CHAPTER I

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 CHAPTER I

INTRODUCTION

1.1 OVERVIEW OF BANKING INDUSTRY

The banking sector is one of the most important instrument of the national
development, occupies a unique place in a nation’s economy. Economic development
of the country is evident through the soundness of the banking system. Deregulation
in the financial market, market liberalization, economic reforms have witnessed
important changes in banking industry leading to incredible competitiveness and
technological sophistication leading to a new era of in banking. Since then, every
bank is relentless in their endeavor to become financial strong and operationally
efficient and effective. Indian banks are the dominant financial intermediaries in India
and have made good progress during the global financial crisis; it is evident from its
annual credit growth and profitability. the growth is possible in two ways, organic or
inorganic. Organic growth is also referred as internal growth, occurs when the
company grows from its own business activity using funds from one year to expand
the company the following year. Such growth is a gradual process spread over a few
years but firms want to grow faster. Inorganic growth is referred as external growth
and considered as a faster way to grow which is most preferred Inorganic growth
occurs when the company grows by merger or acquisition of another business. The
main motive behind the Merger is to create synergy, that is one plus one is more than
two and this rationale beguile the companies for merger at tough times. Merger and
Acquisitions help the companies in getting the benefits of greater market share and
cost efficiency. For expanding the operations and cutting costs, Banks are using
Merger and Acquisitions as a strategy for achieving larger size, increased market
share, faster growth, and synergy for becoming more competitive through economies
of scale. Today a large section of people, who have minimal financial literacy, are
need to know the financial performance status of the banks where their deposits are
vested. They may be as an investor, manager, employee, owner, lender, customer,
government and public at large. Financial performance is not available from the
records and files in any organisation. It has to be derived by the usage of financial

2
statement analysis techniques. The selection and usage of technique is subject to the
option of the user. Some of the important and commonly used techniques are: Ratio
Analysis, Cross section analysis Comparative statement analysis, Time series
analysis, Common size analysis. The usefulness of ratios depends on skilful
interpretation and intelligence of the user. The present study is devoted to analysis the
financial ratios of Axis Bank by using ratio analysis with a view to give meaningful
interpretations for the users Financial Ratios are used in the evaluation of the financial
condition and profitability of a company. The ratios are calculated from the financial
information provided in the balance sheet and income statements. While analyzing the
financial statements you should keep in mind the principles/practices that accountants
use in preparing statements to examine at the financial condition and preference of a
company. Ratio Analysis is one of the techniques of financial analysis where ratios
are used to evaluating the financial condition and performance of a firm. Analysis and
interpretation of various accounting ratios gives a skilled and experienced analyst a
better understanding of the financial condition and performance of the firm.

NATIONAL SCENARIO
Modern banking in India could be traced back to the establishment of Bank of Bengal
(Jan 2, 1809), the first joint-stock bank sponsored by Government of Bengal and
governed by the royal charter of the British India Government. It was followed by
establishment of Bank of Bombay (Apr 15, 1840) and Bank of Madras (Jul 1, 1843).
These three banks, known as the presidency banks, marked the beginning of the
limited liability and joint stock banking in India and were also vested with the right of
note issue. In 1921, the three presidency banks were merged to form the Imperial
Bank of India, which had multiple roles and responsibilities and that functioned as a
commercial bank, a banker to the government and a banker’s bank. Following the
establishment of the Reserve Bank of India (RBI) in 1935, the central banking
responsibilities that the Imperial Bank of India was carrying out came to an end,
leading it to become more of a commercial bank. At the time of independence of
India, the capital and reserves of the Imperial Bank stood at Rs 118 mn, deposits at Rs
2751 mn and advances at Rs 723 mn and a network of 172 branches and 200 sub
offices spread all over the country.

3
In 1951, in the backdrop of central planning and the need to extend bank credit to the
rural areas, the Government constituted All India Rural Credit Survey Committee,
which recommended the creation of a state sponsored institution that will extend
banking services to the rural areas. Following this, by an act of parliament passed in
May 1955, State Bank of India was established in Jul, 1955. In 1959, State Bank of
India took over the eight former state-associated banks as its subsidiaries. To further
accelerate the credit to flow to the rural areas and the vital sections of the economy
such as agriculture, small scale industry etc., that are of national importance, Social
Control over banks was announced in 1967 and a National Credit Council was set up
in 1968 to assess the demand for credit by these sectors and determine resource
allocations. The decade of 1960s also witnessed significant consolidation in the Indian
banking industry with more than 500 banks functioning in the 1950s reduced to 89 by
1969.

For the Indian banking industry, Jul 19, 1969, was a landmark day, on which
nationalization of 14 major banks was announced that each had a minimum of Rs 500
mn and above of aggregate deposits. In 1980, eight more banks were nationalized. In
1976, the Regional Rural Banks Act came into being, that allowed the opening of
specialized regional rural banks to exclusively cater to the credit requirements in the
rural areas. These banks were set up jointly by the central government, commercial
banks and the respective local governments of the states in which these are located.
The period following nationalization was characterized by rapid rise in banks business
and helped in increasing national savings. Savings rate in the country leapfrogged
from 10-12% in the two decades of 1950-70 to about 25 % post nationalization
period. Aggregate deposits which registered annual growth in the range of 10% to
12% in the 1960s rose to over 20% in the 1980s. Growth of bank credit increased
from an average annual growth of 13% in the 1960s to about 19% in the 1970s and
1980s. Branch network expanded significantly leading to increase in the banking
coverage. Indian banking, which experienced rapid growth following the
nationalization, began to face pressures on asset quality by the 1980s. Simultaneously,
the banking world everywhere was gearing up towards new prudential norms and
operational standards pertaining to capital adequacy, accounting and risk
management, transparency and disclosure etc. In the early 1990s, India embarked on
an ambitious economic reform program in which the banking sector reforms formed a

4
major part. The Committee on Financial System (1991) more popularly known as the
Narasimham Committee prepared the blue print of the reforms. A few of the major
aspects of reform included (a) moving towards international norms in income
recognition and provisioning and other related aspects of accounting (b) liberalization
of entry and exit norms leading to the establishment of several New Private Sector
Banks and entry of a number of new Foreign Banks (c) freeing of deposit and lending
rates (except the saving deposit rate), (d) allowing Public Sector Banks access to
public equity markets for raising capital and diluting the government stake,(e) greater
transparency and disclosure standards in financial reporting (f) suitable adoption of
Basel Accord on capital adequacy (g) introduction of technology in banking
operations etc. The reforms led to major changes in the approach of the banks towards
aspects such as competition, profitability and productivity and the need and scope for
harmonization of global operational standards and adoption of best practices. Greater
focus was given to deriving efficiencies by improvement in performance and
rationalization of resources and greater reliance on technology including promoting in
a big way computerization of banking operations and introduction of electronic
banking.

The reforms led to significant changes in the strength and sustainability of Indian
banking. In addition to significant growth in business, Indian banks experienced sharp
growth in profitability, greater emphasis on prudential norms with higher provisioning
levels, reduction in the non performing assets and surge in capital adequacy. All bank
groups witnessed sharp growth in performance and profitability. Indian banking
industry is preparing for smooth transition towards more intense competition arising
from further liberalization of banking sector that was envisaged in the year 2009 as a
part of the adherence to liberalization of the financial services industry. According to
the RBI definition, commercial banks which conduct the business of banking in India
and which (a) have paid up capital and reserves of an aggregate real and exchangeable
value of not less than Rs 0.5 mn and (b) satisfy the RBI that their affairs are not being
conducted in a manner detrimental to the interest of their depositors, are eligible for
inclusion in the Second Schedule to the Reserve Bank of India Act, 1934, and when
included are known as ‘Scheduled Commercial Banks’. Scheduled Commercial Banks
in India are categorized in five different groups according to their ownership and/or
nature of operation. These bank groups are (i) State Bank of India and its associates,

5
(ii) Nationalized Banks, (iii) Regional Rural Banks, (iv) Foreign Banks and (v) Other
Indian Scheduled Commercial Banks (in the private sector). All Scheduled Banks
comprise Schedule Commercial and Scheduled Co-operative Banks. Scheduled
Cooperative banks consist of Scheduled State Co-operative Banks and Scheduled
Urban Cooperative Banks. In the reference period of this publication (FY06), the
number of scheduled commercial banks functioning in India was 222, of which 133
were regional rural banks. There are 71,177 bank XIV offices spread across the
country, of which 43 % are located in rural areas, 22% in semi-urban areas, 18% in
urban areas and the rest (17 %) in the metropolitan areas. The major bank groups (as
defined by RBI) functioning during the reference period of the report are State Bank
of India and its seven associate banks, 19 nationalized banks and the IDBI Ltd, 19 Old
Private Sector Banks, 8 New Private Sector Banks and 29 Foreign Banks.

6
Indian Banking at a Glance

Source: Secondary Data

Number of Banks, Group Wise

Source: Secondary Data

7
Group Wise: Comparative Average

Source: Secondary Data

Bank Groups: Key Indicators

8
Source: Secondary Data

Mergers & Acquisitions

During FY06, two domestic banks were amalgamated - Ganesh Bank of Kurundwad
with Federal Bank Ltd and Bank of Punjab Ltd with Centurion Bank Ltd to become
Centurion Bank of Punjab Ltd, while one Foreign bank UFJ Bank Ltd merged with
Bank of Tokyo-Mitsubishi Ltd. ING Bank NV closed its business in India. In Sept,
2006, The United Western Bank Ltd was placed under moratorium leading to its
amalgamation with Industrial Development Bank of India Ltd. in Oct, 2006. On Apr
1, 2007, Bharat Overseas Bank an old private sector bank was taken over by Indian
Overseas Bank and on Apr 19, 2007, Sangli Bank, another old private sector bank
was merged with ICICI Bank, a new private sector bank. As of Mar 2006, only four
Nationalized Bank had 100% ownership of the Government. These are Central Bank
of India, Indian Bank, Punjab and Sind Bank and United Bank of India. As of Mar
2006, the government shareholding in the State Bank of India stood at 59.7% and in
between 51-77% in other nationalized banks. In Feb 2007, Indian Bank came out with
a public issue thus leaving only three nationalized banks having 100% government
ownership. Foreign institutional holding up to 20% of the paid up is allowed in

9
respect of Public Sector Banks including State Bank of India and many of the banks
have reached the threshold level for FII investment. In respect of Private Sector Banks
where higher FII holding is allowed, threshold limit has been reached in the leading
banks. Indian banking, in addition to improvements in performance and efficiency,
has also experienced significant changes in the structure of asset and liabilities. The
major changes on the liabilities side include relatively higher growth of demand
deposits over time deposits, and also, within time deposits, greater preference for
short term over the longer term deposits. The share of demand deposits in total
deposits increased from 14.7% in FY01 to 17% in FY06. The share of short term
deposits in total time deposits increased from 43.8% in FY00 to 58.2% in FY06. The
narrowing of interest rate spread between short and long term deposits has reduced
the preference for long term deposits. Banks are moving away from investments to
loans due to more lending opportunities offered by the higher economic growth. The
rate of bank credit growth which was at 14.4% in FY03 rose sharply to reach 30%
each in the FY05 and FY06. Bank credit has picked up momentum on the back of
rising growth of real economy. A period of low interest rates induced banks to shift
their preference from investments to advances, which led to the share of gross
advances in total assets of all commercial banks reaching 54.7% in FY06 from 45% in
two years prior to that. the sectors towards which the bank credit was directed has also
shown significant changes. Retail loans witnessed growth of over 40% in the last two
years, and began driving the credit growth to a significant extent. Retail loans as a
percentage of Gross Advances rose from about 22% in FY04 to 25.5% in FY06.
Within the retail loans, housing segment showed the highest growth of 50% in FY05
and 34% in FY06. As per the RBI data, banks direct exposure to commercial real
estate more than doubled in FY06. Despite sharp rise in the credit growth, improved
risk management processes and procedures of banks contained the surge in bad debts
which is evident from the lower levels of incremental nonperforming assets reported
by the banks as also the rise in the proportion of standard assets. Further improvement
in risk management systems could provide banks with more opportunities in
expanding credit and pursuing higher levels of growth in retail lending.

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1.2 ABOUT: AXIS BANK LIMITED

Axis Bank is a leading private sector bank and financial services company in India
offering a wide range of products and services to corporate and retail customers
through a variety of delivery channels. Since commencing operations in April 1994
the Bank has grown both in terms of its physical network of branches, extension
counters and ATMs, as well as in terms of the size of asset base. The Bank's ATM
network of 3,171 ATMs is the third largest in the country. The Bank has a wide
presence through its 749 Branches & Extension Counters across 454 cities and towns
across India. As of March 31, 2008, the total assets of the Bank were Rs.1,095.78
billion, an increase from Rs.732.57 billion as of March 31, 2007, whereas the same
were Rs. 1374.71 billion as at December 31, 2008. In fiscal year 2008 the Bank
posted a 63 per cent increase in net profit of Rs. 10.71 billion (Rs.6.59 billion, fiscal
year 2007), whereas the same for the nine months ended December 31, 2008 was Rs.
12.34 billion, as compared to Rs. 7.10 billion during the corresponding nine months.
Total deposits have grown from Rs. 587.86 billion as of 31 March 2007 to Rs. 876.26
billion as of 31 March 2008, with demand deposits (savings bank and current account)
increasing significantly by Rs. 165.97 billion during the same period. As of December
31, 2008 the total deposits stood at Rs. 1057.16 billion, with demand deposits
contributing 38 percent to the total deposits. The Bank’s net interest margin has
increased from 2.74 per cent in fiscal year 2007 to 3.47 per cent in fiscal year 2008
and for the nine months ended December 31, 2008 stood at 3.32 percent. For the fiscal
year 2008 the Net NPA’s (as a percentage of net customer assets) of the Bank stood at
0.36 percent, compared to 0.61 percent for the fiscal year 2007. The Net NPA’s (as a
percentage of net customer assets) for the nine months ended December 31, 2008
stood at 0.39 percent and the Capital Adequacy Ratio as at December 31, 2008 stood
at 13.84 percent. The Bank’s principal business activity is broadly divided into two
segments, Banking Operations and Treasury. The Banking Operations consist of
corporate/wholesale banking; retail banking, including services offered to Non-
Resident Indians (NRIs); and other banking business which are not covered under any
of the above three segments. Banking Operations include products and services in the
areas of Corporate Banking and Retail Banking. Under Corporate Banking, the Bank
offers various loan and fee-based products and services to large corporations, MSMEs
Mid-Corporate and to the agriculture sector. These products and services include cash

11
credit facilities, demand and short-term loans, project finance, export credit, factoring,
channel financing, structured products, discounting of bills, documentary credits,
guarantees, foreign exchange and derivative products, cash management services,
warrant payment services, cross-border trade and correspondent banking services and
tax collections on behalf of the Government and various State governments in India.
Liability products including current accounts, certificate of deposits and time deposits
are also offered to corporate clients. The Bank also offers various Capital Markets
related services such as loan syndication and placement, advisory services, depository
services, custodian of securities, clearing and settlement services to stock and
commodity exchanges Retail Banking offers a variety of liability and asset products
and services to retail customers. Liability products include savings accounts, time
deposits and customized products for certain target groups such as high net worth
individuals, senior citizens, defense personnel, students and salaried employees.
Retail asset products include home loans, personal loans, auto loans, consumer loans,
educational loans as well as security-backed loans of various types. The Bank also
offers other products and services such as debit and travel currency cards, financial
advisory services, bill payment services and wealth management services. As of 31
March 2008, the Bank had 9.93 million retail customers. The Bank also markets third
party products such as mutual funds and Government savings bonds. A wide range of
liability and asset products and services are also offered to NRIs.
The Treasury department manages the funding position of the Bank and also manages
and maintains its regulatory reserve requirements. The Treasury department also
invests in sovereign and corporate debt instruments, undertakes proprietary trading in
equity and fixed income securities and foreign exchange. The Treasury department
also undertakes investments in commercial paper, mutual funds and floating rate
instruments as part of the management of short-term surplus liquidity. A wide range
of treasury products and services are also offered to corporate customers in the form
of derivative instruments such as forward contracts, interest rate swaps, currency
swaps and foreign currency options.

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1.2.1 PRODUCTS AND SERVICES

The Bank offers a wide spectrum of financial services to the corporate sector. The
Bank serves the large corporate sector, the growing SME sector and the agricultural
sector. A broad classification of products and services offered by the Bank is set out
below.
 Fund-based products: Loans and advances for working capital, corporate
finance and project finance.
 Non-fund-based products: Non-funded advances such as documentary
credits, stand-by letters of credit and guarantees.
 Fee-based services: Including fund transfers, cash management services,
collection of Government taxes, trade services and loan syndication.
Other products and services offered include time deposits and current accounts
(checking accounts). These products and services are delivered to customers through a
network of branches, correspondent banking networks, phone banking and the
Internet. Fund-based limits are generally granted by way of overdrafts, cash credit,
demand loans, term loans and bills discounted. Generally, the purpose, the security
offered, size of advance, repayment terms and requirements of the customer
determine the type of facility to be granted. The following table sets forth a
breakdown of the Bank’s corporate loans as of the dates indicated. (Rs .in millions)
31st March 2007 31st March 2008 Working Capital Finance 106,112 164,356 Project
and Corporate Finance 173,377 296,339 Total 279,489 460,695 Working Capital
Finance Cash credit, working capital demand loans and overdraft facilities, which are
the most common forms of working capital financing, are funded facilities usually
secured by current assets such as inventories and receivables. These facilities are
generally extended for a period of one year. In almost all cases, facilities are subject
to an annual review and are generally repayable on demand. Interest is collected on a
monthly basis, based on daily outstanding amounts. Bill discounting involves
discounting negotiable instruments, which are generally issued for trade receivables.
These can also be re-discounted with other banks if required. As of March 31, 2008,
the Bank’s outstanding net working capital loans amounted to Rs. 164.36 billion,
constituting approximately 27.56 per cent of its net loan portfolio and as of March 31,

13
2007 these amounted to Rs. 106.11 billion, constituting 28.78 per cent of the Bank’s
net loan portfolio.

Project and Corporate Finance

The Bank provides project finance to companies in the manufacturing, service and
infrastructure sectors typically by way of medium and long-term loans. Corporate
finance is offered to customers based on the Bank’s appraisal of the quality of
management, industry, prospects, business model and financial strength of the firm.
This financing is generally provided by way of term loans of various tenors in Indian
rupees, and in foreign currencies to a limited extent. The Bank offers asset-based
lending such as receivable financing and also offers customized corporate finance
products to meet specific customer needs. As of March 31, 2008, the Bank’s
outstanding net loans for project and corporate finance amounted to Rs. 296.34
billion, constituting approximately 49.67 per cent. of its net loan portfolio and as of
March 31, 2007 these amounted to Rs. 173.38 billion, constituting 47.02 per cent. of
the Bank’s net loan portfolio. The Bank earned interest income on its corporate credit
portfolio of Rs. 35.62 billion in fiscal year 2008 and Rs.19.38 billion in fiscal year
2007. The Bank provides documentary credits to customers to meet their working
capital requirements as well as for capital equipment purchases. Documentary credits
are approved together with a working capital assessment or a project finance
assessment. Typically, a working capital line can be drawn down on a revolving basis
over the term of the facility. Customers pay fees for draw downs of the documentary
credit and the Bank may require additional collateral by way of a cash margin which
depends on the risk perception of the transaction. As of March 31, 2008, the Bank’s
documentary credit portfolio amounted to Rs. 82.46 billion and as of 31 March 2007
it amounted to Rs. 54.77 billion. Guarantees, which also include “Stand-by Letters of
Credit”, can be drawn down in a revolving manner over the life of the facility.
Guarantees are also assessed during the course of working capital requirements.
Guarantees are issued for various purposes such as bid bonds, performance guarantees
on behalf of borrowers for execution of contracts, deferral or exemption from
payment of statutory duties against performance obligations, advance payments,
release of retention monies and other purposes. The term of guarantees is generally 36
months or less, although certain guarantees with a longer term may be approved. As

14
with documentary credits, the Bank sometimes obtains additional collateral by way of
cash margin which, in the case of certain types of guarantees, may be as much as 100
per cent. As of March 31, 2008, the Bank’s outstanding guarantees amounted to Rs.
119.72 billion and as of March 31, 2007 these amounted to Rs. 43.86 billion. Fee
income from corporate banking services (which includes fees from Credit, Business
Banking and Capital Markets) constitutes one of the significant revenue streams of the
Bank, accounting for 16.66 per cent of total operating revenue for the year ended 31
March 2008. The Bank offers a variety of fee-based services, including cash
management services, collection of commercial taxes, trade services, remittances,
collections and loan syndication. In addition to these traditional fee-generating
products and services, the Bank also offers tailor-made products on fee-basis to
address specific corporate customer needs through a Structured Products group. The
Micro, Small and Medium Enterprises (MSME) segment is an area of intense focus
for the Bank, as it generates higher yield and helps in diversification of risk. MSMEs
offer good business potential both for fund and non-fund based credit and cross
selling of products. The Bank continued its focus on the MSME segment during the
year to March 31, 2008 by providing timely and adequate credit to customers with
quick turnaround time. The segment offers schematic and non-schematic products
including term loans and working capital finance, depending upon the specific
requirement of clients. Under schematic lending, specific loan-based products have
been devised to target the requirements of specific customers and loans are made
available based on predetermined features, parameters and levels. Loans not falling
under any of the product-based schematic lending schemes are treated as non-
schematic lending. The Bank’s Small and Medium Enterprises (SME) business
segment achieved growth by implementing comprehensive strategies and focusing on
specific industry segments and customer preferences. Advances to SMEs increased by
73.98% to Rs 115,369.2 million as at March 31, 2008. The Bank continues to pursue a
two-pronged strategy of deepening existing relationships and widening its customer
base. In order to increase the level of SME advances across the country, 24 SME cells
have been set-up at key centers. Commercial banks in India are required by RBI to
lend 40 per cent of their adjusted net bank credit of the previous year to specified
sectors known as “priority sectors”, subject to certain exemptions permitted by RBI.
from time to time. Priority sector advances include loans to agriculture, MSME,
microfinance loans to sectors deemed “weaker” by RBI, housing and education

15
finance up to certain ceilings, lending for specific infrastructure projects and
investments in instruments issued by specified institutions. The Bank is required to
comply with the priority sector lending requirements as of the last reporting Friday of
March of every fiscal year. Any shortfall in the amount required to be lent to the
priority sectors may be required to be deposited with Government sponsored Indian
developmental banks such as the National Bank for Agriculture and Rural
Development (NABARD) and Small Industries Development Bank of India (SIDBI).
These deposits have a maturity of up to seven years and carry interest rates lower than
market rates. A summary of the Bank’s priority sector lending position as of the last
reporting Friday in March over the last two years is as follows RBI requires the Bank
to lend 18 per cent of their adjusted net bank credit of the previous year to the
agricultural sector. In light of future business prospects in the Indian agricultural and
related sectors, the Bank has identified agricultural lending as an area of potential
growth. 10 |11 | The Bank has a diverse range of schematic products such as tractor
loans, the Kisan Credit Card (credit facilities to farmers for various requirements),
loans against pledges of gold ornaments and contract farming to cater to the varied
requirements of the agricultural sector. The Bank is in the process of introducing
additional schematic products such as advances to commission agents, warehouse
receipt financing, cattle loans, loans against pledges of gold ornaments and contract
farming to cater to the varied requirements of the agricultural sector. The agriculture
business of the Bank is driven through its selected branches, which facilitate the
Bank’s growth in agricultural lending. In order to provide a strategic focus to
agricultural lending, the Bank has adopted cluster-centric approach for agricultural
lending in areas, which exhibited potential for such activities. 44 agricultural clusters
have since been formed as a result of such initiative. To strengthen the agricultural
lending of the Bank, Agri Business Cells have been formed. In addition, the Bank has
established relationships with various companies and co-operatives in the plantation,
poultry, food processing and seed sectors and meets their project financing and
working capital requirements. The Bank’s strategy in agricultural lending is based on
a comprehensive view of the agricultural value chain, a focus on diversification and
partnerships with other companies in the agricultural sector, micro finance and other
rural institutions and non-governmental organisations that have close links to the
agricultural sector. The Bank has also devised a separate risk evaluation model for
agricultural loans with an objective to measure and mitigate the risk involved in

16
financing this sector. There has been considerable improvement in the rural
infrastructure in select geographies in India in recent years. The Bank’s agricultural
financing initiatives are largely focused on regions where the need for credit has The
Bank offers a range of current account products based on value as well as industry
sectors in order to meet the needs of various customer segments such as SMEs,
traders, exporters, large corporations and other institutions. These products offer
flexibility to customers to choose from different options with varying minimum
average quarterly balance commitments and charge structures. In addition to
conventional banking facilities, these accounts offer a multi-city, AT PAR payable
cheque-book facility and an “Anywhere Banking” facility across all of the Bank’s
branches. In addition to the Bank’s branches and ATMs, customers can access and
conduct transactions in their accounts online through Corporate I-Connect, the Bank’s
internet banking platform, or can access account information through a tele-banking
facility and mobile banking facility. Customers are subject to transaction charges
including charges for non-maintenance of minimum balances. The Bank had 341,998
business current account relationships as of March 31, 2008. The average balance of
the Bank’s business current accounts during fiscal 2008 was Rs. 118.34 billion with
an outstanding balance of Rs.200.45 billion as of March 31, 2008. Cash Management
Services Through the Bank’s cash management services, the Bank’s corporate and
institutional clients are offered customized solutions such as collection, payment and
remittance services allowing them to minimize the time gap between collections and
remittances, thereby improving their cash flows. Cash management products include
local and remote collections with the pooling of funds in a central account along with
a customized management information system (MIS) including online viewing of
transactions through the Bank’s internet interface. In addition to collections, the Bank
also offers local and remote payments through customer cheques and bulk demand
drafts with centralized or remote printing, electronic clearing services, disbursement
of dividend and interest, remittance services and internet-based payment products.
Electronic payment facilities are offered to government, corporate and institutional
customers for payments to their vendors or suppliers through various modes such as
electronic clearing and funds transfer facilities and direct credit facilities for common
customers. These services offer a high level of convenience because no physical
instruments are required and all transactions are effected electronically. To respond to
increasing customer demand, the Bank has established correspondent relationships

17
with smaller local banks in India to offer a broader distribution network for its cash
management services. As a result of these correspondent banking relationships, cash
management services are provided at over 3,000 locations in India, with a capability
of extending the network to other remote locations depending on need. The Bank also
offers its services and network of 342 cash management service locations to other
private and foreign banks as a correspondent bank. Customers are charged a fee for
these services based on the number and size of transactions, the location for cheque
collection and the expected date of credit to the customer accounts. Apart from fees,
the Bank also benefits from holding the funds for a period of time before they are
required to be deposited in the customers’ current accounts.

1.2.2 COMPANY SIZE

NO. OF EMPLOYEES 59614

MARKET CAPITALIZATION Rs. 1,56,083(crore)
BALANCE SHEET SIZE Rs. 5,25,468(crore)
SAVINGS BANK ACCOUNT 172(lakhs)
PROPOSED DIVIDEND 250%

1.2.3 BOARD OF DIRECTORS

Director and Non-Executive Chairman Dr. Sanjiv Misra

Managing Director & CEO Smt. Shikha Sharma
Director Shri. Prasad R. Menon
Prof. Samir K. Barua
Shri. Som Mittal
Shri. Rohit Bhagat
Smt. Usha Sangwan
Deputy Managing Director Shri. V. Srinivasan
Executive Director (Retail Banking ) Shri. Rajiv Anand
Executive Director (Corporate Centre ) Shri. Rajesh Dahiya

18
1.2.4 COMPETITIVE POSITION IN THE MARKET

There are Kotak Mahindra Bank and State Bank of India is the major competitor of
the Bank in that area. Other competitors of the Bank include HDFC Bank, Induslnd
and Federal Bank which were also near the Axis bank.

BASIS HDFC BANK KOTAK AXIS BANK

(2018) MAHINDRA (2018)
BANK (2018)
TOTAL ASSETS 1063934.31 264933.40 691329.57
NET PROFIT 17486.75 4084.30 275.68
NET INTEREST 80241.35 19748.49 45780.31
EARNED
MARKET 549073.67 255983.98 177131.14
CAPITALIZATION
(Rs. In
Crores)

TOTAL ASSETS
1200000
1000000
800000
600000
TOTAL ASSETS
400000
200000
0
HDFC BANK KOTAK MAHINDRA AXIS BANK
BANK

In this total assets of HDFC bank are more than the axis bank so axis bank but it is
more than Kotak Mahindra bank this implies Axis bank is more profitable than Kotak
Mahindra bank.

19
 NET PROFIT
20000
18000
16000
14000
12000
10000
8000 NET PROFIT

6000
4000
2000
0
HDFC BANK KOTAK MAHINDRA AXIS BANK
BANK

NET INTEREST EARNED

90000
80000
70000
60000
50000
40000 NET INTEREST EARNED
30000
20000
10000
0
HDFC BANK KOTAK MAHINDRA AXIS BANK
BANK

20
 MARKET CAPITALIZATION
600000

500000

400000

300000
MARKET CAPITALIZATION
200000

100000

0
HDFC BANK KOTAK MAHINDRA AXIS BANK
BANK

INTERPRETATION:-

 Profit earned by HDFC bank is more as compared to Axis bank.

 Net interest earned by axis bank is more as compared to Kotak Mahindra
bank.
 Total assets maintained by Axis bank are more as compared to Kotak
Mahindra bank.
 Interest earned by axis bank is less it implies it focus on more products and
services offered to the customer.
 More and more customers should be attracted to increase its total assets.
 Bank must plan for training and employee development programme because
there is positive correlation between credibility of axis bank and knowledge &
skills of personnel.

21
1.2.5 Organizational Structure

22
1.2.5 SWOT ANALYSIS OF AXIS BANK

STRENGTH:

 Axis bank has been given the rating as one of top three positions in terms of
fastest growth in private sector banks.
 Financial express has given number two position and BT-KPMG has rated
AXIS bank as the best bank with some 26 parameters.
 The bank has a network of 1,493 domestic branches and 8,324 ATMs.
 The bank has its presence in 971 cities and towns.
 The bank’s financial position grows at a rate of 20% every year which is a
major positive sign for any bank.
 The company’s net profit is Q3FY12 is 1,102.27 which has a increase of
25.19% growth compared to 2011.

WEAKNESS:

 Gaps – Majorly they concentrated in corporate, wholesale banking, treasury

services, retail banking.
 Foreign branches constitute only 8% of total assets.
 Very recently the bank started focusing its attention towards personal banking
and rural areas.
 The share rates of AXIS bank are constantly fluctuating in higher margins
which makes investors in an uncomfortable position most of the time.
 There are lot of financial product gaps in terms of performance as well as
reaching out to the customer.
 There are many fraudulent activities involved in credit cards as the banks
process credit card approval even without verification of original documents.
 Their financial consultants are not wise enough to guide the customers towards
right investments.
 Customer service has to improve a lot in order to be in race with other major
players.

23
OPPORTUNITY:

 Acquisitions to fill gap.

 In 2009, Alliance with Motilal Oswal for online trading for 10 million
customers.
 In 2010, acquired Enam Securities Pvt Ltd – broking and investment banking.
 In Sep 2009, SEBI approved Axis Asset Management Co. for mutual fund
business.
 No. of e-transactions increased from 0.7 million to around 2 million.
 Geographical expansion to rural market – 80% of them have no access to
formal lending.
 46% use informal lending channels.
 24% unregulated money lenders.
 Now number of branches increased to 1493 from 339.
 Last quarter there were 48 new branches opened across the Nation.
 Since it’s a new age banking there are lot of opportunities to have the advance
technicalities in banking solutions compared to existing major players.
 The assets in their international operations are growing at a very faster pace
with a growth rate of 9%.
 The concept of ETM (Everywhere teller machine) by AXIS Bank had a good
response in terms of attracting new customers in personal banking segment.

THREATS:

 Since 2009, RBI has increased CRR by 100 basis points.

 Increased repo rate reverse repo rate by 50 points – 11 times of late.
 Increasing popularity of QIPs due to ease in fund raising.
 RBI allowed foreign banks to invest up to 74% in Indian banking.
 Government schemes are most often serviced only by govern banks.
like SBI ,Indian Banks, Punjab National Bank etc.
 ICICI and HDFC are imposing strong threats in terms of their expansion
in customer baseby their aggressive marketing strategies.

24
1.3 ABOUT THE TOPIC: FINANCIAL ANALYSIS

Financial Analysis is also known as “analysis & interpretation of financial

statements”. It is the process of assessing the financial position of a company by
analyzing its stability; viability and profitability through financial statements i.e.
balance sheet & income statement. The primary objective of financial analysis is to
recognize changes in financial trends, to help measure the progress made by an
enterprise and identify a relationship to draw a logical conclusion on the performance
of the company. It helps to make forecast about future prospects of the firm.
Profitability and financial performance could be defined as a measurement of the
results of a firm’s polices and operations in monetary terms. In assessing the overall
financial condition of a company, the income statement he and the balance sheet are
important reports, as the income statement captures the company's operating
performance and the balance sheet shows its net worth.

1.3.1 IMPORTANCE OF FINANCIAL ANALYSIS

Financial analysis is important for any business because it helps-

 To assess the profitability of the firm.

 To assess the operational efficiency & managerial effectiveness.
 To assess the short-term as well as long term solvency of the firm.
 To identify the reasons for change in financial position of the firm.
 To make the inter-firm comparisons.
 To make forecasts about the future prospects of the firm.
 To help in decision making & control.
 To assess the credit worthiness of the company.
 To convey the financial information to users/investors.

25
CHAPTER II

26
 CHAPTER II

Research Methodology

We can define research methodology as a systematic way to solve a given problem. It

is a science of studying how the research is to be carried out. It is also defined as the
study of methods by which we have gained the knowledge. The main aim is to give
the work plan of research. It answers two questions, first how the data is generated
and second how it is analyzed.

2.1 OBJECTIVES OF THE STUDY

 To know the liquidity position and solvency.

 To study the profitability of axis bank.
 To find financial performance and efficiency use of capital employed.

2.2 SCOPE OF THE STUDY

The current study choose one private sector bank to evaluate the financial
performance The main scope of the study was to put into practical the aspect of the
study into real life work experience. The study applies Ratio analysis based on last 5
years Annual financial reports of Axis bank in India.

2.3 SIGNIFICANCE OF THE STUDY

Government regulation, in most of the countries shielded the banks from the forces of
competition. India is no exception for this. With the nationalization of the most of the
major commercial banks in 1969, restrictions on entry and expansion of private and
foreign banks were gradually increased. The Reserve Bank of India also began
enforcing uniform interest rates, spreads and service changes among nationalized
banks. This cause of lack free market competition either among public and private
banks. Gradually the force of competition from the banking sector is still remaining.
In addition, some areas of concern in the form of increasing non-performing assets,

27
declining profitability and efficiency, which were threatening the viability of
commercial banks. Commercial banks have played a vital role in giving direction to
economic development by catering the financial requirement of trade and industry in
the country. By encouraging saving among the people, commercial banks have
fastened the process of capital formation. Banks draw the community savings into the
organized sector which can then be allotted among the different economic activities
according to the priorities laid down by planning authorities in the country. ‘The
banks are not only the safe deposit vaults for these savings, but taking the banking
system as a whole, they also create deposits in the process of their lending operations.
However, the important function of a banker is the provision of convenient machinery
by which people can make payments to each other without having to walk round each
other’s house with bags of coins. Banks also exercise influence on the level of
economic activities through the creation of manufacturing of money. Through their
lending policies, they divert the economic activity to the needs of the country. In view
of this, the role of commercial banks in underdeveloped countries and planned
economies like India becomes particularly important. the present study seeks to
examine the trends in the financial performances of one of the leading banking sector
of the country (Axis Bank).

2.4 RESEARCH METHODOLOGY

The researcher adopted the analysis of data in a manner that to combine relevance to
purpose with economy in procedure. Research design is the based define of a research
problem. The preparation of the design of the project is standard analytical of
researcher favorite. It was used in secondary data that was published already as annual
reports of the bank in bank website, journals, magazines and newspapers and other
secondary data sources. This Secondary data may be already collected and analyzed
by someone else but gap is period of the study and variables which we want to know.
The study mainly connected annual financial reports that are last five years 2013-2018
company final accounts (balance sheet and profit and loss).

28
2.4.1 DATA COLLECTION

Main data of this study is based to the annual financial reports axis bank from in 2013
to 2018. Also researcher used four main financial statements for ratio analysis of bank
such as; balance sheets, an income statement, cash flow statement; statement of
shareholder's equity although study strongly emphasis the first main reports.

2.4.2 DATA ANALYSIS

The study used all important tools of ratio analysis for profitability evaluation of
bank. It indicates the different steps such Selection of financial report, Identification
of balance sheet, income statement and cash flow statement, ratio analysis,
mathematical calculation, statistical analysis of bank financial report year by year
comparison and among industry First step of model, we do a selection of financial
report that means a choose of annual financial report. The annual financial report
present financial data of a company's position, operating performance, and funds flow
for an accounting period .We use the annual reporting of bank in 2010 to 2015.
Second step of model, researcher identify the balance sheet, income statement, cash
flow statement from the annual financial report. Study used some data from balance
sheets for different kind of ratio such as liquidity ratios, asset management ratios, debt
management ratios. In contrast, we was used some sources from income statement.
When analysis the ratio of profitability and debt management ratio employment of
bank income statement and balance sheet is must. However the use of some data from
the cash flow statement for ratio analysis such as market value ratio is also possible .
The third step of model, study identify the suitable ratio for profitability analysis and
evaluation the ratio such as current ratio, liquidity ratio, asset management ratio,
profitability ratio, debt coverage ratio, market value etc. All types of ratio are most
important for how well a bank to generate its assets, liquidity, revenue, expense, share
holder equity profit or loss are also here . The Forth step of model, study used the
Mathematical calculation of bank. Some figure from the income statement and
balance sheet. Financial calculators was used to determine the results a financial ratio
calculations a graphical analysis for evaluation of bank using Microsoft excel is
employed and finally study compares the results to manipulate objectives

29
2.4.3 SECONDARY DATA

The major source of data for this project was collected through Balance sheet and
Profit and loss of Axis bank account of 5 year period from 2013-2018 Descriptive
research is used in this study because it will ensure the minimization of bias and
maximization of reliability of data collected. The researcher had to use fact and
information already available through financial statements of earlier years and analyze
these to make critical evaluation of the available material. Hence by making the type
of the research conducted to be both Descriptive and Analytical in nature.

2.4.4 RESEARCH DESIGN

In the present descriptive study is employed. An attempt has been made to measure,
evaluate and compare the financial performance of the Bank. The analysis partitioned
two side aspect of stakeholders; the shareholders wealth and other external
stakeholders. The study is based on secondary data that has been collected from
annual reports of the bank website, magazines, journals, documents and other
published information. The study covers the period of 5 years from year 2013-14 to
year 2017-18. Ratio Analysis was applied to analyze and compare the trends in
banking business and financial performance.

2.4.4 RESEARCH INSTRUMENTS

Study used secondary data collected from publishers of the bank final accounts it is
limited to last five years 2013-2018 annual financial reports.

2.4.5 STATISTICAL TOOLS

The Researcher has used the following tools to present and analyse the data.

30
Data presentation
I. Tables
II. Diagrams
Data analysis
I. Microsoft excel 2007

2.4.6 PERIOD OF THE STUDY

This study of financial ratio analysis is limited to five years from 2013 to 2018. The
accounting year starts from 1 April to 31 March.

2.4.7 HYPOTHESIS OF THE STUDY

The bank profitability is improving with constant growth rate.

2.4.8 OPERATIONAL KEY TERMS DEFINITION

Ratios: are the simplest mathematical (statistical) tools that reveal significant
relationships hidden in mass of data, and allow meaningful comparisons. Some ratios
are expressed as fractions or decimals, and some as percentages. Major types of
business ratios include Efficiency, Liquidity, Profitability, and Solvency ratios.

Analysis: Ratio Analysis is a form of Financial Statement Analysis that is used to

obtain a quick indication of a firm's financial performance in several key areas. The
ratios are categorized as Short-term Solvency Ratios, Debt Management Ratios, Asset
Management Ratios, Profitability Ratios, and Market Value Ratios

Profit: The surplus remaining after total costs are deducted from total revenue, and
the basis on which tax is computed and dividend is paid. It is the best known measure
of success in an enterprise.

31
2.4.9 RATIO ANALYSIS FORMULAS

For most of us, accounting is not the easiest thing in the world to understand, and
often the terminology used by accountants is part of the problem. “Financial ratio
analysis” sounds pretty complicated. The analysis of the financial statements and
interpretations of financial results of a particular period of operations with the help of
'ratio' is termed as "ratio analysis." Ratio analysis used to determine the financial
soundness of a business concern. The term 'ratio' refers to the mathematical
relationship between any two inter-related variables. In other words, it establishes
relationship between two items expressed in quantitative form. According J. Batty,
Ratio can be defined as "the term accounting ratio is used to describe significant
relationships which exist between figures shown in a balance sheet and profit and loss
account in a budgetary control system or any other part of the accounting
management

2.4.9.1 CLASSIFICATION OF RATIOS

Accounting Ratios are classified on the basis of the different parties interested in
making use of the ratios. A very large number of accounting ratios are used for the
purpose of determining the financial position of a concern for different purposes.
Ratios may be broadly classified in to:

 Classification of Ratios on the basis of Balance Sheet.

 Classification of Ratios on the basis of Profit and Loss Account.
 Classification of Ratios on the basis of Mixed Statement (or) Balance Sheet
and Profit and Loss account.
To meet the objective the study groups ratios and divides three main parts which are
Liquidity ratios, profitability ratios, and asset management ratios.

32
2.4.9.2 Common size ratios

One of the most useful ways for the owner of a business to look at the company’s
financial statements is by using “common size” ratios. Common size ratios can be
developed from both balance sheet and income statement items. The phrase “common
size ratio” may be unfamiliar to you, but it is simple in concept and just as simple to
create. You just calculate each line item on the statement as a percentage of the total

2.4.9.3 Liquidity ratio

Liquidity ratio refers to the ability of a company to interact its assets that is most
readily converted into cash. Assets are converted into cash in a short period of time
that are concerns to liquidity position. However, the ratio made the relationship
between cash and current liability.

 Current Ratio:
Current Ratio = Current assets /Current liabilities

 Quick Ratio:
Quick Ratio= (Quick Assets-Inventories)/ Quick Liabilities
Quick Asset= current asset-(stock + prepaid expense)
Quick Liabilities = current liabilities -Bank Overdraft

 Cash Ratio:
Cash Ratio = Cash / Current Liabilities

2.4.9.4 Profitability Ratio

Profitability ratios designate a bank's overall efficiency and performance. It measures

how to use assets and how to control its expenses to generate an acceptable rate of
return. It also used to examine how well the bank is operating or how well current
performance compares to past records of bank

33
  Net Profit margin:
Net Profit margin = Net profit /sales

 Return on common stock equity ratio:

Return on common stock equity ratio = Net income / Common stockholders'
equity

 Return on Total Assets:

Return on Total Assets = Net profits / total assets

2.4.9.5 Asset management ratios

Asset management ratios are most notable ratios of financial ratios analysis. It
measure how effectively any organization uses and controls its assets. It is analysis
how a company quickly converted to cash or sale on their resources. It is also called
Turnover ratios because it indicates the asset converted or turnover in to sales.

 Current asset turnover ratio:

Current asset turnover ratio=sales/current asset

 Fixed asset turnover:

Fixed asset turnover = Sales / Net fixed asset

 Total asset turnover:

Total asset turnover = Sales / Total asset

 Debt Ratio:
Debt Ratio =Total liabilities / Total assets

34
CHAPTER III

35
 CHAPTER III

Findings and Analysis

3.1 Data Analysis

The previous chapter discussed a detailed description of the research methodology. In

this chapter, the data comes from the Axis Bank in India with relation to the research
objectives, all data is Secondary data which is already published to Secondary data
sources mainly bank website. The data will be analyzed by using Microsoft excel
2007. Also in this section study present the result from our data analysis; the study
briefly examined the performance of liquidity position of the bank. Second part
present the overall profitability of the bank and third part is asset management
condition after analysis the study also discussion the debt management position and
finally comments represent the market value of the bank.

36
 CURRENT RATIO

Table 5.1 Showing the Bank's Current Ratio

(Rs. In crores)

Year Current Asset Current Liabilities Ratio

(A) (B) (A/B)

2013-2014 2,67,286.25 2,94,733.45 0.907

2014-2015 3,27,075.25 3,37,497.61 0.969

2015-2016 3,99,938.24 3,73,076.33 1.072

2016-2017 4,68,927.40 4,40,674.26 1.064

2017-2018 5,33,481.81 4,79,868.17 1.112

Source: Secondary Data from Financial Statements of Axis Bank

INFERENCE:

Table 5.1 presents current ratio of five years from 2013 to 2018. In the above ratios
the bank current ratio of 2013-14 is 0.907, 2014-15 is 0.969, 2015-16 is 1.072, 2016-
17 is 1.064, and 2017-18 is 1.112 it shows that bank current ratio is passed one with
increasing positive growth year by year. Current Assets are increasing more
comparing to Current Liabilities year by year.

37
 Figure No: 1

The Bank Current Ratio

Bank Current Ratio

1.2

0.8

0.6

0.4

0.2

0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

38
 Quick Ratio

Table 5.2 Showing the Bank's Quick Ratio

(Rs. In Crores)

Year Quick Assets Current Liabilities Ratio

(A) (B) (A/B)

2013-2014 28,238.70 2,94,733.45 0.096

2014-2015 36,099.03 3,37,497.61 0.107

2015-2016 33,325.44 3,73,076.33 0.089

2016-2017 50,256.18 4,40,674.26 0.114

2017-2018 43,454.89 4,79,868.17 0.091

Source: Secondary Data from Financial Statements of Axis Bank

INFERENCE:

Table 5.2 presents Quick ratio of five years from 2013 to 2018. In the above ratios the
bank quick / asset test ratio of 2013-14 is 0.096, 2014-15 is 0.107, 2015-16 is 0.089,
2016-17 is 0.114, and 2017-18 is 0.091, it shows us that bank liquidity is normally
good. The ratio is fluctuating and the range varies from 0.089 to 0.114.

39
 Figure No: 2

The Bank Quick Ratio

Bank Quick Ratio

0.12

0.1

0.08

0.06

0.04

0.02

0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

40
 Table 5.3 Showing the Bank's cash position Ratio

(Rs. In Crores)

Year Cash Current Liabilities Ratio

(A) (B) (A/B)

2013-2014 17,041.32 2,94,733.45 0.058

2014-2015 19,818.84 3,37,497.61 0.059

2015-2016 22,361.15 3,73,076.33 0.060

2016-2017 30,857.94 4,40,674.26 0.070

2017-2018 35,481.06 4,79,868.17 0.074

Source: Secondary Data From Financial Statements Of Axis Bank

INFERENCE:

Table 5.3 presents Cash ratio of five years from 2013 to 2018. In the above ratios the
bank cash position ratio of 2013-14 is 0.058, 2014-15 is 0.059, 2015-16 is 0.060,
2016-17 is 0.70, and 2017-18 is 0.074, it shows us that bank liquidity is normally
good and the ratio is increased gradually in recent years.

41
 Figure No: 3

The Bank Cash Position Ratio

Bank Cash Position Ratio

0.08

0.07

0.06

0.05

0.04

0.03

0.02

0.01

0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

42
 Table 5.4 Showing the Bank’s Net Profit Margin Ratio

(Rs. In Crores)

Year Net Profit Current Liabilities Ratio

(A) (B) (A/B)

2013-2014 6,217.67 2,94,733.45

0.021
2014-2015 7,357.82 3,37,497.61
0.022
2015-2016 8,223.66 3,73,076.33
0.022
2016-2017 3,679.28 4,40,674.26
0.008
2017-2018 275.68 4,79,868.17
0.001
Source: Secondary Data from Financial Statements of Axis Bank.

INFERENCE:

Table 5.4 presents net profit margin ratio of five years from 2013 to 2018. In the
above ratios the bank net profit margin ratio of 2013-14 is 0.021, 2014-15 is 0.022,
2015-16 is 0.022, 2016-17 is 0.008, and 2017-18 is 0.001. It shows that bank
profitability was satisfactory for 3 years and then it started to decline.

43
 Figure No: 4

Bank's Net Profit Margin

Net Profit Margin Ratio

0.025

0.02

0.015

0.01

0.005

0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

44
 Table 5.5 Showing the Bank's Return on Common Stock Equity

(Rs. In Crores)

Year Net Profit Common stock equity Ratio

(A) (B) (A/B)

2013-2014 6,217.67 469.84 13.234

2014-2015 7,357.82 474.1 15.520

2015-2016 8,223.66 476.57 17.256

2016-2017 3,679.28 479.01 7.681

2017-2018 275.68 513.31 0.537

Source: Secondary Data from Financial Statements of Axis Bank.

INFERENCE:

Table 5.5 presents Return on common stock equity ratio of five years from 2013 to
2018. In the above ratios the bank return on common stock equity of 2013-14 is
13.234, 2014-15 is 15.520, 2015-16 is 17.256, 2016-17 is 7.681, and 2017-18 is
0.537. . It shows that bank profitability was satisfactory for 3 years and then it started
to decline.

45
 Figure No: 5

Bank's Return on Common Stock Equity

Return on Common Stock Equity

20

18

16

14

12

10

0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

46
 Table 5.6 Showing the Bank's Return on Asset Ratio

(Rs. In Crores)

Year Net Profit Total Assets Ratio

(A) (B) (A/B)

2013-2014 6,217.67 3,83,244.89 0.016

2014-2015 7,357.82 4,61,932.39 0.016

2015-2016 8,223.66 5,25,467.62 0.016

2016-2017 3,679.28 6,01,467.67 0.006

2017-2018 275.68 6,91,329.58 0.0004

Source: Secondary Data from Financial Statements of Axis Bank.

INFERENCE:

Table 5.6 presents Return on Asset Ratio of five years from 2013 to 2018. In the
above ratios the bank Return on Asset Ratio of 2013-14 is 0.016, 2014-15 is 0.016,
2015-16 is 0.016, 2016-17 is 0.006, and 2017-18 is 0.0004. It shows that bank
profitability was satisfactory and constant for 3 years and then it started to decline
from 2016 but the total assets are increasing gradually.

47
 Figure No: 6

Bank's Return on Asset

Return on Assets
0.018

0.016

0.014

0.012

0.01

0.008

0.006

0.004

0.002

0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

48
 Table 5.7 Showing the Bank's Current Asset Turnover Ratio

(Rs. In Crores)

Year SALES Current Asset Ratio

(A) (B) (A/B)

2013-2014 38,046.38 2,67,286.25 0.142

2014-2015 43,843.64 3,27,075.25 0.134

2015-2016 50,359.50 3,99,938.24 0.126

2016-2017 56,233.47 4,68,927.40 0.120

2017-2018 56,747.40 5,33,481.81 0.106

Source: Secondary Data from Financial Statements of Axis Bank.

INFERENCE:

Table 5.7 presents Current Asset Turnover Ratio of five years from 2013 to 2018. In
the above ratios the bank Current Asset Turnover Ratio of 2013-14 is 0.142, 2014-15
is 0.134, 2015-16 is 0.126, 2016-17 is 0.120, and 2017-18 is 0.106. It shows that bank
Current Asset Turnover Ratio is not good as liquidity and it is declining every year.

49
 Figure No: 7

Bank's Current Asset Turnover

Current Assets Turnover

0.16

0.14

0.12

0.1

0.08

0.06

0.04

0.02

0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

50
 Table 5.8 Showing the Bank's Fixed Asset Turnover Ratio

(Rs. In Crores)

Year SALES Fixed Assets Ratio

(A) (B) (A/B)

2013-2014 38,046.38 1,15,958.64 0.328

2014-2015 43,843.64 1,34,857.14 0.325

2015-2016 50,359.50 1,25,529.37 0.401

2016-2017 56,233.47 1,32,540.26 0.424

2017-2018 56,747.40 1,57,847.76 0.360

Source: Secondary Data from Financial Statements of Axis Bank.

INFERENCE:

Table 5.8 presents Fixed Asset Turnover Ratio of five years from 2013 to 2018. In the
above ratios the bank Current Asset Turnover Ratio of 2013-14 is 0.328, 2014-15 is
0.325, 2015-16 is 0.401, 2016-17 is 0.424, and 2017-18 is 0.360. It shows that bank
Fixed Asset Turnover Ratio is not good as liquidity and it also started to decline in
2017.

51
 Figure No: 8

The Bank's Fixed Asset Turnover Ratio

Fixed Assets Turnover Ratio

0.45

0.4

0.35

0.3

0.25

0.2

0.15

0.1

0.05

0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

52
 Table 5.9 Showing the Bank's Total Asset Turnover Ratio
(Rs. In Crores)

Year SALES Total Assets Ratio

(A) (B) (A/B)

2013-2014 38,046.38 3,83,244.89 0.099

2014-2015 43,843.64 4,61,932.39 0.095

2015-2016 50,359.50 5,25,467.62 0.096

2016-2017 56,233.47 6,01,467.67 0.093

2017-2018 56,747.40 6,91,329.58 0.082

Source: Secondary Data from Financial Statements of Axis Bank.

INFERENCE:

Table 5.9 presents Fixed Asset Turnover Ratio of five years from 2013 to 2018. In the
above ratios the bank Current Asset Turnover Ratio of 2013-14 is 0.099, 2014-15 is
0.095, 2015-16 is 0.096, 2016-17 is 0.093, and 2017-18 is 0.082. It shows that bank
Total Assets Turnover Ratio is not good as liquidity and it also started to decline in
2017.

53
 Figure No: 9

The Bank's Total Asset Turnover Ratio

Total Assets Turnover Ratio

0.12

0.1

0.08

0.06

0.04

0.02

0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

54
 Table 5.10 Showing the Bank's Debt Ratio

(Rs. In Crores)

Year Total Liabilities Total Assets Ratio

(A) (B) (A/B)

2013-2014 3,45,024.39 3,83,244.89 0.900

2014-2015 4,17,255.88 4,61,932.39 0.903

2015-2016 4,72,302.71 5,25,467.62 0.899

2016-2017 5,45,705.13 6,01,467.67 0.907

2017-2018 6,27,884.31 6,91,329.58 0.908

Source: Secondary Data from Financial Statements of Axis Bank.

INFERENCE:

Table 5.10 presents Debt Ratio of five years from 2013 to 2018. In the above ratios
the Bank’s Debt Ratio of 2013-14 is 0.900, 2014-15 is 0.903, 2015-16 is 0.899, 2016-
17 is 0.907, and 2017-18 is 0.908. It shows that bank Debt Ratio is favorable but it is
increasing gradually from past two years.

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 Figure No: 10

Table 5.10 Showing the Bank's Debt Ratio

Debt Ratio
0.91

0.908

0.906

0.904

0.902

0.9

0.898

0.896

0.894
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

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CHAPTER –IV

57
 CHAPTER- IV

LIMITATIONS OF THE STUDY

Due to constraints of time and resources, the study is likely to suffer from certain
limitations. Some of these are mentioned here under so that the findings of the study
may be understood in a proper perspective. The limitations of the study are:
 The study is based on the secondary data and the limitation of using
secondary data may affect the results.
 The secondary data was taken from the five years annual reports of the Axis
Bank. It may be possible that the data shown in the annual reports may be
limited period of time which does not effectively show the actual fluctuation
of the bank profitability.

Financial analysis is mainly done to compare the growth, profitability and financial
soundness of bank by diagnosing the information contained in the financial
statements. Financial ratio analysis is done to identify the financial strengths and
weaknesses of the bank by properly establishing relationship between the items of
Balance Sheet and Profit & Loss Account for period of five years. It helps in better
understanding of bank financial position, growth and performance by analyzing the
financial statements with various tools and evaluating the relationship between
various elements of financial statements

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CHAPTER –V

59
 CHAPTER –V

CONCUSION & SUGGESTIONS

5.1 Conclusion:

 The liquidity position of the bank is good. Current ratio is passed one with
increasing positive growth year by year. Current Assets are increasing more
comparing to Current Liabilities year by year.
 The Cash position ratio is increased gradually in recent years.
 The debt of the bank is quite high as it indicates debt ratio. There is leverage
risk. To address this concern, bank can also analyze the firm's interest
coverage ratio, which is the company's operating income divided by debt
service payments. A high operating income will allow even a debt-burdened
firm to meets its obligations
 Asset turnover ratio should be improved together with the bank's financing
mix and its profit margin for a better analysis. A lower turnover ratio means
that the bank is not using its assets optimally. Total asset turnover ratio is a
key driver of return on equity. It is not good as liquidity and it also started to
decline in 2017.
 Net Profit Margin Ratio shows that bank profitability was satisfactory for 3
years and then it started to decline.

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5.2 Suggestions
It is recommended that bank to use more ratios, especially those in the study which
are as significant as improvement of their financial performance measures. Axis bank
should probably consider the use of the fund to invest other opportunities to get a
profit, since they seem to be paying or expending more interest not only for the
majority of participants, but for businesses in general.

It is also recommended that axis bank owners/ managers request more research study
and financial analysis to their financial staff and also external examiner on bankruptcy
prediction models at relevant institutions such as universities. The few models
presented in this study may be used by Axis bank as well, since they are simple and
important to know financial health of the bank,

The Axis bank should have increased its current assets than its current liabilities to
make constant positive working capital. The bank should have decreased its current
liabilities by paying through the profit which is being made. The debt should been
minimized to keep debt ratio and debt-equity ratio to a minimum value

Efficient use of asset is good as liquidity measures of Asset accounts such us total
asset turnover of the bank are significant increase in positive account side but
decreases some accounts. The point is that there is no proper efficient use of asset so
Axis bank executive have to consider best asset position use.

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