This report has been already submitted . This Is only for educational Purpose © Bikram Adhikari
FUNDAMENTAL FINANCIAL PERFORMANCE
ANALYSIS OF
LUMBINI BIKAS BANK LIMITED
BY:
Bikram Adhikari
Exam Roll no:- 27563/20
T.U. Reg. No :-
A Internal Assignment Project Report
Submitted to
Faculty of Management, Tribhuvan
University, MM Campus,
Lecturer Mr. ISHWARI PRASAD GHIMIRE
In Partial Fulfillment of the Requirement for the
Degree of
Bachelor of Business Admiration (BBA)
At the
Mahendra Multiple campus
Tribhuwan University
Bharatpur Dang
August, 2022
STUDENT DECLARATION
I hereby declare that I have completed
the Project Report entitled " Fundamental Financial performance
analysis of Lumbini Bikas Bank limited ",
under the supervision of Mr. ISHWARI PRASAD GHIMIRE
in partial fulfillment of the requirements for
the degree of Bachelor of Business Administration at Faculty of Management,
Tribhuvan University.
I solemnly declare that no part of this report has been submitted here
or elsewhere in previous application for award of degree. All sources of
Knowledge used have been duly acknowledged.
Date:
- August 12 2022
Student Signature:
Bikram Adhikari
DEDICATION
Efforts,
dedications, and commitment were fundamental elements for the completion of my
Project Report, more important was the support by my family members and
friends. To my Mother in particular, Mrs
Renuka Devi Sharma, My Father Mr Padam
Prasad Sharma, Brothers, Sister, and Friends, today I dedicate this very
important report to them because without their presence, support, love, and
understanding I would never have been able to achieve my goal.
ACKNOWLEDGEMENT
I
would like to express my sincere gratitude to Mahendra Multiple Campus
Bharatpur, Dang for providing the golden opportunity to prepare a project work
on “Fundamental Financial performance analysis of Lumbini Bikas Bank limited”
to broaden our theoretical knowledge into real practical life.
I am extremely thankful to Mr. ISHWARI
PRASAD GHIMIRE for his immeasurable
guidance, inspiration, and resource materials, without which I would not have
been able to prepare this project work being in bound of complete formality. I
express my sincere thanks to Mr. Ram Thapa, BBA Coordinator; MMC Dang for his direct
and indirect support during my Project Work that counts in my study. I express
my sincere thanks to our friends for their time and advise to sharpen up this
study.
Bikram
Adhikari
August,
2022
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TABLE OF CONTENT
Contents
1.1.1 Overview of Lumbini Bikas Bank Limited
DATA PRESENTATION AND
ANALYSIS
CONCLUSION AND ACTION
IMPLICATION
ABBREVIATION
|
Acronym |
Full
Form |
|
LBBL |
Lumbini
Bikas Bank Limited |
|
EPS |
Earnings
Per Share |
|
MMC |
Mahenda
Multiple Campus |
|
TU |
Tribhuvan
University |
|
ROE |
Return
On Equity |
|
ROA |
Return
On Asset |
|
BVPS |
Book
Value Per Share |
|
P/E |
Price
Earning |
|
NRB |
Nepal
Rastra Bank |
|
NEPSE |
Nepal
Stock Exchange |
|
C.V |
Coefficient
of variation |
|
Ltd. |
Limited |
|
|
|
CHAPTER 1
INTRODUCTION
1.1.Contextual
Information
Introduction
Fundamental analysis is a method used to
determine the value of a stock by analyzing the financial data that is
fundamental to the company. In order to make a rational and scientific
investment decision, an investor has to evaluate a lot of information as to the
part as well as the expected future performance of companies, industries and
the economy as a whole in advance such evaluation or analysis is known as fundamental
analysis.
Bank is a financial institution, which plays
significant role in the development of the country. It helps the growth of
agriculture, trade, commerce and industry of the national economy. The banking
sectors are largely responsible for collecting household saving its items of
different types of the deposit and regulating them in the society by lending
them in different sector of the economy. The banking sector has now reached
even to the most remote areas of the country and has contributed a good deal to
the growth of the economy. By lending their resources in small scale industries
under intensive banking programmed the banks has contributed to the economic
growth if the economy.
1.1.1
Overview
of Lumbini Bikas Bank Limited
Lumbini Bikas Bank has been an emerging name in the field
of banking and financial sector of Nepal. It stands with 86 branches, 17
ATMs and offers a wide range of banking products in deposits, lending
and other value-added services such as internet/mobile banking remittance etc.
The bank’s team comprises of more than 600 staff providing
wide range of services to more than 15,000 loan customers and is the driving
force of the bank.
It is an entity established with the merger of five Banks
and Financial Institutions namely Bhajuratna Finance Ltd., Birgunj Finance
Ltd., Himichuli Bikas Bank Ltd., Lumbini Finance and Leasing Co. Ltd. and Vibor
Bikas Bank Ltd. The last merger of Vibor Society Development Bank and Lumbini
Finance and Leasing took place on 25th Ashad 2074.
Basic
Info from Share Sansar
Organization
Name:
Lumbini Bikas Bank Limited
Symbol: LBBL
Sector: Development
Bank
Share Registrar: Muktinath
Capital Limited
Paid
Up Capital: 3,284,292.51
In last 52 weeks high low price- 774.00 - 290.10
120 Days Average: 401.60
180 Days Average: 437.56
1.1.2
Latest Dividend
Bonus
share- 13.00%
Cash
dividend- 0.68%
Year-
2077/2078
Book
close date- 2021-12-13
The
general objective of this study is to examine financial performance of the
Lumbini Bikas bank Limited. The specific objectives of the study are given
below:
·
To
measure the performance analysis of banks.
·
To
find out the profitability position of banks.
Research itself
has own importance because it aims to gain knowledge and to add the new
literature to the existing field. The significant of this study lies mainly in
filling a research gap on the study of comparative financial performance
analysis of with respect to Lumbini Bikas bank Limited. This study will
contribute significantly to solve the problem existing in the financial
institution and to formulate the policy and strategies to maintain activities
effectively. The study is important for commercial banks, researchers,
scholars, investor, students, government and many other parties. So, this study
will be helpful to those who want to study in further detail and widely in this
field. At last, it is expected that the study will add a drop of literature to
the field of commercial banks and their comparative financial performance
analysis. The significance of the study are as follows:
·
The
study is mainly significant to the shareholders, depositors and other creditors
to identify the productivity of their funds.
·
It
helps in tracing the various problems regarding profitability of the banks.
·
Every
individual as well as further researcher will have a good source of literature
about finding by this research.
Review
of Literature is the study of past research studies, article and conceptual
framework for the related studies. It is advancement of existing knowledge and
in-depth study of subject matters. It starts with a search of a suitable topic
and continues throughout the volume of similar or related subjects. This
chapter Literature Review highlights upon the existing upon the existing
literature and research related to the present study with a view to functioning
out what had already been explained and how the present research adds to his
dimension. This chapter attempts to review the following relevant literature to
make the project report effective.
Review
of Supportive Texts
·
Review
of books
·
Review
of related article
·
Review
of previous project report
·
Review
of financial reports of concerned banks
1.5
Concept of Financial Analysis
Financial analysis is the process of evaluating
business, projects, budgets, and other finance-related transactions to
determine their performance and suitability. In another words, financial
performance analysis is the process of determining the operating and financial
characteristics of firm from accounting and financial statements. The goal of
such analysis is to determine the efficiency and performance of firm’s
management, as reflected in the financial records and reports. The analyst
attempts to measure the firm’s liquidity, profitability and other indicators
that the business is conducted in a rational and normal way, ensuring enough
returns to the shareholders to maintain at least its market value.
Financial performance analysis is a process of
identifying the financial strength and weakness of the firm by properly
establishing the relationship between item of balance sheet and the profit and
loss account. The balance sheet, which represents a snapshot of the firms’
financial position at the movement in time and next is the income statement
that depicts a summary of the firm’s profitability over time.
i.
Profit and loss accounts
ii.
Balance sheet
The
report is descriptive in nature. To prepare a report gathering data is very
important.This chapter provides
the overall framework or plan for the collection, analysis and presentation of
data required to fulfill the objectives of the study. The main objectives of
the study are to analyze and evaluate comparative financial performance of
Lumbini Bikas Bank Limited. To meet the objective, the following methodology is
applied in the study, which is described as below.
Research Design
By research design we mean an overall framework
or plan for the activities to be undertaken during the course of a research
study. The plan is the overall scheme or program of the research. Therefore, to
achieve the desired objectives of this study descriptive and analytical
research design is applied. Descriptive research design seeks to find out the
fact by help of sufficient date and information.
Population and Sample
At present, there are 26 commercial Bank,17
development banks, 17
finance companies ,and 67 Micro finance companies are
operating in Nepal. Due to time and resources factors, it is not possible to
study all of them regarding the study topic. All the commercial banks and
development bank that are operating in Nepal are considered as the population.
From the development banks of Nepal Lumbini Bikas Bank Limited is taken as
sample.
Nature and Sources of Data
The study is based on secondary data. For the
purpose of the study, the annual reports of the LBBL are used as the major
sources of data. Besides the annual reports of those banks required data and
information is collected from the following sources.
·
NRB reports and bulletins and its website.
·
Various publications dealing in the subject
matters of the study.
·
Various articles published in journals, etc.
·
Various website about Nepalese economy and
share market.
·
Online
data from LBBL website.
Formal and informal talks with the senior staff
of the company were also helpful to obtain the information of the related
problem.
1.7
Scope of the Report
Banks
have been playing an important role in economic development and contributing
immensely to build the country. Banking sector is fast expanding in our country
because of globalization and reform of private sector. To survive as a key
player in this highly competitive and complex business environment a bank
should develop its business focusing the customer’s satisfaction.
As
every study is conducted within certain limitations the present study is not an
exceptional.
It
has some limitations due to complexity of the subject matter, difficulty in
obtaining accurate measurement, influence of the measurement process on
results, difficulty in making accurate predictions, vague objectives etc. The
study is based on a case study of Lumbini Bikas Bank, which may not represent
the overall scenario of all Development banks. Basically, the study is limited
within the following factors.
·
Lack Of Time
·
Most of the data are of secondary natures and calculation,
conclusions of the study will fully depend on the accuracy of the data provided
by the respective organization.
1.9
Methods of Analysis
Purpose of this study is the different data
obtained from various sources are arranged and tabulated. Using various
financial and statistical analytical tools makes analysis of tabulated data.
Such analytical tools are presented as under.
Financial Tools
This study is based on following tools and
techniques.
Earning Quality
a. Return on Assets (ROA)
Return
on Assets Return on Asset indicates how profitable a company is relative to its
total assets. The return on assets (ROA) ratio illustrates how well management
is employing the company's total assets to make a profit.
Return on Asset = Net Income/Total
Asset
b. Earnings Per Share (EPS)
Earnings
per share (EPS) are the portion of a company's profit allocated to each
outstanding share of common stock. The earnings per share are a useful measure
of profitability, and when compared with EPS of other similar companies, it
gives a view of the comparative earning power of the companies. Following is the expression of earning per
share.
Other Financial Indicators
a. P/E Ratio
The price to earnings ratio (P/E ratio) is the ratio for
valuing a company that measures its current share price relative to its
earnings per share (EPS). In another words, P/E is short for the ratio of a
company’s price to its per- share earnings. As the name implies, to calculate
the P/E, you simply take the current stock price of a company and divide by its
earnings per share (EPS).
Statistical Tools
a.
Average
A simple arithmetic average is used to summarize the data as
a representation of mean data. A simple arithmetic average is a value obtained
by dividing the sum of the values by their numbers. The arithmetic
mean (AM) is denoted by X:
b.
Standard Deviation
Standard
deviation is the measure of dispersion of a set of data from its mean. It
measures the absolute variability of a distribution; the higher the dispersion
or variability, the greater is the standard deviation and greater will be the
magnitude of the deviation of the value from their mean.
c.
Coefficient of variation (C.V)
A
coefficient of variation (CV) is a statistical measure of the dispersion of
data points in a data series around the mean. The coefficient of variation
represents the ratio of the standard deviation to the mean, and it is a useful
statistic for comparing the degree of variation from one data series to
another, even if the means are drastically different from one another.
C.V = standard
deviation/Mean
CHAPTER 2
DATA PRESENTATION AND ANALYSIS
2.1.Organizational
Profile
Lumbini Bikas Bank has been an emerging name in the field
of banking and financial sector of Nepal. It stands with 86 branches, 17
ATMs and offers a wide range of banking products in deposits, lending
and other value-added services such as internet/mobile banking remittance etc.
The bank’s team comprises of more than
600 staff providing wide range of services to more than 15,000 loan
customers and is the driving force of the bank.
It is an entity established with the merger of five Banks
and Financial Institutions namely Bhajuratna Finance Ltd., Birgunj Finance
Ltd., Himichuli Bikas Bank Ltd., Lumbini Finance and Leasing Co. Ltd. and Vibor
Bikas Bank Ltd. The last merger of Vibor Society Development Bank and Lumbini
Finance and Leasing took place on 25th Ashad 2074.
2.2. Data Presentation
2.2.1.
Return on Equity (ROE)
Return on Equity= Net profit / Total Equity
|
Particular (000') |
YoY
Growth |
078-079Q4 |
078-079Q3 |
078-079Q2 |
078-079Q1 |
077-078Q4 |
|
Net Profit |
30.86% |
675,632.11 |
510,652.61 |
351,744.58 |
213,164.63 |
516,288.16 |
|
Total Equity |
9.89% |
5,819,359.38 |
5,689,763.69 |
5,540,010.58 |
5,436,508.36 |
5,295,701.39 |
|
ROE |
19.09% |
11.61 % |
11.97 % |
12.7 % |
15.68 % |
9.75% |
ROE is very popular ratio toward the shareholders of any
bank. The higher the percentage is the better for the bank as well as for
shareholders. But the ROE of Lumbini Bikas bank shows that the shareholders are
receiving decreasing rate of returns throughout the 4th quarter.
Though in Q1 their ROE was 15.68%, but after that it gradually decreased. It
was so because the net income of Lumbini Bikas bank has decreased at a higher
rate than its equity capital.
2.2.2.
Return On Asset
Return on Asset (ROA) =Net profit / Total Asset
|
Particular (000') |
YoY
Growth |
078-079Q4 |
078-079Q3 |
078-079Q2 |
078-079Q1 |
077-078Q4 |
|
Net Profit |
30.86% |
675,632.11 |
510,652.61 |
351,744.58 |
213,164.63 |
516,288.16 |
|
Total Asset |
27.69% |
56,366,768.44 |
55,809,883.26 |
50,662,579.12 |
46,798,038.54 |
44,144,982.27 |
|
ROA |
1.19% |
% |
0.91 % |
0.70 % |
0.46% |
1.17% |
ROA is the most used profitability ratio. As LBBL was a part
of banking industry and its most of the assets come from the debt which was the
reasons for its low net profit as well as poor ROA. As a result the LBBL had
low ROA in the 4TH Quartile which were 1.19%. In the year 2014 the
net profit of the bank had not increased that much.
2.2.3.
Price Earnings Ratio (PE Ratio)
The price-earnings ratio (P/E ratio) is the ratio for valuing
a company that measures its current share price relative to its per-share
earnings. The price-earnings ratio is also sometimes known as the price
multiple or the earnings multiple.
There is a significant negative relationship between business
risk and payout policy. The P/E ratio implicitly incorporates the risk of a
company's future earnings. High P/E ratio suggest that investors are expecting
higher earnings growth in the future compared to companies with a lower P/E.
High P/E ratio may be associated with low risk and higher payout ratios,
whereas low P/E ratio with high risk and lower payouts ratios. It is the price
of share the outsider is paying for each rupee reported by the balance sheet of
the banks. It is calculated by dividing the market value per share by book
value per share.
P/E = Market Price
per Share (MPS)/ Earning Per Share (EPS)
|
Particular (000') |
YoY
Growth |
078-079Q4 |
078-079Q3 |
078-079Q2 |
078-079Q1 |
077-078Q4 |
|
PE ratio |
- |
16.58 |
21.22 |
25.44 |
17.62 |
32.93 |
P/E ratio, or
price-to-earnings ratio, is a quick way to see if a stock is undervalued or
overvalued. And so generally speaking, the lower the P/E ratio is, the
better it is for both the business and potential investors
2.2.4.
Earnings Per Share (EPS)
Earnings per share (EPS) are the portion of a company's
profit allocated to each outstanding share of common stock. It reflects the
earning power of a company. It makes easy to compare past and present EPS of
the company and compare with competitions. It is calculated by dividing total
earnings available to the common shares holders by number of common shares
outstanding.
|
Particular (000') |
YoY
Growth |
078-079Q4 |
078-079Q3 |
078-079Q2 |
078-079Q1 |
077-078Q4 |
|
EPS |
15.81% |
20.57 |
20.73 |
21.42 |
29.34 |
17.76 |
The higher the
earnings per share of a company, the better are its profitability. Comparing from
Q1 to Q4 it is continuously diminishing.
2.2.5.
Book Value per
Share (BVPS):-
Book value per
share (BVPS) is the ratio of equity available to common shareholders divided
by the number of outstanding shares. This figure represents the minimum value
of a company's equity and measures the book value of a firm on a per-share
basis. The formula for calculating book value per share is the total
common stockholders' equity less the preferred stock, divided by the number of
common shares of the company.
|
Particular (000') |
YoY
Growth |
078-079Q4 |
078-079Q3 |
078-079Q2 |
078-079Q1 |
077-078Q4 |
|
Book Value |
-2.75% |
177.19 |
173.24 |
168.68 |
187.05 |
182.20 |
CHAPTER 3
CONCLUSION AND ACTION IMPLICATION
3.1
Conclusion
In this age of modern civilization bank
is playing its splendid role to keep to the economic development wheel moving.
We can see lot of new commercial banks has been established in last few years
and these banks have made this banking sector very competitive. The major task
for banks, to survive in this competitive environment is by managing its assets
and liabilities in an efficient way. LBBL has a strong financial base and huge
assets to meet up its liabilities which make this organization financially
sound and solvent. Lumbini Bikas Bank Ltd. started with a vision to be the most
efficient financial intermediary in the country and it believes that the day is
not far off when it will reach its desired goal. LBBL looks forward to a new
horizon with a distinctive mission to become a highly competitive modern and
transparent institution comparable to any of its kind at home and abroad.
Lumbini Bikas Bank Limited has been
working with great confidence and competing tremendously with Government
oriented bank, local commercial banks along with the multinational banks also.
Lumbini Bikas Bank Limited always tried its level best to perform financially
well. In spite of trying to do well in some aspects Lumbini Bikas Bank Limited
faced some financial problems from time to time. Some of the problems
were-excessive bad loans, shortage of loans and advances, scarcity of cash in
hands due to vault limit etc. These problems arouse time to time due to
economic slowdown, interest rate fluctuation, emerging capital market,
inflation in the money market and so on. Fighting with all these problems and
competing with other banks every moment the bank is trying to do better to
best. If this thing continues we hope that Lumbini Bikas Bank Limited will
develop even more in the future.
3.2
Action implication
The study is based on the financial
performance of Lumbini Bikas Bank bank. The study is confined to limited
aspects of bank performance; thus the researchers can further make intensive
study with other numerous variables apart from those that have been considered
in this study.
REFERENCES
· Pandey,
I. M. (2004). “Financial statement analysis (9th edition ). New Delhi, India:
Vikas.
· Nepal
Rastra Bank. (2019). Bank supervision report. kathmandu: Bank Supervision
Department, Nepal Rastra Bank.
· Shrestha,
M. S. (2022, June 09). Retrieved from thehimalayantimes.com.
· N
R B. Mid-April 2016 “Banking and Financial Statistics”. Kathmandu:
· NRB
Directives. 2020/2021.Nepal Rastra bank
WEBSITES
https://www.lumbinibikasbank.com/
https://www.merolagani.com/CompanyDetail.aspx?symbol=LBBL
https://nepalstockinfo.com/companyhistory/LBBL
http://www.nepalstock.com/company/display/358
APPENDICES
Appendix I
Unaudited Quarterly Financial Report Published
by LBBL
|
Particular (in 000') |
YoY Growth |
078-079Q4 |
078-079Q3 |
078-079Q2 |
078-079Q1 |
077-078Q4 |
|
Paid Up Capital |
13% |
3,284,292.51 |
3,284,292.51 |
3,284,292.51 |
2,906,453.55 |
2,906,453.55 |
|
Share Premium |
- |
- |
- |
- |
- |
- |
|
Retained Earnings |
22.01% |
479,226.16 |
336,203.70 |
249,433.42 |
510,156.30 |
392,775.43 |
|
Reserves |
2.97% |
2,055,840.71 |
2,069,267.48 |
2,006,284.66 |
2,019,898.51 |
1,996,472.41 |
|
Total Equity |
9.89% |
5,819,359.38 |
5,689,763.69 |
5,540,010.58 |
5,436,508.36 |
5,295,701.39 |
|
Total Assets |
27.69% |
56,366,768.44 |
55,809,883.26 |
50,662,579.12 |
46,798,038.54 |
44,144,982.27 |
|
Deposits from Customers |
17.88% |
42,873,977.59 |
40,813,365.81 |
39,284,786.35 |
36,554,499.94 |
36,371,789.38 |
|
Borrowings |
- |
- |
- |
- |
- |
- |
|
Loans and Advances to BFIs |
-7.24% |
2,340,988.24 |
2,465,976.18 |
2,318,681.44 |
2,077,378.16 |
2,523,574.84 |
|
Loan and Advances to Customers |
28.05% |
38,081,068.00 |
37,557,678.32 |
35,679,883.34 |
32,398,021.09 |
29,740,136.03 |
|
Investment Securities |
58.06% |
8,804,475.60 |
6,178,050.61 |
4,881,613.75 |
5,195,302.71 |
5,570,446.09 |
|
Interest Income |
39.38% |
4,828,018.95 |
3,333,456.17 |
2,071,610.32 |
959,654.13 |
3,463,902.67 |
|
Net Interest Income |
29.08% |
1,576,090.16 |
1,131,923.53 |
727,415.79 |
333,662.72 |
1,221,003.87 |
|
Total Operating Income |
12.94% |
1,780,588.55 |
1,304,889.27 |
852,308.46 |
421,593.83 |
1,576,566.78 |
|
Operating Profit |
37.23% |
970,328.55 |
740,464.11 |
514,035.25 |
292,794.71 |
707,066.30 |
|
Net Profit |
30.86% |
675,632.11 |
510,652.61 |
351,744.58 |
213,164.63 |
516,288.16 |
|
Distributable Profit |
29.24% |
479,226.16 |
336,203.70 |
249,433.42 |
510,156,303.00 |
370,793.90 |
|
Shares Outstanding |
13% |
32,842,925.11 |
32,842,925.11 |
32,842,925.11 |
29,064,535.50 |
29,064,535.50 |
|
EPS |
15.81% |
20.57 |
20.73 |
21.42 |
29.34 |
17.76 |
|
Book Value |
-2.75% |
177.19 |
173.24 |
168.68 |
187.05 |
182.20 |
|
ROE |
19.09% |
11.61 % |
11.97 % |
12.7 % |
15.68 % |
9.75% |
|
CAR |
-8.48% |
11.77 % |
12.48 % |
12.77 % |
13.12 % |
12.86% |
|
NPL |
-21.13% |
1.68 % |
1.69 % |
1.67 % |
1.31 % |
2.13% |
|
Cost Of funds |
46.6% |
9.28 % |
8.35 % |
7.33 % |
6.6 % |
6.33% |
|
Credit To Deposit Ratio |
9.62% |
89.21 % |
88.84 % |
88.88 % |
88.85 % |
81.38% |
|
Base Rate |
33.25% |
10.9 % |
10.34 % |
9.6 % |
9.01 % |
8.18% |
|
Interest Spread Rate |
1.45% |
4.2 % |
3.58 % |
3.97 % |
4.04 % |
4.14% |
Data
Source: Unaudited Quarterly Financial Report Published by the Company
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