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risk management in commercial banks report
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Performance
analysis of
Bank of Maharashtra and ICICI Bank
Submitted to:
Indian Banking Industry
Banking in India
The Indian banking industry is an integral and very important part of the country’s economy.
One can say, it is the life & blood of the nation and its people. The sector has helped people’s
dream come true, and has translated the hopes and aspirations of millions of people into reality.
It all started in the 18th century when the Indian banking industry laid its foundation, and has
since then followed an evolutionary path towards growth. The importance of private and foreign
players has been recognized in the recent times by the industry in a competitive scenario and has
led towards greater liberalization. The ability of Indian banks to win market shares profitably is
dependent on stock returns because they have mobilized around 80% of funding through
deposits.
In recent times, the Indian banking industry has been changing rapidly; high growth and
development can be seen in this sector. The total assets of Indian banks were put up as
Rs.82,99,220 crore during FY2012 and also the revenues of Indian banks grew almost four-fold
from USD 11.8 billion to USD 46.9 billion over the decade spanning 2001-10. Even the PAT has
rose nearly nine-fold from USD 1.4 billion to USD 12 billion over 2001-10.
This growth has been driven primarily by two factors, first, the arrival of Foreign Direct
Investment (FDI) of up to 74% with certain restrictions and second, the conservative policies of
the RBI, which have shielded Indian Banks from recession and global economic turmoil. The
BANKEX, an index tracking the performance of important banking sector stocks has grown at a
CAGR of approximately 20% over 2003-12.
For banks, the current and saving accounts (CASA) are their lifeline for profitable growth, but
during Financial Year (FY) 2012 high interest rate chocked them of such deposits, slowing
expansion to a five-year low of 7%. Because of the slowdown of the general economy, credit
growth of the Scheduled Commercial Banks (SCBs) also slowed down to 18.10% in FY2012,
which was 22.90% in FY2011. In FY 2012 the growth of total deposits of the SCBs stood at
14.92% as against 18.31% in FY 2011 and also the net interest margin (NIM) of SCBs was
2.90% on average in FY 2012.
The private banks, in the present competitive scenario are targeting faster growing retail loans,
and also improving the growth rate in fee income by increasing transaction fees, the Public sector
banks are targeting to push for higher recoveries and upgrades Non Performing Loans (NPL) and
also improve their deposit mix by reducing the share of bulk deposits.
About the Maharashtra Bank :
Bank of Maharashtra is an Indian bank based in the city of Pune. The bank was established in the year
1935 with an initial authorized capital worth Rs. 10.00 Lacs, although it became operational in the early
phase of the next year. The bank got nationalized by the Government of India in the year 1969. With a
total number of 1421 branches located all over India as of April 2009, the bank claims to have the largest
number of branches within the state of Maharashtra, among all the Public Sector banks.
Commonly known as a common man's bank, Bank of Maharashtra adopts a philosophy of "Technology
with personal touch", and follows its motto stating "One Family, One Bank, Bank of Maharashtra".
Facilities
All the branches of Bank of Maharashtra have been fully computerized, with Depository services and
Demat facilities being offered at 131 branches as of April 2009. The bank aims at increasing its ATM
network from 345 to 500 soon, apart from planning to install Biometric ATMs at some selected branches.
Apart from it, introduction of Phone Banking, Internet Banking and Mobile Banking is also on the cards.
Other Highlights
Apart from providing regular banking services to the customers, Bank of Maharashtra has established two
Joint Ventures to fulfill its other commitments towards the general public and society. These Joint
Ventures are M-SETI and Mahabank Info Centre. Mahabank Self-Employment Training Institute (M-
SETI) is an effort initiated by Mahabank Agricultural Research & Rural Development Fund (MARDEF),
a trust run by Bank of Maharashtra receiving help from National Bank for Rural Development
(NABARD). The institute runs various self-employments oriented training courses for the rural
unemployed youth from the districts of Pune, Kolhapur, Satara, Sangli, Nasik, Ahmednagar, Jalgaon,
Dhule and Nandurbar.
Mahabank Info Centre is a yet another initiative by Bank of Maharashtra aimed at providing various retail
baking related information to the customers, and enabling smoother operations for them.
Products / Services
Bank of Maharashtra Credit Cards
Bank of Maharashtra Auto Loans
Bank of Maharashtra Personal Loans
Bank of Maharashtra Fixed Deposits
Bank of Maharashtra Saving Accounts
Bank of Maharashtra Educational Loans
Risk management frame work
Banks are faced with a variety of risks while conducting day to day banking operations. Bank has its Risk
Management Frame work in accordance with the RBI Guidelines and benchmarks itself against the
industry best practices. This enables the Bank to identify measure, monitor and manage risk efficiently.
The Board of Directors of the Bank reviews all Risk Management Policies and Strategies and establishes
control systems in line with the Bank’s aggregate Risk Appetite.
Credit Risk Management.
The Bank has constituted Credit Risk Management Committee (CRMC) which reviews the policies,
procedures and systems relating to credit administration and monitoring, at periodic intervals. The Bank
has put in place comprehensive Lending Policy, Loan Review Policy and Credit Risk Management Policy
for credit risk management.
The policies prescribe various guidelines, procedures, standards and prudential / exposure norms. To
evaluate the risk perception in a lending proposition, the Bank has put in place an in-house developed
Credit Risk Rating Framework (CRRF) for rating of existing as well as entry level borrowers in various
asset classes, as desired under Basel II. In house developed rating model is also in use to rate Non-SLR
Investments. The Bank utilizes industry risk rating from reputed credit rating agency and incorporates the
industry risk score in the Credit Risk Rating Models. These models are periodically validated by
independent experts to ensure the efficacy and relevance. The Bank has prescribed threshold ratings for
entry level exposures with a view to building up credit portfolio within the risk appetite and achieves the
profit plan. With a view to separating the Credit Risk '' Management function from credit sanctioning,
Credit Approval Grids are set up at various levels and at Treasury & International Banking Division
(TIBD), Mumbai, which assess the risk perception through a committee approach. The Bank has
undertaken migration analysis of credit risk rating of borrowers over a time horizon and probability of
default has been estimated in line with Basel II requirements. To achieve risk-retum trade off, risk based
pricing framework has been implemented and reviewed periodically. The Bank undertakes following
studies periodically to assess Credit Risk:
o Compliance to Prudential Norms as per Lending Policy Credit Portfolio Review
o Assessment of Credit Concentration Risk
o Quick Mortality of Loans and Advances
o Country Risk Management
o Aggregate exposure on other banks and Stress test Report
Findings of these studies are placed before the Credit Risk Management Committee (CRMC), Risk
Management Committee (RMC) and the Board on periodical basis.
Market Risk Management:
Bank has its separate Market Risk Management Committee which reviews MRM Policy on regular basis and reports modifications, if any, to the Risk Management Committee & the Board for approval. The Bank's MRM Policy aims to set out the broad processes i.e. by which the Bank will identify risks in the areas of Interest Rate Risk, Forex Risk, Equity Price Risk and Options Risk. Reporting framework has been prescribed for internal reporting, Regulatory reporting and Pillar III disclosures.
Interest Rate Risk Management:
Bank uses the following tools to manage interest rate risk:
o Traditional Gap Analysis (TGA) which is undertaken through the preparation of Interest
Rate Sensitive Gap Reports on a monthly basis.
o Earning at Risk is based on Calculation of impact on Nil due to 1% change in interest
rates. It also takes into account Basis Risk. Embedded Option Risk, Yield Cure Risk, Net
Interest Position Risk, Price Risk and Reinvestment Risk.
o Duration Gap Analysis (DGA) which focuses on the bank's exposure to interest rate risk
in banking book (IRRBB) in terms of sensitivity of Market Value of its Equity (MVE) to
interest rate movements.
o Considering the interest rate risk in the portfolio, the Bank has set upper limits of
Modified Duration for AFS HFT category and also the upper limit for total investment
portfolio.
o Value at Risk (VaR) for treasury positions is calculated for 1 Day,10 Days and 30 Days
for 99% Confidence Level. The Bank has constituted Asset Liability Management
Committee (ALCO) which meets at regular intervals to review the interest rate scenarios,
liquidity positions in the banking book etc. The ALCO manages and supervises Liquidity
Risk through review of rates of interest on deposits / advances. ALCO also monitors
adherence to various risk limits and determines the business strategy in light of prevailing
interest rate scenario and liquidity position in the market with a view to optimizing profit
and overall balance sheet management while managing interest rate risk.
The ALM Policy, which is reviewed annually and approved by the Board, prescribes the parameters for
management of Liquidity Risk, Interest Rate Risk, Basel III Compliance and lays down Strategies for
Asset Liability Pricing, Profit Planning and Growth Projections, Funding and Capital Planning and
Regulatory Reporting Framework. Investment Risk is managed through the prescriptions made in the
Investment Management Policy & Investment Risk Management Policy. Management of Foreign
Exchange Risk, prudential limits for open foreign exchange position, aggregate gap position, Daylight
limit, Overnight limit, Net open overnight position, Stop loss limit, Limit for undertaking
swaps/investment/ borrowing overseas, interbank exposure limits etc. have been put in place. These limits
are monitored regularly.
The ''Liquidity Risk'' is measured and managed through ''Gap analysis'' for maturity mismatches by
reviewing structural liquidity position on daily basis and short term dynamic liquidity on fortnightly basis.
Bank is conducting behavioral studies in GAP analysis. Stress testing is undertaken periodically.
Operational Risk Management: Operational risk is the risk of loss resulting from inadequate or failed
internal processes, people or systems or from external events. Bank's primary aim is the early
identification, recording, assessment, monitoring, prevention and mitigation of operational risks,
as well as timely and meaningful management reporting. The Operational Risk Management Committee
(ORMC) meets regularly to review the matters related to operational risk. The Bank has put in place
policy on Business Continuity Planning. A policy on outsourcing is also formulated which facilitates use
of expertise available in the market with adequate safeguards against risk associated with outsourcing.
Under the Risk based supervision, Risk Profile Template covering five business risks and two control
risks are prepared on quarterly basis and submitted to RBI. Rating of the branches is being done under
Risk-based Internal Audit (RBIA) and the position is reviewed every quarter.
Implementation of Basel II: The Bank is Basel II compliant in terms of the New Capital Adequacy
Framework (Basel II) guidelines issued by RBI. Bank has adopted Standardized Approach for Credit
Risk, Standardized Measurement Approach for Market Risk and Basic Indicator Approach for
Operational Risk as per RBI guidelines for capital adequacy computation. External credit ratings from
approved rating agencies are used for risk weighting of corporate exposures as required under Basel II.
Bank has also put in place a Policy on Disclosure, Policy on Utilization of Credit Risk Mitigation
Techniques & Collateral Management and Policy on Stress Testing approved by the Board. The Bank has
evolved Board approved internal Capital Adequacy Assessment Process (ICAAP) which covers
identification and measurement of risks other than Pillar 1 risks (i.e. Credit Risk, Market Risk &
Operational Risk), to meet the requirements of Pillar 2 of Basel II norms. The Bank has adhered to
disclosure norms as stipulated in the guidelines of RBI to meet Pillar 3 requirements of Basel II. The
year-end disclosures as on March 31, 2013 are part of the Annual Report and also displayed on the
Bank''s website. In-house software - Credit Information and Monitoring System (CIMS) is used for
computation of Capital Adequacy under Basel II framework, in line with RBI Master Circular on
implementation of New Capital Adequacy Framework dated 02.07.2012. CIMS is used for generating
credit risk statements for Standardised Approach under Basel II, statement of un-availed portion of credit
facilities and capital adequacy report in Extensible Business Reporting Language (XBRL) format.
For implementation of the advanced approaches under the Basel II framework and industry best practices
in risk management, the Bank has appointed consultants for Credit, Market and Operational Risk. The
Bank will enhance its Risk and Capital Management capabilities by migrating to the Advanced
Approaches of the Basel II framework. Advanced approaches include Foundation and Advanced Internal
Ratings Based Approach (''FIRBA'' & ''AIRBA'') for Credit Risk, Standardized and Advanced
Measurement Approach (''TSA'' & ''AMA'') for Operational Risk and Internal Models Approach (''IMA'')
for Market Risk. Improvement in awareness of Basel II norms amongst the employees is ensured through
training. Knowledge and skill levels of risk management team at Head Office are constantly upgraded
through exposure to external trainings, workshops and seminars.
Implementation of Basel iii: RBI has issued Guidelines on Implementation of Basel III Capital
Regulations in India on 2nd May, 2012. These Guidelines will become effective from April 1, 2013 in a
phased manner. Basel III guidelines of RBI have also introduced (i) a minimum Leverage Ratio of 4.5 per
cent as an additional standard of riskiness of a Bank''s balance sheet, (ii) Liquidity standards by way of
two liquidity ratios namely Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR).
During the parallel run between January, 2013 and January, 2017, banks will strive to maintain a
minimum Leverage Ratio of 4.5 per cent. The regulatory leverage ratio requirements would be prescribed
by RBI after a parallel becomes effective from Jan. 1, 2018. Bank is having adequate MIS for
implementation of the Basel III guidelines issued by RBI and reporting/ disclosures will be done as per
periodicity prescribed.
Internal Control Systems Inspection & Concurrent Audit: The Inspection and Audit system & various
measures of internal control are adopted by the Bank to ensure identification /assessment and
mitigations of operational risks. Internal Audit of branches:-
Inspection of more than 63 per cent of total branches was conducted so as to cover more than 62 per cent
of the business of the bank while complying with the Jilani Committee recommendations. Complying
with the RBI Guidelines, the Bank has also started Risk Based Internal Audit of the branches w.e.f.
01.01.2013 on standalone basis as against the conventional internal inspection and RBIA being done on
parallel basis earlier. During the year, the Bank has implemented some strategic decisions so as to
strengthen the internal control system such as,
o On the spot rectification of atleast 51 per cent irregularities during the course
inspection itself in the branches.
o Implementation of Document mechanization system.
o Initiating the process of Web Based application system so as to improve Branch
Inspection, Concurrent Audit system and Off-site surveillance.
The Bank is prepared to implement Seth Committee Recommendations so as to strengthen the Internal
Audit System. During the year, the Bank also organized conference of all Inspecting Officials and Heads
of Inspection Cells so as to update them on policies, procedures, business environment, opportunities and
challenges for banks, emerging areas of risks and their role in alerting the Top Management of existing
and impending risks at branches and offices.
i) Surprise inspection: Surprise inspection of 91 branches, focusing mainly on high risk areas
was also carried out in pursuance of Ghosh Committee recommendations.
ii) Concurrent Audit: The Bank also ensured concurrent audit of its branches and departments
which covered business of 51 per cent of aggregate deposit and 74.29 per cent of total advances
in addition to business covered in RBIA.
iii) Income & Expenditure Audit: Income & Expenditure Audit for the period from October 2011
to September 2012 was carried out at 995 branches to identify and recoverincome leakage, if
any. Half yearly expenses audit of all the Zonal offices was carried out during the year.
iv) Management audit: For assessing their effectiveness of Zonal Offices and different
departments in the Head Office in terms of supervision and control, Management Audit of 17
Zonal offices and 14 departments at Head Office was carried out during the year.
RBI Inspection under Section 35 of the Banking Regulation Act: The Bank was also subject to RBI
inspection under Sec.35 of the Banking Regulation Act. Besides that two branches were also inspected
during the year.
Disclosure on compliance to capital adequacy & other regulatory prescriptions
The Bank is subjected to the Capital Adequacy guidelines stipulated by RBI. Adequate capital is
maintained by the Bank as a cushion for covering the risk of loss in value of exposure, businesses etc. so
as to protect the depositors, general creditors and stakeholders against such losses. The Bank has
evolved and put in place a Board approved Internal Capital Adequacy Assessment Process (ICAAP)
framework. Assessment and review of Bank‟s capital requirements are carried out at periodical
intervals.
The guidelines for implementation of the New Capital Adequacy Framework issued by RBI stipulates
higher of the following amounts as minimum capital required to be maintained by the Bank.
(a) Minimum capital as per Basel II norms for Credit, Market and Operational Risk.
(b) 80% of Minimum capital as per Basel I norms for Credit and Market risks.
The minimum capital required to be maintained by the Bank as on March 31, 2013 is 80% of the capital
requirement under Basel I norms i.e. Rs. 5611.26 Crore or capital requirement as per Basel II norms i.e.
Rs.6474.56 Crore, whichever is higher. However, the actual capital (Tier 1 and Tier 2) maintained by the
Bank as on March 31, 2013 is Rs. 9059.14 Crore, which is above the prudential floor limit.
The Capital ratios of the bank and subsidiaries are:
Bank of Maharashtra
CRAR % 12.59
CRAR – Tier I Capital (%) 7.57
CRAR – Tier II Capital (%) 5.02
Consolidated Group
CRAR % 12.59
CRAR – Tier I Capital (%) 7.57
CRAR – Tier II Capital (%) 5.02
CAPITAL STRUCTURE
The Capital Structure of the Bank comprises Equity, Preference shares, Reserves & Surplus and
Innovative Perpetual Bonds. The Bank has raised equity capital of Rs. 406.00 crore (including share
premium) through allotment of equity share capital to Government of India on preferential basis during
the year as under:
Particulars Date of
Allotment
No. of Shares
issued
Equity share
capital
Share
premium
Total
Government of
India
30.03.2013 7,18,83,852 71.88 334.12 406.00
Interest rates:
Above 1 year and less than 3 year – 9.10%
Base rate – 10.25%
Financial analysis based on financial statements
Profitability Analysis
Profitability Ratio 13-Mar 12-Mar 11-Mar 10-Mar 9-Mar
Spread 3033.35 2517.09 1968.39 1296.25 1256.53
Burden 1236.71 874.57 324.17 223.3 293.51
Net Profit 7.21 5.52 5.42 8.16 7.88
ROE% 12.21 9.97 10.23 18.28 18.16
ROA% 87.82 70.13 70.23 66.39 58.47
On the Basis of Spread
Spread refers to the difference in borrowing and lending rates of financial institutions (such as banks) in nominal terms. The Spread of the bank has been continuously increasing which shows that company is able to increase its profits. Thus we conclude that bank has source of financing to meets its obligation.
On the Basis of Burden
Burden refers to excess of non –interest expenses over non interest income. Higher the Burden in the bank lower will be the profitability of the bank burden amount in the bank of Maharashtra has been increasing continuously thus its lowering down the profitability of the bank. Bank needs to decrease its non interest expenses and should try to increase its non-interest income. By doing this bank would be able to increase its profit.
On the basis of Net Profit
From the below graph we clearly conclude that net profit the bank has increasing from the previous year. As compared to 2012 the net profit of the bank has increased to approx 30%, is clearly shows that bank is able to meet its entire obligation.
On The basis of ROE
Return on equity measures the rate of return on the ownership interest of the common stock owners. It measures a firm's efficiency at generating profits from every unit of shareholders' equity. We could clearly see that how the ROE has increases from year 2011 earlier there was a downfall in the ROE of the
Company but now the bank is able to regain its efficiency or we could say that the bank is able to fulfill the interest of existing shareholders or owners.
On the Basis of ROA
The return on assets percentage shows how profitable a company's assets are in generating revenue. From the below graph we could clearly find out that the bank efficient asset, as the ROA of the bank has been increasing continuously, From the year 2009, Thus bank is able to manage its assets very well.
Overall Profitability Ratio
From analyzing the profitability Ratio we conclude the following things:
Bank is efficiently managing its Interest Expenses and Incomes thus insuring that bank has sufficient source of funds in order to meet its obligation.
ROA of the bank is also increasing continuously from the year 2009, thus we could that company is managing its asset efficiently.
The net profit of the bank has been increased from its previous year, but the net profit has decreased in the year 2011, this happen because of significant increase in burden means non-interest expense of the bank has increased a lot in this as compared to non-interest income.
Similarly ROE of the bank has increased as compared to its previous year, but there is downfall in the ROE of the bank in the year 2011.
Balance Sheet Analysis
Ratios 13-Mar 12-Mar 11-Mar 10-Mar 9-Mar
Capital Adequacy Ratio 12.59 12.43 13.35 12.78 12.05
Credit Deposit Ratio 32.81 71.8 67 64.56 67.63
Investment Deposit Ratio 31.8 31.67 33.67 34.36 32.62
Debt-Equity Ratio 16.34 20.51 22.94 26.33 25.31
Current Ratio 0.8 0.03 0.03 0.03 0.03
Quick Ratio 0.249 0.2152 0.2082 0.2275 0.978
On the basis of Capital Adequacy Ratio
A measure of a bank's capital. It is expressed as a percentage of a bank's risk weighted credit exposures. This ratio is used to protect depositors and promote the stability and efficiency of financial systems of the
bank. The capital adequacy ratio of the bank of Maharashtra has been continuously increasing from year 2009 thus bank has enough capital to meet its credit exposure.
On the basis of Credit Deposit Ratio
A commonly used statistic for assessing a bank's liquidity by dividing the banks total loans by its total deposits. As per the RBI Guidelines the credit deposit ratio of the bank should be 60%. Currently Credit deposit ratio of the bank is 32.81% which has decreased from its previous year this means that banks is not earning as much as they could earn in short we could conclude that Bank of Maharashtra is following the conservative approach.
On The Basis of Debt-Equity Ratio
Debt-Equity measures of a company's financial leverage, indicates what proportion of equity and debt the company is using to finance its assets. In the year 2009 the debt – equity ratio of the bank was quite high, but since then bank has significantly reduces its debt. A high Portion of debt means that bank is financing its funds from outside which is not a good source of financing, and high debt result in increase in interest expenses and even it increase risk of bankruptcy/Liquidity, thus reduction in debt-equity means bank financial structure is being continuously improving.
On the basis of Current ratio
A liquidity ratio that measures a company's ability to pay short-term obligations. The current ratio of the bank remains stable till 2012 after that it gradually increases to 0.8. But still current ratio of the bank is below ideal ratio. Thus liquidity position of the bank is quite week. Thus bank does not have cash/Short term funds to pay off its short term obligation.
On the Basis of Quick Ratio
The Acid-test or quick ratio or liquid ratio measures the ability of a company to use its near cash or quick assets to extinguish or retire its current liabilities immediately. The quick ratio is below the benchmark but it gradually increased as compared to past few years.
Business parameters
Growth in deposits- As far as 2010-11 is concerned there has been robust growth in CASA deposits,
total deposits recorded growth of 3541 crore during the year to reach 66,845 crore, up by 5.59 per cent
over the level of 63,304 crore as at the end of March 2010. Aggregate deposits recorded growth of 5.44
per cent over the same period. CASA deposits constituted 40.44 per cent of total deposits of the Bank. In
2011-12 CASA deposits have increased by 17.01% and have stood at 31,632 crore and share of CASA
deposits in total bank deposits improved to 41.33%. In 2012-13 CASA deposits increased by 21.64% and
has stood at 38,476 crore and constituting the 40.79% of the total bank deposits. It is seen that there has
been a continuous growth in the deposits of the bank which shows that it has developed its trustworthy
image in the minds of its customers.
Growth in advances- Gross advances have increased from 40,926 crore in 2010 to 47,487 crore in 2011
with growth rate of 16.03 per cent. Credit deposit ratio (CDR) in 2011 is 71.04 per cent as against 64.65
per cent as in 2010. As it has been continuously emphasising on qualitative credit growth and ensures
compliance with regulatory requirements as well as the prudential exposure limits, the gross advances of
the bank have increased from 40,487 crore in 2011 to 56,979 crore in 2012 with a growth of 19.99%.
Credit deposit ratio is 74.75% in 2012 as against 71.04% in 2011. The bank takes several steps in for
reduction in the proposal processing time at all levels and for improvement in the quality of credit. With
this the gross advances of the bank have increased from 56,979 crore in 2012 to 76,397 crore in 2013 with
the growth of 34.08%. Advances have been showing a continuous positive growth in its advances which
shows that customers believe that the bank has good lending facility.
Growth in investments- The Net investments of the bank has stood at 22,491.08 crore in 2011as against
21,323.85 crore in 2010, registering a growth of 5.47per cent. The Net Interest Income from investment
increased by 17.13 percent to 1,520.29 crore from 1,297.90 crore during 2010. As far as 2011-12 is
concerned the net investments of the bank has stood at 22,911.36 crore in 2011 as against 22,491 crore in
2012. The net interest income is increased by 12.38% to 1,708.57 crore to 1,520.29 crore during 2012.
The net investment of the bank in 2013 has stood at 31,430.31 crore as against 26,031.36 crore in 2012.
The net interest income from investment activity increased to 2,231.28 crore from 1,708.57 crore during
the last year, a growth of 30.59 per cent. This shows that Bank of Maharashtra has been consistently
earning good net interest income from its investments.
Efficiency parameters
Cost to income ratio- The lower the cost to income ratio, more profitable the bank is.The cost to
income ratio of 2010-11, 2011-12 and 2012-13 have stood at 65.79%, 52.02% and
45.54%respectively. It is seen that the bank is efficiently running its business and controlling its costs
in an efficient manner.
Operating profit to average working funds ratio- It measures the efficiency of the bank to utilize its
funds. The ratio of the bank stands at 1.22, 1.98 and 2.08 in 2010-11, 2011-12 and 2012-13
respectively which shows that the bank is able to utilise its funds in a better manner and generating
operating profit.
Business per employee- This tool measures the efficiency of all the employees of a bank in generating
business for the bank. The ratio stands at 8.25, 9.67 and 12.56 (in crore) for 2010-11, 2011-12 and 2012-
13 which show that all the employees are working efficiently in generating huge business for the
organization.
Profit per employee- This ratio measures the efficiency of employees at the branch level. The higher the
ratio, higher is the efficiency of the management. The ratio stands at 2.38, 3.12 and 5.59 (in lakhs) in
2010-11, 2011-12 and 2012-13 respectively which indicates that the employees are working efficiently in
their respective branches, thus leading to the efficient management of the organization.
PRODUCTIVITY PARAMETERS
Average business per employee:- It is calculated as average month wise deposits plus advances by number of full-time employees
2013 2012 2011Business/employee 12.56 9.67 8.25
It is increasing each year which is a good indicator of profitability.
Average profit per employee: it is the ratio of net profit to number of full-time employees.
Year ended 31.3.2013 31.3.2012Profit Per Emp. [Rs. in Lacs] 5.59 3.12
Average yield on advances :-
2013 2012 2011Yield on advances(in %) 11.50 11.44 9.69
The yield is increasing which is showing a good trend.
Average cost of deposit :-
2013 2012 2011Cost of deposit(in %) 6.87 6.35 5.38
The cost of deposit is increasing which is profitable to bank.
VULNERABILITY PARAMETERS
Capital to Risk Adjusted Return ratio (CRAR)
2013 2012 2011CRAR 12.59 12.43 13.35
The minimum Capital Adequacy Ratio prescribed by RBI is 9%.Capital Adequacy Ratio of Bank of Maharashtra is more than 9% over the years which is a good sign.
Gross NPA Ratio
2013 2012 2011NPA 1.49 1.71 2.28
Gross NPA Ratio is reducing over the years means it is not vulnerable to earnings.
Net NPA Ratio
2013 2012 2011NPA .52 .66 .84
SWOT Analysis of Bank of Maharashtra
Strength 1. Public sector undertaking. Thus, has govt. backing2. In this area for more than 75 years. Thus, expertise in this field.3. Very high investments in SLR securities4. High connectivity to common man in some parts of the country
5. Over 1500 branches in 23 states and 2 union territories
Weakness
1.Risk averse2.Low profitability3.Increasing NPAs
Opportunity
1.Rural Areas2.Increasing Non-SLR investments to increase profits3.Making their credit cards profitable
Threats
1.Competitor
2.New bank licenses3.Dis-investments by the government
Recommendation and Suggestion
The business growth of bank of Maharashtra has been constantly positive but as the market is in
downturn condition it should try to consolidate itself so that its growth may not go down.
The liquidity position of the bank is quite weak as the liquidity ratio of the bank is below the
benchmark, thus bank is required to improve its liquidity.
They should improve their credit policy so as to protect themselves from defaulters.
As the government of India has decided to infuse 14000 crore in public sector banks so bank of
Maharashtra should make the best utilization of this opportunity.
The up gradation of technology by bank of Maharashtra is quite slow they should adopt the latest
technology on time in order to speed up their process and to satisfy their customers.
Now the bank should try to increase their profitability and they should try to expand their busi -
ness in the rural market.
ICICI BANK
Industrial Credit and Investment Corporation of India (ICICI) Bank was originally promoted in
1994 by ICICI Limited, an Indian financial institution, and was its wholly owned subsidiary. ICICI
was formed in 1955 at the initiative of the World Bank, the Government of India and
representatives of Indian industry. The principal objective was to create a development
financial institution for providing medium-term and long-term project financing to Indian
businesses.
In the 1990s, ICICI transformed its business from a development financial institution offering
only project finance to a diversified financial services group offering a wide variety of products
and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In
1999, ICICI become the first Indian company and the first bank or financial institution from non-
Japan Asia to be listed on the NYSE.
ICICI Bank is India's largest private sector bank with total assets of Rs. 5,367.95 billion (US$ 99
billion) at March 31, 2013 and profit after tax Rs. 83.25 billion (US$ 1,533 million) for the year
ended March 31, 2013. The Bank has a network of 3,100 branches and 10,481 ATMs in India,
and has a presence in 19 countries, including India.
ICICI Bank offers a wide range of banking products and financial services to corporate and retail
customers through a variety of delivery channels and through its specialised subsidiaries in the
areas of investment banking, life and non-life insurance, venture capital and asset
management.
The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in
United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance
Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh,
Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium and
Germany.
ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock
Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New
York Stock Exchange (NYSE).
ICICI Bank also provides various services under government banking wherein, it includes-
Agency function
Power sector
Municipal corporations
Development Authority
Social Welfare Department
Food and Civil Supplies
Forest Corporation
Nagar Nigam
Jal Nigam, etc.
Its products under government banking are as follows:-
Online Auctioning/E-tendering
Biometric Card-Payment
Collection of State and Central taxes (both online and offline)
E-governance- Collection of Direct General Foreign Trade (DGFT), online collection of
fees and stamp duty and e-ticket for railways.
Form selling through branches
ICICI Bank’s facts and figures
1. Size of the firm
I. Turnover- Rs. 22,212 crore
II. Profit- 29% growth in ICICI Bank’s profit after tax to 83.25 billion in fiscal 2013.
III. Branches & ATMs- During fiscal 2013, they added 348 branches and 1,475 ATMs
to their network, taking their branch and ATM count to 3,100 and 10,481
respectively at March 31, 2013
2. Structure of the firm:-
Key Players and market share
ICICI Prudential Life Insurance Company Limited(ICICI Life)- market share
7.0% in fiscal 2013
ICICI Lombard General Insurance Company Limited (ICICI General)-
market share 9.5% in fiscal 2013
ICICI Securities Primary Dealership Limited
ICICI Securities Limited
ICICI Securities Holdings Inc.
ICICI Securities Inc.
ICICI Home Finance Company Limited
ICICI Trusteeship Services Limited
ICICI Investment Management Company Limited
ICICI Venture Funds Management Company Limited
ICICI International Limited
ICICI Bank UK PLC
ICICI Bank Eurasia Limited Liability Company
ICICI Bank Canada
ICICI Prudential Trust Limited
ICICI Prudential Asset Management Company Limited
ICICI Prudential Pension Funds Management Company Limited
3. Growth rate over the period 3-5 years- 20 to 25%
4. Key growth drivers- technology, investment, people, products and services
5. Segmental analysis
Retail- Small and Medium enterprise and Agricultural, Rural Microfinance and
Agricultural business, ATMs and Branches
Wholesale- Corporate Banking, Commercial banking, Government Banking
Service- Treasury, Compliance, Account opening team
6. Specific terminologies and key performance- Refer to “Appendices” section of the
report.
7. Dynamics of the firm- The competition is happening because of price, product
differentiation and services.
8. Critical success factors- Market share, Low cost and Depreciation, elite customer base
9. Regulations that affect the firm- Cash Reserve Ratio, Statutory Liquidity Ratio, Repo rate,
Reverse Repo rate, rules & guidelines of RBI regarding financial inclusion
10. Analysis of costs and profitability
I. Major costs
a. Payments to and provisions for employees
b. Rent, taxes and lighting
c. Printing and stationery
d. Advertisement and publicity
e. Depreciation on Bank's property
f. Depreciation (including lease equalisation) on leased assets
g. Directors' fees, allowances and expenses
h. Auditors' fees and expenses
i. Law charges
j. Postages, telegrams, telephones, etc.
k. Repairs and maintenance
l. Insurance
m. Direct marketing agency expenses
n. Other expenditure
II. Margins & profitability- 17.19% (Net profit margin)
11. Analysis of top 3-5 competitors of the firm
Particulars State Bank of
India
Axis Bank HDFC Punjab National
Bank
Assets &
Liabilities
Rs.1,566,261.04
crore
Rs.340,560.66
crore
Rs.400,331.89
crore
Rs.478,877.03
crore
Profit Rs. 14,104.98
crore
Rs.5,179.43
Crore
Rs.6,726.28
crore
Rs.4,747.67
crore
Non-Performing
Assets
Rs. 21,956.48
crore
Rs. 704.13
Crore
Rs. 468.95
crore
Rs.7,236.50
crore
Cash Deposit
Ratio
5.34% 5.39% 5.46% 38.10%
ICICI Bank Group
BUSINESS PROFILE
Products & Services
Personal Banking
Deposits Loans Cards Investments Insurance Demat Services Wealth Management
NRI Banking
Money Transfer Bank Accounts Investments Property Solutions Insurance Loans
Business Banking
Corporate Net Banking Cash Management Trade Services FXOnline SME Services Online Taxes Custodial Services
BALANCE SHEET OF ICICI BANK LTD. (Rs. In crores)
2009 2010 2011 2012 2013CAPITAL AND LIABILITIES:Total Share Capital
1086.75 1239.83 1249.34 1462.68 1463.29
Equity Share Capital
736.75 889.83 899.34 1112.68 1113.29
Share Application Money
0.02 0.00 0.00 0.00 0.00
Preference Share Capital
350.00 350.00 350.00 350.00 350.00
Reserves 11813.20 21316.16 23413.92 45357.53 48419.73Revaluation Reserves
0.00 0.00 0.00 0.00 0.00
Net Worth 12899.97 22555.99 24663.26 46820.21 49883.02Deposits 99818.78 165083.17 230510.19 244431.05 218347.82Borrowings 33544.50 38521.91 51256.03 65648.43 67323.69Total Debt 146263.25 226161.17 306429.48 356899.69 335554.53Other Liabilities And Provisions
21396.17 25227.88 38228.64 42895.39 43746.43
Total Liabilities 167659.42 251388.95 344658.12 399795.08 379300.96
ASSETS:Cash And Balances With RBI
6344.90 8934.37 18706.88 29377.53 17536.33
Balances With Banks,Money At Call
6585.07 8105.85 18414.45 8663.60 12430.23
Advances 91405.15 146163.11 195865.60 225616.08 218310.85Investments 50487.35 71547.39 91257.84 111454.34 103058.31Gross Block 5525.65 5968.57 6298.56 7036.00 7443.71Accumulated Depreciation
1487.61 1987.85 2375.14 2927.11 3642.09
Net Fixed Assets 4038.04 3980.72 3923.42 4108.89 3801.62Capital Work In Progress
96.30 147.94 189.66 0.00 0.00
Other Assets 8702.59 12509.57 16300.26 20574.63 24163.62Total Assets 167659.40 251388.95 344658.11 399795.07 379300.96
Contingent liabilities
97507.79 119895.78 177054.18 371737.36 803991.92
Bills for collection
9803.67 15025.21 22717.23 29377.55 36678.71
Book value(Rs.)
170.35 249.55 270.37 417.64 445.17
EPS 27.22 28.55 34.59 37.37 33.78No. of equity shares
736716094 889823901 899266672 1112687495 1113250642
PROFIT AND LOSS ACCOUNT OF ICICI BANK LTD. For The Year Ended Mar2005,Mar2006,Mar2007,Mar2008,Mar2009 (Rs. In Crores)
2009 2010 2011 2012 2013INCOME:Interest Earned 9409.90 13784.49 22994.29 30788.34 31092.55Other Income 3416.14 4983.14 5929.17 8810.77 7603.72Total Income 12826.04 18767.63 28923.46 39599.11 38696.27EXPENDITURE:Interest Expended 6570.89 9597.45 16358.50 23484.24 22725.93Operating Expenses
3299.15 4479.51 6690.56 8154.18 7045.11
Total Expenses 9870.04 14076.96 23049.06 31638.42 29771.04Operating Profit 2956 4690.67 5874.40 7960.69 8925.23Other Provision And Contigencies
428.80 1594.07 2226.36 2904.59 3808.26
Provision For Tax 522 556.53 537.82 898.37 1358.84Net Profit 2005.20 2540.07 3110.22 4157.73 3758.13Extraordinary Items
0.00 0.00 0.00 0.00 (0.58)
Profit B/F 53.09 188.22 293.44 998.27 2436.32
Total 2058.29 2728.29 3403.66 5156.00 6193.87Preference Dividend
0.00 0.00 0.00 0.00 0.00
Equity Dividend 632.96 759.33 901.17 1227.70 1224.58Corporate Dividend Tax
90.10 106.50 153.10 149.67 151.21
Pershare DataEps(Rs.) 27.22 28.55 34.59 37.37 33.78Equity 85.00 85.00 100.00 110.00 110.00
Dividend(%)Book Value(Rs) 170.35 249.55 270.37 417.64 445.17AppropriationsTransfer To Statutory Reserve
547.00 248.69 1351.12 1342.31 2008.42
Transfer To Other Reserve
600.01 1320.34 0.00 0.01 0.01
Proposed Dividend/Transfer To Govt
723.06 865.83 1054.27 1377.37 1375.79
Balance C/F To Balance Sheet
188.22 293.44 998.27 2436.32 2809.65
Total 2058.29 2728.30 3403.66 5156.01 6193.87
FINANCIAL STATEMENT ANALYSIS
Comparative Balance Sheet Of ICICI Bank From 2005-2006 To 2008-2009 (Rs. in crores)
PARTICULARS 2009-2010 2010-2011 2011-2012 2012-2013Absolute change
% of change
Absolute change
% of change
Absolute change
% of change
Absolute change
% of change
CAPITAL AND LIABILITIES:Capital 153.08 14 9.51 0.8 213.34 17 0.61 .04Reserves and surplus
9502.96 80 2097.76 10 21943.61 94 3062.2 7
Deposits 65264.39 65 65427.02 40 13920.86 6 (26083.23) (11)
Borrowings 4977.41 15 12734.12 33 14392.4 28 1675.26 2.5
Other Liabilities and Provisions
3831.71 18 13000.76 51.5 4666.75 12 851.04 2
TOTAL CAPITAL AND LIABILITIES
83729.55 50 93269.17 37 55136.96 16 (20494.12) (5.1)
ASSETS:
Investments 21060.04 42 19710.45 27.5 20196.5 22 (8396.03) (7.5)
Advances 54757.96 60 49702.49 34 29750.48 15 (7305.23 (3.25)
Fixed assets (57.32) (1.4) (57.3) (1.4) 185.47 5 (307.27) (7.5)
Capital Work In Progress
51.64 54 41.72 28.2 (189.66) -100 0.00 0.00
Current assets 7917.23 37 23871.8 81 5194.17 10 (4485.58) (8)
TOTAL ASSETS:
83729.55 50 93269.16 37 55136.96 16 (20494.11) (5.1)
Interpretation
The capital of bank increased by 14% in 2009-10,0.8% in 2010-11,17% in 2011-12,and .04 % in 2012-13.This shows that there is fluctuation in the rate of increase in the capital. In 2009-10 and 2011-12 the rate of increase in capital is more than that of 2010-11 and 2012-13
There is a huge fluctuation in the rate of increase in reserves and surplus also. This shows that bank is effectively utilizing its reserves and surplus.
In 2009-10 deposits increase by 65%,in 2010-11 it increased by 40%,and an increase of 6% in 2011-12.in 2012-13 deposits fall by 11%.this shows that the bank has repayed its deposits in this year.
The borrowings are also showing a fluctuating rate of increase.in 2012-13 the borrowings have increased at a very low rate.this shows that bank has repaid a large amount of borrowings in this year and thereby reducing the dependence on outside debt.
The investments are also increasing but with lower rates compared to the preceding years.
Similarly advances rose by 60% in 2009-10,an increase of 34% in 2010-11,15% increase in 2010-11 and finally decresed by 3.25% in 2012-13.
Thre has been a consistent decline in the fixed assets over years.in 2009-10 and 2010-11 it decreased by 1.4 % ,increased by 5% in 2011-12 and again decreasing by 7.5% in 2012-13.this is mainly due to increase in the rate of depreciation in the subsequent years.
A huge fluctuation is revealed from current assets. it increased by 37% in 2009-10,rate of increase rose to 80% in 2010-11 and then the it increased at a much lower rate i.e at 10%.this shows that the bank is effectively ustilising its working capital.there is a fall in current assets in 2012-13 by 8 %.this is mainly due to the repayment of deposits in the years 2012-13.
1. Comparative Income Statement Of ICICI Bank From 2009-2010 To 2012-2013
(Rs. in crores)PARTICULARS 2009-2010 2010-11 2011-12 2012-13
Absolute change
% of change
Absolute change
% of change
Absolute change
% of change
Absolute change
% of chan-ge
INCOME:
Operating income 5941 46.3 10156 54.1 10676 37 (902.84) (2.3)
EXPENDITURE:
Interest expended 3026.56 46 6761.05 70.4 7125.74 43.5 (758.31) (3)
Operating expenses
1180.36 36 2211.05 49.3 1463.62 22 (1109.07 (14)
Total expenses 4206.92 43 8972.1 64 8589.36 37.2 (1867.38) (5.9)
Operating profit 1734.67 59 1183.73 25.2 2086.29 35.5 964.54 12.1
Provision and contigencies
1199.8 126.1 613.58 28.5 1038.78 37.5 1364.14 36
Net profit for the yearExtraordinary items
534.87
0.00
27
0.00
570.15
0.00
22.4
0.00
1047.51
0.00
34
0.00
(399.6)
(0.58)
(10)
0.00
Profit brought forward 135.13 254.5 105.22 56 704.83 21 1438.05 144
TOTAL PROFIT/(LOSS):
670 32.55 675.37 25 1752.34 51.4 1037.87 20
Interpretation:-
The net profit shows a fluctuating trend i.e it increased by 27% in 2000-10,22.4% increase in 2010-11,and increased by 34% in 2011-12 and finally if falls by 10% in2012-13.this may be due to decline in operating income and inresed tax liability in the year 2012-13.
The interest expenses from the period 2009 to 2012 showed an increasing trend but decresed in 2012-13 due to repayment of borrowings.
2. TREND ANALYSIS Trend Percentage Of ICICI Bank From 2009-20 To 2012-2013 (base year 2004 -05) Percentage(%) figures
Particulars 2009 2010 2011 2012 2013Deposits 100 165 231 245 219Advances 100 160 214 247 239Net profit 100 127 155 207 187
Interpretation:
There is a continous increase in the deposits till the year ending 2012 followed by a downfall in the year ending 2013 due to repayment od deposits in this year.
Similarly advances also shows as increasing trend till the year ending 2012 followed by a slight downfall in the year ending 2013.
There has been a substantial increase in net profit till the year year ending 2012.In four years it has been more than double.
The overall performance of the bank is satisfactory.
3 . RATIO ANALYSIS
CURRENT RATIO:
An indication of a company's ability to meet short-term debt obligations; thehigher the ratio, the more liquid the company is. Current ratio is equal to current assetsdivided by current liabilities. If the current assets of a company are more than twice thecurrent liabilities, then that company is generally considered to have good short-termfinancial strength. If current liabilities exceed current assets, then the company may have problems meeting its short-term obligations.
CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITY
Year Current Assets(Rs. In crores)
Current Liabilities(Rs. In crores)
Current Ratio
2009 21632.56 21396.16 1.012010 29549.79 25227.88 1.172011 53421.59 38228.64 1.392012 58615.76 42895.38 1.362013 54130.18 43746.43 1.23
Interpretation :
An ideal solvency ratio is 2. The ratio of 2 is considered as a safe margin of solvency dueto the fact that if current assets are reduced to half (i.e.) 1 instead of 2, then also thecreditors will be able to get their payments in full. But here the current ratio is less than 2 and more than 1 which shows that the bank have current assets just equal to the current liabilities which is not satisfactory as the safety margin is very less or zero. Therefore the bank should keep more current assets so that it can maintain a satisfactory safety margin.
LIQUID RATIO:
Liquid ratio is also known as ‘Quick’ or ‘Acid Test ‘Ratio. Liquid assets refer toassets which are quickly convertible into cash. Current Assets other stock and prepaid expensesare considered as quick assets.
Quick Ratio = Total Quick Assets Total Current Liabilities
Quick Assets = Total Current Assets – Inventory
2009 12929.97 21396.16 0.602010 17040.22 25227.88 0.672011 37121.33 38228.64 0.972012 38041.13 42895.38 0.882013 29966.56 43746.43 0.68
Interpretation:
A quick ratio of 1:1 is considered favourable because for every rupee of current liability,there is atleast one rupee of liquid assets. A higher value of ratio is considered favourable. Here this ratio is less than 1 in 2005,2006 & 2009 but in 2007 & 2008 it is close to 1 which is not satisfactory. This means the bank has not managed its funds properly in this particular period.Therefore bank should rationally utilise its funds to maintain an ideal liquid ratio.
EARNING PER SHARE :
In order to avoid confusion on account of the varied meanings of the term capitalemployed, the overall profitability can also be judged by calculating earning per sharewith the help of the following formula:
Earning Per Equity Share = Net Profit after Tax –Prefrence Dividend No. of Equity shares
The earning per share of the company helps in determining the market price of theequity shares of the company. A comparison of earning per share of the company withanother will also help in deciding whether the equity share capital is being effectivelyused or not. It also helps in estimating the company’s capacity to pay dividend to itsequity shareholders.
Year Net Income Available For Shareholders(Rs. In crores)
No. Of Equity Shares(Rs. In crores)
EPS
2009 2005.2 73.6716 27.222010 2540.07 88.9823 28.552011 3110.22 89.9266 34.592012 4157.73 111.2687 37.372013 3758.13 111.325 33.78
Interpretation : Earning Per Share is the most commonly used data which reflects the performance and prospects of the company.It affects the market price of shares.Here the Earning Per Share is shows a persistent increase till the year 2008 after that in the year 2009 Earning Per share is followed by a downfall due to decline in profits.
DIVIDEND PER SHARE :
It is expressed by dividing dividend paid to equity shareholders by no. of equity shares.this shows the per share dividend given to equity shareholders.It is very helpful for potential investors to know the dividend paying capacity of the company.It affects the market value of the company.
Dividend Per Share = Dividend Paid To Equity Shareholders No. Of Equity Shares
Year Dividend Paid
(Rs. In crores)
No. Of Equity Shares(Rs. In crores)
DPS
2005 632.96 73.6716 8.592006 759.33 88.9823 8.532007 901.17 89.9266 10.022008 1227.7 111.2687 11.032009 1224.58 111.325 11
Interpretation:
Here the Dividend Per Share is increasing year after year except a little decline in 2009.otherwise the dividend per share ratio of the bank is quite satisfactory which shows the bank has a good dividend paying capacity.
NET PROFIT RATIO :
This ratio indicates the Net margin on a sale of Rs.100. It is calculated as follows:
Net Profit Ratio = Net Profit X 100 Net Sales
This ratio helps in determining the efficiency with which affairs of the businessare being managed. An increase in the ratio over the previous period indicatesimprovement in the operational efficiency of the business. The ratio is thus on effectivemeasure to check the profitability of business.
Year Net Profit(Rs. In crores)
Sales(Rs. In crores)
Net Profit Ratio(in %)
2009 2005.2 9409.9 21.32010 2540.07 13784.49 18.422011 3110.22 22994.29 13.522012 4157.73 30788.34 13.52013 3758.13 31092.55 12.08
Interpretation:
Although both the sales and net profit have increased during the above period but the Net Profit Ratio of the bank is declining continuously. This is because of the reason that net profits have not increased in the same proportion as of the sales.
OPERATING PROFIT RATIO:
This ratio is calculated as follows:
Operating Profit Ratio = Operating Profit X100 Net Sales
The difference between net profit ratio and net operating profit ratio is that net operating profit is calculated without considering non-operating expenses and non-operating incomes. If we deduct this ratio from 100,the result will be operating ratio. Higher operating profit ratio enable the organization to recoup non-operating expenses out of operating profits and provide reasonable return.
Year Operating Profit(Rs. In crores)
Sales(Rs. In crores)
Operating Profit Ratio (in %)
2009 2956 9409.9 31.412010 4690.67 13784.49 34.022011 5874.4 22994.29 25.542012 7960.69 30788.34 25.852013 8925.23 31092.55 28.7
Interpretation:
In the year 2009 & 2010 the operating profit is 31.41% & 34.02% respectively. After that it has been consistently declined from the year 2011 till 2012 and again gaining momentum in 2013. This may be due to the reason that operating expenses have been increased more as compared to sales during the above period consequently reducing the operating profits.Therefore the bank should check on unnecessary operating expenses to correct this situation and to provide a sufficient return.
RETURN ON NET WORTH:
It measures the profitability of the business in view of the shareholders. It judges the earning capacity of the company and the adequacy of return on proprietor’s funds.Shareholders and potential investors are interested in this ratio.It is calculated as below:
Return On Net Worth = Net Profit After Interest And Tax x 100 Shareholder’s Funds
Year Net Profit After Interest And Tax(Rs. In crores)
Shareholder's Fund
(Rs. In crores)
Return On Net Worth (in %)
2009 2005.2 12899.97 15.542010 2540.07 22555.99 11.262011 3110.22 24663.26 12.612012 4157.73 46820.21 8.882013 3758.13 49883.02 7.53
Interpretation :
The net profit after interest and tax have increased slowly till the year 2012 followed by a downfall due to high interest payments,operating expenses and taxation liability.consequently the networth ratio has declined considerably and has reduced to more than half in the year 2013 than it was in 2009.
RETURN ON CAPITAL EMPLOYED :
It establishes relationship between profit before interest and tax and capital employed. It indicates the percentage of return on the total capital employed in the business.This ratio is also known as Return On Investment. It measures the overall efficiency and profitabilityof the business in relation to investment made in business. It also shows how efficiently the resources are used in the business.comparison of one unit with that of the other or performance in one year with that of the same unit is possible. It is calculated as below:
Year Net Profit Before Interest And Tax(Rs. In crores)
Capital Employed
(Rs. In crores)
Return On Capital Employed (in %)
2009 9098.09 146263.25 6.222010 12694.05 226161.17 5.612011 20006.54 306429.48 6.522012 28540.34 356899.69 7.992013 27842.9 335554.53 8.29
Interpretation :
The above table exhibit the return on capital employed ratio of the bank for last five years.This ratio measures the earning of the net assets of the business. The ratio was 6.22% in year 2005. After that it rised to the tune of 5.61%,6.52%,7.99% and 8.29% in year 2010, 2011, 2012 and year 2013 respectively. It lead to the conclusion bank rising but very little proportion of return on capital employed.
DEBT- EQUITY RATIO:
The Debt-Equity ratio is calculated to find out the long-term financial position of the firm.This ratio indicates the relationship between long-term debts and shareholder’s funds.The soundness of long-term financial policies of a firm can be determined with the help of this ratio.It helps to assess the soundness of long-term financial policies of a business.It also helps to determine the relative stakes of outsiders and shareholders.Long-term creditors can assess the security of their funds in a business.it indicates to what extent a firm depends upon lenders to meet its long-term financial requirements.A low Debt-Equity ratio is considered better from the point of view of creditors.
Year Debt(Rs. In crores)
Equity(Rs. In crores)
Debt Equity Ratio
2009 154759.45 12899.97 11.992010 228832.96 22555.99 10.142011 319994.86 24663.26 12.972012 352974.87 46820.21 7.532013 329417.94 49883.02 6.6
Interpretation :
The ratio shows the extent to which funds have been provided by long-term creditors as compared to the funds provided by the owners.Here the Debt-Equity ratio for the above period is always high.this shows that the bank is more relying on outside funds as compared to internal sources of capital,in its capital structure. From the long-term lenders point of view this ratio is not satisfactory.
PROPRIETORY RATIO:
It is also called shareholders equity to total equity ratio or net worth to total assets ratio or equity ratio.It compares the shareholder’s funds to total assets.It is calculated by dividing shareholder’s funds by total assets.
Proprietory Ratio = Shareholder’s Fund Total Assets
It helps to determine the long-term solvency of a company.This ratio measures the protection available to the creditors.Higher the ratio,lesser is the likelihood of insolvency in future,as the management has to use lessor debts and vice versa.Thus,this ratio is of great importance to the creditors.
Years Shareholder's Funds(Rs. In crores)
Total Assets(Rs. In crores)
Proprietory Ratio
2009 12899.97 167659.4 0.072010 22555.99 251388.95 0.082011 24663.26 344658.11 0.072012 46820.21 399795.07 0.122013 49883.02 379300.96 0.13
Interpretation:
Above table exhibits the proprietary ratio of the bank for last five years . It was 7% in 2009,After that was 8% in year 2010. Similarly it was once again reduced to 7 % in the year 2011. After 2011 it registered increase and was 12% and 13% in the year 2012 and 2013 respectively. Hence it leads to the conclusion owners have less than 13% stake in the total assets of the bank. It is not a good sign as far the long term solvency is concerned.
FIXED ASSETS TURNOVER RATIO :
It is also called as Sales to Fixed Assets Ratio.It measures the efficient use of fixed assets.This ratio is a measure of efficient use of fixed assets.it is calculated as:
Fixed Assets Turnover Ratio = Cost of goods sold or Sales Net Fixed Assets It measures the efficiency and profit earning capacity of the business.Higher the ratio,greater is the intensive utilization of fixed assets and a lower ratio shows under utilization of the fixed assets.This ratio has a special importance for manufacturing concerns where investment in fixed assets,is vey high and the profitability is significantly dependent on the utilization of these assets.
Year Sales(Rs. In crores)
Net Fixed Assets(Rs. In crores)
Fixed Assets Turnover Ratio
2009 9409.9 4038.04 2.332010 13784.49 3980.72 3.462011 22994.29 3923.42 5.862012 30788.34 4108.89 7.492013 31092.55 3801.62 8.17
Interpretation:
Here the fixed assets employed in the business shows a decreasing trend except in the year 2012 where fixed assets have again increased.This may be due to increase in rate of depreciation in subsequent years. Neverthless,the fixed assets turnover ratio has been consistently increasing.It indicates that fixed assets have been effectively used in the business without much additional investment in the period of study and also the capital is not blocked in fixed assets.
CREDIT-DEPOSIT RATIO:This ratio is very important to assess the credit performance of the bank. The ratio shows the relationship
between the amount of deposit generated by the bank has well as their deployment towards disbursement
of loan and advances. Higher credit deposit ratio shows overall good efficiency and performance of any
banking institution.
Credit Deposit Ratio= CreditsDeposits
×100
Credit means disbursement of advances
Deposit mean sum of fixed deposit,
Saving deposit and current deposit.
Year Advances(Rs. In crores)
Deposits(Rs. In crores)
Credit Deposit Ratio (in%)
2009 91405.15 99818.78 912010 146163.11 165083.17 882011 195865.6 230510.19 842012 225616.08 244431.05 922013 218310.85 218347.82 99
Interpretation:
Above table exhibits credit deposit ratio of the bank during last 5 years. In the year 2005 ratio was 91%
and it declined to 88% and 84%in the year 2010 and 2011 respectively. In the year 2012 and 2013 ratio
was increased to 92% and 99% respectively. it leads to conclusion that credit performance of the bank is
very good.
