A STUDY ON THE FINANCIAL PERFORMANCE OF INDIAN

OVERSEAS BANK FOR THE PERIOD

2009-2012

Submitted as a part of MBA I year Course Requirement

By

SATHYA. S

3511140229

Under the guidance of

Mr. Ganesh Kumar MBA

Faculty, SRM B-School,

VadapalaniCampus, Chennai

SRM B-SCHOOL

FACULTY OF ENGINEERING AND TECHNOLOGY

SRM UNIVERSITY (RAMAPURAM II)

VADAPALANI, CHENNAI

BONAFIDE CERTIFICATE

This is to certify that SATHYA.S is a Bonafide Student of SRM B-School, SRM

University, Vadapalani, Chennai. She is in the I year of Masters Degree Program in

Business Administration (MBA). She / He has done this project under my guidance and

supervision towards part fulfillment of I year MBA course.

Project Guide HOD

Date:

Place:

DEPARTMENT SEAL

DECLARATION

I SATHYA.S (3511140229) studying in I year MBA program at SRM B-School, SRM

University, Vadapalani, Chennai, hereby declare that this project is an original work of

mine and I have not verbatim copied / duplicated any material from sources like internet

or from print media, excepting some vital company information / statistics, which are

provided by the company itself.

Signature of the Student

Date:

Place:

ACKNOWLEDGEMENT

I wish to place on record my thanks for our esteemed institution S.R.M University for

providing me with opportunity to pursue my studies in this institution

I am extremely thankful and indebted to my supervisor, Mr.Ganesh Kumar BE MBA,

Lecturer at S.R.M B-School,Vadapalani, for his valuable guidance and advice at each

and every stage in the progress of my project work by for sharing with me his time,

knowledge and helping in every step during the process of data collection for my study.

I also express my sincere thanks to all my dear teachers of the Department of

Business Administration for their constant support and encouragement. Special and warm

thanks to Ms. Gayathri,M.Phil; Senior Lecturer at S.R.M B School,Vadapalani for her

help and motivation to go ahead with this topic for study.

My heartfelt thanks goes to the staffs of Indian Overseas Bank, Chintadripet branch,

Chennai; for providing me with the opportunity to conduct my summer internship project

at their organisation and for providing me the inspiration to work on this topic as well as

for being so cooperative during my data collection.

I would finally like to thank my family and friends for the constant support and

encouragement.

ABSTRACT

Banks play an important role in the economic development of every nation. They have

control over a large part of the supply of money in circulation. A bank is a financial

intermediary that accepts deposits and channels those deposits into lending activities.

Banks are a fundamental component of the financial system and are also active players in

financial markets. Financial performance refers to the achievement of the bank in terms

of profitability. The profitability of a bank denotes the efficiency with which a bank

deploys its total resources to optimize its net profits and thus serve as an index to the

degree of asset utilization and managerial effectiveness. In this study an attempt is made

to see the financial performance of Indian Overseas Bank with the different norms.

For this study, Indian overseas bank was chosen on the basis of opportunity obtained;

however the summer internship project served an excellent exposure to get valuable

insights into the financial performance of an international public bank. Further in the

study, the bank at a glance can be found along with a thorough and systematic procedure

at deriving financial solutions to the crucial issues extracted out of the data.

The result of the study has been largely positive on the growth trend of the bank. With

adequate policy adjustments and enhancing performance the bank can be ensured high

productivity and efficiency. The methods to arrive at such results are discussed in this

study with sufficient reference to the past and current trends on the financial functioning

and positioning of the bank.

TABLE OF CONTENTS

Page Number

CHAPTER 1 INTRODUCTION

1.1 INDUSTRY PROFILE

1.2 COMPANY PROFILE

1.3 OBJECTIVE OF THE STUDY

1.4 NEED FOR THE STUDY

1.5 SCOPE AND SIGNIFICANCE

CHAPTER 2 DATA ANALYSIS & INTERPRETATION

2.1 PROBLEM IDENTIFIED

2.2 ANALYSIS

2.3 MAJOR FINDINGS

CHAPTER 3 CONCLUSION& SUGGESTIONS

3.1 CONCLUSIONS

3.2 SUGGESTIONS FOR IMPROVEMENT

CHAPTER 1

INTRODUCTION

1.1 INDIAN BANKING INDUSTRY PROFILE

A good bank is not only the financial heart of the community, but also one with an

obligation of helping in every possible manner to improve the economic conditions of

the common people

A bank is a financial intermediary that accepts deposits and channels those deposits into

lending activities. Banks are a fundamental component of the financial system, and are

also active players in financial markets. The essential role of a bank is to connect those

who have capital (such as investors and depositors), with those who seek capital (such as

individuals wanting a loan or business wanting to grow). Banks thus play an important

role in the economic development of every nation. They have control over a large part of

the supply of money in circulation. Through their influence over the volume of bank

money, they can influence in nature and character of production in any country.

Economic development is a dynamic and continuous process. Banks are the main stay of

economic progress of a country, and in the modern economy, banks have become a part

and parcel of all economic activities in India.

Indian Banking Industry Vs Global Economy

Currently, amidst all the turmoil of global economic recession, India’s banking industry

has been amongst the few to maintain resilience. The tempo of development for the

Indian banking industry has been remarkable over the past decade. It is evident from the

higher pace of credit expansion; expanding profitability and productivity similar to banks

in developed markets, lower incidence of non-performing assets and focus on financial

inclusion have contributed to making Indian banking vibrant and strong. Indian banks

have begun to revise their growth approach and re-evaluate the prospects on hand to keep

the economy rolling.

Structure of Indian Banking Industry

Banking industry in India functions under the sunshade of Reserve Bank of India-

The regulatory, central bank. Banking industry mainly consists of:

Commercial banks

Co-operative banks

The commercial banking structure in India consists of : schedules Commercial Banks and

Unscheduled Bank. Scheduled commercial banks constitute those banks which have been

included in the second schedule of Reserve Bank of Indian (RBI) Act. 1934.

RBI in turn includes only those banks in this schedule which satisfy the criteria laid down

vide section 42 (60) of the Act. Some co-operative banks are scheduled commercial

banks although not all co-operative banks are. Being a part of the second schedule

confers some benefits to the banks in terms of access to accommodation by RBI during

the times of liquidity constraints. At the same time, however this status also subjects the

bank certain conditions and obligation towards the reserve regulation of RBI.

For the purpose of assessment of performance of banks the RBI categories them as public

sector banks, old private sector banks, new private sector banks and foreign banks.

Figure 1.1 Structure of Indian Commercial Banking Sector

S.NO NATIONALISED

BANKS

OLD PRIVATE

BANKS

NEW PRIVATE

BANKS

FOREIGN BANKS

1 Allahabad Bank Ltd Catholic Syrian bank Ltd. Axis Bank Ltd AbuDhabi

Commercial Bank

2 Andhra Bank Ltd City Union Bank Ltd Development Credit

Bank Ltd

American Express

Bank

3 Bank of Baroda Ltd Dhanalakshmi Bank Ltd HDFC Bank Ltd Bank International

Indonesia

4 Bank of India Ltd Federal Bank Ltd ICICI Bank Ltd Standard Chartered

Bank

5 Bank of Maharashtra Ltd ING Vysya Bank Ltd Induslnd Bank Ltd Bank of America

6 Canara Bank Ltd Jammu and Kashmir

Bank Ltd

Kotak Mahindra

Bank Ltd

Bank of Ceylon

7 Central Bank of India Ltd Karnataka Bank Ltd Yes Bank Ltd Bank of Nova Scotia

8 Corporation Bank Ltd KarurVysya Bank Ltd Bank of Tokyo

Reserve Bank of India

Bank Financial Institution

Scheduled Commercial

banks

All India Financial Institution

Co-Operative credit

institutions

State level Instituition

Other Institution

Public Sector Banks

Private Sector Banks

Foreign Banks Regional Rural Banks

Urban Cooperative

Rural Cooperative Cedit Institutions

Mitsubishi UFJ

9 Dena Bank Ltd Lakshmi Vilas Bank Ltd Barclays Bank PLC

10 Idbi Bank Ltd Nainital Bank Ltd BNP Paribas

11 Indian Bank Ltd Ratnakar Bank Ltd Caylon Bank

12 Indian overseas Bank Ltd SBI Commercial and

International Bank Ltd

China trust

Commercial

13 Oriental Bank of

Commerce Ltd

South Indian Bank Ltd Citi Bank N.A

14 Punjab and Sind Bank Ltd Tamil Nadu Mercantile

Bank Ltd

DBS Bank

15 Punjab National Bank Ltd Deutsche Bank AG

16 Syndicate Bank Ltd HSBC

17 UCO Bank Ltd JPMorgan Chase

Bank

18 Union Bank of India Krung Thai Bank

19 United Bank of India Ltd Mashreq Bank psc

20 Vijaya Bank Ltd Mizuho Corporate

Bank

21 State Bank of Bikaner and

Jaipur Ltd

Royal Bank of

Scotland

22 State Bank of Hyderabad

Ltd

Shinhan Bank

23 State Bank of India Ltd Societe Generale

24 State Bank of Mysore LTd Sonali Bank

25 State Bank of Patiyala Ltd State Bank of

Mauritius

26 State Bank of Travancore UBS

27 VTB

Challenges Faced By Indian Banking Industry

Developing countries like India, still has a huge number of people who do not have

access to banking services due to scattered and fragmented locations. But if we talk about

those people who are availing banking services, their expectations are raising as the level

of services are increasing due to the emergence of information technology and

competition. Since, foreign banks are playing in Indian market the number of services

offered has increased and banks have laid emphasis on meeting the customer

expectations.

Now, the existing situation has created various challeneges and opportunity for Indian

commercial banks. In order to encounter the general scenario of banking industry we

need to understand the challenges and opportunities lying with banking industry of India.

Rural Market

Banking in India is generally fairly mature in terms of supply, product range and

reach, even though reach in rural India still remains a challenge for the private

and foreign banks. In terms of quality of asset and capital adequacy, Indian

banks are considered to have clean, strong and transparent balance sheets relative

to other banks in comparable economies in this region.

Management of Risks

The growing competition increases the competitiveness among banks. But,

existing global banking scenario is seriously posing threats for Indian Banking

Industry. We have already witnessed the bankruptcy of some foreign banks.

However according to certain studies there is a positive association between

changes in risk and capital.

Market Discipline and Transparency

Transparency and disclosure norms as part of internationally accepted corporate

governance practices are assuming greater importance in the emerging

environment. Banks are expected to be more responsive and accountable to the

investors. Banks have to disclose in their balance sheets a plethora of information

on the maturity profiles of assets and liabilities, lending to sensitive sectors,

movements in NPAs, capital, provisions, shareholdings of the government, value

of investment in India and abroad, operating and profitability indicators, the total

investments made in the equity share, units of mutual funds, bonds, debentures,

aggregate advances against shares and so on.

Human Resource Management

When relations between human resources management (HRM), work climate and

organizational performance in the branch network of a retail bank. Significant

correlations were found between work climate, human resource practices, and

business performance. The results showed that the correlations between climate

and performance cannot be explained by their common dependence on HRM

factors, and that the data are consistent with a mediation model in which the

effects of HRM practices on business performance are partially mediated by work

climate.

Global Banking

It is practically and fundamentally impossible for any nation to exclude itself from

world economy. Therefore, for sustainable development, one has to adopt

integration process in the form of liberalization and globalization becomes

challenges for the domestic enterprises as they are bound to complete with global

players.

If we look at the Indian banking industry, then we find that there are 36 foreign

banks operating in India, which becomes a major challenge for nationalize and

private sector banks, these foreign banks are larger in size, technically advanced

and having presence in global market, which gives more and better options and

services to Indian traders.

Financial Inclusion

Financial inclusion has become a necessity in today’s business environment.

Whatever is produced by business houses that have to be under the check from

various perspectives like environmental concerns, corporate governance social

and ethical issues. Apart from it to bridge the gap between rich and poor the poor

people of the country should be given proper attention to improve their economic

condition.

Employee’s Retention

The banking industry has transformed rapidly in the last ten years, shifting from

transactional and consumer service-oriented to an increasingly aggressive

environment, where competition for revenue is on top priority. Long-time banking

employees are becoming disenchanted with the industry and are often resistant to

perform up to new expectations. The diminishing employee morale results in

decreased revenue. Due to the intrinsically close ties between staff and clients,

losing those employees completely can mean the loss of valuable customer

relationships. The retail banking industry is concerned about employee retention

from all levels: from tellers to executives to customer service representatives

because competition is always moving in to hire them away.

Customer Retention

The major determinants of customer satisfaction and future intentions in the retail

bank sector include service quality dimensions (such as getting it right the first

time), service features (such as competitive interest rates), service problems,

service recovery and products used. It was found, in particular, that service

problems and the bank’s service recovery ability have a major impact on

satisfaction and intentions to switch.

Thus, these challenges and opportunities like rural market, transparency, customer

expectations, management of risks, growth in banking sector, human factor,

global banking, environment concern, social, ethical issues, employee and

customer retentions, banks are striving to combat the competition. The

competition from global banks and technological innovation has compelled the

banks to rethink their policies and strategies.

INDIAN OVERSEAS BANK

– THE COMPANY PROFILE

Company information :

Full name: Indian Overseas Bank

Legal Form: Public Limited Company (BSE 532388)

Legal Address/HQ: 763 Anna Salai, Central Office, ; Chennai; Tamil Nadu;

Tel: 044-28524212 / 28415702 / 28519491

Incorporation Date: February 10, 1937

Total Employees: 25,626

Revenue: INR 34,550 cr

Net Income: INR 19,578 cr

Total Assets: INR 921,841 cr

Website: www.iob.in

Company Description

At home or abroad, Indian Overseas Bank wants to provide a safe haven for clients'

rupees. Indian Overseas Bank (IOB) is one of India's largest state-controlled banks and

provides banking and financial services throughout the country. Established with a focus

on foreign exchange and overseas banking, IOB has some 1,800 domestic branches and

about a half-dozen international branches. It provides deposit, lending, mortgage,

currency transfer, agri-business consultation, and credit card services. Specialized

branches offer services related to such concerns as commercial and industrial credit,

industrial finance, and high-tech agriculture.

Organizational expansion

Pre-World War II

In 1937, Thiru.M. Ct. M. Chidambaram Chettyar establishes the Indian Overseas Bank

(IOB) to encourage overseas banking and foreign exchange operations. IOB started up

simultaneously at three branches, one each in Karaikudi, Madras (Chennai) and Rangoon

(Yangon). It then quickly opened a branch in Penang and another in Singapore. The bank

served the Nattukottai Chettiars, who were a mercantile class that at the time had spread

from Chettinad in Tamil Nadu state to Ceylon (Sri

Lanka), Burma(Myanmar), Malaya, Singapore, Java, Sumatra, and Saigon. As a result,

from the beginning IOB specialized in foreign exchange and overseas banking (see

below).

After World War II

In the 1960s, the banking sector in India was consolidating by the merger of weak private

sector banks with the stronger ones; IOB absorbed five banks, including Kulitali Bank

(est. 1933). Then in 1969 the Government of India nationalized IOB. At one point,

probably before nationalization, IOB had twenty of its eighty branches located overseas.

After nationalization it, like all the nationalized banks, turned inward, emphasizing the

opening of branches in rural India.

In 1988-89, IOB acquired Bank of Tamil Nadu in a rescue.

The new millennium

In 2000, IOB engaged in an initial public offering (IPO) that brought the government's

share in the bank's equity down to 75%. In 2001 it acquired the Mumbai-based

AdarshaJanataSahakari Bank, which gave it a branch in Mumbai. Then in 2009 IOB took

over Shree SuvarnaSahakari Bank, which was founded in 1969 and had its head office

in Pune. Shree SuvarnaSahakari Bank has been in administration since 2006. It had nine

branches in Pune, two in Mumbai and one in Shirpur. The total employee strength was

estimated to be little over 100.

International expansion

As mentioned above, IOB was international from its inception with branches in Rangoon,

Penang, and Singapore. In 1941, IOB opened a branch in Malaya that presumably closed

almost immediately because of the war.

In 1946, after the War, IOB opened a branch in Ceylon. More overseas branches

followed quickly. In 1947, IOB opened a branch in Bangkok and re-opened others. In

i948 United Commercial Bank (see below) opened a branch in Malaya. In 1949, IOB

opened a branch in Bangkok.

Then in 1963, The Burmese government nationalized IOB’s branch in Rangoon. In 1973,

IOB, Indian Bank and United Commercial Bank established United Asian Bank

BerhadinMalaysia. (Indian Bank had been operating in Malaysia since 1941 and United

Commercial Bank Limited had been operating there since 1948.) The banks set up United

Asian to comply with the Banking Law in Malaysia, which prohibited foreign

government banks from operating in the country. Also, IOB and six Indian private banks

established Bharat Overseas Bank as a Chennai-based private bank to take over IOB's

Bangkok branch.

In 1977: IOB opened a branch in Seoul. Two years later, IOB opened a Foreign Currency

Banking Unit in Colombo, Sri Lanka.

International expansion slowed thereafter, for a while. In 1992 Bank of Commerce

(BOC), a Malaysian bank, acquired United Asian Bank (UAB).

In the new millennium, international expansion picked up once again. In 2007, IOB took

over Bharat Overseas Bank. Three years later, Malaysia awarded a commercial banking

license to a locally incorporated bank to be jointly owned by Bank of Baroda, Indian

Overseas Bank and Andhra Bank. The new bank, India International Bank (Malaysia),

will reside in Kuala Lumpur, which has a large population of Indians. Andhra Bank will

hold a 25% stake in the joint-venture, Bank of Baroda will own 40% and IOB the

remaining 35%.

Product and Service Profile

Constituents accounts

Savings account

Current and cash credit account

Term deposits

Safe deposits- Lockers & safe custody service

Nominations and settlement

Advances :

1. Advances against bank’s term deposits & RD

2. Advances against LIC policies

3. Advances against Central & State Govt

4. Advances against NSC/IVP/KVP securities

5. Advances against units of mutual funds

6. Advances against shares & debentures

7. Advances against gold ornaments

8. Advances against goods

9. Advances against immovable properties

10. Clear advances

11. Personal loans

12. Pensioner’s loan scheme

13. Advances to HP concerns

14. Advances to leasing concerns

15. Loans/overdrafts to NRI’s & their relatives

16. Advances against book debts

Bank guarantees: Advances to staff members

1. Staff housing loans

2. Loan against NSC

3. Loan against gold ornament

4. Staff consumer loan

5. Vehicle loan for supervisory staff

6. Vehicle loan for clerical staff

7. Conveyance loan from subordinate staff

8. Car loan for clerical staff

Management of non-performing assets

Rehabilitation of sick industrial units

Suit filed accounts

Foreign Exchange Operation

1. Rupee A/C of NRI

2. Foreign currency A/C in India

3. Remittances

4. Foreign travel

5. Exports

6. Imports

7. Forward Contract

8. Foreign currency loans

9. Precious Metal Business

10. Import of gold

I.O.B Gold Deposit Scheme

Government accounts, Accounting procedures & other matters

1. Cash & currency chest

2. Civil, defense, railway pension

3. SwatantraSainikSamman Pension scheme

4. Telecom pension

5. State Govt Pension

6. Chennai Port Trust Pension

7. T.N.E.B Pension

8. Employees PF organisation& Pension scheme

9. Malaysian Govt Pension Scheme

10. PPF Scheme 1968

11. Collection of Income Tax & other Direct Taxes

12. Collection of central excise, customs and other duties

13. Special deposit scheme

14. Deposit scheme for retiring Govt Employees,1998

15. Accounting of planning commission and national information centre

16. Post office collection A/C

17. Compulsory deposit (Income Tax Payers) scheme

Priority sector advances (other than SSI)

Agricultural advances:

1. Crop loans

2. Term loans for land development/reclamation

3. Term loan for plantation and horticulture

4. Term loan for dry land development

5. Term loan for farm forestry/waste land development

6. Term loan for tractor/power tiller/agricultural machinery and implement

7. Term loan for combine harvesters

8. Term loan for bullocks/bullock carts

9. Term loan for farmers for purchase of vehicle from transport/conveyance

10. Term loan for pisciculture

11. Credit facilities for animal husbandry

12. Term deposit for gobar gas plants

13. Financial appraisal of agricultural projects

Small & Micro enterprises Small Loans

Forest collections services

Agri business consultancy

Personal banking

Corporate banking

E- banking

Atm services

Trading services

CHAPTER 2: DATA ANALYSIS &

INTERPRETATION

2.1 PROBLEMS IDENTIFIED

An analysis of the factors responsible for the steep increase in the capital from

2011 to 2012

Enquiry into the reason why there has been no increase in the Net Profit of the

Bank for the period 2011-2012, although there has been commendable increase

in the Net Income

Generally fixed assets will decline every year due to the deductions of

depreciation. Although the Bank has declared an increase in its fixed assets.

The causes for sudden increase in loan advances in 2012 when compared to any

other financial year of the Bank.

These are few of the prominent issues identified by the researcher while analyzing

financial statements of the Bank for the period 2011-2012. The study has been thus

designed on basis of these questions, such that a systematic analysis and reasoning can be

provided. The issues have been analysed and resolved from the point of view of the

Bank’s policy as well as the overall Public Sector Banking Scenario.

2.2 OBJECTIVES

To study the financial performance and positioning of the Indian Overseas Bank

through assessment of financial statements for the period 2011-2012

To identify critical financial phenomenon in the functioning of the Bank and its

performance.

To reveal the trend of profits and other important facts, through a comparative

study of the financial statements for the Bank.

2.3 NEED FOR THE STUDY

To understand the banking industry functioning overall

To analyse and understand the financial statement by using financial analysis

techniques.

To forecast and prepare the plans for the future as suggestions for Bank’s further

improvement.

2.4 DATA COLLECTION:

Primary data :

Interview with the Manager.

Discussions with other personnel such as advisors and trainers.

Secondary data:

Annual Report.

IOB web site.

2.5 SCOPE & SIGNIFICANCE :

In this study the method comparative statement is used to find, analyze and interpret

the data of the bank to know the financial position of the bank and then arrive at

suggestions to improve or contribute to improvement of the Bank’s functioning.

2.6 LIMITATION OF THE STUDY:

Time constraint

Restriction on the availability of primary data on bank financials

Lack of availability of empirical secondary data

2.7 DATA ANALYSIS AND INTERPRETATION

Analysis and interpretation is used by the financial manager to ascertain the financial

performance of their firm. It has become a useful tool in the analytical kit. This is because

the financial statement, i.e., the “Balance Sheet” has a limited role to perform. .The

Balance Sheet is merely a static statement. It is a statement of asset and liabilities as on a

particular date.

1. COMPARATIVE STATEMENTS:

The elements of financial position are shown in a comparative form so as to give an idea

of financial position at two or more periods .Any statement prepared in a comparative

form will be covered in comparative statements. From practical point of view, generally

financial statements (balance sheet) are prepared in comparative form for financial

analysis purpose.

A comparative statement showS:

Absolute figures ( rupee amounts )

Changes in absolute figures i.e., increase or decrease in absolute figures.

Absolute data in terms of percentages.

Increase or decrease in terms of percentages.

The financial data will be comparative only when same accounting principles are used in

preparing these statements. In case of any deviation in the use of accounting principles

this fact must be mentioned at the foot of financial statements and the analyst should be

careful in using these statements.

COMPARATIVE BALANCE SHEET:

The comparative balance sheet analysis is the study of the trend of the same items, group

of items and computed items in two or more balance sheet of the same bank on different

dates. The changes in periodic balance sheet items reflect the conduct of a business. The

changes can be observed by comparison of the balance sheet at the begining and at the

end of period and these changes can help in forming an opinion about the progress of an

enterprise.

PROCEDURE OF PREPARE A COMPARATIVE BALANCE SHEET:

The Comparative balance sheet has two columns for the data of original balance

sheet.

Third column is used to show increases in figures.

The Fourth column is use to give percentages of increase or decrease

Comparative Balance Sheet of IOB For The Year Ending

2011-12

PARTICULARS SCHEDULES 2011 2012ABSOLUTE

INCRESE/DECREASE%

INCREASE/DECREASECAPITAL & LIABILITES      EQUITY SHARE CAPITAL 1 61,87,493 79,69,982 17,82,489 28.8RESERVE & SURPLUS 2 8,70,61,807 11,13,06,540 2,42,44,733 27.84

DEPOSITS 3 1,45,22,87,511 1,78,43,41,764 33,20,54,253 22.86

BORROWINGS 4 19,35,54,046 23,61,38,471 4,25,84,425 22CURRENT LIABILITES 5 4,87,51,928 5,67,24,995 79,73,067 16

TOTAL LIABILITES   1,78,78,42,785 2,19,64,81,752 40,86,38,967 22.85

ASSETS          

CASH BALANCE 6 10,01,08,943 10,19,89,124 18,80,181 1.87

BANK 7 2,00,77,614 6,06,21,862 4,05,44,248 20

INVESTMENT 8 48,61,04,540 55,56,58,811 6,95,54,271 14.3

ADVANCES 9 1,11,83,29,775 1,40,72,44,443 28,89,14,688 25.83

FIXED ASSETS 10 1,68,11,068 1,74,40,479 6,29,411 3,74

OTHER ASSETS 11 4,64,10,845 5,35,27,033 71,16,188 15.33

TOTAL ASSETS   1,78,78,42,785 2,19,64,81,752 40,86,38,967 22.85

MAJOR FINDINGS FROM THE COMPARATIVE BALANCE SHEET:

From the above Balance Sheet of IOB it is clear that the bank is progressing

well. This analysis is made by comparing it with the past year balance sheet i.e.,

2011 with the 2012.

The Net Profit of the Bank has been decreased from 10725427 to 10501262. The

reason for the decline in Net Profit is because of huge number of deposits.

Deposits have risen from 145228711 to 1784341764. There is an increase of 22.86%.

This increase in % is mainly due to the increase of term deposit where it is the deposit

held at a financial institution that has a fixed term. These are generally short term with

maturities ranging anywhere from a month to a few years. When a term deposit is

purchased, the lender (the customer) understands that the money can only be withdrawn

after the term has ended.

By having the money tied up he’ll generally get a higher rate with a term deposit

compared with any other deposits. Since there is huge number of deposits from 2011 to

2012 there is a decline in Net Profit though there is increase in Net Income.

Bank, on the other hand lends loans to the Customers with a higher rate of interest and

hence, the Term Deposit amount is rotated in this way.

This leads to pay higher interest to them and thus, Net Profit decreases.

Advances have increased to 25.83%.The interest earned from these loans also

would have given rise to Net Profit but since there was a dealing with

Shareholders they were to give it to the Shareholders as dividend.

The reason for the increase in Share Capital from 6187493 to 7969982 is

because the Bank promised to pay the Shareholders a dividend of 45%.

Dividends are payments given to Shareholder members. When they earn

Profit a portion of amount is given as Dividend.

The reason attribute for the increase in borrowings from 2011 to 2012 is

because of the expansion of IOB. The borrowing has been increased to 22%

because of opening of branches. During the year the Bank opened 44% branches

across the Country, highest in the history of Bank. The maximum amount of

borrowing has been borrowed from RBI Rs 6, 50, 00,000.

Fixed Assets have also been increased from 16811068 to 17440479. This rise is

because of introduction of New Asset (fixed) like furniture & fittings, premises,

etc. Though there is some amount of deductions from depreciation for the

existing asset, the cost of purchasing New Asset is more. The reason for

purchasing Fixed Assets like furniture & fittings & premises is because of the

expansion of Banks in an around the World.

2. TREND ANALYSIS

The second popular method for analysis of financial performance of an institution

is through a trend analysis. Trend analysis is a form of comparative analysis that

is often employed to identify current and future movements of an investment. The

process may involve comparing past and current figure in order to project how

long the current trend will continue. This type of information is extremely helpful

to investors who wish to make the most from their investments.

To calculate the percentage change between two periods:

Calculate the amount of the increase/(decrease) for the period by subtracting the

earlier year from the later year.

If the difference is negative, the change is a decrease and if the difference is

positive, it is an increase.

Divide the change by the earlier year's balance. The result is the percentage

change.

Now this method is used to perform a trend analysis on the deposits and profit

acquired by Indian Overseas Bank, for the period 2011-2012.

TREND ANALYSE FOR THE YEAR 2011-2012

YEAR DEPOSITS(In Lakhs) RATIO %

2008 1,652 0 0

2009 1,956 118 18%

2010 2,162 130 30%

2011 2,856 172 72%

2012 3,507 212 112%

YEAR NET PROFIT (In Lakhs) RATIOS %2008 1202 0 02009 1326 110 10%2010 707 58 -42%2011 1073 90 -10%2012 1050 87 -13%

TREND ANALYSIS INTERPRETATION:

From the above two graph it is very clear that the Net Profit varies in significant to the

amount of deposits. This shows the inverse effect. Meaning to say they are inverse

relationship.

When there is decrease in NP there is increase in deposit. In the year 2011 Net

Profit is decreased from 1326 to 707 say (+10% to -42%) but there is increase in

deposits from 195550 to 216229 say (18% to 30%)

On comparing 2011 with 2012, as said above it is verified. When Net Profit

declines from 1073 to 1050 deposit on the other hand increase from 285610 to

350653.

This makes us understand better that Banking refers to accepting deposits and lending

loans. Therefore Banks are concentrating on both aspects by rendering service along with

profit motive.

From the above analysis it is clear that why the Net Profit of 2012 is have reduced from

2011. This is just because of huge amount of domestic as well as global deposits

especially term or fixed deposit.

CHAPTER 3

CONCLUSIONS & SUGGESTIONS

3.1 SUGGESTIONS

The performance of the Bank is commendable from the financial records it has

declared. The Director, Mr.Narendra has come forward with a promise of greater

increase in the share value of the Bank for following financial year. To make this

a reality the bank has few agendas that it has to seriously focus on.

There has to wider propaganda of the brand among the people, to make them

aware about the benefit of becoming IOB Bank customers.

The Bank should provide life time valid ATM card to all its customers, which can

encourage them for active participation in banking endeavours. Simultaneously it

is important to make people understand about the various benefits of its products.

Thus propagating the marketability of the brand among the focus group.

From observation as an intern in the branch, the service speed and efficiency can

be further improved through adequate quality control measures in the every

branch. The employees are mostly excessively occupied with work load and so,

there is no proper response to the customers at times. Thus, it creates

dissatisfaction in the minds of the customers on overall public sector banks.

To avoid this, there can be a person allotted to meet the queries of the customers

like to help fill the vouchers or guide them with banking procedures, thus

enhancing Bank’s productivity as well as customer satisfaction.

Add finaicial suggestions

3.2 CONCLUSIONS:

The main aim of the training was to understand Banking activities and management. The

objective was to bridge the gap between the theories and practice, in an actual working

bank environment.

Thus, during the course of the training I learnt many things about the Bank working and

its functions. The bank already has good number of employees on board and is still

recruiting to increase the head count. It is on the brim of increasing its customers through

its attractive schemes and offer.

The demand for banking sector is increasing day by day. There is tough competition

ahead for the company from its major competitors in the banking sector.

From the Financial Analysis, it can be concluded that the Net Profit can be risen even

more by attracting more number of customers through their financial schemes.

Last but not the least I would like to thank IOB Bank and SRM University for giving me

an opportunity to work in the field of finance.

REFERENCES

1. “Spice Telcom takes a giant leap in VAS”, www.thetimesofindia.com, 21st June

2010.

2. “TRAI holds back number portability”, Business Line, 6th April 2008.

3. http://www.hoovers.com/company/Indian_Overseas_Bank/rckscri-1-1njht4-

1njhft.html

4. http://www.hoovers.com/company/Indian_Overseas_Bank/rckscri-1.html

5. http://www.securities.com/Public/company-profile/IN/

Indian_Overseas_Bank_en_1624469.html

6. http://economictimes.indiatimes.com/indian-overseas-bank/stocks/companyid-

11713.cms

7. http://in.reuters.com/finance/stocks/analyst?symbol=IOBK.BO

8. http://www.indiainfoline.com/Markets/Company/Background/Company-Profile/

Indian-Overseas-Bank/532388

ANNEXURES

CHAIRMAN OF IOB

HEAD OFFICE AT ANNA SALAI