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, April 10, 2023

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 ratioThe 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 ratioFixed 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 ratioThe ratio is calculated to make an estimate of application in the value of share of a company.

g) Cash Dividend on Share CapitalCash 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 IncomeIt 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 RatioThis ratio indicates the ratio between loans to its deposit, which clearly shows the ratio between them.

j) Total Operating Expenses/ Total AssetsA 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 AdvancesIt shows the interest income from loan and advances given by bank to others.

l) Interest Expense on Total Deposit and BorrowingsInterest Expense on Total Deposit and Borrowings shows the total interest expenses on total deposit and borrowings.

Ratios Formula Indicator Nabil Bank Limited

2011/1212 2012/13Return on Assets Net income/ Total

AssetsPercent 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


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

Comparisons of ratios of Nabil Bank limited for 2011/1212 with 2012/13

a) Return on AssetsRatios Formula Indicator Nabil Bank Limited



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 EquityRatios Formula Indicator Nabil Bank Limited

2011/1212 2012/13


Percent 30.25 32.78

In this table, the ROE of Nabil Bank has been increased from 30.25 to 32.78 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 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 ShareRatios Formula Indicator Nabil Bank Limited

2011/1212 2012/13Earnings per

ShareNet Profit After

Tax / No. of Shares

Rupees 83.23 95.14

In this table, the EPS of Nabil Bank has been increased from 83.23 to 95.14 which show 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.iii) Due to stabilization of Weighted average number of outstanding shares on 23,320,064

thousands.

d) Price Earnings Ratio2011/12 2012/13


Market Value Per Share / Earning Per

Share

Ratio 16.21 19.08

In this table, the PE ratio of Nabil Bank has been increased from 16,21 to 19.08 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 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 Capital2011/12 2012/13


Proposed Cash Dividend / Paid up Share Capital

Percent 40 40

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 IncomeNet Profit / Gross

IncomeNet Profit After

Tax / Total Operating

Income

Percent 23.74 32.66

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:

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.

iii) This effect came due to reduction on Nabil Bank’s interest expenses and increase in other operating incomes

g) Loan-Deposit Ratio2011/12 2012/13

Loan-Deposit Ratio


Percent 77.91 74.90

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

2011/12 2012/13


Assets


Assets

Percent 6.73 4.84

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.

k) Fixed Assets Turnover Ratio2011/12 2012/13



Times 6.86 6.51

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 times2011/12 2012/13

Total Assets to Shareholders'

Fund times

Total Assets/ Shareholders'

Fund

Times 10.09 9.56

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.

Ratios Formula Indicator Nabil Bank Limited Bank of Kathmandu




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


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


Assets


Assets

Percent 4.84 7.40



Times 6.51 4.37



Percent 11.64 12.01

Interest Expense on Total Deposit and

Borrowings

Interest Expense on Total Deposit and

Borrowings

Percent 3.67 5.62

Comparisons of ratios of Nabil Bank limited (NBL)with Bank of Kathmandu (BOK)

a) Return on assetsRatios Formula Indicator Nabil Bank

LimitedBank of

Kathmandu2012/13 2012/13

Return on Assets

Net income/ Total Assets

Percent 3.03 1.90

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 EquityNBL-2012/13 BOK-2012/13

Return on Equity

Net income/ Total Equity

Percent 32.78 20.39

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.

c) Earnings per ShareNBL-2012/13 BOK-2012/13

Earnings per Share

Net Profit After Tax / No. of

Shares

Rupees 95.14 36.64

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

NBL-2012/13 BOK-2012/13


Market Value Per Share / Earning Per

Share

Ratio 19.08 15.09

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.

g) Loan-Deposit RatioNBL-2012/13 BOK-2012/13

Loan-Deposit Ratio


Percent 74.90 83.21

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.

NBL-2012/13 BOK-2012/13Total Operating Expenses/ Total

Assets


Assets

Percent 4.84 7.40

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.

i) Fixed Assets Turnover RatioNBL-2012/13 BOK-2012/13



Times 6.51 4.37

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 AdvancesNBL-2012/13 BOK-2012/13



Percent 11.64 12.01

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.

Summary and Conclusion

Intra-Bank of NBLThis 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. BOKThis 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.

Date post:	25-Dec-2014
Category:	Economy & Finance
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Comparison of Ratio analysis of banks of NEPAL....

Economy & Finance