FINANCIAL PERFORMANCE ANALYSIS OF KUMARI BANK

LIMITED

A Project Report

Submitted by:
Aditya Karki

MBA(General) 23rd Batch

Roll no: 02

Submitted to:
Dr. Binod Shah
School of Management
Tribhuvan University (TU), Kritipur

In partial fulfillment of the requirements of the degree of

Master of Business Administration (MBA)

July 2023
Kritipur, Nepal
 ACKNOWLEDGEMENT
I am delighted to have conducted this study. However, this report would not have been
possible without the generous support and assistance of many individuals.

First, I would like to thank Dr. Binod Shah, a faculty member, for his unwavering support and
invaluable guidance throughout this project. Also, I would like to thank the college
administration and teachers who offered us valuable help and provided us with necessary
instructions for our report.

Furthermore, I would like to express my special appreciation to everyone who aided me

during this research.

Thank you,

Aditya Karki

ii
 Table of Content

ACKNOWLEDGEMENT ......................................................................................................... ii

LIST OF TABLES .................................................................................................................... vi

LIST OF FIGURES ................................................................................................................. vii

ABBREVATIONS .................................................................................................................. viii

CHAPTER I ............................................................................................................................... 1

INTRODUCTION ..................................................................................................................... 1

1.1 Background of the Study ................................................................................................. 1

1.2 Statement of problem ....................................................................................................... 1

1.3 Objective of the Study ..................................................................................................... 2

1.4 Rationale of the study ...................................................................................................... 2

1.5 Limitations of the study ................................................................................................... 2

CHAPTER II ............................................................................................................................. 3

COMPANY PROFILE ANALYSIS .......................................................................................... 3

2.1 Background of the study .................................................................................................. 3

2.2 Company profile Analysis ............................................................................................... 3

2.2.1 vision mission and company objective ..................................................................... 4

2.3. Branches ......................................................................................................................... 4

2.4 Organizational Structure .................................................................................................. 5

2.5 Board of Directors ........................................................................................................... 5

2.6 Major product and services .............................................................................................. 6

iii
 2.7 Capital Structure .............................................................................................................. 6

CHAPTER III ............................................................................................................................ 7

FINANCIAL PERFORMANCE ANALYSIS ........................................................................... 7

3.1 Background ...................................................................................................................... 7

3.2 Purpose of Analysis of Financial Statement .................................................................... 7

3.3 Tools of financial Performance Analysis ......................................................................... 8

3.3.1 Horizontal Analysis ................................................................................................... 8

3.3.2 Vertical Analysis ..................................................................................................... 13

3.3.3 Cash Flow Analysis................................................................................................. 18

3.3.3.1 Cash flow from Operating Activities ..................................................... 19

3.3.3.2 Cash flow from Investing Activities ...................................................... 19
3.3.3.3 Cash flow from Financing Activities ..................................................... 19
3.3.3.4 Net Change in Cash Flow ...................................................................... 20
3.3.4 Working Capital Analysis ....................................................................................... 20

3.3.5 Ratio Analysis ............................................................................................................. 26

3.3.5.1 Capital Adequacy ratio ....................................................................... 26

3.3.5.2 Staff expenses to total operating expenses ......................................... 27
3.3.5.3 Return on assets .................................................................................. 27
3.3.5.4 Return on equity ................................................................................. 28
3.3.5.5 Earnings per share .............................................................................. 28
3.3.5.6 P/E ratio .............................................................................................. 28
CHAPTER IV .......................................................................................................................... 31

CONCLUSION AND ACTION IMPLICATION .................................................................... 31

4.1 Conclusion ..................................................................................................................... 31

4.2 Recommendations.......................................................................................................... 32

iv
REFERENCES ........................................................................................................................ 33

v
 LIST OF TABLES
Table 1 Branches of kumari bank ltd ...................................................................................... 4

Table 2 Board Of Directors .................................................................................................... 5

Table 3 Capital Structure ........................................................................................................ 6

Table 4 Horizontal analysis of Profit and loss ........................................................................ 9

Table 5 Horizontal Analysis of Financial Position ............................................................... 10

Table 6 Vertical analysis of profit and loss .......................................................................... 13

Table 7 Vertical Analysis of financial position .................................................................... 14

Table 8 Cash flow statement ................................................................................................ 16

Table 9 Ratio Analysis ......................................................................................................... 25

vi
 LIST OF FIGURES
Figure 1 Organizational Structure .......................................................................................... 5

Figure 2 Earnings per share ...................................................................................................19

Figure 3 Net profit ratio ........................................................................................................ 20

Figure 4 Dividend per share .................................................................................................. 20

Figure 5 Market price per share ............................................................................................ 21

Figure 6 P/E ratio .................................................................................................................. 22

Figure 7 Capital Adquacy ratio ............................................................................................. 22

Figure 8 Paid up capital ........................................................................................................ 23

vii
 ABBREVATIONS
ATMs: Automated Teller Machine

CAR: Capital Adequacy Ratio

DPS: Dividend Per Share

EPS: Earning Per Share

FY: Fiscal Year

GAAP: Generally Accepted Accounting Principles

NFRS: Nepal Financial Reporting Standard

PE ratio: Price to Earnings Ratio

ROA: Return on Asset

ROE: Return on Equity

viii
 CHAPTER I
INTRODUCTION
1.1 Background of the Study
Financial reporting is the formal documentation of financial transactions conducted by
individuals, businesses, or other entities. These annual reports contain vital information used
by external parties. They typically include financial statements like the income statement,
adjusted income statement, balance sheet, and cash flow statements. In the case of banks and
financial institutions, financial reporting is a crucial responsibility involving the summarization
of accounting and financial data for a specific period, be it daily, weekly, monthly, quarterly,
or annually. These reports serve both internal and external users and are used to assess the
company's performance and growth achieved over the given operational period.

The objective of this research report is to analyze how Kumari Bank prepares and presents its
financial statements in compliance with different accounting standards like GAAP and NFRS.
The report also aims to describe the bank's financial performance based on the available data.
As part of its regulatory obligations, the bank is obligated to create and publish key financial
statements and progress reports that are accessible to the public. These reports contain elements
that reflect the bank's performance and stability.

The bank's branches generate regular reports that are then consolidated by the head office and
forwarded to the central authority. The primary purpose of collecting these reports is to ensure
that the company maintains stability and remains economically viable in the market. Moreover,
the company produces various reports based on its operations and activities to reassess the risks
it faces.

1.2 Statement of problem

Financial statement analysis is a process of evaluating a company's financial statements to
make informed decisions. It serves as a valuable tool for both external and internal
stakeholders. External stakeholders use financial statement analysis to assess the overall
financial health and performance of an organization, while internal stakeholders utilize it to
effectively manage their finances.
There are several techniques employed in financial statement analysis, including Horizontal
analysis, Vertical analysis, and Ratio analysis. Horizontal analysis involves examining data
over a specific period to identify trends and changes. Vertical analysis focuses on the
proportionate representation of different line items in relation to the overall business. Ratio
analysis utilizes key metrics to determine statistical relationships and evaluate the company's
financial performance and position.
The balance sheet, income statement, and cash flow statement play crucial roles in managing
a business and providing transparency to stakeholders. These statements are interconnected
and offer distinct perspectives on a company's activities and performance. Each statement
provides valuable information about the company's financial position, profitability, and cash
flows, enabling stakeholders to make well-informed decisions.
• What information is conveyed by the key financial indicator?
• What conclusions can be drawn from the financial evaluation of Kumari Bank?
• What actions should Kumari Bank take based on the analysis of their financial
statements?

1.3 Objective of the Study

The objective of this report are as under:
• To evaluate and analyze the financial performance of Kumari Bank Limited.
• To furnish relevant financial information about the reporting entity that aids existing
and potential investors, lenders, and other creditors in making informed decisions
regarding the provision of resources to the entity.

1.4 Rationale of the study

This research aims to interpret the financial performance of Kumari Bank Limited and make
informed decisions using publicly available information for various purposes, such as
investment, industry, and company analysis. It will provide external users with an
understanding of the company's financial situation over the past five years and be beneficial
for students and others interested in the banking field.

1.5 Limitations of the study

The followings are the limitations of this study:
• The study is based on Secondary data only the evaluation of the exact situation was not
possible.

• Even though the data is extracted from audited reports, there is a slim chance of
misrepresentation
• The study covers only five years of data from 2017-2021.

2
 CHAPTER II

COMPANY PROFILE ANALYSIS

2.1 Background of the study

The banking sector in Nepal has experienced substantial transformations over the past two
decades, reflecting its adaptation to global changes and its ability to cater to diverse segments
of society. A noteworthy shift can be observed when comparing the current state of banking to
that of twenty years ago.

In the past, Nepal did not witness the establishment of any new banks for a significant period
of time. However, this scenario changed when the Nepalese government embraced a free
economy and privatization policy. This policy shift encouraged foreign banks to enter the
market through joint ventures, leading to a more liberalized, modernized, and well-managed
banking sector.

Presently, Nepal's banking system encompasses various types of banks, including central
banks, development banks, commercial banks, financial banks, co-operative banks, and micro-
credit banks. This diversification of banking institutions has further contributed to the sector's
growth and adaptability.

Moreover, with the rapid advancement of technology, traditional methods of delivering

banking services are being influenced and transformed. The integration of technology has
facilitated the introduction of innovative and convenient banking solutions, thereby reshaping
the way customers interact with banks and access financial services in Nepal.

2.2 Company profile Analysis

Kumari Bank Limited, established on April 03, 2001, holds the distinction of being the fifteenth
commercial bank in Nepal. Its primary objective is to deliver modern and competitive banking
services within the Nepalese financial market. The bank has established a wide network,
comprising 414 points of representation strategically located in urban and semi-urban areas.
This network includes 303 branches within and outside the valley, as well as 49 extension
counters and 62 branchless banking units.

3
Kumari Bank Limited is renowned for its innovative approach, pioneering the provision of
lucrative services such as E-Banking and Mobile Banking in Nepal. The bank places significant
emphasis on the development of technology-driven systems to meet the evolving needs of its
customers. In addition to these digital services, the bank offers a comprehensive range of
banking services, encompassing consumer and corporate banking, finance and insurance,
investment banking, mortgage banking, private banking, asset management, wealth
management, and other related services (Wikipedia, 2023). The bank has an authorized capital
of Rs. 8 arba and a paid-up capital of Rs. 6 arba with a face value of Rs. 100 each. To meet the
directive from Nepal Rastra Bank to achieve a paid-up capital of NPR 8 billion, Kumari Bank
Limited acquired Kasthamandap Development Bank Ltd., Paschimanchal Finance Co. Ltd.,
Mahakali Bikash Bank Ltd., and Kankrebihar Bikash Bank Ltd. in Asadh 2074. The bank also
acquired Deva Bikas Bank Limited and began joint operations on Asadh 28, 2077. Recently,
on January 01, 2023, Nepal Credit and Commerce Bank Limited merged with Kumari Bank
Limited, resulting in a joint operation under the name Kumari Bank Limited. After the merger,
the bank's branch network expanded to 303 branches, with 294 ATMs, and the bank's
investment in loans and deposits reached NPR 280 billion and NPR 302 billion, respectively.
2.2.1 vision mission and company objective

Vision
Its vision is to be the preferred financial partner to their customers, a center of career growth to
their employees, and to maximize their shareholders’ value, while contributing to nation’s
financial sector and to its economic welfare.”
Mission
Their mission is to deliver innovative products and services to its customers, use these
innovative products to achieve financial inclusion, and do so by exemplifying good corporate
governance, proactive risk management practices, and superior corporate social responsibility.
Company Objective
The Bank focuses on meeting dynamic needs of its customers via modern technology-driven
banking products/services, thereby solidifying its reputation as an organization committed
towards enhancing stakeholders’ experience.

2.3. Branches
The Head Office of Kumari Bank Ltd is located at Tangal, Kathmandu. At current, Kumari
Bank ltd. has altogether 303 Branches, 296 ATMs, 62 Branchless Banking Units and 49
Extension Counters. The number of branches of Kumari Bank inside and outside the valley can
be presented as below:

4
Table 1

Branches of Kumari bank ltd

Branches Number
Inside Valley 70
Outside Valley 233

Total 303
(Source: https://www.kumaribank.com/)

2.4 Organizational Structure

Organizational structure can be defined as a framework that establishes how specific activities
are directed within an organization to accomplish its goals. It represents the hierarchical
arrangement within an organization, outlining the roles, responsibilities, and reporting
relationships of individuals. This hierarchical structure illustrates the positions and levels of
authority held by staff members based on their job responsibilities and capabilities. In simpler
terms, organizational structure provides a clear understanding of how different tasks are
organized, who has decision-making power, and how the organization functions. The
organizational structure of Kumari Bank, Ltd, is illustrated as under:
Figure 1
Organizational Structure

Branch Manager

Operational Incharge Credit Manager

CSD Remittance Cash

Assistant Credit
Manager
2.5 Board of Directors
The Board of Directors is the apex body of the bank. It formulates policies as well as strategies
and provides guidance to the management.

5
Table 2
Board of Directors
Positions Names
Chairman Mr. Amir Pratap J.B. Rana
Director Mr. Upendra Keshari Neupane
Director Mr. Krishna Prasad Gyawali
Director Mr. Chandra Prasad Bastola
Director Mr. Mahesh Prasad Pokhrel
Director Mr. Iman Singh Lama

(Source: https://www.kumaribank.com/)

2.6 Major product and services

To deliver effective services to its customers, Kumari Bank offers a wide range of products and
services. These products and services encompass both tangible and intangible goods produced
by the bank and consumed by its customers. Some of the prominent products provided by
Kumari Bank include Nagrik Bachat Khata, Pariwar Surakshya Bachat Khata, Recurring Fixed
Deposit, Kumari Dhanbriddhi Bachat Khata, Kumari Youth Saving, Kumari Premium Salary
Account, Kumari Subha Laxmi Savings, Kumari Twinkle star savings, Swastha Jeevan Bachat
Khata, Non-Resident Nepali (NRN) Saving Account, Saving Deposit Premium, Education
Loan, Home Loan, Auto Loan, Kumari Shuvalabh GharGhrayesi Karja, Kumari Foneloan, and
many more.
2.7 Capital Structure

Table 3

Capital Structure
Particulars Amount

Authorized capital 15,000,000,000

Issued Capital 14,711,183,326.16

Paid-up Capital 14,711,183,326.16

(Source: https://www.kumaribank.com/)

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 CHAPTER III

FINANCIAL PERFORMANCE ANALYSIS

3.1 Background
Financial performance analysis involves assessing and evaluating a company's financial
statements to gain insights into its financial and operational attributes. The primary objective
of this analysis is to gauge the competence and effectiveness of the company's management as
evident in its financial records and reports. By examining key financial indicators such as
liquidity and profitability, the analysis aims to determine whether the company is operating in
a rational and sound manner while delivering satisfactory returns to its shareholders. In simpler
terms, financial performance analysis helps to scrutinize a company's financial health and
performance, ensuring that it is functioning efficiently and generating favorable outcomes for
its stakeholders.
When it comes to commercial banks, assessing performance is usually centered around their
proficiency in utilizing assets, liabilities, revenues, and expenses. This evaluation holds
significance for various stakeholders such as depositors, investors, bank managers, and
regulators. Financial ratios serve as a commonly employed tool to evaluate a bank's
performance as they offer a straightforward means to assess the bank's financial standing in
comparison to previous periods and other banks in the industry. By employing financial ratio
analysis, a bank can identify areas that require improvement and respond appropriately to
enhance their management practices. Financial ratio analysis enables a bank to gain insights
into its performance, make necessary adjustments, and strive towards achieving better financial
outcomes.

3.2 Purpose of Analysis of Financial Statement

The following are some of the purposes of analysis of financial statement:
• To know about the earning capacity or profitability of the company.
• To know about the solvency of the company.
• To know about the financial strengths of the company.
• To make comparative study with other firms.
• To know about the trend of business

7
3.3 Tools of financial Performance Analysis
Several methods can be used for the purpose of analysis of financial statements. These are
also termed as techniques or tools of financial analysis. Out of these, an enterprise can choose
those techniques which are suitable to its requirements. The principal techniques of financial
analysis are:
3.3.1 Horizontal Analysis

This is used when the financial statement of several years is to be analyzed. Such analysis
indicates the trends and the increase or decrease in distinct items not only in absolute figures
but also in percentage form. This analysis indicates the strengths and weaknesses of the firm.

8
Table 4

Horizontal analysis of Profit and loss

Particulars/Year 2074/2075 percent 2075/2076 percent 2076/2077 percent 2077/2078 percent 2078/2079

Interest Income 6,804,011,381 33.72 9,098,573,839 16.17 10,569,829,224 20.88 12,776,387,133 43.66 18,355,159,241
Interest Expense 4,797,987,363 29.82 6,228,619,912 12.33 6,996,630,749 10.04 7,698,873,522 57.66 12,137,993,244
Net Interest Income 2,006,024,017 43.07 2,869,953,928 24.50 3,573,198,475 42.10 5,077,513,611 22.45 6,217,165,997
Fees & Commission Income 396,815,439 17.43 465,986,518 13.59 529,322,874 56.46 828,201,496 16.26 962,856,296
Fees & Commission Expense 27,322,461 16.63 31,866,063 12.45 35,833,499 99.17 71,371,197 102.72 144,683,738

Net Fees & Commission Income 17.49 13.68 53.36 8.11

369,492,978 434,120,455 493,489,375 756,830,299 818,172,558
Net Interest, Fees & Commission
39.09 23.08 43.47 20.58
Income 2,375,516,995 3,304,074,383 4,066,687,850 5,834,343,910 7,035,338,555
Net Trading Income 148,951,414 73.82 258,904,627 37.24 355,323,689 18.44 420,833,394 -10.21 377,867,068
Other Operating Income 92,120,818 -7.82 84,919,398 -81.82 15,435,693 2,426.76 390,023,547 35.36 527,950,068
Total Operating Income 2,616,589,227 39.41 3,647,898,408 21.64 4,437,447,231 49.75 6,645,200,852 19.50 7,941,155,691
Impairment Charge 31,946,183 616.93 229,030,770 101.63 461,786,171 2.92 475,280,357 70.87 812,100,287
Net Operating Income 2,584,643,043 32.28 3,418,867,638 16.29 3,975,661,060 55.19 6,169,920,495 15.55 7,129,055,404
Personnel Expenses 775,186,599 26.27 978,860,368 43.90 1,408,600,989 43.68 2,023,918,383 15.27 2,332,987,934
Other Operating Expenses 374,352,088 48.16 554,656,220 26.76 703,066,709 21.88 856,905,482 -20.25 683,386,361
Depreciation and Amortization 79,214,269 51.65 120,126,238 48.11 177,913,962 59.24 283,304,555 88.92 535,205,469
Operating Profit 1,355,890,087 30.19 1,765,224,812 -4.48 1,686,079,399 78.27 3,005,792,074 19.02 3,577,475,641
Non-Operating Income 32,572,057 -63.64 11,842,001 97.06 23,336,294 45.25 33,895,859 -45.95 18,320,846
Non-Operating Expenses 1,029,811 -96.87 32,238 801.82 290,729 581.72 1,981,949
Profit before Income Tax 1,388,462,144 27.91 1,776,037,002 -3.75 1,709,383,455 77.81 3,039,397,204 18.24 3,593,814,538
Income Tax Expenses 341,973,741 59.56 545,658,742 0.96 550,877,499 93.99 1,068,667,046 -5.12 1,014,004,706
9
 Current Tax 411,550,374 51.12 621,921,927 -9.94 560,133,759 65.91 929,312,008 10.77 1,029,422,733
Deferred Tax -69,576,633 9.61 -76,263,185 -87.86 -9,256,260 -1,605.52 139,355,038 -111.06 -15,418,027
Profit / (Loss) for the period 1,046,488,403 17.57 1,230,378,260 -5.84 1,158,505,956 70.11 1,970,730,158 30.91 2,579,809,832

Table 5

Horizontal Analysis of Financial Position

Assets 2074/2075 percent 2075/2076 percent 2076/2077 percent 2077/2078 percent 2078/2079

Cash and Cash Equivalent 3,780,643,820 133.32 8,821,135,632 3.78 9,154,311,271 -17.19 7,580,241,082 132.31 17,609,892,391
Due from Nepal Rastra
-35.86 62.59 45.78 -35.48
Bank 5,582,760,819 3,580,514,349 5,821,520,113 8,486,453,288 5,475,310,681
Placement with B/FIs 714,095,685 -46.17 384,382,797 121.77 852,447,642 467.86 4,840,711,695 -59.73 1,949,476,858
Derivative Financial
-99.21 -100.00
Instruments 5,858,648,394 46,522,820
Other Trading Assets

Loans and Advances to

70.63 25.06 34.97 14.10
B/FIs 1,778,934,583 3,035,403,974 3,796,212,739 5,123,681,172 5,846,262,217

Loans and Advances to

20.50 51.63 24.55 10.63
Customers
60,596,575,817 73,017,913,052 110,717,259,568 137,897,925,002 152,562,929,781

Investment Securities 3.62 39.86 77.92 0.52

8,802,903,890 9,121,568,177 12,757,707,848 22,697,941,963 22,815,085,583
Current Tax Assets 113,783,100 -46.19 61,227,298 436.18 328,287,861 -21.67 257,142,529 76.83 454,701,292

Investment in Subsidiaries 0.00 10.00 0.00 90.91

200,000,000 200,000,000 220,000,000 220,000,000 420,000,000
Investment in Associations 0.00 550.32 19.19 19.35
20,000,000 20,000,000 130,063,901 155,017,596 185,017,596
 Investment Property -34.10 -31.75 112.29 12.78
134,171,003 88,422,015 60,348,333 128,112,878 144,491,994
Property and Equipment 434,304,421 52.45 662,104,656 108.98 1,383,658,862 -9.04 1,258,559,299 -6.26 1,179,754,479
Goodwill and Intangible
-11.82 112.37 -4.48 -18.29
Assets 110,453,429 97,393,609 206,831,581 197,573,361 161,441,291
Deferred Tax Assets 77,789,908 -87.14 10,001,698 -

Other Assets 454,924,100 -37.36 284,981,292 70.81 486,767,825 93.00 939,456,216 251.70 3,304,074,229

Total Assets 82,723,550,667 27.31 105,311,485,153 38.61 145,971,942,062 30.01 189,782,816,080 11.76 212,108,438,392

Liabilities 2074/2075 2075/2076 2076/2077 2077/2078 2078/2079

Due to Bank and Financial

20.43 -38.56 97.06 -57.95
Institutions 10,104,187,331 12,168,482,092 7,475,893,656 14,731,924,737 6,194,529,106
Due to Nepal Ratsra Bank 539,557,578 165.63 1,433,248,037 -84.28 225,355,404 2158.20 5,088,973,668 -73.56 1,345,585,620
Derivative Financial
93421.96 -100.00 1103.71
Instrument 6,111,249 5,715,359,938 3,267,738 39,334,195
Deposits from customers 59,546,335,519 22.93 73,201,143,766 59.21 116,547,033,196 25.13 145,838,231,009 21.21 176,767,665,556
Borrowings ..

Current Tax Liabilities … … .. …

Provisions 2,231,750 0.00 2,231,750 3.61 2,312,232 0.98 2,334,810 7.08 2,500,000
Deferred Tax Liabilities 20,361,526 -100.00 145,625,275 -48.35 75,208,206
Other liabilities 1,964,985,865 -45.45 1,071,934,043 36.02 1,458,057,633 42.98 2,084,796,958 76.79 3,685,702,222
Debt securities issued … … 2,995,116,270 0.01 2,995,439,826 0.01 2,995,797,489
Subordinated Liabilities … … … … …

Total Liabilities 72,183,770,819 29.66 93,592,399,626 37.52 128,703,768,392 32.78 170,890,594,021 11.83 191,106,322,395
Equity

Share Capital 7,163,394,973 21.25 8,685,573,112 44.15 12,520,049,469 10.85 13,878,474,836 6.00 14,711,183,326

11
 Share Premium 54,803,159 0.00 54,803,159 943.06 571,628,069 -84.46 88,804,041 0.00 88,804,041
Retained Earnings 1,526,720,614 -42.12 883,698,633 49.09 1,317,542,681 -5.35 1,247,097,056 50.15 1,872,567,427
Reserves 1,794,861,101 16.72 2,095,010,622 36.46 2,858,953,451 28.64 3,677,846,125 17.72 4,329,561,203
Total Equity Attributable to
11.19 47.35 9.40 11.17
Equity Holders 10,539,779,848 11,719,085,527 17,268,173,670 18,892,222,058 21,002,115,997
Non-controlling Interest

Total Equity 10,539,779,848 11.19 11,719,085,527 47.35 17,268,173,670 9.40 18,892,222,058 11.17 21,002,115,997
Total Liabilities and Equity 82,723,550,667 27.31 105,311,485,153 38.61 145,971,942,062 30.01 189,782,816,080 11.76 212,108,438,392
A positive percentage value indicates growth whereas a negative value indicates decrement.
Table 4 shows the horizontal analysis of the income statement where there is an increase in
total revenue. In FY 2074/75, it was Rs. 6,804,011,381 and reached Rs. 9,098,573,839 in a FY
2075/76. It is 33.72% increase. In the same way Total Profit After Tax in FY 2074/75 is Rs.
1,046,488,403 and for FY 2075/76 is Rs. 1,230,378,260 which is a 17.57% change from FY
2074/75 to 2075/76. In the year 2076/77 it reaches 1,158,505,956 which is a 70.11% change
from the last year. Thus, it can be concluded that the year 2076/77 was a better fiscal year.
Table 5 shows the horizontal analysis of the financial position where assets, liabilities, and
shareholders’ equity are showing consistent growth over the years. The better performance can
be seen of the bank in the year 2075/76 in comparison to the rest as there is an enormous
difference in the retained earning percentage.

3.3.2 Vertical Analysis

This type of analysis is employed when examining the financial statements for a specific year
or a particular date. It utilizes common size statements and ratio analysis to study the
quantitative relationships among various items in the balance sheet and profit and loss account.
This form of analysis is considered static because it relies on the financial outcomes of a single
year.
Vertical analysis, which is a component of this type of analysis, proves useful when comparing
the performance of different departments within the same company. By using common size
statements, which express each item as a percentage of a base value, it becomes easier to
identify and compare the relative proportions of various elements within the financial
statements.
Table 6

Vertical analysis of profit and loss

% of % of % of % of % of
Particulars/Year 2074/2075 interest 2075/2076 interest 2076/2077 interest 2077/2078 interest 2078/2079 interest
income income income income income
Interest Income 100 100 100 100 100%
6,804,011,381 9,098,573,839 10,569,829,224 12,776,387,133 18,355,159,241
Interest Expense 70.52 68.46 66.19 60.26 66.13
4,797,987,363 6,228,619,912 6,996,630,749 7,698,873,522 12,137,993,244
Net Interest Income 29.48 31.54 33.81 39.74 33.87
2,006,024,017 2,869,953,928 3,573,198,475 5,077,513,611 6,217,165,997
Fees & Commission Income 5.83 5.12 5.01 6.48 5.25
396,815,439 465,986,518 529,322,874 828,201,496 962,856,296
Fees & Commission Expense 0.40 0.35 0.34 0.56 0.79
27,322,461 31,866,063 35,833,499 71,371,197 144,683,738
Net Fees & Commission Income 5.43 4.77 4.67 5.92 4.46
369,492,978 434,120,455 493,489,375 756,830,299 818,172,558
Net Interest, Fees & Commission
Income 34.91 36.31 38.47 45.67 38.33
2,375,516,995 3,304,074,383 4,066,687,850 5,834,343,910 7,035,338,555
Net Trading Income 2.19 2.85 3.36 3.29 2.06
148,951,414 258,904,627 355,323,689 420,833,394 377,867,068
Other Operating Income 1.35 0.93 0.15 3.05 2.88
92,120,818 84,919,398 15,435,693 390,023,547 527,950,068
Total Operating Income 38.46 40.09 41.98 52.01 43.26
2,616,589,227 3,647,898,408 4,437,447,231 6,645,200,852 7,941,155,691
Impairment Charge 0.47 2.52 4.37 3.72 4.42
31,946,183 229,030,770 461,786,171 475,280,357 812,100,287
Net Operating Income 37.99 37.58 37.61 48.29 38.84
2,584,643,043 3,418,867,638 3,975,661,060 6,169,920,495 7,129,055,404
Personnel Expenses 11.39 10.76 13.33 15.84 12.71
775,186,599 978,860,368 1,408,600,989 2,023,918,383 2,332,987,934
Other Operating Expenses 5.50 6.10 6.65 6.71 3.72
374,352,088 554,656,220 703,066,709 856,905,482 683,386,361
Depreciation and Amortization 1.16 1.32 1.68 2.22 2.92
79,214,269 120,126,238 177,913,962 283,304,555 535,205,469
Operating Profit 19.93 19.40 15.95 23.53 19.49
1,355,890,087 1,686,079,399 3,005,792,074 3,577,475,641
Non-Operating Income 0.48 0.13 0.22 0.27 0.10
32,572,057 11,842,001 23,336,294 33,895,859 18,320,846
Non-Operating Expenses 0.00 ….. .. … ..
1,029,811 32,238 290,729 1,981,949
Profit before Income Tax 20.41 19.52 16.17 23.79 19.58
1,388,462,144 1,776,037,002 1,709,383,455 3,039,397,204 3,593,814,538
Income Tax Expenses ….. … … 1,068,667,046 … …
341,973,741 545,658,742 550,877,499 1,014,004,706
Current Tax 6.05 6.84 5.30 7.27 5.61
411,550,374 621,921,927 560,133,759 929,312,008 1,029,422,733

14
 Deferred Tax -1.02 -0.84 -0.09 1.09 -0.08
-69,576,633 -76,263,185 -9,256,260 139,355,038 -15,418,027
Profit / (Loss) for the period 15.38 13.52 10.96 15.42 14.05
1,046,488,403 1,230,378,260 1,158,505,956 1,970,730,158 2,579,809,832

Table 7

Vertical Analysis of financial position

% of % of % of
% of Total % of Total
Assets 2074/2075 Total 2075/2076 Total 2076/2077 Total 2077/2078 2078/2079
Assets Assets
Assets Assets Assets
Cash and Cash Equivalent 4.57 8.38 6.27 3.99 8.30
3,780,643,820 8,821,135,632 9,154,311,271 7,580,241,082 17,609,892,391
Due from Nepal Rastra
6.75 3.40 3.99 4.47 2.58
Bank 5,582,760,819 3,580,514,349 5,821,520,113 8,486,453,288 5,475,310,681
Placement with B/FIs 0.86 0.36 0.58 2.55 0.92
714,095,685 384,382,797 852,447,642 4,840,711,695 1,949,476,858
Derivative Financial
0.00 5.56 0.03 0.00 0.00
Instruments 5,858,648,394 46,522,820
Other Trading Assets 0.00 0.00 0.00 0.00

Loans and Advances to

2.15 2.88 2.60 2.70 2.76
B/FIs 1,778,934,583 3,035,403,974 3,796,212,739 5,123,681,172 5,846,262,217
Loans and Advances to 60,596,575,81 7 110,717,259,56 8 137,897,925,00 152,562,929,78
73.25 69.34 75.85 72.66 71.93
Customers 73,017,913,052 2 1
Investment Securities 10.64 8.66 8.74 11.96 10.76
8,802,903,890 9,121,568,177 12,757,707,848 22,697,941,963 22,815,085,583
Current Tax Assets 0.14 0.06 0.22 0.14 0.21
113,783,100 61,227,298 328,287,861 257,142,529 454,701,292
Investment in Subsidiaries
200,000,000 200,000,000 220,000,000 220,000,000 420,000,000
Investment in Associations
0.02 0.09
20,000,000 20,000,000 130,063,901 155,017,596 185,017,596
Investment Property 0.16 0.08 0.04 0.07 0.07
134,171,003 88,422,015 60,348,333 128,112,878 144,491,994
Property and Equipment 0.53 0.63 0.95 0.66 0.56
434,304,421 662,104,656 1,383,658,862 1,258,559,299 1,179,754,479
Goodwill and Intangible
0.13 0.14 0.10 0.08
Assets 110,453,429 97,393,609 206,831,581 197,573,361 161,441,291

15
 Deferred Tax Assets -
77,789,908 10,001,698
Other Assets 0.55 0.27 0.33 0.50 3,304,074,229 1.56
454,924,100 284,981,292 486,767,825 939,456,216

82,723,550,66 105,311,485,15 145,971,942,06 189,782,816,08 212,108,438,39

Total Assets 100 100 100 100 100.00
7 3 2 0 2
% of % of % of % of % of
Total Total Total Total Total
Liabilities 2074/2075 2075/2076 2076/2077 2077/2078 2078/2079
Liabilitie Liabilitie Liabilitie Liabilitie Liabilitie
s s s s s
Due to Bank and Financial 10,104,187,33
Institutions 1 12.21 11.55 5.12 7.76 2.92
12,168,482,092 7,475,893,656 14,731,924,737 6,194,529,106
Due to Nepal Ratsra Bank 0.65 1.36 0.15 2.68 0.63
539,557,578 1,433,248,037 225,355,404 5,088,973,668 1,345,585,620
Derivative Financial
5.43 0.00 0.00 0.02
Instrument 6,111,249 5,715,359,938 3,267,738 39,334,195
59,546,335,51 116,547,033,19 145,838,231,00 176,767,665,55
Deposits from customers 71.98 69.51 79.84 76.84 83.34
9 73,201,143,766 6 9 6
Borrowings 0.00 0.00 0.00 .. … 0.00
Current Tax Liabilities … … .. … .. .. … ..
Provisions 0.00 0.00 0.00 0.00 0.00
2,231,750 2,231,750 2,312,232 2,334,810 2,500,000
Deferred Tax Liabilities 0.02 0.00 0.00 0.08 0.04
20,361,526 145,625,275 75,208,206
Other liabilities 2.38 1.02 1.00 1.10 1.74
1,964,985,865 1,071,934,043 1,458,057,633 2,084,796,958 3,685,702,222
Debt securities issued … … .. … 1.58 1.41
2,995,116,270 2,995,439,826 2,995,797,489
Subordinated Liabilities … … . … … … .. … ..
72,183,770,81 128,703,768,39 170,890,594,02 191,106,322,39
Total Liabilities 87.26 88.87 88.17 90.05 90.10
9 93,592,399,626 2 1 5
Equity 0.00
Share Capital 8.66 8.25 8.58 7.31 6.94
7,163,394,973 8,685,573,112 12,520,049,469 13,878,474,836 14,711,183,326
Share Premium 0.07 0.05 0.39 0.05 …
54,803,159 54,803,159 571,628,069 88,804,041 88,804,041
Retained Earnings 1.85 0.84 0.90 0.66 0.88
1,526,720,614 883,698,633 1,317,542,681 1,247,097,056 1,872,567,427
Reserves 2.17 1.99 1.96 1.94 2.04
1,794,861,101 2,095,010,622 2,858,953,451 3,677,846,125 4,329,561,203
Total Equity Attributable 10,539,779,84
to Equity Holders 8 12.74 11.13 11.83 9.95 9.90
11,719,085,527 17,268,173,670 18,892,222,058 21,002,115,997

16
Non-controlling Interest
10,539,779,84
Total Equity 12.74 11.13 11.83 9.95 9.90
8 11,719,085,527 17,268,173,670 18,892,222,058 21,002,115,997
Total Liabilities and 82,723,550,66 105,311,485,15 145,971,942,06 189,782,816,08 212,108,438,39
100 100 100.00 100 100
Equity 7 3 2 0 2

17
Table 6 shows vertical analysis that restates income statement amounts as a percentage of
interest income. While performing a vertical analysis, every line item on the financial statement
is entered as a percentage of another item. Thus, in an income statement, every line item is
stated in terms of the percentage of premium income. As per the vertical analysis, the profit
for the year decreased continuously in both FY 2075/76 and FY 2076/77 in comparison to FY
2074/75 and later increased in FY 2077/78 and again decreased in FY 2078/79.

Table 7 shows vertical analysis that restates balance sheet amounts as a percentage of total
assets and total liabilities and equity. From the above data, we can see the bank has been
performing smoothly and consistently over the last five years. The total equity has been
decreased. It was 12.74% of total in 2074/75. It decreased to 11.13% in year 2075/76 and again
decreased to 11.83%, 9.95% and 9.90% in FY 2076/77, FY 2077/78 and FY 2078/79
respectively. Likewise, total liabilities have been increased. It was 87.26% in FY 2074/75 and
reaches 88.87%, 88.17%, 90.05% and 90.10% in year FY 2075/76, 2076/77, 2077/78 and
2078/79 respectively.

3.3.3 Cash Flow Analysis

A cash flow analysis determines a company’s working capital—the amount of money available
to run business operations and complete transactions. To perform a cash flow analysis, we must
first prepare operating, investing and financing cash flow statements. The information about
the cash flows of a firm is useful in providing users of financial statements with a basis to assess
the ability of the enterprise to generate cash and cash equivalents and the needs of the enterprise
to utilize these cash flows.
Table 8

Cash flow statement

Cash flow analysis

% change
Particulars 2075/76 2076/77 2077/78 2078/79
Cash flow from operating activities 143% -211% 304% 391%
Cash flow from investing activities -87% -31% 126% -88%
Cash flow from Financing activities -94% 127% -157% -155%
Net changes in Cash -628% -135% 65% -1151%
Opening cash and cash equivalents -20% 86% 93% 60%
closing cash and cash equivalents 133% 142% 101% 366%

18
3.3.3.1 Cash flow from Operating Activities
The cash flow from operating activities of the bank includes the receipts, payments and
affecting current assets and current liabilities. Cash flow from operating activities includes cash
collection from debtors, depreciation, interest received, payment to creditors and other
operating expenses, payment for interest, tax and dividend, and so on.
Table 8 shows that cash flow from operating activities of FY 2075/76 has increased to 143%,
decreased to 211% in FY 2076/77, and again increased to 304% and 391% in FY 2077/78 and
FY 2078/79 respectively assuming base year FY 2074/75.

3.3.3.2 Cash flow from Investing Activities

Cash flow from investing activities indicates how much money has been used in making
investments in a specific period. It collects money as deposit and sells it to customers, which
called, investment. Investment may be in terms of bank balance, money at call and short notice,
loan, fixed assets, payment related to purchase and sale of assets, payment related to merger
and acquisition and so on.
Table 8 shows that cash flow from investing activities decreased to 87% and 31% in FY 2075/76
and 2076/77 respectively and then increased to 126% FY 2077/78 and again it decreased to 88
% FY 2078/79 assuming base year FY 2074/75.

3.3.3.3 Cash flow from Financing Activities

Financing refers to the process of acquiring capital by a company through various means such
as issuing shares, debentures, and bonds, as well as obtaining soft loans from the Nepal Rastra
Bank (NRB). In the context of the cash flow statement, inflow of cash from financing activities
represents the receipt of funds through share issuance, debenture and bond issuance, and loans
from the NRB. On the other hand, outflow of cash from financing activities includes the
repayment of debentures, bonds, soft loans from the NRB, as well as payment of interest on
loans, debentures, and bonds, and distribution of dividends to shareholders.
Cash flow from financing activities provides valuable insights to investors about a company's
financial strength and how its capital structure is managed. By analyzing this section of the
cash flow statement, investors can gain an understanding of how the company raises capital
and manages its financial obligations. It helps investors assess the company's ability to secure
funding, meet its debt obligations, and provide returns to shareholders through dividend
payments. This information is crucial for evaluating the financial health and stability of a
company and making informed investment decisions.

19
Table 8 shows that cash flow from financing activities has decreased to 94% in FY 2075/76,
increased to 127% in FY 2076/77, and again decreased to 157% and 155% in FY 2077/78 and
FY 2078/79 respectively assuming base year FY 2074/75.

3.3.3.4 Net Change in Cash Flow

The net cash flow of a bank represents the total amount of cash generated or utilized by the
bank during a given fiscal period. It is calculated by summing the cash flows from operating
activities, investing activities, and financing activities. The net change in cash refers to the
difference between the starting and ending cash balances of a company within a specific fiscal
period. It reflects the increase or decrease in the company's cash position during that time.
Table 8 shows that net change in cash flow has decreased to 628% and 135% in FY 2075/76
and FY 2076/77 respectively. Later it increased to 65% in FY 2077/78, and again decreased to
1151% in FY 2078/79 assuming base year FY 2074/75.

3.3.4 Working Capital Analysis

The statement of changes in working capital is a vital financial statement that focuses on the
net changes in a company's working capital, which is the difference between its current assets
and current liabilities, during a specified period. This statement plays a crucial role for financial
managers as it helps them assess the need for short-term funding. The changes in working
capital for Kumari Bank can be found in the table below.

Table 9 presents the working capital of Kumari Bank for the past five years. The analysis
reveals certain trends within the current assets and current liabilities of the bank. In particular,
the current assets of FY 2075/76 witnessed an increase compared to FY 2074/75. Furthermore,
the current assets of FY 2076/77, FY 2077/78, and FY 2078/79 continued this upward trend,
displaying consecutive increases in each respective year. Conversely, the current liabilities of
Kumari Bank from FY 2074/75 to FY 2078/79 also exhibited an increasing pattern. As a result,
the working capital of the bank has followed suit and experienced an increasing trend as well.
The relationship between working capital, current assets, and current liabilities is
straightforward.

Table 9

20
Working capital

current assets 2074/75 2075/76 2076/77 2077/78 2078/79

17,609,892,
Cash and Cash
Equivalent 3,780,643,820 8,821,135,632 9,154,311,271 7,580,241,082 391
5,475,310,6
Due from Nepal
Rastra Bank 5,582,760,819 3,580,514,349 5,821,520,113 8,486,453,288 81
1,949,476,8
Placement with
B/FIs 714,095,685 384,382,797 852,447,642 4,840,711,695 58
Derivative Financial
Instruments 5,858,648,394 46,522,820
5,846,262,2
Loans and Advances
to B/FIs 1,778,934,583 3,035,403,974 3,796,212,739 5,123,681,172 17
152,562,92
Loans and Advances
to Customers 60,596,575,817 73,017,913,052 110,717,259,568 137,897,925,002 9,781
22,815,085,
Investment
Securities 8,802,903,890 9,121,568,177 12,757,707,848 22,697,941,963 583
206,258,95

total current assets81,255,914,614 103,819,566,375 143,145,982,001 186,626,954,202 7,511

current liabilities
Derivative Financial
Instrument 6,111,249 5,715,359,938 3,267,738 39,334,195
145,838,23 176,767,66
Deposits from
customers 59,546,335,519 73,201,143,766 116,547,033,196 1,009 5,556
Borrowings
Provisions 2,231,750 2,231,750 2,312,232 2,334,810 2,500,000
176,809,49
total current
liabilities 59,554,678,518 78,918,735,454 116,549,345,428 145,843,833,557 9,751
29,449,457,
working capital
(CACL) 21,701,236,096 24,900,830,921 26,596,36,573 40,783,120,645 760

When a company possesses more current assets than current liabilities, it signifies a positive
working capital. This positive working capital indicates that the bank has sufficient funds to
fulfill its short-term obligations. Moreover, it demonstrates the bank's capability to invest in its
growth and expansion.

21
On the other hand, if a bank has more current liabilities than current assets, it has negative
working capital. Negative working capital means that the company may struggle to meet its
short-term obligations and may need to borrow funds to keep its operations going.

3.3.5 Trend Analysis

The trends of various important components of financial statements of Kumari Bank Limited
have been shown below.
Figure 2

Earnings per share

EPS
20.00%
18.00% 17.45%
16.00%
14.20% 14.81% 14.54%
14.00%
12.00% 12.08%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2074/75 2075/76 2076/77 2077/78 2078/79

The figure 2 shows the trend of earning per share of Kumari Bank Limited of the 5 years. The
EPS has decreased from 2074/2075 to 2076/2078 and increased in fiscal year 2077/2078 and
again decreased in 2078/2079. The EPS has decreased from Rs. 17.45% to 12.08% and
increased little and reached 14.81% and then it slightly decreased and reached Rs. 14.54%.
Figure 3

Net profit ratio

22
 Net profit margin
40.00%

35.00% 34.84%

30.00%

25.00% 25.03% 24.91%

20.00% 20.24%
17.78%
15.00%

10.00%

5.00%

0.00%
2074/75 2075/76 2076/77 2077/78 2078/79

Figure 3 shows the net profit ratio of last five fiscal years. The net profit trend was in declining
trend until the fiscal year 2076/2077 and after that it increased up to 24.91% and again decline
to 17.78%.

Figure 4

Dividend per share

DPS
16.00%

14.00% 14.00%

12.00% 12.50%

10.53%
10.00%
8.50% 8.67%
8.00%

6.00%

4.00%

2.00%

0.00%
2074/75 2075/76 2076/77 2077/78 2078/79

A cash dividend is the distribution of funds or money paid to stockholders generally as part
of the corporation's current earnings or accumulated profits. This figure shows the cash
dividend paid to the shareholders. Figure 4 shows the trend of DPS was in increasing trend

23
upto the fiscal year 2076/2077 and then decreased year 2077/2078 and again increased in year
2078/2079.
Figure 5

Market price per share

Market value per share

400
371
350

300

250
220
200 199 191
186
150

100

50

0
2074/75 2075/76 2076/77 2077/78 2078/79

The market value per share is simply the going price of the stock. The market price per share
formula says this is equal to the total value of the company, divided by the number of shares.
The figure 5 shows the market price of Kumari Bank Limited's in last five fiscal years. At FY
2074/2075 the price was Rs.199 and it increased up to Rs.371 in year 2077/78 and decreased
to Rs.191 in the fiscal year 2078/2079.
Figure 6

P/E ratio

24
 p/e ratio
30.00%

26.13%
25.00%

20.00%

15.00% 14.85% 15.39%

13.68%

10.00% 10.89%

5.00%

0.00%
2074/75 2075/76 2076/77 2077/78 2078/79

The price-earning ratio is the relationship between a company’s stock price and earnings per
share. It is a popular ratio that gives investors a better sense of the value of the company. The
P/E ratio shows the expectations of the market and is the price one must pay per unit of current
earnings. The P/E ratio was 13.68 in FY 2074/2075 and increased to 26.13 in FY 2077/2078
and decreased to 10.89 in FY 2078/2079.

Figure 7

Capital Adequacy Ratio

capital adequacy ratio

18.00%
16.00%
15.35%
14.00% 13.71%
13.36%
12.63%
12.00% 11.75%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2074/75 2075/76 2076/77 2077/78 2078/79

The Capital adequacy ratio of Kumari Bank Limited is decreased to 11.75% from 13.36% in
year 2075/76. Capital adequacy ratio increase to 15.35% in FY 2074/2075. The ratio
decreased to 12.63% in FY 2078/2079.

25
Figure 8

Paid up Capital

paid up capital
16000
14711
14000 13878
12520
12000

10000
8686
8000
7163
6000

4000

2000

0
2074/75 2075/76 2076/77 2077/78 2078/79

Figure 8 shows trend of paid up capital over the five years. The paid up capital of the bank is
seen to be in increasing trend from 7163 to 14711 until year 2078/79.

3.3.5 Ratio Analysis

Ratio analysis is a valuable tool for evaluating the financial well-being of a company. It
involves measuring different aspects such as liquidity, solvency, efficiency, profitability,
operating efficiency, and stability over both short and long-term periods. By utilizing ratio
analysis, one can make relative assessments of a company's performance and gain insights into
its financial position.

To effectively employ ratio analysis, it is essential to have a set of financial performance

indicators for comparison purposes. These indicators include liquidity ratios, debt-equity
ratios, interest coverage ratios, inventory turnover ratios, return on investment ratios, and debt
to net worth ratios. These ratios help determine a company's financial position, performance,
and stability, providing crucial information about how well the company is managed.

3.3.5.1 Capital Adequacy ratio

The Capital Adequacy Ratio (CAR) is a measure of a bank's financial strength and its ability
to absorb unexpected losses. It is calculated by dividing a bank's capital by its risk-weighted
assets (RWA). The CAR is expressed as a percentage, and it represents the proportion of a
bank's capital that is available to cover its risk-weighted assets.

26
The purpose of the CAR is to ensure that banks have enough capital to withstand unexpected
losses and continue to operate without being at risk of insolvency. Regulators set minimum
CAR requirements for banks, which vary depending on the level of risk in the bank's assets.
Banks that fall below the minimum CAR requirement may be subject to penalties or
restrictions on their operations. The CAR is an important measure of a bank's financial health
and stability, and it is closely monitored by regulators, investors, and rating agencies.

CAR = (Tier 1 capital + Tier 2 capital)

risk-weighted assets

3.3.5.2 Staff expenses to total operating expenses

The staff expenses to total operating expenses ratio is a financial metric that measures the
portion of a company's operating expenses that are related to staff costs, such as salaries,
wages, benefits, and bonuses. The staff expenses to total operating expenses ratio can be used
to compare the staffing costs of different companies or to track changes in staffing costs over
time. A higher ratio may indicate that a company is spending a larger portion of its operating
expenses on staffing costs, which may impact profitability. However, it is important to
consider the industry norms and the company's business model before making any
conclusions about the ratio.
The formula to calculate the staff expenses to total operating expenses ratio is:

Staff to operating expenses = . Staff Expenses .

Total operating expenses

3.3.5.3 Return on assets

Return on assets (ROA) is an indicator of how profitable a company is relative to its total
assets. ROA gives a manager, investor, or analyst an idea as to how efficient a company's
management is at using its assets to generate earnings. Return on assets is displayed as a
percentage. Return on Assets can be calculated by using the following formula:

Return on Assets

27
3.3.5.4 Return on equity
Return on equity (ROE) is a financial metric used to assess the performance of a company by
calculating the ratio of net income to shareholders' equity. Shareholders' equity represents the
residual interest in the company's assets after deducting its liabilities. ROE is regarded as a
measure of how efficiently a company's management utilizes its assets to generate profits.
Return on Equity can be calculated by using the following formula:

.
Return on Equity
𝑆ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠′𝐸𝑞𝑢𝑖𝑡𝑦

3.3.5.5 Earnings per share

Earnings per share (EPS) is a significant financial metric that provides insights into a
company's profitability. It is computed by dividing the company's net income by the total
number of outstanding shares. This ratio is commonly used by market participants as a tool
to assess a company's profitability before making investment decisions. In simpler terms, EPS
reveals how much profit is generated for each share of the company's stock, allowing investors
to evaluate the company's financial performance on a per-share basis.. EPS can be calculated
by using the following formula:
Earning Per Share Net Income .
𝑁𝑜.𝑜𝑓 𝑆ℎ𝑎𝑟𝑒𝑠 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔
3.3.5.6 P/E ratio

The price-to-earnings ratio (PE ratio) is a metric used to evaluate the relationship between a
company's share price and its annual net income per share. It provides insight into the level of
investor interest in a company's stock. A high PE ratio typically suggests strong investor
demand as it indicates that investors have high expectations for future earnings growth. In other
words, a higher PE ratio indicates that investors are willing to pay a premium for the company's
shares based on their anticipation of higher profits in the future. P/E ratio can be calculated by
using the following formula:

Price-Earning Ratio = Price per share .

𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝑝𝑒𝑟 𝑆ℎ𝑎𝑟𝑒
Table 10

Ratio Analysis

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 2074/20 2075/20 2076/20 2077/20 2078/20
Ratio/Fiscal Year
75 76 77 78 79
Capital Adequacy Ratio 13.36% 11.75% 15.35% 13.71% 12.63%
Net Profit Margin 34.84% 25.03% 20.24% 24.91 17.78%
Return on Assets 1.27% 1.17% 0.76% 1.04% 1.22%
Return on Equity 9.93% 10.50% 6.71% 10.43% 12.28%
Earning Per Share 17.54 14.20 12.08 14.81 14.54
Price-Earning Ratio 13.68 14.85 15.39 26.13 10.89
Interest Expenses/Total Deposits and 6.85% 7.30% 5.64% 4.79% 6.63%
Borrowings
Staff Expenses/Total Operating 51.37% 47.26% 53.23% 52.84% 54.45%

Expenses
Market value per share 199 220 186 371 191

According to Table 10, the ratio analysis of Kumari Bank from FY 2074/2075 to FY 2078/79
reveals several trends. Firstly, the net profit margin has shown a declining trend over the years,
indicating that the bank's profitability in relation to its revenue has decreased.

Secondly, both return on equity and return on assets initially experienced a decreasing trend in
the first two fiscal years, followed by an increasing trend thereafter. This suggests that the
bank's ability to generate returns for its shareholders and utilize its assets efficiently improved
after the initial decline. Furthermore, the earnings per share has demonstrated a decreasing
trend over the past five fiscal years. This indicates that the bank's net income allocated to each
outstanding share has declined over time.

In terms of market value per share, the highest value was observed in FY 2077/78 at 371 per
share, while the lowest value occurred in FY 2076/77 at 186 per share. These figures reflect
the market's perception of the bank's value during those specific fiscal years. Lastly, the price-
to-earnings (P/E) ratio was highest in FY 2077/78 and lowest in FY 2078/79. The P/E ratio
provides insight into investor sentiment, and a higher ratio suggests that investors are willing
to pay a premium for the bank's shares due to anticipated future earnings growth.

In summary, the ratio analysis highlights various trends in Kumari Bank's financial
performance. While the net profit margin, earnings per share, and market value per share have
shown decreasing trends, the return on equity, return on assets, and P/E ratio have displayed a
combination of decreasing and increasing trends over the studied period.

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 CHAPTER IV

CONCLUSION AND ACTION IMPLICATION

4.1 Conclusion
This study presents an overview of Kumari Bank Ltd.'s financial performance during a five-
year period, ranging from the fiscal year 2074/75 to the fiscal year 2078/79. To gain insights
into the bank's performance, various analytical tools such as vertical analysis, horizontal
analysis, ratio analysis, and cash flow analysis were employed.

Commercial banks, as financial institutions engaged in business activities, play a crucial role
in the integration of the community's financial operations. Their primary objective is to
contribute significantly to the growth of trade and commerce. Commercial banks serve as
channels for mobilizing funds from the public and transforming them into productive
resources. They provide a range of financial services, including loans, to support various
businesses. By pooling the savings of the community and making prudent investments,
commercial banks facilitate the economic development of the nation. For comprehensive
progress and development, it is imperative that competitive banking services reach every
corner of the country, ensuring inclusive and rapid growth.

Banks play a crucial role in the economic progress of nations, and formulating effective
banking policies for remote areas presents a significant challenge for governments. Providing
banking services in rural regions is essential for the economic development of those areas.
Therefore, the purpose of this research is to examine the financial statement of Kumari Bank
Ltd over a period of five years, spanning from 2074/75 to 2078/79. This study investigates the
financial performance of Kumari Bank Limited, a commercial bank, by analysing pooled data
from 2073/74 to 2077/78, utilizing various tools and techniques.

The data analysis employed vertical and horizontal analysis, comparative analysis, ratio
analysis, and cash flow analysis. Based on these techniques, we can conclude that Kumari Bank
demonstrates a satisfactory financial position and overall performance. The bank has
effectively maintained a reasonable level of profitability, which is a noteworthy
accomplishment. Furthermore, the bank has successfully increased its share capital in
compliance with the directives issued by Nepal Rastra Bank. Another major achievement of

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the bank is the consistent growth of its deposits, which has always been a primary objective.
Both fixed and current deposits have exhibited an upward trend.

In summary, the financial analysis of Kumari Bank reveals positive outcomes, indicating that
the bank is performing well. It has effectively managed its financial position, demonstrated a
satisfactory level of profitability, and achieved growth in its deposits, aligning with its
objectives.

4.2 Recommendations

Based on the overall assessment of the financial performance, while the results are generally
satisfactory, there are specific areas that warrant improvement. Therefore, the following
recommendations are put forward:

1) The bank should exercise careful utilization of funds collected from savings deposit
accounts. It is essential to allocate these funds wisely and consider investment opportunities
that can generate higher yields.
2) Emphasize investing customer deposits in areas that offer higher returns. It is advisable to
avoid excessive allocation towards fixed assets, as they typically provide only nominal or
no returns.
3) Conduct a thorough analysis of short-term investment opportunities. Identifying and
capitalizing on these opportunities can contribute to the bank's profitability and overall
financial performance.
4) Endeavor to reduce long-term debt. By actively managing and reducing long-term debt
obligations, the bank can enhance its financial position and mitigate potential risks.

These recommendations aim to guide Kumari Bank towards optimizing its financial strategies.
By carefully managing funds, focusing on higher-yielding investments, exploring short-term
investment prospects, and reducing long-term debt, the bank can further improve its financial
performance and strengthen its overall position.

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 REFERENCES
Kumari Bank. (n.d.). Retrieved March 2, 2023, from Kumari Bank:

https://www.kumaribank.com/en/personal-banking

Merolagani. (2023, March 2). Merolagani. Retrieved from Merolagani:

https://merolagani.com/CompanyDetail.aspx?symbol=KBL

KBL. (2017). 18th Annual Report

KBL. (2018) 19th Annual Report
KBL. (2019) 20th Annual Report
KBL. (2020) 21st Annual Report
KBL. (2021) 22nd Annual Report

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