comparative analysis of financial performance of banks using ratio analysis

8/10/2019 Comparative analysis of financial performance of banks using ratio analysis

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ICICI Bank Vs. HDFC Bank

2014

Danish Kalim

Sikkim Manipal University

12/10/2014


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Project Report

n

Submitted in lieu of the partial fulfillment of the

Degree of Master of Business Administrat ion

Submitted by: - Submitted to:-

Danish Kalim Rafi Ahmad


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Table of CONTENTS

Acknowledgement

Executive Summary

Banking History

Banking Structure -India

Indian Banking System

Indian Banking Industry Structure Analysis

Organizational Profile ICICI Bank

Organizational Profile HDFC Bank

Objective of Study

Research Methodology

Ratio Analysis

Financial of HDFC & ICICI Bank

Classification of Ratios for Banking Industry

Data Analysis & Interpretation

Findings


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Acknowledgement

To acknowledge all the persons who had helped for the fulfillment of the project is not

possible for any researcher but in spite of all that it becomes the foremost responsibility

of the researcher and also the part of research ethics to acknowledge those who had

played a great role for the completion of the project.

The text contain in this report is the manifestation of learning Process that began for me

over 3 month ago. During the intervening period I have come across some wonderful

people in the form of Relatives ,friends or acquaintances from I have learnt immensely

.While it is not possible to name them individually I would like to express a deep sense of

gratitude towards them.

I would like to thank my colleagues who have supported me through thick and thin

during the last few months. These include Mr Anand Kumar,Amit.

No amount of thank can ever repay the great debt that I owe My Faculty guide Mr. Rafi

Ahmad who has provided me constant inspiration over the past one year. In fact, this

report Would not have been possible but for the direct and indirect Support, inspiration

and guidance from Rafi Ahmad who has been a consent mentor in my efforts over the

few months.

Rest all those people who helped me are not only matter of acknowledgment but also

authorized for sharing my success.


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EXECUTIVE SUMMARY

As a part of the partial fulfillment of the MBA course at Sikkim M anipal Universit ywas

undertaken.

This project is specially designed to understand the subject matter of Financial Analysis

through various rat ios for HDFC and ICICI Bank. This project gives us information and

report about companys Financial Position and comparison. Throughout the project the

focus has been on presenting information and comments in easy and intelligible manner.

The purpose of this project is to have a detailed understanding of financial statements of

bank and their ratio analysis.

This project is very useful for those who want to know about banking industry and

financial position of the companies.

.


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HISTORY OF BANKING

Banking is nearly as old as civilization. The history of banking could be said to have started

with the appearance of money. The first record of minted metal coins was in Mesopotamia

in about 2500B.C. the first European banknotes, which was handwritten appeared in1661, in

Sweden. cheque and printed paper money appeared in the 1700s and 1800s, with many

banks created to deal with increasing trade.

The history of banking in each country runs in lines with the development of trade and

industry, and with the level of political confidence and stability. The ancient Romans

developed an advanced banking system to serve their vast trade network, which extended

throughout Europe, Asia and Africa.

Modern banking began in Venice. The word bank comes from the Italian word ban co,

meaning bench, because moneylenders worked on benches in market places. The bank of

Venice was established in 1171 to help the government raise finance for a war.

At the same time, in England merchant started to ask goldsmiths to hold gold and silver in

their safes in return for a fee. Receipts given to the Merchant were sometimes used to buy or

sell, with the metal itself staying under lock and key. The goldsmith realized that they could

lend out some of the gold and silver that they had and charge interest, as not all of the

merchants would ask for the gold and silver back at the same time. Eventually, instead of

charging the merchants, the goldsmiths paid them to deposit their gold and silver.


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The bank of England was formed in 1694 to borrow money from the public for the

government to finance the war of Augsburg against France. By 1709, goldsmith were using

bank of England notes of their own receipts.

New technology transformed the banking industry in the 1900s round the world, banks

merged into larger and fewer groups and expanded into other country.


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BANKING STRUCTURE IN INDIA:

In todays dynamic world banks are inevitable for the development of a country. Banks play

a pivotal role in enhancing each and every sector. They have helped bring a draw of

development on the worlds horizon and developing country like India is no exception.

Banks fulfills the role of a financial intermediary. This means that it acts as a vehicle for

moving finance from those who have surplus money to (however temporarily) those who

have deficit. In everyday branch terms the banks channel funds from depositors whose

accounts are in credit to borrowers who are in debit.

Without the intermediary of the banks both their depositors and their borrowers would have

to contact each other directly. This can and does happen of course. This is what has lead to

the very foundation of financial institution like banks.

Before few decades there existed some influential people who used to land money. But a

substantially high rate of interest was charged which made borrowing of money out of the

reach of the majority of the people so there arose a need for a financial intermediate.

The Bank have developed their roles to such an extent that a direct contact between the

depositors and borrowers in now known as disintermediation

Banking industry has always revolved around the traditional function of taking deposits,

money transfer and making advances. Those three are closely related to each other, the

objective being to lend money, which is the profitable activity of the three. Taking depositsgenerates funds for lending and money transfer services are necessary for the attention of

deposits. The Bank have introduced progressively more sophisticated versions of these

services and have diversified introduction in numerable areas of activity not directly relating

to this traditional trinity


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INDIAN BANKING SYSTEM

Non-Schedule Banks

State co-op Banks Commercial Banks Central co-op Banksand Primary Cr.

Societies

Commercial Banks

Indian Foreign

Public Sector BanksPrivate Sector Banks HDFC,

State Bank of India

and its Subsidiaries

Other Nationalized Banks Regional Rural

Banks

Reserve Bank of India

Schedule Banks


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INDIAN BANKING INDUSTRY ANALYSIS:

The banking scenario in India has been changing at fast pace from being just the borrowers

and lenders traditionally, the focus has shifted to more differentiated and customized

product/service provider from regulation to liberalization in the year 1991, from planned

economy to market.

Economy, from licensing to integration with Global Economics, the changes have been swift.

All most all the sector operating in the economy was affected and banking sector is no

exception to this. Thus the whole of the banking system in the country has undergone a

radical change. Let us see how banking has evolved in the past 57 years of independence.

After independence in 1947 and proclamation in 1950 the country set about drawing its road

map for the future public ownership of banks was seen inevitable and SBI was created in

1955 to spearhead the expansion of banking into rural India and speed up the process of

magnetization.

Political compulsions brought about nationalization of bank in 1969 and lobbying by bank

employees and their unions added to the list of nationalized banks a few years later.

Slowly the unions grew in strength, while bank management stagnated. The casualty was to

the customer service declined, complaints increased and bank management was unable to

item the rot.


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In the meantime, technology was becoming a global phenomenon lacking a vision of the

future and the banks erred badly in opposing the technology up gradation of banks. They

mistakenly believed the technology would lead to retrenchment and eventually the

marginalization of unions.

The problem faced by the banking industry soon surfaced in their balance sheets. But the

prevailing accounting practices unable banks to dodge the issue.

The rules of the game under which banks operated changed in 1993. Norms or income

Recognition, Assets classification and loan loss provisioning were put in place and capital

adequacy ratio become mandatory. The cumulative impact of all these changes has been on

the concept of state ownership in banks. It is increasingly becoming clear that the state

ownership in bank is no longer sustainable.

The amendment of banking regulation act in 1993 saw the entry of new private sector banks

and foreign banks.

MAJOR PLAYER IN INDIA

1. HDFC BANK LTD

2. ICICI BANK LTD

3. STATE BANK OF INDIA LTD

4. PUNJAB NATOINAL BANK LTD

5. BANK OF BARODA LTD

6. FEDERAL BANK LTD

7. AXIS BANK LTD

8. ING VYSYA BANK LTD

9. IDBI BANK LTD10. INDUSIND BANK LTD

11. YES BANK LTD


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Organizat ion Prof i

ICICI Bank is India's second-la

total assets of about Rs. 1 trillio

1,000 ATMs. ICICI Bank offers

corporate and retail customer

specialized subsidiaries and af

Banking , venture capital, ass

equity shares are listed in India

Vadodara, the Stock Exchange,

and its American Depositary R

(NYSE).

ICICI Bank was originally promo

and was its wholly owned subsi

through a public offering of sha

ADRs listed on the NYSE in fisca

an all-stock amalgamation in fis

investors in fiscal 2001 and fis

World Bank, the Government o

objective was to create a devel

long-term project financing to I

from a development financial

financial services group offerin

12

e

rgest bank with

n and a network of about 540 branches and of

wide range of banking products and financi

through a variety of delivery channels an

iliates in the areas of investment banking,

t management and information technology.

on stock exchanges at Chennai, Muzaffarnaga

Mumbai and the National Stock Exchange of

ceipts (ADRs) are listed on the New York St

ted in 1994 by ICICI Limited, an Indian financi

diary. ICICI's shareholding in ICICI Bank was re

res in India in fiscal 1998, an equity offering i

2000, ICICI Bank's acquisition of Bank of Mad

cal 2001, and secondary market sales by ICICI t

al 2002. ICICI was formed in 1955 at the ini

India and representatives of Indian industry.

pment financial institution for providing med

dian businesses. In the 1990s, ICICI transform

institution offering only project finance to

a wide variety of products and services, bot

ices and over

al services to

through its

life and non-

ICICI Bank's

, Kolkata and

India Limited

ck Exchange

al institution,

duced to 46%

n the form of

ra Limited in

institutional

tiative of the

The principal

um-term and

d its business

a diversified

directly and


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through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first

Indian company and the first bank or financial institution from non-Japan Asia to be listed on

the NYSE.

After consideration of various corporate structuring alternatives in the context of the

emerging competitive scenario in the Indian banking industry, and the move towards

universal banking, the managements of ICICI and ICICI Bank formed the view that the merger

of ICICI with ICICI Bank would be the optimal strategic alternative for both entities, and

would create the optimal legal structure for the ICICI group's universal banking strategy. The

merger would enhance value for ICICI shareholders through the merged entity's access to

low-cost deposits, greater opportunities for earning fee-based income and the ability to

participate in the payments system and provide transaction-banking services. The merger

would enhance value for ICICI Bank shareholders through a large capital base and scale of

operations, seamless access to ICICI's strong corporate relationships built up over five

decades, entry into new business segments, higher market share in various business

segments, particularly fee-based services, and access to the vast talent pool of ICICI and its

subsidiaries. In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the

merger of ICICI and two of its wholly owned retail finances subsidiaries, ICICI Personal

Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was

approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court of

Gujarat at Ahmedabad in March 2002, and by the High Court of Judicature at Mumbai and

the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's

financing and banking operations, both wholesale and retail, have been integrated in a

single entity.


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History-

ICICI Bank has signed an agreement to use the NCR switch mark technology for online-

networking all its ATMs, the officials said they network would come into place in September.

ICICI Bank recently restructured its organizational structure by setting up strategic business

units for retail banking, corporate banking and fore and treasury operations, as independent

profit centers.

ICICI is all set to launch a 60-second television commercial on August 15, 1999.

2000

ICICI Bank became the first Indian bank to list on the New York Stock Exchange with its

$175-million American depository shares issue generating a demand book 13 times its size at

$2.2 billion.

The Bank proposes to bring credit cards to the "large, underserved population" in rural and

semi-urban areas.

SkyCell Communications Ltd, one of the two cellular service providers in Chennai, has

launched `Sky Banking', for which the company has tied up with ICICI Bank and HDFC Bank.

The ICICI has announced the launch of mobile banking services for its customers, using the

wireless application protocol (WAP) technology.

Ford India has tied up with ICICI Bank to introduce a scheme, enabling non-resident Indians

(NRIs) to purchase a Ford Ikon car for their friends and relatives in India.

ICICI Bank has set up an ATM facility at an Indian Oil Corporation petro diesel outlet at

Chennai. ICICI Bank has tied up with Chennai Telephones to provide Internet bill payment

facility to its customers.


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Product Portfolio

CORPORATE BANKING RETAIL BANKING

Corporate Solutions Home Loans

Government Solutions Car & Two Wheeler Loans

Capital Market Services Consumer/Personal Loans

Agriculture Finance Saving & Term Deposit

Structured Finance Salary Account

Project Finance Roaming Current Accounts

Infrastructure Finance Investment Products

Term Loans Private Banking

Working Capital Finance NRI Services

Cash Management Services Demat Services

Trade Finance Services Credit & Debit Cards

International Banking Smart Cards

Treasury Services Bill Payment Services

Corporate Internet Banking E-Cheques

Corporate Advisory Branches

Custodial Services ATMs

Professional Clearing Internet Banking

Membership Services Phone Banking


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HDFC Bank

The Housing Development Finance Corporation

Limited (HDFC) was amongst the first to

receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in

the private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994.

The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its

registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled

Commercial Bank in January 1995. HDFC is India's premier housing finance company and

enjoys an impeccable track record in India as well as in international markets. Since its

inception in 1977, the Corporation has maintained a consistent and healthy growth in its

operations to remain the market leader in mortgages. Its outstanding loan portfolio covers

well over a million dwelling units. HDFC has developed significant expertise in retail

mortgage loans to different market segments and also has a large corporate client base

for its housing related credit facilities. With its experience in the financial markets, a

strong market reputation, large shareholder base and unique consumer franchise, HDFC

was ideally positioned to promote a bank in the Indian environment.

HDFC Bank began operations in 1995 with a simple mission : to be a World Class Indian

Bank. We realized that only a single minded focus on product quality and service

excellence would help us get there. Today, we are proud to say that we are well on our

way towards that goal.

HDFC Bank Limited (the Bank) is an India-based banking company engaged in providing a

range of banking and financial services, including commercial banking and treasury


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operations. The Bank has a network of 1412 branches and 3295 automated teller machines

(ATMs) in 528 cities and total employees is 52687.

HISTORY OF HDFC BANK-

HDFC BANK LTD was incorporated in August 1994 in the name of 'HDFC Bank Limited, with

its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled

Commercial Bank in January 1995.

If ever there was a man with a mission it was Hasmukhbhai Parekh, Founder and

Chai rman-Emeritus, of HDFC Group. HDFC BANK LTD was amongst the first to set up a

bank in the private sector. The bank was incorporated on 30th August 1994 in the name of

HDFC Bank Limited, with its registered office in Mumbai.It commenced operations as a

Scheduled Commercial Bank on 16th January 1995. The bank has grown consistently and is

now amongst the leading players in the industry .

HDFC is India's premier housing finance company and enjoys an impeccable track record in

India as well as in international markets. Since its inception in 1977, the Corporation has

maintained a consistent and healthy growth in its operations to remain the market leader in

mortgages. Its outstanding loan portfolio covers well over a million dwelling units.

HDFC has developed significant expertise in retail mortgage loans to different market

segments and also has a large corporate client base for its housing related credit facilities.

With its experience in the financial markets, a strong market reputation, large shareholder

base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the

Indian environment In a milestone transaction in the Indian banking industry, Times Bank

was merged with HDFC Bank Ltd., effective February 26, 2000.


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OBJECTIVES OF STUDY

The major objectives of the resent study are to do comparative analysis of ICICI Bank Vs.

HDFC Bankthrough FINANCIAL RATIO ANALYSIS.

The main object ives of resent study aimed as:

To evaluate the performance of the companies using ratios as a yardstick to measure

the efficiency of the companies.

To understand the liquidity, profitability and efficiency positions of the companies

during the study period.

To evaluate and analyze various facts of the financial performance of the company.

To make comparisons between the ratios during different periods.

Secondary Objectives:

To understand the present financial strength of ICICI and HDFC Bank.

To determine the Profitability, Liquidity Ratios.

To simplifies and summarizes a long array of accounting data and makes them

understandable.


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RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem.

it may be understood as a science of studying how research is done scientifically. So, the

research methodology not only talks about the research methods but also considers the logic

behind the method used in the context of the research study.

1 Research Design:

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 Descriptiveand Analytical in nature.

From the study, the type of data to be collected and the procedure to be used for this

purpose were decided.

2 Data Collect ion:

The required data for the study are basically secondary in nature and the data are

collected from the audited reports of the company.

Sources of Data:

The sources of data are from the annual reports of the company from the year 2009-

2014.


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3 Methods of Data Analysis:

The data collected were edited, classified and tabulated for analysis. The analytical

tools used in this study.

3.1 Analyt ical Tools Applied:

The study employs the following analytical tools:

Comparative statement.

Common Size Statement.

Trend Percentage.

Ratio Analysis.


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RATIO ANALYSIS

1 Financial Analysis:

Financial analysis is the process of identifying the financial strengths and

weaknesses of the firm and establishing relationship between the items of the balance sheet

and profit & loss account.

Financial ratio analysis is the calculation and comparison of ratios, which are

derived from the information in a companys financial statements. The level and historical

trends of these ratios can be used to make inferences about a companys financial condition,

its operations and attractiveness as an investment. The information in the statements is used

by

Trade creditors, to identify the firms ability to meet their claims i.e. liquidity position

of the company.

Investors, to know about the present and future profitability of the company and its

financial structure.

Management, in every aspect of the financial analysis. It is the responsibility of the

management to maintain sound financial condition in the company.

2 Rat io Analysis:

The term Ratio refers to the numerical and quantitative relationship

between two items or variables. This relationship can be exposed as


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Percentages

Fractions

Proportion of numbers

Ratio analysis is defined as the systematic use of the ratio to interpret the

financial statements. So that the strengths and weaknesses of a firm, as well as its historical

performance and current financial condition can be determined. Ratio reflects a quantitative

relationship helps to form a quantitative judgment.

3 Rat ios Are Useful For Several Part ies Such As:

1) Investors, both present as well as potential investors.

2) Financial analyst.

3) Mutual funds.

4) Stock broker and stock exchange authorities.

5) Government.

6) Tax department.

7) Competitors.

8) Research analysts and students.

9) Companys management.

10) Creditors and Suppliers

11) Lending Institutions Banks and Financial Institutions

12) Financial Manager

13) Other Interested parties like credit rating agencies etc.


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4 Nature of Rat io Analysis:

Ratio analysis is a technique of analysis and Interpretation of financial

statements. It is the process of establishing and interpreting various ratios for helping in

making certain decisions. It is only a means of understanding of financial strengths and

weaknesses of a firm. There are a number of ratios which can be calculated from the

information given in the financial statements, but the analyst has to select the appropriate

data and calculate only a few appropriate ratios. The following are the four steps involved in

the ratio analysis.

Selection of relevant data from the financial statements depending upon the

objective of the analysis.

Calculation of appropriate ratios from the above data.

Comparison of the calculated ratios with the ratios of the same firm in the past, or

the ratios developed from projected financial statements or the ratios of some other

firms or the comparison with ratios of the industry to which the firm belongs.


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Financials of HDFC and ICICI Bank Last five years-

-Balance Sheet


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Profit & Loss Account-


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Cash Flow-


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5 Classificat ion of Rat ios for Banking Industr y:

A) Liquidit y Rat ios

It is also known as liquidity ratios. it includes the following

1) Measures ability of a company to meet its current obligations.

2) Indicates short term financial stability of a company.

3) Indicates present cash solvency and ability to remain solvent in times of adversities.

To measure the liquidity of a firm the following ratios can be calculated

Current ratio

Quick (or) Acid-test (or) Liquid ratio

(a) Current Ratio:

Current ratio is useful to find out solvency of the company. High current ratio

indicates that company will be able to pay its debt maturity within a year. Low current ratio

indicates that company will not be able to meet its short term debts.

Minimum standard current ratio is 2:1.

Current Assets

Current Rat io=

Current Liabilities


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(b) Quick Rat io:

Quick ratio is also known as acid test ratio. It indicates immediate ability of a

company to pay off its current obligations. And also shows the solvency and financial

soundness of the business. Greater the ratio stronger the financial position of the

company.

The standard quick ratio should be 1:1

Quick Assets

Quick Rat io=

Quick Liabilities


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B) Prof itabilit y Rat ios:

The primary objectives of business undertaking are to earn profits. Because

profit is the engine, that drives the business enterprise.

It measures the overall efficiency of the business. It indicates whether

utilization of business assets and funds are done efficiently and best way or not , so as to

generate adequate profits or returns.

Profitability ratios are followings:

1) Net Int erest Spread:

Net interest spreadrefers to the difference in borrowing and lending rates of financial

institutions (such as banks) in nominal terms. It is considered analogous to the gross margin

of non-financial companies.

Net interest spread is similar to net interest margin; net interest spread expresses the nominal

average difference between borrowing and lending rates, without compensating for the fact

that the amount of earning assets and borrowed funds may be different.

2) Net Profit Margin:

The net profit margin is calculated by dividing net income by sales. Both of these numbers

are found on a bank's net income or profit-and-loss statement. Net profit margin shows how

much of each sales dollar is earned by the companyas profit. Comparing net profit margin

across the banking industry or another industry allows a lender or investor to determine how

well one company is doing in relation to its peers.


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7 Guidelines or Precautions for Use of Ratios:

The calculation of ratios may not be a difficult task but their use is not easy.

Following guidelines or factors may be kept in mind while interpreting various ratios is

Accuracy of financial statements

Objective or purpose of analysis

Selection of ratios

Use of standards should also be kept in mind when attempting to interpret ratios.


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DATA ANALYSIS AND INTERPRETATION

8.1 Financial stabilit y Ratios:

To measure the liquidity of a firm the following ratios can be calculate the following

ratios,

a) CURRENT RATIO:

Current Asset

Current Rat io:

Current Liabil it ies

Bank Mar '10 Mar '11 Mar '12 Mar '13 Mar '14

HDFC Bank 0.03 0.06 0.08 0.78 0.06

ICICI Bank 0.14 0.07 0.12 0.98 0.09

0.03 0.06 0.08

0.78

0.06

0.14

0.07

0.12

0.98

0.09

Mar '10 Mar '11 Mar '12 Mar '13 Mar '14

Current Ratio Trend

HDFC Bank ICICI Bank


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ANALYSIS AND INTERPRETATION:

The current ratio of the firm measures the short term solvency. It indicates the

rupees of current asset available for each rupee of current liabilities.

The above chart shows that ICICI is in better place compare to HDFC Bank.

b) QUICK RATIO:

Quick Asset

Quick Rat io:

Quick Liabil it ies


HDFC Bank 7.14 6.89 6.2 7.84 8.55

ICICI Bank 14.7 15.86 9.37 10.53 11.31

7.14 6.896.2

7.848.55

14.715.86

9.3710.53

11.31


Quick Ratio Trend



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The above chart indicates over the last five years ICICI Bank has better in quick ratio

compared to HDFC Bank.

PROFITABILITY RATIO:-

A) Interest Spread


HDFC Bank 5.89 8.25 8.42 -- 8.01

ICICI Bank 5.66 6.95 7.45 -- 7.35


5.89

8.25 8.42

0

8.01

5.666.95

7.45

0

7.35


Interest Spread



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The above chart shows that in last five years HDFC is better in this ratio

compare to ICICI Bank.

b) Net Profit margin:


HDFC Bank 14.76 16.18 15.88 16.04 17.28

ICICI Bank 12.17 15.79 15.75 17.19 17.96


The above chart indicates that net profit margin for both HDFC as well as ICICI

bank have same (Approx) as of March 2014 but from last five years HDFC growth is better

than ICICI bank.

14.76

16.18 15.88 16.0417.28

12.17

15.79

15.75

17.19

17.96


Net Profit Margin Trend



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c) Return on Long Term Fund-


HDFC Bank 56.08 59.91 75.2 80.09 81.47

ICICI Bank 44.72 43.05 52.33 56.37 56.48

ANALYSIS AND INTERPRETATION

The above chart shows that ICICI bank has always better return on long term

fund compare to HDFC Bank.

.

56.0859.91

75.2

80.09 81.47

44.72 43.05

52.3356.37 56.48


Return on Long Term Fund



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(d) Return on Net Wor th:


HDFC Bank 13.7 15.47 17.26 18.57 19.5

ICICI Bank 7.79 9.35 10.7 12.48 13.4


The above chart shows that the returns on net worth for both banks have very

good growth and from investor point of view these banks have performed good. Overall on

this ratio ICICI Bank has good rate of return for last five years.

13.7

15.47

17.2618.57

19.5

7.79

9.35

10.7

12.4813.4


Return on Net Worth



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EFFICIENCYRATIOS: These ratio show management efficiency of operating bank

a. Net Interest Income to Total Fund:

.


The above chart shows that Net Interest Income over the period have

decreased for both banks and from beginning ICICI has better income compare to HDFC

Bank.

6

4.22 44.28 4.144.08

2.34 2.42.7 2.91


Net Interest Income Trend



HDFC Bank 6 4.22 4 4.28 4.14

ICICI Bank 4.08 2.34 2.4 2.7 2.91


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b) Operat ing Expense to Total Funds:


HDFC Bank 3.6 2.66 2.62 2.87 2.55

ICICI Bank 2.59 1.59 1.74 1.66 1.72


Above chart shows that Operating expense to total fund for both banks has decreased over

these periods. HDFC has better in terms of this ratio.

3.6

2.66 2.62

2.87

2.552.59

1.591.74 1.66 1.72


Operating Expense to Total fund Trend



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C) Loan Turnover Rat io


HDFC Bank 0.18 0.14 0.15 0.36 0.27

ICICI Bank 0.17 0.13 0.14 0.34 0.26

ANALYSIS AND INTERPRETATION:In this ratio both banks are having similar situation but

HDFC has better loan turnover ratio.

0.18

0.140.15

0.36

0.27

0.17

0.13

0.14

0.34

0.26


Loan Turn Over Ratio



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D) Asset Turnover Ratio


HDFC Bank 0.11 0.09 0.1 0.11 0.1

ICICI Bank 0.1 0.07 0.08 0.08 0.08


The above chart shows that ICICI has better than HDFC Ratio.

0.11

0.09

0.1

0.11

0.10.1

0.07

0.08 0.08 0.08


Asset Turn Over Ratio



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FINDINGS

Classificat ion Rat io Performanc

Liquidity Current Rat io HDFC Bank

Liquidity Quick Rat io HDFC Bank

Profitability Interest Spread HDFC Bank

Profitability Net Profit M argin ICICI Bank

Profitability Return on Long term fund HDFC Bank

Profitability Return on Net Wort h HDFC Bank

Efficiency Net Int erest Income to Total Fund HDFC Bank

Efficiency Operat ing Expense to t otal fund ICICI Bank

Efficiency Loan turn over rat io HDFC Bank

Efficiency Asset turnover rat io HDFC Bank


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CONCLUSION

Finance is the life blood of every business. Without effective financial

management a company cannot in this competitive world. A Prudent financial Manager has

to measure company performance in all aspect and also with industry standards.

If we look at the performance of both banks then we can understand that both are

performing in a effective way and their stability is good. Because of their performance they

are the leading ones. Particularly the last three years position is well due to raise in the

profit level from the FY 2012 to FY 2014.

On the aspect of financial ratio analysis of both banks, we can reach at a conclusion that interms of liquidity and profitability HDFC is better than ICICI.

On the other hand, management effectiveness of ICICI bank is better than HDFC Bank.


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BIBLIOGRAPHY

Financial Management: M Y KHAN AND P K JAIN Fifth Edition

FINANCIAL MANAGEMENT - I. M. PANDEY

www.hdfcbank.com

www.icicibank.com

http://www.moneycontrol.com/stocks/company_info/

Annual Reports of ICICI and HDFC Banks from 2010 to 2014.

Search Engine : www.google.com

comparative analysis of financial performance of banks using ratio analysis

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