Professional Documents
Culture Documents
Introduction
Financial analysis is the starting point for making plans, before using any
sophisticated forecasting and planning procedures. Understanding the past is a
prerequisite for anticipating the future. Financial analysis is the process of
identifying the financial strength and weakness of the firm by properly
establishing relationship between the items of the balance sheet and the profit
and loss account. Financial analysis can be undertaken by management of the
firm, or by parties outside the firm, viz. owners, creditors, investors and
others. The nature of analysis will differ depending on the purpose of the
analyst.
Investors: Who invested their money in the firm’s shares, are most
concerned about the firm’s earnings. They more confidence in those
firm’s that show steady growth in earnings. As such, they concentrate
on the analysis of the firm’s present and future profitability. They are
also interested in the firm’s financial structure to that extent influence
the firm’s earning ability and risk.
Suppliers: On the other hand, are concerned with the firm’s long-
term solvency and survival. They analysis the firm’s profitability over
time, its ability to generate cash to be able to pay interest and repay
principal and the relationship between various sources of funds (capital
structure relationships). Long-term creditors do analysis the historical
1
financial statements, but they place more emphasis on the firm’s projected,
or pro forma, financial statements to make analysis about its future
solvency and profitability.
2
To act of analysis may also reveal areas where control is deficit and desirable
for the efficient operating of the bank which in turn help to achieve
organizational goals.
3
OBJECTIVES OF THE STUDY
The objectives of the study are to evaluate the financial position and
performance of the “HDFC BANK LTD”. The purpose of the study mainly
centers on the critical analysis of the financial statements of the bank. And
makes attempt to get better in sight about the financial strength and weakness
of the bank by analyzing and interpreting the data reported in its statements.
4
RESEARCH DESIGN OF THE STUDY
Research design means a search of facts, answers to question and
solution to the problems. It is a prospective investigation. Research is a
systematical logical study of an issue or problem through scientific method. It
is a systematic and objective analysis and recording of controlled observation
that may lead to the development of generalization, principles, resulting in
prediction ultimate control of events.
5
METHODOLOGY
Sources of data can be classified into two groups they are:
• Primary data and
• Secondary data
Primary data
The data are originally collects the data directly from the company or
from the agency for the first time, for any statistical investigation and used by
them in the statistical analysis are termed as primary data. It has been
collected through different books of accounting, broaches, catalogs, company
prospects, company file etc.
Secondary data
The data published or un published, which have already been collected
and processed by some agencies for their statistical work are termed as
secondary data. As for as secondary data is concerned the second agency if
and when it publishes and files such data, it becomes secondary data sources
to any one who later uses that data.
6
Analysis and Interpretation of Financial Statement
The subject matter of the Finance has been changing at a rapid pace
about three decades ago. The scope of Financial Management was
circumscribed to the raising Funds whenever is needed and a little significance
used to be attached to Financial Decisions and problem solving. As a
consequence the traditional finance context was structured around the theme
and contains discussion of the instruments and institution of rising funds and
of the major events such as Promotion, re-organization, re-adjustment,
Mergers, Consolidation, etc., when fund are required to be raised.
7
Finance is a life blood of business; it is rightly termed as the science of
money. It is the foundation of each and every economic activity and is the
pivot around whichever business rotates. So it is very essential for the smooth
running of the business. It has made possible tremendous savings of time and
trouble in the marshalling productive facilities and in the distribution of the
output of the industry to final consumers. It has brought about rapid economic
progress be facilitating specialization and division of labour technological
progress, large scale production and expansion of various forms of business
and financial organization and it controls the Policies, activities and decision
of every business.
8
The Financial Management concerned with:
The ascertainment of finance both long term and short term needed by
the firm
Determination of suitable resources under given circumstance
Collection of funds with in the time and control over utilization of
funds
And also to maximization of profit of the firm, share holder’s wealth
maximization.
Ensure a fair return in investment to the share holders
Creating of reserves for growth and expansion
FINDINGS
Average Quarterly balance for urban area are slight high for
common people
Penetrating rural market
In the era where India is witnessing emergence of eminent
foreign banks, HDFC Bank has still maintain its glory
9
LIMITATIONS
CONCLUSION
In general, the bank has achieved tremendous progress over the recent
years. The bank has a healthy financial performance. The bank has been able
to achieve heavy growth across multiple parameters, including customer’s
acquisition, geographical spread, business volumes and revenues.
10
COMPANY PROFILE
HDFC BANK LTD. is leading private sector bank and financial services
company in India. The Housing Development Finance Corporation Limited
(HDFC) was amongst the first to receive an in principle approval from the
Reserve Bank of India (RBI) to set up a bank in the private sector, as part of
RBI`s liberalization of the Indian Banking Industry in 1994. The Bank was
incorporated in August 1994 in the name of “HDFC BANK LTD.”, with its
registered office in Mumbai, in India and commenced operation as a
Scheduled Commercial Bank in January 1995. The Bank is a banking
company governed by India’s Banking Regulations Act, 1949. The Bank’s
shares are listed on the Bombay Stock Exchange Ltd., the National Stock
Exchange of India Limited and its ADSs are listed on the New York Stock
Exchange.
11
The strategy of bank is to provide comprehensive range of financial
products and services for their customers through multiple distributed in
channels, with high quality service and superior execution. The multiple
distribution channel including an electronically linked branch network,
automated telephone banking, internet banking and banking by mobile phone,
to offer customer convenient access to their product. The quality of service is
provided by bank through intensive staff training and the use of our
technology platform. Their focus on knowledgeable and personalized services
draws customers to our products and increases the loyalty to the existing
customers.
Today, HDFC are market leader in most of the segments that they
operate and their goal is to acquire the best position in attracting customers.
The bank has grown rapidly since commencing operations in Jan 1995.
Currently the bank has a nation spread over 583 branches in 263 cities across
the country by operating in three principle segments, that is
Wholesale banking
Retail banking
Treasury service
12
Wholesale Banking Services
The Bank's target market ranges from large, blue-chip
manufacturing companies in the Indian corporate to small & mid-sized
corporate and agri-based businesses. For these customers, the Bank provides a
wide range of commercial and transactional banking services, including
working capital finance, trade services, transactional services, cash
management, etc. The bank is also a leading provider of structured solutions,
which combine cash management services with vendor and distributor finance
for facilitating superior supply chain management for its corporate customers.
It is recognized as a leading provider of cash management and transactional
banking solutions to corporate customers, mutual funds, stock exchange
members and banks.
Treasury
Within this business, the bank has three main product areas - Foreign
Exchange and Derivatives, Local Currency Money Market & Debt Securities,
and Equities. With the liberalization of the financial markets in India,
corporate need more sophisticated risk management information, advice and
product structures. These and fine pricing on various treasury products are
provided through the bank's Treasury team. To comply with statutory reserve
requirements, the bank is required to hold 25% of its deposits in government
securities. The Treasury business is responsible for managing the returns and
market risk on this investment portfolio.
13
It is well-recognized fact that the quality of financial management is a
key ingredient in determining the success of an organization. This is even
more relevant in a service industry like banks. In this bank, they work for
ultimate identity and success of their bank will reside, as it always has, in the
exceptional quality of their people and their extraordinary effort. The bank is
only as strong as its infrastructure and its processes. The bank, right from
inception, they have invested in a robust technology platform, that’s
seamlessly integrated with centralized and audited processes. This has
enabled them to expand rapidly and grow manifold while maintaining
acceptable service standards.
14
MANAGEMENT
15
ORGANIZATIONAL STRUCTURE
BOARD OF DIRECTORS
CHAIRMAN AND
MANAGING DIRECTKOR
EXEUTIVE DIRECKTOR
REGIONAL BUSINESS
MANAGER
STATE MANAGER
BRANCH MANAGER
SUPERVISOR SUPERVISOR
AUTHORITIES AUTHORITIES
16
PRODUCT PROFILE
Saving Account
Current Account
Fixed Account
Preferred Program
Demat Account
NRI Account
ForexPlus travel’s Card
Bill pay
Insta Alert
Direct banking Channel
Current Account
These deposits constitute major portion of banks circulating medium of
exchange. Normally business people keep money in his accounts as they can
withdraw and issues cheques any number of times. Banks does not pay any
17
interest for these deposits. The different accounts that can be opened under
the current accounts are:
Regular Account
Premium Account
Plus Account
Trade Account and Merchant Establishment
Fixed Deposits
Money is accepted for a fixed period it cannot be with draw on before
expiry of fixed period. The interest’s rate higher than other accounts.
Minimum amount of new fixed accounts is Rs. 10,000 and addition on fixed
deposits is 5,000. Since fixed deposits was booked for a period 14 days
interest is paid only if the fixed deposits runs for at least 15 days if the
deposits was booked for 14 days or less interest is paid if the fixed deposits
runs for at least 7 days.
Preferred Program
The following are the components of preferred program
Free Gold Debit card with enhanced daily limit
ATM at par cheque book
Free Gold Debit card
Fixed discount up to 8 paise on card rate
Free intercity transaction
Monthly combined statement
Free cheque book pick-up and delivery
Discount on loans
Free standing instructions.
18
Demat account
With SEBI making trading mandatory in the Demat form advent of
rolling settlement, it is imperative that all investors have a Demat account with
a depository participant. When a customer places an order the seller can
deliver the securities in Demat form, which can only be traded to the Demat
account.
NRI Account
The different types of NRI Accounts are
♦ NRO Accounts: It is an account that can be opened in Indian rupees. One
can also open on account in any form; be it savings, current or term
deposits. Interest on account can be repatriated.
♦ NRE Account: Non Resident External account at HDF Bank is available
as a savings, current and term deposit. One can also get an international
debit card with your NRE Account, the average quarterly balanced are
19
NRE savings accounts is Rs. 10,000 and current and fixed deposit account
is Rs. 25,000.
♦ FCNR Account : In foreign currency non resident account you get
protection against exchange risk, apart from earning attractive interest rate
the fund can also be repatriated abroad
♦ RFC Account: It is an account is to retain fund in foreign currency.
Hence, Forex plus Card cannot be used for the cash withdrawal in India,
Nepal and Bhutan. The customers are not able to check outstanding balance at
HDFC Bank ATMs. Also, the card Pin cannot be changed.
20
Pay through Mobile Phone is just to access your HDFC Bank account on your
mobile phone to pay your bills, while you are on the move. Bill Pay at ATMs
is simply by selecting the others option in the main menu. Then, select the bill
payment option in the sub-menu. And finally, just confirm the amount of the
bill that you wish to pay. However, you must be registered for Net banking
and Mobile Banking in order to use these channels for Bill pay.
Insta Alert
HDFC Bank makes its customer life simple with the introduction of its
new Insta alert service. With this facility, one can get regular updates on his
bank account via SMS or e-mail. Hence, Insta alert ensures its customer
complete peace of mind. For our salary account holders, Insta alert helps in
getting an SMS or e-mail the moment the salary gets credited.
The main features of the Insta Alert are Utility bill payments due and weekly
balance alert. For these services they charge Rs: 25 per account quarterly for
savings account and for current account they charge Rs: 50 per account
quarterly.
Net banking
Net banking relates to the benefits through financial and non financial
transactions. They are Free Funds transfer, Demand Draft, Bank Credit Card,
Bill Pay for financial transactions. For non financial transactions, account
balance, statement download update mailing address, cheque book request
etc…
21
Mobile banking
Mobile banking product proposition is based on the SMS (Short
Messaging Service) protocol. The information available on the cell phone
screen is in the form of text message.
Phone banking
Phone banking is the transaction between non-financial and financial
phone banking that give the details of both the mentioned transactions.
Examples are Free Funds transfer, Demand Draft, Bank Credit Card, Bill Pay
for financial transactions. For non financial transactions, account balance,
statement download update mailing address, cheque book request etc…
22
Risk management and portfolio quality of HDFC Bank
23
The risk monitoring committee of the Board monitors the Bank’s
management policies and procedure, vets treasury risk limits before they are
considered by the Board, and reviews portfolio composition and impaired
credits, from an industry concentration perspective, as of March 31 2005, the
retail asset portfolio constituted 49% of the total customer assets (including
advances, corporate debt instruments, etc.). Other larger industry exposures
include automotive at 9% land transport at 4%, housing finance at 4% and
24
meeting the requirements in this respect. The Bank is in the process of
implementing a solution, which meets its requirements in the wholesale credit
area in connection with the Internal Rating Based (IRB) Approach for credit
risk. This will supplement the risk management systems the Bank already has
in place since inception.
PROJECT OVERVIEW
Theoretical overview of Financial Statement Analysis
Financial Statement
25
these financial statements and the reported amounts of revenues and expenses
for the years presented. Actual results could differ from these estimates.
Material estimates included in these financial statements that are susceptible to
change include the allowance for credit losses and the valuation of unlisted
investments.
in the financial position and a few schedules such as schedule of fixed assets
and schedule of debtors.
Income Statement: The profit and loss account sets out income as
well as expenses of the same period and after matching the two, the
difference being the net profit or net loss, is shown as the difference
between the two sides of the account. Thus, the earning capacity and
the potential of an organization are reflected by its profit and loss
account.
26
the owner’s equity between two balance sheet dates. Thus, it is a
statement of flows, which is it measures the changes that have been
taken place in the financial position of a firm between two balance
sheet dates. It summarizes the sources and uses of the funds obtained.
The essence of financial statement of the bank lies in balancing its goal,
commercial strategy and resultant financial needs. The bank should have
financial capabilities and flexibility to peruse its commercial strategies.
27
OBJECTIVES OF THE STUDY
The objectives of the study are to evaluate the financial position and
performance of the “HDFC BANK LTD”. The purpose of the study mainly
centers on the critical analysis of the financial statements of the bank. And
makes attempt to get better in sight about the financial strength and weakness
of the bank by analyzing and interpreting the data reported in its statements
Various objectives of the analysis are:
To study the service offered by the HDFC BANK LTD., to the
customers and financial activities, and also study the new planes and
schemes of the bank.
Study is mainly focused on the financial and commercial activities of
the bank
To indicate the trend progress of downfall of the bank
To evaluate the profitability of the bank
To show the relative strength and weakness of the bank
To determine the financial condition and financial performance of the
bank
To involve comparison for a useful interpretation of the financial
statement
To find out the solution to the unfavorable financial conditions and
financial performance
To analyze how the bank as utilized its each financial resources and its
sources
To find out the market share of the bank
28
To act of analysis may also reveal areas where control is deficit and
desirable for the efficient operating of the bank which in turn help to achieve
organizational goals.
29
of this analytical technique. This research seeks to investigate and
constructively contribute to help,
The bank in finding out the gray areas for improvement in performance
The bank to understand its own position overtime
The managers to understand the contribution to the performance of
bank
The present and potential investors outside parties such as the creditors,
debtors, government and many more to get an idea of the over all performance
of the bank.
30
METHODOLOGY
Sources of data can be classified into two groups they are:
• Primary data and
• Secondary data
Primary data
The data are originally collects the data directly from the company or
from the agency for the first time, for any statistical investigation and used by
them in the statistical analysis are termed as primary data. It has been
collected through different books of accounting, broaches, catalogs, company
prospects, company file etc.
Secondary data
The data published or un published, which have already been collected
and processed by some agencies for their statistical work are termed as
secondary data. As for as secondary data is concerned the second agency if
and when it publishes and files such data, it becomes secondary data sources
to any one who later uses that data.
31
through the annual reports. The study is basically relies on secondary data
supplied by the bank. The primary data used for this study consist of informal
discussion, interviews with the deputy manager of the bank.
Financial Analysis
32
According to material used, financial analysis can be of two types, they
are
33
Analysis of the financial statement by selecting the appropriate
techniques according to the purpose of analysis financial statement may be
analyzed by means of any of the following techniques, they are
Ratio Analysis
Comparative Statements Analysis
Common-size Statements Analysis
Trend Analysis
Cash flow Statements Analysis
Fund flow Statements Analysis
Ratio analysis
It is one of the powerful tools of the financial analysis and it is a
statistical yard stick that provides a measure of relationship between two
accounting figures. Ratio analysis of financial statement stands for the process
of determining and presenting the relationship of items and group of items in
the statement. Ratio analysis can be used both in the trend analysis and static
analysis. Ratio is thus the numerical or an arithmetical relationship between
two figures, it expressed where one figures is divided by another. It is very
useful analytical techniques to raise pertinent questions on a number of
managerial issues. It provides bases or clues to investigate such issues in
details. While assessing the financial health of a company ratio analysis
answers to question relating to the companies profitability, asset utilization
and liquidity and financial capability of the firm. The ratio can be classified as
follows,
• Profitability ratios
• Coverage ratios
• Turnover ratios
• Financial ratios
Comparative Financial Statement analysis
34
The preparation of comparative financial statement is an important
device of horizontal financial analysis. Financial data become more
meaningful when compared with similar data for a previous period or a
number of prior periods. Statements prepare in a form that reflect financial
data for two or more periods are known as comparative financial statement
analysis. Any statement prepared in a comparative form will be covered in
comparative statements. This statement not only the comparison of the figures
of two periods but also be relationship between balance sheet and income
statement enables an in depth study of financial position and operative results.
The financial data will be comparative only when same accounting principles
statements and the analyst should be careful in using these statements the two
comparative statements are balance sheet and income statement
35
Trend Analysis
The financial statements may be analyzed by computing trends of
services of information. This method determines the direction upwards or
downwards and involves the computation of the percentage relationship that
each statement item bears to the same item in base year. Clearly the
comparison of the past data over a period of time with a base year is known as
trend analysis. Under trend analysis the percentage relationship that each
financial statement item of each year bears to the same in the base year is
taken as hundred and on that the base trend analysis for the corresponding
item in the other years are calculated.
36
1. Fixed assets ratio
This ratio establishes the relationship between fixed assets and share
holders funs. This ratio indicates the extent to which share holders funds are
sunk in the fixed assets. Generally, in the purchase of fixed assets should be
financed by the share holder’s equity, which includes Reserves, Surplus and
retained earnings
Table-1
(Rs in Lacs)
Years Fixed assets Net worth Ratios (%)
The above table shows that the fixed assets to the net worth in the
year 2002 it was 19.02%, then it increased to 23.47% in 2003, but it decreased
37
to 22.90% and 15.52% in 2004 and 2005 respectively. Then it has increased
to 16.11% in the year 2006. This ratio is in good position as the net worth is
more than the fixed assets. The share holder’s funds are sufficient to finance
the fixed assets.
Chart 1:
25
20
15
ratios
10
0
2002 2003 2004 2005 2006
years
38
2. Proprietary ratio
This ratio establishes the relationship between the share holders fund and
the total assets of the firm. It establishes the claims of the share holders on the
firm’s assets. It is usually expressed as a pure ratio.
Table - 2
(Rs in Lacs)
Years Share holders Total assets Ratios (%)
funds
39
The above table indicates that the Proprietary ratio reflects the
financial strength of the bank. In the year 2002, the ratio was 8.20%, and then
it decreased to 7.40% and 6.21%, in the year 2003 and 2004 respectively.
Then it increased to 8.87% in the year 2005, but again decreased to 7.21% in
the year 2006.
Chart 2:
10
6
ratios
0
2002 2003 2004 2005 2006
years
40
3. Return on equity
It indicates the how the firm has used the resources of the owners. This
ratio is one of the most important ratios in financial analysis. The earnings of
a satisfactory return are one of the most desirable objectives of a business. The
ratio of net profit to owner’s equity reflects the extent to which the objective
has been accomplished.
Table – 3
(Rs in Lacs)
Years PAT Equity share Ratios (%)
holders fund
41
The above table shows that, this reflects the financial strength of the
bank. In the year 2002, the ratio was 105.56%, and then it was continuously
increased to 137.42%, 78.08%, 214.77% and 278.08% in the year 2003, 2004,
2005 and 2006 respectively.
Chart 3:
300
250
200
ratios
150
100
50
0
2002 2003 2004 2005 2006
years
42
4. Return on assets
Table – 4
(Rs in Lacs)
Years Net profit Total assets Ratios (%)
43
The above table shows that, the ratio indicates the return on assets. In
the year 2002 it was 1.25% and it increased to 1.27% in 2003. But it was
decreased to 1.17% in 2004, and again it has been increased to 1.29% in the
year 2005 and was decreased to 1.18% in the year 2006.
Chart 4:
1.5
ratios
0.5
0
2002 2003 2004 2005 2006
years
44
5. Equity Multiplier
This ratio establishes relationship between total assets and total equity
capital of the bank.
Table – 5
(Rs in Lacs)
Years Total assets Total equity Ratios (%)
capital
45
The above table indicates that the relationship between the bank total
assets and total equity. In the year 2002, it was 84.54% then it increased to
107.87%, 148.56%, 165.96% and 254.74, in the year 2003, 2004, 2005 and
2006 respectively.
Chart 5:
250
200
150
ratios
100
50
0
2002 2003 2004 2005 2006
years
46
6. Earnings per share
It is the ratio between net profits available for equity share holders (i.e.
net profits after tax and preference dividend) and the number of equity shares.
Table – 6
The above table shows that the bank earnings position was
satisfactory. So that the bank EPS has continuously increased that is 11.01 per
47
share in 2002 and 13.75, 17.95, 22.92 and 27.92 in the year 2003, 2004, 2005
and 2006 respectively.
Chart 6:
48
30
25
20
ratios
15
10
0
2002 2003 2004 2005 2006
years
7. Profit margin
This ratio is establishes the relationship between the net profit and
total income of the company.
49
Table – 7
(Rs in Lacs)
Years Net profit Total income Ratios (%)
This above table shows that the profit margin of the bank was
satisfactory. That was 14.59% in the year 2002, then it continuously increased
to 15.63%, 16.82%, 17.79% in the year 2003, 2004, 2005. But it again
decreases in the year 2006 that is 15.55%.
Chart 7:
50
20
16
12
ratios
8
0
2002 2003 2004 2005 2006
years
Table – 8
51
(Rs in Lacs)
Years Interest Total income Ratios (%)
expended
The above table shows that the interest expended ratio that is it
establishes relationship between the interests expended and total income of the
bank. This ratio was 52.73% in the year 2002, then it increased to 48.08% in
2003, and then it decreased to 39.98%, 35.13% and 34.45% in 2004, 2005 and
2006 respectively.
Chart 8:
52
60
50
40
ratios 30
20
10
0
2002 2003 2004 2005 2006
years
Table – 9:
53
(Rs in Lacs)
Years Non interest Total income Ratios (%)
expenses
The above table shows that the relationship between the non interest
expenses and total income to found non interest expenses ratio. This ratio was
20.53% in the year 2002 and then in continuously increased to 23.87%,
26.74%, 28.98% and lastly 30.23% in the year 2003, 2004, 2005 and 2006
respectively.
Chart 9:
54
35
30
25
20
ratios
15
10
0
2002 2003 2004 2005 2006
years
Table – 10
55
(Rs in Lacs)
Years Provision for Total income Ratios (%)
tax
The above table shows that the relationship between the provision for
taxation and total income of the bank. This ratio was 12.15% in the year 2002.
Then it increases to 13.01%, 16.45%, 18.11% and 19.78% in the year 2003,
2004, 2005 and 2006 respectively.
Chart 10:
56
24
20
ratios 16
12
0
2002 2003 2004 2005 2006
years
This ratio is shows relationship between net interest income and total
earning assets.
Table - 11
57
(Rs in Lacs)
Years NII Total earning Ratios (%)
assets
The above table shows that the net interest margin, which is
relationship between the net interest income and total earnings assets. That
ratio was 2.65% in the year 2002, and then it was increased to 2.70%, 3.16%,
3.46% and 3.46% in the year 2003, 2004, 2005 and 2006 respectively.
Chart 11:
58
5
3
ratios
2
0
2002 2003 2004 2005 2006
years
Table – 12
59
(Rs in Lacs)
Years Non interest Net total Ratios (%)
expenses income
The above table shows that the efficiency ratio that included cost and
income. This ratio was reflects that the relationship between the non interest
expenses and net total income of the bank.
Chart 12:
60
44
34
ratios
24
14
4
2002 2003 2004 2005 2006
years
Table – 13
61
(Rs in Lacs)
Years Non interest Non interest Ratios (%)
income expenses
The above table shows that the over head efficiency of the bank by efficiency
ratio that is the relationship between the non interest income and non interest
expenses of respected years.
Chart 13:
62
1
0.75
ratios
0.5
0.25
0
2002 2003 2004 2005 2006
years
Table – 14
63
(Rs in Lacs)
Years Total income Total assets Ratios (%)
The above table shows that the asset utilization that is the relationship
between total income and total assets of the bank
Chart 14:
64
12
8
ratios
0
2002 2003 2004 2005 2006
years
65
Capital and
Liabilities
Capital 281.37 282.05 0.68 0.24
Reserves and Surplus 1,660.91 1,962.78 301.87 18.17
Employees stock
option (grants) O/S 9.05 6,91 (2.14) (23.65)
Assets
Cash and balance with 1,211.1
RBI 7 2,081.96 870.79 71.90
Balance with banks 2,247.02 1,087.26 (1,159.76) (51.61)
Investments 12,044.02 13,388.08 1,384.06 11.53
Advances 6,813.72 11,754.86 4,941.14 72.52
Fixed assets 371.18 528.58 157.40 42.40
Other assets 1,140.35 1,583.34 442.99 38.85
66
Capital 282.05 284.79 2.74 0.97
Reserves and Surplus 1,962.78 2,407.09 444.31 22.64
Employees stock option
(grants) O/S
6,91 1.45 (5.46) (79.02)
Deposits 22,376.07 30,408.86 8,032.79 35.90
Borrowings 2,084.65 2,307.82 223.17 10.71
Subordinated debt 200.00 600.00 400.00 200.00
Other liabilities provisions 3,511.62 6,296.98 2,785.36 79.32
30,424.
Total 08 42,306.99 11,882.91 39.06
Assets
Cash and balance with
RBI 2,081.96 2,541.98 460.02 22.10
Balance with banks 1,087.26 1,115.57 28.31 2.60
Investments 13,388.08 19,256.79 5,868.71 43.83
Advances 11,754.86 17,744.51 5,989.65 50.95
Fixed assets 528.58 616.91 88.33 16.71
Other assets 1,583.34 1031.23 (552.11) (34.87)
67
Capital and
Liabilities 284.79 309.88 25.09 8.81
Capital
Reserves and 2,407.09 4,209.97 1,802.88 74.90
Surplus
Employees stock
option (grants)
out standing 1.45 0.43 (1.02) (70.34)
Assets
Cash and balance
with RBI 2,541.98 2,650.13 108.15 4.25
Balance with banks 1,115.57 1,823.87 708.30 80.78
Investments 19,256.79 19,349.81 93.02 0.48
Advances 17,744.51 25,566.30 7,821.79 44.08
Fixed assets 616.91 708.32 91.41 14.82
Other assets 1031.23 1,330.57 299.34 29.03
68
Capital and
Liabilities
Capital 309.88 313.14 3.26 1.05
Reserves and
Surplus 4,209.97 4,986.39 776.42 18.44
Employees stock
option (grants)
out standing 0.43 0.07 (0.36) (83.72)
Deposits 36,354.25 55,796.82 19,442.57 53.48
Borrowings 4,790.01 2,858.48 (1,931.53) (40.32)
Subordinated debt 500.00 1,702.00 1,202.00 240.40
Other liabilities and 5,264.46 7,849.49 2,585.03 49.10
provisions
Total 51,429.00 73,506.39 22,077.39 42.29
Assets
Cash and balance
with RBI 2,650.13 3,306.61 656.48 24.77
Balance with banks 1,823.87 3,612.39 1,788.52 98.06
Investments 19,349.81 28,393.96 9,044.15 46.74
Advances 25,566.30 35,061.26 9,494.96 37.13
Fixed assets 708.32 855.08 146.76 20.71
Other assets 1,330.57 2,277.09 946.52 71.14
Findings from the comparative balance sheet of the year 2002 -2003
The comparative balance sheet of the bank reveals that during 2003, there
has been increased in fixed assets of Rs. 157.4 lakhs i.e. 42% and the
subordinated debt outstanding as at March 31 2003 is a long term unsecured
non-convertible debt aggregating Rs 200 cores of the year i.e. 2002 Rs. It was
69
also 2002 cores when it compare to the 2002 and 2003. and also included
deposits and borrowings also has been increased in the year 2003.
Reserves and surplus, there has been increased by Rs. 301.87 lakhs that
is from 1,660.91 to 1,962.78 lakhs i.e. 18.7%. The bank has made an
appropriation from the profit and loss account balance of Rs. 38.76 lakhs out
of profit for the year ended March 31 2003 to general reserves and 28.88 lakhs
in the year of 2002.
The cash balance with the RBI, it has been increased to 870.79 lakhs in
the year 2003 i.e. 71.90% from the year 2002 and also cash balance with
banks and money at call and short notices has decreased to 1,159.76 lakhs in
2003 i.e. 51.61% reduction from the year 2002.
70
increased in 2004 from the year 2003. The financing of increased in fixed
assets out of owners fund and subordinate fund is a sound financial policy
There has been increased in investments by Rs 5868.71 lakhs i.e. 43.83%
in the year 2004. The increased in long term investments has been financed
out of increased in the long –term borrowed funds. The financing of long –
term investments by long term borrowed funds is also a good financial policy-
deposits and borrowings.
71
25.04 i.e. 8.81% and deposits and borrowing of Rs. 5,945 lakhs and 2,482
lakhs i.e., 19.55% and 107.55% respectively. The financing the increase in
fixed assets through additional capital and deposits and borrowing is a sound
financial policy.
There has been substantial increase in advances by Rs 7,821.79 lakhs
i.e., 44.08% and investment are treated as long term investments there has
been an increase of Rs lakhs i.e.. The increase in investment is a
appreciable. There has been as increase of 80.78% in cash with banks and
4.25% with RBI. Cash is an idle asset the means a huge cash balance is kept
idle.
There is an increase of Rs. 1,802.88 lakhs in reserve i.e., 74.90%. This
suggests that the profitability of the concern is good. To conclude the
financial position of the concern seems to be good.
Findings from the comparative balance sheet of the year 2005 -2006
In this comparative balance sheet of the company, there has been an
overall increase of Rs. 146.76 lakhs in fixed assets i.e., 20.17%. The above
increase in fixed assets has been financial through the raising of additional
72
capital of Rs. 3.26 lakhs i.e. 1.05%. Financing the increase in fixed assets
through additional equity share capital is a sound financial policy.
There is an increased Rs 776.42 lakhs in reserve created out of profit i.e.
18.44%. This is indicates not only the increased financial strength of the bank,
but also the profitability of the operations.
There has been increased in investments by Rs 9,044.15 i.e. 46.74% in
the year 2006. The increased in long term investment has been financed out of
increased in the long term borrowed funds. The financing of long term
investments by long-term borrowed and deposits is also a good financial
positions. There has been increased in subordinate debt by Rs. 1,202 lakhs i.e.
240.14% in the year 2006. To conclude the overall financial position and the
profitability of the concern are good.
2002 2003
73
Amount % Amount %
Assets
Cash and balance with 1,211.17 5.09 2,081.96 6.84
RBI 2,247.02 9.45 1,087.26 3.57
Balance with banks 12,044.02 50.46 13,388.08 44.00
Investments 6,813.72 28.65 11,754.86 38.65
Advances 371.18 1.56 528.58 1.74
Fixed assets 1,140.35 4.79 1,583.34 5.20
Other assets
Total 23,787.38 100 30,424.0 100
2004 2005
74
Amount % Amount %
Assets
Cash and balance with
RBI 2,541.98 6.00 2,650.13 5.15
Balance with banks 1,115.57 2.64 1,823.87 3.55
Investments 19,256.79 45.52 19,349.81 37.62
Advances 17,744.51 41.94 25,566.30 49.71
Fixed assets 616.91 1.46 708.32 1.38
Other assets 1031.23 2.44 1,330.57 2.59
Total 42,306.99 100 51,429.00 100
2005 2006
75
Amount % Amount %
TREND ANALYSIS
1. Total income
76
The total income of the year 2002 was 2,036.24 loch and was increased
to 122.58% in the year 2003, 148.75% in 2004,183.91 in 2005and 274.98 in
2006. When compared to base year the bank earning position was satisfactory.
This income was earned from investment, interest/discount, advance/bills,
interest on balance with RBI and other bank funds. These major incomes to
the bank and some other income as commission, exchange and brokerage,
profit on sales of assets, profit on exchange transaction, etc. The bank total
income of these years was satisfactory
Chart 1:
300
250
percentage
200
150
100
50
2002 2003 2004 2005 2006
years
Profit before tax and depreciation in the year 2002 was 494.40 lakhs. It
was increased to 136%, 170.85%, 227.14% and 289.66% in the year 2003,
77
2004, 2005 and 2006 respectively, when it compared to the base year 2002.
The earning position is satisfactory.
Chart 2:
350
300
250
percentage
200
150
100
50
2002 2003 2004 2005 2006
years
3. Net profit
The net profit of the banking the year 2002 was 297.04. It was increased
to 130.48%, 171.52%, 224.06%, and 293.13% in the year 2003, 2004, 2005
and 2006 respectively, when it compared to the base year 2002. This shows
78
the financial strength of the bank and also growth of the Bank in every year.
And it attracts the share holders and other financial institutions to increase the
financial position.
Chart 3:
350
300
250
percentage
200
150
100
50
2002 2003 2004 2005 2006
years
Deposits and other Borrowings were 19,476.08 during the year 2002. It
increased to 125.59%, 167.98%, 211.25% and 301.15% during the year 2003,
2004, 2005 and 2006respectively, when it compared to the base year 2002. It
79
is go on increasing as the company’s earning position is good and is providing
good service.
Chart 4:
350
300
250
percentage
200
150
100
50
2002 2003 2004 2005 2006
years
5. Advances
Advances of the bank, it was 6813.72 during the year 2002. And In
2003, it was 11,754 i.e, 172.52% increase from the previous year and during
2004 it was 17, 744.51 i.e. increased to 260.42%. And then in 2005 it was
80
25,566.30, i.e. increased to 375.22%. in the year 2006 it increased to 514.57%
i.e., 35,061 compared to the year 2002.
Chart 5:
550
500
450
400
percentage
350
300
250
200
150
100
50
2002 2003 2004 2005 2006
years
6. Investments
81
111.53%, 160.42%, 161.19%, and 236.54% in the year 2003, 2004, 2005 and
2006 respectively, when it compared to the base year 2002.
Chart 6:
300
250
percentage
200
150
100
50
2002 2003 2004 2005 2006
years
7. Fixed assets
Fixed assets was 371.10 lakhs in the year 2002 and was increased to
142.44%, 166.24%, 190.87% and 230.42%, during 2003, 2004, 2005 and
2006 respectively, when it compared to the base year 2002. The fixed assets of
the company have increased i.e. There is regular purchase of the required
82
fixed assets when compared to base year. The company has to utilize all the
fixed assets properly so that it will help in increasing sales and reduces
blockage of capital.
Chart 7:
300
250
percentage
200
150
100
50
2002 2003 2004 2005 2006
years
8. Net worth
Net worth represent that the total share holder’s fund, that included
equity share holder’s fund, reserves and surplus etc. the net worth of the year
2002 was 1,951.33 lakhs. Then it continuously increased to 115%, 138%,
234% and 272% in the year 2003, 2004, 2005 and 2006 respectively, when it
83
compared to the base year 2002. The main reason for increased in net worth
was tremendous growth in the profit of the bank. To conclude the b and
earnings position, and financial position was satisfactory.
Chart 8:
300
250
percentage
200
150
100
50
2002 2003 2004 2005 2006
years
The bank has kept their cash balance with RBI and also other banks.
Balance has been maintaining by current accounts and other accounts with
Indian banks and also out side Indian banks. The cash balance of the year
2002 was 3,458.19 lakhs with both RBI and other banks but in the year 2003 it
84
has been decreased to 91.6% and it continuously increased to 105%, 129% and
200% in the year 2004, 2005 and 2006 respectively, when it compared to the
base year 2002. To conclude the bank financial position was good.
Chart 9:
250
230
210
190
percentage
170
150
130
110
90
70
50
2002 2003 2004 2005 2006
years
The profits was available for the appropriation to, they are statutory
reserve, general reserve, capital reserve, investment fluctuation reserves
proposed dividend etc. the profit for apportion was 297.04 in the year 2002.
85
Then it increased to 197.9%, 291.4%, 360% and 659% in the year 2003, 2004,
2005 and 2006 respectively, when it compared to the base year 2002.
Chart 10:
650
550
450
percentagd
350
250
150
50
2002 2003 2004 2005 2006
years
86
require an evaluation of the ability of an enterprise to generate cash and cash
equivalents and the timing and certain of their generations. The cash flow
statement which classifies cash flows during the period from operating,
investing and financing activities.
The following terms are used in this statements with the meaning
specified,
Cash comprises cash on hand and demand deposits with banks.
Cash and cash equivalents are short term, highly liquid investments
that are readily convertible in cash and which are subject to an
insignificant risk o changes in value.
Cash flow are inflow and outflows of cash and cash equivalents
• Cash flow from investing activities: These are the acquisition and
disposal of long term assets and other investments not included in cash
equivalents. The separate disclosure of cash flows have been made for
resources intended to generate future income and cash flows.
• Cash flow from financing activities: These are the activities that
result in changes in the size and composition of the owner’s capital
(including preference share capital) and borrowings of the enterprise.
This is an important activity than other activities because it is useful in
predicting claims on future cash flows by providers of funds (both
capital and borrowing) to the enterprise.
87
Financial enterprise may be reported on a net basis are:
Cash receipts and payments for the acceptance and repayment of
deposits with a fixed maturity date
The placement of deposits with and withdraws of deposits from other
financial enterprises
Cash advances and loans made to customer to customers and the
repayment of the advances and loans.
88
Particulars 31-03-2002 31-03-2003
Adjustment for:
Depreciation and amortizations 95.16 162.27
loan loss provisions 85.77 88.39
ESOs compensation lapsed (54) (12)
Contingencies provision 14.06 ---
(Profit)/Loss on sale of fixed assets 81 (1.08)
620.64 820.31
Adjustment for:
(Increase) in Investment (4,875.54) (1,436.63)
(Increase) in Advances (2,262.83) (5,029.53)
Increase in Borrowings 590.12 261.63
Increase in Deposits 5,995.70 4,722.26
(Increase) in other assets net of opening deferred
tax (180.26) (403.13)
Increase in Other liabilities and provisions 520.42 1,317.79
Increase in Deposit Placements --- (774.74)
408.25 (522.04)
Direct taxed paid (148.70) (237.47)
Net cash flow from operating activities 259.55 (759.51)
89
Cash flows from financing activities
Proceeds from issue of shares abroad net of under-
writing commission 780.34 ---
Dividend provided last year paid during the year (53.69) (70.34)
Dividend paid during the year on stock option
exercised during the previous year --- (10)
90
the year 2003. and The net cash used in investing activities has been negative
value in both year but in 2003 has shown more negative value than the year
2002
and also The net cash generated from financing activities was Rs 736.90 lacks
in the year 2002 but in 2003 it has shown negative value.
91
Adjustment for:
Depreciation and amortizations 162.27 230.45
loan loss provision 88.39 178.28
ESOs compensation lapsed (12) (4)
Contingencies provision --- 16.70
(Profit)/Loss on sale of fixed assets (1.08) 45
820.31 1,145.55
Adjustment for:
(Increase) in Investment (1,436.63) (5,981.59)
(Increase) in Advances (5,029.53) (6,051.86)
Increase in Borrowings 261.63 223.17
Increase in Deposits 4,722.26 8,032.79
(Increase) in other assets net of opening deferred
tax (403.13) 635.09
Increase in Other liabilities and provisions 1,317.79 2,634.40
Increase in Deposit Placements (774.74) 418.22
(522.04) 1,055.77
Direct taxed paid (237.47) (284.39)
Net cash flow from operating activities (759.51) 771.38
Dividend provided last year paid during the year (70.34) (84.95)
92
Dividend paid during the year on stock option
exercised during the previous year (10) ---
investing activities in 2003 shown all the negative value but it has been
increased in the year 2004, which is shown positive cash balance due to
sufficient net cash flow from position has improved but it is note that such
93
improvements were brought about due to availability of more net profit rather
increased interest charges.
Adjustment for:
Depreciation and amortizations 230.45 318.15
loan loss provisions 178.28 176.22
94
ESOs compensation lapsed (4) ---
Contingencies provision and provision for wealth
tax 91.70 65
(Profit)/Loss on sale of fixed assets 45 (21)
1,145.55 1,473.75
Adjustment for:
(Increase) in Investment (5,981.59) (160.43)
(Increase) in Advances (6,051.86) (7,961.18)
Increase in Borrowings 223.17 2,482.19
Increase in Deposits 8,032.79 5,945.39
(Increase) in other assets net of opening deferred
tax 635.09 (232.71)
Increase in Other liabilities and provisions 2,634.40 (1,146.64)
Increase in Deposit Placements 418.22 (376.48)
1,055.77 23.89
Direct taxed paid (284.39) (371.95)
Net cash flow from operating activities 771.38 (348.06)
Dividend provided last year paid during the year (84.95) (100.05)
Tax on Dividend (10.88) (13.08)
95
Net increase/(decrease)in cash and cash
equivalents 906.55 546.64
Cash and cash equivalents at 1st April 2,394.48 3,301.03
96
Cash Flow Statement for the
Year ended 31st March 2005 and 2006
(Rs Lacs)
Adjustment for:
Depreciation and amortizations 318.15 513.41
loan loss provisions 176.22 479.76
Contingency provision 65 30
(Profit)/Loss on sale of fixed assets (21) (27)
97
1,473.75 2,246.71
Adjustment for:
(Increase) in Investment (160.43) (9,350.30
(Increase) in Advances (7,961.18) (9,889.35)
Increase in Borrowings 2,482.19 (1,931.53)
Increase in Deposits 5,945.39 19,442.57
(Increase) in other assets net of opening deferred
tax (232.71) (738.33)
Increase in Other liabilities and provisions (1,146.64) 2,495.49
Increase in Deposit Placements (376.48) 2.66
23.89 2,277.92
Direct taxed paid (371.95) (553.76)
Net cash flow from operating activities (348.06) 1,724.76
Dividend provided last year paid during the year (100.05) (140.07)
Proceeds from ADR issue net of commission 1,274.77 ---
Tax on Dividend (13.08) (19.64)
Net cash generated from financing activities 1,138.03 1,104.87
98
equivalents
Cash and cash equivalents at 1st April 3,301.03 3,741.00
the cash generated from financing activities also decreased from the year 2005
to 2006, it was 1,138 lacks to 1,104.87 lacks. Even though the net cash from
financing activities decreased and investing activities has shown negative
value but it has not affected to the cash earning position of the year 2006. And
the overall cash position of the year 2006 was satisfactory.
Interpretation
The directed policy of the bank is to be well appreciated for the reason
that comp any has paid for dividend to equity share holders when it was
making profits while the company had not paid any amount when it incurred a
loss.
99
The main reasons of cash outflow of the bank has been purchased of
fixed assets but to proportionately increased in the net profit could not be
brought about therefore further investment will have to be made with cautions.
FINDINGS
Average Quarterly balance for urban area are slight high for
common people
Penetrating rural market
In the era where India is witnessing emergence of eminent
foreign banks, HDFC Bank has still maintain its glory
HDFC Bank has excelled in all the banking products starting
from saving account and current account till the critical fields
like investment and insurance
HDFC Bank possess a treasure of highly qualify and
professionalized employees which helps the bank to excel in all
the banking fields
All the products are carefully hand picked and molded in order
to meet the needs of its customers
The bank success is reflected by its share price, which is ever
increasing since the day of its commencement.
HDFC Bank is a blend of antiquity and modernity
100
LIMITATION OF THE STUDY
The main limitation of the study is time constraints some other limitation
as follows,
The financial statements are prepared on the basis of historical costs or
original costs. The value of assets decreases with the passage of time
current price changes are not taken into account.
The financial statements are expressed in monetary values, so they
appear to give final and accurate position, but some times it does not
give exact position.
The precision of financial statement data is not possible because the
statements deal with natters which cannot be precisely stated.
The bank wanted not to disclose some of the analysis carried on.
Hence some of them are not included in this report.
The study had to be fully dependent upon past financial statements as
such it may fail to reflect the financial stand and capacity of the bank a
near future.
More emphasis has been laid on the accounting ratios as they reveal
the trend over a period.
101
A conclusion from this analysis is not real indications of the efficiency
of the management and hence requires further investigation.
The balance sheet ratio cannot be fully relied upon as the balance sheet
show the financial position as particular data.
For the industrial average comparisons analysis the data were not
available.
Difference in definitions of basic concepts renders the comparison
inaccurate. Hence ratio value might vary significantly.
SUGGESTION
102
through multiple channels that are phoned Banking, Internet banking and
mobile banking.
If the bank has to attract more customers and deal with more
transactions, the bank can provide advances and loans to the general public
for the following purposes:
CONCLUSION
In general, the bank has achieved tremendous progress over the recent
years. The bank has a healthy financial performance. The bank has been able
to achieve heavy growth across multiple parameters, including customer’s
acquisition, geographical spread, business volumes and revenues.
103
Recently, HDFC Bank managing director, Aditya Puri has told that more
than 50 percent of the consumer lending is now from 14 cities of the country.
If things go forward, then this lending could go up by 5 percent. Also more
than 50 percent of HDFC Bank branches are now in semi urban bank or under
bank regions. Current year bank is looking at 45-50 percent of new branches.
BIBLIOGRAPHY
Website: www.hdfcbank.Com
104