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    Profit & Loss: Prof.b.p.mshra Ximb

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    SudhansuSekhar
    The document provides details about the key components of a bank's profit and loss statement and balance sheet. It discusses the major line items on the income and expense sides of the profit and loss statement, including interest income, non-interest income, interest expenses, operating expenses, and provisions. It also outlines the major disclosures required in a bank's balance sheet, such as capital adequacy, asset quality, investments, business ratios, and accounting policies. Finally, it differentiates between a bank's banking book and trading book.

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    Profit & Loss: Prof.b.p.mshra Ximb

    Uploaded by

    SudhansuSekhar
    47 views28 pages
    The document provides details about the key components of a bank's profit and loss statement and balance sheet. It discusses the major line items on the income and expense sides of the profit and loss statement, including interest income, non-interest income, interest expenses, operating expenses, and provisions. It also outlines the major disclosures required in a bank's balance sheet, such as capital adequacy, asset quality, investments, business ratios, and accounting policies. Finally, it differentiates between a bank's banking book and trading book.

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    The document provides details about the key components of a bank's profit and loss statement and balance sheet. It discusses the major line items on the income and expense sides of the profit and loss statement, including interest income, non-interest income, interest expenses, operating expenses, and provisions. It also outlines the major disclosures required in a bank's balance sheet, such as capital adequacy, asset quality, investments, business ratios, and accounting policies. Finally, it differentiates between a bank's banking book and trading book.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    47 views28 pages

    Profit & Loss: Prof.b.p.mshra Ximb

    Uploaded by

    SudhansuSekhar
    The document provides details about the key components of a bank's profit and loss statement and balance sheet. It discusses the major line items on the income and expense sides of the profit and loss statement, including interest income, non-interest income, interest expenses, operating expenses, and provisions. It also outlines the major disclosures required in a bank's balance sheet, such as capital adequacy, asset quality, investments, business ratios, and accounting policies. Finally, it differentiates between a bank's banking book and trading book.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 28

    Profit & Loss

    Prof.b.p.mshra
    ximb
    PROFIT AND LOSS ACCOUNT

    15.Expenses
    Income Interest Expenses
    13.Interest Income(85%) (70%)(borrowings & deposits)
    Advances
    Investment 16. Non Interest Expenses -
    Inter bank Bank lending 19.67% (Operating Expenses)
    Interest on balances with RBI Expenses on
    14.Non Interest Income (15%) Employee,Premises,Printing &
    Stationery etc
    Income earned from in form
    of Commission and brokerage
    Profit & sale of Investment Provisions & Contingencies
    Profit on Forex Transaction 10.33%
    Profit on Sale of assets

    Net Profit is Income net of expenses is apportioned to Reserves & Surplus

    2
    Appropriation of Net Profit
    Net Profit is transferred to
    Statutory Reserve
    Staff Welfare Fund
    Investment Reserve
    Capital Reserve
    Special Reserve
    General Reserve
    Dividend
    Tax on dividend
    3
    Income
    Interest IncomeS 13
    Interest on Advances/Bills
    Income on Investment
    Interest on Inter Bank Deposits
    Other/Non Interest IncomeS 14
    Commission/Brokerage
    Profit on Sale of Investment
    Profit on Sale of Fixed assets
    Profit on Derivative/ Forex Transaction
    Income from Dividend
    Income from Financial Lease 4
    Expenses
    Interest Expenses.S 14
    Interest on Deposits
    Interests on RBI/ Inter Bank Borrowing
    Others
    Operating/ Non Interest Expenses.S 15
    Salary/Pension
    Rent, Taxes
    Printing/Advertisement
    Others..
    Provision & Contingency
    Investment Depreciation
    Tax
    NPA/Standard Asset/Country 5
    Burden management
    Net Profit = Total Income Total Expenditure
    = (Interest Income + Other Income)
    - (Interest Expenditure + Operating Expenditure)
    - (Provisions & Contingencies)
    =>(Interest Income Interest Expenditure) +
    (Other Income - Operating Expenditure) (Provisions & Contingencies)
    = Net Interest Margin (Spread) + Burden Provisions & Contingencies

    For Profitable operation these three elements to be managed.


    Spread Management has imitation in a
    deregulated interest rate regime.

    Burden Management is the only recourse=>


    Increasing Other Income
    Reducing Operating Expenses
    Issues relating to other income
    Theory of ROE decomposition:
    ROE = ROA X EQUITY MULTIPLIER ( EM ), WHERE

    ROE = Net Profit / Average Equity


    ROA = Net Profit / Average Assets
    EM = Average assets / Average Equity

    Other thing remaining equal, A bank earning


    Non- interest income without adding asset increases ROA.
    Since asset are not added, the EM remains same.
    The combined effect is higher RoE.
    In addition, Non-creation of assets does not call for
    any provisioning, which coupled with higher net profit
    increases CRAR And lower NPA.

    Limitation:
    If higher income is originating from Contingent Liabilities
    (Off-balance sheet items), bank has to risk-adjust
    their capital requirement.
    Schedule 17.Accounting Policies P169
    Schedule 18.Notes on Accounts P..169

    9
    Balance Sheet Disclosures
    Disclosure essential for objective assessment of the
    stability of the banking system

    Enhance market discipline(3rd pillar of Basel II)

    Disclosures enable counterparties and other market


    participants to take informed decisions

    Important element of corporate governance


    10
    Disclosures- Capital
    CRAR (%)
    CRAR-Tier I Capital (%)
    CRAR-Tier II capital (%)
    Percentage of shareholding of Govt. of India
    in public sector banks
    Amount of subordinated debt raised as Tier II
    Capital
    11
    Disclosures-Investments
    Gross value of investment
    1. In India
    2. Outside India
    Provisions for depreciation
    1. In India
    2. Outside India

    Net value of investment


    1. In India
    2. Outside India 12
    Disclosures-Investments
    Movement of provisions held towards depreciation
    on investments

    Non SLR investment portfolio:


    1. Issuer ( PSUs, FIs, Banks, Private Corporate,
    Subsidiaries/JVs, Others ) composition of non SLR
    investment
    2. Non performing non SLR investment

    13
    Disclosures-Asset Quality

    NPAs:
    1. Net NPAs to Net advances (%)

    2. Movement of NPAs (Gross)

    3. Movement of Net NPAs

    1. Movement of provisions for NPAs ( excluding provisions


    on standard Assets)
    14
    Disclosures-Asset Quality
    Floating provisions
    Details of loan assets subjected to
    Restructuring
    Details of financial assets sold to SC/RC for
    Asset Reconstruction
    Provisions on Standard Asset

    15
    Disclosures-Business Ratios

    Interest Income as a % to Average WF (w.e.f. 31-3-98)


    Non Interest Income as a % to Average WF (w.e.f. 31-3-8)
    Operating Profit as a % to Average WF (w.e.f. 31-3-98)
    ROA
    Business per employee
    Profit per employee

    16
    Disclosures-ALM
    Maturity pattern of Advances and Investments
    Maturity pattern of Deposits and Borrowings
    Maturity pattern of Foreign Currency Assets and
    Liabilities

    17
    Disclosures-Lending to sensitive sectors

    Exposure to Real Estate


    Exposure to Capital Market

    18
    Disclosures
    Risk Category-wise Country Exposure
    Risk category:
    1. Insignificant
    2. Low
    3. Moderate
    4. High
    5. Very High
    6. Restricted
    7. Off-Credit
    Details of Single Borrower Limit /Group Borrower
    Limit exceeded by the bank 19
    Disclosures-Miscellaneous

    Provisions made for income tax during the year


    Disclosure of penalties imposed by RBI
    Customer complaints
    Awards passed by the Banking Ombudsman

    20
    Other Disclosures- Accounting Standard

    Segmented Reporting (AS-17)


    Business Segments
    1. Banking Operations
    2. Treasury operations
    Geographic Segments
    1. Domestic Operations
    2. Foreign Operations
    Related Party disclosures under (AS -18)
    EPS (AS-20) 21
    Other Disclosures- Accounting Standard

    Consolidated Financial Statements (AS 21 and


    23)
    DTA/DTL (AS-22)
    Impairment of Assets (As-28)-Mostly
    applicable to manufacturing concerns using
    Plant and Machinery

    22
    Balance Sheet Analysis
    Guidelines on Framework on analysis of
    Balance Sheet issued on February 8,1999
    Objective:
    1. To enable banks to undertake focused
    scrutiny of the balance sheet to identify/
    analyse the key measures of returns and risks
    2. To demonstrate the relationship of returns
    and risks

    23
    Net worth analysis
    . PUC
    1

    2. +Reserves
    3. +Surplus (in P&L Account)
    4. (-) Accumulated Losses
    Net worth (Book Value)
    Adjustments following inspection findings
    5 (-)Additional loan loss provisions required
    6. (-) Additional investment (depreciation) provisions required
    7. (-)Provisions required for losses in other assets
    8. (-) Provisions required for likely loss in off balance sheet items
    9. (-) Additional provisions required for any other liabilities (tax, gratuity,
    bonus, pension, etc.)
    10. (-)Any liabilities ,likely to devolve ,but not recognised
    11. (-)Intangibles
    12. (-) Unrealised interest on NPAs taken to income
    13. (+)Any items included under liabilities which may not be outside liabilities
    14. (+) Any excess or surplus provisions or provisions no longer required
    Real Net worth or Real/exchangeable value of PUC and reserves

    24
    Net worth analysis
    Compliance with section 22 (3)(a) of BR Act i.e. the
    bank has adequate assets to meet its liabilities
    Compliance with Section 11 of BR Act i.e. bank
    continues to maintain in real value the minimum
    capital required or prescribed for it for holding
    license
    Impairment in equity:
    1. Erosion of reserves ( Rs. )
    2. Erosion of capital ( Rs. )
    3. Erosion of deposits ( Rs. )
    25
    ANW covers % of outside liabilities.
    Banking Book vs Trading Book
    Assets are classified into Banking Book and Trading Book

    A trading book consists of positions in financial instruments


    and commodities held either with trading intent or in order to
    hedge other elements of the Banking book.

    Positions held with trading intent are those held intentionally


    for short-term resale and/or with the intent of benefiting
    from actual or expected short-term price movements.

    26
    Trading book consists of
    AFS Securities
    HFT Securities
    Exposure in Gold
    Forex Exposure
    Derivative position

    Banking Book Includes


    All types of dvances
    HTM Securties
    thanks

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