COMMERCIAL BANKING ASSIGNMENT

Ratios

Kotak Mahindra
Bank

Axis Bank

Cash in Bank to Demand Deposit Ratio

Cash in Bank

5,431,071,000.00

42,154,312,000.00

Demand Deposit

2,551,379,000.00

39,562,710,000.00

2.13

1.07

Cash in Bank to Demand Deposit

Ratio

Demand to Time Deposit Ratio

Total Demand Deposit

130,113,997,000.0
0
559,370,299,000.00

Total Time Deposit

457,959,526,000.0 3,222,441,700,000.
0
00

Demand to Time Deposit Ratio

0.28

0.17

Short Term Investments to Total Assets Ratio

Short Term Investments

278,689,801,000.0
0
822,292,020,000.00

Total Assets

1,485,757,620,000. 4,619,323,942,000.
00
00

Short Term Investments to Total

Assets Ratio

0.19

0.18

SLR Investments to Total Investment Ratio

SLR Investments

21,052,000,000.00 85,313,168,000.00

Total Investments

473,508,682,000.0 1,333,192,446,000.
0
00

SLR Investments to Total Investment

Ratio
0.04

0.06

Operating Efficiency Ratio

Total Operating Expenses

97,492,643,000.00 96,099,332,000.00

Total Assets

1,485,757,620,000. 4,619,323,942,000.
00
00

Operating Efficiency Ratio

0.07

0.02

Non Interest Income to Total Income Ratio

Non Interest Income

81,521,957,000.00 88,381,144,000.00

Total Income

214,710,843,000.0
0
445,655,709,000.00

Non Interest Income to Total Income

Ratio

0.38

0.20

Income Productivity Per Employee

Total Income

214,710,843,000.0
0
445,655,709,000.00

Number of Employees

29,000.00

42,230.00

Income Productivity Per Employee

7,403,822.17

10,553,059.65

Profit Margin
Net Profit

30,650,789,000.00 73,578,223,000.00

Total Income
214,710,843,000.0

Profit Margin

445,655,709,000.00

0.14

0.17

Asset Utilisation Ratio

Total Income

214,710,843,000.0
0
445,655,709,000.00

Total Assets

1,485,757,620,000. 4,619,323,942,000.
00
00

Asset Utilisation Ratio

0.14

0.10

Cost of Funds
Interest Expense

69,661,022,000.00 213,412,610,000.00

Interest Bearing Deposits

43,998,499,000.00 171,078,082,000.00

Borrowings

314,148,793,000.0
0
843,935,036,000.00

Cost of Funds

0.19

0.21

Net Interest Margin

Total Interest Income

133,188,886,000.0
0
357,274,565,000.00

Total Interest Expended

69,661,022,000.00 213,412,610,000.00

Total Assets

1,485,757,620,000. 4,619,323,942,000.
00
00

Net Interest Margin

0.04

0.03

Return on Equity Ratio

Net Profit

30,650,789,000.00 74,478,965,000.00

Equity

7,000,000,000.00

8,500,000,000.00

Return on Equity Ratio

4.38

8.76

Return on Assets Ratio

Net Profit

30,650,789,000.00 74,478,965,000.00

Total Assets

1,485,757,620,000. 4,619,323,942,000.
00
00

Return on Assets Ratio

0.02

0.02

Analysis of the Banks

LIQUIDITY RATIOS
1. Cash in Bank to Demand Deposit Ratio: The ratio of 2.13 indicates that
there is sufficient amount of liquidity in Kotak Mahindra Bank. Whereas a ratio
of 1.07 of Axis Bank indicates that that the liquidity in the bank is poor and
there is scope for improvement in its liquidity.
2. Demand to Time Deposit Ratio: This ratio too is used to interpret the
liquidity of cash in the bank. A ratio of 0.28 in Kotak indicates that the bank is
sufficiently liquid, whereas the ratio of 0.17 again shows that the liquidity in
Axis Bank is not as desirable.
3. Short Term Investments to Total Assets Ratio: As the short term
investments refer to the money market instruments. A ratio of 0.19 at Kotak
shows that the bank asset portfolio is sufficiently liquid. But in this case, Axis
bank is better performing and has better investment in Short Term Investments
4. SLR Investment to Total Investment Ratio: The ratios observed in case of
Kotak Mahindra Bank and Axis Bank are 0.04 and 0.06 respectively. These
ratios show that there is large scope for improvement by these banks. They can
do so by investing a greater portion of the money in liquid assets.

EFFICIENCY RATIOS
1. Operating Efficiency: The operating ratio shows as to how the assets are
managed. Lower the operating efficiency the better the assets of the bank are
being managed at lower costs. In the given scenario, Axis bank is working at a
better operating efficiency as compared to Kotak Mahindra Bank.
2. Non Interest Income to Total Income: There is a greater portion of Non
Interest Income in case of Kotak Mahindra Bank 0.38 as compared to Axis bank
0.20.
3. Income Productivity Per Employee: Kotak Mahindra Ban has a total
employee number of 29000 as compared to 42420 of Axis Bank. The
productivity per employee at Kotak is 7403822 which is higher than that at
Axis, 10553059. So it can be said that the employee productivity is higher at
Kotak. But the acquisition of ING Visya bank by kotak should be taken into
consideration.

PROFITABILITY RATIOS
1. Profit Margin: The profit margin is a measure designed to gauge the
financial health of a business or industry. In general, it is defined as the ratio
of profits earned to total sales receipts over some defined period. The profit
margin of Axis Bank (0.17) stands higher than that of Kotak Mahinda Bank
(0.14).
2. Asset Utilisation Ratio: The asset utilization ratio calculates the total
revenue earned for every rupee of assets the company owns. The Asset
Utilisation of Kotak Mahindra Bank is 0.14 and can be improved by a fair

extent. Whereas the Asset Utilisation Ratio of Axis Bank can be considered as
poor.
3. Cost of Funds: Cost of Funds is the interest rate paid by financial institutions
for the funds that they deploy in their business. For lenders such as banks and
credit unions, cost of funds is determined by the interest rate paid to depositors
on financial products including savings accounts and time deposits. The interest
paid by Kotak Mahindra Bank on its borrowed funds (0.19) is lower than that of
Axis Bank (0.21).
4. Net Interest Margin (Spread): It is a value that examines how successful a
firm's investment decisions are compared to its debt situations. A negative value
denotes that the firm did not make an optimal decision, because interest
expenses were greater than the amount of returns generated by investments.
Kotak Mahindra Bank has an NIM of 0.04 whereas Axis Bank has an NIM of
0.03 which indicates that Kotaks investment decisions were slightly better than
that of Axis Bank.
5. Return on Equity: The amount of net income returned as a percentage of
shareholders equity. Return on equity measures a corporation's profitability by
revealing how much profit a company generates with the money shareholders
have invested. Axis bank has performed relatively well in this case, with an
ROE of 8.76. Kotak on the other hand has an ROE of 4.38 which is lesser than
that of Axis. It can be said that Axis is generating more profits with its
shareholders funds.
5) Return on Assets: An indicator of how profitable a company is relative to its
total assets. ROA gives an idea as to how efficient management is at using its
assets to generate earnings. As indicated by the figures it can be understood that
Kotak Mahindra Bank is better efficient at managing at Assets (0.021). Axis
Bank with an ROA of 0.016 needs better management of its Assets.