NAME &LOGO INDIAN INSTITUTE OF PLANNING AND MANAGEMENT STUDENT NAME MAHESH KUMAR PANDEY BATCH AND SECTION SPRING SUMMER & SF-1 STUDENT ID D1113SSIIPMPGPA10009(CHD-6-CA-2052) COMPANY NAME TITLE OF REPORT COMPRATIVE STUDY OF FINANCIAL REPORT OF TOP THREE BANK OF INDIA AREA OF RESEARCH PRODUCT & SERVICES WITH FINANCIL ANALYSIS INTERNSHIP START & FINISH DATE 1 ST MARCH–30 TH APRIL (2012) PHONE.NO : 09910220753 E.MAIL: [email protected]
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Analysis of financial statements is an attempt to assess the efficiency and performance of anenterprise. For that there are some objectives which are described as under.
To know the project financed by SBI, ICICI, PNB.
To analysis SBI, ICICI, PNB bank financial statement.
To understand the importance of financial statement analysis calculate, the ratio and also analyzethem.
Through the net profit ratio and other profitability ratio, understand the profitability position of SBI,
ICICI, PNB.
Evaluating company performance relating to financial statement analysis.
To know the Liquidity position of the company, with the help of current ratio.
To know the policies of SBI, ICICI, PNB towards the project financing.
To know the risk involved in project financing.
To appraise the project using financing tools.
To know the measures taken by bank when the client fail to repay the amount.
SBI has five associate banks; all use the same logo of a blue circle and all the associates use the "StateBank of" name, followed by the regional headquarters' name:
State Bank of Bikaner & Jaipur State Bank of Hyderabad State Bank of Mysore State Bank of Patiala State Bank of Travancore.
G. D. Nadaf (Officer Employee Director) Rashpal Malhotra (Director)
D. K. Mittal (Director)
Subir V. Gokarn (Director)
Branches of SBI:
State Bank of India has 172 foreign offices in 37 countries across the globe.
SBI has about 25,000 ATMs (25,000th ATM was inaugurated by the then Chairman of State Bank Shri O.P. Bhatt on 31 March 2011, the day of his retirement); and SBI group(including associatebanks) has about 45,000 ATMs.
SBI has 21,500 branches, including branches that belong to its associate banks. SBI includes 99345 offices in India. India's number one ADB is in bellary i e State bank of India bellary ADB.
ICICI Lombard ICICI Prudential Life Insurance Company Limited ICICI Securities Limited ICICI Prudential Asset Management Company Limited ICICI Venture ICICI Home Finance ICICI direct.com ICICI Foundation.
International
ICICI Bank UK PLC ICICI Bank Canada ICICI Bank Eurasia LLC
ORGANISATIONAL STRUCTURE:
It offers a wide range of banking products and financial services to corporate and retailcustomers through a variety of delivery channels and through its specialized subsidiaries in the areasof investment banking, life and non-life insurance, venture capital and asset management. The Bank has a network of 2,630 branches and 8,003 ATM's in India, and has a presence in 19 countries,including India
The bank 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 andIndonesia. The company's UK subsidiary has established branches in Belgium and Germany.
middle market businesses and government entities. We offer a wide range of retail credit products including
housing loans, personal loans and automobile loans. We cater to the financing needs of the agricultural
sector and have created innovative financing products for farmers. We also provide significant financing to
other priority sectors including small scale industries. Through our treasury operations, we manage ourbalance sheet, including the maintenance of required regulatory reserves, and seek to maximize profits from
our trading portfolio by taking advantage of market opportunities.
Our revenue, which is referred to herein and in our financial statements as our income, consists of
interest income and other income. Interest income consists of interest on advances (including the discount on
bills discounted) and income on investments. Income on investments consists of interest and dividends from
securities and our other investments and interest from interbank loan and cash deposits we keep with theRBI. Our securities portfolio consists primarily of Government of India and state government securities. We
meet our statutory liquidity reserve ratio requirements through investments in these and other approved
securities. We also hold debentures and bonds issued by public sector undertakings and other corporations,
commercial paper, equity shares and mutual fund units.
Our interest expense consists of our interest on deposits as well as borrowings. Our interest Income and
expense are affected by fluctuations in interest rates as well as the volume of activity. Our interest expense isalso affected by the extent to which we fund our activities with low interest or non-interest deposits, and the
extent to which we rely on borrowings.
Our non-interest expense consists principally of operating expenses such as expenses for wages and
employee benefits, rent paid on premises, insurance, postage and telecommunications expenses, printing and
stationery, depreciation on fixed assets, other administrative and other expenses. Provisioning for non-
performing assets, depreciation on investments and income tax is included in provisions and contingencies.
We use a variety of indicators to measure our performance. These indicators are presented in tabular
form in the section titled “Selected Statistical Information”. Our net interest income represen ts our total
interest income (on advances and investments) net of total interest expense (on deposits and borrowings).
Net interest margin represents the ratio of net interest income to the monthly average of total interest earning
assets. Our spread represents the difference between the yield on the monthly average of interest earning
assets and the cost of the monthly average of interest bearing liabilities. We calculate average yield on the
monthly average of advances and average yield on the monthly average of investments, as well as the
average cost of the monthly average of deposits and average cost of the monthly average of borrowings. Our
cost of funds is the weighted average of the average cost of the monthly average of interest bearing
liabilities. For purposes of these averages and ratios only, the interest cost of the unsecured subordinated
bonds that we issue for Tier 2 capital adequacy purposes (“Tier 2 bonds”) is included in our cost of interest bearing liabilities. In our financial statements, these bonds are accounted for as “other liabilities and
provisions” and their interest cost is accounted for under other interest expenses.
Since 1969, when we became a public sector bank, we have managed to continue to grow our business
while maintaining a strong balance sheet. As of September 30, 2004, our total deposits represented 85.9% of
our total liabilities. On average, interest free demand deposits and low interest savings deposits represented
43.8% of these deposits in the first six months of fiscal 2005.These low-cost deposits led to an average costof funds excluding equity for the first six months of fiscal 2005 of 4.7%. As of September 30, 2004, our
gross and net non-performing assets constituted 7.65% and 0.30% of our gross and net advances,
respectively. In fiscal 2004 our total income was Rs. 96.5 billion and our net profit was Rs. 11.1 billion
before adjustment and Rs. 10.6billion after adjustment as part of the restatement of our financial statements
for this Issue. In the first six months of fiscal 2005 our total income was Rs. 51.9 billion and our net profit
was Rs. 7.4billion. Between fiscal 2002 and 2004, our total income grew at a compound annual rate
of12.5%, our unadjusted and adjusted net profit grew at a compound annual rate of 40.4% and37.4%,
respectively, and our total deposits and total advances grew at a compound annual growth rate of 17.1% and
17.2%, respectively.
We intend to maintain our position as a cost efficient and customer friendly institution that
Provides comprehensive financial and related services. We seek to achieve this by continuing to adopt
technology which will integrate our extensive branch network. We intend to grow by cross selling various
financial products and services to our customers and by expanding geographically in India and
internationally. We are committed to excellence in serving the public and also maintaining high standards of
corporate responsibility. In line with our philosophy of aiding Indias development we have opened
branches in many rural areas.
PNB is the third largest bank in India by assets. It was founded in 1894 and is currently the second
largest state-owned commercial bank in India ahead of Bank of Baroda with about 5000 branches across 764
cities. It serves over 37 million customers. The bank has been ranked 248th biggest bank in the world by the
Bankers Almanac, London. The bank's total assets for financial year 2007 were about US$60 billion. PNB
has a banking subsidiary in the UK, as well as branches in Hong Kong, Dubai and Kabul, and representative
World Class Services from a Bank you can Trust Indians everywhere should become enlightened
International citizens. Wherever you are, whichever country you live, enrich that nation, not only
in financial terms, but also with your sweat knowledge and dignity since that is the tradition of the
country from where you came. At the same time, remember we have a common umbilical
connectivity to our motherland, India.
INTERNATIONAL BANKING:
International banking services of State Bank of India are delivered for the benefit of its Indian
customers, non-resident Indians, foreign entities and banks through a network of 84
offices/branches in 32 countries as on 31 March 2008, spread over all time zones. The network is
augmented by a cluster of Overseas and NRI branches within India and correspondent links with
over 522 banks, the world over. Bank's Joint Ventures and Subsidiaries abroad further underline
the Bank's international presence.
The services include corporate lending, loan syndications, merchant banking, handling
Letters of Credit and Guarantees, short-term financing, collection of clean and documentary credits
and remittances.
The Bank has carved a niche for itself in the Euro land with branches located in Antwerp, Paris and
Frankfurt. Indian banks and corporates are able to avail single-window Euro services from the
Bank's Frankfurt branch.
CORPORATE BANKING:
SBI is a one shop providing financial products / services of a wide range for large, medium and
small customers both domestic and international.
Working Capital Financing :
Assistance extended both as Fund based and Non-Fund based facilities to Corporate, Partnershipfirms, Proprietary concerns
Working Capital finance extended to all segments of industries and services sector such as IT TermLoans to support capital expenditures for setting up new ventures as also for expansion, renovationetc.
State Bank of India's linkage with Government business is widespread. No wonder that out of 9315
branches in India, about 7000 branches are conducting Government Business. The large network of our branches provides easy access to the common man to deposit the following Government dues
and pension payments.
SME (small scale industries):
State Bank of India has been playing a vital role in the development of small scale industries since1956.The Bank has financed over 8 lakhs SSI units in the country. It has 55 specialised SSIbranches, 99 branches in industrial estates and more than 400 branches with SIB divisions.
The Bank finances for Small Business activities which are of special significance to a large numberof people as many of these activities can be started with relatively lower investment and with nospecial skills on the part of the entrepreneurs.
Banking at your fingertips !!!Why be inline when you can be online for paying your utility bills, mobile bill, prepared mobileRecharge, shopping credit cards, insurance premium and lots more.
INTERNATIONAL MARKETING:
ICICI Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches inSingapore, Bahrain, Hong Kong, Sri Lanka, Dubai International Finance Centre, Qatar FinancialCentre and the United States and representative offices in the United Arab Emirates, China, SouthAfrica, Bangladesh, Thailand, Malaysia and Indonesia. The Banks wholly owned subsidiary
ICICI Bank UK PLC has nine branches in the United Kingdom and a branch each in Belgium andGermany. ICICI Bank Canada has eight branches including three in Toronto. ICICI Bank EurasiaLLC has six branches including three branches in Moscow and one in St. Petersburg.
Our international strategy is focused on building a retail deposit franchise, diversewholesale funding sources and strong syndication capabilities to support our corporate andinvestment banking business; achieving the status of a non-resident Indian (NRI) community bank in key markets; and expanding private banking operations for India-centric asset classes. Duringfiscal 2008, we focused on deepening our presence in existing overseas locations and expandingour operations in key markets. In line with our strategy to establish a presence in large marketswith significant savings pools, we entered into Germany through a branch established by ICICIBank UK PLC. We have been able to successfully leverage our technology advantage to create agrowing international deposit base. Total deposits of ICICI Bank UK PLC and ICICI Bank Canadaincreased by 76.0% from Rs. 191.28billion at March 31, 2007 to Rs. 335.86 billion at March 31,2008. We also received approval for and commenced branch operations in the United States.
Through our international private banking services, we offer various products to mass affluentand high net worth clients based on their financial needs and risk appetite. The offerings rangefrom simple deposits and loans to more sophisticated structured products, private equity andproducts giving exposure to the real estate sector in India.
CORPORATE BANKING:
Our corporate banking strategy is based on providing comprehensive and customised financialsolutions to our corporate customers. We offer a complete range of corporate banking productsincluding rupee and foreign currency debt, working capital credit, structured financing, syndicationand transaction banking products and services.
We have created an integrated Global Investment Banking Group, which is responsible forworking with the relationship team in India and our international subsidiaries and branches, fororigination, structuring and execution of investment banking mandates on a global basis. We havealso restructured our delivery team for transaction banking products by creating dedicated sales
teams for trade services and transaction banking products. This has been done with the intent toincrease our market share from transaction banking products, which will translate into recurring feeincome for the Bank. We have also focused on increasing market share in trade finance byleveraging and further strengthening correspondent banking relationships. 22.
During fiscal 2008, our small enterprises customer base increased by 26% to about 1.1 million
accounts. We have introduced our service offerings in over 400 new branches, increasing ourcoverage to over 1,000 branches. During the year, we have focused on product specialisation
including investment banking for SMEs. We have continued to focus on shaping the small and
medium enterprises sphere in India through initiatives such as the Emerging India Awards”, the
SME CEO Knowledge Series - a platform to mentor and assist SME entrepreneurs, and the “SME
Dialogue” - a weekly feature in a leading financial newspaper sharing SME best practices and
success stories. During the year, we have launched several new products and services like the SME
toolkit – an online business and advisory resource for SMEs.
RURAL BANK- AGRI BUSINESS:
We believe the rural economy has high growth potential and offers large credit growthopportunities. Towards this end, our suite of products and services is targeted to address the needsof both the farm and non-farm sectors. Our retail product suite encompasses loans for cropproduction, purchase of farm equipment; commodity based finance as well as various savings,investment and insurance products. We also offer micro-finance and jewel loans. We have alsofocused on enhancing credit to farmers by leveraging on corporate partnerships. For example, wehave partnered with various dairies to provide financing to farmers for purchase of milch cattle.We also provide credit and banking services to SMEs active in the agricultural value chain. Toenhance our service quality and product delivery capabilities we have developed a large network of
rural branches which is further augmented by non-branch channels.
Rural banking in India is still at a nascent stage and the deployment of technologychannels and modern banking methods for rural lending continues to be an evolving process. Inline with our learning from our rural banking operations, we undertook a comprehensive review of and realigned our channel architecture, credit underwriting processes and account managementsystems. We have put in place a robust risk management structure to Mitigate and manage credit,operational and fraud risks. Through this, we aim to create a strong foundation for scaling up of ourrural business.
CORPORATE AND COMMERCIAL SECTOR LENDING ACTIVITIES
Term loans
Cash credit and other working capital facilities
Bill discounting
Export credits
Other credit and financing products
SERVICES TO NON-RESIDENT INDIANS
We provide personal financial services for NRIs. We have established a branch in Kabul andRepresentative offices in other cities overseas in order to facilitate services being provided to NRIs.We offer foreign currency accounts to NRIs under our Foreign Currency Non-Resident Scheme andrupee accounts for NRIs under our Non-Resident External and Non-Resident Ordinary Schemes. Wehave introduced our Global Foreign Currency Scheme and Global Rupee Deposit Scheme, which
offer benefits and concessions to NRIs and their relatives provided a minimum balance of Rs.250,000 or US$5,000 is maintained in the account. We also offer various products for facilitatingremittances from NRIs to India. We recently entered into an arrangement to facilitate moneytransfers through Western Union, which is a global leader in money transfer services. We have alsoentered into an agreement with Times Online Money Ltd., a Times of India group company, with aview to establishing an internet based international remittance service. In addition, we also providehousing loans to NRIs.
RETAIL BANKING
In retail banking, our principal competitors are the large public sector banks, as well as existing andnew private sector banks and foreign banks in the case of retail loan products. The other public sectorbanks have large deposit bases and large branch networks, including the State Bank of India whichhas 13,593 branches. Private sector and foreign banks compete principally by offering a wider rangeof products as well as greater technological sophistication in some cases.
Foreign banks, while having a small market penetration overall, has a significant presence among non-resident Indians and also competes for non-branch based products such as auto loans and credit cards.
In particular, we face significant competition primarily from private sector banks and to a lesser
degree from other public sector banks, in the housing, auto and personal loan segments. In mutualfund sales and other investment related products, our principal competitors are brokers, foreignbanks and new private sector banks.
Agriculture contributes 22% to Indias GDP and supports approximately two-thirds of Indias
population. In fiscal 2004, we surpassed the stated national goal that banks should provide atleast18% of their net bank credit (which is gross credit minus Foreign Currency Non-Resident Bank deposits) to this segment, for which we received an award from Indias Finance Minister. Our
average credit growth rate in this segment has been 32.2% over the last four years. As of the lastreporting Friday of September 2004, agricultural loans constituted 18.8% of our net bank credit.
SMALL SCALE INDUSTRIES
We provide financing to “small scale industries” or “SSIs”. SSIs are defined as manufacturing,
processing and servicing businesses with up to Rs. 50 million invested in plant and machinery forcertain industries such as hosiery, hand tools, drugs and pharmaceuticals and stationery items and upto Rs. 10 million invested in plant and machinery for other small scale industries. SSIs are alsoconsidered a priority sector for directed lending purposes.
See the section titled “Business-Directed Lending” below. As of the last reporting Friday inSeptember 2004, SSI loans constituted 11.3% of our net bank credit. As of the last reporting Fridayin September, 2004 we had an outstanding loan portfolio of Rs. 57.3 billion in this segmentcompared to Rs. 48.5 billion as of the last reporting Friday in September 2003, representing growth
of approximately 18.1%.We have also received awards and recognition from the Government of India relating to our efforts in financing SSI businesses.
Capital Work In Progress 332.23 295.18 263.44 234.26
Other Assets 43,777.85 35,112.76 37,733.27 44,417.03
Total Assets 1,223,736.20 1,053,413.74 964,432.08 721,526.32
Balance sheet keep clean up and hits profit:
If you see total assets as compare to previous year .This time SBI gain Rs.170322.46 crore. Itshow, the bank is gain huge profit and their product and services customers attract on them.
Cash and Balance show how SBI can manage in 2011 Rs.94,395.50 crore as previous year onlythey gain Rs.61,290.87 crore.
They Investement in markets Rs.295,600.57 crore
SBI can grow every year as per see the data of 4 year back how bank can grow and developed ineconomy. 26.
NII at Rs.96.9 billion well ahead of our and street expectations. Net profit Rs.15.8 billion wasdragged by provision towards regulated requirements.
If you see positive way: NIM expenses of 44 bps y-o-y aided by 2% q-o-q growth in loan book,lending rate hikes (170 bps) past 1 years and deposit lower rates.
If you see negative way: Assets quality, Net worth at 18% and slippages at 3.2% annual;slippages from SME and agricultural segments. The bank has already migrated to system basedon NPA recognition. NPA provision at Rs.27 billion credit cost came in at 1.6% annually.
The tax provision has also remain high 49% of PBT and 21% of operating profit. Some portion of the pension expenses were not tax deductible and also provision for NPA are not deductibleexpenses.
In coming 2012 :
Earning by 12% for higher NPA and Tax provision .Right must be balance sheet growthmaintain hold with TP of Rs.2,200
NII grew 33% y-o-y to Rs.96.9 billion above our streetexpectation.NII growth was led bymargin expansion of 44 bps y-o-y to 3.62% and loan growth of 2% (18% y-o-y). Cost of deposit at 5.7% was up and advanced 10.43%.
Lower non-interest income and higher provision including tax outgo.The bank made provisiontowards NPA including restructured assets and counter cyclical requirements.
Margin expansion aided by lending rate hike and repricing of deposit at relatively lower rateloan growth targeted 16-19% y-o-y.
Best CASA ratio deposit targeted to grow at 19% y-o-y in 2012.CASA ratio 48% remainindustry best for SBI.Total deposit for the bank grew 16.5% y-o-yand the management hasguided for deposit growth of 19% y-o-y over 2012.
Non-interest and dividend hit by lower treasury and dividend income (fee income up 9% y-o-y
Advance grew 27.6% y-o-y driven by the 45.9%, 32.7% and 29% y-o-y growth in MSME,
retail and agricultural segments‟.
PNB growth both sector advance and deposit.
Industry growth rate CASA deposit grew at a healthy 24.9% y-o-y driven by 24.3% y-o-ygrowth in Current account Saving account deposit.
NIM high but likely to come down, going forward.
NIM expected 4.06% and NII increased by a healthy 42.1% y-o-y and 13.7% q-o-q to
Rs.2,977 crore.
Operating expanses increased by a substantial 14.6% q-o-q and 37.8% y-o-y employeecosts 12.1% y-o-y.
PNB has cumulatively restructured Rs.13.545 crore worth of loan till date (6.5% loans,68.2% of the net worth ) which is higher there industry standards.
IN COMING 2012:
PNB Net Profit growth 12.1% y-o-y to Rs.1,205 crore.
Key Positive way: They improved NIM as well as slippage remaining under check,despit, completion of migration to system based NPA recognition platform.
Advanced growing by 19.3% y-o-y and deposit increasing by 25% y-o-y.
FD interest rate growth in CASA deposit 11.7% y-o-y
NIM of back improved by 4.0%
Fee income growth was sluggish as fresh credit linked fees declined 27.4% y-o-y.
NPA remained largely flat sequently at Rs.2,089 crore as compared to Rs.2,091crore in 2012.
Central govt.shareholding in bank has increased 58%, which provide headroom of 7% for equity capital raising with any support from government. 31.
A class of financial metrics that are used to assess a business's ability to generate earnings ascompared to its expenses and other relevant costs incurred during a specific period of time. Formost of these ratios, having a higher value relative to a competitor's ratio or the same ratio from aprevious period is indicative that the company is doing well.
EXAMPLE:
Typically experiences higher revenues and earnings for the Christmas season. Therefore, it would
not be too useful to compare a retailer's fourth-quarter profit margin with its first-quarter profitmargin. On the other hand, comparing a retailer's fourth-quarter profit margin with the profitmargin from the same period a year before would be far more informative.
OPERATING MARGIN:
A ratio used to measure a company's pricing strategy and operating efficiency. Operating margin isa measurement of what proportion of a company's revenue is left over after paying for variablecosts of production such as wages, raw materials, etc. A healthy operating margin is required for a
company to be able to pay for its fixed costs, such as interest on debt. It Is Also known as"operating profit margin."
CALCULATED AS:
OPERATING MARGIN = OPERATING INCOME
NET SALE
Operating margin gives analysts an idea of how much a company makes (before interest and taxes)on each dollar of sales. When looking at operating margin to determine the quality of a company, it
is best to look at the change in operating margin over time and to compare the company's yearly orquarterly figures to those of its competitors. If a company's margin is increasing, it is earning moreper dollar of sales. The higher the margin, the better.
FOR EXAMPLE
If a company has an operating margin of 12%, this means that it makes $0.12 (before interest andtaxes) for every dollar of sales. Often, nonrecurring cash flows, such as cash paid out in a lawsuitsettlement, are excluded from the operating margin calculation because they don't represent acompany's true operating performance.
It shows that operating efficiency of SBI is better than PNB and ICICI. While operating efficiencyof ICICI is lower than PNB and SBI. So rank of operating efficiency of banks can be given as SBI,PNB and ICICI.
A financial metric used to assess a firm's financial health by revealing the proportion of money leftover from revenues after accounting for the cost of goods sold. Gross profit margin serves as thesource for paying additional expenses and future savings. It is also known as "gross margin".
CALCULATED AS:
GROSS PROFIT MARGIN = REVENUE- COGS
NET SALE
FOR EXAMPLE:
Suppose that ABC Corp. earned $20 million in revenue from producing widgets and incurred $10million in COGS-related expense. ABC's gross profit margin would be 50%. This means that forevery dollar that ABC earns on widgets, it really has only $0.50 at the end of the day.
This metric can be used to compare a company with its competitors. More efficient companieswill usually see higher profit margins.
This ratio shows financial position of company. Here, financial position of SBI is better than PNBand ICICI. So SBI is at first rank by its financial position than PNB and ICICI.
NET PROFIT MARGIN:
Net profit margin ratio indicates profit levels of a business after all costs have been taken into account.It is worth analysing the ratio over time. A variation in the ratio from year to year may be due toabnormal conditions or expenses. Variations may also indicate cost blowouts which need to beaddressed.
A decline in the ratio over time may indicate a margin squeeze suggesting that productivityimprovements may need to be initiated. In some cases, the costs of such improvements may lead to afurther drop in the ratio or even losses before increased profitability is achieved.
This ratio is key performance indicators for business. Key performance means the profit levelof company; from above graph we can say that performance of PNB is better than SBI andICICI. So profit level of PNB is at first rank than comes SBI and ICICI.
Return on Net worth (RONW) is used in finance as a measure of a company‟s profitability. It
reveals how much profit a company generates with the money that the equity shareholders haveinvested. Therefore, it is also called Return on Equity (ROE)
CALCULATED AS:
RONW = NET INCOME * 100
SHARE HOLDER EQUITY
RONW is a measure for judging the returns that a shareholder gets on his investment as ashareholder, equity represents your money and so it makes good sense to know how wellmanagement is doing with it.
This ratio is useful for comparing the profitability of a company to that of other firms in thesame industry. Here, profitability of PNB is more than SBI and PNB. So we can say that PNB
is at first rank by its profitability than comes SBI and ICICI.
LEVERAGE RATIO:
Any ratio used to calculate the financial leverage of a company to get an idea of the company'smethods of financing or to measure its ability to meet financial obligations. There are severaldifferent ratios, but the main factors looked at include debt, equity, assets and interest expenses.
A ratio used to measure a company's mix of operating costs, giving an idea of how changes in
output will affect operating income. Fixed and variable costs are the two types of operating costs;depending on the company and the industry, the mix will differ.
DEBT EQUITY RATIO:
A measure of a company's financial leverage calculated by dividing its total liabilities bystockholders' equity.
CALCULATED AS:
DEBT EQUITY RATIO = TOTAL LIABALITIES
SHAREHOLDER’S EQUITY
If a lot of debt is used to finance increased operations (high debt to equity), the company couldpotentially generate more earnings than it would have without this outside financing. If this were toincrease earnings by a greater amount than the debt cost (interest), then the shareholders benefit asmore earnings are being spread among the same amount of shareholders. However, the cost of thisdebt financing may outweigh the return that the company generates on the debt through investmentand business activities and become too much for the company to handle. This can lead tobankruptcy, which would leave shareholders with nothing.
The debt/equity ratio also depends on the industry in which the company operates.
EXAMPLE:
Capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio above 2, whilepersonal computer companies have a debt/equity of under 0.5.
This ratio indicates what proportion of equity and debt the company is using to finance itsassets. From above diagram we can say that PNB has a high debt-equity ratio means it isaggressive in financing its growth with debt. Than after SBI has a low debt-equity ratio ascomparison with PNB and ICICI comes at third rank in debt-equity ratio.
Measure of the productivity of a firm, it indicates the amount of sales generated by each dollarspent on fixed assets, and the amount of fixed assets required to generate a specific level of revenue. Changes in the ratio over time reflect whether or not the firm is becoming more efficientin the use of its fixed assets.
CALCULATED AS:
FIXED ASSETS TURNOVER RATIO = SALE REVENUE / AVG.FIXED ASSETS
This ratio shows specific level of revenue by the amount of fixed assets. SBI has a high level of revenue in comparison with ICICI and PNB. After SBI, ICICI has a high level of revenue andthan comes PNB at last.
LIQUIDITY RATIO:
Common liquidity ratios include the current ratio, the quick ratio and the operating cash flow ratio.Different analysts consider different assets to be relevant in calculating liquidity. Some analystswill calculate only the sum of cash and equivalents divided by current liabilities because they feelthat they are the most liquid assets, and would be the most likely to be used to cover short-termdebts in an emergency.
A company's ability to turn short-term assets into cash to cover debts is of the utmost importancewhen creditors are seeking payment. Bankruptcy analysts and mortgage originators frequently usethe liquidity ratios to determine whether a company will be able to continue as a going concern.
CURRENT RATIO:
This ratio is a rough indication of a firm's ability to service its current obligations. Generally, thehigher the current ratio, the greater the "cushion" between current obligations and your Company'sability to pay them. The composition and quality of current assets is a critical factor in the analysis
of your Company's liquidity. It is calculated as Total current assets divided by total currentliabilities.
Current ratio of ICICI is higher than SBI and PNB, means ICICI has a high ability to pay for itsliabilities, and than secondly comes SBI and PNB has a low ability to pay for liabilities incomparison with ICICI and PNB.
QUICK RATIO:
It is also known as the "Acid Test" ratio; it is a refinement of the current ratio and is a moreconservative measure of liquidity. The ratio expresses the degree to which your current Company's
current liabilities are covered by the most liquid current assets. Generally, any value of less than 1to 1 implies a "dependency" on inventory or other current assets to liquidate short-term debt.
It is calculated as Cash plus trade receivables divided by total current liabilities.
PNB has a high quick ratio means it has enough current assets to cover its current liabilities,while SBI and ICICI have a low quick ratio in comparison with PNB.
PAYOUT RATIO:
The amount of earnings paid out in dividends to shareholders. Investors can use the payout ratio todetermine what companies are doing with their earnings.
CALCULATED AS:
PAYOUT RATIO = DIVIDEND PER SHARE
EARNING PER SHARE
FOR EXAMPLE:
A very low payout ratio indicates that a company is primarily focused on retaining its earningsrather than paying out dividends. The payout ratio also indicates how well earnings support thedividend payments: the lower the ratio, the more secure the dividend because smaller dividends areeasier to pay out than larger dividends.
INTERPRETATION: ICICI has a high dividend payout ratio, so the Investors who areseeking high current income and limited capital growth should be invest in ICICI bank. PNBand SBI have a low dividend payout ratio, so investors who are seeking capital growth shouldbe invest in PNB and SBI because capital gains are taxed at a lower rate.
It can also be calculated as one minus the dividend payout ratio.
RATIO AT 31ST
MARCH-2011
Sr.No NAME OF BANK PERCENTAGE %
1. SBI 77.33%
2. ICICI 66.35%
3. PNB 76.59%
BAR-GRAPH
INTERPRETATION:
Earning retention ratio is the opposite of the dividend payout ratio. SBI and PNB have a highearning retention ratio, so the Investors who are seeking high current income and limitedcapital growth should be invest in SBI and PNB. ICICI has a low earning retention ratio, so theinvestors who are seeking capital growth should be invest in ICICI BANK. 45.
Ratios make the related information comparable. A single figure by itself has no meaning, butwhen expressed in terms of a related figure, it yields significant interferences. Thus, ratios arerelative figures reflecting the relationship between related variables. Their use as tools of financial analysis involves their comparison as single ratios, like absolute figures, are not of much use.
Ratio analysis has a major significance in analysing the financial performance of a company
over a period of time. Decisions affecting product prices, per unit costs, volume or efficiencyhave an impact on the profit margin or turnover ratios of a company.
Financial ratios are essentially concerned with the identification of significant accounting datarelationships, which give the decision-maker insights into the financial performance of acompany.
The analysis of financial statements is a process of evaluating the relationship betweencomponent parts of financial statements to obtain a better understanding of the firms position
and performance.
The first task of financial analyst is to select the information relevant to the decision underconsideration from the total information contained in the financial statements. The second stepis to arrange the information in a way to highlight significant relationships. The final step isinterpretation and drawing of inferences and conclusions. In brief, financial analysis is theprocess of selection, relation and evaluation.
Ratio analysis in view of its several limitations should be considered only as a tool for analysisrather than as an end in itself. The reliability and significance attached to ratios will largelyhinge upon the quality of data on which they are based. They are as good or as bad as the data
itself. Nevertheless, they are an important tool of financial analysis.