Chapter 1

Research Methodology
1.1 Objective of the Study
? The main objective is to evaluate the business and financial performance of major Banks which are listed on BSE BANKEX so as to facilitate investment decisions and to maximize return with the minimum risk. ? To create a virtual portfolio based on the fundamental analysis carried out.

1.2 Scope of the Study

This study only includes Banks that are listed in Bombay Stock Exchange. Moreover the result of the study will be only based on fundamental analysis. The data of last three years:2004-2005, 2005-2006, 2006-2007 are taken into consideration for the study.

1.3 Research Design

It is a descriptive research.

1.4 Sources of Data

Basic data like Balance sheet, P/L a/c etc. of the companies will be taken from the Prowess software. Along with that the annual reports and websites of the companies will also be referred.

1.5 Sampling
The stocks selected are Banking Stocks which are listed in BSE - BANKEX BSE BANKING SECTOR INDEX BSE Bankex was launched with an objective of measuring the performance of banking sector stocks listed on the Bombay Stock Exchange. Bankex has a base date of 1st January 2002 and base value of 1000 points. Bankex constituents represent 90% of the total market capitalisation of the banking sector on BSE. The following companies we take which is come under the BSE- BANKING SECTOR INDEX : 1

1. ALLAHABAD BANK 2. ANDHRA BANK 3. AXIS BANKI 4. VIJAYA BANK 5. UNION BANK 6. ORIENTAL BANK OF COMMERECE 7. BANK OF INDIA 8. CANARA BANK 9. HDFC BANK 10. ICICI BANK 11. INDIAN OVERSEAS BANK 12. KOTAK BANK 13. PUNJAB NATIONAL BANK 14. STATE BANK OF INDIA 15. BANK OF BARODA.

1.6 Method of analysis

? The major criteria for the study like Capital Adequacy Ratio, N/P growth, EPS, market capitalization, current ratio etc. will be selected and all companies are compared as per these criteria. ? ? The selected companies can also be compared on individual basis. Finally weights are given to the selected ratios.

1.7 Benefits of the Study

This study will be helpful to take buy or sell decisions in the capital market. Thus overall this study will be useful to, ? ? ? ? Investors Shareholders Students Researchers

1.8 Limitations
? ? The major limitation of this study may be the uncertainty of the capital market. Due to the current market volatility any prediction of the market can be proved wrong at any time. The other limitation may be the time horizon. As the study will be of short period of time, it may lack with some important considerations. Any sudden change in rules and regulations by the Government for running the Banks of the country may affect the conclusion of this study.

1.9

Expected Contribution of the Study

This study will help an investor to decide whether to buy, sell or hold the stock. It will also create a virtual portfolio that can be used by any investor who wants to invest in the Banking sector.

Chapter 2

Indian Stock Market

2.1 History of stock market
Stock market is a system through which company shares are traded. The equity market offers investors an opportunity to participate in a company's success through an increase in its stock price. With enhanced opportunity, however, the equity market usually carries greater risk than debt markets. The Indian equity market focuses on the SENSEX. The other major component of the Indian equity market is the NIFTY, a computerized system of brokers/dealers with no physical trading space. The Indian equity market also comprises trading on the regional stock exchanges. The worldwide equity market grew rapidly in the late 20th century, rising from $1 trillion in market capitalization in 1974 to $16 trillion in 1997 and today the size of the stock market is estimated at about $51 trillion. The world derivatives market has been estimated at about $480 trillion face or nominal value, 30 times the size of the U.S. economy. and 12 times the size of the entire world economy. It must be noted though that the value of the derivatives market, because it is stated in terms of notional values, and cannot be directly compared to a stock or a fixed income security, which traditionally refers to an actual value. Many such relatively illiquid securities are valued as marked to model, rather than an actual market price. The worldwide equity market benefited from freer markets, government privatizations, and companies seeking an alternative to debt. The working of stock exchanges in India started in 1875. BSE is the oldest stock market in India. The history of Indian stock trading starts with 318 persons taking membership in Native Share and Stock Brokers Association, which we now know by the name Bombay Stock Exchange or BSE in short. In 1965, BSE got permanent recognition from the Government of India. National Stock Exchange comes second to BSE in terms of popularity. BSE and NSE represent themselves as synonyms of Indian stock market. The history of Indian stock market is almost the same as the history of BSE. The 30 stock sensitive index or Sensex was first compiled in 1986. The Sensex is compiled based on the performance of the stocks of 30 financially sound benchmark companies. 4

The unpredictable behavior of the market gave it a tag 'a volatile market.' Global investors now ardently seek India as their preferred location for investment. Once viewed with skepticism, stock market now appeals to middle class Indians also. Many Indians working in foreign countries now divert their savings to stocks. This recent phenomenon is the result of opening up of online trading and diminished interest rates from banks. The stockbrokers based in India are opening offices in different countries mainly to cater the needs of Non Resident Indians. The time factor also works for the NRIs. They can buy or sell stock online after returning from their work places. The recent incidents that led to growing interest among Indian middle class are the initial public offers announced by Tata Consultancy Services, Maruti Udyog Limited, ONGC and big names like that. Good monsoons always raise the market sentiments. A good monsoon means improved agricultural produce and more spending capacity among rural folk. The bullish run of the stock market can be associated with a steady growth of around 6 in GDP, the growth of Indian companies to MNCs, large potential of growth in the fields of telecommunication, mass media, education, tourism and IT sectors backed by economic reforms ensure that Indian stock market continues its bull run.

2.3 Importance of stock market

Function and purpose
The stock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional capital for expansion by selling shares of ownership of the company in a public market. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate. History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central banks tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions. Financial stability is the raison d'tre of central banks. 5

Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. This eliminates the risk to an individual buyer or seller that the counterparty could default on the transaction. The smooth functioning of all these activities facilitates economic growth in that lower costs and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity.

Stock market index

The movements of the prices in a market or section of a market are captured in price indices called stock market indices, of which there are many, e.g., the S&P, the FTSE and the Euronext indices. Such indices are usually market capitalization (the total market value of floating capital of the company) weighted, with the weights reflecting the contribution of the stock to the index. The constituents of the index are reviewed frequently to include/exclude stocks in order to reflect the changing business environment.

2.4 Bombay Stock Exchange

Bombay Stock Exchange
Mumbai Seyar Bazar

Type Location Owner Key people Currency No. of listings MarketCap Volume Indexes Website

Stock Exchange Mumbai, India Bombay Stock Exchange Limited Rajnikant Patel (CEO) INR 4,800 US$ 1.61 trillion US$ 980 billion BSE Sensex www.bseindia.com

BSE indices
The BSE SENSEX (also known as the BSE 30 index) is a value-weighted index composed of thirty scrips, with the base April 1979 = 100. The set of companies which make up the index has been changed only a few times in the last twenty years. These companies account for around one-fifth of the market capitalization of the BSE. Apart from BSE SENSEX, which is the most popular stock index in India, BSE uses other stock indices as well:
? ? ? ? ? ? ? ? ? ? ? ? ?

BSE 500 BSE 100 BSE 200 BSE PSU BSE MIDCAP BSE SMLCAP BSE BANKEX BSE Teck BSE Auto BSE Pharma BSE Fast Moving Consumer Goods (FMCG) BSE Consumer Durables BSE Metal

2.5 National Stock Exchange Limited

National Stock Exchange Limited

Type Location Coordinates Owner Key people Currency No. of listings Market Cap

Stock Exchange Mumbai, India 193'37?N, 7251'35?E National Stock Exchange of India Limited Abhinay dutta Managing Director INR 1587 US$ 1.46 trillion S&P CNX Nifty

Indexes

CNX Nifty Junior S&P CNX 500

Website

www.nse-india.com

Indices
NSE also set up as index services firm known as India Index Services & Products Limited (IISL) and has launched several stock indices, including:
? ? ? ? ?

S&P CNX Nifty CNX Nifty Junior CNX 100 (= S&P CNX Nifty + CNX Nifty Junior) S&P CNX 500 (= CNX 100 + 400 major players across 72 industries) CNX Midcap (introduced on 18 July 2005 replacing CNX Midcap 200) 9

2.6 Current Situation & Volatility

Year 2007 started on a strong note, but is ending on a mixed note. The US sub prime crisis is far from over, and can drag the US economy into recession. Crude prices have surged, so have many agriculture and other commodity prices at a time when the global economy is none to strong. This will definitely have an impact on India, particularly on its export prospects. Fortunately, India is more of an internal-consumption-driven economy. In the past few years, the cream of growth has been investment-driven, too. These factors provide strong support for sustained acceleration in the domestic economy. The US Federal Reserve has cut rates thrice. This has led to a surge in forex inflows into emerging markets like India and into commodities. Domestic inflation has moderated and is below 4%. Also, interest rates have already peaked. If they fall steeper from the current levels, it could revive the auto sector and boost the profitability of the banking sector, particularly PSU banks, through surge in investment income. The surge on the Indian stock markets was powered by foreign institutional investors (FIIs). Inflows from FIIs stood at US$ 17 billion in 2007. A majority of this was received in the later part of the year. The main reason was the cutting of rates by the US Federal Reserve. With the US market heading for a recession and the global economy for a slowdown, will foreign portfolio investment decline, remain consistent or surge? With large global investment banking entities reporting poor results of late, FII inflows are bound to reduce from such entities for now. India is also witnessing one of the lengthiest capital expenditure cycles, which shows no signs of easing. This experience has helped the domestic players to strengthen their overseas businesses as well.

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2008 has begun with a bang. And how! The Bombay Stock Exchange (BSE) Sensitive Index (Sensex) shaved off 3,222.1 points in six consecutive trading sessions between 14 and 21 January 2008. Though the fall was continuous on each of these days, 21 January turned to be a typical Black Monday as the market went down intra-day by Equity Markets In India An Overview 79 2,062.2 points, finally closing with 1,408.35 points off. The carnage was not unique to India but was spread across the globe. In the year to 21 January 2008, only three of the 52 global equity markets gave positive returns in dollar terms, according to the Broad Market Index provided by Standard & Poors/Citigroup Global Equity Indices. These were Morocco, Jordan and Nigeria. On the other extreme, six markets Luxembourg, Norway, Poland, Brazil, Iceland and Turkey witnessed over 20% fall. Thirtyseven markets had a double-digit dip, while six markets witnessed single-digit decline. India lost 16.2% in dollar terms in this period. It is becoming increasingly clear that the global economy is set to slow down. Sub-prime crisis is just a symptom of the weaknesses in the US economy. A US recession will slow down the global economy due to its global linkages. Starting the December 2007 quarter at a level of 17,291 points, the BSE Sensex kept on rising (with many corrections) throughout the quarter and was up over 17% at the end of the quarter. When the December 2007 quarter results started pouring in, the index shot up to a historic high of 21,207 points on 10 January 2008 and then crashed like a, pack of card on fears of a US recession and huge write-offs by almost all global banks and financial institutions on account of defaults in the sub-prime mortgage market. This took a heavy toll on the Indian markets also. After closing at a historical high of 20,873.33 on 8 January 2008, the BSE Sensex tumbled by over 29% to 14,809.49 on 17 March 2008. Fortunately, there was a relief rally, which talked up the Sensex past the16,000 levels to 16,371.29 on 28 March 2008. Still the market is nearly 22% lower from its peak. There was sustained and heavy selling by foreign institutional investors (FIIs) in January 2007 as well as in February till date. From excessive inflows, the markets are now suffering from excessive FII selling. Nevertheless, the Indian markets have managed Equity Markets In India An Overview 80 to fare much better compared with other markets on good inflows from domestic institutional investors.

11

Investors realize how lonely they are during a market meltdown. Innovations in dissemination of information ensure that the markets never sleep. Somewhere a market is reeling under the impact of events unfolding in another part of the globe. Despite the availability of sophisticated trading instruments to cushion risks, investors are either propelled on euphoria emanating at one end or swept aside on a wave of pessimism stemming from another. Institutional investors, went the conventional wisdom, collectively determine the course of the markets. Not any more. If an aggressive investor such as Bear Stearns, allegedly sitting on a pile of cash just 100 hours before its hasty rescue, could not foresee its fate, how are retail investors to know that the chattering class, propounding the theory of decoupling of emerging markets such as India and China even as Citigroup, Merrill Lynch and other blue-chip US investment banks were writing off huge amounts of their exposure to paper backed by sub prime mortgages, were as clueless as they were? Each crisis brings to the table its own lessons. We can not exactly judge the market, but we can analyze the fundamental of company and some what predict the trend.

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Chapter 3

Fundamental Analysis Concept

3.1 Introduction to Fundamental Analysis

Fundamental analysis is the examination of the underlying forces that affect the well being of the economy, industry groups, and companies. As with most analysis, the goal is to derive a forecast and profit from future price movements. At the company level, Fundamental analysis may involve examination of financial data, management, business concept and competition. At the industry level, there might be an examination of supply and demand forces for the products offered. For the national economy, Fundamental analysis might focus on economic data to assess the present and future growth of the economy. To forecast future stock prices, Fundamental analysis combines economic, industry, and company analysis to derive a stock's current fair value and forecast future value. If fair value is not equal to the current stock price, Fundamental analysts believe that the stock is either over or under valued and the market price will ultimately gravitate towards fair value. Fundamentalists do not heed the advice of the random walkers and believe that markets are weak-form efficient. By believing that prices do not accurately reflect all available information, Fundamental analysts look to capitalize on perceived price discrepancies.

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3.2 General Steps to Fundamental Evaluation

Even though there is no one clear-cut method, a breakdown is presented below in the order an investor might proceed. This method employs a top-down approach that starts with the overall economy and then works down from industry groups to specific companies. As part of the analysis process, it is important to remember that all information is relative. Industry groups are compared against other industry groups and companies against other companies. Usually, companies are compared with others in the same group. For example, a telecom operator (Idea) would be compared to another telecom operator (Tata communication), not to an oil company (ONGC).

1.

Economic Forecast

First and foremost in a top-down approach would be an overall evaluation of the general economy. The economy is like the tide and the various industry groups and individual companies are like boats. When the economy expands, most industry groups and companies benefit and grow. When the economy declines, most sectors and companies usually suffer. Many economists link economic expansion and contraction to the level of interest rates. Interest rates are seen as a leading indicator for the stock market as well. Below is a chart of the S&P 500 and the yield on the 10-year note over the last 30 years. Although not exact, a correlation between stock prices and interest rates can be seen. Once a scenario for the overall economy has been developed, an investor can break down the economy into its various industry groups.

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2.

Industry Selection

In an expanding economy, then certain groups are likely to benefit more than others. An investor can narrow the field to those groups that are best suited to benefit from the current or future economic environment. If most companies are expected to benefit from an expansion, then risk in equities would be relatively low and an aggressive growth-oriented strategy might be advisable. A growth strategy might involve the purchase of technology, biotech, semiconductor and cyclical stocks. If the economy is forecast to contract, an investor may opt for a more conservative strategy and seek out stable income-oriented companies. A defensive strategy might involve the purchase of consumer staples, utilities and energy-related stocks. To assess a industry group's potential, an investor would want to consider the overall growth rate, market size, and importance to the economy. While the individual company is still important, its industry group is likely to exert just as much, or more, influence on the stock price. When stocks move, they usually move as groups; there are very few lone guns out there. Many times it is more important to be in the right industry than in the right stock! The chart below shows that relative performance of 5 sectors over a 7-month time frame. As the chart illustrates, being in the right sector can make all the difference.

15

3.

Narrow with in the Industry Group

Once the industry group is chosen, an investor would need to narrow the list of companies before proceeding to a more detailed analysis. Investors are usually interested in finding the leaders and the innovators within a group. The first task is to identify the current business and competitive environment within a group as well as the future trends. How do the companies rank according to market share, product position and competitive advantage? Who is the current leader and how will changes within the sector affect the current balance of power? What are the barriers to entry? Success depends on an edge, be it marketing, technology, market share or innovation. A comparative analysis of the competition within a sector will help identify those companies with an edge, and those most likely to keep it.

4.

Company Analysis

With a shortlist of companies, an investor might analyze the resources and capabilities within each company to identify those companies that are capable of creating and maintaining a competitive advantage. The analysis could focus on selecting companies with a sensible business plan, solid management and sound financials. ? Business Plan

The business plan, model or concept forms the bedrock upon which all else is built. If the plan, model or concepts stink, there is little hope for the business. For a new business, the questions may be these: Does its business make sense? Is it feasible? Is there a market? Can a profit be made? For an established business, the questions may be: Is the company's direction clearly defined? Is the company a leader in the market? Can the company maintain leadership? ? Management

In order to execute a business plan, a company requires top-quality management. Investors might look at management to assess their capabilities, strengths and weaknesses. Even the best-laid plans in the most dynamic industries can go to waste with bad management. Alternatively, even strong management can make for extraordinary success in a mature industry. Some of the questions to ask might include: How talented is the management team? Do they have a track record? How long have they worked together? Can management deliver on its promises? If management is a problem, it is sometimes best to move on. 16

Financial Analysis

The final step to this analysis process would be to take apart the financial statements and come up with a means of valuation. Below is a list of potential inputs into a financial analysis. Accounts Payable Accounts Receivable Acid Ratio Amortization Assets - Current Assets - Fixed Book Value Brand Business Cycle Business Idea Business Model Business Plan Capital Expenses Cash Flow Cash on hand Current Ratio Days Payable Days Receivable Debt Debt Structure Debt:Equity Ratio Depreciation Derivatives-Hedging Dividend Dividend Cover Earnings EBITDA Economic Growth Good Will Gross Profit Margin Growth Industry Interest Cover International Investment Liabilities - Current Liabilities - Long-term Management Market Growth Market Share Net Profit Margin Pageview Growth Pageviews Patents Price/Earnings PEG Price/Sales Product Product Placement Regulations R&D Sector Stock Options Strategy Subscriber Growth Subscribers 17

Customer Relationships Price/Book Value

Discounted Cash Flow Revenues

Equity Equity Risk Premium Expenses

Supplier Relationships Taxes Trademarks Weighted Average Cost of Capital

The list can seem quite long and intimidating. However, after a while, an investor will learn what works best and develop a set of preferred analysis techniques. There are many different valuation metrics and much depends on the industry and stage of the economic cycle. A complete financial model can be built to forecast future revenues, expenses and profits or an investor can rely on the forecast of other analysts and apply various multiples to arrive at a valuation. Some of the more popular ratios are found by dividing the stock price by a key value driver. Ratio Company Type

Price/Book Value Price/Earnings Price/Sales Price/Subscribers Price/Lines Price/Page views Price/net interest I/C

Oil Retail B2B ISP or cable company Telecom Web site Biotech Banking

Price/Earnings/Growth Networking

This methodology assumes that a company will sell at a specific multiple of its earnings, revenues or growth. An investor may rank companies based on these valuation ratios. Those at the high end may be considered overvalued, while those at the low end may constitute relatively good value. After all is said and done, an investor will be left with a handful of companies that stand out from the pack. Over the course of the analysis process, an understanding will develop of which companies stand out as potential leaders and innovators. In addition, other companies would be considered laggards and unpredictable. The final step of the Fundamental analysis process is to synthesize all data, analysis and understanding into actual picks. 18

3.3 Strengths of Fundamental Analysis

? Long-term Trends

Fundamental analysis is good for long-term investments based on long-term trends, very longterm. The ability to identify and predict long-term economic, demographic, technological or consumer trends can benefit patient investors who pick the right industry groups or companies.

Value Spotting

Sound Fundamental analysis will help identify companies that represent a good value. Some of the most legendary investors think long-term and value. Fundamental analysis can help uncover companies with valuable assets, a strong balance sheet, stable earnings, and staying power.

Business Acumen

One of the most obvious, but less tangible, rewards of Fundamental analysis is the development of a thorough understanding of the business. After such painstaking research and analysis, an investor will be familiar with the key revenue and profit drivers behind a company. Earnings and earnings expectations can be potent drivers of equity prices. Even some technicians will agree to that. A good understanding can help investors avoid companies that are prone to shortfalls and identify those that continue to deliver. In addition to understanding the business, Fundamental analysis allows investors to develop an understanding of the key value drivers and companies within an industry. A stock's price is heavily influenced by its industry group. By studying these groups, investors can better position themselves to identify opportunities that are high-risk (tech), low-risk (utilities), growth oriented (computer), value driven (oil), non-cyclical (consumer staples), cyclical (transportation) or income-oriented (high yield).

Knowing Who's Who

Stocks move as a group. By understanding a company's business, investors can better position themselves to categorize stocks within their relevant industry group. Business can change rapidly and with it the revenue mix of a company. This happened to many of the pure Internet retailers, which were not really Internet companies, but plain retailers. Knowing a company's business and being able to place it in a group can make a huge difference in relative valuations. 19

3.4 Weaknesses of Fundamental Analysis

? Time Constraints

Fundamental analysis may offer excellent insights, but it can be extraordinarily time-consuming. Time-consuming models often produce valuations that are contradictory to the current price prevailing on Dalal Street. When this happens, the analyst basically claims that the whole street has got it wrong. This is not to say that there are not misunderstood companies out there, but it is quite brash to imply that the market price, and hence Dalal street, is wrong.

Industry/Company Specific

Valuation techniques vary depending on the industry group and specifics of each company. For this reason, a different technique and model is required for different industries and different companies. This can get quite time-consuming, which can limit the amount of research that can be performed. A subscription-based model may work great for an Internet Service Provider (ISP), but is not likely to be the best model to value an oil company.

Subjectivity

Fair value is based on assumptions. Any changes to growth or multiplier assumptions can greatly alter the ultimate valuation. Fundamental analysts are generally aware of this and use sensitivity analysis to present a base-case valuation, a best-case valuation and a worst-case valuation. However, even on a worst-case valuation, most models are almost always bullish, the only question is how much so. The chart below shows how stubbornly bullish many Fundamental analysts can be.

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Analyst Bias

The majority of the information that goes into the analysis comes from the company itself. Companies employ investor relations managers specifically to handle the analyst community and release information. When it comes to massaging the data or spinning the announcement, CFOs and investor relations managers are professionals. Only buy-side analysts tend to venture past the company statistics. Buy-side analysts work for mutual f nds and money u managers. They read the reports written by the sell-side analysts who work for the big brokers.These brokers are also involved in underwriting and investment banking for the companies. Even though there are restrictions in place to prevent a conflict of interest, brokers have an ongoing relationship with the company under analysis. When reading these reports, it is important to take into consideration any biases a sell-side analyst may have. The buy-side analyst, on the other hand, is analyzing the company purely from an investment standpoint for a portfolio manager. If there is a relationship with the company, it is usually on different terms. In some cases this may be as a large shareholder.

Definition of Fair Value

When market valuations extend beyond historical norms, there is pressure to adjust growth and multiplier assumptions to compensate. If Dalal Street values a stock at 50 times earnings and 21

the current assumption is 30 times, the analyst would be pressured to revise this assumption higher. There is an old Dalal Street adage: the value of any asset (stock) is only what someone is willing to pay for it (current price). Just as stock prices fluctuate, so too do growth and multiplier assumptions. However, because so many companies were and are losing money, it has become popular to value a business as a multiple of its revenues. This would seem to be OK, except that the multiple was higher than the PE of many stocks! Some companies were considered bargains at 30 times revenues.

3.5 End Note

Fundamental analysis can be valuable, but it should be approached with caution. If you are reading research written by a sell-side analyst, it is important to be familiar with the analyst behind the report. We all have personal biases, and every analyst has some sort of bias. There is nothing wrong with this, and the research can still be of great value. Learn what the ratings mean and the track record of an analyst before jumping off the deep end. Corporate statements and press releases offer good information, but they should be read with a healthy degree of skepticism to separate the facts from the spin. Press releases don't happen by accident; they are an important PR tool for companies. Investors should become skilled readers to weed out the important information and ignore the hype.

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Chapter 4

Analysis of Global Economy

Global output rose by 5.2% in 2007, led by China (11.4%), India (9.2%), and Russia (8.1%). The 14 other successor nations of the USSR and the other old Warsaw Pact nations again experienced widely divergent growth rates; the three Baltic nations continued as strong performers, in the 8%-10% range of growth. From 2007 to 2008 growth rates slowed in all the major industrial countries except for the United Kingdom (3.1%). Analysts attribute the slowdown to uncertainties in the financial markets and lowered consumer confidence. Worldwide, nations varied widely in their growth results. Externally, the nation-state, as a bedrock economic -political institution, is steadily losing control over international flows of people, goods, funds, and technology. Internally, the central government often finds its control over resources slipping as separatist regional movements typically based on ethnicity - gain momentum, e.g., in many of the successor states of the former Soviet Union, in the former Yugoslavia, in India, in Iraq, in Indonesia, and in Canada. Externally, the central government is losing decision making powers to international bodies, notably the EU. In Western Europe, governments face the difficult political problem of channeling resources away from welfare programs in order to increase investment and strengthen incentives to seek employment. The addition of 80 million people each year to an already overcrowded globe is exacerbating the problems of pollution, desertification, underemployment, epidemics, and famine. Because of their own internal problems and priorities, the industrialized countries devote insufficient resources to deal effectively with the poorer areas of the world, which, at least from an economic point of view, are becoming further marginalized. The introduction of the euro as the common currency of much of Western Europe in January 1999, while paving the way for an integrated economic powerhouse, poses economic risks because of varying levels of income and cultural and political differences among the participating nations. 23

The terrorist attacks on the US on 11 September 2001 accentuated a growing risk to global prosperity, illustrated, for example, by the reallocation of resources away from investment to anti-terrorist programs. The opening of war in March 2003 between a US-led coalition and Iraq added new uncertainties to global economic prospects. After the initial coalition victory, the complex political difficulties and the high economic cost of establishing domestic order in Iraq became major global problems that continued through 2007-08.

GDP (purchasing power parity): GWP (gross world product): $65.61 trillion (est) GDP (official exchange rate): GWP (gross world product): $54.62 trillion (est.) GDP - real growth rate: 5.2% (est.) GDP - per capita (PPP): $10,000 (est.) GDP - composition by sector: agriculture: 4% industry: 32% services: 64% (est.) Labor force: 3.131 billion (est.) Labor force - by occupation: agriculture: 40.2% industry: 20.5% services: 39.3% (est.) Unemployment rate: 30% combined unemployment and underemployment in many non-industrialized countries; developed countries typically 4%-12% unemployment (2007 est.) Inflation rate (consumer prices): developed countries 1% to 4% typically; developing countries 5% to 20% typically; national inflation rates vary widely in individual cases, from declining prices in Japan to hyperinflation in one Third World country (Zimbabwe); inflation rates have declined for most countries for the last several years, held in check by increasing international competition from several low wage countries (est.) Investment (gross fixed): 22.7% of GDP (est.) Industries: Dominated by the onrush of technology, especially in computers, robotics, telecommunications, and medicines and medical equipment; most of these advances take place in OECD nations; only a small portion of non-OECD countries have succeeded in rapidly adjusting to these technological forces; the accelerated development of new industrial (and agricultural) technology is complicating already grim environmental problems

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Industrial production growth rate: 5% (est.) Oil - production: 78.9 million bbl/day (est.) Oil - consumption: 80.29 million bbl/day (est.) Exports: $14.01 trillion f.o.b. (est.) Exports - commodities: the whole range of industrial and agricultural goods and services top ten - share of world trade: electrical machinery, including computers 14.8%; mineral fuels, including oil, coal, gas, and refined products 14.4%; nuclear reactors, boilers, and parts 14.2%; cars, trucks, and buses 8.9%; scientific and precision instruments 3.5%; plastics 3.4%; iron and steel 2.7%; organic chemicals 2.6%; pharmaceutical products 2.6%; diamonds, pearls, and precious stones 1.9% (est.) Exports - partners: US 15%, Germany 7.4%, China 5.9%, France 4.6%, UK 4.5%, Japan 4.4% Imports: $13.91 trillion f.o.b. (est.) Imports - commodities: the whole range of industrial and agricultural goods and services top ten - share of world trade: see listing for exports Imports - partners: China 9.8%, Germany 8.8%, US 8.5%, Japan 5.6%, France 4 Market value of publicly traded shares: $43.64 trillion (est.)

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Chapter 5

Analysis of Indian Economy

5.1 Introduction
The economy of India, measured in USD exchange-rate terms, is the twelfth largest in the world, with a GDP of around $1 trillion (2008). It recorded a GDP growth rate of 9.0% for the fiscal year 20072008 which makes it the second fastest big emerging economy, after China, in the world. At this rate of sustained growth many economists forecast that India would, over the coming decades, have a more pronounced economic effect on the world stage. Despite this phenomenal rate of growth, India's large population has a per capita income of $4,542, measured by PPP, and $1,089, measured in nominal terms (estimate).The World Bank classifies India as a low-income economy. India's economy is diverse, encompassing agriculture, handicrafts, textile, manufacturing, and a multitude of services. Although two-thirds of the Indian workforce still earn their livelihood directly or indirectly through agriculture, services are a growing sector and play an increasingly important role in India's economy. The advent of the digital age, and the large number of young and educated populace fluent in English, is gradually transforming India as an important 'back office' destination for global outsourcing of customer services and technical support. India is a major exporter of highly-skilled workers in software and financial services, and software engineering. Other sectors like manufacturing, pharmaceuticals, biotechnology, nanotechnology, telecommunication, shipbuilding, aviation , tourism and retailing are showing strong potentials with higher growth rates. India followed a socialist-inspired approach for most of its independent history, with strict government control over private sector participation, foreign trade, and foreign direct investment. However, since the early 1990s, India has gradually opened up its markets through economic reforms by reducing government controls on foreign trade and investment. The privatisation of publicly owned industries and the opening up of certain sectors to private and foreign interests has proceeded slowly amid political debate.

India faces a fast- growing population and the challenge of reducing economic and social
inequality. Poverty remains a serious problem, although it has declined significantly since

independence. Official surveys estimated that in the year 2004-2005, 27% of Indians were poor.
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Economy of India

Currency Fiscal year Trade organizations

1 Indian Rupee (INR) (? ) = 100 Paisa April 1March 31 WTO, SAFTA

Statistics
GDP (PPP) GDP growth GDP per capita GDP by sector Inflation (CPI) Population below poverty line Labor force Labor force by occupation 509.3 million (2006 est.) agriculture: 60%, industry: 12%, services: 28% (2003) $5.21 trillion (PPP) (2008 est.) (3rd) 9.6% (2006/07) $1,089 (nominal); $4,543 (PPP) [2] Agriculture: 19.9%, industry: 19.3%, services: 60.7% (2006 est.) 3.5% (2008 est.) 25% (2002 est.) [3]

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Unemployment 7.8% (2006 est.) Main industrie s textiles, chemicals, food processing, steel, transportation equipment, cement, mining, petroleum, machinery, software, services

External
Exports Export goods $125 billion (Financial Year 2006-2007) textile goods, gems and jewelry, engineering goods, chemicals, leather manufactures, services Main export partners Imports Import goods Main import partners US 18%, the People's Republic of China 8.9%, UAE 8.4%, UK 4.7%, Hong Kong 4.2% (2005) $187.9 billion f.o.b. (2006 est.) crude oil, machinery, gems, fertilizer, chemicals the People's Republic of China 7.2%, US 6.4%, Belgium 5.1%, Singapore 4.7%, Australia 4.2%, Germany 4.2%, UK 4.1% (2005)

Public finances
Public debt Revenues Expenses $132.1 billion (2006 est.) $109.4 billion (2006 est.) $143.8 billion; including capital expenditures of $15 billion (2006 est.)

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5.2 Sectors
1. Agriculture
India ranks second worldwide in farm output. Agriculture and allied sectors like forestry, logging and fishing accounted for 16.6% of the GDP in 2007, employed 60% of the total workforce and despite a steady decline of its share in the GDP, is still the largest economic sector and plays a significant role in the overall socio-economic development of India. Yields per unit area of all crops have grown since 1950, due to the special emphasis placed on agriculture in the five-year plans and steady improvements in irrigation, technology, application of modern agricultural practices and provision of agricultural credit and subsidies since Green revolution in India. However, international comparisons reveal that the average yield in India is generally 30% to 50% of the highest average yield in the world. The low productivity in India is a result of the following factors:
?

Illiteracy, general socio-economic backwardness, slow progress in implementing land reforms and inadequate or inefficient finance and marketing services for farm produce. The average size of land holdings is very small (less than 20,000 m) and is subject to fragmentation, due to land ceiling acts and in some cases, family disputes. Such small holdings are often over-manned, resulting in disguised unemployment and low productivity of labour.

Adoption of modern agricultural practices and use of technology is inadequate, hampered by ignorance of such practices, high costs and impracticality in the case of small land holdings.

Irrigation facilities are inadequate, as revealed by the fact that only 52.6% of the land was irrigated in 200304, which result in farmers still being dependent on rainfall, specifically the Monsoon season. A good monsoon results in a robust growth for the economy as a whole, while a poor monsoon leads to a sluggish growth. Farm credit is regulated by NABARD, which is the statutory apex agent for rural development in the subcontinent.

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2. Industry
India is fourteenth in the world in factory output. They together account for 27.6% of the GDP and employ 17% of the total workforce. However, about one-third of the industrial labour force is engaged in simple household manufacturing only. Economic reforms brought foreign competition, led to privatisation of certain public sector industries, opened up sectors hitherto reserved for the public sector and led to an expansion in the production of fast-moving consumer goods. Post-liberalisation, the Indian private sector, which was usually run by oligopolies of old family firms and required political connections to prosper was faced with foreign competition, including the threat of cheaper Chinese imports. It has since handled the change by squeezing costs, revamping management, focusing on designing new products and relying on low labour costs and technology. 34 Indian companies have been listed in the Forbes Global 2000 ranking for 2008.

3. Services
India is fifteenth in services output. It provides employment to 23% of work force, and it is growing fast, growth rate 7.5% in 19912000 up from 4.5% in 195180. It has the largest share in the GDP, accounting for 55% in 2007 up from 15% in 1950. Business services (information technology, information technology enabled services, business process outsourcing) are among the fastest growing sectors contributing to one third of the total output of services in 2000. The growth in the IT sector is attributed to increased specialisation, availability of a large pool of low cost, but highly skilled, educated and fluent English-speaking workers. On the supply side and on the demand side, increased demand from foreign consumers interested in India's service exports or those looking to outsource their operations. India's IT industry, despite contributing significantly to its balance of payments, accounted for only about 1% of the total GDP or 1/50th of the total services.

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4. Banking and finance

The Indian money market is classified into: the organised sector (comprising private, public and foreign owned commercial banks and cooperative banks, together known as scheduled banks); and the unorganised sector (comprising individual or family owned indigenous bankers or money lenders and non-banking financial companies (NBFCs)). The unorganised sector and microcredit are still preferred over traditional banks in rural and sub-urban areas, especially for non-productive purposes, like ceremonies and short duration loans. Prime Minister Indira Gandhi nationalised 14 banks in 1969, followed by six others in 1980, and made it mandatory for banks to provide 40% of their net credit to priority sectors like agriculture, small-scale industry, retail trade, small businesses, etc. to ensure that the banks fulfill their social and developmental goals. Since then, the number of bank branches has increased from 10,120 in 1969 to 98,910 in 2003 and the population covered by a branch decreased from 63,800 to 15,000 during the same period. The total deposits increased 32.6 times between 1971 to 1991 compared to 7 times between 1951 to 1971. Despite an increase of rural branches, from 1,860 or 22% of the total number of branches in 1969 to 32,270 or 48%, only 32,270 out of 5 lakh (500,000) villages are covered by a scheduled bank. Since liberalisation, the government has approved significant banking reforms. While some of these relate to nationalised banks (like encouraging mergers, reducing government interference and increasing profitability and competitiveness), other reforms have opened up the banking and insurance sectors to private and foreign players.

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Chapter 6

Introduction to Banking Sector

6.1 History of Banking in India
Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors. Banking in India originated in the first decade of 18th century with The General Bank of India coming into existence in 1786. This was followed by Bank of Hindustan. Both these banks are now defunct. The oldest bank in existence in India is the State Bank of India being established as "The Bank of Bengal" in Calcutta in June 1806. A couple of decades later, foreign banks like Credit Lyonnais started their Calcutta operations in the 1850s. At that point of time, Calcutta was the most active trading port, mainly due to the trade of the British Empire, and due to which banking activity took roots there and prospered. The first fully Indian owned bank was the Allahabad Bank, which was established in 1865. By the 1900s, the market expanded with the establishment of banks such as Punjab National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai - both of which were founded under private ownership. The Reserve Bank of India formally took on the responsibility of regulating the Indian banking sector from 1935. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers. For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reasons of India's growth process. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India. Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. Today, he has a choice. Gone are days when the most efficient bank transferred money from one branch to other in two days. Now it is simple as instant messaging or dials a pizza. Money has become the order of the day. 32

The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below:
? ? ?

Early phase from 1786 to 1969 of Indian Banks Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms. New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991.

Scenario of Bank as per Phase I, Phase II and Phase III. Phase I The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks, mostly Europeans shareholders. In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935. During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning and activities of commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision of banking in india as the Central Banking Authority. During those days public has lesser confidence in the banks. As an aftermath deposit mobilisation was slow. Abreast of it the savings bank facility provided by the Postal department was comparatively safer. Moreover, funds were largely given to traders.

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Phase II Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalised Imperial Bank of India with extensive banking facilities on a large scale specially in rural and semi-urban areas. It formed State Bank of india to act as the principal agent of RBI and to handle banking transactions of the Union and State Governments all over the country. Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on 19th July, 1969, major process of nationalisation was carried out. It was the effort of the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country was nationalised. Second phase of nationalisation Indian Banking Sector Reform was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under Government ownership. The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country:
? ? ? ? ? ? ? ?

1949 : Enactment of Banking Regulation Act. 1955 : Nationalisation of State Bank of India. 1959 : Nationalisation of SBI subsidiaries. 1961 : Insurance cover extended to deposits. 1969 : Nationalisation of 14 major banks. 1971 : Creation of credit guarantee corporation. 1975 : Creation of regional rural banks. 1980 : Nationalisation of seven banks with deposits over 200 crore.

After the nationalisation of banks, the branches of the public sector bank India rose to approximately 800% in deposits and advances took a huge jump by 11,000%. Banking in the sunshine of Government ownership gave the public implicit faith and immense confidence about the sustainability of these institutions.

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Phase III This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalisation of banking practices.

The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and net banking is introduced. The entire system became more convenient and swift. Time is given more importance than money. The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure.

6.2 Types of banks

Banks' activities can be divided into retail banking, dealing directly with individuals and small businesses; business banking, providing services to mid-market business; corporate banking, directed at large business entities; private banking, providing wealth management services to High Net Worth Individuals and families; and investment banking, relating to activities on the financial markets. Most banks are profit-making, private enterprises. However, some are owned by government, or are non-profits. Central banks are normally government owned banks, often charged with quasi-regulatory responsibilities, e.g. supervising commercial banks, or controlling the cash interest rate. They generally provide liquidity to the banking system and act as Lender of last resort in event of a crisis.

Types of retail banks

Commercial bank: the term used for a normal bank to distinguish it from an investment bank. After the Great Depression, the U.S. Congress required that banks only engage in banking activities, whereas investment banks were limited to capital market activities. Since the two no longer have to be under separate ownership, some use the term "commercial bank" to refer to a 35

bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses. ? ? ? ? ? ? Community Banks: locally operated financial institutions that empower employees to make local decisions to serve their customers and the partners. Community development banks: regulated banks that provide financial services and credit to under-served markets or populations. Postal savings banks: savings banks associated with national postal systems. Private banks: manage the assets of high net worth individuals. Offshore banks: banks located in jurisdictions with low taxation and regulation. Many offshore banks are essentially private banks. Savings bank: in Europe, savings banks take their roots in the 19th or sometimes even 18th century. Their original objective was to provide easily accessible savings products to all strata of the population. In some countries, savings banks were created on public initiative, while in others socially committed individuals created foundations to put in place the necessary infrastructure. Nowadays, European savings banks have kept their focus on retail banking: payments, savings products, credits and insurances for individuals or small and medium-sized enterprises. Apart from this retail focus, they also differ from commercial banks by their broadly decentralised distribution network, providing local and regional outreach and by their socially responsible approach to business and society. ? ? ? Building societies and Landesbanks: conduct retail banking. Ethical banks: banks that prioritize the transparency of all operations and make only what they consider to be socially-responsible investments. Islamic banks: Banks that transact according to Islamic principles.

Types of investment banks

?

Investment banks "underwrite" (guarantee the sale of) stock and bond issues, trade for their own accounts, make markets, and advise corporations on capital markets activities such as mergers and acquisitions.

Merchant banks were traditionally banks which engaged in trade financing. The modern definition, however, refers to banks which provide capital to firms in the form of shares rather than loans. Unlike venture capital firms, they tend not to invest in new companies.

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Both combined
?

Universal banks, more commonly known as a financial services company, engage in several of these activities. For example, First Bank (a very large bank) is involved in commercial and retail lending, and its subsidiaries in tax-havens offer offshore banking services to customers in other countries. Other large financial institutions are similarly diversified and engage in multiple activities. In Europe and Asia, big banks are very diversified groups that, among other services, also distribute insurance, hence the term bancassurance is the term used to describe the sale of insurance products in a bank. The word is a combination of "banque or bank" and "assurance" signifying that both banking and insurance are provided by the same corporate entity.

In India the banks are being segregated in different groups. Each group has their own benefits and limitations in operating in I dia. Each has their own dedicated target market. Few of them n only work in rural sector while others in both rural as well as urban. Many even are only catering in cities. Some are of Indian origin and some are foreign players. All these details and many more is discussed over here. The banks and its relation with the customers, their mode of operation, the names of banks under different groups and other such useful informations are talked about. With years, banks are also adding services to their customers. The Indian banking industry is passing through a phase of customers market. The customers have more choices in choosing their banks. A competition has been established within the banks operating in India. With stiff competition and advancement of technology, the services provided by banks has become more easy and convenient. The past days are witness to an hour wait before withdrawing cash from accounts or a cheque from north of the country being cleared in one month in the south. This section of banking deals with the latest discovery in the banking instruments along with the polished version of their old systems.

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6.3 Reserve Bank of India (RBI)

The central bank of the country is the Reserve Bank of India (RBI). It was established in April 1935 with a share capital of Rs. 5 crores on the basis of the recommendations of the Hilton Young Commission. The share capital was divided into shares of Rs. 100 each fully paid which was entirely owned by private shareholders in the begining. The Government held shares of nominal value of Rs. 2,20,000. Reserve Bank of India was nationalised in the year 1949. The general superintendence and direction of the Bank is entrusted to Central Board of Directors of 20 members, the Governor and four Deputy Governors, one Government official from the Ministry of Finance, ten nominated Directors by the Government to give representation to important elements in the economic life of the country, and four nominated Directors by the Central Government to represent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and New Delhi. Local Boards consist of five members each Central Government appointed for a term of four years to represent territorial and economic interests and the interests of co-operative and indigenous banks. The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II of 1934) provides the statutory basis of the functioning of the Bank. The Bank was constituted for the need of following:
? ? ?

To regulate the issue of banknotes To maintain reserves with a view to securing monetary stability and To operate the credit and currency system of the country to its advantage.

38

6.4 Banking Structure

39

6.5 Opportunities and Challenges for Players

The bar for what it means to be a successful player in the sector has been raised. Four challenges must be addressed before success can be achieved. First, the market is seeing discontinuous growth driven by new products and services that include opportunities in credit cards, consumer finance and wealth management on the retail side, and in fee-based income and investment banking on the wholesale banking side. These require new skills in sales & marketing, credit and operations. Second, banks will no longer enjoy windfall treasury gains that the decade-long secular decline in interest rates provided. This will expose the weaker banks. Third, with increased interest in India, competition from foreign banks will only intensify. Fourth, given the demographic shifts resulting from changes in age profile and household income, consumers will increasingly demand enhanced institutional capabilities and service levels from banks.

6.6 Current trend in banking

Currently (2007), banking in India is generally fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly been true. With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. One may also expect M&As, takeovers, and asset sales. Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is with the Government of India holding a stake), 29 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively. 40

Chapter 7

Introduction & Ratio Analysis of Banks

7.1. Allahabad Bank

The Oldest Joint Stock Bank of the Country, Allahabad Bank was founded in April 24th of the year 1865 at the confluence city of Allahabad by a group of Europeans. At that occasion Organized Industry, Trade and Banking started taking shape in India. Thus, the History of the Bank spread over three Centuries - namely Nineteenth Twentieth and Twenty-First In Twentieth Century, The Bank became a part of P & O Banking Corporation's group with a bid price of Rs.436 per share in 1920. The Head Office of the Bank was shifted to Calcutta on business considerations during the year of 1923. The Bank crossed its century year in 1965. In July 19th of the year 1969, Allahabad Bank was nationalized (with 151Branches - Rs.119 crores of Deposits and Rs.82 crores of Advances) along with 13 other banks. United Industrial Bank Ltd was merged with the bank in October of the year1989. The Bank made a foray into merchant banking activity in 1984 and subsequently instituted AllBank Finance Ltd as a wholly owned subsidiary for Merchant Banking in the year of 1991 The Official Language Implementation Committee of Calcutta awarded the Rajbhasha Shield to the Bank as Second Prize for its best performance for the year 1991. During the year 1995, The Bank had entered into an MOU with the Small Industries Development Bank of India (SIDBI) for financing small-scale industrial units. In 1996, The Bank had set up Information Technology Centre to provide in-depth computer training to Officers at Calcutta and Lucknow. Consequent to the SEBI Rules and Regulation the company surrendered its merchant banking registration in 1998 and got it registered as a Non Banking Financial Company (NBFC) with Reserve Bank of India (RBI). In the same year of 1998, the bank had received permission from the RBI for gold t ading. r Allahabad Bank has entered into an arrangement, informally though, with IDBI and ICICI in regard to funding of infrastructure projects. During the year 1999, Allahabad Bank has launched two new schemes to increase the pace of credit off take and in the same period TATA Consultancy Services (TCS) has entered into a contract with Bank for implementing the Integrated Standard Banking System (ISBS), a branch mechanisation package at 60 branches. 41

The Bank bagged three major core sector clients, namely the National Thermal Power Corporation (NTPC), Power Grid Corporation and Indian Railway Finance Corporation Ltd (IRFC). In Twenty-First Century, Allahabad Bank has launched its new personal loan scheme for pensioners in the year of 2001. As at October of the year 2002, the bank came out with Initial Public Offer (IPO) of 10 crores share of face value Rs.10 each, reducing Government shareholding to 71.16% and in the same year 2002, Allahabad has tied up with National Institute of Banking Management, Crisil and Earnst & Young for development of HRM, risk Management and general business strategy. The Bank has seized the commercial assets of the Guarantors of Ramolene Fabrics (P) Ltd in 2003 at Mumbai and signed a Memorandum of Understanding (MoU) with Corporation Bank for mutual sharing of their ATM Network. The Bank has entered into an MOU in the year of 2004 with the Export Credit Guarantee Corporation of India (ECGC) for distribution of their products to the exporters. UTI Mutual Fund and Allahabad Bank on April 5, 2004 announced a strategic tie-up for distribution of UTI MF schemes. During April of the year 2005, the bank made Follow on Public Offer (FPO) of 10 crores equity shares of face value Rs.10 each with a premium of Rs.72, reducing Government shareholding to 55.23%. The Bank has signed MoU with Mahindra Gujarat Tractor Ltd in the identical year 2005 for financing Hindustan brand tractor under special finance scheme. Allahabad Bank transcended beyond the National Boundary, Allahabad bank had opened a representative office at Shenzen, China in June 2006. In October of the same year 2006, the bank rolled out its first branch under Core Banking Services (CBS). During February of the year 2007, The Bank opened its first overseas branch at Hong Kong. During the calendar year of 2007, 100 more branches opened throughout the country, the total number of branches were stirred from 2042 to 2142 of which rural are 983 (46%), semi-urban 402 (19%), urban 450 (21%) and metropolitan 307 (14%). Allahabad Bank has opened its 2154th branch in at Pudukkottai, Tamil Nadu during March of the year 2008. The Bank has 211 ATM's and Card members can now have access at over 16500 ATM's all across the country under National Financial Switch. One of the premier nationalised banks of the country, Allahabad Bank has commenced the process of implementing the Agricultural Debt Waiver and Debt Relief Scheme-2008 in June of the year 2008.

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The Bank has improved its performance and established its visibility and strong presence in the market. The Bank is steadily moving at a faster pace to consolidate its position in the coming days introducing extensive computerization to ensure the state-of-the-art service comfort for its customers. The Bank has already in hand 116 authorizations for opening of new branches. Bank's plan is to expand in areas where the Bank's presence is not very much visible now and where business potentiality is good. Ratios: 1. Capital adequacy ratio
Year Capital Adequacy Ratio 2005 12.5 2006 13.4 2007 12.5

Capital Adequacy Ratio

13.6 13.4 Percentage 13.2 13 12.8 12.6 12.4 12.2 12 2005 2006 Year 2007 12.5 12.5 13.4

Capital adequacy ratio shows the ratio of a banks capital to its risk-weighted assets. it determines the capacity of a bank in terms of meeting the liabilities and other risks such as credit risks, operational risks ets. Here it is 12.5 ,13.4and 12.5 in 2005,2006,& 2007 respectively .it reduces in 2006 due to hike in beta(risk) as compare to 2005 & increase in 2007.but bank is capable in meeting its liabilities as& when arises.

2. Dividend Payout Ratio

Year Dividend Payout Ratio 2005 95.99% 2006 253.04% 2007 178.65%

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Dividend Payout Ratio

300.00% 250.00% Percentage 200.00% 150.00% 100.00% 50.00% 0.00% 2005 2006 Year 2007 95.99% 178.65% 253.04%

DPR measures what a bank payout to investors in the form of dividend. Here, bank pays 95.99%, 253.04% and 178.65% in 2005, 2006 &2007resp. they use general reserve for the purpose of dividend distribution. It reduces the reserve every year because bank declared more then the EPS. 3. Current assets & Saving account
Year CASA Proportion 2005 2.04 2006 2.44 2007 2.80

CASA Proportion
2.80 3.00 2.50 Proportion 2.00 1.50 1.00 0.50 0.00 2005 2006 Year 2007 2.44 2.04

It shows relationship between current assets& saving accounts. This ratio is useful for the investors to know the abilities of bank to pay out their liabilities as& when arises. It presents 44

liquidity o bank. here it 2.04, 2.44 and 2.80 and6.09respe.it decreases every year due to f decrease in current assets as compare to saving account.. It shows banks liquidity position which induces investors to invest in bank.

4. Credit deposit ratio

Year Credit Deposit Ratio 2005 51.89% 2006 60.10% 2007 69.34%

Credit Deposit Ratio

80.00% 70.00% Percentage 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 2005 2006 Year 2007 69.34% 51.89% 60.10%

It shows relationship between credit given & deposit received. Higher the ratio, better utilization of available deposits which directly increase the profit of the bank. Here it is 51.89, 60.10 and 69.34 % in 2005, 2006, & 2007.it increases every year which shows that bank use its fund efficiently. It increases interest income.

5. P/E ratio
Year P/E Ratio 2005 3.30 2006 5.41 2007 4.77

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P/E Ratio
6.00 5.41 5.00 4.77

4.00 Proportion 3.30 3.00

2.00

1.00

0.00 2005 2006 Year 2007

It shows the relationship between market value of per share & EPS. It is beneficial for the investors to know about what should be the price of the bank share. Here it 3.3, 5.41, & 4.77 in 2005, 2006, & 2007 respectively. It increased in 2006 due to heavy investment in stock market & reduced in 2007 due to not favoring the banking sector by the investors 6. Net interest income growth
Year Net Interest Income Growth 2005 25.63% 2006 15.65% 2007 10.99%

Net Interest Income Growth

30.00% 25.00% Percentage 20.00% 15.00% 10.00% 5.00% 0.00% 2005 2006 Year 2007 15.65% 10.99% 25.63%

It shows the growth in the interest income of the bank. It is main source of income of the bank. Higher the ratio, better for the bank. Here it is 25.63%, 15.65%, & 10.99% in 2005, 2006, 46

&2007.the ratio increases rapidly in 2006 due to increase in credit growth which leads to rise in the profit. In 2007 it reduce due to increased in other exp.

7. Interest income to interest expense

Year Interest Income to Interest Expense 2005 1.75 2006 1.72 2007 1.56

Interest Income to Interest Expense

1.80 1.75 Proportion 1.70 1.65 1.60 1.55 1.50 1.45 2005 2006 Year 2007 1.56 1.75 1.72

It shows the interest income arises from the advance made by the bank as against the interest given to the depositors. Higher the ratio better is the position of the bank. Here it is 1.75, 1.72, 1.56 in 2005, 2006, & 2007.it is down slightly during 2006 which did not create any big difference. Buy reduced sharply in 2007. It reduced the profit 8. Net interest margin
Year Net Interest Margin 2005 3.42% 2006 3.14% 2007 2.85%

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Net Interest Margin

3.50% 3.40% 3.30% 3.20% 3.10% 3.00% 2.90% 2.80% 2.70% 2.60% 2.50% 3.42% 3.14%

Percentage

2.85%

2005

2006 Year

2007

This ration shows us to the total interest income in comparison of avg assets .which was decreased every year because in comparison of assets the interest income was very less increased. The ratio in 2005, 2006 and 2007 like 3.42%, 3.14%, & 2.85%

9. Advance growth
Year advance growth 2005 37.87% 2006 37.81% 2007 41.66%

Advances Growth
42.00% 41.00% Percentage 40.00% 39.00% 38.00% 37.00% 36.00% 35.00% 2005 2006 Year 2007 37.87% 37.81% 41.66%

This ratio show the growth in the advances (credit, loan).it is very important because it is the main source of income as far as bank is concern. here it is 37.87%, 37.81%, & 41.66% in 2005, 48

2006, &2007 respectively .it reduces in 2006 due to increase in investment in govt. securities which proves safe as compare to market risk &in 2007 it increased due to easy credit policy adopted by the bank.

10. Deposit growth

Year Deposit growth 2005 29.50% 2006 18.98% 2007 22.77%

Deposit Growth
35.00% 30.00% Percentage 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2005 2006 Year 2007 18.98% 22.77% 29.50%

It shows the growth in deposits of the bank in current year as compare to the previous year. It is very important that deposits are increase so that funds are available with the bank to make advances. Higher the ratio, good for the bank. Here it is 29.50%, 18.98%, & 22.77% in 2005, 2006, &2007. It decreased in 2006 due to heavy rush towards the stock market. In 2007 it increased due to attractive schemes.

11. Net profit growth

Year net profit growth 2005 16.92% 2006 30.33% 2007 6.23%

49

Net Profit Growth

35.00% 30.00% Percentage 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2005 2006 Year 2007 6.23% 16.92% 30.33%

It shows the increase or growth in net profit of the bank. Higher the ratio, better is the position of the bank.here, it is 16.92%, 30.33% & 6.23% in 2005, 2006, & 2007 respectivly. During the year 2006, the ratio has been increased rapidly due to increase in interest income. It decreases in 2007 because of decrease in interest income & increase in interest exp. 12. Return on Equity
Year ROE 2005 156.3% 2006 158.1% 2007 167.9%

Return on Equity (ROE)

170.00% 165.00% 158.08% 160.00% 156.27% 155.00% 150.00% 2005 2006 Year 2007 167.93%

This ratio measured how efficiently a bank uses its capital to produce earnings. Here it is 156.27%, 158.08% & 167.93% in 2005, 2006, &2007 respectively .it increase every year due to proper utilization of available funds .here there is increase in interest income & reduces in interest exp. 50

Percentage

7.2 Andhra Bank

Founded by Dr Bhogaraju Pattabhi Sitaramaiah in Nov. 1923, Andhra Bank started its operations at Machilipatnam, Andhra Pradesh. It was nationalised in Apr. 1980. At time of nationalisation the bank was ranked as largest private sector bank and had to its c redit, implementation Lending. of concepts like Lead Banking Responsibility & Priority Sector .

The bank, which was one of the pioneers in introducing the Visa cards in the country, achieved the autonomy status in April 1998. The bank has successfully introduced facilities like credit cards, Kissan credit cards, lobby banking, automated teller machines (ATMs) at various centres across the country, insurance-linked savings bank scheme and corporate terminals to facilitate corporate clients to access their accounts from their office. The bank came out with a public issue of 15 crore equity shares of Rs 10 each at par aggregating Rs 150 crore in Feb. 2001. The issue was mainly to augment the capital base of the bank in order to meet its future capital adequacy requirements and also to augment its longterm resources. The Bank has been ranked No. 1 in the State of Andhra Pradesh for linking /financing the maximum number of Self Help Gps(SHGs) and conferred to the Best Performance Award by NABARD. During 2005-06, the Bank made Follow-on Public Offer of 8.5 crore Equity Shares of Rs.10/each for cash at a premium of Rs.80/- per share through Book Building Route. The Bank also launched Mobile-ATM first of its kind in the state of Andhra Pradesh. During 2006-07, the Bank opened 76 branches and 114 ATMs, with this at the end of 31st March, 2007, the Bank had 1930 Delivery Channels consisting of 1289 Branches, 99 extension counters, 37 Satellite Offices and 505 ATMs.

51

Ratios: 1. Capital adequacy ratio

Year Capital Adequacy Ratio 2005 12.1 2006 14 2007 11.3

Capital Adequacy Ratio

16 14 12 12.1 14 11.3

Percentage

10 8 6 4 2 0 2005 2006 Year 2007

Capital adequacy ratio shows the ratio of a banks capital to its risk-weighted assets. It determines the capacity of a bank in terms of meeting the liabilities and other risks such as credit risks, operational risks ets. Here it is 12.1 14 &11.3 in 2005, 2006, & 2007 resp.it increase in 2006 due to decrease in beta (risk) as compare to 2005.but bank is capable in meeting its liabilities as& when arise.

2. Dividend Payout Ratio

Year Dividend Payout Ratio 2005 115.36% 2006 349.64% 2007 183.76%

52

Dividend Payout Ratio

400.00% 350.00% Percentage 300.00% 250.00% 200.00% 150.00% 100.00% 50.00% 0.00% 2005 2006 Year 2007 115.36% 349.64%

183.76%

DPR measures what a bank payout to investors in the form of dividend. Here, bank pays 115.36% 349.64%, & 183.76% in 2005, 2006 &2007resp. They use general reserve for the purpose of dividend distribution. it reduces the reserve every year because bank declared more then the EPS.

3. Current assets & Saving account

Year CASA Proportion 2005 2.96 2006 3.14 2007 3.10

CASA Proportion
3.20 3.15 Proportion 3.10 3.05 3.00 2.95 2.90 2.85 2005 2006 Year 2007 2.96 3.14 3.10

53

It shows relationship between current assets& saving accounts. This ratio is useful for the investors to know the abilities of bank to pay out their liabilities as& when arises. it presents liquidity of bank. Here it is 2.96 3.14 &3.10 respe.it rises every year due to increase in deposit in proportion to advances. It shows banks liquidity increases every year which induce investors to make deposits in bank.

4. Credit deposit ratio

Year Credit Deposit Ratio 2005 63.58% 2006 65.15% 2007 67.28%

Credit Deposit Ratio

68.00% 67.00% 66.00% Percentage 65.00% 64.00% 63.00% 62.00% 61.00% 2005 2006 Year 2007 63.58% 65.15% 67.28%

It shows relationship between credit given & deposit received. Higher the ratio, better utilization of available deposits which directly increase the profit of the bank. Here it is 63.58%, 65.15%, & 67.28% in 2005, 2006, & 2007. .it increases every year which shows that bank use its fund efficiently. It increases interest income. 5. P/E ratio
Year P/E Ratio 2005 4.50 2006 9.63 2007 8.29

54

P/E Ratio
12.00 9.63 8.29 8.00 Proportion

10.00

6.00 4.50 4.00

2.00

0.00 2005 2006 Year 2007

It shows the relationship between market value of per share & EPS. It is beneficial for the investors to know about the should be the price of the bank share. Here it 4.5, 9.63, & 8.29 in 2005, 2006, & 2007 respectively. It increased in 2006 due to heavy investment in stock market & reduced in 2007 due to not favoring the banking sector by the investors 6. Net inte rest income growth
Year Net Interest Income Growth 2005 17.40% 2006 9.35% 2007 21.26%

Net Interest Income Growth

25.00% 20.00% Percentage 15.00% 10.00% 5.00% 0.00% 2005 2006 Year 2007 9.35% 17.40% 21.26%

55

It shows the growth in the interest income of the bank. It is main source of income of the bank. Higher the ratio, better for the bank. Here it is 17.4%, 9.35%, & 21.26% in 2005, 2006, &2007. .it reduced in 2006 due to increase in deposits which lead to increase in interest exp. it increase in 2007 due to high advances 7. Interest income to interest expense
Year Interest Income to Interest Expense 2005 1.88 2006 1.70 2007 1.75

Interest Income to Interest Expense

1.90 1.85 Proportion 1.80 1.75 1.70 1.65 2005 2006 Year 2007 1.78 1.75 1.88

It shows the interest income arises from the advance made by the bank against the interest given to the depositors. Higher the ratio better is the position of the bank. Here it is 1.88 1.78 &1.75 in 2005, 2006, & 2007. It is down slightly during 2006 which did not create any big difference. But reduced the profit. 8. Net interest margin
Year Net Interest Margin 2005 3.58% 2006 3.18% 2007 3.21%

56

Net Interest Margin

3.70% 3.60% Percentage 3.50% 3.40% 3.30% 3.20% 3.10% 3.00% 2.90% 2005 2006 Year 2007 3.18% 3.58%

3.21%

This ration shows us to the total interest income in comparison of a assets .which was vg decreased every year because in comparison of assets the interest income was very less increased. The ratio in 2005, 2006 and 2007 like 3.58%, 3.18%, & 3.21%

9. Advance growth
Year advance growth 2005 35.94% 2006 26.17% 2007 26.19%

Advances Growth
40.00% 35.00% Percentage 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2005 2006 Year 2007 35.94% 26.17% 26.19%

This ratio show the growth in the advances (credit, loan).it is very important because it is the main source of income as far as bank is concern. here it is35.94%, 26.14% & 26.19% in 2005, 57

2006, &2007 respectivly. It reduces in 2006 due to increase in investment in govt. securities which proves safe as compare to market risk. 10. Deposit growth
Year Deposit growth 2005 20.10% 2006 23.13% 2007 22.20%

Deposit Growth
24.00% 23.00% Percentage 22.00% 21.00% 20.00% 19.00% 18.00% 2005 2006 Year 2007 20.10% 23.13% 22.20%

It shows the growth in deposits of the bank in current year as compare to the previous year. It is very important that deposits are increase so that funds are available with the bank to make advances. Higher the ratio, good for the bank. Here it is 20.1%, 23.13% & 22.2% in 2005, 2006, &2007. It increase continuously which means that bank gives satisfaction to their customer. It leads to rise in profit of the bank 11. Net profit growth
Year net profit growth 2005 12.21% 2006 -6..65% 2007 -2.15%

58

Net Profit Growth

15.00% 10.00% Percentage 5.00% 0.00% 2005 -5.00% -10.00% -6.65% Year 2006 2007 -2.15% 12.21%

It shows the increase or growth in net profit of the bank. Higher the ratio, better is the position of the bank.here, it is 12.21% -6.65% & -2.15 in 2005, 2006, & 2007 respectivly. During the year 2007, the ratio has been inceased because of increase in interest income & decrease in interest exp. in 2006 it decrease due to low rate if advances. 12. Return on Equity
Year ROE 2005 130.03% 2006 100.01% 2007 97.95%

Return on Equity (ROE)

140.00% 120.00% Percentage 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% 2005 2006 Year 2007 130.03% 100.10% 97.95%

This ratio measured how efficiently a bank uses its capital to produce earnings. Here it is 130.03%, 100.1%, & 97.95% in 2005, 2006, &2007 respectively .it decrease every year due to not utilization of available funds efficiently &also due to increase in interest expenses & reduces in interest income.

59

7.3 Axis Bank

AXIS Bank is one of the fastest growing banks in private sector. It was incorporated in the year 1993 as The Bank (UTI BANK LIMITED) ", which provided corporate and retail banking products and was among the few banks to be granted a license under the new guidelines issued in 1993 to carry on banking business in India. AXIS Bank formerly known as UTI Bank is being promoted by Unit Trust of India (UTI), Life Insurance Corporation of India (LIC), General Insurance Corporation of India (GIC) and its four subsidiaries. The bank had two subsidiaries namely UBL Sales Limited and UBL Asset Management Company and was incorporated in the year 2005 and 2006 respectively. The bank has restructured its business into four strategic profit centers such as Corporate, Retail, Merchant & Treasury Banking and Further the bank also provide mobile banking services and mobile refill facilities for Airtel,Hutch, Orange and Idea cellular service providers. In fact the bank is among the few Indian banks to have completely centralized its database which enables possible for the bank to increasingly e-enable its transaction processing capabilities. In the year 2001,the bank along with Global Trust Bank (GTB) had a merger proposal to create the largest private sector bank in swap ratio of 9 shares of UTI Bank for 4 shares of GTB but due to media's issues both the banks withdraw he merger proposal. 2003 was the year to AXIS, the bank was authorized to handle Government transactions such as collection of Government taxes, to handle the expenditure related payments of Central Government Ministries and Departments and pension payments on behalf of Civil and Non-civil Ministries such as defense, posts, telecom and railways and AXIS is the first private sector bank to be authorized for collection of Commercial Taxes in twin cities of Hyderabad & Secunderabad. The bank has launched pre-paid Dollar denominated card which is useful for outbound travelers and has tied up with 14 major full-fledged moneychangers to market the cards and the 1st Indian bank to offer the International Travel Currency Card and.

The bank raised $239.3 million through Global Depositary Receipts in 2005 and in the same year the bank has won the award 'Outstanding Achievement Award' for the year 2005 from Indian Banks Association for IT Infrastructure, delivery capabilities and innovative solutions. In the year of 2007 the bank again raised $218.67 million through Global Depository Receipts. The bank has rated 1st rank under new private sector banks in India's Best Banks for the year 2007 by The Financial Express magazine (The Express Group). 60

In 2007, the bank has opened 153 new branches. This includes 43 extension counters that have been upgraded to branches and the setting up of 8 Service branches/CPCs. The Bank has opened four new overseas offices, with branches at Singapore, Dubai and Hong Kong and a representative office in Shanghai and has signed an agreement with the Luxembourg-based bank Banque Privet Edmond de Rothschild Europe provide wealth management solutions to overseas Indians. 450 ATMs are opened during the year of 2007. The total network of the bank as on April 2008, a customer base of 90 lakh, 655 branches in more than 407 cities and towns, 20 extension counters and 2778 ATMs across the country. Ratios:

1. Capital adequacy ratio

Year Capital Adequacy Ratio 2005 12.7 2006 11.1 2007 11.6

Capital Adequacy Ratio

13 12.5 Percentage 12 11.5 11 10.5 10 2005 2006 Year 2007 11.1 11.6 12.7

Capital adequacy ratio shows the ratio of a banks capital to its risk-weighted assets. It determines the capacity of a bank in terms of meeting the liabilities and other risks such as credit risks, operational risks etc. Here it is 12.7, 11.1 & 11.6 in 2005,2006,& 2007 respectively .it increases in 2006 due to hike in beta(risk) as compare to 2005.but bank is capable in meeting its liabilities as& when arises.

61

2. Dividend Payout Ratio

Year Dividend Payout Ratio 2005 229.14% 2006 201.08% 2007 192.30%

Dividend Payout Ratio

240.00% 230.00% Percentage 220.00% 210.00% 200.00% 190.00% 180.00% 170.00% 2005 2006 Year 2007 201.08% 192.30% 229.14%

DPR measures what a bank payout to investors in the form of dividend. Here, bank pays 229.14%, 201.08% & 192.30% in 2005, 2006 &2007resp.for 2007&2006; they use general reserve for the purpose of dividend distribution. I 2005, they distributed dividend out of that n year profit 3. Current assets & Saving account
Year CASA Proportion 2005 9.97 2006 7.74 2007 6.09

CASA Proportion
12.00 10.00 Proportion 8.00 6.00 4.00 2.00 0.00 2005 2006 Year 2007 7.74 6.09 9.97

62

It shows relationship between current assets& saving accounts. This ratio is useful for the investors to know the abilities of bank to pay out their liabilities as& when arises. It presents liquidity of bank. Here it is 9.97, 7.74, & 6.09 respectively. It rises every year due to increase in deposit in proportion to advances. It shows banks liquidity increases every year which induce investors to make deposits in bank. 4. Credit deposit ratio
Year Credit Deposit Ratio 2005 49.20% 2006 55.63% 2007 62.73%

Credit Deposit Ratio

70.00% 60.00% Percentage 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 2005 2006 Year 2007 55.63% 49.20% 62.73%

It shows relationship between credit given & deposit received. Higher the ratio, better utilization of available deposits which directly increase the profit of the bank. Here it is 49.20%, 55.63% & 62.73% in 2005, 2006, & 2007. It increases every year which shows that bank use its fund efficiently. It increases interest income. 5. P\E Ratio
2005 48.29 2006 43.16 2007 40.91

Year P/E Ratio

63

P/E Ratio
50.00 48.29 48.00 46.00 Po oto r p ri n 44.00 42.00 40.00 38.00 36.00 2005 2006 Year 2007

43.16

40.91

It shows the relationship between market value of per share & EPS.it is beneficial for the investors to know about what should be the price of the bank share.here it 48.29, 43.16, & 40.91 in 2005, 2006, & 2007 respe. It decreased in every year due to not favoring the banking sector by the investors 6. Net interest income growth
Year Net Interest Income Growth 2005 26.70% 2006 47.47% 2007 45.34%

Net Interest Income Growth

50.00% 40.00% Percentage 30.00% 20.00% 10.00% 0.00% 2005 2006 Year 2007 26.70% 47.47% 45.34%

64

It shows the growth in the interest income of the bank. It is main source of income of the bank. Higher the ratio, better for the bank. Here it is 26.70%, 47.47% & 45.34% in 2005, 2006, &2007.the ratio decrease every year due to increase in deposit growth which leads to rise in interest expenses. 7. Interest income to interest expense
Year Interest Income to Interest Expense 2005 1.61 2006 1.60 2007 1.52

Interest Income to Interest Expense

1.62 1.60 Proportion 1.58 1.56 1.54 1.52 1.50 1.48 1.46 2005 2006 Year 2007 1.52 1.61 1.60

It shows the interest income arises from the advance made by the banks against the interest given to the depositors. Higher the ratio better is the position of the bank. Here it is 1.61, 1.6, & 1.52 in 2005, 2006, & 2007. It is down slightly during 2006 which did not create any big difference. But reduced the profit. 8. Net interest margin
Year Net Interest Margin 2005 1.12% 2006 1.33% 2007 1.63%

65

Net Interest Margin

1.80% 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% 1.63% 1.33% 1.12%

Percentage

2005

2006 Year

2007

This ration shows us to the total interest income in comparison of avg assets .which was increased every year because in comparison of assets the interest income was very high increased. The ratio in 2005, 2006 and 2007 like 1.12%, 1.33% & 1.63% 9. Advance growth
Year advance growth 2005 66.65% 2006 43.01% 2007 65.26%

Advances Growth
70.00% 60.00% Percentage 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 2005 2006 Year 2007 43.01% 66.65% 65.26%

This ratio show the growth in the advances (credit, loan).it is very important because it is the main source of income as far as bank is concern. Here it is 66.65%, 43.01%, & 65.26% in 2005, 2006, &2007 respe. .it reduces in 2006 due to increase in investment in govt. securities which 66

proves safe as compare to market risk &in 2007 it increased due to easy credit policy adopted by the bank.

10. Deposit growth

Year Deposit growth 2005 51.34% 2006 26.49% 2007 46.55%

Deposit Growth
60.00% 50.00% Percentage 40.00% 30.00% 20.00% 10.00% 0.00% 2005 2006 Year 2007 26.49% 51.34% 46.55%

It shows the growth in deposits of the bank in current year as compare to the previous year. It is very important that deposits are increase so that funds are available with the bank to make advances. Higher the ratio, good for the bank. Here it is 29.5%, 18.98% & 22.77% in 2005, 2006, &2007. it decreased in 2006 due to heavy rush towards the stock market. in 2007 it increased due to attractive schemes. 11. Net profit growth
Year net profit growth 2005 20.22% 2006 44.98% 2007 35.86%

67

Net Profit Growth

50.00% 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2005 2006 Year 2007 20.22% 44.98% 35.86%

It shows the incease or growth in net profit of the bank.higher the ratio, better is the position of the bank.here, it is 20.22%, 44.98% & 35.86% in 2005, 2006, & 2007 respe.during the year 2006, the ratio has been increased rapidly because of increase in interest income & decrease in interest income. 12. Return on Equity
Year ROE 2005 122.20% 2006 174.06% 2007 234.01%

Percentage

Return on Equity (ROE)

250.00% 200.00% Percentage 150.00% 100.00% 50.00% 0.00% 2005 2006 Year 2007 122.20% 174.06% 234.01%

This ratio measured how efficiently a bank uses its capital to produce earnings. Here it is 122.20,174.06%,234.01% in 2005, 2006, &2007 respe.it increases every year due to utilization of available funds efficiently &also due to increase in interest income & reduces in interest exp. 68

7.4 Vijaya Bank

Vijaya Bank was established on 23rd October, 1932 in Mangalore, Karnataka. Late Sri. A.B. Shetty was the founding father of the bank with an objective to promote banking among the farming community of Dakshina Kannada district. The bank became a scheduled bank in the year 1958. It grew steadily into a large all India bank by merging with 9 smaller banks during 1963-68. The bank was nationalised on 1980 with the 100% holding by the government of India. In Jan. 2001 the bank came out with its Initial Public Offer (IPO) of for Rs 100 crore comprise an issue of 10 crore equity shares of Rs 10 each for cash at par. The main object of the issue is to augment the capital base of the bank to meet its future capital adequacy requirements and to shore up the capital funds needed for healthy asset expansion and profitability. The bank's board decided to issue the shares at par to reward the investors in the future. After the issue, the shareholding of Govt of India has come down from 100% to 72.16%. It has a well spread branch network, in all the 25 States and Union Territories of the country. The bank has a strong presence in the fast growing southern states. Its business activities are diversified and they encompass merchant banking, credit cards, ATMs, housing finance, fast collection services, etc. At the end of the financial year 2003-04,the bank has 866 branches of which 58 are specialised branches. It is also having 63 extention counters.The total includes 19 new branches which were inaugurated during the financial year 2003-04. The bank has increased its branch network to 910 at the end of the Fiscal year 2004-05 by opening of 41 new branches. The bank has been chosen as the Best Bank of the year 2003-04 by 'Business Standard'. During 2005-06, the bank opened 11 new branches and upgraded 2 extension counters into full fledged branches. As a result, the total number of branches increased from 910 in March 2005 to 923 in March 2006, spread over in 28 States and 4 Union Territories. Out of 13 new branches opened, one is a Specialised SSI branch. During the year, the Bank has also opened extension counters taking the total number of extension counters to 62.

69

Ratios: 1. Capital adequacy ratio

Year Capital Adequacy Ratio 2005 12.9 2006 11.9 2007 11.2

Capital Adequacy Ratio

13.5 13 Percentage 12.5 12 11.5 11 10.5 10 2005 2006 Year 2007 11.9 11.2 12.9

Capital adequacy ratio shows us to the banks capacity to face different risks. Here in this bank CAR in 2005, 2006and 2007 like 12.9, 11.9 and 11.2 so it was continuous decreased in every year. This is bad for any bank. 2. Dividend Payout Ratio
Year Dividend Payout Ratio 2005 113.91% 2006 341.68% 2007 130.84%

Dividend Payout Ratio

400.00% 350.00% 300.00% Percentage 250.00% 200.00% 150.00% 100.00% 50.00% 0.00% 2005 2006 Year 2007 113.91% 130.84% 341.68%

70

This ratio shows us the banks capacity to pay dividend. We can also say that it tells us to the banks earning position. Here the ratio in 2005, 2006and 2007 like 113.91, 341.68 and 130.84% means it was decreased in 2007. Because here the reason behind this decreased were some financial problems 3. Current assets & Saving account
Year CASA Proportion 2005 3.15 2006 3.16 2007 4.07

CASA Proportion
4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 4.07 3.15 3.16

Proportion

2005

2006 Year

2007

This ratio shows us to the comparison between current assets and saving account. Here the ratio in 2005, 2006 and 2007 like 3.15, 3.16.and 4.07 it is continuous increasing which is good for any bank.

4. Credit deposit ratio

Year Credit Deposit Ratio 2005 55.96% 2006 60.14% 2007 64.42%

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Credit Deposit Ratio

66.00% 64.00% Pecentage 62.00% 60.00% 58.00% 56.00% 54.00% 52.00% 50.00% 2005 2006 Year 2007 55.96% 60.14% 64.42%

This ratio shows us to the total credits of bank in comparison of total deposits. Here this ratio continuously increasing means banks has good credit in comparison of deposit The ratio like 55.96,61.14 and 64.42 %.The reason behind this increased was Continued buoyancy in the real sectors of the economy helped the Bank sustain the credit growth. 5. P/E ratio

Year P/E Ratio

2005 6.29

2006 20.66

2007 6.17

P/E Ratio
25.00 20.66 20.00

Proportion

15.00

10.00 6.29 5.00 6.17

0.00 2005 2006 Year 2007

It shows the relationship between market value of per share & EPS.it is beneficial for the investors to know about what should be the price of the bank share. Here it 6.29, 20.66, & 6.17 in 2005, 2006, & 2007 respe. It increased in 2006 due to heavy investment in stock market & reduced in 2007 due to not favoring the banking sector by the investors 72

6. Net interest income growth

Year Net Interest Income Growth 2005 17.80% 2006 -1.43% 2007 10.19%

Net Interest Income Growth

20.00% 15.00% Percentage 10.00% 5.00% -1.43% 0.00% 2005 -5.00% Year 2006 2007 17.80% 10.19%

This ratio shows us to the banks interest income which is decreasing in every year like 2005, 2006 and 2007 as 17.80,-1.43 and10.19 %.Because Rise in interest rates across the board was a factor secularly observed across the industry. Interest expenditure of the banks increased. 7. Interest income to interest expense
Year Interest Income to Interest Expense 2005 1.89 2006 1.73 2007 1.61

Interest Income to Interest Expense

1.95 1.90 1.85 1.80 1.75 1.70 1.65 1.60 1.55 1.50 1.45 1.89

Proportion

1.73 1.61

2005

2006 Year

2007

73

This ratio show us to the banks interest income in comparison interest expenses which is increasing in every year because bank increase its interest rate .The ratio like 2005,2006 and 2007 was 1.88 ,1.73 and 1.64.

8. Net interest margin

Year Net Interest Margin 2005 3.70% 2006 3.20% 2007 2.90%

Net Interest Margin

4.00% 3.50% 3.00% 2.50% Percentage 2.00% 1.50% 1.00% 0.50% 0.00% 2005 2006 Year 2007 3.70% 3.20% 2.90%

This ration show us to the total interest income in comparison of avg. assets .which was decreased in every year like 3.70, 3.20and2.90 %.Because the interest expensed increased in comparison to interest income. 9. Advance growth
Year advance growth 2005 29.79% 2006 16.24% 2007 45.36%

Advances Growth
50.00% 40.00% Percentage 29.79% 30.00% 20.00% 10.00% 0.00% 2005 2006 Year 2007 16.24% 45.36%

74

This ratio shows us to the banks financial growth which is very important for any bank. Here this ratio decreased in 2006 but after this year it was increased like 2005 29.79%, 2006-16.24% but in 2007 it was 45.36%. 10. Deposit growth
Year Deposit growth 2005 21.90% 2006 8.16% 2007 35.71%

Deposit Growth
40.00% 35.00% 30.00% Percentage 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2005 2006 Year 2007 8.16% 21.90% 35.71%

This ratio shows us to the banks position and security of money in market because we always select that bank which provide us to good services and this deposit growth is one part of it. This ratio only decreased in 2006 due to some financial problems. The ratio in 2005, 2006 and 2007 like 21.90, 8.16 and 35.71%. 11. Net profit growth
Year net profit growth 2005 -7.47% 2006 -66.66% 2007 161.14%

Net Profit Growth

200.00% 150.00% Percentage 100.00% 50.00% 0.00% -50.00% -100.00% 2005 2006 -66.66% Year 2007 -7.47% 161.14%

75

This ration shows us to the total interest income in comparison of avg assets .which was decreased in every year like -7.47, -66.66and161.14%.Because the interest expensed increased in comparison to interest income.

12. Return on Equity

Year ROE 2005 87.79% 2006 29.77% 2007 76.43%

Return on Equity (ROE)

100.00% 80.00% Percentage 60.00% 40.00% 20.00% 0.00% 2005 2006 Year 2007 29.27% 87.79% 76.43%

These ratio shows us to the total return come form the bank in comparison of its earning. Here bank provided good return to its investors in terms of .2005 like 87.89% but in 2006 it was decreased and it was 29.27% which was very low but in 2007 it was good increased around 76.43%.The reason behind this increased and decreased was EPS.

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7.5 Union Bank of India

Union Bank of India (UBI) that was flagged off by none other than the Father of the Nation, Mahatama Gandhi. Since that the golden moment, Union Bank of India has this far unflinchingly traveled the arduous road to successful banking... a journey that spans more than 8 decade of years. It was incorporated in the year 1919. UBI is firmly committed to consolidating and maintaining its identity as a leading, innovative commercial Bank, with a proactive approach to the changing needs of the society. The Bank's services include the broad categories of Govt. Business, Social Banking, Insurance, Mutual Fund, Non-Life Insurance and RTGS/NEFT/ECS. The Bank was brought into existence by the Ordinance issued on 10th July of the year 1969, by the Central Government of India. In terms of the Ordinance, the Undertaking of The Union Bank of India, Ltd.', was replaced by the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969. During the year 1970, under the Lead Bank' scheme, UBI was allotted 5 districts and the survey reports in respect of 3 districts were submitted. In 1972, the Bank sponsored four regional rural banks. UBI has introduced novel credit schemes for housing and consumer finance in the year of 2000. During the year 2001, the Bank has launched special Deposit Scheme for senior citizens, which offered a high rate of interest on all domestic term deposit. United Bank of India Staff College, which received ISO 9001 certification during the year 2001. It offers training programmes on commercial basis. UBI has identified KPMG as its strategic technology consultant for implementing the core banking solution. For selling of insurance products, HDFC Standard Life Insurance Company has tied up with UBI. The Bank has forayed into the loan syndication business for corporate. Chennai based SSI has signed an agreement with Union Bank of India to jointly provide loans to students to pursue IT education. During the year 2002, UBI ties up with New India Insurance Company for market and distribute the products of New India Insurance Company on a commission basis and has introduced a new scheme called 'Union Express Remittance scheme' to provide service to NRI in West Asia. The scheme would reduce the time lag in the receipt of draft by the beneficiary. UBI has set up Cash Management Services (CMS) in Coimbatore. In the same year of 2002, the Bank has tied up with two IT companies to develop core-banking solutions. UBI specially designed loan product 'Union Rent' for owners of buildings or portion thereof rented out to reputed companies has got good response and has launched an emergency cash-on-hand scheme christened as 'Union Lifeguard' to cater to the hospitalization needs in Mumbai. Standard Chartered bank has entered into an 'agency trade services agreement with UBI, according to which all letters of credit issued by UBI to Asian countries would be done through StanChart. During the year 2003, the bank has launched 2 new schemes, namely NRI Foreign Currency Loans (NRIFCL) and 77

Domestic Resident Foreign currency accounts for the benefit of NRI and FCNR (B) customers and in the same year UBI has launched its major IT initiative, the Core Banking Solution (CBS), for Anywhere Banking interconnecting its 12 branches across centres. Union Bank has signed an agreement with Corporation Bank to share its Cash Management System infrastructure. Launched Union BillPay, a convenient utility bill payment service for its customers in association will Billdesk. To facilitate growth of Agri business, the bank made tie-up with Small Farmers Agri-business Consortium (SFAC) jointly with Dena Bank during the year 2006 and also in the identical year, the bank made tie-up with LIC to unveil group insurance. The Bank has been awarded the 'Best IT user award 2006' in the BFSI category instituted by NASSCOM. As at the year-end of 2007, the 198 Village Knowledge Centres (VKCs) established by the Bank so far have had a lasting impact on the rural areas. UBI received the Skoch Challenger award for its initiatives in establishing VKCs. The Bank has set up financial education centers at 51 locations in the country. These Financial Education centers will bring financial literacy to farmers, weaker sections and others through a process of credit counseling. Union Bank of India, Staff College, Bangalore, was adjudged winner of the 'Golden Peacock National training Award' for 2007. This was the 3rd occasions this award has been conferred on the Bank. The Bank opened its 2nd overseas representative Office at Abu Dhabi in the United Arab Emirates (UAE) on 1st December 2007. The Bank signed the joint venture agreement in the year for its foray into life insurance business along with its partners i.e. Bank of India and Dai-Ichi Life Insurance Co. of Japan. During the period of 2007-08, The Bank has successfully migrated all its 2514 outlets to the Core Banking Service (CBS) network and is the first large public sector bank to achieve this feat. During 2007-08, Union Bank has opened 155 branches (63 branches opened on a single day) including upgradation of 18 extension counters thereby taking the total number of branches to 2361 as on 31st March 2008. As well as during the year Bank has added 377 ATMs, taking the ATM network to 1,146 as on 31st March 2008.

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Ratios: 1. Capital adequacy ratio

Year Capital Adequacy Ratio 2005 12.1 2006 11.4 2007 12.8

Capital Adequacy Ratio

13 12.5 Percentage 12 11.5 11 10.5 2005 2006 Year 2007 11.4 12.1 12.8

Capital adequacy ratio shows the ratio of a banks capital to its risk-weighted assets.it determines the capacity of a bank in terms of meeting the liabilities and other risks such as credit risks, operational risks ets. Here it is 12.1 11.4 & 12.8 in 2005,2006,& 2007 resp.it reduces in 2006 due to hike in beta(risk) as compare to 2005.but bank is capable in meeting its liabilities as& when arises. 2. Dividend Payout Ratio
Year Dividend Payout Ratio 2005 95.98% 2006 261.84% 2007 119.50%

Dividend Payout Ratio

300.00% 250.00% Percentage 200.00% 150.00% 95.98% 100.00% 50.00% 0.00% 2005 2006 Year 2007 119.50% 261.84%

79

DPR measures what a bank payout to investors in the form of dividend.here, bank pays 95.98% 261.84%& 119.5% in 2005, 2006 &2007resp.for 2005&2006, they use general reserve for the purpose of dividend distribution. It reduces the reserve every year because bank declared more then the EPS. 3. Current assets & Saving account
Year CASA Proportion 2005 3.21 2006 3.47 2007 3.56

CASA Proportion
3.60 3.50 Proportion 3.40 3.30 3.20 3.10 3.00 2005 2006 Year 2007 3.21 3.47 3.56

It shows relationship between current assets& saving accounts. This ratio is useful for the investors to know the abilities of bank to pay out their liabilities as& when arises. It presents liquidity of bank. Here it is 3.21 3.47 & 3.56 receipt rises every year due to increase in deposit in proportion to advances. It shows banks liquidity increases every year which induce investors to make deposits in bank. 4. Credit deposit ratio
Year Credit Deposit Ratio 2005 64.86% 2006 72.04% 2007 73.24%

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Credit Deposit Ratio

74.00% 72.00% 70.00% Percentage 68.00% 66.00% 64.00% 62.00% 60.00% 2005 2006 Year 2007 64.86% 73.24% 72.04%

It shows relationship between credit given & deposit received. Higher the ratio, better utilition of available deposits which directly increase the profit of the bank. Here it is 64.86% 72.04% & 73.24% in 2005, 2006, & 2007. It increases every year which shows that bank use its fund efficiently. It increase interest income 5. P/E ratio
Year P/E Ratio 2005 5.24 2006 8.87 2007 6.79

P/E Ratio
10.00 9.00 8.00 7.00 P o o to r p ri n 6.00 5.00 4.00 3.00 2.00 1.00 0.00 2005 2006 Year 2007 5.24 6.79 8.87

It shows the relationship between market value of per share & EPS.it is beneficial for the investors to know about what should be the price of the bank share. Here it 5.24, 8.87, & 6.79 in 2005, 2006, & 2007 respe. It increased in 2006 due to heavy investment in stock market & reduced in 2007 due to not favoring the banking sector by the investors 81

6. Net interest income growth

Year Net Interest Income Growth 2005 18.91% 2006 15.00% 2007 17.52%

Net Interest Income Growth

20.00% 15.00% Percentage 10.00% 5.00% 0.00% 2005 2006 Year 2007 18.91% 15.00% 17.52%

It shows the growth in the interest income of the bank. It is main source of income of the bank. Higher the ratio, better for the bank. Here it is 18.91% 15% & 17.52% in 2005, 2006, &2007. It reduced in 2006 due to increase in a deposit which leads to increase in interest exp.it increase in 2007 due to high advances.

7. Interest income to interest expense

Year Interest Income to Interest Expense 2005 1.71 2006 1.68 2007 1.61

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Interest Income to Interest Expense

1.71 1.72 1.70 1.68 1.66 1.64 1.62 1.60 1.58 1.56 1.54 2005 1.68

Proportion

1.61

2006 Year

2007

It shows the interest income arises from the advance made by the banks against the interest given to the depositers.higher the ratio, better is the position of the bank. Here it is 1.71 1.68 & 1.61 in 2005, 2006, & 2007. It is down slightly during 2006 which did not create any big difference. Buy reduced sharply in 2007. It reduced the profit 8. Net interest margin
Year Net Interest Margin 2005 3.16% 2006 2.94% 2007 2.91%

Net Interest Margin

3.20% 3.15% 3.10% 3.05% 3.00% 2.95% 2.90% 2.85% 2.80% 2.75% 3.16%

Percentage

2.94%

2.91%

2005

2006 Year

2007

This ration shows us to the total interest income in comparison of avg assets .which was decreased every year because in comparison of assets the interest income was very less increased. The ratio in 2005, 2006 and 2007 like 3.16%, 2.94%, & 2.91%. 83

9. Advance growth
Year advance growth 2005 36.29% 2006 33.10% 2007 16.87%

Advances Growth
40.00% 35.00% 30.00% 25.00% Percentage 20.00% 15.00% 10.00% 5.00% 0.00% 2005 2006 Year 2007 16.87% 36.29% 33.10%

This ratio show the growth in the advances (credit, loan).it is very important because it is the main source of income as far as bank is concern. Here it is 36.29% 33.1% & 16.87% in 2005, 2006, &2007 respe. It reduces in 2006 & 2007 due to increase in investment in govt. securities which proves safe as compare to market risk. 10. Deposit growth
Year Deposit growth 2005 22.29% 2006 19.83% 2007 14.96%

Deposit Growth
25.00% 20.00% Percentage 14.96% 15.00% 10.00% 5.00% 0.00% 2005 2006 Year 2007 22.29% 19.83%

84

It shows the growth in deposits of the bank in current year as compare to the previous year. It is very important that deposits are increase so that funds are available with the bank to make advances. Higher the ratio, good for the bank. Here it is 22.29%, 19.83% & 14.96% in 2005, 2006, &2007 it decreased in 2006 & 2007 due to heavy rush towards the stock market. 11. Net profit growth
Year net profit growth 2005 0.98% 2006 -6.10% 2007 25.21%

Net profit growth

30.00% 25.00% 20.00% Percentage 15.00% 10.00% 5.00% 0.00% -5.00% -10.00% Year 2005 2006 2007 0.98% -6.10% 25.21%

It shows the increase or growth in net profit of the bank. higher the ratio, better is the position of the bank.here,it is 0.98%, -6.10% & 25.21% in 2 005, 2006,& 2007 respe during the year 2007, the ratio has been increased because of increase in interest income & decrease in interest exp.in 2006 it decrease due b to low rate if advances.

12. Return on Equity

Year ROE 2005 2006 156.28% 133.67.1% 2007 167.36%

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Return on Equity (ROE)

180.00% 160.00% 140.00% 120.00% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% 156.28% 133.67% 167.36%

Percentage

2005

2006 Year

2007

This ratio measured how efficiently a bank uses its capital to produce earnings. Here it is 156.28%,133.87%,& 167.36% in 2005, 2006, &2007 respe.it increases every year due to utilization of available funds efficiently &also due to increase in interest income & reduces in interest exp.

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7.6 Oriental Bank of Commerce

First established at Lahore, Pakistan, in Feb.'43, Oriental Bank of Commerce (OBCL) shifted its registered office to Amritsar on partition. In 1951, the registered office was relocated to Delhi. Since its inception, the bank registerd steady growth under the control and ownership of the Thapar Group. It was nationalised in Apr.'80. In Jul.'92, the merchant banking division of the bank was set up and the bank was authorised to act as a category-I merchant banker, by the SEBI. It went public in Oct.'94 at a premium of Rs 50. With effect from 16 Oct.'94, OBC was granted Certificate of Registration for acting as Banker to the Issue. The bank has also been rated as 'Customer Friendly' Bank by the National Institute of Bank Management (NIBM), Pune. Under innovative banking, the bank pioneered a pilot project called Oriental Bank Grameen Project in the year 1995. The project is based on concept of Self-Help Groups - Bank Linkage. It aims to alleviate poverty plus identify the reasons responsible for the failure or success. In 1997 the bank launched another innovative programme called started other project called Comprehensive Village Development Programme (CVDP). The programme aims at overall development of the selected villages. The bank has been a bit conservative in terms of expansion of business. Post liberalization, as most of the banks have been diversifying into number of areas, OBCL has been very selective in its area of operations. It has been focussing more on creating a clean asset portfolio rather then expanding on anything. As a result, its profitability has been much better in comparison to others and so it can leverage its size and efficiency to enter other lucrative areas like insurance etc in future. Moreover, with the wide branch network, the bank can always take a lead in these new ventures as compared to the other players. It has also been one of the exceptional performers amongst the public sector banks. Not only, has it posted an impressive growth rate across all sectors, it has also been able to put a break on its NPA levels. Further the bank is planning to enter into mutual funds and 'active' treasury operations. Since the future of commercial banks lies in converting themselves into financial supermarkets. This will mean the cross-selling of an array of fee-based services like insurance, mutual funds, units, etc. Global Trust Bank Ltd was amalgamated with the Bank with effect from 14th August 2004. which resulted in the increase in the network of branches of the Bank. During 2006-07, the bank opened 63 new branches including upgradation of 65 Extension counters, one service branch was also opened during the year. The total number of branches 87

stood at 1273 as on 31.03.2007 as against 1148 as on 31.03.2006.

During the year the Bank has signed a Memorandum of Understanding (MOU) with Canara Bank and HSBC Insurance (Asia-Pacific) Holdings Ltd to participate in the equity of proposed Joint Venture Company of Life Insurance Business. Ratios: 1. Capital adequacy ratio
Year Capital Adequacy Ratio 2005 9.2 2006 11 2007 12.5

Capital Adequacy Ratio

14 12 10 Percentage 8 6 4 2 0 2005 2006 Year 2007 9.2 11 12.5

Capital adequacy ratio shows us to the banks capacity to face different risks. Here in this bank CAR in 2005, 2006and 2007 like 9.2, 11 and 12.5 so it was continuous increased in every year which is good for any bank. 2. Dividend Payout Ratio
Year Dividend Payout Ratio 2005 79.55% 2006 202.35% 2007 116.47%

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Dividend Payout Ratio

250.00% 202.35% 200.00% 150.00% Percentage 100.00% 50.00% 0.00% 2005 2006 Year 2007 79.55% 116.47%

This ratio shows us the banks capacity to pay dividend. We can also say that it tells us to the banks earning position. Here the ratio in 2005, 2006and 2007 like 79.55, 202.35 and 116.47%.The reason behind of this increased dividend was increased EPS in every year. 3. Current assets & Saving account

Year CASA Proportion

2005 3.81

2006 3.58

2007 4.07

CASA Proportion
4.20 4.10 4.00 3.90 3.80 Proportion 3.70 3.60 3.50 3.40 3.30 4.07

3.81 3.58

2005

2006 Year

2007

This ratio shows us to the comparison between current assets and saving account. Here the ratio in 2005, 2006and2007 like 3.81, 3.58and 4.07.It was decreased in 2006 but overall increased which is good for any bank 89

4. Credit deposit ratio

Year Credit Deposit Ratio 2005 52.87% 2006 66.89% 2007 68.97%

Credit Deposit Ratio

80.00% 70.00% 60.00% 50.00% Percentage 40.00% 30.00% 20.00% 10.00% 0.00% 2005 2006 Year 2007 52.87% 66.89% 68.97%

This ratio shows us to the total credits of bank in comparison of total deposits. Here this ratio continuously increasing means banks has good credit in comparison of deposit The ratio like 52.87.66.89 and 68.97 %.The reason behind this increased was During the financial year 200607, fresh flow of credit to agriculture sector amounted to Rs. 2602.93 crore. Banks total credit to agriculture during the year went up by Rs. 1252.28 crore to Rs. 5732.28 crore in March 2007 from Rs. 4480.00 crore as at end-March 2006, thus recording a growth of 27.95%. A total of 72573 new agriculture loan accounts were added in 342 semi-urban and 264 rural branches and projected targets under rural & semi-urban areas were fully achieved. In addition, 31 Agriclinic and Agribusiness centers amounting to Rs. 59.2 lakh (cumulative) have been financed by the Bank. 5. P/E ratio
Year P/E Ratio 2005 7.34 2006 11.72 2007 9.16

90

P/E Ratio
14.00 12.00 10.00 Proportion 8.00 6.00 4.00 2.00 0.00 2005 2006 Year 2007 7.34 11.72

9.16

It shows the relationship between market value of per share & EPS.it is beneficial for the investors to know about what should be the price of the bank share.here it 7.94, 11.72, & 9.16 in 2005, 2006, & 2007 respe. It increased in 2006 due to heavy investment in stock market & reduced in 2007 due to not favoring the banking sector by the investors

6. Net interest income growth

Year Net Interest Income Growth

2005 4.66%

2006 5.34%

2007 5.37%

Net Interest Income Growth

5.60% 5.40% 5.20% Percentage 5.00% 4.80% 4.60% 4.40% 4.20% 2005 2006 Year 2007 4.66% 5.34% 5.37%

This ratio shows us to the banks interest income which is increasing in every year like 2005, 2006 and 2007 as 4.66, 5.34 and 5.37%. 91

7. Interest income to interest expense

Year Interest Income to Interest Expense 2005 1.74 2006 1.64 2007 1.49

Interest Income to Interest Expense

1.80 1.75 1.70 1.65 1.60 Proportion 1.55 1.50 1.45 1.40 1.35 1.74 1.64

1.49

2005

2006 Year

2007

This ratio show us to the banks interest income in comparison interest expenses which is increasing in every year because bank increase its interest rate .The ratio like 2005,2006 and 2007 is 1.74,1.64 and 1.49.It shows that the banks income continuous decreased due to increased expenses. 8. Net interest margin
Year Net Interest Margin 2005 3.21% 2006 2.84% 2007 2.55%

Net Interest Margin

3.50% 3.00% 2.50% Percentage 2.00% 1.50% 1.00% 0.50% 0.00% 2005 2006 Year 2007 3.21% 2.84% 2.55%

92

This ration shows us to the total interest income in comparison of av.assets .which was decreased after 2005 because in comparison of assets the interest income was very less increased. The ratio in 2005, 2006 and 2007 like3.21, 2.84 and 2.55%. 9. Advance growth
Year advance growth 2005 28.55% 2006 35.72% 2007 31.45%

Advances Growth
34.00% 33.00% 32.00% 31.00% Percentage 30.00% 29.00% 28.00% 27.00% 26.00% 2005 2006 Year 2007 28.55% 32.72% 31.45%

This ratio shows us to the banks financial growth which is very important for any bank. Here this ratio decreased in 2007 but before this year it was increased like 2005=28.55%, 2006=32.72% and 2007=31.45%.

10. Deposit growth

Year Deposit growth 2005 34.13% 2006 4.91% 2007 27.49%

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Deposit Growth
40.00% 35.00% 30.00% 25.00% Percentage 20.00% 15.00% 10.00% 5.00% 0.00% 34.13% 27.49%

4.91%

2005

2006 Year

2007

This ratio shows us to the banks position and security of money in market because we always select that bank which provide us to good services and this deposit growth is one part of it. This ratio only decreased in 2006 due to some financial problems. The ratio in 2005, 2006 and 2007 like 34.13, 4.91 and 27.49%. 11. Net profit growth

Year net profit growth

2005 5.83%

2006 -23.26%

2007 4.24%

Net Profit Growth

10.00% 5.00% 0.00% -5.00% Percentage -10.00% -15.00% -20.00% -25.00% -23.26% Year 2005 2006 2007 5.83%

4.24%

This ratio shows us to the banks total profit. Here the profit like in 2005 5.83% but after 2005 it was decreased in 2006 with higher gap means the ratio like -23.26% due to increased NPA position. But after 2006 it was increased in 2007 like 4.24%. 94

12. Return on Equity

Year ROE 2005 377.10% 2006 222.38% 2007 231.82%

Return on Equity(ROE)
400.00% 350.00% 300.00% 250.00% Percentage 200.00% 150.00% 100.00% 50.00% 0.00% 2005 2006 Year 2007 377.10%

222.38%

231.82%

These ratio shows us to the total return come form the bank in comparison of its earning. Here bank provided good return to its investors in terms of .2005, 2006 and 2007. Like 377.10, 222.38 and 231.82 %.Because banks interest income overall increased in every year.

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7.7 Bank of India

The Bank of India (BOI), a traditional bank have 101 year of experience in banking sector. It was started in the year 1906 under private ownership and continued till 1969 by the group of eminent businessmen in Bombay, later it was nationalised along with 13 other major Banks. The Bank came out with its maiden public issue in 1997. BOI plays a vital role in several areas, such as Merchant banking, Housing Finance, Leasing, Venture capital, Credit card, Mutual Fund, Stock Broking etc. It was the first Indian Bank to open a branch outside the country. BOI embarked on a major expansion plan of increasing its branch network in rural and semi urban areas after its nationalisation. During the year 2002 the bank returned Rs 150.42 crore of equity capital to Government, with this the government stake in the bank reduced to 69.3% from 76.5% earlier. The Bank has merged 2 of its branches in the year of 2004-05. As part of its strategy to give due focus to core banking, the bank has decided to prune down the non-core activity by rationalising the subsidiaries. It fulfilled the obligation of the assured returns to its investors in respect of two schemes floated by its subsidiary, BOI Mutual Fund and another subsidiary, BOI Finance. BOI honored as "The Best Bank" in the implementation of Information System Security Polices (IDRBT). BOI has tied-up with ICICI Prudential Life Insurance for providing reference to customers for sale of their life insurance products against a referral fee. This scheme is being piloted at 7 centres, covering 70 branches and bank has also entered into an arrangement with ICICI Bank for using its wide branch network for their cash management services covering 1000 branches, which add to non interest income of the Bank. BOI have also a strategic tie up with Securities Trading Corporation of India (STCI), in facilitating secondary market sale of Government Securities. As on May 2007, BOI tied up with National Bulk Handling Corporation (NBHC) for lending to farmers against warehouse receipts at 10.25 per cent, 50 basis points (bps) lower than the normal agri lending rate of 10.75 per cent. Government of India rated the second Best Bank for 'Excellence in Lending to Tiny Sector' in 2005-06. Bank also received the Stock Challenger Award - 2007 for social impact. As on August 2007, BOI announced plans to provide free insurance cover on deposits which have a minimum base of Rs 1 lakh and cheaper insurance cover on education loans to attract low-cost deposits and more customers and also bank has restructured its business model by segmenting its 2,734 96 from Institute for Development & Research in Banking Technology

branches in four categories - resources center, profit center, priority sector and general banking center. The resource center will have 522 branches under its fold which are mainly located in residential areas and will focus on mobilising low-cost deposits.BOI, a public sector bank started credit card operations almost 30 years ago but has just seven lakh credit cards, hence bank decided to revamp its low key credit card operations to increase retail banking operations. As a enhancement, it is exploring an option to set up a subsidiary for credit card biz and may rope in a partner with expertise in this area addition to this the bank will also launch wealth management services. BOI will open branches in Cambodia and Scotland and a subsidiary in Tanzania. Other areas the bank plans to expand include Canada, where a subsidiary will be set up soon, Auckland and Cairo. The African business is growing, as the capital involved is lower and recovery is higher. On future plans to invest in new businesses such as insurance and mutual funds, and increase its presence in the overseas market due to its recently-concluded Rs 1,360-crore qualified institutional placement (QIP). Insurance, for which it has a tie-up with Dai-ichi Insurance and Union Bank of India and also the bank, is in talks with foreign players regarding a joint venture for mutual fund business. Ratios: 1. Capital adequacy ratio
Year Capital Adequacy Ratio 2005 11.5 2006 10.8 2007 11.6

Capital Adequacy Ratio

11.8 11.6 Percentage 11.4 11.2 11 10.8 10.6 10.4 2005 2006 Year 2007 10.8 11.5 11.6

97

Capital adequacy ratio shows the ratio of a banks capital to its risk-weighted assets. It determines the capacity of a bank in terms of meeting the liabilities and other risks such as credit risks, operational risks etc. Here it is 11.5, 10.8 & 11.6 in 2005,2006,& 2007 respite reduces in 2006 due to hike in beta(risk) as compare to 2005.but bank is capable in meeting its liabilities as& when arises. 2. Dividend Payout Ratio
Year Dividend Payout Ratio 2005 143.55% 2006 208.77% 2007 65.19%

Dividend Payout Ratio

250.00% 200.00% Percentage 143.55% 150.00% 100.00% 50.00% 0.00% 2005 2006 Year 2007 65.19% 208.77%

DPR measures what a bank payout to investors in the form of dividend. here,bank pays 143.55%,208.77%&65.19% in 2005 ,2006 &2007resp. they use general reserve for the purpose of dividend distribution. It reduces the reserve every year because bank declared more then the EPS.for the purpose of dividend distribution. In 2007, they distributed dividend out of current year profit. 3. Current assets & Saving account
Year CASA Proportion 2005 3.10 2006 3.13 3.61 2007

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CASA Proportion
3.70 3.60 3.50 3.40 3.30 3.20 3.10 3.00 2.90 2.80 3.61

Proportion

3.10

3.13

2005

2006 Year

2007

It shows relationship between current assets& saving accounts. This ratio is useful for the investors to know the abilities of bank to pay out their liabilities as& when arises. It presents liquidity of bank. Here it is 3.1, 3.13, &3.61 receipt rises every year due to increase in deposit in proportion to advances. It shows banks liquidity increases every year which induce investors to maka deposits in bank. 4. Credit deposit ratio
Year Credit Deposit Ratio 2005 70.45% 2006 69.38% 2007 71.18%

Credit Deposit Ratio

71.50% 71.00% Percentage 70.50% 70.00% 69.50% 69.00% 68.50% 68.00% 2005 2006 Year 2007 69.38% 70.45% 71.18%

It shows relationship between credit given & deposit received. higher the ratio, better utilization of available deposits which directly increase the profit of the bank. Here it is 70.45%, 69.38&,

99

71.18% in 2005, 2006, & 2007.it is slightly up&down during every year which create sightable impact on profit. 5. P/E ratio
Year P/E Ratio 2005 9.72 2006 8.15 2007 6.55

P/E Ratio
12.00 9.72 8.15 8.00 Proportion 6.55 6.00

10.00

4.00

2.00

0.00 2005 2006 Year 2007

It shows the relationship between market value of per share & EPS.it is beneficial for the investors to know about what should be the price of the bank share. Here it 9.72, 8.15, & 6.55 in 2005, 2006, & 2007 respe. It decreased in ever year due to not favoring the banking sector by the investors 6. Net interest income growth
Year Net Interest Income Growth 2005 8.55% 2006 20.63% 2007 28.22%

100

Net Interest Income Growth

30.00% 25.00% Percentage 20.00% 15.00% 10.00% 5.00% 0.00% 2005 2006 Year 2007 8.55% 20.63% 28.22%

It shows the growth in the interest income of the bank. It is main source of income of the bank. Higher the ratio, better for the bank. Here it is 8.55%, 20.63%, &28.22%in 2005, 2006, &2007.the ratio increases every year due to increase in deposit growth which leads to rise in the profit. 7. Interest income to interest expense
Year Interest Income to Interest Expense 2005 1.65 2006 1.69 2007 1.67

Interest Income to Interest Expense

1.70 1.69 Proportion 1.68 1.67 1.66 1.65 1.64 1.63 2005 2006 Year 2007 1.65 1.67 1.69

It shows the interest income arises from the advance made by the banks against the interest given to the depositers.higher the ratio, better is the position of the bank. Here it is 1.65, 1.69, 101

&1.67in 2005, 2006, & 2007.it is up&down slightly during every year which does not create any big difference. It affect to the profit.

8. Net interest margin

Year Net Interest Margin 2005 2.65% 2006 2.77% 2007 2.90%

Net Interest Margin

2.95% 2.90% 2.85% 2.80% 2.75% 2.70% 2.65% 2.60% 2.55% 2.50% 2.90% 2.77% 2.65%

Percentage

2005

2006 Year

2007

This ration shows us to the total interest income in comparison of avg assets .which was increased every year because in comparison of assets the interest income was very high increased. The ratio in 2005, 2006 and 2007 like 2.65%, 2.77%, & 2.9%. 9. Advance growth
Year advance growth 2005 21.32% 2006 17.37% 2007 30.94%

Advance Growth
35.00% 30.00% Percentage 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2005 2006 Year 2007 21.32% 17.37% 30.94%

102

This ratio show the growth in the advances (credit, loan).it is very important because it is the main source of income as far as bank is concern. Here it is 21.32%, 17.37%, & 30.94% in 2005, 2006, &2007 respe. .it reduces in 2006 due to increase in investment in govt. securities which proves safe as compare to market risk &in 2007 it increased due to easy credit policy adopted by the bank. 10. Deposit growth
Year Deposit growth 2005 10.27% 2006 19.17% 2007 27.63%

Deposit Growth
30.00% 25.00% Percentage 20.00% 15.00% 10.00% 5.00% 0.00% 2005 2006 Year 2007 10.27% 19.17% 27.63%

It shows the growth in deposits of the bank in current year as compare to the previous year. It is very important that deposits are increase so that funds are available with the bank to make advances. Higher the ratio, good for the bank. Here it is 10.27%, 19.17%, &27.63% in 2005, 2006, &2007. It increase continuously which means that bank gives satisfaction to their customer. It leads to rise in profit of the bank. 11. Net profit growth
Year net profit growth 2005 -66.28% 2006 106.28% 2007 60.12%

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Net profit growth

150.00% 106.28% 100.00% Percentage 60.12% 50.00% 0.00% 2005 -50.00% -66.28% -100.00% Year 2006 2007

It shows the increase or growth in net profit of the bank. higher the ratio, better is the position of the bank.here,it is-66.28%, 106.28% &60.12% in 2005, 2006,& 2007 respe.during the year 2006, the ratio has been increased rapidly because of increase in interest income & decrease in interest income. 12. Return on Equity
Year ROE 2005 69.66% 2006 143.70% 2007 230.09%

Return on Equity (ROE)

250.00% 200.00% Percentage 150.00% 100.00% 50.00% 0.00% 2005 2006 Year 2007 69.66% 143.70% 230.09%

This ratio measured how efficiently a bank uses its capital to produce earnings. Here it is 66.97%, 143.7%, &230.09% in 2005, 2006, &2007 respe.it inceases every year due to utilization of available funds efficiently &also due to increase in interest income & reduces in interest exp. 104

7.8 Canara Bank

Canara Bank (CBK) was founded on July 1, 1906 in the town of Mangalore in Karnataka by Shri Ammembal Subbarao Pai, an eminent lawyer, educationist and social reformer. Backed by a team of professionals, committed staff and extended clientele base, the bank has, over the last 96 years, achieved many a milestone in the fields of commercial and social banking. The bank also has been able to register profits every year since inception. The Bank began operations as the Canara Hindu Permanent Fund and was later reconstituted as CBK in 1910. From a small beginning, the bank has grown into one of the largest banks in India with a wide branch network and client base. Acquisitions have also enabled the bank to achieve growth. Prior to nationalisation in 1969, the bank took over a number of banks starting with the Bank of Kerala in 1961 and ending with the Pangal Nayak Bank in 1968. Subsequently in 1985, it took over Laxmi Commercial Bank. The bank has a large network of geographically well diversified branches, which enables it to raise low cost long-term deposits. The number of branches of the bank rose from 368 at the time of nationalisation in 1969 to reach 2532 by March 2006. The bank has also diversified into other banking related areas through its various subsidiaries and sponsored companies: Canbank Computer Services, Canbank Factor, Canbank Financial Services, Canbank Investment Management Services, Canbank Venture Capital, Gilt Securities Trading Corporation, Indo Hong Kong International Finance and Canfin Homes. CBK, came out with its first initial public offer (IPO) in Nov. 2002 for 11,00,00,000 equity shares of Rs 10 each at a premium of Rs 25 per share aggregating Rs 385 crore through the fixed price route. The main object of the issue is to augment the long-term resources of the bank and the capital base of the bank to meet its future capital adequacy requirements. Moreover on 1st Nov. 2002 the bank returned the governments capital to the tune of Rs 277.87 crore. After the current IPO and return of capital, the paid-up capital stands at Rs 410 crore and the shareholding of GOI has come down to around 73.2%. During 2002-03 the bank has started corporated agency of life insuance products in strategic alliance with AVIVA with the aid of a dedicated 'bancassurance' outfit. As at March 2006, the Bank has 2532 branches, inclusive of its branch a London and an t Offshore Banking Unit at Special Economic Zone, Noida in the State of Uttar Pradesh. The Bank has 766 rural, 680 Semi-urban, 565 urban and 519 metropolitan branches besides having 267 extension counters. The Bank has also 142 specialized service branches. The bank also 105

has 815 ATMs, 1240 Anywhere Banking branches and 1043 branches offering Internet and Mobile banking services. Ratio: 1. Capital adequacy ratio

Year Capital Adequacy Ratio

2005 12.8

2006 11.2

2007 13.5

Capital Adequacy Ratio

16 14 Percentage 12 10 8 6 4 2 0 2005 2006 Year 2007 12.8 11.2 13.5

Capital adequacy ratio shows us to the banks capacity to face different risks. Here in this bank CAR in 2005, 2006and 2007 like 12.8, 11.2and 13.5 so we can assume that in 2006 company face some financials problem but in 2007 the ratio was increased. Because in During the financial year 2006, the Bank has initiated implementation of parallel run of new capital adequacy framework under Basel II norms and computed Capital to Risk Weighted Assets Ratio periodically, by adopting Standardized Approach for credit risk, Basic Indicator Approach for operational risk and Standardized Modified Duration Approach for market risk, as stipulated by the RBI. Steps have also been initiated to move towards advanced approaches in risk management. In addition to reviewing existing risk management policies, the Bank has adopted various new policies, such as, Compliance Policy, Disclosure Policy, Group Risk Management Policy and Outsourcing Policy covering the entire gamut of risk management functions. These policies are comprehensive and focus on, among others, risk appetite, processes involved in identification, assessment, measurement, monitoring and mitigation of various risks. 106

2. Dividend Payout Ratio

Year Dividend Payout Ratio 2005 55.43% 2006 122.09% 2007 86.57%

Dividend Payout Ratio

140.00% 120.00% Percentage 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% 2005 2006 Year 2007 55.43% 86.57% 122.09%

This ratio shows us the banks capacity to pay dividend. We can also say that it tells us to the banks earning position. Here the ratio in 2005, 2006and 2007 like 55.43, 122.09and 86.57%.In the year 2006 banks EPS. Around 33 and bank paid dividend 40 so thats why it was increased in 2006 comparison 2007. 3. Current assets & Saving account
Year CASA Proportion 2005 3.01 2006 3.32 2007 3.63

CASA Proportion
4.00 3.50 Percentage 3.00 2.50 2.00 1.50 1.00 0.50 0.00 2005 2006 Year 2007 3.01 3.63 3.32

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This ratio shows us to the comparison between current assets and saving account. Here the ratio in 2005, 2006and2007 like 3.01, 3.32and 3.63.It is continuous increasing which is good for any bank. 4. Credit deposit ratio
Year Credit Deposit Ratio 2005 62.42% 2006 68% 2007 69.18%

Credit Deposit Ratio

70.00% 68.00% Percentage 66.00% 64.00% 62.00% 60.00% 58.00% 2005 2006 Year 2007 62.42% 68.00% 69.18%

This ratio shows us to the banks financial position. Here the ratio is increasing in every. Year 2005, 2006and2007like 62.42, 68and 69.18% so it is good for investing money. 5. P/E ratio
Year P/E Ratio 2005 6.05
P/E Ratio
7.20 7.00 6.80 6.60 Proportion 6.40 6.20 6.00 5.80 5.60 5.40 2005 2006 Year 2007 6.05 6.97 6.88

2006 6.88

2007 6.97

108

It shows the relationship between market value of per share & EPS.it is beneficial for the investors to know about what should be the price of the bank share. Here it 6.05, 6.88, & 6.97in 2005, 2006, & 2007 respe. It increased in every year due to heavy investment in stock market 6. Net interest income growth
Year Net Interest Income Growth 2005 14.99% 2006 13.68% 2007 12.43%

Net Interest Income Growth

16.00% 14.00% Percentage 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2005 2006 Year 2007 14.99% 13.68% 12.43%

This ratio shows us to the banks interest income which is decreasing in every year like 2005, 2006 and 2007 as 14.99, 13.68 and 12.43%.Because Rise in interest rates across the board was a factor secularly observed across the industry. Interest expenditure of the Bank increased to Rs.7338 crore as against Rs.5130 crore during the previous year. 7. Interest income to interest expense
Year Interest Income to Interest Expense 2005 1.71 2006 1.7 2007 1.55

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Interest Income to Interest Expense

1.75 1.70 Propotion 1.65 1.60 1.55 1.50 1.45 2005 2006 Year 2007 1.55 1.71 1.70

This ratio show us to the banks interest income in comparison interest expenses which is increasing in every year because bank increase its interest rate .The ratio like 2005,2006 and 2007 was 1.71,1.70 and 1.56. 8. Net interest margin
Year Net Interest Margin 2005 3.00% 2006 2.94% 2007 2.69%

Net Interest Margin

3.10% 3.00% Percentage 2.90% 2.80% 2.70% 2.60% 2.50% 2005 2006 Year 2007 2.69% 3.00% 2.94%

This ration shows us to the total interest income in comparison of avg assets .which was decreased in every year like 3, 2.94 and 2.69%.

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9. Advance growth
Year advance growth 2005 24.74% 2006 31.45% 2007 24.02%

Advance Growth
35.00% 30.00% Percentage 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% 2005 2006 Year 2007 24.74% 31.45% 24.02%

This ratio show the growth in the advances (credit, loan).it is very important because it is the main source of income as far as bank is concern. Here it is 24.74% 31.45% & 24.02% in 2005, 2006, &2007 respe.it increase in 2006 due to increase in advances in that year bank adopted moderate credit policy. It reduces in 2007 due to strike rules & regulation of bank. 10. Deposit growth
Year Deposit growth 2005 12.10% 2006 20.67% 2007 21.90%

Deposit Growth
25.00% 20.67% 20.00% Percentage 15.00% 10.00% 5.00% 0.00% 2005 2006 Year 2007 12.10% 21.90%

111

It shows the growth in deposits of the bank in current year as compare to the previous year. It is very important that deposits are increase so that funds are available with the bank to make advances. Higher the ratio, good for the bank. Here it is 12.10, 20.67 & 21.90% in 2005, 2006, &2007. It increase continuously which means that bank gives satisfaction to their customer. It leads to rise in profit of the bank 11. Net profit growth
Year net profit growth 2005 -17.08% 2006 21.07% 2007 5.78%

Net Profit Growth

25.00% 20.00% 15.00% Percentage 10.00% 5.00% 0.00% -5.00% -10.00% -15.00% -20.00% -17.08% Year 2005 2006 2007 5.78% 21.07%

This ratio shows us to the banks total profit. Here the profit like in 2005 -17.06% because bank increase its interest rate thats why banks interest expenses was more than its income. IN 2006 it was increased 21.08% but after 2006 in 2007 bank had to face some financial problem like NPA. 12. Return on Equity
Year ROE 2005 270.61% 2006 327.61% 2007 346.54%

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Return on Equity (ROE)

400.00% 350.00% Percentage 300.00% 250.00% 200.00% 150.00% 100.00% 50.00% 0.00% 2005 2006 Year 2007 346.54%

327.61% 270.61%

These ratio shows us to the total return come form the bank in comparison of its earning. Here bank provided good return to its investors in terms of .2005, 2006 and 2007. like 270.6,327.6 and 346.5%.Because The Bank's performance under 'Return to Shareholders' was reflected in a consistent uptrend in its Book Value and Earnings per Share. While book value increased to Rs.197.83 as at March 2007 as compared with Rs.171.19 recorded for previous financial, Earnings per Share further rose from Rs.32.76 a year ago to Rs.34.65 for the year ended March 2007. A dividend of 70%, amounting to Rs.287 crore, was declared by the Board of Directors of the Bank, as against 66% (Rs.270.60 crore) paid in the preceding year.

113

7.9 HDFC Bank

HDFC Bank, a private sector bank was incorporated in the year of 1994 by Housing Development Finance Corporation Limited (HDFC), India's premier housing finance company. HDFC was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector. The Bank commenced its operations as a Scheduled Commercial Bank in January 1995 with the help of RBI's liberalization. HDFC Bank deals with three key business segments - Wholesale Banking Services, Retail Banking Services, Treasury. It has entered the banking consortia of over 50 corporate for providing working capital finance, trade services, corporate finance and merchant banking. It is also providing sophisticated product structures, sound advice and fine pricing mainly in areas of foreign exchange and derivatives, money markets and debt trading and equity research through its state-of-the-art dealing room. Notable event was happened in the history of bank as well as Indian banking sector in Feb. 2000, the Times Bank was amalgamated with HDFC bank. This was an important milestone, being the first merger of two private sector banks. HDFC Bank was the first Bank to launch an International Debit Card in association with VISA (Visa Electron). The Bank launched its Credit Card business in 2001. In the same year HDFC Bank has became the first private sector bank to be authorized by the Central Board of Direct Taxes (CBDT) as well as the RBI to accept direct taxes. The taxes accepted at specified branches of the bank. Also it has announced a strategic tie-up with a Bangalore-based business solutions software developer Tally Solutions Pvt (TSPL) for developing and offering products and services facilitating on-line accounting and banking services to SMEs (Small and Medium Enterprises). In 2001-02 the bank was listed on the New York Stock Exchange in the form of ADS and bank had alliance with LIC for provide online payment of insurance premium to the customers. Bank received plenty of awards to its credit, in the year 2003 bank received "Best Local Bank in India" by Finance Asia, "Best Domestic Bank in India Region" in The Asset Triple A Country Awards 2003. Apart from this, 'Best Bank in the Private Sector' for the year 2003 in the Outlook Express Awards, 'Best New Private Sector Bank 2003' by the Financial Express in the FE-Ernst & Young Best Bank's survey 2003. It was also figured in the 'Best Under a Billion, 200 Best Small Companies for 2003' by Forbes Global and for use of information technology the bank was awarded with 'Best IT user in Banking' at the IT User Awards 2003 conferred by 114

Economictimes.com & Nasscom. In the year of 2004 to 2005, "Best Domestic Commercial Bank" & "Best Cash Management Bank"- India- Asiamoney Awards for Corporate Excellence of 2004-05, "Best Bank" - India - Finance Asia, "Company of the Year " The Economic Times Awards for Corporate Excellence 2004-05, "Best Domestic Bank in India" - The Asset Triple A Country Awards 2005, "Most Customer Responsive Company- Banking and Financial Services" - The Economic Times - Avaya Global Connect Customer Responsiveness Awards 2005. During the year of 2006-07 also bank received number of awards, The Asian Banker Achievement Award, Best Listed Bank of India in 2006 by Business World, Euromoney Award as Best Bank in India, One of Asia Pacific's Best 50 Companies in 2006 by Forbes Magazine, Asiamoney Award for Best Local Cash Management in Large and Medium segments, other than above bank received " Best Bank in India " award continuously from the year 2003 to 2007 conferred by the magazine Business Today. The Financial Express rated 1st in India's Best Banks 2007 under New Private Sector Bank under along with Axis Bank. .

As on 2007 May, The Reserve Bank of India has allowed HDFC Bank to start a non banking finance company. The NBFC, to be set up by HDFC Bank as a wholly owned subsidiary and will undertake retail operations such as auto, personal loans etc. On June 2nd of 2007 HDFC Bank has opened 19 branches in a day in Delhi and the National Capital Region (NCR), outdoing its own record of 14 branches in a day 2005. As part and apart from the regular banking activity, HDFC Bank and The Institute for Technology and M anagement (ITM), Chennai gone under Memorandum of Understanding to promote co-operation advancement of academic and business exchanges between the two. In credit card industry alone, HDFC grown more than 10 times within the 3 years from 2005 to 2007. The bank have over 10 million customers and 1605 ATMS. The number of branches accounted 684 in 316 towns and cities as of 2007 and the bank want to survive as " a World Class Indian Bank ", benchmarking against international standards and best practices in terms of product offering, technology, service levels, risk management.

115

Ratio: 1. Capital adequacy ratio

Year Capital Adequacy Ratio 2005 12.2 2006 11.4 2007 13.1

Capital Adequacy Ratio

13.5 13 12.5 Percentage 12 11.4 11.5 11 10.5 2005 2006 Year 2007 12.2 13.1

Capital adequacy ratio shows the ratio of a banks capital to its risk-weighted assets.it determines the capacity of a bank in terms of meeting the liabilities and other risks such as credit risks, operational risks etc. Here it is 12.2 11.4 &13.1 in 2005,2006,& 2007 resp.it reduces in 2006 due to hike in beta(risk) as compare to 2005 & hike in 2007 .but bank is capable in meeting its liabilities as& when arises. 2. Dividend Payout Ratio
Year Dividend Payout Ratio 2005 209.60% 2006 197.78% 2007 195.87%

Dividend Payout Ratio

215.00% 210.00% Percentage 205.00% 200.00% 195.00% 190.00% 185.00% 2005 2006 Year 2007 197.78% 195.87% 209.60%

116

DPR measures what a bank payout to investors in the form o dividend. Here, bank pays f 209.6% 197.78% & 195.87 in 2005, 2006 &2007resp they use general reserve for the purpose of dividend distribution. It reduces the reserve every year because bank declared more then the EPS. 3. Current assets & Saving account
Year CASA Proportion 2005 2.74 2006 2.73 2007 3.04

CASA Proportion
3.10 3.00 2.90 Proportion 2.80 2.70 2.60 2.50 2005 2006 Year 2007 2.74 2.73 3.04

It shows relationship between current assets& saving accounts. This ratio is useful for the investors to know the abilities of bank to pay out their liabilities as& when arises. It presents liquidity of bank. Here it is2.74 2.73 & 3.04 respe.it rises every year due to increase in deposit in proportion to advances. It shows banks liquidity increases every year which induce investors to make deposits in bank. 4. Credit deposit ratio
Year Credit Deposit Ratio 2005 70.33% 2006 62.84% 2007 68.74%

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Credit Deposit Ratio

72.00% 70.00% 68.00% Percentage 66.00% 64.00% 62.00% 60.00% 58.00% 2005 2006 Year 2007 62.84% 70.33%

68.74%

It shows relationship between credit given & deposit received. Higher the ratio, better utilition of available deposits which directly increase the profit of the bank. Here it is 70.33%$ 62.84% & 68.74% in 2005, 2006, & 2007.it is slightly up&down during every year which does not create any sightable inpact on profit. 5. P/E ratio
Year P/E Ratio 2005 20.38 2006 23.70 2007 25.53

P/E Ratio
30.00 25.53 25.00 20.38 20.00 Proportion 23.70

15.00

10.00

5.00

0.00 2005 2006 Year 2007

It shows the relationship between market value of per share & EPS.it is beneficial for the investors to know about what should be the price of the bank share.here it 20.38, 23.7, & 25.63 118

in 2005, 2006, & 2007 respe. It increased in every year due to heavy investment in stock market. 6. Net interest income growth
Year Net Interest Income Growth 2005 34.39% 2006 49.56% 2007 42.17%

Net Interest Income Growth

60.00% 49.56% 50.00% 40.00% Percentage 30.00% 20.00% 10.00% 0.00% 2005 2006 Year 2007 34.39% 42.17%

It shows the growth in the interest income of the bank. It is main source of income of the bank. Higher the ratio, better for the bank. Here it is 34.39% 49.56% & 42.17% in 2005, 2006, &2007. The ratio increases rapidly in 2006 due to increase in credit growth which leads to rise in the profit. In 2007 it reduce due to increased in other exp. 7. Interest income to interest expense
Year Interest Income to Interest Expense 2005 2.28 2006 2.30 2007 2.12

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Interest Income to Interest Expense

2.35 2.30 2.25 Proportion 2.20 2.15 2.10 2.05 2.00 2005 2006 Year 2007 2.12 2.28 2.30

It shows the interest income arises from the advance made by the banks against the interest given to the depositers.higher the ratio, better is the position of the bank. Here it is 2.28 2.3 & 2.12 in 2005, 2006, & 2007.it is up&down slightly during every year which does not create any big difference. It affect to the profit. 8. Net interest margin
Year Net Interest Margin 2005 3.57% 2006 4.01% 2007 4.33%

Net Interest Margin

5.00% 4.00% 3.00% Percentage 2.00% 1.00% 0.00% 2005 2006 Year 2007 3.57% 4.01% 4.33%

120

This ration shows us to the total interest income in comparison of avg assets .which was increased every year because in comparison of assets the interest income was very high increased. The ratio in 2005, 2006 and 2007 like 3.57%, 4.01% & 4.33%. 9. Advance growth
Year advance growth 2005 44.08% 2006 37.14% 2007 33.89%

Advance Growth
50.00% 40.00% 30.00% Percentage 20.00% 10.00% 0.00% 2005 2006 Year 2007 44.08%

37.14% 33.89%

This ratio show the growth in the advances (credit, loan).it is very important because it is the main source of income as far as bank is concern. Here it is 44.08% 37.14% & 33.49% in 2005, 2006, &2007 respe.it reduces in 2006 & 2007 due to increase in investment in govt. securities which proves safe as compare to market risk. 10. Deposit growth
Year Deposit growth 2005 19.55% 2006 53.48% 2007 22.40%

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Deposit Growth
60.00% 50.00% 40.00% Percentage 30.00% 20.00% 10.00% 0.00% 2005 2006 Year 2007 19.55% 22.40% 53.48%

It shows the growth in deposits of the bank in current year as compare to the previous year. It is very important that deposits are increase so that funds are available with the bank to make advances. Higher the ratio, good for the bank. Here it is 19.55% 53.48% & 22.4% in 2005, 2006, &2007. It increase continuously which means that bank gives satisfaction to their customer. It leads to rise in profit of the bank. 11. Net profit growth
Year net profit growth 2005 30.58% 2006 30.89% 2007 31.08%

Net Profit Growth

31.20% 31.10% 31.00% 30.90% 30.80% Percentage 30.70% 30.60% 30.50% 30.40% 30.30% 31.08% 30.89%

30.58%

2005

2006 Year

2007

122

It shows the increase or growth in net profit of the bank. Higher the ratio better is the position of the bank.here, it is 30.58% 30.89% & 31.08% in 2005, 2006, & 2007 respe.during the years, the ratio has been increased because of increase in interest income & decrease in interest exp. 12. Return on Equity
Year ROE 2005 214.70% 2006 278.08% 2007 357.38%

Return on Equity (ROE)

400.00% 350.00% 300.00% 250.00% Percentage 200.00% 150.00% 100.00% 50.00% 0.00% 2005 2006 Year 2007 214.70% 357.38% 278.08%

This ratio measured how efficiently a bank uses its capital to produce earnings. Here it is 214.70% 278.08% & 357.38% in 2005, 2006, &2007 respe.it increases every year due to utilization of available funds efficiently &also due to increase in interest income & reduces in interest exp.

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7.10 ICICI Bank

ICICI Bank, a private sector bank under the house of ICICI was incorporated in the year of 1994. It is a multi-specialist financial service provider with leadership position across the spectrum of financial services in India. ICICI Bank is the 2nd largest bank in India and Bank breaking into the top 100 financial institutions in the world, in terms of market capitalization. It got this position in short time, because the bank doing what customers want. ICICI running its business with six principal groups, such as Retail Banking, Wholesale Banking, International Banking, Rural, Micro Banking and Agri-Business, Government Banking and Corporate Centre. The Bank offers a wide spectrum of domestic and international banking services to facilitate trade, investment banking ,Insurance, Venture Capital, asset management, cross border business & treasury and foreign exchange services besides providing a full range of deposit and ancillary services for both individuals and corporate through various delivery Channels and specialized subsidiaries. ICICI Bank has 14 subsidiaries, out of that 10 in domestic and rest of 4 in international level such as UK, Canada and Russia. To efficiently distribute its products and services, the bank has developed multiple access channels comprising lean brick and mortar branches, ATMs, call centers and Internet banking. The Bank has introduced the concept of mobile ATMs in the remote/rural areas. It has also extended its mobile banking services to all cellular service providers across I dia and NRI n customers in USA, UK, Middle-East and Singapore. The merger and acquisition are the key kind to bank. The Bank of Madura (BOM) got merged with ICICI Bank during the period 2000-01 and in 2001 ICICI (Financial Institution) merged with ICICI Bank. The two subsidiaries of ICICI Ltd viz ICICI Personal Financial Services and ICICI Capital Services were also merged with the ICICI Bank on March 2002. During May,2003 the bank has acquired Transamerica Appple Distribution Finance Private Ltd and renamed it to ICICI Distribution Finance Private Limited which is primarily engaged in financing in the twowheeler segment.

Bank received many awards and recognitions during the year 2005-06. Some of them are Best Bank in India by Euro money, Best Integrated Consumer Bank Site in Asia by Global Finance, Best Cash Management-Country Awards in India by The Asset and Best Secondary Offering by Finance Asia. ICICI Bank noted as Bank of the year 2006 India by The Banker, it was an award to ICICI Bank at second time from last year. During the year 2006-07 also Bank acquired the number of awards. Samples are, Best Transaction Bank in India by Asset Triple AAA, Best 124

Bank of the Year 2006 by Business India, National Award for Excellence in Energy Management by CII and Excellence in Multi Channel Distribution by Asian Banker. As on April 2007 Sangli Bank Ltd was merged with ICICI Bank Ltd. In the Wholesale Banking segment, the bank has achieved a significant milestone in the market making activity by expanding the product suite to include foreign exchange options. As on May 2007 the bank have market capitalization of Rest 77,834 crore. In 2007 June ICICI Bank has entered into an agreement with networking solutions provider GTL Ltd to lease out its call centre facility at Mahape worth of around Rs 100 crore for a period of 25 years. In August of 2007 the bank has availed of a $200-million worth Line of Credit (LoC) from The Export-Import Bank of Korea (Korea Exim bank) for the purpose of the Hong Kong branch of ICICI Bank gets funds from Korea Exim bank, and the bank lends foreign currency loans to domestic companies investing in Korea and the bank had taken a similar LoC of $200 million from the Japan Bank for International Cooperation (JBIC) last year. In 2008 ICICI Bank, come a cropper in the global stage when it comes to their brand value, which is $2,603 million, it reveals by the study of London-based consultancy Brand Finance. Ratios: 1. Capital adequacy ratio

Year Capital Adequacy Ratio

2005 11.8

2006 13.4

2007 11.7

Capital Adequacy Ratio

14 13.5 13 Percentage 12.5 12 11.5 11 10.5 2005 2006 Year 2007 11.8 11.7 13.4

125

Capital adequacy ratio shows the ratio of a banks capital to its risk-weighted assets. It determines the capacity of a bank in terms of meeting the liabilities and other risks such as credit risks, operational risks ets. Here it is 11.8 13.4m & 11.7 in 2005,2006,& 2007 resp. it increases in 2006 due to hike in beta(risk) as compare to 2005.but bank is capable in meeting its liabilities as& when arises. 2. Dividend Payout Ratio
Year Dividend Payout Ratio 2005 312.31% 2006 297.77% 2007 289.16%

Dividend Payout Ratio

315.00% 310.00% 305.00% 300.00% Percentage 295.00% 290.00% 285.00% 280.00% 275.00% 2005 2006 Year 2007 312.31%

297.77% 289.16%

DPR measures what a bank payout to investors in the form of dividend. Here, bank pays 312.31% 297.77% & 289.16 in 2005, 2006 &2007resp. they use general reserve for the purpose of dividend distribution. It reduces the reserve every year because bank declared more then the EPS. 3. Current assets & Saving account
Year CASA Proportion 2005 9.91 2006 8.38 2007 8.62

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CASA Proportion
10.50 10.00 9.50 Proportion 9.00 8.50 8.00 7.50 2005 2006 Year 2007 8.38 8.62 9.91

It shows relationship between current assets& saving accounts. This ratio is useful for the investors to know the abilities of bank to pay out their liabilities as& when arises. It presents liquidity of bank. Here it is9.91 8.38 & 8.62 in 2005, 2006 & 2007. Receipt rises every year due to increase in deposit in proportion to advances. It shows banks liquidity increases every year which induce investors to make deposits in bank. 4. Credit deposit ratio
Year Credit Deposit Ratio 2005 89.15% 2006 88.54% 2007 84.97%

Credit Deposit Ratio

90.00% 89.00% 88.00% 87.00% Percentage 86.00% 85.00% 84.00% 83.00% 82.00% 2005 2006 Year 89.15% 88.54%

84.97%

2007

It shows relationship between credit given & deposit received. higher the ratio, better utilization of available deposits which directly increase the profit of the bank. Here it is 89.15%, 88.54% 127

&84.97% in 2005, 2006, & 2007.it is down during every year which creates impact on profit & reduces the interest income. 5. P/E ratio
Year P/E Ratio 2005 10.95 2006 17.83 2007 20.83

P/E Ratio
25.00 20.83 20.00 17.83

Proportion

15.00 10.95 10.00

5.00

0.00 2005 2006 Year 2007

It shows the relationship between market value of per share & EPS.it is beneficial for the investors to know about what should be the price of the bank share. here it 10.95, 17.83, & 20.83 in 2005, 2006, & 2007 respe. It increased every year due to heavy investment in stock market 6. Net interest income growth
Year Net Interest Income Growth 2005 42.4% 2006 65.89% 2007 42.13%

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Net Interest Income Growth

65.89% 70.00% 60.00% 50.00% Percentage 40.00% 30.00% 20.00% 10.00% 0.00% 2005 2006 Year 2007 42.40% 42.13%

It shows the growth in the interest income of the bank. it is main source of income of the bank. Higher the ratio, better for the bank. Here it is 42.4% 65.89%& 42.13% in 2005, 2006, &2007. The ratio increases rapidly in 2006 due to increase in credit growth which leads to rise in the profit. In 2007 it reduce due to increased in other exp 7. Interest income to interest expense
Year Interest Income to Interest Expense 2005 1.43 2006 1.49 2007 1.41

Interest Income to Interest Expense

1.50 1.48 1.46 Proportion 1.44 1.42 1.40 1.38 1.36 2005 2006 Year 2007 1.43 1.41 1.49

It shows the interest income arises from the advance made by the banks against the interest given to the depositers.higher the ratio, better is the position of the bank. Here it is 1.43 1.49 & 1.41 in 2005, 2006, & 2007.it is up&down slightly during every year which does not create any big difference. It affect to the profit. 129

8. Net interest margin

Year Net Interest Margin 2005 1.91% 2006 2.22% 2007 2.22%

Net Interest Margin

2.30% 2.20% 2.10% Percentage 2.00% 1.91% 1.90% 1.80% 1.70% 2005 2006 Year 2007 2.22% 2.22%

This ration shows us to the total interest income in comparison of avg assets .which was increased in 2006 because in comparison of assets the interest income was very high increased. The ratio in 2005, 2006 and 2007 like 1.91%, 2.22%, & 2.22%. 9. Advance growth
Year advance growth 2005 45.15% 2006 64.24% 2007 34%

Advance Growth
70.00% 60.00% 50.00% Percentage 40.00% 30.00% 20.00% 10.00% 0.00% 2005 2006 Year 2007 45.15% 34.00% 64.24%

130

This ratio show the growth in the advances (credit, loan).it is very important because it is the main source of income as far as bank is concern. Here it is 45.15% 64.24% & 34% in 2005, 2006, &2007 respe.it increase in 2006 due to increase in advances in that year bank adopted moderate credit policy. it reduce in 2007 due to stike rules & regulation of bank. 10. Deposit growth
Year Deposit growth 2005 46.56% 2006 65.38% 2007 39.63%

Deposit Growth
70.00% 60.00% 50.00% Percentage 40.00% 30.00% 20.00% 10.00% 0.00% 2005 2006 Year 2007 46.56% 39.63% 65.38%

It shows the growth in deposits of the bank in current year as compare to the previous year. It is very important that deposits are increase so that funds are available with the bank to make advances. Higher the ratio, good for the bank. Here it is 46.56% 65.38% 39.63% in 2005, 2006, &2007. It increase continuously which means that bank gives satisfaction to their customer. It leads to rise in profit of the bank 11. Net profit growth
Year net profit growth 2005 22.48% 2006 26.67% 2007 22.45%

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Net profit growth

26.67% 27.00% 26.00% 25.00% Percentage 24.00% 23.00% 22.00% 21.00% 20.00% 2005 2006 Year 2007 22.48% 22.45%

It shows the increase or growth in net profit of the bank. higher the ratio, better is the position of the bank.here,it is22.48% 26.67% & 22.45 in 2005, 2006,& 2007 respe.during the year 2007, during the year 2006, the ratio has been increased rapidly due to increase in interest income. It decreases in 2007 because of decrease in interest income & increase in interest exp. 12. Return on Equity
Year ROE 2005 272.16% 2006 285.46% 2007 345.83%

Return on Equity (ROE)

400.00% 350.00% 300.00% 250.00% Percentage 200.00% 150.00% 100.00% 50.00% 0.00% 2005 2006 Year 2007 345.83% 285.46% 272.16%

This ratio measured how efficiently a bank uses its capital to p roduce earnings. Here it is 272.16% 285.46 & 345.83% in 2005, 2006, &2007 respe.it increases every year due to utilization of available funds efficiently &also due to increase in interest income & reduces in interest exp. 132

7.11 Indian Overseas Bank

Indian Overseas Bank (IOB) was founded in 1937 by setting up domestic and overseas branches simultaneously with the twin objectives of specializing in foreign exchange business and overseas banking... Sheri M. Ct. M. Chidambaram, the founder of the bank, is a pioneer in the banking and insurance industry. During the 60s, Indian banking witnessed a strong wave of mergers of weak private sector banks with stronger institutions. IOB also took up five banks into its fold and widened its reach. After adjusting for the accumulated losses of Rest 1,000 cry against the paid-up capital of the bank in Mar.'96, IOB has maintained a profitability track record for the last five years. However, due to higher provisions, there was a fall in profit for 2000 & 1999. During 2000, IOB came out with an issue of 11, 12, 00,000 equity shares of Rest 10 each at par aggregating to Rest 111.20 cr. The post-issue holding of the government of India has come down to 75% from the present 100%. The present issue of shares was made mainly to augment the capital base o the bank to meet its future CAR requirements and to meet long term f resources of the bank. The bank has sponsored three regional banks, viz. Pandean Gram in Tamil Nadir, Purim Grammy and Dhenkanal Gramya in Orissa. It also has a wholly-owned in subsidiary by the name of IOB Properties Pte, Singapore. The banking scenario has undergone a major change in the last few years. With the traditional business of banks coming under pressure, retail and other fee-based revenues are in focus. It requires a customer-oriented workforce, proper networking and use of technology. The bank has taken due care of this and has set up a Computer Policy & Planning Department (CPPD) at the central office. Besides developing in-house software for routine banking operations, other customer support products such as Any Branch Banking (ABB), Home Utility Banking Service (HUBS) and Speedy Transfer and Realisation Services (STARS) have been developed. The bank has also been awarded an ISO 9001 certificate for its Computer Policy and Planning Department from Det Norske Veritas (DNV), Netherlands. IOB, currently owned 75% by the government of India (GoI), has come out with its second initial public offer of 10,00,00,000 equity shares of Rs 10 each for cash at premium of Rs 14 per share aggregating Rs 240 crore through the fixed price route on 5th Sep 2003. In September 2000, the bank had came out with an offer of 11,12,00,000 equity shares of Rs 10 each at par, aggregating to Rs.111.20 crore.The main object of the issue is to augment long-term resources 133

and maintain a comfortable capital adequacy ratio (CAR) in line with the estimated growth in assets . During 2005-2006, the Bank opened 14 branches and 6 extension counters were upgrated as branches. One branch was merged while two branches were converted into Satelite Offices. As at March 31, 2006, the bank had a network of 1513 branches and 253 extension counters in India. Ratios: 1. Capital adequacy ratio

Year Capital Adequacy Ratio

2005 14.2

2006 13

2007 13.3

Capital Adequacy Ratio

14.5 14 13.5 Percentage 13 12.5 12 2005 2006 Year 2007 13 13.3 14.2

Capital adequacy ratio shows the ratio of a banks capital to its risk-weighted assets. It determines the capacity of a bank in terms of meeting the liabilities and other risks such as credit risks, operational risks ets. Here it is 14.2, 13, &13.3 in 2005,2006,& 2007 resp.it reduces in 2006 due to hike in beta(risk) as compare to 2005.but bank is capable in meeting its liabilities as& when arises. 2. Dividend Payout Ratio
Year Dividend Payout Ratio 2005 83.64% 2006 180.83% 2007 162.07%

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Dividend Payout Ratio

200.00% 150.00% Percentage 100.00% 50.00% 0.00% 2005 2006 Year 2007 83.64% 180.83%

162.07%

DPR measures what a bank payout to investors in the form of dividend. Here, bank pays 83.64%, 180.83%, & 162.07% in 2005, 2006 &2007resp. they use general reserve for the purpose of dividend distribution. It reduces the reserve every year because bank declared more then the EPS. 3. Current assets & Saving account
Year CASA Proportion 2005 2.57 2006 2.76 2007 3.37

CASA Proportion
4.00 3.50 3.00 2.50 Proportion 2.00 1.50 1.00 0.50 0.00 2005 2006 Year 2007 2.76 2.57 3.37

It shows relationship between current assets& saving accounts. This ratio is useful for the investors to know the abilities of bank to pay out their liabilities as& when arises. It presents liquidity of bank. Here it is2.57, 2.76, &3.37 respe.it rises every year due to increase in deposit 135

in proportion to advances. It shows banks liquidity increases every year which induce investors to make deposits in bank.

4. Credit deposit ratio

Year Credit Deposit Ratio 2005 56.97% 2006 68.78% 2007 68.46%

Credit Deposit Ratio

80.00% 70.00% 60.00% 50.00% Percentage 40.00% 30.00% 20.00% 10.00% 0.00% 2005 2006 Year 2007 56.97% 68.78% 68.46%

It shows relationship between credit given & deposit received. Higher the ratio, better utilition of available deposits which directly increase the profit of the bank. Here it is 57.97%, 68.76%, & 68.46% in 2005, 2006, & 2007.it is slightly up&down during every year which shows that bank use its fund efficiently. It increases interest income. 5. P/E ratio
Year P/E Ratio 2005 4.77 2006 6.25 2007 5.45

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P/E Ratio
7.00 6.25 6.00 5.00 Propotion 4.00 3.00 2.00 1.00 0.00 2005 2006 Year 2007 4.77 5.45

It shows the relationship between market value of per share & EPS.it is beneficial for the investors to know about what should be the price of the bank share. here it 4.77, 6.25, & 5.45 in 2005, 2006, & 2007 respe. It increased in 2006 due to heavy investment in stock market & reduced in 2007 due to not favoring the banking sector by the investors 6. Net interest income growth
Year Net Interest Income Growth 2005 16.01% 2006 11.41% 2007 23.88%

Net Interest Income Growth

30.00% 25.00% 20.00% Percentage 15.00% 10.00% 5.00% 0.00% 2005 2006 Year 2007 16.01% 11.41% 23.88%

It shows the growth in the interest income of the bank. It is main source of income of the bank. Higher the ratio, better for the bank. Here it is 16.01%, 11.41%, & 23.88% in 2005, 2006, 137

&2007.it reduced in 2006 due to increase in deposits which leads to increase in interest exp.it increase in 2007 due to high advances. 7. Interest income to interest expense
Year Interest Income to Interest Expense 2005 1.89 2006 1.88 2007 1.78

Interest Income to Interest Expense

1.90 1.88 1.86 1.84 1.82 Proportion 1.80 1.78 1.76 1.74 1.72 1.89 1.88

1.78

2005

2006 Year

2007

It shows the interest income arises from the advance made by the banks against the interest given to the depositers.higher the ratio, better is the position of the bank. Here it is 1.89, 1.88, &1.78 in 2005, 2006, & 2007. It is down slightly during 2006 which did not create any big difference. Buy reduced sharply in 2007. It reduced the profit. 8. Net interest margin
Year Net Interest Margin 2005 3.78% 2006 3.75% 2007 3.61%

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Net Interest Margin

3.80% 3.75% 3.70% Percentage 3.65% 3.60% 3.55% 3.50% 2005 2006 Year 2007 3.61% 3.78% 3.75%

This ration shows us to the total interest income in comparison of avg assets .which was decreased every year because in comparison of assets the interest income was very less increased. The ratio in 2005, 2006 and 2007 like 3.78%, 3.75% & 3.61%. 9. Advance growth
Year advance growth 2005 24.19% 2006 37.89% 2007 35.4%

Advance Growth
40.00% 35.00% 30.00% 25.00% Percentage 20.00% 15.00% 10.00% 5.00% 0.00% 2005 2006 Year 2007 24.19% 37.89% 35.40%

This ratio show the growth in the advances(credit, loan).it is very important because it is the main source of income as far as bank is concern.here it is 24.19%, 37.89%, & 35.4% in 2005, 2006, &2007 respe.. it increase in 2006 due to increase in advances in that year bank adopted moderate credit policy . it reduce in 2007 due to stike rules & regulation of bank.

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10. Deposit growth

Year Deposit growth 2005 6.65% 2006 14.21% 2007 36.04%

Deposit Growth
40.00% 35.00% 30.00% 25.00% Percentage 20.00% 15.00% 10.00% 5.00% 0.00% 2005 2006 Year 2007 6.65% 14.21% 36.04%

It shows the growth in deposits of the bank in current year as compare to the previous year.it is very important that deposits are increase so that funds are available with the bank to make advances. Higher the ratio, good for the bank. Here it is 6.65%, 14.21%, & 36.04% in 2005, 2006, &2007. It increase continuously which means that bank gives satisfaction to their customer. It leads to rise in profit of the bank. 11. Net profit growth
Year net profit growth 2005 27.03% 2006 20.26% 2007 28.73%

Net Profit Growth

35.00% 30.00% 25.00% Percentage 20.00% 15.00% 10.00% 5.00% 0.00% 2005 2006 Year 2007 27.03% 20.26%

28.73%

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It shows the increase or growth in net profit of the bank. higher the ratio, better is the position of the bank.here,it is27.03%, 20.26%, &28.73% in 2005, 2006,& 2007 respe.during the year 2007, the ratio has been increased because of increase in interest income & decrease in interest ex. 2006 it decrease due b to low rate if advances. 12. Return on Equity
Year ROE 2005 119.56% 2006 143.78% 2007 185.1%

Return on Equity (ROE)

200.00% 150.00% Percentage 100.00% 50.00% 0.00% 2005 2006 Year 2007 143.78% 119.56% 185.10%

This ratio measured how efficiently a bank uses its capital to produce earnings. Here it is 119.6%, 143.08%, &185.1% in 2005, 2006, &2007 respectively. It increases every year due to utilization of available funds efficiently &also due to increase in interest income & reduces in interest exp.

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7.12 Kotak Mahindra Bank

Established in 21st November of the year 1985 as Kotak Capital Management Finance Ltd and a year after, The Company's name was changed in 8th April 1986 to Kotak Mahindra Finance Limited. In February 2003, Kotak Mahindra Finance Ltd, the group's flagship company was given the license to carry on banking business by the Reserve Bank of India (RBI). This approval creates banking history since Kotak Mahindra Finance Ltd. is the first company in India to convert to a bank and named as Kotak Mahindra Bank (KMB) Ltd in March 2003. Its banking operations offer a central platform for customer relationships across the group's various businesses. The bank has presence in Commercial Vehicles, Retail Finance, Corporate Banking, Treasury and Housing Finance. Kotak Mahindra Bank has started its operations in New Delhi by inaugurating a branch Cannaught place office in the year 2003. KMB has entered into an ATM sharing agreement with UTI Bank, which allows KMB's customer free access to around 800 ATM's. The bank has unveiled several home finance products options, which include Home Loan, Home Equity Loan, Home Loan Transfer and Home Improvement Loans. The bank launched online remittance services called FUNDStoHOME for Non-resident Indians. During the year 2004, Kotak Mahindra Bank sets up branch in Surat. Kotak Mahindra Mutual Fund has launched Kotak Opportunities, an open-ended equity growth scheme and in the same year the bank inks pact with Reuters. As on June 2007, the bank made a tie up with Taxshax.com to help customers file tax returns in a simple, secure and efficient manner. These services are available to Kotak Mahindra Bank customers at a reduced price on quoting special promo codes. In July 2007, KMB launched Home Banking Service. The service is available across all urban & metro branches and is aimed at making banking convenient for the retail customer. With the launch of this service, the bank can deliver money, demands drafts and pickup cash and cheques for deposit into the customer's account at/from the customer's doorstep. Salary 2 Wealth accounts, a comprehensive product suite to cater to the financial needs of the Indian professional, which was launched by the bank in October 2007. The Kotak Mahindra Salary 2 Wealth Account enables young professionals to go beyond a vanilla corporate salary account and Gold Debit Card, a 'fully loaded' Visa Debit Card with unlimited free access to all the VISA ATMs in India and worldwide, which also launched by the bank during the same period. As on April 2008, the bank launched its suite of Simple and 142

Powerful Credit Cards. Kotak Credit Cards is the newest addition to the wide array of financial services offerings of the Kotak Group. The card range on offer at launch includes 2 Visa Gold Cards, a Visa Platinum Card and a Visa Signature Card. .

Kotak Mahindra Bank address the entire spectrum of financial needs for individuals and corporate. KMB have the products, the experience, the infrastructure and most importantly the commitment to deliver pragmatic, end-to-end solutions that really work with over 178 branches spread across 107 locations (as on April 2008) across the nation. Ratios: 1. Capital adequacy ratio
Year Capital Adequacy Ratio 2005 12.8 2006 11.3 2007 13.5

Capital Adequacy Ratio

14 13.5 13 12.5 Percentage 12 11.5 11 10.5 10 13.5 12.8

11.3

2005

2006 Year

2007

Capital adecuacy ratio shows the ratio of a banks capital to its risk-weighted assets.it determines the capacity of a bank in terms of meeting the liabilities and other risks such as credit risks, operational risks ets. Here it is 12.8, 11.3, & 13.5 in 2005,2006,& 2007 resp.it reduces in 2006 due to hike in beta(risk) as compare to 2005.but bank is capable in meeting its liabilities as& when arises. 2. Dividend Payout Ratio
Year Dividend Payout Ratio 2005 181.59% 2006 156.96% 2007 161.50%

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Dividend Payout Ratio

185.00% 180.00% 175.00% 170.00% 165.00% Percentage 160.00% 155.00% 150.00% 145.00% 140.00% 181.59%

161.50% 156.96%

2005

2006 Year

2007

DPR measures what a bank payout to investors in the form of dividend.here,bank pays181.59%, 156.96%, &161.5% in 2005 ,2006 &2007resp. . they use general reserve for the purpose of dividend distribution.it reduces the reserve every year because bank declared more then the EPS. 3. Current assets & Saving account
Year CASA Proportion 2005 31.19 2006 14.71 2007 14.48

CASA Proportion
35.00 30.00 25.00 Proportion 20.00 15.00 10.00 5.00 0.00 2005 2006 Year 2007 14.71 14.48 31.19

It shows relationship between current assets& saving accounts.this ratio is useful for the investors to know the abilities of bank to pay out their liabilities as& when arises.it presents liquidity of bank.here it 31.19,14.71,& 14.48 respe.it decreases every year due to decrease in current assets as compare to saving account.. It show banks liquidity position which induce investors to invest in bank. 144

4. Credit deposit ratio

Year Credit Deposit Ratio 2005 93.43% 2006 96.69% 2007 99.31%

Credit Deposit Ratio

100.00% 98.00% 96.00% Percentage 94.00% 92.00% 90.00% 2005 2006 Year 2007 93.43% 96.69% 99.31%

It shows relationship between credit given & deposit received.higher the ratio, better utilition of available deposits which directly increase the profit of the bank. Here it is 93.43%, 96.69% & 99.31% in 2005, 2006, & 2007.it is slightly up&down during every year which does not create any sightable inpact on profit 5. P/E ratio
Year P/E Ratio 2005 43.18 2006 74.97 2007 80.14

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P/E Ratio
90.00 80.14 80.00 70.00 60.00 Proportion 50.00 40.00 30.00 20.00 10.00 0.00 2005 2006 Year 2007 43.18 74.97

it shows the relationship between market value of per share & EPS.it is beneficial for the investors to know about the what should be the price of the bank share.here it 43.18, 74.97, & 80.14 in 2005, 2006, & 2007 respe. It increased every year due to heavy investment in stock market. 6. Net interest income growth
Year Net Interest Income Growth 2005 31.97% 2006 68.51% 2007 72.34%

Net Interest Income Growth

80.00% 70.00% 60.00% 50.00% Percentage 40.00% 30.00% 20.00% 10.00% 0.00% 2005 2006 Year 2007 68.51% 72.34%

31.97%

It shows the growth in the interest income of the bank.it is main source of income of the bank.higher the ratio, better for the bank.here it is 31.97%, 68.51%,&72.34% in 2005, 2006, 146

&2007.the ratio increases every year due to increase in deposit growth which leads to rise in the profit. .it increases every year which shows that bank use its fund efficiently.it increase interest income. 7. Interest income to interest expense
Year Interest Income to Interest Expense 2005 2.16 2006 2.12 2007 1.94

Interest Income to Interest Expense

2.20 2.15 2.10 2.05 Proportion 2.00 1.95 1.90 1.85 1.80 2005 2006 Year 2007 1.94 2.16 2.12

It shows the interest income arises from the advance made by the bankas against the interest given to the depositers.higher the ratio, better is the position of the bank. Here it is 2.16, 2.12, &1.94 in 2005, 2006, & 2007. it is down slightly during 2006 which did not create any big difference.but reduced sharply in 2007. it reduced the profit . 8. Net interest margin
Year Net Interest Margin 2005 3.65% 2006 4.55% 2007 4.35%

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Net Interest Margin

5.00% 4.00% 3.00% Percentage 2.00% 1.00% 0.00% 2005 2006 Year 2007 3.65% 4.55% 4.35%

This ration shows us to the total interest income in comparison of av.assets .which was increased in 2006 because in comparison of assets the interest income was very high increased. The ratio in 2005, 2006 and 2007 like 3.65%, 4.55%, & 4.35. 9. Advance growth
Year advance growth 2005 91.56% 2006 58.03% 2007 72.08%

Advance Growth
100.00% 80.00% 60.00% Percentage 40.00% 20.00% 0.00% 2005 2006 Year 2007 58.03% 91.56%

72.08%

This ratio show the growth in the advances(credit, loan).it is very important because it is the main source of income as far as bank is concern.here it is 91.56%, 58.03%, & 72.08% in 2005, 2006, &2007 respe. it reduces in 2006 due to increase in investment in govt. securities which proves safe as compare to market risk &in 2007 it increased due to easy credit policy adopted by the bank. 148

10. Deposit growth

Year Deposit growth 2005 -3.58% 2006 52.71% 2007 67.53%

Deposit Growth
80.00% 70.00% 60.00% 50.00% Percentage 40.00% 30.00% 20.00% 10.00% 0.00% -10.00% -3.58% 2005 2006 Year 2007 52.71% 67.53%

It shows the growth in deposits of the bank in current year as compare to the previous year.it is very important that deposites are incease so that funds are available with the bank to make advances.higher the ratio, good for the bank. Here it is -3.58%, 52.71% & 72.08% in 2005, 2006, &2007. it incease continuously which means that bank gives satisfaction to their customer. It leads to rise in profit of the bank. 11. Net profit growth
Year net profit growth 2005 7.82% 2006 39.27% 2007 19.57%

Net profit growth

45.00% 40.00% 35.00% 30.00% 25.00% Percentage 20.00% 15.00% 10.00% 5.00% 0.00% 39.27%

19.57%

7.82%

2005

2006 Year

2007

149

It shows the incease or growth in net profit of the bank.higher the ratio, better is the position of the bank.here,it is 7.82% 39.27% &19.57% in 2005, 2006,& 2007 respe. during the years, the ratio has been inceased because of incease in interest income & decrease in interest exp.

12. Return on Equity

Year ROE 2005 68.84% 2006 38.23% 2007 43.34%

Return on Equity (ROE)

80.00% 70.00% 60.00% 50.00% Percentage 40.00% 30.00% 20.00% 10.00% 0.00% 2005 2006 Year 2007 68.84% 43.34% 38.23%

This ratio measured how efficiently a bank uses its capital to produce earnings. Here it is 6.88% 3.82% &4.33% in 2005, 2006, &2007 respe.it decreases in 2006 due to not utilization of available funds efficiently & increase in 2007 due to increase in interest income & reduces in interest exp.

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7.13 Panjab National Bank

Punjab National Bank (PNB), established in the year 1895 at Lahore, undivided India, has the distinction of being the first Indian bank to have been started solely with Indian capital. The bank was nationalised in July 1969 along with 13 other banks. From its modest beginning, the bank has grown in size and stature to become a front-line banking institution in India at present. With its presence virtually in all the important centres of the country. Punjab National Bank offers a wide variety of banking services which include corporate and personal banking, industrial finance, agricultural finance, financing of trade and international banking. Among the clients of the Bank are Indian conglomerates, medium and small industrial units, exporters, non-resident Indians and multinational companies. A package was developed for corporate customers for fast remittance of funds from different upcountry branches to the controlling office during the year 1996. The Bank has introduced a scheme for providing finance against mortgage of immovable property in the year 2000. It commenced its Gold Business in the form of Gold Import Scheme in September of the same year 2000. An International Co-branded Credit Card of Punjab National Bank and Hongkong & Shanghai Banking Corporation (HSBC) was launched in New Delhi in November of the year 2000. The scheme offers international quality gold for sale to the Bank's clientele consisting of exporters and others at competitive prices. PNB came out with its first Initial public offer (IPO) in March 2002 for 5,30,60,700 equity shares of Rs 10 each. During the year 2002, the bank started its branch in M.G. Road, Bangalore named as Mid-Corporate Branch (MCD) to provide its corporate clients with a credit limit of Rs 3.5 crore and above. PNB made joint venture with Infosys for the implementation of a Centralised Banking Solution for it. The Bank received the Best Bank Award' for excellence in banking technology. PNB tied up with Cisco Systems for networking 3,870 branches as part of its Rs 150 crore plan. PNB has taken over Kozhikode-based Nedungadi Bank Ltd (NBL) in February of the year 2003. The Bank has entered into an alliance with New India Assurance for selling its general insurance products in the same year 2003. In June of the year 2003, PNB made Memorandum of Understanding (MoU) with Principal Financial Services Inc. (USA) and Vijaya Bank for joint venture partnership in Life Insurance, Pensions and Asset Managements (MF) business. The Bank has formed a strategic alliance with Infrastructure Leasing and Financial Services Ltd (IL&FS) to set up a private equity fund for investing in domestic companies. Entered an agreement with Oriental Bank of Commerce, Indian Bank, UTI Bank and Global Trust Bank for 151

sharing ATMs spread across the country. In the year 2004, PNB acquired the assets of Hindustan Transmission Product Limited (HTPL) under Sarfaesi. The Bank had signed a corporate agency agreement with Export Credit Guarantee Corporation of India Ltd (ECGC) for marketing ECGC's export credit insurance products through the network of the bank's branches. A MoU was signed for the deployment of various IT-related solutions between the bank and Intel. PNB and ICICI Bank had signed a MoU for ATM network sharing. PNB implements Loans and Advances Data Desk for Evaluations and Reports, (LADDER) system for rationalisation of returns, asset classification and provisioning, credit monitoring and NPA management. During the year 2006, PNB had tied up with MasterCard International to launch a signaturebased debit card and opened one new branch in Uttaranchal. Also during the same year of 2006, the bank has made tie up with Indian Airlines for online booking of air tickets and ties up with IDBI Capital. PNB had entered into MoU with I dia Infrastructure Finance Company (IIFC) n in October of the year 2007 with an aim to extend its cooperation and support to IIFC in areas of creating a deal flow of infrastructure projects. PNB aims to expand its base in the entire northern India region for providing banking facilities at the doorsteps of the peoples. The Bank is serving over 3.5 crore customers through 4540 Offices including 421 extension counters - largest amongst Nationalized Banks. PNB is moving with the vision, to be India's most profitable Universal Bank. Also wants to profitably serve the banking and the financial services needs of the nation everyday and everywhere.

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Ratios: 1. Capital adequacy ratio

Year Capital Adequacy Ratio 2005 14.8 2006 11.9 2007 12.3

Capital Adequacy Ratio

16 14 12 10 Percentage 8 6 4 2 0 2005 2006 Year 2007 14.8 11.9 12.3

Capital adequacy ratio shows us to the banks capacity to face different risks. Here in this bank CAR in 2005, 2006and 2007 like 14.8, 11.9and 12.3 so we can assume that in 2006 company face some financials problem but in 2007 the ratio was increased. 2. Dividend Payout Ratio
Year Dividend Payout Ratio 2005 67.08% 2006 131.44% 2007 122.84%

Dividend Payout Ratio

140.00% 120.00% 100.00% Percentage 80.00% 60.00% 40.00% 20.00% 0.00% 2005 2006 Year 2007 67.08% 131.44%

122.84%

153

This ratio shows us the banks capacity to pay dividend. We can also say that it tells us to the banks earning position. Here the ratio like 2005, 2006and 2007 like 67.08, 131.44 and 122.84%. 3. Current assets & Saving account
Year CASA Proportion 2005 2.11 2006 2.46 2007 2.41

CASA Proportion
2.50 2.40 2.30 Proportion 2.20 2.10 2.00 1.90 2005 2006 Year 2007 2.11 2.46 2.41

This ratio shows us to the comparison between current assets and saving account. Here the ratio in 2005, 2006and2007 like 2.11, 2.46and 2.41.It is continuous increasing overall which is good for any bank The reason behind it like Demand for higher bank credit (upto Dec 2006) was mainly led by industry that accounted for almost 35% of incremental non-food credit followed by personal loans (28.7%), services (23.7%) and agriculture (12.2%). In order to protect asset quality in the light of high credit growth, RBI has doubled the provisioning requirement from 1% to 2% for standard assets in some of the sectors like commercial real estate sector, outstanding credit card receivables, loans and advances qualifying as capital market exposure, and personal loans (excluding residential housing loans). 4. Credit deposit ratio
Year Credit Deposit Ratio 2005 58.56% 2006 62.35% 2007 69.07%

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Credit Deposit Ratio

70.00% 68.00% 66.00% 64.00% 62.00% Percentage 60.00% 58.00% 56.00% 54.00% 52.00% 69.07%

62.35% 58.56%

2005

2006 Year

2007

This ratio shows us to the banks financial position. Here the ratio is increasing in every.Year 2005, 2006and2007like 58.56, 62.35and 69.07% so it is good for investing money . 5. P/E ratio
Year P/E Ratio 2005 7.22 2006 9.22 2007 9.41

P/E Ratio
10.00 9.00 8.00 7.00 Proportion 6.00 5.00 4.00 3.00 2.00 1.00 0.00 2005 2006 Year 2007 7.22 9.22 9.41

it shows the relationship between market value of per share & EPS.it is beneficial for the investors to know about the what should be the price of the bank share.here it 7.22, 9.22 & 9.41 in 2005, 2006, & 2007 respe. It increased every year due to heavy investment in stock market.

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6. Net interest income growth

Year Net Interest Income Growth 2005 10.56% 2006 16.47% 2007 18.17%

Net Interest Income Growth

20.00% 16.47% 15.00% 10.56% Percentage 10.00% 5.00% 0.00% 2005 2006 Year 2007 18.17%

This ratio shows us to the banks interest income which is increasing in every year like 2005, 2006 and 2007 as 10.56, 16.47 and 18.17%.Because Total income during the year rose by 15.9%, while total expenses grew by 17.7%, mainly on account of higher interest expenses (growth of 22.5%), an industry wide phenomenon. However, due to stress on low cost deposit mobilization, the bank was able to contain the increase to lower level vis--vis its peer banks 7. Interest income to interest expense
Year Interest Income to Interest Expense 2005 1.90 2006 1.95 2007 1.92

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Interest Income to Interest Expense

1.96 1.95 1.94 1.93 1.92 Proportion 1.91 1.90 1.89 1.88 1.87 1.95

1.92 1.90

2005

2006 Year

2007

This ratio show us to the banks interest income in comparison interest expenses which is increasing in every year because bank increase its interest rate .The ratio like 2005,2006 and 2007 is 1.90,1.95 and 1.92.It shows that the banks income increase .In 2007 it was minor decreased due to increase interest rate. 8. Net interest margin
Year Net Interest Margin 2005 3.50% 2006 3.44% 2007 3.58%

Net Interest Margin

3.60% 3.55% 3.50% 3.50% Percentage 3.45% 3.40% 3.35% 2005 2006 Year 2007 3.44% 3.58%

This ration shows us to the total interest income in comparison of av.assets .which was decreased in 2006 because in comparison of assets the interest income was very less increased. The ratio in 2005, 2006 and 2007 like 3.50, 3.44 and 3.58%. 157

9. Advance growth
Year advance growth 2005 27.93% 2006 23.53% 2007 29.44%

Advances Growth
35.00% 30.00% 25.00% Percentage 20.00% 15.00% 10.00% 5.00% 0.00% 2005 2006 Year 2007 27.93% 23.53% 29.44%

This ratio shows us to the banks financial growth which is very important for any bank. Here this ratio decreased in 2006 but after this year it was increased like 2005-27.93%, 2006-23.53% and 2007-29.44%. 10. Deposit growth
Year Deposit growth 2005 17.35% 2006 16.01% 2007 16.86%

Deposit Growth
17.50% 17.00% 16.50% Percentage 16.00% 15.50% 15.00% 2005 2006 Year 2007 16.01% 17.35% 16.86%

This ratio shows us to the banks position and security of money in market because we always select that bank which provide us to good services and this deposit growth is one part of it. This ratio only decreased in 2006 due to some financial problems. The ratio in 2005, 2006 and 2007 like 17.35, 16.01 and 16.86%. 158

11. Net profit growth

Year net profit growth 2005 27.19% 2006 2.07% 2007 7%

Net Profit Growth

30.00% 25.00% 20.00% Percentage 15.00% 10.00% 2.07% 5.00% 0.00% 2005 2006 Year 2007 7.00% 27.19%

This ratio shows us to the banks total profit. Here the profit like in 2005 27.19% but after 2005 it was decreased in 2006 with higher gap means the ratio like 2.07% due to increased NPA position. But after 2006 it was increased in 2007 like 7%.

12. Return on Equity

Year ROE 2005 447.23% 2006 456.49% 2007 488.45%

Return on Equity (ROE)

500.00% 490.00% 480.00% 470.00% Percentage 460.00% 450.00% 440.00% 430.00% 420.00% 2005 2006 Year 2007 447.23%

488.45%

456.49%

159

These ratio shows us to the total return come form the bank in comparison of its earning. Here bank provided good return to its investors in terms of .2005, 2006 and 2007. Like 447.2, 456.49 and 488.45%.Because banks interest income overall increased in every year.

160

7.14 State Bank of India

SBI, started as Imperial Bank then named State Bank of India commenced its operations from the year 1955, is the largest commercial bank in India in terms of profits, assets, deposits, branches and employees. As of March 2008, the bank has had 21 subsidiaries and 10,000 branches. SBI offering the services of banking and as well as non- banking services to their customers. It provides a whole range of financial services which includes Life Insurance, Merchant Banking, Mutual Funds, Credit Cards, Factoring, Security Trading & Primary dealership in the Money market. The Bank is actively involved in non-profit activity called community services banking apart from its normal banking activity. The bank also concentrate in agriculture, for that it took initiative spotlight kharif and spotlight rabi campaigns for higher disbursement. It introduced Automated Teller Machine with Kishan Credit Cards in all circles to assist agriculture peoples, cumulatively the bank has credit linked 7.68 lac Self Help Groups and disbursed loans to the extent of Rs 3,468 crs, so far. In the year 2001 the SBI Life was started. SBI is the only Bank to have been permitted a 74% stake in the insurance business. The Bank's insurance subsidiary "SBI Life Insurance Company" is a joint venture with Cardif S.A holds 26% stake. SBI Life enjoys the unique distinction of being the first private sector life insurance company in India to make profits for two consecutive years.

During the year 2004-05 SBI was the only one bank in India to ranked among top 100 banks in the world and also among the top 20 banks in Asia in the annual survey by "The Banker" as well as in the same year bank received two prestigious awards for technology from the same The Banker magazine. In the year 2005-06 the bank introduced "SBI e-tax" an online tax payments facility for direct and indirect tax payment, the centralized pension processing center also launched during the year. SBI made a partnership with Tata Consultancy Services for setup C -Edg Technologies and consulting services to the banking, financial services and insurance industry. The bank noted as The most preferred bank in a survey by TV 18 in association with AC Nielsen-ORG Marg along with SBI voted as The most preferred housing loan provider in AWAAZ consumer awards for 2006.

161

In the customer loyalty survey 2006-07 conducted by "Business World", SBI has been ranked number One in all parameters of customer satisfication, service orientation, customer care/ call center, customer loyalty and home loans. SBI Funds (SBIFMPL) was judged "Mutual fund of the year" by CNBC/TV-18/CRISL. SBI FMBL Equity schemes won 11 awards and ranging of the AMC in terms of Assets under management remained at 7th position during the year 2006-07. SBI cards is in 2nd position in the country under market share. During the year 2006-07 14.81 lac additional cards were issued by SBI and they crossed the landmark of 3 million cards totally. The strategic initiatives that SBI have launched business groups in 2007 namely rural and agri business; treasury and marketing; corporate strategy and new business; and fourth mid corporate group is on the anvil. They also introduced new products and services such as webbased remittance, instant fund transfer, online-trading, comprehensive cash management. SBI opened its 10,000th branch in March 2008, it becomes only the second bank in the world to have more than 10,000 branches after China's ICBC. SBI is pursuing aggressive IT policy, where the Automated Teller Machines are now also enabled to pay utility bills, college fees, book air-line tickets and accept donations, further bilateral sharing of ATMs was extended to thirteen banks covering 15,700 Automated Teller Machines and an Memorandum of Understanding has been signed with the Indian railways for installing ATMs at 682 railway stations. Infrastructure fund, private equity, venture capital and pension fund management are under in process to assist the customer in time. SBI is targeting to emerge as the best rated bank among public, private, foreign and state -owned banks by the end of the next fiscal. Employee Stock Option Scheme, where employees have the option to pick up shares as per their needs is avail in SBI. SBI plans to implement the mobile banking technology will soon with aim of customer will no be just "Branch customers" but will be "Bank customers".

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Ratios: 1. Capital adequacy ratio

Year Capital Adequacy Ratio 2005 12.45 2006 11.88 2007 12.34

Capital Adequacy Ratio

12.45 12.5 12.4 12.3 12.2 12.1 Percentage 12 11.9 11.8 11.7 11.6 11.5 2005 12.34

11.88

2006 Year

2007

Capital adecuacy ratio shows the ratio of a banks capital to its risk-weighted assets.it determines the capacity of a bank in terms of meeting the liabilities and other risks such as credit risks, operational risks ets.Here it is 12.45, 11.88,& 12.34 in 2005,2006,& 2007 resp.it reduces in 2006 due to hike in beta(risk) as compare to 2005.but bank is capable in meeting its liabilities as& when arises. 2. Dividend Payout Ratio
Year Dividend Payout Ratio 2005 152.83% 2006 167.21% 2007 162.25%

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Dividend Payout Ratio

170.00% 165.00% 160.00% Percentage 155.00% 150.00% 145.00% 2005 2006 Year 2007 152.83% 167.21% 162.25%

DPR measures what a bank payout to investors in the form of dividend.here,bank pays 152.83%, 167.21%, & 162.25% in 2005 ,2006 &2007resp. they use general reserve for the purpose of dividend distribution.it reduces the reserve every year because bank declared more then the EPS. 3. Current assets & Saving account
Year CASA Proportion 2005 0.27 2006 0.32 2007 0.37

CASA Proportion
0.40 0.35 0.30 0.25 Proportion 0.20 0.15 0.10 0.05 0.00 2005 2006 Year 2007 0.37 0.32 0.27

It shows relationship between current assets& saving accounts.this ratio is useful for the investors to know the abilities of bank to pay out their liabilities as& when arises.it presents liquidity of bank.here it is0.27,0.32, & 0.37 respe.it rises every year due to increase in deposit in 164

proportion to advances. It show banks liquidity increases every year which induce investors to maka deposits in bank. 4. Credit deposit ratio
Year Credit Deposit Ratio 2005 55.14% 2006 68.89% 2007 77.46%

Credit Deposit Ratio

90.00% 80.00% 70.00% 60.00% 50.00% Percentage 40.00% 30.00% 20.00% 10.00% 0.00% 77.46% 68.89% 55.14%

2005

2006 Year

2007

It shows relationship between credit given & deposit received.higher the ratio, better utilition of available deposits which directly increase the profit of the bank. Here it is 55.14%, 68.89%, & 77.46% in 2005, 2006, & 2007. .it increases every year which shows that bank use its fund efficiently.it increase interest income. 5. P/E ratio
Year P/E Ratio 2005 6.64 2006 9.84 2007 12.16

165

P/E Ratio
14.00 12.16 12.00 10.00 Proportion 8.00 6.64 6.00 4.00 2.00 0.00 2005 2006 Year 2007 9.84

it shows the relationship between market value of per share & EPS.it is beneficial for the investors to know about the what should be the price of the bank share.here it 6.64, 9.84 & 12.16 in 2005, 2006, & 2007 respe. It increased every year due to heavy investment in stock market 6. Net interest income growth
Year Net Interest Income Growth 2005 18% 2006 18.11% 2007 2.98%

Net Interest Income Growth

20.00% 15.00% Percentage 10.00% 5.00% 0.00% 2005 2006 Year 2007 18.00% 18.11%

2.98%

166

It shows the growth in the interest income of the bank.it is main source of income of the bank.higher the ratio, better for the bank.here it is 18.00%, 18.11%, & 2.98% in 2005, 2006, &2007 the ratio increases repidily in 2006 due to increase in credit growth which leads to rise in the profit.in 2007 it reduse due to increased in other exp 7. Interest income to interest expense
Year Interest Income to Interest Expense 2005 1.71 2006 1.76 2007 1.68

Interest Income to Interest Expense

1.78 1.76 1.74 Proportion 1.72 1.70 1.68 1.66 1.64 2005 2006 Year 2007 1.68 1.71 1.76

It shows the interest income arises from the advance made by the bankas against the interest given to the depositers.higher the ratio, better is the position of the bank. Here it is 1.71,1.76,& 1.68 in 2005, 2006, & 2007.it is up&down slightly during every year which does not create any big difference.it affect to the profit. 8. Net interest margin
Year Net Interest Margin 2005 33.05% 2006 31.04% 2007 26.11%

167

Net Interest Margin

35.00% 30.00% 25.00% Percentage 20.00% 15.00% 10.00% 5.00% 0.00% 2005 2006 Year 2007 33.05% 31.04% 26.11%

This ration shows us to the total interest income in comparison of av.assets .which was decreased every year because in comparison of assets the interest income was very less increased. The ratio in 2005, 2006 and 2007 like 33.05%, 31.04%, & 26.11% 9. Advance growth
Year advance growth 2005 28.14% 2006 29.36% 2007 28.85%

Advances Growth
29.50% 29.00% Percentage 28.50% 28.00% 27.50% 2005 2006 Year 2007 28.14% 29.36% 28.85%

This ratio show the growth in the advances(credit, loan).it is very important because it is the main source of income as far as bank is concern.here it is28.14%, 29.36%, & 28.85% in 2005, 2006, &2007 respe. it increase in 2006 due to increase in advances in that year bank adopted moderate credit policy . it reduce in 2007 due to stike rules & regulation of bank.

168

10. Deposit growth

Year Deposit growth 2005 15.20% 2006 3.54% 2007 14.60%

Deposit Growth
16.00% 14.00% 12.00% 10.00% Percentage 8.00% 6.00% 4.00% 2.00% 0.00% 2005 2006 Year 2007 15.20% 14.60%

3.54%

It shows the growth in deposits of the bank in current year as compare to the previous year.it is very important that deposites are incease so that funds are available with the bank to make advances.higher the ratio, good for the bank. Here it is 15.2%, 3.54% & 14.6& in 2005, 2006, &2007. it decreased in 2006 due to heavy rush towards the stock market.in 2007 it increased due to attractive schemes. 11. Net profit growth
Year net profit growth 2005 16.94% 2006 2.37% 2007 3.06%

169

Net Profit Growth

18.00% 16.00% 14.00% 12.00% 10.00% Percentage 8.00% 6.00% 4.00% 2.00% 0.00% 16.94%

3.06% 2.37%

2005

2006 Year

2007

It shows the incease or growth in net profit of the bank.higher the ratio, better is the position of the bank.here,it is 16.94%, 2.37%,& 3.06% in 2005, 2006,& 2007 respe. during the year 2007, the ratio has been inceased because of incease in interest income & decrease in interest exp.in 2006 it decrease due b to low rate if advances.

12. Return on Equity

Year ROE 2005 817.88% 2006 837.29% 2007 862.87%

Return on Equity (ROE)

870.00% 860.00% 850.00% 840.00% Percentage 830.00% 820.00% 810.00% 800.00% 790.00% 2005 2006 Year 2007 817.88% 837.29% 862.87%

This ratio measured how efficiently a bank uses its capital to produce earnings. Here it is 817.88%, 837.29% & 862.87% in 2005, 2006, &2007 respe.it inceases every year due to utilization of available funds efficiently &also due to increase in interest income & reduces in interest exp. 170

7.15 Bank 0f Baroda

A public sector bank going towards 100 year services in banking sector, which was incorporated in the year of 1908 by Sir Maharaja Sayajirao Gaekwad - III of Baroda. Bank of Baroda (BoB) was nationalised in 1969 and the first branch of the Bank was opened in the city of Ahmadabad in 1910 , the fifth largest bank in India have 2772 branches across the country and overseas also, out of that 616 branches and offices including 47 specialized branches were brought under ISO certification. It provides lending, banking, financing rehabilitation, treasury and investment management services to consumers and to industries. It was the first to venture overseas. BoB realigning its operations into four business lines - retail, rural and agriculture, small and medium enterprises and corporate banking -in sync with market needs. The realignment envisages shifting of all mid-corporate and large corporate accounts from the bank's retail branches to its wholesale banking branches and bank want to shift from functional approach to a business segment focus, especially at branches on core banking platform. In the year end of 1996 BoB entered into capital market. The Benares State Bank was integrated with the Bank at June,2002. During the year 2002-03 Debit Card project was launched in affiliation with VISA. The project envisages installation of 500 ATMs in consequent financial year of the bank. Further the Bank has amalgamated South Gujarat Local Area Bank Ltd with itself with effect from 24th June 2004. In the year 2004-05 the bank has expanded its interconnected ATM network to cross 501, spread over 180 centres in the country. The bank has also introduced 8AM to 8PM banking at 101 branches and 24-Hour banking at 5 branches in the country and in the same year the bank has merged its 11 branches (1- metro, 3- Urban,3Semi-urban and 4- rural). BoB has launched its new logo 'The Baroda Sun' in June 2005 subsequently the bank has commissioned global data center during the year 2006 and also given inter-connectivity for over 1300 branches in the country. BoB has commissioned 464 new ATMs across the country taking the tally to 634 in the year 2006. During 2006-07, as part of Branch Consolidation Exercise 22 branches were merged with the Bank itself. As of 2007, Bank of Baroda has identified Legal & General, the UK-based life insurance company as a partner for its life-insurance venture with initial capital of about Rs 200 crore. In 2007 April, BoB has opened Gen-Next, the youth-oriented branch. The GenNext Branch is the first of its kind in the country where the bank has created facilities that will appeal to the young professionals which have new products for the youth segment - Gen-Next Lifestyle, Gen-Next 171

Power, Gen-Next Suvidha and Gen-Next Junior. In the month of May in the same year Bank of Baroda and Dun & Bradstreet (D&B) have signed an agreement regarding assign ratings to the bank's small-scale industry (SSI) customers. The bank's SSI customers will get D&B's globally accepted rating at a special fee, it help them tap global business opportunities. As on 6th October 2007 Pioneer Global Asset Management SpA, Italy tied up with BoB to launch joint venture for asset management business (Baroda Pioneer Asset Management Company). The joint venture would first offer products of Indian origin and later bring international investment opportunities to the Indian market. .

Bank of Baroda pursuing Multi-Specialist Banking and plans to open four new branches in the eastern region as part of century year celebrations and also BoB is go ahead to expand its presence in the global market by increasing the number of its overseas branches and also acquisitions and joint ventures abroad. The overseas acquisition is part of BoB's global expansion drive as the bank intends to reach the landmark of 100 foreign branches in the next five year, besides penetration in the countries where it has presence. Approvals are in place for opening branches/offices in Trinidad & Tobago, Ghana, Australia and Bahrain in the immediate future. Other countries being explored include Canada, New Zealand, Russia, GCC countries like Qatar, Kuwait, Saudi Arabia and Mozambique in Africa. Bank took steps for open an Electronic Banking Service Unit (EBSU) in Jebel Ali Free Zone, UAE - a hi-tech electronic branch.

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Ratios: 1. Capital adequacy ratio

Year Capital Adequacy Ratio 2005 12.6 2006 13.7 2007 11.8

Capital Adequacy Ratio

14 13.5 13 Percentage 12.5 12 11.5 11 10.5 2005 2006 Year 2007 11.8 12.6 13.7

Capital adecuacy ratio shows the ratio of a banks capital to its risk-weighted assets.it determines the capacity of a bank in terms of meeting the liabilities and other risks such as credit risks, operational risks ets.Here it is 12.6 13.7 & 11.8 in 2005,2006,& 2007 resp.it increase in 2006 due to reduce in beta(risk) as compare to 2005.but bank is capable in meeting its liabilities as& when arises. 2. Dividend Payout Ratio
Year Dividend Payout Ratio 2005 139.94% 2006 221.89% 2007 107.26%

Dividend Payout Ratio

250.00% 200.00% 139.94% 150.00% Percentage 100.00% 50.00% 0.00% 2005 2006 Year 2007 107.26% 221.89%

173

DPR measures what a bank payout to investors in the form of dividend.here,bank pays 139.94% 221.89% & 107.26% in 2005 ,2006 &2007resp.for 2005&2006, .it reduces in 2006 due to increase in investment in govt. securities which proves safe as compare to market risk &in 2007 it increased due to easy credit policy adopted by the bank.

3. Current assets & Saving account

Year CASA Proportion 2005 2.49 2006 2.85 2007 3.39

CASA Proportion
4.00 3.50 3.00 2.50 Percentage 2.00 1.50 1.00 0.50 0.00 2005 2006 Year 2007 2.49 3.39 2.85

It shows relationship between current assets& saving accounts.this ratio is useful for the investors to know the abilities of bank to pay out their liabilities as& when arises.it presents liquidity of bank.here it is2.49, 2.85, & 3.39 in 2005,2006 & 2007. respe. it decreases every year due to decrease in current assets as compare to saving account.. It show banks liquidity position which induce investors to invest in bank. 4. Credit deposit ratio
Year Credit Deposit Ratio 2005 53.36% 2006 63.97% 2007 66.94%

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Credit Deposit Ratio

80.00% 70.00% 60.00% 50.00% Percentage 40.00% 30.00% 20.00% 10.00% 0.00% 2005 2006 Year 2007 53.36% 63.97% 66.94%

It shows relationship between credit given & deposit received.higher the ratio, better utilition of available deposits which directly increase the profit of the bank. Here it is 53.36% 63.97% & 66.94% in 2005, 2006, & 2007. .it increases every year which shows that bank use its fund efficiently.it increase interest income. 5. P/E ratio
Year P/E Ratio 2005 8.36 2006 10.04 2007 7.89

P/E Ratio
12.00 10.04 10.00 8.36 8.00 Proportion 7.89

6.00

4.00

2.00

0.00 2005 2006 Year 2007

it shows the relationship between market value of per share & EPS.it is beneficial for the investors to know about the what should be the price of the bank share.here it 8.36, 10.04, & 175

7.89 in 2005, 2006, & 2007 respe. It increased in 2006 due to heavy investment in stock market & reduced in 2007 due to not favouring the banking sector by the investors

6. Net interest income growth

Year Net Interest Income Growth 2005 15.85% 2006 6.57% 2007 19.25%

Net Interest Income Growth

25.00% 19.25% 20.00% 15.85% 15.00% Percentage 10.00% 6.57% 5.00% 0.00% 2005 2006 Year 2007

It shows the growth in the interest income of the bank.it is main source of income of the bank.higher the ratio, better for the bank.here it is 15.85% 6.57% & 19.25% in 2005, 2006, &2007. it reduced in 2006 due to increase in deposites which leads to increase in interest exp.it increase in 2007 due to high advances. 7. Interest income to interest expense
Year Interest Income to Interest Expense 2005 1.86 2006 1.82 2007 1.70

176

Interest Income to Interest Expense

1.90 1.85 1.80 Proportion 1.75 1.70 1.65 1.60 2005 2006 Year 2007 1.70 1.86 1.82

It shows the interest income arises from the advance made by the bankas against the interest given to the depositers.higher the ratio, better is the position of the bank. Here it is 1.86 1.82 & 1.7 in 2005, 2006, & 2007. .it is down slightly during 2006 which did not create any big difference.but reduced sharply in 2007. it reduced the profit. 8. Net interest margin
Year Net Interest Margin 2005 3.31% 2006 3.05% 2007 2.95%

Net Interest Margin

3.40% 3.30% 3.20% Percentage 3.10% 3.00% 2.90% 2.80% 2.70% 2005 2006 Year 2007 3.31% 3.05% 2.95%

This ration shows us to the total interest income in comparison of av.assets .which was decreased every year because in comparison of assets the interest income was very less increased. The ratio in 2005, 2006 and 2007 like 3.31%, 3.05%, & 2.95% 177

9. Advance growth
Year Advance growth 2005 21.91% 2006 38.04% 2007 39.57%

Advance growth
45.00% 40.00% 35.00% 30.00% 25.00% Percentage 20.00% 15.00% 10.00% 5.00% 0.00% 38.04% 39.57%

21.91%

2005

2006 Year

2007

This ratio show the growth in the advances(credit, loan).it is very important because it is the main source of income as far as bank is concern.here it is 21.91% 38.04% & 39.57% in 2005, 2006, &2007 respeit increase every year due to moderate credit policy & advances to the aii sector which gives such rise. 10. Deposit growth
Year Deposit growth 2005 11.47% 2006 15.16% 2007 33.37%

Deposit Growth
40.00% 35.00% 30.00% 25.00% Percentage 20.00% 15.00% 10.00% 5.00% 0.00% 2005 2006 Year 2007 15.16% 11.47% 33.37%

178

It shows the growth in deposits of the bank in current year as compare to the previous year.it is very important that deposites are incease so that funds are available with the bank to make advances.higher the ratio, good for the bank. Here it is 11.47% 15.16% & 33.37% in 2005, 2006, &2007. it decreased in 2006 due to heavy rush towards the stock market.in 2007 it increased due to attractive schemes.

11. Net profit growth

Year net profit growth 2005 -30.01% 2006 22.18% 2007 24.12%

Net profit growth

30.00% 22.18% 20.00% 10.00% 0.00% Percentage -10.00% -20.00% -30.00% -30.01% -40.00% Year 2005 2006 2007 24.12%

It shows the incease or growth in net profit of the bank.higher the ratio, better is the position of the bank.here,it is -30.01%, 22.18% & 24.12% in 2005, 2006,& 2007 respe. during the year 2006, the ratio has been inceased repidily due to increase in interest income.it decrease in 2007 because of decrease in interest income & increase in interest exp.

179

12. Return on Equity

Year ROE

2005 228.66%

2006 225.33%

2007 279.69%

Return on Equity (ROE)

300.00% 279.69% 250.00% 200.00% Percentage 150.00% 100.00% 50.00% 0.00% 2005 2006 Year 2007 228.66% 225.33%

This ratio measured how efficiently a bank uses its capital to produce earnings. Here it is 228.66% 225.33% &279.69 % in 2005, 2006, &2007 respe.it inceases every year due to utilization of available funds efficiently &also due to increase in interest income & reduces in interest exp.

180

Chapter 8

Portfolio Creation
In this report we have analyze the annual report of FY 04-05,FY 05-06 and FY 06-07 of Banks in India. We take the Banks which are included in BANKEX; Because Banks which are listed in BANKEX is good performing Banks. Here we considered the result in terms of liquidity, profitability, leverage and returns. Mainly this study is suggests which banks are performing well and which banks are good for the investment. For creating portfolio rank is given to all banks by weighted average method that is as follows. 8.1 RATING: Steps in portfolio calculation: 1. First of all, calculated the average of all the ratios of every bank. 2. Then, allocated the rates on the basis of their important. Giving the highest rate (15) to the most important ratio, then rate 14 to second highest important ratio & so on. 3. After allocation of rates, the weights are allocated on the basis of importance of the ratio. We give more weightage to most important ratio and give less weightage to less important ratio. 4. Multiply the weight with the allocated rates. 5. Calculation has been done as per above for all the banks. 6. At the end make sum of all ratios of each & every bank & given the rating to those bank whose total is highest & so on

8.2 Assumptions:
? For this study 15 banks are taken which are included in BANKEX and rates are given to banks in all ratio. ? ? The investment is for the long term

The weights are subject to change

181

182

183

WEIGHTS TABLE
Ratios Weight

Capital Adequacy Ratio Dividend Payout Ratio CASA Proportion Net Interest Income Growth Interest Income To Interest Expense Net Profit Growth P/E Ratio Return On Equity Advance Growth Deposit Growth Credit-Deposit Growth Net Interest Margin Total

0.1 0.067 0.067 0.075 0.1 0.075 0.075 0.1 0.075 0.1 0.1 0.066 1

184

PORTFOLIO
BANKS HDFC BANK KOTAK MAHINDRA BANK ICICI BANK INDIAN OVERSEAS BANK PUNJAB NATIONAL BANK ALLAHABAD BANK STATE BANK OF INDIA ANDHRA BANK BANK OF BARODA AXIS BANK VIJAYA BANK BANK OF INDIA UNION BANK OF INDIA CANARA BANK ORIENTAL BANK OF COMMERCE TOTAL RANK 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 WEIGHT 11.753 11.375 9.485 9.176 8.656 8.453 7.851 7.843 7.792 7.61 7.416 6.696 6.389 5.57 4.055 120.12 AMOUNT(IN RS) 195688 189394 157925 152781 144123 140743 130719 130586 129737 126707 123477 111489 106377 92741 67516 2000000

185

Chapter 9

Conclusion
Based on the ranks given to the Banks a virtual portfolio of Rs. 20, 00,000 is created.

Proportion in Portfolio
HDFC BANK KOTAK MAHINDRA BANK ICICI BANK INDIAN OVERSEAS BANK 4.055 5.57 6.389 6.696 7.416 7.61 9.176 7.792 7.843 8.656 7.851 8.453 AXIS BANK VIJAYA BANK BANK OF INDIA UNION BANK OF INDIA CANARA BANK ORIENTAL BANK OF COMMERCE 11.375 STATE BANK OF INDIA 9.485 ANDHRA BANK BANK OF BARODA 11.753 ALLAHABAD BANK PUNJAB NATIONAL BANK

186

Reference:
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DAILY SHARE PRICE, Retrieved 11 JULY 2008, available at <http:// www.nseindia.com >, <http:// www.bseindia.com >

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STOCK MARKET INFORMATION, Retrieved 9 JULY 2008, available at <http:// www.sebi.gov.in>

INDIAN ECONOMY, Retrieved 14 JULY 2008, available at <http://en.wikipedia.org/wiki/Economy_of_India#Banking_and_finance>

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SOFTWARE
? PROWESS

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