Professional Documents
Culture Documents
Preface
Knowledge is not power but the applied knowledge is power As the above line suggests the importance of application of knowledge, this report contains the pragmatic approach of financial concepts and its applicability in banking that is through financial analysis of Bank Of Baroda. The practical approach is much more important to have an exposure of concepts which have been learnt in the class room teaching. This report contains the financial analysis of a Bank named Bank of Baroda in vis--vis comparison with HDFC Bank Ltd.
Page 2
Acknowledgement
We would like to pay our thanks to all who helped me while doing this project work. Without the support of colleague and guide this project would have not been prepared. We would like to pay our special thanks to Dr. A. C. Mehta who helped us in clearing the concepts of management of financial institutions and principles and practices of Banking. We would also pay our thanks to our friends who helped us in preparing this report.
Page 3
Index
Sr.No.
1 2 3 4 5 6 7 8 9 Introduction
Particulars
Page No.
5 6 8 9 10 11
History of the Bank of Baroda The profit and loss Account of company The Balance sheet of the company Bank of Baroda: Key Strengths The ratio analysis : CAMEL analysis The Stock Price analysis Conclusion Bibliography
Page 4
1. Introduction
The financial institution i.e. banking industry is the Back Bone of any Economy. And the public sector banks especially in India have given a considerable contribution in financing and investment part of economy. This report contains the financial over view and analysis of a giant public sector bank i.e. Bank of Baroda. Starting from a city like Baroda now it has travelled through the entire globe and has became Indias international bank. This report contains the CAMEL Rating Analysis of Bank of Baroda in vis--vis comparison with HDFC Bank Ltd. Generally it is believed that public sector units are less competitive as compared to private sector units thats why it is very interesting to have a comparison between two big Bs i.e. Banks one is public sector Lion (BoB) and the another one is private sector Tiger (HDFC).
Page 5
Page 6
Name: Type Traded as Industry Founded Headquarters Area served Key people Products
Bank Of Baroda Public BSE: 532134 Banking, Financial services 1908 Vadodara, India ,Mumbai, india Worldwide M. D. Mallya (Chairman & MD) Credit cards, consumer banking, corporate banking, finance and insurance, investment banking, mortgage loans, private banking, private equity, wealth management INR25,800 crore (US$5.15 billion) (2011)[1] INR4,433 crore (US$884.38 million) (2011)[2] INR355,826 crore (US$70.99 billion) (2011)[3] www.bankofbaroda.com
Source: http://en.wikipedia.org/wiki/Bank_of_Baroda
Page 7
Page 8
Page 9
Page 10
Ratio analysis is a powerful tool for the interpretation of the financial statement. A ratio can be defined as the indicated quotient of two mathematical expressions in financial analysis the ratio is used as the benchmark for evaluating the financial position and performance of a firm. The relation between two accounting figures, expressed mathematically, is known as financial ratios. The financial performance analysis in the banking industry is done through the help of stereotype ratios i.e. CAMEL analysis. Banks are rated on various parameters, based on financial and non financial performance. One of the popular technique to measure the performance. CAMEL, each letter refers to the specific category of performance. Capital Adequacy Assets Quality Management Quality Earnings Liquidity
Page 11
Assets-at-risk are defined as the total of the impaired values of assets at the date of making the advance to the sub borrower. Assets are typically classified as: (i) risk-free; (ii) minimum risk; (iii) general risk; (iv) substandard; (v) "workout" (or minimal chance of recovery); and (vi) fixed assets, furniture and office equipment, computers, etc. To each of these classifications is awarded a percentage of their values for which an FI's capital is needed to cover risk of losses. It includes three ratios
G.H.Patel P.G. Institute of Business Management Page 12
1) CAR i.e. Capital Adequacy Ratio 2) Debt to Equity Ratio(Financial leverage) 3) Credit Extended Ratio
in %
10 8 6 4 2 0 BOB HDFC 2007 14.52 13.8 2008 14.36 13.6 2009 14.05 15.09 2010 12.91 16.45 2011 11.8 15.32
Source: www.moneycontrol.com
The capital Adequacy ratio of Bank of Baroda has been improving from FY 2007 to FY 2010. But it has reduced in the FY 2011. CAR of BoB has been more than the HDFC Bank in initial years but it is less than that of HDFC bank in last two years.
Page 13
Source: www.moneycontrol.com
Banking industry is highly levered industry as compared to other manufacturing industry. Bank of Baroda being a public sector bank is having higher portion of debt in its capital structure as compared to the private player i.e. HDFC bank. Higher the financial leverage higher the return on equity and vice versa but at the same time financial leverage is a double edged sword which can cause a bankruptcy in case of situation of fluctuating income of the bank. But being a public sector bank, BoB can afford higher degree of leverage because support of RBI.
Page 14
Source: www.moneycontrol.com
The credit extended ratio of BoB has consistently been more than HDFC bank. The higher the ratio more aggressive the bank is. BoB is more aggressive in lending than HDFC bank.
Page 15
Two ratios are been calculated to measure the assets quality. 1) Net NPAs to Net Advances ratio 2) Net NPAs to Total Assets Ratio
Page 16
The net NPAs to Net advances ratio in BoB in FY 2009 is lower than HDFC Bank while it is higher in the year 2011 because of liberal recovery and expansion of operation The lower the ratio more efficient the bank is.
Page 17
The Net NPAs to Total assets ratio of BoB was lower than that of HDFC bank in the year 2009 but again it is higher than that of HDFC bank in FY 2011. The lower the Ratio more efficient the Bank is. The higher % of NPAa eats out the productivity of performing assets so NPAs are as dangerous for the Bank as the terror for mankind.
Page 18