Camel Thesis
-
Upload
sadhana-joshi -
Category
Documents
-
view
805 -
download
10
description
Transcript of Camel Thesis
A STUDY OF CAMEL ANALYSIS OF COMMERCIAL BANKS (REFERENCE TO EVEREST BANK LTD., BANK OF KATHMANDU AND
NEPAL INDUSTRIAL AND COMMERCIAL BANK LTD.)
By:
ESHA RAI
Shanker Dev Campus
T.U. Regd. No: 7-1-3-1838-2001
Campus Roll No: 2077/063
A Thesis Submitted to:
Office of the Dean
Faculty of Management
Tribhuvan University
In partial fulfillment of the requirement for the Degree of
Master of Business Studies (M.B.S)
Kathmandu, Nepal
March, 2010
RECOMMENDATION
This is to certify that the Thesis
Submitted by:
ESHA RAI
Entitled:
A STUDY OF CAMEL ANALYSIS OF COMMERCIAL BANKS (REFERENCE TO EVEREST BANK LTD., BANK OF KATHMANDU AND
NEPAL INDUSTRIAL AND COMMERCIAL BANK LTD.)
has been prepared as approved by this Department in the prescribed format of the
Faculty of Management. This thesis is forwarded for examination.
…..……..…….……… .……………....……………. ….…….………….………
Rita Maskey Prof. Bisheshwor Man Shrestha Prof. Dr. Kamal Deep Dhakal
Lecturer (Head of Research Department) (Campus Chief)
(Thesis Supervisor)
VIVA-VOCE SHEET
We have conducted the viva –voce of the thesis presented
by
ESHA RAI
Entitled:
A STUDY OF CAMEL ANALYSIS OF COMMERCIAL BANKS (REFERENCE TO EVEREST BANK LTD., BANK OF KATHMANDU AND
NEPAL INDUSTRIAL AND COMMERCIAL BANK LTD.)
And found the thesis to be the original work of the student and written
according to the prescribed format. We recommend the thesis to
be accepted as partial fulfillment of the requirement for
Master Degree of Business Studies (M.B.S.)
Viva-Voce Committee
Head, Research Department …………………….………
Member (Thesis Supervisor) …..………………………..
Member (External Expert) …..………………………..
TRIBHUVAN UNIVERSITY
Faculty of Management
Shanker Dev Campus
DECLARATION
I hereby declare that the work reported in this thesis entitled “A STUDY OF CAMEL
ANALYSIS OF COMMERCIAL BANKS (REFERENCE TO EVEREST BANK
LTD., BANK OF KATHMANDU AND NEPAL INDUSTRIAL AND
COMMERCIAL BANK LTD.)” submitted to Office of the Dean, Faculty of
Management, Tribhuvan University, is my original work done in the form of partial
fulfillment of the requirement for the Master Degree in Business Studies (M.B.S.) under
the supervision of Rita Maskey, Lecturer of Shanker Dev Campus.
………………………………
ESHA RAI
Researcher
T.U. Regd. No. : 7-1-3-1838-2001
Campus Roll No. : 2077/063
TABLE OF CONTENTS
Recommendation
Viva- Voce Sheet
Declaration
Acknowledgement
Table of Contents
List of Tables
List of Figures
Abbreviations
Page No.
CHAPTER – I INTRODUCTION
1.1 Background of the Study 1
1.2 Introduction of the Organizations 3
1.3 Focus of the Study 8
1.4 Statement of the Problem 9
1.5 Objective of the Study 9
1.6 Significant of the Study 10
1.7 Limitation of the Study 10
1.8 Organization of the Study 10
CHAPTER – II REVIEW OF LITERATURE
2.1 Introdu
ction 12
2.2 Theore
tical Review 12
2.2.1 History
of Banking in Nepal 13
2.2.2 Conce
pt of Commercial Bank 15
2.2.3 Functi
ons of Commercial Banks 17
2.2.4 Conce
pt of Bank Supervision 18
2.2.5 Objecti
ves of Bank Supervision 19
2.2.6 Proces
s of Bank Supervision 19
2.2.7 Superv
isory and Monitoring System of the Nepal Rastra Bank 20
2.2.8 Conce
pt of CAMEL Banks Rating System 20
2.3 Composite of Ratings 21
2.4 Camels Components 22
2.5 Review of Previous Studies 25
2.5.1 Review of Journals and Articles 25
2.5.2 Review of Thesis 26
CHAPTER – III RESEARCH METHODOLOGY
3.1 Introduction 30
3.2 Research Design 30
3.3 Population and Sampling of Data 30
3.4 Periods Covered 30
3.5 Source of Data 30
3.6 Data Analysis Tools 31
3.6.1 Financi
al ratio analysis tools 31
3.6.1.1 Capital
Adequacy Ratio (CAR) 31
3.6.1.2 Assets Quality 32
3.6.1.3 Management 33
3.6.1.4 Earning 34
3.6.1.5 Liquidity 35
CHAPTER – IV DATA PRESENTATION AND ANALYSIS
4.1 Introduction 37
4.2 Data Presentation and Analysis 37
4.2.1 Capital
Adequacy 37
4.2.1.1 Core Capital Ratio (CCR) 41
4.2.2 Assets
Quality 44
4.2.2.1 Non-Performing loan 44
4.2.2.2 Loan Loss Coverage Ratio 47
4.2.2.3 Loan Loss Provision Ratio 50
4.2.3 Manag
ement 52
4.2.4
Earnings 56
4.2.4.1 Earning per Shares 56
4.2.4.2 Return on Equity 59
4.2.4.3 Return on Assets 61
4.2.5 Liquidi
ty 64
4.2.5.1 Cash & Bank Balance Ratio 64
4.2.5.2 Investment in Government Security Ratio (IGSR) 66
4.3 Major Findings 69
CHAPTER – V SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary 73
5.2 Conclusion 74
5.3 Recommendations 76
Bibliography
Appendices
LIST OF TABLES
Table No. Title Page No.
2.1 List of licensed Commercial Banks in Nepal 16
4.1 Capital Adequacy Ratio 39
4.2 Core Capital Ratio 42
4.3 Non-Performing Loan Ratio 45
4.4 Loan Loss Coverage Ratio 48
4.5 Loan Loss Provision Ratio 51
4.6 Management Efficiency Ratio 53
4.7 Earning per Shares 57
4.8 Return on Equity 59
4.9 Return on Assets 62
4.10 Cash & Bank Balance Ratio 64
4.11 Investment in Government Security Ratio 67
LIST OF FIGURES
Figure No. Title Page No.
4.1 Capital Adequacy Ratio 39
4.2 Capital Adequacy Ratio 40
4.3 Core Capital Ratio 42
4.4 Core Capital Ratio 43
4.5 Non-Performing Loan Ratio 45
4.6 Non-Performing Loan Ratio 46
4.7 Loan Loss Coverage Ratio 48
4.8 Loan Loss Coverage Ratio 49
4.9 Loan Loss Provision Ratio 51
4.10 Loan Loss Provision Ratio 52
4.11 Management Efficiency Ratio 54
4.12 Management Efficiency Ratio 55
4.13 Earning per Shares 57
4.14 Earning per Shares 58
4.15 Return on Equity 60
4.16 Return on Equity 60
4.17 Return on Assets 62
4.18 Return on Assets 63
4.19 Cash & Bank Balance Ratio 65
4.20 Cash & Bank Balance Ratio 66
4.21 Investment in Government Security Ratio 68
4.22 Investment in Government Security Ratio 68
CHAPTER - I
INTRODUCTION
1.9 Background of the Study
In any economy, the important of financial sector in general and banking sector in
particular cannot be undermined. Banking sector plays the significant role in overall
development of the economy in all countries. Thus it is said that the banking sector
mirrors the larger economy. It‟s linkage to all sectors makes it a proxy for what is
happening in the economy as a whole. As this aspect various financial institutions are
growing rapidly on last decades. Commercial banks are one of the vital aspects of
banking sector, which deals in process of analyzing the available resources in the needed
sector. Bank plays the intermediary role in-between surplus and deficit of financial
sector. Banks motivate people to keep their surplus money as deposits in the bank then
bank utilize that money by providing loan to these people who have deficit and need of
that fund or by investing that fund in other profitable sector.
The word „Bank‟ has been derived from the Italian word „Banco‟ which means a place
for keeping, lending and exchanging money. The bank is a financial institution, which
deals with money. It accepts deposits from individuals and organizations and grants loans
to them. It allows interest on the deposits made and charges interest on the loans granted.
Since, it accepts deposits and grants loans, it is regarded as the trader of money. Further,
it creates credit and supports for the formation of capital and hence it is regarded as
“Manufacturer of Money”.
The growth of financial sector in Nepal is much better as compare to other sectors.
Despite of conflict and political insurgency, banking and financial sector continued
growing. Numbers of banks and financial institutions are increasing day by day. Similarly
banking habit of people is also in increasing trend.
A single institution cannot fulfill all the services demanded by the customers. So,
different types of bank also emerged in the banking industry specializing in different
functions areas. There are different types of banks. Among them commercial bank is one.
Commercial banks represent a key financial intermediary because they serve all types of
surplus and deficit units. They offer deposit accounts with the size and maturity
characteristics desired by surplus units. They repackage the funds received from deposits
to provide loans of the size and maturity desired by deficit units. They have the ability to
assess the creditworthiness of deficit units that apply for loans, so that they can limit their
exposure to credit (default) risk on the loans they provide (Madura J., 1999: 506).
The commercial bank has been a vital role for economic development. Banks are
intermediaries, which mobilize funds through the prudential combination of investment
portfolio in advanced countries. Now Nepal is underdevelopment country so that joint
venture Banks are still to be realize as an essential mechanism of mobilizing interval
saving through various Banking schemes in the economy they can accumulate and collect
the capital among other prerequisite.
Commercial banks are suppliers of the finance for trade and industry as well as other
sector, which plays the vital role for economic and financial development of the country.
They help in the formulation of capital by investing the savings in productive areas.
Normally Banking facility is available in underdeveloped country (Like Nepal) is urban
area. In almost of the countries banking facilities are concentrated into urban and semi-
urban area, they wanted stay far from rural area due to lower rate of return or higher risk.
But in fact, without it, other sector of economy can not be flourished.
Banking often perceived on milestone of economy growth of any country. The Banking
history is very much old because the first systematic public Banking history or institution
goes to credit to Bank of Venice, Italy established in 1157 AD. About after 250 years of
bank of Venice establishment, other two bank founded name a as Bank of Barcelona and
bank of Genoa in 1401 and 1407 A.D. Respectively then after Bank of Amsterdam is
established in 1609 AD. The Bank of England was established in 1694 AD. But the
modern banking is started only after introducing banking Act 1883 A.D. in USA. When
the government has liberalized economy policy and democracy in the country then the
growth of commercial bank is very much. In current situation (Jan. 2010) 26 commercial
bank are operating and providing their services to customers. Nepal Rastra Bank (NRB)
is the monitoring and regulating body of financial institutions (Viz. commercial banks,
development banks and finance companies). NRB poses the directive of maintaining Rs.
2000 million on a paid up capital with in dated of 15 July 2009 AD (Kantipur daily,
20Aug.2008) which is the mandatory rule of NRB.
1.10 Introduction of the Organizations
Everest Bank Limited
Everest Bank Limited (EBL) stared its operation in 1994 with a view and objectives of
extending professionalized and efficient banking services to various segments of the
society. Its joint venture partner, Punjab National Bank (PNB), (holding 20% equity in
the bank) is the largest nationalized bank in India having 112 years of banking history.
The bank is providing customer friendly services through a network of 34 branches in
Nepal.
The bank has Authorized Capital of Rs.1,000,000,000, Issued Capital of Rs.840,620,000
and Paid up Capital of Rs.838,821,000. Out of Paid up Capital, local Nepalese Promoters
hold 50% stake in the Banks equity, while 20% of equity is contributed by joint venture
partner PNB whereas remaining 30% is held by the public. (EBL Annual report 2008/09)
EBL was one of the first bank to introduce Any Branch Banking System (ABBS) in
Nepal. It has introduced Mobil Vehicle Banking system to serve the segment deprived of
proper banking facilities through its Birtamod Branch, which is also the first of its kind.
The bank was bestowed with the “NICCI Excellence award” by Nepal India chamber of
commerce for its spectacular performance under finance sector. This bank has been
conferred with “Bank of the Year 2006” by the banker, a publication of financial times,
London.
The main and best features of this bank are:
One of the Largest Network among private sector banks spread across Nepal and all
connected with ABBS.
Strong Joint Venture Partner providing Technical Support.
Representative office in India to facilitate remittance from India.
Direct Drawing arrangement with PNB and HDFC bank India whereby instant
payment is done on presentation of the instrument.
Direct amount credit in PNB branches commented with Central Banking System
and RTGS member banks via speed remittance. More than 126 remittance payout
location in Nepal.
EBL in association with Smart Choice Technology (SCT) is providing ATM service to its
customers through more than 74 ATMs and over 850 point of sales across the country.
ATM sharing arrangement with Punjab National Bank has facilitated usage of EBL Debit
Card at more than 1000 PNB ATM outlets across the India at a nominal rate. Similarly,
Indian tourists and businessmen having PNB cards will be able to use EBL ATM, while
in Nepal.
Services that the bank is providing currently
Deposit Loan
Current Account
Saving Account
Saving premium account
Cumulative Deposit Scheme
Sunaulo Bhavishya Yojana
Unfixed Fixed Deposit Scheme
USD Account
EBL NRN Deposit
1. Retail Loan 2. Corporate Loan
Home Loan Working Capital Finance
Vehicle loan Project Finance
Education Loan Trade Finance
Future Lease Rental Consortium Finance
Professional loan
Loan Against Mortgage
Bike loan
Loan Against Life Insurance
Share loan
Tractor and Water Pump finance
Bank of Kathmandu Limited
"We make your life easier" is the slogan that Bank of Kathmandu (BOK) is renowned
for. BOK was established in 12th
March 1995 as 10th commercial bank of Nepal with the
objective to stimulating the Nepalese economy and taking it to new heights. BOK aims to
facilitate the nation's economy and to become more competitive globally. BOK is
committed to delivering quality services to the customers, generating good returns for
their shareholders, providing attractive incentive for their employees and serving the
community through stronger corporate social responsibilities. To achieve these, BOK has
been focusing on its set objectives right from the beginning. BOK was started as a joint
venture with Syam Bank of Thailand.
The bank has Authorized Capital of Rs.1,000,000,000, Issued Capital and Paid up Capital
of Rs.844,397,900. Out of Paid up Capital, 41.81% of the shares are owned by the
promoters and 58.19% of the shares are owned by the public (BOK Annual report
2008/09).
BOK takes pride in using Financial, banking application software, “The Banker”
Technology Award 2004.
In summary, the following main objectives have been focused by BOK:
To contribute to the sustainable development of the nation by mobilizing domestic
savings and channeling them into productive areas.
To use the latest banking technology to provide better, reliable and effective
services at a reasonable cost.
To facilitate trade by making financial transactions easier, faster and more reliable
through relationships with foreign banks and money transfer agencies.
To contribute to the overall socio-economic development of Nepal.
Bank of Kathmandu Limited has become a prominent name in the Nepalese banking
sector. BOK has today become a landmark in the Nepalese banking sector by being
among the few commercial banks, which is entirely managed by Nepalese professionals
and owned by the public.
Products and Services
BOK has introduced various products and services in order to facilitate the requirements
of customers.
Deposit Loan and Advances
1. Current Account
2. Saving Account
General Savings
Ladder Savings
Sajilo Bachat Yojana
Jestha Lagani Kosh (JLK)
Griha Laxmi Bachat
Hello Savings
3. Call Deposits
4. Fixed Deposit
5 Recurring Deposits
1. Corporate Credit
a. Project Finance (Term Loan)
b. Working Capital Finance
Overdraft
Demand / Short-term loan (Trade Finance)
Trust Receipt/ Importers Loan (Trade Finance)
Export Loan
Consortium Lending
2. Business Credit
a. Demand / Short-term loan (Trade Finance)
b. Trust Receipt/ Importers Loan (Trade Finance)
3. Retail Banking
a. Housing Loan
b. Vehicle Loan
Car 4 U Loan
LCV Loan/ Buses
LCV Loan/ Trucks
c. Education Loan
d. Foreign Employee Loan
e. Festivity Loan
4. Other Services
a. Safe Deposit Locker
b. ATM / Debit Card
Nepal Industrial & Commercial Bank
Nepal Industrial & Commercial Bank Limited (NIC Bank) commenced its operation on
21 July 1998 from Biratnagar. The current shareholding pattern of the Bank constitutes of
promoters holding 51% of the shares while 49% is held by general public. The bank has
Authorized Capital of Rs. 1,600,000,000, Issued Capital and Paid up Capital of Rs.
1,140,480,000 (NIC Annual Report 2008/09).
The shares of the Bank are actively traded in Nepal Stock Exchange. Within 10 years of
commencing business, the Bank has grown rapidly with 16 branches throughout the
country while 2 more are planned to be opened this year. All branches are inter-
connected through V-Sat and are capable of providing real time on-line transactions.
It is the first commercial Bank in Nepal to get ISO 9001:2000 certifications for quality
management system. Furthermore, NIC Bank became the first Bank in Nepal to get a line
of credit by International Finance Corporation (IFC), an arm of World Bank Group under
its Global Trade Finance Program, enabling the Bank's Letter of Credit and Guarantee to
be accepted/ confirmed by more than 200 banks worldwide.
NIC Bank's organizational structure is designed to support its business goals. However, it
is flexible enough in seeking to ensure effective control, supervision, and consistency in
standards across all businesses at the same time. The organization structure is divided
into five major areas such as Consumer Banking, Business Banking, Special Assets
Management, Treasury and Liability Marketing and Transaction Banking all of which are
supported by the corporate center.
The Bank believes in continuously offering new and value added services to its
customers, with commitment to quality and value to its clients at the same time.
Accordingly, the Bank has been in the forefront in launching innovative and superior
products having unique customer friendly features with immense success.
The Bank is awarded the "Bank of the Year 2007-Nepal" by the world-renowned
financial publication of The Financial Times, U.K.-The Banker.
Product & Services
NIC has introduced various products and services in order to facilitate the requirements
of customers.
A. Deposits B. Business Banking
Current Account a. Funded Credit Facilities
Normal Savings Project Finance/Consortium Finance
Call Account Working Capital Finance
Fixed Deposit Account Overdraft / Demand Loan
NIC Business Account Trade Finance
NIC Life Saving Account Export Finance
Karmashil Bachat Khata Packing Credit/ Per- Shipment Loan
NIC Shareholder Savings Account Post-Shipment Loan
NIC Sikshya Kosh account Pledge Loan
NIC Super Deposit Margin Lending
NIC Corporate Super Account b. Non Funded Credit Facilities
Import Letter of Credit (L/C)
Bank Guarantees
D. SME Banking E. Transaction Banking
NIC Small Business Loan NIC SMS banking
NIC SME Trade & Industry Loan ATM/ Debit Card banking
NIC Ghar Subidha (NGS) Fund Transfer
NIC Sajilo Loan Purchase & Sale of Traveler‟s Cheques
NIC Auto Loan Safe Deposit Locker
NIC Education Loan Any Bank banking system
NIC Housing Loan Extended Counter Services
1.11 Focus of the Study
This research study is focused on comparing the financial condition and performance of
Everest bank Limited, Bank of Kathmandu and Nepal Industrial & Commercial bank
Limited in the framework of CAMEL by using descriptive and analytical research design.
Here we assess the bank effectiveness, efficiency and soundness through CAMEL.
CAMEL focuses the capital, assets, management, earnings and liquidity of the bank.
1.12 Statement of the Problem
The overall performance of financial institutions may not reflect by financial statement,
so that major question emerges whether these are adequate to reflect the overall
performance of company. Hence, there is needed to identify the overall conditions
strengths, weakness, opportunity and threats of the banks. For these purpose, several
financial and statistical tools and techniques are developed by different experts and
financial institutions all over the world, one of them is CAMEL. This study aims to asses
the financial conditions and overall performance of sampled commercial banks in the
framework of CAMEL.
What are the capital Adequacy ratios of commercial banks?
What are the qualities of assets of banks?
What are the management qualities of the banks?
What are the earning capacities of the banks?
What is the liquidity position of commercial banks?
1.13 Objective of the Study
The main objective of the study is to examine the financial performance through CAMEL
test of selected commercial banks and compare each other. To accomplish the main
objective, specific objective of the study are:
To check the capital adequacy, assets quality, management quality and earning
capability and liquidity position of selected banks.
To asses the organization investments, social corporate responsibility and services
provided by selected commercial banks.
On the basis of comparative analysis and conclusion drawn, recommend the related
banks for the better improvement.
1.14 Significant of the Study
The study deals with different financial performance and its indicator as well as financial
viability of the banks. The study also significance lies mainly in identifying and
comparing the financial health of banks in the framework of CAMEL. This study also
provides necessary information of performance capability of their banks to the
management. It provide the real picture of performance which is beneficial to potential as
well as existing shareholders, about risk return and utilizing fund. The study is also useful
for depositors, merchant bankers as well as other stakeholders; they can identify the
overall performance of the bank. It will be helpful to those who want to conduct further
study in this field. Mainly, the purposed study will be significance for the researchers,
research group and academicians for the future in the view of review.
1.15 Limitation of the Study
Out of twenty-six commercial banks here we only consider three banks and five
fiscal years i.e. from 2004/2005 to 2008/09 for the comparative analysis of
commercial banks. So this thesis shows the trend of commercial banks but not
become whole mirror of all commercial banks.
In this tough competition, there can be other factors beside the financial factor
which effects the overall position of the bank, but all factors are not consider in this
research because off limited time.
This Study will be based on secondary data and information and by review of
relevant literatures. Thus it may bias to some extent.
1.16 Organization of the Study
The study has been organized into five chapters, each devoted to some aspect of the study
on “Comparative CAMEL Analysis of Commercial Banks". The titles of these chapters
are as follows:
Chapter: I Introduction
This chapter deals with the subject matter consisting Background, Focus of the Study,
Statement of Problem, Objectives of the Study, Significant of the Study, Limitation of the
Study of Everest Bank Limited, Bank of Kathmandu Limited and Nepal Industrial &
Commercial Bank Limited.
Chapter: II Review of Literature
The Second Chapter, Review of literature deals with review some work analysis and
discussion already made in CAMEL Analysis.
Chapter: III Research and Methodology
This chapter includes the research methodology adopted in carrying out the present
research. It deals with Research Design, Sources of Data, Data Collection Procedure,
Data Processing, Data Analysis Tools and Limitation of the Methodology.
Chapter: IV Presentation and Analysis of Data
The fourth chapter is concerned with analytical frameworks. It includes the analysis of
Financial Statement of Everest Bank Limited, Bank of Kathmandu Limited and Nepal
Industrial & Commercial Bank Limited under the framework of CAMEL and comparing
it with the guidelines set by Nepal Rastra Bank and also to each other and overall
findings of all three banks.
Chapter: V Summary, Conclusion and Recommendations
This is the last chapter, which consists of the suggestive framework that consists with the
issues and gaps, conclusion and recommendations of the study.
CHAPTER - II
REVIEW OF LITERATURE
2.6 Introduction
Review of literature is the most important part of the study. Without clear concept on the
subject matter, the study might not be conducted with in its periphery. This section
provides current stage of the research work and guidelines or further study and helps to
avoid unnecessary duplication of research work. This chapter is focused on brief
discussion about the abstract regarding the camel analysis. In order to accomplish the
objectives of the study, the chapter includes review of relevant concepts, assumption,
books and journals as well as major findings of previous studies of the relevant field are
included in precise manner.
The purpose of review of the literature is to develop some expertise in one's area, to see
what new contribution can be made and to receive some ideas for developing a research
design. Thus, the previous studies can not be ignored, because they provide the
foundation to the present study. In other words, these have to be continuity in research.
This continuity in research is ensured by linking the present study with the past research
studies. From this, it is clear that the purpose of literature review is to find out what
researcher studies have been conducted in one's chosen field of study and what remains
to be done.
The review of literature is a crucial aspect because it denotes planning of the study. The
main purpose of literature review is to find out what works have been done in the areas of
the research problem understudy being undertaken. For review study, the researcher uses
different books, reports, journals and research studies published by various institutions,
unpublished dissertations submitted by master level students have been reviewed.
2.7 Theoretical Review
This section presents the theoretical aspect of the study, which includes the concept of
commercial bank, function of commercial bank, concept of CAMEL rating system.
2.7.1 History of Banking in Nepal
The history of modern commercial banking industry dates back to 1937 A.D. in which
year Nepal Bank Limited was incorporated. Till 1984, financial sector was closed to
private sector and foreign investors. Then the Government started to liberalize the
financial sector in the first half of 1980s.But it speeded up this process only in early
1990s.Private Sector rushed into the finance industries especially after the restoration of
democracy in 1990.Most of the commercial Banks came into operation during the decade
of 1990s.Government of any countries highly monitors and controls the finance industry
even in the liberalized market economy. Government does so due to its high gravity in
the national economy, and to build up the confidence of private sector in its financial
system. Nepal Rastra Bank (NRB) as an apex monitory authority of the country started to
monitor and control the finance industry especially at the end of the 1990s by issuing
directives to the financial institutions (FIs).It initiated the offsite and onsite supervision of
FIs to maintain their sound financial health and to build up the confidence of private
sector in the liberalized financial system and protect the interest of the investors.
Even though the specific date of the beginning of money and banking deal in Nepal is not
obvious , it is speculated that during the reign of the king Manadev, the coin “Manank”
and “Gunank”during the reign of the king Gunakamadev were in use.Historically,we find
the evidence of minted coin of Amshuverma in the 7th
century and later the coin of Jishnu
Gupta.In the beginning of eighth century, king Gunakamadev renovated the Kathmandu
city by taking loan and at the end of the same century, a merchant named Shankhadhar
had started the “New year” Nepal Sambat after freeing all the people of Kathmandu from
the debt.Sadashiva Dev in 12th
century, introduced, Silver Coins, King jayasthiti Malla,
had given the responsibility to a caste of society called “Tankadhari”while he had given
the name of the castes and their professions for the purpose of transactions of money in
the society. In the same century, copper coins were used by King Ratna Malla and the
gold coins by the last Malla King of Kathmandu Jaya Prakash Malla.
After the unification of Nepal, Prithvi Narayan Shaha the great King had used coin
Mohar in his name. An institution called “Taksar” was established in 1989 and it started
to issue the coin scientifically. In this way, we see that the coins have been in use from
the ancient time, and there was practice of taking and giving loan for the purpose of trade
and other various purposes. During the reign of Ranodip Singh, an office named
“Tejarat”was established in Katmandu in 1933(B.S.) It used to provide loans to the
government officials and the people against deposit of gold and silver. It had also
extended its branches outside Katmandu valley for giving loan. However, this office had
no right to accept deposit of public and it had no characteristics of modern banks.
Nevertheless we can say that the institutional banking system had started from then. After
having concluded a treaty with British India in 1980(B.S), Nepal could trade over Sea
freely for the diversification of trade. As a result, in 1993(1936 the draft of the company
act and banking act were prepared by forming industrial council “A Jute Mill” was
established in Biratnagar under this act and both commercial and industrial development
as well as institutional banking system had been started together at a time in Nepal.
After the establishment of Nepal Bank Limited on 30th Kartik, 1994(1938), modern
banking system started in Nepal. Nepal was influenced by the renaissance and the
industrial growth brought about by First World War. Nepal established first legation in
international level in London in 1934 for creating international relation with the various
countries. The first secretary Gunjaman Singh was posted to the legation in his alertness,
and under the international influence and the national necessity, Nepal Bank limited was
established under the Nepal Bank Act 1994(1938).It has many important functions. The
Nepal Bank Limited is the oldest bank of Nepal.
The economic and industrial development was stopped in Nepal from the Second World
War. After 2007, the banking activities of Nepal were not satisfactory due to political
instability. At first, though this bank was given the authority and responsibility of central
bank, but with the change of time, it was necessary to establish a Central Bank.
Nepal Rastra Bank was established in 2013(1957), Baisakh 14th
in Nepal. This was
established to replace the Indian Currency and to increase the usage of Nepalese notes, to
stop duel monitory system, to apply monetarism in all part of the country, to provide
issuance of notes, to bring Nepalese currency in use, to manage the monetary system
well, to keep stability of the exchange rate of Nepalese currency, to encourage national
industry by mobilizing the capital for development and to develop the banking system in
Nepal. This is the government bank. This is bank of banks.
After the establishment of Central bank other banks like Rastriya Banijya Bank,
Agricultural Development Bank was established under the initiative of the Central Bank.
After this phase, commercial banks started its operation. Those banks were opened with
joint investment. After this Development Banks, Micro financing came into existence.
Nabil Bank is the first bank established in joint investment in 2041(1984) and then Nepal
Investment Bank was established in 2042(1985). Standard Chartered Bank was
established in 2043(1987)as a joint venture between ANZ Grindlays and Nepal Bank
Limited. Himalayan bank was established as a joint venture with Habib Bank of Pakistan
in 2049(1993). Nepal SBI Bank Limited was established as a joint venture between
Employees Provident Fund and State Bank of India in 2050(1992).Nepal Bangladesh
bank was established in 2050(1993) in technical collaboration with I.F.I.C. Bank Limited
of Bangladesh. Everest Bank started its operation in 2051(1994) but it entered into joint
venture with Punjab National Bank in 1997.Bank of Kathmandu was established in
2051(1994) under joint investment with syam Bank of Thailand. Nepal Credit and
Commerce Bank was established as joint investment with leading Bank of Srilanka.
Hence there are so many commercial Banks in operation in Nepal.
2.7.2 Concept of Commercial Bank
According to the Black's Law Dictionary "Commercial Bank" means a bank authorized to
receive both demand and time deposits, to engage in trust services, to issue letter of
credit, to rent time-deposit boxes and to provide similar services.
Likewise Section 2(a) of the Commercial bank Act 2031 (1974) has defined that
"Commercial Bank" means a bank which operates currency exchanges transactions,
accepts deposits, provides loan; performs, dealing, relating of commerce except the banks
which have been specified for the co-operatives, agricultural, industry of similar other
specific objective.
So, commercial banks are the important source of institutional credit in the money
market. A commercial bank is a profit-seeking business firm, dealing in money or rather
dealing in claims to money. It is a FI that creates deposits liabilities which circulates as
money unlike the deposits of other FIs. In fact, the greater part of money supply is the
direct consequence of the profit-seeking or money-crating activities of commercial banks.
Table 2.1
List of licensed Commercial Banks in Nepal
S. No. Name Established Date
1. Nepal Bank Limited (NBL) 15 Nov,1937
2. Rastriya Banijya Bank (RBB) 23 Jan,1966
3. Nabil Bank Limited 16 July,1984
4. Nepal Investment Bank 27 Feb,1986
5. Standard Chartered Bank 30 Jan,1987
6. Himalayan Bank Limited 18 Jan,1993
7. Nepal SBI Bank Limited 7 July,1993
8. Nepal Bangladesh Bank 5 June1993
9. Everest Bank Limited 18 Oct,1994
10. Bank of Kathmandu 12 March,2005
11. Nepal Credit and Commerce Bank 14 Oct,1996
12. Lumbini Bank Limited 17 July,1998
13. NIC Bank Limited 21 June,1998
14. Machhapuchre Bank Limited 3 Dec,2000
15. Kumari bank Limited 3 April,2001
16 Laxmi Bank Limited 3 April,2002
17. Siddhartha Bank Limited 24 Dec,2002
18 Agricultural Development Bank Limited 19 Feb,1968
19. Global Bank Limited 2 Jan, 2007
20 Citizens Bank Limited 21 June, 2007
21. Prime Commercial Bank Limited 24 Sept, 2007
22. Bank of Asia Nepal Limited 12 Oct, 2007
23. Sunrise Bank Limited 12 Oct, 2007
24. Development Credit Bank Limited 23 Jan, 2001
25. Nepal Merchant Bank Limited 26 Nov, 1996
26. Kist Bank 7 May, 2009
2.7.3 Functions of Commercial Banks
Commercial banks are directly related whit the people and institution. Although these
banks are truly inspired with the objective of gaining profit, these commercial banks are
also established to, to accelerate common people's economic welfare and facility, to make
available loans to agriculture, industry and commerce and to provide the banking services
to the public and the state. The commercial banks in Nepal provide the following main
banking functions;
1. Receiving Deposits
This is the main function of commercial banks to collect savings of individuals and firms.
They offer different types of deposits for the facility of the customers.
i. Current Account or Demand Deposits
Any amount can be withdrawn from this account any time without any notice. No interest
is allowed on this type of account.
ii. Saving Account
In this account the bank pays interest relatively at low rate to the depositors. Depositors
are allowed to withdraw their money by cheque up to a limited amount.
iii. Fixed Deposit
A bank accepts fixed or time deposits from savers who do not need money for a
stipulated period from 6 months to longer periods ranging up to 10 years or more.
Amount cannot be withdrawn before the fixed future date in this type of deposit. High
interest is allowed in fixed deposit which is different according to period.
2. Advancing Loans
This is the important function of the commercial bank. Credit is given to the people in
different ways.
a. Making Loans
There are three types of loans given to borrowers.
i. Short Term Loans
These loans are advanced for the period of six months to one year. High Interest rate is
charged on this type of accounts.
ii. Medium Term Loans
Loans from one to five years are called medium term loans.
iii Long Term Loans
Loans which are advanced for the period, more than ten years are long term loans.
b. Bank Overdraft
Banks allows their trustful customers to draw more than the deposit they have in
the Bank. Bank charges interest on overdraft.
c. Cash Credit
Bank also gives credit against immovable property and interest is charged by the
bank.
d. Discounting of Bills
This is income source of bank to discount bills of exchange. They charge nominal
Interest and discount only reputed and clear bills of exchange.
2.7.4 Concept of Bank Supervision
There is no theoretically proven system or standard textbook blueprint for the structure
and process of regulating and supervising financial institution, including banks. In fact,
arrangements for banking regulation and supervision differ considerably from country to
country. Apart from the differences in political structure, the most important factors that
account for the differences in regulatory and supervision approaches include the general
complexity and state of development of the financial system, the number, size and
concentration of banking instructions, the relative openness of the demotic financial
system, the nature and extent of public discloser of bank, financial position and
availability of technology and human recourses for regulation and supervision. However,
an impact framework for the regulation and supervision of the banks can be found in the
core principles for effective banking supervision issued by the Basel Committee on
banking Supervision in 1977. The frame work can be interpreted as comprising four
distinct yet complementary sets of arrangement.
2.7.5 Objectives of Bank Supervision
With the respect of the supervisory arrangements the core principles describe what could
be termed a "cradle to grave" approach covering potential problem that may emerge in
the future on account of the current risk profile of the banking institution, overall,
supervisory risk assessment and early warning systems assist in
Systematical assessment of banking institution within a formalized framework both
at a time of on-site examination and in between examinations through off-site
monitoring.
Identification of institution and areas within institutions where problems exist or are
likely to emerge.
Prioritization of bank examinations for optimal allocation of supervisory resources
and pre-examination planning.
Initiation of warranted and timely action by the supervisory.
2.7.6 Process of Bank Supervision
On going banking supervision consists of a differentiated mix of off- site monitoring
procedures and on site examinations. Off site monitoring is the minimum tool for
ongoing supervision. Supervisory authorities do not have the mandate or resources to
carry out periodic on site examinations. The process involves analyzing and reviewing
periodic financial and other information received by the supervisor relating to banks
activities. Supervisor typically subject regulated banks to reporting requirements
covering, for insurance, balance sheet and profit and loss statement, business profile,
loans and investments, liability, capital and liquidity levels. Loan loss provision, etc
during on-site examination, supervision make an overall assignment of a banking
institution on the promises of the organization.
2.7.7 Supervisory and Monitoring System of the Nepal Rastra Bank
Principally, the central bank has the liability and obligation to maintain fair and healthy
environment of the economic activities of the nation. For it the necessary acts, rule and
regulation are enacted and development. Thus, the act of checking weather the related
officials and banks have honestly complied with the policy, regulation and supervisions
enacted by the controlled financial system, it self is called inspection. As a central bank,
the Nepal Rastra Bank has been discharging such serious and sensitive task.
Before the establishment of Nepal Rastra Bank, the function of inspection and
supervision used to be carried out by the officials by His Majesty of the Government of
auditor general. This practiced was contributing until the enactment of the commercial
bank act 2020BS. After the introduction of this act, the function of inspection and
supervision for the commercial bank was given to the Nepal Rstra Bank and this right
was more strengthened by the Nepal Rastra Bank act and the introducing of the
commercial bank act 1974. The Nepal Rastra Bank has been discharging the task of
inspection for the fiscal year 2025/26BS.
The system if inspection and supervision of the banking and the non banking financial
institution is to be followed on a certain slandered norms. In this regards, the bank for
international settlement has formulated an important standard, which is called CAMEL
system. The evaluation of financial institutions is done on the basic of it. In the case of
Nepal, the Nepal Rastra Bank adopting this system has made in the main basis of the one
site and off site supervision.
2.7.8 Concept of CAMEL Banks Rating System
The acronym "CAMEL" is revised in January 1997, the uniform financial institution
rating system, which is commonly referred at as that camel rating system. For purpose of
this rating system, the term financial institution refers those insured depository institution
whose primary federal supervisory agency is represented on the FFIEC. The agency
comprising the FFIEC the board of governors of the federal reserve system (FRB) the
federal deposit insurance corporation, the national credit union administration the office
of the controller of the currency and the office of the thrift supervision. The term
financial institution includes federally supervised commercial banks, savings and loan
associations, mutual savings banks and credit unions.
Capital adequacy, Assets quality, Management efficiency, Earnings and Liquidity. A
sixth component, a bank's sensitively to market risk was added in 1997; hence the
acronym was changed to CAMEL.
The camel rating system is subjective beach marks for each component are provided, but
they are guidelines only and presents essential foundations upon which the composite
rating is based. They do not eliminate consideration of the other patient's factors by the
examinant. The uniform rating system provides the ground work for necessary
supervisory response and helps institutions supervised by all three us supervisors to be
reasonably compared and evaluated. Rating are assigned for each component in addition
to the over all rating of a banks financial condition. The ratings are assigned on a scale
from 1 to 5. The camel ratings are commonly viewed as a summary measures of the
private bank supervisory information gathered by examiners regarding banks overall
financial conditions, although they also reflect available public information.
During on site bank supervisor gating private information. Such as details on problem
loans, with which to evaluate banks financial conditions and to monitors its compliance
with laws and regulatory polices. A key product of such an exam in a supervisory rating
of banks overall conditions commonly referred at as a CAMELS rating.
In Nepal, the NRB plays the supervisory role for evaluating banks financial condition
through rating the banks in accordance to CAMELS is still a myth.
2.8 Composite of Ratings
Composite ratings are based on a careful evolution of an institution's managerial,
operational, and financial and compliance performance. The six key composites used to
access an institution's financial condition and operations are: capital adequacy ratio, assist
quality, management capability, earning quantity and quality, the adequacy of liquidity
and sensitivity to market risk. The rating scale ranges from 1 to 5 with a rating of 1
including; the strangest performance and risk management practices relatives to the
institutions size, complexity and risk profile; and the profile; and the level of least
supervisory concern. A 5 rating includes; the most critically deficient level of
performance; inadequate risk management practices relatives to the institutions size,
complexity and risk profile and the greatest supervisory concern. (www.google.com)
2.9 Camels Components
Each of the components rating descriptions is divided in the three sections; and
introductory paragraph; a list of the principle evaluation factors that related to that
components; and a brief description of each numerical rating for the components. Some
of the evaluation factors are reiterated under one or more of the other components to
reinforce the interrelationship between components. The listing of evaluation factors for
each component's rating is in no particular order of importance.
A. Capital Adequacy Ratio
A financial institution is expected to maintain capital commensurate with the nature and
extents of risks to the institution and the ability of management to identify, measure,
monitor and control these risks. The effect of credit, market and other risks on the
institution's financial conditions should be considered when evaluating the adequacy of
capital. The types and quantity of risk inherent in institution's activities will determine the
extent to which it may be necessary to maintain capital at levels above required
regulatory minimums to properly reflect the potentially adverse consequences that these
risks may have on the institution's capital. The capital adequacy of an institution's related
based upon, but not limited to an assessment of the following evaluation factors.
1. Size of the bank
2. Volume of inferior quality assets
3. Bank's growth experience, plan and prospects
4. Quality of capital retained earnings
5. Access to capital markets
B. Assets Quality
Commercial banks collect funds in the form of capital, deposit etc. It mobilizes these
funds to generate certain returns by giving loans to the users of money to invest in
various alternatives. A significant part of the banks income is through its lending
activities. There are basically two types of loans - advances and loss provisions:
1. Performing loans:
All good loans and overdue for below 90 days.
2. Non Performing loans:
Sub- standard-loans overdue by more than 3 months up to 6 months.
Doubtful-loans overdue by more than 6 months up to 1 year
Bad-loans overdue by more than 1 year.
C. Management
The success of any institution depends on the competency of its management. In fact, the
management not only makes suitable policy and the business plans but also implements
them for the short term and the long term interests, which helps to achieve aimed
objectives of bank and financial institution's. It is evaluated by checking the effectiveness
of the board of directors, the management, manpower and the officials, operating
expenditure, customer's relation with the officials and institution, management
information system, organization and working method, internal control system, power
concentration, monitoring, decision making process, policies.
An institution can take a desire momentum only when the management is capable of
strong and long term vision. For the proper and efficient management, the banks have to
possess the following qualities:
1. Structure of management team should be perfect.
2. Qualitative manpower and its productivity.
3. Good relationship between customers and organization.
4. Adequate management expenses.
5. Internal management system should be perfect.
6. Fair decision making capability.
7. Proper communication system.
8. Working environment should be perfect.
D. Earnings
Earnings are the ultimate result of any business. Generally, if the earnings are good then
that business is running well. Similarly the aggregate performance of the bank reflects
from its earnings. An analysis of the earnings ration helps the management, investors and
creditors to know the performance of the bank. They can get information regarding their
interest. The following ratios help the management and other stakeholders to know about
the earning policy of the respective banks:
1. Return on Equity (ROE)
2. Return on Assets (ROA)
3. Earning pre Share (EPS)
It measures the profit available to the equity shareholders as per share basis i.e. the
amount that they can get on each share held. In other words, this ratio measures the
earnings available to equity shareholders on a per share basis.
E. Liquidity
Simply, liquidity means short- run solvency of a firm. It reflects the short term financial
strength of banks. Bank does not provide all deposit at loan and advances. The certain
percentage of deposit should be kept in bank in the form of cash. It the bank will keep
greater deposit in cash, it losses the opportunity cost. Similarly, if bank keeps low amount
in deposit, it could not be able to pay depositors on the time of requirement.
Liquidity can be measured in following ways:
1. Cash Reserve Ratio
2. Cash & Bank Balance Ratio
3. Investment Government Securities
2.10 Review of Previous Studies
National and international journals, exports views, review of previous research and study
are covered in research review.
2.5.1 Review of Journals and Articles
Berger and Davies evaluated the impact of CAMEL rating changes on the parent
holding company's stock price. They separated stock price changes into two component a
'private information' effect (which identified the public's awareness of new information
discovered by examiners), and a 'regulatory discipline' effect which valued a regulators'
presumed ability to force a bank to changes its behavior). Berger and Davies' empirical
results provided only weak evidence of a regulatory discipline effect, but they found a
strong private information effect. However, the information effect applied only to
CAMEL downgrades, which tend to precede stock prices declines. Berger and Davies
found no movement in the stock price following a CAMEL upgrade.
Hirtle and Lopez examine the usefulness of the past CAMEL rating in assessing banks
current conditions. They find that, condition on current public information, the private
supervisory information contained in the past CAMEL rating provides further insight into
bank current conditions as summarized by current CAMEL ratings. The authors find that,
over the period from 1989 to 1995 the private supervisory information during the last on-
site exam remains useful with respect to the current condition of the bankfor up to 6 to 12
quarters. The overall conclusion drawn from academic studies is that private supervisory
information, as summarized by CAMELS ratings, is clearly useful in the supervisory
monitoring of bank conditions.
Dhungana Bhisma argues CAMEL rating system plays key role for bank supervision.
According to him, The NRB as a central bank has the important task of regulating &
supervising the banking system of Nepal. NRB assess the overall strength of the banking
system as well as the safety and soundness of each individual bank and financial
institution, In order to discharge this role. To help in this endeavor, a uniform rating
system for all banks and financial institution has been used. Under this modality,
supervisors assign individual numerical rating to the key areas of Capital, Assets,
Management, Earnings, liquidity and sensitivity to the market risk (CAMELS) as well as
assigning an overall composite rating to each banking institution. In this way, the NRB
has been able to categorized banks and financial institutions into group based on their
overall strength, quality and operating soundness. The rating system known as CAMEL
has served as a supervisory tool to help identify those banks that are having problems and
require increased supervision. To date, early warning signals are drawn are drawn &
monitored from the CAMEL rating through on-site inspection and CAMEL rating
through offsite supervision.
Pant Radish argued that after 2010, there will be new international entrants in the
market, we must remain very competitive, and we have to operate at international
standards. However, he does not think we need to fear. He believed combined capital of
all Nepalese commercial banks would not even equal to the capital of a small bank in
developed countries. It somehow, Nepal is able to capitalize on the growth of China and
India, there is no turning back for the banking sector. There will be opportunities for all
types of banks. So, we need to work together to address the challenges of that WTO."
2008 was an extraordinarily tumultuous year, full of shocks & surprises. None of us have
even quite seen the scale of dislocation & disruption in financial market that we have
experienced this year. To put things in perspective, there has been more volatility in the
US equity market in the three month since Lehman went bankrupt in the mid- September,
than in the previous 45 years put together,. Moreover, with the disappearance or effective
nationalization of several major players, and the demise of the US broke, dealer model,
the global industry has changed fundamentally & irreversibly.
2.5.2 Review of Thesis
Shrestha, M.D. (2003), in his study of “Capital Adequacy Norms for Commercial
Banks and its impact of Bank of Kathmandu and Himalayan Bank Ltd.”, has concluded
that BOK and HBL are found to be successful to comply with requirement of capital
adequacy norms. The CD ratio of HBL is very much low which needs to be improved
immediately and CD ratio of BOK is satisfactory. Although, the banks are successful to
meet the capital adequacy requirement as per NRB directive.
Bhandari, K.R. (2006) conduct a study on "Financial performance Analysis of
Himalayan Bank Limited in the Framework of CAMEL". The basic objective of the study
was to analyze the financial performance of Himalayan Bank Limited through CAMEL
framework. He had used secondary data for the period of six years from 1999 to 2004.
The study revealed the adequate capital of the bank. The non-performing loan was in
decreasing trend, which shows the improvement of the bank. The bank is still with better
return which is proved by its better ROE; however it is in decreasing trend. The
decreasing trend of net interest margin shows management slack monitoring over the
banks earning assets. The liquid fund to total deposit ratio is above the industrial average
ratio. NRB balance and cash in vault to total deposit ratios are below the industrial
average ratio during the study period.
Sharma, S. (2007) performed a study on "Financial Performance Analysis of Nepal SBI
Bank Ltd., In the Frame work of CAMEL." The main objective of the study is to analyze
the financial performance of Nepal SBI bank Ltd. Through CAMEL framework, the
study was based on secondary data covering the six years from 2001 to 2006. The
researcher conducts the financial tools to analyze the six years data. He concluded That
Nepal SBI bank Ltd. Was well capitalized and complying with directives of NRB. The
bank has maintained satisfactory level of past due loan on total loan except 2001. Earning
per employees of the bank was found quite high. Net interest margin of the bank was
found satisfactory. Further the liquidity position of the bank was found sound.
Poudel, R. (2007) carried out “A study on comparative analysis of financial performance
between Himalayan Bank and Standard Charted Bank” the basic objectives of that study
was provided comparative financial performance of SBCNL and HBL. Only five fiscal
years financial performance beginning from 1995/96 through 2000/2001were analyzed.
In this study financial and statistical tools were used to evaluate the performance of
banks. In financial tools liquidity, activity, profitability, structural and income and
expenditures ratios. Further, the research used the method of least square to find our the
tend of different financial indicators he found that the performance of SCBNL is better
than that of HBL.
Chand, K.B. (2007) conducted "Financial Performance Analysis (CAMEL - Test) of
Selected CBs (Nabil, NIBL &SCBL)" the main objective of the study is comparative
analysis of commercial banks through the frame work of CAMEL. He did her study
covering five FY (2001 to 2005) on the basis primary as well as secondary data. Some
financial and statistical tools and techniques are applied to evaluate the performance of
selected joint venture banks. On his study, except 2001, SCBL had highest CAR among
these selected CBs where Nabil is moderate in all time. In the case of NIBL in 2001 it
had highest CAR among them and then after it went behind and getting second and some
year third position in CAR. Here Chand gave first rank to SCBL for maintain highest
CAR. In case of Assets quality in average study show the Nabil performance is much
better than other and SCBL and NIBL follows Nabil respectively. Chand study shows the
factors affecting the management efficiency and effectiveness. Bank management quality
model was also presented in his study. As per earning concern SCBL leads other two
banks and tough fight between Nabil and NIBL. For comparative analysis of liquidity
part which compare, it is found that NIBL secures first position for percentage of cash
balance and percentage of balance with bank and SCBL scores first position for
investment in government securities. Nabil is a little bit take risk and invest less in
government securities as compare to other two banks. All banks are maintaining the
benchmark of the NRB on case of CRR.
Bhusal, M. (2008) carried out a research study on " Financial Performance Analysis of
Commercial Banks in Nepal the Frame Work of CAMEL ( A Comparative Study of
Kumari Bank and Machhapuchchhre Bank", with the fundamental objective to analyze
and compare the financial performance of KBL and MBL in the frame work of CAMEL
from FY 2058/59 to 2062/63. with the help of both secondary as well as primary data, she
conducted her study by applying Some financial and statistical tools and techniques. Her
study shows both banks are maintaining CAR as per rule of NRB and the trend of CAR is
decreasing. Both banks are in much satisfactory level in the case of assets management.
Increasing profit of both banks shows the good sign but it is not enough to compete with
other established banks. According to her study, Profits are also not enough to meet
benchmark set by the World Bank. In the case of liquidly both banks are not properly
maintaining the rule of NRB. In her overall analysis there is tough competition between
KBL and MBL and both are in the phase of improvement.
Singh, R. B. (2008) conducted "A Study of CAMEL Analysis of Commercial Banks" i.e.
SCBNL, HBL & Nabil Bank. The objective of that study was to evaluate the capital
adequacy ratio, to analyze assets quality and to absorb the liquidity position of these
banks. He used ration analysis and statistical tools to covered five years analysis. On the
basis of Mr. Singh's analysis, SCBNL is on the top and NABIL followed by HBL.
CHAPTER - III
RESEARCH METHODOLOGY
3.7 Introduction
Research methodology describes the methods and process applied in the entire study. In
other words, research methodology is a systematic process to approach any research
problem and explore it objectively. Hence this chapter includes research design, Source
of Data, population and samples, Data collection tools and Data Analysis tools.
3.8 Research Design
To fulfill the objectives of the study certain research design in essential so the analysis of
this study is based on the nature of data and tools for analysis. To fulfill the objectives of
the study it emphasized on historical as well as descriptive and exploratory.
3.9 Population and Sampling of Data
The total number of commercial bank represent as the total population for the purpose of
this study. Hence, the population consists of twenty-six commercial banks. Out of the
total population three private sector commercial banks are used as samples. These are
Everest bank Limited, Bank of Kathmandu and Nepal Industrial & Commercial bank
Limited
3.10 Periods Covered
To do this research work Five Years Annual Report have been taken of respective banks
which are published by the bank after audit to the general public. It covers the fiscal year
of 2004/05 to 2008/09.
3.11 Source of Data
This research study is basically based on secondary data. The required data for the study
will be collected in followings ways:
Library research study
Internet, home pages and related links visit.
Directives of NRB
Annual reports of the Everest bank Limited, Bank of Kathmandu and Nepal
Industrial & Commercial bank Limited
The other sources will be articles, previous study on related topic, published articles
of different authors and journals.
3.12 Data Analysis Tools
3.6.2 Financial ratio analysis tools
The financial analysis tools are used to determine the performance of the banks in the
frame work CAMEL components. These ratios are categorized in accordance of the
CAMEL components. Following categories of key ratio are used to analyze the relevant
components in terms of CAMEL.
3.6.1.1 Capital Adequacy Ratio (CAR)
Commercial bank holds adequate capital depending on their requirement. Capital
adequacy ratio is a measure of the amount of a bank's capital as a percentage of its risk
weighted credit exposure. Nepal Rastra Bank (NRB) which recommends minimum CAR
of 11% and 5.5% of Core Capital Ratio (CCR).
Total Capital Fund
Capital Adequacy Ration (CAR) = × 100%
Total Risk Weighted Assets
(Minimum requirement as per NRB Directive is 11%)
Total Core Capital Fund
Core Capital Ratio (CCR) = × 100%
Total Risk Weighted Assets
(Minimum requirement as per NRB Directive is 5.5%)
Where,
Total Capital Fund = Core Capital + Supplementary Capital
Total Risk Weighted Assets = On Balance Sheet Risk Weighted Items + Off Balance
Sheet Risk Weighted Items
3.6.1.2 Assets Quality
Commercial banks collect funds in the form of capital, deposit etc. It mobilizes these
funds to generate certain returns by giving loans to the users of money to invest in
various alternatives. A significant part of the banks income is through its lending
activities. There are basically two types of loans and advances.
1 Performing Loans
Loan on which payments of interest and principal are less than 90days past due called
performing loan.
2 Non Performing Loans (NPL)
A loan is non-performing when payments of interest and principal are past due by 90
days or more, or at least 90 days of interest payments have been capitalized, refinanced or
delayed by agreement, or payments are less than 90 days overdue, but there are other
good reasons to doubt that payments will be made in full.
Sub Standard Loan
All loans and advances that are past due for a period of 3 months to 6 months shall be
included in this category. Those are classified as non-performing loan.
Doubtful Loan
All loans and advances, which are past due for a period of 6 months to one year, shall be
included in this category. Those are non performing loan.
Bad/ Loss Loan
All loans and advances, which are past due for a period of more than one year, shall be
included in this category. Those are classified as nonperforming loan.
Classification of loans Provision required
Good 1%
Sub-standard 25%
Doubtful 50%
Bad loans 100%
Total Non-Performing loan
Non-performing Loan Ratio = × 100%
Total Loan & Advances
Where,
Total Non-Performing loan (NPL) = Sub Standard Loan + Doubtful Loan + Bad Loan
Total Loan & Advances = Total Performing Loan + Total Non Performing Loan
Total Loan Loss Provision (LLP)
Loan Loss Coverage Ratio = ×100%
Total Non-Performing loan
Where,
Total Loan Loss Provision (LLP) = Provision on (Pass Loan + Restructured Loan + Sub
Standard Loan + Doubtful Loan + Bad Loan)
Total Non-Performing loan (NPL) = Sub Standard Loan + Doubtful Loan + Bad Loan
Total Loan Loss Provision (LLP)
Loan Loss Provision Ratio = × 100%
Total Loan & Advances
Where,
Total Loan Loss Provision (LLP) = Provision on (Pass Loan + Restructured Loan + Sub
Standard Loan + Doubtful Loan + Bad Loan)
Total Loan & Advances = Total Performing Loan + Total Non Performing Loan
3.6.1.3 Management
Management is the arrangement of various things in a systematic manner for the
achievement of organizational goal. An institution can take a desired goal only when the
management is capable, which is of strong and long-term vision. For the achievement of
the goal of the bank within certain period of time proper and efficient management is
required, for which the banks should have the following qualities:
Qualitative Human resource management
Adequate management expenses
Perfect structure of management team.
Fair decision making capability.
Use of modern Information Technology and proper communication system
Perfect working environment
Internal management system and relationship between customer and organization.
Management analysis can be done by using following formula;
Net Profit after Tax
Management Efficiency Ratio (MER) =
Total No. of Staffs
3.6.1.4 Earning
Earning means excess of revenue over cost, so excess revenue earned by any organization
in the course of operation is known as profit. It is the ultimate result of any business.
Generally, if the earnings are good then that business is running well. Similarly the
aggregate performance of the bank reflects from its earnings. Earning is the ultimate
result of any business. Generally, higher earnings reflect better financial position.
Similarly the aggregate performance of the bank reflects from its earnings.
Following ratios depicts the earning position of EBL, BOK & NIC.
Net Profit after Tax
Earning per Shares (EPS) =
No. of outstanding Shares
Net Income after Tax
Return on Equity (ROE) = × 100%
Total Shareholders‟ fund
Net Income after Tax
Return on Assets (ROA) = × 100%
Total Assets
3.6.1.5 Liquidity
Liquidity is the state of owning things of value that can easily be exchanged for cash.
Liquidity is the term which denotes the ability of an organization to meet its financial
obligation or debts in cash in time. Such an organization has assets which can be
converted into cash and without any loss at their conversion through the maintenance of
certain reserves and provision. Liquidity reflects the short term financial strength of the
banks. Bank does not provide all its deposit at loans and advances, but certain percentage
is kept as liquidity in the bank itself or elsewhere.
Basically bank measures liquidity through three methods. They are as follows;
Cash Reserve Ratio (CRR)
It is the minimum amount of reserves a bank must hold in the form account balance with
NRB. This ratio ensures minimum level of the bank‟s first line of defense in meeting
depositor‟s obligations. It is the mandatory reserve that the commercial bank has to keep
in the form of cash in their account in NRB for depositors‟ assurance and safety of bank
which also reflects the bank‟s goodwill. As per the regulation made by NRB, Cash
Reserve Ration is to be maintained 5.5% on average of total deposits of bank on weekly
basis. It is calculated as
Cash Balance in NRB
Cash Reserve Ratio =
Local Currency Deposit – Margin Deposit
Since, we cannot find the daily deposit amount in annual report and also cannot access it,
we cannot find cash reserve ration and compare it as mandatory set by NRB of 5.5% on
average of total deposit of bank on weekly basis. So, it will give false information or
mislead to others if we calculate it on the figure that is given on year ending Balance
Sheet.
Cash and Bank Balance Ratio (CBR)
The ratio measures the bank ability to meet immediate obligation. So, optimum balance
should maintain in order to meet their paying obligation. Further, this ratio is employed to
measure whether bank‟s cash balance is sufficient to cover unexpected demand made by
the depositors. It is calculated as follows
Cash & Bank Balance
Cash & Bank Balance Ratio =
Total Deposit
Investment in Government Security Ratio (IGSR)
Government securities are known as risk free assets, which are easily converted into cash
to meet the short term obligation. That‟s why every commercial bank has to invest their
certain amount in government securities. This ratio calculated as
Investment in Govt. Security
Investment in Govt. Security Ratio = × 100%
Total Deposit
CHAPTER – IV
DATA PRESENTATION AND ANALYSIS
4.4 Introduction
This chapter deals with the presentation and analysis of data collected from different
sources with the focus on the camel components. As stated in the theoretical prescription,
the financial performance analysis of Everest Bank Limited, Bank of Kathmandu and
Nepal Industrial and Commercial Bank Limited are concentrated in the five components
of camel i.e. Capital Adequacy, Assets Quality, Management Quality, Earning Quality
and Liquidity. The data collected from annual reports of respective banks have bee
analyzed with the application of camel.
4.5 Data Presentation and Analysis
The data collected from different sources has been defined and documented in Excel
tables, which are further processed to analyze and arrived at the findings on the financial
conditions of above mentioned banks in terms of Camel Analysis. The major findings of
the study on financial performance of EBL, BOK and NIC are also described on each
section and part of CAMEL Analysis.
4.5.1 Capital Adequacy
Capital Adequacy is a measure of an FI‟s financial strength, in particular its ability to
cushion operational and abnormal losses. Minimum capital adequacy ratios have been
designed to ensure banks can absorb a reasonable level of losses before becoming
insolvent. The higher the capital adequacy ratios a bank has, the greater the level of
unexpected losses it can absorb before becoming insolvent. An FI should have adequate
capital to support its risk assets in accordance with the risk-weighted capital ratio
framework. It has become recognized that capital adequacy more appropriately relates to
asset structure than to the volume of liabilities. Risk Weighted Assets, Core Capital and
Supplementary Capital are major figures used to calculate Capital Adequacy Ratio.
In the context of Nepal, NRB has assigned following weight for following Assets of
Banks.
0% Risk Weight Asset
Cash in Hand, Gold (Tradable), Balance with Nepal Rastra Bank, Investment in
Government Bonds, Investment in NRB Bonds, Loan against own Fixed Deposit Receipt,
Loan against Government Bonds, accrued Interest on Government and Bills for
Collection.
10% Risk Weight Asset
Forward Foreign Exchange Contract
20% Risk Weight Asset
Balance with domestic Licensed Banks & Financial Institutions, Loan against other
Banks F.D. receipt, Balance with Foreign Banks, Money at Call, Loan against Guarantee
of International Rated Banks, Investments on International Rated Banks, L/C (Below 6
months maturity) and Guarantee against International Bank Guarantee
50% Risk Weight Asset
L/C (Over 6 months maturity), Bid Bonds and Performance Bond
100% Risk Weight Asset
Investments on Share, Debenture & Bonds, Other Investments, Loan, Advances & Bills
Purchase/Discount, Fixed Assets, Other Assets, Net Other Interest Receivable (Gross Int.
Receivable – Interest receivable on Govt. Bonds - Interest Suspense) , Financial
Guarantee, Other Guarantee, Irrevocable Loan Commitment, Contingent Liability for Tax
and Other Contingent Liability.
Capital Adequacy ratio calculated as follows:
Total Capital Fund
Capital Adequacy Ration (CAR) = X 100%
Total Risk Weighted Assets
Table 4.1 is the observed Capital Adequacy Ratio during the study period in numerical
terms which is presented below:
Table 4.1
Capital Adequacy Ratio
Fiscal Year Banks Total Capital
Fund
Total Risk
Weighted Assets
Capital
Adequacy Ratio
2004/05 EBL 1,247,562,000 9,195,588,000 13.57
BOK 763,528,243 6,936,942,398 11.01
NIC 730,985,785 5,499,435,330 13.29
2005/06 EBL 1,391,339,000 11,291,137,000 12.32
BOK 1,100,797,467 7,583,653,036 14.52
NIC 1,036,838,663 7,656,131,091 13.54
2006/07 EBL 1,676,115,000 14,976,737,000 11.19
BOK 1,265,828,177 10,226,193,976 12.38
NIC 1,208,607,803 9,905,036,012 12.20
2007/08 EBL 2,406,056,000 21,039,879,000 11.44
BOK 1,635,235,217 13,702,369,666 11.93
NIC 1,615,719,466 12,321,131,296 13.11
2008/09 EBL 2,703,870,000 24,131,922,000 11.20
BOK 2,005,695,528 16,025,037,210 12.52
NIC 1,954,934,793 15,741,613,929 12.42
(Sources: Appendix 3, 4 & 5)
Figure 4.1 is a bar diagram which represents the above tabulated numerical data which
helps to compare the Capital adequacy Ratio among three banks.
Figure 4.1
Capital Adequacy Ratio
-
2
4
6
8
10
12
14
16
2004/05 2005/06 2006/07 2007/08 2008/09
Years
CA
R in
%
EBL
BOK
NIC
As shown in the table 4.1 and figure 4.1, the Capital Adequacy Ratio of EBL of 13.57%
is the highest and BOK of 11.01% is the lowest in FY 2004/05; BOK of 14.52% is the
highest and EBL of 12.32% is lowest in FY 2005/06; BOK of 13.38% is the highest and
EBL of 11.19% is lowest in FY 2006/07; NIC of 13.11% is in highest position and EBL
of 11.44% is the lowest position in FY 2007/08;BOK of 12.52% is the highest and EBL
of 11.20% is the lowest in the FY 2008/09 among three banks. Furthermore figure 4.2
helps to find out the trend of three banks Core Capital Ratio over the last five years
period.
Figure 4.2
Capital Adequacy Ratio
-
2
4
6
8
10
12
14
16
2004/05 2005/06 2006/07 2007/08 2008/09
Years
CA
R i
n % EBL
BOK
NIC
Figure 4.2 is the trend analysis of three banks over the five years study period. As shown
in the figure Capital Adequacy Ratio of EBL started by 13.57% in 2004/05, decreased in
FY 2005/06 and 2006/07 thereafter increased in 2007/08, again decreased in FY 2008/09
and reached to 11.20% in FY 2008/09. Overall, Capital Adequacy Ratio of EBL
decreased.
Similarly, BOK is starting with11.01% in FY 2004/05, then increases in 2005/06 after
that decreases in FY 2006/07 and 2007/08but at the end slightly increases and reached to
12.52% in FY 2008/09. Overall Capital Adequacy Ratio of BOK also is in decreasing
trend.
Likewise, Capital Adequacy Ratio of NIC stares with 13.29% in FY 2004/05 and slightly
increases in 2005/06 after that decreases in FY 2006/07 and again increases in FY
2007/08 and 2008/09 and reached to 12.42%. This also shows the decreasing trend in
overall.
4.2.1.1 Core Capital Ratio (CCR)
Core Capital measures a bank‟s financial strength from a regulator‟s point of view. In the
context of Nepal Core or Primary Capital includes Paid-up Capital, Share Premium, Non
redeemable Preference Share, General Reserve Fund, Cumulative Profit/ loss, Capital
Redemption Reserve, Capital Adjustment Fund/ Proposed Bonus Share and other Free
Reserve. Amount of the goodwill, Fictitious Assets, Investment in excess of prescribe
limit specified by NRB, and investment in security of companies with financial interest is
deducted from the sum of all elements of the primary capital to arrive at the core capital.
It is calculated as follows:
Total Core Capital Fund
Core Capital Ratio (CCR) = ×100%
Total Risk Weighted Assets
Table 4.2 is the observed Core Capital Ratio during the study period in numerical terms
which is presented below:
Table 4.2
Core Capital Ratio
Fiscal Year Banks Core Capital
Fund
Total Risk
Weighted Assets
Core Capital
Ratio
2004/05 EBL 816,793,000 9,195,588,000 8.88
BOK 694,351,456 6,936,942,398 10.01
NIC 680,142,550 5,499,435,330 12.37
2005/06 EBL 927,550,000 11,291,137,000 8.21
BOK 811,917,204 7,583,653,036 10.71
NIC 761,128,967 7,656,131,091 9.94
2006/07 EBL 1,171,133,000 14,976,737,000 7.82
BOK 953,263,195 10,226,193,976 9.32
NIC 911,806,552 9,905,036,012 9.21
2007/08 EBL 1,900,859,000 21,039,879,000 9.03
BOK 1,310,851,552 13,702,369,666 9.57
NIC 1,293,750,759 12,321,131,296 10.50
2008/09 EBL 1,981,579,000 24,131,922,000 8.21
BOK 1,683,588,123 16,025,037,210 10.51
NIC 1,649,007,425 15,741,613,929 10.48
(Sources: Appendix 3, 4 & 5)
Figure 4.3 is a bar diagram which represents the above tabulated numerical data which
helps to compare the Core Capital Ratio among three banks.
Figure: 4.3
Core Capital Ratio
-
2
4
6
8
10
12
14
2004/05 2005/06 2006/07 2007/08 2008/09
Years
CC
R in
%
EBL
BOK
NIC
As shown in the table 4.2 and Figure 4.3, the Core Capital Ratio of NIC of 12.37% is the
highest and EBL of 8.88% is the lowest in FY 2004/05; BOK of 10.71% is the highest
and EBL of 8.21% is lowest in FY 2005/06; BOK of 9.32% is the highest and EBL of
7.82% is lowest in FY 2006/07; NIC of 10.50% is highest and EBL of 9.03% is the
lowest in FY 2007/08; BOK of 10.51% is the highest and EBL of 8.21% is the lowest in
the FY 2008/09 among three banks. Furthermore figure 4.4 helps to find out the trend of
three banks Core Capital Ratio over the last five years period.
Figure 4.4
Core Capital Ratio
-
2
4
6
8
10
12
14
2004/05 2005/06 2006/07 2007/08 2008/09
Years
CC
R in
%
EBL
BOK
NIC
Figure 4.4 is the trend analysis of three banks over the five years study period. As shown
in the figure Core Capital Ratio of EBL started by 8.88% in FY 2004/05, decreased there
after till 2006/07 and increases in FY 2007/08, again decreased in FY 2008/09 and
reached to 8.21% in FY 2008/09. Overall, Core Capital Ratio of EBL decreases.
Similarly, Core Capital Ratio of BOK started with 10.01% in FY 2004/05, then increases
in 2005/06 after that decreases in FY 2006/07, increased There after till FY 2008/09 and
reached to 10.51% in the FY 2008/09. Overall Core Capital Ratio of BOK also is in
increasing trend.
Likewise, Core Capital Ratio of NIC stared with 12.37% in FY 2004/05, decreases in FY
2005/06 and 2006/07 after that increases in FY 2007/08 and again decreases in FY
2008/09 and reached to 10.48%. This also shows the decreasing trend in overall.
4.5.2 Assets Quality
Commercial bank holds their assets in the form of liquid assets like cash and bank
balance and short term investment etc. Through this lending bank generated interest.
Assets quality ratio is also known as activity ratio as well as turnover ratio be converted
in to cash and equivalent to cash. This is only profit if the bank is efficient enough to earn
profit. For identifying the assets quality we need to calculate three ratios. They are:
4.2.2.1 Non-Performing loan
Non-Performing loan refers to those loans which are not paying its Principle + Interest in
time or overdue more than three months. So, it consists of Sub-standard loan, Doubtful
loan and Bad Loan. The non-performing loan ratio indicated the relationship between
non-performing loan and total loan, it measures the proportion of non-performing loan in
total loan and advance. Higher non-performing loan ratio indicates that the bank‟s assets
are not doing well or the loan department is not so conscious while passing loan. So,
lower ratio will be perferred regarding Non-erforming Loan Ratio. The ratio is
determined by using the given model.
Total Non-Performing loan
Non-performing Loan Ratio = × 100%
Total Loan & Advances
Where,
Total Non-Performing loan (NPL) = Sub Standard Loan + Doubtful Loan + Bad Loan
Total Loan & Advances = Total Performing Loan + Total Non Performing Loan
Table 4.3 is the observed Non-Performing Loan Ratio of three banks during the study
period in numerical terms which is presented below:
Table 4.3
Non-Performing Loan Ratio
Fiscal
Year
Banks Total Non
Performing loan
Total Loan &
Advances
Non Performing
Loan Ratio
2004/05 EBL 128,807,745 7,900,090,271 1.63
BOK 308,506,039 6,182,045,019 4.99
NIC 185,430,811 4,909,355,200 3.78
2005/06 EBL 129,235,790 10,136,254,448 1.27
BOK 203,624,470 7,488,700,923 2.72
NIC 179,554,435 6,902,123,944 2.60
2006/07 EBL 113,178,936 14,082,686,087 0.80
BOK 243,296,250 9,694,101,954 2.51
NIC 101,140,201 9,128,649,206 1.11
2007/08 EBL 126,639,038 18,836,431,762 0.67
BOK 236,898,850 12,747,721,603 1.86
NIC 98,167,144 11,465,334,005 0.86
2008/09 EBL 117,985,232 24,366,195,740 0.48
BOK 190,315,657 14,945,719,764 1.27
NIC 129,178,432 13,915,850,035 0.93
(Sources: Appendix 3, 4 & 5)
Figure 4.5 is a bar diagram which represents the above tabulated numerical data which
helps to compare the Non-Performing Ratio among three banks.
Figure 4.5
Non-Performing Loan Ratio
-
1
2
3
4
5
6
2004/05 2005/06 2006/07 2007/08 2008/09
Years
NP
L in
%
EBL
BOK
NIC
As shown in the table 4.3 and figure 4.5, the Non-Performing Loan Ratio of BOK of
4.99% is the highest and EBL of 1.63% is the lowest in FY 2004/05; BOK of 2.72% is
the highest and EBL of 1.27% is lowest in FY 2005/06; BOK of 2.51% is the highest and
EBL of 0.80% is lowest in FY 2006/07; BOK of 1.86% is highest and EBL of 0.67% is
the lowest in FY 2007/08; BOK of 1.27% is the highest and EBL of 0.48% is the lowest
in the FY 2008/09 among three banks. Furthermore figure 4.6 helps to find out the trend
of three banks Non-Performing Loan Ratio over the last five years period.
Figure 4.6
Non-Performing Loan Ratio
-
1
2
3
4
5
6
2004/05 2005/06 2006/07 2007/08 2008/09
Years
NP
L in
%
EBL
BOK
NIC
Figure 4.6 is the trend analysis of three banks over the five years study period. As shown
in the figure Non-Performing Loan Ratio of EBL started by 1.63% in FY 2004/05 and
there after continuously decreased till FY 2008/09 and reached to 0.48% . So, trend
analysis shows that EBL is able to decrease its non performing loan continuously which
is good sign of bank.
Similarly, Non-Performing Loan Ratio of BOK started with 4.99% in FY 2004/05 and
continuously decreased till FY 2008/09 and reached to 1.27%. It‟s also good sign for
BOK.
Likewise, Non-Performing Loan Ratio of NIC stared with 3.78% in FY 2004/05. Non-
Performing Loan Ratio of NIC is also in decreasing trend and reached to 0.93% in FY
2008/09.
4.2.2.2 Loan Loss Coverage Ratio
Loan Loss Coverage Ratio is the relationship between Total Loan Loss Provision and
Total Non Performing Loan. It measures the proportion of Total Loan Los Provision in
relation to Total Non Performing Loan. Out of the Total non Performing if some loans
becomes bad or default then that loss to the bank is covered from the Loan Loss
Provision Fund. So, from that point of view, higher the loan loss coverage ratio is better
for the banks. The ratio is determined by using the given model:
Total Loan Loss Provision (LLP)
Loan Loss Coverage Ratio = X 100%
Total Non-Performing loan
Where,
Total Loan Loss Provision (LLP) = Provision on (Pass Loan + Restructured Loan + Sub
Standard Loan + Doubtful Loan + Bad Loan)
Total Non-Performing loan (NPL) = Sub Standard Loan + Doubtful Loan + Bad Loan
Table 4.4 is the observed Loan Loss Coverage Ratio of three banks during the study
period in numerical terms which is presented below:
Table 4.4
Loan Loss Coverage Ratio
Fiscal Year Banks Total Loan Loss
Provision
Total NPL Loan Loss
Coverage Ratio
2004/05 EBL 281,418,795 128,807,745 218.48
BOK 269,465,548 308,506,039 87.35
NIC 197,642,899 185,430,811 106.59
2005/06 EBL 334,946,772 129,235,790 259.17
BOK 229,618,344 203,624,470 112.77
NIC 246,159,924 179,554,435 137.09
2006/07 EBL 418,604,423 113,178,936 369.86
BOK 294,774,337 243,296,250 121.16
NIC 187,251,555 101,140,201 185.14
2007/08 EBL 497,346,200 126,639,038 392.73
BOK 285,084,062 236,898,850 120.34
NIC 200,655,909 98,167,144 204.40
2008/09 EBL 226,816,062 117,985,232 192.24
BOK 298,422,777 190,315,657 156.80
NIC 236,456,256 129,178,432 183.05
(Sources: Appendix 3, 4 & 5)
Chart 4.7 is a bar diagram which represents the above tabulated numerical data which
helps to compare the Loan Loss Coverage Ratio among three banks.
Figure 4.7
Loan Loss Coverage Ratio
-
50
100
150
200
250
300
350
400
450
2004/05 2005/06 2006/07 2007/08 2008/09Years
LL
C in
%
EBL
BOK
NIC
As shown in the table 4.4 and figure 4.7, the Loan Loss Coverage Ratio of EBL of
218.48% is the highest and BOK of 87.35% is the lowest in FY 2004/05; EBL of
259.17% is the highest and BOK of 112.77% is lowest in FY 2005/06; EBL of 369.86%
is the highest and BOK of lowest is 121.16% in FY 2006/07; EBL of 392.73% is highest
and BOK of 120.34% is the lowest in FY 2007/08; EBL of 192.24% is the highest and
BOK of 156.8% is the lowest in the FY 2008/09 among three banks. Furthermore figure
4.8 helps to find out the trend of three banks Loan Loss Coverage Ratio over the last five
years period.
Figure 4.8
Loan Loss Coverage Ratio
-
50
100
150
200
250
300
350
400
450
2004/05 2005/06 2006/07 2007/08 2008/09Years
LL
C in
%
EBL
BOK
NIC
Figure 4.8 is the trend analysis of three banks over the five years study period. As shown
in the figure Loan Loss Coverage Ratio of EBL started by 218.48% in FY 2004/05 and
after that continuously increased till 2007/08 and reached to 392.73% in FY 2007/08 but
in the FY 2008/09decreased to 192.24%.
Similarly, Loan Loss Coverage Ratio of BOK started with 87.35% in FY 2004/05 and
continuously increased up to 121.16% in FY 2006/07 after that decreases to 120.34% in
FY 2007/08 and then increased to 156.80% in FY 2008/09.
Likewise, Loan Loss Coverage Ratio of NIC stared with 106.59% in FY 2004/05 after
that continuously increases up to 204.40% in FY 2007/08and the decreases to 183.05% in
FY 2008/09.
4.2.2.3 Loan Loss Provision Ratio
Loan loss provision is the sum of amount that banks are required to set or kept for
potential loan loss. Loan loss provision is deductible expenses. It is deducted from
interest income. It is a provision set by a bank to cover unpredictable loss caused due to
default of the loan amount. This ratio shows how much the bank needs to set the
provision to cover the loss of default loan in the future from the loan released by the
bank. Lower the loan loss provision significant that the bank has higher volume of good
loan and higher non-performing loan. Loan loss provision is the whole amount of
provision set aside to cover the loss then LLP to NPL as NPL is lower we can say that
quality of loan is better. But if LLP to TL is higher hen we can say that the quality of loan
is good but at least we are in safe position as it has more provision for losses from loan.
LLP can calculate as follows:
Total Loan Loss Provision (LLP)
Loan Loss Provision Ratio = × 100%
Total Loan & Advances
Where,
Total Loan Loss Provision (LLP) = Provision on (Pass Loan + Restructured Loan + Sub
Standard Loan + Doubtful Loan + Bad Loan)
Total Loan & Advances = Total Performing Loan + Total Non Performing Loan
Table 4.5 is the observed Loan Loss Coverage Ratio of three banks during the study
period in numerical terms which is presented below:
Table 4.5
Loan Loss Provision Ratio
Fiscal Year Banks Total Loan Loss
Provision
Total Loan &
Advances
Loan Loss
Provision Ratio
2004/05 EBL 281,418,795 7,900,090,271 3.56
BOK 269,465,548 6,182,045,019 4.36
NIC 197,642,899 4,909,355,200 4.03
2005/06 EBL 334,946,772 10,136,254,448 3.30
BOK 229,618,344 7,488,700,923 3.07
NIC 246,159,924 6,902,123,944 3.57
2006/07 EBL 418,604,423 14,082,686,087 2.97
BOK 294,774,337 9,694,101,954 3.04
NIC 187,251,555 9,128,649,206 2.05
2007/08 EBL 497,346,200 18,836,431,762 2.64
BOK 285,084,062 12,747,721,603 2.24
NIC 200,655,909 11,465,334,005 1.75
2008/09 EBL 226,816,062 24,366,195,740 0.93
BOK 298,422,777 14,945,719,764 2.00
NIC 236,456,256 13,915,850,035 1.70
(Sources: Appendix 3, 4 & 5)
Chart 4.9 is a bar diagram which represents the above tabulated numerical data which
helps to compare the Loan Loss Provision Ratio among three banks.
Figure 4.9
Loan Loss Provision Ratio
-
1
1
2
2
3
3
4
4
5
5
2004/05 2005/06 2006/07 2007/08 2008/09Years
LL
P in
%
EBL
BOK
NIC
As shown in the table 4.5 and figure 4.9, the Loan Loss Provision Ratio of BOK of
4.36% is the highest and EBL of 3.56% is the lowest in FY 2004/05; NIC of 3.57% is the
highest and BOK of 3.07% is lowest in FY 2005/06; BOK of 3.04% is the highest and
NIC of 2.05% is lowest in FY 2006/07; EBL of 2.64% is highest and NIC of 1.75% is the
lowest in FY 2007/08; BOK of 2% is the highest and EBL of 0.93% is the lowest in the
FY 2008/09 among three banks. Furthermore figure 4.10 helps to find out the trend of
three banks Loan Loss Provision Ratio over the last five years period.
Figure 4.10
Loan Loss Provision Ratio
-
1
1
2
2
3
3
4
4
5
5
2004/05 2005/06 2006/07 2007/08 2008/09
Years
LL
P in
%
EBL
BOK
NIC
Figure 4.10 is the trend analysis of three banks over the five years study period. As
shown in the figure Loan Loss Provision Ratio of EBL started from 3.56% in FY 2004/05
and after that continuously decreasing trend till 2008/09 and reached to 0.93%. Similarly,
Loan Loss Provision Ratio of BOK started with 4.36% in FY 2004/05. BOK has also
decreasing trend of LLP and its maintained 2% in FY 2008/09.
Likewise, Loan Loss Provision Ratio of NIC stared with 4.03% in FY 2004/05 and then
decreases till FY 2008/09. Minimum LLP of NIC is 1.7% in FY 2008/09.
4.5.3 Management
The success of any institution depends on the competency of its management. In fact, the
management not only makes suitable policy and the business plans but also implements
them for the short term and the long term interests, which helps to achieve aimed
objectives of bank and financial institution's. It is evaluated by checking the effectiveness
of the board of directors, the management, manpower and the officials, operating
expenditure, customer's relation with the officials and institution, management
information system, organization and working method, internal control system, power
concentration, monitoring, decision making process, policies.
Management analysis can be done by using following formula;
Net Profit after Tax
Management Efficiency Ratio (MER) =
Total No. of Staffs
Table 4.6 is the observed Management Efficiency Ratio of three banks during the study
period in numerical terms which is presented below:
Table 4.6
Management Efficiency Ratio
Fiscal
Year
Banks Net Profit
After Tax
Total no. of
Staffs
Management
Efficiency Ratio
2004/05 EBL 168,214,611 257 654,532
BOK 139,529,721 171 815,963
NIC 113,755,734 157 724,559
2005/06 EBL 237,290,936 306 775,461
BOK 202,440,627 177 1,143,732
NIC 96,587,674 166 581,853
2006/07 EBL 296,409,281 393 754,222
BOK 262,386,980 179 1,465,849
NIC 158,475,051 189 838,492
2007/08 EBL 451,218,613 449 1,004,941
BOK 361,496,879 390 926,915
NIC 243,058,040 232 1,047,664
2008/09 EBL 638,732,757 531 1,202,887
BOK 461,734,911 489 944,243
NIC 317,434,138 270 1,175,682
(Sources: Appendix 3, 4 & 5)
Figure 4.11 is a bar diagram which represents the above tabulated numerical data which
helps to compare the Management Efficiency Ratio among three banks.
Figure 4.11
Management Efficiency Ratio
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
2004/05 2005/06 2006/07 2007/08 2008/09Years
ME
R
EBL
BOK
NIC
As shown in the table 4.6 and figure 4.11, the Management Efficiency Ratio of BOK of
Rs.815963.00 is the highest and EBL of Rs.654532.00 is the lowest in FY 2004/05; BOK
of Rs.1143732.00 is the highest and NIC of Rs.581853.00 is lowest in FY 2005/06; BOK
of Rs.1465849.00 is the highest and EBL of Rs.754222.00 is lowest in FY 2006/07; NIC
of Rs.1047664.00 is highest and BOK of Rs.926915.00 is the lowest in FY 2007/08; EBL
of Rs.1202887.00 is the highest and BOK of Rs.944243.00 is the lowest in the FY
2008/09 among three banks. Furthermore figure 4.12 helps to find out the trend of three
banks Management Efficiency Ratio over the last five years period.
Figure 4.12
Management Efficiency Ratio
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
2004/05 2005/06 2006/07 2007/08 2008/09
Years
ME
R
EBL
BOK
NIC
Chart 4.12 is the trend analysis of three banks over the five years study period. As shown
in the figure Management Efficiency Ratio of EBL started by Rs.654532.00 in FY
2004/05, increased in FY 2005/06 and decreases in FY 2006/07, again increased till FY
2008/09 and reached to Rs.1202887.00. Overall, Management Efficiency Ratio of EBL
increases.
Similarly, Management Efficiency Ratio of BOK started with Rs.815963.00 in FY
2004/05, then increases till FY 2006/07 after that decreases in FY 2007/08 and again
increased in FY 2008/09 and reached to Rs.944243.00. Overall, Management Efficiency
Ratio of BOK also is in decreasing trend.
Likewise, Management Efficiency Ratio of NIC stared with Rs.724559.00 in FY
2004/05, decreases in FY 2005/06 after that increases till in FY 2008/09. This shows the
increasing trend in overall.
4.5.4 Earnings
Earning means excess of revenue over cost, so excess revenue earned by any organization
in the course of operation is known as profit. It is the ultimate result of any business.
Generally, if the earnings are good then that business is running well. Similarly the
aggregate performance of the bank reflects from its earnings. Earning is the ultimate
result of any business. Generally, higher earnings reflect better financial position.
Similarly the aggregate performance of the bank reflects from its earnings. Following
ratios depicts the earning position.
4.2.4.1 Earning per Shares
Earning per share is generally considered to be the single most important variable in
determining a share‟s price. It is the portion of a company‟s profit allocated to each
outstanding share of common stock. An important aspect of EPS that is often ignored is
the capital that is required to generate the earnings (net income) in the calculation. Two
companies could generate the same EPS number, but one could do so with less equity
(investment)-that company would be more efficient at using its capital to generate income
and, all other things being equal would be a “better” company. Following is the
expression of earning per share:
Net Profit after Tax
Earning per Shares (EPS) =
No. of outstanding Shares
Table 4.7 is the observed Earning per Shares of three banks during the study period in
numerical terms which is presented below:
Table 4.7
Earning per Shares
Fiscal
Year
Banks Net Profit
After Tax
No. of Share
Outstanding
EPS
2004/05 EBL 168,214,611 3,150,000 53.40
BOK 139,529,721 4,635,809 30.10
NIC 113,755,734 5,000,000 22.75
2005/06 EBL 237,290,936 3,780,000 62.78
BOK 202,440,627 4,635,809 43.67
NIC 96,587,674 6,600,000 14.63
2006/07 EBL 296,409,281 3,780,000 78.42
BOK 262,386,980 6,031,413 43.50
NIC 158,475,051 6,600,000 24.01
2007/08 EBL 451,218,613 4,914,000 91.82
BOK 361,496,879 6,031,413 59.94
NIC 243,058,040 9,438,771 25.75
2008/09 EBL 638,732,757 6,388,210 99.99
BOK 461,734,911 8,443,979 54.68
NIC 317,434,138 11,404,800 27.83
(Sources: Appendix 3, 4 & 5)
Chart 4.13 is a bar diagram which represents the above tabulated numerical data which
helps to compare the Earning Per Shares among three banks.
Figure 4.13
Earning per Shares
-
20
40
60
80
100
120
2004/05 2005/06 2006/07 2007/08 2008/09Years
EP
S
EBL
BOK
NIC
As shown in the table 4.7 and figure 4.13, the Earning per Shares of EBL of Rs.53.40 is
the highest and NIC of Rs.22.75 is the lowest in FY 2004/05; EBL of Rs.62.78 is the
highest and NIC of Rs.14.63 is lowest in FY 2005/06; EBL of Rs.78.42 is the highest and
NIC of Rs.24.01 is lowest in FY 2006/07; EBL of Rs.91.82 is highest and NIC of
Rs.25.75 is the lowest in FY 2007/08; EBL of Rs.99.99 is the highest and NIC of
Rs.27.83 is the lowest in the FY 2008/09 among three banks. Furthermore figure 4.14
helps to find out the trend of three banks Earning per Shares over the last five years
period.
Figure 4.14
Earning per Shares
-
20
40
60
80
100
120
2004/05 2005/06 2006/07 2007/08 2008/09
Years
EP
S
EBL
BOK
NIC
Figure 4.14 is the trend analysis of three banks over the five years study period. As
shown in the figure earning per Shares of EBL started by Rs.53.40 in FY 2004/05,
increasing there after till FY 2008/09 and reached to Rs.99.99 in FY 2008/09. Overall
earning per Shares of BOK also is in increasing trend
Similarly, Earning per Shares of BOK started with Rs.30.10 in FY 2004/05, then
increases in FY 2005/06 after that decreases in FY 2006/07, increased There after till FY
2007/08 and again decreased in FY 2008/09 and reached to Rs.54.68 in the FY 2008/09.
Overall earning per Shares of BOK also is in increasing trend.
Likewise, earning per Shares of NIC stared with Rs.22.75 in FY 2004/05, decreases in
FY 2005/06 and after that increases till in FY 2008/09 and reached to Rs.27.83. This also
shows the slightly increasing trend in overall.
4.2.4.2 Return on Equity
This ratio denotes how much of the shareholders' fund is mobilized towards earning
profit. The higher the ratio the better it is for the bank. It is calculated as follows:
Net Income after Tax
Return on Equity (ROE) = X 100%
Total Shareholders‟ fund
Table 4.8 is the observed Return on Equity of three banks during the study period in
numerical terms which is presented below:
Table 4.8
Return on Equity
Fiscal
Year
Banks Net Profit
After Tax
Total Shareholders'
Fund
ROE
2004/05 EBL 168,214,611 832,617,365 20.20
BOK 139,529,721 763,528,243 18.27
NIC 113,755,734 730,985,785 15.56
2005/06 EBL 237,290,936 1,391,339,000 17.05
BOK 202,440,627 1,100,797,467 18.39
NIC 96,587,674 1,036,838,663 9.32
2006/07 EBL 296,409,281 1,676,116,000 17.68
BOK 262,386,980 1,290,124,103 20.34
NIC 158,475,051 1,209,113,613 13.11
2007/08 EBL 451,218,613 2,406,056,000 18.75
BOK 361,496,879 1,635,235,217 22.11
NIC 243,058,040 1,615,719,466 15.04
2008/09 EBL 638,732,757 2,703,870,000 23.62
BOK 461,734,911 2,005,695,528 23.02
NIC 317,434,138 1,954,934,793 16.24
(Sources: Appendix 3, 4 & 5)
Figure 4.15.a is a bar diagram which represents the above tabulated numerical data which
helps to compare the Return on Equity among three banks.
Figure 4.15
Return on Equity
-
5
10
15
20
25
2004/05 2005/06 2006/07 2007/08 2008/09
Years
RO
E
EBL
BOK
NIC
As shown in the table 4.8 and figure 4.15, the Return on Equity of EBL of 53.40% is the
highest and NIC of 22.75% is the lowest in FY 2004/05; EBL of 63.78% is the highest
and NIC of 14.63%is lowest in FY 2005/06; EBL of 78.42% is the highest and NIC of
24.01% is lowest in FY 2006/07; EBL of 91.82% is the highest and NIC of 25.75% is the
lowest in FY 2007/08; EBL of 99.99% is the highest and NIC of 27.83% is the lowest in
the FY 2008/09 among three banks. Furthermore figure 4.16 helps to find out the trend of
three banks Return on Equity over the last five years period.
Figure 4.16
Return on Equity
-
5
10
15
20
25
2004/05 2005/06 2006/07 2007/08 2008/09
Years
RO
E
EBL
BOK
NIC
Figure 4.16 is the trend analysis of three banks over the five years study period. As
shown in the figure Return on Equity of EBL started by 20.20% in FY 2004/05,
decreased in FY 2006/07 and increases in FY 2007/08 to FY 2008/09 and reached to
23.62% in FY 2008/09. Overall, Return on Equity of EBL increases.
Similarly, Return on Equity of BOK started with 18.27% in FY 2004/05, then increases
till FY 2008/09 and reached to 23.02% in the FY 2008/09. Overall, Return on Equity of
BOK also is in increasing trend.
Likewise, Return on Equity of NIC stared with 15.56% in FY 2004/05, decreases in FY
2005/06 and after that increases till FY 2008/09 and reached to 16.24%. This also shows
the increasing trend in overall.
4.2.4.3 Return on Assets
The term ROA is return on total assets. Major assets of banks are loan and advances,
ROA reveals how efficiently the total recourses have been utilized and measured the
return on assets productive sectors that can generate profit for the banks. Higher ROA
shows the better utilization and management on the assets and extend profit level. This
ratio depicts how efficiently a bank is utilizing and mobilizing its assets to generate
profit. It is calculated as follows:
Net Income after Tax
Return on Assets (ROA) = × 100%
Total Assets
Table 4.9 is the observed Return on Assets of three banks during the study period in
numerical terms which is presented below:
Table 4.9
Return on Assets
Fiscal
Year
Banks Net Profit
After Tax
Total Assets ROA
2004/05 EBL 168,214,611 11,732,516,418 1.43
BOK 139,529,721 9,888,533,138 1.41
NIC 113,755,734 7,510,396,565 1.51
2005/06 EBL 237,290,936 15,959,284,687 1.49
BOK 202,440,627 12,278,329,302 1.65
NIC 96,587,674 10,383,601,708 0.93
2006/07 EBL 296,409,281 21,432,574,300 1.38
BOK 262,386,980 14,581,394,916 1.80
NIC 158,475,051 11,678,834,055 1.36
2007/08 EBL 451,218,613 27,149,342,884 1.66
BOK 361,496,879 17,721,925,187 2.04
NIC 243,058,040 15,238,736,314 1.60
2008/09 EBL 638,732,757 36,916,848,654 1.73
BOK 461,734,911 20,496,005,483 2.25
NIC 317,434,138 18,750,633,197 1.69
(Sources: Appendix 3, 4 & 5)
Figure 4.17 is a bar diagram which represents the above tabulated numerical data which
helps to compare the Return on Assets among three banks.
Figure 4.17
Return on Assets
-
0.50
1.00
1.50
2.00
2.50
2004/05 2005/06 2006/07 2007/08 2008/09
Years
RO
A
EBL
BOK
NIC
As shown in the table 4.9 and figure 4.17, the Return on Assets of NIC of 1.51% is the
highest and BOK of 1.41% is the lowest in FY 2004/05; BOK of 1.65% is the highest and
NIC of 0.93% is lowest in FY 2005/06; BOK of 1.80% is the highest and NIC of 1.36%
is lowest in FY 2006/07; BOK of 2.04% is highest and NIC of 1.60% is the lowest in FY
2007/08; BOK of 2.25% is the highest and NIC of 1.69% is the lowest in the FY 2008/09
among three banks. Furthermore figure 4.18 helps to find out the trend of three banks
Return on Assets over the last five years period.
Figure 4.18
Return on Assets
-
0.50
1.00
1.50
2.00
2.50
2004/05 2005/06 2006/07 2007/08 2008/09Years
RO
A
EBL
BOK
NIC
Figure 4.18 is the trend analysis of three banks over the five years study period. As
shown in the figure Return on Assets of EBL started by 1.43% in FY 2004/05, increased
there after in the FY 2005/06 and decreases in FY 2006/07 and then increased in FY
2007/08 and in FY 2008/09 and reached to 2.25% in FY 2008/09. Overall, Return on
Assets of EBL increases.
Similarly, Return on Assets of BOK started with 1.41% in FY 2004/05, then increases till
FY 2008/09 and reached to 2.25% in the FY 2008/09. Overall, Return on Assets of BOK
also is in increasing trend.
Likewise, Return on Assets of NIC stared with 1.51% in FY 2004/05, decreases in FY
2005/06 and after that increases till in FY 2008/09 and reached to 1.69%. This also shows
the increasing trend in overall.
4.5.5 Liquidity
Simply, liquidity means short- run solvency of a firm. It reflects the short term financial
strength of banks. Bank does not provide all deposit at loan and advances. The certain
percentage of deposit should be kept in bank in the form of cash. It the bank will keep
greater deposit in cash, it losses the opportunity cost. Similarly, if bank keeps low amount
in deposit, it could not be able to pay depositors on the time of requirement.
Liquidity can be measured in following ways:
4.2.5.1 Cash & Bank Balance Ratio
A Higher ratio shows higher liquidity and great ability of the bank to meet unexpected
demand made by the depositor. On the country lower ratio indicates that banks might
face liquidity crunch while paying its obligations. It is calculated as follows:
Cash & Bank Balance
Cash & Bank Balance Ratio =
Total Deposit
Table 4.10 is the observed Return on Assets of three banks during the study period in
numerical terms which is presented below:
Table 4.10
Cash & Bank Balance Ratio
Fiscal Year Banks Cash & Bank Balance Total Deposit Cash & Bank Balance Ratio
2004/05 EBL 1,049,989,208 10,097,690,989 10.40
BOK 740,520,482 8,975,780,868 8.25
NIC 1,010,386,565 6,241,378,160 16.19
2005/06 EBL 1,552,967,494 13,802,444,988 11.25
BOK 728,697,092 10,485,359,239 6.95
NIC 749,139,079 8,765,950,638 8.55
2006/07 EBL 2,391,420,594 18,186,253,541 13.15
BOK 1,315,903,941 12,388,927,294 10.62
NIC 599,758,632 10,068,230,869 5.96
2007/08 EBL 2,667,971,831 23,976,298,535 11.13
BOK 1,440,466,943 15,833,737,799 9.10
NIC 1,192,348,786 13,084,688,672 9.11
2008/09 EBL 6,164,371,163 33,322,946,246 18.50
BOK 1,889,174,230 18,083,980,266 10.45
NIC 1,461,150,549 15,579,930,904 9.38
(Sources: Appendix 3, 4 & 5)
Figure 4.19 is a bar diagram which represents the above tabulated numerical data which
helps to compare the Cash & Bank Balance Ratio among three banks.
Figure 4.19
Cash & Bank Balance Ratio
-
2
4
6
8
10
12
14
16
18
20
2004/05 2005/06 2006/07 2007/08 2008/09Years
CB
BR
EBL
BOK
NIC
As shown in the table 4.10 and figure 4.19, the Cash & Bank Balance Ratio of NIC of
16.19% is the highest and BOK of 8.25% is the lowest in FY 2004/05; EBL of 11.25% is
the highest and BOK of 6.95% is lowest in FY 2005/06; EBL of 13.15% is the highest
and NIC of 5.96% is lowest in FY 2006/07; EBL of 11.13% is highest and BOK of
9.10% is the lowest in FY 2007/08; EBL of 18.50% is the highest and NIC of 9.38% is
the lowest in the FY 2008/09 among three banks. Furthermore figure 4.20 helps to find
out the trend of three banks Cash & Bank Balance Ratio over the last five years period.
Figure 4.20
Cash & Bank Balance Ratio
-
2
4
6
8
10
12
14
16
18
20
2004/05 2005/06 2006/07 2007/08 2008/09Years
CB
BR EBL
BOK
NIC
Figure 4.20 is the trend analysis of three banks over the five years study period. As
shown in the figure Cash & Bank Balance Ratio of EBL started by 10.40% in FY
2004/05, increased there after till 2006/07 and decreases in FY 2007/08, again increased
in FY 2008/09 and reached to 18.50% in FY 2008/09. Overall, Cash & Bank Balance
Ratio of EBL increases.
Similarly, Cash & Bank Balance Ratio of BOK started with 8.25% in FY 2004/05, then
decreases in 2005/06 after that increases in FY 2006/07 and again decreased in FY
2007/08, increases in FY 2008/09 and reached to 10.51%. Overall Cash & Bank Balance
Ratio of BOK is slightly increasing.
Likewise, Cash & Bank Balance Ratio of NIC stared with 16.19% in FY 2004/05,
decreases in FY 2005/06 and 2006/07 after that increases in FY 2007/08 and 2008/09 and
reached to 9.38%. This also shows the decreasing trend in overall.
4.2.5.2 Investment in Government Security Ratio (IGSR)
Government securities are known as risk free assets, which are easily converted into cash
to meet the short term obligation. That‟s why every commercial bank has to invest their
certain amount in government securities. This ratio calculated as:
Investment in Govt. Security
Investment in Govt. Security Ratio = × 100%
Total Deposit
Table 4.11 is the observed Investment in Government Security Ratio of three banks
during the study period in numerical terms which is presented below:
Table 4.11
Investment in Government Security Ratio
Fiscal
Year
Banks Total
Investment in
Govt. Security
Total Deposit Investment in
Govt. Security
Ratio
2004/05 EBL 2,100,289,702 10,097,690,989 20.80
BOK 2,146,619,488 8,975,780,868 23.92
NIC 1,194,313,877 6,241,378,160 19.14
2005/06 EBL 3,548,616,968 13,802,444,988 25.71
BOK 2,658,369,057 10,485,359,239 25.35
NIC 1,756,585,150 8,765,950,638 20.04
2006/07 EBL 4,704,632,426 18,186,253,541 25.87
BOK 2,332,041,251 12,388,927,294 18.82
NIC 1,104,060,515 10,068,230,869 10.97
2007/08 EBL 4,821,604,740 23,976,298,535 20.11
BOK 2,113,223,115 15,833,737,799 13.35
NIC 1,545,375,347 13,084,688,672 11.81
2008/09 EBL 5,146,045,773 33,322,946,246 15.44
BOK 1,744,976,571 18,083,980,266 9.65
NIC 2,195,003,685 15,579,930,904 14.09
(Sources: Appendix 3, 4 & 5)
Figure 4.21 is a bar diagram which represents the above tabulated numerical data which
helps to compare the Investment in Government Security Ratio among three banks.
Figure 4.21
Investment in Government Security Ratio
-
5
10
15
20
25
30
2004/05 2005/06 2006/07 2007/08 2008/09Years
IGS
R
EBL
BOK
NIC
As shown in the table 4.11 and figure 4.21, the Investment in Government Security Ratio
of BOK of 23.92% is the highest and NIC of 19.14% is the lowest in FY 2004/05; BOK
of 25.35% is the highest and NIC of 20.04% is lowest in FY 2005/06; EBL of 25.87% is
the highest and NIC of 10.97% is lowest in FY 2006/07; EBL of 20.11% is highest and
NIC of 11.81% is the lowest in FY 2007/08; EBL of 15.44% is the highest and BOK of
9.65% is the lowest in the FY 2008/09 among three banks. Furthermore figure 4.22 helps
to find out the trend of three banks Investment in Government Security Ratio over the last
five years period.
Figure 4.22
Investment in Government Security Ratio
-
5
10
15
20
25
30
2004/05 2005/06 2006/07 2007/08 2008/09Years
IGS
R
EBL
BOK
NIC
Figure 4.22 is the trend analysis of three banks over the five years study period. As
shown in the figure Investment in Government Security Ratio of EBL started by 20.80%
in FY 2004/05, increased there after till FY 2006/07 and decreases in FY 2007/08, again
decreased in FY 2008/09 and reached to 15.44%. Overall, Investment in Government
Security Ratio of EBL decreases.
Similarly, Investment in Government Security Ratio of BOK started with 23.92% in FY
2004/05, then increases in 2005/06 after that decreases till FY 2008/09 and reached to
9.65% in the FY 2008/09. Overall Investment in Government Security Ratio of BOK also
is in decreasing trend.
Likewise, Investment in Government Security Ratio of NIC stared with 19.14% in FY
2004/05, increases in FY 2005/06 and after that decreases in FY 2006/07 and again
increases till in FY 2008/09 and reached to 14.09%. This is fluctuating trend in overall.
4.6 Major Findings
The major findings of the study of CAMEL Analysis of Everest Bank Ltd, Bank of
Kathmandu and Nepal Industrial and commercial Bank Ltd are as follows:
Total Capital Adequacy ratios (CAR) of EBL were 13.57% to 11.20% during the
review period. It was in decreasing trend. The ratio of 13.57% was maximum in FY
2004/05 and ratio of 11.20% was minimum in FY 2008/09. The Capital Adequacy
ratios of BOK in the review period were 11.01%, 14.52%, 12.38%, 11.93% and
12.52%. The ratio of 14.52% was highest in FY 2005/06 and the ratio of 11.01%
was lowest in 2004/05. In the same way, the capital adequacy ratios of NIC were
13.29%, 13.54%, 12.20%, 13.11% and 12.42%. The highest ratio was 13.54% in
FY 2005/06 and lowest was 12.20% in FY 2006/07. In general, all three banks were
able to maintain CAR as per NRB standard during the study period i.e. 11%.
The Core Capital Ratio (CCR) of EBL in fluctuating trend. The highest CCR was
9.03% in FY 2007/08 and lowest ratio was 7.82% in 2006/07. However, the bank
was able to maintain more then 5.5% above the NRB requirement during study
period. The ratios of BOK were 10.01%, 10.71%. 9.32%, 9.57% and 10.51% and
highest ratio was 1071% in FY 2005/06 and lowest was 9.32% in FY 2006/07. The
BOK also success to maintain NRB requirement. As same way, the maximum CCR
of NIC was 12.37% in FY 2004/05 and minimum was 9.21% in FY 2006/07.
However, it is judged that all banks were maintain more CCR than NRB has
Prescribed.
Non Performing Loan Ratios were in decreasing over the study period, it means the
banks were able to collect the loans. The ratio of BOK was greater than other two
banks i.e. 1.27% in FY 2008/09. It seems that BOK has high non performing loan
as compare to other banks. Where, the EBL bank has lowest non performing loan
ratio i.e. 0.48% in FY 2008/09 which show that EBL has maintained its loan and
advance most efficiently and effectively.
Loan loss coverage ratios of EBL was 218.48% in FY 2004/05 and it was
increasing up to 392.73% in FY 2007/08 and then decreased to 192.24% in FY
2008/09. BOK has also increasing trend of loan loss coverage ratio up to FY
2006/07 and slightly decreased in FY 2007/08 and again increased in FY 2008/09.
NIC has also increasing loan loss coverage ratio but its decreased in 2008/09. Over
all, BOK has lowest loan loss coverage ratio as compare to other two banks. And
EBL has highest loan loss coverage ratio which shows the better financial position.
The loan loss provision has been maintained for NPL and has been increasing
which is good sign.
The loan loss provision ratios of all three banks were in decreasing trend. As per the
FY 2008/09, EBL has the lowest loan loss provision ratio which indicates that the
EBL has better quality loan and BOK has highest ratio which means BOK has not
enough good loan the year as compare to other banks.
Total management efficiency ratios (MER) of EBL were Rs.654532.00 to
Rs.1202887.00 during the review period. The ratio of Rs.1202887.00 was
maximum in FY 2008/09 and ratio of Rs.654532.00 was minimum in FY 2004/05.
The highest management efficiency ratio of BOK was Rs.1465849.00 and lowest
was Rs.815963.00 in FY 2006/07 and FY 2004/058. In the same way, the
management efficiency ratios of NIC were increasing trend. The highest ratio was
Rs.1175682.00 in FY 2008/09 and lowest was Rs.581853.00 in FY 2005/06. As per
the latest data i.e. 2008/09 EBL has the highest MER i.e. Rs.1202887.00.
When net profit of bank is high, the Earning per share (EPS) of the bank will also
be high which shows the bank is in good condition. EPS of EBL is in increasing
trend and in FY 2008/09 EBL has highest EPS which shows that the bank is in best
position compare to other banks. This is the good sign to shareholders. EPS of BOK
is in fluctuating trend and NIC has also fluctuating EPS during the study period. In
overall, EBL is in good position as per EPS.
The return on equity consists of ratio between net profit after tax and equity. The
ratio of EBL is fluctuating trend. ROE of EBL was decreased in 2005/06 and then
increasing. ROE of BOK is in increasing trend which is better for shareholders‟.
NIC has also fluctuating ROE which decreased in 2005/06. A return on equity
calculates to see the profitability of the owners‟ investment. Higher ratio shows that
profitability of owners‟ investment is increasing. As compare to other banks BOK
has highest ROE in FY 2008/09.
Return on assets (ROA) comprises net profit after tax and total assets. It shows the
percentage of return that a firm gets from the total assets. It shows how well the
firm is doing. Here in the study EBL and NIC has fluctuating ROA but BOK has
increasing trend of ROA.
The Cash and bank balance ratio of EBL fluctuated over the period. First three year
the cash and bank balance ratio increased and then decreased in FY 2007/08, after
that increased in FY 2008/09 and reached to 18.50%. BOK has also fluctuated Cash
and Bank balance ratio and maintained 10.45% in FY 2008/09. In the same way,
NIC has also fluctuated ratio. The ratio was decreasing from FY 2004/05 to FY
2006/07 and after that the ratios were increasing in FY 2007/08 and in FY 2008/09.
The Investment in government security ratio (IGSR) of EBL is fluctuating in the
course of the study period. EBL has maximum IGSR of 25.87% in FY 2006/07 and
minimum IGSR of 15.44% in FY 2008/09. Now, BOK has highest IGSR of 25.35%
in FY 2005/06 and lowest of 9.65% in FY 2008/09. In the same way, highest IGSR
of NIC is 20.04% in FY 2005/05 and lowest of 10.97% in FY 2006/07. From
comparative analysis of new data i.e. 2008/09, we can see that EBL has maximum
and NIC has minimum IGSR.
CHAPTER - V
SUMMARY, CONCLUSION AND RECOMMENDATIONS
This chapter includes three aspects of the study- summary, conclusion and
recommendations. The first aspect summarizing the whole study, the second draws the
conclusion and the last but not he least recommendations.
5.1 Summary
The study was conducted with the objective to analyze and compare the financial
performances of Everest Bank Ltd. (EBL), Bank of Kathmandu (BOK) and Nepal
Industrial and Commercial Bank Ltd. (NIC) in the framework of CAMEL over the five
years period from FY 2004/05 to 2008/09. The study is based on the secondary data. For
the analysis of EBL, BOK and NIC are used as the major sources of data out of 26
commercial banks. CAMEL is a common method for analyzing the health of individual
institution, to quantify the performance and the financial condition of the firm. It was
designed by regulatory authorities and this study scrutinizes the financial performance of
EBL, BOK and NIC as regards to CAMEL i.e. Capital Adequacy, Assets Quality,
Management Earning and Liquidity. The analysis of financial statement is done to obtain
a better sight into the bank‟s position and performance. The various financial and
statistical tools have been used in this study to get the meaningful result and to meet the
research objectives.
During the research the areas that formed part of the conceptual review were; historical
development of financial system and evolution of commercial banks in Nepal, concept of
commercial banks, function of commercial banks and components of CAMEL. Besides
these, reviews of various theses were carried out under research review.
The analysis has been made to compare the company‟s ratios with NRB and international
standard. The banks are successful to maintain Capital Adequacy Ratio as per NRB
standard i.e. 11%. As per current data BOK has highest CAR. It means, BOK has higher
internal sources and comparatively strong financial position and security to depositors as
compare to others. Similarly EBL, BOK and NIC bank are able to maintain the Core
Capital Ratio as per prescribed by NRB of 5.5%. The highest CCR shows the protection
and security to creditors and depositors and financial soundness of the company.
The lower non performing loan ratio reflects the good performance of the banks in
mobilizing loan and advance. EBL has lower NPL ratio, it indicates the better proportion
of performing loans and risk of default (credit) than BOK and NIC. NPL ratio is in
decreasing trend where is the loan loss coverage ratio of bank is increasing in each year.
In the same way, loan loss provision ration is decreasing. Lower LLP ratio is better for
the banks. EBL has lower LLP ratio as compare to BOK and NIC.
The management efficiency ratio (MER) indicates the better operation of the bank and
better profitability. MER is fluctuation over the study period. EBL has highest MER, it
indicates the better operation management and better printability of EBL.
EPS of all three banks are in increasing trend but EBL has highest EPS than other two
banks. The ROE of all banks are in increasing trend with fluctuation. Similarly, ROA of
EBL and NIC are in increasing trend with fluctuation but BOK has increasing trend of
ROA.
The higher cash and bank balance ratio and Investment in Government Security ratio of
EBL indicates that the liquidity position of EBL is strong than other two banks.
5.2 Conclusion
Based on the findings, following conclusions have drawn as the concluding framework of
the study on CAMEL analysis.
1. Capital Adequacy Ratio (CAR) reveals that the bank is running with the adequate
capital and the capital fund of the bank is sound and sufficient to meet the banking
operation as per the NRB standard. CAR of all banks is above the NRB standard.
2. Core Capital Ratio (CCR) measured in terms of core capital to risk weighted assets
is as per NRB standard. It means the bank is using adequate amount of the internal
sources or core capital is past five years. In this point of view the bank is financially
sound and strong.
3. The decreasing trend of non-performing loans ratio helps to conclude that the bank
is aware of non performing loans and adopting the appropriate policies to manage
this problem and to increase the quality of assets.
4. The increasing trend of loan loss coverage ratio shows that the banks are taking
appropriate recovery policy.
5. The decreasing trend of loan loss provision ratio indicates that the quality of loans
becoming upgrading year by year. It seems that amount of non performing loans
and possibility of default in future is decreasing.
6. The management efficiency ratio depicts efficiencies and productivity as a result of
well managed of human resources in terms of profitability.
7. The increasing trend of EPS depicts that the return flowing to the bank‟s owner is
increasing. This tendency reflects the strength of the share in the market is also
increasing.
8. The increasing trend of ROE shows that the rate of return flowing to the bank‟s
shareholders is upgrading year by year.
9. The increasing trend of ROA concludes that the net income for each unit of assets
of the bank is increasing. This shows that the capability of the management to
converting the bank‟s assts into net earning is increasing.
10. The cash and bank balance to total deposit ratio of all banks are in fluctuating trend
but EBL has the highest among three banks. Similarly, investment in government
security ratio of all banks are also in fluctuating trend and in this case also, EBL has
highest ratio, EBL presents itself as most secured from the liquidation risk among
all three banks.
5.3 Recommendations
The following recommendations are made based on the conclusions as suggestion to
overcome the weakness as regard to financial performance of Everest Bank Limited
(EBL), Bank of Kathmandu (BOK) and Nepal Industrial and Commercial Bank (NIC).
1. Capital Adequacy Ratio and Core Capital Ratio of all banks are as per NRB
standard over the review period but are in fluctuating trend. So recommendation is
provided and maintain stable if possible increase core capital fund to increase
Capital Adequacy Ratio and Core Capital Ratio.
2. The assets quality ratio of all banks are in satisfactory level and being better each
year. So, the recommendation is to maintain non performing loan ratio as lower as
possible and try to give additional attention in recovering the doubtful and loss loan
in future and try to increase its performing loan ratio.
3. The management efficiency ratio of EBL and NIC seems to be satisfactory as
compare to BOK. So, the recommendation is that the BOK should increase Net
Profit after Tax and should not appoint extra employee in organization.
4. The earning quality ratios of banks like EPS, ROE and ROA are in increasing trend.
So, all banks recommended that to increase more profit of the bank should
minimized its operating cost by increasing the operating efficiency of its
employees.
5. Liquid assets of the commercial banks play an important role to meet the day to day
and short term obligation. if liquid assets of the banks are not maintained properly
then there is a high probability of banks going to liquidation. The liquidity ratio of
EBL seems to be satisfactory among three banks but BOK and NIC should be
careful and try to increase liquidity position by increasing Cash and Bank Balance
Ratio and Investment in Government Security Ratio
BIBLIOGRAPHY
Books
Adhikari, N.K. & Shrestha, P. (2063). A Text Book on Corporate Finance. Kathmandu:
Khushbu Prakasan Pvt. Ltd.
Barealy, R. & Stewart M. (2000). Principle of Corporate Finance. India: Tata McGraw -
Hill Publishing Company Limited,
Brigham, E. & Houston, J. (2000). Fundamental of Financial Management, 3rd
edition.
New York: Harcourt College Publishers.
Brigham, E.F. & Gaspenski, L.C. (1985). Financial Management, Theory and Practice.
New York: The Dryden Press.
Cheney, J.M. & Moses, E.A. (1993). Fundamental of Investment. St.Paul: West
Publishing Co. Encyclopedia, The World Book, America: Grolier Incorporated.
Madura, J. (1999). Financial Institutions and Markets. New Delhi: Akash Press.
Thapa, K. (2060). Corporate Financial Management, Theory and Practice. Kathmandu:
Khanal Books and Stationary.
Thapa, K., Bhattrai, R., & Basnet, D. (2006). Investment: Theory and Solution.
Kathmandu: Asmita Books Publishers and Distributors.
Weston, J.F. & Copeland, J.F. (1992). Managerial Finance. Chicago: The Dryden Press.
Journals and Publications
Berger, A.N., & Davies, S.M. (1994). The Information Content of Bank Examinations.
Journal of Financial Services Research.
Dhungana, B.R. Problem Bank Identification, Correction & Resolution Mechanism in
Nepal. 53rd
Anniversary Special Issue.
Hirtle, B.J. & Lopez, J.A. (1999). Supervisory Information and the Frequency of Bank
Examination. Federal Reserve Bank of New York, Economic Policy Review.
Jha, Resta (2009) Troubled Global Economy-Cause and Concern, The Boss.
Pant Radish, Nepal Newbiz, Feb. 2006.
Thesis
Bhandari, K.R. (2006). The Financial Performance of Himalayan Bank Ltd. in the
Framework of CAMEL. An Unpublished Master Degree Thesis submitted to Faculty
of Management, T.U.
Bhusal, M. (2008). Financial Performance Analysis of commercial banks In Nepal the
Frame work of CAMEL (A Comparative Study of Kumari Bank and
Machhapuchchhre Bank. An Unpublished Master Degree Thesis submitted to
Faculty of Management, T.U.
Chand, K.B. (2007). Financial Performance Analysis (CAMEL - Test) of Selected CBs
(Nabil, NIBL &SCBL). An Unpublished Master Degree Thesis submitted to Faculty
of Management, T.U.
Poudel, R. (2007). A Study on Comparative Analysis of Financial Performance Between
Himalayan Bank and Standard Charted Bank. An Unpublished Master Degree Thesis
submitted to Faculty of Management, T.U.
Sharma, S.R. (2007). Financial Performance Analysis of Nepal SBI Bank Ltd. In the
Frame work of CAMEL. An Unpublished Master Degree Thesis submitted to Faculty
of Management, T.U.
Shrestha M.D. (2003). Capital Adequacy Norms for Commercial Banks and its Impact of
Bank (Himalayan Bank Ltd). An Unpublished Master Degree Thesis submitted to
Faculty of Management, T.U.
Singh, R.B. (2008). A Study of CAMEL Analysis of Commercial banks (SCBNL, HBL &
Nabil Bank). An Unpublished Master Degree Thesis submitted to Faculty of
Management, T.U.
Websites
www.bok.com.np
www.everstbankltd.com
www.google.com
www.googlescholar.com
www.nicbank.com.np
www.nrb.org.np
Appendix – 1
Share Capital of 2008/09
Capital EBL BOK NIC
Authorized Capital 1,000,000,000 1,000,000,000 1,600,000,000
Issued Capital 840,620,000 844,397,900 1,140,480,000
Paid Up Capital 838,821,000 844,397,900 1,140,480,000
Sources: Annual Report of EBL, BOK and NIC of Fiscal year 2008/09
Appendix – 2
Share Capital and Shareholding of 2008/09
Share ownership
particulars
EBL BOK NIC
% Amount in
Rs. %
Amount in
Rs. %
Amount in
Rs.
A. Promoters 50 321,235,140 41.81 353,036,900 51 581,644,800
1.1 Nepal
Government
1.2 Foreign
Institutions
1.3 „A‟ Class
Licensed
institutions
1.4 Other Licensed
Institutions
1.5 Other
Institutions 9.34 59,696,190 2.2 18,593,400
1.6 Individual 40.66 261538950 39.61 334,443,500 51 581,644,800
1.7 Others
B. General Public 30 189,091,780 58.19 491,361,000 49 558,835,200
C. Joint Partner
Punjab National
Bank, India
20 128,494,080
Total 100 638,821,000 100 844,397,900 100 1,140,480,000
Sources: Annual Report of EBL, BOK and NIC of Fiscal year 2008/09
Appendix – 3
Everest Bank Limited
2004/05 2005/06 2006/07 2007/08 2008/09
Total
Capital
Fund
1,247,562,000 1,391,339,000 1,676,115,000 2,406,056,000 2,703,870,000
Core
Capital
Fund
816,793,000 927,550,000 1,171,133,000 1,900,859,000 1,981,579,000
Total Risk
Weighted
Assets
9,195,588,000 11,291,137,000 14,976,737,000 21,039,879,000 24,131,922,000
Total Non
Performin
g loan
128,807,745 129,235,790 113,178,936 126,639,038 117,985,232
Total
Loan &
Advances
7,900,090,271 10,136,254,448 14,082,686,087 18,836,431,762 24,366,195,740
Total
Loan Loss
Provision
281,418,795 334,946,772 418,604,423 497,346,200 226,816,062
Net Profit
After Tax 168,214,611 237,290,936 296,409,281 451,218,613 638,732,757
Total
Sharehold
ers' Fund
832,617,365 1,391,339,000 1,676,116,000 2,406,056,000 2,703,870,000
Total
Assets 11,732,516,418 15,959,284,687 21,432,574,300 27,149,342,884 36,916,848,654
Cash &
Bank
Balance
1,049,989,208 1,552,967,494 2,391,420,594 2,667,971,831 6,164,371,163
Total
Deposit 10,097,690,989 13,802,444,988 18,186,253,541 23,976,298,535 33,322,946,246
Total
Investmen
t in Govt.
Security
2,100,289,702 3,548,616,968 4,704,632,426 4,821,604,740 5,146,045,773
No. of
Share
outst-
3,150,000 3,780,000 3,780,000 4,914,000 6,388,210
anding
Total no.
of Staffs 257 306 393 449 531
Sources: Annual Report of EBL of Fiscal year 2004/05 to 2008/09
Appendix – 4
Bank of Kathmandu
2004/05 2005/06 2006/07 2007/08 2008/09
Total
Capital
Fund
763,528,243 1,100,797,467 1,265,828,177 1,635,235,217 2,005,695,528
Core Capital
Fund 694,351,456 811,917,204 953,263,195 1,310,851,552 1,683,588,123
Total Risk
Weighted
Assets
6,936,942,398 7,583,653,036 10,226,193,976 13,702,369,666 16,025,037,210
Total Non
Performing
loan
308,506,039 203,624,470 243,296,250 236,898,850 190,315,657
Total Loan
& Advances 6,182,045,019 7,488,700,923 9,694,101,954 12,747,721,603 14,945,719,764
Total Loan
Loss
Provision
269,465,548 229,618,344 294,774,337 285,084,062 298,422,777
Net Profit
After Tax 139,529,721 202,440,627 262,386,980 361,496,879 461,734,911
Total
Shareholder
s' Fund
763,528,243 1,100,797,467 1,290,124,103 1,635,235,217 2,005,695,528
Total Assets 9,888,533,138 12,278,329,302 14,581,394,916 17,721,925,187 20,496,005,483
Cash &
Bank
Balance
740,520,482 728,697,092 1,315,903,941 1,440,466,943 1,889,174,230
Total
Deposit 8,975,780,868 10,485,359,239 12,388,927,294 15,833,737,799 18,083,980,266
Total
Investment
in Govt.
Security
2,146,619,488 2,658,369,057 2,332,041,251 2,113,223,115 1,744,976,571
No. of Share
outst-
anding
4,635,809 4,635,809 6,031,413 6,031,413 8,443,979
Total no. of
Staffs 171 177 179 390 489
Sources: Annual Report of BOK of Fiscal year 2004/05 to 2008/09
Appendix – 5
Nepal Industrial and Commercial Bank Limited
2004/05 2005/06 2006/07 2007/08 2008/09
Total
Capital
Fund
730,985,785 1,036,838,663 1,208,607,803 1,615,719,466 1,954,934,793
Core
Capital
Fund
680,142,550 761,128,967 911,806,552 1,293,750,759 1,649,007,425
Total Risk
Weighted
Assets
5,499,435,330 7,656,131,091 9,905,036,012 12,321,131,296 15,741,613,929
Total Non
Performin
g loan
185,430,811 179,554,435 101,140,201 98,167,144 129,178,432
Total
Loan &
Advances
4,909,355,200 6,902,123,944 9,128,649,206 11,465,334,005 13,915,850,035
Total
Loan Loss
Provision
197,642,899 246,159,924 187,251,555 200,655,909 236,456,256
Net Profit
After Tax 113,755,734 96,587,674 158,475,051 243,058,040 317,434,138
Total
Sharehold
ers' Fund
730,985,785 1,036,838,663 1,209,113,613 1,615,719,466 1,954,934,793
Total
Assets 7,510,396,565 10,383,601,708 11,678,834,055 15,238,736,314 18,750,633,197
Cash &
Bank
Balance
1,010,386,565 749,139,079 599,758,632 1,192,348,786 1,461,150,549
Total
Deposit 6,241,378,160 8,765,950,638 10,068,230,869 13,084,688,672 15,579,930,904
Total
Investmen
t in Govt.
Security
1,194,313,877 1,756,585,150 1,104,060,515 1,545,375,347 2,195,003,685
No. of
Share
outst-
anding
5,000,000 6,600,000 6,600,000 9,438,771 11,404,800
Total no.
of Staffs 157 166 189 232 270
Sources: Annual Report of NIC of Fiscal year 2004/05 to 2008/09