BANK’S FINANCIAL STATEMENT

PRESENTED BY:
Abhijeet Mishra
Ankit Kesarwani
Mohd. Arish
Mohit Khurana
Puja Srivastava
Shruti Verma
Vishal Jaiswal
PERFORMA OF BALANCE SHEET

FRAMED BY RBI
 BANK’S BALANCE SHEET- INDIA
SCHEDULE LIABILITIES SCHEDULE ASSETS

01 Capital 06 Cash & Balances with The

RBI
02 Reserves & Surplus 07 Balances with banks &
Money at call & Short Notice
03 Deposits 08 Investments

04 Borrowings 09 Advances

05 Other Liabilities & 10 Fixed Assets

Provisions
12 Contingent Liabilities 11 Other Assets

13 Interest Earned 15 Interest Expended

14 Other Income 16 Operating Expenses

BALANCE SHEETS-TERMINOLOGIES
BANK LIABILITIES:

1. Net worth
i. Share Capital
ii. Reserves & Surplus
2. Deposits
3. Borrowings
4. Other Liabilities & Provisions
5. Contingent Liabilities
6. Interest Earned
7. Other Income
 BIFURCATION OF CAPITAL
In the Basel I accord bank capital was divided into two "tiers", each with some subdivisions.

• Tier 1 capital:
 The amount paid up to originally purchase the stock (or shares) of the Bank (not the amount
those shares are currently trading for on the stock exchange), retained profits subtracting
accumulated losses, and other qualifiable Tier 1 capital securities.

 In simple terms, if the original stockholders contributed $100 to buy their stock and the Bank
has made $10 in retained earnings each year since, paid out no dividends, had no other forms
of capital and made no losses, after 10 years the Bank's tier one capital would be $200.
Shareholders equity and retained earnings are now commonly referred to as "Core" Tier 1
capital, whereas Tier 1 is core Tier 1 together with other qualifying Tier 1 capital securities.

• Tier 2 (supplementary) capital:

 There are several classifications of, tier 2 capital, which is composed of supplementary
capital and are called temporary capital unlike, tier 1 which is permanent capital.

 In the Basel I accord, these are categorized as- undisclosed reserves, revaluation reserves,
general provisions, hybrid instruments and subordinated term debt.
• BANK ASSETS:

1. Cash & Balances with the RBI

2. Balances with banks & Money at call &
Short Notice
3. Investments
4. Advances
5. Fixed Assets
6. Other Assets
7. Interest Expended
8. Operating Expenses
 NPA’s
• NPA is defined as an advance for which interest or repayment
of principal or both remain outstanding for a period of more
than two quarters. The level of NPA act as an indicator
showing the bankers credit risks and efficiency of allocation of
resource.
Reasons:
• Various studies have been conducted to analysis the reasons
for NPA. Whatever may be complete elimination of NPA is
impossible.
• The reasons may be widely classified in two:

(1) Over hang component

(2) Incremental component
• Income Recognition And Provisioning

Income from NPA is not recognized on accrued basic but is booked as

income only when, it is actually received. RBI has also tightened red the
provisions norms against asset classification. It ranges from 0.25% to
100% from standard asset to loss asset respectively.

• Management of NPA
Various steps have been taken by the government to recover and reduce
NPAs. Some of them are.

1. One time settlement / compromise scheme

2. Lok adalats
3. Debt Recovery Tribunals
4. Securitization and reconstruction of financial assets and enforcement of
Security Interest Act 2002.
5. Corporate Reconstruction Companies
6. Credit information on defaulters and role of Credit Information Bureaus
 CLASSIFICATION OF BANK ASSETS

The RBI has issued guidelines to banks for classification of assets into four
categories.

1. Standard assets:
These are loans which do not have any problem are less risk.

2. Substandard assets:
These are assets which come under the category of NPA for a period of less then 12
months.

3. Doubtful assets:
These are NPA exceeding 12 months

4. Loss assets:
These NPA which are identified as unreliable by internal inspector of bank or auditors
or by RBI.
ANALYSING BANKS’FINANCIAL STATEMENTS

•Traditional Models – ROA Approach

•CAMELS Ratings Models – Various

Parameters

•Rating Analysis
 ROA Approach
• Return on Assets
Measures the company's ability to utilize its
assets to create profits.
• Formula:
Net Income

(Opening + Closing Total Assets) / 2

 CAMELS Ratings
• C – Capital Adequacy
• A – Assets Quality
• M –Management Factors
• E – Earnings
• L – Liquidity
• S – Sensitivity to market risk
 Rating Analysis
• 1.0-1.4 –Strong
• 1.6-2.4 –Satisfactory
• 2.6-3.4 –Fair
• 3.6-4.4 –Marginal
• 4.6-5.0 –Unsatisfactory
 Trend Analysis
• Average Capital
BANKS PNB SBI ICICI HDFC
AVERAGE 315.3 597.55 1391.77 366.4
CAPITAL
• Reserves & Surplus
BANKS PNB SBI ICICI HDFC
Reserves & 11039.44 43495.43 39063.70 10494.32
Surplus
• Deposits
BANKS PNB SBI ICICI HDFC
Deposits 172026 571665.97 231096.33 103959.63
• Borrowings
BANKS PNB SBI ICICI HDFC
Borrowings 3923.26 48381.47 61409.37 3326.70
• Cash Balance with the RBI
BANKS PNB SBI ICICI HDFC
Cash 14896.17 45385.74 21873.57 10420.96
Balances
• Investments
BANKS PNB SBI ICICI HDFC
Investments 54188.90 204868.10 101923.27 46258.63
• Advances
BANKS PNB SBI ICICI HDFC
Advances 123600.50 432202.40 213264.33 69751.60
DISCLOSURES IN THE FINANCIAL STATEMENTS OF BANKS

• Capital Adequacy Ratio-Tier I & II Capital

• Percentage of Share Holding of the GOI in the nationalized banks
• Gross value of Investments
• Movement in NPA
• Percentage of NAPs to net advances
• Disclosures On Risk exposure in Derivative
• Return on assets
• Restructuring under CDR
• Provision on standard assets
• Profit Per Employees
• Disclosures of penalties imposed by the RBI
• Many others…..