THE ANNUAL FINANCIAL STATEMENT ANALYSIS OF YES BANK IN

VIEW OF INVESTMENT

PROJECT REPORT

Submitted to A S S COLLEGE OF COMMERCE GADAG

requirements for the award of the Degree of
MASTER OF BUSINESS ADMINISTRATION

Submitted By

KARTHIK M MERWADE

Reg. No.U02FL21C0086

Under the guidance of

S,B,JADHAV

Faculty Guide

Accredited by NAAC with ‘A’ Grade

DEPARTMENT OF MANAGEMENT STUDIES
MAR ATHANASIOS COLLEGE FOR ADVANCED STUDIES
TIRUVALLA
2021

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 MAR ATHANASIOUS COLLEGE
FOR ADVANCED STUDIES
THIRUVALLA

Ph: 0469 2730323 Fax: 0469 2730317 www.macfast.org

CERTIFICATE

This is to certify that the project report entitled “ANNUAL FINANCIAL STATEMENT
ANALYSIS OF YES BANK IN VIEW OF INVESTMENT” is a bonafide report of the
project work undertaken by Ms.DIVYA BINU, fourth semester MBA student of our
college during the period from 27th April to 10th June, 2021

Jibumon K G Dr. Sudeep B. Chandramana

Faculty Guide Head of Dept. of management studies

Rev. Fr. Dr. Cherian J Kottayil Signature of the external examiner

Principal

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 DECLARATION

I hereby declare that this project report entitled “THE ANNUAL FINANCIAL
STATEMENT ANALYSIS OF YES BANK IN VIEW OF INVESTMENT” is a bonafide
report of the study undertaken by me, under the guidance S,B, JADHAV K.G ,Department of
Management Studies, MACFAST, Tiruvalla.

I also declare that this project report has not been submitted to any other University or
Institute for the award of any degree or diploma.

Place: Thiruvalla

Date :

Type your text

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 ACKNOWLEDGEMENT

First and foremost, I thank the Lord Almighty, for his perpetual shower of blessings, which led
to the successful completion of my project.

I take this opportunity to express my deep sense of gratitude to all those who have helped me
throughout this project. It gives me immense pleasure to acknowledge all those who have rented
encouragement and support for the successful completion of this work.

I express my profound gratitude and sincere thanks to Rev. Dr. Cherian J. Kottayil, principle of
MACFAST, Tiruvalla.

I express my heartfelt thanks to Dr. Sudeep B. Chandramana, head of department of management

studies, MACFAST, Tiruvalla for inspiration and valuable suggestions for carrying out this
endeavour.

I express my deep sense of gratitude to Mr.Jibumon K G, the faculty member of department of

management studies, MACFAST, for encouraging and inspiring me for developing the project.

My project work involves many people at different stages. I would like to thank all those who
have directly or indirectly contributed to the success of the project.

I also take this opportunity to express profound gratitude to my parents, family members and
several people who have contributed for the successful completion of the project. It is my duty
and pleasure to acknowledge them.

KARTHIK MERWADE

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LIST OF TABLES

SI NO TITLE PAGE NO

5.1 Net Profit 55

5.2.1 Debt Equity Ratio 56

5.2.2 Debt Asset Ratio 58

5.3.1 Return On Asset 59

5.3.2 Return On Equity 60

5.4.1 Current Ratio 62

5.4.2 Absolute Liquidity Ratio 63

5.4.3 Quick Ratio 64

5.5 Trend Analysis 66

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LIST OF FIGURES

SI NO TITLE PAGE
NO

1 Banking services 17

2 Net profit 52

3 Debt Equity Ratio 57

4 Debt Asset Ratio 58

5 Return On Asset 60

6 Return On Equity 61

7 Current ratio 62

8 Absolute Liquidity Ratio 64

9 Quick Ratio 65

10 Trend analysisi of NPA 66

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CHAPTERS CONTENTS PAGE NO
i. Acknowledgement 4
ii. List of tables 5
iii. List of figures 6

INTRODUCTION 10- 19
01
1.1 Background of the study 10
1.2 Statement of the problem 11
1.3 Relevance and scope of the study 11
1.4 Objectives of the study 12

PROFILE OF BANKING INDUSTRY 20-40

2.1 Business process of the study 21

02 2.2 market demand supply-contribution to GDP- Revenue 23
generation
2.3 level and type of competition- firms operating in the 27
industry
2.4 pricing strategies in the industry 29
2.5 prospects and challenges of the industry 30
2.6 key drivers of the industry 38

REVIEW OF LITERATURE 40-44

03 3.1 Brief theoretical construct related to the problem 41

3.2 An overview of earlier studies 41
3.3 uniqueness of research study 43

METHODOLOGY OF THE STUDY 44-54

04 4.1 Research Approach and design 45

4.2 Sources of online data 46
4.3 Data collection methods 46
4.4 Data analysis tools 46
4.5 Report structure 52
4.6 Limitation of the study 53

05 DATA ANALYSIS, INTERPERATION, INFERENCE 55-68

06 FINDINGS 69-71

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07 CONCLUSION 73

BIBLOGRAPHY 74
ANNEXURES

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CHAPTER 1

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INTRODUCTION
1.1 BACKGROUND OF THE STUDY
The study of financial statement is prepared for the purpose of presenting a periodical review or
report by the management of and deal with the state of investment in business and result
achieved during the period under review. They reflect the financial position and operating
strengths or weaknesses of the concern by properly establishing relationship between the items
of the balance sheet and remove statements.

Financial statement analysis can be under taken either by the management of the firm or by the
outside parties. The nature of analysis defers depending upon the purpose of the analysis. The
analyst is able to say how well the firm could utilize the resource of the society in generating
goods and services. Turnover ratios are the best tools in deciding these aspects. Hence it is
overall responsibility of the management to see that the resource of the firm is used most
efficiently and effectively and that the firm’s financial position is good. Financial statement
analysis does indicate what can be expected in future from the firm.

Financial statements refer to such statements which contains financial information about an
enterprise. They report profitability and the financial position of the business at the end of
accounting period. The team financial statement includes at least two statements which the
accountant prepares at the end of an accounting period. The two statements are: -

• The Balance Sheet

• Profit and Loss Account

They provide some extremely useful information to the extent that balance Sheet mirrors the
financial position on a particular date in terms of the structure of assets, liabilities and owner’s
equity, and so on and the Profit and Loss account shows the results of operations during a certain
period of time in terms of the revenues obtained and the cost incurred during the year. Thus the
financial statement provides a summarized view of financial position and operations of a firm.

Financial performance analysis can identify the financial strengths and weaknesses of the firm by
properly establishing the relationship between the items of balance sheet and profit and loss. It
helps a firm to identify short term and long term growth forecasting. This analysis can be

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undertaken by management of the firm or by parties outside the namely, owner, creditors,
investors. Financial statement analysis involves the re-organization of the entire financial data
contained the financial statements. It is the establishment of significant relationships between the
individual components of balance sheet and profit loss account. This is done through the
application tools of financial analysis like ratio analysis, trend analysis, common size balance
sheet and comparative balance sheet. This is used for determining the investment value of the
business, credit rating and for testing efficiency of operation. Every company need to analyse
financial statement to know the performance of a company.

Normally the financial statement analysis conducts for the purpose of investment, strategic
planning, etc. While considering the investors point of view the financial statement analysis
conducted by the investors, the share market intermediaries, Competitors and the company itself.
This analysis for the purpose of investment. It can be consider, it is for the investors and share
market intermediaries. This analysis conducted on the field of capital market of financial
industry and also the banking industry of India

1.2 STATEMENT OF THE PROBLEM

The project work is titled with regard to Financial Statement Analysis Of YES Bank In view of
Investment. The focus of financial analysis is on key figures in the financial statements and the
significant relationship that exists between them. The analysis of financial statements is a process
of evaluating relationship between component parts of financial statements to obtain a better
understanding of the firm’s position and performance for the purpose of investment.

1.3 SCOPE OF THE STUDY

Financial statement analysis (or financial analysis) is the process of reviewing and analysing a
company's financial statements to make better economic decisions. These statements include the
income statement, balance sheet, statement of cash flows, and a statement of retained earnings.

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The report is an important partial requirement of MBA program because knowledge and learning
become perfect when it is associated with theory and practice. That is, student can train and
prepare themselves for the job market. It also helps a lot to compare the theoretical knowledge
with the practical field.

1.4 OBJECTIVES OF THE STUDY

The study has the following objectives.

• To provide a strong theoretical framework for analysing financial statements.

• Find the net profit margins and operating profit margins of Yes Bank for five
• consecutive years To study the financial position of the company and operation of Yes
Bank
• To appraise financial soundness of the company
• Conduct ratio analysis with Current ratio, Debt-Equity ratio, Debt-Asset ratio,
• ROE and ROA

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CHAPTER 2

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INDUSTRY PROFILE
BANKING INDUSTRY
The banking services sector provides financial services to people and corporations. This segment
of the economy is made up of a variety of financial firms including banks, investment houses,
lenders, finance companies, real estate brokers, and insurance companies. As noted above, the
financial services industry is probably the most important sector of the economy, leading the
world in terms of earnings and equity market capitalization. Large conglomerates dominate this
sector, but it also includes a diverse range of smaller companies.

According to the finance and development department of the International Monetary

Fund (IMF), financial services are the processes by which consumers or businesses acquire
financial goods.1 For example, a payment system provider offers a financial service when it
accepts and transfers funds between payers and recipients. This includes accounts settled through
credit and debit cards, checks, and electronic funds transfers.Companies in the financial services
industry manage money. For instance, a financial advisor manages assets and offers advice on
behalf of a client. The advisor does not directly provide investments or any other product, rather,
they facilitate the movement of funds between savers and the issuers of securities and other
instruments. This service is a temporary task rather than a tangible asset.

Banking is part of financial system that provides different types of finance through various
credit instruments, financial products and services. In financial instruments, we come across
cheques, bills, promissory notes, debt instruments, letter of credit, etc. In financial products, we
come across different types of mutual funds. Extending various types of investment
opportunities. In addition, there are also products such as credit cards, debit cards, etc. In
services we have leasing, factoring, hire purchase finance etc., through which various types of
assets can be acquired either for ownership or on lease. There are different types of leases as well
as factoring too. Thus, financial services enable the user to obtain any asset on credit, according
to his convenience and at a reasonable interest rate.

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Importance

1. Promoting investment

2. Promoting savings

3. Minimizing the risks

4. Maximizing the Returns

5. Ensures greater Yield

6. Economic growth

7. Economic development

8. Benefit to Government

9. Expands activities of Financial Institutions

10. Capital Market

11. Promotion of Domestic and Foreign Trade

12. Balanced Regional development

BANKING FINANCIAL SERVICES

Banking refers to that process in which a bank which is a commercial or government institution
offers financial services that include lending money, collection of deposits, issue of currencies
and debit cards, and transaction processing etc. The majority of banks works as profit-seeking
enterprises, however, a few government banks work as non-profit organizations. Central banks
function as government agencies and they regulate the interest rates and circulation of money in
the total economy. Banking system plays a very significant role in the economy of a country. It is
central to a nation’s economy as it caters to the needs of credit for all the sections of the society.
Money lending in one form or the other has evolved along with the history of mankind. Even in

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the ancient times, there are references to the money-lenders, in the form of sahukars and
zamindars who lend money by mortgaging the land property of the borrowers.

A) Role of banking services

• The banks collect the savings of the individuals and lend them out to business-
people and manufacturers. Bank loans facilitate commerce.
• Manufacturers borrow from banks the money needed for the purchase of raw
materials and to meet other requirements such as working capital. It is safe to
keep money in banks. Interest is also earned thereby. Thus, the desire to save is
stimulated and the volume of savings increases.
• The savings can be utilised to produce new capital assets. Thus, the banks play an
important role in the creation of new capital (or capital formation) in a country
and thus help the growth process.
• Banks arrange for the sale of shares and debentures. Thus, business houses and
manufacturers can get fixed capital with the aid of banks. There are banks known
as industrial banks, which assist the formation of new companies and new
industrial enterprises and give long-term loans to manufacturers.
• The banking system can create money. When business expands, more money is
needed for exchange transactions.
• The legal tender money of a country cannot usually be expanded quickly. Bank
money can be increased quickly and used when there is need of more money. In a
developing economy (like that of India) banks play an important part as supplier
of money.
• The banking system facilitates internal and international trade. A large part of
trade is done on credit. Banks provide references and guarantees, on behalf of
their customers, on the basis of which sellers can supply goods on credit. This is
particularly important in international trade when the parties reside in different
countries and are very often unknown to one another.

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 • Trade is also assisted by the grant of loans by discounting bills of exchange and in
other ways. Foreign exchange transactions (the exchange of one currency for
another) are also done through banks.
• Finally, banks act as advisers, counsellors and agents of business and industrial
organisations. They help the development of trade and industry.

B) Functions of Banks

Figure 2.0 functions of bank

Primary Functions of Bank

All banks have to perform two major primary functions namely:

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 1. Accepting of deposits
2. Granting of loans and advances

Accepting of Deposits

A very basic yet important function of all the commercial banks is mobilising public funds,
providing safe custody of savings and interest on the savings to depositors. Bank accepts
different types of deposits from the public such as:

1. Saving Deposits: encourages saving habits among the public. It is suitable for salary and
wage earners. The rate of interest is low. There is no restriction on the number and
amount of withdrawals. The account for saving deposits can be opened in a single name
or in joint names. The depositors just need to maintain minimum balance which varies
across different banks. Also, Bank provides ATM cum debit card, cheque book, and
Internet banking facility. Candidates can know about the Types of Cheques at the linked
page.
2. Fixed Deposits: Also known as Term Deposits. Money is deposited for a fixed tenure.
No withdrawal money during this period allowed. In case depositors withdraw before
maturity, banks levy a penalty for premature withdrawal. As a lump-sum amount is paid
at one time for a specific period, the rate of interest is high but varies with the period of
deposit.
3. Current Deposits: They are opened by businessmen. The account holders get an
overdraft facility on this account. These deposits act as a short term loan to meet urgent
needs. Bank charges a high-interest rate along with the charges for overdraft facility in
order to maintain a reserve for unknown demands for the overdraft.
4. Recurring Deposits: A certain sum of money is deposited in the bank at a regular
interval. Money can be withdrawn only after the expiry of a certain period. A higher rate

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 of interest is paid on recurring deposits as it provides a benefit of compounded rate of
interest and enables depositors to collect a big sum of money. This type of account is
operated by salaried persons and petty traders.

Granting of Loans & Advances

The deposits accepted from the public are utilised by the banks to advance loans to the
businesses and individuals to meet their uncertainties. Bank charges a higher rate of interest on
loans and advances than what it pays on deposits. The difference between the lending interest
rate and interest rate for deposits is bank profit.

Bank offers the following types of Loans and Advances:

1. Bank Overdraft: This facility is for current account holders. It allows holders to
withdraw money anytime more than available in bank balance but up to the provided
limit. An overdraft facility is granted against collateral security. The interest for overdraft
is paid only on the borrowed amount for the period for which the loan is taken.
2. Cash Credits: a short term loan facility up to a specific limit fixed in advance. Banks
allow the customer to take a loan against a mortgage of certain property (tangible assets
and / guarantees). Cash credit is given to any type of account holders and also to those
who do not have an account with a bank. Interest is charged on the amount withdrawn in
excess of the limit. Through cash credit, a larger amount of loan is sanctioned than that of
overdraft for a longer period.
3. Loans: Banks lend money to the customer for short term or medium periods of say 1 to 5
years against tangible assets. Nowadays, banks do lend money for the long term. The
borrower repays the money either in a lump-sum amount or in the form of instalments
spread over a pre-decided time period. Bank charges interest on the actual amount of loan
sanctioned, whether withdrawn or not. The interest rate is lower than overdrafts and cash
credits facilities.

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 4. Discounting the Bill of Exchange: It is a type of short term loan, where the seller
discounts the bill from the bank for some fees. The bank advances money by discounting
or purchasing the bills of exchange. It pays the bill amount to the drawer(seller) on behalf
of the drawee (buyer) by deducting usual discount charges. On maturity, the bank
presents the bill to the drawee or acceptor to collect the bill amount.

Secondary Functions of Bank

Like Primary Functions of Bank, the secondary functions are also classified into two parts:

1. Agency functions
2. Utility Functions

1.Agency Functions of Bank

Banks are the agents for their customers, hence it has to perform various agency functions as
mentioned below:

1. Transfer of Funds: Transfering of funds from one branch/place to another.

2. Periodic Collections: Collecting dividend, salary, pension, and similar periodic

collections on the clients’ behalf.

3. Periodic Payments: Making periodic payments of rents, electricity bills, etc on behalf of
the client.

4. Collection of Cheques: Like collecting money from the bills of exchanges, the bank
collects the money of the cheques through the clearing section of its customers.

5. Portfolio Management: Banks manage the portfolio of their clients. It undertakes the
activity to purchase and sell the shares and debentures of the clients and debits or credits
the account.

6. Other Agency Functions: Under this bank act as a representative of its clients for other
institutions. It acts as an executor, trustee, administrators, advisers, etc. of the client.

2.Utility Functions of Bank

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 • Issuing letters of credit, traveller’s cheque, etc.

• Undertaking safe custody of valuables, important documents, and securities by providing

safe deposit vaults or lockers.

• Providing customers with facilities of foreign exchange dealings

• Underwriting of shares and debentures

• Dealing in foreign exchanges

• Social Welfare programmes

• Project reports

• Standing guarantee on behalf of its customers, etc.

2.1 BUSINESS PROCESS OF BANKING INDUSTRY

Machine learning, artificial intelligence and robotic processes automation (RPA) are some of the
significant automation technologies that are leading the smooth digital transformation within the
finance and banking sector. Biometrics and Blockchain are some other technologies that are
turned out to be transformative within the banking industry. Some of the major breakthroughs
that are introduced to the industry are because of these automated processes. Below we have
discussed few that we found most important.

1. KYC (Know-Your-Customer)
In the banking and financial sectors, the information related to the customers is of utmost
importance. Financial and banking services require customer data not only for account opening
but also for other banking processes. This information is required to be passed through the
internal banking process, to ensure its regulatory compliance with other regulatory agencies.
And, to ensure that, multiple checks such as ID Verification, Background Checks, Reference
Checks etc. are imposed. Applying the entire process step-by-step every time for every single
customer, whenever they open an account or request a loan, become a very heft task for banks.
This is where the efficient automated processing comes into play within the banking sector.
Modern banks are now using automated systems to create a centralized information network

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which allow quick and easy access and push and pull of the information. These systems are using
machine learning to extract information from disparate data sources.

2. Risk Analysis & Compliance

Audits are inevitable in banking operations, and this is why financial institutions and banks are
significantly investing in process automation technologies, in order to automate and improve
their operation that are potential to risk and compliance issues. These automation technologies
not only improve the overall performance and efficiency, but also reflect amazing adaptability in
relation to other IT platforms. This helps banks to better check the frauds, report risk, and check
quality etc.

3. Core Banking & Finance Operations

There are numerous automation technologies available now that are being efficiently used in
blend with BPA to modify and improve the back-office banking and financial operations such as
ID verifications, data updates, accounts reconciliation, documentation and much more.

4. Mortgage Loan & Credit Processing

Mortgage loan systems have been amplified by the technological transformations, but especially
by the process automation. The loan approval process used to take more than 60 days before the
process was automated. But now, as soon as the ID checks and employment status are checked
and verified, you get your loan approval. BPA has made the process a lot easier and simpler. The
entire loan approval procedure has been accelerated by BPA with reduced processing time and
quicker response.

5. Customer Request & Support Services

Customer service is amongst the top most priorities for banks. With scorching competition
within the banking industry, banks are continuously striving hard to provide exceptional
customer service to their customers. BPA has enabled banks to provide remarkable service and
customer experience. For example, with automated processes, banks are now capable of

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responding thousands of queries everyday while offering the best possible solutions at the
earliest.

6. Fraud Detection
Terrorist activities and fraud concerns have been significantly increased along with the
digitization. However, RPA (Robotic Process Automation) is amongst one of the process
automation technology which offer great fraud prevention by using predictive analysis and steps
any data breach.

2.2 DEMAND AND SUPPLY FOR BANKING SERVICES

Commercial banks may be described as institutions that engage in the following services.;

• processing of payments through e-money transfers,

• issuing of bank drafts and bank charges,
• accepting money on term deposits and lending by overdrafts,
• installments, provision of documents such as standby letter of credit, guarantees,
• performance bonds, securities underwriting,
• commitments and other forms of sheet exposures, safe keeping of
• documents and other documents in safety deposit boxes,
• sales, distribution of brokerage with or without advice, cash management and treasury,
merchant banking and private equity financing, etc.

In general, there are three broad categories of financial services/ banking services i.e. loans
(credit services), savings services such as deposit accounts and insurance services that retail
banking consumers may demand which are demanded for various reasons such as financial
smoothing ( Ellison et al., 2011) or for portfolio services such as the income life cycle hypothesis
explains (Ando A, 1963). Unsecured loans are monetary type loans that are not secured against
the borrowers assets. Such type of credits/ loans are most typically credit card debt, credit lines
and corporate credit lines, overdrafts among others which may be available under many different
guises and credit packages (Schindler, 2007). As previously discussed, different income groups
demand different financial services from commercial banks. For lower income group where cash

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flow management and consumption smoothing/ financial smoothing is a concern, it is typical that
their major utility in using commercial banking services would be for the sake of credit/ loan
facilities. For higher income groups interested in capital gains and equity banks offer a variety of
agency services such as advisory services to cater to that niche, thus the demand for banking
services may be perceived as a multivariate type of demand.

SUPPLY FOR BANKING SERVICES

GST is a consumption based destination tax. A tax payer has to be registered in all the states in
which he is supplying/selling. Now, most banks have a pan-India presence which means they are
required to register in ALL states. In addition to this, banks provide services to their own
branches and also to other banks. Transactions between branches are taxable under GST. Owing
to the nature and volume of other services (apart from normal banking services) provided by
banks and NBFCs such as lease transactions, hire purchase, actionable claims, fund and non-fund
based services etc., GST compliance will be complex. This article deals with the place of supply
of banking and financial services from the point of the customers and what they will be charged.
Please read our article on Impact of GST on Banks and NBFCs to know the bank’s perspective.

CONTRIBUTION TO GDP

The banking sector plays a significant role in lending financial support to the various
components of our economy – individuals and organisations alike. Without the banking
structure, the financial growth experienced by the Indian economy could have been
inconceivable.

Banks contribute to economic growth in more ways than one. They are significant credit
generators for the economy and work in interesting ways. People deposit their savings in banks,
which are then channelised to entities/individuals in need of funds in the form of different types
of loans. Further, people use the loan amount to make investments, which in turn generates more
income for the economy.

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Apart from income produced through credit-creation techniques, banks also generate revenue for
the economy in other ways. One example could be the income earned for lending services to the
people of the country. The income earned by bank employees in this case in the form of wages
and the like also contributes to the larger GDP pool. Besides, any expenditure incurred by banks
in the name of various bills, rent, stationery, internet cost, etc., also invariably contributes to the
country’s GDP.

• Contribution of the banking sector to GDP is about 7.7% of GDP

• Banking sector intermediation as measured by total loan as a % of GDP is 30%.
• Banking sector has generated employment to the tune of 1.5 million

Banking is the credit creating sector. Contributions of banks to the GDP of a country can be
looked in the following ways,

• Credit creation - In the simple model, income is either consumed or saved. Banks
channelize these savings where funds are needed, in the form of loans. These loans are
further used for investment purposes, generating more income.

• The income that they earn through their services. Banks nowadays perform various
operations, out of which it generates income for its functioning and survival (profits).

• Factor payments - banks while operating needs various factors to operate, and in return
payments are made. Profits were discussed in the earlier point, other factor payment
includes wages and salary paid to the employees, rent for the land on which they
operate, or the implicit rent if they own that land.

• Expenditure - while providing the various services banks incur expenditure which is
again contributing to the gdp of the country. Expenditure includes - water bills,
electricity bills, stationery, internet, telephone bills etc

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REVENUE GENERATION

The main operations and source of revenue for banks are their loan and deposit operations.
Customers deposit money at the bank for which they receive a relatively small amount of
interest. The bank then lends funds out at a much higher rate, profiting from the difference in
interest rates.

1. Profits from debt interest

When you deposit your money in a bank account, the bank uses that money to make loans to
other people and businesses to whom they charge interest. The bank pays you a certain amount
of interest in exchange for keeping your deposit. However, they collect more interest on the
loans they issue to others than the amount of interest they pay to account holders like you. This,
in turn, earns them a profit.

2. Banking fees
Another way banks make money is through regular or case-by-case fees. These might include:

• Account “maintenance” fees which are generally charged to your account monthly just
for being open. These are often avoidable and should be taken into consideration when
choosing a bank or a particular account.
• Inactivity fees for not using your account often enough. Be sure to look into this before
opening an account you plan to seldom use.
• Overdraft or insufficient fund charges when you spend more than you have in your
account. You can avoid these by staying on top of your budget.
• Excessive withdrawal fees from savings accounts, which have monthly caps mandated
by the federal government.
• Wire transfer fees if you want to send money to another bank or entity quickly. These
transfers typically happen on the same day. It is not the same as ACH transfers which can
take a few days etc.
• Charges for paper statements if you opt not to receive online statements. Going
paperless is more environmentally friendly, easier to track, and efficient anyway, so
definitely consider this option.

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 • Debit card replacement fees for lost or stolen debit cards.
• ATM fees if you use certain ATMs outside of your bank's network.
• Bad check penalties if you deposit someone else’s bad check, even if you do so
unknowingly.
• Minimum balance charges if your account balance falls below the minimum required
balance.

3. Interchange fees
While swiping your debit or credit card is generally free to you, a transaction or processing fee
called interchange is typically generated. This fee is charged by your bank to the merchant's bank
(merchant being the store where you made the purchase) as a percentage of your transaction. The
merchant's bank then deducts this fee and their own processing fee, from the cost of your
purchase.

2.3 LEVEL AND TYPE OF COMPETITION

Competition in the financial sector matters for a number of reasons. As in other industries, the
degree of competition in the financial sector can affect the efficiency of the production of
financial services. Also, again as in other industries, it can affect the quality of financial
products and the degree of innovation in the sector. Specific to the financial sector is the link
between competition and stability that has long been recognized in theoretical and empirical
research and, most importantly, in the actual conduct of prudential policy towards banks.
Importantly, it has also been shown, theoretically as well as empirically, that the degree of
competition in the financial sector can effect the access of firms and households to financial
services and external financing. The direction of the latter relationship is, however, unclear.
Less competitive systems may lead to more access to external financing since banks are more
inclined to invest in information acquisition and relationships with borrowers. When banking
systems are less competitive, however, hold-up problems may lead borrowers to be less willing
to enter such relationships. Furthermore, less competitive banking systems can be more costly
and exhibit a lower quality of services thus providing less financing and encouraging less

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growth. These effects may further vary by the degree of a country’s financial sector
development.

The global financial crisis reignited the interest of policy makers and academics in bank
competition and the role of the state in competition policies (that is, policies and laws that affect
the extent to which banks compete). Some believe that increases in competition and financial
innovation in markets such as subprime lending contributed to the financial turmoil. Others
worry that the crisis and government support of the largest banks increased banking
concentration, reducing competition and access to finance, and potentially contributing to future
instability as a result of moral hazard problems associated with too-big-to-fail institutions.

As in other industries, competition in the banking system is desirable for efficiency and
maximization of social welfare. However, due to its roles and functions, there are some
properties that distinguish it from other industries. It is important to not only make sure that
banking sector is competitive and efficient, but also stable.

Competitors in banking industry

• HDFC
• ICICI
• SBI
• Bank of Baroda
• Indusind bank
• Bandhan bank
• Federal bank
• IDBI Bank
• RBL
• Punjab national bank
• Canara bank
• Central bank of india
• Kotak Mahindra bank

28
 • Indian bank
• Union bank of india
• Indian overseas bank
• South Indian bank ltd

2.4 PRICING STRATEGIES IN BANKING INDUSTRY

demand for financial services is price sensitive, a lower price leads to a significant increase in
demand. However, where demand is greater than supply, as in most microfinance markets, price
is not the limiting factor. Neither for many microfinance institutions subject to achieving a stated
level of return, is profit maximisation a key driver

there are two things about pricing in the financial service sector, Firstly, the majority of
microfinance markets are immature and so institutions do not need to adopt aggressive pricing
strategies. Secondly, in many markets setting artificially high prices is often difficult for
microfinance programmes to justify to their customers or to external stakeholders. Thirdly, other
non-economic factors, such as mission to serve the poorest have led to heavy subsidies in some
donor-supported programmes. A thorough approach to pricing is given later, but two strategies
are worth considering now, penetration pricing and loss leaders.

• Penetration Pricing:
Transformed microfinance institutions that can accept deposits, or non-bank financial
institutions frequently offer higher interest rates on savings to attract deposits to finance
their loan portfolios. As illustrated by PRIDE Uganda, a transformed microfinance
institution and Stanhope a Non-Bank Financial Institution in Uganda, which offers
interest rates a few percentage points higher than those of larger banks.

• Loss Leaders:
Loss leaders are products deliberately priced at a loss making level. Such products
typically include children’s accounts, church accounts and lotteries. For example,
Cooperative Bank in Kenya offers a children’s deposit account call Jumbo Junior, on

29
 which it is prepared to loose small amounts of money in order to generate lifetime loyalty
from future customers. Often larger institutions have offer a children’s account because it
is popular with parents or is seen as a must have account. Costing exercises show that
children’s accounts consistently loose money but that losses are modest.

Pricing a financial service is both an art and a science. The “art” of pricing is in choosing a
combination of fees and charges acceptable to customers, that are fair and transparent, and in
determining if the product has any unique attributes that deserve premium pricing. The “art” of
pricing is in careful and considered communication to and feedback from customers and staff to
ensure that pricing messages are appropriately and correctly delivered. The “science” of pricing
is in ensuring that the product is profitable and is competitive in the market, that aside from very
few specific and chosen loss leaders, that each products returns a profit.

In concept product pricing is simple, firstly, establish cost, secondly examine the fees charged
by the competition and finally determine whether the product or service has sufficient customer
value to deserve a premium price. In practice, pricing is complex, customers and institutions
alike find it difficult to track prices regularly and to understand the nuances of pricing
calculations. There is a role for regulators in promoting transparency, but a less clear role in
setting interest rate ceilings as these can act to restrict the supply of credit. Finally, where
possible, pricing should reflect levels of risk and not be an avenue for excessive returns or to
cover for inefficiencies in delivery of services.

2.5 PROSPECTS AND CHALLENGES OF BANKING

INDUSTRY

FUTURE PROSPECTS
A. Potential of Internet Banking

Personal computer sales in India are presently growing at a rate of 57% annually and
developments in information technology including internet access are also persistent. 35% of

30
households are expected to own a PC by 2016 and this growth will proliferate if Indian internet
infrastructure keeps on following the prototype of global trends. Introduction of internet banking
system in India will result into a thriving number of online bankers. In India, there is a colossal
potential for progress and expansion of a world-scale internet economy. The elements that may
impact enhancement of internet banking in India are discussed in the ensuing section.

• Perceived Security
Perceived security is the most critical element influencing decisions of Indian customers
to adopt internet banking. Indian customers give substantially more significance to
security than to convenience or time saving. Bauer and Hein (2006) affirm that apparent
danger is the most essential element that makes customers hesitant to embrace internet
banking. In addition, older customers are less inclined towards internet banking whereas
younger customers have a tendency to be early adopters on grounds that they are willing
to endure high risk. Berger and Gensler (2007) concur with and bolster Bauer’s and
Hein’s (2006) findings that internet banking customers have propensity to be young,
doing white collar jobs, earning a high personal income, making a great
telecommunication usage and possessing a willingness to accept some risks. Mattila and
Mattila (2005) recommend that banks offering internet banking should first persuade
their customers that internet is a secure medium. Altintas and Gursakal (2007) asseverate
that trust and security are imperative elements supporting a positive perspective on
internet banking service quality.

• Web Experience Component

According to Khamenei (2002) World Wide Web can change human conduct and
interactions to a great degree. Internet furnishes new systems for correspondence with
organizations and customers. For instance, internet makes available to consumers access
to new rich data sources and possibility to improve well thoughtout choices. Research
shows that internet banking experience incorporates online consumer behavior and online
service adoption factors. Internet banking experience is a vital element that influences
consumers’ intentions to use internet banking and consumers’ state of mind towards
using online banking system (Lichtenstein and Williamson, 2006.) If consumers have
internet experience, they are most destined to adopt online banking services. Karjuoto et
31
 al. (2002) reasoned that prior computer experience, technology experience and personal
banking experience decidedly influence consumers’ thought process and demeanor
towards online banking.

• Web Esteem
It incorporates among different elements status and high standing among peers and
selfrespect. Most Chinese banks have not forcefully promoted internet banking to their
bank customers on the grounds that their customers could not afford a personal computer
(PC) and this forbid ad option of internet banking. Young (2006) demonstrates that
affluent and highly educated groups generally accept changes more promptly.
Consequently, highly educated consumers may be more inclined to adopt internet
banking services than less educated consumers. In addition, using internet banking gives
these consumers prestige among their companions. Online banking is additionally part of
social scene of our innovation driven society today. Price Waterhouse Coopers avers that
a typical internet banking customer is aged between 25 and 35 years, has medium to high
income and likes to make his/her own financial decisions. Al-Somali, Gholami and Clegg
(2008) found that trust and education have an effect on customers’ attitudes towards
using internet banking

B. Internet Banking Risks

Despite the fact that internet banking has much potential, nature of information shared over
internet may spawn potentially dangerous risks. Internet banking does not open up new risk 12
categories, yet rather accentuates the risks that any financial institution faces. Board and senior
management must be cognizant of these risks and manage them appropriately. These risks that
frequently overlap are briefly described below:

• Strategic Risk
This is a current or imminent risk that influences earnings and capital emerging from
unfavorable business decisions or improper execution of business decisions. Numerous
senior managers do not completely comprehend strategic and technical aspects of internet
banking. Spurred by competitive and peer pressures, banks may seek to introduce or
expand internet banking without an adequate costbenefit analysis when management

32
 doesn’t plan for, manage and monitor performance of technology. Insufficient planning
of internet banking can aggravate this risk

• Operational-Transactional Risk
This is another present or forthcoming risk that affects earnings and capital arising from
extortion, mistake, negligence and inability to keep up expected service levels. An
abnormal state of transaction risk may exist with internet banking products as a result of
need to have sophisticated internal controls and consistent accessibility. Most internet
banking platforms are based on new forums that use complex interfaces to connect with
legacy systems, accordingly, the expanding risk of transaction errors. There is also need
to ensure data integrity and irrevocability of transactions. Third-party providers also
increase transaction risks since organizations do not have full control over a third party

• Compliance Risk
This is another risk that has an impact on earnings and capital arising from infringement
of or nonconformity with laws, regulations and ethical norms. It may lead to diminished
reputation, actual monetary losses and reduced business opportunities. Banks need to
painstakingly comprehend and decipher existing laws as they apply to internet banking
and ensure consistency with different channels, such as, branch banking. This risk is
amplified when transactions are made internationally. Conflicting laws, tax procedures
and reporting requirements across different jurisdictions additionally add to this risk

• Reputation Risk
This is the current and prospective risk to earnings and capital arising from negative
popular supposition. A bank's reputation can be harmed by Internet banking services that
are wretched

• Information Security Risk

This is the risk to earnings and capital arising out of lax information security processes.
Accordingly, they may expose organizations to pernicious hackers or insider assaults,
viruses, denial-of-service assaults, information robbery, information devastation and

33
 fraud. Speed of change of technology and the fact that internet is accessible all around the
world makes this risk especially critical.

• Credit Risk
This is the risk to earnings and capital from customers’ failures to meet their financial
obligations. Internet banking enables customers to apply for credit from anywhere in
world. Banks will find it amazingly hard to confirm identities of customers if they intend
to offer instant credit through internet. Verifying collateral and perfecting security
agreements may bring about challenges. Finally, there could be questions about
jurisdiction of which country (or state) applying to transactions.

• Interest Rate Risk

This is the risk to earnings and capital arising from movements in interest rates (e.g.
interest rate differentials between assets and liabilities and how these are affected by
interest rate changes.) Internet banking can attract loans and deposits from a large pool of
customers. Additionally, given that it is easy to cross-compare interest rates across banks,
pressure on these rates is higher accentuating the need to respond quickly to changing
interest rates in market.

• Liquidity Risk
This is the risk to earnings and capital arising from failures of banks to meet their
commitments. Internet banking can increase deposit and asset volatility particularly from
customers who maintain accounts exclusively in light of the fact that they getting an
improved rate. These customers have a tendency to haul out of the relationship in the
event of fetching better rate somewhere else.

• Price Risk
This is the risk to earnings and capital arising from changes in estimation of traded
portfolios or financial instruments. Banks may be exposed to price risk if they expand
deposit brokering, loan sales or securitization programs as result of internet banking
activities

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C. Challenges to Internet Banking

Internet banking in India is in its earliest stage of development. Most banks offer basic services
.In addition, deregulation of electronic banking industry coupled with emergence of new banking
technology is enabling new competitors to enter financial services market quickly and
proficiently. However, it needs to be recognized that improvements in perception norms and
functioning of internet banking are required.

• Customer Acceptance
Proper understanding of customers is an essential part of internet banking. It has been
realized that computer proficiency in India is still low and is also a hindrance in fast
acceptance of internet. Mindset of Indian customers should be changed by spreading
awareness about technical terms used in internet banking. Further, there exists a fast
changing technical scenario and obsolesce of former technologies is also a rapidly
occurring phenomenon. Subsequently, adaptation to the same becomes difficult. There is
lack of talented personnel and apprehension of technology too. Cost of Technology Start-
up cost of internet banking is immense at introductory level for acquiring PCs and other
equipment’s. Online banking is still not within reach of middle classes and upper middle
classes. Cost of maintenance of all equipment’s like modems, routers, bridges and
network management systems is high. Costs of sophisticated hardware’s and software’s
and skilled employees turn out to be considerable.

• Security
In paper less transactions, numerous security issues are included. A secrecy threat can
cause financial hardship to data, destruction of network resources disclosure, alteration or
misrepresentation of data, foreswearing in services or twisting of information. Providing
appropriate security by using encryption techniques, implementation of firewalls, virus
protection software’s etc. is wanting.

• Legal Issues
In banking world today, legal framework for recognizing legitimacy of banking
transactions is a desirable attribute. Information technology gives security and requisite

35
 legal framework for 15 e-commerce transactions. The Information Technology Act or the
RBI recommended paradigm of Digital Signature Certification Board for authentication
of electronic records and communication with digital signatures.

• Restricted Business
Not all transactions can be conveyed electronically. Many deposits and some withdrawals
oblige use of physical services. A few banks have robotized to their customers at front
end yet generally rely on manual procedure at back end. Most clientele or customers,
resultantly, stay restricted by lack of know how about technical problems.

• Transparency
Banks should endeavour to adopt best practices in corporate governance and Corporate
Social Responsibility (CSR) to enhance their image and improve confidence of
international investors in them. Banks should strive to move towards better corporate
governance standards and adopt uniform accounting standards and disclosure necessities.

• Adoption of Proper Organizational Structure

Banks should venture to adopt flatter organizational structure for judicious blending of
requirements for greater delegation of power, decentralization, customer centric business
models, quick reaction to customer needs, continuous learning from customers, and
provision of customer access and their wish to transact and interact, especially, young IT-
savvy populace

CHALLENGES TO BANKING INDUSTRY

1. Increasing Competition

The threat posed by FinTechs, which typically target some of the most profitable areas in
financial services, is significant. Goldman Sachs predicted that these startups would account for
upwards of $4.7 trillion in annual revenue being diverted from traditional financial services
companies These new industry entrants are forcing many financial institutions to seek

36
partnerships and/or acquisition opportunities as a stop-gap measure; in fact, Goldman Sachs,
themselves, recently made headlines for heavily investing in FinTech. In order to maintain a
competitive edge, traditional banks and credit unions must learn from FinTechs, which owe their
success to providing a simplified and intuitive customer experience.

2. A Cultural Shift

From artificial intelligence (AI)-enabled wearables that monitor the wearer’s health to smart
thermostats that enable you to adjust heating settings from internet-connected devices,
technology has become ingrained in our culture — and this extends to the banking industry. In
the digital world, there’s no room for manual processes and systems. Banks and credit unions
need to think of technology-based resolutions to banking industry challenges. Therefore, it’s
important that financial institutions promote a culture of innovation, in which technology is
leveraged to optimize existing processes and procedures for maximum efficiency. This cultural
shift toward a technology-first attitude is reflective of the larger industry-wide acceptance of
digital transformation.

3. Regulatory Compliance

Regulatory compliance has become one of the most significant banking industry challenges as a
direct result of the dramatic increase in regulatory fees relative to earnings and credit losses since
the 2008 financial crisis. From Basel’s risk-weighted capital requirements to the Dodd-Frank
Act, and from the Financial Account Standards Board’s Current Expected Credit Loss (CECL) to
the Allowance for Loan and Lease Losses (ALLL), there are a growing number of regulations
that banks and credit unions must comply with; compliance can significantly strain resources and
is often dependent on the ability to correlate data from disparate sources

37
2.6 KEY DRIVERS OF BANKING INDUSTRY

1. Customer Behaviour

The new ways consumers get information and go about their lives is profoundly different from
the customer behaviour norms of yore. Increasingly, customers are looking for digital
interactions that are simple yet aesthetically appealing, highly personalized and context aware so
that the need of the moment is served quickly without cumbersome intervention from the service
provider. Customer Experience (CX) is now the decisive competitive differentiator between
banks, more so than just the breadth and depth of their products and services portfolio.

2. Digital Innovation

Advances in digital technology are offering a myriad of channels for customer interaction.
Channels like online and mobile banking have already changed how customers engage with the
bank. Customer interaction through digital channels is also generating valuable behavioural and
transactional data. Analytics on this newly available data enables even more meaningful ways to
engage customers. Ever since the transaction mix started favouring digital channels, most
industry analysts and technology service providers have been calling out the underlying
technology imperative. However, what is often overlooked is the operational transformation and
process optimization required to profitably support the morphing operating model.

Furthermore, as the operating model transitions to support this bias towards digital interactions,
back office systems such as Core Banking and CRM will also need to be modernized to provide
requisite functional capabilities.

4. Regulatory Compliance

Increasing regulatory pressure is one of the legacies of the recent financial crisis. The cost of
compliance as well as non-compliance continues to be on the rise. In many scenarios,
streamlined customer interaction and low-touch transaction processing made possible by the 9
ubiquity of digital channels will help mitigate various risks associated with regulatory
compliance. Moreover, a number of compliance initiatives can generate information and context
that can be channelled towards revenue creation.

38
5.. Macroeconomic Environment

The interest rate trends and after-effects of the financial crisis have created a tough operating
environment for banks. At the time of this writing, the return on equity and return on assets for
banks in the US is close to the lowest it has been over the past 12 quarters. Return on equity
remains below the cost of equity. Now, more than ever, banks are looking to eke out incremental
profitability from product and service innovation deployed via digital channels. However, such
profitability can only be achieved via efficiencies derived from requisite operational changes and
process optimization

39
CHAPTER 3

40
REVIEW OF LITERATURE

3.1 THEORETICAL FRAMEWORK

Financial statements of a company helps an third party which can be anyone like government,
competitors, students to understand and evaluate the financial stability of the organisation.
Financial statement analysis is the process of analyzing a company's financial statements for
decision-making purposes. External stakeholders use it to understand the overall health of an
organization as well as to evaluate financial performance and business value.Financial statement
basically involves trading and Profit and Loss account, Balance sheet and Ratios. Thus
evaluating this basic things itself will help the outsider to understand about the firm, Its financial
strength and financial stability

The major uses of financial statements are

• To identify cash flows

• Helps the investors
• Helps to allocate resources
• Helps to make government decisions
• Financial records of company’s strength

3.2 OVERVIEW OF EARLIER STUDIES

• PHILIPPE GERGOOIRE (2001) - conducted a study on “Predictive Power of

Technical Analysis: The moving average rules on European” According to him simple
forms of technical analysis possessed significant forecast power on various market
indexes. He shows that these results can be replicated on formally selected European
indexes, which almost completely eliminates any influences from data – snooping.
Implications of these results in terms of market efficiency are also discussed.

41
• DG PRAVEEN AND NIHAR RANAJN PANDA (2002)- had conducted a study on
“Beat the market with hammer“, Japanese candlestick analysis is one of most popular and
oldest forms of technical analysis. Candlestick charting studies the records of the market
movements in the past to identify the future patterns. It identifies exuberant buying and
panic selling, enabling the trader to pocket a great deal of profits from the stock market.
Compared to traditional bar charts, many traders consider candlestick charts more
visually appearing and easier to interpret. Each candle stick provides an easy to decipher
picture of price action. Immediately a trader can see and compare the relationship
between the open and close as well as the high and low

• STEPHEN SAULT (2006) - had conducted a study on fundamental and technical

analysis literatures invest considerable effort in assessing their respective ability to
explain share prices, they invariably do so without reference to each other. In this 29
context, we propose an equity valuation model integrating both fundamental and
technical analysis and, in doing so, recognize their potential as complements rather than
as substitutes. Testing confirms the complementary nature of fundamental and technical
analysis by showing that, while each performs well in isolation, models integrating both
have superior explanatory power. While our findings relate to the valuation of shares,
they also have implications for other valuation exercises.

• CHEOL-HO PARK AND SCOTT H. IRWIN (2004)- the purpose of this report is to
review the evidence on the profitability of technical analysis. To achieve this purpose, the
report comprehensively reviews survey, theoretical and empirical studies regarding
technical trading strategies. We begin by over viewing survey studies that have directly
investigated market participants’ experience and view some technical analysis. Foreign
exchange markets, and that about 30% to 40% of practitioners appear to believe that
technical analysis is an important factor in determining price movement at shorter time
horizons up to 6 months.

42
 • NISHANT GHUGE (2020)- Banking Sector in India has achieved new heights in the
last few decades. The entire banking business has increased many folds because of the
digitalization and growing emphasis on the financial inclusion and cashless economy.
The banking sector thus remains as an attractive sector for the Investors. The Banking
sector still has immense growth potential in India. The Macroeconomic fundamentals of
India are very strong. India is one of the fastest growing economies in the world..
However the Indian Banking Industry is also going through some of the challenges like
deteriorating asset quality because of the increased levels of Nonperforming assets. In
this Paper, the Researcher has made fundamental analysis of the selected public sector
and private sector banks using certain financial Indicators. The researcher has selected 5
banks from public sector and private sector each for analysis. For the present Study top 5
Banks based on their market capitalisation are selected from both the Public Sector and
Private Sector Banks List. The study shows that the profitability position of the public
sector banks is extremely low as compared to the private sector banks. All the public
sector banks are suffering from NPA crisis and has huge NPA percentage. According to
valuation ratio the private sector banks are slightly overvalued but they justify the
overvalued price considering their superior profitability position, lower non-performing
assets and growth potential.

3.3 UNIQUENESS OF THE STUDY

This study helps to evaluate all the factors like Net profit margin, Current ratio, Debt equity
ratio, Operating profit ratio, RoE, RoA, Debt equity ratio and the liquidity ratio which will help
the investors to understand the ability of the firm. Thus the investment process will be easier
also. As the earlier table shows firm as a good share value which will help the current investor to
stay and invite new investors .Thus as a private bank this bank as a unique way of attracting the
investors that is the reason why this bank as a good share value

43
CHAPTER 4

44
METEDOLOGY OF THE STUDY

4.1 RESEARCH APPROACH AND DESIGN

The annual financial analysis of YES bank from the data that collected from the online sources.
For the analysis we have to collect the financial statements of the bank in the five consecutive
years (2016-2020). The fundamental analysis done for the purpose of the investment. This is in
the view of an investor who is interested to invest in the YES bank, he/she need to analyse the
company. So we can analyse the company from the available previous year data like financial
statements, ratios, return from their paid out as return. Only by studying these result he/she can
make the apt decision on investment and portfolio management.

The analysis has been done through the analysis of the financial statements of previous years.
We can collect the data from the online sources balance sheet, profit and loss account, trading
account and some ratios. With that we can go for a graphical analysis that can understand the
situation easily. In this analysis we were taken different tools which are the most important ones
having vital role in the investment decision

Tools used

1. Net profit

2. Ratio Analysis

• Solvency ratios
• Profitability ratios
• Liquidity ratio

3.Trend analysis

4. SWOT analysis

45
4.2 SOURCE OF DATA

The study based on secondary data collected from NSE. The data on monthly and yearly market
prices of leading sector listed in NSE have been collected. In addition the other sources are also
used for data collecting like newspaper and internet (www.nseindia.com,
www.economictimes.indiatimes.com, www.capitalmarket.com and www.moneycontrol.com).
Published data will be available in Newspapers, Websites, Journals, books, Reports by
management, scholars, researchers, brokers etc.., The reason behind choosing the monthly prices
is that short term fluctuations in the market prices of the stocks due to internal and external
factors can be catch hold off. Through it is possible to make much an analysis using daily prices;
collection of data for long period of time is not possible. Hence the monthly prices are
considered

4.3 DATA COLLECTION METHOD

The sample of the stock for the purpose of collecting secondary data has been selected on the
basis of judgemental Sampling. The private sector banks holds a vital role in Indian economy.
So the banking sector is a growing area. The yes bank is one of the newest private sector bank in
India and showing growth also 33 The data collected only from the online sources.

4.4 DATA ANALYSIS TOOLS

As mentioned above the tools used for the analysis are net profit, eps, capital yield, etc..

1.Net Profit

The net profit of a company, organization or any individual or entity that does business, is its
profit after operating expenses and all other charges including depreciation, interest, and taxes
have been deducted from total revenue.

46
2.Ratio analysis

Financial ratio analysis is the process of calculating financial ratios, which are mathematical
indicators calculated by comparing key financial information appearing in financial statements of
a business, and analyzing those to find out reasons behind the business’s current financial
position and its recent financial performance, and develop expectation about its future outlook.
Financial ratio analysis is very useful tool because it simplifies the process of financial
comparison of two or more businesses. Direct comparison of financial statements is not efficient
due to difference in the size of relevant businesses. Financial ratio analysis makes the financial
statements comparable both among different businesses and across different periods of a single
business.

There are different financial ratios to analyze different aspects of a business’ financial position,
performance and cash flows. Financial ratios calculated and analyzed in a particular situation
depend on the user of the financial statements

2.1 Solvency Ratios

A solvency ratio is a key metric used to measure an enterprise's ability to meet its long-term debt
obligations and is used often by prospective business lenders. A solvency ratio indicates whether
a company's cash flow is sufficient to meet its long-term liabilities and thus is a measure of its
financial health. This includes;

➢ Debt Equity Ratio

The debt-to-equity (D/E) ratio is calculated by dividing a company’s total liabilities by its
shareholder equity. These numbers are available on the balance sheet of a company’s financial
statements. The ratio is used to evaluate a company's financial leverage. The D/E ratio is an
important metric used in corporate finance. It is a measure of the degree to which a company is
financing its operations through debt versus wholly-owned funds. More specifically, it reflects

47
the ability of shareholder equity to cover all outstanding debts in the event of a business
downturn.

The optimal debt-to-equity ratio will tend to vary widely by industry, but the general consensus
is that it should not be above a level of 2.0. While some very large companies in fixed asset-
heavy industries (such as mining or manufacturing) may have ratios higher than 2, these are the
exception rather than the rule.

➢ Debt-Asset Ratio

The debt to asset ratio is a leverage ratio that measures the amount of total assets that are
financed by creditors instead of investors. In other words, it shows what percentage of assets is
funded by borrowing compared with the percentage of resources that are funded by the investors.
Basically it illustrates how a company has grown and acquired its assets over time. Companies
can generate investor interest to obtain capital, produce profits to acquire its own assets, or take
on debt. Obviously, the first two are preferable in most cases.

This is an important measurement because it shows how leveraged the company by looking at
how much of company’s resources are owned by the shareholders in the form of equity and
creditors in the form of debt. Both investors and creditors use this figure to make decisions about
the company. Investors want to make sure the company is solvent, has enough cash to meet its
current obligations, and successful enough to pay a return on their investment. Creditors, on the
other hand, want to see how much debt the company already has because they are concerned
with collateral and the ability to be repaid. If the company has already leveraged all of its assets

48
and can barely meet its monthly payments as it is, the lender probably won’t extend any
additional credit.

Debt-Asset Ratio = Total Debt

Total Asset

2.2 Profitability Ratios

Profitability ratio is used to evaluate the company's ability to generate income as compared to its
expenses and other cost associated with the generation of income during a particular period.
This ratio represents the final result of the company.

➢ ROA (Return on Asset)

Return on Assets (ROA) is a type of return on investment (ROI) metric that measures the
profitability of a business in relation to its total assets. This ratio indicates how well a company is
performing by comparing the profit (net income) it’s generating to the capital it’s invested in
assets. The higher the return, the more productive and efficient management is in utilizing
economic resources. Below you will find a breakdown of the ROA formula and calculation.

ROA = Net Income

Avg. Asset

➢ ROE (Return on Equity)

The return on equity is a measure of the profitability of a business in relation to the equity.
Because shareholder's equity can be calculated by taking all assets and subtracting all liabilities,
ROE can also be thought of as a return on assets minus liabilities.

ROE = Net Income ,

Avg. Shareholders’ Equity

49
2.3 Liquidity Ratios

Liquidity ratios are an important class of financial metrics used to determine a debtor's ability to
pay off current debt obligations without raising external capital. Liquidity ratios measure a
company's ability to pay debt obligations and its margin of safety through the calculation of
metrics including the current ratio, quick ratio, and operating cash flow ratio. Current liabilities
are analysed in relation to liquid assets to evaluate the coverage of short-term debts in an
emergency. Liquidity is the ability to convert assets into cash quickly and cheaply. Liquidity
ratios are most useful when they are used in comparative form. This analysis may be internal or
external.

➢ Current ratio

Current ratio is a liquidity ratio which measures a company's ability to pay its current liabilities
with cash generated from its current assets.In a sound business a current ratio of 2:1 is
considered an ideal one. High ratio indicates sound solvency and low ratio indicates inadequate
working capital. It is calculated by dividing current assets by current liabilities.

Current Ratio = Current Asset/Current Liabilities

Current assets are assets that are expected to be converted to cash within normal operating cycle,
or one year. Examples of current assets include cash and cash equivalents, marketable securities,
debtors , bills receivable, inventories and prepaid expenses.

➢ Quick ratio

The quick ratio or acid test ratio is a liquidity ratio that measures the ability of a company to pay
its current liabilities when they come due with only quick assets. Quick assets are current assets
that can be converted to cash within 90 days or in the short-term. It is calculated by dividing
quick assets by the current liabilities.

Quick ratio = Quick assets / Current liabilities

Quick assets refer to the more liquid types of current assets which include: cash and cash
equivalents, marketable securities, and short-term receivables. Inventories (stock) and
prepayments are not included.

50
 ➢ Absolute liquidity ratio

It shows the relationship between absolute liquid or super quick current assets and liabilitiesIt is
more conservative compared to the current ratio and quick ratio since only cash and marketable
securities are compared with current liabilities

Absolute liquid ratio = Absolute liquid assets / Current liabilities

The current ratio measures liquidity by comparing all current assets with current liabilities. The
quick ratio is more conservative in that it measures liquidity using quick assets (cash and cash
equivalents, marketable securities, and short-term receivables).Cash ratio is an even more
conservative ratio since it considers cash and marketable securities only.

3.Trend analysis

Trend analysis is, fundamentally, a method for understanding how and why things have changed
– or will change – over time. A non performing asset (NPA) is a loan or advance for which the
principal or interest payment remained overdue for a period of 90 days. The banks are lending
funds as loans and advances to various sectors such as agriculture, industry, personal and
housing and other to meet the productive use of these funds. In recent situations, the banks are
facing the problems of Non-Performing Assets (NPAs) and the banks need to be very cautious in
extending loans to the needy people, the reason being mounting of NPAs. Now -a –days Non-
Performing Assets has been the single largest cause of nuisance of the Indian banking sector.
Non-Performing Assets are those assets on which the interest or principal have not been paid by
the borrower for the specified period in accordance with the directions/guidelines issued by
Reserve Bank of India (RBI) which is the Central Bank of India. So it is very important to
anlalyse the trend in NPA.

4.SWOT Analysis

SWOT analysis is a strategic planning technique used to help a person or organization identify
strengths, weaknesses, opportunities, and threats related to business competition or project
planning

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4.5 STRUCTURE OF THE REPORT
The report is presented in five chapters as given below;

CHAPTER 1
Introduction
1. Background of the study
2. Statement of the Problem
3. Relevance and Scope of the study
4. Objectives of the study

CHAPTER 2
Industry profile
1. Business process of the study
2. market demand supply-contribution to GDP- Revenue generation
3. level and type of competition- firms operating in the industry
4. pricing strategies in the industry
5. prospects and challenges of the industry
6. key drivers of the industry

CHAPTER 3
Review of Literature
1. Theoretical Framework
2. Overview Of Earlier Studies
3. Uniqueness Of The Study

CHAPTER 4
Research Methodology
1. Research Approach And Design
2. Source Of Data

52
 3. Data Collection Method
4. Data Analysis Tools
5. Limitations Of The Study

CHAPTER 5
Data analysis and interpretation

CHAPTER 6
Findings
Conclusion

4.6 LIMITATIONS OF THE STUDY

• This project report data is collected from the secondary ources

• This project anaysisi report may not be applicable in all equity markets
• The accuracy of the study is based on the accuracy of the data presented in the NSE
listings
• Detailed study of the topic was not possible due to limited size of the project . the time
taken for the study is limited.

53
CHAPTER 5

54
5. DATA ANALYSIS AND INTERPRETATION

5.1 NET PROFIT OF THE COMPANY

YEAR NET PROFIT/ LOSS

2015-2016 2539.45

2016-2017 3330.1

2017-2018 4224.56

2018-2019 1720.38

2019-2020 -16,418.03

Table 5.1. net proft

5 Net Profit
. 5000
2
4000
D
e 3000
b
t 2000
-
1000
E
q 0
u 2016 2017 2018 2019 2020
i -1000
t -1648.03
y -2000
Figure 2. Net profit
55
Interpretation
In the sense of net profit of the Yes Bank, it shows a gradual growth in the 3 consecutive
years(2016-2018) then it show an immense decline in the year 2019. It is because of the increase
in the expenditure for the year 2019 . In 2020 the yes bank is faced a net loss due to the covid-19
pandemic. And also earnings get impacted due to drop in net interest income and rise in
provisions.

5.2 Solvency Ratios

➢ Debt equity Ratio

Debt-Equity is calculated by Debt divided by Equity.

YEAR DEBT EQUITY

2015-2016 11.98

2016-2017 9.75

2017-2018 12.12

2018-2019 14.15

2019-2020 11.86

Table 5.2.1 Debt Equity

56
 DEBT EQUITY RATIO

14.15
12.12
11.98
9.75 11.86

2016
2017
2018
2019
2020

Figure 3. Debt Equity

Interpretation
In the sense of Debt-Equity of the Yes Bank, it shows that in 2016 Debt-Equity was 11.98 and in
2017 it is declined to 9.75. after that there will be an increase in the next 2 years. And again
declined in the year 2020. It is because of the increase in the covid pandemic also the share
holders equity is in excess and it does not need to tap its debt to finance its operations and
business.

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➢ Debt-Asset Ratio

YEAR DEBT ASSET RATIO

2015-2016 1.00

2016-2017 1.00

2017-2018 1.00

2018-2019 1.00

2019-2020 1.00

Table 5.2.2. Debt Asset

DEBT ASSET RATIO

2020 2016
20% 20%

2019 2017
20% 2018 20%
20%

Figure 4. Debt Asset Ratio

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Interpretation
From the analysis the debt-asset ratio shown a good levelling. These five analysis year Yes bank
has only one debt-asset ratio value. The ratio is 1, it means the bank owns the same amount of
liabilities as its assets. It indicates the bank is highly leverged and that the bank is extreamely
high risky to invest or lend to.

5.3 Profitability Ratios

➢ Return on Asset (ROA)

YEAR ROA(%)

2015-2016 1.53

2016-2017 1.54

2017-2018 1.35

2018-2019 0.45

2019-2020 -1.26

Table 5.3.1 ROA

59
 ROA (%)
2

1.5

0.5

0
2016 2017 2018 2019 2020
-0.5

-1

-1.5

FIGURE 5. ROA

Interpretation
In ROA ratio the first 2 years the bank has an increase in the ratio. After that it will declined. In
2020 the ROA ratio is negative value because of low profit margin. It means that the bank can’t
use its assets effectively to generate income. This is because that the bank is not able to make
maximum use of its assets for getting more profits.

➢ Return on Equity (ROE)

YEAR ROE(%)

2015-2016 18.41

2016-2017 15.05

2017-2018 16.40

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 2018-2019 6.39

2019-2020 -7.56
Table 5.3.2 ROE

ROE (%)
20

15

10

0
1016 2017 2018 2019 2020

-5

-10

Figure 6. ROE

Interpretation
In the sense of ROE ratio it is maintained like a wave. First year has an increase in the ratio, the
next year it will be declined. After that it will increase then it decrease. In the last year 2020 the
ratio is has declined to negative value. This is because the bank has face a net loss in the year
2020 so hence the bank has no net income, so ROE becomes negative.

61
5.4 Liquidity Ratios

➢ Current ratio
It is calculated by dividing current assets by current liabilities.

YEAR CURRENT RATIO(%)

2015-2016 1.17

2016-2017 1.08

2017-2018 1.35

2018-2019 1.25

2019-2020 1.95

Table 5.4.1 Current ratio

Current Ratio
2.5

1.95
2 0

1.5 1.35 1.25

0
1.17 1.08 0
0
00
1

0.5

0
2016 2017 2018 2019 2020

Figure 7. Liquidity Ratio

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Interpretation
In CURRENT ratio it assumes that there will be an icrease in the first and last year. The second
and 4th year has a decrease in current ratio is because the increase in short term debt and decrease
in current assets. The last year has an increase in current ratio it means that the bank is able to
meets its short term obligations.

➢ Absolute Liquid Ratio

It is calculated using the cash and bank balance divided by current liabilities

YEAR ALR (%)

2015-2016 0.71

2016-2017 0.60

2017-2018 1.03

2018-2019 0.60

2019-2020 0.35
Table 5.4.2 ALR

63
 ALR (%)
2.5

1.5

0.5

0
2016 2017 2018 2019 2020

Figure 8. ALR

Interpretation

In the absolute liquidity ratio in the graph shows that the bank have the highest ALR ratio in
2018, in that year the bank have enough fund in thre form of cash. After 2018 the ALR is
declining it will below 1. It reperesents that the banks day to day cash management in a poor
light.

➢ Quick ratio

It is calculated by quick asset divided by current liability

YEAR QUICK RATIO

2015- 2016 0.98

2016-2017 0.90

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2017-2018 1.09

2018-2019 1.04

2019-2020 1.72
5.4.3 Quick ratio

QUICK RATIO
2.5

1.5

0.5

0
2016 2017 2018 2019 2020

Figure 9. quick ratio

Interpretation

In the graph we can see that there will be an increase in quick ratio. It means that the banks
liquidity and financial health. In the first 2 years the liquidity ratio is low that is because that
bank is struggle with the payment of debt.

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5.5 Trend Analysis

YEAR NET NPA TREND

2015-2016 284.47 100

2016-2017 1072.27 376.9

2017-2018 1312.75 461.4

2018-2019 4484.85 1576.5

2019-2020 8623.78 3031.5

Table 5.5 npa trend

NPA Trend
TREND NET NPA

8623.78

4484.85

3031.5
1312.75
1072.27 1576.5
284.47
376.9 461.4
100 5
2016 2017 2018 2019 2020

Figure 10. NPA trend

66
Interpretation

It can be see that the trend indices of NPA shows that an increasing in every year compared to
the base year 2016. During the year 2017 the trend has been increased to 376.9. every year the
NPA trend is increasing. The last year 2020 the NPA trend has been increased to 3031.5.

5.6 SWOT ANALYSIS

Following are the SWOT analysis of yes bank,

1. STRENGTHS

• Biggest private sector bank

• Expanded business
• Management
• Very good quality technology
• Fund raising
• Human capital is effective
• More proficiency and better accommodation
• Awards and recognition

2.WEAKNESSES

• Security over digital media

• Utilization of digital in rural area
• Heterogeneous client
• Change in laws and regulations

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3.OPPORTUNITIES

• Huge assets in one client

• Worldwide markets
• Extending service to clients
• Business goals towards middle and lower income groups
• Awareness in digital media

4.THREATS

• Security issues
• High fee
• Worldwide competitors

68
CHAPTER 6

69
FINDINGS
The Following were the findings from the research

• The net profit of the company shows the money or the amount which the company have
after all the expenses are paid. From the analyses we can see that 2018 have the highest
value and 2020 have the lowest tht is net loss. The net profit is increasing year by year
but in 2020 the bank has faced a net loss. This is because the COVID-19 pandemic, due
to this the bank has faced low demand, revenue etc and also a drop in net interest income
and rise in provisions.

• The debt equity is a measure of the relative contribution of the creditor, shareholder in the
capital employed in the business. According to the analyses each year shows an increase
and decrese in debt equity year by year. 2019 have the highest debt equity ratio.

• Debt based assets are generally conservative investment that pay a fairly predictable rate
of return. in the analyses we can see that the bank has maintained its debt asset ratio
constantly in the last 5 year. The bank ownes its same amount of liabilities as assets. So it
is a highly liverged bank.

• Return on asset is the financial ratio that shows the percentage of profit a company earns
in relation towards overall resources .The ROA line is not in a positive way. In the year
of 2020 the bank has a negative ROA. This is because that the bank is not able to make
maximum use of its assets for getting more profits.

• Return on equity is the measure of companies efficiency in generating profit with respect
is to it net worth. High return on equity leads to faster future growth in company. In this
bank first 3 year have good ROE , after that it will be declined . in the year of 2020 the
bank has only negative ROE , so from these we can assume that the bank have a net loss
in the year 2020.

70
• In the analyses of yes bank we can see an increase in current ratio. So it is assume that
the bank is able to meets its short term obligations smoothly. In quick ratio there will be
an increase. In total the liquidity of yes bank is favorable.

• The trend anlaysis of NPA is not favorable ,because in yes bank the NPA trend has been
increasing every year. And the net NPA is also increasing. The increased NPAs put
pressure on recycling of funds and reduces the ability of bank for lending more and thus
it result in lesser interest income.

71
CHAPTER 7

72
CONCLUSION

Analysis and interpretation of financial statement is an important tool in assessing companies’

performance. It reveals the strength and weakness of a firm. This project of financial analysis
and interpretation in the production concerns is not nearly a work of the project but a brief
knowledge and experience of that how to analyse the financial performance of the firm. The
study undertaken has brought to the light of the following conclusions.

According to this project I came to know that from the analysis of financial statement it is clear
that yes bank have been incurring profit but in the last year due to the pandemic situation the
bank faces some trouble and there will be a net loss in the year. So the firm should focus on
getting of more profit in the coming years by taking care of many factors.

This project mainly focuses on the basis of different type of financial statement. Balance sheet
and profit and loss statement of yes bank have been studied.

From analysis of balance sheet and profit and loss account of yes bank of 2015-2019 the bank
has faced a net loss in 2020. From ratio analysis of balance sheet and Profit and Loss statement
of yes bank of 2015-2019 it was concluded that liquidity position of the company was good .
liquidity ratios, debt equity ratio, debt asset ratio, net profit , return in assets, return on equity
was sound to be acceptable but in 2020 some of the ratios is negative because the bank face a net
loss in the year 2020. The trend analysis of NPA is not favorable because the Non Performing
Asset is increasing year by year. It causes poor recycling of funds.

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BIBLIOGRAPHY

Books of Reference

1. Chandra, P. “Financial Management”, Tata Me Graw-Hill Publishing

Company Ltd., New Delhi,2014
2. Dr. Maheshwari, S.N. “Financial Management Principles and Practices”,
Sultan Chand and Sons, New Delhi, 2009
3. Jain and Narang. “Financial Accounting”, Kalyani Publishers, 2005
4. Financial Statement Analysis and Security Valuation - Penman

Websites and Journals

• www.yesbank.com
• www.capitalmarket.com
• www moneycontrol.com
• www.nseindia.com,
• www.economictimes.indiatimes.com,

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