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ABSTRACT
Banking Sector plays an important role in economic development of a country. The banking
system of India is featured by a large network of bank branches, serving many kinds of financial
services of the people. The State Bank of India, popularly known as SBI is one of the leading
bank of public sector in India. SBI has 14 Local Head Offices and 57 Zonal Offices located at
important cities throughout the country. ICICI Bank is second largest and leading bank of private
sector in India. The Bank has 2,533 branches and 6,800 ATMs in India. The purpose of the study
is to examine the financial performance of SBI and ICICI Bank, public sector and private sector
respectively. The research is descriptive and analytical in nature. The data used for the study was
entirely secondary in nature. The present study is conducted to compare the financial
performance of SBI and ICICI Bank on the basis of ratios such as credit deposit, net profit
margin etc. The period of study taken is from the year 2007-08 to 2011-12. The study found that
SBI is performing well and financially sound than ICICI Bank but in context of deposits and
expenditure ICICI bank has better managing efficiency than SBI.
KEYWORDS: Credit Deposit Ratio, ICICI, Net Profit Margin, Net worth Ratio, Advances, SBI.
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INTRODUCTION
An efficient banking system is recognized as basic requirement for the economic development of
any economy. Banks mobilize the savings of community into productive channels. The banking
system of India is featured by a large network of bank branches, serving many kinds of financial
needs of the people.
The State Bank of India, popularly known as SBI is one of the leading banks in India. The State
Bank Group, with over 16,000 branches provides a wide range of banking products through its
vast network of branches in India and overseas, including products aimed at Non-Resident
Indians (NRIs). The headquarter of SBI is at Mumbai. SBI has 14 Local Head Offices and 57
Zonal Offices that are located at important cities throughout the country. It also has around 130 branches out of the country. It has a market share among Indian commercial banks of about 20%
in deposits and loans.
The roots of the State Bank of India rest in the first decade of 19th century, when the Bank of
Calcutta later on renamed the Bank of Bengal, was established on 2 June 1806. The Bank of
Bengal was one of three Presidency banks, the other two being the Bank of Bombay
(incorporated on 15 April 1840) and the Bank of Madras (incorporated on 1 July 1843). With the
result of the royal charters all three Presidency banks were incorporated as joint stock companies
and received the exclusive right to issue paper currency in 1861 with the Paper Currency Act.
They retained this right till the formation of the Reserve Bank of India. The Presidency banks
amalgamated on 27 January 1921, and renamed Imperial Bank of India. The Imperial Bank of
India remained a joint stock company.
The State Bank of India was constituted on 1st July 1955, pursuant to the State Bank of India
Act, 1955 (the "SBI Act") for the purpose of creating a state-partnered and state-sponsored bank
integrating the former Imperial Bank of India. In 1959, the State Bank of India (Subsidiary
Banks) Act was passed, enabling the Bank to take over eight former state associated banks as its
subsidiaries.
The State Bank of India's is largest bank, with approximately 9,000 branches in India and 54
international offices. Its Associate Banks have a domestic network of around 4,600 branches,
with strong regional ties. The Bank also has subsidiaries and joint ventures outside India,
including Europe, the United States, Canada, Mauritius, Nigeria, Nepal, and Bhutan. The Bank
has the largest retail banking customer base in India.
SUBSIDIARIES OF SBI
State Bank of Bikaner & Jaipur
ICICI BANK-PROFILE
ICICI Bank is second largest and leading bank of private sector in India. It‟s headquarter is in
Mumbai, India. According to Forbes State Bank of India is the 29th most reputed company in the
world. The Bank has 2,533 branches and 6,800 ATMs in India. In 1998 ICICI Bank launched
internet banking operations. The Bank offers a wide range of banking products and financial
services to the corporate and retail customers. It also provides services in the areas of venture
capital investment banking, asset management and life and non-life insurance. ICICI Bank's
equity shares are listed in India on Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) and its American Depositary Receipts (ADRs) are also listed on the New York
Stock Exchange (NYSE).
ICICI Bank limited is major banking and financial services organization in India. The bank is the
second largest bank in India and the largest private sector bank in India by market capitalization.
They are publicly held banking company engaged in providing a wide range of banking and
financial services including commercial banking and treasury operations. The bank and their
subsidiaries offers a wide range of banking and financial services including commercial banking,
retail banking, project and corporate finance, working capital finance, insurance, venture capital
and private equity, investment banking, broking and treasury products and services. They offer
through a variety of delivery channels and through their specialized subsidiaries in the area of
investment banking, life and non-life insurance, venture capital and assets management. The
bank has a network of 2035 branches and about 5518 ATMs in India and presence in 18
countries. They have subsidiaries in the United Kingdom, Russia and Canada, branches in United
States, Singapore, Bahrain, Hong-Kong, Srilanka, Qatar and Dubai International finance centre
and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand,
Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium and Germany.
The bank equity shares are listed in India on Bombay Stock Exchange and National stock
exchange of India Limited and their American Depository Receipts (ADRs) are listed on NYSE.
The bank is first Indian banks listed NYSE.
OBJECTIVE OF THE STUDY
•To study the financial performance of SBI and ICICI Bank.
•To compare the financial performance of SBI and ICICI Bank.
RESEARCH METHODOLOGY
In the present study, an attempt has been made to measure, evaluate and compare the financial
performance of SBI and ICICI Bank which one related to the public sector and private sector
respectively. The study is based on secondary data that has been collected from annual reports of
the respective banks, magazines, journals, documents and other published information. The study
covers the period of 5 years i.e. from year 2007-08 to year 2011-12. Ratio Analysis was applied
to analyze and compare the trends in banking business and financial performance. Mean and
Compound Growth Rate (CGR) have also been deployed to analyze the trends in banking
business profitability.
LIMITATION OF THE STUDY
Due to constraints of time and resources, the study is likely to suffer from certain limitations.
Some of these are mentioned here under so that the findings of the study may be understood in a
proper perspective.
The limitations of the study are:
•The study is based on the secondary data and the limitation of using secondary data may
affect the results.
•The secondary data was taken from the annual reports of the SBI and ICICI Bank. It may
be possible that the data shown in the annual reports may be window dressed which does
not show the actual position of the banks.
Financial analysis is mainly done to compare the growth, profitability and financial soundness of
the respective banks by diagnosing the information contained in the financial statements.
Financial analysis is done to identify the financial strengths and weaknesses of the two banks by
properly establishing relationship between the items of Balance Sheet and Profit & Loss
Account. It helps in better understanding of banks financial position, growth and performance by
analyzing the financial statements with various tools and evaluating the relationship between
various elements of financial statements.
FOR THIS PURPOSE THE FOLLOWING PARAMETERS HAVE BEEN STUDIED
1. Credit Deposit Ratio
2. Interest Expenses to Total Expenses
3. Interest Income to Total Income
4. Other Income to Total Income
5. Net Profit Margin
6. Net worth Ratio
7. Percentage Change in Net Profits
8. Percentage Change in Total Income
9. Percentage Change in Total Expenditure
10. Percentage Change in Deposits
11. Percentage Change in Advances
CREDIT DEPOSIT RATIO:-
Credit-Deposit Ratio is the proportion of loan-assets created by a bank from the deposits
received. Credits are the loans and advances granted by the bank. In other words it is the amount
lent by the bank to a person or an organization which is recovered later on. Interest is charged
from the borrower. Deposit is the amount accepted by bank from the savers and interest is paid to
them.
FINDINGS AND CONCLUSIONS:-
The study found that the mean of Credit Deposit Ratio in ICICI was higher (89.302 %) than in
SBI (76.184%). This shows that ICICI Bank has created more loan assets from its deposits as
compared to SBI. The share of interest expenses in total expenses higher in ICICI (63.36 %) as
compare to SBI (59.99 %) and the proportion of interest income to total income was higher in
case of SBI(84.49 % ) as compared to ICICI (78.84%), which shows that people prefer ICICI to
invest their savings and SBI to take loans & advances. The ratio of other income to total income was relatively higher in ICICI (21.44 %) as compared to SBI (15.22 %). The Net Profit Margin
of ICICI is higher (14.37 %) whereas in SBI it was (10.99 %), which shows that ICICI has
shown comparatively better operational efficiency than SBI. The growth rate of net profit is
73.97% in SBI which is higher than ICICI which is 55.49%. This shows that SBI performed well
as compared to ICICI. The mean value of total income was higher in SBI (87,598.58) as
compared to that in ICICI (37,282.114). Net worth ratio was also higher in SBI (14.11 %) than
ICICI (8.87 %), which revealed that SBI has utilized its resources more efficiently as compared
to ICICI.
The mean value of total expenditure was higher in SBI (Rs. 78,784.06 crores) as compared to
that in ICICI (Rs.32,570.61) and the combined growth rate of expenditure was negative (-1.47%)
in the case of ICICI whereas in SBI it is 111.52%. Deposits in SBI were continuously increased.
However deposits in ICICI were decreased (with a declining trend) till 2009-10 but these were
increased in the subsequent years. In case of SBI Advances were continuously increased (with a
decreasing trend) with the combined growth rate of (108.16 %), However Advances in ICICI
were decreased (with a declining trend) till 2009-10 but these were increased thereafter with
combined growth rate of (12.45 %). It shows that ICICI has suffered with funds or avoid
providing advances through 2007-08 to 2009-10. Hence, on the basis of the above study or
analysis banking customer has more trust on the public sector banks as compared to private
sector banks.