A

PROJECT REPORT
ON

FINANCIAL ANALYSIS

OF
PNB BANK
SUBMITTED IN PARTIAL FULLFILLMENT OF STUDY OF
“MASTERS OF BUSINESS ADMINISTRATION”

Submitted to: Submitted by:

MEDHAVI THAKUR SUNIL KUMAR SHARMA

(Assistant Prof.) MBA 4th Sem.
Roll no: MB4010003

Abhilashi Institute of Management Studies

Ner- Chowk Mandi (HP)

HIMACHAL PRADESH TECHNICAL UNIVERSITY,

HAMIRPUR
1
 DECLARATION

I Sunil Kumar Sharma student of MBA 4th semester declare

that I have done the project report on “FINANCIAL ANALYSIS
OF PNB BANK” has been personally done by me under the
guidance of Ms. MEDHAVI THAKUR (Assistant Prof.) at
Abhilashi Institute of Management Studies Ner-chowk Mandi
(Himachal Pradesh Technical University Hamirpur) in partial
fulfillment of MBA Program- during academic year-2015-16. All
the data represented in this project is true & correct to the best of
my knowledge & belief.

I also declare that this project report is my own preparation

and not copied from anywhere else.

Signature

SUNIL KUMAR SHARMA

2
 CERTIFICATE BY THE GUIDE

This is to certify that the contents of this report entitled

“FINANCIAL ANALYSIS OF PNB BANK” by Sunil Kumar
Sharma, Roll No.MB4010003 submitted to Abhilashi Institute of
Management Studies for the Award of Master of Business
Administration is original research work carried out by him under
my supervision.

This report has not been submitted either partly or fully to

any other University or Institute for award of any degree or
diploma.

(Name of the Guide),

MEDHAVI THAKUR
(Assistant Prof.)

Date :

Place :

3
 ACKNOWLEDGEMENT

I take this opportunity to express my deep sense of

gratitude, thanks and regards towards all of those who have
directly or indirectly helped me in the successful completion of this
project.

I also thank Ms. MEDHAVI THAKUR [Assistant Prof.

(Guide)] who has sincerely supported me with the valuable
insights into the completion of this project.

I am grateful to all faculty members of Abhilashi Institute of

Management Studies (AIMS) and my friends who have helped me
in the successful completion of this project.

Last but not the least I am indebted to my PARENTS who

provided me their time, support and inspiration needed to prepare
this report.

.
SUNIL KUMAR SHARMA
Roll. No-MB4010003

4
 CONTENTS

i. TITLE PAGE
ii. DECLARATION
iii. CERTIFICATE OF GUIDE
iv. ACKNOWLEDGEMENT
v. TABLE OF CONTENT (INDEX)

INDEX
Chapter Topics Page
No. No.
 1.  Introduction 7
1.1 Objective of the study 7
1.2 Introduction to the topic 8
1.3 Features of financial 9
analysis
1.4 Purpose of financial 9
analysis
1.5 Procedure of Financial 10
Statement Analysis
1.6 Tools of financial 11
analysis
2. Company profile 25
2.1 History of Banking 25
2.2 Banking structure in 27
India
2.3 Profile of PNB Bank 29
5
 2.4 Board of directors 35
2.5 Vision and mission 36
2.6 Achievements and 37
Awards

6
 Research Methodology 38
3.1 Objective of the study 38
3.2 Meaning of the Research 40
3.3 Research Problem 40
3.4 Research Design 41
3.5 Data collection method 43
3.6 Analysis and Interpretation 44
3.7 Limitation of Study 44
1.
Data analysis and interpretation 45
4.1 Balance Sheet 45
4.2 Profit & Loss Account 47
4.3 Cash Flow Statement 49
4.4 Key Financial Ratios 50
4.5 Results and findings 54
2.
Recommendations and Conclusion 55
Bibliography 57

7
 CHAPTER NO.1
INTRODUCTION

1.1 OBJECTIVE OF THE STUDY

The main objectives of this project are the following:-

 To study about PNB BANK and its related aspects like its
products & services, history, organizational structure, subsidiary
companies etc.
 To analyze the financial statement i.e. P&L account and
Balance sheet of PNB BANK.
 To learn about P&L Account, Balance-sheet and different type
of Assets& Liabilities.
 To understanding the meaning and need of Balance Sheet and
profit and loss account.
 The purpose is to portray the financial position of PNB BANK
with the help of Balance sheet and profit and loss account.
 To evaluate the financial soundness, stability and liquidity of
PNB BANK.

1.2 INTRODUCTION TO THE TOPIC

MEANING OF FINANCIAL STATEMENT:-

Financial statement refers to such statement which

contains financial information about an enterprise. It gives
report of profitability and the financial position of the business at
the end of accounting period. The term financial statement
includes at least two statements which the accountant prepares
at the end of an accounting period.

8
 The two statements are:-

a) Balance Sheet
b) Profit and Loss Account

They provide some extremely useful information to the

extent that balance sheet mirror the financial position on a
particular date in terms of the structure of assets, liabilities and
owners equity and the profit and loss account shows the results
of operations during a certain period of time in terms of the
revenues obtained and the cost incurred during the year.

Thus the financial statement provides a summarized view

of financial positions and operations of a firm.

MEANING OF FINANCIAL ANALYSIS:-

The term financial analysis is also known as “Analysis

and interpretation of financial statement”. It refers to the
process of determining financial strength and weakness of the
firm by establishing strategic relationship between the items of
the balance sheet, profit and loss account and other operative
data.

The first task of financial analysis is to select the

information relevant to the decision under consideration to the
total information contained in the financial statement.

The second step is to arrange the information in a way to

highlight significant relationship.

The final step is interpretation and drawing of inference

and conclusion. Financial statement is the process of selection,
relation and evaluation.
9
1.3 FEATURES OF FINANCIAL ANALYSIS

The main Features of Financial Analysis are the

following:-

 To present a complex data contained in the financial

statement in simple and understandable form.

 To classify the items contained in the financial statement

in convenient and rational groups.

 To make comparison between various groups to draw

various conclusions.

1.4 PURPOSE OF FINANCIAL ANALYSIS

The main purposes of financial analysis are the following:-

 To know the earning capacity or profitability.

 To know the solvency.
 To know the financial strengths.
 To know the capability of payment of interest & dividends.
 To make comparative study with other firms.
 To know the trend of business.
 To know the efficiency of mgt.
 To provide useful information to mgt.

10
1.5 PROCEDURE OF FINANCIAL STATEMENT ANALYSIS

The following procedure is adopted for the analysis and

interpretation of financial statements:-

 The analyst should acquaint himself with principles and

postulated of accounting. He should know the plans and
policies of the management so that he may be able to find
out whether these plans are properly executed or not.

 The extent of analysis should be determined so that the

sphere of work may be decided. If the aim is find out.
Earning capacity of the enterprise then analysis of income
statement will be undertaken. On the other hand, if
financial position is to be studied then balance sheet
analysis will be necessary.

 The financial data be given in statement should be

recognized and rearranged. It will involve the grouping
similar data under same heads.

11
1.6 TOOLS OF FINANCIAL ANALYSIS

The tools and techniques of financial analysis are

following:-

(a) Horizontal and vertical analysis

(b) Ratio analysis

(a) Horizontal and vertical analysis:-

 Horizontal Analysis or Trend Analysis:

Comparison of two or more year’s financial data is known

as horizontal analysis, or trend analysis. Horizontal analysis is
facilitated by showing changes between years in both
Rupees/Dollars and percentage form.

Graphical Representation of Horizontal and Trend Analysis:

Data of PNB bank :

Year Mar-2014 Mar-2015 Mar-2016

Total
Revenues
25,032 30,599 40,630
(In Rs. Cr.

12
 Graph:-

Horizontal & Trend Analysis

50000

40000

30000 2014
2015
20000
2016

10000

Trend Percentage:-

Horizontal analysis of financial statements can also be

carried out by computing trend percentages. Trend
percentage states several years’ financial data in terms of a
base year. The base year equals 100%, with all other years
stated in some percentage of this base.

13
  Vertical Analysis:

Vertical analysis is the procedure of preparing and

presenting common size statements. Common size statement
is one that shows the items appearing on it in percentage form
as well as in dollar form. Each item is stated as a percentage of
some total of which that item is a part. Key financial changes
and trends can be highlighted by the use of common size
statements.

b) RATIO ANALYSIS

It refers to the systematic use of ratios to interpret the

financial statements in terms of the operating performance and
financial position of a firm. It involves comparison for a
meaningful interpretation of the financial statements.

TYPE OF RATIO ANALYSIS:-

In view of the needs of various uses of ratios the ratios,

which can be calculated from the accounting data are classified
into the following broad categories:-

A. Liquidity Ratio
B. Turnover Ratio
C. Solvency or Leverage ratios
D. Profitability ratios

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A. LIQUIDITY RATIO:-

It measures the ability of the firm to meet its short-term

obligations that is capacity of the firm to pay its current liabilities
as and when they fall due. Thus these ratios reflect the short-
term financial solvency of a firm. A firm should ensure that it
does not suffer from lack of liquidity. The failure to meet
obligations on due time may result in bad credit image, loss of
creditors confidence, and even in legal proceedings against the
firm on the other hand very high degree of liquidity is also not
desirable since it would imply that funds are idle and earn
nothing. So therefore it is necessary to strike a proper balance
between liquidity and lack of liquidity.

The various ratios that explains about the liquidity of the

firm are:-

1. Current Ratio

Current Ratio = Current Asset

Current Liabilities

2. Acid Test Ratio / quick ratio

Acid Test Ratio = Quick Assets

Current liabilities

3. Absolute liquid ration / cash ratio

Absolute liquid ratio = Absolute liquid assets

Current liabilities

15
B. Turnover ratios:-

Turnover ratios are also known as activity ratios or efficiency

ratios with which a firm manages its current assets. The
following turnover ratios can be calculated to judge the
effectiveness of asset use.

1. Inventory Turnover Ratio

Inventory Turnover Ratio = Cost of goods sold

Average Inventory

2. Debtor Turnover Ratio

Debtor Turnover Ratio = Net Credit Sales

Average Trade Debtors

3. Creditor Turnover Ratio

Creditor Turnover Ratio = Net Credit Purchases

Average Trade Creditor

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 4. Assets Turnover Ratio

a) Total asset turnover

Total asset turnover = Total Sales

Total Assets

b) Net asset turnover

Net asset turnover = Total Sales

Net Assets

c) Fixed asset turnover

Fixed asset turnover = Total Sales

Net Fixed Assets

d) Current asset turnover

Current asset turnover = Total Sales

Current Assets

17
e) Net working capital turnover ratio

Net working capital turnover ratio = Total Sales

Working Capital

C. SOLVENCY OR LRVERAGE RATIOS

The solvency or leverage ratios throws light on the long

term solvency of a firm reflecting it’s ability to assure the long
term creditors with regard to periodic payment of interest during
the period and loan repayment of principal on maturity or in
predetermined installments at due dates. There are thus two
aspects of the long-term solvency of a firm.

a. Ability to repay the principal amount when due

b. Regular payment of the interest.

The ratio is based on the relationship between borrowed funds

and owner’s capital it is computed from the balance sheet, the
second type are calculated from the profit and loss a/c. The
various solvency ratios are:-

1. Debt equity ratio

Debt equity ratio = Outsider Funds (Total Debts)

Shareholder Funds or Equity

2. Debt to total capital ratio

Debt to total capital ratio = Total Debts

Total Assets

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3. Proprietary (Equity) ratio

Proprietary (equity) ratio = Shareholder funds

Total assets

4. Fixed assets to net worth ratio

Fixed assets to net worth ratio = Fixed Assets X 100

Net Worth

5. Fixed assets to long term funds ratio

Fixed assets to long term funds ratio= Fixed Assets X 100

Long-term Funds

6. Debt service (Interest coverage) ratio

Debt Service Ratio=Earnings before interest and tax (EBIT)

Interest Charges

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D. PROFITABILITY RATIOS

The profitability ratio of the firm can be measured by

calculating various profitability ratios. General two groups of
profitability ratios are calculated.

a. Profitability in relation to sales.

b. Profitability in relation to investments.

a. Profitability in relation to sales:-

1. Gross profit margin or ratio

Gross profit margin or ratio = Gross profit X 100

Net sales

2. Net profit margin or ratio

Net profit margin or ratio = Earnings after tax X 100

Net Sales

3. Operating profit margin or ratio

Operating profit = Operating Profit X 100

Margin or ratio Net sales

20
4. Operating Ratio

Operating ratio = Operating expenses X 100

Net sales

5. Expenses Ratio

Cost of goods sold = Cost of goods sold X 100

Net Sales

Administrative = Administrative Expenses X 100

Expenses Ratio Net sales

Selling and distribution

Expenses ratio = Selling and distribution expenses X 100

Net sales

21
b. Profitability in relation to investments:-

1. Return on gross capital employed

Return on gross = Earnings After Tax (EAT) X 100

Capital employed Gross capital employed

2. Return on net capital employed

Return on = Earnings Before Interest & Tax (EBIT) X 100

Net capital Net capital employed

Employed

3. Return on shareholder’s capital employed.

Return on = Earnings after tax (EAT) X 100

Share capital Shareholder capital employed

Employed

4. Return on equity shareholder capital employed.

Return on = Earnings after tax (EAT),

Equity share preference dividends X 100

Capital employed Equity share capital employed

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5. EARNINGS PER SHARE

Earnings = Earnings after tax – Preferred dividends (if any)

Per share Equity shares outstanding

6. DIVIDEND PER SHARE

Dividend = Earnings paid to the ordinary shareholders

Per share Number of ordinary shares outstanding

7. DIVIDENDS PAY OUT RATIO (PAY OUT RATIO)

Dividend pay = Total dividend paid to equity share holders

Out ratio Total earnings available to

Equity share holders

Or

= Dividend per share

Earnings per share

23
8. DIVIDEND AND EARNINGS YIELD

Dividend Yield = Dividend Per share

Market value of ordinary share

Earnings yield = Earnings per share

Market value of ordinary share

9. PRICE EARNING RATIO

Price earnings (P/E) ratio = Market price of share

Earnings per share

ADVANTAGES OF RATIO ANALYSIS:-

1. It simplifies the financial statements.

2. It helps in comparing companies of different size with each
other.
3. It helps in trend analysis which involves comparing a single
company over a period.
4. It highlights important information in simple form quickly. A
user can judge a company by just looking at few numbers
instead of reading the whole financial statements.

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 LIMITATIONS OF RATIO ANALYSIS:-

Despite usefulness, financial ratio analysis has some

disadvantages. Some key demerits of financial ratio analysis
are:-

1. Different companies operate in different industries each having

different environmental conditions such as regulation, market
structure, etc. Such factors are so significant that a
comparison of two companies from different industries might
be misleading.

2. Financial accounting information is affected by estimates and

assumptions. Accounting standards allow different accounting
policies, which impairs comparability and hence ratio analysis
is less useful in such situations.

3. Ratio analysis explains relationships between past information

while users are more concerned about current and future
information.

25
 CHAPTER NO. 2
COMPANY PROFILE

2.1 HISTORY OF BANKING

 Definition Of Bank:-

Banking Means “Accepting Deposits for the purpose of

lending or Investment of deposits of money from the public,
repayable on demand or otherwise and withdraw by cheque,
draft or otherwise.”

(Banking Companies (Regulation) Act, 1949)

Banking is nearly as old as civilization. The history of

banking could be said to have started with the appearance of
money. The first record of minted metal coins was in
Mesopotamia in about 2500B.C. the first European banknotes,
which was handwritten appeared in1661, in Sweden. Cheque
and printed paper money appeared in the 1700’s and 1800’s,
with many banks created to deal with increasing trade.

The history of banking in each country runs in lines with the

development of trade and industry, and with the level of political
confidence and stability. The ancient Romans developed an
advanced banking system to serve their vast trade network,
which extended throughout Europe, Asia and Africa.

26
 Modern banking began in Venice. The word bank comes
from the Italian word “ban co”, meaning bench, because
moneylenders worked on benches in market places. The bank
of Venice was established in 1171 to help the government raise
finance for a war.

At the same time in England, merchant started to ask

goldsmiths to hold gold and silver in their safe return for a fee.
Receipts given to the Merchant were sometimes used to buy or
sell, with the metal itself staying under lock and key. The
goldsmith realized that they could lend out some of the gold
and silver that they had and charge interest, as not all of the
merchants would ask for the gold and silver back at the same
time. Eventually, instead of charging the merchants, the
goldsmiths paid them to deposit their gold and silver.

The bank of England was formed in 1694 to borrow money

from the public for the government to finance the war of
Augsburg against France. By 1709, goldsmith were using bank
of England notes of their own receipts.

New technology transformed the banking industry in the

1900’s round the world, banks merged into larger and fewer
groups and expanded into other country.

27
 2.2 BANKING STRUCTURE IN INDIA

In today’s dynamic world banks are inevitable for the

development of a country. Banks play a pivotal role in
enhancing each and every sector. They have helped bring a
draw of development on the world’s horizon and developing
country like India is no exception.

Banks fulfills the role of a financial intermediary. This means

that it acts as a vehicle for moving finance from those who have
surplus money to (however temporarily) those who have deficit.
In everyday branch terms the banks channel funds from
depositors whose accounts are in credit to borrowers who are
in debit.

Without the intermediary of the banks both their depositors

and their borrowers would have to contact each other directly.
This can and does happen of course. This is what has lead to
the very foundation of financial institution like banks.

Before few decades there existed some influential people

who used to land money. But a substantially high rate of
interest was charged which made borrowing of money out of
the reach of the majority of the people so there arose a need for
a financial intermediate.

The Bank have developed their roles to such an extent that

a direct contact between the depositors and borrowers in now
known as disintermediation.

Banking industry has always revolved around the traditional

function of taking deposits, money transfer and making
advances. Those three are closely related to each other, the
objective being to lend money, which is the profitable activity of
the three. Taking deposits generates funds for lending and
money transfer services are necessary for the attention of

28
 deposits. The Bank have introduced progressively more
sophisticated versions of these services and have diversified
introduction in numerable areas of activity not directly relating to
this traditional trinity.

INDIAN BANKING SYSTEM

29
 2.3 PROFILE OF PNB BANK

Punjab national bank is the third largest bank in India. It was

registered on May 19, 1894 under the Indian companies act
with its office in Anarkali bazaar Lahore. Today, the bank is the
second largest state owned commercial bank in India with
about 5000 branches across 764 cities. It serves over 37 million
customers. The bank has been ranked 248th biggest bank in the
world by the bankers almanac, London. The bank’s total assets
for financial year 2007 were about us$60 billion. PNB has a
banking subsidiary in the UK, as well as branches in Hong
Kong, Dubai and Kabul, and representative offices in Almighty,
Dubai, Oslo, and Shanghai.Punjab national bank is one of the
big four banks of India, along with ICICI bank, state bank of
India and Canara bank.

 HISTORY:-

1895:
PNB commenced its operations in Lahore. PNB has
the distinction of being the first Indian bank to have been
started solely with Indian capital that has survived to the
present. (The first entirely Indian bank, the Oudh commercial
bank, was established in 1881 in Faizabad, but failed in 1958.)
PNB’s founders included several leaders of the Swadeshi
movement such as Dyal Singh Majithia and Lala Harkishen
Lal,[2] Lala Lalchand, Shri Kali Prosanna Roy, Shri E.C.
Jessawala, Shri Prabhu Dayal, Bakshi Jaishi Ram, and Lala
Dholan Dass. Lala Lajpat Rai was actively associated with the
management of the bank in its early years.

1904:
PNB established branches in Karachi and Peshawar.

1940:
PNB absorbed Bhagwan Dass Bank, a scheduled
bank located in Delhi circle.

30
 1947:
Partition of India and Pakistan at independence.PNB
lost its premises in Lahore, but continued to operate in
Pakistan.

1951:
PNB acquired the 39 branches of Bharat Bank (est.
1942); Bharat Bank became Bharat Nidhi Ltd.

1961:
PNB acquired universal bank of India.

1960:
PNB amalgamated indo commercial bank (est. 1933)
in a rescue.

1996
- A package was developed for corporate customers for
fast remittance of funds from different up-country branches to
the controlling office.

- The concept of ‘Chief Host’ introduced by the bank for

Resolving customers’ complaints in the minimum possible time
has resulted in substantial improvement in customer service.

- The company also entered into new activity of

arranging Mergers, Acquisitions and Takeovers which has been
quite rewarding in terms of return.

2000
- The Credit Rating Information Services of India has
suspended its rating for the fixed deposit programmers of
Amruntanjan Finance.

- The Bank has introduced a scheme for providing

finance against mortgage of immovable property.

- Punjab National Bank and Bank of Baroda will tie up to

31
 form a subsidiary for a foray into life insurance business,
banking industry.

- The Bank is the first amongst the public sector banks

to come out with Voluntary Retirement Scheme.

2002

- Punjab National Bank is in a joint venture with Infosys

for the implementation of a Centralized Banking Solution for it.
The bank plans to implement Centralized Banking Solutions
establishing connectivity between its branches to cover 1,500 to
2,000 branches and all ATMs by 2004.

- Punjab National Bank has launched a special loan

scheme called ‘Fin-Basket’, a composite package of retail
loans, for a minimum size of Rs 5 lakhs.

- Punjab National Bank (PNB) has been presented with

the `Best Bank Award’ for excellence in banking technology.

2003

- Punjab National Bank (PNB) has entered into an

alliance with New India Assurance for selling its general
insurance products.

- Punjab National Bank has informed that Shri V K

Sibal, a director on the Board of the Bank has resigned from the
Board. Ministry of Finance, Govt. of India, vide its letter dated
May 09, 2003 has conveyed the acceptance of resignation
w.e.f. May 07, 2003.
- Punjab National Bank has informed the Exchange
that the Bank has signed a Memorandum of Understanding
(MOU) on June 24, 2003 with Principal Financial Services Inc.
(USA) and Vijaya Bank for joint venture partnership in Life
Insurance, Pensions and Asset Management’s (MF) business.

32
 - New Delhi: Punjab National Bank has entered an
agreement with Oriental Bank of Commerce, Indian Bank, UTI
Bank and Global Trust Bank for sharing ATMs spread across
the country.

-Punjab National Bank (PNB) has decided to

amalgamate its merchant banking arm 'PNB Caps' with itself.

2004

-PNB acquires Hindustan Transmission Product

Limited (HTPL) assets under Sarfaesi.

-Export Credit Guarantee Corporation of India Ltd

(ECGC) and Punjab National Bank (PNB) sign a corporate
agency agreement for marketing ECGC's export credit
insurance products through the network of PNB branches.

-Tata Consultancy Services (TCS) has joined hands

with PeopleSoft to handle a Rs 5-10 crore worth project
mandated by Punjab National Bank(PNB) to implement human
capital management and payroll solution.

-Punjab National Bank has informed that the Bank

has entered into money transfer arrangement with Western
Union Through their agent M/s Weizmann Forex Ltd.

-Launches corporate internet banking facility on

November 18, 2004.

2006

-Punjab National Bank today tied up with MasterCard

International to launch a signature-based debit card.

-PNB opens branch in Uttaranchal.

-Punjab National Bank (PNB) has tied up with Indian

Airlines for online booking of air tickets.
33
 2008

- Punjab National Bank entered into a memorandum

of understanding (MoU) with IL&FS Cluster Development
Initiative Ltd in order to provide impetus to financing of industrial
infrastructure projects.

-Punjab National Bank (PNB), has tied up with

Networth Stock Broking Ltd (NSBL) for an Internet trading
alliance.

- Punjab National Bank cut its prime lending rate by

50 bps.

- Punjab National Bank has informed that Government

of India has nominated Shri Vinod Kumar Mishra as part-time
non-official Director on the Board of the Bank for a period of
three years from the date of Notification of his appointment or
until further orders, whichever is earlier.

2009

- Punjab National Bank (PNB) has entered into a pact

with Ashok Leyland to extend finance to the latter’s commercial
vehicle customers.

- Sh. K R Kamath, has been appointed as Chairman

and Managing Director (MD) of the Bank by Government of
India, Ministry of Finance, Deptt. Of Economic Affairs (Banking
Division) vide notification dated October 27, 2009 for a period of
5 years from the date of taking charge and / or until further
orders, whichever is earlier. Accordingly, Shri. K R Kamath has
taken charge of Chairman and Managing Director on October
28, 2009.

34
 2010

- Punjab National Bank has appointed Shri Mohinder

Paul Singh as Workmen Employees Director on the Board of
the Bank w.e.f. January 28, 2010.

- Punjab National Bank has forged an alliance with

Oriental Insurance Company Limited, to offer a floater Health
Insurance Policy covering the proposer and family under one
sum insured.

2011

- Acquisition Of 33% Stake in Metlife By Punjab

National Bank.

- PNB – Agreement with Weizmann Forex Ltd & BFC

Forex & Financial Services Ltd.

- PNB has launched two new deposit schemes- FCNR

Premium Linked Deposit Scheme and NRE Rupee Flexible
Deposit Scheme- which would provide special benefits to the
NRIs.

- PNB & Metlife partner for life insurance venture.

- PNB’s Mega Recovery Camps receives excellent

response from small agricultural 35orrower in recovering the
loan amount.

2015

- In a move to bring cheers for the loan seekers,

India’s second largest public sector lender, Punjab National
Bank (PNB) has reduced interest rates on housing and car
loans by up to 50 basis points.

- PNB raised interest rates on domestic and NRE term

deposits.

35
 - PNB sold stake to LIC for Rs 1,590 cr.

-PNB Awarded Overall Best Corporate Social

Responsibility Awards 2012.

2016

-India’s second largest public sector lender Punjab

National Bank.

2.4 VISION AND MISSION

Vision:-

 To be the leading provider of financial services in India and a

major global bank.

Mission:-

We will leverage our people, technology, speed and financial

capital to:

 Be the banker of first choice for our customers by delivering

high quality, world-class products and services.

 Expand the frontiers of our business globally.

 Play a proactive role in the full realization of India’s potential.

 Maintain a healthy financial profile and diversify our earnings

across businesses and geographies.
36
  Maintain high standards of governance and ethics.

 Contribute positively to the various countries and markets in

which we operate.

 Create value for our stakeholders.

2.5 ACHIEVEMENTS AND AWARDS

ACHIEVEMENTS:-

-Punjab National Bank announced its Q1FY2010 results

on 29 July 2009, delivering 62% y-o-y growth in net profits to
Rs832 crore (Rs512cr), substantially ahead of expectations on
account of large treasury gains, apart from healthy operating
performance.
-While the bank’s deposit growth was reasonably robust
at 4.4% sequentially and 26.5% y-o-y, unlike the peers its
growth in advances also remained strong at 38% y-o-y.

-Other Income surged 113% y-o-y, driven by strong

treasury gains of Rs355 crore during the quarter in line with
industry trends, even as Fee income was also robust at 45% y-
o-y, on the back of strong balance sheet growth.

-Operating expenses were higher than expected on

account of Rs150 crore of provisions for imminent wage hikes.

-Gross and Net NPA ratios remained stable sequentially

at 1.8% and 0.2%, with the bank not adopting the guidelines of
treating floating provisions as part of tier 2 capital instead of
adjusting against NPAs on express permission from the RBI.

37
 AWARDS AND DISTINCTIONS:-

-Ranked among top 50 companies by the leading financial

daily, Economic Times.

-Ranked as 323rd biggest bank in the world by Bankers

Almanac (January 2006), London.

-Earned 9th place among India’s Most Trusted top 50

service brands in Economic Times- A.C Nielson Survey.

-Golden Peacock Award for Excellence in Corporate

Governance – 2005 by Institute of Directors.

CHAPTER NO. 3
RESEARCH METHODOLOGY

The procedure adopted for conducting the research

require a lot of Attention as it has direct bearing on accuracy,
reliability and adequacy of results. It is due to this reason that
research methodology, which we used at the time of conducting
the research, needs to be elaborated upon. It may be
understood as a science of study how research methods, but
also considers the logic behind the method used in the context
of the research study. Research methodology is a way to
systematically study and solve the research problem. If a
researcher wants to claim his study as a good study, he must
clearly state the methodology adopted in conducting the
research, so that it was be judged by the reader whether the
methodology of work done is sound or not.

The research methodology includes:-

1) Objective of the study

2) Meaning of research
3) Research problem

38
 4) Research design
5) Data collection method
6) Analysis and interpretation of data
7) Limitation of study

3.1 OBJECTIVE OF THE STUDY

Objectives are the ends that states specifically how goal be

achieved. Every study must have an objective for which all the
efforts have been done. Without objective no research can be
conducted and no result can be obtained.

On the basis of objective all the research process is

followed. Objectives are the main aspect of every study.

The objective of the study gives direction to go through the

research problem. It guides the researcher and keeps him on
track. I have two objectives regarding my research project.
These are shown below:-

A. Primary objective

B. Secondary objective

A. Primary objective:-

1) To study the software used in PNB Bank.

2) To analyze the financial statements of the corporation to

assess its true financial position by the use of ratios.

B. Secondary objective:-

1) To find out the shortcomings in PNB Bank.

2) To see whether PNB Bank is going well or not in different

areas.

39
 IMPORTANCE OF THE STUDY

-By “FINANCIAL PERFORMANCE ANALYSIS OF ICICI

Bank” we would be able to get a fair picture of the financial
position of ICICI Bank.

-By showing the financial performance to various lenders

and creditors it is possible to get credit in easy terms if good
financial condition is maintained in the company with assets
outweighing the liabilities.

-Protecting the property of the business

-Compliance with legal requirements.

3.2 MEANING OF RESEARCH

Research is defined as “a scientific and systematic search

for pertinent information on a specific topic”. Research is an art
of scientific investigation. Research is a systematized effort to
gain new knowledge. It is a careful investigation or inquiry
especially through search for new facts in any branch of
knowledge. Research comprises defining and redefining
problem, formulating, hypothesis or suggested solutions.
Making deductions and research conclusion to determine
whether they if the formulating hypothesis.

Research is thus, an original contribution to the existing

stock of knowledge making for its advancement. The search
for knowledge through objective and systematic method of
finding solutions to a problem is research.

3.3 RESEARCH PROBLEM

The first step while conducting research is careful definition

of research problem. In this world no one is the perfect. Every
40
 researcher has to face many problem which conducting any
research that’s why problem statement is defined to know
which type of problem a researcher has to face while
conducting any study.

It is said that:

“Problem well defined is problem half solved”.

Basically a problem statement refers to some difficulty,

which researcher experience in the context of either a
theoretical or practical solution or wants to obtain the solution
for the same.

Hare the problem statement is:

“To make financial analysis statement of PNB Bank”.

3.4 RESEARCH DESIGN

A research design is the arrangement of conditions for

collection and analysis of data in a manner that aims to
combine relevance to the research purpose with economy in
procedure. Research design is the conceptual structure with in
which research in conducted. It constitutes the blueprint for the
collection measurement and analysis of data. Research design
includes an outline of what the researcher will do form writing
the hypothesis and it operational implication to the final analysis
of data. A research design is a framework for the study and
used as guide in collection and analyzing the data. It is strategy

41
 specifying which approach will be used for the gathering and
analyzing the data. It also include the time and cost budget
since most studies are done under these two constraints. The
design is such studies must be rigid and not flexible and most
focus attention on the following:

 What is the study about?

 Why is the study being made?
 Where will the study be carried out?
 What type of data is required?
 What period of time will the study include?
 What will be sample design?
 How will the data analyzed?

Type of research design:-

I. Exploratory research design

II. Experimental research design
III. Descriptive research design
IV. Diagnostic research design

I. Exploratory research design:- This research design is

preferred when researcher has a vague idea about the
problem the researcher has to explore the subject.
II. Experimental Research Design:- The research design is
used to provide a strong basis for the existence of casual
relationship between two or more variables.
III. Descriptive Research Design:- It seeks to determine the
answers to who, what, where, when and how questions. It is
based on some previous understanding of the matter.
IV. Diagnostic Research Design:- It determines the frequency
with which something occurs or its association with
something else.

42
 RESEARCH DESIGN USED IN THE STUDY:

Descriptive research design is used in this study because it

will ensure the minimization of bias and maximization of
reliability of data collected. Descriptive study is based on some
previous understanding of the topic. Research has got a very
specific objective and clear cut data requirements the
researcher had to use fact and information already available
through financial statements of earlier years and analyze these
to make critical evaluation of the available material.
Hence by making the type of the research conducted to be
both Descriptive and Analytical in nature.

3.5 DATA COLLECTION METHOD

The process of data collection begins after a research

problem has been defined and research design ahs been
chalked out.

There are two types of data –

 PRIMARY DATA -

It is first hand data, which is collected by researcher itself.

Primary data is collected by various approaches so as to get a
precise, accurate, realistic and relevant data. The main tool in
gathering primary data was investigation and observation. It
was achieved by a direct approach and observation from the
officials of the company.

 SECONDARY DATA -

It is the data which is already collected by someone else.

Researcher has to analyze the data and interprets the results. It
has always been important for the completion of any report. It
provides reliable, suitable, adequate and specific knowledge.
43
 Type of data used in the study:-

The required data for the study are basically Secondary in

nature and the data are collected from-

 The audited reports of the company.

 INTERNET:- which includes required financial data
collected from PNB Bank official website i.e.
www.pnbindia.in and some other website on the internet
for the purpose of getting all the required financial data of
the bank.

3.6 ANALYSIS AND INTERPRETATION

The data collected were edited, classified and tabulated for

analysis. The analytical tools used in this study are:-

 Comparative balance sheet

 Ratio analysis
 Cash flow statement

3.7 LIMITATION OF THE STUDY

 Difficulty in data collection.

 Limited knowledge about the bank in initial stage.
 The analysis and interpretation are used on secondary
contained in the published annual reports of PNB bank for
the study period.
 Ratio itself will not completely show the company’s good
or bad financial position.

44
  Inter firm comparison was not possible due to the non
availability of competitors data.
 The study of financial performance can be only a mean to
know about the financial condition of the company and
cannot show a through picture of the activity of the
company.

CHAPTER NO. 4
DATA ANALYSIS AND INTERPRETATION

4.1 BALANCE SHEET OF PNB BANK

Balance Sheet ------------------- in Rs. Cr. -------------------

Mar '16 Mar '15 Mar '14 Mar '13 Mar '12

12 months 12 months 12 months 12 months 12 months

Capital and Liabilities:

Total Share Capital 339.18 316.81 315.30 315.30 315.30

Equity Share Capital 339.18 316.81 315.30 315.30 315.30

Share Application Money 0.00 0.00 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves 26,028.37 19,720.99 15,915.63 12,824.59 10,467.35

Revaluation Reserves 1,449.53 1,470.76 1,491.99 1,513.74 1,535.70

45
Net Worth 27,817.08 21,508.56 17,722.92 14,653.63 12,318.35

Deposits 379,588.48 312,898.73 249,329.80 209,760.50 166,457.23

Borrowings 37,264.27 31,589.69 19,262.37 4,374.36 5,446.56

Total Debt 416,852.75 344,488.42 268,592.17 214,134.86 171,903.79

Other Liabilities &

13,524.18 12,328.27 10,317.69 18,130.13 14,798.23
Provisions

Total Liabilities 458,194.01 378,325.25 296,632.78 246,918.62 199,020.37

46
 Mar '16 Mar '15 Mar '14 Mar '13 Mar '12

12 months 12 months 12 months 12 months 12 months

Assets

Cash & Balances with RBI 18,492.90 23,776.90 18,327.58 17,058.25 15,258.15

Balance with Banks,

10,335.14 5,914.32 5,145.99 4,354.89 3,572.57
Money at Call

Advances 293,774.76 242,106.67 186,601.21 154,702.99 119,501.57

Investments 122,629.47 95,162.35 77,724.47 63,385.18 53,991.71

Gross Block 5,265.08 4,981.60 4,215.21 3,930.36 3,699.64

Accumulated Depreciation 2,096.22 1,876.01 1,701.74 1,533.25 1,384.12

Net Block 3,168.86 3,105.59 2,513.47 2,397.11 2,315.52

Capital Work In Progress 0.00 0.00 0.00 0.00 0.00

Other Assets 9,792.88 8,259.42 6,320.07 5,020.20 4,380.84

Total Assets 458,194.01 378,325.25 296,632.79 246,918.62 199,020.36

Contingent Liabilities 173,768.84 101,465.73 68,124.47 79,270.65 80,606.88

Bills for collection 50,981.22 37,449.53 33,215.78 31,941.43 23,448.99

Book Value (Rs) 777.39 632.48 514.77 416.74 341.98

47
 4.2 PROFIT AND LOSS ACCOUNT

Profit & Loss account ------------------- in Rs. Cr. -------------------

Mar '16 Mar '15 Mar '14 Mar '13 Mar '12

12 12 12 12 12
months months months months months

Income

Interest Earned 36,428.03 26,986.48 21,466.91 19,326.16 14,265.02

Other Income 4,202.60 3,612.58 3,565.31 2,919.69 1,997.56

Total Income 40,630.63 30,599.06 25,032.22 22,245.85 16,262.58

Expenditure

Interest expended 23,013.59 15,179.14 12,944.02 12,295.30 8,730.86

Employee Cost 4,723.48 4,461.10 3,121.14 2,924.38 2,461.54

Selling and Admin Expenses 3,353.59 2,813.45 1,701.46 1,406.42 884.19

Depreciation 292.26 255.85 222.83 191.06 170.23

Miscellaneous Expenses 4,363.51 3,456.02 3,137.42 2,337.80 1,966.98

Preoperative Exp Capitalized 0.00 0.00 0.00 0.00 0.00

Operating Expenses 9,405.85 8,367.96 5,761.36 5,026.81 3,902.55

Provisions & Contingencies 3,326.99 2,618.46 2,421.49 1,832.85 1,580.39

Total Expenses 35,746.43 26,165.56 21,126.87 19,154.96 14,213.80

48
 Mar '16 Mar '15 Mar '14 Mar '13 Mar '12

12 12 12 12
12 months
months months months months

Net Profit for the Year 4,884.20 4,433.50 3,905.36 3,090.88 2,048.76

Extraordinary Items 7.88 0.00 0.00 0.00 0.00

Profit brought forward 0.00 0.00 7.64 0.00 15.52

Total 4,892.08 4,433.50 3,913.00 3,090.88 2,064.28

Preference Dividend 0.00 0.00 0.00 0.00 0.00

Equity Dividend 746.19 696.99 693.67 630.61 409.89

Corporate Dividend Tax 121.05 113.07 116.43 107.17 69.66

Per share data (annualized)

Earnings Per Share (Rs) 144.00 139.94 123.86 98.03 64.98

Equity Dividend (%) 220.00 220.00 220.00 200.00 130.00

Book Value (Rs) 777.39 632.48 514.77 416.74 341.98

Appropriations

Transfer to Statutory Reserves 1,390.32 1,258.39 1,532.46 1,155.46 596.14

Transfer to Other Reserves 2,634.53 2,365.05 1,570.44 1,190.00 988.59

Proposed Dividend/Transfer to
867.24 810.06 810.10 737.78 479.55
Govt.

Balance c/f to Balance Sheet 0.00 0.00 0.00 7.64 0.00

Total 4,892.09 4,433.50 3,913.00 3,090.88 2,064.28

49
 4.3 CASH FLOW STATEMENT

Cash Flow Statement ------------------- in Rs. Cr. -------------------

Mar '16 Mar '15 Mar '14 Mar '13 Mar '12
12 12 12 12 12
months months months months months
Net Profit Before Tax 7037.04 6563.72 5904.78 4766.92 3295.91
Net Cash From Operating
-811.22 8045.67 1835.99 2105.16 1756.13
Activities
Net Cash (used in)/from
-492.34 -1083.66 -409.41 -395.84 -444.46
Investing Activities
Net Cash (used in)/from Financing
440.38 -744.36 633.84 873.11 1873.54
Activities
Net (decrease)/increase In Cash
-863.18 6217.65 2060.42 2582.42 3185.21
and Cash Equivalents
Opening Cash & Cash
29691.21 23473.56 21413.14 18830.72 15645.52
Equivalents
Closing Cash & Cash Equivalents 28828.03 29691.21 23473.56 21413.14 18830.72

50
 4.4 FINANCIAL RATIOS

Key Financial Ratios

Mar '16 Mar '15 Mar '14 Mar '13 Mar '12

Investment Valuation Ratios

Face Value 10.00 10.00 10.00 10.00 10.00
Dividend Per Share 22.00 22.00 22.00 20.00 13.00
Operating Profit Per Share (Rs) 223.61 205.58 191.63 151.48 109.81
Net Operating Profit Per Share
1,170.81 940.76 777.82 694.81 505.09
(Rs)
Free Reserves Per Share (Rs) 130.21 69.25 63.79 64.04 63.79
Bonus in Equity Capital -- -- -- -- --
Profitability Ratios
Interest Spread 4.51 4.67 4.46 4.18 4.18
Adjusted Cash Margin(%) 12.80 15.39 16.52 14.60 13.72
Net Profit Margin 12.09 14.56 15.64 13.76 12.68
Return on Long Term Fund(%) 113.95 108.49 116.11 129.83 111.52
Return on Net Worth (%) 18.52 22.12 24.06 23.52 19.00
Adjusted Return on Net Worth
18.50 22.11 24.04 23.50 18.99
(%)
Return on Assets Excluding
777.39 632.48 514.77 416.74 341.98
Revaluations
Return on Assets Including
820.13 678.91 562.09 464.75 390.68
Revaluations

51
Management Efficiency Ratios
Interest Income / Total Funds 9.53 8.87 9.07 9.89 8.86
Net Interest Income / Total
4.01 4.35 4.28 4.34 4.00
Funds
Non Interest Income / Total
0.16 0.19 0.16 0.25 0.13
Funds
Interest Expended / Total Funds 5.52 4.52 4.79 5.55 4.86
Operating Expense / Total Funds 2.19 2.41 2.05 2.18 2.08
Profit Before Provisions / Total
1.91 2.05 2.31 2.32 1.96
Funds
Net Profit / Total Funds 1.17 1.32 1.45 1.40 1.14
Loans Turnover 0.15 0.14 0.14 0.16 0.15
Total Income / Capital Employed
9.69 9.06 9.24 10.14 8.99
(%)
Interest Expended / Capital
5.52 4.52 4.79 5.55 4.86
Employed (%)
Total Assets Turnover Ratios 0.10 0.09 0.09 0.10 0.09
Asset Turnover Ratio 0.10 0.09 0.10 0.11 4.35
Profit And Loss Account Ratios
Interest Expended / Interest
63.18 56.25 60.30 63.62 61.20
Earned
Other Income / Total Income 1.68 2.12 1.75 2.46 1.43
Operating Expense / Total
22.56 26.64 22.19 21.53 23.10
Income
Selling Distribution Cost
0.09 0.13 0.16 0.14 0.14
Composition
Balance Sheet Ratios
Capital Adequacy Ratio 12.63 12.42 14.16 14.03 13.46
Advances / Loans Funds (%) 77.17 78.98 77.31 80.15 76.19

52
Debt Coverage Ratios
Credit Deposit Ratio 77.39 76.25 74.34 72.88 70.55
Investment Deposit Ratio 31.45 30.75 30.74 31.20 32.38
Cash Deposit Ratio 6.10 7.49 7.71 8.59 9.02
Total Debt to Owners Fund 14.40 15.62 15.36 15.96 15.44
Financial Charges Coverage
0.36 0.47 0.50 0.43 0.42
Ratio
Financial Charges Coverage
1.22 1.31 1.32 1.27 1.25
Ratio Post Tax
Leverage Ratios
Current Ratio 0.02 0.03 0.02 0.02 0.02
Quick Ratio 23.81 22.24 20.47 9.75 9.40

Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit 17.75 18.27 20.74 23.86 23.40
Dividend Payout Ratio Cash
16.75 17.27 19.62 22.47 21.61
Profit
Earning Retention Ratio 82.23 81.72 79.25 76.12 76.59
Cash Earning Retention Ratio 83.24 82.72 80.37 77.51 78.38
Adjusted Cash Flow Times 73.39 66.77 60.43 63.95 75.05

Mar '16 Mar '15 Mar '14 Mar '13 Mar '12

Earnings Per Share 144.00 139.94 123.86 98.03 64.98

Book Value 777.39 632.48 514.77 416.74 341.98

53
 CAPITAL STRUCTURE OF PNB BANK

Punjab National Bank

Capital Structure
Period Instrument --- CAPITAL (Rs. cr) --- -PAIDUP-

From To Authorized Issued Shares (nos) Face Value Capital

2015 2016 Equity Share 3000 339.18 339178683 10 339.18

2014 2015 Equity Share 3000 316.81 316812157 10 316.81

2013 2014 Equity Share 3000 315.3 315302500 10 315.3

2012 2013 Equity Share 1500 315.3 315302500 10 315.3

2011 2012 Equity Share 1500 315.3 315302500 10 315.3

2010 2011 Equity Share 1500 315.3 315302500 10 315.3

2009 2010 Equity Share 1500 315.3 315302500 10 315.3

2008 2009 Equity Share 1500 315.3 315302500 10 315.3

2007 2008 Equity Share 1500 265.3 265302500 10 265.3

2006 2007 Equity Share 1500 265.3 265302500 10 265.3

2005 2006 Equity Share 1500 265.3 212241300 10 212.24

54
 4.5 RESULTS AND FINDINGS
Finding-1. The profitability ratio of PNB Bank is not
sound in last three years.

Finding-2. In the last three years no profit balance is

transfer to the balance sheet of the PNB Bank.

Finding-3. The current ratio has shown in the statement

is non fluctuating trend as 0.02, 0.02, 0.03, 0.02 during 2013,
2014, 2015, 2016 respectively.

Finding-4. The quick ratio is increased from 9.75 to 23.81

in the year 2013-2016.

Finding-5. Earnings per share ratio are also increased

from 98.03 to 144.00 during 2013-2016.

Finding-6. The capital adequacy ratio is decreased from

14.03 to 12.63 during 2013 to 2016, shown in the financial ratio
table.

Findung-7 The operating expenses ratio has shown is

fluctuating trend as 2.18, 2.05, 2.41, 2.19 in the years 2013,
2014, 2015, 2016 respectively.

Finding-8 The PNB bank has raised 50% equity share

capital during 2013-2014. Therefore banks profit is reduced
because of dividend that’s paid for the shareholders.

Finding-9 Increase the profit of bank, bank should

decrease their operating expenses and increase their income.
Also increase its liquidity, bank should keep some more cash in
its hand instead of giving more and more advances.

55
 CHAPTER NO. 5
RECOMENDATIONS AND CONCLUSION
6.1 RACOMENDATIONS:-

With regard to banking products and services, consumers

respond at different rates, depending on the consumer’s
characteristics. Hence, PNB should try to bring their new
product and services to the attention of potential early adopters.

 Due to the intense competition in the financial market, PNB

should adopt better strategies to attract more customers.
 Return on investment company reputation and premium
outflow are most preferred attributes that are expected by
the respondents. Hence greater focus should be given to
these attributes.
 PNB should adopt effective promotional strategies to
increase the awareness level among the consumers.
 PNB should ask for their consumer feedback to know
whether the consumers are really satisfied or dissatisfied
with the service and product of the bank. If they are
dissatisfied, then the reasons for dissatisfaction should be
found out and should be corrected in future.
 The PNB brand name has earned a lot of goodwill and
enjoys high brand equity. As there is intense competition,
PNB should work hard to maintain its position and offer
better service and products to consumers.
 The bank should try to increase the Brand image through
performance and service then, only the customers will be
satisfied.

Majority of the people find banking important in their life, so PNB

should employ the strategies to convert the want in to need which will
enrich their business.

56
 6.2 CONCLUSION:-

On the basis of various techniques applied for the financial

analysis of PNB Bank we can arrive at a conclusion that the
financial position and overall performance of the bank is
satisfactory. The income of the bank has increased over the
period but not in the same pace of expenses. But the bank has
succeeded in maintaining a reasonable profitability position. The
bank has succeeded in increasing its share capital also which
has increased around50% in the last 3 years. Individuals are the
major shareholders. The major achievement of the bank has
been a tremendous increase in its deposits, which has always
been its main objective. Fixed and current deposits have also
shown an increasing trend. Equity shareholders are also
enjoying an increasing trend in the return on their capital.
Though current assets and liabilities (current liquidity) of the
bank is not so satisfactory but bank has succeeded in
maintaining a stable solvency position over the years.

As far as the ratio of external and internal equity is

concerned, it is clear that bank has been using more amount of
external equity in the form of loans and borrowings than owner’s
equity. Bank’s investments are also showing an increasing trend.
Due to increase in advances, the interest received by the bank
from such advances is proving to be the major source of income
for the bank.

57
 BIBLIOGRAPHY

WEBSITES:

 http://www.google.com/
 http://www.moneycontral.com/
 http://www.pnbindia.in/
 http://www.wikipedia.com/
 http://www.scribd.com/

BOOKS:

 Kishore M. Ravi, (2007), Financial Management,

 Pandey I.M, (2006), Financial Management

58