Pawan-report.docx

RESEARCH REPORT ON Employee’s Satisfaction of Everest Bank By Ankit agarwal Roll no: 15429/15 Semester: VIII Kantipur College of Management and Information Technology

In Partial Fulfillment of the Requirements for the degree of Bachelors in Business Administration

DECLARATION This is to certify that I have the summer project entitled "Employee’s satisfaction of Everest Bank" under the guidance of Ms. Shubhanu Joshi in partial Fulfillment of the requirements for the degree of the Bachelor of Business Administration at faculty of management, Tribhuvan University. This is my original work and I have not submitted it earlier anywhere else.

Date: Name: Ankit Agarwal i

CERTIFICATE FROM THE SUPERVISOR This is to certify that the summer project entitled "Employee’s satisfaction of Everest bank" is an academic work done by "Ankit Agarwal” submitted in the partial fulfillment of the requirement for the degree of Bachelor of Business Administration at faculty of Management, Tribhuvan University under my guidance and supervision. To the best of my knowledge the information presented by him/her in the summer project report has not been submitted earlier.

………………………………. Ms.Shubhanu Joshi Research Advisor

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ACKNOWLEDGEMENT I take the opportunity to express my gratitude to all the concerned people who have directly or indirectly contributed the completion of this project. I extend my sincere gratitude to Ms. Shubhanu joshi for providing opportunity and resources on this project and provide the feedback and show the way to doing research time. Similarly, I would like to acknowledge all the respondent staff behaviors of KCMIT for the support they gave during the completion of my summer project. I would like the thank to the employs of the Everest bank Mr. Mahesh Bajracharya, head HR, Mr. Nawaraj Acharya, branch manager and my friends of their support cooperation, encouragement during the time of preparing this summer project.

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Contents DECLARATION ........................................................................................................................ i CERTIFICATE FROM THE SUPERVISOR ...........................................................................ii ACKNOWLEDGEMENT ....................................................................................................... iii CHAPTER 1 .............................................................................................................................. 1 INTRODUCTION ..................................................................................................................... 1 1.1 BACKGROUND INFORMATION ................................................................................ 1 1.2 Statement of the problem ................................................................................................. 4 1.3 Objective of Study ........................................................................................................... 4 1.4 Significance of the Study ................................................................................................. 4 1.5 Limitation of study........................................................................................................... 4 1.6 Literature review .............................................................................................................. 5 1.7 Theoretical framework ..................................................................................................... 8 1.8 RESEARCH METHODS ................................................................................................ 8 1.8.1 RESEARCH DESIGN .................................................................................................. 9 1.8.2 SOURCES OF DATA .................................................................................................. 9 1.7.3 DATA COLLECTION INSTRUMENT....................................................................... 9 1.7.4 POPULATION AND SAMPLING .............................................................................. 9 1.7.5 DATA ANALYSIS TOOLS ......................................................................................... 9 CHAPTER 2 ............................................................................................................................ 11 DATA PRESENTATION AND ANALYSIS ......................................................................... 11 2.1 ORGANIZATION SITUATION ................................................................................... 11 2.2 DATA PRESENTATION AND DATA ANALYSIS ................................................... 13 2.2.1 PROFITABILITY RATIO ANALYSIS ..................................................................... 13 2.2.1.1 RETURN ON ASSETS ........................................................................................... 13 2.2.1.2 RETURN ON EQUITY ........................................................................................... 16 2.2.1.3 EARNING PER SHARE ......................................................................................... 17 2.3 SWOT ANALYSIS ....................................................................................................... 19 2.4 FINDINGS AND DISCUSSIONS ................................................................................ 21 CHAPTER 3 ............................................................................................................................ 22 CONCLUSIONS AND ACTIONS IMPLICATIONS ............................................................ 22 3.1 CONCLUSIONS............................................................................................................ 22 3.2 ACTION/PRACTICE/POLICY IMPLICATIONS ....................................................... 22 v

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CHAPTER 1 INTRODUCTION 1.1 BACKGROUND INFORMATION The word profitability is composed of two words, namely, profit and ability. Profit is the difference between total revenues and total expense over a period. Profit is an excess of revenues over associated expenses for an activity over a period of time. Terms with similar meanings include ‘earnings’, ‘income’, and ‘margin’. Lord Keynes remarked that ‘Profit is the engine that drives the business enterprise’. Every business should earn sufficient profits to survive and grow over a long period of time. It is the index to the economic progress, improved national income and rising standard of living. Therefore, the financial manager continuously evaluates the efficiency of the banks in terms of profits. The profitability may be defined as the ability of a given investment to earn a return from its use. Profitability is a relative concept whereas profit is an absolute connotation. Profitability means ability to make profit from all the business activities of an organization, company, firm, or an enterprise. It shows how efficiently the management can make profit by using all the resources available in the market. According to Harward & Upton, “profitability is the ‘the ability of a given investment to earn a return from its use." A very high profit does not always indicate sound organizational efficiency and low profitability is not always a sign of organizational sickness. Therefore, it can be said that profit is not the prime variable on the basis of which the operational efficiency and financial efficiency of an organization can be compared. To measure the productivity of capital employed and to measure operational efficiency, profitability analysis is considered as one of the best techniques. The relation of the return of the firm to either its sales or equity of its assets is known as profitability ratio. Profit is necessary to survive in any business field for its successful operation and further expansion. It measures management’s overall effectiveness s shown by the return generated on sales and investment. Higher the profitability ratio, better the financial performance of the bank and vice versa. Standard Chartered Bank Nepal Limited has been in operation in Nepal since 1987 when it was initially registered as a joint-venture operation. Today the Bank is an integral part of Standard Chartered Group having an ownership of 75% in the company with 25% shares owned by the Nepalese public. The Bank enjoys the status of the largest international bank currently operating in Nepal. Standard Chartered has a history of over 150 years in banking and operates in many of the world's fastest-growing markets with an extensive global network of over 1700 branches (including subsidiaries, associates and joint ventures) in over 70 countries in the Asia Pacific Region, South Asia, the Middle East, Africa, the United Kingdom and the Americas. As one of the world's most international banks, Standard Chartered employs almost 87,000 people, representing over 115 nationalities, worldwide. This diversity lies at the heart of the Bank's values and supports the Bank's growth as the world increasingly becomes one market. With 15 points of representation, 23 ATMs across the country and with more than 450 local staff. Standard Chartered Bank Nepal Ltd. is in a position to serve its clients and customers through an extensive domestic network. In 1

addition, the global network of Standard Chartered Group gives the Bank a unique opportunity to provide truly international banking services in Nepal. Standard Chartered Bank Nepal Limited offers a full range of banking products and services to a wide range of clients and customers encompassing individuals, mid-market local corporate, multinationals, large public sector companies, government corporations, airlines, hotels as well as the DO segment comprising of embassies, aid agencies, NGOs and INGOs. The Bank has been the pioneer in introducing 'customer focused' products and services in the country and aspires to continue to be a leader in introducing new products in delivering superior services. It is the first Bank in Nepal that has implemented the Anti-Money Laundering policy and applied the 'Know Your Customer' procedure on all the customer accounts. Corporate Social Responsibility is an integral part of Standard Chartered's ambition to become the world's best international bank and is the mainstay of the Bank's values. The Bank believes in delivering shareholder value in a socially, ethically an environmentally responsible manner. Standard Chartered throughout its long history has played an active role in supporting those communities in which its customers and staff live. It concentrates on projects that assist children, particularly in the areas of health and education. For the first time in a history of Nepal on third September the Bank of the year 2002 was rewarded to standard chartered Bank LTD .By the Banker's financial time's .this resonation of the Banker's excellent performance, stringent compliance culture, introduction of new technology and successful strategy of diversifying into new products. 2. His govt. of Nepal the ministry 'of finance awarded the certificates of commercially of important person CPIO the Bank for being amongst the 10 highest tax paying institution in the country for the fiscal year 2057/2058. 3. FNCCI national excellence award 2002 awarded a commendation the Bank for obtaining the highest points in the category of "significant achievement in customer’s satisfaction and relationship management. Table: 1 List of Board Members Name Position Joseph Silvanus CEO and Director Anurag Adlakha Chairman Sujit Mundul Director Krishna K. Pradhan Professional Director Shankar Lal Agrawal Public Director Source: Annual Report of SCBL. Table: 2 List of Management team Name Suraj Lamichhane Diwakar Poudel Sujit Shrestha Bina Rana Joseph Silvanus

Position Financial Controller Head, Board and Marketing corporate affair Chief Information officer Head Human Resource Chief Executive officer and Head Retail Banking Head, Financial Markets and Financial

Adarsha Bazgain 2

Markets sales Head, Legal and Compliance Head, Transaction Banking Head, Commercial banking and international corporate Chief Risk officer and Senior Credit Officer Head, Financial Institutions

Shobha B. Rana Michael Siddhi Gorakh Rana Gopi K. Bhandari Anil K. Shrestha Source: Annual report of SCBL. Table: 3 List of Audit Committee Name Sujit Mundul Anurag Adlakha Sanjay Ballav Pant Sources: Annual report of SCBL.

Position Director-Chairman Director- Member County Head of Audit- Member Secretory

Objectives of SCBL   



To develop a customer oriented service culture with special emphasis on customer care and convenience. To increase our market share by following disciplined growth strategy. To leverage our technology platform and open scalable systems to achieve cost effective operations, efficient MIS, improved delivery capability and high service standards. To develop innovative products and services those attract our targeted customers and market segments.

Functions of SCBL        

Dealing Foreign Exchange Mobilization of the capital Advancing of loan Creation of Credit Agency Functions Overseas trading services Information and Offer services Know your customer Services

Products and services offered by SCBL Standard Chartered Bank Nepal has offered wide range of banking products and services in terms of whole sale and consumer banking ranging from individuals to local corporate, large public sector companies, Embassies, Aid Agencies, Airlines, Hotels and Government Corporations. Some Products launched and services offered can be listed below: 

Current 3

      

Saving Call and Term Deposit Account in Local and foreign currency Fund Transfer Service- Local and International draft SWIFT Internet Banking SMS Banking Personal, Education, Home and vehicle loans.

1.2 Statement of the problem The researcher stated of the issues or problem related to this research work, while doing research of SCBL. The problems are like what factors are responsible for profitability in the bank are difficult to know and it is also one of the emerging topics this days but there are no paper research done. 1.3 Objective of Study The purposes of the researcher are:  

To analyze the profitability position of SCBL. To measure the trend of net profit of SCBL.

1.4 Significance of the Study The study is practically usable and valuable to the major parties interested in the performance of SCBL. It is significant for following parties: 



 

Management: Administration interested in identifying profitability trend to take the necessary actions to improve the performance of the company and choose the right decisions. Government: Government interested in knowing which bank operate successfully or failed to take the necessary measures to avoid crises of the bankruptcy in these companies. Investors: Investors interested in such studies in order to protect their investment, and directing it to the best investment. Customers: Customers interested in knowing the profitability trend of bank to make deposit based on the indicators of success of the companies.

Furthermore, this study does have a paramount importance in providing a better ground for bank managers, business professionals, business initiatives and policy makers. Moreover, the researcher also contributes that this study can potentially serve as a stepping stone for further research in the area. 1.5 Limitation of study The sample size chosen may not be enough to give true representation of the total population.  The chance of personal prejudice and bias are possible at respondent level.  The time period of study was limited.

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 Due to their busy schedule sometime employee were unable to give proper attention to me. 1.6 Literature review Previous study materials, books and research reports related to the current research issues are considered as literature. Some literature survey related to this topic is as follows: Profitability is a measure of firm’s efficiency (Khan & Jain, 1998). It is also a control measure of the earning power of a firm as well as operating efficiency. Weston & Copland (1998) described profitability as net result of a large number of policies and decisions. Ratios are used to measure profitability and these give final answers about how effectively the firm is being managed. Trujillo-Ponce (2013) has examined empirically the main determinants of banks profitability for Spain in the period 1999-2009. The study concludes that a higher level of capitalization of analyzed banks had a positive impact on the return on average assets (ROAA), and negatively on the return on Average Equity (ROAE). The study also shows that the rate of growth of deposits, size and income diversification does not have an impact on banks profitability. In terms of external factors, market concentration, economic cycle, the inflation rate and the interest rate have influenced banks profitability. Dietrich and Wanzenried (2010) has focused on their research interests on empirical assessment of the key factors impact on profitability for a sample of 453 commercial banks in Switzerland, between 1999 and 2008. The study reveals substantial differences between banks in terms of profitability and concludes that better capitalized banks are more profitable. In addition, the authors have shown that the cost-to-income ratio had a significant impact on the return on assets only for the period before the crisis, while during the crisis a major negative impact on profitability was exercised by the loan loss provisions relative to total loans. Krishna (1996), in his article titled, “Profitability Analysis: An Overview”, has defined the profitability analysis in detail. According to the researcher, it is a rate expressing profit as a percentage of total aspects or sales or any other variable to represent assets or sales. What should be used in the numerator and the denominator to compute the profit rate depends upon the objective for which it is being measured. Brigham and Houston (2004) views that financial profitability lies in a firm’s ability to generate revenues in excess of its costs: for either long or short term. In the long run, a firm should be able to maintain the value of invested capital and able to yield a profit, which exceeds the opportunity cost of capital meaning that the yield generated by the firm should exceed the opportunity cost of capital. In order to examine long-term profitability, especially Net present value (NPV), profitability index (PI) and internal rate of return (IRR) are used. Pathak (2003) compared the financial performance of private sector banks in terms of financial parameters like deposits, advances, profits, return on assets and productivity. 5

Ramamoorthy (1997), in his paper titled, “Profitability and Productivity in Indian Banking International Comparisons and Implications for Indian banking observed that the old order of regulated market banks were not conscious of their profitability and productivity levels. But new economic order has compelled these banks to shift towards market-oriented, commercially driven banking system. He also observed in his study that performance of banks operating in different economic systems with different levels of economic development and varying degrees of regulations were not comparable. The results further revealed that profitability of a bank was function of allocation efficiency, volume of credit, provisioning for loan losses, interest rate movements and operating cost structure. He suggested that performance incentive plans, motivation, training and leadership of human resources and level of technology absorption can improve the productivity and profitability of the bank. Bhatia (1978), in his study titled, “Banking Structure and Performance − A Case Study of the Indian Banking System” attempted to analyze the economic performance of Indian banking system as reflected by its output, price and profitability during the period 1950-68. He found that profit of the Indian banking system during the said period had an upward trend. The study suggested deregulation of interest rates to enhance the profitability of financial institutions and to ensure a competitive banking environment which would ultimately result in better services. (Singla, 2008) revealed that profitability position of the banks was reasonable and sustained at a moderate rate during the study period. Increasing interest covering ratio and maintaining debt equity ratio over 1:1 indicated strong solvency position of the banks. Negative correlation between return on net worth and the debt equity ratio was revealed during the study period. Even interest income to working funds also had negative association with interest coverage ratio. It was also divulged from the study that the Non-Performing Assets to net advances was negatively correlated with interest coverage ratio. Beckmann (2007) investigates structural and cyclical determinants of banking profitability in 16 Western European countries. Empirical results show, in particular, that the diversification of banks' income has a positive effect, and the concentration of national banking systems does not significantly influence profitability, while the business cycle has a pro-cyclical impact on bank profits. Pasiouras and Kosmidou (2007) evaluate the impact of bank’s specific characteristics and the overall banking environment on the profitability of commercial domestic and foreign banks in 15 countries of the EU, between 1995 and 2001. The results of the empirical analysis show that the profitability of the EU commercial banks, regardless of their form of ownership, is influenced both by internal characteristics and by the changes in the global banking environment. Furthermore, the authors suggest that the ratio of equity to assets seems to be the most important determinant of profitability for domestic banks, while the cost to income ratio is the most important determinant of profitability for foreign banks.

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(Goel & Bajpai, 2013) used financial indicators like Liquidity, Capital Adequacy, and Profitability ratios to explain that there is no such great impact on Indian banks due to global recession for the time period 2006-2009. Jain (2006), in his article titled, “Ratio Analysis: An Effective Tool for Performance Analysis in Banks” discussed various ratios relating to profitability of the banks. The author classified the various ratios under three categories, viz. Costing Ratio, Returns / Yield Ratio and Spread Ratios. Such ratios can be used to understand a bank’s financial condition, its operation and attractiveness as an investment. He explained that such ratio analysis can be used to make an inter-branch comparison for investigating the strengths and weaknesses of individual banks and to enable them to take strategic decisions and initiate necessary corrective actions. Under costing ratio, the author advocated for computation of average cost of deposits, average cost of borrowings, average cost of interest bearing liabilities, average cost of funds and operating expenses to average working funds. Similarly under yield/return category, he computed ratios like yield on advances, yield on investment, average return on interest earnings, average return on funds and noninterest income to average working funds and total income. Under spread category, he sub-categorized the ratios like interest spread, net interest margin and burden ratios. The author discussed the significance of ratio analysis as a tool for evaluating the performance of different banks / bank branches. Apart from profitability ratios, the author mentioned the following categories of ratios for undertaking comparative performance of banks, viz. Productivity Ratios, NPA Ratio, Efficiency Ratio, Ratios on Shares (Shareholders front). Arora and Kaur (2006) made an attempt to review the performance of banking sector in India during the post-reforms period. Banking sector being an integral part of Indian financial system has undergone dramatic changes reflecting the ongoing economic and financial sector reforms. The main objective of these reforms has been to strengthen the banking system amongst international best practices and standards, which will have lasting effect on the entire fabric of Indian financial system. These financial sector reforms have stimulated greater competition convergence and consolidation in Indian banking sector. For the purpose of analysis, banks have been broadly categorized into four categories, i.e., private sector, foreign banks, nationalized banks, and SBI and its associates. They made a comparative appraisal of banks on the basis of seven key performance measures such as returns on assets (ROA), capital asset, risk weighted ratio, NPA to net advances, business per employee, net profitability ratio, NPA level and off-balance-sheet operations of commercial banks for a time period of 9 years, i.e., 1996-2005. The researchers deliberated the latest trends and developments in the banking sector. The analysis reveals that there is phenomenal development in the banking sector particularly in PSBs. Their performance is comparable with banks in other sectors. Bansal (2005), in his research work, attempted to find out the impact of liberalization on productivity and profitability of public sector banks in India. The researcher evaluated the productivity and profitability of 27 PSBs in the post liberalization period, i.e., from 1991-02. The productivity of all the PSBs has been measured on the basis of employee productivity (labour productivity), branch productivity and overall productivity. The researcher ranked 7

different banks from all the three levels of productivity. While measuring productivity he used parameters like Deposit, Advances, Business, Total Income, Total Expenditure, Burden, Spread and Net Profit. While measuring profitability of all the PSBs, the trend analysis results showed that net profits in absolute terms have increased for majority of the PSBs but profitability has witnessed a decline.

1.7 Theoretical framework Capital Strength

Operational efficiency Profitability Income Diversification

Liquidity Risk

Dependent variable Assets Quality

Independent variable

Fig.1 Theoretical framework In the above fig.1 Capital Strength, Operational efficiency, Income Diversification, Liquidity Risk, Assets Quality is dependent variable and profitability is independent variable. The equity-to- assets ratio measure how much of firms assets are owners fund. Cost to income ratio shows the overheads or cost of the firms including salaries and benefits, such as office supplies, as percentage of income. The concept of revenue diversifications follows the concept of portfolio theory which states that bank can reduce firm-specific risk by diversifying their portfolio. Liquidity risk is one the type of risk for banks; when bank hold a lower amount of liquid assets they are more vulnerable to large deposit withdrawals.

1.8 RESEARCH METHODS It includes publication, research, interview, surveys and other techniques. The research methods are listed as below

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1.8.1 RESEARCH DESIGN A research design includes how data to be collected and what instruments is used to analyze data. This research includes analytical and descriptive research design because this study includes mathematical models. 1.8.2 SOURCES OF DATA There are primary and secondary sources of data. Primary data are collected by researcher himself/herself. Secondary sources of data include those data which have already done. This study fetches quantitative data from secondary sources. 1.7.3 DATA COLLECTION INSTRUMENT The required data for the study is collected from primary and secondary sources. Primary sources are  

Field visit: The SCBL Bank located at Baneshwor Branch has been visited. Questionnaire: The questionnaires were designed with the views of management exports and friends to collect data.

Secondary sources are Bank websites, published articles and magazines, internet, past research paper. 1.7.4 POPULATION AND SAMPLING The population required for the study is taken from Baneshwor branch. This SCBL bank is selected as sample to collect the data on the basis of convenient method. For this report, the respected organization is selected easily and quickly without any incontinent or obstacles. Thus, this report is based on convenience sampling technique. 1.7.5 DATA ANALYSIS TOOLS For the analysis of data following tools are used: a) Financial tools b) Statistical tools a) Financial tools: There are several ways to Measure Company’s profit other than looking at bank account. There are different types of financial tools like Gross profit margin, Net profit Margin, Return on Assets, Return on Equity etc. Among various profitability analysis tools, researcher used following Profitability analysis tools:  Return on Assets (ROA)  Return on Equity (ROE)  Earnings Per Share (EPS) b) Statistical tools: There are many statistical tools. Among them researcher used following tools: 

Mean: The arithmetic mean, more commonly known as “the average,” is the sum of a list of numbers divided by the number of items on the list. The mean is useful in 9

 

determining the overall trend of a data set or providing a rapid snapshot of your data. Another advantage of the mean is that it’s very easy and quick to calculate. Standard deviation: The standard deviation, often represented with the Greek letter sigma, is the measure of a spread of data around the mean. Coefficient of Variation: A coefficient of variation (CV) is a statistical measure of the dispersion of data points in a data series around the mean. The coefficient of variation represents the ratio of the standard deviation to the mean, and it is a useful statistic for comparing the degree of variation from one data series to another, even if the means are drastically different from one another.

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CHAPTER 2 DATA PRESENTATION AND ANALYSIS 2.1 ORGANIZATION SITUATION Standard Chartered has a history of over 152 years in banking and operates in many of the world's fastest-growing markets with an extensive global network of over 1700 branches (including subsidiaries, associates and joint ventures) in over 70 countries in the Asia Pacific Region, South Asia, the Middle East, Africa, the United Kingdom and the Americas. As one of the world's most international banks, Standard Chartered employs almost 87,000 people, representing over 115 nationalities, worldwide. This diversity lies at the heart of the Bank's values and supports the Bank's growth as the world increasingly becomes one market. With 15 points of representation, 23 ATMs across the country and with more than 450 local staff, Standard Chartered Bank Nepal Ltd. is in a position to serve its clients and customers through an extensive domestic network. In addition, the global network of Standard Chartered Group gives the Bank a unique opportunity to provide truly international banking services in Nepal. Standard Chartered Bank Nepal Ltd. provides banking products and services for clients and customers, including individuals, mid-market local corporate, multinationals, large public sector companies, government corporations, airlines, hotels, embassies, aid agencies, NGOs, and INGOs in Nepal. It offers online services, supplementary cards, 24hour customer services, savings accounts, current accounts, fixed deposits, debit cards, mortgage loans, auto loans, cash backed loans, personal loans, life insurance, group insurance, and non-life insurance. The company was founded in 1987 and is based in Kathmandu, Nepal. It has branches in Kathmandu, Biratnagar, Birgunj, Butwal, Dharan, Lalitpur, Narayangarh, Nepalgunj, and Pokhara, Nepal. Standard Chartered Bank Nepal Ltd. operates as a subsidiary of Standard Chartered Bank. It was the first bank in Nepal to use the Digital Signature and Certificate (DSC). There are many branches of SCBL in Nepal. The branch Network of SCBL is            

Buddha Lazimpat Ktm Naya Baneshwore , Ktm New road , ktm Lalitpur Biratnagar Birgunj Butwal Dharan Pokhara Narayangadh Nepalgunj

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Standard Chartered Bank Nepal has been awarded the prestigious “Bank of the Year” award at The Banker Awards 2015. The award was announced at a grand gala dinner program held at an award ceremony in London on December 2, 2015. Now in its 16th year, The Banker Awards has become one of the most prestigious events within the industry. The Banker is the world's premier banking and finance magazine, read in over 180 countries around the world, The Banker is the key source of data and analysis for the industry. In addition to the Bank of the Year 2015 award, the Bank has also won three other prestigious awards this year viz. 2015 Euro money Awards for Excellence, Worlds Best Emerging Market Banks for 2015 from Global Finance and the World’s Best Consumer Digital Banking Awards for 2015 in Nepal from Global Finance Magazine. This is the fourth time Standard Chartered Bank Nepal has won the `Bank of the Year’ award. The Bank had earlier won this award in 2002, 2009 and 2013. The GDP growth remained lower in 2015/16 compared to the previous year. Delay in monsoon, prolonged strikes and obstruction in southern border points adversely affected the economy resulting in lower growth in 2015/16. According to the preliminary estimates of the Central Bureau of Statistics, the real GDP grew by 0.8 percent at basic price and 0.6 percent at producers’ price in 2015/16. Such growth rates were 2.3 percent and 2.7 percent respectively in the previous year17Economic activities in most part of FY 2015/16 were affected due to typical post-earthquake impact as well as prolonged agitation in the Terai region that began after promulgation of the new constitution. The obstruction created in movement of essential supplies including fuel from the customs points adjoining India, impacted the normal life and the overall business environment. Moreover, the slowdown continued 17 because of bottoming up of interest rates, surplus liquidity and low rate volatility; this is reflected in restrained performance of FY 2015/16. The Board is committed to managing risks and in controlling its business and financial activities in a manner which enables it to maximize profitable business opportunities, avoid or reduce risks which can cause loss or reputational damage, ensure compliance with applicable laws and regulations and enhance resilience to external events. To achieve this, the Board has adopted the SCB Group policies and procedures of risk identification, risk evaluation, risk mitigation and control/monitoring, besides implementation of the local regulations / NRB directives. The effectiveness of the Company’s internal control system is reviewed regularly by the Board, its Committees, Management and Internal Audit. The Audit Committee has reviewed the effectiveness of the Bank’s system of internal control during the year and provided feedback to the Board as appropriate. The Internal Audit monitors compliance with policies/standards and the effectiveness of internal control structures across the Company through its program of business/unit audits. The Internal Audit function is focused on the areas of greatest risk as determined by a risk-based assessment methodology. Internal Audit reports are periodically forwarded to the Audit Committee. The findings of all audits are reported to the Chief Executive Officer and Business Heads for initiating immediate corrective measures. 12

Employee banking segment of SCBL continues to be a significant contributor in retail banking business with eco-system continually being leveraged. Retail Banking has effectively driven client engagement through several small as well as big format events, both to source new/additional business as well as to gauge the client experience issues. The increasing potential in the Retail Banking business both from within ecosystem and beyond will be exploited to increase improve the performance. To deliver holistic financial solutions that will help small & medium sized entities in Nepal, the Bank has come up with a new segment, Business Banking (BB – erstwhile SME) in 2008 with a range of products. Over the period, number of initiatives has been taken to widen Business Banking catchment area. As a result of focused approach, our BB portfolio has been growing rapidly. The Bank is contributing in the expansion of productive sector in line with the Central Bank’s directive to help credit growth under the productive sector.

2.2 DATA PRESENTATION AND DATA ANALYSIS Presentation means the presentation of the collected data through table; figure etc. presentation is the process of understanding the study or the report and calculating the opinion. An analysis of a data means the process where the statement or the report gets resolve by breaking them into simple statement. Analysis means to find out something and give opinion about the presented data.

2.2.1 PROFITABILITY RATIO ANALYSIS A profitability ratio is a measure of profitability, which is a way to measure a company’s performance. Profitability is simply the capacity to make a profit, and a profit is what is left over from income earned after you have deducted all costs and expenses related to earning the income. Profitability ratios measure the efficiency with which company turns business activity into profits. Profit margins asses’ ability to turn revenue into profits. The profit margin shows the relationship between profit and sales and is mostly used for internal comparison. Therefore, the financial manager continuously evaluates the efficiency of the banks in terms of profits. Profitability shows the overall efficiency of the business concerns. The relation of the return of the firm to either its sales or equity of its assets is known as profitability ratio. Profit is necessary to survive in any business field for its successful operation and further expansion. It measures management’s overall effectiveness s shown by the return generated on sales and investment. Higher the profitability ratio, better the financial performance of the bank and vice versa. Profitability ratio can be calculated by following different ratio: 2.2.1.1 RETURN ON ASSETS The return on assets ratio, often called the return on total assets, is a profitability ratio that measures the net income produced by total assets during a period by comparing 13

net income to the average total assets. Your assets include current items such as cash and inventory, as well as long-lived items such as equipment, machinery, buildings and warehouses. In other words, the return on assets ratio or ROA measures how efficiently a company can manage its assets to produce profits during a period. Since company assets' sole purpose is to generate revenues and produce profits, this ratio helps both management and investors see how well the company can convert its investments in assets into profits. The return on assets ratio measures how effectively a company can earn a return on its investment in assets. In other words, ROA shows how efficiently a company can convert the money used to purchase assets into net income or profits. It only makes sense that a higher ratio is more favorable to investors because it shows that the company is more effectively managing its assets to produce greater amounts of net income. A positive ROA ratio usually indicates an upward profit trend as well. ROA is most useful for comparing companies in the same industry as different industries use assets differently. It is useful for measurement of the profitability of all financial resources invested in the bank assets. ROA gives investors a reliable picture of management's ability to pull profits from the assets and projects into which it chooses to invest. ROA is calculated by dividing the amount of net profit by the total assets. ROA = Net Income / Total Assets Table 4. Return on Assets of SCBL Year 2013/14 2014/15 2015/16 2016/17 2017/18

Net Income 1,336,589,187 1,290,025,348 1,292,494,632 1,421,596,136 2,189,898,090

Assets Ratio 53324102172 64926805120 65185732479 77408597693 82896263159

%(x) 2.51 1.98 1.98 1.84 2.64

Source: Annual Report of Standard Chartered Bank Nepal Limited Where, S.D = √ (∑X-A.M) ²/N A.M = ΣX/N C.V = (σ/A.M)*100

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(x- AM )² 0.1024 0.0441 0.0441 0.12250 0.2025 (Σx –AM) )²=0.5156 A.M = 2.19 S.D( σ )= 0.322 C.V= 14.70%

The above table represents the ratio of net income and total assets maintained by Standard chartered bank Nepal Limited in the fiscal year 2013/12 to 2017/18. The Return on Assets ratio of fiscal years 2013/14, 2014/15, 2015/16, 2016/17, 2017/18 are 2.51, 1.98, 1.98, 1.84 and 2.64 respectively and the mean, standard deviation and coefficient variation are 2.19, 0.322 and 14.70 respectively. It can be seen that the ratio is decreasing in every year. It means Net Income is Decreasing in fiscal year 2014/15 but in 2015/16 , 2016/17,2017/18 Net Income is increase and Total Assets is increasing every Fiscal year as shown in the table 2.1. It shows that SCBL is not effectively managing its assets to produce greater amount of Net Income. 3 2.5 2

Ratio= %

1.5 1 0.5 0 2013/14

2014/15

2015/16

2016/17

2017/18

Figure 1: Bar Diagram of ROA Source: Annual Report of Standard Chartered Bank Nepal Limited In the above bar diagram the ROA ratio is fluctuating per year. It shows inefficient use of bank’s assets and profitability is satisfactory every year.

Ratio% 3 2.5 2 1.5 1 0.5 0

2013/14

2014/15

2015/16

2016/17

15

2017/18

Figure 2: Line chart of ROA Source: Annual Report of Standard Chartered Bank Nepal Limited This ratio indicates how profitable a bank is relative to its total assets. It illustrates how well management is employing the bank’s total assets to make a profit. In the above trend line the ratio is fluctuating every year which means profitability is fluctuating and it implies that SCBL is holding an productive assets or the management is using the company’s assets to their maximum potential. 2.2.1.2 RETURN ON EQUITY Return on equity (ROE) is the amount of net income returned as a percentage of shareholders equity. Return on equity measures how efficiently a firm can use the money from shareholders to generate profits and grow the company. ROE is more than a measure of profit; it's a measure of efficiency. A rising ROE suggests that a company is increasing its ability to generate profit without needing as much capital. It also indicates how well a company's management is deploying the shareholders' capital. In other words, the higher the ROE is good. Falling ROE is usually a problem. However, it is important to note that if the value of the shareholders' equity goes down, ROE goes up. Unlike other return on investment ratios, ROE is a profitability ratio from the investor's point of view—not the company. In other words, this ratio calculates how much money is made based on the investors' investment in the company, not the company's investment in assets or something else. That being said, investors want to see a high return on equity ratio because this indicates that the company is using its investors' funds effectively. Higher ratios are almost always better than lower ratios, but have to be compared to other companies' ratios in the industry. Many investors also choose to calculate the return on equity at the beginning of a period and the end of a period to see the change in return. This helps track a company's progress and ability to maintain a positive earnings trend. ROE is one of the most important financial ratios and profitability metrics. It is often said to be the ultimate ratio or the ‘mother of all ratios’ that can be obtained from a company’s financial statement. It measures how profitable a company is for the owner of the investment, and how profitably a company employs its equity. Table 5: ROE of SCBL Years 2013/14 2014/15 2015/16 2016/17 2017/18

Net Income 1,336,589,187 1,290,025,348 1292,494,632 1421,596,136 2189,898,090

Total Equity 5087891542 594755808 752325164 1186402532 1549986963

Ratio(x)% 26.27 21.70 17.18 11.98 14.12

(x- AM )² 64.33 11.97 1.15 39.32 17.06 (Σx AM)²=134.18 A.M =18.25 S.D ( σ)=5.19

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Source: Annual Report of Standard Chartered Bank Nepal Limited Where, S.D = √ (∑X-A.M) ²/N A.M = ΣX/N C.V = (σ/A.M)*100 The above table represents the ratio of net income and total equity maintained by Standard chartered bank Nepal Limited in the fiscal year 2013/14 to 2017/18. The Return on Equity ratio of fiscal years 2013/14, 2014/15, 2015/16, 2016/17 and 2017/18 are 26.27, 21.70, 17.18, 11.98 and 14.12 respectively. And the mean, standard deviation and coefficient of variation of ROE ratio are 18.25, 5.19 and 26.83 % respectively. It can be seen that ratio is decreasing every year. It shows that company is not using investor’s fund effectively. Figure 3 : Bar Diagram of ROE

ROE ratio 30 25 20 15 10 5 0 2013\14

2014/15

2015/16

2016/17

2017/18

In the above bar diagram the ROA ratio is decreasing per year. It shows inefficient use of bank’s assets and profitability is decreasing every year. 2.2.1.3 EARNING PER SHARE Earnings per share (EPS) are the portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company's profitability. Earnings per share, also called net income per share, is a market prospect ratio that measures the amount of net income earned per share of stock outstanding. In other words, this is the amount of money each share of stock would receive if all of the profits were distributed to the outstanding shares at the end of the year. Earnings per share are also a calculation that shows how profitable a company is on a shareholder basis. So a larger company's profits per share 17

can be compared to smaller company's profits per share. Obviously, this calculation is heavily influenced on how many shares are outstanding. Thus, a larger company will have to split its earning amongst many more shares of stock compared to a smaller company. Table 5: EPS of SCBL Years 2013/14 2014/15 2015/16 2016/17 2017/18

Net income 1336589.187 1290025.534 1292494.632 1421596.136 2189890.90

(in thousand) No of share 2041672 2248161 2812426 3043512 3165345

Ratio %(x) 65.46 57.38 45.95 46.71 69.18

(x- AM )² 8.52 0.1936 120.78 104.65 149.82 (Σx AM)²=383.96 A.M =56.94 S.D ( σ)=8.77 C.V =15.41%

Where, S.D = √(∑X-A.M)²/N A.M = ΣX/N C.V = (σ/A.M)*100 The above table represents the ratio of net income and No. of Equity share maintained by Standard chartered bank Nepal Limited in the fiscal year 2013/14 to 2017/18. The Earning Per share ratio of fiscal years 2013/14, 2014/15, 2015/16, 2016/17 and 2017/18 are 65.46, 57.38, 45.95, 46.71 and 69.18 respectively. And the mean, standard deviation and coefficient of variation of Equity per share ratio are 56.94, 8.77 and 15.41% respectively. In the above table Net income is less than No. of Equity share which means low EPS. It shows that the return of each shareholder is not satisfactory. Figure: 5 Pie - chart of EPS

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23%

24%

2013/14 2014/15 2015/16

17%

2016/17

20%

2017/18

16%

In the above Pie-chart of Earnings per Share ratio is decreasing every year. It shows that the company is not able to generate significant dividend for investor. 2.3 SWOT ANALYSIS The SWOT analysis comprises of the organization’s internal strength and weaknesses and external opportunities and threats. SWOT analysis gives an organization an insight of what they can do in future and how they can compete with their existing competitors. SWOT analysis helps to develop a strong business strategy by considering all strengths, weakness, and opportunities and threats it faces in the market place. It can be internal and external. Strength and weakness are internal factors and opportunities and threats are external factors. The strengths, weaknesses, opportunities and weaknesses of Standard Chartered Bank Nepal Limited are: a) Strength  SCBL was the first bank to use Digital Signature and Certificate for the first time in Nepal.  Standard Chartered Bank Nepal has been awarded the prestigious “Bank of the Year” award at The Banker Awards 2015.In addition to the Bank of the Year 2015 award, the Bank has also won three other prestigious awards this year viz. 2015 Euro money Awards for Excellence, Worlds Best Emerging Market Banks for 2015 from Global Finance and the World’s Best Consumer Digital Banking Awards for 2015 in Nepal from Global Finance Magazine. This is the fourth time Standard Chartered Bank Nepal has won the `Bank of the Year’ award. The Bank had earlier won this award in 2002, 2009 and 2013.  It offers online services, supplementary cards, 24-hour customer services, savings accounts, current accounts, fixed deposits, debit cards, mortgage loans, auto loans, cash backed loans, personal loans, life insurance, group insurance, and non-life insurance. 19

    

It has qualified, experienced and dedicated human resources. Being a joint venture is one of the strength of bank as it helps to improve a lot in operation of bank. Good interpersonal relation between every individual of the organization. Technologically well developed. Strong relation with foreign competitors.

b) Weakness    

Lesser emphasis on small enterprises. Current profitability ratio is low Capital of investors is not properly utilized. The bank is now experiencing a loss. The growth rate is decreasing in each year. The growth rate is decreasing because of the impact of earthquake, strikes, lack of coordination in between the managers of different branches.

c) Opportunities  Standard Chartered Bank was approved of the permission from The Government of Nepal. The bank now has a whole new prospect opening up and also the opportunity to introduce a wide array of Nepalese Banking products. It also has the prospect of expanding its customer base. The country’s growing population is gradually and increasingly learning to adapt to and use the banking service. As the bulk of our population is middle class, different types of Banking products will have a very large market.  More Branches around Kathmandu specially and all over Nepal will enable Standard chartered bank Nepal Limited to capture more market share, and hold a stronger competition against local banks.  By offering more attractive interest rates, and lowering the minimum balances eligible for interest, the bank can attract a lot of the old customers who have strewn away to other banks as well as new customers. c) Threats  Increased competition by other foreign banks is a threat to SCB. Furthermore, the new comers in private sector such as Nabil Bank, Mega Bank are also coming up with very competitive products. With customers shifting to these banks, SCB’s profits, as well as market share is falling, and it faces the threat of being wiped out by competition. Standard Chartered Bank Nepal Limited needs to be strong to compete with those National and International bank.  Political Instability, Promulgation of new Constitution and Unstable Government is also a threat to Standard Chartered Bank Nepal Limited.

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2.4 FINDINGS AND DISCUSSIONS As stated above, the main objective of this research is to analysis the profitability position of standard chartered bank in five fiscal years. The financial performance of Standard Chartered Bank Nepal Limited is not satisfactorily. The presentation of data can be summarized as of the following findings and discussions:  The Net income in each fiscal year is fluctuating i. e Net income in fiscal years 2013/14, 2014/15, 2015/16, 2016/17, 2017/18 is 1336589.187, 1290025.534, 1292494.632, 1421596.136, and 2189890.90 respectively.  The Return on Assets (ROA) of Standard Chartered Bank Nepal Limited shows a fluctuating trend which means SCBL is managing its assets effectively to increase Net Income  The Return on Equity (ROE) of Standard Chartered Bank Nepal Limited is also is in decreasing trend which means SCBL is not using its investor’s fund effectively.  Earnings per Share (EPS) of Standard Chartered Bank Nepal Limited are also is in decreasing trend which means company is not able to generate significant dividend to its shareholders.  Decreasing in trend of all ratio shows the bank’s unsatisfactory position  Bank’s assets are not utilizing effectively which shows the ineffective management system of SCBL.  Standard Chartered Bank Nepal limited has won the Bank of the year award in 2002, 2009, 2013 and 2015.  SCBL is a first bank to use Digital Signature and Certificate in Nepal.  The Mean, Standard deviation and coefficient of variation of ROA are 2.19, 0.322 and 14.70 respectively.  The Mean, Standard Deviation and coefficient of variation of ROE are 18.25, 5.19 and 28.43 % respectively.  The Mean, Standard Deviation and Coefficient of Variation of EPS are 56.94, 8.77 and 15.41% respectively.

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CHAPTER 3 CONCLUSIONS AND ACTIONS IMPLICATIONS 3.1 CONCLUSIONS In the research report, researcher focuses on the profitability analysis of Standard Chartered Bank Nepal Limited which covers the study of five fiscal year i.e. from 2013/14 to 2017/18. After studying the data of last 5 years, the researcher analyzed the” Profitability Position of Standard Chartered Bank”. The researcher has collected the information from Secondary sources and has used analytical research design. Researcher has used Return on Assets (ROA), Return on Equity (ROE), Earning per Share (EPS) as a profitability analysis tools and Standard deviation, Mean and Coefficient of Variation as Statistical tools. Though the main objective was to find out the trend analysis of Standard Chartered Bank Nepal Limited, researcher has also included SWOT analysis of Standard Chartered Bank Nepal Limited. It has found that during last 5 years profitability is in declining trend. Going through this project researcher found that the capital of investors is not fully utilized and the bank’s assets are not properly managed and this results into low performance of SCBL.

3.2 ACTION/PRACTICE/POLICY IMPLICATIONS From above finding, it is clear that SCBL is not strong in all fields. Therefore the following actions or practice should be brought into highlight to overcome weakness and inefficiency and to increase the growth rate of bank. o The Profitability ratio shows that the profitability position of SCBL is not satisfactory. It should increase the growth trend in future. For this SCBL should understand that profit is the key success of any business. The bank also cannot survive without profit. So, SCBL should keep in mind for profit maximization. But in long run Bank should concern on shareholder’s wealth maximization. o Branches existing in some limited areas will not enable a bank to boot up its sales by increasing its services. Therefore, SCBL should open new branches at certain places every year after making feasibility of studies. o SCBL should also increase its investment in government securities. Even though a government security has low interest rate, they are risk free assets. o Low ROA means inefficient management of bank’s assets. So, to increase ROA ratio, SCBL should build effective and efficient management system and for this there should be coordination and cooperation between the management of every branches. o Today with the globalization, the numbers of competitors are increasing. Therefore for attraction of deposit SCBL should bring different attractive programs, facilities, programs etc.

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