mba summer training project report

8/2/2019 MBA Summer Training Project Report

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Summer Training Project Report

On

A Study On Financial Statement Analysis AndManagement Of Risk With Special Reference To ICICI

Bank

Submitted in Partial Fulfilment for the Award of the

Degree of Master in Business Administration 2010-2012

Under the Guidance of: Submitted By:

Mrs. Sanam Sharma Dikshant Kapoor

MAIT 05414803910

Department of Management

Maharaja Agrasen Institute of Technology


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Affiliated to Guru Gobind Singh Indraprastha University, Delhi

DECLARATION

This is to certify that I have completed the Summer Project title A STUDY ON FINANCIAL

STATEMENT ANALYSIS AND MANAGEMENT OF RISK WITH SPECIAL

REFERENCE TO ICICI BANK under the guidance of Mr. Surender Adarsh in partial

fulfillment of the requirement for the award of Degree of Master of Business Administration at

Maharaja Agrasen Institute of Technology, Delhi. This is an original piece of work & I have not

submitted it earlier elsewhere.

Date: 20-08-2011 ______________________

Place: New Delhi Name: Dikshant Kapoor

University Enrollment No.: 05414803910


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Acknowledgement

I wish to express my gratitude to ICICI Bank for giving me an opportunity to be a part of theiresteemed organization and enhance my knowledge by granting permission to do summer training

project under their guidance.

This report is result of the continuous support & guidance of a lot of people. Getting a project

ready requires the work and effort of many people. I would like to pay my sincere gratitude and

thanks to those people, who directed me at every step in this project work. The present report is

based on A study on financial statement analysis and management of risk with special reference

to ICICI Bank.

I extended my sincere thank and gratitude to Mrs. Sanam Sharma, internal faculty, for her help

and valuable support throughout the term of the project. It was a learning experience to work

under her guidance.

I am also very thankful to Mr. Surender Adarsh who has given me the opportunity to do this

project report. I am also thankful to my parents, all my friends and other sources who gave me

their much needed support and inspiration in preparing this project report. I would considermyself lucky & privileged to have worked with such understanding professionals.

I am also thankful to the employees of ICICI for providing great support and help in completion

of the training.

The learning during the project was immense and valuable.

Regards,

Dikshant Kapoor

Enrollment No: - 05414803910

Maharaja Agrasen Institute of Technology


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LIST OF DIAGRAMS AND TABLES

S.No Title Of Diagram Page No.


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EXECTIVE SUMMARY

The future of banking will undoubtedly rest on risk management dynamics. Only those banks

that have efficient risk management system will survive in the market in the long run. The major

cause of serious banking problems over the years continues to be directly related to lax credit

standards for borrowers and counterparties, poor portfolio risk management, or a lack of

attention to deterioration in the credit standing of a bank's counterparties.

Credit risk is the oldest and biggest risk that bank, by virtue of its very nature of business,

inherits. This has however, acquired a greater significance in the recent past for various reasons.

In this study we try to undertake an analysis of the financial statements of the bank and

empirically investigate the various aspects of the risk management in the banking sector.

The scope of the study is limited to the statement analysis of the accounts during the period

2011-2011. The purpose of the paper is to evaluate the financial statements and determine the

risk management aspect of the bank.


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CONTENTS

Page No.

EXECUTIVE SUMMARY

COMPANY PROFILE

1.1 History 41.2 Board of Directors 51.3 Board Committees 61.4 Organizational Structure 71.5 Products & Services 121.6 Risk Aspects 181.7 Subsidiary companies 211.8 Key Group Companies 221.9 Public Recognition 24

INTRODUCTION

2.1 Research Objective 112.2 Limitations of the study 122.3 Research Methodology2.4 Data Collection

PrimarySecondary

ANALYSIS OF DATA AND INTERPRETATION

Study of Profit & Loss A/C 27

Study of Balance-Sheet 28

Study of cash flow statement 38

Financial Statement Analysis 40

Management Discussion & Analysis 46

Comparative Income Statement 53

Comparative Financial Position Statement 55

Ratio Analysis- Financial Statement 57

Cash Flow Statement 60


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FINDINGS 44

SUGGESTIONS 45

CONCLUSIONS & LIMITATIONS 46

BIBLIOGRAPHY


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CHAPTER-1

COMPANY PROFILE


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1.1 ABOUT ICICI BANK

Company Overview

ICICI Bank is India's second-largest bank with total assets of Rs. 4,062.34 billion (US$ 91

billion) at March 31, 2011 and profit after tax Rs. 51.51 billion (US$ 1,155 million) for the year

ended March 31, 2011. The Bank has a network of 2,538 branches and about 6,810 ATMs in

India, and has a presence in 19 countries, including India.

ICICI Bank offers a wide range of banking products and financial services to corporate and retail

customers through a variety of delivery channels and through its specialised subsidiaries in the

areas of investment banking, life and non-life insurance, venture capital and asset management.

The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in

United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International

Finance Centre and representative offices in United Arab Emirates, China, South Africa,

Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in

Belgium and Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National StockExchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New

York Stock Exchange (NYSE).

1.2 HISTORY

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution,

and was its wholly owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46%

through a public offering of shares in India in fiscal 1998, an equity offering in the form of

ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in

an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional

investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World

Bank, the Government of India and representatives of Indian industry. The principal objective

was to create a development financial institution for providing medium-term and long-term


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project financing to Indian businesses. In the 1990s, ICICI transformed its business from a

development financial institution offering only project finance to a diversified financial services

group offering a wide variety of products and services, both directly and 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.

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution,

and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46%

through a public offering of shares in India in fiscal 1998, an equity offering in the form of

ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in

an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional

investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the WorldBank, the Government of India and representatives of Indian industry. The principal objective

was to create a development financial institution for providing medium-term and long-term

project financing to Indian businesses.

In the 1990s, ICICI transformed its business from a development financial institution offering

only project finance to a diversified financial services group offering a wide variety of products

and services, both directly and 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,


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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 finance 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.

ICICI Bank has formulated a Code of Business Conduct and Ethics for its directors andemployees.

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 finance

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 Citst of Gujarat at Ahmedabad in March 2002, and by the High Citst 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


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integrated in a single entity. ICICI Bank has formulated a Code of Business Conduct and Ethics

for its directors and employees.

1.3 BOARD OF DIRECTORS

MR. K. V. Kamath (CHAIRMAN)

Mrs. Chanda Kochhar (MANAGING DIRECTOR & CEO)

Mr. Sridar Iyengar

Mr. Homi R. Khusrokhan

Mr. Arvind Kumar

Mr. M. S. Ramachandran

Dr. Tushaar Shah

Mr. V. Sridar

Mr. N. S. Kannan (Executive Director & CFO)

Mr. K. Ramkumar (Executive Director)

Mr. Rajiv Sabharwal (Executive Director)

1.4 BOARD COMMITTEES

Audit Committee Board Governance &Remuneration

CommitteeMr. Sridar Iyengar

Mr. Narendra Murkumbi

Mr. M. K. Sharma

Mr. N. Vaghul

Mr. Anupam Puri

Mr. M. K. Sharma

Mr. P. M. SinhaProf. Marti G. Subrahmanyam


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Customer Service Committee Credit Committee

Mr. N. Vaghul


Mr. M.K. SharmaMr. P.M. Sinha

Mr. K. V. Kamath

Mr. N. Vaghul


Mr. M .K. SharmaMr. P. M. Sinha

Mr. K. V. Kamath

Fraud Monitoring Committee Risk Committee

Mr. M. K. SharmaMr. Narendra Murkumbi

Mr. K. V. Kamath

Ms. Chanda D. Kochhar

Mr. V. Vaidyanathan

Mr. N. VaghulMr. Sridar Iyengar

Prof. Marti G. Subrahmanyam

Mr. V. Prem Watsa

Mr. K. V. Kamath

Share Transfer &

Shareholders/ Investors

Grievance Committee

Asset-Liability Management

Committee

Mr. M. K. Sharma



Ms. Madhabi Puri-Buch


Dr. Nachiket Mor

Ms. Madhabi Puri-Buch

Mr. V. Vaidyanathan


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Committee of Directors -Mr. K. V. Kamath


Dr. Nachiket Mor

Ms. Madhabi Puri-BuchMr. V. Vaidyanathan

1.5 ORGANISATIONAL STRUCTURE OF ICICI BANK

ICICI Banks organisation structure is designed to be flexible and customer-focused, while

seeking to ensure effective control and supervision and consistency in standards across the

organisation and align all areas of operations to overall organisational objectives. The

organisation structure is divided into six principal groups Retail Banking, Wholesale

Banking, International Banking, Rural (Micro-Banking) and Agriculture Banking,

Government Banking and Corporate Center.

RETAIL BANKING

The Retail Banking Group is responsible for products and services for retail customers and small

enterprises including various credit products, liability products, distribution of third party

investment and insurance products and transaction banking services.

WHOLESALE BANKINGThe Wholesale Banking Group is responsible for products and services for large and medium-

sized corporate clients, including credit and treasury products, investment banking, project

finance, structured finance and transaction banking services.

INTERNATIONAL BANKING

The International Banking Group is responsible for its international operations, including

operations in various overseas markets as well as its products and services for non-resident

Indians and its international trade finance and correspondent banking relationships.


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RURAL AND AGRICULTURAL BANKING

The Rural, Micro-Banking & Agri-Business Group is responsible for envisioning and

implementing rural banking strategy, including agricultural banking and micro-finance.

GOVERNMENT BANKING

The Government Banking Group is responsible for government banking initiatives.

CORPORATE CENTER

The Corporate Center comprises the internal control environment functions (including

operations, risk management, compliance, audit and legal); finance (including financial

reporting, planning and strategy, asset liability management, investor relations and corporate

communications); human resitsces management; and facilities management & administration.

1.6 PRODUCTS AND SERVICES

BANKING ACCOUNTS

ICICI Bank offers a wide range of banking accounts such as Current, Saving, Life Plus Senior,

Recurring Deposit, Young Stars, Salary Account etc. tailor-made for every customer segments,

from children to senior citizens. Convenience and ease to access are the benefits of ICICI Bank

accounts.

YOUNG STARS ACCOUNT

A special portal for children to learn banking basics, manage personal finances and have a lot

of fun.

BANK@CAMPUS

This student banking services gives students access to their account details at the click of a

mouse. Plus, the student gets a chequebook, debit card and annual statements .


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SAVINGS ACCOUNTS

Convenience is the name of the game with ICICI banks savings account. whether it is an

ATM/debit card, easy withdrawal, easy loan options or internet banking, ICICI banks saving

account always keep you in touch of money.

FIXED DEPOSITS

ICICI Bank offers a range of deposit solutions to meet varying needs at every stage of life. It

offers a range of tenures and other features to suit all requirements.

INSURANCE

The ICICI group offers a range of insurance products to cover varying needs ranging from life,

pensions and health, to home, motor and travel insurance. The products are made accessible to

customers through a wide network of advisors, banking partners, Corporate agents and

brokers with the added convenience of being able to buy online.

LIFE INSURANCE

The ICICI group provides the many life insurance product through ICICI Prudential Life

Insurance Company.

GENERAL INSURANCE

The ICICI group provides the many general insurance products like motor, travel and

home insurance through ICICI Lombard General Insurance Company.


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LOANS

ICICI bank offers a range of deposits solutions to meet varying needs at every stage of life. It

offers a range of tenures and other features to suit all requirements.

HOME LOAN

The No. 1 Home Loans Provider in the country, ICICI Bank Home Loans offers some

unbeatable benefits to its customers - Doorstep Service, Simplified Documentation and

Guidance throughout the Process. It's really easy !

PERSONAL LOAN

ICICI Bank Personal Loans are easy to get and absolutely hassle free. With minimum

documentation you can now secure a loan for an amount upto Rs. 15 lakhs.

VEHICLE LOANS

The No. 1 financier for car loans in the country. Network of more than 2500 channel

partners in over 1000 locations. Tie-ups with all leading automobile manufacturers to

ensure the best deals. Flexible schemes & quick processing are the main advantages are

here. Avail attractive schemes at competitive interest rates from the No 1 Financier for

Two Wheeler Loans in the country . Finance facility upto 90% of the On Road Cost of

the vehicle, repayable in convenient repayment options and comfortable tenors from 6

months to 36 months

CARDS

ICICI Bank offers a variety of cards to suit different transactional needs. Its range includes

Credit Cards, Debit Cards and Prepaid cards. These cards offer you convenience for financial

transactions like cash withdrawal, shopping and travel. These cards are widely accepted both inIndia and abroad.

CREDIT CARD

ICICI Bank Credit Cards give you the facility of cash, convenience and a range of

benefits, anywhere in the world. These benefits range from life time free cards, Insurance


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benefits, global emergency assistance service, discounts, utility payments, travel

discounts and much more.

DEBIT CARD

The ICICI Bank Debit Card is a revolutionary form of cash that allows customers to

access their bank account around the clock, around the world. The ICICI Bank Debit

Card can be used for shopping at more than 3.5 Lakh merchants in India and 24 million

merchants worldwide.

TRAVEL CARD

ICICI Bank Travel Card. The Hassle Free way to Travel the world. Traveling with US

Dollar, Euro, Pound Sterling or Swiss Francs; Looking for security and convenience; take

ICICI Bank Travel Card. Issued in duplicate. Offers the Pin based security. Has the

convenience of usage of Credit or Debit card.

MOBILE BANKING

Bank on the move with ICICI Bank Mobile Banking. With ICICI Bank, Banking is no longer

what it used to be. ICICI Bank offers Mobile Banking facility to all its Bank, Credit Card, Demat

and Loan customers.

ICICI Bank Mobile Banking can be divided into two broad categories of facilities:

Alert facility : ICICI Bank Mobile Banking Alerts facility keeps you informed about the

significant transactions in yits Accounts. It keeps you updated wherever you go.

Request facility : ICICI Bank Mobile Banking Requests facility enables you to query for yits

account balance.

INVESTMENT PRODUCTS: Along with Deposit products and Loan offerings, ICICI

Bank assists you to manage yits finances by providing various investment options ranging from

ICICI Bank Tax Saving Bonds to Equity Investments through Initial Public Offers and

Investment in Pure Gold. ICICI Bank facilitates following investment products:


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ICICI Bank Tax Saving Bonds

Government of India Bonds

Investment in Mutual Funds

Initial Public Offers by Corporates

Investment in "Pure Gold"

Foreign Exchange Services

Senior Citizens Savings Scheme, 2004

TRADE-SERVICES: ICICI Bank offers online remittances as well as online processing of

letters of credit and bank guarantees.

ASSET-MANAGEMENT: Prudential ICICI Asset Management Company offers a widerange of retail mutual fund products tailored to suit varied risk and maturity profiles.

CASH MANAGEMENT: ICICI Bank offers a complete range of highly customized

solutions for managing both the collections and payments requirements of clients by leveraging

technology. Daily customized transactions reports and real time web-enabled downloads, provide

on-tap information facilitating effective working capital management.

CORPORATE BANKING: ICICI Bank offers comprehensive and customized financial

solutions for its corporate clients, including rupee and foreign currency debts, working capital

credit, structured financing syndication and transaction banking products and services.

INTERNET BANKING: Internet banking is available to all ICICI bank savings and

deposit account holders, credit card, demat and loan customers. Internet banking service offers

customers a world of convenience with services such as balance enquiry, transaction history,

account statement, bill payments, fund transfers and accounts related service requests.

ATMs: With more than 2500 ATMs across the country, ICICI Bank has one of the

largest ATM networks in India


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PHONE BANKING: Phone banking offers 24*7 service across liability, asset and

investment products to both retail and corporate customers.

NRI-BANKING: A gamut of services to take care of all NRI banking needs including

deposits, money transfers and private banking.

MONEY2INDIA: A complete range of online and offline money transfer solutions to send

money to India.

PROPERTY: For millions of home buyers across the country, ICICI Bank offers not just great

deals on home loans but also a wealth of expert advice. ICICI Bank offers home search service

which can help a customer identify the property of his choice based on his budget and other

requirements.

DEMAT ACCOUNTS: ICICI Banks demat services after unique features like e-

constructions, consolidation, digitally signed statements, mobile requests and corporate benefit

tracking.

RURAL-BANKING: Bank offers technology-based solutions, financial innovations and

multiple delivery channels to meet the financial needs of rural areas.

MICROFINANCE: ICICI Bank assists over 2.5 million low income clients to build

livelihoods by partnering with over 100 microfinance institutions.

BRANCHES: ICICI Bank has a network of over 630 branches (of which 51 are extension

counters) across the country. The network puts a wide range of banking products and financial

services within easy reach of retail and corporate customers.


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1.7 RISK ASPECTS OF ICICI BANK

RISK MANAGEMENT

Risk is an integral part of the banking business and bank aim at delivering superior shareholder

value by achieving an appropriate trade-off between risk and returns. Bank is exposed to various

risks, including credit risk, market risk and operational risk. Banks risk management strategy is

based on a clear understanding of various risks, disciplined risk assessment and measurement

procedures and continuous monitoring. The policies and procedures established for this purpose

are continuously benchmarked with international best practices. Bank has two dedicated groups,

the RISK MANAGEMENT GROUP (RMG) and COMPLIANCE & AUDIT GROUP (CAG)

which is responsible for assessment, management and mitigation of risk in ICICI Bank. These

groups from part of the corporate center are completely independent of all business operations

and are accountable to the Risk and Audit committees of the Board of directors. RMG is further

organized into the Credit Risk Management group, Market Risk Management group, Retail Risk

Management group and Operational Risk Management group. CAG is further organised into the

Credit Policies, RBI Inspection & Anti-Money Laundering Group and the Internal Audit Group.

CREDIT RISK

Credit risk is the risk that a borrower is unable to meet its financial obligations to the lender.

Bank measure, monitor and manage credit risk for each borrower and also at the portfolio level.

Bank has standardized credit-approval processes, which include a well-established procedure for

comprehensive credit appraisal and rating. ICICI Bank has well developed internal credit rating

methodologies for rating obligors. The rating factors in quantitative, qualitative issues and credit

enhancement features specific to the transaction. The rating serves as a key input in the approval

as well as post-approval credit processes. Industry knowledge is constantly updated through fieldvisits and interactions with clients, regulatory bodies and industry experts. In retail credit

operations, the Board or a Board Committee approves all products, policies and authorizations.

Credit approval authority lies only with the credit officers who are distinct from the sales team.

Credit scoring models are used in the case of certain products like credit cards. External

agencies such as field investigation agencies and credit processing agencies are used to facilitate


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a comprehensive due diligence process including visits to offices and homes in the case of loans

to individual borrowers.

MARKET RISK

Market risk is the risk of loss resulting from changes in interest rates, foreign currency exchange

rates, equity prices and commodity prices. The objective of market risk management is to

minimize the impact of losses on earnings and equity capital due to market risk. Market risk

policies include the Investment Policy and the Asset-Liability Management (ALM) Policy. The

policies are approved by the Board of Directors. The Asset Liability Management

Committee (ALCO) of the Board of Directors stipulate liquidity and interest rate risk limits,

monitors adherence to limits, articulates the organisations interest rate view and determines the

strategy in light of the current and expected environment. These policies and processes are

articulated in the ALPM policy. The investment policy addresses issues related to investment in

various trading products. RMG exercises independent control over the process of market risk

management and recommends changes in process and methodologies for measuring market risk

Interest rate risk is measured through the use of re-pricing gap analysis and duration analysis.

Liquidity risk is measured through gap analysis. Bank ensure adequate liquidity at all time

through systematic funds planning and maintenance of liquid investment as well as focusing on

more stable funding sitsces such as retail deposits. ICICI Bank limit exposure to exchange rate

risk by stipulating position limits. The treasury Middle Office Group monitors the asset-liability

position under the supervision of the ALCO. The Treasury Middle Office Group is also

responsible for processing treasury transactions, tracking the daily funds position and complying

with all treasury related management and regulatory reporting requirements.

OPREATIONAL RISK

Operational risk is the risk of loss that can result from a variety of factors, including failure to

obtain proper internal authorizations, improperly documented transactions, failure of operational

and information security procedures, computer systems, software or equipment, fraud,

inadequate training and employee errors. Banks approach to operational risk management is

designed to mitigate operational risk by maintaining a comprehensive system of internal


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controls, establishing systems and procedures to monitor transactions, maintaining key back-up

procedures and undertaking regular contingency planning. Effective operational risk

management system would ensure that bank has sufficient information to make appropriate

decisions about additional controls, adjustments to controls, or other risk responses. Operational

risk management policy aims at minimizing losses and customer dissatisfaction due to failure in

processes, focusing on flaws in products and their design that can expose the bank to losses due

to fraud, analyzing the impact of failures in systems, developing mitigants to minimize the

impact and developing plans to meet external shocks that can adversely impact continuity in the

banks operations.

1.8 SUBSIDIARY COMPANIES

DOMESTIC SUBSIDIARIES

ICICI Home Finance Company Limited

ICICI Investment Management Company Limited

ICICI Lombard General Insurance Company Limited

ICICI Prudential Life Insurance Company Limited

ICICI Securities Limited

ICICI Trusteeship Services Limited

ICICI Venture Funds Management Company Limited

ICICI Securities Primary Dealership Limited

ICICI Prudential Asset Management Company Limited

ICICI Prudential Trust Limited

INTERNATIONAL SUSIDIARIES

ICICI Bank Canada

ICICI Bank Eurasia Limited Liability Company

ICICI International Limited


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ICICI Securities Holding Inc

ICICI Securities Inc

ICICI Bank Uk Limited

1.9 KEY GROUP COMPANIES

1. ICICI Grouphttp://www.icicigroupcompanies.com

2. ICICI Prudential Life Insurance Companyhttp://www.iciciprulife.com/public/default.htm

3. ICICI Securitieshttp://www.icicisecurities.com/

4. ICICI Lombard General Insurance Companyhttp://www.icicilombard.com/

5. ICICI Prudential AMC & Trusthttp://www.icicipruamc.com/
http://www.icicigroupcompanies.com/http://www.icicigroupcompanies.com/http://www.iciciprulife.com/public/default.htmhttp://www.iciciprulife.com/public/default.htmhttp://www.icicisecurities.com/http://www.icicisecurities.com/http://www.icicilombard.com/http://www.icicilombard.com/http://www.icicipruamc.com/http://www.icicipruamc.com/http://www.icicipruamc.com/http://www.icicilombard.com/http://www.icicisecurities.com/http://www.iciciprulife.com/public/default.htmhttp://www.icicigroupcompanies.com/


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6. ICICI Venturehttp://www.iciciventure.com/

7. ICICI Direct

http://www.icicidirect.com

8. ICICI Foundationhttp://www.icicifoundation.org

9. Disha Financial Counsellinghttp://www.icicifoundation.org

1.10 PUBLIC RECOGNITION

During 2011, ICICI Bank received several prestigious awards in recognition of overall business

strategies, specific objectives and technology focus:

For the second consecutive year, ICICI Bank was ranked second in the "India's 50

Biggest Financial Companies" , in The BW REAL 500 by Business World

ICICI Bank tops the list of "Most Trusted Private Sector Bank" and ranks 10th in the list

of "India's Most Trusted Service Brands" by Brand Equity, Most Trusted Brands 2011

ICICI Bank received the Best Manpower Efficient Award amongst private sector banks

by FICCIIBA ICICI Bank won the Best Local BankGold by Trade and Forfaiting Awards, UK

ICICI Bank was awarded The Asset Triple A Awards, Hongkong for:

o Best Domestic Transaction Bank (India)

o For 6th consecutive year won the Best Domestic Trade Finance Bank (India)

o Best Domestic Cash Management Bank (India)

o Best e-Commerce Bank (India)

o Best SME Bank (India)

ICICI Bank is the only Indian brand to figure in the BrandZ Top 100 Most Valuable

Global Brands Report 2011, second year in a row.

ICICI Bank ranked 5th in the list of "57 Indian Companies", and 288 th in World

Rankings in Forbes Global 2000 list
http://www.icicipruamc.com/http://www.icicipruamc.com/http://www.iciciventure.com/http://www.iciciventure.com/http://www.icicidirect.com/http://www.icicidirect.com/http://www.icicifoundation.org/http://www.icicifoundation.org/http://www.icicifoundation.org/http://www.icicifoundation.org/http://www.icicifoundation.org/http://www.icicifoundation.org/http://www.icicidirect.com/http://www.iciciventure.com/


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ICICI Bank has won the "Banking Technology Awards 2010" at The Indian Banks

Association in the following categories:

o "Best Financial Inclusion Initiative" (first prize)

o "Best Online Bank" ( runner up)

o "Best use of Business Intelligence" ( runner up)

o "Technology Bank of the year" ( runner up)

ICICI Bank was recognized for its Special Citation of the Fully Electronic Branch

Service Channel, first set up at Hiranandani Estate, Thane, at the Financial Insights

Innovation Awards held in conjunction with Asian Financial Services Congress

For the second year in a row, ICICI Bank was ranked 70th in the Brandirectory league

tables of the worlds most valuable brands by ,The BrandFinance Banking 500.

ICICI Bank UK, HiSAVE product range has been awarded the Consumer Moneyfacts

Awards 2011 for the 'Best Online Savings Provider'

ICICI Bank ranked second in the financial services sector in Business World's,"Most

Respected Company Awards 2011"

ICICI Bank was ranked 1st in the Banking and Finance category and 9th in the "2010

Best Companies To Work For" by Business Today.


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CHAPTER-2

INTRODUCTION


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2.1 A BRIEF INTRODUCTION

In any organization, the two important financial statements are the Balance sheet & Profit and

loss account of the business. Balance sheet is a statement of the financial position of an

enterprise at a particular point of time. Profit and loss account shows the net profit or net loss of

a company for a specified period of time. When these statements of the last few year of any

organization are studied and analyzed, significant conclusions may be arrived regarding the

changes in the financial position, the important policies followed and trends in profit and loss

etc. Analysis and interpretation of the financial statement has now become an important

technique of credit appraisal. The investors, financial experts, management executives and the

bankers all analyze these statements. Though the basic technique of appraisal remains the same

in all the cases but the approach and the emphasis in analysis vary. A banker interprets the

financial statement so as to evaluate the financial soundness and stability, the liquidity position

and the profitability or the earning capacity of borrowing concern. Analysis of financial

statement is necessary because it help in depicting the financial position on the basis of past and

current records. Analysis of financial statement helps in making the future decision and

strategies. Therefore, it is very necessary for every organization whether it is a financial or

manufacturing etc. to make financial statement and to analyze it.

The future of banking will undoubtedly rest on risk management dynamics. Only those banks

that have efficient risk management system will survive in the market in the long run. The major

cause of serious banking problems over the years continues to be directly related to lax credit

standards for borrowers and counterparties, poor portfolio risk management, or a lack of

attention to deterioration in the credit standing of a bank's counterparties.

Credit risk is the oldest and biggest risk that bank, by virtue of its very nature of business,inherits. This has however, acquired a greater significance in the recent past for various reasons.

In this study we empirically investigates the various aspects of the risk management in the

banking sector.


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2.2 RESEARCH OBJECTIVE

The main objective of this report are the following:

To study about ICICI BANK and its related aspects like its products & services, history,

organizational structure, subsidiary companies etc.

To analyse the financial statement i.e P&L account and Balance sheet of ICICI BANK.

To learn about P&L Account, Balance-sheet and different type of Assets&

Liabilities.

To understanding the meaning and need of Balance Sheet and profit and loss account.

The purpose is to portray the financial position of ICICI BANK with the help of balance

sheet and profit and loss account.

To evaluate the financial soundness ,stability and liquidity of ICICI BANK.

The objectives of the study are to basically understand the risk management practices in

ICICI bank.

2.3 RESEARCH METHODOLOGY OF THE STUDY:

The methodology for my research design was Explanatory as well as descriptive. Study was

conducted on both the primary data as well as secondary data.

My first objective was to explore the project and plan it periodically. The next few days were of

understanding, reading and studying the business of the company. The methodology adopted for

the project is as follows:

Literature survey and further working on them.

Primary and secondary data collection and analysis on them.

Final preparation of report will be done based on the findings and appropriate

recommendations will be made. f P E C Page 13

The source of data for the completion of the project concentrated from my organization .The

sources of data are detailed below:


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Primary Data: To know more about the company in better way , I met personally with top

officials of the ICICI Bank.

Secondary Data: Capital market is studied with the help of the secondary data. For that

purpose various research reports on internet, books, scholarly articles, financialnewspapers, and the companys reports and documents prepared for the transactions between the

suppliers and the associates are used for the completion of the project.


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STUDY OF FINANCIAL STATEMENT


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STUDY OF PROFIT& LOSS A/C

MEANING: It is a financial statement, which shows net loss of a company for a

specified period. The accounting year means calendar year of 12 months or less or

more than 12 months.

CONTENTS: This presents the revenues and expenses of a company and shows the

excess of revenues over expenses for profit and vice versa for a loss.

FORMAT: The Companies act does not provide any specific format for this

account. However it is required to be prepared on the basis of the instructions

given in part ii of schedule (vi) of the companies act.

MAIN ITEMS OF PROFIT AND LOSS ACCOUNT

Turnover or sales: The aggregate amount of sales and connected items with the

sales such as commission paid to sole-selling agents and other selling agents and

brokerage and discounts on sales other than usual trade discount.

Depreciation: The amount of depreciation of fixed assets and the arrears of

depreciation as per section 205(2) shall be disclosed by way of foot-note.

Interest on loans and debentures: Interest on loans and debentures has to be

stated separately. It will include the amount of interest paid as well as outstanding.

Miscellaneous expenses: In this head items such as rates and taxes, insurance

premium etc., must be stated separately.

Preliminary expenses: Such expenses include the costs of formation of a

company and since their amount is usually large, it is not desirable to write off

them in one year.

Provision for taxation: The profit and loss account of a company must be debited with the

estimated liabilities for tax on the current profits at current rates of taxation.


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Unclaimed dividends: it is shown on the liabilities side of the balance sheet under the heading

current liabilities.

Interim dividends: It is an item of appropriation. It is transferred to the debit side of the

Profit and loss appropriation account.

Final dividend as an item of the trial balance: This is shown in the debit side of the

appropriation section of the profit and loss account.

Proposed dividend or final dividend proposed: Since it is an adjustment item, it has to

be shown at two places- In the debit side of the profit and loss appropriation account and on the

liabilities side of the balance sheet under the head current liabilities and provisions.

Political donations: It must be shown as a separate item in the profit and loss account.

Dividend on interest income: This item is transferred to the credit side of the profit and lossaccount.

Payment to auditors: It must be stated separately. This will include consultancy fee,

auditing fees management services etc.

Managerial remuneration: This includes the payments made to managerial remuneration

directors fee, pension, other allowances and commission.

2.2 STUDY OF BALANCE SHEET

MEANING: The balance sheet is a financial snapshot of a company's condition at a single

point in time. A balance sheet contains a listing of the company's asset, liability and Capital

accounts. When someone, whether a creditor or investor, asks you how your company is doing,

you'll want to have the answer ready and documented. The way to show off the success of your

company is a balance sheet. A balance sheet is a documented report of your company's assets

and obligations, as well as the residual ownership claims against your equity at any given point

in time. It is a cumulative record that reflects the result of all recorded accounting transactions

since your enterprise was formed. You need a balance sheet to specifically know what your

company's net worth is on any given date. With a properly prepared balance sheet, you can look

at a balance sheet at the end of each accounting period and know if your business has more or


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less value, if your debts are higher or lower, and if your working capital is higher or lower. By

analyzing your balance sheet, investors, creditors and others can assess your ability to meet

short-term obligations and solvency, as well as your ability to pay all current and long-term debts

as they come due. The balance sheet also shows the composition of assets and liabilities, the

relative proportions of debt and equity financing and the amount of earnings that you have had to

retain. Collectively, external parties to help assess your companys financial status, which is

required by both lending institutions and investors before they will allot any money toward your

business, will use this information.

LEARN THE DIFFERENT ASSETS

Current assets: Current assets include cash and other assets that in the normal course of

events are converted into cash within the operating cycle. For example, a manufacturing

enterprise will use cash to acquire inventories of materials. These inventories of materials are

converted into finished products and then sold to customers. Cash is collected from the

customers. This circle from cash back to cash is called an operating cycle. In a merchandising

business one part of the cycle is eliminated. Materials are not purchased for conversion into

finished products. Instead, the finished products are purchased and are sold directly to the

customers. Several operating cycles may be completed in a year, or it may take more than a year

to complete one operating cycle. The time required to complete an operating cycle depends upon

the nature of the business. It is conceivable that almost all of the assets that are used to conduct

your business, such as buildings, machinery, and equipment, can be converted into cash within

the time required to complete an operating cycle. However, your current assets are only those

that will be converted into cash within the normal course of your business. The other assets are

only held because they provide useful services and are excluded from the current asset

classification. If you happen to hold these assets in the regular course of business, you can

include them in the inventory under the classification of current assets. Current assets are usually

listed in the order of their liquidity and frequently consist of cash, temporary investments,

accounts receivable, inventories and prepaid expenses.


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Cash: Cash is simply the money on hand and/or on deposit that is available for general business

purposes. It is always listed first on a balance sheet. Cash held for some designated purpose, such

as the cash held in a fund for eventual retirement of a bond issue, is excluded from current assets.

Marketable Securities: These investments are temporary and are made from excess funds

that you do not immediately need to conduct operations. Until you need these funds, they are

invested to earn a return.

Accounts Receivable:Simply stated, accounts receivables are the amounts owed to you and

are evidenced on your balance sheet by promissory notes. Accounts receivable are the amounts

billed to your customers and owed to you on the balance sheet's date. You should label all other

accounts receivable appropriately and show them apart from the accounts receivable arising in

the course of trade. If these other amounts are currently collectible, they may be classified as

current assets.

Inventories: Your inventories are your goods that are available for sale, products that you

have in a partial stage of completion, and the materials that you will use to create your products.

The costs of purchasing merchandise and materials and the costs of manufacturing your various

product lines are accumulated in the accounting records and are identified with either the cost of

the goods sold during the fiscal period or as the cost of the inventories remaining.

Prepaid expenses:These expenses are payments made for services that will be received in

the near future. Strictly speaking, your prepaid expenses will not be converted to current assets in

order to avoid penalizing companies that choose to pay current operating costs in advance rather

than to hold cash. Often your insurance premiums or rentals are paid in advance.

Investments:Investments are cash funds or securities that you hold for a designated purpose

for an indefinite period of time. Investments include stocks or the bonds you may hold for

another company, real estate or mortgages that you are holding for income-producing purposes.

Your investments also include money that you may be holding for a pension fund.


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Plant Assets: Often classified as fixed assets, or as plant and equipment, your plant assets

include land, buildings, machinery, and equipment that are to be used in business operations over

a relatively long period of time. It is not expected that you will sell these assets and convert them

into cash. Plant assets simply produce income indirectly through their use in operations.

Intangible Assets: Your other fixed assets that lack physical substance are referred to as

intangible assets and consist of valuable rights, privileges or advantages. Although your

intangibles lack physical substance, they still hold value for your company. Sometimes the

rights, privileges and advantages of your business are worth more than all other assets combined.

Other Assets: During the course of preparing your balance sheet you will notice other assets

that cannot be classified as current assets, investments, plant assets, or intangible assets. These

assets are listed on your balance sheet as other assets. Frequently, your other assets consist of

advances made to company officers, the cash surrender value of life insurance on officers, the

cost of buildings in the process of construction, and the miscellaneous funds held for special

purposes.

LEARN THE DIFFERENT LIABILITIES

Current Liabilities: On the equity side of the balance sheet, as on the asset side, you need tomake a distinction between current and long-term items. Your current liabilities are obligations

that you will discharge within the normal operating cycle of your business. In most

circumstances your current liabilities will be paid within the next year by using the assets you

classified as current. The amount you owe under current liabilities often arises as a result of

acquiring current assets such as inventory or services that will be used in current operations. You

show the amounts owed to trade creditors that arise from the purchase of materials or

merchandise as accounts payable. If you are obligated under promissory notes that support bank

loans or other amounts owed, your liability is shown as notes payable. Other current liabilities

may include the estimated amount payable for income taxes and the various amounts owed for

wages and salaries of employees, utility bills, payroll taxes, local property taxes and other

services.


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Long-Term Liabilities: Your debts that are not due until more than a year from the balance

sheet date are generally classified as long-term liabilities. Notes, bonds and mortgages are often

listed under this heading. If a portion of your long-term debt is due within the next year, it should

be removed from the long-term debt classification and shown under current liabilities.

Deferred Revenues: Your customers may make advance payments for merchandise or

services. The obligation to the customer will, as a general rule, be settled by delivery of the

products or services and not by cash payment. Advance collections received from customers are

classified as deferred revenues, pending delivery of the products or services.

Owner's Equity:Your owner's equity must be subdivided on your balance sheet: One portion

represents the amount invested directly by you, plus any portion of retained earnings converted

into paid-in capital. The other portion represents your net earnings that are retained. This rigid

distinction is necessary because of the nature of any corporation. Ordinarily, stockholders, or

owners, are not personally liable for the debts contracted by a company. A stockholder may lose

his investment, but creditors usually cannot look to his personal assets for satisfaction of their

claims. Under normal circumstances, the stockholders may withdraw as cash dividends an

amount measured by the corporate earnings. The distinction in this rule gives the creditors some

assurance that a certain portion of the assets equivalent to the owner's investment cannot bearbitrarily withdrawn. Of course, this portion could be depleted from your balance sheet because

of operating losses. The owner's equity in an unincorporated business is shown more simply. The

interest of each owner is given in total, usually with no distinction being made between the

portion invested and the accumulated net earnings. The creditors are not concerned about the

amount invested. If necessary, creditors can attach the personal assets of the owners.

Basis of balance-sheet: Assets = Liability + Equity


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BALANCE-SHEET STRUCTURE

The following Balance sheet structure is just an example. It does not show all possible kind of

assets, equity and liabilities, but it shows the most usual ones. It could be a consolidated balance

sheet. Monetary values are not shown and summary (total) rows are missing as well.

Assets

Current Assets

Cash and cash equivalents

Inventories

Account receivable

Investment held for trading

Other current assets

Non-Current Assets

Property, plant and equipment

Goodwill

Other intangible fixed assetsInvestment in associates

Deferred tax assets

Miscellaneous Expenditure

Equity And Liabilities

Capital & Reserve

Share capital reserve

Revaluation reserve

Translation reserve


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Retained earnings

Minority interest

Non-Current Liabilities

Bank loan

Issued debt securities

Deferred tax liability

Current Liabilities

Accounts payable

Current income tax liabilityShort-term part of bank loans

Short-term provisions

Other current liabilities

EQUITY VALUATION:The real value to a purchaser of the business or a shareholder may

be different from the net assets shown by the balance sheet. This is because factors that affect the

value of a business may not be recorded yet. For example, a purchaser will be interested in thefuture earnings of the business, whether assets such as property have been revalued recently, and

whether there are potential liabilities in the future such as lawsuits. The value of the assets in the

balance has also been based on the assumption that the business is a going concern, otherwise the

break-up value of the assets may be far less than the value in the balance sheet.

PREPAIRING A BALANCE-SHEET

Title and Heading: In practice, the most widely used title is Balance Sheet; however

Statement of Financial Position is also acceptable. Naturally, when the presentation includes

more than one time period the title "Balance Sheets" should be used.


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Heading:In addition to the statement title, the heading of your balance sheet should include

the legal name of your company and the date or dates that your statement is presented. For

example, a comparative presentation might be headed:

XYZ CORPORATION

BALANCE SHEETSDecember 31, 2006

Format: There are two basic ways that balance sheets can be arranged. In Account Form, your

assets are listed on the left-hand side and totaled to equal the sum of liabilities and stockholders'

equity on the right-hand side. Another format is Report Form, a running format in which your

assets are listed at the top of the page and followed by liabilities and stockholders' equity.

Sometimes total liabilities are deducted from total assets to equal stockholders' equity.

Captions: Captions are headings within your statement that designate major groups of

accounts to be totaled or subtotaled. Your balance sheet should include three primary captions:

Assets, Liabilities and Stockholders' Equity. In the report form of presentation, the placement of

your primary captions would be as follows: 2006 ASSETS, LIABILITIES AND

STOCKHOLDERS EQUITY.

Except in certain specialized industries your balance sheet should include the following

secondary captions:

CURRENT ASSETS

CURRENT LIABILITIES

Order of Presentation of Captions:First, start with items held primarily for conversion

into cash and rank them in the order of their expected conversion. Then, follow with items heldprimarily for use in operations but that could be converted into cash, and rank them in the order

of liquidity. Finally, finish with items whose costs you will defer to future periods or that you

cannot convert into cash. Following these guidelines, your major assets should normally be

presented in the following order:


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Cash

Short-term marketable securities

Trade notes and accounts receivable

Inventories

Long-term investments

Property and equipment

Intangible assets

Deferred charges

Liabilities are ordinarily presented in the order of maturity as follows:

Demand notes

Trade accounts payable

Accrued expenses

Long-term debt

Other long-term liabilities

Components of stockholders' equity are usually presented the following order:

Preferred stock

Common stock Additional paid-in capital

Retained earnings

Accumulated other comprehensive income

Treasury stock

2.3 STUDY OF CASH FLOW STATEMENT

MEANING:Cash flow statement or statement of cash flows is a financial statement that

shows a company's incoming and outgoing money (sources and uses of cash) during a time

period (often monthly or quarterly). The statement shows how changes in balance sheet and

income accounts affected cash and cash equivalents, and breaks the analysis down according to

operating, investing, and financing activities. As an analytical tool the statement of cash flows

is useful in determining the short-term viability of a company, particularly its ability to pay bills.
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PURPOSE: The cash flow statement reflects a firms liquidity or solvency. The main purpose to

make cash flow statement are as follows:

1. provide information on a firm's liquidity and solvency and its ability to change cash flows

in future circumstances

2. provide additional information for evaluating changes in assets, liabilities and equity

3. improve the comparability of different firms' operating performance by eliminating the

effects of different accounting methods

4. indicate the amount, timing and probability of future cash flows

ACTIVITIES INVOLVED IN CASH FLOW:The cash flow statement is partitioned

into cash flow resulting from operating activities, cash flow resulting from investing activities,

and cash flow resulting from financing activities.

Operating activities:Operating activities include the production, sales and delivery of the

company's product as well as collecting payment from its customers. This could include

purchasing raw materials, building inventory, advertising.

Investing activities: Investing activities focus on the purchase of the long-term assets a

company needs in order to make and sell its products, and the selling of any long-term assets.

Financing activities: Financing activities include the inflow of cash from investors such as

banks and shareholders, as well as the outflow of cash to shareholders as dividends as the

company generates income. Other activities which impact the long-term liabilities and equity of

the company are also listed in the financing activities section of the cash flow statement.

Analysis of cash flow statement is necessary for every organisation to depict its cash inflow and

outflow.

2.4 FINANCIAL STATEMENT ANALYSIS

MEANING:

Financial statement analysis is the process of examining relationships among financial statement

elements and making comparisons with relevant information. It is a valuable tool used by
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investors and creditors, financial analysts, and others in their decision-making processes related

to stocks, bonds, and other financial instruments.With a great understanding of the balance sheet

& p&l account and how it is constructed, we can look at some techniques to analyze the

information contained within the balance sheet & p&l account.

PURPOSE:

The main purpose of analyzing the financial statement are the following:-

To assess past performance and current financial position.

To make predictions about the future performance of a company.

TOOLS FOR ANALYSING

1. PERCENTAGE CALCULATION

There are two popular methods by which we can analyze the financial statement by

calculating percentage as taking a common base.

Horizontal Analysis

When an analyst compares financial information for two or more years for a single

company, the process is referred to as horizontal analysis, since the analyst is reading

across the page to compare any single line item, such as sales revenues. In addition to

comparing dollar amounts, the analyst computes percentage changes from year to year

for all financial statement balances, such as cash and inventory. Alternatively, in

comparing financial statements for a number of years, the analyst may prefer to use a

variation of horizontal analysis called trend analysis. Trend analysis involves calculating

each year's financial statement balances as percentages of the first year, also known as the

base year. When expressed as percentages, the base year figures are always 100 percent,

and percentage changes from the base year can be determined.

If we want to calculate % change in sales then we apply the following formula:

Percentage= change in sales /Base Year Sales*100


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Vertical Analysis

When using vertical analysis, the analyst calculates each item on a single financial

statement as a percentage of a total. The term vertical analysis applies because each year's

figures are listed vertically on a financial statement. The total used by the analyst on theincome statement is net sales revenue, while on the balance sheet it is total assets. This

approach to financial statement analysis, also known as component percentages, produces

common-size financial statements. Common-size balance sheets and income

statements can be more easily compared, whether across the years for a single company

or across different companies.

If we want to calculate % change of current assets then we apply the following formula:

Percentage: current assets/total assets*100

2. RATIO ANALYSIS

Financial ratio analysis uses formulas to gain insight into the company and its operations.

For the balance sheet, using financial ratios (like the debt-to-equity ratio) can show you a

better idea of the companys financial condition along with its operational efficiency. It is

important to note that some ratios will need information from more than one financial

statement, such as from the balance sheet and the income statement. Ratio analysis

facilitates inter-firm and intra-firm comparison.

Meaning of Ratio: A ratio is simple arithmetical expression of the relationship of onenumber to another. It may be defined as the indicated quotient of two mathematical expressions.

According to Accountants Handbook by Wixon, Kell and Bedford, a ratio is an expression of

the quantitative relationship between two numbers.

Ratio Analysis: - Ratio analysis is the process of determining and presenting the relationshipof items and group of items in the statements. According to Batty J. Management AccountingRatio can assist management in its basic functions of forecasting, planning coordination, control

and communication.


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It is helpful to know about the liquidity, solvency, capital structure and profitability of anorganization. It is helpful tool to aid in applying judgment, otherwise complex situations.

Ratio analysis can represent following three methods.

Ratio may be expressed in the following three ways :

1. Pure Ratio or Simple Ratio: -It is expressed by the simple division of one numberby another. For example, if the current assets of a business are Rs. 200000 and its current

liabilities are Rs. 100000, the ratio of Current assets to current liabilities will be 2:1.

2. Rate or so Many Times: -In this type, it is calculated how many times a figureis, in comparison to another figure. For example , if a firms credit sales during the year

are Rs. 200000 and its debtors at the end of the year are Rs. 40000 , its Debtors TurnoverRatio is 200000/40000 = 5 times. It shows that the credit sales are 5 times in comparison

to debtors.

3. Percentage: -In this type, the relation between two figures is expressed in hundredth.For example, if a firms capital is Rs.1000000 and its profit is Rs.200000 the ratio of

profit capital, in term of percentage, is 200000/1000000*100 = 20%

ADVANTAGE OF RATIO ANALYSIS

1. Helpful in analysis of Financial Statements.

2. Helpful in comparative Study.

3. Helpful in locating the weak spots of the business.

4. Helpful in Forecasting.

5. Estimate about the trend of the business.

6. Fixation of ideal Standards.

7. Effective Control.

8. Study of Financial Soundness.


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CLASSIFICATION OF RATIO

Ratio may be classified into the four categories as follows:

A. Liquidity Ratio

a. Current Ratio

b. Quick Ratio or Acid Test Ratio

B. Leverage or Capital Structure Ratio

a. Debt Equity Ratio

b. Debt to Total Fund Ratio

c. Proprietary Ratio

d. Fixed Assets to Proprietors Fund Ratio

e. Capital Gearing Ratio

f. Interest Coverage Ratio

C. Activity Ratio or Turnover Ratio

a. Stock Turnover Ratio

b. Debtors or Receivables Turnover Ratio

c. Average Collection Period

d. Creditors or Payables Turnover Ratio

e. Average Payment Period

f. Fixed Assets Turnover Ratio

g. Working Capital Turnover Ratio

D. Profitability Ratio or Income Ratio

(A) Profitability Ratio based on Sales:

a. Gross Profit Ratio


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b. Net Profit Ratio

c. Operating Ratio

d. Expenses Ratio

(B)Profitability Ratio Based on Investment :

I. Return on Capital Employed ]

II. Return on Shareholders Funds :

a. Return on Total Shareholders Funds

b. Return on Equity Shareholders Funds

c. Earning Per Share

d. Dividend Per Share

e. Dividend Payout Ratio

f. Earning and Dividend Yield

g. Price Earning Ratio

Ratios are often classified using the following terms:

LIQUIDITY RATIO

Liquidity ratios are measures of the short-term ability of the company to pay its debts

when they come due and to meet unexpected needs for cash.

Current Ratio: The current ratio is a rough indication of a firm ability to service its

current obligations. Generally, the higher the current ratio, the greater the cushion

between current obligations and a firm ability to pay them. The stronger ratio reflects a

numerical superiority of current assets over current liabilities Current ratio is calculated

as follows:

Current ratio= Current Assets/Current Liabilities


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Quick Ratio: It is also known as the acid test ratio, this is a refinement of the current

ratio and is a more conservative measure of liquidity. The quick ratio expresses the

degree to which a companys current liabilities are recovered by the most liquid current

assets. quick ratio is calculated as follows:

Quick ratio= (cash + marketable securities + Receivables)/current

liabilities

SOLVENCY RATIO

Solvency ratios indicate the ability of the company to meet its long-term obligations on a

continuing basis and thus to survive over a long period of time.

Debt/Worth Ratio: This ratio expresses the relationship between capital contributed by

creditors and that contributed by owners. It expresses the degree of protection provided

by the owners for the creditors. The higher the ratio, the greater the risk being assumed

by creditors. The lower the ratio, the greater the long-term financial safety. A firm with a

low debt/worth ratio usually has a greater flexibility to borrow in the future. A more

highly leveraged company has a more limited debt capacity.

Debt/worth ratio=Total Liabilities / Tangible Net Worth

PROFITABILITY RATIO

Profitability ratios are gauges of the company's operating success for a given period of

time.

Return On Assets: Return on assets is a measure of how effectively the firms assets

are being used to generate profit. It is calculated as follows:

Return On Assets= Net Income/Total Assets

Return On Equity: Return on equity is the bottom line measure for the shareholders,

measuring for the profits earned for each rupee invested in business. It is calculated as

follows:

Return on Equity= Net income/shareholders equity

Fixed/Worth Ratio: This ratio measures the extent to which owners equity (capital) has been

invested in plant and equipment (fixed assets). A lower ratio indicates a proportionately smaller
http://www.answers.com/topic/solvency-ratiohttp://www.answers.com/topic/solvency-ratio


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investment in fixed assets in relation to net worth and a better cushion for creditors in case of

liquidation. Similarly, a higher ratio would indicate the opposite situation. The presence of

substantial leased fixed assets (not shown on the balance-sheet) may deceptively lower this ratio.

Fixed Worth Ratio=Net Fixed Assets/ Tangible Net Worth


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FINANCIAL STATEMENT

ANALYSIS


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CONSOLIDATED BALANCE SHEET

BALANCE SHEET OF ICICI

BANK ------------------- in Rs. Cr. -----

Mar '11 Mar '10 Mar '09

12 mths 12 mths 12 mths

Capital and Liabilities:

Total Share Capital 1,151.82 1,114.89 1,463.29

Equity Share Capital 1,151.82 1,114.89 1,113.29

Share Application Money 0.29 0.00 0.00

Preference Share Capital 0.00 0.00 350.00

Reserves 53,938.82 50,503.48 48,419.73

Revaluation Reserves 0.00 0.00 0.00

Net Worth 55,090.93 51,618.37 49,883.02

Deposits 225,602.11 202,016.60 218,347.82

Borrowings 109,554.28 94,263.57 67,323.69

Total Debt 335,156.39 296,280.17 285,671.51

Other Liabilities & Provisions 15,986.35 15,501.18 43,746.43

Total Liabilities 406,233.67 363,399.72 379,300.96

Mar '11 Mar '10 Mar '09

12 mths 12 mths 12 mths

Assets

Cash & Balances with RBI 20,906.97 27,514.29 17,536.33

Balance with Banks, Money at Call 13,183.11 11,359.40 12,430.23

Advances 216,365.90 181,205.60 218,310.85

Investments 134,685.96 120,892.80 103,058.31

Gross Block 9,107.47 7,114.12 7,443.71

Accumulated Depreciation 4,363.21 3,901.43 3,642.09

Net Block 4,744.26 3,212.69 3,801.62

Capital Work In Progress 0.00 0.00 0.00

Other Assets 16,347.47 19,214.93 24,163.62

Total Assets 406,233.67 363,399.71 379,300.96

Contingent Liabilities 883,774.77 694,948.84 803,991.92

Bills for collection 47,864.06 38,597.36 36,678.71

Book Value (Rs) 478.31 463.01 444.94


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CASH FLOW OF ICICI BANK------------------- in Rs. Cr. -------------------

Mar '11 Mar '10 Mar '09 Mar '08

12 mths 12 mths 12 mths 12 mths

Net Profit Before Tax 6760.70 5345.32 5116.97 5056.10

Net Cash From Operating Activities -6908.92 1869.21 -14188.49 -11631.15

Net Cash (used in)/from

Investing Activities-2108.82 6150.73 3857.88 -17561.11

Net Cash (used in)/from Financing Activities 4283.20 1382.62 1625.36 29964.82

Net (decrease)/increase In Cash and Cash

Equivalents-4783.61 8907.13 -8074.57 683.55

Opening Cash & Cash Equivalents 38873.69 29966.56 38041.13 37357.58

Closing Cash & Cash Equivalents 34090.08 38873.69 29966.56 38041.13

COMPARATIVE INCOME STATEMENT

TREND ANALYSISSUMMARISED PROFIT & LOSS A/C

(ON 31 MARCH, 2011)

(RS. IN BILLION)

PARTICULARS 2009(RS.)

2010(RS.)

2011(RS.)

%Change

(2010)

%Change

(2011)

Interest income 94.10 143.06 229.94 46.5% 60.7%

Interest expense 65.71 95.97 163.8 46.1% 70.4%

Net interest income 28.39 47.09 66.36 47.5% 40.9%

Non-interest income 27.05 42.42 59.14 49.9% 39.4%


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Fee income 20.98 34.47 50.12 55.3% 45.4%

Lease income 4.01 3.61 2.38 (10.0) (34.1)

Others 2.06 4.34 6.64 111.2% 53.0%

Core operating income 55.44 89.51 125.50 48.7% 40.2%

Operating expenses 25.17 35.47 49.79 40.9% 40.3%

Direct marketing agency

(DMA) expense

4.85 11.77 15.24 35.1% 29.5%

Lease depreciation, net

of lease equalization

2.97 2.77 1.88 (6.7) (31.9)

Core operating profit 22.45 39.50 58.59 67.6% 48.3%

Net treasury income - (0.62) 0.15 - -

Operating profit 29.56 38.88 58.74 58.7% 51.1%

Provisions, net of write-

backs

4.29 7.92 22.26 84.61% 181.1%

Profit before tax 25.27 30.97 36.48 22.6% 17.8%

Tax, net of deferred tax 5.22 5.56 5.38 6.7% (3.2)

Profit after tax 20.05 25.40 31.10 26.7% 22.4%

By anlysing the summarized profit & loss account of ICICI Bank, the following

trends are presented:

1. Operating profit increased 51% to Rs. 5,874 crore for FY2011 from Rs. 3,888 crore for

FY2010 which is less than as compared to increased 58.7% to Rs. 3,888 crore for FY

2010 from Rs. 2,956 crore for FY2009.


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2. Profit after tax increased 22% to Rs. 3,110 crore for FY2011 from Rs. 2,540 crore for

FY2010 which is less than as compared to increased 26.7% to Rs. 2,540 crore for FY2010

from Rs. 2,005 crore for FY2009.

3. Profit before tax increased 18% to Rs. 3,648 crore for FY2011 from Rs. 3,097 crore for

FY2010 which is also less than as compared to increased to 22.6 % to Rs. 3,097 crore for

FY2010 fom Rs. 2,527 crore for FY2009.

4. Net interest income increased 41% to Rs. 6,636 crore for FY2011 from Rs. 4,709 crore

for FY2010 which is less than as compared to increased 47.5% to Rs. 4,709 crore for

FY2010 from Rs. 2,839 crore for FY2009.

5. Fee income increased 45% in 2011 which is less than as compared to 55.3% increased in

2010

6. Interest expenses increased at a very high rate from 46.1% in FY2010 to 70% in FY2011.

7. Interest income is increased at a higher rate than the previous year i.e. 47% in 2010 to

61% in 2011.

8. Increase in non-interest income is less than in 2011 49% as compared to increase in

2010 39%.

9. Provision is increased at a high rate as compared to previous years 85% in 2010 to 181%

in 2011.

COMPARATIVE FINANCIAL POSITION STATEMENT

TREND ANALYSIS

SUMMARIZED BALANCE-SHEET

(ON MARCH 31, 2011)(RS. In crore)

PARTICULARS2009(RS.)

2010(RS.)

2011(RS.)

%Change

(2010)

%Change

(2011)

Cash balance with

banks & SLR

47,412 68,115 104,489 43.7% 53%


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-Cash & bank balances 12,930 17,040 37,121 31.8% 118%

-SLR investment 34,482 51,075 67,368 48.1% 32%

Advances 91,405 146,163 195,866 59.9% 34%

Other Investment 2,854 20,473 23,890 41.9% 17%

Fixed and other Assets 12,836 16,638 20,413 29.61% 23%

TOTAL ASSETS 167,659 251,389 344,658 49.9% 37%

Net Worth 12,550 22,206 24,313 76.9% 9%

-Equity Capital 737 890 899 20.8% 1%

-Reserves 11,813 21,316 23,414 80.4% 10%

Preference Capital 350 350 350 - -

Deposits 99,819 165,083 230,510 65.4% 40%

Erstwhile ICICI

Borrowings

19,348 13,190 10,837 (31.16%) (18%)

Other Borrowings 22,405 35,477 59,823 58.2% 69%

Other Liabilities 13,187 15,083 18,824 14.4% 25%

TOTAL

LIABILITIES167,659 251,389 344,658 49.9% 37%

By anlysing the balance sheet of ICICI Bank, the following trends are presented:

1. Total assets and total liabilities are increased in 2011 from Rs. 251389 crore to Rs.

344658 Crore i.e. 37% which is less than as compared to increase in 2010 from Rs.

167659 crore to Rs. 251389 crore i.e. 49.9%.


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2. Increase in cash balance with bank in 2011 is more than in the previous year 2010. In

2010 it is 32% and in 2011 it is 118%.

3. But increase in SLR investment in 2011 is less than the previous year. In 2010 it is 48%

and in 2011 it is 32%.

4. Increase in advances in 2011 is 60% from 2010 which is less than as compared to

increase in advances in 2010 is 34% from 2009.

5. Increase in fixed and other assets is also less than in 2011 from 2010 i.e 23% as

compared to 30% in 2010 from 2009.

6. Erstwhile ICICI borrowings is decreasing in both years but rate of decreasing is less in

2011 i.e. 18% but in 2010 it is 31%.

7. Increase in net worth is also less than from previous year in 2011 i.e 80% in 2010 to 9%

in 2011.

8. Increase in equity capital is only 1% in 2011 whereas in 2010 it is 21% and increase in

reserve in 2011 is very less as compared to increase in 2010 i.e. from 10% to 80%.

9. 40%Deposits is increased in 2011 from 2010 which is less than as compared to 65%

increase in deposits in 2010 from 2009.

10. Increase in other liabilities is more in 2011 than in 2010 i.e from 14% in 2010 to 25% in

2011.

11.69%borrowing is increased in 2011 from 2010 which is more than as compared to 58%increase in borrowing in 2010 from 2009.

RATIO ANALYSIS

1) CURRENT RATIO:

Current Ratio= Current Assets/Current Liabilities

In 2010:

Current Assets= 27,514.29+11,359.40+181,205.60=39054.8 billion (cash + advances)

Current Liabilities=202,016.60+94,263.57=296280billion (short-term deposits+ borrowings)

Current Ratio=39054.8/296279.5=0.13

In 2011:


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Current Assets= 20,906.97+13,183.11+216,365.90=2329.87billion (cash + advances)

Current Liabilities=225,602.11+109,554.28=920.36 billion (short-term deposits+ borrowings)

Current Ratio=2329.87/920.36=2.6:1

2) QUICK RATIO:

Quick Ratio=Quick Assets/Current Liabilities

In 2010:

Quick Assets=27,514.29+11,359.40billion (cash in hand and other bank)

Current Liabilities=296280.17billion

Quick Ratio=170.40/652.40=0.26:1

In 2011:

Quick Assets=20,906.97+13,183.11billion (cash in hand and other bank)

Current Liabilities=920.30billion

Quick Ratio=371.21/920.30=0.40:1

3) RETURN ON AVERAGE ASSETS:

Return on average assets= Net income/average assets*100

average assets= total assets at the beginning + total assets at the end/2

In 2010: net income=25.40 billion

Average assets= (1676.59+ 2513.89)/2= 2095.24

Return on average assets= 25.40/2095.24*100 = 1.21%

In 2011: net income= 31.10 billion

Average assets= (2513.89+ 3446.58)/2= 2980.24

Return on average assets= 31.10/2980.24*100=1.04%

4) RETURN ON AVERAGE EQUITY:

Return on average equity = Net income/average equity*100

average equity= total equity at the beginning + total equity at the end/2

In 2010: net income=25.40 billion

Average equity= (129.00+225.56)/2= 177.28

Return on average equity= 25.40/177.28*100 = 17.54%

In 2011: net income= 31.10 billion

Average equity= (225.56+246.63)/2= 236.10


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Return on average equity = 31.10/236.10*100=13.17%

5) FIXED/WORTH RATIO:

Fixed Worth Ratio=Net Fixed Assets/ Tangible Net Worth

In 2010:

Net Fixed Assets= 39.80 billion

Tangible Net Worth= 225.55 billion

Fixed Worth Ratio=39.80/225.55= 0.18:1

In 2011:

Net Fixed Assets= 39.23 billion

Tangible Net Worth= 246.62 billion

Fixed Worth Ratio=39.23/246.62 = 0.16:1

6) OPERATING PROFIT TO WORKING FUNDS

Operating Profit To Working Funds=operating profit/ average assets*100

In 2010:

Operating profit=38.80 billion

Average assets=2095.24

Operating profit to working fund=38.80/2095.24*100= 1.85%

In 2011:

Operating profit=58.84 billion

Average assets=2980.84

Operating profit to working fund=58.84/2980.84*100= 1.98%

(Approximately)

RATIOS IN 2010 IN 2011

Current Ratio 2.5:1 2.6:1

Quick Ratio 0.26:1 0.40:1

Return On Assets 1.21% 1.04%

Return On Equity 17.54% 13.17%

Fixed/worth Ratio 0.18:1 0.16:1

Operating profit to working funds 1.85% 1.98%


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The above table shows that: - both current ratio and quick ratio is liquidity ratio. The ideal ratio

for current ratio is 2:1 and ideal ratio for quick ratio is 1:1. In these table current ratio of both

year is higher than the ideal ratio which shows that there is enough current assets which make the

bank able to pay its current liabilities on time but quick ratio is lower than the ideal ratio which

shows that bank have not enough liquid assets to pay their current liabilities. Therefore bank

should keep some assets in the form of liquid assets such as cash, marketable securities etc.

Return on equity, return on assets and operating profit to working funds are profitability ratio.

The higher the profitability ratio of any organization is show the better position of that

organization. The profitability ratio of ICICI bank is very low. It is decreasing from the previous

year.

Fixed/worth ratio measures the extent to which owners equity has been invested in plant

and equipment. A lower ratio indicates a proportionately smaller investment in fixedassets. This ratio shows that bank has invested more in current assets than the fixed assets.

It could be a good position in case of liquidation.

TREND ANALYSIS

Date Close Bse Sensex Rx Ry

7/29/2011 1038.3 18,197.20 0.022451994 (0.00068)7/28/2011 1015.5 18,209.52 (0.01004) (0.01208)

7/27/2011 1025.8 18,432.25 (0.01460) (0.00464)

7

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