FAM Project

8/3/2019 FAM Project

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Financial Statement Analysis of

HDFC & ICICI Bank

Submitted By:

Gaurav Tripathi (11DCP074)

Nirvan Rustagi (11DCP085)

Yudhvir Singh (11DCP103)


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Contents

Objective ................................................................................................................................................. 3

HDFC Bank Introduction ....................................................................................................................... 3ICICI Bank Introduction ........................................................................................................................ 3

Methodology ........................................................................................................................................... 4

Ratio Analysis .......................................................................................................................................... 8

Conclusion ................................................................................................ Error! Bookmark not defined.


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Objective

The objective of this project is to analyse the financial position of two leading banks in the Indian

banking sector by using trend analysis, common size analysis and ratio analysis method of evaluation

and present a comparative study over a period of 5 years from 2006-07 to 2010-11.

HDFC Bank Introduction

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 the RBI's liberalisation of the Indian Banking Industry in 1994. The bank was incorporated inAugust 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC

Bank commenced operations as a Scheduled Commercial Bank in January 1995.

HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound customer

franchises across distinct businesses so as to be the preferred provider of banking services for target

retail and wholesale customer segments, and to achieve healthy growth in profitability, consistent

with the bank's risk appetite. The bank is committed to maintain the highest level of ethical

standards, professional integrity, corporate governance and regulatory compliance. HDFC Bank's

business philosophy is based on four core values - Operational Excellence, Customer Focus, Product

Leadership and People.

ICICI Bank Introduction

ICICI Bank is India's second-largest bank with total assets of Rs. 4,062.34 billion (US$ 91 billion) at

March 31, 2011 and profit after tax Rs. 51.51 billion (US$ 1,155 million) for the year ended March 31,

2011. The Bank has a network of 2,533 branches and 6,700 ATMs in India, and has a presence in 19

countries, including India.

ICICI Bank offers a wide range of banking products and financial services to corporate and retail

customers through a variety of delivery channels and through its specialised subsidiaries in the areas

of investment banking, life and non-life insurance, venture capital and asset management.

The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in United

States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and

representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia

and Indonesia. Our UK subsidiary has established branches in Belgium and Germany.


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Methodology

Analysis of financial statements of HDFC Bank and ICICI Bank has been carried out for the

period 20062010. As a first step financial statements of both the companies have been

downloaded from their respective corporate website and the data that are required for ouranalysis are tabulated below:

HDFC Bank

Balance Sheet in Rs. Cr.

Mar '07 Mar '08 Mar '09 Mar '10 Mar '11

Capital and Liabilities:

Total Share Capital 319.39 354.43 425.38 457.74 465.23

Equity Share Capital 319.39 354.43 425.38 457.74 465.23Share Application Money 0 0 400.92 0 0

Preference Share Capital 0 0 0 0 0

Reserves 6,113.76 11,142.80 14,226.43 21,064.75 24,914.04

Revaluation Reserves 0 0 0 0 0

Net Worth 6,433.15 11,497.23 15,052.73 21,522.49 25,379.27

Deposits 68,297.94 1,00,768.60 1,42,811.58 1,67,404.44 2,08,586.41

Borrowings 2,815.39 4,478.86 2,685.84 12,915.69 14,394.06

Total Debt 71,113.33 1,05,247.46 1,45,497.42 1,80,320.13 2,22,980.47

Other Liabilities & Provisions 13,689.13 16,431.91 22,720.62 20,615.94 28,992.86

Total Liabilities 91,235.61 1,33,176.60 1,83,270.77 2,22,458.56 2,77,352.60

Assets

Cash & Balances with RBI 5,182.48 12,553.18 13,527.21 15,483.28 25,100.82

Balance with Banks, Money at Call 3,971.40 2,225.16 3,979.41 14,459.11 4,568.02

Advances 46,944.78 63,426.90 98,883.05 1,25,830.59 1,59,982.67

Investments 30,564.80 49,393.54 58,817.55 58,607.62 70,929.37

Gross Block 1,917.56 2,386.99 3,956.63 4,707.97 5,244.21

Accumulated Depreciation 950.89 1,211.86 2,249.90 2,585.16 3,073.56

Net Block 966.67 1,175.13 1,706.73 2,122.81 2,170.65

Capital Work In Progress 0 0 0 0 0Other Assets 3,605.48 4,402.69 6,356.83 5,955.15 14,601.08

Total Assets 91,235.61 1,33,176.60 1,83,270.78 2,22,458.56 2,77,352.61

Contingent Liabilities 2,02,126.73 5,82,835.94 3,96,594.31 4,66,236.24 5,59,681.87

Bills for collection 7,211.88 17,092.85 17,939.62 20,940.13 28,869.10

Book Value (Rs) 201.42 324.38 344.44 470.19 545.53


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HDFC Bank

Profit & Loss account in Rs. Cr.


Income

Interest Earned 6,889.02 10,115.00 16,332.26 16,172.90 19,928.21

Other Income 1,510.24 2,205.38 3,470.63 3,810.62 4,433.51

Total Income 8,399.26 12,320.38 19,802.89 19,983.52 24,361.72

Expenditure

Interest expended 3,179.45 4,887.12 8,911.10 7,786.30 9,385.08

Employee Cost 776.86 1,301.35 2,238.20 2,289.18 2,836.04

Selling and Admin Expenses 727.53 974.79 2,851.26 3,395.83 2,510.82

Depreciation 219.6 271.72 359.91 394.39 497.41

Miscellaneous Expenses 2,113.28 3,295.22 3,197.49 3,169.12 5,205.97

Preoperative Exp Capitalised 0 0 0 0 0

Operating Expenses 2,590.66 3,935.28 7,290.66 7,703.41 8,045.36

Provisions & Contingencies 1,246.61 1,907.80 1,356.20 1,545.11 3,004.88

Total Expenses 7,016.72 10,730.20 17,557.96 17,034.82 20,435.32

Net Profit for the Year 1,382.54 1,590.18 2,244.94 2,948.70 3,926.40

Extraordionary Items -0.35 -0.06 -0.59 -0.93 -2.65

Profit brought forward 1,455.02 1,932.03 2,574.63 3,455.57 4,532.79

Total 2,837.21 3,522.15 4,818.98 6,403.34 8,456.54

HDFC Bank

Cash Flowin Rs. Cr.


Net Profit Before Tax 1638.75 2280.63 3299.25 4289.14 5818.66

Net Cash From OperatingActivities

666.63 3583.43 -1736.14 9389.89 -375.83

Net Cash (used in)/frominvesting activities

-311.4 -619.82 -663.78 -551.51 -1122.74

Net Cash (used in)/fromFinancing Activities

1637.88 3628.34 2964.66 3598.91 1227.99

Net (decrease)/increase InCash and Cash Equivalents

1993.11 6591.95 564.74 12435.78 -273.56

Opening Cash & CashEquivalents

6188.66 8074.54 14778.34 17506.62 29942.4

Closing Cash & CashEquivalents

8181.77 14666.49 15343.08 29942.4 29668.83


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ICICI BankBalance Sheet in Rs. Cr.

2006-07 2007-08 2008-09 2009-10 2010-11

Capital and Liabilities:

Total Share Capital 1,249.34 1,462.68 1,463.29 1,114.89 1,151.82

Equity Share Capital 899.34 1,112.68 1,113.29 1,114.89 1,151.82

Share Application Money 0 0 0 0 0.29

Preference Share Capital 350 350 350 0 0

Reserves 23,413.92 45,357.53 48,419.73 50,503.48 53,938.82

Net Worth 24,663.26 46,820.21 49,883.02 51,618.37 55,090.93

Deposits 2,30,510.19 2,44,431.05 2,18,347.82 2,02,016.60 2,25,602.11

Borrowings 51,256.03 65,648.43 67,323.69 94,263.57 1,09,554.28

Total Debt 2,81,766.22 3,10,079.48 2,85,671.51 2,96,280.17 3,35,156.39

Other Liabilities & Provisions 38,228.64 42,895.39 43,746.43 15,501.18 15,986.35

Total Liabilities 3,44,658.12 3,99,795.08 3,79,300.96 3,63,399.72 4,06,233.67

Assets

Cash & Balances with RBI 18,706.88 29,377.53 17,536.33 27,514.29 20,906.97

Balance with Banks, Money at Call 18,414.45 8,663.60 12,430.23 11,359.40 13,183.11

Advances 1,95,865.60 2,25,616.08 2,18,310.85 1,81,205.60 2,16,365.90

Investments 91,257.84 1,11,454.34 1,03,058.31 1,20,892.80 1,34,685.96

Gross Block 6,298.56 7,036.00 7,443.71 7,114.12 9,107.47

Accumulated Depreciation 2,375.14 2,927.11 3,642.09 3,901.43 4,363.21

Net Block 3,923.42 4,108.89 3,801.62 3,212.69 4,744.26

Capital Work In Progress 189.66 0 0 0 0

Other Assets 16,300.26 20,574.63 24,163.62 19,214.93 16,347.47

Total Assets 3,44,658.11 3,99,795.07 3,79,300.96 3,63,399.71 4,06,233.67

Contingent Liabilities 1,77,054.18 3,71,737.36 8,03,991.92 6,94,948.84 8,83,774.77

Bills for collection 22,717.23 29,377.55 36,678.71 38,597.36 47,864.06

Book Value (Rs) 270.37 417.64 444.94 463.01 478.31


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ICICI Bank

P & L Statement in rs Cr.

Income 2006-07 2007-08 2008-09 2009-10 2010-11

interest income 22994.29 30788.34 31092.55 25706.93 25974.05

other income 6962.95 8878.85 8117.76 7292.43 7108.91

Total 29957.24 39667.19 39210.31 32999.36 33082.96

expenditure

interest expenditure 16358.5 23484.24 22725.93 17592.57 16957.15

employee cost 1616.75 2078.9 1971.7 1925.79 2816.93

selling and admin expenses 4900.67 5834.95 5977.72 6056.48 3785.13

depriciation 544.78 578.35 678.6 619.5 562.44

miscellaneous expenses 3426.32 3533.03 4098.22 2780.03 3809.93

preoperative exp capitalised 0 0 0 0 0

operating expenses 8849.86 10855.18 10795.14 10221.99 8594.16provisions and contingencies 1638.66 1170.05 1931.1 1159.81 2380.27

total expenses 26947.02 35509.47 35452.17 28974.37 27931.58

net profit 3110.22 4157.73 3758.13 4024.98 5151.38

ICICI Bank

Cash Flowin Rs. Cr.


Net Profit Before Tax 3648.04 5056.1 5116.97 5345.32 6760.7

Net Cash From OperatingActivities

23061.95 -11631.15 -14188.49 1869.21 -6908.92

Net Cash (used in)/fromInvesting activities

-18362.67 -17561.11 3857.88 6150.73 -2108.82

Net Cash (used in)/fromFinancing activities

15414.58 29964.82 1625.36 1382.62 4283.2

Net (decrease)/increase InCash and Cash Equivalents

20081.1 683.55 -8074.57 8907.13 -4783.61

Opening Cash & CashEquivalents

17040.22 37357.58 38041.13 29966.56 38873.69

Closing Cash & CashEquivalents

37121.32 38041.13 29966.56 38873.69 34090.08


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Ratio Analysis

Liquidity Analysis: The liquidity analysis is carried to determine a companys ability to pay off.

Current Ratio: - Ability of a company to meet short term debt obligations

Liquidity Analysis

Current Ratio

Mar 07 Mar 08 Mar 09 Mar 10 Mar 11

HDFC 0.04 0.04 0.04 0.03 0.06

ICICI 0.09 0.11 0.13 0.14 0.11

The current Ratio of both the companies is very weak. An ideal ratio is 2:1 which nowhere is

close to the existing ratio. The low current ratio is due to the high short term deposits of the

companies, which act as inventories for banks. Due to this the quick ratio is comparatively

very high as compared to the current ratio.

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16


Current Ratio

HDFC

ICICI


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Quick Ratio: - A measure of short term debt paying ability

Quick Ratio


HDFC 4.07 4.89 5.23 7.14 6.89

ICICI 6.04 14.7 5.94 6.42 15.86

The quick ratio of both the companies is very strong indicating a very healthy short term liquidity

situation.

0

2

4

6

8

10

12

14

16

18


Quick Ratio

HDFC

ICICI


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Profitability Analysis:- It is a measure of profitability of a company

Net Profit Ratio: - A measure of profitability of the company

Net Profit Ratio

Mar 07 Mar 08 Mar 09 Mar 10 Mar 11HDFC 13.57 12.82 11.35 14.76 16.09

ICICI 10.81 10.51 9.74 12.17 15.91

The net profit ratio is very decent for both the companies and lies within the industry acceptable

standards of 10-15%. This implies that net profit is a fair margin of the total sales which further

implies that the expenses incurred to turn in the sales are paying off along with a good margin held

in sales.

0

2

4

6

8

10

12

14

16

18


Net Profit Ratio

HDFC

ICICI


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Return on Assets:- Measure of productivity of assets

Return On Assets


HDFC 6.37% 6.30% 6.83% 5.52% 5.88%

ICICI 6.12% 7.21% 7.49% 6.27% 6.03%

The returns on assets of both the companies is identical but at the same time lower than the

industry norms of 10% (average). This basically means that the management of both the companies

is not able to profitably convert the assets into operating profit. This is a weak sign on the part of themanagement as it gives a negative outlook to future investors of both debt and equity.

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

2007 2008 2009 2010 2011

Return on Assets

ICICI

HDFC


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Return on Net Worth:

Return On Net Worth


HDFC 23.57 13.83 15.32 13.7 15.47

ICICI 12.31 8.8 7.55 7.53 9.27

Both the companies have a very strong return to net worth ratio indicating a bright prospect forfuture equity investors. Another positive sign for the companies is that even though their net worth

has constantly increased due to retained earnings added back, the company is still able to generate

operating profits in line to maintain a decent ratio indicating a good profitable picture of both the

companies.

0

5

10

15

20

25


Return On net worth

HDFC

ICICI


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Leverage Analysis:- Means of using borrowed money to earn a return greater than the cost of

borrowing

DebtEquity Ratio:

Debt Equity RatioMar 07 Mar 08 Mar 09 Mar 10 Mar 11

HDFC 10.62 8.76 9.75 7.78 8.22

ICICI 9.5 5.27 4.42 3.91 4.1

Even though the debt equity ratio of both the companies is on the higher side, ICICI has managed to

balance it out a bit in the recent past by managing their dividend payout and retained earnings well.

Also HDFC has raised substantial capital but they have been unable to create a good balance as they

have taken a more than proportionate debt component into their capital structure. This can harm

the company in the near future as this will increase the interest component of the company and

harm the near term liquidity situation (quick) of the company which is currently strong.

0

2

4

6

8

10

12


Debt Equity Ratio

HDFC

ICICI


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Efficiency Analysis:

Cash Deposit Ratio:

Cash Deposit Ratio

Mar 07 Mar 08 Mar 09 Mar 10 Mar 11HDFC 6.84 10.49 10.71 9.35 10.79

ICICI 6.99 10.12 10.14 10.72 11.32

0

2

4

6

8

10

12


Cash Deposit Ratio

HDFC

ICICI


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The comparative cost and other data is attached along with the project.

0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

2006-07 2007-08 2008-09 2009-10 2010-11

Trend Analysis - Profit

net profit - icici

Net Profit - hdfc

0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

350.00%

2006-07 2007-08 2008-09 2009-10 2010-11

Trend Analysis - Income

Interest Earned - HDFC

interest income - ICICI

Documents

FAM Project