FINANCIAL PERFORMANCE COMPARISON OF EVEREST

BANK LIMITED TO COMMERCIAL BANKS

(A CAMEL model analysis)

Submitted by

Puskar Khanal

TU Registration No: 7-2-2-0266-2018

Exam Roll No: 21552/18

A Summer Project Report

Submitted to

Faculty of Management

Tribhuwan University

In partial fulfillment of the requirement for the degree of

Bachelor of Business Administration

Mechi Multiple Campus

Bhadrapur, Jhapa

February, 2022
 Student’s Declaration

This is to certify that I have completed the summer project report entitled “Financial

Performance Analysis of Everest Bank Limited in Comparison to Commercial Banks

(A CAMEL model analysis)” under the guidance of Mr. Ghanashyam Dhakal in

partial fulfillment of the requirements for the degree of Bachelor of Business

Administration at Faculty of Management, Tribhuvan University. This is my original

work and I have not submitted it elsewhere.

Date: Signature:

Name: Puskar Khanal

ii
 Certificate from the Supervisor

This is to certify that the summer project entitled “Financial Performance comparison

of Everest Bank Limited to Commercial Banks (A CAMEL model analysis)” is an

academic work done by Puskar Khanal submitted in the partial fulfilment of the

requirement of degree for Bachelor of Business Administrstion (BBA) at Faculty of

Management, Tribhuvan University under my guidance and supervision. To the best

of my knowledge, the information provided by him in the summer project report has

not been submitted earlier.

...................................

Signature of the Supervisor

Name: Mr. Ghanashyam Dhakal

Designation: Teaching Assistant

Date:

iii
 Certificate from Research Head

We, hereby endorse the project work report entitled “Financial Performance

Comparison of Everest Bank Limited to Commercial Banks (A CAMEL model

analysis)” submitted by Puskar Khanal of BBA program, Mechi Multiple Campus,

Bhadrapur, Jhapa, in the partial fulfillment of the requirement for award of the

Bachelor of Business Administration (BBA) for external evaluation.

.............................. ...............................

Harish Luitel Netra Prasad Nepal

Management Research Head BBA Director

iv
 Acknowledgement

The research project has been prepared to fulfill the partial requirement for the BBA

degree of Tribhuvan University. This report would not have been possible without the

help and dedication of few people to whom I must extend my sincere gratitude. So, I

would like to extend my sincere gratitude to all those who have contributed directly

and indirectly to complete this report.

First and foremost, I would like to thank my supervisor, Mr. Ghanashyam Dhakal, for

providing necessary guidance for completing this report. He has been so kind and

supportive throughout the research period. I would also like to thank our Director

Netra Prasad Nepal and Deputy Director Harish Luitel for guiding us throughout the

time of preparing report.

I would also like to extend my thanks to all the faculty members at Mechi Multiple

Campus who have been standing by my side in my difficulties.

Lastly, my special thanks go to my friends, without moral support of them, my report

would not have been completed.

Puskar Khanal

Mechi Multiple Campus

v
 Table of Content

Student‟s Declaration ................................................................................................ ii

Certificate from the Supervisor ................................................................................. iii

Certificate from Research Head ................................................................................ iv

Acknowledgement ..................................................................................................... v

Table of Content ....................................................................................................... vi

List of Tables.......................................................................................................... viii

List of Figures .......................................................................................................... ix

List of Abbreviation................................................................................................... x

Executive Summary.................................................................................................. xi

Chapter 1: Introduction .......................................................................................... 1

Background of the Study ........................................................................................ 1

Problem Statement ................................................................................................. 3

Objectives of the Study .......................................................................................... 4

Significance of the Study ....................................................................................... 4

Literature Review................................................................................................... 5

Research Methodology........................................................................................... 8

Research design .................................................................................................. 8

Population and sample ........................................................................................ 8

Nature and collection of data .............................................................................. 9

Data analysis ...................................................................................................... 9

Limitations of the study........................................................................................ 16

Chapter 2: Data Presentation and Analysis.......................................................... 17

Organizational profile .......................................................................................... 17

Analysis of Capital Adequacy .............................................................................. 18

Capital adequacy ratio: ..................................................................................... 18

vi
 Analysis of Asset Quality ..................................................................................... 20

Non performing loan ratio ................................................................................ 20

Management Efficiency Analysis ......................................................................... 21

Earning per employee ....................................................................................... 21

Analysis of Earnings ............................................................................................ 23

Return on Assets (ROA) ................................................................................... 23

Earning per share .............................................................................................. 25

Price Earning (P/E) Ratio ................................................................................. 28

Analysis of Liquidity ........................................................................................... 29

Credit to deposit ratio ....................................................................................... 30

Current ratio (CR) ............................................................................................ 32

Cash Ratio ........................................................................................................ 34

Ranking Process ................................................................................................... 36

Chapter 3: Conclusion and Action Implications .................................................. 37

Summary ............................................................................................................. 37

Conclusion ........................................................................................................... 37

Actions implications ............................................................................................ 39

Bibliography

Appendices

vii
 List of Tables

Table 2.1 Capital Adequacy Ratio (%) of Selected Banks ........................................ 18

Table 2.2 Non-performing Loan Ratio (in %) of Selected Banks .............................. 20

Table 2.3 Earning Per Employee (in Lakhs) ............................................................. 22

Table 2.4 Return on Assets (ROA) of Selected Banks .............................................. 24

Table 2.5 Earning Per Share (EPS) of Sample Banks ............................................... 26

Table 2.6 Price Earning Ratio of Selected Banks ..................................................... 28

Table 2.7 Credit to Deposit Ratio (%) of Selected Banks ......................................... 30

Table 2.8 Current Ratio of Selected Banks ............................................................... 32

Table 2.9 Cash Ratio of Seleced Banks .................................................................... 34

Table 2.10 Points and Ranks Obtained by Commercial Banks ................................. 36

viii
 List of Figures

Figure 2.1 Column Chart of CAR of Selected Banks in FY 2021/22 ........................ 19

Figure 2.2 Column Chart of NPL of Selected Banks as of FY 2021/22 .................... 21

Figure 2.3 Column Chart of Four Years Average Earning Per Employee (in lakhs).. 23

Figure 2.4 Trend Chart of ROA of Selected Banks .................................................. 25

Figure 2.5 Earning Per Share of Selected Banks ...................................................... 27

Figure 2.6 Trend Chart of P/E Ratio of Commercial Banks ...................................... 29

Figure 2.7 CD Ratio of Commercial Banks for the FY 2021/22 ............................... 31

Figure 2.8 Column Chart of Current Ratio of Selected Banks for the FY 2021/22 .... 33

Figure 2.9 Cash Ratio of Selected Banks for the FY 2021/22 ................................... 35

ix
 List of Abbreviation

AM Arithmetic Mean

CAMEL Capital adequacy, Asset quality, management efficiency,

Earnings, Liquidity

CAR Capital Adequacy Ratio

CV Coefficient of variation

EBL Everest Bank Limited

EPS Earning Per Share

GBIME Global Ime Bank Limited

MBL Machhapuchhre Bank Limited

NBL Nepal Bank Limited

NEPSE Nepal Stock Exchange

NICA Nic Asia Bank Limited

NPL Non Performing Loan

P/E Price Earning

PCBL Prime Commercial Bank Limited

ROA Return on Assets

SBL Siddhartha Bank Limited

SD Standard Deviation

x
 Executive Summary

Financial Institutions are essential for economic development of a nation.

Comparative performance analysis of financial institutions helps to understand the

strengths and weaknesses in different areas. This study was undertaken from January

15 to February 15 and data of 4 fiscal years (from 2018/19 to 2021/22) were analyzed

to asses and compare the performance of Everest Bank Limited to six other banks.

Other banks taken for the study were Nepal Bank Limited, Global IME Bank Limited,

Machhapuchhre Bank Limited, Nic Asia Bank Limited, Prime Commercial Bank

Limited, and Siddhartha Bank Limited. CAMEL model was used to assess the

performance of these commercial banks. The major focus of the study was to

understand how well EBL is doing among the competitors in terms of capital

adequacy, asset quality, management efficiency, earnings and liquidity. It was

concluded that NICA obtained the highest points and was the best among the seven

banks. As for EBL, it was able to obtain second position and proved that it is doing

better than most of its competitors. EBL obtained second position overall in terms of

financial performance analysis using CAMEL model. EBL‟s major strength was that

it was the best among the competing banks in terms of asset quality and management

efficiency. However, it is suggested that EBL improve its capital adequacy ratio,

reduce deviations in earnings, increase its profit, and maintain higher liquidity as it

showed the weaknesses and that the bank was not performing best in these areas.

Banks that are ranked from 1 to 7 in terms of their performance evaluation using

camel model (where 1 being best and 7 being poor) are NICA, EBL, PCBL, MBL,

NBL, GBIME and SBL respectively.

xi
xii
 1

Chapter 1: Introduction

Background of the Study

The financial services industry plays a significant part in the overall growth of

an economy by generating employment, providing various investment avenues to the

investors and financial services to the customers and the community (Berger,

Demsetz, & Strahan, 1999).

The banks in the economy aid in making fund accessible by moving excess

funds from depositor (with no instant requirement of those fund) and channeling those

funds as a credit to investors who have excellent ideas for generating surplus funds in

the economy but have a deficiency of the funds to implement those ideas

(Nwanyanwu & O.J., 2010). This generates income for banks, ensuring profitability.

It is enlightening to understand that the banking sector is a prominent one in the

financial sector as it has stood one of the most extensive means of attracting many

developing nations (Adeniyi, 2006).

Financial performance is the achievement of the company‟s financial

performance for a certain period covering the collection and allocation of finance

measured by capital adequacy, liquidity, solvency, efficiency, leverage and

profitability. Financial performance, the company‟s ability to manage and control its

own resources, cash flow, balance sheet, profit-loss, and capital change can be the

basis of information for corporate managers to make decisions (Fatihudin, Jusni, &

Mochklas, 2018).

Central banks apply the rating system while analyzing bank‟s performance and

efficiency because they are responsible for managing the country‟s financial system in
 2

general and regulating banks. Hence, central banks‟ rating for banks specifies the

level of direct supervision it requires and enhances the depositor‟s trust in banks. The

concept of examining banks‟ processes and operations was first applied through

Uniform Financial Institutions Rating System for banks in the USA. Regulatory

bodies and central banks worldwide adopted CAMEL as a supervisory rating system

to evaluate and differentiate between strong and distressed banks and to specify the

required level of supervision required for each bank (Najjar & Assous, 2021)

The performance of commercial banks and other financial institutions in Nepal

has to be on par with standards set by NRB. NRB is an apex of monetary authority of

the country and it is monitoring and controlling the financial institutions by issuing

various directives and policies. As the banks play the pivotal role in the economy,

their performance should be supervised by the central bank and take necessary

corrective actions if their health is poor. It has adopted the international banks rating

system (CAMELS) to assess the financial performance of Nepalese commercial

banks. CAMELS is an acronym for six parameters, capital adequacy (C), asset quality

(A), management efficiency (M), earnings (E), liquidity (L) and sensitivity to the

market risk (S) to measure the banking and financial performance.

As of 11 January 2023, there are 22 commercial banks in Nepal. Commercial

banks are „A‟ class financial institutions with a minimum paid up capital of Rs 8

billion as per NRB. To meet the required capital and capital adequacy ratio banks

issue right shares, acquire, and merge with one another. Thus, to satisfy huge number

of shareholders and surviving and growing in market, banks should perform

consistently and better with time.

 3

This study aims to find out the performance of Everest Bank Limited and its

comparison to commercial banks by using descriptive and comparative research

design. The study focuses on the financial performance of a bank in the framework of

internationally recognized bank‟s rating system known as CAMEL.

Problem Statement

The main objective of the bank is to collect as much deposit as possible from

the public and mobilize it into the most profitable and preferable sector. It will

maximize the profit of the commercial banks and help strengthen the banking sectors

and their operations. However, only profit does not disclose the efficiency and

effectiveness of the bank. The other aspects financial performance must also signal

towards the bank being operationally and financially sound. The bank must also

comply with the rules and guidelines provided by NRB in regulating BFIs. The

present study seeks to explore the efficiency and comparative financial performance

of Everest Bank Limited. The problem of the study will ultimately find out about the

difference in financial performance. The analysis of financial performance of bank

would be highly beneficial for pointing out its strengths and weaknesses. In spite of

rapid growth, some indicators show performance is not much encouraging towards the

service coverage. In such a situation, this study tries to analyze the present

performance of banks based on CAMEL model, which would give the answers of :

i. What is the status of selected banks in terms of capital adequacy, assets

quality, management, earning?

ii. Where does Everest Bank Limited stand in comparison to other banks in

terms of CAMEL analysis?

iii. What is the liquidity position of EBL?

 4

Objectives of the Study

The objectives of the study are derived from the above mentioned research

problems. The main objectives of the study are listed below:

i. To examine the capital adequacy of the selected bank

ii. To identify the assets quality

iii. To analyze management efficiency

iv. To examine the earnings, liquidity, and profitability of the selected bank.

Significance of the Study

Poor financial management affect adversely on liquidity, turnover and

profitability. It is required to measure the financial position of the enterprise

periodically in order to ensure smooth functionally and enterprise of great national

concern. Thus, the study is made to evaluating the financial performance of Nepalese

commercial banks. A well performance resembles the well combination of all factors.

So the effectiveness of policy, managerial skill, mobilization of funds and assets will

be reflected by the achievement.

Although the various studies have been carried out regarding financial

performance of banks, very few studies have been employed in terms of CAMEL

framework analysis. This study aims to analyze the financial performance of one of

the commercial bank of Nepal in the framework of CAMEL.

This research will be useful to the financial sector of Nepal. The study will

also be a great value for investors, equity holders, bankers, capital markets,

government, financial institutions, researchers and students.

 5

Literature Review

Literature review sums up the concept of the variables used along with prior

discoveries in the research topic previously by other researchers. The purpose of

literature review section in a report is to gain insight about the research topic so as to

successfully work on the research. Literature review presents the understanding about

variables used in research. It presents the insights from previously done research

works on the related topic.

Magoma, Mbwambo, Sallwa, & Mwasha (2022) focused on studying and

analyzing the financial performance of Tanzania‟s seven listed commercial banks at

the Dar es Salaam Stock of exchange (DSE) for five years from 2016 to 2020.

CAMEL model was utilized to fully assess the financial strength of these listed banks.

The findings revealed that commercial banks listed at the DSE in Tanzania are mostly

affected by management efficiency and capital adequacy.

Gebregiorgies (2021) conducted research in six senior private Ethiopian

commercial banks over the period 2010-2014 and thereby ranked the overall financial

performance of the respective banks based on CAMEL. He concluded that capital

adequacy, asset quality, management efficiency, earning quality is major significant

determinants of the profitability of the senior private commercial banks. The results

also confirmed that improvement in capital strength, asset quality, management

efficiency, and earning quality leads to higher profits. Moreover, despite the loose

ends of subjective interpretation and the possibility of criticism of any type of ranking

of commercial banks; the method of analysis still provides simplistic and user friendly

version of complex data.

 6

Nguyen, Nguyen, & Pham (2020) conducted research on 31 Vietnamese

commercial banks over the 6-year period, from 2013 to 2018. It came to the

conclusion that - capital adequacy: the size of equity is considered to have the most

powerful and positive impact on the performance of Vietnamese commercial banks

followed by leverage ratio and minimum capital adequacy ratio. Asset quality: debt

ratio has an opposite effect meanwhile the loan/total asset has positive effect on

performance. Management quality: the operating expense index has no significant

impact on the operational efficiency of banks. Earning measured by ROA, ROE, and

NIM are significantly affected by equity size, the deposit guarantee, the short-term

liquidity coefficient, and the financial leverage ratio. Liquidity: deposit guarantee

ratio and the short-term liquidity ratio have a strong performance of Vietnamese

banks, while the other factors have no or little effect.

Kandel (2019) conducted a research on analysis of financial performance of

commercial banks of Nepal using CAMEL approach. The study concluded that

earning quality of banks mainly affect their performance. The result showed that

earning and liquidity positions mainly result to the high influence to return on assets

while assets quality, liquidity and earning influence more to increase return on equity.

Risal & Panta (2019) investigated the effectiveness of CAMELS based

supervision in risk management of A class commercial banks of Nepal. The result

showed that the commercial banks in Nepal can reduce their downside deviation as

well as standard deviation of ROA and ROE by reducing the Non-performing Loan

(NPL), maintaining appropriate liquidity and by increasing management efficiency.

Further, result justified the relevance of risk based supervision adopted by central

bank and interest spread set. However, increased capital base has not helped in

reducing riskiness of banks.

 7

Lavanya & Srinivas (2018) ranked five Indian private banks by using a

CAMEL model. The position of selected banks by averaging all the ranks related to

all the calculated ratios were i) ICICI BANK ii) HDFC BANK iii) KOTAK

MAHENDRA BANK iv) YES BANK and v) AXIS BANK.

Majumder & Rahman (2016) attempted to measure the financial performance

of the fifteen selected banks in Bangladesh. They concluded that during the year

2009-2013 under the capital adequacy ratio parameter IBBL is the top position, while

IFICBL got lowest rank. Under asset quality parameter, AIBL held the top rank while

RBL held the lowest rank. Under management efficiency parameter, it is observed

that top rank taken by EBL and lowest rank taken by RBL. In terms of earning quality

parameter the capability of EBL got the top rank while TBL was at the lowest

position. Under the liquidity parameter DBBL stood on the top position and NCCBL

& BAL both are on the lowest position.

Rauf (2016) found out that private banks in Sri Lanka were best in all

parameters of CAMEL and financial performance. However, performance of public

banks were not at the level of private banks. Private banks were superior than public

banks in terms of financial performance and efficiency.

Zedan & Daas (2015) attempted to evaluate the performance and financial

soundness of Palestinian commercial banks. The study concluded that Bank of

Palestine is the best ranked with total components score of 16. Large banks dominated

the ranking while small banks were at the bottom of the table.
 8

Trivedi (2013) on his research analyzed the performance of the 14 major

banks which constitute the „Bankex‟ indices. Based on the composite ranking as per

CAMEL analysis it was found that ICICI, IndusInd, Kotak Mahindra, Yes Bank and

IDBI come in the cadre of top five banks. Bottom five banks list consututed of SBI,

PNB, UBI, BOI and Axis.

Research Methodology

Methodology section defines the type of research, research design, population

and sample definition, nature of collected data, methods used for data collection and

data analysis.

Research design: The research involves obtaining, analyzing and

summarizing different variables that are presented in numerical form. So, descriptive

research design is used in this research. The study illustrates numerical analysis, ratios

of sample bank and compares them with other commercial banks. Hence the study

uses descriptive research design as it focuses on evaluation of different variables with

banking performance and making a comparison of the performances.

Population and sample: Out of twenty two banks as per January 11 2023,

Everest Bank Limited (EBL) will be a major focus of the study and other bank‟s data

will be collected as well for comparative study. Out of twenty two banks, seven banks

are chosen as per the researcher‟s will. Convenience sampling (where the researcher

chooses the samples based on ease in collecting data from samples) will be used while

collecting and analyzing the data. Remaining six banks are Nepal Bank Limited

(NBL), Global IME Bank Limited (GBIME), Machhapuchhre Bank Limited (MBL),

NIC Asia Bank Limited (NICA), Prime Commercial Bank Limited (PCBL), and

Siddhartha Bank Limited (SBL).

 9

Nature and collection of data: Data used in this research are secondary in

nature. Secondary data are already published data which can be found in books,

circulars, annual reports etc. The data used for this study is obtained from financial

statements of commercial banks and publications of Nepal Rastra Bank. Likewise, the

research period is taken of four years which means data from FY 2018/19 to FY

2021/22 are collected. The data are collected from official website of banks as well as

NRB.

Data analysis: Financial as well as statistical tools are used to get the

meaningful result of the collected data and to meet the research objectives. Collected

data are tabulated and shown in charts under various heads. Then the data are

analyzed through various financial and statistical tools which are discussed below:

Financial tools: Quantitative tools are used for analysis of the collected data.

This is because the data collected can be measured using different financial ratios.

Since we are analyzing on a basis of CAMEL, every component is explained by using

various financial tools.

Capital adequacy ratio (CAR): Capital is important for an organization as

holding excess capital than required may have higher holding cost and low return

from investment and similarly holding too little capital may have inefficiency in

paying liabilities of a bank. Capital adequacy ratio a measurement of commercial

bank‟s total capital expressed as a percentage of its risk weighted- exposure. Capital is

broken down as Tier-1 or core capital and Tier-2 or supplementary capital.

Tier-1 capital consists of paid up equity share capital, equity share premium,

proposed bonus equity shares, statutory general reserves, retained earnings, un-

audited current year cumulative profit/loss, capital redemption reserves, capital

 10

adjustment reserves, dividend equalization reserves, other free reserves etc. Tier-2

capital consists of cumulative and/or redeemable preference shares, sub-ordinated

term debt, hybrid capital instruments, stock premium, general loan loss provision,

exchange equalization reserve, investment adjustment reserve, asset revaluation

reserve, and other reserves.

Tier −1 Capital +Tier −2 Capital

Mathematically, CAR =
Total Risk Weight Assets

Assets quality (A): Asset quality means the ability of any institution to utilize

its assets use it in revenue generation. It represents financial strength. A

comprehensive evaluation of the asset quality is one of the most important

components in accessing the current and future variability of banks. It is also known

as turnover ratio. Thus asset quality indicates the speed in which the asset is being

turned over. For a bank, asset is mainly credit to its customers. Hence, asset quality of

bank simply represents if repayment of loans and advances are timely or not. Loans

and advances are classified as performing loans and non-performing loans.

Performing loans are those loans which are earning profit or loans of which

interest/repayment is being made. There are two types of performing loans and they

are pass loan and watch list loan. Those loans which don‟t earn a bank any income is

defined as non performing loans. According to NRB directive non performing loans

are classified as substandard loan (loans and advances that are past due for a period of

3-6 months), doubtful loan (loans and advances which are past due for a period of 6-

12 months), and loss loan (loans and advances which are past due for more than one

year). In order to determine asset quality we calculate non-performing loan ratio.

Non −Performing Loans

Mathematically, NPL =
Total Loans
 11

Management efficiency (M): Management is the key for an organizational

growth and success. It includes top, middle and bottom level employees. Employees

efficiency and effectiveness in the work translates into a management efficiency.

Management efficiency is evaluated by checking the effectiveness of the entire

employees in the workplace. Efficient management helps improve earnings of the

bank. In that manner we calculate earning per employee. It emphasizes how much net

income one employee generates. Higher earning per employee indicates that

employees are greatly contributing to the business. Lower earning per employee

indicates either overstaffing or poor earning which in both cases shows poor

management efficiency.

Net Profit After Tax

Mathematically, EPE =
Total Number of Employee

Earnings (E): Earning is one of the major phenomena to evaluate the bank‟s

performance. Earning is simply the difference between revenue and expenses. Banks

earning higher profit tend to survive and grow in the economy. Lack of adequate

earning leads bank to either be merged, acquired or become liquidated. The earnings

help the management, shareholders and depositors to evaluate the performance of the

bank. The success of a bank rests heavily upon the efficiency of the management to

drive it towards earning good profits. Following ratios depict the earnings of the

banks:

Return on Assets (ROA): ROA measures the profitability of a firm in

relation to its total assets. Moreover, it shows the management efficiency in utilizing

the firm‟s assets. It emphasizes how well a firm is able to earn given the assets. It tells

us what earnings were generated from invested assets. Comparing earnings to the

resources a company used to earn them displays the feasibility of that company‟s
 12

existence. Higher return on assets indicates better performance in terms of earning as

well as operational efficiency and vice versa.

Net Profit After Tax

Mathematically, ROA =
Total Assets

Earnings per share (EPS): It measures the amount of net income earned per

share of stock outstanding. In other words, this is the amount of money each share of

stock would receive if all of the profits were distributed to the outstanding shares at

the end of the years. Higher earning per share is always better than lower because it

means the company is more profitable and the company has more profits to distribute

to its shareholders.

Net Profit After Tax

Mathematically, EPS =
Number of Equity Shares

Price to Earnings (P/E) ratio: Price to earnings ratio is the ratio for valuing a

company that measures its current share price relative to its earnings per share. The

price to earnings ratio is also sometimes known as the price multiple or the earnings

multiple. PER are used by investors and analysts to determine the relative value of a

company‟s shares. This ratio facilitates security analysis on the basis of future

expected performance of Bank. Higher P/E indicates investors are willing to pay more

for a given EPS. It shows that they have a strong conviction that a firm will show

growth in its earning in future.

Market Value Per Share

Mathematically, P/E =
Earnings Per Share
 13

Liquidity (L): Liquidity of banks provides an insight into bank‟s capability

to meet withdrawal request of depositors. It is bank‟s duty to provide withdrawal to

depositor on demand. Failing to do so creates liquidity risk for the banks. To avoid

this risk banks maintain certain percent of their deposits to NRB as cash reserve ratio

(CRR), Statutory liquidity ratio (SLR), invest in liquid assets such as treasury

securities etc. Having sufficient liquid assets allows banks to repay the current

liabilities, meet the withdrawal request of the customer and have sufficient working

capital for day to day operation. Banks need to maintain adequate liquidity so that it

does not suffer from liquidity crisis and also bank needs to avoid over liquidity as it

does not earn profit and remains idle over time. Liquidity of banks is calculated by

following ratios:

Credit to deposit (CD) ratio: It is the ratio of total loan and advances to

total deposit. Higher loan to deposit ratio indicates less liquidity and vice versa.

Maximum loan to deposit ratio prescribed by NRB is 90%. Higher CD ratio can

create liquidity problem to the bank.

Total Credit
Mathematically, CD =
Total Deposit

Current Ratio (CR): It is the current assets divided by current liabilities.

Current ratio shows the firm‟s ability to pay short term (less than one year) liabilities

when they are due. It is necessary to maintain sufficient current ratio. If current ratio

is too low then firm may not be able to pay its obligation on time. Meanwhile very

high current ratio may indicate that the company is not efficiently using its current

assets or its short-term financing facilities.

Current Assets
Mathematically CR =
Current Liabilities
 14

Cash ratio: Cash ratio is a measurement of a company‟s liquidity. It

specifically calculates the ratio of a company‟s total cash and cash equivalents to its

current liabilities. The metric evaluates company‟s ability to repay its short-term debt

with cash or near-cash resources, such as easily marketable securities. This

information is useful to creditors when they decide how much money, if any, they

would be willing to loan a company. The cash ratio is more conservative than other

liquidity ratios because it only considers a company‟s most liquid resources. A

calculation greater than 1 means a company has more cash on hand than current debts,

while a calculation less than 1 means a company has more short term debt than cash.

𝐶𝑎𝑠ℎ 𝑎𝑛𝑑 𝐶𝑎𝑠ℎ 𝐸𝑞𝑢𝑖𝑣𝑎𝑙𝑒𝑛𝑡

Mathematically, Cash ratio =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

Statistical tools: Statistical tools are used to analyze the the variables using

statistics. In this study, following statistical tools are used.

Arithmetic mean or average: Arithmetic mean is an average of a given

set of data. It is calculated by dividing sum of the values of the observations by

number of observations . It is denoted by X̅ . The arithmetic mean is the most

commonly used and readily understood measure of central tendency in a data set.

Σx
Mathematically, X̅ =
𝑁

Where,

Σx= Sum of the values of the observation

N= Total number of observation

 15

Standard deviation: Standard deviation is the measure of dispersion of a set of data

from its mean. It measures the absolute variability of a distribution; the higher the

dispersion or variability, the greater is the standard deviation and greater will be the

magnitude of the deviation of the value from their mean.

Σ(x−x̅ )2
Mathematically, Standard Deviation (σ) =
𝑁−1

Where,

Σ(x-x̅)2 = Sum of the mean deviation square

N= Total number of observations

Coefficient of variation: The coefficient of variation (CV) is a statistical

measure of the dispersion of data points in a data series around the mean. The

coefficient of variation represents the ratio of the standard deviation to the mean, and

it is a useful statistic for comparing the degree of variation from one data series to

another, even if the means are drastically different from one another. The coefficient

of variation shows the extent of variability of data in a sample in relation to the mean

of the population. In finance, the coefficient of variation allows investors to determine

how much volatility, or risk, is assumed in comparison to the amount of return

expected from investments. Ideally, lower CV is preferred as it indicates lower risk

and variability.

𝑆.𝐷.(𝜎)
Mathematically, C.V. =
𝑀𝑒𝑎𝑛 (x )
 16

Limitations of the study

Despite the optimum effort to make this report as accurate as possible, there were

some limitations experienced during the preparation of this report. They are presented

below:

i. The study is confined to four years of data only. Detailed calculations

covering a lengthy period which may give slightly different results, has not

been made.

ii. The findings and conclusion of this study may not be applicable to other

commercial banks.

iii. The study exclusively depends on published financial data, so it is subject

to the limitations that are inherent in the condensed published financial

statements.

iv. Comparison is made among only seven commercial banks out of twenty

two, which creates a limitation in comprehensive study.

 17

Chapter 2: Data Presentation and Analysis

Organizational profile

Organization profile contains the details about the selected banks and its

establishment, motives, number of employees etc. The profiles of selected banks are

given below:

Everest Bank Limited (EBL) is the major focus of our study as we compare

its financial performance with other commercial banks. Founded in 1994 as a joint

venture bank by Punjab National Bank and Nepalese investors, 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 and industrially. 39.2% of its share is

owned by local promoters, 40.77% by public shareholders and 20.03% by Punjab

National Bank.

“To be a leading commercial bank with pan Nepal presence and become a household

name, providing wide range of financial products and services under one roof” is the

vision of EBL. Growth through banking for all is the mission for the bank.

With 123 branches, 157 ATM counters, 32 revenue collection counters and 3

extension counters across the country EBL has been providing customer-friendly

services. Headquartered in Kathmandu, Its wide network connected through ABBS

system enables customers for operational transactions from any branches. Mr. Sudesh

Khaling is the CEO of Everest Bank Limited.

Apart from our major bank, there are other six banks which are taken for

performance comparison and they are: Nepal Bank Limited (NBL), Global IME Bank
 18

Limited (GBIME), Machhapuchhre Bank Limited (MBL), Nic Asia Bank Limited

(NICA), Prime Commercial Bank Limited (PCBL), and Siddhartha Bank Limited

(SBL)

Analysis of Capital Adequacy

Capital adequacy represents how well a bank is capitalized. Analysis of bank

capital and its soundness is done by calculating different ratios. In order to find out

the capital composition and sufficiency the following data are analyzed:

Capital adequacy ratio: It is the ratio of a bank‟s capital to its Total Risk Weighted

Exposures. Let us look at the capital adequacy ratio of banks.

Table 2.1 Capital Adequacy Ratio (%) of Selected Banks

Fiscal
EBL NBL GBIME MBL NICA PCBL SBL
year

2018/19 13.74 16.8 12.31 12.79 13.32 14.82 12.7

2019/20 13.38 17.01 12.48 13.02 13.5 13.84 13.17

2020/21 12.48 16.8 13.2 12.06 12.47 12.76 13.36

2021/22 11.89 15.05 12.67 13.36 13.38 12.24 13

(Source: Annual report of selected banks)

As presented in the table 2.1 the CAR ratio of Everest Bank Limited has been

declining from the fiscal year 2018/19 to the current fiscal year 2021/22. Even though

bank has continuously maintained required CAR of 10% as prescribed by the NRB, it

is however in decreasing trend which may cause bank unable to maintain required

capital adequacy ratio in the future if NRB hikes required capital adequacy ratio.
 19

16 15.05

14 13.36 13.38 13
12.67 12.24
11.89
12

10
CAR (%)

0
EBL NBL GBIME MBL NICA PCBL SBL
Banks

Figure 2.1 Column Chart of CAR of Selected Banks in FY 2021/22

From the figure 2.1, it is clear that EBL has the least CAR with 11.89%

among other banks in FY 2021/22. NBL has the highest capital adequacy ratio of

15.05%. Every bank has CAR higher than 12% except for EBL. Hence, even though it

is able to abide by capital adequacy framework, it will be a useful step if EBL

maintains higher capital adequacy ratio in order to compete with other banks in terms

of capital.
 20

Analysis of Asset Quality

Under the asset quality part we analyze how well a bank is managing its

assets specially loans, advances and investments.

Non performing loan ratio: This ratio is used to identify the proportion of non

performing loans to total loan and advances. It is calculated in the table below:

Table 2.2 Non-performing Loan Ratio (in %) of Selected Banks

Fiscal
EBL NBL GBIME MBL NICA PCBL SBL
year

2018/19 0.16 2.64 0.55 0.37 0.46 0.99 0.75

2019/20 0.22 2.47 1.76 0.52 0.75 1.48 1.38

2020/21 0.12 2.05 1.41 0.62 0.50 1 1

2021/22 0.12 1.83 1.28 1.04 0.53 0.85 1.07

(Source: Annual report of selected banks)

The table shows non performing loans to total loans and advances ratio.

EBL has the lowest non performing loan ratio from FY 2018/19 to 2021/22.

Meanwhile NBL has the highest non performing loan ratio. Lower NPL ratio signifies

that the bank is able to recover loans effectively and timely payment of principle and

interest is being made to bank. Higher ratio is not favorable for banks because it

increases the chances of loss for the bank.

 21

2
1.83
1.8
1.6
1.4 1.28
1.2 1.07
1.04
NPL

1 0.85
0.8
0.6 0.53

0.4
0.2 0.12

0
EBL NBL GBIME MBL NICA PCBL SBL
Banks

Figure 2.2 Column Chart of NPL of Selected Banks as of FY 2021/22

Figure 2.2 exhibits the column chart of NPL of banks as of FY 2021/22 in

which it is seen that EBL has the lowest NPL with 0.12%. The chart shows that NBL

has the highest NPL amongst any bank at 1.83%. GBIME, SBL, MBL, PCBL and

NICA have NPL of 1.28%, 1.07%, 1.04%, 0.85% and 0.53% respectively as of FY

2021/22.

Management Efficiency Analysis

Management efficiency is concerned with how well a management is

functioning. The following things are calculated in analyzing management efficiency:

Earning per employee: It is the net profit after taxes divided by number of

employees. It signifies how much each employee is contributing to the profit of the

bank. It shows the efficiency and competency of employees. Higher earning per

employee suggests better efficiency in the job performance. It is tabulated below:

 22

Table 2.3 Earning Per Employee (in Lakhs)

Fiscal
EBL NBL GBIME MBL NICA PCBL SBL
year

2018/19 34.5 11.2 16.28 14.2 8.7 30.31 13.72

2019/20 28.98 10.74 9.5 8.51 10.6 15.32 11.35

2020/21 18.73 11.82 14.06 10.64 8.6 21.11 15.32

2021/22 23.45 12.03 16.72 10.64 9.6 17.42 15.33

Average 26.42 11.45 14.14 11.00 9.38 21.04 13.93

(Source: Annual report of selected banks)

The data in table 2.3 shows the earning per employee. Everest Bank

Limited has been able to maintain high EPE throughout the four fiscal years. EBL

attained Rs 23.45 lakhs net income per employees in FY 2021/22 which is highest

among any sample banks in the year. Its close competitor is PCBL with Rs 17.42

lakhs per employee at the same fiscal year. NICA is at last position only having Rs

9.6 lakhs per employee in the same fiscal year.

 23

30
26.42
25
21.04
20
Average EPE

15 14.14 13.93
11.45 11
9.38
10

0
EBL NBL GBIME MBL NICA PCBL SBL
Banks

Figure 2.3 Column Chart of Four Years Average Earning Per Employee (in lakhs)

From the above column chart the average EPE from FY 2018/19 to FY

2021/22 is shown. It is done in order to find out which bank has been consistent in

terms of their employee performance. It is evident that EBL is at the top with Rs

26.42 lakhs per employee. Following it are PCBL, GBIME, SBL, NBL, MBL and

NICA with Rs 21.04, Rs 14.14, Rs 13.93, Rs 11.45, Rs 11 and Rs 9.38 lakh per

employee respectively. Hence it is pretty much clear that EBL is the best bank among

the competitors in terms of management efficiency.

Analysis of Earnings

Return on Assets (ROA): It depicts the relationship between earnings and

assets. It indicated how much income a bank generates given the assets. Return on

assets measures the profitability of a firm in relation to its total assets.

 24

Table 2.4 Return on Assets (ROA) of Selected Banks

Fiscal
EBL NBL GBIME MBL NICA PCBL SBL
Year

2018/19 1.94 1.51 1.82 1.61 1.56 2.15 1.49

2019/20 1.42 1.22 1.06 1.02 1.32 1.48 1.26

2020/21 0.89 1.33 1.2 1.02 1.09 1.72 1.25

2021/22 1.13 1.12 1.38 0.94 1.2 1.33 1.1

Average 1.35 1.30 1.37 1.15 1.29 1.67 1.28

SD 0.45 0.17 0.33 0.31 0.20 0.36 0.16

CV 0.34 0.13 0.24 0.27 0.16 0.21 0.13

(Source: Annual report of selected banks)

The data on table 2.4 exhibits ROA of seleted banks from the FY 2018/19

to FY 2021/22. From the 4 years average data it is concluded that PCBL has highest

ROA with 1.67% followed by GBIME and EBL with 1.37% and 1.35% respectively.

It shows that in terms of average return on Assets over the 4 years period EBL stands

in the third position followed by NBL, NICA, SBL and MBL with the ROA of 1.30%,

1.29%, 1.28%, and 1.15% respectively. However the absolute risk calculated by SD

and relative risk on ROA calculated by CV both suggests that EBL is the most risky

bank in terms of ROA. It stands at top with SD of 0.45 and CV of 0.34 which

indicates that EBL returns are not consistent throughout the 4 year period. Also the

declining trend in ROA does not provide a good signal in terms of return. Hence, it

can be concluded that EBL is failing to earn consistent return on the given assets.
 25

2.50

2.00

1.50
EBL
NBL
ROA

GBIME
MBL
1.00 NICA
PCBL
SBL

0.50

0.00
2018/19 2019/20 2020/21 2021/22
Fiscal Year

Figure 2.4 Trend Chart of ROA of Selected Banks

Trend chart of ROA in figure 2.4 represents that ROA was falling in FY

2018/19 for every banks rapidly. After that each bank recovered in its own way.

However the deviation in ROA can be clearly seen.

Earning per share: Earning per share is a net income earned by a single

share of a stock. It is obtained by dividing net income by number of shares. It shows

how much has earned by each number of share and gives idea to investor if it is

attractive investment. EPS of selected banks is calculated below:

 26

Table 2.5 Earning Per Share (EPS) of Sample Banks

Fiscal
EBL NBL GBIME MBL NICA PCBL SBL
Year

2018/19 38.05 26.99 23.47 21.07 34.22 23.6 23.07

2019/20 29.71 20.68 17.99 14.96 31.89 16.1 19.55

2020/21 19.91 23.43 19.25 17.76 28.18 20.32 22.79

2021/22 26.3 20.29 20.84 16.44 36.45 14.94 23.17

Average 28.49 22.85 20.39 17.56 32.69 18.74 22.15

SD 7.56 3.10 2.36 2.61 3.53 3.98 1.74

CV 0.27 0.14 0.12 0.15 0.11 0.21 0.08

(Source: Annual report of respective banks)

The data presented in table 2.5 exhibits banks‟ earning in terms of number

of shares. It is noteworthy that EBL is in second position with an average EPS of

RS.28.49 for the past four years. Only bank ahead is NICA with an average EPS of

Rs. 32.69 in the past four years. However, EBL has highest SD of 7.56 which

indicates that its EPS is not consistent in every fiscal year. It is risky for the investors

as well as shareholders. Also EBL has highest CV of 0.27. It shows there is highest

degree of variation in EPS is found in EBL than any other selected banks.
 27

40

35

30
EBL
25
NBL
EPS (Rs.)

GBIME
20
MBL
15 NICA
PCBL
10 SBL

0
2018/19 2019/20 2020/21 2021/22
Fiscal Year

Figure 2.5 Earning Per Share of Selected Banks

Trend chart of EPS on figure 2.5 shows that NICA has been able to

maintain high EPS throughout the fiscal years. Other banks are somewhat identical in

terms of EPS however EBL has the most deviation since its EPS dropped steeply until

2020/21 and only in 2021/22 it has increased.

 28

Price Earning (P/E) Ratio: This ratio reflects the price currently being

paid by the market for each rupee of currently reported EPS. This ratio facilitates

security analysis on the basis of future expected performance of Bank. It is calculated

below

Table 2.6 Price Earning Ratio of Selected Banks

Fiscal
EBL NBL GBIME MBL NICA PCBL SBL
Year

2018/19 17.5 12.45 12.48 12.53 13.09 11.78 13.79

2019/20 22.72 12.04 13.29 14.71 17.34 15.84 15.14

2020/21 37.06 18.9 22.9 21.68 35.27 23.57 19.35

2021/22 16.69 13.21 12.06 21.68 19.1 17.74 13.07

Average 23.49 14.15 15.18 17.65 21.20 17.23 15.34

(Source: Annual report of selected banks)

Table 2.6 shows price earning ratio of banks and its average from FY

2018/19 to FY 2021/22. EBL has the highest P/E ratio on average with 23.49

followed by NICA, MBL, PCBL, SBL, GBIME and NBL with P/E of 21.20, 17.65,

17.23, 15.34, 15.58 and14.15 respectively. Higher P/E ratio indicates that investors

are ready to pay higher price for a reported EPS. Also, higher P/E indicates that

investors believe that there are possibilities of future growth for the bank. Overall,

higher P/E means people have strong conviction that bank will yield better result

whether in terms of profitability, dividend or growth in future. EBL therefore is well

reputed in the market.

 29

40

35

30

25
EBL
P/E

NBL
20 GBIME
MBL
15 NICA
PCBL
SBL
10

0
2018/19 2019/20 2020/21 2021/22
Fiscal Year

Figure 2.6 Trend Chart of P/E Ratio of Commercial Banks

In figure 2.6 it is realized that up until FY 2020/21, P/E of every bank is in

increasing trend. It might be caused by the increase in NEPSE index. Since then, it is

declined significantly meaning that investors are no longer interested in buying shares

of commercial banks. It is the result of fall of NEPSE index.

Analysis of Liquidity

Liquidity of banks provides an insight into bank‟s capability to meet its

liabilities especially the withdrawal requests by its depositors.

 30

Credit to deposit ratio: It is the ratio of total loan and advances to total

deposit. Higher loan to deposit ratio indicates less liquidity and vice versa. Maximum

90% loan to deposit ratio is prescribed by NRB. Higher CD ratio can create liquidity

problem to the bank. CD ratio of banks is tabulated below:

Table 2.7 Credit to Deposit Ratio (%) of Selected Banks

Fiscal
EBL NBL GBIME MBL NICA PCBL SBL
year

2018/19 87.01 78.14 91.62 87. 84.55 89.15 89.65

2019/20 83.52 72.25 88.25 88.56 85.75 88.97 89.04

2020/21 85.3 82.76 85.59 86.53 87.58 89.23 90.6

2021/22 90.77 86.97 94.99 86.32 89.85 93.65 96.08

Average 86.65 80.03 90.11 87.1 86.93 90.25 91.34

(Source: Annual reports of respective banks)

Credit to deposit ratio from FY 2018/19 to FY2021/22 is shown by Table

2.7. On average NBL has the lowest CD ratio at 80.03%. Then NICA and EBL has

average CD ratio of 86.93% and 86.65% which indicates that these banks suffers less

when there is liquidity crisis and higher withdrawals by the depositors comparing to

other four banks. During the FY 2021/22 MBL has the lowest CD of 86.32% followed

by NBL, NICA, EBL,PCBL ,GBIME and SBL with 80.03%, 89.85%, 90.77%,

93.65%, 94.99% and 96.08% respectively. In the FY 2021/22 EBL attains 4th position

in terms of CD ratio. Still it has to reduce it a little so that future liquidity problems

can be minimized without more loss.

 31

98.
96.08
96. 94.99
93.65
94.
92. 90.77
89.85
CD Ratio

90.
88. 86.97
86.32
86.
84.
82.
80.
EBL NBL GBIME MBL NICA PCBL SBL
Banks

Figure 2.7 CD Ratio of Commercial Banks for the FY 2021/22

It is realized as of FY 20221/22 that three banks namely NBL, MBL, and

NICA has CD ratio of less than 90% while EBL, GBIME, PCBL and SBL has more

than 90%. It is considered that CD ratio above 90% can potentially create liquidity

problems for the banks.

 32

Current ratio (CR): It is the ratio of current assets to current liabilities.

Generally, current ratio higher than one is preferable.

Table 2.8 Current Ratio of Selected Banks

Fiscal
EBL NBL GBIME MBL NICA PCBL SBL
Year

2018/19 0.97 1.01 0.99 1 0.98 1.02 0.99

2019/20 0.93 1.22 1 1.01 1 1.03 0.98

2020/21 1.25 0.97 0.94 0.96 89.45 1 0.92

2021/22 0.92 0.92 0.96 0.96 0.97 1.01 0.88

(Source: Financial statements of selected commercial banks)

The above table shows the current ratio of sample banks. Even though

current ratio greater than one is considered good, the banks have not maintained

sufficient current assets to meet their current liabilities. Only one bank to have CR

more than 1 in FY 2021/22 is PCBL as it has CR of 1.01 times. In second position

there is NICA with current ratio of 0.97 times in FY 2021/22. Similarly GBIME and

MBL have both 0.96 current ratio. Then only comes EBL and NBL with current ratio

of 0.92 times for the FY 2021/22. At last position is SBL with only 0.88 times current

ratio.
 33

1.05
1.01
1
0.97
0.96 0.96
Current Ratio

0.95
0.92 0.92

0.9
0.88

0.85

0.8
EBL NBL GBIME MBL NICA PCBL SBL
Banks

Figure 2.8 Column Chart of Current Ratio of Selected Banks for the FY 2021/22

The chart shows that only PCBL has maintained current ratio of 1.01 times.

No bank has been able to maintain current ratio more than 1 except for it. It indicates

that commercial banks in Nepal are not able to sufficiently cover the current liabilities

if all of it is to be due at the same time.

 34

Cash Ratio: It is the analysis of how much liabilities a bank can payout in

terms of cash.

Table 2.9 Cash Ratio of Seleced Banks

Fiscal
EBL NBL GBIME MBL NICA PCBL SBL
Year

2018/19 5.12 7.32 8.6 10.04 10.26 5.97 6.13

2019/20 5.55 3.08 5.84 8.91 5.71 7.92 3.69

2020/21 5.52 3.51 5.06 6.1 6.96 4.8 2.98

2021/22 6.97 2.89 5.72 7.27 8.61 6.67 3.43

(Source: Financial statements of selected banks)

From the table 2.9 NICA has the highest cash ratio with 8.61% in the FY

2021/22. Then MBL, EBL, PCBL, GBIME, SBL and NBL come with a cash ratio of

7.27%, 6.97%, 6.67%, 5.72%, 3.43% and 2.89% respectively. It shows that NICA is

at the top and it can pay 8.61% of current liabilities by cash only.
 35

10
9 8.61

8 7.27
6.97
7 6.67
5.72
Cash Ratio

6
5
4 3.43
2.89
3
2
1
0
EBL NBL GBIME MBL NICA PCBL SBL
Banks

Figure 2.9 Cash Ratio of Selected Banks for the FY 2021/22

The above figure shows the cash ratio of selected banks and NBL has the

lowest cash ratio at 2.89%. NICA is able to maintain cash ratio of 8.61% which

indicates that 8.61% of its current liabilities can be paid out from cash and equivalents

only. It is necessary for the banks to maintain adequate cash ratio. Maintaining higher

than it requires causes cash to remain idle and maintaining lower can cause liquidity

problems and withdrawal problems for customers

 36

Ranking Process

Ranking is based on the points a bank has obtained in each parameter of a

CAMEL analysis. A bank obtaining 7, 6, 5, 4, 3, 2, and 1 points gets a ranking of 1, 2,

3, 4, 5, 6, and 7 respectively in each parameters namely capital adequacy, assets

quality, management efficiency, earnings and liquidity (CAMEL). The bank scoring

highest point in aggregate is the best bank in terms of performance. And the ranks are

obtained for all seven banks where banks are rated from best to poor in the sample.

When there is more than one subheading in a parameter, CAMEL rating is given to

each subheading. Each subheading is given a point of 1 to 7 based on the

performance. And after adding all the points of subheadings, one with most points is

ranked as no.1 on that parameter and gets 7 points on that parameter like above. It is

to be noted that rankings are based on the data of FY 2021/22 only and not the

historical data prior to 2021/22. The final ranking is given below:

Table 2.10 Points and Ranks Obtained by Commercial Banks

CAMEL/ Banks EBL NBL GBIME MBL NICA PCBL SBL

Capital Adequacy (C) 1 7 3 5 6 2 4

Asset Quality (A) 7 1 2 4 6 5 3

Management (M) 7 3 5 2 1 6 4

Earnings (E) 5 5 5 1 7 2 6

Liquidity (L) 4 3 3 7 7 5 1

Total Points 24 19 18 19 27 20 18

Rank 2 4 6 4 1 3 6
 37

Chapter 3: Conclusion and Action Implications

Summary

The study was done to examine the performance of Everest Bank Limited

and make a comparison of it to other commercial banks. The study was undertaken to

analyze the idea of how well EBL is performing amidst the fierce competition

between commercial banks. We have examined capital adequacy ratio, asset quality,

management efficiency, earnings and liquidity position of EBL as well as six other

commercial banks (NBL, GBIME, MBL, NICA, PCBL, and SBL).

Conclusion

It was concluded that Nic Asia Bank Limited was the best among others in

terms of CAMEL analysis of performance. It stood at the top with a whopping 27

points. EBL, which was the major focus of our study was able to secure second

position in ranking with 24 points. Other banks such as PCBL, MBL, NBL, GBIME

and SBL ranked 3rd, 4th, 5th, 6th, and 7th respectively. The study concluded that EBL is

doing excellent in the competitive market in terms of CAMEL model analysis as it

has been able to secure 2nd position.

The conclusion drawn from the study is EBL is performing better than the most of its

rivals except one. Let‟s explain the performance of EBL in terms of every parameter

of CAMEL.

Capital adequacy: Even though EBL has obliged by the rules of maintaining 10%

CAR, its capital adequacy ratio is the lowest among competing banks and in the

decreasing trend for the past four years. It was able to obtain last position in terms of

capital adequacy. The best bank was NBL terms of capital adequacy.
 38

Asset quality: In terms of asset quality EBL has been doing the best job as it has only

0.12% of non-performing loan ratio. It stood at the top with this stat. NBL was at the

bottom of the list with 1.83% non-performing loan ratio.

Management Efficiency: For analyzing management efficiency we calculated net

income per employee. EBL has the highest net income per employee with 23.4 lakhs

in FY 2021/22. EBL stood at the top followed by PCBL. NICA stood at the bottom of

ranking of management efficiency.

Earning: In terms of earning EBL has second highest EPS and high ROA in FY

2021/22. However the variability in the return is highest in both of the cases which

makes EBL a risky investment decision for investors. Hence, in terms of earning it is

at 3rd position with a score of 5 along with NBL and GBIME.

Liquidity: For liquidity analysis EBL scored 4 points out of 7 and stood at the 4 th

place. It is not good in terms of liquidity position for our bank.

 39

Actions implications

Based on the above findings and conclusions, certain recommendation can

be made here so that the concerned authorities, further researchers, academicians and

investors can get some insights on the present conditions on above topics. It is

considered that this research will be fruitful for them to improve the present condition

as well as for further research. The major recommendations of this study are as

follow:

i) Everest Bank Limited has the lowest capital adequacy ratio in comparison

to other banks, so it is strongly recommended to increase its CAR whether

by reducing risk in its assets or by increasing its capital fund.

ii) Asset quality of Everest bank limited is excellent hence nothing in specific

is recommended although it is encouraged to maintain the same level in

upcoming years.

iii) Management efficiency of EBL is better than other banks but still it is

recommended that management efficiency be improved.

iv) For earning EBL has the most deviation whether it‟s in terms of EPS or

ROA. Therefore it is recommended that EBL increase its earning and

reduce the inconsistencies in the future.

v) EBL needs to maintain enough liquidity, and also maintain current ratio of

more than 1 in order to function smoothly on a day to day basis. Hence, it

is required to maintain its current ratio at least to 1 in every fiscal year

from now.
 Bibliography

Adeniyi. (2006). Bank Credit and Economic Development in Nigeria: A Case Study

of Deposit Money Banks. Jos Journal of Economics.

Berger, A. N., Demsetz, R. S., & Strahan, P. E. (1999). The consolidation of the

financial services industry: Causes, consequences, and implications for the

future. Journal of Banking and Finance, 23(2-4), 135-194.

Fatihudin, D., Jusni, & Mochklas, M. (2018). How Measuring Financial Performance.

International Journal of Civil Engineering and Technology, 9(6), 553-557.

Gebregiorgies, E. (2021). Financial Performance Analysis through CAMEL Rating: A

Comparative Study of Selected Private Commercial Banks in Ethiopia.

Journal of Accounting and Marketing, 10(8).

Kandel, S. (2019). Analysis of Financial Performance of Commercial Banks of Nepal

Using Camel Approach. IEEE-SEM, 10(6).

Magoma , A., Mbwambo, H., Sallwa, A., & Mwasha, N. (2022). Financial

Performance of Listed Commercial Banks in Tanzania: A CAMEL Model

Approach. African Journal of Applied Research, 8(1), 228-239.

Majumder, T. H., & Rahman, M. M. (2016). A CAMEL Model Analysis of Selected

Banks in Bangladesh. International Journal of Business and Technology, 6,

233-266.

Najjar, D. A., & Assous, H. F. (2021). Key Determinants of Deposits Volume Using

CAMEL rating system: The Case of Saudi Banks. PLOS One, 12(16).
Nguyen, A. H., Nguyen, H. T., & Pham, H. T. (2020). Applying the CAMEL model

to assess the performance of commercial banks: empirical evidence from

Vietnam. Banks and Bank Systems, 15(2).

Nwanyanwu, & O.J. (2010). An Analysis of Bank Credit on the Nigeria Economic

Growth. 43-58.

Rauf, A. L. (2016). Towards Increasing the Financial Performance: An Application of

CAMEL Model in Banking Sector in the Context of Sri Lanka. Research Journal of

Finance and Accounting , 7 (5).

Lavanya, B., & Srinivas, T. (2018). Performance Analysis Usiing CAMEL Model- A

Study of Select Private Banks. JETIR , 5 (6).

Trivedi. (2013). Performance Analysis of Bankex Banks through Camel Model.

Management Dynamics , 13 (12)

Risal, H. G., & Panta, S. B. (2019). CAMELS-Based Supervision and Risk

Management: Waht Works and What Does Not. SAGE journals , 8 (3).
 Appendices

Point assigned based on earnings:

Earnings EBL NBL GBIME MBL NICA PCBL SBL

ROA 5 3 7 1 4 6 2

CV of ROA 1 7 3 2 5 4 7

EPS 6 5 3 1 7 2 4

CV of EPS 1 4 5 3 6 2 7

P/E 7 1 2 5 6 4 3

Total Points 20 20 20 12 28 18 23

Points in terms of 7 5 5 5 1 7 2 6

Points assigned based on liquidity:

Liquidity EBL NBL GBIME MBL NICA PCBL SBL

Credit to Deposit 4 6 2 7 5 3 1

Current Ratio 3 3 5 5 6 7 1

Cash Ratio 5 1 3 6 7 4 2

Total Points 12 10 10 18 18 14 4

Points in terms of 7 4 3 3 7 7 5 1