FMB Project PGCBM22 Group11

7/29/2019 FMB Project PGCBM22 Group11

1/18

Financial Markets and Banking Group Assignment

13

Bank of BarodaFinancial Statement Analysis

PGCBM 22 XLRI, Jamshedpur


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Bank of Baroda

PGCBM 22 Page 2

Group Detail

SID SMS ID Name Center Group

DB12021 2224281 Sandeep Moudgil Chandigarh - Sector 34 A 11

DB12022 2224781 Soumya Mishra Chandigarh - Sector 34 A 11

Faculty

Professor Santosh Sangem

Assignment Objectives

For the assignment, you are required to make use of publicly available information on the individual

bank for a period of 4-7 years, ending in the financial year 2011-12. The primary submission should be in

Microsoft Word or PDF format and must not exceed 25 pages. You are expected to analyze the trends in

the nature of asset portfolio choices and profitability based on what has been taught during the course.

Students are also required to provide the summarized financial statements of the bank studied in an

excel sheet . Such summarized financial statements should have formed the basis for the computation

of the financial indicators used in the assignment. The excel sheet must also contain the calculation of

the ratios used for the analysis. The marks assigned to the group would depend on the rigor employed in

terms of the length of period for the assignment, the number and accuracy of the financial indicators

computed, and most importantly, the quality of the analysis. It is these and not the submission length

that will help in getting good marks, so try to be as much precise and to the point as possible.

The primary source of information for the submission will be the annual reports of the concerned bank

available at its own website. In addition, you may use any other source of data to provide support for

other points made by you in the analysis. However, be sure to cite the source clearly.


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Bank of Baroda

PGCBM 22 Page 3

Section 1

A Brief History of the Assigned Bank

The Heritage

It all started with a visionary Maharaja's uncanny foresight into the future of trade and enterprising in his country. On20th July 1908, under the Companies Act of 1897, and with a paid up capital of Rs 10 Lacs started the legend thathas now translated into a strong, trustworthy financial body, THE BANK OF BARODA.

It has been a wisely orchestrated growth, involving corporate wisdom, social pride and the vision of helping othersgrow, and growing itself in turn.

The founder, Maharaja Sayajirao Gaekwad, with his insight into the future, saw "a bank of this nature will prove abeneficial agency for lending, transmission, and deposit of money and will be a powerful factor in the development ofart, industries and commerce of the State and adjoining territories."

The Ethics

Between 1913 and 1917, as many as 87 banks failed in India.Bank of Barodasurvived the crisis, mainly due to its

honest and prudent leadership. This financial integrity, business prudence, caution and an abiding care and concernfor the hard earned savings of hard working people, were to become the central philosophy around which businessdecisions would be effected. This cardinal philosophy was over years of its existence, to become its biggest asset. Itensured that the Bank survived the Great War years. It ensured survival during the Great Depression. Even while bignames were dragged into the Stock Market scam and the Capital Market scam, the Bank of Baroda continued itstriumphant march along the best ethical practices.

The major ongoing initiatives of the Bank are detailed below:

Business Process Reengineering (BPR)

People Initiatives

New Technology Platform

Marketing Initiatives

Corporate Social Responsibility (CSR) Initiatives

Board of Directors


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Bank of Baroda

PGCBM 22 Page 4

Source -http://www.bankofbaroda.co.in/
http://www.bankofbaroda.co.in/http://www.bankofbaroda.co.in/http://www.bankofbaroda.co.in/http://www.bankofbaroda.co.in/


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Bank of Baroda

PGCBM 22 Page 5

International Presence

Source -http://www.bankofbaroda.co.in/
http://www.bankofbaroda.co.in/http://www.bankofbaroda.co.in/http://www.bankofbaroda.co.in/http://www.bankofbaroda.co.in/


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Bank of Baroda

PGCBM 22 Page 6

Section 2 And 3

Analysis of Bank Financial Reports [2012-2008 (5 years)]

a. Official Balance Sheet/P and L Statement/Annual Report 20012-08

http://www.bankofbaroda.co.in/fin/AnnualReport.asp

b. Bank of BarodaBalance Sheet (Last 5 years)

Consolidated Balance Sheet ------------------- in Rs. Cr. -------------------

Mar '12 Mar '11 Mar '10 Mar '09 Mar '08

12 mths 12 mths 12 mths 12 mths 12 mths

Capital and Liabilities:

Total Share Capital 412.38 392.81 365.53 365.53 365.53

Equity Share Capital 412.38 392.81 365.53 365.53 365.53

Share Application Money 0.00 0.00 0.00 0.00 0.00

Preference Share Capital 0.00 0.00 0.00 0.00 0.00

Init. Contribution Settler 0.00 0.00 0.00 0.00 0.00

Preference Share Application Money 0.00 0.00 0.00 0.00 0.00

Employee Stock Opiton 0.00 0.00 0.00 0.00 0.00

Reserves 28,103.92 21,379.55 15,349.06 12,914.99 10,993.01

Revaluation Reserves 0.00 0.00 0.00 0.00 0.00

Net Worth 28,516.30 21,772.36 15,714.59 13,280.52 11,358.54

Deposits 392,615.95 311,603.25 245,951.15 196,608.44 155,295.08Borrowings 23,598.06 22,378.33 13,404.27 5,644.85 3,962.17

Total Debt 416,214.01 333,981.58 259,355.42 202,253.29 159,257.25

Minority Interest 91.18 72.91 59.42 46.43 36.29

Policy Holders Funds 0.00 0.00 0.00 0.00 0.00

Group Share in Joint Venture 0.00 0.00 0.00 0.00 0.00

Other Liabilities & Provisions 12,590.52 10,386.92 9,049.71 16,730.97 12,826.91

Total Liabilities 457,412.01 366,213.77 284,179.14 232,311.21 183,478.99



AssetsCash & Balances with RBI 22,268.34 20,394.42 14,076.07 10,901.21 9,617.34

Balance with Banks, Money at Call 43,542.00 31,029.31 22,493.41 14,301.41 13,552.77

Advances 292,077.14 232,085.11 177,711.90 146,293.98 108,578.97

Investments 86,697.00 74,018.46 63,163.27 53,626.58 44,657.76

Gross Block 5,096.79 4,716.57 4,412.31 4,268.90 4,092.10

Accumulated Depreciation 2,668.60 2,333.37 2,042.92 1,709.27 1,417.83

Net Block 2,428.19 2,383.20 2,369.39 2,559.63 2,674.27
http://www.bankofbaroda.co.in/fin/AnnualReport.asphttp://www.bankofbaroda.co.in/fin/AnnualReport.asphttp://www.bankofbaroda.co.in/fin/AnnualReport.asp


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Bank of Baroda

PGCBM 22 Page 7

Capital Work In Progress 0.00 0.00 0.00 0.00 0.37

Other Assets 10,399.33 6,303.27 4,458.54 4,628.39 4,344.08

Minority Interest 0.00 0.00 0.00 0.00 0.00

Group Share in Joint Venture 0.00 0.00 0.00 0.00 0.00

Total Assets 457,412.00 366,213.77 284,272.58 232,311.20 183,425.56

Contingent Liabilities 134,988.89 112,544.64 78,341.53 64,958.31 75,729.57

Bills for collection 41,028.30 34,004.12 28,071.78 22,800.15 15,225.85

Book Value (Rs) 693.62 556.06 431.40 364.58 311.82

Source : Dion Global Solutions LimitedURL -http://www.moneycontrol.com/stocks/company_info/print_main.php

Bank of BarodaProfit and Loss Statement (Last 5 years)

Previous Years

Profit & Loss account ------------------- in Rs. Cr. -------------------



Income

Interest Earned 29,673.72 21,885.92 16,698.34 15,091.58 11,813.48

Other Income 3,422.33 2,809.19 2,806.36 2,757.66 2,051.04

Total Income 33,096.05 24,695.11 19,504.70 17,849.24 13,864.52

Expenditure

Interest expended 19,356.71 13,083.66 10,758.86 9,968.17 7,901.67

Employee Cost 2,985.58 2,916.78 2,350.88 2,348.13 1,803.76

Selling and Admin Expenses 2,589.44 1,885.00 1,627.56 885.24 927.20

Depreciation 276.57 243.04 230.86 230.50 232.00

Miscellaneous Expenses 2,880.80 2,324.94 1,478.21 2,189.99 1,564.36

Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.00

Operating Expenses 6,727.59 5,669.88 4,711.23 3,844.66 3,370.27

Provisions & Contingencies 2,004.80 1,699.88 976.28 1,809.20 1,157.05

Total Expenses 28,089.10 20,453.42 16,446.37 15,622.03 12,428.99



Net Profit for the Year 5,006.96 4,241.68 3,058.33 2,227.20 1,435.52

Extraordionary Items 0.00 0.00 0.00 0.00 0.00

Profit brought forward 0.00 0.00 0.00 0.00 0.00

Total 5,006.96 4,241.68 3,058.33 2,227.20 1,435.52

Preference Dividend 0.00 0.00 0.00 0.00 0.00

Equity Dividend 812.29 753.35 639.26 383.56 340.94

Corporate Dividend Tax 0.00 0.00 0.00 0.00 0.00

Per share data (annualised)

Earning Per Share (Rs) 121.79 108.33 83.96 61.14 39.41

Equity Dividend (%) 170.00 165.00 150.00 90.00 80.00
http://www.moneycontrol.com/stocks/company_info/print_main.phphttp://www.moneycontrol.com/stocks/company_info/print_main.phphttp://www.moneycontrol.com/stocks/company_info/print_main.phphttp://www.moneycontrol.com/stocks/company_info/print_main.php


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Bank of Baroda

PGCBM 22 Page 8

Book Value (Rs) 668.34 536.16 414.71 352.37 303.18

Appropriations

Transfer to Statutory Reserves 1,740.81 1,387.87 1,162.07 1,136.23 444.23

Transfer to Other Reserves 2,453.86 2,100.46 1,257.00 707.41 650.35

Proposed Dividend/Transfer to Govt 812.29 753.35 639.26 383.56 340.94

Balance c/f to Balance Sheet 0.00 0.00 0.00 0.00 0.00

Total 5,006.96 4,241.68 3,058.33 2,227.20 1,435.52

Source : Dion Global Solutions LimitedURL: http://www.moneycontrol.com/stocks/company_info/print_main.php

Annual Report Self Analysis

ta 2012(in Crores)

2011(in

Crores)

2010(in

Crores)

2009(in

Crores) 2008(in Cror

t Worth 27476.85 20993.11 15106.39 12835.54 1104tal Assets 447321.46 358397.18 278316.71 227406.73 1795

tal Advances 287377.29 228676.36 175035.29 143985.9 10670

ntingent Liabilities 134552.25 112272.64 77997.01 64745.82 7536

t NPAs 1,543.64 790.88 602.32 449.04 49

oss NPAs 4,464.75 3,152.50 2,400.69 1842.92 198

er-I Capital 27497.91 20974.23 14356.88 11069.64

tal Risk Weighted Assets 253733.75 209890.48 156091.41 130324.89

ovision for Doubtful Debts 76.14 0.1 0.06 51.01 3

vances Subject to

structuring 8,265.41 1,603.83 2,455.05 2658.56 ofit after Tax 5,216.29 4,419.20 3,149.79 2,331.27 1,51

erest Income 30,488.49 22,513.31 17,234.82 15,547.56 12,16

n-Interest Income 4,099.89 3,284.66 2,966.47 2,845.67 2,14

Annual Report Self analysis Excel Attached Below

FinStmt_Analysis_Ratios.xlsx
http://www.moneycontrol.com/stocks/company_info/print_main.phphttp://www.moneycontrol.com/stocks/company_info/print_main.phphttp://www.moneycontrol.com/stocks/company_info/print_main.php


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Bank of Baroda

PGCBM 22 Page 9

Section 4

Capital Adequacy Ratios

Type Ratio Formula

2012 (in

%)

2011(in

%)

2010(in

%)

2009(in

%)

2008(i

%)

Capital

Adequacy

Capital Asset Ratio Net Worth/Total Assets 6.14 5.86 5.43 5.64 6.1

Net Capital-Assets

Ratio

(Net Worth- Net NPAs)/

Total Assets 5.8 5.64 5.21 5.45 5.8

Net NPA Coverage

Ratio Net NPAs / Net Worth 5.62 3.77 3.99 3.5 4.4

Tier-I Capital Ratio

Tier-I Capital / Total Risk

Weighted Assets 10.84 9.99 9.2 8.49 NA

Section 5

Asset Quality, Market Risk & Liquidity Ratios

Type Ratio Formula

2012 (in

%)

2011(in

%)

2010(in

%)

2009(in

%)

2008(i

%)

sset Quality,

Market Risk &

quidity Ratios

Gross NPA Ratio-I

(A) Gross NPAs/ Total Assets 1.00 0.88 0.86 0.81 1.1

Net NPA Ratio-I (A) Net NPAs/ Total Assets 0.35 0.22 0.22 0.2 0.2

Gross NPA Ratio-II(A)

Gross NPAs/ TotalAdvances 1.55 1.38 1.37 1.28 1.8

Net NPA Ratio-II (A)

Net NPAs/ Total

Advances 0.54 0.35 0.34 0.31 0.4

Provisions Ratio (A)

Provision for Doubtful

Debts/ Total Advances 0.03 0 0 0.04 0.0

Restructured Assets

Ratio (A)

Advances Subject to

Restructuring/ Total

Advances 2.88 0.7 1.4 1.85 NA


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Bank of Baroda

PGCBM 22 Page 10

Section 5


Type Ratio Formula

2012 (in

%)

2011(in

%)

2010(in

%)

2009(in

%)

2008(i

%)

Profitability

Ratio

Return on Equity

Profit after Tax/Net

Worth 18.98 21.05 20.85 18.16 13.7

Return on Assets

Profit after Tax/Total

Assets 1.17 1.23 1.13 1.03 0.8

Interest Income

Ratio

Interest Income/ Total

Assets 6.82 6.28 6.19 6.84 6.7

Non-Interest

Income Margin

Non-Interest

Income/Contingent

Liabilities 3.05 2.93 3.8 4.4 2.8

A Consolidated List of Calculated Ratios Along with Formulae Can be Found in

below Attached Excel Sheet (Double Click on Ratios to check Formulae used)

FinStmt_Analysis_Ratios.xlsx


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Bank of Baroda

PGCBM 22 Page 11

Section 7

Interpretation of Ratios and Overall Analysis

Type Ratio Ratio Interpretations

2012

(in

%)

2011(in

%)

2010(in

%)

2009(in

%)

Capital

Adequacy

Capital Asset Ratio

This ratio tells us the extent of

shareholders funds maintained

against the total assets owned by

the bank. It also gives us an

indication of the maximum

extent of losses in the value of

assets that the bank can

withstand. 6.14 5.86 5.43 5.64

Net Capital-Assets

Ratio

Since Net NPA's are nothing but

an expected loss that is not

provided for, the true amount of

capital available to withstand

losses in total asset value is

lower than the net worth. This

ratio captures the true amount of

such capital available as a buffer

against future losses. 5.8 5.64 5.21 5.45

Net NPA Coverage

Ratio

Percentage reduction in Net

Worth if provisions made against

entire amount of Net NPA's. A

higher/increasing value of this

ratio points to trouble 5.62 3.77 3.99 3.5

Tier-I Capital Ratio

This ratio gives us the proportion

of equity held against the amount

of risk weighted assets. To put it

simply, risk weighted assets are a

measure of the amount of risk

involved with each asset (think

of risk weighted asset values as

the maximum amount of loss that

could be incurred on the assets if

no recovery is possible at all) 10.84 9.99 9.2 8.49

Asset Quality,

Market Risk &

Liquidity Ratios

Gross NPA Ratio-I

(A)

The proportion of total assets that

are not generating any income

for the bank. This ratio is not of

much value as gross NPA's are

not the only non-income

generating assets for banks. 1 0.88 0.86 0.81

Net NPA Ratio-I (A)

The proportion of total assets that

are to be written off. As with

gross NPA ratio-I, this ratio is

not of much value but is very

widely used in the financial

press. 0.35 0.22 0.22 0.2


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Bank of Baroda

PGCBM 22 Page 12

Gross NPA Ratio-II

(A)

This ratio more correctly

compares apples with apples. It

gives us the proportion of non-

income generating advances.

High and increasing values of

this ratio are indicative of lax

lending policies in the pastleading to problems in recovery

in the present. 1.55 1.38 1.37 1.28

Net NPA Ratio-II (A)

The proportion of total advances

that are yet to be written

off/provided against. Same

interpretation as for Gross NPA

Ratio-II 0.54 0.35 0.34 0.31

Provisions Ratio (A)

The amount of accumulated

provisions made against total

advances. A high and increasing

value of this ratio has the same

implication as Gross NPA Ratio-

II. It also indicates that the bank

is possibly being more cautious

in terms of recognizing possible

losses in its profit and loss

account. 0.03 0 0 0.04

Restructured Assets

Ratio (A)

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 theseloans. A high value of this ratio

has the same interpretation as

Gross NPA Ratio-II.

Additionally, this ratio has to be

compared with Gross NPA

Ratio-II to get a sense of the true

extent of loss making loans (for

instance if the Gross NPA Ratio-

II is 3% and this ratio is 2%, it

means that the bank is able to

restructure 2/3 of its possible loss

making loans and hence, its

actual losses will be lower. 2.88 0.7 1.4 1.85

Profitability

Ratio

Return on Equity

This ratio gives us the extent of

returns earned by the bank on the

capital invested by shareholders18.98 21.05 20.85 18.2

Return on Assets

This ratio gives us the extent of

returns earned by the bank on the

capital invested by all providers

of capital. 1.17 1.23 1.13 1.03


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Bank of Baroda

PGCBM 22 Page 13

Interest Income

Ratio

This is used to further analyze

the drivers of net interest margin.

It gives us the interest yield on

interest earning assets. As the

profitability decomposition

exercise shows, this ratio should

be further broken down in termsof the rate of return earned by

different categories of interest

bearing assets and their

composition. A declining value

of this ratio is indicative of

greater competition and lesser

avenues for growing assets more

profitably. 6.82 6.28 6.19 6.84

Non-InterestIncome Margin

This gives us the rate of income

earned on off-balance sheet

items. Typically, it can be further

broken down into the

composition of various off-

balance sheet items and the rates

of income earned on each. 3.05 2.93 3.8 4.4

What do the above indicators mean for Bank of Baroda?

The year FY12 has been challenging for the Indian economy. After two years of a fairly robust growth of 8.4%,

Indias GDP growth is estimated at 6.9% for FY12 by the Central Statistical Organization, Government of India.

Notwithstanding the challenging environment, the Bank was able to exploit the opportunities within the given

environment and sustain its qualitatively superior performance during FY12.

The Bank posted a very healthy growth of 25.9% in its global businessway above the banking industrys averageperformance. On the back of healthy growth of 17.2% in its Net Interest Income, the Bank recorded Net Profit

growth of 18.0% despite adverse pressures on Net Interest Margins (NIMs).

The Banks Return on Average Assets (ROAA) at 1.24%,

Capital Adequacy at 14.67% and Return on Equity at 18.98 % again provided an eloquent testimony to the financial

Soundness of your Bank.

Moreover, the Bank again proved its strength in the asset quality management by restricting its Gross NPA ratio at

1.53% and Net NPA ratio at 0.54% during FY12 one of the lowest in the large sized banking segment in India.

Source Annual Report 2012-11


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Bank of Baroda

PGCBM 22 Page 14

INDEX-

Formulae Used for Calculation

Capital Adequacy

Ratios 4

S.

No.Ratio Formula

1 Capital-Assets

Ratio

Net Worth/Total Assets

2 Net Capital-

Assets Ratio

(Net Worth-Net NPAs)/

Total Assets

3 Net NPA

Coverage Ratio

Net NPAs / Net Worth

4 Tier-I Capital

Ratio (Also

called Tier-I

Leverage Ratio)


Weighted Assets

5 Basel RiskWeighted

Capital Ratio

(Tier-I Capital + Tier-IICapital + Tier-III Capital) /

Total Risk Weighted

Assets

6 Equity-Risk

Weighted Assets

Ratio


Weighted Assets

7 Short-Term

Leverage Ratio

Short-Term Borrowed

Funds (Non-Deposit

Funds)/ Total Assets


S.

No.Ratio Formula

1 Gross NPARatio-I (A)

Gross NPAs/ Total Assets

2 Gross NPA

Ratio-II (A)

Gross NPAs/ Total

Advances

3 Net NPA Ratio-

I (A)

Net NPAs/ Total Assets


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Bank of Baroda

PGCBM 22 Page 15

4 Net NPA Ratio-II (A)

Net NPAs/ TotalAdvances

5 Provisions Ratio(A)

Provision for DoubtfulDebts/ Total Advances

6 RestructuredAssets Ratio (A)

Advances Subject toRestructuring/ Total

Advances


S.

No.Ratio Formula

7 AssetConcentration

Ratio (A)

Large Loans/ TotalAdvances

8 Sectoral

ConcentrationRatios (A)

Exposures to Individual

Sector/ (Total Advances+Investments (except G-

secs))(e.g. Exposures to Real

Estate Sector, Retail

Advances, Capital Markets,etc)

9 Liquidity Ratio-I (A,L,M)

Liquid Assets/(Demanddeposits + Savings

deposits+ Interbank

Deposit Liabilities + ShortTerm Borrowed funds)

10 Liquidity Ratio-II (A,L,M)

Liquid Assets/ (TotalAssets)


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Bank of Baroda

PGCBM 22 Page 16

11 Liquidity Ratio-III (Short-Term

Gap Ratio)

(A,L,M)

Assets Maturing in Oneyear/ Liabilities Due in One

year

12 Off-BalanceSheet Exposure

Ratio (A,M)

Off Balance SheetTransactions / Total Assets


S.

No. Ratio Formula

13 Relative Growth

Rate Ratio-I

Growth Rate of Advances

(%)/ Growth Rate of

Investments(A,M)

14 Relative GrowthRate Ratio-II

Growth Rate ofGovernment Securities

Holdings/ Growth Rate of

Investments(A,L,M)

15 Relative Growth

Rate Ratio-III

(A)

Growth Rate of Off

Balance Sheet Transactions

/ Growth Rate of TotalAssets

16 Relative Growth

Rate Ratio-IV

(A,M)

Growth Rate of Risk

Weighted Assets / Growth

Rate of Total Assets

17 Exposure to

Banks &

FinancialInstitutions

Ratio (A,L,M)

(Investment in Securities

issued by Banks & FIs +

Interbank Deposit Balances+ Advances to Banks &

FIs)/ Total Assets


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Bank of Baroda

PGCBM 22 Page 17

Profitability Ratios 3

S.

No.Ratio Formula

1 Return on Equity Profit after Tax/Net Worth

2 Return on Assets Profit after Tax/Total Assets

3 Net Interest

Margin

(Interest Income-Interest

Expense)/ Total Assets

4 Interest IncomeRatio

Interest Income/ Total Assets

5 Interest ExpenseRatio

Interest Expense/ (Deposits +Borrowings)

6 Non-Interest

Income Ratio

Non-Interest Income/ Net

Interest Income

Profitability Ratios 3

S.

No. Ratio Formula7 Operating

Expense Ratio

Operating Expenses/ (Net

Interest Income + Non-Interest Income)

8 NPA ProvisionRatio

Provision against NPAs/(NetInterest Income)


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Bank of Baroda

PGCBM 22 Page 18

9 Non-InterestIncome Margin

Non-InterestIncome/Contingent Liabilities

Documents

FMB Project PGCBM22 Group11