INTERSHIP WEEKLY REPORT

Week-1 Retail Banking

Submitted by,
Ashwin Paldano
Leoprabhu Ekambaram
Suresh Venkatesan

P301313CMG419
P301313CMG443
P301313CMG479

AUGUST 20, 2014

NIIT NEEMRANA
[Company address]

Table of Contents
INTRODUCTION City Union Bank ............................................................ 2
History of Bank: ...................................................................................... 2
Branches and location: ........................................................................... 2
Major Shareholder: ................................................................................. 3
Financial Analysis: ................................................................................... 4
CAPITAL ADEQUACY .............................................................................. 4
ASSET QUALITY ...................................................................................... 6
MANAGEMENT SOUNDNESS ................................................................... 7
EARNINGS & PROFITABILITY .................................................................. 7
LIQUIDITY .............................................................................................. 9

INTRODUCTION City Union Bank

History of Bank:
'The Kumbakonam Bank Limited' as it was then called was incorporated as a limited company
on 31st October, 1904. The bank in the beginning preferred the role of a regional bank and
slowly but steadily built for itself a place in the Delta District Thanjavur. In April, 1965, two
other local banks viz., 'The City Forward Bank Limited' and 'The Union Bank Limited' were
amalgamated with the Bank under a scheme of amalgamation with the resultant addition of
six more branches viz., Kumbakonam-Town, Nannilam, Koradacherry, Tiruvidaimarudur,
Tirupanandal and Kuttalam. Consequently, the Bank's name was changed to 'The Kumbakonam
City Union Bank Limited'. The first branch outside the state of TamilNadu was opened at
Sultanpet, Bangalore in Karnataka in September,1980. In tune with the national image
attached to the Bank, the Bank's name was changed to 'City Union Bank Limited' with effect
from December, 1987.

Branches and location:

A network of 382 branches of which 336 branches are located in South India and 251 in Tamil
Nadu alone

State
Tamilnadu
Andhra Pradesh
Karnataka
Maharashtra
Kerala
Gujarat
Others
Total

No. of
Branches
251
49
24
17
12
6
23
382

% of
Business
71
9
6
7
2
1
4

Most of the banks operation is in Semi urban (40%) region and in TamilNadu (71%).

Major Shareholder:

Major Institutional Shareholders

Regal Investment and Trading Co. Pvt Ltd
L&T Unnati Finance Ltd.
Argonaut Ventures
FMO, Nederlandse

% Share holding
2.03
4.59
4.36
4.35

LIC of India
Acacia Partners
Wasatch Core Growth Fund
Emblem
Morgan Stanley Asia

4.02
2
1.95
1.66
1.09

Financial Analysis:

We have chosen the CAMELS Model for Financial analysis purpose. It measures
the performance of the banks from each parameter i.e. Capital, Assets, Management,
Earnings, Liquidity and Sensitivity to Market risks. CAMELS evaluate banks on the
following six parameters

CAPITAL ADEQUACY
It is important for a bank to maintain depositors confidence and preventing the bank from
going bankrupt. It reflects the overall financial condition of banks and also the ability of
management to meet the need of additional capital. The following ratios measure capital
adequacy
Capital Adequacy Ratio (CAR): The capital adequacy ratio is developed to ensure that banks
can absorb a reasonable level of losses occurred due to operational losses and determine the
capacity of the bank in meeting the losses. As per the latest RBI norms, the banks should have
a CAR of 9 per cent
Capital to Risk Weighted Asset

Tier1_capital+TierII_Capital
Risk weighted assets

1964.63+78.88
13617.19
=
15.01%
CAR for the City union bank is greater than the required rate of 9% by RBI also higher than the
overall bank average of 13.9%
=

Tier I Capital to Risk Weighted Asset

=
=

Tier1_capital
Risk weighted assets
1964.63+78.88
13617.19
= 14.43%

The average Tier I capital to risk weighted Asset ratio is 10.9% in 2013, the above calculation
shows that the ratio for City union bank is greater than the national average which shows that
it that better capital adequacy ratio.

Gross_NPA-Provision
capital

Non-performing loans net off provisions to capital =

=

293.06-95.77
2024.93
=

9.74%

Debt-Equity Ratio (D/E): This ratio indicates the degree of leverage of a bank. It indicates
how much of the bank business is financed through debt and how much through equity.
Debt-Equity ratio

Debt
Equity

304.98
2024.93

15.06%

Government Securities to Total Investments (G-sec/Inv): It is an important indicator

showing the risk-taking ability of the bank. It is a banks strategy to have high profits, high
risk or low profits, low risk
G-sec to total investments

G-sec
Total Investment

5318.97
5953.56
=
89.34%
The bank as invested about 89.34% of its total investment in government securities which are
more secure, however this leads the bank to have low profit as the risk involved is also low.
=

Advance to Assets Ratio (Adv/Ast): This is the ratio indicates a banks aggressiveness in
lending which ultimately results in better profitability.
G-sec to total investments

Total_advance
Total Assets

16096.84
24993.84

64.40%

The advance to asset ratio of Indian banks on an average is 61 %( 2013 data) considering this
the City Union bank as provided advances in line with the other banks.

ASSET QUALITY
The quality of assets is an important parameter to gauge the strength of bank. The prime
motto behind measuring the assets quality is to ascertain the component of non-performing
assets as a percentage of the total assets. The ratios necessary to assess the assets quality
are:

NPAs to Total Assets (NNPAs/TA): This ratio discloses the efficiency of bank in assessing the
credit risk and, to an extent, recovering the debts.

Non_performing_loans
Total Advances

Non-performing loans to total gross loans =

=

293.06
16096.84

1.82%

The Gross NPA percentage for the City Union Bank is lower the average of 3.6% for Indian
banks. This shows that the bank is assessing their credit risk and have a sound credit lending
policy.
Net NPAs to Net Advances (NNPAs/NA): It is the most standard measure of assets quality
measuring the net non-performing assets as a percentage to net advances.
Net NPA to Net advances

Net_NPA
Net Advances

197.29
16096.84
=
1.23%
The Net NPA percentage for the City Union Bank is lower the average of 1.7% for Indian banks.
This shows that the bank is having good asset quality.
=

Sectorial Distribution of loans :

priority sectors loans
total advances
Public sectots loans
Total advances

= 7409.84
16096.84
= 298.11
16096.84

Total Investments to Total Assets (TI/TA): It indicates the extent of deployment of assets in
investment as against advances.

Total investment to Total Assets

Total_Investment
Total Asset

=
=
=

5953.26
24993.82
23.82%

MANAGEMENT SOUNDNESS
Management efficiency is another important element of the CAMEL Model. The ratio in this
segment involves subjective analysis to measure the efficiency and effectiveness of
management. The ratios used to evaluate management efficiency are described as:
Credit Deposit Ratio (TA/TD): This ratio measures the efficiency and ability of the banks
management in converting the deposits available with the bank excluding other funds like
equity capital, etc. into high earning advances.
Credit Deposit Ratio

Total_advances
Total Deposits

=
=
=

16096.84
22016.89
73.11%

This shows that the management of City Union Bank as lend 73.11% of the deposits received,
which is lesser than the average of Indian banks of about 79.1%. This shows that the
management of CUB has to perform better and find ways/customers to lend our more
deposits available.
Return on Net worth (RONW): It is a measure of the profitability of a bank. Here, PAT is
expressed as a percentage of Average Net Worth.
Return on Net-worth

PAT
Net worth

=
=
=

347.07
2006.38
17.30%

EARNINGS & PROFITABILITY

The quality of earnings is a very important criterion that determines the ability of a bank to
earn consistently. It basically determines the profitability of bank and explains its

sustainability and growth in earnings in future. The following ratios explain the quality of
income generation.

Operating expense to Total assets: This ratio indicates how much a bank spends for its
operations against total assets.
Return on Net-worth

Operating_expenses
Total assets

=
=
=

2266.17
24993.82
9.07%

Return on equity: This ratio indicates the returns earned to the shareholders fund inested in
the entity
Return
=

on

equity PAT
Shareholders Equity
347.07
2024.93

=
=

17.30%

This ratio is higher than the Indian bank average ROE of 13.84%. This show that the bank is
earning higher returns than many other Indian Banks.
Return on Asset: This ratio measures return on assets employed or the efficiency in
utilization of assets.
Return
on
equity PAT
=
Total Asset
347.07
24993.82

=
=

1.39%

This ratio is higher than the Indian bank average ROA of 1.03%. This show that the bank is
earning higher returns than many other Indian Banks.
Interest income to Total asset: This ratio depicts the asset utilization. The assets of the
banks consists of the loans and advances and the investments portfolio.

Interest
=

income

to

total

asset Interest_income_+_others
Total Asset
347.07
24993.82

= 11.39%
Interest income to Total asset: Interest expense constitutes the largest operating cost of
a bank, it is be useful to analyze its relationship to interest income. The ratio of interest
expense to income would reflect the efficiency of raising resources and their deployment
Interest Expense to Interest income

Interest_expense
Interst income

1786.54
2847.13

= 62.75%
Net Interest Income as a percentage of Total Assets: This ratio signifies the percentage of
net interest income earned on total assets .This ratio is significant as net interest income is
the largest source of income for the banks in India
Net
=

interest

Margin

Interst_Income-Interest_expense
Total asset
2847.13-1786.54
24993.82

= 4.24%
This shows that the net interest margin of CUB is higher than the average of Indian banks
2.8%.
LIQUIDITY
Risk of liquidity is curse to the image of bank. Bank has to take a proper care to hedge the
liquidity risk; at the same time ensuring good percentage of funds are invested in high return
generating securities, so that it is in a position to generate profit with provision liquidity to
the depositors. The following ratios are used to measure the liquidity
Liquid Assets to Demand Deposits (LA/DD): This ratio measures the ability of bank to meet
the demand from depositors in a particular year. To offer higher liquidity for them, bank has
to invest these funds in highly liquid form
Liquid
=

asset

to

Demand

Deposits Liquid_asset
Demand Deposit

2179.61
3917

=
=

0.56

Liquid Assets to Total Deposits (LA/TD): This ratio measures the liquidity available to the
total deposits of the bank.
Liquid asset to Total Deposits

Liquid_asset
Total Deposit

2179.61
22016.89

=
=

9.90%

Liquid Assets to Total Assets (LA/TA): It measures the overall liquidity position of the bank.
The liquid asset includes cash in hand, balance with institutions and money at call and short
notice. The total assets include the revaluation of all the assets
Liquid asset to Total assets

Liquid_asset
Total Assets

2179.61
24993.82

= 8.72%
G-Sec to Total Assets (G-Sec/TA): It measures the risk involved in the assets. This ratio
measures the Government securities as proportionate to total assets.

G-Securities to Total assets

G-sec
Total Assets
5318.97
24993.82

=
=

21.28%

10

11