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1) C CAPITAL ADEQUACY
Capital adequacy is stipulated by Bank for International Settlements (BIS) at Basle to
ensure that the banks have enough capital to absorb losses from assets which turn bad. The
norms are fixed as a percentage of risk weighted assets i.e. assets are, weighted on the basis of
the risk involved in their realization. For example, cash is given a risk weightage of 0% and
higher weightage for assets secured by goods, mortgage etc. In India Narasimham Committee
recommendations have stipulated that Indian Banks particularly those with International
Presence must have a capital adequacy of 8%. 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 ratio Tier I Debt to Equity Ratio Advance to assets
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Capital Adequacy Ratio (CAR)
Capital Adequacy Ratio or Total Capital Ratio measures a bank's capital position and is expressed as a
ratio of its capital to its assets. It determines the capacity of the bank of meeting the time liabilities and
other risks such as operational risk, credit risk etc. Capital Adequacy Ratio below the minimum statutory
level indicates that the bank is not sufficiently capitalized to expand its operations. The ratio describe
that the banks do not expand their business without having adequate capital.
Formula:
(Tier 1 Capital + Tier 2 Capital)Capital Adequacy Ratio = ------------------------------------
Risk Based Assets
Where,
Tier 1 Capi. = Total Equity - Revaluation Reserves
Tier 2 Capi. = Revaluation Reserves + Hybrid Capital + Subordinated Debt + Provisions including
Deferred Tax+ Total Loan Loss & Other Reserves.
Total equity = Equity Reserves + Total Share Capital
IDBI BOB SBI BOI PNB
Capital Funds 17573.99 27476.85 83951.2 19725.9 26367.55Risk Weighted
Assets
120534.9 187299.60 614127.28 165070.29 208769.20
Ratio 14.60 14.67 13.86 14.58 12.63
Rank 2 1 4 3 5
Interpretation of the Capital Adequacy Ratio
The minimum CAR as per RBI norms is 9 % at Present. In fact, Raj Bank has always shown a healthy and
improved margin of over 9 % which is stipulated by RBI, from the above bank higest car is BOB bank is
14.67% and lowest for PNB bank is 12.63% .This is due to steady rise in the Risk Weighted Assets. The
main reason for the rise in Risk Weighted Assets and decline in CAR is constant increase in advances
over the above bank.
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Debt Equity Ratio:
Debt Equity Ratio indicates the relationship between long-term liabilities and shareholders
funds. It helps to appraise the ability of the firm to meet its long-term obligations. This ratio is
calculated to determine long-term solvency of the firm. Debt-Equity ratio is arrived at by
dividing Total debt to total equity share capital.
The higher the ratio, the greater the proportion of debtbut also the greater the risk. The
debt/equity ratio discloses the proportion of debt and equity a company is using to finance to
business. It also measures a banks borrowing capacity.
Also called leverage ratio or gearing ratio.
Formula:
Total debt
Debt to Equity Ratio = ---------------------
Total Equity
IDBI BOB SBI BOI PNB
Debt 263970.20 408444.16 1170652.93 350330.26 416852.75
Equity 22034.20 29153.75 94179.64 21719.17 28948.10
Ratio 11.98 14.01 12.43 16.13 14.40
Rank 5 3 4 1 2
Interpretation of the Debt Equity Ratio
The higher the ratio, the greater the proportion of debtbut also the greater the risk. From the
above bank the highest debt equity ratio of BOI is a 16.13% and lowest ratio is SBI bank is
12.43%. The lowest Ratio is best because that is less debt to the bank. Therefore, the bank has
maintain his debt component on their capital structure.
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Advances to Assets:
Total Advances also includes receivables. The value Total Assets is excluding revaluation of all
the assets.it is calculate on the base of total advance divided by total assets of the bank.it givethe capital adequacy of the bank in a way to timely arrange fund.
Formula:
Total advance
Advance to assets = ------------------
Total Assets
IDBI BOB SBI BOI PNBTotal
advance
181158.43 287377.29 867578.89 248833.34 293774.76
Total assets 290837.23 447321.46 1335519.24 384535.47 458194.01
Ratio 62.29 64.24 64.96 64.71 64.12
Rank 3 4 1 2 5
Interpretation of the Advances to Assets
This ratio shows the total advances as a percentage of total assets, which can give the capital
adequacy of the firm. It shows the ability of firm to meet capital need. Here, we see that the
lowest ratio is PNB is 64.12 and highest ratio is a SBI bank is 64.96.
Table-1
Capital Adequacy Parameter -Group Ranking
IDBI BOB SBI BOI PNB
Capital adequacy ratio Tier I 2 1 4 3 5
Debt to Equity Ratio 5 3 4 1 2
Advance to assets 3 4 1 2 5
Average 3.33 2.67 3.00 2.00 4.00
Rank 4 2 3 1 5
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2) A ASSET QUALITY
The prime motto behind measuring the asset quality is to ascertain the quality of assets
and majority of ratios in this segment are related to non-performing assets i.e. NPA. A credit
facility is treated as past due when it remains outstanding for 30 days beyond the due date. An
NPA is defined generally as a credit facility in respect of which interest or instalment of principal
is in arrears for two quarter or more. This segment contain following ratio
Gross NPAs to total assets Ratio Gross NPAs to Net Advances Ratio
Total Investments to Total Assets:
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Gross NPAs to Total Assets:
Gross NPAs are gross provisions on NPAs and Total Assets considered are net of revaluation
reserves. Gross NPA is an advance which is consider ire recovered for which bank has madeprovision and which is still held in banks books of account. Bank has made specific amount of
fund against to this.
Formula:
Gross NPAs
Gross NPAs to total assets Ratio = ----------------- X 100
Total Assets
IDBI BOB SBI BOI PNB
GROSS NPAs 2784.73 3152.5 25326.29 4811.55 4379.39
ASSETS 290837.23 447321.46 1335519.24 384535.47 458194.01
Ratio 0.96 0.70 1.90 1.25 0.94
Rank 4 1 5 4 2
Interpretation of the Gross NPAs to Total Assets
The quality of loan is one of the crucial aspects of that decide the health of banks. This ratio
indicates the percentage of gross NPAs to total assets. Ratio does not give any tolerable ordesirable limit. But it should be below 10 %. Going by this norm, all the banks ratio below 10 %
which shows that it has the lowest gross NPAs in relation to their total assets.
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Gross NPAs to Net Advances:
Net Advances are net of bills rediscounted and specific loan loss provision. The lowest is the
best because it is less provision keep against to NPAs. Net NPA is Gross NPA less interestdebited to borrowed account and not recovered or recognized as income.
Formula:
Gross NPAs
Gross NPAs to Net Advances Ratio = ------------------ X 100
Net Advances
IDBI BOB SBI BOI PNB
GROSS NPAs 2784.73 3152.5 25326.29 4811.55 4379.39Total
advance
181158.43 287377.29 867578.89 248833.34 293774.76
Ratio 1.54 1.10 2.92 1.93 1.49
Rank 3 1 5 4 2
Interpretation of the Gross NPAs to Net Advance
Gross NPAs as a percentage of net advances is most standard measure of asset quality. A ratio
of below 1 % is considered as a tolerable limit. The gross NPAs of bank stand below 1 % to net
advances. From the above the highest ratio of SBI bank is 2.92 and lowest ratio is PNB bank is
1.49. The lowest ratio is the best of the bank.
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Total Investments to Total Assets:
This ratio is used as a tool to measures the percentage of total assets locked up in
investments. And also described the investment agents the total assets of the bank.
Formula:
Total Investments
Total Investments to Total Assets Ratio = ----------------------- X 100
Total Assets
IDBI BOB SBI BOI PNB
Total
Investments
83175.36 83209.40 312197.61 68753.59 122629.47
Total Assets 290837.23 447321.46 1335519.24 384535.47 458194.01
Ratio 28.60 18.60 23.38 17.88 26.76
Rank 1 4 3 5 2
Interpretation of the Total Investments to Total Assets
Total investments to total assets indicate the extent of deployment of assets in investments as
against advances. The higher level of investment indicates the lack of credit off-take in the
market. . From the above the highest ratio of IDBI bank is 228.60 and lowest ratio is BOI bank is
17.88. The lowest ratio is the best for the bank.
Table-2
Asset Quality Parameter Group Ranking
IDBI BOB SBI BOI PNB
Gross NPAs to total assets
Ratio 4 1 5 4 2
Gross NPAs to Net
Advances Ratio3 1 5 4 2
Total Investments to Total
Assets:1 4 3 5 2
Average 2.67 2.00 4.33 4.33 2.00
Rank 3 2 5 5 2
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3) M MANAGEMENT
Management is the most important ingredient that ensures sound functioning of banks.
With increased competition in the Indian banking sector, efficiency and effectiveness havebecome the rule as banks constantly strive to improve the productivity of their employees. The
major improvements in the style of management and productivity have come about in the all
sectors of banks. Today, it is not uncommon to see the extended working hours, flexible time
schedules, outsourcing marketing, etc. to attract and retain customers. The parameters used to
assess the quality of management gives the measurement of the efficiency and effectiveness of
management. The ratios of this segment are:
Total advances to Total Deposits Net Profit per Employee Business Per Employee Return onNet Worth
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Total advances to Total Deposits:
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
banks. Total advances also include the receivables.
Formula:
Total advances
Total advances to Total Deposits = -------------------- X 100
Total Deposits
IDBI BOB SBI BOI PNBTotal
advance
181158.43 287377.29 867578.89 248833.34 293774.76
Total
deposits
210492.56 384871.11 1043647.36 318216.03 379588.48
Ratio 86.06 74.67 83.13 78.20 77.39
Rank 1 5 2 3 4
Interpretation of the Total advances to Total Deposits
As it said above it measures the efficiency of the management in converting deposits intoadvances. From the above bank the lowest ratio is BOI bank is 74.67 the highest ratio of IDBI
bank is 86.06 this can be analyzed from the chart shown above.
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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 the efficiency of management.
Formula:
Net Profit
Net Profit per Employee = ----------------------
No. of Employee
IDBI BOB SBI BOI PNB
Net profit 1894.34 5006.96 11686.11 2677.52 4884.20
No. of
employee
14952 35799 292215 24350 62127
Ratio 1,26,69,475.7 1,39,86,312 39,99,148 1,09,95,975 78,61,638
Rank 2 1 5 3 4
Interpretation of the Net Profit per Employee
The net profit per employee ratio of the above banks which is show the effective management
of the bank which can be observe from the table and the figures quoted above. The most
effective management of BOB bank because the ratio is highest from them is 1,39,86,312.
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Business per Employee:
Its shows the total business of the bank per employee. It is arrived at by dividing total business
by total number of employees. Business includes the sum total advances and deposits in aparticular year.
Formula:
Total Business
Business per Employee = ----------------------
No. of Employee
IDBI BOB SBI BOI PNB
Total
business
391650.99 672248.4 1355844.97 567049.37 4020201.76
No. of
employee
14952 35799 292215 24350 62127
Ratio 26,19,38,864.4 18,77,84,128 4,6398,883.36 23,28,74,484.6 64,70,94,139.4
Rank 2 4 5 3 1
Interpretation of the Business per Employee
Business per employee indicates the labour productivity of long term viability of the bank. From
the figures shown above we see that the business per employee of IDBI bank is 26,19,38,864.4
BOB bank is 18,77,84,128 SBI bank is 4,6398,883.36 BOI bank is 23,28,74,484.6 PNB bank is
64,70,94,139.4
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Return on Net worth:
It is a measure of the profitability of a company. PAT is expressed as a percentage of Average
Net Worth. It is the ratio of net profit to investment. It is the relationship between net profit
and shareholder's fund. This ratio establishes the profitability from the share holders' point of
view. This ratio is generally calculated in base of percentage.
It is a measure of the profitability of a company. PAT is expressed as a percentage of Average
Net Worth.
Formula:
Net Profit
Return on Net Worth = --------------- X 100
Net Worth
IDBI BOB SBI BOI PNB
Net profit 1894.34 5006.96 11686.11 2677.52 4884.20
Net worth 14427.92 27476.83 83951.20 20961.29 27817.08
Ratio 11.56 18.22 13.94 13.57 18.52
Rank 5 2 3 4 1
Interpretation of the Return on Net worth
This ratio expresses the net profit in terms of net worth. This ratio is an important yardstick of
performance for equity shareholders since it indicates the return on the funds employed by
them. The highest ratio is PNB bank is 18.52% and lowest ratio of IDBI bank is 11.56%.
Table-3
Management Quality Parameter Group Ranking
IDBI BOB SBI BOI PNB
Total advances to Total
Deposits1 5 2 3 4Net Profit per Employee 2 1 5 3 4
Business Per Employee 2 4 5 3 1
Return on Net Worth 5 2 3 4 1
Average 2.5 3 3.75 3.25 2.5
Rank 3 4 5 1 3
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4) E EARNINGS QUALITY
Investing additional funds forms an important part of the banking function along with
lending. In the recent past, banks have been criticized for making most of their money from
treasury operation and other investment rather than from core lending operation. Even as fee-
based operations still account for a minority of the banks revenues, the share of non-interest
income is higher. The ratio of this section, assesses the quality of income in terms of income
generated by core activities i.e., income from lending operations. This segment contains the
following;
Net Profit to Average Assets
Interest income to total income Non-Interest income to total income
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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. It is most often used by banks and other financial
institutions as a means to gauge their performance.
Formula:
Net Profit
Net Profit to Average Assets = --------------------- X 100
Average Assets
IDBI BOB SBI BOI PNB
Net profit 1894.34 5006.96 11686.11 2677.52 4884.20
Average
assets
272107.105 402859.32 1279927.72 367854.01 418259.63
Ratio 0.70 1.24 0.91 0.73 1.17
Rank 5 1 3 4 2
Interpretation of the Net Profit to Average Assets
The profitability of the firm is measured by establishing relation of net profit with the total
assets of the organization. This indicates the efficiency of utilization of assets in generating
revenue. And the highest ratio is the beneficial to the bank and highest ratio of BOB bank is
1.24%.
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Non Interest Income / Total Income:
This measures the income from operations, other than lending as a percentage of total income.
Non-interest income is the interest income earned by the banks excluding income on advancesand deposits with RBI.
Formula:
Non-Interest Income
Non-Interest Income to Total Income = ---------------------------- X 100
Total Income
IDBI BOB SBI BOI PNB
Non-Interest
Income
2009.54 3422.33 14351.45 3321.17 4202.60
Total Income 25379.47 33096.05 120872.90 31801.84 40630.63
Ratio 7.92 10.32 11.87 10.44 10.34
Rank 5 4 1 2 3
Interpretation of the Non Interest Income / Total Income
It expresses the income from operations as a percentage of total income of the bank to the
amount of deposits with RBI and advances. From the above banks the highest ratio of SBI bank
is 11.87% and lowest ratio of IDBI bank is 7.92%.the high ratio means bank has keep more
deposits and advance with RBI.
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Interest Income / Total Income:
This ratio measures the income from lending operations as a percentage of total income
generated by the banks in a year. Interest income includes income on advances, interest on
deposits with RBI.
Formula:
Interest Income
Interest Income to Total Income = --------------------- X 100
Total Income
IDBI BOB SBI BOI PNB
Interest
Income
23369.93 29673.72 106521.43 28480.67 36428.03
Total Income 25379.47 33096.05 120872.90 31801.84 40630.63
Ratio 92.08 89.68 88.13 89.56 89.66
Rank 1 3 2 5 4
Interpretation of the Interest Income / Total Income
From the above banks the highest ratio of IDBI bank is 92.08% and lowest ratio of BOI bank is
89.56%.This ratio expresses the income from lending operations. It mainly generates from the
deposits and advances. It is earn from the efforts of the bank to give the loan, advance and
deposits to the public.
Table-4
Earnings Quality Parameter Group Ranking
IDBI BOB SBI BOI PNB
Net Profit to Average
Assets 5 1 3 4 2
Interest income to total
income 1 3 2 5 4Non-Interest income to
total income 5 4 1 2 3
Average 3.67 2.67 2.00 3.67 3.00
Rank 5 2 1 5 3
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5)L LIQUIDITY
The business of banking is all about borrowing and lending money. Timely repayment of
deposits is of crucial importance to avoid a run on a bank. With co-operative banks going under
frequently and with the recent collapse of GTB (Global Trust Bank) investors have become
extremely sensitive. They are alert; they rush to the bank to withdraw money at the slightest
hint of trouble. In such a scenario, even false rumours could wreck havoc with a bank. Hence,
banks have to ensure that they always maintain enough liquidity. Through mandatory Statutory
Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR), RBI ensures that banks maintain ample
liquidity. In fact, over the last few years banks have been awash with liquidity. It contains the
following;
Liquid assets to total assets Liquidasset to total deposit
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Liquid Assets to Total Deposits:
Liquid assets are measured as percentage of Total Deposits of banks. Liquid Assets include cash
in hand, balance with RBI, balance with other banks, and money at call and short notice. Total
Deposits include demand deposits, saving deposits, term deposits and deposits of otherfinancial institutions and banks.
Formula:
Liquid Assets
Liquid Assets to Total Deposits = ------------------- X 100
Total Deposits
IDBI BOB SBI BOI PNB
Liquid Assets 196248.34 309028.67 921654.83 263819.75 278694.76
Total
deposits
210492.56 384871.11 1043647.36 318216.03 379588.48
Ratio 93.23 80.29 88.31 82.91 73.42
Rank 1 4 2 3 5
Interpretation of the Liquid Assets / Demand Deposits
Liquid assets as a percentage of demand deposits are one of the most important measures of
the liquidity position of the bank. From the above banks the highest ratio of IDBI bank is 93.23%
and lowest ratio of PNB bank is 73.42%.
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Liquid Assets / Total Assets:
Liquidity ratios is a set of ratios or figures that measure a bank s ability to pay offits short-term
debt obligation. This is done by measuring a companys liquid assets (including those that might
easily be converted into cash) against its short-term liabilities.
Liquid Assets as measured as percentage of Total Assets.
Formula:
Liquid Assets
Liquid Assets to Total assets = ------------------- X 100
Total assets
IDBI BOB SBI BOI PNB
Liquid Assets 196248.34 309028.67 921654.83 263819.75 278694.76
Total Assets 290837.23 447321.46 1335519.24 384535.47 458194.01
Ratio 67.48 69.08 69.01 68.61 60.82
Rank 4 1 2 3 5
Interpretation of the Liquid Assets / Total Assets
Liquid assets as a percentage of total assets measures of the liquidity position of the bank to
meet the amount of total assets. From the above bank IDBI is 67.48, BOB is 69.08, SBI is 69.01,
BOI is 68.61, and PNB is 60.82.
Table-5
Liquidity Parameter Group Ranking
IDBI BOB SBI BOI PNB
Liquid assets to total assets 4 1 2 3 5
Liquid asset to total deposit 1 4 2 3 5
Average 2.5 2.5 2 3 5
Rank 3 3 1 4 5
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Table-6
OVERALL GRAND RANKING BASED ON THE CAMEL PARAMETER
IDBI BOB SBI BOI PNB
Capital Adequacy
Parameter -Group Ranking 4 2 3 1 5
Asset Quality ParameterGroup Ranking 3 2 5 5 2
Management Quality
Parameter Group Ranking 3 4 5 1 3
Earnings Quality Parameter
Group Ranking 5 2 1 5 3
Liquidity Parameter Group
Ranking 3 3 1 4 5
Average3.6 2.6 3 3.2 3.6
Rank (Small Number
represents good
Performance)
5 1 2 3 4
Conclusion
Here we have obtained a ranking of various Indian public sector banks in terms of their CAMEL variable
values. Asking the banks is difficult to the extent that any type of ranking is subject to criticism as the
ratios used for the purpose of ranking can be interpreted in the way one likes. This method of analysis
provides a simplistic, reader friendly version of presenting complex data regarding performance of a set
of players in the banking industry. The ranking system makes judging and analyzing the financial data of
banks much simpler for the common man. Thus through this particular data set, it can be established
that BOB bank at the top of the list with their performances in terms of soundness being the best. While
banks like IDBI Bank and PNB have taken a backseat and display low economic soundness in comparison.
This implies that the Government needs to focus more on this bank order to increase the net profit to
average.