Profit and Loss Analysis" Of Everest Bank Ltd.

PURBANCHAL UNIVERSITY




RECOMMENDATION


This is to certify that the field work assignment report:



Submitted by:

P.U.Regd. No.:
Symbol No.:

Entitled

"Profit and Loss Analysis"
Of
Everest Bank Ltd.


has been prepared as approved by this department. This fieldwork assignment is forwarded for examination.


Supervisor,

Date:
……………………….
Head of Department
GM College
Birtamode



ACKNOWLEDGEMENT]

As per the rules and regulation of Purwanchal university every students of B.B.A. 3rd year, semester 5th to prepare a fieldwork report.i here being the student of B.B.A. 3rd year, semester 5th has prepared a fieldwork report concerned to the subjest matter of “case study of Citizen’s Bnak International limited(CBIL)”.
The central objective of this fieldwork report writing is to meet the partial requirement on fieldwork assignment as an integral part of B.B.A. programme designed by faculty of management, Purwanchal University.

I have tried my best to make the fieldwork report satisfactory. I believe it will fulfill the purpose. The contents have been logically divided as prescribed by Purwanchal University. Being the student of Bachelor of Business Administration, I have chosen Profit & loss as my subject and Everest Bank Limited as an organization.

Since this is my first approach of report writing, I have got help, guidance & support from various persons. I would like to convey my special thanks to Citizens Bank family.
And I’d like to thanks specially to my classmate and my partner of internship and marketing research from Citizen’s Bank International Limited.

Finally, I would like to thank to my parents and friends who helped me by providing their important suggestion.


Thank You!
Krishna Pd. Ghimire
B.B.A 3rd year, semester 5th
G.M. College
Birtamode , Jhapa






CHAPTER I

INTRODUCTION

1.1 INTRODUCTION

Simply bank means an institution which transact with money and money's worth. In toady’s world everyone is aware of bank and using banking services. Many people have defined bank in various ways. Some of which are as follows

According to Kent “A bank is an organization whose principal operation are concerned with the accumulation of temporarily idle money of the general pubic for general public for the purpose of advancing to other for expenditure.”
“Bank is a manufacturer of credit and machine for facilitating exchange.”

Hence bank is an institution which deals with money by accepting various types' deposits, disbursing loan and rending various types of financial services. As banks are rendering a wide range of services they have become an essential part of our life. Today, we cannot expect our activities without banking services.

The origin of the word “Bank” is linked with the Latin word “bancus” Italian word “banca” and French word “banque” which means bench. Money lenders in streets of Europe used benches for acceptance and payment of valuable coins. However, it is difficult to say exactly whether the term “Bank” has been derived from “bancus” or “banca” or German word “bank”, meaning Joint Stock Company.

Banking has come to present advanced from through various stages. The first banking institution seems to have been established in Italy in 115A.D by the name of Bank of Venice. However, the history of banking in Nepal is not more than 60 years, started with the establishment of credit house named “Tejarath Adda” in 1933 B.S. But they said institution did not carry out all the banking activities.

Banking in true sense started by the establishment of Nepal Bank Limited on 30th of Kartik 1994 B.S. and carried out the function of commercial bank. After that, as a central bank of Nepal, Nepal Rastra Bank was established in 2013 B.S., Agricultural Development Bank. However, these all were government & semi government Banks.


1.2 BACKGROUND
His Majesty's Government of Nepal opened the banking sector for private and foreign participation from the mid-eighties. Everest Bank Limited was set up in the private sector and commenced its operations in October 1994(Kartik 2051) under the company act 1964 and new commercial bank act 1974.

India being the major trade partner of Nepal, the obvious choice with the promoter of the bank was to join hand with an Indian Bank. Thus EBL entered into a joint-venture in January 1997 with Punjab National Bank, One of the largest commercial bank in India having 110yrs of banking history with more than 4500 offices all over India. Of which 1400 branches are interconnected. Punjab National Bank has over 1000 ATMs spread across India.
It was established as joint venture with PNB with 20% participation only. The ownership of EBL can be shown as below-


Table 1.1
Ownership structure of EBL

SHAREHOLDER % COMPOSITION
PNB, INDIA 20
GENERAL PUBLIC 30
NEPALESE PROMOTERS 50
TOTAL 100


Fig 1.1 Ownership Structure of EBL








(a) Capital Structure

Authorized Capital 60,00,000@Rs 100
Issued Capital 52,98,000@Rs 100
Paid up Capital 51,80,000@Rs 100

(b) Branch Network
EBL is one of the joint venture banks having largest bank network among the private sector banks in Nepal.

There are altogether 18 branches and 14 branches in urban areas namely at New Road, Teku, Birganj, Butwal, Pulchowk, Biratnagar, Satungal, Janakpur, Lazimpat, Pokhara, Cabahil, Nepalgunj, Itahari, Balaju and 5 branches in rural areas i.e. at Simra, Dhangadhi, Parsa, Bhairahawa, Duhabi. The bank is also managing the SCT ATM at Tribhuwan International Airport.

EBL Debit Card can be accessed at more than 50 ATMs and over 250 Point of sales across the nation. The bank is planning to extend its branch network in other areas also. The head office as well as the corporate banking division is located in its own premises called EBL house at Lazimpat, Kathmandu.


1.2.1 About the Subject
The financial performance of any organization is reflected by the profit it earned. Since business organization are established for profit motive. Profit or earning is the major factor of any organization. So, to the bank also. Bank is an organization, which sells product and earns revenue with the growth competition among commercial banks.

Investors both lender and owners consider profit as a sign of strength. They expect year-to-year growth in profit. Simply saying profit means the difference between income and expenses of any organization. In banking terminology, profit is the difference between cost of deposit borne and returns on money lender out which are affected by various internal and external factor encountered during the operation. Hence, profit and loss analysis of its income and expenses and finding out its difference.

Since being the student of business and finance profit and loss position analysis is the crucial thing for the financial position analysis of any organization.

1.3 Purpose/ Objectives of the Study
As mentioned above, since profit is the heart of any organization, more so in the banking sector. Hence, the purpose of this fieldwork is to analysis the financial position of EBL through the analysis of profit and loss. Hence, the main objective with which this fieldwork has been carried out can be listed as follows:

- To analysis the income and expenses trend of EBL.

- To analysis the profit and/or loss trend of EBL.



1.4 Method of Data Collection
- Most of all required data for the study was identified.

- The data were processed to meet the objectives of the study

- Data were analyzed and the conclusion was drawn and recommendations were made.

- The sources of the data are both from primary and secondary data. The annual reports of EBL are the main source.















CHAPTER II
DATA PRESENTATION AND ANALYSIS

2.1 Data Presentation and Analysis
The profit and loss account of EBL for the F/Y 2002/03 is presented as below
Table 2.1 Profit & Loss A/C for the F/Y 2002/03
Profit & Loss Account
As on 16th July 2003

In lakh

EXPENSES Amount(Rs) INCOME Amount(Rs)
Interest Expenses 2570 Total Income 5409
Personal Expenses 322
Other Operating Expenses 754
Provision for Possible Losses 347
Extra Ordinary Expenses nil
Provision for Staff Bonus 142
Provision for Income Tax 420
Net Profit c/d 854
Total 5409 Total 5409






The expense breakdown can be presented through following pie chart
Fig 2.1.1 Expenses Breakdown



The fiscal year 2002/03 is the 12th year of operation of EBL. In this fiscal year EBL made a net profit of Rs 854 lakh. The total income earned by the bank in this fiscal year is Rs. 5409 lakh.

The expense occurred during the fiscal year is about Rs. 3646 lakh. Interest on deposits and borrowing occupy about 71% of the total expense. A slight increase in the interest rate .as well as increase in total interest bearing deposit are the main reason for the increment in total interest paid out by the bank. Personal expenses stood at Rs 322lakh and operating expense Rs. 754 lakh. Hence, the gross profit was Rs. 1763 lakh. Out of which Rs 142lakh was allotted for staff bonus, Rs 347lakh for possible loss and Rs. 420 lakh was set aside as provision for tax. After all these deduction, a net profit of Rs 854 lakh was attained in this fiscal year.



The profit and loss account of EBL for the F/Y 2003/04 is presented as below :
Table 2.2 Profit & Loss A/C for the F/Y 2003/04

Profit & Loss Account
As on 16th July 2004
in lakh
EXPENSES Amount(Rs) INCOME Amount(Rs)
Interest Expenses 3076 Total Income 6353
Personal Expenses 374
Other Operating Expenses 936
Provision for Possible Losses 457
Extra Ordinary Expenses nil
Provision for Staff Bonus 151
Provision for Income Tax 417
Net Profit c/d 942
Total 6353 Total 6353
The expense breakdown can be presented through following pie-chart

Fig 2.2.1 Expenses Breakdown










This is the 13th year of operation of EBL. In this fiscal year EBL made a net profit of Rs. 942 lakh against Rs. 854 lakh than that of the last year. This increase in profit can primarily be attributed to the income earned from loans, advances and overdraft that showed an increase of total income from Rs. 5409 lakh to Rs. 6353 lakh which is 17.5% over the previous year.

The total expense incurred in this year is Rs. 4386 lakh showing an increment of Rs. 740 lakh over the previous year. As usual interest on deposit and borrowing occupied 70% of the total expense was revised and personal expense increased by 16% and reached Rs 374 lakh which occupied 9% of total expenses. Attributing to the increased business of the bank, operating expenses was also increased by Rs. 182 lakh to reach at Rs. 936 lakh and occupied 21%of total expenses.

In this fiscal year the bank has made a gross profit of Rs. 1967 lakh. Among that provision for staff bonus was Rs. 151 lakh, provision for possible loss was Rs 457 lakh and provision for tax was Rs. 417 lakh, which was 0.7% lower than that of previous year
The profit and loss account of EBL for the F/Y 2004/05 is presented as below
Table 2.3 Profit & Loss A/C for the F/Y 2004/05

Profit &Loss account
As on 16th July 2005
in lakh
EXPENSES Amount(Rs) INCOME Amount(Rs)
Interest Expenses 3164 Total Income 7851
Personal Expenses 485
Other Operating Expenses 1038
Provision for Possible Losses 818
Extra Ordinary Expenses nil
Provision for Staff Bonus 235
Provision for Income Tax 676
Net Profit c/d 1435
Total 7851 Total 7851

The expense breakdown can be presented through following pie-chart
Fig 2.3.1 Expenses Breakdown









This is the 14th year of operation of EBL. In this fiscal year EBL made a net profit of Rs. 1435 lakh against Rs. 942 lakh than that of the last year. This increase in profit can primarily be attributed to the income earned from loans, advances and overdrafts that showed an increase of total income from Rs. 6353 lakh to Rs. 7851 lakh which is 24% over the previous year.

The total expenses for this year stood Rs. 4687 lakh, an increment of Rs. 301 lakh over the last year. This is mainly due to increase in total interest paid out on the deposits. An additional Rs. 88 lakh was paid out as interest on deposits than that of previous figure making total interest on deposit Rs. 3164 lakh and occupied 67% of total expenses. Personal expenses occupy 11%of the total expenses and also showed an increment of Rs 111 lakh. Similarly, an increment of Rs 102 lakh was witnessed in total operating expense and occupied 22% of the total of the total expenses.

In this fiscal year gross profit was Rs 3164 lakh out of which Rs 818 lakh, Rs 235 lakh, Rs 676 lakh was allotted as provision for possible losses, staff bonus and tax respectively. After all these deduction, EBL has made a net profit of Rs 1435 lakh which was 52.34% more than that of the last year

The profit and loss account of EBL for the F/Y 2005/06 is presented below

Table 2.4 profit and loss A/C for the F/Y 2005/06

Profit & Loss Account
As on 16th July 2006
In lakh
EXPENSES Amount(Rs) INCOME Amount(Rs)
Interest Expenses 2996 Total Income 8590
Personal Expenses 551
Other Operating Expenses 1291
Provision for Possible Losses 889
Extra Ordinary Expenses 55
Provision for Staff Bonus 281
Provision for Income Tax 819
Net Profit c/d 1798
Total 8590 Total 8590




The expense breakdown can be presented through following pie- chart:
Fig 2.4.1 Expenses Breakdown








This is the 15th year of operation of EBL. In this fiscal year EBL made a net profit of Rs 1708 lakh against Rs 1435 lakh than that of the last year. This increase in profit can primarily be attributed to the income earned from loans, advances and overdraft that showed an increase of total income from Rs 7851 lakh to Rs 8590 lakh which is 9.4% over the previous year.

The total expenses for this year stood Rs 4838 lakh, an increment of Rs 271 lakh over the last year. This is mainly due to increase in total interest paid out on the deposits. The major component of expenses, interest expenses decreased by Rs168 lakh than that of previous figure making total interest on deposit Rs2996 lakh and occupied 62% of total expenses. However Personal expenses occupy 11%of the total expenses and also showed an increment of Rs 66 lakh. Similarly, an increment of Rs 253 lakh was witnessed in total operating expense and occupied 27% of the total of the total expenses.

In this fiscal year gross profit was Rs 3752 lakh out of which Rs 889 lakh, Rs 55 lakh, Rs 281 lakh and Rs 819 lakh was allotted as provision for possible losses, extra ordinary expenses, staff bonus and tax respectively. After all these deduction, EBL has made a net profit of Rs 1708 lakh which was 19% more than that of the last year.

Table 2.5 Profit and Loss A/C for the F/Y 2006/07

Profit & Loss Account
As on 16th July 2007

In lakh
EXPENSES Amount(Rs) INCOME Amount(Rs)
Interest Expenses 4014 Total Income 10665
Personal Expenses 684
Other Operating Expenses 1436
Provision for Possible Losses 705
Extra Ordinary Expenses 26
Provision for Staff Bonus 345
Provision for Income Tax 1083
Net Profit c/d 2372
Total 10665 Total 10665


The expense breakdown can be presented through pie- chart
Fig 2.5.1 Expenses Breakdown







This is the 16th year of operation of EBL. In this fiscal year EBL made a net profit of Rs 2372 lakh against Rs 1708 lakh than that of the last year. This increase in profit can primarily be attributed to the income earned from loans, advances and overdraft that showed an increase of total income from Rs 8590 lakh to Rs 10665 lakh which is 24.2% over the previous year.

The total expenses for this year stood Rs 6134 lakh, an increment of Rs 1296 lakh over the last year. This is mainly due to increase in total interest paid out on the deposits. An additional Rs 1018 lakh was paid out as interest on deposits than that of previous figure making total interest on deposit Rs4014 lakh and occupied 65% of total expenses. Personal expenses occupy 11.2%of the total expenses and also showed an increment of Rs 133 lakh. Similarly, an increment of Rs 145 lakh was witnessed in total operating expense and occupied 24.4% of the total of the total expenses.

In this fiscal year gross profit was Rs 4531 lakh out of which Rs 705 lakh, Rs 26lakh, Rs 345 lakh and Rs 1083 lakh was allotted as provision for possible losses, extra ordinary expenses, staff bonus and tax respectively. After all these deduction, EBL has made a net profit of Rs 2372 lakh which was 39% more than that of the last year.

The substantial increase in net profit is mainly due to increment on loans, advances & investment of Govt. security. Similarly, the higher rate of increment under commission & discount & dividend is also responsible for it.









The five years income, expenses and gross profit of EBL can be shown as follows

Table 2.6 Income, Expense and Gross Profit Trend
(In lakh of Rs)
F/Y INCOME EXPENSE GROSS PROFIT
2002/03 5409 3646 1763
2003/04 6353 4386 1967
2004/05 7851 4687 3164
2005/06 8590 4838 3752
2006/07 10665 6134 4531


Fig 2.6.1 Income, Expense & Gross Profit Tend


2.2 Major Finding
After doing this fieldwork, the researcher got the thorough knowledge of the financial position of the bank through the analysis of profit and loss position analysis. The major finding of the fieldwork can be listed as follows:

EBL is in profit since its first year of operation
- The profit trend of EBL is increasing in higher rate from its initial phase
- Personal expenses, interest expenses, operating expenses are the components of expenses. Among them interest expenses is the major component of expenses.
- Since interest income and interest expenses are the major component of income and expenses it contributed mostly in the profit/loss of the organization.

















CHAPTER III
SUMMARY, CONCLUSION AND RECOMMENDATION

3.1 SUMMARY
The bank has passed a long way from goldsmith to local money lender come to present modern situations. The role of the bank has paramount signification in the economic development of the country. Along with government’s participation there should be equal participation from private and public sector to perform, development activities with concept have given the birth of bank of Nepal.
EBL is a bank, which is not only broke even but also made a profit in its very first operation and up to now is in profit.

In the fiscal year 2002/03 EBL made a gross profit of Rs1763lakh and net profit of Rs854lakh. During the year the bank’s total income was about Rs5409lakh and total expenses Rs3636lakh. In the fiscal year 2003/04 EBL made a gross profit of Rs4386lakh and net profit of Rs942lakh. During the year the bank’s total income was about Rs6353lakh and total expenses Rs4386lakh. In the fiscal year 2004/05 EBL made a gross profit of Rs3164lakh and net profit of Rs1435lakh. During the year the bank’s total income was about Rs7851lakh and total expenses Rs4681lakh. In the fiscal year 2005/06 EBL made a gross profit of Rs3752lakh and net profit of Rs1708lakh. During the year the bank’s total income was about Rs8590lakh and total expenses Rs4838lakh. In the fiscal year 2006/07 EBL made a gross profit of Rs4531lakh and net profit of Rs2372lakh. During the year the bank’s total income was about Rs10665lakh and total expenses Rs6134lakh.



3.2 CONCLUSION
EBL emerged in1994A.D in private banking industry mainly to revitalize the economy by accelerating productivity in various sector and to provide efficient and effective customer service. The pioneer in the private sector bank EBL brought a revolution in the sluggish banking environment. It is the bank, which has been able to make a profit in the first year of operation which is due to the good quality of management and the efficient staff. With each passing years, EBL has manage to take its profit a new height. It adapted new technology available in the market.


3.3 RECOMMENDATION
After doing this fieldwork the researcher is quite impressed with the financial position of the bank. Even though EBL is doing pretty good business and is in profit since its operation, it has few shortcomings, which it has to overcome in order to maintain its status in this competitive business world. Few recommendations are given to the organization which is as follows:-
 EBL should adopt innovative strategies to keep pace with changing technology and business environment.
 The minimum balance required to open and operate account are high. Similarly, interest on lending, commission on banking services are also high which discourage general people and business people to approach the bank. So, the management should look upon the matter.
 Most of the bank’s services are centralized in urban areas only. The bank need to forward its strategy and services towards rural areas and deprived and priority sector so that the bank need not have to pay penalty to Nepal Rastra Bank for shortfall in investment. Those sector and the fulfillment of social responsibility also helps in flourishment of bank’s business in long run.
 Since manpower is the major assets of the organization. They should be properly trained and the management should take care of labour turnover. The management should adopt those policies so that experienced manpower can be retained.
 Since the main source is the income and expenses is interest earning and interest expenses, the bank must try to decrease the cost of interest bearing deposits and advance loans in various productive sectors.
 Marketing department should put more effort so that they would attract new clients and new business.

Hence, if the management looks into the above recommendation EBL will certainly reach to a position ahead of other banks.

















BIBLIOGRAPHY

 Bajracharya B.C (2050). Basic Statistics, Kathmandu: M.K. Publishers and Distributors.
 Dahal, Bhuban and Dahal, Sarita. (2056). A Hand Book of Banking. Kathmandu.
 Gupta, S.C. (1996), Fundamental of Statistics. Bombay: Himalayan Publishing.
 Khadka, Sherjung and Singh, Hridaybir. (2056). Banking Principles, Legislation and Practice. Kathmandu: Navin Prakashan
 Mithai, D.M. (1998). Money, Banking, International Trade and Public Finance. Kathmandu: Himalayan Publication House.
 Pant, Prem R. (2000). Field Work Assignment and Report Writing. Kathmandu: Buddha Academic Enterprise Ptv. Ltd.
 Timilsina, Yogendra. (2047). Banking Business in Nepal. Kathmandu.