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comparative profitability analysis of commercial banks in nepal PDF

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A PERFORMANCE ANALYSIS OF
COMMERCIAL BANKS IN NEPAL

(A Comparative study of Everest Bank and Himalayan Bank Limited)

A THESIS PROPOSAL

Submitted By:

Kulesh Panthi

Goldengate Int'l College

T.U. Regd. No: 7-2-725-20-2008

Exam Roll No: 4530004

Submitted To:

Goldengate Int'l College

Tribhuvan univesity

In partial fulfillment of the Requirements for the Degree of Masters of Business
Studies (MBS)

Kathmandu, Nepal

September, 2015
1. Background of the Study
Nepal, officially the Federal Democratic Republic of Nepal. It is situated in south
Asia between two huge and rapid economically progressive countries namely
China and India.Nepal is a least developed country in the world and large
numbers of peoples are living still below the poverty line. Various factors like the
landlocked situation, poor resource mobilization, lack of entrepreneurs, lack of
institutional commitment, erratic government policies and political instability are
the major responsible for the slow pace ofeconomic development in past, since
country recently get full constitution therefore we can expect greater pace of
economic development in country.

Banking systems play a very important role in the economic life of the nation. The
health of the economic is closely related to the soundness of its banking system. In
a developing country like Nepal the banking system as a whole plays a vital role in
the progress of economic development. A bank as a matter of fact is just like a
heart in the economic structure and the Capital provided by it is like blood in it. As
long as blood is in circulation the organs will remain sound and healthy if the
blood is not supplied to any Organ then that part would become useless and same
thing happen in the nation if the fund is not provided to productive sector, country
economy will be destroyed. Sustainable economy and its growth would almost be
impossible without the availability of suitable banking services. First of all,
banking promotes savings and mobilizes the saving in productive sector thus;
banks play an important role in the economic development of the nation. Hence,
the performance of commercial banks can have a markedinfluence on the
development of an economy in the developing country like Nepal.

The study is based on performance evaluation of commercial banks in Nepal up to
mid July, 2015 there were thirty commercial banks operated in Nepal. The study,
Performance evaluation covers an analysis of performance of Everest Bank and
Himalayan Bank Limited, Nepal which were believed to be the two strongest joint
venture banks of the country. Financial ratio analysis is widely used tool for the
performance analysis of any financial institution. Thus, this thesis report is mainly
focused on ratio analysis, growth and correlation analysis of selected variables of
Everest bank and Himalayan Bank Limited, Nepal.
2. Statement of the problem
Financialsystemoperatesindynamicenvironmentasaresultofthatthe
components of the financial system cannot be far away from problems. When the
nations going through the transition era, the organization face more challenge than
the normal period therefore Nepalese commercial banking industry also face more
problems. Nepalese commercial banks perform all activities under the regulation of
Nepal Rastra Bank. They mainly rely upon the instructions and guidelines of Nepal
Rastra Bank their performance also affected with the change in commands and
guidelinesofits.Furthermoretheeffectsofthetransitioneraofcountry
performance of commercial bank also vary with the change in period.

Thus the present study will make a modest attempt to analyze the financial
performance of two of the biggest joint venture bank of Nepal, EBL and HBL. In
thisstudy,EBLfinancialperformanceisanalyzedcomparingitwiththe
performance of HBL. In spite of rapid growth, some indicates show performance is
not much encouraging towards the service coverage. In such a situation the study
tries to analyze the present performance of banks, which try to give the answer of
following queries.

a) What are the comparative liquidity, profitability and leverage ratio of EBL and
HBL banks?

b) Are the trends of these indicators satisfactory?

C) What is the relationship between selected variables?

D) Is financial performance of EBL was eye-catching than the HBL?

3. Objective of the Study

Themainobjectiveofthestudyistoevaluateandanalysisthefinancial
performance of these banks i.e. HBL and EBL and to recommend the suitable
suggestion for further improvement in future.

a) To analyze and compare the financial strengths and weakness as of the sample
financial institutions.

b) To determine the financial performance through the use of appropriate financial
ratios and statistical tools.

C) To provide necessary recommendations and suggestion on the basis of finding.
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