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Financial Markets and Banking Group Assignment
13
Bank of BarodaFinancial Statement Analysis
PGCBM 22 XLRI, Jamshedpur
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Bank of Baroda
PGCBM 22 Page 2
Group Detail
SID SMS ID Name Center Group
DB12021 2224281 Sandeep Moudgil Chandigarh - Sector 34 A 11
DB12022 2224781 Soumya Mishra Chandigarh - Sector 34 A 11
Faculty
Professor Santosh Sangem
Assignment Objectives
For the assignment, you are required to make use of publicly available information on the individual
bank for a period of 4-7 years, ending in the financial year 2011-12. The primary submission should be in
Microsoft Word or PDF format and must not exceed 25 pages. You are expected to analyze the trends in
the nature of asset portfolio choices and profitability based on what has been taught during the course.
Students are also required to provide the summarized financial statements of the bank studied in an
excel sheet . Such summarized financial statements should have formed the basis for the computation
of the financial indicators used in the assignment. The excel sheet must also contain the calculation of
the ratios used for the analysis. The marks assigned to the group would depend on the rigor employed in
terms of the length of period for the assignment, the number and accuracy of the financial indicators
computed, and most importantly, the quality of the analysis. It is these and not the submission length
that will help in getting good marks, so try to be as much precise and to the point as possible.
The primary source of information for the submission will be the annual reports of the concerned bank
available at its own website. In addition, you may use any other source of data to provide support for
other points made by you in the analysis. However, be sure to cite the source clearly.
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Bank of Baroda
PGCBM 22 Page 3
Section 1
A Brief History of the Assigned Bank
The Heritage
It all started with a visionary Maharaja's uncanny foresight into the future of trade and enterprising in his country. On20th July 1908, under the Companies Act of 1897, and with a paid up capital of Rs 10 Lacs started the legend thathas now translated into a strong, trustworthy financial body, THE BANK OF BARODA.
It has been a wisely orchestrated growth, involving corporate wisdom, social pride and the vision of helping othersgrow, and growing itself in turn.
The founder, Maharaja Sayajirao Gaekwad, with his insight into the future, saw "a bank of this nature will prove abeneficial agency for lending, transmission, and deposit of money and will be a powerful factor in the development ofart, industries and commerce of the State and adjoining territories."
The Ethics
Between 1913 and 1917, as many as 87 banks failed in India.Bank of Barodasurvived the crisis, mainly due to its
honest and prudent leadership. This financial integrity, business prudence, caution and an abiding care and concernfor the hard earned savings of hard working people, were to become the central philosophy around which businessdecisions would be effected. This cardinal philosophy was over years of its existence, to become its biggest asset. Itensured that the Bank survived the Great War years. It ensured survival during the Great Depression. Even while bignames were dragged into the Stock Market scam and the Capital Market scam, the Bank of Baroda continued itstriumphant march along the best ethical practices.
The major ongoing initiatives of the Bank are detailed below:
Business Process Reengineering (BPR)
People Initiatives
New Technology Platform
Marketing Initiatives
Corporate Social Responsibility (CSR) Initiatives
Board of Directors
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Bank of Baroda
PGCBM 22 Page 4
Source -http://www.bankofbaroda.co.in/
http://www.bankofbaroda.co.in/http://www.bankofbaroda.co.in/http://www.bankofbaroda.co.in/http://www.bankofbaroda.co.in/ -
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Bank of Baroda
PGCBM 22 Page 5
International Presence
Source -http://www.bankofbaroda.co.in/
http://www.bankofbaroda.co.in/http://www.bankofbaroda.co.in/http://www.bankofbaroda.co.in/http://www.bankofbaroda.co.in/ -
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Bank of Baroda
PGCBM 22 Page 6
Section 2 And 3
Analysis of Bank Financial Reports [2012-2008 (5 years)]
a. Official Balance Sheet/P and L Statement/Annual Report 20012-08
http://www.bankofbaroda.co.in/fin/AnnualReport.asp
b. Bank of BarodaBalance Sheet (Last 5 years)
Consolidated Balance Sheet ------------------- in Rs. Cr. -------------------
Mar '12 Mar '11 Mar '10 Mar '09 Mar '08
12 mths 12 mths 12 mths 12 mths 12 mths
Capital and Liabilities:
Total Share Capital 412.38 392.81 365.53 365.53 365.53
Equity Share Capital 412.38 392.81 365.53 365.53 365.53
Share Application Money 0.00 0.00 0.00 0.00 0.00
Preference Share Capital 0.00 0.00 0.00 0.00 0.00
Init. Contribution Settler 0.00 0.00 0.00 0.00 0.00
Preference Share Application Money 0.00 0.00 0.00 0.00 0.00
Employee Stock Opiton 0.00 0.00 0.00 0.00 0.00
Reserves 28,103.92 21,379.55 15,349.06 12,914.99 10,993.01
Revaluation Reserves 0.00 0.00 0.00 0.00 0.00
Net Worth 28,516.30 21,772.36 15,714.59 13,280.52 11,358.54
Deposits 392,615.95 311,603.25 245,951.15 196,608.44 155,295.08Borrowings 23,598.06 22,378.33 13,404.27 5,644.85 3,962.17
Total Debt 416,214.01 333,981.58 259,355.42 202,253.29 159,257.25
Minority Interest 91.18 72.91 59.42 46.43 36.29
Policy Holders Funds 0.00 0.00 0.00 0.00 0.00
Group Share in Joint Venture 0.00 0.00 0.00 0.00 0.00
Other Liabilities & Provisions 12,590.52 10,386.92 9,049.71 16,730.97 12,826.91
Total Liabilities 457,412.01 366,213.77 284,179.14 232,311.21 183,478.99
Mar '12 Mar '11 Mar '10 Mar '09 Mar '08
12 mths 12 mths 12 mths 12 mths 12 mths
AssetsCash & Balances with RBI 22,268.34 20,394.42 14,076.07 10,901.21 9,617.34
Balance with Banks, Money at Call 43,542.00 31,029.31 22,493.41 14,301.41 13,552.77
Advances 292,077.14 232,085.11 177,711.90 146,293.98 108,578.97
Investments 86,697.00 74,018.46 63,163.27 53,626.58 44,657.76
Gross Block 5,096.79 4,716.57 4,412.31 4,268.90 4,092.10
Accumulated Depreciation 2,668.60 2,333.37 2,042.92 1,709.27 1,417.83
Net Block 2,428.19 2,383.20 2,369.39 2,559.63 2,674.27
http://www.bankofbaroda.co.in/fin/AnnualReport.asphttp://www.bankofbaroda.co.in/fin/AnnualReport.asphttp://www.bankofbaroda.co.in/fin/AnnualReport.asp -
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Bank of Baroda
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Capital Work In Progress 0.00 0.00 0.00 0.00 0.37
Other Assets 10,399.33 6,303.27 4,458.54 4,628.39 4,344.08
Minority Interest 0.00 0.00 0.00 0.00 0.00
Group Share in Joint Venture 0.00 0.00 0.00 0.00 0.00
Total Assets 457,412.00 366,213.77 284,272.58 232,311.20 183,425.56
Contingent Liabilities 134,988.89 112,544.64 78,341.53 64,958.31 75,729.57
Bills for collection 41,028.30 34,004.12 28,071.78 22,800.15 15,225.85
Book Value (Rs) 693.62 556.06 431.40 364.58 311.82
Source : Dion Global Solutions LimitedURL -http://www.moneycontrol.com/stocks/company_info/print_main.php
Bank of BarodaProfit and Loss Statement (Last 5 years)
Previous Years
Profit & Loss account ------------------- in Rs. Cr. -------------------
Mar '12 Mar '11 Mar '10 Mar '09 Mar '08
12 mths 12 mths 12 mths 12 mths 12 mths
Income
Interest Earned 29,673.72 21,885.92 16,698.34 15,091.58 11,813.48
Other Income 3,422.33 2,809.19 2,806.36 2,757.66 2,051.04
Total Income 33,096.05 24,695.11 19,504.70 17,849.24 13,864.52
Expenditure
Interest expended 19,356.71 13,083.66 10,758.86 9,968.17 7,901.67
Employee Cost 2,985.58 2,916.78 2,350.88 2,348.13 1,803.76
Selling and Admin Expenses 2,589.44 1,885.00 1,627.56 885.24 927.20
Depreciation 276.57 243.04 230.86 230.50 232.00
Miscellaneous Expenses 2,880.80 2,324.94 1,478.21 2,189.99 1,564.36
Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.00
Operating Expenses 6,727.59 5,669.88 4,711.23 3,844.66 3,370.27
Provisions & Contingencies 2,004.80 1,699.88 976.28 1,809.20 1,157.05
Total Expenses 28,089.10 20,453.42 16,446.37 15,622.03 12,428.99
Mar '12 Mar '11 Mar '10 Mar '09 Mar '08
12 mths 12 mths 12 mths 12 mths 12 mths
Net Profit for the Year 5,006.96 4,241.68 3,058.33 2,227.20 1,435.52
Extraordionary Items 0.00 0.00 0.00 0.00 0.00
Profit brought forward 0.00 0.00 0.00 0.00 0.00
Total 5,006.96 4,241.68 3,058.33 2,227.20 1,435.52
Preference Dividend 0.00 0.00 0.00 0.00 0.00
Equity Dividend 812.29 753.35 639.26 383.56 340.94
Corporate Dividend Tax 0.00 0.00 0.00 0.00 0.00
Per share data (annualised)
Earning Per Share (Rs) 121.79 108.33 83.96 61.14 39.41
Equity Dividend (%) 170.00 165.00 150.00 90.00 80.00
http://www.moneycontrol.com/stocks/company_info/print_main.phphttp://www.moneycontrol.com/stocks/company_info/print_main.phphttp://www.moneycontrol.com/stocks/company_info/print_main.phphttp://www.moneycontrol.com/stocks/company_info/print_main.php -
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Bank of Baroda
PGCBM 22 Page 8
Book Value (Rs) 668.34 536.16 414.71 352.37 303.18
Appropriations
Transfer to Statutory Reserves 1,740.81 1,387.87 1,162.07 1,136.23 444.23
Transfer to Other Reserves 2,453.86 2,100.46 1,257.00 707.41 650.35
Proposed Dividend/Transfer to Govt 812.29 753.35 639.26 383.56 340.94
Balance c/f to Balance Sheet 0.00 0.00 0.00 0.00 0.00
Total 5,006.96 4,241.68 3,058.33 2,227.20 1,435.52
Source : Dion Global Solutions LimitedURL: http://www.moneycontrol.com/stocks/company_info/print_main.php
Annual Report Self Analysis
ta 2012(in Crores)
2011(in
Crores)
2010(in
Crores)
2009(in
Crores) 2008(in Cror
t Worth 27476.85 20993.11 15106.39 12835.54 1104tal Assets 447321.46 358397.18 278316.71 227406.73 1795
tal Advances 287377.29 228676.36 175035.29 143985.9 10670
ntingent Liabilities 134552.25 112272.64 77997.01 64745.82 7536
t NPAs 1,543.64 790.88 602.32 449.04 49
oss NPAs 4,464.75 3,152.50 2,400.69 1842.92 198
er-I Capital 27497.91 20974.23 14356.88 11069.64
tal Risk Weighted Assets 253733.75 209890.48 156091.41 130324.89
ovision for Doubtful Debts 76.14 0.1 0.06 51.01 3
vances Subject to
structuring 8,265.41 1,603.83 2,455.05 2658.56 ofit after Tax 5,216.29 4,419.20 3,149.79 2,331.27 1,51
erest Income 30,488.49 22,513.31 17,234.82 15,547.56 12,16
n-Interest Income 4,099.89 3,284.66 2,966.47 2,845.67 2,14
Annual Report Self analysis Excel Attached Below
FinStmt_Analysis_Ratios.xlsx
http://www.moneycontrol.com/stocks/company_info/print_main.phphttp://www.moneycontrol.com/stocks/company_info/print_main.phphttp://www.moneycontrol.com/stocks/company_info/print_main.php -
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Bank of Baroda
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Section 4
Capital Adequacy Ratios
Type Ratio Formula
2012 (in
%)
2011(in
%)
2010(in
%)
2009(in
%)
2008(i
%)
Capital
Adequacy
Capital Asset Ratio Net Worth/Total Assets 6.14 5.86 5.43 5.64 6.1
Net Capital-Assets
Ratio
(Net Worth- Net NPAs)/
Total Assets 5.8 5.64 5.21 5.45 5.8
Net NPA Coverage
Ratio Net NPAs / Net Worth 5.62 3.77 3.99 3.5 4.4
Tier-I Capital Ratio
Tier-I Capital / Total Risk
Weighted Assets 10.84 9.99 9.2 8.49 NA
Section 5
Asset Quality, Market Risk & Liquidity Ratios
Type Ratio Formula
2012 (in
%)
2011(in
%)
2010(in
%)
2009(in
%)
2008(i
%)
sset Quality,
Market Risk &
quidity Ratios
Gross NPA Ratio-I
(A) Gross NPAs/ Total Assets 1.00 0.88 0.86 0.81 1.1
Net NPA Ratio-I (A) Net NPAs/ Total Assets 0.35 0.22 0.22 0.2 0.2
Gross NPA Ratio-II(A)
Gross NPAs/ TotalAdvances 1.55 1.38 1.37 1.28 1.8
Net NPA Ratio-II (A)
Net NPAs/ Total
Advances 0.54 0.35 0.34 0.31 0.4
Provisions Ratio (A)
Provision for Doubtful
Debts/ Total Advances 0.03 0 0 0.04 0.0
Restructured Assets
Ratio (A)
Advances Subject to
Restructuring/ Total
Advances 2.88 0.7 1.4 1.85 NA
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Bank of Baroda
PGCBM 22 Page 10
Section 5
Asset Quality, Market Risk & Liquidity Ratios
Type Ratio Formula
2012 (in
%)
2011(in
%)
2010(in
%)
2009(in
%)
2008(i
%)
Profitability
Ratio
Return on Equity
Profit after Tax/Net
Worth 18.98 21.05 20.85 18.16 13.7
Return on Assets
Profit after Tax/Total
Assets 1.17 1.23 1.13 1.03 0.8
Interest Income
Ratio
Interest Income/ Total
Assets 6.82 6.28 6.19 6.84 6.7
Non-Interest
Income Margin
Non-Interest
Income/Contingent
Liabilities 3.05 2.93 3.8 4.4 2.8
A Consolidated List of Calculated Ratios Along with Formulae Can be Found in
below Attached Excel Sheet (Double Click on Ratios to check Formulae used)
FinStmt_Analysis_Ratios.xlsx
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Bank of Baroda
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Section 7
Interpretation of Ratios and Overall Analysis
Type Ratio Ratio Interpretations
2012
(in
%)
2011(in
%)
2010(in
%)
2009(in
%)
Capital
Adequacy
Capital Asset Ratio
This ratio tells us the extent of
shareholders funds maintained
against the total assets owned by
the bank. It also gives us an
indication of the maximum
extent of losses in the value of
assets that the bank can
withstand. 6.14 5.86 5.43 5.64
Net Capital-Assets
Ratio
Since Net NPA's are nothing but
an expected loss that is not
provided for, the true amount of
capital available to withstand
losses in total asset value is
lower than the net worth. This
ratio captures the true amount of
such capital available as a buffer
against future losses. 5.8 5.64 5.21 5.45
Net NPA Coverage
Ratio
Percentage reduction in Net
Worth if provisions made against
entire amount of Net NPA's. A
higher/increasing value of this
ratio points to trouble 5.62 3.77 3.99 3.5
Tier-I Capital Ratio
This ratio gives us the proportion
of equity held against the amount
of risk weighted assets. To put it
simply, risk weighted assets are a
measure of the amount of risk
involved with each asset (think
of risk weighted asset values as
the maximum amount of loss that
could be incurred on the assets if
no recovery is possible at all) 10.84 9.99 9.2 8.49
Asset Quality,
Market Risk &
Liquidity Ratios
Gross NPA Ratio-I
(A)
The proportion of total assets that
are not generating any income
for the bank. This ratio is not of
much value as gross NPA's are
not the only non-income
generating assets for banks. 1 0.88 0.86 0.81
Net NPA Ratio-I (A)
The proportion of total assets that
are to be written off. As with
gross NPA ratio-I, this ratio is
not of much value but is very
widely used in the financial
press. 0.35 0.22 0.22 0.2
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Gross NPA Ratio-II
(A)
This ratio more correctly
compares apples with apples. It
gives us the proportion of non-
income generating advances.
High and increasing values of
this ratio are indicative of lax
lending policies in the pastleading to problems in recovery
in the present. 1.55 1.38 1.37 1.28
Net NPA Ratio-II (A)
The proportion of total advances
that are yet to be written
off/provided against. Same
interpretation as for Gross NPA
Ratio-II 0.54 0.35 0.34 0.31
Provisions Ratio (A)
The amount of accumulated
provisions made against total
advances. A high and increasing
value of this ratio has the same
implication as Gross NPA Ratio-
II. It also indicates that the bank
is possibly being more cautious
in terms of recognizing possible
losses in its profit and loss
account. 0.03 0 0 0.04
Restructured Assets
Ratio (A)
This ratio gives us the proportion
of advances that the bank could
not recover fully on originally
contracted terms and hence
require restructuring to reduce
the extent of future losses on
such loans. Possibly in the
absence of such restructuring, the
bank would have had to fully
write-off the amount of theseloans. A high value of this ratio
has the same interpretation as
Gross NPA Ratio-II.
Additionally, this ratio has to be
compared with Gross NPA
Ratio-II to get a sense of the true
extent of loss making loans (for
instance if the Gross NPA Ratio-
II is 3% and this ratio is 2%, it
means that the bank is able to
restructure 2/3 of its possible loss
making loans and hence, its
actual losses will be lower. 2.88 0.7 1.4 1.85
Profitability
Ratio
Return on Equity
This ratio gives us the extent of
returns earned by the bank on the
capital invested by shareholders18.98 21.05 20.85 18.2
Return on Assets
This ratio gives us the extent of
returns earned by the bank on the
capital invested by all providers
of capital. 1.17 1.23 1.13 1.03
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Interest Income
Ratio
This is used to further analyze
the drivers of net interest margin.
It gives us the interest yield on
interest earning assets. As the
profitability decomposition
exercise shows, this ratio should
be further broken down in termsof the rate of return earned by
different categories of interest
bearing assets and their
composition. A declining value
of this ratio is indicative of
greater competition and lesser
avenues for growing assets more
profitably. 6.82 6.28 6.19 6.84
Non-InterestIncome Margin
This gives us the rate of income
earned on off-balance sheet
items. Typically, it can be further
broken down into the
composition of various off-
balance sheet items and the rates
of income earned on each. 3.05 2.93 3.8 4.4
What do the above indicators mean for Bank of Baroda?
The year FY12 has been challenging for the Indian economy. After two years of a fairly robust growth of 8.4%,
Indias GDP growth is estimated at 6.9% for FY12 by the Central Statistical Organization, Government of India.
Notwithstanding the challenging environment, the Bank was able to exploit the opportunities within the given
environment and sustain its qualitatively superior performance during FY12.
The Bank posted a very healthy growth of 25.9% in its global businessway above the banking industrys averageperformance. On the back of healthy growth of 17.2% in its Net Interest Income, the Bank recorded Net Profit
growth of 18.0% despite adverse pressures on Net Interest Margins (NIMs).
The Banks Return on Average Assets (ROAA) at 1.24%,
Capital Adequacy at 14.67% and Return on Equity at 18.98 % again provided an eloquent testimony to the financial
Soundness of your Bank.
Moreover, the Bank again proved its strength in the asset quality management by restricting its Gross NPA ratio at
1.53% and Net NPA ratio at 0.54% during FY12 one of the lowest in the large sized banking segment in India.
Source Annual Report 2012-11
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Bank of Baroda
PGCBM 22 Page 14
INDEX-
Formulae Used for Calculation
Capital Adequacy
Ratios 4
S.
No.Ratio Formula
1 Capital-Assets
Ratio
Net Worth/Total Assets
2 Net Capital-
Assets Ratio
(Net Worth-Net NPAs)/
Total Assets
3 Net NPA
Coverage Ratio
Net NPAs / Net Worth
4 Tier-I Capital
Ratio (Also
called Tier-I
Leverage Ratio)
Tier-I Capital / Total Risk
Weighted Assets
5 Basel RiskWeighted
Capital Ratio
(Tier-I Capital + Tier-IICapital + Tier-III Capital) /
Total Risk Weighted
Assets
6 Equity-Risk
Weighted Assets
Ratio
Tier-I Capital / Total Risk
Weighted Assets
7 Short-Term
Leverage Ratio
Short-Term Borrowed
Funds (Non-Deposit
Funds)/ Total Assets
Asset Quality, Market Risk & Liquidity Ratios
S.
No.Ratio Formula
1 Gross NPARatio-I (A)
Gross NPAs/ Total Assets
2 Gross NPA
Ratio-II (A)
Gross NPAs/ Total
Advances
3 Net NPA Ratio-
I (A)
Net NPAs/ Total Assets
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4 Net NPA Ratio-II (A)
Net NPAs/ TotalAdvances
5 Provisions Ratio(A)
Provision for DoubtfulDebts/ Total Advances
6 RestructuredAssets Ratio (A)
Advances Subject toRestructuring/ Total
Advances
Asset Quality, Market Risk & Liquidity Ratios
S.
No.Ratio Formula
7 AssetConcentration
Ratio (A)
Large Loans/ TotalAdvances
8 Sectoral
ConcentrationRatios (A)
Exposures to Individual
Sector/ (Total Advances+Investments (except G-
secs))(e.g. Exposures to Real
Estate Sector, Retail
Advances, Capital Markets,etc)
9 Liquidity Ratio-I (A,L,M)
Liquid Assets/(Demanddeposits + Savings
deposits+ Interbank
Deposit Liabilities + ShortTerm Borrowed funds)
10 Liquidity Ratio-II (A,L,M)
Liquid Assets/ (TotalAssets)
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11 Liquidity Ratio-III (Short-Term
Gap Ratio)
(A,L,M)
Assets Maturing in Oneyear/ Liabilities Due in One
year
12 Off-BalanceSheet Exposure
Ratio (A,M)
Off Balance SheetTransactions / Total Assets
Asset Quality, Market Risk & Liquidity Ratios
S.
No. Ratio Formula
13 Relative Growth
Rate Ratio-I
Growth Rate of Advances
(%)/ Growth Rate of
Investments(A,M)
14 Relative GrowthRate Ratio-II
Growth Rate ofGovernment Securities
Holdings/ Growth Rate of
Investments(A,L,M)
15 Relative Growth
Rate Ratio-III
(A)
Growth Rate of Off
Balance Sheet Transactions
/ Growth Rate of TotalAssets
16 Relative Growth
Rate Ratio-IV
(A,M)
Growth Rate of Risk
Weighted Assets / Growth
Rate of Total Assets
17 Exposure to
Banks &
FinancialInstitutions
Ratio (A,L,M)
(Investment in Securities
issued by Banks & FIs +
Interbank Deposit Balances+ Advances to Banks &
FIs)/ Total Assets
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Profitability Ratios 3
S.
No.Ratio Formula
1 Return on Equity Profit after Tax/Net Worth
2 Return on Assets Profit after Tax/Total Assets
3 Net Interest
Margin
(Interest Income-Interest
Expense)/ Total Assets
4 Interest IncomeRatio
Interest Income/ Total Assets
5 Interest ExpenseRatio
Interest Expense/ (Deposits +Borrowings)
6 Non-Interest
Income Ratio
Non-Interest Income/ Net
Interest Income
Profitability Ratios 3
S.
No. Ratio Formula7 Operating
Expense Ratio
Operating Expenses/ (Net
Interest Income + Non-Interest Income)
8 NPA ProvisionRatio
Provision against NPAs/(NetInterest Income)
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9 Non-InterestIncome Margin
Non-InterestIncome/Contingent Liabilities