1 Ratio Analysis:

Capital Adequacy Ratios

Capital Adequacy Ratios

25%

20%
Capital-Assets Ratio Net Capital-Assets Ratio
15% Net NPA Coverage Ratio Tier-I Capital Ratio
Basel Risk Weighted Capital Equity-Risk Weighted Assets
10% Ratio Ratio
Short-Term Leverage Ratio
5%

0%

Net NPA Coverage Ratio (Net NPAs / Net worth) has been decreasing
indicating the reduction in Net NPAs. This ratio gives us the percentage reduction
in Net Worth if provisions are made against entire amount of Net NPA's. A
decreasing value of this ratio points to greater likelihood of stability for the
banking.
Capital-Assets Ratio (Net Worth/Total Assets) has been stagnant over last five
years. However Net Capital-Assets Ratio ((Net Worth- Net NPAs)/ Total Assets)
has been increasing indicating that Net NPAs have been decreasing over the
year. Net Capital-Assets Ratio provides the true amount of capital available
against the total assets owned.
Tier-I Capital Ratio, Basel Risk Weighted Capital Ratio (behind green line),
Equity-Risk Weighted Assets Ratio have been stagnant over the five years.
Tier-I Capital Ratio gives us the proportion of equity held against the amount of
risk weighted assets. Basel Risk Weighted Capital Ratio tells us the extent of
capital (as per regulatory definitions) maintained against total risk weighted
assets. This indicates that the equity and capital are constantly managed against
total risk weighted assets.
Short-Term Leverage Ratio has been decreasing over past five years. Short
term borrowed funds are typically a very volatile source of funds for banks. A
decreasing value of this ratio value indicates adoption of safe behaviour on the
part of bank. This behaviour is typically expected when banks expect interest
rates to decline in the near future. We will see that NIM also has been on
decreasing trend.

NPA Ratios and Provision Ratios

Gross NPA Ratio-I (Gross NPAs/ Total Assets) have been decreasing over the
last five years. The decreasing value of this ratio indicated that bank has been
able to reduce the proportion of total assets that are not generating any income
for the bank.
Gross NPA Ratio-II (Gross NPAs/ Total Advances) have been decreasing over
the last five years. This ratio gives us the true picture of the proportion of non-
income generating advances. The decreasing values of this ratio indicates tight
lending policies adopted by the bank in the past.

NPA Ratios, Provision Ratios & Restructured Assets Ratio

5.00%
4.50%
4.00% Gross NPA Ratio-I
Gross NPA Ratio-II
3.50%
Net NPA Ratio-I
3.00%
Net NPA Ratio-II
2.50%
Provisions Ratio
2.00%
Restructured Assets Ratio
1.50%
1.00%
0.50%
0.00%
2011-12 2012-13 2013-14 2014-15 2015-16

Net NPA Ratio-I (Net NPAs/ Total Assets), Net NPA Ratio-II (Net NPAs/ Total
Advances) have been decreasing over past five years due to proportion decrease
in Net NPAs. These ratios indicate the proportion of total assets/advances that
are to be written off.
Provision Ratio (Provision for Doubtful Debts/ Total Advances) is stagnant over
past year. This ratio indicates the amount of accumulated provisions made
against total advances. Since Net NPAs are decreasing, it also indicates that the
bank is possibly being less cautious in terms of recognizing possible losses in its
profit and loss account.
Restructured Assets Ratio (Advances Subject to Restructuring/Total Advances)
has been decreasing. This ratio gives us the proportion of advances that the
bank could not recover fully on originally contracted terms and hence require
restructuring to reduce the extent of future losses on such loans. Possibly in the
absence of such restructuring, the bank would have had to fully write-off the
amount of these loans. The decrease in this ratio may be due to decrease in
Gross NPA Ratio-II.
Asset Concentration Ratio, Liquidity Ratios, Off Balance Sheet Exposure
Ratio
Asset Concentration Ratio, Liquidity Ratios, Off Balance Sheet Exposure Ratio
60.00%

50.00% Asset Concentration Ratio

Liquidity Ratio-I
40.00% Liquidity Ratio-II
Liquidity Ratio-III (Short-Term
30.00% Gap Ratio)
Off-Balance Sheet Exposure
20.00% Ratio

10.00%

0.00%
2011-12 2012-13 2013-14 2014-15 2015-16

Asset Concentration Ratio (Large Loans/ Total Advances) has been decreasing
over past five years. This indicates that the bank is becoming more diversified
and is getting less exposed to financial problems.
Liquidity Ratio-I [Liquid Assets/(Demand deposits + Savings deposits+
Interbank Deposit Liabilities + Short Term Borrowed funds] has been increasing
over past five years. This ratio gives us the proportion of liquid assets held by the
bank that would be available to meet its short-term/demand liabilities. An
increasing value of this ratio is indicative of greater ability of the bank to meet
such liabilities. Liquidity Ratio-II [Liquid Assets/(Total Assets)] has been
decreasing. This ratio give us a sense of the proportion of low income generating
liquid assets in the asset portfolio of a bank. Although Liquidity Ratio-I is
increasing indicating increasing liquidity, the decreasing Liquidity Ratio-II
indicates that the bank has been able to reduce the proportion of low income
generating liquid assets in the asset portfolio. Liquidity Ratio-III also called
Short-Term Gap Ratio (Assets Maturing in One year/ Liabilities Due in One year)
has been stagnant over past years. This ratio gives us a more precise view of
liquidity as the ability of a bank to repay its obligations falling due within a year.
Off-Balance Sheet Exposure Ratio (Off Balance Sheet Transactions / Total
Assets) has been decreasing over past years. The decreasing value indicates
banks strategy of relying low on non-interest based incomes. It is indicative of
the focus on interest bearing assets and advances than fee-based incomes.

Relative Growth Ratios

 Relative Growth Rate Ratios
4.00

2.00
Relative Growth Rate Ratio-I
0.00 Relative Growth Rate Ratio-II
Relative Growth Rate Ratio-III
-2.00
Relative Growth Rate Ratio-IV
-4.00

-6.00

-8.00
2012-13 2013-14 2014-15 2015-16

Relative Growth Rate Ratio-I (Growth Rate of Advances (%)/ Growth Rate of
Investments) has been decreasing. The decreasing value of this ratio indicates
that the growth in advances have been less than the growth in investments. This
tells us the preference of the bank to attain growth through its investment
activities vis--vis lending activities.
Relative Growth Rate Ratio-II (Growth Rate of Government Securities
Holdings/ Growth Rate of Investments) has been decreasing indicating that the
growth in government securities has been lower compared to the growth in
investments. This indicated that the bank is acting aggressively in investment
and investing in high profit assets.
Relative Growth Rate Ratio-III (Growth Rate of Off Balance Sheet Transactions
/ Growth Rate of Total Assets) has been decreasing due to decrease in Off
Balance Sheet Transactions. This indicates that the bank has reduced its
dependence on non-interest sources of income relative to income earning assets.

Relative Growth Rate Ratio-IV (Growth Rate of Risk Weighted Assets / Growth
Rate of Total Assets) has been increasing indicating that the growth in Risk
Weighted Assets has been higher compared to the growth in total assets. The
increasing value of this ratio indicates higher level of risk taking.
Profitability Ratios
 Profitability Ratios-I
50%
45%
40% Return on Equity
Return on Assets
35%
Net Interest Margin
30%
Interest Income Ratio
25%
Interest Expense Ratio
20%
Non-Interest Income Ratio
15%
10%
5%
0%
2011-12 2012-13 2013-14 2014-15 2015-16

Return on Equity, Return on Assets and Net Interest Margin [(Interest

Income-Interest Expense)/ Total Assets] have been increasing due to rise in
interest income. This gives us an idea that the bank has increased its reliance on
interest based income. Non-Interest Income Ratio (Non-Interest Income/ Net
Interest Income) has been decreasing which is again highlighting banks strategy
to decrease reliance on non interest based income.

Profitability Ratios-II
80.00%

70.00%

60.00%
Operating Expense Ratio
50.00%
NPA Provision Ratio
40.00% Non-Interest Income Margin
30.00%

20.00%

10.00%

0.00%
2011-12 2012-13 2013-14 2014-15 2015-16

Operating Expense Ratio [Operating Expenses/(Net Interest Income + Non-

Interest Income)] has been decreasing. This ratio gives us the proportion of
operating expenses incurred by a bank for the smooth running of its day-to-day
business activities. This deceasing ratios is considered better as bank is
becoming cost efficient in its operations.
Non-Interest Income Margin (Non-Interest Income/Contingent Liabilities) has
been increasing indicating that growth in Non-Interest Income has been higher
than the growth in Contingent Liabilities which is a good sign for reduced
financial disruption of the bank.