CHAPTER – I

Introduction

1.1. History of Bank:

Bank is financial institution which deals with monetary business. Bank is one of the most
important financial institutions in the economy and is very essential for the business Banks are
fundamental components of the financial system, and are also active players in financial markets.
The essential role of a bank is to connect those who have capital (such as investor or deposits),
with those who seek capital (such as individuals wanting a loan, or business wanting to grow).
Bank has a vital role to play develop a country’s economy.

The name bank derives from the Italian word banco “desk/bench”, used during the renaissance
by Jewish Florentine bankers, who used to make their transactions above a desk covered by a
green tablecloth. However, there are traces of banking activity even in times ancient, which
indicates that the word ‘bank’ might not necessarily come from the word ‘banco’. Bank helps not
only the big organization, but it also helps individuals. Those financial institutions offer widest
range of financial services. So bank services and its functions have to be said as “Financial
Supermarkets”.

Bank is also an organization, usually a corporation, chartered by a state or federal government,

which does most or all of the following: receives demand deposits and time deposits, honors
instruments drawn on them, and pays internet on them; discounts notes, makes loan, and invest in
securities; collects checks, drafts, and notes; certifies depositor’s checks; and issues drafts and
cashier’s checks. The principle types of banking in the modern world today are commercial
banking and central banking. A commercial banker is a dealer in money and in substitutes for
money such as cheques or bill of exchange.

Commercial banking is also known as business banking. It provides checking accounts, saving
accounts, and money market accounts and that accepts timely deposits. The basis of banking
business is borrowing from individuals, firms, and occassionally government i.e. receiving

1
deposits from them. A bank must always have cash balances on hand in order to pay its
depositors upon demand or when the amount credited to them becomes due. It must also keep a
proportion of its assets in forms that can easily be converted to cash. A bank can create credit for
use by issuing additional notes or by making new loans, which in turn becomes new deposits.

Another types of banking as the name suggests, it is carried out by central bank, bankers to
government and to commercial banks and other financial institutions. They are often responsible
for formulation and implementing monetary and credit policies usually with cooperation with the
government. Some institutions often called banks and such as financial companies or the
cooperatives do not perform banking functions described as above and best classified as financial
intermediaries. These financial intermediaries cannot however, create money (i.e. credit) as the
commercial banks do as there are some limitations to such financial institutions. Certain concepts
are not addressed here that nevertheless fundamentals to banking and are treated in the articles
accounting and money.

Bank is a financial institution that deals with monetary transaction. The role of money in the
economy is very important. Proper and well – planned management of money directs and
enhances the health and productivity of total financial sectors and the performance of financial
sectors thereof affect the growth of economy. Hence money needs to be managed. The main
function of bank is collecting deposits (fixed, saving, call etc.) from the public and advancing
loan who need it. This way the whole infrastructure of national development, direction of
economy, rate of progress and even the habit of people is being affected by the function of
banking system. Therefore, existence of a bank is for the change in every aspect of human being
and its presence is for the upliftment of people.

Banks are the most important among financial institutions in the economy. They are the principal
source of credit for millions of individuals, families and government. Banks have also evolved
itself as an integral part of trade, commerce and industry. Worldwide, banks grant more
installment source of financing short-term working capital for business loans for new plant and
equipment.

2
According to Geoffrey Crother-“A bank or banker is a dealer in debts of his own and other
people.”

Webster dictionary has defined bank as- “an institution, which trade in money, establishment of
deposits, custody and issue of money for making loans, discounts and facilitating the
transmission of remittance from one place to another.”

The early bankers the jews in lombardy transacted their business at benches in the markets place.
When a banker failed his “banko” was broken up by the people on world bankrupt. One of the
earliest Italian banks, the bank of Venice was originated for the management of a public loan, or
‘monte’ as it was called. Bank of the Venice set up in 1157 in Venice. Italy is regarded as first
modern bank. Subsequently, Bank of Barcelona (1401) and Bank of Geneva (1407) were
established. The Lombard migrated to England and others parts of Europe from Italy are
regarded for development and expression of the modern banking. Bank of Amsterdam set up in
1609 was very popular. These modern banks gradually replaced goldsmiths and money lenders.
Through, bank of England was established in 1694, the growth of banks accelerated only after
the introduction of banking Act-1833 in United Kingdom as it allowed opening joint stock
company banks.

1.1.1 Introduction to EBL (Everest Bank Ltd.)

Everest Bank Ltd. (EBL) started its operations in 1994 with a view and the objectives of
extending professionalized and efficient banking services to various segments of the society. The
bank is providing customer-friendly services through its Branch Network. All the branches of the
bank are connected through ABBS, which enables customers for operational transactions from
any branches with an aim to help Nepalese citizens working abroad; the bank has entered in to
arrangements with banks and finance companies in different countries, which enable quick
remittance of funds by the Nepalese citizens in countries like UAE, Kuwait, Bahrain, Qatar,
Saudi Arabia, Malaysia, Singapore and UK. Bank has set up its representative offices at New
Delhi (India) to support Nepalese citizen remitting money and advising banking related services.

3
EBL was the first bank to introduce ABBS in Nepal. This service facilitates customers to operate
account from any branch of the EBL within the Kathmandu valley. It is has also introduced
Mobile vehicle banking system to serve the segment deprived of proper banking facilities
through its Birtamod branch, which is the first of its kind. It is also the bank that has launched e-
ticketing system in Nepal. This bank serves with a motto i.e. “the name you can bank upon”.

Punjab national bank (PNB), our joint venture partner (holding 20% equity in the bank) is the
largest nationalized bank in India. With its presence virtually in all the important centers at India,
Punjab National Bank offers a wide variety of banking services which include corporate and
personal banking, industrial finance, agricultural finance, financing of trade and international
banking. Among the clients of the Bank are Indian conglomerates, medium and small industrial
units, exporters, non-resident Indians and multinational companies. The large presence and vast
resource base have helped the Bank to build strong links with trade and industry.

1.1.2. Corporate Vision & Mission

Vision
 To evolve & position the bank as a progressive, cost effective & customer friendly
institution providing comprehensive financial and related services.
 To integrate the frontiers of technology & serving the various segments of society.
 To be committed to excellence on corporate values.

Mission
 To provide excellent professional services & improve its position as a leader in
the field of financial related services.
 To build & maintain a team of motivated and committed workforce with high
work ethos.
 To use the latest technology aimed at customer satisfaction & act as an effective
catalyst for socio –economic developments.

4
1.1.3 Share ownership and holding pattern of the bank

Table – 1.1: Share ownership

Share capital Structure Ordinary Share Cumulative Pref.

(Amount in Rs) share (Amount in Rs)
Authorized capital 800,000,000 200000000
Issued capital 640,620,000 200,000,000
Paid up capital 638,821,000 200,000,000

(Source:www.ebl.com)

Figure No. 1.1: Bar Diagram of share capital structure:

(Source:www.ebl.com)

5
 Table – 1.2 : Share holding pattern of bank:

Share ownership % Amount (Rs)

Nepal Government - -
Foreign Institutions – PNB, India 20 36,11,47,800
Other Institutions 10.86 19,55,95,100
General Public 69.14 1,24,44,96,151
Total 1,80,12,39,051
(Source: www.ebl.com)

Figure No. 1.2: Share holding pattern

(Source:www.ebl.com)
1.2. Problem Statement
This study covers the source of income of Everest Bank Limited. It shows the relationship
between deposits, investment and income. Its gives the overall view of the total income of EBL
and as well as shows the relationship between deposit and income, investment and income.
Though banking sector in Nepal plays a very important role for its prosperity, it is facing
many problems and challenges. The increasing numbers of banks, finance and insurance
companies are creating stiff competition in the field of banking sectors. The major

6
problem can be viewed from an insignificant or negative growth rate in net profit of these
banks in recent fiscal years. There is unhealthy competition among the financial
institutions which is creating threat to these banks.

1.3. Objectives of the study

The main objectives of the study are as follows:
 To know the income of EBL.
 To know the relationship between deposit and income.
 To know the relationship between investment and income.

1.4. Rationale
Report writing is the very significant for the study. It helps the student to broaden the mind by
studying without others proper guide. Everest Bank is not only providing loan to needy area like
industry, trade and rural and deprived sector should also give the technical idea. Collection of
money and circulating them in required area plays a role of pillar in the development of the
country. It provides employment to public. As a result economy will grow up. Here are few
points which highlight on the importance of the field work report:

 This field work report is prepared for the partial fulfillment of the requirement for the
degree of bachelor of business studies.
 It can be used as a guideline and can take some ideas from studying this report.
 It presents the income sources of EBL. So, its helps those who are willing to know
something about it.
 It may useful for these who are willing to prepare a report of subject.

1.5 Report Structure

Chapter I – Introduction : EBL was the first bank to introduce ABBS in Nepal.In this unit,
first of all, the background of the topic is written. Introduction creates interest over research
issue or subject. This project is about income source of Everest Bank Limited and it also
includes introduction in brief.
7
Chapter II – Related Literature Review: This is the second chapter which includes review
of supportive texts and review of previous related studies.
Chapter III – Methods: It is the third chapter that includes research design, population and
sample, sampling technique, procedures of data collection and data analysis tools.
Chapter IV- Presentation and analysis of Data: In this unit it deals with presentation of
data using appropriate tables and graphs as well analysis of data using financial tools and
statistical tools for the analysis and interpretation of data. Lastly, the major findings are
drawn from analysis.
Chapter V – Discussion and Conclusion: It includes brief sketch of the study, conclusion
and implication.

8
 CHAPTER II
RELATED LITERATURE REVIEW
2.1. Conceptual Review
Review of literature starts with a search of suitable topic and continues throughout the
volumes of similar or limited subjects. It is very rare to find out completely new
problem. In literature review, researcher takes hints from the past dissertation but
he/she should take need of replication. There are various sources to obtain
information about the related field. The sources may be internet surfing, books and
articles, previous reports on the subject matter, newspaper, reports issued by the
related company or association on the quarterly, semiannually and yearly basis. In
order to prepare this report, I had considered the following sources and articles.

Through these reports I can know that how to present the available data, about the
appropriate use of language, well description of the presented data and the analysis
and conclusion of the analyzed data. I had considered the data of last 4-5 years. The
comparative study of annual report between the last two years is possible with the
help of data. I had used internet surfing as a tool to gather the information on the
National and International organization’s websites through GOOGLE.com.

2.2. Review of Previous Works

The review of previous works on income source of EBL makes easier to find the
research gap. Few studies are made regarding this topic. Some studies related to the
topic of income source of EBL has been conducted in the partial fulfillment of the
requirements of the Master degree in business Studies. In this study, only relevant
subject matters are reviewed which are as follows:
EBL was the first bank to introduce ABBS in Nepal. This service facilitates customers
to operate account from any branch of the EBL within the Kathmandu valley. It is has
also introduced Mobile vehicle banking system to serve the segment deprived of
proper banking facilities through its Birtamod branch, which is the first of its kind.

9
2.3. Research Gap
In this study, the major areas will be to disclose the credit policy of Everest Bank
Limited. These types of research are done regularly, however the present credit policy
of the bank may not have been done. The research can help the people who wanted to
know about the overall credit policy of Everest Bank. In the study of few theses on
the same topic by the past researcher, there has been found a growth financial status
on income source of Everest Bank Limited. The previous researcher only shows the
profitability of Everest Bank Limited. Therefore, In this study I choose income source
of Everest Bank Limited. I use different data of income source of Everest Bank
Limited in the different fiscal years. This analysis data of income source of Everest
Bank Limited will help to know about the increasing or decreasing trend of income of
EBL. This report also provides the exchange rate from year 2067/68 to 2071/2072.
Thus, the present study provides more reliable conclusion than previous research
works.

10
 CHAPTER III
METHODS
3.1. Research Design
Research design is the plan, structure and strategy used to obtain answers to research questions.
To achieve of this study, descriptive and analytical research design have been used various
financial and mathematical tools have been applied to examine facts and descriptive technique
have been adapted to evaluate. A research design is a plan for the collection and analysis of data.
It includes definite procedures and techniques, which guide to sufficient way for analyzing and
evaluating the study.

3.2. Population and sample

This section provides the information about sample and population of the research work. The
population of this study is all the income source of Everest Bank Limited. In this section,
researcher should give brief information of sample and indicate which section of the population
is represented by the sample.
Sampling procedure provides the information about population, sample size and possible
sampling errors. There are various methods for sampling or sample selection. A reason of
selecting particular sample is also included in it.

3.3. Source of data: All the data included in the report are secondary type of data and already
published in EBL, annual report, which were provided by the concerned authorities. The
secondary data as are follow:
 Annual report
 Financial statement

3.4. Instrument:
 Average Net interest income
 Average other income
 Average total income
 Net interest income ratio
 Other income ratio
11
 While preparing this report Microsoft excel 2007 windows software has been used.

3.5. Limitation of study:

 The study is based on the data publish on the annual reports provided by the
banks so, the output of the study entirely depends on data provided by the
banks.
 The reports ignore the rounding value.
 Difficulty in getting appropriate data in time.
 The study has covered only 5 years data.
 The study has time and resource limitation.
 The study is based on income source of the bank so the study may not be
sufficient for depth analysis.

12
 CHAPTER – IV
PRESENTATION AND ANALYSIS OF DATA

4.1. Introduction to income of EBL

The main objective of a commercial bank is earning profit by granting loans / advance and by
the investment and satisfying the share holders of the bank. Major sores of the income of the
bank are,
 Interest received from loan & advance
 foreign exchange income
 return from the investment
 commission & discount received

A part from this, the bank needs sufficient earning to meet.

 Administration cost such as salary and benefits to the staffs;
 An adequate sum to meet possible losses;
 Overhead expenses of the fixed assets of the bank;
 Provision for a reserve fund to meet unforeseen contingencies;
 Interest payable to the deposit received in the bank;

4.1.1. Types of sources of income of EBL

Basically there are two types of sources of income of EBL. They are as follows:
1. Net interest income
2. Other income
1. Net Interest income
The interest income of the EBL is by giving the loan & Advance, and Government securities.
NRB bonds, Debentures and others. To get the net interest income, interest expenses has to be
deducted from interest income. The interest expenses included Deposits loans & Advance and
other.

Net interest = Interest Income – Interest expenses

13
2. Other expenses:
The other income includes commission & Discounts, Dividend, exchange Fluctuation gain,
Non- operating income and other incomes.
Total income = Net Interest income + other income

Figure No. 4.1: Source of Income

Source of Income

Operating Income Non-operating Income

Interest income Commission & Exchange Gain

Discount

Loans, advances, & Bills purchased & Trading gain &

overdraft; Govt. securities Discounted Revaluation gain
&NRB Bond; debentures commission other
others

(Source:www.ebl.com)

14
 4.2. Interest Income of EBL Since Last Five Years
Table . 4.1: Interest Income since last five years (Rs In millions)

Fiscal years Loans & Govt. Securities Others Total

Advances NRB Bonds
2067/68 2801.33 278.8 22.32 3102.45
2068/69 3869.81 445.26 15.96 4331.03
2069/70 4504.89 428.29 26.89 4960.07
2070/71 4636.68 274.95 25.29 4936.92
2071/72 4896.79 240.89 39.87 5177.55
(Source:www.ebl.com)
The table no. 4.1 shows the amount figure of the interest income of five fiscal years in Rs
Million. The source of income such as Loans & advances, Investment in Govt. securities
and NRB bond and other are illustrated separately in the table. Giving view in the table it
can be said that the total interest income is increasing every year. The interest income from
loans, advances and overdraft is increasing. The government securities are increasing till
the year 2069/70 . Thus, it can be concluded that interest income is increasing every year.

Figure No. 4.2: Interest Income of EBL since last 5 years

(Source: www.ebl.com)

15
The figure no. 4.2 shows the interest income trend of EBL since last five fiscal years. The
total interest income bar is increasing every year. Income from loans & advance is also in
increasing order. The income from government securities & NRB bonds is in a fluctuating
order. The income from other sources is very less compared to others.

Table . 4.2: Descriptive statistics table

(Rs. Amount in millions)
No. Minimum Maximum Mean Std.
Particulars deviation

Loans and 5 2801.33 4896.79

advance 3849.06 1481.71

Govt. 5 240.89 445.26

securities 343.075 144.51
Others 5 15.96 39.87
27.915 16.91
(Source: www.ebl.com)

The above table shows the mean and standard deviation of loans and advances, govt.
securities and others. From the above table it is clear that the mean for loans and advances
is 3849.06 and S.D. is 1481.71. Likewise, mean for govt. securities is 343.075 and S.D. is
144.51. And at last mean for others is 27.915 and S.D. is 16.91.

Table 4.3: Correlation of Interest Income from various Income Sources

Particular Loans and advances Govt. securities Others
16
 Loans and advances 1 -0.0672 0.6138
Govt. securities -0.0672 1 0.6228
Others 0.6138 0.6228 1

(Source: www.ebl.com)

The above table shows correlation between two or more variables which shows a
positive relationship between loans and advances, govt. securities and others.

Figure No.4.3: Graphical presentation of interest income from loan and advances

(Source: www.ebl.com)

Figure No.4.4: Graphical presentation of interest income from govt. securities

17
 (Source: www.ebl.com)

Figure No.4.5: Graphical presentation of interest income from other

(Source: www.ebl.com)

One of the main sources in EBL other income. It includes the income from
commission and discounts, foreign exchange, other and non – operating income.

18
4.3. Other income of EBL since last five years
Table . 4.4: Other income of EBL since last five years
(Rs in millions)
Fiscal year Commission Foreign Non– Total
& discounts exchange operating
income
2067/68 202.094 55.861 5.005 262.96
2068/69 208.123 47.879 1.233 257.235
2069/70 203.468 46.259 1.433 251.16
2070/71 233.569 109.679 25.155 368.403
2071/72 266.820 98.905 8.336 374.061
(Source: www.ebl.com)

The table no. 4.4 shows the amount value of the other income sources such as the
commission and discounts, foreign exchange and the non – operating income. The
commission and discounts, foreign exchange and the income from non – operating is
fluctuating.

Figure No. 4.6 Other Income of EBL since last five years

(Source: www.ebl.com)
The figure 4.6 shows the position of the other income of EBL. In the figure it can be
seen that income from commission and discounts is increasing till 2071/72. The

19
income from foreign exchange is fluctuating every year. The income from non –
operating income is also fluctuating every year same as that of the foreign exchange.

Table 4.5 Descriptive statistics table for other income

(Rs. Amount in millions)

Particulars No. Minimum Maximum Mean Std.

deviation

Commission & 5 202.094 266.82

discounts 234.457 45.77

Foreign 5 46.259 109.679

exchange 77.969 44.84

Non-operating 5 1.233 25.155

income
13.194 16.92

(Source: www.ebl.com)
The above table shows the mean and standard deviation of commission and discounts,
foreign exchange and non- operating income. The mean for commission and discounts
is 234.457, S.D. is 45.77. For foreign exchange the mean is 77.969and S.D. is 44.84.
And at last mean and S.D. for non –operating income is 13.194 and 16.92 respectively.

Particular Commission & Foreign exchange Non–operating

Discounts income
Commission & discounts 1 0.8293 0.4445
Foreign exchange 0.8293 1 0.8666
Non–operating income 0.4445 0.8666 1

20
Particular Commission & Foreign exchange Non–operating
Discounts income
Commission & discounts 1 0.8293 0.4445
Foreign exchange 0.8293 1 0.8666
Non–operating income 0.4445 0.8666 1
Table 4.6: Correlation of Other Income of EBL
The correlation between commission, discount & foreign exchange is 0.8293,
commission, discount & non-operating income is 0.4445 & correlation between
foreign exchange & non-operating income is 0.8666. The above table shows the
correlation between different variables. The table shows positive between commission
and discounts, foreign exchange and non – operating income.

Figure No.4.7: Graphical presentation of commission and discounts

(Source: www.ebl.com)

Figure No. 4.8: Graphical presentation of foreign exchange

21
 (Source: www.ebl.com)

Figure No. 4.9: Graphical presentation of non – operating income

(Source: www.ebl.com)

4.4. Interest expenses of EBL since last Five years

Table . 4.7 Interest expenses of EBL since last five year
(Rs in million)
22
 Fiscal year Deposits Borrowing Total
2067/68 987.477 25.397 1012.87
2068/69 1537.517 35.272 1572.79
2069/70 2494.532 41.342 2535.87
2070/71 2856.347 16.986 2873.33
2071/72 2179.182 4.044 2183.23
(Source: www.ebl.com)

This table no.4.7 explains the amount figure of interest expense on deposits, loans and
advances. The interest expenses on loan and advance are very low as compared to that of
the deposits. That interest expenses on deposits is increasing every year. The total
interest expenses are in increasing order in every fiscal year. The expense of EBL is in
increasing stage except in the FY 2071/72. It includes various expenses such as interest
expense, staff expense, office operating expense etc. The interest expense includes
deposits, loans and advance. The meaning of interest expense is the expense on deposits
such as fixed call and saving deposits given by the bank. To calculate the net interest
income interest expense should be deducted from interest income.

Figure No.4.10: Interest Expenses since last 5 years

The figure no. 4.10 gives the picture of five years interest expense of EBL. The bar of
deposits goes very high in compared to that of the loans. The interest expense on deposit
it’s increasing every year except in the FY 2071/72.
Table . 4.8: Descriptive statistics table (Rs Amount in millions)
Particulars No Minimum Maximum Mean Std. deviation
Deposits 5 987.477 2856.347 2052.299 678.178
23
 Borrowing 5 4.044 41.342 21.492 15.276

(Source: www.ebl.com)
The above table shows the mean and std. deviation of deposits and Borrowing
regarding interest expenses. The mean and S.D. for deposits are 2052.299 and 678.178
respectively. Likewise, mean and S.D. deviation for loans and advances are 21.492
and 15.276 respectively.

Table 4.9:Correlation of Interest Expenses

Particular Commission & discounts Foreign exchange

Commission & discounts 1 -0.17282

Foreign exchange -0.17282 1

The above correlation table shows the relation between the two variables which shows a
positive relationship between deposits borrowing.

Figure No 4.11: Graphical presentation expenses of deposit

24
 (Source: www.ebl.com)

Figure No. 4.12: Graphical presentation expenses of borrowing

(Source: www.ebl.com)

4.5. Total income since last five years

The main source of income for a commercial bank is accepting deposits advancing loans,
credit creation and agency functions, by providing short term loans, medium loans and long
term loans to trade and industry and also issuing guarantee, bonds & letter of credit, etc.

Net Interest Income= Interest Income- Interest Expenses

Total Income= Net Interest Income + Other Income

25
 Table . 4.10: Total income of EBL since last 5 years (Rs. In Million)
Fiscal year (A) Interest (B) Interest (A-B) net Other Total income
Income expense interest income income
2067/68 1548.657 632.609 916.047 79.133 995.18
2068/69 2186.814 1012.874 1173.940 106.403 1280.343
2069/70 3102.451 1572.790 1529.661 142.311 1671.972
2070/71 4331.026 2535.875 1795.150 148.061 1943.211
2071/72 4959.998 2873.334 2086.663 179.822 2266.485
(Source:www.ebl.com)

The above table no. 4.10 shows total income in figure since last five years. The total income
of EBL 995.18 million in the FY 2067/68, then increased to 1280.343 million in the FY
2068/69, then to 1671.972 million in the FY 2069/70, then to 1943.211 million in the FY
2070/71 and finally the bank increase 2266.485 million in the FY 2071/72.

Figure No. 4.13 Net interest income of EBL since last five year

(Source: www.ebl.com)

The above figure shows the net interest income of the last five years of EBL. In the bar
diagram interest income and net interest income is increasing every year, whereas the
interest expense is also increasing except in the FY 2067/68 to FY 2071/72. The interest
income bar is higher than that if interest expense bar every year.

26
 Figure No. 4.14 Total income of EBL since last five year

(Source: www.ebl.com)

The figure 4.14 shows the total income if EBL last five years. In the figure the bar of net
interest income, other income and total income is increasing every year. Same as above, the
net interest income is higher than the other income. Hence, there is no negative total income.
Figure 4.15 Total income trend of EBL since last five year

(Source: www.ebl.com)
The figure 4.15 shows the trend line of total income since last five years. The total income
EBL is an increasing order from the FY 2009/10 to 2012/14. Descriptive statistics (Rs.
Amount in million)
Table 4.11 Descriptive statistics table for Total Income
Particulars No Minimum Maximum Mean Std. deviation

27
 Net interest 5 916.047 2086.663 1501.36 827.75
income
Other 5 79.133 179.822 129.48 71.20
income
(Source: www.ebl.com)
The above table shows the mean and S.D of net interest income and other income regarding
total income. The mean and S.D. of net interest income are 1501.36 and 827.75 respectively.
Likewise, mean and S.D. for other income is 129.48 and 71.20 respectively.

Table 4.12 Correlation for Total Income

Particular Net interest income Other income
Net interest income 1 0.9876
Other income 0.9876 1
(Source: www.ebl.com)
The above correlation shows the relationship between net interest income and other income.
It shows a positive relationship between the two variables.

4.6. Regression analysis between deposits, investment and total income

Here the regression analysis is used as a tool for determining the strength of relationship
between different variables i.e. deposits, investments and total income of Everest Bank
Limited. Now, calculation between deposits and total income is given below.

Table 4.13. Computation of regression equation between total deposits and total
income
(Rs. Amount in millions.)
Lets X & Y be the deposits and income of Everest Bank respectively. To compute the
regression equation, the calculation is given in the following table:
Fiscal Total Total U=X- V=Y- U2 V2 UV
years Deposits Income (Y) 41127.9 3500.8

28
 (X)
2009/10 23976.3 1848.2 -
-12956 167857936 2731086.76 2141108
1652.6
2010/11 33322.9 2565.3 -3609.4 -935.5 13027768.36 13027768.36 3376593
2011/12 36932.3 3500.8 0 0 0 0 0
2012/13 41127.9 4728.8 4195.6 1228 17603059.36 1507984 5152196
2013/14 50006.1 5483.1 13073.8 1982.3 170924246.4 3929513.29 2591619
∑X = ∑Y = ∑U = ∑V = ∑U2 = ∑V2 = ∑UV =
185365.5 18126.2 704 622.2 369413010.2 21196352.41 5585606

(Source: www.ebl.com)
Here, A = 36932.3 ∑U = 704 ∑UV = 55856069.84
B = 3500.8 ∑V = 622.2 ∑V2 = 21196352.41
N=5 ∑U2 = 369413010.2

__ ∑U
X = A + ───
N
704
= 36932.3 + ─────
5
= 37073.1

__ ∑U
Y = A + ───
N
622.2
= 3500.8 + ─────
5
= 3625.24

Regression coefficient,
byx = N∑UV-∑U. ∑V/ N∑U2 – (∑U2)
= 5 x 55856069.84-704 x 622.2/ 5 x 369413010.2- (704)2
= 279280349.2-438028.8/1847065051-495616
=278842320.4/1846569435
= 0.151

29
Similarly, bxy = N∑UV-∑U. ∑V/ N∑V2 – (∑V2)
= 5x55856069.84- 704x622.2/5x21196352.41- (622.2)2
= 279280349.2-438028.8/105981762.1-495616
=278842320.4/105486146.1
= 2.643
_ _
Now, the regression equation of y on x is (y-y) = byx(x-x)

Or, y – 3625.24 = 0.151 ( x – 37073.1)

Or, y- = 0.151x – 5598.038+3625.24

Or, y = 0.151x-1972.79

Therefore, y = 0.151x-1972.79

We get the best fit of regression line on y on x i.e. y = a + bx

When deposit i.e. x = 23976.3, then,

y = 0.151x-1972.79

= 1647.63

When x = 33322.9

y = 0.151x-1972.79

y = 0.151x33322.9-1972.79

= 3058.97

When x = 36932.3

y = 0.151x-1972.79

y = 0.151x36932.3-1972.79

= 3603.99

When x = 41127.9
30
 y = 0.151x-1972.79

y = 0.151x41127.9-1972.79

y = 4237.52

When x = 50006.1

y = 0.151x-1972.79

y = 0.151x50006.1-1972.79

y = 5578.13

Calculation of correlation coefficient

The correlation coefficient is the geometric mean between two regression coefficients.
_______
Hence, r = √byx x bxy

___________
= √0.151 x 2.643
_____
= √0.399

= 0.631
The calculated income of Everest Bank Limited, when one variable, deposit is known, for the
FY 2009/10 to 2013/14 is Rs. 1647.63 million, Rs. 3058.97 million, Rs. 3603.99 million, Rs.
4237.52 million and Rs. 5578.13 million respectively which shows the total income of the
bank is increasing every year with increase in deposits except in the FY 2067/68. The
correlation coefficient between deposit and income is 0.631.

Table 4.14. Regression between investment and income

Fiscal Investment Income U=X- V=Y- U2 V2 UV

years (X) (Y) 7863.6 3500.8
2009/10 5008.3 1848.2 -
-2855.3 1652.6 8152738.09 2731086.76 4718668.78

31
2010/11 7743.9 2565.3
-119.7 -935.5 14328.09 875160.25 111979.35
2011/12 7863.6 3500.8
0 0 0 0 0
2012/13 9263.6 4728.8
1400 1228 1960000 1507984 1719200
2013/14 6504.2 5483.1
-1359.4 1982.3 1847968.36 3929513.29 -2694738.62
∑X = ∑Y = ∑U = ∑V = ∑U2 = ∑V2 = ∑UV =
36383.6 18126.2 -2934.4 622.2 11975034.54 5114231.01 3855109.51

Here,

A = 7863.6 ∑U = -2934.4

B = 3500.8 ∑V = 622.2

N =5 ∑U2 = 11975034.54

∑UV = 3855109.51 ∑V2 = 5114231.01

__∑U -2934.4
X = A + ─── = 7863.6 + ─────
N 5

= 7276.72

__ ∑V 622.2
Y = B + ─── = 3500.8 + ─────
N 5

= 3376.36

Regression coefficient,

N∑UV-∑U. ∑V
byx = ──────────
N∑U2 – (∑U)2
32
 5 x (3855109.51) – (-2934.4) x 622.2
= ──────────────────────
5 x 11975034.54- (-2934.4)2

19275547.55-(-1825783.68)
= ────────────────
59875172.7-8610703.36

21101331.23
= ────────
51264469.34

= 0.412

Similarly, bx y

N∑UV-∑U. ∑V 21101331.23
= ────────── = ────────────── = 0.838
N∑V2 – (∑V)2 5 x 3855109.51– (622.2)2

__ __
Now, the regression equation of y on x is (y-y) = byx(x-x)

Or, y – 3376.36 = 0.412(x – 7276.72)

Or, y -3 376.36 = 0.412x(-2998.009)

Or, y = 0.412x + 3376.36-2998.009

Or, y = 0.412x + 378.351

We get the best fit of regression line on y on x i.e. y = a + bx

When, investment i.e. x = 5008.3 then,

33
y = 0.412x + 378.351

= 0.412 x 5008.3 + 378.351

= 2441.77

Likewise, x = 7743.9

Y = 3568.84

Likewise, x = 7863.6

Y = 3618.15

Likewise, x = 9263.8

Y = 4195.04

Likewise, x = 6504.2

Y = 3058.08

Calculation of correlation coefficient

The correlation coefficient is the geometric mean between two regression coefficients,

________
Hence, r = √byx x bxy
___________
= √0.412 x 0.838
_____
= √0.345

= 0.587

34
The calculated income of Everest Bank, when one variable, investment is known, for the FY
2067/68 to 2071/72 is Rs. 2441.77 million, Rs. 3568.84 million, Rs. 3618.15 million, Rs.
4195.04 million and Rs. 3058.08 million which shows the income is in increasing position
with increase in investments except in the FY 2009/10 but last FY 2071/72 show the
decreasing position in investment. The correlation coefficient between investments and
income is 0.587.

4.7. Average income of EBL since last five years

Table . 4.15 Income of EBL since last five years
(Rs. In million)

Fiscal Year Net interest income Other income Total income

2067/68 916.047 79.133 995.18
2068/69 1173.94 106.403 1280.34
2069/70 1529.66 142.311 1671.97
207071 1795.15 148.061 1943.21
2071/72 2086.66 179.822 2266.49
Total 7501.46 655.73 8157.19

Total net interest income

Average net interest income = ────────────────
No. of years

7501.46
= ─────
5

= 1500.29 million

Total other income

Average other income = ────────────
No. of years

655.73
= ──────
5

= Rs. 131.15 million

Total income
Average total income = ─────────
35
No. of years

8157.19
= ────────
5
= Rs. 1631.44 million

Figure No. 4.16 Graphical presentation of net interest income

Figure No.4.17 Graphical presentation of other income

36
4.8: Net interest income ratio

For FY 2013/14 the net interest income of EBL is Rs. 2086.66 million and total
income is Rs. 11164.32 million. So the net interest income ratio for FY 2071/72 is

Net interest income

Net interest income ratio = ───────────
Total income

2086.66
= ────────
8157.19

= 0.2558 (25.58 %)

The total net interest income of EBL for last five years is Rs. 7501.46 million and
total income is Rs. 8157.19 million. So the net interest income ratio is,

Total net interest income

Net interest income ratio = ─────────────────
Total income

7501.46
= ───────
8157.19

= 0.9196 (91.96%)
37
4.9: Other income ratio

For FY 2013/14, the other income of EBL is Rs. 179.822 million and total income is
Rs. 8157.19 million. So, the other income ratio for FY 2013/14 is,

Other income
Other income = ─────────
Total income

179.822
= ──────
8157.19

= 0.0220 (2.2%)

The total other income of EBL for last five years is Rs. 905.115 million and total
income is Rs 11164.32 million. So, the other income ratio for last five years is,

Total other income

Other income = ────────────
Total income

655.73
= ────────
8157.19

= 0.0804 (8.04%)

CHAPTER V

38
 DISCUSSION AND CONCLUTION

5.1. Discussions
The field work report has been prepared by studying the five years total income of Everest
Bank Limited (EBL). The major study of the report is income source of EBL. It studies about
the interest income and interest expenses and other income. Interest expense is included in the
data to calculate the net interest income.

In interest income it studies interest received by giving loans advantages and overdraft,
government securities and NRB bonds and other. In interest expense it studies interest paid to
deposits, loans and advances. In other income it studies income from commission and
discounts, foreign exchange, non-operating income and other income.

5.2. Conclusion
Everest Bank Limited has been successful in strengthening its financial position in the past
several years. The interest income and other income of the bank show increment in the past
five years. Whereas interest expense also shows increment except in the FY 2009/10. The total
income of the bank in the FY 2009/10 is Rs. 995.18 million, Rs. 1280.34 million in FY
2010/11, Rs. 1671.97 in FY 2011/12, Rs. 1943.21 million in FY 2012/13 and Rs. 2266.49
million in FY 2013/14. This shows that the total income of the bank is increasing every year.

Despite the dynamic changes in environment the bank is successful in satisfying the people.
From above researcher can conclude that the overall financial performance of the bank is
good.

5.3. Implications
Today, there are number of commercials banks all over the nation. With the increase in the
number of the bank competition is also increasing day by day. So for the success of the bank,
it highly depends upon the efficient management of the credit as per the new environment.
The main function of any commercial bank is to mobilize and utilize the funds collected from

39
public bodies and to help in promoting the economy of the nation. Everest Bank Limited also
has a separate position in the Nepalese economy. The bank is successful in increasing its
income in the past years.

The following are some suggestions to improve the situation of the bank:
 Ensure that the bank attracts quality management and services and also attracts on loan
facilities by decreasing interest rates as much as possible.
 Building their capacity for creating products in different areas of their operation.
 The bank should not collect deposits more than they require.
 The bank should accept more deposits in foreign currencies, which helps in increasing
the treasury business of the bank and also helps in improving the economy of the
nation.
 The bank should upon more branches, if possible, all over the nation so that the people
all over can take advantage of the services given by the bank. Frequent training can be
given to the employees so to increase the efficiency level.
 The bank should have a smooth communication channel.

40