Upload
abhinandan-bose
View
2.924
Download
5
Embed Size (px)
Citation preview
Presented By: Group 4
Financial Analysis of HDFC
Financial Analysis of HDFC Bank – Group 4
Contents
Introduction.......................................................................................3
Financial Sector of India – An Overview..........................................7
HDFC Bank.....................................................................................10
Financial Analysis...........................................................................12
Financial Statement analysis of HDFC Bank..................................16
Comparative Statement Analysis.....................................................16
Ratio Analysis of HDFC Bank........................................................21
Common Size Analysis of HDFC Bank..........................................33
Trend Analysis of HDFC Bank.......................................................37
Managers Perspective……………………………………………………………47
2
Financial Analysis of HDFC Bank – Group 4
Introduction
Financial statement analysis is very helpful in spanning
bank’s internal operations and its relations with the
outside world. Therefore, the financial information must
be organized into an understandable, coherent and
sufficiently limited set of data. Data from the financial
statement analysis can be used to quickly calculate and
examine financial ratios. An attempt has been made
here to analyse the financial statements of HDFC Bank.
The investors rely on the financial statement to judge
the performanceof the bank and ensure that these
statements are correct, complete, consistent and
comparable. The accuracy of the financial statement
can be identified from the report of the auditors. The
financial statement analysis can be used by investors
for deciding about their investments. The financial
institutions also use these statements while granting
loans to the banks. The debenture holders, creditors,
employees and government can also use the financial
statements for different purposes.
The bank itself and outside providers of capital –
creditors and investors – all undertake financial
statement analysis. The type of analysis varies
3
Financial Analysis of HDFC Bank – Group 4
according to the specific interests of the party involved.
Creditors are primary interested in the liquidity of a
bank. Their claims are short term, and the ability of the
bank to pay these claims quickly is best judged by an
analysis of the bank’s liquidity. The claims of bond
holders, on the other hand, are long term. Accordingly,
bond holders are more interested in the cash – flows
ability of the bank to service debt over a long period of
time.
Inflation Rate
Inflation rate in double-digit and resulted in hike in
policy rates by 150 bps, which put the liquidity
situation under high stress. Although, further rate hike
is not imminent, but inflation would drive the monetary
policy further and interest rate expected to remain
high.
4
Financial Analysis of HDFC Bank – Group 4
Headline inflation is always considered as a major
vexation for the India’s central bank. Since, inflation
was reading in a double-digit figure, it was a challenge
for the Reserve Bank of India to fix the inflation
problem under the condition of fragile global economic
recovery without denting the recovery process. In
response to that, RBI revised its policy rates by over
100 bps and now it does seem that the policy action is
working but the money supply is still at 20.34 per
cent. Both trend lines are now acting inversely, and
inflation is falling down to 8 per cent. According to VMW
Research, inflation is projected at 7.48 per cent for the
month of Nov, 2010. It is also evident that in the past
three months, schedule commercial banks and non-
banking financial companies have started
5
Financial Analysis of HDFC Bank – Group 4
borrowing from the RBI’s window of Liquidity
Adjustment Facility (LAF) at the rate of 6.25 per cent.
Since, banks are now left with the limited amount of
liquidity; they’re again focusing on deposits from
customers. Several banks have revised their deposit
rates between 50 bps and 150 bps to attract funds,
however, going forward, banks will see a
narrow interest rate spread, resulted in lower earnings.
Discomfort levels of inflation and money supply will
keep interest rates higher for the next few months.
Moreover, to reduce the impact of tight liquidity, RBI
has already started the Open Market Operation
(OMO) to infuse liquidity by way of purchasing
government bonds in exchange of money.
Financial Sector of India – An Overview
Financial Sector of India is intrinsically strong,
operationally sundry and exhibits competence and
flexibility besides being sensitive to India’s economic
aims of developing a market oriented, industrious and
viable economy. An established financial sector assists
greater standards of endowments and endorses
expansion in the economy with its intensity and
6
Financial Analysis of HDFC Bank – Group 4
exposure. The fiscal sector in India entails banks,
financial organization, markets and services.
Fiscal transactions in an organized industry are
executed by a number of financial organizations which
are commercial in nature and offer monetary services
to the society. Further classification includes banking
and non-banking enterprises, often recognized as
activities that are client specific. The chief controller of
the finance in India is the Reserve Bank of India (RBI)
and is regarded as the supreme organization in the
fiscal structure. Other significant fiscal organizations
are business banks, domestic rural banks, cooperative
banks and development banks. Non-banking fiscal
organizations entail credit and charter firms and other
organizations like Unit Trust of India, Provident Funds,
Life Insurance Corporation, Mutual funds, GIC, etc.
Indian Banking Sector
After a difficult FY09 Indian banks managed to
grow their balance sheets in FY10 albeit at a lower
average rate than that projected by the RBI. The
monetary stimuli (reduction in repo rate, cash reserve
ratio (CRR) and statutory liquidity ratio (SLR) offered to
the banks by the RBI early in the fiscal made it easier to
7
Financial Analysis of HDFC Bank – Group 4
sustain margins But what really helped was the
accretion of low cost deposits (CASA). Indian banks
grew their advances and deposits by 16.9% YoY and
17.2% YoY respectively in FY10. The growth was mainly
driven by a expansion in low cost deposits and growth
in agricultural and large corporate credit.
With lesser avenues of credit disbursal, banks had
to park most of the liquidity available with them with
the RBI. In the retail portfolio, while home loans grew
by 11% YoY, personal loans enjoyed a much smaller
growth of 6% YoY due to bank's reluctance towards
uncollateralized credit. Credit card outstanding in fact
dropped by 27% YoY.
8
Financial Analysis of HDFC Bank – Group 4
Indian banks, however, enjoyed higher levels of
money supply, credit and deposits as a percentage of
GDP in FY10 as compared to that in FY09 showing
improved maturity in the financial sector.
Despite poor pricing power lower cost of funds
helped Indian banks grow their net interest margins in
FY10. While few like ICICI Bank chose to reduce their
balance sheet size, most entities chose to reasonably
grow their franchise as well as assets. Public sector
banks outdid their private sector counterparts in terms
of growth and franchise expansion in the last fiscal.
Improved capital adequacy also helped banks to
comfortably comply with Basel II. The higher efficiency
9
Financial Analysis of HDFC Bank – Group 4
levels were the hallmarks of better performance of
Indian banks last year.
Most banks had to restructure some loans in their
portfolio during FY10 which deferred their interest
income. Further the PSU banks had also to provide for
the loss of interest on the agri-loans waived by the
government.
HDFC Bank
In August, 1994 the Housing Development
FinanceCorporation Limited (HDFC) was incorporated in
the name ofHDFC Bank Limited. The Reserve Bank of
India has approved in principle to set up private banks.
HDFC was one of the firstorganizations to receive in
principle approval from RBI. The HDFC
Bank has its registered office in Mumbai. In January
1995, theoperations of HDFC Bank as a commercial
bank has commenced.In India and in international
markets HDFC has an impeccabletrack record. HDFC
has maintained a healthy growth and aconsistency in
its operations and remained as a leader in market
ofmortgages. The portfolio of HDFC’s outstanding loan
has a milliondwelling units. HDFC has a large corporate
client base for housingrelated credit facilities. HDFC
10
Financial Analysis of HDFC Bank – Group 4
was ideally positioned to promote abank in the Indian
market with its experience and strong reputationin
market of finance.HDFC Bank has 1,725 branches in
India.
Objective:
HDFC Bank is a young and dynamic bank, with a youthfuland
enthusiastic team determined to accomplish the vision ofbecoming
a world-class Indian bank.
Bank’s business philosophy is based on four core values- Customer
Focus, Operational Excellence, ProductLeadership and People.
Bank believes that the ultimateidentity and success of bank will
reside in the exceptionalquality of our people and their
extraordinary efforts. For thisreason, bank is committed to hiring,
developing, motivatingand retaining the best people in the industry.
Mission:
The Bank’s mission is to be “a World Class Indian
Bank”,benchmarking bank against international
standards and bestpractices in terms of product
offerings, technology, service levels,risk management
and audit & compliance. The objective is to buildsound
customer franchises across distinct businesses so as to
bea preferred provider of banking services for target
retail and wholesale customer segments, and to
11
Financial Analysis of HDFC Bank – Group 4
achieve a healthy growth inprofitability, consistent with
the Bank’s risk appetite. Bank iscommitted to do this
while ensuring the highest levels of ethicalstandards,
professional integrity, corporate governance
andregulatory compliance.HDFC Bank has been
recognized as 'Best Bank in India' inthe magazine
rankings as well as surveys year on year. HDFC
Bank is the most preferred employer in banking
industry in India.Bank business strategy emphasizes
the following:
Increase bank’s market share in India’s expanding bankingand financial services industry by following a disciplinedgrowth strategy focusing on quality and not on quantity anddelivering high quality customer service.
Leverage technology platform and open scalable systems todeliver more products to more customers and to controloperating costs.
Maintain current high standards for asset quality throughdisciplined credit risk management.
Develop innovative products and services that attract targeted customers and address inefficiencies in the Indianfinancial sector.
12
Financial Analysis of HDFC Bank – Group 4
Continue to develop products and services that reduce costof funds.
Focus on high earnings growth with low volatility.
Capital Structure:
At present, HDFC Bank boasts of an authorized capital
of Rs.550 crore (Rs5.5 billion), of this the paid-up
amount is Rs 424.6 crore (Rs.4.2 billion). In terms of
equity share, the HDFC Group holds 19.4%. Foreign
Institutional Investors (FIIs) have around 28% of the
equity and about 17.6% is held by the ADS Depository
(in respect of the bank's American Depository Shares
(ADS) Issue). The bank has about 570,000
shareholders. Its shares find a listing on the Stock
Exchange, Mumbai and National Stock Exchange, while
its American Depository Shares are listed on the New
York Stock Exchange (NYSE), under the symbol 'HDB'.
Capital Adequacy Ratio:
Bank’s total Capital Adequacy Ratio (CAR) calculated in
line with the Basel II framework stood at 17.4%, well
above the regulatory minimum of 9.0%. Of this, Tier I
CAR was 13.3%.
13
Financial Analysis of HDFC Bank – Group 4
Financial Analysis
Financial Analysis:
Financial analysis is a study of relationship among the
various financial factors in a business. The process of
financial statement analysis can be described in various
ways depending on the objective to be obtained.
Financial analysis can be used as a preliminary
screening tool in the selection of the stock in
theprimary and secondary market. It can be used as a
forecasting tool of future financial condition and result.
It may be used as a process of evolution and
diagnosis’s of managerial, operating or other problem
area. Financial analysis is an integral part of the
interpretation of result disclosed by financial
statements. It supplies to decision makers, crucial
financial information and points out the problem areas,
which can be investigated. Financial analysis reduce
reliance on institution guesses and thus narrows the
areas of uncertainty that is present in all decision
making process.
Tools of Financial Analysis:
Common Size Statement:
14
Financial Analysis of HDFC Bank – Group 4
The statement is prepared to bring out the ratio of each
asset or liability to the total of balance sheet and the
ratio of each item of expense or revenue to interest
earned. These common size statements are often
called common measurement or component
percentage statement, since each statement is reduced
to the total of 100 and each individual component of
the statement is represented as a percentage of the
total of 100, which invariably serves as the base.
Comparative Financial Statement:
Comparative financial statements are statement of
financial position of a business so designed as to
facilitate comparison of different accounting variables
from drawing useful inferences.
Preparation of Comparative Financial Statement
These statements are prepared by placing the various
items in rows and years in the columns. This is done to
facilitate easy identification of their significant
differences. Columns may be drawn to accommodate
absolute changes as well as percentage changes side
by side. In order to calculate the percentage change,
the absolute change in the various account figures are
15
Financial Analysis of HDFC Bank – Group 4
divided by their respective base year figures and
multiplied by 100.
Comparative Income Statement:
A comparative income statement shows the absolute
figures for two or more periods, and the absolute
change from one period to another since the figure are
shown side by side the user can quickly understand the
operation.
Comparative Balance Sheet:
Balance sheet as on two or more different dates is used
to compare the assets, liabilities and net worth of the
bank. Comparative balance sheet is useful to study the
trends in the financial position of a bank.
Ratio Analysis:
Ratio analysis is the method or process by which the
relationship or item or group of item in the financial
statement are computed determine and presented to
determine a particular aspect of organization or
company. Ratio analysis is an attempt to drive
quantities measure or guide concerning the financial
16
Financial Analysis of HDFC Bank – Group 4
health and profitability of a business enterprise. Ratio
analysis can be used both in trends and static analysis.
There are several ratios at the disposal of an analysis
but the group of the ratio would prefer depends on the
purpose and the objective of analysis.
Types of Financial Ratios:
1. Liquidity Ratios:2. Profitability Ratios:3. Solvency Ratios:4. Capital Market Ratio
Financial Statement analysis of HDFC Bank
Comparative Statement Analysis
Here we analyse the comparative financial
statements of HDFC Bank as at 31st March 2008, 2009,
2010. Analysis with respect to its competitors namely
ICICI Bank, Axis Bank and the public sector giant State
Bank of India all of which fall among the top banks in
India is also done.
Comparative Balance Sheet of HDFC Ltd as at 31st March 2008, 2009 and 2010 (in Rs Cr.)
17
Financial Analysis of HDFC Bank – Group 4
Capital & Liabilities
Mar'08 Inc/Dec % Mar'09 Inc/Dec % Mar'10
Total Share Capital
354.43 70.95 20.02 425.38 32.36 7.61 457.74
Equity Share Capital
354.43 70.95 20.02 425.38 32.36 7.61 457.74
Share Application Money
0 400.92 0 400.92 -400.92 -100 0
Preference Share Capital
0 0 0 0 0 0 0
Reserves 11,142.80 3083.63 27.67 14,226.43 6838.32 48.07 21,064.75
Revaluation Reserves
0 0 0 0 0 0 0
Net Worth 11,497.23 3555.5 30.9 15,052.73 6469.76 42.98 21,522.49
Deposits 1,00,768.60 42042.98 41.7 1,42,811.58 24592.86 17.22 1,67,404.44
Borrowings 4,478.86 -1793.02 -40.03 2,685.84 10229.85 380.88 12,915.69
Total Debt 1,05,247.46 40249.96 38.24 1,45,497.42 34822.71 23.93 1,80,320.13
Other Liabilities & Provisions
16,431.91 6288.71 38.27 22,720.62 -2104.68 -9.26 20,615.94
Total Liabilities
1,33,176.60 50094.17 37.61 1,83,270.77 39187.79 21.38 2,22,458.56
Assets Mar'08 Inc/Dec % Mar'09 Inc/Dec % Mar’10
Cash &
Balances 12,553.18 974.03 7.76 13,527.21 1,956.07 14.46 15,483.28
18
Financial Analysis of HDFC Bank – Group 4
with RBIBalance
with Banks,
Money at
Call
2,225.16 1,754.25 78.84 3,979.4110,479.7
0263.35 14,459.11
Advances 63,426.90 35,456.15 55.9 98,883.0526,947.5
427.25
1,25,830.5
9
Investments 49,393.54 9,424.01 19.08 58,817.55 -209.93 -0.35 58,607.62
Gross Block 2,386.99 1,569.64 65.76 3,956.63 751.34 18.99 4,707.97
Accumulate
d
Depreciatio
n
1,211.86 1,038.04 85.66 2,249.90 335.26 14.9 2,585.16
Net Block 1,175.13 531.6 45.24 1,706.73 416.08 24.37 2,122.81
Capital
Work In
Progress
0 0 0 0 0 0 0
Other
Assets4,402.69 1,954.14 44.39 6,356.83 -401.68 -6.32 5,955.15
Total Assets1,33,176.6
050,094.18 37.61
1,83,270.7
8
39,187.7
821.38
2,22,458.5
6
Contingent
Liabilities
5,82,835.9
4
-
1,86,241.6
3
-31.953,96,594.3
1
69,641.9
317.56
4,66,236.2
4
Bills for
collection17,092.85 846.77 4.95 17,939.62 3,000.51 16.73 20,940.13
Book Value
(Rs)324.38 20.06 6.18 344.44 125.75 36.51 470.19
19
Financial Analysis of HDFC Bank – Group 4
Comparative Income Statement of HDFC Ltd for the periods 31st March 2008, 2009 and 2010 (in Rs. Cr)
Income Mar '08 % Mar '09 % Mar '10
Interest Earned10,115.0
061.47 16,332.26 -0.98 16,172.90
Other Income 2,205.38 57.37 3,470.63 9.8 3,810.62
Total Income12,320.3
860.73 19,802.89 0.91 19,983.52
Expenditure
Interest expended 4,887.12 82.34 8,911.10 -12.62 7,786.30
Employee Cost 1,301.35 71.99 2,238.20 2.28 2,289.18
Selling and Admin
Expenses974.79 192.5 2,851.26 19.1 3,395.83
Depreciation 271.72 32.46 359.91 9.58 394.39
Miscellaneous
Expenses3,295.22 -2.97 3,197.49 -0.89 3,169.12
Preoperative Exp.
Capitalized0 0 0
Operating Expenses 3,935.28 85.26 7,290.66 5.66 7,703.41
Provisions &
Contingencies1,907.80 -28.91 1,356.20 13.93 1,545.11
Net Profit 1,590.18 41.18 2,244.94 31.35 2,948.70
Total Expenses10,730.2
063.63 17,557.96 -2.98 17,034.82
Extraordinary Items -0.06 883.33 -0.59 57.63 -0.93
Profit brought
forward1,932.03 33.26 2,574.63 34.22 3,455.57
Total 3,522.15 36.82 4,818.98 32.88 6,403.34
Preference Dividend 0 0 0
Equity Dividend 301.27 41.2 425.38 29.13 549.29
Corporate Dividend 51.2 41.19 72.29 26.2 91.23
20
Financial Analysis of HDFC Bank – Group 4
Tax
Per share data
(annualized)
Earnings Per Share
(Rs.)44.87 17.61 52.77 22.08 64.42
Equity Dividend (%) 85 17.65 100 20 120
Book Value (Rs.) 324.38 6.18 344.44 36.51 470.19
Appropriations
Transfer to Statutory
Reserves436.05 47.06 641.25 45.83 935.15
Transfer to Other
Reserves159.02 41.18 224.5 31.35 294.87
Proposed
Dividend/Transfer to
Govt.
352.47 41.19 497.67 28.7 640.52
Balance c/f to
Balance Sheet2,574.61 34.22 3,455.57 31.17 4,532.79
Total 3,522.15 36.82 4,818.99 32.88 6,403.33
Interpretation of Comparative Statements
Comparative Balance Sheet:
The total assets and liabilities have increased by
21.38% compared to 2008-2009 to reach Rs.
2,22,458.56 crore but this rise is less when compared
to the previous period’s rise of 37.6%. The increase in
total assets can be attributed mainly by the rise in
Advances and Balances with Banks and Money at Call
and Short notice. This could be an indication of the
21
Financial Analysis of HDFC Bank – Group 4
healthy position the bank is in. Cash and Balance with
RBI has also increased over the period by 14.46%
further contributing to the rise in total assets.
Investments have reduced by 0.36% over the period.
According to the schedules to the accounts, there
has been addition of fixed assets, mainly to premises
including land worth Rs.2,735,762,000 further adding
to rise in value of fixed assets. This increase in assets is
met by a 7.61% rise in Capital, increase in deposits by
17.22% and a large increase in borrowingswhich shows
the company has raised money through
borrowings.This is an indication of the bank planning for
expansion to cover more areas and increase its
operations. But the large part of this expansion is
funded by deposits and borrowings which may not be
good sign as far as the bank and its shareholders are
concerned.
There is a 14.46% increase in cash balances with
the RBI which could be explained by the various
policies adopted by the central bank, 263.35% increase
in balance with banks and money at call and short
notice, 27.25% in advances and 24.38% in fixed assets.
Contingent liabilities have increased by 17.56% and
Bills for collection by 16.73%. Book value has increased
by 36.5% to 470.19.
22
Financial Analysis of HDFC Bank – Group 4
Capital has increased by 7.61%. It consists of
55,00,00,000 Equity Shares of Rs. 10/- each of
Authorised Capital and 45,77,43,272 Equity Shares of
Rs. 10/- each of Issued, Subscribed and Paid-up Capital.
Reserves have increased by 48.06% compared to the
previous period where there was only 27.67% rise. This
rise can be attributed to the rise in profits. The deposits
have grown by 17.22% which is a good indication of the
bank’s healthy position and the confidence it enjoys
with the public.
Comparative Income Statement:
We notice that the interest earned has decreased
by 0.98% over the period ending March 2010 whereas
there was in increase by 61.47% over the previous
period. This change is not favourable to the bank as far
as shareholders and the management are concerned.
But the interest expense has also gone down by -
12.62% whereas there was a rise by 82.34% over the
previous period. The decrease in interest expense is
23
Financial Analysis of HDFC Bank – Group 4
mainly due to the reduction in interest on deposits and
interest on RBI/Inter-Bank Borrowings. The decrease in
interest earned has gone down mainly due to
decreases in Interest / discount on advances / bill,
income from investments, Interest on balance with RBI
and other inter-bank funds. From the balance sheet we
have noticed that investments had gone down.There is
decrease in investments from 32.09% to 26.35%, which
shows that bank has sold some of its investments Since
there has been a much greater descent in interest
expense, the profit had increased over the period.
There has been a decrease in the rate of depreciation
from 32.46% to 9.58%. Employee cost and Selling and
Administrative expenses has increased down by 2.28%
and 19.10% respective whereas in the previous year it
was 71.99% an 192.50% respectively.
Net profit for the period was Rs.2948.70 crore
which represents an increase by 31.35% compared to a
rise of 41.18% over the previous period. The decrease
in interest income could have contributed to the decline
in the rate. Profit brought forward from the previous
year was Rs.3,455.57 crore. Equity dividend rose by
29.13% to 549.29 crore compared to 41.20% over the
previous period and corporate dividend tax rose by
26.2% to Rs. 91.23 crore.
24
Financial Analysis of HDFC Bank – Group 4
Equity dividend percentage rose by 20% to 120%
from the previous 100%. The book value has increased
by 36.51% to 470.19 which is good news for the
investors.Transfers to statutory and other reserves rose
by 45.83 and 31,83% respectively. Proposed Dividend
rose by 28.7% to 640.52 which indicates the healthy
position of the bank.
Comparative Balance Sheet of HDFC Bank with respect to ICICI as of 31 st March 2010.
HDFC Bank ICICI Mar. 2010 % Mar.2010 %Total share capital 457.74 14.46 1,114.89 -23.81Equity share capital 457.74 263.38 1,114.89 0.14Share Application money
0 27.251 0
Preference share capital
0 -0.256 0 -100
Reserves 21064.8 14.901 50,503.48 4.3Revaluation reserves 0 24.2787 0 Net worth 21522.5 0 51,618.37 3.48Deposits 167404.5 -6.3188 2,02,016.60 -7.48Borrowings 12915.7 21.382 94,263.57 40.02Total debt 180320.1 21.382 2,96,280.17 3.71Other liablities and 20615.94 17.56 15,501.18 -64.57Provisions Total liabilities 222458.6 21.38 3,63,399.72 -4.19 Cash & balances with RBI
15483.28 23.35 27,514.29 56.9
Balances with banks Money at call 1459.11 27.25 11,359.40 -8.61
Advances 125830.6 18.989 1,81,205.60
-17
Investments 58607.62 24.39 1,20,892.80 17.31Gross block 4707.97 -6.31 7,114.12 -4.43
25
Financial Analysis of HDFC Bank – Group 4
Accumulated depreciation
2585.16 21.383 3,901.43 7.12
Net block 2122.81 17.599 3,212.69 -15.49Capital work in progress
0 16.7 0
Other assets 5955.15 36.5 19,214.93 -20.48Total assets 222458.6 21.39 3,63,399.71 -4.19
Here we, observe that share capital has increased
by a greater extent for HDFC bank than ICICI but still
ICICI is shown to be having a much larger share capital
than HDFC. Reserves rose about 14.9% as of March
2010 when compared to ICICI where it is only 4.3%.
ICICI has a much larger amount in investment where
they seek to increase their wealth but the growth is
larger for HDFC bank for the period. Advances grew at
19% for HDFC bank whereas in the case of ICICI bank,
there is decrease by 17%. HDFC is a smaller bank than
ICICI but when comparing profitability, efficiency etc it
is not behind ICICI in any manner. ICICI bank gets funds
by borrowings and the rate of increase is more than
that of HDFC. Total assets rose by 21.39% for HDFC
bank whereas it went down by 4.19% for ICICI bank.
Ratio Analysis of HDFC Bank
Here a ratio analysis of HDFC Bank for three
periods with respect to its competitors namely ICICI
26
Financial Analysis of HDFC Bank – Group 4
Bank, Axis Bank and the public sector giant State Bank
of India is performed (FY ending March of that year).
Profitability Ratios
1. Profit Margin
Profit Margin = (Profit After Tax / Net Revenue) * 100
HDFC Bank:Year 2008 2009 2010Profit Margin 12.82 11.35 14.76
ICICI Bank:Year 2008 2009 2010Profit Margin 10.51 9.74 12.17
Axis BankYear 2008 2009 2010Profit Margin 12.22 13.31 16.10
State Bank of IndiaYear 2008 2009 2010Profit Margin 11.65 12.03 10.54
2. Return on Assets
Return on Assets = (Profit After Tax / Average Total Assets) * 100
HDFC Bank:Year 2008 2009 2010Return on Assets 1.20 1.20 1.3
ICICI Bank:Year 2008 2009 2010Return on Assets 1.12 0.98 1.13
Axis BankYear 2008 2009 2010
27
Financial Analysis of HDFC Bank – Group 4
Return on Assets 1.24 1.44 1.67
State Bank of IndiaYear 2008 2009 2010Return on Assets 0.93 1.04 0.91
3. Asset Turnover
Assets Turnover = (Net Revenue / Average Operating Assets) * 100
HDFC Bank:Year 2008 2009 2010Assets Turnover 5.18 5.0 4.24
ICICI Bank:Year 2008 2009 2010Assets Turnover 5.61 5.14 4.60
Axis BankYear 2008 2009 2010Assets Turnover 6.32 7.78 7.31
State Bank of IndiaYear 2008 2009 2010Assets Turnover 6.32 7.20 7.26
4. Return on Equity
Return on Equity = (Profit After Tax / Average Shareholders’ Equity) * 100
HDFC Bank:Year 2008 2009 2010Return on Equity 13.83 15.32 13.7
ICICI Bank:Year 2008 2009 2010Return on Equity 8.94 7.58 7.79
Axis Bank
28
Financial Analysis of HDFC Bank – Group 4
Year 2008 2009 2010Return on Equity 12.21 17.77 15.67
State Bank of IndiaYear 2008 2009 2010Return on Equity 13.72 15.74 13.89
5. Earnings Per Share
Earnings Per Share (EPS) = (Profit After Tax / Weighted Average No. of Equity Shares) * 100
HDFC Bank:Year 2008 2009 2010EPS 44.87 52.77 64.42
ICICI Bank:Year 2008 2009 2010EPS 37.37 33.76 36.10
Axis BankYear 2008 2009 2010EPS 29.94 50.57 62.06
State Bank of IndiaYear 2008 2009 2010EPS 106.56 143.67 144.37
Interpretation of Profitability Ratios
The Profit Margin has increased by over 30% to 14.76
as of March 2010 over the period where as there was a
slight fall as of March 2009 over the period. The net
profit had gone up by 31% for the period 2009-10
although for the period 2008-09, the rise in profits was
41%. Though there was a fall by 0.98% in interest
income, other income rose by 9.8% over the period due
29
Financial Analysis of HDFC Bank – Group 4
to increase in fees and commissions earned and
income from foreign exchange and derivatives offset in
part by lower bond gains than those in the previous
financial year as per the annual report of the bank.
Total income rose by 0.91% over the period. Total
expenses had gone down by 2.98%, thus explaining the
rise in profit margin. Although total income had
increased by 60.73% for the period ending March 2009,
there was a higher increase in total expenses by
63.63%. Hence total expenses rose at a higher
percentage than total income thus causing a reduction
in profit with respect to income thus causing a fall in
Profit margin during the period.
The rise in profit margin over the period 2009-10
shows the good health the bank is in. Investors have
reason to feel satisfied as an increase in profit cause
increase in wealth. Increase in capital value signals a
healthy position for the management too. The
profitability is in good shape and hence potential
investors can take a favourable decision as the profit
margin shows the bank in good health. Operating
efficiency could have increased over the period and it
shows effective cost control. This outcome is favourable
to the management. Creditors too can take comfort in
30
Financial Analysis of HDFC Bank – Group 4
the fact that the situation is favourable to them also as
there rise in profits and there is less risk of returns.
Comparing with the competitors (here Axis Bank,
ICICI Bank and SBI are taken), only Axis Bank shows a
larger profit margin due to its consistently good
performance. Other banks show a fall in profit margin in
the period 2008-09, Axis Bank show an increase in
profit margin. Hence HDFC Bank should take measures
to prevent investors to consider the opportunity cost
with respect to Axis Bank and arriving at a conclusion
that Axis Bank was a better choice.
There is a slight increase in Return On Assetsratio to 1.3 from
1.2 over the period ending March 2010. There has been
an increase in profits over the period though assets
have also increased over the period. An increase in
ROA indicates higher efficiency and here the costs have
shown to be effectively controlled. From the three other
banks, only Axis Bank is shown to have a higher ROA
due to its consistently better performance when
compared to other banks including HDFC.
There was a fall in Assets Turnoverratio to 4.24 from 5.00
during the period. We can see that there was a fall in
this ratio over the previous period also. This could be
due to the lesser rise in Net Revenue when compared
to the rise in assets over the period. A fall in this ratio
31
Financial Analysis of HDFC Bank – Group 4
indicates lesser efficiency in utilising the assets to
generate revenue. We see that the ratios for the other
three banks too have fallen during the period, but they
are still higher than that of HDFC bank indicating higher
efficiency. The management has to consider this
seriously and take steps to improve the operating
efficiency of the bank.
There was a fall in Return on Equityratio over the period
ending March 2010 to 13.7 from 15.32 though there
was a rise in the previous period from 13.82. This
indicates that the efficiency to generate profits from
every unit of shareholder’s equity has gone down which
should be of concern to the shareholders as well as the
management. The opportunity cost has to be
considered in the case of Return on Equity. We can see
that this ratio has fallen for most other banks except
ICICI Bank which shows a marginal increase. Axis Bank
has a highest value of this ratio and there is very little
difference between the ratios for SBI and HDFC. There
is a chance that investors could prefer Axis Bank over
HDFC.
There has been in increase in Earnings Per Share(EPS) over the
period to 64.42 from 52.77. Thisshows strong
foundation of the bank to achieve this growth rate by
increasing the netincome. This is good news for the
32
Financial Analysis of HDFC Bank – Group 4
shareholders as well as the management because this
results in maximization of wealth which is the objective
of any firm. According to the Annual Report, post
merger of the erstwhile Centurion Bank of Punjab with
the bank, 26,200,220 warrants convertible into an
equivalent number of equity shares were issued to
HDFC Limited on a preferential basis at a rate of Rs.
1,530.13 each. On November 30, 2009 these said
warrants were converted by HDFC Limited and
consequently the bank issued them 26,200,220 equity
shares. During the year under review, 61.59 lac shares
were allotted to the employees of the bank pursuant to
the exercise of options under the employee stock
option scheme of the bank. These include the shares
allotted under the employee stock option scheme of the
erstwhile Centurion Bank of Punjab. Correspondingly
there was a large rise in net revenue and profit
contributing to the higher EPS. Hence shareholders can
find the situation more favourable.
Liquidity Ratios
1. Current Ratio
Current Ratio = (Current Assets / Current Liabilities)
33
Financial Analysis of HDFC Bank – Group 4
HDFC Bank:Year 2008 2009 2010Current Ratio 0.26 0.27 0.28
ICICI Bank:Year 2008 2009 2010Current Ratio 0.72 0.78 1.94
Axis BankYear 2008 2009 2010Current Ratio 0.36 0.37 0.63
State Bank of IndiaYear 2008 2009 2010Current Ratio 0.53 0.34 0.43
2. Quick Ratio
Quick Ratio = (Quick Assets / Current Liabilities)
HDFC Bank:Year 2008 2009 2010Quick Ratio 4.89 5.23 7.14
ICICI Bank:Year 2008 2009 2010Quick Ratio 6.42 5.94 14.70
Axis BankYear 2008 2009 2010Quick Ratio 9.23 9.52 19.19
State Bank of IndiaYear 2008 2009 2010Quick Ratio 6.15 5.74 9.07
34
Financial Analysis of HDFC Bank – Group 4
Interpretation of Liquidity Ratios
The Current Ratiois mainly used to give an idea of the
company's ability to payback its short-term liabilities
with its short-term assets. The higher the current ratio,
themore capable the company is of paying its
obligations. Hence creditors are most concerned about
these liquidity ratios. A lesser current ratio leads to
higher creditor concern. A ratio under 1 suggests that
thecompany would be unable to pay off its obligations if
they came due at that point. Due to a rise in current
assets the ratio shows a rise, but is very low as current
assets are only 28% of current assets. ICICI Bank is
shown to have the highest Current Ratio and the ratio
for all the other three banks are shown to have
increased substantially when compared to HDFC bank.
The Quick Ratiois an indicator of a company's short-
term liquidity. Itmeasures a company's ability to meet
its short-term obligations with its most liquidassets. The
higher the quick ratio, the better the position of the
company. Hence creditors are most concerned about
the quick ratios. A lesser quick ratio leads to higher
creditor concern. The quick ratiois more conservative
than the current ratio. When short-term obligations
need to be paid off immediately, there are situations in
which the current ratio would overestimate a
35
Financial Analysis of HDFC Bank – Group 4
company's short-term financial strength. The quick
ratio has been 7.14 in the year 09-10 which indicates
the bank’s robustness and financial soundness in
paying off its short term obligations. The figures
indicate that there is excess liquidity in the bank except
in 2009-10. But the other three banks show a higher
liquidity when compared to HDFC. But thebanks are
under the guidance of RBI and they have to follow the
liquidity norms laiddown by RBI.
Solvency Ratios
1. Total Debt To Equity Ratio
Total Debt to Equity Ratio = (Total Debt /Shareholders’ Equity)
HDFC Bank:Year 2008 2009 2010Total Debt to Equity Ratio
8.76 9.75 7.78
ICICI Bank:Year 2008 2009 2010Total Debt to Equity Ratio
5.27 4.42 3.91
Axis BankYear 2008 2009 2010Total Debt to Equity Ratio
9.99 11.49 8.81
State Bank of IndiaYear 2008 2009 2010Total Debt to Equity Ratio
10.96 12.81 12.19
36
Financial Analysis of HDFC Bank – Group 4
2. Interest Coverage Ratio
Interest Coverage Ratio = (Earnings Before Income Tax / Interest Expenses)
HDFC Bank:Year 2008 2009 2010Interest Coverage Ratio
1.79 1.44 1.63
ICICI Bank:Year 2008 2009 2010Interest Coverage Ratio
1.25 0.25 0.33
Axis BankYear 2008 2009 2010Interest Coverage Ratio
1.46 1.43 1.62
State Bank of IndiaYear 2008 2009 2010Interest Coverage Ratio
1.37 1.36 0.33
3. Loan to Depost Ratio
Loan to Deposit Ratio = (Total Loans Lent / Total Deposit)
HDFC Bank:Year 2008 2009 2010Loan to Deposit Ratio
65.28 66.64 76.00
ICICI Bank:Year 2008 2009 2010Loan to Deposit Ratio
84.99 91.44 90.04
37
Financial Analysis of HDFC Bank – Group 4
Axis BankYear 2008 2009 2010Loan to Deposit Ratio
65.94 68.89 71.87
State Bank of IndiaYear 2008 2009 2010Loan to Deposit Ratio
77.51 74.97 75.96
Interpretation of Solvency Ratios
The Total Debt To Equityratio indicates what proportion of
equity and debt the company is usingto finance its
assets. A high total debt/equity ratio generally means
that a company has beenaggressive in financing its
growth with debt. This can result in volatile earnings as
aresult of the additional interest expense. In the case of
HDFC Bank, this ratio has decreased over the period
ending March 2010. There is growth of the bank and it
is able to manage its funds fromthe internal sources.
The equity capital has increased its share in the
liabilities in balancesheet in comparison to the outside
debts. This helps the bank to maintain highcredit
reputation in market. The other banks were able to
reduce the ratio substantially.
38
Financial Analysis of HDFC Bank – Group 4
The Interest Coverageratio is used to determine how
easily a company can pay interest on outstanding debt.
The interest coverage ratio is calculated by dividing a
bank's earnings before interest and taxes (EBIT) of one
period by the bank's interest expenses of the same
period. The lower the ratio, the more the company is
burdened by debt expense. When a company's interest
coverage ratio is 1.5 or lower, its ability to meet
interest expenses may be questionable. An interest
coverage ratio below 1 indicates the company is not
generating sufficient revenues to satisfy interest
expenses. The ratio for the year ending 2010 is 1.63
which is reasonable and not below1.5. This indicates
that the bank is in a sound financial health and is able
to pay theinterest on its outstanding debts. The ratio
was best in 2007-08 among the three financialyears.
But has reduced in the year 2009 to 1.44 and increased
to 1.63 in 2009-10. The bank has maintained a
somewhat healthy ratioover the years. The ratios for
SBI and ICICI are substantially lower.
The Loan To Depositratio is indicative of the percentage
of funds lent by the bank out of the total amount raised
through deposits. Higher ratio reflects ability of the
bank to make optimal use of the available resources.
The point to note here is that loans given by bank
39
Financial Analysis of HDFC Bank – Group 4
would also include its investments in debentures, bonds
and commercial papers of the companies. This ratio
forms an integral part of analysis as it indicates
theamount of reliability the bank has earned in the
minds of its customers and evidence of itsrobustness.
The ratio has increased over the period ending March
2010 to 76 which is a healthy sign. The ratio of ICICI
bank is the highest though it shows a slight decline in
the ratio over the period.
Capital Market Ratios
1. Price - earnings Ratio
Price – earnings Ratio = Average Stock Price / Earnings Per Share
HDFC Bank (30/12/10):35.74ICICI Bank (30/12/10): 31.50Axis Bank (30/12/10): 21.42State Bank of India (30/12/10): 19.04
2. Dividend Per Share
HDFC Bank:Year 2008 2009 2010Dividend Per Share
8.50 10.00 12.00
ICICI Bank:Year 2008 2009 2010Dividend Per Share
11.00 11.00 12.00
Axis Bank
40
Financial Analysis of HDFC Bank – Group 4
Year 2008 2009 2010Dividend Per Share
6.00 10.00 12.00
State Bank of IndiaYear 2008 2009 2010Dividend Yield Ratio
21.50 29.00 30.00
3. Book Value Per ShareBook Value Per Share = (Equity Share Capital + Reserves &Surplus / No. of Equity Shares)
HDFC Bank:Year 2008 2009 2010Book Value Per Share
324.38 344.44 470.19
ICICI Bank:Year 2008 2009 2010Book Value Per Share
417.64 444.94 463.01
Axis BankYear 2008 2009 2010Book Value Per Share
245.13 284.50 395.99
State Bank of IndiaYear 2008 2009 2010Book Value Per Share
776.48 912.73 1,038.76
Interpretation of Capital Market Ratios
41
Financial Analysis of HDFC Bank – Group 4
The Price – Earningsratio (P/E Ratio) is a valuation ratio
of a company's current share price compared to its per-
share earnings. In general, a high P/E suggests that
investors are expecting higher earnings growth in the
future compared to companies with a lower P/E.
However, the P/E ratio doesn't tell us the whole story by
itself. It's usually more useful to compare the P/E ratios
of one company to other companies in the same
industry, to the market in general or against the
company's own historical P/E. Here we can see that
HDFC Bank has a higher P/E ratio of 35.74. When
compared to the other three banks HDFC has the
highest ratio with ICICI Bank close behind at 31.50.
Dividends Per Share(DPS) is the sum of declared dividends
for every ordinary share issued. Dividend per share
(DPS) is the total dividends paid out over an entire year
(including interim dividends but not including special
dividends) divided by the number of outstanding
ordinary shares issued. Dividends are a form of profit
distribution to the shareholder. Having a growing
dividend per share can be a sign that the company's
management believes that the growth can be
sustained. HDFC Bank has a growing DPS value which is
12.00 for the period ending March 2010 while it was
42
Financial Analysis of HDFC Bank – Group 4
10.00 for the period ending March 2009 thus
representing an increase of 20% which is a very
healthy sign for investors as well as the management
which can be confident that the growth can be
sustained. The increase in the ratios of the other three
banks is also similar with State Bank of India showing
the highest DPS of 30.0.
The Book Value Per Share (BV)relates the shareholder's
equity to the number of shares outstanding, giving the
shares a raw value. It is measure used by owners of
common shares in a firm to determine the level of
safety associated with each individual share after all
debts are paid accordingly. Should the company decide
to dissolve, the book value per common indicates the
dollar value remaining for common shareholders after
all assets are liquidated and all debtors are paid. In
simple terms it would be the amount of money that a
holder of a common share would get if a company were
to liquidate.The BV value for HDFC Bank for the year
ending March 2010 has substantially increased to
470.19 from 344.44 from the previous year which can
be interpreted as a healthy sign as far as investors are
concerned and also for the management. The share
price as of 31-12-2010 is 2346.50 and BV value is
464.14. This could be interpreted as a healthy situation.
43
Financial Analysis of HDFC Bank – Group 4
The book values of ICICI Bank, Axis Bankand SBI have
risen in the period with SBT having the highest Book
Value Per Share value of 1038.76 in the period ending
March 2010.
44
Financial Analysis of HDFC Bank – Group 4
Common Size Analysis of HDFC Bank
Here a common size financial statement analysis of HDFC Bank for three periods is performed (FY ending March of that year).
Common Size Balance Sheet of HDFC Bank Ltd as on 31 st March 2008, 09, 10 (Rs. million)
31-Mar-10 %BT 31-Mar-09 %BT 31-Mar-08 %BT
Equity Capital 4577.43 0.21 4253.84 0.23 3544.33 0.27
Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00
Share Capital 4577.43 0.21 8263.00 0.45 3544.33 0.27
Reserves and Surplus 210618.37 9.47 142209.46 7.76 111428.08 8.37
Deposits 1674044.39 75.25 1428115.80 77.92 1007685.91 75.67
Borrowings 129156.93 5.81 91636.37 5.00 45949.24 3.45
Other Provisions and Liabilities
206159.44 9.27 162428.23 8.86 163158.48 12.25
Capital and Liabilities (BT) 2224585.70 100.00 1832707.73 100.00 1331766.03 100.00
Fixed Assets 21228.11 0.95 17067.29 0.93 11750.92 0.88
Investments 586076.16 26.35 588175.49 32.09 493935.38 37.09
Advances 1258305.94 56.56 988830.47 53.95 634268.93 47.63
Cash & Money at Call 299423.99 13.46 175066.17 9.55 147783.39 11.10
Other Current Assets 59551.50 2.68 63568.31 3.47 44027.41 3.31
Properties and Assets (BT) 2224585.70 100.00 1832707.73 100.00 1331766.03 100.00
Common Size Income Statement of HDFC Bank Ltd for the periods ending 31 st March 2008, 09, 10
31-Mar-10 31-Mar-09 31-Mar-08Profit/Loss A/C Rs. mln %OI Rs. mln %OI Rs. mln %OIInterest Income
Earned161729 80.
9163322.61 83.23 101150 81.58
Commission, Exchange and
Brokerage Income28305.86
14.2 24572.97 12.52 17145 13.83
Lease Income 0 0 0 0 0 0Dividend Income 0 0 0 0 0 0
Miscellaneous Income 9770.25 4.89
8333.07 4.25 5686.5 4.59
Other Income 38076.11 19.1
32906.04 16.77 22831.5 18.42
Total Income (OI) 199805.11 100 196228.65 100 123981.5 100
45
Financial Analysis of HDFC Bank – Group 4
Interest Expenditure 77862.99 39 89111.04 45.41 48871.2 39.42Employee
Expenditure22891.76 11.
522381.98 11.41 13013.5 10.5
Depreciation 3943.92 1.97
3599.09 1.83 2717.2 2.19
Other Operating Expenditure
30809.15 15.4
29346.99 14.96 21725.5 17.52
Provision and Contingencies
34810.28 17.4
29340.15 14.95 14843.3 11.97
Total Expenditure 170318.1 85.2
173779.25 88.56 101170.7 81.6
Pretax Income 29487.01 14.8
22449.4 11.44 22810.8 18.4
Tax 0 0 0 0 6909 5.57Extra Ordinary and
Prior Period Items Net0 0 0 0 0 0
Net Profit 29487.01 14.8
22449.39 11.44 15901.8 12.83
Adjusted Net Profit 29487.01 14.8
22449.39 11.44 15901.8 12.83
Dividend - Preference 0 0 0 0 0 0
Dividend - Equity 5492.92 2.75
4253.84 2.17 3012.7 2.4
Interpretation
From the common size balance sheet, we notice
that as on 31st March 2010, equity capital of HDFC bank
forms only 0.21% of its liabilities. This ratio is
decreasing from 2008 when it was 0.27% and 0.23% in
2009. Share capital had become 0.45% of the total
liabilities in 2009 but has decreased to 0.21%. Share
capital ratio falling may not be favourable for the
investors. But reserves and surplus shows a marked
increase to 9.47% of total liabilities in 2010 which
indicates the healthy profitability situation. But the bulk
of the share of liabilities ie. 75.25% is deposits. Though
46
Financial Analysis of HDFC Bank – Group 4
the percentage has decreased over the previous
period, deposits have increased signaling the
confidence the public has in the bank. This is a
favourable situation for investors and the management.
Borrowings have also risen to 5.81% of total liabilities
which shows the company has raised money through
borrowings. Fixed assets form just 0.95% of the total
liabilities. Investments and Advances form the bulk i.e.
26.35% and 56.56% of the total liabilities. Investments
have reduced from the previous period where it
accounted for 32.09 of total liabilities.
From the common size income statement we
notice that, interest income has reduced over the
period ending March 2010 and it now constitutes
80.94% of the total income whereas in the previous
period ending March 2009, it was 83.23% of total
income.The decrease in interest earned has gone down
mainly due to decreases in Interest / discount on
advances / bill, income frominvestments, Interest on
balance with RBI and other inter-bank funds. There is
decrease in investments from 32.09% to 26.35%, which
shows that bank has sold some of its
investments.However there was an increase in
Commission, Exchange and Brokerage Income and
Other Income which constitutes 14.17% and 19.06% of
47
Financial Analysis of HDFC Bank – Group 4
the total income respectively. This is a rise from
12.52% and 16.77% which these components
constituted in the total income of the period ending
31st March 2009. Operating expenditures is 15.42% of
the total income and provision and contingencies
17.42% of the total income. The total income has
increased over the previous period and the net profit is
14.76% of the total income which is shows the healthy
profitability situation of the bank. This is more
favourable compared to the previous year where it was
only 11.44% of the total income.
Common Size Statement Analysis of HDFC Bank and Competitor
HDFC % ICICI % SBI %
Income
Interest Earned 16,172.90 80.9 25,706.93 77.9013 70,993.92 82.58749
Other Income 3,810.62 19.1 7,292.43 22.0987 14,968.15 17.41251
Total Income 19,983.52 100 32,999.36 100 85,962.07 100
Expenditure 0 0 0
Interest expended 7,786.30 39 17,592.57 53.3119 47,322.48 55.05042
Employee Cost 2,289.18 11.5 1,925.79 5.83584 12,754.65 14.83753
Selling and Admin
Expenses3,395.83 17 6,056.48 18.3533 7,898.23 9.188041
Depreciation 394.39 1.97 619.5 1.87731 932.66 1.084967
Miscellaneous Expenses 3,169.12 15.9 2,780.03 8.4245 7,888.00 9.17614
Preoperative Exp
Capitalised0 0 0 0 0 0
48
Financial Analysis of HDFC Bank – Group 4
Operating Expenses 7,703.41 38.5 10,221.99 30.9763 24,941.01 29.01397
Provisions &
Contingencies1,545.11 7.73 1,159.81 3.51464 4,532.53 5.272709
Total Expenses 17,034.82 85.2 28,974.37 87.8028 76,796.02 89.3371
Net Profit for the Year 2,948.70 14.8 4,024.98 12.1972 9,166.05 10.6629
Extraordionary Items -0.93 -0 0 0 0 0
Profit brought forward 3,455.57 17.3 2,809.65 8.51426 0.34 0.000396
Total 6,403.34 32 6,834.63 20.7114 9,166.39 10.6633
Preference Dividend 0 0 0 0 0 0
Equity Dividend 549.29 2.75 1,337.95 4.05447 1,904.65 2.215687
Corporate Dividend Tax 91.23 0.46 164.04 0.4971 236.76 0.275424
Per share data
(annualised)0 0 0
Earning Per Share (Rs) 64.42 0.32 36.1 0.1094 144.37 0.167946
Equity Dividend (%) 120 0.6 120 0.36364 300 0.348991
Book Value (Rs) 470.19 2.35 463.01 1.40309 1,038.76 1.208393
Appropriations 0 0 0
Transfer to Statutory
Reserves935.15 4.68 1,867.22 5.65835 6,495.14 7.555821
Transfer to Other
Reserves294.87 1.48 1.04 0.00315 529.5 0.615969
Proposed
Dividend/Transfer to
Govt
640.52 3.21 1,501.99 4.55157 2,141.41 2.49111
Balance c/f to Balance
Sheet4,532.79 22.7 3,464.38 10.4983 0.34 0.000396
Total 6,403.33 32 6,834.63 20.711 9,166.39 10.6633
Interpretation
Comparing the common size income statements of
HDFC, ICICI and SBI Banks, we see that interest earned
forms 81% of the total income of HDFC bank whereas it
49
Financial Analysis of HDFC Bank – Group 4
forms 77.9% and 82.5% of the total incomes of ICICI
and SBI respectively. The public sector giant SBI is
much larger than both other banks when we compare
their interest incomes. Interest expense is just 38% of
the total income of HDFC whereas it is much larger in
the case of the other two banks. Operating expenses is
at the highest ratio with total income for HDFC bank
when compared t the other two which indicates that it
needs to improve its operational efficiency. But when
comparing the net profits, HDFC has the highest ratio of
net profit to total income at 14.76% whereas it is
12.19% for ICICI bank and 10.67% for SBI which
indicates that HDFC’s profitability is good when
compared to the other two as 14.76% of its total
income constitutes profit. Hence from the
management’s, creditors’ and from shareholders’
perspective profitability situation is good for HDFC
bank. HDFC bank gives equity dividend of 2.75% of
total income but it is ICICI bank which gives a highest
dividend of 4.05% of total income.
50
Financial Analysis of HDFC Bank – Group 4
Trend Analysis of HDFC Bank
Here a trend analysis of HDFC Bank is performed from a Managerial, Creditor’s and Investor’s perspective.
51
Financial Analysis of HDFC Bank – Group 4
52
Financial Analysis of HDFC Bank – Group 4
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100
500
1000
1500
2000
2500
3000
IratioEratioPratio
Creditor’s perspective:
The financial performance during the fiscal year
2009-10 remained healthy with total net revenues (net
interest income plus other income) increasing by 0.91%
to Rs. 12,320.38 crores from Rs. 19,802.89crore in
2008-09. The revenue growth was driven both by an
increase Commission, Exchange and Brokerage Income
and Other Income.
Shareholders perspective:
The Bank’s basic earnings per share increased from Rs.
52.9 to Rs. 64.42 per equity share. Bank has had a
consistent dividend policy of balancing the dual
objectives of appropriately rewarding shareholders
53
Financial Analysis of HDFC Bank – Group 4
through dividends and retaining capital to maintain a
healthy capital adequacy ratio to support future
growth. It has had a consistent track record of
moderate but steady increases in dividend declarations
over its history with the dividend payout ratio
rangingbetween 20% and 25%.Net profit increased by
31.35% from Rs. 2244.95 crores in 2008-09 to Rs.
2498.70 crores in 2009-10.
54
Financial Analysis of HDFC Bank – Group 4
55
Financial Analysis of HDFC Bank – Group 4
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100
500
1000
1500
2000
2500
3000
EratioDratioPratio
56
Financial Analysis of HDFC Bank – Group 4
57
Financial Analysis of HDFC Bank – Group 4
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100
500
1000
1500
2000
2500
3000
3500
4000
DratioLratioPratio
Managers’ perspective:
The financial performance during the years
remained healthy. An increment in providing loan
shows that the bank is in a sound position, as it is an
asset to the bank. The percentage of deposits has been
increasing but by comparing the percentage change of
loans and deposits, loans have more increase in its
percentage change. Deposits and lending rates spiked
up sharply. Net profit increased by 31.35% from Rs.
2244.95 crores in 2008-09 to Rs. 2498.70 crores in
2009-10.
58
Financial Analysis of HDFC Bank – Group 4
GROUP MEMBERS
Karthik Kutty
Abhirup Sen
Rohan Kurian John
Abhimanyu Kumar
Vivin
Bobby
Rohini
Vineet Matthew George
Abhinandan Bose
Vinay
59