Liquidity Position of Citizen Bank
Liquidity Position of Citizen Bank
ON
LIQUIDITY POSTION
OF
KATHMANDU, NEPAL
Submitted To:
Office of dean
Faculty of Management
Purbanchal University
Biratnagar
Submitted By:
Smita Shrestha
Symbol No:
Of
April,2014
Acknowledgement
This report has been prepared in partial fulfillment of the requirement for the degree of
Bachelor Administration (BBA) 5th semester. I would like to express my gratitude to
Purbanchal University for providing me with a great opportunity of preparing this project
report in accordance to its syllabus. I was very much anxious, and excited writing a report
of this kind, first time ever in my career. What so ever the situation, this report is finally
prepared with the help and guidance from my teachers and friends. I highly appreciate
and honor the efforts of Purbanchal University to develop required attitude, abilities and
practical skills in students which constitute a foundation for their competent and
responsibilities business managers.
I would like to thanks those who help in this project report .My thanks go to lectures of
field report whose valuable suggestion and advices guided to the completion of this
report.
And lastly I would like to thanks staffs of Citizen Bank International Ltd for
co-operation in providing all the necessary information and data for preparing this report.
Thank you,
Recommendation
Acknowledgement
Abbreviations
Page no
Chapter I: INTRODUCTION 1
Title
1.1General background 1
1.1.1Introduction of banks 1
1.1.2 Commercial banks in Nepal 2
1.1.3 Introduction of Citizen Bank International Ltd 2-3
1.1.4 List of Commercial bank in Nepal 4-5
1.1.5 Branches of CBIL 5-6
1.1.6 Nature of study 7
2.1.1Financial Analysis
3.1 Summary 29
3.2 Conclusion 29
3.3 Recommendation 30
Bibliography
Annex
ABBERVATIONS
& And
% Percentage
No Number
FY Fiscal Year
LIST OF FIGURES
Websites:
www.ctznbank.com
www.google.com
www.financialmarket.com
pg. 8
CHAPTER –I
INTRODUCTION
1.1GENERAL BACKGROUND
According to Scholars, “The bank is defined as factory of money for credit where it does
not purchase goods and sells it rather produces credit inform of deposit and sells it
inform of loans.” Thus in conclusion, we can say that bank is an organization which
deals with the monetary transactions for the mobilization of idle money or deposits in
productive sectors, is essentially essential for the development of the whole net.
pg. 9
1.1.2 COMMERCIAL BANK IN NEPAL
The history of financial and economic development in Nepal is not very old. It has gone
through different stages, during the PM Ranodip Singh around 1972 A.D. “TEJARATH
ADDA” was introduced, which brought a reform in economic and financial section. The
main purpose of “TEJARATH ADDA” was to provide credit facilities to the general
public at confessional rate. However the installment of “KHUSI KHANA” as a banking
agency during the king Prithivi Narayan Shah could also be regarded as the first step
towards banking in Nepal. After that the first commercial bank of Nepal, Nepal bank
Limited (NBL) was lunched with the cooperation of imperial bank of India in November
1937. Holding 51% government equity. The second commercial bank, Rastriya Banijya
bank come into existence in 1966 A.D. with 100% government ownership. In early 1980,
to meet the need of health completion in the financial system, Nepal allowed to entry of
foreign banks as joint ventures with up to maximum of 50% equity participation.
Nepal Arab bank limited was the first joint venture bank which was established with the
joint venture of Arab bank emirates in 1984. in 1986, Nepal grind lays bank limited (now
chartered bank limited) entered in Nepali financial market as a joint venture with ANZ-
Grind lays.
pg. 10
economic development of the country Massive changes and developments have taken
place during the past two decades in the financial sector. Amidst all these changes, for
economic growth and development of New Nepal, Liberalization, Privatization and
Globalization in this sector has given birth to the largest commercial bank,.
It is managed by a team of experienced bankers and professionals It provides various
banking services to a wide range of customers including banks, insurance companies,
industrial trading houses, airlines, hotels, and many other sectors
Vision
To be the leading bank known for its service excellence in the region.
Mission
To be a trustworthy partner for the progress of individuals and institutions by designing,
producing and delivering the best financial solutions. The Bank will constantly strive to
inculcate in its services five corporate values as follows:
Customer Focus
we are committed to meet the financial needs of our customers and exceed their
expectations through innovative solutions.
Service Excellence
we promise to deliver customer centered products and services par excellence.
Human Resource
We employ bright, honest, helpful and pleasant people. We nurture and empower them to
achieve their full potential.
Corporate Governance
We believe in being accountable, conducting business ethically and maintaining
transparency.
pg. 11
Social Responsibility
We are committed to take social initiatives for the development of the nation.
pg. 12
District Branch location
pg. 13
Banke Nepalgunj Branch Dhambouji Chowk,
Bhaktapur Khauma-15
Dhanusa BhanuChowk-2
Kalanki Branch
Kathmandu
Ganesh Man Singh Marg, (Near Kalanki Mandir)
Maitidevi Branch
Kathmandu
Setopul, Maitidevi
Lalitpur Chayabahal-2
pg. 14
Parsa Birgunj Branch,Adarsha Nagar Chowk,Main Road
Liquidity is the availability of cash amount and at the time of needed at a reasonable cost.
Liquidity can be defined as bank’s capacity to pay cash in exchange of deposits. And
assets is said to be liquid when it is readily converted into cash with little or no capital
loss or price deprecation.
It is the status & part of the assets which can be used to meet the obligation of the banks.
Commercial bank holds liquid assets balances in the form of currency, bank balance,
marketable securities and other assets immediately convertible into cash. Liquidity can be
viewed in terms of liquidity stored in the balance sheet and in terms of liquidity available
through purchase funds.
Commercial banks need liquidity to meet loan demand and deposit withdrawals such as:
pg. 15
Repay deposits:
The various deposits taken by bank are repayable on demand or fixed maturity along with
interest, so demand for liquidity arises.
Banks carry out off balance sheet activities like letter of credit, acceptance, guarantee,
forward exchange contract etc. For carrying out all those activities, the bank needs
sufficient liquidity.
The main profit earing function of banks is by giving loans and advances. Some loans are
disbursed at once while some loans are withdrawn by the customers as per their
requirement.
To meet foregoing demands for liquidity, banks can draw upon several potential sources
of supply. The most important sources is receipt of new customer deposits, both from
newly opened accounts and from new deposits placed in exiting accounts. Another
element in the supply of bank liquidity from customers repaying their loans.
These various sources of liquidity demand and supply come together determine each
bank’s net liquidity position at any moment in time.
The purpose of managing liquid assets is to minimize the opportunity cost of holding
cash and maximizes the opportunity cost holding cash and maximize on the portion of the
funds that is not required immediately. Business firms need to maintain a certain degree
of liquidity in the form of cash in hands, bank deposits & marketable securities to meet
daily operating expenses and short term financial obligation.
pg. 16
1.2 Area of study
Liquidity ratios are used to determine a company’s ability to meet its short-term debt
obligations. Investors often take a close look at liquidity ratios when performing
fundamental analysis on a firm. Since a company that is consistently having trouble
meeting its short-term debt is at a higher risk of bankruptcy, liquidity ratios are a good
measure of whether a company will be able to comfortably continue as a going concern
any type of ratio analysis should be looked at within the correct context. For instance,
investors should always look at a company’s ratios against those of its competitors, its
sector and its industry and over a period of several years. In this issue’s Fundamental
Focus, we investigate liquidity ratios using time-series analysis, competitive analysis and
sector and industry analysis.
pg. 17
The demands for bank liquidity are rarely equal to the supply of the liquidity at
any particular moment in time. The bank must continually deal with either a
liquidity deficit or liquidity surplus.
The method which is use in the research is called research methodology. How the data is
collected and which source the research use for getting the data is under the research
methodology. Research methodology covers the data analysis tools as well. It helps in
carrying out the entire research work in desired way.
pg. 18
The primary data, which are collected directly from the question answer, direct
interview with customer and office staffs.
The secondary data are collected from respective annual reports especially from
the Citizen bank web sites and various other journals and from security bond Nepal
(SUBO) and Nepal stock exchange (NEPSE).
Primary data:
Primary data are those fresh and original data, which are collected and recorded by the
investigator or researcher. They are collected from face to face dealing with the investors
and members in the organization.
.Secondary data:
Secondary data are those data that have been collected earlier for some purpose.
These data are borrows from others who have collected them for some purpose.
This fieldwork report is total based on the secondary data. The sources of
secondary data are as follows:
CBIL Reports.
Website of CBIL, www.ctznbank.com
pg. 19
1.6.5 Data collection procedure
As stated earlier, this report is purely based on secondary data annual report of the bank
for the study. This report is prepare by using real data obtained from various sources like
financial news newspaper, magazine of commercial work and annual report.
Data analysis tools means which tools the research used for present and analyzed the
data. The main tools of analysis are mathematical and statistical tools. In this reports
statistical and financial ratio tools is used for data analysis. Mean and correlation is
calculated for analysis the data as statistical tools
pg. 20
Ratio gives false result, if they are calculated from incorrect accounting data.
Ratios are calculated on the basis of past data. Therefore, they don’t provide
complete information for future forecasting.
Chapter-II
2.1Data presentation
2.1.1Financial Analysis:
The process of evaluating businesses, projects, budgets and other finance-related entities
to determine their suitability for investment. Typically, financial analysis is used to
analyze whether an entity is stable, solvent, liquid, or profitable enough to be invested in.
When looking at a specific company, the financial analyst will often focus on the income
statement, balance sheet, and cash flow statement. In addition, one key area of financial
analysis involves extrapolating the company's past performance into an estimate of the
company's future performance. Financial analysis can be performance by insiders or by
pg. 21
parties outside the firm visa creditors, investors, government, financial analysis and
others. The primary tools of the financial analysis are financial ratio.
But the reporter isn’t subject to calculation of financial ratio.by the topic. The report is
limited to the calculation of the set of commonly used liquidity ratios and integrated
models analyzing the liquidity position. Generally, the liquidity position is the key of the
creditors to know the firm’s ability to meet there claim over the short period of time.
However the analysis in this report is not interested in analyzing the firm’s ability to meet
their current obligation.
pg. 22
1. Liquidity ratios
2. Leverage ratios
3. Activity ratios
4. Profitability ratios
5. Market value ratios
Liquidity ratios measure the firm’s ability to meet current obligations.
Leverage ratios show the proportions of the debt & equity in financing the firm’s asset
this ratio is known as debt management ratio.
Activity ratio also known as asset management ratios, measure how effectively the firm
managing its assets.
Profitability ratios measure the overall performance & the effective ness of the firm. It
shows the combined effects of the liquidity, assets management and debt management on
operating results.
pg. 23
translate sales into profit at different stages of measurement. Some major profitability
ratios are performed below :
Gross Profit
GPM= x 100
Sales
Table:2.1
Gross Profit Ratio (In millions)
Fiscal Year Gross Profit Total Interest GPR
Revenue
2065/66 150.64 758.256 19.87%
2066/67 305.14 1398.83 21.97%
2067/68 312.37 1795.23 17.41%
2068/69 355.39 1980.32 17.94%
2069/70 627.02 2211.98 28.34%
Source: Annual report of CBIL( FY 2065/66- 2069/70)
pg. 24
Table shows the change in gross profit ratio of Citizen Bank International Limited from
the period 2065/66 to 2069/70. The highest GPR was 28.34% in the fiscal year 28.34%
and the lowest was 17.41% in the fiscal year 2067/68.
Figure 2.1
Gross profit ratio
2000
1500
1000
500
0
2065/66 2066/67 2067/68 2068/69 2069/70
The above bar diagram shows the GPR of CBIL which is decreasing at first year 2065/66
and slowly increasing at last 4 years.
pg. 25
When doing a simple profitability ratio analysis, net profit margin is the most often
margin ratio used. It is ratio between net income and sales. The net profit margin shows
how much of each sales dollar shows up as net income after all expenses are paid.
The formula for net profit margin is:
Net Profit
NPR = x 100
Sales
Table 2.2
Net Profit Ratio (NPR):
(In millions)
Fiscal Year Net Profit Total Interest NPR
Revenue
2065/66 95.809 758.256 12.68%
2066/67 193.56 1398.83 13.87%
2067/68 198.56 1795.23 11.06%
2068/69 224.79 1980.32 11.35%
2069/70 413.24 2211.98 18.68%
Source: Annual report of CBIL( FY 2065/66- 2069/70)
Table and chart shows the change in net profit ratio of Citizen Bank International Ltd.
from the period 2065/66 to 2069/70. The highest NPR was 18.68 % in the fiscal year
2069/70 and the lowest was 11.06 % in the fiscal year 2067/68.
Figure 2.2
Net profit ratio
pg. 26
Net profit ratio
100%
90%
80%
70%
60% NPR
Total Intrest Revenue
50% Net profit
40%
30%
20%
10%
0%
2065/66 2066/67 2067/68 2068/69 2069/70
The above bar diagram shows the PR of CBIL which is decreasing at first year 2065/66
and slowly increasing at last 4 years.
It shows the relationship between operating profit and sales and indicates operating profit
of a firm. Higher operating profit ratio is preferred because it is good sign of operating
efficiency of a firm.
Table 2.3
Operation Profit Ratio:
(in millions)
Fiscal Year Operation Profit Total Interest Operation Profit
Revenue Ratio
pg. 27
2065/66 758.256 36.36%
275.74
2066/67 405.51 1398.83 28.98%
2067/68 461.90 1795.23 25.79%
2068/69 435.22 1980.32 21.97%
2069/70 919.10 2211.98 41.55%
Source: Annual report of CBIL( FY 2065/66- 2069/70)
Table shows the change in operating profit ratio of CBIL from the period 2065/66to
2069/70. The highest OPR was 41.55% in the fiscal year 2069/70 and the lowest was
21.97% in the fiscal year 2068/69.
Figure 2.3
Operation profit ratio
The above bar diagram shows the operation profit ratio which is increasing at first
2065/66 year and slowly decreasing at 2066/69 and lastly it increasing in 2069/70.
Net profit
ROA= x 100
Total assets
Table 2.4
Return on Assets
( in millions)
Fiscal Year Net Profit Total Assets ROA
2065/66 95.809 12966.04 0.00735
2066/67 193.56 16516.88 0.0117
2067/68 198.56 16816.49 0.0118
2068/69 224.79 20068.50 0.0112
2069/70 413.24 25979.51 0.0159
Source: Annual report of CBIL( FY 2065/66- 2069/70)
From above table we can see that total assets is increasing all over the year and the net profit
is increasing process which makes ROA process. The highest ROA obtained is 0.0159 which
is in the year 2069/70 and the lowest is 0.00735 which is in the year 2065/70.
Figure 2.4
Return on Assets
pg. 29
Return on assets
30000
25000
20000
15000
10000
5000
0
2065/66 2066/67 2067/68 2068/69 2069/70
The above bar diagram shows the Return on ratio which is decreasing at first 2065/66year
and increasing at last 4 years.
Net profit
ROE = x 100
Total equity
Table 2.5
Return on Equity
(in millions)
Fiscal Year Net Profit Equity ROE
2065/66 95.809 9.23%
2066/67 193.56 14.79%
2067/68 198.56 8.89%
2068/69 224.79 9.85%
pg. 30
2069/70 413.24 17.37%
Source: Annual report of CBIL( FY 2065/66- 2069/70)
14
12
SROE
9.23%
10 14.79%
8.89%
9.85%
8 17.37%
eries 3
Series 2
6 Net Profit
95.809
193.56
4 198.56
224.79
413.24
2
0
Category 1 Category 2 Category 3 Category 4
Net profit
EPS=
No of common share
pg. 31
Table 2.6
Earnings per share
Source:
Fiscal Year Net profit No. of common EPS
Annual
share
2065/66 95.809 100.00 0.95% report
of 2066/67 193.56 120.69 1.60%
2067/68 198.56 210.00 0.94%
2068/69 224.79 210.18 1.06%
2069/70 413.24 210.18 1.96%
CBIL( FY 2065/66- 2069/70)
Table shows the change in EPS of Citizen Bank from the period 2065/66 to 2069/70. The
highest EPS was 35.63 in the fiscal year 2064/65 and the lowest was 12.68 in the fiscal year
2068/68. Therefore from above analysis we can say that the earning power of NCCB is in
good condition
Figure 2.6
pg. 32
Earnings per share
Table 2.7
pg. 33
Interest spread Ratios
Interest Spread
Year Interest Income Interest expenses Total Assets
Ratio (in %)
12966.04
2065/66 758.25 508.80 758.21%
2066/67 1398.83 950.90 16516.88 1398.77%
2067/68 1795.23 1236.32 16816.49 1795.15%
2068/69 1980.32 1405.86 20068.50 1980.25%
2069/70 2211.98 1176.91 25979.51 2211.93%
Source: Annual report of CBIL( FY 2065/66- 2069/70)
30000
25000
20000
Interest Income
Interest expenense
15000 Total Assets
5000
0
2065/66 2066/67 2067/68 2068/69 2069/70
pg. 34
2.3 Major Finding
From the primary sources, the liquidity position of CIBL is in good position. It
maintains its financial position in every situation. The customers of this bank are
satisfied with this bank.
The legal documents demanded by bank in regard loans and deposit is bound to
make any genuine costumer fill irritated, so the banks should appropriate
stapes toward it.
The bank should give immediate response to the new starting business by
lowering the loans provided.
The
pg. 35
CHAPTER-III
3.1 Summary
It is growing and doing well with sound participate management and efficiency of
employees. It has made its unique position in the competition of commercial bank.
pg. 36
This study is confined to Citizen Bank International Limited is done with the main purpose of
analyzing the profitability performance of this bank from the FY 2065/66 to FY 2069/70. The
data presented in the tabular and graphical forms. A ratio analysis has been used to evaluate
the profitability performance of this company. Thus, this report gives the general idea about
the profitability position of CIBL.
3.2 Conclusion
The main objective of this study is to analyze the liquidity position of CBIL and to
provide recommendation based on the study. From the analysis of primary and
secondary, we have rough idea about the liquidity position trend of CBIL for the period
2065/66 to 2069/70 .the ratio of cash and bank balance to current assets of CBIL is
getting stronger and better. . The detailed conclusion of every ratio is as follows
The highest GPR is 28.34% in the FY 2069/70 and the lowest is 17.41% in the FY
2067/68. It declines due to high margin between gross profit and total interest
revenue (sales).
The highest NPR is 18.68% in the FY 2069/ 70 and it lowest NPR is 11.06% in
FY 2067/68. NPR is regularly declining due to large margin between the net profit
and the total interest revenue.
The highest OPR is 41.55% in the FY 2069/70 and the lowest is 21.97% in the
year 2068/69. It declines due to high margin between earning and sales (interest
revenue).
The ROA of the starting FY 2065/66 is 0.00735 and it increasing throughout the
year and at the end FY 2069/70 it becomes 0.0159. Here, ROA increasing due to
heavy investment on assets and getting returns.
pg. 37
The ROE of NCCB is in declining position. The ROE of the starting FY 2064/65 is
0.7280 which is good enough but in the ending FY 2068/69 it declines to 0.0924
which shows the companies ineffectiveness towards returns of net profit.
The Earning Per Share (EPS) of CBIL at starting FY 2065/66 is 9.95% 1.60%
and 0.94% but it increase to 1.06% and 1.96% at last 2 years.
The interest spread ratio of CIBL at first year 758.21 % and it regularly increasing.
The lowest ISR is 758.21% at the beginning year FY 2065/66. ISR increase due to
having the large margin between interest in deposit and interest while providing
loan
3.3 Recommendation
From the above study, it can be considered that the current position of liquidity of CIBL
is fairly well enough. However, the following recommendation can be made based on the
study.
CIBL should maintain the current ratio of cash and bank balance to current assets
ratio.
Formulate the clear vision, mission of the organization to attract customers and
make aware to employees and customers.
Show the interest rate on deposits and create awareness of the service of the
organization for landing to customers by displaying in notice board.
Standardize the operations of the various departments in all branches of the banks.
Improve service quality of official so as to maintain customer faith and image of
the bank.
pg. 38