A STUDY ON FINANCIAL ANALYSIS OF EVEREST BANK Ltd.

Butwal

Submitted By:

Anuradha Sharma

Oxford College

T.U. Reg. No: 7-2-559-5-2009

Exam Roll. No:

Submitted to:

Office of the Dean

Faculty of Management

Tribhuvan University

In partial fulfillment of the requirement for the degree of Bachelor of

Business studies
 Butwal

Bhadra, 2069

RECOMMENDATION
 This is to certify that the field work assignment report

Submited By

Anuradha Sharma

T.U. Reg No:

Exam Roll No:

Entitled

A STUDY ON FINANCIAL ANALYSIS OF EVEREST BANK

LIMITED, BUTWAL

has been prepared as approved by this department in the prescribed

format

of faculty of management. This project work assignment report is

forwarded

for examination.

……………………………
……………………………
…………………………

Mr. Bhesraj Banjade Mr.

Mr. Krishna Adhikari

Pashupati Adhikari

(Department head
(Supervisor)

(Co-ordinator)
 ACKNOWLEDGEMENT

The project report entitled “Financial analysis of Everest Bank Limited” is

presentation for the partial fulfillment of requirement of degree of Bachelor of
business studies (BBS) of Tribhuwan University, under the subject Banking and
Insurance.

This report has been prepared with outstanding suggestions, kind supports,
guidance and inspiration from various personalities. I express my deep
appreciation to Mr. Krishna Adhikari (supervisor), Mr. Bhesraj Banjade
(department head), Mr. Pashupati Adhikari (Co-ordinator).

I would like to thanks my respected all teachers who had taken orientation class and
generated ideas for us.

I must express my gratitude to Mr. Bishnu Prasad Gyawali (branch manager) and
entire staff of Everest Bank Limited, for providing requisite statistical data for this
report.

Lastly, I would like to appreciation to my family, friends who support and encourage
me while preparing this report.

Anurad

ha Sharma

BBS 3​rd
years

Oxford College, Butwal

 TABLE OF CONTENT

Recommendation
Acknowledgement
I
Table of Contents
Ii
List of Tables
Iii
List of Figures
iv
List of Abbreviation
v

CHAPTER-1 INTRODUCTION
Page No.
1.1 Back ground of the study
1
1.2 Significance of the study
3
1.3 Literature Review
3
1.4 Purpose of the study
4
1.5 Fieldwork Procedure
4
1.6 Limitation of the study
5
 CHAPTER 2: DATA PRESENTATION AND ANALYSIS
6-17
2.1 Data presentation and analysis
6
2.2 Major findings of study
17

CHAPTER: SUMMARY, CONCLUSION AND RECOMMENDATION

18-2O
3.1 Summary
18
3.2 Conclusion
19
3.3 Recommendation
19
Time allotment

Bibliography

Proposal

LIST OF TABLES AND FIGURES

List of Table
Page No.
Table no. 2.1 Income statement of Everest Bank Ltd.

6
Table no. 2.2 Balancesheet of Everest Bank Ltd.
7
Table no. 2.3 Liquidity Ratio
8
Table no. 2.4 Asset Utilization Ratio
9
Table no. 2.5 Net Interest margin 10
Table no. 2.6 Profit margin
11
 Table no. 2.7 Return on Assets
12

List of Figure
Page No.
Figure no. 2.1 Trend line of Ratios 9
Figure no 2.2 Pie Chart of Profitability Ratios
10
Figure no 2.3 Capital Adequacy Ratios
11

LIST OF ABBREVIATION
% Percentage

EBL Everest Bank Limited

& And

BBS Bachelor of Business

Studies

i.e. That is

Reg. no Registration Number

TU Tribhuvan University

Fig Figure

TATOR Total Asset Turnover Ratio

ROE Return on Asset

 CHAPTER-1

INTRODUCTION

1.1 Background of the Fieldwork Project:

Financial analysis is the process of analyzing the various item of financial statement
of a firm to ensure its comparative strength and weakness.

Financial management has undergone through various change during the past
century. Finance was studies as a part of economics before but in the early 19​th
century it developed as separate field to study with the development of the
industry location in 20​th century. Most of the European countries were oriented
towards industrialization.

Financial management is the acquisition, management and financing of resources

for prices in external economic market. It is not only concern with collection of
capital but also with proper utilization of those capitals into productive areas.

Financial management is the source of income which is required to analyze the

performance of company such as it represents a record of historical and financial
performance and development over the year. It is prepared by the cooperation at
the end of a period. The statements are prepared by the organization engaged in
profit earning activities to reveal their position. A careful analysis of financial
statement enables the managers and others to understand relative strength and
weakness of the firm in relation to various aspects of firm’s financial
performance. So this statement provides a fair comprehensive position and its
performance during a particular period.

An analysis of financial position is necessary to serve the purpose of interested

group looser in the society. The analysis provides different users such as
investors, government, management. This analysis provides different information
about profitability of the company. Such as returns of investment net profit
margin, return of shareholders equity etc. the strength weakness of the firm can
be analyzed, so that they can make decision from their own point of view.

There are many financial institutions which are working as intermediaries. They have
made financial activity easy. Present study focus on the financial analysis of
Everest Bank Limited, for the year 2008/09 to 2010/11.

Brief Profile of EBL

Everest Bank Limited (EBL) started its operations in 1994 with a view & objective of
extending professionalized & efficient banking to various segments of the society.
The bank is providing customer friendly services through its Branch Network. All
it’s the branches are connected through Anywhere Branch Banking System
(ABBS) which enables customers for operational transactions from any
branches. The bank has 45 branches, 55 ATM counters & 21 Revenue Collection
Counters across the country making it a very efficient and accessible bank for its
customers, anytime anywhere.

With an aim to help Nepalese citizens working abroad, the bank has entered
into arrangements with banks and finance companies in different countries like
UAE, Kuwait, Bahrain, Qatar, Saudi Arabia, Malyasia, Singapore and U.K.

Bank has set up its representative offices at New Delhi (India) to support Nepalese
citizen remitting money and advising banking related services.

Catering to more than 4 lacs customer today, the bank has been one of the leading
banks of the country & has been catering its service to various segments of the
society since then. With clients from all walks of life, the bank has helped develop
nation corporately, agriculturally & Industrially.

Joint Venture Partner

Punjab National Bank (PNB) is its joint venture partner holding 20% equity in the
bank is the largest nationalized bank in India with its presence virtually in all the
important centers at India, PNB offers a wide variety of banking services which
include corporate bond and personal banking, industrial finance, agricultural
finance, financing of trade and international banking. For its excellence in
banking services, it was recently awarded the “Best Bank Award 2011” amongst
all banks in India by the leading magazine, Business India.

Awards

The bank has been conferred with “Bank of the year 2006, Nepal” by the Banker, a
publication of financial times, London.
The bank was bestowed with the “NICCI Excellence award” by Nepal India chamber
of commerce for its spectacular performance under finance sector.

Pioneering Achievements

Recognizing the value of offering a complete range of services, EBL have pioneered
in extending various customer friendly products such as Home Loan, Education
Loan, EBL flexi Loan, EBL property plus (Future Lease Rental), Home Equity
Loan, Vechile Loan, Loan against Life Insurance policy & Loan for professionals.
EBL was one of the first bank to introduce anywhere Branch Banking (ABBS) in
Nepal. It has introduced Mobile Vechile Banking system to serve the segment
deprived of proper banking facilities through its Birtamod Branch, which is the
first its kind.
EBL has introduced branchless banking system first time in Nepal to cover
unbanked sector of Nepalese society.
EBL is first bank that has launched e-ticketing system in Nepal. EBL customer can
buy Yeti airlines ticket through internet.
1.1 Significance of the study :

To run the firm, financial position must be sound. The study provides information on
financial position of the firm and different problems of the firm. The study must
concerns with the following specific issues:
1. What is the liquidity position does the firm hold?

2. What is the relationship between EPS and MPS of the firm?

3. What is the interest income and interest expenditure?

4. What is the profitability position of the firm?

1.2 Literature Review:

According to Ross, Peter S, (2000), “​Financial analysis refers to ​the assessment

of a business to deal with the planning, budgeting, monitoring, forecasting, and
improving of all financial details within an organization.”

According to Brigham E.F., L.G. Gapenski, (1992), ​“financial ​analysis means

assessing the viability, stability and profitability of a project. It also includes
techniques used for determining the needs of a business.”

1.3 Purpose of the study:

The major purpose this project work study is to know the financial position of the
organization. It helps to get the information about various ratios in order to
interpret the financial statement so that the strength and weakness of the firm as
well as its historical performance and current financial condition can be
determined. Some specific objectives in our topic are listed as below:

1. To assess capital adequacy.

2. To find the income and expenditure.

3. To identify the components of income and expenditure.

4. To determine the profitability position.

1.4 Fieldwork procedure:

This project work study attempts to analyze the relationship among different figure in
the financial statement for determining the financial performance of the bank. The
methods used for research purpose are highlighted here. It includes the period
covered, nature and sources of data collection procedure. The methods used in
collection procedures. The methods used in collection of data are listed below.

1.4.1Sources of data

To analyze topic different data are gathered. The sources from where information
achieved are as follows:
A. Primary source and

B. Secondary source.

A. Primary source

The data collected for the first time by the researcher himself from the field of
enquiry is called primary data. Primary data collection includes questionnaire
method. Direct interview method and direct observation method.

a) Questionnaire method:

The related workers are interviewed by preparing the schedule of question in the
relevant topic.

b) Direct interview method:

The direct interview is the raw information, it is collected by interviewing the
manager of the firms.
c) Direct observation method

To acquire the practical knowledge the workers were being observed in the spot.

B Secondary source

The data which are initially collected by someone but obtained from some published
sources are called secondary data. The data from various sources are collected
and proper data for purpose of the study are arranged and analyzed. The
sources of secondary data are:

a) Report provided by the management of the Everest Bank Limited.

b) office records and magazines.

c) Different related books journals, daily newspaper report published

by different other medias.

d) Different related Web sites.

1.4.2Tools used for analysis

Since the study is concerned of financial aspect of the firms, some important tools
like of the firms are:

a) Statistical tools

Bar diagram

Tables

Trend line

b) Financial ratio

Ratio analysis
 Fund flow statements

1.5 Limitation of the study:

The study is not free from some limitation that the researcher has experienced
during research work activities performance and generation drawn regarding the
study of financial analysis of Everest Bank Ltd. The limitation served as
constraints to perform the assigned task effectively and efficiently.

1) The study realize on secondary data collected from the annual reports of
the bank.
 2) The study period covers only 3 years period from 2008/09 to
2010/011.

3) This study considers only one bank out of large number of bank.

4) There are many factors that affect the financial analysis of

Everest Bank Ltd.

5) Conclusion drawn by study is based on the reliability of

statistical and financial tools.

CHAPTER II

DATA PRESENTATION AND ANALYSIS

2.1 Presentation and Analysis of data

The data are the raw information which are meaningless until and unless
analyzed and presented in systematic manner. In this chapter, data
obtained from secondary sources are analyzed. To fulfill the
objective of study, the data are analyzed using various appropriate
financial and statistical tools. It has been divided into two
sections:-Data presentation and analysis.

2.1.1 Income statement and Balance sheet for the year 2008-

2011

Income statement of Everest Bank ltd.

Rs.
S. Particulars Years
N. 2008/09 2009/10 2010/11

1 Interest income 2,18,68,14,99 3,10,24,51,48 4,33,10,26,08

2 Interest expenses 2 4 7
1,01,28,74,35 1,57,27,90,30 2,53,58,75,55
A. ​Net interest income (1-2) 3 6 2
1,17,39,40,6 1,52,96,61,1 1,79,51,50,5
3 Commission and discount 39 78 35
20,20,94,44 20,81,23,48 20,34,68,42
4 Other operating income 6 1 4
10,64,03,69 14,23,11,42 14,80,61,97
5 Foreign exchange gain/loss (net) 4 7 9
6,25,26,81 4,78,79,96 4,62,59,06
9 7 5
 B. Total operating income 1,54,49,65,5 1,92,79,76,0 2,19,29,40,0
6 (A+3+4+5) 98 53 03
Staff expenses 18,69,19,87 22,63,64,00 29,31,30,56
7 Other operating expenses 0 9 7
29,20,10,52 35,25,11,23 3,81,12,05
C. Operating profit before2 1 4
1,06,60,35,2 1,34,91,00,8 1,51,66,97,3
8 provision (B-6-7) 06 13 7,70,10,62 82
Provision for possible losses 9,30,84,885 9,82,99,48
D. Operating profit (C-8) 0 2
97,29,50,31,27,20,90,1 1,41,83,97,9
9 Non operating income/expenses26 88 1,23,38,97 00
50,05,25 2 14,33,38
10 (net) 6 8,35,53,46 5
Return back from provision for 80,44,17 1 5,63,37,47
possible loss from regular 0 8
E. Profit 98,59,99,71,36,79,82,6 1,47,61,68,7
11 activities (D+9+10) 52 21 (6,11,92,47 63
Extraordinary income/expenses (55,49,176) (1,20,51,52
(net) 0) 2)
F. Profit before bonus and 98,04,50,51,30,67,90,1 1,46,41,17,2
taxes (E+11) 82 45 41
12 Provision for staff bonus 8,91,31,87 11,87,99,10 13,31,01,56
13 Provision for tax 1 4 7
25,25,85,95 35,62,25,40 39,97,12,04
4 9 6
G. ​Net profit/loss (F-12-13)
57​63,87,32,7 32​83,17,65,6 28​93,13,03,6
Table no. 2.1
Balance sheet of Everest Bank Ltd. Rs.

Capital and liabilities Years

2008/09 2009/10 2010/11

1 Share Capital 1,03,04,67,3 1,27,96,07,4 1,39,15,70,4
.
2 Reserve and surplus 00 90 39
1,17,31,57,7 1,47,95,30,3 1,72,19,75,6
.
55 65 17
3 Debenture and bond

. 30,00,00,000 30,00,00,000 30,00,00,000

4 Borrowing 31,20,00,000 40,46,00,000 48,20,00,000
. Deposit liabilities
5 33,32,29,46, 36,93,23,10, 41,12,79,14,
. Bills payable 246 008 339
6 14,86,55,592 14,55,14,679 4,97,16,572
. Purposed dividend
7 21,80,80,345 27,62,52,832 57,68,97,427
. Income tax liabilities
8 2,05,22,280 (11,36,458) 2,69,00414
. Other liabilities
9 39,10,19,136 56,60,81,795 55,92,37,454
. Total liabilities
36,91,68,48 41,38,27,60 46,23,62,12
,654 ,711 ,262
 Assets Year
2008/09 2009/10 2010/11

1Cash in hand 94,46,95,793 1,09,15,00,4 1,04,89,98,7

2Balance with NRB 07 21

4,78,71,63,5 5,62,51,13,8 4,70,63,20,5
3Balance with other Banks and Financial 41 49 90
43,25,11,829 1,10,22,00,7 36,75,43,641
Institutions
4Call and Short note Account - 47 -
-
5Investment 5,94,84,80,2 5,00,83,07,5 7,74,39,28,3

6Loans, advances and bills purchased 73 89 21

23,88,46,73, 27,55,63,56, 31,05,76,91,
7Fixed assets 616 032 462
42,71,57,451 46,30,94,391 46,02,58,735
8Non- Banking Assets
- - -
9Other Assets 49,21,66,151 53,61,87,696 85,14,70,792
Total Assets
36,91,68,48 41,38,27,60 46,23,62,12
,654 ,711 ,262

2.1.2 Analysis of Different Ratios

2.1.2.1 Analysis of short term solvency position

This ratio measure the firm’s ability to satisfy its short term commitments out of
current or liquid assets to analyze the short term solvency position,
Liquidity ratio is used.

Liquidity ratio is the quantitative relationship between Liquid assets & total
depositors. Here liquid assets are cash or cash worth assets like
Bank & cash balance, Money at call and short notice, Balance in
other Banks etc.
On the other hand depositors are those obligations which must be paid demand by
the depositors.
Table no. 2.3 Liquidity Ratio

Fiscal year EBL

Liquid asset Deposit Liquidity Ratio

2008/09 6,16,43,71,163 33,32,29,46,246 0.1850

2009/10 7,81,88,15,003 36,93,23,10,008 0.2117
2010/11 6,12,28,62,952 41,12,79,14,339 0.1489

Fig. no. 2.1

Bar diagram showing liquidity ratio

In the above figure, years and values has been shown in X- axis and Y-axis
respectively.
Liquid assets to total deposit ratio is increasing at first and then after decreasing.
The liquidity of 2008/09 is 0.1850, 2009/10 is 0.2117 & 2010/2010 is 0.1489
increasing liquidity ratio is seems to be good but decreasing ratio in last year of
research period is not good for the organization.

2.1.2.2 Asset Utilization Ratio

Asset utilization ratio measures the efficiency with which a bank uses its assets to
generate profits. This ratio is also known as the Assets turnover ratio or Assets
management efficiency ratio. It is calculated as under:
Asset utilization = Total operating revenues / Total assets

Table no. 2.4 Asset Utilization Ratio

Fiscal year Operating Total assets TATOR (%)

2008/09 revenue 36,91,68,48,65 4.1850
1,54,49,65,598
2009/10 1,92,79,76,053 4 4.6589
41,38,27,60,71
2010/11 2,19,29,40,003 1 4.7429
46,23,62,12,26
2

Table no.2.4

Fig. no. 2.2 Bar diagram showing asset utilization ratio

According to above table & bar diagram, the Asset Utilization of EBL is in increasing
trend, it can be said that EBL has better effective utilization of its total investment
in assets in term of generating income.

2.1.2.3 Profitability Ratios

Profitability ratios show the combined effects of liquidity, asset management and
debt management on operating results. It measures the earning of the company
for a certain period. Five widely used measure of profitability ratio are Net Profit
Margin (NPM), Net Interest Margin (NIM), Earning spread, Return on assets
(ROA), Return On Equity (ROE) some of them are mentioned here,
A)Return on equity
Return on equity (ROE) is percentage of net profit (Income) on total equity of the
firm. It also shows how effectively the bank is utilizing its total equity worth for
profit generation. The efficiency can be analyzed from the table below.

Return on equity (ROE) = Net Income/ Total equity capital Table

no. 2.5 Return on equity of EBL

Fiscal year Net Income Total equity ROE

2008/09 63,87,32,757 capital 0.2899
2,20,36,25,055
2009/10 83,17,65,632 2,75,91,37,855 0.3015
2010/11 93,13,03,628 3,11,35,46,056 0.2991
Table no. 2.3

Fig no. 2.3 Trend line showing ROE of EBL

According to table and diagram, the return on equity is quite fluctuating and it is
decreasing trend in the fiscal year 2009/10, This result of ROE prove the way to
 deteriorate the enthusiasm of present and potential investors of equity. Also it
directly affects the value of shares and goodwill of bank.

B)Net Interest Margin

The net interest margin is the difference between revenue generated by interest
bearing assets (loans and investments) and the interest cost of borrowed funds
expressed as a percentage of either, average total assets or, as some analysts
prefer, average earning assets. The NIM is calculated as follows;

Net Interest Margin = Net Interest Income/ Interest Earning Assets

Table no. 2.6 Net interest margin

Fiscal year Net Interest Interest NIM (%)
Income Earning
2008/09 1,17,39,40,639 Assets 3.18
36,91,68,48,65
2009/10 1,52,96,61,178 4 3.69
41,38,27,60,71
2010/11 1,79,51,50,535 1 3.88
46,23,62,12,26
2

Table no. 2.6

Fig no. 2.4 Net interest Margin

From the above table & figure it can be said that the Net Interest Margin of EBL is in
increasing trend. It refers that EBL is in profitability position.

C)Profit Margin
Profit margin shows the relationship between net income and operating income. It
shows proportion of net income with respect to its operating income. The profit
margin is calculated as under;

Profit Margin = Net profit / operating income

Table no. 2.7 Profit margin

Fiscal year Net profit Operating Net Profit

2008/09 63,87,32,757 Income margin (%)
1,54,49,65,598 41.3428
2009/10 83,17,65,632 1,92,79,76,053 43.1419
2010/11 93,13,03,628 2,19,29,40,003 42.4683

Table no. 2.7

Fig no. 2.5 trend line showing NPM of EBL

From the table & figure presented above NPM of EBL is quite fluctuating at first
increases & reaches up to 43.1419% then slightly decreases & reaches up to
 42.4683%. But in average Net Profit margin of EBL seems to be in sound
position.

2.2 Major Finding of the Study

The presentation and analysis of data done in this chapter exacts many results and
point regarding different aspects of the bank. However the most and major can
pointed out as follows.

Table no 2.8
Details 2008/09 EBL 2010/11
2009/10
a)Short term
solvency 0.1850 0.2117 0.1487
position
- ​Liquidity ratio
b)Asset
utilization 4.1850 4.6589 4.7429
ratio
-Total asset
turnover ratio
c)Profitability 0.2899 0.3015 0.2991
ratio
-Return on 3.18 3.69 3.88
equity 41.3428 43.1499 42.4683
-Net interest
margin (%)
-Profit margin
(%)

CHAPTER III

SUMMARY, CONCLUSION AND RECOMMENDATIONS

3.1 Summary

This report mainly concern with the principal objectives to comply with assessment
required for the degree of BBs 3​rd year of Tribhuvan Uiversity. EBL is one of the
successful banks operating the territory of Nepal, providing fair banking service
to its customers namely remittance letter of credit, loan, locker, guarantees etc
are major and one of indirect investment for the nation by EBL. So, this company
is selected for the purpose of study, it started operation since 1994 with the
objectives to fuel the Nepalese economy and take it to hover height as well as to
facilitate the nation economy to competitive globally.
This report is summed up in three chapters. It begins with brief background
information of financial development of bank, statement of the problem,
objectives of fieldwork projects & methodology followed till the completion of the
report writing. The sampled objectives of fieldwork & methodology followed till the
completion of the report writing. The sampled period of the study is only of three
fiscal years. All the data which have been extracted from Income statement &
Balance sheet of presented years, are of secondary nature. To meet the basis
purpose of the study different financial ratios are used as per the five subsidiary
objectives. The presentation and analysis part of the field work project also
consider by table.