II Part (Deepa)

8/3/2019 II Part (Deepa)

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CHAPTER 1: INTRODUCTION

1.1 BACKGROUND OF STUDY

Introduction of Bank

For each and every development of a country, bank plays one of the vital roles. In other

words, bank is that institution which helps a country to develop. It is like lifeblood of a

country.

Here, the word Bank means to focus only commercial bank. A bank is an institution,

which deals with money accepting it in various type of deposit from customers,collecting cheques for customers, disbursing loans, and rendering other financial

services. In other words, those organizations whose transactions are on money and

credit is said to be a bank. Since bank help wide range of people at different walks of

life, they have become an essential part of modern society.

The word bank is said to be derived from Italian word Banco, French word

Banque and Latin word Bancus which all means bench. In early stage, the bankers

transacted their business at benches for acceptance and payment of valuable money or

coins.So; this is how the word is derived.

Some of the definitions of renowned scholars are as follows:

According to R.S. Sayers, I believe in that fact the banks are not merely

purveyors of money, but also in an; manufactures of money.

According to U.S. Law, Bank is any institution offering deposits subject to

withdrawal on demand and making loans of a commercial or business nature.

According to Prof.Kinley,Bank is an establishment, which makes to individual

such as advantage of money when do not required by them for use.


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Bank is nearly as old as civilization. The ancient Romans developed as advanced as

banking system to drive their vast trade networks which extend through our Europe,

Asia, and much of Africa. But modern banking began to develop between the 1200s

and 1600s in Italy. In Nepal, it began after 18th century.

1.2 COMMERCIAL BANKS OF NEPAL

The word bank is the synonym of commercial bank. Bank can be categorized into

different types on the basis of its functions and objectives. Commercial banks are those

banks that do all kinds of functions such as accepting deposit, providing credit/loan,

creation of money, advancing loan, foreign money exchange etc. It also issues

guarantee, Bonds, Letter of credit etc.

Commercial bank is a profit oriented organization that gives certain rate of interest to

the depositors and takes certain rate of interest from debtors. According to the

Commercial Bank Act 2031 B.S., A commercial bank means a bank which

operatesrelating to commerce except the banks which have been specified for the

Co-operative, agricultural, industry of similar other specific objective. In other

words, those banks, which meet the criteria of this Act, are known as Commercial

banks. Without the development of sound commercial banking, underdeveloped

countries cannot hope to join the ranks of advanced countries. If industrial development

requires the use of capital, the use of capital equipment will not be possible without the

existence of banks to provide the necessary capital. Industrial development will be

impossible without the existence of markets of goods produced. On the Other hand, the

services of the Commercial Banks will help to extend the market.

Role of Commercial Banks:

Help in Business Expansion

Encouragement for the Right Type of Industries

Necessary for the Trade and Industry

Transfer of Surplus Funds to Needy Regions


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Promotion of Capital Formation

Provides number of Subsidiary Services

Now there are many commercial banks operating in Nepal. Some of the commercial

banks of Nepal are as follows:-

Nepal Bank Limited

Rastriya Banijya Bank

Nepal Arab Bank Limited

Nepal Invested Bank Limited

Standard Chartered Bank Limited

Himalayan Bank Limited Nepal SBI Bank Limited

Nepal Bangladesh Bank Limited

Everest Bank Limited

Bank of Kathmandu Limited

Nepal Credit and Commerce Bank Limited

Lumbini Bank Limited

Machhapuchre Bank Limited

Laxmi Bank Limited

Nepal Industrial and Commercial Bank Limited

Siddhartha Bank Limited

Ace Bank Limited

Global Bank Limited

Agriculture Development Bank

NCC Bank Limited

Citizens International Bank Limited

Kumari Bank Limited


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1.3 INTRODUCTION OF

NEPAL INDUSTRIAL AND COMMERCIAL BANK

Authorization Fact

This summer project work has been prescribed in BBA for the partial academic

fulfillment under Pokhara University. It has been authorized by the Coordinator of

National Open College; Mrs. Gina Shrestha, for which I have chosen Nepal Industrial

and Commercial Bank.

BACKGROUND

Nepal Industrial & Commercial Bank Limited (NIC Bank) commenced its operation on

21 July 1998 from Biratnagar. The Bank was promoted by some of the prominent

business houses of the country. The current shareholding pattern of the Bank constitutes

of promoters holding 65% of the shares while 35% is held by general public. NIC Bank

is one of the most widely-held Banking companies in Nepal, with over 32,000

shareholders. The shares of the Bank are actively traded in Nepal Stock Exchange withcurrent market capitalization of about NPR 10,699 million.

Within 10 years of commencing business, the Bank has grown rapidly with 16 branches

throughout the country while 2 more are planned to be opened this year. All branches

are inter-connected through V-Sat and are capable of providing real time on-line

transactions.

The Bank is the first commercial Bank in Nepal to have received ISO 9001:2000

certification for quality management system. Furthermore, NIC Bank became the 1st

Bank in Nepal to be provided a line of credit by International Finance Corporation

(IFC), an arm of World Bank Group under its Global Trade Finance Program, enabling

the Bank's Letter of Credit and Guarantee to be accepted/ confirmed by more than 200


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banks,worldwide.

To add to these achievements, the Bank has also been awarded the "Bank of the Year

2007-Nepal" by the world-renowned financial publication of The Financial Times,

U.K.-The Banker. This is the fruit of the Bank's outstanding performance backed by

belief and support of its customers towards the Bank.

Shares of NIC

The banks shareholdings are as follows:-

Table 1: Rate of share Subscription of NIC Bank Limited

Holders Contribution (%)

Promoters 65%

General Public 35%

Total 100%

Figure 1: Shareholding Pattern of NIC Bank


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65%

35%

Promoters

General Public

1.4. BRANCHES OF NIC

Corporate office:

Kamaladi Sadak, Kathmandu

Registered Office:

Main Road, Biratnagar

Inside Valley:

1. Kamaladi Branch Kamaladi Ganeshsthan, Kathmandu,Nepal

2. New Road Branch New Road, Kathmandu, Nepal

3. Battisputali Branch Battisputali, Kathmandu , Nepal

4. Kirtipur Branch Kirtipur, Naya Bazar, Kathmandu, Nepal

5. Pulchowck branch Pulchowk, Lalitpur

6. Samakhushi Branch Samakhushi, Kathmandu, Nepal

7. Bhaktapur branch Suryavinayak, Bhaktapur

Outside Valley:

1. Biratnagar Branch Main Road, Biratnagar, Nepal

2. Pokhara Branch Mahendra Pool , Pokhara, Nepal

3. Dharan Branch Mahendra Path, Dharan, Nepal


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4. Birgunj Branch Adarsh Nagar, Birgunj, Nepal

5. Janakpur Branch Ram Mandir Chowk, Janakpur, Nepal

6. Damak Branch Rajmarg Chowk, Damak, Jhapa, Nepal

7. Butwal Branch Shrawan Path, Butwal, Rupandehi, Nepal

8. Nepalgunj Branch Surkhet Road, Nepalgunj, Nepal

9. Surkhet Branch Birendra Chowk, Surkhet, Nepal

10. Lahan Branch Ganesh Chowk, Lahan, Siraha, Nepal

11. Dhangadhi Branch Dhangadhi Municipality - 3, Kailali, Nepal

1.5 BOARD OF DIRECTORS

The Bank is run by professionals and believes in the highest standards of corporate

governance. The Board of Directors of the Bank is supported by a management team,

which comprises of young, enthusiastic professionals. The Bank has successfully

embarked on a multi-pronged strategy of consolidation, administrative streamlining,

human resource up-skilling, strategic cost management, focused non-performing assets

management, balance sheet and treasury management and controlled asset growth, in

tandem with strengthening the credit culture as well as strategic marketing and sales.

Organizational StructureThe composition of the Board of Directors of the Bank is, as per the Company Act and

Bank and Financial Institution Ordinance 2062. The Directors of the Bank are eminent

personalities drawn from various fields. The Directors have been contributing their

professional knowledge, experience and expertise in their respective areas of

specialization for the development of the Bank. The Directors are fully committed to the

corporate governance model adopted by the Bank, which among others, encompasses

the principles of full disclosure and transparency, social responsibility and


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accountability, "zero tolerance" compliance culture, business and customer

confidentiality, intolerance of conflict of interests, and an independent management.

Table no: 2 Management Members

Mr.Dambar Bahadur Bomjan Executive Chairman

Mr.Dhan Prashad Rai Director

Mr.Ramesh Tamang Director

Mrs.Meena Shrestha Director

Mr.Nirmal Gurung Director

Mr.Dinesh Shakya Director

Mr.Mahesh Prasad Rijal Director

1.6 FUNCTIONS OF NIC

Tailor-made solutions to suit every customer is the main motto of this bank. The

main services provided by the bank are:

1. Current, Savings, Call and Fixed Deposit Accounts (both in LCY & FCY)

2. Funds transfer (Draft, T.T. & Fax etc.)

3. Bank Guarantees

4. Letter of Credit

5. Bills Purchase

6. Clearing / Collection

7. Corporate Finance

8. Consumer Loans

9. Safe Deposit Lockers

10. Cash Management

11. Trade Finance

12. Loans

13. Purchase and sale of travelers cheques14. Other Allied services

15. Banking services on SWIFT

Besides this, the recently provided facilities by the bank are:


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1. NIC Bank presents NIC Life Savings Account for ensuring protection of

the Savings, High Return & also the Financial & Personal Security.

2. Interest Rate 6%

3. Life Insurances up to Rs 100,000 (with double accident cover)

4. Gold coin for seven lucky winners every quarter

5. Free any Branch Banking Facility

6. Free inward remittances

7. NIC Privilege Card with privilege counter facility

8. 25% discount on Locker Facility (subject to availability)

9. 50% discount on Draft issuance

10. 50% discount on Travelers Cheque issuance

11. On-call Home Banking Service

12. Multiple / Unlimited withdrawal facility

13. No maintenance fees

14. Free Statements upon request

15. Extended Banking hours including free Sunday Banking

16. Free Hyundai Club Membership

17. And many more benefits

1.7 STATEMENT OF THE PROBLEM

The research seeks to find out the financial status of Nepal Industrial & Commercial

Bank Ltd. with the analysis of these banks financial statements. The attempts have

been made to sort out the answers to the following questions:

1. How do the Nepal Industrial & commercial bank Ltd. operating its activities?

2. How is the financial performance managed by the Nepal Industrial & Commercial

Bank Ltd.? Is the performance of the bank satisfactory?

3. Is the central bank policy creating the problem for Nepal Industrial & Commercial

Bank Ltd.?


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1.8 OBJECTIVES OF THE STUDY

The general objective of this study is to identify the financial situation of Nepal

Industrial & Commercial bank Ltd. The specific objectives of the research are as

follows:

To study the existing financial situation of Nepal Industrial & Commercial Bank

Ltd.

To observe whether the bank is in progressive or not by the help of financial tools.

To evaluate the financial performance of Nepal Industrial & Commercial Bank

Ltd.

To meet the requirement of internal assignment.

To provide important suggestions.

1.9 SIGNIFICANCE OF THE STUDY

The study of this fieldwork is important in various fields. Some of the importance of

this fieldwork report are highlighted below:

This fieldwork is prepared to fulfill the objectives set forth by Pokhara

University for the partial fulfillment of degree of BBA.

This fieldwork report might be useful for those who are willing to know

about the financial situation of the NICB like deposit, financial performance

and its utilization, position of this commercial bank etc.


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This report helps to provide necessary documentary information to the

existing and the new companies to be operated in near future.

This report also helps the students of financial management to gain and

share some practical knowledge of banking.

This fieldwork also acts as guidelines for preparing small project reports.

This fieldwork report might be useful for the library purpose so that any

student wanting to prepare a report on such field can have some idea and

basic guidelines.

1.10 LIMITATIONS OF THE STUDY

There are many limitations faced while preparing this project work report. Some of

them are given below:

The study is concerned with only NICB and it cannot be accurate unless

compared with other such commercial banks.

The project work is focused on the financial analysis of the bank. As a result,

other various aspects of the bank such as marketing strategies, employees

motivation programs etc are neglected.

Due to the unavailability of sufficient references and resources, most of the data

used are of secondary type in forms of publications of the bank and other

sources.

The project report has been prepared under the constraint of the limited time.

Thus, it was not possible to analyze each and every aspect of the bank.

As a student, this project work has been completed within the constraint of the

limited budget.


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This project work is not suitable for future since it was done on the basis of only

past five fiscal years financial records. So, the future projections of the bank as

per the fieldwork may not be effective.

CHAPTER 2: RESEARCH METHODOLOGY

To obtain relevant qualitative and quantitative data, the following methodology will be

employed. The different tools and techniques will be used in the data collection and in

the analysis of various information. This study is based on an appropriate research

methodology. It helps to analyze the data in finding the causes and effects of

relationships and the performance of the bank.

2.1 Sample Unit

As it is self explanatory that the study is based on only field works, a single unit, of NIC

has been selected for the study purpose. Hence, there is no need to express the unit in

terms of sample size.

2.2 Nature and Sources of Data

The data for the study will be both primary and secondary in nature. The primary data

will be collected from the fieldwork. These will be collected through personal contact

with the respondents and key informants (focused group discussion) from the study


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area. The secondary data will be collected from various libraries and various related

literatures such as books, journals, articles, reports etc.

2.3 Data Collection Procedure

The required dates will be collected in a period of about two months and made use of

the following techniques: Observation method, Interview method and questionnaire

method. But due to the time limitations and cost limitations, all these data are

secondary. Although these data are secondary, they are reliable, suitable and adequate.

2.4 Data Processing

The collected data are processed for analysis and interpretation. In course of that, all the

analyzed data are classified, tabulated and presented in various forms like table, bar

diagrams, pie charts etc.

2.5 Research Tools used

Simple research tools have been used to measure the financial performance of the NICB.

Data used in the study have been analyzed by using financial and statistical tools to

achieve the objectives of the study. Following tools serves as an important tool for

arranging this bank as a whole:

I have used some of the other statistical tools which are as follows:

Statistical Tools:

Time Line

Average

Percentage

Pie Chart

Financial Tools:


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CHAPTER 3. DATA PRESENTATION AND ANALYSIS

Introduction

The organizations provide the annual reports, which are necessary for all the parties

outside or inside of the organization. The annual reports include the details of Balance

Sheet and Income Statement. With the help of this annual report, detailed financial

position and the strength of the organization can be determined by using the financial

analysis tools. It helps to analyze the financial strength and weakness of the firm. The

various investors, managers, creditors and parties involved within the organization and

the outsiders, do this financial analysis. The method of financial analysis may vary from

parties to parties. Various analyses have been done in this chapter for the financial

analysis purpose. These include the ratio analysis and the various other statistical tools.

3.1 POSITION OF PROFIT OVER DIFFERENT YEARS

Table 3. Position of Profit over Different Years

Fiscal Year

Net Profit (NPR

in Million)

Increase

(Decrease)

Percentage

Increase

(Decrease)


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2003/04 68.3 0 0

2004/05 113.7 45.4 66.47%

2005/06 96.6 17.1 15%

2006/07 158.5 61.9 64.08%

2007/08 243.1 84.6 53.38%

Sources: Annual Report of NIC, 2007/2008

For the clear light of the above table, the available data has been presented in the time

line.

Figure no. 2: Profit over different Years

Trend of Profit

0

66.47

-15

64.08

53.38

-20

-10

0

10

20

30

40

50

60

70

80

2003/04 2004/05 2005/06 2006/07 2007/08

Fiscal years

Percentage

Series1

The above table 3, shows the amount of profit over Five years beginning from F/Y

2003/04 to 2007/08. The profit of NIC is fluctuating through out the period. In the year


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2004/05 profit increased by 66.47%, which is the maximum profit through out the five

fiscal years. In the Year 2005/06, the bank faced the lowest profit i.e. just 15%. Again

in the year 2006/07, it was able to recover and gain the profit which is near to

maximum. And the profit increased to 64.08% in that year. The profit in the year

2007/2008 again decreased as compared to the previous year i.e. only 53.38%. Despite

the down fall in economic condition, the bank is able to increase net profit by 53.38% in

the year ended 15th July 2008.This increase in profit is primarily due to the

diversification of credit to high yielding consumer loans, recovering of non

performing loans and efficient management of the Bank.

3.2 POSITION OF DEPOSIT OVER DIFFERENT YEARS

Table 4: Position of Deposit

Fiscal Year

Deposit (in

Million)

Increase

(Decrease) in

million

Percentage

Increase

(Decrease)

2003/2004 5215.8 0 0

2004/2005 6691.7 1475.9 28.30%

2005/2006 9223.7 2532 37.84%

2006/2007 10420.4 1196.7 12.98%

2007/2008 13419.7 2999.3 28.79%

Source: Annual Report of NIC, 2006/07

Figure no. 3


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Deposit over different Year

0

31.16

40.59

32.26

25.6

0

5

10

15

20

25

30

35

40

45

2003/2004 2004/2005 2005/2006 2006/2007 2007/2008

Fiscal Year

Percentage

Series1

Deposit is the main source of bank which bank generally yields income by investing it

on different sectors. Public starts to deposit their money in such bank, which is more

attractive and faithful for them in different point of view. If the amount of deposit is in

increasing trend then the bank has good relation with the public.

In the above table, the trend of deposit is increasing up to the fiscal year 2005/06.In thefiscal year 2004/05 deposit increased by 28.30% and in the fiscal year 2005/06 it is

increased by 37.84% which is the maximum till the date. Then it is fluctuating i.e.

decreasing in the year 2006/07 i.e. was only 12.98%. Again in the year ended 2008

bank is able to recover that means it is able to make the good public relation. The

deposit is increased by 28.79% as compared to previous year.

3.3 POSITION OF LOAN ISSUED OVER DIFFERENT YEARS

Table 5: Position of Loan over the Years

Fiscal Year

Loan Amount

(NPR in Million)

Increase(NPR in

million)

Percentage

Increase


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2003/2004 3743.1 0 0%

2004/2005 4909.4 1166.3 31.16%

2005/2006 6902.1 1992.7 40.59%

2006/2007 9128.7 2226.6 32.26%

2007/2008 11465.3 2336.6 25.6%


Figure no: 4

T r e n d s h o w in g P o s i tio n o

0

3 1 . 1

4 0 . 5

3 2 . 2

25 .

0

5

1 0

1 5

2 0

2 5

3 0

3 5

4 0

4 5

2 0 0 3 / 04 2 0 0 4 / 0 5 2 0 0 5 / 0 6 2 0 0 6 / 0 7 2 0 0 7 / 0 8

F isca l ye a

Ratio

in

Percentage

S e r i e s


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The above table depicts the position of loan issued over different years. The bank has

issued loan over different heads. The loan issued is increased by 31.16% in the fiscal

year 2004/05 and by 40.59% in the year ended 2006. Then the loan issued amount

decreased by 32.26% in the year ended 2007.And in the fiscal year the loan issued

amount decreased as compared to the ratio of the year ended 2007. It is increased only

by 25.6%.

The loan issued amount is in fluctuating trend. As the volume of total loan goes on

increasing and in the same ratio recovery of loan also goes smoothly, it is profitable to

bank. This is possible under sound operational performance, consistency, outstanding

managerial skill and dedicated personnel.

3.4 POSITION OF NET FIXED ASSETS:

Table 6: Position of net fixed Assets

Fiscal YearsTotal Assets(NPR In Million)

Increase(NPR inmillion)

PercentageIncrease

2003/04 5939.4 0 0

2004/05 7508.1 1568.7 26.42%

2005/06 10383.6 2875.5 38.3%

2006/07 11679.3 1295.7 12.48%

2007/08 15238.7 3559.4 30.48%


Figure no. 5


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Position of Net Fixed Assets

0

26.42

38.3

12.48

30.48

0

5

10

15

20

25

30

35

40

45

2003/04 2004/05 2005/06 2006/07 2007/08

Fiscal years

Trendi

np

ercentage

Series1

The above table shows the position of net Fixed Assets over five fiscal years. The

amount of Net Fixed Assets is increasing as well as decreasing i.e. in fluctuating

trend.Net Fixed Assets is increased by 26.42%, 38.3%, 12.48% and 30.48% in the fiscal

year 2004/05, 2005/06, 2006/07, 2007/08 respectively. The Net fixed Assets was

increased by only 12.48% in the year ended 2007.

3.5 PROFITABILITY RATIO

3.5.1 Calculation of Earning Per Share (EPS)

Table 7:

Fiscal Year

Net Profit

(NPR in Million)

No. of

Share

Outstanding EPS (NPR)

2003/04 68.3 5.003663004 13.65

2004/05 113.7 4.997802198 22.75

2005/06 96.6 6 16.1

2006/07 158.5 6.601416077 24.01


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2007/08 243.1 9.440776699 25.75


EPS = Net Profit After Tax

No. of Share Outstanding

The below line graph helps to know the trend of EPS at ease.

Figure no: 6

Earning per sha

01 02 03 0

2003

/04

2004

/05

2005

/06

2006

/07

2007

/08

Fiscal ye a

EPSi

n

NPR

E P S

The earning per share of the NIC is NPR 13.65, 22.75, 16.10, 24.01, 25.75 in the

economic year 2003/04, 2004/05, 2005/06, 2006/07,and 2007/08 respectively. EPS is


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always in increasing trend and the maximum EPS is in the fiscal Year 2007/08, i.e.

increment in EPS by NPR 1.74, as compared to the base year.

3.5.2 RETURN ON TOTAL ASSETS (ROTA)

Return on Total Assets = Net Profit

Total Assets

The higher return on Total Assets reflects the efficiency of the bank in utilizing its

overall resources and higher ratio also indicates the lower volume of non-performing

assets by the bank. Non- performing Assets are ideal resources for the bank. So, they try

to reduce proposition in Assets structure.

Table 8. Return on Total Assets

Fiscal Year

Net Profit

(NPR in Million)

Total Assets (NPR

In Million)

Return on Total

Assets

2003/04 68.3 5939.4 1.15%

2004/05 113.7 7508.1 1.52%

2005/06 96.6 10383.6 0.94%

2006/07 158.5 11679.3 1.36%

2007/08 243.1 15238.7 1.60%



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From the above table, we can see that the ROTA of the bank is in increasing as well as

decreasing trend. The ROTA is 1.15%, 1.52%, 0.94%, 1.36%, and 1.60% from the

fiscal year 2003/04, 2004/05, 2005/06, 2006/07 and 2007/08 respectively. Higher return

is in the year ended 2008.And the lowest is in the year ended 2006. Every year ROTA is

in fluctuating because of the fair performance of the bank.

3.5.3 RETURN ON TOTAL DEPOSIT (ROTD)

Return on Total Deposit =Net profit

Total Deposit

Deposit is one of the main sources of fund for the bank. Collected deposit has to be

mobilized into the loan and advance and on other sector effectively to maximize the

Return on Equity. Bank had to bear same cost for deposit. Therefore Bank has to

mobilize deposit in productive sector where return is more.

The net Profit to total deposit ratio enables to evaluate what extent the management has

been successful to mobilize and utilize deposit in generating profit.

Table 9. Return on Total Deposit

Fiscal Year

Net Profit (NPR

in Million)

Total Deposit

(NPR in Million)

Return on Total

Deposit

2003/04 68.3 5215.8 1.31%

2004/05 113.7 6691.7 1.70%

2005/06 96.6 9223.7 1.05%


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2006/07 158.5 10420.4 1.53%

2007/08 243.1 13419.7 1.82%

Sources: Annual Report of NIC, 2007/08

The above table shows the Return on Deposit of the five fiscal years. Returns on

Deposits are 1.31%, 1.70%, 1.05%, 1.53% and 1.82% from the year ended 2004 to the

year ended 2008.The trend of the Return on Deposit in increasing except the fiscal year

2005/06. There is highly increase in return on total deposit in the year ended 2008 as

compared to the previous year.

3.5.4 DIVIDEND PAYOUT RATIO

The bank does not distribute all its profit to its stakeholders or owners because every

Bank is established to gain profit by mobilizing money in productive sectors. So, they

keep the money for the future reference or as to face the uncertainties. Reserve also

helps to know about the financial position of a bank too. Nepal Government or Nepal

Rastra Bank has implied some compulsory provision to keep the reserve. So, some

profit earned by bank is retained in its own account and remaining profit distributed

among the shareholders as a dividend by the decision of the board meeting.

Dividend Payout Ratio shows the relation between Earning per Share and Dividend per

Share.

We need to calculate earning per share and dividend per share before calculating the

Dividend Payout Ratio.

Step 1: Earning Per Share= Net Profit

No. of Share Outstanding

Table 10: Earning per Share


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Fiscal Year

Net Profit

(NPR in Million)

No. of

Share

Outstanding EPS (NPR)

2003/04 68.3 5.003663004 13.65

2004/05 113.7 4.997802198 22.75

2005/06 96.6 6 16.1

2006/07 158.5 6.601416077 24.01

2007/08 243.1 9.440776699 25.75


Step 2: Dividend per Share

Table 11.

Fiscal Year Dividend Per Share(NPR)

2003/04 -

2004/05 6.825

2005/06 1.69533

2006/07 5.054105

2007/08 5.420375


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Step 3: Calculation of Dividend payout Ratio (DPR)

Table 12.

Fiscal

Year

Dividend

Per

Share(NPR) EPS (NPR) Dividend Payout Ratio

2003/04 -

13.65_

2004/05 6.825

22.75 30%

2005/06 1.69533

16.1 10.53%2006/07 5.054105

24.01 21.05%

2007/08 5.420375

25.75 21.05%


In the F/Y 2003/04, bank doesnt distribute any dividend due to less earning per share.

In the F/Y 2004/05 bank distributed 30% of the total earning i.e. Rs 6.825 as a dividend

although it earned Rs. 22.75 per Share. In F/Y 2005/06 dividend was distributed only

10.53% of the total earning. Bank is able to distribute 21.05% dividend of the total

earning in the F/Y 2006/07 and F/Y 2007/08.

3.5.5 LAON AND ADVANCES TO TOTAL DEPOSIT

Loan and advance to total deposit is an indication of the velocity with which funds

moves through the business. It measures the velocity of loan and advances out of the

total deposit. Generally bank earns profit by issuing loan. If the bank is able to mobilize

its funds, it is considered to be good because if the deposit funds remains ideal, then

bank have to pay cost on it and it will certainly decrease the amount of profit.

Table 13. Loan and Advances to Total Deposit


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Fiscal Year

Loan (NPR

millions) Deposit (Rs.)

Loan to Deposit

Ratio

2003/04 3743.1 5215.8 71.76463821%

2004/05 4909.4 6691.7 73.3655125%

2005/06 6902.1 9223.7 74.83005735%

2006/07 9128.7 10420.4 87.60412268%

2007/08 11465.3 13419.7 85.43633613%

Source :Annual Report of NIC,2007/08

The above table depicts ratio of loan and advances to total deposit over five fiscal years.

In the four fiscal year the Loan and advance to total deposit is in increasing trend i.e.

71.76%, 73.36%, 74.83% in the fiscal year 2003/04, 2004/05, 2005/06, 2006/07

respectively. In the F/Y 2006/07, the bank is able to mobilize its deposit at maximum

level. In the fiscal year 2007/08 ratio of loan and advances to total deposit decreased by

2.1678%

3.5.6 EMPLOYEE PRODUCTIVITY RATIO

Employee Productivity Ratio shows the employers skill to work, knowledge and

capacity and profit from the employers to the bank. It simply tends the productivity of

employers and effectiveness of the whole management team.

Table no.14 Employee Productivity Ratio

Fiscal

Year

Net Operating Income

(NPR in Million)

No. of fulltime

employees

Employees

Productivity Ratio

2003/04 150.5 140 107.5%

2004/05 201.8 157 128.5350318%


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2005/06 212 166 127.7108434%

2006/07 291.4 189 154.1798942%

2007/08 393.1 232 169.4396552%Source: Annual Report of NIC, 2007/08

The Employees Productivity of the bank is increasing as portrayed by the enclosed

chart. In the F/Y 2003/04 it was increased by 107.5%. Then the Employees Productivity

is increased to 128.53%, 127.71%, 154.17%, and 169.44% in the Fiscal Year 2004/05,

2005/06, 2006/07 and 2007/08 respectively.

The basic reasons for such an increment include implementation of multiple work-

culture system, part time employment and technology guided works at various

departments resulting in swiftness in work performance.

CHAPTER 4. SUMMARY CONCLUSION

RECOMMENDATION

4.1 Summary

Nepal Industrial & Commercial Bank Limited overall financial condition, performance &

prospects within the Nepalese environment are considered satisfactory. Nepal Industrial &

commercial bank Ltd. is newly established bank which was established in 21 July, 1998.

The financial statement of five fiscal years i.e. from 2003/04 to 2007/08 has been taken for

the purpose of study. The study is based on secondary data. The data has been taken from

annual report of Nepal Industrial and Commercial Bank.


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It is one of the reputed banks of Nepal. It launches different programs and activities, which

helps to attract the people towards it. It provides loan regarding home, education, auto etc.

It is further planning to extend its branches in several parts of the country. It also helps to

produce skilled manpower by interning college student.

4.2 Conclusion

It is common practice in the banking sector of Nepal to use consultant to look into

various corporate problems. How many of their recommendations are being

successfully implemented is still questionable although huge sum of money and other

resources are spent in research and implementation.

In a nutshell, the above outcomes have not only revealed the satisfactory performance

of the bank but the sign of future prosperity and development can also be expected as

well. The problem identification and suggestions mentioned in this report of ours, we

feel, may not be new. In reality, the managers in the bank may be aware of some of the

problems identified and if asked, they can also give probable solutions. There are

following specific findings.

1. The profit of the bank is not constant. It is fluctuating. In the year ended 2005,

the bank had the maximum profit. In the next year i.e. in the year ended 2006,

the bank had the 15% loss as compared to previous year.

2. Deposit is the main source of bank. The position of deposit is satisfactory

because it is increasing which also means that the bank is able to make the good

public relation.

3. The bank has issued loan over different heads. The loan amount is in fluctuating

trend. As the volume of total loan goes on increasing and in the same ratio

recovery of loan also goes smoothly. It is beneficial to the bank.

4. The bank is able to increase its Net Fixed Assets as per the time and need and

Return on Total Assets is also in increasing trend.


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5. Earning Per Share is also in increasing trend. Return on Total Assets is in

fluctuating trend. Return on Total Deposit is in satisfactory trend which shows

that bank is able to mobilize and utilize in generating profit.

6. Dividend Payout Ratio is in lower rate.

7. Ratio of Employee Productivity is good. It indicates that bank is able to

implement new technology, part time employment etc.

4.3 Recommendation

1. Profitability position of Nepal Industrial & Commercial Bank Ltd. is

comparatively not better . So the bank should use its resources for generating more profit

margin. If resources held idle, bank faces high cost and causes the low profit margin.

2. Nepal Industrial & Commercial Bank Ltd. should extent its contacts with

different institutions to increase to its business transactions.

3. Reports of Nepal Industrial & Commercial Bank Ltd. show that it is not

involved in social activities. Therefore, Nepal Industrial & Commercial Bank Ltd. should

be involved in such social programs to maintain favorable public image. In order to


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maintain the competitive banking environment, the bank should venture into new areas of

banking activities, emphasize to improve the quality of work force.

4. Bank should keep some amount of profit for future reference. Bank should

expand its branches in remote areas too.

Documents

II Part (Deepa)