A Study On Financial Statement Analysis in HDFC Bank LTD 2013

HDFC Bank
Financial Analysis of HDFC
Financial Analysis of HDFC Bank
A
PROJECT REPORT
ON
A STUDY ON FINANCIAL STATEMENT ANALYSIS IN HDFC BANK
MASTER OF MANAGEMENT STUDIES (MMS)
UNIVERSITY OF MUMBAI
SUBMITTED TO
SINHGAD INSTITUTE OF BUSINESS MANAGEMENT
CHANDIVALI
UNDER THE GUIDANCE OF

MRS. SUSHMA VERMA
SUBMITTED BY
ABHIRUP KRISHNA UBALE
BATCH : 2011-2013 ROLL NO : 112

FINANCE
CERTIFICATE
This is to certify that Mr. Abhirup Krishna Ubale has successfully completed
the project work as a part of academic fulfillment of Masters of Management
Studies (M.M.S.) semester IV examination.
Mrs. Sushma Verma
Date : _________________
DIRECTOR
SIBM
DECLARATION
I, Abhirup Krishna Ubale of Master of Management Studies Semester IV of
Sinhgad Institute of Business Management (SIBM), hereby declare that I have
successfully completed this Project on A Study on Financial Statement Analysis
in HDFC Bank Limited in the academic year 2012 13.The information
incorporated in this project is true and original to the best of my knowledge.
_____________________________
Signature
ACKNOWLEDGEMENT
I owe a great many thanks to a great many people who helped and supported me
during the writing of this book.
My deepest thanks to Professor, Mrs. Sushma Verma the Guide of the project
for guiding and correcting various documents of mine with attention and care.
She has taken pain to go through the project and make necessary correction as
and when needed.
I express my thanks to the Director of, Sinhgad Institute of Management
Studies, Chandivali, for extending her support.
I would also thank my Institution and my faculty members without whom this
project would have been a distant reality. I also extend my heartfelt thanks to
my family and well wishers.
CONTENTS
PAGE
NO
INTRODUCTION
FINANCIAL SECTOR OF INDIA AN OVERVIEW
10
HDFC BANK
13
FINANCIAL ANALYSIS
16
FINANCIAL STATEMENT ANALYSIS OF HDFC BANK
19
COMPARATIVE STATEMENT ANALYSIS
16
RATIO ANALYSIS OF HDFC BANK
29
COMMON SIZE ANALYSIS OF HDFC BANK
49
TREND ANALYSIS OF HDFC BANK
56
GROSS NON-PERFORMING ASSET AND NET NON-PERFORMING
60
MANAGERS PERSPECTIVE
67
BIBLIOGRAPHY
68
INTRODUCTION
Financial statement analysis is very helpful in spanning
banks internal operations and its relations with the
outside world. Therefore, the financial information must
be organized into an understandable, coherent and
sufficiently limited set of data. Data from the financial
statement analysis can be used to quickly calculate and
examine financial ratios. An attempt has been made
here to analyse the financial statements of HDFC Bank.
The investors rely on the financial statement to judge
the performance of the bank and ensure that these
statements
are
correct,
complete,
consistent
and
comparable. The accuracy of the financial statement

can be identified from the report of the auditors. The
financial statement analysis can be used by investors
for deciding about their investments. The financial
institutions also use these statements while granting
loans to the banks. The debenture holders, creditors,
employees and government can also use the financial
statements for different purposes.
The bank itself and outside providers of capital
creditors
and
investors
all
undertake
financial
7
statement
analysis.
The
type
of
analysis
varies
according to the specific interests of the party involved.

Creditors are primary interested in the liquidity of a
bank. Their claims are short term, and the ability of the
bank to pay these claims quickly is best judged by an
analysis of the banks liquidity. The claims of bond
holders, on the other hand, are long term. Accordingly,
bond holders are more interested in the cash flows
ability of the bank to service debt over a long period of
time.
Inflation Rate
Inflation rate in double-digit and resulted in hike in

policy
rates
by
150
bps,
which put
the liquidity
situation under high stress. Although, further rate hike

is not imminent, but inflation would drive the monetary
policy further and interest rate expected to remain
high.
Headline inflation is always considered as a major

vexation for the Indias central bank. Since, inflation
was reading in a double-digit figure, it was a challenge
for the Reserve Bank of India to fix the inflation
problem under the condition of fragile global economic
recovery without denting the recovery process. In
response to that, RBI revised its policy rates by over
100 bps and now it does seem that the policy action is
working but the money supply is still at 20.34 per
cent. Both trend lines are now acting inversely, and
inflation is falling down to 8 per cent. According to VMW
Research, inflation is projected at 7.48 per cent for the
month of Nov, 2010. It is also evident that in the past
three months, schedule commercial banks and nonbanking
financial
borrowing from
the
companies
RBIs
window
have
started
of
Liquidity
9
Adjustment Facility (LAF) at the rate of 6.25 per cent.

Since, banks are now left with the limited amount of
liquidity;
theyre
again
focusing on deposits
from
customers. Several banks have revised their deposit

rates between 50 bps and 150 bps to attract funds,
however,
going
forward,
banks
will
see
narrow interest rate spread, resulted in lower earnings.

Discomfort levels
of inflation
and money
supply will
keep interest rates higher for the next few months.

Moreover, to reduce the impact of tight liquidity, RBI
has
already
(OMO) to
started
infuse
the
liquidity
Open
by
Market
way
of
Operation
purchasing
government bonds in exchange of money.
10
FINANCIAL SECTOR OF INDIA AN OVERVIEW

Financial Sector of India is intrinsically strong,
operationally sundry and exhibits competence and
flexibility besides being sensitive to Indias economic
aims of developing a market oriented, industrious and
viable economy. An established financial sector assists
greater standards of endowments and endorses
expansion in the economy with its intensity and
exposure. The fiscal sector in India entails banks,
financial organization, markets and services.
Fiscal transactions in an organized industry are
executed by a number of financial organizations which
are commercial in nature and offer monetary services
to the society. Further classification includes banking
and non-banking enterprises, often recognized as
activities that are client specific. The chief controller of
the finance in India is the Reserve Bank of India (RBI)
and is regarded as the supreme organization in the
fiscal structure.
Other significant fiscal organizations are business
banks, domestic rural banks, cooperative banks and
development banks. Non-banking fiscal organizations
entail credit and charter firms and other organizations
11
like Unit Trust of India, Provident Funds, Life Insurance

Corporation, Mutual funds, GIC, etc.
12
INDIAN BANKING SECTOR
After a difficult FY09 Indian banks managed to grow

their balance sheets in FY10 albeit at a lower average
rate than that projected by the RBI. The monetary
stimuli (reduction in repo rate, cash reserve ratio (CRR)
and statutory liquidity ratio (SLR) offered to the banks
by the RBI early in the fiscal made it easier to sustain
margins But what really helped was the accretion of low
cost deposits (CASA). Indian banks grew their advances
and deposits by 16.9% YoY and 17.2% YoY respectively
in FY10. The growth was mainly driven by a expansion
in low cost deposits and growth in agricultural and large
corporate credit.
With lesser avenues of credit disbursal, banks had to

park most of the liquidity available with them with the
13
RBI. In the retail portfolio, while home loans grew by

11% YoY, personal loans enjoyed a much smaller
growth of 6% YoY due to bank's reluctance towards
uncollateralized credit. Credit card outstanding in fact
dropped by 27% YoY.
Indian banks, however, enjoyed higher levels of money
supply, credit and deposits as a percentage of GDP in
FY10 as compared to that in FY09 showing improved
maturity in the financial sector.
Despite poor pricing power lower cost of funds helped

Indian banks grow their net interest margins in FY10.
While few like ICICI Bank chose to reduce their balance
sheet size, most entities chose to reasonably grow their
franchise as well as assets. Public sector banks outdid
14
their private sector counterparts in terms of growth and

franchise expansion in the last fiscal. Improved capital
adequacy also helped banks to comfortably comply
with Basel II. The higher efficiency levels were the
hallmarks of better performance of Indian banks last
year.
Most banks had to restructure some loans in their
portfolio during FY10 which deferred their interest
income. Further the PSU banks had also to provide for
the loss of interest on the agri-loans waived by the
government.
15
HDFC Bank
In August, 1994 the Housing Development Finance
Corporation Limited (HDFC) was incorporated in the
name of HDFC Bank Limited. The Reserve Bank of India
has approved in principle to set up private banks. HDFC
was one of the first organizations to receive in principle
approval from RBI. The HDFC Bank has its registered
office in Mumbai. In January 1995, the operations of
HDFC Bank as a commercial bank has commenced.
In India and in international markets HDFC has an
impeccable track record. HDFC has maintained a
healthy growth and a consistency in its operations and
remained as a leader in market of mortgages. The
portfolio of HDFCs outstanding loan has a million
dwelling units.
HDFC has a large corporate client base for housing
related credit facilities. HDFC was ideally positioned to
promote a bank in the Indian market with its experience
and strong reputation in market of finance. HDFC Bank
has 1,725 branches in India.
Objective:
16
HDFC Bank is a young and dynamic bank, with a youthfuland

enthusiastic team determined to accomplish the vision ofbecoming
a world-class Indian bank.
Banks business philosophy is based on four core values- Customer
Focus, Operational Excellence, ProductLeadership and People.
Bank believes that the ultimateidentity and success of bank will
reside in the exceptionalquality of our people and their
extraordinary efforts. For this reason, bank is committed to hiring,
developing, motivating and retaining the best people in the
industry.
MISSION:
The Banks mission is to be a World Class Indian
Bank,
benchmarking
bank
against
international
standards and best practices in terms of product

offerings, technology, service levels, risk management
and audit & compliance. The objective is to build sound
customer franchises across distinct businesses so as to
be a preferred provider of banking services for target
retail and wholesale customer segments, and to
achieve a healthy growth in profitability, consistent with
the Banks risk appetite. Bank is committed to do this
while ensuring the highest levels of ethical standards,
professional
integrity,
corporate
governance
and
regulatory compliance. HDFC Bank has been recognized
17
as 'Best Bank in India' in the magazine rankings as well

as surveys year on year. HDFC
Bank is the most preferred employer in banking
industry in India. Bank business strategy emphasizes
the following:
Increase banks market share in Indias
expanding banking and financial services
industry by following a disciplined growth
strategy focusing on quality and not on
quantity and delivering high quality customer
service.
Leverage technology platform and open
scalable systems to deliver more products to
more customers and to control operating
costs.
Maintain current high standards for asset
quality
through
disciplined
credit
risk
management.
Develop innovative products and services that
attract targeted customers and address
inefficiencies in the Indian financial sector.
Continue to develop products and services
that reduce cost of funds.
Focus on high earnings growth with low
volatility.
18
CAPITAL STRUCTURE:
At present, HDFC Bank boasts of an authorized capital

of Rs.550 crore (Rs5.5 billion), of this the paid-up
amount is Rs 424.6 crore (Rs.4.2 billion). In terms of
equity share, the HDFC Group holds 19.4%. Foreign
Institutional Investors (FIIs) have around 28% of the
equity and about 17.6% is held by the ADS Depository
(in respect of the bank's American Depository Shares
(ADS)
Issue).
The
bank
has
about
570,000
shareholders. Its shares find a listing on the Stock

Exchange, Mumbai and National Stock Exchange, while
its American Depository Shares are listed on the New
York Stock Exchange (NYSE), under the symbol 'HDB'.
CAPITAL ADEQUACY RATIO:
Banks total Capital Adequacy Ratio (CAR) calculated in

line with the Basel II framework stood at 17.4%, well
above the regulatory minimum of 9.0%. Of this, Tier I
CAR was 13.3%.
19
Financial Analysis
Financial Analysis:
Financial analysis is a study of relationship among the
various financial factors in a business. The process of
financial statement analysis can be described in various
ways depending on the objective to be obtained.
Financial analysis can be used as a preliminary
screening
tool
in
the
selection
of
the
stock
in
theprimary and secondary market. It can be used as a

forecasting tool of future financial condition and result.
It may be used as a process of evolution and
diagnosiss of managerial, operating or other problem
area. Financial analysis is an integral part of the
interpretation
of
result
disclosed
by
financial
statements. It supplies to decision makers, crucial

financial information and points out the problem areas,
which can be investigated. Financial analysis reduce
reliance on institution guesses and thus narrows the
areas of uncertainty that is present in all decision
making process.
Tools of Financial Analysis:

Common Size Statement:
20
The statement is prepared to bring out the ratio of each

asset or liability to the total of balance sheet and the
ratio of each item of expense or revenue to interest
earned. These common size statements are often called
common
measurement
or
component
percentage
statement, since each statement is reduced to the total

of 100 and each individual component of the statement
is represented as a percentage of the total of 100,
which invariably serves as the base.
21
Comparative Financial Statement:
Comparative financial statements are statement of

financial position of a business so designed as to
facilitate comparison of different accounting variables
from drawing useful inferences.
Preparation of Comparative Financial Statement
These statements are prepared by placing the various

items in rows and years in the columns. This is done to
facilitate
easy
identification
of
their
significant
differences. Columns may be drawn to accommodate

absolute changes as well as percentage changes side
by side. In order to calculate the percentage change,
the absolute change in the various account figures are
divided by their respective base year figures and
multiplied by 100.
Comparative Income Statement:
A comparative income statement shows the absolute

figures for two or more periods, and the absolute
change from one period to another since the figure are
shown side by side the user can quickly understand the
operation.
22
Comparative Balance Sheet:
Balance sheet as on two or more different dates is used

to compare the assets, liabilities and net worth of the
bank. Comparative balance sheet is useful to study the
trends in the financial position of a bank.
Ratio Analysis:
Ratio analysis is the method or process by which the

relationship or item or group of item in the financial
statement are computed determine and presented to
determine
company.
particular
Ratio
analysis
aspect
is
an
of
organization
attempt
to
or
drive
quantities measure or guide concerning the financial

health and profitability of a business enterprise. Ratio
analysis can be used both in trends and static analysis.
There are several ratios at the disposal of an analysis
but the group of the ratio would prefer depends on the
purpose and the objective of analysis.
Types of Financial Ratios:
1. Liquidity Ratios:
2. Profitability Ratios:
3. Solvency Ratios:
4. Capital Market Ratio
23
Financial Statement analysis of HDFC Bank

Comparative Statement Analysis
Here we analyse the comparative financial statements
of HDFC Bank as at 31st March 2008, 2009, 2010.
Analysis with respect to its competitors namely ICICI
Bank, Axis Bank and the public sector giant State Bank
of India all of which fall among the top banks in India is
also done.
24
Comparative Balance Sheet of HDFC Ltd as at 31st March 2008, 2009 and
2010 (in Rs Cr.)
Capital &
Liabilities
Mar'08
Inc/D
ec
Mar'09
Inc/Dec
Mar'10
Total
Share
Capital
354.43
70.95
20.02
425.38
32.36
7.61
457.74
Equity
Share
Capital
354.43
70.95
20.02
425.38
32.36
7.61
457.74
Share
Applicatio
n Money
400.92
400.92
-400.92
-100
Preference
Share
Capital
11,142.8
0
3083.6
3
27.67
14,226.4
3
6838.32
48.07
21,064.7
5
Revaluatio
n
Reserves
Net Worth
11,497.2
3
3555.5
30.9
15,052.7
3
6469.76
42.98
21,522.4
9
Deposits
1,00,768.
60
Borrowing
s
4,478.86
Total Debt
Reserves
41.7
1,42,811.
58
24592.8
6
17.22
1,67,404.
44
40.03
2,685.84
10229.8
5
380.8
8
12,915.6
9
1,05,247.
46
42042.
98
1793.0
2
40249.
96
38.24
1,45,497.
42
34822.7
1
23.93
1,80,320.
13
Other
Liabilities
&
Provisions
16,431.9
1
6288.7
1
38.27
22,720.6
2
2104.68
-9.26
20,615.9
4
Total
Liabilities
1,33,176.
60
50094.
17
37.61
1,83,270.
77
39187.7
9
21.38
2,22,458.
56
25
Assets
Cash &
Balances
Mar'08
Inc/Dec
12,553.1
974.03
7.76
2,225.16
1,754.25
78.84
63,426.9
35,456.1
with RBI
Balance
Mar'09
Inc/Dec
13,527.2
1,956.0
with
Banks,
3,979.41
Money at
Mar10
14.46
15,483.2
8
10,479.
263.3
14,459.1
70
Call
Advances
Investmen
49,393.5
55.9
9,424.01
19.08
2,386.99
1,569.64
65.76
1,211.86
1,038.04
1,175.13
98,883.0
26,947.
54
58,817.5
27.25
1,25,830.
59
58,607.6
-209.93
-0.35
3,956.63
751.34
18.99
4,707.97
85.66
2,249.90
335.26
14.9
2,585.16
531.6
45.24
1,706.73
416.08
24.37
2,122.81
4,402.69
1,954.14
44.39
6,356.83
-401.68
-6.32
5,955.15
Total
1,33,176.
50,094.1
1,83,270.
39,187.
Assets
60
ts
Gross
Block
Accumulat
ed
Depreciati
on
Net Block
Capital
Work In
Progress
Other
Assets
Contingen
t
Liabilities
Bills for
collection
Book
5,82,835.
94
37.61
1,86,241.
-31.95
63
17,092.8
5
324.38
846.77
4.95
20.06
6.18
78
78
3,96,594.
31
69,641.
93
17,939.6
3,000.5
344.44
125.75
21.38
17.56
16.73
36.51
2,22,458.
56
4,66,236.
24
20,940.1
3
470.19
26

Value (Rs)
Comparative Income Statement of HDFC Ltd for the periods 31st March
2008, 2009 and 2010 (in Rs. Cr)
Income
Interest Earned
Other Income
Total Income
Expenditure
Interest
expended
Employee Cost
Selling and
Admin Expenses
Depreciation
Miscellaneous
Expenses
Preoperative
Mar '08
10,115.
00
2,205.3
8
12,320.
38
4,887.1
2
1,301.3
5
0
1,590.18
10,730.
Preference
71.99
-2.97
Contingencies
Net Profit
Total
82.34
32.46
8
1,907.8
forward
60.73
271.72
3,295.2
Expenses
Provisions &
Items
Profit brought
57.37
192.5
3,935.2
Extraordinary
61.47
974.79
Exp. Capitalized
Operating
Total Expenses
20
3
3,522.1
5
0
26
3,470.6
3
19,802.
89
8,911.1
0
2,238.2
0
2,851.2
6
359.91
3,197.4
9
%
-0.98
9.8
0.91
85.26
-28.91
41.18
63.63
33.26
36.82
7,290.6
6
1,356.2
0
2,244.94
17,557.
96
-0.59
2,574.6
3
4,818.9
8
0
Mar '10
16,172.9
0
3,810.62
19,983.5
2
-12.62
7,786.30
2.28
2,289.18
19.1
3,395.83
9.58
394.39
-0.89
3,169.12
-0.06 883.33
1,932.0
Mar '09
16,332.
0
5.66
7,703.41
13.93
1,545.11
31.35
2,948.70
17,034.8
-2.98
57.63
-0.93
34.22
3,455.57
32.88
6,403.34
0
27

Dividend
Equity Dividend
Corporate
301.27
41.2
425.38
29.13
549.29
51.2
41.19
72.29
26.2
91.23
44.87
17.61
52.77
22.08
64.42
85
17.65
100
20
120
324.38
6.18
344.44
36.51
470.19
436.05
47.06
641.25
45.83
935.15
159.02
41.18
224.5
31.35
294.87
352.47
41.19
497.67
28.7
640.52
31.17
4,532.79
32.88
6,403.33
Dividend Tax
Per share data
(annualized)
Earnings Per
Share (Rs.)
Equity Dividend
(%)
Book Value (Rs.)
Appropriations
Transfer to
Statutory
Reserves
Transfer to Other
Reserves
Proposed
Dividend/Transfe
r to Govt.
Balance c/f to
2,574.6
Balance Sheet
Total
1
3,522.15
34.22
36.82
3,455.5
7
4,818.99
Interpretation of Comparative Statements

Comparative Balance Sheet:
The total assets and liabilities have increased by

21.38%
compared
to
2008-2009
to
reach
Rs.
2,22,458.56 crore but this rise is less when compared

to the previous periods rise of 37.6%. The increase in
total assets can be attributed mainly by the rise in
Advances and Balances with Banks and Money at Call
and Short notice. This could be an indication of the
28
healthy position the bank is in. Cash and Balance with

RBI has also increased over the period by 14.46%
further
contributing
to
the
rise
in
total
assets.
Investments have reduced by 0.36% over the period.

According to the schedules to the accounts, there has
been addition of fixed assets, mainly to premises
including land worth Rs.2,735,762,000 further adding
to rise in value of fixed assets. This increase in assets is
met by a 7.61% rise in Capital, increase in deposits by
17.22% and a large increase in borrowingswhich shows
the
company
has
raised
money
through
borrowings.This is an indication of the bank planning for

expansion to cover more areas and increase its
operations. But the large part of this expansion is
funded by deposits and borrowings which may not be
good sign as far as the bank and its shareholders are
concerned.
There is a 14.46% increase in cash balances with the
RBI which could be explained by the various policies
adopted by the central bank, 263.35% increase in
balance with banks and money at call and short notice,
27.25% in advances and 24.38% in fixed assets.
Contingent liabilities have increased by 17.56% and
29
Bills for collection by 16.73%. Book value has increased

by 36.5% to 470.19.
Capital
has
55,00,00,000
increased
Equity
by
Shares
7.61%.
of
Rs.
It
consists
10/-
each
of
of
Authorised Capital and 45,77,43,272 Equity Shares of

Rs. 10/- each of Issued, Subscribed and Paid-up Capital.
Reserves have increased by 48.06% compared to the
previous period where there was only 27.67% rise. This
rise can be attributed to the rise in profits. The deposits
have grown by 17.22% which is a good indication of the
banks healthy position and the confidence it enjoys
with the public.
Comparative Income Statement:
We notice that the interest earned has decreased by

0.98% over the period ending March 2010 whereas
there was in increase by 61.47% over the previous
period. This change is not favourable to the bank as far
as shareholders and the management are concerned.
But the interest expense has also gone down by
30
-12.62% whereas there was a rise by 82.34% over the

previous period.
The decrease in interest expense is mainly due to the
reduction in interest on deposits and interest on
RBI/Inter-Bank Borrowings. The decrease in interest
earned has gone down mainly due to decreases in
Interest / discount on advances / bill, income from
investments, Interest on balance with RBI and other
inter-bank funds. From the balance sheet we have
noticed that investments had gone down.
There is decrease in investments from 32.09% to
26.35%, which shows that bank has sold some of its
investments Since there has been a much greater
descent in interest expense, the profit had increased
over the period. There has been a decrease in the rate
of depreciation from 32.46% to 9.58%. Employee cost
and Selling and Administrative expenses has increased
down by 2.28% and 19.10% respective whereas in the
previous year it was 71.99% an 192.50% respectively.
31
Net profit for the period was Rs.2948.70 crore which

represents an increase by 31.35% compared to a rise of
41.18% over the previous period. The decrease in
interest income could have contributed to the decline in
the rate. Profit brought forward from the previous year
was Rs.3,455.57 crore. Equity dividend rose by 29.13%
to 549.29 crore compared to 41.20% over the previous
period and corporate dividend tax rose by 26.2% to Rs.
91.23 crore.
Equity dividend percentage rose by 20% to 120% from
the previous 100%. The book value has increased by
36.51%
to
470.19
which
is
good
news
for
the
investors.Transfers to statutory and other reserves rose

by 45.83 and 31,83% respectively. Proposed Dividend
rose by 28.7% to 640.52 which indicates the healthy
position of the bank.
32
Comparative Balance Sheet of HDFC Bank with respect to ICICI as of 31st

March 2010.
HDFC Bank
Mar. 2010
%
Total share
capital
Equity share
capital
Share Application
money
Preference share
capital
Reserves
Revaluation
reserves
Net worth
Deposits
Borrowings
Total debt
Other liablities
and
Provisions
Total liabilities
Cash & balances
with RBI
Balances with
banks
Money at call
Advances
Investments
Gross block
Accumulated
depreciation
Net block
Capital work in
progress
Other assets
Total assets
ICICI
Mar.2010
457.74
14.46
1,114.89
-23.81
457.74
263.38
1,114.89
0.14
27.251
-0.256
-100
21064.8
14.901
50,503.48
4.3
24.2787
21522.5
167404.5
12915.7
180320.1
0
-6.3188
21.382
21.382
51,618.37
2,02,016.60
94,263.57
2,96,280.17
3.48
-7.48
40.02
3.71
20615.94
17.56
15,501.18
-64.57
222458.6
21.38
3,63,399.72
-4.19
15483.28
23.35
27,514.29
56.9
1459.11
27.25
11,359.40
1,81,205.
125830.6
18.989
60
58607.62
24.39
1,20,892.80
4707.97
-6.31
7,114.12
-8.61
-17
17.31
-4.43
2585.16
21.383
3,901.43
7.12
2122.81
17.599
3,212.69
-15.49
16.7
5955.15
222458.6
36.5
21.39
19,214.93
3,63,399.71
-20.48
-4.19
33
Here we, observe that share capital has increased by a

greater extent for HDFC bank than ICICI but still ICICI is
shown to be having a much larger share capital than
HDFC. Reserves rose about 14.9% as of March 2010
when compared to ICICI where it is only 4.3%.
ICICI has a much larger amount in investment where
they seek to increase their wealth but the growth is
larger for HDFC bank for the period. Advances grew at
19% for HDFC bank whereas in the case of ICICI bank,
there is decrease by 17%. HDFC is a smaller bank than
ICICI but when comparing profitability, efficiency etc it
is not behind ICICI in any manner.
ICICI bank gets funds by borrowings and the rate of
increase is more than that of HDFC. Total assets rose by
21.39% for HDFC bank whereas it went down by 4.19%
for ICICI bank.
34
Ratio Analysis of HDFC Bank

Here a ratio analysis of HDFC Bank for three periods
with respect to its competitors namely ICICI Bank, Axis
Bank and the public sector giant State Bank of India is
performed (FY ending March of that year).
Profitability Ratios
1. Profit Margin
Profit Margin = (Profit After Tax / Net Revenue) * 100
HDFC Bank:
Year
Profit Margin
2008
12.82
2009
11.35
2010
14.76
2008
10.51
2009
9.74
2010
12.17
2008
12.22
2009
13.31
2010
16.10
2009
12.03
2010
10.54
ICICI Bank:
Year
Profit Margin
Axis Bank:
Year
Profit Margin
State Bank of India:

Year
Profit Margin
2008
11.65
35
2. Return on Assets
Return on Assets = (Profit After Tax / Average Total Assets) * 100
HDFC Bank:
Year
Return on Assets
2008
1.20
2009
1.20
2010
1.3
2008
1.12
2009
0.98
2010
1.13
2008
1.24
2009
1.44
2010
1.67
2009
1.04
2010
0.91
ICICI Bank:
Year
Return on Assets
Axis Bank:
Year
Return on Assets

Year
Return on Assets
2008
0.93
36
3. Asset Turnover
Assets Turnover = (Net Revenue / Average Operating Assets) * 100
HDFC Bank:
Year
Assets Turnover
2008
5.18
2009
5.0
2010
4.24
2008
5.61
2009
5.14
2010
4.60
2008
6.32
2009
7.78
2010
7.31
2009
7.20
2010
7.26
ICICI Bank:
Year
Assets Turnover
Axis Bank:
Year
Assets Turnover

Year
Assets Turnover
2008
6.32
37
4. Return on Equity
Return on Equity = (Profit After Tax / Average Shareholders Equity) * 100
HDFC Bank:
Year
Return on Equity
2008
13.83
2009
15.32
2010
13.7
2008
8.94
2009
7.58
2010
7.79
2008
12.21
2009
17.77
2010
15.67
2009
15.74
2010
13.89
ICICI Bank:
Year
Return on Equity
Axis Bank:
Year
Return on Equity

Year
Return on Equity
2008
13.72
38
5. Earnings Per Share

Earnings Per Share (EPS) = (Profit After Tax / Weighted Average No. of
Equity Shares) * 100
HDFC Bank:
Year
EPS
2008
44.87
2009
52.77
2010
64.42
2008
2009
37.37
33.76
2010
36.10
2008
29.94
2009
50.57
2010
62.06
2008
2009
2010
106.56
143.67
144.37
ICICI Bank:
Year
EPS
Axis Bank:
Year
EPS

Year
EPS
Interpretation of Profitability Ratios

The Profit Margin has increased by over 30% to 14.76
as of March 2010 over the period where as there was a

slight fall as of March 2009 over the period.
The net profit had gone up by 31% for the period 200910 although for the period 2008-09, the rise in profits
was 41%.
39
Though there was a fall by 0.98% in interest income,

other income rose by 9.8% over the period due to
increase in fees and commissions earned and income
from foreign exchange and derivatives offset in part by
lower bond gains than those in the previous financial
year as per the annual report of the bank.
Total income rose by 0.91% over the period. Total
expenses had gone down by 2.98%, thus explaining the
rise in profit margin.
Although total income had increased by 60.73% for the
period ending March 2009, there was a higher increase
in total expenses by 63.63%.
Hence total expenses rose at a higher percentage than
total income thus causing a reduction in profit with
respect to income thus causing a fall in Profit margin
during the period.
The rise in profit margin over the period 2009-10 shows
the good health the bank is in. Investors have reason to
feel satisfied as an increase in profit cause increase in
wealth. Increase in capital value signals a healthy
position for the management too.
40
The profitability is in good shape and hence potential

investors can take a favourable decision as the profit
margin shows the bank in good health. Operating
efficiency could have increased over the period and it
shows effective cost control.
This outcome is favourable to the management.
Creditors too can take comfort in the fact that the
situation is favourable to them also as there rise in
profits and there is less risk of returns.
Comparing with the competitors (here Axis Bank, ICICI
Bank and SBI are taken), only Axis Bank shows a larger
profit margin due to its consistently good performance.
Other banks show a fall in profit margin in the period
2008-09, Axis Bank show an increase in profit margin.
Hence HDFC Bank should take measures to prevent
investors to consider the opportunity cost with respect
to Axis Bank and arriving at a conclusion that Axis Bank
was a better choice.
There is a slight increase in Return On Assets ratio to 1.3 from
1.2 over the period ending March 2010. There has been
an increase in profits over the period though assets
have also increased over the period.
41
An increase in ROA indicates higher efficiency and here

the costs have shown to be effectively controlled. From
the three other banks, only Axis Bank is shown to have
a higher ROA due to its consistently better performance
when compared to other banks including HDFC.
There was a fall in Assets Turnover ratio to 4.24 from 5.00
during the period. We can see that there was a fall in

this ratio over the previous period also. This could be
due to the lesser rise in Net Revenue when compared
to the rise in assets over the period. A fall in this ratio
indicates lesser efficiency in utilising the assets to
generate revenue.
We see that the ratios for the other three banks too
have fallen during the period, but they are still higher
than that of HDFC bank indicating higher efficiency. The
management has to consider this seriously and take
steps to improve the operating efficiency of the bank.
There was a fall in Return on Equity ratio over the period
ending March 2010 to 13.7 from 15.32 though there

was a rise in the previous period from 13.82. This
indicates that the efficiency to generate profits from
every unit of shareholders equity has gone down which
42
should be of concern to the shareholders as well as the

management.
The opportunity cost has to be considered in the case
of Return on Equity. We can see that this ratio has fallen
for most other banks except ICICI Bank which shows a
marginal increase.
Axis Bank has a highest value of this ratio and there is
very little difference between the ratios for SBI and
HDFC. There is a chance that investors could prefer
Axis Bank over HDFC.
There has been in increase in Earnings Per Share (EPS) over the
period
to
64.42
from
52.77.
This
shows
strong
foundation of the bank to achieve this growth rate by

increasing the net income.
This is good news for the shareholders as well as the
management because this results in maximization of
wealth which is the objective of any firm. According to
the Annual Report, post merger of the erstwhile
Centurion Bank of Punjab with the bank, 26,200,220
warrants convertible into an equivalent number of
43
equity shares were issued to HDFC Limited on a

preferential basis at a rate of Rs. 1,530.13 each.
On November 30, 2009 these said warrants were
converted by HDFC Limited and consequently the bank
issued them 26,200,220 equity shares. During the year
under review, 61.59 lac shares were allotted to the
employees of the bank pursuant to the exercise of
options under the employee stock option scheme of the
bank.
These include the shares allotted under the employee
stock option scheme of the erstwhile Centurion Bank of
Punjab. Correspondingly there was a large rise in net
revenue and profit contributing to the higher EPS.
Hence
shareholders
can
find
the
situation
more
favourable.
Liquidity Ratios
1. Current Ratio
Current Ratio = (Current Assets / Current Liabilities)
HDFC Bank:
Year
Current Ratio
2008
2009
2010
0.26
0.27
0.28
2008
2009
2010
ICICI Bank:
Year
44
Current Ratio
0.72
0.78
1.94
2008
2009
2010
0.36
0.37
0.63
2008
2009
2010
0.53
0.34
0.43
Axis Bank
Year
Current Ratio
State Bank of India
Year
Current Ratio
2. Quick Ratio
Quick Ratio = (Quick Assets / Current Liabilities)
HDFC Bank:
Year
Quick Ratio
2008
4.89
2009
5.23
2010
7.14
2008
6.42
2009
5.94
2010
14.70
2008
9.23
2009
9.52
2010
19.19
2008
6.15
2009
5.74
2010
9.07
ICICI Bank:
Year
Quick Ratio
Axis Bank
Year
Quick Ratio
State Bank of India
Year
Quick Ratio
Interpretation of Liquidity Ratios
45
The Current Ratio is mainly used to give an idea of

the company's ability to payback its short-term
liabilities with its short-term assets.
The higher the current ratio, the more capable the
company
is
of
paying
its
obligations.
Hence
creditors are most concerned about these liquidity

ratios. A lesser current ratio leads to higher
creditor concern.
A ratio under 1 suggests that the company would
be unable to pay off its obligations if they came
due at that point. Due to a rise in current assets
the ratio shows a rise, but is very low as current
assets are only 28% of current assets.
ICICI Bank is shown to have the highest Current
Ratio and the ratio for all the other three banks are
shown
to
have
increased
substantially
when
compared to HDFC bank.

The Quick Ratio is an indicator of a company's shortterm liquidity. It measures a company's ability to
meet its short-term obligations with its most liquid
assets.
The higher the quick ratio, the better the position
of
the
company.
Hence
creditors
are
most
46
concerned about the quick ratios. A lesser quick

ratio leads to higher creditor concern. The quick
ratio is more conservative than the current ratio.
When short-term obligations need to be paid off
immediately, there are situations in which the
current ratio would overestimate a company's
short-term financial strength. The quick ratio has
been 7.14 in the year 09-10 which indicates the
banks robustness and financial soundness in
paying off its short term obligations.
The figures indicate that there is excess liquidity in
the bank except in 2009-10. But the other three
banks show a higher liquidity when compared to
HDFC.
But the banks are under the guidance of
RBI and they have to follow the liquidity norms laid

down by RBI.
Solvency Ratios
1. Total Debt To Equity Ratio
Total Debt to Equity Ratio = (Total Debt /Shareholders Equity)
HDFC Bank:
Year
2008
2009
2010
47
Total Debt to
Equity Ratio
8.76
9.75
7.78
2008
2009
2010
5.27
4.42
3.91
2008
2009
2010
9.99
11.49
8.81
2008
2009
2010
10.96
12.81
12.19
ICICI Bank:
Year
Total Debt to
Equity Ratio
Axis Bank
Year
Total Debt to
Equity Ratio
State Bank of India
Year
Total Debt to
Equity Ratio
48
2. Interest Coverage Ratio

Interest Coverage Ratio = (Earnings Before Income Tax / Interest Expenses)
HDFC Bank:
Year
2008
Interest Coverage
1.79
Ratio
2009
2010
1.44
1.63
2009
2010
0.25
0.33
2009
2010
1.43
1.62
2009
2010
1.36
0.33
ICICI Bank:
Year
2008
Interest Coverage
1.25
Ratio
Axis Bank
Year
2008
Interest Coverage
1.46
Ratio
State Bank of India
Year
2008
Interest Coverage
1.37
Ratio
49
3. Loan to Depost Ratio

Loan to Deposit Ratio = (Total Loans Lent / Total Deposit)
HDFC Bank:
Year
Loan to Deposit
Ratio
2008
2009
2010
65.28
66.64
76.00
2008
2009
2010
84.99
91.44
90.04
2008
2009
2010
65.94
68.89
71.87
2008
2009
2010
77.51
74.97
75.96
ICICI Bank:
Year
Loan to Deposit
Ratio
Axis Bank
Year
Loan to Deposit
Ratio
State Bank of India
Year
Loan to Deposit
Ratio
50
Interpretation of Solvency Ratios

The Total Debt To Equity ratio indicates what proportion
of equity and debt the company is using to finance its

assets. A high total debt/equity ratio generally means
that a company has been aggressive in financing its
growth with debt. This can result in volatile earnings as
a result of the additional interest expense.
In the case of HDFC Bank, this ratio has decreased over
the period ending March 2010. There is growth of the
bank and it is able to manage its funds from the
internal sources. The equity capital has increased its
share in the liabilities in balance sheet in comparison to
the outside debts. This helps the bank to maintain high
credit reputation in market. The other banks were able
to reduce the ratio substantially.
The Interest Coverage ratio is used to determine how
easily a company can pay interest on outstanding debt.

The interest coverage ratio is calculated by dividing a
bank's earnings before interest and taxes (EBIT) of one
period by the bank's interest expenses of the same
period.
The lower the ratio, the more the company is burdened
by debt expense. When a company's interest coverage
ratio is 1.5 or lower, its ability to meet interest
expenses may be questionable. An interest coverage
51
ratio below 1 indicates the company is not generating

sufficient revenues to satisfy interest expenses.
The ratio for the year ending 2010 is 1.63 which is
reasonable and not below1.5. This indicates that the
bank is in a sound financial health and is able to pay
the interest on its outstanding debts.
The ratio was best in 2007-08 among the three
financial years. But has reduced in the year 2009 to
1.44 and increased to 1.63 in 2009-10. The bank has
maintained a somewhat healthy ratio over the years.
The ratios for SBI and ICICI are substantially lower.
The Loan To Deposit ratio is indicative of the percentage
of funds lent by the bank out of the total amount raised

through deposits. Higher ratio reflects ability of the
bank to make optimal use of the available resources.
The point to note here is that loans given by bank
would also include its investments in debentures, bonds
and commercial papers of the companies. This ratio
forms an integral part of analysis as it indicates the
amount of reliability the bank has earned in the minds
of its customers and evidence of its robustness.
The ratio has increased over the period ending March
2010 to 76 which is a healthy sign. The ratio of ICICI
bank is the highest though it shows a slight decline in
the ratio over the period.
52
Capital Market Ratios

1. Price - earnings Ratio
Price earnings Ratio = Average Stock Price / Earnings Per Share
HDFC Bank (30/12/10): 35.74

ICICI Bank (30/12/10): 31.50
Axis Bank (30/12/10): 21.42
State Bank of India (30/12/10): 19.04
53
2. Dividend Per Share

HDFC Bank:
Year
Dividend Per
Share
2008
2009
2010
8.50
10.00
12.00
2008
2009
2010
11.00
11.00
12.00
2008
2009
2010
6.00
10.00
12.00
2008
2009
2010
21.50
29.00
30.00
ICICI Bank:
Year
Dividend Per
Share
Axis Bank:
Year
Dividend Per
Share

Year
Dividend Yield
Ratio
54
3. Book Value Per Share

Book Value Per Share = (Equity Share Capital + Reserves &
Surplus / No. of Equity Shares)
HDFC Bank:
Year
Book Value Per
Share
2008
2009
2010
324.38
344.44
470.19
2008
2009
2010
417.64
444.94
463.01
2008
2009
2010
245.13
284.50
395.99
2008
2009
2010
776.48
912.73
1,038.76
ICICI Bank:
Year
Book Value Per
Share
Axis Bank
Year
Book Value Per
Share
State Bank of India
Year
Book Value Per
Share
55
Interpretation of Capital Market Ratios

The Price Earnings ratio (P/E Ratio) is a valuation ratio
of a company's current share price compared to its

per-share earnings. In general, a high P/E suggests
that
investors
earnings growth in
are
the
expecting higher
future
compared
to
companies with a lower P/E.

However, the P/E ratio doesn't tell us the whole story by
itself. It's usually more useful to compare the P/E
ratios of one company to other companies in the
same industry, to the market in general or against
the company's own historical P/E. Here we can see
that HDFC Bank has a higher P/E ratio of 35.74.
When compared to the other three banks HDFC has the
highest ratio with ICICI Bank close behind at 31.50.
Dividends Per Share(DPS) is the sum of declared
dividends for every ordinary share issued. Dividend per
share (DPS) is the total dividends paid out over an
entire
year
(including
interim
dividends
but
not
including special dividends) divided by the number of

outstanding ordinary shares issued.
56
Dividends are a form of profit distribution to the

shareholder. Having a growing dividend per share can
be a sign that the company's management believes
that the growth can be sustained. HDFC Bank has a
growing DPS value which is 12.00 for the period ending
March 2010 while it was 10.00 for the period ending
March 2009 thus representing an increase of 20%
which is a very healthy sign for investors as well as the
management which can be confident that the growth
can be sustained.
The increase in the ratios of the other three banks is
also similar with State Bank of India showing the
highest DPS of 30.0.
The Book Value Per Share (BV) relates the shareholder's
equity to the number of shares outstanding, giving the

shares a raw value. It is measure used by owners of
common shares in a firm to determine the level of
safety associated with each individual share after all
debts are paid accordingly.
Should the company decide to dissolve, the book value
per common indicates the dollar value remaining for
common shareholders after all assets are liquidated
and all debtors are paid. In simple terms it would be the
57
amount of money that a holder of a common share

would get if a company were to liquidate.
The BV value for HDFC Bank for the year ending March
2010 has substantially increased to 470.19 from 344.44
from the previous year which can be interpreted as a
healthy sign as far as investors are concerned and also
for the management. The share price as of 31-12-2010
is 2346.50 and BV value is 464.14.
This could be interpreted as a healthy situation. The
book values of ICICI Bank, Axis Bankand SBI have risen
in the period with SBT having the highest Book Value
Per Share value of 1038.76 in the period ending March
2010.
58
Common Size Analysis of HDFC Bank

Here a common size financial statement analysis of HDFC Bank for three
periods is performed (FY ending March of that year).
Common Size Balance Sheet of HDFC Bank Ltd as on 31st March 2008, 09, 10
(Rs. million)
31-Mar-10 %BT 31-Mar-09 %BT 31-Mar-08
%BT
Equity Capital
4577.43
0.21
4253.84
0.23
3544.33
0.27
Preference Capital
0.00
0.00
0.00
0.00
0.00
0.00
Share Capital
4577.43
0.21
8263.00
0.45
3544.33
0.27
7.76 111428.08
8.37
Reserves and Surplus 210618.37
9.47 142209.46
Deposits 1674044.39 75.25 1428115.80 77.92 1007685.91 75.67

Borrowings 129156.93
Other Provisions and
206159.44
Liabilities
5.81
91636.37
9.27 162428.23
5.00
45949.24
3.45
8.86 163158.48 12.25
Capital and Liabilities (BT) 2224585.70 100.00 1832707.73 100.00 1331766.03 100.00
Fixed Assets
21228.11
0.95
17067.29
0.93
11750.92
0.88
Investments 586076.16 26.35 588175.49 32.09 493935.38 37.09

Advances 1258305.94 56.56 988830.47 53.95 634268.93 47.63
Cash & Money at Call 299423.99 13.46 175066.17
Other Current Assets
59551.50
2.68
63568.31
9.55 147783.39 11.10

3.47
44027.41
3.31
Properties and Assets (BT) 2224585.70 100.00 1832707.73 100.00 1331766.03 100.00
59
Common Size Income Statement of HDFC Bank Ltd for the periods
ending 31st March 2008, 09, 10
31-Mar-10
Profit/Loss A/C
Interest Income
Earned
Commission,
Exchange and
Brokerage
Income
Lease Income
Dividend Income
Miscellaneous
Income
31-Mar-09
31-Mar-08
%O
I
80.
9
Rs. mln
%OI
Rs. mln
%OI
163322.
61
83.2
3
101150
81.58
28305.8
6
14.
2
24572.9
7
12.5
2
17145
13.83
0
0
0
0
4.8
9
19.
1
10
0
0
0
0
0
0
0
0
0
8333.07
4.25
5686.5
4.59
32906.0
4
196228.
65
89111.0
4
22381.9
8
16.7
7
22831.5
18.42
100
123981.5
100
48871.2
39.42
13013.5
10.5
3599.09
1.83
2717.2
2.19
29346.9
9
29340.1
5
173779.
25
21725.5
17.52
14843.3
11.97
101170.7
81.6
22810.8
18.4
14.9
6
14.9
5
88.5
6
11.4
4
0
6909
5.57
15901.8
12.83
15901.8
12.83
Rs. mln
161729
9770.25
Interest
Expenditure
Employee
Expenditure
38076.1
1
199805.
11
77862.9
9
22891.7
6
Depreciation
3943.92
Other Operating
Expenditure
Provision and
Contingencies
30809.1
5
34810.2
8
170318.
1
29487.0
1
0
11.
5
1.9
7
15.
4
17.
4
85.
2
14.
8
0
29487.0
1
29487.0
1
0
14.
8
14.
8
0
22449.3
9
22449.3
9
0
11.4
4
11.4
4
0
Other Income
Total Income (OI)
Total Expenditure
Pretax Income
Tax
Extra Ordinary
and Prior Period
Items Net
Net Profit
Adjusted Net
Profit
Dividend -
39
22449.4
45.4
1
11.4
1
60

Preference
Dividend - Equity
5492.92
2.7
5
4253.84
2.17
3012.7
2.4
61
Interpretation
From the common size balance sheet, we notice that as

on 31st March 2010, equity capital of HDFC bank forms
only 0.21% of its liabilities. This ratio is decreasing from
2008 when it was 0.27% and 0.23% in 2009. Share
capital had become 0.45% of the total liabilities in 2009
but has decreased to 0.21%.
Share capital ratio falling may not be favourable for the
investors. But reserves and surplus shows a marked
increase to 9.47% of total liabilities in 2010 which
indicates the healthy profitability situation.
But the bulk of the share of liabilities ie. 75.25% is
deposits. Though the percentage has decreased over
the previous period, deposits have increased signaling
the confidence the public has in the bank.
This is a favourable situation for investors and the
management. Borrowings have also risen to 5.81% of
total liabilities which shows the company has raised
money through borrowings. Fixed assets form just
0.95% of the total liabilities. Investments and Advances
form the bulk i.e. 26.35% and 56.56% of the total
62
liabilities. Investments have reduced from the previous

period where it accounted for 32.09 of total liabilities.
From the common size income statement we notice
that, interest income has reduced over the period
ending March 2010 and it now constitutes 80.94% of
the total income whereas in the previous period ending
March 2009, it was 83.23% of total income.
The decrease in interest earned has gone down mainly
due to decreases in Interest / discount on advances /
bill, income frominvestments, Interest on balance with
RBI and other inter-bank funds. There is decrease in
investments from 32.09% to 26.35%, which shows that
bank has sold some of its investments.
However
there
was
an
increase
in
Commission,
Exchange and Brokerage Income and Other Income

which constitutes 14.17% and 19.06% of the total
income respectively.
This is a rise from 12.52% and 16.77% which these
components constituted in the total income of the
period ending 31st March 2009.
Operating expenditures is 15.42% of the total income
and provision and contingencies 17.42% of the total
63
income. The total income has increased over the

previous period and the net profit is 14.76% of the total
income which is shows the healthy profitability situation
of the bank. This is more favourable compared to the
previous year where it was only 11.44% of the total
income.
64
Common Size Statement Analysis of HDFC Bank and Competitor
HDFC
ICICI
16,172.
80.
25,706.9
77.90
90
3,810.6
9
19.
13
22.09
2
19,983.
1
10
52
0
0
SBI
Income
Interest Earned
Other Income
Total Income
Expenditure
Interest expended
Employee Cost
7,786.3
0
2,289.1
Selling and Admin
8
3,395.8
Expenses
39
11.
5
17
1.9
7,292.43
32,999.3
6
17,592.5
7
1,925.79
6,056.48
100
0
53.31
19
5.835
84
18.35
33
1.877
Depreciation
394.39
Miscellaneous
3,169.1
7
15.
Expenses
Preoperative Exp
7,703.4
38.
10,221.9
30.97
1
1,545.1
5
7.7
63
3.514
1
17,034.
3
85.
82
2,948.7
2
14.
-0.93
-0
3,455.5
17.
7
6,403.3
Capitalised
Operating Expenses
Provisions &
Contingencies
Total Expenses
Net Profit for the
Year
Extraordionary
Items
Profit brought
forward
Total
Preference Dividend
4
0
Equity Dividend
549.29
619.5
87
2,780.03
1,159.81
28,974.3
7
4,024.98
0
2,809.65
32
6,834.63
0
2.7
1,337.95
31
8.424
5
64
87.80
28
12.19
72
0
8.514
26
20.71
14
0
4.054
47
70,993.92
14,968.15
85,962.07
47,322.48
12,754.65
7,898.23
932.66
82.5874
9
17.4125
1
100
0
55.0504
2
14.8375
3
9.18804
1
1.08496
7
7,888.00
9.17614
24,941.01
4,532.53
29.0139
7
5.27270
9
76,796.02
89.3371
9,166.05
10.6629
0.34
0.00039
6
9,166.39
10.6633
0
2.21568
1,904.65
65

Corporate Dividend
Tax
Per share data
(annualised)
Earning Per Share
(Rs)
91.23
64.42
120
Book Value (Rs)
470.19
Reserves
Transfer to Other
Reserves
Proposed
935.15
294.87
0.3
2
0.6
2.3
5
0
4.6
8
1.4
8
3.2
Dividend/Transfer to
640.52
Govt
Balance c/f to
4,532.7
22.
Balance Sheet
Total
164.04
Equity Dividend (%)
Appropriations
Transfer to Statutory
0.4
6,403.33
32
0.497
1
236.76
0
36.1
120
463.01
1,867.22
1.04
1,501.99
3,464.38
6,834.63
0.109
4
0.363
64
1.403
09
0
5.658
35
0.003
15
4.551
57
10.49
83
20.711
0.27542
4
0
144.37
300
1,038.76
6,495.14
529.5
2,141.41
0.34
9,166.39
0.16794
6
0.34899
1
1.20839
3
0
7.55582
1
0.61596
9
2.49111
0.00039
6
10.6633
Interpretation
Comparing the common size income statements of

HDFC, ICICI and SBI Banks, we see that interest
earned forms 81% of the total income of HDFC
bank whereas it forms 77.9% and 82.5% of the
total incomes of ICICI and SBI respectively.
The public sector giant SBI is much larger than
both other banks when we compare their interest
incomes.
Interest expense is just 38% of the total income of
HDFC whereas it is much larger in the case of the
other two banks. Operating expenses is at the
66
highest ratio with total income for HDFC bank

when compared t the other two which indicates
that it needs to improve its operational efficiency.
But when comparing the net profits, HDFC has the
highest ratio of net profit to total income at 14.76%
whereas it is 12.19% for ICICI bank and 10.67% for
SBI which indicates that HDFCs profitability is good
when compared to the other two as 14.76% of its
total income constitutes profit.
Hence from the managements, creditors and from
shareholders perspective profitability situation is
good for HDFC bank.
HDFC bank gives equity dividend of 2.75% of total
income but it is ICICI bank which gives a highest
dividend of 4.05% of total income.
67
Trend Analysis of HDFC Bank

Here a trend analysis of HDFC Bank is performed from a Managerial,
Creditors and Investors perspective.
68
Creditors perspective:
The financial performance during the fiscal year 200910 remained healthy with total net revenues (net
interest income plus other income) increasing by 0.91%
to Rs. 12,320.38 crores from Rs. 19,802.89crore in
2008-09. The revenue growth was driven both by an
increase Commission, Exchange and Brokerage Income
and Other Income.
Shareholders perspective:
The Banks basic earnings per share increased from Rs.

52.9 to Rs. 64.42 per equity share. Bank has had a
consistent
dividend
policy
of
balancing
the
dual
69
objectives of appropriately rewarding
shareholders
through dividends and retaining capital to maintain a

healthy capital adequacy ratio to support future growth.
70
It has had a consistent track record of moderate but

steady increases in dividend declarations over its
history with the dividend payout ratio rangingbetween
20% and 25%.Net profit increased by 31.35% from Rs.
2244.95 crores in 2008-09 to Rs. 2498.70 crores in
2009-10.
71
72
GROSS NON-PERFORMING ASSET AND NET NONPERFORMING

Gross NPA is advance which is considered irrecoverable,
for bank has made provisions, and which is still held in
banks' books of accoun t. Net NPA is obtained by
deducting items like interest due but not recovered,
part payment received and kept in suspense account
from Gross NPA.
The Reserve Bank of India states that, compared to
other Asian countries and the US, the gross nonperforming asset figures in India seem more alarming
than the net NPA figure. The problem of high gross
NPAs is simply one of inheritance. Historically, Indian
public sector banks have been poor on credit recovery,
mainly because o f very little legal provision
governing foreclosure and bankruptcy, lengthy legal
battles, sticky loans made to government public
sector undertakings, loan waivers and priority sector
lending. Net NPAs are comparatively better on a
global basis because of the stringent provisioning
norms prescribed for banks in 1991 by
Narasimham Committee.
In India, even on security taken against loans,
provision has to be created. Further, Indian Banks have
to make a 100 per cent provision on the amount not
covered by the realizable Value of securities in case
of ''doubtful'' advance, while in some countries; it
is 75 per cent or just 50 per cent. The ASSOCHAM
Study titled Solvency Analysis of the Indian Banking
sector reveals that on an average 24 per cent rise
in net non performing assets have been registered by
25 public sector and commercial banks during the
second quarter of the 2009 as against 2008.
According to the RBI, "Reduction of NPAs in the
73
Indian banking sector should be treated as a

national priority item to make the system stronger,
resilient and geared to meet the challenges of
globalization. It is necessary that a public debate is
started soon on the problem of NPAs and their
resolution. "
74
The major cause for the NPA can be attributed to:

Improper selection of borrowers activities
Weak credit appraisal system
Industrial problem
Inefficiency in management of borrower
Slackness in credit management & monitoring
Lack of proper follow up by bank
Recession in the market
Due to natural calamities and other uncertainties
The Non-Performing Assets (NPAs) problem is one of the
foremost and the most formidable problems that have
shaken the entire banking industry in India like an
earthquake. Like a canker worm, it has been eating the
banking system from within, since long. It has grown
like a cancer and has infected every limb of the banking
system. At macro level, NPAs have choked off the
supply line of credit to the potential borrowers, thereby
having a deleterious effect on capital formation and
arresting the economic activity in the country. At the
micro level, the unsustainable level of NPAs has eroded
the profitability of banks through reduced interest
income and provisioning requirements, besides
restricting the recycling of funds leading to serious
asset liability
mismatches. Unfortunately the high level of NPAs of
banks is adversely affecting the profitability, liquidity
and solvency position of the banking sector. Therefore
NPA should be brought down to internationally
accepted level (i. e. 2-3% of loan assets).
The objectives of the present study are:
Find out trends in NPA Level.
Highlight the NPAs position of selected PSBs and
Private Banks
75
Assess the comparative position of NPA in selected

PSBs & Private banks.
Assess the variation of NPA ratio in selected PSBs
& Private banks.
The foregoing review indicates that existing studies
concentrated on PSBs & comparison of PSBs with
private & foreign banks. But the present study has
focused on the comparison of NPAs between public and
private sector banks. The banks selected for the study
are prominent banks among all banks in their
respective sector and includes:
Public Sector: State bank of India (SBI) &
Punjab National Bank (PNB)
Private Sector: HDFC Bank & ICICI Bank
For the study, secondary data has been collected using
annual report of Reserve Bank of India publication
including Trend & Progress of banking in India,
statistical tables related to banks in India and report on
currency and finance. Articles and papers relating to
NPA published in different business journals,
magazines, newspaper, periodicals were studied and
data available on internet and other sources has also
been used. Major guidelines issued by RBI from time to
time were studied in depth. Along with this assets
quality of banks and recommendations also studied.
In the present study, various statistical tools ratio,
Averages, percentages, ratio analysis, Measure of
central tendency, frequency distribution, Standard
Deviations, coefficient of variation and ANOVA test have
been used to analyze and interpret the data. In the light
of objective mentioned above, the present study is
confirmed to examine the various aspects of NPAs in
PSBs & Private banks of India(selected banks). The
study covers the period from 2001-02 to 2010-2011. To
76
study NPA ratio variation data over the year 2010-2011

have been analyzed.
NPA position is different and present in PSBs & Private
Banks of India. Basically, there are many banks but in
this study some prominent banks are selected among
all in their respective sector. And the data related to
NPA of all these banks i.e. SBI, PNB, HDFC, ICICI is
collected and their comparison is done on this basis.
77
TABLE 1:
Source: Reports on Trend & Progress of Banking in
India
YEAR
SBI
PNB
HDFC
ICICI
2001-02
11. 95
11. 38
3. 18
10. 23
2002-03
9. 34
11. 58
2. 22
8. 72
2003-04
7. 75
9. 35
1. 86
4. 70
2004-05
5. 96
5. 96
1. 69
4. 27
2005-06
3. 61
4. 10
1. 44
1. 51
2006-07
2. 92
3. 45
1. 39
2. 08
2007-08
3. 04
2. 74
1. 42
3. 30
2008-09
2. 86
1. 60
1. 98
4. 32
2009-10
3. 05
1. 71
1. 44
6. 52
2010-11
3. 28
1. 79
1. 06
5. 80
Gross NPA ratio (%)

Table: 1(a): Analysis of Mean, Standard Deviation &
Coefficient of Variation
Source: calculated on the basis of data in Table 1.
BANKS
SBI
PNB
HDFC
ICICI
MEAN
5. 37
5. 36
1. 76
5. 14
STANDARD
DEVIATION
3. 09
3. 78
0. 57
2. 60
CO-EFFICIENT OF
VARIATION
57. 53
70. 59
32. 24
50. 53
Table 1(b): ANOVA Table

SOURCE OF VARIATION
Between
Within
Total
F value
Table value
SUM OF
DEGREE OF
SQUARE
FREEDOM
93. 67
3
311. 01
36
404. 68
39
0. 02
2. 84 at 5% level of significance
MEAN
SQUARE
31. 22
0. 64
31. 86
78
Gross NPA ratio (in %): (position of gross NPA to

gross advances):
It is clear from table 1 that there has been marginal
decrease in NPAs level over the period in all selected
banks. Gross NPAs to Gross Advances ratio of SBI
decreased from 11. 95 percent at the end of March
2002 to 3. 28 percent at the end of March 2011. In Case
of PNB this ratio decreased from 11. 38 percent at the
end of March
2002 to 1. 79 percent at the end of March 2011. And in
HDFC Gross NPAs to Gross Advances ratio decreased
from 3. 18 percent at the end of March 2002 to 1. 06
percent at the end of March 2011. In improvement term
PNB has shown the significant result while in ICICI trend
has started reversing from 2006 and its NPA is 5. 80 in
2011. To ascertain the significance difference between
NPA ratios of these selected banks ANOVA test by
formulating null hypothesis (Ho) is attempted.
Ho: There is no significant difference in Gross NPAs to
Gross Advances ratio of SBI, PNB, HDFC, and ICICI.
It is observed from above table 1(b) that the calculated
value is less than the table value resulting in accepting
of null hypothesis meaning thereby there is no
significant difference in GNPAs to Gross Advances ratio
of SBI, PNB, HDFC, and ICICI.
TABLE 2:
Source: Reports on Trend & Progress of Banking
in India
YEAR
2001-02
2001-03
2001-04
2001-05
SBI
5. 64
4. 49
3. 45
2. 65
PNB
5. 27
3. 80
0. 98
0. 20
HDFC
0. 50
0. 37
0. 16
0. 24
ICICI
5. 48
5. 21
2. 21
1. 65
79

2001-06
2001-07
2001-08
2001-09
2001-10
2001-11
1. 88
1. 56
1. 78
1. 79
1. 72
1. 63
0. 35
0. 76
0. 64
0. 17
0. 53
0. 85
0. 44
0. 43
0. 47
0. 63
0. 31
0. 19
0. 72
1. 02
1. 55
2. 09
2. 12
1. 11
Net NPA ratio
80
Table: 2(a): Analysis of Mean, Standard Deviation

& Coefficient of Variation
BANKS
SBI
PNB
HDFC
ICICI
MEAN
2. 65
1. 35
0. 37
2. 31
STANDARD
DEVIATION
1. 87
2. 09
0. 14
1. 59
CO-EFFICIENT OF
VARIATION
70. 57
154. 83
37. 83
68. 54
Table 2(b): ANOVA Table

SOURCE OF VARIATION
Between
Within
Total
F value
Table value
SUM OF
DEGREE OF
SQUARE
FREEDOM
31. 74
3
70. 09
36
101. 83
39
0. 18
2. 84 at 5% level of significance
MEAN
SQUARE
10. 58
1.95
12. 53
Net NPA ratio (in %age): (position of net NPA to

net advances):
It is observed from table-2 that there has been
marginal reduction in Net NPAs ratio of all selected
banks over the considered period. Net NPAs to Net
Advances ratio of SBI reduced from 5.64 percent at the
end of March 2002 to 1.63 percent at the end of March
2011.In Case of PNB this ratio decreased from 5.27
percent at the end
of March 2002 to 0.85 percent at the end of March
2011. And in HDFC Net NPAs to Net Advances ratio
came down from 0.50 percent the end of March 2002 to
0.19percent at the end of March 2011. In improvement
term PNB has shown the significant result and control
Net NPA while in ICICI since 2001 Net NPAs ratio was
decreasing till 2006 but trend has started reversing
from 2007and its NPA is 1.11 in 2011.To be compared
81
PNB is better in term of NNPA in PSBs and HDFC in

Private sector banks.
Ho: There is no significant difference in Net NPAs to Net
Advances ratio of SBI, PNB, HDFC, and ICICI
Table: 2(a) shows that bank wise Mean, standard
deviation & coefficient of variation of NNPAs ratio of
selected banks. SBI & ICICI has highest mean value
while HDFC has lowest value in comparison to other.
Standard deviation of Net NPAs to Net Advances Ratio
is 2.09 of PNB with highest coefficient of variation with
154.83percent. HDFC has less Standard Deviation &
coefficient of variation than ICICI.
It is observed from above table 2(b) that the
calculated value is less than the table value resulting in
accepting of null hypothesis meaning thereby there is
no significant difference in NNPAs to Net Advances ratio
of SBI, PNB, HDFC, and ICICI.
82
Managers perspective:
83
The financial performance during the years remained

healthy. An increment in providing loan shows that the
bank is in a sound position, as it is an asset to the bank.
The percentage of deposits has been increasing but by
comparing
the
percentage
change
of
loans
and
deposits, loans have more increase in its percentage

change. Deposits and lending rates spiked up sharply.
Net profit increased by 31.35% from Rs. 2244.95 crores
in 2008-09 to Rs. 2498.70 crores in 2009-10.
84
BIBLIOGRAPHY
www.hdfcbank.com
www.hdfcbank.com/aboutus/cg/annual_report
www.moneycontrol.com/financials/hdfcbank/ratios/HDF01
www.wikinvest.com/stock/HDFC_Bank_LTD_Ads_(HDB)/Non-performing_Assets
www.rbi.org.in
85

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HDFC Bank

Financial Analysis of HDFC

Financial Analysis of HDFC Bank

UNDER THE GUIDANCE OF

BATCH : 2011-2013 ROLL NO : 112

Financial Analysis of HDFC Bank

Mrs. Sushma Verma

Financial Analysis of HDFC Bank

Financial Analysis of HDFC Bank

Financial Analysis of HDFC Bank

FINANCIAL SECTOR OF INDIA AN OVERVIEW

FINANCIAL STATEMENT ANALYSIS OF HDFC BANK

COMPARATIVE STATEMENT ANALYSIS

RATIO ANALYSIS OF HDFC BANK

COMMON SIZE ANALYSIS OF HDFC BANK

TREND ANALYSIS OF HDFC BANK

GROSS NON-PERFORMING ASSET AND NET NON-PERFORMING

Financial Analysis of HDFC Bank

comparable. The accuracy of the financial statement

Financial Analysis of HDFC Bank

according to the specific interests of the party involved.

Inflation rate in double-digit and resulted in hike in

situation under high stress. Although, further rate hike

Financial Analysis of HDFC Bank

Headline inflation is always considered as a major

Financial Analysis of HDFC Bank

Adjustment Facility (LAF) at the rate of 6.25 per cent.

customers. Several banks have revised their deposit

narrow interest rate spread, resulted in lower earnings.

keep interest rates higher for the next few months.

government bonds in exchange of money.

Financial Analysis of HDFC Bank

FINANCIAL SECTOR OF INDIA AN OVERVIEW

Financial Analysis of HDFC Bank

like Unit Trust of India, Provident Funds, Life Insurance

Financial Analysis of HDFC Bank

INDIAN BANKING SECTOR

After a difficult FY09 Indian banks managed to grow

With lesser avenues of credit disbursal, banks had to

Financial Analysis of HDFC Bank

RBI. In the retail portfolio, while home loans grew by

Despite poor pricing power lower cost of funds helped

Financial Analysis of HDFC Bank

their private sector counterparts in terms of growth and

Financial Analysis of HDFC Bank

Financial Analysis of HDFC Bank

HDFC Bank is a young and dynamic bank, with a youthfuland

standards and best practices in terms of product

regulatory compliance. HDFC Bank has been recognized

Financial Analysis of HDFC Bank

as 'Best Bank in India' in the magazine rankings as well

Financial Analysis of HDFC Bank

At present, HDFC Bank boasts of an authorized capital

shareholders. Its shares find a listing on the Stock

Banks total Capital Adequacy Ratio (CAR) calculated in

Financial Analysis of HDFC Bank

theprimary and secondary market. It can be used as a

statements. It supplies to decision makers, crucial

Tools of Financial Analysis:

Financial Analysis of HDFC Bank

The statement is prepared to bring out the ratio of each

statement, since each statement is reduced to the total