A PROPOSAL ON ANALYSIS OF FINANCIAL

PERFORMANCE OF NEPAL INVESTMENT BANK LIMITED

(“A” CLASS FINANCIAL INSTITUTION)

A Project Proposal

By

Xirax Thapa

T.U. Regd. No.: 7-2-136-7-2019

Hetauda Campus

Submitted To

The Faculty of Management

Tribhuwan University

Kathmandu

In Partial fulfillment of the requirements for the degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Hetauda, Makwanpur
Background of Study

Financial performance is a subjective measure of how well a firm can use assets from
its primary mode of business and generate revenues. The term is also used as a general
measure of a firm’s overall financial health over a given period. Financial
performance in broader sense refers to the degree to which financial objectives being
or has been accomplished and is an important aspect of finance risk management.

Financial Analysis is an evaluation of both a firm’s past financial performance and its
prospectus for the future. Financial statement analysis involves the calculation of
various ratios. In mathematics a ratio is the relationship between two quantitative
figures. In financial management the ratio is the relationship of two accounting
figures. The ratio analysis is the financial tool by which the financial strength and
weakness are measured by relating two accounting data.

Bank is a financial institution, and the backbone of a country for the economic
development. Bank constitutes the important segment of the financial infrastructure of
any country. In broad sense, bank can be said as important financial institution, which
collects and safeguards the public money, disburses the collected money for the
productive purposes, transfer funds guarantees the credit worthiness and exchange of
money.

The study aims to analyze the financial performance of Nepal Investment Bank
Limited. This study is done using recent data which will be helpful not only to the
shareholders but also to the customers and management. Private sector and public
sector both can play the vital role for the growth of the economy of any country.
Integrated and speedy development of the country is possible only when competitive
banking service reaches nook and corners of the country.

1. History of Banking Institutions in Nepal

The history of banking in Nepal dates back to the year 1937 AD with the
establishment of Nepal Bank Limited as the first commercial bank in Nepal. It was
established as a semi-government bank with METALLIC COINS worth NRs 10
million as the authorized capital. Banknotes in Nepal weren’t introduced up until the
mid-1940s. It was in the year 1945 that the earliest banknotes were issued by the
treasury “Sadar Muluki Khana”.

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Later in the year 1955, the Nepal Rastra Bank Act was formulated for a better banking
system and Nepal Rastra Bank was established in 1956 as the Central Bank of Nepal
accordingly. After this date, the banknotes were issued by the Central Bank with the
signatures of the governors of the institution. Till the 1980s, the banking sector was
wholly owned by the government, with Agriculture Development Bank, Rastriya
Banijya Bank, NBL, and NRB being the pillars of a financial institution in Nepal.

The banking sector in Nepal has faced many hurdles and hindrances. It has undergone
various political conflicts and instability. But today, it stands more liberalized and
modernized. There are various types of banks working in the modern banking system
in Nepal.

2. General Introduction

2.1. Commercial Banks in Nepal

Further, as per the Bank and Financial Institutions Act, 2073 B.S. “Bank or financial
institution" means a bank or financial institution which has obtained a license
pursuant to this Act for carrying on banking or financial transaction.” Commercial
Bank is a “A” Class Financial Institution licensed by Nepal Rastra Bank.

2.2. Nepal Investment Bank Limited

Background

Nepal Investment Bank Limited herein after referred as NIBL previously Nepal
Indosuez Bank Ltd., now Nepal Investment Mega Bank Limited after recent merger
with Mega Bank Limited was established in 1986 as a joint venture between Nepalese
and French partners. The French partner (holding 50% of the capital of NIBL) was
Credit Agricole Indosuez, a subsidiary of one of the largest banking group in the
world. Later in 2002, a group of Nepalese companies comprising of bankers,
professionals, industrialists and businessmen acquired the 50% shareholding of
Credit Agricole Indosuez in Nepal Indosuez Bank Ltd., and accordingly the name of
the Bank also changed to Nepal Investment Bank Ltd.

The mission of the bank is to be the most preferred provider of Financial Services of
Nepal. NIBL aims to be the leading Nepali bank, delivering world class service
through the blending of state-of-the-art technology and visionary management in
partnership with competent and committed staff, to achieve sound financial health

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with sustainable value addition to all our stakeholders. We are committed to do this
mission while ensuring the highest levels of ethical standards, professional integrity,
corporate governance and regulatory compliance.

3. Statement of Problem

As we know that the main objective of any business organization e.g. Bank is profit
maximization. Analysis of financial statement helps to attain this objective as it gives
the information about the different activities inside the organization. A bank has to
make decisions with a framework of statutory requirements of regulation by central
banks, as well as the national objectives that are determined in the matter of the
provisions from time to time.

Though the banking system is making much progress, the progress has been set up
with the problem and hindrances. Another pressing problem is under developed
country, lack of banking habit in people. Many people are under the poverty line.
Many people are not literate so people are not conscious about the banking system
and don’t know the importance of bank. Bank concentrates only in the city so villages
have to take a loan from money lender at ahigh rate of interest. Most of the people
keep their saving idle or give it to others to use it in greed of more interest.The main
problem of the study is to inquire into the financial performance of Nepal Investment
Bank Limited.

Thus, this study will help to find out the answer of the following questions:

What is the overall financial position of NIBL?

What is the position of the NIBL in terms of liquidity and profitability?

In this context, the main purpose of the study is analyzing the financial performance
of Nepal Investment Bank Limited in terms of profitability, liquidity, turnover, and
efficiency in operation as well as other related dimensions.

4. Objectives of the Study

The major purpose of 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. Analysis of

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financial statements helps to examine efficiency and performance of an organization.
Some specific objectives in our topic are listed below:

a) To analyze the financial performances through the use of appropriate financial and

analytical tools.

b) To evaluate the financial position of Nepal Investment Bank Limited

c) To identify the profitability position i.e. EPS, DPS and ROA.

d) To analyze the growth rate trend of profitability position.

e) To identify the liquidity turnover efficiency of assets management.

5. Statement of hypothesis

Alternative hypothesis (H1):

There is significance relationship between profitability and financial performance of

Nepal Investment Bank Limited in past fiscal years.

Alternative hypothesis (H2):

There is a significant relationship between the efficiency and financial position of

6. Research Methodology

Research methodology simply refers to the process that is used to collect information
and data, which helps to collect reliable data and information from various sources in
order to prepare report writing.

6.1. Research design

The research design will consist of descriptive research designs to deal with the
various aspects. The descriptive research design will be developed with the aim of
studying the subject of research in detail.

6.2. Sources of Data Collection

There are various data collection sources are available i.e. primary sources and
secondary sources. The major data used in this project report are collected from
secondary sources.

The sources of detailed data are as follows.

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6.2.1. Secondary Data:

The data are collected from the published and unpublished sources. Secondary data
are those data which are already available and have been collected for some other
purpose.

• Annual financial reports of Nepal Investment Bank Limited

• Official website of Nepal Investment Bank Limited

• News paper

• Various research papers

•Books and articles

6.3. Data Presentation and Analysis Tool

Various statistical as well as financial ratios are used in analysis of data obtained in
the due course of research. The obtained data is presented, tabulated and graphed and
subsequently done the same to the results computed to analyze and achieve the goal of
the study. The following tools which are used for data analysis are:

• Liquidity ratios

• Profitability ratios

• Assets management ratio

• And other financial ratios

Further, following tools have been used for data presentation:

• Tabulation

• Bar diagrams

7. Chapter Plan

i) Chapter one - Introduction:

The first chapter includes general background, statement of the problem, objective of
the study, significance of the study, limitations of the study, organization of the study
and also the conceptual frameworks along with review of published and unpublished
reports, booklets, journals, magazines, research works and thesis and useful website
relating to liquidity. This chapter also describes the various sequential steps that were

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strictly followed in conducting this research. Different financial as well as statistical
tools have been used to find

out the actual performance of the banks. The main financial tool adapted to analyze
the data is accounting ratio. Other simple statistical analysis such as standard
deviation, coefficient of variance, etc. will be calculated where necessary. Moreover,
the forecasting of the next five years’ data will be done with the help of regression.

ii) Chapter two – Result and Analysis:

This chapter deals with the static evidence and facts to clarify the research work.
Here, the study presents the collected data for various purpose of analysis to obtain
the answer to the research question. Here, the calculation of different accounting
ratios and their applications will be presented.

iii) Chapter three – Summary, Conclusion and Recommendation:

Finally, the third chapter is the conclusion of the research. On the basis of the data
analyzed the research will reach in final phase to conclude the analysis of this chapter.
This chapter further deals with the major findings, prevailing issues and gaps of the
concerned banks. The suggestions to the related bank will also be given which will
help the bank to improve the company in many ways.

8. Limitation of the study

Limitation is the boundary line of the study which narrows the area of study into a
specific circumstance. The major limitations of this study are mentioned below:

The researcher has used only some statistical tools for presentation and analysis of

data.

Most of the data used in this study are based on secondary sources mainly official

website of Nepal Investment Bank Limited.

The main focus is given to the quantitative aspect rather than qualitative aspect.

The study based on only Nepal Investment Bank Limited. However, comparison
with other banks will be done wherever necessary.

It is only for partial fulfillment of Bachelor of Business Studies (BBS).

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