Financial Ratio Analysis

Financial ratios are useful indicators of a firm's performance and financial situation.
These ratios help us to

To know whether the company is making enough profit or not

To evaluate the financial strength of the company
To judge the ability of the company to generate enough cash and cash equivalents
and their timing
To know the future growth prospects

Ratios can be classified into

Return on Investment (ROI) ratios

Solvency ratios
Liquidity ratios
Efficiency or Turnover ratios
Profitability ratios

Some Key Ratios

Key Ratios

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

Credit-Deposit(%)

81.7
9

80.1
4

78.0
6

76.0
2

72.4
4

66.6
4

65.2
8

66.0
8

65.7
9

64.8
7

55.8
9

46.3
9

Investment / Deposit (%)

35.0
5

38.5
1

36.9
9

34.4
5

37.8
5

44.4
3

47.2
9

47.5
1

51.8
1

57.9
9

62.0
5

63.4
3

Cash / Deposit (%)

6.02

5.46

8.81

10.7
9

9.35

10.7
1

10.4
3

6.75

6.46

7.78

8.76

8.23

Interest Expended / Interest Earned

(%)

55.0
7

54.9
1

53.7
8

47.0
9

48.1
4

54.5
6

48.3
2

47.8
3

43.1
1

42.5
3

47.5
1

59.2

Other Income / Total Income (%)

16.1
4

16.3
5

17.1
8

17.8
7

19.7
6

17.5
3

18.4
2

19.3
5

21.3
3

19.1
2

16.1
6

18.8
5

Operating Expenses / Total Income (%)

24.5
5

26.8
1

27.5
6

29.4
8

29.4
7

28.8
5

30.2
1

30.2
9

31.3

30.4
6

27.0
2

23.3
4

Interest Income / Total Funds (%)

9.22

9.5

9.06

7.97

7.97

10.3
2

9.01

8.06

7.16

6.59

7.42

Interest Expended / Total Funds (%)

5.08

5.22

4.87

3.75

3.84

5.63

4.35

3.86

3.08

2.8

3.32

4.39

Net Interest Income / Total Funds (%)

4.14

4.28

4.19

4.22

4.13

4.69

4.66

4.21

4.07

3.79

3.67

3.03

Non Interest Income / Total Funds (%)

1.78

1.86

1.88

1.73

1.96

2.19

2.03

1.93

1.94

1.56

1.35

1.72

Operating Expenses / Total Funds (%)

2.7

3.04

3.02

2.86

2.93

3.61

3.34

3.03

2.85

2.48

2.25

2.13

3.22

3.1

3.05

3.09

3.17

3.27

3.35

3.11

3.16

2.86

2.77

2.62

Profit before Provisions / Total Funds

(%)
Net Profit / Total funds (%)

RONW (%)

1.9

1.82

1.68

1.57

1.45

1.42

1.42

1.38

1.39

1.42

1.4

1.43

21.2
8

20.3
4

18.6
9

16.7
4

16.1
2

16.9
1

17.7
4

19.4
6

17.7
4

18.4
6

20.6
4

18.5
1

Credit-Deposit (%)
It indicates how much of a bank's core funds are being used for lending, the main banking
activity. We could see from 2010 onwards there is a higher ratio which indicates more reliance
on deposits for lending.
Credit-deposit ratio, Investment/Deposit & Cash/Deposit ratio are debt coverage ratios. The
debt coverage ratio is used in banking to determine a companies ability to generate enough
income in its operations to cover the expense of a debt
Return on Net worth (RONW)
It reveals how much profit a company generates with the money that the equity shareholders
have invested. If we compare RONW for HDFC bank with other banks we could see that RONW
for HDFC is higher than most of the banks.
Interest expense ratio (Interest Expenses to Total Income)
Interest-Expense Ratio is a measurement of financial efficiency and is determined based on
information derived from a business or farm operations financial statements specifically using
the financials that determine gross farm income. The lower the percentages the better, a
business or farm should be no higher than 5% to be considered strong. A Interest-Expense ratio
higher than 10% indicates that the business or farm is spending too much of its gross income
paying interest on borrowed money.