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INTRODUCTION
1.1 About the project
Financial ratios are widely used for modelling purposes both by practitioners and researchers. The firm involves many interested parties, like the owners, management, personnel, customers, suppliers, competitors, regulatory agencies, and academics, each having their views in applying financial statement analysis in their evaluations. Practitioners use financial ratios, for instance, to forecast the future success of companies, while the researchers' main interest has been to develop models exploiting these ratios. Many distinct areas of research involving financial ratios can be discerned. Historically one can observe several major themes in the financial analysis literature. There is overlapping in the observable themes, and they do not necessarily coincide with what theoretically might be the best founded areas.
Financial Management is the specific area of finance dealing with the financial decision corporations make, and the tools and analysis used to make the decisions. The discipline as a whole may be divided between long-term and short-term decisions and techniques. Both share the same goal of enhancing firm value by ensuring that return on capital exceeds cost of capital, without taking excessive financial risks.
Before understanding the meaning of analysis of financial statements, it is necessary to understand the meaning of ‘analysis’ and ‘financial statements‘.
Analysis means establishing a meaningful relationship between various items of the two financial statements with each other in such a way that a conclusion is drawn. By financial statements, we mean two statements- (1) profit & loss a/c (2) balance sheet. These are prepared at the end of a given period of time. They are indicators of profitability and financial soundness of the business concern.
Thus, analysis of financial statements means establishing meaningful relationship between various items of the two financial statements, i.e., income statement and position statement
After preparation of the financial statements, one may be interested in knowing the position of an enterprise from different points of view. This can be done by analyzing the financial statement with the help of different tools of analysis such as ratio analysis, funds flow analysis, cash flow analysis, comparative statement analysis, etc. Here I have done financial analysis by ratios. In this process, a meaningful relationship is established between two or more accounting figures for comparison.
Parties Interested In Analysis of Financial Statements
Analysis of financial statement has become very significant due to widespread interest of various parties in the financial result of a business unit. The various persons interested in the analysis of financial statements are:-
1. Short- term creditors
They are interested in knowing whether the amounts owing to them will be paid as and when fall due for payment or not.
2. Long –term creditors
They are interested in knowing whether the principal amount and interest thereon will be paid on time or not.
3. Shareholders
They are interested in profitability, return and capital appreciation.
4. Management
The management is interested in the financial position and performance of the enterprise as a whole and of its various divisions.
5. Trade unions
They are interested in financial statements for negotiating the wages or salaries or bonus agreement with management.
6. Taxation authorities
These authorities are interested in financial statements for determining the tax liability.
7. Researchers
They are interested in the financial statements in undertaking research in business affairs and practices.
8. Employees
They are interested as it enables them to justify their demands for bonus and increase in remuneration.
You have seen that different parties are interested in the results reported in the financial statements. These results are reported by analyzing financial statements through the use of ratio analysis.
BANKING IN INDIA
Without a sound and effective banking system in india it can not have a healthy economy. The banking system of india should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factor.for the past three decades banking system has several outstanding achievements to its credit. The most strinking is its extensive reach. It is no longer confided to only metropolitans or cosmopolitants in india. Indian banking system has reached even to the remote corners of the country. This is one of the main reason of india’s growth process
HISTORY
The first bank in india, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated in to three distinct phases. They are as mentioned below:
PHASE 1- Early phase from 1786 to 1969 of Indian Banks
PHASE II – Nationalization of Indian Banks and up to 1991
PHASE III – Indian Financial & Banking sector Reforms after 1991
PHASE-I :
The General Bank of India was set up in the year 1789. Next came Bank of Hindustan and Bengal Bank.
The east India bank Established
Bank of Bengal (1809)
Bank of Bombay (1840)
Bank of Madras (1843)
As independent units and called it presidency Bank
These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private share holders bank, mostly Europeans shareholders. During the first phase the growth was very slow and bank also Experienced periodic failure between 1913 and 1948. There were approximately 1100 banks, Mostly small. To streamline.
1.2 Scope of the Study
1. The study has great significance and provides benefits to various parties whom directly or indirectly interact with the bank.
2. It is beneficial to management of the bank by providing crystal clear picture regarding important aspects like liquidity, leverage, activity and profitability.
3. The study is also beneficial to employees and offers motivation by showing how actively they are contributing for bank’s growth.
4. The investors who are interested in investing in the bank’s shares will also get benefited by going through the study and can easily take a decision whether to invest or not to invest in the bank’s shares.
5. To know whether the bank is growing or incurring losses or it is stagnant in its performance.
2. REVIEW OF LITERATURE
A Review of the Theoretical and Empirical Basis of Financial Ratio Analysis Financial ratios are widely used for modeling purposes both by practitioners and researchers. The firm involves many interested parties, like the owners, management, personnel, customers, suppliers, competitors, regulatory agencies, and academics, each having their views in applying financial statement analysis in their evaluations. Practitioners use financial ratios, for instance, to forecast the future success of companies, while the researchers' main interest has been to develop models exploiting these ratios. Many distinct areas of research involving financial ratios can be discerned. Historically one can observe several major themes in the financial analysis literature. There is overlapping in the observable themes, and they do not necessarily coincide with what theoretically might be the best founded areas, ex post.
The existing themes include
The functional form of the financial ratios, i.e. the proportionality discussion,
Distributional characteristics of financial ratios,
Classification of financial ratios,
Comparability of ratios across industries, and industry effects,
Distributional characteristics of financial ratios,
Classification of financial ratios,
Comparability of ratios across banking industries, and banking industry effects,
Time-series properties of individual financial ratios,
Bankruptcy prediction models,
Explaining (other) firm characteristics with financial ratios,
Stock markets and financial ratios,
Forecasting ability of financial analysts vs. financial models,
Estimation of internal rate of return from financial statements
The history of financial statement analysis dates far back to the end of the previous century. However, the modern, quantitative analysis has developed into its various segments during the last two decades with the advent of the electronic data processing techniques. The empiricist emphasis in the research has given rise to several, often only loosely related research trends in quantitative financial statement analysis. Theoretical approaches have also been developed, but not always in close interaction with the empirical research.
3.1 INDUSTRY PROFILE
Axis Bank Limited provides a suite of corporate and retail banking products. The Bank operates through four segments: Treasury, Retail Banking, Corporate/Wholesale Banking and Other Banking Business. Its Treasury operations include investments in sovereign and corporate debt, equity and mutual funds, trading operations, derivative trading and foreign exchange operations on the proprietary account and for customers. Its Retail Banking constitutes lending to individuals/small businesses and activities include liability products, card services, Internet banking, mobile banking and financial advisory services among others. Its Corporate/Wholesale Banking includes corporate relationships not included under Retail Banking, corporate advisory services, placements and syndication, project appraisals, capital market related services and cash management services. Its Other Banking Business includes Para banking activities, such as third-party product distribution and other banking transactions.
Axis Bank is the third largest private sector bank in India. The Bank offers the entire spectrum of financial services to customer segments covering Large and Mid-Corporate, MSME, Agriculture and Retail Businesses.
The Bank has a large footprint of 2589 domestic branches (including extension counters) and 12,355 ATMs spread across the country as on 31st March 2015. The overseas operations of the Bank are spread over nine international offices with branches at Singapore, Hong Kong, Dubai (at the DIFC), Colombo and Shanghai; representative offices at Dhaka, Dubai, Abu Dhabi and an overseas subsidiary at London, UK. The international offices focus on corporate lending, trade finance, syndication, and investment banking and liability businesses.
Axis Bank is one of the first new generation private sector banks to have begun operations in 1994. The Bank was promoted in 1993, jointly by Specified Undertaking of Unit Trust of India (SUUTI) (then known as Unit Trust of India), Life Insurance Corporation of India (LIC), General Insurance Corporation of India (GIC), National Insurance Bank Ltd., The New India Assurance Bank Ltd., The Oriental Insurance Bank Ltd. and United India Insurance Bank Ltd. The share holding of Unit Trust of India was subsequently transferred to SUUTI, an entity established in 2003.
With a balance sheet size of Rs. 4, 61,932crores as on 31st March 2015, Axis Bank has achieved consistent growth and stable asset quality with a 5 year CAGR (2010-11 to 2014-15) of 21% in Total Assets, 18% in Total Deposits, 22% in Total Advances and 24% in Net Profit.
Overview
Retail banking
The Bank aims to increase its share in the financial services sector by continuing to build a strong retail franchise. The segment continues to be one of the key drivers of the Bank’s growth strategy, encompassing a wide range of products delivered through multiple channels to customers. The Bank offers a complete suite of products across deposits, loans, investment solutions, payments and cards and is committed to developing long-term relationships with its customers by providing high-quality services.
The Bank pursues an effective customer segmentation strategy, the success of which is reflected in the fact that Savings Bank deposits grew at a Compounded Annual Growth Rate (CAGR) of 26.13% over the last five years. During the year, Savings Bank deposits grew 23.44% to Rs. 63,778 cores from Rs. 51,668 cores last year. On a daily average basis, Savings Bank deposits grew 20.26% to Rs. 52,243 crores. The Bank has also maintained its approach in increasing the proportion of Retail Term Deposits. On the 31st March 2013, retail term deposits grew 24.37% year-on-year to Rs. 59,531 crores, constituting 42.37% of total term deposits, compared to 37.20% last year. Likewise, the Bank continued to focus on increasing its share of retail loans in total advances. The retail loans of the Bank grew 43.62% to Rs. 53,960 crores as on 31st March 2013 from Rs. 37,570 crores last year. Retail loans constituted 27.40% of the Bank’s total advances as on 31st March 2013, compared to 22.13% last year of which secured loans accounted for 87%. The distribution of specific portfolios within the Retail loan segment as on 31st March 2013 was as follows: home loans - 65%, loans against property - 7%, auto loans - 14%, personal loans and credit cards - 9%.
Business banking:
Business Banking offers transactional banking services, leveraging upon the Bank’s network and technology. Its initiatives focus on procurement of low-cost funds by offering a range of current account products and cash management solutions across all business segments covering corporates, institutions, central and state government ministries and undertakings as well as small and retail business customers. Product offerings of this business segment aim at providing customised transactional banking solutions to fulfill customer’s business requirement. Cross-sell of transactional banking products, product innovation and a customer-centric approach have succeeded in growing current account balances and realisation of transaction banking fees. As on 31st March 2013, balances in current accounts increased by 21.55% and stood at Rs. 48,322 crores compared to Rs. 39,754 crores last year. On a daily average basis, current accounts balances grew by 4.73% to Rs. 28,698 crores compared to Rs. 27,403 crores last year.
In the cash management services (CMS) business, the Bank focuses on offering customised service to its customer to cater to specific corporate requirements and improve the existing product line to offer enhanced features to customers. The Bank is also focusing on host-to-host integration for both collections and payments, such as IT integration between corporates and the Bank for seamless transactions and information flow. The Bank provides comprehensive structured MIS reports on a periodic basis, for better accounting and reporting. CMS continued to constitute an important source of fee income and contributed significantly to generate low cost funds. The Bank is one of the top CMS providers in the country with the number of locations covered under CMS increased to 890 from 801 last year. The number of CMS clients has grown to 15,818 from 11,548 last year.
Corporate credit:
In the backdrop of a subdued macro-economic environment, capital expenditure by corporates remained lacklustre during the year. Loans for working capital and the drawdown on committed sanctions in existing projects under implementation contributed to the growth in corporate credit during the year. The corporate credit portfolio of the Bank comprising advances to large and mid-corporates including infrastructure) grew 7.89% to Rs. 98,239 crores from Rs. 91,053 crores last year. This includes advances at overseas branches amounting to Rs. 29,972 crores (equivalent to USD 5.52 billion) comprising mainly the portfolio of Indian corporates and their subsidiaries as also trade finance. The advances at overseas branches accounted for 15.22% of total advances. The Bank’s infrastructure business includes project and bid advisory services, project lending, debt syndication, project structuring and due diligence, securitisation and structured finance.
International banking:
The international operations of the Bank have generally catered to Indian corporates who have expanded their business overseas. The overseas network of the Bank currently spans the major financial hubs in Asia. The Bank now has a foreign network of four branches at Singapore, Hong Kong, DIFC-Dubai and Colombo (Sri Lanka), and three representative offices at Shanghai, Dubai and Abu Dhabi, besides strategic alliances with banks and exchange houses in the Gulf Co-operation Council (GCC) countries. While branches at Singapore, Hong Kong, DIFC-Dubai and Colombo enable the Bank to partner with Indian corporates doing business globally and primarily offer corporate banking, trade finance, treasury and risk management solutions, the Bank also offers retail liability products from its branches at Hong Kong and Colombo. The representative offices and strategic alliances with banks and exchange houses in the GCC countries cater to the large Indian diaspora and promote the Bank’s NRI products. With management of liquidity being a major challenge in the present global markets, the Bank consciously restrained its asset growth at the overseas centres to report an asset size of USD 6.84 billion as at 31st March 2013 vis-à-vis USD 6.35 billion as at 31st March 2012. Further, interactions are also in progress with China Banking Regulatory Commission (CBRC) for upgrade of the Shanghai Representative Office into a branch.
Information technology:
Technology is one of the key enablers for business and for delivering customised financial solutions. The Bank continued to focus on introducing innovative banking services through investments in scalable, robust and function-rich technology platforms to enable delivery of efficient and seamless services across multiple channels for customer convenience and cost reduction. The Bank has also focused on improving the governance process in IT. During the year, the Bank has received certification of ISO 27001:2005 by BSI (ANAB accredited) for complying with the standards of Information Security Management System for its data centres located in Navi Mumbai and Bengaluru. The Bank has also successfully completed migration of its data centre to a co-hosted location during the year. The new premises offer a category IV data center that complies with the highest benchmarking standards applicable to data centres promising built-in redundancy of infrastructure. A robust Project Management framework is used to ensure that investments in IT are based on good gate-keeping principles and result in appropriate payback in value terms.
CSR:
Axis Bank has set up a Trust – the Axis Bank Foundation (ABF)to channel its philanthropic initiatives. The Foundation has committed itself to participate in various socially relevant endeavours with a special focus on poverty alleviation, providing sustainable livelihoods, education of the underprivileged, healthcare, sanitation etc. The Bank contributes up to one per cent of its net profit annually to the Foundation under its CSR initiatives.
The Foundation aims to provide one million sustainable livelihoods to the underprivileged in some of the most backward regions of the country in the next five years, with 60% of the beneficiaries being women.
The Foundation nurtures / supports NGOs working in the areas of education health and development of underprivileged and special children. The Foundation also supports various projects to impart vocational training to the underprivileged youth.
The Foundation supports the Lifeline Foundation for providing high level trauma care and rural medical relief in the states of Maharashtra, Kerala, Gujarat and Rajasthan. The Foundation also supports projects in skill development, water harvesting and low-cost agricultural practices to enhance farm yield.
Vision 2015
To be the preferred financial solutions provider excelling in customer delivery through insight, empowered employees and smart use of technology
Core Values
• Customer Centricity
• Ethics
• Transparency
• Teamwork
• Ownership
Awards:
1. Axis Bank wins 'Best Loyalty Program of the year' for the second year in a row, 9th Edge Loyalty Awards 2016
2. Axis Bank wins 'Best Reward Program of the year' for the second year in a row, 9th Edge Loyalty Awards 2016