INTRODUCTION
Background of the study
Banking sector plays an important role in the economic development of the country. They are inevitable for the resource mobilization and all-round development of the country. It is a resource for economic development as it maintains economic confidence of various segments and extends credit to people. Commercial Banks (CB) are one of the vital aspects of this sector, which deals in the process of channelizing the available resources in the needed sector. It is the intermediary between the deficit and surplus sector of the economy. There are two types of financial institutions in the economy to play the role of intermediary i.e. Depository financial institution and Non-depositary financial institutions. Commercial Banks, Development Banks and Finance Companies (in Nepalese context) are the examples of depository financial institutions whereas Employee Provident Fund, Insurance Companies etc. are the examples of non-depository financial institutions. All the economic activities are directly or indirectly channel through these financial institutions. Surplus sector keeps their surplus money as deposits in the banks and hence banks can provide such funds to deficit sector in the form of loans and advances.
The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions. Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities and equity are directly related to an organization’s financial position. Reported income and expenses are directly related to an organization’s financial performance.
Profile of the Organization
Nepal Bank Limited is the first commercial bank of Nepal. It was established in 1937 which marked the beginning of an era of formal banking in Nepal. The headquarter of Nepal Bank Limited at Dharmapath, Kathmandu. Nepal Bank Limited is a pioneer bank of the country and it shall not be seemed to be exaggerated that; without NBL the history of bank in Nepal would be uncompleted. Monetization of Nepali currency in Nepalese economy was possible only after the establishment of NBL and the speed of industrialization in Nepal was accelerated only with the active support of the NBL. NBL had played the role of central bank up to the 14 years of its establishment and it had initiated (Encouraged) the banking culture in Nepalese society.
Despite such an amazing and glorious history; NBL has been facing lots of problem in regards of the bank operation and customer service. Negative net worth, operating loss, Negative capital adequacy ratio, huge volume of nonperforming loan, increasing volume of nonbanking assets and decreasing trend of net interest income indicate that the NBL’s performance is below than the average performance of the Nepalese banking industry.
Statement of the problem
A bank helps in the process of capital formation by accumulating scattered money from the surplus sector of the society and it also helps to accelerate the economic activity in the society. Since Nepal Bank has opened its most of branches in remote area; it has highly supported to capital formation in the country and also to enhance the economic activity in rural area of Nepal. In the light of such a great contribution in Nepalese economy; we can conclude that NBL is backbone of national economy. Specially, the study is expected to reveal the following research questions.
- What is the financial position of NBL?
- What is the liquidity position of NBL?
- What is the relationship between total deposits and investment?
- What is the return over the period?
Objective of the study
The basic objective of this study is to analyze financial performance of NBL. The following are the specific objectives of this study.
- To analyze financial position of NBL.
- To analyze the liquidity, capital structure, profitability, operating and activity position of the bank.
- To analyze the correlation between the financial variables.
- To provide and draw the conclusion and suggest some recommendation.
Limitation of the study
The research is done for the partial fulfillment of B.B.S. As every research has its own limitation, this study is not different. Therefore; this study has some limitations, which are as follow:
The study covers the relevant audited data information of only for five years from 2069/70 to 2073/74.
This study is mostly based on available secondary data and information (i.e. Published financial statements of NBL and Nepal Rastra Bank (NRB) along with other related journals, newspapers, magazines, bulletins textbooks etc). Therefore, the consistency of findings & conclusion is strictly dependents upon the reliability of secondary data & information.
The study concentrates on financial position of the bank for said period and has been analyzed with the help of various financial, accounting and mathematical tools. As it focuses only on financial aspects of the bank, it does not cover all the aspects of the bank.
The research is concerned with NBL only.
This report cannot remain without flaws. Best effort has been done to make this report with minimum error. Being almost impossible without error, existence of unnoticed error is also major limitation of the study.
Rationale of the study
The present study is the critical analysis of financial performance of NBL. The NBL is managed by semi government to provide financial services to the rural and urban population to stimulate income and generate employment in remote and urban areas. The result of this study would be proved important for the following stakeholder as follows:
Management of the Bank: Management may apply corrective measures for the improvement of the bank's performance with the help of the report of this study.
Shareholders of the Bank: With the help of the study the shareholders will know their real position in the bank. The shareholders will be able to know how their investment has been fluctuating.
Potential Investors: Potential investors in the markets may know whether to invest on bank's share or not.
Policy Formulators: With the help of the result of this study; the policy formulators of the bank may gain something. The financial position which has been analyzed through this study has the result of their past policy and decision. Hence if necessary and not satisfied with the concluded financial position, they might bring the changes in their future policies.
General Public: The result of this study may provide something to conclude about bank's financial position. Being the oldest bank of the country, which has contributed a lot for nation's economic development general public also may be interested about the financial position of this bank.
Concerned Parties and Other Commercial Banks: The government, customers, depositors, borrowers and all other parties who want to know about the Nepal Bank Limited may obtain some useful information with the help of the report of this study. The vicissitudes in the financial position of this bank may be useful and guidelines for other commercial banks formulating their plans and policies.
Review of the Literature
Conceptual framework
To explore the relevant and true facts for the research purpose, this chapter highlights the literature available related to the study. Review of literature refers to the reviewing of the past studies in the concerned field. Review of literature provides us sight into the past development of the particular problem that interests us. Such studies could be thesis that are written earlier, books, articles, journals and any sort of other publication concerning the subject matter which are published by person or an organization.
Financial analysis
Financial analysis as a part of the financial management is the main indicator of the success or failure of the firm. The focus of the financial analysis is on key figure contained in the financial statement and the significant relationship that exist between them.
These are different person/institutions that affect are affected by the decision of the firm financial condition of business firm should be sound from the pointing view of shareholders, debenture holders, financial institutions and nation as whole. The future of analysis will differ depending on the interest of different group for example trade creditors are interested in long term solving and survival. So, a financial analysis is undertaken by outsiders, creditor and investor and also by the firm itself. Thus, the various parties according to the particular interest of the analysts have undertaken the type of financial analysis. Management of the firm is generally in every aspect of the financial analysis because they have overall responsibility of maintaining efficient and effective utilization of resources. Financial analysis is concerned with weakness of the firm by properly establishing relationship between the item of the balance sheet and the profit and loss a/c (Pandey), 1992, p. 109
A separate department research and statistics can be found in every bank. This department makes available the local and foreign information to the businessmen. The bank publishes monthly and annual bulletins giving information about the situation of trade, industry, rate of interest etc.
Research Methodology
This stage is about how research was executed and how respondents were approaches, as well as how the research was completed. Research methodology basically describes the methods, processes, tools and techniques applied in the entire process a scientific research. According to" Research is the process of systematic and in-depth study for any particular topic, subject or area of investigation backed by collection, presentation or relevant details or data." The major objective of this study includes the analysis of the comparative trend of various variables by measuring the relationship between risk and return and the analysis of financial decision through correlation analysis. So, this chapter is divided into different headings as below:
- Research design
- Population and sample
- Nature and types of data
- Techniques of analysis
- Data collection procedure
- Financial tools
Organization of study
The entire study carried out to different stages and procedures as it needed. The study on following chapters in order to make the study easy to understand.
Chapter I- Introduction
The first chapter will deal with the subject matter consisting Introduction of main topic of the study like background of the study, profile of organization, Statement of the problem, objective of the Study, Rationale of the study, Review of the literature, research methodology, limitation of the study and organization of the study.
Chapter II- Result and analysis
The second chapter consists of presentation and analysis of data, which describes with the empirical analysis of the study. In this chapter all collected relevant data are analyzed and interpreted and will explain the measure finding of the study.
Chapter III: Summary and conclusion
The third chapter consists of summary of the study, conclusion and recommendation on the basis of the study. This chapter presents the measure finding of the study, recommendation is made to the commercial bank regarding to financial analysis. Different data will deal with deal with presentation of data in tables and figures and represented in the form of graphs. Major findings from the analysis will be further discussed.
