PROFITABILITY ANALYSIS OF EVEREST BANK

LIMITED

Submitted By:

Biraj Chaudhary

P.U. Reg. No: 20172450034

Exam Roll No: 18450269

Level: BBA-BI 5th Semester

A Project Work Report submitted to Pokhara University in partial fulfillment of the

requirements for the degree of

Bachelor of Business Administration in Banking and Insurance (BBA-BI)

At

Apollo International College

Faculty of Management

Pokhara University

New Baneshwor, Kathmandu

December, 2020
 DECLARATION
I hereby declare that the project work report entitled “PROFITABILITY ANALYSIS
OF EVEREST BANK LIMITED” submitted for the BBA-BI is my original work and
the Project Work Report has not formed the basis for the award of any degree, diploma,
or other similar titles.

Signature…………………….

Biraj Chaudhary

December, 2020

i
BONAFIDE CERTIFICATED

ii
 ACKNOWLEDGEMENT

This project work report “PROFITABILITY ANALYSIS OF EVEREST BANK

LIMITED” has been prepared in the partial fulfillment for the Degree of Bachelor of
Business Administration in Banking and Insurance (BBA-BI) under the course designed
by the faculty of management of Pokhara University. This study has been prepared to
examine the analysis of EVEREST BANK LIMITED.

First of all, I would like to thank Pokhara University for including this project report in
our BBA-BI 5th semester program. This gives us chance for gaining practical knowledge
to boost our research skills.

I express my sincere honor and special sense of gratitude to the principal of Apollo
International College Prof. Dr. Gauri Raj Sharma for his generous guidance, thoughtful
encouragement and brilliant insight throughout this research work.

Also, I owe great intellectual debt for support and immense contribution to administrative
of Everest Bank Limited. I am thankful to all those writers and researchers whose
materials and methods has been review wherever necessary during the study period as a
reference.

Finally, I would like to thank to my teachers and friends of Apollo International College
who directly and indirectly contributing their time and effort in this report.

Biraj Chaudhary

BBA-BI 5th Semester

Apollo International College

December, 2020

iii
 ABBREVIATIONS

BBA-BI: Bachelor of Business Administration in Banking and Insurance

Ltd: Limited

P.U: Pokhara University

PLC: Public Limited Company

ATM: Automated Teller Machine

BOD: Board of Director

NRB: Nepal Rastra Bank

BOK: Bank of Kathmandu

NBL: Nabil Bank Limited

FY: Fiscal Year

3rd: Third

5h: Fifth

iv
 TABLE OF CONTENTS
Titles Pages
Declaration i

Bonafide Certificate ii

Acknowledgment iii

Abbreviations iv

Table of contents v-vi

List of Tables vii

CHAPTER-1: INTRODUCTION 1- 5
1.1 Background of the Study 1-3

1.2 Objective of the Study 3

1.3 Scope of the Study 3

1.4 Limitations of the Study 3-4

1.5 Importance of the Study 4-5

1.6 Organization of the Study 5

CHAPTER-2: LITERATURE REVIEW 6-8

2.1 Meaning of Literature Review 6

2.2 Objective of Literature Review 6-7

2.3 Review of Related Studies 7-8

CHAPTER-3: RESEARCH METHODOLOGY 9-12

3.1 Meaning of Research Methodology 9

3.2 Research Design 9-10

3.3 Nature and Source of Data 10-11

3.4 Decision of Sample 11

3.5 Data Collection Procedure 12

v
3.6 Data Processing 12

3.7 Data Analysis Tools 12

3.8 Data interpretation Techniques 12

CHAPTER-4: DATA PRESENTATION, ANALYSIS

AND INTERPRETATION 13-24

4.1 Data presentation, Analysis and Interpretation 13-23

4.2 Findings of Analysis 23-24

CHAPTER-5: SUMMARY AND CONCLUSION 25-26

5.1 Summary 25

5.2 Conclusion 25-26

BIBLIOGRAPHY I

APPENDICES
Appendix-1: Balance Sheet and Profit/Loss Account

Appendix-2: Calculations of the Different Ratios

vi
LIST OF TABLES

Tables Pages
4.1.1 Net Profit Margin 13-14
4.1.2 Gross Profit Margin 15

4.1.3 Return on Assets 17

4.1.4 Return on Equity 18

4.1.5 Earning Per Share 20

4.1.6 P/E Ratio 22

vii
 CHAPTER-1

INTRODUCTION
1.1 Background of the Study
A bank is a financial institution that accepts deposit from the public and creates
credit. The word bank was borrowed in middle English from middle French banque, from
old Italian banca, meaning table bench used for money exchanges. According to oxford
dictionary bank means “an establishment for keeping money and valuable safety of the
money being paid out on the customer order by means of cheque. So, Bank is the
financial institution where financial services are broadly offered and performed. In
general sense, bank is a kind of business, which deals in money by accepting deposits,
advancing loans & rendering other financial services.

To sum up, banks accumulate idle money from general public by providing attractive
interest rate in their deposits and disburse the collected deposits as loan to business,
organization, agriculture sector, industrial sectors and needy people etc. So, we can say
that main task of commercial bank is to mobilize resources in productive area by
collecting it from scattered sources and generating profit. In this way, bank plays an
imperative role in our economy by providing effective service effective service
efficiently towards the attainment of economic development.

Several definitions regarding the bank had been given by many writers, authors. Among
them some of the definitions were as follows:

Crowther (1934) says,” the banker’s business is to take the debts of the people to offers
his own in exchange and thereby create money.”

Prof.R.S.Sayers (1958) Says,” Bank is an institutions whose debts (bank deposit) are
widely accepted in the settlement of the other peoples debts to each others.”

Out of 28 commercial banks two are government controlled and rests are joint venture
banks. The commercial bank Act 1947 sets out regulation for licensing supervisor. The
joint venture bank currently comprises in number, the first of which started in 1984. The
comparative growth of commercial banks categorize as class ‘A’ consists total 32 no of
banks as previous record. But now at present, out of 32 only 28 banks are listed in class
‘A’ after joint operation merger process according to latest information recorded by NRB
(2016).

A bank can be defined according to the function they preformed that is established with
the prime objectives of profit maximization. To achieve this, bank preforms various
functional activities. (i.e. accepts deposit, provide loan, agency functions like undertake

1
the payment of subscription, insurance, premium, rent, collection of bills, salaries,
pension, dividends, interest and changes small amount of commission, Credit creation.)
Similarly, Bank has its main services (i.e. Assist to the traders who engaged in foreign
trade by discounting bills of exchange and others, safeguards valuable, such as securities,
jewelers, documents for save custody, Makes venture capital loan to the startup cost of
new companies particularly in high tech industries, offers a wide range of financial
advisory services about financial advisory services about financial, planning, consulting
and others. Provide the facility of exchange foreign currencies.)

Everest Bank Limited is a commercial bank of Nepal founded in 1994 with its head
officer situated at Laximpat, Kathmandu Nepal. EBL joined hands with Panjab National
Bank (PNB), India as joint venture partner in 1994. Its slogan is “CONSISTANCE,
STRONG & DEPENDABLE”. Punjab National Bank (PNB), joint venture partner
(Holding 20% equity) id the largest nationalized bank in India having presence virtually
in all important centers. The bank provide service to more than 7.5 lakhs customers like
saving accounts, Fixed deposits, ATM card, home loan, loan against life insurance policy
and loan for professionals etc. It has also established any branch Banking System
(ABBS), mobile banking and e-ticketing system.

Everest Bank is the first bank that has introduced branches banking system through out
any banking branch system (ABBS) that enables client for withdrawal and deposit of
their money from any branches through biometric machine. It has been also lunch e-
ticketing system in Nepal for the first time where customers can buy Yeti Airlines ticket
through internet. Everest Bank Limited introduces online payment of mobile/ pstl/ adsl/
ncell bill or form the counter as well. EBL is the first bank to introduce agro-specialize
branch “Krishi uddhyamm bikash sakha” at Rijbiraj. It has introduced cash deposit cash
conveniently.

EBL has been established itself as a privately leading bank of the country. The bank has
60 Branches, 90 ATM counters, extension counter & 25 revenue collection counters (as
on 4th of June 2017) across the country making it a very efficient and accessible bank for
its customers, anytime, anywhere. It has also arrangements with banks & financial
companies in different countries like UAE, Kuwait, Bahrain, Quarter, Saudi Arabia,
Malaysia, Singapore and UK to assist Nepalese working abroad. Thus, The bank always
focus on building sound technology driven internal system to carter the changing needs
of the customers that enhance high comfort and value.

Everest Bank Limited is now, one of the largest private sectors, Commercial bank in the
country. Such types of bank are inspiration of low level bank. It is also necessary for us
to collect and provide the proper information to required parties. These all help to coming
generations with made by the references.

2
So this topic has been selected to test the effectiveness Profitability position of Everest
Bank Limited.

1.2 Objectives of the Study

The main objective of the study are given below:

 To find out gross profit, net profit, return on assets, return on equity, earning per
share and P/E ratio.
 To show the profitability condition of Everest Bank of each 5 years.
 To analyze the efficiency of Everest Bank through profitability ratios.
 To suggest on findings.

1.3 Scope of the Study

Scope refers to the extent of the area or subject matter that something deals with or to
which it is relevant. It covers the upper and lower limits of the area that have been
studied. The scope of the study is that it covers the profitability analysis of Everest Bank
Limited and suggests the necessary measures for the improvement of the financial
performance of the bank. It revolves around the profitability analysis and related
calculations of Everest Bank Limited.

 It revolves around the profitability analysis of Everest Bank Limited.

 The study is useful for making comparison with other competitors.
 It can also be used as a base performance evaluation.

1.4 Limitation of the Study

Limitations are the restriction that can affect the result of the study. Its limitations
are those events, things, variables, information etc. that are outside of the scope of this
study. The limitations of the project work are as follows.

 The financial statements are of 2072-2076 and so the results of the study do not
reflect previous years.
 Data have been collected from the internet. So, there may be lack of reliability
and accuracy.
 It only focuses on the profitability ratios to EBL and cannot be compared with the
profitability of the other bank.

1.5 Importance of the Study

After completing this study it will help researcher, the organization and
information seekers, Some of major importance are as follows.

3
  To the researcher
This study helped the researcher to develop both skill and knowledge that
are useful for problem solving, time management etc. through the study. This is
because researcher did a lot of activities like data collections, presentation,
analysis and interpretation.

 To the organization
The organization will know the strength and weakness. This study
provides importance information to the bank. Through the study organization
easily get feedback that is helpful for decision making.
 To the Information Seeker
Through the study, information seekers get relevant information in
effective manner. The study provides relevant information seeker regarding the
profitability analysis of the organizations. Similarly, this study will also help
further generation as a sample to prepare report.
 To Enrich Library Assets
The study Enrich or enhance the library assets. Library assets include
books, article, thesis, document etc. The piece of research article is kept in the
library which will increase number of articles.

1.6 Organization of the Study

The study has been divided into five chapters. The first chapter is introductory in
nature. This includes objectives of the study, importance of the study, scope of the study,
limitation of the study.

The second chapter is Literature review and review of related studies.

The third chapter includes, research methodology, research design, nature and sources of
data, data collection procedure, data analysis tools, data presentation technique and data
interpretation technique.

The fourth chapter includes data presentation, analysis and interpretation, analyzes and
interprets the collected data using various financial and mathematical tools and
techniques with tables.

The fifth chapter, summarizes the whole study, draws conclusion and forwards
recommendation. It also contains Bibliography and Appendices.

At last, appendices and bibliography have also been affixed.

4
 Chapter-2

LITERATURE REVIEW
2.1 Meaning of Literature Review
The literature review is a summary of previous research on a topic. It is a process of
obtaining, reading and evaluating the research literature in the area of the student’s
interest. The literature review survey’s scholarly articles books, and other sources
relevant to a particular area of research or interest. Review of literature is a basic
requirement for any research which is done to receive some new idea for developing a
research design. It is the summary and analysis of the knowledge about the particular
topic or issues.

According to Cardesco and Gatner (1987), “A literature review is a self-contained unit

in a study which analysis critically a segment of published body of knowledge through
summary, classification and comparison of prior research studies and theoretical articles.”

According to D.B Bhattacharya (2005), “Literature Review is a systematic, explicit and

reproducible method for identifying, evaluating and synthesizing the existing body of
complete and recorded work produced by researchers, scholars and practitioners.”

According to Walliman (1982), “A literature review is a summary and analysis of

current knowledge about a particular topic or areas of enquiry.”

2.2 Objectives of Literature Review

The main objectives of literature Review include the followings:

 To know the background knowledge of the research topic.

 To get some support for design the research work.
 To know the research conducted in the chosen field.
 To identify the research gap.
 To update on current issue.
 To know the methods of data collection

2.3 Review of Related Studies

There are so many related studies conducted by previous researchers relating this
topic .But, it is quite impossible to review all these studies .Therefore, only three related
studies have been reviewed.

5
One study on “Profitability Analysis of Nepal Credit and Commerce Bank Limited”
(2014) by Pradipta Sharma had the following objectives and findings.

Objectives of the study

● To find the financial information that assists in estimating the earning potential of
the enterprise.
● To evaluate Profitability position of NCC Bank Limited.
● To know the ability of the firm to reflect the financial solvency of the firm.
Major Findings

● The ROE is not constant .It is decreasing in first 3 years and there is slightly
increment in year 2069/70 which is 0.1757 .The highest ROE is 0.2783 and
lowest is 0.0924 in 2068/69 due to the low profit and high equity.
● The ROA is decreasing in the first 3 years and slightly increases which is 0.163 in
year 2069/70.The highest ROA is 0.0332 and lowest is 0.0096 in year 2066/67
and 2068/69 respectively .It decreases due to the less profit and heavy investment
on assets .
● The ISR is not in constant position .It is in declining position due to less income
and more expenses .The highest ISR is 3.62 and lowest is 2.52 in a year 2066/67
and 2068/69 respectively .At last year 2070/71 there is 3.01 ISR.
● The GPR is decreasing in first 3 years and increases in 2069/70 which is
40.87% .The highest GPR is 44.33% and lowest is 30.86 in 2066/67 and 2068/69
respectively.
The next study on “Profitability Analysis of Kumari Bank Limited” (2013) by Yadav
B.K had the following objectives and findings.

Objectives of the Study

● To demonstrate position of Kumari Bank Limited.

● To show the situation of profit of Kumari Bank Limited.
● To find the going trend especially.
● To show the situation of profit of Kumari Bank Limited.
Major Findings

● Return on shareholders’ equity is in the fluctuating trend which shows the average
result that is the soundless in Kumari Bank Limited funds is satisfactory.
● Return on assets is also in fluctuating trend which reflects that the Kumari Bank
Limited is satisfactory.
● Return on fixed assets shows same result as in ROE and ROA.
● Market value of Kumari Bank Limited share is in increasing trends ,which means
the banks earing is in increasing year by year and customers are positive towards
the bank.

6
The last study on “Profitability Ratios of Standard Chartered Bank” (2014) by
Ayush Shrestha had the following objectives and findings.

Objectives of the Study

● To demonstrate position of SCBNL.

● To find out the Profitability of SCBNL.
Major Findings

● Return on fixed assets shows the same result ROE and ROA.
● Return on assets is also in fluctuating trend which reflows that the SCBNL is
satisfactory.
● Return on shareholders’ equity is in fluctuating trend, which shows the average
result that is the soundness in SCBNL funds in satisfactory.
Market value of SCBNL share is in increasing trend, which means the banks earning is in
increasing year by year and customer are positive towards the

7
 CHAPTER-3
RESEARCH METHODOLOGY

3.1 Meaning of Research Methodology

Research Methodology refers to various sequential steps to adopt by a researcher
in studying a problem with certain objectives in view. It is the systematic methods of
analysis applied to a field of study. It allows readers to critically evaluate a study’s
overall validity and reliability.
According to Mouley(1994) “Research Methodology is the process of arriving at
dependable solution to the problems through the planned and systematic collection,
analysis and interpretation of data” ("Research Design" USA: Black Day Publishing)
According to John.W.Best(1985)“Research Methodology is a systematic and objective
analysis and recording of controlled observations that may lead to the development of
generalizations, principles, theories and concepts, resulting in prediction for seeing and
possibly ultimate control of events.” ("Research skills for Management" USA: Ablex
Publishing)
3.2 Research Design
Research design is the conceptual structure within which the research is
conducted; it constitutes the blueprint for the collection, measurement and analysis of
data. So, the research design can be defined as a plan, structure and strategy of a research
to find out alternative tools to solve the problems and to minimize the variances.

3.2.1 Types of Research Design

Research design is an overall plan of completing the research work. Different
types of research designs are used according to nature of researches, objectives and
availability of resources. Generally, it is classified into the following types.
 Exploratory research designs
 Casual comparative research design
 Correlation study
 Experimental research design
 Descriptive research design
Out of all these research designs, this project report uses exploratory and
descriptive research design, which is used to studying the subject of research in
detail and to explain the facts and features related to the research problem.

8
3.3 Nature and Sources of Data
3.3.1 Nature of Data
Data is collected, measured, analyzed and reported, where upon it can be
visualized using graphs or images. Generally, there are two types of nature of data
 Primary data
 Secondary data
The analysis of the study is based on the nature of secondary data. Under the study
secondary data are collected from financial statements of the banks like profit and loss
account and balance sheet.

3.3.2 Sources of Data

Data is the information acquired from optional sources like magazine, books,
documents, journals, reports, websites and more. Normally one can gather data from two
sources namely
 Primary sources
 Secondary sources
Out of these two sources, the analysis of study is based on secondary source, so these
data are obtained from internet.
3.4 Decision of Sample
A sample is a smaller, manageable version of a larger group. A sample should
represent the whole population and not reflect bias toward a specific attribute. The
various types of sampling are
 Probability Sampling
 Simple Random Sampling
 Stratified Sampling
 Cluster Sampling
 Systematic Sampling
 Non-Probability Sampling
 Convenience Sampling
 Quota Sampling
 Judgment Sampling
 Snowball Sampling

This report is based on judgment sampling which is one of the types of non- probability
sampling. Many banks are there in Nepal but out of them Everest Bank Limited is
selected.

9
3.5 Data Collection Procedure

Data collection is the process of gathering and measuring data, information or any
variables of interest in a standardized and established manner that enables the collector
answer or test hypothesis and evaluate outcomes of the particular collection. This is an
integral, usually initial, component of any research done in any field of study. The
research has followed all steps of secondary data. Hence, following data collection
procedure was done
 Searched in the computer.
 Got data in Internet.

3.6 Data Processing

Data processing is the conversion of raw data into useable and desired form. This
includes sorting, grouping, and tabulating.

Sorting is a process of arranging, ordering items in a systematic and sequential ordered

by some criterion, categorizing, grouping items with similar properties.

Grouping is the process of accumulating similar items into various classes.

Tabulating is a way of processing information or data by putting it in a table.

This report has followed the same process.

3.7 Data Analysis Tools

Tools used to arrange and classify the data with the purpose of generating useful
information is data analysis. There are generally three categories of analytical tools-
statistical, financial, and mathematical. The data in this report are analyzed by using the
financial and simple mathematical tools.

 Financial Tools
 Net Profit Margin
 Gross Profit Margin
 Return on Assets
 Return on Equity
 Earning Per Share
 Price Earning Ratio

10
  Mathematical Tools
 Percentage

3.8 Data Interpretation Techniques

There are different interpretative techniques that are used in report. But only three
techniques were used in this report
 Figurative and explanation.
 Central meaning of explanation.
 Future prediction and causes/reasons for improvement.

11
 CHAPTER-4

DATA PRESENTATION, ANALYSIS, INTERPRETATION

AND FINDING
The unit/chapter of research work/project-work is very important. This unit is
prepared by using the research methodology stated in the third unit/chapter. For this
purpose, the required data were collected; necessary calculations were done using
financial tools and suitable tables have been prepared. The calculated data have been
presented in the prepared tables. The analysis and interpretation part is under each table.
To present a clear pictures of the calculated result, bar diagrams are also used. This
unit/chapter has particularly, the following.

4.1 Data Presentations, analysis and interpretation

4.2 Findings of analysis

4.1 Data presentation, analysis and interpretation are of the following

 Net Profit Margin

 Gross Profit Margin
 Return on Assets
 Return on Equity
 Earning Per Share
 Price Earning Ratio

4.1.1 Net Profit Margin

The derived Net Profit Margin values and their differences in values have been
presented in table 4.1.1

Table 4.1.1

Years Calculated Value Change in Value

2072 31.510% -
2073 34.214% +2.704
2074 29.735% -4.479
2075 25.55% -4.185
2076 23.46% -2.09
Source: Financial Statements (2072-2076)

The table above shows the calculated values, the change in value of each five
years.

12
 The calculated net profit margin value of Everest Bank Limited in the year 2072
is 31.510%. The calculated value gets increased to 34.214% in the year 2073. But in the
year 2074 the calculated value gets decreased, which is 29.735%. Similarly, in the year
2075 and 2076 the calculated values are also in decreasing trend, which are 25.55% and
23.46% respectively.

The change in value in the year 2073 is +2.704%. There is positive change in
2073. Similarly, in the year 2074 the change in value is -4.479%. There is negative
change in year 2074. But, in the year 2075 and 2076 the change in values are -4.185%
and -2.09% respectively. Both year have a negative change. In the table above, + and –
symbols have been used, where + symbol represents positive and – symbol represent
negative change in the value.

From the above analysis, it is clear that the value tend from positive to negative. It
shows the trend is in decline. The reasons behind the trending toward the positive are
given below.

 Due to continuous increment in the interest revenue in each five years.

 Due to decrement in interest expenses from the year 2072 to 2076 of this bank.
 Due to less tax payment.
The reasons behind the trending toward the negative are given below.

 Due to continuous decrement in the interest revenue in each five years.

 Due to increment in interest expenses from the year 2072 to 2076 of this bank.
 Due to high tax payment.
The same data can be presented in the line graph below.

Change in value
4
3
2
1
0
2072 2073 2074 2075 2076
-1
-2
-3
-4
-5

Change in value

Fig 4.1.1 Net Profit Margin

13
4.1.2 Gross Profit Margin

The derived Gross Profit Margin values and their differences in values have been
presented in the table 4.1.2

Table 4.1.2

Years Calculated Value Change in Value

2072 57.630% -
2073 63.843% +6.213
2074 55.392% -8.451
2075 48.119% -7.273
2076 43.770% -4.349
Source: Financial Statements (2072-2076)

The table above shows the calculated values, the change in value of each five
years.

The calculated gross profit margin value of Everest Bank Limited in the year
2072 is 57.630%. The calculated value gets increased to 63.843% in the year 2073. But,
in the year 2074 the calculated value is in decreasing trend, which is 55.392%. Similarly,
in the year 2075 and 2076 the calculated values are in decreasing trend, which are
48.119% and 43.77% respectively.

The change in the year 2073 is +6.213%. There is positive change in 2073. But, in
the year 2074 the change in value is -8.451%. There is negative change in year 2074.
similarly, in the year 2075 and 2076 the change in values are -7.273% and -4.349%
respectively. Both year have a negative change. In the table above, + and – symbols have
been used, where + symbol represents positive and – symbol represent negative change in
the value.

From the above analysis, it is clear that the value tend from positive to negative. It
shows the trend is in decline. The reasons behind the trending toward the positive are
given below.

 Due to the decrement in the interest expenses (COGS) of Everest Bank Limited in
each five years.
 Due to higher interest income.
The reasons behind the trending toward the negative are given below.

 Due to the increment in the interest expenses (COGS) of Everest Bank Limited in
each five years.
 Due to lower interest income.

14
 The same data can be presented in the line graph below.

Calculated Values
8
6
4
2
0
2072 2073 2074 2075 2076
-2
-4
-6
-8
-10

Calculated Values

Fig 4.1.2 Net profit Margin

4.1.3 Return on Assets

The derived Return on Assets (ROA) values and their differences in values have
been presented in table 4.1.3

Table 4.1.3

Years Calculated Value Change in Value

2072 1.558% -
2073 1.519% -0.039
2074 1.722% +0.203
2075 1.780% +0.058
2076 1.80% +0.02
Source: Financial Statements (2072-2076)

The table above shows the calculated values, the change in value of each five
years.

The calculated return on assets value of Everest Bank Limited in the year 2072 is
1.558%. The calculated value gets decreased to 1.519% in the year 2073. But, in the year
2074 the calculated value is in increasing trend, which is 1.722%. Similarly, in the year
2075 and 2076 the calculated values are in increasing trend, which are 1.780% and 1.80%
respectively.

15
 The change in value in the year 2073 is -0.039%. There is negative change in
2073. But, in the year 2074 the change in value is +0.203%. There is positive change in
year 2074. Similarly, in the year 2075 and 2076 the change in values are +0.058% and
0.02% respectively. Both year have a positive change. In the table above, + and –
symbols have been used, where + symbol represents positive and – symbol represent
negative change in the value.

From the above analysis, it is clear that the value tend from negative to positive.
The reasons behind the trending toward the negative are given below.

 Due to decrement in net profit of Everest Bank Limited in each five years.
 Due to decrement in total assets of the bank in each five years.
 Due to reduction in profit margin.
 Due to under-utilization of fixed assets.
The reasons behind the trending toward the negative are given below.

 Due to increment in net profit of Everest Bank Limited in each five years.
 Due to increment in total assets of the bank in each five years.
 Due to increment in profit margin.
 Due to over-utilization of fixed assets.
The same data can be presented in the line graph below.

Calculated Values
0.25

0.2

0.15

0.1

0.05

0
2072 2073 2074 2075 2076
-0.05

-0.1

Calculated Values

Fig 4.1.3 Return on Assets (ROA)

4.1.4 Return on Equity

The derived Return on Equity (ROE) values and their differences in values have
been presented in table 4.1.4

16
 Table 4.1.4

Years Calculated Value Change in Value

2072 22.849% -
2073 20.322% -2.527
2074 17.986% -2.336
2075 16% -1.986
2076 17.33% +1.33
Source: Financial Statements (2072-2076)

The table above shows the calculated values, the change in value of each five
years.

The calculated return on equity value of Everest Bank Limited in the year 2072 is
22.849%. The calculated value gets decreased to 20.322% in the year 2073. Similarly, in
the year 2074 the calculated value is also in decreasing trend, which is 17.986%. But, in
the year 2075 the calculated values is in decreasing trend, which is 16%. Whereas in the
year 2076 the calculated value is in increasing trend, which is 17.33%.

The change in value in the year 2073 is -2.527%. There is negative change in
2073. Similarly, in the year 2074 and 2075 the change in value are -2.336% and -1.986%
respectively. Both year have a negative change. But, in the year 2076 the change in
values is +1.33%. There is also positive change in year 2076. In the table above, + and –
symbols have been used, where + symbol represents positive and – symbol represent
negative change in the value.

From the above analysis, it is clear that the value tend from negative to positive.
The reasons behind the trending toward the negative are given below.

 Due to high debt payment.

 Due to decrease in net profit.
 Due to low paid up capital.
 Due to higher rate of tax payment.
The reasons behind the trending toward the negative are given below.

 Due to low debt payment.

 Due to increase in net profit.
 Due to high paid up capital.
 Due to lower rate of tax payment.

17
 The same data can be presented in the line graph below.

Calculated Values
2
1.5
1
0.5
0
2072 2073 2074 2075 2076
-0.5
-1
-1.5
-2
-2.5
-3

Calculated Values

Fig 4.1.4 Return on Equity (ROE)

4.1.5 Earning Per Share

The derived Earning Per Share (EPS) values and their differences in values have
been presented in table 4.1.5

Table 4.1.5

Years Calculated Value in Rupees Change in Value

2072 78.04 -
2073 65.79 -12.25
2074 44.32 -21.47
2075 32.78 -11.54
2076 37.67 +4.89
Source: Financial Statements

Source: Financial Statements (2072-2076)

The table above shows the calculated values, the change in value of each five
years.

The calculated earning per share value of Everest Bank Limited in the year 2072
is Rs.78.04. The calculated value gets decreased to Rs.65.79 in the year 2073. Similarly,
in the year 2074 the calculated value is decreased, which is Rs.44.32. In the year 2075,
the calculated value gets decreased to Rs.32.78. But, in the year 2076 the calculated value
gets increased to Rs.37.67.

18
 The change in value in the year 2073 is -12.25. There is negative change in 2073.
Similarly, in the year 2074 the change in value is -21.47. There is negative change in year
2074. In the year 2075 the change in value is -11.54. There is negative change in 2075.
But, in the year 2076 the change in value is +4.89. There is positive change in 2076. In
the table above, + and – symbols have been used, where + symbol represents positive and
– symbol represent negative change in the value.

From the above analysis, it is clear that the value tend from negative to positive.
The reasons behind the trending toward the negative are given below.

 Due to decrement in dividend per share.

 Due to decrement in a net income.
The reasons behind the trending toward the positive are given below.

 Due to increment in dividend per share.

 Due to increment in a net income.
The same data can be presented in the line graph below.

Calculated Values
10
5
0
2072 2073 2074 2075 2076
-5
-10
-15
-20
-25

Calculated Values

Fig 4.1.5 Earning Per Share

4.1.6 P/E Ratio

The derived Price Earning Ratio values and their differences in values have been
presented in table 4.1.6

Table 4.1.6

Years Calculated Value in Times Change in Value

2072 27.17 -
2073 51.452 +24.282

19
 2074 30.528 -20.924
2075 20.23 -10.298
2076 18.05 -2.18
Source: Financial Statements (2072-2076)

The table above shows the calculated values, the change in value of each five
years.

The calculated P/E ratio value of Everest Bank Limited in the year 2072 is 27.17
times. The calculated value gets increased to 51.452 times in the year 2073. Similarly, in
the year 2074 the calculated value is also in decreasing trend, which is 30.528 times.
Similarly, in the year 2075 and 2076 the calculated values are in decreasing trend, which
is 20.23 times and 18.05 times respectively.

The change in value in the year 2073 is +6.213. There is positive change in 2073.
But, in the year 2074 and 2075 the change in value are -8.451 and -7.273 respectively.
Both year have a negative change. Similarly, in the year 2076 the change in values is -
4.349. There is negative change in year 2076. In the table above, + and – symbols have
been used, where + symbol represents positive and – symbol represent negative change in
the value.

From the above analysis, it is clear that the value tend from positive to negative. It
shows the trend is in decline. The reasons behind the trending toward the positive are
given below.

 Due to higher price of stocks.

 Due to lower ROE.
 Due to increment in interest revenue.
The reasons behind the trending toward the negative are given below.

 Due to lower price of stocks.

 Due to higher ROE.
 Due to decrement in interest revenue.

20
 The same data can be presented in the line graph below.

Calculated Values
30

20

10

0
2072 2073 2074 2075 2076

-10

-20

-30

Calculated Values

Fig 4.1.6 P/E Ratio

4.2 Major Findings

From the above analysis of data in the above tables and graphs, the following
findings are derived.
 The values of net profit margin trend from positive to negative in five year due to
change in net profit and sales revenue.
 The values of gross profit margin trend from positive to negative in five year due
to change in gross profit and sales revenue.
 The values of return on assets trend from negative to positive in five years due to
change in net income and total assets.
 The values of return on equity trend from negative to positive in five years due to
change in net income and total equity.
 The values of earning per share trend from negative to positive in five years due
to change in net income preferred dividends and weighted average share
outstanding.
 The values of price earning ratio trend from positive to positive to negative in five
years due to change in market price per share and earning per share.

21
 Chapter 5

SUMMARY AND CONCLUSIONS

5.1 Summary

The project is prepared on this topic “A Study on profitability position on

Everest Bank Limited”. The objective of this report is to find out profitability position
on Everest Bank Limited, to determine trend of profitability, to show the profitability
condition of the bank. The basic objective of the study is to find out the profitability
position of Everest Bank Limited. Thus, this report brings the banks objective and its
visions.

After that the study talks about the Literature review done for this report. It
includes the reviewing of previous working related topic. This report includes the four
related studied with their objectives and their findings to support this study such as,
“Profitability position of Nepal Credit and Commercial Bank Limited” (2014) by
Pradipta Sharma. “Profitability position of Kumari Bank Limited” (2013) by Yadav
B.K., “Profitability Ratios of Standard Chartered Bank” (2014) by Ayush Shrestha.

Next, the study brings the concept of research mythology. The chapter deals about
the methodology that is used for this report. It talks about the research design, source of
data sampling technique, data processing, tools, technique etc. Thus, the study uses the
exploratory research design and based on secondary data.

Lastly, the forth chapter revolves around the data presentation analysis and data
the profitability position of the bank. Various ratios (NPM, GPM, ROA, ROE, EPS and
P/E Ratio) have been computed to determine the financial condition of the bank relating
to profitability management.

5.2 Conclusion

The overall results are not satisfactory and are in fluctuating trend. But in some
cases, Everest Bank Limited should take certain steps to improve the bank’s
profitability position. Therefore, some recommendations are put forward for its
improvement along with the development of the company. Based on the analysis, data
and findings, the following conclusions are made.

 The analysis of data shows the net profit margin (NPM) of Everest Bank Limited
is tending towards positive to negative. So, the bank should reduce the interest
expenses, increase the interest income and reduce labor and operation cost.

22
 The gross profit margin (GPM) of the Everest Bank Limited is also tending
towards positive to negative. So, the bank should increase price, limit the
discounting, cut waste, schedule employee need, no overtime period, give bonuses
when deserved.
 However, the return on assets (ROA) of the Everest Bank Limited is tending
towards negative to positive. It is a good sign, especially the growing companies.
So, the bank has to keep maintaining ROA factors.
 Similarly, the return on equity (ROE) of the Everest Bank Limited is tending
towards negative to positive. So, the bank should maintain paid of capital,
liabilities, net income.
 Again, the earning per share (EPS) of the Everest Bank Limited is tending
towards negative to positive. So, the bank should maintain its earning (net profit).
 The price earning ratio (P/E ratio) of the Everest Bank Limited is tending towards
negative to positive. So, the bank should maintain the price of stock and earnings.

23
 BIBLIOGRAPHY
Annual Reports
Everest Bank Limited (2015-2019)
Articles

Mouley (1994) "Research Design" USA: Black Day Publishing

John.W.Best (1985) "Research skills for management" USA: Ablex Publishing

Hart (1998) "Page 34, Business Research Method" Sukunda Pustak Bhawan

Walliman (2006) "Page 35, Business Research Method" Sukunda Pustak Bhawan

Carsesco and Gatner (1986) "Page 30, Business Research Method" Asmita Publications

Unpublished Report

Sushil Dhakal (2008),"Profitability Analysis of Commercial Banks in Nepal"

Shyam Basnet (2008), “Profitability Analysis of Commercial Bank (a comparative study

of Nabil Bank Ltd &Himalayan Bank Ltd.)

Roshan Shrestha (2007), "A Comparative Analysis on Profitability Analysis of

commercial banks in Nepal"

Websites
http://www.google.com https://everestbankltd.com

I
Appendix-1
Balance Sheets and Profit and Loss Accounts FY(2072-2076)

APPENDICES
Appendix 2
CALCULATION OF PROFITABILITY RATIOS
Working for 32nd Ashadh, 2076
1. Net profit Margin= Net Profit/Sales Revenue*100%

Here,

Net Profit= Rs. 3,054,122,062

Sales Revenue=Rs.13,019,443,721

Now,

Net Profit Margin=3,054,122,062/13,019,443,721*100

=23.46%

Hence, The Net Profit Margin is 23.46%

2. Gross Profit Margin= Gross Profit /Sales Revenue*100

Here,

Gross Profit= Rs. 5,698,591,793

Sales Revenue= Rs. 13,019,443,721

Now,

Gross Profit Margin= 5,698,591,793/13,019,443,721*100

=43.77%

Hence, The Gross Profit Margin is 43.77%

3. Return On Assets= Net Income/Total Assets*100

Here,

Net Income = Rs. 3,054,122,062

Total Assets= Rs. 170,077,533,454

Now,

Return On Assets= Rs.3,054,122,062/170,077,533,454*100

 =1.80%

Hence, The Return On Assets is 1.80%

4. Return On Equity= Net Income/Total Equity*100

Here,

Net Income=Rs. 3,054,122,062

Total Equity=Rs. 17,625,063,404

Now,

Return On Equity = 3,054,122,062/17,625,063,404*100

=17.33%

Hence, The Return On Equity is 17.33%

5. Earning per Share= Net Income Preferred Dividends/Weighted Average Shares

Outstanding

Here,

Earning Per Share=Rs.37.67 (Given in financial Report)

Hence, The earning per share is Rs.37.67

6. P/E Ratio=Market Price Per Share/EPS

Here,

Market Price Per Share=Rs. 680

Earning Per Share=Rs.37.67

Now,

P\E Ratio=Rs. 680/37.67

=18.05 Times

Hence, The P\E ratio is 18.05 Times.

Working for 32nd Ashadh, 2075

1. Net profit Margin= Net Profit/Sales Revenue*100%
Here,

Net Profit= Rs. 2,581,681,778

Sales Revenue= Rs.10,103,451,389

Now,

Net Profit Margin= Rs. 2,581,681,778/Rs. 10,103,451,389*100%

=25.55%

Hence, The Net Profit Margin is 25.55%

2. Gross Profit Margin= Gross Profit /Sales Revenue*100

Here,

Gross Profit= Rs. 4,869,763,854

Sales Revenue= Rs.10,103,451,389

Now,

Gross Profit Margin= Rs.4,869,763,854/Rs.10,103,451,389*100

=48.199%

Hence, The Gross Profit Margin is 48.199%

3. Return On Assets= Net Income/Total Assets*100%

Here,

Net Income = Rs.2,581,681,778

Total Assets= Rs.144,811,151,443

Now,

Return On Assets= Rs.2,581,681,778/Rs.144,811,151,443*100%

=1.78%

Hence, The Return On Assets is 1.78%

4. Return On Equity= Net Income/Total Equity*100

Here,
Net Income=Rs.2,581,681,778

Total Equity=Rs.16,134,507,415

Now,

Return On Equity =Rs.2,581,681,778/16,134,507,415*100

=16%

Hence, The Return On Equity is 16%

5. Earning per Share= Net Income Preferred Dividends/Weighted Average Shares

Outstanding

Here,

Earning Per Share=Rs.32.78 (Given in financial Report)

Hence, The earning per share is Rs.32.78.

6. P\E Ratio=Market Price Per Share\EPS

Here,

Market Price Per Share=Rs.663

Earning Per Share=Rs.32.78

Now,

P\E Ratio=Rs.663\Rs.32.78

=20.23 Times

Hence, The P\E ratio is 20.23 Times.

Working for 32nd years Ashadh, 2074

1. Net profit Margin= Net Profit/Sales Revenue*100%

Here,

Net Profit= Rs. 2,006,247,780

Sales Revenue=Rs. 6,747,148,285

Now,
Net Profit Margin= Rs.2,006,247,780/Rs. 6,747,148,285*100

=29.735%

Hence, The Net Profit Margin is 29.735%

2. Gross Profit Margin= Gross Profit /Sales Revenue*100

Here,

Gross Profit= Rs. 3,737,355,791

Sales Revenue= Rs. 6,747,148,285

Now,

Gross Profit Margin= Rs. 3,737,355,791/Rs. 6,747,148,285*100

=55.392%

Hence, The Gross Profit Margin is 55.392%.

3. Return On Assets= Net Income/Total Assets*100%

Here,

Net Income = Rs. 2,006,247,780

Total Assets= Rs. 116,510,445,575

Now,

Return On Assets= Rs. 2,006,247,780/Rs. 116,510,445,575*100

=1.722%

Hence, The Return On Assets is 1.722%

4. Return On Equity= Net Income/Total Equity*100

Here,

Net Income=Rs. 2,006,247,780

Total Equity= Share capital + Reserve and Surplus

=Rs. 7,732,732,147+3,811,858,733

=Rs. 11,154,459,088
Now,

Return On Equity =Rs. 2,006,247,780/Rs. 11,154,459,088*100

=17.986%

Hence, The Return On Equity is 17.986%.

5. Earning per Share= Net Income Preferred Dividends/Weighted Average Shares

Outstanding

Here,

Earning Per Share=Rs. 44.32 (Given in financial Report)

Hence, The earning per share is Rs. 44.32

6. P\E Ratio=Market Price Per Share\EPS

Here,

Market Price Per Share=Rs. 1353

Earning Per Share=Rs. 44.32

Now,

P\E Ratio=Rs 1353/Rs. 44.32

=30.528 Times

Hence, The P\E ratio is 30.528 Times.

Working for Ashadh,2073

1. Net profit Margin= Net Profit/Sales Revenue*100%

Here,

Net Profit= Rs. 1,730,207,025

Sales Revenue=Rs. 5,057,077,497

Now,

Net Profit Margin= Rs. 1,730,207,025/Rs. 5,057,077,497*100%

=34.214%
Hence, The Net Profit Margin is 34.214%.

2. Gross Profit Margin= Gross Profit /Sales Revenue*100

Here,

Gross Profit= Rs. 3,228,584,628

Sales Revenue= Rs. 5,057,077,497

Now,

Gross Profit Margin= Rs.3,228,584,628/ Rs. 5,057,077,497*100

=63.843%

Hence, The Gross Profit Margin is 63.843%

3. Return On Assets= Net Income/Total Assets*100%

Here,

Net Income = Rs. 1,730,207,025

Total Assets= Rs. 113,885,046,402

Now,

Return On Assets= Rs. 1,730,207,025/113,885,046,402*100%

=1.519%

Hence, The Return On Assets is 1.519%

4. Return On Equity= Net Income/Total Equity*100

Here,

Net Income=Rs. 1,730,207,025

Total Equity= Share capital + Reserve and Surplus

=Rs. 4,606,426,899+3,907,661,213

=Rs. 8,514,088,112

Now,

Return On Equity =Rs. 1,730,207,025/Rs. 8,514,088,112*100%

 =20.322%

Hence, The Return On Equity is 20.322%

5. Earning per Share= Net Income Preferred Dividends/Weighted Average Shares

Outstanding

Here,

Earning Per Share=Rs. 65.79 (Given in financial Report)

Hence, The earning per share is Rs. 65.79

6. P\E Ratio=Market Price Per Share\EPS

Here,

Market Price Per Share=Rs. 3385

Earning Per Share=Rs.65.79

Now,

P\E Ratio=Rs. 3385/Rs. 65.79

=51.452 Times.

Hence, The P\E ratio is 51.452 Times.

Working for 32nd Ashadh, 2072

1. Net profit Margin= Net Profit/Sales Revenue*100%

Here,

Net Profit= Rs. 1,574,352,443

Sales Revenue= Rs. 4,996,428,451

Now,

Net Profit Margin= Rs. 1,574,352,443/Rs. 4,996,428,451*100%

=31.510%

Hence, The Net Profit Margin is 31.510%

2. Gross Profit Margin= Gross Profit /Sales Revenue*100

Here,

Gross Profit= Rs. 2,879,435,285

Sales Revenue= Rs. 4,996,428,451

Now,

Gross Profit Margin= Rs. 2,879,435,285/Rs. 4,996,428,451*100%

=57.630%

Hence, The Gross Profit Margin is 57.630%.

3. Return On Assets= Net Income/Total Assets*100%

Here,

Net Income = Rs. 1,574,352,443

Total Assets= Rs. 99,152,806,017

Now,

Return On Assets= Rs. 1,574,352,443/Rs. 99,152,806,017*100%

=1.588%

Hence, The Return On Assets is 1.588%.

4. Return On Equity= Net Income/Total Equity*100

Here,

Net Income=Rs. 1,574,352,443

Total Equity= Share capital + Reserve and Surplus

=Rs. 2,742,604,058 + Rs. 4,147,772,967

=Rs. 6,890,377,025

Now,

Return On Equity =Rs. 1,574,352,443/Rs. 6,890,377,025*100

=22.849%

Hence, The Return On Equity is 22.849%

5. Earning per Share= Net Income Preferred Dividends/Weighted Average Shares
Outstanding

Here,

Earning Per Share=Rs. 78.04 (Given in financial Report)

Hence, The earning per share is Rs. 78.04.

6. P\E Ratio=Market Price Per Share\EPS

Here,

Market Price Per Share=Rs. 2120

Earning Per Share=Rs. 78.04.

Now,

P\E Ratio=Rs. 2120/Rs. 78.04

=27.17 Times.

Hence, The P\E ratio is 27.17 Times.