hdfc financial analysis

FINANCIAL STATEMENTS

Anubha JindalAnushka AnandChavi GoelKriti SharmaRishabh ChowdhryShruti Jain

Financial Analysis of

Introduction

HDFC Bank is an Indian banking and financial services company headquartered in Mumbai, Maharashtra.

The MD and CEO of the company is Amitabh Chaudhry, ED and CFO is Vibha Padalkar

Amitabh Chaudhry Vibha Padalkar

It is largest bank in India by market capitalization as of February 2016.

Products

Retail Banking Treasury Car Loans

Personal Loans Loans against property Credit Cards

Objective of this Study

• Financial analysis refers to collecting the financial data

• Making comparisons amongst different variables

Balance Sheet

P&L Statment

• Financial ratios allow logical relationships between different variables

• The main source of financial information is the balance sheet and the income statement.

Methodology

Ratio analysis is the process of determining and interpreting numerical relationships based on financial statements

Analyzing Financial Statements

Judging Efficiency Locating weakness Formulating plans Comparing Performance

Focus areas

Profitability Operational SolvencyLiquidity

Ratios

Mar '12

Mar '13

Mar '14

Mar '15 Mar '160

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

0.090.08

0.06 0.06

0.04

0.07

Current ratio

CURRENT RATIO:• The current ratio is a liquidity ratio that measures a company's ability to pay

short-term and long-term obligations.• a current ratio below 1 shows that the bank is not in good financial health

Since current ratio for all the year is below 1 , it is not a good sign.

RatiosQUICK RATIO• The quick ratio measures a company’s ability to meet its short-term obligations

with its most liquid assets.• The higher the quick ratio, the better the company's liquidity position.

Quick ratio is increasing in every next year highest being in 2016.

Mar '12 Mar '13 Mar '14 Mar '15 Mar '1602468

10121416

QUICK RATIO

RatiosInterest spread • Interest spread is the difference between the average lending rate and the

average borrowing rate for a bank or other financial institution. • The greater the spread, the more profitable the financial institution is likely to

be; the lower the spread, the less profitable the institution is likely to be.

Over the past 5 years the interest spread has lowered, indicating that the institution is not as profitable as it was before.

Mar '12 Mar '13 Mar '14 Mar '15 Mar '166.5

7

7.5

8

8.5

9

8.42

8.78

8.01 8.01

7.52

Interest Spread

RatiosNet Profit Margin• Net profit margin is the ratio of net profits to revenues for a company or business

segment • Net profit margin indicates a business's financial health• Business can use its net profit margin to forecast profits based on revenues.

The fall in this margin indicates that the bank is making some decisions which are lowering the profits.

Mar '12 Mar '13 Mar '14 Mar '15 Mar '1617.5

18

18.5

19

19.5

20

20.5

21

21.5

18.9319.18

20.61

21.07

20.41

Profit Margin

RatiosReturn on Equity• Return on equity (ROE) is the amount of net income returned as a percentage

of shareholders equity. • The ROE is useful for comparing the profitability of a company to that of other firms in

the same industry.

The fall from 2014-2015 indicates how the investors had lost faith in the bank. Now the rise has indicated more profitability for the banks


15

16

17

18

19

20

17.26

18.57

19.5

16.4716.91

Return on Equity

RatiosCredit deposit ratio• It is the ratio of how much a bank lends out of the deposits it has mobilized.• A higher ratio indicates more reliance on deposits for lending and vice-versa.

The credit deposit ratio is high which indicates that HDFC bank is more reliance on deposits for lending.


76

77

78

79

80

81

82

83

84

78.06

80.14

81.79 81.71

83.24

Credit deposit ratio

RatiosLoan-to-deposit ratio (LTD)• The loan-to-deposit ratio (LTD) is used for assessing a bank's liquidity • If the ratio is too high, it means that the bank may not have enough liquidity • Conversely, if the ratio is too low, the bank may not be earning as much as it could be.

The ratio is not too high and not too low, putting the bank in a comfortable position


31

32

33

34

35

36

37

38

39

36.99

38.51

35.05 35.13

33.13

LTD

RatiosEarnings per share (EPS) • It the portion of a company's profit allocated to each outstanding share of common stock.• Earnings per share serves as an indicator of a company's profitability..• High-quality EPS means that the number is a relatively true representation of what the

company actually earned • A low-quality EPS number does not accurately portray what the company earned

HDFC bank has continuously increased from year 2012 to year 2016 which shows a positive impact of decisions taken by the management

1 2 3 4 50

10

20

30

40

50

60

22.11

28.49

35.47

42.15

48.84

Chart Title

RatiosTOTAL DEBT TO OWNERS FUND• A measurement of a company’s financial leverage• Calculated as the company’s debt divided by its total capital. • A lower debt to equity ratio usually implies a more financially stable business.• Companies with a higher debt to equity ratio are considered more risky to creditors and investors

As per the given data in the previous years 2012 and 2013 debt to equity ratio was more stable as compared to later years 2014 and 2015 where either it was extremely high or low which are both considered as risky condition

1 2 3 4 57

7.5

8

8.5

9

9.5

9.04 9.09

9.36

8

8.25