A Performance Analysis of Commercial Banks in Nepal: EBL vs HBL

This thesis proposal presents a comprehensive performance analysis of Everest Bank (EBL) and Himalayan Bank Limited (HBL) in Nepal. The study aims to evaluate and compare the financial performance of these two major joint venture banks. The research will employ financial ratio analysis, growth analysis, and correlation analysis to assess key indicators such as liquidity, profitability, and leverage. The study addresses the challenges faced by Nepalese commercial banks and seeks to determine the comparative strengths and weaknesses of EBL and HBL. It investigates the relationships between various financial variables and provides recommendations for future improvement. The research utilizes secondary data from annual reports and published sources, covering a five-year period. The findings are expected to benefit bank management, shareholders, policymakers, and the general public, as well as serve as a resource for future researchers in the field.

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 of economic 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 marked influence 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
Financial system operates in dynamic environment as a result of that the
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
guidelines of its. Furthermore the effects of the transition era of country
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
this study, EBL financial performance is analyzed comparing it with the
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
The main objective of the study is to evaluate and analysis the financial
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.

4. Hypothesis Statements
For the purpose of this dissertation, following hypotheses are conducted.
i. H0: There is no significant relationship between Number of Branch and
Banks Performance.
H1: There is a significant relationship between Number of Branch and
Banks Performance.
ii. H0: There is no significant relationship between Loan growth and Banks
Profitability.
H1: There is a significant relationship between Loan growth and Banks
Profitability.
iii. H0: There is no significant relationship between Deposit and Banks
Profitability.
H1: There is a significant relationship between Deposit and Banks
Profitability.
iv. H0: There is no significant relationship between Inflation rate and Banks
Profitability.
H1: There is a significant relationship between Inflation rate and Banks
Profitability.
v. H0: There is no significant relationship between Banks Liquidity and
Financial performance.
H1: There is a significant relationship between Banks Liquidity and
Financial performance.
vi. H0: There is no significant relationship between the financial performances
of two banks.
H1: There is a significant relationship between the Financial performances
of two banks.

5. Review of Literature
Review of literature means reviewing the research study or other relevant report
which was already conducted in the related area of the study, thus the conclusions,
findings and recommendations of those research and reports are helpful for
conducting further research in the similar territory of research. Literature review is
a basically "an inventory checking" of the available literature in the related field of
study. According to Wolf & Pant “The purpose of the reviewing the literature is to
develop some expertise in One’s area, to see what new contribution can be made
and to review some idea for Developing research design”. (Pant and Wolf;
1996:31-44). This portion has been divided into two parts Conceptual Framework
and Review of Related Studies.
Banking is one of the important integral parts of the economy or a financial system
as a result of that a lot of books, journal, research report and thesis are available in
the market for the study, among that for the purpose of thesis I made review of the
following books, thesis and journals related to my field of study.
5.1 Review of books
Shrestha M.S. (2007), published a book "Fundamental of Banking." This book has
been designed for the subject banking in Nepal of bachelor level as per the syllabus
prescribed by Faculty of management Tribhuwan University. This book shall
definitely contribute readers to widen the knowledge of the banking scenario in the
modern world.
Manandhar, Dhakal, Thapa, Koirala and Basnet (2015), published a book
"Managerial Finance". This book has designed to provide an introduction to the
core concept and key topic area of managerial finance decision. In addition to that
it provides knowledge about the various financial tools that may used to analyze
the managerial financial decision.

5.2 Review of Thesis
Shrestha (2004), in his study on "Performance Evaluation of Private Commercial
Banks in Nepal", has found that the depositors are not aware of the fact of the
necessity of adequate capital fund to safeguard their deposits. They deposit their
money to any banks regardless of adequate capital fund which may endanger
safety of their money. Therefore, NRB should initiate awareness programs to make
the depositors aware of such fact and think before depositing money in any
commercial banks.
Adhikari (2009), in his study on "Financial Performance Analysis of Everest Bank
Limited", has recommended that before mobilization the funds the bank is to
collect a large variety of deposits through a variety of deposit schemes.
A thesis conduct by Shakya, Suman (2010), in “Financial Performance of Nepal
SBI Bank Limited and Everest Bank Limited.” analyzed different ratio of NSBIBL
and EBL for the period of five years till fiscal year 2008.
6. Research Methodology
Research methodology is the process used to collect information and data for the
purpose of making decisions to solve the problem. The methodology mainly
include publication research, interviews, surveys and other research techniques,
and could include both present and historical information. Thus the research
methodology is one of the important parts of the every research. In fact, research
methodology is a method which is used to solve the research problem. It contains
the research design, nature and source of data, data collection procedure, and tools
and techniques analysis.
There are thirty (30) commercial banks in Nepal, hence it is not possible to carry
out the study of the all commercial bank in a limited time period therefore in thesis
study, two major commercial banks EBL and HBL has been taken into account as
a random sample to compare their financial performance. In thesis study,
descriptive and analytical research designs will be carrying out in order to make
the study more authentic and reliable. To complete the research, majority of the
data will be collected from secondary sources such as; Annual Reports of EBL and
HBL, Publish reports of Nepal Rastra Bank and other published source.

7. Significance of the Study
The thesis study has multidimensional significance and will be useful to following
stated parties.
I. The research would be useful for the management of the banks.
II. The research would be useful for the shareholders.
III. The research would be useful for the policy makers regarding commercial
banks.
IV. The research would be useful for the general public (Customer, Depositors
and Creditors).
V. The research would be useful for the further researchers.
The research would be useful for the university students those who are undertaking
research in similar field of study in upcoming future.
8. Limitation of the Study
The following are limitation of the study.
I. The thesis study only cover a five year period i.e. from 2009/10 to 2013/14.
II. Significant portion of the data used in the research are secondary nature, as a
result of that there might be reporting errors.
III. Only two commercial banks EBL and HBL are taken as a commercial bank
for the study purpose, therefore finding of the study may not reflect the other
commercial bank performance at same era.
IV. The study highly focuses on the comparison of the financial performance
only therefore study may not able to cover the comparison on CSR,
Customer satisfaction and employee satisfaction.