Comparison of Ratio analysis of banks of NEPAL....

Comparison of Ratio analysis
Intra-bank
(Nabil Bank Limited (NBL)-2011/12—2012/13)
And
Inter-bank
(Nabil Bank Limited (NBL) vs. Bank of Kathmandu (BOK) —2012/13)
Submitted by: Submitted to:
Ram Krishna Tiwari CA Yuba Raj Pandey
Roll no: MFC 23
Monday, August 04, 2014

Before calculating and analyzing different ratios, we should know the meaning, benchmarking
for that ratio and other relating information relating to that ratio. So, here are such information of
them.
a) Return on Assets (ROA)
This ratio describes regarding return on assets (ROA). This ratio reveals the earning
capacity of profit by a business on its total assets which are employed in the business. It
can be calculated as percentage of after tax profit to total assets. In this study it is used as
a measure to know the financial performance and it shows the management ability to
generate net profits by using its assets.
b) Return on Equity (ROE)
This table describes the data regarding return on equity (ROE) of a company for the
period of time. This ratio reveals the earning capacity of profit by a company on its total
Equity which are in the business. It can be calculated as percentage of after tax profit to
total equity. In this study it is used as a measure to know the financial performance and it
shows the management ability to generate net profits on its equity.
c) Earnings per Share (EPS)
EPS is the ratio between net profit after tax to number of shares outstanding at the end of
the year as shown in balance sheet and its relevant notes to accounts. It is useful for
whole financial sector.
d) proprietary ratio
The proprietary ratio establishes the relationship between shareholders’ funds to total
assets. It determines the long-term solvency of the firm. This ratio indicates the extent to
which the assets of the company can be lost without affecting the interest of the company.
e) Fixed assets turnover ratio
Fixed assets are used in the business for producing the goods to be sold. This ratio shows
the firm’s ability in generating sales from all financial resources committed to total
assets. The ratio indicates the account of one rupee investment in fixed assets.
f) P/E ratio
The ratio is calculated to make an estimate of application in the value of share of a
company.
g) Cash Dividend on Share Capital
Cash Dividend on Share Capital shows the cash dividend earning by shareholder’s on
their net share capital. It largely depends on previous year profit.
h) Net Profit / Gross Income
It shows the net profit amount of the bank in comparison to its gross income. It helps to
find out the ratio of administrative, marketing, tax, dividend expenses of the company.
i) Loan-Deposit Ratio
This ratio indicates the ratio between loans to its deposit, which clearly shows the ratio
between them.

j) Total Operating Expenses/ Total Assets
A measure of the total costs associated with managing and operating an investment fund.
The total cost of the fund is divided by the fund's total assets to arrive at a percentage
amount
k) Interest Income/ Loan and Advances
It shows the interest income from loan and advances given by bank to others.
l) Interest Expense on Total Deposit and Borrowings
Interest Expense on Total Deposit and Borrowings shows the total interest expenses on
total deposit and borrowings.

Comparisons of ratios of Nabil Bank limited for 2011/1212 with 2012/13
Ratios Formula Indicator Nabil Bank Limited
2011/1212 2012/13
Return on Assets Net income/ Total
Assets
Percent 2.69 3.03
Return on Equity Net income/ Total
Equity
Percent 30.25 32.78
Earnings per
Share
Net Profit After
Tax / No. of
Shares
Rupees 83.23 95.14
Price Earnings
Ratio
Market Value Per
Share / Earning
Per Share
Ratio 16.21 19.08
Cash Dividend on
Share Capital
Proposed Cash
Dividend / Paid
up Share Capital
Percent 40 40
Net Profit / Gross
Income
Net Profit After
Tax / Total
Operating Income
Percent 23.74 32.66
Loan-Deposit
Ratio
Total Credit/
Deposit
Percent 77.91 74.90
Total Operating
Expenses/ Total
Assets
Total Operating
Expenses / Total
Assets
Percent 6.73 4.84
Fixed Assets
Turnover Ratio
Net interest
income/ Net
Fixed Assets
Times 6.86 6.51
Interest Income/
Loan and
Advances
Interest Income/
Loan and
Advances
Percent 12.55 11.64
Interest Expense
on Total Deposit
and Borrowings
Interest Expense
on Total Deposit
and Borrowings
Percent 5.74 3.67
Total Assets to
Shareholders'
Fund times
Total Assets/
Shareholders'
Fund
Times 10.09 9.56

a) Return on Assets
In this table, the ROA of Nabil Bank has been increased from 2.69 to 3.03 which shows the positive
trending of Nabil Bank from 2011/12 to 2012/13. It is because of following reasons:
i) Due to increment in Net profit after tax to Rs. 2,226,686,260 from Rs. 1,693,491,387.
ii) Due to increment in Net interest income to Rs. 3,534,804,564 from Rs. 2,985,926,271.
b) Return on Equity
In this table, the ROE of Nabil Bank has been increased from 30.25 to 32.78 which shows the positive
a) Due to increment in Net profit after tax to Rs. 2,226,686,260 from Rs. 1,693,491,387.
b) Due to increment in Net interest income to Rs. 3,534,804,564 from Rs. 2,985,926,271.
c) Earnings per Share
In this table, the EPS of Nabil Bank has been increased from 83.23 to 95.14 which show the positive
iii) Due to stabilization of Weighted average number of outstanding shares on 23,320,064
thousands.
2011/1212 2012/13
Assets
Percent 2.69 3.03
2011/1212 2012/13
Return on Equity Net income/
Total Equity
Percent 30.25 32.78
2011/1212 2012/13
Earnings per
Share
Net Profit After
Tax / No. of
Shares
Rupees 83.23 95.14

d) Price Earnings Ratio
In this table, the PE ratio of Nabil Bank has been increased from 16,21 to 19.08 which shows the positive
i) Due to increment in Market Value Per Share from Rs. 1,355 to Rs. 1,815.
ii) Due to increment in Earning Per Share from Rs. 83.23 to 95.14.
e) Cash Dividend on Share Capital
In this table, the Cash Dividend on Share Capital of Nabil Bank has been unchanged from on 40. This
shows the same trending of Nabil Bank from 2011/12 to 2012/13. It is because of following reasons:
i) Due to stabilization of weighted average number of outstanding shares on 23,320,064
thousands.
ii) Due to stabilization of Proposed Cash Dividend on Rs. 932,802,560.
f) Net Profit / Gross Income
In this table, the Net Profit / Gross Income of Nabil Bank has been increased from 23.74 to 32.66 which
shows the positive trending of Nabil Bank from 2011/12 to 2012/13. It is because of following reasons:
2011/12 2012/13
Price Earnings
Ratio
Market Value Per
Share / Earning Per
Share
Ratio 16.21 19.08
2011/12 2012/13
Cash Dividend on
Share Capital
Proposed Cash
Dividend / Paid
up Share Capital
Percent 40 40
Net Profit / Gross
Income
Net Profit After
Tax / Total
Operating
Income
Percent 23.74 32.66

iii) This effect came due to reduction on Nabil Bank’s interest expenses and increase in
other operating incomes
g) Loan-Deposit Ratio
In this table, the Net Profit / Gross Income of Nabil Bank has been increased from 23.74 to 32.66.
It is because of following reasons:
i) Due to increment in Total Credit.
ii) Due to increase in total deposit.
iii) But change in deposit > change in credit.
h) Total Operating Expenses/ Total Assets
In this table, the Total Operating Expenses/ Total Assets of Nabil Bank has been decreased from
6.73to 4.84 which shows the positive trending of Nabil Bank from 2011/12 to 2012/13. It is because of
following reasons:
a) Due to increment in Total Assets to Rs. 284,038 from Rs. 253,093 thousands.
b) Due to decrease in Total operating expenses.
2011/12 2012/13
Loan-Deposit
Ratio
Total Credit/
Deposit
Percent 77.91 74.90
2011/12 2012/13
Total Operating
Expenses/ Total
Assets
Total Operating
Expenses / Total
Assets
Percent 6.73 4.84

k) Fixed Assets Turnover Ratio
In this table, the Fixed Assets Turnover Ratio of Nabil Bank has been decreased from 6.86 to 6.51
which show the following relationship of Nabil Bank from 2011/12 to 2012/13. It is because of following
reasons:
a) Due to decrease in Total Assets to Rs. 6,139,204. From Rs. 6,952,017.
b) Due to increment in Net interest income to Rs. 3,534,804,564 from Rs. 2,985,926,271.
m) Total Assets to Shareholders' Fund times
In this table, the Total Assets to Shareholders' Fund times of Nabil Bank has been decreased from
10.09 to 9.56 which show the positive trending of Nabil Bank from 2011/12 to 2012/13. It is because of
following reasons:
a) Due to decrease in Total Assets to Rs. 6,139,204. From Rs. 6,952,017.
b) Shareholders' Fund increment to 6689 mn from 5444 mn.
2011/12 2012/13
Fixed Assets
Turnover Ratio
Net interest
income/ Net
Fixed Assets
Times 6.86 6.51
2011/12 2012/13
Total Assets to
Shareholders'
Fund times
Total Assets/
Shareholders'
Fund
Times 10.09 9.56

Comparisons of ratios of Nabil Bank limited (NBL)with Bank of Kathmandu
(BOK)
Ratios Formula Indicator Nabil Bank Limited Bank of
Kathmandu
2012/13 2012/13
Assets
Percent 3.03 1.90
Return on Equity Net income/ Total
Equity
Percent 32.78 20.39
Earnings per Share Net Profit After Tax /
No. of Shares
Rupees 95.14 36.64
Price Earnings Ratio Market Value Per
Share / Earning Per
Share
Ratio 19.08 15.09
Cash Dividend on
Share Capital
Proposed Cash
Dividend / Paid up
Share Capital
Percent 40 0.74
Net Profit / Gross
Income
Net Profit After Tax /
Total Operating
Income
Percent 32.66 37.85
Loan-Deposit Ratio Total Credit/ Deposit Percent 74.90 83.21
Total Operating
Expenses/ Total
Assets
Total Operating
Expenses / Total
Assets
Percent 4.84 7.40
Fixed Assets
Turnover Ratio
Net interest income/
Net Fixed Assets
Times 6.51 4.37
Interest Income/
Loan and Advances
Interest Income/ Loan
and Advances
Percent 11.64 12.01
Interest Expense on
Total Deposit and
Borrowings
Interest Expense on
Total Deposit and
Borrowings
Percent 3.67 5.62

a) Return on assets
In this table, the ROA of Nabil Bank has more than that of Bank of Kathmandu from 1.90 to 3.03. This
shows that Nabil Bank has more strength than that of Bank of Kathmandu in 2012/13 due to following
reasons:
a) The Net interest income of NBL is Rs. 3,534,804,564 and that of BOK is only Rs.
1,230,743,106 that means around 2.5 times.
b) The Total Assets of NBL is Rs. 284,038 thousands and that of BOK is only Rs. 33,042,253.
c) The Net profit after tax of NBL is Rs. 2,226,686,260 but that of BOK is only Rs.
617,090,030.
b) Return on Equity
In this table, the ROE of Nabil Bank has more than that of Bank of Kathmandu from 20.39 to 32.78.
This shows that Nabil Bank has more strength than that of Bank of Kathmandu in 2012/13 due to
following reasons:
a) The Net profit after tax of NBL is Rs. 2,226,686,260 but that of BOK is only Rs.
617,090,030.
b) The Total Equity of NBL is Rs. 23,320,064 thousands and that of BOK is only Rs.
3,304,643,308.
Ratios Formula Indicator Nabil Bank
Limited
Bank of
Kathmandu
2012/13 2012/13
Return on
Assets
Net income/
Total Assets
Percent 3.03 1.90
NBL-2012/13 BOK-2012/13
Return on
Equity
Net income/
Total Equity
Percent 32.78 20.39

c) Earnings per Share
In this table, the Earnings per Share of Nabil Bank has more than that of Bank of Kathmandu from
36.64 to 95.14. This shows that Nabil Bank has more strength than that of Bank of Kathmandu in
2012/13 due to following reasons:
a) The Net profit after tax of NBL is Rs. 2,226,686,260 but that of BOK is only Rs.
617,090,030.
b) The Total Equity of NBL is Rs. 23,320,064 thousands and that of BOK is only Rs.
3,304,643,308.
c) The Net interest income of NBL is Rs. 3,534,804,564 and that of BOK is only Rs.
1,136,356,825.
d) Price Earnings Ratio
In this table, the Price Earnings Ratio of Nabil Bank has more than that of Bank of Kathmandu from
15.09 to 19.08. This shows that Nabil Bank has more strength than that of Bank of Kathmandu in
2012/13 due to following reasons:
a) The Market Value per Share of NBL is Rs. 1,815.00 and that of BOK is only Rs. 535.00
i.e. more than 3 times.
b) The Total Earning per Share of NBL is Rs. 95.14 and that of BOK is only Rs. 36.64.
c) The Net interest income of NBL is Rs. 3,534,804,564 and that of BOK is only Rs.
1,136,356,825.
d) The Net profit after tax of NBL is Rs. 2,226,686,260 but that of BOK is only Rs.
617,090,030.
NBL-2012/13 BOK-2012/13
Earnings per
Share
Net Profit After
Tax / No. of
Shares
Rupees 95.14 36.64
NBL-2012/13 BOK-2012/13
Price Earnings
Ratio
Market Value Per
Share / Earning Per
Share
Ratio 19.08 15.09

g) Loan-Deposit Ratio
In this table, the Loan-Deposit Ratio of Nabil Bank has less than that of Bank of Kathmandu
from 83.21 to 74.90. This shows that Nabil Bank has more strength than that of Bank of
Kathmandu in 2012/13.
This ratio shows the portion of total credit out of total deposit. NRB has directed banks to
contain their C/D ratio with 70%. Here NBL has been able to reduce its C/D ratio more
than that of BOK. Still both bank needs to reduce its ratio further.
h) Total Operating Expenses/ Total Assets ratio
In this table, the Total Operating Expenses/ Total Assets of Nabil Bank have more than that of Bank
of Kathmandu from 7.40 to 4.84. This shows that Nabil Bank has more strength than that of Bank of
Kathmandu in 2012/13 due to following reasons:
a) The Total Assets of NBL is Rs. 284,038 thousands and that of BOK is only Rs. 33,042,253.
b) The Total Operating Expenses of NBL is more than that of BOK.
NBL-2012/13 BOK-2012/13
Loan-Deposit
Ratio
Total Credit/
Deposit
Percent 74.90 83.21
NBL-2012/13 BOK-2012/13
Total Operating
Expenses/ Total
Assets
Total Operating
Expenses / Total
Assets
Percent 4.84 7.40

i) Fixed Assets Turnover Ratio
In this table, the Fixed Assets Turnover Ratio of Nabil Bank have more than that of Bank of
Kathmandu from 4.37 to 6.51. This shows that Nabil Bank has more strength than that of Bank of
Kathmandu in 2012/13 due to following reasons:
a) The Total Assets of NBL is Rs. 284,038 thousands and that of BOK is only Rs. 33,042,253.
b) The Net profit after tax of NBL is Rs. 2,226,686,260 but that of BOK is only Rs. 617,090,030.
k) Interest Income/ Loan and Advances
In this table, the Interest Income/ Loan and Advances Ratio of Nabil Bank have less than that of Bank
of Kathmandu from 12.01 to 11.64. This shows that Nabil Bank has less strength than that of Bank of
Kathmandu in 2012/13 in this section due to following reasons:
a) The Net interest income of NBL is Rs. 3,534,804,564 and that of BOK is only Rs. 1,136,356,825
but,
b) The Loan and Advances of NBL is Rs. 44,832,762,000 but that of BOK is only Rs.
20,633,653,346.
c) With comparison to Loan and advances NBL can’t get more interest income incomparision of
BOK.
d) This shows that the BOK bank has not been able to channelize its fund which is not good.
NBL-2012/13 BOK-2012/13
Fixed Assets
Turnover Ratio
Net interest
income/ Net
Fixed Assets
Times 6.51 4.37
NBL-2012/13 BOK-2012/13
Interest Income/
Loan and
Advances
Interest Income/
Loan and
Advances
Percent 11.64 12.01

Summary and Conclusion
Intra-Bank of NBL
This paper measured the performance of NBL intra-Bank over the period 2011/12 with 2012/13.
The results indicate that the overall bank performance in terms of profitability, liquidity, and
credit quality has been improving than that of 2011/12. Banks increased the size of their loan
portfolios during the period. Although the banks aggressively increased their loan portfolios,
sound and effective credit risk management policies have been in place so that the lending
behavior could still be contained.
So, intra-bank conclusion is that 2012/13 is good enough than 2012/13.
Inter-Bank—NBL vs. BOK
This paper also measured the performance of NBL with BOK inter-Bank over the period
2012/13. The results indicate that the overall bank performance in terms of profitability, liquidity,
and credit quality NBL have more than BOK. NBL increased the size of their loan portfolios
during the period. Although the banks aggressively increased their loan portfolios, sound and
effective credit risk management policies have been in place so that the lending behavior could
still be contained in both banks.
So, inter-bank conclusion is that NBL is good enough than BOK in most ratios.

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