1

CHAPTER-1
1.1 Background of the study
The word Bank derived from the Italian word "Banka" and French word "Banque" which
means a counter table or beach used by medieval money exchanges. It is an organization
whose primary function are concentrated with accumulated of idle money from general
public and advancing loan to individual traders, industries and business houses for
expenditure. Generally the bank collects money from general public from which it should
pay sound interested regularly. The money thus accumulated con invested in different
sectors such an business, foreign trades, agriculture, industry and social works for which
charges certain percentage of interest which is higher than interest paid by the bank to
accumulate funds such charges on advancing loan is the major revenue source of the bank
by which it car bear administration expenses incurring in the process of operating its
activities. Thus a bank a good mediator between depositors and loan takers.

This study is focused to analyze the financial performance of Everest Bank Limited
(EBL) basing on its activity for past two years. Everest Bank Limited in the 9 th
commercial bank of Nepal. It was established on 1994. The Central office is in Lazimpat,
Kathmandu and other branches spread throughout 5 development regions. It is the
category 'A' class financial institution registered under the "Bank and Institution Act" of
Nepal. It has been established by prominent business personnel and professionals from
diversified areas with a Everest objective of providing 'Banking Services to Everyone" in
the country where still large number of population are deprived of Banking Services.

The bank has established itself as an emerging player in financial sector with focus in
customer service excellence maintaining excellent relationship with valued customers. It
is counted among the top 8 commercial bank in Nepal by independent rater and
publications in the country.

The Bank's shares are listed and actively traded in the Nepal Stock Exchange (NEPSE).
 2

EBL is providing various services to its client such as money transfer facilities through
various branches. 24 hour ATM services, SMS Banking, E-Banking services and other
important services of the bank.

The Bank has professional as well as technical manpower. Currently EBL is fully
computer based and has strong computer network which provide fast as well as
qualitative services to its clients. The bank regularly upgrades its technologies.

Everest Bank Limited is one of the leading commercial bank of nation. It makes financial
services convenient to people. The Bank has contributed a lot in the economic
development of the country.

Investment sector of EBL, Inaruwa Branch are as follows,

 Agriculture
 Industries
 Business Services
 Mortgage Loan Services
 Helping Infrastructures of development of nation.
 Others.

Therefore from the above presentation, we can say that the EBL Inaruwa Branch is an
important bank for the people and organization of Inaruwa it has led great importance in
the speedy growth and development of Inaruwa.

1.2 Profile of Everest Bank Limited

Catering to more than 10 lacs customers, Everest Bank Limited (EBL) is a name you can
depend on for professionalized & efficient banking services. Founded in 1994, the Bank
has been one of the leading banks of the country and has been catering its services to
various segments of the society. With clients from all walks of life, the Bank has helped
the nation to develop corporately, agriculturally & industrially.

All banks compete with each other. Without a proportional increase in the depositor base
and diversification of investment portfolios, the unnatural growth in the number of bank
led to cutthroat competition. Most banks have offered similar deposit and loan products.

The banks in Nepal have a history of unstable liquidity position. Sometime they face
liquidity crunch and more often liquidity surplus. The small size of the banks operation
has limited portfolios to smaller project and medium size borrowers.
 3

1.3 Objectives
General objective of the study will be to analyze the existing data of the bank and assess
its financial performance through the help of ratio analysis. After competition of this
report a concrete conclusion will be derived and thereby it be able to portray a real
picture of the organization's profitability aspect and its status. The other objectives are
listed as below;
 To analyze the profitability position of the EBL.
 To find out the comparative pictures of profit and loss and balance sheet.
 To Ensure its strength and weakness.

1.4 Rationale
Today financial management covers the management of all aspects of the balance sheet,
including the management of short and long term assets, short and long term liabilities
and liabilities and equity.
The importance of finance in the small industry is to maximize the stockholders wealth
but stockholders are not the only party to benefit from business operation. These are other
function also (The firms, the investors and the consumers) who expects a fair share of
benefits.

1.5 Review
Review of literature is an essential part of all studies. It is ways to discover that other
research in area of our problems has uncovered. A literature review is the process of
looking, reading and evaluating the area of the researcher's interest. A Critical review of
the literature helps to researcher to develop through understanding and insight into
pervious research work that related the present study.
Finance is the necessity of every business. Finance is very important in each
small-scale industry whether it is banks or any other small-scale industries.
Finance is the process of collection of funds from various sources necessary for the
smooth operation of business and its proper utilization and allocation in the productive
sector. Finance is the application of skill or cares to the manipulation the use and the
control of the money.
 4

Finance can be collected from the commercial and private banks in form of loan,
overdraft, etc. An industrialist can operate his business with his own capital also. If there
is great flow of flow of finance in small business then production increases with
production increase sale increase industry can compete is the market. The very term in
real word about the "finance" has been interpreted differently by different scholars.

Financial analysis is the process of identifying the financial strength and weakness of the
firm by properly establishing relationship between the items of balance sheet and profit
and loss a/c. Financial analysis can be undertaken by management of the firm or by
parties outside the firm viz. owners, creditors, investors and others.

Financial statement analysis generally begins with the calculation of a set of financial
ratios designed to reveal the relative strength and weakness of a company as compared to
other companies in the same industry. (Robins, 1955)

Today financial management covers the management of all aspects of the balance sheet,
including the management of short and long term assets, short and long term liabilities
and equity.

The importance of finance in the small industry is to maximize the stockholders wealth
but stockholder are not the only party to benefit from business operation. These are other
function also (the firms, the investors and the consumers) who expects a fair share of
benefits.

The history of analysis of financial statement begins with present century. The analysis of
these facts and related data was considered to be important and number of techniques
were developed and used for this purpose. At, present, the most important techniques of
analysis are:

I. Ratio Analysis

II. Percentage Method

I. Ratio Analysis

Ratio analysis means comparing the data in standard measures. It implies the process of
computing, determining and presenting the relationship of items or group of item of
financial statement. A ratio is the mathematical relationship between two figures. In
financial management, ratio is the relationship between two accounting figures. 'Ratio'
analysis is a statistical yardstick that provides a measures of the relationship between two
variables or figures. Different types of ratio, gross profit, net profit, total assets turnover
ratio has been calculated.
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II. Percentage Method

The percentage method is that method where items of one year are taken as base and
other year items are compared with period items in percentage. Different statements such
as trading account, profit and loss account and balance sheet are used to analyze this
method.

1.6 Methods

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

The methodology is the general research strategy that outlines the way is which research
is to be undertaken, and described in the methodology, define the means or modes of data
collection or, sometimes, how a specific result is to be calculated.

Research methodology is based on different methods which are described below;

I. Population and Sampling

The method of conducting this study is secondary based on direct contact interviews. The
data and information collected from direct contact and interview. are carefully analyzed
and necessary conclusions have been derived thereof. Similarly, direct observation and a
small survey were conducted to collect various information. For collecting information
about satisfaction of costumers toward EBL . I met several customer within the premises
and at the gate of EBL. This survey helped me a lot to gather true data about EBL. The
methodology of this report includes the study participations, data collection tools, and
data presentation and analysis techniques. All the information collected is based on both
primary and secondary sources such as direct contact, interview, observation and from
annual report. This study discusses all the services provided by the bank and to check the
relevance of the information about these services a survey was also conducted within the
premises of the bank. Therefore, this study is based on the behavioral approach which
includes only qualitative data and quantitative data.

Population of the study: To conduct the survey, the employees of the bank, front desk and
production department are taken as a population. The survey was conducted in order to
 6

collect the information about the services provided by this department. Similarly,
customers of the EBL are also taken as a population for survey in order to analyze the
effectiveness of the services provided.

Sample of the study: selective sampler survey through which information is collected
about the services provided by the bank and a sample of 10 customers were selected in
order to analyze the effectiveness of the service provided by the bank.

II. Instrumentation
This field work is based on secondary source of data published by Everest Bank Limited.
The annual report is the main source of data. The data from 2073/074 to 2075/076 are
used for preparing this report.

III. Analysis Plan

The estimated time of the field work is 15 days. The title is selected in the first step as 'A
Study on Financial Study of Everest Bank Limited'. The secondary data is collected from
the annual report of the bank. The collected data are tabulated and analyzed using
financial tools. Finally, the report is prepared and submitted to the department of the
college for examination.

IV. Validity AND Reliability

The data collected through direct personal interview may be valid and reliable but the
data collected through worker and labor may not. It is assumed that the facts and figures
provided by the proprietor of Everest Bank Limited are assumed to be correct. The field
work report is based completely on personal interview and hence the data provided are
assumed to be correct and the report was confident as confidential policy of company
may not have given complete disclosure to the field work report.
 7

1.7 Limitations

The limitations of the study are:

 This study includes only the secondary data as well as the documentations of the
EBL.
 The Study is focus on financial analysis of EBL.
 Only the past 3 years data would be taken because of the limitation time and resource.
 Due to short period of time confidentiality of some of the data, it is not done going
deeply toward the subject matter.
 8

CHAPTER –II
RESULT AND ANALYSIS

This is the main part of the field work report writing. In this part, the collection data are
tabulated and analyzed in order to fulfill the purpose of this field work report. It has been
already defined that this field work report is mainly based on secondary data published by
the Everest Bank Limited in its annual report.

2.1 Presentation of Data

Presentation of data means to present the data in concise and precise form in order to
make easy for the readers to understand. Data can be presented in different tables which
make easy for readers to analyze them. In this field report, data are presented and
analyzed with the help of modern tools and techniques of ratio analysis.

2.2 Analysis of Data

Ratio analysis is one of the techniques of financial analysis. Business firms use ratio as
yardstick for evaluating the financial condition and performance. Ratio measures the
financial position in short-term and long- term. Ratio indicates the performance of the
business. Ratio also measures the profitability of the business enterprises. It is a powerful
tool for mathematical relationship between two related items expressed in quantitative
form. It is a kind of method of finding a strength and weakness of the financial position
under the computation of different ratios. Among different ratios, profitability ratio9 is
highlighted.
Ratio analysis is the process of establishing meaningful relationship between two figure
of set financial statement with a view to present financial statement in simple, concise
and intelligible form.
 9

I. Return on Assets Ratio

Table: 1
Statement of ROA
Particulars 2073/074 2074/075 2075/076

Net Profit 1574352443 1730207025 2006247780

Total Assets 99167293661 113885046402 116510445575

ROA 15.87% 15.19% 17.21%

Source: Annual Report of EBL

17.50%

17.00%

16.50%

16.00%

15.50%

15.00%

14.50%

14.00%
2073/074 2074/075 2076/076

The profitability ratio studies a relationship between net profit and total assets. Return in
assets is computed in order to determine how efficiently the total assets have been used
by the management. It also measures the productivity of the assets. It also measures the
productivity of the assets. It is also called the profit to total assets ratio. It is calculated by
dividing net profit after tax by total assets.
 10

II. Net Profit or Total Deposited Ratio

Table: 2
Statement of Net Profit to Total Deposited Ratio

Particulars 2073/074 2074/075 2075/076

Net Profit 1574352443 1730207025 2006247780

Total Assets 99167293661 113885046402 116510445575

ROA 1.59% 1.52% 17.21%

Source: Annual Report of EBL

1.75%

1.70%

1.65%

1.60%

1.55%

1.50%

1.45%

1.40%
2073/074 2074/075 2075/076

This ratio measure the percentage of profit earns the utilization of the total deposit. The
ratio is compute to know what exactly is returned from the deposit fund. The objective of
computing this ratio is to determine the operation efficiently of the management. It is
computed by dividing the net profit by total deposit. It is calculated by dividing net profit
or loss by total deposit.
 11

III. Net Interest Margin (NIM)

Table: 3
Statement of Interest Earning Assets

Particulars 2073/074 2074/075 2075/076

Cash in NRB 5924718626 13356018269 14577083955

Loan Advance /bills purchase 54482465225 67955107021 77287764142
Total 60407183851 81311125290 91864848097
Source: Annual report of EBL.

Net interest margin is the relationship between net interest income and interest earning
assets. Net interest income is calculated by subtracting interest expenses from interest
income and interest earning assets are those assets which can earn interest directly or
indirectly. Net interest margin is calculated by dividing net interest by interest earning
assets.
 12

IV. Net Interest Margin

Table: 4
Statement of Net Interest Margin

Particulars 2073/074 2074/075 2075/076

Net interest income 4996428451 5057077497 6747148285

Interest earning assets 60407183851 81311125290 91864848097
Net interest margin 8.27% 6.21% 7.34%
Source: Annual report of EBL.

9.00%
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
2073/074 2074/075 2075/076

Net interest income is calculated by subtracting interest expenses from the interest
income and interest earning assets are those assets which can earn interest directly or
indirectly.Net interest margin is calculated by dividing net interest by interest earning
assets.
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V. Return on equity
Table: 5
Statement of Return on Equity

Particulars 2073/074 2074/075 2075/076

Net income 1574352443 1730207025 2006247780

Common equity 2742604058 4606426899 7732723147
Return on equity 57.40% 37.56% 25.95%

2073/074

Net Income
Common equity

2074/075

Net Income
Common equity
 14

2075/076

Net Income
Common equity

Return on equity (ROE) measures the rate of return on shareholder's investment. It is also
the relationship between net income after tax and common equity which is calculated by
dividing earning available to common stock at per paid in capital and retained earnings.
Return on equity is calculated by dividing net income by common equity.

VI. Earnings per share

Table: 6
Statement of Earnings per Share

Particulars 2073/074 2074/075 2075/076

Net. Income 1574352443 1730207025 2006247780

No. of share 2742604058 4606426899 7732723147
Earnings per share 0.57 0.38 0.26

2073/074

Net income
Number of share
 15

2074/075

Net income
Number of share

2075/076

Net income
Number of share

Earnings per share are net income available to shareholders for each share or per share.
Income available to shareholders is divided by number of shares. First of all earning
available to shareholder is determined by using income statement and net income is
divided by share to find earning per share. Earnings per share are calculated by dividing
net income by number of shares.
 16

VII. Profit Margin

Table: 7
Statement of operating income

Particulars 2073/074 2074/075 2075/076

Interest Income 4996428451 5057077497 6747148285

Commission & Discount 305138807 285939873 346169793
Other Operating Income 387487562 509795262 565449748
Exchange Income 87273141 112975610 94025599
Operating Income 5776327961 5965788242 7752793425
Source: Annual Report of EBL.

Profit margin established relationship between net income and earnings available to
shareholders. It shows efficiency of bank to convert operating into net profit. Operating
income includes all the income which is derived from operating transactions. Operating
income includes interest income, commission and discounts, other income and exchange
income profit margin is calculated by dividing net income by operating income.
 17

VIII. Profit Margin

Table: 8
Statement of Profit Margin

Particulars 2073/074 2074/075 2075/076

Net income 4996428451 5057077497 6747148285

Operating income 5776327961 5965788242 7752793425
Profit margin 86.50% 84.77% 87.03%
Source: Annual Report of EBL.

2073/074

Net income
Operating Income

2074/075

Net income
Opreating Income

Profit margin establishes relationship between net income and earnings available to
shareholders. It shows sufficiency of bank to convert operating into net profit.
2.3 Findings
 18

Ability to earn a satisfactory profit is the indication of good financial condition of the
company. It mentions the relationship of the profit with other variables like investment,
assets, deposits, etc. after studying the area of topic, valuable conclusion or major finding
are drawn after much observation, field study collection, presentation & analysis of data.
Some of the major findings of the report that writer has found out are as follows:
 Return on assets is higher in current year than past one years. Conditions of ROA are
good.
 Net profit to total deposit ratio is higher than previous one year.
 Net interest margin is higher in current year than previous year.
 Return on equity in current year is lower than previous years
 Earnings per share in current year have decrease than past one year.
 Profit margin of the bank is so good.

The above points show that profitability ratios of the bank and its condition are still not
satisfactory. Various ratios are still falling which is good for the bank.

CHAPTER-III
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SUMMARY AND CONCUSION

3.1 Summary

In this study, an analysis of the financial performance and profitability of the bank is
done. Hence, the main findings from the study of the financial performance are herby
presented. Based upon the findings of this study, some conclusions are mode in the
present chapter.
It is seen that although profitability conditions is not very good, but it can be taken as
satisfactory if it will increase trend in recent years. The trend has been increasing as it has
scattered its loan, investment and other activities which directly uplift the people.
Everest Bank Limited was established in 1994. It has 20 It has 17 branches inside valley
and 75 branches outside the valley. It has 10 VISA member banks. ATM location of EBL
is in 21 places inside Kathamandu valley and 18 branches outside the valley. It accepts
deposit through demand and current account, saving account, margin account and fixed
account.
There are lots of question to be answered which should be testable, solvable and
measurable. The profitability position of EBL on various items in the year 2074 to 2076
B.S. are addressed and analyzed in this report.
While presenting and analyzing the data and figures the carious profitability ratio are
chosen as means to evaluate and meet the condition of the study. While datelining the
various profitability ratios, the EBL seems to be operating satisfactorily. The ratio are
analyzed and worked with the method by using the tabular form and trend analysis.
In the presentation and analysis of data, the ROA is in decreasing trend which shows that
the organization is unable to utilize assets in a systematic manner. Net profit to total
deposit ratio is increasing. It was 1.52%to 1.72% at present. Net interest margin of the
bank was around 6.22% to 7.34% as present, which is not satisfactory. Return from
equity is in decreasing trend. It shows that the bank is insufficient to utilize resources of
the owners. Earnings per share shows decreasing trend which is not good. Profit margin
is 87.02% at present which is low and riskier for the bank.
 20

The entire profitability ratio indicates that the bank has satisfactory profitability condition
but still there are many area of improvement. Profitability position of the bank is
decreasing than previous years

3.2 Conclusion:

From the establishment of EBL, it has been playing an important role to develop the
economic and financial sector of country. Among the various commercial bank. EBL is
one of the major leading commercial bank in Nepal. However, the financial performance
of any bank cannot be measured or judged only on term of profitability.

In the conclusion part we can draw various conclusions from the different profitability
ratio.

 The ROA is in increasing trend of EBL. The increase in ROA shows that it asset are
sufficiently utilized in a systematic manner. ROA tells that profitability position of
the bank if good enough.
 Net profit to total deposit is high. It may decrease if there is decrease in deposit.
 Net profit margin is satisfactorily according to its increase in percentage.
 Return on equity if falling heavily in current year which indicate that the bank is
unable to produce profit by perfectly utilizing owner's resources.
 Earnings per share are decreasing in current year. This shows earning for each share
is decreasing slowly which is not good for the inventors.
 Profit margins of the bank are increasing at rapid rate. This indicates that rate of
conversion of operating income into net profit is very high.
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Appendix-1
Everest Bank Limited
Balance Sheet
For the financial year 2073/074, 2074/075, 2075/076
S.N. Particular 2073/074 2074/075 2075/076

1 Capital and Liabilities

Share capital 2742604058 4606426899 7732723147
Reserve and Surplus 4147772967 3907661213 3811858733
Debenture and Bond 1068845000 1068845000 1068845000

Loans and Borrowings - 250000 14761650

Deposit Liabilities 83093789957 93735480708 95094461030
Bill payable 349529622 1365317237 471729717
Provision cash dividend 141122877 106495939 110422513
Income Tax Liabilities - - -
Other Liabilities 9623629179 9092319407 8205643786
Total Capital and Liabilities 99167293661 113885046402 116510445575
2 Assets
Cash on bank 2065607611 2514947575 3060845724
Balance in NRB 5924718626 13356018269 14577083955
Money at Call and Short Notice - - -
Investments 15102674197 18198739944 11964561347
Loan, Advance and bill 54482465225 67955107021 77287764142
Fixed Assets 630397372 678987899 728387934
Non-Banking Assets - - -
Other assets 385274807 3934817040 5146242122
Total assets 99167293661 113885046402 116510445575
Source: Annual Report of EBL.
 22

Apendix-2
Everest Bank Limited
Profit and Loss Account
For Financial Year 2073/074,2074/075,2075/076
S.N Particular 2073/074 2074/075 2075/076

1. Interest income 4996428451 5057077497 6747148285

2 Interest expenses 2116993166 1828492869 3009792494
Net interest & expenses 2879435285 3228584628 3737355791
3 Commission & Discount 305138807 285939873 346169793
4 Other operating expenses 387487562 509795262 565449748
5 Exchange income 87273141 112975610 94025599
Total operating income 3659334795 4137295373 4743000931
6 Staff expenses 687510119 699880930 882328736
7 Other operating expenses 555221406 603177998 681018155
8 exchange loss - - -
Operating profit before prevision 2416603270 2834236445 3179654040
9 Provision for possible losses 163962647 168133771 89728124
Operating profit 2252640623 2666102674 3089925916
10 Non operating income/expenses 12484331 24718829 16511723
11 Write-back of Loan loss Provision 207119781 92751077 43323645
Profit from regular activities 2472244735 2783572580 3149761284
12 Profit/Less from Transaction of - 4278683 -
Extraordinary Nature
Profit before After Inclusion of 2472244735 2787851263 3149761284
13 Provision for staff bonus 224749521 253441024 286341935
14 Provision for income tax - - -
-Tax for the year 648767242 752147755 852882594
-Tax for Earlier Year - 45000000 -
-Current year Deferred tax income exp. 24375529 7055459 4288975

Net Profit/Loss 1574352443 1730207025 2006247780

Sources: Annual report of EBL
 23

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Asmita Publication, Kathamandu

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Pandey, I.M.(1999),"Financial management of Bank" New Delhi: Vikash
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Websites:
www.google.com
www.ime.edu.com
www.mof.np.com
www.edusanjal.com
www.moe.edu.com
www.everestbank.com