(VIII) Chapter 3 (Financial Analysis and SWOT Analysis)
(VIII) Chapter 3 (Financial Analysis and SWOT Analysis)
(VIII) Chapter 3 (Financial Analysis and SWOT Analysis)
CHAPTER 3
Financial analysis is one of the important tools for every organization, which helps
to determine the financial position, earning and cash flow of the organization. It
plays the major roles in smooth functioning of the business. Financial analysis is
such a tool that helps to determine the economic status of the organization.
Ratio analysis stands for the process of determining and presenting the relationship
of items and group of items in the financial statements, to evaluate financial
condition and performance of the bank.
A. Profitability Ratios:
B. Liquidity Ratios:
Credit quality ratio measures the provision that the banks keep to face the
default risk.
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1. Return on Equity (ROE):
RETURN ON EQUITY
NET PROFIT
Year TOTAL ASSETS Return On Assets
AFTER TAX
Higher the equity capital ratio lower will be the risk and lower will be the return.
The above table shows increase in the Equity Capital ratio which shows lower will
be risk and lower return of the BOK.
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Higher spread is measure of higher profitability. Since the interest spread ratio is
decreasing which represent lower profitability.
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5. Net operating Cost Ratio (NOCR):
Finding from above fig shows decreasing net operating cost ratio that indicates the
higher profitability of the BOK.
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Higher ratio shows lower liquidity position. Loan to total assets is increasing that
indicates lower liquidity.
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7. Provision for Credit Losses to Total Assets Ratio (PCLTAR):
0.90%
0.80%
0.70%
0.60%
0.50%
0.40%
0.30%
0.20%
0.10%
0.00%
2010 /011 2011 / 012 2012 / 013 2013 / 014
Provision for Credit 0.87% 0.49% 0.47% 0.35%
Losses to Total Assets
Fig 3.7: Showing Ratio of Provision for Credit Losses to Total Assets
Higher the ratio, higher the risk on lending. The provision to credit losses to total
assets is decreasing it indicates the lower the risk on lending.
1.40%
1.20%
1.00%
0.80%
0.60%
0.40%
0.20%
0.00%
2010/011 2011/012 2012/013 2013/014
Provision for Loan 1.39% 0.81% 0.75% 0.50%
Losses to Total Loan
Ratio
Fig 3.8: Showing ratio of provision for loan losses to total loans
Higher the ratio, higher is the risk on lending. The ratio of the bank is decreasing
which shows that the risk on lending is decreasing but lower ratio means that the
return is also lower.
0
2010/011 2011/012 2012/013 2013/014
Credit Loss Coverage 2.3764689124.8637896165.5764724027.500257372
Ratio
Higher is the credit loss coverage ratio, higher is the loss bearing capacity. The
coverage ratio of the BOK is increasing it indicates the higher loss bearing capacity.
80.00%
78.00%
76.00%
74.00%
72.00%
70.00%
68.00%
66.00%
64.00%
62.00%
2010/011 2011/012 2012/013 2013/014
Loan to Deposit Ratio 71.04% 67.50% 70.59% 78.36%
Higher ratio shows the greater availability of capital to the firm. Data shows that the
bank’s ratio is decreased in the second year and increasing in the following year. It
is strength of the bank that able to manage its capital availability consistant.
10.00%
9.00%
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
Higher ratio shows higher liquidity. The total cash and total assets of the bank are
increasing. It shows the liquidity position of the bank is getting higher.
A scan of the internal and external environment is an important part of the strategic
planning process. Environmental factors internal to the firm usually can be classified
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as strengths (S) or weaknesses (W), and those external to the firm can be classified
as opportunities (O) or threats (T). Such an analysis of the strategic environment is
referred to as a SWOT analysis.
The SWOT analysis provides information that is helpful in matching the firm's
resources and capabilities to the competitive environment in which it operates. As
such, it is instrumental in strategy formulation and selection.
Strengths:
A firm's strengths are its resources and capabilities that can be used as a basis for
developing competitive advantage. Strengths of BOK are,
Compare to other banks in Nepal, BOK has the strongest overall financial
performance with a strong equity base and adequate financial ratio.
BOK has incorporates many services like ATM, credit cards, Internet
Banking Services, LCs.
patents
Weaknesses:
The branches of the bank are not expanded in the rural area.
Opportunities:
The external environmental analysis may reveal certain new opportunities for profit
and growth. Some opportunities include:
Increasing no of customer.
Threats:
Changes in the external environmental also may present threats to the firm. Some
examples of such threats include:
new regulations