Download chapter-iv - Shodhganga

CHAPTER-IV
ANALYSIS OF DATA
Enhancing efficiency and performance of Public sector
banks (PSBs) is a key objective of economic reforms in many
countries including India. It is believed that private ownership
helps in improving efficiency and performance. Accordingly, the
Indian government started diluting its equity in PSBs from early
1990s in a phased manner. It has to be analysed whether the
partial privatization of Indian banks had really helped them in
improving their efficiency and performance.
The
present
research
seeks
to
asses
the
financial
performance of the public and private sector Banks operating in
India in post liberalization era. The Indian banking sector has
been dominated by public sector bank in number of branches
and assets. The Indian banking sector (comprise of 28 public
sector bank with majority of government owned banks, 23 banks
operating in private sector and 27 foreign banks. It is observed
that the public sector bank has remained unchanged in terms of
number over the last decades. In the era of liberalization where
the Indian Banks are trying to compete with global banks, it is
the need of the hour to study the efficiency and their
[118]
performance in the post liberalization period. It is in this context
that the present research has been undertaken. "The public
sector banks constitute about 27% of the total commercial
banking assets. It is glaring to note that the assets share of
public sector banks have decline from 90% in 1980 to 68% in
2007".1
Though the number of domestic private banks had decline
since 1980, but the assets of these banks have gone upto 20% in
2007. The total banking assets constitute more than 92% of GDP
at the end of March 2008, and the commercial banking assets
constitute more than 95% of total banking assets. Even though
the number of foreign banks have gone up significantly the
assets share had not increased correspondingly. "The total
assets of public sector bank in 1980 was Rs. 1649.56 billion,
which increased to Rs. 5638.22 billion in 2000."2 and further to
"12,206.56 billion in 2007. During the financial reform the total
assets of banking sector had recorded higher growth, and since
1999
the
total
assets
of
the
banking
sector
has
gone
significantly. The total commercial banking assets in 1999 was
Rs. 6531.37 billion was increased to Rs. 17854.76 billion".3
In case of private sector banks the "total assets was Rs.
[119]
90.26 billion which increased to Rs. 686.30 billion in 1993 and
further to Rs. 3728.88 billion in 2007".4
CAMEL MODEL
"CAMEL is basically a ratio-based model for evaluating the
performance of banks".5 Various ratios forming this model are
available as follows:C: Capital Adequacy
A: Assets Quality
M: Management
Efficiency
E: Earning Quality
-
Capital Adequacy Ratio
-
Debt-Equity Ratio
-
Advances to Assets
-
Govt. Securities to Total investment
-
Gross NPA to Net Advances
-
Net NPAs to Net Advances
-
Total Investments to Total Assets
-
Net NPAs to Total Assets.
-
Total Advances to Total Deposits
-
Business per Employee
-
Profit per Employee
-
Operating Profits to Average Working
Funds.
L: Liquidity
-
Spread to Total Assets
-
Net Profit to Average Assets
-
Interest Income to Total Income.
-
Non-Interest Income to Total Income
-
Liquid Assets to Total Assets
-
Govt. Securities to Total Assets
-
Liquid Assets to Demand Deposits
-
Liquid Assets to Total Deposits
[120]
8.3
CONSTITUENTS OF CAMEL MODEL
(i)
CAPITAL ADEQUACY
It is important for a bank to maintain depositor's
confidence and preventing the bank from going bankrupt.
Capital is seen as a cushion to protect the depositors and to
promote the stability and efficiency of financial system around
the world. 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 also indicates whether the
bank has enough capital to absorb unexpected losses. Capital
adequacy ratio acts as an indicator of bank leverage. The
following ratios measure Capital Adequacy:
(A)
Capital Adequacy Ratio :
The banks are required to
maintain the Capital Adequacy Ratio (CAR) as specified by RBI
from time to time. As per the latest RBI norms, the banks in
India should have a CAR of 9%. It is arrived at by dividing the
sum of Tier-I & Tier-II capital by aggregate of Risk Weighted
Assets (RWA) Symbolically CAR = (Tier I + Tier-II) / RWA
• Tier - I capital includes equity capital & free reserves
• Tier - II capital comprise of subordinate debt of 5-7 years
tenure, revaluation reserves, general provisions and loss
[121]
reserves, hybrid debt capital instruments and undisclosed
reserves and cumulative perpetual preference shares.
(B)
Debt-Equity Ratio:
The ratio indicates the degree of
leverage of a bank. It indicates the extent of the bank business
which is financed through debt and equity. This is calculated as
the proportion of total outside liability to net worth. 'Outside
Liabilities'
includes
total
borrowings,
deposits
and
other
liabilities. 'Net Worth' includes equity capital and reserves &
surplus. Higher ratio indicates less protection for the creditors
and depositors in the banking system.
(C)
Advances to Assets: Advances to Assets is the ratio of the
total advances to total assets. This ratio indicates a bank's
aggressiveness in lending which ultimately results in better
profitability.
Higher
ratio
of
advance/deposits
(assets)
is
preferred to a lower one. Total advances also include receivables.
The value of total assets excludes the re-valuation of all the
assets.
(D)
Govt Securities (G-Secs) to Total Investments:
The
percentage of investment in government securities to total
investments is a very important indicator, which shows the risktaking ability of the bank. It indicates a bank's strategy as being
[122]
high profit-high risk or low profits-low risk. It also provides a
view as to the availability of alternative investment opportunities.
Government securities are generally considered as the most safe
debt instrument, which, as a result, carries the lowest return. As
government securities are risk-free, the higher the G-Secs to
investment ratio,
the
lower the
risk
involved
in
bank's
investments.
(ii)
ASSETS QUALITY:
The quality of assets is an important parameter to gauge
the strength of the bank. The prime motto behind measuring the
assets quality is to ascertain the component of non-Performing
Assets (NPA) as a percentage of the total assets. This indicates
the models of advances which the bank has made to generate
interest income. Thus, assets quality indicates the type of the
debtors the bank is having. The following ratios are necessary to
assess the asset quality:
(A)
Gross NPAs to Net Advances:
It is a measure of the
quality of assets in a situation, where the management has not
provided for loss on NPAs. The Gross NPAs are measured as a
percentage of Net Advances. The lower the ratio betters the
quality of advances.
[123]
(B)
Net NPAs to Net Advances:
It is the most standard
measure of assets quality. In this ratio, Net NPAs are measured
as a percentage of Net Advances. Net NPAs are gross NPAs net of
provision on NPAs and interest in suspense account.
(C)
Total
Investments
to
Total
Assets
Ratio:
Total
investments to total assets indicate the extent of deployment of
assets in investment as against advances. The ratio is applied as
a tool to measure the percentage of total assets locked up in
investments, which, by conventional definition, does not form
part of the core Income of the bank. A higher level of investment
lack of credit off-take in the economy. The ratio is calculated by
dividing total investments by total assets of the bank. A higher
ratio indicates that the bank has conservatively kept a high
cushion of investment to guard against NPAs. However, this also
affects its profitability adversely.
(D)
Net NPAs to Total Assets:
This ratio indicates the
efficiency of the bank in assessing credit risk and, to an extent,
recovering the debts. The ratio is arrived by dividing the Net
NPAs by Total Assets. Total assets considered are net of
revolution reserves. Lower the ratio better is the performance of
the Bank.
[124]
(iii)
MANAGEMENT EFFICIENCY:
Management efficiency is another important element of the
CAMEL model. The ratios in this element involve subjective
analysis
to
measure
the
efficiency
and
effectiveness
of
management. The management of the bank takes crucial
decisions depending on its risk perception. It sets vision and
goals for the organization and sees that it achieves them. This
parameter is used to evaluate management efficiency as to
assign premium to better quality banks and discount poorly
managed ones. The ratios that are used to evaluate management
efficiency are:(A)
Total Advances to Total Deposits:
This ratio measures
the efficiency and ability of the bank's management in converting
the deposits available with the bank (excluding other funds like
equity capital, etc.) into high earnings advances. Total Deposits
include demand deposits, saving deposits, term deposits and
deposits of other banks. Total Advances also include the
receivables.
(B)
Business Per Employee: This ratio shows the productivity
of human forces of the bank. It is used as a tool to measure the
efficiency of all the employees of a bank in generating business
[125]
for the bank. It is arrived at by dividing the total business by
total number of employees. Higher the ratio, the better it is for
the bank. Business, per employee relates to the sum of Total
Deposits and Total Advances in a particular year.
(C)
Profit Per Employee:
This ratio indicates the surplus
earned per employee. It is arrived at by dividing the Profit after
Tax (PAT) earned by the bank by the total number of employees.
The
higher
the
ratio,
the
higher
the
efficiency
of
the
management.
(iv)
EARNING QUALITY
The quality of earnings is an important criterion that
determines the ability of a bank to earn consistently, going into
the future. It basically determines the profitability of the banks.
It also explains the sustainability and growth in earnings in the
future. The parameter gains importance in the light of the
argument that a large part of a bank's income is earned through
non core activities like investments, treasury operations, and
corporate advisory services and so on. The following ratios try to
assess the quality of income in terms of income generated by
core activity- income from lending operations:
[126]
(A)
Operating Profits to Average Working Funds Ratio: This
ratio indicates how much a bank can perform its operations net
of the operating expenses for every rupee spent on working
funds. This is arrived at by dividing the operating profits by
average working funds. Average Working Funds (AWF) are the
total resources (total assets/liabilities) employed by a bank. It is
daily average of total assets/liabilities during a year. The higher
the ratio, the better it is. This ratio determines the operating
profits generated out of working funds employed. The better
utilization of funds will result in higher operating profits. Thus,
this ratio will indicate how a bank has employed its working
funds in generating profits. Banks, which use their assets
efficiently, will tend to have a better average than the industry
average.
(B)
Spread or Net Interest Margin (NIM) to Total Assets:
NIM, being the difference between the interest income and the
interest expended as a percentage of total assets, shows the
ability of the bank to keep the interest on deposits low and
interest on advance high. It is an important measure of a bank's
core income (income from lending operations). A higher spread
indicates the better earnings given the total assets. The interest
[127]
income includes dividend income and interest expended includes
interest paid on deposits, loan from the RBI, and other shortterm and long-term loans.
(C)
Net Profit to Average Assets: Profit to average assets
indicates the efficiency of the banks in utilizing their assets in
generating profits. A higher ratio indicates the better income
generating capacity of the assets and better efficiency of
management. It is arrived at by dividing the net profit by average
assets, which is the average of total assets in the current year
and previous year. Thus, the ratio measures the return on assets
employed. Higher ratio indicates better earnings potential in the
future.
(D)
Interest Income to Total Income : Interest income is a
basic source of revenue for banks. The interest income to total
income indicates the ability of the bank in generating income
from its lending. In other words, 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 deposits with the RBI, and
dividend income.
(E)
Non-Interest Income to Total Income:
Fee based
income accounts for a major portion of a bank's other incomes.
[128]
The bank generates higher fee income through innovative
products and adapting the technology for sustained service
levels. The stream of revenue is not dependent on the bank's
capital adequacy and consequent potential to generate income is
immense. Thus, this ratio measures the income from operations,
other than lending, as a percentage of the total income. Non
interest income is the income earned by the banks excluding
income on advance and deposits with the RBI. The higher ratio
of non-interest income/total income indicates the increasing
proportion of fee-based income.
(V)
LIQUIDITY
Liquidity is am important aspect for any organization
dealing in 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
investment, so that banks can generate profit while at the same
time provide liquidity to the depositors. Among a bank's assets,
cash investments are the most liquid. The ratios suggested to
measure liquidity under CAMEL Model are as follows;
(A)
Liquid Assets to Total Assets: Liquid assets include cash
in hand, balance with the RBI, balance with other banks (both in
India and abroad) and money at call and short notice. Total
assets include the revaluations of all the assets. The proportion
[129]
of liquid assets to total assets indicates the overall liquidity
position of the bank.
(B)
G-Secs to Total Assets: Government securities are the
most liquid and safe investments. This ratio measures the GSecs as a proportion of total assets. Banks invest in government
securities primarily to meet their SLR requirements, which are
around 25% of net demand and time liabilities. This ratio
measures the risk involved in the assets held by a bank.
(C)
Liquid Assets to Demand Deposits: The ratio measures
the ability of a bank to meet the demand from deposits in a
particular year. It is arrived at by dividing the liquid assets by
total demand deposits. The demand deposits offer high liquidity
to the depositors and hence banks have to invest these assets in
a highly liquid form. The liquid assets include cash in hand,
balance with the RBI, balance with other banks (both in India
and abroad), and money at call and short notice.
(D)
Liquid Assets to Total Deposits: This ratio measures the
liquidity available to the deposits of a bank. Total deposits
include demand deposits, saving deposits, term deposits and
deposits of other financial institutions. Liquid assets include
cash in hand, balance with RBI, balance with other banks, and
money at calls and short notice.
[130]
DEPOSITS:
Deposits play a very important role in analyzing the
financial performance of any bank. Deposit is one of the
important function of commercial bank. On the basis of deposits
banks generates loans and advances to the various sector of the
economy and thereby generates profit. The total deposits of the
commercial banks had significantly increased since 1990. It has
been observed and that majority of the banks whether operating
public private or foreign banks had recorded higher deposits
specially after 1990. "In the case of public sector banks the total
deposits was Rs. 1227.23 billion in 1980 which increase to Rs.
4217.06 billion in 1999 and further to Rs. 6169.36 billion in
2003. By end of 2007 the total deposits of public sector bank
amounted to Rs. 9975.96 billion. In case of private bank the
total deposit was 70.81 billion, which increases 572.81 billion in
1999 and further to 1182.58 billion in 2003 and Rs. 2761.31
billion in 2007. The total deposits of all bank comprising of
public private, foreign and regional rural banks increases to Rs.
1397.57 billion in 2007 which was only Rs. 5283.27 billion in
1999 and Rs. 1342.81 billion in 1980".6
In case of SBI the total deposit was Rs. 43521 crores in
[131]
2007 which increased to Rs. 537404 crore in 2008 showing
increase of 23.3%. Regarding the ICICI bank the total deposit
was Rs. 230510 crores which increased to Rs. 244431 crore in
2008 indicating a 6% increase since it can be analyize that
deposits of SBI is 4 times the total deposits of ICICI Bank. This
reason that could be attributed was due to the larger no. of
branches and also due to a larger number of customers. The
increase in deposits can lead to the generation of larger profit.
Total Deposits (In Rs.)
800000
700000
600000
500000
400000
SBI
300000
ICICI Bank
200000
100000
0
2007
2008
2009
Years
Total Deposits
(Fig. 4.1)
Earning Per Share (EPS):
Earning Per share (EPS) is an importance aspect. The
portion of company's profit allocated to each outstanding shares
of common stock. Earning per share serves as an indication of a
company's profitability. It is calculated as:
"EPS = Net Income-Dividends on Preferred stock/Average
outstanding shares."7
[132]
Return on Assets (ROA):
Return on Assets (ROA) is a ratio indication of how
profitable a company is relative to its total assets. It is calculated
by dividing a company's annual earnings by its total assets, and
is represented as a percentage. ROA is also referred as 'Return
on Investment.
The formula for return on assets is:
"ROA = Net Income/Total Assets."8
TOTAL INCOME:
Income plays a very important role in banking sector as
this factor leads to the determination of profit. The income
comprises of interest income and other income like, commission
brokerage etc. "The interest income of the State Bank of India in
2007 was Rs. 37242 crore which increased to Rs. 48950 crore in
2008 and further to Rs. 63788 crore while the other income in
2007 was Rs. 6765 crore which increased to Rs. 8695 crore and
further to 12691 in 2009. Hence the total income in 2007 of
State Bank of India was 44008 crore which increased to
57645.24 crore showing an increase of 31%. In case of ICICI
Bank the interest income was Rs. 21995 crore which increased
to 30,788 crore in 2008 and further to Rs. 31,092".9
[133]
"The total income of ICICI Bank was Rs. 28,923 crore in
2007 which increased to Rs. 39,599 crore in 2008 showing a
increase 37%"10. The increase in interest of Private Sector Bank
as compare to SBI could be attributed to the fact that interest
rate on advance and other income was more as compare to
public sector bank.
Interest Income (In Rs.)
70000
60000
50000
40000
SBI
ICICI Bank
30000
20000
10000
0
2007
2008
Year
2009
Interest Income
(Fig. 4.2.1)
Other Income (In Rs.)
14000
12000
10000
8000
SBI
6000
IC IC I B a n k
4000
2000
0
2007
2008
2009
Year
Other Income
(Fig. 4.2.2)
[134]
Operating Ratio:
Operating ratio is an important ratio that explains the
changes in net profit margin ratio. The higher operating ratio is
unfavorable since it is believed that a small amount of operating
income will not be able to meet interest, dividend etc. The
operating ratio is a field of operating efficiency but is should be
used continuously. The ratio effected by a number of external
uncontrollable
factors,
internal
factor
employees
and
management efficiency or inefficiency which are difficult to
analyze. Further the operating ratio can not be used as test of
financial condition in case of firm, where non operating revenue
and expenses form a substantial part of total income. The
operating ratio indicates the average aggregate variation in
expenses where some of the expenses may increase or decrease
over the years.
"The operating profit of State Bank of India in 2007 was Rs.
10,000 crore which increased to Rs. 13,108 crore in 2008 and
further to Rs. 17,915 crore showing an increase of 31% in the
year of 2007-08. In case of ICICI Bank the operating profit in
2007 was Rs. 5874 crores which increased to Rs. 7960 crore an
increase of 35.5% and further to Rs. 8925.23 crore."11
[135]
Operating profit (In Rs. Crore)
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
SBI
ICICI Bank
2007
2008
2009
Year
Operating Profit
(Fig. 4.3)
Net Profit:
Net profit is obtained when operating expenses and taxes
are deducted from gross profit. "The net profit in State Bank of
India was Rs. 4541 crore in 2007, which increased to Rs. 6729
crore showing an increase of 48%, while in case of ICICI Bank
the net profit of Rs. 3110.22 crore which increased to Rs.
4157.73 crore indicate the growth rate of 33.78%."12
Credit Deposit Ratio:Credit deposit ratio reflects the management performance
of Bank often the financial liberalization majority of bank have
shown higher credit deposit ratio. One of the glaring observation
seen in India during the years is that the credit deposit ratio has
highest in case of foreign bank and lowest in case of public
sector bank.
[136]
The over all commercial sector bank witnessed an increase
in credit deposit ratio in 1980. The credit deposit ratio of all
commercial bank was 63% which increased to 73% in 2007. In
case of State Bank of India the credit deposit ratio was 77.46%
which increased to 77.55% and further to 73.11 in 2009.
While in case of ICICI Bank Credit Deposit Ratio 84.97% in
2007 which further increased to 92.30% in 2008 and further
99.80% in 2009. It is seen that the credit deposit ratio has
shown improvement in Private Sector Bank as compare to public
Credit Deposit Ratio (in %age)
sector bank which shown in declining.
100
90
80
70
60
50
40
30
20
10
0
SBI
ICICI Bank
2007
2008
2009
Year
Credit Deposit Ratio
(Fig. 4.4)
Total Advances Credit:
The advances in case of SBI was Rs. 337336 crore in 2007
crore which increased to Rs. 41676 crore in 2008 which in case
[137]
of ICICI Bank the advance in 2007 was Rs. 195865.6 crore
which increased to Rs. 225616.08 crore in 2008 and further to
Rs. 218310.8 crore in 2009. The total advance in public sector
bank had significantly improved in case of public and private
sector banks. "In case of public sector bank the total advances
was Rs. 779.47 crore which increased to Rs. 2228.26 crore the
2000 and Rs. 7204 crore in 2007 while in case of public sector
Bank the total advance was Rs. 38.13 crore 2000 and Rs. 2074
crore in 2007. Since 2003, advances of all commercial bank have
been more than double. In 2007 the all banks advances
aggregated Rs. 4344.5 crore which increase to Rs. 10147.7 crore
Total Advance Credit (In Rs.)
in 2007"13.
450000
400000
350000
300000
250000
200000
150000
100000
50000
0
SBI
ICICI Bank
2007
2008
Year
Total Advance Credit
(Fig. 4.5)
Asset Quality:
The asset quality reflects the structured soundness of the
[138]
banking sector. The ratio of contingent liability shows that
foreign banks are more exposed to default which indicate that
these banks provide more significant services. The reason that
could be given in this context us that foreign banks concentrate
more in urban areas and mostly have big clients. The contingent
liability Asset ratio of the total commercial bank showed decline
from 1980 to 2007. The private sector Banks are exposed to
more losses in case of default than public sector Bank. "The ratio
of contingent liability to asset in case of public sector bank have
decline from 14% in 2000 to 12% in 2004 but again increased to
14% in 2007 while in case of private sector bank this ratio was
11% in 2000 which increased to 24% in 2003 and further
declined to 19% in 2007"14. This indicate that private sector
banks are exposed to more losses as compared to public sector
Bank.
Profitability:
Profitability can be measured with two indicator viz. Return
on asset (ROA) and Return on Equity (ROE). The ROA is defined
as ratio of net profit to average assets. In the port financial
reform period the Banking Sector had showing more profitability.
The domestic private bank had shown larger profit as compared
[139]
to public sector bank. After liberalization the public sector bank
recorded higher rate of return on assets. During the early phase
of reform the ROA was negative but with the passage of time it
converted itself to positive. "In case of State Bank of India the
ROA was 0.84% in 2007 which increased to 1.01% in 2008 and
further to 1.40% in 2009 while in case of ICICI Bank it was
1.09% in 2007 which increased to 1.12% in 2008 and decline to
0.98% in 2009"15.
[140]
RESULT AND ANALYSIS:
Table - 4.6 Capital Adequacy (In %)
Ratios
Banks
Capital Adequacy Ratio
(CAR)
Debt-Equity Ratio
Advances to Assets
G-Securities
Investment
Source: 1.
2.
3.
to
Total
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
SBI
12.79
13.35
13.50
13.53
12.45
11.88
12.34
13.54
12.97
ICICI Bank
11.57
11.44
11.10
10.36
11.78
13.35
11.70
14.92
15.92
SBI
18.84
18.38
17.75
16.41
16.04
13.75
13.92
10.96
12.81
ICICI Bank
13.27
12.32
11.32
11.82
10.34
7.45
9.50
5.27
4.22
SBI
35.99
34.69
36.65
38.73
44.01
53.00
59.50
57.80
56.30
ICICI Bank
35.62
45.18
49.88
49.59
54.52
58.00
50.00
56.43
57.55
SBI
78.47
80.83
83.61
84.85
87.24
86.00
82.12
76.34
83.94
ICICI Bank
49.71
63.31
72.05
69.96
68.31
72.00
77.65
71.70
67.79
SBI Annual Report 2000-01, 2001-02, 2002-03, 2003-04, 2004-05, 2005-06, 2006-07, 2007-08, 2008-09
ICICI Bank Annual Report 2000-01, 2001-02, 2002-03, 2003-04, 2004-05, 2005-06, 2006-07, 2007-08, 2008-09
Kumar Satish B. "Financial Performance of Private Sector Bank in India coimbatore, Tamilnadu, India - An Evaluation" VLB Janakimal College of
Engineering & Tech.
[141]
Table - 4.6.1 Capital Adequacy Ratio
Ratios
Capital Adequacy Ratio (CAR)
Debt-Equity Ratio
Advances to Assets
G-Securities to Total Investment
Banks
Mean Ratio
Standard Deviation
C.V.
SBI
12.93
0.06
0.46
ICICI Bank
12.46
1.76
14.13
SBI
15.43
2.72
17.63
ICICI Bank
9.50
3.01
31.68
SBI
46.30
9.71
20.97
ICICI Bank
50.75
6.72
13.24
SBI
82.60
3.34
04.44
ICICI Bank
68.05
7.45
10.95
[142]
A-
Capital Adequacy:
The ratios used in measuring capital adequacy are Capital
Adequacy Ratio (CAR), Debt Equity Ratio, Advance to Assets and
Government Security to Total Investment. In Case of State Bank
of India (SBI) and Investment Credit and Industrial Corporation
of India (ICICI) Bank. These ratios are depicted in Table 4.6 and
4.6.1. It is observed from these tables that SBI and ICICI Bank
have maintained the average capital adequacy ratio at 12.93%
and 12.46% respectively between 2000-01 to 2008-09. This
indicates that both the banks have maintained higher CAR than
the prescribed level. "According to the norms of RBI, each bank
in India has to maintain 8% of their risk weighted assets as
capital with effect from March 2000" However the coefficient of
variance of ICICI was 14.13 in respect to SBI 0.46%, which
indicates that SBI is in better position, in respect to capital
adequacy than ICICI Bank due to less fluctuation.
Debt-Equity Ratio is also an important ratio to measure the
capital adequacy. Higher ratio indicates less protection for the
creditors and depositors in the banking system. The average
Debt Equity Ratio of SBI and ICICI Bank from 2000-01 to 20082009 are 15.43% and 9.50% respectively. The coefficient of
variance (CV) of SBI was 17.63 as against 31.68 of ICICI Bank.
[143]
This figure shows that instead of higher Debt-Equity Ratio SBI
had low fluctuation but the Debt-Equity Ratio in ICICI Bank was
better.
Advances to Assets indicates the bank aggressiveness in
lending. Higher ratio indicates higher investment which results
in higher profitability. The average Advances to Asset ratio in
2000-01, 2008-09 are 46.30% and 50.75% of SBI and ICICI
Bank respectively. The CV of SBI and ICICI Bank are 20.97 and
13.24 respectively as shown in table 4.6.1. The ratios indicates
that ICICI has shown better profitability than SBI.
Government Security to Total Investment indicates the
risk-taking ability of the bank. It indicates a bank strategy as
being high profit - high risk and law profit law risk. The average
ratios from 2000-01 to 2008-09 are 82.60% and 68.05 and the
CV is 4.44 and 10.95 of SBI and ICICI Banks respectively. The
high ratios indicates the low risk and low ratios indicates high
risk due to investing in others risky and high return securities.
The low ratio of ICICI Bank shows higher profit.
[144]
Table - 4.7 Assets Quality Ratio (In %)
Ratios
Gross NPAs to net Advances
Net NPAs to Net Advances
Total Investments to Total
Assets
Net NPAs to Total Assets
Source: 1.
2.
3.
Banks
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
SBI
13.98
12.82
9.80
8.02
6.15
4.86
2.96
2.52
2.98
ICICI Bank
5.82
10.66
9.44
4.91
3.03
1.55
2.13
3.36
4.32
SBI
6.03
5.63
4.50
3.48
2.65
1.88
1.56
1.78
1.76
ICICI Bank
2.19
5.48
5.21
2.21
1.65
0.72
1.02
1.55
2.09
SBI
38.93
41.68
45.85
45.53
42.86
32.90
26.33
26.26
28.61
ICICI Bank
41.48
34.47
33.20
34.13
30.11
19.54
26.29
27.88
24.64
SBI
2.17
1.96
1.64
1.33
1.16
1.13
0.93
1.03
0.88
ICICI Bank
-
-
2.64
1.17
0.90
0.43
0.58
0.87
1.20
SBI Annual Report 2000-01, 2001-02, 2002-03, 2003-04, 2004-05, 2005-06, 2006-07, 2007-08, 2008-09
ICICI Bank Annual Report 2000-01, 2001-02, 2002-03, 2003-04, 2004-05, 2005-06, 2006-07, 2007-08, 2008-09
Kumar Satish B. "Financial Performance of Private Sector Bank in India coimbatore, Tamilnadu, India - An Evaluation" VLB Janakimal College of
Engineering & Tech.
[145]
Table - 4.7.1 Assets Quality Ratio
Ratios
Gram NPAs to net Advances
Net NPAs to Net Advances
Total Investments to Total Assets
Net NPAs to Total Assets
Banks
Mean Ratio
Standard Deviation
C.V.
SBI
7.90
3.78
47.85
ICICI Bank
5.02
8.92
177.69
SBI
3.25
1.62
49.85
ICICI Bank
2.46
4.91
199.59
SBI
36.55
7.64
20.90
ICICI Bank
30.19
6.10
20.20
SBI
1.36
0.45
33.09
ICICI Bank
1.11
0.67
60.36
[146]
B.
Assets Quality
The Assets Quality is an important element in measuring
the performance of the assets in Banks. The ratio used to
measure Assets quality are the Gross NPAs to net Advances, Net
NPAs to net advances, total investment to total assets and net
NPAs to total assets.
Gross NPAs to Net Advances is the measure of the quality
of assets in a situation, where the management has not provided
for loss of NPAs. Hence the Gross NPAs are measured as a
percentage of Net Advances. A low ratio is better for a bank.
Table 4.7.1 indicates the average ratio of Gross NPAs to net
advances of SBI and ICICI Bank from 2000-01 to 2008-09. The
mean ratios are 7.90 and 5.02 of SBI and ICICI bank
respectively. The ratio depicts that ICICI bank is in better
position than SBI.
Net NPAs to Net Advances is the most standard measure of
assets quality. Net NPAs and gross NPAs net of provision on
NPAs and interest in suspense account. The ratios and
coefficient of variance of SBI and ICICI Banks are 3.25, 2.46 and
49.85, 99.59 respectively. The ratios indicate that ICICI Bank is
in better position in assets management.
Total Investment to Total Assets ratios indicate the extent
[147]
of deployment of assets in investment as against advances. A
higher level of investment means lack of credit of - take in the
economy but increase the profitability. The average total
investment to total assets from 2000-01 to 2008-09 is 36.55 and
30.19 and C.V. of SBI and ICICI Bank and 20.90 and 20.20. This
indicate the fluctuation in both bank is approximately same but
the investment of SBI is higher means getting high profit than
ICICI Bank.
Net NPAs to Total Assets Ratios indicates the efficiency of
the bank in assessing credit risk and to some extent, recovering
the debts. The average of ratios from 2000-01 to 2008-09 are
1.36 and 1.11 of SBI and ICICI Banks respectively. The
coefficient of variance are 33.09 and 60.36 of SBI and ICICI
Bank respectively. The ratio shows that ICICI Bank has lower
ratio of Net NPAs to total Assets which indicates that the Bank
has been able to manage advances is better way as compare &
SBI.
[148]
Table - 4.8 Management Efficiency
Ratios
Banks
Total Advances to Total
Deposits (In %)
Business Per Employee (Rs.
Lakh)
Profit per Employee (Rs.
Lakh)
Source:
1.
2.
3.
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
SBI
46.78
44.65
46.52
49.57
55.14
68.89
77.46
77.55
73.11
ICICI Bank
42.93
146.59
110.61
91.17
91.57
88.54
74.38
92.30
99.98
SBI
136.58
173.01
190.77
211.00
243.08
299.23
357.00
456.00
55.60
ICICI Bank
815.22
486.49
1120.00
1010.00
880.00
905.00
1027.00
1008.00
1154.00
SBI
0.70
1.16
1.48
2.00
2.07
2.16
2.37
3.73
4.74
ICICI Bank
10.45
5.33
11.00
12.00
11.00
10.00
9.00
10.00
11.00
SBI Annual Report 2000-01, 2001-02, 2002-03, 2003-04, 2004-05, 2005-06, 2006-07, 2007-08, 2008-09
ICICI Bank Annual Report 2000-01, 2001-02, 2002-03, 2003-04, 2004-05, 2005-06, 2006-07, 2007-08, 2008-09
Kumar Satish B. "Financial Performance of Private Sector Bank in India coimbatore, Tamilnadu, India - An Evaluation" VLB Janakimal
College of Engineering & Tech.
[149]
Table - 4.8.1 Management Efficiency Ratio
Ratios
Total Advances to Total Deposits (In %)
Business Per Employee (Rs. Lakh)
Profit per Employee (Rs. Lakh)
Banks
Mean Ratio
Standard Deviation
C.V.
SBI
59.96
13.28
22.19
ICICI Bank
93.12
31.45
33.77
SBI
235.81
113.57
48.16
ICICI Bank
933.97
184.96
19.77
SBI
2.27
1.20
52.86
ICICI Bank
9.98
1.83
18.34
[150]
C.
Management Efficiency:
The Management Efficiency is another important element
of camel model which is calculated on the basis of total advances
to total deposits, business per employee and profit per employee.
Total Advances to Total Deposits measures the efficiency
and ability of the bank's management in converting the deposits
available with the bank in to advances. The table 4.8.1 shows
the average ratios and C.V. from 2000-01 to 2008-09. The
average total advances to total deposits of SBI and ICICI Bank
are 59.96 and 93.12 respectively and SD are 13.28 and 31.45 of
SBI and ICICI Bank respectively. The ratios indicates that ICICI
Bank is efficiently converting their advances into deposits.
Business Per Employee indicate the productivity of human
forces of the bank. It is used as a tool to measure 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 total
number of employees. The average business per employee of SBI
and ICICI Bank from 2000-01 to 2008-09 are (Rs. Lakh) 235.81
and 933.97 and SD of these banks are 113.57 and 184.96
respectively. This shows that ICICI Bank have the letter
productivity human forces of the bank.
Profit Per Employee shows
the
surplus earned per
employees. The average profit per employees of SBI and ICICI
Bank are 2.27 and 9.98 (Rs. in Lakh) respectively. The SD of SBI
and ICICI Banks are 1.20 and 1.83. The ratio shows that the
ICICI Bank profit per employee is higher than the SBI and high
variance, it is good for the ICICI Bank.
[151]
Table - 4.9 Earning Quality (In %)
Ratios
Banks
Operating profit to Average
working Funds
Spread to Total Assets
Net Profit to Average Assets
Interest
Income
Income
to
Total
Non Interest Income to Total
Income
Source:
1.
2.
3.
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
SBI
1.33
1.83
2.27
2.5
2.61
2.27
1.86
1.96
2.05
ICICI Bank
2.35
2.14
2.49
2.09
2.18
1.98
2.05
2.14
2.33
SBI
2.61
2.61
2.65
2.74
3.03
3.16
2.66
2.36
2.16
ICICI Bank
2.05
0.57
1.33
1.50
1.69
1.87
1.93
1.83
2.21
SBI
0.56
0.73
0.86
0.97
0.99
0.89
0.84
1.01
1.04
ICICI Bank
1.01
0.42
1.14
1.41
1.37
1.30
1.10
1.10
1.0
SBI
86.62
87.72
87.41
80.00
82.00
82.87
84.63
87.92
83.41
ICICI Bank
84.96
78.91
74.78
74.37
73.37
77.38
79.50
78.52
79.56
SBI
13.38
12.28
15.59
20.00
18.00
17.13
16.63
15.08
16.59
ICICI Bank
15.05
21.09
25.22
25.63
26.63
22.95
20.75
22.25
19.65
SBI Annual Report 2000-01, 2001-02, 2002-03, 2003-04, 2004-05, 2005-06, 2006-07, 2007-08, 2008-09
ICICI Bank Annual Report 2000-01, 2001-02, 2002-03, 2003-04, 2004-05, 2005-06, 2006-07, 2007-08, 2008-09
Kumar Satish B. "Financial Performance of Private Sector Bank in India coimbatore, Tamilnadu, India - An Evaluation" VLB Janakimal
College of Engineering & Tech.
[152]
Table - 4.9.1 Earning Quality Ratio
Ratios
Operating profit to Average working Funds
Spread to Total Assets
Net Profit to Average Assets
Interest Income to Total Income
Non Interest Income to Total Income
Banks
Mean Ratio
Standard Deviation
C.V.
SBI
2.08
0.37
17.79
ICICI Bank
2.19
0.24
10.96
SBI
2.66
0.86
32.33
ICICI Bank
1.66
0.49
29.52
SBI
0.87
0.14
16.09
ICICI Bank
1.09
0.83
76.15
SBI
84.06
2.09
2.49
ICICI Bank
77.93
3.33
4.27
SBI
16.08
2.20
13.68
ICICI Bank
22.14
3.37
15.22
[153]
D.
Earnings Quality:
The Earning Quality determines the profitability, of the
banks. It explains the sustainability and growth in earnings in
the future. It is assessed on the basis of (a) Operating Profits to
Average Working Funds Ratio (b) Spread or Net Interest Margin
(NIM) to Total Assets (c) Net Profit to Average Assets (d) Interest
Income to Total Income and (e) Non Interest Income to Total
Income.
The Operating Profits to Average Working finds. The ratio
indicates the extent which a bank can form its operations, net of
the operating expenses for the every rupee spent on working
funds. The higher the ratio is better. The average ratio of last ten
years from 2000-01 to 2008-09 show higher ratio of ICICI
Banks. The average ratio are 2.08 and 2.18 and S.D. are 0.37
and 0.24 of SBI and ICICI Bank respectively.
Spread or Net Interest Margin (NIM) to total assets (NIM) is
an important measure of a bank's core income (income from
lending operations). A higher spread indicates the better
earnings given by the total assets. The table 4.9.1 indicates the
average ratio from 2000-01 to 2008-09 are 2.66 and 1.66 of SBI
and ICICI Banks respectively. The S.D. of these banks are 0.86
and 0.49 respectively. This shows that SBI is better than ICICI
Bank.
[154]
Net Profit to Average Assets indicates the efficiency of the
banks in utilizing their assets in generating profits. A higher
ratio indicates better income generating capacity of the assets
and better efficiency of management the average ratios of the SBI
and ICICI Banks from 2000-01 to 2008-09 are (Rs. in Lakhs)
0.87 and 1.09 and the S.D. are 0.14 and 0.83 respectively. It
shows that the ICICI is better bank than SBI in this term.
Interest Income to Total Income measures the income from
lending operations as a percentage of the total income generated
by the bank in a year. Its average between 2000-01 and 2008-09
are 84.06 and 77.93 and the S.D. are 2.09 and 3.33 respectively.
These figures indicates that SBI is in better position.
Non Interest Income to Total Income measures the income
from operations, other than lending, as a percentage of the total
income. The higher ratio of non-interest income/total income
indicates the increasing proportion of fee-based income. The
average non-interest income to total income from 2000-01 to
2008-09 are 16.08 and 22.14 and S.D. and 2.20 and 3.37 of SBI
and ICICI Bank respectively. These values indicates that the
ICICI Bank non-interest income against total income is higher
than SBI during the period.
[155]
Table - 4.10 Liquidity (In %)
Ratios
Banks
Liquid Assets to Total Assets
G-secs Total Assets
Liquid Assets to Deposits
Liquid Assets
Deposits
Source:
1.
2.
3.
to
Total
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
SBI
19.23
18.65
12.02
10.68
8.55
6.14
6.46
1.66
8.33
ICICI Bank
18.21
12.28
6.08
6.76
7.71
4.23
6.05
7.65
1.16
SBI
30.55
33.69
38.34
38.63
37.39
27.25
20.77
19.51
23.46
ICICI Bank
20.63
21.82
23.92
23.88
20.57
20.32
19.55
18.85
16.71
SBI
150.54
153.45
100.91
86.63
69.46
44.61
44.61
63.91
72.56
ICICI Bank
137.07
467.36
175.9
116.7
100.72
64.22
97.51
78.24
28.07
SBI
25.00
24.00
15.26
13.67
10.71
7.98
8.40
11.54
10.83
ICICI Bank
21.94
39.85
13.47
12.44
12.95
6.45
9.04
12.51
10.05
SBI Annual Report 2000-01, 2001-02, 2002-03, 2003-04, 2004-05, 2005-06, 2006-07, 2007-08, 2008-09
ICICI Bank Annual Report 2000-01, 2001-02, 2002-03, 2003-04, 2004-05, 2005-06, 2006-07, 2007-08, 2008-09
Kumar Satish B. "Financial Performance of Private Sector Bank in India coimbatore, Tamilnadu, India - An Evaluation" VLB Janakimal
College of Engineering & Tech.
[156]
Table - 4.10.1 Liquidity Ratio
Ratios
Liquid Assets to Total Assets
G-secs Total Assets
Liquid Assets to Deposits
Liquid Assets to Total Deposits
Banks
Mean Ratio
Standard Deviation
C.V.
SBI
10.19
5.44
53.39
ICICI Bank
7.79
4.63
59.44
SBI
29.95
7.13
23.81
ICICI Bank
20.69
2.17
10.49
SBI
87.41
38.49
44.03
ICICI Bank
140.64
122.18
86.87
SBI
14.15
5.90
41.70
ICICI Bank
15.31
9.04
59.05
[157]
E.
Liquidity:
Liquidity is one of the vital elements for organization
dealing with finance. The ratio suggested to measure liquidity
under CAMEL model are (a) Liquid Assets to Total Assets (b) GSecurities to Total Assets (c) Liquid Assets to Demand Deposits
(c) Liquid Assets to Total Deposits.
The Liquid Assets to Total Assets are the proportion of
liquid assets to total assets indicates the overall liquidity position
of the bank. The average ratio from 2000-01 to 2008-09 are
10.19 and 7.79 and S.D. are 5.44 and 4.63 of SBI and ICICI
Banks respectively. It shows that inspite of higher mean ratio the
SBI kept more fluctuations. ICICI Bank investing more and
getting higher profit than SBI.
Government securities to Total Assets measures the G.
Securities as a proportion of total assets. Banks invest in
government securities primarily to meet their SLR requirements,
which are 25 of net demand and time liabilities. This ratio
measures the risk involved in the assets held by a bank. The
average of it from 2000-01 to 2008-09 is 29.95 and 20.69 and
S.D. of it is 7.13 and 2.17 of SBI and ICICI Bank respectively.
Liquid Assets to Demand Deposits ratio measures the
ability of a bank to meet the demand from deposits in a
[158]
particular year. The demand deposits offer high liquidity to the
depositors and hence banks have to invest these assets in a
highly liquid form. The average of it from 2000-01 to 2008-09 is
87.41 and 140.64 and S.D. is 38.49 and 122.18 of SBI and ICICI
Bank respectively.
Liquid Assets to Total Deposits ratio measures the liquidity
available to the deposits of a bank. The high ratio indicates the
conservating investment policy of the bank and getting law risk
and low return. The average ratio of the banks from 2000-01 to
2008-09 are given in table 4.10.1. The average ratios are 14.15 &
15.31 and standard aviation is 5.90 and 9.04 of SBI and ICICI
banks respectively. This indicates that shows the private banks
are using aggressive policy and getting high risk and return.17
Overall Ranking:
The CAMEL model is used for rating of banks according
their performance. Hence, an attempt has been made to rank the
two banks under consideration Table 5.11,19 the reveals that, on
the whole, ICICI bank has fared well than it's public sector
competitor SBI.
[159]
Table 4.11 : Ranking of SBI and ICICI Bank According to average
of CAMEL Model Ratios for the Period 2000-01 to 2008-09.
Camel Ratio
C: Capital Adequacy
Bank
SBI
ICICI
Bank
Capital Adequacy Ratio
Debt Equity Ratio
Advances to Assets
G-Security to total Investment
A: Assets Quality
M: Management
Efficiency
E: Earning Quality
Gross NPAs to Net Advances
Net NPAs to Net Advances
Total Investments to Total Assets
Net NPAs to Total Assets
Total Advances to Total Deposits
Business per Employees
Profit per Employees
Operating profit
working funds.
to
average
Spread to Total Assets
Net Profit to Average of Assets
Interest Income to Total Income
Non interest
income
C: Liquidity
Income
to total
Liquid Assets to Total Assets
G-Securities to Total Assets
Liquid
Assets
Deposits
to
Demand
Liquid Assets to total Deposits
Note: indicate the superiority of a bank over the other bank in terms of
the concerning ratios.
From the above analysis, it is obvious that both SBI and
ICICI are performing ungallantly since the beginning of the 21st
century. In the respect of some of the parameters in which SBI
[160]
has outperformed ICICI bank are government securities to total
investment, spread to Total Assets, Interest to total Assets, GSecs to total assets etc. In contrast, ICICI has done better than
SBI in regard to the advances to Assets, Total Advances to
Deposits, Business per Employee; Profit per Employee, NonInterest income to total income, liquid assets to Total Deposits
etc. On the whole, ICICI bank has performed better than SBI.
The performance of the Public and Private Sector Banks also
may be checked through the ranking of CAMEL model on the
basis of recommendation of the Padmanabhan Committee
Report.
CAMEL Rating System:
The CAMEL rating system is based upon an evaluation of
five critical elements of a credit union's operations Capital
Adequacy,
Asset
Quality,
Management,
Earnings
and
Asset/liability Management. This rating system is designed to
take into account and referential significant financial and
operational factors examiners assess in their evaluation of a
credit union's performance. Credit unicons are stated using a
combination of financial ratios and examiner judgments.
[161]
Since the composite CAMEL rating is an indicator of the
visibility of a credit union, it is important that examiners rate
credit unions based on their performance in absolute terms
rather than against peer averages or predetermined benchmarks.
The examiner must use professional judgment and consider both
qualitative and quantitative factors when analyzing a credit
unions performance. Since members are often lagging indicators
of a credit unions condition, the examiner must also conduct a
qualitative analysis of current and projected operations when
assigning CAMEL ratings.
Although the CAMEL composite rating should normally be
based on close relationship to the component ratings. The
examiner should not derive the composite rating solely by
computing an arithmetic average of the component ratings.
Following are general definitions the examiner should use for
assigning the crolx unions CAMEL composite rating.
Need of CAMEL Rating System in Banks:
In 1979, the bank regulatory agencies created the Uniform
Financial Institutions Rating System (LFIRS). Under the original
LFIRS a bank was assigned ratings based on performance in five
areas the adequacy of Capital, the quality of Assets, the
capability of Management, the quality and level of Earnings and
the adequacy of Liquidity.
[162]
CAMEL ratings reflect the excellent banking condition and
performance over the last several years. There is a need for bank
employees to have sufficient knowledge of the rating system in
coder to guide the banking growth rate in the positive direction.
Lack
of
knowledge
among
employees
regarding
banking
performance indicators affects banks negatively as these are the
bases for any banking action.
Reasons for Weightage:
1.
Capital:
In Capital ratios we have given 0.5 to capital adequacy
ratio as it is the most important ratio which has significant
impact on capital of the basis. Second most important ratio
which affects the capital ratio is debit - enquiry ratio and rest of
then are of low impact.
2.
Assets:
In assets Ratio, we have highest importance to Net NPA
which shows clear picture how well company is performing with
its assets. Secondly Gross NPA is given is not given so much
importance compared to Net NPAs. Other ratios like Net NPA to
Total Assets, Total Investment to Total Asset.
3.
Management:
In management ratios there is no specific ratio which has
specific importance. All ratios have equal impact so here we have
equal weightage to all the ratios.
[163]
4.
Earnings:
In Earnings ratios there is no specific ratio which has
specific importance. All ratios have equal impact so here we have
equal weightage to all the ratios.
5.
Liquidity:
In liquidity ratios, there is no specific ratio which has
specific importance. All ratios have impact so here we have equal
weightage to all the ratios.
Table - 4.12 CAPITAL RATIOS
CAPITAL RATIOS
Particulars
Capital
Adequacy
Ratio
Debt
Equity
Ratio
Advances
to Assets
Securities
to Total
Investments
State Bank of India
12.93
15.43
46.30
82.60
ICICI Bank
12.46
9.50
50.75
68.05
Weightage
0.5
0.3
0.1
0.1
Total
State Bank of India
6.47
4.63
4.63
8.26
23.99
ICICI Bank
6.23
2.85
5.08
6.81
20.97
90
80
70
60
50
40
30
20
10
0
State Bank of India
(Fig. 4.12.1)
[164]
Securities to
Total
Investments
Advances to
Assets
Debt Eqiutiy
Ratio
Capital
Adequacy
Ratio
ICICI Bank
Table-4.13 ASSETS RATIOS
ASSETS RATIOS
Particulars
Gross NPA
to Net
Advances
Net NPA
to Net
Advances
Total
Investment
to Total
Assets
State Bank 7.90
of India
3.25
36.55
1.36
ICICI Bank
5.02
2.46
30.19
1.11
Weightage
0.1
0.5
0.2
0.2
Total
State Bank 0.79
of India
1.63
7.31
0.27
10.00
ICICI Bank
1.23
6.04
0.22
7.99
0.50
Net NPA to
total Assets
40
35
30
25
State Bank of
India
ICICI Bank
20
15
10
5
0
Gross NPA
to Net
Advances
Net NPA to
Net
Advances
Total
Net NPA to
Investment Total Assets
to Total
Assets
(Fig. 4.13.1)
[165]
Table-4.14 MANAGEMENT RATIOS
MANAGEMENT RATIOS
MANAGEMENT RATIOS
Particulars
MANAGEMENT RATIOS
Total
Advances
to Total
Deposits
Business
Per
Employee
(In Lacs)
Profit Per
Employee
(In Lacs)
State Bank of India
59.96
235.81
2.27
ICICI Bank
93.12
933.997
9.98
Weightage
0.33
Total
0.33
0.33
Total
%age
State Bank of India
19.79
19.79
77.82
0.75
78.57
20.14
ICICI Bank
30.73
30.73
308.21
3.29
311.5
79.86
Particulars
Total 1
Total 2
Final Total
State Bank of India
19.79
20.14
39.93
ICICI Bank
30.73
79.86
110.59
1000
900
800
700
State Bank of
India
600
500
ICICI Bank
400
300
200
100
0
Total
Business
Advances to
Per
Total
Employee
Deposit
(In Lacs)
Profit Per
Employee
(In Case)
(Fig. 4.14.1)
[166]
Table - 4.15 EARNINGS RATIOS
EARNINGS RATIOS
Particulars
Operating
Profit to
Average
Working
Funds
Spread
to
Total
Assets
Net Profit
to
Average
Assets
Interest
Income to
Total
Income
NonInterest
Income
to Total
Income
State Bank of India
2.08
2.66
0.87
84.06
16.08
ICICI Bank
2.19
1.66
1.09
77.93
22.14
Weightage
0.2
0.2
0.2
0.2
0.2
Total
State Bank of India
0.42
0.53
0.17
16.81
3.22
21.15
ICICI Bank
0.44
0.33
0.22
15.59
4.43
21.01
90
80
70
60
State Bank of
India
ICICI Bank
50
40
30
20
10
0
Operating
Profit to
Average
Working
Funds
Spread to Net Profit to
Total Assets
Average
Assets
Interest
Income to
Total
Income
(Fig. 4.15.1)
[167]
Non-Interest
Income to
Total
Income
Table - 4.16 LIQUIDITY RATIOS
LIQUIDITY RATIOS
Particulars
Liquid
Assets
to Total
Assets
Government
Securities to
Total Assets
Liquid Assets
to Demand
Deposits
Liquid
Assets to
Total
Deposits
State Bank of
India
10.19
29.95
87.41
14.15
ICICI Bank
7.79
20.69
140.64
15.31
Weightage
0.25
0.25
0.25
0.25
Total
State Bank of
India
2.55
7.49
21.85
3.54
35.43
ICICI Bank
1.95
5.17
35.16
3.83
46.11
160
140
120
100
State Bank of
India
80
ICICI Bank
60
40
20
0
Liquid
Government
Assets to Securities to
Total Assets Total Assets
Liquid
Assets to
Demand
Deposits
Liquid
Assets to
Total
Deposits
(Fig. 4.16.1)
[168]
TABLE 4.17 SHOWING CAMEL RATING COMPARSION
CAMEL RATING
Particulars
Assets
ICICI
Bank
23.99
10.00
39.93
21.15
20.97
7.99
110.59
0.2
0.2
4.80
4.19
Weightage
Total
Rank
35.43
-
-
21.01
46.11
-
-
0.2
0.2
0.2
-
-
2.00
7.99
4.23
7.09
26.11
2
1.60
22.12
4.20
9.22
41.11
1
of
ICICI
Bank
120
100
80
State Bank of
India
ICICI Bank
60
40
20
(Fig. 4.17.1)
[169]
ty
Li
qu
id
i
ni
ng
s
Ea
r
t
m
en
ag
e
M
an
A
ss
l
et
s
0
ita
State
Bank
India
Manage- Earnings Liquidity
ment
of
C
ap
State
Bank
India
Capital
Interpretation:
Here ICICI Bank got Rank I which indicates strong
performance and risk management practices that consistently
provide for safe and sound operations. The historical trend and
projections for key performance measures are consistently
positive. It is not performing well in liquidity ratio but it performs
strong in other ratios which covered up its weak performing
area.
The performance of ICICI Bank is better than State Bank of
India through CAMEL model. Hence the hypothesis is proved.
[170]
REFERENCE
1.
"Business Standard" Subscribers copy, Banking annual
Dec. 2008.
2.
Ibid.
3.
Report of Committee on Financial System 1991- a
summary; Reserve Bank of India, 2010.
4.
http://scribd.com, March-April 2010.
5.
Kumar, Satish, B. "Financial Performance of Private
Sector Bank in India, Coimbatore, Tamilnadu, India - An
Evaluation, 2009.
6.
"Business Standard" Subscribers copy, Banking annual
Dec. 2008.
7.
http://www.investopedia.com/terms/e/eps.asp, Dec.
2008
8.
www.investopedia.com/terms/r/returnonassts.asp.
9.
"Business Standard" Subscribers copy, Banking annual
Dec. 2008.
10.
Ibid.
11.
Ibid.
12.
www.iba.org.in, Jan.-April 2010.
13.
Ibid.
[171]
14.
Annual Report of SBI and ICICI Bank of 2000, 07, 08, 09.
15.
Ibid.
16.
Graewal Lovely, "A project on CAMEL Framework as a tool
of performance evaluation for banking" Som Institute,
Ahmedabad, 2010.
17.
SBI Annual Report and ICICI Bank Annual Report of
2000-01, 2001-02, 2002-03, 2003-04, 2004-05, 2005-06,
2006-07, 2007-08, 2008-09.
18.
Graewal Lovely, "A project on CAMEL Framework as a tool
of performance evaluation for banking" Som Institute,
Ahmedabad, 2010.
19.
http://en:wikipedia.org/wiki/CAMELS-ratings, Feb. 2010.
[172]