ASSIGNMENT-1BANKING AND INSURANCE

TOPIC:- Comparative analysis of SBI and HDFC

INTRODUCTION OF THE BANKS

HDFCHDFC Bank was amongst the first to receive an 'in-principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector from Housing Development Finance Corporation Limited (HDFC), in 1994 during the period of liberalization of the banking sector in India. HDFC India was incorporated in August 1994 in the name of 'HDFC Bank Limited'. HDFC Bank , one amongst the firsts of the new generation, tech-savvy commercial banks of India, was set up in august 1994 after the Reserve Bank of India allowed setting up of Banks in the private sector

. The Bank was promoted by the Housing Development Finance Corporation Limited, a premier housing finance company (set up in 1977) of India.

HDFC Bank, has a network of over 684 branches spread over 316 cities across India. All branches are linked on an online real-time basis. Customers in over 120 locations are serviced through Telephone Banking. The Bank also has a network of about over 1605 networked ATMs across these cities.

SBIState Bank of India (SBI) is India's largest commercial bank. SBI has a

vast domestic network of over 9000 branches (approximately 14% of all

bank branches) and commands one-fifth of deposits and loans of all

scheduled commercial banks in India.The State Bank Group includes a

network of eight banking subsidiaries and several non-banking

subsidiaries offering merchant banking services, fund management,

factoring services, primary dealership in government securities, credit

cards and insurance.

The eight banking subsidiaries are:

1-State Bank of Bikaner and Jaipur (SBBJ)

2-State Bank of Hyderabad (SBH)

3-State Bank of India (SBI)

4-State Bank of Indore (SBIR)

5-State Bank of Mysore (SBM)

6-State Bank of Patiala (SBP)

7-State Bank of Saurashtra (SBS)

8-State Bank of Travancore (SBT)

The origins of State Bank of India date back to 1806 when the Bank of

Calcutta (later called the Bank of Bengal) was established. In 1921, the

Bank of Bengal and two other Presidency banks (Bank of Madras and

Bank of Bombay) were amalgamated to form the Imperial Bank of India.

In 1955, the controlling interest in the Imperial Bank of India was

acquired by the Reserve Bank of India and the State Bank of India (SBI)

came into existence by an act of Parliament as successor to the Imperial

Bank of India.

SCHEMES PROVDED BY SBI:-

Terms deposit scheme

Recurring deposits scheme

Loans

SBI SARAL Personal loan

Education loan

Car loan

Home loan

Medi-Plus loan

TERM DEPOSITS

Provide security, trust and competitive rate of interest.

Flexibility in period of term deposit from 15 days to 10 years

Flexibility in choosing the amount one wish to invest and the maturity period.

RECURRING DEPOSIT:-

Recurring deposit refers to a little investment by an investor to meet his financial goals of future. Recurring deposit provides the element of compulsion to save at high rates of interest, wide choice in period of deposit.

Features:-

Flexibility in period of deposit with maturity ranging from 12 months to 120 months.

Low minimum monthly deposit amount.

One can start a Recurring Deposit with SBI for a monthly instalment of Rs.100/- only.

SCHEMES PROVDED BY HDFC:-

DEPOSITS

CARDS

ONLINE INVESTEMENT

Loans

Personal loan

Education loan

Car loan

Home loan

Property loan

Some of the HDFC deposit products are :-

A Savings Account for everyone with a host of convenient features and banking channels to

transact through. So now you can bank at your convenience, without the stress of waiting in

queues.

CARDS :-

HDFC Bank offers a variety of cards to suit your different transactional needs. One can use these

cards for shopping, traveling or any other type of payments. These cards are of many types and

used for different purpose.

The different types of cards are:-

1. Credit cards : - Credit Cards give a smart way to shop, and offer flexibility and

convenience in managing finances. HDFC credit cards provide a lot of exciting offers

like low interest rate and high cash and credit limit.

2. Travel cards : - Travel cards give a flexibility to travel around the world. One can pay in

currency of various countries for traveling with the help of this card.

3. Debit Card : - this is a most common card. This can be used for shopping, billing of

electricity and telephony.

Loans :-

HDFC provides various loan schemes. It is a no. one home loan and car loan provider. Along

with this it provides personal and education loan.

Balance Sheet of State Bank of India

------------------- in Rs. Cr. -------------------

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

12 mths 12 mths 12 mths 12 mths 12 mths

Capital and Liabilities:Total Share Capital 526.30 526.30 631.47 634.88 634.88Equity Share Capital 526.30 526.30 631.47 634.88 634.88Share Application Money 0.00 0.00 0.00 0.00 0.00Preference Share Capital 0.00 0.00 0.00 0.00 0.00Reserves 27,117.79 30,772.26 48,401.19 57,312.82 65,314.32Revaluation Reserves 0.00 0.00 0.00 0.00 0.00Net Worth 27,644.09 31,298.56 49,032.66 57,947.70 65,949.20Deposits 380,046.06 435,521.09 537,403.94 742,073.13 804,116.23Borrowings 30,641.24 39,703.34 51,727.41 53,713.68 103,011.60Total Debt 410,687.30 475,224.43 589,131.35 795,786.81 907,127.83Other Liabilities & Provisions 55,538.17 60,042.26 83,362.30 110,697.57 80,336.70Total Liabilities 493,869.56 566,565.25 721,526.31 964,432.08 1,053,413.73

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

12 mths 12 mths 12 mths 12 mths 12 mths

AssetsCash & Balances with RBI 21,652.70 29,076.43 51,534.62 55,546.17 61,290.87Balance with Banks, Money at Call 22,907.30 22,892.27 15,931.72 48,857.63 34,892.98Advances 261,641.53 337,336.49 416,768.20 542,503.20 631,914.15Investments 162,534.24 149,148.88 189,501.27 275,953.96 285,790.07Gross Block 7,424.84 8,061.92 8,988.35 10,403.06 11,831.63Accumulated Depreciation 4,751.73 5,385.01 5,849.13 6,828.65 7,713.90Net Block 2,673.11 2,676.91 3,139.22 3,574.41 4,117.73Capital Work In Progress 79.82 141.95 234.26 263.44 295.18Other Assets 22,380.84 25,292.31 44,417.03 37,733.27 35,112.76Total Assets 493,869.54 566,565.24 721,526.32 964,432.08 1,053,413.74

Contingent Liabilities 191,819.34 259,536.57 736,087.59 614,603.47 429,917.37Bills for collection 57,618.44 70,418.15 93,652.89 152,964.06 166,449.04Book Value (Rs) 525.25 594.69 776.48 912.73 1,038.76

Key Financial Ratios of State Bank of India ------------------- in Rs. Cr. -------------------

Mar '06

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

Investment Valuation RatiosFace Value 10.00 10.00 10.00 10.00 10.00Dividend Per Share 14.00 14.00 21.50 29.00 30.00Operating Profit Per Share (Rs) 124.77 147.72 173.61 230.04 229.63Net Operating Profit Per Share (Rs) 719.54 833.38 899.83 1,179.45 1,353.15Free Reserves Per Share (Rs) 178.33 184.43 356.61 373.99 412.36Bonus in Equity Capital -- -- -- -- --Profitability RatiosInterest Spread 4.31 4.20 4.32 4.34 3.82Adjusted Cash Margin(%) 13.06 11.43 12.81 13.04 -42.79Net Profit Margin 11.21 10.12 11.65 12.03 10.54Return on Long Term Fund(%) 97.89 99.20 86.83 100.35 23.26Return on Net Worth(%) 15.94 14.50 13.72 15.74 13.89Adjusted Return on Net Worth(%) 15.93 14.47 13.70 15.74 -57.84Return on Assets Excluding Revaluations

525.25 594.69 776.48 912.73 1,038.76

Return on Assets Including Revaluations

525.25 594.69 776.48 912.73 1,038.76

Management Efficiency RatiosInterest Income / Total Funds 7.94 8.27 8.82 8.88 8.52Net Interest Income / Total Funds 3.71 3.85 3.87 3.79 3.82Non Interest Income / Total Funds 0.30 0.19 0.14 0.11 0.10Interest Expended / Total Funds 4.23 4.42 4.96 5.09 4.69Operating Expense / Total Funds 2.34 2.39 2.16 2.06 2.38Profit Before Provisions / Total Funds 1.52 1.54 1.74 1.75 1.46Net Profit / Total Funds 0.92 0.86 1.04 1.08 0.91Loans Turnover 0.16 0.15 0.15 0.16 0.15Total Income / Capital Employed(%) 8.24 8.46 8.96 8.99 8.62Interest Expended / Capital Employed(%)

4.23 4.42 4.96 5.09 4.69

Total Assets Turnover Ratios 0.08 0.08 0.09 0.09 0.09

Asset Turnover Ratio 5.10 5.44 6.32 7.20 7.26Profit And Loss Account RatiosInterest Expended / Interest Earned 56.32 59.35 65.23 67.28 66.66Other Income / Total Income 3.60 2.25 1.56 1.18 1.21Operating Expense / Total Income 28.37 28.19 24.13 22.91 27.61Selling Distribution Cost Composition 0.28 0.20 0.30 0.33 0.26Balance Sheet RatiosCapital Adequacy Ratio 11.88 12.34 13.47 14.25 13.39Advances / Loans Funds(%) 65.66 76.16 78.31 78.34 74.22Debt Coverage RatiosCredit Deposit Ratio 62.11 73.44 77.51 74.97 75.96Investment Deposit Ratio 48.14 38.22 34.81 36.38 36.33Cash Deposit Ratio 5.15 6.22 8.29 8.37 7.56Total Debt to Owners Fund 13.75 13.92 10.96 12.81 12.19Financial Charges Coverage Ratio 1.40 1.37 1.37 1.36 0.33Financial Charges Coverage Ratio Post Tax

1.25 1.22 1.23 1.23 1.21

Leverage RatiosCurrent Ratio 0.05 0.05 0.07 0.04 0.04Quick Ratio 5.50 6.52 6.15 5.74 9.07Cash Flow Indicator RatiosDividend Payout Ratio Net Profit 19.06 18.98 22.64 22.90 23.36Dividend Payout Ratio Cash Profit 16.35 16.75 20.56 21.13 21.20Earning Retention Ratio 80.93 80.97 77.33 77.11 105.61Cash Earning Retention Ratio 83.64 83.21 79.41 78.88 78.82AdjustedCash Flow Times 74.03 84.87 72.64 75.05 79.54

Mar '06

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

Earnings Per Share 83.73 86.29 106.56 143.67 144.37Book Value 525.25 594.69 776.48 912.73 1,038.76

Balance Sheet of HDFC Bank

------------------- in Rs. Cr. -------------------

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths 12 mths 12 mths

Capital and Liabilities:Total Share Capital 309.88 313.14 319.39 354.43 425.38Equity Share Capital 309.88 313.14 319.39 354.43 425.38Share Application Money 0.43 0.07 0.00 0.00 400.92Preference Share Capital 0.00 0.00 0.00 0.00 0.00Reserves 4,209.97 4,986.39 6,113.76 11,142.80 14,226.43Revaluation Reserves 0.00 0.00 0.00 0.00 0.00Net Worth 4,520.28 5,299.60 6,433.15 11,497.23 15,052.73Deposits 36,354.25 55,796.82 68,297.94 100,768.60 142,811.58Borrowings 5,290.01 4,560.48 2,815.39 4,478.86 2,685.84Total Debt 41,644.26 60,357.30 71,113.33 105,247.46 145,497.42Other Liabilities & Provisions 5,264.46 7,849.49 13,689.13 16,431.91 22,720.62Total Liabilities 51,429.00 73,506.39 91,235.61 133,176.60 183,270.77

Mar '05 Mar '06 Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths 12 mths 12 mths

AssetsCash & Balances with RBI 2,650.13 3,306.61 5,182.48 12,553.18 13,527.21Balance with Banks, Money at Call 1,823.87 3,612.39 3,971.40 2,225.16 3,979.41Advances 25,566.30 35,061.26 46,944.78 63,426.90 98,883.05Investments 19,349.81 28,393.96 30,564.80 49,393.54 58,817.55Gross Block 1,290.51 1,589.47 1,917.56 2,386.99 3,956.63Accumulated Depreciation 582.19 734.39 950.89 1,211.86 2,249.90Net Block 708.32 855.08 966.67 1,175.13 1,706.73Capital Work In Progress 0.00 0.00 0.00 0.00 0.00Other Assets 1,330.57 2,277.09 3,605.48 4,402.69 6,356.83Total Assets 51,429.00 73,506.39 91,235.61 133,176.60 183,270.78

Contingent Liabilities 84,585.95 138,898.60 202,126.73 582,835.94 396,594.31Bills for collection 5,342.70 5,239.26 7,211.88 17,092.85 17,939.62Book Value (Rs) 145.86 169.24 201.42 324.38 344.44

Key Financial Ratios of HDFC Bank

------------------- in Rs. Cr. -------------------

Mar '05

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

Investment Valuation RatiosFace Value 10.00 10.00 10.00 10.00 10.00Dividend Per Share 4.50 5.50 7.00 8.50 10.00Operating Profit Per Share (Rs) 41.65 52.56 86.19 107.32 92.36Net Operating Profit Per Share (Rs) 120.17 177.80 259.98 348.57 464.77Free Reserves Per Share (Rs) 99.78 132.01 155.69 269.89 252.37Bonus in Equity Capital -- -- -- -- --Profitability RatiosInterest Spread 5.39 5.25 5.47 7.08 6.98Adjusted Cash Margin(%) 26.63 23.11 19.07 15.01 13.15Net Profit Margin 17.77 15.55 13.57 12.82 11.35Return on Long Term Fund(%) 50.77 60.06 74.91 62.34 83.31Return on Net Worth(%) 23.67 22.73 23.57 13.83 15.32Adjusted Return on Net Worth(%) 14.72 16.42 17.75 13.82 15.29Return on Assets Excluding Revaluations

1.66 1.52 1.52 324.38 344.44

Return on Assets Including Revaluations

1.66 1.52 1.52 324.38 344.44

Management Efficiency RatiosInterest Income / Total Funds 7.95 8.91 10.08 11.01 12.50Net Interest Income / Total Funds 5.14 5.82 6.22 6.66 6.86Non Interest Income / Total Funds 0.04 0.05 0.13 0.04 --Interest Expended / Total Funds 2.81 3.09 3.86 4.36 5.63Operating Expense / Total Funds 2.38 3.19 2.88 3.27 4.38Profit Before Provisions / Total Funds 2.09 2.01 2.91 3.19 2.26Net Profit / Total Funds 1.82 1.79 1.68 1.42 1.42Loans Turnover 0.17 0.18 0.20 0.22 0.24Total Income / Capital Employed(%) 7.99 8.96 10.21 11.05 12.50Interest Expended / Capital Employed(%)

2.81 3.09 3.86 4.36 5.63

Total Assets Turnover Ratios 0.08 0.09 0.10 0.11 0.13Asset Turnover Ratio 2.89 3.50 4.33 5.18 5.00Profit And Loss Account RatiosInterest Expended / Interest Earned 42.53 43.11 46.15 48.32 54.56Other Income / Total Income 0.55 0.56 1.22 0.35 --Operating Expense / Total Income 29.84 35.58 28.21 29.55 35.06Selling Distribution Cost Composition 1.47 1.45 0.90 0.92 0.54Balance Sheet RatiosCapital Adequacy Ratio 12.16 11.41 13.08 13.60 15.69Advances / Loans Funds(%) 68.21 68.75 71.41 71.93 78.87Debt Coverage RatiosCredit Deposit Ratio 64.87 65.79 66.08 65.28 66.64Investment Deposit Ratio 57.83 51.81 47.51 47.29 44.43Cash Deposit Ratio 7.78 6.46 6.84 10.49 10.71Total Debt to Owners Fund 8.04 10.53 10.62 8.76 9.75

Financial Charges Coverage Ratio 2.00 1.87 1.90 1.79 1.44Financial Charges Coverage Ratio Post Tax

1.76 1.67 1.50 1.38 1.29

Leverage RatiosCurrent Ratio 0.03 0.04 0.04 0.04 0.04Quick Ratio 5.61 5.18 4.07 4.89 5.23Cash Flow Indicator RatiosDividend Payout Ratio Net Profit 23.99 22.55 22.91 22.16 22.16Dividend Payout Ratio Cash Profit 16.00 15.17 16.32 18.93 19.10Earning Retention Ratio 76.00 77.44 77.11 77.83 77.79Cash Earning Retention Ratio 83.99 84.83 83.69 81.07 80.87AdjustedCash Flow Times 36.45 43.11 42.60 54.14 54.91

Mar '05

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

Earnings Per Share 27.55 35.64 43.29 44.87 52.77Book Value 145.86 169.24 201.42 324.38 344.44

COMPARISON OF FINANCIAL PERFORMANCE INDICATORS OF SBI AND HDFC

ADVANTAGES OF SBI OVER HDFC:

SBI is the largest and oldest bank of India. Its major stocks are held by government of

India. So this bank enjoys the trust of its Customers a lot.

SBI offers flexible tenures of loan repayment.

State bank of India has vast experience in the field of SME

(Small and Medium Enterprises) Financing.

As it is the oldest name so it enjoys public trust a lot.

SBI have four national level Apex Training Colleges and 54

Learning Centers spread all over the country the Bank is

Continuously engaged in skill enhancement of its employees.

Some of the training programs are attended by bankers from

banks in other countries.

SBI group, which has over 10,000 branches, is planning to add another 3,000 branches.

It is also set to become the largest issuer of debit cards and is the second largest credit

card issuer.

Comparison

PERIOD OF DEPOSITSBI – Flexibility in period of deposit with maturity ranging from 6 months to 10 years.HDFC - The minimum period is 6 months, and thereafter-in multiples of 3 months.

MINIMUM DEPOSIT AMOUNTYou can open a Recurring Deposit with SBI for a nominal amount of Rs. 100/- only. The minimum balance of deposit in HDFC Bank is Rs. 500 per month and thereafter, in multiples of Rs. 100.

DEFAULT PAYMENTDelayed monthly installments in SBI attract minimal penalty at the rate of Rs. 1.50/- for every Rs. 100/- per month for deposits up to 5 years and Rs. 2/- per Rs. 100/- in case of longer maturities. Installments payable in multiples of Rs.10/-.

MATURITY PERIODSBI – Minimum maturity period is 46 days.HDFC – Minimum maturity is 91 days.

STATE BANK OF INDIA

1. Strengths

Convenience to reach-It is the oldest bank of the country. Having nationwide coverage, each and every part of the country has at least one branch.

Minimum amount required to open the account: For SBI it is only Rupees100 to open the account making RD account more affordable.

Minimum period for renewing the account: It is not necessary to renew the account in multiples of 3 as in case of HDFC.

Reputation: Having the reputation of being the India’s largest branch is the biggest strength of HDFC.

2. Weakness

Government sector image-It is general perception that government sectors lack in customer orientation.

Lack of automation in all the branches, hindering the facility of any -where accessibility.

Lack of Customer Orientation among the employees.

Less effort in maintaining Customer Relationship.

In-Branch facilities are also not up to the mark.

3. Opportunities

Maintaining strong Customer Relationship with the customers so that their government sector image can be changed.

Through automating its each and every branch, it can take better advantage of its nationwide coverage.

4. Threats

Opening Banking Sector for FDI pose major threat for Nationalized Banks. Its major competitors are HDFC and ICICI

HDFC

1. Strengths

Customer Orientation Approach among the employees

Automation of each and every branch

Good ambience and In-Branch services

Strong Advertising and sales force team.

Enjoy the image of being private sector bank.

Customer satisfaction is high.

Bank believes in Retaining Acquisition than Customer Acquisition.

2. Weakness

Lack of Nationwide Coverage

Minimum account required to open the account is comparatively high.

3. Opportunity

Should aim at nationwide coverage specially the small towns and villages.

Introducing more flexibility in Minimum amount required to open the account and period of renewal.

4. Threats

All the new private sector banks and nationalized banks that are moving towards Customer Orientation. Major competitor is SBI and PNB.

CONCLUSION:

The gap between SBI and the rest of the bank is so wide that SBI comes out as number

one on almost all counts. This includes assets, branch network, ATM network, number of

employees, and size of profits. The only place that HDFC Bank has been able to upset the

monolith has been in the area of market capitalization.

One reason why SBI has lagged in market cap despite its size has been its inability to

unlock value from its various businesses. However, there are signs that this is changing

and the bank is making attempts to realize the value of its investments in the life

insurance and asset management business.

SBI and HDFC are both India’s largest banks. Their growth means India’s growth. And

by this competition customers will be benefited and Indian economy will get a boost.