Analysis of Financial

Statement of Banking
Sector-
SBI

ICICI

PGPM 2010 SECTION D

Group 3

Ashwin Nair (10P213)

Nikhil Gupta (10P215)
Polumi Mukherjee (10P219)
Shashank Shekhar (10P232)
Vipul Manglik (10P241)

1
Acknowledgements

First we wish to acknowledge our profound gratitude towards Prof. Shailendra Kumar Rai for
his constant encouragement, invaluable guidance and supportive attitude from the start of the
project up to its conclusion.

We would also like to convey our gratitude towards students of our section, Section D for their
persistent encouragement during the course of this project.

Date: 1st September, 2010

2
 INTRODUCTION OF BANKING SECTOR IN INDIA
1786-1969
In the year 1786, the General Bank of India was set up, followed by Bank of Hindustan and Bengal Bank.
The East India Company formed Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras
(1843) as independent banks and called them as Presidency Banks. These three banks were unified in
1920 and Imperial Bank of India was formed. In 1865 Allahabad Bank was established, In 1894 Punjab
National Bank ltd was formed in 1894.From the year 1906 to 1913 Bank of India, Central Bank of India,
Bank of Baroda, Canara Bank, Indian Bank and Bank of Mysore were established. The RBI was founded in
1935.
During this period the development of banks was sluggish and banks suffered regular failures. To bring
about greater stability in the bank’s the Government of India passed The Banking Companies Act 1949,
which was later modified as Banking Regulation Act 1949.The act of 1965 entrusted the Reserve Bank of
India with authority to control the functioning of other nationalized banks heralding a new beginning in
Indian banking. In 1955 the Imperial Bank of India was nationalized. The State Bank of India was
established to act as the controlling authority for RBI and to take care of banking transactions of the
Union and State governments across the country. In 1960 seven banks were nationalized and assigned
as subsidiary of SBI.

After Nationalization
In 1969 under directions from the then Prime Minister Mrs. Indira Gandhi, 14 major commercial banks
in the country was nationalized. In 1980 seven more banks were nationalized, resulting in 80% of the
banking sector coming under the control of the government. The national banks played a vital role in
both rural and urban economies and in making banking services accessible to the masses.

Post Liberalization
Reforms were introduced in the banking sector to strengthen Indian banks and make them
internationally competitive and for banks to play a vital role in the economic development of the
country. The Banking Industry was opened up for private participation and the entry of new private
banks and foreign banks increased competition. The efficiency of the banking sector improved as
suggested by indicators such as gradual reduction in cost of intermediation and decline in
nonperforming loans. Efficiency in the banking sector was driven by improved technology and
competition

The economic reforms undertaken in the last 15 years have brought about a considerable improvement
in the health of banks and financial institutions in India. The banking sector is a very important sector of
the Indian economy. The sector has made a marked improvement in the liberalization period. There has
been extraordinary progress in the financial health of the commercial banks with respect to capital
adequacy, profitability, and asset quality and risk management. Deregulation has opened new doors for
banks to increase revenues by entering into investment banking, insurance, credit cards, depository
services, mortgage, securitization, etc.
3
The limit for foreign direct investment in private banks has been increased from 49% to 74%. In addition,
the limit for foreign institutional investment in private banks is 49%. Liberalization and globalization
have created a more challenging environment in the banking sector as well as in the other segments of
the financial sector such as mutual funds, Non Banking Finance Companies, post offices, capital markets,
venture capitalists, etc. Now the challenges faced by the sector would be gaining profitability,
reinforcing technology, maintaining global standards, corporate governance, sharpening skills, risk
management and, the most important of all, to establish 'Customer Intimacy'.

Commercial banks are coming up with more and more vacancies, and the banking sector now has more
new jobs than any other sector. Right from the branch level to the highest level, there is tremendous
range of opportunities available in the sector. Jobs in this sector can be both rewarding and enjoyable,
as you get opportunities to learn about business, interact with people and build up clientele.

State Bank of India (SBI) is the largest state-owned banking and financial services company in India, by
almost every parameter - revenues, profits, assets, market capitalization, etc. The bank traces its
ancestry to British India, through the Imperial Bank of India, to the founding in 1806 of the Bank of
Calcutta, making it the oldest commercial bank in the Indian Subcontinent. Bank of Madras merged into
the other two presidency banks, Bank of Calcutta and Bank of Bombay to form Imperial Bank of India,
which in turn became State Bank of India. The Government of India nationalized the Imperial Bank of
India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India.
In 2008, the Government took over the stake held by the Reserve Bank of India.

SBI provides a range of banking products through its vast network of branches in India and overseas,
including products aimed at NRIs. The State Bank Group, with over 16,000 branches, has the largest
banking branch network in India. With an asset base of $352 billion and $285 billion in deposits, it is a
regional banking behemoth. It has a market share among Indian commercial banks of about 20% in
deposits and advances, and SBI accounts for almost one-fifth of the nation's loans.

SBI has tried to reduce over-staffing by computerizing operations and "golden handshake" schemes that
led to a flight of its best and brightest managers. These managers took the retirement allowances and
then went on to become senior managers in new private sector banks.

The State bank of India is the 10th most reputed company in the world according to Forbes.

4
ICICI Bank (formerly Industrial Credit and Investment Corporation of India) is a major banking and
financial services organization in India. It is the second largest bank in India and the largest private
sector bank in India by market capitalization. The bank also has a network of 2,016 branches (as on 31
March 2010) and about 5,219 ATMs in India and presence in 18 countries, as well as some 24 million
customers (at the end of July 2007). ICICI Bank offers a wide range of banking products and financial
services to corporate and retail customers through a variety of delivery channels and specialization
subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital
and asset management. (These data are dynamic.) ICICI Bank is also the largest issuer of credit cards in
India. ICICI Bank's shares are listed on the stock exchanges at BSE, NSE, Kolkata and Vadodara ; its ADRs
trade on the New York Stock Exchange (NYSE).

The Bank is expanding in overseas markets and has the largest international balance sheet among Indian
banks. ICICI Bank now has wholly-owned subsidiaries, branches and representatives offices in 19
countries, including an offshore unit in Mumbai. This includes wholly owned subsidiaries in Canada,
Russia and the UK (the subsidiary through which the HiSAVE savings brand is operated), offshore
banking units in Bahrain and Singapore, an advisory branch in Dubai, branches in Belgium, Hong Kong
and Sri Lanka, and representative offices in Bangladesh, China, Malaysia, Indonesia, South Africa,
Thailand, the United Arab Emirates and USA. Overseas, the Bank is targeting the NRI (Non-Resident
Indian) population in particular.

ICICI reported a 1.15% rise in net profit to Rs. 1,014.21 crore on a 1.29% increase in total income to Rs.
9,712.31 crore in Q2 September 2008 over Q2 September 2007. The bank's CASA ratio increased to 30%
in 2008 from 25% in 2007.

5
 ANALYSIS OF P&L ACCOUNT AND BALANCE SHEET OF

SBI AND ICICI

PROFIT AND LOSS ACCOUNT
Total Income

The following chart compares the Total Income of SBI and ICICI Bank, for the last five years.

INCOME : 2005-06 2006-07 2007-08 2008-09 2009-10

Interest Earned 35,979.57 37,242.33 48,950.31 63,788.43 70,993.92
SBI Other Income 7,528.16 7,429.04 9,487.11 12,694.31 15,966.60
Total 43,507.73 44,671.37 58,437.42 76,482.74 86,960.52
Interest Earned 14,306.13 21,995.59 30,788.34 31,092.55 25,706.93
ICICI Other Income 5,062.22 6,962.95 8,878.85 8,176.26 7,480.30
Total 19,368.35 28,958.54 39,667.19 39,268.81 33,187.23

Graph

90,000.00
80,000.00
70,000.00
60,000.00
50,000.00
SBI
40,000.00
ICICI
30,000.00
20,000.00
10,000.00
0.00
2005-06 2006-07 2007-08 2008-09 2009-10

Explanation:The total income of ICICI has been increasing consistently from 2004-05 to 2007-08. During
the year 2008-09 the income of ICICI bank showed a downward trend. The bankruptcy of Lehman
Brothers in September 2008 led to a rapid deterioration of the global macroeconomic environment and
a sharp moderation in global economic activity. In India, this impact was felt mainly through the trade
and capital flow channels.

State Bank of India has seen a steady rise in income during this time.

6
Total Expenditure

Total
Expenditure 2005-06 2006-07 2007-08 2008-09 2009-10
SBI 39,101.06 40,130.06 51,708.30 67,361.51 77,794.47
ICICI 16,828.28 25,848.32 35,509.46 35,510.68 29,162.25

Graph

80,000.00
70,000.00
60,000.00
50,000.00
40,000.00 SBI
ICICI
30,000.00
20,000.00
10,000.00
0.00
2005-06 2006-07 2007-08 2008-09 2009-10

Explanation

The total expenditure for SBI has been increasing over the last 5 years. The total expenditure for ICICI
increased from 2005-06 to 2008-09 before declining in 2009-10.

7
Expenditure Breakup

II. Expenditure: SBI

Interest expended 47,322.48 42,915.29 31,929.08 22,184.13 20,390.45
Payments to/Provisions for Employees 12,754.65 9,747.31 7,785.87 7,932.59 8,123.05
Operating Expenses & Administrative Expenses 3,598.09 2,927.84 2,382.81 1,942.13 1,808.99
Depreciation 932.66 763.14 679.98 602.39 763.68
Other Expenses, Provisions & Contingencies 8,427.72 5,949.51 5,221.49 4,385.54 5,516.29
Provision for Tax 6,166.62 5,971.52 3,823.50 3,014.61 1,682.71
Fringe Benefit Tax 0 142 105 88.5 458
Deferred Tax -1,407.75 -1,055.10 -219.43 -19.83 357.89
Total 77,794.47 67,361.51 51,708.30 40,130.06 39,101.06
II. Expenditure: ICICI
Interest expended 17,592.57 22,725.94 23,484.24 16,358.50 9,597.45
Payments to/Provisions for Employees 1,925.79 1,971.71 2,078.90 1,616.75 1,082.29
Operating Expenses & Administrative Expenses 1,770.03 1,952.99 1,922.20 1,510.44 1,126.66
Depreciation 619.5 678.6 578.35 544.78 623.79
Other Expenses, Provisions & Contingencies 5,937.02 6,825.60 6,550.40 5,283.03 3,844.55
Provision for Tax 1,597.78 1,793.31 1,569.53 944.32 661.87
Fringe Benefit tax 0 34.2 39.2 36.93 26.35
Deferred Tax -280.44 -471.67 -713.36 -446.43 -134.68
Total 29,162.25 35,510.68 35,509.46 25,848.32 16,828.28

Explanation

The interest expenditure, Interest Income and the total expenditure for SBI have increased over the last
year as compared to the decrease in the same for ICICI over the same period. However the rates of
increase and decrease of these expenditures over the last year for SBI and ICICI has determined the %
growth in PAT.

8
Balance Sheet

Advances

Advances 2005-06 2006-07 2007-08 2008-09 2009-10

SBI 261,800.94 337,336.49 416,768.20 542,503.20 631,914.15
ICICI 146,163.11 195,865.60 225,616.08 218,310.85 181,205.60

700,000.00

600,000.00

500,000.00

400,000.00
SBI
300,000.00 ICICI
200,000.00

100,000.00

0.00
2005-06 2006-07 2007-08 2008-09 2009-10

Explanation

SBI has shown a consistent growth in its advances throughout the previous 5 years. It has remained a
strong lender even through the recession phase in 2008-09.The bank’s advances grew by 16.4 % to Rs
6.31 LAKH CRORES and deposits by 8.3 % to 8.04 LAKH CRORES, leading to a business growth of 11.79 %
to 14.35 CRORES.

The rate of growth in advances from ICICI from 2005-06 is relatively lower. There is a dip in advances
post 2007-08 due to recession.

9
Investment

Investments 2005-06 2006-07 2007-08 2008-09 2009-10

SBI 162,534.24 149,148.88 189,501.27 275,953.96 285,790.07
ICICI 71,547.39 91,257.84 111,454.34 103,058.31 120,892.80

Graph

300,000.00

250,000.00

200,000.00

150,000.00 SBI
ICICI
100,000.00

50,000.00

0.00
2005-06 2006-07 2007-08 2008-09 2009-10

Explanation

Investments of SBI have increased continuously over the last 5 years as compared to them being almost
flat in case of ICICI over the same period. Investments for SBI are better placed as compared to ICICI.

10
Deposits

Deposits 2005-06 2006-07 2007-08 2008-09 2009-10

SBI 380,046.06 435,521.09 537,403.94 742,073.13 804,116.23
ICICI 38,521.91 51,256.03 65,648.43 93,155.45 94,263.57

Graph

900,000.00
800,000.00
700,000.00
600,000.00
500,000.00
SBI
400,000.00
ICICI
300,000.00
200,000.00
100,000.00
0.00
2005-06 2006-07 2007-08 2008-09 2009-10

Explanation

The deposits in SBI have been traditionally high and have been increasing at a higher rate over the last 5
years as compared to that of ICICI. Deposits also include the Current Account and Savings Account
Deposit which are very high for SBI compared to ICICI because of the pan India presence of SBI and its
large number of accounts. Also the rate of growth of deposits are higher for SBI than for ICICI for the
year 2009-10.

11
Equity Capital

Equity Capital 2005-06 2006-07 2007-08 2008-09 2009-10

SBI 526.3 526.3 631.47 634.88 634.88
ICICI 1,239.83 1,249.34 1,462.68 1,113.29 1,114.89

Graph

1600
1400
1200
1000
800 SBI
ICICI
600
400
200
0
2005-06 2006-07 2007-08 2008-09 2009-10

Explanation

The equity capital of SBI is almost half that of ICICI. ICICI is a private bank with good brand image and
growth prospects and therefore has huge share capital. It has remained flat over ICICI and SBI over the
last 5 years.

12
Reserves

Reserves 2005-06 2006-07 2007-08 2008-09 2009-10

SBI 27,117.79 30,772.26 48,401.19 57,312.82 65,314.32
ICICI 21,316.16 23,413.92 45,357.53 48,419.73 50,503.48

Graph

70,000.00

60,000.00

50,000.00

40,000.00
SBI
30,000.00 ICICI
20,000.00

10,000.00

0.00
2005-06 2006-07 2007-08 2008-09 2009-10

Explanation

The reserves for SBI and ICICI have been increasing steadily over the last 5 years. The growth of reserves
of SBI is more than that of ICICI due to higher earnings of SBI than compared to ICICI in the last few
years.

13
Borrowings

Borrowings 2009-10 2008-09 2007-08 2006-07 2005-06

SBI 133,652.84 123,761.26 103,454.82 123,761.26 133,652.84
ICICI 132,785.48 144,411.48 131,296.86 144,411.48 132,785.48

Graph

160,000.00
140,000.00
120,000.00
100,000.00
80,000.00 SBI
ICICI
60,000.00
40,000.00
20,000.00
0.00
2009-10 2008-09 2007-08 2006-07 2005-06

Explanantion:

The borrowings for SBI and ICICI have remained almost equal and constant over the last 5 years.

14
Short Term Investment
The most important parameters measuring the characteristics and soundness of short term nature are:
1. Price to Earnings Ratio (P/E) = Average Share Price/EPS

2. Earnings Per Share (EPS) = PAT/No. of Shares Outstanding

3. Operating Profit Margin = Operating Profit/Sales

4. Market Capitalization

5. Beta Ratio

We look into each of these in detail:

Earnings per Share

EPS 2005-06 2006-07 2007-08 2008-09 2009-10

SBI 81.77 83.91 103.94 139.76 140.65
ICICI 27.35 32.88 36.03 32.4 34.63

Graph

160

140

120

100

80 SBI
60 ICICI

40

20

0
2005-06 2006-07 2007-08 2008-09 2009-10

Explanation

The PAT in case of SBI has been increasing continuously over the past 5 years. There was a dip in PAT in
case of ICICI in 2008-09 and it increased again in 2009-10.On this account we can see a similar trend in
the EPS of SBI and ICICI.
15
Price / Earnings Ratio

Price Earning
(P/E) 2005-06 2006-07 2007-08 2008-09 2009-10
ICICI 21.54 25.95 21.37 10.27 27.51
SBI 11.84 11.83 15.38 7.63 14.78

Graph

30

25

20

15 ICICI
SBI
10

0
2005-06 2006-07 2007-08 2008-09 2009-10

Explanation:

The price earning ratio (P/E) of private banks at aggregate level showed a decline on May 20, 2009, as
against the figure recorded on May 20, 2008. Simultaneously, P/E showed a marginal decline during the
same period for public sector banks (PSBs), too.Private banks like ICICI are rapidly increasing their asset
base every year vis-à-vis public sector banks. Hence, they do enjoy much higher P/Es.
Until 2008-09, Private sector banks experienced a decline in market capital , increase in trailing net
profit and decrease in P/E. However, Banks were unable to increase investors' confidence despite better
profit performance and increase in PAT due to conservative sentiments during recession.Post recession,
as the markets are recovering, the P/E ratio for both SBI and ICICI has increased.

16
PAT/TOTAL INCOME

PAT/Total
Income 2005-06 2006-07 2007-08 2008-09 2009-10
SBI 10.13% 10.16% 11.50% 11.93% 10.55%
ICICI 13.09% 10.45% 10.37% 9.54% 11.84%

Graph

14.00%

13.00%

12.00%

11.00% SBI

10.00% ICICI

9.00%

8.00%
2005-06 2006-07 2007-08 2008-09 2009-10

Explanation

As seen above the EBTDA and EBT value for ICICI has only marginally increased over the last year
whereas PAT /Total Income has increased considerably after 2008-09 after a continuous decline from
2005-06 to 2008-09. The reason for this sudden turnaround after 2008-09 is the % decrease in interest
income is less than the % decrease in interest expenses.

The EBTDA value for SBI has shown a marginal increase and the EBT value a marginal decrease over the
last year. The PAT/Total Income has declined for SBI after a steady increase from 2005-06 to 2008-09.
The increase in Interest Income is almost same as the Increase in Interest Expense in case of SBI.

Beta Ratio:
ICICI Bank – 1.375
SBI – 1.078

Market Cap
SBI – 175107.22
ICICI – 111863.77

Decision: Since SBI's P/E is low, EPS is high and beta ratio is lesser, so it's a more lucrative buy compared
to ICICI.

17
Long Term Investment
The most important parameters measuring the characteristics and soundness of short term nature are:
1. Return on Capital Employed (ROCE) = Return/Capital (debt + equity)
2. Debt Equity Ratio (D/E) = Long term Debt/Equity
3. Return on Net Worth (RONW) = Return/Equity
4. Interest Coverage Ratio = PBIT/Interest
5. Dividend Payout Ratio = Cash Dividends/PAT
6. Return on Total Assets (ROTA) = PAT/Total Asset

We look into each of the ratios in detail now.

Return on Equity / Return on Net Worth

RONW (%) 2005-06 2006-07 2007-08 2008-09 2009-10

SBI 17.04 15.41 16.75 17.05 14.8
ICICI 14.62 13.37 11.75 7.83 7.96

GRAPH

18
16
14
12
10
SBI
8
ICICI
6
4
2
0
2005-06 2006-07 2007-08 2008-09 2009-10

EXPLANATION

The ROE for SBI has been consistently greater than that of ICICI. For the year 2009-10 SBI had an ROE of
14.8% while that of ICICI is at 7.96%.

18
Solvency Ratio

Total debt/equity 2005-06 2006-07 2007-08 2008-09 2009-10

SBI 13.75 13.91 10.96 12.81 12.19
ICICI 7.45 9.5 5.27 4.42 3.91

Graph

16

14

12

10

8 SBI
6 ICICI

0
2005-06 2006-07 2007-08 2008-09 2009-10

19
Return on Assets

Return on Assets (%) 2005-06 2006-07 2007-08 2008-09 2009-10

SBI 0.89 0.84 1.01 1.04 0.88
ICICI 1.3 1.09 1.12 0.98 1.13

Graph

1.4

1.3

1.2

1.1

1 SBI
0.9 ICICI

0.8

0.7

0.6
2005-06 2006-07 2007-08 2008-09 2009-10

Explanation

The ROA for ICICI bank has been falling till 2008-09 on account of decreasing PAT. Even though total
assets have decreased slightly in 2008-09 yet there was a marginal fall in ROA. However on the account
of increase in PAT in 2009-10 there has been an increase in ROA inspite of a decrease in total assets in
the year 2009-10 too.

For SBI, PAT has increased by almost 10% against an increase of total assets by almost 20%. Hence the
decline in ROA.

20
Dividend per Share

Dividend per
share 2005-06 2006-07 2007-08 2008-09 2009-10
SBI 14 14 21.5 29 30
ICICI 8.5 10 11 11 12

30

25

20

15 SBI
ICICI
10

0
2005-06 2006-07 2007-08 2008-09 2009-10

21
 Price – Book Value

Price to Book Value ( P/BV) 2005-06 2006-07 2007-08 2008-09 2009-10

SBI 1.84 1.67 2.06 1.17 2
ICICI 2.36 3.16 1.84 0.75 2.06

Graph

3.5
3
2.5
2
SBI
1.5
ICICI
1
0.5
0
2005-06 2006-07 2007-08 2008-09 2009-10

Explanation:

If low Price-to-Book value is what value investors look for while picking up stocks, SBI definitely catches
attention. Moneycontrol found out that the most expensive banking stock in the country is actually
trading at a discount to its peers.

The above trend clearly shows that private sector banks are trading at a premium to the public sector
banks. What does this signify? One reason could be that private sector banks have higher retail exposure
than the public sector banks. Retail lending has grown phenomenally in recent years and banks in the
private sector have made most of it.
Second reason is the more obvious one. Private sector banks are more efficient than the public sector
ones. Private Banks trade at higher P/BV because they have higher CASA, enjoy one of the highest
margins, and operationally are much more efficient than SBI. ICICI Bank's P/BV of 2.06x is justified by
good growth rate, and performance of its subsidiaries. Most of ICICI subsidiaries are market leaders in
their own right.

22
Dividend

Equity Dividend % 2005-06 2006-07 2007-08 2008-09 2009-10

SBI 140 140 215 290 300
ICICI 85 100 110 110 120

Graph

350

300

250

200
SBI
150
ICICI
100

50

0
2005-06 2006-07 2007-08 2008-09 2009-10

23
 Dividend Payout Ratio

Payout (%) 2005-06 2006-07 2007-08 2008-09 2009-10

SBI 17.12 16.68 20.69 20.75 21.33
ICICI 31.2 30.47 30.53 33.95 34.65

Graph

40

35

30

25 SBI
ICICI
20

15

10
2005-06 2006-07 2007-08 2008-09 2009-10

Decision:

RONW for SBI is higher and more sustainable compared to ICICI.

But, dividend payout for ICICI is better when compared to SBI.
However, the dividend per share of SBI is 2.5 times that of ICICI and has been increasing
consistently which overcomes the lag of SBI in the dividend payout ratio.

So SBI is a better proposition than ICICI for long term investment.

24
RATIO ANALYSIS
Profitability ratios

EBTDA

Since the interest forms the major part of expenses of the Bank as it pays interest to its investors, we
have calculated the EBTDA i.e. Profit before Tax, Depreciation and Amortization. The following table
compares the EBTDA of both the banks.

EBDTA 2004-05 2005-06 2006-07 2007-08 2009-10 2009-10

SBI 10998.12 12026.41 11497.92 13862.1 18623.52 20244.04
ICICI 3523.71 5292.95 7302.67 9283.94 9978.49 10908.43

Graph

25
EBT

PBT 2005-06 2006-07 2007-08 2008-09 2009-10

SBI 6,905.27 7,624.59 10,438.19 14,179.65 13,924.92
ICICI 3,093.61 3,645.04 5,053.10 5,113.97 5,342.32

Graph

16,000.00
14,000.00
12,000.00
10,000.00
8,000.00 SBI
ICICI
6,000.00
4,000.00
2,000.00
0.00
2005-06 2006-07 2007-08 2008-09 2009-10

26
 Other Ratios
SBI ICICI
Key Ratios
2009-10 2008-09 2009-10 2008-09
Credit-Deposit(%) 75.96 74.97 95.04 95.93
Investment / Deposit (%) 36.33 36.38 53.28 46.35
Cash / Deposit (%) 7.56 8.37 10.72 10.14
Interest Expended / Interest Earned (%) 66.66 67.28 68.44 73.09
Other Income / Total Income (%) 18.36 16.6 22.54 20.82
Operating Expenses / Total Income (%) 23.38 20.47 17.66 19.25
Interest Income / Total Funds (%) 7.03 7.56 6.91 7.97
Interest Expended / Total Funds (%) 4.69 5.09 4.73 5.83
Net Interest Income / Total Funds (%) 2.34 2.47 2.18 2.14
Non Interest Income / Total Funds (%) 1.58 1.5 2.01 2.1
Operating Expenses / Total Funds (%) 2.01 1.86 1.58 1.94
Profit before Provisions / Total Funds (%) 1.91 2.12 2.62 2.3
Net Profit / Total funds (%) 0.91 1.08 1.08 0.96
RONW (%) 14.8 17.05 7.96 7.83

Credit to deposit ratio: This ratio indicates how much of the advances lent by banks is done through
deposits. It is the proportion of loan-assets created by banks from the deposits received. The higher the
ratio, the higher the loan-assets created from deposits. Deposits would be in the form of current and
saving account as well as term deposits. The outcome of this ratio reflects the ability of the bank to
make optimal use of the available resources. ICICI Bank distinctly stands out from its peers. A strong
reason for the same would be its aggressive nature, with a C-D Ratio of around 95 as compared to about
75 for SBI. Further, PSU banks like SBI have seen their ratios increase gradually over the years.

The proportion of deposits given out on credit has increased slightly in case of SBI.. In each year, this
figure was greater for ICICI Bank showing that a greater reserve ratio was maintained by the PSU Bank.

The investements to deposits ratios show how much of the deposits that the bank is getting is used in
investing and earning interest. Post crisis ICICI Bank has increased its investment realtive to deposits.

Interest expended by interest earned shows how much the interst the bank has to pay on deposits by
how much interst the bank is earning through advances and investments. The ratio is high in ICICI Bank
as they have high deposits on which they have to pay intersts.

The subsequent ratios gives the incomes and expenditures are percentages of the total funds that the
bank has. Net interest by total funds has increased and operating expenses by total funds has decreased
for both banks indicating an increase in operational efficiency.

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CAR (Capital Adequacy Ratio)
Capital adequacy ratio: A bank's capital ratio is the ratio of qualifying capital to risk adjusted (or
weighted) assets. The RBI has set the minimum capital adequacy ratio at 9% for all banks. A ratio below
the minimum indicates that the bank is not adequately capitalized to expand its operations. The ratio
ensures that the bank do not expand their business without having adequate capital.

It must be noted that it would be difficult for an investor to calculate this ratio as banks do not disclose
the details required for calculating the denominator (risk weighted average) of this ratio in detail. As
such, banks provide their CAR from time to time.

Both SBI and ICICI have high CAR ratios, well above the prescribed RBI value. The CAR for SBI has
remained fairly constant over the five years from 2005-06 to 2009-10. However for ICICI the CAR has
increased considerably from 13.35% in 2005-06 to 19.14% in 2009-10

YEAR 2005-06 2006-07 2007-08 2008-09 2009-10

Capital Adequacy Ratio (%) 11.88 12.34 13.54 12.97 12
SBI Tier I Capital (%) 9.36 8.01 9.14 8.53 8.46
Tier II Capital (%) 2.52 4.33 4.4 4.44 3.54
Capital Adequacy Ratio (%) 13.35 11.69 13.97 15.92 19.14
ICICI Tier I Capital (%) 9.2 7.42 11.76 12.16 13.48
Tier II Capital (%) 4.15 4.27 2.21 3.76 5.66

Graph

20
19
18
17
16
15 SBI
14
ICICI
13
12
11
10
2005-06 2006-07 2007-08 2008-09 2009-10

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Net Interest Margin

Net interest margin (NIM) is a measure of the difference between the interest income
generated by banks or other financial institutions and the amount of interest paid out to their
lenders(for example, deposits), relative to the amount of their (interest-earning) assets. It is
similar to the gross margin of non-financial companies.

It is usually expressed as a percentage of what the financial institution earns on loans in a time
period and other assets minus the interest paid on borrowed funds divided by the average
amount of the assets on which it earned income in that time period (the average earning
assets).

Net interest margin is similar in concept to net interest spread, but the net interest spread is the
nominal average difference between the borrowing and the lending rates, without compensating
for the fact that the earning assets and the borrowed funds may be different instruments and
differ in volume.

Net Interest Income / Total Funds (%) 2005-06 2006-07 2007-08 2008-09 2009-10
SBI 3.27 2.84 2.64 2.47 2.34
ICICI 2.24 1.89 1.96 2.14 2.18

Graph

3.5

2.5

2
SBI
1.5
ICICI
1

0.5

0
2005-06 2006-07 2007-08 2008-09 2009-10

29
Though the Net Interest margin for SBI has declined over the years from 2005-06 to 2009-10, the NIM is
of SBI (2.34%) is better compared to that of ICICI (2.18) for the year 2009-10.

The Net Interest Margin for ICICI has increased in the last two years for ICICI which shows improving
investment decisions. The declining NIM for SBI indicates deteriorating investment decisions in last few
years.

Enterprise Value/EBIDTA

2005- 2006- 2007- 2008- 2009-

EV/EBIDTA 06 07 08 09 10
SBI 14.86 15.64 14.46 13.12 2.34
ICICI 17.95 15.64 12.29 10.26 4.91

Graph

20
18
16
14
12
10 SBI
8 ICICI
6
4
2
0
2005-06 2006-07 2007-08 2008-09 2009-10

30
CASH FLOW ANALYSIS
Cash Flow Summary for ICICI 2009-10 2008-09
Cash and Cash Equivalents at Beginning of the year 29966.6 38041.13
Net Cash from Operating Activities 1373.78 -13557.8
Net Cash Used in Investing Activities 6150.73 3857.88
Net Cash Used in Financing Activities 1382.62 1625.36
Net Inc/(Dec) in Cash and Cash Equivalent 8907.13 -8074.57
Cash and Cash Equivalents at End of the year 38873.7 29966.56

Cash Flow Summary for SBI 2009-10 2008-09

Cash and Cash Equivalents at Beginning of the year 104404 67466.34
Net Cash from Operating Activities -3098.77 31537.89
Net Cash Used in Investing Activities -1761.52 302.19
Net Cash Used in Financing Activities -3359.67 5097.38
Net Inc/(Dec) in Cash and Cash Equivalent -8219.96 36937.46
Cash and Cash Equivalents at End of the year 96183.8 104403.8

ICICI has been able to increase its Cash flow from operating significantly where as in case of SBI the the
cash flows from operating have decreased significantly. The overall cash position of SBI has weakened
compared to its last year’s performance while in case of ICICI its cash position has strengthened during
the year 2009-10.

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NPA (Non Performing Assets)
A nonperforming asset (NPA) is a loan or an advance where;
1. Interest and/ or installment of principal remain overdue for a period of more than 90 days in
respect of a term loan,
2. The account remains ‘out of order’ in respect of an Overdraft/Cash Credit (OD/CC),
3. The bill remains overdue for a period of more than 90 days in the case of bills purchased and
discounted,
4. The installment of principal or interest thereon remains overdue for two crop seasons for short
duration crops,
5. The installment of principal or interest thereon remains overdue for one crop season for long
duration crops.

% of Net Non-Performing Assets to Net Advance 2005-06 2006-07 2007-08 2008-09 2009-10
SBI 1.88 1.56 1.78 1.79 1.72
ICICI 0.72 1.02 1.55 2.09 2.12

2.5

1.5
SBI
1 ICICI

0.5

0
2005-06 2006-07 2007-08 2008-09 2009-10

In case of SBI the Non performing assets to advances ratio has remained fairly constant when compared
to ICICI. The NPA to advances ratio for ICICI has increased from 0.72% in 2005-06 to 2.12% in 2009-10.
The NPA to advances percentage for SBI is 1.72% for the year 2009-10 compared to 2.12 for ICICI during
the same period. SBI ranks better than ICICI in terms of NPA.

32
Bibliography:

1. www.moneycontrol.com
2. www.capitaline.com
3. www.wikipedia.org
4. www.investopedia.com
5. www.icicibank.com
6. www.statebankofindia.com
7. www.business-standard.com

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