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Analysis Of Financial Performance Of Banks After Financial Marketing Essay

The international financial meltdown and recessionary conditions has affected financial performance of the banks. Considering the prevailing global and domestic macroeconomic situation, the Reserve Bank of India (RBI) has revised the repo rate, reverse repo rate and cash reserve ratio from 2009 to improve liquidity in the market on a regular basis.

The prime objective of this paper is to make comparative analysis of financial performance of one of the largest public sector banks (State Bank of India) and one of the largest private sector banks (ICICI) post 2009 global financial meltdown.

State Bank of India (SBI):

The State Bank of India is the country’s oldest Bank and a premier in terms of balance sheet size, number of branches, market capitalization and profits.

The bank has entered into many new businesses with strategic tie-ups – Pension Funds, General Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale Merchant Acquisition, Advisory Services, structured products etc – each one of these initiatives having a huge potential for growth.

The Bank is forging ahead with cutting edge technology and innovative new banking models, to expand its Rural Banking base, looking at the vast untapped potential in the hinterland and proposes to cover 100,000 villages in the next two years.

 

It is also focusing at the top end of the market, on whole sale banking capabilities to provide India’s growing mid / large Corporate with a complete array of products and services. It is consolidating its global treasury operations and entering into structured products and derivative instruments. Today, the Bank is the largest provider of infrastructure debt and the largest arranger of external commercial borrowings in the country. It is the only Indian bank to feature in the Fortune 500 list.

The Bank is changing outdated front and back end processes to modern customer friendly processes to help improve the total customer experience. It offers the largest banking network to the Indian customer with about 8500 of its own 10000 branches and another 5100 branches of its Associate Banks. The Bank is also in the process of providing complete payment solution to its clientele with its over 21000 ATMs, and other electronic channels such as Internet banking, debit cards, mobile banking, etc.

ICICI Bank Ltd.

ICICI Bank is India's second-largest bank with total assets of Rs. 4,062.34 billion (US$ 91 billion) at March 31, 2011 and profit after tax Rs. 51.51 billion (US$ 1,155 million) for the year ended March 31, 2011. The Bank has a network of 2,621 branches and 8,003 ATMs in India, and has a presence in 19 countries, including India.

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

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

Financial performance analysis during all four quarter of 2009-10

Table 1.1: Interest income analysis during all the four Quarters

(Rs. in Crores)

Jun-09

Sep-09

Dec-09

Mar-10

Interest earned

Change from March-09

% change

Change from June- 09

% change

Change from

Sep-09

% change

Change from Dec-09

ICICI

-396.25

-5.26

-476.5

-6.68

-567.4

-8.52

-262.59

SBI

130.37

0.75

303.12

1.73

3.81

.021

185.9

From table 1.1, we can see that in ICICI bank, interest income has been continuously decreasing in all the four quarters. In june-09, interest income has decreased by Rs.396.25 crores (5.26% from last quarter March-09), in Sep-s09, it decreased by Rs.476.5 crores (6.68% from June-09), in Dec-09, it decreased by Rs.567.4 crores (8.52% of Sep-09) which is the highest decline of all the quarters and in March -10, it decreased by Rs. 262.59 crores (4.31% from Dec-09).

In SBI bank, interest income has been continuously increasing in all the four quarters. In June-09, it is increased by Rs.130.37 crores (.75% from last quarter March-09), in Sep-09, it increased by Rs. 303.12 crores (1.73% from June-09) which is the highest jump of all the quarters, in Dec-09, it increased by Rs. 3.81 crores (.021% from Sep-09) and in March-10, it increased by Rs. 185.9 crores (1.05% from Dec-09).

Graph 1.1: Interest income analysis during all the four Quarters

Table 1.2: Operating profit analysis during all the four Quarters

Jun-09

Sep-09

Dec-09

Mar-10

Operating profit

Change from March-09

% change

Change from June- 09

% change

Change from

Sep-09

% change

Change from Dec-09

ICICI

373.66

17.34

-93.79

-3.71

-66.49

-2.73

30.05

SBI

-1603.18

-30.38

1161.15

31.61

-216.88

-4.48

575.74

From table 1.2, we can see that the operating profit of ICICI bank is increased by Rs.373.66 crores in June-09 (17.34% from March-09) highest jump of all the quarters, in Sep-09, it is decreased by Rs.93.79 crores (3.71% from June-09), in Dec-09, it decreased by Rs.66.49 crores (2.73% from Sep-09), in March-10, it again increased by Rs.30.05 crores (1.27% from Dec-09).

In June-09, operating profits of SBI decreased by Rs.1603.18 crores (30.38% from March-09), in Sep-09, it increased by Rs.1161.15 crores (31.61% from June-09) which is the highest jump of all the quarters, in Dec-09, it decreased by Rs.216.88 crores (4.48% from Sep-09) and in the last quarter March-10, it increased by Rs.575.74 crores (12.47% from Dec-09)

Graph 1.2: Operating profit analysis during all the four Quarters

Table 1.3: Earning per share (EPS) analysis during all the four Quarters

EPS

March-09

June- 09

Sep-09

Dec-09

March-10

ICICI

6.68

7.87

9.3

9.84

8.98

SBI

43.23

36.71

39.22

39.05

29.4

From the table 1.3, we can see that in ICICI bank, EPS has been continuously increasing in first three quarters and increased from Rs.7.87 per share to Rs. 9.84 per share but in the last quarter March-10, it decreased to Rs. 8.98 per share.

In SBI bank, in June-09, EPS decreased from Rs.43.23 to Rs.36.71 per share, in Sep-09 it increased to Rs. 39.22 per share, in Dec-09, it again decreased to Rs.39.05 per share and in last quarter March-10 it also decreased to Rs. 29.4 per share.

Graph 1.3: Earning per share (EPS) analysis during all the four Quarters

Table 1.4: Capital Adequacy Ratio analysis during all the four Quarters

CAR

March-09

June- 09

Sep-09

Dec-09

March-10

ICICI

15.53%

17.38%

17.69%

19.40%

19.41%

SBI

14.25%

14.12%

14.11%

13.77%

13.39%

From the table 1.4, we can see that the CAR ratio of ICICI bank has been continuously increasing in all the four quarters and it increased from 17.38% to 19.41% in the last quarter.

In SBI bank CAR ratio has been continuously decreasing in all the four quarters. It decreased from 14.12% to 13.39% in the last quarter.

Graph 1.4: Capital Adequacy Ratio analysis during all the four Quarters

Table 1.5: Return on assets analysis during all the four Quarter

ROA

March-09

June- 09

Sep-09

Dec-09

March-10

ICICI

.80%

.95%

1.17%

1.27%

1.15%

SBI

1.10%

.92%

.97%

.94%

.69%

From the table 1.5, we can see that in ICICI bank, the Return on Assets ratio has been continuously increasing in first three quarters. It increased from .95% to 1.27 % but in the last quarter March-10, it decreased to 1.15%.

In SBI bank, in June-09, it decreased to .92%. In Sep-09, it increased to .97% but in the next quarter Dec-09, it again decreased to .94%. In the mast quarter Mach-10 also it decreased to .69%.

Graph 1.5: Return on assets analysis during all the four Quarters

Table 1.6: Net Non Performing Assets (NPAs) analysis during all the four Quarters

Jun-09

Sep-09

Dec-09

Mar-10

NPAs

Change from March-09

% change

Change from June- 09

% change

Change from

Sep-09

% change

Change from Dec-09

ICICI

53.90

1.18

-108.79

-2.36

-142.22

-3.16

-515.72

SBI

-1149.54

-12.03

1524.81

18.15

1343.5

13.53

-400.62

From the table 1.6, we can see that in first quarter June-09, the net NPAs of ICICI bank increased by Rs. 53.90 crores (1.18% from March-09) but after that in all the quarters it has been continuously decreasing which is a good sign. In Sep-09, it decreased by Rs.108.79 crores (2.36% from June-09). In Dec-09 it decreased by Rs.142.22 crores (3.16% from Sep-09) and in March-10, it decreased by Rs.515.72 crores (11.83% from Dec-09) which is the highest decline of all the quarters.

Graph 1.6: Net Non-Performing Assets analysis during all the four Quarters

Financial performance analysis during all four quarter of 2010-11

Table 2.1: Interest income analysis during all the four Quarters

(Rs. in Crores)

Jun-10

Sep-10

Dec-10

Mar-11

Interest earned

Change from March-10

% change

Change from June- 10

% change

Change from

Sep-10

% change

Change from Dec-10

ICICI

-14.44

-.25

496.56

8.54

386.86

6.13

460.49

SBI

486.53

2.71

1355.97

7.35

1604.7

8.10

308.56

From table 2.1, we can see that in ICICI bank, except in first quarter, interest income has been continuously increasing in remaining all three quarters. In June-10, it decreased by Rs.14.44 crores (.25% from March-10), in Sep-10, it increased by Rs.496.56 crores (8.54% from June-10) highest jump of all the quarters, in Dec-10 it increased by Rs. 386.86 crores (6.13% from Sep-10) and in March-11, it increased by Rs. 460.49 crores (6.87% from Dec-10).

In SBI bank, interest income has been continuously increasing in all the four quarters. In June-10, it increased by Rs. 486.53 crores (2.71% from March-10), in Sep-10, it increased by Rs.1355.97 crores (7.35% from June-10), in Dec-10, it increased by Rs. 1604.7 crores (8.10% from Sep-10) which is the highest jump of all the quarters and in last quarter March-11 it increased by Rs. 308.56 crores (1.44% from Dec-10)

Graph 2.1: Interest income analysis during all the four Quarters

Table 2.2: Operating profit analysis during all the four Quarters

Jun-10

Sep-10

Dec-10

Mar-11

Operating profit

Change from March-10

% change

Change from June- 10

% change

Change from

Sep-10

% change

Change from Dec-10

ICICI

-210.82

-8.79

23.87

1.09

130.67

5.91

-37.68

SBI

940.48

18.11

222.65

3.63

407.47

6.41

-684.77

From the table 2.2, we can see that in ICICI bank, in June-10, operating profit is decreased by Rs. 210.82 crores (8.79% from March-10), in Sep-10, it increased by Rs.23.87 crores (1.09% from June-10), in Dec-10, it increased by Rs.130.67 crores (5.91% from Sep-10) which the highest jump of all the quarters and in March-11, it increased by Rs. 37.68 crores (1.60% from Dec-10).

In SBI bank, operating profit has been continuously increasing in first three quarters but decreased in the last quarter. In June-10, it increased by Rs. 940.48 crores (18.11% from March-10), in Sep-10 it increased by Rs. 222.65 crores (3.63% from June-10), in Dec-10. It increased by Rs. 407.47 crores (6.41% from Sep-10) and in March-11 it decreased by Rs. 684.77 crores (10.12% from Dec-10).

Graph 2.2: Operating profit analysis during all the four Quarters

Table 2.3: Earning per share (EPS) analysis during all the four Quarters

EPS

March-10

June- 10

Sep-10

Dec-10

March-11

ICICI

9.02

9.2

10.91

12.48

12.61

SBI

29.4

45.9

39.39

45.54

.33

From the table 2.3, we can see that the EPS of ICICI bank has been continuously increasing in all the four quarters. It increased from Rs. 9.2 per share in June-10 to Rs. 12.61 crores in March-11.

In SBI bank, in June-10, EPS increased from Rs. 29.4 per share to Rs. 45.9 per share, in Sep-10, it declined to Rs. 39.39 per share, in Dec-10, it again increased to Rs. 45.54 per share, in last quarter March-11, it decreased to Rs. .33 per share a sharp decline.

Graph 2.3: Earning per share (EPS) analysis during all the four Quarters

Table 2.4: Capital Adequacy Ratio analysis during all the four Quarters

CAR

March-10

June- 10

Sep-10

Dec-10

March-11

ICICI

19.41%

20.20%

20.23%

19.98%

19.54%

SBI

13.39%

13.54%

13.20%

13.16%

11.98%

From the table 2.4, we can see that the CAR ratio of ICICI bank has been increasing first two quarters and decreasing in last two quarters. In June-10, it increased to 20.20% from 19.41% in March-10, in Sep-10, it increased to 20.23%, in Dec-10, it decreased to 19.98% and in March-11 it decreased to 19.54%.

In SBI bank, CAR ratio has been continuously decreasing in all the four quarters. It decreased to 19.18% in March-11 from 13.54% in June-10.

Table 2.4: Capital Adequacy Ratio analysis during all the four Quarters

Table 2.5: Return on Assets analysis during all the four Quarters

ROA

March-10

June- 10

Sep-10

Dec-10

March-11

ICICI

1.15%

1.15%

1.31%

1.46%

1.47%

SBI

.69%

1.07%

.87%

.94%

.002%

In ICICI bank, CAR ratio has been continuously increasing in all the four quarters. It increased to 1.47% in March-11 from 1.15% in June-10.

In SBI bank, in June-10 it increased to 1.07% from .69% in March-10, in Sep-10, it decreased to .87%, in Dec-10 it again increased to .94% and in March-11, it decreased to .002%.

Graph 2.5: Return on Assets analysis during all the four Quarters

Table 2.6: Non-performing Assets (NPAs) analysis during all the four Quarters

Jun-10

Sep-10

Dec-10

Mar-11

NPA

Change from March-10

% change

Change from June- 10

% change

Change from

Sep-10

% change

Change from Dec-10

ICICI

-384.93

-10.02

-310.95

-8.99

--272.49

-8.66

-465.38

SBI

204.2

1.88

526.86

4.76

93.91

.81

651.75

From the table 2.6, we can see that in ICICI bank NPAs has been continuously decreasing in all the four quarters a good sign of loan collection policy, in June-10, NPAs decreased by Rs. 384.93 crores (10.02% from March-10), in Sep-10, it again decreased by Rs. 310.95 crores (8.99% from June-10). In Dec-10, it decreased by Rs. 272.49 crores (8.66% from Sep-10) and in March-11, it decreased by Rs. 465.38 crores (16.19% from Dec-10).

In SBI bank, NPAs has been continuously increasing in all the four quarters. In June-10, it increased by Rs. 204.2 crores (1.88% from March-10), in Sep-10, it increased by Rs. 526.86 crores (4.76% from June-10), in Dec-10, it increased by Rs. 93.91 crores (.81% from Sep-10) and in March-11 it increased by Rs. 5.57 crores (5.57% from Dec-10) which is the highest in all the quarters.

Graph 2.6: Non-performing Assets analysis during all the four Quarters

Financial performance analysis during all three quarter of 2011-12

Table 3.1: Interest income analysis during all the three Quarters

(Rs. in Crores)

Jun-11

Sep-11

Dec-11

Interest earned

Change from March-11

% change

Change from June- 11

% change

Change from

Sep-11

ICICI

462.07

6.45

539.10

7.07

434.25

SBI

2476.09

11.40

1769.65

7.31

1694.33

We can see from the table 3.1, interest earned by ICICI bank has been increasing in all the three quarters. In June-11, it is increased by Rs. 462.07 crores (6.45% from March-11), in Sep-11, it increased by Rs. 539.10 crores (7.07% from June-11), in Dec-11, it increased by Rs. 434.25 crores (5.32% from Sep-11).

In SBI bank also interest income has been increasing in all the three quarters. In June-11, it increased by Rs. 2476.09 crores (11.40% from March-11), in Sep-11, it increased by Rs. 1769.65 crores (7.31% from June-11), in Dec-11, it increased by Rs. 1694.33 crores (6.52% from Sep-11.

Graph 3.1: Interest income analysis during all the three Quarters

Table 3.2: Operating profit analysis during all the three Quarters

Jun-11

Sep-11

Dec-11

Operating profit

Change from March-11

% change

Change from June- 11

% change

Change from

Sep-11

ICICI

462.07

6.45

539.10

7.07

434.25

SBI

2476.09

11.40

1769.65

7.31

1694.33

We can see from the table 3.2, operating profits in ICICI bank has been continuously increasing in all the three quarters. In June-11, it increased by Rs. 462.07 crores (6.45% from March-11), in Sep-11, it increased by Rs. 539.10 crores (7.07% from June-11) which is the highest jump in all the quarters, in Dec-11, it increased by Rs.434.35 crores (5.32% from Sep-11).

In SBI also operating profits in ICICI bank has been continuously increasing in all the three quarters. In June-11, it increased by Rs. 2476.09 crores (11.40% from March-11) which is the highest jump in all the quarters, in Sep-11, it increased by Rs. 1769.65 crores (7.31% from June-11), in Dec-11, it increased by Rs. 1694.33 crores (6.52% from Sep-11).

Graph 3.2: Operating profit analysis during all the three Quarters

Table 3.3: Earning per share (EPS) analysis during all the four Quarters

EPS

March-11

June- 11

Sep-11

Dec-11

ICICI

12.61

11.56

13.05

14.99

SBI

.33

24.94

44.26

51.39

From the table 3.3, we can see that the EPS of the ICICI bank in June-11 is decreased to Rs. 11.56 per share. In Sep-11 it increased to Rs. 13.05 per share and in Dec-11, it increased to Rs. 14.99 per share.

In SBI bank, EPS has been continuously increasing in all the three quarters and increased to Rs. 51.39 per share from Rs. 24.94 per share.

Graph 3.3: Earning per share (EPS) analysis during all the four Quarters

Table 3.4: Capital Adequacy Ratio analysis during all the four Quarters

CAR

March-11

June- 11

Sep-11

Dec-11

ICICI

19.54%

19.57%

18.99%

18.88%

SBI

11.98%

11.6%

11.40%

11.6%

We can see from table 3.4, that in ICICI bank capital adequacy ratio has been continuously decreasing in all three quarters. It decreased to 18.88% in Dec-11 from 19.57% in June-11.

In SBI bank, in June-11, it decreased to 11.6% from 11.98% in March-11. In sep-11 it again decreased to 11.40%. In Dec-11, it increased to 11.6%.

Graph 3.4: Capital Adequacy Ratio analysis during all the four Quarters

Table 3.5: Return on Assets analysis during all the four Quarters

ROA

March-11

June- 11

Sep-11

Dec-11

ICICI

1.47%

1.30%

1.41%

1.57%

SBI

.002%

.5%

.87%

.97%

From the table 3.5, we can see that the Return on assets ratio has been increasing in all the three quarters. It increased to 1.57% in Dec-11 from 1.30% in June-11.

In SBI bank also Return on assets ratio has been increasing in all the three quarters. It increased to 97% in Dec-11 from .002% in June-11.

Graph 3.5: Return on Assets analysis during all the four Quarters

Table 3.6: Net Non-Performing Assets (NPAs) analysis during all the three Quarters

Jun-11

Sep-11

Dec-11

NPAs

Change from March-11

% change

Change from June- 11

% change

Change from

Sep-11

ICICI

-104.84

-4.35

-118.75

-5.15

-136.10

SBI

88.31

.72

3685.29

29.64

2682.68

From the table 3.6, we can see that NPAs has been continuously decreasing in all the three quarters which is good sign of loan collection policy. In June-11, it decreased by Rs. 104.84 crores (4.35% from March-11), in Sep-11, it decreased by Rs. 118.75 crores (6.23% from June-11) and in Dec-11 it decreased by Rs. 136.10 crores (6.23% from Sep-11).

In SBI bank, NPAs has been continuously increasing in all the three quarters. In June-11, it increased by Rs.88.31 crores (.72% from March-11), in Sep-11, it increased by Rs.3685.29 crores (29.64% from June-11) and in Dec-11, it increased by Rs. 2682.68 crores (16.64% from Sep-11).

Table 3.6: Net Non-Performing Assets analysis during all the three Quarters

Conclusion: Financial meltdown and recessionary conditions severely affected the performance of both the public and private sector banks. To improve the liquidity in the market, RBI has also revised the repo rate, reverse repo rate and CRR time to time. After analyzing the financial performance of largest public sector banks SBI and one of the largest private sector banks ICICI from 2009-10, we can say that both the banks have been continuously improving from last three years. SBI has been continuously doing better compare to ICICI bank in terms of interest income, operating profits and earning per share. In terms of maintaining capital adequacy ratio, return on total assets and NPAs management, ICICI bank has an upper hand over SBI bank.

Hence on one hand ICICI bank needs to focus more on their profitability part, SBI on the other hand needs to have a cautionary outlook towards NPAs management.


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