1

A PROJECT ON

Comparative study on financial performance of State Bank of

India and Bank of Baroda

A PROJECT SUBMITTED TO

UNIVERSITY OF MUMBAI
FOR PARTIAL COMPLETION OF THE DEGREE OF BACHELOR IN
COMMERCE (ACCOUNTING AND FINANCE) UNDER THE FACULTY
OF
COMMERCE

BY
PRATHMESH PRAKASH PASHTE

UNDER THE GUIDANCE OF

PROF. MACNOBLE M D'CRUZ

ST. GONSALO GARCIA COLLEGE OF ARTS AND COMMERCE

VASAI, PALGHAR-401201
MARCH- 2021-2022
 2

A PROJECT ON
Comparative study on financial performance of State Bank of
India and Bank of Baroda

A PROJECT SUBMITTED TO

UNIVERSITY OF MUMBAI

FOR PARTIAL COMPLETION OF THE DEGREE OF BACHELOR IN

COMMERCE (ACCOUNTING AND FINANCE) UNDER THE FACULTY
OF
COMMERCE

BY

PRATHMESH PRAKASH PASHTE

UNDER THE GUIDANCE OF

PROF. MACNOBLE M DCRUZ

ST. GONSALO GARCIA COLLEGE OF ARTS AND COMMERCE

VASAI, PALGHAR-401201
MARCH- 2021-2022
 3

DECLARATION

I the undersigned MR. PRATHMESH PRAKASH PASHTE hereby, declares

that the work embodied in this project work titled “Comparative study on
financial performance of State Bank of India and Bank of Baroda”, forms
my Own contribution to the research work carried out under the guidance of
PROF. MACNOBLE M DCRUZ is a result of my own research work and has
not been previously submitted to any other University for any other Degree or
Diploma to this or any other University.

Wherever reference has been made to previous works of others, it has been
clearly indicated as such and included in the reference.

I, hereby further declare that all information of this document has been obtained
and presented in accordance with academic rules and ethical conduct.

________________________
SIGNATURE OF THE STUDENT
PRATHMESH PRAKASH PASHTE

_______________
CERTIFIED BY
PROF. MACNOBLE M DCRUZ
 4

CERTIFICATE
This is to certify that MR. PRATHMESH PRAKASH PASHTE student of
BCOM (Accounting & Finance) semester VI (2021-2022) has successfully
completed the project on ‘Comparative study on financial performance of
State Bank of India and Bank of Baroda’ under guidance of ‘PROF.
MACNOBLE M D’CRUZ’.

________________ __________________
PRINCIPAL COORDINATOR
(DR.SOMNATH VIBHUTE) (PROF.MRS.RUBINA D’MELLO)

_________________ ____________________
PROJECT GUIDE EXTERNAL EXAMINER
(PROF. MACNOBLE M D’CRUZ’)
 5

ACKNOWLEDGMENT

To list who all have helped me is difficult because they are so numerous and the
depth is so enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me the
chance to do this project.

I would like to thank my Principal, DR. SOMNATH VIBHUTE for providing

the necessary facilities required for completion of this project.

I take this opportunity to thank our Coordinator, PROF. RUBINA D’MELLO

for her moral support and guidance.

I would also like to express my sincere gratitude towards my project guide

PROF.MACNOBLE M DCRUZ whose guidance and care made the project
successful.

I would like to thank my College Library, for having provided various

reference books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or indirectly
helped me in the completion of the project especially my Parents and Peers
who supported me throughout my project.
 6

EXECUTIVE SUMAMRY

Financial statements analysis is the process of identifying the financial strength

and weakness of the firm by property establishing relationships between the
various item of balance sheet and profit and loss account.

In this project the study is all about financial analysis of State bank of India and
Bank of Baroda this are largest banks of India. This banks have a vast market
capital in Indian financial Market. In this project we have studied Ratio analysis
of both banks. Also, we have studied Balance sheet and Profit and Loss
Statements of both banks of 5 years. The aim of this project is to have a thorough
study about the financial analysis of both banks, also a comparative study of
both banks. However, the statements do not disclose all of the necessary and
relevant information. For the purpose of obtaining the material and relevant
information necessary for ascertaining the financial strengths and weakness of
an enterprise, it is necessary to analyse the data depicted in the financial
statements. This study helps to find out market position of State Bank of India
and Bank of Baroda in Indian market as well as International market.
 7

Index

Chapter No. Particulars Page No.

1. Introduction 8-18
1.1 Banking system in India
1.2 History of Banking in India
1.3 current period
1.4 significance
1.5 Banking structure in India
1.6 Objective of Study
2. Research of methodology 19-29
2.1 Introduction
2.2 Financial Analysis
2.3 Ratio Analysis
3. Review of literature 30-34
4. Company Profile 35-49
4.1 Introduction to State Bank of India
4.2 History of State Bank of India
4.3 Ratio analysis of State Bank of India
4.4 Introduction to Bank of Baroda
4.5 Ratio analysis of Bank of Baroda
5. Comparative Data analysis 50-59
6. Findings and Conclusion 60-61
6.1 Findings
6.2 Conclusion
7. References 62
 8

CHP.1 INTRODUCTION
DEFINITION OF BANK
Banking means “Accepting deposits for the purpose of lending or investment of
deposits of money from the public, repayable on the demand or otherwise and
withdraw by cheque, draft or otherwise.”
-Banking companies (regulations) Act1949

1.1 Banking system in India

The banking sector in India function under the umbrella of the RBI -the
regulatory, central bank. The reserve bank of India was passed in 1934 and the
RBI was constituted in 1935 as the apex bank, the banking regulations act was
passed in 1949. This act brought the RBI under government control. Under the
act, RBI received wide ranging power in regards to establishment of new banks,
mergers and amalgamations of the banks, opening and closing of branches of
banks maintaining certain standards of banking business, inspection of the
banks, etc. the Act also vested licensing powers and the authority to conduct
inspection with the RBI. Banks in India can be broadly be classified as the
regional rural banks or RRBs, schedule commercial banks or SCBs and
cooperative banks. The commercial banking in India consists of schedule
commercial bank and unscheduled banks. Schedule banks constitute those
banks that are included in the second schedule of the reserve bank India (RBI)
Act, 1934.As on June 30, 1999 there were 300 schedule banks in India having a
total network of 64918 branches.
The schedule commercials banks in India comprise State bank of India and its
associates, nationalised banks, foreign banks, private banks, cooperative banks,
cooperative Banks, regional bank and regional bank. Before the nationalized
bank, which was nationalized on July 1, 1955, under the SBI Act of 1955. The
nationalization of seven state bank subsidiaries took place in 1959. After the
nationalization of banks in India, the branches of the public sectors rose to
approximately 800 percent in deposits and advances tool huge jump 11000
percent. Indian banking had come a long way since India adopted refuse path.
Today Indian banks are as technology savvy as they counter parts in developed
countries. The competitive and reforms forces have led to the emergence of
internet, ebanking, ATM, credit cards and mobile banking too, to let banks
attracts customers. This apart retail lending has emerged as another major
opportunity for banks. Due to globalisation, liberalisation and privatization
 9

mode, Indian banks going global and many global banks setting p shops in India,
the Indian banking system is set to involve into a totally new level it will help the
banking system grow in strength going into future. But it is opposed on the front
that it will lead to state run insures losing business and workers their job.
There are several reasons why giving foreign investor’s grater voting rights is
fraught with dangers. When domestic foreign investor acquire a large
shareholding in any bank and exercise proportionate voting rights it creates
potential problem not only of executive concentration in the banking sectors but
also can expose the economy the economy to more intensive financial crises at
slightest hint of panic. Solvency and liquidity are very significant for banks since
its assets and loans have diverse maturities. Banks have the principal role of
converting liquid deposit (liabilities) to illiquid assets such as loans, which makes
them intrinsically vulnerable to liquidity risk. Lack of liquidity is an indicator of
the liquidity crisis in a banking system and therefore liquidity management is an
imperative objective for the commercial banks since illiquidity may results in
insolvency and deprived financial performance. Liquidity elucidates the bank’s
potential to manage its short duration liability. In other words, the liquidity
management shows how efficiently a bank manages its short duration
requirement and invests the funds to raise the profitability of the organization.
Therefore, the optimum level of liquidity guarantees a bank to meet their short-
term debts and the proper management of flow can be promised by a profitable
business. Besides, the illiquidity will lead to insolvency and bankruptcy as the
liabilities surpass its assets.it is impossible for banks to endure without making
profits and there exists positive association between liquidity and profitability,
which implies that lower liquidity position may result in lower profitability due
to greater requirement for loans, and low profitability would not generate
sufficient cash flows, thus creating a viscous cycle. Besides, the liquidity is
negatively associated with profitability of the banks because of holding liquid
assets tend to condense income due to the lower rates of return connected with
liquid assets Solvency represents the association between borrowed funds and
owner’s funds in the capital structure of a bank. It comprises debt and common
equity for financing the bank’s total assets, operations and financial growth. The
Capital adequacy norms curb the banks in their liberty of capital structure. The
enforcement of capital adequacy ratio may have negative impact on the
profitability of the banks. It has been stated that agency costs between
managers and shareholders tend to increase when capital ratios are higher due
to the discipline provided by debt repayment on managers’ behaviour.
However, the increased surplus engendered as result of healthy bank-borrower
relationship and enhanced monitoring laid down by the capital adequacy norms
would have positive impact on the banks’ profitability. Moreover, the capital
 10

adequacy norms target at stability of the banks and thereby reduce the riskiness
of the assets in the portfolio of the banks. Management of liquidity and solvency
ratios are vital for the commercial banks as it associated with their performances
and reputations, especially with the enforcement of capital adequacy ratio may
have negative impact on the profitability of the banks. It has been stated that
agency costs between managers and shareholders tend to increase when capital
ratios are higher due to the discipline provided by debt repayment on managers’
behaviour. However, the increased surplus engendered as result of healthy
bank-borrower relationship and enhanced monitoring laid down by the capital
adequacy norms would have positive impact on the banks’ profitability.
Moreover, the capital adequacy norms target at stability of the banks and
thereby reduce the riskiness of the assets in the portfolio of the banks.
Management of liquidity and solvency ratios are vital for the commercial banks
as it associated with their performances and reputations, especially with
profitability ratios. If the banks have poor liquidity conditions, the regulators will
penalize them and therefore it becomes imperative for the banks to keep a
sound liquidity arrangement. Healthy financial performance has become a great
challenge in the modern times as banks are characterised by the technological
advancements, high competition for consumer deposits and altering monetary
policy that augments the liquidity, solvency and the profitability of the banks.
The present study attempts to evaluate the financial performance of selected
Indian commercial banks using the financial ratios, and also examines the impact
of liquidity, solvency and efficiency on the profitability of the selected Indian
commercial banks by employing the panel data estimations, viz. the Fixed Effect
and Random Effect models. The study will throw light on financial performance
of the commercial banks which will help policy makers, regulator (Reserve Bank
of India), Governments and other stakeholders to devise targeted policies and
regulations that will dynamically stimulate the growth and sustainability of the
commercial banks in the country. The study is of great important compare the
performances of various commercial banks and efforts should be made to solve
the discrepancies in performances of those banks Besides, the study is immense
help for the management and staff of commercial banks who will gain insight
into how their institutions can effectively manage their financial ratios by
appropriate practices to increase their profits. The banking sector is the
economy's backbone and a prerequisite for the country's survival. It offers a
wide range of financial services, including a savings account, a current account,
an ATM, a deposit, a debit card, a credit card, internet banking, investment,
financial advice, and other financial services. The banking industry's growth is
dependent on the public's traditional services, such as deposits and loans. The
banking sector's primary purpose is to collect money from depositors and lend
 11

it to those who are in need. Banks are the most prominent participants in the
financial and stock markets. The fund is provided for the investment and
economic development which contributes in the overall performance. It
developed into a division of our society which included corporations as well as
individual customers. The banking sector, as we all know, is the economy's
backbone and has a direct impact on economic development. Customer service,
deposit and loan facilities, and financial results are all factors that affect the
bank's ability to grow. Following the privatisation of India's banking industry, the
sector has experienced rapid growth, with public banks expanding their services
and earnings. In terms of financial performance, Private sector banks are
thought to be better planned or structured than public or old private sector
banks (2015). Public and private sector banks each have their own set of
advantages and disadvantages, so before making any financial decisions about
a bank, it is vital to determine its financial efficiency, regardless of whether it is
public or private. Due to Covid-19 pandemic the public sector banks and private
sector banks are affected badly. As a result, financial performance review of
public and private sector banks is recommended. The objective of this study is
to analyse the financial performance of two public banks and two private banks
like Bank of Baroda, State Bank of India, HDFC bank and ICICI bank. For the past
three decades Indians banking systems has several outstanding achievements
to its credit. The most striking is its extensive reach even to the remote corners
of the country. It has been increasingly focusing on adopting integrated
approach to risk management. According to RBI, majority of the banks already
meet capital requirements Basel III. Already state run banks have put in place
the framework for asset-liability match, credit and derivatives risk management.
Banks look for maximum profitability and have the responsibility in increasing
the value of shareholders equities (State run banks maintain equity ratio of
8.5%) on one side and improving customers satisfaction on other side. The role
of banking industry is crucial for sustained economic growth. In this context, it
is essential to understand and evaluate banks performance in monetary terms
which can be carried out by using financial ratios. generally, the results are
reflected in the banks return on net worth, return on investment, return on
assets, return on equity, operating income, earnings before interest and taxes,
net asset value, etc. the performance of the banks is a major concern for any
countries trade and its development. It has to manage large value transactions.
Industry related stakeholders, investors, stockholders and other policy makers
need to know about the financial performances of the banks for granting credits,
loans and investments. RBI and government crossed its hands in finding various
ways for full implementation of international capital norms. In this scenario, it is
essential to analyse the financial status of the banks by examining the ratio
 12

analysis which is the most logical way to examine the present and to predict the
future position of any bank. Moreover, it Determine the ability of the bank to
meet its current obligations, its operating efficiency and its performance. These
ratios not only help to decision making process but also emphasised on internet
status of banks and also its performance in market comparing to other banks.
So, this study aims to examine the financial performance under three major
areas like internal based performance, market-based performance and
performance related to banks income. By establishing a secure relationship
between variables, a firm can analyse its financial performance in terms of
profitability and viability. The present study Focus on measuring the
performance of some large private sectors banks. With the integration of Indian
financial sector with rest of the world, the concept banks and banking has
undergone a paradigm shift. Before financial reforms, Indian banks were
enjoying, in a protected environment with a strong cushion of the government
and their bank. Commercial banks play significant role in the development
process in the country by promoting trade. Besides the custodian of the wealth
of the country, banks are considered as Engines for fostering economic
development of the nation. Reforms in India in the banking sector have resulted
in expansion of banking sector in the form of new branches, new private Banks
and entry of more foreign banks. As a result of which, the whole country a
witnessed a surge in banking sector at very fast pace. Also, the role of banks
changed significantly with onset of economic reforms in 1991. These changes
came due to LPG policy being followed by Government of India. Since then old
fashioned archaic concepts, practices, procedures, and methods of banking have
changed significantly. The modern banking system is now a complete financial
service unit that offers a wide range of innovative and technology driven
services.

1.2 History of banking in India

The Indian banking industry has its foundation in the 18th century, has had a
varied evolutionary experience since then. The initial banks in India were
primarily traders’ banks engaged only in financing activities. Banking industry in
the pre-independence era developed with the presidency banks, which were
transformed into the imperials bank of India and subsequently into the state
bank of India. The initial days of the industry saw a majority private ownership
and a highly volatile work environment. Major strides towards public ownership
and accountability were made with nationalised in 1969 and 1980 which
transformed the face of banking in India. The industry in recent times recognised
the importance of private and foreign players in a competitive scenario and has
 13

moved towards greater liberalization. Prior to 1991-92 Indian banks were a

protected environment with a strong cushion of government. This had made
them operationally inefficient and commercially not visible, as they had
accumulated as much as Rs.37000 crores as non-performing advances.
However, with the Reserve Bank of India taking strong measures based on the
recommendations of the Narasimha committee, the landscape of Indian banking
changed altogether. All the banks were directed to follow the prudential norms,
provisioning for NPAs, norms of capital adequacy, asset quality, disclosure
requirements, speeding up of pace and reach of latest technology, streamlining
the procedures and complying with international accounting standards and
making financial statements transparent. Towards this end they redefined their
objective, strategies, policies, process, methods and technologies which have a
direct bearing on financial health and performance of these banks. In this way,
these banks were not only required to take the above steps bur always evaluate
their financial position from time to time. The first phase of reforms introduced
subsequent to the report of the committee on financial system in 1992, which
focused mainly on enabling and strengthening measures. The second phase of
reforms, introduced subsequent to the recommendation of the committee on
banking sectors reforms in 1998, placed greater emphasis on structural
measures and in standards of disclosure and levels of transparency so as to align
the Indian standards with international best practices reforms brought about
considerable improvement as reflected in various parameters relating to capital
adequacy, asset quality, profitability and operational efficiency. Unfortunately,
commercial banks still continue to face the problem of non-performing assets.

1.3 Current Period

All banks which are included in the second schedule to the reserve bank of India
Act., 1934 are schedule banks. These banks comprise schedule commercial
banks and schedule co-operative banks. Schedule commercial banks in India are
categorised into five different groups according to their ownership and nature
of operations. These bank groups are
a) State bank of India and its associates
b) Nationalised Banks
c) Private sector Banks
d) Foreign Bank
e) Regional Bank
In the bank group wise classifications, IDBI bank Ltd. Is included in nationalized
banks. Scheduled co-operative banks consists of schedule state co-operative
banks and schedule urban cooperative banks.
 14

By 2017, banking in India was generally fairly mature in terms of supply, product
range and reach even through in rural India still remains a challenge for the
private sector and foreign banks. In terms of quality of assets and capital
adequacy. Indian banks are comparable economic in its region. The Reserve
Bank of India is an autonomous body with minimum pressure from the
government.
With the growth in the Indian economy expected to be strong for quite some
time especially in its services sectors the demand for banking services, especially
retail banking, mortgages and investment services are expected to be strong one
may also expect M&A, takeover, and asset sales.
In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase
its stake in Kotak Mahindra bank to 10%. This is the first time an investor has
been allowed to hold more than 5% in a private sector bank since the RBI
announced norms in 2005 that any exceeding 5% in the private sectors banks
would need to be vetted by them.
In recent years critics have charged have charged that the non-government
owned banks are too aggressive in their loan recovery efforts in connections
with housing, vehicles, and personal loans. There are press reports that the
banks’ loan recovery efforts have driven defaulting borrowers.

1.4 Significance

Financial statement analysis is the process of identifying the financial strength

and weakness of the firm by property establishing relationships between the
various item of balance sheet and the profit and loss account. Financial
statement analysis can be undertaken by management of the firm, or by parities
outside the firm viz, owner, trade, creditors, Lenders, investors, labour, unions,
analysts and other. The nature of analysis will differ depending on the purpose
of the analyst a technique frequently used by an analysis need not necessarily
serve the purpose of other analysts because of the difference in the interest of
the analysis. Financial statement analysis is useful and significance to difference
users in the following ways:
(a)Financial managers: financial analysis focuses on the facts and relationships
related to managerial performance, corporate efficiency, financial strength and
Weakness and creditworthiness of the company. A finance manager must be
well equipped with the difference took of analysis to make rational decisional
for the firm. The tool for analysis help in studying accounting data so as to
determine the continuity of the operating policies, investment value of the
business, credit rating and testing the efficiency of operations. The techniques
are equally important in the area of financial control. Enabling the financial
 15

managers to make constant reviews of the actual financial operation of the firm
to analyse the causes of the major deviations, which may help in corrective
actions wherever indicated.

(b)Top management: the importance of financial statement analysis is not

limited to the finance managers alone. Its scope of importance is quite broad
which include top management in general and the other financial managers.
Management of the firm would be interested in every aspect of the financial
analysis. It is their overall responsibility to see that the resources of the firm are
used most efficiently. And that the firms, financial condition is sound. Financial
statement analysis helps the management in measuring the success or
otherwise of the company’s operations, appraising the individual’s performance
and evaluating the system of internal control.

(c) Trade creditors: a trade creditor, through an analysis of financial statements.

Appraises not only the urgent ability of the company to meet its obligations, but
also probability of its continuity ability to meet all its financial obligations in
future. Trade creditors are particularly interested in the firm’s ability to meet
their clams over a very short period of time. Their analysis will, therefore,
confine to the evaluation of the firm liquidity position.

(d)Lenders: suppliers of long term debt are concerned with the fir, long terms
solvency and survival. They analyse the firm’s probability overtime, its ability to
generate cash to be able to pay interest and repay the principle and
relationships between various sources of funds (capital structure relationship).
Long term tenders do analyse the historical financial statements. But they place
more emphasis on the firm’s projected financial statements to make analysis
about its future solvency and profitability.

(e)Investors: investors, who have invested their money in the firm’s shares, are
interests about the firms’ earnings. As such, they concentrate on the analysis of
the firm’s present and future profitability. They are also interested in the firm
capital structure to ascertain its influences on firms earning and risk. They
Also evaluate the efficiency of the management and determine whether a
change is needed or not. However, on some companies, the shareholders
interest is limited to decide whether to buy sell or hold the shares.

(f)Labour unions: labour unions analyse the financial statements to assess

whether it can presently afford a wage increase and whether it can absorb wage
increase through increased productivity or by raising the prices.
 16

(g)Others: the economists, researchers, etc. analyse the financial statement to

study the present business and economic conditions. The government agencies
need it for prices regulations taxations and other similar purpose.

1.5 Banking structure in India

1.5.1 Schedule banks in India

Schedule commercial Banks
Public sector Banks Private sector Foreign banks in Regional rural
banks India banks
 Nationalized  old private
banks banks
 Other public  new
sector banks private
 SBI and its banks
associates

1.5.2. Schedule Cooperative banks

Schedule Urban Cooperative banks Schedule State Cooperative Banks

1.5.3. Public Sector Banks

Public sector banks are those banks which are owned by the government, the
government runs the banks. In India 14 banks were nationalized in 1969 and
1980 another 6 banks were also nationalized. Therefore in 1980 the number of
nationalized bank were 20. At present there are total 26 public sector in India.
Of these 19 are nationalized banks, 6 belongs to SBI and associates group and 1
bank is classified as other public sector bank. Welfare is the primary objective of
these banks.
 17

1.5.4. Private Sector Banks

These banks are owned and run by the private sector. Various banks in the
country such as ICICI bank, HDFC bank etc. An individual has control over their
banks in the preparation to the share of the bank held by him.

Private banking in India was practised in since the beginning of banking system
in India. The first private bank in India to be set up in Private sector banks in
India was IndusInd bank. It is o0ne of the fastest growing bank private sector
bank in India. IDBI ranks the tenth largest development bank in the world ads
private bank in India and has promoted world lass institutions in India. The first
bank in India to receive an in principle approval from the Reserve bank of India
was Housing Development Finance Corporation Limited, to set up a bank in the
private sector bank in India as part of RBIs liberalization of the Indian banking
industry. It was incorporated in august 1994 as HDFC Bank Limited with the
registered office in Mumbai and commenced operations as schedule
commercial bank in January 1995. ING vyasa, yet another private bank of India
was incorporated in the year 1930.

Indian Banking Industry

The Indian banking market is growing at an astonishing rate with assets

expected to reach 1 USD trillion by 2017. An expanding economy, middleclass
and technical innovations are all contributions to this growth.

The country’s middleclass accounts for over 320 million people. In correlation
with the grow of the economy, rising income levels, increased standard of living,
and affordability of banking products are promising factors for continued
expansion.

The Indian banking industry is in the middle of an IT revolution, focusing on the

expansion of retail and rural banking. Players are becoming increasingly
customer centric in their approach, which has resulted in innovative methods of
offering new banking products and services. Banks are now realizing the
importance of being a big player and are beginning to focus their attention n
mergers and acquisitions to take advantage of economic of scale and comply
with Basel regulations. “The banking industry should focus on having a small
number of large players that can compete globally rather than having a large
number of fragmented players.”
 18

1.6 Objectives of the study:

1. To know the strength and weakness of state bank of India and Bank of Baroda
through ratio analysis.
2. To evaluate the performance of the companies.
3. To understand the liquidity, profitability and efficiency positions of the
companies.
4. To make comparison between the ratios during the different period.
 19

CHP.2 RESEARCH METHODOLOGY

Data collection method: The data used in this study is secondary data,
and taken from various websites and articles available on internet.

2.1 Introduction:

Financial management is the specific area of financial dealing with the financial
decision corporations make, the tools and analysis used to make the decisions.
The discipline as a whole may be divided between long-term and short term
decisions and techniques. Both share the same goal of enhancing firm value by
ensuring that return on capital exceeds cost of capital, without taking excessive
financial risks.
Capital investment decisions comprises the long term choices about which
projects receive investment, whether to finance that investment with equity or
debt, and when or whether to pay dividends to shareholders.
Short term corporate finance decisions are called working capital management
and deal with balance of current assets and current liability by managing cash,
inventories and short term borrowings and lending. Corporate finance is closely
related to managerial finance, which is slightly broader in scope, describing the
financial techniques available to all forms of business enterprise, corporate or
not.

2.2 Financial Analysis:

Financial analysis is the process of identifying the financial strength and

weakness of the firm and establishing relationship between the items of the
balance sheet and profit and loss account. Financial ratio analysis is the
calculation and comparisons of ratios, which are derived from the information
in a company s financial statements. The level and historical trends of these
ratios can be used to make inference about a company’s financial conditions, its
operations and attractiveness as an investments. The information’s in the
statements is used by
1. Trade creditors to identify the firm’s ability to meet their claims i.e.,
liquidity positions of the company.
2. Investors, to know about the present and future profitability of the
company and its financial structure.
 20

3. Management, in every aspect of the financial analysis. It is the

responsibility of the management to maintain sound financial conditions
in the company.

2.3 Ratio analysis:

The term “Ratio” refers to the numerical and quantitative relationship between
two items or variables. This relationship can be exposed as
1. Percentage
2. Fractions
3. Proration of numbers
Ratio analysis is defined as the systematic use of the ratio to interpret the
financial statements.so, that the strengths and weaknesses of a firm, as well as
its historical performances and current financial conditions cab be determined.
Ratio reflects a quantitative relationships helps to form a quantitative
judgement.

2.3.1 Steps in ratio analysis:

1. The first task of the financial analysis is to select the information
relevant to decision under the consideration from the statements and
calculates the appropriate ratios.
2. To compare the calculated ratios with the ratios of the same firm
relating to the past or the industry ratio. It facilitate an assessing
success or failure of the firm.
3. Third step is to interpretation, drawing of interference and report
writing conclusion are drawn after comparison in the shape of report
or recommended course of action.

2.3.2 Nature of ratio analysis:

Ratio analysis is a technique of analysis and interpretation of financial
statements. It is the process of establishing and interpreting various ratios for
helping in making decisions. Is the only means of understanding of strength and
weakness of the firm, There are a number of ratios which can be calculated from
the information given in the financial statement, but the analyst has to select
the appropriate data and calculate only a few appropriate ratios. The following
are the steps involved in the ratios analysis.
1. Selection of relevant data from the financial statements depending
upon the objective of the analysis
2. Calculation of appropriate ratios from the above data
3. Comparison of calculated ratios with the ratios of the same firm in
the past or the ratios developed from the projected financial
 21

statements to the ratios of the some other firms or the comparisons

with ratios of the industry to which the firm belongs.

2.3.3 Interpretation of the ratios:

The interpretation of the ratios is an important factor. The inherent limitations

of ratio analysis should be kept in mind while interpreting them.
The impact of factors such as prices level changes, change in accounting policies,
window dressing etc. should also kept in mind when attempting to interpret
ratios.

2.3.4 Importance of ratio analysis:

1. Aid to measure general efficiency
2. Aid to measure financial solvency
3. Aid in forecasting and planning
4. Facilitate decision making
5. Aid I corrective actions
6. Aid in intra firm comparison
7. Acts as a good communication
8. Evaluation of efficiency
9. Effective tool

2.3.5 Limitations of ratio analysis:

1. Difference in definitions
2. Limitations of accounting records
3. Lack of proper standards
4. No allowances for prices level changes
5. Changes in accounting procedures
6. Quantitative factors
7. Limited use of single ratio
8. Background is over looked
9. Limited use
10.Personal bias

Following are the ratios to be studied

1. Liquidity ratio
2. Leverage ratio
3. Activity ratio
4. Profitability ratio
 22

1. Liquidity ratio

Liquidity ratio refers to ability of a concern to meet its current obligations as &
when there becomes due. The short term obligations of a firm can be met only
when there are sufficient liquid assets. The short term obligations are met by
realizing amounts from the current, floating, circulating assets. The current
assets should either be calculated liquid near or liquidity. They should be
convertible into cash for paying obligations of short term nature. The sufficiency
or insufficiency of current assets should be assessed by comparing them with
short term current liabilities. If current assets can pay off current liabilities, then
liquidity positions will be satisfactory.
To measure the liquidity of a firm the following ratios can be calculated
1. Current ratios
2. Quick or acid test or liquid ratio
3. Absolute liquid ratio or cash position ratio

(A) Current ratio:

Current ratio may be defined as the relationship between current assets and
current liabilities. This ratio also known as working capital ratio is a measure of
general liquidity and is most widely used to make the analysis of a short term
financial position to liquidity of a firm.

Current Ratio = Current Asset/Current Liabilities

Components of current ratios:

Current assets Current liabilities
Cash in hand Outstanding expanses
Cash at bank Bank overdraft
Bills receivables Bills payable
Inventories Short term advances
Work in progress Sundry creditors
Marketable securities Dividend payable
Short term investments Income tax payable
Sundry debtors
Prepaid expenses

(B) Quick ratio:

Quick ratio is a test of liquidity than the current ratio. The term liquidity refers
to the ability of affirm to pay its short term obligations as & when they become
 23

due. Quick ratio may be defined as the relationship between quick or liquid
assets and current liabilities. An asset is said to be liquid if it is converted into
cash with in a shirt period without loss of value.

Quick or liquid asset

Quick Ratio = Quick Or Liquid Assets/ Current Liabilities

Components
Quick assets Current liabilities
Cash in hand Outstanding expenses
Cash at bank Bank overdraft
Bills receivable Bills payable
Sundry debtors Short term advances
Marketable securities Sundry debtors
Temporary investments Dividend payable
Income tax payable

(C) Absolute Liquid Ratio:

Although receivables , debtors and bill as receivables arte generally more liquid
than inventories, yet there may be doubts regarding their more liquid than
inventories, yet there may be doubts regarding their realization into cash
immediately or in time. Hence, absolute liquid ratio should be calculated
together with current ratio and quick ratio so as to exclude even receivable from
the current assets and find out the absolute liquid assets.

Absolute Liquid Ratio = Absolute Liquid Ratio/ Current Liabilities

Absolute liquid assets include cash in hand etc. the acceptable forms for this
ratio is 50% or 0.5:1 or 1:2 i.e., Rs. 1 worth absolute liquid assets are considers
to pay Rs.2 worth current liabilities in time as all the creditors are nor accepted
demand cash t the same time and then cash may also be realised from the
inventories.

Components
Absolute liquid ratio Current liability
Cash in hand Outstanding or accrued expenses
Cash in hand Bank overdraft
Interest on fixed deposits Bills payable
Dividend payable
Sundry creditors
 24

Short term advances

Income tax payable

2. Leverage ratios:

The leverage or solvency ratio refers to the ability of a concern to meet its long
term obligation. Accordingly, long term solvency ratios indicate firm’s ability
timed the fixed interest and costs and repayment schedules associated with its
long term borrowings.
The following ratios serves the purpose of determining the solvency of the
concern.
a) Proprietary ratio

(a) Proprietary Ratios

A variant to the debt equity is the proprietary ratio which is also known as equity
ratio. This ratio establishes relationship between shareholders’ funds to total
assets of the firm.

Proprietary Ratio = Shareholders’ Funds/ Total Assets

Shareholders fund Total assets
Reserve & surplus Fixed assets
Share capital Current assets
Cash in hand
Cash in bank
Bills receivables
Inventories
Marketable securities
Short term investments
Sundry debtors

3. Activity Ratios:
Funds are invested in various assets business tom make sales and earn profits.
The efficiency with which assets are managed directly affect the volume sales.
Activity ratios measure the efficiency or effectiveness with which a firm
manages its resources or assets. These ratios are also called “turnover ratio”
because they indicate the speed with which assets are converted or turned over
into sales.
 25

A. working capital turnover ratio into sales

B. fixed assets turnover ratio
C. capital turnover ratio
D. current asset to fixed assets ratio

(A) Working capital turnover Ratio:

Working capital; of a concern is directly related to sales.

Working Capital = Current Assets – Current Liabilities

It indicates the velocity of the utilization of net working capital.

This indicates the no. of the times the working capital is turned over in the
course of year. Higher ratio indicates efficient of working capital and a lower
ratio indicates inefficient utilization.
Working Capital = Cost Of Goods Sold/ Working Capital.

Components of working capital:

Current assets Current liabilities
Cash in hand cash at bank Outstanding expenses
Bills receivables Bank overdraft
Prepaid expenses Bill payable
Short term investments Short term advances
Inventories Sundry creditors
Work n progress Dividend payable
Marketable securities Income tax payable
Sundry debtors

(B) Fixed Assets Turnover Ratio:

It is also known as sales to fixed assets ratio. This ratio measure the efficiency
and profit earning capacity of the firm. Higher the ratio. Greater is the intensive
utilization of fixed assets. Lower radio means underutilization of fixed assets.
Fixed Assets Turnover Ratio = Cost Of Sales/ Net Fixed Assets

Cost Of Sale = Income from Services

Net Fixed Assets = Fixed Assets – Depreciation

(C) Capital Turnover Ratio:

 26

Sometimes the efficiency adds effectiveness of the operations are judged by

comparing the cost of sales or sales with amount of capital invested in the
business and not with assets held in the business, through in both case the same
result is expected. Capital invested in the business may be classified as long term
and short term capital or fixed capital and working capital or owned capital and
loaned capital. All capital turnover are calculated to study the uses of various
types of capital.
Capital Turnover Ratio = Cost Of Goods Sold/ Capital Employed

Capital Employed= Capital+ Reserve & Surplus

Cost Of Goods Sold= Income From Service

(D) Current Assets to Fixed Assets Ratio:

This ratio differs from industry to industry. The increase in the ratio means that
trading is slack or mechanization has been used. A decline in the ratio means
that debtors and stock are increased
Too much or fixed assets are more intensively used. If current assets increase
with the corresponding increase in profit, it will show that the business is
expanding.
Current Assets To Fixed Assets Ratio= Current Assets/Fixed Assets

Current assets Fixed assets

Cash In hand Plant
Cash at bank Machinery
Bills receivables Land
Short term investments Building
Inventories Vehicles
Sundry debtors
Work in progress
Marketable securities

4. Profitability Ratios:
The primary objectives of business undertaking are to earn profits. Because
profits is the engine that drives the business enterprise.
A. Net profit ratio
B. Return on total assets
C. Reserves and surplus to capital ratio
D. Earnings per share
 27

E. Operating profit ratio

F. Price –earnings ratio
G. Return on investments

(A) Net Profit Ratio:

Net profit ratio establishes a relationship between net profits (after tax) and
sales and indicates the efficiency of the management in manufacturing selling
administrative and other activities of the firm.

Net Profit after Tax = Net Profit- (Depreciation +Interest+ Income Tax)

Net Sales = Income from Services

Net Profit Ratio= Net Profit after Tax/Net Sales

It also indicates the firm’s capacity to face adverse economic condition such as
price competitors, low demand etc. obviously higher the ratio, the better is the
profitability.

(B) Return On Total Assets:

Profitability can be measured I terms of relationships between net profit and
assets. This ratio is also known as profit to assets ratio. It measure the
profitability of investments. The overall profitability can be known.

Returns on Assets = Net Profit/ Total Assets

Net Profit= Earnings before Interest and Tax

Total Assets= Current Assets+ Fixed Assets

(C)Reserve and Surplus to Capital Ratio:

It reveals the policy pursued by the company with regard to growth shares. A
very high ratio indicates a conservative’s dividends policy and increased
ploughing back to profit. Higher the ratio better will be position.

Reserve & Surplus to Capital Ratio= Reserve& Surplus/Capital

 28

(D) Earnings per share:

Earnings per share is a small verification of return of equity and is calculated by
dividing the net profit earned by the company and those profits after taxes and
preference divided by total no. of equity share.

Earnings per Share = Net Profit after Tax/No. Of Equity Shares

The earning per share is a good measure of profitability when compared with
EPS of similar other components or companies, it gives a view of the
comparatives earnings of a firm.

(E)Operating Profit Ratio:

Operating ratio establishment the relationship between cost of goods sold and
other operating expenses on one hand and the sales on the other.

Operating Ratio=Operating Cost/Net Sales

Operating Profit Ratio Is Calculated By Dividing Operating Profit By Sales.

Operating Profit= Net Sales-Operating Cost

Operating Profit Ratio= Operating Profit/Sales

(F)Price Earned Ratio:

Price earnings ratio is the between market price per equity share and earning
per share. The ratio is calculated to make an estimate of appreciation in the
value of a share of a company and is widely used by investors to decide whether
or not to buy shares in a particular company, generally, higher the price earnings
ratio, the better it is. If the price earnings ratio falls, the management should
look into causes that have resulted into the fall of the ratio.

Prices Earnings Ratio = Market Price Per Share/Earning Per Share

Market Prices per Share = Capital+ Reserve & Surplus/No. Of Equity Shares

Earnings per Share =Earnings before Interest and Tax/No. Of Equity Shares
 29

(G) Return on investments:

Return on shareholders investments, popularly known as return on investment
or return on shareholders or proprietors funds is the relationship between net
profit (after interest and tax) and the proprietor’s funds.

Return On Shareholders Investments = Net Profit after Interest And Tax/

Shareholders’ Funds

The ratios generally calculated as percentage by multi-plying the above with

100.
 30

CHP.3 REVIEW OF LITERATURE

Focused on determinants of bank profitability in India and found that the profit
margins deteriorated due to increased competition and changing face of the
Indian banking. Reported that the Indian public sector banks were most efficient
than the private and foreign banks in terms of cost and profit efficiencies.
examined the financial performance of SBI (State Bank of India) using the
investment valuation ratio, profitability ratio, management efficiency ratio,
balance sheet ratio, and cash flow indicators. They suggested that SBI’s excellent
performance can be attributed to the adoption of modern technology, banking
reforms, and good recovery mechanisms. Has done comparative analysis of the
financial performance of Indian commercial banks and disclosed that there is no
statistically significant difference in the financial performance of the public and
private sector banks in India. Found no significant difference in the profitability
of Indian commercial banks in terms of net interest margin and return on assets,
but have significant differences in terms of return on equity. Recently, showed
significant differences among the financial performance of commercial banks
operating in India. Besides, evaluated the financial, operational, and managerial
efficiency of the selected largest scheduled commercial banks in India with
different ownership structure, such as public (State Bank of India), private (ICICI
Bank), and foreign bank (Standard Chartered Bank). The findings revealed that
there was no difference statistically among these banks in terms of ratios and
performance of sub-parameters namely, debt/equity ratio, gross non-
performing assets/total assets, income interest/total assets, and liquid assets to
total deposits during the research. However, the study showed that the foreign
bank is significantly more efficient than the private and public banks in terms of
profitable banking business and converting deposits into higher earning
advances.

It is clear from the existing literature that the studies pertaining to the financial
performance of commercial banks across the globe, especially in Indian context,
are performed based on the ratio analysis and CAMEL ranking method. Besides
there have been studies which proved that there has been significant difference
in the performance of public and private sector banks in India. However, the
analysis has been done on the basis of aggregate financial ratios of public and
private sector banks and not on the basis of individual banks. Besides, there exist
only few studies in the context of India that associates the liquidity, solvency
and efficiency positions of the Indian commercial banks with their profitability
ratio. Our study attempts to evaluate the financial performance of selected
 31

Indian commercial banks for the period from 2012/13 to 2016/17. The study
comprises 16 commercial banks, 11 representing public sector and 5 from
private sector, and the financial performance of these banks are analysed using
the financial ratios. In addition, the study investigates the impact of liquidity,
solvency and efficiency on the profitability of the selected public sector banks
and private sector banks, respectively, by employing the panel data estimations.

(Kumar & Kumar, 2016) studied and compared the output of four public sector
banks from 2018 to 2015. They compared SBI to other public banks using a
variety of financial ratios and came to the conclusion that SBI is superior. (Karri
et al., 2015) used the CAMEL model and T-test to evaluate the financial strength
of Bank of Baroda and Punjab National Bank. Based on 14 financial ratios, they
discovered that Bank of Baroda outperformed Punjab National Bank on average.

(Chintala & Kumar, 2016) studied public and private bank’s financial
performance. SBI, BOB, PNB, CBI, IDBI, HDFC, ICICI, Kotak, and IndusInd bank's
total income, interest income, and service income were analysed for the five
years i.e., from 2018 to 2016. They came to the conclusion that private sector
banks were the most profitable and experienced the fastest growth. Similarly,

(Koley, n.d.) Analysed the financial performance of State Bank of India and HDFC
Bank from 2013 to 2018. After considering annual income, net interest income,
operating profit, net profit, and the CAMEL model, it was concluded that HDFC
outperformed the rest. The findings were supported when the financial
performance of public and private sector banks in India was compared and
evaluated from 2016 to 2012

(Goel and Rekhi 2013). The ratio analysis and correlation coefficient matrix
showed that HDFC bank performed well when compared to SBI, BOB, PNB, ICICI,
and Axis bank.

(Nathwani 2018) examined into the financial performance of all commercial

banks of India over a five-year period, from 1997-1998 to 2001-2002. The
ANOVA table was applied to Interest Income to Average Working Funds Ratio,
Non-Interest Income to Average Working Funds Ratio, and Capital Adequacy
Ratio. He discovered that banks that adapt to change, evolve, and adopt new
technology to meet the needs of their customers are more likely to succeed.
Banks that have introduced new and creative business models will be well
positioned to face the demands and perform successfully in the marketplace.
These are the banks that will hit greater heights of success in the future.
 32

(C. Valenzano 2018) used ratio analysis, and the CAMEL model to evaluate the
financial performance of two public and two private Indian banks from 2015 and
2013. When comparing public and private sector banks, it was found that private
sector banks perform better in all of the selected parameters compared to
public sector banks.

(Al-Kasabian, 2018) compared SBI and ICICI bank's financial results between
2012 and 2016. Financial ratio analyses and hypothesis testing were conducted,
and it was concluded that the SBI registered a fluctuating trend while the ICICI
bank struggled to handle an increasing trend.

(Mishra, 2015) analysed the financial data of private Indian banks over a nine-
year period. Based on the standard deviation and variance analyses, it was
calculated that three private banks, namely HDFC Bank, SBI, BOB and Yes Bank,
performed well as compared to all other private banks. In terms of profitability,
the other private banks had fallen short of expectations. It was suggested that
banks could improve their profitability in a competitive market by converting
branches from transactional centres to relationship centres. (2018, Ns et al.)
They used multiple
Regression analysis to analyse the financial performance of private commercial
banks in India. And discovered that bank size, credit risk, operating quality, asset
management, and debt ratio all have a major effect on internal performance,
market performance, and bank profits, which illustrates the financial
performance of the three selected private commercial banks. According to the
literature review, the performance of private banks and public banks differ
significantly in terms of time, profitability, credit risk, and asset quality, return
generating capability, and other factors. The financial output of banks was
greatly influenced during this Covid-19. A comparison of private and public
banks’ financial results from 2016 to 2020 will aid in a deeper understanding of
the effect of Covid-19 on financial performance and how it affected the overall
banking industry. Many studies have undertaken by researchers on the
performers of Indian commercial banking. The studies have focused on ratio
analysis, CAMEL rankings, liquidity, and profitability and so on. There have been
studies which prove that there have been studies which proves that there has
been significant difference in the performance of the public sector banks.

(Tatuskar, Svetlana, 2017, Makkar, Anita; Singh, Shweta, Sharma, Vijay

Kumar; Kumar, Anuj 2013). The other studies have shown that non-performing
assets have been rising in recent years
 33

(Bansal Disha 2017, Mishra, Akshay Kumar 2013). The banking services in retail
segments have also improved over the last couple of the years.

(Haque, Immanuel 2018). The analysis of the banks has not been done on the
basis of economics cycles. The impact of recession on Indian banks has been
analysed in current paper. The principal component analysis is applied on
financial parameters of the banks. The resultant 11 parameters are compared
between two period time.

Prior research to commercial bank financial ratios has been directed at the
failure prediction models and distributional properties of ratios. Bank insolvency
studies provided the conceptual framework models and utilized by many federal
institutions surveillance systems. Suhr and van winklen sinkey, hanweck and
simon identified ratios that presently compromise the CAMEL Rating system.
CAMEL is an acronym for capital adequacy, asset quality, management, earnings
and liquidity. Financial regulatory agencies concluded that an institutions
financial constitution can be judged based on these criteria. Banks are rated on
numerical systems of 1(excellent) through 5 poor in each of the five areas.
Basically, all five criteria receive the same weights, although examiners are free
to give more weight to some variables than others. The CAMEL rating system
was adopted by the regulatory agencies on agencies on Novembers 21, 1979.

Additional studies in the banking literature examined the distribution of

commercials bank financial ratio. Their purpose was to determine if bank
financial ratios are normally distributed and if not, determine the distributes
shape. Kolari mclnish and saringa and Bedingfield, reckers and stagliano have
shown that selected financial ratios are not normally distributed. They conclude
that a non-normal distribution limits the comparability of these ratios from one
to another. This information has important implications for bank regulatory
agencies whose purpose is to evaluate bank safety and soundness based upon
the CAMEL rating system. Lacking in this literature is empirical evidence
regarding the financial characteristics of commercial bank ratio in general.

Several studies in the banking literature examined the distribution of

commercial bank financial ratios. Their purpose was to determine if bank
financial ratio is normally distributed and, if not, determine the distributions
shape. Have shown that selected financial ratios are not normally distributed.
They conclude that a non-normal distribution limit the comparability of these
ratios from one bank to another bank. This information has important
 34

implications for the bank regulatory agencies whose purpose is to evaluate bank
safety and soundness based upon CAMEL rating system. Lacking in this literature
is empirical evidence regarding the financial characteristics of commercial bank
ratios in general. Several studies have investigated the financial characteristics
of the ratio and their importance to performance evaluation, future profit
estimation, and competitor analysis and credit worthiness for other industries.
These studies have focuses on the analysis of financial ratios for industrial firm.
Retail firm and electronic, food, steel, and textile firms. Additional studies have
examined financial ratios for combined industry groups such as automobile and
aerospace; and chemical, rubber, and oil. The findings, however do not benefit
the commercials banking industry because of its unique goods sold can be used
to evaluate commercial banks.

This literature reveals the efficiency of studding classification patterns of

financial data. These inquiries expose the interrelationship among many
accountings many accountings and also help a user select a small number of
variables to measures bank performance. Therefore, extending the research
may improve commercial bank financial data analysis.
 35

CHP.4 COMPANY PROFILE

STATE BANK OF INDIA

Bank name State bank of India

Banking sector Public sector

Incorporation year 1955

Chairman Dinesh Kumar Khara

Managing director C.S. Setty

Company secretary ------

Auditor M/S Chaturvedi & Shah LLP. Mumbai

Registered office State Bank Bhavan 8th floor, madame

cama road Nariman point, Mumbai,
4000021, Maharashtra.

Telephone 91-22-22883888/22022678

Fax 91-22-22855348

E-mail gm.snb@sbi.co.in

website https://www.sbi.co.in

Face value 462.45

BSE code 500112

BSE group A

NSE Group SBIN

Bloomberg SBIN IN
 36

Reuters SBI.BO

ISIN Demat INE062A01012

Market Lot 1500

Listing Ahmedabad, Chennai, Delhi, Kolkata,

London, Mumbai, NSE.

Financial year End March

Book Closure Month May

AGM Month June

Registrars name & address Datamatics Financial Services, Plot no.

A- 16-17 PartB, Cross Lane MIDC, Marol,
Andheri(East), Mumbai-400 093.
 37

4.1 Introduction:

It is largest Indian banking and financial services company with its headquarters
in Mumbai, India. It is state-owned. The bank traces its ancestry to British India,
through the imperial bank of India. To the founding in 1806 of the bank of
Calcutta, making it the oldest commercial bank in the Indian subcontinent. Bank
of madras merged into other two presidency banks, bank of Calcutta and bank
of Bombay to form imperial bank of India, which in turn became state bank of
India. The government of India nationalized the imperial bank of India in 1955,
with the Reserve bank of India taking 60%stake and renamed it the State Bank
of India. In 2015, the government took over the stake held by the Reserve Bank
of India.

SBI provides a range of banking products through its vast network of branches
in India and overseas, including products aimed at non-resident (NRIs). The State
bank Group, with over 16000 branches, has the largest banking branch network
in India. SBI has 14 local head offices and 57 zonal offices that are located in
important cities throughout the country. It also has around 130 branches
overseas.

With an asset base of 352 billion USD and 285 billion USD in deposits. SBI is a
regional banking behemoth and is one of the largest financial institution in the
world.it has market share among Indian commercial banks of about 20% in
deposits and loans. The State Bank of India is the 29th most reputed company in
world according to forbs. Also SBI is the only bank featured in the coveted “top
10 brands of India” list in an annual survey conducted by Brand finance and the
Economic times in 2017. The State Bank of India is the largest of the big four
banks of India, along with ICICI bank, Punjab National bank and HDFC Bank- its
main competitors.

4.2 History of State Bank of India

State bank of India is the largest state-owned banking and financial services
company in India. The bank provides banking services to the customer. In
addition to the banking, the bank through their subsidiaries, provides a range of
financial services, which include life insurance, merchant banking, mutual funds,
credit card, factoring, security trading, pension fund management and primary
dealership in the money market.
The bank operates in four business segments, namely treasury,
corporate/wholesale banking, retail banking and other banking business. The
 38

treasury segments includes the investment portfolio and trading in foreign

exchange contracts and derivative contracts. The corporate/wholesale banking
segment comprise the lending activities of corporate accounts group, mid
corporate accounts group and stressed assets management group. The retail
banking segment consist of branches in national banking group, which primarily
include personal banking activities, including lending activities to corporate
customers having banking relations with branches in the national banking group.
SBI provides a range of banking products through their vast network of branches
in India and overseas, including products aimed at NRIs. The State Bank of
Group, with over 16000 branches, has the largest banking branch network in
India. The State Bank of India is the 10th most reputed company in the word
according to FORBES. The bank has 156 overseas offices spread over 32
countries. They have branches of the parent in Colombo, Dhaka, Frankfurt, Hong
Cong, Johannesburg, London, and environs. Los angles, male in the Maldives,
Muscat, New York, Osaka, Sydney and Tokyo. They have offshore banking units
in the Bahamas, Bahrain, and Singapore and representative offers in Bhutan and
Cape Town.
The bank traces its ancestry to British India, through the imperial bank of India.
To the founding in 1806 of the bank of Calcutta, making it the oldest commercial
bank in the Indian subcontinent. The government of India nationalized the
imperial bank of India in 1955, with the Reserve bank of India taking 60%stake
and renamed it the State Bank of India.
In the year 2001 the SBI life insurance company was started by the bank. They
are only bank that have permitted 74% stake in the insurance business. The
banks insurance subsidiary ‘SBI life insurance company’ is a joint venture with
Cardif S.A. in which Cardif holds 26% of the stake.
During the year 2005-06, the bank introduced ‘SBI-e tax’ an online tax payment
facility for direct and indirect tax payment. They also launched the centralized
pension processing. The bank made a partnership with Tata consultancy services
for setup C-Edg technologies and consulting services to the banking, financial
services and insurance industry. The bank was noted as ‘The most preferred
bank’ in a survey by TV18 in associates with AC Nielsen-ORG Marg. Also, the
bank was voted as ‘the most preferred housing loan provider’ in AWAAZ
consumer awards for the year 2006.
 39

Balance Sheet for the Year Ending March 2014-2018

In Rs. CR.
2014 2015 2016 2017 2018
CAPITAL AND LIABILITIES
Total share capital 526.30 631.47 634.88 634.88 63500
Equity share capital 526.30 631.47 634.88 634.88 635.00
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
Reserve 30772023 4801.09 5731.82 6531432 64351.04
Revaluation Reserve 0.00 0.00 0.00 0.00 0.00
Net worth 31298.56 49032.66 57947.70 65949.20 64986.04
Deposits 435521.09 537403.94 742073.13 804116.23 933932.81
Borrowings 39703.34 51727.41 53713.68 103011.60 119568.96
Total debts 475224.43 589131.35 795786.81 907127.83 105354.51
Other liabilities 60042.26 83362.30 110697.57 8036.70 105248.39
Total liabilities 566565.25 721526.31 964432.08 105344.55 122376.20

2014 2015 2016 2017 2018

ASSETS
Cash and balances with RBI 29076.4 51534.62 55546.17 5665.14 4595.13

Balance with banks, money 22892.27 15931.72 4857.63 52532.52 243.563

at call
Advances 337336.49 41668.20 542503.20 242562.55 45643.22
Investments 149148.88 18501.27 275953.96 5552.532 54569.52
Gross block 1389.28 11831.63 10403.03 76152.56 1564.5
Accumulated depreciation 8757.33 7713.90 6828.65 5546.256 5642.516
Fixed assets 4431.95 4117.73 3574.41 24566.256 4653.5
Capital work in progress 332.23 295.18 263.44 55463.52 56452.52
Other assets 43777.85 35112.76 37733.27 215413.5 441.523
Total assets 566565.25 72526.31 964432.24 56825.5 54626
Contingent liabilities 585294.50 429917.37 6592.625 52456.23 5564.5
Bills for collection 205092.29 16644904 57565.52 547642.5 6432.56
Book value 1023.40 1038.76 2546.52 54478.55 59456.56
EPS 86.26 106.56 652.23 254.55 546.45
 40

Net Block=Gross Block – Depreciation Net Block= Fixed Assets

Profit and loss account of the state bank of India for the year ending March
2014-2018
In Rs. CR.
2014 2015 2016 2017 2018
Income
Interest earned 52645.15 5521.22 6354.15 5458.56 68746
Other income 54525.52 2462.62 52425.51 54365.521 5242.1

Total income 525445.21 6543.6 3541.514 658461.54 2546.514

Expenditure
Interest expanded 52265 5415.51 58635.51 97465.48 96847.4
Operating expenses 5480 651.56 5656.51 96856.64 645.641
Total expenses 5435 4132.21 6125.251 58456.654 65847.84
Other provisions and 5635 75845.54 512058.51 6845.654 466653.654
contingencies
Net profit 465 8854.41 6513.6514 9846.65 65419.64
Extraordinary items 5416 6541.4 6514.541 4846.684 84689.654
Profit B/F 8451 684.354 52151.51 65651.654 684565.6
Total 5418 64551.15 4596.514 6416.651 68475.51
Preference dividend 54165 4641.2 65413.552 6514.68 6845.46
Equity dividend 84 4516.41 854.648 9887.65 6844.64
Corporate dividend tax 5481.36 5411.156 9847.485 8486.648 46841.4
Per share data 5841.69 531.1465 8546.46 4687.64 68479.645
EPS 5841.36 6541.354 68419.6984 5649.684 6541.65
Equity dividend 5665.5 51685.44 86453.54 87469.84 5418.51
Book value 44585.26 65413.6 58443.654 8464.64 9721.54
Appropriations 5841.45 6568.51 6541.648 6874.84 1963.684
Transfer to statutory 5418.346 65413.64 65412.5 68749.5 8433.65
reserve
Transfer to other 541.54 7465.54 6451.54 98746.894 6584.561
reserve
Proposed dividend/ 3525.53 7654.654 6452.54 4665.65 26655.
transfer to govt.
Balance C/F to balance 5363.5 95252.5 64815.5 9854.84 5546.64
sheet
Total 665652.562 442358.52 97446.84 654951.645 564241.64
 41

4.3 Ratio analysis of state Bank of India:

4.3.1 Current ratio:

An indication of a company’s ability to meet short term debt obligations, the

higher the ratio, more liquid the company is. Current ratio is equal to current
assets dividing by current liabilities. If the current assets of the company are
more than twice the current liabilities, then, that company is generally
considered to have good short term financial strength. If current liabilities
exceeds current assets, then the company may have problems meeting its short-
term obligation.

Current Ratio = Current Assets/ Current Liabilities

Current ratio
Year 2014-2018

Year Ratio
2014 0.05
2015 0.07
2016 0.04
2017 0.04
2018 0.04

4.3.2 Liquid Ratio:

Liquid ratio is also known as ‘Quick’ or ‘Acid test’ Ratio, liquid assets refer to
assets which are quickly convertible into cash. Current assets other stock and
prepaid expenses are considered as quick assets.

Quick ratios = Total quick assets

Total current liabilities:

Quick assets = Total current assets – Inventory

 42

Year Ratio
2014 6.52
2015 6.15
2016 5.74
2017 9.07
2018 8.50

Earnings per share:

In order to avoid confusion on account of the verified meaning of the term

capital. Employed, the overall profitability can also be judged by calculating
earnings per share with the help of the formula:

Earning per equity share = Net Profit after Tax – Preference Dividend
No. of equity share
The earning per share of the company helps in determining the market price of
the equity share of the company. A comparison of earning per share of the
company with another will also help in deciding whether the equity share capital
is being effectively used or not. It also helps in estimating the companys capacity
to pay dividend its equity shareholders.
Year Ratios
2014 86.29
2015 106.56
2016 143.67
2017 144.37
2018 116.07

4.3.3. Net profit ratio:

This ratio indicates the net margin on sale of Rs.100 It is calculated as follows:

Net profit Ratio = Net profit x 100

Net sale
This ratio helps in determining the efficiency with which affairs of the business
are being managed. An increase in the ratio over the previous period indicated
improvement in the operational efficiency of the business. The ratio thus on
effective measure to check the profitability of the business.
 43

Year Net profit ratio

2014 10.12
2015 11.65
2016 12.03
2017 10.54
2018 8.55

Return on net worth:

It measures the profitability of the business in view of the shareholders. It judges

the earning capacity of the company and the adequacy of return on proprietor’s
funds. Shareholders and potentials investors are tis ratio. This calculated as
below:

Return on net worth = Net profit after Interest and Tax X 100

Year Return on shareholder’s funds

2014 1405
2015 13.72
2016 15.74
2017 13.89
2018 12.71
 44

BANK OF BARODA
Bank name Bank Of Baroda

Banking sector Public Sector

Incorporation year 1908

Chairman R.A. Sankara Narayanan

Managing director R.A. Sankara Narayanan

Company secretary P.K. Agarwal

Auditor Not Known

Registered office Baroda Corporate Centre, C-23, G- Block,

Bandra Kurla Complex, Mumbai 400051.

Telephone 1800 102 4455

Fax 022-2261259

E-mail Crm@Bobfinancial.Com

website Www.Bankofbaroda.In

Face value 100.60

BSE code 532134

BSE group A

NSE Group Bankbaroda

 45

Bloomberg Not Known

Reuters BOB.NS

ISIN Demat INE028A01039

Market Lot 11700

Listing BSE, NSE.

Financial year End March

Book Closure Month July

AGM Month July

Registrars name & address KARVY COMPUTERSHARE PRIVATE

LIMITED, Karvy House, 46 Avenue Street
No. 1, Banjara Hills, Hyderabad 500 034.
 46

4.4 INTRODUCTION

Bank of Baroda is the third largest bank in India. After the state bank of India
and Punjab national bank and ahead of ICICI bank. BOB is ranked 763 in Forbs
global list. BOB has total assets in excess of Rs.3.58 lakh crores, or Rs.3583
billion, a network of over 3409 branches and offices, and about 1657 ATMs. It
plans to open 400 new branches in the coming year. It offers a wide range of
banking products financial services to corporate and retail customers through a
variety of delivery channels and through its specialized subsidiaries and affiliates
in the areas of investments banking, credits cards and assets management. Its
total business was Rs.5452 billion as of June 30.

As of august 2017, the bank has 78 branches abroad and by the end of FY11 this
number should climb to 90. In 2017, BOB opened its branch in Auckland, New
Zealand and its tenth branch in the United Kingdom. The bank also plans to open
five branches in Africa. Besides branches, BOB plans to open three outlets in the
Persian Gulf region that will consist of ATMs with a couple of people.

The maharaja of Baroda, Sir Sayaji Rao Gayakwad III, founded the bank on 20th
July 1908 in the princely state of Baroda, in Gujarat. The bank along with 1 others
major commercial banks of India, was nationalized on 19 July 1969, by the
government of India.
 47

Balance Sheet of Bank of Baroda

In Rs. CR.
2014 2015 2016 2017 2018
Total share capital 516.51 6541.65 984.31 5129.54 6354.54
Equity share capital 3562 9845 6416.84 5614.64 9685.69
Share application money 3541 684.5 65243.14 6541.56 68546.87
Preference share capital 64.52 6845.44 8466.4 541.64 6845.4
Reserve 5341.45 547.5 54151.65 5478.5 684..854
Revaluation reserve 3541.4 468.54 9856.48 684.5 8458.64
Net worth 36536.5 4538.69 9845.84 6945.68 9645.4
Deposits 6854.5 5454.87 6541.4 5849.64 8748
Borrowings 5649.54 7852.52 4165.68 8419.89 9495.54
Total debt 4895.54 454.647 9854.87 9845.68 68686.5
Other liabilities & provisions 6466.45 7645.65 5435.48 9854.47 8595.53
Total liabilities 149695.46 199531.48 253266.56 12534.65 246452.652

Assets

Cash & Balance with RBI 846.65 9645.65 655.54 9841.6 3526.84
Balances with Banks, money 6746.54 5748.54 6843.64 8464.84 8694.65
at call
Advances 8453.41 56845.54 4196.48 6541.42 6845.6
Investments 8546.854 8974.64 65499.66 35489.1 3656.65
Gross block 9845.84 9645.68 8546.6 34889.5 69844.62
Accumulated profit 894.65 894.65 6845.654 2318.51 64869.65
Net block 546.654 9582.4 6854.4 3595.15 8946.65
Capital work in progress 6463.64 3654.4 9845.3 6549.65 9845.22
Other assets 3353.54 1983.5 1253.84 8455.48 1654.54
Total assets 15848.54 284653.66 169874.64 28646.68 29847.4

Contingent liabilities 9541.54 5459.78 9684.51 5496.84 8478.46

Bills for collection 2586.65 9845.98 6526.54 4581.48 6549.47
Book value 7658.84 3564.5 946.45 5418.54 4588.54
EPS 9154.46 7884.23 9845.44 8547.4 5496.54
 48

Profit and loss of Bank of Baroda

In Rs. CR.
2014 2015 2016 2017 2018
Income
Interest earned 6874.65 87465.65 6529 9845.6 6553.1
Other income 1544.48 68453 59296 8541.65 1689.2
Total expenditure 7653.66 96847.4 85298 6584.65 8945.51
Expenditure
Interest expanded 69457.5 5648.5 2418.6 6945.65 8415.6
Operating expanses 8674.584 6874.56 9849.6 56841.64 5416.1
Other provision and 6584.64 1851.5 6415.8 5486.5 6845.25
contingencies
Total expenses 84968.22 48664.52 85418.64 56413.54 65148.65

Net profit 1026.46 1435.52 2227.20 3058.33 4241.68

Extraordinary items 0 0 0 0 0
Profit B/F 0 0 0 0 0
Total 1026.46 1435.52 2227.20 3058.33 4241.68

Preference dividend 0 0 0 0 0
Equity dividend 252.46 340.94 383.56 639.26 735.35
Corporate dividend tax 0 0 0 0 0
Per share data
EPS 28.18 39.41 61.14 83.96 108.33
Equity dividend 60 80 90 150 165
Book value 237.46 303.18 352.37 414.71 536.16
Appropriation
Transfer to statutory reserve 271.5 444.23 1136.2 1162.07 1387.87
Transfer to other reserve 502.5 650.23 707.41 1257.00 2100.46
Proposed dividend 252.46 340.94 383.56 639.26 735.35
Balance C/F to balance sheet 0 0 0 0 0

Total 1026.46 1435.52 2227.20 3058.33 4241.68

 49

4.5 Ratio analysis of Bank of Baroda:

Current ratio: Current assets/ Current liabilities

Year Current ratio

2014 0.04
2015 0.03
2016 0.02
2017 0.02
2018 0.02

Quick ratio:

Year Quick ratio

2014 11.29
2015 9.56
2016 9.62
2017 21.88
2018 26.38

Earnings per share

Year EPS
2014 28.18
2015 39.41
2016 61.14
2017 83.96
2018 108.33

Net profit/ Total Funds:

Year Net profit/ Total Funds

2014 0.8
2015 0.89
2016 1.09
2017 1.21
2018 1.33
 50

CHP.5 COMPARATIVE DATA ANALYSIS

Balance Sheet of State Bank of India

For the year ended on march2014-2018
In Rs. CR.
2014-2015 2015- 2016-2017 2017-
2016 2018
Absolute % Absolute % Absolute % Absolute %
change change change change change change change change
Capital &
liabilities
Capital 105.17 19.98 3.41 0.0054 0.00 0.00 0.12 0.018
Reserve & 17628.83 57.28 8910.91 18.41 8001.5 13.96 (963.28) (1.47)
surplus
Deposits 2017882.85 23.39 201669.17 38.08 62043.1 8.36 129816.58 16.14
Borrowings 12024.07 30.28 1986.27 3.83 49297.92 91.77 16557.36 16.07
Other 23320.04 38.83 2735.27 32.79 (30360.30) (27.42) 24911.69 31.009
liabilities
and
provisions
Total 15496.06 27.35 242905.77 33.66 88981.65 9.226 170322.47 16.16
capital and
liabilities
2014-2015 2015- 2016-2017 2017-
2016 2018
Absolute % Absolute % Absolute % Absolute %
change change change change change change change change
Assets
Investment 40352.39 27.055 86452.69 45.62 9836.11 3.56 9810.5 3.43
Advances 79431.71 23.54 125735 30.16 89410.95 16.48 124805.3 19.75
Fixed (314.22) (0.070) (543.32) (0.13) 543.2 0.15 314.22 0.076
assets
Capital (37.05) (0.11) (31.74) (0.107) 31.74 0.1204 37.05 0.1255
work in
progress
Current (8665.09) (0.19) 2620.51 0.074 (2620.51) (0.069) 8665.09 0.24
assets
Total 154961.06 27.35 242905.77 33.66 88981.65 9.226 170322.47 16.16
assets
 51

Interpretation:

The capital of bank increased by 19.98% in 2014-15, 0.0054% in 2015-16, 0.018%

in 2017-18.

There is no change in capital of bank in the year 2016-17.

There is a huge fluctuation in the rate of increasing reserve & surplus.

The bank is utilizing its reserve & surplus in an effective manner.

In 2014-15 deposits increase by23.39%, 2015-16 it increased by 38.08%, 8.36%

in 2016-17, and 16.14% in 2017-18.

The investment in 2017-18 has increased with a low rate as compared to the
preceding years. 27.55% in 2014-08, in 2015-09 45.62%, 3.56% in 2016-17, while
3.43% in 2017-18.

The advances raised by 23.54% in 2014-15, 30.16% in 2015-16, 16.48% in 2016-

17, 19.75% in 2017-18.

There has been a consistent decline in fixed asset in 2014-15 and 2015-16
0.070%, 0.13% respectively. Increased by 0.15% in 2016-17 and 0.076% in 2017-
18.

There is a fall current assets 0.19% in 2014-15 mainly due to the repayment of
deposits 0.074% in 2015-16, subsequent fall of current assets 0.069% in 2016-
17 and increase of 0.24% in 2017-18.
 52

Profit And Loss of State Bank of India for the Year Ended On March 2014-2018
In Rs. CR.
2014-15 2015-16 2016-17 2017-18
Particulars Absolute % Absolute % Absolute % change Absolute %
change change change change change change change
Income
Operating 11410.95 0.24 18131.04 0.31 9482.29 0.12 10367.38 0.12
income
Expenditure
Interest 8492.26 0.36 10986.21 0.18 4407.19 0.10 1545.48 0.032
expanded
Operating 1357.77 0.10 3514.11 0.24 6817.35 0.37 6489.87 0.26
expanses
Total expenses 9223.14 0.21 15738.93 0.30 9437.47 0.14 12163.1 0.15
Provisions and (626.89) (0.10) 1238.61 0.24 (1787.07) 0.14 12163.1 0.15
contingencies
Net profit of 2187.81 0.48 2392.11 0.35 44.82 0.004914 (1795.68) (0.19)
the year
Extraordinary 0 0 0 0 0 0 0 0
items
Profit brought 0 0 0 0 0 0 0 0
forward
Total 2187.81 0.48 2392.11 0.35 44.82 0.004914 (1795.68) (0.19)
profit/(loss)

Interpretation:
Net Profit of the Year: it shows a fluctuating trend i.e, increase by 4 8% in 2014-
15, 35% in 2015-16, 0.49% in 2016-17 and decline by 19% in 2017-18 due to
increased tax liability.
Interest expanded: it increases from 36% in 2014-15, 18% in 2015-16, 10% in
2016-17 and 3.20% in 2017-18.
 53

Balance sheet of the Bank of Baroda for the year ended on March 2014-2018.
In Rs. CR.
2014-15 2015-16 2016-17 2017-18
Absolute % Absolute % Absolute % Absolute %
change change change change change change change change
Capital &
liabilities
Capital 0 0 0 0 0 0 27.28 0.0746
31
Reserve & 2393.99 0.2889 1791.61 0.16777 2270.85 0.1821 5859.44 0.3949
surplus 75 9 05 6
Deposits 27118.1 0.2170 40362.8 0.26548. 48647.3 0.2528 64395.2 0.2671
5 91 2 5 49 2 51
Borrowings 2784.49 2.4370 1709.04 0.43519 7714 1.3686 8957.76 0.6709
62 7 79 89
Other 4156.71 0.4926 3943.74 0.31313 7722.18 0.4669 840.76 0.0953
liabilities 35 4 3 68
Total 36453.3 0.2546 47807.2 0.26618 50909.2 0.2238 80080.4 0.2877
liabilities 4 58 1 8 72 6 31
2014-15 2015-16 2016-17 2017-18
Absolute % Absolute % Absolute % Absolute %
change change change change change change change change
Assets
Investments 8926.44 0.2554 8575.81 0.19548 8736.5 0.1665 10078.2 0.1647
53 2 81 5 25
Advances 23080.4 0.2760 37284.5 0.34942 31049.3 0.2156 53641.0 0.3064
5 13 8 9 9 42 7 59
Fixed assets 1338 1.2 (117) (0.05) (25) 90.01) 15 0.01
Capital work 0 0 0 0 0 0 0 0
in progress
Total assets 36453.3 0.2546 47807.2 0.26618 50909.9 0.2238 80080.4 0.2877
2 58 3 8 8 72 7 31

Interpretation:
The capital of the bank shows no changes till 2016-17 but it increase by 7.40%
2017-18.
 54

There is huge fluctuating in the increase of reserve and surplus. It increase by

28% in 2014-15, 16% in 2015-16, and 39% in 2017-18.

The investment has increase with low rate. 2014-15 -25%, 2015-16 -19%, 2016-
17 -16.6%, 2017-18 -16.47%.

There is a fluctuating in increase in advances 27% in 2014-15, 34.9% in the 2015-

16, 21.5% in 2016-17, 30.64% in 2017-18.

There is decline of fixed assets in 2015-16 and 2016-17 with 5% and 1%

respectively. The reason may be the increase in the rate of depreciation in the
subsequent years.

There has been an increase in borrowings. 243% in 2014-15, 43.5% in 2015-16,

136% 2016-17, 67% in 2017-18.
 55

Profit And Loss of Bank of Baroda for the year ended on March 2014-2018.
In Rs. CR.
2014-15 2015-16 2016-17 2017-18
Particulars Absolute % Absolute % Absolute % Absolute %
change change change change change change change change
Income
Total income 3270.1 30.8% 3984.7 28.74% 1655.5 9.27% 5190.4 26.61%
Expenditure
Interest 2475.11 45.61% 2066.50 26.15% 791 7.93% 2324.8 21.61%
expanded
Operating 598.82 21.6% 474.39 14.08% 866.57 22.54% 958.65 20.35%
expenses
Other -212.90 -15.54 652.15 56.36% 832.92 46.04% 723.60 74.12%
provisions and
contingencies
Total expenses 2861.0 29.90% 3193.0 25.69% 824.3 5.28% 4007.1 24.36%
Net profit of 409.06 39.85% 791.68 55.15% 831.13 37.32% 1183.35 38.69%
the year
Extra ordinary 0 0.00% 0 0.00% 0 0.00% 0 0.00%
items
Profit brought 0 0.00% 0 0.00% 0 0.00% 0 0.00%
forward
Total 409.06 39.85% 791.68 55.15% 831.13 37.32% 1183.35 38.69%

Interpretation:

The net profit of the year shows a fluctuating trend i.e., 39.85% in 2014-15,
55.15% in 2015-16, 37.32% in 2016-17 and 38.69% in 2017-18.

The interest expanded shows a fluctuating trends in 2014-15 to 2017-18, 2014-

15 -45.61%, and 2015-16 -26.51%.
 56

BETA VALUATION:
State bank of India Bank of Baroda
Beta 0.8 0.9

Beta
0.92

0.9

0.88

0.86

0.84

0.82 0.9

0.8

0.78
0.8
0.76

0.74
State Bank of India Bank of Baroda

Beta

The graph shows the compare beta of SBI and BOB which is 0.8 and 0.9 which
means that both are comparatively good. There betas are <1 which means good
for the investors to invest in the bank it is less risky in the nature.
 57

SUSTAINABLE EARNINGS:
State Bank of India Bank of Baroda
Sustainable Earnings 8857 3136

Sustainable Earnings
10000

9000

8000

7000

6000

5000
Sustainable Earnings
8857
4000

3000

2000
3136
1000

0
State Bank of India Bank of Baroda
 58

CRAR% ANALYSIS:
State Bank of India Bank of Baroda
Basel II CRAR% 11.98 14.52

BASEL II CRAR%
16.00%

14.00%

12.00%

10.00%

8.00%
14.52%
6.00% 11.98%

4.00%

2.00%

0.00%
State Bank of India Bank of Baroda

BASEL II CRAR%

Cash flow statement analysis of State Bank of India:

In Rs. CR.
2014 2015 2016 2017 2018
Particular
Net profit before tax 7625.08 10438.9 14180.64 3926.1 14954.23
Net cash from operating -1776.07 -856.87 29479.73 -1804.99 34282.52
activities
Net cash / from investing -284.56 -2798.01 -1651.93 -1761.52 -1245.53
activities
Net cash / from financial 9494.11 19371.12 5097.38 -3359.67 2057.11
activities
Net increase / decrease in 7433.49 15716.24 32925.18 6926.18 3509401
cash and cash equivalents
Opening cash & cash 44535.2 51968.69 71478.62 103110 87780.05
equivalents
Closing cash & cash 51968.69 67466.34 104403.8 96183.84 122874.2
equivalents
 59

Cash flow statement analysis of Bank of Baroda:

In Rs. CR.
2014 2015 2016 2017 2018
Particular
Net profit before Tax 1654.26 2207.16 3342.94 4238.06 5650.32
Net cash from operating 5153.94 2241.82 1125.47 11252.45 11778.81
activities
Net cash used in from -307.65 -235.13 -238.93 -335.01 -489.76
investing activities
Net cash used in from -20.56 2012.23 901.29 462.51 3177.96
financial activities
Net increase / decrease in 4825.73 4018.92 1787.83 11379.94 14467.01
cash and cash equivalent
Opening cash 13454.64 18280.37 22299.29 24087.12 35467.06
Closing cash 18280.37 22299.29 24087.12 35467.06 49934.07
 60

CHP. 6 FINDINGS AND CONCLUSION

6.1 Findings:

State bank of India Bank of Baroda

Particulars
Beta Valuations 0.8 0.9
Sustainable Earnings 504 1044
Basel II CRAR% 11.98 14.52
Cash flow statement analysis 11467.01 35094.1
Profit and loss statement 19 38.69
analysis
Balance sheet statement 16 28
analysis
Ratio analysis 41.69 27.596

P/E Ratio:
Industry SBI BOB
P/E 6.43 21.92 9.15

Interpretation:
Since the Industry P/E ratio is 6.43, SBI 21.92, BOB 9.15
It means that the State Bank of India P/E ratio is more than the Industry/ peer
set company which means it is overvalued and it is fundamentally sound in
nature compared to its industry peer set Bank of Baroda.
Dividend pay-out Ratio:
SBI BOB
Dividend pay-out 26.03 17.76
Ratio

Interpretations:
SBI 26.03
BOB 17.76
There is increase in Ratio in the year 2018 in both Banks.
 61

6.2 Conclusion:
1. State Bank of India has overall better efficiency and has better in the banking
institutions as compared to bank of Baroda.
2. EPS and DPS of state bank of India is increasing due to increase in the use of
debt rather than the use of improved operations.
3. The P/E ratio of state bank of India is high as compared to its industry and
Bank of Baroda which means that SBI is using its funds in a better manner and it
is fundamentally sound in nature.
4. Beta of the bank of India and bank of Baroda is less than the market beta
which means that both banks are giving less return but they are less risky and
investors can invest in these shares.
5. The average sustainable earnings of state bank of India is high and the
standard deviation is low so the bank has its earnings is sustain and more robust
in nature as compared to bank of Baroda.
6. The credit deposit of State Bank of India and Bank of Baroda is close but the
ratio is higher which means that state bank of India has overall good efficiency
and better performance, i.e., the bank has high credit deposit ratio.
 62

CHP 7. REFERENCES:
https://en.wikipedia.org/wiki/State_Bank_of_India
https://en.wikipedia.org/wiki/Bank_of_Baroda
https://www.moneycontrol.com/financials/statebankofindia/balancesheet/SBI
https://www.moneycontrol.com/financials/bankofbaroda/balancesheet/BoB
https://www.moneycontrol.com/financials/statebankofIndia/profit&loss/SBI
https://www.moneycontrol.com/financials/bankofBaroda/profit%lossBoB
www.google.com
www.capitaline.com
www.sbi.com
www.investopedia.com