A STUDY ON FINANCIAL PERFORMANCE OF CIVIL BANK LIMITED

SUBMITTED BY:
SHIRISH SHRESTHA
UNIVERSITY ROLL NO.: 1408007891
COLLEGES ROLL NO: 1407201105

A PROPOSAL SUBMITED TO
HEAD OF THE DEPARTMENT
COLLEGE FOR PROFSSIONAL STUDIES
LC OF SIKKIM MANIPAL UNIVERSITY

IN PARTIAL FULFILLMENT O F THE REQUIREMENT FOR THE AWARD OF THE DEGREE OF

MBA IN FINANCE
KATHMANDU, NEPAL
OCTOBER, 2015

TABLE OF CONTENTS

COVER PAGE
TABLE OF CONTENTS

ABBREVIATIONS

1.0 INTRODUCTION....................................................................................................................1
1.1 BACKGROUND OF THE STUDY.........................................................................................2
1.2 BACKGROUND OF THE ORGANIZATION........................................................................3
1.3 STATEMENT OF THE PROBLEM........................................................................................4
1.4 THEORETICAL FRAMEWORK............................................................................................4
1.5 OBJECTIVE OF THE STUDY................................................................................................5
1.6 SIGNIFICANCE OF THE STUDY.........................................................................................5
1.7 LITERATURE REVIEW.........................................................................................................6
1.8 RESEARCH METHODOLOGY.............................................................................................7
1.8.1

Research design .. 7

1.8.2

Population and Sample.....................................................................................................7

1.8.3

Sources of data.................................................................................................................7

1.8.4

Data Analysis tools...........................................................................................................7

1.9

LIMITATIONS OF THE STUDY..........................................................................................8

1.10 ORGANISATION OF STUDY..............................................................................................8

1.11 GANTT CHART.....................................................................................................................9
BIBLIOGRAPHY..........................................................................................................................10

ABBREVIATIONS
ATM

Automatic Teller Machine

B.S.

Bikram Sambat

FY

Fiscal Year

NRB

Nepal Rastra Bank

BAFIA

Banking and Financial Institution Act

ROA

Return on Assets

ROE

Return on Equity

RWA

Risk Weighted Assets

S.D.

Standard Deviation

S.E

Share Holder Equity

1.0

INTRODUCTION

A bank is a financial institution that deals with monetary transactions. It deals in money,
receiving it as deposit from customers, honoring customer's drawing against such deposits on
demands, lending or investing surplus deposits until they are required for payment and so on.
The bank safeguards the deposits of their customers, promises to repay at the time of their need,
provide interests on their deposits and creates credit by providing loans to individuals, traders
and businesspersons.
Banking institutions are largely responsible for collecting household saving in terms of different
types of deposits and regulating them in the society by lending them in different sectors of the
economy. This sector has now reached even to the most remote areas of the country through
micro banking and has contributed a good deal to the growth of the economy. By lending their
resources in small-scale industries and large-scale industries under intensive banking program,
the banks have contributed to the economic growth of the Nation.
Bank offer the widest range of financial services especially credit, saving, payment services, and
perform the widest range of financial functions of any business firm in the economy .This
multiplicity of bank resources, services and function has lead intense and extensive competition.
Thus to be in the long run, bank needs to make its performance better than the other competitive
banks in the market. Financial analysis is the main quantitative judgment process of identifying
the financial strengths and weakness of the firm by properly establishing the relationship
between the items of balance sheet and profit and loss accounts. Financial analysis is an
evaluation of both the firms past financial performance and its prospects for the future.

1.1

BACKGROUND OF THE STUDY

The origins of modern Bank can be traced to early Renaissance Italy, to the rich cities in the
north like Florence, Lucca, Siena, Venice and Genoa. Then modern bank practice, including
fractional reserve bank and the issue of banknotes, emerged in the 17th and 18th centuries. In
1965, the Bank of England was the first to begin the permanent issue of Banknotes. During the
1990s, organizations focused more on giving back to customers and then the internet provided
more options and greater opportunities for organizations to improve their financial services.
Financial performance can be defined as the heart of financial decision. The achievement and
development of a firm is fully affected by the financial status and performance. Balance sheets,
profit and loss account and the accompanying notes are the most widely aspects of financial
statement of the banks. The banks balance sheet includes financial claims as liabilities in the
form of deposit and as assets in the form of loans. Financial innovation, which are generally
contingent in nature are consider as off balance sheet items. Interest received on loans, advance
and investment and paid in deposit liabilities are major components of profit and loss account.
The other sources of income are fee, commission and discounts, foreign exchange income,
dividends on investment, other service charges etc.

1.2

BACKGROUND OF THE ORGANIZATION

Civil Bank Limited is one of the latest banks in the country with the history of nearly a half
decade and is a fully commercial bank. Civil bank was established on Bhadra 2072 B.S. under
BAFIA and Company Act, 2063. The bank is licensed by NRB as an 'A' class commercial bank
of the country. It provides various banking services to a wide range of customers including elite
to poor individuals, institutional customers, and the customers from industry / business
communities.
Despite having small history, the bank has been contributing for the monetization of the
economy, eliminating dual currency in the market, help flourish industrial, commercial and
financial sector of the country; has now emerged as a modern and most technologically advanced
financial institute of the country. The bank has expanded its wings in the most part of the country
with 41 branches, several branchless banking and many more ATMs.
The bank with as many as half a million satisfied / direct customers ranging from poor to elite
ones and millions of indirect ones, has drawn important imprint in the picture of country's
economy through its significant involvement in the best use of its resources to enhance the
production, income and employment opportunities. The bank is fully committed to contribute its
best for the socio-economic development of the country and people in the days to come.

1.3

STATEMENT OF THE PROBLEM

Financial sector is the backbone of economy of a country. It works as a facilitator for achieving
sustained economic growth through providing efficient monetary intermediation. A strong
financial system promotes investment by financing productive business opportunities,
mobilizing savings, efficiently allocating resources and makes easy the trade of goods and
services. In context of Nepal, commercial bank tries to play such vital role for economic growth
of nation. As being commercial institution, a commercial bank must make profit out of its
operation for its survival and fulfillment of its responsibilities. The study tries to seek to answer
the following questions:

What are the liquidity, assets quality, profitability, risk observing capacity and efficiency

position?
What are the majors factors affecting the financial performance of the bank?
How are the commercials banks managing their financial needs?
Which types of relation seemed in ROA & ROE with other selected ratios?
At what extends the banks are able to raise and maintain profitability?
What is the financial position of the bank in market?

1.4

THEORETICAL FRAMEWORK

This research incorporates the two types of study variables. They are independent variables and
dependent variables. Independent variables presumed to influence activities, outcomes and
quality of financial services of the bank. Dependent variable depends on the independent
variables and the one that we measure or analyze during the research.

1.5

OBJECTIVE OF THE STUDY

To analyzes the liquidity, assets quality, profitability, risk observing capacity and efficiency

of the bank.
To analyzes and compare the lending capacity of selected bank.
To examine income and expenditure of the bank.
To examine the relationship of ROE and ROA with other ratio like capital adequacy ratio,
total risk weighted exposure to total assets, non-performing loan to total loan, return to
total deposit etc.

1.6

SIGNIFICANCE OF THE STUDY

The financial performance analysis is an effective managerial evaluation. It studies the each
aspect of the commercial banks i.e. risk observing capacity, assets quality management,
profitability condition, liquidity position and efficiency management aspect. Consequently, the
effect on market value of the share can be verified with profitability analysis. A proper profit
planning considerably contributes to improve the overall financial performance and leads the
organization towards success. This study will be helpful to management of the bank to make
effective profit planning strategy for future. This also will be valuable for researcher, students
who want to investigate into the financial performance analysis of the selected commercial banks
of Nepal.

1.7

LITERATURE REVIEW

The review of literature is a fundamental part of the research. Every search requires a clear cut
idea on the problem of study and its solution, which emerges from the review of literature as it
provides foundation for the research to be conducted.
The review of literature of this research will include review of related books, journals, article,
annual report published by the bank and previous unpublished Master Level Thesis etc.

1.8

RESEARCH METHODOLOGY

1.8.1 Research design

The study will follow descriptive and analytical research design. The data will be collected
through financial statements and interviews with Heads of Departments. The historical data of
the bank will also be analyzed.

1.8.2 Population and Sample

The population of the study will be the employees of Civil Bank, mostly who are assigned under
Finance Department. Since the Bank has centralized Finance department, the corporate office of
the bank will be visited and its staff will be interviewed.

1.8.3 Sources of data

The study will use mostly secondary data and some primary data as well.

Primary data will be collected through interviews with the employees of the bank.

Secondary data will be collected through different financial statements and websites.

1.8.4 Data Analysis tools

The data will be checked, summarized and categorized using various statistical tools and will be
presented in appropriate tables and diagrams.

1.9

LIMITATIONS OF THE STUDY

There are always certain limitations while doing any kind of research. Some constraints for this
study are as follows:

The study is concerned with Civil Bank Limited which may not represent the all 30

Commercial Banks.
The study is concerned to analyze liquidity, management assets quality management,
profitability management, risk observing capacity and efficiency management aspect. It

ignored other aspects like investment policy of the bank.

This study will be based on the financial statement like balance sheet, profit and loss

account and cash flow statement which provides the quantitative information.
There is the limitation of time, cost, resources etc.
The research is based on the secondary data published and processed by the bank and
Banking regulation Department, Nepal Rastra Bank.

1.10 ORGANISATION OF STUDY

Chapter I

: Introduction

Chapter II

: Literature Review

Chapter III

: Research Methodology

Chapter IV

: Data Presentation and Analysis

Chapter V

: Conclusions and Recommendations

1.11 GANTT CHART

Activities / months(2016)

December

Literature review preparation and

presentation of thesis proposal
Data collection and study
Data analysis
Initial Draft and presentation
Final report
submission

presentation

and

January

February

Marc
h

April

May

BIBLIOGRAPHY
Books:

Joshi, P.R. (2003). Research Methodology, Kathmandu: Buddha Academic Publishers

and Distributors Pvt. Ltd.

Edward, E. O. & Bell, P. W. (1991). The Theory & Measurement of Business Income.
Berkeley, CA: The University of California Press.

Kothari, C. R. (1990). Research Methodology, Method & Techniques. New Delhi: Vikash

Prakashan.
Nissim, R. & Penman, T. (2008). Ratio Analysis & Equity Valuation. From Research to

Practice.
Pandey, I. M. (1992). Financial Management. New Delhi: Vikash Publishing House Pvt.
Ltd.

Websites:

www.civilbank.com.np

www.businessdictionary.com

www.nrb.org.np