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Chapter – IV
Comparison of ICICI Bank
with other Private Sector Banks
117
CHAPTER - IV
COMPARISON OF ICICI BANK WITH OTHER PRIVATE SECTOR BANKS
S. No Particulars Page
No
4.1 Introduction 116
4.2 Introduction of AXIS Bank 119
4.3 Introduction of HDFC Bank 120
4.4 Introduction of YES Bank 124
4.5 Introduction of ING VYSYA Bank in India 127
4.6 Introduction of KOTAK MAHINDRA Bank 130
Growth of ICICI with HDFC, AXIS, ING VYSYA, KOTAK 4.7
MAHINDRA AND YES Bank 133
4.8 Deposits 134
4.9 Credit Deployment 135
4.10 Borrowings 137
4.11 Growth in ATM Machines 137
4.12 Number of Branches 140
4.13 Number of Employees 142
4.14 Capital Adequacy 144
4.15 Earnings per Share 145
4.16 Net Profit Margin 147
4.17 Credit Deposit Ratio 148
4.18 Conclusion 150
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CHAPTER – IV
COMPARISON OF ICICI BANK WITH OTHER
PRIVATE SECTOR BANKS
4.1 INTRODUCTION
In India the banks are being segregated in different groups. Each group has their own
benefits and limitations in operating in India. Each has their own dedicated target market.
Few of them work in rural sector while others in both rural as well as urban. Some are of
Indian origin and some are foreign players. All these details and many more are discussed
over here.
Indian Banking Sector: Challenges Ahead
India's banking industry is at a watershed. It has met and successfully overcome
several challenges over the last decade. But bigger challenges lie ahead. Some of these lie in
the distance which Indian banking has still to go, before it can claim to be at the top of the
Asia-Pacific region. Indian banks, the dominant financial intermediaries in India, have made
good progress over the last five years; it is evident from several parameters, including annual
credit growth, profitability, and trend in gross non-performing assets (NPAs). While the
annual rate of credit growth clocked 23% during the last five years, profitability (average
Return on Net Worth) was maintained at around 15% during the same period, and gross
NPAs fell from 3.3% as on March 31, 2006 to 2.3% as on March 31, 2011.1
Good internal capital generation, reasonably active capital markets, and governmental
support ensured good capitalization for most banks during the period under study, with
overall capital adequacy touching 14% as on March 31, 2011. At the same time, high levels
of public deposit ensured most banks had a comfortable liquidity profile. While banks have
benefited from an overall good economic growth over the last decade, implementation of
SARFAESI2, setting up of credit information bureaus, internal improvements such as upgrade
of technology infrastructure, tightening of the appraisal and monitoring processes, and
strengthening of the risk management platform have also contributed to the improvement.
1
Indian Banking Sector: Challenges unlikely to derail the progress made June 2011 2
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
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Significantly, the improvement in performance has been achieved despite several hurdles
appearing on the way, such as temporary slowdown in economic activity (in the second half
of 2008-09), a tightening liquidity situation, increases in wages following revision, and
changes in regulations by the Reserve Bank of India (RBI), some of which prescribed
higher credit provisions or higher capital allocations.
Currently, Indian banks face several challenges, such as increase in interest rates on
saving deposits, possible deregulation of interest rates on saving deposits, a tighter monetary
policy, a large government deficit, increased stress in some sectors (such as, State utilities,
airlines, and microfinance), restructured loan accounts, unamortized pension/gratuity
liabilities, increasing infrastructure loans, and implementation of Basel III.
The Indian financial sector (including banks, non-banking financial companies
( NBFCs), and housing Finance companies (HFCs) reported a compounded annual growth
rate (CAGR) of 19% over the last three years and their credit portfolio stood at close
to ` 49 trillion (around 62% of 2010-11 GDP) as on March 31, 2011. Banks accounted to
nearly 86% of the total credit, NBFCs for around 10%, and HFCs for around 4%. Within
banks, public sector banks (PSBs), on the strength of their country-wide presence,
continued to be the leader, accounting for around 76% of the total credit portfolio, while
within the NBFC sector, large infrastructure financing institutions3
accounted for more
than half the total NBFC credit portfolio; NBFCs that are into retail financing took up the
rest.
While the Indian banking sector features a large number of players competing
against each other, the top 10 banks accounted for a significant 57% share of the total credit
as on March 31, 2011
3 Such as Power Finance Corporation, Rural Electrification Corporation, and other infrastructure
NBFCs
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Table 4.1
Table showing the Key Players in Indian Banking Sector
Name of Bank
Credit
Portfolio as
in March
2011 (` billion)
Market
Share
(%)
NIMs
(2010-11)
Tier-I
Capital
% as in
March
2011
Return
On Net
Worth
(2010-11)
Gross NPA
% as in
March
2011
State Bank of India 7,567 18% 2.9% 7.8% 13% 3.3%
Bank of Baroda 2,287 5% 2.8% 10.0% 24% 1.4%
ICICI Bank 2,164 5% 2.3% 13.2% 10% 4.5%
Bank of India 2,131 5% 2.5% 8.3% 17% 2.2%
Canada Bank 2,125 5% 2.6% 10.9% 26% 1.5%
HDFC Bank 1,600 4% 4.2% 12.2% 17% 1.1%
IDBI Bank 1,571 4% 1.8% 8.1% 16% 1.8%
Axis Bank 1,424 3% 3.1% 9.4% 19% 1.1%
Central Bank of India 1,297 3% 2.7% 6.4% 18% 2.2%
Total banking sector4
42,874 100% 2.9% 9.7% 17% 2.3%
Source: Annual reports of banks, RBI, ICRA Research
On asset quality, public sector banks (PSBs) report some deterioration while private
banks show improvement.
The Gross NPA percentage of SCBs did not increase by the extent that the stress in
the Indian market during 2008-09 would warrant because of large loan restructuring over last
2-3 years (4-5% of total advances); Gross NPAs declined marginally from 2.4% as in March
2010 to 2.3% as in March 2011. However, higher provisioning led to a reduction in Net
NPAs from 1.1% as in March 2010 to 0.9% as in March 2011.
Table 4.2
Table showing the Trend in Asset Quality Indicators of SCBs
SCBs FY06 FY07 FY08 FY09 FY10 FY115
Gross NPAs (%) 3.3 2.5 2.3 2.3 2.4 2.3
Net NPAs (%) 1.2 1.0 1.0 1.1 1.1 0.9
Fresh NPA Generation Rate (%) 2.0 1.7 1.8 2.1 2.2 2.0
Net NPAs/Net Worth (%) 10.1 9.2 7.8 8.6 9.1 10.0
PSBs FY06 FY07 FY08 FY09 FY10 FY11
Gross NPA (%) 3.6 2.7 2.2 2.0 2.2 2.3
Net NPA (%) 1.3 1.1 1.0 0.9 1.1 1.1
Net NPAs/Net Worth (%) 13.1 12.1 11.2 11.4 13.5 13.4
Private banks FY06 FY07 FY08 FY09 FY10 FY11
Gross NPAs (%) 2.1 2.1 2.4 2.9 2.7 2.3
Net NPAs (%) 0.9 0.9 1.1 1.3 1.0 0.6
Net NPAs/Net Worth (%) 6.3 7.8 6.1 7.5 5.3 3.2 Source: Annual reports of banks, RBI, ICRA Research
4The data pertains to SCBs, except for NIMs and Returns on Net Worth, which are for select
Public Sector Banks + Private Sector Banks covering more than 90% of the universe.
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Over the last two years, PSBs‟ Gross NPAs rose from 2% to 2.3%, while private
banks NPAs declined from 2.9% to 2.3%. The Gross NPA percentage of the PSBs
got impacted by slippages from restructured accounts, “Agri Debt Relief”, and
slippages because of automation of asset classification.
Better provisioning coverage and a stronger capitalization profile allowed private
banks report better solvency (Net NPA/Net Worth) than PSBs during last few years.
4.2 INTRODUCTION OF AXIS BANK
Axis Bank was the first of the new private banks to have begun operations in 1994,
after the Government of India allowed new private banks to be established. The Bank was
promoted jointly by the Administrator of the specified undertaking of the Unit Trust of India
(UTI - I), Life Insurance Corporation of India (LIC) and General Insurance Corporation of
India (GIC) and other four PSU insurance companies, i.e. National Insurance Company Ltd.,
The New India Assurance Company Ltd., The Oriental Insurance Company Ltd. and United
India Insurance Company Ltd. The Bank as on 31st March, 2012 is capitalized to the extent
of ` 413.20 crores with the public holding (other than promoters and GDRs) at 54.08%. The
Bank's Registered Office is at Ahmedabad and its Central Office is located at Mumbai. The
Bank has a very wide network of more than 1600 branches (including 169 Service
Branches/CPCs as on 31st March, 2012). The Bank has a network of over 10000 ATMs (as
on 31st March, 2012) providing 24 hrs a day banking convenience to its customers. This is
one of the largest ATM networks in the country.5
The Bank has strengths in both retail and
corporate banking and is committed to adopting the best industry practices internationally in
order to achieve excellence.
To be the preferred financial solutions provider excelling in customer delivery
through insight, empowered employees and smart use of technology.
Key Executives
Chairman Adarsh Kishore
Managing Director & CEO Shikha Sharma
Director Rama Bijapurkar
Nominee K N Prithviraj
5
Axis bank annual report and director summary, 2011
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Banking made convenient
They have made everyday-banking as easy and convenient as possible so customer
can focus on what's more important - the business.
Current Accounts
Salary Accounts
Prepaid Cards
Debit Cards
Finance & funding customized for customer
Simple finance businesses are:
Credit for Corporates
Financing for Small & Medium Enterprises
Capital Market Solutions
Manage risk, Maximize liquidity
Walking the line of risk and liquidity can be challenging for any business.
Explore the Treasury Management Solutions
Payment & collection made easy
Quick and efficient transactions are always one of the hallmarks of a flourishing
business. And facilitating them is just another day in the office for us.
Cash Management Services
Government Business Solutions
Merchant Solutions
4.3 INTRODUCTION OF HDFC BANK
The Housing Development Finance Corporation Limited (HDFC) was amongst the
first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a
bank in the private sector, as part of the RBI's liberalisation of the Indian Banking Industry in
1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with
its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled
Commercial Bank in January 1995. MD received the Asian Banker Best Bank in India Award
at a function on March 23, 2012 at Singapore. Mr. Puri is flanked by Mr. Emmanuel Daniel,
CEO, The Asian Banker, on his right and Mr.Philippe Paillart, Chairman, Advisory Council.
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Key Executives
Director Ashim Samanta
Chairman (Non-Executive) C M Vasudev
Director Pandit Palande
Managing Director Aditya Puri
Banking Services
HDFC Bank began operations in 1995 with a simple mission: to be a "World-class
Indian Bank". They realised that only a single-minded focus on product quality and service
excellence would help us get there. Today, they are proud to say that they are well on the way
towards that goal. It is extremely gratifying that the efforts towards providing customer
convenience have been appreciated both nationally and internationally.6
Promoters
HDFC is India's premier housing finance company and enjoys an impeccable track
record in India as well as in international markets. Since its inception in 1977, the
Corporation has maintained a consistent and healthy growth in its operations to remain the
market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling
units. HDFC has developed significant expertise in retail mortgage loans to different market
segments and also has a large corporate client base for its housing related credit facilities.
With its experience in the financial markets, a strong market reputation, large shareholder
base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the
Indian environment.
Business Focus
HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build
sound customer franchises across distinct businesses so as to be the preferred provider of
banking services for target retail and wholesale customer segments, and to achieve healthy
growth in profitability, consistent with the bank's risk appetite. The bank is committed to
maintain the highest level of ethical standards, professional integrity, corporate governance
and regulatory compliance. HDFC Bank's business philosophy is based on four core values -
Operational Excellence, Customer Focus, Product Leadership and People.
6 Annual report of HDFC bank, 2011
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Capital Structure
As on 31st March, 2012 the authorized share capital of the Bank is ` 550 crore. The
paid-up capital as on the said date is ` 469,33,76,540 (234,66,88,270 equity shares of ` 2/-
each). The HDFC Group holds 23.15% of the Bank's equity and about 17.29 % of the equity
is held by the ADS / GDR Depositories (in respect of the bank's American Depository Shares
(ADS) and Global Depository Receipts (GDR) Issues). 30.68 % of the equity is held by
Foreign Institutional Investors (FIIs) and the Bank has 4,47,924 shareholders.
The shares are listed on the Bombay Stock Exchange Limited and the National Stock
Exchange of India Limited. The Bank's American Depository Shares (ADS) are listed on the
New York Stock Exchange (NYSE) under the symbol 'HDB' and the Bank's Global
Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange under ISIN No
US40415F2002.
Centurion Bank of Punjab amalgamation with HDFC
On May 23, 2008, the amalgamation of Centurion Bank of Punjab (CBoP) with
HDFC Bank was formally approved by Reserve Bank of India to complete the statutory and
regulatory approval process. As per the scheme of amalgamation, shareholders of CBoP
received 1 share of HDFC Bank for every 29 shares of CBoP. The merged entity will have a
strong deposit base of around ` 1, 22,000 crores and net advances of around ` 89,000 crores.
The balance sheet size of the combined entity would be over ` 1, 63,000 crores. The
amalgamation added significant value to HDFC Bank in terms of increased branch network,
geographic reach, and customer base, and a bigger pool of skilled manpower.
In a milestone transaction in the Indian banking industry, Times Bank Limited
(another new private sector bank promoted by Bennett, Coleman & Co. / Times Group) was
merged with HDFC Bank Ltd., effective February 26, 2000. This was the first merger of two
private banks in the New Generation Private Sector Banks. As per the scheme of
amalgamation approved by the shareholders of both banks and the Reserve Bank of India,
shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times
Bank.
Distribution Network
HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable
network of 2,544 branches spread in 1,399 cities across India. All branches are linked on an
online real-time basis. Customers in over 500 locations are also serviced through Telephone
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Banking. The Bank's expansion plans take into account the need to have a presence in all
major industrial and commercial centres where its corporate customers are located as well as
the need to build a strong retail customer base for both deposits and loan products. Being a
clearing/settlement bank to various leading stock exchanges, the Bank has branches in the
centres where the NSE/BSE has a strong and active member base. The Bank also has 8,913
networked ATMs across these cities. Moreover, HDFC Bank's ATM network can be
accessed by all domestic and international Visa/MasterCard, Visa Electron/Maestro,
Plus/Cirrus and American Express Credit/Charge cardholders.
Business
HDFC Bank offers a wide range of commercial and transactional banking services
and treasury products to wholesale and retail customers. The bank has three key business
segments:
Wholesale Banking Services
The Bank's target market ranges from large, blue-chip manufacturing companies in
the Indian corporate to small & mid-sized corporate and agri-based businesses. For these
customers, the Bank provides a wide range of commercial and transactional banking services,
including working capital finance, trade services, transactional services, cash management,
etc. The bank is also a leading provider of structured solutions, which combine cash
management services with vendor and distributor finance for facilitating superior supply
chain management for its corporate customers. Based on its superior product delivery /
service levels and strong customer orientation, the Bank has made significant inroads into the
banking consortia of a number of leading Indian corporates including multinationals,
companies from the domestic business houses and prime public sector companies. It is
recognised as a leading provider of cash management and transactional banking solutions to
corporate customers, mutual funds, stock exchange members and banks.
Retail Banking Services
The objective of the Retail Bank is to provide its target market customers a full range
of financial products and banking services, giving the customer a one-stop window for all
his/her banking requirements. The products are backed by world-class service and delivered
to customers through the growing branch network, as well as through alternative delivery
channels like ATMs, Phone Banking, Net Banking and Mobile Banking. The HDFC Bank
Preferred program for high net worth individuals, the HDFC Bank Plus and the Investment
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Advisory Services programs have been designed keeping in mind needs of customers who
seek distinct financial solutions, information and advice on various investment avenues.
The Bank also has a wide array of retail loan products including Auto Loans, Loans
against marketable securities, Personal Loans and Loans for Two-wheelers. It is also a
leading provider of Depository Participant (DP) services for retail customers, providing
customers the facility to hold their investments in electronic form. HDFC Bank was the first
bank in India to launch an International Debit Card in association with VISA (VISA
Electron) and issues the Master card Maestro debit card as well. The Bank launched its credit
card business in late 2001. By March 2010, the bank had a total card base (debit and credit
cards) of over 14 million. The Bank is also one of the leading players in the “merchant
acquiring” business with over 90,000 Point-of-sale (POS) terminals for debit / credit cards
acceptance at merchant establishments. The Bank is well positioned as a leader in various net
based B2C opportunities including a wide range of internet banking services for Fixed
Deposits, Loans, Bill Payments, etc.
Treasury
Within this business, the bank has three main product areas - Foreign Exchange and
Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the
liberalisation of the financial markets in India, corporates need more sophisticated risk
management information, advice and product structures. These and fine pricing on various
treasury products are provided through the bank's Treasury team. To comply with statutory
reserve requirements, the bank is required to hold 25% of its deposits in government
securities. The Treasury business is responsible for managing the returns and market risk on
this investment portfolio.
4.4 INTRODUCTION OF YES BANK
YES BANK is a state-of-the-art high quality, customer centric, service driven, private
Indian Bank catering to the “Future Businesses of India”, and is an outcome of the
professional & entrepreneurial commitment of Rana Kapoor, Founder, Managing Director &
CEO. As the Professionals‟ Bank of India, YES BANK has exemplified „creating and sharing
value‟ for all its stakeholders, and has created a differentiated Banking Paradigm. Since
inception, YES BANK has tried to play a catalytic role in bridging the infrastructure and
knowledge gap in various Sunrise sectors of the economy. As part of the differentiated
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strategy, YES BANK has had a strong focus on Development Banking, as is evident from the
cutting-edge work that the Bank has done in the area of Food & Agribusiness, Infrastructure,
Microfinance, and Sustainability which in most cases have been first-of-its kind in India. The
focus on Governance and Good Corporate Citizenship, actualized through YES BANK‟s
Responsible Banking approach, stands evidence to YES BANK‟s strategic vision.
Since inception in 2004, YES BANK has fructified into a „“Full Service Commercial
Bank” that has steadily built Corporate and Institutional Banking, Financial Markets,
Investment Banking, Corporate Finance, Branch Banking, Business and Transaction
Banking, and Wealth Management business lines across the country and is well equipped to
offer a range of products and services to corporate and retail customers. YES BANK offers a
full-range of client-focused corporate banking services, including working capital finance,
specialized corporate finance, trade and transactional services, treasury risk management
services, investment banking solutions and liquidity management solutions among others to a
highly focused client base.
The Bank also has a widespread branch network of over 350 branches across 200
cities, with over 600 ATM's and 2 National Operating Centres in Mumbai and Gurgaon.
Since inception, YES BANK has adopted innovative and creative technologies that facilitate
robust systems and processes and facilitate in the delivery of world-class banking solutions
that significantly improve the business and financial efficiency of the clients.
YES BANK has been recognized amongst the Top and the Fastest Growing Bank in
various Indian Banking League Tables by prestigious media houses and Global Advisory
Firms, and has received national and international honours for the various Businesses
including Corporate Finance, Investment Banking, Treasury, Transaction Banking, and
Sustainable practices through Responsible Banking. The Bank has received several
recognitions for the world-class IT infrastructure, and payments solutions, as well as
excellence in Human Capital. The sustained growth of YES BANK is based on the key pillars
of Growth, Trust, Technology, Human Capital, Transparency and Responsible Banking. YES
BANK is committed towards building the “Best Quality Bank of the World in India” –
resting on the strengths of its six key pillars and differentiation built through exemplary
Customer Service, to ensure that it provides the finest Banking Experience to its customers.7
7 Yes bank annual report of 2011
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Brand Vision & Strategy
YES BANK is pursuing a Brand strategy to build one of the finest financial brands in
India. YES BANK believes that differentiation begins with its service and trust mark
embedded in „YES‟, which represents the Bank‟s fundamental goal of being a highly service-
oriented Financial Institution. The Endeavour at YES BANK is to provide an unprecedented
Delightful Banking Experience to all its customers.
The name YES signifies-
The essence of the brand completely by conveying all the values and characteristics -
Attractive, Smart, Simple, Serious, Reliable, Trustworthy, Optimistic, Positive,
Efficient, Universal
Clutter breaking in the banking environment, and affirmative with target clients across
business and market segments.
Brand Vision and Commitment
To be recognized as the WORLD‟s BEST QUALITY BANK IN INDIA.
To provide a Delightful Banking Experience to all its customers.
To be a long term partner with all stakeholders particularly customers by creating &
sharing value.
To be a solid and trusted financial trust mark backed by two professional promoters
and an exceptional management team
Brand Pillars
The YES BANK brand is being built around 6 Key Brand Pillars, which epitomize the
growing strengths of the Bank. All communication and advertising has been created around
these key Brand Pillars.
Growth: YES BANK's core promise is growth, for its internal and external
stakeholders symbolize in Say YES to Growth!
Trust: YES BANK's Promoters, Investors and Top Management team, are all of the
highest pedigree with a demonstrated track record, thus inspiring and establishing a
Trust Mark - Say YES to Trust!
Knowledge Driven Human Capital: YES BANK has adopted a knowledge driven
entrepreneurial approach to Banking and offers Financial Solutions beyond the
traditional realm of banking. YES BANK's top quality Human Capital represents the
finest talents in Indian banking mobilized from India and abroad.
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Technology: YES BANK is establishing the highest standards in customer service by
adopting cutting-edge Innovative Technology. The only thing constant about YES
BANK's Technology is Evolution.
Transparency and Responsible Banking: YES BANK holds Transparency and
Accountability above all else. The Bank has established the most stringent
Corporate Governance norms, and is also committed to Responsible Banking by
focusing on Sustainability and Social Responsibility.
YES BANK will continue to declare its Promise through consistent communication
activities under the Brand Slogans "Experience our Expertise" and "YES for YOU".
Key Executives
Managing Director & CEO Rana Kapoor
Director S L Kapur
Director Ajay Vohra
Director Bharat Patel
4.5 INTRODUCTION OF ING VYSYA IN INDIA
In India, ING is present in all three fields of banking, insurance and asset management
in the form of ING, ING Vysya Life Insurance and ING Investment Management
respectively. The presence in all three fields signifies the importance that the group attaches
to the Indian markets and the group's operations here, as well as its bullish future outlook on
the country. ING and ING Vysya Life Insurance are headquartered at Bangalore, while the
corporate office of ING Investment Management is situated at Mumbai. The synergies arising
out of the three distinct but complimentary businesses are bound to be an asset to the group in
the changing market dynamics of the future. The first such signs are already visible on the
horizon with combined products being successfully launched by the different entities of the
group in conjunction with each other.
The origin of ING Group
On the other hand, ING group originated in 1990 from the merger between Nationale
– Nederlanden NV the largest Dutch Insurance Company and NMB Post Bank Groep NV.
Combining roots and ambitions, the newly formed company called “Internationale
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Nederlanden Group”. Market circles soon abbreviated the name to I-N-G. The company
followed suit by changing the statutory name to “ING Group N.V.”
Profile ING has gained recognition for its integrated approach of banking, insurance and
asset management. Furthermore, the company differentiates itself from other financial service
providers by successfully establishing life insurance companies in countries with emerging
economies, such as Korea, Taiwan, Hungary, Poland, Mexico and Chile. Another
specialization is ING Direct, an Internet and direct marketing concept with which ING is
rapidly winning retail market share in mature markets. Finally, ING distinguishes itself
internationally as a provider of „employee benefits‟, i.e. arrangements of nonwage benefits,
such as pension plans for companies and their employees.
Mission
ING`s mission is to be a leading, global, client-focused, innovative and low-cost
provider of financial services through the distribution channels of the client‟s preference in
markets where ING can create value.8
The new identity
The immediate benefit to the bank, ING Vysya Bank, has been the pride of having
become a Member of the global financial giant ING. As at the end of the year December
2008, ING's total assets exceeded 1332 billion Euros, employed over 125000 people, and
served over 85 million customers, across 50 countries. This global identity coupled with the
backup of a financial power house and the status of being the first Indian International Bank,
would also help to enhance productivity, profitability, to result in improved performance of
the bank, for the benefit of all the stake holders.
ING ING Vysya Bank Ltd., is an entity formed with the coming together of erstwhile,
Vysya Bank Ltd, a premier bank in the Indian Private Sector and a global financial
powerhouse, ING of Dutch origin, during Oct 2002. The origin of the erstwhile Vysya Bank
8
ING Vysya Bank annual report of 2011
131
was pretty humble. It was in the year 1930 that a team of visionaries came together to found a
bank that would extend a helping hand to those who weren't privileged enough to enjoy
banking services. It's been a long journey since then and the Bank has grown in size and
stature to encompass every area of present-day banking activity and has carved a distinct
identity of being India's Premier Private Sector Bank.
In 1980, the Bank completed fifty years of service to the nation and post 1985; the
Bank made rapid strides to reach the coveted position of being the number one private sector
bank. In 1990, the bank completed its Diamond Jubilee year. At the Diamond Jubilee
Celebrations, the then Finance Minister Prof. Madhu Dandavate, had termed the performance
of the bank „Stupendous‟. The 75th anniversary, the Platinum Jubilee of the bank was
celebrated during 2005.
Key Executives
Managing Director & CEO Shailendra Bhandari
Director Aditya Krishna
Part Time Chairman Arun Thiagarajan
Director Lars Kramer
An outlet comprises of 441 branches, 37 ECs, 28 Satellite Offices and 351 ATMs as
of March 31st 2009. Additionally bank also has Internet Banking, mi-bank and Customer
Service Line for Phone Banking Service.
The long journey of seventy-five years has had several milestones…
1930 Set up in Bangalore
1948 Scheduled Bank
1985 Largest Private Sector Bank
1987 The Vysya Bank Leasing Ltd. Commenced
1988 Pioneered the concept of Co branding of Credit Cards
1990 Promoted Vysya Bank Housing Finance Ltd.
1992 Deposits cross `1000 crores
1993 Number of Branches crossed 300
1996 Signs Strategic Alliance with BBL., Belgium. Two National Awards by Gem & Jewellery Export Promotion Council for excellent performance in Export
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Promotion
1998
Cash Management Services, & commissioning of VSAT. Golden Peacock Award - for the best HR Practices by Institute of Directors. Rated as Best
Domestic Bank in India by Global Finance (International Financial Journal -
June 1998)
2000 State-of-the-art Date Centre at I.T.P.L. Bangalore. RBI clears setting up of ING Vysya Life Insurance Company.
2001 ING-Vysya commenced life insurance business.
2002
The Bank launched a range of products & services like the Vys Vyapar Plus, the range of loan schemes for traders, ATM services, Smartserv, personal assistant
service, Save & Secure, an account that provides accident hospitalization and
insurance cover, Sambandh, the International Debit Card and the mi-bank net
banking service.
2002 ING takes over the Management of the Bank from October 7th , 2002
2002 RBI clears the new name of the Bank as ING Vysya Bank Ltd, vide their letter of 10.12.02
2003 Introduced customer friendly products like Orange Savings, Orange Current and Protected Home Loans
2004 Introduced Protected Home Loans - a housing loan product
2005 Introduced Solo - My Own Account for youth and Customer Service Line – Phone Banking Service
2006 Bank has networked all the branches to facilitate „AAA‟ transactions i.e. Anywhere, Anytime & Anyhow Banking.
4.6 INTRODUCTION OF KOTAK MAHINDRA BANK
Established in 1985, The Kotak Mahindra group has long been one of India's most
reputed financial organizations. In February 2003, Kotak Mahindra Finance Ltd, the group's
flagship company was given the license to carry on banking business by the Reserve Bank of
India (RBI). This approval creates banking history since Kotak Mahindra Finance Ltd. is the
first company in India to convert to a bank.
The complete bank
At Kotak Mahindra Bank, address the entire spectrum of financial needs for
individuals and corporates. They have the products, the experience, the infrastructure and
most importantly the commitment to deliver pragmatic, end-to-end solutions that really work.
A license authorizing the bank to carry on banking business has been obtained from the
Reserve Bank of India in terms of Section 22 if the Banking Regulation Act, 1949. It must be
distinctly understood, however, that in issuing the license, the Reserve Bank of India does not
undertake any responsibility for the financial soundness of the bank or the correctness of any
133
of the statements made or opinion expressed in this connection.
Established in 1985, the Kotak Mahindra group has been one of India's most reputed
financial conglomerates. In February 2003, Kotak Mahindra Finance Ltd, the group's flagship
company was given the license to carry on banking business by the Reserve Bank of India
(RBI). This approval created banking history since Kotak Mahindra Finance Ltd. is the first
non-banking finance company in India to convert itself in to a bank as Kotak Mahindra Bank
Ltd. Today, this is one of the fastest growing bank and among the most admired financial
institutions in India.
Bank Reach
Kotak Mahindra Bank has over 357 branches and 866 ATMs, which are spread all
over India, not just in the metros but in Tier II cities and rural India as well, bank are
redefining the reach and power of banking.
The Offerings
Kotak Mahindra Bank caters to the myriad needs of Resident Individuals, NRIs and
Businesses. Kotak Mahindra Bank offer complete financial solutions for infinite needs of all
individual & non-individual customers depending on the customer's need - delivered through
a state of the art technology platform. Investment products like Mutual Funds, Life Insurance,
retailing of gold coins and bars etc are also offered. The Bank follows a mix of both open and
closed architecture for distribution of the investment products. All this is backed by strong,
in-house research on Mutual Funds.
The Savings Account goes beyond the traditional role of savings, and allows putting
aside a lot more than just money. The worry-free features of the Savings Account provides a
range of services from funds transfer, bill payments, 2-way sweep through the Active Money
feature & much more. Customer can place standing instructions for investment options that
can be booked through Internet or through Phone banking services. The Savings Account
thus provides for attractive returns earned through a comprehensive suite products and
services that offer investment options, all delivered seamlessly to the customer by well
integrated technology platforms. Apart from Phone banking and Internet banking, the Bank
offers convenient banking facility through Mobile banking, SMS services, Netcard, Home
banking and Pay Bill facility among others.
134
Depository services offered by the Bank allows the customers to hold equity shares,
government securities, bonds and other securities in electronic or Demat forms. The Salary to
Wealth offering provides comprehensive administrative solutions for Corporates with
features such as easy and automated web based salary upload process thereby eliminating the
paper work involved in the process, a dedicated relationship manager to service the corporate
account, customized promotions and tie - ups and many such unique features. The whole
gamut of investment products and investment advisory services is available to the salary
account holders as well.
For the business community, bank offer comprehensive business solutions that
include the Current Account, Trade Services, Cash Management Service and Credit
Facilities, keeping in mind the myriad needs of the business. Wholesale banking products
offer business banking solutions for long-term investments and working capital needs, advice
on mergers and acquisitions and equipment financing. To meet special needs of the rural
market, banks have dedicated business offerings for agricultural financing and infrastructure.
Agriculture Finance division delivers customised products for capital financing and
equipment financing needs of the rural customers. For financial liquidity bank offer the loans
that meet personal requirements with quick approval and flexible payment options. To
complete the personal financial offerings space, bank now offer Kotak Credit Card which is a
hassle-free, transparent product that also happens to be the first vertical credit card in the
industry. Kotak Mahindra Bank addresses the entire spectrum of financial needs of Non-
Resident Indians. Bank tie-up with the Overseas Indian Facilitation Centre (OIFC) as a
strategic partner gives us a platform to share the comprehensive range of banking &
investment products and services for Non Resident Indians (NRIs) and Persons of Indian
Origin (PIOs). Online Account Opening facility and Live Chat service helps to get in touch
with us at the comfort of customers‟ homes. These offerings are specifically designed to suit
the overseas Indian's personal financial needs and give the global Indians a near to home feel.
Businesses
Multiple businesses. One brand. Kotak Mahindra is one of India's leading banking
and financial services groups, offering a wide range of financial services that encompass
every sphere of life.
Kotak Mahindra Bank Ltd
135
Kotak Mahindra Bank Ltd is a one stop shop for all banking needs. The bank offers
personal finance solutions of every kind from savings accounts to credit cards, distribution of
mutual funds to life insurance products. Kotak Mahindra Bank offers transaction banking,
operates lending verticals, manages IPOs and provides working capital loans. Kotak has one
of the largest and most respected Wealth Management teams in India, providing the widest
range of solutions to high net worth individuals, entrepreneurs, business families and
employed professionals.9
Kotak Mahindra Old Mutual Life Insurance Ltd
Kotak Securities Ltd
Kotak Mahindra Capital Company (KMCC)
Kotak Mahindra Prime Ltd (KMPL)
Kotak International Business
Kotak Mahindra Asset Management Company Ltd (KMAMC)
Kotak Private Equity Group (KPEG)
Kotak Realty Fund
Key Executives
Part Time Chairman Shankar Acharya
Executive Vice Chairman & MD Uday Kotak
Director Asim Ghosh
Joint Managing Director C Jayaram
4.7 GROWTH OF ICICI with HDFC, AXIS, ING VYSYA, KOTAK
MAHINDRA AND YES BANK
Financial analysis is mainly done in order to judge the growth of the banks but
diagnosing the information contained in the financial statements. Financial analysis is done
to identify the financial strengths and weaknesses of banks by properly establishing
relationship between the items of balance sheet and profit and loss account. It helps in better
understanding of banks financial position, growth and performance by analyzing the financial
statements with various tools and evaluating the relationship between various elements
of financial statements.
The term “financial statement analysis” includes both “analysis” and
“interpretation”. The term “analysis” is used to mean the generalization of data given in the
financial statements by systematic arrangements and classification of data and
9 Kotak Mahindra Bank annual report of 2011
136
“interpretation” means explaining the meaning and significance of the data so simplified.
However both analysis and interpretation are interlinked and complimentary to each other. In
this paper an attempt has been made to study the growth of HDFC, AXIS, ING VYSYA
KOTAK MAHINDRA AND YES BANK.
For analyze the growth of the selected banks under study for the period of 2005-2006
to 2010-2011. To attain the purpose the following parameters have been taken.
1. Growth of deposits
2. Branch expansion
3. Number of employees
4. Credit deployment
5. Borrowings
4.8 DEPOSITS
Deposits serve as the basis for capital formation and facilitate the process of economic
development. Deposits are one of the important growth oriented functions of banking
industry. The great emphasis has been placed on deposits mobilization by banks in the
country. Banks obtain a major amount of their working capital from deposits. As their
lending and profit earning capacities depend upon deposits. The management of banks is
always engaged in working out plans and schemes to mobilize deposits. The total deposits
depend upon the no. of factors like the monetary policy and deposit mobilization by other
commercial banks. The above said bank‟s deposits are shown in the following table.
Table 4.3
Table showing the Growth in Deposits (` In crores)
YEAR
ICICI
HDFC
AXIS KOTAK
MAH
YES ING
VYSYA
2005-2006 165083.17 55796.82 40113.53 6565.92 2910.38 13335.26
2006-2007 230510.19 68297.94 58785.60 11000.09 8220.39 15418.59
2007-2008 244431.05 100768.59 87626.22 16423.65 13273.16 20457.56
2008-2009 218347.83 142811.58 117374.11 15644.00 16169.42 24889.47
2009-2010 202016.60 167404.44 141300.22 23886.47 26798.56 25865.30
2010-2011 225602.11 208586.41 189237.80 29260.97 45938.93 30194.25
Source: A nnual reports of both the banks for the period 2005-2006 to 2010-2011
The above table shows that the deposits of ICICI bank have been increased from
137
` 165083.17 crores in the year 2005 to ` 225,602.11 crores in the year 2011. Further the
deposits of HDFC have been increased from ` 55,796.82 crores to ` 208,586.41 crores. The
following chart shows that all other banks show the rising trend but there is more growth in
deposits in ICICI Bank as compared to the HDFC, AXIS, ING VYSYA KOTAK
MAHINDRA AND YES BANK.
4.9 CREDIT DEPLOYMENT
Lending or advancing loan is one of the main functions of all the banks. A bank
provides loan directly or indirectly. Lending is done on the basis of funds raised by accepting
deposits from the public. Advances provide income to the banks in t h e form of interest
and discount on the one hand and promote economic development of the country by meeting
financial needs of industries and commercial establishment on the other hand. Credit
deployment of both the banks is shown in table.
The following table 4.4 depicts that the total advances of ICICI bank has been
increased ` 146163.11 crores in the year 2005 to ` 216,365.90 crores in year 2011. Further in
case of HDFC the advances are increased from Rs 35,061.26 crores i n t h e year 2005 to
Rs 159,982.67 crores in the year 2011. It is cleared that the growth rate of ICICI is more as
compared to all other HDFC, AXIS, ING VYSYA KOTAK MAHINDRA AND YES BANK.
But all five banks show a rising trend in advances.
Table 4.4
Table showing the Credit Deployment (` in crores)
YEAR
ICICI
HDFC
AXIS KOTAK
MAH
YES ING
VYSYA
2005-2006 146163.11 35061.26 22314.23 6348.31 2407.09 10231.53
2006-2007 195865.60 46944.78 36876.48 10924.07 6289.74 11976.16
2007-2008 225616.08 63426.90 59661.15 15552.22 9430.27 14649.55
2008-2009 218310.85 98883.05 81556.76 16625.34 12403.09 16756.38
2009-2010 181205.60 125830.59 104340.95 20775.05 22193.12 18507.19
2010-2011 216365.90 159982.67 142407.83 29329.31 34363.64 23602.14
Source: A nnual reports of both the banks for the period 2005-2006 to 2010-2011.
138
CHART 4.1
Chart showing the Growth in Deposits
300000
250000
200000
150000
100000
50000
0
2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
ICICI HDFC AXIS KOTAK MAHINDRA YES ING VYSYA
Chart 4.2
Chart showing the Credit Deployment
250000
200000
150000
100000
50000
0
ICICI HDFC AXIS KOTAK MAH
YES ING VYSYA
2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011
139
4.10 BORROWINGS
Borrowings are the amount that the general public deposits in the banks in their
accounts. Banks use these deposits as their resources to advance money to the borrowers
with the help of cash credit. Growth in borrowings of the ICICI bank and all other private
banks has been shown in table 4.5.
Table 4.5
Table showing the Borrowings (` in crores)
YEAR
ICICI
HDFC
AXIS KOTAK
MAH
YES ING
VYSYA
2005-2006 38521.91 2858.48 2680.93 1609.23 464.76 1107.45
2006-2007 51256.03 2815.39 5195.60 5099.75 867.32 843.55
2007-2008 65648.43 4594.92 5624.04 5119.25 986.21 1249.80
2008-2009 93155.45 9163.64 15519.87 6734.01 3701.68 3185.32
2009-2010 94263.57 12915.69 17169.55 6140.51 4749.08 3671.39
2010-2011 109554.28 14394.06 26267.88 11723.95 6690.91 4146.91
Source: A nnual reports of both the banks for the period 2005-2006 to 2010-2011
Table 4.5 depicts that the borrowings of ICICI bank has increased from ` 38,521.91
crores in year 2005 to ` 109,554.28 crores. in year 2011. Further in case of the borrowings
are increased from 2005 to 2010 of all other five banks HDFC, AXIS, ING VYSYA KOTAK
MAHINDRA AND YES BANK.
4.11 GROWTH IN ATM MACHINES
Automated Teller Machine (ATM) is a computerized machine that provides the
customers of banks the facility of accessing their accounts for dispensing cash and to carry
out other financial transactions without the need of actually visiting a bank branch. The most
frequent point of interaction with the Bank is ATM facility, the Account holders whether
in Private/Foreign sector or public sector have been provided with ATM facility by their
respective Banks. ICICI Bank has installed its first talking ATM in 2003. Over the years, the
bank has also ensured that the basic banking facilities can be used by physically handicapped
people, "The country has 10.6 million visually challenged people and it is the duty of the
banks to help these people to meet their banking needs," ICICI Bank's Chief Executive
Officer and Managing Director Chanda Kochhar told.
140
Table 4.6
Table showing the Growth in ATM Machines (No. of machines)
YEAR 2005 2006 2007 2008 2009 2010 2011
ICICI 1910 2200 3271 3881 4713 5219 6425
AXIS 1599 1891 2341 2764 3595 4293 6871
HDFC 1147 1323 1605 1977 3295 4232 5998
ING 79 114 158 203 351 357 409
YES 30 40 75 150 200 213 261
KOTAK - - 135 314 387 429 725
Source: A nnual reports of both the banks for the period 2005-2006 to 2010-2011
To judge the performance level of any Bank today it is crucial that the ATM service
of the Bank be studied, this includes not only the number of ATM machines installed by the
Bank, but also how technologically advanced the machines are (number of transaction that
can be done with the ATM Facility), IC IC I b a n k takes effort to maintain the machines and
also the overall experience of the Account holder with the service.
141
Chart 4.3
Chart showing the Borrowings (`in crores)
ING VYSYA
YES
KOTAK MAH
AXIS
HDFC
ICICI
0 20000 40000 60000 80000 100000 120000
2010-2011 2009-2010 2008-2009 2007-2008 2006-2007 2005-2006
Chart 4.4
Chart showing the Growth in ATM Machine (No. of machines)
2011
2010
2009
2008
2007
2006
2005
0 1000 2000 3000 4000 5000 6000 7000 8000
KOTAK YES ING HDFC AXIS ICICI
142
4.12 NUMBER OF BRANCHES
The branch expansion policy seeks to achieve to broad objectives (a)
narrowing down regional imbalance and (b) providing banking facilities to rural and
neglected areas. The policy mainly emphasize on opening more offices in rural and semi-
urban areas and centers which have few or no branches without jeopardizing branch
expansion in urban and metropolitan cities. The main emphasis of branch licensing
policy is on areas where population per branch is higher than the national average. The
number of branches of above said private banks are given in the table 4.7.
Table 4.7
Table showing the Number of Branches
YEAR
2005
2006
2007
2008
2009
2010
2011
ICICI 562 614 755 1262 1419 1707 2529
AXIS 256 355 508 651 835 1035 1390
HDFC 467 535 684 761 1412 1725 1820
ING 370 377 400 407 441 468 510
YES 30 40 67 117 123 150 214
KOTAK - - 105 178 217 249 321
Source: A nnual reports of both the banks for the period 2005-2006 to 2010-2011
Table 4.7 indicates that the number of branches of ICICI bank is increased from 562
in year 2005 to 2529 in year 2011; the major growth was in the year 2008 -2009. Further
there is uprising trend in case of HDFC. It increases from 467 in the years 2005 to 1820 in
years 2011. But the growth in HDFC is not much higher as compared to ICICI. All other
banks are gradually increasing in there number of branches year after year from 2005 to
2011.
143
Chart 4.5
Chart showing the Number of Branches
2011
2010
2009
2008
2007
2006
2005
0 500 1000 1500 2000 2500 3000
KOTAK YES ING HDFC AXIS ICICI
144
4.13 NUMBER OF EMPLOYEES
Unemployment is one of the main problem for a under developed country and
developing country. Generating employment is another criterion on which the working of
the banks can be evaluated. However employment so generated should improve the business
of banks and the quality of service they provide.
Table 4.8
Table showing the number of employees
YEAR
ICICI
HDFC
AXIS KOTAK
MAH
YES
ING VYSYA
2005
18000
9465
4761
-
207 4963
2006
25384
14878
6553
3600
627 5312
2007
33321
21477
9980
5400
2443 5341
2008
34021
37386
14739
5577
3150 5852
2009
34821
52687
20624
8400
4050 6227
2010
41068
51888
77983
8800
5167 6249
2011
56969
55752
65378
11000
12000 7041
Source: A nnual reports of both the banks for the period 2005-2006 to 2010-2011
Table 4.8 shows that the number of employees in ICICI bank increased from
18000 in year 2005 to 56969 in the year 2011. Further in case of AXIS there is an increasing
trend the number increase from 4761 in the year 2005 to 77983 in the year 2010. But in
2011 there is a slightly decrease in number of employees to 65378. The number of employees
in IC ICI bank leads to control in productivity because there is no much increase in profits
and business according to the growth in number of employees.
145
Chart 4.6
Chart showing the Number of Employees
80000
70000
60000
50000
40000
30000
20000
10000
0
2005 2006 2007 2008 2009 2010 2011
ICICI HDFC AXIS KOTAK MAH YES ING VYSYA
146
4.14 CAPITAL ADEQUACY
Table 4.9
Table showing the Capital Adequacy (%)
Particulars 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
ICICI 13.35 11.69 13.97 15.53 19.41 19.54
AXIS 11.08 11.57 13.73 13.69 15.80 12.65
HDFC 11.41 17.44 15.69 13.60 13.08 16.22
ING VYS 10.67 10.56 10.20 11.65 14.91 12.94
KOTAK 11.27 13.46 18.65 20.01 18.35 19.92
YES 16.43 13.60 13.60 16.60 20.60 16.50
Source: A nnual reports of both the banks for the period 2005-2006 to 2010-2011
Interpretation
Reserve Bank of India prescribes Banks to maintain a minimum Capital to risk-
weighted Assets Ratio (CRAR) of 9 percent with regard to credit risk, market risk and
operational risk on an ongoing basis, as against 8 percent prescribed in Basel Documents.
Capital adequacy ratio of the ICICI Bank was well above the industry average of 18.69%
CAR of HDFC bank is below the ratio of ICICI bank. HDFC Bank‟s total Capital Adequacy
stood at 16.22% as on March 31, 2011.
ICICI CAR is gradually increased over the last 5 year and the capital adequacy ratio
of Axis bank is increasing by every 2 year. But ING VYSYA should reconsider their business
as its CAR is falling. Higher the ratio the banks are in a comfortable position to absorb losses.
So ICICI and HDFC are on a strong base to absorb their loses.
147
4.15 EARNINGS PER SHARE
EPS is o f t e n c o n s i d e r e d t h e s i n g l e m o s t i m p o r t a n t m e t r i c to determine
company‟s profitability. It is also a major component of another important metric, price
per earnings ratio (P/E). Analysis should look for a positive trend of EPS in order to make
sure that the company is finding more ways to make more money. HDFC is also
showing the positive trend over last 5 year. AXIS bank must be attracted by investors as
positive growth in EPS is highest among peers who show its ability to generate profit for
shareholders. ICICI has not any remarkable performances in EPS. There were so many
up‟s and downs in IC IC I business performance during economic crises which is
reflected in its EPS.
Table 4.10
Table showing the Earnings per Share
Particular 2005 - 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10 2010-11
ICICI 28.55 34.59 37.37 33.76 36.10 44.73
AXIS 17.41 23.40 29.94 50.57 62.06 82.54
HDFC 35.64 43.29 44.87 52.77 64.42 84.40
ING VYS 1.00 9.78 15.12 18.40 20.19 26.34
KOTAK 3.82 4.33 8.53 7.99 16.12 11.10
YES 2.05 3.37 6.76 10.23 14.06 20.95
Source: A nnual reports of both the banks for the period 2005-2006 to 2010-2011
148
RA
TIO
%
RA
TIO
%
Chart 4.7
Chart showing the Capital Adequacy
120
100
80
60
40
20
0
2005 - 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10 2010-11
ICICI AXIS HDFC ING VYS KOTAK YES
Chart 4.8
Chart showing the Earnings per Share
300
250
200
150
100
50
0
2005 - 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10 2010-11
ICICI AXIS HDFC ING VYS KOTAK YES
149
To calculate this ratio, simply divide the company‟s net income by the number of
shares outstanding during the period. If the number of shares out in the market has
changed during that period (ex. a share buyback), a weighted average of the quantity of
shares is used.
Importance of EPS
The significance of EPS is obvious, as the viability of any business depends on the
income it can generate. A money losing business will eventually go bankrupt, so the only way
for long term survival is to make money. Earnings per share allow us to compare different
companies‟ power to make money. The higher the earnings per share with all else equal, the
higher each share should be worth.
4.16 NET PROFIT MARGIN
Table 4.11
Table showing the Net Profit Margin (%)
Particular 2005 - 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10 2010-11
ICICI 14.12 10.81 10.51 9.74 12.17 15.91
AXIS 13.47 12.01 12.22 13.31 16.1 17.2
HDFC 15.55 13.57 12.82 11.35 14.76 16.09
ING VYS 0.66 5.57 7.45 6.77 8.48 9.56
KOTAK 12.97 8.84 10.37 8.35 15.23 17.19
YES 19.08 12.06 12.01 12.35 16.3 15.56
Source: A nnual reports of both the banks for the period 2005-2006 to 2010-2011
Net Profit margin is a key method of measuring profitability. It can be interpreted as
the amount of money the company gets to keep for every dollar of revenue. That is, Net
Profit Margin = Net Income ÷ Net Sales.
Interpretation
Profit margins can be useful metrics, but typically require some specific
circumstances to really have significance. Suppose it have Company A from above (15%
profit margins) and Company B (with 20% profit margins). If A and B are in the same
industry and, indeed, are competitors, then B may be more intelligent in investment.
150
If, however, companies A and B are not in the same space, then the differences in
profit margins may not be so insightful. Suppose A is in an industry where profit margins are
typically less than 10%, and B is in an industry where margins are typically greater than 25%,
then A is probably a higher quality.
group.
AXIS bank shown its performance in Net Profit Margin as it is highest among the
HDFC’s NPM is better but it decreased in first 4 year (2006-09) and then in 2009-10
its rises.
KOTAK is slightly low as compared to HDFC but its performance is constant.
ICICI in 2005-06 has highest NPM (18.43%) but it decreased to 12 % in 2008-09.
ICICI has incurred huge losses in financial crisis but in 2009-10 it again shows its ability to
perform and achieve 15.91%.
4.17 CREDIT DEPOSIT RATIO
Table 4.12
Table showing the Credit Deposit Ratio (%)
Particulars 2005 - 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10 2010-11
ICICI 87.59 83.83 84.99 91.44 90.04 87.81
AXIS 52.79 59.85 65.94 68.89 71.87 74.65
HDFC 65.79 66.08 65.28 66.64 72.44 76.02
ING VYS 74.55 77.23 74.13 69.18 69.47 75.12
KOTAK 95.4 98.33 96.55 100.34 94.61 94.27
YES 88.66 78.13 73.14 74.16 80.52 77.75
Source: A nnual reports of both the banks for the period 2005-2006 to 2010-2011
151
RA
TIO
%
RA
TIO
%
Chart 4.9
Chart showing the Net Profit Margin
100
90
80
70
60
50
40
30
20
10
0
2005 - 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10 2010-11
ICICI AXIS HDFC ING VYS KOTAK YES
Chart 4.10
Chart showing the Credit Deposit Ratio
120
100
80
60
40
20
0
2005 - 06 2006 - 07 2007 - 08 2008 - 09 2009 - 10 2010-11
ICICI AXIS HDFC ING VYS KOTAK YES
152
Interpretation
It is the proportion of loan-assets created by banks from the deposits received. The
higher the ratio, the higher the loan-assets created from deposits.
Now, the Indian government is the largest borrower in the domestic credit market. The
government borrows by issuing securities (G-secs) through auctions held by the RBI. If the
money so released is large, ``too much money will chase too few goods'' in the economy
resulting in higher inflation levels. This would prompt investors to demand higher returns on
debt instruments. In other words, the interest rates are high.
HDFC and AXIS bank has CDR in equal range for last 5 year. IDBI has highest CDR
all 5 year but a good thing is that it gradually falls. ICICI bank‟s CDR is slightly higher than
AXIS and HDFC, but it also maintained its CDR
4.18 CONCLUSION
The selected banks have shown growth in terms of deposits, number of branches,
employees, credit deployment and borrowings. But the growth of ICICI bank is higher
as compared to HDFC, AXIS, ING VYSYA KOTAK MAHINDRA AND YES bank. For the
past three decades India's banking system has several outstanding achievements to its credit.
The most striking is its extensive reach. It is no longer confined to only metropolitans or
cosmopolitans in India. In fact, Indian banking system has reached even to the remote
corners of the country. This is one of the main reasons of India's growth process. So a public
and private sector bank plays a crucial role in the economy.
Ratios make the related information comparable. A single figure by itself has no
meaning, but when expressed in terms of a related figure, it yields significant
interferences. Thus, ratios are relative figures reflecting the relationship between
related variables. Their use as tools of financial analysis involves their comparison as
single ratios, like absolute figures, are not of much use.
Ratio analysis has a major significance in analyzing the financial
performance of a company over a period of time. Decisions affecting product prices,
per unit costs, volume or efficiency have an impact on the profit margin or turnover
ratios of a company.
153
Financial ratios are essentially concerned with the identification of significant
accounting data relationships, which give the decision-maker insights into the
financial performance of a company.
The analysis of financial statements is a process of evaluating the relationship
between component parts of financial statements to obtain a better understanding of
the firm‟s position and performance.
The first task of financial analyst is to select the information relevant to the
decision under consideration from the total information contained in the financial
statements. The second step is to arrange the information in a way to
highlight significant relationships. The final step is interpretation and drawing of
inferences and conclusions. In brief, financial analysis is the process of
selection, relation and evaluation.
Ratio analysis in view of its several limitations should be considered only as a tool
for analysis rather than an end by itself. The reliability and significance attached
to ratios will largely hinge upon the quality of data on which they are based. They
are as good as or as bad as the data itself. Nevertheless, they are an important tool of
financial analysis.