-An insight on the financials of the 3 rd largest

Public Sector
Bank in India
Presented by:
Group 8
Section A
MBA-JAN 13
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INTRODUCTION
TIMELINE:
In 1849, Punjab under the British witnessed a period of
development giving rise to a new educated class fired
with a desire for freedom from slavery.
Amongst the cherished desires of this new class was
also an overriding ambition to start a SWADESHI BANK
with the Indian Capital and Management representing
all sections of the Indian community.
The idea was first mooted by Rai Mool Raj, who had a
long cherished idea that Indians should have a national
bank of their own.
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 Rai Mool Raj , Lala Lajpat Rai sent around circular

inviting selected friends insisting on a joint stock bank as
the first step in the genesis of this bank.
On May 23, 1894, the efforts materialized. The founding
board was drawn from different parts of the country with
a common objective of a national bank which would
further boost the economic interest of the country.
The bank opened for business on 12th April 1895.
A maiden dividend of 4% was declared after ONLY 7
months of operation.
With its Ups and Lows , during independence PNB as a
symbol of trust and a name you can bank upon repaid
many deposits of its customer who were on the other side
of the boarder.
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In 1951, the bank took over Bharat Bank Ltd. and

became the 2nd largest bank in the private sector.
In 1969 Government of India Nationalized PNB
1986 witnessed another acquisition, Hindustan
Commercial Bank which added 142 branches to PNBs
network.
1990s saw the rise in opening foreign branches like
London, Leicester, South Hall, Bhutan
Forbes Global 2000 Ranking PNB was ranked #1243 in
2006.
Fortune India 500 Ranking- PNB was ranked #26 in 2011
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BANKING CONCEPTS
Cash Reserve Ratio (CRR)-

is the amount of funds that all Scheduled

Commercial Banks (SCB) excluding Regional Rural Banks (RRB) are required to maintain
without any floor or ceiling rate with RBI with reference to their total net Demand and
Time Liabilities (DTL) to ensure the liquidity and solvency of Banks (Section 42 (1) of
RBI Act 1934). The current CRR is 4.75% and at present no incremental CRR is
required to be maintained by the banks.

Rs.
(Crs.)

MAR
12

MAR
11

MAR
10

CASH
WITH
RBI

16,557.
73

22,053.
34

16,997.
20

SLR

7,029.97 5,804.71 4,690.22

Statutory Liquidity Ratio (SLR)-

Apart from CRR, every bank is required to

maintain in India at the close of business every day, a minimum proportion of their Net
Demand and Time Liabilities as liquid assets in the form of cash, gold and unencumbered approved securities. The ratio of liquid assets to demand and time
liabilities is known as Statutory Liquidity Ratio (SLR). Present SLR is 23%. (Reduced
w.e.f. 11/08/2012 from earlier 24%). RBI is empowered to increase this ratio up to 40%.
An increase in SLR also restricts the banks leverage position to pump more money into
the economy.
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Rates & Interest

1.) Repo Rate-The rate at which the RBI lends money to commercial banks
is called repo rate. It is an instrument of monetary policy. Whenever
banks have any shortage of funds they can borrow from the RBI.A
reduction in the repo rate helps banks get money at a cheaper rate and
vice versa.
The current Indian interest rate RBI (base rate) is 7.75%
2.) Interest Rate

Fixed Deposits- Fixed Deposit, also called Term Deposit is an investment

where the interest rate is guaranteed not to change for the nominated
term, so you know exactly what your investment is worth.
The current rates is 4.00% to 9.00% depending upon the time period

Loans & Advancesa.) Benchmark Prime Lending Rate (BPLR) -According to the
Reserve Bank of India (RBI), banks are free to fix the Benchmark Prime
Lending Rate (BPLR) with the approval of their respective Boards. Banks
are free to decide the BPLR but their interest rates have to have a
reference to the BPLR fixed. The BPLR is the interest rate that commercial
banks charge their most credit-worthy customers.
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BPLR is 14% w.e.f
01.05.2012

b.) BASE RATE :The Base Rate is the minimum interest rate of a Bank below
which it cannot lend, except in cases allowed by RBI.
The Base Rate w.e.f 9.02.2013 is 10.25%
c.) Bulk Deposit Rate: Rate of Interest for Single deposit of above Rs.10 Crore
(Wholesale Deposit).
The current rate is 7.00% to 9.25% depending on the time period

RATIO ANALYSIS
1. CURRENT RATIO:

CURRENT ASSETS
CURRENT LIABILITIES
Meaning:
It establishes the short term solvency of a firm. It means how much cash
Money or easily convertible cash assets the company has to pay back the
Current Liabilities.
Rs (Crs.)

YEAR

MAR 12

MAR 11

MAR 10

CURRENT ASSETS

182,228.02

152,441.74

112,000.71

CURRENT LIABILITIES

393,112.66

325,227.00

259,647.49

CURRENT RATIO

0.46

0.47

0.43

CURRENT RATIO = CURRENT ASSET/CUTTENT LIABILITY

0.48
0.47
0.46
0.45
0.44

0.46

0.47

0.43

0.43

0.42
0.41

39883.0

39882.0

39881.0

For financial institutions like banks , current liability mainly consists of the term
deposits, savings accounts, current account of its customers compared to which its
current assets consisting of cash in hand, bank balances, and Over draft facility
given is very low.
Banks are liable to pay their customers as and when they want to withdraw their
deposits which increases the current liability.
These are the reason why we have low current ratio of approximately around 0.50.

2. Operating Profit Ratio:

(Net Income-Operating Expenses/Total Income) X 100
Meaning
This gives the profit only after deducting the operating expenses.
It does not take into account of any other expenses.

YEAR
RS. (Crs.)

Mar 12

Mar 11

Mar 10

Net Income

17,617.04

15,419.92

12,088.20

Operating
Expense

9,405.85

8,367.96

5,761.36

Operating profit

8,211.19

7,051.96

6,326.84

Operating profit
ratio

35.68%

46.46%

48.88%

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Operating profit ratio

Mar '10

48.88%

Mar '11

46.46%

Mar '12

0.00%

35.68%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

The operating profit is showing a decrease in 2011 because

the operating expense rises.
Operating expense consists of directors salary, provision for
employees, rent, lighting, insurance increased due to increased
operations, inflation and expansion of branches.

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3. NET PROFIT RATIO:

NET PROFIT /TOTAL INCOME x 100
Meaning: It gives the profit margin to total income. As in what part
of total income is left with the company after deducting the
expenses.

12-Mar

11-Mar

10-Mar

NET PROFIT

4,884.20

4,433.50

3,905.36

TOTAL INCOME

40,630.63

30,599.06

25,032.22

Net Profit Ratio

12.02%

14.49%

15.60%

YEAR
(Rs. Crs.)

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15.60%

16.00%

14.49%
14.00%

12.02%
12.00%

10.00%

Net
Profit
Ratio

8.00%

6.00%

4.00%

2.00%

0.00%

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39883.0

39882.0

39881.0

The total income of the bank is

increasing but the net profit is not
increasing because of increase in
operating expenses, employee cost,
depreciation, and other indirect cost.

4.Net Interest Margin

(Interest earned interest expended)/Earning Assets)X100
Meaning:
The use of net interest margin is helpful in tracking the profitability of a
banks investing and lending activities over a specific course of time.
Year

Mar 12

Mar 11

Mar 10

13,414.44

11,807.34

8,522.89

Rs.(Crs.)
Net Interest

Earning Assets
Cash Credit, Overdraft &
Loans

143,607.10

114,491.10

82,207.07

Term Loans

142,747.12

120,675.59

99,935.36

Government Securities

99,759.45

79,501.72

65,970.43

Other Approved Secutires

223.27

373.86

492.18

Debentures & Bonds

7,636.75

4,862.89

3,032.68

Total

393,973.69

319,905.16

251,637.72

Net Interest
Margin

3.40%

3.69%

3.39%

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NPA- Non Performing Assets

An asset is classified as non-performing asset (NPAs) if dues in the
form of principal and interest are not paid by the borrower for a
period of 90 days.
Increasing NPAs have a direct impact on banks profitability as legally
banks are not allowed to book income on such accounts and at the
same time banks are forced to make provision on such assets as per
the Reserve Bank of India (RBI) guidelines.

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Gross NPA: The amount of principal + interest outstanding is the gross

NPA
of the bank.
Net NPA: The amount of principal of loan due is the net NPA of the bank.
Interest is deducted from the gross NPA to take out the NET NPA
9000

8719

8000
7000
6000
5000

4454

GROSS NPA
NET NPA

4379

4000
3000

3214
2038

2000
1000

981

0
2012

2011

2010

Rs(Crs.)

Year
Rs(Crs.)
GROSS NPA

2012

2011

2010

8719

4379

3214

NET NPA

4454

2038

981

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INDUSTRY ANALYSIS
Public Sector Banks are banks where the majority stake (more than
50%) is held by the Government.
There are 26 Public Sector Banks in India.

No. of
branche
s in
India

PNB

SBI

5000

20193

Bank of Canara Bank of

Baroda Bank
India

4171

17

3000

3079

CURRENT RATIO Industry Analysis

MAR 12
Rs.(Crs.)

PNB

Bank of
Baroda

SBI

Canara Bank Bank of India

CURRENT
182,228.02
526,309.59
172,198.13
144,543.87
156,113.65
ASSETS
CURRENT
393,112.66
1,124,562.45
402,271.56
335,924.85
331,459.46
LIABILITIES
CURRENT
0.46
0.47
0.43
0.43
0.47
RATIO
Industry Average considering these big players is 0.45 and so far as PNB is considered the
current ratio is similar to that of the industry average.

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Net profits of the banks and Net profit ratio

Banks
Rs(Crs.)
Net Profit for
the Year
Mar 12

PNB

SBI

Bank of
Baroda

4,884.20 11,686.01 5,006.96

16.00%

Canara
Bank

Bank of
India

3,282.71

2,677.52

15.13%

14.00%
12.02%

Net Profit

12.00%
10.00%

Ratio

9.67%
9.71%

8.00%
8.42%
6.00%
4.00%
2.00%
0.00%

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DEBT EQUITY RATIO

Meaning:
What is the ratio of the total long term borrowing to your net
worth? It also shows the leverage of the banks. It gives the
solvency of the firms.
=LONG TERM DEBTS/NET WORTH

PNB

SBI

Bank of
Baroda

Canara
Bank

Bank of
India

Debts (Rs.
37,264.27
127,005.57
23,573.05
15,525.39
32,114.23
Crs.)
Net Worth(Rs.
27,817.08
83,951.20
27,476.85
22,689.96
20,961.79
Crs)
Debt Equity
1.34
1.51
0.86
0.68
1.53
Ratio
Average of the Industry if you take these big players = 1.19 (Mar 12)

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Price Earning Ratio ( P/E Ratio )

Meaning:
It shows how many times is the market price of the share to the earnings
from it. It also helps to determine the expected future growth of the
company from the investor point of view.

=MPS/EPS

Bank of Canara Bank of

Baroda
Bank
India

PNB

SBI

EPS(Rs
.)

144

174.15

121.79

74.1

46.66

MPS(R
s.)

1035

2200

639

323

361

PE
Ratio

7.19

12.63

5.25

4.36

7.74

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Thank you !
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