Fundamental ND Technical Analysis of Indian Banking Sector

Fundamental and Technical Analysis of Indian Banking Sector
Research Methodology
Objectives
To ascertain and analyze the strength of public & private sector banks through measurement of performance indicators To analyze trends in significant heads of balance sheet and profit & loss account To apply Altmans Z -score bankruptcy model in order to know how far banks are safe to bankruptcy
Method
Research method used for survey is Data Analysis mainly consisting of distinctive models like Trend analysis, CAMEL analysis, Z-score Analysis and Technical analysis. These models focus mainly on quantitative aspects as they witness performance of a bank based on derivation of different ratios pertaining to a banks capital adequacy, asset quality, management efficiency, earnings capacity, liquidity, proximity to bankruptcy, trends in significant heads of balance sheet and profit & loss account and lastly a glimpse of movement of share price in the market based on the historical data.
Data Analysis
Descriptive analysis will be used in order to draw conclusion. Outcome of the study will be presented in tables and graphs for easy understanding of the findings of the research.
N. R. Institute of Business Management
Research Design
The study may be viewed as a formal study wherein resea rch problem requires examining the current state of the banks in a typically structured manner with validation - rejection of certain hypothesis and ascertaining probable opportunities. Hence, Descriptive Research Design Approach has been employed to accomplish the project.
Limitations of Study
Ratios forming part of analysis are calculated based on the data available through secondary sources and validity of that data cannot be ascertained. Though ratios have been computed using practices to the best of our knowledge. Distinctive tools used for analysis may not certify that a particular bank is excels in all dimensions of business as different tools may lay contradictory results for the same bank. Service Quality is based largely on quality of personnel in service centric organizations like banks and thus, is difficult to measure. Though competence measures demand but it has been observed that the major determinant of demand in this type of industry is maintenance of Prestigious Relations and Prominent Contacts . It implies that the best in performance need not be the one with higher profitability in this type of industry.
Sample Design
Population Elements
The relevant population elements for the research consist of the following: Existing Public & Private Sector Banks in India
Sample Size
1) Existing Public Sector Banks in India Bank of Baroda Bank of India Canara Bank IDBI Bank Punjab National Bank State Bank of India
2) Existing Private Sector Banks in India Axis Bank HDFC Bank ICICI Bank Kotak Mahindra Bank
Sampling Method
The method used for the project is Stratified Sampling .
Sources of Data
Data collection has solely been done through secondary sources.
Primary Source
No primary sources have been used in data collection.
Secondary Sources
Articles Books Newspapers Annual Reports Bank Website Center for Monitoring Indian Economy (CMIE) Data
1. Introduction to Indian Banking Sector

Banks are the most significant players in the Indian financial market. They are the biggest purveyors of credit, and they also attract most of the savings from the population. Dominated by public sector, the banking industry has so far acted as an efficient partner in the growth and the development of the country. Driven by the socialist ideologies and the welfare state concept, public sector banks have long been the supporters of agriculture and other priority sectors. They act as crucial channels of the government in its efforts to ensure equitable economic development. The Indian banking can be broadly categorized into nationalized (government owned), private banks and specialized banking institutions. The Reserve Bank of India acts a centralized body monitoring any discrepancies and shortcoming in the system. Following the nationalization of banks in 1969, the public nationalized banks have prominence and has since progress. The need to focused has forced the sector banks to adopt a sector acquired then seen banks a or place the of
tremendous
become highly customer slow moving public
fast track approach. The
unleashing of products and services through the net has galvanized players at all levels of the banking and financial institutions market grid to look a further at their existing portfolio offering. Conservative banking practices allowed Indian banks to be insulated partially from the Asian currency crisis. Indian banks are now quoting at higher valuation when compared to banks in other Asian countries (viz. Hong Kong, Singapore, Philippines etc.) that have major problems linked to huge Non Performing Assets (NPAs) and payment defaults. Co-operative banks are nimble footed in approach and armed with efficient branch networks focusing primarily on the high revenue niche retail segments. The Indian banking has finally worked up to the competitive dynamics of the new Indian market and is addressing the relevant issues to take on the varied challenges of globalization. Banks that employ IT solutions are perceived to be futuristic and proactive players capable of meeting the varied requirements of the large customer base. Private Banks have been prompt on
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the uptake and are reorienting their strategies using the internet as a medium. The Internet has emerged as the new and challenging frontier of marketing with the conventional physical world creed being just as applicable like in any other marketing medium. The Indian banking has come from a long way from being a sleepy business institution to a highly proactive and dynamic entity. This transformation has been largely brought about by the large dose of liberalization and economic reforms that allowed banks to explore new business opportunities rather than generating revenues from conventional streams (i.e. borrowing and lending). The banking in India is highly fragmented with 30 banking units contributing to almost 50% of deposits and 60% of advances. Indian nationalized banks (banks owned by the government) continue to be the major lenders in the economy due to their sheer size and penetrative networks which assures them high deposit mobilization. The Indian banking can be broadly categorized into nationalized, private banks and specialized banking institutions. The liberalize policy of Government of India permitted entry to private sector in the banking, the industry has witnessed the entry of nine new generation private banks. The major differentiating parameter that distinguishes these banks from all the other banks in the Indian banking is the level of service that is offered to the customer. Their focus has always rested on the customer understanding his needs, preempting him and consequently delighting him with various configurations of benefits and a wide portfolio of products and services. These banks have generally been established by promoters of repute or by high value domestic financial institutions. The popularity of these banks can be gauged by the fact that in a short span of time, these banks have gained considerable customer confidence and consequently have shown impressive growth rates. Today, the private banks comprise of almost 4% share of the total share of deposits. Most of the banks in this category are concentrated in the high growth urban areas in metros (that account for approximately 70% of the total banking business). With efficiency being the major focus, these banks have leveraged on their strengths and competencies viz. Management, operational efficiency & flexibility, superior product positioning and higher employee productivity skills.
The private banks with their focused business and service portfolio have a reputation of being niche players in the industry, a strategy that has allowed these banks to concentrate on few reliable high net worth companies and individuals rather than cater to the mass market. These well-chalked out integrates strategy plans that have allowed most of these banks to deliver superlative levels of personalized services. With the Reserve Bank of India allowing these banks to operate 70% of their businesses in urban areas, this statutory requirement has translated into lower deposit mobilization costs and higher margins relative to public sector banks.
Evolution
Banking in India originated in the last decades of the 18th century. The oldest bank in existence in India is the State Bank of India, a government-owned bank that traces its origins back to June 1806 and that is the largest commercial bank in the country. Central banking is the responsibility of the Reserve Bank of India, which in 1935 formally took over these responsibilities from the then Imperial Bank of India, relegating it to commercial banking functions. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers. In 1969 the government nationalized the 14 largest commercial banks; the government nationalized the six next largest in 1980. Currently, India has 96 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 % of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively. Early History Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India which started in 1786, and the Bank of Hindustan, both of which are now non-operational. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three government banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the government banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India.
Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank in India. It was not the first though. That honour belongs to the Bank of Upper India, which was established in 1863, and which survived until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of Simla. Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Pondichery, then a French colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking center. The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the present and is now one of the largest banks in India. The government banks dominated banking in India but there were also some exchange banks and a number of Indian joint stock banks. All these banks operated in different segments of the economy. The exchange banks, mostly owned by Europeans, concentrated on financing foreign trade. Indian joint stock banks were generally undercapitalized and lacked the experience and maturity to compete with the presidency and exchange banks. This segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments." The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi movement. The Swadeshi movement inspired local businessmen and political figures to found banks of and for the Indian community. A number of banks established then have survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India.
World War I to Independence The period during the First World War (1914-1918) through the end of the Second World War (1939-1945), and two years thereafter until
the independence of India were challenging for Indian banking. The years of the First World War were unstable, and it took its toll with banks simply collapsing despite the Indian economy gaining indirect boost due to warrelated economic activities. At least 94 banks in India failed between 1913 and 1918 as indicated in the following table:
Year 1913 1914 1915 1916 1917 1918
No. of Banks that Failed 12 42 11 13 9 7
Authorised Capital ( Rs. Lakhs) 274 710 56 231 76 209
Paid-up Capital (Rs. Lakhs) 35 109 5 4 25 1
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Post Independence The partition of India in 1947 adversely impacted the economies of Punjab and West Bengal, paralyzing banking activities for months. India's independence marked the end of a regime of the Laissez-faire for the Indian banking. The Government of India initiated measures to play an active role in the economic life of the nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy. This resulted into greater involvement of the state in different segments of the economy including banking and finance. The major steps to regulate banking included: In 1948, the Reserve Bank of India, India's central banking authority, was nationalized, and it became an institution owned by the Government of India. In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India." The Banking Regulation Act also provided that no new bank or branch of an existing bank could be opened without a license from the RBI, and no two banks could have common directors. However, despite these provisions, control and regulations, banks in India except the State Bank of India, continued to be owned and operated by private persons. This changed with the nationalisation of major banks in India on 19 July 1969.
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Nationalization
By the 1960s, the Indian banking industry had become an important tool to facilitate the development of the Indian economy. At the same time, it had emerged as a large employer, and a debate had ensued about the possibility to nationalise the banking industry. Indira Gandhi, thethen Prime Minister of India expressed the intention of the GOI in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalisation." The paper was received with positive enthusiasm. Thereafter, her move was swift and sudden, and the GOI issued an ordinance and nationalised the 14 largest commercial banks with effect from the midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August 1969. A second dose of nationalization of 6 more commercial banks followed in 1980. The stated reason for the nationalization was to give the government more control of credit delivery. With the second dose of nationalization, the GOI controlled around 91% of the banking business of India. Later on, in the year 1993, the government merged New Bank of India with Punjab National Bank. It was the only merger between nationalized banks and resulted in the reduction of the number of nationalised banks from 20 to 19. After this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy. The nationalised banks were credited by some, including Home minister P. Chidambaram, to have helped the Indian economy withstand the global financial crisis of 2007-2009.
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Liberalization
In the early 1990s, the then Narsimha Rao government embarked on a policy of liberalization, licensing a small number of private banks. These came to be known as New Generation techsavvy banks, and included Global Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, Axis Bank(earlier as UTI Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, revitalized the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks. The next stage for the Indian banking has been setup with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%, at present it has gone up to 74% with some restrictions. The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of functioning. The new wave steered in a
modern outlook and tech-savvy methods working traditional banks. All this led to the retail boom in India. People not just demanded more from their of for
banks but also received more.
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In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has been allowed to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any stake exceeding 5% in the private sector banks would need to be scrutinized by them. Currently, banking in India is generally fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly been true. With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector; the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. One may also expect M & As, takeovers, and asset sales. In recent years critics have charged that the non-government owned banks are too aggressive in their loan recovery efforts in connection with housing, vehicle and personal loans. There are press reports that the banks' loan recovery efforts have driven defaulting borrowers to suicide.
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Players in the Indian Banking Sector
The Reserve Bank of India acts as a centralized body monitoring any discrepancies and shortcoming in the system. It is the foremost monitoring body in the Indian financial sector. The nationalized banks (i.e. government-owned banks) continue to dominate the Indian banking arena. Industry estimates indicate that out of 274 commercial banks operating in India, 223 banks are in the public sector and 51 are in the private sector. The private sector bank grid also includes 24 foreign banks that have started their operations here.
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Some of the prominent players that have made their presence invincible and have constituted the Indian banking sector can be classified as under:
Public Sector Banks

Nationalised Banks
Bank of Baroda Bank of India Canara Bank Corporation Bank Dena Bank Oriental Bank of Commerce Punjab National Bank Union Bank of India Central Bank of India Vijaya Bank
SBI & Associates

State Bank of India
State Bank of Bikaner & Jaipur State Bank of Hyderabad State Bank of Indore State Bank of Mysore State Bank of Patiala State Bank of Saurashtra State Bank of Travancore
Private Sector Banks Foreign Banks

Axis Bank Ltd. HDFC Bank Ltd. ICICI Bank Ltd. Indusind Bank Ltd. Kotak Mahindra Bank Ltd. YES Bank Development Credit Bank Ltd. Karur Vysya Bank Ltd. ING Vysya Bank Ltd. ABN-AMRO Bank N.V. American Express Bank Ltd. Barclays Bank PLC BNP Paribas Citibank N.A. Deutsche Bank AG HSBC Ltd. Standard Chartered Bank DBS Bank Ltd.
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Role of Reserve Bank of India

Reserve Bank of India was nationalised in the year 1949. The general superintendence and direction of the bank is entrusted to Central Board of Directors of 20 members, the Governor and 4 Deputy Governors, 1 Government official from the Ministry of Finance, 10 nominated Directors by the Government to give representation to important elements in the economic life of the country, and 4 nominated Directors by the Central Government to represent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and New Delhi. Local Boards consist of 5 members each Central Government appointed for a term of four years to represent territorial and economic interests and the interests of co-operative and indigenous banks. The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II of 1934) provides the statutory basis of the functioning of the Bank. The Bank was constituted for the need of following:

To regulate the issue of banknotes To maintain reserves with a view to securing monetary stability and To operate the credit and currency system of the country to its advantage.
The Reserve Bank of India Act of 1934 entrust all the important functions of a central bank the Reserve Bank of India. Bank of Issue Under Section 22 of the Reserve Bank of India Act, the Bank has the sole right to issue bank notes of all denominations. The distribution of one rupee notes and coins and small coins all over the country is undertaken by the Reserve Bank as agent of the Government. The Reserve Bank has a separate Issue Department which is entrusted with the issue of currency notes. The assets and liabilities of the Issue Department are kept separate from those of the Banking Department. Originally, the assets of the Issue Department were to consist of not less than two-fifths of gold coin, gold bullion or sterling securities provided the amount of gold was not less than Rs. 40 crores in value. The remaining three-fifths of the assets might be held in rupee coins, Government of India rupee securities, eligible bills of exchange and promissory notes payable in India. Due to the exigencies of the Second World War and the post-war period, these provisions were considerably modified. Since 1957, the Reserve Bank
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of India is required to maintain gold and foreign exchange reserves of Ra. 200 crores, of which at least Rs. 115 crores should be in gold. The system as it exists today is known as the minimum reserve system. Banker to Government The second important function of the Reserve Bank of India is to act as Government banker, agent and adviser. The Reserve Bank is agent of Central Government and of all State Governments in India except the state of Jammu and Kashmir. The Reserve Bank has the obligation to transact Government business, via. to keep the cash balances as deposits free of interest, to receive and to make payments on behalf of the Government and to carry out their exchange remittances and other banking operations. The Reserve Bank of India helps the Government - both the Union and the States to float new loans and to manage public debt. The Bank makes ways and means advances to the Governments for 90 days. It makes loans and advances to the States and local authorities. It acts as adviser to the Government on all monetary and banking matters. Bankers' Bank and Lender of the Last Resort The Reserve Bank of India acts as the bankers' bank. According to the provisions of the Banking Companies Act of 1949, every scheduled bank was required to maintain with the Reserve Bank a cash balance equivalent to 5% of its demand liabilities and 2 % of its time liabilities in India. By an amendment of 1962, the distinction between demand and time liabilities was abolished and banks have been asked to keep cash reserves equal to 3 % of their aggregate deposit liabilities. The minimum cash requirements can be changed by the Reserve Bank of India. The scheduled banks can borrow from the Reserve Bank of India on the basis of eligible securities or get financial accommodation in times of need or stringency by rediscounting bills of exchange. Since commercial banks can always expect the Reserve Bank of India to come to their help in times of banking crisis the Reserve Bank becomes not only the banker's bank but also the lender of the last resort.
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Controller of Credit The Reserve Bank of India is the controller of credit i.e. it has the power to influence the volume of credit created by banks in India. It can do so through changing the Bank rate or through open market operations. According to the Banking Regulation Act of 1949, the Reserve Bank of India can ask any particular bank or the whole banking system not to lend to particular groups or persons on the basis of certain types of securities. Since 1956, selective controls of credit are increasingly being used by the Reserve Bank. Every bank has to get a license from the Reserve Bank of India to do banking business within India, the license can be cancelled by the Reserve Bank of certain stipulated conditions are not fulfilled. Every bank will have to get the permission of the Reserve Bank before it can open a new branch. Each scheduled bank must send a weekly return to the Reserve Bank showing, in detail, its assets and liabilities. As supreme banking authority in the country, the Reserve Bank of India, therefore, has the following powers: (a) It holds the cash reserves of all the scheduled banks. (b) It controls the credit operations of banks through quantitative and qualitative controls. (c) It controls the banking system through the system of licensing, inspection and calling for information. (d) It acts as the lender of the last resort by providing rediscount facilities to scheduled banks. Custodian of Foreign Reserves The Reserve Bank of India has the responsibility to maintain the official rate of exchange. According to the Reserve Bank of India Act of 1934, the Bank was required to buy and sell at fixed rates any amount of sterling in lots of not less than Rs. 10,000. The rate of exchange fixed was Re. 1 = sh. 6d. Since 1935 the Bank was able to maintain the exchange rate fixed at lsh.6d. though there were periods of extreme pressure in favour of or against the rupee. After India became a member of the International Monetary Fund in 1946, the Reserve Bank has the responsibility of maintaining fixed exchange rates with all other member countries of the I.M.F. Besides maintaining the rate of exchange of the rupee, the Reserve Bank has to act as the custodian of India's reserve of international currencies. The vast sterling balances were
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acquired and managed by the Bank. Further, the RBI has the responsibility of administering the exchange controls of the country. Supervisory functions In addition to its traditional central banking functions, the Reserve bank has certain nonmonetary functions of the nature of supervision of banks and promotion of sound banking in India. The Reserve Bank Act, 1934, and the Banking Regulation Act, 1949 have given the RBI wide powers of supervision and control over commercial and co-operative banks, relating to licensing and establishments, branch expansion, liquidity of their assets, management and methods of working, amalgamation, reconstruction, and liquidation. The RBI is authorized to carry out periodical inspections of the banks and to call for returns and necessary information from them. Promotional functions With economic growth assuming a new urgency since Independence, the range of the Reserve Bank's functions has steadily widened. The Bank now performs a variety of developmental and promotional functions, which, at one time, were regarded as outside the normal scope of central banking. The Reserve Bank was asked to promote banking habit, extend banking facilities to rural and semi-urban areas, and establish and promote new specialized financing agencies. Accordingly, the Reserve Bank has helped in the setting up of the IFCI and the SFC; it set up the Deposit Insurance Corporation in 1962, the Unit Trust of India in 1964, the Industrial Development Bank of India also in 1964, the Agricultural Refinance Corporation of India in 1963 and the Industrial Reconstruction Corporation of India in 1972. These institutions were set up directly or indirectly by the Reserve Bank to promote saving habit and to mobilize savings, and to provide industrial finance as well as agricultural finance. Classification of RBIs functions The monetary functions also known as the central banking functions of the RBI are related to control and regulation of money and credit, i.e., issue of currency, control of bank credit, control of foreign exchange operations, banker to the Government and to the money market.
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Monetary functions of the RBI are significant as they control and regulate the volume of money and credit in the country. Equally important, however, are the non-monetary functions of the RBI in the context of India's economic backwardness. The supervisory function of the RBI may be regarded as a non-monetary function. The promotion of sound banking in India is an important goal of the RBI, the RBI has been given wide and drastic powers, under the Banking Regulation Act of 1949 - these powers relate to licensing of banks, branch expansion, liquidity of their assets, management and methods of working, inspection, amalgamation, reconstruction and liquidation. Since independence, particularly after its nationalisation 1949, the RBI has followed the promotional functions vigorously and has been responsible for strong financial support to industrial and agricultural development in the country.
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Reforms & Developments

Reforms
As the real sector reforms began in 1992, the need was felt to restructure the Indian banking industry. The reform measures necessitated the deregulation of the financial sector, particularly the banking sector. The initiation of the financial sector reforms brought about a paradigm shift in the banking industry. In 1991, the RBI had proposed to from the committee chaired by M. Narasimham, former RBI Governor in order to review the Financial System viz. aspects relating to the Structure, Organisations and Functioning of the financial system. The Narasimham Committee report, submitted to the then finance minister, Manmohan Singh, on the banking sector reforms highlighted the weaknesses in the Indian banking system and suggested reform measures based on the Basle norms. The guidelines that were issued subsequently laid the foundation for the reformation of Indian banking sector. Reduction of SLR and CRR - The Narasimham Committee had argued for reductions in SLR on the grounds that the stated government objective of reducing the fiscal deficits will obviate the need for a large portion of the current SLR. Similarly, the need for the use of CRR to control secondary expansion of credit would be lesser in a regime of smaller fiscal deficits. The committee offered the route of Open Market Operations (OMO) to the Reserve Bank of India for further monetary control beyond that provided by the (lowered) SLR and CRR reserves. Some of the problems in reducing SLR and CRR were the supporting condition of smaller fiscal deficits is not happening in reality and open market operations have not been used to any significant extent in India for monetary control. The time required for gaining experience with the use of such operations would be much more than 5-6 years. This scenario thus indicates that despite the stated aim of reductions in SLR and CRR, RBI may be forced to revert to higher reserve levels, if the economic indicators become unfavourable. Minimum Capital Adequacy Ratio - The growing concern of commercial banks regarding international competitiveness and capital ratios led to the Basle Capital Accord 1988. The accord sets down the agreement to apply common minimum capital standards
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to their banking industries, to be achieved by year-end 1992. Based on the Basle norms, the RBI also issued similar capital adequacy norms for the Indian banks. According to these guidelines, the banks will have to identify their Tier-I and Tier-II capital and assign risk weights to the assets. Having done this they will have to assess the Capital to Risk Weighted Assets Ratio (CRAR). The minimum CAR that the Indian banks are required to meet is set at 9 %. Prudential Norms - To get a true picture of the profitability and efficiency of the Indian Banks, a code stating adoption of uniform accounting practices in regard to income recognition, asset classification and provisioning against bad and doubtful debts has been laid down by the Central Bank. Close to 16 % of loans made by Indian banks were NPAs very high as compared to 5 % in banking systems in advanced countries. Disclosure Norms - Banks should disclose in balance sheets maturity pattern of advances, deposits, investments and borrowings. Apart from this, banks are also required to give details of their exposure to foreign currency assets and liabilities and movement of bad loans. The banks must be forced to make public the nature of NPAs being written off. This should be done to ensure that the taxpayers money given to the banks as capi tal is not used to write off private loans without adequate efforts and punishment of defaulters. Rationalization of Foreign Operations in India - As per the guidelines for licensing of new banks in the private sector issued in January 1993, RBI had granted licenses to 10 banks. Based on a review of experience gained on the functioning of new private sector banks, revised guidelines were issued in January 2001. The main provisions/requirements were relating to initial minimum paid-up capital, promoters contribution, restriction on the NRI participation in the primary equity of the new bank, minimum capital adequacy ratio, etc. Special Tribunals and Asset Reconstruction Fund - Setting up of special tribunals to speed up the process of recovery of loans and setting up of Asset Reconstruction Funds (ARFs) to take over from banks a portion of their bad and doubtful advances at a discount was one of the crucial recommendations of the Narasimham Committee. To expedite adjudication and recovery of debts due to banks and financial institutions (FIs) at the instance of the Tiwari Committee (1984), appointed by the Reserve Bank of India (RBI), the government enacted the Debt Recovery Tribunal Act, 1993 (DRT). Accordingly,
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DRTs and Appellate DRTs have been established at different places in the country. The act was amended in January 2000 to tackle some problems with the old act. Restructuring of Weak Banks - Keeping in view the urgent need to revive the weak banks, the Reserve Bank of India set up a Working Group in February, 1999 under the Chairmanship of Shri M.S. Verma to suggest measures for the revival of weak public sector banks in India. The major recommendations/points of the Working Group, which submitted its Report in October, 1999, were based on seven parameters covering three areas have been identified; these are (i) Solvency (capital adequacy ratio and coverage ratio), (ii) Earning Capacity (return on assets and net interest margin) and (iii) Profitability (ratio of operating profit to average working funds, ratio of cost to income and ratio of staff cost to net interest + income all other income) and also restructuring of weak banks suggested to be a two-stage operation; stage one involves operational, organizational and financial restructuring aimed at restoring competitive efficiency; stage two covers options of privatization and/or merger. Asset Liability Management System - Keeping in view the level of computerization and the current MIS in banks, adoption of a uniform ALM System was not feasible for all banks so the final guidelines have been formulated so to serve as a benchmark for those banks which lack a formal ALM System. Banks that have already adopted more sophisticated systems may continue their existing systems but they should ensure to finetune their current information and reporting system so as to be in line with the ALM System suggested in the Guidelines. Other banks should examine their existing MIS and arrange to have an information system to meet the prescriptions of the new ALM System. In the normal course, banks are exposed to credit and market risks in view of the assetliability transformation. Banks need to address these risks in a structured manner by upgrading their risk management and adopting more comprehensive Asset-Liability Management (ALM) practices than has been done previously. Reduction of Government Stake in PSBs - Banking is a business and not an extension of government. Banks must be self-reliant, lean and competitive. The best way to achieve this is to privatize the banks and make the managements accountable to real shareholders. If "privatization" is a still a dirty word, a good starting point is to restrict government stake to 33 %.
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Deregulation of Interest Rate - The interest rate regime has also undergone a significant change. For long, an administered structure of interest rate has been in vogue in India. The 1998 Narasimham Reforms suggested deregulation of interest rates on term deposits beyond a period of 15 days. At present, the Reserve Bank prescribes only two lending rates for small borrowers. Banks are free to determine the interest rate on deposits and lending rates on all lending above Rs. 200,000.
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Developments
The financial sector reforms have brought about significant improvements in the financial strength and the competitiveness of the Indian banking system. The efforts on the part of the Reserve Bank of India to adopt and refine regulatory and supervisory standards on a par with international best practices, competition from new players, gradual disinvestments of government equity in state banks coupled with functional autonomy, adoption of modern technology, etc are expected to serve as the major forces for change. New businesses, new customers, and new products beckon, but bring increased risks and competition. How might that change banks? To attract and retain customers, the banks need to optimize their networks, speed up decision-making, cut down on bureaucratic layers, and sharpen response times. The reform has lead to new trends of being ahead and being with, by and for the customer. While the private sector banks are on the threshold of improvement, the Public Sector Banks (PSBs) are slowly contemplating automation to accelerate and cover the lost ground. VRS introduced to bring up the productivity, the concept of universal competition set in just to ensure customer convenience all the time. Voluntary Retirement Scheme - Voluntary Retirement Scheme in Banks was formally taken up by the Government in November 1999. According to Finance Ministry on the basis of business per employee (BPE) of Rs. 100 lakhs, there were 59,338 excess employees in 12 nationalised banks, while based on a BPE of Rs. 125 lakhs, the number shot up to 1,77,405. Government had cleared a uniform VRS for the banking sector, giving public sector banks a seven-month time frame. The IBA has been allowed to circulate the scheme among the public sector banks for adoption. The scheme was to remain open till March 31, 2001. It would become operational after adoption by the respective bank board of directors. No concession had been made to weak banks under the scheme. The scheme is envisaged to assist banks in their efforts to optimize use of human resource and achieve a balanced age and skills profile in tune with their business strategies. Universal Banking - The evolving scenario in the Indian banking system points to the emergence of universal banking. The traditional working capital financing is no longer the banks major lending area while FIs are no longer dominant in term lending. The motive of
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universal banking is to fulfill all the financial needs of the customer under one roof. The leaders in the financial sector will be aiming to become a one-stop financial shop. Universal Banking includes not only services related to savings and loans but also investments. However in practice the term 'universal banks' refers to those banks that offer a wide range of financial services, beyond commercial banking and investment banking, insurance etc. Universal banking is a combination of commercial banking, investment banking and various other activities including insurance. Mergers and Acquisition - For the irresistible compulsions of competitiveness have created situation where the only route for survival for many a bank in India may be to merger with another. With the Union Finance Ministry thinking along the same lines, it may not be long before mega-mergers between banks materialize. World over banks have been merging at a furious pace, driven by an urge to gain synergies in their operation, derive economies of scale and offer one stop facilities to a more aware and demanding consumer. In the eighties and nineties mergers were used as means to strengthen the banking sector. Small, weak and inefficient non-scheduled banks were merged with scheduled banks when the running of such banks becomes non-viable. However, mergers in the current era will be driven by the motive of establishing a bigger market share in the industry and to improve the profitability. Though Indian systems were not keen on the mergers and acquisitions in the banking sector, of late the systems have started encouraging the global trends of M&A's. Rural Banking - Economically empowering, i.e. access to inexpensive credit and other micro-finance services, including savings and insurance, India's rural population will have a significant impact on India's economic growth. Economic empowerment is defined here as the modern banking system has failed to deliver inexpensive credit to Indias 600,000 villages despite several expensive attempts to do so. Since the days of the Rural Credit Survey Committee (1954), India has come a long way in its search for an appropriate rural banking set-up. Reserve Bank appointed the R V Gupta Committee in 1997. The committee was asked to identify the constraints faced by banks in augmenting the flow of credit and simplifying the procedures for agricultural credit. New institutions were overadministered, and bureaucratic regimentation was the result. It is along such lines that the rural credit co-operatives came up followed by the commercial banks diversification into
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rural banking after the nationalisation of 14 big banks. Since the commercial banks, too, did not perform as expected, the regional rural banks (RRBs) were formed. At the national level NABARD was established. Virtual Banking - The practice of banking has undergone a significant transformation in the nineties. While banks are striving to strengthen customer relationship and move towards 'relationship banking', customers are increasingly moving away from the confines of traditional branch-banking and are seeking the convenience of remote electronic banking services. And even within the broad spectrum of electronic banking, the aspect of banking that has gained currency is virtual banking. Increase in the functional and geographical spread of banks has necessitated the switchover from hard cash to paper based instruments and now to electronic instruments. Broadly speaking, virtual banking denotes the provision of banking and related services through extensive use of information technology without direct recourse to the bank by the customer. The origin of virtual banking in the developed countries can be traced back to the seventies with the installation of Automated Teller Machines (ATMs). It is possible to delineate the principal types of virtual banking services. These include Shared ATM networks, Electronic Funds Transfer at Point of Sale (EFTPoS), Smart Cards, Stored-Value Cards, phone banking, and more recently, internet and intranet banking. Retail Banking - With increased competition, spreads in corporate lending have decreased significantly. Banks are thus moving into the retail mode to tide over the global slowdown and boost the bottom-line. Retail banking had been a neglected segment accounting to 10.5 % of all banks loans of India. The main advantages of retail banking are assured spread, widely distributed risks and lower NPAs due to limited risk associated with the salaried class. However, transactions cost is higher as compared to of corporate lending. Thus, the target clientele is consumers and mid size companies. The product offerings include home loans, car loans, credit cards, personal loans and also customized loans like equipment loan for doctors. In retail banking, a higher physical presence i s needed, in the form of ATMs as well as branches. State-of-art technology has to be used to enable convenient customer transactions.
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Current Scenario
Indian Banking sector is ruled by Public sector banks (PSBs) which accounted for 72.6% of total advances for all Scheduled Commercial Banks (SCBs) as on 31st March 2008. PSBs have rapidly expanded their foot prints after nationalization of banks in India in 1969 and further in 1980. Although there is a restrictive entry/expansion for private and foreign banks in India, these banks have increased their presence and business over last 5 years. Peculiar characteristic of Indian banks unlike their western counterparts such as high share of household savings in deposits (57.4% of total deposits), adequate capitalization, stricter regulations and lower leverage makes them less prone to financial crisis, as was seen in the western world in mid 2009. The Scheduled Commercial Banks (SCBs) in India have shown an impressive growth from 2004 to the mid of 2009. Total deposits, advances and net profit grew at CAGR of 19.6%, 27.4% and 20.2% respectively from 2003 to 2008. Banking sector recorded credit growth of 33.3% in 2005 which was highest in last two and half decades and credit growth in excess of 30% for three consecutive years from 2004 to 2007, which is best in the banking industry so far. Increase in economic activity and robust primary and secondary markets during this period have helped the banks to harvest larger increase in their fee based incomes. A significant improvement in
recovering the NPAs, lowest ever increase in new NPAs coupled with a sharp increase in gross advances for SCBs translated into the best asset quality ratio for banking sector in last two decades. Gross NPAs to gross advances ratio for SCBs decreased from the high of 14% in 2000 to 2.3% in 2008.
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Within the group of banks, foreign and private sector banks grew at a higher rate than the industry from 2003 to 2008 principally because of lower base effect and rapid expansion undertaken by these banks. In 2009, overall growth in credit and deposits was led by PSBs. However, growth of private and foreign banks was significantly lower in 2009 due to their high exposure to stressed sectors and crisis at parent level for foreign banks. Unsecured bank credit has risen over the years and stood at 23.3% of bank credit in FY08 as compared to just 10.9% in 2000. Lending to sensitive sector has also grown at CAGR of 46.1% from 2005 to 2008. In the backdrop of the economic downturn, CARE Research feels that the excellent performance seen in last five years ended 2008 and will be difficult to reiterate in subsequent years. CARE Research expects that with the downturn in the economy, credit and deposit growth will moderate in coming years. Credit growth will be led by spending on the infrastructure while retail credit will show a moderate growth. Margin pressures due to lag effect of rate cuts between interest rate on deposits and advances, lower treasury gains and core fee income and increasing in provisions for NPAs is likely to put pressure in the bottom line of the banks. Going forward, PSBs which are close to the required lower level of government stake and have concentrated presence in particular region are likely to consider its merger with other PSB as an important option if they want to sustain the growth seen in past.
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2.
Global Scenario
September 2009 marked the first anniversary of the global financial crisis. It was September 2008 when Americas one of the biggest investment bank, Lehman Brothers, collapsed and triggered a chain reaction of economic, financial and psychological crisis which very soon engulfed the entire globe. The year 2008-09 turned out to be a year when hard-hit by the global financial crisis, the worldwide banking industrys future development has been sharply drawn into focus. Recognizing that repairing the financial system remains a key priority, the rescue measures were undertaken globally.
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These have contributed to an avoidance of worst case scenarios, in particular by reducing the default risk of major banks. From a period of volatility, the international financial markets are normalizing in Q2 of 2009. However, the global banking sector outlook remains difficult on both the sides of the Atlantic. Due to proactive and swift action of central banks and Governments and regulatory and supervisory policy initiatives, the adverse impact of the crisis remained under control. The global economy is slated to recover during 2010, which may facilitate revival of the global banking system. The banking sector is undergoing significant changes as a result of the financial crisis. It is expected to become a less fashionable and even more heavily regulated industry with greater state involvement, increased investor scrutiny and substantially higher capital levels. This may lead to lower growth, lower profits and lower volatility for banks than during the past few decades a trend that may be exacerbated in the medium term by the expected lack of major growth drivers. According to analysts, following the financial crisis, the global banking outlook is perceived to be uncertain. In the short-term, the outlook seems to be grim while the drivers for the long-term prospects show some sign of incipient recovery. Especially US banks might well face lean years due to low loan growth, higher credit losses and weaker revenues from capitalmarket activities. Secondly, while consolidation in banking may continue, there could be a possible reorientation towards domestic markets rather than financial globalization and market integration. Thirdly, a more general effect could be the vast destruction of confidence in banks and of their reputation. Given that the demand for banking services is relatively inelastic even though this may not have adverse consequences in the short run in the longer run, banks could feel strong negative repercussions. It will, therefore, be one of the greatest challenges for banks apart from adjusting to a profoundly changed business environment to repair their public reputation as soon as possible and regain the trust of clients, policymakers and the general public.
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Global Banking Crisis

The global financial crisis came to the forefront of the business world and world media in September 2008, with the failure and merging of a number of American financial companies. It was not a surprise -- many business journals had been commenting on the stability of the leading American and European financial firms following the Sub-Prime Mortgage Crisis. Much of the American economy is built on credit with firms borrowing money from other firms and the general consumer borrowing money for homes and cars. Many people were taking advantage of the housing boom in the US when it ended, leaving both investors and mortgage companies in trouble. On 7 September 2008, it was announced that two firms, Fannie Mae and Freddie Mac, would be nationalised to try to ensure the financial stability of the two firms. One week later, on the 14th September 2008, it came to light that the financial services firm, Lehman Brothers, would file for bankruptcy after being denied support by the Federal Reserve Bank. Later the same day, the Bank of America announced that it would be purchasing Merrill Lynch. Due to the above factors, there was major instability on the global stock markets with major decreases in market value between the 15th and 17th of September 2008. On the 16th September, the American International Group (AIG), which suffered due to its credit rating being reduced, was helped by the Federal Reserve which created an $85 billion credit facility to stop it from collapse. Over the next two weeks, more banks failed and the two remaining banks-Goldman Sachs and Morgan Stanley converted into 'bank holding companies' so that they had more access to market liquidity. Numerous plans were put forward with intent to solve the crisis and in the end President George W. Bush and the Secretary of the Treasury announced a $700 billion financial aid package intended to limit the damage that the previous few weeks events caused. The plan was received well by investors on Wall Street and around the world. On 28th September it was announced that Fortis, a large banking and finance firm would be semi-nationalized with Luxembourg, Belgium and the Netherlands investing over 11 billion Euros into the company. On Monday 29th September, it was announced that the US bank Wachovia would be bought up by Citigroup (this deal fell through in early October 2008 and
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Wachovia opted for a more favourable offer from Wells Fargo) and stock market values fell dramatically in both the US and Europe. Later that day, Iceland nationalized the Icelandic lender Glitnir. Finally, on Tuesday 30th September 2008, stock markets began to rise again, although the credit markets remained very tight. It was also announced that 9 billion Euros was being made available for the bank Dexia by France, Belgium and Luxembourg. Consumer spending has fallen, and banks a much less likely to approve loans, and with many countries now in a recession, there will be more hard times ahead. The events described above started a plethora of problems in the economic and political world and continued through the end of 2008 into the beginning of 2009 and is likely to continue effect the world for months and years to come.
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Leading Global Banks

Listed below is a selection of the top banks worldwide ranked on total assets in US$. World and Country Bank Rankings are based on the total assets of a bank calculated from yearend figures gained from submitted balance sheets. These World and Country Rankings offer an excellent indicator of how financial institutions are performing in the industry. Below you can see the top 50 banks and best banks ranked on total assets in US Dollars.
Top 20 Banks in the World

The Royal Bank of Scotland Group PLC Deutsche Bank AG Barclays PLC BNP Paribas SA Crdit Agricole SA UBS AG JPMorgan Chase Bank National Association Socit Gnrale The Bank of Tokyo-Mitsubishi UFJ Ltd. Bank of America NA Banco Santander SA UniCredit SpA ING Bank NV Industrial & Commercial Bank of China Limited HSBC Bank PLC Citibank NA Credit Agricole Corporate and Investment Bank Sumitomo Mitsui Banking Corporation China Construction Bank Corporation Credit Suisse Group Source:
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UK Germany UK France France Switzerland USA France Japan USA Spain Italy Netherlands China UK USA France Japan China Switzerland
3. Economy Analysis
The fiscal year 2009-10 began as a difficult one. There was a significant slowdown in the growth rate in the second half of 2008-09, following the financial crisis that began in the industrialized nations in 2007 and spread to the real economy across the world. The growth rate of the gross domestic product (GDP) in 2008-09 was 6.7 %, with growth in the last two quarters hovering around 6 %. There was apprehension that this trend would persist for some time, as the full impact of the economic slowdown in the developed world worked through the system. It was also a year of reckoning for the policymakers, who had taken a calculated risk in providing substantial fiscal expansion to counter the negative fallout of the global slowdown. Inevitably, Indias fiscal deficit increased from the end of 2007-08, reaching 6.8 % (budget estimate, BE) of GDP in 2009-10. A delayed and severely subnormal monsoon added to the overall uncertainty. The continued recession in the developed world, for the better part of 2009-10, meant a sluggish export recovery and a slowdown in financial flows into the economy. Yet, over the span of the year, the economy posted a remarkable recovery, not only in terms of overall growth figures but, more importantly, in terms of certain fundamentals, which justify optimism for the Indian economy in the medium to long term.
Overall GDP Growth

The advance estimate of GDP growth at 7.2 % for 2009-10, falls within the range of 7 +/- 0.75 projected nearly a year ago in the Economic Survey 2008-09. With the downside risk to growth due to the delayed and sub-normal monsoons having been contained to a large extent, through the likelihood of a better-than-average rabi agricultural season, the economy has responded well to the policy measures undertaken in the wake of the global financial crisis. While the GDP at factor costs at constant 2004-05 prices, is placed at Rs 44,53,064 crore, the GDP at market prices, at constant prices, is estimated at Rs 47, 67,142 crore. The corresponding figures at current prices are Rs 57,91,268 crore and Rs 61, 64,178 crore respectively. It is worthwhile to note here that the growth rates of GDP at market prices, at constant 2004-05 prices, in 2008-09 and 2009-10 at 5.1 % and 6.8 % have been considerably lower than the growth rates of GDP at factor cost. This is due to the significant decline in net indirect taxes (i.e. indirect taxes minus subsidies) in the corresponding years on account of the fiscal stimulus implemented by the
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Government, which included tax relief to boost demand and increase in the expenditure on subsidies. The recovery in GDP growth for 2009-10 is broad based. Seven out of eight sectors/sub-sectors show a growth rate of 6.5 % or higher. The exception, as anticipated, is agriculture and allied sectors where the growth rate is estimated to be minus 0.2 % over 2008-09. Sectors including mining and quarrying; manufacturing; and electricity, gas and water supply have significantly improved their growth rates at over 8 % in comparison with 2008-09. The construction sector and trade, hotels, transport and communication have also improved their growth rates over the preceding year, though to a lesser extent. However, the growth rate of community, social and personal services has declined significantly, though it continues to be around its pre-global crisis medium-term trend growth rate. Financing, insurance, real estate and business services have retained their growth momentum at around 10 % in 2009-10. In terms of sectoral shares, the share of agriculture and allied sectors in GDP at factor cost has declined gradually from 18.9 % in 2004-05 to 14.6 % in 2009-10. During the same period, the share of industry has remained the same at about 28 %, while that of services has gone up from 53.2 % in 2004-05 to 57.2 % in 2009-10.
Per Capita Growth

The growth rates in per capita income and consumption, which are gross measures of welfare in general, have declined in the last two years. This is a reflection of the slowdown in the overall GDP growth. While the growth in per capita income, measured in terms of GDP at constant market prices, has declined from a high of 8.1 % in 2007-08 to 3.7 % in 2008-09 and then recovered to 5.3 % in 2009-10, per capita consumption growth as captured in the private final consumption expenditure (PFCE) shows a declining trend since 2007-08 with its growth rate in 2009-10 falling to one-third of that in 2007-08. The growth rate of per capita consumption was lower than that of per capita income up to 2007-08; however since then it was higher in two years and became lower again in 2009-10. The average growth in per capita consumption over the period 2005-06 to 2009-10 was slower at 6.08 % than that in per capita income at 6.52 %. These year to year differences in growth rates can be explained by the rising savings rate and also the rise in tax collections that have been observed in some of these years.
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Aggregate Demand and its Composition

The change in the NAS series from the old base of 1999-2000 to the new base of 2004-05 has brought about significant revision in the expenditure estimates of the GDP for 2008-09. While growth of the PFCE in 2008-09 was revised upward from 2.9 % to 6.8 %, growth in Government final consumption expenditure was revised downwards from over 20 % in 2008-09 on the old base to 16.7 % on the new base. In 2009-10 a growth of 4.1 % is expected in private final expenditure and 8.2 % in Government final expenditure. There is therefore a significant decline in the growth of consumption expenditure in 2009-10. However, the overall share of consumption expenditure, both private as well as Government in GDP at market prices, at constant 2004-05 prices, has declined only marginally from 70.9 % in 2008-09 to 69.6 % in 2009-10. Thus it now appears that moderation in the decline in GDP growth rate, in the second half of 2008-09, was primarily a result of the boost provided by the fiscal stimulus to consumption demand, both private as well as Government, rather than the continued buoyancy in investment growth, as indicated in the Economic Survey 2008-09. This in fact was the intended purpose of the fiscal stimulus, which was not captured by the earlier NAS data. It implies that expansion in investments in the manufacturing sector may have declined a lot faster and, perhaps, earlier than the estimates for 2008-09 suggested in May 2009. Further, though the growth in gross fixed capital formation (a proxy for investment growth) in 2009-10 has recovered to 5.2 % from 4 % in 2008-09, it is still below the GDP growth rate unlike in the pre-global crisis phase. This makes it necessary, therefore, to watch the growth recovery in private investment in the third and fourth quarters, in sequencing the rollback of the stimulus measures. Moreover, the contribution of net exports has become positive in 2009-10, after a considerable period of time. It may again turn negative as the demand for imports increases with a deepening of industrial recovery and a pickup in domestic demand.
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Production and Supply

Agriculture Total food grains production in 2008-09 was estimated at 233.88 million tons as against 230.78 million tons in 2007-08 and 217.28 million tons in 2006-07. In the agricultural season 2009-10, the impact of the delayed and sub-normal monsoon is reflected in the production and acreage data for kharif crops. As per the first advance estimates, covering only the kharif crop, production of food grains is estimated at 98.83 million tons in 2009-10, as against the fourth advance estimates of 117.70 million tons for the kharif crop in 2008-09 and a target of 125.15 million tons for 2009-10. Overall production of kharif cereals in 2009-10 has shown a decline of 18.51 million tons over 2008-09. Both for rice and coarse cereals, there has been a shortfall as compared to the targeted production and also the production level achieved in the previous year. In the case of rice the decline is about 15 % over the 2008-09 level and 17 % in comparison with the target for 2009-10. The decline in kharif coarse cereals in 2009-10 in comparison with 2008-09 is nearly 20 % and the shortfall with respect to the target for kharif 2009-10 is nearly 10 million tons. Total production of kharif pulses is estimated at 4.42 million tons in 2009-10, which is 8 % lower than the production during 2008-09 and 32 % lower than the targeted production for 2009-10. Similarly, total kharif production of the nine oilseeds in 2009-10 is about 15 % lower than the kharif production in 2008-09. Industry and Infrastructure The cyclical slowdown in the industrial sector which began in 2007-08 got compounded by the global commodity price shock and the impact of the global slowdown during the course of calendar year 2008 was arrested at the beginning of 2009-10. After the first two months of the current fiscal, there were clear signs of recovery. This is evident from the NAS data as well as the index of industrial production (IIP). While the CSOs advance estimates place industrialsector growth at 8.2 %, as against 3.9 % in 2008-09, the IIP industrial growth is estimated at 7.7 % for the period April- November 2009-10, significantly up from 0.6 % during the second half of 2008-09. The manufacturing sector, in particular, has grown at the rate of 8.9 % in 2009-10.
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Growth in the major industrial groups has been a mixed bag. There was strong growth in automobiles, rubber and plastic products, wool and silk textiles, wood products, chemicals and miscellaneous manufacturing; modest growth in nonmetallic mineral products; no growth in paper, leather, food and jute textiles; and a slump in beverages and tobacco products in 2009-10. In terms of use-based classification, there was strong growth in consumer durables and intermediate goods (partly aided by the base effect); moderate growth in basic and capital goods; and sharp deceleration in consumer nondurables. Core industries and infrastructure services, led by the robust growth momentum of telecom services and spread across power, coal and other infrastructure like ports, civil aviation and roads, have also shown signs of recovery in 2009-10. In the current fiscal, electricity generation emerged from the lackluster growth witnessed in the previous year and equaled its performance in 2007-08. That this was achieved despite constraints imposed by the inadequate availability of coal and the dismal hydelgeneration scenario due to the sub-normal monsoon, attests well to its potential. During April-December 2009, the peak deficit and total energy deficit came down considerably to 12.6 % and 9.8 % respectively from 13.8 % and 10.9 % during the corresponding period of the previous year. This happened mainly due to the increase in the growth in electricity generation. The availability of gas from the KG basin (D6) and surplus utilization of gas available on fallback basis resulted in better utilization of capacity and higher plant load factor (PLF) as also high growth in electricity generated from gas-based plants. The overall PLF also improved during April-December 2009. The domestic supply of crude oil remained around 34 million metric tons (mmt) and natural gas at about 32 billion cubic metric tons during the past five years. With 15 new oil and gas discoveries during 2009-10, the domestic availability is expected to improve. During 2009-10, the projected production for crude oil is 36.7 mmt, which is about 11 % higher than the actual crude oil production of 33.5 mmt in 2008-09. The opening of the telecom sector has not only led to rapid growth in subscriber base, but has also significantly helped in maximization of consumer benefits, particularly in terms of price discovery, following the forbearance approach in tariffs. From only 54.6 million telephone subscribers in 2003, the number increased to 429.7 million at the end of March 2009 and
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further to 562 million as of October 31, 2009 showing an addition of 96 million subscribers during the period from March to December 2009. Service Sector The service sector which has been Indias workhorse for well over a decade has continued to grow rapidly. Following the NAS classification, it comprises the sub-sectors trade, hotels, transport and communications; financing, insurance, real estate and business services; and community, social and personal services. As against a growth of 9.8 % in 2008-09 it grew at 8.7 % in 2009-10. While there has been a significant dip in the growth of community social and personal services in 2009-10, the other sub-sectors have either retained their growth momentum or improved upon it. A comparison between the old and the new series of NAS reveals considerable difference in the level estimates of the value added of service sub-sectors to GDP at current prices. Thus, for instance, there has been a decline, ranging from around 8 % in 2004-05 to 30 % in 2008-09, in the communication sub-sector. This has been partly offset by the increase in the level estimates of value added in real estate, ownership of dwellings, business and legal services, ranging from 11.6 % in 2004-05 to nearly 34.4 % in 2008-09.
Savings and investments

Gross Domestic Savings Gross domestic savings (GDS) at current prices in 2008-09 were estimated at Rs 18,11,585 crore, amounting to 32.5 % of GDP at market The fall in the rate of GDS has mainly been due to the fall in the rates of savings of the public sector (from 5.0 % in 2007-08 to 1.4 % in 200809) and private corporate sector (from 8.7 % in 2007-08 to 8.4 % in 2008-09). In respect of the household sector, the rate of saving has remained at the same level of 22.6 % in 2007-08 and 2008-09. Indeed, the change in the NAS series has had the most conspicuous effect on the savings and investment rates. The rate of GDS on the new series increased from 32.2 % in 2004-05 to 36.4 % in 2007-08 before declining to 32.5 % in 2009-10, as against the old series where it rose from 31.7 % in 2004-05 to 37.7 % in 2007-08. Thus, from 2005-06 to 2007-08, the GDS rate was overestimated in the NAS old series by an average of 1.3 %.
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Sectoral Investment The sectoral investment rate is a useful indicator of the direction of new investments. While the overall growth of investment in India was in the range of 15 to 16 % per annum during the last few years, it plunged to - 2.4 % in 2008-09 as a result of the external shock-led slowdown. At sectoral level, there has been a welcome rebound in the growth rate of investment in the agricultural sector, which grew at 16.5 % and 26.0 % in 2007-08 and 200809 respectively. This is in contrast to the growth rate of 1.4 % recorded in 2006-07. Growth of investment in the industrial sector has been more than the total investment growth up to 200708. However, in 2008-09, this was reversed, when investment in the industrial sector declined by - 17.6 % as compared to a decline of - 2.4 % in total investment. Within the industrial sector, the decline was more prominent in manufacturing and the construction sector. Investment in the unorganized manufacturing sector declined by a negative 42 %, indicative, perhaps, of the difficulty faced by the sector in accessing credit due to the tight market conditions in the post financial crisis phase. Investment in the services sector registered a growth of 20.2 % in 2006-07, which suddenly declined to - 16.0 % in 2007-08 as a result of a decline in investment in the trade, hotels and restaurants sub-sector. This decline in the said sub-sector was made up in 2008-09 when, on the strength of a growth of 19.4 %, there was a revival in investment growth rate in the services sector as a whole. Within the services sector, the global financial crisis has had a dampening effect on investment growth in the banking and insurance subsector in 2008-09.
Prices and Inflation

The year-on-year WPI inflation rate has been fairly volatile in 2009-10. It was 1.2 % in March 2009 and then declined continuously to become negative during June-August 2009, assisted in part by the large statistical base effect from the previous year. It turned positive in September 2009 and accelerated to 4.8 % in November 2009 and further to 7.3 % in December 2009. For the fiscal year so far (March over December 2009) WPI inflation is estimated at 8 %. Year-onyear inflation in the composite food index (with a weight of 25.4 %) at 19.8 % in December 2009 was significantly higher than 8.6 % last year. In respect of food articles, inflation on year-on-year basis in December was 19.2 % and on fiscal-year basis (i.e. over March 2009) it was 18.3 %. At the same time, the composite non-food inflation within the manufactured group of the WPI (with
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a weight of 53.7 %) at 2.4 % in December 2009 was lower than the 6.7 % recorded last year. This suggests concentrated inflation. Indeed, for several months, rapidly rising food inflation has been a cause for concern. In December 2009, nearly 67 % of the overall WPI inflation could be attributed to food items (primary and manufactured), followed by 12 % in the fuel and power commodity group, the remaining 21 % being explained by manufactured nonfood and primary non-food articles. Among food items the major contributors to inflation are milk (20 %), eggs, meat and fish (over 20 %), rice (about 10 %), wheat (6 %), pulses (about 9 %), potatoes (9 %) and tomatoes (6 %). The recent period has witnessed significant divergence in the WPI and CPI inflation rates, principally on account of the larger weights assigned to the food basket in the CPIs and due to the fact that retail prices are relatively sticky downwards. Thus, due to the sharp increase in essential commodity prices, while all the four CPIs remained elevated since March 2008, rising gradually from about 7 to 8 % (month-on-month) to around 15 to 17 % in December 2009, WPI inflation first went up from around 8 % in March 2008 to 13 % in August 2008, then declined to about 1 % in March 2009, turned negative during June to August 2009 before rising again to over 7 % in December 2009.
Foreign Exchange Reserves

During fiscal 2009-10, foreign exchange reserves increased by US$ 31.5 billion from US$ 252.0 billion in end March 2009 to US$ 283.5 billion in end December 2009. Out of the total accretion of US$ 31.5 billion, US$ 11.2 billion (35.6 %) was on BoP basis (i.e. excluding valuation effect), because of higher inflows under FDI and portfolio investments, while accretion of US$ 20.3 billion (64.4 %) was on account of valuation gain due to weakness of the US dollar against major currencies. Besides, the Reserve Bank of India (RBI) concluded the purchase of 200 metric tons of gold from the IMF, under the IMFs limited gold sales programme at the cost of US$ 6.7 billion in the month of November 2009. Further, a general allocation of SDR 3,082 million (equivalent to US$ 4,821 million) and a special allocation of SDR 214.6 million (equivalent to US$ 340 million) were made to India by the IMF on August 28, 2009 and September 9, 2009 respectively.
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Exchange Rate
In fiscal 2009-10, with the signs of recovery and return of FII flows after March 2009, the rupee has been strengthening against the US dollar. The movement of the exchange rate in the year 2009-10 indicated that the average monthly exchange rate of the rupee against the US dollar appreciated by 9.9 % from Rs 51.23 per US dollar in March 2009 to Rs 46.63 per US dollar in December 2009, mainly on account of weakening of the US dollar in the international market.
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4. Industry Analysis
Five Force Analysis
Named after Michael E. Porter, this model identifies and analyzes 5 competitive forces that shape every industry, and helps determine an industry's weaknesses and strengths.
1. Competition in the industry 2. Potential of new entrants into industry 3. Power of suppliers 4. Power of customers 5. Threat of substitute products
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Threat of New Entrants Those industries with high entry barriers will have fewer firms entering. With fewer firms, there is less environmental complexity, and it is easier for one firm to begin to dominate the industry. In Indian banking sector there are large number of player are existing although Indian banking industry are not so much developed as in other developed economy. For any private or foreign bank want to start their operations in India it is first requirement to take the permission from the government of India and also the bank has to follow the rules and regulation formed the RBI. 1. Economies of scale If economies of scale exist, it represents a high barrier to entry. In Indian banking sector there is an economies of scale. There are so many large bank s and their wide network spread over the whole country. There are so many banks which are operating in foreign and this entire bank has wider market potentially. And if new player enters, they have to match their scale size, but without the benefits of the associated learning curve it is not possible to match them. Since economies of scale do not exist in any tangible way, one must prove their existence or nonexistence. Provide measures related to the capital investment and through which you should reach to lower unit costs. 2. Working capital requirements How much money will we have to tie up to keep the doors open? This is money that cannot be invested in any other way. This is also a barrier to entry in that if firms must tie up large amounts of capital for daily operations; this will deter smaller firms from entering. In India any bank wants to enter than any bank has require the large amount in the form of the working capital because India is such a country that has wider geographic area and new entrant want to attain the economies of scale than it has to require the large amount of fund in the form of working capital. 3. Proprietary product differences In Indian banking sector there are so many banks which are operating as an universal banking so there are no kind of differentiation in any service provided by the foreign bank so for any bank will think about that whether to enter in any country or not, because no differentiation in the services than they will not get enough response from the customer side so there is no meaning for to enter in the economy.
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4. Brand identity Is brand identity important in this industry? Do buyers make conscious choices based on brand identity? If so, this would be a high barrier to entry. In Indian banking sector are most of the customer are attracted by the brand and select the service of that bank like in India SBI, ICICI and HDFC and so on. There are so many other factors affected in the brand identity like the associated company or any other government also because the government provides the surety for the money. There are rating also available for the entire bank through which you can judge the efficiency level of any bank. 5. Access to distribution For the purpose of the easy accessibility the bank has to provide the so many facilities like internet banking facility, ATM facility, travelling cheque and so on. For the purpose of the wide accessibility bank has to invest large amount of capital in infrastructure and also open the large number of branches.
Bargaining Power of Suppliers
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There are so many factors through which you can judge the bargaining power of the supplier. In Indian banking sector there are so many customers so we can say that there are no bargaining power of the suppliers although depends on some factors which are as follows. 1. Supplier concentration In India there are diversified needs of the customer but majority are more concern about the service provided by the bank and how fast the service is. 2. Presence of substitute The presence of substitute lowers the power of suppliers. But buyer has no availability of substitute for the same as the service provided by the bank. But in some case like investment purpose there are so many other services are available to the investors like the mutual fund, stock market and so on. 3. Differentiation of inputs In some cases, there are some alternative available to the investors that can differentiate their supply. 4. Threat of forward or backward integration Is there any indication that vertical integration is occurring? If suppliers are coming forward to gain access to distribution channels, this gives them power. If there are indications of firms backward integrating to capture margins, this gives firms power over supplier in the industry.
Bargaining Power of Buyers
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First, determine who the buyers are. Now we will see power of the buyer in the industry. 1. Buyer concentration If we think on the point of view of the bank than the bank has so much power because it can borrow the money from customer because there are so many customers available in the market who has require the earning from the other one and also provide security of money. 2. Buyer switching cost In banking industry there is moderate switching cost for example if you have a bank account with HDFC and you want to open the new bank account with other bank SBI, you want just minimum balance as per rules. 3. Buyer Information Here we can also think on point of view of the customer and the bank. If customer has the full information then the bank has less bargaining power. For example, the interest rate prevailing in the market.
Threat of Substitute Products
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An industry will be attractive if there is no threat from substitute products. A substitute is any product or services that will fulfill the same need of the customer. In banking sector there are so many substitutes like you can invest in fix deposit or any other mutual fund scheme. Threat of Existing Rivalry An industry characterized by high rivalries unattractive because it limits the ability to achieve higher growth. At the other extreme, industries with no rivalry are usually dominated by a few major firms which could limit strategic flexibility. 1. Degree of concentration and balance among competitor As the business cycle progresses, there is a tendency for consolidation to occur within industries. In Indian banking sector at present so many merger and acquisition has happened like SBS and SBI. In the banking sector, three to four banks together has market share of 60%. 2. Diversity among competitors Are firms following different strategies? If so, they have found market niches and this reduces rivalry. If they are all following the same strategy, they are fighting for the markets and this increases rivalry. 3. Industry growth rate There is a positive trend to industry growth rate in Indian banking sector. 4. Product differentiation Are firms able to differentiation their product or services? If so, this reduces rivalry as each firm is able to find a market niche. For example, SBI has differentiated their services through the value chain. In the banking industry each firm offers the same service. The lack of differentiation makes the industry unattractive. 5. Exit barrier If we enter this industry, will we be able to get out again? A firm can exit by converting operation to product/services or by selling out merger. If exit barriers are low, this reduces rivalry and makes industry unattractive. Sector requires large investments.
PEST Analysis
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PEST analysis of any industry sector investigates the important factors that are affecting the industry and influencing the companies operating in that sector. PEST is an acronym for political, economic, social and technological analysis. Political factors include government policies relating to the industry, tax policies, laws and regulations, trade restrictions and tariffs etc. The economic factors relate to changes in the wider economy such as economic growth,
interest rates, exchange rates and inflation rate, etc. Social factors often look at the cultural aspects and include health consciousness, population growth rate, age distribution, changes in tastes and buying patterns, etc. The technological factors relate to the application of new inventions and ideas such as R&D activity, automation, technology incentives and the rate of technological change.
Political/ Legal Environment

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Government and RBI policies affect the banking sector. Sometimes looking into the political advantage of a particular party, the Government declares some measures to their benefits like waiver of short-term agricultural loans, to attract the farmers votes, but by doing that the profits of the banks get affected. Various banks in the cooperative sector are open and run by the politicians. They exploit these banks for their benefits. Sometimes the government appoints various chairmen of the banks. Various policies are framed by the RBI looking at the present situation of the country for better control over the banks. Economical Environment Banking is as old as authentic history and the modern commercial banking are traceable to ancient times. In India, banking has existed in one form or the other from time to time. The present era in banking may be taken to have commenced with establishment of bank of Bengal in 1809 under the government charter and with government participation in share capital. Allahabad bank was started in the year 1865 and Punjab national bank in 1895, and thus, others followed. Every year RBI declares its 6 monthly policy and accordingly the various measures and rates are implemented which has an impact on the banking sector. Also the Union budget affects the banking sector to boost the economy by giving certain concessions or facilities. If in the Budget savings are encouraged, then more deposits will be attracted towards the banks and in turn they can lend more money to the agricultural sector and industrial sector, therefore, booming the economy. If the FDI limits are relaxed, then more FDI are brought in India through banking channels. Social Environment Before nationalization of the banks, their control was in the hands of the private parties and only big business houses and the effluent sections of the society were getting benefits of banking in India. In 1969 government nationalized 14 banks. To adopt the social development in the banking sector it was necessary for speedy economic progress, consistent with social justice, in democratic political system, which is free from domination of law, and in which opportunities are open to all. Accordingly, keeping in mind both the national and social
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objectives, bankers were given direction to help economically weaker section of the society and also provide need-based finance to all the sectors of the economy with flexible and liberal attitude. Now the banks provide various types of loans to farmers, working women, professionals, and traders. They also provide education loan to the students and housing loans, consumer loans, etc. Banks having big clients or big companies have to provide services like personalized banking to their clients because these customers do not believe in running about and waiting in queues for getting their work done. The bankers also have to provide these customers with special provisions and at times with benefits like food and parties. But the banks do not mind incurring these costs because of the kind of business these clients bring for the bank. Banks have changed the culture of human life in India and have made life much easier for the people. Technological Environment Technology plays a very important role in banks internal control mechanisms as well as services offered by them. It has in fact given new dimensions to the banks as well as services that they cater to and the banks are enthusiastically adopting new technological innovations for devising new products and services. The latest developments in terms of technology in computer and telecommunication have encouraged the bankers to change the concept of branch banking to anywhere banking. The use of ATM and Internet banking has allowed anytime, anywhere banking facilities. Automatic voice recorders now answer simple queries, currency accounting machines makes the job easier and self-service counters are now encouraged. Credit card facility has encouraged an era of cashless society. Today MasterCard and Visa card are the two most popular cards used world over. The banks have now started issuing smartcards or debit cards to be used for making payments. These are also called as electronic purse. Some of the banks have also started home banking through telecommunication facilities and computer technology by using terminals installed at customers home and they can make the balance inquiry, get the statement of accounts, give instructions for fund transfers, etc. Through ECS
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we can receive the dividends and interest directly to our account avoiding the delay or chance of losing the post. Today banks are also using SMS and Internet as major tool of promotions and giving great utility to its customers. For example SMS functions through simple text messages sent from your mobile. The messages are then recognized by the bank to provide you with the required information. All these technological changes have forced the bankers to adopt customer-based approach instead of product-based approach.
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5. Tools for Analysis & Interpretation

Bank supervisory agencies are responsible for monitoring the financial conditions of commercial banks and enforcing related legislation and regulatory policy. Although much of the information needed to do so can be gathered from regulatory reports, on-site examinations are needed to verify report accuracy and to gather further supervisory information. Much research has explored the value of this private information, both to the bank supervisors and to the public who monitor banks through the financial markets.
Trend Analysis
Trend analysis involves calculation of percentage changes in financial statement items for a number of successive years. It is an extension of horizontal analysis to many years. We first assign value 100 to the financial statement items in a past financial year used as the base year and then express financial statement items in the following years as a percentage of the base-year value. Trend analysis over longer periods helps in identifying certain basic changes in the nature of the business. Since many large corporations publish a summary of operating results and selected financial indicators for five years or more, it is possible to perform trend analysis using published reports.
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CAMEL Analysis
In 1994, the RBI established the Board of Financial Supervision (BFS), which operates as a unit of the RBI. The entire supervisory mechanism was realigned to suit the changing needs of a strong and stable financial system. The supervisory jurisdiction of the BFS was slowly extended to the entire financial system barring the capital market institutions and the insurance sector. Its mandate is to strengthen supervision of the financial system by integrating oversight of the activities of financial services firms. The BFS has also established a sub-committee to routinely examine auditing practices, quality, and coverage. In addition to the normal on-site inspections, Reserve Bank of India also conducts off-site surveillance which particularly focuses on the risk profile of the supervised entity. The Off-site Monitoring and Surveillance System (OSMOS) was introduced in 1995 as an additional tool for supervision of commercial banks. It was introduced with the aim to supplement the on-site inspections. Under off-site system, 12 returns (called DSB returns) are called from the financial institutions, which focus on supervisory concerns such as capital adequacy, asset quality, large credits and concentrations, connected lending, earnings and risk exposures (viz. currency, liquidity and interest rate risks). In 1995, RBI had set up a working group under the chairmanship of Shri S. Padmanabhan to review the banking supervision system. The Committee certain recommendations and based on such suggestions a rating system for domestic and foreign banks based on the international CAMEL model combining financial management and systems and control elements was introduced for the inspection cycle commencing from July 1998. It recommended that the banks should be rated on a five point scale (A to E) based on the lines of international CAMEL rating model. CAMEL evaluates banks on the following six parameters:(a) Capital Adequacy: Capital adequacy is measured by the ratio of capital to risk-weighted assets (CRAR). A sound capital base strengthens confidence of depositors. (b) Asset Quality: One of the indicators for asset quality is the ratio of non-performing loans to total loans (GNPA). The gross non-performing loans to gross advances ratio is more indicative of the quality of credit decisions made by bankers. Higher GNPA is indicative of poor credit decision-making.
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(c) Management Efficiency: The ratio of non-interest expenditures to total assets (MGNT) can be one of the measures to assess the working of the management. . This variable, which includes a variety of expenses, such as payroll, workers compensation and training investment, reflects the management policy stance. (d) Earnings Capacity: It can be measured as the return on asset ratio. (e) Liquidity: Cash maintained by the banks and balances with central bank, to total asset ratio (LQD) is an indicator of bank's liquidity. In general, banks with a larger volume of liquid assets are perceived safe, since these assets would allow banks to meet unexpected withdrawals. (f) Sensitivity to Market Risk: Market risks are risks inherent in dealing with products embedded with interest rates, foreign currencies and commodity prices. For interest rate, the ratio of rate sensitive assets to rate sensitive liabilities are a good indicator, for foreign currency, net open position is a good indicator. Each of the above six parameters are weighted on a scale of 1 to 100 and contains number of sub-parameters with individual weightings. CAMEL supervisory ratings are assigned at the end of examinations and are directly disclosed only to senior bank management and to the appropriate supervisory personnel. CAMEL ratings are commonly viewed as summary measures of the private supervisory information gathered by examiners regarding banks' overall financial conditions, although they also reflect available public information. The general consensus is that the private supervisory information contained in CAMEL ratings is useful in the supervisory monitoring of banks. Furthermore, to the extent that this information filters out into the financial markets, it appears to affect the prices of bank securities. Thus, private supervisory information in CAMEL ratings also appears to be useful in the public monitoring of banks. A bank's CAMEL rating is directly known only by the bank's senior management and the appropriate supervisory staff. CAMEL ratings are never released by supervisory agencies, even on a lagged basis. While exam results are confidential, the public may infer such supervisory information on bank conditions based on subsequent bank actions or specific disclosures.
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Overall, the private supervisory information gathered during a bank exam is not disclosed to the public by supervisors, although studies show that it does filter into the financial markets. (a) Capital Adequacy: Capital adequacy reflects the overall financial condition of a bank and also the ability of the management to meet the need for additional capital. Capital adequacy is measured by the ratio of capital to risk-weighted assets (CRAR). A sound capital base strengthens confidence of depositors. Capital Adequacy Ratio:
Capital Adequacy Ratio = Tier I Capital+Tier II Capital * 100 Risk Weighted Assets
Leverage Ratio:
Leverage Ratio = Total Debt Shareholders' Funds * 100
Debt Equity Ratio:

Debt Equity Ratio = Total Deposits Shareholders' Funds
Advances to Total Assets Ratio:

Advances to Total Assets Ratio = Total Advances Total Assets * 100
Government Securities to Total Investment Ratio:

Govt. Sec. to Total Inv. Ratio = Govt. Securities Total Investment * 100
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(b) Asset Quality: The prime motto behind measuring the asset quality is to ascertain the component of non-performing assets as a percentage of the total assets. In addition, the parameter also ascertains the NPA movement and the amount locked up in investments as a percentage of the total assets. One of the indicators for asset quality is the ratio of non-performing loans to total loans (GNPA). The gross non-performing loans to gross advances ratio is more indicative of the quality of credit decisions made by bankers. Higher GNPA is indicative of poor credit decision-making. Net NPA to Net Advances:
Net NPAs to Net Advances = Net NPAs Net Advances * 100
Net NPA to Total Assets:

Net NPA to Total Assets = Net NPAs Total Assets * 100
Total Investments to Total Assets:

Total Investments to Total Assets = Total Investments Total Assets * 100
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(c) Management Efficiency: To measure the efficiency of the management we have used parameters like profit per branch, business per employee and advances to deposits. Total Advances to Total Deposits:
Total Advances to Total Deposits = Total Advances Total Deposits * 100
Business per Employee:

Business per Employee = Deposits+Advances No. of Employees
Profit per Employee:

Profit per Employee = Operating Profit No. of Employees
Return on Net Worth:

Return on Net Worth = Net Profit Average Net Worth * 100
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(d) Earnings Capacity: This parameter gains importance in the light of the argument that much of a banks income is earned through non-core activities like investments, treasury operations, and corporate advisory services and so on. Here, we try to assess the quality of income of a bank in terms of income generated by core activity - income from lending operations. It can be measured as the return on asset ratio. Net Interest Margin:
Net Interest Margin = Net Interest Income Average Interest Earning Assets * 100
Return on Average Assets:

Return on Average Assets = Net Profit Average Total Assets * 100
Return on Equity:
Return on Equity = Net Profit Shareholder's Funds * 100
Non-Interest Income to Average Assets Ratio:

Non-Int. Income to Avg. Assets Ratio = Non-Interest Income Average Total Assets * 100
Overhead Ratio:
Overhead Ratio = Non-Interest Expenses Average Total Assets * 100
Efficiency Ratio:
Efficiency Ratio = Non-Interest Expenses Net Int. Income+Non-Int. Income * 100
Interest Income to Working Funds:

Interest Income to Working Funds = Interest Income Working Funds * 100
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Non-Interest Income to Working Funds:

Non-Int. Income to Working Funds = Non-Interest Income Working Funds * 100
Operating Profit to Working Funds:

Operating Profit to Working Funds = Operating Profit Working Funds * 100
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(e) Liquidity: Cash maintained by the banks and balances with central bank, to total asset ratio (LQD) is an indicator of bank's liquidity. In general, banks with a larger volume of liquid assets are perceived safe, since these assets would allow banks to meet unexpected withdrawals. Liquidity is arrived at by finding out various liquidity ratios like assets to deposits ratio, liquid assets to total deposits, liquid assets to total assets and G-secs to total assets.
Liquid Assets to Demand Deposits:

Liquid Assets to Demand Deposits = Liquid Assets Demand Deposits * 100
Liquid Assets to Total Deposits:

Liquid Assets to Total Deposits = Liquid Assets Total Deposits * 100
Liquid Assets to Total Assets:

Liquid Assets to Total Assets = Liquid Assets Total Assets * 100
Government Securities to Total Assets:

Government Sec. to Total Assets = Government Securities Total Assets * 100
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Z-score Analysis
The Z-score formula for predicting bankruptcy was published in 1968 by Edward I. Altman, an Assistant Professor of Finance at New York University. In 2009, he is a professor at NYU. The formula may be used to predict the probability that a firm will go into bankruptcy within two years. Z-scores are used to predict corporate defaults and an easy-to-calculate control measure for the financial distress status of companies in academic studies. The Z-score uses multiple corporate income and balance sheet values to measure the financial health of a company. The Z-score is a linear combination of four or five common business ratios, weighted by coefficients. The coefficients were estimated by identifying a set of firms which had declared bankruptcy and then collecting a matched sample of firms which had survived, with matching by industry and approximate size (assets). Altman's applied the statistical method of discriminant analysis to a dataset of publicly held manufacturers. The estimation was originally based on data from publicly held manufacturers, but has since been re-estimated based on other datasets for private manufacturing, nonmanufacturing and service companies. The original data sample consisted of 66 firms, half of which had filed for bankruptcy under Chapter 7. All businesses in the database were manufacturers and small firms with assets of less than $1 million were eliminated. Altman's work built upon research by accounting researcher William Beaver and others. In the 1930s and on, Mervyn and others had collected matched samples and assessed that various accounting ratios appeared to be valuable in predicting bankruptcy. William Beaver's work, published in 1966 and 1968, was the first to apply a statistical method, ttests to predict bankruptcy for a pair-matched sample of firms. Beaver applied this method to evaluate the importance of each of several accounting ratios based on uni-variate analysis, using each accounting ratio one at a time. Altman's primary improvement was to apply a statistical method, discriminant analysis, which could take into account multiple variables simultaneously.
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The original Z-score formula was as follows: Z = 1.2T1 + 1.4T2 + 3.3T3 + .6T4 + .999T5 where,
T1 = Working Capital Total Assets
The ratio of Working Capital to Total Assets is the Z-Score component which is considered to be a reasonable predictor of deepening trouble for a company. A company which experiences repeated operating losses generally will suffer a reduction in working capital relative to its total assets.
T2 = Accdumulated Retained Earnings Total Assets
The ratio of Retained Earnings to Total Assets is a Z-Score component which provides information on the extent to which a company has been able to reinvest its earnings in itself. An older company will have had more time to accumulate earnings so this measurement tends to create a positive bias towards older companies.
T3 = EBIT Total Assets
This ratio adjusts a company's earnings for varying income tax factors and makes adjustments for leveraging due to borrowings. These adjustments allow more effective measurements of the company's utilization of its assets.
T4 = Market Value of Equity Total Liabilities
This ratio gives an indication of how much a company's assets can decline in value before debts may exceed assets. Equity consists of the market value of all outstanding common and preferred stock. For a private company the book value of equity is used for this ratio. This depends on the assumption that a private company records its assets at market value.
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T5 =
Sales Total Assets
This ratio measures the ability of the company's assets to generate sales. This ratio is not included in the Z-Score of a private company. Zones of Discrimination Z > 2.99 1.80 < Z < 2.99 Z < 1.80 Safe Zone Grey Zone Distress Zone
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Z-score formula for Private firms is as follows: Z' = .717T1 + .847T2 + 3.107T3 + .420T4 + .998T5 where,
T1 = Current Assets - Current Liabilities Total Assets Accdumulated Retained Earnings Total Assets EBIT Total Assets Book Value of Equity Total Liabilities Sales Total Assets
T2 =
T3 =
T4 =
T5 =
Zones of Discrimination Z' > 2.90 1.23 < Z' < 2.90 Z' < 1.23 Safe Zone Grey Zone Distress Zone
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Z-score formula for Non-manufacturer Industrials is as follows: Z = 6.56T1 + 3.26T2 + 6.72T3 + 1.05T4 where,
T1 = Current Assets - Current Liabilities Total Assets Accdumulated Retained Earnings Total Assets EBIT Total Assets Book Value of Equity Total Liabilities
T2 =
T3 =
T4 =
Zones of Discrimination Z > 2.60 1.10 < Z < 2.60 Z < 1.10 Safe Zone Grey Zone Distress Zone
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Technical Analysis
Introduction to Candlesticks History The Japanese began using technical analysis to trade rice in the 17th century. While this early version of technical analysis was different from the US version initiated by Charles Dow around 1900, many of the guiding principles were very similar:

The "what" (price action) is more important than the "why" (news, earnings, and so on). All known information is reflected in the price. Buyers and sellers move markets based on expectations and emotions (fear and greed). Markets fluctuate. The actual price may not reflect the underlying value.
According to Steve Nison, candlestick charting first appeared sometime after 1850. Much of the credit for candlestick development and charting goes to a legendary rice trader named Homma from the town of Sakata. It is likely that his original ideas were modified and refined over many years of trading eventually resulting in the system of candlestick charting that we use today. Formation In order to create a candlestick chart, you must have a data set that contains open, high, low and close values for each time period you want to display. The hollow or filled portion of the candlestick is called "the body" (also referred to as "the real body"). The long thin lines above and below the body represent the high/low range and are called "shadows" (also referred to as "wicks" and "tails"). The high is marked by the top of the upper shadow and the low by the bottom of the lower shadow. If the stock closes higher than its opening price, a hollow candlestick is drawn with the bottom of the body represents the opening price and the top of the body representing the closing price. If the stock closes lower than its opening price, a filled candlestick is drawn with the top of the body representing the opening price and the bottom of the body representing the closing price.
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Compared to traditional bar charts, many traders consider candlestick charts more visually appealing and easier to interpret. Each candlestick provides an easy-to-decipher picture of price action. Immediately a trader can see compare the relationship between the open and close as well as the high and low. The relationship between the open and close is considered vital information and forms the essence of candlesticks. Hollow candlesticks, where the close is greater than the open, indicate buying pressure. Filled candlesticks, where the close is less than the open, indicate selling pressure.
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Exponential Moving Average
EMA weights N=15 An exponential moving average (EMA), sometimes also called an exponentially weighted moving average (EWMA), applies weighting factors which decrease exponentially. The weighting for each older data point decreases exponentially, giving much more importance to recent observations while still not discarding older observations entirely. The graph at right shows an example of the weight decrease. Parameters The degree of weighting decrease is expressed as a constant smoothing factor , a number between 0 and 1. The smoothing factor may be expressed as a percentage, so a value of 10% is equivalent to = 0.1. A higher discounts older observations faster. Alternatively, may be expressed in terms of N time periods, where = 2/(N+1). For example, N = 19 is equivalent to = 0.1. The half-life of the weights (the interval over which the weights decrease by a factor of two) is approximately N/2.8854 (within 1% if N > 5). The observation at a time period t is designated Yt, and the value of the EMA at any time period t is designated St. S1 is undefined. S2 may be initialized in a number of different ways, most commonly by setting S2 to Y1, though other techniques exist, such as setting S2 to an average of the first 4 or 5 observations. The prominence of the S2 initialization's effect on the resultant moving average depends on ; smaller values make the choice of S2 relatively more important than larger values, since a higher discounts older observations faster.
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Moving Average Convergence / Divergence
MACD, which stands for Moving Average Convergence / Divergence, is a technical analysis indicator created by Gerald Appel in the late 1970s. MACD shows the difference between a fast and slow exponential moving average (EMA) of closing prices. Since it is based on moving averages, MACD is inherently a lagging indicator. MACD is a form of Absolute Price Oscillator (APO), meaning that it takes the difference of two price EMAs. An alternate form of price oscillator is the Percentage Price Oscillator (PPO) which is computed by dividing the difference between two moving averages of price by the longer moving average value. The relative values generated by a PPO will differ from an APO (or MACD) in subtle but significant ways, and are preferred when (a) comparing the oscillator values between different securities, especially of widely different prices, or (b) comparing oscillator values for the same security at significantly different times, especially for a security whose value has changed greatly. The APO (and hence the MACD) will show greater oscillator extremes for higher priced securities, unlike the percentage price oscillator. The final member of the price oscillator family is the Detrended price oscillator. Thomas Aspray added a histogram to the MACD indicator in 1986, as a means to anticipate MACD crossovers, and thereby not miss important moves in a security. The example graph above right shows the MACD line, its signal line, and its histogram. The upper graph is the prices. The lower graph has the MACD line in blue. The signal line, which
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is another EMA of the MACD values themselves, is in red. The difference between the MACD line and its signal line is plotted histogram style along with the two MACD lines. The set of periods for the averages can be varied. Appel and others have experimented with different combinations. The usual set of parameters is written as 12,26,9 for the fast EMA, slow EMA and signal line periods respectively.
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Accumulation/Distribution Index Accumulation/Distribution index is a cumulative total volume technical analysis indicator created by Marc Chaikin, which adds or subtracts each day's volume in proportion to where the close is between the days high and low. First a close location value is formed,
This ranges from -1 when the close is the low of the day, to +1 when it's the high. For instance if the close is 3/4 the way up the range then CLV is +0.5. The accumulation/distribution index adds up volume multiplied by the CLV factor, i.e.
The starting point for the acc/dist total, i.e. the zero point, is arbitrary, only the shape of the resulting indicator is used, not the actual level of the total. The name accumulation/distribution comes from the idea that during accumulation buyers are in control and the price will be bid up through the day, or will make a recovery if sold down, in either case more often finishing near the day's high than the low. The opposite applies during distribution. The accumulation/distribution index is similar to on balance volume, but acc/dist is based on the close within the day's range, instead of the close-to-close up or down that the latter uses.
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Relative Strength Index
The Relative Strength Index (RSI) is a trading indicator in the technical analysis of financial markets. It is intended to indicate the current and historical strength or weakness of a market based on the closing prices of completed trading periods. It assumes that prices close higher in strong market periods, and lower in weaker periods and computes this as a ratio of the number of incrementally higher closes to the incrementally lower closes. The Relative Strength Index was developed by J. Welles Wilder and published in a 1978 book, New Concepts in Technical Trading Systems, and in Commodities magazine (now Futures magazine) in the June 1978 issue. The RSI method may be classified as a momentum oscillator measuring the velocity and magnitude of directional price movements. Momentum is the rate of the rise or fall in price.
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6. Analysis & Interpretation

Axis Bank
Axis Bank was the first of the new private banks to have begun operations in 1994, after the Government of India allowed new private banks to be established. The Bank was promoted jointly by the Administrator of the specified undertaking of the Unit Trust of India (UTI - I), Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC) and other four PSU insurance companies, i.e. National Insurance Company Ltd., The New India Assurance Company Ltd., The Oriental Insurance Company Ltd. and United India Insurance Company Ltd. The Bank today is capitalized to the extent of Rs. 403.63 crores with the public holding (other than promoters and GDRs) at 53.72%. The Bank's Registered Office is at Ahmedabad and its Central Office is located at Mumbai. The Bank has a very wide network of more than 896 branches and Extension Counters (as on 31st December 2009). The Bank has a network of over 4055 ATMs (as on 31st December 2009) providing 24 hrs a day banking convenience to its customers. This is one of the largest ATM networks in the country. The Bank has strengths in both retail and corporate banking and is committed to adopting the best industry practices internationally in order to achieve excellence. Vision 2015
To be the preferred financial solutions provider excelling in customer delivery through insight, empowered employees and smart use of technology
Core Values

Customer Centricity Ethics Transparency Teamwork Ownership
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Trend Analysis
Particulars Interest Income Expenses Net Profit Retained Earnings Dividend per Share Earnings per Share Reserves Deposits Borrowings Net Fixed Assets Loans & Advances Investments Net Current Assets
2004-'05 1924.15 2033.61 334.58 246.83 2.80 12.22 2147.80 31712.00 2570.01 518.44 15602.92 15048.02 5346.11
2004-'05 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
2005-'06 2888.79 3135.45 485.08 372.53 3.50 17.41 2606.94 40113.53 4469.53 567.72 22314.23 21527.35 2117.86
2005-'06 150.13 154.18 144.98 150.93 125.00 142.47 121.38 126.49 173.91 109.51 143.01 143.06 39.61
Rs. Crore 2006-'07 4461.66 4815.66 659.03 510.24 4.50 21.26 3120.57 58785.61 8697.02 673.20 36876.47 26897.17 5883.79
2006-'07 231.88 236.80 196.97 206.72 160.71 173.98 145.29 185.37 338.40 129.85 236.34 178.74 110.06
2007-'08 7005.32 7745.06 1071.03 819.39 6.00 29.94 8412.99 87626.22 9053.37 922.86 59661.14 33705.10 11201.06
2007-'08 364.07 380.85 320.11 331.97 214.29 245.01 391.70 276.32 352.27 178.01 382.37 223.98 209.52
2008-'09 10835.48 11997.81 1815.36 1394.84 10.00 50.57 9855.80 117374.10 15519.86 1072.89 81556.77 46330.35 13857.04
2008-'09 563.13 589.98 542.58 565.10 357.14 413.83 458.88 370.13 603.88 206.95 522.70 307.88 259.20
79
Interpretation From the above trend anal ysis of selected financial data we can observe: Generall y, t rends are in favour for the company. Expenses have shoot up sharpl y at a pace faster than that for core interest income which resulted into pressure on rising profits of the bank. However, increasing profit has resulted earnings over the five years. into increasing retained
Dividend per share has boosted by almost 3.5 times so as the Earnings per share which has considerabl y shown a fourfold increase over the years. The bank has also managed to add an enormous value to t he shareholders kitt y, which can be witnessed from over 4.5 times increase in the reserves. It seems that the bank being in its development phase attracted less amount of deposits as borrowed funds have seen six fold rise to meet up the capital needs. Fixed assets have almost grown by 2 times, less rapidl y than interest income. This shows optimum utilization of resources available to achieve targets by the bank. Net current assets have shown a 60% fall in the year 2005 - 06, however it got recovered in the subsequent years which is a good sign for the bank. On the whole, from the trends it is apparent that the compan y has become more affluent than is was 5 years ago.
80
CAMEL Analysis
Capital Adequacy Ratios Capital Adequacy Ratio
PARTICULARS Tier I Capital (%) Tier II Capital (%) Capital Adequacy Ratio (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 8.87 3.79 12.66 7.26 3.82 11.08 6.42 5.15 11.57 10.17 3.56 13.73 9.26 4.43 13.69
Leverage Ratio
PARTICULARS Total Debt Shareholders' Funds Leverage Ratio (Times) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
33,493.41 42,794.46 63,981.20 93,250.26 127,559.59 2,421.60 2,885.63 3,402.20 8,770.70 10,214.81 13.83 14.83 18.81 10.63 12.49
Debt Equity Ratio

PARTICULARS Total Deposits Shareholders' Funds Debt Equity Ratio (Times) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 31712.00 40113.53 58785.61 87626.22 117374.10 2,421.60 2,885.63 3,402.20 8,770.70 10,214.81 13.10 13.90 17.28 9.99 11.49
Advances to Total Assets Ratio

PARTICULARS Total Advances Total Assets Advances to Total Assets Ratio (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 15602.9 37799.8 41.28 22314.2 49784.6 44.82 36876.5 73309.7 50.30 59661.1 109626 54.42 81556.8 147759 55.20
Government Securities to Total Investment Ratio

PARTICULARS Govt. Securities Total Investment Govt. Sec. to Total Inv. Ratio (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 7538.40 11789.79 16436.30 20178.84 27727.24 15048.02 21527.35 26897.17 33705.10 46330.35 50.10 54.77 61.11 59.87 59.85
81
Graphs Capital Adequacy Ratio (%)

14.00 13.50 13.00 12.50 12.00 11.50 11.00 10.50 10.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 20.00 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00
Leverage Ratio (Times)
13.73 12.66 11.57 11.08
13.69
18.81 13.83 14.83 12.49 10.63
2004-'05
2005-'06
2006-'07
2007-'08
2008-'09
Year
Year
Debt Equity Ratio (Times)

20.00 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 60.00
Advances to Total Assets Ratio (%)

50.00 40.00
17.28 13.10 13.90 11.49 9.99
50.30 41.28 44.82
54.42
55.20
30.00 20.00 10.00 0.00
2004-'05
2005-'06
2006-'07
2007-'08
2008-'09
2004-'05
2005-'06
2006-'07
2007-'08
2008-'09
Year
Year
Govt. Sec. to Total Inv. Ratio (%)

70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
61.11 50.10 54.77
59.87
59.85
Year
82
Asset Quality Ratios Net NPA to Net Advances

PARTICULARS Net NPAs Net Advances Net NPA to Net Advances (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 216.85 217.60 266.33 248.29 327.13 15602.92 22314.23 36876.47 59661.14 81556.77 1.39 0.98 0.72 0.42 0.40
Net NPA to Total Assets

PARTICULARS Net NPAs Total Assets Net NPA to Total Assets (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
216.85 217.60 266.33 248.29 327.13 37,799.75 49,784.64 73,309.71 109,625.68 147,758.84 0.57 0.44 0.36 0.23 0.22
Total Investments to Total Assets

PARTICULARS Total Investments Total Assets Total Investments to Total Assets (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
15048.02 21527.35 26897.17 33705.10 46330.35 37799.75 49784.64 73309.71 109625.68 147758.84 39.81 43.24 36.69 30.75 31.36
83
Graphs Net NPA to Net Advances (%)

1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
1.39
0.98
0.72 0.42
2004-'05 2005-'06 2006-'07 2007-'08
0.40
2008-'09
Year
Net NPAs to Total Assets (%)

0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00
0.57 0.44 0.36 0.23

2004-'05 2005-'06 2006-'07 2007-'08
0.22
2008-'09
Year
Total Investments to Total Assets (%)

50.00 40.00 30.00 20.00 10.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
39.81
43.24 36.69 30.75 31.36
Year
84
Management Efficiency Ratios Total Advances to Total Deposits

PARTICULARS Total Advances Total Deposits Total Advances to Total Deposits (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
15602.92 22314.23 36876.47 59661.14 81556.77 31712.00 40113.53 58785.61 87626.22 117374.10 49.20 55.63 62.73 68.09 69.48
Business per Employee

PARTICULARS Deposits+Advances No. of Employees Business per Employee (Rs. Cr.) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
47,314.92 62,427.76 95,662.08 147,287.36 198,930.87 4761 6553 9980 14739 20624 9.94 9.53 9.59 9.99 9.65
Profit per Employee

PARTICULARS Operating Profit No. of Employees Profit per Employee (Rs. Lacs) 2004-'05 2005-'06 565.62 4761 11.88 993.81 6553 15.17 2006-'07 1,263.85 9980 12.66 2007-'08 2,225.92 14739 15.10 2008-'09 3,724.88 20624 18.06
Return on Net Worth

PARTICULARS Net Profit Average Net Worth Return on Net Worth (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 334.58 1779.83 18.80 485.08 2653.62 18.28 659.03 3143.92 20.96 1071.03 6086.45 17.60 1815.36 9492.75 19.12
85
Graphs
Total Advances to Total Deposits (%)
69.48
Business per Employee (Rs. Cr.)

10.10 10.00 9.90 9.80 9.70 9.60 9.50 9.40 9.30 9.20
80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00
62.73 49.20 55.63
68.09
9.94
9.99
9.53
9.59
9.65
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
Profit per Employee (Rs. Lacs)

20.00 15.00 15.17 10.00 5.00 0.00 2004-'052005-'062006-'072007-'082008-'09 11.88 12.66 15.10 18.06 22.00 21.00 20.00 19.00 18.00 17.00 16.00 15.00
Return on Net Worth (%)
20.96 18.80 19.12 18.28 17.60
2004-'052005-'062006-'072007-'082008-'09
Year
Year
86
Earnings Capacity Ratios Net Interest Margin

PARTICULARS Net Interest Income Avg. Int. Earning Assets Net Interest Margin (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
731.18 1,078.23 1,468.33 2,585.35 3,686.21 23903.33 37246.86 53807.61 78569.94 110626.7 3.06 2.89 2.73 3.29 3.33
Return on Average Assets

PARTICULARS Net Profit Average Total Assets Return on Average Assets (%) 2004-'05 334.58 30946.93 1.08 2005-'06 485.08 43792.20 1.11 2006-'07 659.03 61547.18 1.07 2007-'08 2008-'09
1071.03 1815.36 91467.70 128692.26 1.17 1.41
Return on Equity
PARTICULARS Net Profit Shareholder's Funds Return on Equity (%) 2004-'05 334.58 2,421.60 13.82 2005-'06 485.08 2,885.63 16.81 2006-'07 659.03 3,402.20 19.37 2007-'08 2008-'09
1071.03 1815.36 8,770.70 10,214.81 12.21 17.77
Non-Interest Income to Average Assets Ratio

PARTICULARS Non-Interest Income Average Total Assets Non-Int. Income to Avg. Assets Ratio (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
415.82 729.63 1,010.11 1,795.49 2,896.88 30,946.93 43,792.20 61,547.18 91,467.70 128,692.26 1.34 1.67 1.64 1.96 2.25
Overhead Ratio
PARTICULARS Non-Interest Expenses Average Total Assets Overhead Ratio (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
581.38 814.05 1,214.59 2,154.92 2,858.21 30,946.93 43,792.20 61,547.18 91,467.70 128,692.26 1.88 1.86 1.97 2.36 2.22
87
Efficiency Ratio
PARTICULARS Non-Interest Expenses Net Int. Income+NonInt. Income Efficiency Ratio (%) 2004-'05 581.38 1,147.00 50.69 2005-'06 814.05 1,807.86 45.03 2006-'07 1,214.59 2,478.44 49.01 2007-'08 2,154.92 4,380.84 49.19 2008-'09 2,858.21 6,583.09 43.42
Interest Income to Working Funds

PARTICULARS Interest Income Working Funds Interest Income to Working Funds (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
1924.15 2888.79 4461.66 7005.32 10835.48 37,799.75 49,784.64 73,309.71 109,625.68 147,758.84 5.09 5.80 6.09 6.39 7.33
Non-Interest Income to Working Funds

PARTICULARS Non-Interest Income Working Funds Non-Int. Income to Working Funds (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
415.82 729.63 1,010.11 1,795.49 2,896.88 37,799.75 49,784.64 73,309.71 109,625.68 147,758.84 1.10 1.47 1.38 1.64 1.96
Operating Profit to Working Funds

PARTICULARS Operating Profit Working Funds Operating Profit to Working Funds (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
565.62 993.81 1,263.85 2,225.92 3,724.88 37,799.75 49,784.64 73,309.71 109,625.68 147,758.84 1.50 2.00 1.72 2.03 2.52
88
Graphs Net Interest Margin (%)

3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 3.29 2.89 2.73 3.33 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
Return on Average Assets (%)
3.06
1.41 1.08 1.11 1.07 1.17
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
Return on Equity (%)

25.00 20.00 15.00 10.00 5.00 0.00 2004-'052005-'062006-'072007-'082008-'09 13.82 19.37 16.81 12.21 17.77
Non-Int. Income to Avg. Assets Ratio (%) 2.50

2.00 1.50 1.00 0.50 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 1.34 1.96 1.67 1.64 2.25
Year
Year
Overhead Ratio (%)

2.50 2.00 1.50 1.00 0.50 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 1.88 1.86 1.97 2.36 2.22 52.00 50.00 48.00 46.00 44.00 42.00 40.00 38.00
Efficiency Ratio (%)
50.69 49.01 45.03 43.42 49.19
2004-'052005-'062006-'072007-'082008-'09
Year
Year
89
8.00 6.00 4.00 2.00 0.00
Interest Income to Working Funds (%)

7.33 5.80 5.09 6.09 6.39
2.50 2.00 1.50 1.00
Non-Int. Income to Working Funds (%)
1.96 1.47 1.10 1.64 1.38
0.50 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
Op. Profit to Working Funds (%)

3.00 2.50 2.00 1.50 1.00 0.50 0.00 2004-'052005-'062006-'072007-'082008-'09 1.50 2.00 1.72 2.03 2.52
Year
90
Liquidity Ratios
Liquid Assets to Demand Deposits

PARTICULARS Liquid Assets Demand Deposits Liquid Assets to Demand Deposits (%) 2004-'05 6556.49 7154.84 91.64 2005-'06 2006-'07 2007-'08 14969.71 20044.58 74.68 2008-'09 18305.89 24821.61 73.75
5248.27 8650.71 7970.08 11304.32 65.85 76.53
Liquid Assets to Total Deposits

PARTICULARS Liquid Assets Total Deposits Liquid Assets to Total Deposits (%) 2004-'05 6556.49 31712.00 20.68 2005-'06 5248.27 40113.53 13.08 2006-'07 8650.71 58785.61 14.72 2007-'08 2008-'09
14969.71 18305.89 87626.22 117374.10 17.08 15.60
Liquid Assets to Total Assets

PARTICULARS Liquid Assets Total Assets Liquid Assets to Total Assets (%) 2004-'05 6556.49 37799.75 17.35 2005-'06 5248.27 49784.64 10.54 2006-'07 2007-'08 2008-'09
8650.71 14969.71 18305.89 73309.71 109625.68 147758.84 11.80 13.66 12.39
Government Securities to Total Assets

PARTICULARS Government Securities Total Assets Government Sec. to Total Assets (%) 2004-'05 7538.40 37799.75 19.94 2005-'06 11789.79 49784.64 23.68 2006-'07 2007-'08 2008-'09
16436.30 20178.84 27727.24 73309.71 109625.68 147758.84 22.42 18.41 18.77
91
Graphs
Liquid Assets to Demand Deposits (%)
91.64 76.53 65.85 74.68 73.75
Liquid Assets to Total Deposits (%)

25.00 20.00 20.68 15.00 10.00 5.00 0.00 13.08 14.72 17.08 15.60
100.00 80.00 60.00 40.00 20.00 0.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
Liquid Assets to Total Assets (%)

20.00 15.00 10.00 10.54 5.00 0.00 2004-'052005-'062006-'072007-'082008-'09 17.35 13.66 11.80 12.39 25.00 20.00 15.00 10.00 5.00 0.00
Government Sec. to Total Assets (%)

23.68 19.94 22.42 18.41 18.77
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
92
Interpretation Capital adequacy ratios have shown satisfactory performance over the years for the bank. Core capital adequacy ratio has remained above the regulatory requirements of RBI and witnessed a gradual improvement which is a good indication for the bank. On the other hand, leverage and debt equity ratio have stabilized which were at their peak during 2006-07. Moreover, advances to total assets ratio has boosted significantly coupled with government securities to total investment ratio depicting a tale of handsome efforts leading to healthier business opportunities while keeping hands safe. Asset quality ratios seem to have become strength for the bank. Non Performing Assets which are considered to be the most critical part of a banks portfolio have shown a sharp fall over the five years in comparison to net advances which gives a picture of vigorous efforts in advancing loans and also in recovering the same. Apart from these, investments to total assets ratio has also decreased from which is a fine signal as bank by decreasing investments can now advance more funds and earn interest income which is its core area of operation. Management efficiency ratios more or less have remained stabilized and shown a mix trend over the years. Total advances to total deposits ratio has tremendously rose to the tune of 20% over the five years which shows dynamic efforts of the bank in towards optimum utilization of the funds available with the bank. With the increasing number of employees over the years bank has managed to maintain more or less the same increase in its business, however, profitability per employee has improved by over Rs. 6 lacs which shows operational excellence of the bank in reducing costs which results into rising profits. Return on net worth i.e. shareholders funds have stabilized with increasing-decreasing trend year after year. Earnings capacity ratios have witnessed robust performance from 2004-05 to 2008-09. Net interest margin has rose by a nominal over 25 bps but is a good indication that it is moving upwards. Return on average assets and return on equity shareholders funds have followed the same trend. It is interesting to note that non-interest income and non-interest
93
expenses have shown relatively similar change. However, encouraging trend in net interest income has resulted into superior efficiency for the bank. Interest income to working funds, non-interest income to working funds and operating profit to working funds have observed a remarkable growth. Liquidity ratios appear to be as the broken leg of the bank and have observed poor performance over the years. Liquid assets though witnessing an upward trend have failed to be in line with an increase in the deposits and assets as a result of which these ratios have diminished. Not having enough liquidity on the hand to meet the requirement of the banks stakeholders can prove to be dangerous. However, bank has maintained the tune of investment in the government securities in line with the assets.
94
Z-score Analysis
Z = 6.56T1 + 3.26T2 + 6.72T3 + 1.05T4
Altman Z Score Model
(CA-CL)/Total Assets (T1) Acc. Retained Earnings/ Total Assets (T2) EBIT / Total Assets (T3) B. V. of Equity / Total Liabilities (T4)
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 0.2593 0.0568 0.0452 0.0637 2.26 0.1640 0.0524 0.0511 0.0577 1.65 0.2151 0.0426 0.0544 0.0463 1.96 0.2706 0.0767 0.0553 0.0800 2.48 0.2551 0.0667 0.0672 0.0691 2.42
Z-score
Graph showing Z-score for 5 years

2.75
2.50
2.25
2.48 2.26 1.96 1.65
2.42
Z-Score
2.00 1.75 1.50 1.25 1.00
2004-'05
2005-'06
2006-'07
2007-'08
2008-'09
Year
95
Technical Analysis
96
Exponential Moving Average (EMA) Chart In Axis bank we can see the stable trend in the month of January and February but in March it goes sharply down and reaches the lowest point of the year which is 290 and from that month it rises in the next months. In the month of April, May and July it rises very sharply from 290 to 800. Then there is stable trend in coming months. It also touched the highest point of 1050 in December. Due to recent stability in EMA it will better to invest in the company. Moving Average Convergence Divergence (MACD) Chart As per the MACD chart, it is advisable to wait and watch. The reason behind is that in the first quarter of the year it shows the down fall trend and which is below the expectation. In the month of May only it increases sharply to 50 and rises sharply to 75 in June. Then it shows the mix trend which is not quite satisfactory and it is below the expectation also. So if consider this chart we give preference to wait for some time. Relative Strength Index (RSI) Chart In RSI chart we have shown the Upward Control line (UCL) at 70 points and Lower Control Line (LCL) at 30 points. Company have shown sharp fall in the first quarter but then it is a stable trend and it is satisfactory. So it is advisable to invest in this company because the RSI is moderate. Accumulation/Distribution Chart Axis bank is showing the continues decrease in the first three months and after March there is a continuous accumulation and shown upward trend till December and it the positive sign for the company. There is continuous buying is going on, so it is the perfect time to get in this company.
97
Bank of Baroda
All started with a visionary Maharaja's uncanny foresight into the future of trade and enterprising in his country. On 20th July 1908, under the Companies Act of 1897, and with a paid up capital of Rs 10 Lacs started the legend that has now translated into a strong, trustworthy financial body, THE BANK OF BARODA. It has been a wisely orchestrated growth, involving corporate wisdom, social pride and the vision of helping others grow, and growing itself in turn. The founder, Maharaja Sayajirao Gaekwad, with his insight into the future, saw "a bank of this nature will prove a beneficial agency for lending, transmission, and deposit of money and will be a powerful factor in the development of art, industries and commerce of the State and adjoining territories." It has been a long and eventful journey of almost a century across 25 countries. Starting in 1908 from a small building in Baroda to its new hi-rise and hi-tech Baroda Corporate Centre in Mumbai is a saga of vision, enterprise, financial prudence and corporate governance. It is a story scripted in corporate wisdom and social pride. It is a story crafted in private capital, princely patronage and state ownership. It is a story of ordinary bankers and their extraordinary contribution in the ascent of Bank of Baroda to the formidable heights of corporate glory. It is a story that needs to be shared with all those millions of people - customers, stakeholders, employees & the public at large - who in ample measure, have contributed to the making of an institution. Our new logo is a unique representation of a universal symbol. It comprises dual B letterforms that hold the rays of the rising sun. We call this the Baroda Sun. The sun is an excellent representation of what our bank stands for. It is the single most powerful source of light and energy its far reaching rays dispel darkness to illuminate everything they touch. At Bank of Baroda, we seek to be the source that will help all our stakeholders realise their goals. To our customers, we seek to be a one-stop, reliable partner who will help them address different financial needs. To our employees, we offer rewarding careers and to our investors and business partners, maximum return on their investment.
98
The single-colour, compelling vermillion palette has been carefully chosen, for its distinctiveness as it stands for hope and energy. We also recognize that our bank is characterized by diversity. Our network of branches spans geographical and cultural boundaries and rural-urban divides. Our customers come from a wide spectrum of industries and backgrounds. The Baroda Sun is a fitting face for our brand because it is a universal symbol of dynamism and optimism it is meaningful for our many audiences and easily decoded by all. Our new corporate brand identity is much more than a cosmetic change. It is a signal that we recognize and are prepared for new business paradigms in a globalised world. At the same time, we will always stay in touch with our heritage and enduring relationships on which our bank is founded. By adopting a symbol as simple and powerful as the Baroda Sun, we hope to communicate both.
99
Trend Analysis
Particulars Interest Income Expenses Net Profit Retained Earnings Dividend per Share Earnings per Share Reserves Deposits Borrowings Net Fixed Assets Loans & Advances Investments Net Current Assets 2004-'05 6431.41 7098.97 676.84 509.88 5.00 23.08 5333.23 81333.46 3140.83 860.81 43400.38 37074.44 8485.26 2005-'06 7049.95 7839.63 826.96 619.28 5.00 22.70 7478.90 93661.99 7072.20 920.73 59911.78 35114.22 12621.64 Rs. Crore 2006-'07 9004.08 9411.65 1026.46 774.00 6.00 27.17 8284.41 124915.98 3861.66 1088.81 83620.87 34943.63 18608.36 2007-'08 11813.47 12456.66 1435.52 1094.58 8.00 39.41 10678.40 152034.13 9349.76 2427.01 106701.33 43870.06 20465.91 2008-'09 15091.58 15648.91 2227.20 1843.64 9.00 58.53 12470.01 192396.95 12767.90 2309.72 143985.90 52445.88 21494.28
2004-'05 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
2005-'06 109.62 110.43 122.18 121.46 100.00 98.35 140.23 115.16 225.17 106.96 138.04 94.71 148.75
2006-'07 140.00 132.58 151.65 151.80 120.00 117.72 155.34 153.58 122.95 126.49 192.67 94.25 219.30
2007-'08 183.68 175.47 212.09 214.67 160.00 170.75 200.22 186.93 297.68 281.94 245.85 118.33 241.19
2008-'09 234.65 220.44 329.06 361.58 180.00 253.60 233.82 236.55 406.51 268.32 331.76 141.46 253.31
100
Interpretation From the above trend anal ysis of selected financial data we can observe: Generall y, trends are in favour for the company. Core interest income have shoot up sharpl y at a pace faster than that for expenses which resulted into rising profits of the bank. Hence, increasing profit has resulted into increasing retained earnings over the five years. Dividend per share has boosted by almost 1.8 times so as the Earnings per share which has considerabl y shown a 2.5 times increase over the years. The bank has also managed to add an enormous value to the shareholders kitt y, which can be witnessed from over 2 times increas e in the reserves. It seems that the bank being in its development phase attracted less amount of depos its as borrowed funds have seen fourfold rise to meet up the capital needs. Fixed assets have almost grown by over 2 times, less rapidl y than interest income. This shows optimum utilization of resources available to achieve targets by the bank. Net current assets have shown recovery in the subsequent years which is a good sign for the bank. On the whole, from the trends it is apparent that the compan y has become more affluent than is was 5 years ago.
101
CAMEL Analysis
Leverage Ratio
PARTICULARS Total Debt Shareholders' Funds Leverage Ratio (Times) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
82,974.29 98,464.19 126,058.54 155,961.18 198,033.04 5627.76 7844.43 8649.94 11043.93 12835.54
14.74
12.55
14.57
14.12
15.43
Debt Equity Ratio

PARTICULARS Total Deposits Shareholders' Funds Debt Equity Ratio (Times) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
81333.46 93661.99 124915.98 152034.13 192396.95 5627.76 7844.43 8649.94 11043.93 12835.54
14.45
11.94
14.44
13.77
14.99

PARTICULARS Total Advances Total Assets Advances to Total Assets Ratio (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
43400.38 59911.78 83620.87 106701.33 143985.90 94664.24 113392.53 143146.18 179599.51 227406.72
45.85
52.84
58.42
59.41
63.32

PARTICULARS Govt. Securities Total Investment Govt. Sec. to Total Inv. Ratio (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 29007.9 26005.8 26256.7 34261.8 40849 37074.44 35114.22 34943.63 43870.06 52445.88 78.24 74.06 75.14 78.10 77.89
102

14.00 13.50 13.00 12.50 12.00 11.50 11.00 10.50 10.00 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00
13.65 12.61 11.80 12.91 12.88
14.74 12.55
14.57
14.12
15.43
2004-'052005-'062006-'072007-'082008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09

14.99
14.45 11.94
14.44
13.77
52.84 45.85
58.42
59.41
63.32
2004-'052005-'062006-'072007-'082008-'09
Year
Year

79.00 78.00 77.00 76.00 75.00 74.00 73.00 72.00 71.00 78.24 78.10 77.89
75.14 74.06
2004-'052005-'062006-'072007-'082008-'09
Year
103


PARTICULARS Net NPAs Total Assets Net NPA to Total Assets (%) 2004-'05 619.64 94664.24 0.65 2005-'06 518.04 113392.5 0.46 2006-'07 501.67 143146.2 0.35 2007-'08 493.55 179599.51 0.27 2008-'09 451.15 227406.72 0.20

37074.44 35114.22 34943.63 43870.06 52445.88 94664.24 113392.5 143146.2 179599.51 227406.72 39.16 30.97 24.41 24.43 23.06
104

1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
1.43 0.86 0.60

2004-'05 2005-'06 2006-'07
0.46
2007-'08
0.31
2008-'09
Year

0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00
0.65 0.46 0.35 0.27 0.20

2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year

50.00 40.00 30.00 20.00 10.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
39.16 30.97 24.41 24.43 23.06
Year
105

43400.38 59911.78 83620.87 106701.33 143985.9 81333.46 93661.99 124915.98 152034.13 192396.95 53.36 63.97 66.94 70.18 74.84

124,733.84 153,573.77 208,536.85 258,735.46 336,382.85 39529 38774 38604 36774 36838
3.16
3.96
5.40
7.04
9.13
Profit per Employee

Return on Net Worth

PARTICULARS Net Profit Average Net Worth Return on Net Worth (%) 2004-'05 2005-'06 2006-'07 2007-'08 676.84 5379.34 12.58 826.96 6736.09 12.28 1026.46 8247.18 12.45 1435.52 9846.94 14.58 2008-'09 2227.20 11939.74 18.65
106
Graphs
70.18 74.84

10.00 8.00 6.00 4.00 2.00 0.00 3.16 3.96 5.40 7.04 9.13
80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00
63.97 53.36
66.94
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

12.00 10.00 8.00 6.00 4.00 2.00 0.00 2004-'052005-'062006-'072007-'082008-'09 6.21 4.74 4.36 7.05 10.00 5.00 0.00 10.96 20.00 15.00
18.65 14.58 12.58 12.28 12.45
2004-'052005-'062006-'072007-'082008-'09
Year
Year
107

2,979.27 3,224.91 3,786.08 3,911.81 5,123.41 77,047.26 87,750.41 106,795.25 134,567.95 173,501.59
3.87
3.68
3.55
2.91
2.95

PARTICULARS Net Profit Average Total Assets Return on Average Assets (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
676.84 826.96 1026.46 1435.52 2227.20 89886.46 104028.39 128269.36 161372.85 203503.12 0.75 0.79 0.80 0.89 1.09
Return on Equity
PARTICULARS Net Profit Shareholder's Funds Return on Equity (%) 2004-'05 676.84 5627.76 12.03 2005-'06 826.96 7844.43 10.54 2006-'07 1026.46 8649.94 11.87 2007-'08 1435.52 11043.93 13.00 2008-'09 2227.20 12835.54 17.35

1,304.83 1,191.69 1,381.79 2,051.04 2,757.66 89886.46 104028.39 128269.36 161372.85 203503.12 1.45 1.15 1.08 1.27 1.36
Overhead Ratio
PARTICULARS Non-Interest Expenses Average Total Assets Overhead Ratio (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 3,844.66 203503.12 1.89
2,411.58 2,724.77 2,771.45 3,370.27 89886.46 104028.39 128269.36 161372.85 2.68 2.62 2.16 2.09
108
Efficiency Ratio
PARTICULARS Non-Interest Expenses Net Int. Income+NonInt. Income Efficiency Ratio (%) 2004-'05 2,411.58 4,284.10 56.29 2005-'06 2,724.77 4,416.60 61.69 2006-'07 2,771.45 5,167.87 53.63 2007-'08 3,370.27 5,962.85 56.52 2008-'09 3,844.66 7,881.07 48.78

PARTICULARS Interest Income Working Funds Interest Income to Working Funds (%) 2004-'05 6431.42 94664.24 6.79 2005-'06 7100.00 113392.5 6.26 2006-'07 9212.64 143146.2 6.44 2007-'08 11813.48 179599.51 6.58 2008-'09 15091.58 227406.72 6.64

PARTICULARS Non-Interest Income Working Funds Non-Int. Income to Working Funds (%) 2004-'05 1,304.83 94664.24 1.38 2005-'06 1,191.69 113392.5 1.05 2006-'07 1,381.79 143146.2 0.97 2007-'08 2,051.04 179599.51 1.14 2008-'09 2,757.66 227406.72 1.21

PARTICULARS Operating Profit Working Funds Operating Profit to Working Funds (%) 2004-'05 1872.52 94664.24 1.98 2005-'06 1691.83 113392.5 1.49 2006-'07 2,396.42 143146.2 1.67 2007-'08 2,592.58 179599.51 1.44 2008-'09 4,036.41 227406.72 1.77
109

5.00 3.87 4.00 3.00 2.00 1.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 3.68 3.55 2.91 2.95 1.20 1.00 0.80 0.60 0.40 0.20 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 0.75 0.79 0.80 0.89 1.09
Year
Year

20.00 15.00 10.00 5.00 0.00 2004-'052005-'062006-'072007-'082008-'09 12.03 11.87 13.00 17.35

1.50 1.00 0.50 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 1.45 1.15 1.27 1.08 1.36
10.54
Year
Year
Overhead Ratio (%)

3.00 2.50 2.00 1.50 1.00 0.50 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 2.68 2.62 2.16 2.09 1.89 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00
56.29
61.69 53.63
56.52 48.78
2004-'052005-'062006-'072007-'082008-'09
Year
Year
110

Interest Income to Working Funds (%) 6.90 6.80 6.70 6.60 6.50 6.40 6.30 6.20 6.10 6.00 5.90 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Non-Int. Income to Working Funds (%)
6.79 6.58 6.44 6.26 6.64
1.38 1.05 1.14 0.97 1.21
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

2.50 2.00 1.50 1.00 0.50 0.00 2004-'052005-'062006-'072007-'082008-'09 1.98 1.49 1.67 1.44 1.77
Year
111
Liquidity Ratios

PARTICULARS Liquid Assets Demand Deposits Liquid Assets to Demand Deposits (%) 2004-'05 2005-'06 2006-'07 2007-'08 26601.11 11696.01 227.44 2008-'09 28665.22 14451.22 198.36
13328.61 17445.80 23492.87 6871.09 8378.72 9874.8 193.98 208.22 237.91

PARTICULARS Liquid Assets Total Deposits Liquid Assets to Total Deposits (%) 2004-'05 13328.61 81333.46 16.39 2005-'06 2006-'07 2007-'08 2008-'09
17445.80 23492.87 26601.11 28665.22 93661.99 124915.98 152034.13 192396.95 18.63 18.81 17.50 14.90

PARTICULARS Liquid Assets Total Assets Liquid Assets to Total Assets (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
13328.61 17445.80 23492.87 26601.11 28665.22 94664.24 113392.53 143146.18 179599.51 227406.72 14.08 15.39 16.41 14.81 12.61

26256.73 34261.81 40848.95 143146.2 179599.51 227406.72 18.34 19.08 17.96
112
Graphs
237.91 193.98 208.22 227.44 198.36 10.00 100.00 50.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 5.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09

20.00 15.00 18.63 16.39 18.81 17.50 14.90
250.00 200.00 150.00
Year
Year

18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 35.00 15.39 16.41 14.81 12.61 30.00 25.00 20.00 15.00 10.00 5.00 0.00 2004-'052005-'062006-'072007-'082008-'09

30.64 22.93 18.34 19.08 17.96
14.08
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
113
Interpretation Capital adequacy ratios have shown satisfactory performance over the years for the bank. Core capital adequacy ratio has remained above the regulatory requirements of RBI and has stabilized which is a good indication for the bank. On the other hand, leverage and debt equity ratio have remained steady. Moreover, advances to total assets ratio has boosted significantly and shown 18% rise. Government securities to total investment ratio been balanced depicting a tale of handsome efforts leading to healthier business opportunities while keeping hands safe. Asset quality ratios seem to have become strength for the bank. Non Performing Assets which are considered to be the most critical part of a banks portfolio have shown a sharp fall over the five years in comparison to net advances which gives a picture of vigorous efforts in advancing loans and also in recovering the same. Apart from these, investments to total assets ratio has also decreased from which is a fine signal as bank by decreasing investments can now advance more funds and earn interest income which is its core area of operation. Management efficiency ratios have witnessed quite aggressiveness over the five years. Total advances to total deposits ratio has tremendously rose to the tune of 20% over the five years which shows dynamic efforts of the bank in towards optimum utilization of the funds available with the bank. With the increasing number of employees over the years, bank has managed to expand its business coupled with profitability per employee which has improved by over Rs. 6 lacs which shows operational excellence of the bank in reducing costs which results into rising profits. Return on net worth i.e. shareholders funds have observed upward trend with increasing-decreasing trend year after year. Earnings capacity ratios have witnessed robust performance from 2004-05 to 2008-09. Net interest margin has declined by almost 100 bps but is not a good indication. Return on average assets and return on equity shareholders funds have followed the growing trend. It is interesting to note that non-interest income and non-interest expenses have shown relatively similar change. However, discouraging trend in net interest income has
114
resulted into poor efficiency for the bank. Interest income to working funds, non-interest income to working funds and operating profit to working funds have also deteriorated. Liquidity ratios appear to be as the broken leg of the bank and have observed poor performance over the years. Liquid assets though witnessing an upward trend have failed to be in line with an increase in the deposits and assets as a result of which these ratios have diminished. Not having enough liquidity on the hand to meet the requirement of the banks stakeholders can prove to be dangerous. The bank has also failed to maintain the tune of investment in the government securities in line with the assets.
115
Z-score Analysis
Z = 6.56T1 + 3.26T2 + 6.72T3 + 1.05T4
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 0.3200 0.0563 0.0456 0.0594 2.65 0.3828 0.0660 0.0440 0.0692 3.09 0.3883 0.0579 0.0495 0.0604 3.13 0.4320 0.0595 0.0563 0.0615 3.47 0.4497 0.0548 0.0585 0.0564 3.58
Z-score

3.80 3.30 2.80
3.47
3.09 2.65 3.13
3.58
Z-Score
2.30 1.80 1.30 0.80
2004-'05
2005-'06
2006-'07
2007-'08
2008-'09
Year
116
Technical Analysis
117
Exponential Moving Average (EMA) Chart In BOB we can see the down ward trend in the month from January to March it goes sharply down and reaches the lowest point of the year which is 175 and from that month it rises in the next months. In the month of April, May and July it rises very sharply to 490. Then there is stable trend for next three months. It also touched the highest point of 555 in December. Due to recent stability in EMA it will better to invest in the company. Moving Average Convergence Divergence (MACD) Chart As per the MACD chart, it is advisable to wait and watch. The reason behind is that in the first quarter of the year it shows the down fall trend and which is below the expectation. In the month of May only it increases sharply to 20 and rises sharply to 40 in June. Then it shows the down ward trend which is not quite satisfactory and it is below the expectation also. So if consider this chart we give preference to wait for some time. Relative Strength Index (RSI) Chart In RSI chart we have shown the Upward Control line (UCL) at 70 points and Lower Control Line (LCL) at 30 points. Company have shown sharp fall in the first quarter but then it is a stable trend and it is satisfactory. So it is advisable to invest in this company because the RSI is moderate. Accumulation/Distribution Chart BOB is showing the stable trend in the first three months and after March there is a continuous accumulation and shown upward trend till December and it the positive sign for the company. There is continuous buying is going on, so it is the perfect time to get in this company.
118
Bank of India
Bank of India was founded on 7th September, 1906 by a group of eminent businessmen from Mumbai. The Bank was under private ownership and control till July 1969 when it was nationalised along with 13 other banks. Beginning with one office in Mumbai, with a paid-up capital of Rs.50 lakh and 50 employees, the Bank has made a rapid growth over the years and blossomed into a mighty institution with a strong national presence and sizable international operations. In business volume, the Bank occupies a premier position among the nationalised banks. The Bank has 3101 branches in India spread over all states/ union territories including 141 specialized branches. These branches are controlled through 48 Zonal Offices. There are 29 branches/ offices (including three representative offices) abroad. The Bank came out with its maiden public issue in 1997 and follow on Qualified Institutions Placement in February 2008. . Total number of shareholders as on 30/09/2009 is 2,15,790. While firmly adhering to a policy of prudence and caution, the Bank has been in the forefront of introducing various innovative services and systems. Business has been conducted with the successful blend of traditional values and ethics and the most modern infrastructure. The Bank has been the first among the nationalised banks to establish a fully computerized branch and ATM facility at the Mahalaxmi Branch at Mumbai way back in 1989. The Bank is also a Founder Member of SWIFT in India. It pioneered the introduction of the Health Code System in 1982, for evaluating/ rating its credit portfolio. The Bank's association with the capital market goes back to 1921 when it entered into an agreement with the Bombay Stock Exchange (BSE) to manage the BSE Clearing House. It is an association that has blossomed into a joint venture with BSE, called the BOI Shareholding Ltd. to extend depository services to the stock broking community. Bank of India was the first Indian Bank to open a branch outside the country, at London, in 1946, and also the first to open a branch in Europe, Paris in 1974. The Bank has sizable presence abroad, with a network of 29 branches (including five representative offices) at key banking and financial centers viz. London, New York, Paris, Tokyo, Hong-Kong and Singapore. The international business accounts for around 17.82% of Bank's total business.
119
Our Mission "To provide superior, proactive banking services to niche markets globally, while providing costeffective, responsive services to others in our role as a development bank, and in so doing, meet the requirements of our stakeholders". Our Vision "To become the bank of choice for corporate, medium businesses and up market retail customers and to provide cost effective developmental banking for small business, mass market and rural markets"
120
Trend Analysis
2004-'05 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
2005-'06 116.59 109.70 206.28 233.13 170.00 206.16 113.05 119.17 110.61 99.48 117.37 110.79 187.53
2006-'07 148.27 136.93 330.30 403.94 175.00 273.35 135.97 152.09 136.96 96.95 154.00 123.73 262.11
2007-'08 205.02 182.01 590.91 768.94 200.00 548.14 253.06 190.32 145.85 297.98 204.36 145.72 264.70
2008-'09 271.27 239.39 884.38 1096.88 400.00 820.34 326.12 240.68 188.64 310.98 257.36 183.39 377.57
121
Interpretation From the above trend anal ysis of selected financial data we can observe: Generall y, trends are in favour for the company. Core interest income has shoot up sharply at a pace faster than that for expenses which resulted into higher profits of the bank which has become almost nine fold in five years. Retained earnings have also r isen by over 10 times in line with the increasing profit s over the five years. Dividend per share has boosted by 4 times so as the Earnings per share which has considerabl y shown a eightfold increase over the years. The bank has also managed to add an eno rmous value to the shareholders kitt y, which can be witnessed from over 3 times increas e in the reserves. Deposits and borrowings have increased considerabl y but it cannot be said to be a sharp increase. Whereas advances have increased at a faster pace than deposits which adds to strength of the bank. Fixed assets have almost grown by over 3.5 times, more rapidl y than interest income. This shows that bank needs to optimall y utilize its resources available to achieve targets . Net current assets have shown improvement in the subsequent years which is a good sign for the bank. On the whole, from the trends it is apparent that the compan y has become more affluent than is was 5 years ago.
122
CAMEL Analysis
Leverage Ratio
PARTICULARS Total Debt Shareholders' Funds Leverage Ratio (Times) 2004-'05 2005-'06 2006-'07 2007-'08
84,783.39 4464.87 99,825.94 126,502.57 157,184.43 4983.88 5895.38 10589.39
2008-'09
199,195.46 13494.92
18.99
20.03
21.46
14.84
14.76
Debt Equity Ratio

78821.45 93932.04 119881.73 150011.98 4464.87 4983.88 5895.38 10589.39 189708.48 13494.92
17.65
18.85
20.33
14.17
14.06

55528.89 65173.74 85515.9 113476.34 142909.38 94978.18 112274.27 142247.02 178860.63 225931.65
58.46
58.05
60.12
63.44
63.25

PARTICULARS Govt. Securities Total Investment Govt. Sec. to Total Inv. Ratio (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
20313.21 23127.57 25812.79 34273.42 44102.82 28686.33 31781.75 35492.76 41802.88 52607.17
70.81
72.77
72.73
81.99
83.83
123

13.50 13.00 12.50 12.00 11.50 11.00 10.50 10.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 11.52 10.75 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 11.58 12.04 13.01 25.00 20.00 15.00 10.00 5.00
18.99
20.03
21.46 14.84 14.76
Year
Year

25.00 20.00 15.00 10.00 5.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 17.65 18.85 20.33 14.17 14.06 64.00 63.00 62.00 61.00 60.00 59.00 58.00 57.00 56.00 55.00

63.44
63.25
60.12 58.46 58.05
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

85.00 80.00 75.00 70.00 70.81 65.00 60.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 72.77 72.73 81.99 83.83
Year
124

PARTICULARS Net NPAs Net Advances Net NPA to Net Advances (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
1,554.00 55528.89 1,120.00 65173.74 812.00 592.00 628.00 85515.9 113476.34 142909.38
2.80
1.72
0.95
0.52
0.44

PARTICULARS Net NPAs Total Assets Net NPA to Total Assets (%) 2004-'05
1,554.00 94978.18
2005-'06
1,120.00 112274.27
2006-'07
812.00 142247.02
2007-'08
592.00 178860.63
2008-'09
628.00 225931.65
1.64
1.00
0.57
0.33
0.28

PARTICULARS Total Investments Total Assets Total Investments to Total Assets (%) 2004-'05 2005-'06 2006-'07
28686.33 31781.75 35492.76 94978.18 112274.27 142247.02
2007-'08
41802.88 178860.63
2008-'09
52607.17 225931.65
30.20
28.31
24.95
23.37
23.28
125

3.00 2.50 2.00 1.50 1.00 0.50 0.00 2004-'05 2005-'06 2006-'07
2.80 1.72 0.95 0.52

2007-'08
0.44
2008-'09
Year

2.00 1.50 1.00
1.64 1.00
0.50
0.57
0.00 2004-'05 2005-'06 2006-'07
0.33
2007-'08
0.28
2008-'09
Year

35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
30.20
28.31
24.95
23.37
23.28
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
126

PARTICULARS Total Advances Total Deposits Total Advances to Total Deposits (%) 2004-'05
55528.89 78821.45
2005-'06
2006-'07
2007-'08
2008-'09
142909.38 189708.48
65173.74 85515.9 113476.34 93932.04 119881.73 150011.98
70.45
69.38
71.33
75.64
75.33

PARTICULARS Deposits+Advances No. of Employees Business per Employee (Rs. Cr.) 2004-'05 2005-'06 2006-'07 2007-'08
263,488.32 40616
2008-'09
332,617.86 40155
134,350.34 159,105.78 205,397.63 42635 42206 41511
3.15
3.77
4.95
6.49
8.28
Profit per Employee

Return on Net Worth

PARTICULARS Net Profit Average Net Worth Return on Net Worth (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
340.05 4237.27 701.44 4724.38 1123.17 5439.63 2009.40 3007.35 8242.39 12042.15
8.03
14.85
20.65
24.38
24.97
127
Graphs
Total Advances to Total Deposits (%) Business per Employee (Rs. Cr.)
9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00
78.00 76.00 74.00 72.00 70.00 68.00 66.00
8.28 6.49 4.95 3.15 3.77
75.64
75.33
70.45 69.38
71.33
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 2.60 4.43 2.76 2004-'052005-'062006-'07 2007-'082008-'09 7.40 12.04 30.00 25.00 20.00 15.00 10.00 5.00 0.00
24.38 20.65 14.85 8.03
24.97
2004-'05 2005-'062006-'072007-'082008-'09
Year
Year
128

PARTICULARS
Net Interest Income Avg. Int. Earning Assets Net Interest Margin (%)
2004-'05 2005-'06 2006-'07
2007-'08
2008-'09
2,236.89 2,631.98 3,440.47 4,229.27 5,498.91 78,617.00 90,585.35 108,982.08 138,143.94 175,397.89
2.85
2.91
3.16
3.06
3.14

340.05 701.44 1123.17 2009.40 3007.35 89919.09 103626.23 127260.65 160553.83 202396.14 0.38 0.68 0.88 1.25 1.49
Return on Equity

PARTICULARS
Non-Interest Income Average Total Assets Non-Int. Income to Avg. Assets Ratio (%)
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09

1,155.80 1,184.38 1,562.95 2,116.93 3,051.86 89919.09 103626.23 127260.65 160553.83 202396.14
1.29
1.14
1.23
1.32
1.51
Overhead Ratio
2,283.56 2,650.74 3,165.32 3,342.23 89919.09 103626.23 127260.65 160553.83 2.54 2.56 2.49 2.08
129
Efficiency Ratio

PARTICULARS Interest Income Working Funds Interest Income to Working Funds (%) 2004-'05
6031.53 94978.18
2005-'06
7028.70 112274.27
2006-'07
9180.33 142247.02
2007-'08
12355.22 178860.63
2008-'09
16347.36 225931.65
6.35
6.26
6.45
6.91
7.24

PARTICULARS Non-Interest Income Working Funds Non-Int. Income to Working Funds (%) 2004-'05
1,155.80 94978.18
2005-'06
1,184.38 112274.27
2006-'07
1,562.95 142247.02
2007-'08
2,116.93 178860.63
2008-'09
3,051.86 225931.65
1.22
1.05
1.10
1.18
1.35

PARTICULARS Operating Profit Working Funds Operating Profit to Working Funds (%) 2004-'05
1109.13 94978.18
2005-'06
1165.62 112274.27
2006-'07
1,838.10 142247.02
2007-'08
3,003.97 178860.63
2008-'09
4,834.12 225931.65
1.17
1.04
1.29
1.68
2.14
130

3.20 3.10 3.00 2.90 2.80 2.70 2.60 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 2.85 2.91 3.16 3.06 3.14 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00

1.49 1.25 0.88 0.68 0.38 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
Non-Int. Income to Avg. Assets Ratio (%) 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00

25.00 20.00 15.00 10.00 5.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 7.62 14.07 19.05 18.98 22.29
1.51 1.29 1.14 1.23 1.32
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
Overhead Ratio (%)

3.00 2.50 2.00 1.50 1.00 0.50 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 2.54 2.56 2.49 2.08 1.84 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00
67.31
69.46
63.26 52.67 43.47
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
131

Interest Income to Working Funds (%) 7.40 7.20 7.00 6.80 6.60 6.40 6.20 6.00 5.80 5.60 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Non-Int. Income to Working Funds (%)
7.24 6.91 6.35 6.45 6.26
1.22 1.05
1.35 1.10 1.18
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

2.50 2.00 1.50 1.00 0.50 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 1.17 1.29 1.04 1.68 2.14
Year
132
Liquidity Ratios

9913.75 14484.26 20375.48 6098.26 7406.57 9365.86 162.57 195.56 217.55

PARTICULARS Liquid Assets Total Deposits Liquid Assets to Total Deposits (%) 2004-'05 9913.75 78821.45 12.58 2005-'06 2006-'07 2007-'08 2008-'09
14484.26 20375.48 21072.69 27453.10 93932.04 119881.73 150011.98 189708.48 15.42 17.00 14.05 14.47

PARTICULARS
Liquid Assets Total Assets Liquid Assets to Total Assets (%)
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09

9913.75 14484.26 20375.48 21072.69 27453.10 94978.18 112274.27 142247.02 178860.63 225931.65
10.44
12.90
14.32
11.78
12.15

25812.79 34273.42 44102.82 142247 178860.63 225931.65 18.15 19.16 19.52
133
Graphs
Liquid Assets to Demand Deposits (%) 250.00 200.00 150.00 100.00 50.00 0.00 18.00 16.00 218.20 14.00 217.55 12.00 195.56 10.00 168.95 162.57 8.00 6.00 4.00 2.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
17.00 15.42 12.58 14.05 14.47
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
Government Sec. to Total Assets (%) 22.00

16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00
14.32 12.90 10.44 11.78 12.15
21.00 20.00 19.00 18.00 17.00 16.00
21.39 20.60 19.16 18.15 19.52
2004-'052005-'062006-'072007-'082008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
134
Interpretation Capital adequacy ratios have shown quite satisfactory performance over the years for the bank. Core capital adequacy ratio has remained above the regulatory requirements of RBI and witnessed a gradual improvement which is a good indication for the bank. On the other hand, leverage and debt equity ratio have stabilized which were at their peak during 2005-06. Moreover, advances to total assets ratio has boosted significantly coupled with government securities to total investment ratio depicting a tale of handsome efforts leading to healthier business opportunities while keeping hands safe. Asset quality ratios seem to have become strength for the bank. Non Performing Assets which are considered to be the most critical part of a banks portfolio have shown a sharp fall over the five years in comparison to net advances which gives a picture of vigorous efforts in advancing loans and also in recovering the same. Apart from these, investments to total assets ratio has also decreased from which is a fine signal as bank by decreasing investments can now advance more funds and earn interest income which is its core area of operation. Management efficiency ratios more or less have remained stabilized and shown a mix trend over the years. Total advances to total deposits ratio has rose to the tune of 5% over the five years which shows dynamic efforts of the bank in towards optimum utilization of the funds available with the bank. With the increasing number of employees over the years, bank has managed to expand its business coupled with profitability per employee which has improved by almost Rs. 10 lacs which shows considerable operational excellence of the bank in reducing costs which results into rising profits. Return on net worth i.e. shareholders funds have observed threefold increase. Earnings capacity ratios have witnessed robust performance from 2004-05 to 2008-09. Net interest margin has rose by a nominal almost 30 bps but is a good indication that it is moving upwards. Return on average assets and return on equity shareholders funds have followed the same trend. It is interesting to note that non-interest income and non-interest
135
expenses have shown relatively similar change. However, encouraging trend in net interest income has resulted into superior efficiency for the bank. Interest income to working funds, non-interest income to working funds and operating profit to working funds have observed a remarkable growth. Liquidity ratios also appear to be strength for the bank over the years. Liquid assets have witnessed significant rise and excelled to be in line with an increase in the deposits and assets as a result of which these ratios have increased. Having enough liquidity on the hand to meet the requirement of the banks stakeholders can prove to be fruitful. Bank has maintained the tune of investment in the government securities in line with the assets.
136
Z-score Analysis
Z = 6.56T1 + 3.26T2 + 6.72T3 + 1.05T4
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 0.3481 0.0419 0.0432 0.0453 2.76 0.3825 0.0400 0.0451 0.0430 2.99 0.3909 0.0380 0.0494 0.0404 3.06 0.3820 0.0563 0.0604 0.0493 3.15 0.3773 0.0574 0.0664 0.0522 3.16
Z-score

3.30 2.80
3.06 2.76 2.99
3.15
3.16
Z-Score
2.30 1.80
1.30
0.80 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
137
Technical Analysis
138
Exponential Moving Average (EMA) Chart In BOI we can see the down ward trend in the month from January to March it goes sharply down and reaches the lowest point of the year which is 180 and from that month it rises in the next two months. In the month of May it falls very marginally to 240. Then there is mix trend for next three months. It also touched the highest point of 475 in October but in November it declines sharply to 325. Due to recent stability in EMA it will better to invest in the company. Moving Average Convergence Divergence (MACD) Chart As per the MACD chart, it is advisable to wait and watch. The reason behind is that in the first quarter of the year it shows the down fall trend and which is below the expectation. In the month of May only it increases sharply to 10 and declines marginally to 0 in June. Then it shows the good trend which is satisfactory because it increases for two months and stables. So if consider this chart we give preference of this company. Relative Strength Index (RSI) Chart In RSI chart we have shown the Upward Control line (UCL) at 70 points and Lower Control Line (LCL) at 30 points. Company have shown fall in the first quarter but then it is a mix trend and it is satisfactory because it is between the upper and lower limits. It also touches highest 80 in October So it is advisable to invest in this company because the RSI is moderate. Accumulation/Distribution Chart BOI is showing the stable trend in the first three months and after March there is a continuous accumulation for two months and decrease in May. After that there is an upward trend till October and after that there is a stable trend and it the positive sign for the company. There is continuous buying is going on, so it is the perfect time to get in this company.
139
Canara Bank
Widely known for customer centricity, Canara Bank was founded by Shri 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 a 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 the Indian banking industry. The eventful journey of the Bank has been characterized by several memorable milestones. Today, Canara Bank occupies a premier position in the comity of Indian banks. With an unbroken record of profits since its inception, Canara Bank has several firsts to its credit. These include:

Launching of Inter-City ATM Network Obtaining ISO Certification for a Branch Articulation of Good Banking Banks Citizen Charter Commissioning of Exclusive Mahila Banking Branch Launching of Exclusive Subsidiary for IT Consultancy Issuing credit card for farmers Providing Agricultural Consultancy Services
Over the years, the Bank has been scaling up its market position to emerge as a major 'Financial Conglomerate' with as many as nine subsidiaries/sponsored institutions/joint ventures in India and abroad. As at September 2009, the Bank has further expanded its domestic presence, with 2802 branches spread across all geographical segments. Keeping customer convenience at the forefront, the Bank provides a wide array of alternative delivery channels that include over 2000 ATMs- one of the highest among nationalized banks- covering 715 centers, 1591 branches providing Internet and Mobile Banking (IMB) services and 2084 branches offering 'Anywhere Banking' services. Under advanced payment and settlement system, all branches of the Bank have been enabled to offer Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) facilities.
140
Not just in commercial banking, the Bank has also carved a distinctive mark, in various corporate social responsibilities, namely, serving national priorities, promoting rural development, enhancing rural self-employment through several training institutes and spearheading financial inclusion objective. Promoting an inclusive growth strategy, which has been formed as the basic plank of national policy agenda today, is in fact deeply rooted in the Bank's founding principles. "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". These insightful words of our founder continue to resonate even today in serving the society with a purpose. The growth story of Canara Bank in its first century was due, among others, to the continued patronage of its valued customers, stakeholders, committed staff and uncanny leadership ability demonstrated by its leaders at the helm of affairs. We strongly believe that the next century is going to be equally rewarding and eventful not only in service of the nation but also in helping the Bank emerge as a Global Bank with Best Practices". This justifiable belief is founded on strong fundamentals, customer centricity, enlightened leadership and a family like work culture. 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 stakeholders and to continue as a responsive corporate social citizen by effectively blending commercial pursuits with social banking.
141
Trend Analysis
2004-'05 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
2005-'06 115.05 107.34 121.07 121.24 120.00 121.06 117.96 120.67 131.06 102.33 131.45 97.16 158.08
2006-'07 150.09 139.25 128.06 127.15 127.27 123.43 174.49 147.09 290.49 425.28 163.03 118.85 211.85
2007-'08 187.54 181.65 141.06 138.40 145.45 141.06 177.06 159.17 320.46 433.54 177.48 130.90 200.58
2008-'09 226.08 212.40 186.79 197.89 145.45 186.81 207.02 193.08 519.75 435.41 228.76 151.83 212.72
142
Interpretation From the above trend anal ysis of selected financial data we can observe: Generall y, t rends are in favour for the company. Expenses have shoot up sharpl y at a pace faster than that for core interest income which resulted into pressure on rising profits of the bank. However, increasing profit has resulted into increasing retained earnings over the five years. Dividend per share has boosted by almost 1.5 times so as the Earnings per share which has considerabl y shown a fourfold increase over the years. The bank has also managed to add an enormous value to the shareholders kitt y, which can be witnessed from over 2 times increas e in the reserves. It seems that the bank being in its development phase attracted less amount of deposits as borrowed funds have five fold rise to meet up the capital needs. Fixed assets have almost grown by 4 times, rapidl y than interest income. This shows inefficienc y in utilization of resources available to achieve targets by the bank. Net current assets have shown improvement in the subsequent years which is a good sign for the bank. On the whole, from the trends it is apparent that the compan y has become more afflu ent than is was 5 years ago.
CAMEL Analysis
143

Leverage Ratio
97,022.58 116,829.05 143,955.80 156,589.65 6108.96 7132.24 10353.99 10500.49
2008-'09
193,949.12 12207.77
15.88
16.38
13.90
14.91
15.89
Debt Equity Ratio

96795.92 116803.22 142381.44 154072.42 6108.96 7132.24 10353.99 10500.49 186892.51 12207.77
15.84
16.38
13.75
14.67
15.31

60421.40 79425.70 98505.69 107238.04 138219.40 110305.16 132821.86 165961.04 180528.69 219645.80
54.78
59.80
59.35
59.40
62.93

28992.65 30621.43 37320.47 42830.37 50831.77 38053.88 36974.17 45225.53 49811.57 57776.90
76.19
82.82
82.52
85.98
87.98
Graphs
144
Capital Adequacy Ratio (%)

14.50 14.00 13.50 13.00 12.50 12.00 11.50 11.00 10.50 10.00 17.00 16.50 16.00 15.50 15.00 14.50 14.00 13.50 13.00 12.50
14.10 13.50 12.78 13.25
16.38
15.88
14.91 13.90
15.89
11.22
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'052005-'062006-'072007-'082008-'09
Year
Year
Advances to Total Assets Ratio (%) 64.00

17.00 16.50 16.00 15.50 15.00 14.50 14.00 13.50 13.00 12.50 12.00
16.38 15.84 15.31 14.67 13.75
62.00 60.00 58.00 56.00 54.00 52.00 50.00
62.93 59.80 59.35 59.40
54.78
2004-'052005-'062006-'072007-'082008-'09
2004-'052005-'062006-'072007-'082008-'09
Year
Year

90.00 88.00 86.00 84.00 82.00 80.00 78.00 76.00 74.00 72.00 70.00
87.98 85.98 82.82 82.52 76.19

2004-'052005-'062006-'072007-'082008-'09
Year
Asset Quality Ratios

145
Net NPA to Net Advances

1,125.28 60421.40 879.18 79425.70 926.97 899.03 1,507.25 98505.69 107238.04 138219.40
1.86
1.11
0.94
0.84
1.09

PARTICULARS Net NPAs Total Assets Net NPA to Total Assets (%) 2004-'05 2005-'06 2006-'07 2007-'08 899.03 180528.69 0.50 2008-'09 1,507.25 219645.80 0.69
1,125.28 879.18 926.97 110305.16 132821.86 165961.04 1.02 0.66 0.56

38053.88 36974.17 45225.53 110305.16 132821.86 165961.04
2007-'08
49811.57 180528.69
2008-'09
57776.90 219645.80
34.50
27.84
27.25
27.59
26.30
Graphs
146
Net NPA to Net Advances (%)

2.00 1.50 1.00
1.86
1.11
0.50 0.00 2004-'05 2005-'06
0.94
1.09 0.84
2006-'07
2007-'08
2008-'09
Year

1.20 1.00 0.80 0.60 0.40 0.20 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
1.02 0.66 0.69 0.56 0.50
Year

40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
34.50 27.84 27.25 27.59 26.30
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Management Efficiency Ratios
147
Total Advances to Total Deposits

138219.40 186892.51
60421.40 79425.70 98505.69 107238.04 96795.92 116803.22 142381.44 154072.42
62.42
68.00
69.18
69.60
73.96

261,310.46 45260
2008-'09
325,111.91 44090
157,217.32 196,228.92 240,887.13 47389 46893 46359
3.32
4.18
5.20
5.77
7.37
Profit per Employee

Return on Net Worth

PARTICULARS Net Profit Average Net Worth Return on Net Worth (%) 2004-'05 2005-'06 2006-'07 1109.50 5680.31 19.53 1343.22 6620.60 20.29 1420.81 8743.11 16.25 2007-'08 1565.01 10427.24 15.01 2008-'09 2072.42 11354.13 18.25
Graphs
148
Fundamental and Technical Analysis of Indian Banking Sector Total Advances to Total Deposits (%)
73.96 68.00 62.42 69.18 69.60

8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00
75.00 70.00 65.00 60.00 55.00
7.37 5.20 4.18 3.32 5.77
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 25.00 7.21 5.43 3.75 4.22 4.82 20.00 15.00 10.00 5.00 0.00 2004-'052005-'062006-'072007-'082008-'09
19.53
20.29 16.25 15.01
18.25
2004-'052005-'062006-'072007-'082008-'09
Year
Year
Earnings Capacity Ratios

149
Net Interest Margin

PARTICULARS
2004-'05 2005-'06
2006-'07
2007-'08
2008-'09
3,150.47 3,581.50 4,026.83 3,537.80 4,717.80 90,953.45 107,437.58 130,065.55 150,390.42 176,522.96
3.46
3.33
3.10
2.35
2.67

1109.50 1343.22 1420.81 1565.01 2072.42 104922.28 121563.51 149391.45 173244.87 200087.25 1.06 1.10 0.95 0.90 1.04
Return on Equity

PARTICULARS Non-Interest Income Average Total Assets Non-Int. Income to Avg. Assets Ratio (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 2,427.10 200087.25 1.21
1,543.83 1,377.51 1,511.80 2,308.31 104922.28 121563.51 149391.45 173244.87 1.47 1.13 1.01 1.33
Overhead Ratio
2,915.87 2,982.32 3,023.26 3,666.30 104922.28 121563.51 149391.45 173244.87 2.78 2.45 2.02 2.12
Efficiency Ratio
150
PARTICULARS Non-Interest Expenses Net Int. Income+NonInt. Income Efficiency Ratio (%)
2004-'05 2,915.87 4,694.30 62.12
2005-'06 2,982.32 4,959.01 60.14
2006-'07 3,023.26 5,538.63 54.58
2007-'08 3,666.30 5,846.11 62.71
2008-'09 3,965.24 7,144.90 55.50

PARTICULARS Interest Income Working Funds Interest Income to Working Funds (%) 2004-'05 2005-'06 2006-'07 2007-'08 14200.74 180528.69 7.87 2008-'09 17119.05 219645.80 7.79
7571.97 8711.51 11364.56 110305.16 132821.86 165961.04 6.86 6.56 6.85

PARTICULARS Non-Interest Income Working Funds Non-Int. Income to Working Funds (%) 2004-'05 2005-'06 2006-'07 2007-'08 2,308.31 180528.69 1.28 2008-'09 2,427.10 219645.80 1.11
1,543.83 1,377.51 1,511.80 110305.16 132821.86 165961.04 1.40 1.04 0.91

PARTICULARS Operating Profit Working Funds Operating Profit to Working Funds (%) 2004-'05 2005-'06 2006-'07 2007-'08 2,179.81 180528.69 1.21 2008-'09 3,179.66 219645.80 1.45
1778.43 1976.69 2,515.37 110305.16 132821.86 165961.04 1.61 1.49 1.52
Graphs
151
Net Interest Margin (%)

4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 1.20 1.00 3.46 3.33 3.10 2.35 2.67 0.80 0.60 0.40 0.20 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 1.06

1.10 0.95 0.90
1.04
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
Non-Int. Income to Avg. Assets Ratio (%) 1.47 1.13 1.01

20.00 15.00 10.00 5.00 0.00 2004-'052005-'062006-'072007-'082008-'09 18.16 18.83 16.98 13.72 14.90 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
1.33
1.21
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
Overhead Ratio (%)

3.00 2.50 2.00 1.50 1.00 0.50 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 2.78 2.45 2.02 2.12 1.98 64.00 62.00 60.00 58.00 56.00 54.00 52.00 50.00

62.71 62.12 60.14
54.58
55.50
2004-'052005-'062006-'072007-'082008-'09
Year
Year
152

Interest Income to Working Funds (%) 8.00 7.50 7.00 6.50 6.00 5.50 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 6.86 6.56 6.85 7.87 7.79 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Non-Int. Income to Working Funds (%)
1.40 1.04 0.91
1.28 1.11
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

2.00 1.50 1.00 0.50 0.00 2004-'052005-'062006-'072007-'082008-'09
1.61
1.49
1.52 1.21
1.45
Year
153
Liquidity Ratios

11157.08 15733.50 19368.46 8957.13 10261.85 12445.25 124.56 153.32 155.63

PARTICULARS
Liquid Assets Total Deposits Liquid Assets to Total Deposits (%)
2004-'05
11157.08 96795.92
2005-'06
15733.50 116803.22
2006-'07
19368.46 142381.44
2007-'08
20562.20 154072.42
2008-'09
20720.05 186892.51
11.53
13.47
13.60
13.35
11.09

PARTICULARS
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09

11157.08 15733.50 19368.46 20562.20 20720.05 110305.16 132821.86 165961.04 180528.69 219645.80
10.11
11.85
11.67
11.39
9.43

PARTICULARS Government Securities Total Assets Government Sec. to Total Assets (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
28992.65 30621.43 37320.47 42830.37 50831.77 110305.16 132821.86 165961.04 180528.69 219645.80 26.28 23.05 22.49 23.72 23.14
154
Graphs

16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00
200.00 150.00
153.32 100.00 50.00 0.00 124.56
155.63
155.15
13.47 11.53
13.60
13.35 11.09
144.32
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
Government Sec. to Total Assets (%) 27.00 26.00 26.28 23.72 23.05 22.49

14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 2004-'05 2005-'06 2006-'072007-'08 2008-'09 10.11 11.85 11.67 11.39 9.43
25.00 24.00 23.00 22.00 21.00 20.00
23.14
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
155
Interpretation Capital adequacy ratios have shown satisfactory performance over the years for the bank. Core capital adequacy ratio has remained above the regulatory requirements of RBI and witnessed a gradual improvement which is a good indication for the bank. On the other hand, leverage and debt equity ratio have stabilized which were at their peak during 2005-06. Moreover, advances to total assets ratio has boosted significantly coupled with government securities to total investment ratio depicting a tale of handsome efforts leading to healthier business opportunities while keeping hands safe. Asset quality ratios seem to have become strength for the bank. Non Performing Assets which are considered to be the most critical part of a banks portfolio have shown a remarkable fall over the five years in comparison to net advances which gives a picture of vigorous efforts in advancing loans and also in recovering the same. Apart from these, investments to total assets ratio has also decreased from which is a fine signal as bank by decreasing investments can now advance more funds and earn interest income which is its core area of operation. Management efficiency ratios more or less have remained stabilized and shown a mix trend over the years. Total advances to total deposits ratio has rose to the tune of 10% over the five years which shows dynamic efforts of the bank in towards optimum utilization of the funds available with the bank. With the increasing number of employees over the years bank has managed to maintain the same increase in its business, however, profitability per employee has improved by over Rs. 4 lacs which shows operational excellence of the bank in reducing costs which results into rising profits. Return on net worth i.e. shareholders funds have stabilized with increasing-decreasing trend year after year. Earnings capacity ratios have witnessed robust performance from 2004-05 to 2008-09. Net interest margin has declined by almost 80 bps and is not a good indication. Return on average assets and return on equity shareholders funds have followed the stable trend. It is interesting to note that non-interest income and non-interest expenses have shown relatively similar change. However, encouraging trend in net interest income has resulted
156
into positive efficiency ratio for the bank. Interest income to working funds, non-interest income to working funds and operating profit to working funds have also deteriorated. Liquidity ratios appear to be as the weak link of the bank and have observed mixed performance over the years. Liquid assets though witnessing an upward trend have managed to be in line with an increase in the deposits and assets as a result of which these ratios have stabilized overall. Not having enough liquidity on the hand to meet the requirement of the banks stakeholders can prove to be dangerous. However, bank has maintained the tune of investment in the government securities in line with the assets.
157
Z-score Analysis
Z = 6.56T1 + 3.26T2 + 6.72T3 + 1.05T4
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 0.3124 0.0516 0.0516 0.0543 2.62 0.3694 0.0506 0.0502 0.0528 2.98 0.3686 0.0599 0.0542 0.0478 3.03 0.3608 0.0558 0.0696 0.0459 3.06 0.3855 0.0537 0.0682 0.0457 3.21
Z-score

3.80 3.30 2.80
Z-Score
2.98 2.62
3.03
3.06
3.21
2.30 1.80 1.30 0.80
2004-'05
2005-'06
2006-'07
2007-'08
2008-'09
Year
158
Technical Analysis
159
Exponential Moving Average (EMA) Chart In Canara Bank we can see the down ward trend in the month from January to March it goes sharply down and reaches the lowest point of the year which is 150 and from that month it rises in the next months. In the month of April, May and June it rises very sharply to 300. Then there is stable trend for next three months. It also touched the highest point of 440 in December. Due to recent stability in EMA it will better to invest in the company. Moving Average Convergence Divergence (MACD) Chart As per the MACD chart, it is advisable to go for this company. The reason behind is that in the first quarter of the year it shows the down fall trend and which is below the expectation. In the month of April only it increases sharply and rises sharply to 20 in June. Then it shows the down ward trend and stables after that for three months and then after increases from September and touches the highest of 21. Relative Strength Index (RSI) Chart In RSI chart we have shown the Upward Control line (UCL) at 70 points and Lower Control Line (LCL) at 30 points. Company have shown minor fall in the first quarter but then it is a mix trend and it is satisfactory because it crosses the upper limit five times. So it is advisable to invest in this company because the RSI is high. Accumulation/Distribution Chart Canara Bank is showing the downward trend in the first four months and after April there is a continuous accumulation till June and shown stable trend till October and after that there is a mix trend. It is not the ideal sign for the company. There is much fluctuation is going around in the market so wait and watch strategy would be good.
160
HDFC Bank
The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. HDFC is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment. HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services for target retail and wholesale customer segments, and to achieve healthy growth in profitability, consistent with the bank's risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Bank's business philosophy is based on four core values - Operational Excellence, Customer Focus, Product Leadership and People. HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of 1,725 branches spread in 771 cities across India. All branches are linked on an online real-time basis.
161
Customers in over 500 locations are also serviced through Telephone Banking. The Bank's expansion plans take into account the need to have a presence in all major industrial and commercial centers where its corporate customers are located as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing/settlement bank to various leading stock exchanges, the Bank has branches in the centers where the NSE/BSE has a strong and active member base. The Bank also has 4,000 networked ATMs across these cities. Moreover, HDFC Bank's ATM network can be accessed by all domestic and international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.
Mr. Jagdish Capoor took over as the bank's Chairman in July 2001. Prior to this, Mr. Capoor was a Deputy Governor of the Reserve Bank of India. The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25 years and before joining HDFC Bank in 1994 was heading Citibank's operations in Malaysia.
The Bank's Board of Directors is composed of eminent individuals with a wealth of experience in public policy, administration, industry and commercial banking. Senior executives representing HDFC are also on the Board. Senior banking professionals with substantial experience in India and abroad head various businesses and functions and report to the Managing Director. Given the professional expertise of the management team and the overall focus on recruiting and retaining the best talent in the industry, the bank believes that its people are a significant competitive strength. HDFC Bank operates in a highly automated environment in terms of information technology and communication systems. All the bank's branches have online connectivity, which enables the bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also provided to retail customers through the branch network and Automated Teller Machines (ATMs). The Bank has made substantial efforts and investments in acquiring the best technology available internationally, to build the infrastructure for a world class bank. The Bank's business is supported by scalable and robust systems which ensure that our clients always get the finest services we offer.
162
Trend Analysis
Particulars Interest Income Expenses Net Profit Retained Earnings Dividend per Share Earnings per Share Reserves Deposits Borrowings Net Fixed Assets Loans & Advances Investments Net Current Assets 2004-'05 2993.51 3159.27 665.3 505.59 4.50 21.48 4210.4 36354.25 5290.01 708.32 25566.3 19349.81 (2,782.04) 2005-'06 4438.98 4818.2 870.78 674.39 5.50 27.81 4986.46 55796.82 4560.48 855.08 35061.26 28393.96 41.30 Rs. Crore 2006-'07 6747.19 7342.16 1141.45 879.53 7.00 33.22 6113.76 68297.94 6097.99 966.67 46944.78 30296.96 1,881.05 2007-'08 10135.78 11096.34 1590.19 1237.66 8.50 44.87 11142.8 100768.6 7844.02 1175.09 63426.89 48912.39 5,859.07 2008-'09 16102.06 17557.97 2244.94 1746.68 10.00 52.77 14226.44 142811.58 9564.55 1706.73 98883.05 56290.44 9,389.58
2004-'05 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 (100.00)
2005-'06 148.29 152.51 130.89 133.39 122.22 129.47 118.43 153.48 86.21 120.72 137.14 146.74 1.48
2006-'07 225.39 232.40 171.57 173.96 155.56 154.66 145.21 187.87 115.27 136.47 183.62 156.57 67.61
2007-'08 338.59 351.23 239.02 244.80 188.89 208.89 264.65 277.19 148.28 165.90 248.09 252.78 210.60
2008-'09 537.90 555.76 337.43 345.47 222.22 245.67 337.89 392.83 180.80 240.95 386.77 290.91 337.51
163
Interpretation From the above trend anal ysis of selected financial data we can observe: Generall y, t rends are in favour for the company. Expenses have shoot up sharpl y at a pace faster than that for core interest income which resulted into pressure on rising profits of the bank. However, increasing profit has resulted into increasing retained earnings over the five years. Dividend per share has boosted by over 2 times so as the Earnings per share which has considerabl y shown a fourfold incre ase over the years. The bank has also managed to add an enormous value to the shareholders kitt y, which can be witnessed from over 3 times increas e in the reserves. It seems that the bank has maintained advances in line with the deposits which is an enco uraging trend while keeping borrowed funds minimal. Fixed assets have almost grown by over 2 times, less rapidl y than interest income. This shows optimum utilization of resources available to achieve targets by the bank. Net current assets have shown considerable improvement in the subsequent years which is a good indication for the bank. On the whole, from the trends it is apparent that the compan y has become more affluent than is was 5 years ago.
164
CAMEL Analysis
Leverage Ratio
41,644.26 4562.63 60,357.30 5299.60 71,113.33 105,247.46 6433.15 11497.23
2008-'09
145,497.42 14651.82
9.13
11.39
11.05
9.15
9.93
Debt Equity Ratio

36354.25 55796.82 68297.94 100768.60 4562.63 5299.60 6433.15 11497.23 142811.58 14651.82
7.97
10.53
10.62
8.76
9.75

25566.30 51429.00 35061.26 73506.39 46944.78 63426.89 98883.05 91235.61 133176.60 183270.78
49.71
47.70
51.45
47.63
53.95

165

16.00 15.00 14.00 13.00 12.00 12.16 11.00 10.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 11.41 2.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 13.08 13.60 15.09 8.00 6.00 4.00 9.13 12.00 10.00 11.39 11.05 9.15 9.93
Year
Year
Advances to Total Assets Ratio (%) 56.00

12.00 10.00 8.00 6.00 4.00 2.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 7.97 10.53 10.62 9.75 8.76
54.00 52.00 50.00 48.00 46.00 44.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 49.71 47.70 47.63 51.45 53.95
Year
Year

100.00 90.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 92.66 69.14 58.02 74.41 64.74
2004-'052005-'062006-'072007-'082008-'09
Year
166



19349.81 28393.96 30296.96 48912.39 56290.44 51429.00 73506.39 91235.61 133176.60 183270.78 37.62 38.63 33.21 36.73 30.71
167

0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00
0.63 0.44 0.24

2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
0.43
0.47
Year

0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00
0.34 0.21 0.12

2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
0.22
0.22
Year

50.00 40.00 30.00 20.00 10.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
37.62
38.63 33.21
36.73
30.71
Year
168

PARTICULARS Total Advances Total Deposits Total Advances to Total Deposits (%) 2004-'05
25566.30 36354.25
2005-'06
35061.26 55796.82
2006-'07
2007-'08
2008-'09
98883.05 142811.58
46944.78 63426.89 68297.94 100768.60
70.33
62.84
68.74
62.94
69.24

PARTICULARS Deposits+Advances No. of Employees Business per Employee (Rs. Cr.) 2004-'05
61,920.55 9030
2005-'06
2006-'07
2007-'08
164,195.49 37836
2008-'09
241,694.63 52687
90,858.08 115,242.72 14878 21477
6.86
6.11
5.37
4.34
4.59
Profit per Employee

Return on Net Worth

169
Graphs
70.33 68.74

8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00
72.00 70.00 68.00 66.00 64.00 62.00 60.00 58.00
69.24
6.86 6.11 5.37 4.34 4.59
62.84
62.94
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 2004-'052005-'062006-'072007-'082008-'09 12.80 11.65 11.94 9.95 9.83 20.00 19.50 19.00 18.50 18.00 17.50 17.00 16.50 16.00
19.46 18.31 17.66 17.74 17.17 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
170

PARTICULARS
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09

1,589.87 2,300.68 3,468.48 5,227.88 7,421.16 44,916.11 54,185.67 70,348.48 94,790.51 133,756.39
3.54
4.25
4.93
5.52
5.55

PARTICULARS Net Profit Average Total Assets Return on Average Assets (%) 2004-'05 665.56 46868.00 1.42 2005-'06 870.78 62467.70 1.39 2006-'07 2007-'08 2008-'09
1141.45 1590.18 2244.93 82371.00 112206.11 158223.69 1.39 1.42 1.42
Return on Equity

651.34 1,123.98 1,516.23 2,283.15 3,290.60 46868.00 62467.70 82371.00 112206.11 158223.69
1.39
1.80
1.84
2.03
2.08
Overhead Ratio
1,085.40 1,691.09 2,420.80 3,745.62 46868.00 62467.70 82371.00 112206.11 2.32 2.71 2.94 3.34
171
Efficiency Ratio
PARTICULARS Non-Interest Expenses Net Int. Income+NonInt. Income Efficiency Ratio (%) 2004-'05 1,085.40 2,241.21 48.43 2005-'06 1,691.09 3,424.66 49.38 2006-'07 2,420.80 4,984.71 48.56 2007-'08 3,745.62 2008-'09 5,532.81
7,511.03 10,711.76 49.87 51.65


PARTICULARS Non-Interest Income Working Funds Non-Int. Income to Working Funds (%) 2004-'05 651.34 51429.00 1.27 2005-'06 1,123.98 73506.39 1.53 2006-'07 1,516.23 91235.61 1.66 2007-'08 2,283.15 133176.60 1.71 2008-'09 3,290.60 183270.78 1.80

PARTICULARS Operating Profit Working Funds Operating Profit to Working Funds (%) 2004-'05 1155.81 51429.00 2.25 2005-'06 1733.57 73506.39 2.36 2006-'07 2,563.91 91235.61 2.81 2007-'08 3,765.41 133176.60 2.83 2008-'09 5,178.95 183270.78 2.83
172

6.00 5.00 4.00 3.00 2.00 1.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09

5.55
1.43 1.42 1.41 1.40 1.39 1.38 1.37 1.36
5.52 4.93 4.25 3.54
1.42
1.42 1.39
1.42
1.39
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

20.00 15.00 10.00 5.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 2.00
14.59
16.43
17.74 13.83 15.32
1.50 1.00 0.50 0.00
1.80 1.39
1.84
2.03
2.08
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
Overhead Ratio (%)

4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 52.00 51.00

51.65 49.87 48.56
3.34 2.71 2.32 2.94
3.50
50.00 49.00 48.00 47.00 46.00
49.38 48.43
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'052005-'062006-'072007-'082008-'09
Year
Year
173

Interest Income to Working Funds (%) 10.00 8.00 6.00 4.00 2.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 2.00 Non-Int. Income to Working Funds (%)
8.91 7.29 5.65 5.75 7.60
1.50
1.53
1.00 0.50 0.00
1.66
1.71
1.80
1.27
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

3.00 2.50 2.00 1.50 1.00 0.50 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2.81 2.25 2.36
2.83
2.83
Year
174
Liquidity Ratios

PARTICULARS Liquid Assets Demand Deposits Liquid Assets to Demand Deposits (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 5731.07 9134.76 12869.29 19279.02 25527.74 10630.46 14752.46 19811.84 28759.70 28444.92 53.91 61.92 64.96 67.03 89.74

PARTICULARS Liquid Assets Total Deposits Liquid Assets to Total Deposits (%) 2004-'05 5731.07 36354.25 15.76 2005-'06 9134.76 55796.82 16.37 2006-'07 2007-'08 2008-'09
12869.29 19279.02 25527.74 68297.94 100768.60 142811.58 18.84 19.13 17.88

PARTICULARS
2004-'05 2005-'06 2006-'07
2007-'08
2008-'09
5731.07 9134.76 12869.29 19279.02 25527.74 51429.00 73506.39 91235.61 133176.60 183270.78
11.14
12.43
14.11
14.48
13.93

22544.22 31665.58 52156.58 91235.61 133176.60 183270.78 24.71 23.78 28.46
175
Graphs
Liquid Assets to Demand Deposits (%) 100.00 80.00 60.00 61.92 40.00 20.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 53.91 64.96 67.03 89.74 25.00 20.00 15.00 15.76 10.00 5.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 18.84 16.37 19.13 17.88
Year
Year
Government Sec. to Total Assets (%) 30.00 25.00 13.93 20.00 15.00 10.00 5.00 0.00 21.83

16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00
14.11 12.43 11.14
14.48
26.71
28.46 24.71 23.78
2004-'052005-'062006-'072007-'082008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
176
Interpretation Capital adequacy ratios have shown quite satisfactory performance over the years for the bank. Core capital adequacy ratio has remained above the regulatory requirements of RBI and witnessed a gradual improvement which is a good indication for the bank. On the other hand, leverage and debt equity ratio have stabilized which were at their peak during 2005-06. Moreover, advances to total assets ratio has boosted significantly coupled with government securities to total investment ratio depicting a tale of handsome efforts leading to healthier business opportunities while keeping hands safe. Asset quality ratios seem to have remained poor overall. Non Performing Assets which are considered to be the most critical part of a banks portfolio have shown a sharp rise over the five years in comparison to net advances which gives a picture of lethargic efforts in advancing loans and also in recovering the same. Apart from these, investments to total assets ratio has also decreased from which is a fine signal as bank by decreasing investments can now advance more funds and earn interest income which is its core area of operation. Management efficiency ratios more or less have remained stabilized and shown a declining trend over the years. Total advances to total deposits ratio has become steady over the five years which shows inadequate efforts of the bank in towards optimum utilization of the funds available with the bank. With the increasing number of employees over the years, bank has managed to maintain more or less the same increase in its business, and the same goes with the profitability per employee which has declined. Return on net worth i.e. shareholders funds have stabilized with increasing-decreasing trend year after year. Earnings capacity ratios have witnessed robust performance from 2004-05 to 2008-09. Net interest margin has rose by a significant over 200 bps but is a good indication that it is moving upwards. Return on average assets and return on equity shareholders funds have followed the same trend. It is interesting to note that non-interest income and noninterest expenses have shown relatively similar change. However, discouraging trend in
177
net interest income has resulted into poor efficiency for the bank. Interest income to working funds, non-interest income to working funds and operating profit to working funds have observed a remarkable growth. Liquidity ratios appear to be advantageous for the bank and have observed vigorous performance over the years. Liquid assets though witnessing an upward trend have succeeded to be in line with an increase in the deposits and assets as a result of which these ratios have risen by considerable amount. Having enough liquidity on the hand to meet the requirement of the banks stakeholders can prove to be safe. Bank has also maintained the tune of investment in the government securities in line with the assets.
178
Z-score Analysis
Z = 6.56T1 + 3.26T2 + 6.72T3 + 1.05T4
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 0.0535 0.0817 0.0446 0.0878 1.01 0.1077 0.0678 0.0433 0.0720 1.29 0.1339 0.0669 0.0528 0.0704 1.53 0.1721 0.0836 0.0550 0.0863 1.86 0.1955 0.0776 0.0682 0.0799 2.08
Z-score

2.20 2.00 1.80
2.08 1.86 1.53 1.29 1.01

2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Z-Score
1.60
1.40 1.20 1.00 0.80
Year
179
Technical Analysis
180
Exponential Moving Average (EMA) Chart In HDFC we can see the down ward trend in the month from January to March it goes sharply down and reaches the lowest point of the year which is 790 and from that month it rises in the next months. In the month of April, May and July it rises very sharply to 1600. Then there is stable trend for next three months. It also touched the highest point of 1840 in December. Due to recent stability in EMA it will better to invest in the company. Moving Average Convergence Divergence (MACD) Chart As per the MACD chart, it is advisable to go for this company. The reason behind is that in the first quarter of the year it shows the down fall trend and which is below the expectation. In the month of May only it increases sharply to 50 and rises sharply to 90 in June. Then it shows the down ward trend which is not quite satisfactory but from September it is mix trend mostly upward side. Relative Strength Index (RSI) Chart In RSI chart we have shown the Upward Control line (UCL) at 70 points and Lower Control Line (LCL) at 30 points. Company have shown stable trend in the first quarter and then it increases above the upper limit many times so it is satisfactory and advisable to invest in this company because the RSI is moderate. Accumulation/Distribution Chart HDFC is showing the stable trend in the first three months and after March there is a continuous accumulation and shown upward trend till December and it the positive sign for the company. There is continuous buying is going on, so it is the perfect time to get in this company.
181
ICICI Bank
ICICI Bank is India's second-largest bank with total assets of Rs. 3,562.28 billion (US$ 77 billion) at December 31, 2009 and profit after tax Rs. 30.19 billion (US$ 648.8 million) for the nine months ended December 31, 2009. The Bank has a network of 1,679 branches and about 4,883 ATMs in India and presence in 18 countries. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium and Germany. ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE). For the third year in a row ICICI Bank has won The Asset Triple a Country Awards for Best Domestic Bank in India. ICICI Bank won the Most Admired Knowledge Enterprises (MAKE) India 2009 Award. ICICI Bank won the first place in "Maximizing Enterprise Intellectual Capital" category, October 28, 2009. Ms. Chanda Kochhar, MD and CEO was awarded with the Indian Business Women Leadership Award at NDTV Profit Business Leadership Awards, October 26, 2009. ICICI Bank received two awards in CNBC Awaaz Consumer Awards; one for the most preferred auto loan and the other for most preferred credit Card, on September 30, 2009. Ms. Chanda Kochhar, Managing Director & CEO ranked in the top 20 of the World's 100 Most Powerful Women list compiled by Forbes, August 2009. Financial Express at its FE India's Best Banks Awards, honoured Mr. K.V. Kamath, Chairman with the Lifetime Achievement Award, July 25, 2009. ICICI Bank won Asset Triple an Investment Awards for the Best Derivative House, India. In addition ICICI Bank were highly commended, Local Currency Structured product, India for 1.5 year ADR GDR linked Range Accrual Note., July 2009.
182
Trend Analysis
2004-'05 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
2005-'06 152.01 153.76 126.67 130.58 100.00 104.89 180.44 165.38 116.56 99.86 164.24 141.71 141.03
2006-'07 245.01 245.30 155.11 160.35 117.65 125.64 198.20 230.93 169.23 99.49 220.09 180.75 388.98
2007-'08 336.69 332.66 207.35 216.85 129.41 137.29 383.96 244.87 206.93 114.87 253.52 220.76 429.12
2008-'09 335.47 330.92 187.42 185.77 129.41 124.03 409.88 218.74 222.27 113.18 245.32 204.13 416.70
183
Interpretation From the above trend anal ysis of selected financial data we can observe: Generall y, t rends are in favour for the company. Expenses have shoot up sharpl y at a pace faster than that for core interest income which resulted into pressure on rising profits of the bank. However, increasing profit has resulted into increasing retained earnings over the five years. Dividend per share has increased by almost 1.3 times so as the Earnings per share which has considerably shown a 1.25 times increase over the years. The bank has also managed to add an enormous value to the shareholders kitt y, whic h can be witnessed from over 4 times increas e in the reserves. It seems that the bank being in its development phase attracted less amount of deposits but it has managed to keep advances intact as compared to deposits. Fixed assets have almost grown by over 1 times, less rapidl y than interest income. This shows optimum utilization of resources available to achieve targets by the bank. Net current assets have shown considerable improvement in the years 2007- 08 and 2008 - 09 which is a good indication for the bank. On the whole, from the trends it is apparent that the compan y has become more affluent than is was 5 years ago.
CAMEL Analysis
184

Leverage Ratio
133,363.28 203,605.08 281,766.22 310,079.48 12899.98 22555.99 24663.26 46820.20
2008-'09
285,671.51 49883.01
10.34
9.03
11.42
6.62
5.73
Debt Equity Ratio

99818.78 165083.17 230510.19 244431.05 12899.98 22555.99 24663.26 46820.20 218347.82 49883.01
7.74
7.32
9.35
5.22
4.38

88991.75 146163.11 195865.6 225616.08 218310.85 167659.40 251388.95 344658.11 399795.07 379300.96
53.08
58.14
56.83
56.43
57.56

34489.47 51208.68 67664.75 75518.00 63472.83 50487.35 71547.40 91257.84 111454.34 103058.31
68.31
71.57
74.15
67.76
61.59
Graphs
185
Capital Adequacy Ratio (%)

16.00 15.00 13.96 14.00 13.00 12.00 11.00 10.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 11.78 11.69 13.35 8.00 6.00 4.00 2.00 0.00 15.53 12.00 10.00

11.42 10.34 9.03 6.62 5.73
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
59.00 58.00 57.00 56.00 55.00 54.00 53.00 52.00 51.00 50.00 58.14 57.56 56.83 56.43

10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 9.35 7.74 7.32 5.22 4.38
53.08
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 68.31 71.57 74.15 67.76 61.59
Year
Asset Quality Ratios

186
Net NPA to Net Advances

PARTICULARS
Net NPAs Net Advances Net NPA to Net Advances (%)
2004-'05 2005-'06
2006-'07
2007-'08
2008-'09
1,505.27 1,052.68 1,992.04 3,490.55 4,553.94 88,991.75 146,163.11 195,865.60 225,616.08 218,310.85
1.69
0.72
1.02
1.55
2.09

PARTICULARS Net NPAs Total Assets Net NPA to Total Assets (%) 2004-'05 2005-'06 2006-'07 2007-'08 3,490.55 399795.07 0.87 2008-'09 4,553.94 379300.96 1.20
1,505.27 1,052.68 1,992.04 167659.40 251388.95 344658.11 0.90 0.42 0.58

PARTICULARS Total Investments Total Assets Total Investments to Total Assets (%) 2004-'05 2005-'06 2006-'07 2007-'08
111454.34 399795.07
2008-'09
103058.31 379300.96
50487.35 71547.40 91257.84 167659.40 251388.95 344658.11
30.11
28.46
26.48
27.88
27.17
Graphs
187
Net NPA to Net Advances (%)

2.50 2.00 1.50 1.00 0.50 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2.09
1.69 1.02 0.72
1.55
Year

1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
1.20
0.90
0.58 0.42
2004-'05 2005-'06 2006-'07
0.87
2007-'08
2008-'09
Year

31.00 30.00 29.00 28.00 27.00 26.00 25.00 24.00
30.11 28.46 26.48

2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
27.88 27.17
Year
Management Efficiency Ratios
188
Total Advances to Total Deposits

218310.85 218347.83
88991.75 146163.11 195865.6 225616.08 99818.78 165083.17 230510.19 244431.05
89.15
88.54
84.97
92.30
99.98

470,047.13 33959
2008-'09
436,658.68 34596
188,810.53 311,246.28 426,375.79 18000 25384 33321
10.49
12.26
12.80
13.84
12.62
Profit per Employee

Return on Net Worth

Graphs
189
Fundamental and Technical Analysis of Indian Banking Sector Total Advances to Total Deposits (%) Business per Employee (Rs. Cr.)
16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00
105.00 100.00 95.00 90.00 85.00 80.00 75.00
99.98 92.30 89.15 88.54 84.97 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
12.26 10.49
12.80
13.84
12.62
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

18.00 17.00 16.00 15.00 14.00 13.00 12.00 2004-'052005-'062006-'07 2007-'082008-'09 14.25 5.00 0.00 17.10 15.56 15.99 17.07 15.00 10.00 20.00
18.86 14.33 13.17
11.63 7.77
2004-'05 2005-'062006-'072007-'082008-'09
Year
Year
Earnings Capacity Ratios

190
Net Interest Margin

PARTICULARS
2004-'05
2005-'06
2006-'07
2007-'08
2008-'09
2,839.00 4,187.05 6,635.79 7,304.10 8,366.62 122,158.74 178,594.81 252,416.98 312,096.93 329,219.79
2.32
2.34
2.63
2.34
2.54

2005.20 2540.07 3110.22 4157.73 3758.13 146444.14 209524.18 298023.53 372226.59 389548.02 1.37 1.21 1.04 1.12 0.96
Return on Equity

PARTICULARS
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09

3,416.23 5,036.62 6,962.95 8,878.85 8,117.76 146444.14 209524.18 298023.53 372226.59 389548.02
2.33
2.40
2.34
2.39
2.08
Overhead Ratio
3,177.78 5,274.23 8,849.86 10,855.18 146444.14 209524.18 298023.53 372226.59 2.17 2.52 2.97 2.92
Efficiency Ratio
191
PARTICULARS Non-Interest Expenses Net Int. Income+NonInt. Income Efficiency Ratio (%)
2004-'05 3,177.78 6,255.23 50.80
2005-'06 5,274.23
2006-'07
2007-'08
2008-'09
8,849.86 10,855.18 10,795.14
9,223.67 13,598.74 16,182.95 16,484.38 57.18 65.08 67.08 65.49

9409.89 13784.5 22994.29 167659.40 251388.95 344658.11 5.61 5.48 6.67

3,416.23 5,036.62 6,962.95 167659.40 251388.95 344658.11 2.04 2.00 2.02

3077.45 3949.44 4,748.88 167659.40 251388.95 344658.11 1.84 1.57 1.38
Graphs
192
Net Interest Margin (%)

2.70 2.60 2.50 2.40 2.30 2.20 2.10 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 2.32 2.34 2.34 2.63 2.54 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
1.37 1.21 1.04 1.12 0.96
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
Non-Int. Income to Avg. Assets Ratio (%) 2.50 2.40 2.40 2.33 2.34 2.39

20.00 15.00 15.54 10.00 5.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 11.26 12.61 8.88 7.53
2.30 2.20 2.10 2.00 1.90
2.08 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
Overhead Ratio (%)

3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00
2.97 2.52 2.17
2.92
2.77
65.08 50.80 57.18
67.08
65.49
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
193

Interest Income to Working Funds (%) 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 2.25 2.20 2.15 2.10 2.05 2.00 1.95 1.90 1.85 Non-Int. Income to Working Funds (%)
7.70 6.67 5.61 5.48
8.20
2.22 2.14 2.04 2.02
2.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

2.00 1.50 1.00 0.50 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 1.84 1.57 1.38 1.33 1.50
Year
194
Liquidity Ratios

21582.06 29296.94 52761.44 12836.90 16573.48 21375.65 168.13 176.77 246.83

PARTICULARS Liquid Assets Total Deposits Liquid Assets to Total Deposits (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
21582.06 29296.94 52761.44 56640.15 51460.21 99818.78 165083.17 230510.19 244431.05 218347.83 21.62 17.75 22.89 23.17 23.57

PARTICULARS
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09

21582.06 29296.94 52761.44 56640.15 51460.21 167659.40 251388.95 344658.11 399795.07 379300.96
12.87
11.65
15.31
14.17
13.57

34489.47 51208.68 67664.75 75518.00 63472.83 167659.40 251388.95 344658.11 399795.07 379300.96 20.57 20.37 19.63 18.89 16.73
195
Graphs
Liquid Assets to Demand Deposits (%) Liquid Assets to Total Deposits (%)
25.00 20.00 246.83 168.13 176.77 229.39 237.89 15.00 10.00 5.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 21.62 17.75 22.89 23.17 23.57
300.00 250.00 200.00 150.00 100.00 50.00 0.00
Year
Year

18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 25.00 20.00 15.31 12.87 11.65 10.00 5.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 14.17 13.57
20.57 15.00
20.37
19.63
18.89 16.73
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
196
Interpretation Capital adequacy ratios have shown quite satisfactory performance over the years for the bank. Core capital adequacy ratio has remained above the regulatory requirements of RBI and witnessed a significant improvement which is a good indication for the bank. On the other hand, leverage and debt equity ratio have declined which were at their peak during 2005-06. Moreover, advances to total assets ratio has boosted at a nominal rate coupled with government securities to total investment ratio depicting a tale of handsome efforts leading to healthier business opportunities while keeping hands safe. Asset quality ratios seem to have remained poor overall. Non Performing Assets which are considered to be the most critical part of a banks portfolio have worsened over the five years in comparison to net advances which gives a picture of lethargic efforts in advancing loans and also in recovering the same. Apart from these, investments to total assets ratio has also decreased from which is a fine signal as bank by decreasing investments can now advance more funds and earn interest income which is its core area of operation. Management efficiency ratios more or less have remained stabilized and shown a mixed trend over the years. Total advances to total deposits ratio has increased to the tune of 10% over the five years which shows adequate efforts of the bank in towards optimum utilization of the funds available with the bank. With the increasing number of employees over the years, bank has managed to maintain more or less the same increase in its business and the same goes with the profitability per employee which has stabilized. Return on net worth i.e. shareholders funds have fall sharply year after year. Earnings capacity ratios have witnessed robust performance from 2004-05 to 2008-09. Net interest margin has rose by a nominal over 20 bps but is a good indication that it is moving upwards. Return on average assets and return on equity shareholders funds have declined considerably as net profits have failed to increase by the same ratio. It is interesting to note that non-interest income and non-interest expenses have shown
197
relatively opposite change. Nominal rise in net interest income and sharp rise in noninterest expenses have resulted into poor efficiency for the bank. Interest income to working funds, non-interest income to working funds and operating profit to working funds have observed a steady phenomenon. Liquidity ratios appear to be advantageous for the bank and have observed vigorous performance over the years. Liquid assets though witnessing an upward trend have succeeded to be in line with an increase in the deposits and assets as a result of which these ratios have risen by considerable amount. Having enough liquidity on the hand to meet the requirement of the banks stakeholders can prove to be safe. Bank has also maintained the tune of investment in the government securities in line with the assets.
198
Z-score Analysis
Z = 6.56T1 + 3.26T2 + 6.72T3 + 1.05T4
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 0.1212 0.0701 0.0540 0.0617 1.45 0.1441 0.0846 0.0504 0.0878 1.65 0.1862 0.0678 0.0579 0.0703 1.91 0.1852 0.1133 0.0713 0.1160 2.19 0.1899 0.1275 0.0733 0.1304 2.29
Z-score

2.40 2.20 2.00
2.19 1.91 1.65 1.45
2.29
Z-Score
1.80 1.60 1.40
1.20
1.00 0.80 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
199
Technical Analysis
200
Exponential Moving Average (EMA) Chart In ICICI bank we can see the down ward trend in the month from January to March it goes sharply down and reaches the lowest point of the year which is 250 and from that month it rises in the next months. In the month of April, May and June it rises very sharply to 800. Then there is stable trend for next three months. It also touched the highest point of 1000 in October. Due to recent stability in EMA it will better to invest in the company. Moving Average Convergence Divergence (MACD) Chart As per the MACD chart, it is advisable to wait and watch for some time. The reason behind is that in the first quarter of the year it shows the down fall trend and which is below the expectation. In the month of April only it increases sharply and rises sharply to 75 in June. Then it shows the down ward trend and stables after that for three months and then after decreases from November and stables just below 0. Relative Strength Index (RSI) Chart In RSI chart we have shown the Upward Control line (UCL) at 70 points and Lower Control Line (LCL) at 30 points. Company have shown sharp fall in the first quarter but then it is a mix trend and it is reasonable satisfactory. So it is advisable to wait for sometimes in this company because the RSI is moderate. Accumulation/Distribution Chart ICICI Bank is showing the downward trend in the first three months and after April there is a continuous accumulation till June and shown stable trend till October and after that there is a mix trend. It is not the ideal sign for the company. There is much fluctuation is going around in the market so wait and watch strategy would be good.
201
IDBI Bank
IDBI Bank is a Board-managed organization. The responsibility for the day-to-day management of operations of the Bank is vested with the Chairman & Managing Director and two Deputy Managing Directors, who draw upon the support and expertise of a cross-disciplinary Top Management Team. IDBI Bank Ltd.'s employee base includes professionals from the fields of accountancy, management, engineering, law, computer technology, banking and economics. Vision Statement "To be trusted partner in progress by leveraging quality human capital and setting global standards of excellence to build the most valued financial conglomerate" Preamble IDBI Bank Ltd. is committed to creating long term economic value for all its stakeholders, including shareholders, depositors, customers, employees and the society as a whole. IDBI Bank Ltd. is committed to maintaining high standards of ethical and professional conduct in all its corporate activities. This Code of Conduct and Ethics outlines the overall standards that shall guide the actions of IDBI Bank Ltd. and its Directors, officers and employees.
202
Trend Analysis
2004-'05 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
2005-'06 202.61 248.28 182.55 177.97 200.00 120.90 108.48 172.16 95.27 91.17 116.13 101.00 290.95
2006-'07 248.25 215.63 205.14 204.94 200.00 129.64 145.50 287.06 88.48 312.38 137.56 102.30 695.90
2007-'08 302.78 282.97 237.41 228.99 266.67 157.10 155.52 483.35 81.33 310.99 181.03 130.70 643.87
2008-'09 437.98 378.64 279.42 263.33 333.33 184.87 167.08 744.25 82.43 317.52 227.75 199.40 832.26
203
Interpretation From the above trend anal ysis of selected financial data we can observe: Generall y, t rends are in favour for the company. Expenses have shoot up at a pace slower than that for core interest income which resulted into rising profits for the bank at a nominal rate as compared to total income . Increasing profit has resulted into increasing retained earnings over the five years. Dividend per share has boosted by over 3 times so as the Earnings per share which has considerabl y shown over 1.5 times increase over the years. Deposits for the bank have risen by over 7.5 times whereas advances onl y just over 2 times. This shows inadequate efforts of the bank in utilization of funds lying with it. Fixed assets have almost grown by 3 times, less rapidl y than interest income. This shows optimum utilization of resources available to achieve targets by the bank. Net current assets have shown eight fold increase which is a good si gn for the bank. On the whole, from the trends it is apparent that the compan y has become more affluent than is was 5 years ago.
204
CAMEL Analysis
Leverage Ratio
65,108.18 5,928.41 73,531.13 6,372.06 85,758.42 111,610.53 8,299.85 8,821.96
2008-'09
156,818.05 9,423.86
10.98
11.54
10.33
12.65
16.64
Debt Equity Ratio

PARTICULARS Total Deposits Shareholders' Funds Debt Equity Ratio (Times) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 15102.64 26000.92 43354.03 72997.98 112401.01 5,928.41 6,372.06 8,299.85 8,821.96 9,423.86 2.55 4.08 5.22 8.27 11.93

45413.57 81360.24 52739.06 62470.81 82212.69 103428.34 88564.78 103839.33 130694.38 172402.32
55.82
59.55
60.16
62.90
59.99

205

16.00 15.00 14.00 13.00 12.00 11.00 10.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 11.95 11.57 15.51 14.80 13.70 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00

16.64 12.65 10.33
10.98
11.54
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
64.00 11.93 8.27 62.00 60.00 58.00 56.00 54.00 52.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 55.82 59.55 60.16 59.99 62.90

14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 2.55 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 4.08 5.22
Year
Year

90.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00
81.36 71.04 59.53 63.82 63.06
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
206

847.49 45413.57 563.12 52739.06 721.93 62470.81 1,082.91 948.96 82212.69 103428.34
1.87
1.07
1.16
1.32
0.92

PARTICULARS Net NPAs Total Assets Net NPA to Total Assets (%) 2004-'05 847.49 81360.24 1.04 2005-'06 563.12 88564.78 0.64 2006-'07 721.93 103839.3 0.70 2007-'08 1,082.91 130694.38 0.83 2008-'09 948.96 172402.32 0.55

25098.70 25350.54 25675.32 32802.93 50047.61 81360.24 88564.78 103839.3 130694.38 172402.32 30.85 28.62 24.73 25.10 29.03
207

2.00 1.50 1.00
1.87 1.16 1.32 0.92
1.07
0.50 0.00 2004-'05 2005-'06
2006-'07
2007-'08
2008-'09
Year

1.20 1.00 0.80 0.60 0.40 0.20 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
1.04 0.83
0.64
0.70 0.55
Year

35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
30.85
28.62 24.73 25.10
29.03
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
208

45413.57 52739.06 62470.81 82212.69 103428.34 15102.64 26000.92 43354.03 72997.98 112401.01 300.70 202.84 144.09 112.62 92.02

PARTICULARS Deposits+Advances No. of Employees Business per Employee (Rs. Cr.) 2004-'05
60,516.21 4761
2005-'06
2006-'07
2007-'08
155,210.67 14739
2008-'09
215,829.35 20624
78,739.98 105,824.84 6553 9980
12.71
12.02
10.60
10.53
10.46
Profit per Employee

PARTICULARS Operating Profit No. of Employees Profit per Employee (Rs. Lacs) 2004-'05 2005-'06 401.78 4761 8.44 627.08 6553 9.57 2006-'07 690.77 9980 6.92 2007-'08 1,315.33 14739 8.92 2008-'09 1,319.97 20624 6.40
Return on Net Worth

209
Graphs
300.70 202.84 144.09 112.62 92.02

14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 12.71 12.02 10.60 10.53 10.46
350.00 300.00 250.00 200.00 150.00 100.00 50.00 0.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

12.00 10.00 8.00 6.00 4.00 2.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 8.44 6.92 9.57 8.92 6.40 10.00 8.00 6.00 4.00 2.00 0.00
9.12
8.59
9.41 8.52
5.22
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
210

187.85 379.90 657.93 656.43 1,325.91 63,894.69 74,300.94 83,117.87 101,580.88 134,245.79
0.29
0.51
0.79
0.65
0.99

PARTICULARS Net Profit Average Total Assets Return on Average Assets (%) 2004-'05 307.26 72603.35 0.42 2005-'06 560.89 84962.51 0.66 2006-'07 2007-'08 2008-'09
630.31 729.46 858.54 96202.06 117266.86 151548.35 0.66 0.62 0.57
Return on Equity
PARTICULARS Net Profit Shareholder's Funds Return on Equity (%) 2004-'05 307.26 5,928.41 5.18 2005-'06 560.89 6,372.06 8.80 2006-'07 630.31 8,299.85 7.59 2007-'08 729.46 8,821.96 8.27 2008-'09 858.54 9,423.86 9.11

PARTICULARS
2004-'05 2005-'06 2006-'07 2007-'08
2008-'09
633.73 1,280.45 1,046.74 1,751.26 1,475.72 72,603.35 84,962.51 96,202.06 117,266.86 151,548.35
0.87
1.51
1.09
1.49
0.97
Overhead Ratio
PARTICULARS Non-Interest Expenses Average Total Assets Overhead Ratio (%) 2004-'05
419.80 72,603.35
2005-'06
1,033.27 84,962.51
2006-'07
2007-'08
2008-'09
1,481.66 151,548.35
1,013.90 1,092.36 96,202.06 117,266.86
0.58
1.22
1.05
0.93
0.98
211
Efficiency Ratio
PARTICULARS Non-Interest Expenses Net Int. Income+NonInt. Income Efficiency Ratio (%) 2004-'05 419.80 821.58 51.10 2005-'06 1,033.27 1,660.35 62.23 2006-'07 1,013.90 1,704.67 59.48 2007-'08 1,092.36 2,407.69 45.37 2008-'09 1,481.66 2,801.63 52.89

PARTICULARS Interest Income Working Funds Interest Income to Working Funds (%) 2004-'05 2655.72 81360.24 3.26 2005-'06 2006-'07 2007-'08 8020.84 130694.38 6.14 2008-'09 11631.63 172402.32 6.75
5380.72 6345.42 88564.78 103839.33 6.08 6.11

PARTICULARS Non-Interest Income Working Funds Non-Int. Income to Working Funds (%) 2004-'05 633.73 81360.24 0.78 2005-'06 2006-'07 2007-'08 1,751.26 130694.38 1.34 2008-'09 1,475.72 172402.32 0.86
1,280.45 1,046.74 88564.78 103839.33 1.45 1.01

PARTICULARS Operating Profit Working Funds Operating Profit to Working Funds (%) 2004-'05 401.78 81360.24 0.49 2005-'06 2006-'07 2007-'08 1,315.33 130694.38 1.01 2008-'09 1,319.97 172402.32 0.77
627.08 690.77 88564.78 103839.33 0.71 0.67
212

1.20 1.00 0.80 0.60 0.40 0.20 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 0.29 0.51 0.79 0.65 0.99 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00

0.66 0.66
0.62
0.57
0.42
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

10.00 8.00 6.00 4.00 2.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 5.18 8.80 7.59 8.27 9.11

1.50 1.51 1.00 1.09 0.50 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 0.87 0.97 1.49
Year
Year
Overhead Ratio (%)

1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00
1.22 1.05 0.93 0.98
62.23 51.10
59.48 52.89 45.37
0.58
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
213
8.00 6.00

6.75
2.00 1.50 1.00
6.08 4.00 2.00 0.00 3.26
6.11
6.14
1.45 1.01
1.34 0.86
0.50 0.00
0.78
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

1.20 1.00 0.80 0.60 0.40 0.20 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 0.49 0.71 0.67 1.01 0.77
Year
214
Liquidity Ratios

PARTICULARS Liquid Assets Demand Deposits Liquid Assets to Demand Deposits (%) 2004-'05 9925.74 3886.65 255.38 2005-'06 2006-'07 2007-'08 12893.51 7268.45 177.39 2008-'09 16096.73 11119.98 144.76
9594.70 12881.75 5174.66 6988.61 185.42 184.32

PARTICULARS Liquid Assets Total Deposits Liquid Assets to Total Deposits (%) 2004-'05 9925.74 15102.64 65.72 2005-'06 9594.70 26000.92 36.90 2006-'07 12881.75 43354.03 29.71 2007-'08 2008-'09
12893.51 16096.73 72997.98 112401.01 17.66 14.32

PARTICULARS
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09

9925.74 9594.70 12881.75 12893.51 16096.73 81360.24 88564.78 103839.33 130694.38 172402.32
12.20
10.83
12.41
9.87
9.34

16191.39 23303.41 40717.24 103839.3 130694.38 172402.32 15.59 17.83 23.62
215
Graphs
Liquid Assets to Demand Deposits (%) 300.00 250.00 200.00 150.00 100.00 50.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 255.38 185.42 184.32 177.39 144.76 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 36.90 29.71 17.66 14.32 65.72
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
Government Sec. to Total Assets (%) 25.00 23.62 20.00 15.00 10.00 5.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 18.37 18.27 15.59 17.83 23.62

25.00 20.00 15.00 10.00 5.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 18.37 18.27 15.59 17.83
Year
Year
216
Interpretation Capital adequacy ratios have shown dissatisfactory performance over the years for the bank. Core capital adequacy ratio has remained above the regulatory requirements of RBI but witnessed a gradual decline which is not a good indication for the bank. On the other hand, leverage and debt equity ratio have increased tremendously which were at their peak during 2008-09. Moreover, advances to total assets ratio has boosted significantly coupled with government securities to total investment ratio depicting a tale of handsome efforts leading to healthier business opportunities while keeping hands safe. Asset quality ratios seem to have become strength for the bank. Non Performing Assets which are considered to be the most critical part of a banks portfolio have shown a sharp fall over the five years in comparison to net advances which gives a picture of vigorous efforts in advancing loans and also in recovering the same. Apart from these, investments to total assets ratio has also decreased from which is a fine signal as bank by decreasing investments can now advance more funds and earn interest income which is its core area of operation. Management efficiency ratios more or less have remained stabilized and shown a delining trend over the years. Total advances to total deposits ratio has fall significantly to the tune of 200% over the five years which shows sluggish efforts of the bank in towards optimum utilization of the funds available with the bank. With the increasing number of employees over the years bank has witnessed marginal decline in its business and profitability per employee has also followed the same trend. Return on net worth i.e. shareholders funds have stabilized with increasing-decreasing trend year after year and shown gradual rise. Earnings capacity ratios have witnessed robust performance from 2004-05 to 2008-09. Net interest margin has rose by a nominal 70 bps but is a good indication that it is
moving upwards. Return on average assets and return on equity shareholders funds have followed the same trend. It is interesting to note that non-interest income has increased slowly as compared to non-interest expenses. Discouraging trend in net interest income
217
coupled with increase in non-interest expenses have resulted into dissatisfactory efficiency for the bank. Interest income to working funds, non-interest income to working funds and operating profit to working funds have observed a remarkable growth. Liquidity ratios appear to be as the broken leg of the bank and have observed poor performance over the years. Liquid assets though witnessing an upward trend have failed to be in line with an increase in the deposits and assets as a result of which these ratios have diminished. Not having enough liquidity on the hand to meet the requirement of the banks stakeholders can prove to be dangerous. However, bank has maintained the tune of investment in the government securities in line with the assets.
218
Z-score Analysis
Z = 6.56T1 + 3.26T2 + 6.72T3 + 1.05T4
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 0.0298 0.0639 0.0370 0.0720 0.73 0.0665 0.0637 0.0631 0.0719 1.14 0.1296 0.0730 0.0641 0.0601 1.58 0.1395 0.0619 0.0643 0.0520 1.60 0.1438 0.0504 0.0665 0.0431 1.60
Z-score

1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
1.58 1.14 0.73
1.60
1.60
Z-Score
2004-'05
2005-'06
2006-'07
2007-'08
2008-'09
Year
219
Technical Analysis
220
Exponential Moving Average (EMA) Chart In IDBI we can see the downward trend in the month of January to March It goes sharply down and reaches the lowest point of the year which is 40 and from that month it rises in the next months. In the month of April, May and July it rises very sharply from 50 to 120. Then there is downward trend for one month. It also touched the highest point of 140 in November. Due to recent volatility in EMA it will better to wait and watch. Moving Average Convergence Divergence (MACD) Chart As per the MACD chart, it is advisable to wait and watch for some time. The reason behind is that in the first quarter of the year it shows the down fall trend and which is below the expectation. In the month of May only it increases sharply to 5 and rises to 10 in June. Then it shows the mix trend and stables which is not satisfactory and the mix trend mostly downward side. Relative Strength Index (RSI) Chart In RSI chart we have shown the Upward Control line (UCL) at 70 points and Lower Control Line (LCL) at 30 points. Company have shown stable trend in the first quarter and then it increases above the upper few times so it is satisfactory and advisable to invest in this company because the RSI is moderate. Accumulation/Distribution Chart IDBI is showing the marginal decrease in the first four months and after March there is a continuous accumulation and shown upward trend for three months and there is a stable trend till September. After that there is a continuous selling is going on, so it is difficult time for the investor so he should wait for the sometime.
221
Kotak Mahindra Bank

Kotak Mahindra is one of India's leading financial organizations, offering a wide range of financial services that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the diverse financial needs of individuals and corporate. The group has a net worth of over Rs. 7,100 crore and has a distribution network of branches, franchisees, representative offices and satellite offices across cities and towns in India and offices in New York, London, San Francisco, Dubai, Mauritius and Singapore. The Group services around 6.5 million customer accounts. The Kotak Mahindra Group was born in 1985 as Kotak Capital Management Finance Limited. This company was promoted by Uday Kotak, Sidney A. A. Pinto and Kotak & Company. Industrialists Harish Mahindra and Anand Mahindra took a stake in 1986, and that's when the company changed its name to Kotak Mahindra Finance Limited. Since then it's been a steady and confident journey to growth and success.
222
Trend Analysis
Particulars Interest Income Expenses Net Profit Retained Earnings Dividend per Share Earnings per Share Reserves Deposits Borrowings Net Fixed Assets Loans & Advances Investments Net Current Assets 2004-'05 420.31 479.11 84.89 67.28 1.25 6.88 633.61 4299.54 985.51 97.10 4017.15 1826.97 -678.11 2005-'06 718.89 894.43 118.23 96.04 0.60 3.82 555.29 6565.92 1849.24 105.23 6348.31 2855.53 -1152.95 Rs. Crore 2006-'07 1354.11 1573.40 141.37 114.62 0.70 4.26 1335.77 11000.09 5725.27 141.09 10924.07 6861.97 -1788.64 2007-'08 2535.36 2842.52 293.93 263.67 0.75 8.53 3249.03 16423.65 5901.49 210.25 15552.21 9141.98 -594.08 2008-'09 3065.14 3365.27 276.10 248.28 0.75 7.99 3559.86 15644.93 6734.01 213.35 16625.34 9110.18 -491.42
2004-'05 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
2005-'06 171.04 186.69 139.27 142.75 48.00 55.52 87.64 152.71 187.64 108.37 158.03 156.30 58.82
2006-'07 322.17 328.40 166.53 170.36 56.00 61.92 210.82 255.84 580.94 145.30 271.94 375.59 37.91
2007-'08 603.21 593.29 346.25 391.90 60.00 123.98 512.78 381.99 598.83 216.53 387.15 500.39 114.14
2008-'09 729.26 702.40 325.24 369.02 60.00 116.13 561.84 363.87 683.30 219.72 413.86 498.65 137.99
223
Interpretation From the above trend anal ysis of selected financial data we can observe: Generall y, t rends are in favour for the company. Expenses have shoot up sharpl y at a pace faster than that for core interest income which resulted into pressure on rising profits of the bank. However, increasing profit has resulted into increasing retained earnings over the five years. Dividend per share has boosted by alm ost 3.5 times so as the Earnings per share which has considerabl y shown a fourfold increase over the years. The bank has also managed to add an enormous value to the shareholders kitt y, which can be witnessed from over 4.5 times increase in the reserves. It seems that the bank being in its development phase attracted less amount of deposits as borrowed funds have seen six fold rise to meet up the capital needs. Fixed assets have almost grown by 2 times, less rapidl y than interest income. This shows optimu m utilization of resources available to achieve targets by the bank. Net current assets have shown a slow increase over the years. On the whole, from the trends it is apparent that the compan y has become more affluent than is was 5 years ago.
224
CAMEL Analysis
Leverage Ratio
PARTICULARS Total Debt Shareholders' Funds Leverage Ratio (Times) 2004-'05 2005-'06 2006-'07 2007-'08 5,285.05 756.93 6.98 8,175.15 16,099.84 21,542.90 864.58 1661.93 3593.70 9.46 9.69 5.99 2008-'09 21,549.00 3905.53 5.52
Debt Equity Ratio

PARTICULARS Total Deposits Shareholders' Funds Debt Equity Ratio (Times) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 4299.54 756.93 5.68 6565.92 11000.09 16423.65 864.58 1661.93 3593.70 7.59 6.62 4.57 15644.93 3905.53 4.01

PARTICULARS Total Advances Total Assets Advances to Total Assets Ratio (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 4017.15 6512.86 61.68 6348.31 10175.1 62.39 10924.1 19915.4 54.85 15552.2 28312.4 54.93 16625.3 28711.9 57.90

225

22.00 20.00 18.00 16.00 14.00 12.00 10.00 12.00 10.00
20.01 18.65
8.00 6.00 4.00
9.46 6.98
9.69 5.99
5.52
12.80 11.27
13.46
2.00 0.00 2004-'052005-'062006-'072007-'082008-'09
2004-'052005-'062006-'072007-'082008-'09
Year
Year
64.00 62.00

8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00
7.59 6.62 5.68 4.57 4.01
60.00 58.00 56.00 54.00 52.00 50.00
61.68
62.39
57.90 54.85
54.93
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

105.00 90.00 75.00 60.00 45.00 30.00 15.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 72.77 83.05 85.45 88.68 89.46
Year
226



PARTICULARS Total Investments Total Assets Total Investments to Total Assets (%) 2004-'05 2005-'06 2006-'07 1826.97 2855.53 6861.97 6512.86 10175.12 19915.42 28.05 28.06 34.46 2007-'08 9141.98 28312.36 32.29 2008-'09 9110.18 28711.88 31.73
227

3.00 2.50 2.00 1.50 1.00 0.50 0.00
2.39 1.98 1.78
0.24 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09

Year
0.37

1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
1.38 1.09 0.98
0.23
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
0.15
Year

40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00
34.46 28.05 28.06
32.29
31.73
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
228

PARTICULARS Total Advances Total Deposits Total Advances to Total Deposits (%) 2004-'05 4017.15 4299.54 93.43 2005-'06 2006-'07 2007-'08 2008-'09 16625.34 15644.93 106.27
6348.31 10924.07 15552.21 6565.92 11000.09 16423.65 96.69 99.31 94.69

PARTICULARS Deposits+Advances No. of Employees Business per Employee (Rs. Cr.) 2004-'05 2005-'06 2006-'07 2007-'08 31,975.86 8330 3.84 2008-'09 32,270.27 9300 3.47
8,316.69 12,914.23 21,924.16 2148 3669 5711 3.87 3.52 3.84
Profit per Employee

PARTICULARS Operating Profit No. of Employees Profit per Employee (Rs. Lacs) 2004-'05 2005-'06 117.35 2148 5.46 193.24 3669 5.27 2006-'07 246.60 5711 4.32 2007-'08 537.03 8330 6.45 2008-'09 342.49 9300 3.68
Return on Net Worth

229
Graphs
4.00 3.90 3.80 3.70 3.60 3.50 3.40 3.30 3.20
110.00 105.00 100.00 95.00 90.00 85.00
106.27 99.31 96.69 93.43 94.69
3.87
3.84
3.84
3.52
3.47
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 2004-'052005-'062006-'072007-'082008-'09 5.46 5.27 4.32 3.68 6.45 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00
14.58 12.45 11.19 11.19 7.36
2004-'052005-'062006-'072007-'082008-'09
Year
Year
230

PARTICULARS
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09

225.48 5,411.95 354.93 654.86 1,225.80 1,518.54 7,524.09 13,495.05 21,240.12 25,214.87
4.17
4.72
4.85
5.77
6.02

PARTICULARS Net Profit Average Total Assets Return on Average Assets (%) 2004-'05 84.89 6164.91 1.38 2005-'06 118.23 8343.99 1.42 2006-'07 141.37 15045.27 0.94 2007-'08 293.93 24113.89 1.22 2008-'09 276.10 28512.12 0.97
Return on Equity

PARTICULARS
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 132.13 237.33 287.83 310.48 157.56 6164.91 8343.99 15045.27 24113.89 28512.12 2.14 2.84 1.91 1.29 0.55
Overhead Ratio
PARTICULARS Non-Interest Expenses Average Total Assets Overhead Ratio (%) 2004-'05 240.26 6164.91 3.90 2005-'06 2006-'07 2007-'08 2008-'09 1,333.61 28512.12 4.68
399.02 696.06 999.25 8343.99 15045.27 24113.89 4.78 4.63 4.14
231
Efficiency Ratio
PARTICULARS Non-Interest Expenses Net Int. Income+NonInt. Income Efficiency Ratio (%) 2004-'05 240.26 357.61 67.18 2005-'06 399.02 592.26 67.37 2006-'07 696.06 942.69 73.84 2007-'08 999.25 1,536.28 65.04 2008-'09 1,333.61 1,676.10 79.57


PARTICULARS Non-Interest Income Working Funds Non-Int. Income to Working Funds (%) 2004-'05 132.13 6512.86 2.03 2005-'06 237.33 10175.12 2.33 2006-'07 287.83 19915.42 1.45 2007-'08 310.48 28312.36 1.10 2008-'09 157.56 28711.88 0.55

PARTICULARS Operating Profit Working Funds Operating Profit to Working Funds (%) 2004-'05 117.35 6512.86 1.80 2005-'06 193.24 10175.12 1.90 2006-'07 246.60 19915.42 1.24 2007-'08 537.03 28312.36 1.90 2008-'09 342.49 28711.88 1.19
232

7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00

1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
5.77 4.17 4.72 4.85
6.02
1.38
1.42 1.22
0.94
0.97
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
Non-Int. Income to Avg. Assets Ratio (%)

16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 3.00 2.50
2.84 2.14 1.91 1.29 0.55

2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
13.67 11.22 8.51 8.18 7.07
2.00 1.50 1.00 0.50 0.00
2004-'052005-'062006-'072007-'082008-'09
Year
Year
Overhead Ratio (%)

6.00 5.00 4.00 3.00 2.00 1.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 100.00 80.00
4.78 3.90
4.63
4.14
4.68
60.00 40.00 20.00 0.00
67.18
67.37
73.84
79.57 65.04
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
233

Interest Income to Working Funds (%) 12.00 10.00 8.00 6.00 4.00 2.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 2.50 Non-Int. Income to Working Funds (%)
10.68 8.95 6.45 6.82 6.80
2.00 1.50 1.00 0.50 0.00
2.33 2.03 1.45 1.10 0.55

2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

2.00 1.50 1.00 0.50 0.00 2004-'052005-'062006-'072007-'082008-'09
1.80
1.90 1.24
1.90
1.19
Year
234
Liquidity Ratios

PARTICULARS Liquid Assets Demand Deposits Liquid Assets to Demand Deposits (%) 2004-'05 565.48 388.56 145.53 2005-'06 847.80 758.63 111.75 2006-'07 1931.03 2108.68 91.58 2007-'08 3277.15 3152.37 103.96 2008-'09 2586.19 3418.16 75.66

PARTICULARS Liquid Assets Total Deposits Liquid Assets to Total Deposits (%) 2004-'05 565.48 4299.54 13.15 2005-'06 847.80 6565.92 12.91 2006-'07 1931.03 11000.09 17.55 2007-'08 3277.15 16423.65 19.95 2008-'09 2586.19 15644.93 16.53

PARTICULARS
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09

565.48 847.80 1931.03 3277.15 2586.19 6512.86 10175.12 19915.42 28312.36 28711.88
8.68
8.33
9.70
11.57
9.01

PARTICULARS Government Securities Total Assets Government Sec. to Total Assets (%) 2004-'05 1329.55 6512.86 20.41 2005-'06 2371.65 10175.12 23.31 2006-'07 5863.67 19915.42 29.44 2007-'08 8107.01 28312.36 28.63 2008-'09 8149.93 28711.88 28.39
235
Graphs
Liquid Assets to Demand Deposits (%) 160.00 140.00 120.00 100.00 80.00 60.00 40.00 20.00 0.00 25.00 145.53 111.75 91.58 103.96 75.66 10.00 5.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 13.15 12.91 20.00 15.00 19.95 17.55 16.53
Year
Year
Government Sec. to Total Assets (%) 35.00 30.00 11.57 25.00 9.01 20.00 15.00 10.00 5.00 0.00 20.41 23.31 29.44 28.63 28.39

14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 2004-'052005-'062006-'072007-'082008-'09 8.68 8.33 9.70
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
236
Interpretation Capital adequacy ratios have shown satisfactory performance over the years for the bank. Core capital adequacy ratio has remained above the regulatory requirements of RBI and witnessed a gradual improvement which is a good indication for the bank. On the other hand, leverage and debt equity ratio have stabilized which were at their peak during 2005-06. Moreover, advances to total assets ratio has boosted significantly coupled with government securities to total investment ratio depicting a tale of handsome efforts leading to healthier business opportunities while keeping hands safe. Asset quality ratios seem to have become worsened to a great extent for the bank. Non Performing Assets which are considered to be the most critical part of a banks portfolio have shown a sharp rise over the five years in comparison to net advances which gives a picture of unproductive efforts in advancing loans and also in recovering the same. Apart from these, investments to total assets ratio has also increased from which is a not fine signal as bank can now advance less funds and earn interest income which is its core area of operation. Management efficiency ratios more or less have remained stabilized and shown a mix trend over the years. Total advances to total deposits ratio has tremendously rose to the tune of 10% over the five years which shows dynamic efforts of the bank in towards optimum utilization of the funds available with the bank. With the increasing number of employees over the years bank has managed to maintain more or less the same increase in its business, and the same is the case with profitability per employee. Return on net worth i.e. shareholders funds have witnessed decreasing trend year after year. Earnings capacity ratios have witnessed average performance from 2004-05 to 2008-09. Net interest margin has rose by a nominal over 180 bps but is a good indication that it is moving upwards. Return on average assets and return on equity shareholders funds have followed the opposite trend. . It is interesting to note that non-interest income has increased slowly as compared to non-interest expenses. Discouraging trend in net interest income coupled with increase in non-interest expenses have resulted into dissatisfactory
237
efficiency for the bank. Interest income to working funds, non-interest income to working funds and operating profit to working funds have observed a remarkable decline. Liquidity ratios appear to have observed poor performance over the years. Liquid assets though witnessing an upward trend have failed to be in line with an increase in the deposits and assets as a result of which these ratios have diminished. Not having enough liquidity on the hand to meet the requirement of the banks stakeholders can prove to be dangerous. However, bank has maintained the tune of investment in the government securities in line with the assets.
238
Z-score Analysis
Z = 6.56T1 + 3.26T2 + 6.72T3 + 1.05T4
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 (0.0755) (0.0749) (0.0473) 0.0972 0.0480 0.1161 0.27 0.0546 0.0504 0.0849 0.11 0.0671 0.0453 0.0834 0.30 0.0291 0.1147 0.0603 0.1269 1.10 0.0613 0.1240 0.0687 0.1360 1.41
Z-score

1.60 1.40 1.20
1.41 1.10
Z-Score
1.00 0.80 0.60
0.40
0.20 0.00
0.27 0.11
2004-'05 2005-'06
0.30
2006-'07
2007-'08
2008-'09
Year
239
Technical Analysis
240
Exponential Moving Average (EMA) Chart In Kotak we can see the downward trend in the month of January to March It goes sharply down and reaches the lowest point of the year which is 200 and from that month it rises in the next months. In the month of April, May and June it rises very sharply from 200 to 775. Then there is stable trend in coming few months. It also touched the highest point of 850 in November. Due to recent stability in EMA it will better to invest in the company. Moving Average Convergence Divergence (MACD) Chart As per the MACD chart, it is advisable to go for this company. The reason behind is that in the first quarter of the year it shows the down fall trend and which is below the expectation. In the month of May only it increases sharply to 25 and rises sharply to 75 in June. Then it shows the mix trend and stables which is quite satisfactory and the mix trend mostly upward side. Relative Strength Index (RSI) Chart In RSI chart we have shown the Upward Control line (UCL) at 70 points and Lower Control Line (LCL) at 30 points. Company have shown stable trend in the first quarter and then it increases above the upper few times so it is satisfactory and advisable to invest in this company because the RSI is moderate. Accumulation/Distribution Chart Kotak is showing the continues decrease in the first three months and after March there is a continuous accumulation and shown upward trend for one and half month and there is a stable trend till September. After that there is a continuous buying is going on, so it is the perfect time to get in this company.
241
Punjab National Bank

Punjab National Bank (PNB) was registered on May 19, 1894 under the Indian Companies Act with its office in Anarkali Bazaar Lahore. The Bank is the second largest governmentowned commercial bank in India with about 4,904 branches across 764 cities. It serves over 37 million customers. The bank has been ranked 248th biggest bank in the world by 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 offices in Almaty, Dubai, Oslo, and Shanghai. PNB was founded in the year 1895 at Lahore (presently in Pakistan) as an off-shoot of the Swadeshi Movement. Among the inspired founders were Sardar Dayal Singh Majithia, Lala HarKishen Lal, Lala Lalchand, Shri Kali Prosanna Roy, Shri E.C. Jessawala, Shri Prabhu Dayal, Bakshi Jaishi Ram, Lala Dholan Dass. With a common missionary zeal they set about establishing a national bank; the first one with Indian capital owned, managed and operated by the Indians for the benefit of the Indians. The Lion of Punjab, Lala Lajpat Rai, was actively associated with the management of the Bank in its formative years. The Bank made steady progress right from its inception. It has shown resilience to tide over many a crisis. It withstood the crisis in banking industry of 1913 and the severe depression of the thirties. It survived the most critical period in its history the Partition of 1947 when it was uprooted from its major area of operations. It was the farsightedness of the management that the registered office of the Bank was shifted from Lahore to Delhi in June 1947 even before the announcement of the Partition. With the passage of time the Bank grew to strength spreading its wings from one corner of the country to another. Some smaller banks like, The Bhagwan Dass Bank Limited, Universal Bank of India, The Bharat Bank Limited, The Indo-Commercial Bank Limited, The Hindustan Commercial Bank Limited and The Nedungadi Bank were brought within its fold.
242
PNB has the privilege of maintaining accounts of the illustrious national leaders like Mahatma Gandhi, Shri Jawahar Lal Nehru, Shri Lal Bahadur Shastri, Shrimati Indira Gandhi besides the account of the famous Jalianwala Bagh Committee. Nationalization of the fourteen major banks on 19th July, 1969 was a major step for the banking industry. PNB was one amongst these. As a result, banking was given a new direction and thrust. The banks were expected to reach people in every nook and corner, meet their needs, and work for their economic upliftment. Removal of poverty and regional imbalances were accorded a high priority. PNB has always responded enthusiastically to the nation's needs. It has been earnestly engaged in the task of national development. In the process, the bank has emerged as a major nationalized bank.
243
Trend Analysis
2004-'05 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
2005-'06 113.29 109.19 102.07 100.92 200.00 102.08 115.49 116.01 169.92 106.73 123.53 81.02 540.74
2006-'07 132.82 126.57 109.22 88.01 333.33 136.72 128.98 135.57 111.51 104.62 159.89 89.18 373.75
2007-'08 168.62 155.02 145.29 129.42 333.33 145.30 152.98 161.35 229.42 239.89 197.81 106.55 386.64
2008-'09 228.45 211.80 219.19 194.08 666.67 219.21 182.75 203.32 246.18 248.34 256.08 125.09 426.98
244
Interpretation From the above trend anal ysis of selected financial data we can observe: Generall y, t rends are in favour for the company. Expenses have shoot up sharpl y at a pace slower than that for core interest income whic h resulted into rising profits for the bank. However, increasing profit has resulted into increasing retained earnings over the five years. Dividend per share has boosted by over 6.5 times so as the Earnings per share which has considerabl y shown a fourfold increase over the years. The bank has also managed to add value to the shareholders kitt y, which can be witnessed from over 4.5 times increase in the reserves. Being an established bank, advances have grown faster than the deposits which is a positive sign for the bank. Fixed assets have almost grown by 2 times in line with the interest income. This shows optimum utilization of resources available to achieve targets by the bank. Net current assets have shown a fourfold increase over the years. On the whole, from the trends it is apparent that the compan y has become more affluent than is was 5 years ago.
245
CAMEL Analysis
PARTICULARS Capital Adequacy Ratio (%)

Leverage Ratio
PARTICULARS Total Debt Shareholders' Funds Leverage Ratio (Times)
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 14.78 12.29 11.95 13.46 14.03
2004-'05 2005-'06 2006-'07 2007-'08

105,885.18 126,372.10 141,808.53 171,903.79 8,161.30 9,376.37 10,435.46 12,318.35
2008-'09
214,134.86 14,653.63
12.97
13.48
13.59
13.96
14.61
Debt Equity Ratio

103166.89 119684.92 139859.68 166457.22 8,161.30 9,376.37 10,435.46 12,318.35 209760.51 14,653.63
12.64
12.76
13.40
13.51
14.31

60412.75 74627.36 96596.52 119501.57 154702.99 126268.71 145349.79 162529.13 199048.77 246939.66
47.84
51.34
59.43
60.04
62.65

246

16.00 15.00 14.00 13.00 12.00 15.00 14.50
14.78 14.03 13.46
14.00 13.50 13.00
14.61 13.96 13.48 12.97

2004-'052005-'062006-'072007-'082008-'09
13.59
12.29
11.00 10.00
11.95
12.50 12.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
70.00 60.00 50.00

14.50 14.00 13.50 13.00 12.50 12.00 11.50 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
14.31 13.40 12.64 12.76 13.51
59.43 47.84 51.34
60.04
62.65
40.00 30.00 20.00 10.00 0.00
2004-'052005-'062006-'072007-'082008-'09
Year
Year

87.00 86.00 85.00 84.00 83.00 82.00 81.00 80.00 79.00 78.00
86.03
81.30 81.40 81.06
81.90
2004-'052005-'062006-'072007-'082008-'09
Year
247

120.83 60412.75 210.17 74627.36 725.62 753.78 263.85 96596.52 119501.57 154702.99
0.20
0.28
0.75
0.63
0.17


50672.83 41055.32 45189.83 53991.70 63385.18 126268.7 145349.8 162529.1 199048.77 246939.66 40.13 28.25 27.80 27.12 25.67
248

0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00
0.75
0.63
0.28 0.20
2004-'05 2005-'06 2006-'07 2007-'08
0.17
2008-'09
Year

0.50 0.40 0.30 0.20 0.10 0.00
0.45
0.38
0.10
2004-'05
0.14
2005-'06 2006-'07 2007-'08
0.11
2008-'09
Year

50.00 40.00 30.00 20.00 10.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
40.13 28.25 27.80 27.12 25.67
Year
249

154702.99 209760.51
60412.75 74627.36 96596.52 119501.57 103166.89 119684.92 139859.68 166457.22
58.56
62.35
69.07
71.79
73.75

285,958.79 56025
2008-'09
364,463.50 58205
163,579.64 194,312.28 236,456.20 58329 58047 57316
2.80
3.35
4.13
5.10
6.26
Profit per Employee

Return on Net Worth

PARTICULARS Net Profit Average Net Worth Return on Net Worth (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
1410.12 6586.55 1439.31 8768.83 1540.08 9905.91 2048.76 3090.88 11376.9 13485.99
21.41
16.41
15.55
18.01
22.92
250
Graphs
7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00
58.56
62.35
69.07
71.79
73.75
6.26 5.10 4.13 2.80 3.35
Year
Year

9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 25.00
8.46 6.48 4.46 4.96 5.12
20.00 15.00 10.00 5.00 0.00
21.41 16.41 15.55 18.01
22.92
2004-'052005-'062006-'072007-'082008-'09
2004-'052005-'062006-'072007-'082008-'09
Year
Year
251

PARTICULARS
2004-'05
2005-'06
2006-'07
2007-'08
2008-'09
4,006.74 4,666.76 5,514.57 5,534.16 7,030.86 100,217.90 113,384.13 128,734.52 157,639.81 195,790.72
4.00
4.12
4.28
3.51
3.59

1410.12 1439.31 1540.08 2048.76 3090.88 114300.23 135809.25 153939.46 180788.95 222994.22 1.23 1.06 1.00 1.13 1.39
Return on Equity
PARTICULARS Net Profit Shareholder's Funds Return on Equity (%) 2004-'05 1410.12 8,161.30 17.28 2005-'06 2006-'07 2007-'08 2008-'09
1439.31 1540.08 2048.76 3090.88 9,376.37 10,435.46 12,318.35 14,653.63 15.35 14.76 16.63 21.09

PARTICULARS
2004-'05
2005-'06
2006-'07
2007-'08
2008-'09
2,919.69 222,994.22
1,854.54 1,478.23 1,343.64 1,997.56 114,300.23 135,809.25 153,939.46 180,788.95
1.62
1.09
0.87
1.10
1.31
Overhead Ratio
5,026.81 222,994.22
3,257.26 3,263.15 3,926.05 3,902.55 114,300.23 135,809.25 153,939.46 180,788.95
2.85
2.40
2.55
2.16
2.25
252
Efficiency Ratio

8459.85 9584.15 11537.48 126268.71 145349.79 162529.13 6.70 6.59 7.10

1,854.54 1,478.23 1,343.64 126268.71 145349.79 162529.13 1.47 1.02 0.83

2604.02 2881.84 2,932.16 126268.71 145349.79 162529.13 2.06 1.98 1.80
253

5.00 4.00 3.00 2.00 1.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09

1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
4.00
4.12
4.28
3.51 3.59
1.39 1.23 1.06 1.00 1.13
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

25.00 20.00

21.09
1.50 1.00
15.00 10.00 5.00 0.00
1.62 1.31 1.09 1.10
17.28
15.35
14.76
16.63
0.50 0.00 2004-'052005-'062006-'072007-'082008-'09
0.87
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
Overhead Ratio (%)

3.00 2.50 2.00 1.50 1.00 0.50 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 58.00

56.00
2.85 2.40 2.55 2.16 2.25
57.25 55.57 53.10 51.81 50.52
54.00 52.00 50.00 48.00 46.00
2004-'052005-'062006-'072007-'082008-'09
Year
Year
254

Interest Income to Working Funds (%) 8.00 7.50 7.00 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Non-Int. Income to Working Funds (%)
7.83 7.10 7.17
1.47
1.18 1.02 0.83 1.00
6.50 6.00 5.50
6.70
6.59
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
2.10 2.05 2.00 1.95 1.90 1.85 1.80 1.75 1.70 1.65
Year
2.06 1.98 1.99
1.80
1.82
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
255
Liquidity Ratios

14048.13 28554.49 19536.24 12466.57 16723.77 16465.71 112.69 170.74 118.65

14048.13 28554.49 19536.24 22983.25 26148.81 103166.89 119684.92 139859.68 166457.22 209760.51 13.62 23.86 13.97 13.81 12.47

PARTICULARS
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09

14048.13 28554.49 19536.24 22983.25 26148.81 126268.71 145349.79 162529.13 199048.77 246939.66
11.13
19.65
12.02
11.55
10.59

36630.96 44216.72 54530.82 162529.1 199048.77 246939.66 22.54 22.21 22.08
256
Graphs
Liquid Assets to Demand Deposits (%) 180.00 160.00 140.00 120.00 100.00 80.00 60.00 40.00 20.00 0.00 30.00

25.00
170.74 112.69 118.65 129.18
138.99 20.00
15.00 10.00 5.00 0.00
23.86 13.97 13.81
13.62
12.47
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
Government Sec. to Total Assets (%) 35.00 30.00 25.00 20.00 15.00

25.00 20.00 15.00 10.00
32.63 22.99 22.54 22.21 22.08
19.65 12.02 11.55
11.13
5.00 0.00
10.59
10.00 5.00 0.00
2004-'052005-'062006-'072007-'082008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
257
Interpretation Capital adequacy ratios have shown satisfactory performance over the years for the bank. Core capital adequacy ratio has remained above the regulatory requirements of RBI and witnessed a gradual improvement which is a good indication for the bank. On the other hand, leverage and debt equity ratio have stabilized which were at their peak during 2008-09. Moreover, advances to total assets ratio has boosted significantly coupled with government securities to total investment ratio depicting a tale of handsome efforts leading to healthier business opportunities while keeping hands safe. Asset quality ratios seem to have become strength for the bank. Non Performing Assets which are considered to be the most critical part of a banks portfolio have been remained steady with increasing in the years 2006-07 and 2007-08 in comparison to net advances which gives a picture of vigorous efforts in advancing loans and also in recovering the same. Apart from these, investments to total assets ratio has also decreased from which is a fine signal as bank by decreasing investments can now advance more funds and earn interest income which is its core area of operation. Management efficiency ratios shown a rising trend over the years. Total advances to total deposits ratio has tremendously rose to the tune of 15% over the five years which shows dynamic efforts of the bank in towards optimum utilization of the funds available with the bank. With the increasing number of employees over the years bank has managed to increase its business coupled with significant improvement in profitability per employee has improved by Rs. 4 lacs which shows operational excellence of the bank in reducing costs which results into rising profits. Return on net worth i.e. shareholders funds have stabilized with increasing-decreasing trend year after year. Earnings capacity ratios have witnessed robust performance from 2004-05 to 2008-09. Net interest margin has declined by a nominal 40 bps. Return on average assets and return on equity shareholders funds have followed upward trend. It is interesting to note that non-interest income and non-interest expenses have shown relatively similar change. However, encouraging trend in net interest income has resulted into superior efficiency
258
for the bank. Interest income to working funds, non-interest income to working funds and operating profit to working funds have observed an insignificant decline. Liquidity ratios appear to have observed average performance over the years. Liquid assets though witnessing an upward trend have failed to be in line with an increase in the deposits and assets as a result of which these ratios have steady. Not having enough liquidity on the hand to meet the requirement of the banks stakeholders can prove to be dangerous. However, bank has maintained the tune of investment in the government securities in line with the assets.
259
Z-score Analysis
Z = 6.56T1 + 3.26T2 + 6.72T3 + 1.05T4
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 0.2546 0.0621 0.0515 0.0622 2.28 0.3726 0.0623 0.0478 0.0624 3.03 0.3564 0.0623 0.0504 0.0638 2.95 0.3797 0.0603 0.0604 0.0542 3.15 0.3652 0.0581 0.0687 0.0532 3.10
Z-score

3.50 3.00 2.50
3.03 2.28
2.95
3.15
3.10
Z-Score
2.00
1.50 1.00 0.50 0.00
2004-'05
2005-'06
2006-'07
2007-'08
2008-'09
Year
260
Technical Analysis
261
Exponential Moving Average (EMA) Chart In PNB we can see the downward trend in the month of January to March It goes sharply down and reaches the lowest point of the year which is 290 and from that month it rises in the next months. In the month of April, May and June it rises very sharply from 290 to 700. Then there is stable trend in coming months. It also touched the highest point of 1000 in December. Due to recent stability in EMA it will better to invest in the company. Moving Average Convergence Divergence (MACD) Chart As per the MACD chart, it is advisable to go for this company. The reason behind is that in the first quarter of the year it shows the down fall trend and which is below the expectation. In the month of May only it increases sharply to 30 and rises sharply to 50 in June. Then it shows the mix trend and stables which is quite satisfactory and the mix trend mostly upward side. Relative Strength Index (RSI) Chart In RSI chart we have shown the Upward Control line (UCL) at 70 points and Lower Control Line (LCL) at 30 points. Company have shown sharp fall in the first quarter but then it is an upward trend and it is satisfactory. So it is advisable to invest in this company because the RSI is high and it touches the highest of 83 in October. Accumulation/Distribution Chart PNB is showing the continues decrease in the first three months and after March there is a continuous accumulation and shown upward trend for one and half month and there is a stable trend. There is not continuous buying or selling is going on, so if someone wants stability they can go for PNB.
262
State Bank of India

The State Bank of India, the countrys oldest Bank and a premier in terms of balance sheet size, number of branches, market capitalization and profits is today going through a momentous phase of Change and Transformation the two hundred year old Public sector behemoth is today stirring out of its Public Sector legacy and moving with an ability to give the Private and Foreign Banks a run for their money. The bank is entering into many new businesses with strategic tie ups Pension Funds, General Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale Merchant Acquisition, Advisory Services, structured products etc each one of these initiatives having a huge potential for growth. The Bank is forging ahead with cutting edge technology and innovative new banking models, to expand its Rural Banking base, looking at the vast untapped potential in the hinterland and proposes to cover 100,000 villages in the next two years. It is also focusing at the top end of the market, on whole sale banking capabilities to provide Indias growing mid/large Corporate with a complete array of products and services. It is consolidating its global treasury operations and entering into structured products and derivative instruments. Today, the Bank is the largest provider of infrastructure debt and the largest arranger of external commercial borrowings in the country. It is the only Indian bank to feature in the Fortune 500 list. The Bank is changing outdated front and back end processes to modern customer friendly processes to help improve the total customer experience. With about 8500 of its own 10000 branches and another 5100 branches of its Associate Banks already networked, today it offers the largest banking network to the Indian customer. The Bank is also in the process of providing complete payment solution to its clientele with its over 8500 ATMs, and other electronic channels such as Internet banking, debit cards, mobile banking, etc. With four national level Apex Training Colleges and 54 learning Centers spread all over the country the Bank is continuously engaged in skill enhancement of its employees. Some of the training programs are attended by bankers from banks in other countries.
263
The bank is also looking at opportunities to grow in size in India as well as internationally. It presently has 82 foreign offices in 32 countries across the globe. It has also 7 Subsidiaries in India SBI Capital Markets, SBICAP Securities, SBI DFHI, SBI Factors, SBI Life and SBI Cards - forming a formidable group in the Indian Banking scenario. It is in the process of raising capital for its growth and also consolidating its various holdings. Throughout all this change, the Bank is also attempting to change old mindsets, attitudes and take all employees together on this exciting road to Transformation. In a recently concluded mass internal communication programme termed Parivartan the Bank rolled out over 3300 two day workshops across the country and covered over 130,000 employees in a period of 100 days using about 400 Trainers, to drive home the message of Change and inclusiveness. The workshops fired the imagination of the employees with some other banks in India as well as other Public Sector Organizations seeking to emulate the programme. The CNN IBN, Network 18 recognized this momentous transformation journey, the State Bank of India is undertaking, and has awarded the prestigious Indian of the Year Business, to its Chairman, Mr. O. P. Bhatt in January 2008. Shri Om Prakash Bhatt declared as one of the "25 most valuable Indians" by The Week Magazine for 2009. State bank of India has been adjudged the Best Bank 2009 by Business India (August-2009). State bank of India has been ranked as no.1 in the 4Ps B & M & ICMR survey on India's best marketed banks (august-2009). State Bank of India is the country's premier financial institution. It is a crucial wheel in the economy with the ability to move markets. SBI has produced many stalwarts, and its chairman Om Prakash Bhatt stands out among them. For Bhatt has put the bank on a high growth path.
264
Trend Analysis
2004-'05 31682.73 35277.52 4304.52 3552.90 12.50 81.79 23545.82 367047.53 22649.15 2697.68 202374.46 197097.90 28688.84
2004-'05 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
2005-'06 35979.57 39101.06 4406.67 3566.51 14.00 83.73 27117.78 380046.05 35627.05 2752.94 261800.93 162534.24 26546.52
2005-'06 113.56 110.84 102.37 100.38 112.00 102.37 115.17 103.54 157.30 102.05 129.36 82.46 92.53
Rs. Crore 2006-'07 37242.33 40147.53 4541.31 3679.27 14.00 74.13 30772.25 435521.09 55872.83 2818.87 337336.49 149148.88 32617.10
2006-'07 117.55 113.80 105.50 103.56 112.00 90.63 130.69 118.66 246.69 104.49 166.69 75.67 113.69
2007-'08 48950.30 51711.37 6729.12 5205.60 21.50 106.56 48401.19 537403.95 73016.75 3373.49 416768.20 189501.27 41914.77
2007-'08 154.50 146.58 156.33 146.52 172.00 130.28 205.56 146.41 322.38 125.05 205.94 96.15 146.10
2008-'09 63788.44 67419.32 9121.23 7032.04 29.00 143.67 57312.82 742073.12 84058.09 3837.84 542503.21 275953.96 65543.07
2008-'09 201.34 191.11 211.90 197.92 232.00 175.66 243.41 202.17 371.13 142.26 268.07 140.01 228.46
265
Interpretation From the above trend anal ysis of selected financial data we can observe: Generall y, t rends are in favour for the company. Expenses have shoot up sharpl y at a pace slower than that for core interest income which resulted into rising profits of the bank. However, increasing profit has resulted into increasing retained earnings over the five years. Dividend per share has boosted by over 2 times so as the Earnings per share which has considerabl y shown a fourfold increase over the years. The bank has also managed to add an enormous value to the shareholders kitt y, which can be witnessed from almost 2.5 times increase in the rese rves. SBI being the oldest bank of India, it is definitel y in a position to advance the funds it has received as deposits. Fixed assets have almost grown by 2 .5 times, rapidl y than interest income. This shows inadequate utilization of resources available to achieve targets by the bank. Net current assets have shown a gradual increase over the five years. On the whole, from the trends it is apparent that the compan y has become more affluent than is was 5 years ago.
266
CAMEL Analysis
PARTICULARS Capital Adequacy Ratio (%)

Leverage Ratio
PARTICULARS Total Debt Shareholders' Funds Leverage Ratio (Times)
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 12.45 11.88 12.34 13.47 14.25
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09

386,231.84 410,687.30 475,224.43 589,131.35 795,786.81 24,072.12 27,644.08 31,298.55 49,032.66 57,947.70
16.04
14.86
15.18
12.02
13.73
Debt Equity Ratio

367047.53 380046.05 435521.09 537403.95 24,072.12 27,644.08 31,298.55 49,032.66 742073.12 57,947.70
15.25
13.75
13.92
10.96
12.81

202374.46 261800.93 337336.49 416768.20 542503.21 459882.84 494160.60 566806.14 722125.09 965042.96
44.01
52.98
59.52
57.71
56.22

171943.51 135291.39 118270.83 141128.27 226960.06 197097.90 162534.24 149148.88 189501.27 275953.96
87.24
83.24
79.30
74.47
82.25
267

14.50 14.00 13.50 13.00 12.50 12.00 11.50 11.00 10.50 10.00

14.25
18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00
16.04
13.47 12.45 11.88 12.34
14.86 15.18 12.02
13.73
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'052005-'062006-'072007-'082008-'09
Year
Year

18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00
15.25
13.75 13.92 10.96
12.81
59.52 52.98 44.01
57.71
56.22
2004-'052005-'062006-'072007-'082008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

90.00 85.00 80.00 75.00 70.00 65.00 2004-'052005-'062006-'072007-'082008-'09
87.24 83.24 82.25
79.30
74.47
Year
268

5,362.92 4,921.86 5,262.45 7,418.47 9,548.06 202374.46 261800.93 337336.49 416768.20 542503.21
2.65
1.88
1.56
1.78
1.76

PARTICULARS Net NPAs Total Assets Net NPA to Total Assets (%) 2004-'05 2005-'06 2006-'07 2007-'08 7,418.47 722125.09 1.03 2008-'09 9,548.06 965042.96 0.99
5,362.92 4,921.86 5,262.45 459882.84 494160.60 566806.14 1.17 1.00 0.93

197097.90 162534.24 149148.88 459882.84 494160.6 566806.14
2007-'08
189501.27 722125.09
2008-'09
275953.96 965042.96
42.86
32.89
26.31
26.24
28.59
269

3.00 2.50 2.00 1.50 1.00 0.50 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2.65 1.88 1.56 1.78 1.76
Year

1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00
1.17
1.00 0.93 1.03 0.99
2004-'05
2005-'06
2006-'07
2007-'08
2008-'09
Year

50.00 40.00 30.00 20.00 10.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
42.86
32.89 26.31 26.24 28.59
Year
270

542503.21 742073.12
202374.46 261800.93 337336.49 416768.2 367047.53 380046.05 435521.09 537403.95
55.14
68.89
77.46
77.55
73.11

569,421.99 641,846.98 772,857.58 205515 198774 185388
954,172.15 1,284,576.33 179205 205896
2.77
3.23
4.17
5.32
6.24
Profit per Employee

PARTICULARS Operating Profit No. of Employees Profit per Employee (Rs. Lacs) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
9786.34 11151.44 10,249.19 11,810.11 15,440.83 205515 198774 185388 179205 205896 4.76 5.61 5.53 6.59 7.50
Return on Net Worth

271
Graphs
7.00 6.00 5.00
100.00 80.00 60.00 40.00 20.00 0.00
6.24 5.32 4.17 2.77 3.23
68.89
55.14
77.46
77.55
73.11
4.00 3.00 2.00 1.00 0.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 25.00
7.50 6.59 5.61 4.76 5.53
20.00 15.00 10.00 5.00 0.00
19.43 17.04 15.41 16.75 17.05
2004-'052005-'062006-'072007-'082008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
272

PARTICULARS
2004-'05
2005-'06
2006-'07
2007-'08
2008-'09
13,944.62 15,635.64 16,054.21 17,021.23 20,873.14 371,541.19 411,903.77 455,410.27 546,377.42 712,363.32
3.75
3.80
3.53
3.12
2.93

4304.52 4406.67 4541.31 6729.12 9121.23 433849.06 477021.72 530483.37 644465.62 843584.03 0.99 0.92 0.86 1.04 1.08
Return on Equity
PARTICULARS Net Profit Shareholder's Funds Return on Equity (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
4304.52 4406.67 4541.31 6729.12 9121.23 24,072.12 27,644.08 31,298.55 49,032.66 57,947.70 17.88 15.94 14.51 13.72 15.74

12,691.35 843,584.03
7,119.90 7,388.69 7,446.76 9,398.43 433,849.06 477,021.72 530,483.37 644,465.62
1.64
1.55
1.40
1.46
1.50
Overhead Ratio
18,123.66 843,584.03
11,278.18 11,872.89 13,251.78 14,609.55 433,849.06 477,021.72 530,483.37 644,465.62
2.60
2.49
2.50
2.27
2.15
273
Efficiency Ratio
PARTICULARS Non-Interest Expenses Net Int. Income+NonInt. Income Efficiency Ratio (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
11,278.18 11,872.89 13,251.78 14,609.55 18,123.66 21,064.52 23,024.33 23,500.97 26,419.66 33,564.49 53.54 51.57 56.39 55.30 54.00

32428.00 35794.93 39491.03 459882.84 494160.60 566806.14 7.05 7.24 6.97

7,119.90 7,388.69 7,446.76 459882.84 494160.60 566806.14 1.55 1.50 1.31

9786.34 11151.44 10,249.19 459882.84 494160.60 566806.14 2.13 2.26 1.81
274

4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00
3.75
3.80

1.20 1.00 0.80 0.60 0.40 0.20 0.00
3.53 3.12 2.93
0.99
1.04 0.92 0.86
1.08
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

20.00 15.00 10.00 5.00 0.00 2004-'052005-'062006-'072007-'082008-'09

1.60
17.88 15.94 14.51 15.74 13.72
1.64 1.55 1.50
1.50 1.40 1.30 1.20
1.46
1.40
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
Overhead Ratio (%)

3.00 2.50 2.00 1.50 1.00 0.50 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 57.00 56.00 55.00 54.00 53.00 52.00 51.00 50.00 49.00
2.60
2.49
2.50
56.39 55.30 53.54 51.57

2004-'052005-'062006-'072007-'082008-'09
2.27
2.15
54.00
Year
Year
275
7.40 7.20 7.00 6.80 6.60 6.40 6.20

7.24 7.05 6.97 6.78 6.61
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
1.60 1.50 1.40 1.30 1.20 1.10

1.55 1.50
1.31
1.30
1.32
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
2.50 2.00

2.13 2.26 1.81 1.64 1.60
1.50 1.00 0.50 0.00
2004-'052005-'062006-'072007-'082008-'09
Year
276
Liquidity Ratios

PARTICULARS Liquid Assets Demand Deposits Liquid Assets to Demand Deposits (%) 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
57237.11 66823.04 77261.01 111841.31 141109.49 56612.32 67995.65 81997.97 98133.53 110753.57 101.10 98.28 94.22 113.97 127.41

57237.11 66823.04 77261.01 111841.31 141109.49 367047.53 380046.05 435521.09 537403.95 742073.12 15.59 17.58 17.74 20.81 19.02

PARTICULARS Liquid Assets Total Assets Liquid Assets to Total Assets (%) 2004-'05
57237.11 459882.84
2005-'06
66823.04 494160.60
2006-'07
77261.01 566806.14
2007-'08
111841.31 722125.09
2008-'09
141109.49 965042.96
12.45
13.52
13.63
15.49
14.62

171943.51 135291.39 118270.83 141128.27 226960.06 459882.84 494160.60 566806.14 722125.09 965042.96 37.39 27.38 20.87 19.54 23.52
277
Graphs
Liquid Assets to Demand Deposits (%) Liquid Assets to Total Deposits (%)
25.00
140.00 120.00 100.00 80.00 60.00 40.00 20.00 0.00
127.41 20.00 113.97 101.10 98.28 94.22

15.00
20.81 15.59 17.58 17.74
19.02
10.00 5.00 0.00 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year

18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00

37.39 27.38 20.87 23.52 19.54
15.49 12.45 13.52 13.63
14.62
2004-'052005-'062006-'072007-'082008-'09
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Year
278
Interpretation Capital adequacy ratios have shown satisfactory performance over the years for the bank. Core capital adequacy ratio has remained above the regulatory requirements of RBI and witnessed a gradual improvement which is a good indication for the bank. On the other hand, leverage and debt equity ratio have stabilized which were at their peak during 2004-05. Moreover, advances to total assets ratio has boosted significantly coupled with government securities to total investment ratio depicting a tale of handsome efforts leading to healthier business opportunities while keeping hands safe. Asset quality ratios seem to have become strength for the bank. Non Performing Assets which are considered to be the most critical part of a banks portfolio have shown a sharp fall over the five years in comparison to net advances which gives a picture of vigorous efforts in advancing loans and also in recovering the same. Apart from these, investments to total assets ratio has also decreased from which is a fine signal as bank by decreasing investments can now advance more funds and earn interest income which is its core area of operation. Management efficiency ratios shown a rising trend over the years. Total advances to total deposits ratio has tremendously rose to the tune of 18% over the five years which shows dynamic efforts of the bank in towards optimum utilization of the funds available with the bank. With the increasing number of employees over the years bank has managed to increase its business coupled with significant improvement in profitability per employee has improved by Rs. 2.5 lacs which shows operational excellence of the bank in reducing costs which results into rising profits. Return on net worth i.e. shareholders funds have stabilized with increasing-decreasing trend year after year. Earnings capacity ratios have witnessed robust performance from 2004-05 to 2008-09. Net interest margin has declined by a considerable 80 bps. Return on average assets and return on equity shareholders funds have followed steady trend. It is interesting to note that non-interest income and non-interest expenses have shown relatively similar change. However, encouraging trend in net interest income has resulted into superior efficiency
279
for the bank. Interest income to working funds, non-interest income to working funds and operating profit to working funds have observed an insignificant decline. Liquidity ratios appear to have observed average performance over the years. Liquid assets though witnessing an upward trend have managed to be in line with an increase in the deposits and assets as a result of which these ratios have steady. Not having enough liquidity on the hand to meet the requirement of the banks stakeholders can prove to be dangerous. However, bank has maintained the tune of investment in the government securities in line with the assets.
280
Z-score Analysis
Z = 6.56T1 + 3.26T2 + 6.72T3 + 1.05T4
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09 0.2231 0.0512 0.0544 0.0523 2.05 0.2477 0.0549 0.0552 0.0559 2.23 0.2789 0.0543 0.0521 0.0541 2.41 0.3194 0.0670 0.0587 0.0679 2.78 0.3486 0.0594 0.0592 0.0600 2.94
Z-score

3.25 3.00 2.75 2.50 2.25 2.00 1.75 1.50 1.25 1.00
Z-Score
2.78 2.41 2.23 2.05
2.94
2004-'05
2005-'06
2006-'07
2007-'08
2008-'09
Year
281
Technical Analysis
282
Exponential Moving Average (EMA) Chart In SBI we can see the downward trend in the month of January to March It goes sharply down and reaches the lowest point of the year which is 500 and from that month it rises in the next months. In the month of April, May and June it rises very sharply from 500 to 2020. Then there is downward trend in coming few months. It also touched the highest point of 2500 in October. Due to recent stability in EMA it will better to invest in the company. Moving Average Convergence Divergence (MACD) Chart As per the MACD chart, it is advisable to go for this company. The reason behind is that in the first quarter of the year it shows the down fall trend and which is below the expectation. In the month of May only it increases sharply to 78 and rises sharply to 180 in June. Then it shows the mix trend and stables which is quite satisfactory and the mix trend mostly upward side. Relative Strength Index (RSI) Chart In RSI chart we have shown the Upward Control line (UCL) at 70 points and Lower Control Line (LCL) at 30 points. Company have shown stable trend in the first quarter and then it increases above the upper few times so it is satisfactory and advisable to invest in this company because the RSI is moderate. Accumulation/Distribution Chart SBI is showing the continues decrease in the first three months and after March there is a continuous accumulation and shown upward trend for one and half month and there is a stable trend till September. After that there is a continuous buying is going on, so it is the perfect time to get in this company.
283
7. Key Findings
Z-score comparative analysis for Public Sector Banks
Public Sector Banks BOB BOI Canara Bank IDBI PNB SBI Weighted Weighted Average Average Rank Z S core Deviation Z S core Deviation Z S core Deviation Z S core Deviation Z S core Deviation Z Score Deviation
2004-'05
2005-'06
2006-'07
2007-'08
2008-'09
2.65 2.76 2.62 0.73 2.28 2.05
0.11 0.00 0.14 2.03 0.47 0.71
3.09 2.99 2.98 1.14 3.03 2.23
0.00 0.11 0.11 1.95 0.06 0.86
3.13 3.06 3.03 1.58 2.95 2.41
0.00 0.07 0.10 1.55 0.18 0.72
3.47 3.15 3.06 1.60 3.15 2.78
0.00 0.32 0.41 1.87 0.32 0.69
3.58 3.16 3.21 1.60 3.10 2.94
0.00 0.42 0.37 1.98 0.48 0.64
3.33 3.09 3.07 1.48 3.02 2.64
0.01 0.25 0.28 1.86 0.32 0.70
1 2 3 6 4 5
Z-score comparative analysis for Private Sector Banks

Private Sector Banks Axis Bank HDFC ICICI Kotak Mahindra Bank Weighted Weighted Avgerage Avgerage Rank Z S core Deviation Z S core Deviation Z S core Deviation Z S core Deviation Z S core Deviation Z Score Deviation
2004-'05
2005-'06
2006-'07
2007-'08
2008-'09
2.26 1.01 1.45 0.27
0.00 1.25 0.81 1.99
1.65 1.29 1.65 0.11
0.00 0.36 0.00 1.54
1.96 1.53 1.91 0.30
0.00 0.44 0.06 1.66
2.48 1.86 2.19 1.10
0.00 0.62 0.30 1.38
2.42 2.08 2.29 1.41
0.00 0.34 0.12 1.00
2.23 1.73 2.04 0.86
0.00 0.50 0.19 1.37
1 3 2 4
284
Z-score comparative analysis for Public & Private Sector Banks

Banks Weighted Weighted Average Average Rank Z S core Deviation Z S core Deviation Z S core Deviation Z S core Deviation Z S core Deviation Z Score Score
2004-'05
2005-'06
2006-'07
2007-'08
2008-'09
BOB BOI Canara Bank IDBI PNB SBI Axis Bank HDFC ICICI Kotak Mahindra Bank
2.65 2.76 2.62 0.73 2.28 2.05 2.26 1.01 1.45 0.27
0.11 0.00 0.14 2.03 0.47 0.71 0.50 1.75 1.31 2.49
3.09 2.99 2.98 1.14 3.03 2.23 1.65 1.29 1.65 0.11
0.00 0.11 0.11 1.95 0.06 0.86 1.44 1.80 1.44 2.98
3.13 3.06 3.03 1.58 2.95 2.41 1.96 1.53 1.91 0.30
0.00 0.07 0.10 1.55 0.18 0.72 1.17 1.61 1.23 2.83
3.47 3.15 3.06 1.60 3.15 2.78 2.48 1.86 2.19 1.10
0.00 0.32 0.41 1.87 0.32 0.69 0.99 1.61 1.29 2.37
3.58 3.16 3.21 1.60 3.10 2.94 2.42 2.08 2.29 1.41
0.00 0.42 0.37 1.98 0.48 0.64 1.17 1.50 1.29 2.17
3.33 3.09 3.07 1.48 3.02 2.64 2.23 1.73 2.04 0.86
0.01 0.25 0.28 1.86 0.32 0.70 1.11 1.61 1.30 2.48
1 2 3 9 4 5 6 8 7 10
285
Here, comparative analysis of Z-score has been done for public sector banks, private sector banks and for both together. As it can be seen from the above tables Z-score has been derived for all the five years for all the banks and then deviation is found out for the same by assigning zero value in the deviation column for the bank with highest z-score for any given year. All other banks deviation has been derived by deducting the highest Z-score from their respective Z-score for any given year. Thereafter, weighted average Z-score is found out by multiplying Z-score for all years with their respective weightage assigned. Weightages have been assigned as follows: Year 2004-05 2005-06 2006-07 2007-08 2008-09 Weightage 1 2 3 4 5
In the same manner weightage average deviation has been found out for all the banks and on the basis of that a bank with the least deviation has been given the 1st rank and so on. Z-score comparative analysis for the public sector banks shows that the Bank of Baroda has achieved the 1st rank. Z-score comparative analysis for the private sector banks shows that the Axis Bank has achieved the 1st rank. Z-score comparative analysis for the public and private sector banks together shows that the Bank of Baroda and Bank of India have achieved 1st and 2nd ranks respectively. As far as private sector banks are concerned, Axis Bank has achieved the highest rank i.e. 6th.
286
Z-score comparative analysis for Public & Private Sector Banks

2004-'05 Banks
Safe Grey Distress Zone Zone Zone
2005-'06
2006-'07
2007-'08
2008-'09
2.65 2.76 2.62 0.73 2.28 2.05 2.26 1.01 1.45 0.27
3.09 2.99 2.98 1.14 3.03 2.23 1.65 1.29 1.65 0.11
3.13 3.06 3.03 1.58 2.95 2.41 1.96 1.53 1.91 0.30
3.47 3.15 3.06 1.60 3.15 2.78 2.48 1.86 2.19 1.10
3.58 3.16 3.21 1.60 3.10 2.94 2.42 2.08 2.29 1.41
287
Z-score formula for Banks is as follows: Z = 6.56T1 + 3.26T2 + 6.72T3 + 1.05T4 Zones of Discrimination Z > 2.60 1.10 < Z < 2.60 Z < 1.10 Safe Zone Grey Zone Distress Zone
Based on the zones of discrimination as given by the Z-score model, banks have been classified for all the five years to be either in Safe zone, Grey zone or Distress zone. Bank of Baroda, Bank of India and Canara Bank have continued to be in the Safe zone for all the five years. Punjab National Bank which was in Grey zone for the year 2004-05 has attained the Safe zone for all the four remaining years. Following the same State Bank of India was in Grey zone till 2006-07 and has attained Safe zone after that. Axis Bank and ICICI Bank have remained in Grey zone for all the five years but their Zscore has shown a significant increase and in the coming years they are likely to be in the Safe zone. HDFC Bank and IDBI Bank were in the Distress zone for the year 2004-05 but thereafter both the banks moved to Grey zone for the remaining years. However, HDFC Bank shown a remarkable increase in its Z-score as compared to IDBI Bank. Kotak Mahindra Bank has been at its worst as far as Z-score is concerned. Till the year 2006-07 it was in the Distress zone and thereafter entered the Grey zone but still its has a long way to go before it reaches Safe zone.
288
Ranking Methodology
Capital Adequacy Ratios Capital Adequacy Ratio (%) Leverage Ratio (Times) Debt Equity Ratio (Times) Advances to Total Assets Ratio (%) Govt. Sec. to Total Inv. Ratio (%) Total Asset Quality Ratios Net NPA to Net Advances (%) Net NPA to Total Assets (%) Total Investments to Total Assets (%) Total Management Efficiency Ratios Total Advances to Total Deposits (%) Business per Employee (Rs. Cr.) Profit per Employee (Rs. Lacs) Return on Net Worth (%) Total Earnings Capacity Ratios Net Interest Margin (%) Return on Average Assets (%) Return on Equity (%) Non-Int. Income to Avg. Assets Ratio (%) Overhead Ratio (%) Efficiency Ratio (%) Interest Income to Working Funds (%) Non-Int. Income to Working Funds (%) Operating Profit to Working Funds (%) Total Liquidity Ratios Liquid Assets to Demand Deposits (%) Liquid Assets to Total Deposits (%) Liquid Assets to Total Assets (%) Government Sec. to Total Assets (%) Total Score 4.00 4.00 4.00 4.00 4.00 20.00 Score 7.00 6.00 7.00 20.00 Score 5.00 5.00 5.00 5.00 20.00 Score 3.00 3.00 3.00 1.50 2.50 2.50 1.50 1.50 1.50 20.00 Score 5.00 5.00 5.00 5.00 20.00
Grand Total
100.00
In order to derive CAMEL comparative analysis all the five parameters i.e. Capital Adequacy Ratios, Asset Quality Ratios, Management Efficiency Ratios, Earnings Capacity Ratios and
289
Liquidity Ratios which comprise of certain specific ratios have been assigned scores as shown above. For any ratio a bank achieving most favourable outcome is assigned the score stated in the table. All other banks are assigned scores in proportionate to the bank getting the highest score. Each parameter consists of a total score of 20 and collectively 100. Apart from these all the years have also been assigned specific weightage as follows: Year 2004-05 2005-06 2006-07 2007-08 2008-09 Weightage 1 2 3 4 5
Two types of analysis have been done in order to rank banks and they are: CAMEL comparative analysis for all the banks (Parameter-wise) CAMEL comparative analysis for all the banks (Year-wise)
290
CAMEL comparative analysis for Public & Private Sector Banks (Parameter-wise)
Banks
C
Total WAR Rank Total WAR
A
Rank Total WAR
M
Rank Total WAR
E
Rank Total WAR
L
Rank
Total of Total Rank WAR 67.07 65.76 60.17 63.42 69.30 60.12 67.09 70.15 71.11 62.97 5 6 9 7 3 10 4 2 1 8
13.43 13.03 13.86 15.05 13.92 13.68 12.42 14.40 16.53 18.81
8 9 6 3 5 7 10 4 2 1
14.44 12.56 10.11 9.54 16.54 8.15 12.61 13.91 9.21 9.27
2 5 6 7 1 10 4 3 9 8
10.89 12.08 10.49 13.90 11.29 10.42 15.16 11.78 16.04 9.14
7 4 8 3 6 9 2 5 1 10
12.70 13.86 12.82 10.55 14.25 13.43 14.91 16.35 12.80 12.68
8 4 6 10 3 5 2 1 7 9
15.61 14.23 12.89 14.37 13.30 14.44 11.98 13.71 16.53 13.07
2 5 9 4 7 3 10 6 1 8
C - Capital Adequacy Ratios
A - Asset Quality Ratios
M - Management Efficiency Ratios
E - Earnings Capacity Ratios
L - Liquidity Ratios
291
Here, comparative analysis of CAMEL model has been done for public and private sector banks together based on Parameters. All the five parameters i.e. Capital Adequacy Ratios, Asset Quality Ratios, Management Efficiency Ratios, Earnings Capacity Ratios and Liquidity Ratios have been evaluated independently for all the banks for all the years based on the scores as mentioned earlier in the ranking methodology. Weighted Average Ratio is found out by multiplying all the ratios in any parameter with their respective scores. Weighted Average Ratio is found out individually for all years. Now, the Total Weighted Average Ratio is found out by making the sum total of multiplication of weightage assigned to each year with their respective WAR and dividing it by the total weightage. This is done for all parameters which results into derivation of Total WAR for all the banks. Hence, banks have been ranked based on each of these individual parameters with the help of their respective Total WAR. Lastly, a composite ranking is given to all the banks based on Total of Total WAR. As far as Capital adequacy ratios are concerned Kotak Mahindra Bank attained 1st rank and ICICI Bank is ranked 2nd. For Asset quality ratios Punjab National Bank attained 1st rank and Bank of Baroda is ranked 2nd. In Management efficiency ratios ICIC Bank attained 1st rank and Axis Bank is ranked 2nd. In Earnings capacity ratios HDFC Bank attained 1st rank and Axis Bank is ranked 2nd. In Liquidity ratios ICICI Bank attained 1st rank and Bank of Baroda is ranked 2nd. Overall ICIC Bank attained 1st rank and HDFC Bank is ranked 2nd. It can be seen that State Bank of India being Indias largest bank is ranked 10th which is quite surprising. However, if we look at the individual parameters it scores least in Asset Quality parameter which is the least score attained by any bank in any of the parameter.
292
Private sector banks are found to be strong when it comes to parameters like Management efficiency and Earnings capacity which again speaks out loud the old saga of inefficiency of the public sector banks in comparison to private sector banks. However, in contradiction to that Kotak Mahindra Bank score the least in these two parameters whereas banks like BOI and to certain extent PNB, IDBI proves to be promising when it comes to their managements efficiency or their profitability.
293
CAMEL comparative analysis for Public & Private Sector Banks (Year-wise)
2004-'05 Banks
Total WAR Rank
2005-'06
Total WAR Rank
2006-'07
Total WAR Rank
2007-'08
Total WAR Rank
2008-'09
Total WAR Rank
Average of Total Rank WAR 67.07 65.76 60.17 63.42 69.30 60.12 67.09 70.15 71.11 62.97 5 6 9 7 3 10 4 2 1 8
52.85 44.93 51.90 63.30 66.64 53.53 55.45 66.05 63.74 62.18
8 10 9 4 1 7 6 2 3 5
60.44 54.70 60.88 69.37 72.88 59.13 60.58 67.25 70.99 72.85
8 10 6 4 1 9 7 5 3 2
69.32 64.97 64.10 69.61 64.37 61.45 67.21 78.19 74.64 61.22
4 6 8 3 7 9 5 1 2 10
70.66 70.90 61.33 62.88 65.45 61.86 73.22 71.95 72.85 65.99
5 4 10 8 7 9 1 3 2 6
68.34 70.70 58.27 57.79 74.44 59.64 67.04 65.86 69.13 57.80
4 2 8 10 1 7 5 6 3 9
294
Here, comparative analysis of CAMEL model has been done for public and private sector banks together based on Years. All the five parameters i.e. Capital Adequacy Ratios, Asset Quality Ratios, Management Efficiency Ratios, Earnings Capacity Ratios and Liquidity Ratios have been evaluated collectively for all the banks for a particular year based on the scores as mentioned earlier in the ranking methodology. Weighted Average Ratio is found out by multiplying all the ratios in any parameter with their respective scores. Weighted Average Ratio is found out individually for all parameters. Now, the Total Weighted Average Ratio is found out by making the sum total of WAR of all parameters. This is done for all years which results into derivation of Total WAR for all the banks. Based on this Total WAR banks are ranked with for all the years separately with the bank getting highest Total WAR being ranked 1st. Thereafter, Average of Total WAR is found out by making the sum total of multiplication of weightage assigned to each year with their respective Total WAR and dividing it by the total weightage. Lastly, a composite ranking is given to all the banks based on Average of Total WAR. In the year 2004-05, Punjab National Bank attained 1st rank and HDFC Bank is ranked 2nd. In the year 2005-06, Punjab National Bank attained 1st rank and Kotak Mahindra Bank is ranked 2nd. In the year 2006-07, HDFC Bank attained 1st rank and ICICI Bank is ranked 2nd. In the year 2007-08, Axis Bank attained 1st rank and ICICI Bank is ranked 2nd. In the year 2004-05, Punjab National Bank attained 1st rank and Bank of India is ranked 2nd. Overall ICIC Bank attained 1st rank and HDFC Bank is ranked 2nd. It can be seen that State Bank of India being Indias largest bank is ranked 10th which is quite surprising. However, if we look at the ranks of the individual years it was ranked 9th for 3 years and ranked 7th for other two years.
295
Fundamental and Technical Analysis of Indian Banking Sector Private sector banks are found to be strong amongst all for all years to a great extent.
However, Punjab National Bank seems to be a tough competitor as it ranked 1st for three years.
296
8. Conclusion
It has been witnessed in past few years that global turmoil that was caused due to Sub-prime Crisis in U.S., the banks were the foremost victim and especially the banks having significant global exposure. The competition was so stiff that every bank in order to increase their business was allowing advances on such liberal terms and conditions that anyone could opt for that. However, this was the global scenario in general but Indian banks showed their resistance in being part of such scenario by the efficiency of their operation, policies and procedures which do aim at increasing their business but not at the cost of the bank itself. Indian banks showed how sound they are even when all the banks across the world were passing by a critical situation and some of them even filing petition for bankruptcy. Banks of Indian origin usually are found to follow the conservative principles till date which have facilitated them in stabilizing their operations in the state of global slowdown and again walking on the path of development with not much difficulty. As can be derived from the analysis done, Indian banks seem to be quite exceptional when it comes to excellence in their area of operation. All the banks CAMEL analysis reveals an upward trend over the past five years which is a good indication. Not only the private sector banks but also the public sector banks are in the race. All the five parameters i.e. capital adequacy, asset quality, management efficiency, earnings capacity and liquidity are found to be positive for most of the banks. Also, the Z-score model which is a tool to analyze proximity to bankruptcy indicated that initially i.e. in 2004-05 many banks were in the distress or grey zone but as we look forward to 2008-09 the situation has become exactly the opposite. Moreover, the trend analysis for all the banks show that all the banks in order to enhance their turnover are deploying more assets by borrowing capital and are attracting more deposits to advance to the customers. However, net interest income which is a critical factor remains an area of concern for few of the banks. However, all these analysis tools are not the only means of measuring a banks performance. In modern consumer centric era, service quality has become the most vital factor in achieving success as far as there prevails monopolistic competition. Apart from that, all these tools of analysis tend to be of no use when unstable or unusual circumstances occur which may prove to be critical for a bank. No matter how sound a bank is, no matter how old a bank is, just one wrong decision and everything gets out of the way. If we take the case of Satyam, no one was even having a sigh of anything to happen the way it happened. When a company publishes its financials or annual report or quarterly results, it also attaches its 297
Fundamental and Technical Analysis of Indian Banking Sector credibility with it which makes us believe that no information can be as truthful as this is. But now there is also a question mark as to what extent all these information are viable and genuine for that matter. Thus, analysis help only to make believe ourselves that whether there is anything erroneous with the company or not which may not actually turn out to be. All these analysis proves to be insignificant and hopeless when faced with situation that is of Satyam. Only the senior management of any company is involved into integrities like this and knows what the truth is. Lastly to conclude it can be said that there are many tools available which help in analyzing a companys strength which is again subjective i.e. it differs from person to person but usually influence seems to be the only means as we look around which force people or magnetize them to develop liking towards a company or organization irrespective of what its offerings are, what is its credibility in the market and whether it is ethical in its operations or not.
298
Bibliography
Current Scenario (Indian Banking Sector) retrieved available at http://www.bharatbook. com/Market-Research-Reports/Report-on-Indian-Banking-Sector.html Evolution - retrieved available at http://en.wikipedia.org/wiki/Banking_in_India Role of RBI - retrieved available at http://finance.indiamart.com/investment_in_india /rbi.html Global Financial Crisis - retrieved available at http://mortgagesloans.suite101.com /article.cfm/the_start_of_the_global_financial_crisis_2008#ixzz0haKlFLSu Top Global Banks - retrieved available at http://www.bankersalmanac.com/addcon /infobank/bank-rankings.aspx Economy Analysis - retrieved available at http://indiabudget.nic.in/es2009-10/esmain.htm
CAMEL Analysis - retrieved available at http://www.finance30.com/forum/topics/camelanalysis
Z-score Model - retrieved available at http://en.wikipedia.org/wiki/Z-Score_Financial_ Analysis_Tool Technical Analysis - retrieved available at http://www.icharts.in/charts.html Annual Reports of Axis Bank - retrieved available at http://www.axisbank.com/ shareholderscorner/Share-Holders-Corner.asp Annual Reports of Bank of Baroda - retrieved available at http://www.bankofbaroda.com/ fin/fin_keyfinratios.asp Annual Reports of Bank of India - retrieved available at http://www.bankofindia.com/ Investors.aspx Annual Reports of Canara Bank - retrieved available at http://www.canarabank.com/ English/Scripts/ShareholderInformation.aspx Annual Reports of HDFC Bank - retrieved available at http://www.hdfcbank.com/ aboutus/default.htm
299
Annual Reports of ICICI Bank - retrieved available at http://www.icicibank.com/ aboutus/invest-relations.html Annual Reports of IDBI Bank - retrieved available at http://www.idbi.com/idbi/financials. asp Annual Reports of Kotak Mahindra Bank - retrieved available at http://www.kotak.com/ Kotak_GroupSite/investor/overview.htm Annual Reports of Punjab National Bank - retrieved available at http://www.pnbindia.in/# Annual Reports of SBI - retrieved available at http://www.statebankofindia.com/user.htm
300

Fundamental ND Technical Analysis of Indian Banking Sector

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Fundamental and Technical Analysis of Indian Banking Sector

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

1. Introduction to Indian Banking Sector

become highly customer slow moving public

fast track approach. The

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

Year 1913 1914 1915 1916 1917 1918

No. of Banks that Failed 12 42 11 13 9 7

Authorised Capital ( Rs. Lakhs) 274 710 56 231 76 209

Paid-up Capital (Rs. Lakhs) 35 109 5 4 25 1

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

banks but also received more.

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

Players in the Indian Banking Sector

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

Public Sector Banks

SBI & Associates

Private Sector Banks Foreign Banks

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

Role of Reserve Bank of India

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

Reforms & Developments

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector

N. R. Institute of Business Management

Fundamental and Technical Analysis of Indian Banking Sector