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A COMPARATIVE STUDY ON EQUITY SHARE ANALYSIS OF NABIL BANK LIMITED AND HIMALAYAN BANK LIMITED

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ABBREVIATIONS
%          :             Percentage
A.D.      :             Anno Domini
B.S.       :             Bikram Sambat
DPR      :             Dividend Payout Ratio
DPS      :             Dividend per Share
DY        :             Dividend Yield
e.g.        :             For Example
EPS      :             Earning Per Share
EY         :             Earning Yield
HBL     :             Himalayan Bank Limited
i.e.         :             that is
Ltd.       :             Limited
NABIL :             Nepal Arab Bank Limited
P/E        :             Price Earning
Pvt.       :             Private
Rs.        :               Rupees



CHAPTER – I
INTRODUCTION
            Introduction: -
Bank, a financial intermediary is playing a significant role in accelerating the rate of economic development of the country. At present context, bank is not only confined to accepting deposits and distributing loans but also, rendering wide range of services to the different section of the society, to facilitate the growth of trade, commerce, industry, and agriculture sector of the national economy. Economic development becomes slow in the absence and insufficiency of banking and finance facilities. Hence, a bank may be called the financial supermarket providing all kinds of monetary service, which is necessary for, the industrialization and economic development.
Bank is established for keeping money, valuable assets etc. safety so that the money could be paid out on the customer’s order (by means of cheques). Similarly , a definition given in encyclopedia  that a bank is a business organization that receives and holds deposits of funds from others and makes loans or extends credits and transfers funds by written order of deposit.
Commercial banks are the financial institutions which deal in accepting deposit from persons and institutions, provide interest formulate capitals and grant loans against securities that help to remove the deficiency of capital, that contributes significantly in the formation and mobilization of interest capital and development effort. They also furnish necessary working capital according to the requirement for trade, commerce, industry and even to agriculture sector. They also perform agencies function to make easier and play an important role in credit creation. Besides, they also provide technical and administrative assistance to industry, trades and business enterprises. So, they are being the means fro the upliftment of society. Their main objectives are to earn reasonable profit as reward for their services by proper mobilization of idea & resources collected from different scattered sources, in particular productive sectors. They help to reduce the probability of  inflation by increasing the interest rate while economy is in boom period and reduce the interest rate so that investors are interested for investment in case of depression period. More specifically, they collect required capital through float (issue) of different types of securities, specially shares and debentures. According to Nepal Commercial Bank Act 2031 B.S., “Commercial Bank is one which exchanges money, deposits money , accepts deposits, grants loans and performs commercial banking functions and which is not a bank meant fro cooperation, agriculture, industries or for such specific purpose.”


            BACKGROUND OF THE STUDY: -    
                                                    
1.2.1 Background of the project work
         While studying the origin of modern banking, we come to know that Bank of Venice was established, as the first commercial bank of the world, in 1157 and in Nepal, Nepal Bank Limited was established, as the first commercial bank in B.S. 1994. Before 1974 (B.S.2031), there was no any existence of joint venture banks in the country, there was no provisions made in the old Commercial Bank Act, which facilitated to the establishment of joint venture banks in Nepal. The new commercial bank Act 1974 has however, made provisions to permit foreign banks to operate in the country by obtaining the approval of Nepal Rastra Bank. To accelerate economic activities towards growth, encourage proficient banking service, economic development, industrialization and growth of nation, three joint venture banks, Nepal Arab bank limited, Nepal Indosuez Bank Limited and Nepal Grindlays bank limited came into existence in 2041, 2042 and 2043 respectively . Similarly, when the democratic elected government adopted the liberal and market oriented economic policy, the number of joint venture banks has increased dramatically. Joint venture banks are established by joining different forces and ability to achieve a common goal with each of the partners. They are efficient and effective monetary financial institution in modern banking fields than other old type of banks in Nepalese context. D.P. Gupta has defined the joint venture as, “A joint venture is the joining of forces between two or more enterprises for the purpose of carrying out a specific operation (industrial or commercial, investment, production or trade)”. In Nepal, joint venture banks are playing vital role in the economic development of the country. They collect deposits from different sources under different accounts, create capital and mobilize the resources in productive area.

Dividend is one of the major reasons fro which public is interested to invest money on the shares of bank or institution. It refers to the portion of earnings that is distributed to the shareholders in return to their investment in the shares. Normally, that business, which is running at profit, is capable to pay dividend. The amount which is distributed as dividend should be adequate to meet the normal expectations of shareholders. Dividend can be paid in cash, share and securities or a composition of these. There is a reciprocal relationship between retained earning and cash dividends. So, cash dividend payout reduces the total amount of internal financing.
Dividend policy, an integral part of the firm’s financing decisions, refers that policy of a company on the division of its profits between distribution to shareholders as dividend and retention for its investment. It is one of the major decisions of financial management because it affects the value of firm’s as well overall financing decision like financing structure, the flow of funds, corporate liquidity and investor’s attitudes. It is the work of management to adopt the appropriate dividend policy. The important aspect of dividend policy is to determine the appropriate allocation of profit between dividend payments and the amount to be retained in the firm. It solves the problem of how the profit should be retained in the firm. It also determines the forms of dividend. Under this policy it is determined that what percentage of the earnings of the firm is distributed to its shareholders and what percentage of the earnings is retained in the firm which is desirous for the growth of the firm. Dividend policy, having a crucial importance and being purely a policy matter, it is to be formulated with consistent approach. It is obviously known that the dividend payout ratio depends on earnings. But net earnings may not conform and may not be an appropriate measure of the ability of the firm to pay dividend. So, what and how much it is desirable to pay dividend and retained in the firm for the growth of firm is always a controversial matter because shareholders expect higher dividend but corporations ensure towards setting funds aside for maximizing the shareholder's wealth.

The issue of how much a company should pay its stockholders as dividends is one that has concerned managers for a longtime. It has often been pointed out that a company that raises its dividend often experiences an increase in its stock price and that a company that lowers its dividends has a falling stock price. These consequences suggest that dividends do matter in affecting stock price. It is therefore, a wise policy to maintain a balance between dividend declaration and profit pretension.

In Nepal, only few companies are able to pay dividend. But after the establishment of joint venture banks, they have shown new trend of paying dividend to shareholders that has brought new hopes for productive mobilization of funds. So dividend policy is assumed as the major decision of financial management. Thus, among the several commercial banks operating in Nepal, this study aims to focus on prevailing practice and policies of two joint venture commercial banks namely Nabil Bank Limited and Himalayan Bank Limited regarding payments of dividend. 

1.2.2 A Brief profile of the banks under study
The study focuses on the comparative dividend policy and practices of two joint venture banks namely NABIL Bank Limited (NBL) and Himalayan Bank Limited (HBL).
a. Nabil Bank limited (NBL): -
Nabil Bank Limited (NBL) commenced its operation on 12Th July 1984 as the first joint venture bank in Nepal. Dubai Bank Ltd., Dubai (later acquired by Emirates Bank Ltd., Dubai) was first joint Venture partner of Nabil. Currently, NB (international) Ltd. Ireland is the foreign partner.
Nabil Bank Ltd. Has the official name Nepal Arab Bank Ltd. Till 31 st of December 2001. Nabil was the pioneer in introducing many innovative products & market concept in banking sector of Nepal with 18 branches & 2 countries in all major cities. It is only bank having its presence at Tribhuvan International Airport, only international airport of the country also; the number of outlets in the country is the highest among the joint venture and the private operating bank in Nepal. Success of Nabil is the milestone in the banking history of Nepal as it paved the way for the establishment of many commercial banks & financial institutions.
     
   BOARD OF DIRECTORS
The board of directors of Nabil Bank ltd. is as follows:
1. Chairman         : Mr.Satyendra Pyara Shrestha, NB (International) Ltd.
2. Director          : Mr. Mohiuddin Ahmed, NB (International) Ltd.
3. Director           : Miss Supriya Gupta
4. Director           : Mr. Shambhu Prashad Poudyal
5. Director           : Mr.Dayaram Gopal Agrawal
6. Director           : Mr. Milan Bikram Shah
7. Director           : Mr. Abdul Awal Mintoo
8. Director           : Mr. Suraj Lal Mehta
9. Director           : Mr. A.P. Bazgain (Professional)
Shareholders in Nabil Bank Ltd.
1. NB (International ) Ltd. Ireland                                50%
2. Nepalese Public                                                       30%
3. Nepal Industrial Development Corporation           10%
4. Rastriya Beema Sansthan                                       9.6% 
5. Nepal Stock Exchange Ltd.                                    0.33%

   Chart Showing Shareholders’ Percentage in Nabil Bank Ltd.
HBL-Nabil-1

b. Himalayan Bank Limited (HBL): -
            Himalayan Bank Limited was incorporate in 1992 registered under Commercial Bank Act 2031 by the distinguished business personalities with Employee Provident Fund and Habib Bank Limited, one of the largest commercial banks of Pakistan. Banks operation was commenced from January 1993.It is the first commercial banks of Nepal with maximum shareholding by the Nepalese private sector. HBL's  Board of Directors, the policy making body constitutes of seven member of which one is chairman, one is nominated from Habib Bank Limited, Pakistan  one is nominated from Employee Provident Fund and one member is elected from public shareholders, and annual general meeting nominates three. HBL has authorized capital Rs. 12, 00,000 issued capital. The promoter holds 5.1% of shares, Habib Bank Limited, Pakistanholds 20% and the financial institution holds 14 % by Nepalese citizen. Himalayan Bank has access to the worldwide Correspondent network of Habib Bank of fends transfer , letter of credit or any banking business anywhere in the world . Habib Bank in Pakistanhas over 1700 Domestic and 65 branches covering all continents and over 1800 correspondents worldwide. Besides HBL commercial activities, the bank also offers industrial and merchant banking.
               The bank at present has five branches in Kathmanduvalley namely Thamel, New-Road, Mahargung, Patan and Bhaktapur. Besides , nine branches outside Kathmandu in Tandi , Narayangadh , Birgunj , Hetauda , Siddharthanagar , Biratnagar ,Banepa ,Dharan , and Pokhara branch . The bank is also operating a counter in the premise of the Royal palace. The bank has a very aggressive plan of establishing more branches in different parts of the nation in near future. Himalayan Bank's policy is to extend quality and personalized service to its customer's as promptly as possible. All customers are treated with utmost courtesy as valued clients. The Bank, as far as possible, offers tailor made facilities to its clients, based on the unique needs and requirements. To extend more efficient services to its customers, Himalayan Bank has been adopting innovative and latest banking technology. This has not only helped the bank to constantly improve its services level but has kept it prepared for future adoption of new technology. Himalayan Bank committed to be a "BANKING WITH A DIFFERNCE".
               
    Objectives of HBL
            The commercial banking industry has been passing through various phase of transition right from its inception which is now operating with liberalization of  financial policies, but has given a way to some malfunctioning misuse or fraudulent practices., deregulation in banking environment. So as to capture the increased interest sensitivity of depositors "manage the change" has become the important management objectives of banks are:
               1. To organize the structure to meet the challenges of changing environment,
               2. To improve customer services,
               3. To introduce new schemes,
               4. To improve customer technology in banks,
               5. To improving house keeping,
               6. To modernize office equipment,
            7. To train on an ongoing basic,
               8. To improve work ethics,
               9. To improve the quality of banking services,
               10. To improve the health of the organization,
               11. To improve value system,
               12. To improve productivity through participative management,
                     13. To improve inspection and social audit,
               14. To follow instruction and serve the community,
               15. to rise above and serve the community,
               16. To develop leadership and entrepreneurial spirit among the cadre,
               17. To motivate employees to work efficient, productively and profitably,
               18. To evolve a unique monitoring and controlling system,
               19. To improve the image and strengthen the confidence of people in system.
               20. To utilize human resources fro improving quality of life.

1.3  LITERATURE SURVEY
          The present research aims to analyze the equity shares in the commercial bank, especially two joint venture banks viz. Nabil Bank Limited and Himalayan Bank Limited. For this purpose, it needs to review related literatures in this concerned area which will help to get clear ideas, opinions and other concepts. 'What others have said? What others have done? And what other has written?' these all and other related questions are reviewed which has provided which has provided useful inputs in this research work.
            According to Commercial Bank Act 2031 "A Bank is a bank which deals in exchanging currency, accepting deposits, giving loans and doing commercial transaction."
               C.R. Crowther says "A Bank collects money from those who have it to spear or are saving it out of their incomes and it lends this money to those who require it."
               Horace White says" A bank is a manufacturer of credit and machine for facilitating services."
               Oxford Dictionary defines "Bank is an organization or place that provides financial services."
               This portion of the report emphasizes about the literatures which we are concerned in these connections.

1.4 Equity Shares: -
Fixed income securities such as bonds almost have life and upper Rs. amount on cash payment to investors but there is another security which has no limitation on cash payments, the security is common stock. Equity share represents equity or an ownership position in a company which has residual claim on any payments. It means creditors and preferred stockholders are paid before the payment to common stock holders. In bankruptcy, equity shareholders are entitled to any value remaining after all the claims have been satisfied. Equity share are also termed as common stock interchangeably. According to Peter S.Ross, “Equity share is a certificate of ownership in a corporation a residual claims against both assets and earnings of a business firm.” Equity shareholders are generally fully paid and non assessable which means that the equity shareholders may lose their initial investment but not more.
            If the company fails to meet its obligations the stockholders can't be forced to give the corporation the funds that are needed to pay off the obligations. Due to failure of company, the value of the company's shares will be negligible the stock holders may lose an amount equal to the price paid to the shares.


 1.5 Characteristics of Equity Shares: -

The equity shares of a firm have the following characteristics:
1.   Par Value   
               Par value is the quoted value or nominal value of the share which is fixed while incorporating the firm. It is also called the face value. In Nepal, the par value of a share should be Rs. 100 according to the Company Act.

2.      Authorized, issued, subscribed, called up & paid up shares:
       There are different phase of share capital. The corporate charter of the company    specific the number of authorized equity shares, which is the maximum shares that the company can issue without amending its charter.
The issued, subscribed, called up, and paid up shares are different stages of capital collection.

3.      Priority to Assets and Earnings:
               The equity shareholders have a residual claim on the earnings and the assets of the company i.e. they are paid only after the payment of the debt and the preferred stocks.

4.                        Voting Rights:
              The owners of equity shares have the right to vote in the company’s affairs. The shareholders can use the voting rights on the matters bought up at the company’s annual cast one vote for the section of directors. One shareholder can cast vote for one share held.

5.      Maturity:
      The equity shares have no specified time to maturity. So the company cannot redeem in mid of the life of the organization.

6.      Retained Earnings:
                  The whole amount of the residual earnings may not be paid by the company to the shareholders. The company can pay certain % to the stockholders and retain the remaining portion for the future growth of the business.

7.      Capital excess of Par Value:
                  The company may issue shares at a price more than face value which is called the capital in excess of par value, or share premium or capital surplus or additional.

8.      The Book Value Per Share (BVPS)
                  The book value of equity shares is the amount of equity or net assets backed by the equity shares. The book value per share is the equity per share and is calculated as follows:
BVPS= Common Equity/No. of shares outstanding
                              Or,
Net Assets for equity shares/No. of outstanding shares.

1.6 DIVIDEND DISCOUNT MODELS: -
It is widely used method because it takes into consideration the basic inputs of valuation principles i.e. cash flows riskiness associated with the cash flows and appropriate discount rate. Under this approach the value of the common stock is the function of expected future cash inflows and associated riskiness. It is also called dividend capitalization approach. There are following models of common stock.

a)      Single Period Valuation:
It is applicable for the valuation of such stocks which are held for a year. At the end of which, the investor expects to sell stock at a certain price
V0= D1/ (1+Ks) 1 +P1/ (1+Ks) 1
Where,
Vo = Intrinsic Value
D1= Year End Dividend
P1= Year End Price
Ks = Required rate of return on equity capital
P1 can be calculated as P1= Po(1+g) or, P1= Do(1+g)
                                                                                   ( Ks g )
Where, g= Growth Rate
               P0= Market Value Of Stock

b)     Multi Period Valuation Model :
         This model assumes that the investors hold the common stock for more than a year. So under this model, the valuation formula is
V0 = D/(1+ Ks )1  + D2/ (1+Ks)2 +  Dn/ (1+ Ks)n + Pn/ (1+ Ks)n
If dividend are constant,
V0 = D(PVIFAKs,n + Pn (PVIFks,n)
This  model should be used only when the finite holding period is given.

c)      Growth Model (In Dividend):
i)                    Zero growth in dividends:
This model assume that dividends on equity share do not  grow i.e. D1= D2=D3=Dnso under  this model the value of equity share is
Vo =  D1/(1+ Ks)1 + D1/(1+Ks) + …………+D1/(1+Ks)
The zero growth stock is a perpetuity.  So,
Vo=D(PVIFAKs,∞)=D/Ks

ii)                  Constant or Normal Growth:
In practice, stock grows at a certain specified growth rate because most of the companies today do not distribute all the earnings. Some earnings are retained in the business for reinvestment purpose. Due to this, the common stock equity and company’s earning will increase, if the number of stocks is constant. So to find growth in dividend, the equation g= br is used, where b is retention ratio which is
b =Retained earnings/Net income
or, (1- DPR)
And r is company’s internal rate of return or return on equity.
Under this model, the valuation formula is
Vo= Do(1+g)1/(1+Ks)1 + Do(1+g)2/(1+Ks)2+Do(1+g)/(1+Ks)
=Do(1+g)/(Ks-g)
=D1/(Ks-g)
This model is also called the Gordon Valuation Model. This model is valid when IRR of Ks is greater than g.

iii)                Variable or Non-constant or super normal growth in dividend
Most of the companies dividends grow at variable growth model provides enough grounds to adjust in the variable growth rate. Now constant growth is the part  of the life cycle of a firm in which its growth either is much faster or is much slower than that of the company as a whole.
Vo= D1(1+Ks) + D2/(1+ Ks)2……………+ Pn/(1+Ks)n
P3= D4/(Ks-g)=D3(1+g)/(Ks-g)

d.      Earning Per Share (EPS)
Earning per share refers the rupee amount earned per share of common stock outstanding. It measures the return of each equity shareholders. It is also identified to measure the profitability of the shareholders investments of the profitability of the banks by mobilizing their funds and vice versa. In other words, higher earning per share indicates the weakness of the banks. The ratio can be computed by dividing the earning available to common shareholders by the total number of common stock outstanding of banks. Thus,
   EPS=Earning available to common shareholders
            No. of common stock outstanding

e.       Dividend per share (DPS)
      It measures the dividend distribution to each equity shareholders. The DPS simply shows the portion of earning distribution to the shareholders on per share basis. Generally, the higher DPS creates positive attitude of the shareholders towards the bank, which consequently helps to increase the market value of the shares. And it also works as the indicator of the shares. And it also works as the indicator of better performance of the bank management. It is defined as the result received by dividing by the total dividend distributed to equity shareholders by the total number of equity shares outstanding. Thus,
DPS= Dividend distributed to equity shareholders
               Total number of equity share outstanding

f.       Dividend payout Ratio (DPR)
      It is the portion of the earning used payment of dividend. The dividend payout ratio is the earning paid to the equity holders from the earnings a firm in a particular year. This ratio shows what percentage of the profit is distributed as dividend and what percentage is retained as reserved and surplus fro the growth of the banks. In other words, the amount of dividend that a bank pays depends upon the earning capacity of the bank. Higher earning enhances the ability to pay more dividends and vice-versa. There is a reciprocal relationship between dividends and retained earnings. The higher the dividend payout ratio, the lower will be the retained earnings and hence the capacity of internal financing o the firm is checked. It is calculated to indicate the percentage of the profit of that is distributed as dividend. This ratio is calculated by dividing dividend per share by the earning per share.
DPS = Dividend Per share
            Earning Per Share
                           Or,
DPR= (1-Retention ratio)
Where,
Retention ratio= EPS-DPS
                           EPS

g.      Price – Earning Ratio/Earnings Multiplier (P/E Ratio)
      Price- earning ratio is also called the earnings multiplier. Price- earning ratio is simply the ratio between market price per share and earning per share. In other words, this represents the amount which investors are wiling to pay for each rupee of the firm’s earnings. The P/E ratio measures expectation and market appraisal of the performance of firms. This is important to compare the market share prices of different stocks given their earning per share. The higher P/E ratio implies the high market share price of a stock given the earning per share and the greater confidence of investor in the firm’s future. This ratio is computed by dividing earning per share to market price share. Thus,
            P/E ratio = EPS
                                 MPS

1.7 Objectives of the Study: -
The study primary focuses on the dividend policy and practices adopted by the sample banks with a view to provide workable suggestion which may be helpful to the formulation of optimal dividend policy and maximize the stock price and to take some other appropriate dividend strategies. However, the specific objectives can be set as follows:
i.                    To highlight the equity share policies of the banks.
ii.                  To reflect (identify) the relationship between dividend per share and earning per share.
iii.                To know if there is any uniform among dividend per share, earning per share and dividend payout ratio of the two commercial banks sampled.
iv.                To provide a possible guideline and a package of suggestion on the basis of finding and analysis to overcome various issues and gaps.

1.8            Importance of the Study:
1)                   The study gives the clear picture about the equity share policy adopted by the banks under study.
2)                   This report provides information’s those who are planning to invest in the banks and the shareholders about the way they are getting the dividends from the banks.
3)                   After the complete, the report will be kept in the library, which will play the role of reference to the students making similar study in the future.

1.9  Limitation of the Study:
          No study can be free from its own limitations. So, the present study has also some limitations. Reliability of statistical tools used and lack of research experience are the major limitations and some other limitations can be enlisted as follows:
1)            The study covers the time period of last 5 years from fiscal year 2065/66 to 2069/70.
2)            The study is fully is based on the student’s financial resources and it is to be conducted and submitted with in a time constraint. Further, the study is not a final study on the subject.
3)            Due to time & resources constraint only two joint venture banks, namely Nabil Bank Limited and Himalayan Bank Limited have been select as samples in the study.
4)            The study is primarily based on the secondary data source such as annual report of concerned banks, and other related journals, magazines, books etc. The up-to- date and complete data are very difficult to obtain due to in ability of providing the required data are by concerned authority. Variation in the data itself is also found when comparing with different sources. So the reliability of conclusion of the study depends upon the accuracy of the secondary data.
  

     
CHAPTER II
PRESENTATION AND ANALYSIS OF SECONDARY DATA

2.     Presentation & Analysis Of Data:
This chapter consists presentation and analysis of secondary data related with different variables using both financial and statistical tools explained in 1st chapter. The prime objects of this chapter are to achieve the objectives, which are set in first chapter, Introduction. In order to achieve these objectives, the gathered data are presented, compared and analyzed with the help of different tools. So it is focal part of this study, which helps to analyze the comparative dividend decision of joint venture banks and the management’s attitudes towards the optimum dividend decision. This study is highly supported by the dividend distribution practice of joint venture banks.
            General Analysis of Financial Indicators:

            Earning Per Share(EPS): -
                            Table no. 1: EPS of NABIL & HBL

YEAR

NBL

HBL

2069/70

92.61

49.05

2070/71

105.41

47.91

2071/72

129.21

59.24

2072/73

137.08

60.66

2073/74

108.31

62.74
While observing the above table as presented in table no. 1, we come to know that the EPS of Nabil Bank Limited has decreased from year 2069/70 to fiscal year 2073/74 and reached to Rs.108.31 from Rs. 137.08. As the EPS of every year was increasing until F.Y 2072/73, it shows the EPS is in increasing trend.

Similarly, the EPS of Himalayan Bank Limited has decreased in first year 2069/70 to 2070/71. As the EPS of the bank was Rs.49.05, it decreased to Rs. 47.91 next year and then increased to Rs.59.24 in another year. Then after, it has increasing EPS in last two years 2071/72 and 2072/73, so that, the firm became strong and has high EPS in these years. It has EPS of Rs. 60.66 and Rs. 62.74 in year 2072/73 and 2073/74 respectively which indicates an increase in EPS over the last three years. It seems that although the bank was not performing good in first two years but it is getting good from 2071/72 and this increasing trend still continues in the year 2072/73.
In an aggregate, EPS of both the bank has been recorded in an increasing trend.
HBL-Nabil-2
Figure 1: EPS of NABIL & HBL

            Dividend per Share (DPS): -
                    
Table No. 2: DPS of NABIL & HBL

Year

NABIL

HBL

2069/70

65

-

2070/71

70

11.58

2071/72

85

30

2072/73

100

15

2073/74

60

25
                                                                        Sources: Appendix A
The dividend per share table 2 shows that both the banks paid some dividend in every year except by HBL during F.Y 2069/70. The NABIL paid only Rs. 65 in year 2070/71 and Rs. 70 in year 2070/71. It has paid the higher dividend in the year 2071/72 and 2072/73 of Rs. 85 and Rs. 100 respectively. This shows that the firm has paid higher dividend in these two years than the before two years. However, it has distributed Rs. 60 in F.Y 2073/74.
In case of Himalayan Bank Limited (HBL) the dividend is in fluctuating trend. It has paid the highest dividend in year 2071/72. But in other years, the dividend is getting lower than previous year. In analyzing the table we see that Nabil Bank has positive attitude of shareholders towards the bank. It consequently helps to increase the market value of shares and also helps to indicate the better performance of the bank’s management.
HBL-Nabil-3
 Figure 2: DPS of NABIL & HBL

2.1.3      Dividend Payout Ratio (DPR)
                                      Table No.3: DPR of NABIL & HBL

Year

NABIL

HBL

2069/70

70.12

-

2070/71

66.36

24.17

2071/72

65.78

50.64

2072/73

72.95

24.73

2073/74

55.40

39.85
                                                                             Source: Appendix A
The above table 3 depicts the dividend payout ratio of the banks analyzed. The main objective of this presentation is to show the percentage of dividend payment out of its earnings. The importance of this type of presentation lies in its ability to state the dividend policy of the concerned banks more obviously. According to the table, the dividend payout ratio is fluctuating in both of the banks. In NABIL Bank the DPR in year 2069/70 is 70.12 which have decreased to 66.36 in year 2070/71. It has again decreased to 65.78 in F.Y 2071/72. It paid 72.95% in 2072/73 and 55.40% in 2073/74.
In case of HBL the DPR is in fluctuating trend. In the year 2070/71, the bank DPR was 24.17 which has increased in the further years paying dividend of 50.64%, 24.73% & 39.85% in the year 2071/72, 2072/73 & 2073/74 respectively. The following figure shows the DPR of sample banks: -
HBL-Nabil-4
Figure 3: DPR of NABIL & HBL
2.1.4      Price Earning Ratio (P/E Ratio)
Table no. 4: P/E Ratio of NABIL & HBL

Year

NABIL

HBL

2069/70

10.8

17.12

2070/71

14.27

19.20

2071/72

17.34

18.57

2072/73

36.84

28.69

2073/74

48.70

31.56
                                                                                       Source: Appendix A
The above table 4 exhibits the P/E Ratio of two banks viz. NBL and HBL. This presentation helps our study by clarifying the relationship between earning per share and market price per share. According to the table, the P/E ratio of NBL is in increasing manner in every year. The P/E ratio in year 2069/70 is 10.80 which have increased to 14.27 in year 2070/71. In the year 2071/72, 2072/73 and 2073/74 P/E ratio is 17.34, 36.84 and 48.70 respectively which is higher than last two years.
In case of HBL also the P/E ratio is increasing trend in last two years. The P/E ratio is 17.12 and 19.20 in years 2069/70, and 2070/71which is increasing in each year. But in 2071/72 the P/E ratio has decreased to 18.57. It has reached to 28.69 and 31.56 in 2072/73 and 2073/74 respectively. The following figure shows the P/E Ratio of NABIL & HBL: -
HBL-Nabil-5

Figure 4: P/E Ratio of NABIL & HBL
2.1.5      Dividend Yield Ratio (DY)
                   
                                      Table No. 5: DY of NABIL & HBL

Year

NABIL

HBL

2069/70

6.5

-

2070/71

4.65

1.26

2071/72

3.79

2.73

2072/73

1.98

8.62

2073/74

1.14

1.26
                                                                                       Source: Appendix A
The above table no. 5 reveals the dividend yield ratio of the concerned banks from the year 2069/70 to 2073/74. It is clearly shown that NABIL has fluctuating trend in the dividend yield ratio. In base year it is 6.5 where as it is 4.65 in next year. And again it is 3.79, 1.98 and 1.14 in next years.
In case of HBL, the dividend yield ratio is also in fluctuating trend. In base year it is nil and in next four years it is 1.26, 2.73, 8.62, and 1.26 which shows that it is fluctuating every year.
HBL-Nabil-6
 Figure 5: DY of NABIL & HBL
2.1.6                Earning Yield Ratio (EY)
                   Table no.6: EY of NABIL & HBL      (in %)

Year

NABIL

HBL

2069/70

9.26

5.84

2070/71

7.01

5.21

2071/72

5.77

5.39

2072/73

2.71

3.49

2073/74

2.05

3.17
Turning to the analysis of percentage return on net worth exhibited (presented) in table 7, it is depicted (seemed) that the percentage return on net worth of NBL is decreasing in nature. In base year, it is 9.26 which have decreased to 7.01 in next year, again it further decreased to 5.77 in third year which shows it is in decreasing trend. Where as, in HBL it is in fluctuating trend. But, it has slightly decreased in year 2073/74.
HBL-Nabil-7
 Figure 6: EY of NABIL & HBL
2.2  Study Result: -
          The main purpose of the study is to know about the overall position of particular two banks, NBL & HBL & to trace out the similarities & differences between them i.e. to compare equity share only. It is so because equity share are also important parts, which play vital role in the existence of any bank.
          Equity share represents equity or an ownership position in a company which have residual claim on any payments. It means creditors and preferred stockholders are paid before the payment to common stockholders. In bankruptcy, equity shareholders are entitled to any value remaining after all the claimants have been satisfied. Equity share are also termed as common stock interchangeably.
          The banking system started in Nepal from 1994 B.S. & since then the commercial banks have been operating successfully.
1.      NBL & HBL were established with the motto to provide maximum services as promptly as possible to its customers.
2.      Both the banks are trying a lot to provide maximum services to its customers accompanied with modern technology & infrastructures. NBL & HBL both have equity share.
3.      After analyzing it is found that the EPS, DPS, DPR etc are increasing and decreasing in both the bank.
4.      After identifying the two bank DPS, EPS, EY, DY and DPR we see that as the Himalayan Bank is also good but the NABIL Bank has better result than Himalayan.
5.      But in some place the Himalayan Bank has better result than the Nabil Bank limited.
6.      In the recent year both the banks have the strong finance and the bank are giving more benefit to the equity shareholder.


CHAPTER III
SUMMARY, CONCLUSION & RECOMMENDATION
3.1      Summary:
The major reason why people invest money in the shares and the debentures of the various companies is for the expectation of future return in from of dividends from the companies after the ascertainment of the profit. Similarly, is the reason why people invest in the shares of bank and other financial institution.
So, it is a major concern for any shareholder to know the return that we obtain from the bank by investing in it. So for this reason the dividends of the two major joint ventures banks have been taken into consideration viz. NABIL and HBL.
In the first chapter named Introduction the brief introduction about the banks under study, their objectives, literature reviews made for the preparation of the report, etc are mentioned. Similarly, objectives of the field study, purposed, limitations and the importance of the data. This includes various data such as EPS, DPS, MPS, DPR are presented.
In the last chapter headed Summary, Conclusion and Recommendations, various conclusions drawn from the analysis of the result made are quoted.

3.2  Conclusions:
            
1)   The intrinsic value per share is constantly increasing with increasing amount of retained earning, the shareholders equity is also constantly increasing every year. So the equity position of the banks is good.
2)   The return on the shareholder’s equity of the both banks is satisfactory.
3)   The companies have paid the dividends in the increasing trend with the increasing level of earning of the banks.
4)   On the basis of dividend yield ratio, Nabil is more efficient with more constancy than HBL for distribution of dividend on the basis of market price per share. Price-earning ratio analysis shows that the average price-earning ratio of Nabil is higher with high variation than HBL. HBL has lower price earning ratio, but has comparatively more consistency of price-earnings ratio.

3.2      Recommendations:
Based on major findings and issues and gaps found in course of this study, some recommendations are explained below hoping that these recommendations will certainly be provide milestone to overcome existing issues in the fields.
1.                  There is no clear – cut legal provision regarding dividend payments. So the government should act in favor of investors and should bind through such legal provisions or distinct uses so that the profit earning companies should distribute certain percent of their earnings as dividend.
2.                  Banks should provide a chance to their shareholders fro their interest. They should try to know whether they (shareholders) prefer to obtain dividend or stock dividend or any forms of dividend. So, instead declaring of cash or stock or any forms of dividend, dividend declaring should be proposed to the annual general meeting of shareholders for their approval. Furthermore, the banks should also be careful about informing the impact of dividends, of potential investors who know less about the matters.
3.                  The payment of dividends is highly fluctuating, which is neither static nor constantly growing. Such inconsistency and irregularity in the dividend payment may create more confusion and misconception about that firm. Due to high degree of risk and uncertainty, such fluctuation can’t impact positively in the firm’s market price per share. So these banks are advised payment policy. Similarly, according to the changing context and shareholders interest and expectation, the predetermined policies should be reviewed.

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