Financial Management

Analysis of Banking Industry

Submitted to Prof Manoj Anand 3/23/2011

Submit By Group-8, Section-B

PGP26076 Ankur Dutt PGP26086 - Gagandeep Singh Nanda PGP26106 - Paresh Jha PGP26119 - Shiv Kumar Seth PGP26120 - Shravan Kumar Mukhopadhyay

Contents
Overview of the Indian Banking Sector................................................................................................... 2 AXIS BANK ......................................................................................................................................... 3 HDFC BANK ....................................................................................................................................... 3 ICICI BANK ........................................................................................................................................ 3 PUNJAB NATIONAL BANK .............................................................................................................. 4 STATE BANK OF INDIA .................................................................................................................... 4 Risk Profile & Estimation of WACC ......................................................................................................... 5 ESTIMATION OF E ......................................................................................................................... 5 ESTIMATION OF COST O F EQUITY ............................................................................................... 6 ESTIMATION OF COST O F DEBT ................................................................................................... 6 ESTIMATION OF WACC ................................................................................................................... 7 ESTIMATION OF THE RISK PROFILES ........................................................................................... 7 Capital structure Analysis...................................................................................................................... 11 AXIS BANK ....................................................................................................................................... 12 HDFC BANK ..................................................................................................................................... 13 ICICI BANK ...................................................................................................................................... 14 PUNJAB NATIONAL BANK ............................................................................................................ 15 STATE BANK OF INDIA .................................................................................................................. 16 Dividend Policy ...................................................................................................................................... 17 References ............................................................................................................................................ 22

OVERVIEW OF THE INDIAN BANKING SECT OR

The banking system remains, as always, the most dominant segment of the financial sector. Indian banks continue to be well-regulated, and under the regulator's watchful eye, have emerged stronger. In the annual international ranking conducted by UK-based Brand Finance Plc, 20 Indian banks have been included in the Brand Finance Global Banking 500. In fact, the State Bank of India (SBI) has become the first Indian bank to be ranked among the Top 50 banks in the world, capturing the 36th rank, as per the Brand Finance study. According to RBI's 'Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks: March 2010', nationalised banks, as a group, accounted for 51.9 per cent of the aggregate deposits, while State Bank of India (SBI) and its associates accounted for 22.5 per cent. The share of other scheduled commercial banks, foreign banks and regional rural banks in aggregate deposits were 17.5 per cent, 5.0 per cent and 3.1 per cent, respectively. With respect to gross bank credit also, nationalised banks hold the highest share of 52.0 per cent in the total bank credit, with SBI and its associates at 23.1 per cent and other scheduled commercial banks at 17.4 per cent. Foreign banks and regional rural banks had a share of 4.9 per cent and 2.5 per cent respectively in the total bank credit. Significantly, on a year-onyear basis, bank credit grew by 16.7 per cent in 2009-10. Amongst the private banks, owing to strong growth in interest income, the countrys thirdlargest private sector lender, Axis Bank, reported a net profit of US$ 166.3 million for the second quarter of this financial year, a 38.28 per cent increase from US$ 120.3 million a year ago. HDFC Bank, Indias second largest private lender reported a 32.7 percent rise in net profits at US$ 204.3 million for the quarter ended September 30, 2010. The Cabinet, on December 1, 2010 approved to provide an additional amount of US$ 1.33 billion, in addition to the US$ 3.32 billion already provided in the Budget 2010-11, to ensure Tier I CRAR (Capital to Risk Weighted Assets) of all Public Sector Banks (PSBs) at 7 per cent and also to raise Government of India holding in all PSBs to 58 per cent. It also approved that the exact amount, mode of capitalization and other terms and conditions would be decided in consultation with the banks at the time of infusion. The proposed capital infusion would enhance the lending capacity of the PSBs to meet the credit requirement of the economy in order to maintain and accelerate the economic growth momentum. For the purpose of this study we have chosen the top 5 banks (in terms of their market capitalization) in India namely State Bank of India, ICICI Bank, HDFC Bank, Axis Bank and Punjab National Bank. In terms of the market capitalization, these five banks together account for more than 62 percent of the total market capitalization of all banks in India.

Moreover, among these five banks, two banks State Bank of India and Punjab National Bank are state owned banks whereas the remaining three are privately owned banks.
AXIS BANK

Axis Bank was the first of the new private banks to have begun operations in 1994, after the Government of India allowed new private banks to be established. The Bank was promoted jointly by the Administrator of the specified undertaking of the Unit Trust of India (UTI - I), Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC) and other four PSU insurance companies, i.e. National Insurance Company Ltd., The New India Assurance Company Ltd., The Oriental Insurance Company Ltd. and United India Insurance Company Ltd. The Bank as on 31st December, 2010 is capitalized to the extent of Rs. 409.90 crores with the public holding (other than promoters and GDRs) at 53.62%. The Bank operates in four segments: treasury, retail banking, corporate/wholesale banking and other banking business.
HDFC BANK

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalisation of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. As on 30th June, 2010 the authorized share capital of the Bank is Rs. 550 crores. The paid-up capital as on said date is Rs. 459.7 crores (45.97 Crore equity shares of Rs. 10/- each). The HDFC Group holds 23.63 % of the Bank's equity and about 17.05 % of the equity is held by the ADS Depository (in respect of the bank's American Depository Shares (ADS) Issue). About 27.45% of the equity is held by Foreign Institutional Investors (FIIs) and the Bank has about 0.44 million shareholders. The shares are listed on the Bombay Stock Exchange Limited and the National Stock Exchange of India Limited. The Bank's American Depository Shares (ADS) are listed on the New York Stock Exchange (NYSE) and the Bank's Global Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange.
ICICI BANK

ICICI Bank is India's second-largest bank with total assets of Rs. 3,634.00 billion (US$ 81 billion) at March 31, 2010 and profit after tax Rs. 40.25 billion (US$ 896 million) for the year ended March 31, 2010. The bank today 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. ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).
PUNJAB NATIONAL BANK

Punjab National Bank is a state-owned commercial bank and is one of the Big Four Banks of India. They offer banking products, and also operate credit card and debit card business, bullion business, life and non-life insurance business, and gold coins and asset management business. The Bank has the largest domestic network of 4997 offices, including 46 extension counters among Nationalized Banks. Punjab National Bank was incorporated in the year 1895 at Lahore and was nationalised in July 1969 along with 13 other banks. In March 2002, the Bank came out with their first Initial public offer (IPO) for 5,30,60,700 equity shares of Rs 10 each which resulted in the reduction of the government's shareholding in the Bank. PNB is ranked as the second largest bank in the country after SBI in terms of branch network, business and many other parameters. During the FY 2009-10, with 40.85% share of CASA deposits; the Bank achieved a net profit of Rs 3905 crores. The bank has a strong capital base with capital adequacy ratio of 14.16% as on Mar10 as per Basel II with Tier I and Tier II capital ratio at 9.15% and 5.01% respectively. Recently, the Bank received permission from RBI for setting up a representative office in Sydney, Australia. Also, they are in the process of entering into Canada. The company is having an aim to increase the customer base to 150 million by the year 2013.

STATE BANK OF INDIA

State Bank of India is the largest state-owned banking and financial services company in India. The Bank provides banking services to the customer. In addition to the banking services, the Bank through their subsidiaries, provides a range of financial services, which include life insurance, merchant banking, mutual funds, credit card, factoring, security trading, pension fund management and primary dealership in the money market. The Bank operates in four business segments, namely Treasury, Corporate/ Wholesale Banking, Retail Banking and Other Banking Business. The Treasury segment includes the investment portfolio and trading in foreign exchange contracts and derivative contracts. The Corporate/ Wholesale Banking segment comprises the lending activities of Corporate Accounts Group, Mid Corporate Accounts Group and Stressed Assets Management Group. The Retail Banking segment consists of branches in National Banking Group, which primarily includes personal

banking activities, including lending activities to corporate customers having banking relations with branches in the National Banking Group. The bank has 131 overseas offices spread over 32 countries. They have branches of the parent in Colombo, Dhaka, Frankfurt, Hong Kong, Johannesburg, London and environs, Los Angeles, Male in the Maldives, Muscat, New York, Osaka, Sydney, and Tokyo. They have offshore banking units in the Bahamas, Bahrain, and Singapore, and representative offices in Bhutan and Cape Town. State Bank of India was incorporated in the year 1955.The Government of India nationalized the Imperial Bank of India in the year 1955, with the Reserve Bank of India taking a 60% stake, and name was changed to State Bank of India. The bank went public in the year 1993 with the issuance of 2 crore equity shares of Rs 100 each.
RISK PROFILE & ESTIMATION OF WACC

We intentionally chose the five banks such that three of them (HDFC, ICICI, Axis Bank) are private sector banks and two of them ( SBI, PNB) being public sector banks.
ESTIMATION OF E

The first step in the project was to get the stock prices for each of the five banks along with the returns of the BSE Sensex for the period 1st Jan 2005 to 1 st Jan 2011. The Returns on the Stock for a particular week were calculated by using the formula: ln P1 / P0. The weekly returns were then regressed for the entire period to find the value of E. This procedure

gave the Beta Equity of each of the banks. The D/E ratio for each of the banks were then found by dividing the five yearly Interest by the loans outstanding in that period which is explained more in details in the Capital Structure analysis. The E for each bank is then unlevered to find the A by
using the formula

A = E / ( 1 + D/E* (1 Tc))
The A are then averaged by weights of the market capitalization of each of the banks

to find the industry A.

Then the E is relevered by using the same above formula this time taking A as the industry beta for each of the banks.

Axis Bank Lever the Asset beta Unlevered Industry Asset beta Current Market Debt to Market Total equity Ratio Corporate Tax Rate Levered Equity beta 0.358

HDFC Bank

ICICI Bank

PNB

SBI

0.358

0.358

0.358

0.358

3.345 33.66% 1.154

2.038 33.66% 0.843

2.790 33.66% 1.022

8.406 33.66% 2.357

6.873 33.66% 1.993

ESTIMATION OF COST OF EQUITY

Once the E has been found for each of the banks, we tried to find the Average market risk premium. We found the average weekly returns on the BSE sensex from 1 st Jan 2005 to 1st Dec 2010 for each of the years. This was then multiplied by 52 to get the average annual returns. This was our rm . Valued at 19.36 % . The risk free return rf was found by finding the yield 10 year GOI bonds as on 17th March 2011 and was found to be 7.99%. The cost of equity for each of the banks is then found by using the CAPM model :

re = rf + (rm rf)*E
Equity Cost of Capital Risk free rate on 10-years Govt Sec. in % Market Risk Premium (%) on equity Levered Equity beta Cost of Equity using CAPM in % Axis Bank 7.99% 11.37% 0.680 15.72% HDFC 7.99% 11.37% 0.787 16.94% ICICI 7.99% 11.37% 0.844 17.59% PNB 7.99% 11.37% 0.582 14.60% SBI 7.99% 11.37% 0.851 17.66%

ESTIMATION OF COST OF DEBT

Since data on the bond yields was not available, the return to lenders r d before taxes was calculated as: Interest Expense / Average outstanding debt for the year. Hence the cost of debt will be Kd = rd*(1-Tc)
Cost of Debt Interest expense Average debt for FY '10 Axis Bank 6633.53 143014.68 HDFC 7786.3 162908.775 ICICI 17592.57 290975.84 PNB 12944.02 241363.515 SBI 47322.48 851457.32

Cost of debt before taxes (rd) in % Cost of debt after taxes (Kd) in %

4.64% 3.0771%

4.78% 3.1708%

6.05% 4.0110%

5.36% 3.5577%

5.56% 3.6871%

ESTIMATION OF WACC

The WACC was calculated by using the formula: RWACC = Kd*D/V + Ke*E/V The calculations are as below:
Banks Axis Bank HDFC ICICI PNB SBI

Debt Market Value of Equity WACC in %

47368.42 158469.77 12.81%

88458.26 180320.13 12.41%

106210.81 296280.17 14.01%

31954.08 268592.17 13.43%

131991.55 907127.83 15.89%

ESTIMATION OF THE RISK PROFILES

BSE Sensex
25000

20000
15000

10000
5000

BSE Sensex

Annual Standard deviation of BSE 27.17%

Axis Bank
1800 1600 1400 1200 1000 800 600 400 200 0

Axis Bank

Annual Standard deviation of Axis Bank 46.96%

Annual Standard deviation of ICICI 50.13%

PNB
1600 1400 1200 1000 800 600 400 200 0

PNB

Annual Standard deviation of PNB 40.53%

Annual Standard deviation of SBI 41.30%

Annual Standard deviation of HDFC

36.78%

CAPITAL STRUCTURE ANALYSIS

Looking at the set of the five companies chosen together, we may conclude that the industry Debtequity ratio is nearly 5.5. We also observed that the state-owned banks have much higher D/E ratio (6.5-8.5) as compared to their privately owned counter-parts who have much lower D/E ratio (in the range of 2-3.5).
Company Name Axis Bank HDFC Bank ICICI Bank PNB SBI Mkt value of Equity (Rs crore) 47,368.42 88,458.26 106210.81 31,954.08 131,991.55 Total Debt (Rs crore) Debt to Mkt Equity

158469.77 180,320.13 296280.17 268592.17 907,127.83

3.35 2.04 2.79 8.41 6.87

This can be explained based on the differences in the share-holding pattern. PSU banks have majority of shareholding lying with the state, which means there market capitalization is not a true indicative of their value. Thus since PSU owned banks have shareholding pattern starkly different from that of the privately owned banks, they seem to be over-leveraged.
Private Banks Ownership Pattern as on 3112-2010 Foreign (Promoter & Group) Indian (Promoter & Group) Total of Promoter Non Promoter (Institution) Non Promoter (NonInstitution) Total Non Promoter Total Promoter & Non Promoter Custodians(Against Depository Receipts) Grand Total
Axis Bank HDFC Bank ICICI Bank

#Shares 0

% Holding 0

#Shares 0

% Holding 0

#Shares 0 0 0

% Holding 0 0 0

153084705 37.3468 108643220 23.3978 153084705 37.3468 108643220 23.3978 171680740 41.8835 186822609 40.2349 48138629 11.744 87735313 18.895

721512292 62.6627 116429141 10.1118 837941433 72.7745 837941433 72.7745

219819369 53.6275 274557922 59.1299 372904074 90.9743 383201142 82.5277 36996446 409900520

9.0257 81128819 17.4722 313480756 27.2255 100 464329961 100 1151422189 100

State-owned Banks Ownership Pattern as on 31-12-2010 Foreign (Promoter & Group) Indian (Promoter & Group) Total of Promoter Non Promoter (Institution) Non Promoter (Non-Institution) Total Non Promoter Total Promoter & Non Promoter Custodians(Against Depository Receipts) Grand Total AXIS BANK #Shares

PNB

SBI

0 182241300 182241300 117015801 16045399 133061200 315302500 0 315302500

% Holding 0 57.7989 57.7989 37.1122 5.0889 42.2011 100

#Shares 0 377207200 377207200 183840990 55739737 239580727 616787927

% Holding 0 59.4029 59.4029 28.9514 8.7779 37.7293 97.1322 2.8678 100

0 18210188 100 634998115

The company has slowly raised equity over the years and has exhausted more than 80% of authorized capital till date. It appears company has taken a strategic stand of expanding in phases and has successfully done it over the years. We see issued capital rising significantly every twothree years on a consistent basis. This indicates how company is effectively utilizing markets valuation to take finances at regular intervals.

Capital Structure - Axis Bank Ltd.

Period From 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1998 1997 To 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1998 Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Instrument Authorized Capital (Rs. cr) 500 500 500 300 300 300 300 300 230 230 230 300 Issued Capital (Rs. cr) 405.2 359 357.7 281.6 278.7 273.8 231.6 230.2 191.8 131.9 131.9 115 Shares (nos) 405174119 359005118 357709669 281630787 278690727 273796444 231580570 230185579 191812870 131903170 131903170 115000070 -PAIDUPFace Value 10 10 10 10 10 10 10 10 10 10 10 10 Capital (Rs. Cr) 405.2 359 357.7 281.6 278.7 273.8 231.6 230.2 191.8 131.9 131.9 115

HDFC BANK

It is observed that HDFC Bank has raised its authorized capital twice, which indicates how rapidly HDFC has grown. There can be several reasons why this is done, may be as a way to indicate all the shareholders that the company is looking to expand quickly. It is also to be noted that there has been a continuous slow increase in the capital amount since 2002, however during the boom periods of 2007 & 2008, when it raised the capital by 11% and 20% respectively as compared to the previous year.

Capital Structure - HDFC Bank Ltd.

Period From 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1995 To 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Instrument Authorized Capital (Rs. cr) 550 550 550 450 450 450 450 450 450 300 300 300 Issued Capital (Rs. cr) 457.7 425.4 354.4 319.4 313.1 309.9 284.8 282 281.4 243.6 243.3 200 Shares (nos) 457743272 425384109 354432920 319389608 313142408 309875308 284791713 282045713 281374613 243596261 243278261 200000000 -PAIDUPFace Value 10 10 10 10 10 10 10 10 10 10 10 10 Capital (Rs. Cr) 457.7 425.4 354.4 319.4 313.1 309.9 284.8 282 281.4 243.6 243.3 200

ICICI BANK

During the period 2003-2004, the company suddenly raised its equity capital by raising the authorized capital more than five-fold. It was a period of rapid growth for ICICI Bank, however we also observe that later on it went on to decrease the authorized capital probably because it observed that the markets are under-valuing it. Since 2007-2008 ICICI has kept the equity capital fixed at around 1100 cr.

Capital Structure - ICICI Bank Ltd.

Period From 2009 2008 2007 2006 2005 2004 2003 2001 2000 1999 1997 1995 To 2010 2009 2008 2007 2006 2005 2004 2002 2001 2000 1999 1997 Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Instrument Authorized Capital (Rs. cr) 1275 1275 1275 1000 1000 1550 1550 300 300 300 300 300 Issued Capital (Rs. cr) 1114.8 1113.3 1112.7 899.3 889.8 616.4 613 220.4 196.8 196.8 165 150 -PAIDUPShares (nos) 1114845314 1113250642 1112687495 899266672 889823901 616391905 613021301 220358680 196818880 196818880 165000700 150000700 Face Value 10 10 10 10 10 10 10 10 10 10 10 10 Capital (Rs. Cr) 1114.8 1113.3 1112.7 899.3 889.8 616.4 613 220.4 196.8 196.8 165 150

PUNJAB NATIONAL BANK

PNB has kept its capital nearly fixed at about 315 cr for last 6 years, indicating that it feels that the market has kept the valuation upto its expectations. Also, since it is a state owned company it is probably difficult for it to raise equity because of the plethora of approvals and other hindrances. However we also observe that in the last year it has doubled its authorized capital, which may be taken as an indicative of the fact that the company wants to raise equity capital to finance its growth.

Capital Structure - Punjab National Bank

Period From 2009 2008 2007 2006 2005 2004 2003 2002 2001 To 2010 2009 2008 2007 2006 2005 2004 2003 2002 Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Instrument Authorized Capital (Rs. cr) 3000 1500 1500 1500 1500 1500 1500 1500 1500 Issued Capital (Rs. cr) 315.3 315.3 315.3 315.3 315.3 315.3 265.3 265.3 265.3 Shares (nos) 315302500 315302500 315302500 315302500 315302500 315302500 265302500 265302500 212241300 -PAIDUPFace Value 10 10 10 10 10 10 10 10 10 Capital (Rs. Cr) 315.3 315.3 315.3 315.3 315.3 315.3 265.3 265.3 212.2

STATE BANK OF INDIA

As observed in the case of Punjab National Bank, State Bank of India also has kept constant capital for long periods, as opposed to its counter-parts from the private sector. It did raise some equity capital during the boom period of 2007-2008, probably because of good valuation by the markets. Since then the capital has more or less been constant.

Capital Structure - State Bank of India

Period From 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1996 1995 1994 1993 1991 To 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 2000 1996 1995 1994 1993 Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Instrument Authorized Capital (Rs. cr) 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 Issued Capital (Rs. cr) 635 635 631.6 526.3 526.3 526.3 526.3 526.3 526.3 526.3 526.3 526.3 474 474 473.8 200 Shares (nos) 634882644 634880222 631470376 526298878 526298878 526298878 526298878 526298878 526298878 526298878 526298878 526298878 474009872 474009189 473828726 20000000 -PAIDUPFace Value 10 10 10 10 10 10 10 10 10 10 10 10 10 10 10 100 Capital (Rs. Cr) 634.9 634.9 631.5 526.3 526.3 526.3 526.3 526.3 526.3 526.3 526.3 526.3 474 474 473.8 200

DIVIDEND POLICY

State Bank of India

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Dividend(Rs Cr) 263.15 263.15 315.78 447.36 578.93 657.87 736.82 736.82 1357.66 1841.15 1904.65 Dividend (%) 50 50 60 85 110 125 140 140 215 290 300 Div Yield (%) 2.64 2.65 2.89 3.34 1.92 2.02 1.53 1.49 1.34 2.72 1.44

350 300 Dividend % 250 200 150 100 50 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Dividend(%) Div Yield(%)

4 3.5 2.5 2 1.5 1 0.5 0 Dividend Yield % 3

The State bank of India has over the past decade paid out dividends to its shareholders ranging from Rs 263 crores in 2000 to about Rs 1900 Crores in 2010. Its dividends have grown from 50 percent in 2000 to 300 percent in 2010. In 2010, the company paid out approximately Rs 1900 Crores in Dividends to its share holders. Between 2004 and 2007, the growth in dividends was slow. The company paid out 110 percent dividends in 2004 and increased them to 140 percent in 2006 and then maintained the dividends at 140 percent again in 2007. However, after 2007, the company has been aggressive in its dividend payout and increased dividends to 215 percent in 2008 and to 200 percent last year. The dividend yield though has remained almost constant moving between 1.5 to 2.5 percent over the past decade.

Axis Bank Ltd

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Dividend(Rs Cr) 15.83 19.79 28.72 47.71 57.9 76.66 97.54 126.73 214.63 359.01 486.22 Dividend (%) 12 15 20 22 25 28 35 45 60 100 120 Div Yield (%) 3.03 6.11 5.01 5.48 1.7 1.16 0.98 0.92 0.77 2.41 1.03

140 120 100 Dividend % 80 60

7 6

4 3

40
20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Dividend(%) Div Yield(%)

2
1 0

Axis bank has been regularly paying dividends to its shareholders over the past decade and has maintained a healthy dividend payout ratio. Its dividends have grown from 12 percent in 2000 to 120 percent in 2010. In 2010, the company paid out approximately Rs 490 Crores in Dividends to its share holders. The dividend yield though dropped from 5.48 percent in 2003 to about 1.03 percent in 2010. Between 2007 and 2010, the dividend per share has almost tripled from Rs 45 per share in 2007 to Rs 120 per share in 2010.

Dividend Yield %

HDFC Bank Ltd

Year End 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Dividend(Rs Cr) 32.39 48.72 70.34 85.05 100.05 140.07 172.23 223.57 301.27 425.38 549.29 Dividend (%) 16 20 25 30 35 45 55 70 85 100 120 Div Yield (%) 0.63 0.87 1.06 1.28 0.93 0.83 0.71 0.74 0.64 1.03 0.62

140 120 100

1.4 1.2 Dividend Yield % 1 0.8 0.6 0.4 0.2 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Dividend(%) Div Yield(%)

Dividend %

80 60 40 20 0

HDFC bank has over the past decade paid out dividends to its shareholders ranging from Rs 32.4 crores in 2000 to about Rs 550 Crores in 2010. Its dividends have grown from 16 percent in 2000 to 120 percent in 2010. In 2010, the company paid out approximately Rs 550 Crores in Dividends to its share holders. The growth in dividends was somewhat slow between 2000 and 2004. The company paid out 16 percent dividends in 2000 and increased them to 35 percent in 2005. However, after 2004, the company has been aggressive in its dividend payout and increased dividends from 45 percent in 2005 to approximately 120 percent in 2010. The dividend yield of HDFC stock though has remained almost constant at less than one over the past decade only moving above one in 2003 and then again in 2009.

ICICI Bank Ltd

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Dividend(Rs Cr) 24.75 44.07 44.07 459.78 544.06 632.96 759.33 901.17 1223.96 1224.58 1337.86 Dividend (%) 15 20 20 75 75 85 85 100 110 110 120 Div Yield (%) 0.58 1.21 1.61 5.6 2.53 2.16 1.44 1.17 1.43 3.31 1.26

140 120 100 Dividend % 80 60 40 20 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Dividend(%) Div Yield(%)

6 5 4 3 2 1 0 Dividend Yield %

Like its peers ICICI bank has over the past decade paid out dividends to its shareholders ranging from Rs 24 crores in 2000 to about over Rs 1300 Crores in 2010. Its dividends have grown from 15 percent in 2000 to 120 percent in 2010. In 2010, the company paid out approximately Rs 1340 Crores in Dividends to its share holders. The growth in dividends was somewhat slow between 2000 and 2003. But in 2004m the company increased its dividends substantially from 20 percent per share to about 75 percent per share. Ever since 2003, the growth of dividends has been somewhat slow and dividends have increased to 120 percent per share in 2010. The dividend yield of ICICI stock though shot up to almost 6 percent in 2003 but ever since then , it has remained consistent between 1.5-2.5 percent with the exception being 2009 when it again shot up to approximately 3.3 percent.

Punjab National Bank

End 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Dividend 50 53.07 63.67 92.86 106.12 174.18 189.18 315.3 409.89 630.61 693.66 Dividend(%) 24 25 30 35 40 60 90 100 130 200 220 Div Yield(%) 0 0 0 3.44 1.2 1.53 1.91 2.12 2.56 4.87 2.17

250 200 Dividend % 150 100 50 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Dividend(%) Div Yield(%)

6 5 4 3 2 1 0 Dividend Yield %

Much like its peer state owned SBI, Punjab National bank has over the past decade paid out increasing dividends to its shareholders ranging from Rs 50 crores in 2000 to about Rs 700 Crores in 2010. Its dividends have grown from 24 percent in 2000 to 220 percent in 2010. In 2010, the company paid out approximately Rs 700 Crores in Dividends to its share holders. The growth in dividends was somewhat slow between 2000 and 2005. During this period the companys dividends increased from 24 percent in 2000 to 60 percent in 2005. However after 2005, the growth in its dividends per share has been stupendous. The company increased its dividends to 90 percent in 2006 and finally to 220 percent last year in 2010. The dividend yield of ICICI stock though shot up to almost 3.5 percent in 2003 but ever since then , it has remained consistent between 1.5-2.5 percent with the exception being 2009 when it again shot up to approximately 5 percent.

REFERENCES

i. ii. iii. iv. v.

Prowess Capitaline - http://www.capitaline.com BSE India - http://www.bseindia.com Moneycontrol - http://www.moneycontrol.com Economic Times - http://www.economictimes.indiatimes.com