delhi: Vikash Publishing House of

India.

Pokhrel, B. (2013). Financial performance analysis of commercial banks in Nepal.

An Unpublished Master Degree Thesis, T.U. Kathmandu.

Pradhan, R.S. (1992). Financial Management Practices in Nepal. New Delhi: Vikash

Publishing House.

Pudasaini, R. (2015). A Study on Financial Performance Analysis of Nabil Bank

Limited. An Unpublished Master Degree Thesis, T.U. Kathmandu.

Thakuri, M. (2009). A Thesis on Financial Performance of Standard Chartered Bank

Nepal Limited. An Unpublished Master Degree Thesis, T.U. Kathmandu.

www.books.google.com

www.scbnl.com

46