CHAPTER – 1

INTRODUCTION

1.1 Background of the study:-

Bank plays an importance role in the development of the economic

position of country. Most people believe that bank's play only a narrow role
in the economy taking deposits and granting loans. The modern bank has to
adopt new roles in order to remain competitive and responsive to public
needs. Bank acts as a regulator for the customers to obtain credit or other
services else where in the financial market place. The above to ends and
roles have profoundly changed the important of banks, business in the world
and in the years a head will continue to market a country making itself a
dynamic institutions both as a topic of study and as a new carrier path
therefore, it is very important in the economy.

Financial management is one of the operational aspects of management,

which is mostly concerned with making a number of financial decisions with
a view to attain the objectives of maximizing the shareholders wealth.
Investment decisions of a firm are mainly concerned with determining the
assets structure of firm. The financial decisions which are made by firm's
manage are mainly investment, financing and dividend decision. They
determine the nature and type of long term assets and also short term assets.
Financing decision is mainly involved in deciding the dividend policy of
firm.

The living standard of people is a nation can be raised with the

economic development that nation. Banking system contributes a lot the
economic development of the country. A great amount of capital needs to be
utilized for the economic development it is possible to utilize huge capital
any through banks.

Despite of strong criticism from the church regarding chorgin of

interest. On unethical proactive, the first banking institution was established
in Italy in 1157 A.D. namely "Bank of venice". Later in 1401 A.D, Bank of
Barcelona was established in Spain. In 1964 "Bank of England" was
established as a Joint Stock Company.

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1.1.1 Meaning of Commercial Bank

Commercial banks have to manage their aspects and liabilities

prudently because it is only by balancing them they can achieve better
financial result for long term survival and the profitability.

The banks which does barking creations on the favor of commercial

area and social progress considering sales and regulation of goods, services
from producer to consumers and the financial activities of our medium of
enlarge and there are five function of commercial bank which are as follows:

a) To handle payments of money.

b) To grant wan and investment.
c) To create money by extension of credit.
d) To receive and handle deposits.
e) To give suggestion for development and progress to basic sector of
nation.

Nepalese joint venture banks have been established and operated

under the rules, regulations and guidance of central bank at 1996 and
commercial bank act 1975. Nepal Rastra Bank has issued certain directives
to there banks.

According to Kent,
"A bank is an organization whose principle operations are concerned
with the accumulation of temporary ideal money of the general public for
the purpose of advancing to others for expenditure."

Accord’ing to Banking regulation act of India,

"Banking means the accepting for the purpose of lending or investing
of deposit of money from the public repayable on derm and or otherwise and
withtdraw able by cheque, draft or otherwise."

Accordint to VS Law,
"Any institutions aterning deposits subjects to withdraw on demand
and making loans of a commercial or business nature, are bank."

Hence, bank means financial establishment for the deposit, laons,

exchange or issue of money and for transmission of funds.
1.1.2 Function of Commercial Bank

2
The primary function of a bank is to accept deposits from the general public
and advancing loans to industrialists, businessman and needy individuals.
a) Accepting deposits:
A bank accepts deposits is the forms namely – saving, current and fixed
deposits saving deposits is called from small depositors and low income
depositors the bank pays small interest to the depositors against their
deposits.

Under fixed deposit account customers is required to keep fixed amount with
bank for specific period. The bank pays higher interest on such deposits.

b) Providing Loan:
To provide loan and advance from the money which it receives as deposits
loans are granted by banks in four forms. They are overdraft, cash credit,
direct loan and discounting bill of exchange.

c) Providing Services:
 Payment of subscription, Insurance permium, rent etc.
 Collection of cheques, bills, salaries, pension, dividends and interests.
 To buy and sell securities.
 To remit money from one place to another by means of cheques, drafts,
wire transfer.

d) Credit Creation:
In other to earn profits they accept deposits and advance loans by keeping
small cash in reserve for day to day transaction.

e) General Utility Services:

1) The bank assist the traders engaged in foreign trade of the country.
2) Money banks market security brokerage service officing customers
the opportunity to buy stocks, bonds and other financial securities
without having to go to the security dealer or broker.
3) The bank acts as a custodian of the valuation belonging to the
customers.
4) Bankers have long been asked for financial advice by their customers.

1.1.3 Development of Commercial Banks in Nepal

3
 The origin and growth of bank in Nepal is not long. In comparison to
other development countries, the institutional development of banking
system of Nepal is for behind. As Nepal Bank Limited is the first bank of
Nepal which was established on 30th Kartik 1994 B.S. latter the second
commercial bank was established in 2022 B.S. by the name of "Rastriya
Banijiya Bank". Similarly Nepal Arab Bank Ltd. (NABIL) was established
in 2041 B.S. is the first joint venture bank in Nepal. In 2039 B.S. The
government adopted the policies of economic liberalization and
provatization as a result of which banking activities flourish properly in
every sector of the economy. By the end of July 2007 at Commercial Banks
are 20 in number. They are the 'A' level banks of Nepal which is categorized
by NRB.

Table 1.1

4
 List of Commercial Bank in Nepal
1 Nepal Bank Ltd. 1937/11/15 Kathmandu
2 Rastriya Banijya Bank Ltd. 1966/01/23 Kathmandu
3 Agriculture Development Bank Ltd. 1968/01/02 Kathmandu
4 Nabil Bank Ltd. 1984/07/16 Kathmandu
5 Nepal Investment Bank Ltd. 1986/02/27 Kathmandu
6 Standard Chartered Bank Nepal Ltd.. 1987/01/30 Kathmandu
7 Himalayan Bank Ltd. 1993/01/18 Kathmandu
8 Nepal SBI Bank Ltd. 1993/07/07 Kathmandu
9 Nepal Bangladesh Bank Ltd. 1994/06/05 Kathmandu
10 Everest Bank Ltd. 1994/10/18 Kathmandu
11 Bank of Kathmandu Ltd. 1995/03/12 Kathmandu
12 Nepal Credit and Commerce Bank Ltd. 1996/10/14 Rupandehi
13 Lumbini Bank Ltd. 1998/07/17 Narayangadh, Chitawan
14 Machhapuchhre Bank Ltd. 2000/10/03 Pokhara, Kaski
15 Kumari Bank Ltd. 2001/04/03 Kathmandu
16 Laxmi Bank Ltd. 2002/04/03 Birgunj, Parsa
17 Siddhartha Bank Ltd. 2002/12/24 Kathmandu
18 Global IME Bank Ltd. 2007/01/02 Birgunj, Parsa
19 Citizens Bank International Ltd. 2007/06/21 Kathmandu
20 Prime Commercial Bank Ltd 2007/09/24 Kathmandu
21 Sunrise Bank Ltd. 2007/10/12 Kathmandu
22 NIC Asia 16/03/2070 Kathmandu
23 Grand Bank Ltd. 2008/05/25 Kamaladi, Kathmandu
24 NMB Bank Ltd. 2008/06/05 Babarmahal, Kathmandu
25 Kist Bank Ltd. 2009/05/07 Anamnagar, Kathmandu
26 Janata Bank Nepal Ltd. 2010/04/05 Kathmandu
27 Mega Bank Nepal Ltd. 2010/07/23 Kantipath, Kathmandu
28 Civil Bank Ltd. 2010/11/26 Kamaladi, Kathmandu
29 Century Commercial Bank Ltd. 2011/03/10 Kathmandu
30 Sanima Bank Ltd. 2012/03/15 Nagpokhari, Kathmandu

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 Source: NRB

1.1.4 Profile of Laxmi Bank Limited

One of the reputed commercial bank is Laxmi Bank Ltd which was
established on 2002. My subject of this study is financial analysis of LXBL.
I had tried to analyze the financial performance of LXBL. Laxmi Bank is
first south asian bank to implement SWIFT Net, Laxmi Bank is the 17 th
commercial bank. Birgunj is the head office whereas as Hattisar is the
corporate office.

Laxmi Bank Limited, the commercial bank has been incorporated in April
2002 re-registered in 2006, as a commercial bank classified as a category a
financial institution under the Banks and Financial institutions act of Nepal.
The current shareholding constitutes of promoters holding 55.42 percent.
Citizen investment trust holding 9.02 percent and the general public holding
35.56 percent. Promoters represent Nepal's leading business groups with
diversified business interests. The Bank's share are listed and actively traded
in the Nepalese Stock Exchange.

9.02

35.56
CIT
Promoters
General Public

55.42

Product and Services of Laxmi Bank Ltd

Laxmi Bank has been the innovator in introducing new products.

1. Schemes
2. Demand Draft
3. Locker
4. Clearing/Collection
5. Foreign Exchange

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6. Fund Transfer.
7. ATM/Debit Card
Table no:1.2
Branches of Laxmi Bank Limited

S.N Name of Town Address

1. Kathmandu Hattisar
2. Birganj Adarshanagar
3. Banepa Kavre Planchowk
4. Biratnagar Tulsi Complex (Main
road)
5. Lalitpur Pul Chowk
6. Narayanghat Chitwan
7. Kathmandu Taku
8. Pokhara Pokhara industrial area
9. Damak Damak-7
10. Kathmandu Bhat. Bhateni
11. Itahari Itahari
12. Kathmandu Maharajgunj
13. Kathmandu Naya Baneswor
14. Janakpur Janakpur dham
15. Pokhara New Road
16. Kathmandu New Road
Bhairawa Bhairawa

1.2 Literature Survey:

Literature review is basically a Stock taking of available literature is

one's project of research literature survey thus provides the students with the
knowledge of the status of their field of research. The library is a rich
storage base for the all kinds of published materials including these
dissertation business reports and government publications.

The purpose of literature review is thus to find out what research

studies have been conducted in one's chosen field of study and what remains
to be down. It provides the foundation of developing a comprehensive
theoretical frame work from which hypothesis can be developed for tentify.

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The study of financial analysis is a process of evaluating the relationship
between component parts of financial statement to obtain a bettet
understanding of the firms position and performance.
The Laxmi Bank Mission

We are committed to excellence in delivery of entire gamut of

financial services in order to achieve sound business growth and maximize
stock holder values by embracing team spirit. Progressive technology and
good corporate government.

The Laxmi Bank Vision

 Provider of most integrated financial services.

 Bank with the best asset book.
 Key player and a thought leader in the retail financial services.
 Best IT capability.
 Preformed employer in the financial sector.

The Laxmi Bank Values

Our values are built around high standard of good corporate

governance. Transparency, professionalism and high ethical tone at the
leadership are foundations on which actions are based. Laxmi Bank's code of
conduct encapsulates international best practices applicatble to Nepal
context. The level of commitment of our people to take Laxmi Bank to
greater heights has been a hugh catalyst. The Team Spirit within the
organizations something we are proud of.

1.3 Objectives of the project work study:

 To make credit easily available for agriculture industry.

 Trade and services to maintain the economic benefit and facility of
general people.
 To collect various deposits of customer and to provide modern
Banking services to the country and people.
 To estimate the future expansion area for the bank.
 To know the position of different ratios for knowing operating result
is the throat cut competition of the market.

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1.4 Significance of the project work study:

 The result and conclusion of the study will be significant to Laxmi

Bank Ltd in making their financial decision.
 The result and conclusion will guide the board of directors and
managers to wipe out the weakness of the bank.
 It helps in maximizing unnecessary expenses and increasing return to
the shareholders.
 The study will also be significance to the individual who deposit their
money in the bank in different accounts and securities.

1.5 Problems of study:

Nepal is underdeveloped country most of people depend on
agriculture now days most of people are literate in our country but people
doesnot give interest on financial institution like as bank. Banking facilities
is only at town area. So that people of village didn't save their deposit their
earning in bank. Lack of deposits banks cant provides loan to public and
financial institutions. People are not properly aware about he benefits of
banking facilities. Only the population of market areas want to grate the
opportunities or facilities provided by the bank. Therefore almost every
banks change their functional are from time. Laxmi Bank Ltd. so provide
services to each individual and business for wealth maximization of the
shareholders.

1.6 Methodology:
Research Design:
The research design choosen in the research are historical as well as
descriptive is nature. The research design's are descriptive and historical
is the sense that the research is based on the part data collected from the
annual report of Laxmi Bank Ltd.

1.6.1 Data Collection:

The data required for the studies are obtaine dfrom the concerned
bank. The supplementary data nad information are obtained from
unpublished officieals, record, brockets, journals, NRB etc. The direct
appointment with the manager and marketing which other staffs of the banks
also provides other supplementary information. So we can say that the data
presented is the study are all secondary not primary.

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1.6.2 Data Analysis:
Various procedures have been employed to conduct the research first
of all various literatures have been studies then overall data and
information’s are collected. They are organized, tabulated and presented in
table form as required by the study. The graph and chart used in the study
are helpful to analysis the performance of the bank and helpful to understand
properly.

Financial Statement Analysis:

Company's profit and loss account and balance sheet is not complete
if the data are not analyze properly. Properly managing of financial
statement data is called financial statement analysis. Generally profit and
loss account, balance sheet are known as financial statement. Analysis
involves a comparison of a firm's performance with that of other firms in the
same one of other firms in the same line of business, which often is
identified by the firm's industry classification.

According to I.M. Pandey,

"Financial statement analysis is the process of identifying the financial
strength and weakness of the firm by properly establishing relationship
between the items of balance sheet of profit and loss account."

Thus, financial analysis is essential for each shareholder's of the bank

which helps them in making proper decision.

Ratio Analysis:
Ratio Analysis are the tools of financial analysis. Ratios are designed
to show relationship between financial statement accounts with in firm and
between firms. The term ratio refers to the numerical or quantitative
relationship between two items/ variables. A ratio is calculated by dividing
one item of the relationship with another.

According to R.N. Anthony,

"A ratio is simply one number expressed in terms of another. It is
found by dividing one number by other."
Thus, relation between variable or two data of account is called ratio
analysis.

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1. Liquidity Ratio:
This ratio s analysis for short term financial position of short term
current assets and liabilities. There are two types of liquidity ratio.

a. Current Ratio:
Current Ratio is calculated by dividing current assets by current
liabilities.

Current assets includes cash, marketable securities, inventory, debtors,

accountable receivable, prepaid expenses.

Current Liabilities:
Current liabilities includes creditors, short term bank loan, bills payable,
accrued expenses, income tax, liabilities & long term debts maturing in
current year.

Standard :- 2 :1

b. Quick ratio/ Acid – Test ratio:

This ratio is calculated by deducting inventories and prepaid expenses from
current assets and dividing the remainder by current liabilities.

Standard:- 1:1
Where,
Quick Assets = Current Assets
= Inventories
= Prepaid expenses
= Quick Assets

2. Debt Management ratio:

Debt management ratios are also called leverage ratios. They indicates
the content to which of firm use debt financing.

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a. Debt ratio/ debt to total assets ratio:
The debt ratios is calculated by dividing total debt by total assets. It
measures the percentage of the firm's assets financed by creditors. Total debt
includes both current liabilities and long term debt.

b. Long term debt to total assets ratio:

This ratio measures the relative proportion of the firm's asset bounded by
long term or permanent debt. Long term debt to total assets ratio is
calculated as follows:

c. Debt equity ratio:

The debt equity ratio is calculated by dividing total debt by
shareholder's equity.

3. Profitability ratio:
Profitability ratio shows the combined effects of liquidity, assets
management and debt management on operating result. Major types of
profitability ratios are as follows.

a. Return on total assets (ROA):

The ratio of net income to toal assets measures the return on total
assets after interest and tax. The ROA is calculated by dividing net income
by total assets.

b. Return on equity (ROE):

The ratio of net income to common equity measures the return on
common equity or the rate of return on stockholder's investment. The ROE
is calculated by dividing net income available to common stock holder's by
common equity.

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c. Eqiuty capital ratio:
The equity capital ratio is defined as equity dividend by total assets.
Other things being equal a lower equity capital ratio leads to higher return
equity.

d. Interest Spread:-
Interest spread is also popular tools to measure the profitability of a
commercial bank.
Interest spread is the difference between average rate of return on interest
earning assets and average rate of interest paid on interest paying liabilities.

4. Market value ratio:

The market value ratio represents a group of ratio that related the
firm's stock price to its earnings and book value per share. There ratio give
management and indication of what investor think of the company's past
performance and future prospects. Two commonly used market value ratio
are as follows:

a. Price earning (P/E) ratio:

The P/E ratio shows how much invests are willing to pay per respect
of reported profits. The P/E ratio is calculated by dividing market price per
share by earnings per share. The CPS is calculated by dividing net income
by number of common share outstanding.
We know,

Now,

b. Market to book value ratio:

13
The ratio of a stock's market price to its book value gives another indication
of how investor regard the company. The ratio is calculated by dividing
market price per share by book value per share.

Where,

1.7 Organization of the study:

In this study chapter -1 deals with background of commercial bank,

meaning of commercial bank, function of commercial bank. Commercial
bank in Nepal objectives of the project work study. Problem of study,
limitation of the review, methodology and at last profile of Laxmi Bank Ltd.
And its vision, mission and different ratio.

Similarly chapter – 2 concerned with core objectives of thus report –

It involves presentation and analysis of financial statement and data
presentation involves table and diagram in accordance with the objectives of
the study. Finally chapter deals with conclusion recommendation on the
financial performance of Laxmi Bank Ltd.

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 CHAPTER – 2

PRESENTATION AND ANALYSIS OF DATA

2.1 Presentation of data in table

Table No. 1
Laxmi Bank Limited
3 years Balance Sheet
Particulars 2067/68 2068/69 2069/70
Liabilities
1. Share Capital 1,694,196,525 1,694,081,100 1,948,193,265
2. Reserves and Funds 419,180,198 606,177,808 772,491,811
3. Debentures and Bonds 350,000,000 350,000,000 7,50,000,000
4. Borrowings 0 27,980,000 0
5. Deposits 18,299,627,620 22,831,842,639 2,596,059,8154
6. Bills Payables 302,100,039 1,765,225 2,663,146
7. Proposed Dividend 174,098,862 169,408,110 0
8. Income Tax Liabilities - - 4,678,074 0 0
9. Other Liabilities 316,010,075 347,273,355 381,990,587
Total Capital & Liabilities 21,559,891,393 26,028,528,237 29,815,936,963
ASSETS:
1. Cash Balance 356,669,236 407,788,874 357,704,910
2. Balance with Nepal Rastra Bank 1,866,490,707 3,845,300,276 2,871,238,020
3. Balance with Banks / Financial
Institutions 551,432,373 195,585,115 236,198,630
4. Money at Call and Short Notice 50,000,000 659,487,873 443,329,112
5. Investments 3,041,421,767 3,758,105,909 5,417,569,587
6. Loan Advances and Bills Purchase 15,199,847,906 16,476,630,201 19,693,819,578
7. Fixed Assets 352,338,243 308,172,110 437,739,766
8. Non - Banking Assets 15 - - 0 0 0
9. Other Assets 141,691,161 377,457,879 358,337,360
Total Assets 21,559,891,393 26,028,528,237 29,815,936,963
Source: From Appendix 1

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 Table No. 2
Laxmi Bank Limited
3 year Income Statement

Particulars 2067/68 2068/69 2069/70

1. Interest Income 2,233,332,791 2,289,359,534 2,376,734,733
2. Interest Expenses 1,503,851,025 1,645,718,018 1,451,899,411
Net Interest Income 729,481,766 643,641,516 924,835,322
3. Commission and Discount 67,795,886 149,817,868 139,294,980
4. Other Operating Income 69,514,877 56,390,780 88,637,367
5. Exchange Fluctuation Income 63,127,874 107,950,625 117,338,453
Total Operating Income 929,920,403 957,800,789 1,270,106,122
6. Staff Expenses 157,662,248 178,284,804 207,372,944
7. Other Operating Expenses 169,294,370 194,842,563 240,502,808
8. Exchange Fluctuation Loss 0 0 0
Operating Profit before Provision for
Possible Losses 602,963,785 584,673,422 822,230,370
9. Provision for Possible Losses 13,634,832 30,808,421 186,037,811
Operating Profit 589,328,953 553,865,001 636,192,559
10. Non-Operating Income/(Loss) 873,687 5,834,022 12,971,950
11. Loan Loss Provision Written-Back 798,406 0 10,187,031
Profit from Regular Operations 591,001,046 559,699,023 659,351,540
12. Profit/(Loss) from Extra-ordinary
Activities 2,348,347 0 1,200,000
Net Profit after considering all Activities 593,349,393 559,699,023 660,551,540
13. Staff Bonus Provision 53,940,854 50,881,729 60,050,140
14. Tax Provision 0 0 0
a) Current Years 161,482,469 154,626,044 185,477,731
b) Previous Year’s Additional Tax 0 0
c) Deferred Tax 2,780,975 -2,199,092 -4,818,910
Net Profit/(Loss) 375,145,095 356,390,342 419,842,579

2.2 Analysis of data using ratio analysis

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2.2.1 Liquidity Ratio
2.2.1 (a)

Table No. 3
Laxmi Bank Limited
3 Years Current Assets
Fiscal Year 2067/68 2068/69 2069/70
Current Assets 2,966,283,477 5,485,620,017 4,266,808,032
Current Liabilities 19,096,514,670 23,350,289,329 26,345,251,887
Current Ratio 0.16 0.23 0.16
Source: Appendix – 1
Figure No. 1
3 years current ratio
Current Ratio

0.25

0.2

0.15
Current Ratio
Ratio

0.1

0.05

0
2067/68 2068/69 2069/70
Fiscal Year

The current ratio of Laxmi Bank Limited in the F/Y 2067/068, 2068/069 and
2069/070 are 0.16, 0.23 and 0.16 respectively. It shows the current ratio of
Laxmi Bank is very bad. So it should be improved.

2.2.1 (b) Quick Ratio (QR) =

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 Table No. 4
Laxmi Bank Limited
3 Years Quick Ratio
Fiscal Year 2067/68 2068/69 2069/70
Quick Assets 2,966,283,477 5,485,620,017 4,266,808,032
Current Liabilities 19,096,514,670 23,350,289,329 26,345,251,887
Quick Ratio 0.16 0.23 0.16
Source: From Appendix – 2
Figure No. 2
3 years Quick ratio
Quick Ratio

0.25

0.2

0.15
Quick Ratio
Ratio

0.1

0.05

0
2067/68 2068/69 2069/70
Fiscal Year

The quick ratio of Laxmi Bank Limited in the F/Y 2067/068, 2068/069 and
2069/070 are 0.16, 0.23 and 0.16 respectively. It shows the Quick ratio of
Laxmi Bank is very bad. So it should be improved.

2.2.2 Debt Management Ratio

2.2.2 (a) Debt Ratio (Debt to total assets ratio)

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 Table No. 5
Laxmi Bank Limited
3 Years Total Debt Ratio
Fiscal Year 2067/68 2068/69 2069/70
Total Debt 19,446,514,670 23,728,269,329 27,095,251,887
Total Assets 21,559,891,393 26,028,528,237 29,815,936,963
Debt Ratio 90.20% 91.16% 90.88%
Source: From Appendix – 2

Figure No. 3
3 years Debt ratio

The debt ratio of LXBC in F/Y 2067/068, 2068/069 and 2069/070

are 90.20 %, 91.16% and 90.88% respectively. The debt ratio is in
fluctuation trend. From the above table and figure, it is cleared that more
than 90 % of fund is available through debt.

2.2.2 (b) Long term debt to total assets ratio:

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 Table No. 6
Laxmi Bank Limited
3 Years Long Term Debt Ratio
Fiscal Year 2067/68 2068/69 2069/70
Long term Debt 350,000,000 377,980,000 750,000,000
Total Assets 21,559,891,393 26,028,528,237 29,815,936,963
Long term Debt Ratio 1.62% 1.45% 2.52%
Source: From Appendix – 2

Figure No. 4
3 years Long term debt to total assets ratio

Long term debt ratio of LXBL in the F/Y 2067/068, 2068/069 and 2069/070
are 1.62%,1.45% and 2.52% respectively. The long term debt ratio is in
fluctuating trend.

2.2.3 Profitability Ratio

2.2.3 (a) Return on assets

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 Table No. 7
Laxmi Bank Limited
3 Years Return on Assets

Fiscal Year 2067/68 2068/69 2069/70

Net Income 375,145,095 356,390,342 419,842,579
Total Assets 21,559,891,393 26,028,528,237 29,815,936,963
Return On Assets 1.74% 1.37% 1.41%
Source: From Appendix – I & II

Figure No. 5
3 years Return on assets

The Return on Assets of Laxmi Bank Limited in the Fiscal year

2067/068, 2068/069 and 2069/070 are 1.74%,1.37% and 1.41% respectively.
Here, Return on Asset is in fluctuating trend. Fluctuating trend of Return on
assets it is not better because it measure inefficient management and not
utilized of sources.
2.2.3 (b) Return on Equity

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 Table No. 8
Laxmi Bank Limited
3 Years Return on Equity
Fiscal Year 2067/68 2068/69 2069/70
Net Income 375,145,095 356,390,342 419,842,579
Shareholder's Equity 2,113,376,723 2,300,258,908 2,720,685,076
Return On Equity 17.75% 15.49% 15.43%
Source: From Appendix I & II

Figure No. 6
3 years Return on Equity

Return on equity of LXBL in the fiscal year 2067/068, 2068/069 and

2069/070 are 17.75%,15.49% and 15.43% respectively .The Return on
Equity is decreasing each year. Decreasing the Return on Equity ratio it is
not better for bank.

2.2.4 Market Value Ratio:

2.2.4 (a) Price/ Earning (P/E) ratio:

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 Table No. 10
Laxmi Bank Limited
3 Years P/E ratio
Fiscal Year 2067/68 2068/69 2069/70
MPS (Rs.) 340 340 309
EPS (Rs.) 23.25 21.55 24.78
P/E Ratio( times) 14.62 15.78 12.47
Source: From Appendix I & II

The Earning Per share of Laxmi Bank Limited in the fiscal year
2067/068, 2068/069 and 2069/070 are Rs. 23.25, Rs. 21.55 and Rs.24.78
[Link] MPS of Laxmi Bank in the fiscal year 2067/068,
2068/069 and 2069/070 are Rs. 340,Rs. 340 and [Link] is in fluctuating
trend but MPS is in decreasing trend. P/E Ratio is also in fluctuating trend.
Figure No. 8
3 years P/E ratio

2.2.4 (b) Market Book value ratio

23
 Table No. 11
Laxmi Bank Limited
3 Years Market Book value ratio
Fiscal Year 2067/68 2068/69 2069/70
MPS (Rs.) 340 340 309
BVPS 131 136 161
M/B Ratio( times) 2.60 2.50 1.92
The Market book, ratio of Laxmi Bank Limited in the F/Y 2067/068,
2068/069 and 2069/070 are 2.60, 2.50 and 1.92 respectively. It shows the
market book value ratio of Laxmi Bank limited has been decreasing over the
period.
Table No. 11(a)
Laxmi Bank Limited
3 Years Book value Per Share (BVPS)
Fiscal Year 2067/68 2068/69 2069/70

Net Worth 2113376723 2300258908 2720685076

No. of Share 16135205 16940811 16940811

BVPS 131 136 161

Figure No. 9
3 years Market Book ratio

2.3 Study Result:

Table No. 12
Particulars Comment
2067/68 2068/69 2069/70

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1) Liquidity Ratio
a) Current Ratio (times) 0.16 0.23 0.16 Fluctuating
b) Quick Ratio (times) 0.16 0.23 0.16 Fluctuating
2) Debt Management Ratio
a) Debt Ratio (%) 90.20% 91.16% 90.88% Fluctuating
b) Long Term debt to total ratio (%) 1.62% 1.45% 2.52% Fluctuating
3) Profitability Ratios
a) Return on total assets (%) 1.74% 1.37% 1.41% Fluctuating
b) Return on equity (%) 17.75% 15.49% 15.43% Decreasing
4) Market value ratio
a) Price earning ratio (times) 14.62 15.78 12.47 Fluctuating
b) Market to Book value ratio (times) 2.60 2.50 1.92 Decreasing
Following are the result that can be drawn out from the study:

Even though fluctuating and highly competition in market bank is able to

make adequate profit. The bank can be provide dividend to its shareholders.
The bank has good and systematic management. The bank can invest to
many resources to earn assets. The bank liquidity ratios indicates that
liquidity position is weak.

In liquidity ratio, current ratio and quick ratio is 0.16 in 2067/068 and
gradually increased to 0.23 in 2068/069 and decreased in 2069/070 to
0.16%. In debt management ratio debt ratio is 90.20% in 2067/068 and
increased to 91.6% in 2068/069 and finally decreased to 90.88% in
2069/070. The ratio are fluctuating. Similarly, in profitability ratio return on
total assets is 1.74% in 2067/068, 1.37% in 2068/069 and 1.41% in
2069/070. In Market value ratio price earning ratio is fluctuating and market
to book value ratio is decreasing.

CHAPTER – 3

SUMMARY, CONCLUSION AND RECOMMENDATION

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3.1 Summary

A bank is a institution, which deals in money. It draws surplus money

from the surplus units of the society and lends it to the deficit unit . A bank
is like a reservoir. The rate of interest paid to depositors is generally lower
than the rate charged from the borrowers in this process a bank earns
commission. The difference between these two rates of interest is the profit
to the bank.

The project report entitled "Financial analysis of Laxmi Bank Limited

is the basic need to fulfill the requirements of the course of study in BBS 3 rd
year. First of all I went to Laxmi Bank Ltd. and then I met staffs and talk
about project work. Bank provides me annual report of Laxmi Bank Ltd. as a
necessary data for project work. I also checked website of Laxmi Bank
Limited further necessary data.

This report has been formatted and organized in main three chapters
as mentioned bellows.

Chapter 1: Introduction
Chapter 2: Preparation and analysis of data
Chapter 3: Summary and conclusion

In this study chapter – 1 deals with background of commercial bank,

meaning of commercial bank, function of commercial bank. Development of
Commercial Bank in Nepal, profile of Laxmi Bank Limited, literature
survey, mission, vision, objectives of the project work study, signification of
the project work study problem of the study & methodology.

The second chapter includes data presented in tables analysis of data

using ratio analysis method and major findings derived from it.

Finally this third chapter includes a brief summary of this report and
the major conclusions is derived from the analysis of data and suggestion.

3.2 Conclusions:

The analysis of various ratios gives an indication of bank performance

and financial position.

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 i) Its current ratio and quick Ratio are fluctuating each year and
nom meeting the standard of 2:1 and 1:1 through 2067/68 to
2069/70. Evaluation of liquidity ratios indicates the liquidity
position of Laxmi Bank Limited is weak.

ii) Debt Ratio through 2067/2068 to 2069/2070 is fluctuating each

year. The maximum portion of assets are invested through debt.
Long term debt ratio is also fluctuating each year.

iii) ROA is fluctuating each year and similarly ROE is decreasing

each year. So it can be said that profitability position of Bank is not
good.

iv) Price/ earning ratio is fluctuating condition and market book

ratio is also fluctuation condition. Evaluation of market value
ratios indicates that investors are now not excited about the future
prospects of its common stock as an investment.

3.3 Recommendations

On the basis of the analysis made above the following

recommendation is made.

 Although LXBL has a strong financial base and capital structure as

well as good market status and reputation, in order to increase deposit
collection and to introduce new customers it should introduce new
deposit schemes.

 The bank should aim towards increasing its customers but it must also
provide the quality services to the present customers. For this the bank
must make plans & policies keeping customers in mind.

 There should be coordination between LXBL, NRB & other

commercial banks so as to deliver credit and other supporting services
smoothly. The joint effort can be made to carry out in making any
decision like change in interest rate, interest policy.
 Bank should try attract more customers. It must not target that there
are many other banks offering similar types of facilities. Banks should
therefore always try to be innovative, cooperative & competitive.

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 LXBL should open their branches in rural areas as well. It has opened
only in semi urban areas, which has left the role people deprived of
normal banking services.

 At last it should focus on the development of modern technology and

study the problems and obstacles of customers.

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 BIBLIOGRAPHY

 Agrawal R.D, Principles of management, Buddha Academic Publishers and

Distributors Pvt. Ltd, Kathmandu ( 2003).
 Basu, A.K. , Mukharjee, A.K. “Fundamentals of Banking Theory and
Practices”, New Delhi, Mac Malian India, 1990 Page-128.
 Brigham, E.F. and Weston, J.F., “Essential of Managerial Finance,” Chicago,
The Dryden Press, Ninth Edition
 Gurung Santa Bahadur , Rural Development Approaches in Nepal, DEVA
Publication, ( 1997)
 Kunwar, K.B, Poverty and Rural Development in Nepal, Mina Prakashan.
 M.C Shukla, Business organization and management (1995), S. Chand &
company, New Delhi.
 N.C Jain and Saakshi , Personal Management and Human Resources , AITBS
Publishers Delhi. ( 2005)
 Pant Prem Raj , Principles of management , Buddha Academic Publishers and
Distributors Pvy. , Ltd, Kathmandu (2003) .
 UNDP , Nepal Human Development Report , 2001 ( Poverty), UNDP (2002)

Journals
Annual report of Laxmi Bank Limited

Websites
[Link]

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