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SBI

 Personal Banking
 NRI Services
 Agriculture
 International
 Corporate
 SME
 Domestic Treasury

SBI Life Products and Services

 Individual plan
 ULIP
 Child plan
 Pension
 Protection

Future planes

SBI is planning Initial Public Offers (IPOs) of two regional rural banks (RRBs), namely Andhra
Pradesh Grameen Vikas Bank and Saurashtra Garmin Bank by 2018, in order to create value and
to increase efficiency.

• In January 2018, SBI has launched credit cards for farmers, via its subsidiary SBI Cards &
Payments Services Pvt Ltd, in the states of Gujarat, Rajasthan and Madhya Pradesh on a pilot
basis, and based on the success in these states, it will launch the same across India.

• In April 2018, SBI enabled 60 digital Pan India branches offering advanced banking services

HDFC Bank
HDFC bank business loan: To help small and medium scale businesses grow and flourish
more, HDFC Bank offers business loans loaded with a host of benefits. These loans are tailor-
made to suit the unique needs of a business and are available at competitive interest rates.

HDFC bank credit card: HDFC Bank is the largest credit card provider in the country and
offers an exciting range of credit cards that match the needs of different types of customers and
their spending habits.
HDFC bank personal loan: Offered at competitive rates, personal loan can be used to provide
for a number of financial needs such as wedding, vacation, debt consolidation and more.

HDFC bank gold loan: HDFC Bank offers gold loans to help its customers fulfil their
immediate need for cash such as wedding expenses, business expansion, education or medical
needs.

Insurance
 Life insurance
 Health insurance
 General insurance
 Travel Insurance

ICICI Bank

Core benefit
 Commercial banking
 Current Account facility
 Saving Account facility
 Fix/Deposited

Expected products line:

Buyers are normally expecting from banks


 ATM
 home loan/ Car loan/ personal loan
 Demat services

Augment product
It includes additional products which distinguish from competitors

 Internet banking
 Mobile banking
 NRI services
 Wealth management

Strength

 Source of employment & GDP growth


 High standard regulatory environment
 Bank lending has been significantly driver of GDP and employment
 the vast networking & growing number of branches & ATMs. Indian banking system has
reached even to the remote corners of the country.
 Foreign banks will have the opportunity to own up to 74 per cent of Indian private sector
banks and 20 per cent of government owned banks

Weakness

 Low operating size


 High level of nonperforming asset
 Competition from non-banking institution
 Capital adequacy

Opportunity

 Opportunities to access foreign markets


 Boom in Indian consumer spending
 To acquire any banking or non-banking finance company, housing finance where there is
a lot of potentials

Threats

 Bad loans
 Cyber threat
 High level of NPAs in PSU banks
 Competition at global player for product innovation

Qualitative analysis of public and private sector banks in India


Introduction of the company
SBI

State Bank of India (SBI) Established in 1955, State Bank of India is the largest public-sector bank
in India. Is an Indian multinational, public sector banking and financial services company? It is
a government-owned corporation headquartered in Mumbai, Maharashtra. The company is ranked 217th on
the Fortune Global 500 list of the world’s biggest corporations as of 2017. It is the largest bank in India with a
23% market share in assets, besides a share of one-fourth of the total loan and deposits market.

The Net Interest Income of State Bank of India in FY16, was US$ 9.5 billion. •

Divisions – Treasury, retail banking, corporate/wholesale banking & other banking businesses

• Size – Number of branches & extensions (FY17): 24,017

• Number of ATMs(FY17): Over 59,263

• Number of Employees (FY17): 209,572

• Total Assets (FY17): US$ 365.43 billion

• SBI is planning Initial Public Offers (IPOs) of two regional rural banks (RRBs), namely Andhra Pradesh
Grameen Vikas Bank and Saurashtra Garmin Bank by 2018, in order to create value and to increase
efficiency.

HDFC Bank

Established in 1994, HDFC Bank is the 2nd largest private sector bank in India. HDFC was
amongst the 1st to receive an 'in principle' approval from the RBI to set up a bank in the private
sector

Divisions – Retail banking, Wholesale banking and Treasury operations

Size – Number of branches & extensions (FY17): 4,715

Number of ATMs: (FY17) 12,260

Number of Employees (FY17): 84,325

Total Assets (FY17): US$ 133.89. billion


ICICI Bank

ICICI Bank is India's largest private sector bank with total assets of Rs 5,367.95 billion (US$
89.24 billion) for the year ended March 31, 2013. The bank has a network of 3,753 branches and
11,292 ATMs in India and has a presence in 18 other countries.

It offers a wide range of banking products and financial services to corporate and retail
customers through a variety of delivery channels and through its specialised subsidiaries in the
areas of investment banking, life and non-life insurance, venture capital and asset management.

ICICI Bank has subsidiaries in the United Kingdom, Russia and Canada; branches in United
States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance
Centre; and representative offices in United Arab Emirates, China, South Africa, Bangladesh,
Thailand, Malaysia and Indonesia.

Its equity shares are listed in India on Bombay Stock Exchange (BSE) and the National Stock
Exchange of India Ltd (NSE) and its American Depositary Receipts (ADRs) are listed on the
New York Stock Exchange (NYSE).

 Total assets of Rs 5,367.95 billion (US$ 89.24 billion) in FY 13

 Profit after tax of Rs 83.25 billion (US$ 1.38 billion) in FY 13

 Network of 3,753 branches

 11,292 ATMs in India

 Presence in 19 countries
Chapter 5

5.1 Data analysis of the banking sector

Key indicators of the banks in the banking sector

Current account and Saving account (CASA)

CASA ratio of a bank is the ratio of deposits in current and saving accounts to total deposits. A
higher CASA ratio indicates a lower cost of funds, because banks do not usually give any
interests on current account deposits and the interest on saving accounts is usually very low 3-
4%. If a large part of a bank’s deposits comes from these funds, it means that the bank is getting
those funds at a relative lower cost. It is generally understood that a higher CASA ratio leads to
higher net interest margin. In India, it is used as one of the metrics to assess the profitability of a
bank.
Figure 3 https://www.financialexpress.com
Net Interest Margin

Net interest margin (NIM) is a measure of the difference between the interest income generated by banks or
other financial institutions and the amount of interest paid out to their lenders (for example, deposits), relative
to the amount of their (interest-earning) assets.
It is usually expressed as a percentage of what the financial institution earns on loans in a time period and other
assets minus the interest paid on borrowed funds divided by the average amount of the assets on which it
earned income in that time period

NIM = Interest earned – Interest paid


Average loans

NET INTREST MARGIN


Net intreest margin(%) public sector Net intreest margin(%) private sector
Net intreest margin(%) overall

3.49% 3.60% 3.50%

2.45% 2.42% 2.35%


2.18% 2.07% 1.98%

2015 2016 2017

Figure: 5 NIM

The private sector banks have been able to maintain their NIM in the range of 3.40% to 3.60% over the
last three years. The overall Return on Total Assets (ROTA) for public sector banks was negative for
FY16 while it was near zero for FY17.
Impact of NPA

A Non-performing asset (NPA) is defined as a credit facility in respect of which the interest and/or
installment of Bond finance principal has remained ‘past due’ for a specified period of time.

Once the borrower has failed to make interest or principal payments for 90 days the loan is considered to be a
non-performing asset. Non-performing assets are problematic for financial institutions since they depend on
interest payments for income. Troublesome pressure from the economy can lead to a sharp increase in NPLs
and often results in massive write-downs.

Problem caused by NPAs

 Bank shareholders are adversely affected


 Hence, the economy suffers due to loss of good projects and failure of bad investments.
 When bank do not get loan repayment or interest payments, liquidity problems may ensue.

Growth in NPA (q-o-q)

16.6

8.1

5.4 5
4

Figure: 6 NPA

The increase in NPAs have been the highest in Q1 FY18 witnessing an increase of about 16.6% to
reach Rs 829,338 crore as of June 2017. T
Net Interest Income

Net interest income (NII) is the difference between revenues generated by interest-
bearing assets and the cost of servicing (interest-burdened) liabilities. For banks, the
assets typically include commercial and personal loans, mortgages, construction loans
and investment securities. The liabilities consist primarily of customers’ deposits.

NII is the difference between (a) interest payments the bank receives on loans
outstanding and (b) interest payments the bank makes to customers on their deposits.

NII = (interest payments on assets) – (interest payments on liabilities)

NII in (USDbillion)

110.74
102.17 102.88

30.65 31.38 34.12


7.78 7.6 8.26

2013 2014 2015

publicbank private bank foreign bank

Figure 8: NII
5.2 Data analysis of the public and private banks

Quantitative analysis of Indian Banks

SBI

Financial 2016-17 2017-18 %Growth


performance
Net interest income 57195 61860 8.16
(In Crores)
Net interest margin 2.51 2.28 9.16
(%)
Gross NPA (%) 6.5 6.9 .62
CASA ratio (%) 43.84 45.58 3.97

Table 1 NIM

The most important ratio when it comes to banks and financial companies is the is Net Interest
Margin.

NIM = (Interest Earned - Interest Expended) / Total Assets

Analysis:

As per the research and analysis has been done through these four tools it shows
that NII has been increased by 8.16% (Y -O-Y) so it looks quite good but there gross
NPA ratio is more so it looks bad signs for the company. An ideal financial company
should have NIM above 3%
HDFC bank

Financial 2017 2016 %growth


performance
NII (million) 331392
NIM (%) 3.83 3.89
Gross NPA (%) 1.0 1.0

Table 2

Analysis:
ICICI bank

Financial 2016 2017 %growth


performance
NII (billion) 212.24 217.37 2.41
NIM (%) 3.49 3.25 (6.87)
Gross NPA (%) 6 9 50

Table: 3

Analysis

In table 3 it has seen that ICICI bank’s NIM has been in negative of 6.87% so that means bank
has to pay more amount of interest on their deposit while it’s gross NPA has also been increased
by 50% so it is also not good for the investor.
Net profit margin

Net profit margin, or net margin, is equal to net income or profits divided by total revenue.

A higher net profit margin means that a company is more efficient at converting sales into actual
profit.

The formula is: Net Profit Margin = (Net profits / Net sales) x 100 - One

Year SBI HDFC ICICI


2015-16 8.59 21.07 22.76
2016-17 6.07 20.41 18.44
2017-18 5.97 20.49 18.09
Average 6.88 20.66 19.76
SD 1.48 .36 2.6

Table: 4

Analysis:

Form the table 4 it can be seen that ICICI bank has earned the highest NPM of RS 22.76 for
every Rs.100 among all the three banks. HDFC is closely followed by ICICI. ICICI has the
highest degree of variability in NPM with a standard deviation of 2.60.

So according to NPM HDFC and ICICI bank both are more efficient at converting sales into
actual profit.
Return on Equity (ROE)

Return on equity measures a corporation's profitability by revealing how much profit a company
generates with the money shareholders have invested. ROE is expressed as a percentage.

Return on Equity = Net Income / Shareholder's Equity

Year SBI HDFC ICICI


2015-16 10.20 16.47 13.89
2016-17 6.89 16.91 11.19
2017-18 6.69 16.26 10.11
Average 7.93 16.55 11.73
SD 1.97 .34 1.95

Table: 5

Analysis

IN Table It can be clearly seen that HDFC Bank scores highest in average ROE at 16.55% followed by
ICICI bank with 11.73%. At the same time, HDFC Bank scores lowest in terms of ROE variability with a
standard deviation of .34.

So according to ROE HDFC is good stock because it has a lowest score in terms of volatility
with a standard deviation.
Earnings per share (EPS)

Earnings per share is the portion of a company's profit that is allocated to each outstanding share
of common stock, serving as an indicator of the company's profitability. It is often considered to be
one of the most important variables in determining a stock's value. Higher the EPS, higher is the
profitability of the company.

EPS = net income / average outstanding common shares

Year SBI HDFC ICICI


2015 17.55 42.15 19.32
2016 12.98 48.84 16.75
2017 13.43 51.18 16.84
Average 14.65 47.39 17.64
SD 2.52 4.69 1.46

Table: 6

Analysis
In Table shows the earnings per share of the selected banks. It can be seen that HDFC tops in
terms of EPS with a highest average value of Rs47.39. HDFC stands highest with an average
EPS of Rs. 51.18. and also, the degree of variability of EPS is lowest in case of ICICI bank with
a standard deviation of 1.46.

According to data which has been shown in table suggests that here lowest volatile stock as per
the SD is ICICI bank but the HDFC’s profitability is higher in the year of 2017 with 51.18.
Dividend Per Share (DPS)
Dividend per share (DPS) is the total dividends paid out over an entire year divided by the
number of outstanding ordinary shares issued. It is the number of dividends that the shareholders
receive on a per-share basis.

DPS = Dividends/ No. of outstanding shares

Year SBI HDFC ICICI


2015 3.5 8.0 5
2016 2.6 9.5 5
2017 2.6 11 2.5
Average 2.9 9.5 4.17
SD .52 1.5 1.44

Table: 7

Analysis
In Table shows the dividend per share given by the selected banking companies. It can be seen
that HDFC has declared the highest amount of dividend per share with an average of Rs.9.5 over
the last three years. And with a standard deviation of 1.5 HDFC stands at the most stable position
in terms of dividend per share.

According to data investor should invest in HDFC because it’s DPS is good over the period of
time compare to other banks in the table.
Prior to 1991 the Indian Banking was dominated by state controls of direct credit delivery and
regulated interest rates. The Indian banking sector is also dominated by public sector banks
(PSBs) that include SBI & associates and nationalized banks. The Banking industry is a valuable
contributor to the GDP, works under a regulated environment and has government support..
However, the Indian Banking industry is facing formidable challenges. Increasing competition,
increasing level of Non-performing Assets (NPAs) and deteriorating asset quality have become
major areas of concern for the entire banking industry, and by extension, the Indian economy.
The vicious cycle of economic slowdown, corporate earnings slowdown, increase in NPAs,
increase in the proportion of restructured assets and depressed profitability of the Banking sector,
has led to a situation where banks, particularly Public-Sector Banks (PSBs), will be severely
challenged to raise the required capital to comply with the Basel III requirements. For long,
banks were comfortable that competition would only come from similar entities and that the
Reserve Bank of India was ensuring the least number of banks entered the market to compete
with them. But as it happens in any business, technological innovation and the regulator’s delay
in waking up to developments have allowed a new set of companies to play the role of financial .
After the liberalization, many private sector banks and foreign banks come into the banking
industry. The major objectives of banking sector reforms were to encourage operational
flexibility and competition in the system and to improve banking standards in India to the
international best practices The issues facing the Indian banking system today are, ironically,
very similar to the issues that were raised nearly a decade ago .Banks continues to encompass the
following issues:

(a) whether public sector banks should be privatized,

(b) how the banks can best deal with the NPAs that have an adverse effect on their balance
sheets,

(c) how the banks can best deal with greater competition and manage the new forms of risk
This research paper provides insights on the financial performance of the selected banking companies.
SBI scores the highest average in terms of Earnings per Share. Also, for SBI the CAGR is negative in all the
parameters except for Net Profit Margin. Bank of Baroda has positive CAGR in P/E Ratio and D/P Ratio.
PNB has performed the best in Operating Profit Margin along with a positive CAGR only in D/P Ratio.
HDFC bank scores a higher average than others in Net Profit Margin, Return on Equity and P/E Ratio, and
the highest CAGR in Net Profit Margin. ICICI Bank has the highest CAGR in Operating Profit Margin and
Return on Equity, and stands as the best performer in D/P Ratio. The selected public sector banks' Net
Profit Margins (NPMs) dropped after 2013 which has impacted their core profitability significantly. Given
the improvement in assets, the public sector banks are likely to improve their NPMs. Return on Equity
for public sector banks dropped significantly after 2013. However, it is likely to improve as going
forward, public sector banks' credit provisioning could decline if they are able to control the NPA
generation rate. Also, continuous decline in G-sec yields and surge in equity markets could offer a
marginally higher treasury income to banks in the coming years. The past few years have seen a
slowdown because of high inflation, depreciation of the rupee and economic slowdown. However,
private sector banks have still performed better than PSBs in terms of growth and profitability. The
current year is expected to be a good year for the entire Indian Banking Sector. Although a series of
challenges like deteriorating asset quality in public sector banks, accompanying financial inclusion and
Basel III implementation are all lingering issues, the sector is well-cushioned with a stable government
focusing on increasing investment in infrastructure, innovation in technology and bringing in productive
regulatory policies. Overall, the Indian Banking industry is expected to consolidate in the current year in
the wake of future economic growth, changes in banking regulations and increase in competition from
foreign banks. The Indian economy is on the brink of a major transformation, with several policy
initiatives set to be implemented shortly. Positive business sentiments, improved consumer confidence
and more controlled inflation are likely to boost the country's economic growth. Greater spending on
infrastructure, speedy implementation of projects and continuation of reforms are expected to provide
further impetus to growth. The banking sector is laying greater emphasis on providing improved services
to their clients and also upgrading their technology infrastructure in order to enhance the customer's
overall experience as well as give banks a competitive edge. The Indian banking industry is expected to
witness better growth prospects in 2016 due to the Government's measures towards revitalizing the
industrial growth in the country. In addition, RBI's new measures may go a long way in helping the
restructuring of the domestic banking industry. References • Bhattacharya, A., Lovell, C.A.K., and Sahay,
P. (1997). The impact of liberalization on the productive efficiency of Indian commercial banks.
European Journal of Operational Research, 98, 332-345. • Das, Abhiman & S. Ghosh. (2006). Financial
Deregulation and Efficiency: An Empirical Analysis of Indian Banks during the Post Reform Period.
Review of Financial Economics, Vol. 15(3), 193-221. • Dwivedi. Amit Kumar & Charyulu D. Kumara.
Efficiency of Indian Banking Industry in the Post-Reform Era Working Paper 2011-03-01 March
2011IIMA. • Davda, Nishit V (2012). A Comparative Study of Selected Private Sector Banks in India.
International Journal of Research in Commerce and Management, Vol. 3(7), 161-165. • Gupta
Omprakash K., Doshit Yogesh, and Chinubhai Aneesh. (2008). Dynamics of Productive Efficiency of
Indian Banks. International Journal of Operations Research Vol. 5 (2), 78-90. • Koundal, Virender (2012)
Performance Of Indian Banks in Indian Financial System.International Journal Of Social Science &
Interdisciplinary Research, Vol.1 (9). • Malik,Seema (2014) Technological Innovations in Indian Banking
Sector: Changed face of Banking. 46 47 Changes cities of India, and therefore street Contents mall
farmers. Majority of the farmers (82%) borrow less than Rs 5 lakhs, and 18% borrow between Rs 5 – 10
lakhs on a per annum basis. Most farmers (65.79%) ar ** p < .01 + Reliability coefficie ** p < .01 +
Reliability coefficie References Table 23: The Results of Mann-Whitney U Test for DOWJONES Index Daily
Returns Dr. Rosy Kalra Mr. Piyuesh Pandey ISSN: 0971-1023 | NMIMS Management Review Volume
XXVIII January-February 2016 Fundamental Analysis of Selected Public and Private Sector Banks in India
ISSN: 0971-1023 | NMIMS Management Review Volume XXVIII January-February 2016 Fundamental
Analysis of Selected Public and Private Sector Banks in India is also the threat of payment method
substitutes and loans are relatively high for the industry. For example, electronics sellers, jewellers, car
dealers, and many more sellers tend to offer preferred financing on "big ticket" items to the customers.
Often, these nonbanking companies offer lower interest rates on payments than the consumer would
otherwise get from a traditional bank loan. Threat of new entrants – Threat of new entrants is very low
in the banking industry because of RBI regulation. Besides, it is difficult to wean customers away from
existing banks, which have already built their credibility with them. Indian banking companies are
challenged not only in terms of loan recovery, but also with how to generate future business. With loans
growth at a decade low, there is little choice for banks other than chasing the retail customer, and laying
the foundation to acquire more when the economic expansion gathers pace. The boom in digital wallet
transactions has been triggered by the rise in mobile commerce, emergence of cheaper internet access
and increasing mobile penetration. Another big challenge for the banking industry is inadequate capital
although the Government of India is taking the required steps to face this challenge by infusing more
capital. Limitations of the Study 1. This research paper studies only the quantitative aspect of the
performance of selected banking companies and does not study the qualitative aspects of performance
like business models, competitive advantage, management, corporate governance etc. 2. The study is
limited to financial data for a period of 5 years from 2010-11 to 2014-15. 3. The research paper studies
the performance of only five banks. The analysis can be further done on the basis of categorization of
the banking industry into public sector, private sector and foreign banks. 4. This study is based on the
analysis of secondary data. The result and conclusion of this study might not be accurate due to
reliability of the secondary data and limitation on the variables selected and the time span considered.
5. This study mainly focuses on selected independent variables, which may not completely represent the
financial analysis. Conclusion This research paper provides insights on the financial performance of the
selected banking companies. SBI scores the highest average in terms of Earnings per Share. Also, for SBI
the CAGR is negative in all the parameters except for Net Profit Margin. Bank of Baroda has positive
CAGR in P/E Ratio and D/P Ratio. PNB has performed the best in Operating Profit Margin along with a
positive CAGR only in D/P Ratio. HDFC bank scores a higher average than others in Net Profit Margin,
Return on Equity and P/E Ratio, and the highest CAGR in Net Profit Margin. ICICI Bank has the highest
CAGR in Operating Profit Margin and Return on Equity, and stands as the best performer in D/P Ratio.
The selected public sector banks' Net Profit Margins (NPMs) dropped after 2013 which has impacted
their core profitability significantly. Given the improvement in assets, the public sector banks are likely
to improve their NPMs. Return on Equity for public sector banks dropped significantly after 2013.
However, it is likely to improve as going forward, public sector banks' credit provisioning could decline if
they are able to control the NPA generation rate. A

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