SUMMER PROJECT REPORT

Performance and Profitability Analysis of Axis Bank

Prepared for the Mumbai University in the partial fulfillment of the
requirement for the award of the degree in...

MASTERS OF MANAGEMENT STUDIES

Submitted By:
Prinston Stanley Pereira
Roll No 40 MMS II

Under the guidance of

Prof. Shilpa Peswani
SFIMAR

St Francis Institute Of Management And Research, Mt. Poinsur,

S.V.P Road, Borivali (W) Mumbai.
Batch- 2008-2010

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Company Certificate
Company Logo/
Address

Date:

TO WHOMSOEVER IT MAY CONCERN

This is to certify that (Student Name) has successfully completed his/her Summer project
on Project Title for a period of __________ months. i.e. from ______ to ______ 2009.

During this period, we found him/her sincere, honest & hardworking.

We wish him/her all the best for further assignments.

For (Company Name)

Signing Authority
Name
Designation
Department

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College certificate

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Acknowledgement

With a sense of satisfaction, as I reflect upon my project activity, I am filled with a deep
sense of gratitude towards the important few whose help and support was instrumental in
the completion of my project.
I wish to express my gratitude to my faculty guide, Prof. Shilpa Peswani, who guided and
encouraged me during the entire tenure of the project. I also thank my assignment owner,
Mr. Vihang, Assitant Vice President Axis Bank, Vasai Branch, for having immense
faith in my abilities. I would also like to thank my project guides, Ms. Cloudina Dcosta and
Mr. Rohan Lopes, Branch Team member, Axis Bank for their co-operation and valuable
advice throughout the project.
I am able to say with conviction that I have being immensely benefited from auspicious and
prestigious association of eight weeks as summer intern with Axis Bank.

With Regards,
Prinston Stanley Pereira
MMS II, SFIMAR.

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EXECUTIVE SUMMARY

Project on Performance and Profitability Analysis of Axis Bank was very

helpful in giving a hand of experience in Banks working. The aim of study is to understand the
performance of Axis Bank by comparing it with other banks. It is very important for every
business to understand the techniques to increase its profits and reduce its cost which is
important in todays world to beat the competition in current markets.
Profitability analysis is that which breaks down costs and revenue per
customer in financial services companies. The challenge is to incorporate credit quality in
profitability analysis and then to use profitability information to manage account.
From this project I have learned about the performance of Axis Bank and ways
to increase its profitability and reduce its cost. While increasing its profitability the bank should
keep in mind that it should not take excess risk. Bank should try to utilize all its funds in more
appropriate manner from which they can incur maximum returns with minimum risk. Bank
should not hold excess liquidity which will hamper profitability of the bank. If there is excess
liquidity bank should seek more investing opportunities. Nevertheless, the bank should also
increase its operational efficiency and its earning quality and retain its asset quality to ensure
high profits and good reputation of bank in the economy. On personal level, the ratios analysis
conducted for the project has immensely helped in gaining proficiency in micro soft excel

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Table of Contents
Sr. No

Content

Page No

Title Page

Company Certificate

College Certificate

Acknowledgement

Executive Summary

Table of Contents

Company Introduction

8-9

Need for Study & Objective

10

Research Methodology

11

10

Project Introduction

12

11

Analysis of data

11.1

Key Performance Indicators

26

#####

Rating Scale

28

11.2

Per Head Ratios

34

11.3

Camel Model

38

12

Findings

40

13

Recommendations

42

14

Limitations

44

-------

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15

Conclusion

45

16

References

46

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Company Information

Incorporation
Incorporated in 1994 as Unit Trust Bank
Renamed as Axis Bank in 2007

Promoters

Unit Trust of India (UTI - I)

Life Insurance Corporation of India (LIC) and General Insurance Corporation of India
(GIC) and
Four PSU insurance companies, i.e.
1. National Insurance Company Ltd.,
2. The New India Assurance Company Ltd.,
3. The Oriental Insurance Company Ltd. and
4. United India Insurance Company Ltd.

Mission and Values

Mission
Customer Service and Product Innovation tuned to diverse needs of individual
and corporate clientele.
Continuous technology up gradation while maintaining human values.
Progressive globalization and achieving international standards.
Efficiency and effectiveness built on ethical practices.

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Vision
Customer Satisfaction through
Providing quality service effectively and efficiently
"Smile, it enhances your face value" is a service quality stressed on
Periodic Customer Service Audits
Maximization of Stakeholder value
Success through Teamwork, Integrity and People

Retail banking
Retail products service provided are

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Need for study:

To increase its profits and reduce its cost and increase efficiency.
To improve and suggest the ways of improving KPIs (key performance indicators) of
Axis bank.
To scrutinize Axis Bank Performance from long term point of view.(more than 4 years)

Objectives:
To understand the performance of KPIs (key performance indicators) of Axis bank by
comparing with other bank
To increase management efficiency in Axis bank by comparing per head ratios
To study the performance of Axis bank through C.A.M.E.L model.

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Research methodology

Analytical

Execution:
Comparative analysis of financial ratios was done between private sector banks and
public sector banks
Banks considered were
Private Sector Banks: ICICI Bank, HDFC Bank, Yes Bank
Public Sector Banks: Bank of Baroda, Union Bank of India
Data was collected from various sources like websites, capital online, prowess and the
annual reports of all the banks.
Analysis was done according to the data collected and recommendations were given as
per the observations.

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Project Introduction

Key Performance Indicators

External factors that affect the performance of financial institutions include:
Technology changes
Competition
Regulation
Government policies (fiscal and monetary policy)

Bank management cannot control these factors. The best they can do is to try to anticipate
future changes and position the institution to best take advantage of these changes.
Managers of banks, can however, control many internal factors. The KPIs will, therefore,
focus on these controllable factors, some of which are:

Operating efficiency
Expense control
Tax management
Liquidity
Risk

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Efficiency and expense control ratios.

These ratios describe how well the financial institution controls expenses relative to
producing revenues, and how productive employees are in terms of generating income,
managing assets, and handling accounts.

Liquidity

It is mandatory that banks meet investors demands for liquidity. However, there is a
tradeoff since more liquid assets generally yield lower returns.

Risk

Financial institutions face many risks including losses on loans and losses on
investments. Financial institution managers must limit these risks in order to avoid failure
of the institution (bankruptcy).

Profitability

The bank expects the borrowing firm to conduct its business prudently, mitigate risks, be
cost effective and thus generate enough profits to cover long-term debt obligation; taxes
and other statutory payments; pay reasonable dividends to equity holders; and thereafter
leave a surplus for plough back onto reserves or invest in high yielding projects.

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C.A.M.E.L model
CAMEL stands for Capital Adequacy, Asset Quality, Management Efficiency, Earnings
Quality and Liquidity

Capital adequacy: - Capital adequacy reflects the overall financial condition of the banks and
also the ability of the management to meet the need for additional capital. It reflects a banks
leverage. Capital is a cushion against losses. If a particular company is making losses then its
owned capital and reserves and surplus will help the company to survive.
Asset quality: - Its prime motto behind measuring the asset quality is to ascertain the component
of non-performing assets as a percentage of the total asset. In addition, the parameter also
ascertains the NPA movement and the amount locked up in investments as a percentage of the
total assets.
Management efficiency: - It involves a subjective analysis for measuring the efficiency of the
management. To measure the efficiency of the management we used parameters like profit per
employee, business per employee and advances to deposits.

Earnings quality : - This parameter gains importance in the light of the argument that much of a
banks income is earned through non-core activities like investment, treasury operations,
corporate advisory services and so on. In this section, we try to assess the quality of income in
terms of income generated by core activity income from lending operations.

Liquidity: - Liquidity is very important for any organization dealing with money. Banks have to
take proper care in hedging liquidity risk, while at the same time ensuring that a good percentage
of funds are invested in higher return generating investments, so that the banks can generate
profit while at the same time providing liquidity to the depositor. Demand deposit offer high
liquidity to the customers and so to cater to these customers the banks have to invest in liquid
assets even at the cost of losing higher opportunity interest.

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CAMEL MODEL ANALYSIS

The components of the CAMELS rating system comprise of both objective and subjective
parameters. Some illustrative components are as follows:

Capital adequacy.
o Size of the bank
o Volume of inferior quality assets
o Banks growth experience, plans and prospects
o Quality of capital
o Retained earnings
o Access to capital markets
o Non-ledger assets and sound values not shown on books (real property at
nominal values, charge-offs with firm recovery values, tax adjustments.

Asset quality
o Volume of classifications
o Special mention loans- ratio and trends
o Level, trend and comparison of non-accrual and renegotiated loans
o Volume and character of insider transactions

Management factors
o Technical competence, leadership of middle and senior management.
o Compliance with banking laws and regulations
o Adequacy and compliance with internal policies
o Tendencies towards self-dealing
o Ability to plan and respond to changing circumstances
o Demonstrated willingness to serve the legitimate credit needs of the
community
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o Adequacy of directors
o Existence and adequacy of qualified staff and programs

Earnings
o Return on asset compared to peer group averages and banks own trends
o Material components, and income and expense compare to peers and
banks own trends
o Adequacy of provision for loan losses
o Quality of earning
o Dividend payout ratio in relation to the adequacy of bank capital.

Liquidity
o Adequacy of liquidity sources compared to present and future needs
o Availability of asset readily convertible to cash without undue loss
o Access to money markets
o Level of diversification of funding sources (on- and off-balance sheet)
o Degree of reliance on short-term volatile sources of funds
o Trend and stability of deposits
o Ability to securitise and sell certain pools of funds
o Management competence to identify, measure, monitors and control
liquidity position.

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Camels rating applied to banks in India.

The main instrument of supervision in India is the periodical on-site inspection of banks
supplemented by off-site monitoring and surveillance. Since 1995, on-site inspections are based
on the CAMELS model and aim at achieving the following objectives:

Evaluation of banks safety and soundness.

Appraisal of the quality of board and top management.

Ensuring compliance with prudential regulations

Identifying of key financial factors such as capital, earnings, and liquidity and banks
solvency.
.

Financial performance parameters have typically been developed along the dimensions of
this framework. These are typically used for peer comparison and benchmarking, regulatory
reporting, and shareholder reporting purposes. Some banks have also linked these parameters to
the individual performance review process and compensation of its employees. However, these
financial measures are primarily lag indicators, a post-mortem view of the business, rather than
lead indicators that assess the banks ability to create value in the future.
Domestic banks are rated on the CAMELS model while foreign banks are rated on the
CACS model (capital adequacy, asset quality, compliance and systems). The frequency of
inspections is generally annual, which can be increased / decreased depending on the financial
position, methods of operation and compliance record of the bank.
The risk profile of each bank draws upon a wide range of sources of information, besides
the CAMELS rating, such as, off-site surveillance and monitoring (OSMOS) data, market
intelligence reports, ad-hoc data from external and internal auditors, information form other
domestic and overseas supervisors, on-site finding, and sanctions applied. The data inputs are
assessed for their significance and quality before being fed into the risk profile. All outliers, i.e.,
banks which fall outside the normal distribution based on characteristics such as profitability,
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new business activity, and balance sheet growth are identified and investigated on a regular
basis. The risk profile is constantly updated.
The key components of the risk profile document are:

CAMELS rating with trends

Narrative description of key risk features captured under each CAMELS component

Summary of key business risks including volatility of trends in key business risk factors

Monitorable action plan and banks progress to date

Strength, weaknesses, opportunities, threats (SWOT) analysis

INTERPRETATION OF RATIOS
Capital Adequacy ratio This ratio should be of minimum 9% as decided by RBI. It is arrived at
by dividing the Tier I and Tier II capital by risk weighted assets. Tier I capital includes paid up
capital and free reserves. Tier II capital comprises sub-ordinate debt of a 5-7 year tenure. Lower
the ratio maximum is the risk taken by the bank. If the ratio is much higher i.e. above 20% we
can assume that particular bank is doing narrow business. That bank is not taking much of risk
which can even affect the profitability of the bank. As we all know higher the risk higher will be
the returns. Generally in the case of co-operative banks we can find that this ratio is above 20%.
As now in over comparison we can find that Axis bank is working smoother with not much high
risk as we can say its trying to make optimum utilization of its funds. If this ratio is between 10%
- 14% is said to be optimum in banking business.

Debt- equity ratio.( total borrowings + Deposits / Capital + R&S): - Debt is borrowed funds
from any sources which has to be returned with interest. Equity means the net worth of the bank.
In this case highest debt can be seen from two way point of view i.e. if debt is high bank has to
pay regular interest as well as has to return it debt at the time of closing the firm but its even
better as interest paid on debt is non taxable and in this case equity will be lower so remaining

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can be distributed among the equity shareholders and they can earn higher returns and this way
the bank can retain its share holders.
But if we see the other way round if debt is less then comparatively
less interest has to be paid. and if debt is 10%; only 10% has to be refunded and remaining is not
a compulsion to pay as equity and reserves and surplus is owned capital so can retained. It is
even not compulsory to pay dividend on own funds

G-secs to total investments: - Investments include government securities, other approved

securities, shares, debentures and bonds, subsidiaries and associates, and other investments. This
ratio shows the risk involved in a banks investments. Since government securities are risk-free,
the higher the G-Secs to investment ratio, lower the risk involved in a banks investments. It is
arrived at by dividing the amount invested in government securities by total investment. Axisdia
has invested around 60% of its total investments in G-Secs. Part of this investments are also form
of SLR investments which the bank has to maintain in form of securities and bonds with
government of India, at present its 25%.
Net NPA's to total asset: - this ratio shows the asset quality of the bank. Lower the ratio its
better for the bank. Non-performing assets are normally generated from the advances given by
the bank to general public. When there is no scope of getting returns from those assets then it is
put in the category of non-performing assets. Higher the ratio is bad for the banks as that percent
of its assets are not generating revenue to the bank which could harm its profitability.
In this case all the banks in the sample are bellow 1% which will be an positive side for the
banking sector.
If we would have seen this ratio about 5 years bank the percentage were about 5%
and above of most of the banks. So as of now most of the banks has tried to recover there
position in a much better way with which they can increase there profitability.

Total investment to total assets: - Investments include government securities, other approved
securities, shares, debentures and bonds, subsidiaries and associates, and other investments. Total
investments consist of SLR investments which are kept with RBI -government in the form of

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government securities and bonds. SLR investment ratio is fixed by RBI. Currently it is 25%. This
ratio shows how much percent of total asset is in the form of investment.
Many banks prefer to keep it minimum as they dont get higher returns as compare to advances.
This ratio is used as a tool to measure the percentage to total assets looked up in investment,
which by conventional definition, doesnt form part of the core income of a bank.
Axis bank has 31% which is equal to the average of other banks, but if we
look at public banks it is slightly lower than private banks.
Banks have to do their money management in most appropriate manner. If we see if there is
100% deposit out of which the have to give advances as per demand first. Then they have to
maintain CRR ratio which is 8.25% and SLR which is 25%. If the cash is not sufficient they have
to borrow money from money market or other sources.

Percentage change in net NPAs: - This ratio shows net increase or decrease in NPA. This ratio
is calculated based on the previous year closing NPA. This measure gives the movement in net
NPAs in relation to net NPAs in the previous year.
Higher the percentage change better for the banks (on the lower side). If the figure is in positive
it indicates there has been increase in net NPAs as to last year and negative figure indicates
there has been decrease in NPAs as to last year. In the sampling frame we can see that public
sector banks are performing much better then private sector bank. Public sector figures are in
single digit or negative whereas private sector are pretty high.

Percentage change in net NPAs: - This ratio shows net increase or decrease in NPA. This ratio
is calculated based on the previous year closing NPA. This measure gives the movement in net
NPAs in relation to net NPAs in the previous year.
Higher the percentage change better for the banks (on the lower side). If the figure is in positive
it indicates there has been increase in net NPAs as to last year and negative figure indicates
there has been decrease in NPAs as to last year. In the sampling frame we can see that public
sector banks are performing much better then private sector bank. Public sector figures are in
single digit or negative whereas private sector are pretty high.
Axis bank is performing the the second best in this sector as it has reduced its NPAs which is a
record in its bank for last 10 years. This has given hike to the profits.

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Total advances to total deposits: - This ratio measures the efficiency of the management in
converting the deposits available with the bank (excluding other funds like equity capital). Banks
basic business is lending and borrowing. Total advances are those, which are given to general
public in the form of different types of loan on which banks earn interest which contribute to its
profits, whereas total deposits are borrowed from general public in the form of current, saving
and term deposits on which banks have to pay interest which contribute to the operating expense
of banks. This ratio shows how much is the risk taken by the bank. How much is the bank using
its deposits to meet the demand for loans. It is the percentage of deposit used to give advances.
Axis bank is using its 68% of total deposit to meet the demand of loans. Highest in the sampling
frame is ICICI which uses 92% of its deposit. Which even shows ICICI is very aggressive.
Higher the use higher will be the profitability as advances is the major source through which the
banks contribute to their profits. By getting new attractive schemes as Bank of India is now
trying to do by introducing new star loans. Now further years to come will show how these loans
are contributing to its profitability.

Profit per employee (in lakhs): - This measures the efficiency of the employee at individual
level. It also gives valuable inputs to assess the real strength of a banks branch network.. Profit
per employee is calculated annually in lakhs. This is generally calculated to know the
productivity of the employees in the bank. How much is the bank making profits and how much
each employee is contributing towards its profits. Axis bank has 8.39 lac profit per employee
where as ICICI has 10 lac. To increase the profit per employee cut the costs spend on employee
and increase its scales. Axis bank stands 2nd in the sampling frame of 7 banks.

Business per employee (in crores): - This tool measures the efficiency of all the employees of a
bank in generating business for the bank. It is arrived at by dividing the total business by the total
number of employees. By business we mean the sum of total advances and total deposit in a
particular year.
Private sector banks are doing much better in this category. As we can see the
figures are almost double then public sector banks. Axis bank has 11.170 crore business per
employee where as ICICI has 10.08crores.

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Return on net worth (return on equity) : - Equity capital is share holders capital. Share holders
show there interest in the firm and invest their money expecting some amount of returns on it.
Higher the returns, higher is the benefit to the shareholders and easy to retain them. Higher the
ratio is better in this case. Axis bank ratio is on an average. This ratio gives benefits to the
shareholders. Its shows behind every share what is the vales in return they get every year. To
improve this ratio generally all banks prefer to increase their profits by reducing their operating
expense or increasing their non-interest income which played a very crucial part in increasing
profits of banks with no risk.

Tax Ratio: - Tax has to be paid by every organization, but the tax paid by a firm maximum the
firm can retain its profits. Tax rates are fixed by the government but the can be some adjustments
made to get down the tax amount. There are many companies having ample of profits doing
extremely well but then too they come under MAT (minimum alternative taxed companies) eg:
Reliance.
Even banks have started adopting this strategy by which banks are trying to
pay minimum taxes to the government. They can make adjustment in their profit and loss
statement to show minimum profits to pay out minimum tax.

Operating efficiency: - Banks continue to struggle with customer service and operational
efficiency due to systems-based infrastructures inherited from multiple generations and iterations
of mergers, acquisitions, and customization. Legacy systems are often based on aging technology
that is difficult to integrate and expensive to maintain. While some middleware-driven
integration projects have helped relieve pain points, the results are only treating the symptoms of
a much bigger problem. To remain competitive, businesses must boost operational efficiency
wherever possible. Axis bank has enough scope of increasing its operating efficiency as it is 3rd
in the sample frame.

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Percentage growth in net profit: - There was a continuous growth in its profits. It has become a
trend to many banks to perform extremely well. As we can see there was a 61% rise in net profits
of Axis bank. The highest contribution for this growth in net profits was repayment of NPA.
Net interest margin : - Net Interest Margin (NIM) is a measurement of the difference between
the interest of the income generated by banks or other financial institutions and the amount of
interest paid out to their lenders(for example, deposits). It is considered similar to the gross
margin of non-financial companies.
It is expressed as a percentage of what the financial institutions are earning (it's
interest often from borrowing from other financial institutions like the Federal Reserve) minus
the interest that it pays on borrowed funds to its investors.
So in that vein, net interest margin is similar in concept to the net interest spread; where the net
interest spread expresses the nominal average difference between the borrowing and the lending
rates, without compensating that they earning assets and the borrowed funds may be different
instruments.
The net interest spread is generally higher than the net interest margin because banks
may need to keep a certain amount of assets in non-interest bearing assets (such as cash balances
held at branches for customers or liquid reserves as determined by banking regulators).
Calculated as:

Net interest margin is an extremely important measure to the bank since it usually accounts for
70-85% of our total revenue. A small change in margin has a huge impact on profitability.
Since net interest income is a component of the efficiency ratio, improving the margin will
improve the efficiency ratio (a good thing).

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Return on asset net profit / average assets : - This ratio measures return on asset employed
or the efficiency or how well the institution is using its assets to generate income. Its shows how
much capital you have invested in assets and how much percent returns are you getting on it. If
you have invested Rs.100 and you are earning net profit of Rs.10 i.e. your ROA is 10%. Higher
the returns you are earning on a particular investment its better. You can recover the amount in
short period of time. Axis bank has a ratio of 1.24% where as private bank like YES BANK has
1.424 which is the highest in the sample frame.

Interest income / total income: - This ratio measures the income from lending operations as a
percentage of the total income generated by the bank in a year. Interest income includes income
on advances, interest on deposit with RBI, and dividend income. Interest income is earned from
advances given to general public. Interest income is earned on the risk taken by the bank. Higher
the advances given, higher the risk taken and higher the interest income earned. Core business of
banking is lending and borrowing so the percentage of interest income earned is higher. But there
are banks like HDFC and Bank of Baroda which has low interest income as there income from
other sources in high. This is actually better for the bank because income from other sources
carries low or no risk of getting defaulters.

Non-interest income / total income: - This measures the income from operation s other than
lending as a percentage of total income earned by the banks excluding income on advances and
deposits with RBI.
Non-interest income are like charges applied for various bank transactions, preparing demand
draft, charges applied for less then or more than balance in current account etc, transfer of
money, foreign exchange, asking for account history and many other documents and
verifications needed from the bank. Non-interest income also includes bancassurance and cross
selling fees which forms the important part of it. The best part in non-interest income is that the
is no risk taken by the bank. so higher the percent of this ratio is better for the bank, as bank can
earn more profit with minimum risk. As we can see in the sample bank of India is doing better
from public sector and HDFC bank from private sector.

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Cash to total demand deposit: Cash is the liquid cash hold by the bank to meet its day to day
requirement. Demand deposit are deposits in current account and saving account, as the holder
can any time withdraw from this account and the bank has to provide it on its demand. The cash
holding should be adequate to meet the demand of this deposits and even working capital
needed. Higher the ratio, the higher is the liquidity of the bank. Hence the profitability that the
bank defaults on its payment obligations is low. If there is excess of cash holding even that is
not favorable to the bank as they can invest that cash in some investment opportunities to earn
income.
Cash to total deposit ratio: - Total deposit include current account, saving account, fixed
deposit in different schemes lade down by banks and deposits of other financial institution. Fixed
deposits are required after a certain period of time. But current account and saving account cash
can be withdrawn any time. Thus banks have to maintain certain amount of cash with them to
meet the need of current account and saving accounts of the banks. If there is excess of cash
holding even that is not favorable to the bank as they can invest that cash in some investment
opportunities to earn income. .
Cash to total: - Cash in this case include liquid cash plus cash and bank balances in call money.
Higher the ratio, the higher the liquidity of the asset portfolio; however this may lead to low
profitability as bank is loosening the opportunity to invest the same money in other investing
opportunity. From where the banks can earn interest or profit. This ratio shows the percentage of
liquid cash holding by the bank of its total asset. In this case bank of India is compatibly high
then other banks, which shows bank of India is holding excess of liquid cash in should seek
opportunity to invest it. Through which bank can increase its profitability.
G-sec/ total assets: - Investments include government securities, other approved securities,
shares, debentures and bonds, subsidiaries and associates, and other investments. Of this
government securities can be easily liquidated when ever needed. This ratio measures the
proportion of risk-free liquid assets invested in G-secs as a percentage of the assets held by a
bank and is arrived at by dividing investment in government securities by total assets. Axis bank
has invested around 18.41% of its total assets in G-Secs. This is around the same average of
other banks

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Data Analysis : key performance indicators of Axis Bank

AXIS BANK
Profitability
YEILD ON FUND ADVACES

INT. INC. EARNED/TOTAL

LOAN ADVANCES

7.95
16.09

RETURN ON EQUITY.

NET PROFIT / EQUITY

RETURN ON ASSET.

NET PROFIT / ASSET

NET PROFIT / TOTAL
INCOME
TOTAL INCOME / TOTAL
ASSET
INT. INC. EARNED / TOTAL
EARNING ASSET

1.24
PROFIT MARGIN
ASSET UTILISATION
YIELD ON ASSET
INT. COST TO TOTAL ASSET
RATIO
EPS
P/E RATIO
NET OPERATING MARGIN
NET INTEREST MARGIN

INT. EXP. / TOTAL ASSET

NET PROFIT / NO. OF EQUITY
SHARES
SHARE PRICE / EPS
NET OPER. INCOME / TOTAL
ASSET

12.22
8.027
6.390
4.032
31.31
23.49
2.57
3.47

EFFICIENCY AND EXPENSE CONTROL RATIOS

OPERATING EFFICIENCY

TOTAL OPERATING
EXPENSES / TOTAL ASSETS

COST OF FUNDS

INT. EXP. / INT. BEARING

DEPOSITS + BORROWING

EFFICIENCY [COSTINCOME] RATIO

NON-INTEREST INCOME /
NET TOTAL INCOME
PROVISION FOR TAX /
TOTAL EQUITY

TAX RATIO

6.13
4.572
20.539
0.529

LIQUIDITY
DEMAND-TO-TIME
DEPOSITS
DEMAND DEPOSITS RATIO

TOTAL DEMAND DEPOSITS

/TOTAL TIME DEPOSITS
TOTAL DEMAND DEPOSITS /
TOTAL ASSETS

AXIS Bank/SFIMAR

21.110
18.290
Page 26

NON-DEPOSIT BORROWING
RATIO
CREDIT-ASSET RATIO
EXTENDED
NET LOAN-ASSET RATIO
CASH TO TOTAL DEMAND
DEPOSIT
CASH TO TOTAL DEPOSIT
RATIO
CASH TO TOTAL ASSETS

NON DEPOSIT BORROWINGS

/ TOTAL ASSETS
TOTAL CREDIT / TOTAL
ASSETS
TOTAL CREDIT LESS
PROVISON / TOTAL ASSETS
CASH N BANK BAL. INCL.
CALL MONEY / DEMAND
DEPOSIT
CASH N BANK BAL. / TOTAL
DEPOSIT
CASH N BANK BAL.
INCLUDING CALL MONEY /
TOTAL ASSET

8.250
54.420
54.109
62.382
14.270
11.406

RISK
EQUITY MULTIPLIER
EQUITY RATIO
CAPITAL ADEQUACY
RATIO
PROVISION RATIO
NET NPA TO ASSET RATIO
NET NPA TO EQUITY RATIO

TOTAL ASSETS / EQUITY

EQUITY / TOTAL ASSET
TOTAL CAPITAL / RISKWEIGHTED ASSET
LOAN LOSS PROVISION /
TOTAL ASSET
NET NPA / TOTAL ASSET
NET NPA / EQUITY

306.465
0.326
13.730
0.314
0.226
69.410

EARNING
INCOME FROM FUND
ADVANCES AS A % OF OP
INCOME
FUND BASED INCOME AS A
% OF OP INCOME
FEE BASED INCOME AS A %
OF OP INCOME
OPERATING INCOME AS A
% OF WORKING FUNDS

INCOME FROM FUND

ADVANCES/ OP INCOME
FUND BASED INCOME/ OP
INCOME
FEE BASED INCOME/ OP
INCOME
OPERATING INCOME/
WORKING FUNDS

AXIS Bank/SFIMAR

54.23
84.55
15.45
14.66

Page 27

Rating scale

EXECELLENT

GOOD

FAIR

AVERAGE

BELOW AVERAGE

POOR

TOTAL SCORE
HIGHEST SCORE
LOW SCORE

----- POOR PERFORMANCE

----- GOOD PERFORMANCE

AXIS Bank/SFIMAR

Page 28

Comparison of key Performance Indicator ratios

Particulars

ICICI
BANK

AXIS
BANK

HDFC
BANK

YES
BANK

UNION

BOB

PROFITABLITY RATIOS
YIELD ON FUND
ADVANCES

10.50

7.95

10.98

9.86

9.05

7.88

NET PROFIT MARGIN

10.51

12.22

12.82

12.01

13.20

10.38

RETURN ON EQUITY
RETURN ON ASSETS

11.1
1.1

16.09
1.24

16.1
1.32

15.165
1.178

24
1.26

13
0.8

ASSETS UTILISATION
YIELD ON ASSETS

10.131
10.5

8.027
6.39

9.521
7.59

9.843
7.718

8.524
7.414

7.735
6.578

EPS
P/E RATIO

32
33.12

31.31
23.49

46.22
28.8

44.9

27.46
17.01

39.41
23.75

INTEREST COST TO
TOTAL FUNDS(%)

5.865

4.032

3.670

5.736

5.118

4.400

AXIS
BANK

HDFC
BANK

UNION

BOB

Particulars
YIELD ON FUND
ADVANCES
NET PROFIT MARGIN
RETURN ON EQUITY
RETURN ON ASSETS
ASSETS UTILISATION
YIELD ON ASSETS
EPS
P/E RATIO

INTEREST COST TO
TOTAL FUNDS (%)
TOTAL
OVERALL RANK

ICICI
BANK

YES
BANK

2
5
6
5
1
4
4
2

5
3
2
3
5
5
4
2

1
2
3
1
3
2
2
3

3
4
4
4
2
1
1
1

4
1
1
2
4
6
6
6

6
6
5
6
6
3
3
5

6
34
4

2
31
3

1
17
1

5
28
2

4
34
4

3
45
6

AXIS Bank/SFIMAR

Page 29

Particulars

ICICI
BANK

AXIS
BANK

HDFC
BANK

YES
BANK

UNION

BOB

EFFICIENCY RATIO
OPERATING EFFICIENCY
COST OF FUNDS
EFFICIENCY RATIO
(COST-INCOME)
TAX RATIO

Particulars

8.43

6.13

6.42

3.54

6.78

6.15

7.099

4.572

4.504

6.500

5.661

4.896

14.963

20.539

18.415

21.589

12.775

14.963

0.191

0.525

0.518

0.627

0.381

0.428

ICICI
BANK

AXIS
BANK

HDFC
BANK

YES
BANK

UNIO
N

BO
B

EFFICIENCY RATIO
OPERATING
EFFICIENCY

COST OF FUNDS

EFFICIENCY RATIO
(COST-INCOME)

1
15
5

5
14
4

4
13
3

6
18
6

2
12
2

3
11
1

TAX RATIO
TOTAL

OVERALL RANK

AXIS Bank/SFIMAR

Page 30

AXIS
BANK

ICICI
BANK

Particulars

HDFC
BANK

YES
UNION
BANK

BOB

EARNINGS RATIOS
INCOME FROM FUND
ADVANCES AS A % OF OP
INCOME
FUND BASED INCOME AS A
% OF OP INCOME
FEE BASED INCOME AS A
% OF OP INCOME
OPERATING INCOME AS A
% OF WORKING FUNDS

57.26

54.23

56.39

58.48

66.48

64.05

85.78

84.55

85.7

86.97

97.00

95.81

14.21

15.44

14.29

13.02

2.99

4.18

18.35

14.66

19.47

16.86

13.61

12.30

ICICI
BANK

Particulars

AXIS
BANK

HDFC
BANK

YES
BANK

UNION

BOB

EARNINGS RATIOS
INCOME FROM FUND
ADVANCES AS A % OF OP
INCOME
OPERATING INCOME AS A
% OF WORKING FUNDS
TOTAL
OVERALL RANK

Particulars

ICICI
BANK

2
6
1

4
10
3

1
6
1

3
6
1

5
6
1

6
8
2

AXIS
BANK

HDFC
BANK

YES
BANK

UNION

BOB

LIQUIDITY RATIO
DEMAND TO TIME
DEPOSITS
DEMAND RATIO
NON-DEPOSITS
BORROWING RATIO
CREDIT ASSET RATIO
NET LOANS-ASSET
RATIO
CASH TO DEMAND
DEPOSITS

13.667
6.170

21.110
18.290

62.710
19.630

8.087
5.783

17.494
9.523

11.186
6.512

21.570

8.250

5.790

10.091

6.847

5.206

56.340

54.420

47.600

55.527

59.754

59.411

55.710

54.109

46.829

55.513

59.284

59.168

154.067

62.382

51.386

165.718

85.316 190.657

AXIS Bank/SFIMAR

Page 31

CASH TO TOTAL DEPOSITS

CASH TO TOTAL ASSETS

15.563
9.500

14.270
11.406

AXIS
BANK

ICICI
BANK

Particulars

14.666
11.091

12.262
9.583

HDFC
BANK

13.193
8.125

YES
BANK

14.667
12.416

UNION

BOB

LIQUIDITY RATIO
DEMAND TO TIME DEPOSITS
DEMAND RATIO
NON-DEPOSITS BORROWING
RATIO

4
2

2
5

1
6

6
1

3
4

5
3

CREDIT ASSET RATIO

NET LOANS-ASSET RATIO

4
4

2
2

1
1

3
3

6
6

5
5

3
1
24
3

5
4
24
3

6
2
19
1

2
6
26
5

4
5
31
6

1
2
22
2

CASH TO DEMAND DEPOSITS

CASH TO TOTAL DEPOSITS
TOTAL
OVERALL RANK

Particulars

ICICI
BANK

AXIS
BANK

HDFC
BANK

YES
BANK

UNION

BOB

RISK RATIO
EQUITY RATIO(%)
CAPITAL
ADEQUACY
PROVISION RATIO
NET NPA TO ASSETS
RATIO
NET NPA TO EQUITY
RATIO

0.278

0.326

0.266

1.742

0.406

0.203

13.970

13.730

13.600

13.600

12.510

12.880

0.109

0.314

0.770

0.014

0.471

0.243

0.089

0.226

0.224

0.050

0.102

0.123

313.729

69.410

84.220

6.231

21.336 135.490

AXIS Bank/SFIMAR

Page 32

Particulars

AXIS
BANK

ICICI
BANK

HDFC
BANK

YES
BANK

UNION

BOB

RISK RATIO
EQUITY RATIO(%)

CAPITAL ADEQUACY

PROVISION RATIO

4
23
6

1
8
1

2
19
4

5
22
5

NET NPA TO ASSETS

RATIO
NET NPA TO EQUITY
RATIO
Total
OVERALL RANK

2
6
15
2

6
3
18
3

Observations
Yield on Assets, return on Assets and asset utilization of the Axis Bank is poor: Comparison
of yield on assets shows that Axis Bank lies at 6th position in the sample frame. Similarly Return
on Assets and asset utilization is performing below. This is mainly due to inadequate performance
of income from fund advances. This can be justified by the ratio in earning quality which states
that income from fund advances to percentage of operating income is lowest in the sample frame.
Efficiency Ratio and Tax Ratio needs improvement: Efficiency ratio of Axis Bank is at lower
half of ranking table. This due to less proportion of non interest funds. Tax ratio when compared
with the other banks is comparatively higher which needs to be reduced.
Net Non Performing Assets and provision ratio are comparatively high: Net NPA seems to
be high in Net Non performing assets. Also provision for Non performing assets ranks high
which gives an indication of risk in future.
Cash to Demand Deposit Ratio needs to be improved: Cash to Demand Deposit should be
higher. Due to this it increases the chance short term solvency and due to this Axis Bank may
have to sell off short term securities or borrow money from other bank which needs to be repaid
with interest.

AXIS Bank/SFIMAR

Page 33

Per Head Ratios of Axis Bank

PER BRANCH RATIO(crores)

OPERATING PROFIT PER
OPERATING PROFIT/
BRANCH
PER BRANCH
NET PROFIT/ PER
NET PROFIT PER BRANCH
BRANCH
PERSONNEL EXPENSES PER
PERSONNEL EXPENSES/
BRANCH
PER BRANCH
ADMINISTRATIVE
ADMINISTRATIVE EXPENSES
EXPENSES/ PER
PER BRANCH
BRANCH
FINANCIAL EXPENSES PER
FINANCIAL EXPENSES/
BRANCH
PER BRANCH
BORROWINGS/ PER
BORROWINGS PER BRANCH
BRANCH
DEPOSITS/ PER BRANCH
DEPOSITS PER BRANCH

PER EMPLOYEE RATIOS(crores)

OPERATING INCOME PER
OPERATING INCOME/ PER
EMPLOYEE
EMPLOYEE
OPERATING PROFIT PER
OPERATING PROFIT/ PER
EMPLOYEE
EMPLOYEE
NET PROFIT PER
NET PROFIT/ PER EMPLOYEE
EMPLOYEE
PERSONNEL EXPENSES
PERSONNEL EXPENSES/ PER
PER EMPLOYEE
EMPLOYEE
DEPOSITS/ PER EMPLOYEE
DEPOSITS PER EMPLOYEE
FUND ADVANCES PER
FUND ADVANCES/ PER
EMPLOYEE
EMPLOYEE

3.03
1.62
1
2.31

6.59
8.38
130.59

5937094.24
1380554.04
736959.83
454745.3
59451944.23
40478420.92

AXIS Bank/SFIMAR

Page 34

Comparison of Per Head ratios

AXIS
BANK

ICICI
BANK

Particulars

HDFC
BANK

YES
BANK

UNION

BOB

PER BRANCH RATIOS(crores)

OPERATING PROFIT PER
BRANCH
NET PROFIT PER
BRANCH

4.52

3.03

2.38

0.70

0.72

3.24

1.62

2.09

1.71

0.58

0.50

1.65

1.71

1.73

0.35

0.62

PERSONNEL EXPENSES
PER BRANCH
ADMINISTRATIVE
EXPENSES PER BRANCH
FINANCIAL EXPENSES
PER BRANCH

5.11

2.31

2.95

1.14

0.50

0.45

18.61

6.59

6.42

8.33

2.65

2.73

BORROWINGS PER
BRANCH
DEPOSITS PER BRANCH

52.02
153.87

8.38
130.59

5.89
132.42

8.43
113.45

1.99
43.35

1.35
52.44

AXIS
BANK

HDFC
BANK

YES
BANK

UNION

BOB

Particulars

ICICI
BANK

PER BRANCH RATIOS

OPERATING PROFIT PER
BRANCH
NET PROFIT PER BRANCH
PERSONNEL EXPENSES
PER BRANCH
ADMINISTRATIVE
EXPENSES PER BRANCH
FINANCIAL EXPENSES PER
BRANCH
BORROWINGS PER
BRANCH
DEPOSITS PER BRANCH
TOTAL
OVERALL RANK

2
1

3
4

1
2

4
3

6
5

5
6

6
1
26
5

4
3
25
4

3
2
21
1

5
4
30
6

2
6
23
3

1
5
22
2

AXIS Bank/SFIMAR

Page 35

Particulars

AXIS
BANK

ICICI
BANK

HDFC
BANK

YES
BANK

UNION

BOB

PER EMPLOYEE RATIOS(Rs)

(Rs. in Units)
OPERATING
INCOME PER
EMPLOYEE
OPERATING
PROFIT PER
EMPLOYEE
NET PROFIT PER
EMPLOYEE
PERSONNEL
EXPENSES PER
EMPLOYEE
DEPOSITS PER
EMPLOYEE
FUND
ADVANCES PER
EMPLOYEE

4887702

5,937,094.

3,265,252

5,050,270

3,935,766

3,448,461

1,574,306

1,380,554.

1,005,320

885,826

655,565

549,772

930715

736,959

420,097

635,029

539,351

376,819

352875

454,745.

343,944

642,582

328,778

473,602

244371068

59,451,944

26,632,995

42,137,012

40,377,359

39,918,638

15963620

40,478,420

16,763,637

29,937,366

28,904,554

28,015,891

AXIS
BANK

HDFC
BANK

ICICI
BANK

Particulars

YES
BANK

UNIO
N

BO
B

PER EMPLOYEE RATIOS

OPERATING INCOME PER
EMPLOYEE
OPERATING PROFIT PER
EMPLOYEE
NET PROFIT PER EMPLOYEE
PERSONNEL EXPENSES PER
EMPLOYEE
DEPOSITS PER EMPLOYEE
FUND ADVANCES PER
EMPLOYEE
TOTAL
OVERALL RANK

1
1

2
2

3
5

4
3

6
4

5
6

3
6

4
1

2
5

1
2

6
3

5
4

5
19
3

1
11
1

6
27
5

2
14
2

3
26
4

4
29
6

AXIS Bank/SFIMAR

Page 36

OBSERVATION:
Operating profit per employee of Axis Bank is 2nd highest in the sample frame with 13
lacs. However the Operating profit per branch is 3.03 crores with 3rd place in the sample
frame indicate that there is understaffing in Axis Bank which should be eradicated at the
earliest.

Axis Bank has the highest business per employee but its profit per employee slips to
second place. This is due to high personnel, administrative and financial expenses. This
can supported with the fact that all the three above said per head expense ratio are
performing below average. Also the tax ratio of the Axis Bank is one of the highest in the
sample frame which reduces the profit per employee and adds to the cause.

AXIS Bank/SFIMAR

Page 37

AXIS Bank/SFIMAR

Page 38

AXIS Bank/SFIMAR

Page 39

Findings and observations

Capital adequacy
Capital adequacy ratio of Axis bank ranks second in the given sample frame following
ICICI bank
Advances to Total assets ratio ranks fifth in the given sample frame. This indicates that
Axis bank income earned from advance is lower compared to other banks
G-sec to Total Investments of axis bank is lowest in the given sample banks.
Asset Quality
Net NPA to Total assets ratio is poor among the sample frame.
G-sec to total assets ratio is comparatively better than the other banks, but Total G-sec to
total Investment ratio is lower at ranking. From the aforesaid sentence it is evident that
Axis Bank has done risk free investment from money received from Deposits and
borrowing
Percentage change in Net NPA is better than the other banks.
Management Efficiency
Total Advances to Total Deposits is lower than most of the banks in the sample frame.
Profit Per Employee and Business Per Employee is highest among the six banks
The management efficiency of the Axis bank is the best among the six banks.
Earning quality
Percentage growth in profit is comparatively low than the other banks.
Net interest margin is second from the given banks.
Interest income ratio is not performing.

AXIS Bank/SFIMAR

Page 40

Liquidity
G-sec to total investment ratio is better than other banks which makes the Axis bank less
riskier than the other bank.
The liquidity position of the bank is in better position.

AXIS Bank/SFIMAR

Page 41

Recommendations
Capital Adequacy
In order to increase capital adequacy ratio , Axis bank should reduce its risk
weighted assets and increase its profits by taking less risk or increase its capital
base as Axis bank is highly geared bank
Asset quality
Asset quality of the axis bank can be improved by reducing Non Performing Assets.
Following measures can be taken to reduce NPAs

Checking historical records.

Credit stability of the person.

Collecting all the documents and verifying them.

Checking the credit standing and giving the credit rating to the loan. Then
accordingly charge him interest rate.

Tracking the account from regular EMIs.

Strict following of all the laid down procedure which is related before
giving loan, while giving loan and after giving loan

New loan Portfolio should be started

Management efficiency
profit per employee and business per employee should be increased
Provide employees with secure, consistent access to information.
Improvement in employee retention and satisfaction.
Increase in employee selection standards.

Earning quality
Increase in net profit
AXIS Bank/SFIMAR

Page 42

 The poor ratios from Key Performance Indicators i.e. yield on assets, asset utilization,
and return on assets and interest income to working funds c.a.m.e.l model elucidates that
income funds advances must be in higher proportion to its total assets.
This can only be achieved by profitable loan portfolios which should be
implemented at the earliest. This will ensure long term earning stability to the bank.
In order to improve the earning quality of Axis Bank , it should concentrate more on non interest
income as there is less risk involved in it as compared to interest income. Interest rate income is
subject to interest volatility due change in interest rate, whereas noninterest income is fixed in
nature.

Liquidity
Availability of asset readily convertible to cash without undue loss.

AXIS Bank/SFIMAR

Page 43

Limitation

The results of the project is subject to limited data available due to security reasons

The data analyzed is on the assumption of authenticity of the data

The analysis and recommendations are completely on the basis of camel and Per Head
ratios and without taking into consideration any other factors therefore remedy provided
may not be 100% effective.

In case of Yes Bank, some ratios are at extreme end. This is because of its small size.

AXIS Bank/SFIMAR

Page 44

Conclusion
The completion of the project i.e. Performance and Profitability Analysis of Axis Bank was a
learning process as it focused on camel ratios, key performance indicators and Per Head ratios.
As a student of management graduate it gave a me a good hold on ratios analysis and knowing
the banking environment in India.
The growth of Axis bank in the booming banking industries lies on its
management efficiency and reputation in the market which should be retained and improved.
Nevertheless, some of liquidity position should be strengthened which will enable the bank to
stand up in short term liquidity crisis
The aggressiveness of Axis bank in casa i.e. current and saving account will
also play a pivotal role in the growth of the bank. The opportunity of witnessing the Axis Banks
working culture and environment during the period of 8 week provided an immense dedication
and devotion in pursuing and completing of the project.

AXIS Bank/SFIMAR

Page 45

Bibliography:

Management of banking and financial services. Justin Paul and Padmalatha Suresh.

Analysis of balance sheet. N.S. Toor.

CFA journal Indian Banking

o Oct. 2005-06 and 2006-07.

The Accounting World journal

o Audit practice in banking sector

RBI bulletin 2007-08

Professional Banker ICFAI

Economic times.

Annual Reports 2007-08

o All the banks (ICICI, AXIS, HDFC,YES, BOB,UNION)

Internet

o http://www.dbmarketing.com/articles/Art195.htm
o http://web.mit.edu/~bilalw/www/cases/accounting.pdf
o http://www.iimk.ac.in/GCabstract/Roji%20George.pdf
o www.mastermarts.com
o www.moneycontrol.com
o www.rediffmoney.com

AXIS Bank/SFIMAR

Page 46