Presentation for B&1 (1)

8/7/2019 Presentation for B&1 (1)

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Analysis of financial statements of Analysis of financial statements of

banksbanks

Presented to,

Dr. Bharati Pathak

Prepared by,

Kapil Chauhan (1911)

Adil Ganchi (1920)

Nayan Mistry (1928)



What is Financial Statements?What is Financial Statements?

y A financial statement (or financial report) is a

formal record of the financial activities of a

business, person, or other entity.

y Objective

The objective of financial statements is to provide

information about the financial position, performance

and changes in financial position of an enterprise thatis useful to a wide range of users in making economic

decisions.



Operating ProfitOperating Profit

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

SBI 19676.75 25257.87 33673.05 44405.16 46280.41

ICICI Bank 7710.91 14077.37 19729.57 20239.18 15460.24

HDFC Bank 2059.03 3301.97 4884.6 8919.75 8267.82

BOB 3798 5907.58 8057.78 10553.46 12190.56

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

Operating Profit



Net ProfitNet Profit


SBI 4406.67 4541.31 6729.12 9121.24 9166.05

ICICI Bank 2540.07 3110.22 4157.73 3758.13 4024.98

HDFC Bank 870.78 1141.45 1590.18 2244.95 2948.69

BOB 826.96 1026.47 1435.52 2227.2 3058.33

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

Net Profit



Net Profit MarginNet Profit Margin


SBI 11.21 10.12 11.65 12.03 10.54

ICICI Bank 14.12 10.81 10.51 9.74 12.17

HDFC Bank 17.77 15.55 13.57 12.82 11.35

BOB 10.76 10.22 10.38 12.86 15.37

0

2

4

6

8

10

12

14

16

18

20

Net Profit Margin



AssetTurnover RatioAssetTurnover Ratio


SBI 5.1 5.44 6.32 7.2 7.26

ICICI Bank 2.94 4.52 5.61 5.14 4.6

HDFC Bank 2.89 3.5 4.33 5.18 5

BOB 3.89 4.25 3.47 4.2 4.48

0

1

2

3

4

5

6

7

8

Asset Turnover Ratio



Current RatioCurrent Ratio


SBI 0.05 0.05 0.07 0.04 0.04

ICICI Bank 0.08 0.09 0.11 0.13 0.14

HDFC Bank 0.03 0.04 0.04 0.04 0.04

BOB 0.04 0.04 0.03 0.02 0.02

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

Current Ratio



Quick RatioQuick Ratio


SBI 5.5 6.52 6.15 5.74 9.07

ICICI Bank 6.64 6.04 6.42 5.94 14.7

HDFC Bank 5.61 5.18 4.07 4.89 5.23

BOB 9.49 11.29 9.56 9.62 21.88

0

5

10

15

20

25

Quick Ratio



Cash Earning Retention RatioCash Earning Retention Ratio


SBI 83.64 83.21 79.41 78.88 78.82

ICICI Bank 72.58 70.22 70.51 68.87 66.7

HDFC Bank 83.99 84.83 83.69 81.07 80.87

BOB 82.12 79.1 79.55 84.4 80.57

0

10

20

30

40

50

60

70

80

90

Cash Earning Retention Ratio



Earnings per ShareEarnings per Share


SBI 83.73 86.29 106.56 143.67 144.37

ICICI Bank 28.55 34.59 37.37 33.76 36.1

HDFC Bank 35.64 43.29 44.87 52.77 64.42

BOB 28.83 28.18 39.41 61.14 83.96

0

20

40

60

80

100

120

140

160

Earnings per Share



OVERVIEW OF CAMELOVERVIEW OF CAMEL

MODELMODELy The acronym "CAMEL" refers to the five parameters of a bank's condition that are assessed:

1.C apital adequacy

2. Asset quality

3. M anagement4. E arnings

5. Liquidity

y R atings are assigned for each component in addition

to the overall rating of a bank's financial condition.The ratings are assigned on a scale from 1 to 5.

y Banks with ratings of 1 or 2 are considered to present few, if any, supervisory concerns, while banks with ratings of 3, 4, or 5 present moderate toextreme degrees of supervisory concern.



Capital AdequacyCapital Adequacy

y Capital adequacy reflects the overall financial condition

of the banks and also the ability of the management to

meet the need for additional capital. It includes the

following

Capital Adequacy R atio.

Debt ± Equity R atio.

Advances to Assets.



Capital Adequacy RatioCapital Adequacy Ratio

Particular (2009-10) HDFC Bank

ICICI

Bank SBI BOB Bank

Tier I + Tier II(cr.) 27237.75 68122 119466 15321.17

R isk Weighted Assets

(Cr.) 160654.44 355662 934724.39 143303.72

Capital AdequacyR atio(%) 16.95 19.15 12.78 10.69

As per the latest R BI norms, banks in India should have a CAR of 9%.It is arrived at by dividing the Tier I and Tier II capital by risk

weighted assets. Tier I capital includes equity capital and free reserves.

Tier II capital comprises sub-ordinate debt of 5-7 year tenure.



Debt-Equity R atio = Debt / Equity × 100

Particular (2009-10) HDFC Bank ICICI Bank SBI BOB

(R s. in Crore)

Total Debt(cr.) 180320.13 296280.17 907127.83 254394.35

Net Worth(cr.) 21522.49 51618.37 65949.2 15106.39

Total Debt-Equity R atio(%) 8.39 5.74 13.75 16.84

DebtDebt--Equity RatioEquity Ratio

Debt-Equity ratio is arrived at by dividing Total borrowings and Deposits by Net Worth. Net Worth includes equity capital, preference capital, reserves and

surplus less revaluation reserves and miscellaneous expenses not written off.




(R s. in Crore)

Total Advances(cr.) 125830.59 181205.6 631914.15 175035.29

Total Assets(cr.) 222458.56 363399.71 1053413.74 278316.71

Advance to Assets(cr.) 0.57 0.50 0.60 0.63

Advances to Assets = (Total Advances / Total assets) × 100

Advances to Assets RatioAdvances to Assets Ratio

Total Advances also includes receivables.The value of Total Assets is excluding revaluation of all the assets.



Asset QualityAsset Quality

y The prime motto behind measuring the asset quality isto ascertain the quality of assets and majority of ratiosin this segment are related to non-performing assets i.e. NPA.

y An NPA is defined generally as a credit facility inrespect of which interest or instalment of principal is inarrears for two quarter or more.

y This segment contain following ratio: Net NPAs to Total Assets

Net NPAs to Net Advances

Total Investments to Total Assets

Percentage change in Net NPAs




(R s. in Crore)

Net NPAs(cr.) 394.63 461.4 13782.97 382.75

Total Assets(cr.) 222458.56 363399.71 1053413.74 174820.23

Net NPAs to Total Assets 0.17 0.13 1.3 0.21

Net NPAs to Total Assets = Gross NPAs / Total Assets X 100

Net NPAs toTotal Asset RatioNet NPAs toTotal Asset Ratio

It is a measure of the quality of assets in a situation where themanagement has not provided for loss on NPAs.

The lower the ratio, the better the quality of advances.




(R s. in Crore)

Net NPAs(cr.) 394.63 461.4 13782.97 382.75

Total Advances(cr.) 125830.59 181205.6 858074.46 87481.98

Net NPAs to TotalAdvances(%) 0.31 0.25 1.61 0.44

Net NPAs to Total Advances = (Gross NPAs / Total Advances) x 100

Net NPAs toTotal Advances RatioNet NPAs toTotal Advances Ratio

In this ratio Net NPAs are measured as a percentage of TotalAdvance.




(R s. in Crore)

Total Investment(cr.) 58607.62 120892.8 285790.07 61182.38

Total Assets(cr.) 222458.56 363399.71 1053413.74 278316.71

Total Investment to Assets 0.263454101 0.332671702 0.27129898 0.219830063

Total Investments to Total Assets = Total Investments / Total Assets × 100

Total Investments to Total AssetsTotal Investments to Total Assets RatioRatio

This ratio used as a tool to measure the percentage of total assetslocked up in investments, which by conventional

definitional, doesn¶t form part of the core income of a bank.




(R s. in Crore)

Change in Net NPAs(cr.) -129.64 -55 3365.66 -26.99

Net NPAs at beginning (cr.) 1951.53 4669 7749.11 1981.38

% Change in Net NPAs(%) -6.64299293 -1.17798244 43.4328587 -1.36218191

(Net NPAs at the end ± at beginning of the year) x 100 / Net NPAs at

beginning of the year

Percent change in Net NPAsPercent change in Net NPAs

This measure gives the movement in Net NPAs in relation to Net

NPAs in previous year. The higher the reduction in Net NPAs

levels, the better it is for the bank.



Management EfficiencyManagement Efficiencyy

Management is the most important ingredient thatensures sound functioning of banks. With increasedcompetition in the Indian banking sector, efficiency andeffectiveness have become the rule as banks constantlystrive to improve the productivity of their employees.

y The parameters used to assess the quality of managementgives the measurement of the efficiency andeffectiveness of management.

y The ratios of this segment are: Total Advances to Total Deposits

Net Profit per Employee

Business per Employee

R eturn on Net Worth




(R s. in Crore)

Total Advance(cr.) 125830.59 181205.6 631914.15 175035.29

Total Deposits(cr.) 167404.44 202016.6 804116.23 241044.26

Total Advance to TotalDeposit(%) 75.1656228 89.6983713 78.584927 72.6154151

Total advances to Total Deposits = Total advances / Total Deposits X 100

Total Advances to Total DepositTotal Advances to Total Deposit

This ratio measures the efficiency of the management in

converting deposits into advances.

Total deposits include demand deposits, saving deposits, term

deposits and deposits of other bank. Total advances also include

the receivables.




(R s. in Crore)

Net Profit(Cr.) 2244.94 3758.13 1815.36 2227.2

No. of Employee 52096 36000 200,299 38960

Net Profit per Employee (cr.) 0.043092368 0.1043925 0.00906325 0.057166324

Net Profit per Employee = Net Profit / No. of Employee

Net Profit per Employee Net Profit per Employee

It is arrived at by dividing the Net profit earned by the bank by

total number of employees. Higher the ratio, higher will be the

efficiency of management.




(R s. in Crore)

Deposit + Advance(cr.) 293235.03 383222.2 1436030.38 416079.55

No. of Employee 52096 36000 200299 38960

Business per Employee(cr.) 5.628743666 10.64506111 7.1694336 10.67965991

Business per Employee = Total Business / No. of Employee

Business per EmployeeBusiness per Employee

It is arrived at by dividing total business by total number of

employees. Business includes the sum total advances and deposits

in a particular year.




(R s. in Crore)

Net profit(cr.) 2948.7 4024.98 9166.05 3058.33

Net Worth(cr.) 21522.49 51618.37 65949.2 15106.39

R eturn on Net Worth(%) 13.70055231 7.797572841 13.8986523 20.24527369

RO NW = Net Profit / Net Worth X 100

R eturn on Net WorthR eturn on Net Worth

It is a measure of the profitability of a company. PAT is expressed

as a percentage of Average Net Worth.



Earning QualityEarning Quality

y It assesses the quality of income in terms

of income generated by core activities i.e.,

income from lending operations.

y This segment contains the following:

O perating Profit by Average Working Funds

Net Profit to Average Assets

Percentage Growth in Net Profit Net Interest Margin




(R s. in Crore)

O perating Profit(cr.) 4863.44 5552.3 14578.54 3875.53

Total Assets(cr.) 222458.56 363399.71 1053413.74 278316.71

O perating profit to Avg. TotalAsset (%) 2.186222908 1.527876838

1.383932964 1.392489154

O perating Profit to Total Assets = O perating Profit / Total assets

O perating Profit to Total AssetsO perating Profit to Total Assets

This is arrived at by dividing the operating profit by Total Assets.




(R s. in Crore)

Net Profit(cr.) 2244.94 3758.13 1815.36 2227.2

Avg. Total Assets(cr.) 202864.67 371350.335 1008922.91 252861.72

Net Profit to Average Assets(%) 1.106619502 1.012017399

0.179930496 0.880797615

Net Profit to Average Assets = Net Profit / Average Assets

Net Profit to Average Assets Net Profit to Average Assets

This ratio measures return on assets employed or the efficiency in

utilization of the assets.

It is arrived at by dividing the Net Profit by Average Assets, which

is the average of total assets in the current year and previous year.




(R s. in Crore)

profit for year ending march

2009 2244.94 3758.13 9121.23 2227.2

profit for year ending march

2010 2948.7 4024.98 9166.05 3058.33

% change in net profit 23.86678875 6.6298466080.48897834

9 27.17594243

% Change in Net Profit = Changes in Net Profit / Net Profit at Beginning X 100

Percent Change in Net ProfitPercent Change in Net Profit

It is percentage change in net profit from last year.

It arrived by dividing changes in net profit by net profit at

beginning.




Net Interest Margin (%) 4.2 2.4 2.66 3.12

Net Interest Margin = Interest Earned ± Interest Expended / Average Total Assets

Net Interest Margin Net Interest Margin

It is an important measure of a bank¶s core income (income from

lending operation).



LiquidityLiquidity

y The business of banking is all about borrowing andlending money. Timely repayment of deposits is of crucial importance to avoid a run on a bank.

y Hence, banks have to ensure that they always maintainenough liquidity. Through mandatory StatutoryLiquidity R atio (SLR ) and Cash R eserve R atio(CRR ), R BI ensures that banks maintain ample liquidity.

y It contains the following:

Liquid Assets to Demand Deposits Liquid Assets to Total Deposits

Liquid Assets to Total Assets




(R s. in Crore)

Liquid Assets (cr.) 29942.39 38873.69 96183.85 35467.06

Demand Deposits (cr.) 87104 62668 346563 22328.6084

Liquid Assets to Demanddeposits 34.37544774 62.03116423

27.75364075 158.8413365

Liquid Assets to Demand Deposits = Liquid Assets / Demand Deposits

Liquid Assets to Demand DepositsLiquid Assets to Demand Deposits

This ratio measures the ability of a bank to meet demand from

demand deposits in a particular year.

Liquid assets include cash in hand, balance with R BI, balance with

other banks (both in India and abroad), and money at call and short

notice.




(R s. in Crore)

Liquid Assets(cr.) 29942.39 38873.69 96183.85 35467.06

Total Deposit(cr.) 167404 202017 804116.23 241044

Liquid Assets to TotalDeposit(%) 17.88630499 19.24278155 11.96143622 14.71393604

Liquid Assets to Total Deposits = Liquid Assets / Total Deposits

Liquid Assets to Total DepositsLiquid Assets to Total Deposits

Liquid Assets include cash in hand, balance with R BI, balance

with other banks (both in India and abroad), and money at call and

short notice and capital work in progress.

Total Deposits include demand deposits, saving deposits, term

deposits and deposits of other financial institutions.




(R s. in Crore)

Liquid Assets(cr.) 29942.39 38873.69 96183.85 35467.06

Total Assets(cr.) 222458.56 363399.71 1053413.74 278316.71

Liquid Assets to Total Assets(%) 13.45976078 10.69722648 9.13068117 12.74341738

Liquid Assets to Total Assets = Liquid Assets / Total Assets

Liquid Assets to Total AssetsLiquid Assets to Total Assets

Liquid Assets as measured as percentage of Total Assets.



Summary of Summary of

Financial PerformanceFinancial Performance

of of

Schedule Commercial BanksSchedule Commercial Banks

(RBI Report)(RBI Report)



Overview of the Financial StabilityOverview of the Financial Stability

y Global Financial Crisis has impacted relatively low.

y Few small and medium level impact can be

observed through the balance sheet

y Year 20009-10 has seen decline in growth of balance sheet compare to the year of 2008-09

y Foreign banks and Public sector banks has seenslowdown in growth where the Private Banks hasseen the growth is the only exception



Major Liability of the SCBsMajor Liability of the SCBs

y Deposits is one of the main factor which has largely causedto the slowdown to the growth of balance sheet, as if itcontains 78% of the total liabilities of all commercial banks inIndia

y

Declaration in growth of the deposit has been registered inthree consecutive year since 2007-08,

y One of the factor for the decline in growth is the lowinterest rate.

y Composition of the deposits however has been changedsignificantly where CASA(Current and Saving Account)contribution towards the total deposit has been increasetremendously compare to other term deposits



Cont«Cont«

y CASA contribution become almost half of thetotal deposits of the banks

y Other major liability of the Bank is the Borrowingwhich consist of 8.7% of Balance Sheet

y Borrowing has also shown sharp downturn interm of growth in year 2009-10 compare to

previous year

y Growth has been declined from 56.5% to 10.8%



Major Assets of the SCBsMajor Assets of the SCBs

y

Major part of the Assets of the SCBs has been captured by1. Bank Credit,

2. Investments

3. Loan and Advance

y Effect of these component can largely affect the balance sheet.

y Bank Credit has been continuously decline in the last subsequent year. It

has reached to a low of 16.6% in the year of the 2009-10 from the high of

2004-05 where it has reached to the 30%

y Major factor of the decline in the bank credit is the decline in the deposits

of the bank which is the major source of funds for the banks

y Similar to the Bank Credit, Growth in Investment has also been decline in

the last few years



ContdContd««y Composition of Investment has also shown some changes where

Banks has increased their investment in Non-Approved Securities.

y Non-Approved Securities consist of Mutual Funds, Debenture andCommercial Paper

y Non-Approved Securities consists of 48% of total investment in2009-10

y Investment in Approved securities has decrease to 72.7 in year of 2009-10 from the 87 in year of 2008-09

y

Investment in non-approved securities has been increased from the13 in 2008-09 to 27.3 in 2009-2010

y Reason behind the increase in the Non-approved securitiesinvestment is the preference of the bank that has shown moreinterest in the low-risk investment due to global marketuncertainties



Overview of the FinancialOverview of the Financial

PerformancePerformancey Growth in Income has been slowdown in the year of 2009-

10 compare to previous year

y Major factor for the decline in income is the decrease in the

growth of the interest earning and non-interest earnings.

y Decline has been shown in growth of the expenditure of the

bank in year 2009-10

y Decline in growth of the both component has impacted on

the profitability of the banks which has been recorded a

sharp decline in the year of the 2009-10,



ContdContd««

y The growth in the profit of the bank has been

registered 10.4% which is much lower compare to the

previous year

y Return on Asset(ROA) which is another indicator of the

financial performance of the bank has also shown

decline in growth in 2009-10

y The other indicator of the financial performance likeReturn on Equity and Return on Cost of Fund has also

been decline in the year of 2009-10



ContdContd«.«.

y CRAR(Capital to Risk weighted Assets Ratio) hasshown the marginal rise in the year of the 2009-10where it has been increased from the 13.0% in 2008-09 to 13.2% in 2009-10

y It is s it is much above the minimum ratio of 9% byRBI which signifies that Indian bank has successfullymanaged to meet the increased capital requirementunder the changed framework of Basel II.

y CRAR is consist of the Capita and the Reserve andsurplus which is the financial strength of any bank.



ContdContd«.«.

y One of the important factor for soundness of banks is their non-performing assets(NPA).

y Indian banks has seen steady improvement asevident from a decline level of net NonPerforming assets ratio since 1999 which hasbeen steady decline from 14.6% in 1999 to 2.25percent at the end of 2008.

y But in the year of 2009-10 it has increased to2.39 which is a result of the global financial crisis.



BibliographyBibliography

y www.sbi.co.in

y www.bankofbaroda.com

y www.hdfcbank.com

y www.icicibank.com

y www.moneycontrol.com

y www.money.rediff.com

y www.rbidocs.rbi.org.in/rdocs/Publications/

PDFs/RTP081110FL.pdf



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Presentation for B&1 (1)

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