Beruflich Dokumente
Kultur Dokumente
Darun v
da runvd@gmail.com
A PROJECT REPORT
SUBMITTED BY
DARUN V
Reg.No:12351034
Submitted to Pondicherry University in partialfulfillment of the requirements for the award of the
Post Graduate degree in Master of Commerce (Business Finance)
Dr.D. LAZAR
ASSOCIATE PROFESSOR
VERS
DEPARTMENT OF COMMERCE
SCHOOL OF MANAGEMENT
PONDICHERRY UNIVERSITY
NOVEMBER-2013
STATEMENT OF THE PROBLEM
The study of fundamental analysis of banking industry in India Infoline ltd is to assess the performance of banking
industry and select the most performing banking companies through the analysis of macro and micro variables that affects
the performance of particular company.
To analyze economy by using some economic indicators like GDP, and inflation rate etc to find out the best time
for investment and selection of industry performing well in economy.
To analyze industry for assessing the strength and find out best performing companies. To carry out analysis
of companies to select particular company performing well for investment.
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To provide investment decisions
PERIOD OF STUDY
The period of the study is 5 years i.e. (2009-2013). Company 5 years data has been taken
for the analysis
RESEARCH METHODOLOGY
DATA SOURCES
Secondary data has been collected from various sources to analyze the fundamentals.
Following are the Sources.
RBI
Annual reports
CMIE Data base
Bloomberg data base
NSE
World bank
Money control
Other websites
TOOLS FOR ANALYSIS
Unlike any other manufacturing or service company, a bank' s accounts are presented in a different manner (as per
banking regulations). The analysis of a bank account differs significantly from any other company. The key operating and
financial ratios, which one would normally evaluate before investing in company, may not hold true for a bank.
The followings are the most popular tools for the fundamental analysis of Banks or to evaluate performance of B anks.
Net interest margin (NIM)
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Credit to deposit
Operating profit margin
Non-performing asset ratio(NPA)
Cost to income ratio
Earnings per share(EPS)
Dividend per share (DPS)
Dividend payout ratio
Price eamings ratio
For banks, interest expenses are their main costs (similar to manufacturing cost for
companies) and interest income is their main revenue source. The difference between interest
income and expense is known as net interest income. It is the income, which the bank earns from
its core business of lending. Net interest margin is the net interest income earned by the bank on
its average earning assets. These assets comprises of advances, investments, balance with the
RBI and money at call.
NTERESTINCOME
INTERESTEXPENSE
NIM
EARNING ASSETS
The ratio is indicative of the percentage of funds lent by the bank out of the total amount
Raised through deposits. Higher ratio reflects ability of the bank to make optimal use of the
available resources. The point to note here is that loans given by bank would also include its
investments in debentures, bonds and commercial papers of the companies (these are generally
included as a part of investments in the balance sheet).
CREDIT
CREDIT TO DEPOSIT
ADVANCES
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OPM 100
TOTAL INTEREST INCOME
NPA RATIO
The 'net non-performing assets to loans (advances) ratio' is used as a measure of the
overall quality of the bank' s loan book Net NPAs are calculated by reducing cumulative balance
of provisions outstanding at a period end from gross NPAs. Higher ratio reflects rising bad
quality of loans.
The portion of a company's profit allocated to each outstanding share of common stock.
Earnings per share serve as an indicator of a company's profitability.
SUM OFDIVIDEND
DPS
NUMBEROF SHARES
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Having a growing dividend per share can be a sign that the company's growth can be sustained.
D PS
DIVIDEND PAY OUT RATIO
EPS
A reduction in dividends paid is looked poorly upon by investors, and the stock price usually
depreciates as investors seek other dividend-paying stocks. A stable dividend payout ratio
indicates a solid dividend policy by the company's board of directors.
INTRINSIC VALUE
P/E multiplier can be estimated by taking into consideration several factors like (a) past
performance of the company, (b) expectation about future, (c) goodwill of company etc. Here in
this analysis P/E multiplier is calculated on the basis of past performance of company, ie average
of past five years P/E ratio. And estimated EPS also calculated on the basis of past five year EPS
ie average of past five years EPS. Thus
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INTRINSIC VALUE EXPECTED EPS * PRICE EARNING MULTIPLIER
TECHNIQUES
The technique used in the analysis of the company is excel sheets, graphs and tables of
Financial statement etc.
LIMITATIONS
For study only following limited variables has studied such as GDP, CAD, Foreign
exchange reserve, foreign investment inflow, inflation, agricultural production, industrial
production index, lending rate, employment, §orial contribution to GDP.
Industrial analysis is limited to quantitative factors and excluded qualitative factors like
political factors, product line, innovations etc.
Fundamental analysis is a time consuming analysis, efficiency of the analysis is totally
depends up on the availability of time. The analysis here conducted with limited period of
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THEORETICAL FRAMEWORK
FUNDAMENTAL ANALYSIS
ANALYSIS
The examination and evaluation of the relevant information to select the best course of
action from among various altematives. The methods used to analyze securities and make
investment decisions fall into two very broad categories: fundamental analysis and technical
analysis. Fundamental analysis involves analyzing the characteristics of a company in order to
estimate its value. Technical analysis takes a completely different approach; it doesn't care one
bit about the "value" of a company or a commodity. Technicians (sometimes called chartists) are
only interested in the price movement in the market
TECHNICAL ANALYSIS
FUNDAMENTAL ANALYSIS
Fundamental analysis is a stock valuation methodology that uses financial and economic
analysis to envisage the movement of stock prices. The fundamental data that is analyzed could
include a company's financial reports and non-financial information such as estimates of its
growth, demand for products sold by the company, industry comparisons, economy-wide
changes, changes in govemment policies etc.
The outcome of fundamental analysis is a value (or a range of values) of the stock of the
Company called its 'intrinsic value' (often called 'price target' in fundamental analysts'
parlance).To a fundamental investor, the market price of a stock tends to revert towards its
intrinsic value. If the intrinsic value of a stock is above the current market price, the investor
would purchase the stock because he believes that the stock price would rise and move towards
its intrinsic value. If the intrinsic value of a stock is below the market price, the investor would
sell the stock because he believes that the stock price is going to fall and come closer to its
intrinsic value.
To find the intrinsic value of a company, the fundamental analyst initially takes a
topdown view of the economic environment; the current and future overall health of the economy
as a whole. After the analysis of the macro-economy, the next step is to analyze the industry
environment which the firm is operating in. One should analyze all the factors that give the firm
a competitive advantage in its sector, such as, management experience, history of performance,
growth potential, low cost of production, brand name etc. In simple term fundamental analysis is
the analysis of Economy, Industry and Company.
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TWO APPROACHES OF
1. Top-down approach
2. Bottom-up approach
I .Top-down approach: In this approach, an analyst investigates both international and national
economic indicators, such as GDP growth rates, energy prices, inflation and interest rates. The
search for the best security then trickles down to the analysis of total sales, price levels and
foreign competition in a sector in order to identify the best business in the sector.
2. Bottom-up approach: In this approach, an analyst starts the search with specific businesses,
irrespective of their industry/region.
5. Valuation
The valuation of any security is done through the discounted cash flow (DCF) model, which
takes into consideration:
3. Debt, which is calculated by using the debt to equity ratio and the current ratio (current
assets/cunent liabilities)
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FUNDAMENTAL ANALYSIS
WHY ONLY
Long-term Trends
Fundamental analysis is good for long-term investments based on long-term trends, very
long-term. The ability to identify and predict long-term economic, demographic, technological or
consumer trends can benefit patient investors who pick the right industry groups or companies.
Value Spotting
Sound fundamental analysis will help identify companies that represent a good value. Some of
the most legendary investors think long-term and value. Graham and Dodd, Warren Buffett and
John Neff are seen as the champions of value investing. Fundamental analysis can help uncover
companies with valuable assets, a strong balance sheet, stable eamings, and staying power
Business insights
One of the most obvious, but less tangible, rewards of fundamental analysis is the
development of a thorough understanding of the business. After such pains taking research and
analysis, an investor will be familiar with the key revenue and profit drivers behind a company.
Earnings and earnings expectations can be potent drivers of equity prices. Even some technicians
will agree to that.
A good understanding can help investors avoid companies that are prone to shortfalls and
identify those that continue to deliver. In addition to understanding the business, fundamental
analysis allows investors to develop an understanding of the key value drivers and companies
within an industry. A stock's price is heavily influenced by its industry group. By studying these
groups, investors can better position themselves to identify opportunities that are high-risk (tech),
low-risk (utilities), growth oriented (computer), value driven (oil), non-cyclical (consumer
staples), cyclical (transportation) or income-oriented (high yield).
USERS OF
Investors
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Brokers
Financial institutions Competitors
COMPONENTS OF FUNDAMENTAL ANALYSIS
A. ECONOMIC ANALYSIS
B. INDUSTRY ANALYSIS C. COMPANY
ANALYSIS
A-ECONOMIC ANALYSIS
The economic analysis aims at determining if the economic climate is conclusive and is
capable of encouraging the growth of business sector, especially the capital market. When the
economy expands, most industry groups and companies are expected to benefit and grow. When
the economy declines, most sectors and companies usually face survival problems. Hence, to
predict share prices, an investor has to spend time exploring the forces operating in overall
economy. Exploring the global economy is essential in an intemational investment setting. The
selection of country for investment has to focus itself to examination of a national economic
scenario. It is important to predict the direction of the national economy because economic
activity affects corporate profits, not necessarily through tax policies but also through foreign
policies and administrative procedures.
It is domestic production because it includes only goods and services produced within the
country.
2. Inflation
Inflation can be defined as a trend of rising prices caused by demand exceeding supply. Over
time, even a small annual increase in prices of say I % will tend to influence the purchasing
power of the nation. In others word, if prices rise steadily, after a number of years, consumers
will be able to buy only fewer goods and services assuming income level does not change with
inflation.
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FUNDAMENTAL ANALYSIS
3. Interest rate
Interest rate is the price of credit. It is the percentage fee received or paid by individual or
organization when they lend and borrow money. In general, increases in interest rate, whether
caused by inflation, government policy, rising risk premium, or other factors, will lead to
reduced borrowing and economic slowdown.
4. International influences
Rapid growth in overseas market can create surges in demand for exports, leading to growth
in export sensitive industries and overall GDP. In contrast, the erection of trade barriers, quotas,
currency restrictions can hinder the free flow of currency, goods, and services, and harm the
export sector of an economy.
5. Fiscal policy
The fiscal policy of the government involves the collection and spending of revenue. In
particular, fiscal policy refers to the efforts by the government to stimulate the economic directly,
through spending.
6. Monsoon
Agriculture forms a very important sector of the Indian economy. Rise in the agricultural
income will cause increase in the demand for industrial products and services and the
performance of agriculture is depends up on monsoon. So the progress and adequacy of monsoon
becomes a matter of great concern for an investor in the Indian contest.
7. Political stability
A stable political environment is necessary for steady and balanced growth. Stable long term
political policies are good for the performance of economy
8. Exchange rates
The performance and profitability of industries and companies that are major importers or
exporters are considerably affected by the exchange rates of rupee against major currencies. A
depreciation of rupee improve the competitive position of Indian products in the foreign market,
thereby stimulating exports. But it would also make imports more expensive. A company
depending heavily on imports may find devaluation of rupee affecting its profitability adversely.
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9. Monetary policy and Liquidity
10. International influences
11. Fiscal policy 12. Budget 13. Balance of payment 14. Domestic legislation 15.
Unemployment
16. Infrastructural growth etc.
B-INDUSTRY ANALYSIS
An industry analysis helps inform business managers about the viability of their current
strategy and on where to focus a business among its competitors in an industry. The analysis
examines factors such as competition and the extemal business environment, substitute products,
management preferences, buyers and suppliers. Industry analysis involves reviewing the
economic, political and market factors that influence the way the industry develops. Major
factors can include the power wielded by suppliers and buyers, the condition of competitors. And
the likelihood of new market entrants
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2. INDUSTRY CHARACTERISTICS
Excess supply reduces the profitability of industry through a decline in unit price realization.
On the contrary insufficient supply tends to improve the profitability through higher unit price
realization. Therefore the gap between demand and supply in an industry is a fairly good
indicator of its shon term or medium term prospects.
c) Permanence
d) Labour conditions
e) Attitude of government
Government may encourage the growth of certain industries and assist such industries
through favorable legislation
g) Cost structure
Cost structure is the proportion of fixed cost to variable cost. The higher the fixed cost
component, higher is the sales volume necessary to achieve breakeven point. Conversely lower
the fixed cost proportion to variable cost, lower would be the breakeven point.
h) Etc.
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CONCLUSION OF INDUSTRY ANALYSIS
The main aim is to identify such industries in which
Chance of growth
Chance of high profitability
Low risk if investment is made
C-COMPANY ANALYSIS
Every industry has more than one company therefore this phase scans the companies of those
industries which have been selected in the Industry analysis. The purpose of this phase is to
identify the best company in the industry selected. This is done with the help of the
following factors
2) Management quality
Investors prefer to have highly skilled management in company
3) Brand image
4) Raw materials 5) Labour conition 6) Capacity utilisation
Ratio analysis
A tool used by individuals to conduct a quantitative analysis of information in a company's
financial statements. Ratios are calculated from current year numbers and are then compared to
previous years, other companies, the industry, or even the economy to judge the performance of
the company. Ratio analysis is predominately used by proponents of fundamental analysis. There
are many ratios that can be calculated
From the financial statements pertaining to a company's performance, activity, financing and
liquidity. Some common ratios include the price-earnings ratio, debt-equity ratio, earnings per
share, asset turnover and working capital.
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ROA
Return on assets, which, offering a different take on management's effectiveness reveals
how much profit a company earns for every dollar of its assets. Assets include things like cash in
the bank, accounts receivable, property, equipment, inventory and furniture. ROA is calculated
like this.
ROI
Return on Investment is one of several commonly used approaches for evaluating the
financial consequences of business investments, decisions, or actions. ROI analysis compares the
magnitude and timing of investment gains directly with the magnitude and timing of investment
costs. A high ROI means that investment gains compare favorably to investment costs:
GANINS INVESTMENTCOST
ROI
INVESTMENT COST
ROE
Of all the fundamental ratios that investors look at, one of the most important is return on
equity. It's a basic test of how effectively a company's management uses investors' money - ROE
shows whether management is growing the company's value at an acceptable rate. ROE is
calculated as
ANNUAL NETINCOME
ROE
NUMBER OF EQUITY SHARE HOLDERS
EPS
The portion of a company's profit allocated to each outstanding share of common stock.
Earnings per share serve as an indicator of a company's profitability.
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DPS
The the sum of declared dividends for every ordinary share issued. Dividend per share
(DPS) is the total dividends paid out over an entire year (including interim dividends but not
including special dividends) divided by the number of outstanding ordinary shares issued.
TOTAL DIVIDEND
DPS
NUMBEROF SHARES
DIVIDEND YEILD
Financial ratio that shows how much a company pays out in dividends each year relative
to its share price. In the absence of any capital gains, the dividend yield is the return on
investment for a stock. Dividend yield is calculated as follows:
COMPANY PROFILE
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NFL (INDIA INFOLINE LTD)
IIFL is a brokerage firm dealing in retail brokerage, institutional brokerage, consumer
lending, institutional lending, realty and wealth management. Was founded in 1995 by Mr.
Nirmal Jain (Chairman) as an independent business research and information provider. It
gradually evolved into a financial services solution provider. IIFL has a network of 3000
business locations spread over more than 500 cities and towns across India.
IIFL is listed on the Bombay Stock Exchange (BSE) and the National stock exchange of
India (NSE) for securities trading; with MCX, NCDEX and DGCX for commodities trading; and
with CDSL and NSDL as depository participants.[citation needed] IIFL is registered as a
Category I merchant banker and is a SEBI registered portfolio manager.
Equities
India infoline provided the prospect of researched investing to its clients.reserch for retail
invester did not exist prior to India infoline. India infoline liveraged technology to bring the
convenience of trading to the investor's location of preference through computerized access. IIFL
made it possible for clients to view transaction cost and ledger updates in real time
Commodities
IIFL was among the first offer the facility of commodities trading in India's young
commodities market (MCX). Average monthly turnover on the commodity exchanges increased
from Rs 0.34 bn to 20.02 bn.
IIFL offers commodities trading to its customers vide its membership of the MCX and the
NCDEX. Our domain knowledge and data based on in depth research of complex paradigms of
commodity kinetics, offers our customers a unique insight into behavioral patterns of these
markets. Our customers are ideally positioned to make informed investment decisions with a
high probability of success.
Insu rance
IIFL entered the insurance distribution business in 2000 as ICICI Prudential Life
Insurance Co. Ltd's corporate agent. Later, it became an Insurance broker in October 2008 in line
with its strategy to have an 'open architecture' model. The Company now distributes products of
major insurance companies through its subsidiary India Infoline Insurance Brokers Ltd.
Customers can choose from a wide bouquet of products from several insurance companies
including Max New York Life Insurance, MetLife, Reliance Life Insurance, Bajaj Allianz Life,
Birla Sunlife, Life Insurance Corporation, Kotak Life Insurance and others.
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Wealth Management Service
IIFL offers private wealth advisory services to high-net-worth individuals (HNI) and
corporate clients under the 'IIFL Private Wealth' brand. IIFL Private Wealth is managed by a
qualified team of MBAs from 11Ms and premier institutes with relevant industry experience. The
team advises clients across asset classes like sovereign and quasi-sovereign debt, corporate and
collateralised debt, direct equity, ETFs and mutual funds, third party PMS, derivative strategies,
real estate and private equity. It has developed innovative products structured on the fixed
income side. It also has tied up with Interactive Brokers LLC to strengthen its execution platform
and provide investors with a global investment platform.
Investment Banking
IIFL's investment banking division was launched in 2006. The business leverages upon its
strength of research and placement capabilities of the institutional and retail sales teams. Our
experienced investment banking team possesses the skill-set to manage all kinds of investment
banking transactions. Our close interaction with investors as well as corporates helps us
understand and offer tailor-made solutions to fulfill requirements. The Company possesses strong
placement capabilities across institutional, HNI and retail investors. This makes it possible for
the team to place large issues with marquee investors.
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The Company identified the potential of the Internet to cater to a mass retail segment and
transformed its business model from providing information services to institutional customers to
retail customers. Hence IIL launched its Intemet portal, www.indiainfoline.com in May of the
year 1999 and started providing news and market information, independent research, interviews
with business leaders and other specialized features. IIL was convened into a Public Limited
Company in 28th April of the year 2000 and the name of the Company was changed to Probity
Research & Services Limited. The name of the company was changed to India Infoline.com
Limited in 23rd May of the year 2000. During 23rd March of the year 2001, again the name was
changed as India Infoline Limited. IIL acquired 100% shares of Agri Marketing Services Limited
during March of the year 2000. In the year 2000, IIL leveraged its position as a provider of
financial information and analysis by diversifying into transactional services, primarily for online
trading in shares and securities and online as well as offline distribution of personal financial
products, like mutual funds and RBI Bonds. These activities are carried on through the wholly
owned subsidiaries. The broking service was launched under the brand name of 5paisa through
our subsidiary, India Infoline Securities Private Limited and www.5paisa.com, the e-broking
portal, was launched for online trading in June of the year 2000. It combined competitive
brokerage rates and research, supported by Intemet technology. Besides investment advice from
an experienced team of research analysts, also offer real time stock quotes, market news and
price charts with multiple tools for technical analysis.
In December of the year 2000, India Infoline Insurance Services Limited (subsidiary)
became a corporate agent for ICICI Prudential Life Insurance Company Limited. In the year
2004, the company launched commodities broking through its subsidiary India Infoline
Commodities Private Limited. Also received a license for Portfolio Management Services from
SEBI for broking subsidiary. During the year 2006, the company received the requisite prior
approval from The Securities and Exchange Board of India for its proposed merger of India
Infoline Securities Private Limited (IISPL), a wholly owned subsidiary with itself. It had earlier
received in-principle approval from National Stock Exchange and The Stock Exchange, Mumbai.
In January of the year 2007, the company entered into an alliance with Bank of Baroda for
providing Brokerage Platform, besides research and analysis services to the bank's customers.
India Infoline awarded the Best Broker in India' by Finance Asia. This was a result of Finance
Asia's annual look at the best financial services firms in each country around Asia for the period
from June 2007 to May 2008. During March of the year 2008, India Infoline's institutional
broking arm IIFL, partnered with Auerbach Grayson & Company, Inc., a New York-based
brokerage firm to offer US investors premium access to investing in India's capital markets.
Auerbach Grayson specializes in providing global trade execution and exclusive research to U .S.
institutional investors. As of July 2008, the company received the in-principle approval for the
insurance broking licence from IRDA
VISION
To become the most respected company in the financial services space in india
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MISSION
To become a full fledged financial services company known for its quality of
advice,personalized services and cutting edge technology
SCHOLARSHIPS
H Nemkumar and Nirmal Jain Scholarship (May 2012) India has a large number of gifted and
deserving students who are unable to avail of a high-quality learning experience from reputed
institutions in India or abroad due to financial or other constraints. Young India Fellows reaches
out to such students. The YIF scholarships have been made possible by generous donations by a
stellar set of individuals including Mr. Nirmal Jain and Mr. H Nemkumar on behalf of IIFL
Foundation.
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Offshore Asset Management Deepesh Pandey
Information Technology uv
Realty Jain
Mr A K Purwar kars
Mr R Venkataraman on
Mr Nilesh Vikamsey B
jee
H.Nemkumar
Bal
Nipun Goel
aji
Pratima Ram
Rag
Karan
ha
Bhagat
Bharat
Parajia
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# 1997-Launched research products of leading Indian companies, key sectors and the
economy Client included leading Flls, banks and companies 1999-
Launchedwww.indiainfoline.com
# 2000-Launched online trading through www.5paisa.com Started distribution of life
insurance and mutual fund
2003-Launched proprietary trading platfonn Trader Terminal for retail customers #
2004-Acquired commodities broking license Launched Portfolio Management Service #
2005-Maiden IPO and listed on NSE, BSE
2006-Acquired membership of DGCX Commenced the lending business
# 2007-Commenced institutional equities business under IIFL Formed Singapore subsidiary,
IIFL (Asia) Pten Ltd
2008-Launched IIFL Wealth Transitioned to insurance broking model
# 2009-Acquired registration for Housing Finance SEBI in-principle approval for Mutual
Fund Obtained Venture Capital licence.
2010-Received in-principle approval for membership of the Singapore Stock Exchange
Received membership of the Colombo Stock Exchange
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CORPORATE STRUCTURE
IIFL has a network of over 2,500 business locations spread over more than 500 cities and towns
across India facilitates the smooth acquisition and servicing of a large customer base. All our
offices are connected with the corporate office in Mumbai with cutting edge networking
technology. The group caters to a customer base of about a million customers, over a variety of
mediums viz. online, over the phone and at our branches
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INDIAN BANKING SECrOR
Without a sound and effective banking system in India it cannot have a healthy economy. The
banking system of India should not only be hassle free but it should be able to meet new
challenges posed by the technology and any other external and internal factors. credit. It is no
longer confined to only metropolitans or cosmopolitans in India; in fact, Indian banking system
has reached even to the remote corners of the country. This is one of the main reasons of India's
growth process. The government's regular policy for Indian bank since 1969 has paid rich
dividends with the nationalization of 14 major private banks of India. Not long ago, an account
holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own
money. Today, he has a choice. Gone are days when the most efficient bank transferred money
from one branch to other in two days. Now it is simple as instant messaging or dial a pizza.
Money has become the order of the day.
POST-INDEPENDENCE
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 may be opened without a license from the RBI, and no two banks could have
common directors.
LIBERALIZATION
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. In the early 1990s the
then Narsimha Rao government embarked on a policy of liberalization and gave licenses to a small
number of private banks, which came to be known as New Generation tech savvy banks, which
ilW*luded banks such as Global Trust Bank (the first of such new generation banks to be set up)
which later amalgamated with Oriental Bank of Commerce, UTI Bank (now re-named as Axis
Bank), ICICI Bank and HDFC Bank.
CURRENT SITUATION
Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that
is with the Government of India holding a stake), 29 private banks (these do not have government
stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks. They
have a combined network of over 67 branches and 17 ATMs. According to a report by ICRA
Limited, a rating agency, the public sector banks hold over 78 percent of total assets of the
banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively. Over
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the last four years, India"s economy has been on a high growth trajectory, creating unprecedented
opportunities for its banking sector. Most banks have enjoyed high growth and their valuations
have appreciated significantly during this period. Looking ahead, the mostpertinent issue is how
well the banking sector is positioned to cater to continued growth. A holistic assessment of the
banking sector is possible only by looking at the roles and actions of banks, their core capabilities
and their ability to meet systemic objectives, which include increasing shareholder value,
fostering financial inclusion, contributing to GDP growth, efficiently managing intermediation
cost, and effectively allocating capital and maintaining system stability.
The banking institutions in the organized sector, commercial banks are the oldest institutions,
some them having their genesis in the nineteenth century. Initially they were set up in large
numbers, mostly as corporate bodies with shareholding with private individuals. Today 27 banks
constitute a strong Public Sector in Indian Commercial Banking. Commercial Banks operating in
India fall under different sub categories on the basis of their ownership and control over
management;
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banks would be 5 crores with promoters contribution at least Rs. 2 crores. They are to be set up in
district towns and the area of their operations would be limited to a maximum of 3 districts. At
present, four local area banks are functional, one each in Punjab, Gujarat, Maharashtra and
Andhra Pradesh.
FOREIGN BANKS
Foreign commercial banks are the branches in India of the joint stock banks incorporated abroad.
There number was 38 as on 31.()3.2()()9.
'Scheduled banks in India" means the State Bank of India constituted under the State Bank of
India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary
Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the
Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under
section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of
1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of
India Act, 1934 (2 of 1934), but does not include a co-operative bank". "Nonscheduled bank in
India" means a banking company as defined in clause (c) of section 5 of the Banking Regulation
Act, 1949 (10 of 1949), which is not a scheduled bank".
COOPERATIVE BANKS
Besides the commercial banks, there exists in India another set of banking institutions
called cooperative credit institutions. These have been made in existence in India since long.
They undertake the business of banking both in urban and rural areas on the principle of
cooperation. They have served a useful role in spreading the banking habit throughout the
country. Yet, there financial position is not sound and a majority of cooperative banks has yet to
achieve financial viability on a sustainable basis. The cooperative banks have been set up under
various Cooperative Societies Acts enacted by State Governments. Hence the State Governments
regulate these banks. In 1966, need was felt to regulate their activities to ensure their soundness
and to protect the interests of depositors According to the RBI in March 2009, number of all
Scheduled Commercial Banks (SCBs) was 171 of which, 86 were Regional Rural Banks and the
27
number of Non-Scheduled Commercial Banks including Local Area Banks stood at 5. Taking
into account all banks in India, there are overall 56,640 branches or offices, 893,356 employees
and 27,088 ATMs. Public sector banks made up a large chunk of the infrastructure, with 87.7 per
cent of all offices, 82 per cent of staff and 60.3 per cent of all automated teller machines (ATMs)
28
ANALYSIS
29
ECONOMIC ANALYSIS
30
The independence-era Indian economy (from 1947 to 1991) was based on a mixed
economy combining features of capitalism and socialism, And failed to take advantage of the
post-war expansion of trade. In 1991, India adopted liberal and free-market principles and
liberalised its economy to international trade under the guidance of Former Finance minister
Manmohan Singh under the Prime Ministry of P. V. Narasimha Rao, prime minister from 1991 to
1996, who had eliminated Licence Raj, a pre- and post-British era mechanism of strict
government controls on setting up new industry. After more fundamental reforms since 1991 and
their renewal in the 20()()s, India has progressed towards a free market economy.
The economy of India is the tenth-largest in the world by nominal GDPand the third-largest by
purchasing power parity (PPP). The country is one of the G-2() major economies and a member
of BRICS. On a per-capita-income basis, India ranked 141st by nominal GDP and 130th by GDP
(PPP) in 2012. The economy slowed to around 5.0% for the 201213 fiscal year compared with
6.2% in the previous fiscal, On August 28, 2013 the Indian rupee hit an all time low of 68.80
against the US dollar. In order to control the fall in rupee, the government introduced capital
controls on outward investment by both corporates and individuals. the growth rate has nearly
halved in just three years. GDP growth rose marginally to 4.8% during the quarter through March
2013, from about 4.7% in the previous quarter. The government has forecast a growth rate of
for the year 201314, India suffered a very high fiscal deficit of US$ 88 billion
(4.8% of GDP) in the year 201213. The Indian Government aims to cut the fiscal deficit to
US$ 70 billion or 3.7% of GDP by 2013-14.
India is the tenth-largest in the world by nominal GDP. India's GDP grew by 9.3% in 201011;
thus, the growth rate has nearly halved in just three years. GDP growth rose marginally to 4.8%
during the quarter through March 2013, from about 4.7% in the previous quarter. The
government has forecast a growth rate of for the year 201314, The GDP value of
India represents 2.97 percent of the world economy, GDP in India is reported by the The World
Bank Group. The gross domestic product (GDP) measures of national income and output for a
given country's economy.GDP of india at Factor cost is Rs 55054.37 Billion in the year 2012-13
It indicate future growth of GDP,which is shown by the following Diagram.
GDP AT FACTOR COST(CONSTANT
PRICE) (RUPEES IN BILLION)
6000
0
5000
0
40000
31
30000
20000
10000
SOURCE:RBI
SOURCE:RBI
32
GDP RANKING
India is the largest Economy in the world on the basis of nominal GDP according to the
record of World bank. And india represent 2.97 percentage of word economy GDP.US is the
largest contributor of world Economy GDP Which amounts to 15,684, 800 Million US Dollar
and in case of India which is amounts tol, 841,717 Million US Dollar. Following Chart showing
the ranking of countries according to GDP contribution on 2012.
SOURCE:WORLD BANK
Acoording to the Ministry of Finance Economic reforms introduced two decades ago
would make the country with the third largest GDP in the worldby 2025.1ndia is now an
attractive FDI destination welcoming both trade and technology flows. The Prime Minister's
Economic Advisory Council (PMEAC) - the government's topmost thinktank - on Friday cut its
growth forecast for India in 2013-14 to 5.3%, just above last year's decade-low 5%
expansion.recent expansion of the automobile sector and pick-up in exports would have a
positive impact on the manufacturing sector. "Taking these factors into account, the forecast
growth rate appears reasonable.the farm sector would post a 4.9% growth, which would aid
overall expansion. The Indian economy, Asia's third-largest, grew 4.4% in the June quarter.
Monetary policy of Central Bank under the supervision of new Governer Raghuram
Rajan And fiscal policies of Government gives hope to the indian economy to become worlds 3rd
largest economy.
33
TREND OF GDP
GDP of India shows a possitive Trend. Following is the chart shows the Trend line of
India's GDP on the basis of past 25 years..
60000
50000
40000
30000 10524e006,tsx
20000
1000
0
SOURCE:RBI
The current account is one of the two primary components of the balance of payments,
the other being capital account.is one of two major measures of the nature of a country's foreign
trade.A current account surplus increases a country's net foreign assets by the corresponding
amount, and a current account deficit does the reverse.
India's growing oil import bill is seen as the main driver behind the large current account
deficit.Oil imports account for 34 per cent of the total import bill.lndia, which imported crude oil
worth USD 144.3 billion in 2012-13.
After 2003-04 India's CCurrent Account Deficit start to fall and In 2012-13 Current Account
Deficit shows -88163 USD Million in the place of -78155 USD Million in
34
2003-04 2004-05
-20000
-40000
-60000
-80000
-100000
SOURCE:RBI
The upto date policies taken by RBI and Central Govt gives hopes to india's BOP.Indiacurb oil
importsto reduce the dollar demand and shore up the rupee on september 2013, And place
restrictions on gold imports.RBI sells Dollar directly to state oil companies is another measure
possitively influenced the Economy.
In the recent publication of Ministry of Commerce & Industry states a rise in export to 11.2% and
fall in import to 18.1% as gap shrinks to two-and-a-half-year low of $6.76 billion in September
2013. Lower import of Gold and Crude oil helped pare the deficit to well below August's figure
of $10.9 billion. gold imports have sharply compressed in the months of July, August and
September,come down to about 65 or 70 tonnes.
The chart given bellow showing a possitive trend of India 's Forex reserve. During
201112 Forex reserve was 12832 USD Million and it fall to -3826 USD Million in 2012-13. The
chart showing 10 years movement of india' s Forex reserve. Financial year 2007-08 shows lowest
forex reserve for the 10 years and compared to that the reserve comes to possitive.
India Foreign Exchange Reserves averaged 5008.66 INR Billion from 1990 until 2013,
reaching an all time high of 16275.30 INR Billion in September of 2013 and a record low of
35
23.86 INR Billion in June of 1991.Foreign Exchange Reserves in India decreased to 15309.80
INR Billion in October of 2013 from 16275.30 INR Billion in September of 2013.
The policies and measures of Central government and RBI grately influenced to the forex
reserve.
20000
-20000
-40000
-60000
-80000
-100000 -92164
SOURCE:RBI
FOREIGNINVESTMENT INFLOW
It is the sum of equity capital, reinvestment of earnings, other long-term capital, and
short-term capital as shown in the balance of payments.The chart shown bellow shows a possitive
movement of Foreign investment inflow over 10 years.
36
FOREIGN INVESTMENT INFLOW
(US $ MILLION)
60000
50000
40000
30000
FOREIGN INVESTMENT
INFLOW
20000
10000 Linear (FOREIGN INVESTMENT
INFLOW)
SOURCE:RBI
INFLATION
The inflation rate in India was recorded at 6.46 percent in September of 2013. Inflation Rate in
India is reported by the Ministry of Commerce and Industry, India. India Inflation Rate averaged
7.72 Percent from 1969 until 2013, reaching an all time high of 34.68 Percent in September of
1974 and a record low of -11.31 Percent in May of 1976. In India, the wholesale price index
(WPI) is the main measure of inflation.
AGRICULTURAL PRODUCTION
India ranks second worldwide in farm output. Agriculture and allied sectors like forestry
and fisheries accounted for 16.6% of the GDP in 2009, about 50% of the total
workforce.Agriculture production in India plays a significant role in the overall socio-economic
Development of the country.lndia receives an average annual rainfall of 1,208 millimetres (47.6
in) and a total annual precipitation of 4000 billion cubic metres, with the total utilisable water
resources, including surface and groundwater, amounting to 1123 billion cubic metres.lndia is the
37
largest producer in the world of milk, jute and pulses, and also has the world's second largest
cattle population with 175 million animals in 2008.1t is the second largest producer of rice,
wheat, sugarcane, cotton and groundnuts, as well as the second largest fruit and vegetable
producer, accounting for 10.9% and 8.6% of the world fruit and vegetable production
respectively.lndia is also the second largest producer and the largest consumer of silk in the
world, producing 77,000 million tons in 2005.1ndian states Uttar Pradesh, Punjab, Haryana,
Madhya Pradesh, Andhra Pradesh, Bihar, West Bengal, Gujarat and Maharashtra are key
agricultural contributing states of India.
Following is the chart showing total agricultural production of india over 10 years
includes Foodgrains and Commercial Crops.Chart showing a possitive trend over total griculture
production.Production increased to 1805.7 Million tonnes in the Financial year 2012-13 from
1792.19 Million tonnes Production in 2011-12. A country mostly depends up on Agricultural
production like india has greatest influence in economic development of that particular country.
SOURCE:RBI
INDUSTRIAL PRODUCTION
Index of industrial production released by Central Statistical Organisation is the main
source of industrial production statistics .lndian Index of Industrial production(IIP) focus on
sectors like mining, electricity and manufacturing.
India Industrial Production averaged 6.95 Percent from 1994 until 2013.1ndustrial
Production in India irwreased 0.60 percent in August of 2013 over the same month in the
previous year. Industrial Production in India is reported by the Ministry of Statistics and
Programme Implementation.
38
Following is the chart showing the Index of Industrial production over 5 years, upto
200910. It also showing a possitve growth of production. And it shows an average growth rate of
8.29% over the 5 years
320
304.1
300
280
260
240
221.5
220
200
LENDING RATE
From 2000 until 2013, India Interest Rate averaged 6.6 Percent reaching an all time high
of 14.5 Percent in August of 2000 and a record low of 4.3 Percent in April of 2009. In India,
interest rate decisions are taken by the Reserve Bank of India's Central Board of Directors.
Fall in lending rate possitively influence the economic activities of that particular country,
because a fall in interest rate will cause decrease the cost of capital and increase the volume of
investment in that country.
Following is the chart showing Average lending rate of Bnks over past 5 years.By
analysing the graph it is clear that the interest rate is decreased to 9.975% in financial year
201213 from 10.375% in financial year 2011-12.
39
8
6
4
EMPLOYMENT
India's labour regulations among the most restrictive and complex in the world have
constrained the growth of the formal manufacturing sector where these laws have their widest
application. Better designed labour regulations can attract more labour- intensive investment and
create jobs for India's unemployed millions.
Following chart showing total employment in public sector and private sector over 10
years.which showing an increasing trend.
EMPLOYMENT
IN MILLION
SOURCE:RBI
Following table showing the sectorial Contribution to GDP of India Over past 10 years,
the sectors include Finance, Trade, Agriculture, Manufacturing, and Construction etc.
Moving through the chart it is clear that Trading sector including Hotel, Transport and
communications is the greatest contributor to GDP in India among the sectors selected. But the
growth rate is not much high compared to the rate of growth of finance sector.
Finance sector contributed only 10.6% in financial year 2003-04, but it is increased to
31.5% in financial year 2012-13. While trading sector contributed 32.1% in financial year
200304 and which is 35.2% in financial year 2012-13.
40
SECTORAL CONTRIBUTION TO GDP
(FACTOR COST)
SOURCE:RBI
Finance sector is best among the other sectors in Indian economy after trading sector even though
there is a slight decrease in GDP contribution on the year 2011-12 and 2012-13.
41
INDUSTRY ANALYSIS
INDUSTRIAL DATA
Following is the table showing banking industrial data for past 10 years from 2004 to
2013. Which shows total income, total assets,total liabilities and total expenses are increasing at
an increasing rate.lt indicate that banking industry in india is currently passing through the
expansion stage.
120000
000
100000
000
80000
000
60000
000
40000
000
20000000
Total income(Ann)
Total expenses(Ann)
Total liabilities
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Total assets
SOURCE:CMIE
Total assets of banks increased to 96446190.6 in 2013 from 20693894.1 in 2012.total liabilities
of industry increased to 96446190.6 in 2013 from 20693894.1 in 2004.total income increased to
8759813.951n 2013 from 1958576.34 in 2004.total expenses increased to 7845122.1 from 2013
to 1723968.1 in 2012.Highest of total income, total expense, total liability, and total assets
showed in the year 2013.
43
BANK INDEX
The CNX Bank Index is an index comprised of the most liquid and large capitalized
Indian Banking stocks. Itcaptures the capital market performance of the Indian banks.The Index
has 12 stocks from the banking sector, which trade on the National Stock Exchange. Following
are given the performance of Bank Index for past 10 years.
SOURCE:NSE
Moving on the Chart given above it is clear that the Banking industry is growing for past
10 years. During the year 2008 to 2009 Index showed a sudden decline because of the financial
crisis existed those period and later on showed positive movements. Then after the period 2011
to 2012 also showed a declining trend then after also showed positive upward movements.
Graph above showed a V formation, i.e. the index will move upward in coming years
according to the V formation principles.
Following is the graph showing NPA of Indian banking sector for past 10 years.
44
N PA
(PERCENTAGE TO TOTAL ASSET)
2
.
5
1
.
5
0
.5
Sheduled commercial banks Public sector banks 001d private sector banks new
private sector banks *Foreign banks
SOURCE:RBI
NPA of banks decreasing over the years. Decreasing NPA shows performance efficiency of
banking sector in India. Following is table showing NPA Ratio of banking industry.
NPA Ratio of 2002-03 was 9.2% and which was decreased to 2.8% in financial year 2011-12.
45
stage of life cycle in which it stands. Here Deposits, Income earned, Number of offices and
employees, Advances are taken as the variables to find the life cycle of banking industry.
DEPOSITS
Deposits are cheapest sources of loanable funds for banks. Banks business is directly
related with the volume of deposits. Higher the deposit means banks can lend more to needy
people and widen business and earnings.
Following is the chart showing the volume of deposits of banking industry in India for
past 8 years. By looking to the chart it will be clear that the deposits to banks are increasing at an
increasing rate over the period of time. This is a positive signal to banking industry. Deposits of
banking industry will increase in expansion stage of industry life cycle.
DEPOSITS
(Amount in million
80000000
70000000
60000000
50000000
40000000
30000000
20000000
46
10000000
SOURCE:RBI
EARNINGS
Following is the chart showing income of banking industry over past 8 years. Interest
income and other incomes are shown separately. Both are showing increasing trend. During the
stage of expansion the income of banks will increase at an increasing rate.
So the following movements of income of banking industry indicate that industry currently
going through expansion stage.
7000000
6000000
5000000
4000000
3000000
2000000
1000000
47
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Interest income Other income Linear (Interest income) Linear (Other income)
SOURCE:RBI
Following chart indicate the industry is currently passing through expansion stage because both
number of employees and number of offices are increased at an increasing rate over the period of
NO OFFICES AND EMPLOYEES
1200000 (Amount in Rs million)
1000000
800000
600000
400000
200000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
e No. of offices No. of employees Linear (No. of offices) Linear (No. of em ployees)
SOURCE:RBI
ADVANCES
Making loans and advances are the main business and one of the important sources of
income of banks. So the volume of advances is also influencing the performance of industry.
During the stage of expansion of industry life cycle the business and income will increase, in the
case banking industry advances will increase
ADVANCES
IN MILLION
60000000
48
50000000
40000000
30000000
20000000
10000000
SOURCE:RBI2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
By analyzing the above variables related to the banking industry it is clear about that banking
industry is passing through Expansion stage.
The above charts states the life cycle of banking industry during financial year 2004 to 2013. By
analyzing above charts we can say that banks are now passing through Expansion stage.
Deposits, income, number of offices and employees and advances are increasing at an increasing
rate. And NPA of banking industry showed a decreasing trend. This all proves banking industry is
now in Expansion stage.
RBI REGULATIONS
Repo rate is the rate at which RBI lends to commercial banks, Reduction in Repo rate
helps the commercial banks to get money at a cheaper rate. Reverse Repo rate is the rate at which
RBI borrows money from the commercial banks, increase in Reverse repo rate will encourage
banks to invest with RBI. Cash Reserve Ratio is a certain percentage of bank deposits which
banks are required to keep with RBI in the form of reserves or balances .Higher the CRR with the
RBI lower will be the liquidity in banks.
Following is the chart showing Repo and reverse repo and cash reserve ratio for the past 19
months. Repo rate is decreased to 7.5% in 09/13 from 8% in 03/12. Reverse repo also decreased
from 7.5% in 03/12 to 6.5% in 09/13.Cash reserve ratio decrease from 4.75% in 03/12 to 4% in
49
09/13. Decrease in repo and reverse repo and CRR will increase the liquidity and business of
banks.
6.5
SOURCE:RBI
EFFECT OF NATIONAIXSATION
The nationalisation of banks in India took place in 1969 by Mrs. Indira Gandhi. Following is the
chart showing the effect of nationalization of banks in india over the period of 1969 to 2012.
EFFECT OF NATIONALISATION
120,000
101,261
100,000
80,000 74,563
64,000
50
60,570
60,000
40,000
20,000
SOURCE:RBI
By analyzing the above table it would be clear that number of bank offices are increased over the
period and population per office is decreased. Number of bank offices are increased from 8262
from 1969 to 101261 in 2012. And population per office is decreased from 64000 in 1969 to
13000 in 2012.
51
60
20
120
. 1990-91
. 2007-08
. 2011-12
100
80
40
Gross Gross Bank Credit / Broad Money / Net I nterest BSE Market
Domestic Domestic GDP GDP I ncome to Capitalisation
Saving Rate (% I nvestment Total Assets of GDP) ofGDP) Rate (% of
GDP)
SOURCE:RBI
Gross domestic saving rate showed 22.9% in 1990-91 then increased to 36.8% in 2007-08 and then
decreased to 30.8% in 2011-12. Highest recorded in 2007-08 at 36.8%
52
Gross domestic investment increased to 38.1% in 2007-08 from 26% in 1990-91 and then
decreased to 35% in 2011-12. Highest is in the year 2007-08 at 38.1%.
Bank credit increased from 20.4% in 1990-91 to 47.4% in 2007-08, again increased to 50.6% in
2011-12.50.6% in 2011-12 is the highest.
Broad money also showed increasing trend, it increased from 46.7% in 1990-91 to 82.9% in 2007-
08 then a slight change to 83.21 % in 2011-12.
Net interest income to total asset shows 3% in 2007-08, and decreased to 2.9% in 2007-08
BSE market capitalization highest in 2007-08 at 103% and decreased to 70.2% in 2011-12.
53
INDUSTRY RATIOS
TREND
OPERATIG
EXPENSE 165885 190540.1 229361.6 231985.2 356769.6 430672.2 692756.1 874346.7
INTEREST
INCOME 1558010 1856168 2316753 3084823 3884816 4151786 4913407 6550565
OPERATING
PROFIT
10.65 10.27 9.9 7.52 9.18 10.37 14.1 13.35 12.87
OPERATING
EXPENSES 501333.4 592640.1 663192.6 772826.5 895814.5 1000279 1231403 1371033
NET
ADVANCES 22313.26 30336.23 39624.74 49538.73 59998.49 69941.46 85974.08 101491
1.65
NPA
5.32 3.37 2.55 2.27 2.28 2.42 2.28 2.8
Operating profit margin of banking industry decreased from 2011 to 2012 from 14.1 % to
13.35%. It was 10.65% in 2005, it is the highest among the period also.it showing a decreasing
trend for 2013.
Cost to income ratio increased from 2011 to 2012 from 45.23% to 44.19% and it was 49.56% in
2005, highest recorded 52.12% in 2006. it showing a decreasing trend for 2013.
Loan to deposit ratio increased from 2011 to 2012 from 76.52% to 78.63%. It was 62.62% in
2005, and highest recorded 78.63% in 2012. It showing an increasing trend for 2013.
NPA ratio increased from 2011 to 2012 from 2.28% to 2.8%, it was 5.32% in 2005 and highest
recorded in the same year. It showing an decreasing trend for 2013.
55
COMPANY ANALYSIS
56
STATE BANK OF INDIA (SBI)
State Bank of India (SBI) is a Multinational Govemment owned (62.31 financial and
banking services company in India. with headquarters in Mumbai, Maharashtra, and Founded I
July 1956. As of December 2012, it had assets of billion and 15,003 branches, including 157
foreign offices, making it the largest banking and financial services company in India by assets.
SBI had 14,816 branches of which 9,851 (66%) were in Rural and Semi-urban areas its revenue
was INR 200,560 Crores (US$ 36.9 billion), out of which domestic operations contributed to
95.35% of revenue in financial year 2012-13. SBI has five associate banks State Bank of Bikaner
& Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of
Partial, State Bank of Travancore. Apart from five associate banks it has seven Non-Banking
Financial services. rom its five associate banks, SBI also has the following non-banking
subsidiaries SBI Capital Markets Ltd, SBI Funds Management Pvt Ltd, SBI Factors &
Commercial Services Pvt Ltd, SBI Cards & Payments Services Pvt. Ltd. (SBICPSL), SBI DFHI
Ltd, SBI Life Insurance Company Limited, SBI General Insurance.
COMPETITIVE POSITION
SBI is India's oldest and largest public sector Bank. With the market capitalization of Rs.
106, 671.68Crore. Net interest income of Rs.cr 119,657.10 and net profit of Rs.cr 14,104.98.
Some of the major competitors for SBI in the banking sector are ICICI Bank, HDFC Bank, Axis
Bank, Bank of India, Punjab National Bank and Bank of Baroda Canara Bank. However in terms
of average market share, SBI is by far the largest player in the market.
BOARD OF DIRECTORS
Chairman Mrs Amndhati Bhattacharya
Shri Hemant G
Shri Diwakar Gupta
Managing Directors
Shri A. Krishna Kumar
Shri S. Vishvanathan
Debit cards:Debit Card spends of State Bank Group crossed 15,000 crores for FY 2012-13 which
constitutes over 20% of total Debit Card spends in the industry.
Prepaid Cards:Bank's range of products include popular Rupee Prepaid Cards like Gift Card,
General Purpose Prepaid Card like eZ-Pay Card and Foreign Travel Card catering to various
payment needs of the customers.
Foreign Travel Card: Foreign travel card providing safety, security and convenience to overseas
travelers.which is now available in eight major currencies US Dollar (USD), Great Britain Pound
(GBP), Euro, Canadian Dollar(CAD), Australian Dollar (AUD), Japanese Yan (JPY),Saudi Riyal
(SAR) and Singapore Dollar (SGD).
Cards are aligned with most of the social schemes of State and Central
57
Governments
Gift Cards:Gift Cards remain the preferred option to customers to gift the 'freedom of choice' to
their loved ones
Green Remit Card cardholder can swipe the card at Green Channel
Counter or in
Cash Deposit Machines and remit money to the beneficiary whose account number is mapped to
the card. Once the transaction is complete, both the remitter and beneficiary get confirmation
through SMS on their mobile phone.
Mobile banking
Internet banking
MARKET CAPITALIZATION
SBI is India's Number one bank on the basis of market capitalization, Amounted to
m. 113,864.29 Crorein 2013.
AREA COVERED
SBI provides a range of banking products through its network of branches in India and
overseas with headquarters in Mumbai, Maharashtra. It has 14 regional hubs and 57 Zonal
Offices that are located at important cities throughout India. And had 14,816 branches in India of
which 9,851 (66%) were in rural and Semi-urban areas In the financial year 2012-13. the bank
had 180 overseas offices spread over 34 countries.
LABOUR CONDITION
SBI is one of the largest employers in the country having 228,296 employees as on 31st
March 2013. Which shows there is no labour scarcity in SBI.
LABOUR CONDITION Rs In Crore
The table above stated shows the productive quality and availability of labours over past
5 years. It is clear about there is no scarcity of labour and the employed Labours are highly
productive. The number of employees increased by 10.8% from 2009 to 2013, ie 22400
58
additional labours are recruited during the period of time. And Sales per employee increased
from .37 crore in 2009 to .59 crore in 2013, ie an increase of .22 Crore over the period.
RATIO ANALYSIS
It is the net interest income earned by the bank on its earning assets.if the non-performing
assets are high, their NIM will go down. So higher the ratio indicate efficiency of firms
investment decision.Here table above shows NIM of SBI is increasing. It rose from 2.26% in
2009 to 3.39%in 2012, and after declined to 2.93% in 2013.
CREDIT TO DEPOSIT
CREDIT TO DEPOSIT
2009 2010 2011 2012 2013
Higher ratio reflects ability of the bank to make optimal use of the available resources.By
analyzing the above it is clear that Credit to deposit ratio is increasing over the years from
83.13% in 2012 to 86.94% in 2013, and it was 73.11% in 2009.
59
OPERATING PROFIT
MARGIN 4.31 -1.79 1.35 5.38 12.57
SOURCE:MONEY CONTROL
Higher the ratio indicate operating efficiency and profitability of banks. Above table
showing a negative ratio of -1.79% in 2010 and afterwards an increasing trend. Ratio increased to
12.5% in 2013 from 5.38% in 2012.
NPA Ratio is increasing over the past 5 years 2.54% in 2009 to 4.71% in 2013, and it was 4.33%
in 2012.
cost to income ratio increased from 2009 to 2012 from 54% to 65.17% and then decreased to
48.51% in 2013.
60
Year 2009 2010 2011 2012 2013
EPS irwreased from 2012 to 2013 from 174.55 to 206.20.it was 143.67 in 2009,then decreased to
116.07 in 2011 and increased to 174.55 in 2012.
61
PRICE EARNING RATIO
PRICE EARNING RATIO
INTRINSIC VALUE
Market value of stock tends towards its intrinsic value. Here the Intrinsic value of security
is higher than the current market price, it indicate that stock is undervalued. It is advisable to buy
the security.
INTRINSIC VALUE
AVG PRICE EARNING RATIO 13.63952
EXPECRED EPS 156.9784
INTRINSIC VALUE 2141.11
CURRENT MARKET PRICE(31 ocr 13) 1796.75
BUY/SELL BUY
62
BANK OF BARODA(BOB)
BOD is a state owned and second largest Bank in india after state bank of india. Its total
global business was INR 8,021 billion as of 31 March 2013. Its headquarters situated in Baroda,
or Vadodara. Its business also spreads all over the world.
COMPETITIVE POSITION
Bank of Baroda is India's second largest public sector bank operating worldwide. Its
market capitalization is amounts to Rs19,881.69 crore. Its main competitors are SBI,ICICI Bank,
HDFC Bank, Axis Bank, Bank of India, Punjab National Bank and Bank of Baroda Canara Bank
BOARD OF DIRECTORS
Chairman and Managing Directo Shri S.S. Mundra
Executive Directors Shri P. Srinivas
Shri Bhuwanchandra B.
Joshi
Directors Shri Alok Nigam
Shri Sudarshan Sen
Shri V. B. Chavan
Bank of baroda is india's second largest public sector Bank after SBI with market
capitalization of Rs 19,881.69Crore in 2013.
63
AREA COVERED
BOB provides a range of banking products and services through its network of branches
in India and overseas. with headquarters inBaroda, or Vadodara.The Bank has 100 branches in 24
countries including 61 branches of the bank, 38 branches of its 8 subsidiaries and 2
representative offices in Thailand and Australia. Its total global business was INR 8,021 billion
as of 31 March 2013.Bank of Baroda has received permission or in-principle approval from host
country regulators to open new offices in Trinidad and Tobago and Ghana.
LABOUR CONDITION
Following is the table showing number of employees and eamings per employees over past 5
years.
LABOUR CONDITION Rs In
Crore
2009 2010 2011 2012 2013
Total Income 17849.24 19504.7 24695.11 33096.05 38827.27
Number of E 10 36838 38960 42175 43108
Earn r em 10 0.484533 0.500634 0.616669 0.784731 0.900698
SOURCE:BLOOMBERG
By analyzing the above table number of employees as well as eamings per employee is
increasing over the period.the increased volume of earning per employees showing the
productive capacity of employees. Number of employees are increased by 17%, ie 6270
additional labours are recruited during the period of 2009 to 2013.And productive capacity of
employees also increased from.48 Crore in 2009 to .90 Crore in 2013, ie .42 crore increased
during this period of time.
RATIO ANALYSIS
Higher the ratio indicate efficiency of firms investment decision.Here table above shows
NIM rose from 2.19% in 2010 to 2.52% in 2011, and after declined to 2.12% in 2013 from
2.37% in 2012.
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CREDIT TO DEPOSIT
CREDIT TO DEPOSIT
Higher ratio reflects ability of the bank to make optimal use of the available resources.By
analyzing the above it is clear that Credit to deposit ratio is decreased from 74.66% in 2012 to
69.25% in 2013.
Non-performing asset ratio increasing over the years.it increased to 2.48% in 2013 from
2.07% in 2012 and it was 1.05% in 2009.
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YEAR 2009 2010 2011 2012 2013
OPERATING EXPENSE 4711.23 5669.88 6727.59 5946.74
TOTAL INCOME 7881.07 8745.84 11611.45 13739.34 14945.88
RATIO 48.78 53.87 48.83 48.97 39.79
Cost to income ratio showing a decreasing trend, it is decreased from 48.78% in 2009 to
39.79% in 2013. There was an increase in 2009 to 2010 from 48.78% to 53.87%.
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Dividend payout ratio increased for the past 5 years except 2012. It increased from 2012
to 2013 from 14% to 20.27%. 20.27% in 2013 is the highest dividend payout ratio and Earning
retention ratio decreased from 2012 to 2013 from 86% to 79.73%, it was 82.78% in 2009.
INTRINSIC VALUE
INTRINSIC VALUE
COMPETITIVE POSITION
Main competitors are SBI,ICICI Bank, HDFC Bank, Axis Bank, Bank of India, Bank of
baroda etc. BOARD OF DIRECTORS
Chairman & Managing Director
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Executive Director Shri Gauri Shankar
Shri. M A Antulay
Shri. B B Chaudhry
Shri. Devinder
Kumar Singla
Shri M. N.
Gopinath
Panjab National Bank is india's 3 rd largest bank on the basis of market capitalisatio.
Market capitalization is amounts to Rs17 Crore in 2013.
AREA COVERED
Panjab National Bank has more than 6000 branches including 5 overseas branches,in
Hong Kong, Dubai& Afghanistan and an Offshore Banking Unit (OBU) Branch in
SEEPZ,Mumbai.Punjab National Bank is serving more than 82 million esteemed customers.
LABOUR CONDITION
LABOUR CONDITION Rs In Crore
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Total Income 22245.85 25032.22 30599.06 40630.63 46109.25
Number of labours are showing increasing during the period of 2009 to 2013, and the
productive capacity of employees also increasing. 5087 additional labours are recruited during
the period 2009 to 2013. The productive capacity of labours also increased from .38 crore in
2009 to .72 crore in 2013.
RATIO ANALYSIS
NET
INTEREST 7030.86 8522.89 11807.34 13414.44 14856.51
EARNING
ASSETS 239501.31 287799.25 366960.24 445232.27 465756.8
NIM 2.93 2.96 3.21 3.01 3.18
SOURCE:MONEY CONTROL
Higher the ratio indicate efficiency of firms investment decision.Here table above shows
NIM rose from 2.93% in 2009 to 3.21% in 2011, and increased from 3.01 % in 2012 to 3.18% in
2013.
CREDIT TO DEPOSIT
CREDIT TO DEPOSIT
2009 2010 2011 2012 2013
ADVANCES 154702.99 186601.21 242106.67 293774.76 308725.2
DEPOSITS 209760.5 249329.8 312898.73 379588.48 391560.1
CD RATIO 73.75 74.84 77.37 77.39 78.84
Higher ratio reflects ability of the bank to make optimal use of the available resources.By
analyzing the above it is clear that Credit to deposit ratio is increasing over the period of 5 years.
It increased from 77.39% in 2012 to 78.84% in 2013. And it was 73.75% in 2009.
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OPERATING PROFIT MARGIN
OPERATING PROFIT MARGIN
MI-OPERATING
EXPENSE 2004.05 2761.53 3439.38 4008.59 6691.46
TOTAL INTEREST 19326.16 21466.91 26986.48 36428.03 41893.33
OPERATING PROFIT
MARGIN 10.37 12.86 12.74 11.00 15.97
Higher the ratio indicate operating efficiency and profitability of banks. Above table
showing a decrease in ratio from 2011 to 2012 from 12.74% to 11%, then it is increased in 2013
to 15.97%.
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Number of uit Shares 31.53 31.53 31.681 33.918 35.347
EPS 98.02 124.10 139.94 144.23
EPS decreased from 2012 to 2013 from 144.23 to 134.40, it was 98.02 in 2009. 144.23 in
2012 was the highest EPS.
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A high price earning ratio suggest investors expecting high earning growth in future and
it shows how much investors are willing to pay for EPS. Price earning ratio decreased from 2012
to 2013 from 6.84 to 5.87 and it was 4.56 in 2009.2011 shows a high price eaming ratio of 8.19.
INTRINSIC VALUE
INTRINSIC VALUE
AVG PRICE EARNING RATIO 6.368362
EXPECRED EPS 128.1422
INTRINSIC VALUE 816.0559
CURRENT MARKET PRICE(31 ocr 13) 544.4
BUY/SELL BUY
Market value of stock tends towards its intrinsic value. Here Intrinsic value of security is
higher than current market price which indicate the security price is under valued. And advisable
to Buy the security.
CANARA BANK
Canara Bank is an Indian state owned bank headquartered in Bangalore, Karnataka. It
was established in 1906by Shri Ammembal Subba Rao Pai, a great visionary and
philanthropist,.The bank also has offices abroad.Today, Canara Bank occupies a premier position
in the comity of Indian banks with an unbroken record of profits since its inception.
COMPETITIVE POSITION
Main competitors are SBI,ICICI Bank, HDFC Bank, Axis Bank, Bank of India, Bank of
baroda, Panjab national Bank PRODUCTS AND SERVICES
etc. Shri. R.K. DUBEY
BOARD OF DIRECTORS Shri. ASHOK KUMAR GUPTA
Chairman & Managing Director Shri V. S. KRISHNAKUMAR
Executive Directors Shri. PRADYUMAN SINGH
RAWAT
Dr.RAJAT BHARGAVA
Shri. G. V. MANIMARAN
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Shri. SUTANU SINHA Shri.RAJINDER KUMAR GOEL
Shri.BRIJ MOHAN SHARMA Shri.SANJAY JAIN
The important products and services offered by Canara Bank are Investment Banking,
Consumer Banking, Commercial Banking, Retail Banking, Private Banking, Asset Management,
Pensions, Mortgages, Credit Cards etc.
MARKET CAPITALIZATION
Canara bank is the fourth largest bank in india on the basis of market capitalization. The
market capitalization of Canara Bank amounts to Rs 9,418.18 crore in 2013.
AREA COVERED
Canara Bank has a network of more than 3564 branches including abroad. The bank has
offices abroad in London, Hong Kong, Moscow, Shanghai, Doha, and Dubai.
LABOUR CONDITION
Following is the table showing number of employees and eamings per employees over past 5
years.
LABOUR CONDITION:RS IN CRORE
Number of labours are decreased during the period of 2009 to 2013, and the productive
capacity of employees increased over the period.
RATIO ANALYSIS
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NIM 2.02 2.21 2.19 2.39 2.11
SOURCE:MONEY CONTROL
Higher the ratio indicate efficiency of firms investment decision.Here table above shows
NIM rose from 2.02% in 2009 to 3.39% in 2012, then decreased from 2.39% in 2012 to 2.11% in
2013.
CREDIT TO DEPOSIT
CREDIT TO DEPOSIT
MI-OPERATING
EXPENSE -128.5 752.56 776.74 2402.78 1721.5
TOTAL INTEREST 14200.74 17119.05 18751.96 23064.01 30850.62
OPERATING PROFIT
MARGIN -0.90 4.39 4.14 10.41 5.58
Higher the ratio indicate operating efficiency and profitability of banks. Above table
showing ratio increased from 2009 to 2012 from -.9()% to 10.41% and then decreased to 5.58%
in 2013.
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NET LOANS 1383221 1664498 2102460 2326857 2424210
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DIVIDEND PAY OUT RATIO
DIVIDENT PAY OUT RATIO
DPS 8 8 10 11 11
EPS 38.17 50.55 73.69 90.88 74.10
DIVIDENT PAY OUT 20.96 15.83 13.57 12.10 14.84
EARNING RETENTION
79.04 84.17 86.43 87.90 85.16
Dividend pay out ratio increased from 2012 to 2013 from 12.10% to 14.84% and the
Earning retention ratio decreased from 87.9()% to 85.16%. year 2009 shows highest Dividend
pay out ratio of 20.96 and lowest Earning retention ratio of 79.04%.
INTRINSIC VALUE
INTRINSIC VALUE
AVG PRICE EARNING RATIO 6.009091
EXPECTED EPS 65.47818
INTRINSIC VALUE 393.4644
CURRENT MARKET PRICE(31 ocr 13) 258.25
BUY/SELL BUY
Market value of stock tends towards its intrinsic value. Here the Intrinsic value of security
is higher than current market price, so the security is under priced.it is advisable to Buy the
security.
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BANK OF INDIA
Bank of India is a state-owned commercial bank with headquarters in Mumbai and
Maharashtra. BOI is India's 5th largest public sector bank after SBI,BOB,PNB and Canara bank.
It was founded in 1906.
COMPETITIVE POSITION
Main competitors are SBI,ICICI Bank, HDFC Bank, Axis Bank, Bank of India, Bank of
baroda, Canara Bank, Panjab national Bank etc.
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MARKET CAPITALIZATION
Bank of India is the 5th largest bank in India on the basis of market capitalization. The
market capitalization of Bank of India amounts to Rs 8,800.44 crore in 2013.
AREA COVERED
Bank of India has 4322 branches as on 8 August,2()13, including 54 branches outside India.
LABOUR CONDITION
Following is the table showing number of employees and eamings per employees over past 5
years.
LABOUR CONDITION Rs In Crore
Number of labours are showing increasing during the period of 2009 to 2013, and the
productive capacity of employees also increasing. 1991 additional labours are recruited during
the period 2009 to 2013. The productive capacity of labours also increased from .48 crore in
2009 to.84crore in 2013.
RATIO ANALYSIS
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Higher the ratio indicate efficiency of firms investment decision. Here table above shows
NIM rose from 2.06% in 2009 to 2.32% in 2011, then decreased to 2.16% in 2012 and again
increased to 2.53% in 2013.
CREDIT TO DEPOSIT
CREDIT TO DEPOSIT
2009 2010 2011 2012 2013
ADVANCES 142909.37 168490.71 213096.18 248833.34 289367.50
DEPOSITS 189708.48 229761.94 298885.81 318216.03 381839.59
CD RATIO 75.33 73.33 71.30 78.20 75.78
Higher ratio reflects ability of the bank to make optimal use of the available resources. By
analyzing the above it is clear that Credit to deposit ratio increased to 78.20% in 2012 from
75.33% in 2009, then decreased to 75.78% in 2013.
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NPA ratio decreased from 3.09% in 2010 to 251 % in 2011, then increased from 2.68% in 2012
to 3.38% in 2013.
Profit available to uit share holders 3007.35 1741.07 2488.71 2677.52 2749.35
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DIVIDEND PAY OUT RATIO
DIVIDENT PAY our RATIO
INTRINSIC VALUE
INTRIN SIC VALUE
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CONSOLIDATED RATIOS
2009 2010 2011 2012 2013 TREND
SBI 2.26 2.33 2.77 3.39 2.93 3.46
BOB 2.32 2.19 2.52 2.37 2.12 2.35
2.93 2.96 3.21 3.01 3.18 3.07
CANARA 2.02 2.21 2.19 2.39 2.11 2.18
BOI 2.25 2.32 2.16 2.53 2.26
SBI 73.11 78.58 81.03 83.13 86.94 80.56
BOB 74.83 72.61 74.86 69.25 73.24
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BOB 15.00 16.50 17.00 21.50 16.10
20.00 22.00 22.00 21.99 27.00 22.60
CANARA 8.00 8.00 10.00 11.00 11.00 9.60
BOI 9.34 8.15 8.11 8.11 11.68 9.08
SBI 20.18 20.77 25.84 20.05 20.12 21.39
BOB 17.22 17.93 15.28 14.00 20.27 16.94
DIVIDEND PAY O UTRXIIO 20.40 17.73 15.72 15.25 20.09 17.84
CANARA 20.96 15.83 13.57 12.10 14.84 15.46
BOI 16.34 24.62 17.85 17.40 25.35 20.31
SBI 8.90 13.54 23.24 12.14 10.39 13.64
BOB 4.26 5.88 7.78 6.53 6.98 6.29
PRICE EARNING RATIO 4.56 6.38 8.19 6.84 5.87 6.37
CANARA 4.91 6.50 7.72 5.27 5.63 6.01
BOI 4.59 10.43 9.50 7.74 6.84 7.82
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FINDINGS
ECONOMIC ANALYSIS
GDP of India increasing at an increasing rate over past 10 years and shows an increasing
trend for past 25 years. India contribute 2.97% of world GDP. India is 10th largest
economy in the world on the basis nominal GDP
Trading sector and finance sectors are the largest contributors of Indian GDP.
Current account deficit of India widening over past 10 years.
Negative foreign exchange reserves of India decreased to a large extent over past 10
years.
Foreign investment inflow increasing for pmst 10 years and showing a positive trend.
Compared to 2012 inflation rate is low in 2013.
Agricultural production over the past 10 years increasing at a decreasing rate. Industrial
production index showed increasing trend for past 5 years from 2005-06 to 2009-10.
Average lending rate of banks decreased over 5 years from 2008-09 to 2012-13.
Employment opportunities in private and public sector has been increased from 2001-02
to 2010-11
Finance sector is the most competing contributor to Indian GDP, even trading sector
showing highest contribution.
INDUSTRY ANALYSIS
Total income, total expenses, total assets, total liabilities, and bank index of banking
industry increased over past 10 years from 2004 to 2013
Non-performing assets of banking industry decremsed over the 10 years from 2002-
03 to 2011-12. Which shows 9.2% in 2002-03 and 2.8% in 2011-12.
Increased growth of Deposits, earnings, number of offices and employees and
advances indicating industry now passing through expansion stage of industry life
cycle.
Repo, Reverse repo and Cash reserve ratio of banks decreased past 19 months.
Nationalization increases the number of bank offices and population per office since
1969.
Financial sector reforms results increase savings, investments, credit, and Interest
income and market capitalization of banking industry.
Operating profit margin decreased and trend also decreasing for 2013.
Cost to income ratio decreased and also showing decreasing trend
Loan to deposit ratio increased and also showing increasing trend for 2013
NPA ratio increased in 2012 and showing an decreasing trend for 2013
COMPANY ANALYSLS
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SBI
SBI is the largest public sector bank in India on the basis of market capitalization and had
180 overseas offices spread over 34 countries. There is no scarcity of labour and
employed labours are highly productive compared to past years.
Credit to deposit ratio, Operating profit margin, NPA ratio, EPS ,DPS are increased and
Dividend payout ratio constant in 2012-13
NIM and Cost to income ratio decreased 2012-13 Price eamings ratio decreased.
NIM ratio, cost to income ratio, dividend payout ratio, and P/E ratio are showing an
increasing trend to 2013-14.
Credit to deposit ratio, operating profit margin, NPA ratio, EPS, and DPS are showing
decreasing trend for 2013-14.
Intrinsic value=2141. I I
Current market price=1796.75
Current market price is lower than intrinsic value of security, security is underprized. It is
advised to buy the share.
BANK OF BARODA
Bank of Baroda is the Second largest public sector bank in India on the basis of market
capitalization and has 100 branches in 24 countries. Number of employees and eaming
per employee is increased in 2012-13.
Operating profit margin, NPA ratio, DPS are increased in 2012-13
NIM, EPS, Dividend payout ratio, Cost to income ratio, Credit to deposit ratio are
decreased.
Price eamings ratio increased.
NIM, Credit to deposit ratio, and cost to income ratio are showing increasing trend for
2013-14.
Operating profit margin, NPA ratio, EPS, DPS, Dividend payout ratio and P/E ratio are
showing decreasing trend for 2013-14.
intrinsic value =6()3.4()1
Current market price=642.9
Current market price is higher than intrinsic value of security, security is overprised. It is
advised to sell the share.
PANJAB NATIONAL BANK
Third largest public sector bank on the basis of market capitalization .1t has 5 overseas
branches. Number of employees and productive capacity of employees are increased.
NIM, Credit to deposit ratio, Operating profit margin, NPA ratio, Cost to income ratio
,DPS are increased in 2012-13
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EPS and Dividend payout ratio are decreased in 2012-13
Price eamings ratio showing decreasing trend for 2013-14.
NIM, credit to deposit ratio, operating profit margin, NPA ratio, cost to income ratio,
EPS, DPS, Dividend payout ratio and P/E ratio showing decreasing trend for 2013-14.
intrinsic value
Current market price=544.4
Current market price is lower than intrinsic value of security, security is underprized. It is
advised to buy the share.
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CANARA BANK
Long term investment in banking sector is good option for investors, important ratios are
increased in long term like operating profit margin, DPS, Price earnings ratio etc.
Non-monetary factors also should consider while investing
Current trend of market also should consider while making investment
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EPS will relieve the market value of the company. If the market value is high the
perception what the investor relating to the company will be high and at the same time
EPS will contribute to the increase in market capitalization.
DPS will relieve the Dividend of the company if dividend is high the investors will be
ready to invest more and it result increase market capitalization
P/E ratio reflects the price the investors are Willing to pay for every one rupee earnings.
Or a high P/E suggests that investors are expecting higher earnings growth in the future
compared to companies with a lower P/E ratio. Higher the P/E ratio will increase market
capitalization and security price, so it is better to invest on it.
The market value of stock tends to move towards its real value or "intrinsic value" if the
intrinsic value is above the market price investors can buy the shares and if the intrinsic
value is bellow they can sell the shares.
Lower the NPA ratio indicates operational efficiency of Banks, it directly influence
profitability of banks. It is advisable to invest banks with lower NPA ratio
NIM indicates how successful Banks investment decision. A negative ratio indicate firm
did not make an optimum decision i.e. Interest expenses greater than investment returns.
Operating margins are profits earned by the bank on its total interest income. Higher the
ratio will increase market capitalization
If the ratio is too high, it means that banks might not have enough liquidity to cover any
unforeseen fund requirements; if the ratio is too low, banks may not be earning as much
as they could be.
The lower Cost to income ratio will be good for banks, it will increase profitability and
return ratios.
Higher the Dividend payout ratio will increase demand for security and lower will
decrease demand. A stable dividend payout ratio indicates a solid dividend policy by the
company's board of directors.
CONCLUSION
Fundamental analysis argued that no investment decision should take without processing
and analyzing all relevant information. The analysis is based on Analysis of Economy, Industry
as well as Company.
Under this study of fundamental analysis of banking industry the Economic analysis
showing an increased growth of GDP of India over the past 25 years at an increased rate. Which
also showing an increasing trend for coming years. Increased growth of agricultural production,
industrial production index, employment opportunities, foreign investment inflow and lower
lending rate are giving hope to Indian economy. Foreign exchange reserves are coming to
positive. Financial sector is the one of the important contributor of Indian GDP after trading
sector.
88
indicating Banking industry in India is now passing through expansion stage. And the repo rate,
reverse repo rate, CRR is decreased over the years. NPA ratio of banking industry showing an
decreasing trend, loan to deposit ratio increased in the last year and showing an increasing trend,
and cost to income ratio also decreased in the last year and showing an decreasing trend.
Nationalization and financial sector reforms are the main reason for the growth of banking sector
in India.
For company analysis Five Banks are selected on the basis of Market capitalization.
Intrinsic value of all banks except Bank of Baroda are underprized and P/E ratio of all banks
except Bank of Baroda showing increasing trend. It indicates that investment in Bank of Baroda
is not viable and other four banks are good for investors, among these four banks SBI showing
Highest P/E ratio and intrinsic value and it would be profitable for investors to invest in SBI.
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BIBLIOGRAPHY
Prasanna Chandra (2002) "investment analysis and portfolio management", tata McGraw
Hill,New Delhi
V.K Bhalla "Investment Management", S. Chand company, Ramnagar, New Delhi
WEBSITES
http://www.rbi.com
http://www.wikipedia.org
http://www.moneycontrol.com
http://www.inve stopedia.com
http://www.in.finance.yahoo.com
http://www.nse.com
http://www.worldbank.com
http://www.indiainfoline.com
http://www.tradingeconomics.com
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