1.

1 Introduction of Industry

1.1.1 Banking in India

Structure of the organised banking sector in India.

Banking in India, in the modern sense, originated in the last decades of the 18th century.
Among the first banks were the Bank of Hindustan, which was established in 1770 and
liquidated in 1829–32; and the General Bank of India, established in 1786 but failed in 1791.

The largest bank, and the oldest still in existence, is the State Bank of India (S.B.I). It
originated as the Bank of Calcutta in June 1806. In 1809, it was renamed as the Bank of
Bengal. This was one of the three banks funded by a presidency government, the other two
were the Bank of Bombay and the Bank of Madras. The three banks were merged in 1921 to
form the Imperial Bank of India, which upon India's independence, became the State Bank
of India in 1955. For many years the presidency banks had acted as quasi-central banks, as
did their successors, until the Reserve Bank of India was established in 1935, under the
Reserve Bank of India Act, 1934.

In 1960, the State Banks of India was given control of eight state-associated banks under the
State Bank of India (Subsidiary Banks) Act, 1959. These are now called its associate

1
banks. In 1969 the Indian government nationalized 14 major private banks. In 1980, 6 more
private banks were nationalized. These nationalized banks are the majority of lenders in the
Indian economy. They dominate the banking sector because of their large size and
widespread networks.

The Indian banking sector is broadly classified into scheduled banks and non-scheduled
banks. The scheduled banks are those included under the 2nd Schedule of the Reserve Bank
of India Act, 1934. The scheduled banks are further classified into: nationalized banks; State
Bank of India and its associates; Regional Rural Banks (RRBs); foreign banks; and other
Indian private sector banks The term commercial banks refers to both scheduled and non-
scheduled commercial banks regulated under the Banking Regulation Act, 1949.

Generally banking in India is fairly mature in terms of supply, product range and reach-even
though reach in rural India and to the poor still remains a challenge. The government has
developed initiatives to address this through the State Bank of India expanding its branch
network and through the National Bank for Agriculture and Rural Development (NBARD)
with facilities like microfinance.

1.1.2 History
Ancient India

The Vedas (2000–1400 BCE) are earliest Indian texts to mention the concept of usury. The
word kusidin is translated as usurer. The Sutras (700–100 BCE) and the Jatakas (600–400
BCE) also mention usury. Also, during this period, texts began to condemn usury. Vasishtha
forbade Brahmin and Kshatriya varnas from participating in usury. By the 2nd century CE,
usury seems to have become more acceptable. The Manusmriti considers usury an
acceptable means of acquiring wealth or leading a livelihood. It also considers money lending
above a certain rate, different ceiling rates for different caste, a grave sin. The Jatakas also
mention the existence of loan deeds. These were called rnapatra or rnapanna. The
Dharmashastras also supported the use of loan deeds. Kautilya has also mentioned the usage
of loan deeds. Loans deeds were also called rnalekhaya.

Later during the Mauryan period (321–185 BCE), an instrument called adesha was in use,
which was an order on a banker directing him to pay the sum on the note to a third person,
which corresponds to the definition of a modern bill of exchange. The considerable use of
these instruments has been recorded. In large towns, merchants also gave letters of credit to
one another.

2
Medieval era

The use of loan deeds continued into the Mughal era and were called dastawez. Two types of
loans deeds have been recorded. The dastawez-e-indultalab was payable on demand and
dastawez-e-miadi was payable after a stipulated time. The use of payment orders by royal
treasuries, called barattes, have been also recorded. There are also records of Indian bankers
using issuing bills of exchange on foreign countries. The evolution of hundis, a type of credit
instrument, also occurred during this period and remain in use.

Colonial era

During the period of British rule merchants established the Union Bank of Calcutta in 1829,
first as a private joint stock association, then partnership. Its proprietors were the owners of
the earlier Commercial Bank and the Calcutta Bank, who by mutual consent created Union
Bank to replace these two banks. In 1840 it established an agency at Singapore, and closed
the one at Mirzapore that it had opened in the previous year. Also in 1840 the Bank revealed
that it had been the subject of a fraud by the bank's accountant. Union Bank was incorporated
in 1845 but failed in 1848, having been insolvent for some time and having used new money
from depositors to pay its dividends.

The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint
Stock bank in India; it was not the first though. That honor belongs to the Bank of Upper
India, which was established in 1863 and survived until 1913, when it failed, with some of its
assets and liabilities being transferred to the Alliance Bank of Shimla.

Foreign banks too started to appear, particularly in Calcutta, in the 1860s. The Comptoir
d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862;
branches followed in Madras and Pondicherry, then a French possession. HSBC established
itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the
trade of the British Empire, and so became a banking centre.

The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in
1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in
Lahore in 1894, which has survived to the present and is now one of the largest banks in
India.

Around the turn of the 20th Century, the Indian economy was passing through a relative period of
stability. Around five decades had elapsed since the Indian rebellion, and the social,

3
industrial and other infrastructure had improved. Indians had established small banks, most of
which served particular ethnic and religious communities.

The presidency banks dominated banking in India but there were also some exchange banks
and a number of Indian joint stock banks. All these banks operated in different segments of
the economy. The exchange banks, mostly owned by Europeans, concentrated on financing
foreign trade. Indian joint stock banks were generally undercapitalized and lacked the
experience and maturity to compete with the presidency and exchange banks. This
segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the
times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into
separate and cumbersome compartments.”

The period between 1906 and 1911 saw the establishment of banks inspired by the Swadeshi
movement. The Swadeshi movement inspired local businessmen and political figures to
found banks of and for the Indian community. A number of banks established then have
survived to the present such as The South Indian Bank, Bank of India, Corporation Bank,
Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India.

The fervor of Swadeshi movement led to the establishment of many private banks in
Dakshina Kannada and Udupi district, which were unified earlier and known by the name
South Canara (South Kanara) district. Four nationalized banks started in this district and also
a leading private sector bank. Hence undivided Dakshina Kannada district is known as
"Cradle of Indian Banking".

The inaugural officeholder was the Britisher Sir Osborne Smith (1 April 1935), while C. D.
Deshmukh (11 August 1943) was the first Indian governor. On September 4, 2016, Urjit R
Patel begins his journey as the new RBI Governor, taking charge from Raghuram Rajan.

During the First World War (1914–1918) through the end of the Second World War (1939–
1945), and two years thereafter until the independence of India were challenging for Indian
banking. The years of the First World War were turbulent, and it took its toll with banks
simply collapsing despite the Indian economy gaining indirect boost due to war-related
economic activities. At least 94 banks in India failed between 1913 and 1918 as indicated in
the following table:

4
 Number of banks Authorised Capital Paid-up Capital
Years
that failed (₹ Lakhs) (₹ Lakhs)

1913 12 274 35

1914 42 710 109

1915 11 56 5

1916 13 231 4

1917 9 76 25

1918 7 209 1

Post-Independence

The partition of India in 1947 adversely impacted the economies of Punjab and West
Bengal, paralyzing banking activities for months. India's independence marked the end of a
regime of the Laissez-faire for the Indian banking. The Government of India initiated
measures to play an active role in the economic life of the nation, and the Industrial Policy
Resolution adopted by the government in 1948 envisaged a mixed economy. This resulted in
greater involvement of the state in different segments of the economy including banking and
finance. The major steps to regulate banking included:

 The Reserve Bank of India, India's central banking authority, was established in
April 1935, but was nationalised on 1 January 1949 under the terms of the Reserve
Bank of India (Transfer to Public Ownership) Act, 1948 (RBI, 2005b). 

 In 1949, the Banking Regulation Act was enacted, which empowered the Reserve
Bank of India (RBI) "...to regulate, control, and inspect the banks in India." 

 The Banking Regulation Act also provided that no new bank or branch of an existing
bank could be opened without a license from the RBI, and no two banks could have
common directors. 

5
Nationalization in the 1960s

Despite the provisions, control and regulations of the Reserve Bank of India, banks in India
except the State Bank of India (SBI), remain owned and operated by private persons. By the
1960s, the Indian banking industry had become an important tool to facilitate the
development of the Indian economy. At the same time, it had emerged as a large employer,
and a debate had ensued about the nationalization of the banking industry. Indira Gandhi, the
then Prime Minister of India, expressed the intention of the Government of India in the
annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on
Bank Nationalization." The meeting received the paper with enthusiasm.

Thereafter, her move was swift and sudden. The Government of India issued an ordinance
('Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1969')
and nationalised the 14 largest commercial banks with effect from the midnight of 19 July
1969. These banks contained 85 percent of bank deposits in the country. Jayaprakash
Narayan, a national leader of India, described the step as a "masterstroke of political
sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the
Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the
presidential approval on 9 August 1969.

A second dose of nationalization of 6 more commercial banks followed in 1980. The stated
reason for the nationalization was to give the government more control of credit delivery.
With the second dose of nationalization, the Government of India controlled around 91% of
the banking business of India. Later on, in the year 1993, the government merged New Bank
of India with Punjab National Bank. It was the only merger between nationalized banks and
resulted in the reduction of the number of nationalized banks from 20 to 19. Until the 1990s,
the nationalized banks grew at a pace of around 4%, closer to the average growth rate of the
Indian economy.

Liberalization in the 1990s

In the early 1990s, the then government embarked on a policy of liberalization, licensing a small
number of private banks. These came to be known as New Generation tech-savvy banks, and
included Global Trust Bank (the first of such new generation banks to be set up), which later
amalgamated with Oriental Bank of Commerce, UTI Bank (since renamed Axis Bank), ICICI
Bank and HDFC Bank. This move, along with the rapid growth in the economy of India,
revitalized the banking sector in India, which has seen rapid growth with strong

6
contribution from all the three sectors of banks, namely, government banks, private banks
and foreign banks.

The next stage for the Indian banking has been set up, with proposed relaxation of norms for
foreign direct investment. All foreign investors in banks may be given voting rights that
could exceed the present cap of 10% at present. It has gone up to 74% with some restrictions.

The new policy shook the Banking sector in India completely. Bankers, till this time, were
used to the 4–6–4 method (borrow at 4%; lend at 6%; go home at 4) of functioning. The new
wave ushered in a modern outlook and tech-savvy methods of working for traditional banks.
All this led to the retail boom in India. People demanded more from their banks and received
more.

1.1.3 Current period

The Indian banking sector is broadly classified into scheduled banks and non-scheduled banks.
All banks included in the Second Schedule to the Reserve Bank of India Act, 1934 are Scheduled
Banks. These banks comprise Scheduled Commercial Banks and Scheduled Co-operative Banks.
Scheduled Co-operative Banks consist of Scheduled State Co-operative Banks and Scheduled
Urban Cooperative Banks. Scheduled Commercial Banks in India are categorized into five
different groups according to their ownership and/or nature of operation:

 State Bank of India and its Associates 


 Nationalized Banks 

 Private Sector Banks 

 Foreign Banks 

 Regional Rural Banks 

By 2010, banking in India was generally fairly mature in terms of supply, product range and
reach-even though reach in rural India still remains a challenge for the private sector and
foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered
to have clean, strong and transparent balance sheets relative to other banks in comparable
economies in its region. The Reserve Bank of India is an autonomous body, with minimal
pressure from the government.

With the growth in the Indian economy expected to be strong for quite some time-especially
in its services sector-the demand for banking services, especially retail banking, mortgages

7
and investment services are expected to be strong. One may also expect M&As, takeovers,
and asset sales.

In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in
Kodak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has
been allowed to hold more than 5% in a private sector bank since the RBI announced norms
in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by
them.

In recent years critics have charged that the non-government owned banks are too aggressive
in their loan recovery efforts in connexion with housing, vehicle and personal loans. There
are press reports that the banks' loan recovery efforts have driven defaulting borrowers to
suicide.

By 2013 the Indian Banking Industry employed 1,175,149 employees and had a total of
109,811 branches in India and 171 branches abroad and manages an aggregate deposit
of ₹67,504.54 billion (US$1.0 trillion or €910 billion) and bank credit of ₹52,604.59
billion (US$780 billion or €710 billion). The net profit of the banks operating in India
was ₹1,027.51 billion (US$15 billion or €14 billion) against a turnover of ₹9,148.59
billion (US$140 billion or €120 billion) for the financial year 2012–13.

Pradhan Mantri Jan Dhan Yojana is a scheme for comprehensive financial inclusion
launched by the Prime Minister of India, Narendra Modi, in 2014. Run by Department of
Financial Services, Ministry of Finance, on the inauguration day, 1.5 crore (15 million) bank
accounts were opened under this scheme. By 15 July 2015, 16.92 crore accounts were
opened, with around ₹20,288.37 crore (US$3.0 billion) were deposited under the scheme,
which also has an option for opening new bank accounts with zero balance

Automated teller machine growth

The total number of automated teller machines (ATMs) installed in India by various banks as
of end June 2012 was 99,218. The new private sector banks in India have the most ATMs,
followed by off-site ATMs belonging to SBI and its subsidiaries and then by nationalized
banks and foreign banks, while on-site is highest for the nationalized banks of India.

Cheque truncation initiative

In 2008 the Reserve Bank of India introduced a system to allow cheque truncation—the
conversion of checks from physical form to electronic form when sending to the paying

8
bank—in India, the cheque truncation system as it was known was first rolled out in the
National Capital Region and then rolled out nationally.

Expansion of banking infrastructure

Physical as well as virtual expansion of banking through mobile banking, internet banking,
telebanking, bio-metric and mobile ATMs is taking place since last decade and has gained
momentum in last few years.

2016 Indian Banks data breach

A huge data breach of data of debit cards issued by various Indian banks was reported in
October 2016. It was estimated 3.2 million debit cards were compromised. Major Indian
banks- SBI, HDFC Bank, ICICI, YES Bank and Axis Bank were among the worst hit.
Many users reported unauthorized use of their cards in locations in China. This resulted in
one of the India's biggest card replacement drive in banking history. The biggest Indian bank
State Bank of India announced the blocking and replacement of almost 600,000 debit cards.

9
1.2 Introduction to Standard Charted Bank Ltd.

Standard Chartered PLC is a British multinational banking and financial services

company headquartered in London. It operates a network of more than 1,200 branches and
outlets (including subsidiaries, associates and joint ventures) across more than 70 countries
and employs around 87,000 people. It is a universal bank with operations in consumer,
corporate and institutional banking, and treasury services. Despite its UK base, it does not
conduct retail banking in the UK, and around 90% of its profits come from Asia, Africa and
the Middle East.

Standard Chartered has a primary listing on the London Stock Exchange and is a constituent
of the FTSE 100 Index. It had a market capitalization of approximately £15 billion as of 20
January 2016, the 28th-largest of any company with a primary listing on the London Stock
Exchange. It has secondary listings on the Hong Kong Stock Exchange and the National
Stock Exchange of India. Its largest shareholder is the Government of Singapore-owned
Temasek Holdings.

1.2.1 History

1.2.1.1 Predecessors

The Chartered Bank began when Queen Victoria granted a Royal Charter to Scotsman
James Wilson in 1853. Chartered opened its first branches in Mumbai, Kolkata and
Shanghai in 1858, followed by Hong Kong and Singapore in 1859. The Bank started issuing
banknotes of the Hong Kong dollar in 1862.

The Standard Bank was a British bank founded in the Cape Province of South Africa in 1862
by Scot, John Paterson. Having established a considerable number of branches, Standard was
prominent in financing the development of the diamond fields of Kimberley from 1867 and
later extended its network further north to the new town of Johannesburg when gold was
discovered there in 1885. Half the output of the second largest gold field in the world passed
through The Standard Bank on its way to London. Standard expanded widely in Africa over
the years, but from 1883 to 1962 was formally known as the Standard Bank of South Africa.
In 1962 the bank changed its name to Standard Bank Limited, and the South African
operations were formed into a separate subsidiary which took the parent bank's previous
name, Standard Bank of South Africa Ltd.

10
1.2.2 Corporate Affairs

Standard Chartered has over 86,000 employees globally and has operations in 70 markets.
The bank is divided into two divisions: The Consumer Bank and the Wholesale Bank.

1.2.2.1 Consumer bank

The consumer bank is retail focused, and focuses on individuals, small business and high-net-
worth clients in the private bank. For retail customers, the unit manages savings, allows
customers to make transactions, provides wealth management services, and provides
mortgages and auto finance. For SMEs, the consumer bank manages cash, collections, and
payments as well as offering loans.

1.2.2.2 Wholesale bank

The wholesale bank's clients are global corporations, financial institutions and commodity
traders and agribusinesses. Transaction banking helps clients manage their treasury function
through cash management, trade finance and custody services. Financial markets allow
clients to raise capital, manage their risks and invest. The corporate finance function offers
advisory for mergers and acquisitions and other restructuring activities. Finally, principal
finance makes equity investments to encourage the growth of businesses.

1.2.3 Sponsorship

In September 2009 it was announced that Standard Chartered had agreed to become the main
sponsor of Liverpool Football Club for the period between July 2010 and the end of the
2013–14 football season. The deal was reported to have a total value of £80 million. An
extension to the end of the 2015-16 season was agreed in 2013 and in 2015 a further
extension until 2019 was agreed.

1.2.4 Social Responsibility

Standard Chartered, along with the International Agency for the Prevention of Blindness
(IAPB), manages a charity called seeing is Believing (SIB). The charity aims to eliminate
preventable blindness in developing countries. Standard Chartered matches every dollar
raised by the organization.

The Priority Academy program was created in 2006 by the bank, with educational programmes
including a study tour of Shanghai, a summer internship programme and a study

11
seminar in the United States. The program donated $250000 to Chan Yik Hei, a science
amateur who won the Intel International Science and Engineering Fair, for his studies at the
Hong Kong University of Science and Technology.

In 2015, Standard Chartered was widely criticized for its $12bn funding of the controversial
Carmichael Coal Mine, with a campaign led by Greenpeace calling for them to quit the
project. The bank sub sequentially withdrew from the deal.

1.2.5 Vision, Mission and Values of Standard Chartered Bank

1.2.5.1 Vision & Goal

Strategic Intent

To be a World Class Shared Services Centre for the Standard Chartered Group

Our Approach

Here for people

Our strategy is simple: focus on what’s important, not what’s merely profitable. And
nothing is more important than our people, and the people we work for.

Here for progress

The best investments are those that can benefit everyone. We are committed to setting the
highest standards for our partners and ourselves. From community programmes to our choice
of corporate partners, the only way to proceed is to always move forward, together.

Here for the long run

We’re connecting the world by using new techniques to create new possibilities. More
important than our global reach is the local knowledge it’s built on.

1.2.5.2 Our Values

Our values underpin all that we are as an organisation. Living them every day in how we
work with our clients, customers, colleagues and local communities, is an essential part
of how we prove we're here for good.

Courageous

We take measured risks and stand up for what is right

Responsive

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We deliver relevant, timely solutions for client and customers

International

We value diversity and work as One Bank

Creative

We innovate and adapt, continuously improving the way we work

Trustworthy

We are reliable, open and honest

1.2.6 Priorities
Standard Chartered Bank uses their business model to make a difference in three ways:

 By contributing to sustainable economic growth; providing finance efficiently and

responsibly, they contribute to sustainable economic growth and job creation. They are
committed to supporting the clients and customers; helping businesses to set up, expand
and trade across borders. 

 Being a responsible company they want to deliver long-term value for shareholders and
society. This means having the right culture, structures and processes in place to ensure
that they practice strong governance, serve the clients and customers well and provide a
great workplace for their people. 

 Investing in communities; their sustainability as a business is closely intertwined with the
health and prosperity of the communities where they operate. Through the employee
volunteering and community investment programs they work with partners to deliver
programs that promote positive social and economic outcomes for people in their wide
markets. 

1.2.7 Standard Chartered in India Region

Standard Chartered is the largest international bank in India and, following successful
completion of the integration of Grind Lays, have a combined customer base of 2.4 million in
Consumer Banking and over 1200 corporate customers in Wholesale Banking. The shared
service centre in Chennai continues to develop rapidly as more services and processes are
migrated from other countries. The average number of employees in the India region in 2002
was 5251.

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1.2.8 Services rendered by the Bank

Services Rendered

Personal Banking Business Banking

Private Banking

1.2.8.1 Personal Banking

1.2.8.1.1 Savings & Accounts

We offer a wide choice of savings accounts with competitive interest rates and the option to
save in local or foreign currencies.

You also have the added convenience of getting easy access to your money when you're
abroad.

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 Our savings accounts

Here are just a few of the savings accounts you can open with us:

o My Dream - save for your children's future with a special account that's easier for parents to
manage.

o Payroll - a one-stop banking solution for companies and their employees that improves the
way salary payments are managed. The account offers a bank-wide range of benefits to
employees and salary processing convenience to the employer.

o Women's account - choose a bank account designed specifically to meet the financial needs
of women.

o e$aver - Manage your money anytime, anywhere and watch your savings grow faster with
our most competitive interest rate.

o Marathon Saving - enjoy an interest rate that's as attractive as time deposits, while enjoying
the transaction convenience to your account and flexibility to withdraw your money at
anytime.

o Foreign currency - start saving your money in multiple foreign currencies. It's easy with us
and it comes with a high interest rate.

1.2.8.1.2 Loans

Whether you're planning a vacation, redecorating your home or supporting your child
through college, a personal loan will give you the extra funds you need. You can even use it
as a standby line of credit for unforeseen expenses.

Depending on your specific credit needs, you can take out an instalment loan or a revolving
loan without any guarantee or collateral.

Whichever option you choose, we'll help you stay in control of your finances and make the
most of life's opportunities and experiences.

1.2.8.1.3 Credit Cards

Our credit cards are accepted at outlets across the world and are designed to give you greater
flexibility and round-the-clock convenience.

15
Whether you're looking for extended repayment terms, special cardholder privileges or an
attractive rewards programme, we have the ideal credit card to suit you and your lifestyle.

1.2.8.2 Private Banking

All our clients have unique needs so before working with you we take the time to understand
your particular circumstances so that we can build a package personal to you. Our goal is to
create a partnership that goes beyond the purely financial and our approach is defined by an
uncompromising commitment to you and your future goals.

1.2.8.3 Business Banking

We bring our corporate clients local expertise with global insights into today's fastest
growing markets.

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1.3 Introduction to Financial Analysis using Ratios

1.3.1 Ratio Analysis

Ratio Analysis is one of the powerful tools of the financial analysis. A ratio can be defined as
“The indicated quotient of two mathematical expressions” and as “the relationship between
two or more things”. Ratio is thus, the numerical or an arithmetical relationship between two
figures. It is expressed where one figure is divided by another. In financial analysis, ratio is
used as a benchmark of a firm.

A ratio is the relationship between two accounting items expressed mathematically. Ratio
analysis helps the analyst to make quantitative judgment with regard to concern’s financial
position and performance. This relationship can be expressed as a percentage or as a quotient.

Ratio analysis is the systematic use of ratio to interpret the financial statements so that the
strengths and weakness of a firm as well as it historical performance ad current financial
position can be determined. Undisputedly, the ratio analysis occupies place of prime
importance.

1.3.2 Significance of Ratio Analysis

Ratio analysis is of great help to commercial bankers, trade creditors and institutional lenders.
They judge the ability of borrowing enterprises by observing various ratios like the current
ratio, acid test ratio, and turnover of receivables, inventory turnover, and coverage of interest
by the level of earnings.

Ratio analysis also helps long term creditors in knowing the ability of borrowing enterprises
to pay interest principal, in case earnings decline they can value the ratios of total debt to
equity and total debt to total assets.

Lastly, ratio analysis is of great use to the management of the firm. Management of the firm
is interested in every aspect of ratio analysis as it is their overall responsibility to see that the
resources of the firm are used most efficiently and effectively and that the firm’s financial
conditions is sound.

17
1.3.3 Advantages of Ratio Analysis

 It facilitates inter firm comparison. It reveals how well it serves. As a useful aid in
financial forecasting future trends can be known in advance based on ratios relating to
part sales, profits and financial position. 

 It facilitates comparative study of the performance and, progress of a firm over a period
of years. Such a study will reveal the directions in which the firm is moving. 

 It serves as a useful tool for cost control. It reveals how efficiently a firm is managed and
how efficiently its assets are utilized. 

 It serves as a means of communication to report on the strength and financial standing of
a firm to the management and external parties. 

 It facilitates trend analysis. It reveals the progress or decline of a firm over the years. 

1.3.4 Limitations of Ratio Analysis

 Standards for Comparison: Ratios of a company have meaning only when they are
compared with some standards and it is always a challenging job to find and adequate
standard. 

 Company Differences: Situations of two companies are never same. Similarly the
factors influencing the performance of a company in one year change in another year.
Thus, the comparison of the ratios of two companies becomes difficult and meaningless
when operating in different situations. 

 Price Level Challenges: The interpretation and comparison of the ratios are also
rendered invalid by the changing value of money; a change in the price level can
seriously affect the validity of comparison of ratios computed for different time periods. 

18
1.3.5 Types of Ratios

Classification according to nature of accounting statements is divided into three categories,

they are:

1) Return on Equity Ratio: Return on equity (ROE) is the amount of net income returned
as a percentage of shareholders equity. Return on equity measures a corporation's
profitability by revealing how much profit a company generates with the money
shareholders have invested. ROE is expressed as a percentage and calculated as:

2) Return on Assets Ratio: Profitability can be measured in terms of relationship between

net profit and assets. This ratio is also known as profit-to-assets ratio. It measures the
profitability of investments. The overall profitability can be known.

3) Cost to Income Ratio: The cost-to-income ratio is a key financial measure, particularly
important in valuing banks. It shows a company’s costs in relation to its income. The
ratio gives investors a clear view of how efficiently the firm is being run – the lower it is,
the more profitable the bank will be. Changes in the ratio can also highlight potential
problems: if the ratio rises from one period to the next, it means that costs are rising at a
higher rate than income, which could suggest that the company has taken its eye off the
ball in the drive to attract more business.

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4) Net Loans to Total Assets Ratio: Net loans to total assets is a leverage ratio that defines
the total amount of loans relative to assets. This enables comparisons of leverage to be made
across different companies. The higher the ratio, the higher the degree of leverage, and
consequently, financial risk. This is a broad ratio and is calculated as follows:

5) Cash Position Indicator: A cash position is the amount of cash that a company,
investment fund or bank has on its books at a specific point in time. The cash position is
a sign of financial strength and liquidity. In addition to cash itself, it will often take into
consideration highly liquid assets such as certificates of deposit, short-term government
debt and other cash equivalents. A Bank is generally required to have a minimum cash
position which is based upon the amount of funds it holds. This ensures that the bank has
the ability to pay out its account holders if they demand funding.

6) Net Working Capital Ratio: The difference between Current Assets and Current
Liabilities excluding short-term bank borrowing is called Net Working Capital or Net
Current Assets. Net Working Capital is sometimes used as a measure of a firm’s
Liquidity.

7) Return on Capital Employed: Return on capital employed (ROCE) is a financial ratio

that measures a company's profitability and the efficiency with which its capital is
employed. It is calculated as:

20
8) Earnings per Share: Earnings per share (EPS) is the portion of a company's profit
allocated to each outstanding share of common stock. It serves as an indicator of a
company's profitability. It is calculated as:

9) Debt Equity Ratio: Debt Equity Ratio is a debt ratio used to measure a company's financial
leverage, calculated by dividing a company’s total liabilities by its stockholders'
equity. The Debt Equity ratio indicates how much debt a company is using to finance
its assets relative to the amount of value represented in shareholders’ equity.

10) Current Ratio: The current ratio is a liquidity ratio that measures a company's ability to
pay short-term and long-term obligations. To gauge this ability, the current ratio
considers the current total assets of a company (both liquid and illiquid) relative to that
company’s current total liabilities. The formula for calculating a company’s current ratio
is:

21
 11) Total Assets Turnover Ratio: This ratio is calculated by dividing the net sales by the
value of total assets. A higher ratio is an indicator of over-trading of total assets while
a low ratio reveals idle capacitor. The traditional standard for the ratio is two times.

12) Net Profit Margin: Net margin is the ratio of net profits to revenues for a company or
business segment - typically expressed as a percentage – that shows how much of each
dollar earned by the company is translated into profits. Net margins can generally be
calculated as:

13) Return on sales: Return on sales is a financial ratio that calculates how efficiently a
company is at generating profits firm its revenue. It is calculated as:

22
2.1 Literature Review
Source 1

Financial Ratios and The Analysis of Marketing Policy

By: Yoram C. Peles

Share on: May 1982

Discusses the analysis that financial ratios have won lots of attention in the accounting and
financial literature. Demonstrates how financial ratios can be used in order to analyse certain
aspects of a firm's marketing policy. It adopts the idea that accounting ratios are affected by
the firm's marketing management philosophy. Validates results obtained for the ratios
supposedly being affected by the firm's consumer service policy and uses other accounting
figures, e.g. cash management. Presents financial data for a set of UK companies examining
the impact of their marketing policy on the behaviou r of financial ratios, and carries out a
cross‐section analysis over time. Uses mathematical equations to explain the methodology,
results and interpretation and freely employs tables to further emphasize points within. It
sums up that in this study high levels of the marketing policies are associated with higher
levels of operating profitability.

Source 2

Analysis of P/E ratios and interest rates

By: Ben Amoako-Adu

Share on: April 2002

Criticizes previous research on price/earnings ratios (PER) for neglecting their historical links
with interest rates and analyses the causal links between interest ratres and the PERs of the
Toronto Stock Exchange 300 Index (TSE300) and of seven major Canadian industries
1965‐1997. Explains the methodology and identifies three “distinct PER regimes”:

1965‐1974 (average PER 17.17), 1975‐1982 (average PER 8.92) and 1983‐1997 (average PER
17.2 with a higher standard deviation). Looks at the economic conditions for each period and
suggests that current PERs “may not be too high”. Finds a negative correlation between

PERs and treasury bill rates, differing between industries; and that the bill rate explains 95
per cent of PER variation for the TSE300, although it is not significant for the gold and silver

23
industry. Adds that divided payout ratios and lower investor risk aversion are positively
related to PERs, but that growth rate has a more variable influence.

Source 3

Beyond earnings management: Using ratios to predict Enron's collapse

By: Joseph T. Kastatin

Share on: September 2005

This paper proposes a revised analytical model for accounting professionals that can be used
to evaluate the financial well being of innovative companies that rely on earnings
management practices (EM) for their growth. Through an analysis of corporate governance,
financial reporting standards, and ratio analysis this paper reaches the conclusion that Enron
extended previously researched earnings management practices that could have been detected
in early 2000. Results of the analysis indicate that by using price book, price earnings
multiple, net margin percentage, and return on assets, and taking into consideration the
so‐called risk management activities which seemed to disguise highly volatile speculative
derivative‐based activities, Enron was headed for implosion at least one year before its
collapse.

Source 4

Analytical and experimental study on damping ratio of GRP‐reinforced glulam

beams

By: Morteza Naghipour

Share on: January 2013

This paper is a high quality research paper that presents weighted residual method (WRM)
for evaluating damping ratio of unreinforced glued‐laminated (glulam) wood beams and also
reinforced glulam beams with E‐glass reinforced epoxy polymer (GRP) plates. In this paper,
LDA, HTA, MBA, and HPB methods are used and an analytical investigation of damping
ratios of glulam beams unreinforced and reinforced with GRP plates is proposed by using
weighted residual method (WRM). Although there is a simplifier assumption in some of
existing methods, proposed method
24
shows the damping ratio can be calculated without any requirement to simplifier
assumption.

Source 5

Analysis of virtualized cloud server together with shared storage and estimation of
consolidation ratio and TCO/ROI
By: Bao Rong Chang

Share on: August 2014

The physical server transition to virtualized infrastructure server have encountered crucial
problems such as server consolidation, virtual machine (VM) performance, workload density,
total cost of ownership (TCO), and return on investments (ROIs). In order to solve the
problems mentioned above, the purpose of this paper is to perform the analysis of virtualized
cloud server together with shared storage as well as the estimation of consolidation ratio and
TCO/ROI in server virtualization.

This paper introduces five distinct virtualized cloud computing servers (VCCSs), and
provides the appropriate assessment to five well-known hypervisors built in VCCSs. The
methodology the authors proposed in this paper will gives people an insight into the problem
of physical server transition to virtualized infrastructure server.

Source 6

Dynamic balance analysis of contamination control for hydraulic systems based on

dynamic filtration ratio

By: Guangying Ma

Share on: July 2015

The paper provides a preliminary model of dynamic filtration ratio, and the model shows that
the filtration ratio is exponentially related to the contamination level and the dirt - holding
quantity. Different filters have different influence coefficients. The filterin g capacity for a
certain particle size and the contamination level control of the filter for different hydraulic
systems can be judged according to the dynamic balance equation of

25
hydraulic systems. The paper is useful in the selection of filters and in the precise control
of the contamination level of the hydraulic system.

Source 7

Have changes in business practices and reporting standards changed the taxonomy of
financial ratios?

By: Thomas L. Zeller

Share on: October 2015

This study identified four additional financial analysis factors beyond the seven established
by prior research. Notably, a separate cash flow factor did not surface as was the case in
earlier work but an entirely new factor (current position) was identified. This paper leaves to
future research to establish the precise causes for the changes to the taxonomy of financial
ratios and how to best utilize the new set of factors for financial analysis research. This study
substantially improves and extends prior work in two areas. First, it utilizes advanced
statistical methodologies and computing technologies that were unavailable to previous
researchers. Second, it investigates not only the current taxonomy of manufacturing industry
financial ratios, but also its stability over a recent ten-year period.

Source 8

Detecting fraudulent financial reporting using financial ratio

By: Emie Famieza Zainudin

Share on: February 2016

The main aim of this study is to analyse the financial ratio (i.e. financial leverage,
profitability, asset composition, liquidity and capital turnover ratio) in detecting fraudulent
financial reporting (FFR). The legit model was used to identify firms that are related to FFR.
The sample firms that engage in fraudulent reporting were obtained from the media centre of
Bursa Malaysia. The firms were selected based on their contravention of the Listing
Requirements of Bursa Malaysia Securities Berthed. The data cover a period of seven

26
years from 2007 to 2013. The results suggest that financial leverage, asset composition,
profitability and capital turnover were significant predictors of FFR.

Source 9

Growth options, dividend payout ratios and stock returns

By : George Li

Share on: April 2016

This paper aims to examine the impact of the dividend payout ratio on future stock returns
and momentum strategies. The author uses the portfolio sorting approach used in the
momentum literature to examine this impact. First, the author shows that the returns for the
winner stocks tend to be the largest if no dividends are paid and then decrease with the
dividend payout ratio; the returns for the loser stocks tend to have an inverted U-shaped
relationship with the dividend payout ratio, but the zero-dividend loser stocks have the
smallest return; and the returns for the stocks between the winners and the losers tend to
remain similar, regardless of the dividend payout ratio. Second, the author shows that
momentum profit is the largest for the stocks that do not make dividend payment but appear
similar for the stocks that pay dividends. The author's empirical findings imply that stock
price momentum is a function of the dividend payout ratio, growth stock momentum tends to
be much stronger than value stock momentum and no-dividend stock momentum beats
dividend stock momentum. In fact, when the dividend payout ratio is considered, momentum
profit can be improved by up to 63 per cent.

Source 10

The impact of dividend policy on price-earnings ratio: The role of conditional and
nonlinear relationship

By: Boonlert Jitaneeroj

Share on: January 2017

This paper aims to examine the conditional and nonlinear relationship between price -
earnings (P/E) ratio and payout ratio. A common finding of previous studies using linear

27
regression model is that the P/E ratio is positively related to the dividend payout ratio .
However, none of them investigates the condition under which the positive relationship .

Based on the annual data of industries in the USA over the period of 1998-2014, this paper
produces new evidence indicating that when the return on equity is greater (less) than the
required rate of return, the P/E ratio and dividend payout ratio exhibit a negative (positive)
relationship and positive (negative) convexity.

28
3.0 Research Methodology

Introduction:-
This chapter studies the entire and how the report was carried out and also explains how the
research was conducted, the area of the study, sample size and sampling technique. This
research also indicates how the data was collected and analyzed.

Meaning of Research:-

Research is defines as to search of knowledge scientifically and systemic collection of

information.

In other words, research is the careful survey of markets especially through search for new
facts in of knowledge.

Research refers to the systematic method consisting of:

 Identifying the problem, 


 Formulating of hypothesis, 

 Collection of data, 

 Analyzing the data 

 Drawing certain conclusions in the form of solutions towards the objective of study
Research methodology is a way to solve the problem systematically and studying how
research is done. 

29
3.1 Conceptualization

Financial analysis involves the use of financial statements. A financial statement is an

organized collection of data according to logical and Conceptual Framework consistent
accounting procedures. Its purpose is to convey an understanding of some financial aspects of
a business firm. It may show a position at a moment of time as in the case of a Balance Sheet,
or may reveal a series of activities over a given period of time, as in the case of an Income
Statement. Thus, the term “financial statements” generally refers to two basic statements:

The Balance Sheet shows the financial position of the firm at a given point of time. It
provides a snapshot and may be regarded as a static picture. “Balance sheet is a summary of a
firm’s financial position on a given date that shows Total assets = Total liabilities + Owner’s
equity.”

The Income Statement referred to in India as the profit and loss statement reflects the
performance of the firm over a period of time. “Income statement is a summary of a firm’s
revenues and expenses over a specified period, ending with net income or loss for the
period”.

Financial Ratio Analysis

Financial Ratio Analysis is the calculation and comparison of ratios, which are derived from
the information in the company’s financial statement. The level and historical trends of these
ratios can be used to make inferences about company’s financial condition. The information
can be used by:


to identify the firm’s ability to meet their claims i.e. liquidity position of
Trade Creditors,
 the company.


Investors, to know about the present and future profitability of the company and its
 financial structure.



Management, in every aspect of financial analysis. It is the responsibility of the
management to maintain sound financial condition of the company.

30
Steps in Ratio Analysis


The first task of the financial analysis is to select the information relevant 
to the decision
 under consideration from the statements and calculates appropriate ratios.


To compare the calculated ratios with the ratios of the same firm  relating to the industry
 ratios. It facilitates in assessing success or failure of the firm.


 are
Third step is to interpretation, drawing of inferences and report writing conclusions
drawn after comparison in the shape of report or recommended courses of action.

31
3.2 Significance of Study

The significance of the study is to analyse the ratios of Standard Chartered Bank Of India.
This study shows the banks performance throughout the five years i.e from 2013 to 2017.
This study helps in analyzing the ability of the bank to meet its current obligations and the
extent to which the bank is used its long term solvency by borrowing funds. It also focuses on
the overall operating efficiency and performance of SCB and also on the efficiency with
which the bank is utilizing it’s assets in generating sales revenue.

32
3.3 Objectives of the Project

Main objective-
 To analyse the ratios of Standard Chartered Bank 

Sub objectives-

 To assess the liquidity and profitability of Standard Chartered Bank 


 To study financial position of the Standard Chartered Bank 

 To analyze the turn over efficiency of the Standard Chartered Bank 

 To know the impact of liquidity, solvency and turnover efficiency on the shareholders
of the Standard Chartered Bank 

33
3.4 Scope of the Study

This project is as a reference guide or as a source of information. It gives the idea about the
financial analysis of a firm and also to study the liquidity position of the firm and for this
Ratio Analysis has been used to analyze the financial position of a firm. It deals with analysis
and interpretation of data collected through the sources of data. Graphs, diagrams and
tabulation method are used to analyze and interpret the data collected.

34
3.5 Research Design

A research design is an 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. It
constitutes the blueprint for collection, measurement and analysis of data.
The research design used in this research is ‘exploratory research’.

Exploratory research: is one type of research design, which has as its primary objective the
provision of insights into and comprehension of the problem situation confronting the
research.

Exploratory research was performed to gain detailed knowledge and understanding of the
functioning of depository in the country by using both primary and secondary data.

3.6 Collection of Data-

Data collection is the most important element of a survey and while collecting data absolute
care must be done because data constitute the base on which the statistical analysis is done.
The entire decision would be wrong if the data is inaccurate.

3.7 Sources of Data

SECONDARY SOURCE OF DATA: For this project secondary data is used. Secondary
data is the data compiled by someone other than the user. It includes published data in the
form of documents, research papers, web pages and other organisational records.

It is recommended to use secondary data in order to avoid duplicating of effort, running up

unnecessary costs, and tiring of informants.

Secondary sources are:

•Annual report of SCB

•Internet browsing

•Various other reports related to the performance of SCB

35
3.8 Sampling Technique

Sampling techniques are the strategies adopted by the researchers during the sampling
process.

There are various types of sampling techniques-

 Simple Random Sampling 


 Stratified Sampling 

 Cluster Sampling 

 Systematic Sampling 

 Convenient Sampling 

 Judgement Sampling 

I use Convenient Sampling in this project.

3.9 Analytical Tool Used-

The following tools are used in this project:

 Figures 

 Tables 

 Bar diagram 

36
3.10 LIMITATION OF STUDY

 The study was completely done on the basis of ratios calculated from the balance sheets. 


 It was not possible to get a personal interview with the top management employees of all
banks under study. 

 There is limited scope where you can imply your knowledge, thoughts and innovations . 

 It is a chain of work where if one breaks the other eventually collapses. 

 It was difficult to get information out of the bank. 

 Load of work pressure was also a barrier in preparing the report. 


 It was not possible to calculate the Current Ratio and Net Working Capital Ratio as there
was no adequate data for the current liabilities is provided by the bank. 

 Limited knowledge about the bank in the initial stages. 

 Limitation of time. 

 Some more ratios can also be calculated. 


 The analysis and interpretation are based on secondary data contained in the
published annual reports of SCB for the study period. 

37
4.1 SWOT ANALYSIS-

SWOT Analysis is a method used to check the strength, weakness, opportunities and threats
of the organisation. It involves in analysing the external and internal factors that may be
favourable or unfavourable in achieving the objectives of the organisation.

38
 STRENGTHS:

1. Inclusion of social and environmental development with economic growth.

2. Aggressive advertising.

3. Leaders in Asia Pacific and Africa.

4. Sponsors of major sports events and teams.

5. Globally it has over 80,000 employees.

39
 WEAKNESSES :

1. Lesser emphasis on Small enterprises.

2. Less penetration in emerging economies like India, China.

3. Having fewer branches.

4. Charging high fees from its rivals.

5. Less advertising and promotion.

6. Small range of offerings.

7. Low profit margins.

8. Weak Human Resource Management.

9. Low rate of interest on deposits.

40
 OPPORTUNITIES: 

1. Growing Foreign Exchange Market.

2. Global expansion in countries across the world.

3. Mergers and Acquisition of smaller institutions.

4. Fresh entrepreneur.

5. Huge untapped sub- urban and rural SME market.

6. New potential market expansion.

41
 THREATS:

1. Stringent economic policies all over the world.

2. Highly competitive environment.

3. Govt. Policies and global financial crisis.

4. Local and multinational banks.

5. Upcoming banks.

6. Empirical Foreign affiliates.

7. Increase of Microfinance.

42
4.2 Analysis-

For the efficient analysis of ratio of standard chartered bank following aspects has been
evaluated:
 
 Liquidity Ratio
 Current Ratio 

 Cash to Position Indicator 

 
Capital Structure Ratio

 Debt Equity Ratio 

 
Profitability Ratio

 Return on Equity 

 Return on Assets 

 Return on Capital Employed 

 Earnings per Share 

 Return on Sales 

 
Turnover Ratio

 Net Loan to Assets 

 Cost to Income Ratio 

 Net Working Capital 

 Total Asset Turnover Ratio 

 Net Profit Margin 

43
A. Liquidity Ratio

1. CACULATION OF CURRENT RATIO-

This ratio cannot be calculated as the relevant information about the current liabilities is not
given in the balance sheet of the bank. The combined data for other liabilities and provisions
is given which is not sufficient of the calculation of current ratio.

44
2. CALCULATION OF CASH POSITION INDICATOR-

Year Cash Position Indicator(%)

2013 3.99
2014 4.60
2015 5.04
2016 6.89
2017 5.38

Cash Position Indicator(%)

7
6
5
4
Cash Position Indicator(%)
3
2
1
0
2013 2014 2015 2016 2017

Interpretation:

A Bank is generally required to have a minimum cash position which is based upon the
amount of funds it holds. This ensures that the bank has the ability to pay out its account
holders if they demand funding. When an investment fund has a large cash position, it is
often a sign that it sees few attractive investments in the market and is comfortable sitting on
the sidelines. Therefore the bank has lesser ability to pay out its account holders, for funding.
The graph shows that there is a fluctuating trend of the cash position indicator. In 2016 the
ratio was the highest in the 5 years where as 2013 had the lowest.

45
B. Capital Structure Ratio

3. CALCULATION OF DEBT EQUITY RATIO-

Year Debt Equity ratio

2013 0.89
2014 0.94
2015 0.58
2016 0.49
2017 0.42

Debt Equity ratio

0.8

0.6
Debt Equity ratio
0.4

0.2

0
2013 2014 2015 2016 2017

Interpretation:

This ratio gives results relating to the capital structure of the firm. 2:1 is the acceptable debt
equity ratio. As seen from the graph, the ratio has been increasing from 2013 to 2014 and
from 2014 onwards it keeps on decreasing.

46
C. Profitability Ratio

4. CALCULATION OF RETURN ON EQUITY-

Year Return On Equity(%)

2013 12.2
2014 15.4
2015 8
2016 13.7
2017 4.07

Return On Equity(%)

20

15

10 Return On Equity(%)

0
2013 2014 2015 2016 2017

Interpretation:

Return on equity measures how efficiently a firm can use the money from shareholders to
generate profits and grow the company. This ratio calculates how much money is made based
on the investors' investment in the company, not the company's investment in assets or
something else. As seen above, the ratio is increased in 2014 and 2016 and it falls sharply in
2017.

47
5. CALCULATION OF RETURN ON ASSETS-

Year Return On Assets(%)

2013 1.42
2014 3.48
2015 2.88
2016 2.32
2017 0.77

Return On Assets(%)
4
3.5
3
2.5
2
Return On Assets(%)
1.5
1
0.5
0
2013 2014 2015 2016 2017

Interpretation:

It shows how capable the management of the bank has been in converting the institution’s
assets into net earnings, as it calculates how much a bank earns using 1 unit of assets. As per
the graph, the ROA increase in 2014 and then keep on decreasing till 2017.

48
6. CALCULATION OF RETURN ON CAPITAL EMPLOYED-

Year Return On Capital Employed(%)

2013 12.71
2014 17.25
2015 11.06
2016 17.70
2017 5.55

Return On Capital Employed(%)

18
16
14
12
10 Return On Capital Employed(%)
8
6
4
2
0
2013 2014 2015 2016 2017

Interpretation:

Return on capital employed (ROCE) is a financial ratio that measures a company's

profitability and the efficiency with which its capital is employed. This graph shows that it
increased from 2013 to 2014 and decreased in 2017.

49
7. CALCULATION OF EARNING PER SHARE-

Year Earning Per Share

2013 25.68
2014 10.86
2015 4.13
2016 4.10
2017 1.35

Earning Per Share

30

25

20

15 Earning Per Share

10

0
2013 2014 2015 2016 2017

Interpretation:

Earnings per share (EPS) are the portion of a company's profit allocated to each outstanding
share of common stock. It serves as an indicator of a company's profitability. The above
graph shows that the EPS is decreasing from 2013 to 2017.

50
8. CALCULATIOM OF RETURN ON SALES

Note: Advances are considered as Net Sales

Year Return on Sales

2013 16.54
2014 14.41
2015 16.86
2016 15.16
2017 16.54

Return on Sales

17
16.5
16
15.5
15 Return on Sales
14.5
14
13.5
13
2013 2014 2015 2016 2017

Interpretation

Return on sales is a financial ratio that calculates how efficiently a company is at generating
profits firm its revenue. As per the graph this ratio is highest in 2013 and 2017 and lowest in
2014.

51
D. Turnover Ratio

9. CALCULATION OF NET LOAN TO TOTAL ASSETS-

Year Net Loan To Total Assets(%)

2013 10.36
2014 15.15
2015 8.76
2016 9.67
2017 8.04

Net Loan To Total Assets(%)

16
14
12
10
8
Net Loan To Total Assets(%)
6
4
2
0
2013 2014 2015 2016 2017

Interpretation:

The higher the ratio, the higher the degree of leverage, and consequently, financial risk. As
per the graph, the ratio increases in 2014 and decreases till 2017 with a limited increase in
2016.

52
10. CALCULATION OF COST TO INCOME RATIO-

Year Cost To Income Ratio

2013 0.33
2014 0.323
2015 0.323
2016 0.32
2017 0.32

Cost To Income Ratio

0.33
0.328
0.326
0.324
0.322 Cost To Income Ratio
0.32
0.318
0.316
0.314
2013 2014 2015 2016 2017

Interpretation:

Cost to income ratio is affected by bank’s cost but also by the variations in income. For any
given level of cost, relative to a bank’s assets, a reduction in income will cause the ratio to
increase. Here we can see that this ratio has decreased throughout the 5 years.

53
11. CALCULATION OF NET WORKING CAPITAL-

This ratio cannot be calculated as the relevant information about the current liabilities is not
given in the balance sheet of the bank. The combined data for other liabilities and provisions
is given which is not sufficient of the calculation of Net Working Capital and hence, Net
Working Capital Ratio.

54
12. CALCULATION OF TOTAL ASSETS TURNOVER RATIO

Note: Advances are considered as Net Sales

Year Total Assets Turnover Ratio

2013 0.456
2014 0.517
2015 0.522
2016 0.519
2017 0.512

Total Assets Turnover Ratio

0.54

0.52

0.5

0.48 Total Assets Turnover Ratio

0.46

0.44

0.42
2013 2014 2015 2016 2017

Interpretation:

The traditional standard for the ratio is two times. From the year 2013 to 2015, the ratio
increases but from 2015 to 2017, the ratio falls gradually. Therefore the bank indicates idle
capacity of the total assets.

55
13. CALCULATION OF NET PROFIT MARGIN

Year Net Profit Margin(%)

2013 84.12
2014 75.10
2015 87.93
2016 77.26
2017 91.62

Net Profit Margin(%)

100
90
80
70
60
50 Net Profit Margin(%)
40
30
20
10
0
2013 2014 2015 2016 2017

Interpretation:

The net profit ratio is the overall measure of the firm’s ability to turn each rupee of income
from services in net profit. If the net margin is inadequate the firm will fail to achieve return
on shareholder’s funds. High net profit ratio will help the firm service in the fall of income
from services, rise in cost of production or declining demand. But as per the graph, the Net
profit margin is maximum in 2017.

56
5.1 FINDINGS-
On the basis of data analysis following are the findings of the research:.

 There is a fluctuating trend of the Cash Position Indicator as in 2016 the ratio was the
highest in the 5 years where as 2013 had the lowest. 

 The Debt Equity Ratio of the bank has increased from 2013 to 2014 and from 2014
onwards it keeps on decreasing which shows that the bank is using less leverage and has
stronger equity position. 

 The Return On Sales of the bank is falling in 2014 & 2016 where as it is favourable in
2013, 2015 & 2017 which indicates that bank is efficiently generating profits from its
revenue in 2017 

 The Return on Equity Ratio is increased in 2014 and 2016 and it falls sharply in 2017
which shows that the efficiency of the bank towards the investors has decreased. 

 The Return on Assets Ratio increase in 2014 and then keep on decreasing till 2017. 


 The Returns on Capital Employed increased from 2013 to 2014 and decreased in 2017
as the bank has decreased the profits in 2017 as compared to 2016 but the provisions and
contingencies are more which is the reason for the decline in profits in 2017 & hence
decrease in return on capital employed although the share capital of 2016 & 2017 were
same. 

 The Earning per Share is decreasing from 2013 to 2016 and minimum in 2017 as there
are more provisions and contingencies in 2017. 

 The Net Loan to Assets Ratio increases in 2014 and decreases till 2017 with a limited
increase in 2016 shows that the bank had less financial risk in 2017. 

 The Cost to income Ratio has decreased throughout the 5 years which shows that the
income of the bank has increased. 

 The Total Assets Turnover Ratio is minimum in 2013 and is constant from 2014 to
2017 which shows that the bank has idle capacity of total assets 

 The Net Profit Margin of the bank is maximum in 2017 which is 91.62% 

57
5.2 Recommendations

Based on the research findings on the ratio analysis of Standard Chartered Bank the
following are the recommended suggestions:

 The Bank must decrease the amount of provisions and contingencies which is the main
concern of the decline of profits in 2017. 


 The bank must increase its liquidity performance by keeping more cash in hand instead
of giving more and more advances. 

 The data for income, advances, and profits for the bank have shown a flat trend over the
past 5 years. In fact there is a decline in the value of its fixed assets and the massive
reduction in profits for the current year. This has a direct impact on its share price which
has shown a steady decline throughout 2017 and the stock is currently trading at
approximately half of its price at the time of its listing. On the other hand most other
banks, inspite of an increase in their NPA’s have registered an impressive overall
business growth during the same period. This has had a positive effect on their stock
prices as well. It seems that the bank is too conservative in its approach and is not
gaining much new business. The bank needs to expand its customer base and gain market
share if it plans to effectively tackle the threat posed by its larger competitors. Otherwise,
it would not be able to serve its shareholders well. 

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5.3 Conclusion

Based on my research on Ratio Analysis of Standard Chartered Bank I concluded that the
current financial performance of the bank is satisfactory. The bank must increase more cash
so as to increase its liquidity position. Although the bank has constant share capital in year
2016 & 2017 then also has decreased the Earnings per Share from 2016 to 2017 due to the
decrease in the net profits of the bank as the bank has increased the provisions &
contingencies which has lead to the decline in the net profits of the bank and hence Earnings
per Share of the bank.

There are many challenges are to be face by the bank and the major problem are to be faced
by all the banks in the industry are the Non Performing Assets. The banks must examine the
credit worthiness of the company while providing loans as greater increase of NPA’s would
negatively affect the financial performance of the banks and decrease the amount of cash held
by the banks which is the main cause of decrease of cash in hand from 2016 to 2017.

59
6 Bibliography
 
 Books
 
 Financial Ratio Analysis : Jagadish R. Raiyani-2011

 
 Financial Accounting: T.R. Jain-2015

 
 Journals
 
 Yoram C. Peles(1982), “ Financial Ratios and The Analysis of Marketing Policy”

 
 Ben Amoako-Adu(2002), “Analysis of P/E ratios and interest rates”

 
 Joseph T. Kastatin(2005), “Beyond earnings management: Using ratios to predict

 Enron's collapse”

 
Morteza Naghipour(2013), “Analytical and experimental study on damping ratio of GRP‐reinforced glulam beams”




Bao Rong Chang(2014), “Analysis of virtualized cloud server together with shared
 storage and estimation of consolidation ratio and TCO/ROI”


Guangying Ma(2015), “Dynamic balance analysisof contamination control for
 hydraulic systems based on dynamic filtration ratio”


Thomas L. Zeller(2015), “Have changes in  business practices and reporting standards
 changed the taxonomy of financial ratios?”


Emie Famieza  Zainudin(2016), “Detecting fraudulent financial reporting using
 financial ratio”
 
 George Li(2016), “Growth options, dividend payout ratios and stock returns”


Boonlert Jitaneeroj(2017), “The impact of dividend  policy on price-earnings ratio:
The role of conditional and nonlinear relationship

60
 
 Websites
 
 www.emeraldinsight.com
 
 https://www.sc.com/ke/investor-relations/en/_pdf/2012/Annual-Report-2012-final.pdf

 
 https://www.sc.com/pk/_documents/SCB-Annual-Report-2013-Final.pdf

 
 https://www.sc.com/annual-report/2014/documents/SCB_ARA_2014_full_report.pdf



https://www.sc.com/en/resources/global- 
en/pdf/annual_reports/annual_report_2015_financial_statements_and_notes.pdf
 
https://www.sc.com/ae/about-us/

61
7 Annexure

7.1 Balance sheet as at 31 March 2013-2017

Parameters MAR'17 MAR'16 MAR'15 MAR'14 MAR'13

(₹ Cr.) (₹ Cr.) (₹ Cr.) (₹ Cr.) (₹ Cr.)
SOURCES OF
FUNDS
Share warrants & 0.00 0.00 0.00 0.00 0.00
Outstandings
Share Capital 7,440.07 7,440.07 3,835.80 2,725.80 675.80
Total Reserve 17,257.66 18,508.51 15,710.09 16,427.30 13,467.08
Deposits 75,193.07 72,848.25 72,111.53 62,148.71 63,964.70
Borrowings 10,452.91 12,748.45 11,487.01 17,995.23 12,618.21
Shareholder's 24,697.74 25,948.59 19,545.89 19,153.10 14,142.88
Funds
Other Liabilities & 19,518.20 20,194.40 27,856.54 20,460.93 30,910.81
Provisions
TOTAL 1,29,861.91 1,31,739.68 1,31,000.96 1,19,757.97 1,21,636.59
LIABILITIES
APPLICATION
OF FUNDS:
Cash and balance 3,127.69 4,395.69 3,998.25 3,140.09 3,335.33
with Reserve Bank
of India
Balances with 3,866.35 4,684.62 3,393.71 2,373.79 1,527.14
banks and money
at call and short
Notice
Investments 33,909.66 33,322.23 28,387.56 30,747.11 27,323.88
Advances 66,536.04 68,402.02 68,422.74 61,954.29 55,570.01
Gross Block 1,968.15 1,981.40 2,306.31 2,868.23 2,852.89
Less : 560.12 500.44 505.39 422.55 332.06
Accumulated
Depreciation
Less : Impairment 0.00 0.00 0.00 0.00 0.00
of Assets
Net Block 1,408.03 1,480.96 1,800.91 2,445.68 2,520.83
Lease Adjustment 0.00 0.00 0.00 0.00 0.00
Capital Work in 15.34 3.56 31.58 3.77 6.13
Progress
Other Assets 20,998.81 19,450.60 24,966.20 19,093.24 31,353.27
TOTAL ASSETS 1,29,861.91 1,31,739.68 1,31,000.96 1,19,757.97 1,21,636.59
Contingent 16,43,288.06 15,72,076.64 12,28,492.34 12,01,490.01 16,78,747.38
Liability
Bills for collection 28,754.29 10,984.36 25,296.79 88,332.84 23,526.00

62
7.2 Profit & Loss Account For the Year Ending 31 March 2013-2017

Parameters MAR'17 MAR'16 MAR'15 MAR'14 MAR'13

(₹ Cr.) (₹ Cr.) (₹ Cr.) (₹ Cr.) (₹ Cr.)

I. INCOME

Interest Earned 10,019.10 10,142.02 9,979.09 9,083.49 7,943.23

Other Income 1,993.48 3,281.96 3,145.40 2,807.22 2,988.22

Total Income 12,012.58 13,423.98 13,124.49 11,890.71 10,931.46

II. EXPENDITURE

Interest Expended 4,154.07 4,558.89 4,592.52 4,069.20 3,690.37

Operating Expenses 2,917.52 2,951.95 3,205.06 2,904.09 2,740.82

PBIDT 4,940.99 5,913.14 5,326.90 4,917.42 4,500.27

Provisions and Contingencies 3,819.15 1,213.75 2,892.98 250.95 1,955.46

Profit Before Tax 1,121.84 4,699.40 2,433.92 4,666.47 2,544.80

Taxes 115.34 1,647.95 849.81 1,706.25 809.04

Total 11,006.08 10,372.53 11,540.38 8,930.49 9,195.69

III. Profit & Loss

PAT 1,006.50 3,051.45 1,584.11 2,960.22 1,735.77

Extraordinary Items 0.00 0.00 0.00 0.00 0.00

Profit brought forward 2,257.35 1,143.03 2,193.66 1,211.32 1,475.84

Adjusted Net Profit 0.00 0.00 0.00 0.00 0.00

Total Profit & Loss 1,006.50 3,051.45 1,584.11 2,960.22 1,735.77

Appropriations 3,263.85 4,194.47 3,777.78 4,171.54 3,211.61

63