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PROJECT REPORT PNB BANK (Ratio Analysis of Financial Statement) Assignment - 1

Mentor: Preeti Bakshi

Submitted By: Divya Singh Rathore Himanshu Kushwaha Koushik Dutta Md. Janisar Najish Namrata Gwal Neeraj Sharma Pranati Jaiswal Tapesh Singh

This is a matter of pride for us to express our gratitude and thankfulness towards our faculty Prof. Preeti Bakshi who gave us the opportunity to undertake this project which helped us in understanding the practical and theoretical aspect related to various tools for analysis (ratio analysis) which helped us in the working process of our Finance Project and thereby enhancing the knowledge of the same. We sincerely thank our Librarian Mr. Vipul for his valuable guidance and help which led us to complete our project work.

DATE: - 24/09/2012

Group 5 Section A


1) Introduction 2) Ratio Analysis as a tool of study 3) Executive Summary 4) Ratios & Interpretation 5) Annual Report of the PNB Bank 6) Conclusion 7) Bibliography

PNB remained frontrunner in the Indian Banking with its Total Business, Total Deposits and Total Advances growing over 21% on YoY basis. This is higher than the growth achieved by the Banking System in India. This performance is combined with the consistently higher Book Value per Share and Earnings per Share. This impressive performance was largely due to the Bank's focus on 'Building a Customer Experience' with thrust on Retail, SMEs, Agriculture, Students, Inclusive approach to Banking, Cost effective Organizational Structure, Better Asset Liability Management, Prudent Risk Management, strengthening Recovery Mechanisms and various Cost Control Measures. PNB is amongst India's most trusted brands and features at the25th place amongst the Top 50 most valuable corporate brands by Brand Finance-ET and 195th amongst top 500 global banks as per Brand Finance Global Banking 500 for 2011. More importantly ,during 2011-12, PNB has been recognized as the 'Best in Corporate Social Responsibility (CSR) Overall' by World HRD Congress and been recognized as the 'Best Socially Responsive Bank' by Business World & PwC. Besides, Golden Peacock National Training Award has also been conferred upon the Bank by the Institute of Directors. Above all, the Bank was recognized as the 'Best Bank' by Business India.


Ratio Analysis presents the relationship between the items in the financial statement. The analysis of financial statement aims to study the relationship between various business factors in a business as disclosed in the financial statement for a particular period. This helps in studying the position of the company from various angles as expressed in the form of Percentages, Proportion, Rates etc this helps the end users to understand and interpret these results in a simple and understandable form.

The end users are interested in the companys financial information due to various objectives. Shareholders are interested in the yield and safety of their capital invested. Creditors view the companys financial data from the angle of judging companys debts. Short term creditors are interested in the companys liquid position which is estimated by calculating companys currents asset and current liabilities.


The financial year gone by proved to be a challenging year for the economy. GDP growth rate came down from 8.4% in previous two consecutive financial years to below 7% this year with the first three quarters registering a slower growth rate sequentially. However, on the assumption of higher domestic investment and domestic consumption, growth rate is assumed to be higher at 7.6% (7.3% by RBI) for FY 2012-13 and 8.6% for FY 2013-14 as per CSO.

Money supply (M3) growth, which was 17% at the beginning of the financial year 2011-12, moderated during the course of the year to about 13% by end-March 2012. It was lower than the RBI's indicative trajectory of 15.5%, mirroring both tightness in primary liquidity and lower credit demand during most part of the year. Aggregate Deposits of the SCBs grew by 17.4% during 2011-12 (as on LRF March 2012). Non-food credit grew by 16.8% at the end of March 2012, higher than the indicative projection of 16%. For the FY 2012-13, M3 growth projection has been retained at 15% and Non-food credit growth at 17% and that for deposits at 16% by RBI in annual monetary policy statement on April 17, 2012. As per the Financial Stability Report (FSR), December 2011, stress tests indicate that banking sector would be able to withstand the risks emanating out of the above scenario.


Current Year

Previous Year

Current Ratio

Current Assets /Current Liabilities

Satisfactory day to day liquidity solvency position. There is sufficient cash available for the company to cover most of its current liabilities, there is a balanced investment in the current assets. Only 0.23 proportion funded by the long term liabilities. this ratio has shown improvement. Quick Assets/ Current Liabilities Satisfactory day to day liquidity solvency position. There is sufficient cash available for the company to cover most of its current liabilities, there is a balanced investment in the current assets. Only 0.23 proportion funded by the long term liabilities. this ratio has shown improvement. Total Liabilities/Total Assets The company has employed the funds properly so as to cover its long term and short term




Liquid Ratio




Solvency ratio




liabilities properly.it is a profitable situation as the performance has been consistent.

Return on share holders investment

Net Profit/Shareholders Funds the banks performance in the share market is very good and year by year the investors are getting appreciable return on their investment. Reserves/Equity Share Capital Ratio of reserves ratio provide information about the company's ability to absorb asset reductions arrising from losses without jeopardizing the interest of creditors which has been increased from the previous year. Total Debt/ Total Assets it provides information about the company"s ability to absorb assets reduction arising from losses without jeopardizing the interest of creditors.




Ratio of reserves to equity capital




Total debts to assets ratio




Net profit ratio

Net Profit/Net Sales*100




The ratio indicates the firms capacity to face adverse economic condition. The performance of profit is showing the relation between the investments or the capital of the firm which shows a good performance although the ratio has gone down. Expenses/Net Sales*100 This ratio has increased which shows that there is an increase in the variable expenses which has cut down on the profitability while the sales remain the same.

Expenses Ratio




Operating Expenses Ratio

Operating Expenses/ Net Sales This ratio has increased which shows that there is an increase in the variable expenses which has cut down on the profitability while the sales remain the same.




Working capital turnover ratio

Sales/Net Working Capital




the ratio has decreased continously for two years which shows that company is concentrating more on other functions rather than decreasing cost of production

Fixed assets turnover ratio

Sales/ Net Fixed Assets the fixed asset turnover ratio of PNB is higher the year 2012 for this year the cost of production is higher than the remaining year because the company utilises higher amount of fixed assets




Return on Capital Employed

Net Profit(PBIT) / Capital Employed x 100 the ratio has increased indicating funds for appropriation increase in the net worth. High scope to attract fresh funds from the shareholders. High price for each equity shares on stock exchange or in merger. Operating Profit/Net Sales*100




Operating profit Ratio




the operating profit ratio to sales ratio of PNB shows that the bank posseses low operating efficiency in this year. That means the company has not concentrated on minimising its cost.

Cash Ratio

Cash/Current Liabilities this ratio indicates the total available cash in hand to cover up any contingencies. The ratio is good enough analysing the economic condition prevelent.




Interest Coverage Ratio

PBIT/Intrest since the ratio has decreased it indicates weak capacity to pay interest as and when due. Small balance profit left for tax and dividends. Less scope of providing more scope to make high rate of interest. Debt/(Share Capital+Reserves & Surplus) the ratio shows high safety margins for lenders. Scope for providing more loans at low rate of interest




Debt-Equity Ratio




and no trading on equity.

Debt to Asset Ratio

Long-term Debt/Total Assets the long term to debt ratio is indicative of coverage of the total debt that can be covered the Assests of the firm. The ratio has been constant for the years which is a good indicator.




Return on Equity

PAT/Net Worth small amount for appropriations there is low increase in the net worth resulting into less scope to attract fresh funds from equity shareholders low price for each equity shares and stock exchange or in a merger.




From the Analysis of the balance sheet of PNB Bank, it was very obvious that the performance of the bank during the financial period 2011-12 was good looking into the economics condition of the Economy. It is very obvious that with the downsizing growth rate and the regulations of the RBI. The bank has performed well and has managed to put on a profit of

PARTICULARS FINANCIAL YEAR(20102011) Operating Profit 9056 Provision Net Profit 4622 4433

FINANCIAL YAER(20112012) 10614 5730 4884


17.2 24 10.2

To complete the following project we have used the following resources.

1) Annual Report PNB Bank 2) Paresh Shah 3) Mba 4) Pearsons