Industry Monitor

Banking &
Financial Services

Vol.906 June 2009

CONTENTS

INDUSTRY AT A GLANCE ....................................................................................................2

KEY DEVELOPMENTS ..........................................................................................................3
Marketing................................................................................................................................3
Finance ...................................................................................................................................3
Corporate................................................................................................................................4
Government Initiatives ...........................................................................................................6
INDUSTRY STATISTICS .........................................................................................................7
SERVICE FOCUS......................................................................................................................8
Credit Card .............................................................................................................................8
Overview ............................................................................................................................8
Global scenario ...................................................................................................................8
Indian scenario....................................................................................................................8
Outlook ............................................................................................................................10
COMPANY SCAN...................................................................................................................11
Bank of India Ltd..................................................................................................................11
Products List.....................................................................................................................11
Performance Analysis........................................................................................................12
Common Size Comparison ...............................................................................................13
Cost Structure Analysis .....................................................................................................13
Stock Performance............................................................................................................14
Outlook ............................................................................................................................14
STOCK SCAN .........................................................................................................................15
UPCOMING EVENTS ...........................................................................................................17

© Cygnus Business Consulting & Research Pvt. Ltd. 2009 1

Industry Monitor – Banking & Financial Services June 2009

INDUSTRY AT A GLANCE
MARKETING
¾ US Bank expands presence in Orange County
¾ Union Bank offers home loan at 8%, India
¾ BoB on overseas expansion spree, to open 10 offices this year, India

FINANCE
¾ Allied Bank suffers 50% drop in income California
¾ French bank Natixis posts massive first-quarter loss
¾ IndusInd Bank to raise Rs2.50bn, hire 700 this fiscal, India
¾ Tata Motors taps LIC to raise Rs2.50bn, India

CORPORATE
¾ TD Bank ranks highest in customer satisfaction for fourth year in a row, Canada
¾ Bank of America raises US$13bn in share sale, US
¾ UK panel blames bonus-driven pay practices for banking crisis
¾ German ‘bad bank’ scheme criticism rejected
¾ Gulf banks prepare for next generation of multi-use payment cards & personal card, UAE
¾ UAE urged to issue licences to Indian banks
¾ Japanese banks in expansion mode
¾ Agricultural bank raises US$7.3bn in bond sale, China
¾ Tata group re-enters housing finance, India
¾ RBI imposes Rs0.1m penalty on CKP Co-op Bank, India
¾ SBI to push for mergers of associate banks, India
¾ Deutsche Postbank (India) cuts RBLR
¾ Fitch downgrades credit outlook of Axis Bank, India
¾ 2 PSU banks may dilute govt stake, India
¾ BoI implements core banking system in all branches, India
¾ ICICI Bank tweaks deposit rates; IDBI Bank slashes, India
¾ Dena bank targeting business of Rs1260bn in 3 years, India
¾ Axis Bank cuts benchmark lending rate by 0.5%, India

GOVERNMENT INITIATIVES
¾ Obama bets on ‘toxic’ asset plan, US
¾ Opening up banking sector for foreign players deferred, India

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Industry Monitor – Banking & Financial Services June 2009

KEY DEVELOPMENTS
Marketing
America
US Bank expands presence in Orange County
US Bank recently completed converting more than 170 former Downey Savings & Loan centres
throughout California and Arizona, thereby increasing its presence in Orange County. The firm now
offers twice as many branches in the Los Angeles and Orange County areas. US Bank acquired the
banking operations of the Newport Beach-based firm in November of last year and now has nearly 560
branches and 890 ATMs in California. It's a 37% increase in offices in less than a year.

Asia-pacific
India: Union Bank offers home loan at 8%
Union Bank of India recently launched its Special Housing Loan Scheme with a combination of fixed and
floating rate of interest. During the tenure of the loan, 8% fixed rate of interest will be applicable for the
first year. The floating rate will become applicable from the second year till the loan is fully repaid. Under
the scheme, applicable only to new accounts, the bank will offer home loans for a maximum tenure of 20
years and the loan ceiling will be Rs5m. The scheme is open up to September 30, 2009.

India: BoB on overseas expansion spree, to open 10 offices this year

Undeterred by the global economic slowdown, Bank of Baroda (BoB), the bank with the largest overseas
presence, recently announced that it is planning to open about 10 foreign branches in the current fiscal.
Overseas expansion plan includes opening of a subsidiary in Malaysia, a branch at New Zealand, he
added, a regulatory approvals are being sought.

Finance
America
California: Allied Bank suffers 50% drop in income
Allied Banking Corp suffered a 50% drop in its earnings in the first quarter after recording higher
expenses and losses from foreign exchange and securities trading. A consolidated income statement filed
at the Philippine Stock Exchange showed the bank earned only P150.9m in the first three months of the
year, half of the P302.64m notched in the same period last year.

Europe
France: French bank Natixis posts massive first-quarter loss
Natixis known as the youngest bank in France has posted €1.8 billion first-quarter loss, triggered by its
toxic assets. Natixis' performance in the first quarter is really frustrating, compared with a profit of €69m
a year earlier. Its two main shareholders, Banque Populaire and Caisse d'Epargne, will give a capital
injection totalling €3.5 billion in order to maintain a solid capital structure. The so-called toxic assets are
blamed for the heavy loss. Natixis' assets of the toxic portfolio amounted to €33.7 billion in the first
quarter, which makes the bank suffer a loss of €1.9 billion.

Asia-pacific
India: IndusInd Bank to raise Rs2.50bn, hire 700 this fiscal
IndusInd Bank may raise Rs2.50 billion of tier 2 capital after July this year to fund its growth. The bank
managing director & CEO Romesh Sobti announced that the bank would need this capital if its lending
grows 25-30%. To support its growth, IndusInd Bank has also decided to hire 700 managers in the lower
and middle management level. It may be recalled that it hired 2200 people last fiscal. It has a headcount of
2700 now.

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Industry Monitor – Banking & Financial Services June 2009
India: Tata Motors taps LIC to raise Rs12.50bn
Tata Motors recently raised Rs12.50 billion by selling non-convertible debentures (NCDs) to Life
Insurance Corporation of India (LIC). The NCDs bear a coupon of 10%, and have a maturity of seven
years. The debt is part of a larger money raising programme to refinance the bridge loan taken at the time
of the Jaguar Land Rover acquisition.

Corporate
America
Canada: TD Bank, ranks highest in customer satisfaction for fourth year in a row
TD Bank, America's Most Convenient Bank, is ranked highest in customer satisfaction in the Mid- tlantic
region according to the J.D. Power and Associates 2009 Retail Banking Customer Satisfaction Study(SM).
This is the fourth year in a row TD Bank has ranked highest in customer satisfaction.

US: Bank of America raises US$13bn in share sale

Bank of America has raised roughly US$13 billion after selling 1.25 billion shares of common stock,
according to people familiar with the situation. The sale is part of the bank's previously announced plan
to sell common shares as it tries to come up with US$33.9 billion in equity to meet the US Government's
stress test requirements. It sold a block of 825m shares at US$10, these people declared, which was below
its closing price of US$11.25. It sold the other 425m shares previously, these people added.

Europe
UK panel blames bonus-driven pay practices for banking crisis
At a time when the British economy continues to reel under recession, an expert panel has blamed
"reckless" risk-taking stoked by bonus-driven executive compensation practices as the prime reason for
the nation's banking crisis. The UK Treasury Committee report declared that the banking crisis has
exposed serious flaws in remuneration pattern in the sector.

German ‘bad bank’ scheme criticism rejected

Germany’s financial regulator has rejected criticism of the country’s planned “bad bank” scheme and
urged banks to take advantage of the chance to get rid of toxic assets before a possible wave of further
hits to their capital. Jochen Sanio, president of BaFin, announced that there was a “concrete risk “that
sudden downgrades to some bank assets would dramatically raise the amount of capital needed by banks.

Africa & Middle East

UAE: Gulf banks prepare for next generation of multi-use payment cards & personal card
International MasterCard Worldwide, as main sponsor for Cards Middle East this week in Dubai, was out
in the market in force to continue the drive to implement chip (EMV) payment cards globally and to
introduce a new more secure product for Internet banking and Internet (card not present) transactions.
Some 35 to 40 bankers from around the region attended the MasterCard workshop on how to implement
infrastructure to support chip card deployment.

UAE urged to issue licences to Indian banks

A top official from India's state bank has urged the UAE Central Bank to begin issuing licences to his
country's banks. It is more than three decades since the Central Bank issued a full banking licence to any
Indian bank, announced AJ Vidyasagar, CEO of State Bank of India (SBI) in the UAE. Currently, Bank
of Baroda remains the only Indian full-licensed bank in the country.

Asia-pacific
Japan: Japanese banks in expansion mode
Japanese banks, which have recently observed some of the constraints on simultaneously providing
banking and broking services revoked in their domestic market, have been swift to capitalise the
opportunities offered by the global financial crisis to boost their investment banking skills. Mitsubishi

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Industry Monitor – Banking & Financial Services June 2009
UFJ Financial Group, a major holder of Bank of Tokyo Mitsubishi UFJ, spent US$9 billion to acquire
20% stake in Morgan Stanley; on the other hand, Nomura got the Asian, Middle Eastern and European
operations of Lehman Brothers.

China: Agricultural bank raises US$7.3bn in bond sale

Agricultural Bank of China raised RMB50 billion (US$7.3bn) in the nation’s biggest corporate bond sale
to boost capital and help pave the way for an initial public offering. The largest lender to China’s 800m
farmers increased the sale of subordinated bonds from a targeted RMB40 billion, Beijing-based
Agricultural Bank declared in a statement posted on the official Chinabond Web site recently.

India: Tata group re-enters housing finance

The Tata group that exited the housing finance business about six years ago is now making a second foray
with the launch of Tata Capital Housing Finance Ltd. The HFC, a wholly-owned subsidiary of Tata
Capital Ltd, has an authorised capital of Rs 1 billion and a paid-up capital of Rs100m, announced Praveen
Kadle, Managing Director and CEO, Tata Capital. The company, which got approval from the National
Housing Bank a month ago, will start with 30 branches in the first year and focus mainly on Tier-II and
Tier-III cities. The disbursal target for the first year would be between Rs2.00 to 4.00 billion.

India: RBI imposes Rs0.1m penalty on CKP Co-op Bank

The Reserve Bank of India has imposed a monetary penalty of Rs0.1m on The CKP Co-operative Bank,
Mumbai, for violation of the apex bank's instructions/guidelines on Know Your Customers norms, a
press release issued recently. The Reserve Bank had issued a show-cause to the bank, to which the bank
submitted a written reply.

India: SBI to push for mergers of associate banks

After merging State Bank of Saurashtra, India's largest lender State Bank of India might soon start the
process of integrating its remaining associates, beginning with two large ones State Bank of Patiala and
State Bank of Hyderabad. According to the roadmap set by State Bank, all its associates will merge with
the parent entity “as quickly as possible” to make SBI one of the top 25-30 banks in the world.

India: Deutsche Postbank (India) cuts RBLR

Deutsche Postbank Home Finance Ltd (DPHFL) has announced a 50 basis point reduction in its retail
basic lending rate (RBLR). All existing floating rate customers will benefit from this move, according to a
company release. This is the second rate cut in last four months by the German Deutsche Postbank-
owned housing finance company in India.

India: Fitch downgrades credit outlook of Axis Bank

Rating agency Fitch recently given Axis Bank's credit rating may be revised downward in future as its
loans to corporates have expanded rapidly over the last two years amid economic slowdown. Fitch
Ratings has recently affirmed Axis Bank Ltd's (ABL) National Long-term rating at 'AAA (ind)', and
revised its Outlook to Negative from Stable. AAA is the highest credit rating. The negative outlook
reflects the bank's greater vulnerability to the current challenging operating environment given the rapid
growth of its corporate loan book over the last two years.

India: 2 PSU banks may dilute govt stake

As markets cheered a more stable and stronger UPA government, United Bank of India (UBI) and
Punjab & Sindh Bank (P&S Bank) the last two unlisted public sector banks - are keeping a close tabs on
benchmark equity indices as they plan to raise capital through government stake dilution. With equity
indices showing signs of an upsurge, these banks are expecting to garner sizeable premium when they
offload equity.

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Industry Monitor – Banking & Financial Services June 2009
India: BoI implements core banking system in all branches
Bank of India (BoI) recently announced that it has completed implementation of core banking solution
(CBS) in all its 3023 branches. BoI opted for an outsourced model for the CBS implementation, the bank
announced in a statement here. The project has been outsourced to Hewlett Packard India Sales for a 10-
year period.

India: ICICI Bank tweaks deposit rates; IDBI Bank slashes

While private sector lender ICICI Bank has both increased and decreased its deposit rates by 0.25%
points on select maturities, government-owned IDBI Bank slashed its deposit rates by 50-100 bps points.
ICICI Bank has cut its deposits rate by 25bps on fixed deposits (FDs) for 90 days to 4.5% per annum and
for 91 days to 180 days to 5.5%. It also increased the rate by 25bps on FDs for 270 days to one year to
7%. The bank has also scrapped the shortest maturity period between 7 days and 14 days. Now the
shortest period for FDs will be 15 days, where the interest rate will remain unchanged at 3.25% per
annum.

India: Dena bank targeting business of Rs1260bn in 3 years

Public sector Dena Bank aims to touch Rs1260 billion of business in three years time and open 400 new
branches by this period, a senior official announced. The bank's current year business target was Rs850
billion against last year's Rs720 billion, D L Rawal, the banks's Chairman and Managing Director, declared
to press. Dena bank would be adding 100 new branches this year, including 10 branches in Chennai
region and 3 in Kerala at Cheratlla, Muvattupuzha and Angamally. It has opened 4 Retail Asset branch
and would be opening 8 more, including one at Chennai. There were also plans to open 3 corporate
business branches one each in New Delhi, Kolkata and Chennai.

India: Axis Bank cuts benchmark lending rate by 0.5%

India's third largest private sector lender Axis Bank has reduced its benchmark prime leading rate (BPLR)
by 0.5% recently. The bank's BPLR now stands reduced at 14.75%, a press release issued. The rate cut
came a day after Reserve Bank Governor, D Subbarao said banks have scope to further lower their
lending rates.

Government Initiatives
America
US: Obama bets on ‘toxic’ asset plan
The long-awaited Obama administration’s plan to rid banks of their ‘toxic’ assets was announced recently.
The gist is that a public-private partnership will be established to acquire loans and securities from banks
through a ‘Legacy Loans Program’ and ‘Legacy Securities Program’. In the first, pools of loans will be
auctioned to private investors who will be provided with financing from the Federal Deposit Insurance
Corporation (FDIC) to acquire the loans. Both Government and the private sector will contribute to the
initial capital. If and when the loans are recovered or sold off, the Government gets a share of the profits.

Asia-Pacific
India: Opening up banking sector for foreign players deferred
The Reserve Bank of India has deferred the opening up of the banking sector for foreign players and
decided to continue with the current policy and procedures governing the presence of foreign banks in
India. In its Annual Policy Statement 2009-10, the RBI declared that, In view of the current global
financial market turmoil, there are uncertainties surrounding the financial strength of banks around the
world. Further, the regulatory and supervisory policies at national and international levels are under
review.

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Industry Monitor – Banking & Financial Services June 2009

INDUSTRY STATISTICS
Overview of Scheduled Commercial Banks' Investments – India

(Rs Bn)

Outstanding SLR Commercial Bonds/ Mutual

Shares
as on Securities Paper Debentures Funds

March 21, 2003 5475.46 40.41 92.30 812.84 375.21

March 19, 2004 6775.88 38.35 90.06 829.18 449.18
March 18, 2005 7391.54 39.44 122.19 859.13 443.01
March 31 2006 7174.54 48.37 131.70 777.21 396.13
March 30, 2007 7915.16 90.38 184.28 746.60 383.29
March 28, 2008 9717.15 132.70 267.08 858.65 447.66
March 27, 2009 11657.46 192.60 282.93 882.11 761.89
Source: RBI & Cygnus Research

15500 Investments Scenerio of Scheduled Commercial

Banks - India
11500
March 28 2008
Rs Bn

7500 March 27 2009

3500

-500
Mutual
Commercial
Securities

Shares

Funds
Debentures
Bonds /
SLR

Paper

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Industry Monitor – Banking & Financial Services June 2009

SERVICE FOCUS
Credit Card
Overview
A credit card is a system of payment named after the small plastic card
issued to users of the system. In the case of credit cards, the issuer lends
money to the consumer to be paid to the merchant. In contrast, a credit
card allows the consumer to 'revolve' their balance, at the cost of having
interest charged. Most credit cards are of the same shape and size, as
specified by the ISO 7810 standard. The most common credit card size, known as ID-1, is 85.60 ×
53.98mm. Most of the banks in India issue credit cards through partnerships with various foreign credit
card issuers and banks to provide their customers wider acceptability.
Major Credit Card Brands
Global scenario 9 UnionPay
The global financial crisis has shown a huge affect on the credit card 9 Visa
market, in China after five consecutive years of growth in the credit card 9 Master
market has now finally started its adjustment from second quarter of 9 American Express
2008. China’s banks have stopped to issue credit cards due to the 9 Capital One
degradation of international credit market and that banks needed to 9 Citi
control risks. As a result, the increase of issue of credit cards was down 9 JCB
more than 50% from a year ago. But the absolute number of credit cards 9 First PREMIER
still went beyond 150m in China in 2008 in spite of the slowdown of
issue. In China credit card market UnionPay is occupying 64.6%, Visa 18.0%, MasterCard 15.2%,
American Express 0.7% and JCB 1.6% by the end of year 2008.

Globally Chase Platinum credit card is Global Credit card Market share:2008
occupying first place in terms of market
share by 24% and the credit outstanding
stood at US$183.32 billion by the end C apital one
of 2008. The second position is taken C iti A.E
8%
by Bank of America by maintaining its 14% 12%
credit outstanding at US$166.32 billion, Discover
7%
3rd , 4th and 5th positions has been taken BOA Wells Fargo
by Citi (US$106.74bn), American 22% 5%
Express (US$88.02bn) and Capital one
(US$60.08bn) with there outstanding C hase
HSBC
amounts respectively. 4%
24%
USAA US Bank
Indian scenario 2% 2%
In past few years, credit card market has Source: Credit card.com; Cygnus Research
shown remarkable developments. Banks
had issued more than 27m credit cards at the end of FY08, but the number has dropped in current fiscal
as the current liquidity crunch has made banks more cautious on their move regarding credit card
issuance. Now the banks are reviewing their credit card limits in wake of the economic slowdown and
credit crunch to reduce the possible risk of defaults to its existing and potential new customers. Some of
the banks also stopped issuing credit cars.

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Industry Monitor – Banking & Financial Services June 2009

Type of Credit Cards (Global)

Low Interest These give people a chance to pay more money towards principal each month,
Credit Cards instead of writing checks that simply cover the interest on an account.
A balance transfer credit card is one onto which you can transfer some of your debts
Balance
and pay the sum off at a 0% interest rate for a set period of usually between six and
Transfer Cards
14 months.
Instant Instant approval credit cards work well for people that want to use their new line of
Approval credit without the usual 2-6 week waiting period
Reward Credit It is a card that offers you a rebate, cash back or reward points that can be used to
Cards purchase goods and services in exchange for using their credit card
This card rewards for using them with cash back incentives and rebate programs.
Cash Back
Credit cards with cash rebates and incentives usually require a good to excellent credit
Credit Cards
rating for approval.
Airline Credit An airline-sponsored credit card, good for airline tickets only. Also known as the
Cards Universal Air Travel Plan Card.
Source: credit card.com; Cygnus Research

The credit card business is facing a 35 50

Number of Credit Card in India
slowdown as rising defaults have prompted
banks to tighten due-diligence procedures. C redit cards
40
The growth in new credit card accounts 30 Growth rate
has been lower at 18% in 2007-08, 30
compared to 33% in 2006-07. The total 25

%
card base in the country currently stands at 20
m

26m in 2007-08. This is because earlier 20

banks would extend loans to customers 10
with a minimum annual income of
Rs80,000, they have now increased this to 15
0
a minimum of Rs0.12m. Banks are also
asking for the PAN card and strictly 10 -10
following other ‘Know Your Customer’ 2004-05 2005-06 2006-07 2007-08 2008-09*
procedures before giving credit cards. The
interest rates on various segments in the Credit Card Outstandings in India
retail asset portfolio have seen a steady rise 25000
and therefore, the outflow in terms of an Non-Food C redit
EMI (equated monthly installments) has C redit card our standing
also gone up. The default rates on credit
15000
cards have moved up by almost 150-200
basis points this year to 11-12% in 2007-
08, against 9-10% in 2006-07.
5000
Rs bn

The latest data released by RBI suggest

that the number of credit cards in India -5000
have declined by 2.2m. In April 2008, there 2005-06 2006-07 2007-08
were 28.3m credit cards and in December
Source: RBI; Cygnus Research;* data up to Dec’08
2008 the number has fallen to 26.1m. In
the year 2007-08 India’s non-food credit stood at Rs22030.38 billion of which credit card outstanding
amount was Rs192.59 billion. The share of credit card outstanding amount in the total non-food credit in
the year 2007-08 stood at 0.87%.

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Industry Monitor – Banking & Financial Services June 2009
New Initiatives
Newly some of the insurance companies are also showing interest in the issuing of credit card; recently
one of the India biggest insurance companies ie LIC had made a JV with Karnataka-based bank for the
launch of its white-labelled credit card. It is first targeting its existing policy holders, the LIC credit cards
will be just like other credit cards and with some of the special value added services like payment of
premiums for policy-holders.

The types of credit cards offered by Indian Banks are:

Silver Cards - Silver credit cards come with advantages such as lower annual membership fees if there is
any, and a lower threshold salary which banks use to evaluate your application in case you should apply.

Gold and Platinum Cards - Gold and platinum credit cards are a status symbol for any credit card
holder, bringing prestige since getting gold and platinum cards usually require that you have good credit
rating and a higher income levels. Gold and platinum cards offer higher limit for cash advance
withdrawals and sometimes can provide higher credit limits as compared to standard or silver cards.

Co-branded Credit Cards - They are credit cards, which are associated with a particular firm like an
airlines or retail outlet. These cards can be used just like regular credit cards but they also offer benefits to
users of the relevant product like frequent travel points and special discounts.

Bank Types of Card

ICICI Platinum, Titanium, Kingfisher Airlines, Big bazaar Gold, HPCL Gold, Preferred,
Picture, EMI, Classic, Affinity and Value for Money Cards
HDFC Silver, Value Plus, Health Plus, Gold, Titanium, Woman's, Platinum Plus, Platinum Plus,
World MasterCard and Corporate
HSBC Platinum, Gold and Classic.
City bank Airline/Travel, Fuel/Auto, Shopping, Telecom, Entertainment, Special Interest and
Dinners club
Axis Platinum, Gold Plus, Gold, Silver Plus, Silver and Secured
ABN Amro Freedom, Smart gold, Wellness, Barista and Adlabs

Advantages
¾ Need not carry cash
¾ Need not run to ATM in case you need money
urgently
¾ Sometimes you get cash back
¾ You can buy tickets/shop online easily
¾ You can build your credit rating
Disadvantages
¾ You may need to pay annual fee - undesirable
cost. So, it’s better to go for the credit card that
does not charge such a fee.
¾ There is tendency to spend more especially if
you are an impulsive buyer.
¾ You need to carry it safely.

Outlook
Indian consumers spend an average of Rs4,000 a month on their credit cards. It is only 1% of their total
purchases. Although this figure is quite below the world average of 9%, yet banks and credit cards issuers
fear high default rate in near future because of the global slowdown and high inflation in the country.

In the year 2008-09 the credit losses were Rs3420 per active card per year compared to Rs3070 in the US
and Rs1220 in Australia, although the purchasing power of Indian consumers was lower compared to the
customers in these markets. Also, Indian customers use their cards less frequently and for lower amounts.
The credit card is most popular mode of online payment making, in India 91% of net user ‘window shop’
online, 74% travel buyers have bought train tickets online and 34% air tickets. In the year 2008-09 credit
card business is expected come down in its growth percentage from the last year growth.

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Industry Monitor – Banking & Financial Services June 2009

COMPANY SCAN

Bank of India Ltd

Bank of India (BOI) was founded on September 7, 1906 by a group of
eminent businessmen from Mumbai. The bank was under private
ownership and control till July 1969 when it was nationalised along
with 13 other banks. The bank first started up with one office in
Mumbai with a paid-up capital of Rs5m and 50 employees,
subsequently the bank made a rapid growth over the years and
blossomed into a mighty institution with a strong national presence and sizable international operations.
The bank has 3021 branches in India spread over all states/ union territories including 136 specialised
branches. These branches are controlled through 48 Zonal Offices. The bank also has sizable presence
abroad, with a network of 28 branches (including five representative offices) at key banking and financial
centres viz. London, New York, Paris, Tokyo, Hong-Kong and Singapore. The international business
accounts for around 17.82% of the bank's total business.
In the year 2008, the bank had implemented Agriculture Debt Waiver and Debt Relief Scheme as per RBI
guidelines. The Rs6.46 billion was waived under the scheme in 3,41,136 accounts for which preliminary
claim was preferred with RBI. An amount of Rs.2.65 billion (41% of the 37 claim amount) has been
reimbursed by the RBI in 2008. The claims under waiver has since been verified and certified by Statutory
Central Auditors.

Mission: - To provide superior, proactive banking services to niche markets globally, while providing
cost-effective, responsive services to others in its role as a development bank, and in so doing, meet the
requirements of the stakeholders.
Vision: - To become the bank of choice for corporates, medium businesses and upmarket retail
customers and to provide cost effective developmental banking for small business, mass market and rural
markets.

Products List
Deposits Loans NRI Cards
9 Saving 9 Personal Loan 9 Housing Loans to NRIs/PIOs 9 Debit
9 Current 9 Agriculture Sector 9 NRI Deposit Schemes 9 Credit
9 Term 9 SME 9 NRI -Yield Enhancing Scheme
9 Tax Saving 9 Commercial Loans 9 Securities Transaction Tax
9 NRI 9 Trade Finance 9 Foreign Currency Deposit Scheme
9 NRI Loans 9 Ac Opening Form for NRI
Source: Company; Cygnus Research

KEY RATIOS
2007-08 2006-07 2005-06 2004-05
Credit Deposit Ratio 73.58 70.29 69.87 67.05
Cash Deposit Ratio 7.02 5.98 5.50 5.41
Investment Deposit Ratio 28.64 31.46 35.00 37.16
NIM (Net Interest Income/Total Funds) 2.65 2.71 2.54 2.49
Capital Adequacy Ratio 12.95 11.58 10.75 11.52
Net Profit/Total Funds 1.26 0.88 0.68 0.38
Return on Net Worth (%) 27.58 21.25 15.37 8.36
Source: Company; Cygnus Research

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 Industry Monitor – Banking & Financial Services June 2009

Company’s Performance at a Glance (Rs m)

2008-09 2007-08 2006-07 2005-06
Operating Income 163473.60 123552.20 91803.30 70287.00
Interest on Advance 125392.50 92751.20 63975.30 45729.80
Income on Investment 33703.10 26390.20 24600.90 21612.90
Other Incomes 30518.60 21169.30 15629.50 11843.80
CAR 13.21 12.95 11.58 10.75
NPM 18.40 16.26 12.23 9.98
Interest Expenditure 108484.50 81259.50 57398.60 43967.20
Operating Expenditure 30939.70 26449.90 26084.30 21151.40
PAT 30073.50 20094.00 11231.70 7014.40
Source : BSE India; Cygnus Research; CAR- Capital Adequacy Ratio

Performance Analysis

PERFORMANCE ANALYSIS OF BOI

Quarterly Performance Financial Year Performance
JFM09 JFM08 Var (%) 2008-09 2007-08 Var (%)
Operating Income 44931.00 35016.10 28.32 163,473.60 123,552.20 32.31
Other Income 7853.70 6532.50 20.23 30518.60 21169.30 44.16
PBIT 44678.00 34970.10 27.76 163052.50 118271.60 37.86
Interest Expenses 30597.50 22847.90 33.92 108484.50 81259.50 33.50
PBT 14080.50 12122.20 16.15 54568.00 37012.10 47.43
Tax 2130.50 1685.90 26.37 11570.80 6753.10 71.34
PAT 8103.70 7570.40 7.04 30073.50 20094.00 49.66
Source: Company; Cygnus Research

Indian economy is mirrored by the financial sector of the country. Credit growth has slowed down in the
banking industry, to 17.3% after staying in the range of 28-30% during most part of the OND08. Sudden
dip in credit growth is on account of repayment of oil marketing companies, slowdown in industrial
production, lower working capital requirement and delay in execution of capex plans. Credit growth
somehow remained healthy in the past on account of desperate need for funds as other source of capital
for corporate India such as ECB, and FCCB had totally dried up.

204000 Retail Credit-Key sectors

Operating Income

Agricultu
154000 re
14%

104000 Corpora
te SME
49% 22%

54000
Retail
15%
Rs m

4000
2005-06 2006-07 2007-08 2008-09

Source: Company site; Cygnus Research

© Cygnus Business Consulting & Research Pvt. Ltd. 2009 12

Industry Monitor – Banking & Financial Services June 2009
However, deposits are not growing at the required pace. Deposit growth is continuously hovering
between 19-21% for JFM09 quarter as against 23-25% in corresponding quarter last year. Credit-Deposit
ratio remains healthy at 72.3%. Major growth in deposits during the year has come through time deposits.
Going forward with decreasing interest rate scenario, transition from time to demand deposit should take
place.

During 2008-09 BOI’s global business mix increased by 26.30% to Rs3344.40 billion. The domestic
business mix increased by 26.77% to Rs580.37 billion and the foreign business increased by 24.16% to
Rs115.99 billion. The banks deposits during 2008-09 increased by 26.46% to Rs396.96 in which domestic
deposit contributed more than the foreign deposit. The domestic gross advance increased by 26.08% to
Rs239.66 and the foreign advance increased by 25.52% to Rs59.73 against the previous year 2007-08. In
2008-09 the networth of the bank increased by 29.16% to Rs111.44 billion from Rs86.29 billion. Return
on asset improved to 1.49% in March 2009 from 1.25% in March 2008.

During JFM09, the banks operating profit increased by 16.17 % from Rs12.12 billion to Rs14.08 billion.
The other incomes of the company have increased by 20.23% to Rs7.85 billion. Net profit increased by
7.40% from Rs7.57 billion to Rs8.10 billion. In the year 2008-09, the book value of the share has
increased to Rs211.89 from Rs164.05 in the year ago.

Common Size Comparison

BOI when compared with its peers State Bank of
Common Size Comparison for 2008-09
India (SBI) and Punjab National Bank (PNB)
shows good operational performance than PNB BOI SBI PNB
and more are less equal to SBI. In terms of Operating Income 100 100 100
operational expenses the bank is spending more Other Income 17.13 17.76 14
than PNB and less than SBI as the percentage of Operating Expenses 21.41 25.76 17.7
interest incomes. In terms of interest on balance as Administrative Expenses 8 9.85 7.46
the percentage of incomes BOI is performing Interest on Balance 3.15 2.45 1.05
more than SBI and PNB. BOI is paying interest Interest paid 65.77 65.23 61.2
amount more are less equal to SBI and more than PBT 29.96 26.78 28.08
PNB. In terms of PAT the bank is performing well Tax 5.47 7.58 8.74
than its peers due to its vast expansion plans and PAT 16.26 13.75 14.36
launching of new products. Source: Company; Cygnus Research
Cost Structure Analysis
Cost Structure as Percentage of Operating Income
2008-09 2007-08 2006-07 2005-06
Interest Expenses 66.36 65.77 62.52 62.55
Operating Expenses 18.93 21.41 -28.41 30.09
Staff Expenses 11.85 13.41 15.60 16.01
Other Operating Expenses 7.07 8.00 10.83 11.20
Tax Charges 7.08 5.47 4.46 3.05
Source: Company; Cygnus Research

In 2008-09, interest expenses as percentage of operating incomes increased by 59.27bps against 2007-08.
Operating expenses declined by 248.15bps and stood at Rs30.93 billion in 2008-09 against the previous
year. Staff cost has also reduced by 155.99bps compared to the previous year 2007-08. The bank has
shown tax efficiency, even though operating income has increased from 2004 to 2008. When all the
expenses are compared, the interest expenses take the major part of cost structure (around 65.34% of the
operating income). Other operating expenses include the cost occurred on making any short term
investments by the bank, it has been declined by 92.16bps against 2007-08. The tax paid by the bank in
the year 2008-09 has increased by 161.23bps as the percentage of operating incomes, against previous
year.

© Cygnus Business Consulting & Research Pvt. Ltd. 2009 13

Industry Monitor – Banking & Financial Services June 2009

Stock Performance
90
The company’s stock price, which was 80 Cost Structure

as a % of sales
Rs295.00 at the end of May 2008, has 70
60
fallen to Rs235.15 by April 2009, because 50 2007-08
of market fluctuation and global 40 2008-09
30
slowdown. The 52-week high share price 20
10
of the company recorded as Rs295.00 in 0
the month of May 2008, and the 52-week -10

low at Rs216.16 in the month of June

es

s
s

ge
se

se

se
ns
2008. The poor performance of the scrip

ar
pe

pe

pe

pe

Ch
Ex

Ex

Ex

Ex
is due to the negative market sentiments.

x
Ta
st

g
af
tin

tin
In the year 2008-09 the bank declared 80%

re

St
te

ra
ra
In

pe
of its profits as the dividend i.e Rs8 per

pe
O

O
share. About major stock of share i.e. 65%

e r
th
O
are in the hands of promoters, institutions
hold 27% of the company’s shares and rest of the shares i.e. 8% is with the hands of public.

120 Relative Market Cap Shareholding Pattern

Performance
100

80 Public
8%
60
Institutio
40 BSE Sensex
ns
BSE Banking 27%
20
BOI promoter
0 s
65%
Feb-09

Mar-09

Apr-09
May-08

Jul-08

Aug-08
Jun-08

Sept-08
Oct-08

Nov-08

Dec-08

Jan-09

Source: BSE India; Cygnus Research

Outlook
Interest rates have remained high for over a year and the ill effects have already been seen in the form of
slowing IIP & GDP. There has been a sharp deterioration in the global financial environment, which has
impacted domestic money, and forex markets with a marked increase in volatility and a sharp imbalance
on market liquidity as reflected in the movements in overnight interest rates and the high recourse to the
Liquidity Management Facility.

BOI has strong presence in the well industrialised and growing western India. This region accounts for
largest share (37%) of credit in the banking industry. BOI also has a strong international presence with
international operations contributing to about 20% of the total business. It has plans to diversify its client
base and embark on retail business as well. BOI has also made its intentions clear to grow inorganically
with a view to increase its international presence. Till now the bank has shown good growth performance
in terms of its Net Interest Incomes. In the year 2008-09 saving bank deposits increased by 14.27% to
Rs379.44 billion against Rs332.07 in the pervious year. The aggregate deposits of the bank increased by
27.24% to Rs1581.21 billion in the year 2008-09. The bank is maintaining its PLR at 12.00% less than SBI
and ICICI Bank. In the coming quarters the bank is expected to perform well and increase its market
network globally.

© Cygnus Business Consulting & Research Pvt. Ltd. 2009 14

 Industry Monitor – Banking & Financial Services June 2009

STOCK SCAN
140
Relative Market Cap performance

130 BSESensex
BSE Bankex
120 SBI
IC IC I
110

100

90
16-Apr
17-Apr
18-Apr
19-Apr
20-Apr
21-Apr
22-Apr
23-Apr
24-Apr
25-Apr
26-Apr
27-Apr
28-Apr
29-Apr
30-Apr
1-May
2-May
3-May
4-May
5-May
6-May
7-May
8-May
9-May
10-May
11-May
12-May
13-May
14-May
15-May
130
Relative Market Cap performance

120 BSESensex

BSE Bankex

110 CANARA

100

90
16-Apr
17-Apr
18-Apr
19-Apr
20-Apr
21-Apr
22-Apr
23-Apr
24-Apr
25-Apr
26-Apr
27-Apr
28-Apr
29-Apr
30-Apr
1-May
2-May
3-May
4-May
5-May
6-May
7-May
8-May
9-May
10-May
11-May
12-May
13-May
14-May
15-May
Source: BSE India; Cygnus Research

16 Apr – 25 Apr 26 Apr – 02 May 03 May – 09 May 10 May – 15 May

Sensex gained The Sensex posted The Sensex posted The Sensex posted
during this period sharp gains during sharp gains during gains during this
under consideration this week aided by this week aided by period due to rise in
SENSEX due to strong cues sustained buying positive cues from FIIs.
in European support from the overseas markets.
markets. foreign institutional
investors (FIIs).
This week the The banking index The sentiments of the In this week the
banking index did not make any market had not banking index
BSE followed Sensex and movement during worked out for fallowed BSE Sensex
Banking rose by 4.14% to this week. banking index and so and rose by 6.93% to
5591 points. declined by 2.06% to 6375 points.
6007 points.

© Cygnus Business Consulting & Research Pvt. Ltd. 2009 15

Industry Monitor – Banking & Financial Services June 2009

The scrip moved This week the scrip The scrip further Good positive
with its index and went against Sensex declined by 3.00% to sentiments of the
rose by 3.65% to and declined by Rs1325.15 due to lack market and good
Rs1307.80. This was 0.35% to of bulk deals in the financial
due to the good Rs1277.07. market. performance of the
SBI
result shown by the company had made
company by year the scrip rise by
end 2009. 4.09% to Rs1312.25.

The scrip rose by Scrip continued the This week the scrip Huge investment by
1.43% to Rs432.50, positive movement declined by 1.60% to FIIs had brought big
during this week and rose by 2.09% Rs520.60. movement in the
ICICI
and followed its to Rs477.75. This scrip registering an
BANK
banking index. was due to good increase of 9.74% to
positive sentiment Rs574.45.
of the market.
In this week the The scrip remained The good results This week the scrip
scrip rose by 2.24% flat in this week. declared by the continued the
CANARA and stood at company made the positive movement
Rs194.35 and scrip rise by 8.16% to and increased by
followed its index. Rs224.70. 5.90% to Rs228.95.

© Cygnus Business Consulting & Research Pvt. Ltd. 2009 16

Industry Monitor – Banking & Financial Services June 2009

UPCOMING EVENTS
1. Event Banks Insurance & Real Estate
Date Jun 17-20, 2009
Venue Beirut International Exhibition & Leisure Centre, Beirut, Beyrouth
Highlights Banks Insurance & Real Estate is the first exhibition to bring together banks,
credit card companies, insurance companies, property developers and real estate
brokers. Banks, insurance & real estate is a one-stop-shop for corporate
Lebanon.
Contact Details Promofair S.A.L, Accaoui, Media Center II Building, P.O. Box 165972,
Achrafieh, Beirut, Lebanon. Tel: +(961)-(1)-561600
2. Event 6th AFE Conference
Date Jul 02-04, 2009
Venue Samos Island, Greece
Highlights The AFE Conference has run annually for the past five years, and continuing
the tradition will seek to address the many challenges and new directions on the
field of financial economics. Providing keynote speakers, plenary sessions,
workshops and forums, the conference aims at promoting research and
provides an opportunity for intensive interdisciplinary interaction and debate
between academics and practitioners with research interests in the field of
finance, accounting and business management.
Contact Details Research and Training Institute of the East Aegean (INEAG). Kambos
Vourlioton, 83100, Samos, Greece
Tel: + 30 6976021240; Fax: + 30 2273094537
Email: afe@ineag.gr; Web: www.ineag.gr
3. Event The Global Business and Finance Research
Date Jul 08-11, 2009
Venue London Hilton on Park Lane, London
Highlights The Global Business and Finance Research Conference, London (GBFR)
brings together academicians and professionals from all areas of related
business fields and related fields to interact with members inside and outside
their own particular disciplines. The conference will provide opportunities for
publishing researcher's paper as well as providing opportunities to view other's
work. All the accepted papers will be published. Doctoral students are highly
encouraged to submit papers to GBFR for competitive review.
Contact Details Dr. Turan Senguder. Executive Chair. 6051 North Ocean Dr., # 506,
Hollywood, FL 33019, Fax: 954-449-6237
E-mail: E-mail: drsenguder@aol.com; Web: www.jaabc.com
4. Event Money Expo
Date Aug 01-03, 2009
Venue Pragati Maidan, Pragati Bhawan, New Delhi, India
Highlights The Money Expo is characterised as pivotal event for tapping investment and
finance opportunities of throughout the world. It is emerged out as a leading
event which proves to offer complete insurance options in the marketplace.
The event offers financial solutions and helps in providing networking
opportunities across the globe.
Contact Details Media Expositions & Events. 112-A Sant Nagar, G. F., East of Kailash, New
Delhi, India. Tel: +(91)-(11)-26236933; Fax: +(91)-(11)-41620861

© Cygnus Business Consulting & Research Pvt. Ltd. 2009 17

Industry Monitor – Banking & Financial Services June 2009

5. Event Softworld Accounting & Finance

Date Oct 13-14, 2009
Venue Olympia Exhibition Centre, Hammersmith Road, London, United Kingdom
Highlights Softworld Accounting & Finance enables to reach an extensive audience of pre-
qualified online visitors, plus a significant incremental audience of live event
attendees and non-attendees. It also boasts a dedicated marketing & PR
campaign that many live events would envy and will also be marketed within its
own live event marketing campaigns.
Contact Details V. N. U. Exhibitions Europe BV, 6, Jaarbeursplein, NL-3521 AL, Rv Utrecht,
The Netherlands. Tel: +(31)-(30)-2952700; Fax: +(31)-(30)-2952809
6. Event Defense Finance
Date Oct 27-29, 2009
Venue TBA, Washington, District of Columbia , United States Of America
Highlights Organised at Washington, District of Columbia, United States of America, the
Defense Finance is recognised as one of the highly prioritised event for marine
industry. Hosted by Worldwide Business Research, the event is aimed towards
providing a potent platform for exhibiting various professionals for both
domestic and international marine fraternity. It is a three-day event which is
directed towards disseminating of information about marine industry.
Contact Details Worldwide Business Research. 535, Fifth Avenue, 8th, New York, United
States Of America. Tel: +(1)-(888)-4826012; Fax: +(1)-(212)-8852798
7. Event European Banking & Insurance Fair (EBIF)
Date Nov 17-19, 2009
Venue Messe Frankfurt, Ludwig-Erhard-Anlage 1, Frankfurt, Germany
Highlights The European Banking & Insurance Fair (EBIF 2009) is recognized as a trusted
platform for the financial industrial sector. For 3 days, the EBIF 2009 is aimed
towards providing a single most meeting point for various pioneers of the
sector.
Contact Details Messe Frankfurt GmbH. Ludwig-Erhard-Anlage, 1, Frankfurt Am Main,
Germany. Tel:+(49)-(69)-75750; Fax:+(49)-(69)-75756433
8. Event Corporate & Banking Systems Exhibition
Date Nov 17-19, 2009
Venue Brovarsky Ave. International Exhibition Centre, Kiev, Ukraine
Highlights The anniversary international specialised exhibition for information
technologies and equipment for banks, financial institutions and corporations
corporate and banking systems. Moreover, it is a specialized exhibition of
informational technologies and equipment for banks and financial institutions,
also devoted to the problems of creation, application and exploitation of the
up-to-date informational systems at enterprises, organizations and corporations.
Contact Details Premier Expo. 13-B, Pimonenko Street, Kyiv, Ukraine
Tel:+(38)-(44)-4514160

© Cygnus Business Consulting & Research Pvt. Ltd. 2009 18