A

PROJECT REPORT

ON

COMPARATIVE STUDY OF FINANCIAL REPORT OF TOP THREE BANKS OF INDIA

SUBMITTED TO TILAK MAHARASHTRA UNIVERSITY IN PARTIAL FULFILLMENT OF 2 YEARS FULL TIME COURSE MASTER OF BUSINESS ADMINISTRATION (MBA)

Submitted By: KAAT RAFIK O. (Batch 2008-09)

Guided By: Prof.R.GANESHAN

MAHARASHTRA COSMOPOLITAN EDUCATION SOCIETY.S PAI INTERNATIONAL CENTRE FOR MANAGEMENT EXCELLENCE CAMP- PUNE-411001

CERTIFICATE

This is certify that KAAT RAFIK OSMAN BHAI student of PAI international or management excellence, Maharashtra Cosmopolitan Education society, Pune leted his field work report on the topic of COMPARATIVE STUDY OF FINANCIAL REPORT THREE BANKS OF INDIA and has submitted the field work report in partial ent of MBA of the college for the academic year 2008-2009.

centre f has comp OF TOP fulfillm

He has worked under our guidance and direction. The said report is based on bona fide information.

Project guide name Prof. R Ganesan

Designation Director

PAI INTERNATIONAL CENTRE FOR MANAGEMENT EXCELLENCE Maharashtra Cosmopolitan Education Society

DECLARATION

I hereby declare that project titled COMPARATIVE STUDY OF FINANCIAL REPORT OF TOP THREE BANKS OF INDIA is an original piece of research work carried out by me under the guidance and supervision of prof. R Ganesan. The information has been collected from genuine &authentic sources. The work has been submitted in partial fulfillment o f the requirement of MBA to our college.

Place: Signature:

Date: Name of the students:

ACKNOWLEDGEMENT

Perseverance inspiration and motivation have always played a key role in success of any venture . I hereby express my deep sense of gratitude to all the personalities inv olved directly and indirectly in my project work.

I would thank to God for their blessing and my parents also for their valuable suggestion and support in my project report.

I would also like to thank our friends and those who have helped us during this project directly or indirectly.

Last but not the least; I would like to express my sincere gratitude to all the faculty members who have taught me in my entire MBA curriculum and our Director Prof.R.GANESAN w ho has always been a source of guidance, inspiration and motivation. However, I accept the sole responsibility for any possible errors of omission and would be extremely gratef ul to the readers of this project report if they bring such mistakes to my notice.

KAAT RAFIK O.

INDEX

Page No

Subjects

Sr.No

1. Introduction

7 2. Bank Profile

10

i. SBI

11

ii. ICICI

14

iii. PNB

17 3. Products & Services

21 4. Balance Sheet

36 5. Ratio Analysis

40 6. Objectives

62 7. Importance

64 8. Advantages, Limitations

66 9. Conclusion

69 10. Bibliography

71

INTRODUCTION

INRTODUCTION . After preparation of the financial statements, one may be interested in knowin g the position of an enterprise from different points of view. This can be done by analyzing th e financial statement with the help of different tools of analysis such as ratio analysis, f unds flow analysis, cash flow analysis, comparative statement analysis, etc. Here I have d one financial analysis by ratios. In this process, a meaningful relationship is established be tween two or more accounting figures for comparison.

. Financial ratios are widely used for modeling purposes both by practitioners a nd researchers. The firm involves many interested parties, like the owners, managem ent, personnel, customers, suppliers, competitors, regulatory agencies, and academics , each having their views in applying financial statement analysis in their evaluations . Practitioners use financial ratios, for instance, to forecast the future success of companies, while the researchers' main interest has been to develop models exploiting these ratios. M any distinct areas of research involving financial ratios can be discerned. Historically one can observe several major themes in the financial analysis literature. There is overlapping in the observable themes, and they do not necessarily coincide with what theoretically might be the best founded areas.

. Financial statements are those statements which provide information about prof itability and financial position of a business. It includes two statements, i.e., profit & los s a/c or income statement and balance sheet or position statement.

. The income statement presents the summary of the income earned and the expense s incurred during a financial year. Position statement presents the financial position of t he business at the end of the year.

. Before understanding the meaning of analysis of financial statements, it is ne cessary to understand the meaning of analysis. and financial statements..

. Analysis means establishing a meaningful relationship between various items of the two financial statements with each other in such a way that a conclusion is drawn. B y financial statements, we mean two statements- (1) profit & loss a/c (2) balance sheet. The se are prepared at the end of a given period of time. They are indicators of profitabil ity and financial soundness of the business concern.

. Thus, analysis of financial statements means establishing meaningful relations hip between various items of the two financial statements, i.e., income statement and positi on statement

. Parties interested in analysis of financial statements Analysis of financial statement has become very significant due to widespread in terest of various parties in the financial result of a business unit. The various persons interested in the analysis of financial statements are:. Short- term creditors They are interested in knowing whether the amounts owing to them will be paid as and when fall due for payment or not. . Long term creditors They are interested in knowing whether the principal amount and interest thereon will be paid on time or not. . Shareholders They are interested in profitability, return and capital appreciation. . Management

The management is interested in the financial position and performance of the en terprise as a whole and of its various divisions. . Trade unions They are interested in financial statements for negotiating the wages or salarie s or bonus agreement with management.

. Taxation authorities These authorities are interested in financial statements for determining the tax liability. . Researchers They are interested in the financial statements in undertaking research in busin ess affairs and practices.

. Employees They are interested as it enables them to justify their demands for bonus and in crease in remuneration. You have seen that different parties are interested in the results reported in t he financial statements. These results are reported by analyzing financial statements through the use of ratio analysis.

BANK PROFILE

1. STATE BANK OF INDIA

Type-

Public (BSE, NSE:SBI) & (LSE:SBID) FoundedCalcutta, 1806 (as Bank of Calcutta) HeadquartersCorporate Centre, Madam Cama Road, Mumbai 400 021 India Key peopleOm Prakash Bhatt, Chairman

State Bank of India (SBI) (LSE: SBID) is the largest bank in India. It is also, measured by the number of branch offices and employees, the second largest bank in the world . The bank traces its ancestry back through the Imperial Bank of India to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. The G overnment of India nationalized the Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India. In 2008, the Government took over the stake held by the Reserve Bank of India.

SBI provides a range of banking products through its vast network in India and o verseas, including products aimed at NRIs. With an asset base of $126 billion and its rea ch, it is a regional banking behemoth. SBI has laid emphasis on reducing the huge manpower through Go lden handshake schemes and computerizing its operations.

The State Bank Group, with over 16000 branches, has the largest branch network i n India. It has a market share among Indian commercial banks of about 20% in deposits and ad vances.

International presence

180px-SBImumbai

Regional office of the State Bank of India (SBI), India's largest bank, in Mumba i. The government of India is the largest shareholder in SBI.

The bank has 52 branches, agencies or offices in 32 countries. It has branches o f the parent in Colombo, Dhakka, Frankfurt, Hong Kong, Johannesburg, London and environs, Los Angeles, Male in the Maldives, Muscat, New York, Osaka, Sydney, and Tokyo. It has offshor e banking units in the Bahamas, Bahrain, and Singapore, and representative offices in Bhutan and Cape Town.

SBI operates several foreign subsidiaries or affiliates. In 1990 it established an offshore bank, State Bank of India (Mauritius). It has two subsidiaries in North America, State Bank of India (California), and State Bank of India (Canada). In 1982, the bank established it s California subsidiary, which now has seven branches. The Canadian subsidiary was also estab lished in 1982 and also has seven branches, four in the greater Toronto area, and three in Brit ish Columbia. In Nigeria, it operates as INMB Bank. This bank was established in 1981 as the Indo -Nigerian Merchant Bank and received permission in 2002 to commence retail banking. It now has five branches in Nigeria. In Nepal SBI owns 50% of Nepal SBI Bank, which has branches throughout the country. In Moscow SBI owns 60% of Commercial Bank of India, with Canara Ban k owning the rest. In Indonesia it owns 76% of PT Bank Indo Monex. State Bank of India al ready has a branch in Shanghai and plans to open one up in Tianjin.

BOARD OF DIRECTORS

1 Shri O.P. Bhatt(Chairman) 2 Shri S.K. Bhattacharyya(MD & CC&RO) 3 Shri Suman Kumar Bery 4 Dr. Ashok Jhunjhunwala 5 Shri Dileep C. Choksi 6 Shri S. Venkatachalam 7 Dr. Deva Nand Balodhi 8 Prof. Mohd. Salahuddin Ansari 9 Dr.(Mrs.) Vasantha Bharucha 10 Shri Arun Ramanathan 11 Smt. Shyamala Gopinath

2. INDUSTRIAL CREDIT & INVESTMENT CORPORATION OF INDIA (ICICI) ICICI was formed in 1955 at the initiative of the World Bank, the government of India and Indian industry representatives. The principal objective was to create a develop ment financial institution for providing medium-term and long-term project financing to Indian businesses. Until the late 1980s, ICICI primarily focused its activities on project finance, provi ding long-term funds to a variety of industrial projects. With the liberalization of the financial se ctor in India in the 1990s, ICICI transformed its business from a development financial institution o ffering only project finance to a diversified financial services provider that, along with its subsid iaries and other group companies, offered a wide variety of products and services. As India.s economy b ecame more market-oriented and integrated with the world economy, ICICI capitalized on the new opportunities to provide a wider range of financial products and services to a broader spectru m of clients. ICICI Bank was incorporated in 1994 as a part of the ICICI group. ICICI Bank.s i nitial equity capital was contributed 75.0% by ICICI and 25.0% by SCICI Limited, a dive rsified finance and shipping finance lender of which ICICI owned 19.9% at December 1996. Pursuan t to the merger of SCICI into ICICI, ICICI Bank became a wholly-owned subsidiary of ICICI . ICICI.s holding in ICICI Bank reduced due to additional capital raising by ICICI Bank an d sale of shares by ICICI, pursuant to the requirement stipulated by the Reserve Bank of India that ICICI dilute its ownership of ICICI Bank. Effective March 10, 2001, ICICI Bank acquired Bank of M adura, an old private sector bank, in an all-stock merger. The issue of universal banking, which in the Indian context means the conversion of longterm lending institutions such as ICICI into commercial banks, had been discusse d at length over the past several years. Conversion into a bank offered ICICI the ability to acce pt low-cost demand deposits and offer a wider range of products and services, and greater opportuni ties for earning nonfund based income in the form of banking fees and commissions. ICICI Bank also c onsidered various strategic alternatives in the context of the emerging competitive scenar io in the Indian banking industry. ICICI Bank identified a large capital base and size and scale

of operations as key success factors in the Indian banking industry. In view of the benefits of trans formation into a bank and the Reserve Bank of India.s pronouncements on universal banking, ICICI and I CICI Bank decided to merge.

At the time of the merger, both ICICI Bank and ICICI were publicly listed in Ind ia and on the New York Stock Exchange. The amalgamation was approved by each of the boards of directors of ICICI, ICICI Personal Financial Services, ICICI Capital Services and ICICI Ba nk at their respective board meetings held on October 25, 2001. The amalgamation was approve d by ICICI Bank.s and ICICI.s shareholders at their extraordinary general meetings held on January 25, 2002 and January 30, 2002, respectively. The amalgamation was sanctioned by the High Court of Gujarat at Ahmedabad on March 7, 2002 and by the High Court of Judicature at Bombay on A pril 11, 2002. The amalgamation became effective on May 3, 2002. The date of the amalgamation f or accounting purposes under Indian GAAP was March 30, 2002. The Sangli Bank Limited, an unlisted private sector bank merged with ICICI Bank with effect from April 19, 2007. On the date of acquisition, Sangli Bank had over 190 branches and extension counters, total assets of Rs. 17.6billion (US$ 440 million), total dep osits of Rs. 13.2 billion (US$ 330 million), total loans of Rs. 2.0 billion (US$ 50million).

BOARD OF DIRECTORS

1.

N. Vaghul, Chairman

2.

Sridar Iyengar

3.

L. N. Mittal

4.

Narendra Murkumbi

5.

Anupam Puri

6.

Arun Ramanathan

7.

M. K. Sharma

8.

P. M. Sinha

9.

Marti G. Subrahmanyam

10.

T. S. Vijayan

11.

V. Prem Watsa

12.

K. V. Kamath, Managing Director & CEO

3. PUNJAB NATIONAL BANK (PNB)

Punjab National Bank (PNB) was registered on May 19, 1894 under the Indian Comp anies Act with its office in Anarkali Bazaar Lahore. The Bank, founded by Dyal Singh M ajithia and Lala Harkishen Lal, is the second largest government-owned commercial bank in India w ith about 4,500 branches across 764 cities. It serves over 37 million customers. The bank has be en ranked 248th biggest bank in the world by Bankers Almanac, London. Total Business of the bank for financial year 2007 is estimated to be approximately US$60 billion. It has a banking subsi diary in the UK, as well as branches in Hong Kong and Kabul, and representative offices in Almaty, S hanghai, and Dubai.

We are a leading public sector commercial bank in India, offering banking produc ts and services to corporate and commercial, retail and agricultural customers. Our ban king operations for corporate and commercial customers include a range of products and services for large corporations, as well as small and middle market businesses and government entit ies. We offer a wide range of retail credit products including housing loans, personal loans and automobile loans. We cater to the financing needs of the agricultural sector and have created inno vative financing products for farmers. We also provide significant financing to other priority se ctors including small scale industries. Through our treasury operations, we manage our balance sheet, including the maintenance of required regulatory reserves, and seek to maximize profits from o ur trading portfolio by taking advantage of market opportunities.

Our revenue, which is referred to herein and in our financial statements as our income, consists of interest income and other income. Interest income consists of intere st on advances (including the discount on bills discounted) and income on investments. Income o n investments consists of interest and dividends from securities and our other investments and interest from interbank loan and cash deposits we keep with the RBI. Our securities portfolio consists primarily of Government of India and state government securities. We meet our statutory li

quidity reserve ratio requirements through investments in these and other approved securities. W e also hold debentures and bonds issued by public sector undertakings and other corporations , commercial paper, equity shares and mutual fund units.

Our interest expense consists of our interest on deposits as well as borrowings. Our interest

Income and expense are affected by fluctuations in interest rates as well as the volume of activity. Our interest expense is also affected by the extent to which we fund our activit ies with low interest or non-interest deposits, and the extent to which we rely on borrowings. Our non-interest expense consists principally of operating expenses such as expe nses for wages and employee benefits, rent paid on premises, insurance, postage and telec ommunications expenses, printing and stationery, depreciation on fixed assets, other administr ative and other expenses. Provisioning for non-performing assets, depreciation on investments an d income tax is included in provisions and contingencies

We use a variety of indicators to measure our performance. These indicators are presented in tabular form in the section titled Selected Statistical Information on page []. Our net interest income represents our total interest income (on advances and investments) net of total interest expense (on deposits and borrowings). Net interest margin represents the ratio o f net interest income to the monthly average of total interest earning assets. Our spread repre sents the difference between the yield on the monthly average of interest earning assets and the cost of the monthly average of interest bearing liabilities. We calculate average yield on the month ly average of advances and average yield on the monthly average of investments, as well as the average cost of the monthly average of deposits and average cost of the monthly average of borro wings. Our cost of funds is the weighted average of the average cost of the monthly average of inte rest bearing liabilities. For purposes of these averages and ratios only, the interest cost o f the unsecured subordinated bonds that we issue for Tier 2 capital adequacy purposes ( Tier 2 bon ds ) is included in our cost of interest bearing liabilities. In our financial statements, these bonds are accounted for as other liabilities and provisions and their interest cost is accounted for under other interest expenses.

Since 1969, when we became a public sector bank, we have managed to continue to grow our business while maintaining a strong balance sheet. As of September 30, 2004, our total deposits represented 85.9% of our total liabilities. On average, interest free demand dep osits and low interest savings deposits represented 43.8% of these deposits in the first six months of fiscal 2005.These low-cost deposits led to an average cost of funds excluding equity for the first

six months of fiscal 2005 of 4.7%. As of September 30, 2004, our gross and net non-performing assets constituted 7.65% and 0.30% of our gross and net advances, respectively. In fiscal 2004 our total income was Rs. 96.5 billion and our net profit was Rs. 11.1 billion before adjustment and R s. 10.6billion after adjustment as part of the restatement of our financial statements for this Issue . In the first six months of fiscal 2005 our total income was Rs. 51.9 billion and our net profit w as Rs. 7.4billion. Between fiscal 2002 and 2004, our total income grew at a compound annual rate of 12.5%, our

unadjusted and adjusted net profit grew at a compound annual rate of 40.4% and37 .4%, respectively, and our total deposits and total advances grew at a compound annua l growth rate of 17.1% and 17.2%, respectively.

We intend to maintain our position as a cost efficient and customer friendly ins titution that Provides comprehensive financial and related services. We seek to achieve this b y continuing to adopt technology which will integrate our extensive branch network. We intend to grow by cross selling various financial products and services to our customers and by expandin g geographically in India and internationally. We are committed to excellence in serving the public and also maintaining high standards of corporate responsibility. In line with our philoso phy of aiding India.s development we have opened branches in many rural areas.

BOARD OF DIRECTORS

1.

Dr K.C Chakrabarty

2.

Smt. Ravneet Kaur

3.

Shri L.M.Fonseca

4.

Shri. S.R.Khurana

5.

Shri P.K. Nayar

6.

Shri Mohan Lal Bagga

7.

Shri Mushtaq A Antulay

8.

Shri Gautam P. Khandelwal

9.

Shri Vinod Kumar Mishra

10.

Shri Tribhuwan Nath Chaturvedi

11.

Shri G R Sundaravadivel

12.

Shri Devinder Kumar Singla

PRODUCTS & SERVICES

1. SBI BANKING

. . . . . . . .

Personal Banking Agricultural & Rural Banking NRI Services International Banking Corporate Banking Services Govt. Business SME

G:\STATE BANK OF INDIA Safe Banking With SBI_files\22top.gif G:\STATE BANK OF INDIA Safe Banking With SBI_files\personal_banking_top22.gif G:\STATE BANK OF INDIA Safe Banking With SBI_files\sme_top22.gif G:\STATE BANK OF INDIA Safe Banking With SBI_files\nri_banking_top22.gif Personal Banking Deposit Schemes Personal Finance Corp Salary Package Services

Agricultural Agricultural Banking Micro Credit Regional Rural Banks

NRI Services Type of Accounts

International Trade Finance Merchant Banking Correspondent Banking

G:\STATE BANK OF INDIA Safe Banking With SBI_files\sbisell.jpg Corporate Banking Corporate Accounts Mid Corporate Group Project Finance Products & Services

G:\STATE BANK OF INDIA Safe Banking With SBI_files\transs.gif Services Internet Banking Mobile Banking

ATM Services

Govt. Business Govt. Accounts.

SME G:\STATE BANK OF INDIA Safe Banking With SBI_files\spacer.gif

Demat Services

. PERSONALBANKING

Public Provident Fund.

SBI Term Deposits SBI Loan For Pensioners SBI Recurring Deposits Loan Against Mortgage Of Property SBI Housing Loan Loan Against Shares & Debentures SBI Car Loan Rent Plus Scheme SBI Educational Loan Medi-Plus Scheme

SBI Personal Loan Rates Of Interest

. AGRICULTURAL State Bank of India Caters to the needs of agriculturists and landless agricultu ral labourers through a network of 6600 rural and semi-urban branches. There are 972 specializ ed branches which have been set up in different parts of the country exclusively for the dev elopment of agriculture through credit deployment .These branches include 427 Agricultural D evelopment Branches (ADBs) and 547 branches with Development Banking Department (DBDs) whic h cater to agriculturists and 2 Agricultural Business Branches at Chennai and Hyderabad cat ering to the needs of hi tech commercial agricultural projects. Our branches have covered a whole gamut of agricultural activities like crop pro duction , horticulture , plantation crops, farm mechanization, land development and reclam ation, digging of wells, tube wells and irrigation projects, forestry, construction of cold storag es and godowns, processing of agri-products, finance to agri-input dealers, allied activities li ke dairy , fisheries, poultry, sheep-goat, piggery and rearing of silk worms. The branch also has farmer's meet in villages to explain to farmers about variou s schemes offered by the bank. To give special focus to agriculture lending Bank has set u p agri business unit. Bank has also agri specialists in various disciplines to handle projects/ guide farmers in their agri

ventures. Advances are given for very small activity covering poorest of the poo r to hi-tech activities involving large fund outlays. We are the leaders in agri finance in the country with a portfolio of Rs. 18,00 0 cars in agri advances to around 50 lac farmers.

. NRI SERVICES World Class Services from a Bank you can Trust Indians everywhere should become enlightened International citizens. Wherever you are, whichever country you live , enrich that nation, not only in financial terms, but also with your sweat knowledge and dign ity since that is the tradition of the country from where you came. At the same time, remember we have a common umbilical connectivity to our motherland, India.

. INTERNATIONAL BANKING International banking services of State Bank of India are delivered for the bene fit of its Indian customers, non-resident Indians, foreign entities and banks through a net work of 84 offices/branches in 32 countries as on 31 March 2008, spread over all time zones . The network is augmented by a cluster of Overseas and NRI branches within India and corresponde nt links with over 522 banks, the world over. Bank's Joint Ventures and Subsidiaries abroad fu rther underline the Bank's international presence. The services include corporate lending, loan syndications, merchant banking, han dling Letters of Credit and Guarantees, short-term financing, collection of clean and documentary credits and remittances. The Bank has carved a niche for itself in the Euro land with branches located in Antwerp, Paris and Frankfurt. Indian banks and corporates are able to avail single-window Euro serv ices from the Bank's Frankfurt branch. . CORPORATE BANKING SBI is a one shop providing financial products / services of a wide range for la rge, medium and small customers both domestic and international.

Working Capital Financing . Assistance extended both as Fund based and Non-Fund based facilities to Corpor ate, Partnership firms, Proprietary concerns

. Working Capital finance extended to all segments of industries and services se ctor such as IT Term Loans to support capital expenditures for setting up new ventures as also for expansio n, renovation etc. Deferred Payment Guarantees to support purchase of capital equipments. Corporate Loans For a variety of business related purposes to corporate. Export Credit To Corporate / Non Corporate Strategic Business Units (i) Corporate Accounts Group (CAG) (ii)Project Finance (iii) Lease Finance . An exclusive unit providing one s shopping to Corporate . A dedicated set up specialised in financing of infrastructure and other large pr ojects . Exclusive set up for handling large ticket leases. Pricing . SBI's Prime Lending Rates (PLR) is among the lowest . Presently Bank has two PLR's . SBAR for loans payable on demand and up to one year . SBMTLR for loans payable beyond one year.

. SERVICES Listed on the left are Services, SBI offers to its customers. . DOMESTIC TREASURY

. . . .

SBI VISHWA YATRA FOREIGN TRAVEL CARD BROKING SERVICES REVISED SERVICE CHARGES ATM SERVICES

. . . . . .

INTERNET BANKING E-PAY E-RAIL RBIEFT SAFE DEPOSIT LOCKER GIFT CHEQUES

. GOVERNMENT BUSINESS

State Bank of India's linkage with Government business is widespread. No wonder that out of 9315 branches in India, about 7000 branches are conducting Government Busines s. The large network of our branches provides easy access to the common man to deposit the following Government dues and pension payments.

. SME (small scale industries) State Bank of India has been playing a vital role in the development of small sc ale industries since 1956.The Bank has financed over 8 lakhs SSI units in the country. It has 5 5 specialised SSI branches, 99 branches in industrial estates and more than 400 branches with SIB divisions. The Bank finances for Small Business activities which are of special significanc e to a large number of people as many of these activities can be started with relatively lowe r investment and with no special skills on the part of the entrepreneurs.

2. ICICI BANKING

. PERSONAL BANKING

ICICI Bank Deposit Account

Safety, Flexibility, Liquidity, Returns! ICICI Bank offers a wide Variety of Deposit Products to suit your banking requirements.

Loans Providers India

Simplified Documentation, Quick Processing, Hassle Free!!!

Exclusive, Economical, Expert Advice!!! ICICI Bank's power-packed, feature-rich investment options for meeting all your investment needs.

ICICI Bank Master Cards & Visa Cards

World Class Service and Acceptance!!! A truly world class service as ICICI Bank cards have both national and international acceptance.

ICICI Bank Life Insurance india

Secure, Reliable, Convenient!!! Convenience has always been synonymous with ICICI Bank and keeping in line we offer the facility of buying Insurance policies online.

ICICI Bank Online Services

Banking at your fingertips!!! Why be inline when you can be online for paying your utility bills, mobile bills, prepaid mobile recharge, Shopping, Credit card, insurance premium and lots more.

. INTERNATIONAL BANKING

In 2001, we identified international banking as a key opportunity, aiming to cat er to the cross-border needs of clients and leveraging our domestic banking strengths to o ffer products internationally. We have made significant progress in the international business since we set up our

first overseas branch in Singapore in 2003. ICICI Bank currently has subsidiarie s in the United Kingdom, Russia and Canada, branches in Singapore, Bahrain, Hong Kong, Sri Lanka , Dubai International Finance Centre, Qatar Financial Centre and the United States and r epresentative offices in the United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. The Bank.s wholly owned subsidiary ICICI Bank UK PLC has nine branche s in the United Kingdom and a branch each in Belgium and Germany. ICICI Bank Canada has e ight branches including three in Toronto. ICICI Bank Eurasia LLC has six branches inc luding three branches in Moscow and one in St. Petersburg.

Our international strategy is focused on building a retail deposit franchise, di verse wholesale funding sources and strong syndication capabilities to support our corporate and investment banking business; achieving the status of a non-resident Indian (NRI) community bank in key markets; and expanding private banking operations for India-centric asset classe s. During fiscal 2008, we focused on deepening our presence in existing overseas locations and ex panding our operations in key markets. In line with our strategy to establish a presence in large markets with significant savings pools, we entered into Germany through a branch established by ICICI Bank UK PLC. We have been able to successfully leverage our technology advantage to crea te a growing international deposit base. Total deposits of ICICI Bank UK PLC and ICICI Bank C anada increased by 76.0% from Rs. 191.28billion at March 31, 2007 to Rs. 335.86 billion at March 31, 2008. We also received approval for and commenced branch operations in the United States.

We have established a strong franchise among NRIs by offering a comprehensive pr oduct suite, technology enabled access, a wide distribution network in India and allia nces with local banks in various markets. Currently, we have over 500,000 NRI customers. We have under taken significant brand-building initiatives in international markets and have emerged as a wellrecognised financial services brand for NRIs. We continue to maintain a market s hare of 25% in inward remittances to India. During fiscal 2008, we launched innovative products like instant money transfer and enhanced our focus on customer relationship management and pr ocess automation. Additionally, we also undertook the development of low cost remittan ce products in non-India geographies with correspondent tie-ups for disbursements in over 100 s uch geographies.

Through our international private banking services, we offer various products to mass affluent and high net worth clients based on their financial needs and risk appe tite. The offerings range from simple deposits and loans to more sophisticated structured products, private equity and products giving exposure to the real estate sector in India.

. CORPORATE BANKING

Our corporate banking strategy is based on providing comprehensive and customise d financial solutions to our corporate customers. We offer a complete range of cor porate banking products including rupee and foreign currency debt, working capital credit, stru ctured financing, syndication and transaction banking products and services.

Our corporate and investment banking franchise is built around a core relationsh ip team that has strong relationships with almost all of the country.s corporate houses. The relationship team is product agnostic and is responsible for managing banking relationships with clie nts. We have also put in place product specific teams with a view to focus on specific areas of ex pertise in designing financial solutions for clients. Through our relationship teams working in tande m with product solution teams, we have deepened our client relationships across our product por tfolio or esulting in significant growth in income and wallet share among all our top corporate client s, as compared to the previous year.

We have created an integrated Global Investment Banking Group, which is responsi ble for working with the relationship team in India and our international subsidiaries a nd branches, for origination, structuring and execution of investment banking mandates on a globa l basis. We have also restructured our delivery team for transaction banking products by creating dedicated sales teams for trade services and transaction banking products. This has been done wi th the intent to increase our market share from transaction banking products, which will translat e into recurring fee income for the Bank. We have also focused on increasing market share in trade fi nance by leveraging and further strengthening correspondent banking relationships.

. SME BANKING

During fiscal 2008, our small enterprises customer base increased by 26% to abou t 1.1 million accounts. We have introduced our service offerings in over 400 new branc hes, increasing our coverage to over 1,000 branches. During the year, we have focused on product specialisation including investment banking for SMEs. We have continued to focus on shaping the small and medium enterprises sphere in India through initiatives such as the Emerging Indi a Awards , the SME CEO Knowledge Series - a platform to mentor and assist SME entrepreneurs, an d the SME Dialogue - a weekly feature in a leading financial newspaper sharing SME best pra ctices and

success stories. During the year, we have launched several new products and serv ices like the SME toolkit an online business and advisory resource for SMEs.

. RURAL BANKING AND AGRI-BUSINESS

We believe the rural economy has high growth potential and offers large credit g rowth opportunities. Towards this end, our suite of products and services is targeted to address the needs of both the farm and non-farm sectors. Our retail product suite encompasses loan s for crop production, purchase of farm equipment; commodity based finance as well as vario us savings, investment and insurance products. We also offer micro-finance and jewel loans. We have also focused on enhancing credit to farmers by leveraging on corporate partnerships. For example, we have partnered with various dairies to provide financing to farmers for purchase of milch cattle. We also provide credit and banking services to SMEs active in the agricultural valu e chain. To enhance our service quality and product delivery capabilities we have developed a large network of rural branches which is further augmented by non-branch channels.

Rural banking in India is still at a nascent stage and the deployment of technol ogy channels and modern banking methods for rural lending continues to be an evolving process . In line with our learning from our rural banking operations, we undertook a comprehensive review of and realigned our channel architecture, credit underwriting processes and account management s ystems. We have put in place a robust risk management structure to Mitigate and manage credit, o perational and fraud risks. Through this, we aim to create a strong foundation for scaling up o f our rural business.

3.PNB BANKING

. CORPORATE AND COMMERCIAL SECTOR LENDING ACTIVITIES

. . . . .

Term loans Cash credit and other working capital facilities Bill discounting Export credits Other credit and financing products

. SERVICES TO NON-RESIDENT INDIANS

We provide personal financial services for NRIs. We have established a branch in Kabul and Representative offices in other cities overseas in order to facilitate services being provided to NRIs. We offer foreign currency accounts to NRIs under our Foreign Currency Non-Reside nt Scheme and rupee accounts for NRIs under our Non-Resident External and Non-Resident Ordinar y Schemes. We have introduced our Global Foreign Currency Scheme and Global Rupee Deposit S cheme, which offer benefits and concessions to NRIs and their relatives provided a mini mum balance of Rs. 250,000 or US$5,000 is maintained in the account. We also offer various prod ucts for facilitating remittances from NRIs to India. We recently entered into an arrange ment to facilitate money transfers through Western Union, which is a global leader in money transfe r services. We have also entered into an agreement with Times Online Money Ltd., a Times of Ind ia group company, with a view to establishing an internet based international remittance service. In addition, we also provide housing loans to NRIs.

. RETAIL BANKING

In retail banking, our principal competitors are the large public sector banks, as well as existing and new private sector banks and foreign banks in the case of retail lo an products. The other public sector banks have large deposit bases and large branch networks, in cluding the State Bank of India which has 13,593 branches. Private sector and foreign banks compet e principally by offering a wider range of products as well as greater technological sophisticati on in some cases.

Foreign banks, while having a small market penetration overall, has a significan t presence among non-resident Indians and also competes for non-branch based products such as aut o loans and credit cards. In particular, we face significant competition primarily from private sector ban ks and to a lesser degree from other public sector banks, in the housing, auto and personal loan segments. In mutual fund sales and other investment related products, our principal competito rs are brokers, foreign banks and new private sector banks.

. PRODUCTS AND SERVICES FOR AGRICULTURE CUSTOMERS

Agriculture contributes 22% to India.s GDP and supports approximately two-thirds of India.s population. In fiscal 2004, we surpassed the stated national goal that b anks should provide at least18% of their net bank credit (which is gross credit minus Foreign Currency Non-Resident Bank deposits) to this segment, for which we received an award from India.s Finance M inister. Our average credit growth rate in this segment has been 32.2% over the last four yea rs. As of the last reporting Friday of September 2004, agricultural loans constituted 18.8% of our net bank credit.

. SMALL SCALE INDUSTRIES

We provide financing to small scale industries or SSIs . SSIs are defined as manufacturing, processing and servicing businesses with up to Rs. 50 million inv ested in plant and machinery for certain industries such as hosiery, hand tools, drugs and pharmace uticals and stationery items and up to Rs. 10 million invested in plant and machinery for ot her small scale industries. SSIs are also considered a priority sector for directed lending purp oses. See the section titled Business-Directed Lending below. As of the last reporting Friday in Septemb er 2004, SSI loans constituted 11.3% of our net bank credit. As of the last reporting Friday in September, 2004 we had an outstanding loan portfolio of Rs. 57.3 billion in this segment compare d to Rs. 48.5 billion as of the last reporting Friday in September 2003, representing growth of approx imately 18.1%.We have also received awards and recognition from the Government of India relating

to our efforts in financing SSI businesses.

BALANCE SHEET

1. STATE BANK OF INDIA

BALANCE SHEET AS ON 31-MARCH-2008 Assets

Rs(mn) %BT Net Own Assets

33291.42 0.46 Net Lease Assets(After Lease Adj A/c)

443.39 0.01 Investment

1895012.71 26.26 Advances

4167681.96 57.76 Cash & Money at call

674663.35 9.35 Other Current Assets

443749.84 6.15 Balance Sheet Total(BT)

7215263.12 100.00 Liabilities

Rs(mn) %BT Equity Share Capital

6314.70 0.09 Reserves

484011.91 6.71 Deposits

5374039.41 74.48 Borrowings

517274.11 7.17 Other Cash liab/prov.

833622.98

11.55 Balance Sheet Total(BT)

7215263.12 100.00 Non Performing Assets(NPA) %

1.87 Capital Adequacy Ratio(CAR) %

13.47 -

2. ICICI

BALANCE SHEET AS ON 31-MARCH-2008 Assets Rs(mn) %BT Net Own Assets 33118.26 0.83 Net Lease Assets(After Lease Adj A/c) 7970.72 0.20 Investment 1114543.42 27.88 Advances 2256160.83 56.43 Cash & Money at call 380411.29 9.52 Other Current Assets 205746.26 5.15 Balance Sheet Total(BT) 3997950.76 100.00 Liabilities

Rs(mn) %BT Equity Share Capital 11126.79 0.28 Reserves 453575.31 11.35 Deposits 2444310.50 61.14 Borrowings 656484.34 16.42 Other Cash liab/prov. 432453.83 10.73 Balance Sheet Total(BT) 3997950.76 100.00 Non Performing Assets(NPA) % 1.49 Capital Adequacy Ratio(CAR) % 14.92 -

3. PUNJAB NATIONAL BANK

BALANCE SHEET AS ON 31-MARCH-2008 Assets Rs(mn) %BT Net Own Assets 23149.03 1.17 Net Lease Assets(After Lease Adj A/c) 6.19 0.00 Investment 539917.05 27.34 Advances 1195015.66 60.51 Cash & Money at call 188307.24 9.54 Other Current Assets 41525.21 2.10 Balance Sheet Total(BT) 1974846.65 100.00

Liabilities Rs(mn) %BT Equity Share Capital 3153.03 0.16 Reserves 104673.49 5.30 Deposits 1664572.26 84.29 Borrowings 54465.60 2.76 Other Cash liab/prov. 147982.29 7.49 Balance Sheet Total(BT) 1974846.65 100.00 Non Performing Assets(NPA) % 0.64 Capital Adequacy Ratio(CAR) % 12.96 -

RATIO ANALYSIS

. PROFITABILITY RATIO

A class of financial metrics that are used to assess a business's ability to gen erate earnings as compared to its expenses and other relevant costs incurred during a specific per iod of time. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well.

Some examples of profitability ratios are profit margin, return on assets and re turn on equity. It is important to note that a little bit of background knowledge is nec essary in order to make relevant comparisons when analyzing these ratios.

For instances, some industries experience seasonality in their operations. The r etail industry, for example, typically experiences higher revenues and earnings for the Christma s season. Therefore, it would not be too useful to compare a retailer's fourth-quarter pro fit margin with its first-quarter profit margin. On the other hand, comparing a retailer's fourt h-quarter profit margin with the profit margin from the same period a year before would be far mo re informative.

. OPERATING MARGIN

A ratio used to measure a company's pricing strategy and operating efficiency. O perating margin is a measurement of what proportion of a company's revenue is left over a fter paying for variable costs of production such as wages, raw materials, etc. A healthy operat ing margin is required for a company to be able to pay for its fixed costs, such as interest o n debt. It Is Also known as "operating profit margin."

Calculated as:

Operating Margin

Operating margin gives analysts an idea of how much a company makes (before inte rest and taxes) on each dollar of sales. When looking at operating margin to determine th e quality of a company, it is best to look at the change in operating margin over time and to c ompare the company's yearly or quarterly figures to those of its competitors. If a company' s margin is increasing, it is earning more per dollar of sales. The higher the margin, the b etter. For example, if a company has an operating margin of 12%, this means that it mak es $0.12 (before interest and taxes) for every dollar of sales. Often, nonrecurring cash flows, such as cash paid out in a lawsuit settlement, are excluded from the operating margin calcula tion because they don't represent a company's true operating performance.

RATIO AT 31-MARCH 2008

Sr.No.

Name of Bank

Percentage

SBI

22.69 %

ICICI

14.45 %

PNB

21.47 %

BAR-GRAPH

. INTERPRETATION It shows that operating efficiency of SBI is better than PNB and ICICI. While op erating efficiency of ICICI is lower than PNB and SBI. So rank of operating efficiency o f banks can be given as SBI, PNB and ICICI.

. GROSS PROFIT MARGIN

A financial metric used to assess a firm's financial health by revealing the pro portion of money left over from revenues after accounting for the cost of goods sold. Gross profit margin serves as the source for paying additional expenses and future savings. It is al so known as "gross margin".

Calculated as:

Gross Profit Margin For example, suppose that ABC Corp. earned $20 million in revenue from producing widgets and incurred $10 million in COGS-related expense. ABC's gross profit mar gin would be 50%. This means that for every dollar that ABC earns on widgets, it really has o nly $0.50 at the end of the day.

This metric can be used to compare a company with its competitors. More efficien t companies will usually see higher profit margins.

RATIO AT 31-MARCH 2008

Sr.No.

Name of Bank

Percentage

SBI

21.49 %

ICICI

12.99 %

PNB

20.67%

BAR-GRAPH

. INTERPRETATION This ratio shows financial position of company. Here, financial position of SBI is better than PNB and ICICI. So SBI is at first rank by its financial position than PNB and IC ICI.

. NET PROFIT MARGIN

For a business to survive in the long term it must generate profit. Therefore t he net profit margin ratio is one of the key performance indicators for your business. The net profit margin ratio indicates profit levels of a business after all cos ts have been taken into account. It is worth analysing the ratio over time. A variation in the rati o from year to year may be due to abnormal conditions or expenses. Variations may also indicate cost blo wouts which need to be addressed. A decline in the ratio over time may indicate a margin squeeze suggesting that productivity improvements may need to be initiated. In some cases, the costs of such improvem ents may lead to a further drop in the ratio or even losses before increased profitability is ach ieved.

The calculation used to obtain the ratio is:

Net Profit Margin = Net Profit x 100 Sales

RATIO AT 31-MARCH 2008

Sr.No.

Name of Bank

Percentage

SBI

11.67 %

ICICI

10.51 %

PNB

12.68 %

BAR-GRAPH

. INTERPRETATION This ratio is key performance indicators for business. Key performance means the profit level of company; from above graph we can say that performance of PNB is better than SBI and ICICI. So profit level of PNB is at first rank than comes SBI and ICICI.

. RETURN ON NETWORTH Return on Net worth (RONW) is used in finance as a measure of a company.s profi tability. It reveals how much profit a company generates with the money that the equity sh areholders have invested. Therefore, it is also called Return on Equity. (ROE)

. It is expressed as:Net Income RONW = ------------------------------------------- X 100 Shareholder.s Equity The numerator is equal to a fiscal year.s net income (after payment of preferenc e share dividends but before payment of equity share dividends).The denominator excludes preference

shares and considers only the equity shareholding. So, RONW measures how much re turn the company management can generate for its equity shareholders. RONW is a measure for judging the returns that a shareholder gets on his investm ent as a shareholder, equity represents your money and so it makes good sense to know how well management 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 This ratio is useful for comparing the profitability of a company to that of oth er firms in the same industry. Here, profitability of PNB is more than SBI and PNB. So we can sa y that PNB is at first rank by its profitability than comes SBI and ICICI.

. LEVERAGE RATIO

Any ratio used to calculate the financial leverage of a company to get an idea o f the company's methods of financing or to measure its ability to meet financial oblig ations. There are several different ratios, but the main factors looked at include debt, equity, a ssets and interest expenses. A ratio used to measure a company's mix of operating costs, giving an idea of ho w changes in output will affect operating income. Fixed and variable costs are the two typ es of operating costs; depending on the company and the industry, the mix will differ.

The most well known financial leverage ratio is the debt-to-equity ratio. For ex ample, if a company has $10M in debt and $20M in equity, it has a debt-to-equity ratio of 0. 5 ($10M/$20M). Companies with high fixed costs, after reaching the breakeven point, see a great er increase in operating revenue when output is increased compared to companies with high varia ble costs. The reason for this is that the costs have already been incurred, so every sale afte r the breakeven transfers to the operating income. On the other hand, a high variable cost compa ny sees little increase in operating income with additional output, because costs continue to b e imputed into the outputs. The degree of operating leverage is the ratio used to calculate this mi x and its effects on operating income.

. DEBT-EQUITY RATIO

A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity.

Debt/Equity Ratio

Note: Sometimes only interest-bearing, long-term debt is used instead of total l iabilities in the calculation. It is also known as the Personal Debt/Equity Ratio, this ratio can be applied to personal financial statements as well as companies'. A high debt/equity ratio generally means that a company has been aggressive in f inancing its growth with debt. This can result in volatile earnings as a result of the additi onal interest expense. If a lot of debt is used to finance increased operations (high debt to equity), the company could potentially generate more earnings than it would have without this outside financing. If this were to increase earnings by a greater amount than the debt cost (interest), the n the shareholders benefit as more earnings are being spread among the same amount of shareholders. However, the cost of this debt financing may outweigh the return that the company generates o n the debt through investment and business activities and become too much for the company to handle . This can lead to bankruptcy, which would leave shareholders with nothing.

The debt/equity ratio also depends on the industry in which the company operates . For example, capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio above 2, while personal computer companies have a debt/equity of under 0.5. RATIO AT 31-MARCH 2008

Sr.No.

Name of Bank

Percentage

SBI

10.96 %

ICICI

5.27 %

PNB

15.44 %

BAR-GRAPH

. INTERPRETATION This ratio indicates what proportion of equity and debt the company is using to finance its assets. From above diagram we can say that PNB has a high debt-equity ratio mean s it is aggressive in financing its growth with debt. Than after SBI has a low debt-equity ratio as comparison with PNB and ICICI comes at third rank in debt-equity ratio.

. FIXED ASSETS TURNOVER RATIO

Measure of the productivity of a firm, it indicates the amount of sales generate d by each dollar spent on fixed assets, and the amount of fixed assets required to generat e a specific level of revenue. Changes in the ratio over time reflect whether or not the firm is becom ing more efficient in the use of its fixed assets. Formula: Sales revenue average fixed assets.

RATIO AT 31-MARCH 2008

Sr.No.

Name of Bank

Percentage

SBI

6.31 %

ICICI

5.61 %

PNB

4.35 %

BAR-GRAPH

. INTERPRETATION

This ratio shows specific level of revenue by the amount of fixed assets. SBI ha s a high level of revenue in comparison with ICICI and PNB. After SBI, ICICI has a high l evel of revenue and than comes PNB at last.

. LIQUIDITY RATIO

A class of financial metrics that is used to determine a company's ability to pa y off its shortterms debts obligations. Generally, the higher the value of the ratio, the large r the margin of safety that the company possesses to cover short-term debts.

Common liquidity ratios include the current ratio, the quick ratio and the opera ting cash flow ratio. Different analysts consider different assets to be relevant in calcu lating liquidity. Some analysts will calculate only the sum of cash and equivalents divided by current liabilities because they feel that they are the most liquid assets, and would be the most li kely to be used to cover short-term debts in an emergency.

A company's ability to turn short-term assets into cash to cover debts is of the utmost importance when creditors are seeking payment. Bankruptcy analysts and mortgage originators frequently use the liquidity ratios to determine whether a company will be able to continue as a going concern.

. CURRENT RATIO

This ratio is a rough indication of a firm's ability to service its current obli gations. Generally, the higher the current ratio, the greater the "cushion" between curre nt obligations and your Company's ability to pay them. The composition and quality of current asset s is a critical factor in the analysis of your Company's liquidity. It is calculated as Total cu rrent assets divided by total current liabilities.

RATIO AT 31-MARCH 2008

Sr.No.

Name of Bank

Percentage

SBI

0.07 %

ICICI

0.10 %

PNB

0.02 %

BAR-GRAPH

. INTERPRETATION

Current ratio of ICICI is higher than SBI and PNB, means ICICI has a high abilit y to pay for its liabilities, and than secondly comes SBI and PNB has a low ability to pay fo r liabilities in comparison with ICICI and PNB.

. QUICK RATIO

It is also known as the "Acid Test" ratio; it is a refinement of the current rat io and is a more conservative measure of liquidity. The ratio expresses the degree to which your current Company's current liabilities are covered by the most liquid current assets. Generally, an y value of less than 1 to 1 implies a "dependency" on inventory or other current assets to liquidate sh ort-term debt.

It is calculated as Cash plus trade receivables divided by total current liabili ties.

RATIO AT 31-MARCH 2008

Sr.No.

Name of Bank

Percentage

SBI

6.15 %

ICICI

6.42 %

PNB

9.40 %

BAR-GRAPH

. INTERPRETATION

PNB has a high quick ratio means it has enough current assets to cover its curre nt liabilities, while SBI and ICICI have a low quick ratio in comparison with PNB.

. PAYOUT RATIOS

The amount of earnings paid out in dividends to shareholders. Investors can use the payout ratio to determine what companies are doing with their earnings. Calculated as:

Payout Ratio

For example, a very low payout ratio indicates that a company is primarily focus ed on retaining its earnings rather than paying out dividends. The payout ratio also i ndicates how well earnings support the dividend payments: the lower the ratio, the more secure the dividend because smaller dividends are easier to pay out than larger dividends.

. DIVIDEND PAYOUT RATIO Dividend payout ratio is the fraction of net income a firm pays to its stockhold ers in dividends: \mbox{Dividend payout ratio}=\frac{\mbox{Dividends}}{\mbox{Net Income for the s ame period}} The part of the earnings not paid to investors is left for investment to provide for future earnings growth. Investors seeking high current income and limited capital growt h prefer companies with high Dividend payout ratio. However investors seeking capital gro wth may prefer lower payout ratio because capital gains are taxed at a lower rate. High growth firms in early life generally have low or zero payout ratios. As they mature, they tend to return mo re of the earnings back to investors. Note that dividend payout ratio is a reciprocate ratio to div idend cover, which is calculated as EPS/DPS. RATIO AT 31-MARCH 2008

Sr.No.

Name of Bank

Percentage

SBI

22.64 %

ICICI

33.12 %

PNB

23.40 %

BAR-GRAPH

. INTERPRETATION

ICICI has a high dividend payout ratio, so the Investors who are seeking high cu rrent income and limited capital growth should be invest in ICICI bank. PNB and SBI ha ve a low dividend payout ratio, so investors who are seeking capital growth should be inv est in PNB and SBI because capital gains are taxed at a lower rate.

. EARNING RETENTION RATIO

The percent of earnings credited to retained earnings. In other words, the propo rtion of net income that is not paid out as dividends.

Calculated as: Retention Ratio It can also be calculated as one minus the dividend payout ratio.

RATIO AT 31-MARCH 2008

Sr.No.

Name of Bank

Percentage

SBI

77.33 %

ICICI

66.35 %

PNB

76.59 %

BAR-GRAPH

. INTERPRETATION Earning retention ratio is the opposite of the dividend payout ratio. SBI and PN B have a high earning retention ratio, so the Investors who are seeking high current income an d limited capital growth should be invest in SBI and PNB. ICICI has a low earning retention ratio, so the investors who are seeking capital growth should be invest in ICICI BANK.

. PERSHARE RATIOS

. EARNIG PER SHARE

The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serve as an indicator of a company's profitability. Calculated as: Earnings Per Share (EPS) When calculating, it is more accurate to use a weighted average number of shares outstanding over the reporting term, because the number of shares outstanding ca n change over time. However, data sources sometimes simplify the calculation by using the numb er of shares outstanding at the end of the period.

Diluted EPS expands on basic EPS by including the shares of convertibles or war rants outstanding in the outstanding shares number. Earnings per share are generally considered to be the single most important vari able in determining a share's price. It is also a major component used to calculate the price-to-earnings valuation ratio.

For example, assume that a company has a net income of $25 million. If the compa ny pays out $1 million in preferred dividends and has 10 million shares for half of the year and 15 million shares for the other half, the EPS would be $1.92 (24/12.5). First, the $1 milli on is deducted from the net income to get $24 million, and then a weighted average is taken to find the number of shares outstanding (0.5 x 10M+ 0.5 x 15M = 12.5M). An important aspect of EPS that's often ignored is the capital that is required to generate the earnings (net income) in the calculation. Two companies could generate the same EPS number, but one could do so with less equity (investment) - that company would be more effic ient at using its capital to generate income and, all other things being equal, would be a "be tter" company. Investors also need to be aware of earnings manipulation that will affect the qu ality of the earnings number. It is important not to rely on any one financial measure, but to use it in conjunction with statement analysis and other measures.

RATIO AT 31-MARCH 2008

Sr.No.

Name of Bank

Percentage

SBI

117.33 %

ICICI

42.56 %

3 PNB 70.38 %

BAR GRAPH

. INTERPRETATION This ratio is an indicator of a company's profitability. From above graph we can say that SBI has a high profitability than PNB and ICICI. So, PNB comes at second position and ICIC I comes at third position in profitability.

OBJECTIVES

OBJECTIVES Analysis of financial statements is an attempt to assess the efficiency and per formance of an enterprise. For that there are some objectives which are described as under.

1. EARNING CAPACITY OR PROFITABILITY The overall objective of a business is to earn a satisfactory return on the fun ds invested in it. Financial analysis helps in ascertaining whether adequate profits are being earn ed on the capital invested in the business or not. It also helps in knowing the capacity to pay th e interest and dividend.

2. COMPARATIVE POSITION IN RELATION TO OTHER FIRMS The purpose of financial statements analysis is to help the management to make a comparative study of the profitability of various firms engaged in similar busin

ess. Such

comparison also helps the management to study the position of their firm in resp ect of sales expenses, profitability and using capital.etc.

3. EFFICIENCY OF MANAGEMENT The purpose of financial statement analysis is to know that the financial polic ies adopted by the management are efficient or not. Analysis also helps the management in prepa ring budgets by forecasting next year.s profit on the basis of past earnings. It also helps the management to find out shortcomings of the business so that remedial measures can be taken to remove th ese shortcomings.

4. FINANCIAL STRENGTH The purpose of financial analysis is to assess the financial potential of busin ess. Analysis also helps in taking decisions;

(a) Whether funds required for the purchase of new machinery and equipments are provided from internal resources of business or not.

(b) How much funds have been raised from external sources.

5.SOLVECNY OF THE FIRM The different tools of analysis tells us whether the firm has suffucient funds to meet its shortterm and long-term liabilities or not.

IMPORTANCE

IMPORTANCE Ratio analysis is an important technique of financial analysis. It is a means fo r judging the financial health of a business enterprise. It determines and interprets the liquidity,solvency,profitability,etc. of a business enterprise.

. It becomes simple to understand various figures in the financial statements th rough the use of different ratios. Financial ratios simplify, sumarise, and systemise the account ing figures presented in financial statements.

. With the help of raito analysis, comparision of profitability and financial so undness can be made between one industry and another. Similarly comparision of current year fig ures can also be made with those of previous years with the help of ratio analysis and if some weak points are located, remidial masures are taken to correct them.

. If accounting ratios are calculated for a number of years, they will reveal th e trend of costs, sales, profits and other important facts. Such trends are useful for planning.

. Financial ratios, based on a desired level of activities, can be set as standa rds for judging actual performance of a business. For example, if owners of a business aim at ea rning profit @ 25% on the capital which is the prevailing rate of return in the industry then this rate of 25% becomes the standard. The rate of profit of each year is compared with this standard and the actual performance of the business can be judged easily.

. Ratio analysis discloses the position of business with different viewpoint. It discloses the position of business with liquidity viewpoint, solvency view point, profitabilit y viewpoint, etc. with the help of such a study, we can draw conclusion regardings the financ ial health of business enterprise.

ADVANTAGES & LIMITATIONS

ADVANTAGES Ratio analysis is an important and age-old technique of financial analysis. The following are some of the advantages of ratio analysis: 1. Simplifies financial statements: It simplifies the comprehension of financial statements. Ratios tell the whole story of changes in the financial condition of the busines s. 2. Facilitates inter-firm comparison: It provides data for inter-firm comparison . Ratios highlight the factors associated with with successful and unsuccessful firm. The y also reveal strong firms and weak firms, overvalued and undervalued firms. 3. Helps in planning: It helps in planning and forecasting. Ratios can assist ma nagement, in its basic functions of forecasting. Planning, co-ordination, control and communicati ons. 4. Makes inter-firm comparison possible: Ratios analysis also makes possible com parison of the performance of different divisions of the firm. The ratios are helpful in de ciding about their efficiency or otherwise in the past and likely performance in the future. 5. Help in investment decisions: It helps in investment decisions in the case of investors and lending decisions in the case of bankers etc.

LIMITATIONS

The ratios analysis is one of the most powerful tools of financial management. T hough ratios are simple to calculate and easy to understand, they suffer from serious limitations . 1. Limitations of financial statements: Ratios are based only on the information which has been recorded in the financial statements. Financial statements themselves are subjec t to several limitations. Thus ratios derived, there from, are also subject to those limitati ons. For example, non-financial changes though important for the business are not relevan t by the financial statements. Financial statements are affected to a very great extent b y accounting conventions and concepts. Personal judgment plays a great part in determining th e figures for financial statements. 2. Comparative study required: Ratios are useful in judging the efficiency of th e business only when they are compared with past results of the business. However, such a compar ison only provide glimpse of the past performance and forecasts for future may not prove c orrect since several other factors like market conditions, management policies, etc. may affe ct the future operations. 3. Problems of price level changes: A change in price level can affect the valid ity of ratios calculated for different time periods. In such a case the ratio analysis may not clearly indicate the trend in solvency and profitability of the company. The financial s tatements, therefore, be adjusted keeping in view the price level changes if a meaningful c omparison is to be made through accounting ratios. 4. Lack of adequate standard: No fixed standard can be laid down for ideal ratio s. There are no well accepted standards or rule of thumb for all ratios which can be accepted as norm. It renders interpretation of the ratios difficult. 5. Limited use of single ratios: A single ratio, usually, does not convey much o f a sense. To make a better interpretation, a number of ratios have to be calculated which is likely to confuse the analyst than help him in making any good decision. 6. Personal bias: Ratios are only means of financial analysis and not an end in itself. Ratios have to interpret and different people may interpret the same ratio in different

way.

7. Incomparable: Not only industries differ in their nature, but also the firms of the similar business widely differ in their size and accounting procedures etc. It makes com parison of ratios difficult and misleading.

CONCLUSION

CONCLUSION

. Ratios make the related information comparable. A single figure by itself has no meaning, but when expressed in terms of a related figure, it yields signi ficant interferences. Thus, ratios are relative figures reflecting the relationship bet ween related variables. Their use as tools of financial analysis involves their comparison as single ratios, like absolute figures, are not of much use.

. Ratio analysis has a major significance in analysing the financial performance of a company over a period of time. Decisions affecting product pric es, per unit costs, volume or efficiency have an impact on the profit margin or turnover ratios of a company.

. Financial ratios are essentially concerned with the identification of significant accounting data relationships, which give the decision-maker insight s into the financial performance of a company.

. The analysis of financial statements is a process of evaluating the relationship between component parts of financial statements to obtain a better understanding of the firm.s position and performance.

. The first task of financial analyst is to select the information relevant to the decision under consideration from the total information contained in the fin ancial statements. The second step is to arrange the information in a way to highlight significant relationships. The final step is interpretation and drawing of infer ences and

conclusions. In brief, financial analysis is the process of selection, relation and evaluation.

. Ratio analysis in view of its several limitations should be considered only as a tool for analysis rather than as an end in itself. The reliability and sign ificance

attached to ratios will largely hinge upon the quality of data on which they are based. They are as good or as bad as the data itself. Nevertheless, they are an importa nt tool of financial analysis.

BIBLIOGRAPHY

BIBLIOGRAPHY

. Web sites:

. www.sbi.com . www.icici.com . www.pnb.com

. Books referred:

Basic Financial Management - M Y Khan P K Jain

. Financial Management -Prasanna Chandra