Bank Performance & Profitability Analysis

Model format for Comparative Analysis

Basic parameters
No. of employees
No. of branches
No. of ATMs

Key balance sheet parameters

Parameter 03/11 03/12 03/13 03/14
Deposits
Growth/change(YOY)
Advances
Growth
Total business mix
(deposits+advances)

Growth
CASA ratio
(CASA/Total deposits)

Shareholders equity
TOTAL ASSETS









ASSET QUALITY RATIOS:
Parameter 03/10 03/11 03/12 03/13
1.Gross loans or Credit
2.Gross NPA
3.NPA provisions
4.Net NPA (2-3)
5. Net loan or credit (1-3)
6. Gross NPA ratio (Gross NPA to Gross
Credit)= 2/1

7. Net NPA ratio (Net NPA to Net Credit) =
4/5

8.Povision Coverage Ratio (PCR) = 3/2
*

*RBI target for PCR is 70% by Sept. 2010 for All Commercial Banks
SUMMARY P&L PARAMETERS
Parameter 03/10 03/11 03/12 03/13
1.Interest income
2. Interest expenditure
3. Net interest income (NII)
(1-2)

4. Non interest income
5. Total Operating income (1+4)
6. Net operating income(3+4)
7. Operating expenditure
8. Operating profit (6-7)
9. Provisions & contingencies
10. Profit after tax (8-9)






Performance and Profitability ratios:
Parameter 03/10 03/11 03/12 03/13
NIM
Cost to income ratio
% of Non interest income to Total operating income
Overhead efficiency (Non Int. Income/Non Int. Exp.)
Efficiency Ratio (Non Int. Exp/(Net Int. Income +
Non Int. Income)

ROA (AU*NPM)
AU
NPM
ROE (ROA*EM)
EM (A/E)

Productivity ratios:
Parameter 03/10 03/11 03/12 03/13
Avg. profit per
employee (Net
Income/avg.
no. of
employees)

Avg. business
per employee
(Bus. Mix/ avg.
no. of
employees)

Avg. profit per
branch

Avg. business
per branch


Vulnerability ratios or Capital Risk ratios or Solvency ratios:
Parameter 03/10 03/11 03/12 03/13
Tier-1 capital
Tier-2 capital
Total capital
funds
(T-1 + T-2)

CAR or CRAR
(Basel-1)

CAR or CRAR
(Basel-2)


Space for your Analysis/Arguments (with graphs/charts/tables etc.):

Note: Presentation and deliberation on Comparative Performance/Profitability/Productivity
evaluation of the bank-pair allotted to each group for the last 4 years (FY 10, 11, 12 & 13
group wise. Submit soft copies of both PPT & Report and hard copies of report only through the
CR. Report not to exceed 8 10 A4 size pages. PPT not to exceed 20 Nos.
This format should be part of your report but your report should contain more than that. The
report should contain your analysis, arguments and graphs/tables for comparison.






Dena bank
parameters 2013-14 2012-13 2011-12 2010-11
Net interest
income
2.52 2.80 3.17 3.17
Cost to income
ratio
48.16 42.77 43.04 46.73
% of Non-
interest income
to Total
operating income
51.63% 37.69% 38.08% 43.62%
Overhead
efficiency (Non
Int. Income/Non
Int. Exp.)
.55 .504 .3808 .4973
Efficiency Ratio
(Non Int.
Exp/(Net Int.
Income + Non
Int. Income)
.48 .42 .43 .46
ROA (AU*NPM) .51 .86 1.08 1
AU .091 .095 .093 .086
NPM .050 .084 .108 .109
ROE (ROA*EM) 8.91 18.017 20.61 19.37
EM (A/E) 17.48 20.95 19.09 19.37






Punjab and sind bank
parameters 2013-14 2012-13 2011-12 2010-11
Net interest
Margin
1.88 2.15% 2.66% 2.45%
Cost to income
ratio
60.90% 54.99% 60.38% 49.26%
% of Non-
interest income
to Total
operating income
21.34% 20.51% 20.54% 21.39%
Overhead
efficiency (Non
Int. Income/Non
Int. Exp.)
.35 .37 .34 .43
Efficiency Ratio
(Non Int.
Exp/(Net Int.
Income + Non
Int. Income)
.60 .54 .59 .49
ROA (AU*NPM) .13 .63 .35 .44
AU .014 .0974 .081 .012
NPM .097 .065 .043 .036
ROE (ROA*EM) 2.6 10.773 6.11 8.29
EM (A/E) 20 17.10 17.47 18.85







PARAMETERS Dena
(14-13)
P & s
(14-13)
Dena
(13-12)
P & s
(13-12)
Dena
(12-11)
P & s
(12-11)
Dena
(11-10)
P & s
(11-10)
Net interest
Margin
2.52 1.88 2.80 2.15% 3.17 2.66% 3.17 2.45%
Cost to income
ratio
48.16 60.90% 42.77 54.99% 43.04 60.38% 46.73 49.26%
% of Non-interest
income to Total
operating income
51.63% 21.34% 37.69% 20.51% 38.08% 20.54% 43.62% 21.39%
Overhead
efficiency (Non Int.
Income/Non Int.
Exp.)
.55 .35 .504 .37 .3808 .34 .4973 .43
Efficiency Ratio
(Non Int. Exp/(Net
Int. Income + Non
Int. Income)
.48 .60 .42 .54 .43 .59 .46 .49
ROA (AU*NPM)
.51 .13 .86 .63 1.08 .35 1 .44
AU
.091 .014 .095 .0974 .093 .081 .086 .012
NPM
.050 .097 .084 .065 .108 .043 .109 .036
ROE (ROA*EM)
8.91 2.6 18.017 10.773 20.61 6.11 19.37 8.29
EM (A/E)
17.48 20 20.95 17.10 19.09 17.47 19.37 18.85










Net interest margin: A performance metric that examines how successful a firm's investment
decisions are compared to its debt situations. In the above graph net interest margin of Dena
bank has falling trend means that banks investment decision are not that successful as it was in
FY 11.

Cost to income ratio: This ratio gives investors a clear view of how efficiently the firm is being
run the lower it is, the more profitable the bank will be. So, above data indicates that Dena
bank had made losses in FY 13 to that of FY 10, 11, 12. Also it means that cost are rising at a
higher rate than income.

Non-interest income level / % of non-interest income to total operating income: This
measures total non-interest income as a proportion of operating income. Above graph shows that
there is slight increment in the proportion of the profits coming from all sources (including fee income)
other than interest spreads as it got increased from 6.85% (FY 12) to 8.41% (FY 13).
What is interest spread?
Interest spread is the difference between the average lending rate and the average borrowing rate
for a bank or other financial institution. It is:
(interest income interest earning assets) - (interest expense interest bearing liabilities)
This is very similar to interest margi. If a bank's lending was exactly equal to its borrowings (i.e.
deposits plus other borrowing) the two numbers would be identical. In reality, bank also has its
shareholder's funds available to lend, but at the same time its lending is constrained by reserve
requirements.
Changes in the spread are an indicator of profitability as the spread is where a bank makes its
money.
Efficiency ratio: In banking, a ratio of expenses to revenue. Given ratio in the above table are almost
equal for the given financial years and are very low as much as .48% in FY13, banks always desires a
lower efficiency ratio because this means that bank is making more than it is spending and is therefore
on sound fiscal footing.
What Does Efficiency Ratio Mean?
A ratio used to calculate a bank's efficiency. Not all banks calculate the efficiency ratio the same
way. The ratio can be calculated one of fourways: (1) noninterest expense divided by total reven
ue less interest expense, (2) noninterest expense divided by net interest income beforeprovision f
or loan losses, (3) noninterest expense divided by revenue, (4) operating expenses divided by fee
income plus tax equivalent netinterest income. In all four methods, an increase means the compa
ny is losing a larger percentage of its income to expenses. If the efficiencyratio is getting lower, i
t is good for the bank and its shareholders. Also referred to as the overhead burden or overhead e
fficiency ratio.
Return on assets: ROA tells you what earnings were generated from invested capital (assets).
ROA for public companies can vary substantially and will be highly dependent on the industry.
This is why when using ROA as a comparative measure, it is best to compare it against a
company's previous ROA numbers or the ROA of a similar company.

The assets of the company are comprised of both debt and equity. Both of these types of
financing are used to fund the operations of the company. The ROA figure gives investors an
idea of how effectively the company is converting the money it has to invest into net income.
The higher the ROA number, the better, because the company is earning more money on less
investment.
Assets utilization ratio: Asset Utilization Assets utilization (activity, turnover) ratios reflects the
way in which a company uses its assets to obtain revenue and profit. One example is how well
receivables are turning into cash. The higher the ratio, the more efficiently the business manages
its assets.
Net profit margin:
Net profit margin is one of the most closely followed numbers in finance. Shareholders look at
net profit margin closely because it shows how good a company is at converting revenue into
profits available for shareholders.
Net profit margin is often used to compare companies within the same industry, in a process
known as "margin analysis." Net profit margin is a percentage of sales, not an absolute number,
so it can be extremely useful to compare net profit margins among a group of companies to see
which are most effective at converting sales into profits.
Return on equity: The return on equity ratio (ROE) measures how much the shareholders
earned for their investment in the company. The higher the ratio percentage, the more efficient
management is in utilizing its equity base and the better return is to investors.
Equity multiplier: The ratio of a companys total assets to its stockholders equity. The equity
multiplier is a measurement of a companys financial leverage. Companies finance the purchase
of assets either through equity or debt, so a high equity multiplier indicates that a larger portion
of asset financing is being done through debt. The multiplier is a variation of the debt ratio.
The equity multiplier gives investors an insight into what financing methods a company may be
able to use to finance the purchase of new assets. It's also an indicator of potential threats a
company may face from economic conditions that affect the debt-equity mix.