APROJEC

TREPORT
ON
COMPARATIVESTUDYOFFINANCIALREPORT
OF
TOPTHREEBANKSOFINDIA

SUBMITTEDTOTILAKMAHARASHTRAUNIVERSITYINP
ARTIALFULFILLMENTOF2YEARSFULLTIMECOURSE
MASTEROFBUSINESSADMINISTRATION(
MBA)
SubmittedBy:KA
ATRAFIKO.
(Batch2008-09)
GuidedBy:Prof.R.G
ANESHAN

MAHARASHTRACOSMOPOLITANEDUCATIONSOCIETYS
PAIINTERNATIONALCENTREFORMANAGEMENTEXCELLENCEC
AMP-PUNE-411001
1

CERTIFICATE
ThisiscertifythatKAATRAFIKOSMANBHAIstudentofPAIinternationalcentreformanagement
excellence,MaharashtraCosmopolitanEducationsociety,Punehascompletedhisfieldworkreportontheto
picofCOMPARATIVESTUDYOFFINANCIALREPORTOFTOPTHREEBANKSOFINDIAandhass
ubmittedthefieldworkreportinpartialfulfillmentofMBAofthe collegeforthe academicyear 2008-2009.
Hehas worked under our guidance anddirection.Thesaid report is basedon
bonafideinformation.

Projectguide name

Prof. R Ganesan

Designation

Director

PAIINTERNATIONALCENTREF
OR
MANAGEMENTEXCELLENCE
MaharashtraCosmopolitanEducationSociety
DECLARATION

IherebydeclarethatprojecttitledCOMPARATIVESTUDYOFFINANCIALREPORTOFTOPT
HREEBANKSOFINDIAisanoriginalpieceofresearchworkcarriedoutbymeundertheguidanceandsupe
rvisionofprof.RGanesan.Theinformationhasbeencollectedfromgenuine&authenticsources.Theworkha
sbeensubmittedinpartialfulfillmentoftherequirementof MBA to ourcollege.

Place:

Signature:

Date:

Name ofthe students:

ACKNOWLEDGEMENT
Perseveranceinspirationandmotivationhavealwaysplayedakeyroleinsuccessofanyventure.Ihe
rebyexpressmydeepsenseofgratitudetoallthepersonalitiesinvolveddirectlyandindirectlyin
myprojectwork.
IwouldthanktoGodfortheirblessingandmyparentsalsofortheirvaluablesuggestionand

support

in myproject report.
Iwouldalsoliketothankourfriendsandthosewhohavehelpedusduringthisprojectdirectlyorindire
ctly.
Lastbut

not

theleast;Iwould

like

to

expressmysinceregratitudeto

all

thefacultymemberswhohavetaughtmeinmyentireMBAcurriculumandourDirectorProf.R.GANESAN
whohasalwaysbeenasourceofguidance,inspirationandmotivation.However,Iacceptthesoleresponsibili
tyforanypossibleerrorsofomissionandwouldbeextremelygratefultothereadersofthis projectreport if
theybringsuch mistakes to mynotice.

KAATRAFIKO.

INDEX

Sr.No
Subjects
Page
1
.

Introduction

2
.

BankProfile

1
0

i.

SBI
1
1

ii.

ICICI
1
4

iii.

PNB
1
7

3
.

Products& Services
2
1

4
.

BalanceSheet
3
6

5
.

RatioAnalysis
4
0

6
.

Objectives
6
2

7
.

Importance
6
4

8
.

Advantages, Limitations

6
6
9
.

Conclusion
6
9

10
.

Bibliography
7
1

INTRODUCTION

INRTODUCTION
Afterpreparationofthefinancialstatements,onemaybeinterestedinknowingthepositionofanenter
prisefromdifferentpointsofview.Thiscanbedonebyanalyzingthefinancialstatementwiththehelp
ofdifferenttoolsofanalysissuchasratioanalysis,fundsflowanalysis,cashflowanalysis,comparativ
estatementanalysis,etc.HereIhavedonefinancialanalysisbyratios.Inthisprocess,ameaningfulrel
ationshipisestablishedbetweentwoormoreaccounting figuresfor comparison.
Financialratiosarewidelyusedformodelingpurposesbothbypractitionersandresearchers.Thefir
minvolvesmanyinterestedparties,liketheowners,management,personnel,customers,suppliers,c
ompetitors,regulatoryagencies,andacademics,eachhavingtheirviewsinapplyingfinancialstatem
entanalysisintheirevaluations.Practitionersusefinancialratios,forinstance,toforecastthefuturesu
ccessofcompanies,whiletheresearchers'maininteresthasbeentodevelopmodelsexploitingtheser
atios.Manydistinctareasofresearchinvolvingfinancialratioscanbediscerned.Historicallyonecan
observeseveralmajorthemesinthefinancialanalysisliterature.Thereisoverlappingintheobservabl
ethemes,andtheydonotnecessarilycoincidewithwhattheoreticallymightbethe
bestfoundedareas.
Financialstatementsarethosestatementswhichprovideinformationaboutprofitabilityandfinanci
alpositionofabusiness.Itincludestwostatements,i.e.,profit&lossa/corincomestatementandbalan
ce sheet or position statement.
The
incomestatementpresentsthesummaryoftheincomeearnedandtheexpensesincurredduringafina
ncialyear.Positionstatementpresentsthefinancialpositionofthebusinessatthe end oftheyear.

 Beforeunderstandingthemeaningofanalysisoffinancialstatements,itisnecessaryto
understandthemeaningofanalysisandfinancialstatements.

Analysismeansestablishingameaningfulrelationshipbetweenvariousitemsofthetwofinancialsta
tementswitheachotherinsuchawaythataconclusionisdrawn.Byfinancialstatements,wemeantwo
statements(1)profit&lossa/c(2)balancesheet.Thesearepreparedattheendofagivenperiodoftime.Theyarein
dicatorsofprofitabilityandfinancialsoundness of the businessconcern.
Thus,analysisoffinancialstatementsmeansestablishingmeaningfulrelationshipbetweenvariousi
tems of the twofinancialstatements, i.e.,income statementand position statement
Partiesinterested in analysis of financial statements
Analysisoffinancialstatementhasbecomeverysignificantduetowidespreadinterestofvariouspart
iesinthefinancialresultofabusinessunit.Thevariouspersonsinterestedintheanalysisoffinancial
statements are: Short- termcreditors
Theyare interested in knowingwhethertheamounts owingto them will be paid as
andwhenfall dueforpayment or not.
Longterm creditors
Theyare interested inknowingwhetherthe principal amount and interest thereon will bepaid
on timeor not.
Shareholders
Theyare interested in profitability,returnandcapitalappreciation.
Management
Themanagement is interested in the financial position andperformanceof theenterprise
asawhole andof its various divisions.
Trade unions

Theyare interested in financial statements for negotiatingthe wages or salaries or

bonusagreement with management.
8

 Taxationauthorities
These authorities areinterested in financial statements fordeterminingthe taxliability.
Researchers
Theyare interested in thefinancialstatements in undertakingresearch in business
affairsandpractices.

Employees
Theyare interestedas it enables them to justifytheir demands for bonus and increase
inremuneration.
You have seen that different parties are interestedin the resultsreported inthe
financialstatements.These results are reportedbyanalyzingfinancialstatementsthrough the useof
ratioanalysis.

10

BANK PROFILE

11

1.

STATEBANKOFINDIA

TypePublic(BSE,NSE:SBI)&(
LSE:SBID)
Founded-

Calcutta, 1806 (asBankof Calcutta)

CorporateCentre,Mada

Headquarters- mCamaRoad,Mumbai
400 021India
Keypeople-

Om PrakashBhatt,Chairman

StateBankofIndia(SBI)
(LSE:SBID)isthelargestbankinIndia.Itisalso,measuredbythenumberofbranchofficesandemployees,the
secondlargestbankintheworld.ThebanktracesitsancestrybackthroughtheImperialBankofIndiatothefou
ndingin1806oftheBankofCalcutta,makingittheoldestcommercialbankintheIndianSubcontinent.TheGo
vernmentofIndianationalizedtheImperialBankofIndiain1955,withtheReserveBankofIndiatakinga60%
stake,andrenamedittheStateBankofIndia.In2008,theGovernmenttookoverthestakeheldbythe
ReserveBankof India.
SBIprovidesarangeofbankingproductsthroughitsvastnetworkinIndiaandoverseas,includingpro
ductsaimedatNRIs.Withanassetbaseof$126billionanditsreach,itisaregionalbankingbehemoth.SBIhasl
aidemphasisonreducingthehugemanpowerthroughGoldenhandshakeschemes

andcomputerizingits

operations.
The

StateBankGroup,withover16000branches,hasthelargestbranchnetworkinIndia.Ithas

marketshareamong Indiancommercial banks of about 20% in deposits and advances.

12

International presence

RegionalofficeoftheStateBankofIndia(SBI),India'slargestbank,inMumbai.Thegovernment
ofIndia is the largestshareholderin SBI.
Thebankhas52branches,agenciesorofficesin32countries.IthasbranchesoftheparentinColombo,
Dhakka,Frankfurt,HongKong,Johannesburg,Londonandenvirons,LosAngeles,MaleintheMaldives,M
uscat,NewYork,Osaka,Sydney,andTokyo.Ithasoffshorebankingunitsin
theBahamas,Bahrain,andSingapore,andrepresentativeoffices inBhutanandCape Town.
SBIoperatesseveralforeignsubsidiariesoraffiliates.In1990itestablishedanoffshorebank,StateBa
nkofIndia(Mauritius).IthastwosubsidiariesinNorthAmerica,StateBankofIndia(California),andStateBa
nkofIndia(Canada).In1982,thebankestablisheditsCaliforniasubsidiary,whichnowhassevenbranches.T
heCanadiansubsidiarywasalsoestablishedin1982andalsohassevenbranches,fourinthegreaterTorontoar
ea,andthreeinBritishColumbia.InNigeria,itoperatesasINMBBank. This bankwasestablishedin 1981as
theIndoNigerianMerchantBankandreceivedpermissionin2002tocommenceretailbanking.Itnowhasfivebranch
esinNigeria.InNepalSBIowns50%ofNepalSBIBank,whichhasbranchesthroughoutthecountry.InMosc
owSBIowns60%ofCommercialBankofIndia,withCanaraBankowningtherest.InIndonesiaitowns76%o
fPTBankIndoMonex.StateBankofIndiaalreadyhasabranch in Shanghaiand plans to open oneup
inTianjin.

13

BOARDOFDIRECTORS

ShriO.P.Bhatt(Chairman)

Shri S.K. Bhattacharyya(MD&CC&RO)

Shri Suman KumarBery

Dr.Ashok Jhunjhunwala

ShriDileep C. Choksi

Shri S.Venkatachalam

Dr. DevaNand Balodhi

Prof. Mohd. SalahuddinAnsari

Dr.(Mrs.)VasanthaBharucha

10

ShriArunRamanathan

11

Smt. Shyamala Gopinath

2.INDUSTRIALCREDIT&INVESTMENTCORPORATIONO
FINDIA(ICICI)
ICICIwasformedin1955attheinitiativeoftheWorldBank,thegovernmentofIndiaandIndianindust
ryrepresentatives.Theprincipalobjectivewas

to

createadevelopmentfinancialinstitutionforprovidingmedium-termandlongtermprojectfinancingtoIndianbusinesses.Untilthelate1980s,ICICIprimarilyfocuseditsactivitiesonproje
ctfinance,providinglongtermfundstoavarietyofindustrialprojects.WiththeliberalizationofthefinancialsectorinIndiainthe1990s,I
CICItransformeditsbusinessfromadevelopmentfinancialinstitutionoffering
onlyprojectfinancetoadiversifiedfinancialservicesproviderthat,alongwithitssubsidiariesandothergroup
companies,offeredawidevarietyofproductsandservices.AsIndiaseconomybecamemoremarketorientedandintegratedwiththeworldeconomy,ICICIcapitalizedonthenewopportunitiesto

providea

widerrangeof financial products andservices to a broader spectrum of clients.

ICICIBankwasincorporatedin1994asapartoftheICICIgroup.ICICIBanksinitialequitycapitalw
ascontributed75.0%byICICIand25.0%bySCICILimited,adiversifiedfinanceandshippingfinancelender
ofwhichICICIowned19.9%atDecember1996.PursuanttothemergerofSCICIintoICICI,ICICIBankbeca
meawholly-ownedsubsidiaryofICICI.ICICIsholdinginICICI Bankreduced duetoadditionalcapital
raisingby

ICICI

Bankandsale

of

shares

byICICI,pursuanttotherequirementstipulatedbytheReserveBankofIndiathatICICIdiluteitsownershipof
ICICIBank.EffectiveMarch10,2001,ICICIBankacquiredBankofMadura,anoldprivate sector bank, in
anall-stockmerger.
Theissueofuniversalbanking,whichintheIndiancontextmeanstheconversionoflongtermlendinginstitutionssuchasICICIintocommercialbanks,hadbeendiscussedatlengthoverthepastsever
alyears.ConversionintoabankofferedICICItheabilitytoacceptlowcostdemanddepositsandofferawiderrangeofproductsandservices,andgreateropportunitiesfor

earning

nonfundbasedincomeintheformofbankingfeesandcommissions.ICICIBankalsoconsideredvariousstrategic
alternativesinthecontextoftheemergingcompetitivescenariointheIndianbankingindustry.ICICIBankide
ntifiedalargecapitalbaseandsizeandscaleofoperationsaskeysuccessfactorsintheIndianbankingindustry.

InviewofthebenefitsoftransformationintoabankandtheReserveBankofIndiaspronouncementsonunive
rsalbanking,ICICIandICICIBankdecided to merge.

Atthetimeofthemerger,bothICICIBankandICICIwerepubliclylistedinIndiaandontheNewYork
StockExchange.TheamalgamationwasapprovedbyeachoftheboardsofdirectorsofICICI,ICICIPersonal
FinancialServices,ICICICapital

ServicesandICICIBankat

theirrespectiveboardmeetingsheldonOctober25,2001.TheamalgamationwasapprovedbyICICIBanks
andICICIsshareholdersattheirextraordinarygeneralmeetingsheldonJanuary25,2002andJanuary30,20
02,respectively.The

amalgamationwassanctioned

bytheHighCourtofGujaratatAhmedabadonMarch7,2002andbytheHighCourtofJudicatureatBombayon
April11,2002.TheamalgamationbecameeffectiveonMay3,2002.Thedateoftheamalgamationforaccoun
tingpurposesunderIndian GAAP wasMarch 30, 2002.
TheSangliBankLimited,anunlistedprivatesectorbankmergedwithICICIBankwitheffectfromAp
ril19,2007.Onthedateofacquisition,SangliBankhadover190branchesandextensioncounters,totalassets
ofRs.17.6billion(US$440million),totaldepositsofRs.13.2billion (US$ 330 million), total loans ofRs.
2.0 billion(US$ 50million).

16

BOARDOFDIRECTORS
1.

N. Vaghul,Chairman

2.

SridarIyengar

3.

L. N. Mittal

4.

NarendraMurkumbi

5.

Anupam Puri

6.

ArunRamanathan

7.

M. K. Sharma

8.

P. M. Sinha

9.

Marti G. Subrahmanyam

10.

T. S. Vijayan

11.

V. Prem Watsa

12.

K. V.Kamath,ManagingDirector&CEO

3.PUNJABNATIONALBANK(PNB)
PunjabNationalBank(PNB)wasregisteredonMay19,1894undertheIndianCompaniesActwithits
officeinAnarkaliBazaarLahore.TheBank,foundedby
DyalSinghMajithiaandLalaHarkishenLal,isthesecondlargestgovernmentownedcommercialbankinIndiawithabout4,500branchesacross764cities.Itservesover37millioncustom
ers.Thebankhasbeenranked248thbiggestbankintheworldbyBankersAlmanac,London.TotalBusinessof
thebankforfinancialyear2007isestimatedtobeapproximatelyUS$60billion.Ithasabankingsubsidiaryint
heUK,aswellasbranchesinHongKongandKabul,andrepresentativeofficesinAlmaty,Shanghai,andDuba
i.
WearealeadingpublicsectorcommercialbankinIndia,offeringbankingproductsandservicestocor
porateandcommercial,retailandagriculturalcustomers.Ourbankingoperationsforcorporateandcommerc
ialcustomersincludearangeofproductsandservicesforlargecorporations,aswellassmallandmiddlemarke
tbusinessesandgovernmententities.Weofferawiderangeofretailcreditproductsincludinghousingloans,p
ersonalloansandautomobileloans.Wecatertothefinancingneedsoftheagriculturalsectorandhavecreatedi
nnovativefinancingproductsforfarmers.Wealsoprovidesignificantfinancingtootherprioritysectorsinclu
dingsmallscaleindustries.Throughourtreasuryoperations,wemanageourbalancesheet,includingthemai
ntenanceofrequiredregulatoryreserves,andseektomaximizeprofitsfromourtradingportfoliobytakingad
vantageof marketopportunities.
Ourrevenue,whichisreferredtohereinandinourfinancialstatementsasourincome,consistsofinter
estincomeandotherincome.Interestincomeconsistsofinterestonadvances(includingthediscountonbillsd
iscounted)andincomeoninvestments.Incomeoninvestmentsconsistsofinterestanddividendsfromsecurit
iesandourotherinvestmentsandinterestfrominterbankloanandcashdepositswekeepwiththeRBI.Oursecu
ritiesportfolioconsistsprimarilyofGovernmentofIndiaandstategovernmentsecurities.Wemeetourstatut
oryliquidityreserveratiorequirementsthroughinvestmentsintheseandotherapprovedsecurities.Wealsoh
olddebenturesandbondsissuedbypublicsectorundertakingsandothercorporations,commercialpaper,
equityshares andmutual fund units.
Ourinterest expense consists of our interest on deposits as wellasborrowings.Ourinterest

Incomeandexpenseareaffectedbyfluctuationsininterestratesaswellasthevolumeofactivity.Ourintereste
xpenseisalsoaffectedbytheextenttowhichwefundouractivitieswithlowinterestor

non-interest

deposits,and the extentto which we relyon borrowings.

Ournoninterestexpenseconsistsprincipallyofoperatingexpensessuchasexpensesforwagesandemployeebenefits
,rentpaidonpremises,insurance,postageandtelecommunicationsexpenses,printingandstationery,deprec
iationonfixedassets,otheradministrativeandotherexpenses.Provisioningfornonperformingassets,depreciationoninvestmentsandincometaxisincluded

in

provisions

andcontingencies
Weuse avarietyofindicators to measure ourperformance.Theseindicatorsare presented
intabularforminthesectiontitledSelectedStatisticalInformationonpage[].Ournetinterestincomerepre
sentsourtotalinterestincome(onadvancesandinvestments)netoftotalinterestexpense(ondepositsandborr
owings).Netinterestmarginrepresents
theratioofnetinterestincometothemonthlyaverageoftotalinterestearningassets.Ourspreadrepresentsthe
differencebetweentheyieldonthemonthlyaverageofinterestearningassetsandthecostofthemonthlyavera
geofinterestbearingliabilities.Wecalculateaverageyieldonthemonthlyaverageofadvancesandaverageyi
eldonthemonthlyaverageofinvestments,aswellastheaveragecostofthemonthlyaverageofdepositsandav
eragecostofthemonthlyaverage

of

borrowings.Our

costoffundsistheweightedaverageoftheaveragecostofthemonthlyaverageofinterestbearingliabilities.Fo
rpurposesoftheseaveragesandratiosonly,theinterestcostoftheunsecuredsubordinatedbondsthatweissuef
orTier2capitaladequacypurposes(Tier2bonds)isincludedinourcostofinterestbearingliabilities.Inourf
inancialstatements,thesebondsareaccountedforasotherliabilitiesandprovisionsandtheirinterestcostis
accountedforunderotherinterestexpenses.
Since1969,whenwebecameapublicsectorbank,wehavemanagedtocontinuetogrowourbusiness
whilemaintainingastrongbalancesheet.AsofSeptember30,2004,ourtotaldepositsrepresented85.9% of
ourtotalliabilities.Onaverage,interestfreedemanddepositsandlowinterestsavingsdepositsrepresented43
.8%ofthesedepositsinthefirstsixmonthsoffiscal2005.Theselowcostdepositsledtoanaveragecostoffundsexcludingequityforthefirstsixmonthsoffiscal2005of4.7%.Asof
September30,2004,ourgrossandnetnonperformingassetsconstituted7.65%and0.30%ofourgrossandnetadvances,respectively.Infiscal2004ourt
otalincomewasRs.96.5billionandournetprofitwasRs.11.1billionbeforeadjustmentandRs.10.6billionaft
eradjustmentaspartoftherestatementofourfinancialstatementsforthisIssue.Inthefirstsixmonthsoffiscal2
005ourtotalincomewasRs.51.9billionandournetprofitwasRs.7.4billion.Betweenfiscal2002and2004,o
urtotalincomegrewatacompoundannualrateof12.5%,our
19

unadjustedandadjustednetprofitgrewatacompoundannualrateof40.4%and37.4%,respectively,andourto
taldepositsandtotaladvancesgrewatacompoundannualgrowthrateof17.1% and17.2%,respectively.
We intend to maintainour position as a costefficientandcustomer friendlyinstitution
thatProvidescomprehensivefinancialandrelatedservices.Weseektoachievethisbycontinuingtoadopttech
nologywhichwillintegrateourextensivebranchnetwork.Weintendtogrowbycrossselling
variousfinancialproductsandservicestoourcustomersandbyexpandinggeographicallyinIndiaandinternat
ionally.We are committedto excellencein serving the public andalsomaintaining
highstandardsofcorporateresponsibility.InlinewithourphilosophyofaidingIndiasdevelopment
wehaveopened branches in manyruralareas.

20

BOARDOFDIRECTORS

1.

DrK.C Chakrabarty

2.

Smt. RavneetKaur

3.

ShriL.M.Fonseca

4.

Shri.S.R.Khurana

5.

Shri P.K. Nayar

6.

ShriMohanLalBagga

7.

Shri Mushtaq AAntulay

8.

ShriGautam P. Khandelwal

9.

Shri Vinod KumarMishra

10.

ShriTribhuwanNathChaturvedi

11.

Shri G R Sundaravadivel

12.

ShriDevinderKumar Singla

PRODUCTS
&
SERVICES

1.SBIBANKING
PersonalBanking
Agricultural& RuralBanking
NRIServices
InternationalBanking
CorporateBanking
Services
Govt. Business
SME

PersonalBanking

AgriculturalAg

DepositSchemes

riculturalBanki

PersonalFinance

ngMicroCredit

Corp

RegionalRural

SalaryPackageSe

Banks

NRIServicesType
ofAccounts

rvices
InternationalTr

CorporateBankingC

adeFinance

orporateAccountsM

MerchantBanking

id CorporateGroup

Correspondent

ProjectFinance

Banking

Products&Serv
ices

Services

Banking

Govt.Bu

InternetBanking

ATM

sinessGo

Mobile

Services

vt.
Accounts.
23

SME
DematServices

PublicP
rovident
Fund.

PERSONALBANKIN
G

SBITerm Deposits

SBI LoanFor Pensioners

SBIRecurringDeposits

LoanAgainstMortgageOfProperty

SBIHousing Loan

LoanAgainstShares&Debentures

SBICarLoan

Rent Plus Scheme

SBIEducationalLoan

Medi-PlusScheme

SBIPersonalLoan

RatesOfInterest

AGRICULTUR
A

StateBankofIndiaCaterstotheneedsofagriculturistsandlandlessagriculturallabourersthroug
hanetworkof6600ruralandsemiurbanbranches.Thereare972specializedbrancheswhichhavebeensetupindifferentpartsofthecountry
exclusivelyfor
thedevelopmentofagriculturethroughcreditdeployment.Thesebranchesinclude427AgriculturalDev
elopmentBranches(ADBs)and547brancheswithDevelopmentBankingDepartment(DBDs)whichca
tertoagriculturistsand2AgriculturalBusinessBranchesatChennaiandHyderabadcateringtotheneeds
ofhi techcommercialagriculturalprojects.
Ourbrancheshavecoveredawholegamutofagriculturalactivitieslikecropproduction,horticul
ture,plantationcrops,farmmechanization,landdevelopmentandreclamation,diggingofwells,tubewe
llsandirrigationprojects,forestry,constructionofcoldstoragesandgodowns,processingofagriproducts,financetoagri-inputdealers,alliedactivitieslikedairy,fisheries,poultry,sheep-goat,
piggeryand rearingof silk worms.
24

Thebranchalsohasfarmer'smeetinvillagestoexplaintofarmersaboutvariousschemesofferedb
y
thebank.TogivespecialfocustoagriculturelendingBankhassetupagribusinessunit.Bankhasalsoagris
pecialistsinvariousdisciplinestohandleprojects/guidefarmersintheiragri

25

ventures.Advancesaregivenforverysmall

activitycoveringpoorestofthepoortohi-techactivities

involvinglargefund outlays.
WearetheleadersinagrifinanceinthecountrywithaportfolioofRs.18,000carsinagriadvances

to

around 50 lac farmers.

NRISERVICES

WorldClassServicesfromaBankyoucanTrustIndianseverywhereshouldbecomeenlightenedInte
rnationalcitizens.Whereveryouare,whichevercountryyoulive,enrichthatnation,notonlyinfinancialterm
s,butalsowithyoursweatknowledgeanddignitysincethatisthetraditionofthecountryfromwhereyoucame.
Atthesametime,rememberwehaveacommonumbilical connectivitytoour motherland,India.

INTERNATIONALBANKING
InternationalbankingservicesofStateBankofIndiaaredeliveredforthebenefitofitsIndiancustome
rs,non-residentIndians,foreignentitiesandbanksthroughanetworkof84offices/branchesin
32countriesason31March2008,spreadoveralltimezones.ThenetworkisaugmentedbyaclusterofOversea
sandNRIbrancheswithinIndiaandcorrespondentlinkswithover
522banks,theworldover.Bank'sJointVenturesandSubsidiariesabroadfurtherunderlinetheBank'sinternat
ionalpresence.
Theservicesincludecorporatelending,loansyndications,merchantbanking,handlingLettersofCr
editandGuarantees,short-termfinancing,collectionofcleananddocumentarycreditsandremittances.
TheBankhascarvedanicheforitselfintheEurolandwithbrancheslocatedinAntwerp,ParisandFrankfurt.In
dianbanksandcorporatesareabletoavailsingle-windowEuroservicesfromtheBank'sFrankfurtbranch.

CORPORATE BANKING
SBIisaone shopprovidingfinancialproducts/servicesofawiderangeforlarge,mediumandsmall
customers both domestic andinternational.

WorkingCapitalFinancing

Assistance extended both as Fund based and Non-Fund basedfacilities

toCorporate,Partnershipfirms, Proprietaryconcerns

WorkingCapital financeextended to all segmentsofindustries

andservicessectorsuch asIT TermLoans
to support capitalexpenditures forsettingup newventures as
alsoforexpansion,renovationetc.
DeferredPaymentGuarantees
to support purchase ofcapital
equipments.CorporateLoans
For avarietyof businessrelated purposes
tocorporate.Export Credit
To Corporate / Non
CorporateStrategicBusiness
Units
(i) CorporateAccounts Group (CAG)
(ii)ProjectFinance
(iii)LeaseFinance

An exclusiveunit providingones shoppingtoCorporate

A dedicatedset up specialised in financingof infrastructure and other large
projectsExclusiveset up for handlinglarge ticket leases.
Pricing
SBI's PrimeLending Rates(PLR) is amongthe
lowestPresentlyBankhas two PLR's
SBAR forloans payable on demandandup to
oneyearfor loanspayable beyond oneyear.

SERVICES
Listed on the left areServices, SBIoffersto its customers.

DOMESTIC TREASURY

SBIVISHWAYATRAFOREIGN TRAVELCARD

BROKINGSERVICES

REVISEDSERVICE CHARGES

ATM SERVICES
26

INTERNETBANKING

E-PAY

E-RAIL

RBIEFT

SAFEDEPOSITLOCKER

GIFT CHEQUES

GOVERNMENT BUSINESS
StateBankofIndia'slinkagewithGovernmentbusinessiswidespread.Nowonderthatoutof9315bra
nchesinIndia,about7000branchesareconductingGovernmentBusiness.Thelargenetworkof

our

branchesprovideseasy accessto the commonman to depositthefollowingGovernmentdues and

pension payments.

SME(smallscaleindustries)
StateBankofIndiahasbeenplayingavitalroleinthedevelopmentofsmallscaleindustriessince1956.Th
eBankhasfinancedover8lakhsSSIunitsinthecountry.Ithas55specialisedSSIbranches,

99

branches

inindustrial estates andmorethan400 brancheswith SIB divisions.

TheBankfinancesforSmallBusinessactivitieswhichareofspecialsignificancetoalargenumberofpeop
leasmanyoftheseactivitiescanbestartedwithrelativelylowerinvestmentandwith no special skills on the
part of theentrepreneurs.

27

2.ICICIBANKING
PERSONAL
BANKING

Safety,Flexibility,Liquidi
ty, Returns!ICICI Bank
offers awideVarietyof
DepositProducts to
suityourbankingrequirem
ents.

SimplifiedDocumentation,Q
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28

World Class Service

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Secure,Reliable,Conven
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e policiesonline.

29

Bankingatyourfingertips!!!
Whybeinline
whenyoucanbeonline for
payingyourutilitybills,
mobilebills,prepaid mobile
recharge,Shopping,Creditcard,
insurance premium and
lotsmore.

INTERNATIONALBANKING
In2001,weidentifiedinternationalbankingasakeyopportunity,aimingtocatertothecrossborderneedsofclientsandleveragingourdomesticbankingstrengthstoofferproductsinternationally.Weha
vemadesignificantprogressintheinternationalbusinesssincewesetupourfirstoverseasbranchinSingapor
ein2003.ICICIBankcurrentlyhassubsidiariesintheUnitedKingdom,RussiaandCanada,branchesinSinga
pore,Bahrain,HongKong,SriLanka,DubaiInternationalFinanceCentre,Qatar
FinancialCentreandtheUnitedStatesandrepresentativeofficesintheUnitedArabEmirates,China,SouthA
frica,Bangladesh,Thailand,MalaysiaandIndonesia.TheBankswhollyownedsubsidiaryICICIBankUK
PLChasninebranchesintheUnitedKingdomandabrancheachinBelgiumandGermany.ICICIBankCanada
haseightbranchesincludingthreeinToronto.ICICIBankEurasiaLLChassixbranchesincludingthreebranc
hes in Moscow andonein St. Petersburg.
30

Ourinternationalstrategyisfocusedonbuildingaretaildepositfranchise,diversewholesalefundings
ourcesandstrongsyndicationcapabilitiestosupportourcorporateandinvestmentbankingbusiness;achievi
ngthestatusofanonresidentIndian(NRI)communitybankinkeymarkets;andexpandingprivatebankingoperationsforIndiacentricassetclasses.Duringfiscal2008,wefocusedondeepeningourpresenceinexistingoverseaslocations
andexpandingouroperationsinkeymarkets.Inlinewithourstrategytoestablishapresenceinlargemarketsw
ithsignificantsavingspools, weentered into Germanythrougha branchestablished by ICICIBank
UKPLC.Wehavebeenabletosuccessfullyleverageourtechnologyadvantagetocreateagrowinginternatio
naldepositbase.TotaldepositsofICICI
BankUKPLCandICICIBankCanadaincreasedby76.0%fromRs.191.28billionatMarch31,2007toRs.33
5.86billionatMarch31,2008.Wealsoreceivedapproval for andcommencedbranchoperations in the
UnitedStates.
WehaveestablishedastrongfranchiseamongNRIsbyofferingacomprehensiveproductsuite,
technologyenabledaccess,awidedistribution

networkinIndiaandalliances

with

local

banksinvariousmarkets.Currently,wehaveover500,000NRIcustomers.Wehaveundertakensignificantbr
and-buildinginitiativesininternationalmarketsandhaveemergedasawellrecognisedfinancialservicesbrandforNRIs.Wecontinuetomaintainamarketshareof25%ininwardremitta
ncesto
India.Duringfiscal2008,welaunchedinnovativeproductslikeinstantmoneytransferandenhancedourfocu
soncustomerrelationshipmanagementandprocessautomation.Additionally,wealsoundertookthedevelo
pmentoflowcostremittanceproductsinnon-Indiageographies

withcorrespondenttie-ups

fordisbursements in over100 suchgeographies.

Throughourinternationalprivatebankingservices,weoffervariousproductstomassaffluentandhig
hnetworthclientsbasedontheirfinancialneedsandriskappetite.Theofferingsrangefromsimpledepositsan
dloanstomoresophisticatedstructuredproducts,privateequityandproducts givingexposure to the real
estatesector inIndia.

CORPORATE BANKING
Ourcorporatebankingstrategyisbasedonprovidingcomprehensiveandcustomisedfinancialsolutionstoour
corporatecustomers.Weofferacompleterangeofcorporatebankingproductsincludingrupeeandforeigncurr
encydebt,workingcapitalcredit,structuredfinancing,

syndicationand transaction bankingproducts andservices.

31

Ourcorporateandinvestmentbankingfranchiseisbuiltaroundacorerelationshipteamthathasstron
grelationshipswithalmostallofthecountryscorporatehouses.Therelationshipteamisproductagnostican
disresponsibleformanagingbankingrelationshipswithclients.Wehavealsoputinplaceproductspecifictea
mswithaviewtofocusonspecificareasofexpertiseindesigningfinancialsolutionsforclients.Throughourre
lationshipteamsworkingintandemwithproductsolutionteams,we
havedeepenedourclientrelationshipsacrossourproductportfoliooresultinginsignificantgrowthinincome
andwalletshareamongallourtopcorporateclients,ascomparedtothe previousyear.
WehavecreatedanintegratedGlobalInvestmentBankingGroup,whichisresponsibleforworkingw
iththerelationshipteaminIndiaandourinternationalsubsidiariesandbranches,fororigination,structuringa
ndexecutionofinvestmentbankingmandatesonaglobalbasis.Wehavealsorestructuredourdeliveryteamfo
rtransactionbankingproductsbycreatingdedicatedsalesteamsfortradeservicesandtransactionbankingpr
oducts.Thishasbeendonewiththeintenttoincreaseourmarketsharefromtransactionbankingproducts,whi
chwilltranslateintorecurringfeeincomefortheBank.Wehavealsofocusedonincreasingmarketshareintrad
efinancebyleveragingandfurtherstrengthening correspondent bankingrelationships.

SME BANKING
Duringfiscal2008,oursmallenterprisescustomerbaseincreasedby26%toabout1.1millionaccount
s.Wehaveintroducedourserviceofferingsinover400newbranches,increasingourcoveragetoover1,000br
anches.Duringtheyear,wehavefocusedonproductspecialisationincludinginvestmentbankingforSMEs.
WehavecontinuedtofocusonshapingthesmallandmediumenterprisessphereinIndiathroughinitiativessu
chastheEmergingIndiaAwards,theSMECEOKnowledgeSeriesaplatformtomentorandassistSMEentrepreneurs,andtheSMEDialogueaweeklyfeatureinaleadingfinancialnewspapersharingSMEbestpracticesandsuccessstories.Duringthey
ear,wehavelaunchedseveralnewproductsandservicesliketheSMEtoolkit an online business and
advisoryresourceforSMEs.

32

 RURAL BANKINGAND AGRI-BUSINESS

Webelievetheruraleconomyhashighgrowthpotentialandofferslargecreditgrowthopportunities.T
owardsthisend,oursuiteofproductsandservicesistargetedtoaddresstheneedsofboththefarmandnonfarmsectors.Ourretailproductsuiteencompassesloansforcropproduction,purchaseoffarmequipment;co
mmoditybasedfinanceaswellasvarioussavings,investmentandinsuranceproducts.Wealsooffermicrofinanceandjewelloans.Wehavealsofocusedonenhancingcredittofarmersbyleveragingoncorporatepartn
erships.Forexample,wehavepartneredwithvariousdairiestoprovidefinancingtofarmersforpurchaseofmi
lchcattle.WealsoprovidecreditandbankingservicestoSMEsactiveintheagriculturalvaluechain.Toenhanc
eourservicequalityandproductdeliverycapabilitieswehavedevelopedalargenetworkofruralbrancheswhi
ch is furtheraugmentedbynon-branch channels.
RuralbankinginIndiaisstillatanascentstageandthedeploymentoftechnologychannelsandmodern
bankingmethodsforrurallendingcontinuestobeanevolvingprocess.Inlinewithourlearningfromourruralb
ankingoperations,weundertookacomprehensivereviewofandrealignedourchannelarchitecture,creditun
derwritingprocessesandaccountmanagementsystems.Wehaveputinplacearobustriskmanagementstruct
uretoMitigateandmanagecredit,operationalandfraud

risks.

Through

this,weaim

to

create

astrongfoundation forscalingup ofour ruralbusiness.

33

3.PNBBANKING

CORPORATE ANDCOMMERCIAL SECTORLENDING ACTIVITIES

Termloans
Cashcreditand other workingcapitalfacilities
Billdiscounting
Export credits
Othercreditandfinancingproducts

SERVICESTO NON-RESIDENT INDIANS

We providepersonal financial services forNRIs.We have established abranch in Kabul
andRepresentativeofficesinothercitiesoverseasinordertofacilitateservicesbeingprovidedtoNRIs.Weoff
erforeigncurrencyaccountstoNRIsunderourForeignCurrencyNonResidentSchemeandrupeeaccountsforNRIsunderourNon-ResidentExternalandNonResidentOrdinarySchemes.WehaveintroducedourGlobalForeignCurrencySchemeandGlobalRupeeD
epositScheme,whichofferbenefitsandconcessionstoNRIsandtheirrelativesprovidedaminimumbalance
ofRs. 250,000 or US$5,000is maintainedin theaccount.We alsooffervarious
productsforfacilitatingremittancesfromNRIstoIndia.Werecentlyenteredintoanarrangementtofacilitate
moneytransfersthroughWesternUnion,whichisagloballeaderinmoneytransferservices.Wehavealsoente
redintoanagreementwithTimesOnlineMoneyLtd.,aTimesofIndiagroupcompany,withaviewtoestablish
inganinternetbasedinternationalremittanceservice.Inaddition,wealso provide housingloans to NRIs.

RETAIL BANKING
Inretailbanking,ourprincipalcompetitorsarethelargepublicsectorbanks,aswellasexistingandnew
privatesectorbanksandforeignbanksinthecaseofretailloanproducts.Theotherpublicsectorbankshavelar
gedepositbasesandlargebranchnetworks,includingtheStateBankofIndiawhichhas13,593branches.Priv
atesectorandforeignbankscompeteprincipallybyofferingawiderrangeofproductsaswellasgreatertechno
logicalsophisticationinsomecases.
34

Foreignbanks,whilehavingasmallmarketpenetrationoverall,hasasignificantpresenceamongnonresidentIndiansandalsocompetesfornon-branchbasedproductssuchasautoloansandcreditcards.
Inparticular,wefacesignificantcompetitionprimarilyfromprivatesectorbanksandtoalesserdegree
fromotherpublicsectorbanks,inthehousing,autoandpersonalloansegments.Inmutualfundsalesandotheri
nvestmentrelatedproducts,ourprincipalcompetitorsarebrokers,foreignbanksandnew

private

sector

banks.

PRODUCTSANDSERVICESFORAGRICULTURE CUSTOMERS
Agriculturecontributes22%toIndiasGDPandsupportsapproximatelytwothirdsofIndiaspopulation.

Infiscal2004,wesurpassedthestated

nationalgoalthat

banksshouldprovideatleast18%oftheirnetbankcredit(whichisgrosscreditminusForeignCurrencyNonResidentBankdeposits)tothissegment,forwhichwereceivedanawardfromIndiasFinanceMinister.Oura
veragecreditgrowthrateinthissegmenthasbeen32.2%overthelastfouryears.AsofthelastreportingFriday
of September2004, agriculturalloansconstituted 18.8%of ournet bankcredit.

SMALL SCALE INDUSTRIES

WeprovidefinancingtosmallscaleindustriesorSSIs.SSIsaredefinedasmanufacturing,process
ingandservicingbusinesseswithuptoRs.50millioninvestedinplantandmachineryforcertainindustriessuc
hashosiery,handtools,drugsandpharmaceuticalsandstationeryitemsanduptoRs.10millioninvestedinpla
ntandmachineryforothersmallscaleindustries.SSIsarealsoconsideredaprioritysectorfordirectedlending
purposes.SeethesectiontitledBusinessDirectedLendingbelow.AsofthelastreportingFridayinSeptember2004,SSIloansconstituted11.3%ofou
rnetbankcredit.AsofthelastreportingFridayinSeptember,2004wehadan outstandingloan portfolio of
Rs.

57.3

billion

in

this

segmentcompared

to

Rs.

48.5

billionasofthelastreportingFridayinSeptember2003,representinggrowthofapproximately18.1%.Weha
vealsoreceivedawardsandrecognitionfromtheGovernmentofIndiarelatingtooureffortsinfinancingSSIb
usinesses.

35

BALANCE
SHEET

36

1.

STATEBANKOFINDIA
BALANCE
SHEETASON 31MARCH-2008
Assets
Net Own Assets
NetLease Assets(AfterLease Adj A/c)
Investment
Advances
Cash&Moneyatcall
OtherCurrent Assets
Balance SheetTotal(BT)

Liabilities
EquityShareCapital
Reserves
Deposits
Borrowings
OtherCashliab/prov.
Balance SheetTotal(BT)
Non PerformingAssets(NPA)%
Capital AdequacyRatio(CAR) %

Rs(mn)

%BT

33291.
42
443.
39
1895012.
71

0.
46
0.
01
26.
26

4167681.
96
674663.
35
443749.
84

57.
76
9.
35
6.
15

7215263.
12
Rs(mn)

100.
00
%BT

6314.
70
484011.
91
5374039.
41

0.
09
6.
71
74.
48

517274.
11
833622.
98

7.
17
11.
55

7215263.
12
1.87

100.
00
-

13.47

2.ICICI
BALANCE
SHEETASON 31MARCH-2008
Assets

Rs(mn)

Net Own Assets

33118.
26
7970.
72
1114543.
42
2256160.
83
380411.
29
205746.
26
3997950.
76
Rs(mn)

NetLease Assets(AfterLease Adj A/c)

Investment
Advances
Cash&Moneyatcall
OtherCurrent Assets
Balance SheetTotal(BT)

Liabilities
EquityShareCapital
Reserves
Deposits
Borrowings
OtherCashliab/prov.
Balance SheetTotal(BT)
Non PerformingAssets(NPA)%
Capital AdequacyRatio(CAR) %

11126.
79
453575.
31
2444310.
50
656484.
34
432453.
83
3997950.
76
1.49
14.92

%BT
0.83
0.20
27.
88
56.
43
9.52
5.15
100.
00
%BT
0.28
11.
35
61.
14
16.
42
10.
73
100.
00
-

3.PUNJABNATIONALBANK
BALANCE
SHEETASON 31MARCH-2008
Assets
Net Own Assets
NetLease Assets(AfterLease Adj A/c)
Investment
Advances
Cash&Moneyatcall
OtherCurrent Assets
Balance SheetTotal(BT)

Liabilities
EquityShareCapital
Reserves
Deposits
Borrowings
OtherCashliab/prov.
Balance SheetTotal(BT)
Non PerformingAssets(NPA)%
Capital AdequacyRatio(CAR) %

Rs(mn)
23149.
03
6.19

%BT

539917.
05
1195015.
66
188307.
24
41525.
21

1.
17
0.
00
27.
34
60.
51
9.
54
2.
10

1974846.
65
Rs(mn)

100.
00
%BT

3153.
03
104673.
49
1664572.
26
54465.
60
147982.
29
1974846.
65
0.64

0.
16
5.
30
84.
29
2.
76
7.
49
100.
00
-

12.96

RATIO
ANALYSIS

PROFITABILITYRATIO

classoffinancialmetricsthatare

usedtoassessabusiness'sabilitytogenerateearningsascomparedto
itsexpensesandotherrelevantcostsincurredduringaspecificperiodoftime.Formostoftheseratios,havinga
highervaluerelativetoacompetitor'sratioorthesameratiofromapreviousperiod

is

indicative

that

thecompanyis doingwell.
Someexamplesofprofitabilityratiosareprofitmargin,returnonassetsandreturnonequity.Itisimpor
tanttonotethatalittlebitofbackgroundknowledgeisnecessaryinordertomakerelevant

comparisons

whenanalyzingtheseratios.
Forinstances,someindustriesexperienceseasonalityintheiroperations.Theretailindustry,forexa
mple, typicallyexperienceshigherrevenuesandearnings fortheChristmasseason.Therefore,itwould not
be

too

usefulto

comparea

retailer'sfourth-quarter

profit

marginwithits

quarterprofitmargin.Ontheotherhand,comparingaretailer'sfourth-quarterprofitmargin

firstwith

theprofitmarginfrom thesameperiod ayear beforewould be far more informative.

OPERATING MARGIN
Aratiousedtomeasureacompany'spricingstrategyandoperatingefficiency.Operatingmarginisam
easurementofwhatproportionofacompany'srevenueisleftoverafterpayingforvariablecostsofproduction
suchaswages,rawmaterials,etc.Ahealthyoperatingmarginisrequiredforacompanytobeabletopayforitsfi
xedcosts,suchasinterestondebt.ItIsAlsoknown as"operatingprofit margin."
Calculatedas:

41

Operatingmargingives analystsanideaofhowmuchacompany
makes(beforeinterestandtaxes)oneachdollarofsales.Whenlookingatoperatingmargintodeterminethequ
alityofacompany,it is best to look at thechangein operatingmargin
overtimeandtocomparethecompany'syearlyor quarterlyfiguresto those of its competitors.Ifa
company'smarginisincreasing,it is earningmore perdollarofsales.The higherthe margin,the better.
For

example,ifacompanyhasanoperatingmarginof12%,thismeansthat

itmakes$0.12(beforeinterestandtaxes)foreverydollarofsales.Often,nonrecurringcashflows,suchascash
paidoutinalawsuitsettlement,areexcludedfromtheoperatingmargincalculationbecausetheydon'treprese
nt a company's trueoperatingperformance.

RATIOAT31-MARCH2008

Sr.No.

Name of Bank

Percentage

SBI

22.69 %

ICICI

14.45 %

PNB

21.47 %

BAR-GRAPH

INTERPRETATION
ItshowsthatoperatingefficiencyofSBIisbetterthanPNBandICICI.WhileoperatingefficiencyofI
CICIislowerthanPNBandSBI.SorankofoperatingefficiencyofbankscanbegivenasSBI, PNBandICICI.

GROSS PROFIT MARGIN

Afinancialmetricusedtoassessafirm'sfinancialhealthbyrevealingtheproportionofmoneyleftover
fromrevenuesafteraccountingforthecostofgoodssold.Grossprofitmarginservesasthesourceforpayingad
ditionalexpensesandfuturesavings.Itisalsoknownas"grossmargin".
Calculatedas:

Forexample,supposethatABCCorp.earned$20million
inrevenuefromproducingwidgetsandincurred$10millioninCOGSrelatedexpense.ABC'sgrossprofitmarginwouldbe50%.ThismeansthatforeverydollarthatABCearnson
widgets,itreally hasonly$0.50attheendofthe day.
Thismetric canbe usedtocompareacompanywithitscompetitors.Moreefficientcompanies will
usuallysee higherprofitmargins.

RATIOAT31-MARCH2008

Sr.No.

Name of Bank

Percentage

SBI

21.49 %

ICICI

12.99 %

PNB

20.67%

BAR-GRAPH

INTERPRETATION
Thisratioshowsfinancialpositionofcompany.Here,financialpositionofSBIisbetterthanPNBandI
CICI. So SBIis at firstrankbyits financial position than PNBandICICI.

NET PROFIT MARGIN

Forabusinesstosurviveinthelongtermitmustgenerateprofit.Thereforethenetprofitmarginratio is
oneof the keyperformance indicators foryourbusiness.
The
netprofitmarginratioindicatesprofitlevelsofabusinessafterallcostshavebeentakenintoaccount.Itisworth
analysing

theratioovertime.Avariationintheratiofromyeartoyear

maybeduetoabnormalconditionsorexpenses.Variationsmayalsoindicatecostblowoutswhichneedto be
addressed.
Adeclineintheratioovertimemayindicateamarginsqueezesuggestingthatproductivityimproveme
ntsmayneedtobeinitiated.Insomecases,thecostsofsuchimprovementsmayleadtoa furtherdrop in the
ratioor evenlossesbefore increased profitabilityis achieved.

Thecalculationused to obtain the ratio is:

NetProfitMargin = Net Profitx100

Sales

RATIOAT31-MARCH2008

Sr.No.

Name of Bank

Percentage

SBI

11.67 %

ICICI

10.51 %

PNB

12.68 %

BAR-GRAPH

INTERPRETATION
Thisratioiskeyperformanceindicatorsforbusiness.Keyperformancemeanstheprofitlevelofcomp
any;fromabovegraphwecansaythatperformanceofPNBisbetterthanSBIandICICI.

So

profit

level

ofPNBis at firstrank thancomes SBI andICICI.

RETURN ONNETWORTH
ReturnonNetworth(RONW)isusedinfinanceasameasureofacompanysprofitability.Itrevealsh
owmuchprofitacompanygenerateswiththemoneythattheequityshareholdershaveinvested.Therefore,iti
salsocalledReturnonEquity(ROE)
It is expressedas:NetIncome
RONW=

-------------------------------------------

X 100

ShareholdersEquity
Thenumeratorisequaltoafiscalyearsnetincome(afterpaymentofpreferenceshare
dividendsbutbeforepaymentofequitysharedividends).Thedenominatorexcludespreference

sharesandconsidersonlytheequityshareholding.So,RONWmeasureshowmuchreturnthecompanymanag
ement can generate for its equityshareholders.
RONWisameasureforjudgingthereturnsthatashareholdergetsonhisinvestmentasashareholder,e
quityrepresentsyourmoneyandsoitmakesgoodsensetoknowhowwellmanagement is doing with it.
RATIO AT 31-MARCH 2008

Sr.No.

Name of Bank

Percentage

SBI

13.72 %

ICICI

8.94 %

PNB

19.00 %

BAR-GRAPH

 INTERPRETATION
Thisratioisusefulforcomparingtheprofitabilityofacompanytothatofotherfirmsinthesameindustr
y.Here,profitabilityofPNBismorethanSBIandPNB.SowecansaythatPNBisatfirstrankbyits
profitabilitythan comes SBIandICICI.

LEVERAGERATIO
Anyratiousedto

calculatethe

financialleverageofacompanytogetanideaofthecompany'smethodsoffinancing
ortomeasureitsabilitytomeetfinancialobligations.Thereareseveraldifferentratios,butthemainfactorsloo
kedatincludedebt,equity,assetsandinterestexpenses.
Aratiousedtomeasureacompany'smixofoperatingcosts,givinganideaofhowchangesinoutputwil
laffectoperating income.Fixedandvariablecostsarethetwotypesofoperating costs;dependingon the
companyand the industry, themixwilldiffer.
Themostwellknownfinancialleverageratioisthedebt-toequityratio.Forexample,ifacompanyhas$10Mindebtand$20Minequity,ithas

adebt-to-

equityratioof0.5($10M/
$20M).Companieswithhighfixedcosts,afterreachingthebreakevenpoint,seeagreaterincreaseinoperatin
grevenuewhenoutputisincreasedcomparedtocompanieswithhighvariablecosts.Thereasonforthisisthatt
hecostshavealreadybeenincurred,soeverysaleafterthebreakeventransferstotheoperatingincome.Onthe
otherhand,ahighvariablecostcompanyseeslittleincreaseinoperatingincomewithadditionaloutput,becau
secostscontinuetobeimputedintotheoutputs.Thedegreeofoperatingleverageistheratiousedtocalculateth
ismixanditseffectsonoperatingincome.

DEBT-EQUITY RATIO
Ameasureofa

company'sfinancialleveragecalculated

totalliabilitiesbystockholders'equity.

bydividingits

Note:Sometimesonlyinterest-bearing,longtermdebtisusedinsteadoftotalliabilitiesinthecalculation.ItisalsoknownasthePersonalDebt/Equity
Ratio,thisratiocanbeappliedtopersonalfinancialstatements aswell ascompanies'.
Ahighdebt/equityratiogenerally
meansthatacompanyhasbeenaggressiveinfinancingitsgrowthwithdebt.Thiscanresultinvolatileearnings
asaresultoftheadditionalinterestexpense.
Ifalotof
debtisusedtofinanceincreasedoperations(highdebttoequity),thecompanycouldpotentiallygeneratemor
eearningsthanitwouldhavewithoutthisoutsidefinancing.Ifthisweretoincreaseearningsbyagreateramou
ntthanthedebtcost(interest),thentheshareholdersbenefitas
moreearningsarebeingspreadamongthesameamountofshareholders.However,thecostofthisdebtfinanci
ngmayoutweighthereturnthatthecompanygeneratesonthedebtthroughinvestmentandbusinessactivities
andbecometoomuchforthecompanytohandle.Thiscanleadto

bankruptcy,which

wouldleave

shareholders with nothing.

Thedebt/equityratioalsodependsontheindustryinwhichthecompanyoperates.Forexample,capit
al-intensiveindustriessuchasautomanufacturingtendtohaveadebt/equityratioabove 2, while personal
computer companies haveadebt/equityofunder 0.5.
RATIOAT31-MARCH2008

Sr.No.

Name of Bank

Percentage

SBI

10.96 %

ICICI

5.27 %

PNB

15.44 %