chapter ~ 4 conceptual framework of profitability...

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CHAPTER ~ 4

CONCEPTUAL FRAMEWORK OF PROFITABILITY ANALYSIS AND

PERFORMANCE

4.1 INTRODUCTION AND MEANING OF PROFITABILITY OF BANK:

Profitability depicts the relationship of the absolute amount of profit with

various other factors. Profitability is a relative concept, which is quite useful in

decision making. Another main issue here is profit planning, which consists of

various steps to be taken to improve the profitability of the bank. The word

“Profitability” is composed of two words viz. Profit and Ability‟. The terms “Ability

showed the power of the business firm to earn profits. The term Ability is also

referred to as “earning power” or “Operating Performance” of the concerned

investment. It can be remarked that “Profitability‟ is helpful in providing a useful

basic for measuring tool in point of view performance and overall efficiency for

Indian banking. Profitability is the most important and reliable indicator as it gives a

broad indication of the ability of a bank to raise its income level.

Profit is the very reason for the continued existence of every commercial

organization. The rate of profitability and volume of profits are therefore, rightfully

considered as indicators of efficiency in the deployment of resources of banks.1

Profitability indicates earning capacity of the banks. It highlights the

managerial competency of the banks. It also portrays work culture, operating

efficiency of the bank.2

A number of factors affect profitability of banks. Some of these are

endogenous, some are exogenous and yet structural. The profitability analysis of

1 V. T. Godse, Productivity in Banks – Concept and Measurements, Papers presented at Bank

Economists met. Madras, 1984, p.298. 2 Dasgupta, Devajyoti, “Profitability of Indian Public Sector Banks in the light of Liberalization of

Indian Economy – An Overview,” The Management Accountant, Sept. 2001.

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commercial banks used to be a frustrating experience as the financial statements of

banks concealed much and revealed less. However, now a day, after liberalization

under pressure from regulatory agencies and the public, the trend has changed. So

now, the profitability analysis of commercial banks means something. The financial

statements of commercial banks are now prepared keeping in mind are the various

changes, so they reveal each aspect.

The present trend of low and declining profitability can be arrested and

reversed if the remedial measures are tried in right direction to ease the pressure on

profitability.3

Profitability ratios are the most important and appropriate indicators for the

evaluation of the financial performance of a bank. Profitability ratios serve as an

important measurement of the efficiency with which the operations of the banks are

going on. In case of banking industry income, assets, deposits and working funds can

be used as measures for finding out profitability.

4.2 FINANCIAL PERFORMANCE

The performance of the firm can be measured by its financial results, i.e., by its

size of earnings Riskiness and profitability are two major factors which jointly

determine the value of the concern. Financial decisions which increase risks will

decrease the value of the firm and on the other hand, financial decisions which

increase the profitability will increase value of the firm. Risk and profitability are

two essential ingredients of a business concern.

There has been a considerable debate about the ultimate objective of firm

performance, whether it is profit maximization or wealth maximization. It is

observed that while considering the firm performance, the profit and wealth

maximization are linked and are effected by one-another.4

3 Bhubal, Subhash B., “Bank Profitability note worth the candle,” Indian Banking Today and

Tomorrow, Feb.1991. e pressure on profitability 4 . Pandey, I .M (2005) Ninth Edition Financial Management, PP 517 – 544.

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4.3 FINANCIAL ANALYSIS

Financial analysis is the approach to judge the effectiveness of the finance

function of a firm. Financial analysis is the process of determining the significant

operating and financial characteristics of a firm from accounting data. The profit and

loss account and balance sheet are indicators of two significant factors-profitability

and financial soundness. Analysis of statement means such a treatment of the

information contained in the two statements as to afford a full diagnosis of the

profitability and financial position of the firm concerned. Financial statement

analysis is largely a study of relationship among the various financial factors in a

business as disclosed by a single set of statements.5

4.4 FINANCIAL STATEMENT

In order to take right decision at right time, the management is equipped with

sufficient past and present information about the firm and its operations. Much of the

information that is used by the management is derived from the financial statement is

known as financial information.

The financial statement contains summarized information of the firm’s

financial affairs, organized systematically. They are means to present the firm’s

financial situation to users. Financial statements are the outcome of summarizing

process of accounting. It is prepared for the purpose of presenting a periodical review

or reports on the progress by the management and deal with the status of the

investments in the business and results achieved during the period under review.

According to John N. Mayer, “The financial statement provides a summary of

the accounts of business enterprise, the balance sheet reflecting the assets, liabilities

and capital as on a certain date and the income statement showing the results of

operations during a certain period”. 6

5 . Arora, M.N. (2012), “Cost and Management Accounting”, Himalaya Publication House, New Delhi,

p.13.2. 6 Madegowda, J (2012), “Advanced Management Accounting”, Himalaya Publication House, New

Delhi, p.72.

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4.4.1 Objectives of Financial Statements

The objectives of financial statements are as:

To serve as the basis for future operations.

To provide sufficient financial information to various parties interested in

financial statements to analyze and to make economic decisions.

To provide financial data on economic resources and obligations of any

concern.

To reveal implications of operating profit of a concern.

To present fair and true view of the business.

4.5 VARIOUS FINANCIAL STATEMENTS:

1. Profit And Loss Account (Statement of Income):

Profit and loss account presents the summary of revenues, expenses and net

Income (or net loss) of a firm. It is prepared usually for a period of twelve

months. The earning capacity and potential of a firm are reflected by profit and

loss account. If revenue is more than expenses the result is profit, if expenses

are more than revenue the result is loss.

2. Balance Sheet (Position Statement):

Balance sheet is the most important financial statement, which indicates the

financial position of the firm at a particular date. It communicates information

about assets, liabilities and owners equity. To make balance sheet more

meaningful to reader, assets and liabilities are grouped on its nature.7

(A) The Balance Sheet Serves The Following Important Functions:

It gives a concise summary of the firm’s resources and liabilities and

owners equity.

It is a measure of the firm’s liquidity.

It is a measure of the firm’s solvency.

3. Statement of Retained Earnings:

It is also called P & L appropriation account. As the name suggests it does the 7 Pandey, I.M. (2013), “ Financial Management”, Vikas Publishing House pvt. Ltd., New Delhi, p.12.

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company earn an appropriation of profits. The previous year balance of profit is

first brought forward and the net profit for the current year is added to it. From

this dividend declared both on equity and preference share capital, the amount

transferred to general reserve or development rebate reserve or any other

reserve are appropriation. The balance of this account is shown in the balance

sheet. Therefore cannot be appropriate without profits.

4. Fund flow statement:

The fund flow statement shows the various sources and application of

funds. The Fund Flow Statement is a financial statement which reveals the

methods by which the business has been financed and how it has used its funds

between the opening and closing balance sheet dates. Thus, it is a report non

movement of funds explaining where from working capital originates and

where into the same goes during an accounting period. The “fund” refers to the

working capital or net current assets (CA – CL). This statement shows the

various sources from which fund has been raised and the uses to which this was

put. This statement improves the understanding of the operation and activities

of an enterprise for the reporting period. These statements is also great

importance to creditors and owner’s as it enable them to obtain information

concerning financing and investing activity of the business enterprises and the

consequent changes in its financial position for a period.

5. Cash Flow Statement:

A cash flow statement it designed to indicate changes in financial position of

enterprises on cash basis. It summarizes the causes for change in cash position

of business enterprises between two balance sheet dates. It shows the

movement of cash into and out of a business by listing the sources of cash

receipts and uses or disbursement of cash the difference being the “Net Cash

Flow”. Cash flow statement is an essential tool for analysing short-term

financial solvency. With the help of this, management can evaluate its ability to

its obligations, such as repayment of loans, payment to creditors, and payment

of interest, dividend and taxes.

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6. Schedules:

A number of schedules are prepared to supplement the information supplied in

the balance sheet. The schedules of investments, fixed assets, debtors and

Creditors etc., are prepared generally by business enterprises. 8

4.6 PERSONS INTERESTED IN FINANCIAL STATEMENT:

The following parties are interested in financial statements:

Owners: The owners provide funds or capital for the organization. They possess

curiosity in knowing whether the business is being conducted on sound lines or

not and whether the capital is being employed properly or not. Owners, being

businessmen, always keep an eye on the returns from the investment.

Comparing the accounts of various years helps in getting good piece of

information.

Management: The management of the business is greatly interested in knowing the

position of the firm. The accounts are the basis, on which the management can

study the merits and demerits of the business activity. Thus, the management is

interested in financial statement to find whether the business carried on is

profitable or not. The financial statements are the “eyes and ears of

management and facilitate in drawing future course of action, further

expansions etc.” for taking sound decisions and also framing the policies and

procedure in future.

Creditors: Creditors are the persons who supply goods on credit, or bankers or

lenders of money. They include both long term and short term creditors. These

groups are interested to know the financial soundness before granting credit.

The progress and prosperity of the firm, to which credits are extended, are

largely watched by creditors from the point of view of security and further

credit. Profit and loss account and balance sheet are nerve centres to know the

soundness of the firm.

8 Ravi M. Kishore (2012), “Financial Management”, Taxmann’s Publications (p) Ltd. p.39.

93

Employees: Payment of bonus depends upon the size of profit earned by the firm

more important point is that the workers expect regular income for the bread.

The demand for wage rise, bonus, better working conditions etc., depends upon

the profitability of the firm and in turn depends upon financial position. For

these reasons, this group is interested in financial statements.

Investors: The prospective investors, who want to invest their money in a firm, of

course wish to see the progress and prosperity of the firm, before investing

their money. They include both short-term and long-term investors. They are

the suppliers of basic capital to run the business they sacrifice their present

consumption for investment, expecting for future benefits. So, the investors

analyse the company performance through the financial statement of the firm.

This is to safeguard the investment. For this purpose, this group is eager to go

through the accounting statements which enable them to know the safety of

investment.

Government: Big concern like company it is compulsory to prepare financial

statement according section 209 of the Indian Companies Act and how to be

published in its annual reports. The small business concern will prepare

voluntary to be known. Its result and financial position. Financial statements

are used by various government department like income tax, sales tax, excise

duty, etc., to determine the tax liability of the company.

Other Interested Groups: Financial statement also served the needs of many other

user groups like stock exchanges, banks, consumers, etc.9

4.7 FINANCIAL STATEMENT ANALYSIS

Financial statements are prepared primarily for decision making. The

statements are not an end in themselves, but are useful in decision making. Financial

analysis is the process of determining the significant operating and financial

characteristics of a firm from accounting data. The profit and loss account and

balance sheet are indicators of two significant factors – profitability and financial

9 Arora M.N. (2012), “ Cost and Management Accounting”, Himalaya Publication House, New

Delhi p.13.2.

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soundness. Financial statement analysis is largely a study of relationship among the

various financial factors in a business as disclosed by a single set of statements and a

study of the trend of these factors as shown in a series of statements. The main

function of financial analysis is the pinpoint of the strength and weakness of a

business undertaking by regrouping and analysis of figures contained in the financial

statements, by making comparisons of various components and examining their

content. The financial statements are the best media of documenting the results of

managerial efforts to the owners of the business, its employees, its customers and the

public at large and thus become excellent tools of the public relations.

The analysis of financial statements provides valuable information for

managerial decisions. Financial statement doesn’t speak anything. It merely contains

financial about business events. The user may gain from these data through his/her

own analysis and interpretation of the information.10

(A) Steps in Financial Statement Analysis:

Determination of objectives and scope of analysis.

Study of financial statements.

Collection of relevant information.

Arrangement of data.

Analysis of data.

Interpretation, presentation and preparation of reports. 11

4.8 TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

For analysis of financial statements, they should be rearranged to reveal the

relative significance and effect of various items of data in relation to time period and

for making inter-firm comparison while rearranging the data. Logical relationship

and sequence should be given consideration. The analysis of financial statements will

help in interpretation and logical conclusions. The important techniques used in

analysis of financial statements are as follows: 10 Pillai, R.S.N. and Bagavathi, “Management Accounting”, Sultan Chand & Company LTD. New

Delhi, pp. 41 – 42. 11 Varshney, J.C. (2006), “ Accounting and Financial Analysis” Wisdom Publications, Delhi; ISBN;

81-89547-13-5, p.344.

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Comparative Financial Statements

Common – size Statements

Trend Analysis or Trend Ratios

Ratio Analysis

(A) Comparative Financial Statements:

Comparison of financial statements is one of the very important tools of

analysis of financial statements. It has been seen that balance sheet and profit

and loss accounts are the two most important financial statements. In these

statements figures for two or more periods are placed side by side to facilitate

comparison. These statements render comparison between two periods of time,

exhibit the magnitude and direction of historical changes in the operating result

i.e., comparative income statement and financial statement i.e., comparative

balance sheet of a business.

Financial statements of two or more firms may also be compared for drawing

inferences. This is known as inter-firm comparison. The comparative

statements reveal the followings:

a) Absolute data (money value or rupee amount)

b) Increase or reduction in absolute data in terms of money value

c) Increase or reduction in absolute data in terms of percentage.

Comparative Income Statement- It shows the absolute figures for two or

more period and the absolute change from one period to another. Since the

figures are shown side by side, the user can quickly understand the operational

performance of the firm in different periods and draw conclusions.

Comparative Balance Sheet- Balance sheets as on two or more different dates

are used for comparing the assets, liabilities and the net worth of the company.

Comparative balance sheet is useful for studying the trends of an undertaking.12

12 Arora, M.N. (2012), “ Cost and Management Accounting”, Himalaya Publication House, New

Delhi p.13.6

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(B) Common Size Statements:

It is a type of comparative financial statements in which each item of the

financial statement is expressed as a percentage of the appropriate total. The

appropriate total is taken as 100% and each item is shown as a proportion of

this 100%. Such a statement is known as 100% statement or ‘vertical analyses.

It should be noted that when a comparative statement is prepared for a number

of years to show the trend. It is known as ‘Horizontal Analysis’. A common

size statement may be prepared for balance sheet as well as income statement.13

Common size income statement analysis is stating every line item on the

income statement as a percentage of sales, if more than one year of financial

data, compare income statements to see financial progress. This type of

analysis will see how the revenues and the spending on different types of

expenses change from one year to the next. The items of the income statement

as a percentage of sales figures, it is easy to compare the income and expenses

and understand the financial position of the company. Common size analysis is

an excellent tool to compare companies of different sizes or to compare

different years of data for the same company. Common size analysis is not as

detailed as trend analysis using ratios. It does not provide enough data for

sophisticated investing decisions. For managers of small businesses who do not

have a lot of formal education in financial management, vertical analysis

provides a simple way for them to analyze their financial statements.

Under this statement all figures are converted into a common unit by

expressing them as a percentage of key figures in the statement. Assets and

liabilities are shown as percentage of total assets and total equities respectively

in common size balance sheet.14

Two components of the common size financial statement are:

1. Balance sheet

2. Income statement

When both these components are clubbed together, a common size financial

statement is obtained. 13 Varshney, J.C. (2006), “ Accounting and Financial Analysis” Wisdom Publications, Delhi; ISBN;

81-89547-13-5, pp.350-351. 14 Kishore, Ravi M. (2012), “ Financial Management”, Taxmann’s Publications (p) Ltd., p.57

97

(C) Trend Analysis:

Trend analysis or trend ratios are the index numbers of the movements of select

major financial items in the financial statements to arrive at the conclusions for

important changes. The trend ratio of different items is calculated for various

periods for compares on purpose. The calculation of trend ratios are based on

statistical technique called index numbers.15

It is an example for Horizontal analysis. This method of comparing the past

performance or data over a period of time with that of a base year is called

trend analysis. In this method, the profit and loss account and the balance sheet

of an accounting year are taken as the base. The base year may be the earliest

year involved in the comparison or the latest year or any intervening year.

Normally the earliest year in the study period is taken as the base year. Every

item in the base year’s financial statement is taken as equivalent to 100. All the

corresponding figures in the financial statements of other years are expressed as

percentage of their value in that base year’s financial statements.16

Procedure for Calculation Trends

One year is taken as a base year. Generally, the first or the last is taken as a

base year.

The figures of base year are taken as 100.

Trend percentages are calculated in relation to base year. If a figure in other

year is less than the figure in base year, the trend percentage will be less than

100 and it will be more than 100 if figure is more than base year figure. Each

year’s figure is divided by the base years figure.

Tabulate the trend ratios for analysis of trend over a period.

The trend percentages are calculated for select major financial items in the

financial statements to arrive at the conclusions for important changes. The

trend may sometimes be affected by external factors like government policies,

economic conditions, changes in income distribution, technology development,

15 Madegowda J (2012), “ Advanced Management Accounting” , Himalaya Publication House, New

Delhi 16 Paramasivan, C. and Subramaniam, T. “Financial management, New Age International Publishers, New Delhi

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population growth, changes in tasted and habits etc. the trend analysis is a

simple technique and does not involve tedious calculations.17

(D) Ratio Analysis:

Though a simple procedure of comparing the financial and operative data as

under the first three methods or tools of analysis and interpretation is possible

and useful, the real picture becomes clear only when the relationship between

the two items having cause and effect relationship with each other is worked

out and compared.18

The ratio analysis is one of the techniques of financial analysis where ratios are

used as a yardstick for evaluating the financial condition and performance of

the firm. Analysis and interpretation of various accounting ratios gives a skilled

and experienced analyst, a better understanding of the financial condition and

performance of the firm than what he/she could have obtained only through a

perusal of financial statements.19

(a) Objectives of Ratio Analysis:

Accounting ratios are true test of the profitability, efficiency and financial

soundness of the company. These ratios have the following objectives.

Facilitating comparative analysis of the performance

Helpful in budgeting and forecasting

Assessing the efficiency of the business

Measurement of the profitability

Judgment the operational efficiency of management

Measuring short and long term financial position of the company

Indicator of true efficiency

Helpful in simplifying accounting figures.

17 Ravi M. Kishore (2012), “ Financial Management”, Taxmann’s Publications (p) Ltd. 18 Madegowda, J (2012), “ Advanced Management Accounting” , Himalaya Publication House, New

Delhi., p.120 19 Khatri, P.V. and Verma, Sudhanshu, (2010), “Management Accounting”, Global Vision

Publishing House New Delhi, ISBN- 978-81-8220-330-3, p.86.

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(b) Importance of Ratio Analysis:

Ratios act as an index of efficiency of a firm

They serve as an instrument of management control

They are useful in evaluating performance

They facilitate and help in forecasting future events

They help management in exercising effective decisions

They help management in take corrective actions

They facilitate intra firm comparisons

They play effective role for easy and clear communications

To ensure secrecy

They facilitate inter-firm comparisons.

(c) Steps Involved in the Ratio Analysis:

1. Selection of relevant data from the financial statements depending upon the

objective of the analysis.

2. Calculation of appropriate ratios from the above data.

3. Comparison of the calculated ratios with the ratios of the same firm in the past,

or the ratios developed from projected financial statements or the ratios of

some other firms or the comparison with ratios of the industry to which the

firm belongs.

4. Interpretation of the ratios.

(d) Guidelines for use of Ratios:

The calculation of ratios may not be difficult task but their use is not easy. The

information on which these are based, the constraints of financial statements,

objective for using them, the caliber of the analyst, etc., are important factors

which influence the use of ratios.

1. Accuracy of Financial Statements:

The ratios are calculated from the data available in financial statements.

The reliability of ratios is linked to the accuracy of information in these

statements. Before calculating ratios one should see whether proper concepts

and conventions have been used for preparing financial statements or not.

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These statements should also be properly audited by competent auditors. The

precautions will establish the reliability of data given in financial statements.

2. Objective of Analysis:

The type of ratios to be calculated will depend upon the purpose of which these

are required. If the purpose is to study current financial position then ratios

relating to current assets and current liabilities will studied. This purpose of

“user” is also important for the analysis of ratios. A creditor, a banker, an

investor, a share holder, all has different objects for studying ratios. The

purpose or object for which ratios are required to be studied should always be

kept in mind for studying various ratios. Different objects may require the

study of different ratios.

3. Selection of Ratios:

Another precaution in ratio analysis is the proper selection of appropriate

ratios. The ratios should match the purpose for which these are required.

Calculation of large number of ratios without determining their need in the

present context may confuse the things instead of solving them. Only those

ratios should be selected which can throw proper light on the matter to be

discussed.

4. Use of Standards:

The ratios will give an indication of financial position, only when discussed

with reference to certain standards. Unless otherwise these ratios are compared

with certain standards one will not be able to reach at conclusions. These

standards may be rule of thumb as in case of current ratio (2:1) and acid – test

ratio (1:1), may be industry standards, may be budgeted or projected ratios,

etc., the comparison of calculated ratios with the standards will help the analyst

in forming his opinion about financial situation of the concern.

5. Caliber of the Analyst:

The ratios are only the tools of analysis and their interpretation will depend

upon the caliber and competence of the analyst. He should be familiar with

various financial statements and the significance of changes, etc., a wrong

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interpretation may create havoc for the concern since wrong conclusions may

lead to wrong decision. The utility of ratios is linked to the expertise of the

analyst.

6. Ratios Provide Only Base:

The ratios are only guidelines for the analyst, he/she should not base his

decisions entirely on them. He/she should study any other relevant information,

situation in the concern, general economic environment, etc., before reaching

final conclusions. They study of ratios in isolation may not always prove

useful. A businessman will not afford a single wrong decision because it may

have far-reaching consequences. The interpretation should use the ratios as

guide and may try to solicit any other relevant information which helps in

reaching a correct decision.20

(e) Users of Ratio Analysis:

Utility to shareholders/investors

Utility to creditors

Utility to employees

Utility to government

Utility to financial institutions.

Other users

(f) Advantages of Ratio Analysis:

1. Simplifies Financial Statements: Ratio analysis simplifies the comprehension

of financial statements. Ratios tell the whole story of changes in the financial

condition of the business.

2. Facilitates Inter-firm Comparison: Ratio analysis provides data for inter-firm

comparison. Ratios highlight the factors associated with successful firms. They

also reveal strong firms and weak firms, overvalued and under-valued firms.

3. Makes Intra-firm Comparison Possible: Ratio analysis also makes possible

comparison of the performance of the different divisions of the firm. The ratios

are helpful in deciding about their efficiency or otherwise in the past and likely

20 Pillai, R.S.N. and Bagavathi, “ Management Accounting”, Sultan Chand & Company LTD. New Delhi,

102

performance in the future.

4. Helps in Planning: Ratio analysis helps in planning and forecasting. Over a

period of time, a firm or industry develops certain norms that may indicate

future success or failure. If relationship changes in firm’s data over different

time periods, the ratios may provide clues on trends and future problems. Thus,

“ratios can assist management in it s basic function of forecasting, planning,

co-ordination, control and communication”.

5. Useful in Judging the Efficiency of a Business: The ratios help in judging the

efficiency of a business liquidity, solvency, profitability etc. of a business can

be easily evaluated with the help of various accounting ratios like current ratio,

liquid ratio, debt-equity ratio, net profit ratio, etc., such an evaluation enables

the management to judge the operating efficiency of the various aspects of the

business.21

(g) Limitations of Ratio Analysis:

1. Comparative Study Required: Ratios are useful in judging the efficiency of

the business only when they are compared with the past results of the business

or with the result of a similar business. However, such a comparison only

provides a glimpse of the past performance and forecast for future may not be

correct since several other factors like market conditions, management policies,

etc., may affect the future operations.

2. Limitations of Financial Statements: Ratios are based only on the

information which has been recorded in the financial statements. As indicated

that financial statement suffer from a number of limitations, the ratios derived

there from therefore, are also subject to those limitations.

3. Ratios Alone are not Adequate: Ratios are only indicators they cannot be

taken as final regarding good or bad financial position of the business. Other

things have also to be seen. The value of a ratio should not be regarded as good

or bad inter say. It may be an indication that a firm is weak or strong in a

particular area, but it must never be taken as proof. “Ratios may be linked to

railroad. They tell the analyst, “stop, look and listen”.

21 Khatri, P.V. and Verma, Sudhanshu (2010),“Management Accounting”, Global Vision

Publishing House New Delhi, ISBN- 978-81-8220-330-3, p. 113.

103

4. Window Dressing: The term window dressing means manipulation of

accounts in a way so as to conceal vital facts and present the financial

statements in a way to show a better position than what it actually is. On

account of such a situation, presence of a particular ratio may not be a definite

indicator of good or bad management.

5. Problem of Price Level Changes: Financial analysis based on accounting

ratios will give misleading results, if the effects of changes in price level are

not taken into account.

6. Ratios Ignore Qualitative Factors: Ratios are as a matter of fact, tools of

quantitative analysis. It ignores qualitative factors which sometimes are equally

or rather more important than the quantitative factor. As a result of this,

conclusions from ratio analysis may be distorted.22

4.9 BRIEF PROFILES SELECTED BANK AND THEIR FINANCIAL

PERFORMANCE

The present study is concerned with Indian banking industry, it is further

divided into three banking sector groups on the basis of Rank given to top five banks

as per the average Maximum branches of last ten years (2004-05 to 2013-14) to

analyze their performance in terms of selected parameters.

22 Khatri, P.V. and Verma, Sudhanshu (2010), “Management Accounting”, Global Vision

Publishing House New Delhi, ISBN- 978-81-8220-330-3, pp.125-126.

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Brief Profile of Selected Bank Companies:

4.9.1 Brief Profile and common size about State Bank India.

4.9.2 Brief Profile and common size statement about Punjab National Bank.

4.9.3 Brief Profile and common size statement about Central Bank of India.

4.9.4 Brief Profile and common size statement about Bank of India.

4.9.5 Brief Profile and common size statement about Bank of Baroda.

4.9.6 Brief Profile and common size statement about ICICI Bank Ltd.

4.9.7 Brief Profile and common size statement about HDFC Bank Ltd.

4.9.8 Brief Profile and common size statement about Axis Bank Ltd.

4.9.9 Brief Profile and common size statement about Federal Bank Ltd.

4.9.10 Brief Profile and common size statement about South Indian Bank.

4.9.11 Brief Profile and common size statement about Standard Chartered Bank.

4.9.12 Brief Profile and common size statement about HSBC Bank.

4.9.13 Brief Profile and common size statement about CITI Bank.

4.9.14 Brief Profile and common size statement about Royal Bank of Scotland.

4.9.15 Brief Profile and common size statement about Deutsche Bank.

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Table 4.9.1

(A) Brief Profile of State Bank India.

State Bank of India

Type Public

Traded As

NSE: SBIN BSE: 500112 LSE: SBID BSE SENSEX Constituent CNX Nifty Constituent

Industry Banking,, Financial Services

Founded 27 January 1921, Imperial Bank Of India 1 July 1955, State Bank Of India 2 June 1956, Nationalization

Headquarters Mumbai, Maharashtra, India

Area Served Worldwide

Key People Smt. Arundhati Bhattacharya (Chairperson)

Products

Consumer Banking, Corporate Banking, Finance And Insurance, Investment Banking, Mortgage Loans, Private Banking, Private Equity, Savings, Securities, Asset Management, Wealth Management, Credit Cards,

Owner Government Of India

Slogan The Banker To Every Indian

Website Www.Sbi.Co.In

Source: https://en.wikipedia.org/wiki/State_Bank_of_India

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4.9.1 (B) Brief Common size Statement of State Bank India

State Bank of India (Amount in ` million)

Items 2008-09 2009-10 2010-11 2011-12 2012-13 Group Aggregate 2012-13

All Banks' Aggregate 012-13

No. of offices 12070 13252 14350 14902 15564 21301 92114

No. of employees 205896 200299 222933 215481 228296 293965 1096984

Business per employee 55.60 63.60 70.47 79.84 94.39 101.97 121.33

Profit per employee 0.47 0.45 0.39 0.53 0.65 0.60 0.83

Capital and Reserves & Surplus 579477 659492 649860 839512 988837 1253189 7089300

Deposits 7420731 8041162 9339328 10436474 12027396 16184449 74295324

Investments 2759540 2957852 2956006 3121976 3509273 4729979 26132752

Advances 5425032 6319142 7567194 8675789 10456166 13792240 58797025

Interest income 637884 709939 813944 1065215 1196571 1637677 7636115

Other income 126908 149682 158246 143514 160348 197442 977866

Interest expended 429153 473225 488680 632304 753258 1065334 5138027

Operating expenses 156487 203187 230154 260690 292844 370940 1565855

Net Interest Margin 2.48 2.35 2.86 3.38 3.06 2.98 2.79

Cost of Funds (CoF) 5.72 5.14 4.67 5.35 5.63 5.96 6.12 Return on advances adjusted to CoF 3.95 3.48 3.97 4.63 3.83 3.93 4.21

Wages as % to total expenses 16.64 18.86 21.16 19.01 17.57 16.20 13.02

Return on Equity 17.05 14.80 12.62 15.72 15.43 15.29 13.84

Return on Assets 1.04 0.88 0.71 0.88 0.91 0.88 1.03

CRAR 14.25 13.39 11.98 13.86 12.92 12.67 13.88

Net NPA ratio 1.79 1.72 1.63 1.82 2.10 2.04 1.68

Source: https://www.rbi.org.in/Scripts/AnnualPublications.aspx?head=A%20Profile%20of%20Banks

107

Table 4.9.2 (A) Brief Profile of Punjab National Bank

Punjab National Bank

The Name You Can BANK Upon!

Type Public

Traded As

BSE: 532461

NSE: PNB

CNX Nifty Constituent

Industry Banking, Financial Services

Founded 19 May 1894[1][2]

Founder Lala Lajpat Rai

Headquarters New Delhi

Key People Usha Anantha Subramanian (MD & CEO)

Products

Credit Cards, Consumer Banking, Corporate

Banking, Finance And Insurance, Investment

Banking, Mortgage Loans, Private Banking, Private

Equity, Wealth Management

Owner Government of India

Website Www.Pnbindia.In

Source: https://en.wikipedia.org/wiki/Punjab_National_Bank

108

Table 4.9.2 (B) Brief Common size Statement of Punjab National Bank

Punjab National Bank (Amount in ` million)

Items 2008-09 2009-10 2010-11 2011-12 2012-13 Group

Aggregate 2012-13

All Banks' Aggregate

2012-13 No. of offices 4536 5056 5256 5777 5977 54478 92114 No. of employees 54780 57103 53114 62127 63292 507694 1096984 Business per employee 65.49 80.80 101.78 113.20 116.51 142.23 121.33 Profit per employee 0.56 0.73 0.84 0.84 0.81 0.65 0.83 Capital and Reserves & Surplus 146536 177229 215086 278154 326769 2832832 7089300 Deposits 2097605 2493298 3128987 3795885 3915601 41272523 74295324 Investments 633852 777245 951623 1227030 1298962 12861079 26132752 Advances 1547030 1866012 2421067 2937748 3087252 30935500 58797025 Interest income 191272 214221 269865 364761 418933 3911088 7636115 Other income 30647 36101 36126 42026 42159 370370 977866 Interest expended 122953 129440 151791 230617 270368 2813956 5138027 Operating expenses 42062 47619 63642 70028 81651 647182 1565855 Net Interest Margin 3.06 3.12 3.50 3.21 3.17 2.39 2.79 Cost of Funds (CoF) 5.93 4.90 4.58 5.73 6.11 6.39 6.12 Return on advances adjusted to CoF 4.71 4.87 5.26 4.88 4.46 3.76 4.21 Wages as % to total expenses 17.72 17.63 20.71 15.71 16.12 11.81 13.02 Return on Equity 22.92 24.12 22.60 19.80 15.70 12.34 13.84 Return on Assets 1.39 1.44 1.34 1.19 1.00 0.74 1.03 CRAR 14.03 14.16 12.42 12.63 12.72 12.26 13.88 Net NPA ratio 0.17 0.53 0.85 1.52 2.35 2.00 1.68


109

Table 4.9.3 (A) Brief Profile of Central Bank of India

Central Bank of India

Central Bank of India, Mumbai, Maharashtra

Type Public Company BSE & NSE:CENTRALBK

Industry Financial Commercial Banks

Founded 21 December 1911; 103 Years Ago


Key People Shri. Rajeev Rishi, Chairman & Managing Director

Number of Employees 42000(Approx)

Website Www.Centralbankofindia.Co.In

Source: https://en.wikipedia.org/wiki/Central_Bank_of_India

110

Table 4.9.3 (B) Brief Common size Statement of Central Bank of India

Central Bank of India (Amount in ` million)

Items 2008-09 2009-10 2010-11 2011-12 2012-13 Group

Aggregate 2012-13


2012-13

No. of offices 3644 3704 3871 4151 4429 54478 92114 No. of employees 32804 34826 34015 35901 37113 507694 1096984 Business per employee 56.03 71.18 83.52 86.16 97.30 142.23 121.33 Profit per employee 0.17 0.33 0.40 0.15 0.28 0.65 0.83 Capital and Reserves & Surplus 64121 76922 108734 124515 153129 2832832 7089300 Deposits 1312718 1621075 1793560 1961733 2260383 41272523 74295324 Investments 430607 505629 545045 592433 726038 12861079 26132752 Advances 854832 1053835 1297254 1475129 1719358 30935500 58797025 Interest income 104552 120643 152206 191495 218607 3911088 7636115 Other income 10700 17352 12650 13953 16673 370370 977866 Interest expended 82267 95190 98952 139809 161231 2813956 5138027 Operating expenses 18617 22220 39990 37490 42323 647182 1565855 Net Interest Margin 1.64 1.54 2.71 2.35 2.30 2.39 2.79 Cost of Funds (CoF) 6.59 6.06 5.09 6.55 6.67 6.39 6.12 Return on advances adjusted to CoF 3.19 3.00 4.48 3.85 3.93 3.76 4.21 Wages as % to total expenses 12.61 13.15 21.33 14.14 14.21 11.81 13.02 Return on Equity 9.25 15.01 13.49 4.57 7.31 12.34 13.84 Return on Assets 0.45 0.66 0.70 0.26 0.44 0.74 1.03 CRAR 13.12 12.23 11.64 12.40 11.49 12.26 13.88 Net NPA ratio 1.24 0.69 0.65 3.09 2.90 2.00 1.68


111

4. 9.4 (A) Brief Profile of Bank of India

Bank of India

Type Public (BSE: BOI)

Industry Financial Services

Founded September 7, 1906 (108 Years Ago)


Key People B.P. Sharma

Products Commercial Banking, Retail Banking, Private Banking, Asset Management, Mortgages, Credit Cards

Website Www.Bankofindia.Com

Source : https://en.wikipedia.org/wiki/Bank_of_India

112

Table 4.9.4 (B) Brief Common size Statement of Bank of India

Bank of India (Amount in ` million)

Items 2008-09 2009-10 2010-11 2011-12 2012-13 Group

Aggregate 2012-13


2012-13



113

Table 4.9.5 (A) Brief Profile of Bank of Baroda

Bank of Baroda

Type Public

Traded As BSE: 532134


Founded 20 July 1908

Founder Maharaja Sayajirao Gaekwad

Headquarters Vadodara (Baroda), Gujarat,India


Key People (Chairman & MD) Shri Ranjan Dhawan

Products

Credit Cards, Consumer Banking, Corporate Banking,

Finance And Insurance, Investment Banking, Mortgage

Loans, Private Banking, Private Equity, Wealth

Management

Owner Government Of India

Website Www.Bankofbaroda.Com

Source: https://en.wikipedia.org/wiki/Bank_of_Baroda

114

Table 4.9.5 (B) Brief Common size Statement of Bank of Baroda

Bank of Baroda (Amount in ` million)

Items 2008-09 2009-10 2010-11 2011-12 2012-13 Group

Aggregate 2012-13


2012-13



115

Table 4.9.6 (A)

Brief Profile of ICICI Bank Limited

ICICI Bank Limited

Type Private Company

Traded As

BSE: 532174 NSE: ICICIBANK NYSE: IBN BSE SENSEX Constituent CNX Nifty Constituent


Founded 1994



Key People Mr. M. K. Sharma (Chairman) Ms.Chanda Kochhar (MD & CEO)

Products Credit Cards, Consumer Banking, Corporate Banking, Insurance, Investment, Mortgage Loans, Private Banking, Wealth Management

Website Www.Icicibank.Com

Source https://en.wikipedia.org/wiki/ICICI_Bank

116

Table 4.9.6 (B) Brief Common size Statement of ICICI Bank

ICICI Bank (Amount in ` million)

Items 2008-09 2009-10 2010-11 2011-12 2012-13 Group

Aggregate 2012-13


2012-13 No. of offices 1434 1721 2565 2786 3134 9718 92114 No. of employees 51835 41068 56969 58276 62065 203733 1096984 Business per employee 115.40 76.50 73.50 70.80 73.50 93.03 121.33 Profit per employee 1.10 0.90 1.00 1.10 1.40 1.18 0.83 Capital and Reserves & Surplus 495330 516184 550909 604052 667060 1599334 7089300 Deposits 2183478 2020166 2256021 2555000 2926136 10219391 74295324 Investments 1030583 1208928 1346860 1595600 1713936 4916070 26132752 Advances 2183108 1812056 2163659 2537277 2902494 8733113 58797025 Interest income 310925 257069 259741 335427 400756 1265589 7636115 Other income 76037 74777 66479 75028 83457 256475 977866 Interest expended 227259 175926 169572 228085 262092 792733 5138027 Operating expenses 70451 58598 66172 78504 90129 327392 1565855 Net Interest Margin 2.15 2.19 2.34 2.40 2.70 3.30 2.79 Cost of Funds (CoF) 5.72 4.18 3.59 4.32 4.55 5.77 6.12 Return on advances adjusted to CoF 4.33 4.51 4.68 5.10 5.50 5.57 4.21 Wages as % to total expenses 6.62 8.21 11.95 11.47 11.05 11.40 13.02 Return on Equity 7.80 7.96 9.65 11.20 13.10 16.51 13.84 Return on Assets 0.98 1.13 1.35 1.50 1.70 1.74 1.03 CRAR 15.53 19.41 19.54 18.52 18.74 17.52 13.88 Net NPA ratio 2.09 2.12 1.11 0.73 0.77 0.45 1.68 Source:https://www.rbi.org.in/Scripts/AnnualPublications.aspx?head=A%20Profile%20of%20Banks

117

Table 4.9.7 (A) Brief Profile of HDFC Bank Limited

HDFC Bank Limited

"We Understand Your World"

Type Public Company

Traded As

BSE: 500180 NSE: HDFCBANK NYSE: HDB BSE SENSEX Constituent CNX Nifty Constituent


Founded August 1994



Key People Aditya Puri (MD)

Products Banking, Investment, Management, Private Banking, Equity, Finance, Consumer, Mortgages, Credit Cards

Website Hdfcbank.Com

Source: https://en.wikipedia.org/wiki/HDFC_Bank

118

Table 4.9.7 (B) Brief Common size Statement of HDFC Bank

HDFC Bank (Amount in ` million)

Items 2008-09 2009-10 2010-11 2011-12 2012-13 Group

Aggregate 2012 -13



Source:https://www.rbi.org.in/Scripts/AnnualPublications.aspx?head=A%20Profile%20of%20Banks

119

Table 4.9.8 (A) Brief Profile of Axis Bank

Traded As

BSE: 532215 LSE: AXBC NSE: AXISBANK


Founded 1990 (As UTI Bank)


Key People (Chairman) Shikha Sharma (MD & CEO)

Products Credit Cards, Consumer Banking, Banking, Finance, Investment, Mortgage Loans, Private Banking, Private Equity, Wealth Management

Website Www.Axisbank.Com

Source: https://en.wikipedia.org/wiki/Axis_Bank

120

Table 4.9.8 (B) Brief Common size Statement of AXIS Bank

Axis Bank (Amount in ` million)

Items 2008-09 2009-10 2010-11 2011-12 2012-13 Group

Aggregate 2012-13


2012-13

No. of offices 831 1035 1466 1701 2019 9718 92114

No. of employees 20624 21640 26341 31738 37901 203733 1096984




Deposits 1173741 1413002 1892378 2201043 2526136 10219391 74295324

Investments 463304 559748 719916 931921 1137375 4916070 26132752

Advances 815568 1043409 1424078 1697595 1969660 8733113 58797025

Interest income 108355 116380 151548 219946 271826 1265589 7636115

Other income 28969 39458 46321 54202 65511 256475 977866




Cost of Funds (CoF) 5.74 4.03 4.10 5.29 5.62 5.77 6.12

Return on advances adjusted to CoF 4.83 4.57 4.34 4.57 4.83 5.57 4.21


Return on Equity 19.12 19.15 19.34 20.29 18.53 16.51 13.84

Return on Assets 1.44 1.67 1.68 1.68 1.70 1.74 1.03

CRAR 13.69 15.80 12.65 13.66 17.00 17.52 13.88

Net NPA ratio 0.40 0.40 0.29 0.27 0.36 0.45 1.68


121

Table 4.9.9 (A)

Brief Profile of Federal Bank Limited

The Federal Bank Limited

Type Private

Traded As

NSE: FEDERALBNK BSE: 500469 LSE: FEDS

Industry Banking And Allied Industries

Founded Kochi, 1945

Headquarters Federal Towers, Aluva, Kochi - 683 101, Kerala, India.

Area Served Republic of India

Key People Shyam Srinivasan (Managing Director & CEO), Nilesh Shivji Vikamsey (Part Time Chairman)

Products Loans, Savings, Etc.

Slogan Your Perfect Banking Partner

Website Www.Federalbank.Co.In

Source https://en.wikipedia.org/wiki/Federal_Bank

122

Table 4.9.9 (B) Brief Common size Statement of Federal Bank

Federal Bank (Amount in ` million)

Items 2008-09 2009-10 2010-11 2011-12 2012-13 Group

Aggregate 2012-13


2012-13



123

Table 4.9.10 (A)

Brief Profile of South Indian Bank Limited

South Indian Bank Ltd (SIB)

Type

Private BSE & NSE

Industry Banking, Financial Services, Insurance, Capital Markets

Founded 1929

Headquarters Thrissur City, Kerala, India

Key People Sri. V.G. Mathew, Managing Director And Chief Executive Officer

Products Loans, Savings, Investment Vehicles, Insurance Etc.

Website Www.Southindianbank.Com

Source https://en.wikipedia.org/wiki/South_Indian_Bank

124

Table 4.9.10 (B) Brief Common size Statement of South Indian Bank

South Indian Bank (Amount in ` million)

Items 2008-09 2009-10 2010-11 2011-12 2012-13 Group

Aggregate 2012-13

All Banks' Aggregate 2



125

Table 4.9.11 (A)

Brief Profile of Standard Chartered PLC

Standard Chartered PLC

Type Public Limited Company

Traded As

LSE: STAN SEHK: 2888 NSE: STAN OTC Pink: SCBFF


Predecessor Standard Bank Chartered Bank

Founded 1969 (London)

Headquarters London, United Kingdom


Key People Sir John Peace (Chairman) Bill Winters (Group Chief Executive)

Services Credit Cards, Consumer Banking, Corporate Banking, Investment Banking, Mortgage Loans, Private Banking, Wealth Management

Website Www.Sc.Com

Source https://en.wikipedia.org/wiki/Standard_Chartered

126

Table 4.9.11 (B) Brief Common size Statement of Standard Chartered Bank

Standard Chartered Bank (Amount in ` million)

Items 2008-09 2009-10 2010-11 2011-12 2012-13 Group

Aggregate 2012-13




127

Table 4.9.12 (A)

Brief Profile of HSBC

Type Public Limited Company

Traded As

LSE: HSBA SEHK: 0005 NYSE: HSBC (ADR)


Founded

First Established On 3 March 1865; 150 Years Ago In Hong Kong. (As The Hongkong And Shanghai Bank)

First Incorporated On 14 August 1866; 149 Years Ago (As The Hongkong And Shanghai Banking Corporation)

25 March 1991; 24 Years Ago (As HSBC Holdings Plc, As Parent Holding Company To The Entity In Hong Kong Now As A Subsidiary)

Founder Thomas Sutherland

Headquarters 8 Canada Square, Canary Wharf, London, United Kingdom


Key People Douglas Flint (Group Chairman) Stuart Gulliver (Group Chief Executive)

Services Consumer Banking, Corporate Banking, Investment Banking, Mortgage Loans, Private Banking, Management, Credit, Finance And Insurance

Subsidiaries

The Hongkong And Shanghai Banking Corporation, HSBC Bank Plc, HSBC GLT India, HSBC Bank USA, HSBC Bank Malaysia, HSBC Bank Middle East, HSBC Mexico, HSBC Bank Brazil, HSBC Financehang Seng Bank

Website Www.Hsbc.Com

Source:https://en.wikipedia.org/wiki/HSBC

128

Table 4.9.12 (B) Brief Common size Statement of HSBC Bank

Hongkong & Shanghai Banking Corporation (Amount in ` million

Items 2008-09 2009-10 2010-11 2011-12 2012-13 Group

Aggregate 2012-13




129

Table 4.9.13 (A)

Brief Profile of CITI Bank

Type

Public

Traded As

NYSE: CS&P 500 Component


Predecessor Citicorp Travelers Group

Founded June 16, 1812; 203 Years Ago

Headquarters 399 Park Avenue, Manhattan, New, U.S.


Key People Michael E. O'Neill(Chairman)

Michael Corbat (CEO)

Products

Credit Cards, Consumer Banking, Corporate Banking,Investment

Banking, Global Wealth Management, Financial Analysis, Private

Equity

Subsidiaries

Citibank India, Banamex,Citimortgage, Citibank,Citibranded

Cards, Citi Private Bank, Citi Securities & Banking, Nikko

Citigroup,Railmark Holdings, Salomon BIG, Sedna Finance

Website Citigroup.Com

Source:https://en.wikipedia.org/wiki/Citibank_India

130

Table 4.9.13 (B) Brief Common size Statement of CITI Bank

CITI Bank (Amount in ` million)

Items 2008-09 2009-10 2010-11 2011-12 2012-13 Group

Aggregate 2012-13


2012- No. of offices 41 43 43 43 43 334 92114 No. of employees 4795 4613 5380 5176 5402 25384 1096984 Business per employee 188.01 197.99 174.59 197.50 212.40 217.33 121.33 Profit per employee 4.51 1.83 2.86 3.60 5.02 4.56 0.83 Capital and Reserves & Surplus 115180 135136 149607 159843 173794 1073817 7089300 Deposits 516775 544521 566681 646977 665594 2879997 74295324 Investments 245194 281087 303985 431667 440766 2280631 26132752 Advances 399199 366551 405970 471030 520355 2636799 58797025 Interest income 68402 60705 62693 77676 89161 422486 7636115 Other income 35823 15913 19472 13933 19972 112127 977866 Interest expended 24288 20168 22227 28875 37382 187406 5138027 Operating expenses 25872 23543 27170 28014 28948 142882 1565855 Net Interest Margin 4.67 4.04 3.91 4.07 4.03 3.89 2.79 Cost of Funds (CoF) 3.56 2.67 2.72 3.00 3.37 4.05 6.12 Return on advances adjusted to CoF 9.04 7.82 6.34 6.68 6.40 5.50 4.21 Wages as % to total expenses 17.56 20.02 20.47 18.65 16.02 18.22 13.02 Return on Equity 20.83 6.87 10.01 12.42 16.30 11.52 13.84 Return on Assets 2.12 0.96 1.37 1.64 2.12 1.94 1.03 CRAR 13.23 18.14 17.31 16.03 15.90 17.88 13.88 Net NPA ratio 2.63 2.14 1.21 0.90 1.47 1.01 1.68


131

Table 4.9.14 (A)

Brief Profile of RBS

The Royal Bank of Scotland Plc

Type Public Company

Industry Finance And Insurance

Founded 1727

Headquarters Edinburgh, Scotland

Key People Ross Mcewan (CEO)

Products Finance And Insurance, Consumer Banking, Corporate Banking

Parent The Royal Bank Of Scotland Group

Slogan Here For You

Website Www.Rbs.Co.Uk

Source :https://en.wikipedia.org/wiki/The_Royal_Bank_of_Scotland

132

Table 4.9.14 (B) Brief Common size Statement of RBS Bank

Royal Bank of Scotland (Amount in ` million)

Items 2008-09 2009-10 2010-11 2011-12 2012-13 Group

Aggregate 2012-13

All Banks' Aggregate 2012-

13

No. of offices 30 31 31 31 31 334 92114 No. of employees 3241 2716 2183 1951 1554 25384 1096984 Business per employee 102.94 115.90 111.32 130.73 162.11 217.33 121.33 Profit per employee 0.06 -0.41 0.83 2.46 1.43 4.56 0.83 Capital and Reserves & Surplus 23858 22809 24623 29421 28319 1073817 7089300 Deposits 159603 166015 139472 130395 127494 2879997 74295324 Investments 108107 72654 89016 77214 91235 2280631 26132752 Advances 166597 134060 105508 125345 125339 2636799 58797025 Interest income 31197 21263 18128 17907 18904 422486 7636115 Other income 12251 7495 7864 8180 5470 112127 977866 Interest expended 14371 7141 7354 8658 9325 187406 5138027 Operating expenses 14973 9963 10005 9033 10274 142882 1565855 Net Interest Margin 5.04 5.24 4.70 3.70 3.52 3.89 2.79 Cost of Funds (CoF) 4.19 2.94 3.48 4.65 4.79 4.05 6.12 Return on advances adjusted to CoF 8.28 7.38 4.86 3.82 3.53 5.50 4.21 Wages as % to total expenses 25.61 24.37 21.90 18.60 17.67 18.22 13.02 Return on Equity 0.82 -4.49 7.65 17.75 7.71 11.52 13.84 Return on Assets 0.06 -0.40 0.76 1.96 0.96 1.94 1.03 CRAR 12.66 12.50 11.65 12.46 14.50 17.88 13.88 Net NPA ratio 2.20 1.95 1.65 0.74 0.29 1.01 1.68

133

Table 4.9.15 (A)

Brief Profile of Deutsche Bank AG

Deutsche Bank AG

Passion To Perform

Type Public Company

Traded As FWB: DBK, NYSE: DB


Founded 1870; 145 Years Ago

Headquarters Deutsche Bank Twin Towers,,Germany


Key People Paul Achleitner (Chairman Of The Supervisory Board), John Cryan (Co-CEO) Andjuergen Fitschen (Co-CEO)

Products

Consumer Banking, Corporate Banking, Finance And Insurance, Banking, Mortgage, Private Banking, Equity, Savings, Securities, Asset Management, Wealth Management, Credit Cards

Website Www.Db.Com

Source: https://en.wikipedia.org/wiki/Deutsche_Bank

134

Table 4.9.15 (B) Brief Common size Statement of DB Bank (Amount in ` million)

Items 2008-09 2009-10 2010-11 2011-12 2012-13 Group Aggregate 2012-

All Banks' Aggregate 2012-13

No. of offices 13 13 15 15 17 334 92114

No. of employees 1599 1498 1453 1351 1675 25384 1096984




Deposits 141474 146930 146464 168427 207943 2879997 74295324

Investments 87049 90471 85984 84215 106012 2280631 26132752

Advances 87976 129228 142938 125489 223741 2636799 58797025

Interest income 18814 15789 18802 23982 27031 422486 7636115

Other income 10197 8170 9805 7530 9364 112127 977866




Cost of Funds (CoF) 3.21 1.60 2.36 3.14 2.99 4.05 6.12

Return on advances adjusted to CoF 10.11 7.10 6.16 9.97 8.51 5.50 4.21


Return on Equity 9.50 9.20 11.98 13.75 14.46 11.52 13.84

Return on Assets 1.75 1.73 1.95 2.58 2.98 1.94 1.03

CRAR 15.25 16.45 15.03 14.12 14.08 17.88 13.88

Net NPA ratio 0.88 0.79 0.23 0.09 0.13 1.01 1.68

135

Note:

Data publication provides quick data on select important items on scheduled

commercial banks, excluding regional rural banks, from 2008-09 to 2012-13. This is

the ninth volume in the series; first volume of the series was published for the year

2004-05.

1. Data definitions

1. Capital, reserves & surplus, deposits, investments, advances, interest income,

interest expended and operating expenses are as in annual accounts of banks.

2. Business (defined as deposits plus advances) per employee, profit per employee,

return on assets, capital adequacy ratio [capital to risk weighted assets ratio

(CRAR)] and net non-performing assets (NPAs) as percentage of net advances

(Net NPA ratio) are from ‘Notes on Accounts’ of annual accounts.

3. For the years 2008-09 to 2012-13, bank-wise CRAR is given as per Basel-II.

4. Number of offices includes branches and administrative offices.

5. Cost of Funds (CoF) is defined as the ratio (in %) of interest paid on deposits and

borrowings to average of opening and closing balances of deposits and

borrowings for the respective years.

6. Cost adjusted return on advances is CoF subtracted from return on advances,

where return on advances is defined as the ratio (in %) of interest earned on

advances to average of opening and closing balances of advances for the

respective years.

7. Wages as percentage to total expenses is computed as the ratio (in %) of payment

to and provisions for employees to total expenses.

8. Net Interest Margin is defined as ratio (in %)of Net Interest Income to Total

Assets.

9. Return on Equity are computed as ratio (in %)of Net Profit to total of Capital and

Reserves & Surplus.

2. Bank group level aggregates

1. Bank group level aggregates have been computed from respective items at bank

level. Computation of ratios follows definitions similar to those of bank level ratios;

136

that is ratios of corresponding aggregates at bank group level. More specific details

are as follows:

a. Business per employee (or profit per employee) is computed by dividing the

total business (or profit) for the group by the number of employees in the

group

b. CoF is computed as the ratio (in %) of interest paid on deposits and

borrowings to average of opening and closing balances of deposits and

borrowings of the respective years.

c. Return on advances adjusted to CoF is computed by subtracting CoF for the

group from return on advances for the group; the latter is computed as the ratio

(in %) of interest earned on advances by the group to average of opening and

closing balances of total advances of the group.

d. Return on assets (in %) for a group is obtained as weighted average of return

on assets of individual banks in the group, weights being the proportion of

total assets of the bank as percentage to total assets of the group.

e. Capital adequacy ratios for the bank groups have been obtained from OSMOS,

Department of Banking Supervision, RBI.

3. General

Data sources

Most of the data presented in the publication are from annual accounts of

banks.

Data on number of offices are from Master Office File (as on September 04,

2013), Department of Statistics and Information Management, RBI.

Data on number of employees are as reported by respective banks. 23

23. https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/APB30091213F.pdf

137

REFERENCES:

1. Arora, M.N. (2012), “Cost and Management Accounting”, Himalaya

Publication House, New Delhi p.13.6

2. Gupta, Shashi, K., Sharma R.K. and Neeti Gupta (2009), “ Management

Accounting”, Kalyani Publishers, pp 4-5.

3. Khatri, P.V. and Verma, Sudhanshu (2010),“Management Accounting”,

Global Vision Publishing House New Delhi, ISBN- 978-81-8220-330-3, p. 113.

4. Kishore, Ravi M. (2012), “Financial Management”, Taxmann’s Publications (p)

Ltd. p.39.

5. Madegowda, J (2012), “Advanced Management Accounting” , Himalaya

Publication House, New Delhi, p.75.

6. Pandey, I.M. (2013), “Financial Management”, Vikas Publishing House pvt.

Ltd., New Delhi, p.30.

7. Paramasivan, C & Subramanian, T., “Financial Management”, New Age

International publishers.

8. Pillai, R.S.N. & Bagavathi, “Management Accounting”, Sultan Chand &

Company LTD. New Delhi, pp. 41-42.

9. Varshney, J.C. (2006), “Accounting and Financial Analysis” Wisdom

Publications, Delhi; ISBN; 81-89547-13-5, pp.344-346.

chapter ~ 4 conceptual framework of profitability...

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