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Trend Analysis

Standard Chartered Bank

Nepal Limited

Report Submitted to:

Mr. Pravat Uprety (Course Instructor
DAM II)

Submitted by:
Asad Kamran
EMBA Fall-2016_Semester II

Ace Institute Of Management,

Kathmandu.
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Table of Content
Topic Page
Acknowledgement 3
Executive Summary 4
CHAPTER1 5
Introduction 5
TREND ANALYSIS 5
History of Banking Industry in Nepal 9
History of Standard Chartered Bank Limited 10
Standard Chartered Bank Nepal Limited 11
CHAPTER2 13
Data Analysis: Standard Chartered Bank Nepal Limited 13
Findings 20
CHAPTER3 21
Conclusions 21
Recommendations 22
References 23

List of Tablets & Graphs:

Table Page
Table 1/ Graph 1: Trend Analysis on Net Interest Income 13
Table 2/ Graph 2: Trend Analysis on Loans & Advances 14
Table 3/ Graph 3: Trend Analysis on Foreign Exchange Gain/Loss 15
Table 4/ Graph 4: Trend Analysis on Fees Commission & Discounts 16
Table 5/ Graph 4: Trend Analysis on Other Operating Income 17
Table 6/ Graph 5: Trend Analysis on Net Profit 18
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Acknowledgement:
First of all, I would like to express my gratitude to Almighty God to enable me to
complete this report on Trend Analysis Of Standard Chartered Bank Nepal Limited.
Successful completion of any type of project requires help from a number of
persons. I have also taken help from different people for the preparation of this report.
I convey my sincere gratitude to my course instructor Mr. Pravat Uprety, Ace
Institute of Management. Without his kind direction and proper guidance this study
would have been a little success.
I would also like to thank my friends from banking industry who helped me
understand banking functions well & guided me to collect data of Standard Chartered
Bank Nepal Limited for Trend Analysis.
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Executive Summary:
With the proliferation of technology, banking customers are living in a connected
world with their experience from other industries influencing their expectations from
their financial services provider. This has led to an evolving customer-bank relationship
necessitating banks to be more customer-centric by embedding themselves in customers
lives to meet rising customer experience expectations. However, banks have been facing
challenges in meeting customer expectations, as they are troubled with legacy challenges
both in terms of technology and culture & sustainability issues in todays fragile financial
environment.
The following trend analysis between 2070 BS and 2074 BS of selected 5
financial parameters of Standard Chartered Bank Nepal Limited including Net Interest
Income, Loans & Advances, Foreign Exchange Gain/Loss, Fees Commission &
Discounts, Other Operating Income and Net Profit shows progressive improvement that
the bank has achieved in the last years.
The finding shows:
In all studied financial parameter Standard Chartered Bank Nepal Limited is
showing linear growth trend.
Hence, the increasing trend in growth of different financial parameters of
Standard Chartered Bank Nepal Limited shows that there is increasing confidence among
people in the SCBNL. The business is rather in a stable position & this is high time to do
more in terms of creating stronger SC business differential in order to excel further.
 5

CHAPTER1
Introduction:
TREND ANALYSIS
Trend analysis is the widespread practice of collecting information and attempting
to spot a pattern. In some fields of study, the term "trend analysis" has more formally-
defined meanings. Although trend analysis is often used to predict future events, it could
be used to estimate uncertain events in the past as well.
The intent of this analysis is to spot patterns in the presented information. In
business, trend analysis is typically used in two ways, which are Revenue & Cost
Analysis and Investment analysis.
When used internally (the revenue and cost analysis function), trend analysis is
one of the most useful management tools available. The following are the examples of
this type of usage:
Examine revenue patterns to see if sales are declining for certain products.
Examine expense report claims for evidence of fraudulent claims.
Examine expense line items to see if there is any unusual expenditure in a
reporting period that require additional investigation.
Extend revenue and expense line items into the future for budgeting purpose, to
estimate future results.
When trend analysis is being used to predict the future, keep in mind that the
factors formerly impacting a data point may no longer be doing so to the same extent.
This means that an extrapolation of a historical time series will not necessarily yield a
valid prediction of the future. Thus, a considerable amount of additional research should
accompany trend analysis when using it to make predictions. (Kadam, 2016)
In statistics, trend analysis often refers to techniques for extracting an underlying
pattern of behavior in a time series which would otherwise be partly or nearly completely
hidden by noise. If the trend can be assumed to be linear, trend analysis can be
undertaken within a formal regression analysis, as described in Trend estimation.
Analysis of long period data normally of more than 5 years is called Trend Analysis.
Trend line/ equation:
Linear Trend (1st degree equation)
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Curvilinear Trend (2nd degree/ parabolic equation)

Linear trend (1st degree equation):
The linear trend line is;
= b0 + b1X where Y is dependent variable & X is independent variable.
b0: Equals the value of Y when the value of independent variable is 0.
b1: The slope of the regression line; how much Y changes for each one unit change in X.
Example Exercise:
By using following time series data fit a linear trend & forecast profit for 2012;
Year (X) Profit (Y) in Millions x = X-X (bar) xY X2
2006 7 -2 -14 4
2007 15 -1 -15 1
2008 20 0 0 0
2009 23 1 23 1
2010 30 2 60 4
Total 95 54 10

Transforming X into x:
x = X-X (bar), if n is odd, where n is total number of periods.
x =2 (X-X (bar)), if n is even
Linear trend line becomes as;
= b0 + b1x
Where b0 = Y/n & b1 = xY/x2
b0 = Y/n = 95/5 = 19
b1 = xY/x2 = 54/10 = 5.4
= b0 + b1x
= 19 + 5.4x Average increment is 5.4 million.
Now profit forecast for year 2012;
x = 2012-2008 = 4
= 19 + 5.4 (4) = 40.6 Million.
Note: Linear Trend Arithmetic progression/ Constant increment
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Curvilinear trend (2nd degree equation):

The Curvilinear trend line is;
= b0 + b1x + b2x2
b0: Equals the value of Y when the value of independent variable is 0.
b1: The slope of the regression line; how much Y changes for each one unit change in X.
Transforming X into x:
x = X-X (bar), if n is odd, where n is total number of periods.
x =2 (X-X (bar)), if n is even
To find the value of b0, b1 & b2 we have to solve following 3 normal equations;
Y = nb0 + b2x2 1
xY = b1x2 2
x2Y = b0x2 + b2x4 3
Now from equation 2;
b1 = xY/ x2
After solving equation 1 & 3 well get b0 & b2.
Example Exercise:
By using following time series data fit a 2nd degree equation & forecast no. of branches
for 2017;
Year (X) Branches (Y) x = X-X (bar) x2 X4 xY x2Y
2011 2 -2 4 16 -4 8
2012 4 -1 1 1 -4 4
2013 10 0 0 0 0 0
2014 25 1 1 1 25 25
2015 50 2 4 16 100 200
Total 91 10 34 117 237

Equation 1
Y = nb0 + b2x2
91 = 5b0 + 10b2
Equation 2
xY = b1x2
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117 = 10b1
Equation 3
x2Y = b0x2 + b2x4
237 = 10b0 + 34b2
Multiplying equation 1 by 10 & equation 3 by 5; the subtracting equation 3 from 1;
910 = 50b0 + 100b2 1
1185 = 50b0 + 170b2 3
275 = 70b2
b2 = 3.93
Putting value of b2 in Equation 1;
91 = 5b0 + 10 (3.93)
b0 = 10.34
Now, the 2nd degree equation is
= b0 + b1x + b2x2
Where x = 2017-2013 = 4
= 10.34 + 11.7 (4) + 3.93 (4)2
= 119.9 120
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History of Banking Industry in Nepal:

The first commercial bank in Nepal, Nepal Bank Ltd. (NBL) was established in
the year 1994 B.S. This is a major milestone in the history of Nepal as the country
entered into official financial system. After the nineteen years of establishment of NBL,
the Nepal Rastra Bank (NRB) was established in the year 2013 B.S.
Rastriya Banijya and Agricultural Development Bank Ltd. were established in the
year 2022 and 2024 B.S. respectively. 47 years after the first bank was established in
Nepal, the first privately owned commercial bank, Nabil Bank ltd., was established in the
year 2041 BS.
Seven more commercial banks were added in a decade after 2041 B.S. Only four
commercial banks were established from the period of 2051 B.S. to 2063 B.S. There are
mainly two reasons for it. In this time period the country saw the sluggish economic
growth due to the maoist insurgency; the second reason being the reluctance on issuing
license by the regulatory body, the NRB.
After the maoist insurgency came to an end in the year 2063 B.S., at least one
commercial bank was established every year till last year. The banking industry, like
other sectors, saw growth in the absence of ongoing conflict. However, this sector was
also not immune from poor governance, corruptions and scandals. The government
owned banks were the most affected ones due to direct political interference in the
banking activities.
Now again the number of commercial banks are set to decline due to the monetary
policy of this fiscal year which requires commercial banks to have paid up capital of at
least Rs. 8 Arba by the end of Ashad 2074. This short time frame given to quadruple the
paid up capital will force banks to merge with each other creating fewer commercial
banks in coming years. (Banking History in Nepal: When were the commercial banks
established in Nepal?, 2016)
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History of Standard Chartered Bank Limited:

Standard Chartered Bank was formed in 1969 through the merger of two separate
banks, the Standard Bank of British South Africa and the Chartered Bank of
India, Australia and China. These banks had capitalized on the expansion of trade
between Europe, Asia and Africa.
The Chartered Bank
The Chartered Bank was founded by James Wilson following the grant of a Royal
Charter by Queen Victoria in 1853. The bank opened in Mumbai (Bombay), Kolkata and
Shanghai in 1858, followed by Hong Kong and Singapore in 1859.
The traditional trade was in cotton from Mumbai, indigo and tea from Kolkata, rice from
Burma, sugar from Java, tobacco from Sumatra, hemp from Manila and silk from
Yokohama. The bank played a major role in the development of trade with the East
following the opening of the Suez Canal in 1869 and the extension of the telegraph to
China in 1871.
In 1957 Chartered Bank bought the Eastern Bank, together with the Ionian Bank's
Cyprus Branches and established a presence in the Gulf.
The Standard Bank
The Standard Bank was founded in London in 1862 by John Paterson from the
Cape Colony in South Africa, and started business in Port Elizabeth in the following year.
The bank was prominent in financing the development of the diamond fields of
Kimberley from the 1870s. It later extended its network further north to the new town of
Johannesburg when gold was discovered there in 1886.
The bank expanded in Southern, Central and Eastern Africa and had 600 offices
by 1953. In 1965, it merged with the Bank of West Africa, expanding its operations into
Cameroon, Gambia, Ghana, Nigeria and Sierra Leone.
In 1987 Standard Chartered Bank sold its stake in the Standard Bank, which now
operates as a separate entity. (https://www.sc.com/en/about-us/our-history.html, 2014)
 11

Standard Chartered Bank Nepal Limited:

Standard Chartered Bank Nepal Limited has been in operation in Nepal since
1987 when it was initially registered as a joint-venture operation. Today the Bank is an
integral part of Standard Chartered Group having an ownership of 70.21% in the
company with 29.79% shares owned by the Nepalese public. The Bank enjoys the status
of the largest international bank currently operating in Nepal.
Standard Chartered has a history of over 150 years in banking and operates in
many of the world's fastest-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 world's most international banks, Standard Chartered
employs almost 87,000 people, representing over 115 nationalities, worldwide. This
diversity lies at the heart of the Bank's values and supports the Bank's 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 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 corporate, multinationals, large public sector companies, government
corporations, airlines, hotels as well as the DO segment comprising of embassies, aid
agencies, NGOs and INGOs.
The Bank has been the pioneer in introducing 'customer focused' products and
services in the country and aspires to continue to be a leader in introducing new products
in delivering superior services. It is the first Bank in Nepal that has implemented the
Anti-Money Laundering policy and applied the 'Know Your Customer' procedure on all
the customer accounts.
Corporate Social Responsibility is an integral part of Standard Chartered's
ambition to become the world's best international bank and is the mainstay of the Bank's
 12

values. The Bank believes in delivering shareholder value in a socially, ethically an

environmentally responsible manner. Standard Chartered throughout its long history has
played an active role in supporting those communities in which its customers and staff
live. It concentrates on projects that assist children, particularly in the areas of health and
education. Environmental projects are also occasionally considered. It supports non-
governmental organizations involving charitable community activities. The Group
launched two major initiatives in 2003 under its 'Believing in Life' campaign- 'Living
with HIV/AIDS' and 'Seeing is Believing'. (https://www.sc.com/np/about-us/, 2017)
 13

CHAPTER2
Data Analysis: Standard Chartered Bank Nepal Limited
Table 1: Trend Analysis on Net Interest Income:
Year X Net Interest Income (Y) x=X-X xY x^2

Ashad 070 1 1,923,977 -2 (3,847,954) 4

Ashad071 2 2,007,659 -1 (2,007,659) 1

Ashad 072 3 1,913,515 0 - 0

Ashad 073 4 1,849,878 1 1,849,878 1

Ashad 074 5 2,195,431 2 4,390,862 4

X 3 Y=9890460 xY=385127 x^2=10

b0 = Y/n 1978092.00
b1=xY/x^2 38512.7

Y = 1978092+38512.7x

2,250,000
2,200,000
Net Interest Income in 000'

2,150,000
2,100,000
2,050,000
2,000,000 Series1
1,950,000 Linear (Series1)
1,900,000
1,850,000
1,800,000
0 2 4 6
Year

Graph: 1
Interpretations:
Overall Net Interest Income is in increasing trend.
 14

In couple of years i.e. 2072-73 it has fallen abruptly possibly due to change in
loan policy or fall in interest rates.
In the year 2074, again Bank has hiked in Net Interest Income most probably due
to increased loans & Advances.

Table 2: Trend Analysis on Loans & Advances:

Year X Loans and Advances (Y) x=X-X xY x^2

Ashad 070 1 23,138,370 -2 (46,276,740) 4

Ashad071 2 26,328,362 -1 (26,328,362) 1

Ashad 072 3 28,007,758 0 - 0

Ashad 073 4 31,697,345 1 31,697,345 1

Ashad 074 5 39,203,690 2 78,407,380 4

X 3 Y=148375525 xY=37499623 x^2=10

b0 = Y/n 29675105.00
b1=xY/x^2 3749962.3

Y =29675105+3749962.3x

45,000,000
40,000,000
Loans & Advances in 000'

35,000,000
30,000,000
25,000,000
20,000,000 Series1
15,000,000 Linear (Series1)
10,000,000
5,000,000
-
0 2 4 6
Year

Graph: 2
 15

Interpretations:
Loans & advances are in increasing trend.
The trend shows successful loaning and advance policies of the Bank.

Table 3: Trend Analysis on Foreign Exchange Gain/Loss:

Year X Foreign Exchange Gain/Loss (Y) x=X-X xY x^2

Ashad 070 1 515,050 -2 (1,030,100) 4

Ashad071 2 477,996 -1 (477,996) 1

Ashad 072 3 613,936 0 - 0

Ashad 073 4 629,555 1 629,555 1

Ashad 074 5 610,569 2 1,221,138 4

X 3 Y=2847106 xY=342597 x^2=10

b0 = Y/n 569421.20
b1=xY/x^2 34259.7

Y =569421.20+34259.7x

700,000
Foreign Exchange Gain/Loss in 000'

600,000

500,000

400,000

300,000 Series1
Linear (Series1)
200,000

100,000

-
0 2 4 6
Years

Graph: 3
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Interpretations:
Foreign exchange gains are in increasing trend.

Table 4: Trend Analysis on Fees Commission & Discounts:

Year X Fees commission and Discount (Y) x=X-X xY x^2

Ashad 070 1 294,968 -2 (589,936) 4

Ashad071 2 383,611 -1 (383,611) 1

Ashad 072 3 363,686 0 - 0

Ashad 073 4 357,520 1 357,520 1

Ashad 074 5 450,757 2 901,514 4

X 3 Y=1850542 xY=285487 x^2=10

b0 = Y/n 370108.40
b1=xY/x^2 28548.7

Y =370108.40+28548.7x

500,000
Fees Commission & Discount 000'

450,000
400,000
350,000
300,000
250,000
Series1
200,000
Linear (Series1)
150,000
100,000
50,000
-
0 2 4 6
Years

Graph: 4
Interpretations:
Fees commission & discounts are in increasing trend.
 17

Table 5: Trend Analysis on Other Operating Income:

Year X Other operating Income (Y) x=X-X xy x^2

Ashad 070 1 42,727 -2 (85,454) 4

Ashad071 2 44,157 -1 (44,157) 1

Ashad 072 3 40,601 0 - 0

Ashad 073 4 48,096 1 48,096 1

Ashad 074 5 90,491 2 180,982 4

X 3 Y=266072 xY=99467 x^2=10

b0 = Y/n 53214.40
b1=xY/x^2 9946.7

Y =53214.40+9946.7x

100,000
90,000
Other OPerating Income in 000'

80,000
70,000
60,000
50,000
Series1
40,000
Linear (Series1)
30,000
20,000
10,000
-
0 2 4 6
Years

Graph: 5
Interpretations:
Other operating income is in increasing trend.
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Table 6: Trend Analysis on Net Profit:

Year X Net Profit (Y) x=X-X xy x^2

Ashad 070 1 1,217,941 -2 (2,435,882) 4

Ashad071 2 1,336,589 -1 (1,336,589) 1

Ashad 072 3 1,290,025 0 - -

Ashad 073 4 1,292,494 1 1,292,494 1

Ashad 074 5 1,381,951 2 2,763,902 4

X 3 Y=6519000 xY=283925 x^2=10

b0 = Y/n 1303800.00
b1=xY/x^2 28392.5

Y =1303800+28392.5x

1,400,000
1,380,000
1,360,000
1,340,000
Net Profit in 000'

1,320,000
1,300,000
Series1
1,280,000
Linear (Series1)
1,260,000
1,240,000
1,220,000
1,200,000
0 2 4 6
Years

Graph: 6
Interpretations:
Overall Net profit is in increasing trend.
In couple of years i.e. 2072-73 it has fallen below the line possibly due to change
in loan policy or fall in interest rates.
 19

In the year 2074, again Bank has hiked in Net profit most probably due to
increased loans & Advances.
 20

Findings:
Overall Net Interest Income is in increasing trend.
In the years 2072 & 2073 Net Interest Income has fallen abruptly possibly due to
change in loan policy or fall in interest rates.
In the year 2074, again Bank has hiked in Net Interest Income most probably due
to increased loans & Advances.
Loans & advances are in increasing trend.
The trend shows successful loaning and advance policies of the Bank.
Foreign exchange gains are in increasing trend.
Fees commission & discounts are in increasing trend.
Other operating income is in increasing trend.
Overall Net profit is in increasing trend.
In the years 2072 & 2073 it has fallen below the line possibly due to change in
loan policy or fall in interest rates.
In the year 2074, Banks Net profit has increased substantially most probably due
potential investments.
 21

CHAPTER3
Conclusion:
The following trend analysis between 2070 BS and 2074 BS of selected 5
financial parameters of Standard Chartered Bank Nepal Limited including Net Interest
Income, Loans & Advances, Foreign Exchange Gain/Loss, Fees Commission &
Discounts, Other Operating Income and Net Profit shows progressive improvement that
the bank has achieved in the last years.
The finding shows:
In all studied financial parameter Standard Chartered Bank Nepal Limited is
showing linear growth trend.
Hence, the increasing trend in growth of different financial parameters of Standard
Chartered Bank Nepal Limited shows that the Bank has very good prestige in financial
market.
 22

Recommendations:
The Standard Chartered Bank Nepal Limited business is in a stable position & the results
of analysis warrant that it is high time to do more in terms of creating stronger SC
business differential in order to excel further.
 23

References:
(2016). Banking History in Nepal: When were the commercial banks established in Nepal?
Kathmandu: www.shareSansar.com.

https://www.sc.com/en/about-us/our-history.html. (2014). Retrieved November 11, 2017, from

www.sc.com.

https://www.sc.com/np/about-us/. (2017). Retrieved November 11, 2017, from

www.sc.com/np.

Kadam, M. (2016). Trend Analysis of HDFC Ltd. New Delhi.