Finance is the science of funds management. The general areas of finance

are business finance, personal finance (private finance), and public

finance. Finance includes saving money and often includes lending

money. The field of finance deals with the concepts of time, money, risk

and how they are interrelated. It also deals with how money is spent and

budgeted.

One fact of finance is through individuals and business organizations,

which deposit money in a bank. The bank then lends the money out to

other individuals or corporations for consumption or investment and

charges interest on the loans.

Loans have become increasingly packaged for resale, meaning that an

investor buys the loan (debt) from a bank or directly from a corporation.

Bonds are debt instruments sold to investors for organizations such as

companies, governments or charities. The investor can then hold the debt

and collect the interest or sell the debt on a secondary market. Banks are

the main facilitators of funding through the provision of credit, although

private equity, mutual funds, hedge funds, and other organizations have

become important as they invest in various forms of debt. Financial

assets, known as investments, are financially managed with careful

attention to financial risk management to control financial risk. Financial

instruments allow many forms of securitized assets to be traded on

securities exchanges such as stock exchanges, including debt such as

bonds as well as equity in publicly traded corporations. Central banks,

such as the Federal Reserve System banks in the United States and Bank

of England in the United Kingdom, are strong players in public finance,

acting as lenders of last resort as well as strong influences on monetary

and credit conditions in the economy.

1

FINANCIAL STATEMENT ANALYSIS AND INTERPRETATION

Financial statements, as used in corporate business houses, refer to a set

of reports and schedules which an accountant prepares at the end of a

period of time for a business enterprise. The financial statements are the

means with the help of which the accounting system performs its main

function of providing summarized information about the financial affairs

of the business. These statements comprise balance sheet or position

statement and profit and loss account or income statement. Of course to

give a full view of financial analysis of an undertaking, in addition to the

above, the business may also prepare a Statement of Retained Earnings

and a Cash Flow Statement. In India, every company has to present its

financial statements in the form and contents as prescribed under section

211 of Companies Act 1956.

RESEARCH DESIGN

Research design is planning a strategy of conducting a research. It

plans as to what is to be observed, how it is to be observed, when/where it

is to be observed, and how to analyze the observations, goals of the

research will be achieved.

Research design is a purposeful scheme of action purposed to be

carried out in a sequence during a process of research focusing

management problem to be tackled. Identification and presentation of an

appropriate research design problem is perhaps one of the most important

needs of research design.

2

Objective of the study

1. To know the financial position of the bank in comparison to other

banks(i.e., Punjab National Bank, Bank of Baroda, State Bank of

India).

2. To make a study of the past and present financial performance of

the bank in comparison with other banks.

3. To analyze the profit level of the bank.

Scope of study:

The present study is confirmed to Financial Analysis of Canara Bank

in comparison with other selected banks. The study will help to explore

the growth of banking sector: it would help to analyze the role played by

banking in the economic development of the country.

Tools used:

Under this study various ratios were used like cost of deposits, yield

on advances, net interest margin. PBDT margin, net profit margin, returns

on equity, book value, earnings per share, payout ratio.

Methodology of the study:

Financial data about the bank has been collected for five years.

Various ratios were used on this data to analyze the performance of the

bank in comparison to other selected nationalized banks.

3

The data required for completing the study were from two sources i.e.

1. Primary sources:

Primary data was collected through discussions with the project

manager and accounts department.

2. Secondary sources:

Secondary data was obtained through a personal observation of

annual report. In addition to this, information was obtained from

journals, websites and related books like financial management.

Limitations of the study:

There are certain limitations of the study conducted:

1. Analysis of financial statement has been restricted to five years.

Financial statements include the annual reports of the company.

2. The ratios are compared on the basis of the figures obtained from

the annual reports and data given in the finance department.

3. Only few ratios are taken into account.

4. Detailed study of the financial statements was not possible due to

time constraint.

4

Origin of bank:

Money lending in India is an age old profession with a history

of about 200yrs. In the late 18th century, Tippu Sultan, was accredited to

have conceived the idea of organizing Banking as a part of state

machinery for extending credit facilities to the needy at an affordable

rates. At the late 18th century, there were hardly any Banks in India. At

the time of an American Civil War, a void was created as the supply of

cotton to Lancashire stopped from the American’s. Some Banks were

opened at the time which functioned as entities to finance industry,

including speculative trades in cotton, with large exposure to speculative

ventures; most of the banks opened in India that period could not service

and failed. The depositors lost money and lost interest in keeping deposits

with Banks. Subsequently, in India remained the exclusive domain of the

Europeans for the next several decades until the beginning of the 20 th

century.

Banking in India originated with the General Bank of India

which came into existence in 1786. This was followed by Bank of

Hindustan which was established in 1870. Both these Banks are now

defunct. Banking in India on modern lines started with the establishment

of three presidency banks under Presidency Banks Act 1876 i.e., Bank of

Calcutta, Bank of Bombay and Bank of Madras. In 1921 all the

presidency banks were amalgamated to form the Imperial Bank of India.

State Bank of India the biggest Commercial bank in India was formed in

1955 by passing of State Bank of India Act 1955, and entire assets and

liabilities of Imperial Bank of India was taken over.

A couple of decades later, foreign banks like HSBC and credit

Lyonnais started their Calcutta operations in the 1850’s. At that point of

5

time, Calcutta was the most active trading port, mainly due to the trade of

the British empire, and due to which banking activities took root and

there and prospered. The first fully Indian owned Bank was the Allahabad

Bank set up in 1865.

By the 1900s, the market expanded with the establishment of the

Banks like Punjab National Bank, in 1895 in Lahore; Bank of India, in

1906 in Mumbai- both of which were founded under private ownership.

Indian banking sector was formally regulated by Reserve Bank of India

from 1935. After India’s independence in 1947, the Reserve Bank was

nationalized and given broader powers.

In the 1900s the then Narasimha Rao government embarked on a

policy of liberalization and gave licenses to a small number of private

banks which came to be known as New Generation tech-savvy Banks,

which included banks like ICICI Bank and HDFC Bank.

Origin of the word bank

The word bank was borrowed in Middle English from Middle French

banque, from Old Italian banca, from Old High German banc, bank

"bench, counter". Benches were used as desks or exchange counters

during the Renaissance by Florentine bankers, who used to make their

transactions atop desks covered by green tablecloths.

The earliest evidence of money-changing activity is depicted on silver

Greek drachms coin from ancient Hellenic colony Trapezes on the Black

Sea, modern Trabzon, presented in the British Museum in London. The

6

coin shows a banker's table laden with coins, a pun on the name of the

city. In fact, even today in Modern Greek the word Trapeza means both a

table and a bank.

Definition of Bank:

Banking Regulation Act of India, 1949 defines Banking as

“accepting, for the purpose of lending or investment of deposits of money

from the public, repayable on demand or otherwise and withdrawal by

cheques, draft, order or otherwise.”

Public sector banks are those in which the government of India

holds a major stake. They are the foundation of Indian Banking system

and account for more than 70 percent of total banking industry assets.

Private Banks are those who do not have government stake. They may be

publically listed and traded on stock exchanges and are witnessing

immense growth and progress. They are leaders in internet banking,

mobile banking, phone banking, ATMs. Branches of foreign banks

having operation in India are called foreign banks.

Scheduled banks are those which are entered in the second

schedule of RBI Act 1934. Initially it was a share holder’s bank and it

was nationalize with effect from 1st January 1949, on passing of the

Reserve Bank of India (Transfer of Public Ownership) Amendment Act,

1948. The banks that are included under this schedule are those that

satisfy the criteria laid down vide section 42 Act. They have a paid up

capital and reserve of aggregate value not less than Rs. 5 lakhs and which

satisfies their affairs and carried out in the interest of their depositors. All

commercial bank India and foreign, regional banks and state co-operative

banks come under this category.

7

A bank is a financial intermediary and appears in several related basic

forms:

A central bank issues money on behalf of a government, and

regulates the money supply

A commercial bank accepts deposits and channels those deposits

into lending activities, either directly or through capital markets. A

bank connects customers with capital deficits to customers with

capital surplus on the world's open financial markets.

A savings bank, also known as a building society in Britain is only

allowed to borrow and save from members of a financial

cooperative

Banks often start as microcredit or savings clubs which become

formalized, first as credit unions and later savings banks which transform

themselves from cooperatives to limited liability companies. A fuller

description of these forms appears below.

Banking is generally a highly regulated industry, and government

restrictions on financial activities by banks have varied over time and

location. The current sets of global bank capital standards are called Basel

II. In some countries such as Germany, banks have historically owned

major stakes in industrial corporations while in other countries such as

the United States banks are prohibited from owning non-financial

companies. In Japan, banks are usually the nexus of a cross-share holding

entity known as the keiretsu. In Iceland banks had very light regulation

prior to the 2008 collapse.

8

The oldest bank still in existence is Monte dei Paschi di Siena,

headquartered in Siena, Italy, and has been operating continuously since

1472.

Standard activities

Banks act as payment agents by conducting checking or current accounts

for customers, paying cheques drawn by customers on the bank, and

collecting cheques deposited to customers' current accounts. Banks also

enable customer payments via other payment methods such as telegraphic

transfer, EFTPOS, and ATM.

Banks borrow money by accepting funds deposited on current accounts,

by accepting term deposits, and by issuing debt securities such as

banknotes and bonds. Banks lend money by making advances to

customers on current accounts, by making installment loans, and by

investing in marketable debt securities and other forms of money lending.

Banks provide almost all payment services, and a bank account is

considered indispensable by most businesses, individuals and

governments. Non-banks that provide payment services such as

remittance companies are not normally considered an adequate substitute

for having a bank account.

Banks borrow most funds from households and non-financial businesses,

and lend most funds to households and non-financial businesses, but non-

bank lenders provide a significant and in many cases adequate substitute

for bank loans, and money market funds, cash management trusts and

9

other non-bank financial institutions in many cases provide an adequate

substitute to banks for lending savings too.

Channels

Banks offer many different channels to access their banking and other

services:

ATM is a machine that dispenses cash and sometimes takes

deposits without the need for a human bank teller. Some ATMs

provide additional services.

A branch is a retail location

Call center

Mail : most banks accept check deposits via mail and use mail to

communicate to their customers, e.g. by sending out statements

Mobile banking is a method of using one's mobile phone to

conduct banking transactions

Public Sector Banks in India

Among the public sector banks in India, United bank of India is

one of the 14major banks which were nationalized on july19, 1969. Its

predecessor, in the Public Sector Banks, the United Bank of India Ltd.,

was formed in 1950 with the amalgamation of four banks viz, Comilla

Banking corporation Ltd. (1914), Bengal Central Bank Ltd. (1918),

Comilla Union Bank Ltd. (1922), and Hooghly Bank Ltd Oriental Bank

of Commerce (OBC), a government of India undertaking offers domestic,

NRI and services. OBC is implementing a GRAMEEN PROJECT in

10

Dehradun District (UP) and Hanumangard District (Rajasthan) disbursing

small loans. This Public Sector Bank in India has implementation 14

point action plan for strengthing of credit delivery to women and has

designated 5 branches as specialized branches for women entrepreneurs.

Private Banks

Private Banks are banks that are not incorporated. A non-

incorporated bank is owned either by an individual or a general partner(s)

with limited partner(s). In any such case, the creditors can look to both

the “entirety of the banks estates” as well as the entirety of the sole-

proprietor’s/ generals-partners assets.

These banks have a long tradition in Switzerland, dating back to at

least the revocation of the Edict of Nantes (1685). However most have

now become incorporated companies, so that the term is rarely true

anymore. There are relatively few corporative banks remaining in U.S.;

but there are a few such as Brown Brothers Harriman and Co., which is a

general partnership about 30 members. This is also true of private banks

abroad, reputable old banks like Duncan Lawrie Bank, London, truly hard

to find.

“Private Banks” and “Private banking” can also refer to non-

government owned Banks in generals, in contrast to government-owned

(or nationalized) Banks, which were prevalent in communist socialist and

some social democratic (“liberal”) states in the 20th century. Private

Banks as a form of organization should also not be confused with

“Private Banks” that offer financial services to high net worth individuals

and others.

11

IMPORTANCE OF BANKS IN MORDEN ECONOMY:

Banks play a significant role in the economic development of a country.

The economic importance of banks is as follows:

1. Banks mobilize the small, scattered and idle savings of the people

and make them available for productive purposes.

2. By offering attractive interest on the savings of the people

deposited with them, banks promote the habit of thrift and savings

among the people.

3. By accepting the savings of the people, banks provide safety and

security to the surplus money of the depositors.

4. Banks provide a convenient and economical means of payment.

The cheque system introduced by banks is of great help for making

patents and the use of cheques economizes time and trouble

involved in settlement of business obligations.

5. Banks provide a convenient and economical means of transfer of

funds from one place to another.

6. Banks contribute the economic development of backward regions,

by moving funds from one place to another.

7. Banks influence the rate of interest in the money market.

8. Banks help trade and commerce, industry and agriculture by

meeting their financial requirements.

9. Banks always make it a point to help industrious, the prudent, the

punctual and the honest, and discourage the dishonest, the spend

thrift, the gambler, the lair and the rouge. Thus banks act as public

conservators of commercial virtues.

12

Company Profile

Sri Ammembal Subba Rao Pai, founder of the bank, was born in Mulki

on 19.11.1852. A great visionary, Sri Ammembal Subba Rao started

Canara High School in 1891 and Canara Girl’s high School in 1894 in

Mangalore.

He was of the firm belief that education is the firm foundation on which a

good society and a strong nation can be built. Similarly, when some

banks failed and some other banks were charging exorbitant interest on

loans, Sri Pai started “Canara Permanent Fund Ltd” in Mangalore on

01.07.1906. The capital for the bank was a mere Rs 30,000.00 and first

deposit of Rs 50,000.00. For collecting capital amount, the founder

travelled in bullock cart and collected the amount from households. The

seed thus sown on 01.07.1906 grew up as giant tree robust branches and

today is known as Canara Bank.

Noble thought of a founder Sri Ammembal Subba Rao Pai “A good bank

is not only the financial heart of the community, but also one with an

obligation of helping in every possible manner to improve the economic

conditions of the common people”.

FOUNDING PRINCIPLES

1. To remove Superstition and ignorance.

2. To spread education among all to sub-serve the first principle.

3. To inculcate the habit of thrift and savings.

4. To transform the financial institution not only as the financial heart

of the community but the social heart as well.

5. To assist the needy.

6. To work with sense of service and dedication.

13

7. To develop a concern for fellow human being and sensitivity to the

surroundings with a view to make changes/remove hardships and

sufferings.

Sound founding principles, enlightened leadership, unique work

culture and remarkable adaptability to changing banking

environment have enabled Canara Bank to be a frontline banking

institution of global standards.

Brief Profile of Canara Bank

Widely known for customer centricity, Canara Bank was founded by Sri

Ammembal Subba Rao Pai, a great visionary and philanthropist, in July

1906, at Mangalore, then a small port in Karnataka. The Bank has gone

through the various phases of its growth trajectory over hundred years of

its existence .Growth of Canara Bank was phenomenal, especially after

nationalization in the year 1969, attaining the status of the national level

player in terms of geographical reach and clientele segments.

Eighties was characterized by business diversification for the Bank.

In June 2006 the Bank completed a century of operation in Indian

Banking industry. The event full journey of the Bank has been

characterized by several memorable milestones. Today Canara Bank

occupies a premier position in the comity of Indian Banks. Bank has an

unbroken record of profit since its inception.

14

VISION

To emerge as a ‘Best Practices Bank’ by pursuing global benchmarks

in profitability, operational efficiency, asset quality, risk management and

expanding the global reach.

MISSION

To provide quality Banking services with enhanced customer

orientation, higher value creation for stake holders and to continue as a

responsive corporate social citizen by effectively blending commercial

pursuits with social banking.

WORK CULTURE

Work culture where family concept is practiced among the

employees.

Receptivity to new ideas.

Opportunities for experimentation.

Facilities which supports growth

Record cordial industrial relations

SUBSIDIARIES

CANARA ROBECO ASSET MANAGEMENT COMPANY

LIMITED

CANBANK FINANCIAL SERVICES LIMITED

CANARA BANK SECURITIES LIMITED

CANBANK COMPUTER SERVICES LIMITED

CAN FIN HOMES LIMITED

CANBANK FACTORS LIMITED

CANBANK VENTURE CAPITAL FUND LIMITED

15

FOREIGN BRANCHES

Foreign Branches- London, Leicester, Hong Kong, shanghai, Sharjah

representation, Commercial bank of India, Moscow (joint venture with

SBI).

Al Razouki International Exchange Co, UAE, Eastern Exchange

Establishment.

HRD PRACTICES

From a small town Bank, started way back in 1906, today we have grown

to become a frontline Banking Institution of India with sound

foundations.

Canara bank considers Human Resources as a most valuable asset.

The workforce has inherited a unique heritage of open and informal

family culture. There are a series of people-building HRD initiatives.

The emerging challenge of a liberalized economy entails on Canara

bank a responsibility for developing motivated and knowledgeable

workforce to meet the requirements.

Towards this end, Canara Bank has been a fore runner in establishing

its own training system way-back in 1950s itself. Canara Apex Level

Training College at Bangalore ably supported by 13 Regional Centers

spread over length and breadth of the country takes care of the

knowledge, skill, and attitudinal development of the employees. Being

proactive to the requirements of empowered workforce, the Bank also

16

sponsors individuals to external training programmers both within and

outside the country.

In order to ensure that a well motivated workforce contributes

towards the growth of the institution, Canara Bank has made inroads

towards establishment of Quality Circle concept among its employees.

The growth of this concept can be gauged by the fact that as on date,

Canara have over 700 active quality circles. These quality circles have

carved out a niche for themselves at various National and International

level competitions and have returned with handsome prizes.

Canara Banks Quality Circles have been participating in the international

Conventions consistently since 1998.

Vision QC of Overseas Branch, Chennai participated in the ICQCC

'98 at Colombo

MIPLADEV QC of our Circle Office, Madurai participated in the

ICQCC '99 at Mauritius

Our Garden QC participated in the ICQCC 2000 held at Singapore

during November 2000.

In the International Convention on Quality Circles held at

Lucknow from 17th to 19th Dec. 2002, 10 of our Quality Circles

had participated and won prizes.

In order to ensure that local area specific issues are addressed and

redressed, development of HRD Cells at the local controlling offices of

the Bank, viz., Circle Offices and Regional Offices, have boosted the

morale and commitment of the workforce. These Cells which have been

set-up for giving focused attention towards effective implementation of

17

formal HRD systems of the Bank are really taking the concept of Human

Resource Management to the grass-root levels.

Canara Banks workforce consists of:

Sportspersons including outstanding cricketers

Renowned musicians.

Canara Bank are on a strong wicket with Venkatesh Prasad, Vijay

Bharadwaj and Sunil Joshi (cricketers) on banks side,

Kaverappa, Sunil Benjamin (Hockey players) ,

Vimal Kumar (Badminton),

Can overcome any hurdles, with M K Asha and B N Sumavathy

(athletes) in canara banks team.

COMMUNITY CONCERNS

Consistent with its philanthropic roots and genuine concerns for the

needy, Bank has taken several initiatives including the following:

KPJ Prabhu Artisans Training, Production & Marketing Centre at

Jogaradoddi, Bidadi, Bangalore Rural District and C E Kamath

Institute for Rural Artisans at Karkalla provide training for artisans

in wood carving, stone carving, sheet metal embossing and terra

cotta and marketing their products.

Rural Women Self Employment Training Institute at Harohalli,

Mahila Abhyudaya Yojana Gramina Mahila Jagruthi Kendra’s

Centre for Entrepreneurship Development for Women provides

counseling, guidance & training to make women self-reliant.

18

A D Pai Institute for Rural Development at Vajrahalli and Rural

Self Employment Promotion and Resource Guidance Centre at

Holalur, Shimoga District provide training to rural youths for self

employment.

Rural Clinic Service and Mahila Shushrusha Yojana provide

medical facilities in remote and backward villages and provide

incentives to doctors to set up clinics in such areas.

Cangrama Shikshana Kendra Adult education centers, Canara

Bank Golden Jubilee Education Fund provide adult literacy and

assist student fraternity by providing books, equipments,

sponsoring libraries etc.

Grama Jala Yojana

Adarsha Grama Project & Jalayoga Scheme provides safe drinking

water facility in backward villages.

Hari Kalyana Yojana, Tribal Counseling Centre’s, Dr.Ambedkar

Self-Employment Training Institute at Pudupudur and Subba Rao

Pai Self-Employment Training Institute at Wandoor train SC/ST

and minority youths to take up self-employment training.

Rural Development and Self Employment Training Institutes and

Rural Resource Development Centre’s provide training in adopting

appropriate technology.

Computer Training Centre for Urban Poor at Bangalore trains

urban poor in the IT field and computers.

Kalagrama - An art village, a complex of 18 houses (at K.P.J.

Prabhu Artisans Training, Production & Marketing Centre, and

Jogaradoddi) has been set-up to assist the artisans who have

undergone training in traditional arts to pursue and practice art for

mutual learning and benefit.

19

Canara Bank Institute of Information Technology (CBIIT),

Alleppy has been set-up with an objective of imparting training to

the rural youth of South Kerala in the field of Information

Technology. The training is offered free of cost and backed up by

post training follow-up to ensure credit linkage and settlement.

Canara Bank Institute of Information Technology (CBIIT),

Thiruvananthapuram has been set-up with an objective of

imparting training in the field of Information Technology to the

unemployed youth of Thiruvananthapuram and nearby districts.

The training is offered free of cost in computer packages with

emphasis on self-employment/wage employment in the IT field.

Organization Structure

BRANCHES

Our Bank has a network of more than 3002 branches, spread over 22

States/4 Union Territories of the country and, which are administered

through

Head Office at Bangalore:- Organizational Structure

34 Circle Office

BRANCHES AND OFFICES ABROAD

The Bank has overseas presence as below:

1. BRANCH at LONDON.

2. BRANCH at HONG KONG.

3. BRANCH at SHANGHAI, CHINA.

20

4. A joint venture Bank in Moscow - COMMERCIAL BANK OF

INDIA LLC - (CBIL) with State Bank of India on 60:40 bases.

5. Canara bank have identified 21 overseas centers for opening

branches/offices, out of which, we have approval from RBI for

opening branches in South Africa, Germany, Bahrain, Sultanate of

Oman , Qatar, USA, Tanzania, Japan, Sharjah (UAE), Brazil and a

Second Branch in UK.

6. The Bank's International Operations is being supported by a

network of 537 Correspondent Banks, spread over 94 Countries.

7. Further, Bank has rupee drawing arrangement with 20 Exchange

Houses and 18 Banks in the Middle East for channelizing the

remittances of expatriates.

8. Electronic funds transfer (EFT) was introduced with the following

11 Exchange Companies/Banks for reducing the time for crediting

remittances.

EXISTING ARRANGEMENT

1. AL RAZOUKI INTL., DUBAI

2. EASTERN EXCHANGE, DOHA

3. BAHARAIN INDIA INTL EXCHANGE CO BAHRAIN

4. AL FARDAN EXCHANGE

5. ZENJ EXCHANGE COMPANY

6. UAE EXCHANGE COMPANY

7. LAXMIDAS TARIA VED EXCHANGE

8. MUSANDAM EXCHANGE

9. CANARA BANK, HONG KONG

10.CANARA BANK, LONDON

11.AL ROSTAMANI INTL EXCHANGE CO

21

Important milestones

Year

1st July 1906 Canara Hindu Permanent Fund Ltd. Formally registered

with a capital of 2000 shares of Rs. 50/- each, with 4

employees

1910 Canara Hindu Permanent Fund renamed as Canara Bank

Ltd.

1969 14 Major Banks in the country including Canara Bank,

nationalized on July 19.

1976 1000th branch inaugurated

1983 Overseas branch at London inaugurated Cancard (the

Bank’s Credit Card) launched

1984 Merger with the Laksmi Commercial Bank limited

1985 Commissioning of Indo Hong Kong International Finance

Ltd

1987 Canbank Mutual Fund and Canfin Homes launched

1989 Canbank venture capital fund started

1989-90 Canbank factors Ltd, the factoring subsidiary launched

1992-93 Became the first Bank to articulate and adopt the directive

principle of “Good Banking”

1995-96 Became the first Bank to be conferred with ISO 9002

certification for one of the branches in Bangalore

2001-02 Opened a ‘Mahila Banking Branch’, first of its kind at

Bangalore, for catering exclusively to the financial

requirements of women clientele.

2002-03 Maiden IPO of the Bank

2003-04 Launched internet and mobile banking services

2004-05 100% branch computerization

22

2005-06 Entered 100th year in Banking service. Launched core

Banking solution in selected branches Number One

Position in aggregate Business among Nationalized Banks

2006-07 Retained number one position in Aggregate Business

among Nationalized Banks. Singed MoUs for

commissioning two JVs in insurance and management

with international majors.

2007-08 Launching of New Brand Identity Incorporation of

Insurance and Asset Management, JVs Launching of

‘Online Trading’ portal launching of a ‘Call Centre’

switch over to Basel New Capital Adequacy Framework.

2008-09 The Bank crossed the coveted Rs. 3 lakh crore in

aggregate business. The Bank’s 3rd foreign branch at

Shanghai commissioned.

2009-10 The Bank’s aggregate business crossed Rs. 4 lakh crore

mark. Net profit of the bank crossed Rs. 3000 crore. The

bank’s branch network crossed the 3000 mark.

Sept 10 Bank successfully achieved 100% implementation of crore

Banking Solution. Banks aggregate business crossed Rs.

4.25 lakh crore mark, net profit for 1st half year 2010-11-

2021 crore.

23

ANALYSIS OF FINANCIAL STATEMENTS

According to Myers, “Financial statements analysis is largely a study of

relationship among the various financial factors in business as disclosed

by a single set of statements and a study of the trend of these financial

factors as shown in the series”.

The significance of financial statements is given below:

i. Balance Sheet or Position Statement: Balance Sheet is a

statement showing the nature and amount of a company’s assets on

one side and liabilities and capital on the other. In other words, the

balance sheet shows the financial positions on a particular date

usually at the end of one year period. Balance sheet shows how the

money has been made available to the business of the company and

how the money is employed in the business.

ii. Profit and Loss Account or Income Statement: earning profit is

the principal objective of all business enterprises and Profit and

Loss account or Income Statement is the document which indicates

the extent of success achieved by a business in meeting this

objective. Profits are of primary importance to the board of

directors in evaluating the management of a company, to

shareholders or potential shareholders in making investment

decisions and to banks and other creditors in judging the loan

repayment capacities and abilities of the company. It is because of

this that the profit and loss or the income statement is regarded as

the primary statement and commands a careful scrutiny by all

interested parties. It is prepared for a particular period which is

24

mentioned along with the title of these statements, which includes

the name of the business firms also.

iii. Statement of Retained Earnings: this statement is also known as

Profit and Loss Appropriation account is generally the part of

Profit and Loss account. This statement shows how the profit of the

business for the accounting period have been utilized or

appropriated towards reserves and dividend and how much of the

same is carried forward to the next period. The term ‘Retained

Earnings’ means the accumulated excess of earnings over losses

and dividends. The balance shown by Profit and Loss Account is to

be transferred to the Balance Sheet through this statement after

making necessary appropriations.

iv. Cash Flow Statement: this is a statement which summarizes for

the period, the cash available to finance the activities of an

organization and the uses to which such cash have been put. A

statement of cash flow reports cash receipts and payments

classified according to the organizations major activities i.e.,

operating activities, investing activities and financial activities.

Definition of financial statement analysis:

According to the author, analysis of financial statements refers to the

treatment of information contained in the financial statement in a way so

as to afford a full diagnosis of the profitable and financial position of the

firm concerned.

The process of analyzing financial statements involves the rearranging,

comparing and measuring the significance of financial and operating data.

25

Such a step helps to reveal the relative significance and effects of items of

the data in relation to the time period and/or between two organizations.

Interpretation which follows analysis of financial statements is an attempt

to reach to logical conclusion regarding the position and progress of the

business on the basis of analysis. Thus, analysis and interpretation of

financial statements are regarded as complementary to each other.

TYPES OF FINANCIAL STATEMENT ANALYSIS:

A distinction may be drawn between various types of financial analysis

1. According to nature of the analyst and the material used by them

2. According to Modus Operandi of analysis

3. According to the Objective of the Analysis

ACCORDING TO NATURE OF THE ANALYST AND THE

MATERIAL USED BY HIM

a. External Analysis: it is made by those who do not have access to

the detailed records of the company. This group, which has to

depend almost entirely on published financial statements, includes

investors, credit agencies and governmental agencies regulating

business in normal way. The position of the external analyst has

been improved in recent times owing to the governmental

regulations requiring business undertaking to make available

detailed information to the public through audited accounts.

26

b. Internal Analysis: the internal analysis is accomplished by those

who have access to the books of accounts and all other information

related to business. While conducting this analysis, the analyst is a

part of the enterprise he is analyzing. Analysis for managerial

purpose in an internal type of analysis and is conducted by

executives and employees of the enterprise as well as governmental

and court agencies which may have regulatory and other

jurisdiction over the business

ACCORDING TO MODUS OPERANDI OF ANALYSIS

a. Horizontal Analysis: when financial statements for a number of

years, are reviewed and analyzed, the analysis is called ‘horizontal

analyses. As it is based on data from year to year rather than on one

date or period of time as a whole, this is also known as ‘dynamic

analyses. This is very useful for long term trend analysis and

planning.

b. Vertical Analysis: it is frequently used for referring the ratios

developed for one date or for one accounting period. Vertical

analysis is also called ‘static analysis’. This is not very conductive

to proper analysis of the firm’s financial positions and its

interpretation as it does not enable to study data in perspective.

This can only be provided by a study conducted over a number of

years so that comparisons can be effected. Therefore, vertical

analysis is not very useful.

27

ACCORDING TO THE OBJECTIVE OF THE ANALYSIS

On the basis the analysis can be long-term and short-term analysis:

a. Long-term Analysis: this analysis is made in order to study the

long-term financial stability, solvency and liquidity as well as

profitability and earning capacity of a business. The objective of

making such an analysts is to know whether in the long-term the

concern will be able to earn a minimum amount which will be

sufficient to maintain a reasonable rate of return on investment so

as to provide the funds required for modernization, development

and growth of the business.

b. Short-term Analysis: this analysis is made to determine the short-

term solvency, stability, liquidity and earning capacity of the

business. The objective is to know whether in the short-run

business enterprises will adequate funds readily available to meet

its short-term requirements and sufficient borrowing capacity to

meet contingencies in the near future.

OBJECTIVES OF FINANCIAL STATEMENT ANALYSIS:

Financial Statement is very much helpful in assessing the financial

position and profitability of a concern. The main objectives of analyzing

the financial statements are as follows:

28

1. The competitive study in regard to one firm with another firm or

one department with another department is possible by the analysis

of financial statements.

2. Analysis of past results in respects of earning and financial position

of the enterprise is of great help in forecasting the future results.

Hence it helps in preparing budgets.

3. It facilitates the assessments of financial stability of the concern.

4. The analysis would enable the present and the future earning

capacity and the profitability of the concern.

5. The operational efficiency of the concern as a whole as well as

department wise can be assessed. Hence the management can

easily locate the areas of efficiency and inefficiency.

6. The solvency of the firm, both short-term and long-term, can be

determined with the help of financial statement analysis which is

beneficial to trade creditors and debenture holders.

7. The long-term liquidity positions of funds can be assessed by the

analysis of financial statement.

29

Limitations of Financial Statement Analysis:

1. Financial statements through expressed in exact monetary terms

are not absolutely final and accurate and it depends upon the

judgement of the management in respect of various accounting

methods.

2. The reliability of analysis depends on the accuracy of the figures

used in the financial statements. The analysis will be vitiated by

manipulations in the income statement or balance sheet and

accounting procedure adopted by the accountant for recording.

3. The results for indications derived from analysis of financial

statements may be differently interpreted by different users.

4. The analysis of financial statement relating to a single year only

will have limited use. Hence, the analysis may be extended over a

number of years so that results may be compared to arrive a

meaningful conclusion.

5. When different firms are adopting different accounting producers,

records, policies and different items under similar headings in the

financial statements, the comparison will be more difficult. It will

not provide reliable bases to access the performance, efficiency,

profitability and financial condition of firm as compared to

industry as a whole.

6. There are different tool of analysis available for the analyst.

However, which is to be used in a particular situation depends on

30

the skill, training, and expertise of the analyst and the result will

vary accordingly.

7. Owing to the fact that financial statements are compiled on the

basis of historical costs, while there is a market decline in the value

of the monetary unit and resultant rise in prices, the figures in the

financial statement loses its functions as an index on current

economic realities. Again the financial statements contain both

items. So an analysis of financial statement cannot be taken as an

indicator for future forecasting and planning.

8. Analysis of financial statements is a tool which can be used

profitably by an expert analyst but may lead to faulty conclusions if

used by unskilled analyst. So the result cannot be taken as

judgments or conclusions.

9. Financial statements are interim reports and therefore cannot be

final because the final gain or loss cam is computed only at the

termination of the business. Financial statement reflects the

progress of the position of the business so analysis of these

statements will not be a conclusive evidence of the performance of

the business.

31

METHODS OF ANALYSING FINANCIAL STATEMENTS

The analysis of financial statements consists of study of relationship

and trends, to determine whether or not the financial position and results

of operations as well as the financial progress of the company are

satisfactory or unsatisfactory.

The analytical methods and devices used in analyzing financial

statements are as follows:

1. Comparative statements

2. Common size statements

3. Trend analysis

4. Ratio analysis

5. Funds flow statement

6. Cash flow statements.

COMMON-SIZE STATEMENTS

Common size financial statements are those in which figures reported

are converted into percentages to some common base. For this, items in

financial statements are presented as percentages or ratios to total of the

items and a common base for comparison is provided. Each percentage

shows the relation of the individual item to its respective total.

Common-size income statement: in a common size income statement,

the sales figure is assumed to be equal to 100 and all other figures of

costs or expenses are expressed as percentages of sales. A comparative

income statement for different periods helps to reveal the efficiency or

otherwise of incurring any cost or expense.

32

Common-size balance sheet: in a common size balance sheet, total of

assets or liabilities is as 100 and all the figures are expressed as

percentage of the total. Comparative common size balance sheets for

different periods help to highlight the trends in different items.

Comparative statements

These financial statements are designed as to provide time perspective to

the various elements of financial position contained therein. These

statements give data for all the periods started so as to show:

a) Absolute money values for each item separately for each of the

periods started.

b) Increase and decrease in absolute data in terms of money values.

c) Increase and decrease in terms of percentages.

d) Comparisons expressed in ratios.

e) Percentages of totals.

Such comparative statements are necessary for the study of trends and

direction of movement in the financial position and operating results.

This call for a consistency in the practice of preparing these statements,

otherwise comparability may be distorted. Comparative statements enable

horizontal analysis of figures.

Comparative profit and loss or income statements: comparative

income statements shows the operating results for a number of accounting

periods and changes in the data significantly in absolute periods and

changes in the significantly in absolute money terms as well as in

relative percentage.

33

Comparative balance sheet: a comparative balance sheet shows the

balance of accounts of assets and liabilities on different dates and also the

extent of their increases or decreases between these dates thronging lights

on the trends and direction of changes in the position over the periods.

Trend ratios

Trend ratios can be defined as index numbers of the movements of

the various financial items in the financial statements for a number of

periods. It is a statistical device applied in the analysis of financial

statements to reveal the trend of the items with the passage of time. Trend

ratios show the nature and rate of movements in various financial factors.

They provide a horizontal analysis of comparative statements and reflect

the behavior of various items with the passage of time.

Trend ratio can be graphically presented for a better understanding

by the management. They are very useful in predicting the behaviour of

various financial factors in future. However, it should be noted that

conclusions should not be drawn on a basis of a single trend. Trends of

related items should be carefully studied, before any meaningful

conclusion is arrived at.

Computation of Trend Percentages:

For calculation of the trend of data shown in the financial statements,

it is necessary to have statements for a number of years, and then proceed

as under:

34

1. Take one of the statements as the base with reference to which all

other statements are to be studied. In selection of the best

statements, it should be noted that it belongs to a ‘normal’ year of

business activities. Statement relating to an ‘abnormal’ year should

not be selected as base; otherwise the trend calculated will be

meaningless.

2. Every item in the base statement is stated as 100.

3. Trend percentage of each item in other statement is calculated with

reference to same item in the base statement.

Limitations of Trend Ratios:

a. If the accounting practices have not been consistently followed

year after year, these ratios become incomparable and thus

misleading.

b. Trend ratios do not take into consideration the price level charges.

An increasing trend in sales might not be the result of larger sales

volume, but may be because of increased sales price due to

inflation. In order to avoid this limitation, figures of the current

year should be first adjusted for price level changes from the base

year and then the trend ratios are calculated.

c. Trend ratios must be always read with absolute data on which they

are based; otherwise the conclusions drawn may be misleading. It

may be that a 100% change in trend ratio may represent an

35

absolute change of Rs.1000 only in one item, while a 20% change

in another item may mean an absolute change of Rs.1, 00,000.

d. The trend ratios have to be interpreted in the light of certain non-

financial factors like economic conditions, government policies,

management policies etc.

Ratio Analysis

According to J. batty “the term accounting ratio is used to describe

significant relationships which exist between figures shown in a balance

sheet, in a profit and loss account, in a budgetary control system or in any

other part of the accounting organization”.

Financial statements contain many information (figures) relating to

profit or loss and financial position of the business. If these items in

financial statements are considered independently it will be or not be of

much use. To make a meaningful reading of financial statements, these

items found in financial statements have to be compared with one

another.

Definition:

“Ratio is a yardstick used to evaluate the financial conditions and

performance of a firm, relating to two pieces of financial data to each

other.”

- James. C. Van Harne

36

Limitation of ratio analysis

The following limitations must be taken into account.

The standards will differ from industry. Comparison of ratios of

firms belonging to different industries is not suggested.

Since ratios are calculated from past records, there are no

indicators of future.

Proper care should be exercised to study only such figures as have

a cause and effect relationship, otherwise ratios will only be

meaningless or misleading.

The reliability and significance attached to ratios depend on the

accuracy of data based on which ratios are calculated.

The change in price levels due to inflation will distort the reliability

of ratio analysis.

The analyst should have through knowledge of methods of

window-dressing.

Single accounting ratio is not useful, at all, unless it is studied with

other accounting ratios. This limitation of ratios necessitates inter-

firm and intra-firm comparison.

Ratios are only based on the quantitative information; hence,

quantitative information (i.e., character, managerial ability, etc.)

puts limits on the ratios.

37

Ratios are computed on the basis of financial statements which are

historical in nature.

Knowledge of ratios alone is meaningless unless it is also

ascertained how it is made up.

Lacks of homogeneity of data, person judgment, lack of

consistency etc. are the factors which limit the conclusion to be

derived on the basis of accounting ratios.

Ratios are calculated form financial statements which are affected

by the financial bases and policies adopted on such matters as

description and the valuation of stocks.

38

Financial ratios used in banks:

Cost of deposits:

Formula:

Cost of deposits = Interest paid ×100

Total deposits

Yield on advances:

Yield on advances means the interest earned on the Loans and

advances extended by the Bank. Yield on advances is the major

contribution to the overall performance of a bank.

Formula:

Yield on advances = Interest earned × 100

Total advances

Net interest margin:

Net interest margin is similar in concept to net interest spread, but

the net interest spread is the nominal average difference between the

borrowing and the lending rates, without compensating for the fact that

the earning assets and the borrowed funds may be different instruments

and differ in volume.

39

The net interest margin can therefore be higher (or occasionally lower)

than the net interest spread.

Formula:

Net interest margin = yield on advances – cost of deposits

PBDT Margin:

Formula:

PBDT margin = PBDT ×100

Total income

Net profit margin:

Profit margin is very useful. A higher profit margin indicates a more

profitable company that has better control over its costs compared to its

competitors. Profit margin is displayed as a percentage; a 20% profit

margin. It is also known as Net Profit Margin.

Formula:

Net profit margin = net profit × 100

Total income

40

Return on equity:

The amount of net income returned as a percentage of shareholders

equity. Return on equity measures a corporation's profitability by

revealing how much profit a company generates with the money

shareholders have invested.  

Formula:

Return on equity = net profit × 100

Share holders fund

Book value:

In accounting book value of an asset according to its balance acount

balance. For assets the value is based on the original cost of asset less any

depreciation, amountization, or impairment costs made against the asset.

However, in practice, depending on the sources of the calculation book

value may variably include goodwill, intangible assets or both. When

intangible assets ang goodwill are explicity excluded, the metric is often

specified to be “tangible book value”.

Formula:

Book value = share holders fund ×100

Number of shares

41

Earnings per share:

  Earnings per share serve as an indicator of a company's profitability.

When calculating, it is more accurate to use a weighted average number

of shares outstanding over the reporting term, because the number of

shares outstanding can change over time. However, data

sources sometimes simplify the calculation by using the number of shares

outstanding at the end of the period.

Formula:

Earnings per share = Net profit available to equity share holders

Number of equity shares

Payout ratio:

When calculating the payout ratio, it is more accurate to use

a weighted average number of shares outstanding over the reporting term,

because the number of shares outstanding can change over time.

However, data sources sometimes simplify the calculation by using the

number of shares outstanding at the end of the period.

Formula:

Payout ratio = Dividend amount × 100

Net profit

Leverage ratio:

42

A general term describing a financial ratio that compares some form of

owner's equity (or capital) to borrowed funds. Gearing is a measure of

financial leverage, demonstrating the degree to which a firm's activities

are funded by owner's funds versus creditor's funds. Also known as the

Net Gearing Ratio.

Formula:

Leverage ratio = deposits+borrowings+other liabilities × 100

Share holders fund

COST OF DEPOSITS:

Table No-1

43

Year 2006 2007 2008 2009 2010

Canara Bank 4.39 5.15 6.92 6.64 5.57

Bank of Baroda 4.14 4.34 5.20 5.18 4.46

Punjab National Bank 4.11 4.31 5.25 5.86 5.19

State Bank of India 5.30 5.38 5.94 5.78 5.89

Chart No-1

Cost of deposit has created implication on operating performance of

the bank. Higher cost leads to lower profitability. While analyzing the

data, it is found that in the recent past, the banks cost of deposits

increased and it was much higher compared to all other leading

nationalized banks but in the recent years the bank managed to overcome

this problem.

YIELD ON ADVANCES:

Table No-2

44

Year 2006 2007 2008 2009 2010

Canara Bank 10.97 11.54 13.24 12.39 11.07

Bank of Baroda 11.85 11.02 11.07 10.48 9.54

Punjab National Bank 12.84 11.94 11.94 12.49 11.50

State Bank of India 13.68 11.71 11.75 11.76 11.23

Chart No-2

Yield on advances means the interest earned on the Loans and

advances extended by the Bank. For Canara Bank Yield on advances has

touched 13.24% in 2008. This is highest among the peer group in last 5

years, Except SBI. For Bank of Baroda the Yield has been declining

slowly and reached its lowest level o of 9.54%. This is lowest when

compared to other leading banks. For SBI the yield is stabilizing above

11%. Overall the Yield has been declining for all Banks in Last 5 years.

NET INTEREST MARGIN (NIM):

Table No-3

45

Year 2006 2007 2008 2009 2010

Canara Bank 6.58 6.38 6.32 5.75 5.50

Bank of Baroda 7.71 6.67 5.87 5.30 5.08

Punjab National Bank 8.73 7.64 6.69 6.63 6.31

State Bank of India 8.38 6.33 5.80 5.98 5.35

Chart No-3

Interest margin shows the margin of safety. The interest margin of

canara bank is not that satisfactory compared to other nationalized banks.

So bank has to take necessary steps in this regard to improve its net

interest margin.

PBDT MARGIN:

Table No-4

46

Year 2006 2007 2008 2009 2010

Canara Bank 14.75 12.19 10.51 11.49 14.60

Bank of Baroda 14.00 11.52 12.03 13.77 16.86

Punjab National Bank 14.70 13.47 13.64 14.75 16.49

State Bank of India 11.89 10.96 12.70 12.92 11.75

Chart No-4

PBDT margin indicates the operating profit which it generated from

the operating activity of the business. Though there was decline in the

operating margin in the year 2007-08. It is slowly picking up and

managing to sustain its initial level.

NET PROFIT MARGIN:

Table No-5

47

Year 2006 2007 2008 2009 2010

Canara Bank 13.31 11.03 9.48 10.60 13.89

Bank of Baroda 12.66 9.69 10.35 12.48 15.68

Punjab National Bank 13.01 11.96 12.60 13.89 15.60

State Bank of India 10.20 9.68 11.53 11.93 10.66

Chart No-5

This indicates the total profit it earned after deducting the operating

and non-operating expenses. Even the net operating margin declined

during the recession 2007-08, is showing the remarkable improvement in

the recent years. Thanks to some of the innovative policies adopted by the

bank.

RETURN ON EQUITY:

Table No-6

48

Year 2006 2007 2008 2009 2010

Canara Bank 19.45 24.21 25.69 26.33 29.03

Bank of Baroda 13.39 11.87 13.00 17.35 20.25

Punjab National Bank 16.41 15.64 22.16 26.59 26.50

State Bank of India 15.94 14.51 13.72 15.74 13.90

Chart No-6

This indicates the profit earned by the investors on its investment.

Higher ratio indicates higher share holders wealth. Canara bank is

showing a remarkable improvement in creating the shareholders wealth

compared to all other nationalized bank, it is showing the vertical growth

in this, which is giving a green signal to the investors to invest.

BOOK VALUE:

Table No-7

49

Year 2006 2007 2008 2009 2010

Canara Bank 168.43 143.13 148.56 191.99 253.82

Bank of Baroda 214.60 236.64 302.13 351.15 413.27

Punjab National Bank 278.20 312.33 293.27 368.73 467.46

State Bank of India 525.25 594.69 776.48 912.73 1038.77

Chart No-7

Book value is indicating the unit of asset availabile to each share.

Higher ratio indicates higher asset creation and long term solvency. The

canara banks book value is not that satisfactory compared to major

nationalised banks. So serious effort has to be made to improve the

capitalisation of the asset.

EARNINGS PER SHARE:

Table No-8

50

Year 2006 2007 2008 2009 2010

Canara Bank 32.76 34.65 38.17 50.55 73.69

Bank of Baroda 28.73 28.08 39.27 60.93 83.67

Punjab National Bank 45.65 48.84 64.98 98.03 123.86

State Bank of India 83.73 86.29 106.56 143.67 144.37

Chart No-8

Earnings per share indicates the share in the profit of each share.

Even though there is consistent improvement in the earning per share

compared to other banks it is lagging behind. Considering the strong

financial ways which the canara bank started with, the bank need to be

improved in this regard so as to regain the top position.

PAYOUT RATIO:

Table No-9

51

Years 2006 2007 2008 2009 2010

Canara Bank 20.15 20.20 20.96 15.83 13.57

Bank of Baroda 22.97 24.93 20.37 13.13 11.95

Punjab National Bank 14.46 14.33 12.31 8.16 8.07

State Bank of India 7.88 8.11 7.51 5.57 6.93

Chart No-9

Payout ratio indicates the proportion of dividend paid out of

earnings indirectly it indicates the retention part of the profit. Canara

banks retention profit is low compared to other leading nationalised

banks.

LEVERAGE RATIO:

Table No-10

52

Year 2006 2007 2008 2009 2010

Canara Bank 18.20 26.52 27.92 26.35 24.03

Bank of Baroda 13.46 15.55 15.26 16.72 17.42

Punjab National Bank 15.49 15.43 20.19 19.98 18.92

State Bank of India 16.87 17.10 13.72 15.64 14.97

Chart No-10

Higher leverage ratio indicates greater amount of debt in the

capital structure which is an indication to high risk. The leverage ratio of

canara bank is very high when compared to other banks,the bank should

try to decrease its ratio.

53

PROPREITORY RATIO(%):

Table No-11

Year 2006 2007 2008 2009 2010

Canara Bank 0.05 0.04 0.03 0.04 0.04

Bank of Baroda 0.07 0.06 0.06 0.06 0.05

Punjab National Bank 0.06 0.06 0.05 0.05 0.05

State Bank of India 0.06 0.06 0.07 0.06 0.06

Chart No-11

Higher porpreitary ratio indicates high shareholders fund, this

inturn indicates higher profitability. Initially the bank had higher

propreitary ratio, but in the year 2007-08 the ratio decreased. In the recent

years the bank has shown improvement in the propreitary ratio.

54

Advance to deposit:

Year 2006 2007 2008 2009 2010

Canara Bank 68 69.18 69.6 73.96 72.16

Bank of Baroda 63.97 66.94 70.18 74.84 72.62

Punjab National Bank 62.35 69.07 71.79 73.75 74.84

State Bank of India 68.84 77.46 77.55 73.11 78.58

Table No-12

Chart No-12

The advances to deposit for canara bank are rising. The bank increased its

advance to deposits from 68 in 2006 to 72.16 in 2010. But it is much less

when compared to other nationalized banks, so the bank needs to improve

on its advances so that the bank earns more profit on its advances and

deposits.

55

Findings and suggestions

Findings:

1. The cost of deposit for canara bank was increasing and it was much

higher when compared to all other leading nationalized banks.

2. Higher yield on advances during the observation period when

compared to other banks which is a good indicator of sound

banking system.

3. Net interest margin is not that satisfactory when compared to other

nationalized banks.

4. There was a decline in operating margin of canara bank in the year

2007-08, but it is slowly picking up and managing to sustain its

initial level.

5. The net operating margin is showing remarkable improvement in

the recent years.

6. Canara bank is showing the vertical growth in creating the

shareholders worth, which is good sign to the investors to invest.

7. The canara bank book value is not that satisfatory compared to

other nationalized banks.

8. Even though there is constant improvement in the earnings per

share of canara bank in the recent years, it is lagging behind when

compared to other nationalized banks.

9. Canara bank retention profit is low compared to other nationalized

banks.

10.The propreitary ratio is not satisfactory when compared to other

nationalized banks.

56

Suggestions:

1. The canara bank has to take necessary steps in the regard to

improve its net interest margin.

2. A serious effort has to be made to improve the capiitalization of the

asset.

3. The bank needs to improve on its retention profit.

4. The bank should try to have control over its leverage ratio.

5. The canara bank should try to improve on its propreitary ratio as

the high propreitary ratio indicates high shareholders fund.

57

Conclusion

Financial analysis is a process of establishing suitable relationship

between the items of the balance sheet and profit and loss account and

studying the relationship to know the financial position of the

company.

The analysis of the data made by me has resulted in the acheivements

of the objectives of the project work. This study was undertaken by

me with the specific objectives such as studying the financial

performance, identifying the operating efficiency of the bank an ratio

analysis.

The financial analysis reveals a good picture on banks performance

except for some areas which were found wanting and bank must

immediately try to improve in these areas to become a leading

financial institution, overall it can be said that the bank is showing

tremendous progress and there is no doubt under the present

leadership there is going further uptrend in the coming years.

CANARA BANK is the largest commercial bank in india in terms of

profits, deposits, assets, branches and employees. It is only the indian

bank among the top 20 banks in Asia. However to compete and win

the global environment, the bank has to benchmark itself against the

best in the world and world class level of effeciency.

The bank has constituted RBI guidelines, which meets regular

intervals to monitor interest rate scenario, product pricing, profit

planning etc.

58

BIBLIOGRAPHY

Text books:

Khan.M.Y and Jain.P.K, “Financial Management”,Tata McGraw-

Hill Publishing Company Limited, Fourth edition.

Pandey I. M., “Financial Management”, Vikas publishing house

Pvt Ltd., Ninth edition.

Maheshwari S. N., Principals of Management Accounting”, Sultan

Chand and sons, Thirteenth edition.

Websites:

www.wekipedia.com

www.moneycontrol.com

www.allbankingsolutions.com

www.canarabank.com

Other resources:

Published balance sheet of the year 2006-2010

Annual reports of Canara Bank 2006-10

Annual reports of Bank of Baroda 2006-10

Annual reports of Punjab National Bank 2006-10

Annual reports of State Bank of India 2006-10

59

Balance sheet of canara bank:

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

Capital & liabilities 

Equity Capital 410.00 410.00 410.00 410.00 410.00

Preference Capital 0.00 0.00 0.00 0.00 0.00

Share Application

Money

0.00 0.00 0.00 0.00 0.00

Reserves 6608.86 7701.11 7885.63 9629.61 12129.11

Revaluation

Reserves

113.38 2242.87 2204.86 2168.16 2132.68

Deposits 116803.23 142381.45 154072.42 186892.51 234651.44

Borrowings 25.82 1574.35 2517.23 7056.61 8440.56

Other Liabilities

& Provisions

8860.57 11651.25 13438.55 13488.91 6977.30

TOTAL 132821.86 165961.03 180528.69 219645.80 264741.09

Assets          

Cash & Balances

with RBI

7,914.00 9,095.19 13,364.79 10,036.79 15,719.46

Balance with

Banks.

4,909.56 7,278.74 4,513.25 6,622.99 3,933.75

Advances 79,425.70 98,505.69 107,238.04 138,219.40 169,334.63

Investments 36,974.18 45,225.54 49,811.57 57,776.90 69,676.95

Net Block 688.47 2861.35 2916.87 2929.46 2859.38

CWIP 0 0 0 0 0

Other Assets 2,909.95 2,994.53 2,684.17 4,060.26 3,216.92

TOTAL 132,821.86 165,961.04 180,528.69 219,645.80 264,741.09

60

Profit and loss account of canara bank:

Income

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

Interest Earned 8,711.51 11,364.56 14,200.74 17,119.05 18,751.96

Other Income 1,377.51 1,511.80 2,308.31 2,427.10 3,000.82

Total Income 10,089.02 12,876.36 16,509.05 19,546.15 21,752.78

Expenditure          

Interest expended 5,130.01 7,337.73 10,662.94 12,401.25 13,071.43

Employee Cost 1,515.30 1,609.29 1,661.28 1,877.15 2,193.70

Selling and

Administration

Expenses

1,061.42 957.77 1,491.09 1,540.27 2,164.65

Miscellaneous

Expenses

894.05 1402.58 958.76 1481.42 1146.44

Preoperative Exp

Capitalised

0 0 0 0 0

Total Op Exp 8,600.78 11,307.37 14,774.07 17,300.09 18,576.22

PBDT 1,488.24 1,568.99 1,734.98 2,246.06 3,176.56

Depreciation 145.03 148.18 169.97 173.64 155.13

Tax          

Net Profit 1,343.21 1,420.81 1,565.01 2,072.42 3,021.43

Supplementary

Informations

FV 10.00 10.00 10.00 10.00 10.00

Number of Shares 410000000 410000000 410000000 410000000 410000000

Dividend Rate 66 70 80 80 100

61

Balance sheet of punjab national bank:

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

Capital & Liabilities

Equity Capital 315.30 315.30 315.30 315.30 315.30

Preference Capital 0.00 0.00 0.00 0.00 0.00

Share Application

Money

0.00 0.00 0.00 0.00 0.00

Reserves 8758.68 9826.31 10467.35 12824.59 15915.63

Revaluation

Reserves

302.38 293.85 1535.70 1513.74 1491.99

Deposits 119684.92 139859.67 166457.23 209760.50 249329.80

Borrowings 6687.18 1948.86 5446.56 4374.36 19262.37

Other Liabilities &

Provisions

9518.93 10178.51 14798.23 18130.13 10317.69

TOTAL 145267.40 162422.50 199020.37 246918.62 296632.78

Assets          

Cash & Balances

with RBI

23,394.56 12,372.03 15,258.15 17,058.25 18,327.58

Balance with Banks. 1,397.14 3,273.49 3,572.57 4,354.89 5,145.99

Advances 74,627.37 96,596.52 119,501.57 154,702.99 186,601.21

Investments 41,055.31 45,189.84 53,991.71 63,385.18 77,724.47

Net Block 1030.23 1009.82 2315.52 2397.11 2513.47

Capital Work In

Progress

0 0 0 0 0

Other Assets 3,762.79 3,980.80 4,380.84 5,020.20 6,320.07

TOTAL 145,267.40 162,422.50 199,020.37 246,918.62 296,632.78

62

Profit and loss account of punjab national bank:

Income

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

Interest Earned 9,584.15 11,537.48 14,265.02 19,326.16 21,466.91

Other Income 1,478.23 1,343.64 1,997.56 2,919.69 3,565.31

Total Income 11,062.38 12,881.12 16,262.58 22,245.85 25,032.22

Expenditure          

Interest expended 4,917.39 6,022.91 8,730.86 12,295.30 12,944.02

Employee Cost 2,114.97 2,352.45 2,461.54 2,924.38 3,121.14

Selling and Admin

Expenses

638.79 1,032.50 884.19 1,406.42 1,701.46

Miscellaneous

Expenses

1765.27 1738.38 1966.98 2337.8 3137.42

Preoperative Exp

Capitalised

0 0 0 0 0

Provision for

Contingencies

         

Total Op Exp 9,436.42 11,146.24 14,043.57 18,963.90 20,904.04

PBDT 1,625.96 1,734.88 2,219.01 3,281.95 4,128.18

Depreciation 186.65 194.8 170.23 191.06 222.83

Tax          

Net Profit 1,439.31 1,540.08 2,048.78 3,090.89 3,905.35

supplementary

informations

face value 10.00 10.00 10.00 10.00 10.00

Number of Shares 315300000 315300000 315300000 315300000 315300000

Dividend Rate 66 70 80 80 100

63

Balance sheet of bank of baroda:

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

Capital &

Liabilities

         

Equity Capital 365.53 365.53 365.53 365.53 365.53

Preference Capital 0.00 0.00 0.00 0.00 0.00

Share Application

Money

0.00 0.00 0.00 0.00 0.00

Reserves 7478.91 8284.41 10678.40 12470.01 14740.86

Revaluation

Reserves

0.00 0.00 0.00 0.00 0.00

Deposits 93661.99 124915.98 152034.13 192396.95 241044.26

Borrowings 4802.20 1142.56 3927.05 5636.09 13350.09

Other Liabilities &

Provisions

7083.90 8437.70 12594.41 16538.15 8815.97

TOTAL 113392.53 143146.18 179599.52 227406.73 278316.71

Assets          

Cash & Balances

with RBI

3,333.43 6,413.52 9,369.72 10,596.34 13,539.97

Balance with Banks,

Money at Call

10,121.21 11,866.85 12,929.56 13,490.77 21,927.09

Advances 59,911.78 83,620.87 106,701.32 143,985.90 175,035.29

Investments 35,114.22 34,943.63 43,870.07 52,445.88 61,182.38

Net Block 920.73 1088.81 2427 2309.72 2284.76

Capital Work In

Progress

0 0 0 0 0

Other Assets 3,991.16 5,212.50 4,301.83 4,578.12 4,347.22

TOTAL 113,392.53 143,146.18 179,599.52 227,406.73 278,316.71

64

Income

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

Interest Earned 7,100.00 9,212.64 11,813.48 15,091.58 16,698.34

Other Income 1,191.69 1,381.79 2,051.04 2,757.66 2,806.36

Total Income 8,291.69 10,594.43 13,864.52 17,849.24 19,504.70

Expenditure          

Interest expended 3,875.09 5,426.56 7,901.67 9,968.17 10,758.86

Employee Cost 1,523.79 1,644.06 1,803.76 2,348.13 2,350.88

Selling and Admin

Expenses

714.77 646.25 927.20 885.24 1,627.56

Miscellaneous

Expenses

1016.85 1656.81 1564.36 2189.99 1478.21

Preoperative Exp

Capitalised

0 0 0 0 0

Total Op Exp 7,130.50 9,373.68 12,196.99 15,391.53 16,215.51

PBDT 1,161.19 1,220.75 1,667.53 2,457.71 3,289.19

Depreciation 111.13 194.28 232 230.5 230.86

Tax          

Net Profit 1,050.06 1,026.47 1,435.53 2,227.21 3,058.33

supplementory

informations

face value 10.00 10.00 10.00 10.00 10.00

Number of Shares 365530000 365530000 365530000 365530000 365530000

Dividend Rate 66 70 80 80 100

Profit and loss account of bank of baroda

65

Balance sheet of state bank of india:

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

Capital &

Liabilities

         

Equity Capital 526.30 526.30 631.47 634.88 634.88

Preference Capital 0.00 0.00 0.00 0.00 0.00

Share Application

Money

0.00 0.00 0.00 0.00 0.00

Reserves 27117.79 30772.26 48401.19 57312.82 65314.32

Revaluation

Reserves

0.00 0.00 0.00 0.00 0.00

Deposits 380046.06 435521.09 537403.94 742073.13 804116.23

Borrowings 30641.24 39703.34 51727.41 53713.68 103011.60

Other Liabilities &

Provisions

55538.17 60042.26 83362.30 110697.57 80336.70

TOTAL 493869.56 566565.25 721526.31 964432.08 1053413.73

Assets          

Cash & Balances

with RBI

21,652.70 29,076.43 51,534.62 55,546.17 61,290.87

Balance with

Banks, Money at

Call

22,907.30 22,892.27 15,931.72 48,857.63 34,892.98

Advances 261,641.53 337,336.49 416,768.20 542,503.20 631,914.15

Investments 162,534.24 149,148.88 189,501.27 275,953.96 285,790.07

Net Block 2673.11 2676.91 3139.22 3574.41 4117.73

Capital Work In

Progress

79.82 141.95 234.26 263.44 295.18

Other Assets 22,380.84 25,292.31 44,417.03 37,733.27 35,112.76

TOTAL 493,869.56 566,565.25 721,526.31 964,432.08 1,053,413.73

Profit and loss account of state bank of india:

Income

66

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

Interest Earned 35,794.93 39,491.03 48,950.31 63,788.43 70,993.92

Other Income 7,388.69 7,446.76 9,398.43 12,691.35 14,968.15

Total Income 43,183.62 46,937.79 58,348.74 76,479.78 85,962.07

Expenditure          

Interest expended 20,159.29 23,436.82 31,929.08 42,915.29 47,322.48

Employee Cost 8,123.04 7,932.58 7,785.87 9,747.31 12,754.65

Selling and Admin

Expenses

1,853.32 3,251.14 4,165.94 5,122.06 7,898.23

Miscellaneous

Expenses

7912.15 7173.55 7058.75 8810.75 7888

Preoperative Exp

Capitalised

0 0 0 0 0

Total Op Exp 38,047.80 41,794.09 50,939.64 66,595.41 75,863.36

PBDT 5,135.82 5,143.70 7,409.10 9,884.37 10,098.71

Depreciation 729.13 602.39 679.98 763.14 932.66

Tax          

Net Profit 4,406.69 4,541.31 6,729.12 9,121.23 9,166.05

supplementory

information

face value 10.00 10.00 10.00 10.00 10.00

Number of Shares 526300000 526300000 631470000 634880000 634880000

Dividend Rate 66 70 80 80 100

67