A Field Report on NIC Bank, Kathmandu

1. INTRODUCTION
1.1 Background
Generally, an institution established by law, which deals with money and credit is
called Bank. It is obvious that in common sense institution involved in monetary
transaction is called bank. Banking plays a significant role to the development of the
economy. It provides an effective payment and credit system, which facilitates the
cannily of the fund from the surplus sending units (savers) to the deficit spending units
(investors) in the economy. It provides a number of services to the general public as well
as to the government. So, it has become a successful to be an essential part of the global
society.

According to section 2 (a) of the NRB Act 2058 (2003) defines bank as follows:
“Bank means the NRB established under section 3 of this act.” Likewise, according
to Kent ; “A bank is an organization whose principal operation are concerned with the
accumulation of the temporary ideal money of the general public for the purpose of
advancing to others for expenditure.”

The basis task of the financial institution is to mobilize the saving of the community
and ensure efficient allocation of these saving to high yielding investment. Commercial
bank plays an important role in affairs of the economy in various ways. The operation of
the commercial bank records the economic plus of the economy. The size and the
composition of their transaction mirror of the economic happening of the country. They
are as essential instrument accelerated growth in a developing economy.

In Nepal, Commercial Banking started with the establishment of the Nepal Bank
Act 1993 B.S. The authorized capital was contributed by government 51% and remaining
by public 49% Nepal Bank Ltd. Was established in 1994 B.S.

Financial management is essential to utilize and manage scare financial resource

efficiently. Now a days, different tools and techniques are applied to evaluate the

1 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

performance of the business organization. Ratio analysis is the most effective and
commonly used tool in the analysis of financial statement and evaluation of managerial
performance. So the narrator has chosen NIC Bank for this purpose.

1.2 General Introduction to Financial Statement Analysis/Ratio Analysis

The relationship between two accounting figures, expressed mathematically is
known as financial ratio. A ratio helps the analyst to make a qualitative relationship,
which can be in turn used to make qualitative judgments. Such is the nature of all
financial ratios.

Financial statement analysis is the process of identifying the financial strength and
weakness of the firm. Ratio analysis is one of the most commonly used techniques in the
analysis of the financial statement and evaluation of managerial performance. Financial
statements do not provide meaningful understanding of the performance and financial
position of the firm. So, the ratio of the analysis can be used for this purpose. It helps to
point out the problem in area of the business operation and provides a basis to
recommend corrective action.

Ratio analysis helps to evaluates financial condition and performance of any

business enterprise. It tries to know whether the liquidity of the NIC bank is good or bad.
It is regarded as most powerful tool of financial analysis. Business firms use ratios as
yardsticks for evaluating the financial condition and performance.

A ratio is defined as “the indicated quotient of two mathematical expression ‘and

as’ the relationship between two or more things.”
“A ratio is the simple one number expressed in term of analysis. It is found by
dividing one number by another. A percentage is a kind of ratio in which the base is taken
as equaling to hundred and the quotient is expressed as per hundred of the base.” It helps
to point out the problem in any area of business operation and provides a basis to
recommend corrective action.

2 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

1.3 Background of NIC Bank, Kathmandu

NIC Bank is one of the largest capitalized commercial bank promoted by reported
industrial and business houses of the kingdom. The bank is registered on Jestha 17, 2054
in the company registrar office as limited company under Commercial Bank Act 2031.

The bank was licensed by NRB to handle all commercial banking transaction
commenced operation on 21st July 1998 from its head office and its branch is situated at
Kathmandu. The bank has been promotes by the successful industrial and business house
like Vishal Group, Triveni Group, Golcha Organization, Shah Udhyog holding 60% of
the share capital and the state owned R.B.B holding 5% of share capital. It has authorized
capital Rs.1000 million, issued capital of Rs.500 million. Individual promoter
shareholders have 60%, R.B.B Bank 5% and public share holding 35% share amounting
to Rs173 million of the total capital subscribed. In spite of the market competition, the
bank is able to maintain its strength showing its future prospects to be even better, in the
first of the 2nd fiscal year it has been able to collect more than 1 billion rupees of deposit
and its lending has crossed Rs.835 million.

The bank is located at Kamlati Kathmandu, Nepal and it has extended its five
branches in various cities of Nepal till now.
 NIC Bank Ltd, Main Road , Biratnagar (Head Office)
 NIC Bank Ltd, Mahendra Path, Dharan
 NIC Bank Ltd, Bhadrapur Road, Birtamod
 NIC Bank Ltd, Adarshanagar, Birgunj
 NIC Bank Ltd, Ram Mandir Chowk, Janakpur

NIC Bank is providing highly efficient and qualified managerial and operational
services to its customer.

3 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

In this way, NIC Bank is maximizing the yield on shareholders investment,

contribution to the national economy in terms of assistance in economic developmental
activities is what the bank is striving for.

1.4 Area of Study:

The main area of study is to highlight the overall financial position of NIC Bank by
using different ratio analysis measurement tools. Ratio analysis helps to evaluates
financial condition and performance of any business enterprise. It tries to know whether
the liquidity of any bank is good or bad. It is regarded as most powerful tool of financial
analysis. Business firms use ratios as yardsticks for evaluating the financial condition and
performance. Thus, a good financial performance can be achieved through comparison by
ratio for the same concern over a period of years; or for one concern against another.
Accounting ratio calculated for a number of year’s shows the trend of change of position
i.e. whether the trend is upward or downward or static. The ascertainment of trend helps
us in making estimate for future and will be useful to anyone further studying in same
field.

1.5 Issues to be addressed/ question to be answered:

Banking system is making much more progress and it has been set up with the
problem of this. This report highly focuses on overall financial performance of NIC
Bank. Therefore this study surrounds and deals with the following issues of the bank:
 What is the overall financial performance of NIC Bank?
 How ratio analysis procedures are done in NIC Bank?

1.6 Objective of study

Research is a theory building activity. Theory is a relationship between two or more
facts. The research design refers to a conceptual structure within which the research is
conducted. Thus, research design is a plan to obtain the answer of research question
through analysis of data. The first step of the study is to collect necessary information and

4 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

data concerning the study of NIC Bank Limited. The task will be fulfilled by the
collection of secondary data and various published information regarding the context.

Analytical, descriptive and exploratory research design will be used for clearing the
situation. On the basis of presented data and facts the data is carefully studied and
analyzed systematically under specific major headings so as to meet the objective of the
study. On the other hand, the accumulated data is described and tabulated systematically.
In this study, only ratio analysis has been designated to analyze the overall performance.

Therefore, the main objective of this study is to identify the financial performance
of NIC Bank. To achieve the mention objectives the appropriate research methodology
has to be followed. Thus, in this chapter focuses have been made on research design,
nature and sources of data, data collection, processing procedure and tools used for
analysis. With the help of this analysis, we can evaluate the financial performance of NIC
Bank. Thus, the purpose of the fieldwork assignment is:-
 To examine the financial performance of NIC Bank in terms of their:
a. Liquidity Position
b. Leverage/capital structure ratio
c. Profitability ratio
d. Activity turns over position
 To identify the trend of some important variables.
 To evaluate the effectiveness of collection of deposit and their utilization.

Limitations of the study

Everyone knows simple fact that every studied has been conducted within certain
limitations. The present studies have been certain limitations:
 The study covers a period of two years i.e. 2061/2062 and 2062/2063.
 The study is based on the published annual report of NIC Bank.
 The study is based on mainly secondary data and to some extent, on primary data too.
 The study has not paid attention towards the funds flow, cash flow patterns, etc.

5 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

 The study focuses on banking performance only, so the study may not be sufficient
for depth analysis.
 Only limited financial tools i.e. ratio and to some extent, trend percentages are used
for this analysis. But the study is mainly depended on ‘Ratio Analysis’.
1.7 Organization of study
This study is organized into the following chapters for the convenient of its good
understanding. These are:

Introduction
The first chapter is introductory in nature. Its gives the background of the study. It
also includes area of study, statement of the problem, objective of study, need of study
and organization of the study.
Presentation and Analysis of Data
The second chapter includes the presentation of data, tables and analysis of data.
This enumerates the research design methods and sources of data, data collection method
and data analysis,
Summary and Conclusion
This chapter consists of summary of the whole study. It provides the brief of
findings and recommendation.
Besides these chapters, bibliography, appendices have also been prepared at the end
of the research work.

1.8 Need of study:

This study tries to find out the financial performance of NIC Bank. It also tries to
generate new knowledge in the field of ratio analysis and also tries to know the trend of
ratio analysis. This study measure the impact of ratios which enable the stakeholders,
general public, shareholders for making appropriate decisions and strategies in the
banking sector. This study will also measure the different ratios from which the
researcher believes that the findings of the study will be useful and valuable.

6 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

This research has attempt to analyze the different data which may probably provide
real pictures of sampled companies to potential investors in order to take proper
investment decision with the help of ratio analysis.

The basic need of the study is to fulfill the partial requirements of the BBA 5 th
semester Purbanchal University course. This gives opportunity and exposure of the
student to obtain first hand knowledge about the related topic in the field from the
experts. Another point is that, it can be taken as the building of knowledge to write a
thesis in the final year.

1.9 Methods of Data Collection

The various data are required for the study but the study is purely based on the basis
of secondary data. The basic secondary data in the form of published annual report to
different years are collected from the account department. Thus, study basically uses the
secondary data, which were firstly collected and tabulated into a separate form
systematically. Simple statistical analyses, such as percentage are calculated where
necessary and these are presented and analyzes in descriptive way. Similarly, the
financial ratio is also widely used for the analysis and interpretation of the performance
of NIC Bank.

The published financial data are mostly used in the study to analyze the overall
performance of NIC Bank, visibly balance sheet and profit and loss account and the only
base of this study which are secondary in nature.
There are generally two types of data collection method. They are explained below:
 Primary Data or Resources:
Primary data are those types of data which is originally collected by the researcher.
It is collected for the first time for the purpose of a statistical inquiry. Interview,
investigation, visiting to the spot, etc are the suitable example of primary data collection
method.

7 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

 Secondary Data or Resource:

It refers those type of data obtained from any published source such as magazine,
newspaper, reports, etc. the data used for this study secondary in nature but required
information has been collected through related person of NIC Bank. For the study, 8 th and
9th annual report of NIC Bank has been collected.

8 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

2. PRESENTATION AND ANALYSIS OF DATA

2.1 Presentation of Data:

This chapter discloses the detailed study of the firm’s financial position.
Therefore, presentation of data helps to emphasize on data relating to its liquidity,
profitability, efficiency and many other aspects relating to it. To make this data
presentation meaningful and understandable, the calculation of ratio and regrouping and
rearranging has been done. The main purpose of this chapter is to study, evaluate and
analysis financial positions of NIC Bank and those major liquidity and profitability
position which makes easier to understand.

Particulars 2061/2062 2062/2063

Current Assets 458275575 1095430386

Current Liabilities 103168867 132124754
Long term debt 69324574 450371046
Share holders equity 620397724 684193958
EBIT 280378085 390719299
Interest 183582272 225992488
Net profit 68260867 113755734
Total assets 5939374215 7508067918
Capital employed 5836205348 7375943164
Dividend NIL NIL
NO. of common share 4999595 5000000
Preference dividend NIL NIL
Dividend per share NIL NIL
Earning per share Rs.13.65 Rs.22.75
Market value per share Rs.218 Rs.366

9 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

2.2 Analysis of Data

Ratio may be classified in a number of ways keeping in view the particular
purpose. Ratio indicating profitability are calculated on the basis of profit and loss
account, those indicating financial position are computed on the basis of the balance sheet
and those which show operating efficiency or productivity are calculated on the basis of
figure in P/L account and the balance sheet. This classification is rather unsuitable to
determine the profitability and financial position of the business. To achieve this purpose,
ratios are classified under different headings that are explained briefly in another page.

2.3 Classification of ratio analysis on the basis of nature

Ratio analysis can be classified in different ways, classification are as follows:
 Liquidity Ratio
 Leverage Ratio or Capital Structure Ratio or Solvency Ratio
 Turnover or Activity Ratio
 Profitability Ratio

a. Liquidity Ratio:
The liquidity ratio shows the relationship of a firm’s cash and current assets to its
current liabilities. This ratio measures the liquid position of the enterprises. This ratio
measures the ability of the firm to meet its short term obligation out of its short-term
resources. Liquidity ratios are calculated to assess the capital of the company to meet
immediately maturing liabilities. The ratio, which indicated liquidity of the firm are:
I. Current Ratio
II. Quick Ratio/Acid Test Ratio/Liquid Ratio

I. Current Ratio:
Current ratio is calculated by dividing current assets by current liabilities.
It shows the relationship between current assets and current liabilities.
Current Ratio = Current assets
Current Liabilities

10 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

Table 1
Current ratio for the F/Y 2061/2062 and 2062/2063

Particulars 2061/2062 2062/2063

Current Assets 458275575 1095430386
Current Liabilities 103168867 132124754
Current Ratio 4.44:1 8.29:1
Source: Appendix 1

Remarks: I. Other assets is not included in current assets.

II. Other liabilities are not included in current liabilities.

Generally, current ratio of 3:1 is considered good for the firm. The current ratio of this
company is higher than standard. So, the liquidity position of the company is satisfactory.
This company will not face difficulty in paying its current liabilities. If we compare with
previous year, this year the current ratio is in increasing trend.

Current Assets:
Current assets are those assets which can be changed into cash within a year’s time.
Current assets normally include cash, marketable securities, account receivables,
inventories, prepaid expenses, debtors, etc.

Current Liabilities:
Current liabilities are those liabilities which can be repayable within the year.
Current liabilities consist of account payable, short term notes payable, current maturities
of long term debt, accrued income taxes, proposed dividend and other accrued expenses.

II. Quick Ratio/ Acid Test Ratio/ Liquid Ratio:

11 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

This ratio is calculated by deducting inventories from current assets and dividing
the remainder by current liabilities. The quick ratio is the variation of the current ratio.
An asset is liquid if it can be converted into cash immediately or within a short period
without loss of value.

Quick ratio or acid test or liquid ratio = Quick assets

Current liabilities

Table 2
Quick ratio for the F/Y 2061/2062 and 2062/2063

Particulars 2061/2062 2062/2063

Quick Assets 458275575 1095430386
Current Liabilities 103168867 132124754
Quick Ratio 4.44:1 8.29:1
Source: Appendix 1

Quick ratio helps to view the liquidity position of the bank. Quick ratio of the NIC Bank
is in increasing trend as compared with the previous year ratio. Where,

Quick assets = current assets – stock – prepaid expenses

Since, the inventory and prepaid expenses are nil so current assets are considered as
quick assets.

b. Leverage Ratio or Capital Structure Ratio or Solvency Ratio:

To evaluate the long-term position of the firm leverage ratio or capital structure
ratio or solvency ratio is calculated. It can be used as a tool of financial planning by the
finance manager. It measures the firm ability to meet long term obligations. The short

12 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

term creditors like banker and depositors if current and saving accounts are more
interested and concerned with the firm current debt paying ability. But, long term
creditors like financial institutions and depositors of fixed account are more concerned
with the firm long term financial strength. They want to be informed that about debt
paying capacity, interest paying capacity, etc.

Therefore, these ratios help to judge the firm ability to maturing long term
obligations. Generally, following types of ratios are used for checking long term
solvency:

I. Debt Ratio
II. Debt Equity Ratio
III. Debt to Total Capital Ratio
IV. Interest Coverage Ratio

I. Debt Ratio:
The debt ratio, which is the ratio of total debt to total assets, measures the
percentage of the firm’s assets financed by creditors. This ratio shows the relationship
between total debt and total assets.
Debt Ratio = Total debt
Total assets

Table 3
Debt ratio for the F/Y 2061/2062 and 2062/2063

Particulars 2061/2062 2062/2063

Total Debt 172493441 582495800
Total Assets 5939374215 7508067918
Debt Ratio 0.03 0.07
Source: Appendix 1

13 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

Where,
Total debt = Long term debt + Current liabilities

Total debt included both the current liabilities and long term debt. The increase in the
ratio is not good sign for a firm. Higher the ratio higher will be the risk. Comparing with
the previous year debt, this year it has increased by 0.04 that shows the risk of the bank is
in increasing trend.
II. Debt Equity Ratio:
Debt equity ratio is calculated to evaluate the effectiveness of the long term
financial policies. It is calculated by dividing the debt portion of the firm by shareholders
equity. Generally the ratio 1:1 is considered satisfactory.

Debt Equity Ratio = Long term debt

Shareholders Equity

Table 4
Debt equity ratio for the F/Y 2061/2062 and 2062/2063

Particulars 2061/2062 2062/2063

Long term debt 69324574 450371046
Share holders equity 620397724 684193958
Debt Equity Ratio 0.11 0.65
Source: Appendix 1

Where,

14 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

Long term debt = debentures, debenture premium, long term or debt + mortgage bonds +
secured loan and,
Shareholders equity = share capital + share premium +retained earning + reserve and
surplus + P/L A/C + general reserve + sinking fund + reserve for
contingencies + capital structure

In case of debt equity ratio, bank has not used any kind of long term debt. So it has no
burden of paying interest.

III. Debt to Total Capital Ratio:

It is calculated by dividing total debt by total capital plus total liabilities. If this ratio
is low, the risk of the creditors is low and also they feel safe and invest more.
Debt to Total Capital Ratio = Total debt
Capital Employed
Table 5
Debt to total capital ratio for the F/Y 2061/2062 and 2062/2063

Particulars 2061/2062 2062/2063

Total debt 172493441 582495800
Capital employed 5836205348 7375943164
Debt to Total Capital Ratio 0.029 0.078
Source: Appendix 1

Debt to total capital ratio has increased comparing with previous year ratio, which shows
the bank has used debt more than previous years, which is not supposed to be good for
the bank.

15 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

IV. Interest Coverage Ratio:

This ratio measures the firm’s ability to meet interest obligation or it measures how
many time a firm can repay its interest payments or this ratio is used to test the firm debt
saving capacity. It is calculated as under:

Interest Coverage Ratio = Earning before interest & tax

Interest Expenses

Table 6
Interest coverage ratio for the F/Y 2061/2062 and 2062/2063

Particulars 2061/2062 2062/2063

EBIT 280378085 390719299
Interest 183582272 225992488
Interest Coverage Ratio 1.5 1.7

Source: Appendix 2
EBIT = Interest expenses + Provision for income tax + Net profit carried down
Interest coverage ratio has increase than the previous year ratio, which is due to the
decreased in fixed deposit.

c. Turnover Ratio or Activity Ratio:

These ratios are very important for the firm to judge how well facilities at the
disposal of the firm are being used or to measure the effectiveness with which a firm used
its resources as its disposal. These ratios are calculated on the basis of sales or cost of
sales and are expressed in integer rather than a percentage. Higher the turnover ratio,

16 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

better the profitability and use of capital or resources will be. Following ratio are
involved in this ratio:

I. Inventory Turnover Ratio

II. Debtors Turnover Ratio
III. Average Collection Period
IV. Fixed Assets Turnover Ratio
V. Total Assets Turnover Ratio
VI. Capital Employed Turnover Ratio

I. Inventory Turnover Ratio:

This ratio is also known as Stock turnover ratio. It established the relationship
between cost of goods during a given period and the average amount of inventory held
during that period. Higher the ratio, the better it is because, it shows that finished stock is
rapidly turned over.

Inventory turnover ratio = Cost of goods sold

Average Inventory

II. Debtors Turnover Ratio:

This ratio measures the account receivables in terms of number of days of credit
sales during a particular period. It is calculated as follows:
Debtors Turnover Ratio = Net credit sale
Average Debtor

III. Average Collection Period:

This ratio is a measure of the collectibles of account receivables and tells about how
the credit policy of the company is being used.

Average Collection Period = Debtors * 360

17 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

Net Credit sale

IV. Fixed Assets Turnover Ratio:

This ratio shows how well the fixed assets are being used in the business. It
expresses the number of time fixed assets are being turned over in a stated period. It is
calculated as under:

Fixed Asset Turnover Ratio = Net sales

Net fixed assets

V. Total Assets Turnover Ratio:

This ratio is calculated by dividing the net sales by the value of total assets. A high
ratio is an indicator of over trading of total assets value while a low ratio reveals idle
capacity.
Total Assets Turnover Ratio = Net sales
Total capital employed
(Capital Employed = Total assets – Current liabilities)

Since, sales and purchased activity is not involved in bank so tables of activity ratio has
not presented.

d. Profitability Ratio:
Owners or shareholders and management of the firm are more interested to measure
the firm’s profitability position. The main object of the firm is to earn more and more
profit. These ratios show the combined effect of liquidity, capital structure and active
ratio operating results. The ratios examined this for providing some information about the
way the firm is operating, but the profitability ratios show the combined effects of
liquidity, assets management and debt management or operating results. A firm position
is evaluated on the basis of the following two aspects:

18 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

 On the basis of investment:

Investment ratio shows the relationship between net profit and investment. It is also
called as return on investment. Ratio bases on investment are as follows:

I. Return on Assets:
The ratio of net income to total assets measures the return on total assets after
interest and taxes. Following formula can be used to calculate ROA:
Return on Total Assets = Net income

Total assets

Table 7
Return on total assets for the F/Y 2061/2062 and 2062/2063

Particulars 2061/2062 2062/2063

Net income 68260867 113755734
Total assets 5939374215 7508067918
Return on Assets 1.15% 1.51%

Source: Appendix 2

Excess return is supposed to be better for the firm. It shows that the firm has used its
sources properly. Return on assets (ROA) of the firm has increased from 1.15% to 1.51%
which is supposed to be good sign for the bank.

II. Return on Capital Employed:

19 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

It provides a test of profitability related to the source of long term funds plus
owner’s fund. It informs about the utilization of the fund received from the firm’s
investor and long term creditors. Creditors and investor shows their intention on this ratio
because they take the decision of investment on the basis of this ratio.

Return on Capital Employed = Net profit

Capital employed

Table 8
Return on capital employed for the F/Y 2061/2062 and 2062/2063

Particulars 2061/2062 2062/2063

Net income/profit 68260867 113755734
Capital employed 5836205348 7375943164
Return on Capital 1.17% 1.54%
Employed

Source: Appendix 1 & 2

It shows the return on capital employed by the bank is high which is considered to be
good. Return on capital employed of NIC Bank is in increasing trend as compared with
previous year return.

III. Return on Shareholders Equity:

The return on shareholders equity measures the return earned on the owner’s (both
preferred and common stockholders) investment in the firm. Higher ratio of return on
shareholders is better foe firm or owner.

Return on Shareholders Equity = NPAT

Shareholders equity

20 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

Table 9
Return on shareholders equity for the F/Y 2061/2062 and 2062/2063

Particulars 2061/2062 2062/2063

NPAT 68260867 113755734
Shareholders equity 620397724 684193958
Return on shareholders 11.00% 16.62%
equity

Source: Appendix 1 & 2

It informs about proper utilization of common shareholders equity if the ratio is high. It is
considered that investment has been used properly. Investment of equity is done properly
on the year 2062/063 as compared with F/Y 2061/062.

IV. Dividend per Share:

It indicates dividend paid to each share.

DPS = Dividend paid to shareholders

No. of common share

Table 10
Dividend per share for the F/Y 2061/2062 and 2062/2063

21 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

Particulars 2061/2062 2062/2063

Dividend paid to NIL NIL
shareholders
No. of common share 4999595 5000000
Dividend per Share - -

Source: Appendix 1 & 2

Bank does not distribute the dividend on the F/Y 2061/062 and 2062/063. So the
dividend per share on both years is nil.

V. Earning per Share:

Earning per share indicates the rupee amount earned per share of outstanding of
common stock. It is the relationship between net income available to common
shareholders and number of outstanding shares of common stock.

EPS = Net profit after tax – Preference dividend

No. of common shares

Table 11
Earning per share for the F/Y 2061/2062 and 2062/2063

22 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

Particulars 2061/2062 2062/2063

NPAT – Preference dividend 68260867 113755734
No. of common share 4999595 5000000
Earning per Share Rs.13.65 Rs.22.75

Source: Appendix 1 & 2

Earning per share of NIC Bank has increased as compared with previous year. High EPS
is good for shareholders. So the EPS of the bank is satisfactory.

VI. Dividend Payout Ratio:

It measures the profit distribution between dividend per share and earning per share.
The main purpose to calculate this ratio is to find out the amount of dividend paid out of
EPS.
Dividend Payout Ratio = DPS
EPS

Table 12
Dividend payout ratio for the F/Y 2061/2062 and 2062/2063

Particulars 2061/2062 2062/2063

Dividend per share(DPS) - -
Earning per share(EPS) Rs.13.65 Rs.22.75
Dividend Payout Ratio - -

23 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

Source: Appendix 1 & 2

Dividend payout ratio for the year 2061/062 and 2062/063 is nil because the bank did not
distribute dividend on 2061/062 and 2062/063.

VII. Dividend Yield:

It shows the relationship between DPS and market value per share.

Dividend Yield = DPS

Market value per share

Where, MPS = Paid up capital

No. of common share
Table 13
Dividend Yield for the F/Y 2061/2062 and 2062/2063

Particulars 2061/2062 2062/2063

Dividend per share(DPS) - -
Market value per share(MPS) Rs.218 Rs.366
Dividend Yield - -

Source: Appendix 1 & 2

24 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

The bank did not distributed dividend, so the dividend yield for the year 2061/062 and
2062/063 is nil.

VII. Earning Yield:

It shows the relationship between EPS and MPS. It is the ratio between earning
per share and market value per share.

Earning Yield = EPS

MPS

Table 14
Earning Yield for the F/Y 2061/2062 and 2062/2063

Particulars 2061/2062 2062/2063

Earning per share(EPS) Rs.13.65 Rs.22.75
Market value per share(MPS) Rs.218 Rs.366
Earning Yield 6.26% 6.22%

Source: Appendix 1 & 2

Earning yield ratio has decreased comparing with previous year ratio.

SWOT Analysis of NIC Bank, Kathmandu Branch

25 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

There are many threats and opportunities in the banking sector. A proper analysis of
these factors is a must for any bank to be on the cutting age. On of the most trusted tools
is the SWOT analysis.

SWOT analysis is an acronym for:

Strength: The strength of the bank is its goodwill in the banking sector. The qualified
and skilled staffs are able to provide better customer service to its client. Higher deposits
assuming huge inward remittance is also its strength.
Weakness: The bank is earning less from the foreign exchange. The bank has got less
staffs and is facing difficulty in its daily activities.

Opportunity: The bank can make use of the excess deposit concentrating more on
lending to various variable projects or to businessman and entrepreneurs.

Threats: The increase in number of joint venture bank is increasing high degree of
competition and threats in decreasing market share. Fast technological changes cause
difficulty in adjustment and finds hard to struggle in competitive market.

Thus, appropriate analysis of strength, weakness, opportunity and threats relating to NIC
Bank must be prepared to grab up the reasonable shape, best possible arrangement

26 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

The table below shows the overall and different ratio of NIC Bank for the F/Y
2061/2062 and 2062/2063:

Table for the fiscal year 2061/62 and 2062/63

S.No Ratios 2061/062 2062/063

1 Current ratio 4.44:1 8.29:1
2 Quick ratio 4.44:1 8.29:1
3 Debt ratio 0.03 0.07
4 Debt equity ratio 0.11 0.65
5 Debt to total capital ratio 0.029 0.078
6 Interest coverage ratio 1.5 1.7
7 Return on assets 1.15% 1.51%
8 Return on capital employed 1.17% 1.54%
9 Return on shareholder’s equity 11.00% 16.62%
10 Dividend per share - -
11 Earning per share Rs.13.65 Rs.22.75
12 Dividend payout ratio - -
13 Dividend yield - -
14 Earning yield 6.26% 6.22%

3. SUMMARY, CONCLUSION AND RECOMMENDATIONS

27 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

3.1 Summary
The field report has been prepared in the format as required by the faculty of
management entitled with “Financial Performance of NIC Bank Limited.” This report has
been divided into three main chapters:

 Introduction
 Presentation and Analysis of Data
 Summary and Conclusion

First of all the narrator would like to comment about the liquidity position of NIC Bank.

* The current position of the bank is higher than the standard ratio, so it increases the
liquidity of the bank which in turn helps to gain the goodwill.

* In case of the financial risk, the bank has used very low amount of long term debt. So, it
has no burden of paying interest. The debt ratio are low in both the years which indicates
bank has low financial risk and debt equity ratio of the bank is very low i.e. bank has
used very low amount of long term debt this year. So, it has low working efficiency.

* Interest coverage ratio has increased than the previous year, which is due to the
decrease in fixed deposits. Higher the return on assets more the profitability, in case of
NIC Bank the ratio has increased, which shows a considerable growth rate.

* The bank did not distributed dividend on its share on both the fiscal year. And high EPS
shows a good financial position for the bank.

3.2 Conclusion

28 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

The commercial bank is an important bank. Commercial Banks are directly related
with the people and institution. Their functions are very attractive for people. Although
these banks are truly inspired with the objective of gaining profit, these commercial
banks are also establish to accelerate common people welfare and facility, to make
available loan to the agriculture, industry and commerce and provide the banking services
to the public and the state. Thus, commercial banks have played a vital role for the
development of the country by providing sufficient money in the industrial and
commercial fields.

NIC Bank has also been establishing with the same objectives as that of other
commercial banks. NIC Bank is playing a significant role to present Nepalese economy
development. It is also one of the largest capitalized commercial bank in Nepal. The
subject of the study is related with the banking operations, especially Financial Position
of NIC Bank. The data used in this study has been obtained from various sources
including the annual report published by the NIC Bank.

The other findings of the study on the analysis of the financial position of NIC
Bank are as under:

 The bank relied on investment in secured sector only. The investment on risk
assets did not improve over the study period.

 Return on risk assets as compared to net profit after tax has decreased in the study
period. It revealed that that bank could not increase its investment in risk assets,
which could have more contribution to net profit.

3.3 Recommendations

29 Submitted by Reeshav Raj Regmi

 A Field Report on NIC Bank, Kathmandu

The following recommendations can be made on the basis of above study:

 The bank should not change its investment pattern i.e. it should not invest only in
secured assets but also try to invest in other areas of developments which helps in
total development of the economy.
 Motivating the customer to take the service from the bank.
 Although it is a profit oriented bank, it should not forget the social responsibility.
So the bank should render its services in rural areas to promote and mobilize
small investors.
 Training and seminar program should be done once in a month so that the mistake
would be reduced.
 Should maintain good relationship among the staff and work as a team.
 Questionnaire should be provided to the customer so that the bank could know
about, what the customer feel about bank and what they expect from bank.
 There must be applied more information and communications system.
 NIC Bank should spread its branches in every region and enjoy the benefits
provided under government policies.
 Bank should give more attention to the priority sectors and industrial to contribute
the nation for the economic development.
 NIC Bank should control its expenses to increase its profitability.
 The management should be prompt in adopting proper management styles and
systems at the proper time without wasting the opportunity and time.

30 Submitted by Reeshav Raj Regmi