FINANCIAL ANALYSIS(For the years 2006-2010)

Under the kind guidance of

Prof. V.K.Nangia

Anant Dhingra

Deep Pathak

L Nikhil Reddy

Laxmi Narasimha Boddu

Vema Jagadish

Vineeth Chama

1

Table of Contents

1. Banking in India.................................................................................................................................3

2. History of Bank of Baroda.................................................................................................................6

2.1 Formation.....................................................................................................................................6

2.2 Global presence............................................................................................................................7

3. Products and Services:....................................................................................................................7

4. Share holding pattern......................................................................................................................8

5. Present financial scenario...............................................................................................................9

6. Liabilities......................................................................................................................................10

6.1 Deposits......................................................................................................................................10

6.2 Capital and Reserves..................................................................................................................16

6.2.1 Capital..................................................................................................................................16

6.2.2 Reserves...............................................................................................................................17

6.2.3 Profit and Loss.....................................................................................................................19

7. Assets............................................................................................................................................23

7.1 Advances....................................................................................................................................23

7.2 Investments.................................................................................................................................28

References............................................................................................................................................32

2

1. Banking in IndiaBanking in India originated in the last decades of the 18th century. The first banks were The General

Bank of India which started in 1786, and the Bank of Hindustan, both of which are now defunct. The

oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta

in June 1806, which almost immediately became the Bank of Bengal. This was one of the three

presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of

which were established under charters from the British East India Company. For many years the

Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in

1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank

of India.

Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a

consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and still

functioning today, is the oldest Joint Stock bank in India.(Joint Stock Bank: A company that issues

stock and requires shareholders to be held liable for the company's debt) It was not the first though.

That honour belongs to the Bank of Upper India, which was established in 1863, and which survived

until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance

Bank of Simla. When the American Civil War stopped the supply of cotton to Lancashire from the

Confederate States, promoters opened banks to finance trading in Indian cotton. With large exposure

to speculative ventures, most of the banks opened in India during that period failed. The depositors

lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained

the exclusive domain of Europeans for next several decades until the beginning of the 20th century.

Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire d'Escompte

de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras

and Puducherry, then a French colony, followed. HSBC established itself in Bengal in 1869. Calcutta

was the most active trading port in India, mainly due to the trade of the British Empire, and so

became a banking center.

The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in

Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895,

which has survived to the present and is now one of the largest banks in India. Around the turn of the

20th Century, the Indian economy was passing through a relative period of stability. Around five

decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had

3

improved. Indians had established small banks, most of which served particular ethnic and religious

communities.

The presidency banks dominated banking in India but there were also some exchange banks and a

number of Indian joint stock banks. All these banks operated in different segments of the economy.

The exchange banks, mostly owned by Europeans, concentrated on financing foreign trade. Indian

joint stock banks were generally undercapitalized and lacked the experience and maturity to compete

with the presidency and exchange banks. This segmentation let Lord Curzon to observe, "In respect

of banking it seems we are behind the times. We are like some old fashioned sailing ship, divided by

solid wooden bulkheads into separate and cumbersome compartments."

The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi

movement. The Swadeshi movement inspired local businessmen and political figures to found banks

of and for the Indian community. A number of banks established then have survived to the present

such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central

Bank of India. The fervour of Swadeshi movement lead to establishing of many private banks in

Dakshina Kannada and Udupi district which were unified earlier and known by the name South

Canara ( South Kanara ) district. Four nationalised banks started in this district and also a leading

private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian

Banking".

During the First World War (1914-1918) through the end of the Second World War (1939-1945),

and two years thereafter until the independence of India were challenging for Indian banking. The

years of the First World War were turbulent, and it took its toll with banks simply collapsing despite

the Indian economy gaining indirect boost due to war-related economic activities.

Post-independence

The partition of India in 1947 adversely impacted the economies of Punjab and West Bengal,

paralyzing banking activities for months. India's independence marked the end of a regime of the

Laissez-faire for the Indian banking. The Government of India initiated measures to play an active

role in the economic life of the nation, and the Industrial Policy Resolution adopted by the

government in 1948 envisaged a mixed economy. This resulted into greater involvement of the state

in different segments of the economy including banking and finance. The major steps to regulate

banking included:

4

* The Reserve Bank of India, India's central banking authority, was nationalized on January 1,

1949 under the terms of the Reserve Bank of India (Transfer to Public Ownership) Act, 1948 (RBI,

2005b).[Reference www.rbi.org.in]

* In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India

(RBI) "to regulate, control, and inspect the banks in India."

* The Banking Regulation Act also provided that no new bank or branch of an existing bank could

be opened without a license from the RBI, and no two banks could have common directors.

However, despite these provisions, control and regulations, banks in India except the State Bank of

India or SBI, continued to be owned and operated by private persons. By the 1960s, the Indian

banking industry had become an important tool to facilitate the development of the Indian economy.

At the same time, it had emerged as a large employer, and a debate had ensued about the possibility

to nationalise the banking industry. Indira Gandhi, the-then Prime Minister of India expressed the

intention of the GOI in the annual conference of the All India Congress Meeting in a paper entitled

"Stray thoughts on Bank Nationalisation." The paper was received with positive enthusiasm.

Nationalisation

Thereafter, her move was swift and sudden. The GOI issued an ordinance and nationalised the 14

largest commercial banks with effect from the midnight of July 19, 1969. Jayaprakash Narayan, a

national leader of India, described the step as a "masterstroke of political sagacity." Within two

weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition and

Transfer of Undertaking) Bill, and it received the presidential approval on 9 August 1969.

A second dose of nationalization of 6 more commercial banks followed in 1980. The stated reason

for the nationalization was to give the government more control of credit delivery. With the second

dose of nationalization, the GOI controlled around 91% of the banking business of India. Later on, in

the year 1993, the government merged New Bank of India with Punjab National Bank. It was the

only merger between nationalized banks and resulted in the reduction of the number of nationalised

banks from 20 to 19. After this, until the 1990s, the nationalised banks grew at a pace of around 4%,

closer to the average growth rate of the Indian economy.

Liberalisation

In the early 1990s, the then Narsimha Rao government embarked on a policy of liberalization,

licensing a small number of private banks. These came to be known as New Generation tech-savvy

banks, and included Global Trust Bank (the first of such new generation banks to be set up), which

5

later amalgamated with Oriental Bank of Commerce, Axis Bank(earlier as UTI Bank), ICICI Bank

and HDFC Bank. This move, along with the rapid growth in the economy of India, revitalized the

banking sector in India, which has seen rapid growth with strong contribution from all the three

sectors of banks, namely, government banks, private banks and foreign banks.

The next stage for the Indian banking has been set

up with the proposed relaxation in the norms for

Foreign Direct Investment, where all Foreign

Investors in banks may be given voting rights which

could exceed the present cap of 10%, at present it

has gone up to 74% with some restrictions. The new

policy shook the Banking sector in India

completely. Bankers, till this time, were used to the

4-6-4 method (Borrow at 4%; Lend at 6%; Go home

at 4) of functioning. The new wave ushered in a

modern outlook and tech-savvy methods of working

for traditional banks. All this led to the retail boom

in India. People not just demanded more from their

banks but also received more.

Currently, banking in India is generally fairly

mature in terms of supply, product range and reach-even though reach in rural India still remains a

challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy,

Indian banks are considered to have clean, strong and transparent balance sheets relative to other

banks in comparable economies in its region. The Reserve Bank of India is an autonomous body,

with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to

manage volatility but without any fixed exchange rate-and this has mostly been true.

With the growth in the Indian economy expected to be strong for quite some time-especially in its

services sector-the demand for banking services, especially retail banking, mortgages and investment

services are expected to be strong.

2. History of Bank of Baroda

2.1 FormationBank of Baroda was incorporated on July 20, 1908 as a as a private bank with the name The Bank of

Baroda Ltd. The Bank was established with a paid up capital of Rs 1 million and was founded by 6

Maharaja Sayajirao Gaekwad III of Baroda. In the year 1910, the Bank opened their first branch in

the city of Ahmedabad. In the year 1919, they opened their first branch in Mumbai City. In the year

1953, the Bank opened first international branch at Mombasa, Kenya. During the period 1953-1969,

the Bank opened three branches in Fiji, five branches in Kenya, three branches in Uganda and one

each in London and Guyana. In the year 1958, The Hind Bank merged with the Bank and in the year

1962, The New Citizen Bank Ltd amalgamated with the Bank. In the year 1964, The Umargaon

Peoples' Bank & Tamilnadu Central Bank amalgamated with the Bank. In July 1969, the Bank was

nationalized and the name was changed from 'The Bank of Baroda Ltd' to 'Bank of Baroda'.

2.2 Global presenceIn its international expansion, the Bank of Baroda followed the Indian diaspora, especially that of the

Gujaratis. It has significant international presence with a network of 78 offices in 25 countries, six

subsidiaries, and four representative offices.

Among the Bank of Baroda’s 42 overseas branches are ones in the world’s major financial centers

(e.g., New York, London, Dubai, Hong Kong (which it has upgraded recently), Brussels and

Singapore), as well as a number in other countries. The bank is engaged in retail banking via 17

branches of subsidiaries in Botswana, Guyana, Kenya, Tanzania, and Uganda. The Bank of Baroda

also has a joint-venture bank in Zambia with nine branches. The Bank of Baroda maintains

representative offices in Malaysia, China, Thailand, and Australia. It plans to upgrade its offices in

China and Malaysia shortly to a branch and joint-venture, respectively.

The Bank of Baroda has received permission or in principle approval from host country regulators to

open new offices in Trinidad and Tobago and Ghana, where it seeks to establish joint ventures or

subsidiaries. The bank has received Reserve Bank of India approval to open offices in The Maldives,

and New Zealand. It is seeking approval for operations in Bahrain, South Africa, Kuwait,

Mozambique, and Qatar and is establishing offices in Canada, New Zealand, Sri Lanka, Bahrain,

Saudi Arabia, and Russia. It also has plans to extend its existing operations in the United Kingdom,

the United Arab Emirates, and Botswana.

3. Products and Services:Bank of Baroda is one of the leading commercial banks in India. The Bank's solutions includes

personal banking, which includes deposits, gen-next services, retail loans, credit cards, debit cards,

services and lockers; business banking, which includes deposits, loans and advances, services and

lockers; corporate banking, which includes wholesale banking, deposits, loans and advances and

7

services, and international business, which includes non-resident Indian (NRI) services, foreign

currency credits, ECB, offshore banking, export finance, import finance, correspondent banking,

trade finance and international treasury.

The Bank offers services, such as domestic operations and foreign exchange operations. They also

offer rural banking services, which include deposits, priority sector advances, remittance, collection

services, pension and lockers. They also offer fee based services such as cash management and

remittance services.

4. Share holding pattern

Bank/Stake holderGovernment holdings

Non Promoter (Institutions)

Corporate bodies

Total Public

Custodian against depository recipts

Bank of India 64.47 28.28 1.53 5.72  Bank of Baroda 53.81 34.77 5.4 6.02  SBI 59.41 29.53 2.67 5.24 3.15canara bank 73.17 21.03 0.9 4.9  Punjab National Bank 57.8 37.33 0.96 3.91  

Govt. h

oldings

Non Pr

omoter(I

nstitu

tions)

Bodies

Corp

orate

Total P

ublic

Custod

ian ag

ainst d

eposi

tory re

c...

64.4

7

28.2

8

1.1 5.72

53.8

1

34.7

7

5.31

6.02

59.4

1

29.5

3

2.54 5.24

3.15

73.1

7

21.0

6

0.9 4.9

57.8

37.3

0.96

0000

0000

0000

1

3.91

Shareholding Pattern

BOI BOB SBI canara bank PNB

Government has the greatest share in all the banks and among all Government holds largest share of

73% in Canara Bank. In case of SBI 3.15% of the shares are in custodian against Depository

Receipts. Total Public holds 4-6.5 % shares in each bank.

8

5. Present financial scenarioBank of Baroda has come out with the strong performance for the quarter ended September 2010

with humble 47% rise in the NII at Rs 2038.14 crore and robust 61% jump in the Net Profit at Rs

1019.30 crore (q-o-q). There is also a growth of 14% rise in the other income at Rs 681.30 crore

which was decreased by 12% in the previous quarter .The total income is increased by 24% and there

is dip in the cost to income ratio in the quarter under review. The growth in the profits was supported

by a strong growth in the NII, core fee base income and control on expenses.

Particulars Jun-10 Jan-09 % Change Mar-10 Mar-09 % ChangeInterest Earned 5158.66 4135.42 25 16698.34 15091.58 11Interest Expended 3120.52 2746.82 14 10758.86 9968.17 8Net Interest Income 2038.14 1388.6 47 5939.48 5123.41 16Other Income 681.3 595.33 14 2724.91 2662.64 2Net Total Income 2719.44 1983.93 37 8664.39 7786.05 11Operating Expenses 1062.7 952.34 12 3810.58 3576.06 7Operating Profits 1656.74 1031.59 61 4853.81 4209.99 15Provisions & Contingencies 185.49 116.33 59 697.2 962.06 -28EO 0 0 0 81.45 95.01 -14Profit Before Tax 1471.25 915.26 61 4238.06 3342.94 27Provision for Tax 451.95 281.08 61 1179.73 1115.74 6Net Profit 1019.3 634.18 61 3058.33 2227.2 37EPS*(Rs) 111.5 69.4 83.7 60.9

On Y-O-Y basis Bank of Baroda has posted 37% jump in the Net Profit to Rs 3058.33 crore on the

back of 16% rise in the NII. Further, 7% increase the operating expenses coupled with 28% dip in

provisions and contingencies and 14% dip in the profit on sale of investment has together has driven

PBT up by 27% . Finally 6% increase in provisions for taxation to Rs 1179.73 crore has led Net

Profit up by 37% on y-o-y basis.

The authorised capital of the bank has increased from 1500 crore to 3000 crores in Nov 2009. Also a

sum of Rs 45.05 crore has been charged to Profit and Loss A/c during all quarters of 2010, on

proportionate basis of the Transitional liability of Rs 901crore up to 31.03.2007, at the time of first

adoption of Revised Accounting Standard (AS) 15 on Employee Benefits. The balance amount of Rs

360.40 crore is to be charged proportionately by the end of March 2012. Asset Quality: The asset

quality of the bank has declined on y-o-y basis. In absolute terms Gross NPA has increased by 39%

9

on y-o-y basis. The Net NPA has spiked up by 80% on y-o-y basis .While the % GNPA stood at

1.39% in 2009-2010.

The Provision coverage ratio stood 85.56% including technical write off. It has been steadily

improving its market share. It expanded its global business level by 24.0% (y-o-y) during the year

FY10. The Bank’s domestic low-cost grew by an unprecedented 25.1% taking the share of domestic

CASA deposits to 35.63% in FY10 versus 34.87% in FY09 helping bank to have a good control over

the cost of deposits.

Also net Profit of International Operations during FY10 increased by 108.08% over that of the

previous year. This substantial increase came from some improvement in global market conditions.

The contribution of international operations to the Bank’s global Net Profit was 28.65% during the

financial year 2010.

6. Liabilities6.1 Deposits

The deposits constitute a major portion of the liabilities for Bank of Baroda. Observing the data for

the past 5 years we can have actual proportion of deposits in liabilities.

Liabilities (in Crore Rupees)2006 2007 2008 2009 2010

Deposits 936619916 1249159793 1520341272 1923969517 2410442642Total liabilities 1133925273 1431461746 1795995162 2266722377 2783167028% proportion 82.5 87.2 84.6 84.8 86.6

2006 2007 2008 2009 2010

93

,66

1.9

9

12

4,9

15

.97

15

2,0

34

.12

19

2,3

96

.95

24

1,0

44

.26

11

33

92

.52

14

31

46

.17

17

95

99

.51

22

66

72

.23

27

83

16

.70Deposits Bank of Baroda across five years

Deposits Total liabilities

10

Observations:

1. Deposits constitute the major portion of Liabilities and its proportion is more than 80% of the

Liabilities.

2. In 2009-2010 deposits constitue 86.6% of total liabilities. It has a growth of 25.28% from previous

year.

Comparisons of total deposits for various banks

Total deposits (In Crore Rupees)Bank/Year 2005 2006 2007 2008 2009 2010Bank of Baroda 81333.46 93661.99 124915.98 152034.13 192396.95 241044.3SBI 367047.52 380046.06 435521.09 537403.94 742073.13 804116.2Bank of India 78821.44 93932.03 119881.74 150011.98 189708.48 229761.9Canara Bank 96795.92 116803.23 142381.45 154072.42 186892.51 234651.4

2005 2006 2007 2008 2009 20100

100000

200000

300000

400000

500000

600000

700000

800000

900000

8133

3.46

9366

1.99

1249

15.9

8

1520

34.1

3

1923

96.9

5

2410

44.2

6

3670

47.5

2

3800

46.0

6

4355

21.0

9

5374

03.9

3999

9999

7420

73.1

3

8041

16.2

3

7882

1.44

9393

2.03

1198

81.7

4

1500

11.9

8

1897

08.4

8

2297

61.9

4

9679

5.92

1168

03.2

3

1423

81.4

5

1540

72.4

2

1868

92.5

1

2346

51.4

4

Total Deposits

Bank of Baroda SBI Bank of India Canara Bank

Observations:

1. Bank of Baroda has comparable deposits with the similar banks like Bank of India and Canara

Bank, which all are far behind the industry leader State Bank of India.

2. Also Canara Bank used to have greater deposits than Bank of Baroda till 2007, but from 2008

Bank of Baroda has surpasses the Canara Bank in terms of deposits.

3. Bank of Baroda is having the highest growth in Deposits in the year 2010.

11

Demand, Savings and Term Deposits Break up for Bank of Baroda (in Crore Rupees)Deposit Type/Year 2006 2007 2008 2009 2010

Demand Deposits 8378.72 9874.8 11696.01 14451.22 18923.59Savings Deposit 27160.44 31577.28 35776.38 42487.28 52543.92Term Deposits 58122.83 83463.9 104561.7 135458.5 169576.8Total 93661.99 124915.98 152034.1 192397 241044.3

Observations:

1. There is a increasing trend in all deposits from year 2006 to 2010.

2. Demand, saving and Term deposits all are growing at a rate between 20-30 % but the major

proportion of increase in total deposits is due to increase in term deposits which are the major part of

total deposits.

Percentage concentration of Demand, Saving and Term Deposits for all Bank

BOB SB

IBO

ICa

nara

Bank BO

B SBI

BOI

Cana

ra Ba

nk BOB SB

IBO

ICa

nara

Bank BO

B SBI

BOI

Cana

ra Ba

nk BOB SB

IBO

ICa

nara

Bank

2006 2007 2008 2009 2010

8.95

17.89

7.89

8.79

7.91 18.83

7.81

8.74

7.69 18.26

8.31

8.60

7.51

14.92

6.63

7.68

7.85

15.24

6.91

7.84

29.00 29

.6627

.1324

.51

25.28 29

.6524

.4022

.78

23.53

28.70

22.29

22.89

22.08 26

.7120

.13 22.37

21.80 32

.0220

.9221

.26

62.06 52

.4564

.9866

.71

66.82 51

.5267

.7868

.48

68.78 53

.0469

.3968

.51

70.41 58

.3673

.24 69.95

70.35 52

.7472

.1670

.91

Percentage concentration of Demand, Saving and Term Deposits

Demand Deposit Saving Deposit Term Deposit

12

Observations:

Bank of Baroda has comparable concentration of Demand, Savings and Term deposits with similar

bank like Bank of India and Canara Bank (all have term deposit in range of 62-72 % in the five year

period), which all are behind the Industry leader State Bank of India who have term Deposits 52-58

% in the five year period. As term deposits are the costlier ones the State Bank of India pays less cost

for same amount of deposits.

Demand Deposits which are the cheapest deposit are highest of the State Bank of India across the

five year. Bank of Baroda has Demand Deposits almost equal to Canara Bank and slightly higher

than Bank of India.

Bank of Baroda used to have slightly lower percentage of Term deposits than Canara Bank till 2007

but after that it has almost equal percentage. As Bank of Baroda has slightly increased its total

deposits than Canara bank after 2008 this might be due to increase in Term Deposit percentage.

Term Deposits percentage of almost all banks are highest in the 2008 2009 period as rate of interest

on Term Deposits increased in the period encouraging people to invest in them.

Cost of Deposits (Crore Rupees)/Year 2006 2007 2008 2009 2010

Bank of Baroda 4.02 4.56 5.35 5.33 4.56State Bank of India 4.85 4.59 5.57 5.93 5.61Bank of India 4.05 4.31 5.23 5.76 5.16Canara Bank 4.52 5.32 6.71 6.72 5.83

2006 2007 2008 2009 20104.00

4.50

5.00

5.50

6.00

6.50

7.00

4.02

4.56

5.35 5.33

4.56

4.854.59

5.57

5.93

5.61

4.05

4.31

5.23

5.76

5.16

4.52

5.32

6.716.72

5.83

Cost of Deposit (%)

Bank of Baroda State Bank of India Bank of India Canara Bank

13

Observations:

Bank of India and Bank of Baroda are having the best Cost of deposits with Bank of India leading in

2006 and 2007 and then Bank of Baroda going ahead in 2009, 2010.

In 2008 and 2009 cost of deposit of all banks rises significantly this is because term deposit of all

banks rises by greater % as banks started giving more rate of interest on term deposits in 2008 and

2009.

Deposits in Foreign countries and India

In terms of Domestic deposits Bank of Baroda is almost equal to Bank of India but lagging behind a

Industry leader state Bank of India and also Canara Bank. Canara Bank has low foreign Deposit as

compare to Bank of Baroda.

Bank of Baroda has highest foreign deposits for the last 4 years and it is far ahead of all banks (even

the industry leader SBI) in foreign deposits. Foreign Deposits in last 2 years have grown at rate of

more than 35%, this might also be the reason for overtaking Canara Bank in terms of total deposits

BO

B

SB

I

BO

I

Can

ara B

an

k

BO

B

SB

I

BO

I

Can

ara B

an

k

BO

B

SB

I

BO

I

Can

ara

Ban

k

BO

B

SB

I

BO

I

Can

ara B

an

k

BO

B

SB

I

BO

I

Can

ara B

an

k

2006 2007 2008 2009 2010

79

.05

36

6.2

3

77

.85

11

3.4

5

99

.73

41

9.9

4

94

.74

13

8.6

7

12

2.4

8

51

4.6

8

12

5.4

2

14

9.5

7

15

1.4

1

71

0.0

3

15

9.4

9

18

2.9

8

18

5.2

8

76

4.7

2

19

6.5

8

22

8.4

4

Deposits of Branches in India

14

BO

B

SB

I

BO

I

Can

ara

Ban

k

BO

B

SB

I

BO

I

Can

ara

Ban

k

BO

B

SB

I

BO

I

Can

ara

Ban

k

BO

B

SB

I

BO

I

Can

ara

Ban

k

BO

B

SB

I

BO

I

Can

ara

Ban

k

2006 2007 2008 2009 2010

14

.61

13

.82

16

.08

3.3

5

25

.19

15

.58 2

5.1

4

3.7

1

29

.55

22

.73

24

.60

4.5

1

40

.99

32

.04

30

.22

3.9

1

55

.76

39

.40

33

.18

6.2

1

Deposits of Branches Outside India

Credit-Deposit Ratio:

Credit-Deposit (%)Bank\Year 2006 2007 2008 2009 2010Industry 68.23 74.35 74.65 76.08 70.74State Bank of India 62.13 73.46 77.51 74.97 75.96Bank of Baroda 59.04 65.67 68.72 72.57 73.43Canara Bank 65.47 68.65 69.4 71.99 72.96Bank of India 69.87 70.29 73.58 75.47 74.24

2006 2007 2008 2009 201055

60

65

70

75

80

Credit-Deposit Ratio

Industry State Bank of India Bank of Baroda Canara Bank Bank of India

Year

Percentage

15

Observation:

Every bank has maintained the credit-Deposit ratio of more than the mandatory requirement of 60%.

The credit to deposit ratio of Bank of Baroda is increasing that indicates that bank has given more

advances /credit as a % of deposits, the ratio has surpassed industry average in the year 2010

generating more Revenues for the Bank.

6.2 Capital and Reserves

6.2.1 Capital

DateCapital Reason Premium -unit

02/02/2006 367 Public Issue 220 21/02/1997 296 Public Issue 75 05/12/1996 196 Capital Restructuring 0 31/03/1996 577 Restructuring - Trans. to Cap. Res. 01991 - 95 2172 Capital contributed by Goverment 0

The bank for its initial functioning was provided with 2170 Crores by the government between the

years 1991 to 1996. The company came with an IPO in the year 1997 and collected a capital of Rs

296 crore with Rs. 75 as a premium amount. The bank come with an FPO in the year 2006 collecting

Rs 71 crore with a premium of Rs 220 per share.

Capital Adequacy Ratio

Capital adequacy ratio (CAR), also called Capital to Risk (Weighted) Assets Ratio (CRAR), is a

ratio of a bank's capital to its risk. Almost all the banks’ CAR is greater than 9 as per RBI norms.

Capital Adequacy Ratio (%) 2006 2007 2008 2009 2010BOI 10.75 11.75 12.04 13.21 12.63BOB 13.65 11.8 12.91 12.88 12.84SBI 11.88 12.34 13.54 12.97 12CANARA 11.22 13.5 13.25 14.1 13.43

16

2006 2007 2008 2009 201010

10.5

11

11.5

12

12.5

13

13.5

14

14.5

Capital Adequacy Ratio

BOIBOBSBICANARA

Observation:

The capital adequacy ratio of Canara Bank is more than other banks in the year 2009-10. The capital

adequacy ratio of all banks has decreased in the year 2010. It does not follow a particular pattern for

Bank of Baroda.

6.2.2 ReservesBreakup of reserves

Year 2006 2007 2008 2009 2010Statutory Reserve 1693.45 1949.08 2304.97 2879.52 3637.32Revenue & other Reserves 3112.85 3659.26 4309.61 4817.02 6074.02Share Premium 2273.88 2273.88 2273.89 2273.89 2273.89Capital Reserves 398.73 402.19 1789.93 2079.58 2079.07Taxation Reserve 0 0 0 420 690Total reserves excluding revaluation reserves 7478.91 8284.41 10678.4 12514.19 14740.86

Observation:

1. There is a steep growth in the capital reserve in the year 2008 due to banking of profits in the

capital reserve.

2. In the year 2009 and 2010 bank has maintained Taxation reserve for payment of Taxes.

3. The share premium is constant at 2273.88 crores indicating that bank had not brought an IPO or

FPO in the above years.

17

Growth of Reserves and Capital

Reserves and Capital (in Crore Rupees) 2005 2006 2007 2008 2009 2010

SBI24,180.

8427,752.

7931,298.

2649,033.

1957,947.

8265,949.

32

BOB5,628.2

37,843.9

18,649.4

111,043.

4012,879.

1915,105.

86

BOI4,464.8

74,983.8

95,895.3

710,589.

4813,495.

0114,230.

08CANARA

6,108.97

7,132.25

10,354.00

10,500.50

12,207.78

14,671.78

INDUSTRY

4,748.09

5,491.32

7,011.52

8,512.47

8,772.78 10300

2006 2007 2008 2009 20100.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

Percentage growth of Reserves and Capital

SBIBOBBOICANARAINDUSTRY

Observations:

1. In the year 2008 the Reserves and Capital of BOI showed the maximum growth of about 80%.In

the year 2009 the growth of Reserves and capital of all the banks is more than the average growth of

the banking industry. SBI has the largest number of Capital and Reserves thus increasing its Net

Worth.

2. It is important to observe that values under the various sub-heads of Reserves and Surplus also

show an increasing trend except value for share premium which remains constant at Rs.

3654,285,000 for the last five years. This implies that the company did not come out with an IPO or

FPO during these years.

18

6.2.3 Profit and Loss

2006 2007 2008 2009 2010

8,444.0010,438.12

13,892.18

17,876.1119,910.65

7,617.04

9,411.66

12,456.66

15,648.9116,852.32

827.16 1,018.45 1,435.30 2,164.91 3,002.21

Income, Expenditure and Net Profit

Total Income Total Expenditure Adjusted Net Profit

Observations:

1. The growth of income of BOB is more in the years 2008 and 2009.

2. The percentage change in the Expenditure in the year 2010 is less as compared to the percentage change in the profit due to which the Net Profit has increased by 37% in the year 2010 as compared to change of 16% in the income.

Expenses:

19

2006 2007 2008 2009 2010

50.8757.66

63.43 63.70 63.84

20.0117.47

15.28 15.01 13.955.21

4.764.34 4.22 4.78

1.462.06

1.86 1.47 1.3721.59 11.38 8.89 8.47 9.05

0.956.62 6.13 7.13 7.00

Breakup of Expenses

  Interest expended   Payments to/Provisions for Employees  Operating Expenses & Admin-istrative Expenses  Depreciation   Other Expenses, Provisions & Contingencies Provision for Tax

Observations:

1. The share of interest Expended in Expenses is constantly increasing over the years.

2. The share of payment of Employees is decreasing over the years.

Interest Expended-Interest Earned (%)Bank\Year 2006 2007 2008 2009 2010Industry 58.46 62.23 69.72 70.57 65.79State Bank of India 56.67 59.57 65.23 67.28 66.66Bank of Baroda 54.97 60.27 66.89 66.05 64.43Canara Bank 58.89 64.57 75.09 72.44 69.71Bank of India 62.55 61.5 65.77 66.36 67.8

20

2006 2007 2008 2009 201054

59

64

69

74

Interest Expended-Interest Earned Ratio

Industry

State Bank of India

Bank of Baroda

Canara Bank

Bank of India

Year

Percentage

Observations:

The Interest Expended to Interest Earned ratio of Bank of Baroda is increasing that indicates that the

difference in the interest earned to interest paid is decreasing thus affecting the profits. As shown

from the above data that the interest expended to the interest Earned ratio of Bank of Baroda is less

than the industry average and thus the difference is more making more profits.

Cash-Deposit (%)Bank\Year 2006 2007 2008 2009 2010Industry 9.14 9.79 9.98 10.75 9.53State Bank of India 5.15 6.22 8.29 8.37 7.56Bank of Baroda 3.45 4.46 5.7 5.8 5.57Canara Bank 6.04 6.56 7.58 6.86 6.11Bank of India 5.5 5.98 7.02 6.08 5.84

2006 2007 2008 2009 20103

4

5

6

7

8

9

10

11

Cash-Deposit Ratio

Industry

State Bank of India

Bank of Baroda

Canara Bank

Bank of India

Year

Percentage

Observations:

21

The cash to Deposit ratio of Bank of Baroda is lesser than other banks and also less than the industry

average which indicates the bank is utilizing more money in its revenue earning operations. The cash

to Deposit ratio is increasing in the year 2006 and 2007 while it is decreasing in the year 2010.

Price Earnings Ratio

Price Earnings ratio (P/E) 2006 2007 2008 2009 2010Bank of India 9.46 7.46 6.74 3.94 10.66Bank of Baroda 10.51 7.93 7.49 3.95 7.87SBI 11.84 11.83 15.38 7.63 14.78Canara Bank 8.39 5.82 6.12 3.37 5.7

2006 2007 2008 2009 20100

2

4

6

8

10

12

14

16

18

Price Earning Ratio (P/E)

Bank of IndiaBank of BarodaSBICanara Bank

Observations:

1. SBI has the largest PE ratio as it has the largest value of Capital and Reserves and assets which is

reflected in its share price.

2. In the year 2009 due to recession the share prices of the entire bank stocks went down thus the PE

ratio of all the banks went down, and when the market moved up the PE ratio of all the banks

doubled in the year 2010.

3. On comparing the PE ratio with the share holding pattern we found that Institutions (Non

Promoters) and Public holds the minimum percentage shares in bank and thus its PE ratio is less as

compared to the other banks.

Business per employee22

Business Per Employee (Rs. Cr) 2006 2007 2008 2009 2010BOI 3.81 4.98 6.52 8.33 10.11BOB 3.96 5.55 7.1 9.14 9.81SBI 2.99 3.57 4.56 5.56 6.36CANARA 4.42 5.49 6.09 7.8 9.83

2006 2007 2008 2009 20100

2

4

6

8

10

12

Business Per Employee

Bank of IndiaBank of BarodaSBICanara Bank

Observations:

The Business brought by per Employee is increasing Y-O-Y for all the banks. The Business per

Employee of SBI is lowest as compared to other banks while it provides more employee benefits as

compared to other banks. In the year 2009 Employees of BOB brought the maximum business.

7. Assets7.1 Advances

Advances of Bank of Baroda contribute 63% to the size of the balance sheet. The accounting policy

followed by Bank of Baroda as regard to advances is similar to that followed by State Bank of India

(SBI), Bank of India (BOI), Punjab National Bank (PNB) and Canara Bank.

The volume of advances has risen steadily across the banking industry. The percentage growth in the

volumes of advances of Bank of Baroda was higher as compared to BOI, PNB and Canara Bank over

the last 5 years.

23

2007 2008 2009 20100.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00Total Advances (% change)

Bank of BarodaCanara BankBank of IndiaPNBSBI

Total Advances2006 2007 2008 2009 2010

Bank of Baroda 599117784 836208698 1067013241 1432514084 1750352859Canara Bank 794256998 985056870 1072380409 1382194005 1693346306Bank of India 651737444 851158944 1134763264 1429093738 1684907098PNB 746273712 1020158514 1195015662 1547029887 1866012080SBI 2618009359 3373364935 4167681962 5425032042 6319141520

The ratio of term loans to total advances is almost equal to the ratio of cash credit, overdraft, and

loans repayable on demand to total advances over the last four years. In 2006, the ratio of cash

credits was greater than ratio of term loans for Bank of Baroda. A similar trend is seen in the ratios

of BOI, PNB and Canara Bank. But in case of SBI, the ratio of term loans has always been higher

than ratio of cash credits.

Cash Credits, Overdrafts and Loans Repayable on DemandBank /Year 2006 2007 2008 2009 2010Bank of Baroda 307878083 369686516 482648712 665210401 796314689Canara Bank 385151926 470298861 455641277 641419986 798922426Bank of India 324511074 409309785 535081653 641060085 706463601PNB 327930456 431609583 559371311 689178629 822070686State Bank of India 958567732 1254761729 1519999996 2236799268 2751504964

24

2007 2008 2009 2010

-10.00

0.00

10.00

20.00

30.00

40.00

50.00

60.00

Cash Credits, Overdrafts and Loans Repayable (% change)

Bank of BarodaCanara BankBank of IndiaPNBState Bank of India

Term Loans

Term LoansBank /Year 2006 2007 2008 2009 2010Bank of Baroda 234145531 378649622 495846089 627951184 761378844Canara Bank 359844748 457606485 554836630 677936723 831134818Bank of India 245988416 332060860 439490658 606410473 723709418PNB 380938717 488041159 591966156 813851641 999353605State Bank of India 1410904135 1810732192 2280347064 2716393114 3139889238

The percentage growth in term loans of SBI has decreased constantly from the year 2008 to 2010 while for the other banks there is no fixed pattern.

2007 2008 2009 20100.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00Term Loans (% change over years)

Bank of BarodaCanara BankBank of IndiaPNBState Bank of India

The Priority Sector Advances

25

There has been a steady growth in volumes of priority sector lending though the ratio of Priority

sector lending to the total advances has decreased. Bank of Baroda has been able to maintain the RBI

norm of keeping the priority sector advances more than 40% of the Adjusted Net Banking Credit

(ANBC).

Priority Sector AdvancesBank/Year 2006 2007 2008 2009 2010

Bank of Baroda17588131

3 240525388 294745436 382500461 461218855

Canara Bank29926865

3 366803255 419797991 459911163 566909290

Bank of India20531210

5 257729361 322389728 375450654 429288969

PNB34093425

6 365276123 462168838 492123451 666154744

State Bank of India80012879

7102015851

4119230511

8143637563

1170568208

0

2006 2007 2008 2009 201024

25

26

27

28

29

30 29.36

28.76

27.6234

26.5651 26.35

Priority Sector advances to Total advance ratio - Trend Analysis

Bank of Baroda

Ratio of priority sector advances to total advancesBank /Year 2006 2007 2008 2009 2010Bank of Baroda 29.36 28.76 27.62 26.57 26.35Bank of India 31.5 29.87 28.41 26.27 25.47Canara Bank 37.68 37.24 39.15 33.27 33.47Punjab National Bank 45.68 37.81 38.67 31.81 35.69State Bank of India 42.45 36.31 28.61 26.48 26.99

26

Secured Advances

The ratio of secured advances to total advances for Bank of Baroda showed a dip in the year 2008. A

similar trend was seen in BOI and PNB. The dip for SBI was sharper as compared to other banks.

Canara Bank managed a steady ratio during that period but suffered a dip in 2010 when the ratios of

the banks in comparison had increased.

Ratio of secured advances to total advances (%)Bank/Year 2006 2007 2008 2009 2010Bank of Baroda 80.61 77.53 73.74 76.59 75.6Bank of India 82.47 82.58 76.93 77.33 78.05Canara Bank 74.25 78.5 78.09 76.47 66.47Punjab National Bank 85.09 85.38 83.18 86.12 89.37State Bank of India 86.09 88.4 73.06 79.01 78.49

2006 2007 2008 2009 201065

70

75

80

85

90

Secured Advances to Total Advances Ratio - Trend Analysis

Bank of Baroda Bank of India Canara Bank Punjab National Bank SBI

Net NPA Ratio

The Net NPA ratio for Bank of Baroda has steadily decreased since 2006 due to the restructuring of

Advances accounts employed by Bank of Baroda to recover the NPAs. Even though the Indian

banking industry suffered from growing slippages, Bank of Baroda managed to restrict its net NPA

ratio to 0.34% in FY10.

27

2006 2007 2008 2009 20100

0.20.40.60.8

11.21.41.61.8

20.

870

0000

000

000

01

0.60

000

000

0000

00

1

0.47

0.3

1000

000

000

000

1

0.34

1.49

0.74

000

0000

000

00

1

0.52

0.4

4

1.31

1.12

0.94

000

0000

000

00

1

0.84

0000

000

000

001

1.09

1.06

0.29

0.76

000

00

0000

000

1

0.6

4000

00

0000

000

1

0.17

0.53

0.74

000

0000

000

00

1

0.45

1.7

8

1.76

1.72

Net NPAs to Net Advances Ratio

Bank of Baroda Bank of India Canara Bank Punjab National Bank SBI

2006 2007 2008 2009 20100

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

10.87000000000000

1

0.600000000000001

0.47

0.310000000000001

0.34

Net NPAs to Net Advances Ratio - Trend Analysis

Bank of Baroda

Ratio of Net NPAs to Net Advances Bank /Year 2006 2007 2008 2009 2010Bank of Baroda 0.87 0.6 0.47 0.31 0.34Bank of India 1.49 0.74 0.52 0.44 1.31Canara Bank 1.12 0.94 0.84 1.09 1.06Punjab National Bank 0.29 0.76 0.64 0.17 0.53State Bank of India 0.74 0.45 1.78 1.76 1.72

Yield on Advances

Yield on advances ratio is almost similar for Bank of Baroda, Bank of India and State Bank of India.

Canara Bank shows higher yield on advances and PNB has lower yield as compared to other banks

in comparison.

28

2006 2007 2008 2009 20107.00%

7.50%

8.00%

8.50%

9.00%

9.50%

10.00%

10.50%

11.00%

Yield on Advances Ratio - Trend Analysis

BoB BoI Canara Bank PNB SBI

Yield on Advances (%) Bank /Year 2006 2007 2008 2009 2010Bank of Baroda 7.43 8.37 9.53 9.50 8.55Bank of India 7.58 8.52 9.34 9.78 8.42Canara Bank 8.24 8.95 10.22 10.79 9.81Punjab National Bank 7.28 7.48 8.01 8.43 7.89State Bank of India 7.78 8.67 9.90 10.15 9.66

7.2 InvestmentsComparison with other banks

Bank of Baroda’s investments are comparable with that of top nationalized banks in India. However

the percentage growth of the investments decreased from 2006 to 2010. Whereas BoB’s major

competitors’ investments grew year on year. In the year 2010 Bank of India’s investments crossed

BoB’s investments.

29

2006 2007 2008 2009 20100.00

50,000.00

100,000.00

150,000.00

200,000.00

250,000.00

300,000.00

Global business

Investments in India constitute 94% of BoB’s global business. From 2006 to 2008, investments

outside India are kept constant whereas investments in India have been growing. In 2009 business

outside India is 8.55% of total business, but in 2010 it is decreased to 4%. India is a growing

economy and attracting more investors globally. Increasing investments in India is good direction of

investments.

30

2006 2007 2008 2009 2010

32498.03 31704.73

40652.49

49157.38

57911.71

3250.01 3685.72 3656.65 4205.82 3798.46

I Investments in India (Gross) (Rs. In Crores) II Investments Outside India (Gross) (Rs. In Crores)

Investments as a part of Assets

2006 2007 2008 2009 20100.00%

10.00%20.00%30.00%40.00%50.00%60.00%70.00%

Investments & Advances

The above graph shows that advances are increasing y-o-y and hence forth return on advances is

increasing. Trend suggests that the investments by BOB seem to be taking a back seat year by year

and hence Income on investment is decreasing. That means the bank is keen in lending more than

Investing.

As per the RBI Guidelines, during the year, the bank has transferred a portion of Government

Securities (SLR) kept in “Available for Sale” category to “Held to Maturity” Category. Due to which

percentage of return on investment is decreased.

31

2006 2007 2008 2009 20100%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%Break up of investments

 vi) Other Investments v) Subsidiaries and/or Joint Ven-tures iv) Debentures and Bonds iii) Shares ii) Other Approved Securities i) Government Securities

Investments constitute 21.98% of total assets. Out of total investments 87.63% is in Government

Securities. Remaining investments are on investment options like:

a) Approved Securities 1.38%

b) Shares 2.14%

c) Debentures and bonds 4.09%

d) Subsidiaries and/or Joint Ventures 1.89%

e) Others Investments 9.16%

Bank of Baroda’s investment outside India is 5.9% of the total assets.

53% of total investments maturity is more than 5 years which infers Bank is having good base of

investments.

32

References1. Website of Reserve Bank of India

2. Website of Bank of Baroda

3. BSE/NSE websites

4. Indian institute of Banking and Finance

5. Website of SBI, BOI, CANARA bank.

6. Companies Act.

7. Indian Banks Association website

8. Ministry of Finance website

33