LIQUIDITY AND PROFITABILITY ANALYSIS OF NABIL BANK LTD.

A Project Work Report

By
Name of Student: Prerana Udas
T.U. registered No.:7-2-455-56-2019
Pinnacle College
Lagankhel, Lalitpur

Submitted To
The Faculty of Management
Tribhuvan University (T.U.)
Kathmandu, Nepal

In Partial Fulfillment of the Requirements for the Degree of

BACHELOR OF BUSINESS STUDIES(BBS)

Lalitpur, Nepal
2024
 Declaration
I hereby declare that the project work entitled, LIQUIDITY AND PROFITABILITY
ANALYSIS OF NABIL BANK LIMITED submitted to the Faculty of Management, Tribhuvan
University, Kathmandu is an original piece of work under the supervision of Mr. Nirmal Tiwari,
faculty member, Pinnacle College, Lagankhel,Lalitpur, and is submitted in partial fulfillment of
the requirements for 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.

Signature:
Name: Prerana Udas
Date:2081/01/05

ii
SUPERVISOR'S RECOMMENDATION
The project work report entitled submitted by Prerana Udas of Pinnacle college,
Lagankhel, Lalitpur is prepared under my supervision as per the procedure and format
requirements laid by the Faculty of Management, Tribhuvan University, as partial
fulfillment of the requirements for the degree of Bachelor of Business Studies (BBS).
I, therefore, recommend the project work report for evaluation.

…………………………….……
Nirmal Tiwari

iii
endorsement

iv
ACKNOWLEDGEMENTS
I would like to express my sincere gratitude to several individuals and organizations for
supporting me throughout my research study. First, I wish to express my sincere gratitude to my
supervisor, Nirmal Tiwari, for his enthusiasm, patience, insight comments, helpful information,
practical advice and unceasing ideas that have helped me tremendously at all times in my
research and writing of this report.
I would also thank my friends for helping me throughout the study with their guidance and
support.

Signature-…………..
Name: Prerana Udas
Date:2081/01/05

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TABLES OF CONTENTS
Title Page…………………………………………………………………………………………………………………i

Declaration……………………………………………………………………………………………………………. ii

Supervisor’s Recommendation……………………………………………………………………………….iii

Endorsement………………………………………………………………………………………………………….iv

Acknowledgments………………………………………………………………………………………………….v

Table of contents…………………………………………………………………………………………………..vi

List of table…………………………………………………………………………………………………………. vii

List of Figure………………………………………………………………………………………………………. viii

Abbreviations……………………………………………………………………………………………………….ix

CHAPTER1: INTRODUCTION……………………………..…. 1
Background……………………………………………………………………..1
Profile of Nabil Bank Limited………………………..……………………………… 2
Objectives……………………..……………………………………………….. 3
Rationale…………………………..…………………………………………… 3
Review…………………………………………………………………………. 4
Research Methodology………………………………………………………… 5
Limitation of the Study………………………………………………………… 6

CHAPTER 2: RESULT AND ANALYSIS………………………7

Data Presentation…………………………………………………………….....7
Analysis…………………….…………………………………………………...7-16
Findings…………………………………..…………………………………......16

CHAPTER 3: SUMMARY AND CONCLUSION…..………….17

Summary…………….………………………………………………………….17
Conclusion………………..…………………………………………………….17

REFERENCES…………………………………………………....18
APPENDICES…………………………………………………….19
vi
LIST OF TABLES
Table 1 Current Ratio……………………………………………………………7
Table 2 Cash and bank balance to current assets ratio…………………………..8
Table 3 Cash and bank balance to total deposit ratio……………………………9
Table 4 Earning per share……………………………………………………….10-11
Table 5 Return on Assets………………………………………………………..11-12
Table 6 Return on equity………………………………………………………...12
Table 7 Net profit to loan and advance ratio…………………………………….13
Table 8 Correlation coefficient between cash balance and deposit……………...14-15

vii
LIST OF FIGURES
Figure 1 Current ratio……………………………………………………..…………..8
Figure 2 Cash and bank balance to current assets ratio……………………………….9
Figure 3 Cash and bank balance to total deposit ratio………………………………...10
Figure 4 Earning per share…………………………………………………………….11
Figure 5 Return on Assets …………………………………………………………….12
Figure 6 Return on equity……………………………………………………………...13
Figure 7 Net profit to loan and advance ratio………………………………………….14

viii
ABBREVIATION
AGM: Annual General Meeting
CCD: Cash Concentration and Disbursement
EPS: Earning Per Share
NGIB: Nilgiri Bikas Bank Limited
NIBL: Nepal Investment Bank Limited
POL: Position of Liquidity
ROE: Return on Assets
ROA: Return on Equity

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CHAPTER- 1
INTRODUCTION
Background of the study
Liquidity is the word that the bankers use to describe their ability to satisfy demand for cash, in
exchanging of deposits. Liquidity simply means ability to meet cash demands. It is characterized
by the use of converting an asset into money at a little cost. In the assets side of the balance sheet
of the commercial bank, will be liquid assets, which can be easily converted into cash-such
assets are called liquid assets. In another words, a liquid asset is one which can easily
expandable, marketable (transferable)and has capital certainly. Hence, managing and
maintaining sufficient degree of liquid assets is termed as liquidity. Liquidity can also be defined
as the bank’s ability to meet immediate maturing liabilities. Liquid assets mainly include, money
at call and short deposit. Investment in government securities such as treasury bills,
developments bonds, saving bonds etc. Among these, first two the most liquid assets and next
two are termed as near-liquid assets. But both of these assets are maintain to meet the liquidity
needs of bank. But, however one difference among these is that, the most liquid assets don’t earn
same returns whereas the near-liquid assets do.
According to Nepal Commercial Bank Act 2031,1(f),"Liquidity is supposed to include bank
cash in vault, amount deposited in current account, amount deposited in Nepal Rastra Bank and
those assets which are specified as liquid. The liquidity management function of a bank is regular
one. Each and every bank attach with great importance of liquidity for maintaining confidence of
customer and its survival. The importance of liquidity is considered very sensitive because if it
can’t maintain the liquidity, it has to pay fine. The commercial banks and financial institutions
should keep the stock of liquid assets in the ratio of their deposit liability as fixed by the Nepal
Rastra Bank. For the bank, the words liquidly and profitability come again and again. They are in
no possibility of profitability without liquidity and also there is no growth in liquidity without
profitability. These are complement to each other of high liquidity in bank; the bank cannot gain
profit because most part of the liquidity is reserved in the bank. It is not possible to hope
profitability without investment. The bank should be aware of the excess supply of found excess
demand of fund in order to move nearest toward the accuracy of tradeoff between the liquidity
and profitability.
The principality of liquidity and profitability are very much crucial. In the lack of liquidity, the
bank can’t give payment to the depositors and the creditors. The bank becomes unable to face
any economic rise and fall occurring in coming days. So, to keep liquidity is very important. It is
very difficult for the bank to discharge both of these functions together, to keep liquidity and
earn profit are compulsory for the bank. The bank should maintain understanding between these
two principals. If the attempts to run its transaction ignoring these two principals, certainly the
bank will bear an economic disaster. Hence, the bank gives emphasis upon the necessarily of
internal co-ordination between liquidity and profitability because liquidity is necessary to make

1
payment of all sorts of deposits. The liquidity and profitability have their peculiar importance in
the bank. So, from the business point of view, it is necessary to maintain balance between
principalities of liquidity and profitability.

Profile of Nabil Bank

Nabil Bank Limited, the first foreign joint venture bank of Nepal, started operations in July 1984.
Nabil was incorporated with the objective of extending international standard modern banking
services to various sectors of the society. Pursuing its objective, Nabil provides a full range of
commercial banking services through its 266 branches across the nation and over 170+ reputed
correspondent banks across the globe. Nabil Bank Limited has continued to show minor progress
in the 4th quarter of the FY 2079/80. As per the unaudited financial report, its net profit has
increased by 76.94 percent as compared to last year’s report. Its net profit now stands at Rs 7.52
Arba. Its operating income has also increased by 76.11 percent to Rs 11.06 Arba. As of Q4,
Nabil Bank’s deposit base stands at a staggering Rs 396.84 Arba. Out of this, it has floated loans
of Rs 332.69 Arba. With 10.82 percent increase in floated loans, it has been able to increase its
net interest income by 101.80 percent to Rs 17.98 Arba. Its paid up capital now stands at Rs
27.05 Arba with a reserve of Rs 31.03 Arba. Its annualized EPS has now reached Rs 27.82 Arba,
net worth per share at Rs 214.69 with the P/E ratio 21.54.
Nabil, as a pioneer in introducing many innovative products and marketing concepts in the
domestic banking sector, represents a milestone in the banking history of Nepal as it started an
era of modern banking with customer satisfaction measured as a focal objective while doing
business. Nabil provides a full range of commercial banking services through its outlets spread
across the nation and reputed correspondent bank across the globe. Moreover, Nabil has good
name in the market for its highly personalized services to the customers. The Head Office of
NABIL Bank Ltd. is located at NABIL House, Kamaladi and Kathmandu, one of the main cities
in the capital of Nepal. Nabil Bank Limited is the nation’s first private sector bank, commencing
its business since July 1984. Nabil was incorporated with the objective of extending international
standard modern banking services to various sectors of the society. Pursuing its objective, Nabil
provides a full range of commercial banking services through its 74 points of representation. In
addition to this, Nabil has presence through over 1500 Nabil Remit agents throughout the nation.
Operations of the bank including day-to-day operations and risk management are managed by
highly qualified and experienced management team. Bank is fully equipped with the modern
technology which includes international standard banking software that supports the E-channels
and E-transactions. Nabil is moving forward with a Mission to be "1st Choice Provider of
Complete Financial Solutions" for all its stakeholders; Customers, Shareholders, Regulators,
Communities and Staff. Nabil is determined in delivering excellence to its stakeholders in an
array of avenues, not just one parameter like profitability or market share. It is reflected in its
Brand Promise "Together Ahead". The entire Nabil Team embraces a set of values
"C.R.I.S.P" ,representing the fact that Nabil consistently strives to the Customer Focused, Result
Oriented, Innovative, Synergistic and Professional.

2
Statement of the problem
The company is currently facing challenges concerning both liquidity and profitability. On the
liquidity front, there has been a noticeable decline in cash reserves and a strained ability to meet
short-term financial obligations. This is exacerbated by mounting short-term debts and current
liabilities outweighing current assets. Concurrently, profitability has been impacted by stagnant
revenue growth and diminishing profit margins. Operational inefficiencies and rising expenses
have further eroded profitability, resulting in consecutive periods of negative net income. These
issues stem from a combination of internal factors, such as ineffective cost management and
strategic misalignment, as well as external market pressures. The main focus of the study is to
deal with the following problems-
 To know about the statement position of Nabil Bank using various ratios.
 To know what has affected financial performance of the Nabil Bank

Objective of the study

As per NABIL Act.1984, NABIL related to the commercial banking system has its own
objectives for the welfare of the general people of Nepal. The main objectives of NABIL Bank
Ltd. are as follows:
1. To examine the profitability position i.e. EPS, ROE and ROA.
2. To assess out the “Position of Liquidity” i.e. current ratio and quick ratio.
3. To assess the condition of cash movement in NABIL Bank Ltd.

Rationale of the study

Since this study has been conducted on Banking and Insurance for meeting the requirement of
partial fulfillment of BBS level, it constitutes the following importance.
1. It will be useful for concerned company as the study has provided suggestions.
2. This study may serve as the guideline for the future researchers.
3. It will also be useful for library use for general readers.
Nabil bank looks forward to emerging as a first rate bank across all strata of the nation. We surge
to turn our services and products into economic values for our treasured customers, talking care
of their financial needs. We know the world is changing and to keep pace with that we customize
our services and re-engineer our products in sync with changing time and technology. We are
always geared up for translating great aspirations of our stakeholders into economic and social
values. We know our customers expect unparalleled service standards: our community looks
forward to seeing the bank emerging as responsible corporate entities that cherish social and
economic harmonies in the community. We go beyond just making profits.

Review of literature

3
 It would not be exaggeration to tell that the bank is the base of economic development of a
country. We can’t imagine the economic development of a country without development of bank
and any other financial institution. The profitability position of NABIL Bank is comparatively
better than other joint venture banks. Its profit is increasing steadily and must maintain its high
profit margin in future. Liquidity position measures the firm’s ability to satisfy its short-term
commitment out of current or liquid assets. Liquidity ratio analysis employs financial data taken
from the bank or firm’s balance sheet and income statement. Thus, the ratio analysis helps in the
accounting numbers. It helps in the standardizing financial information and making meaning
comparison of the firm’s financial data at different points in time and over time with other firms.

Review of journals and articles

Further R.S. Sayers in his book Modern Banking Writers," Ordinary banking business consists of
changing cash for bank deposits and bank deposits from one person to corporation (one depositor
to another) giving bank deposits in exchange for bill of exchange, government banks recurred
and unsecured promises businessmen to repay."
Erich A.H. in his book has described financial analysis as "analytic and judgmental process that
helps to answer the questions that have been properly posed to and therefore, it is a mean to an
end. We can stress enough that financial analysis can aid that allows those responsible for the
results to make sound decisions."
I.M Pandey says, " A firm should ensure that it does not suffer from lack of liquid. And also that
it is not too much highly liquid. The failure of a company to meet its obligations, due to lack of
sufficient liquidity will result in bad credit image. Loss of creditor’s confidence, or even in low
suits resulting in the closure of the company. A very high degree of liquidity is also bad; idle
assets earn nothing. The firm’s funds will be unnecessarily tied up in current assets. Therefore, it
is necessary to strike a proper balance between liquidity and lack of liquid."
Liquidity is measured by the speed with which a bank’s assets can be converted into cash and
other current obligations. It is also important in view of survival and growth of a bank.
Mr. Pragun Shrestha in his study, " A comparative Analysis of Financial performance of the
selected commercial Banks", Concluded that many pf the banks are of the view that political
instability in the country is mainly responsible for the decline of the lending opportunities. Few
banks ascribed it to the economic crisis that occurred in Asia pacific region. No one felt that
higher rates on interest on lending to be a major factor. At one time, it should target not only the
urban sector, it should go the rural sector also. They have to explore all the potential sectors like
tourism etc. in order to generate high rate of profits.
Mr. Gurung’s Study on "A Financial Study of joint Venture Banks in Nepal" is a comparative
Study of NGBL and NIBL. In this study, he has analyzed financial position of the banks by
measuring various ratios to elaborate the financial performance. The liquidity, profitability and
dividend payout ratio of two banks are on favorable position. Nut NIBL seems to be slightly
better position in terms of liquidity, profitability and capital structure compared to the NGBL. In
this evidence he has concluded that the NIBL promises a better future than NGBL. The present

4
study tries to focus on financial performance of NBL and NABIL Bank Limited, it is clear that
there was no research work on comparative study of these banks. This is the comparative study
of commercial banks which were not cleared in previous studies.

Research methodology
Research methodology refers to the different techniques and tools under to make the study
significant and efficient. There are varieties of techniques and tools available to accomplish the
study. The financial analysis is useful to reflect the liquidity position of the concerned bank.

Research design
It is a descriptive research design with using secondary data’s which are available through the
annual report published by the concerned bank.

Method of Analysis
Various financial analysis tools have used in this study. The analysis of the data will be done
according to pattern of data available. The relationship between figures related to study topic will
be drawn out using ratio analysis. The various calculated results are tabulated in a chronological
order under different headings, which are later compared with each other to interpret the results.

Sources of Data
The source of data means the place or materials from which the required data have been found.
There are mainly secondary data are available for the study for the student i.e. the main source of
data is Balance sheet of the concerned bank.
Secondary Data
The source of secondary data is those, which has been collected by the other people. Here the
secondary data include AGM’s report of NABIL Bank Limited. Covering fiscal year 2075/78 to
2079/80, journal publish by various institutions.
Tools Used for Analysis
The collected and observed data is tabulated after adjusting necessarily amount of each overhead.
However, for the analysis of the data, following financial tools were used.
Financial tools
Under financial tools, the study has used two different types of ratios in order to know about
liquidity situation and profitability situation of the institution. The two ratios and further sub-
divided into multiple branches. They are presented below:
Liquidity ratio
1. Current ratio
2. Cash and bank balance to current assets ratio
3. Cash and bank balance to total deposits ratio

5
Profitability ratio
1. Earning per share (EPS)
2. Return on Assets (ROA)
3. Return on Equity (ROE)
4. Net profit to loan and advance ratio
Statistical tools
1. Mean
2. Standard deviation
3. Coefficient of variation
Limitations of the study
1. The study period will cover only from 2075/76 to 2079/2080.
2. The main focus is given to the quantitative aspect rather than qualitative aspect.
3. The case study is confined to only on organization, which is NABIL Bank ltd.
4. The case study is mainly based on secondary data through annual report of bank
brochure and newspaper. So, validity of the findings depends on the reliability of
those data.

6
 CHAPTER –II
RESULT AND ANALYSIS
Presentation of Data
The main aim of this chapter is presentation and analyzing data according to research
methodology to attain the objective of this study. This chapter is basically concerned with
presentation and analysis of data and the effort had been made to analyze the liquidity and
profitability of five years of the NABIL Bank Ltd. The study has used various financial tools to
measure the liquidity position of commercial banks.
Liquidity ratio
The liquidity ratios are calculated from total deposits, total liquid fund cash in hand, total assets,
cash and bank balance and current liabilities of the NABIL as well as using the formula as given
in the methodology. The liquidity of business firm is measured by its ability to satisfy its short-
term obligation as they come due. Liquidity refers to the solvency of firm’s cover all liquidity
position of NABIL Bank Ltd. with the help of financial data of five years of the bank is as
follows:
Current ratio
The current ratio, one of the most commonly cited liquidity ratios, measures the firm’s ability to
meet its short-term obligations. It tells investors and analysis how a company can maximize the
current assets on its balance sheet to satisfy its current debt and other payables. The formula for
current ratio is:
current assets
Current ratio=
current liabilities
Table no. 2.1 current ratio in Rs(million)
Year Current assets Current liabilities Current ratio
2075/76 1971.69 925.02 2.13
2076/77 2835.75 426.21 6.65
2077/78 3699.81 502.53 7.36
2078/79 1215.011 571.34 2.126
2079/80 3436.30 420.74 8.16
Noted from: Annual Report of Nabil Bank Ltd.
Similarly, the figure for above data is presented as:

7
 Figure 2.1 Current Ratio
The above table and figure shows that the current ratio of the bank has the highest & better
current ratio of 8.16 in 2079/80 and the lowest & worse current ratio of 2.126 in 2078/79 and
average ratio is 5.29. In general, it can be said that the bank is able to shore-team obligate.
Cash and Bank Balance to current Assets
Cash and bank balances are the most liquid form of the current assets. The cash and bank balance
ratio indicates the percentage of readily fund with in the bank. It can be calculated by using
following formula:
cash∧bank balance
Cash and bank balance ratio=
current assets
Table no. 2.2 Cash and balance to current Assets in Rs (million)
Year Cash and bank balance Current assets Current ratio(%)
2075/76 286.89 1971.69 14.55
2076/77 630.24 2835.75 22.23
2077/78 1399.83 3699.81 37.83
2078/79 988.02 1834.011 53.87
2079/80 1980.79 3436.30 57.64
Noted from: Annual Report of Nabil Bank Ltd.
Similarly, the figure for above data is presented as:

8
 rati o

4.75 4.78
4.23

1.88 1.94

2075/76 2076/77 2077/78 2078/79 2079/80

Figure 2.2 Cash and Bank Balance to Current Assets Ratio

The above table and figure shows that the cash and bank balance to current ratio of the bank was
maximum & better is 57.64 in the year 2079/80 and minimum is 14.55 in the year 2075/76 and
average is 37.22.
Cash and bank balance to total deposit
The cash reserve requirement in the most developed and developing countries have been used
extensively as a mean to control commercial bank credit. Especially in countries where capital
market is not well developed, cash reserve requirement can be used not only to control the
commercial bank credit but also to influence the investment portfolio of the commercial bank.
cash∧bank balance
Cash and Bank balance to total deposit=
total deposit
Table no. 2.3 Cash and bank balance to total deposit Rs in (million)
Year Cash and bank balance Total deposit Ratio (%)
2075/76 286.89 14586.6 1.97
2076/77 630.24 19347.39 3.26
2077/78 1399.83 23342 5.99
2078/79 988.02 23422 4.21
2079/80 1980.79 39684 4.991
Noted from: Annual Report of Nabil bank Ltd.
Similarly, the figure for above data is presented as:

9
 Figure 2.3 Cash and Bank balance to total deposit ratio
The above table and figure shows that cash and bank balance to total deposit ratio of the bank
varies from maximum 5.99 in year 2077/78 and minimum 1.97 in year 2075/76 and average ratio
is 4.085.
Profitability Ratio
Profitability ratio measures the overall performance of the firm by determining the effectiveness
of the firm in generating profit. A company should earn profit to service and grow over a long
period of time. Beside management both creditor and owners are interested in the profitability of
the principal regularly while owners want to get a reasonable return on their investment. The
following ratios are used to measure the profitability position of NABIL Bank Ltd. With the help
of financial data of the past five year of the bank are as follows.
Earning Per Share (EPS)
EPS simply shows the profitability of the firm on a per share basis. It is calculated from the point
of view of the ordinary shareholders.
net profit after tax
EPS= ∗¿100%
no . of common share
Table no. 2.4 Earning per share in Rs (Million)
Year Net profit after tax No. of common share EPS (%)
2075/76 520.11 491.654 105.49
2076/77 635.26 491.654 129.21

10
 2077/78 674 491.654 137.09
2078/79 452.755 491.654 92.08
2079/80 425.602 491.654 86.56
Noted from: Annual report of Nabil Bank Ltd.
Similarly, the figure for above data is presented as:

Figure 2.4 Earning Per Share

The above table and figure show that, EPS trend is fluctuating out, it is clear that the EPS of
NABIL Bank is substantially high than other competitions. The average EPS is 110.086. The
highest and lowest EPS are 137.09 & 86.56 respectively in the fiscal year 2077/78 and 2079/80.
Therefore, from the above analysis it can be said that the earning power of NABIL Bank is in
good condition up to 2077/78.
Return on Assets (ROA)
It measures the firms return on investment of financial resources. It also helps us to provide the
information of proper utilization of the resources. It is the relation between profit and total assets.
Lower ROA means lower profit and higher ROA means higher profit.
net profit after tax
ROA= * 100%
total assets
Table no. 2.5 Return on Assets in Rs (Million)
Year Net profit after tax Total assets Ratio
2075/76 520.11 170.640 3.05

11
2076/77 635.26 223.299 2.84
2077/78 674 272.53 2.47
2078/79 417.188 291.238 1.432
2079/80 596.14 419.818 1.42
Noted from: Annual Report of Nabil Bank Ltd.
Similarly, the figure for above data is presented as:

Figure 2.5 Return on Assets

The above table and figure show that, the trend of ROA is also fluctuation. The average ratio is
2.24, the highest ROA is 3.05 in the year 2075/76 and the lowest ROA is 1.42 in year 2079/80.
However, the management of bank must keep their eyes towards situation & mobilize their
working assets more efficiently to earn more profit.
Return on Equity (ROE)
It is the measure of the profitability of a business in relation to its total equity. It can be
measured by the given formula below:
net income
ROE= *100%
Shareholder ’ s equity
Table no. 2.6 Return on Equity in Rs (million)
Year Net income Shareholder’s equity Ratio
2075/76 344.16 491.654 70
2076/77 417.91 491.654 85
2077/78 442.49 491.654 90
2078/79 224 491.654 45.56

12
 2079/80 573.26 491.654 11.66
Noted from: Annual report of Nabil Bank Ltd.
Similarly, the figure for above data is presented as:

Figure 2.6 Return on Equity

The above table and figure show that, the average ROE is 60.44. The lowest ROE value is 11.66
per share in 2079/80 and the highest ROE value is 90.00 per share in year 2077/78. Therefore,
higher ROE of NABIL Bank Ltd. shows its financial frailty which ultimately conclusion of the
wicked financial position of it.
Net Profit to loan and advance ratio:
It is calculated by following formula:
Net profit after tax
NP to loan and advance= *100%
Loan∧advance
Table no. 2.6 net profit to loan and advances in Rs(million)
Year Net profit after tax Loan and advance Ratio
2075/76 520.11 109.47 4.75
2076/77 635.26 132.79 4.78
2077/78 674 159.03 4.23
2078/79 417.188 221.909 1.88
2079/80 596.14 115.65 1.94

13
Noted from: Annual report of Nabil bank Ltd
Similarly, the figure for above data is presented as:

rati o

4.75 4.78

4.23

1.88 1.94

2075/76 2076/77 2077/78 2078/79 2079/80

Figure 2.7 NP to Loan and Advance Ratio

The above table and figure show that, in the fiscal year 2075/76, the ratio of net profit to loan
and advance is 4.78 but has been decreasing since then, it reached 1.94 in the fiscal year
2079/80.
Statistical Tools
Various statistical tools may be used for the evaluation of liquidity and profitability of the banks
such as Correlation Analysis, Measure of Central Tendency, theory of Dispersion and Estimation
whatever is required. Statistical analysis is one particular language which describes the data and
makes possible to talk about the relations and the difference of the variables. These tools are
used to calculate coefficient of variation and Karl’s Pearson’s correlation coefficient between
cash, bank balance and total deposited.
Table no. 2.8 Calculation of correlation coefficient between cash and bank deposit
Year Cash & Total X'= 2 Y'= 2 X'Y'
X' Y'
Bank Deposit (Y) A-X B-Y
Balance
(X)
2075/ 286.89 14586.6 770.26 593306.63 9489.7 90056266.08 7309649.7
76 4 98 67
2076/ 630.24 19347.39 426.91 182256.3318 4729.0 22363516.66 2018883.9
77 49 08 77

14
 2077/ 1399.83 23342 (342.6 117426.841 734.39 539340.4224 (251660.5
78 76) 8 69)
2078/ 988.02 23422 69.134 4779.51 654.39 428236.7424 45241.151
79 8 33
2079/ 1980.79 39684 (923.6 853103.4605 15607. 243597240.2 (14415743
80 36) 602 .08)
Σ(X)=528 Σ(Y)=12038 2 2 ΣX'Y'
ΣX ' =175687 ΣY ' =356984
5.77 1.99 2.773 600.1 =7706371.
246

Mean
Mean means the number of the value divide the sum of all the observation, in other words, mean
is the arithmetic average of total observation or values.

Mean=
∑ of variables
n
ΣX
Average CBB (A) =
n
5285.77
=
5
=1057.154
ΣY
Average TD (B) =
N
120381.99
= =24076.398
5
Therefore, the average of the CBB of NABIL Bank Ltd. for the last five years is Rs. 1057.154
million and the average of the TD of NABIL Bank Ltd. is Rs.24076.398 million.
Standard deviation
Standard deviation is the measure of the amount of variation and dispersion of a set of values. In
other words, standard deviation is used to measure the risk of company.

√
2
SD= ∑ X
N

SD OF CBB (σ)=
√ 1756872.773
5
=592.768

SD OF TD (σ)=
√ 356984600.1
5
=8449.6698

15
Therefore, the SD based on CBB of NABIL Bank Ltd. for last five years is Rs. 592.768 million
and SD of TD is Rs. 8449.6698 million.
Coefficient of variation (CV)
The coefficient of dispersion based on standard deviation multiplied by 100 is known as
coefficient of variation. It is independent unit.
σ
C.V.=
mean
σ of CBB 592.768
CV of CBB = = = 56.072%
Mean of CBB 1057.154

σ of TD 8449.6698
CV of TD= = =35.0952%
mean of TD 24076.398

The coefficient of variation measures that can sentiency (variability) of the observation with
reference to above calculations; there is uniformity in the changes of CBB as compared to the
total deposit because CV of CBB is greater than CV of TD i.e. 56.072% >35.0952%.

Major findings of the study

Going through the presentation and analysis of the information of NABIL Bank ltd, the
researcher has found the following things.
1. It is a joint venture bank adopting innovative and latest banking technology.
2. The bank provides different facilities like credit card facility, tele banking, any branch
banking, ATM (24 hours’ service). So it is called "Bank with difference".
3. The bank collects deposits in the form of current, saving, fixed, call and others, but the
majority of deposits are in the saving account.
4. This bank also able to collect sufficient foreign deposit in spite of economic crisis.

16
Chapter III
SUMMARY AND CONCLUSION

Summary of the study

Nepal is one of the less developed countries of the world for the most of the developing
process. It is financially depending on the foreign country. It is economically too weak in
Nepalese banking industries. At present, modern commercial banks made the economy
always alive and smart to run and maintain day to day commercial economic and banking
transactions. Commercial bank including joint venture bank is opening in Nepalese
industries. It is remarkable fact that any country cannot have a developed economy in the
absence of modern banking system because any development works a sufficient capital
and a lack of sufficient capital is also one of the main reason as to why Nepal has been
backward for developing its economy.

So, it is utterly important to find out whether or not the banks are serving an importance
contribution to developed difference sector of the economy. In this record this study has
been based upon the objective to evade liquidity and profitability position of NABIL
Bank ltd.

Conclusion of the study

NABIL Bank has come out as a leading and the most profitable of Nepal among the joint
venture banks. Thus, banks play vital role for the country and its people in the proper way
by making all the policy properly. General activities and management of commercial
banks directly the economic development of Nepal. From the above finding, it has been
concluded that profitability position of NABIL Bank has maintained more liquidity this
year as compare to previous year, which means NABIL bank has more chances to fulfill
the demand of depositors. According to annual report published by NABIL Bank, the
deposition of NABIL was in increasing trend. It is a joint venture bank adopting
innovative and latest banking technology. The bank provides different facilities like
credit card facility, tele- banking, any branch banking, ATM (24-hour service). The bank
collects deposits in the form of current saving, fixed call and others, but the majority of
deposits are in the saving a/c. This bank is also able to collect sufficient foreign deposit
despite of economic crisis.

17
Basically, the data are of secondary nature. Time and resource are the constraints of the
study. Therefore, the study may not be generalized in all cases. I have tried my best to
analyze and interpret the financial status of Nabil Bank limited. However, this study
cannot be considered as a complete. Others may interpret it in different ways since the
perspectives of analysis differ widely.

References

Bajracharya B.C (2059) "Business Statistic and Management’’, Kathmandu M.K

publishers and Distributors.
BatraPramod and Deepak Mahendra (1993) "Management Ideas in Action", New Delhi:
Think Inc.
Gitam L.J (2000) "Financial Management", Prentice Hall, New Delhi, India.
Kreitner, Robert (1999) "Management", Delhi; AITSB.
Pant, PR wolf HK (2005) "Social Science Research and Thesis Writing", Buddha
Academic Enterprises Pvt. Ltd.
Robbins, S.P (2006)"Organizational Behavior", New Delhi; Prentice Hall.
ShresthaAlok Man (2006) "Public Youth Campus", Dhobichaur, Kathmandu, Nepal.
Woodward, Joan (1995)" Industrial Organization", Theory and Practice, London:
Oxford.

Other reference
Annual report of Nabil Bank Ltd. (from FY 2075/76 to 2079/80)

Websites
www.nabilbank.com
www.nabilbankltd.com

18
19
 APPENDICES
Summary of the Financial Transactions of NABIL from FY 2078/76 to 2079/80 (Rs in
Millions)
Details 2075/2076 2076/77 2077/78 2078/79 2079/80
Current 1971.69 2835.75 3699.81 1215.011 3436.30
Assets
Current 925.02 426.21 502.53 571.34 420.74
liabilities
Cash 286.89 630.24 1399.83 988.02 1980.79
&Bank
Balance
Total 14586.6 19347.39 23342 23422 39684
Deposit
Net Profit 520.11 635.26 674 452.755 425.602
After Tax
No. of 491.654 491.654 491.654 491.654 491.654
Common
Share
Total Assets 170.640 223.299 272.53 291.238 419.819
Net Income 344.16 417.91 442.49 224 573.26
Shareholder 491.654 491.654 491.654 491.654 491.654
equity
Loan and 109.47 132.79 159.03 221.909 115.65
advance
Noted from: Annual Report of Nabil Bank Ltd

Details 2075/2076 2076/77 2077/78 2078/79 2079/80

Current 2.13 6.65 7.36 2.126 8.16
ratio (%)
Cash & 1.97 3.26 5.99 4.21 4.991
Bank
Balance
Ratio (%)
EPS (%) 105.49 129.21 137.69 92.09 86.56
Ratio 3.05 2.84 2.47 1.432 1.42
(ROA)
Ratio (ROE) 70. 85 90 45.56 11.66
Loan and 4.75 4.78 4.23 1.88 1.94
advance
ratio
Noted from: Annual Report of Nabil Bank Ltd.

20