FINANCIAL PERFORMANCE OF KUMARI BANK LIMITED

A Reasearch Proposal

SUMMITTED BY

SUSHIL ANGBUHANG

T.U. REGISTERED NO. 7-2-278-906

SYMBOL NO. 2780369

PASHUPATI MULTIPLE CAMPUS

GROUP : FINANCE

SUMMITTED TO

Faculty of Management

TRIBHUWAN UNIVERSITY

Kathmandu, Nepal

In partial Fulfillment of the Requirement for Degree of

BACHLORS OF BUSINESS STUDIES (B.B.S.)

KATHMANDU

JANUARY, 2021
 Tribhuvan University

RECOMMENDATION

This is to certify that the fieldwork assignment report.

Submitted by:

Sushil Angbuhang

T. U. Registered No. 7-2-278-906-2016

Symbol No. 2780369

Entitled

FINANCIAL PERFORMANCE OF KUMARI BANK LIMITED

has been prepared as approved by this department.This fieldwork assignment report is forwarded for
examination.

………………….. ............................

Supervisor (Campus Chief)

Pashupati Multiple Campus

Date: Jan, 2021

Table of Contents Page No.

CHAPTER-I : INTRODUCTION
1. Backround of the Project 1

2. Introduction to Kumari Bank Limited

3. Statement of the Problem

4. Objective of the Study

5. Research Methodology

CHAPTER-II : DATA ANALYSIS & MAJOR FINDINGS

6. Data Presentation and Analysis

6.1 Financial Analysis

(i) Liqudity Ratio

(ii) Current Ratio

(iii) Cash and Bank balence to Total Deposit Ratio

(iv) Cash and Bank balence to Current Deposit Ratio

(v) Cash and Bank balence to Current Assets Ratio

(vi) Loan and Advance to Total Deposit Ratio

6.2 Profitability Ratio

(i) Net Profit to Total Assets Ratio

(ii) Net Profit to Total Deposit Ratio

(iii) Return on Shareholders Equity

(iv) Return on Investment

(v) Earning Per Share

(vi) Dividend Per Share

(vii) Dividend Payout Ratio

6.3 Leverage Ratio

(i) Long-term debt to shareholder fund ratio

(ii) Total long-term debt to Total assets ratio

(iii) Total Debt to Shareholders fund Ratio

(iv) Interest Coverage Ratio

6.4 Activity Ratio

(i) Total Investment to Total Deposit Ratio

(ii) Loan and Advances to Total Deposit Ratio

(iii) Non-Performing Loans to Loan & Advances Ratio

(iv) Loan and Advances to Fixed Deposit Ratio

(v) Loan Loss Provision to Total Loans and Advances Ratio

(vi) Interest Expenses to Total Deposit Ratio

(vii) Interest Expenses to Total Expenses Ratio

7. Major Findings to the Study

CHAPTER-III

8. Summary and Conclusion

9. Recommendation

BIBLOGRAPHY

References

List of Tables Page No.

Table 1: Current Ratio

Table 2: Cash & Bank Balance to Total Deposit Ratio

Table 3: Cash and Bank Balance to Current Deposit Ratio

Table 4: Cash and Bank Balance Assets Ratios

Table 5: Loans and Advances to Total Deposit Ratio

Table 6: Net Profit to Total Assets Ratio

Table 7: Net Profit Total Deposit Ratio

Table 8: Return on Shareholder's Equity

Table 9: Return on Investment

Table 10: Dividend Per Share

Table 11: Dividend Payout Ratio

Table 12: Long-term debt to shareholders fund ratio

Table 13: Total debt to Total Assets ratio

Table 14: Total Debt to Shareholders Fund Ratio

Table 15: Interest Coverage Ratio

Table 16: Total Investment to Total Deposit Ratio

Table 17: Loan and Advances to Total Deposit Ratio

Table 18: Non-Performing Loan to Loan & Advances Ratio

Table 19: Loan loss Provision to Total Loans and Advances Ratio

Table 20: Interest Expenses to Total Deposit Ratio

Table 21: Interest Expenses to Total Expenses Ratio

 Acknowledgement

I am very much greatful to the Tribhuwan University authorities to include this Field work
Programme in the syllabus of B.B.S. 4th year, which, I think very much helpful in development
practical knowledge of the students.

I am, of course deeply indebted to our teacher Maniratna Prajuli instructor to this
assignment of Pashupati Multiple Campus for providing necessary guidance and instructions in
writing of this report.

I would like to express may heartfelt thanks to all the staffs of Kumari Bank Limited. Especially to
honorable Manager for providing necessary data documents and information.

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

Sushil Angbuhang

Pashupati Multiple Campus

Symbol No. 2780369

Date: Jan, 2021

CHAPTER-I

INTRODUCTION

1. Background of the Project

The circular flow of money in a modern economy is maintained smoothly by the national financial mach
having now main wheels.

(i) Money Market:

Mainly for short-term Finance to provide working capital to industry and commerce; and

(ii) Capital Market:

Primary for long-term finance to provide block or fixed capital to business. These two markets work together
are closely inter dependent. In fact, money market are the components of one market called market of credit.

The growth of industries and planned industrialization depends upon the development of both capital market wh
satisfies long-term finance and money market, which fulfills short-term finance. Banks provide both short-te
finance as well a long term finance. The development of banking system is a must for the overal development of
economy of country. Banking system can be considered as the life blood of the economy. In short banks
extermely necessary for the healthy and promt progress of country, it's citizens and the socities it has. Banks cre
and mobilized the capital, render several financial serve that help boost the domestic and international trade. Ba
exercise considerable influence on the level of economic activity through their ability to create money in
economy.

Banking system is necessary to offer institutional service of promotion undertaking, finance and investment for
economy utility functions performed by banks of great economic significance for the economy which can influe
the course and direction of economic activity within the economy. The pool together the saving of he commun
and arrange of their productive use by providing short as well as long term loans in diffrent forms necessary for
trade and commerce. They discharge various functions on behalf of their customers and in turn they paid
services.

Modern commercial Banks perform various functions like the payment of subscriptions, insurance premium, r
etc. collections of cheques, bills, salaryes, pensions, dividends, interest etc. on behalf of their customers by charg
certain amount of commission for the services, In addition, they purchase and discount bill of exchange promiss
notes and exchange foreign currency. Further more, commercial Banks also arrange to remit money from a place
another at very low fees by means of cheques, drafts, SWIFT, etc. They buy and sell shares and securities on beh
of the customers act as the custodian of the valuable such as jewellery, documents of title to goods, securities e
belongings to the customers.

2. Introduction to the Kumari Bank Ltd.

Kumari Bank Limited is a one of the Commercial Bank in Nepal established under the Commercial Bank A
2031. This Bank is established as limited company. So the liability of the shareholders of this Bank will be limi
up to value of share of the Bank.

The head office of Kumari Bank Limited is situated in Putalisadak, Kathmandu. This Bank was established
Mangsir 24, 2056 B.S. and started it's service on 2057 B.S. Chaitra 17. This Bank claimed to give modern, stand
banking service to the customers.

This bank has branches in Biratnagar, Birgunj, Pokhara, Dharan, and New Road Kathmandu. At the initial st
of the bank's establishment, it was started with Rs 35,00,000. Later on, in the year 2060/2061 B.S. it raised
capital from 35,00,000 to 5,00,000 shares @ Rs 100 each by selling 1,50,000 additional shares to the gene
public.
 From the very beginning of it's establishment the bank is providing good service to the general public. Up
now the bank has attempted 5 annual general meeting.

From the year review, it is seen that the bank has achieved tremendous growth and sucess in all areas of
operations due to the patronage, trust and confidences of it's customers.

The bank has continued to remain committed to maximize the return of the shareholders investment in the b
have been pursuing actions and strategies for steady growth and increase return while closely monitoring the qua
of assets.

The bank is also contributing for the development of country from it side by investing it's fund to the vari
sectors related to investment.

3. Statement of the Problem

A sound banking system with wide spread branch throughout the country with varieties of banking service
fulfills commerce, trade industry and agriculture needs of the country is of crucial importance for Nepal. It can
visualized that the banking development in Nepal is it's infants stage.

In Nepal, private commercial banks have shown a good financial performance, people believe that
productivity and profitability position of commercial banks are strong. In these circumstances, it is highly usefu
make the study on Kumari Bank Ltd. This study enables us to see clear picture of the status of the bank.

The real evaluation has not been made to judge the performance of Kumari Bank Ltd. It's profitability posit
and stock prices are generally considered to the yard sticks of it's better performance but one can raise the quest
whether it is enough to reflect the performance of Kumari Bank Limited.

The main problematic of the study is to inquire the financial performance of the Kumari Bank Ltd. This stu
has aimed to find out to the following questions:

(a) Kumari Bank Limited is considered to be operationally efficient. But how far it is efficient ?

(b) What is the financial performance of Kumari Bank Limited ?

(c) Do Kumari Bank Limited utilize it's assets efficiently ?

(d) Does the overall financial statement analyze the financial position indicating any special strength and weakn
of the Bank ?

(e) Are they maintaining sufficient liquidity position ?

In this context, the main purpose of the study is analyzing the financial performance of the Kumari Ba
Limited in terms of profitability, liquidity, turnover, and efficiency in operation as well as other related dimension

4. Objectives of the Study

The core objective of the study is to analyze the financial performance of Kumari Bank Ltd. The spec
objectives of this research study are as follows:

(a) To evaluate the financial performance of Kumari Bank Limited.

(b) To identify the profitability position of the bank.

(c) To identify the liquidity turnover efficiency of assets management.

5. Research Methodology/ Review of Related Study

Research Methodology refers to the various segmental steps along eith the rationale of each step to be adop
by a research in studying a problem with certain objectives in view. In other words research methodology descri
the methods and process appllied in the entire aspects of the study.

The basic objectives of this study is to analyze the financial performance of Kumari Bank Limited.
appropriate research methodology has to be followed to achive the desired objectives of the study. It would
appropriate to mention here that research study is not meaningful to any unless they are sequential in order wh
will be determined by the particular problem at hand. This project focuses and deals with the following parts
methodology.

1. Data Collection

2. Data Analyze

1. Data Collection

The annual report of Kumari Bank Limited was obtained from the Bank itself. Moreover, monthly
economic bulletin banking and financial statistics, economic report etc. have been collected. The data collection
primary and secondary sources.

2. Data Analyze

The Following tools are used to analyze the data presented in the study.
(i) Ratio Analysis

A ratio is simply one number expressed in terms of another and on such it express the quantitative relations
between any two numbers. Ratio can be expressed in terms of percentage, proportion and as a coefficient.

(ii) Liquidity Ratio

Liquidity ratios are used measure a firm's ability to meet short-terms obligations. They compare short-ter
obligations to short-term (current) resources available to meet these obligations from these ratios, much insight
be obtained into the present cash solvency of the firm and the firm's ability to renain solvent in the event of
adversity.

The Following ratios are evaluated under liquidity ratio:

- Current Ratio

- Cash and Bank balence to Current deposit ratio

- Cash and Bank balence to Current asset ratio

Current Ratio

It measures the short-term solvency position of firm by the current assets. It id derived by dividing curr
assets by currents liabilities.

Current assets are those assets that can be converted into cash within a year, such as cash and Bank balen
Investment, Debtors, Inventories, Prepaid expenses, Money at call and short notice, Overdrafts etc.

Higher current ratio indicates better liquidity position and 2:1 or more is considered satisfactory. But all tim
this standard can not be followed blindly, it depends upon quality of assets.

Cash and Bank balence to Current Deposit Ratio

This ratio measures the ability of bank's current assets to fulfills the current deposit. High levels of liquidity
not good as idle assets earn nothing.

Cash and Bank balence to Total Deposit Ratio

 This ratio shows the percentage of liquid assets held on compared to the deposit. High ratio shows the stro
liquidity position of the bank. But very high ratio is not favorable for thr bank, as it does produce appropriate pr
to bear the high interest.

The total deposit consists of current deposit, savings deposit, fixed deposit, money at call and short notice a
other deposit.

Cash and Bank balence to Current assets ratio

Cash and Bank balence is the most liquid form of current assets. This ratio measures the proportion of cash a
bank balence held by the bank. Current assets includes: Cash and Bank balence, Money a call and short noti
Loans and Advances including, Bill dicounted and Purchased, Investments in government securities and ot
securities, Interests receivable and miscellaneous current assets shown under used head other assets.

Loan and Advances to Total Deposit ratio

This ratio measures the banks ability to utilize the via fixed, saving, current call and margin deposit to e
profit by providing loans and advances. Higher ratios indicates higher utilization of funds and lower ratio is
signal of balence remained un utilize or remaining idle.

(iii) Profitability Ratio

Profitabilty ratio measures the efficiency and searches the degree of success in achieving desired profit. A
firm should earn satisfactory profit to survive and grow over a long period in the competitive environm
profitability ratio can determined on the basis of either sales investment. Through this ratio the investor deci
whether to invest in a particular business or not. Some of the important profitability ratio have been calculated a
interpreted in this study which is presented below:

Net profit to total assets ratio

This ratio measures the banks ability to earn as rate of return on the total assets invested. It measures the ret
on assets. The ratio is calculated by dividing the net profit after tax by total assets.

Net profit to Total Deposit ratio

It is used for measuring the internal rate of return from deposits. Here net profit means profit after tax a
deposit, total deposits including saving, current, fixed, call, margin and other deposits. Higher ratio indicates
return from investment on loan and advances are better utilized and mobilized. It is computated by dividing the
profit by total deposit.

Return on Shareholders equity

It is the most vital to judge whether a concern has earned a satisfactory return to it's owner or not. Here, ret
refers to net profit after tax. This ratio is expressed by dividing net profit after tax to ordinary shareholder's equity
Return to Investment

Return on investment measures the company's return from investment or the capacity to generate profit from
investment. It can be computated by dividing net profit after tax to total investment.

Earning Per Share

It measures the profit available to the common shareholders as per share basis i.e. the amount they get fr
every share. This division will automatically after the earning per share. The earning per share is calculated
dividing net profit after tax to the shareholders by number of outstanding shares.

Dividend Per Share

Dividend implies that portion of net profit, which is allocated to shareholders as return on either investment
cash. The net profit after tax belongs to shareholders. However, the income which they really received is
amount of earning distributed as such dividend. The dividend per share is the portion of earning which is alloca
to shareholders dividend by the total no. of shares outstanding. Thus, dividend per share is computed by divid
the total amount of dividend paid by the no. of outstanding share.

Dividend Payout Ratio

Dividend payout ratio indicated the percentage amount of dividend paid to shareholders out of earnings
share i.e. this ratio reflects at what percentage of net profit is to be distributed in terms of dividend and w
percentage is to be retained by company as retained earning. This earning is needed for business to grow and
expand. From the shareholders point of view, the dividends are more desirable to increase their current wealth a
retained earning are the must sufficient internal sources of financing for the earning per share. Therefore, wh
there are not dividends paid, there is not dividend payout ratio. The shareholder of company always expects a hi
dividend payout ratio.

CHAPTER-II

DATA ANALYSIS & MAJOR FINDINS

6. Data Presentation and Analysis

The main purpose of analyzing the financial performance and interpretation is to highlight the strength
weakness of the business enterprises. Therefore, this chapter includes the analysis and result of gathered wit
view to assessing financial performance of the bank for the period of 3 years. Consequently, this analysis help
management take benefits of strategic management teachnique by providing the informantion regarding the stren
and weakness of Kumari Bank Limited to exploit the opportunities lying in the environment and manage the thr
posed by the environment.
In this chapter, the data are presented, calculated and analyzed. The secondary data is used for the purpose and
the data presentation of three years (2016/17, 2017/18, 2018/19).

6.1 Financial Analysis

Ratio Analysis

As mentioned in the earlier chapter, various ratios are applied to judge the financial viability of the y
Kumari Bank Limited. The following ratios are used to analyze and check the financial position of the bank.

(i) Liquidity Ratio

Profitability of a bank is more closely related to liquidity of a commercial bank than any other busin
firm. Since it has to gain confidence from depositors and customers which is the largest sources of fund as wel
earning. Liqidity ratio measures the firm's ability to pay its short-term obligations. It also assests the solvency of
company and its ability to retain solvent even id difficult times. In case of commercial banks, short-term obligati
are current deposit, saving deposit, short-term loans and source of meeting these obligations are cash and b
balence, money at call and short-term notice, investments in government securities and bill discounted
purchased. There is compulsion in banking sector to maintain cash and bank balence as directed by the Ne
Rastra Bank. From legal perspective cash and bank balence to total deposit ratio shows actual liquidity position
the bank whereas other liquidity ratio are also useful.

The liquidity ratio can be analyzed under the following four classifications:

Leverage Ratio

Leverage ratio is known as capital structure ratio or solvency ratio. It is calculated to measure the long te
financial position of a firm. Debt and equity are long-term obligation. This ratio indicates the fund provided
owners and creditores. Leverage ratio measures the overall financial risk as well the ability of the bank in us
debt for the benefit for the shareholders. Thus, there should be appropriate mix of debt and owners equity
financing the firm's assets. To find out the long solvency of the bank several ratio are calculated. This ratio help
find out the proportions of outsiders fund and owners fund.

Long- term debt to shareholders fund ratio

Long-term debt means total amount of fixed and loan from banks and shareholders fund consists of gene
reserve, share premium other reserves, general loans, loss provision, retained earnings and proposed capitalizati
The ratio shows the proportion of outside long-term liabilities to shareholders total funds. The ratio can
calculated by using following fornula:

Total debt to Shareholders fund ratio

Total debt refers to the sum of long-term debt and short-term debt. Debenture or bands, differed paym
arrangments for buying capital equipment and bank borrowning public deposits and any other interest bearing lo
Total debt to fund ratio can be calculated by dividing total debt by the shareholders fund.

Total debt to total assets ratio

This ratio impiles a bank's success in exploiting debts to be more profitable as well as it's riskier cap
structure to assess the proportion of funds short-term and long-term, provided by outsider to finance assets
following ratio may be calculated:

Interest coverage ratio

Other debt ratio describes above is state in nature and fail to indicated the firm's ability to meet intere
obligations. The interest coverage ratio is one of the most conventional. Coverage ratio is computed by divid
earning before interest and tax by interest charges:

Activity Ratio

Activity ratio measures efficiency of an organization from various angles of its operations. This ratio indica
the efficiency of activity of an enterprise to utilize available funds, particularly short-term funds. The follow
activity ratios measure the performance, efficiency, quality and the countribution of loans and advances in the to
profitability.

Total Investment to Total Deposit Ratio

The ratio reveals now efficiency the resources of the bank's have been mobilized. High ratio shows
managerial efficiency regarding the utilization of deposits and vice-versa.

Loan and Advance to Total Deposits Ratio

This ratio indicates the proportion of total deposit investment in loan and advances. Higher ratio indicates
proper use of total deposit where as lower ratio indicates less use of deposit or idle cash.

Non-Performing Loans to Loan and Deposit Ratio

This ratio indicates the proportion of expenses incurred interest out of total deposit of the bank.

Loan loss Provision to Total Loans and Advances Ratio

This ratio indicates the percentage of provision for loan loss out of total loans and advances. Bank's
provisioning as per the guidence of Nepal Rastra Bank. Loan loss provision is inter linked with non-perform
loans. Higher the Non-performing loans, higher will be loan loss provision.

Interest Expenses to Total Deposit Ratio

This ratio indicates the proportion of expenses incurred interest out of total deposit of the bank. The ratio
calculated as under:
Interest Expenses to Total Expenses Ratio

This ratio shows the percentage of interest of interest expenses out of total expenses. High ratio indicates t
the major portion expenses has been spent for interest.

(ii) Current Ratio

This ratio is applied to test solvency as well as in determining short-term financial strength of the bank. T
current ratio indicates the availability of current assets in rupees for one rupees of current liabilities. This ratio m
than 2.1 is satisfactory. It is computed as dividing current assets by current liabilities.

Table 1: Current Ratio

Year Current Assets Current Liabilities Ratio

2016/17 2945750832 2625142306 1.120

2017/18 5437024355 4960773398 1.096

2018/19 7354897975 6792440589 1.083

Asssets = Cash ans Bank Balence + Money at call and short notice + Loans and Advances + other assets

Generally, higher current ratio indicates better liquidity position and 2.1 or more is considered satisfactory. B
here in the context of bank this ratio is less than 2:1 but we considered it satisfactory because bank always h
more liquid current assets than types of organization. Here in the context of Kumari Bank Limited the current ra
of 2016/17 is 1.120, 2017/18 is 1.096 and 2018/19 is 1.083. It indicates that the liquidity position of the bank
decreased with comparison to the year 2016/17.

(iii) Cash and Bank balence to Total Deposit Ratio

This ratio shows the percentage of liquid assets held as compared to the total deposit. High ratio shows
strong liquidity position of the bank. It can be calculated as follows:

Table 2: Cash and Bank Balence to Total Deposit Ratio

Year Cash and Bank Balence Total Deposit Ratio

2016/17 291705250 2513144223 0.117

2017/18 658477911 4807936964 0.143

2018/19 443371369 6268954481 0.070

 The cash and bank balence to total deposit ratio of the bank in the fiscal year 2016/17 is 0.117, in the fis
year 2017/18 is 0.143 and in the fiscal year 2018/19 is 0.070. It shows that the bank has more strong liquid
position in the fiscal year 2017/18 as compare to the fiscal year 2016/17 but the bank has not strong liquid
position in fiscal year 2018/19 as compare to 2017/18. The high ratio also indicates the idle portion of the to
deposit amount which can not generate income.

(iv) Cash and Bank balence to Current Deposit Ratio

This ratio measures the proportion of the cash and bank balence held by the bank to compare with current assets

Table 3: Cash and Bank Balance to Current Deposit Ratio

Year Cash & Bank Balance Current Deposit Ratio

2016/17 291715250 135081020 2.519

2017/18 685477911 251045213 2.730

2018/19 443371369 279361097 1.588

The bank's cash and bank balance to current deposit ratio is higher because it is more than 2 times in the fiscal y
2016/17 and 2017/18 but the ratio in the fiscal year 2018/19 is less than previous years. It indicates that there
high level of idle assets in the year 2016/17 and 2017/18, which earn nothing. But bank tires to minimize the i
cash by investing it to the productive sectors. This shows by its lower ratio. The ratios are 2.519 in fiscal y
2016/2017, 2.730 in the fiscal year 2017/2018 and 1.588 in the year 2018/19.

(v) Cash and Bank Balance to Current Assets Ratio

This ratio measures the proportion of cash and bank balance held by the bank to compare with curr
assets.

Table 4: Cash and Bank Balance Assets Ratios

Year Cash & Bank Balance Current Deposit Ratio

2016/17 291715250 2945750832 0.099

2017/18 685477911 5437024355 0.125

2018/19 443371369 2354897975 0.060

(vi) Loan and Advance to Total Deposit ratio

 This ratio measures the banks ability to utilize the amount that has been collected through saving, curren
fixed deposit account. High ratio indicates the higher utilization of amount and vice-versa. It can be calculated
follows:

Table 5: Loans and Advances to Total Deposit Ratio

Year Cash & Bank Balance Current Deposit Ratio

2016/17 2105736522 2513144223 0.838

2017/18 3649008723 4807936964 0.759

2018/19 5590925658 6268954481 0.982

The loan and advances to total deposit ratio of the Kumari Bank Limited in the fiscal year 2016/17 is 0.8
means about 83% of its deposit is utilized in the loan and advances. In fiscal year 2017/18 is 0.759 means ab
75% of its total deposit is utilized in loan and advances and in the fiscal year 2018/19 is 0.982 means about 98%
its total deposit is utilized. This ratio decreased in the fiscal year 2017/18, thus 2016/17 by about 8% that means
banks ability to utilize its fund is decreased which is not good but in the year 2018/19 ratio increased by 14% wh
shows bank is trying to utilize its fund. This is good.

6.2 Profitability Ratio

It measures the efficiency and searches the degree of success in achieving desired profit. Any firm should e
satisfactory profit for survive and grow over a long period in the competitive environment. Moreover, through t
ratio the investor can decide whether to invest or not. Under this ratio the following ratio are calculated.

(i) Net Profit to Total Assets Ratio

This ratio measure the firm's ability to earn return on total assets invested. It measures the return on ass
The higher rate of return is considered good and vice-versa.

Table 6: Net Profit to Total Assets Ratio

Year Net Profit Total Assets Ratio

2016/17 12474065 2686175754 0.00918

2017/18 48685822 5494176578 0.00886

2018/19 87880557 7437885125 0.01182

The net profit to total assets ratio of the bank is very low in fiscal year. It indicates that the bank is no
good position to earn profit. In the latest year bank's profit and ratio of net profit to total assets is increased, t
factor is good, but the increasing pattern is as the race of tortoise. Bank should accelerate it speed to increase
profit ratio in the coming year.

(ii) Net Profit to Total Deposit Ratio

This ratio is used to measure the internal rate of deposit. Here net profit means profit after tax and depo
means total deposit including saving, current and fixed. Higher ratio indicates the return from the loan and advan
is better.

Table 7: Net Profit Total Deposit Ratio

Year Net Profit after Tax Total Deposit Ratio

2016/17 12474065 2513144223 0.00496

2017/18 48685822 4807936964 0.01013

2018/19 87880557 6268954481 0.0141

The net profit to total deposit ratio of the bank in fiscal year 2016/17 is 0.00496, in 2017/18 is 0.01013 a
in 2018/19 is 0.0141. It indicates quite low rate of return on deposit. But the bank is also increasing its rate return
compared to increasing in total deposit. This ratio is low because here the net profit is taken after deducting bo
to staff and provision for losses.

(iii) Return on Shareholders Equity

This ratio is very important tool to judge whether the concern has earn satisfactory returns to its over or n
Here return refers to the profit after tax.

Table 8: Return on Shareholder's Equity

Year Net Profit after Tax Total Deposit Ratio

2016/17 12474065 392883373 0.03175

2017/18 48685822 570147056 0.0854

2018/19 87880557 533801337 0.1647

The return on shareholders equity measures the performance of the bank. The above table reveals t
Kumari Bank Limited has used very properly the shareholder's fund which is represented by increasing trend of
profit. Ratio is also increasing pattern. The Owners of the Kamari Bank Ltd. are satisfied by seeing above table.
(iv) Return on Investment

Return on investment measures the company's return from investment or the capacity to generate profit fr
investment. This ratio is considered to know the investment generates income from investment. The high ratio
considered as good performance of company.

Table 9: Return on Investment

Year Net Profit after Tax Total Investment Ratio

2016/17 12474065 423154880 0.029

2017/18 48685822 983504403 0.049

2018/19 87880557 1190271012 0.074

The above table reveals that the ratio of increasing total investment is less than the increase percentage
the ratio. It indicates that the bank has used its fund to generate its income. From the increasing ratio of return
investment, we can confidently say that the performance of the bank is in good condition.

(v) Earning Per Share

It measures the profit available to the common shareholders as per share basis. If one forgets to calculate
return on shareholders equity, his performance analysis cannot be completed. Common shareholders are entitled
the residual profit. The rate of common dividend is not fixed, the earning many be distributed to them or retained
the business. This ratio indicates how well the firm utilizes the resources of owners. In fact, this ratio of gr
interest to present as well as prospective shareholders is also of great concern to the management, which has
responsibility of maximizing the owner's welfare.

By studying the above table, we can say that the bank has increased the shareholder's equity by (9.74-3.
i.e. 6.18 in the fiscal year 2017/18 and in the latest fiscal year 2017/18 bank has also increased its earning per sh
by (17.58 - 9.74) i.e. 7.84. However, the bank has increased its shareholders equity or common stock by 15,00,0
in the year 2018/19. The above figure shows that bank is in dynamic motion to increase its shareholder's earning
share at the high rate. So, we can say that the performance of the bank is a very good; it makes the comm
shareholders satisfied.

(vi) Dividend Per Share

 Dividend implies that portion of net profit, which is allocated to shareholders return on either investment
cash. It is the net profit after tax belongs to shareholders. However the income which they really received is
amount of earning distributed as cash dividend per share is that portion of earning per share that is distributed
common shareholder.

Table 10: Dividend Per Share

Year Earning Paid to Shareholder No. of common stock D.P.S.

2016/17 ---- 3500000 ----

2017/18 26300000 5000000 5.26

2018/19 ------ 5000000 -----

The Kumari Bank Limited has not distributed cash dividend on the fiscal year 2016/17 and 2017/18 bu
paid the cash dividend on fiscal year 2017/18 is 5.26 per share. It means the bank has earned more in the fiscal y
2017/18. This factor is very good from the view point of shareholder. It makes shareholders satisfied.

(vii) Dividend Payout Ratio

It indicates the percentage amount of dividend paid to shareholders out of earning per share. It mean
refers to what percent of earning is distributed to shareholders as cash dividend and what percent of earning is n
form of retained earning. That is needed for business to grow and expand. From the shareholders point of v
more cash dividend is desirable however from business point of view or organization's point of view more retain
earning is desirable for internal financing.

Table 11: Dividend Payout Ratio

Year Dividend Per Share Earning Per Share Ratio

2016/17 ---- 3.56 ----

2017/18 5.26 9.74 0.54

2018/19 ------ 17.58 -----

The bank has not distributed cash dividend in the fiscal year 2016/17 and 2017/18 but in the fiscal y
2017/18 the bank distributed 0.54 or 54% of its earning to the shareholders. The rest portion of the earning of
bank is taken is retained earning which is useful for internal financing. From the above table we know that 46%
the earning is taken as retained earning in the fiscal year 2017/18. All the earnings is retained in the fiscal y
2016/17 & 2018/19.

6.3 Leverage Ratio

Leverage ratio is also called structure ratio. It is the solvency ratio too. It is calculated to measure the lon
term financial position of a firm, debt & equity. This ratio measures the solvency of long-term debt from equity.

But in the context of Kumari Bank Limited there is not long-term. So, fixed deposit is taken as its long-te
liability. And here we have calculated the solvency of fixed deposit by its equity under leverage ratio. The follow
ratios are calculated:

(i) Long-term debt to shareholder fund ratio

This ratio shows that the total amount of fixed deposit and long-term bank loan and shareholders fu
consists of general reserve, share premium, other reserves and share capital. Here in the context of Kumari Ba
Limited long-term loan is taken as fixed deposit and loan advance from bank other institutions.

Table 12: Long-term debt to shareholders fund ratio

Year Long-term Debt Shareholder's Fund Ratio

2016/17 798402962 392883373 2.024

2017/18 1292449200 570147056 2.267

2018/19 2703848950 533801337 5.066

The long-term debt to shareholder fund ratio of the bank in the fiscal year 2016/17 is 2.024 which mean
bank has more than double shareholders fund than the fixed deposit. So it can cover the fixed deposit
shareholder fund. In the fiscal year 2017/18 the ratio is increased than the fiscal year 2016/17. And in the fiscal y
2017/18 the ratio is increased as double as 2018/19. This means there is no risk to deposit in this ban from
depositor point of view.

(ii) Total long-term debt to Total assets ratio

This ratio implies banks success in exploiting debts to be more as well as its riskier capital structure. For
requirement fund to the firm the management should financed the proper mix of fund from the debt and others.

Table 13: Total debt to Total Assets ratio

Year Long-term Debt Total Assets Ratio

2016/17 798402962 2986178454 0.267

2017/18 1292449200 5495176578 0.235

2018/19 2703848950 7437882125 0.364

The total debt to total assets ratio of the bank in the fiscal year 2016/17 is 0.267, 2017/18 is 0.235 a
2018/19 is 0.364. It indicates that 0.267 times in fiscal year 2016/17, 0235 times in fiscal year 2018/19 and 0.3
times in the fiscal year 2017/18 of total assets is total debt. Total ratio is decreased in the fiscal year 2017/18 th
fiscal year 2016/17 but increased in fiscal year 2018/19 as compare to earlier.

(iii) Total Debt to Shareholders fund Ratio

This ratio shows the relation between total debt and shareholder's equity. It shows the ratio between to
debt and shareholder's equity. It measures the solvency of total debt from the shareholders equity. Here, in
context of Kumari Bank Limited total debt is taken as fixed deposit and other short-term liabilities.

Table 14: Total Debt to Shareholders Fund Ratio

Year Total Debt Shareholder's Fund Ratio

2016/17 2625142306 392883373 6.682

2017/18 4960773398 570147056 8.701

2018/19 6937882125 533801337 12.99

The total debt to shareholder's fund ratio of the bank is very high. It indicates that in the fiscal year 2016
the bank has used 6 times more debt than equity. In the fiscal year 2017/18 it has used 8 times more th
shareholders equity. And in the fiscal year 2018/19 it has used 12 times more than shareholders equity. The ban
increasing its debt portion as compared to equity portion. It is risky for the creditor.

(iv) Interest Coverage Ratio

Interest coverage ratio measures the interest coverage power to the debt. It shows that the bank is able
cover the interest on the debt others by earning before tax or not.

Table 15: Interest Coverage Ratio

Year EBIT Interest Ratio

2016/17 114298128 92945310 1.23

2017/18 201517886 163902663 1.23

2018/19 294529943 240130179 1.23

 The interest coverage ratio of the bank is also strong. It's interest coverage ratio is more than one means t
it can easily pay the interest to it's creditors from earning before tax.

6.4 Activity Ratio

It measures efficiency of an organization from various angles of its operations. It indicates the efficiency
activity of an enterprise to it's utilizing available funds. The following ratios measures the performance efficiency
an organization to utilize the available funds.

(i) Total Investment to Total Deposit Ratio

This ratio reveals that the resources of the bank have been mobilized less efficiency. High ratio shows
managerial efficiency regarding the utilization of deposit and vice-versa.

Table 16: Total Investment to Total Deposit Ratio

Year Total Investment Total Deposit Ratio

2016/17 423154880 2513144223 0.168

2017/18 983504403 4807936964 0.205

2018/19 1190271012 6268954481 0.189

The investment to total deposit ratio of the bank is very low in the fiscal year 2016/17as about 17% in
fiscal year 2017/18 it is about 21% and in the fiscal year 2018/19 as about 19% of the deposit has been inves
means that the mobilization of the fund is very low. From the comparison of first two fiscal years, the ratio has b
increased in the fiscal year 2017/18 which is acceptable to some extent but decrease in the latest fiscal year.

(ii) Loan and Advances to Total Deposit Ratio

This ratio indicates the proportion of total deposit invested in loan and advances. Higher ratio indicates
proper use of deposit whereas the low ratio indicates the low use of deposit.

Table 17: Loan and Advances to Total Deposit Ratio

Year Loan & Advances Total Deposit Ratio

2016/17 2105736822 2513144223 0.838

2017/18 3649008723 4807936934 0.759

2018/19 5590925658 6268954481 0.892

 Loan and Advances to total deposit ratio of Kumari Bank Limited is greater in fiscal Year 2016/17 than t
of the fiscal year 2017/18 (i.e. 0.838 Vs 0.759) and also greater in fiscal year 2017/18 than that of fiscal y
2018/19 (i.e. 0.759 Vs 0.892). It indicates that the utilization of deposit in loan and advances of the bank
decreased in the fiscal year 2017/18 but increased in the fiscal year 2018/19. It indicates that the ban
performance is fluctuating in the context of utilization of deposit in loan and advances.

(iii) Non-Performing Loans to Loan & Advances Ratio

This ratio indicates the performance of non-performing loans out of total loan and advances. Higher ra
shows the inefficiency and lower ratio shows the efficiency of the firm.

Table 18: Non-Performing Loan to Loan & Advances Ratio

Year Non-Performing Loans Loan & Advances Ratio

2016/17 36323814 2105736822 0.017

2017/18 28189656 3649008723 0.008

2018/19 53988537 5590925658 0.009

From the above table, we can say that the efficiency performance of Kumari Bank Limited in context
non-performing loan is efficient because its ratio of non-performing loans is low.

(iv) Loan and Advances to Fixed Deposit Ratio

This ratio indicates the utilization of fixed deposit in loans and advances. High ratio shows the efficiency
utilization of fixed deposit amount in loan and advances and vice-versa.

Year Loan & Advances Fixed Deposit Ratio

2016/17 2105736822 795402962 2.64

2017/18 3649008723 1292449200 2.82

2018/19 5590925658 2302087622 2.42

This table shows that the loan and advances of Kumari Bank Limited is two times more than fixed depo
and in increasing trend in both the fiscal year. So, it shows the bank's efficiency and better performance.

(v) Loan Loss Provision to Total Loans and Advances Ratio

 This ratio indicates the percentage of Provision for loan loss out of total loans and advances. Banks do m
such provisions as per the guidance and direction of Nepal Rastra Bank.

Table 19: Loan loss Provision to Total Loans and Advances Ratio

Year Loan Loss Provision Loan & Advances Ratio

2016/17 16805159 2105736822 0.0080

2017/18 17125580 344008723 0.0049

2018/19 41111258 559092568 0.0074

The loan loss provision to loan advances ratio of the bank has decreased in the fiscal year 2017/18. In this conte
the performance of the bank is quite weak. But ratio is increased in the latest year, which is quite satisfactory.

(vi) Interest Expenses to Total Deposit Ratio

This ratio indicates the proportion of expenses incurred for interest out of total deposit of the bank. T
ratio is calculated as follows:

Table 20: Interest Expenses to Total Deposit Ratio

Year Interest Expenses Total Deposit Ratio

2016/17 92945310 2513144223 0.037

2017/18 163902663 4807936964 0.034

2018/19 240130179 6268954481 0.038

By evaluating the above table, we came to know that the interest expenses to total deposit ratio of the ba
is 0.037 in the fiscal year 2016/17, 0.034 in the fiscal year 2017/18 and 0.038 in the fiscal year 2018/19. The ra
has slightly decreased in the year 2018/19 and slightly increased in the latest year. The deduction of expense
favorable for the bank. It should be considered as efficient performance of the bank.

(vii) Interest Expenses to Total Expenses Ratio

This ratio indicates the proportion of the interest expenses to the total expenses. Higher ratio indicates t
the major portion has been spent on interest expenses.

Table 21: Interest Expenses to Total Expenses Ratio

Year Interest Expenses Total Deposit Ratio

2016/17 92945310 161703002 0.575

2017/18 163902663 258920112 0.658

2018/19 240130179 354337190 0.677

From the above table, we can say that the bank's interest expense to total expenses is higher than 50
Which means about 58% of its total expenses are interest expenses and the rest are other expenses in the fiscal y
2016/17, about 66% of the total expenses are interest expenses in the fiscal year 2017/18 and about 68% of the to
expenses are interest expenses in the fiscal year 2018/19. The ratio has increased in the latest years.

7. Major Findings of the Study

This assignment work report has been prepared as per the format prescribed by the subject lecturer a
entitled 'A Study of Financial Performance of Kumari Bank Limited." This report has been divided into th
chapters as 'Introduction', 'Data Analysis and Presentation' and Summary and Conclusion' this main chap
contains various subjects. The main part of this report is Presentation and Analysis of Data. For the data analy
purpose Ratio Analysis tools have been used to evaluate the performance of the bank. The major findings of
study are as follows:

¨ From the study, we found that Kumari Bank Limited is overall beneficial Commercial Bank in
Nation and profitability position of the bank is much satisfactory.

¨ From the Liquidity Ratio, we found that the Bank is in strong position to its Short-term obligations a
moreover the bank is increasing it's short-term solvency power for short-term liabilities from current assets.

¨ From the Leverage Ratio, we fond to conclude that the bank has taken some long-term loans fr
central banks. So, by using fixed deposit and loan from bank as long-term liability, we found that the financ
structure of the bank is satisfactory.

¨ From the Activity Ratio, we found that the bank has utilized it's deposits efficiently in the product
sector. The bank has invested high percent of available funds to generate income.

¨ From the profitability Ratio, we found that the bank is in profitable condition. In the fiscal year 2016
and 2017/18, the bank has not distributed any cash divided but in the fiscal year 2017/18, it has distributed c
dividend to it's shareholders. Because of it's good financial performance, the bank has generated profit the financ
activities.

Some other findings of this study are listed below:

¨ The earning per share of the bank has in increasing pattern. In the year 2016/17 it's earning per shar
Rs. 3.56, in the year 2017/18 it increased to Rs. 9.74 and in the year 2018/19 it increased to Rs. 17.58.

¨ In the fiscal year 2016/17 and 2017/18, the bank has not paid any dividend but in the fiscal y
2017/18 it paid 5.26% of share capital as dividend.

¨ The interest income on loan and advances of the bank in fiscal year 2016/17 is 8.79%, in the y
2017/18 is 8.51% and in the year 2018/19 is 8.95%. Which is the result of inefficient performance of the bank ?

¨ The net profit on loan advances of the bank is 0.059% in the year 2016/17, in the year 2017/18 is 1.3
and in the year 2018/19 is 0.16%, which is the indicator of good financial performance of the bank.

CHAPTER-III

SUMMARY, CONCLUSION & RECOMMENDATION

8. Summary and Conclusion

This field work report has been prepared for the fulfillment of the internal assessment of BBS programm
From this purpose, here we have analyzed the financial performance of Kumari Bank Limited. To evaluate
financial performance of the bank, we have divided the whole report to different chapters. In every chapter, th
are several sub-chapter. The first Introduction chapter gives background information about the project wo
introduction of Kumari Bank Limited, Review related studies etc. The second chapter called Presentation
Analysis of Data, we tried to analyze it's financial performance through Ratio Analysis. By using this financial to
we computed different ratios to evaluate it's Liquidity position, Management Position, Profitability Position a
overall Financial Position.

Ratio analysis is a very significant tool to financial performance analysis. It is one of the means by wh
financial stability, wealth, viability and performance of a firm can be judged. Current ratio of Kumari Bank Limi
is how than it's theoretical norm that is 2:1. Its current ratio are 1.12, 1.096 and 1.083 in the year 2016/17, 2017
and 2018/19 respectively. But, there is not matter to worry about because the bank has kept more liquid assets th
other types of organization. Other solvency power of bank to the different deposit by its cash is also in increas
trend. Moreover, it should manage cash properly because cash on hand doesn't generate any income. In aggreg
there is nothing to be worried about the liquidity position of the bank since it's quality of current assets is very go
which can be easily converted into cash within short period without any loss of it's assets.
 The debt position is unfavorable to the management because it has not borrowed loan from banks
institutions in the earlier years. But is the latest year bank has borrowed some amount of money from central ba
which is good symptom. By borrowing loans at low rate of interest from other banks, the institution may gener
lots of income by investing such loans on highly profitable sectors. The profitability position of the bank is m
satisfactory. The net profit of the bank has increased as compared to it's increment in investment.

9. Recommendation
However, we are not authorized person to recommend the management of Kumari Bank Limited but h
we attempt to recommend the management of Kumari Bank Limited. Here under we have given so
recommendation which may be useful to the management:

¨ To raise the total capital of Kumari Bank Limited by long-term debt and minimize the use sharehold
equity.

¨ To maintain the idle cash or cash equivalents minimum.

¨ The bank should finance the maximum fund in external assets.

¨ The bank should take maximum advantage by maintaining minimum cash holding and should fina
in riskier assets that is Loan and Advances to earn high interest.

¨ For the better utilization of Shareholders fund, the bank should conduct research frequently.

¨ Kumari Bank should maintain Liquidity to meet current obligations easily.

¨ The bank should identify better investment opportunity to get high rates of return.

¨ Management of the bank should be effective.

¨ Personnel should be trained and motivated by giving incentives.

¨ The bank needs to adopt new technologies, which is very helpful to work effectively and efficiency.

¨ Loans Programs should be made attractive.

¨ Customer Satisfaction should be the Bank's motto.

BIBLOGRAPHY
Testbooks:

I.M. Pandey, "Financial Management" Tata MC Graw-Hill Bup. New Delhi.

J. Fred Weston1983, Thomas E. Copeland, "Managerial Finance, Addison Wesley 1983.

Khan, M.Y. and Jain P.K. (1992), "Financial Management" Tata MC Graw-Hill, India.

P.R. Panta (1998), Fieldwork Assignment and Report Writing, Veena Academic Enterprises, Ktm.

Paul A. Samuelson Economic (New York M.C. Graw-Hill Company)

S.J. Khadka and H.B. Singh (2056), Banking and Principles, Lesgislation and Practice, Nabin Prakashan, Bhotah
Ktm.

Ronald Grywinshki, The New Fashoned Banking. (Harvered Business Review, May-June 1993)

Reference:
1. The Nepal Commercial Bank Act 23031 B.S.

2. Tiwari Netra, "A Comparative Study of Financial Performance of Commercial Banks Unpublish" (Thesis
MBA)

3. Shrestha M.K. "Commercial Banks Comparative Performance Evaluation" Kosh, Ktm, Karmach
Sanchaya Kosh Publication, Year 16,2047.