A STUDY ON FINANCIAL POSITION ANALYSIS OF NEPAL INVESTMENT BANK LIMITED -Ruchi

A STUDY ON

FINANCIAL POSITION ANALYSIS OF

NEPAL INVESTMENT BANK LIMITED

A Project Work Report

Submitted By:

Name of Student: R Agrawal

T.U. Redg No: 7-2-25-492-2014

Symbol no: 250106

Group: Finance

Submitted To:

The Faculty of Management

Tribhuvan University

Kathmandu

In partial fulfillment of the requirement for the Degree of

BACHELORS OF BUSINESS STUDIES (BBS)

Kathmandu

April, 2018

DECLARATION

I hereby declare that the project work entitled “FINANCIAL POSITION AND LIQUIDITY POSITION ANALYSIS OF NEPAL INVESTMENT BANK LIMITED” submitted to the Faculty of Management, Tribhuvan University, Kathmandu is a original piece of work under the supervision of Mr. Surya Prasad Devkota, Faculty Member, Nepal commerce campus, Minbhawan, Kathmandu, and is submitted in partial fulfillment of the requirements for the degree of Bachelor of Business Studies (BSS). This project work report has not been submitted to any other university or institution for the award of any degree or diploma.

Signature:

Name of Student: R Agrawal

Date:

SUPERVISOR’S RECOMMENDATION

The project work report entitled FINANCIAL POSITION AND LIQUIDITY POSITION ANALYSIS OF NEPAL INVESTMENT BANK LIMITED submitted by RUCHI AGRAWAL of Nepal commerce campus, Minbhawan, 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 Bachelors of Business Studies (BSS). I, therefore, recommend the project work report for evaluation.

Signature:

Name of supervisor:

SURYA PRASAD DEVKOTA

NEPAL COMMERCE CAMPUS

Date:

Phone:4107060,4107044

4107045,4107048

P.O.Box No.2465

E-mail:info@ncc.edu.np

TRIBHUVAN UNIVERSITY

Faculty of Management

NEPAL COMMERCE CAMPUS

Minbhawan,Kathmandu,Nepal

ENDORSEMENT

We hereby endorse the project work report entitled FINANCIAL POSITION AND LIQUIDITY POSITION ANALYSIS OF NEPAL INVESTMENT BANK LIMITED submitted by RUCHI AGRAWAL of Nepal Commerce Campus, Minbhawan, in partial fulfillment of the requirement for the degree of the Bachelor of Business Studiess (BBS) for external evaluation.

Signature: Signature:

PROF.DR.SHUSIL BHAKTA MATHEMA PROF.DR.JEEVAN KUMAR BHATTARAI

Chairman, Research Committee Campus Chief/Principal

Date: Date:

TABLE OF CONTENTS

Title Page

Declaration

Supervisor’s Recommendation

Endorsement

Table of Contents

List of Tables

List of figures

Abbreviation

CHAPTER I: INTRODUCTION

1.1 Background of the study 1

1.1.1 Concept of Commercial banks of Nepal 2

1.2 Profile of the Organization 3

1.2.1 Network of Nepal Investment Bank Limited 4

1.2.2 Board of Directors 5

1.2.3 Events and Activities of NIBL 5

1.2.4 Core Values and Ethical Principals 6

1.2.5 Strategic and Future Plans of NIBL 6

1.3 Objectives of NIBL 7

1.4 Rationale of the study 7

1.5 Review of Literature 8

1.6 Methods 9

1.6.1 Types of Research Design 9

1.6.2 Population and Sample 10

1.7 Limitations 11

1.8 Report Structure 11

CHAPTER II: RESULTS AND ANALYSIS 12

2.1 Data Presentation 12

2.1.1 Types of Data 12

2.1.2 Collection Method Used 13

2.1.3 Data Collecting Procedures 14

2.2 Analysis of Results 14

2.2.1 Ratio Analysis 14

· Current Ratio 15

· Cash Reserve Ratio (CRR) 16

· Return on Total Assets (ROA) 18

· Return on Net Worth (ROE) 19

· Return on Total Capital 21

2.2.2 SWOT Analysis for Nepal Investment Bank 22

2.3 Findings 24

CHAPTER III: SUMMARY AND CONCLUSION 25

3.1 Summary 25

3.2 Conclusion 26

Bibliography 27

List of Tables

Table: Page No.

Table 1: List of Licensed Commercial Banks in Nepal 2

Table 2: Share holding pattern of NIBL 4

Table 3: Board of Directors 5

Table 4: Current Ratio Analysis 15

Table 5: Cash Reserve Ratio (CRR) 17

Table 6: Return on Total Assets 18

Table 7: Return on Net worth 20

Table 8: Return on Total Capital 21

List of Figures

Figure: Page No.

Fig 1: NIBL’s shareholding structure 3

Fig 2: Bar Diagram showing Current Ratio 16

Fig 3: Line Graph showing Cash Reserve Ratio (CRR) 17

Fig 4: Line Graph showing Return on Total Assets 19

Fig 5: Line Graph showing Return on Net worth 20

Fig 6: Line Graph showing Return on Total Capital 22

Abbreviations

NIBL- Nepal Investment Bank Limited

NPR- National Population Register

ICRA- Indian independent and professional investment information and credit rating agency

CRR- Cash Reserve Ratio

ROA- Return on Total Assets

ROE- Return on Equity

ROIC- Return on Invested Capital

ROCE- Return on Capital Employed

CHAPTER-I

INTRODUCTION

1.1 Background of the Study

Finance is the life blood of trade, commerce and industry. Nowadays, banking sector acts as the backbone of modern business. Development of any country mainly depends upon the banking system. The term bank is either derived from old Italian word,’banca’ or from a French word ‘banque’ both mean a bench or money exchange table . In olden days, European money lenders or money changers used to display (show) coins of different countries in big heaps (quantity) on benches or tables for the purpose of lending or exchanging.

A bank is a financial institution which deals with deposits and advances and other related services. It receives money from those who want to save in the form of deposits and it lends money to those who need it. Banks are the intermediary which handles other people’s money both for their advantage and to its own profits. It is a financial institution that links the flow of funds from savers to the users. It plays an important role in the economy of any country as they hold the saving of the public.

The first bank called the ‘banks of venice’ was established in venice, Italy in 1157 A.D. to finance the monarch in his wars. The bankers of Lombardy were famous in England. But Modern Banking began with the English goldsmith only after 1640.

There is no unanimity among the economists about the origin of the world banking the term bank derives from the Italian World Bank which refers to the bench on which the banker would keep its money for lending and exchanging. Some person tract its origin from the Latin word Bancus which refers to the bench on which the banker would keep its money and his record it is believed that the ancestors of modern banking system were merchants goldsmiths and money lenders. Modern banking showed its seed in the medieval Italy despite strong Christian prohibitions against charging interest.

The first banks called the banks of Venice were established in Venice Italy in 1157A.D to finance bank of Genoa was establish in 1401and 1408 respectively. After that bank of Amsterdam was established in 1609A D when the bank of England was established in 1940 it played the vital role for the development of modern banking system. After it’s establishment banks spread all over the world.

According to Crowther “A banker is a dealer in debts. The bankers business is then to take the debts of other to people, to offer his own in exchange and thereby to create money.”

According to World Bank, “Banks are the financial institutions that accept funds in the form of deposit repayable on demand or short notice.”

Therefore a bank is a financial institution, which collects deposits and in turn provides loans by creating credit. Today banking is such a vague tern, it does a lot more then deposits and credit like remitting money, issue of money guarantee, letter of credit, controlling, payment, other agency functions, monetary activity of country etc. are also the major function of bank. This multiplicity of bank service and function has led to a bank being labeled “financial supermarket.

1.1.1 Concept of Commercial banks of Nepal

The commercial banks are those banks, which are established to accept deposits and grant loan to the industries, individual and traders with a view to earn profit. Apart from financing, they also render services like collection of bills and cheques, safekeeping of valuables, financial advising etc. to their customer.

Table 1: List of Licensed Commercial Banks in Nepal

Commercial Banks	Established Date (B.S)	Head Office
1. Nepal Bank Ltd.	1994/07/30	Kathmandu
2. Rastriya Banijya Bank	2022/10/10	Kathmandu
3. Nabil Bank Ltd	2041/03/29	Kathmandu
4. Nepal Investment Bank Ltd	2042/11/16	Kathmandu
5. Standard Chartered Bank Ltd	2043/10/16	Kathmandu
6. Himalayan Bank Ltd	2049/10/05	Kathmandu
7. Nepal SBI Bank Ltd	2050/03/23	Kathmandu
8. Nepal Bangladesh Bank Ltd	2051/02/23	Kathmandu
9. Everest Bank Ltd	2051/07/01	Kathmandu
10. Bank of Kathmandu Ltd	2051/11/28	Kathmandu
11. Nepal Credit and Commerce Bank Ltd.	2053/06/28	Siddarthanagar
12. Lumbini Bank Ltd.	2055/04/01	Narayangadh
13. Nepal Industrial and Commerce Bank Ltd	2055/04/05	Biratnagar
14. Machapuchhre Bank Ltd	2057/06/17	Pokhara
15. Kumari Bank Ltd	2056/08/24	Kathmandu
16. Laxmi Bank Ltd	2058/06/11	Birjung
17. Siddhartha Bank Ltd	2058/06/12	Kathmandu
18. Global Bank Ltd	2063	Kathmandu

Source: Nepal Rastra Bank

1.2 Profile of the organization

Nepal Investment bank Ltd (NIBL) was established in 1986. Previously, it was known as Nepal Indosuez Bank Ltd. It was established 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 one of the largest banking group in the world.

With the decision of Agricole Indosuez to divest, a group of companies comprising of bankers, professionals, industrialists and businessman has acquired on April 2002 the 50% share holding of credit Agricole Indosuez in Nepal Indosuez Bank Ltd. The name of the bank has been changed to Nepal Investment Bank Ltd, upon approval of bank’s Annual General Meeting, Nepal Rastra Bank and company Register’s Office with the following shareholding structures:

A group of companies holding 50% of the capital

Rastriya Banijya Bank 15% of the capital.

Rastiya Beema Sansthan 15% of the capital.

The remaining 20% being held by the general public.

Fig 1: NIBL’s shareholding structure

Mission

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 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.

Vision

“Our Vision is to be the most preferred provider of Financial Services in Nepal”

Table 2: Share holding pattern of NIBL

S.NO	Name	Percentage	Share Capital
1	Local Ownership	100	59,50,86,000
1.1	His Majesty’s Government	-	-
1.2	Commercial Banks	15	8,85,88,000
1.3	Financial Institution	15	8,85,88,000
1.4	Organized Institution	50	29,52,93,000
1.5	General Public	20	11,81,17,000
1.6	Others	-	-
2	Foreign Ownership	-	-
	Total	100	59,05,86,000

Source: Annual Report (2062/2063)

1.2.1 Network of Nepal Investment Bank Limited

The head office of NIBL is located at Durbar Marg, Kathmandu. It has extended its services in different parts of kingdom of Nepal. It has all total 13 branches in the country. It branches are located at:

· Pulchowk- Lalitpur

· Adarshanagar- Birjung

· New Road- Kathmandu

· Putalisadak- Kathmandu

· Banepa- Kavre

· Traffick Chowk- Butwal

· Pulchowk- Narayangadh

· Maitriroad- Bhairahawa

· Jeetpur- Bara

· Suryabinayak- Bhaktapur

· Golcha Chowk- Biratnagar

· Chiple Dhunga- Pokhara

· Boudhha- Kathmandu

1.2.2 Board of Directors

Table 3: Board of Directors

Mr. Prithivi Bahadur Pande'	Chairman
Mr. Prajanya Rajbhandary	Director
Mr. Surya Prakash Lal Shrestha	Director
Mr. Kabi Kumar Tibrewal	Director
Mr. Niranjan Lal Shrestha	Public Director
Mr. Bhuwaneshwar Prasad Shah	Public Director
Mr. Mohan Madan Budhathoki	Independent Director

1.2.3 Events and Activities of NIBL

NIBL, being managed by a team of experienced bankers and professionals with a proven track record, can match our particular needs. We are sure that our choice of bank will be guided, among other things, by its reliability and professionalism in the fulfillment of information.

Over the past decade NIBL has redefined the banking through the deep understanding of customer needs. We have undertaken many initiatives to strengthen the customer experience through multiple touch points such as internet banking, mobile banking and branchless banking. Our overall growth record in deposits, lending, net profit and capital base is second to none.

· Highest growth rate among banks in Nepal.

· Experienced management and sound corporate governance.

· Top lender in Nepal with total loans and advances of NPR 47.70 billion.

· No. 1 Private sector bank in Deposits with NPR 62.42 billion.

· Net profit of NPR 1.91 billion.

· Highest paid up capital among the financial institution in Nepal at Rs. 4.14 billion.

· Largest among taxpayers in Nepal.

· Customer base of over 500,837.

· ICRA Nepal has reaffirmed the rating at “[ICRANP-IR] A” (pronounced as ICRANP IR A) which is at par with the previous rating assigned by ICRA limited at “[Nepal A]”.

1.2.4 Core Values and Ethical Principals

Our core values tell us, our customers and the communities we serve, who we really are; what we are about; and the principles by which we pledge to conduct business. In essence, we believe that success can only be achieved by living our core values and principles:

· Customer Focus: At NIBL, our prime focus is to perfect our customer service. Customers are our first priority and driving force. We wish to gain customer confidence and be their trusted partner.

· Quality: We believe a quality service experience is a paramount to our customers and we are strongly committed in fulfilling this ideal.

· Honesty and Integrity: We ensure the highest level of integrity to our customers, creating an ongoing relationship of trust and confidence. We treat our customers with honesty, fairness and respect.

· Belief in our people: We recognize that employees are our most valuable asset and our competitive strength. We respect the worth and dignity of individual employees who devote their careers for the progress of the Bank.

· Teamwork: We are a firm believer in team work and feel that loyal and motivated teams can produce extraordinary results. We are drived by a performance culture where recognition and rewards are based on individual merit and demonstrated track record.

· Good Corporate Governance: Effective Corporate Governance procedures are essential to achieve and maintain public trust and confidence in any company, more so in a banking company. At NIBL, we are committed in following best practices resulting in good corporate governance.

· Corporate Social Responsibility: As a responsible corporate citizen, we consider it important to act in a responsible manner towards the environment and society. Our commitment has always been to behave ethically and contribute towards the improvement of quality of life of our people, the community and greatly the society, of which we are an integral part.

1.2.5 Strategic and Future Plans of NIBL

The Nepal investment Bank Ltd.’s mission is to be the “Bank of the first choice” to attain the goal to be the “Bank of the first choice”, bank is concerting into the service of its customers and social issues. So Nepal investment is the customer focus and goal oriented.

NIBL’s strategies and future plans:

· To develop a customer oriented service culture with special emphasis on customer care and convenience

· To increase its market share by following a disciplined growth strategy.

· To leverage its technology platform and pen scalable system to achieve cost effective operation, efficient MIS, improved delivery capability and high service standards.

· To develop innovative products and service that attracts its targets customer and market segments

· To continue to develop products and service that reduces its cost of funds.

· To maintain a high quality assets portfolio to achieve strong and sustainable returns and to continuously build share holders value.

· To explore new avenues for growth and profitability.

1.3 Objectives of NIBL

Nepal is a developing country. The economic condition of the country depends on the active participation of banks and other financial institution in different development activities. The development of banks depends on the banking habit of the people.

The main objective of the study is to analyze the Nepal Investment bank’s Financial Position. Based on the analyzed Financial Position, the study suggests the Financial need and its management.

Other objectives are listed below:

1. To evaluate Liquidity Position of NIBL.

2. To examine the financial performance of NIBL.

1.4Rationale of the study

This research will be carried out mainly as to know financial strategy of NEPAL INVESTMENT BANK LIMITED. Thus, it will help to study the sources and uses of funds of INVESTMENT Bank, to evaluate the percentage of investments done in different sectors, and to calculate rate of return on investment on government securities. Also, through this study, we will be able to know about the contribution of investment to its total income and henceforth, the profit position of the bank. This study is also important for other parties such as commercial banks, researchers, students, scholars, and so on.

The competition has become stiff because of large number of competitors. Many banks and financial companies are being liquidated because of various reasons. One of the major reasons for the liquidation of the organization is implementation of poor investment policies. Those banks who have implemented well studied investment policies properly have been succeeded and are thriving now.

I will focus on a study of investment done by a commercial bank. I have choosen INVESTMENT bank for my study which is one of the biggest commercial bank in Nepal. This study will hopefully help to know the investment policies of the bank. It will find out the profit position as well. Investment policies are guidelines that banker should not neglect as it might cause heavy loss to the bank and if the bank become failure it cause loss not only to itself but to the nation also.

1.5 Review of Literature

Knight & Bertoneche (2000). Financial performance analysis includes analysis and interpretation of financial statements in such a way that it undertakes full diagnosis of the liquidity and financial soundness of the business. The financial analyst program provides vital methodologies of financial analysis. 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. It is the process of measuring the results of a firm’s policies and operations in monetary terms. It is used to measure firm’s overall financial health over a given period of time and can also be used to compare similar firms across the same industry or to compare industries or sectors in aggregation.

Traditional financial ratio analysis has mainly focus on the quantitative relation can be used to diagnose strength and weakness in a firm’s performance. But the world is becoming more dynamic and subject to rapid change. It is not enough to analyze operating performance. Financial analysis also includes consideration of strategic and economic development to which the firm must also relate fir its long term success. In addition to the categories of stakeholders must be bordered formally ratio analysis was performed from the point of view of the firms owners and creditors in the present political and social environment the shareholders must expanded to include-employees, customers, social environment consideration and other government regulation interest (Weston and Copeland, 1992-97)

“Financial Analysis involves the use of financial statement the first is the balance sheet, which represents a snapshot of the firm’s financial position at a movement in time and next as the income statement that depicts a summary of the firm’s profitability over time” ( Van horne and Wachowicz, 1997:96)

1.6 Methods

The process that is used to collect information and data for the purpose of making business decisions is Methodology. The methodology includes publication research, interviews, surveys and other research techniques, and could include both present and historical information.

1.6.1 Types of Research Design

The study is based on two types of research design i.e. descriptive and analytical. Descriptive research design is prepared if researchers need to explain the phenomenon or event existing currently under the area of study. Descriptive research design is helpful to obtain information concerning the current status of selected phenomena and describes what exists with respect to variables or conditions in a situation.

In analytical research, the researchers has to use facts or information already available, and analyze them to make critical evaluation of the material.

To achieve the predetermined objective of the research, certain tools will be used. The tools are categoried as:

1. Financial Tools

2. Graphical Tools

3. Statistical Tools

In this study, following statistical tools are used to analyze the financial performance of the bank:

Liquidity Ratios:

Liquidity of a firm refers to the sound solvency position of a firm to meet its obligations. Liquidity ratio measures the ability of a firm to meet its short-term obligations. Liquidity of a bank should be considered as the most important factor for its existence. It shows the capability of payment of current liability. High ratio indicates the liability to pay and low ratio shows scarcity of liquid assets.

1. Current Ratio=

Profitability Ratios:

Profit is the difference between revenue and expenses. A profit is necessary for the survival of the company and also meets the expectation of shareholders. It is the measure of the performance of any business that it is doing well or not. It is calculated to measure the operating efficiency of the firm. Profitability ratio shows the combined effects of liquidity management and debt management on operating result.

1.6.2 Population and Sample

The term “population” of universe for research means the universe of research study in which the research is based” (Pant, 2000:75). At present, According to the year 2017, mid January, there are 28 commercial banks operating in Nepal. Among them, Nepal Investment Bank Limited is selected as sample for the present study. Similarly, financial statement of banks for five fiscal years from 2012/13 to 2016/17 is taken as samples for the same purpose of study.

1.7 Limitations of the study

Like every research study, this study also has some limitation viz-inadequate coverage of commercial banks, time period taken and other variables. The following factors are the basic limitations.

· The main constraints of the study are insufficient of information which is highly required for the study.

· The study includes only five years data from 2012/13 to 2016/17

· This study is limited to the information that was available from the secondary data.

· This study is mainly carried out to attain the partial fulfillment of BBS 4^th year study.

· Only few financial tools are used in this study.

1.8 Report Structure

Chapter-I: Introduction

This Chapter covers the general background of the study, introduction of the organization, events and activities, objectives of the study, rationale, method of the study, literature review, limitations of the study.

Chapter-II: Results and Analysis

This chapter is concern with measurement of financial performance using ratios analysis tools.

Chapter-III: Summary and Conclusion

This chapter gives summarization and conclusion of the study.

CHAPTER II: RESULTS AND ANALYSIS

2.1 Data Presentation

2.1.1 Types of Data

Mainly the study is conducted on the basis of secondary data with negligible primary data collected. The data related to the ratios of Nepal Investment Bank are obtained with the help of Nepal Investment Bank balance sheets from 2012/13 to 2016/17. The supplement data and information have been acquired from journals published from various institutions like NRB, Nepal Chamber of Commerce etc. The sources of data are elaborated as below.

Primary data collection

The data which are originally collected by an investigator or an agent for the first time for the purpose of statistically enquiry are known as primary data collected personally through questionnaire, observation and interviewing method..

Secondary data collection

The data which are originally collected but obtained from some published or unpublished sources are secondary data. This type of data is not original in character. The secondary data are collected from secondary sources. These secondary sources consist of two sources:

a) Internal Sources

· Annual report of Nepal Investment Bank Ltd of year 2012/13 to 2016/17

· Interest chart rate

· Brochure

· Booklets etc.

b) External Sources

· Books and publications.

· Journal article, articles from newspaper

· Local newspaper

· Previous report etc.

2.1.2 Collection Method Used

a) Classification and Tabulation of Data

The data collected was classified and tabulated in order to make it easily understandable. The data was classified in chronological order i.e. on the basis of time intervals. After classification, the data was tabulated i.e. arranging the data in rows and columns systematically.

b) Diagrammatic and Graphic Representation of Data

Two types of diagram and graph were used to present the data more clearly. The diagram and graphs used in this study are:

i) Bar Diagram

ii) Line Diagram

c) Tools used for analysis

Different tools were used to enlighten the factual matters of Nepal Investment Bank. They are as follows:

I. Current Ratio

II. Cash Reserve Ratio (CRR)

III. Return on Total Assets (ROA)

IV. Return on Net worth (ROE)

V. Return on Total Capital

2.1.3 Data Collecting Procedure

Secondary sources, especially the annual report and website of the concerned bank is taken as main source of data collection for purpose of study. The annual reports of the concerned banks is obtained from their head office and their websites.

2.2Analysis of Results

2.2.1 Ratio analysis

The discussion and analysis section is the heart of the report. This is the section in which data are presented and analyzed. The discussion of finding will normally be the longest section of the report to get desired objectives of the study several analytical tools had been employed and used research methodology and research design. This chapter is basically concerned with the presentation and analysis of data. In this chapter the effort had been made to evaluate the performance of Nepal Investment Bank.

Every presentation of the data follows its analysis so that can be drawn out and future prediction can be initiated. For the purposed of the analysis simple method of financial tools, ratio analysis and statically tools, mean, standard deviation, coefficient of variation is used.

Ratio analysis is widely used as a tool of financial analysis. It is defined as a systematic use of ratios to interpret the financial statement so that the strength and weakness of firms well as its historical performance and current financial condition can be defined. The main kinds of tools to measure the performance are:

· Current Ratio

It measures the short term solvency position of firm by the current assets. Current Assets are those assets that can be converted into cash within a year, such as cash and bank balance, investment, Debtors, inventories, prepaid expenses, Money at call and short notice, Overdrafts etc. Similarly Current liabilities refers to obligations maturing within a year such as bills payables, provision, dividend payables, outstanding expenses, current deposit, call deposits, saving deposits and other short term deposits, borrowing bank overdraft, customer acceptance outstanding etc.

Higher current ratio indicates better liquidity position and 2:1 or more is considered satisfactory. But all times this standard cannot be followed blindly, it depends upon quality of assets.

It is derived by dividing current assets by current liabilities as follows:

Current Ratio =

Table 4: Current Ratio Analysis

Year	Current Assets	Current Liabilities	Ratio
2012/13	19298893	1830230	1.05
2013/14	20990700	19814319	1.06
2014/15	23968103	22292091	1.08
2015/16	25430144	2343789	1.09
2016/17	24575521	26302948	1.09

Fig 2: Bar Diagram showing Current Ratio

Generally, higher current ratio indicates better liquidity position and 2:1 or more is considered satisfactory. But here in the context of bank this ratio is less than 2:1 but we consider it satisfactory because bank always have more liquid current assets than other types of organization. Here in the context of Nepal Investment bank Limited the current ratio of 2012/13 is 1.05, 2013/14 is 1.06, 2014/15 is 1.08, 2015/16 is 1.09 and 2016/17 is 1.09.

· Cash Reserve Ratio (CRR)

This ratio shows the percentage of Liquid assets held on compared to the total deposit. High ratio shows the strong liquidity position of the bank. But very high ratio is not favorable for the bank, as it does not produce appropriate profit to bear the high interest.

The total deposits consists of Current deposits, savings deposits, fixed deposits, money at call and short notice and other deposits.

This ratio is calculated as:

Cash Reserve Ratio =

Table 5: Cash Reserve Ratio (CRR)

Year	Cash and Bank Balance	Total Deposits	Ratio (%)
2012/13	1435157	17532404	8.19
2013/14	1264672	18619375	6.79
2014/15	1979209	21007379	9.42
2015/16	2001184	2210333	9.09
2016/17	2014471	24814012	8.12

Fig 3: L`ine Graph showing Cash Reserve Ratio (CRR)

This ratio shows the ability of banks funds to meet their deposits. Dividing cash and bank balance calculate this ratio by total deposit. High ratio shows the good liquidity position, the ratio of Nepal Investment Bank Limited from 2012/13 to 2016/17 is 8.19, 6.79, 9.42, 9.09 and 8.12.

· Return on Total Assets:

This ratio measures the bank’s ability to earn as rate of return on the total assets invested. This ratio measures the profitability of all invested in the firm’s assets. This ratio provides the necessary foundation for a company to deliver a good return on equity. A company without a good return on total assets finds it almost impossible to generate a satisfactory ROE. In this study, ROA is computed to measure the profitability of all the financial resources in bank assets and calculated be applying the following formula:

Return on Total assets =

Table 6: Return on Total Assets

Year	Net Profit	Total Assets	Ratio (%)
2012/13	277039	19500572	1.4207
2013/14	235023	21315848	1.1026
2014/15	212132	24197974	0.8767
2015/16	263052	25729787	1.0240
2016/17	308277	28871343	1.0678

Fig 4: Line Graph showing Return on Total Assets

Return on total assets is obtained by dividing net income after tax by total assets. This ratio measures the efficiency of bank in utilization of overall assets. High ratio indicates the success of management in overall operation, all low ratio means inefficient operation of bank. The ratio from 2012/13 to 2016/17 is 1.4207, 1.1026, 0.8767, 1.0240 and 1.0678.

· Return on Net Worth ratio:

Return on Net worth is used in finance as a measure of a company’s profitability. It reveals how much profit a company generates with the money that equity shareholders have invested. Therefore, it is also called Return on equity (ROE). This ratio is useful for comparing the profitability of a company to that of other firms in the same industry.

It is expressed as:

Return on Net worth =

Table 7: Return on Net worth

Year	Net profit	Net worth	Ratio (%)
2012/13	277039	1198292	23.12
2013/14	235023	1501529	15.65
2014/15	212132	1905883	11.13
2015/16	263052	2291928	11.48
2016/17	308277	2568395	12.00

Fig 5: Line Graph showing Return on Net worth

Here, Net Profit/ EBIT is used in numerator because interest is a return on debt and should be included in the measure of profit for this particular purpose. Using net income in this situation would mean including only the profit earned by equity in the calculation. Return on net worth of Nepal Investment Bank Limited from 2012/13 to 2016/17 is 23.12, 15.65, 11.13, 11.48 and 12.00.

· Return on Total Capital

Return on total capital is a profitability ratio that measures profit earned by a company using both its debt and equity capital. It is also known as return on invested capital (ROIC) or return on capital employed (ROCE). Return on common equity ratio is normally used to assess profitability.

It is expressed as:

Return on Total Capital =

Table 8: Return on Total Capital

Year	Net Profit	Total Capital	Ratio (%)
2012/13	277039	300000	92.35
2013/14	235023	390000	60.26
2014/15	212132	429000	49.45
2015/16	263052	536250	49.05
2016/17	308277	643500	47.91

Fig 6: Line Graph showing Return on Total Capital

Return on total capital is more refined than return on assets in that it takes into account only such capital for which the company bears a cost. Return on common equity ratio is normally used to assess profitability. Here the ratios from 2012/13 to 2016/17 is 92.35, 60.26, 49.45, 49.05 and 47.91.

2.2.2 SWOT Analysis for Nepal Investment Bank

Strength

1. Nepal Investment Bank has vast network system in the nation thus helping customer to transact through bank from place to place. It has 13 branches nation wide to help the customers.

2. Nepal Investment Bank is well known for providing highly personalized service like ATM, ebanking, credit card, safe deposit locker etc. It has also introduced a number of new product and services.

3. Human resources of Nepal Investment Bank are well trained and are dedicated toward its bank. It is providing high remuneration and other benefit to its staff

4. Nepal Investment Bank is equipped with latest technology, computer does most of the banking services. Thus the services of the bank are prompt and accurate.

Weakness

1. The increase of the branches increases the operation cost, administration expenses, salary etc.

2. The political instability is another weakness that the bank is suffering.

3. Too much dependency in computer is not considered to be reliable.

4. Staffs are unwilling to give even required information. They don’t want to cooperate with the ones who are not its real customer.

Opportunity

1. Many people deposit their funds in this bank due to its skill in attracting people by adapting and attracting policies like interest rate, prompt services, ATM, credit card services etc.

2. Staff can perform their work more efficiently with the computers. The environment of the bank is sound which enhance its better performance.

3. People get employment opportunities since it has the highest number of branches in the country.

4. The policies of HMG & NRB rules & regulation always give confidence to the banking sectors to uplift the economy of the nation.

Threats

1. Competitors are increasing.

2. The economic condition of the country is very poor.

3. Excess government pressure may create irregular banking transaction, which leads to bad reputation of the bank.

4. The bank should be discouraged to open account for the individuals or firm having bad name as well as illegal names which effects to society. It may be threat, which can ruin the bank.

2.3 Findings

i. The Current Ratio of Nepal Investment Bank is less than the generally accepted standard of 2:1. However, the current ratio never falls below the ratio 2:1. So, Current Ratio is Satisfactory.

ii. Cash Reserve Ratio (CRR) shows the ability of banks funds to meet their deposits. Dividing cash and bank balance calculate this ratio by total deposit. Here Cash Reserve Ratio is increasing in every fiscal year.

iii. The Return on Total Assets ratio measures how effectively a company can earn a return on its investment in assets. In other words, ROA shows how efficiently a company can convert the money used to purchase assets into net income or profits. Return on Total Assets of NIBL shows that the return is satisfactory.

iv. Return on Net Worth ratio is declining from FY 2012/13 to FY 2014/15 of NIBL whereas From FY 2014/15 to 2016/17 is the almost constant. It shows that the result of NIBL is satisfactory.

v. Return on total capital is most useful when you're trying to determine the returns generated by the business operation itself, not the short-lived results from one-time events. Return on Total capital of NIBL is declining in every fiscal Year.

CHAPTER-III

SUMMARY AND CONCLUSION

3.1 SUMMARY

Nepal is one of the least developed countries of the world. For most of the developing process, it is financially depending upon the foreign countries. It is economically too weak. Thus, the economic condition of the people is weak. In Nepal 85% of the people are depended upon agricultural sector which is unable to provide full employment to the people. Nepal government has to activate people in the nation’s development through overall industrialization of nation. For this purpose, development of sound banking system is essential.

In Nepalese banking sector, commercial banks including ventures banks are operating at present. In the absences of modern banking any country cannot develop the economic activity. Therefore, it is essential to find out whether or not the banks are serving an important contribution to develop sectors of economy. Finance is said to be general business of fund, which shows the bank ability to meet cash requirement. In this record, this study has been based upon the objective to evaluate the Financial position of Nepal investment bank ltd.

In the last two decades, the financial scenario of Nepal has dramatically changed. The vast development of industrial sector or due to the presence of different kinds of risk in the economy brings so many banking institutions from private as well as public sector in Nepal. The first banking of Nepal, Nepal bank limited from government sector was established in 1994.

The main purpose of selecting NIBL is, it have been offering all kinds of available facilities available in banking sectors in the country. The study will be mainly based on the secondary data publicly available in the NEPSE data base and the annual report of respective banks. for the study, the five year’s data of the bank will be pooled starting from FY 2012/13 to 2016/17. The collected data of the bank for the study purpose will be thoroughly processed, tabulated for the required format; different measures of the data will be calculated using different graphical tools and financial tools with the best effort.

3.2 CONCLUSION

It is concluded from the observed analysis of above data that ratios control the major economic activities of the nation. Therefore, it is very important for the policymaker to adopt appropriate policy with calculation interest rate. Therefore, that large capital can be mustard at very low capital cost. It will encourage the industrial & commercial activities eventually leading to better economic condition growth, social economic development, and employment opportunities.

Descriptive and analytical research designs have been presented to analyze the financial position of Nepal Investment Bank Limited. This study is based on secondary data obtain from various sources such as annual general meeting of Nepal Investment Bank Ltd of year 2058/2059 to 2062/2063, brochure, booklets, books and publications etc. Beside this, relevant data are interpreted through various financial and statistical tools

After the study of the final report, we will be able to analyze the financial performance of the bank that whether the bank has sound financial performance or not. All the profitability ratios and liquidity ratios will help to determine the future success of the bank and the condition of the bank in the coming days. The overall results are satisfactory. But in some case the Nepal investment Bank should take certain steps to improve the bank current financial condition.

Bibliography

Evans, J.D & W. (2007). The Complete Real Estate Encyclopedia, McGraw-Hill Companies, Inc

Bhattarai, P. (2004). The Nepalese Financial System, Asmita Books Publishers and Distributors Pvt Lmitited, Kathmandu

Khan, M.Y. & P.K, (1978). Financial Management Policy, McGraw Hill Publishing co.Limited, New Delhi

Bajracharya, B.C. (2053), Business statistics & mathematics, M.K. publishers and Wistributors.

Brigham, Weston, Essentials of Managerial Finance”, Eleventh Edition, University Publishers, USA.

Kothari, C.R., Research Methodology”, Mc. Grow Hill Company, second Edition.

Shekhar and Shekhar “Banking Theory & Practice”, Eighteenth Revised Edition, 1996.

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A STUDY ON FINANCIAL POSITION ANALYSIS OF NEPAL INVESTMENT BANK LIMITED -Ruchi

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