Chapter- I Introduction

1.1 Background

Financial performance is the important statement of an organization. It is a decisionmaking

process to incur strengths or weaknesses of the organization and knowledge of its revenue
generation status. It is a mirror to look into development activities to be undertaken by the
organization or companies. It should also measure or evaluate internal and external
information of past activities, current position and future prospects of organization or venture.
Financial performance evaluation looks into the management team of organization, its
performance in future, efficiency of resource utilization and overall position of the organization.

The initiation of formal banking system in Nepal commenced with the establishment of Nepal
Bank Limited (NBL) in 1937(1994 BS), as the first Nepalese commercial bank. The country's
central bank, Nepal Rastra Bank (NRB) was established in B.S. 2013 by Act of B.S. 2012, after
nearly two decades of NBL having been in existence. A decade after the establishment of NRB,
Rastriya Banijya Bank (RBB) in B.S. 2022, a commercial bank under the ownership of His
Majesty’s Government of Nepal (HMG/N) was established, which provides economic and
financial intermediation in the economy.

In the context of banking development, the 1980s saw a major structural change in financial
sector policies, regulations and institutional developments. HMG/N emphasized the role of the
private sector for the investment in the financial sector. The financial sector liberalization,
started already in the early eighties with the liberalization of the interest rates, encompassed
further deregulation of interest rates, relaxation of entry barriers for domestic and foreign
banks, restructuring of public sector commercial banks and withdrawal of central bank control
over their portfolio management. These policies opened the doors for foreigners to enter into
banking sector under joint venture. Consequently, the third commercial bank in Nepal, or the
first foreign joint venture bank, was set up as Nepal Arab Bank Ltd (now called as NABIL Bank
Ltd) in 1984. Thereafter, two foreign joint venture banks, Nepal Indosuez Bank Ltd. (now called
as Nepal Investment Bank) and Nepal Grindlays Bank Ltd (now called as Standard Chartered
Bank Nepal Ltd.) was established in

1986 and 1987 respectively (http://anju.page.tl/Commercial-Bankinghtm). History has proven

that though the extent may vary from country to country requirement of economic
development of any country heavily relies on its banking system.

Banking institutions are important for resource mobilization and all-round development of the
country. It provides resources for economic development, maintains economic situations of
various segments and extends credit to the people. Banks are those institutions which raise
funds from depositors and then lend those funds to needy individuals and /or institutions. They

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offer the widest range of financial services especially credit, savings, and payment services and
perform the widest range of financial functions of any business firm in the economy.

Like other countries, goldsmiths, merchants and moneylenders were the ancient bankers of
Nepal. Tejarath Adda established during the tenure of then Prime Minister Ranodip Singh (1993
B.S.) was the first step towards the institutional development banking in Nepal. Tejarath Adda
did not collect deposits from the public but provide loans to employees and public against the
bullion. (Dahal & Dahal, 2056: p10)

1.2 Profile of organization

Citizens Bank International Limited has been established as a reliable and trustworthy partner
for all financial solutions. Institutionalized by a highly professional and experienced team, we
have gained credibility in the banking sector through quality financial service.

History

Established on April 20, 2007 (2064/01/07) as 20th commercial bank of the nation, “Citizens
Bank International Limited”, has its corporate office at the heart of the financial sector of the
country, Narayanhiti Path, Kathmandu. It is promoted by eminent personalities, business and
industrial houses and reputed individuals having high social standing and has been managed by
a team of experienced bankers and professionals. There are 174 branches and 117 ATMs all
over the country.

Mission

To be a trustworthy partner for the progress of individuals and institutions by designing,

producing and delivering the best financial solutions.

Vision

To be the leading bank known for its service excellence in the region.

FIVE CORE VALUES

Customer Focus: We are committed to meet the financial needs of our customers and exceed
their expectations through innovative solutions.

Service Excellence: We promise to deliver customer-centered products and services par

excellence.

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Human Resource: We employ bright, honest, helpful and pleasant people. We nurture and
empower them to achieve their full potential.

Corporate Governance: We believe in being accountable, conducting business ethically and

maintaining transparency.

Social Responsibility : We are committed to take social initiatives for the development of the
nation.

1.3 Objectives

The main objective of this study is to analysis the financial position and to know the position of
the Citizens Bank Limited. The specific objectives of this study are:

General Objective: The primary objective of financial performance analysis is to understand and
diagnose the information contain in financial statement with a view to judge the profitability
and financial soundness of the firm, and to make forecast about future prospects of the firm.

Specific objective:

To determine the impact of COVID-19 on financial performance of bank

To determine the dividend trend according to financial performance

To determine the investment opportunities and share market according to financial

performance

To see the trend profitability of the bank.

To access about the return on investment.

To know the liquidity and leverage ratios of the bank.

1.4 Rationale of the study

The study identifies rationale of various groups.

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This research helps to find liquidity position to the persons and parties such as general
readers, decision makers, brokers, traders, shareholders, financial agencies, businessman and
general public (depositors, prospective customers, investors etc.).

This study finds leverage position which is used as pilot work for future research.

To identify how effectively operating assets utilize by the CBIL.

To identify financial position of Bank in term of profitability.

1.5 Review

As this research is related to financial performance analysis of CBIL, following aspects of

analysis are reviewed in sequential manner.

Concept of financial analysis

Importance of financial performance analysis

Objectives of financial analysis

Limitation of financial analysis

Source for judging financial performance

Methods of analyzing and evaluation financial performance

1.6 Methods

In this study, the main purpose of the present researcher is to study the financial performance
of Citizens Bank International Limited. For this, the present researcher has applied certain
methodologies of research. There are basically two methods to conduct the research i.e.
quantitative and Qualitative research.

In this study, present researcher has used quantitative method for reliable results. This research
uses statistical or numerical data for systematic investigation of social phenomena. Basically,
this method analyzes data for trends and relationships and to verify the measurement made i.e.
this research examined the conceptual framework that describes the relationship between
different year financial statements.

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1.7 Limitations

Limitations of study on ratios analysis are summarized as under:-

Study is based on only secondary data.

Only 5 years data are taken.

The study is annualized only on ‘Ratio Analysis’ topic. So study is limited on the title.

The study analysis concentration is taken on the Ratio Analysis of the central office of Citizens
Bank Limited.

Chapter –II Results and Analysis

This chapter deals with the analysis and interpretation of data according to the research
methodology to attain the objectives of this study. During analysis data gathered from various
sources have been inserted in tabular form. Using financial and statistical tools the data have
been analyzed.

2.1 Data Presentation

According to Share Sansar

Symbol CZBIL

Name Citizens Bank Internat

Sector Commercial Bank

Listed Shares 125,769,232.00 units

Paid Up Rs. 100.00

Total Paid Up Value Rs. 12,576,923,200.00

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 Operation Date 2007-04-20

Phone Number 01- 4169067 / 4169068

Email [email protected]

Address Kamaladi , ktm

Website Link

Citizens Bank International Limited Key Financial Indicators of Last 5 years

Particulars FY 2072/73 FY 2073/74 FY 2074/75

1. Net Profit / Gross Income Percent 27.31 19.36 15.41
2. Earnings Per Share (Basic) NPR 35.25 20.27 15.37
3. Market Value Per Share NPR 680 403 236
4. Price Earnings Ratio Times 19.29 19.88 15.36
5. Dividend (including bonus) on Share Capital Percent 25.78 17 5.263
6. Cash Dividend on Share Capital Percent 1.29 1 1.635
7. Interest Income / Loans and Advances Percent 9.41 10.55 12.93
8. Staff Expenses / Total Operating Expenses Percent 44.19 44.94 62.33
9. Interest Expenses / Total Deposits and Borrowings Percent 4.38 6.32 8.15
10. Foreign Exchange Gain / Total Income Percent 3.62 3.27 3.32
11. Staff Bonus / Total Staff Expenses Percent 52.13 35.9 24.19
12 Net Profit / Loans and Advances Percent 3.1 2.43 2.36
13. Return on Total Assets Percent 2.24 1.8 1.72
14. Total Credit / Deposits Percent 85.59 91.89 92.75
15. Total Operating Expenses / Total Assets Percent 1.38 1.62 1.75
16. Adequacy of Capital Fund on Risk Weighted Assets Percent 12.4 16.88 13.84
Core Capital Percent 10.57 15.37 12.76
17. Non-Performing Loans / Total Loans (As per NRB Directive) Percent 1.38 2.02 1.48
18. Weighted Average Interest Rate Spread (As per NRB Directive) Percent 3.96 3.19 3.84
19. Book Net Worth Per Share NPR 121 136 137
20. Number of Equity Shares (At Year End) Nos. 30,652,338 69,216,897 80,332,364
21. Number of Permanent Staffs Nos. 652 684 844
22. Return on Equity Percent 20.36 11.52 11.22
23. Dividend Pay Out Ratio Percent 3.66 6.4 0.34

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24. Earnings Yield Percent 4.36 6.43 6.51
25. Dividend Yield Percent 3.79 4.22 2.23
26. Cost to Operating Income Ratio Percent 31.32 40.44 41.48
27. Total Assets to Shareholder' Fund Times 10.38 6.97 7.06
28. Shareholders’ Fund to Total Liability including Contingent Liability Percent 7.39 10.95 12.03
29. Base Rate Percent 6.06 11.17 11.78
30. CCD Ratio as per NRB Directives Percent 77.63 78.63 77.87
31. Number of Branches Nos. 56 60 78
32. Number of ATMs Nos. 49 57 70
33. Net Profit per staff NPR 1,657,021 1,581,377 1,462,208
34. Per employee staff cost NPR 452,764 642,581 928,979
35. Diluted Earnings Per Share NPR 24.55 20.36 15.37
36. Share capital (in billion) NPR 4.40 8.03 8.03
37. Yearly Expenses (in billion) NPR 3.46 5.29 6.84
38. Yearly Income (in billion) NPR 4.54 6.37 8.07
39. Net Profit (in billion) NPR 1.08 1.08 1.23
40. Reserve Fund (in billion) NPR 1.36 1.63 2.85

35.25 Earnings Per Share (NPR)

20.27
17.49
15.37
13.88

2072/73 2073/74 2074/75 2075/76 2076/77

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 Price Earnings Ratio(times)
19.29 19.88

15.36
12.81 13.55

2072/73 2073/74 2074/75 2075/76 2076/77

Dividend (including bonus) (percentage)

25.78

17
15
11

5.263

2072/73 2073/74 2074/75 2075/76 2076/77

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 Book Net Worth Per Share(NPR)
149.26 147.61
136 137
121

2072/73 2073/74 2074/75 2075/76 2076/77

Share capital (NPR in billion)

9.09
8.03 8.03 8.37

4.40

2072/73 2073/74 2074/75 2075/76 2076/77

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 Reserve Fund (NPR in billion)

3.39
2.85 2.83

1.63
1.36

2072/73 2073/74 2074/75 2075/76 2076/77

Income (NPR in billion)

10.62
9.69

8.07

6.37

4.54

2072/73 2073/74 2074/75 2075/76 2076/77

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 Expenses (NPR in billion)
9.42
8.22

6.84

5.29

3.46

2072/73 2073/74 2074/75 2075/76 2076/77

2.2 Analysis of results

2.2 Findings
Chapter-III Summary and Conclusion

This chapter is dedicated to provide conclusions after analyzing the financial performance of
joint venture banks named Everest Bank Limited. It also tries to provide some suggestions and
recommendations to the bank from the conclusion derived from the study.

3.1 Summary

Financial analysis is the process of identifying the financial strengths and weakness of the firm
by properly establishing relationship between the items of balance sheet and the profit and loss
account. Ratio analysis is one of the tools used by financial analysis for making decisions
regarding credit and investments. This method utilizes the data found in financial statements to

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determine a bank's standing. It will compare the bank's ratios to its past performance as well as
to bank statistics to determine risks, trends, and to identify any peculiarities. To conduct the
research work, the researcher consulted mainly the secondary sources such as documents
published by concerned banks and also consulted the personalities of the related bank as
primary sources where as necessary. Before presenting and analyzing the data, there was also
need to review related books, prior research on the topic. Obviously, it helped the researcher
to construct conceptual framework and to analyze and interpret the secondary data according
to objective set forth previously. Then the research work was analyzed and interpreted by
financial tools such as liquidity ratio, activity turnover ratio, leverage ratio, earning per share,
profitability ratio and dividend per share as well as statistical tools such as mean, standard
deviation, CV, Probable Error and Trend analysis.

3.2 Conclusion

Establishment of commercial banks especially joint venture banks have continued in response
to the economic liberalization policies of the government. So, now in Nepal there are twenty-
eight (research period) commercial banks competing with each other in their business. EBL,
which is working as Joint Venture Bank in Nepal by providing the quality and banking services.
The various financial indicators were used for analysis of financial data of the sampled bank.
The analysis is done on the basis of financial statement from 2013/14 to 2017/18. This study is
mainly based on the secondary data. The researcher has analyzed the data by using financial
tools like ratio analysis as well as statistical tools like mean, S.D. and hypothesis etc.

The liquidity positions of all the banks were strong and enough to meet their immediate needs
of cash and short-term obligations. The current ratio of EBL is in fluctuating trend. The average
mean ratio is 1.08:1, 1.08:1, 1.09:1, 1.00:1 and 1.12:1 times in the study period. These all ratio
shows that the bank has maintained the acceptable liquidity position of the bank.

The liquidity position of the bank is satisfactory because the current ratios of the different years
are about to meet to the standard. Higher current ratio means the better liquidity position. 2:1
is considered to be an adequate ratio. Current assets and current liabilities manage the current
ratio. The cash and bank balance to current asset of EBL fluctuated over the study period.

Interest income is the main source of income and over the years it has become more dominant
as 83.07% of total income contributed by it. The bank's liquidity position is satisfactory. The
liquid assets have increased substantially in the review periods.

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Leverage ratios are judging the long-term financial position of the firm. EBL maintain the debt
equity ratio, total debt and total assets, net profit before interest and tax with interest has
managed. EBL managed greater proportion of the owner's capital in the capital structure lesser
will be the financial risk borne by has legal obligation to pay interest to debt holders
irrespective of the profit or loss incurred by the firm.

Cash and bank balance to the current and saving deposit ratio seems to be consistent. This
exhibit that EBL able to meet its immediate obligation as the bank balance is enough to the
current and saving deposit.

Loan and advances to total deposit ratio fixed deposit was inconsistent during the study period.
Overall rate can be satisfactory.

EBL has made enough investment in Nepal Government securities like Treasury bond,
development bond and shares and debentures in the final years of the study period.

EBL is operating at high risk. Data shows EBL seemed unsuccessful to utilize the raised fund
from the current and saving deposit that may have affected the profitability adversely.

NRB balance by total deposit maintained as directed by NRB. It was higher than the prescribed
percentage. EBL has maintained NRB balance to fixed deposit ratio above the standard
prescribed by NRB.

Profitability ratio is measurement of efficiency. It provides the degree of success in achieving

desired profit. Profitability in terms of net profit to total assets the highest ratio in 2013/14 is
2.20 ratio, net profit to total deposit ratio, return to net worth (shareholders equity), return on
net worth ratio and net profit margin ratio, EBL average ratio is always higher. Thus, it can be
concluded that EBL is getting good return from its investment.

EBL earned a net profit of Rs.1,549.70 million for the fiscal year 2013/14 and this comes to be
Rs. 2,581.68 million more as compared to the same period in the previous fiscal year 2017/18.
The bank's financial performance in the last five years shows a continuous increase in its net
profit.

The major expenses, for the banks EBL, are interest expenses, staff expenses, office expenses
and provision for bonus.

Return on asset ratio showed that profitability with respect to financial resources investment of
the bank assets is unsatisfactory but changes in stable manner.

Performing assets to total asset ratio showed that EBL has funded total assets for income
generation. EBL has utilized assets effectively.

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Expenditure analysis showed that interest expenses occupied major portion in expenses of EBL.

The EPS of EBL is decreasing trend, in 2013/14 EPS is Rs. 86.04 and in 2017/18 EPS reach to Rs.
32.16 within the study period. This shows that, EBL is found decreasing its performance in term
of EPS.

The trend analysis of total deposit, loan and advances and net profit shows the increasing
trend.

References

https://everestbankltd.com/about/profile/

A Thesis Submitted By Dipak Regmi

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