COMPARATIVE FINANCIAL PERFORMANCE ANALYSIS OF SHANGRILA DEVELOPMENT BANK LIMITED
A Project Work Report
BY:
ANOD CHAUDHARY
Symbol No.: 2xxxxxx/20
Mahendra multiple campus
Ghorahi, Dang
Submitted to
Faculty of Management
Tribhuvan University
Mahendra multiple campus, Dang
In Partial Fulfillment of the Requirement for the Degree of
Bachelor of Business Admiration (BBA) internal Assignment
Dang, Nepal
September, 2022
ACKNOWLEDGEMENTS
This report has been prepared on “Comparative Financial Performance Analysis of Shangrila Development Bank Limited partial” fulfillment of the requirement for the Bachelor of Business Administration. It is strictly based on the internal assignment forwarded by T.U in partial fulfillment of the requirement for the Bachelor of Business Administration. I have tried to attempt every chapter simple and precise. A detail of list of authors and the Books, which were used as inputs in course of the preparation of the reports.
I would like to extend my heartiest gratitude to Supervisor Mr. ISHWARI PRASAD GHIMIRE, . under whose guidance this work has been successfully completed. I would like to express my deep appreciation to all who helped me in preparing this report. Furthermore, it would not have been possible without the kind support and help of my family. Without their help this report would not have been completed.
Anod Chaudhary
TABLE OF CONTENT
Title page i
Acknowledgement ii
Table of Contents
List of Table vii
List of Figures viii
Abbreviations ix
7 Research Design
8 Data analysis & results
ABBREVIATIONS
AU : Assets Utilization Ratio
SADBL :Shangri-La development bank limited
C.V : Coefficient of Variation
EPS : Earnings Per Share
Liq. : Liquidity
LLP : Loan loss Provision
LTD : Loan to Deposit Ratio
MPS : Market price per share
Min. : Minimum
NBL : Nepal Bank Limited
NPA : Non-Performing Assets
NPL : Non-Performing Loan
NRB : Nepal Rastra Bank
ROA : Return on Assets
ROE : Return on Equity
S.D. : Standard Deviation
TD : Total Deposit
T.U. : Tribhuvan University
INTRODUCTION
Background of the Study
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 inform 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.
The study of performance of listed commercial banks and returns to investors occupies an important role in the development of capital market. Development and expansion of capital market are essential for the rapid growth of the country. Capital market helps economic development by mobilizing long term capital needed for productive sector. It is vital to long term growth and prosperity of the economy since it provide the channel through which needed funds can be raised.
The role of money in an economy is very important. Proper and well-planned management of money directs, determines and enhances the health and productivity of total financial sector and the performance of financial sector affect the growth of economy. The economy of a country indicates the development of the country. Financial sector plays an important role in the development of the country and mobilization of financial resources. Hence, money is a subject to manage, and banks are the manager. Therefore, banks as manager collects, disperse and controls the flow of money.
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 is 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.
The term commercial bank refers to a financial institution that accept deposits, offers checking account services, makes various loans, and offers basic financial product like certificate of deposit (CDs) and saving accounts to individual and small businesses. Commercial banks, which occupy quite important place in the framework of every economy. Commercial banks lend numerous services to their customer with a view of facilitating their economic and social life. All the economic activities of each and every country are greatly influenced by the commercial bank of that country. Commercial banks, by playing actives roles, have changed the economic structures of the world. Thus, commercial banks have become the heart of financial system.
Profile of Sample Banks
Shangri-la Development Bank Limited
Shangri-la Development Bank Limited is a dream project of few innovative and motivated entrepreneurial minds rather than being just another bank in the crowd of financial institutions. Promoted by respected professionals, bankers, chartered accountants, doctors, engineers, businessmen, entrepreneurs, social workers, and other renowned personality of other fields with very good integrity and social standings. It is formed after merged of two local development bank named Bageswari Development Bank based in Nepaljung and Shangri-la Development Bank based in Pokhara. Shangri-la Development Bank Ltd acquired Cosmos Development Bank and started joint operation from 30 Ashad,2074.
The Bank has 112 branches, 31 ATM locations and cluster office across the country and offers a wide range of banking products in deposits, lending and other value-added services such as internet/mobile banking remittance and branchless banking etc. In line with the progressive strategy, the bank focuses on implementing sustainable business practices and deliver consistent growth that is sustainable and profitable to all its stakeholders.
In last 52 weeks high low price - 477.00 – 245.00
120 days average - 306.76
%Bonus - 10.00
% dividend- 0.53
Year- 2077/2078
Book close date- 2022-01-03
OBJECTIVE
The general objective of this study is to examine financial performance of the Shangrila development bank. The specific objectives of the study are given below:
To measure the performance analysis of selected banks.
To find out the profitability position of selected bank.
RATIONAL OF STUDY
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 Shangri-La development bank. 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 development 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.
POPULATION AND SAMPLE
At present, there are 25 commercial banks, 17 development banks, 17 finance companies and 67 micro finance companies are operating in Nepal. Due to time resource factor, it is not possible to study all of them regarding the study topic. All the commercial banks and development banks that are operating in Nepal are considered as the population. From the development banks of Nepal, Shangrila development bank limited is taken as sample.
DATA COLLECTION PROCEDURE AND ANALYSIS TOOLS
As stated earlier, the study is mainly based on secondary data. The annual reports and other information have been obtained from sample banks. NRB directives, banking and financial statistics and other publications are collected from the website of NRB. Some supplementary date and information, literature review is collected from the Mahendra Multiple Campus Library Dang. NRB publication, different journals magazines and other published and unpublished reports documented by the concern authorities.
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
Return on Assets (ROA)
Return on assets is the numerical relationship between net incomes after taxes to total assets of a company. It is primarily an indicator of managerial efficiency. It indicates how capably the management of the company has been converting the institution’s assets into net earnings (Rose, 1999). It is calculated by using the following model.
Earnings Per Share (EPS)
Earnings per share provides a direct measure of the returns flowing to the company’s owners its stockholders measured relative to the members of shares to the public (Rose, 1999). It gives the strength of the share in the market. Following is the expression of earning per share.
Other Financial Indicators
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
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 pf the values by their numbers.
LIMITATION OF STUDY
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 Shangrila development bank, which may not represent the overall scenario of all development banks. Basically, the study is limited within the following factors.
Among 17 development banks in Nepal, the study is conducted on only one bank Shangri-la Development Bank Limited.
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.
The study covers the financial performance of the Shangrila Bank for the period of only three fiscal years (F/Y 2076/077 to 2078/079)
DATA PRESENTATION AND ANALYSIS
This chapter deals with presentation and analysis of data collected from annual reports of the bank. The raw data collected has been organized and processed using various tools discussed in the previous chapter- “Research Methodology”. In this chapter data and information are presented and analyzed using different financial tools in order to achieve the objectives of the study. In data presentation and analysis.
Return on Assets
The return on assets (ROA) measures the overall effectiveness of management in generating profit with its available assets. The higher the firms return on assets the better it is doing in operation and vice-versa. It is calculated as follows:
ROA = Net income/Total assets
The return on asset for Shangrila bank is increasing. It show the effective management of asset in generating profit than previous year.
Return on Equity
The return on equity (ROE) measures the return on the owner’s investment in the firm. Higher ratio of return on equity is better for owner. It is calculated as follows:
ROE = Net income/Total equity
The return on equity measures the performance of the bank. The above table reveals that Shangrila development bank limited has very properly the shareholder’s fund which is represented by increasing trend of net income. Ratio is also increasing pattern.
Price-Earning Ratio (PE)
Price-earning ratio (PE) is simply the ratio between market price per share and earning per share. The higher PE ratio indicates the greater confidence of investor in the firm’s future.
PE Ratio = MPS/EPS
PE ratio represents the amount which investors are willing to pay for each rupee of the firm’s earning. The above table shows that the Shangri-La development bank has Rs. 19.06, 27.83 and 19.97 respectively in the corresponding year to pay to its investor. The amount is increasing in average each year.
Market-to-Book Ratio
The market to book ratio is simply the ratio between market price per share to book value per share. It measures how the financial market has put the value to the firms overall management and efficiency over the time. It is calculated as:
Market-to-book ratio = MPS/BVPS
The above table shows that market-to-book ratio is increase from FY 2076/077 to FY 2077/078 but decreases to FY 2078/079. This shows that the financial market has put the good value to the Shangrila development bank’s overall management and efficiency over the time.
Conclusion and recommendation
This assignment work report has been prepared as per the format prescribed by the subject lecture and entitled “Financial analysis of Shangrila development Bank Limited”. The parts of this report is presentation and analysis of data. For the analysis purpose, ratio analysis tools have been used to evaluate the performance of the bank. From the study, we found that Shangrila bank is overall beneficial development bank in the nation and the profitability position. The bank has invested high percent of a available funds to generate income.
However, we are not authorized person to recommend the management of Shangrila Development Bank Limited. But there we attempt to recommend the management of Shangrila Development Bank Limited. Here we have given some recommendation which may be useful to the management.
For the better utilization of the shareholders fund, the bank should conduct research frequency.
The bank should finance the maximum fund in external assets.
Management of the bank should be effective.
The bank need to adopt new technologies which is very helpful to work effectively and efficiently.
Customer satisfaction should be the bank’s motto.
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