Fundamental and Technical Analysis of Indian Banking Sector

Description
Research method used for survey is Data Analysis mainly consisting of distinctive models like Trend analysis, CAMEL analysis, Z-score Analysis and Technical analysis.

Fundamental and Technical Analysis of Indian Banking Sector

Research Methodology
Objectives
? To ascertain and analyze the strength of public & private sector banks through
measurement of performance indicators
? To analyze trends in significant heads of balance sheet and profit & loss account
? To apply Altman?s Z-score bankruptcy model in order to know how far banks are
safe to bankruptcy
Method
Research method used for survey is Data Analysis mainly consisting of distinctive
models like Trend analysis, CAMEL analysis, Z-score Analysis and Technical analysis.
These models focus mainly on quantitative aspects as they witness performance of a
bank based on derivation of different ratios pertaining to a bank?s capital adequacy,
asset quality, management efficiency, earnings capacity, liquidity, proximity to
bankruptcy, trends in significant heads of balance sheet and profit & loss account and
lastly a glimpse of movement of share price in the market based on the historical data.
Data Analysis
Descriptive analysis will be used in order to draw conclusion. Outcome of the study
will be presented in tables and graphs for easy understanding of the findings of the
research.

Fundamental and Technical Analysis of Indian Banking Sector

Research Design
The study may be viewed as a formal study wherein research problem requires
examining the current state of the banks in a typically structured manner with validation
- rejection of certain hypothesis and ascertaining probable opportunities.
Hence, Descriptive Research Design Approach has been employed to accomplish the
project.
Limitations of Study
? Ratios forming part of analysis are calculated based on the data available through
secondary sources and validity of that data cannot be ascertained. Though ratios
have been computed using practices to the best of our knowledge.
? Distinctive tools used for analysis may not certify that a particular bank is excels
in all dimensions of business as different tools may lay contradictory results for
the same bank.
? Service Quality is based largely on quality of personnel in service centric
organizations like banks and thus, is difficult to measure.
? Though competence measures demand but it has been observed that the major
determinant of demand in this type of industry is maintenance of Prestigious
Relations and Prominent Contacts. It implies that the best in performance need
not be the one with higher profitability in this type of industry.

Fundamental and Technical Analysis of Indian Banking Sector

Sample Design
Population Elements
The relevant population elements for the research consist of the following:
? Existing Public & Private Sector Banks in India
Sample Size
1) Existing Public Sector Banks in India
? Bank of Baroda
? Bank of India
? Canara Bank
? IDBI Bank
? Punjab National Bank
? State Bank of India
2) Existing Private Sector Banks in India
? Axis Bank
? HDFC Bank
? ICICI Bank
? Kotak Mahindra Bank
Sampling Method
The method used for the project is Stratified Sampling.

Fundamental and Technical Analysis of Indian Banking Sector

Sources of Data
Data collection has solely been done through secondary sources.
Primary Source
? No primary sources have been used in data collection.
Secondary Sources
? Articles
? Books
? Newspapers
? Annual Reports
? Bank Website
? Center for Monitoring Indian Economy (CMIE) Data

Fundamental and Technical Analysis of Indian Banking Sector

1. Introduction to Indian Banking Sector
Banks are the most significant players in the Indian financial market. They are the biggest
purveyors of credit, and they also attract most of the savings from the population. Dominated by
public sector, the banking industry has so far acted as an efficient partner in the growth and the
development of the country. Driven by the socialist ideologies and the welfare state concept,
public sector banks have long been the supporters of agriculture and other priority sectors. They
act as crucial channels of the government in its efforts to ensure equitable economic
development.
The Indian banking can be broadly categorized into nationalized (government owned), private
banks and specialized banking institutions. The Reserve Bank of India acts a centralized body
monitoring any discrepancies and shortcoming in the system. Following the nationalization of
banks in 1969, the public sector banks or the
nationalized banks have acquired a place of
prominence and has since then seen tremendous
progress. The need to become highly customer
focused has forced the slow moving public
sector banks to adopt a fast track approach. The
unleashing of products and services through the net has galvanized players at all levels of the
banking and financial institutions market grid to look a further at their existing portfolio offering.
Conservative banking practices allowed Indian banks to be insulated partially from the Asian
currency crisis. Indian banks are now quoting at higher valuation when compared to banks in
other Asian countries (viz. Hong Kong, Singapore, Philippines etc.) that have major problems
linked to huge Non Performing Assets (NPAs) and payment defaults. Co-operative banks are
nimble footed in approach and armed with efficient branch networks focusing primarily on the
„high revenue? niche retail segments.
The Indian banking has finally worked up to the competitive dynamics of the „new? Indian
market and is addressing the relevant issues to take on the varied challenges of globalization.
Banks that employ IT solutions are perceived to be „futuristic? and proactive players capable of
meeting the varied requirements of the large customer base. Private Banks have been prompt on
Fundamental and Technical Analysis of Indian Banking Sector

the uptake and are reorienting their strategies using the internet as a medium. The Internet has
emerged as the new and challenging frontier of marketing with the conventional physical world
creed being just as applicable like in any other marketing medium.
The Indian banking has come from a long way from being a sleepy business institution to a
highly proactive and dynamic entity. This transformation has been largely brought about by the
large dose of liberalization and economic reforms that allowed banks to explore new business
opportunities rather than generating revenues from conventional streams (i.e. borrowing and
lending). The banking in India is highly fragmented with 30 banking units contributing to almost
50% of deposits and 60% of advances. Indian nationalized banks (banks owned by the
government) continue to be the major lenders in the economy due to their sheer size and
penetrative networks which assures them high deposit mobilization. The Indian banking can be
broadly categorized into nationalized, private banks and specialized banking institutions.
The liberalize policy of Government of India permitted entry to private sector in the banking, the
industry has witnessed the entry of nine new generation private banks. The major differentiating
parameter that distinguishes these banks from all the other banks in the Indian banking is the
level of service that is offered to the customer. Their focus has always rested on the customer –
understanding his needs, preempting him and consequently delighting him with various
configurations of benefits and a wide portfolio of products and services. These banks have
generally been established by promoters of repute or by „high value? domestic financial
institutions.
The popularity of these banks can be gauged by the fact that in a short span of time, these banks
have gained considerable customer confidence and consequently have shown impressive growth
rates. Today, the private banks comprise of almost 4% share of the total share of deposits. Most
of the banks in this category are concentrated in the high growth urban areas in metros (that
account for approximately 70% of the total banking business). With efficiency being the major
focus, these banks have leveraged on their strengths and competencies viz. Management,
operational efficiency & flexibility, superior product positioning and higher employee
productivity skills.
The private banks with their focused business and service portfolio have a reputation of being
niche players in the industry, a strategy that has allowed these banks to concentrate on few
Fundamental and Technical Analysis of Indian Banking Sector

reliable high net worth companies and individuals rather than cater to the mass market. These
well-chalked out integrates strategy plans that have allowed most of these banks to deliver
superlative levels of personalized services. With the Reserve Bank of India allowing these banks
to operate 70% of their businesses in urban areas, this statutory requirement has translated into
lower deposit mobilization costs and higher margins relative to public sector banks.

Evolution
Fundamental and Technical Analysis of Indian Banking Sector

Banking in India originated in the last decades of the 18
th
century. The oldest bank in existence
in India is the State Bank of India, a government-owned bank that traces its origins back to June
1806 and that is the largest commercial bank in the country. Central banking is the responsibility
of the Reserve Bank of India, which in 1935 formally took over these responsibilities from the
then Imperial Bank of India, relegating it to commercial banking functions. After India's
independence in 1947, the Reserve Bank was nationalized and given broader powers. In 1969 the
government nationalized the 14 largest commercial banks; the government nationalized the six
next largest in 1980.
Currently, India has 96 scheduled commercial banks (SCBs) - 27 public sector banks (that is
with the Government of India holding a stake), 31 private banks (these do not have government
stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They
have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by
ICRA Limited, a rating agency, the public sector banks hold over 75 % of total assets of the
banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.
Early History
Banking in India originated in the last decades of the 18th century. The first banks were The
General Bank of India which started in 1786, and the Bank of Hindustan, both of which are
now non-operational.
The oldest bank in existence in India is the State Bank of India, which originated in the Bank
of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was
one of the three government banks, the other two being the Bank of Bombay and the Bank of
Madras, all three of which were established under charters from the British East India
Company. For many years the government banks
acted as quasi-central banks, as did their successors.
The three banks merged in 1921 to form
the Imperial Bank of India, which, upon India's
independence, became the State Bank of India.
Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a
consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and
still functioning today, is the oldest Joint Stock bank in India. It was not the first though. That
Fundamental and Technical Analysis of Indian Banking Sector

honour belongs to the Bank of Upper India, which was established in 1863, and which
survived until 1913, when it failed, with some of its assets and liabilities being transferred to
the Alliance Bank of Simla.
Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire
d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862;
branches in Madras and Pondichery, then a French colony, followed. HSBC established itself
in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade
of the British Empire, and so became a banking center.
The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881
in Faizabad. It failed in 1958. The next was the Punjab National Bank, established
in Lahore in 1895, which has survived to the present and is now one of the largest banks in
India.
The government banks dominated banking in India but there were also some exchange banks
and a number of Indian joint stock banks. All these banks operated in different segments of
the economy. The exchange banks, mostly owned by Europeans, concentrated on financing
foreign trade. Indian joint stock banks were generally undercapitalized and lacked the
experience and maturity to compete with the presidency and exchange banks. This
segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the
times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into
separate and cumbersome compartments."
The period between 1906 and 1911, saw the establishment of banks inspired by
the Swadeshi movement. The Swadeshi movement inspired local businessmen and political
figures to found banks of and for the Indian community. A number of banks established then
have survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of
Baroda, Canara Bank and Central Bank of India.

World War I to Independence
The period during the First World War (1914-1918)
through the end of the Second World War (1939-1945),
Fundamental and Technical Analysis of Indian Banking Sector

and two years thereafter until the independence of India were challenging for Indian banking.
The years of the First World War were unstable, and it took its toll with banks simply
collapsing despite the Indian economy gaining indirect boost due to war-related economic
activities. At least 94 banks in India failed between 1913 and 1918 as indicated in the
following table:

Year
No. of Banks that
Failed
Authorised Capital
( Rs. Lakhs)
Paid-up Capital
(Rs. Lakhs)
1913 12 274 35
1914 42 710 109
1915 11 56 5
1916 13 231 4
1917 9 76 25
1918 7 209 1

Post Independence
The partition of India in 1947 adversely impacted the economies of Punjab and West Bengal,
paralyzing banking activities for months. India's independence marked the end of a regime of
the Laissez-faire for the Indian banking. The Government of India initiated measures to play
Fundamental and Technical Analysis of Indian Banking Sector

an active role in the economic life of the nation, and the Industrial Policy Resolution adopted
by the government in 1948 envisaged a mixed economy. This resulted into greater
involvement of the state in different segments of the economy including banking and finance.
The major steps to regulate banking included:
In 1948, the Reserve Bank of India, India's central banking
authority, was nationalized, and it became an institution owned
by the Government of India.
In 1949, the Banking Regulation Act was enacted which
empowered the Reserve Bank of India (RBI) "to regulate,
control, and inspect the banks in India."
The Banking Regulation Act also provided that no new bank or branch of an existing bank
could be opened without a license from the RBI, and no two banks could have common
directors.
However, despite these provisions, control and regulations, banks in India except the State
Bank of India, continued to be owned and operated by private persons. This changed with the
nationalisation of major banks in India on 19 July 1969.

Nationalization
By the 1960s, the Indian banking industry had
become an important tool to facilitate the
development of the Indian economy. At the same
Fundamental and Technical Analysis of Indian Banking Sector

time, it had emerged as a large employer, and a debate had ensued about the possibility to
nationalise the banking industry. Indira Gandhi, the-then Prime Minister of India expressed the
intention of the GOI in the annual conference of the All India Congress Meeting in a paper
entitled "Stray thoughts on Bank Nationalisation." The paper was received with positive
enthusiasm. Thereafter, her move was swift and sudden, and the GOI issued an ordinance
and nationalised the 14 largest commercial banks with effect from the midnight of July 19,
1969. Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of
political sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the
Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received
the presidential approval on 9 August 1969.
A second dose of nationalization of 6 more commercial banks followed in 1980. The stated
reason for the nationalization was to give the government more control of credit delivery. With
the second dose of nationalization, the GOI controlled around 91% of the banking business of
India. Later on, in the year 1993, the government merged New Bank of India with Punjab
National Bank. It was the only merger between nationalized banks and resulted in the reduction
of the number of nationalised banks from 20 to 19. After this, until the 1990s, the nationalised
banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy.
The nationalised banks were credited by some, including Home minister P. Chidambaram, to
have helped the Indian economy withstand the global financial crisis of 2007-2009.

Liberalization
In the early 1990s, the then Narsimha Rao government embarked on a policy of liberalization,
licensing a small number of private banks. These came to be known as New Generation tech-
savvy banks, and included Global Trust Bank (the first of such new generation banks to be set
up), which later amalgamated with Oriental Bank of Commerce, Axis Bank(earlier as UTI
Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of
India, revitalized the banking sector in India, which has seen rapid growth with strong
Fundamental and Technical Analysis of Indian Banking Sector

contribution from all the three sectors of banks, namely, government banks, private banks and
foreign banks.
The next stage for the Indian banking has been setup with the proposed relaxation in the norms
for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights
which could exceed the present cap of 10%, at present it has gone up to 74% with some
restrictions.
The new policy shook the Banking sector in India completely. Bankers, till this time, were used
to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of functioning. The new wave
steered in a
modern outlook
and tech-savvy
methods of
working for
traditional
banks. All this
led to the retail
boom in India.
People not just
demanded more
from their
banks but also
received more.
In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak
Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has been allowed
to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any
stake exceeding 5% in the private sector banks would need to be scrutinized by them.
Currently, banking in India is generally fairly mature in terms of supply, product range and
reach-even though reach in rural India still remains a challenge for the private sector and foreign
banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have
clean, strong and transparent balance sheets relative to other banks in comparable economies in
Fundamental and Technical Analysis of Indian Banking Sector

its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the
government. The stated policy of the Bank on the Indian Rupee is to manage volatility but
without any fixed exchange rate-and this has mostly been true.
With the growth in the Indian economy expected to be strong for quite some time-especially in
its services sector; the demand for banking services, especially retail banking, mortgages and
investment services are expected to be strong. One may also expect M & As, takeovers, and asset
sales.
In recent years critics have charged that the non-government owned banks are too aggressive in
their loan recovery efforts in connection with housing, vehicle and personal loans. There are
press reports that the banks' loan recovery efforts have driven defaulting borrowers to suicide.

Players in the Indian Banking Sector

Fundamental and Technical Analysis of Indian Banking Sector

The Reserve Bank of India acts as a centralized body monitoring any discrepancies and
shortcoming in the system. It is the foremost monitoring body in the Indian financial sector. The
nationalized banks (i.e. government-owned banks) continue to dominate the Indian banking
arena. Industry estimates indicate that out of 274 commercial banks operating in India, 223 banks
are in the public sector and 51 are in the private sector. The private sector bank grid also includes
24 foreign banks that have started their operations here.

Some of the prominent players that have made their presence invincible and have constituted the
Indian banking sector can be classified as under:
Fundamental and Technical Analysis of Indian Banking Sector

Public Sector Banks
Nationalised Banks SBI & Associates
Bank of Baroda State Bank of India
Bank of India State Bank of Bikaner & Jaipur
Canara Bank State Bank of Hyderabad
Corporation Bank State Bank of Indore
Dena Bank State Bank of Mysore
Oriental Bank of Commerce State Bank of Patiala
Punjab National Bank State Bank of Saurashtra
Union Bank of India State Bank of Travancore
Central Bank of India
Vijaya Bank

Private Sector Banks Foreign Banks
Axis Bank Ltd. ABN-AMRO Bank N.V.
HDFC Bank Ltd. American Express Bank Ltd.
ICICI Bank Ltd. Barclays Bank PLC
Indusind Bank Ltd. BNP Paribas
Kotak Mahindra Bank Ltd. Citibank N.A.
YES Bank Deutsche Bank AG
Development Credit Bank Ltd. HSBC Ltd.
Karur Vysya Bank Ltd. Standard Chartered Bank
ING Vysya Bank Ltd. DBS Bank Ltd.

Role of Reserve Bank of India
Fundamental and Technical Analysis of Indian Banking Sector

Reserve Bank of India was nationalised in the year 1949. The general superintendence and
direction of the bank is entrusted to Central Board of Directors of 20 members, the Governor and
4 Deputy Governors, 1 Government official from the Ministry of Finance, 10 nominated
Directors by the Government to give representation to important elements in the economic life of
the country, and 4 nominated Directors by the Central Government to represent the four local
Boards with the headquarters at Mumbai, Kolkata, Chennai and New Delhi. Local Boards consist
of 5 members each Central Government appointed for a term of four years to represent territorial
and economic interests and the interests of co-operative and indigenous banks.
The Reserve Bank of India Act, 1934 was commenced on April 1, 1935. The Act, 1934 (II of
1934) provides the statutory basis of the functioning of the Bank.
The Bank was constituted for the need of following:
? To regulate the issue of banknotes
? To maintain reserves with a view to securing monetary stability and
? To operate the credit and currency system of the country to its advantage.
The Reserve Bank of India Act of 1934 entrust all the important functions of a central bank the
Reserve Bank of India.
Bank of Issue
Under Section 22 of the Reserve Bank of India Act, the Bank has the sole right to issue bank
notes of all denominations. The distribution of one rupee notes and coins and small coins all
over the country is undertaken by the Reserve Bank as agent of the Government. The
Reserve Bank has a separate Issue Department which is entrusted with the issue of currency
notes. The assets and liabilities of the Issue Department are kept separate from those of the
Banking Department. Originally, the assets of the Issue Department were to consist of not
less than two-fifths of gold coin, gold bullion or sterling securities provided the amount of
gold was not less than Rs. 40 crores in value. The remaining three-fifths of the assets might
be held in rupee coins, Government of India rupee securities, eligible bills of exchange and
promissory notes payable in India. Due to the exigencies of the Second World War and the
post-war period, these provisions were considerably modified. Since 1957, the Reserve Bank
of India is required to maintain gold and foreign exchange reserves of Ra. 200 crores, of
Fundamental and Technical Analysis of Indian Banking Sector

which at least Rs. 115 crores should be in gold. The system as it exists today is known as the
minimum reserve system.
Banker to Government
The second important function of the Reserve Bank of India is to act as Government banker,
agent and adviser. The Reserve Bank is agent of Central Government and of all State
Governments in India except the state of Jammu and Kashmir. The Reserve Bank has the
obligation to transact Government business, via. to keep the cash balances as deposits free of
interest, to receive and to make payments on behalf of the Government and to carry out their
exchange remittances and other banking operations. The Reserve Bank of India helps the
Government - both the Union and the States to float new loans and to manage public debt.
The Bank makes ways and means advances to the Governments for 90 days. It makes loans
and advances to the States and local authorities. It acts as adviser to the Government on all
monetary and banking matters.
Bankers' Bank and Lender of the Last Resort
The Reserve Bank of India acts as the bankers' bank. According to the provisions of the
Banking Companies Act of 1949, every scheduled bank was required to maintain with the
Reserve Bank a cash balance equivalent to 5% of its demand liabilities and 2 % of its time
liabilities in India. By an amendment of 1962, the distinction between demand and time
liabilities was abolished and banks have been asked to keep cash reserves equal to 3 % of
their aggregate deposit liabilities. The minimum cash requirements can be changed by the
Reserve Bank of India.
The scheduled banks can borrow from the Reserve Bank of India on the basis of eligible
securities or get financial accommodation in times of need or stringency by rediscounting
bills of exchange. Since commercial banks can always expect the Reserve Bank of India to
come to their help in times of banking crisis the Reserve Bank becomes not only the banker's
bank but also the lender of the last resort.

Controller of Credit
Fundamental and Technical Analysis of Indian Banking Sector

The Reserve Bank of India is the controller of credit i.e. it has the power to influence the
volume of credit created by banks in India. It can do so through changing the Bank rate or
through open market operations. According to the Banking Regulation Act of 1949, the
Reserve Bank of India can ask any particular bank or the whole banking system not to lend to
particular groups or persons on the basis of certain types of securities. Since 1956, selective
controls of credit are increasingly being used by the Reserve Bank.
Every bank has to get a license from the Reserve Bank of India to do banking business within
India, the license can be cancelled by the Reserve Bank of certain stipulated conditions are
not fulfilled. Every bank will have to get the permission of the Reserve Bank before it can
open a new branch. Each scheduled bank must send a weekly return to the Reserve Bank
showing, in detail, its assets and liabilities. As supreme banking authority in the country, the
Reserve Bank of India, therefore, has the following powers:
(a) It holds the cash reserves of all the scheduled banks.
(b) It controls the credit operations of banks through quantitative and qualitative controls.
(c) It controls the banking system through the system of licensing, inspection and calling for
information.
(d) It acts as the lender of the last resort by providing rediscount facilities to scheduled
banks.
Custodian of Foreign Reserves
The Reserve Bank of India has the responsibility to maintain the official rate of exchange.
According to the Reserve Bank of India Act of 1934, the Bank was required to buy and sell
at fixed rates any amount of sterling in lots of not less than Rs. 10,000. The rate of exchange
fixed was Re. 1 = sh. 6d. Since 1935 the Bank was able to maintain the exchange rate fixed at
lsh.6d. though there were periods of extreme pressure in favour of or against
the rupee. After India became a member of the International Monetary Fund in 1946, the
Reserve Bank has the responsibility of maintaining fixed exchange rates with all other
member countries of the I.M.F.
Besides maintaining the rate of exchange of the rupee, the Reserve Bank has to act as the
custodian of India's reserve of international currencies. The vast sterling balances were
acquired and managed by the Bank. Further, the RBI has the responsibility of administering
the exchange controls of the country.
Fundamental and Technical Analysis of Indian Banking Sector

Supervisory functions
In addition to its traditional central banking functions, the Reserve bank has certain non-
monetary functions of the nature of supervision of banks and promotion of sound banking in
India. The Reserve Bank Act, 1934, and the Banking Regulation Act, 1949 have given the
RBI wide powers of supervision and control over commercial and co-operative banks,
relating to licensing and establishments, branch expansion, liquidity of their assets,
management and methods of working, amalgamation, reconstruction, and liquidation. The
RBI is authorized to carry out periodical inspections of the banks and to call for returns and
necessary information from them.
Promotional functions
With economic growth assuming a new urgency since Independence, the range of the
Reserve Bank's functions has steadily widened. The Bank now performs a variety of
developmental and promotional functions, which, at one time, were regarded as outside the
normal scope of central banking. The Reserve Bank was asked to promote banking habit,
extend banking facilities to rural and semi-urban areas, and establish and promote new
specialized financing agencies. Accordingly, the Reserve Bank has helped in the setting up of
the IFCI and the SFC; it set up the Deposit Insurance Corporation in 1962, the Unit Trust of
India in 1964, the Industrial Development Bank of India also in 1964, the
Agricultural Refinance Corporation of India in 1963 and the Industrial Reconstruction
Corporation of India in 1972. These institutions were set up directly or indirectly by the
Reserve Bank to promote saving habit and to mobilize savings, and to provide industrial
finance as well as agricultural finance.
Classification of RBIs functions
The monetary functions also known as the central banking functions of the RBI are related to
control and regulation of money and credit, i.e., issue of currency, control of bank credit,
control of foreign exchange operations, banker to the Government and to the money market.
Monetary functions of the RBI are significant as they control and regulate the volume of
money and credit in the country.
Fundamental and Technical Analysis of Indian Banking Sector

Equally important, however, are the non-monetary functions of the RBI in the context of
India's economic backwardness. The supervisory function of the RBI may be regarded as a
non-monetary function. The promotion of sound banking in India is an important goal of the
RBI, the RBI has been given wide and drastic powers, under the Banking Regulation Act of
1949 - these powers relate to licensing of banks, branch expansion, liquidity of their assets,
management and methods of working, inspection, amalgamation, reconstruction and
liquidation. Since independence, particularly after its nationalisation 1949, the RBI has
followed the promotional functions vigorously and has been responsible for strong financial
support to industrial and agricultural development in the country.

Reforms & Developments
Reforms
Fundamental and Technical Analysis of Indian Banking Sector

As the real sector reforms began in 1992, the need was felt to restructure the Indian banking
industry. The reform measures necessitated the deregulation of the financial sector,
particularly the banking sector. The initiation of the financial sector reforms brought about a
paradigm shift in the banking industry. In 1991, the RBI had proposed to from the committee
chaired by M. Narasimham, former RBI Governor in order to review the Financial System
viz. aspects relating to the Structure, Organisations and Functioning of the financial system.
The Narasimham Committee report, submitted to the then finance minister, Manmohan Singh,
on the banking sector reforms highlighted the weaknesses in the Indian banking system and
suggested reform measures based on the Basle norms. The guidelines that were issued
subsequently laid the foundation for the reformation of Indian banking sector.
? Reduction of SLR and CRR - The Narasimham Committee had argued for reductions in
SLR on the grounds that the stated government objective of reducing the fiscal deficits
will obviate the need for a large portion of the current SLR. Similarly, the need for the use
of CRR to control secondary expansion of credit would be lesser in a regime of smaller
fiscal deficits. The committee offered the route of Open Market Operations (OMO) to the
Reserve Bank of India for further monetary control beyond that provided by the (lowered)
SLR and CRR reserves.
Some of the problems in reducing SLR and CRR were the supporting condition of smaller
fiscal deficits is not happening in reality and open market operations have not been used to
any significant extent in India for monetary control. The time required for gaining
experience with the use of such operations would be much more than 5-6 years. This
scenario thus indicates that despite the stated aim of reductions in SLR and CRR, RBI
may be forced to revert to higher reserve levels, if the economic indicators become
unfavourable.
? Minimum Capital Adequacy Ratio - The growing concern of commercial banks
regarding international competitiveness and capital ratios led to the Basle Capital Accord
1988. The accord sets down the agreement to apply common minimum capital standards
to their banking industries, to be achieved by year-end 1992. Based on the Basle norms,
the RBI also issued similar capital adequacy norms for the Indian banks. According to
these guidelines, the banks will have to identify their Tier-I and Tier-II capital and assign
Fundamental and Technical Analysis of Indian Banking Sector

risk weights to the assets. Having done this they will have to assess the Capital to Risk
Weighted Assets Ratio (CRAR). The minimum CAR that the Indian banks are required to
meet is set at 9 %.
? Prudential Norms - To get a true picture of the profitability and efficiency of the Indian
Banks, a code stating adoption of uniform accounting practices in regard to income
recognition, asset classification and provisioning against bad and doubtful debts has been
laid down by the Central Bank. Close to 16 % of loans made by Indian banks were NPAs -
very high as compared to 5 % in banking systems in advanced countries.
? Disclosure Norms - Banks should disclose in balance sheets maturity pattern of advances,
deposits, investments and borrowings. Apart from this, banks are also required to give
details of their exposure to foreign currency assets and liabilities and movement of bad
loans. The banks must be forced to make public the nature of NPAs being written off.
This should be done to ensure that the taxpayer?s money given to the banks as capital is
not used to write off private loans without adequate efforts and punishment of defaulters.
? Rationalization of Foreign Operations in India - As per the guidelines for licensing of
new banks in the private sector issued in January 1993, RBI had granted licenses to 10
banks. Based on a review of experience gained on the functioning of new private sector
banks, revised guidelines were issued in January 2001. The main provisions/requirements
were relating to initial minimum paid-up capital, promoters? contribution, restriction on
the NRI participation in the primary equity of the new bank, minimum capital adequacy
ratio, etc.
? Special Tribunals and Asset Reconstruction Fund - Setting up of special tribunals to
speed up the process of recovery of loans and setting up of Asset Reconstruction Funds
(ARFs) to take over from banks a portion of their bad and doubtful advances at a discount
was one of the crucial recommendations of the Narasimham Committee. To expedite
adjudication and recovery of debts due to banks and financial institutions (FIs) at the
instance of the Tiwari Committee (1984), appointed by the Reserve Bank of India (RBI),
the government enacted the Debt Recovery Tribunal Act, 1993 (DRT). Accordingly,
DRTs and Appellate DRTs have been established at different places in the country. The
act was amended in January 2000 to tackle some problems with the old act.
Fundamental and Technical Analysis of Indian Banking Sector

? Restructuring of Weak Banks - Keeping in view the urgent need to revive the weak
banks, the Reserve Bank of India set up a Working Group in February, 1999 under the
Chairmanship of Shri M.S. Verma to suggest measures for the revival of weak public
sector banks in India. The major recommendations/points of the Working Group, which
submitted its Report in October, 1999, were based on seven parameters covering three
areas have been identified; these are (i) Solvency (capital adequacy ratio and coverage
ratio), (ii) Earning Capacity (return on assets and net interest margin) and (iii) Profitability
(ratio of operating profit to average working funds, ratio of cost to income and ratio of
staff cost to net interest + income all other income) and also restructuring of weak banks
suggested to be a two-stage operation; stage one involves operational, organizational and
financial restructuring aimed at restoring competitive efficiency; stage two covers options
of privatization and/or merger.
? Asset Liability Management System - Keeping in view the level of computerization and
the current MIS in banks, adoption of a uniform ALM System was not feasible for all
banks so the final guidelines have been formulated so to serve as a benchmark for those
banks which lack a formal ALM System. Banks that have already adopted more
sophisticated systems may continue their existing systems but they should ensure to fine-
tune their current information and reporting system so as to be in line with the ALM
System suggested in the Guidelines. Other banks should examine their existing MIS and
arrange to have an information system to meet the prescriptions of the new ALM System.
In the normal course, banks are exposed to credit and market risks in view of the asset-
liability transformation. Banks need to address these risks in a structured manner by
upgrading their risk management and adopting more comprehensive Asset-Liability
Management (ALM) practices than has been done previously.
? Reduction of Government Stake in PSBs - Banking is a business and not an extension
of government. Banks must be self-reliant, lean and competitive. The best way to achieve
this is to privatize the banks and make the managements accountable to real shareholders.
If "privatization" is a still a dirty word, a good starting point is to restrict government
stake to 33 %.
? Deregulation of Interest Rate - The interest rate regime has also undergone a significant
change. For long, an administered structure of interest rate has been in vogue in India. The
Fundamental and Technical Analysis of Indian Banking Sector

1998 Narasimham Reforms suggested deregulation of interest rates on term deposits
beyond a period of 15 days. At present, the Reserve Bank prescribes only two lending
rates for small borrowers. Banks are free to determine the interest rate on deposits and
lending rates on all lending above Rs. 200,000.

Developments
The financial sector reforms have brought about significant improvements in the financial
strength and the competitiveness of the Indian banking system. The efforts on the part of the
Fundamental and Technical Analysis of Indian Banking Sector

Reserve Bank of India to adopt and refine regulatory and supervisory standards on a par with
international best practices, competition from new players, gradual disinvestments of
government equity in state banks coupled with functional autonomy, adoption of modern
technology, etc are expected to serve as the major forces for change. New businesses, new
customers, and new products beckon, but bring increased risks and competition. How might
that change banks? To attract and retain customers, the banks need to optimize their networks,
speed up decision-making, cut down on bureaucratic layers, and sharpen response times.
The reform has lead to new trends of being ahead and being with, by and for the customer.
While the private sector banks are on the threshold of improvement, the Public Sector Banks
(PSBs) are slowly contemplating automation to accelerate and cover the lost ground. VRS
introduced to bring up the productivity, the concept of universal competition set in just to
ensure customer convenience all the time.
? Voluntary Retirement Scheme - Voluntary Retirement Scheme in Banks was formally
taken up by the Government in November 1999. According to Finance Ministry on the
basis of business per employee (BPE) of Rs. 100 lakhs, there were 59,338 excess
employees in 12 nationalised banks, while based on a BPE of Rs. 125 lakhs, the number
shot up to 1,77,405. Government had cleared a uniform VRS for the banking sector,
giving public sector banks a seven-month time frame. The IBA has been allowed to
circulate the scheme among the public sector banks for adoption. The scheme was to
remain open till March 31, 2001. It would become operational after adoption by the
respective bank board of directors. No concession had been made to weak banks under the
scheme. The scheme is envisaged to assist banks in their efforts to optimize use of human
resource and achieve a balanced age and skills profile in tune with their business
strategies.
? Universal Banking - The evolving scenario in the Indian banking system points to the
emergence of universal banking. The traditional working capital financing is no longer the
banks major lending area while FIs are no longer dominant in term lending. The motive of
universal banking is to fulfill all the financial needs of the customer under one roof. The
leaders in the financial sector will be aiming to become a one-stop financial shop.
Universal Banking includes not only services related to savings and loans but also
Fundamental and Technical Analysis of Indian Banking Sector

investments. However in practice the term 'universal banks' refers to those banks that offer
a wide range of financial services, beyond commercial banking and investment banking,
insurance etc. Universal banking is a combination of commercial banking, investment
banking and various other activities including insurance.
? Mergers and Acquisition - For the irresistible compulsions of competitiveness have
created situation where the only route for survival for many a bank in India may be to
merger with another. With the Union Finance Ministry thinking along the same lines, it
may not be long before mega-mergers between banks materialize. World over banks have
been merging at a furious pace, driven by an urge to gain synergies in their operation,
derive economies of scale and offer one stop facilities to a more aware and demanding
consumer. In the eighties and nineties mergers were used as means to strengthen the
banking sector. Small, weak and inefficient non-scheduled banks were merged with
scheduled banks when the running of such banks becomes non-viable. However, mergers
in the current era will be driven by the motive of establishing a bigger market share in the
industry and to improve the profitability. Though Indian systems were not keen on the
mergers and acquisitions in the banking sector, of late the systems have started
encouraging the global trends of M&A's.
? Rural Banking - Economically empowering, i.e. access to inexpensive credit and other
micro-finance services, including savings and insurance, India's rural population will have
a significant impact on India's economic growth. Economic empowerment is defined here
as the modern banking system has failed to deliver inexpensive credit to India?s 600,000
villages despite several expensive attempts to do so. Since the days of the Rural Credit
Survey Committee (1954), India has come a long way in its search for an appropriate rural
banking set-up. Reserve Bank appointed the R V Gupta Committee in 1997. The
committee was asked to identify the constraints faced by banks in augmenting the flow of
credit and simplifying the procedures for agricultural credit. New institutions were over-
administered, and bureaucratic regimentation was the result. It is along such lines that the
rural credit co-operatives came up followed by the commercial banks? diversification into
rural banking after the nationalisation of 14 big banks. Since the commercial banks, too,
did not perform as expected, the regional rural banks (RRBs) were formed. At the national
level NABARD was established.
Fundamental and Technical Analysis of Indian Banking Sector

? Virtual Banking - The practice of banking has undergone a significant transformation in
the nineties. While banks are striving to strengthen customer relationship and move
towards 'relationship banking', customers are increasingly moving away from the confines
of traditional branch-banking and are seeking the convenience of remote electronic
banking services. And even within the broad spectrum of electronic banking, the aspect of
banking that has gained currency is virtual banking. Increase in the functional and
geographical spread of banks has necessitated the switchover from hard cash to paper
based instruments and now to electronic instruments. Broadly speaking, virtual banking
denotes the provision of banking and related services through extensive use of information
technology without direct recourse to the bank by the customer. The origin of virtual
banking in the developed countries can be traced back to the seventies with the installation
of Automated Teller Machines (ATMs). It is possible to delineate the principal types of
virtual banking services. These include Shared ATM networks, Electronic Funds Transfer
at Point of Sale (EFTPoS), Smart Cards, Stored-Value Cards, phone banking, and more
recently, internet and intranet banking.
? Retail Banking - With increased competition, spreads in corporate lending have
decreased significantly. Banks are thus moving into the retail mode to tide over the global
slowdown and boost the bottom-line. Retail banking had been a neglected segment
accounting to 10.5 % of all banks loans of India. The main advantages of retail banking
are assured spread, widely distributed risks and lower NPAs due to limited risk associated
with the salaried class. However, transactions cost is higher as compared to of corporate
lending. Thus, the target clientele is consumers and mid size companies. The product
offerings include home loans, car loans, credit cards, personal loans and also customized
loans like equipment loan for doctors. “In retail banking, a higher physical presence is
needed, in the form of ATMs as well as branches. State-of-art technology has to be used
to enable convenient customer transactions.
Current Scenario
Indian Banking sector is ruled by Public sector banks (PSBs) which accounted for 72.6% of total
advances for all Scheduled Commercial Banks (SCBs) as on 31st March 2008. PSBs have
Fundamental and Technical Analysis of Indian Banking Sector

rapidly expanded their foot prints after nationalization of banks in India in 1969 and further in
1980. Although there is a restrictive entry/expansion for private and foreign banks in India, these
banks have increased their presence and business over last 5 years.
Peculiar characteristic of Indian banks unlike their western counterparts such as high share of
household savings in deposits (57.4% of total deposits), adequate capitalization, stricter
regulations and lower leverage makes them less prone to financial crisis, as was seen in the
western world in mid 2009.
The Scheduled Commercial Banks (SCBs) in India have shown an impressive growth from 2004
to the mid of 2009. Total deposits, advances and net profit grew at CAGR of 19.6%, 27.4% and
20.2% respectively from 2003 to 2008. Banking sector recorded credit growth of 33.3% in 2005
which was highest in last two and half decades and credit growth in excess of 30% for three
consecutive years from 2004 to 2007, which is best in the banking industry so far. Increase in
economic activity and robust primary and secondary markets during this period have helped the
banks to harvest larger increase in their
fee based incomes.
A significant improvement in
recovering the NPAs, lowest ever
increase in new NPAs coupled with a
sharp increase in gross advances for
SCBs translated into the best asset
quality ratio for banking sector in last
two decades. Gross NPAs to gross
advances ratio for SCBs decreased from
the high of 14% in 2000 to 2.3% in
2008.

Within the group of banks, foreign and private sector banks grew at a higher rate than the
industry from 2003 to 2008 principally because of lower base effect and rapid expansion
undertaken by these banks. In 2009, overall growth in credit and deposits was led by PSBs.
Fundamental and Technical Analysis of Indian Banking Sector

However, growth of private and foreign banks was significantly lower in 2009 due to their high
exposure to stressed sectors and crisis at parent level for foreign banks.
Unsecured bank credit has risen over the years and stood at 23.3% of bank credit in FY08 as
compared to just 10.9% in 2000. Lending to sensitive sector has also grown at CAGR of 46.1%
from 2005 to 2008. In the backdrop of the economic downturn, CARE Research feels that the
excellent performance seen in last five years ended 2008 and will be difficult to reiterate in
subsequent years.
CARE Research expects that with the downturn in the economy, credit and deposit growth will
moderate in coming years. Credit growth will be led by spending on the infrastructure while
retail credit will show a moderate growth. Margin pressures due to lag effect of rate cuts between
interest rate on deposits and advances, lower treasury gains and core fee income and increasing
in provisions for NPAs is likely to put pressure in the bottom line of the banks.
Going forward, PSBs? which are close to the required lower level of government stake and have
concentrated presence in particular region are likely to consider its merger with other PSB as an
important option if they want to sustain the growth seen in past.

2. Global Scenario
Fundamental and Technical Analysis of Indian Banking Sector

September 2009 marked the first anniversary of the global financial crisis. It was September
2008 when America?s one of the biggest investment bank, Lehman Brothers, collapsed and
triggered a chain reaction of economic, financial and psychological crisis which very soon
engulfed the entire globe. The year 2008-09 turned out to be a year when hard-hit by the global
financial crisis, the worldwide banking industry?s future development has been sharply drawn
into focus. Recognizing that repairing the financial system remains a key priority, the rescue
measures were undertaken globally.

These have contributed to an avoidance of “worst case scenarios”, in particular by reducing the
default risk of major banks. From a period of volatility, the international financial markets are
normalizing in Q2 of 2009. However, the global banking sector outlook remains difficult on both
Fundamental and Technical Analysis of Indian Banking Sector

the sides of the Atlantic. Due to proactive and swift action of central banks and Governments and
regulatory and supervisory policy initiatives, the adverse impact of the crisis remained under
control. The global economy is slated to recover during 2010, which may facilitate revival of the
global banking system.
The banking sector is undergoing significant changes as a result of the financial crisis. It is
expected to become a less “fashionable” and even more heavily regulated industry with greater
state involvement, increased investor scrutiny and substantially higher capital levels. This may
lead to lower growth, lower profits and lower volatility for banks than during the past few
decades – a trend that may be exacerbated in the medium term by the expected lack of major
growth drivers. According to analysts, following the financial crisis, the global banking outlook
is perceived to be uncertain. In the short-term, the outlook seems to be grim while the drivers for
the long-term prospects show some sign of incipient recovery. Especially US banks might well
face lean years due to low loan growth, higher credit losses and weaker revenues from capital-
market activities. Secondly, while consolidation in banking may continue, there could be a
possible reorientation towards domestic markets rather than financial globalization and market
integration. Thirdly, a more general effect could be the vast destruction of confidence in banks
and of their reputation. Given that the demand for banking services is relatively inelastic even
though this may not have adverse consequences in the short run in the longer run, banks could
feel strong negative repercussions. It will, therefore, be one of the greatest challenges for banks –
apart from adjusting to a profoundly changed business environment – to repair their public
reputation as soon as possible and regain the trust of clients, policymakers and the general
public.

Global Banking Crisis
The global financial crisis came to the forefront of the business world and world media in
September 2008, with the failure and merging of a number of American financial companies. It
Fundamental and Technical Analysis of Indian Banking Sector

was not a surprise -- many business journals had been commenting on the stability of the leading
American and European financial firms following the Sub-Prime Mortgage Crisis. Much of the
American economy is built on credit with firms borrowing money from other firms and the
general consumer borrowing money for homes and cars. Many people were taking advantage of
the housing boom in the US when it ended, leaving both investors and mortgage companies in
trouble.
On 7 September 2008, it was announced that two firms, Fannie Mae and Freddie Mac, would be
nationalised to try to ensure the financial stability of the two firms. One week later, on the 14th
September 2008, it came to light that the financial services firm, Lehman Brothers, would file for
bankruptcy after being denied support by the Federal Reserve Bank. Later the same day, the
Bank of America announced that it would be purchasing Merrill Lynch.
Due to the above factors, there was major instability on the global stock markets with major
decreases in market value between the 15th and 17th of September 2008. On the 16th September,
the American International Group (AIG), which suffered due to its credit rating being reduced,
was helped by the Federal Reserve which created an $85 billion credit facility to stop it from
collapse.
Over the next two weeks, more banks failed and the two remaining banks-Goldman Sachs and
Morgan Stanley converted into 'bank holding companies' so that they had more access to market
liquidity. Numerous plans were put forward with intent to solve the crisis and in the end
President George W. Bush and the Secretary of the Treasury announced a $700 billion financial
aid package intended to limit the damage that the previous few weeks? events caused. The plan
was received well by investors on Wall Street and around the world.
On 28th September it was announced that Fortis, a large banking and finance firm would be
semi-nationalized with Luxembourg, Belgium and the Netherlands investing over 11 billion
Euros into the company. On Monday 29th September, it was announced that the US bank
Wachovia would be bought up by Citigroup (this deal fell through in early October 2008 and
Fundamental and Technical Analysis of Indian Banking Sector

Fundamental and Technical Analysis of Indian Banking Sector

Wachovia opted for a more favourable offer from Wells Fargo) and stock market values fell
dramatically in both the US and Europe. Later that day, Iceland nationalized the Icelandic lender
Glitnir. Finally, on Tuesday 30th September 2008, stock markets began to rise again, although
the credit markets remained very tight. It was also announced that 9 billion Euros was being
made available for the bank Dexia by France, Belgium and Luxembourg.
Consumer spending has fallen, and banks a much less likely to approve loans, and with many
countries now in a recession, there will be more hard times ahead.
The events described above started a plethora of problems in the economic and political world
and continued through the end of 2008 into the beginning of 2009 and is likely to continue effect
the world for months and years to come.

Fundamental and Technical Analysis of Indian Banking Sector

Leading Global Banks
Listed below is a selection of the top banks worldwide ranked on total assets in US$. World and
Country Bank Rankings are based on the total assets of a bank calculated from yearend figures
gained from submitted balance sheets.
These World and Country Rankings offer an excellent indicator of how financial institutions are
performing in the industry. Below you can see the top 50 banks and best banks ranked on total
assets in US Dollars.
Top 20 Banks in the World
The Royal Bank of Scotland Group PLC UK
Deutsche Bank AG Germany
Barclays PLC UK
BNP Paribas SA France
Crédit Agricole SA France
UBS AG Switzerland
JPMorgan Chase Bank National Association USA
Société Générale France
The Bank of Tokyo-Mitsubishi UFJ Ltd. Japan
Bank of America NA USA
Banco Santander SA Spain
UniCredit SpA Italy
ING Bank NV Netherlands
Industrial & Commercial Bank of China Limited China
HSBC Bank PLC UK
Citibank NA USA
Credit Agricole Corporate and Investment Bank France
Sumitomo Mitsui Banking Corporation Japan
China Construction Bank Corporation China
Credit Suisse Group Switzerland
Source:
Fundamental and Technical Analysis of Indian Banking Sector

3. Economy Analysis
The fiscal year 2009-10 began as a difficult one. There was a significant slowdown in the growth
rate in the second half of 2008-09, following the financial crisis that began in the industrialized
nations in 2007 and spread to the real economy across the world. The growth rate of the gross
domestic product (GDP) in 2008-09 was 6.7 %, with growth in the last two quarters hovering
around 6 %. There was apprehension that this trend would persist for some time, as the full
impact of the economic slowdown in the developed world worked through the system. It was
also a year of reckoning for the policymakers, who had taken a calculated risk in providing
substantial fiscal expansion to counter the negative fallout of the global slowdown. Inevitably,
India?s fiscal deficit increased from the end of 2007-08, reaching 6.8 % (budget estimate, BE) of
GDP in 2009-10. A delayed and severely subnormal monsoon added to the overall uncertainty.
The continued recession in the developed world, for the better part of 2009-10, meant a sluggish
export recovery and a slowdown in financial flows into the economy. Yet, over the span of the
year, the economy posted a remarkable recovery, not only in terms of overall growth figures but,
more importantly, in terms of certain fundamentals, which justify optimism for the Indian
economy in the medium to long term.
Overall GDP Growth
The advance estimate of GDP growth at 7.2 % for 2009-10, falls within the range of 7 +/- 0.75
projected nearly a year ago in the Economic Survey 2008-09. With the downside risk to growth
due to the delayed and sub-normal monsoons having been contained to a large extent, through
the likelihood of a better-than-average rabi agricultural season, the economy has responded well
to the policy measures undertaken in the wake of the global financial crisis. While the GDP at
factor costs at constant 2004-05 prices, is placed at Rs 44,53,064 crore, the GDP at market
prices, at constant prices, is estimated at Rs 47, 67,142 crore. The corresponding figures at
current prices are Rs 57,91,268 crore and Rs 61, 64,178 crore respectively. It is worthwhile to
note here that the growth rates of GDP at market prices, at constant 2004-05 prices, in 2008-09
and 2009-10 at 5.1 % and 6.8 % have been considerably lower than the growth rates of GDP at
factor cost. This is due to the significant decline in net indirect taxes (i.e. indirect taxes minus
subsidies) in the corresponding years on account of the fiscal stimulus implemented by the
Fundamental and Technical Analysis of Indian Banking Sector

Government, which included tax relief to boost demand and increase in the expenditure on
subsidies.
The recovery in GDP growth for 2009-10 is broad based. Seven out of eight sectors/sub-sectors
show a growth rate of 6.5 % or higher. The exception, as anticipated, is agriculture and allied
sectors where the growth rate is estimated to be minus 0.2 % over 2008-09. Sectors including
mining and quarrying; manufacturing; and electricity, gas and water supply have significantly
improved their growth rates at over 8 % in comparison with 2008-09. The construction sector
and trade, hotels, transport and communication have also improved their growth rates over the
preceding year, though to a lesser extent. However, the growth rate of community, social and
personal services has declined significantly, though it continues to be around its pre-global crisis
medium-term trend growth rate. Financing, insurance, real estate and business services have
retained their growth momentum at around 10 % in 2009-10. In terms of sectoral shares, the
share of agriculture and allied sectors in GDP at factor cost has declined gradually from 18.9 %
in 2004-05 to 14.6 % in 2009-10. During the same period, the share of industry has remained the
same at about 28 %, while that of services has gone up from 53.2 % in 2004-05 to 57.2 % in
2009-10.
Per Capita Growth
The growth rates in per capita income and consumption, which are gross measures of welfare in
general, have declined in the last two years. This is a reflection of the slowdown in the overall
GDP growth. While the growth in per capita income, measured in terms of GDP at constant
market prices, has declined from a high of 8.1 % in 2007-08 to 3.7 % in 2008-09 and then
recovered to 5.3 % in 2009-10, per capita consumption growth as captured in the private final
consumption expenditure (PFCE) shows a declining trend since 2007-08 with its growth rate in
2009-10 falling to one-third of that in 2007-08. The growth rate of per capita consumption was
lower than that of per capita income up to 2007-08; however since then it was higher in two
years and became lower again in 2009-10. The average growth in per capita consumption over
the period 2005-06 to 2009-10 was slower at 6.08 % than that in per capita income at 6.52 %.
These year to year differences in growth rates can be explained by the rising savings rate and
also the rise in tax collections that have been observed in some of these years.
Aggregate Demand and its Composition
Fundamental and Technical Analysis of Indian Banking Sector

The change in the NAS series from the old base of 1999-2000 to the new base of 2004-05 has
brought about significant revision in the expenditure estimates of the GDP for 2008-09. While
growth of the PFCE in 2008-09 was revised upward from 2.9 % to 6.8 %, growth in Government
final consumption expenditure was revised downwards from over 20 % in 2008-09 on the old
base to 16.7 % on the new base. In 2009-10 a growth of 4.1 % is expected in private final
expenditure and 8.2 % in Government final expenditure. There is therefore a significant decline
in the growth of consumption expenditure in 2009-10. However, the overall share of
consumption expenditure, both private as well as Government in GDP at market prices, at
constant 2004-05 prices, has declined only marginally from 70.9 % in 2008-09 to 69.6 % in
2009-10.
Thus it now appears that moderation in the decline in GDP growth rate, in the second half of
2008-09, was primarily a result of the boost provided by the fiscal stimulus to consumption
demand, both private as well as Government, rather than the continued buoyancy in investment
growth, as indicated in the Economic Survey 2008-09. This in fact was the intended purpose of
the fiscal stimulus, which was not captured by the earlier NAS data. It implies that expansion in
investments in the manufacturing sector may have declined a lot faster and, perhaps, earlier than
the estimates for 2008-09 suggested in May 2009. Further, though the growth in gross fixed
capital formation (a proxy for investment growth) in 2009-10 has recovered to 5.2 % from 4 % in
2008-09, it is still below the GDP growth rate unlike in the pre-global crisis phase. This makes it
necessary, therefore, to watch the growth recovery in private investment in the third and fourth
quarters, in sequencing the rollback of the stimulus measures. Moreover, the contribution of net
exports has become positive in 2009-10, after a considerable period of time. It may again turn
negative as the demand for imports increases with a deepening of industrial recovery and a pick-
up in domestic demand.

Production and Supply
Fundamental and Technical Analysis of Indian Banking Sector

Agriculture
Total food grains production in 2008-09 was estimated at 233.88 million tons as against
230.78 million tons in 2007-08 and 217.28 million tons in 2006-07. In the agricultural season
2009-10, the impact of the delayed and sub-normal monsoon is reflected in the production and
acreage data for kharif crops. As per the first advance estimates, covering only the kharif
crop, production of food grains is estimated at 98.83 million tons in 2009-10, as against the
fourth advance estimates of 117.70 million tons for the kharif crop in 2008-09 and a target of
125.15 million tons for 2009-10. Overall production of kharif cereals in 2009-10 has shown a
decline of 18.51 million tons over 2008-09. Both for rice and coarse cereals, there has been a
shortfall as compared to the targeted production and also the production level achieved in the
previous year. In the case of rice the decline is about 15 % over the 2008-09 level and 17 % in
comparison with the target for 2009-10. The decline in kharif coarse cereals in 2009-10 in
comparison with 2008-09 is nearly 20 % and the shortfall with respect to the target for kharif
2009-10 is nearly 10 million tons. Total production of kharif pulses is estimated at 4.42
million tons in 2009-10, which is 8 % lower than the production during 2008-09 and 32 %
lower than the targeted production for 2009-10. Similarly, total kharif production of the nine
oilseeds in 2009-10 is about 15 % lower than the kharif production in 2008-09.
Industry and Infrastructure
The cyclical slowdown in the industrial sector which began in 2007-08 got compounded by
the global commodity price shock and the impact of the global slowdown during the course of
calendar year 2008 was arrested at the beginning of 2009-10. After the first two months of the
current fiscal, there were clear signs of recovery. This is evident from the NAS data as well as
the index of industrial production (IIP). While the CSO?s advance estimates place industrial-
sector growth at 8.2 %, as against 3.9 % in 2008-09, the IIP industrial growth is estimated at
7.7 % for the period April- November 2009-10, significantly up from 0.6 % during the second
half of 2008-09. The manufacturing sector, in particular, has grown at the rate of 8.9 % in
2009-10.
Growth in the major industrial groups has been a mixed bag. There was strong growth in
automobiles, rubber and plastic products, wool and silk textiles, wood products, chemicals
and miscellaneous manufacturing; modest growth in nonmetallic mineral products; no growth
Fundamental and Technical Analysis of Indian Banking Sector

in paper, leather, food and jute textiles; and a slump in beverages and tobacco products in
2009-10. In terms of use-based classification, there was strong growth in consumer durables
and intermediate goods (partly aided by the base effect); moderate growth in basic and capital
goods; and sharp deceleration in consumer nondurables.
Core industries and infrastructure services, led by the robust growth momentum of telecom
services and spread across power, coal and other infrastructure like ports, civil aviation and
roads, have also shown signs of recovery in 2009-10. In the current fiscal, electricity
generation emerged from the lackluster growth witnessed in the previous year and equaled its
performance in 2007-08. That this was achieved despite constraints imposed by the
inadequate availability of coal and the dismal hydelgeneration scenario due to the sub-normal
monsoon, attests well to its potential. During April-December 2009, the peak deficit and total
energy deficit came down considerably to 12.6 % and 9.8 % respectively from 13.8 % and
10.9 % during the corresponding period of the previous year. This happened mainly due to the
increase in the growth in electricity generation. The availability of gas from the KG basin
(D6) and surplus utilization of gas available on fallback basis resulted in better utilization of
capacity and higher plant load factor (PLF) as also high growth in electricity generated from
gas-based plants. The overall PLF also improved during April-December 2009.
The domestic supply of crude oil remained around 34 million metric tons (mmt) and natural
gas at about 32 billion cubic metric tons during the past five years. With 15 new oil and gas
discoveries during 2009-10, the domestic availability is expected to improve. During 2009-10,
the projected production for crude oil is 36.7 mmt, which is about 11 % higher than the actual
crude oil production of 33.5 mmt in 2008-09.
The opening of the telecom sector has not only led to rapid growth in subscriber base, but has
also significantly helped in maximization of consumer benefits, particularly in terms of price
discovery, following the forbearance approach in tariffs. From only 54.6 million telephone
subscribers in 2003, the number increased to 429.7 million at the end of March 2009 and
further to 562 million as of October 31, 2009 showing an addition of 96 million subscribers
during the period from March to December 2009.
Service Sector
Fundamental and Technical Analysis of Indian Banking Sector

The service sector which has been India?s workhorse for well over a decade has continued to
grow rapidly. Following the NAS classification, it comprises the sub-sectors trade, hotels,
transport and communications; financing, insurance, real estate and business services; and
community, social and personal services. As against a growth of 9.8 % in 2008-09 it grew at
8.7 % in 2009-10. While there has been a significant dip in the growth of community social
and personal services in 2009-10, the other sub-sectors have either retained their growth
momentum or improved upon it. A comparison between the old and the new series of NAS
reveals considerable difference in the level estimates of the value added of service sub-sectors
to GDP at current prices. Thus, for instance, there has been a decline, ranging from around 8
% in 2004-05 to 30 % in 2008-09, in the communication sub-sector. This has been partly
offset by the increase in the level estimates of value added in real estate, ownership of
dwellings, business and legal services, ranging from 11.6 % in 2004-05 to nearly 34.4 % in
2008-09.
Savings and investments
Gross Domestic Savings
Gross domestic savings (GDS) at current prices in 2008-09 were estimated at Rs 18,11,585
crore, amounting to 32.5 % of GDP at market The fall in the rate of GDS has mainly been due
to the fall in the rates of savings of the public sector (from 5.0 % in 2007-08 to 1.4 % in 2008-
09) and private corporate sector (from 8.7 % in 2007-08 to 8.4 % in 2008-09). In respect of
the household sector, the rate of saving has remained at the same level of 22.6 % in 2007-08
and 2008-09. Indeed, the change in the NAS series has had the most conspicuous effect on the
savings and investment rates. The rate of GDS on the new series increased from 32.2 % in
2004-05 to 36.4 % in 2007-08 before declining to 32.5 % in 2009-10, as against the old series
where it rose from 31.7 % in 2004-05 to 37.7 % in 2007-08. Thus, from 2005-06 to 2007-08,
the GDS rate was overestimated in the NAS old series by an average of 1.3 %.

Sectoral Investment
The sectoral investment rate is a useful indicator of the direction of new investments. While
the overall growth of investment in India was in the range of 15 to 16 % per annum during the
Fundamental and Technical Analysis of Indian Banking Sector

last few years, it plunged to - 2.4 % in 2008-09 as a result of the external shock-led
slowdown. At sectoral level, there has been a welcome rebound in the growth rate of
investment in the agricultural sector, which grew at 16.5 % and 26.0 % in 2007-08 and 2008-
09 respectively. This is in contrast to the growth rate of 1.4 % recorded in 2006-07. Growth of
investment in the industrial sector has been more than the total investment growth up to 2007-
08. However, in 2008-09, this was reversed, when investment in the industrial sector declined
by - 17.6 % as compared to a decline of - 2.4 % in total investment. Within the industrial
sector, the decline was more prominent in manufacturing and the construction sector.
Investment in the unorganized manufacturing sector declined by a negative 42 %, indicative,
perhaps, of the difficulty faced by the sector in accessing credit due to the tight market
conditions in the post financial crisis phase. Investment in the services sector registered a
growth of 20.2 % in 2006-07, which suddenly declined to - 16.0 % in 2007-08 as a result of a
decline in investment in the trade, hotels and restaurants sub-sector. This decline in the said
sub-sector was made up in 2008-09 when, on the strength of a growth of 19.4 %, there was a
revival in investment growth rate in the services sector as a whole. Within the services sector,
the global financial crisis has had a dampening effect on investment growth in the banking
and insurance subsector in 2008-09.
Prices and Inflation
The year-on-year WPI inflation rate has been fairly volatile in 2009-10. It was 1.2 % in March
2009 and then declined continuously to become negative during June-August 2009, assisted in
part by the large statistical base effect from the previous year. It turned positive in September
2009 and accelerated to 4.8 % in November 2009 and further to 7.3 % in December 2009. For
the fiscal year so far (March over December 2009) WPI inflation is estimated at 8 %. Year-on-
year inflation in the composite food index (with a weight of 25.4 %) at 19.8 % in December 2009
was significantly higher than 8.6 % last year. In respect of food articles, inflation on year-on-year
basis in December was 19.2 % and on fiscal-year basis (i.e. over March 2009) it was 18.3 %. At
the same time, the composite non-food inflation within the manufactured group of the WPI (with
a weight of 53.7 %) at 2.4 % in December 2009 was lower than the 6.7 % recorded last year.
This suggests concentrated inflation. Indeed, for several months, rapidly rising food inflation has
been a cause for concern. In December 2009, nearly 67 % of the overall WPI inflation could be
Fundamental and Technical Analysis of Indian Banking Sector

attributed to food items (primary and manufactured), followed by 12 % in the fuel and power
commodity group, the remaining 21 % being explained by manufactured nonfood and primary
non-food articles. Among food items the major contributors to inflation are milk (20 %), eggs,
meat and fish (over 20 %), rice (about 10 %), wheat (6 %), pulses (about 9 %), potatoes (9 %)
and tomatoes (6 %). The recent period has witnessed significant divergence in the WPI and CPI
inflation rates, principally on account of the larger weights assigned to the food basket in the
CPIs and due to the fact that retail prices are relatively sticky downwards. Thus, due to the sharp
increase in essential commodity prices, while all the four CPIs remained elevated since March
2008, rising gradually from about 7 to 8 % (month-on-month) to around 15 to 17 % in December
2009, WPI inflation first went up from around 8 % in March 2008 to 13 % in August 2008, then
declined to about 1 % in March 2009, turned negative during June to August 2009 before rising
again to over 7 % in December 2009.
Foreign Exchange Reserves
During fiscal 2009-10, foreign exchange reserves increased by US$ 31.5 billion from US$ 252.0
billion in end March 2009 to US$ 283.5 billion in end December 2009. Out of the total accretion
of US$ 31.5 billion, US$ 11.2 billion (35.6 %) was on BoP basis (i.e. excluding valuation effect),
because of higher inflows under FDI and portfolio investments, while accretion of US$ 20.3
billion (64.4 %) was on account of valuation gain due to weakness of the US dollar against major
currencies. Besides, the Reserve Bank of India (RBI) concluded the purchase of 200 metric tons
of gold from the IMF, under the IMF?s limited gold sales programme at the cost of US$ 6.7
billion in the month of November 2009. Further, a general allocation of SDR 3,082 million
(equivalent to US$ 4,821 million) and a special allocation of SDR 214.6 million (equivalent to
US$ 340 million) were made to India by the IMF on August 28, 2009 and September 9, 2009
respectively.

Exchange Rate
In fiscal 2009-10, with the signs of recovery and return of FII flows after March 2009, the rupee
has been strengthening against the US dollar. The movement of the exchange rate in the year
Fundamental and Technical Analysis of Indian Banking Sector

2009-10 indicated that the average monthly exchange rate of the rupee against the US dollar
appreciated by 9.9 % from Rs 51.23 per US dollar in March 2009 to Rs 46.63 per US dollar in
December 2009, mainly on account of weakening of the US dollar in the international market.

4. Industry Analysis
Five Force Analysis
Fundamental and Technical Analysis of Indian Banking Sector

Named after Michael E. Porter, this model identifies and analyzes 5 competitive forces that
shape every industry, and helps determine an industry's weaknesses and strengths.

1. Competition in the industry
2. Potential of new entrants into industry
3. Power of suppliers
4. Power of customers
5. Threat of substitute products

Threat of New Entrants
Those industries with high entry barriers will have fewer firms entering. With fewer firms, there
is less environmental complexity, and it is easier for one firm to begin to dominate the industry.
Fundamental and Technical Analysis of Indian Banking Sector

In Indian banking sector there are large number of player are existing although Indian banking
industry are not so much developed as in other developed economy. For any private or foreign
bank want to start their operations in India it is first requirement to take the permission from the
government of India and also the bank has to follow the rules and regulation formed the RBI.
1. Economies of scale
If economies of scale exist, it represents a high barrier to entry. In Indian banking sector there is
an economies of scale. There are so many large bank s and their wide network spread over the
whole country. There are so many banks which are operating in foreign and this entire bank has
wider market potentially. And if new player enters, they have to match their scale size, but
without the benefits of the associated learning curve it is not possible to match them. Since
economies of scale do not exist in any tangible way, one must prove their existence or non-
existence. Provide measures related to the capital investment and through which you should
reach to lower unit costs.
2. Working capital requirements
How much money will we have to tie up to keep the doors open? This is money that cannot be
invested in any other way. This is also a barrier to entry in that if firms must tie up large amounts
of capital for daily operations; this will deter smaller firms from entering. In India any bank
wants to enter than any bank has require the large amount in the form of the working capital
because India is such a country that has wider geographic area and new entrant want to attain the
economies of scale than it has to require the large amount of fund in the form of working capital.
3. Proprietary product differences
In Indian banking sector there are so many banks which are operating as an universal banking so
there are no kind of differentiation in any service provided by the foreign bank so for any bank
will think about that whether to enter in any country or not, because no differentiation in the
services than they will not get enough response from the customer side so there is no meaning
for to enter in the economy.
4. Brand identity
Is brand identity important in this industry? Do buyers make conscious choices based on brand
identity? If so, this would be a high barrier to entry. In Indian banking sector are most of the
Fundamental and Technical Analysis of Indian Banking Sector

customer are attracted by the brand and select the service of that bank like in India SBI, ICICI
and HDFC and so on. There are so many other factors affected in the brand identity like the
associated company or any other government also because the government provides the surety
for the money. There are rating also available for the entire bank through which you can judge
the efficiency level of any bank.
5. Access to distribution
For the purpose of the easy accessibility the bank has to provide the so many facilities like
internet banking facility, ATM facility, travelling cheque and so on. For the purpose of the wide
accessibility bank has to invest large amount of capital in infrastructure and also open the large
number of branches.

Bargaining Power of Suppliers
There are so many factors through which you can judge the bargaining power of the supplier. In
Indian banking sector there are so many customers so we can say that there are no bargaining
power of the suppliers although depends on some factors which are as follows.
Fundamental and Technical Analysis of Indian Banking Sector

1. Supplier concentration
In India there are diversified needs of the customer but majority are more concern about the
service provided by the bank and how fast the service is.
2. Presence of substitute
The presence of substitute lowers the power of suppliers. But buyer has no availability of
substitute for the same as the service provided by the bank. But in some case like investment
purpose there are so many other services are available to the investors like the mutual fund, stock
market and so on.
3. Differentiation of inputs
In some cases, there are some alternative available to the investors that can differentiate their
supply.
4. Threat of forward or backward integration
Is there any indication that vertical integration is occurring? If suppliers are coming forward to
gain access to distribution channels, this gives them power. If there are indications of firms
backward integrating to capture margins, this gives firms power over supplier in the industry.

Bargaining Power of Buyers
First, determine who the buyers are. Now we will see power of the buyer in the industry.
1. Buyer concentration
Fundamental and Technical Analysis of Indian Banking Sector

If we think on the point of view of the bank than the bank has so much power because it can
borrow the money from customer because there are so many customers available in the market
who has require the earning from the other one and also provide security of money.
2. Buyer switching cost
In banking industry there is moderate switching cost for example if you have a bank account
with HDFC and you want to open the new bank account with other bank SBI, you want just
minimum balance as per rules.
3. Buyer Information
Here we can also think on point of view of the customer and the bank. If customer has the full
information then the bank has less bargaining power. For example, the interest rate prevailing in
the market.

Threat of Substitute Products
An industry will be attractive if there is no threat from substitute products. A substitute is any
product or services that will fulfill the same need of the customer. In banking sector there are so
many substitutes like you can invest in fix deposit or any other mutual fund scheme.
Fundamental and Technical Analysis of Indian Banking Sector

Threat of Existing Rivalry
An industry characterized by high rivalries unattractive because it limits the ability to achieve
higher growth. At the other extreme, industries with no rivalry are usually dominated by a few
major firms which could limit strategic flexibility.
1. Degree of concentration and balance among competitor
As the business cycle progresses, there is a tendency for consolidation to occur within industries.
In Indian banking sector at present so many merger and acquisition has happened like SBS and
SBI. In the banking sector, three to four banks together has market share of 60%.
2. Diversity among competitors
Are firms following different strategies? If so, they have found market niches and this reduces
rivalry. If they are all following the same strategy, they are fighting for the markets and this
increases rivalry.
3. Industry growth rate
There is a positive trend to industry growth rate in Indian banking sector.
4. Product differentiation
Are firms able to differentiation their product or services? If so, this reduces rivalry as each firm
is able to find a market niche. For example, SBI has differentiated their services through the
value chain. In the banking industry each firm offers the same service. The lack of differentiation
makes the industry unattractive.
5. Exit barrier
If we enter this industry, will we be able to get out again? A firm can exit by converting
operation to product/services or by selling out –merger. If exit barriers are low, this reduces
rivalry and makes industry unattractive. Sector requires large investments.
PEST Analysis
Fundamental and Technical Analysis of Indian Banking Sector

PEST analysis of any industry sector investigates the important factors that are affecting the
industry and influencing the companies operating in that sector. PEST is an acronym for
political, economic, social and technological analysis. Political factors include government
policies relating to the industry, tax policies, laws and regulations, trade restrictions and tariffs
etc. The economic factors relate to changes in the wider economy such as economic growth,
interest rates, exchange rates and inflation rate, etc. Social factors often look at the cultural
aspects and include health consciousness, population growth rate, age distribution, changes in
tastes and buying patterns, etc. The technological factors relate to the application of new
inventions and ideas such as R&D activity, automation, technology incentives and the rate of
technological change.

Political/ Legal Environment
Fundamental and Technical Analysis of Indian Banking Sector

Government and RBI policies affect the banking sector. Sometimes looking into the political
advantage of a particular party, the Government declares some measures to their benefits like
waiver of short-term agricultural loans, to attract the farmer?s votes, but by doing that the
profits of the banks get affected. Various banks in the cooperative sector are open and run by
the politicians. They exploit these banks for their benefits. Sometimes the government
appoints various chairmen of the banks.
Various policies are framed by the RBI looking at the present situation of the country for
better control over the banks.
Economical Environment
Banking is as old as authentic history and the modern commercial banking are traceable to
ancient times. In India, banking has existed in one form or the other from time to time. The
present era in banking may be taken to have commenced with establishment of bank of
Bengal in 1809 under the government charter and with government participation in share
capital. Allahabad bank was started in the year 1865 and Punjab national bank in 1895, and
thus, others followed.
Every year RBI declares its 6 monthly policy and accordingly the various measures and rates
are implemented which has an impact on the banking sector. Also the Union budget affects
the banking sector to boost the economy by giving certain concessions or facilities. If in the
Budget savings are encouraged, then more deposits will be attracted towards the banks and in
turn they can lend more money to the agricultural sector and industrial sector, therefore,
booming the economy. If the FDI limits are relaxed, then more FDI are brought in India
through banking channels.
Social Environment
Before nationalization of the banks, their control was in the hands of the private parties and
only big business houses and the effluent sections of the society were getting benefits of
banking in India. In 1969 government nationalized 14 banks. To adopt the social development
in the banking sector it was necessary for speedy economic progress, consistent with social
justice, in democratic political system, which is free from domination of law, and in which
opportunities are open to all. Accordingly, keeping in mind both the national and social
Fundamental and Technical Analysis of Indian Banking Sector

objectives, bankers were given direction to help economically weaker section of the society
and also provide need-based finance to all the sectors of the economy with flexible and liberal
attitude. Now the banks provide various types of loans to farmers, working women,
professionals, and traders. They also provide education loan to the students and housing loans,
consumer loans, etc.
Banks having big clients or big companies have to provide services like personalized banking
to their clients because these customers do not believe in running about and waiting in queues
for getting their work done. The bankers also have to provide these customers with special
provisions and at times with benefits like food and parties. But the banks do not mind
incurring these costs because of the kind of business these clients bring for the bank.
Banks have changed the culture of human life in India and have made life much easier for the
people.
Technological Environment
Technology plays a very important role in bank?s internal control mechanisms as well as
services offered by them. It has in fact given new dimensions to the banks as well as services
that they cater to and the banks are enthusiastically adopting new technological innovations
for devising new products and services.
The latest developments in terms of technology in computer and telecommunication have
encouraged the bankers to change the concept of branch banking to anywhere banking. The
use of ATM and Internet banking has allowed „anytime, anywhere banking facilities.
Automatic voice recorders now answer simple queries, currency accounting machines makes
the job easier and self-service counters are now encouraged. Credit card facility has
encouraged an era of cashless society. Today MasterCard and Visa card are the two most
popular cards used world over. The banks have now started issuing smartcards or debit cards
to be used for making payments. These are also called as electronic purse. Some of the banks
have also started home banking through telecommunication facilities and computer
technology by using terminals installed at customers home and they can make the balance
inquiry, get the statement of accounts, give instructions for fund transfers, etc. Through ECS
we can receive the dividends and interest directly to our account avoiding the delay or chance
of losing the post.
Fundamental and Technical Analysis of Indian Banking Sector

Today banks are also using SMS and Internet as major tool of promotions and giving great
utility to its customers. For example SMS functions through simple text messages sent from
your mobile. The messages are then recognized by the bank to provide you with the required
information. All these technological changes have forced the bankers to adopt customer-based
approach instead of product-based approach.

5. Tools for Analysis & Interpretation
Fundamental and Technical Analysis of Indian Banking Sector

Bank supervisory agencies are responsible for monitoring the financial conditions of commercial
banks and enforcing related legislation and regulatory policy. Although much of the information
needed to do so can be gathered from regulatory reports, on-site examinations are needed to
verify report accuracy and to gather further supervisory information. Much research has explored
the value of this private information, both to the bank supervisors and to the public who monitor
banks through the financial markets.
Trend Analysis
Trend analysis involves calculation of percentage changes in financial statement items for
a number of successive years. It is an extension of horizontal analysis to many years. We first
assign value 100 to the financial statement items in a past financial year used as the base year
and then express financial statement items in the following years as a percentage of the base-year
value.
Trend analysis over longer periods helps in identifying certain basic changes in the nature
of the business. Since many large corporations publish a summary of operating results and
selected financial indicators for five years or more, it is possible to perform trend analysis using
published reports.

CAMEL Analysis
In 1994, the RBI established the Board of Financial Supervision (BFS), which operates as a unit
of the RBI. The entire supervisory mechanism was realigned to suit the changing needs of a
Fundamental and Technical Analysis of Indian Banking Sector

strong and stable financial system. The supervisory jurisdiction of the BFS was slowly extended
to the entire financial system barring the capital market institutions and the insurance sector. Its
mandate is to strengthen supervision of the financial system by integrating oversight of the
activities of financial services firms. The BFS has also established a sub-committee to routinely
examine auditing practices, quality, and coverage.
In addition to the normal on-site inspections, Reserve Bank of India also conducts off-site
surveillance which particularly focuses on the risk profile of the supervised entity. The Off-site
Monitoring and Surveillance System (OSMOS) was introduced in 1995 as an additional tool for
supervision of commercial banks. It was introduced with the aim to supplement the on-site
inspections. Under off-site system, 12 returns (called DSB returns) are called from the financial
institutions, which focus on supervisory concerns such as capital adequacy, asset quality, large
credits and concentrations, connected lending, earnings and risk exposures (viz. currency,
liquidity and interest rate risks).
In 1995, RBI had set up a working group under the chairmanship of Shri S. Padmanabhan to
review the banking supervision system. The Committee certain recommendations and based on
such suggestions a rating system for domestic and foreign banks based on the international
CAMEL model combining financial management and systems and control elements was
introduced for the inspection cycle commencing from July 1998. It recommended that the banks
should be rated on a five point scale (A to E) based on the lines of international CAMEL rating
model. CAMEL evaluates banks on the following six parameters:-
(a) Capital Adequacy: Capital adequacy is measured by the ratio of capital to risk-weighted
assets (CRAR). A sound capital base strengthens confidence of depositors.
(b) Asset Quality: One of the indicators for asset quality is the ratio of non-performing loans
to total loans (GNPA). The gross non-performing loans to gross advances ratio is more
indicative of the quality of credit decisions made by bankers. Higher GNPA is indicative
of poor credit decision-making.
(c) Management Efficiency: The ratio of non-interest expenditures to total assets (MGNT)
can be one of the measures to assess the working of the management. . This variable,
which includes a variety of expenses, such as payroll, workers compensation and training
investment, reflects the management policy stance.
Fundamental and Technical Analysis of Indian Banking Sector

(d) Earnings Capacity: It can be measured as the return on asset ratio.
(e) Liquidity: Cash maintained by the banks and balances with central bank, to total asset
ratio (LQD) is an indicator of bank's liquidity. In general, banks with a larger volume of
liquid assets are perceived safe, since these assets would allow banks to meet unexpected
withdrawals.
(f) Sensitivity to Market Risk: Market risks are risks inherent in dealing with products
embedded with interest rates, foreign currencies and commodity prices. For interest rate,
the ratio of rate sensitive assets to rate sensitive liabilities are a good indicator, for foreign
currency, net open position is a good indicator.
Each of the above six parameters are weighted on a scale of 1 to 100 and contains number of
sub-parameters with individual weightings.
CAMEL supervisory ratings are assigned at the end of examinations and are directly disclosed
only to senior bank management and to the appropriate supervisory personnel. CAMEL ratings
are commonly viewed as summary measures of the private supervisory information gathered by
examiners regarding banks' overall financial conditions, although they also reflect available
public information.
The general consensus is that the private supervisory information contained in CAMEL ratings is
useful in the supervisory monitoring of banks. Furthermore, to the extent that this information
filters out into the financial markets, it appears to affect the prices of bank securities. Thus,
private supervisory information in CAMEL ratings also appears to be useful in the public
monitoring of banks.
A bank's CAMEL rating is directly known only by the bank's senior management and the
appropriate supervisory staff. CAMEL ratings are never released by supervisory agencies, even
on a lagged basis. While exam results are confidential, the public may infer such supervisory
information on bank conditions based on subsequent bank actions or specific disclosures.
Overall, the private supervisory information gathered during a bank exam is not disclosed to the
public by supervisors, although studies show that it does filter into the financial markets.
(a) Capital Adequacy: Capital adequacy reflects the overall financial condition of a bank and
also the ability of the management to meet the need for additional capital. Capital adequacy
Fundamental and Technical Analysis of Indian Banking Sector

is measured by the ratio of capital to risk-weighted assets (CRAR). A sound capital base
strengthens confidence of depositors.
? Capital Adequacy Ratio:
Capital Adequacy Ratio =
Tier I Capital+Tier II Capital
* 100
Risk Weighted Assets

? Leverage Ratio:
Leverage Ratio =
Total Debt
* 100
Shareholders' Funds

? Debt Equity Ratio:
Debt Equity Ratio =
Total Deposits
Shareholders' Funds

? Advances to Total Assets Ratio:
Advances to Total Assets Ratio =
Total Advances
* 100
Total Assets

? Government Securities to Total Investment Ratio:
Govt. Sec. to Total Inv. Ratio =
Govt. Securities
* 100
Total Investment

(b) Asset Quality: The prime motto behind measuring the asset quality is to ascertain the
component of non-performing assets as a percentage of the total assets. In addition, the
parameter also ascertains the NPA movement and the amount locked up in investments as a
percentage of the total assets.
Fundamental and Technical Analysis of Indian Banking Sector

One of the indicators for asset quality is the ratio of non-performing loans to total loans
(GNPA). The gross non-performing loans to gross advances ratio is more indicative of the
quality of credit decisions made by bankers. Higher GNPA is indicative of poor credit
decision-making.
? Net NPA to Net Advances:
Net NPAs to Net Advances =
Net NPAs
* 100
Net Advances

? Net NPA to Total Assets:
Net NPA to Total Assets =
Net NPAs
* 100
Total Assets

? Total Investments to Total Assets:
Total Investments to Total Assets =
Total Investments
* 100
Total Assets

(c) Management Efficiency: To measure the efficiency of the management we have used
parameters like profit per branch, business per employee and advances to deposits.
? Total Advances to Total Deposits:
Fundamental and Technical Analysis of Indian Banking Sector

Total Advances to Total Deposits =
Total Advances
* 100
Total Deposits

? Business per Employee:
Business per Employee =
Deposits+Advances
No. of Employees

? Profit per Employee:
Profit per Employee =
Operating Profit
No. of Employees

? Return on Net Worth:
Return on Net Worth =
Net Profit
* 100
Average Net Worth

(d) Earnings Capacity: This parameter gains importance in the light of the argument that much
of a bank?s income is earned through non-core activities like investments, treasury
operations, and corporate advisory services and so on. Here, we try to assess the quality of
Fundamental and Technical Analysis of Indian Banking Sector

income of a bank in terms of income generated by core activity - income from lending
operations. It can be measured as the return on asset ratio.
? Net Interest Margin:
Net Interest Margin =
Net Interest Income
* 100
Average Interest Earning Assets

? Return on Average Assets:
Return on Average Assets =
Net Profit
* 100
Average Total Assets

? Return on Equity:
Return on Equity =
Net Profit
* 100
Shareholder's Funds

? Non-Interest Income to Average Assets Ratio:
Non-Int. Income to Avg. Assets Ratio =
Non-Interest Income
* 100
Average Total Assets

? Overhead Ratio:
Overhead Ratio =
Non-Interest Expenses
* 100
Average Total Assets

? Efficiency Ratio:
Efficiency Ratio =
Non-Interest Expenses
* 100
Net Int. Income+Non-Int. Income

? Interest Income to Working Funds:
Interest Income to Working Funds =
Interest Income
* 100
Working Funds

? Non-Interest Income to Working Funds:
Fundamental and Technical Analysis of Indian Banking Sector

Non-Int. Income to Working Funds =
Non-Interest Income
* 100
Working Funds

? Operating Profit to Working Funds:
Operating Profit to Working Funds =
Operating Profit
* 100
Working Funds

(e) Liquidity: Cash maintained by the banks and balances with central bank, to total asset ratio
(LQD) is an indicator of bank's liquidity. In general, banks with a larger volume of liquid
Fundamental and Technical Analysis of Indian Banking Sector

assets are perceived safe, since these assets would allow banks to meet unexpected
withdrawals. Liquidity is arrived at by finding out various liquidity ratios like assets to
deposits ratio, liquid assets to total deposits, liquid assets to total assets and G-secs to total
assets.
? Liquid Assets to Demand Deposits:
Liquid Assets to Demand Deposits =
Liquid Assets
* 100
Demand Deposits

? Liquid Assets to Total Deposits:
Liquid Assets to Total Deposits =
Liquid Assets
* 100
Total Deposits

? Liquid Assets to Total Assets:
Liquid Assets to Total Assets =
Liquid Assets
* 100
Total Assets

? Government Securities to Total Assets:
Government Sec. to Total Assets =
Government Securities
* 100
Total Assets

Z-score Analysis
Fundamental and Technical Analysis of Indian Banking Sector

The Z-score formula for predicting bankruptcy was published in 1968 by Edward I. Altman,
an Assistant Professor of Finance at New York University. In 2009, he is a professor at NYU.
The formula may be used to predict the probability that a firm will go into bankruptcy within two
years. Z-scores are used to predict corporate defaults and an easy-to-calculate control measure
for the financial distress status of companies in academic studies. The Z-score uses multiple
corporate income and balance sheet values to measure the financial health of a company.
The Z-score is a linear combination of four or five common business ratios, weighted by
coefficients. The coefficients were estimated by identifying a set of firms which had declared
bankruptcy and then collecting a matched sample of firms which had survived, with matching by
industry and approximate size (assets).
Altman's applied the statistical method of discriminant analysis to a dataset of publicly held
manufacturers. The estimation was originally based on data from publicly held manufacturers,
but has since been re-estimated based on other datasets for private manufacturing, non-
manufacturing and service companies.
The original data sample consisted of 66 firms, half of which had filed for bankruptcy under
Chapter 7. All businesses in the database were manufacturers and small firms with assets of less
than $1 million were eliminated.
Altman's work built upon research by accounting researcher William Beaver and others. In the
1930s and on, Mervyn and others had collected matched samples and assessed that various
accounting ratios appeared to be valuable in predicting bankruptcy.
William Beaver's work, published in 1966 and 1968, was the first to apply a statistical method, t-
tests to predict bankruptcy for a pair-matched sample of firms. Beaver applied this method to
evaluate the importance of each of several accounting ratios based on uni-variate analysis, using
each accounting ratio one at a time. Altman's primary improvement was to apply a statistical
method, discriminant analysis, which could take into account multiple variables simultaneously.

The original Z-score formula was as follows:
Z = 1.2T
1
+ 1.4T
2
+ 3.3T
3
+ .6T
4
+ .999T
5
Fundamental and Technical Analysis of Indian Banking Sector

where,
T1 =
Working Capital
Total Assets

The ratio of Working Capital to Total Assets is the Z-Score component which is considered to be
a reasonable predictor of deepening trouble for a company. A company which experiences
repeated operating losses generally will suffer a reduction in working capital relative to its total
assets.
T2 =
Accdumulated Retained Earnings
Total Assets

The ratio of Retained Earnings to Total Assets is a Z-Score component which provides
information on the extent to which a company has been able to reinvest its earnings in itself. An
older company will have had more time to accumulate earnings so this measurement tends to
create a positive bias towards older companies.
T3 =
EBIT
Total Assets

This ratio adjusts a company's earnings for varying income tax factors and makes adjustments
for leveraging due to borrowings. These adjustments allow more effective measurements of the
company's utilization of its assets.
T4 =
Market Value of Equity
Total Liabilities

This ratio gives an indication of how much a company's assets can decline in value before debts
may exceed assets. Equity consists of the market value of all outstanding common and preferred
stock. For a private company the book value of equity is used for this ratio. This depends on the
assumption that a private company records its assets at market value.

T5 =
Sales
Total Assets

Fundamental and Technical Analysis of Indian Banking Sector

This ratio measures the ability of the company's assets to generate sales. This ratio is not
included in the Z-Score of a private company.
Zones of Discrimination
Z > 2.99 - “Safe” Zone
1.80 < Z < 2.99 - “Grey” Zone
Z < 1.80 - “Distress” Zone

Z-score formula for Private firms is as follows:
Z' = .717T
1
+ .847T
2
+ 3.107T
3
+ .420T
4
+ .998T
5

Fundamental and Technical Analysis of Indian Banking Sector

where,
T1 =
Current Assets - Current Liabilities
Total Assets

T2 =
Accdumulated Retained Earnings
Total Assets

T3 =
EBIT
Total Assets

T4 =
Book Value of Equity
Total Liabilities

T5 =
Sales
Total Assets

Zones of Discrimination
Z' > 2.90 - “Safe” Zone
1.23 < Z' < 2.90 - “Grey” Zone
Z' < 1.23 - “Distress” Zone

Z-score formula for Non-manufacturer Industrials is as follows:
Z = 6.56T
1
+ 3.26T
2
+ 6.72T
3
+ 1.05T
4

Fundamental and Technical Analysis of Indian Banking Sector

where,
T1 =
Current Assets - Current Liabilities
Total Assets

T2 =
Accdumulated Retained Earnings
Total Assets

T3 =
EBIT
Total Assets

T4 =
Book Value of Equity
Total Liabilities

Zones of Discrimination
Z > 2.60 - “Safe” Zone
1.10 < Z < 2.60 - “Grey” Zone
Z < 1.10 - “Distress” Zone

Technical Analysis
Introduction to Candlesticks
Fundamental and Technical Analysis of Indian Banking Sector

History
The Japanese began using technical analysis to trade rice in the 17th century. While this early
version of technical analysis was different from the US version initiated by Charles Dow
around 1900, many of the guiding principles were very similar:
? The "what" (price action) is more important than the "why" (news, earnings, and so on).
? All known information is reflected in the price.
? Buyers and sellers move markets based on expectations and emotions (fear and greed).
? Markets fluctuate.
? The actual price may not reflect the underlying value.
According to Steve Nison, candlestick charting first appeared sometime after 1850. Much of
the credit for candlestick development and charting goes to a legendary rice trader named
Homma from the town of Sakata. It is likely that his original ideas were modified and refined
over many years of trading eventually resulting in the system of candlestick charting that we
use today.
Formation
In order to create a candlestick chart, you must have a data set that contains open, high, low
and close values for each time period you want to display. The hollow or filled portion of the
candlestick is called "the body" (also referred to as "the real body"). The long thin lines above
and below the body represent the high/low range and are called "shadows" (also referred to as
"wicks" and "tails"). The high is marked by the top of the upper shadow and the low by the
bottom of the lower shadow. If the stock closes higher than its opening price, a hollow
candlestick is drawn with the bottom of the body represents the opening price and the top of
the body representing the closing price. If the stock closes lower than its opening price, a
filled candlestick is drawn with the top of the body representing the opening price and the
bottom of the body representing the closing price.

Fundamental and Technical Analysis of Indian Banking Sector

Compared to traditional bar charts, many traders consider candlestick charts more visually
appealing and easier to interpret. Each candlestick provides an easy-to-decipher picture of
price action. Immediately a trader can see compare the relationship between the open and
close as well as the high and low. The relationship between the open and close is considered
vital information and forms the essence of candlesticks. Hollow candlesticks, where the close
is greater than the open, indicate buying pressure. Filled candlesticks, where the close is less
than the open, indicate selling pressure.
Fundamental and Technical Analysis of Indian Banking Sector

Exponential Moving Average
Fundamental and Technical Analysis of Indian Banking Sector

EMA weights N=15
An exponential moving average (EMA), sometimes also called an exponentially weighted
moving average (EWMA), applies weighting factors which decrease exponentially. The
weighting for each older data point decreases exponentially, giving much more importance to
recent observations while still not discarding older observations entirely. The graph at right
shows an example of the weight decrease.
Parameters
The degree of weighting decrease is expressed as a constant smoothing factor ?, a number
between 0 and 1. The smoothing factor may be expressed as a percentage, so a value of 10%
is equivalent to ? = 0.1. A higher ? discounts older observations faster. Alternatively, ? may
be expressed in terms of N time periods, where ? = 2/(N+1). For example, N = 19 is
equivalent to ? = 0.1. The half-life of the weights (the interval over which the weights
decrease by a factor of two) is approximately N/2.8854 (within 1% if N > 5).
The observation at a time period t is designated Y
t
, and the value of the EMA at any time
period t is designated S
t
.
S
1
is undefined. S
2
may be initialized in a number of different ways, most commonly by
setting S
2
to Y
1
, though other techniques exist, such as setting S
2
to an average of the first 4 or
5 observations. The prominence of the S
2
initialization's effect on the resultant moving
average depends on ?; smaller ? values make the choice of S
2
relatively more important than
larger ? values, since a higher ? discounts older observations faster.
Moving Average Convergence / Divergence
Fundamental and Technical Analysis of Indian Banking Sector

MACD, which stands for Moving Average Convergence / Divergence, is a technical
analysis indicator created by Gerald Appel in the late 1970s.
MACD shows the difference between a fast and slow exponential moving average (EMA) of
closing prices. Since it is based on moving averages, MACD is inherently a lagging indicator.
MACD is a form of Absolute Price Oscillator (APO), meaning that it takes the difference of
two price EMAs. An alternate form of price oscillator is the Percentage Price Oscillator (PPO)
which is computed by dividing the difference between two moving averages of price by the
longer moving average value. The relative values generated by a PPO will differ from an
APO (or MACD) in subtle but significant ways, and are preferred when (a) comparing the
oscillator values between different securities, especially of widely different prices, or (b)
comparing oscillator values for the same security at significantly different times, especially
for a security whose value has changed greatly. The APO (and hence the MACD) will show
greater oscillator extremes for higher priced securities, unlike the percentage price oscillator.
The final member of the price oscillator family is the Detrended price oscillator.
Thomas Aspray added a histogram to the MACD indicator in 1986, as a means to anticipate
MACD crossovers, and thereby not miss important moves in a security.
The example graph above right shows the MACD line, its signal line, and its histogram. The
upper graph is the prices. The lower graph has the MACD line in blue. The signal line, which
is another EMA of the MACD values themselves, is in red. The difference between the
MACD line and its signal line is plotted histogram style along with the two MACD lines.
Fundamental and Technical Analysis of Indian Banking Sector

The set of periods for the averages can be varied. Appel and others have experimented with
different combinations. The usual set of parameters is written as 12,26,9 for the fast EMA,
slow EMA and signal line periods respectively.

Accumulation/Distribution Index
Fundamental and Technical Analysis of Indian Banking Sector

Accumulation/Distribution index is a cumulative total volume technical analysis indicator
created by Marc Chaikin, which adds or subtracts each day's volume in proportion to where
the close is between the days? high and low.
First a close location value is formed,

This ranges from -1 when the close is the low of the day, to +1 when it's the high. For instance
if the close is 3/4 the way up the range then CLV is +0.5. The accumulation/distribution index
adds up volume multiplied by the CLV factor, i.e.

The starting point for the acc/dist total, i.e. the zero point, is arbitrary, only the shape of the
resulting indicator is used, not the actual level of the total.
The name accumulation/distribution comes from the idea that during accumulation buyers are
in control and the price will be bid up through the day, or will make a recovery if sold down,
in either case more often finishing near the day's high than the low. The opposite applies
during distribution.
The accumulation/distribution index is similar to on balance volume, but acc/dist is based on
the close within the day's range, instead of the close-to-close up or down that the latter uses.

Relative Strength Index
Fundamental and Technical Analysis of Indian Banking Sector

The Relative Strength Index (RSI) is a trading indicator in the technical analysis of financial
markets. It is intended to indicate the current and historical strength or weakness of a market
based on the closing prices of completed trading periods. It assumes that prices close higher in
strong market periods, and lower in weaker periods and computes this as a ratio of the number
of incrementally higher closes to the incrementally lower closes.
The Relative Strength Index was developed by J. Welles Wilder and published in a 1978
book, New Concepts in Technical Trading Systems, and in Commodities magazine
(now Futures magazine) in the June 1978 issue.
The RSI method may be classified as a momentum oscillator measuring the velocity and
magnitude of directional price movements. Momentum is the rate of the rise or fall in price.

Fundamental and Technical Analysis of Indian Banking Sector

6. Analysis & Interpretation
Axis Bank
Axis Bank was the first of the new private banks to have begun operations in 1994, after the
Government of India allowed new private banks to be established. The Bank was promoted
jointly by the Administrator of the specified undertaking of the Unit Trust of India (UTI - I), Life
Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC) and
other four PSU insurance companies, i.e. National Insurance Company Ltd., The New India
Assurance Company Ltd., The Oriental Insurance Company Ltd. and United India Insurance
Company Ltd.
The Bank today is capitalized to the extent of Rs. 403.63 crores with the public holding (other
than promoters and GDRs) at 53.72%.
The Bank's Registered Office is at Ahmedabad and its Central Office is located at Mumbai. The
Bank has a very wide network of more than 896 branches and Extension Counters (as on 31st
December 2009). The Bank has a network of over 4055 ATMs (as on 31st December 2009)
providing 24 hrs a day banking convenience to its customers. This is one of the largest ATM
networks in the country.
The Bank has strengths in both retail and corporate banking and is committed to adopting the
best industry practices internationally in order to achieve excellence.
Vision 2015
? To be the preferred financial solutions provider excelling in customer delivery through
insight, empowered employees and smart use of technology
Core Values
? Customer Centricity
? Ethics
? Transparency
? Teamwork
? Ownership
Fundamental and Technical Analysis of Indian Banking Sector

Trend Analysis
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 1924.15 2888.79 4461.66 7005.32 10835.48
Expenses 2033.61 3135.45 4815.66 7745.06 11997.81
Net Profit 334.58 485.08 659.03 1071.03 1815.36
Retained Earnings 246.83 372.53 510.24 819.39 1394.84
Dividend per Share 2.80 3.50 4.50 6.00 10.00
Earnings per Share 12.22 17.41 21.26 29.94 50.57
Reserves 2147.80 2606.94 3120.57 8412.99 9855.80
Deposits 31712.00 40113.53 58785.61 87626.22 117374.10
Borrowings 2570.01 4469.53 8697.02 9053.37 15519.86
Net Fixed Assets 518.44 567.72 673.20 922.86 1072.89
Loans & Advances 15602.92 22314.23 36876.47 59661.14 81556.77
Investments 15048.02 21527.35 26897.17 33705.10 46330.35
Net Current Assets 5346.11 2117.86 5883.79 11201.06 13857.04
Particulars
Rs. Crore

Particulars 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 100.00 150.13 231.88 364.07 563.13
Expenses 100.00 154.18 236.80 380.85 589.98
Net Profit 100.00 144.98 196.97 320.11 542.58
Retained Earnings 100.00 150.93 206.72 331.97 565.10
Dividend per Share 100.00 125.00 160.71 214.29 357.14
Earnings per Share 100.00 142.47 173.98 245.01 413.83
Reserves 100.00 121.38 145.29 391.70 458.88
Deposits 100.00 126.49 185.37 276.32 370.13
Borrowings 100.00 173.91 338.40 352.27 603.88
Net Fixed Assets 100.00 109.51 129.85 178.01 206.95
Loans & Advances 100.00 143.01 236.34 382.37 522.70
Investments 100.00 143.06 178.74 223.98 307.88
Net Current Assets 100.00 39.61 110.06 209.52 259.20

Fundamental and Technical Analysis of Indian Banking Sector

Interpretation
From the above trend anal ysis of sel ected financi al dat a we can
observe:
? Generall y, t rends are in favour for the company.
? Expenses have shoot up sharpl y at a pace fast er t han t hat for core
interest income whi ch result ed into pressure on rising profits of the
bank.
? However, increasi ng profit has result ed into increasi ng ret ained
earnings over t he fi ve years.
? Dividend per share has boost ed by almost 3. 5 times so as t he Earni ngs
per share whi ch has consi derabl y shown a fourfol d increase over the
years.
? The bank has also managed t o add an enormous val ue to t he
sharehol ders? kitt y, whi ch can be wit nessed from over 4. 5 ti mes
increase in t he reserves.
? It seems that the bank being i n its development phase attracted less
amount of deposit s as borrowed funds have seen six fol d rise to meet
up the capi tal needs.
? Fixed asset s have al most grown by 2 ti mes, l ess rapidl y than int erest
income. This shows optimum ut ilizat ion of resources availabl e to
achi eve t argets by t he bank.
? Net current assets have shown a 60% fall i n the year 2005 -?06,
however it got recovered i n the subsequent years whi ch i s a good si gn
for the bank.
On t he whol e, from the t rends it is apparent that the company
has become more affluent than is was 5 years ago.

Fundamental and Technical Analysis of Indian Banking Sector

CAMEL Analysis
Capital Adequacy Ratios
? Capital Adequacy Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Tier I Capital (%) 8.87 7.26 6.42 10.17 9.26
Tier II Capital (%) 3.79 3.82 5.15 3.56 4.43
Capital Adequacy Ratio (%) 12.66 11.08 11.57 13.73 13.69

? Leverage Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Debt 33,493.41 42,794.46 63,981.20 93,250.26 127,559.59
Shareholders' Funds 2,421.60 2,885.63 3,402.20 8,770.70 10,214.81
Leverage Ratio (Times) 13.83 14.83 18.81 10.63 12.49

? Debt Equity Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Deposits 31712.00 40113.53 58785.61 87626.22 117374.10
Shareholders' Funds 2,421.60 2,885.63 3,402.20 8,770.70 10,214.81
Debt Equity Ratio (Times) 13.10 13.90 17.28 9.99 11.49

? Advances to Total Assets Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Advances 15602.9 22314.2 36876.5 59661.1 81556.8
Total Assets 37799.8 49784.6 73309.7 109626 147759
Advances to Total Assets
Ratio (%)
41.28 44.82 50.30 54.42 55.20

? Government Securities to Total Investment Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Govt. Securities 7538.40 11789.79 16436.30 20178.84 27727.24
Total Investment 15048.02 21527.35 26897.17 33705.10 46330.35
Govt. Sec. to Total Inv.
Ratio (%)
50.10 54.77 61.11 59.87 59.85

Fundamental and Technical Analysis of Indian Banking Sector

Graphs

12.66
11.08
11.57
13.73
13.69
10.00
10.50
11.00
11.50
12.00
12.50
13.00
13.50
14.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Capital Adequacy Ratio (%)
13.83
14.83
18.81
10.63
12.49
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Leverage Ratio (Times)
13.10
13.90
17.28
9.99
11.49
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
20.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Debt Equity Ratio (Times)
41.28
44.82
50.30
54.42
55.20
0.00
10.00
20.00
30.00
40.00
50.00
60.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Advances to Total Assets Ratio
(%)
50.10
54.77
61.11
59.87 59.85
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Govt. Sec. to Total Inv. Ratio (%)
Fundamental and Technical Analysis of Indian Banking Sector

Asset Quality Ratios
? Net NPA to Net Advances
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net NPAs 216.85 217.60 266.33 248.29 327.13
Net Advances 15602.92 22314.23 36876.47 59661.14 81556.77
Net NPA to Net
Advances (%)
1.39 0.98 0.72 0.42 0.40

? Net NPA to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net NPAs 216.85 217.60 266.33 248.29 327.13
Total Assets 37,799.75 49,784.64 73,309.71 109,625.68 147,758.84
Net NPA to Total
Assets (%)
0.57 0.44 0.36 0.23 0.22

? Total Investments to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Investments 15048.02 21527.35 26897.17 33705.10 46330.35
Total Assets 37799.75 49784.64 73309.71 109625.68 147758.84
Total Investments to
Total Assets (%)
39.81 43.24 36.69 30.75 31.36

Fundamental and Technical Analysis of Indian Banking Sector

Graphs

Management Efficiency Ratios
1.39
0.98
0.72
0.42 0.40
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net NPA to Net Advances (%)
0.57
0.44
0.36
0.23 0.22
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net NPAs to Total Assets (%)
39.81
43.24
36.69
30.75
31.36
0.00
10.00
20.00
30.00
40.00
50.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Total Investments to Total Assets (%)
Fundamental and Technical Analysis of Indian Banking Sector

? Total Advances to Total Deposits
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Advances 15602.92 22314.23 36876.47 59661.14 81556.77
Total Deposits 31712.00 40113.53 58785.61 87626.22 117374.10
Total Advances to Total
Deposits (%)
49.20 55.63 62.73 68.09 69.48

? Business per Employee
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Deposits+Advances 47,314.92 62,427.76 95,662.08 147,287.36 198,930.87
No. of Employees 4761 6553 9980 14739 20624
Business per
Employee (Rs. Cr.)
9.94 9.53 9.59 9.99 9.65

? Profit per Employee
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Operating Profit 565.62 993.81 1,263.85 2,225.92 3,724.88
No. of Employees 4761 6553 9980 14739 20624
Profit per Employee
(Rs. Lacs)
11.88 15.17 12.66 15.10 18.06

? Return on Net Worth
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 334.58 485.08 659.03 1071.03 1815.36
Average Net Worth 1779.83 2653.62 3143.92 6086.45 9492.75
Return on Net Worth (%) 18.80 18.28 20.96 17.60 19.12

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Earnings Capacity Ratios
49.20
55.63
62.73
68.09
69.48
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Total Advances to Total Deposits
(%)
9.94
9.53
9.59
9.99
9.65
9.20
9.30
9.40
9.50
9.60
9.70
9.80
9.90
10.00
10.10
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Business per Employee (Rs. Cr.)
11.88
15.17
12.66
15.10
18.06
0.00
5.00
10.00
15.00
20.00
2004-'052005-'062006-'072007-'082008-'09
Year
Profit per Employee (Rs. Lacs)
18.80
18.28
20.96
17.60
19.12
15.00
16.00
17.00
18.00
19.00
20.00
21.00
22.00
2004-'052005-'062006-'072007-'082008-'09
Year
Return on Net Worth (%)
Fundamental and Technical Analysis of Indian Banking Sector

? Net Interest Margin
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Interest Income 731.18 1,078.23 1,468.33 2,585.35 3,686.21
Avg. Int. Earning Assets 23903.33 37246.86 53807.61 78569.94 110626.7
Net Interest Margin (%) 3.06 2.89 2.73 3.29 3.33

? Return on Average Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 334.58 485.08 659.03 1071.03 1815.36
Average Total Assets 30946.93 43792.20 61547.18 91467.70 128692.26
Return on Average
Assets (%)
1.08 1.11 1.07 1.17 1.41

? Return on Equity
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 334.58 485.08 659.03 1071.03 1815.36
Shareholder's Funds 2,421.60 2,885.63 3,402.20 8,770.70 10,214.81
Return on Equity (%) 13.82 16.81 19.37 12.21 17.77

? Non-Interest Income to Average Assets Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Income 415.82 729.63 1,010.11 1,795.49 2,896.88
Average Total Assets 30,946.93 43,792.20 61,547.18 91,467.70 128,692.26
Non-Int. Income to
Avg. Assets Ratio (%)
1.34 1.67 1.64 1.96 2.25

? Overhead Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Expenses 581.38 814.05 1,214.59 2,154.92 2,858.21
Average Total Assets 30,946.93 43,792.20 61,547.18 91,467.70 128,692.26
Overhead Ratio (%) 1.88 1.86 1.97 2.36 2.22

? Efficiency Ratio
Fundamental and Technical Analysis of Indian Banking Sector

PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Expenses 581.38 814.05 1,214.59 2,154.92 2,858.21
Net Int. Income+Non-
Int. Income
1,147.00 1,807.86 2,478.44 4,380.84 6,583.09
Efficiency Ratio (%) 50.69 45.03 49.01 49.19 43.42

? Interest Income to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 1924.15 2888.79 4461.66 7005.32 10835.48
Working Funds 37,799.75 49,784.64 73,309.71 109,625.68 147,758.84
Interest Income to
Working Funds (%)
5.09 5.80 6.09 6.39 7.33

? Non-Interest Income to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Income 415.82 729.63 1,010.11 1,795.49 2,896.88
Working Funds 37,799.75 49,784.64 73,309.71 109,625.68 147,758.84
Non-Int. Income to
Working Funds (%)
1.10 1.47 1.38 1.64 1.96

? Operating Profit to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Operating Profit 565.62 993.81 1,263.85 2,225.92 3,724.88
Working Funds 37,799.75 49,784.64 73,309.71 109,625.68 147,758.84
Operating Profit to
Working Funds (%)
1.50 2.00 1.72 2.03 2.52

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

3.06
2.89
2.73
3.29
3.33
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net Interest Margin (%)
1.08
1.11
1.07
1.17
1.41
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Return on Average Assets (%)
13.82
16.81
19.37
12.21
17.77
0.00
5.00
10.00
15.00
20.00
25.00
2004-'052005-'062006-'072007-'082008-'09
Year
Return on Equity (%)
1.34
1.67
1.64
1.96
2.25
0.00
0.50
1.00
1.50
2.00
2.50
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Non-Int. Income to Avg. Assets
Ratio (%)
1.88 1.86
1.97
2.36
2.22
0.00
0.50
1.00
1.50
2.00
2.50
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Overhead Ratio (%)
50.69
45.03
49.01
49.19
43.42
38.00
40.00
42.00
44.00
46.00
48.00
50.00
52.00
2004-'052005-'062006-'072007-'082008-'09
Year
Efficiency Ratio (%)
Fundamental and Technical Analysis of Indian Banking Sector

5.09
5.80
6.09
6.39
7.33
0.00
2.00
4.00
6.00
8.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Interest Income to Working
Funds (%)
1.10
1.47
1.38
1.64
1.96
0.00
0.50
1.00
1.50
2.00
2.50
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Non-Int. Income to Working
Funds (%)
1.50
2.00
1.72
2.03
2.52
0.00
0.50
1.00
1.50
2.00
2.50
3.00
2004-'052005-'062006-'072007-'082008-'09
Year
Op. Profit to Working Funds (%)
Fundamental and Technical Analysis of Indian Banking Sector

Liquidity Ratios
? Liquid Assets to Demand Deposits
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 6556.49 5248.27 8650.71 14969.71 18305.89
Demand Deposits 7154.84 7970.08 11304.32 20044.58 24821.61
Liquid Assets to
Demand Deposits (%)
91.64 65.85 76.53 74.68 73.75

? Liquid Assets to Total Deposits
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 6556.49 5248.27 8650.71 14969.71 18305.89
Total Deposits 31712.00 40113.53 58785.61 87626.22 117374.10
Liquid Assets to
Total Deposits (%)
20.68 13.08 14.72 17.08 15.60

? Liquid Assets to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 6556.49 5248.27 8650.71 14969.71 18305.89
Total Assets 37799.75 49784.64 73309.71 109625.68 147758.84
Liquid Assets to
Total Assets (%)
17.35 10.54 11.80 13.66 12.39

? Government Securities to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Government Securities 7538.40 11789.79 16436.30 20178.84 27727.24
Total Assets 37799.75 49784.64 73309.71 109625.68 147758.84
Government Sec. to
Total Assets (%)
19.94 23.68 22.42 18.41 18.77

Fundamental and Technical Analysis of Indian Banking Sector

Graphs

91.64
65.85
76.53
74.68
73.75
0.00
20.00
40.00
60.00
80.00
100.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Liquid Assets to Demand Deposits
(%)
20.68
13.08
14.72
17.08
15.60
0.00
5.00
10.00
15.00
20.00
25.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Liquid Assets to Total Deposits (%)
17.35
10.54
11.80
13.66
12.39
0.00
5.00
10.00
15.00
20.00
2004-'052005-'062006-'072007-'082008-'09
Year
Liquid Assets to Total Assets (%)
19.94
23.68
22.42
18.41
18.77
0.00
5.00
10.00
15.00
20.00
25.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Government Sec. to Total Assets
(%)
Fundamental and Technical Analysis of Indian Banking Sector

Interpretation
? Capital adequacy ratios have shown satisfactory performance over the years for the bank.
? Core capital adequacy ratio has remained above the regulatory requirements of RBI and
witnessed a gradual improvement which is a good indication for the bank. On the other
hand, leverage and debt equity ratio have stabilized which were at their peak during
2006-?07. Moreover, advances to total assets ratio has boosted significantly coupled with
government securities to total investment ratio depicting a tale of handsome efforts
leading to healthier business opportunities while keeping hands safe.
? Asset quality ratios seem to have become strength for the bank.
? Non Performing Assets which are considered to be the most critical part of a bank?s
portfolio have shown a sharp fall over the five years in comparison to net advances which
gives a picture of vigorous efforts in advancing loans and also in recovering the same.
Apart from these, investments to total assets ratio has also decreased from which is a fine
signal as bank by decreasing investments can now advance more funds and earn interest
income which is its core area of operation.
? Management efficiency ratios more or less have remained stabilized and shown a mix
trend over the years.
? Total advances to total deposits ratio has tremendously rose to the tune of 20% over the
five years which shows dynamic efforts of the bank in towards optimum utilization of the
funds available with the bank. With the increasing number of employees over the years
bank has managed to maintain more or less the same increase in its business, however,
profitability per employee has improved by over Rs. 6 lacs which shows operational
excellence of the bank in reducing costs which results into rising profits. Return on net
worth i.e. shareholders? funds have stabilized with increasing-decreasing trend year after
year.
? Earnings capacity ratios have witnessed robust performance from 2004-?05 to 2008-?09.
? Net interest margin has rose by a nominal over 25 bps but is a good indication that it is
moving upwards. Return on average assets and return on equity shareholders? funds have
followed the same trend. It is interesting to note that non-interest income and non-interest
Fundamental and Technical Analysis of Indian Banking Sector

expenses have shown relatively similar change. However, encouraging trend in net
interest income has resulted into superior efficiency for the bank. Interest income to
working funds, non-interest income to working funds and operating profit to working
funds have observed a remarkable growth.
? Liquidity ratios appear to be as the broken leg of the bank and have observed poor
performance over the years.
? Liquid assets though witnessing an upward trend have failed to be in line with an increase
in the deposits and assets as a result of which these ratios have diminished. Not having
enough liquidity on the hand to meet the requirement of the bank?s stakeholders can
prove to be dangerous. However, bank has maintained the tune of investment in the
government securities in line with the assets.

Fundamental and Technical Analysis of Indian Banking Sector

Z-score Analysis
Z = 6.56T
1
+ 3.26T
2
+ 6.72T
3
+ 1.05T
4

Altman Z Score Model 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
(CA-CL)/Total Assets (T1) 0.2593 0.1640 0.2151 0.2706 0.2551
Acc. Retained Earnings/ Total Assets (T2) 0.0568 0.0524 0.0426 0.0767 0.0667
EBIT / Total Assets (T3) 0.0452 0.0511 0.0544 0.0553 0.0672
B. V. of Equity / Total Liabilities (T4) 0.0637 0.0577 0.0463 0.0800 0.0691
Z-score 2.26 1.65 1.96 2.48 2.42

2.26
1.65
1.96
2.48
2.42
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Z
-
S
c
o
r
e

Year
Graph showing Z-score for 5 years
Fundamental and Technical Analysis of Indian Banking Sector

Technical Analysis

Fundamental and Technical Analysis of Indian Banking Sector

Exponential Moving Average (EMA) Chart
In Axis bank we can see the stable trend in the month of January and February but in March it
goes sharply down and reaches the lowest point of the year which is 290 and from that month it
rises in the next months. In the month of April, May and July it rises very sharply from 290 to
800. Then there is stable trend in coming months. It also touched the highest point of 1050 in
December. Due to recent stability in EMA it will better to invest in the company.
Moving Average Convergence Divergence (MACD) Chart
As per the MACD chart, it is advisable to wait and watch. The reason behind is that in the first
quarter of the year it shows the down fall trend and which is below the expectation. In the month
of May only it increases sharply to 50 and rises sharply to 75 in June. Then it shows the mix
trend which is not quite satisfactory and it is below the expectation also. So if consider this chart
we give preference to wait for some time.
Relative Strength Index (RSI) Chart
In RSI chart we have shown the Upward Control line (UCL) at 70 points and Lower Control
Line (LCL) at 30 points. Company have shown sharp fall in the first quarter but then it is a stable
trend and it is satisfactory. So it is advisable to invest in this company because the RSI is
moderate.
Accumulation/Distribution Chart
Axis bank is showing the continues decrease in the first three months and after March there is a
continuous accumulation and shown upward trend till December and it the positive sign for the
company. There is continuous buying is going on, so it is the perfect time to get in this company.

Fundamental and Technical Analysis of Indian Banking Sector

Bank of Baroda
All started with a visionary Maharaja's uncanny foresight into the future of trade and enterprising
in his country. On 20th July 1908, under the Companies Act of 1897, and with a paid up capital
of Rs 10 Lacs started the legend that has now translated into a strong, trustworthy financial
body, THE BANK OF BARODA.
It has been a wisely orchestrated growth, involving corporate wisdom, social pride and the vision
of helping others grow, and growing itself in turn.
The founder, Maharaja Sayajirao Gaekwad, with his insight into the future, saw "a bank of
this nature will prove a beneficial agency for lending, transmission, and deposit of money and
will be a powerful factor in the development of art, industries and commerce of the State and
adjoining territories."
It has been a long and eventful journey of almost a century across 25 countries. Starting in 1908
from a small building in Baroda to its new hi-rise and hi-tech Baroda Corporate Centre in
Mumbai is a saga of vision, enterprise, financial prudence and corporate governance.
It is a story scripted in corporate wisdom and social pride. It is a story crafted in private capital,
princely patronage and state ownership. It is a story of ordinary bankers and their extraordinary
contribution in the ascent of Bank of Baroda to the formidable heights of corporate glory. It is a
story that needs to be shared with all those millions of people - customers, stakeholders,
employees & the public at large - who in ample measure, have contributed to the making of an
institution.
Our new logo is a unique representation of a universal symbol. It comprises dual „B? letterforms
that hold the rays of the rising sun. We call this the Baroda Sun.
The sun is an excellent representation of what our bank stands for. It is the single most powerful
source of light and energy – its far reaching rays dispel darkness to illuminate everything they
touch. At Bank of Baroda, we seek to be the source that will help all our stakeholders realise
their goals. To our customers, we seek to be a one-stop, reliable partner who will help them
address different financial needs. To our employees, we offer rewarding careers and to our
investors and business partners, maximum return on their investment.
Fundamental and Technical Analysis of Indian Banking Sector

The single-colour, compelling vermillion palette has been carefully chosen, for its distinctiveness
as it stands for hope and energy.
We also recognize that our bank is characterized by diversity. Our network of branches spans
geographical and cultural boundaries and rural-urban divides. Our customers come from a wide
spectrum of industries and backgrounds. The Baroda Sun is a fitting face for our brand because it
is a universal symbol of dynamism and optimism – it is meaningful for our many audiences and
easily decoded by all.
Our new corporate brand identity is much more than a cosmetic change. It is a signal that we
recognize and are prepared for new business paradigms in a globalised world. At the same time,
we will always stay in touch with our heritage and enduring relationships on which our bank is
founded. By adopting a symbol as simple and powerful as the Baroda Sun, we hope to
communicate both.

Fundamental and Technical Analysis of Indian Banking Sector

Trend Analysis
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 6431.41 7049.95 9004.08 11813.47 15091.58
Expenses 7098.97 7839.63 9411.65 12456.66 15648.91
Net Profit 676.84 826.96 1026.46 1435.52 2227.20
Retained Earnings 509.88 619.28 774.00 1094.58 1843.64
Dividend per Share 5.00 5.00 6.00 8.00 9.00
Earnings per Share 23.08 22.70 27.17 39.41 58.53
Reserves 5333.23 7478.90 8284.41 10678.40 12470.01
Deposits 81333.46 93661.99 124915.98 152034.13 192396.95
Borrowings 3140.83 7072.20 3861.66 9349.76 12767.90
Net Fixed Assets 860.81 920.73 1088.81 2427.01 2309.72
Loans & Advances 43400.38 59911.78 83620.87 106701.33 143985.90
Investments 37074.44 35114.22 34943.63 43870.06 52445.88
Net Current Assets 8485.26 12621.64 18608.36 20465.91 21494.28
Particulars
Rs. Crore

Particulars 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 100.00 109.62 140.00 183.68 234.65
Expenses 100.00 110.43 132.58 175.47 220.44
Net Profit 100.00 122.18 151.65 212.09 329.06
Retained Earnings 100.00 121.46 151.80 214.67 361.58
Dividend per Share 100.00 100.00 120.00 160.00 180.00
Earnings per Share 100.00 98.35 117.72 170.75 253.60
Reserves 100.00 140.23 155.34 200.22 233.82
Deposits 100.00 115.16 153.58 186.93 236.55
Borrowings 100.00 225.17 122.95 297.68 406.51
Net Fixed Assets 100.00 106.96 126.49 281.94 268.32
Loans & Advances 100.00 138.04 192.67 245.85 331.76
Investments 100.00 94.71 94.25 118.33 141.46
Net Current Assets 100.00 148.75 219.30 241.19 253.31

Interpretation
Fundamental and Technical Analysis of Indian Banking Sector

From the above trend anal ysis of sel ected financi al dat a we can
observe:
? Generall y, t rends are in favour for the company.
? Core int erest i ncome have shoot up sharpl y at a pace fast er than that
for expenses whi ch resul ted into risi ng profits of t he bank.
? Hence, i ncreasing profit has result ed i nt o increasing retained earnings
over t he five years.
? Dividend per share has boost ed by almost 1. 8 times so as t he Earni ngs
per share whi ch has considerabl y shown a 2. 5 times i ncrease over t he
years.
? The bank has also managed t o add an enormous val ue to the
sharehol ders? kitt y, whi ch can be witnessed from over 2 t imes increase
in the reserves.
? It seems that the bank being i n its development phase attracted less
amount of deposits as borrowed funds have seen fourfol d rise to meet
up the capi tal needs.
? Fixed assets have almost grown by over 2 times, less rapidl y t han
interest income. Thi s shows optimum uti lization of resources avail abl e
to achieve t arget s by the bank.
? Net current asset s have shown recovery in the subsequent years whi ch
is a good si gn for the bank.
On t he whol e, from the t rends it is apparent that the company
has become more affluent than is was 5 years ago.

CAMEL Analysis
Fundamental and Technical Analysis of Indian Banking Sector

Capital Adequacy Ratios
? Capital Adequacy Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Tier I Capital (%) 8.21 10.98 8.74 7.63 7.79
Tier II Capital (%) 4.40 2.67 3.06 5.28 5.09
Capital Adequacy Ratio (%) 12.61 13.65 11.80 12.91 12.88

? Leverage Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Debt 82,974.29 98,464.19 126,058.54 155,961.18 198,033.04
Shareholders' Funds 5627.76 7844.43 8649.94 11043.93 12835.54
Leverage Ratio (Times) 14.74 12.55 14.57 14.12 15.43

? Debt Equity Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Deposits 81333.46 93661.99 124915.98 152034.13 192396.95
Shareholders' Funds 5627.76 7844.43 8649.94 11043.93 12835.54
Debt Equity Ratio (Times) 14.45 11.94 14.44 13.77 14.99

? Advances to Total Assets Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Advances 43400.38 59911.78 83620.87 106701.33 143985.90
Total Assets 94664.24 113392.53 143146.18 179599.51 227406.72
Advances to Total Assets
Ratio (%)
45.85 52.84 58.42 59.41 63.32

? Government Securities to Total Investment Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Govt. Securities 29007.9 26005.8 26256.7 34261.8 40849
Total Investment 37074.44 35114.22 34943.63 43870.06 52445.88
Govt. Sec. to Total Inv.
Ratio (%)
78.24 74.06 75.14 78.10 77.89

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Asset Quality Ratios
12.61
13.65
11.80
12.91 12.88
10.00
10.50
11.00
11.50
12.00
12.50
13.00
13.50
14.00
2004-'052005-'062006-'072007-'082008-'09
Year
Capital Adequacy Ratio (%)
14.74
12.55
14.57
14.12
15.43
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
2004-'052005-'062006-'072007-'082008-'09
Year
Leverage Ratio (Times)
14.45
11.94
14.44
13.77
14.99
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Debt Equity Ratio (Times)
45.85
52.84
58.42
59.41
63.32
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
2004-'052005-'062006-'072007-'082008-'09
Year
Advances to Total Assets Ratio
(%)
78.24
74.06
75.14
78.10
77.89
71.00
72.00
73.00
74.00
75.00
76.00
77.00
78.00
79.00
2004-'052005-'062006-'072007-'082008-'09
Year
Govt. Sec. to Total Inv. Ratio (%)
Fundamental and Technical Analysis of Indian Banking Sector

? Net NPA to Net Advances
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net NPAs 619.64 518.04 501.67 493.55 451.15
Net Advances 43400.38 59911.78 83620.87 106701.3 143985.9
Net NPA to Net
Advances (%)
1.43 0.86 0.60 0.46 0.31

? Net NPA to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net NPAs 619.64 518.04 501.67 493.55 451.15
Total Assets 94664.24 113392.5 143146.2 179599.51 227406.72
Net NPA to Total
Assets (%)
0.65 0.46 0.35 0.27 0.20

? Total Investments to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Investments 37074.44 35114.22 34943.63 43870.06 52445.88
Total Assets 94664.24 113392.5 143146.2 179599.51 227406.72
Total Investments to
Total Assets (%)
39.16 30.97 24.41 24.43 23.06

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Management Efficiency Ratios
? Total Advances to Total Deposits
1.43
0.86
0.60
0.46
0.31
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net NPA to Net Advances (%)
0.65
0.46
0.35
0.27
0.20
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net NPAs to Total Assets (%)
39.16
30.97
24.41 24.43
23.06
0.00
10.00
20.00
30.00
40.00
50.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Total Investments to Total Assets (%)
Fundamental and Technical Analysis of Indian Banking Sector

PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Advances 43400.38 59911.78 83620.87 106701.33 143985.9
Total Deposits 81333.46 93661.99 124915.98 152034.13 192396.95
Total Advances to
Total Deposits (%)
53.36 63.97 66.94 70.18 74.84

? Business per Employee
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Deposits+Advances 124,733.84 153,573.77 208,536.85 258,735.46 336,382.85
No. of Employees 39529 38774 38604 36774 36838
Business per
Employee (Rs. Cr.)
3.16 3.96 5.40 7.04 9.13

? Profit per Employee
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Operating Profit 1872.52 1691.83 2,396.42 2,592.58 4,036.41
No. of Employees 39529 38774 38604 36774 36838
Profit per Employee
(Rs. Lacs)
4.74 4.36 6.21 7.05 10.96

? Return on Net Worth
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 676.84 826.96 1026.46 1435.52 2227.20
Average Net Worth 5379.34 6736.09 8247.18 9846.94 11939.74
Return on Net Worth (%) 12.58 12.28 12.45 14.58 18.65

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Earnings Capacity Ratios
53.36
63.97
66.94
70.18
74.84
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Total Advances to Total Deposits
(%)
3.16
3.96
5.40
7.04
9.13
0.00
2.00
4.00
6.00
8.00
10.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Business per Employee (Rs. Cr.)
4.74
4.36
6.21
7.05
10.96
0.00
2.00
4.00
6.00
8.00
10.00
12.00
2004-'052005-'062006-'072007-'082008-'09
Year
Profit per Employee (Rs. Lacs)
12.58
12.28 12.45
14.58
18.65
0.00
5.00
10.00
15.00
20.00
2004-'052005-'062006-'072007-'082008-'09
Year
Return on Net Worth (%)
Fundamental and Technical Analysis of Indian Banking Sector

? Net Interest Margin
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Interest Income 2,979.27 3,224.91 3,786.08 3,911.81 5,123.41
Avg. Int. Earning Assets 77,047.26 87,750.41 106,795.25 134,567.95 173,501.59
Net Interest Margin (%) 3.87 3.68 3.55 2.91 2.95

? Return on Average Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 676.84 826.96 1026.46 1435.52 2227.20
Average Total Assets 89886.46 104028.39 128269.36 161372.85 203503.12
Return on Average
Assets (%)
0.75 0.79 0.80 0.89 1.09

? Return on Equity
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 676.84 826.96 1026.46 1435.52 2227.20
Shareholder's Funds 5627.76 7844.43 8649.94 11043.93 12835.54
Return on Equity (%) 12.03 10.54 11.87 13.00 17.35

? Non-Interest Income to Average Assets Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Income 1,304.83 1,191.69 1,381.79 2,051.04 2,757.66
Average Total Assets 89886.46 104028.39 128269.36 161372.85 203503.12
Non-Int. Income to
Avg. Assets Ratio (%)
1.45 1.15 1.08 1.27 1.36

? Overhead Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Expenses 2,411.58 2,724.77 2,771.45 3,370.27 3,844.66
Average Total Assets 89886.46 104028.39 128269.36 161372.85 203503.12
Overhead Ratio (%) 2.68 2.62 2.16 2.09 1.89

? Efficiency Ratio
Fundamental and Technical Analysis of Indian Banking Sector

PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Expenses 2,411.58 2,724.77 2,771.45 3,370.27 3,844.66
Net Int. Income+Non-
Int. Income
4,284.10 4,416.60 5,167.87 5,962.85 7,881.07
Efficiency Ratio (%) 56.29 61.69 53.63 56.52 48.78

? Interest Income to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 6431.42 7100.00 9212.64 11813.48 15091.58
Working Funds 94664.24 113392.5 143146.2 179599.51 227406.72
Interest Income to
Working Funds (%)
6.79 6.26 6.44 6.58 6.64

? Non-Interest Income to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Income 1,304.83 1,191.69 1,381.79 2,051.04 2,757.66
Working Funds 94664.24 113392.5 143146.2 179599.51 227406.72
Non-Int. Income to
Working Funds (%)
1.38 1.05 0.97 1.14 1.21

? Operating Profit to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Operating Profit 1872.52 1691.83 2,396.42 2,592.58 4,036.41
Working Funds 94664.24 113392.5 143146.2 179599.51 227406.72
Operating Profit to
Working Funds (%)
1.98 1.49 1.67 1.44 1.77

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

3.87
3.68
3.55
2.91 2.95
0.00
1.00
2.00
3.00
4.00
5.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net Interest Margin (%)
0.75
0.79 0.80
0.89
1.09
0.00
0.20
0.40
0.60
0.80
1.00
1.20
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Return on Average Assets (%)
12.03
10.54
11.87
13.00
17.35
0.00
5.00
10.00
15.00
20.00
2004-'052005-'062006-'072007-'082008-'09
Year
Return on Equity (%)
1.45
1.15
1.08
1.27
1.36
0.00
0.50
1.00
1.50
2.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Non-Int. Income to Avg. Assets
Ratio (%)
2.68
2.62
2.16
2.09
1.89
0.00
0.50
1.00
1.50
2.00
2.50
3.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Overhead Ratio (%)
56.29
61.69
53.63
56.52
48.78
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
2004-'052005-'062006-'072007-'082008-'09
Year
Efficiency Ratio (%)
Fundamental and Technical Analysis of Indian Banking Sector

6.79
6.26
6.44
6.58
6.64
5.90
6.00
6.10
6.20
6.30
6.40
6.50
6.60
6.70
6.80
6.90
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Interest Income to Working Funds (%)
1.38
1.05
0.97
1.14
1.21
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Non-Int. Income to Working Funds (%)
1.98
1.49
1.67
1.44
1.77
0.00
0.50
1.00
1.50
2.00
2.50
2004-'052005-'062006-'072007-'082008-'09
Year
Op. Profit to Working Funds (%)
Fundamental and Technical Analysis of Indian Banking Sector

Liquidity Ratios
? Liquid Assets to Demand Deposits
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 13328.61 17445.80 23492.87 26601.11 28665.22
Demand Deposits 6871.09 8378.72 9874.8 11696.01 14451.22
Liquid Assets to
Demand Deposits (%)
193.98 208.22 237.91 227.44 198.36

? Liquid Assets to Total Deposits
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 13328.61 17445.80 23492.87 26601.11 28665.22
Total Deposits 81333.46 93661.99 124915.98 152034.13 192396.95
Liquid Assets to
Total Deposits (%)
16.39 18.63 18.81 17.50 14.90

? Liquid Assets to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 13328.61 17445.80 23492.87 26601.11 28665.22
Total Assets 94664.24 113392.53 143146.18 179599.51 227406.72
Liquid Assets to
Total Assets (%)
14.08 15.39 16.41 14.81 12.61

? Government Securities to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Government Securities 29007.85 26005.81 26256.73 34261.81 40848.95
Total Assets 94664.24 113392.5 143146.2 179599.51 227406.72
Government Sec. to
Total Assets (%)
30.64 22.93 18.34 19.08 17.96

Fundamental and Technical Analysis of Indian Banking Sector

Graphs

193.98
208.22
237.91
227.44
198.36
0.00
50.00
100.00
150.00
200.00
250.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Liquid Assets to Demand Deposits
(%)
16.39
18.63 18.81
17.50
14.90
0.00
5.00
10.00
15.00
20.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Liquid Assets to Total Deposits (%)
14.08
15.39
16.41
14.81
12.61
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
2004-'052005-'062006-'072007-'082008-'09
Year
Liquid Assets to Total Assets (%)
30.64
22.93
18.34
19.08
17.96
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Government Sec. to Total Assets
(%)
Fundamental and Technical Analysis of Indian Banking Sector

Interpretation
? Capital adequacy ratios have shown satisfactory performance over the years for the bank.
? Core capital adequacy ratio has remained above the regulatory requirements of RBI and
has stabilized which is a good indication for the bank. On the other hand, leverage and
debt equity ratio have remained steady. Moreover, advances to total assets ratio has
boosted significantly and shown 18% rise. Government securities to total investment ratio
been balanced depicting a tale of handsome efforts leading to healthier business
opportunities while keeping hands safe.
? Asset quality ratios seem to have become strength for the bank.
? Non Performing Assets which are considered to be the most critical part of a bank?s
portfolio have shown a sharp fall over the five years in comparison to net advances which
gives a picture of vigorous efforts in advancing loans and also in recovering the same.
Apart from these, investments to total assets ratio has also decreased from which is a fine
signal as bank by decreasing investments can now advance more funds and earn interest
income which is its core area of operation.
? Management efficiency ratios have witnessed quite aggressiveness over the five years.
? Total advances to total deposits ratio has tremendously rose to the tune of 20% over the
five years which shows dynamic efforts of the bank in towards optimum utilization of the
funds available with the bank. With the increasing number of employees over the years,
bank has managed to expand its business coupled with profitability per employee which
has improved by over Rs. 6 lacs which shows operational excellence of the bank in
reducing costs which results into rising profits. Return on net worth i.e. shareholders?
funds have observed upward trend with increasing-decreasing trend year after year.
? Earnings capacity ratios have witnessed robust performance from 2004-?05 to 2008-?09.
? Net interest margin has declined by almost 100 bps but is not a good indication. Return
on average assets and return on equity shareholders? funds have followed the growing
trend. It is interesting to note that non-interest income and non-interest expenses have
shown relatively similar change. However, discouraging trend in net interest income has
Fundamental and Technical Analysis of Indian Banking Sector

resulted into poor efficiency for the bank. Interest income to working funds, non-interest
income to working funds and operating profit to working funds have also deteriorated.
? Liquidity ratios appear to be as the broken leg of the bank and have observed poor
performance over the years.
? Liquid assets though witnessing an upward trend have failed to be in line with an increase
in the deposits and assets as a result of which these ratios have diminished. Not having
enough liquidity on the hand to meet the requirement of the bank?s stakeholders can
prove to be dangerous. The bank has also failed to maintain the tune of investment in the
government securities in line with the assets.

Fundamental and Technical Analysis of Indian Banking Sector

Z-score Analysis
Z = 6.56T
1
+ 3.26T
2
+ 6.72T
3
+ 1.05T
4

Altman Z Score Model 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
(CA-CL)/Total Assets (T1) 0.3200 0.3828 0.3883 0.4320 0.4497
Acc. Retained Earnings/ Total Assets (T2) 0.0563 0.0660 0.0579 0.0595 0.0548
EBIT / Total Assets (T3) 0.0456 0.0440 0.0495 0.0563 0.0585
B. V. of Equity / Total Liabilities (T4) 0.0594 0.0692 0.0604 0.0615 0.0564
Z-score 2.65 3.09 3.13 3.47 3.58

Technical Analysis
2.65
3.09
3.13
3.47
3.58
0.80
1.30
1.80
2.30
2.80
3.30
3.80
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Z
-
S
c
o
r
e

Year
Graph showing Z-score for 5 years
Fundamental and Technical Analysis of Indian Banking Sector

Exponential Moving Average (EMA) Chart
Fundamental and Technical Analysis of Indian Banking Sector

In BOB we can see the down ward trend in the month from January to March it goes sharply
down and reaches the lowest point of the year which is 175 and from that month it rises in the
next months. In the month of April, May and July it rises very sharply to 490. Then there is
stable trend for next three months. It also touched the highest point of 555 in December. Due to
recent stability in EMA it will better to invest in the company.
Moving Average Convergence Divergence (MACD) Chart
As per the MACD chart, it is advisable to wait and watch. The reason behind is that in the first
quarter of the year it shows the down fall trend and which is below the expectation. In the month
of May only it increases sharply to 20 and rises sharply to 40 in June. Then it shows the down
ward trend which is not quite satisfactory and it is below the expectation also. So if consider this
chart we give preference to wait for some time.
Relative Strength Index (RSI) Chart
In RSI chart we have shown the Upward Control line (UCL) at 70 points and Lower Control
Line (LCL) at 30 points. Company have shown sharp fall in the first quarter but then it is a stable
trend and it is satisfactory. So it is advisable to invest in this company because the RSI is
moderate.
Accumulation/Distribution Chart
BOB is showing the stable trend in the first three months and after March there is a continuous
accumulation and shown upward trend till December and it the positive sign for the company.
There is continuous buying is going on, so it is the perfect time to get in this company.

Bank of India
Fundamental and Technical Analysis of Indian Banking Sector

Bank of India was founded on 7th September, 1906 by a group of eminent businessmen from
Mumbai. The Bank was under private ownership and control till July 1969 when it was
nationalised along with 13 other banks.
Beginning with one office in Mumbai, with a paid-up capital of Rs.50 lakh and 50 employees,
the Bank has made a rapid growth over the years and blossomed into a mighty institution with a
strong national presence and sizable international operations. In business volume, the Bank
occupies a premier position among the nationalised banks.
The Bank has 3101 branches in India spread over all states/ union territories including 141
specialized branches. These branches are controlled through 48 Zonal Offices. There are 29
branches/ offices (including three representative offices) abroad.
The Bank came out with its maiden public issue in 1997 and follow on Qualified Institutions
Placement in February 2008. . Total number of shareholders as on 30/09/2009 is 2,15,790.
While firmly adhering to a policy of prudence and caution, the Bank has been in the forefront of
introducing various innovative services and systems. Business has been conducted with the
successful blend of traditional values and ethics and the most modern infrastructure. The Bank
has been the first among the nationalised banks to establish a fully computerized branch and
ATM facility at the Mahalaxmi Branch at Mumbai way back in 1989. The Bank is also a
Founder Member of SWIFT in India. It pioneered the introduction of the Health Code System in
1982, for evaluating/ rating its credit portfolio.
The Bank's association with the capital market goes back to 1921 when it entered into an
agreement with the Bombay Stock Exchange (BSE) to manage the BSE Clearing House. It is an
association that has blossomed into a joint venture with BSE, called the BOI Shareholding Ltd.
to extend depository services to the stock broking community. Bank of India was the first Indian
Bank to open a branch outside the country, at London, in 1946, and also the first to open a
branch in Europe, Paris in 1974. The Bank has sizable presence abroad, with a network of 29
branches (including five representative offices) at key banking and financial centers viz. London,
New York, Paris, Tokyo, Hong-Kong and Singapore. The international business accounts for
around 17.82% of Bank's total business.
Our Mission
Fundamental and Technical Analysis of Indian Banking Sector

"To provide superior, proactive banking services to niche markets globally, while providing cost-
effective, responsive services to others in our role as a development bank, and in so doing, meet
the requirements of our stakeholders".
Our Vision
"To become the bank of choice for corporate, medium businesses and up market retail customers
and to provide cost effective developmental banking for small business, mass market and rural
markets"

Trend Analysis
Fundamental and Technical Analysis of Indian Banking Sector

2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 6025.99 7025.50 8934.71 12354.52 16346.98
Expenses 6847.26 7511.64 9376.06 12462.74 16391.86
Net Profit 340.05 701.44 1123.17 2009.40 3007.35
Retained Earnings 229.36 534.71 926.48 1763.63 2515.80
Dividend per Share 2.00 3.40 3.50 4.00 8.00
Earnings per Share 6.98 14.39 19.08 38.26 57.26
Reserves 3976.73 4495.74 5407.24 10063.48 12969.01
Deposits 78821.45 93932.04 119881.73 150011.98 189708.48
Borrowings 8308.68 9190.63 11379.78 12118.42 15673.18
Net Fixed Assets 814.17 809.96 789.30 2426.06 2531.94
Loans & Advances 55528.89 65173.74 85515.90 113476.34 142909.38
Investments 28686.33 31781.75 35492.76 41802.88 52607.17
Net Current Assets 5598.31 10498.65 14673.62 14818.63 21137.60
Particulars
Rs. Crore

Particulars 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 100.00 116.59 148.27 205.02 271.27
Expenses 100.00 109.70 136.93 182.01 239.39
Net Profit 100.00 206.28 330.30 590.91 884.38
Retained Earnings 100.00 233.13 403.94 768.94 1096.88
Dividend per Share 100.00 170.00 175.00 200.00 400.00
Earnings per Share 100.00 206.16 273.35 548.14 820.34
Reserves 100.00 113.05 135.97 253.06 326.12
Deposits 100.00 119.17 152.09 190.32 240.68
Borrowings 100.00 110.61 136.96 145.85 188.64
Net Fixed Assets 100.00 99.48 96.95 297.98 310.98
Loans & Advances 100.00 117.37 154.00 204.36 257.36
Investments 100.00 110.79 123.73 145.72 183.39
Net Current Assets 100.00 187.53 262.11 264.70 377.57

Interpretation
Fundamental and Technical Analysis of Indian Banking Sector

From the above trend anal ysis of sel ected financi al dat a we can
observe:
? Generall y, t rends are in favour for the company.
? Core interest i ncome has shoot up sharpl y at a pace fast er than that for
expenses which resulted int o hi gher profits of the bank which has
become almost nine fold in fi ve years.
? Ret ained earni ngs have also r isen by over 10 times in line with the
increasing profit s over the five years.
? Dividend per share has boost ed by 4 times so as the Earni ngs per share
whi ch has considerabl y shown a ei ght fol d increase over the years.
? The bank has also managed t o add an enormous val ue to the
sharehol ders? kitt y, whi ch can be witnessed from over 3 t imes increase
in the reserves.
? Deposit s and borrowings have i ncreased considerabl y but it cannot be
said to be a sharp increase. Whereas advances have increased at a
faster pace t han deposits whi ch adds to strength of the bank.
? Fixed assets have al most grown by over 3. 5 times, more rapidl y than
interest income. Thi s shows that bank needs t o optimal l y utilize it s
resources avail abl e t o achieve t arget s .
? Net current assets have shown improvement i n the subsequent years
whi ch is a good si gn for the bank.
On t he whol e, from the t rends it is apparent that the company
has become more affluent than is was 5 years ago.

CAMEL Analysis
Fundamental and Technical Analysis of Indian Banking Sector

Capital Adequacy Ratios
? Capital Adequacy Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Tier I Capital (%) 7.05 6.75 6.54 7.70 8.91
Tier II Capital (%) 4.47 4.00 5.04 4.34 4.10
Capital Adequacy Ratio (%) 11.52 10.75 11.58 12.04 13.01

? Leverage Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Debt 84,783.39 99,825.94 126,502.57 157,184.43 199,195.46
Shareholders' Funds 4464.87 4983.88 5895.38 10589.39 13494.92
Leverage Ratio (Times) 18.99 20.03 21.46 14.84 14.76

? Debt Equity Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Deposits 78821.45 93932.04 119881.73 150011.98 189708.48
Shareholders' Funds 4464.87 4983.88 5895.38 10589.39 13494.92
Debt Equity Ratio (Times) 17.65 18.85 20.33 14.17 14.06

? Advances to Total Assets Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Advances 55528.89 65173.74 85515.9 113476.34 142909.38
Total Assets 94978.18 112274.27 142247.02 178860.63 225931.65
Advances to Total Assets
Ratio (%)
58.46 58.05 60.12 63.44 63.25

? Government Securities to Total Investment Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Govt. Securities 20313.21 23127.57 25812.79 34273.42 44102.82
Total Investment 28686.33 31781.75 35492.76 41802.88 52607.17
Govt. Sec. to Total Inv.
Ratio (%)
70.81 72.77 72.73 81.99 83.83

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Asset Quality Ratios
11.52
10.75
11.58
12.04
13.01
10.00
10.50
11.00
11.50
12.00
12.50
13.00
13.50
2004-'052005-'062006-'072007-'082008-'09
Year
Capital Adequacy Ratio (%)
18.99
20.03
21.46
14.84 14.76
0.00
5.00
10.00
15.00
20.00
25.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Leverage Ratio (Times)
17.65
18.85
20.33
14.17 14.06
0.00
5.00
10.00
15.00
20.00
25.00
2004-'052005-'062006-'072007-'082008-'09
Year
Debt Equity Ratio (Times)
58.46
58.05
60.12
63.44
63.25
55.00
56.00
57.00
58.00
59.00
60.00
61.00
62.00
63.00
64.00
2004-'052005-'062006-'072007-'082008-'09
Year
Advances to Total Assets Ratio
(%)
70.81
72.77 72.73
81.99
83.83
60.00
65.00
70.00
75.00
80.00
85.00
2004-'052005-'062006-'072007-'082008-'09
Year
Govt. Sec. to Total Inv. Ratio (%)
Fundamental and Technical Analysis of Indian Banking Sector

? Net NPA to Net Advances
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net NPAs 1,554.00 1,120.00 812.00 592.00 628.00
Net Advances 55528.89 65173.74 85515.9 113476.34 142909.38
Net NPA to Net
Advances (%)
2.80 1.72 0.95 0.52 0.44

? Net NPA to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net NPAs 1,554.00 1,120.00 812.00 592.00 628.00
Total Assets 94978.18 112274.27 142247.02 178860.63 225931.65
Net NPA to Total
Assets (%)
1.64 1.00 0.57 0.33 0.28

? Total Investments to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Investments 28686.33 31781.75 35492.76 41802.88 52607.17
Total Assets 94978.18 112274.27 142247.02 178860.63 225931.65
Total Investments to
Total Assets (%)
30.20 28.31 24.95 23.37 23.28

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Management Efficiency Ratios
? Total Advances to Total Deposits
2.80
1.72
0.95
0.52
0.44 0.00
0.50
1.00
1.50
2.00
2.50
3.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net NPA to Net Advances (%)
1.64
1.00
0.57
0.33
0.28
0.00
0.50
1.00
1.50
2.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net NPAs to Total Assets (%)
30.20
28.31
24.95
23.37 23.28
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Total Investments to Total Assets (%)
Fundamental and Technical Analysis of Indian Banking Sector

PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Advances 55528.89 65173.74 85515.9 113476.34 142909.38
Total Deposits 78821.45 93932.04 119881.73 150011.98 189708.48
Total Advances to Total
Deposits (%)
70.45 69.38 71.33 75.64 75.33

? Business per Employee
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Deposits+Advances 134,350.34 159,105.78 205,397.63 263,488.32 332,617.86
No. of Employees 42635 42206 41511 40616 40155
Business per
Employee (Rs. Cr.)
3.15 3.77 4.95 6.49 8.28

? Profit per Employee
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Operating Profit 1109.13 1165.62 1,838.10 3,003.97 4,834.12
No. of Employees 42635 42206 41511 40616 40155
Profit per Employee
(Rs. Lacs)
2.60 2.76 4.43 7.40 12.04

? Return on Net Worth
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 340.05 701.44 1123.17 2009.40 3007.35
Average Net Worth 4237.27 4724.38 5439.63 8242.39 12042.15
Return on Net Worth (%) 8.03 14.85 20.65 24.38 24.97

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Earnings Capacity Ratios
70.45
69.38
71.33
75.64
75.33
66.00
68.00
70.00
72.00
74.00
76.00
78.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Total Advances to Total Deposits
(%)
3.15
3.77
4.95
6.49
8.28
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Business per Employee (Rs. Cr.)
2.60
2.76
4.43
7.40
12.04
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
2004-'052005-'062006-'072007-'082008-'09
Year
Profit per Employee (Rs. Lacs)
8.03
14.85
20.65
24.38
24.97
0.00
5.00
10.00
15.00
20.00
25.00
30.00
2004-'052005-'062006-'072007-'082008-'09
Year
Return on Net Worth (%)
Fundamental and Technical Analysis of Indian Banking Sector

? Net Interest Margin
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Interest Income 2,236.89 2,631.98 3,440.47 4,229.27 5,498.91
Avg. Int. Earning Assets 78,617.00 90,585.35 108,982.08 138,143.94 175,397.89
Net Interest Margin (%) 2.85 2.91 3.16 3.06 3.14

? Return on Average Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 340.05 701.44 1123.17 2009.40 3007.35
Average Total Assets 89919.09 103626.23 127260.65 160553.83 202396.14
Return on Average
Assets (%)
0.38 0.68 0.88 1.25 1.49

? Return on Equity
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 340.05 701.44 1123.17 2009.40 3007.35
Shareholder's Funds 4464.87 4983.88 5895.38 10589.39 13494.92
Return on Equity (%) 7.62 14.07 19.05 18.98 22.29

? Non-Interest Income to Average Assets Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Income 1,155.80 1,184.38 1,562.95 2,116.93 3,051.86
Average Total Assets 89919.09 103626.23 127260.65 160553.83 202396.14
Non-Int. Income to
Avg. Assets Ratio (%)
1.29 1.14 1.23 1.32 1.51

? Overhead Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Expenses 2,283.56 2,650.74 3,165.32 3,342.23 3,716.65
Average Total Assets 89919.09 103626.23 127260.65 160553.83 202396.14
Overhead Ratio (%) 2.54 2.56 2.49 2.08 1.84

? Efficiency Ratio
Fundamental and Technical Analysis of Indian Banking Sector

PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Expenses 2,283.56 2,650.74 3,165.32 3,342.23 3,716.65
Net Int. Income+Non-
Int. Income
3,392.69 3,816.36 5,003.42 6,346.20 8,550.77
Efficiency Ratio (%) 67.31 69.46 63.26 52.67 43.47

? Interest Income to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 6031.53 7028.70 9180.33 12355.22 16347.36
Working Funds 94978.18 112274.27 142247.02 178860.63 225931.65
Interest Income to
Working Funds (%)
6.35 6.26 6.45 6.91 7.24

? Non-Interest Income to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Income 1,155.80 1,184.38 1,562.95 2,116.93 3,051.86
Working Funds 94978.18 112274.27 142247.02 178860.63 225931.65
Non-Int. Income to
Working Funds (%)
1.22 1.05 1.10 1.18 1.35

? Operating Profit to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Operating Profit 1109.13 1165.62 1,838.10 3,003.97 4,834.12
Working Funds 94978.18 112274.27 142247.02 178860.63 225931.65
Operating Profit to
Working Funds (%)
1.17 1.04 1.29 1.68 2.14

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

2.85
2.91
3.16
3.06
3.14
2.60
2.70
2.80
2.90
3.00
3.10
3.20
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net Interest Margin (%)
0.38
0.68
0.88
1.25
1.49
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Return on Average Assets (%)
7.62
14.07
19.05 18.98
22.29
0.00
5.00
10.00
15.00
20.00
25.00
2004-'052005-'062006-'072007-'082008-'09
Year
Return on Equity (%)
1.29
1.14
1.23
1.32
1.51
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Non-Int. Income to Avg. Assets Ratio (%)
2.54 2.56
2.49
2.08
1.84
0.00
0.50
1.00
1.50
2.00
2.50
3.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Overhead Ratio (%)
67.31
69.46
63.26
52.67
43.47
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
2004-'052005-'062006-'072007-'082008-'09
Year
Efficiency Ratio (%)
Fundamental and Technical Analysis of Indian Banking Sector

6.35
6.26
6.45
6.91
7.24
5.60
5.80
6.00
6.20
6.40
6.60
6.80
7.00
7.20
7.40
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Interest Income to Working Funds (%)
1.22
1.05
1.10
1.18
1.35
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Non-Int. Income to Working Funds (%)
1.17
1.04
1.29
1.68
2.14
0.00
0.50
1.00
1.50
2.00
2.50
2004-'052005-'062006-'072007-'082008-'09
Year
Op. Profit to Working Funds (%)
Fundamental and Technical Analysis of Indian Banking Sector

Liquidity Ratios
? Liquid Assets to Demand Deposits
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 9913.75 14484.26 20375.48 21072.69 27453.10
Demand Deposits 6098.26 7406.57 9365.86 12472.87 12581.54
Liquid Assets to
Demand Deposits (%)
162.57 195.56 217.55 168.95 218.20

? Liquid Assets to Total Deposits
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 9913.75 14484.26 20375.48 21072.69 27453.10
Total Deposits 78821.45 93932.04 119881.73 150011.98 189708.48
Liquid Assets to
Total Deposits (%)
12.58 15.42 17.00 14.05 14.47

? Liquid Assets to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 9913.75 14484.26 20375.48 21072.69 27453.10
Total Assets 94978.18 112274.27 142247.02 178860.63 225931.65
Liquid Assets to
Total Assets (%)
10.44 12.90 14.32 11.78 12.15

? Government Securities to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Government Securities 20313.21 23127.57 25812.79 34273.42 44102.82
Total Assets 94978.18 112274.3 142247 178860.63 225931.65
Government Sec. to
Total Assets (%)
21.39 20.60 18.15 19.16 19.52

Fundamental and Technical Analysis of Indian Banking Sector

Graphs

162.57
195.56
217.55
168.95
218.20
0.00
50.00
100.00
150.00
200.00
250.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Liquid Assets to Demand Deposits (%)
12.58
15.42
17.00
14.05
14.47
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Liquid Assets to Total Deposits (%)
10.44
12.90
14.32
11.78
12.15
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
2004-'052005-'062006-'072007-'082008-'09
Year
Liquid Assets to Total Assets (%)
21.39
20.60
18.15
19.16
19.52
16.00
17.00
18.00
19.00
20.00
21.00
22.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Government Sec. to Total Assets (%)
Fundamental and Technical Analysis of Indian Banking Sector

Interpretation
? Capital adequacy ratios have shown quite satisfactory performance over the years for the
bank.
? Core capital adequacy ratio has remained above the regulatory requirements of RBI and
witnessed a gradual improvement which is a good indication for the bank. On the other
hand, leverage and debt equity ratio have stabilized which were at their peak during
2005-?06. Moreover, advances to total assets ratio has boosted significantly coupled with
government securities to total investment ratio depicting a tale of handsome efforts
leading to healthier business opportunities while keeping hands safe.
? Asset quality ratios seem to have become strength for the bank.
? Non Performing Assets which are considered to be the most critical part of a bank?s
portfolio have shown a sharp fall over the five years in comparison to net advances which
gives a picture of vigorous efforts in advancing loans and also in recovering the same.
Apart from these, investments to total assets ratio has also decreased from which is a fine
signal as bank by decreasing investments can now advance more funds and earn interest
income which is its core area of operation.
? Management efficiency ratios more or less have remained stabilized and shown a mix
trend over the years.
? Total advances to total deposits ratio has rose to the tune of 5% over the five years which
shows dynamic efforts of the bank in towards optimum utilization of the funds available
with the bank. With the increasing number of employees over the years, bank has
managed to expand its business coupled with profitability per employee which has
improved by almost Rs. 10 lacs which shows considerable operational excellence of the
bank in reducing costs which results into rising profits. Return on net worth i.e.
shareholders? funds have observed threefold increase.
? Earnings capacity ratios have witnessed robust performance from 2004-?05 to 2008-?09.
? Net interest margin has rose by a nominal almost 30 bps but is a good indication that it is
moving upwards. Return on average assets and return on equity shareholders? funds have
followed the same trend. It is interesting to note that non-interest income and non-interest
Fundamental and Technical Analysis of Indian Banking Sector

expenses have shown relatively similar change. However, encouraging trend in net
interest income has resulted into superior efficiency for the bank. Interest income to
working funds, non-interest income to working funds and operating profit to working
funds have observed a remarkable growth.
? Liquidity ratios also appear to be strength for the bank over the years.
? Liquid assets have witnessed significant rise and excelled to be in line with an increase in
the deposits and assets as a result of which these ratios have increased. Having enough
liquidity on the hand to meet the requirement of the bank?s stakeholders can prove to be
fruitful. Bank has maintained the tune of investment in the government securities in line
with the assets.

Fundamental and Technical Analysis of Indian Banking Sector

Z-score Analysis
Z = 6.56T
1
+ 3.26T
2
+ 6.72T
3
+ 1.05T
4

Altman Z Score Model 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
(CA-CL)/Total Assets (T1) 0.3481 0.3825 0.3909 0.3820 0.3773
Acc. Retained Earnings/ Total Assets (T2) 0.0419 0.0400 0.0380 0.0563 0.0574
EBIT / Total Assets (T3) 0.0432 0.0451 0.0494 0.0604 0.0664
B. V. of Equity / Total Liabilities (T4) 0.0453 0.0430 0.0404 0.0493 0.0522
Z-score 2.76 2.99 3.06 3.15 3.16

Technical Analysis
2.76
2.99
3.06
3.15 3.16
0.80
1.30
1.80
2.30
2.80
3.30
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Z
-
S
c
o
r
e

Year
Graph showing Z-score for 5 years
Fundamental and Technical Analysis of Indian Banking Sector

Exponential Moving Average (EMA) Chart
Fundamental and Technical Analysis of Indian Banking Sector

In BOI we can see the down ward trend in the month from January to March it goes sharply
down and reaches the lowest point of the year which is 180 and from that month it rises in the
next two months. In the month of May it falls very marginally to 240. Then there is mix trend for
next three months. It also touched the highest point of 475 in October but in November it
declines sharply to 325. Due to recent stability in EMA it will better to invest in the company.
Moving Average Convergence Divergence (MACD) Chart
As per the MACD chart, it is advisable to wait and watch. The reason behind is that in the first
quarter of the year it shows the down fall trend and which is below the expectation. In the month
of May only it increases sharply to 10 and declines marginally to 0 in June. Then it shows the
good trend which is satisfactory because it increases for two months and stables. So if consider
this chart we give preference of this company.
Relative Strength Index (RSI) Chart
In RSI chart we have shown the Upward Control line (UCL) at 70 points and Lower Control
Line (LCL) at 30 points. Company have shown fall in the first quarter but then it is a mix trend
and it is satisfactory because it is between the upper and lower limits. It also touches highest 80
in October So it is advisable to invest in this company because the RSI is moderate.
Accumulation/Distribution Chart
BOI is showing the stable trend in the first three months and after March there is a continuous
accumulation for two months and decrease in May. After that there is an upward trend till
October and after that there is a stable trend and it the positive sign for the company. There is
continuous buying is going on, so it is the perfect time to get in this company.

Canara Bank
Fundamental and Technical Analysis of Indian Banking Sector

Widely known for customer centricity, Canara Bank was founded by Shri Ammembal Subba
Rao Pai, a great visionary and philanthropist, in July 1906, at Mangalore, then a small port in
Karnataka. The Bank has gone through the various phases of its growth trajectory over hundred
years of its existence. Growth of Canara Bank was phenomenal, especially after nationalization
in the year 1969, attaining the status of a national level player in terms of geographical reach and
clientele segments. Eighties was characterized by business diversification for the Bank. In June
2006, the Bank completed a century of operation in the Indian banking industry. The eventful
journey of the Bank has been characterized by several memorable milestones. Today, Canara
Bank occupies a premier position in the comity of Indian banks. With an unbroken record of
profits since its inception, Canara Bank has several firsts to its credit. These include:
? Launching of Inter-City ATM Network
? Obtaining ISO Certification for a Branch
? Articulation of „Good Banking? – Bank?s Citizen Charter
? Commissioning of Exclusive Mahila Banking Branch
? Launching of Exclusive Subsidiary for IT Consultancy
? Issuing credit card for farmers
? Providing Agricultural Consultancy Services
Over the years, the Bank has been scaling up its market position to emerge as a major 'Financial
Conglomerate' with as many as nine subsidiaries/sponsored institutions/joint ventures in India
and abroad. As at September 2009, the Bank has further expanded its domestic presence, with
2802 branches spread across all geographical segments. Keeping customer convenience at the
forefront, the Bank provides a wide array of alternative delivery channels that include over 2000
ATMs- one of the highest among nationalized banks- covering 715 centers, 1591 branches
providing Internet and Mobile Banking (IMB) services and 2084 branches offering 'Anywhere
Banking' services. Under advanced payment and settlement system, all branches of the Bank
have been enabled to offer Real Time Gross Settlement (RTGS) and National Electronic Funds
Transfer (NEFT) facilities.
Not just in commercial banking, the Bank has also carved a distinctive mark, in various
corporate social responsibilities, namely, serving national priorities, promoting rural
Fundamental and Technical Analysis of Indian Banking Sector

development, enhancing rural self-employment through several training institutes and
spearheading financial inclusion objective. Promoting an inclusive growth strategy, which has
been formed as the basic plank of national policy agenda today, is in fact deeply rooted in the
Bank's founding principles. "A good bank is not only the financial heart of the community,
but also one with an obligation of helping in every possible manner to improve the
economic conditions of the common people". These insightful words of our founder continue
to resonate even today in serving the society with a purpose. The growth story of Canara Bank in
its first century was due, among others, to the continued patronage of its valued customers,
stakeholders, committed staff and uncanny leadership ability demonstrated by its leaders at the
helm of affairs. We strongly believe that the next century is going to be equally rewarding and
eventful not only in service of the nation but also in helping the Bank emerge as a “Global Bank
with Best Practices". This justifiable belief is founded on strong fundamentals, customer
centricity, enlightened leadership and a family like work culture.
Vision
To emerge as a „Best Practices Bank? by pursuing global benchmarks in profitability, operational
efficiency, asset quality, risk management and expanding the global reach.
Mission
To provide quality banking services with enhanced customer orientation, higher value creation
for stakeholders and to continue as a responsive corporate social citizen by effectively blending
commercial pursuits with social banking.

Trend Analysis
Fundamental and Technical Analysis of Indian Banking Sector

2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 7571.98 8711.51 11364.56 14200.74 17119.05
Expenses 8226.77 8830.75 11455.55 14944.04 17473.73
Net Profit 1109.50 1343.22 1420.81 1565.01 2072.42
Retained Earnings 853.35 1034.62 1085.03 1181.01 1688.67
Dividend per Share 5.50 6.60 7.00 8.00 8.00
Earnings per Share 27.06 32.76 33.40 38.17 50.55
Reserves 5698.96 6722.24 9943.99 10090.49 11797.77
Deposits 96795.92 116803.22 142381.44 154072.42 186892.51
Borrowings 2693.76 3530.42 7825.07 8632.49 14000.95
Net Fixed Assets 672.81 688.46 2861.35 2916.87 2929.45
Loans & Advances 60421.40 79425.70 98505.69 107238.04 138219.40
Investments 38053.88 36974.17 45225.53 49811.57 57776.90
Net Current Assets 6701.30 10593.72 14196.93 13441.24 14255.18
Particulars
Rs. Crore

Particulars 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 100.00 115.05 150.09 187.54 226.08
Expenses 100.00 107.34 139.25 181.65 212.40
Net Profit 100.00 121.07 128.06 141.06 186.79
Retained Earnings 100.00 121.24 127.15 138.40 197.89
Dividend per Share 100.00 120.00 127.27 145.45 145.45
Earnings per Share 100.00 121.06 123.43 141.06 186.81
Reserves 100.00 117.96 174.49 177.06 207.02
Deposits 100.00 120.67 147.09 159.17 193.08
Borrowings 100.00 131.06 290.49 320.46 519.75
Net Fixed Assets 100.00 102.33 425.28 433.54 435.41
Loans & Advances 100.00 131.45 163.03 177.48 228.76
Investments 100.00 97.16 118.85 130.90 151.83
Net Current Assets 100.00 158.08 211.85 200.58 212.72

Interpretation
Fundamental and Technical Analysis of Indian Banking Sector

From the above trend anal ysis of sel ected financi al dat a we can
observe:
? Generall y, t rends are in favour for the company.
? Expenses have shoot up sharpl y at a pace fast er t han t hat for core
interest income whi ch result ed into pressure on rising profits of the
bank.
? However, increasi ng profit has result ed into increasi ng ret ained
earnings over t he fi ve years.
? Dividend per share has boost ed by almost 1. 5 times so as t he Earni ngs
per share whi ch has consi derabl y shown a fourfol d increase over the
years.
? The bank has also managed t o add an enormous val ue to the
sharehol ders? kitt y, whi ch can be witnessed from over 2 t imes increase
in the reserves.
? It seems that the bank being i n its development phase attracted less
amount of deposits as borrowed funds have five fold ri se to meet up
the capi tal needs.
? Fixed assets have almost grown by 4 times, rapidl y t han interest
income. This shows i neffi ci ency in utilization of resources availabl e to
achi eve t argets by t he bank.
? Net current assets have shown improvement i n the subsequent years
whi ch is a good si gn for the bank.
On t he whol e, from the t rends it is apparent that the company
has become more affluent than is was 5 years ago.

CAMEL Analysis
Capital Adequacy Ratios
Fundamental and Technical Analysis of Indian Banking Sector

? Capital Adequacy Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Tier I Capital (%) 7.81 7.29 7.17 7.01 8.01
Tier II Capital (%) 3.41 5.49 6.33 6.24 6.09
Capital Adequacy Ratio (%) 11.22 12.78 13.50 13.25 14.10

? Leverage Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Debt 97,022.58 116,829.05 143,955.80 156,589.65 193,949.12
Shareholders' Funds 6108.96 7132.24 10353.99 10500.49 12207.77
Leverage Ratio (Times) 15.88 16.38 13.90 14.91 15.89

? Debt Equity Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Deposits 96795.92 116803.22 142381.44 154072.42 186892.51
Shareholders' Funds 6108.96 7132.24 10353.99 10500.49 12207.77
Debt Equity Ratio (Times) 15.84 16.38 13.75 14.67 15.31

? Advances to Total Assets Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Advances 60421.40 79425.70 98505.69 107238.04 138219.40
Total Assets 110305.16 132821.86 165961.04 180528.69 219645.80
Advances to Total Assets
Ratio (%)
54.78 59.80 59.35 59.40 62.93

? Government Securities to Total Investment Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Govt. Securities 28992.65 30621.43 37320.47 42830.37 50831.77
Total Investment 38053.88 36974.17 45225.53 49811.57 57776.90
Govt. Sec. to Total Inv.
Ratio (%)
76.19 82.82 82.52 85.98 87.98

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Asset Quality Ratios
11.22
12.78
13.50
13.25
14.10
10.00
10.50
11.00
11.50
12.00
12.50
13.00
13.50
14.00
14.50
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Capital Adequacy Ratio (%)
15.88
16.38
13.90
14.91
15.89
12.50
13.00
13.50
14.00
14.50
15.00
15.50
16.00
16.50
17.00
2004-'052005-'062006-'072007-'082008-'09
Year
Leverage Ratio (Times)
15.84
16.38
13.75
14.67
15.31
12.00
12.50
13.00
13.50
14.00
14.50
15.00
15.50
16.00
16.50
17.00
2004-'052005-'062006-'072007-'082008-'09
Year
Debt Equity Ratio (Times)
54.78
59.80
59.35 59.40
62.93
50.00
52.00
54.00
56.00
58.00
60.00
62.00
64.00
2004-'052005-'062006-'072007-'082008-'09
Year
Advances to Total Assets Ratio (%)
76.19
82.82
82.52
85.98
87.98
70.00
72.00
74.00
76.00
78.00
80.00
82.00
84.00
86.00
88.00
90.00
2004-'052005-'062006-'072007-'082008-'09
Year
Govt. Sec. to Total Inv. Ratio (%)
Fundamental and Technical Analysis of Indian Banking Sector

? Net NPA to Net Advances
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net NPAs 1,125.28 879.18 926.97 899.03 1,507.25
Net Advances 60421.40 79425.70 98505.69 107238.04 138219.40
Net NPA to Net
Advances (%)
1.86 1.11 0.94 0.84 1.09

? Net NPA to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net NPAs 1,125.28 879.18 926.97 899.03 1,507.25
Total Assets 110305.16 132821.86 165961.04 180528.69 219645.80
Net NPA to Total
Assets (%)
1.02 0.66 0.56 0.50 0.69

? Total Investments to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Investments 38053.88 36974.17 45225.53 49811.57 57776.90
Total Assets 110305.16 132821.86 165961.04 180528.69 219645.80
Total Investments to
Total Assets (%)
34.50 27.84 27.25 27.59 26.30

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Management Efficiency Ratios
? Total Advances to Total Deposits
1.86
1.11
0.94
0.84
1.09
0.00
0.50
1.00
1.50
2.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net NPA to Net Advances (%)
1.02
0.66
0.56
0.50
0.69
0.00
0.20
0.40
0.60
0.80
1.00
1.20
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net NPAs to Total Assets (%)
34.50
27.84
27.25 27.59
26.30
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Total Investments to Total Assets (%)
Fundamental and Technical Analysis of Indian Banking Sector

PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Advances 60421.40 79425.70 98505.69 107238.04 138219.40
Total Deposits 96795.92 116803.22 142381.44 154072.42 186892.51
Total Advances to Total
Deposits (%)
62.42 68.00 69.18 69.60 73.96

? Business per Employee
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Deposits+Advances 157,217.32 196,228.92 240,887.13 261,310.46 325,111.91
No. of Employees 47389 46893 46359 45260 44090
Business per
Employee (Rs. Cr.)
3.32 4.18 5.20 5.77 7.37

? Profit per Employee
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Operating Profit 1778.43 1976.69 2,515.37 2,179.81 3,179.66
No. of Employees 47389 46893 46359 45260 44090
Profit per Employee
(Rs. Lacs)
3.75 4.22 5.43 4.82 7.21

? Return on Net Worth
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 1109.50 1343.22 1420.81 1565.01 2072.42
Average Net Worth 5680.31 6620.60 8743.11 10427.24 11354.13
Return on Net Worth (%) 19.53 20.29 16.25 15.01 18.25

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Earnings Capacity Ratios
62.42
68.00
69.18
69.60
73.96
55.00
60.00
65.00
70.00
75.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Total Advances to Total Deposits
(%)
3.32
4.18
5.20
5.77
7.37
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Business per Employee (Rs. Cr.)
3.75
4.22
5.43
4.82
7.21
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
2004-'052005-'062006-'072007-'082008-'09
Year
Profit per Employee (Rs. Lacs)
19.53
20.29
16.25
15.01
18.25
0.00
5.00
10.00
15.00
20.00
25.00
2004-'052005-'062006-'072007-'082008-'09
Year
Return on Net Worth (%)
Fundamental and Technical Analysis of Indian Banking Sector

? Net Interest Margin
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Interest Income 3,150.47 3,581.50 4,026.83 3,537.80 4,717.80
Avg. Int. Earning Assets 90,953.45 107,437.58 130,065.55 150,390.42 176,522.96
Net Interest Margin (%) 3.46 3.33 3.10 2.35 2.67

? Return on Average Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 1109.50 1343.22 1420.81 1565.01 2072.42
Average Total Assets 104922.28 121563.51 149391.45 173244.87 200087.25
Return on Average
Assets (%)
1.06 1.10 0.95 0.90 1.04

? Return on Equity
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 1109.50 1343.22 1420.81 1565.01 2072.42
Shareholder's Funds 6108.96 7132.24 10353.99 10500.49 12207.77
Return on Equity (%) 18.16 18.83 13.72 14.90 16.98

? Non-Interest Income to Average Assets Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Income 1,543.83 1,377.51 1,511.80 2,308.31 2,427.10
Average Total Assets 104922.28 121563.51 149391.45 173244.87 200087.25
Non-Int. Income to
Avg. Assets Ratio (%)
1.47 1.13 1.01 1.33 1.21

? Overhead Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Expenses 2,915.87 2,982.32 3,023.26 3,666.30 3,965.24
Average Total Assets 104922.28 121563.51 149391.45 173244.87 200087.25
Overhead Ratio (%) 2.78 2.45 2.02 2.12 1.98

? Efficiency Ratio
Fundamental and Technical Analysis of Indian Banking Sector

PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Expenses 2,915.87 2,982.32 3,023.26 3,666.30 3,965.24
Net Int. Income+Non-
Int. Income
4,694.30 4,959.01 5,538.63 5,846.11 7,144.90
Efficiency Ratio (%) 62.12 60.14 54.58 62.71 55.50

? Interest Income to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 7571.97 8711.51 11364.56 14200.74 17119.05
Working Funds 110305.16 132821.86 165961.04 180528.69 219645.80
Interest Income to
Working Funds (%)
6.86 6.56 6.85 7.87 7.79

? Non-Interest Income to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Income 1,543.83 1,377.51 1,511.80 2,308.31 2,427.10
Working Funds 110305.16 132821.86 165961.04 180528.69 219645.80
Non-Int. Income to
Working Funds (%)
1.40 1.04 0.91 1.28 1.11

? Operating Profit to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Operating Profit 1778.43 1976.69 2,515.37 2,179.81 3,179.66
Working Funds 110305.16 132821.86 165961.04 180528.69 219645.80
Operating Profit to
Working Funds (%)
1.61 1.49 1.52 1.21 1.45

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

3.46
3.33
3.10
2.35
2.67
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
2004-'052005-'062006-'072007-'082008-'09
Year
Net Interest Margin (%)
1.06
1.10
0.95
0.90
1.04
0.00
0.20
0.40
0.60
0.80
1.00
1.20
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Return on Average Assets (%)
18.16
18.83
13.72
14.90
16.98
0.00
5.00
10.00
15.00
20.00
2004-'052005-'062006-'072007-'082008-'09
Year
Return on Equity (%)
1.47
1.13
1.01
1.33
1.21
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
2004-'052005-'062006-'072007-'082008-'09
Year
Non-Int. Income to Avg. Assets Ratio
(%)
2.78
2.45
2.02
2.12
1.98
0.00
0.50
1.00
1.50
2.00
2.50
3.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Overhead Ratio (%)
62.12
60.14
54.58
62.71
55.50
50.00
52.00
54.00
56.00
58.00
60.00
62.00
64.00
2004-'052005-'062006-'072007-'082008-'09
Year
Efficiency Ratio (%)
Fundamental and Technical Analysis of Indian Banking Sector

6.86
6.56
6.85
7.87
7.79
5.50
6.00
6.50
7.00
7.50
8.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Interest Income to Working Funds (%)
1.40
1.04
0.91
1.28
1.11
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Non-Int. Income to Working Funds (%)
1.61
1.49
1.52
1.21
1.45
0.00
0.50
1.00
1.50
2.00
2004-'052005-'062006-'072007-'082008-'09
Year
Op. Profit to Working Funds (%)
Fundamental and Technical Analysis of Indian Banking Sector

Liquidity Ratios
? Liquid Assets to Demand Deposits
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 11157.08 15733.50 19368.46 20562.20 20720.05
Demand Deposits 8957.13 10261.85 12445.25 13253.53 14356.81
Liquid Assets to
Demand Deposits (%)
124.56 153.32 155.63 155.15 144.32

? Liquid Assets to Total Deposits
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 11157.08 15733.50 19368.46 20562.20 20720.05
Total Deposits 96795.92 116803.22 142381.44 154072.42 186892.51
Liquid Assets to
Total Deposits (%)
11.53 13.47 13.60 13.35 11.09

? Liquid Assets to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 11157.08 15733.50 19368.46 20562.20 20720.05
Total Assets 110305.16 132821.86 165961.04 180528.69 219645.80
Liquid Assets to
Total Assets (%)
10.11 11.85 11.67 11.39 9.43

? Government Securities to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Government Securities 28992.65 30621.43 37320.47 42830.37 50831.77
Total Assets 110305.16 132821.86 165961.04 180528.69 219645.80
Government Sec. to
Total Assets (%)
26.28 23.05 22.49 23.72 23.14

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Interpretation
124.56
153.32
155.63 155.15
144.32
0.00
50.00
100.00
150.00
200.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Liquid Assets to Demand Deposits
(%)
11.53
13.47 13.60
13.35
11.09
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Liquid Assets to Total Deposits (%)
10.11
11.85
11.67
11.39
9.43
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
2004-'052005-'062006-'072007-'082008-'09
Year
Liquid Assets to Total Assets (%)
26.28
23.05
22.49
23.72
23.14
20.00
21.00
22.00
23.00
24.00
25.00
26.00
27.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Government Sec. to Total Assets (%)
Fundamental and Technical Analysis of Indian Banking Sector

? Capital adequacy ratios have shown satisfactory performance over the years for the bank.
? Core capital adequacy ratio has remained above the regulatory requirements of RBI and
witnessed a gradual improvement which is a good indication for the bank. On the other
hand, leverage and debt equity ratio have stabilized which were at their peak during
2005-?06. Moreover, advances to total assets ratio has boosted significantly coupled with
government securities to total investment ratio depicting a tale of handsome efforts
leading to healthier business opportunities while keeping hands safe.
? Asset quality ratios seem to have become strength for the bank.
? Non Performing Assets which are considered to be the most critical part of a bank?s
portfolio have shown a remarkable fall over the five years in comparison to net advances
which gives a picture of vigorous efforts in advancing loans and also in recovering the
same. Apart from these, investments to total assets ratio has also decreased from which is
a fine signal as bank by decreasing investments can now advance more funds and earn
interest income which is its core area of operation.
? Management efficiency ratios more or less have remained stabilized and shown a mix
trend over the years.
? Total advances to total deposits ratio has rose to the tune of 10% over the five years
which shows dynamic efforts of the bank in towards optimum utilization of the funds
available with the bank. With the increasing number of employees over the years bank
has managed to maintain the same increase in its business, however, profitability per
employee has improved by over Rs. 4 lacs which shows operational excellence of the
bank in reducing costs which results into rising profits. Return on net worth i.e.
shareholders? funds have stabilized with increasing-decreasing trend year after year.
? Earnings capacity ratios have witnessed robust performance from 2004-?05 to 2008-?09.
? Net interest margin has declined by almost 80 bps and is not a good indication. Return on
average assets and return on equity shareholders? funds have followed the stable trend. It
is interesting to note that non-interest income and non-interest expenses have shown
relatively similar change. However, encouraging trend in net interest income has resulted
Fundamental and Technical Analysis of Indian Banking Sector

into positive efficiency ratio for the bank. Interest income to working funds, non-interest
income to working funds and operating profit to working funds have also deteriorated.
? Liquidity ratios appear to be as the weak link of the bank and have observed mixed
performance over the years.
? Liquid assets though witnessing an upward trend have managed to be in line with an
increase in the deposits and assets as a result of which these ratios have stabilized overall.
Not having enough liquidity on the hand to meet the requirement of the bank?s
stakeholders can prove to be dangerous. However, bank has maintained the tune of
investment in the government securities in line with the assets.

Z-score Analysis
Fundamental and Technical Analysis of Indian Banking Sector

Z = 6.56T
1
+ 3.26T
2
+ 6.72T
3
+ 1.05T
4

Altman Z Score Model 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
(CA-CL)/Total Assets (T1) 0.3124 0.3694 0.3686 0.3608 0.3855
Acc. Retained Earnings/ Total Assets (T2) 0.0516 0.0506 0.0599 0.0558 0.0537
EBIT / Total Assets (T3) 0.0516 0.0502 0.0542 0.0696 0.0682
B. V. of Equity / Total Liabilities (T4) 0.0543 0.0528 0.0478 0.0459 0.0457
Z-score 2.62 2.98 3.03 3.06 3.21

Technical Analysis

2.62
2.98
3.03
3.06
3.21
0.80
1.30
1.80
2.30
2.80
3.30
3.80
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Z
-
S
c
o
r
e

Year
Graph showing Z-score for 5 years
Fundamental and Technical Analysis of Indian Banking Sector

Exponential Moving Average (EMA) Chart
In Canara Bank we can see the down ward trend in the month from January to March it goes
sharply down and reaches the lowest point of the year which is 150 and from that month it rises
Fundamental and Technical Analysis of Indian Banking Sector

in the next months. In the month of April, May and June it rises very sharply to 300. Then there
is stable trend for next three months. It also touched the highest point of 440 in December. Due
to recent stability in EMA it will better to invest in the company.
Moving Average Convergence Divergence (MACD) Chart
As per the MACD chart, it is advisable to go for this company. The reason behind is that in the
first quarter of the year it shows the down fall trend and which is below the expectation. In the
month of April only it increases sharply and rises sharply to 20 in June. Then it shows the down
ward trend and stables after that for three months and then after increases from September and
touches the highest of 21.
Relative Strength Index (RSI) Chart
In RSI chart we have shown the Upward Control line (UCL) at 70 points and Lower Control
Line (LCL) at 30 points. Company have shown minor fall in the first quarter but then it is a mix
trend and it is satisfactory because it crosses the upper limit five times. So it is advisable to
invest in this company because the RSI is high.
Accumulation/Distribution Chart
Canara Bank is showing the downward trend in the first four months and after April there is a
continuous accumulation till June and shown stable trend till October and after that there is a mix
trend. It is not the ideal sign for the company. There is much fluctuation is going around in the
market so wait and watch strategy would be good.

HDFC Bank
The Housing Development Finance Corporation Limited (HDFC) was amongst the first to
receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the
Fundamental and Technical Analysis of Indian Banking Sector

private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The
bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered
office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank
in January 1995. The Housing Development Finance Corporation Limited (HDFC) was amongst
the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a
bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry in
1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its
registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled
Commercial Bank in January 1995.
HDFC is India's premier housing finance company and enjoys an impeccable track record in
India as well as in international markets. Since its inception in 1977, the Corporation has
maintained a consistent and healthy growth in its operations to remain the market leader in
mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has
developed significant expertise in retail mortgage loans to different market segments and also
has a large corporate client base for its housing related credit facilities. With its experience in the
financial markets, a strong market reputation, large shareholder base and unique consumer
franchise, HDFC was ideally positioned to promote a bank in the Indian environment.
HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound
customer franchises across distinct businesses so as to be the preferred provider of banking
services for target retail and wholesale customer segments, and to achieve healthy growth in
profitability, consistent with the bank's risk appetite. The bank is committed to maintain the
highest level of ethical standards, professional integrity, corporate governance and regulatory
compliance. HDFC Bank's business philosophy is based on four core values - Operational
Excellence, Customer Focus, Product Leadership and People.
HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of 1,725
branches spread in 771 cities across India. All branches are linked on an online real-time basis.
Customers in over 500 locations are also serviced through Telephone Banking. The Bank's
expansion plans take into account the need to have a presence in all major industrial and
commercial centers where its corporate customers are located as well as the need to build a
strong retail customer base for both deposits and loan products. Being a clearing/settlement bank
Fundamental and Technical Analysis of Indian Banking Sector

to various leading stock exchanges, the Bank has branches in the centers where the NSE/BSE has
a strong and active member base.
The Bank also has 4,000 networked ATMs across these cities. Moreover, HDFC Bank's ATM
network can be accessed by all domestic and international Visa/MasterCard, Visa
Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.
Mr. Jagdish Capoor took over as the bank's Chairman in July 2001. Prior to this, Mr. Capoor was
a Deputy Governor of the Reserve Bank of India.
The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25 years and
before joining HDFC Bank in 1994 was heading Citibank's operations in Malaysia.

The Bank's Board of Directors is composed of eminent individuals with a wealth of experience
in public policy, administration, industry and commercial banking. Senior executives
representing HDFC are also on the Board.
Senior banking professionals with substantial experience in India and abroad head various
businesses and functions and report to the Managing Director. Given the professional expertise
of the management team and the overall focus on recruiting and retaining the best talent in the
industry, the bank believes that its people are a significant competitive strength.
HDFC Bank operates in a highly automated environment in terms of information technology and
communication systems. All the bank's branches have online connectivity, which enables the
bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also
provided to retail customers through the branch network and Automated Teller Machines
(ATMs).
The Bank has made substantial efforts and investments in acquiring the best technology available
internationally, to build the infrastructure for a world class bank. The Bank's business is
supported by scalable and robust systems which ensure that our clients always get the finest
services we offer.
Trend Analysis
Fundamental and Technical Analysis of Indian Banking Sector

2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 2993.51 4438.98 6747.19 10135.78 16102.06
Expenses 3159.27 4818.2 7342.16 11096.34 17557.97
Net Profit 665.3 870.78 1141.45 1590.19 2244.94
Retained Earnings 505.59 674.39 879.53 1237.66 1746.68
Dividend per Share 4.50 5.50 7.00 8.50 10.00
Earnings per Share 21.48 27.81 33.22 44.87 52.77
Reserves 4210.4 4986.46 6113.76 11142.8 14226.44
Deposits 36354.25 55796.82 68297.94 100768.6 142811.58
Borrowings 5290.01 4560.48 6097.99 7844.02 9564.55
Net Fixed Assets 708.32 855.08 966.67 1175.09 1706.73
Loans & Advances 25566.3 35061.26 46944.78 63426.89 98883.05
Investments 19349.81 28393.96 30296.96 48912.39 56290.44
Net Current Assets (2,782.04) 41.30 1,881.05 5,859.07 9,389.58
Particulars
Rs. Crore

Particulars 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 100.00 148.29 225.39 338.59 537.90
Expenses 100.00 152.51 232.40 351.23 555.76
Net Profit 100.00 130.89 171.57 239.02 337.43
Retained Earnings 100.00 133.39 173.96 244.80 345.47
Dividend per Share 100.00 122.22 155.56 188.89 222.22
Earnings per Share 100.00 129.47 154.66 208.89 245.67
Reserves 100.00 118.43 145.21 264.65 337.89
Deposits 100.00 153.48 187.87 277.19 392.83
Borrowings 100.00 86.21 115.27 148.28 180.80
Net Fixed Assets 100.00 120.72 136.47 165.90 240.95
Loans & Advances 100.00 137.14 183.62 248.09 386.77
Investments 100.00 146.74 156.57 252.78 290.91
Net Current Assets (100.00) 1.48 67.61 210.60 337.51

Interpretation
Fundamental and Technical Analysis of Indian Banking Sector

From the above trend anal ysis of sel ected financi al dat a we can
observe:
? Generall y, t rends are in favour for the company.
? Expenses have shoot up sharpl y at a pace fast er t han t hat for core
interest income whi ch result ed into pressure on rising profits of the
bank.
? However, increasi ng profit has result ed into increasi ng ret ained
earnings over t he fi ve years.
? Dividend per share has boost ed by over 2 times so as the Earnings per
share whi ch has considerabl y shown a fourfold incre ase over t he years.
? The bank has also managed t o add an enormous val ue to the
sharehol ders? kitt y, whi ch can be witnessed from over 3 t imes increase
in the reserves.
? It seems that the bank has maint ained advances i n line with the
deposits whi ch i s an encouraging trend whil e keepi ng borrowed funds
minimal.
? Fixed assets have almost grown by over 2 times, less rapidl y t han
interest income. Thi s shows optimum uti lization of resources avail abl e
to achieve t arget s by the bank.
? Net current assets have shown considerabl e improvement in the
subsequent years whi ch is a good indicati on for the bank.
On t he whol e, from the t rends it is apparent that the company
has become more affluent than is was 5 years ago.

CAMEL Analysis
Fundamental and Technical Analysis of Indian Banking Sector

Capital Adequacy Ratios
? Capital Adequacy Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Tier I Capital (%) 9.60 8.55 8.58 10.30 10.18
Tier II Capital (%) 2.56 2.86 4.50 3.30 4.91
Capital Adequacy Ratio (%) 12.16 11.41 13.08 13.60 15.09

? Leverage Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Debt 41,644.26 60,357.30 71,113.33 105,247.46 145,497.42
Shareholders' Funds 4562.63 5299.60 6433.15 11497.23 14651.82
Leverage Ratio (Times) 9.13 11.39 11.05 9.15 9.93

? Debt Equity Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Deposits 36354.25 55796.82 68297.94 100768.60 142811.58
Shareholders' Funds 4562.63 5299.60 6433.15 11497.23 14651.82
Debt Equity Ratio (Times) 7.97 10.53 10.62 8.76 9.75

? Advances to Total Assets Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Advances 25566.30 35061.26 46944.78 63426.89 98883.05
Total Assets 51429.00 73506.39 91235.61 133176.60 183270.78
Advances to Total Assets
Ratio (%)
49.71 47.70 51.45 47.63 53.95

? Government Securities to Total Investment Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Govt. Securities 11227.1 19632.8 22544.2 31665.6 52156.6
Total Investment 19349.81 28393.96 30296.96 48912.39 56290.44
Govt. Sec. to Total Inv.
Ratio (%)
58.02 69.14 74.41 64.74 92.66

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Asset Quality Ratios
12.16
11.41
13.08
13.60
15.09
10.00
11.00
12.00
13.00
14.00
15.00
16.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Capital Adequacy Ratio (%)
9.13
11.39
11.05
9.15
9.93
0.00
2.00
4.00
6.00
8.00
10.00
12.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Leverage Ratio (Times)
7.97
10.53 10.62
8.76
9.75
0.00
2.00
4.00
6.00
8.00
10.00
12.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Debt Equity Ratio (Times)
49.71
47.70
51.45
47.63
53.95
44.00
46.00
48.00
50.00
52.00
54.00
56.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Advances to Total Assets Ratio (%)
58.02
69.14
74.41
64.74
92.66
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
100.00
2004-'052005-'062006-'072007-'082008-'09
Year
Govt. Sec. to Total Inv. Ratio (%)
Fundamental and Technical Analysis of Indian Banking Sector

? Net NPA to Net Advances
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net NPAs 60.63 155.18 202.89 298.52 627.62
Net Advances 25566.30 35061.26 46944.78 63426.89 98883.05
Net NPA to Net
Advances (%)
0.24 0.44 0.43 0.47 0.63

? Net NPA to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net NPAs 60.63 155.18 202.89 298.52 627.62
Total Assets 51429.00 73506.39 91235.61 133176.60 183270.78
Net NPA to Total
Assets (%)
0.12 0.21 0.22 0.22 0.34

? Total Investments to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Investments 19349.81 28393.96 30296.96 48912.39 56290.44
Total Assets 51429.00 73506.39 91235.61 133176.60 183270.78
Total Investments to
Total Assets (%)
37.62 38.63 33.21 36.73 30.71

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Management Efficiency Ratios
? Total Advances to Total Deposits
0.24
0.44
0.43
0.47
0.63
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net NPA to Net Advances (%)
0.12
0.21
0.22 0.22
0.34
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net NPAs to Total Assets (%)
37.62
38.63
33.21
36.73
30.71
0.00
10.00
20.00
30.00
40.00
50.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Total Investments to Total Assets (%)
Fundamental and Technical Analysis of Indian Banking Sector

PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Advances 25566.30 35061.26 46944.78 63426.89 98883.05
Total Deposits 36354.25 55796.82 68297.94 100768.60 142811.58
Total Advances to Total
Deposits (%)
70.33 62.84 68.74 62.94 69.24

? Business per Employee
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Deposits+Advances 61,920.55 90,858.08 115,242.72 164,195.49 241,694.63
No. of Employees 9030 14878 21477 37836 52687
Business per
Employee (Rs. Cr.)
6.86 6.11 5.37 4.34 4.59

? Profit per Employee
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Operating Profit 1155.81 1733.57 2,563.91 3,765.41 5,178.95
No. of Employees 9030 14878 21477 37836 52687
Profit per Employee
(Rs. Lacs)
12.80 11.65 11.94 9.95 9.83

? Return on Net Worth
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 665.56 870.78 1141.45 1590.18 2244.93
Average Net Worth 3634.25 4931.11 5866.38 8965.19 13074.5
Return on Net Worth (%) 18.31 17.66 19.46 17.74 17.17

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Earnings Capacity Ratios
70.33
62.84
68.74
62.94
69.24
58.00
60.00
62.00
64.00
66.00
68.00
70.00
72.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Total Advances to Total Deposits
(%)
6.86
6.11
5.37
4.34
4.59
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Business per Employee (Rs. Cr.)
12.80
11.65
11.94
9.95 9.83
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
2004-'052005-'062006-'072007-'082008-'09
Year
Profit per Employee (Rs. Lacs)
18.31
17.66
19.46
17.74
17.17
16.00
16.50
17.00
17.50
18.00
18.50
19.00
19.50
20.00
2004-'052005-'062006-'072007-'082008-'09
Year
Return on Net Worth (%)
Fundamental and Technical Analysis of Indian Banking Sector

? Net Interest Margin
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Interest Income 1,589.87 2,300.68 3,468.48 5,227.88 7,421.16
Avg. Int. Earning Assets 44,916.11 54,185.67 70,348.48 94,790.51 133,756.39
Net Interest Margin (%) 3.54 4.25 4.93 5.52 5.55

? Return on Average Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 665.56 870.78 1141.45 1590.18 2244.93
Average Total Assets 46868.00 62467.70 82371.00 112206.11 158223.69
Return on Average
Assets (%)
1.42 1.39 1.39 1.42 1.42

? Return on Equity
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 665.56 870.78 1141.45 1590.18 2244.93
Shareholder's Funds 4562.63 5299.60 6433.15 11497.23 14651.82
Return on Equity (%) 14.59 16.43 17.74 13.83 15.32

? Non-Interest Income to Average Assets Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Income 651.34 1,123.98 1,516.23 2,283.15 3,290.60
Average Total Assets 46868.00 62467.70 82371.00 112206.11 158223.69
Non-Int. Income to
Avg. Assets Ratio (%)
1.39 1.80 1.84 2.03 2.08

? Overhead Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Expenses 1,085.40 1,691.09 2,420.80 3,745.62 5,532.81
Average Total Assets 46868.00 62467.70 82371.00 112206.11 158223.69
Overhead Ratio (%) 2.32 2.71 2.94 3.34 3.50

? Efficiency Ratio
Fundamental and Technical Analysis of Indian Banking Sector

PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Expenses 1,085.40 1,691.09 2,420.80 3,745.62 5,532.81
Net Int. Income+Non-
Int. Income
2,241.21 3,424.66 4,984.71 7,511.03 10,711.76
Efficiency Ratio (%) 48.43 49.38 48.56 49.87 51.65

? Interest Income to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 2905.43 4230.18 6647.93 10115.00 16332.26
Working Funds 51429.00 73506.39 91235.61 133176.60 183270.78
Interest Income to
Working Funds (%)
5.65 5.75 7.29 7.60 8.91

? Non-Interest Income to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Income 651.34 1,123.98 1,516.23 2,283.15 3,290.60
Working Funds 51429.00 73506.39 91235.61 133176.60 183270.78
Non-Int. Income to
Working Funds (%)
1.27 1.53 1.66 1.71 1.80

? Operating Profit to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Operating Profit 1155.81 1733.57 2,563.91 3,765.41 5,178.95
Working Funds 51429.00 73506.39 91235.61 133176.60 183270.78
Operating Profit to
Working Funds (%)
2.25 2.36 2.81 2.83 2.83

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

3.54
4.25
4.93
5.52 5.55
0.00
1.00
2.00
3.00
4.00
5.00
6.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net Interest Margin (%)
1.42
1.39
1.39
1.42
1.42
1.36
1.37
1.38
1.39
1.40
1.41
1.42
1.43
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Return on Average Assets (%)
14.59
16.43
17.74
13.83
15.32
0.00
5.00
10.00
15.00
20.00
2004-'052005-'062006-'072007-'082008-'09
Year
Return on Equity (%)
1.39
1.80
1.84
2.03
2.08
0.00
0.50
1.00
1.50
2.00
2.50
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Non-Int. Income to Avg. Assets Ratio (%)
2.32
2.71
2.94
3.34
3.50
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Overhead Ratio (%)
48.43
49.38
48.56
49.87
51.65
46.00
47.00
48.00
49.00
50.00
51.00
52.00
2004-'052005-'062006-'072007-'082008-'09
Year
Efficiency Ratio (%)
Fundamental and Technical Analysis of Indian Banking Sector

5.65
5.75
7.29
7.60
8.91
0.00
2.00
4.00
6.00
8.00
10.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Interest Income to Working Funds (%)
1.27
1.53
1.66
1.71
1.80
0.00
0.50
1.00
1.50
2.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Non-Int. Income to Working Funds (%)
2.25
2.36
2.81 2.83 2.83
0.00
0.50
1.00
1.50
2.00
2.50
3.00
2004-'052005-'062006-'072007-'082008-'09
Year
Op. Profit to Working Funds (%)
Fundamental and Technical Analysis of Indian Banking Sector

Liquidity Ratios
? Liquid Assets to Demand Deposits
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 5731.07 9134.76 12869.29 19279.02 25527.74
Demand Deposits 10630.46 14752.46 19811.84 28759.70 28444.92
Liquid Assets to
Demand Deposits (%)
53.91 61.92 64.96 67.03 89.74

? Liquid Assets to Total Deposits
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 5731.07 9134.76 12869.29 19279.02 25527.74
Total Deposits 36354.25 55796.82 68297.94 100768.60 142811.58
Liquid Assets to
Total Deposits (%)
15.76 16.37 18.84 19.13 17.88

? Liquid Assets to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 5731.07 9134.76 12869.29 19279.02 25527.74
Total Assets 51429.00 73506.39 91235.61 133176.60 183270.78
Liquid Assets to
Total Assets (%)
11.14 12.43 14.11 14.48 13.93

? Government Securities to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Government Securities 11227.07 19632.84 22544.22 31665.58 52156.58
Total Assets 51429.00 73506.39 91235.61 133176.60 183270.78
Government Sec. to
Total Assets (%)
21.83 26.71 24.71 23.78 28.46

Fundamental and Technical Analysis of Indian Banking Sector

Graphs

53.91
61.92
64.96
67.03
89.74
0.00
20.00
40.00
60.00
80.00
100.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Liquid Assets to Demand Deposits (%)
15.76
16.37
18.84
19.13
17.88
0.00
5.00
10.00
15.00
20.00
25.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Liquid Assets to Total Deposits (%)
11.14
12.43
14.11
14.48
13.93
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
2004-'052005-'062006-'072007-'082008-'09
Year
Liquid Assets to Total Assets (%)
21.83
26.71
24.71
23.78
28.46
0.00
5.00
10.00
15.00
20.00
25.00
30.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Government Sec. to Total Assets (%)
Fundamental and Technical Analysis of Indian Banking Sector

Interpretation
? Capital adequacy ratios have shown quite satisfactory performance over the years for the
bank.
? Core capital adequacy ratio has remained above the regulatory requirements of RBI and
witnessed a gradual improvement which is a good indication for the bank. On the other
hand, leverage and debt equity ratio have stabilized which were at their peak during
2005-?06. Moreover, advances to total assets ratio has boosted significantly coupled with
government securities to total investment ratio depicting a tale of handsome efforts
leading to healthier business opportunities while keeping hands safe.
? Asset quality ratios seem to have remained poor overall.
? Non Performing Assets which are considered to be the most critical part of a bank?s
portfolio have shown a sharp rise over the five years in comparison to net advances
which gives a picture of lethargic efforts in advancing loans and also in recovering the
same. Apart from these, investments to total assets ratio has also decreased from which is
a fine signal as bank by decreasing investments can now advance more funds and earn
interest income which is its core area of operation.
? Management efficiency ratios more or less have remained stabilized and shown a
declining trend over the years.
? Total advances to total deposits ratio has become steady over the five years which shows
inadequate efforts of the bank in towards optimum utilization of the funds available with
the bank. With the increasing number of employees over the years, bank has managed to
maintain more or less the same increase in its business, and the same goes with the
profitability per employee which has declined. Return on net worth i.e. shareholders?
funds have stabilized with increasing-decreasing trend year after year.
? Earnings capacity ratios have witnessed robust performance from 2004-?05 to 2008-?09.
? Net interest margin has rose by a significant over 200 bps but is a good indication that it
is moving upwards. Return on average assets and return on equity shareholders? funds
have followed the same trend. It is interesting to note that non-interest income and non-
interest expenses have shown relatively similar change. However, discouraging trend in
Fundamental and Technical Analysis of Indian Banking Sector

net interest income has resulted into poor efficiency for the bank. Interest income to
working funds, non-interest income to working funds and operating profit to working
funds have observed a remarkable growth.
? Liquidity ratios appear to be advantageous for the bank and have observed vigorous
performance over the years.
? Liquid assets though witnessing an upward trend have succeeded to be in line with an
increase in the deposits and assets as a result of which these ratios have risen by
considerable amount. Having enough liquidity on the hand to meet the requirement of the
bank?s stakeholders can prove to be safe. Bank has also maintained the tune of
investment in the government securities in line with the assets.

Fundamental and Technical Analysis of Indian Banking Sector

Z-score Analysis
Z = 6.56T
1
+ 3.26T
2
+ 6.72T
3
+ 1.05T
4

Altman Z Score Model 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
(CA-CL)/Total Assets (T1) 0.0535 0.1077 0.1339 0.1721 0.1955
Acc. Retained Earnings/ Total Assets (T2) 0.0817 0.0678 0.0669 0.0836 0.0776
EBIT / Total Assets (T3) 0.0446 0.0433 0.0528 0.0550 0.0682
B. V. of Equity / Total Liabilities (T4) 0.0878 0.0720 0.0704 0.0863 0.0799
Z-score 1.01 1.29 1.53 1.86 2.08

Technical Analysis
1.01
1.29
1.53
1.86
2.08
0.80
1.00
1.20
1.40
1.60
1.80
2.00
2.20
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Z
-
S
c
o
r
e

Year
Graph showing Z-score for 5 years
Fundamental and Technical Analysis of Indian Banking Sector

Exponential Moving Average (EMA) Chart
Fundamental and Technical Analysis of Indian Banking Sector

In HDFC we can see the down ward trend in the month from January to March it goes sharply
down and reaches the lowest point of the year which is 790 and from that month it rises in the
next months. In the month of April, May and July it rises very sharply to 1600. Then there is
stable trend for next three months. It also touched the highest point of 1840 in December. Due to
recent stability in EMA it will better to invest in the company.
Moving Average Convergence Divergence (MACD) Chart
As per the MACD chart, it is advisable to go for this company. The reason behind is that in the
first quarter of the year it shows the down fall trend and which is below the expectation. In the
month of May only it increases sharply to 50 and rises sharply to 90 in June. Then it shows the
down ward trend which is not quite satisfactory but from September it is mix trend mostly
upward side.
Relative Strength Index (RSI) Chart
In RSI chart we have shown the Upward Control line (UCL) at 70 points and Lower Control
Line (LCL) at 30 points. Company have shown stable trend in the first quarter and then it
increases above the upper limit many times so it is satisfactory and advisable to invest in this
company because the RSI is moderate.
Accumulation/Distribution Chart
HDFC is showing the stable trend in the first three months and after March there is a continuous
accumulation and shown upward trend till December and it the positive sign for the company.
There is continuous buying is going on, so it is the perfect time to get in this company.

ICICI Bank
Fundamental and Technical Analysis of Indian Banking Sector

ICICI Bank is India's second-largest bank with total assets of Rs. 3,562.28 billion (US$ 77
billion) at December 31, 2009 and profit after tax Rs. 30.19 billion (US$ 648.8 million) for the
nine months ended December 31, 2009. The Bank has a network of 1,679 branches and about
4,883 ATMs in India and presence in 18 countries. ICICI Bank offers a wide range of banking
products and financial services to corporate and retail customers through a variety of delivery
channels and through its specialized subsidiaries and affiliates in the areas of investment
banking, life and non-life insurance, venture capital and asset management. The Bank currently
has subsidiaries in the United Kingdom, Russia and Canada, branches in United States,
Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and
representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand,
Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium and Germany.
ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock
Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New
York Stock Exchange (NYSE).
For the third year in a row ICICI Bank has won The Asset Triple a Country Awards for Best
Domestic Bank in India. ICICI Bank won the Most Admired Knowledge Enterprises (MAKE)
India 2009 Award. ICICI Bank won the first place in "Maximizing Enterprise Intellectual
Capital" category, October 28, 2009. Ms. Chanda Kochhar, MD and CEO was awarded with the
Indian Business Women Leadership Award at NDTV Profit Business Leadership Awards,
October 26, 2009. ICICI Bank received two awards in CNBC Awaaz Consumer Awards; one for
the most preferred auto loan and the other for most preferred credit Card, on September 30,
2009. Ms. Chanda Kochhar, Managing Director & CEO ranked in the top 20 of the World's 100
Most Powerful Women list compiled by Forbes, August 2009. Financial Express at its FE India's
Best Banks Awards, honoured Mr. K.V. Kamath, Chairman with the Lifetime Achievement
Award, July 25, 2009. ICICI Bank won Asset Triple an Investment Awards for the Best
Derivative House, India. In addition ICICI Bank were highly commended, Local Currency
Structured product, India for 1.5 year ADR GDR linked Range Accrual Note., July 2009.

Trend Analysis
Fundamental and Technical Analysis of Indian Banking Sector

2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 9385.17 14266.15 22994.29 31598.86 31484.72
Expenses 10944.37 16828.27 26847.01 36407.07 36217.00
Net Profit 2005.20 2540.07 3110.22 4157.73 3758.13
Retained Earnings 1282.13 1674.24 2055.95 2780.36 2381.75
Dividend per Share 8.50 8.50 10.00 11.00 11.00
Earnings per Share 27.22 28.55 34.20 37.37 33.76
Reserves 11813.20 21316.16 23413.91 45357.52 48419.72
Deposits 99818.78 165083.17 230510.19 244431.05 218347.83
Borrowings 41753.40 48666.30 70661.14 86398.61 92805.45
Net Fixed Assets 4134.34 4128.65 4113.08 4749.30 4679.27
Loans & Advances 88991.75 146163.11 195865.60 225616.08 218310.85
Investments 50487.35 71547.40 91257.84 111454.34 103058.31
Net Current Assets 8081.34 11397.03 31435.05 34678.53 33674.63
Particulars
Rs. Crore

Particulars 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 100.00 152.01 245.01 336.69 335.47
Expenses 100.00 153.76 245.30 332.66 330.92
Net Profit 100.00 126.67 155.11 207.35 187.42
Retained Earnings 100.00 130.58 160.35 216.85 185.77
Dividend per Share 100.00 100.00 117.65 129.41 129.41
Earnings per Share 100.00 104.89 125.64 137.29 124.03
Reserves 100.00 180.44 198.20 383.96 409.88
Deposits 100.00 165.38 230.93 244.87 218.74
Borrowings 100.00 116.56 169.23 206.93 222.27
Net Fixed Assets 100.00 99.86 99.49 114.87 113.18
Loans & Advances 100.00 164.24 220.09 253.52 245.32
Investments 100.00 141.71 180.75 220.76 204.13
Net Current Assets 100.00 141.03 388.98 429.12 416.70

Interpretation
Fundamental and Technical Analysis of Indian Banking Sector

From the above trend anal ysis of sel ected financi al dat a we can
observe:
? Generall y, t rends are in favour for the company.
? Expenses have shoot up sharpl y at a pace fast er t han t hat for core
interest income whi ch result ed into pressure on rising profits of the
bank.
? However, increasi ng profit has result ed into increasi ng ret ained
earnings over t he fi ve years.
? Dividend per share has increased by almost 1. 3 t imes so as the
Earni ngs per share which has considerabl y shown a 1. 25 times increase
over t he years.
? The bank has also managed t o add an enormous val ue to the
sharehol ders? kitt y, whi ch can be witnessed from over 4 t imes increase
in the reserves.
? It seems that the bank being i n its development phase attracted less
amount of deposits but it has managed to keep advances intact as
compared t o deposit s.
? Fixed assets have almost grown by over 1 times, less rapidl y t han
interest income. Thi s shows optimum uti lization of resources avail abl e
to achieve t arget s by the bank.
? Net current asset s have shown considerable i mprovement in the years
2007-?08 and 2008-„09 whi ch is a good i ndi cati on for the bank.
On t he whol e, from the t rends it is apparent that the company
has become more affluent than is was 5 years ago.

CAMEL Analysis
Capital Adequacy Ratios
Fundamental and Technical Analysis of Indian Banking Sector

? Capital Adequacy Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Tier I Capital (%) 7.59 9.20 7.42 11.76 11.84
Tier II Capital (%) 4.19 4.15 4.27 2.20 3.69
Capital Adequacy Ratio (%) 11.78 13.35 11.69 13.96 15.53

? Leverage Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Debt 133,363.28 203,605.08 281,766.22 310,079.48 285,671.51
Shareholders' Funds 12899.98 22555.99 24663.26 46820.20 49883.01
Leverage Ratio (Times) 10.34 9.03 11.42 6.62 5.73

? Debt Equity Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Deposits 99818.78 165083.17 230510.19 244431.05 218347.82
Shareholders' Funds 12899.98 22555.99 24663.26 46820.20 49883.01
Debt Equity Ratio (Times) 7.74 7.32 9.35 5.22 4.38

? Advances to Total Assets Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Advances 88991.75 146163.11 195865.6 225616.08 218310.85
Total Assets 167659.40 251388.95 344658.11 399795.07 379300.96
Advances to Total Assets
Ratio (%)
53.08 58.14 56.83 56.43 57.56

? Government Securities to Total Investment Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Govt. Securities 34489.47 51208.68 67664.75 75518.00 63472.83
Total Investment 50487.35 71547.40 91257.84 111454.34 103058.31
Govt. Sec. to Total Inv.
Ratio (%)
68.31 71.57 74.15 67.76 61.59

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Asset Quality Ratios
11.78
13.35
11.69
13.96
15.53
10.00
11.00
12.00
13.00
14.00
15.00
16.00
2004-'052005-'062006-'072007-'082008-'09
Year
Capital Adequacy Ratio (%)
10.34
9.03
11.42
6.62
5.73
0.00
2.00
4.00
6.00
8.00
10.00
12.00
2004-'052005-'062006-'072007-'082008-'09
Year
Leverage Ratio (Times)
7.74
7.32
9.35
5.22
4.38
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Debt Equity Ratio (Times)
53.08
58.14
56.83
56.43
57.56
50.00
51.00
52.00
53.00
54.00
55.00
56.00
57.00
58.00
59.00
2004-'052005-'062006-'072007-'082008-'09
Year
Advances to Total Assets Ratio (%)
68.31
71.57
74.15
67.76
61.59
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
2004-'052005-'062006-'072007-'082008-'09
Year
Govt. Sec. to Total Inv. Ratio (%)
Fundamental and Technical Analysis of Indian Banking Sector

? Net NPA to Net Advances
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net NPAs 1,505.27 1,052.68 1,992.04 3,490.55 4,553.94
Net Advances 88,991.75 146,163.11 195,865.60 225,616.08 218,310.85
Net NPA to Net
Advances (%)
1.69 0.72 1.02 1.55 2.09

? Net NPA to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net NPAs 1,505.27 1,052.68 1,992.04 3,490.55 4,553.94
Total Assets 167659.40 251388.95 344658.11 399795.07 379300.96
Net NPA to Total
Assets (%)
0.90 0.42 0.58 0.87 1.20

? Total Investments to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Investments 50487.35 71547.40 91257.84 111454.34 103058.31
Total Assets 167659.40 251388.95 344658.11 399795.07 379300.96
Total Investments to
Total Assets (%)
30.11 28.46 26.48 27.88 27.17

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Management Efficiency Ratios
? Total Advances to Total Deposits
1.69
0.72
1.02
1.55
2.09
0.00
0.50
1.00
1.50
2.00
2.50
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net NPA to Net Advances (%)
0.90
0.42
0.58
0.87
1.20
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net NPAs to Total Assets (%)
30.11
28.46
26.48
27.88
27.17
24.00
25.00
26.00
27.00
28.00
29.00
30.00
31.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Total Investments to Total Assets (%)
Fundamental and Technical Analysis of Indian Banking Sector

PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Advances 88991.75 146163.11 195865.6 225616.08 218310.85
Total Deposits 99818.78 165083.17 230510.19 244431.05 218347.83
Total Advances to Total
Deposits (%)
89.15 88.54 84.97 92.30 99.98

? Business per Employee
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Deposits+Advances 188,810.53 311,246.28 426,375.79 470,047.13 436,658.68
No. of Employees 18000 25384 33321 33959 34596
Business per
Employee (Rs. Cr.)
10.49 12.26 12.80 13.84 12.62

? Profit per Employee
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Operating Profit 3077.45 3949.44 4,748.88 5,327.77 5,689.24
No. of Employees 18000 25384 33321 33321 33321
Profit per Employee
(Rs. Lacs)
17.10 15.56 14.25 15.99 17.07

? Return on Net Worth
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 2005.20 2540.07 3110.22 4157.73 3758.13
Average Net Worth 10630.27 17727.99 23609.63 35741.73 48351.60
Return on Net Worth (%) 18.86 14.33 13.17 11.63 7.77

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Earnings Capacity Ratios
89.15
88.54
84.97
92.30
99.98
75.00
80.00
85.00
90.00
95.00
100.00
105.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Total Advances to Total Deposits
(%)
10.49
12.26
12.80
13.84
12.62
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Business per Employee (Rs. Cr.)
17.10
15.56
14.25
15.99
17.07
12.00
13.00
14.00
15.00
16.00
17.00
18.00
2004-'052005-'062006-'072007-'082008-'09
Year
Profit per Employee (Rs. Lacs)
18.86
14.33
13.17
11.63
7.77
0.00
5.00
10.00
15.00
20.00
2004-'052005-'062006-'072007-'082008-'09
Year
Return on Net Worth (%)
Fundamental and Technical Analysis of Indian Banking Sector

? Net Interest Margin
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Interest Income 2,839.00 4,187.05 6,635.79 7,304.10 8,366.62
Avg. Int. Earning Assets 122,158.74 178,594.81 252,416.98 312,096.93 329,219.79
Net Interest Margin (%) 2.32 2.34 2.63 2.34 2.54

? Return on Average Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 2005.20 2540.07 3110.22 4157.73 3758.13
Average Total Assets 146444.14 209524.18 298023.53 372226.59 389548.02
Return on Average
Assets (%)
1.37 1.21 1.04 1.12 0.96

? Return on Equity
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 2005.20 2540.07 3110.22 4157.73 3758.13
Shareholder's Funds 12899.98 22555.99 24663.26 46820.20 49883.01
Return on Equity (%) 15.54 11.26 12.61 8.88 7.53

? Non-Interest Income to Average Assets Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Income 3,416.23 5,036.62 6,962.95 8,878.85 8,117.76
Average Total Assets 146444.14 209524.18 298023.53 372226.59 389548.02
Non-Int. Income to
Avg. Assets Ratio (%)
2.33 2.40 2.34 2.39 2.08

? Overhead Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Expenses 3,177.78 5,274.23 8,849.86 10,855.18 10,795.14
Average Total Assets 146444.14 209524.18 298023.53 372226.59 389548.02
Overhead Ratio (%) 2.17 2.52 2.97 2.92 2.77

? Efficiency Ratio
Fundamental and Technical Analysis of Indian Banking Sector

PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Expenses 3,177.78 5,274.23 8,849.86 10,855.18 10,795.14
Net Int. Income+Non-
Int. Income
6,255.23 9,223.67 13,598.74 16,182.95 16,484.38
Efficiency Ratio (%) 50.80 57.18 65.08 67.08 65.49

? Interest Income to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 9409.89 13784.5 22994.29 30788.34 31092.55
Working Funds 167659.40 251388.95 344658.11 399795.07 379300.96
Interest Income to
Working Funds (%)
5.61 5.48 6.67 7.70 8.20

? Non-Interest Income to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Income 3,416.23 5,036.62 6,962.95 8,878.85 8,117.76
Working Funds 167659.40 251388.95 344658.11 399795.07 379300.96
Non-Int. Income to
Working Funds (%)
2.04 2.00 2.02 2.22 2.14

? Operating Profit to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Operating Profit 3077.45 3949.44 4,748.88 5,327.77 5,689.24
Working Funds 167659.40 251388.95 344658.11 399795.07 379300.96
Operating Profit to
Working Funds (%)
1.84 1.57 1.38 1.33 1.50

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

2.32
2.34
2.63
2.34
2.54
2.10
2.20
2.30
2.40
2.50
2.60
2.70
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net Interest Margin (%)
1.37
1.21
1.04
1.12
0.96
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Return on Average Assets (%)
15.54
11.26
12.61
8.88
7.53
0.00
5.00
10.00
15.00
20.00
2004-'052005-'062006-'072007-'082008-'09
Year
Return on Equity (%)
2.33
2.40
2.34
2.39
2.08
1.90
2.00
2.10
2.20
2.30
2.40
2.50
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Non-Int. Income to Avg. Assets Ratio (%)
2.17
2.52
2.97
2.92
2.77
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Overhead Ratio (%)
50.80
57.18
65.08
67.08
65.49
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
2004-'052005-'062006-'072007-'082008-'09
Year
Efficiency Ratio (%)
Fundamental and Technical Analysis of Indian Banking Sector

5.61
5.48
6.67
7.70
8.20
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Interest Income to Working Funds (%)
2.04
2.00
2.02
2.22
2.14
1.85
1.90
1.95
2.00
2.05
2.10
2.15
2.20
2.25
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Non-Int. Income to Working Funds (%)
1.84
1.57
1.38
1.33
1.50
0.00
0.50
1.00
1.50
2.00
2004-'052005-'062006-'072007-'082008-'09
Year
Op. Profit to Working Funds (%)
Fundamental and Technical Analysis of Indian Banking Sector

Liquidity Ratios
? Liquid Assets to Demand Deposits
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 21582.06 29296.94 52761.44 56640.15 51460.21
Demand Deposits 12836.90 16573.48 21375.65 24691.29 21631.69
Liquid Assets to
Demand Deposits (%)
168.13 176.77 246.83 229.39 237.89

? Liquid Assets to Total Deposits
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 21582.06 29296.94 52761.44 56640.15 51460.21
Total Deposits 99818.78 165083.17 230510.19 244431.05 218347.83
Liquid Assets to
Total Deposits (%)
21.62 17.75 22.89 23.17 23.57

? Liquid Assets to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 21582.06 29296.94 52761.44 56640.15 51460.21
Total Assets 167659.40 251388.95 344658.11 399795.07 379300.96
Liquid Assets to
Total Assets (%)
12.87 11.65 15.31 14.17 13.57

? Government Securities to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Government Securities 34489.47 51208.68 67664.75 75518.00 63472.83
Total Assets 167659.40 251388.95 344658.11 399795.07 379300.96
Government Sec. to
Total Assets (%)
20.57 20.37 19.63 18.89 16.73

Fundamental and Technical Analysis of Indian Banking Sector

Graphs

168.13
176.77
246.83
229.39
237.89
0.00
50.00
100.00
150.00
200.00
250.00
300.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Liquid Assets to Demand Deposits
(%)
21.62
17.75
22.89
23.17
23.57
0.00
5.00
10.00
15.00
20.00
25.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Liquid Assets to Total Deposits (%)
12.87
11.65
15.31
14.17
13.57
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
2004-'052005-'062006-'072007-'082008-'09
Year
Liquid Assets to Total Assets (%)
20.57 20.37
19.63
18.89
16.73
0.00
5.00
10.00
15.00
20.00
25.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Government Sec. to Total Assets
(%)
Fundamental and Technical Analysis of Indian Banking Sector

Interpretation
? Capital adequacy ratios have shown quite satisfactory performance over the years for the
bank.
? Core capital adequacy ratio has remained above the regulatory requirements of RBI and
witnessed a significant improvement which is a good indication for the bank. On the
other hand, leverage and debt equity ratio have declined which were at their peak during
2005-?06. Moreover, advances to total assets ratio has boosted at a nominal rate coupled
with government securities to total investment ratio depicting a tale of handsome efforts
leading to healthier business opportunities while keeping hands safe.
? Asset quality ratios seem to have remained poor overall.
? Non Performing Assets which are considered to be the most critical part of a bank?s
portfolio have worsened over the five years in comparison to net advances which gives a
picture of lethargic efforts in advancing loans and also in recovering the same. Apart
from these, investments to total assets ratio has also decreased from which is a fine signal
as bank by decreasing investments can now advance more funds and earn interest income
which is its core area of operation.
? Management efficiency ratios more or less have remained stabilized and shown a mixed
trend over the years.
? Total advances to total deposits ratio has increased to the tune of 10% over the five years
which shows adequate efforts of the bank in towards optimum utilization of the funds
available with the bank. With the increasing number of employees over the years, bank
has managed to maintain more or less the same increase in its business and the same goes
with the profitability per employee which has stabilized. Return on net worth i.e.
shareholders? funds have fall sharply year after year.
? Earnings capacity ratios have witnessed robust performance from 2004-?05 to 2008-?09.
? Net interest margin has rose by a nominal over 20 bps but is a good indication that it is
moving upwards. Return on average assets and return on equity shareholders? funds have
declined considerably as net profits have failed to increase by the same ratio. It is
interesting to note that non-interest income and non-interest expenses have shown
Fundamental and Technical Analysis of Indian Banking Sector

relatively opposite change. Nominal rise in net interest income and sharp rise in non-
interest expenses have resulted into poor efficiency for the bank. Interest income to
working funds, non-interest income to working funds and operating profit to working
funds have observed a steady phenomenon.
? Liquidity ratios appear to be advantageous for the bank and have observed vigorous
performance over the years.
? Liquid assets though witnessing an upward trend have succeeded to be in line with an
increase in the deposits and assets as a result of which these ratios have risen by
considerable amount. Having enough liquidity on the hand to meet the requirement of the
bank?s stakeholders can prove to be safe. Bank has also maintained the tune of
investment in the government securities in line with the assets.

Fundamental and Technical Analysis of Indian Banking Sector

Z-score Analysis
Z = 6.56T
1
+ 3.26T
2
+ 6.72T
3
+ 1.05T
4

Altman Z Score Model 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
(CA-CL)/Total Assets (T1) 0.1212 0.1441 0.1862 0.1852 0.1899
Acc. Retained Earnings/ Total Assets (T2) 0.0701 0.0846 0.0678 0.1133 0.1275
EBIT / Total Assets (T3) 0.0540 0.0504 0.0579 0.0713 0.0733
B. V. of Equity / Total Liabilities (T4) 0.0617 0.0878 0.0703 0.1160 0.1304
Z-score 1.45 1.65 1.91 2.19 2.29

Technical Analysis
1.45
1.65
1.91
2.19
2.29
0.80
1.00
1.20
1.40
1.60
1.80
2.00
2.20
2.40
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Z
-
S
c
o
r
e

Year
Graph showing Z-score for 5 years
Fundamental and Technical Analysis of Indian Banking Sector

Exponential Moving Average (EMA) Chart
Fundamental and Technical Analysis of Indian Banking Sector

In ICICI bank we can see the down ward trend in the month from January to March it goes
sharply down and reaches the lowest point of the year which is 250 and from that month it rises
in the next months. In the month of April, May and June it rises very sharply to 800. Then there
is stable trend for next three months. It also touched the highest point of 1000 in October. Due to
recent stability in EMA it will better to invest in the company.
Moving Average Convergence Divergence (MACD) Chart
As per the MACD chart, it is advisable to wait and watch for some time. The reason behind is
that in the first quarter of the year it shows the down fall trend and which is below the
expectation. In the month of April only it increases sharply and rises sharply to 75 in June. Then
it shows the down ward trend and stables after that for three months and then after decreases
from November and stables just below 0.
Relative Strength Index (RSI) Chart
In RSI chart we have shown the Upward Control line (UCL) at 70 points and Lower Control
Line (LCL) at 30 points. Company have shown sharp fall in the first quarter but then it is a mix
trend and it is reasonable satisfactory. So it is advisable to wait for sometimes in this company
because the RSI is moderate.
Accumulation/Distribution Chart
ICICI Bank is showing the downward trend in the first three months and after April there is a
continuous accumulation till June and shown stable trend till October and after that there is a mix
trend. It is not the ideal sign for the company. There is much fluctuation is going around in the
market so wait and watch strategy would be good.

IDBI Bank
Fundamental and Technical Analysis of Indian Banking Sector

IDBI Bank is a Board-managed organization. The responsibility for the day-to-day management
of operations of the Bank is vested with the Chairman & Managing Director and two Deputy
Managing Directors, who draw upon the support and expertise of a cross-disciplinary Top
Management Team. IDBI Bank Ltd.'s employee base includes professionals from the fields of
accountancy, management, engineering, law, computer technology, banking and economics.
Vision Statement
"To be trusted partner in progress by leveraging quality human capital and setting global
standards of excellence to build the most valued financial conglomerate"
Preamble
IDBI Bank Ltd. is committed to creating long term economic value for all its stakeholders,
including shareholders, depositors, customers, employees and the society as a whole. IDBI Bank
Ltd. is committed to maintaining high standards of ethical and professional conduct in all its
corporate activities.
This Code of Conduct and Ethics outlines the overall standards that shall guide the actions of
IDBI Bank Ltd. and its Directors, officers and employees.

Trend Analysis
Fundamental and Technical Analysis of Indian Banking Sector

2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 2655.72 5380.72 6592.86 8040.88 11631.63
Expenses 3274.38 8129.60 7060.68 9265.49 12397.99
Net Profit 307.26 560.89 630.31 729.46 858.54
Retained Earnings 245.53 436.98 503.19 562.24 646.55
Dividend per Share 0.75 1.50 1.50 2.00 2.50
Earnings per Share 6.41 7.75 8.31 10.07 11.85
Reserves 5206.63 5648.27 7575.50 8097.20 8699.08
Deposits 15102.64 26000.92 43354.03 72997.98 112401.01
Borrowings 53883.37 51334.55 47675.08 43822.97 44417.04
Net Fixed Assets 889.41 810.89 2778.36 2765.97 2824.09
Loans & Advances 45413.57 52739.06 62470.81 82212.69 103428.34
Investments 25098.70 25350.54 25675.32 32802.93 50047.61
Net Current Assets 1146.57 3335.96 7978.94 7382.44 9542.40
Particulars
Rs. Crore

Particulars 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 100.00 202.61 248.25 302.78 437.98
Expenses 100.00 248.28 215.63 282.97 378.64
Net Profit 100.00 182.55 205.14 237.41 279.42
Retained Earnings 100.00 177.97 204.94 228.99 263.33
Dividend per Share 100.00 200.00 200.00 266.67 333.33
Earnings per Share 100.00 120.90 129.64 157.10 184.87
Reserves 100.00 108.48 145.50 155.52 167.08
Deposits 100.00 172.16 287.06 483.35 744.25
Borrowings 100.00 95.27 88.48 81.33 82.43
Net Fixed Assets 100.00 91.17 312.38 310.99 317.52
Loans & Advances 100.00 116.13 137.56 181.03 227.75
Investments 100.00 101.00 102.30 130.70 199.40
Net Current Assets 100.00 290.95 695.90 643.87 832.26

Interpretation
Fundamental and Technical Analysis of Indian Banking Sector

From the above trend anal ysis of sel ected financi al dat a we can
observe:
? Generall y, t rends are in favour for the company.
? Expenses have shoot up at a pace slower than t hat for core int erest
income which result ed i nto rising profits for t he bank at a nominal rat e
as compared to tot al income.
? Increasing profit has resulted i nto increasing retained earnings over the
five years.
? Dividend per share has boost ed by over 3 times so as the Earnings per
share whi ch has considerabl y shown over 1. 5 ti mes i ncrease over the
years.
? Deposit s for the bank have risen by over 7. 5 ti mes whereas advances
onl y just over 2 times. This shows i nadequat e effort s of t he bank i n
utilizati on of funds l yi ng wit h it .
? Fixed asset s have al most grown by 3 ti mes, l ess rapidl y than int erest
income. This shows optimum ut ilizat ion of resources availabl e to
achi eve t argets by t he bank.
? Net current assets have shown ei ght fold increase whi ch is a good si gn
for the bank.
On t he whol e, from the t rends it is apparent that the company
has become more affluent than is was 5 years ago.

CAMEL Analysis
Fundamental and Technical Analysis of Indian Banking Sector

Capital Adequacy Ratios
? Capital Adequacy Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Tier I Capital (%) 11.93 11.71 9.10 7.42 6.81
Tier II Capital (%) 3.58 3.09 4.60 4.53 4.76
Capital Adequacy Ratio (%) 15.51 14.80 13.70 11.95 11.57

? Leverage Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Debt 65,108.18 73,531.13 85,758.42 111,610.53 156,818.05
Shareholders' Funds 5,928.41 6,372.06 8,299.85 8,821.96 9,423.86
Leverage Ratio (Times) 10.98 11.54 10.33 12.65 16.64

? Debt Equity Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Deposits 15102.64 26000.92 43354.03 72997.98 112401.01
Shareholders' Funds 5,928.41 6,372.06 8,299.85 8,821.96 9,423.86
Debt Equity Ratio (Times) 2.55 4.08 5.22 8.27 11.93

? Advances to Total Assets Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Advances 45413.57 52739.06 62470.81 82212.69 103428.34
Total Assets 81360.24 88564.78 103839.33 130694.38 172402.32
Advances to Total Assets
Ratio (%)
55.82 59.55 60.16 62.90 59.99

? Government Securities to Total Investment Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Govt. Securities 14942.25 16179.92 16191.39 23303.41 40717.24
Total Investment 25098.70 25350.54 25675.32 32802.93 50047.61
Govt. Sec. to Total Inv.
Ratio (%)
59.53 63.82 63.06 71.04 81.36

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Asset Quality Ratios
15.51
14.80
13.70
11.95
11.57
10.00
11.00
12.00
13.00
14.00
15.00
16.00
2004-'052005-'062006-'072007-'082008-'09
Year
Capital Adequacy Ratio (%)
10.98
11.54
10.33
12.65
16.64
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Leverage Ratio (Times)
2.55
4.08
5.22
8.27
11.93
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Debt Equity Ratio (Times)
55.82
59.55
60.16
62.90
59.99
52.00
54.00
56.00
58.00
60.00
62.00
64.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Advances to Total Assets Ratio (%)
59.53
63.82
63.06
71.04
81.36
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Govt. Sec. to Total Inv. Ratio (%)
Fundamental and Technical Analysis of Indian Banking Sector

? Net NPA to Net Advances
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net NPAs 847.49 563.12 721.93 1,082.91 948.96
Net Advances 45413.57 52739.06 62470.81 82212.69 103428.34
Net NPA to Net
Advances (%)
1.87 1.07 1.16 1.32 0.92

? Net NPA to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net NPAs 847.49 563.12 721.93 1,082.91 948.96
Total Assets 81360.24 88564.78 103839.3 130694.38 172402.32
Net NPA to Total
Assets (%)
1.04 0.64 0.70 0.83 0.55

? Total Investments to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Investments 25098.70 25350.54 25675.32 32802.93 50047.61
Total Assets 81360.24 88564.78 103839.3 130694.38 172402.32
Total Investments to
Total Assets (%)
30.85 28.62 24.73 25.10 29.03

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Management Efficiency Ratios
? Total Advances to Total Deposits
1.87
1.07
1.16
1.32
0.92
0.00
0.50
1.00
1.50
2.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net NPA to Net Advances (%)
1.04
0.64
0.70
0.83
0.55
0.00
0.20
0.40
0.60
0.80
1.00
1.20
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net NPAs to Total Assets (%)
30.85
28.62
24.73
25.10
29.03
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Total Investments to Total Assets (%)
Fundamental and Technical Analysis of Indian Banking Sector

PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Advances 45413.57 52739.06 62470.81 82212.69 103428.34
Total Deposits 15102.64 26000.92 43354.03 72997.98 112401.01
Total Advances to Total
Deposits (%)
300.70 202.84 144.09 112.62 92.02

? Business per Employee
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Deposits+Advances 60,516.21 78,739.98 105,824.84 155,210.67 215,829.35
No. of Employees 4761 6553 9980 14739 20624
Business per
Employee (Rs. Cr.)
12.71 12.02 10.60 10.53 10.46

? Profit per Employee
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Operating Profit 401.78 627.08 690.77 1,315.33 1,319.97
No. of Employees 4761 6553 9980 14739 20624
Profit per Employee
(Rs. Lacs)
8.44 9.57 6.92 8.92 6.40

? Return on Net Worth
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 307.26 560.89 630.31 729.46 858.54
Average Net Worth 5881.65 6150.24 7335.95 8560.9 9122.91
Return on Net Worth (%) 5.22 9.12 8.59 8.52 9.41

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Earnings Capacity Ratios
300.70
202.84
144.09
112.62
92.02
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Total Advances to Total Deposits
(%)
12.71
12.02
10.60 10.53 10.46
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Business per Employee (Rs. Cr.)
8.44
9.57
6.92
8.92
6.40
0.00
2.00
4.00
6.00
8.00
10.00
12.00
2004-'052005-'062006-'072007-'082008-'09
Year
Profit per Employee (Rs. Lacs)
5.22
9.12
8.59 8.52
9.41
0.00
2.00
4.00
6.00
8.00
10.00
2004-'052005-'062006-'072007-'082008-'09
Year
Return on Net Worth (%)
Fundamental and Technical Analysis of Indian Banking Sector

? Net Interest Margin
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Interest Income 187.85 379.90 657.93 656.43 1,325.91
Avg. Int. Earning Assets 63,894.69 74,300.94 83,117.87 101,580.88 134,245.79
Net Interest Margin (%) 0.29 0.51 0.79 0.65 0.99

? Return on Average Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 307.26 560.89 630.31 729.46 858.54
Average Total Assets 72603.35 84962.51 96202.06 117266.86 151548.35
Return on Average
Assets (%)
0.42 0.66 0.66 0.62 0.57

? Return on Equity
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 307.26 560.89 630.31 729.46 858.54
Shareholder's Funds 5,928.41 6,372.06 8,299.85 8,821.96 9,423.86
Return on Equity (%) 5.18 8.80 7.59 8.27 9.11

? Non-Interest Income to Average Assets Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Income 633.73 1,280.45 1,046.74 1,751.26 1,475.72
Average Total Assets 72,603.35 84,962.51 96,202.06 117,266.86 151,548.35
Non-Int. Income to
Avg. Assets Ratio (%)
0.87 1.51 1.09 1.49 0.97

? Overhead Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Expenses 419.80 1,033.27 1,013.90 1,092.36 1,481.66
Average Total Assets 72,603.35 84,962.51 96,202.06 117,266.86 151,548.35
Overhead Ratio (%) 0.58 1.22 1.05 0.93 0.98

? Efficiency Ratio
Fundamental and Technical Analysis of Indian Banking Sector

PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Expenses 419.80 1,033.27 1,013.90 1,092.36 1,481.66
Net Int. Income+Non-
Int. Income
821.58 1,660.35 1,704.67 2,407.69 2,801.63
Efficiency Ratio (%) 51.10 62.23 59.48 45.37 52.89

? Interest Income to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 2655.72 5380.72 6345.42 8020.84 11631.63
Working Funds 81360.24 88564.78 103839.33 130694.38 172402.32
Interest Income to
Working Funds (%)
3.26 6.08 6.11 6.14 6.75

? Non-Interest Income to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Income 633.73 1,280.45 1,046.74 1,751.26 1,475.72
Working Funds 81360.24 88564.78 103839.33 130694.38 172402.32
Non-Int. Income to
Working Funds (%)
0.78 1.45 1.01 1.34 0.86

? Operating Profit to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Operating Profit 401.78 627.08 690.77 1,315.33 1,319.97
Working Funds 81360.24 88564.78 103839.33 130694.38 172402.32
Operating Profit to
Working Funds (%)
0.49 0.71 0.67 1.01 0.77

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

0.29
0.51
0.79
0.65
0.99
0.00
0.20
0.40
0.60
0.80
1.00
1.20
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net Interest Margin (%)
0.42
0.66 0.66
0.62
0.57
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Return on Average Assets (%)
5.18
8.80
7.59
8.27
9.11
0.00
2.00
4.00
6.00
8.00
10.00
2004-'052005-'062006-'072007-'082008-'09
Year
Return on Equity (%)
0.87
1.51
1.09
1.49
0.97
0.00
0.50
1.00
1.50
2.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Non-Int. Income to Avg. Assets
Ratio (%)
0.58
1.22
1.05
0.93
0.98
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Overhead Ratio (%)
51.10
62.23
59.48
45.37
52.89
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
2004-'052005-'062006-'072007-'082008-'09
Year
Efficiency Ratio (%)
Fundamental and Technical Analysis of Indian Banking Sector

3.26
6.08 6.11 6.14
6.75
0.00
2.00
4.00
6.00
8.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Interest Income to Working
Funds (%)
0.78
1.45
1.01
1.34
0.86
0.00
0.50
1.00
1.50
2.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Non-Int. Income to Working
Funds (%)
0.49
0.71
0.67
1.01
0.77
0.00
0.20
0.40
0.60
0.80
1.00
1.20
2004-'052005-'062006-'072007-'082008-'09
Year
Op. Profit to Working Funds (%)
Fundamental and Technical Analysis of Indian Banking Sector

Liquidity Ratios
? Liquid Assets to Demand Deposits
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 9925.74 9594.70 12881.75 12893.51 16096.73
Demand Deposits 3886.65 5174.66 6988.61 7268.45 11119.98
Liquid Assets to
Demand Deposits (%)
255.38 185.42 184.32 177.39 144.76

? Liquid Assets to Total Deposits
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 9925.74 9594.70 12881.75 12893.51 16096.73
Total Deposits 15102.64 26000.92 43354.03 72997.98 112401.01
Liquid Assets to
Total Deposits (%)
65.72 36.90 29.71 17.66 14.32

? Liquid Assets to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 9925.74 9594.70 12881.75 12893.51 16096.73
Total Assets 81360.24 88564.78 103839.33 130694.38 172402.32
Liquid Assets to
Total Assets (%)
12.20 10.83 12.41 9.87 9.34

? Government Securities to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Government Securities 14942.25 16179.92 16191.39 23303.41 40717.24
Total Assets 81360.24 88564.78 103839.3 130694.38 172402.32
Government Sec. to
Total Assets (%)
18.37 18.27 15.59 17.83 23.62

Fundamental and Technical Analysis of Indian Banking Sector

Graphs

255.38
185.42 184.32
177.39
144.76
0.00
50.00
100.00
150.00
200.00
250.00
300.00
2004-'052005-'062006-'072007-'082008-'09
Year
Liquid Assets to Demand Deposits (%)
65.72
36.90
29.71
17.66
14.32
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Liquid Assets to Total Deposits (%)
18.37 18.27
15.59
17.83
23.62
0.00
5.00
10.00
15.00
20.00
25.00
2004-'052005-'062006-'072007-'082008-'09
Year
Liquid Assets to Total Assets (%)
18.37 18.27
15.59
17.83
23.62
0.00
5.00
10.00
15.00
20.00
25.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Government Sec. to Total Assets (%)
Fundamental and Technical Analysis of Indian Banking Sector

Interpretation
? Capital adequacy ratios have shown dissatisfactory performance over the years for the
bank.
? Core capital adequacy ratio has remained above the regulatory requirements of RBI but
witnessed a gradual decline which is not a good indication for the bank. On the other
hand, leverage and debt equity ratio have increased tremendously which were at their
peak during 2008-?09. Moreover, advances to total assets ratio has boosted significantly
coupled with government securities to total investment ratio depicting a tale of handsome
efforts leading to healthier business opportunities while keeping hands safe.
? Asset quality ratios seem to have become strength for the bank.
? Non Performing Assets which are considered to be the most critical part of a bank?s
portfolio have shown a sharp fall over the five years in comparison to net advances which
gives a picture of vigorous efforts in advancing loans and also in recovering the same.
Apart from these, investments to total assets ratio has also decreased from which is a fine
signal as bank by decreasing investments can now advance more funds and earn interest
income which is its core area of operation.
? Management efficiency ratios more or less have remained stabilized and shown a
delining trend over the years.
? Total advances to total deposits ratio has fall significantly to the tune of 200% over the
five years which shows sluggish efforts of the bank in towards optimum utilization of the
funds available with the bank. With the increasing number of employees over the years
bank has witnessed marginal decline in its business and profitability per employee has
also followed the same trend. Return on net worth i.e. shareholders? funds have stabilized
with increasing-decreasing trend year after year and shown gradual rise.
? Earnings capacity ratios have witnessed robust performance from 2004-?05 to 2008-?09.
? Net interest margin has rose by a nominal 70 bps but is a good indication that it is
moving upwards. Return on average assets and return on equity shareholders? funds have
followed the same trend. It is interesting to note that non-interest income has increased
slowly as compared to non-interest expenses. Discouraging trend in net interest income
Fundamental and Technical Analysis of Indian Banking Sector

coupled with increase in non-interest expenses have resulted into dissatisfactory
efficiency for the bank. Interest income to working funds, non-interest income to working
funds and operating profit to working funds have observed a remarkable growth.
? Liquidity ratios appear to be as the broken leg of the bank and have observed poor
performance over the years.
? Liquid assets though witnessing an upward trend have failed to be in line with an increase
in the deposits and assets as a result of which these ratios have diminished. Not having
enough liquidity on the hand to meet the requirement of the bank?s stakeholders can
prove to be dangerous. However, bank has maintained the tune of investment in the
government securities in line with the assets.

Fundamental and Technical Analysis of Indian Banking Sector

Z-score Analysis
Z = 6.56T
1
+ 3.26T
2
+ 6.72T
3
+ 1.05T
4

Altman Z Score Model 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
(CA-CL)/Total Assets (T1) 0.0298 0.0665 0.1296 0.1395 0.1438
Acc. Retained Earnings/ Total Assets (T2) 0.0639 0.0637 0.0730 0.0619 0.0504
EBIT / Total Assets (T3) 0.0370 0.0631 0.0641 0.0643 0.0665
B. V. of Equity / Total Liabilities (T4) 0.0720 0.0719 0.0601 0.0520 0.0431
Z-score 0.73 1.14 1.58 1.60 1.60

Technical Analysis
0.73
1.14
1.58
1.60 1.60
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Z
-
S
c
o
r
e

Year
Graph showing Z-score for 5 years
Fundamental and Technical Analysis of Indian Banking Sector

Exponential Moving Average (EMA) Chart
Fundamental and Technical Analysis of Indian Banking Sector

In IDBI we can see the downward trend in the month of January to March It goes sharply down
and reaches the lowest point of the year which is 40 and from that month it rises in the next
months. In the month of April, May and July it rises very sharply from 50 to 120. Then there is
downward trend for one month. It also touched the highest point of 140 in November. Due to
recent volatility in EMA it will better to wait and watch.
Moving Average Convergence Divergence (MACD) Chart
As per the MACD chart, it is advisable to wait and watch for some time. The reason behind is
that in the first quarter of the year it shows the down fall trend and which is below the
expectation. In the month of May only it increases sharply to 5 and rises to 10 in June. Then it
shows the mix trend and stables which is not satisfactory and the mix trend mostly downward
side.
Relative Strength Index (RSI) Chart
In RSI chart we have shown the Upward Control line (UCL) at 70 points and Lower Control
Line (LCL) at 30 points. Company have shown stable trend in the first quarter and then it
increases above the upper few times so it is satisfactory and advisable to invest in this company
because the RSI is moderate.
Accumulation/Distribution Chart
IDBI is showing the marginal decrease in the first four months and after March there is a
continuous accumulation and shown upward trend for three months and there is a stable trend till
September. After that there is a continuous selling is going on, so it is difficult time for the
investor so he should wait for the sometime.

Kotak Mahindra Bank
Fundamental and Technical Analysis of Indian Banking Sector

Kotak Mahindra is one of India's leading financial organizations, offering a wide range of
financial services that encompass every sphere of life. From commercial banking, to stock
broking, to mutual funds, to life insurance, to investment banking, the group caters to the diverse
financial needs of individuals and corporate.
The group has a net worth of over Rs. 7,100 crore and has a distribution network of branches,
franchisees, representative offices and satellite offices across cities and towns in India and
offices in New York, London, San Francisco, Dubai, Mauritius and Singapore. The Group
services around 6.5 million customer accounts.
The Kotak Mahindra Group was born in 1985 as Kotak Capital Management Finance Limited.
This company was promoted by Uday Kotak, Sidney A. A. Pinto and Kotak & Company.
Industrialists Harish Mahindra and Anand Mahindra took a stake in 1986, and that's when the
company changed its name to Kotak Mahindra Finance Limited.
Since then it's been a steady and confident journey to growth and success.

Trend Analysis
Fundamental and Technical Analysis of Indian Banking Sector

2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 420.31 718.89 1354.11 2535.36 3065.14
Expenses 479.11 894.43 1573.40 2842.52 3365.27
Net Profit 84.89 118.23 141.37 293.93 276.10
Retained Earnings 67.28 96.04 114.62 263.67 248.28
Dividend per Share 1.25 0.60 0.70 0.75 0.75
Earnings per Share 6.88 3.82 4.26 8.53 7.99
Reserves 633.61 555.29 1335.77 3249.03 3559.86
Deposits 4299.54 6565.92 11000.09 16423.65 15644.93
Borrowings 985.51 1849.24 5725.27 5901.49 6734.01
Net Fixed Assets 97.10 105.23 141.09 210.25 213.35
Loans & Advances 4017.15 6348.31 10924.07 15552.21 16625.34
Investments 1826.97 2855.53 6861.97 9141.98 9110.18
Net Current Assets -678.11 -1152.95 -1788.64 -594.08 -491.42
Particulars
Rs. Crore

Particulars 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 100.00 171.04 322.17 603.21 729.26
Expenses 100.00 186.69 328.40 593.29 702.40
Net Profit 100.00 139.27 166.53 346.25 325.24
Retained Earnings 100.00 142.75 170.36 391.90 369.02
Dividend per Share 100.00 48.00 56.00 60.00 60.00
Earnings per Share 100.00 55.52 61.92 123.98 116.13
Reserves 100.00 87.64 210.82 512.78 561.84
Deposits 100.00 152.71 255.84 381.99 363.87
Borrowings 100.00 187.64 580.94 598.83 683.30
Net Fixed Assets 100.00 108.37 145.30 216.53 219.72
Loans & Advances 100.00 158.03 271.94 387.15 413.86
Investments 100.00 156.30 375.59 500.39 498.65
Net Current Assets 100.00 58.82 37.91 114.14 137.99

Interpretation
Fundamental and Technical Analysis of Indian Banking Sector

From the above trend anal ysis of sel ected financi al dat a we can
observe:
? Generall y, t rends are in favour for the company.
? Expenses have shoot up sharpl y at a pace fast er t han t hat for core
interest income whi ch result ed into pressure on rising profits of the
bank.
? However, increasi ng profit has result ed into increasi ng ret ained
earnings over t he fi ve years.
? Dividend per share has boost ed by almost 3. 5 times so as t he Earni ngs
per share whi ch has consi derabl y shown a fourfol d increase over the
years.
? The bank has also managed t o add an enormous val ue to the
sharehol ders? kitt y, whi ch can be wit nessed from over 4. 5 ti mes
increase in t he reserves.
? It seems that the bank being i n its development phase attracted less
amount of deposit s as borrowed funds have seen six fol d rise to meet
up the capi tal needs.
? Fixed asset s have al most grown by 2 ti mes, l ess rapidl y than int erest
income. This shows optimum ut ilizat ion of resources availabl e to
achi eve t argets by t he bank.
? Net current assets have shown a slow i ncrease over t he years.
On t he whol e, from the t rends it is apparent that the company
has become more affluent than is was 5 years ago.

CAMEL Analysis
Fundamental and Technical Analysis of Indian Banking Sector

Capital Adequacy Ratios
? Capital Adequacy Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Tier I Capital (%) 10.12 8.07 8.81 14.46 16.13
Tier II Capital (%) 2.68 3.20 4.65 4.19 3.88
Capital Adequacy Ratio (%) 12.80 11.27 13.46 18.65 20.01

? Leverage Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Debt 5,285.05 8,175.15 16,099.84 21,542.90 21,549.00
Shareholders' Funds 756.93 864.58 1661.93 3593.70 3905.53
Leverage Ratio (Times) 6.98 9.46 9.69 5.99 5.52

? Debt Equity Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Deposits 4299.54 6565.92 11000.09 16423.65 15644.93
Shareholders' Funds 756.93 864.58 1661.93 3593.70 3905.53
Debt Equity Ratio (Times) 5.68 7.59 6.62 4.57 4.01

? Advances to Total Assets Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Advances 4017.15 6348.31 10924.1 15552.2 16625.3
Total Assets 6512.86 10175.1 19915.4 28312.4 28711.9
Advances to Total Assets
Ratio (%)
61.68 62.39 54.85 54.93 57.90

? Government Securities to Total Investment Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Govt. Securities 1329.55 2371.65 5863.67 8107.01 8149.93
Total Investment 1826.97 2855.53 6861.97 9141.98 9110.18
Govt. Sec. to Total Inv.
Ratio (%)
72.77 83.05 85.45 88.68 89.46

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Asset Quality Ratios
12.80
11.27
13.46
18.65
20.01
10.00
12.00
14.00
16.00
18.00
20.00
22.00
2004-'052005-'062006-'072007-'082008-'09
Year
Capital Adequacy Ratio (%)
6.98
9.46
9.69
5.99
5.52
0.00
2.00
4.00
6.00
8.00
10.00
12.00
2004-'052005-'062006-'072007-'082008-'09
Year
Leverage Ratio (Times)
5.68
7.59
6.62
4.57
4.01
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Debt Equity Ratio (Times)
61.68
62.39
54.85 54.93
57.90
50.00
52.00
54.00
56.00
58.00
60.00
62.00
64.00
2004-'052005-'062006-'072007-'082008-'09
Year
Advances to Total Assets Ratio (%)
72.77
83.05
85.45
88.68 89.46
0.00
15.00
30.00
45.00
60.00
75.00
90.00
105.00
2004-'052005-'062006-'072007-'082008-'09
Year
Govt. Sec. to Total Inv. Ratio (%)
Fundamental and Technical Analysis of Indian Banking Sector

? Net NPA to Net Advances
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net NPAs 14.90 15.00 216.80 276.16 396.84
Net Advances 4017.15 6348.31 10924.07 15552.21 16625.34
Net NPA to Net
Advances (%)
0.37 0.24 1.98 1.78 2.39

? Net NPA to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net NPAs 14.90 15.00 216.80 276.16 396.84
Total Assets 6512.86 10175.12 19915.42 28312.36 28711.88
Net NPA to Total
Assets (%)
0.23 0.15 1.09 0.98 1.38

? Total Investments to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Investments 1826.97 2855.53 6861.97 9141.98 9110.18
Total Assets 6512.86 10175.12 19915.42 28312.36 28711.88
Total Investments to
Total Assets (%)
28.05 28.06 34.46 32.29 31.73

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Management Efficiency Ratios
? Total Advances to Total Deposits
0.37
0.24
1.98
1.78
2.39
0.00
0.50
1.00
1.50
2.00
2.50
3.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net NPA to Net Advances (%)
0.23
0.15
1.09
0.98
1.38
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net NPAs to Total Assets (%)
28.05 28.06
34.46
32.29
31.73
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Total Investments to Total Assets (%)
Fundamental and Technical Analysis of Indian Banking Sector

PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Advances 4017.15 6348.31 10924.07 15552.21 16625.34
Total Deposits 4299.54 6565.92 11000.09 16423.65 15644.93
Total Advances to Total
Deposits (%)
93.43 96.69 99.31 94.69 106.27

? Business per Employee
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Deposits+Advances 8,316.69 12,914.23 21,924.16 31,975.86 32,270.27
No. of Employees 2148 3669 5711 8330 9300
Business per
Employee (Rs. Cr.)
3.87 3.52 3.84 3.84 3.47

? Profit per Employee
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Operating Profit 117.35 193.24 246.60 537.03 342.49
No. of Employees 2148 3669 5711 8330 9300
Profit per Employee
(Rs. Lacs)
5.46 5.27 4.32 6.45 3.68

? Return on Net Worth
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 84.89 118.23 141.37 293.93 276.10
Average Net Worth 681.62 810.76 1263.26 2627.82 3749.62
Return on Net Worth (%) 12.45 14.58 11.19 11.19 7.36

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Earnings Capacity Ratios
93.43
96.69
99.31
94.69
106.27
85.00
90.00
95.00
100.00
105.00
110.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Total Advances to Total Deposits
(%)
3.87
3.52
3.84 3.84
3.47
3.20
3.30
3.40
3.50
3.60
3.70
3.80
3.90
4.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Business per Employee (Rs. Cr.)
5.46
5.27
4.32
6.45
3.68
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
2004-'052005-'062006-'072007-'082008-'09
Year
Profit per Employee (Rs. Lacs)
12.45
14.58
11.19 11.19
7.36
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
2004-'052005-'062006-'072007-'082008-'09
Year
Return on Net Worth (%)
Fundamental and Technical Analysis of Indian Banking Sector

? Net Interest Margin
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Interest Income 225.48 354.93 654.86 1,225.80 1,518.54
Avg. Int. Earning Assets 5,411.95 7,524.09 13,495.05 21,240.12 25,214.87
Net Interest Margin (%) 4.17 4.72 4.85 5.77 6.02

? Return on Average Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 84.89 118.23 141.37 293.93 276.10
Average Total Assets 6164.91 8343.99 15045.27 24113.89 28512.12
Return on Average
Assets (%)
1.38 1.42 0.94 1.22 0.97

? Return on Equity
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 84.89 118.23 141.37 293.93 276.10
Shareholder's Funds 756.93 864.58 1661.93 3593.70 3905.53
Return on Equity (%) 11.22 13.67 8.51 8.18 7.07

? Non-Interest Income to Average Assets Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Income 132.13 237.33 287.83 310.48 157.56
Average Total Assets 6164.91 8343.99 15045.27 24113.89 28512.12
Non-Int. Income to
Avg. Assets Ratio (%)
2.14 2.84 1.91 1.29 0.55

? Overhead Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Expenses 240.26 399.02 696.06 999.25 1,333.61
Average Total Assets 6164.91 8343.99 15045.27 24113.89 28512.12
Overhead Ratio (%) 3.90 4.78 4.63 4.14 4.68

? Efficiency Ratio
Fundamental and Technical Analysis of Indian Banking Sector

PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Expenses 240.26 399.02 696.06 999.25 1,333.61
Net Int. Income+Non-
Int. Income
357.61 592.26 942.69 1,536.28 1,676.10
Efficiency Ratio (%) 67.18 67.37 73.84 65.04 79.57

? Interest Income to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 420.30 694.02 1354.10 2535.36 3065.14
Working Funds 6512.86 10175.12 19915.42 28312.36 28711.88
Interest Income to
Working Funds (%)
6.45 6.82 6.80 8.95 10.68

? Non-Interest Income to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Income 132.13 237.33 287.83 310.48 157.56
Working Funds 6512.86 10175.12 19915.42 28312.36 28711.88
Non-Int. Income to
Working Funds (%)
2.03 2.33 1.45 1.10 0.55

? Operating Profit to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Operating Profit 117.35 193.24 246.60 537.03 342.49
Working Funds 6512.86 10175.12 19915.42 28312.36 28711.88
Operating Profit to
Working Funds (%)
1.80 1.90 1.24 1.90 1.19

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

4.17
4.72
4.85
5.77
6.02
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
2004-'052005-'062006-'072007-'082008-'09
Year
Net Interest Margin (%)
1.38
1.42
0.94
1.22
0.97
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Return on Average Assets (%)
11.22
13.67
8.51
8.18
7.07
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
2004-'052005-'062006-'072007-'082008-'09
Year
Return on Equity (%)
2.14
2.84
1.91
1.29
0.55
0.00
0.50
1.00
1.50
2.00
2.50
3.00
2004-'052005-'062006-'072007-'082008-'09
Year
Non-Int. Income to Avg. Assets Ratio
(%)
3.90
4.78
4.63
4.14
4.68
0.00
1.00
2.00
3.00
4.00
5.00
6.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Overhead Ratio (%)
67.18 67.37
73.84
65.04
79.57
0.00
20.00
40.00
60.00
80.00
100.00
2004-'052005-'062006-'072007-'082008-'09
Year
Efficiency Ratio (%)
Fundamental and Technical Analysis of Indian Banking Sector

6.45
6.82 6.80
8.95
10.68
0.00
2.00
4.00
6.00
8.00
10.00
12.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Interest Income to Working Funds (%)
2.03
2.33
1.45
1.10
0.55
0.00
0.50
1.00
1.50
2.00
2.50
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Non-Int. Income to Working Funds (%)
1.80
1.90
1.24
1.90
1.19
0.00
0.50
1.00
1.50
2.00
2004-'052005-'062006-'072007-'082008-'09
Year
Op. Profit to Working Funds (%)
Fundamental and Technical Analysis of Indian Banking Sector

Liquidity Ratios
? Liquid Assets to Demand Deposits
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 565.48 847.80 1931.03 3277.15 2586.19
Demand Deposits 388.56 758.63 2108.68 3152.37 3418.16
Liquid Assets to
Demand Deposits (%)
145.53 111.75 91.58 103.96 75.66

? Liquid Assets to Total Deposits
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 565.48 847.80 1931.03 3277.15 2586.19
Total Deposits 4299.54 6565.92 11000.09 16423.65 15644.93
Liquid Assets to
Total Deposits (%)
13.15 12.91 17.55 19.95 16.53

? Liquid Assets to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 565.48 847.80 1931.03 3277.15 2586.19
Total Assets 6512.86 10175.12 19915.42 28312.36 28711.88
Liquid Assets to
Total Assets (%)
8.68 8.33 9.70 11.57 9.01

? Government Securities to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Government Securities 1329.55 2371.65 5863.67 8107.01 8149.93
Total Assets 6512.86 10175.12 19915.42 28312.36 28711.88
Government Sec. to
Total Assets (%)
20.41 23.31 29.44 28.63 28.39

Fundamental and Technical Analysis of Indian Banking Sector

Graphs

145.53
111.75
91.58
103.96
75.66
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Liquid Assets to Demand Deposits (%)
13.15
12.91
17.55
19.95
16.53
0.00
5.00
10.00
15.00
20.00
25.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Liquid Assets to Total Deposits (%)
8.68
8.33
9.70
11.57
9.01
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
2004-'052005-'062006-'072007-'082008-'09
Year
Liquid Assets to Total Assets (%)
20.41
23.31
29.44
28.63 28.39
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Government Sec. to Total Assets (%)
Fundamental and Technical Analysis of Indian Banking Sector

Interpretation
? Capital adequacy ratios have shown satisfactory performance over the years for the bank.
? Core capital adequacy ratio has remained above the regulatory requirements of RBI and
witnessed a gradual improvement which is a good indication for the bank. On the other
hand, leverage and debt equity ratio have stabilized which were at their peak during
2005-?06. Moreover, advances to total assets ratio has boosted significantly coupled with
government securities to total investment ratio depicting a tale of handsome efforts
leading to healthier business opportunities while keeping hands safe.
? Asset quality ratios seem to have become worsened to a great extent for the bank.
? Non Performing Assets which are considered to be the most critical part of a bank?s
portfolio have shown a sharp rise over the five years in comparison to net advances
which gives a picture of unproductive efforts in advancing loans and also in recovering
the same. Apart from these, investments to total assets ratio has also increased from
which is a not fine signal as bank can now advance less funds and earn interest income
which is its core area of operation.
? Management efficiency ratios more or less have remained stabilized and shown a mix
trend over the years.
? Total advances to total deposits ratio has tremendously rose to the tune of 10% over the
five years which shows dynamic efforts of the bank in towards optimum utilization of the
funds available with the bank. With the increasing number of employees over the years
bank has managed to maintain more or less the same increase in its business, and the
same is the case with profitability per employee. Return on net worth i.e. shareholders?
funds have witnessed decreasing trend year after year.
? Earnings capacity ratios have witnessed average performance from 2004-?05 to 2008-?09.
? Net interest margin has rose by a nominal over 180 bps but is a good indication that it is
moving upwards. Return on average assets and return on equity shareholders? funds have
followed the opposite trend. . It is interesting to note that non-interest income has
increased slowly as compared to non-interest expenses. Discouraging trend in net interest
income coupled with increase in non-interest expenses have resulted into dissatisfactory
Fundamental and Technical Analysis of Indian Banking Sector

efficiency for the bank. Interest income to working funds, non-interest income to working
funds and operating profit to working funds have observed a remarkable decline.
? Liquidity ratios appear to have observed poor performance over the years.
? Liquid assets though witnessing an upward trend have failed to be in line with an increase
in the deposits and assets as a result of which these ratios have diminished. Not having
enough liquidity on the hand to meet the requirement of the bank?s stakeholders can
prove to be dangerous. However, bank has maintained the tune of investment in the
government securities in line with the assets.

Fundamental and Technical Analysis of Indian Banking Sector

Z-score Analysis
Z = 6.56T
1
+ 3.26T
2
+ 6.72T
3
+ 1.05T
4

Altman Z Score Model 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
(CA-CL)/Total Assets (T1) (0.0755) (0.0749) (0.0473) 0.0291 0.0613
Acc. Retained Earnings/ Total Assets (T2) 0.0972 0.0546 0.0671 0.1147 0.1240
EBIT / Total Assets (T3) 0.0480 0.0504 0.0453 0.0603 0.0687
B. V. of Equity / Total Liabilities (T4) 0.1161 0.0849 0.0834 0.1269 0.1360
Z-score 0.27 0.11 0.30 1.10 1.41

Technical Analysis
0.27
0.11
0.30
1.10
1.41
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Z
-
S
c
o
r
e

Year
Graph showing Z-score for 5 years
Fundamental and Technical Analysis of Indian Banking Sector

Exponential Moving Average (EMA) Chart
Fundamental and Technical Analysis of Indian Banking Sector

In Kotak we can see the downward trend in the month of January to March It goes sharply down
and reaches the lowest point of the year which is 200 and from that month it rises in the next
months. In the month of April, May and June it rises very sharply from 200 to 775. Then there is
stable trend in coming few months. It also touched the highest point of 850 in November. Due to
recent stability in EMA it will better to invest in the company.
Moving Average Convergence Divergence (MACD) Chart
As per the MACD chart, it is advisable to go for this company. The reason behind is that in the
first quarter of the year it shows the down fall trend and which is below the expectation. In the
month of May only it increases sharply to 25 and rises sharply to 75 in June. Then it shows the
mix trend and stables which is quite satisfactory and the mix trend mostly upward side.
Relative Strength Index (RSI) Chart
In RSI chart we have shown the Upward Control line (UCL) at 70 points and Lower Control
Line (LCL) at 30 points. Company have shown stable trend in the first quarter and then it
increases above the upper few times so it is satisfactory and advisable to invest in this company
because the RSI is moderate.
Accumulation/Distribution Chart
Kotak is showing the continues decrease in the first three months and after March there is a
continuous accumulation and shown upward trend for one and half month and there is a stable
trend till September. After that there is a continuous buying is going on, so it is the perfect time
to get in this company.

Punjab National Bank
Fundamental and Technical Analysis of Indian Banking Sector

Punjab National Bank (PNB) was registered on May 19, 1894 under the Indian Companies Act
with its office in Anarkali Bazaar Lahore. The Bank is the second largest government-
owned commercial bank in India with about 4,904 branches across 764 cities. It serves over 37
million customers. The bank has been ranked 248th biggest bank in the world by Bankers
Almanac, London. The bank's total assets for financial year 2007 were about US$60 billion.
PNB has a banking subsidiary in the UK, as well as branches in Hong Kong, Dubai and Kabul,
and representative offices in Almaty, Dubai, Oslo, and Shanghai.
PNB was founded in the year 1895 at Lahore (presently in Pakistan) as an off-shoot of the
Swadeshi Movement. Among the inspired founders were Sardar Dayal Singh Majithia, Lala
HarKishen Lal, Lala Lalchand, Shri Kali Prosanna Roy, Shri E.C. Jessawala, Shri Prabhu Dayal,
Bakshi Jaishi Ram, Lala Dholan Dass.
With a common missionary zeal they set about establishing a national bank; the first one with
Indian capital — owned, managed and operated by the Indians for the benefit of the Indians. The
Lion of Punjab, Lala Lajpat Rai, was actively associated with the management of the Bank in its
formative years.
The Bank made steady progress right from its inception. It has shown resilience to tide over
many a crisis. It withstood the crisis in banking industry of 1913 and the severe depression of the
thirties.
It survived the most critical period in its history — the Partition of 1947 — when it was uprooted
from its major area of operations. It was the farsightedness of the management that the registered
office of the Bank was shifted from Lahore to Delhi in June 1947 — even before the
announcement of the Partition.
With the passage of time the Bank grew to strength spreading its wings from one corner of the
country to another. Some smaller banks like, The Bhagwan Dass Bank Limited, Universal Bank
of India, The Bharat Bank Limited, The Indo-Commercial Bank Limited, The Hindustan
Commercial Bank Limited and The Nedungadi Bank were brought within its fold.
PNB has the privilege of maintaining accounts of the illustrious national leaders like Mahatma
Gandhi, Shri Jawahar Lal Nehru, Shri Lal Bahadur Shastri, Shrimati Indira Gandhi besides the
account of the famous Jalianwala Bagh Committee.
Fundamental and Technical Analysis of Indian Banking Sector

Nationalization of the fourteen major banks on 19th July, 1969 was a major step for the banking
industry. PNB was one amongst these. As a result, banking was given a new direction and thrust.
The banks were expected to reach people in every nook and corner, meet their needs, and work
for their economic upliftment. Removal of poverty and regional imbalances were accorded a
high priority.
PNB has always responded enthusiastically to the nation's needs. It has been earnestly engaged
in the task of national development. In the process, the bank has emerged as a major nationalized
bank.

Trend Analysis
Fundamental and Technical Analysis of Indian Banking Sector

2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 8459.85 9584.16 11236.14 14265.02 19326.17
Expenses 9187.68 10032.45 11628.77 14242.73 19459.71
Net Profit 1410.12 1439.31 1540.08 2048.76 3090.88
Retained Earnings 1212.46 1223.60 1067.08 1569.21 2353.10
Dividend per Share 3.00 6.00 10.00 10.00 20.00
Earnings per Share 44.72 45.65 61.14 64.98 98.03
Reserves 7846.00 9061.07 10120.16 12003.05 14338.33
Deposits 103166.89 119684.92 139859.68 166457.22 209760.51
Borrowings 5061.15 8599.87 5643.66 11611.36 12459.66
Net Fixed Assets 965.24 1030.22 1009.82 2315.52 2397.11
Loans & Advances 60412.75 74627.36 96596.52 119501.57 154702.99
Investments 50672.83 41055.32 45189.83 53991.70 63385.18
Net Current Assets 3951.13 21365.50 14767.20 15276.53 16870.39
Particulars
Rs. Crore

Particulars 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 100.00 113.29 132.82 168.62 228.45
Expenses 100.00 109.19 126.57 155.02 211.80
Net Profit 100.00 102.07 109.22 145.29 219.19
Retained Earnings 100.00 100.92 88.01 129.42 194.08
Dividend per Share 100.00 200.00 333.33 333.33 666.67
Earnings per Share 100.00 102.08 136.72 145.30 219.21
Reserves 100.00 115.49 128.98 152.98 182.75
Deposits 100.00 116.01 135.57 161.35 203.32
Borrowings 100.00 169.92 111.51 229.42 246.18
Net Fixed Assets 100.00 106.73 104.62 239.89 248.34
Loans & Advances 100.00 123.53 159.89 197.81 256.08
Investments 100.00 81.02 89.18 106.55 125.09
Net Current Assets 100.00 540.74 373.75 386.64 426.98

Interpretation
Fundamental and Technical Analysis of Indian Banking Sector

From the above trend anal ysis of sel ected financi al dat a we can
observe:
? Generall y, t rends are in favour for the company.
? Expenses have shoot up sharpl y at a pace sl ower than that for core
interest i ncome whi ch result ed i nto ri sing profi ts for t he bank.
? However, increasi ng profit has result ed into increasi ng ret ained
earnings over t he fi ve years.
? Dividend per share has boost ed by over 6. 5 times so as t he Earnings
per share whi ch has consi derabl y shown a fourfol d increase over the
years.
? The bank has also managed to add val ue to the shareholders? kit t y,
whi ch can be witnessed from over 4. 5 ti mes i ncrease in the reserves.
? Being an establi shed bank, advances have grown fast er than the
deposits whi ch i s a positive si gn for the bank.
? Fixed assets have al most grown by 2 ti mes in line wit h the int erest
income. This shows optimum ut ilizat ion of resources availabl e to
achi eve t argets by t he bank.
? Net current assets have shown a fourfold increase over the years.
On t he whol e, from the t rends it is apparent that the company
has become more affluent than is was 5 years ago.

CAMEL Analysis
Fundamental and Technical Analysis of Indian Banking Sector

Capital Adequacy Ratios
? Capital Adequacy Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Capital Adequacy Ratio (%) 14.78 12.29 11.95 13.46 14.03

? Leverage Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Debt 105,885.18 126,372.10 141,808.53 171,903.79 214,134.86
Shareholders' Funds 8,161.30 9,376.37 10,435.46 12,318.35 14,653.63
Leverage Ratio (Times) 12.97 13.48 13.59 13.96 14.61

? Debt Equity Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Deposits 103166.89 119684.92 139859.68 166457.22 209760.51
Shareholders' Funds 8,161.30 9,376.37 10,435.46 12,318.35 14,653.63
Debt Equity Ratio (Times) 12.64 12.76 13.40 13.51 14.31

? Advances to Total Assets Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Advances 60412.75 74627.36 96596.52 119501.57 154702.99
Total Assets 126268.71 145349.79 162529.13 199048.77 246939.66
Advances to Total Assets
Ratio (%)
47.84 51.34 59.43 60.04 62.65

? Government Securities to Total Investment Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Govt. Securities 41196.63 33419.27 36630.96 44216.72 54530.82
Total Investment 50672.83 41055.32 45189.83 53991.70 63385.18
Govt. Sec. to Total Inv.
Ratio (%)
81.30 81.40 81.06 81.90 86.03

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Asset Quality Ratios
14.78
12.29
11.95
13.46
14.03
10.00
11.00
12.00
13.00
14.00
15.00
16.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Capital Adequacy Ratio (%)
12.97
13.48
13.59
13.96
14.61
12.00
12.50
13.00
13.50
14.00
14.50
15.00
2004-'052005-'062006-'072007-'082008-'09
Year
Leverage Ratio (Times)
12.64
12.76
13.40
13.51
14.31
11.50
12.00
12.50
13.00
13.50
14.00
14.50
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Debt Equity Ratio (Times)
47.84
51.34
59.43
60.04
62.65
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
2004-'052005-'062006-'072007-'082008-'09
Year
Advances to Total Assets Ratio (%)
81.30
81.40
81.06
81.90
86.03
78.00
79.00
80.00
81.00
82.00
83.00
84.00
85.00
86.00
87.00
2004-'052005-'062006-'072007-'082008-'09
Year
Govt. Sec. to Total Inv. Ratio (%)
Fundamental and Technical Analysis of Indian Banking Sector

? Net NPA to Net Advances
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net NPAs 120.83 210.17 725.62 753.78 263.85
Net Advances 60412.75 74627.36 96596.52 119501.57 154702.99
Net NPA to Net
Advances (%)
0.20 0.28 0.75 0.63 0.17

? Net NPA to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net NPAs 120.83 210.17 725.62 753.78 263.85
Total Assets 126268.71 145349.8 162529.1 199048.77 246939.66
Net NPA to Total
Assets (%)
0.10 0.14 0.45 0.38 0.11

? Total Investments to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Investments 50672.83 41055.32 45189.83 53991.70 63385.18
Total Assets 126268.7 145349.8 162529.1 199048.77 246939.66
Total Investments to
Total Assets (%)
40.13 28.25 27.80 27.12 25.67

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Management Efficiency Ratios
? Total Advances to Total Deposits
0.20
0.28
0.75
0.63
0.17
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net NPA to Net Advances (%)
0.10
0.14
0.45
0.38
0.11
0.00
0.10
0.20
0.30
0.40
0.50
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net NPAs to Total Assets (%)
40.13
28.25 27.80
27.12
25.67
0.00
10.00
20.00
30.00
40.00
50.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Total Investments to Total Assets (%)
Fundamental and Technical Analysis of Indian Banking Sector

PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Advances 60412.75 74627.36 96596.52 119501.57 154702.99
Total Deposits 103166.89 119684.92 139859.68 166457.22 209760.51
Total Advances to Total
Deposits (%)
58.56 62.35 69.07 71.79 73.75

? Business per Employee
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Deposits+Advances 163,579.64 194,312.28 236,456.20 285,958.79 364,463.50
No. of Employees 58329 58047 57316 56025 58205
Business per
Employee (Rs. Cr.)
2.80 3.35 4.13 5.10 6.26

? Profit per Employee
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Operating Profit 2604.02 2881.84 2,932.16 3,629.17 4,923.74
No. of Employees 58329 58047 57316 56025 58205
Profit per Employee
(Rs. Lacs)
4.46 4.96 5.12 6.48 8.46

? Return on Net Worth
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 1410.12 1439.31 1540.08 2048.76 3090.88
Average Net Worth 6586.55 8768.83 9905.91 11376.9 13485.99
Return on Net Worth (%) 21.41 16.41 15.55 18.01 22.92

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Earnings Capacity Ratios
58.56
62.35
69.07
71.79
73.75
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Total Advances to Total Deposits
(%)
2.80
3.35
4.13
5.10
6.26
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Business per Employee (Rs. Cr.)
4.46
4.96
5.12
6.48
8.46
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
2004-'052005-'062006-'072007-'082008-'09
Year
Profit per Employee (Rs. Lacs)
21.41
16.41
15.55
18.01
22.92
0.00
5.00
10.00
15.00
20.00
25.00
2004-'052005-'062006-'072007-'082008-'09
Year
Return on Net Worth (%)
Fundamental and Technical Analysis of Indian Banking Sector

? Net Interest Margin
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Interest Income 4,006.74 4,666.76 5,514.57 5,534.16 7,030.86
Avg. Int. Earning Assets 100,217.90 113,384.13 128,734.52 157,639.81 195,790.72
Net Interest Margin (%) 4.00 4.12 4.28 3.51 3.59

? Return on Average Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 1410.12 1439.31 1540.08 2048.76 3090.88
Average Total Assets 114300.23 135809.25 153939.46 180788.95 222994.22
Return on Average
Assets (%)
1.23 1.06 1.00 1.13 1.39

? Return on Equity
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 1410.12 1439.31 1540.08 2048.76 3090.88
Shareholder's Funds 8,161.30 9,376.37 10,435.46 12,318.35 14,653.63
Return on Equity (%) 17.28 15.35 14.76 16.63 21.09

? Non-Interest Income to Average Assets Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Income 1,854.54 1,478.23 1,343.64 1,997.56 2,919.69
Average Total Assets 114,300.23 135,809.25 153,939.46 180,788.95 222,994.22
Non-Int. Income to
Avg. Assets Ratio (%)
1.62 1.09 0.87 1.10 1.31

? Overhead Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Expenses 3,257.26 3,263.15 3,926.05 3,902.55 5,026.81
Average Total Assets 114,300.23 135,809.25 153,939.46 180,788.95 222,994.22
Overhead Ratio (%) 2.85 2.40 2.55 2.16 2.25

? Efficiency Ratio
Fundamental and Technical Analysis of Indian Banking Sector

PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Expenses 3,257.26 3,263.15 3,926.05 3,902.55 5,026.81
Net Int. Income+Non-
Int. Income
5,861.28 6,144.99 6,858.21 7,531.72 9,950.55
Efficiency Ratio (%) 55.57 53.10 57.25 51.81 50.52

? Interest Income to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 8459.85 9584.15 11537.48 14265.02 19326.16
Working Funds 126268.71 145349.79 162529.13 199048.77 246939.66
Interest Income to
Working Funds (%)
6.70 6.59 7.10 7.17 7.83

? Non-Interest Income to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Income 1,854.54 1,478.23 1,343.64 1,997.56 2,919.69
Working Funds 126268.71 145349.79 162529.13 199048.77 246939.66
Non-Int. Income to
Working Funds (%)
1.47 1.02 0.83 1.00 1.18

? Operating Profit to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Operating Profit 2604.02 2881.84 2,932.16 3,629.17 4,923.74
Working Funds 126268.71 145349.79 162529.13 199048.77 246939.66
Operating Profit to
Working Funds (%)
2.06 1.98 1.80 1.82 1.99

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

4.00
4.12
4.28
3.51
3.59
0.00
1.00
2.00
3.00
4.00
5.00
2004-'052005-'062006-'072007-'082008-'09
Year
Net Interest Margin (%)
1.23
1.06
1.00
1.13
1.39
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Return on Average Assets (%)
17.28
15.35
14.76
16.63
21.09
0.00
5.00
10.00
15.00
20.00
25.00
2004-'052005-'062006-'072007-'082008-'09
Year
Return on Equity (%)
1.62
1.09
0.87
1.10
1.31
0.00
0.50
1.00
1.50
2.00
2004-'052005-'062006-'072007-'082008-'09
Year
Non-Int. Income to Avg. Assets
Ratio (%)
2.85
2.40
2.55
2.16
2.25
0.00
0.50
1.00
1.50
2.00
2.50
3.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Overhead Ratio (%)
55.57
53.10
57.25
51.81
50.52
46.00
48.00
50.00
52.00
54.00
56.00
58.00
2004-'052005-'062006-'072007-'082008-'09
Year
Efficiency Ratio (%)
Fundamental and Technical Analysis of Indian Banking Sector

6.70
6.59
7.10
7.17
7.83
5.50
6.00
6.50
7.00
7.50
8.00
2004-'052005-'062006-'072007-'082008-'09
Year
Interest Income to Working Funds (%)
1.47
1.02
0.83
1.00
1.18
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Non-Int. Income to Working Funds (%)
2.06
1.98
1.80
1.82
1.99
1.65
1.70
1.75
1.80
1.85
1.90
1.95
2.00
2.05
2.10
2004-'052005-'062006-'07 2007-'082008-'09
Year
Op. Profit to Working Funds (%)
Fundamental and Technical Analysis of Indian Banking Sector

Liquidity Ratios
? Liquid Assets to Demand Deposits
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 14048.13 28554.49 19536.24 22983.25 26148.81
Demand Deposits 12466.57 16723.77 16465.71 17791.15 18813.91
Liquid Assets to
Demand Deposits (%)
112.69 170.74 118.65 129.18 138.99

? Liquid Assets to Total Deposits
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 14048.13 28554.49 19536.24 22983.25 26148.81
Total Deposits 103166.89 119684.92 139859.68 166457.22 209760.51
Liquid Assets to
Total Deposits (%)
13.62 23.86 13.97 13.81 12.47

? Liquid Assets to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 14048.13 28554.49 19536.24 22983.25 26148.81
Total Assets 126268.71 145349.79 162529.13 199048.77 246939.66
Liquid Assets to
Total Assets (%)
11.13 19.65 12.02 11.55 10.59

? Government Securities to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Government Securities 41196.63 33419.27 36630.96 44216.72 54530.82
Total Assets 126268.7 145349.8 162529.1 199048.77 246939.66
Government Sec. to
Total Assets (%)
32.63 22.99 22.54 22.21 22.08

Fundamental and Technical Analysis of Indian Banking Sector

Graphs

112.69
170.74
118.65
129.18
138.99
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Liquid Assets to Demand Deposits (%)
13.62
23.86
13.97 13.81
12.47
0.00
5.00
10.00
15.00
20.00
25.00
30.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Liquid Assets to Total Deposits (%)
11.13
19.65
12.02
11.55
10.59
0.00
5.00
10.00
15.00
20.00
25.00
2004-'052005-'062006-'072007-'082008-'09
Year
Liquid Assets to Total Assets (%)
32.63
22.99
22.54 22.21 22.08
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Government Sec. to Total Assets (%)
Fundamental and Technical Analysis of Indian Banking Sector

Interpretation
? Capital adequacy ratios have shown satisfactory performance over the years for the bank.
? Core capital adequacy ratio has remained above the regulatory requirements of RBI and
witnessed a gradual improvement which is a good indication for the bank. On the other
hand, leverage and debt equity ratio have stabilized which were at their peak during
2008-?09. Moreover, advances to total assets ratio has boosted significantly coupled with
government securities to total investment ratio depicting a tale of handsome efforts
leading to healthier business opportunities while keeping hands safe.
? Asset quality ratios seem to have become strength for the bank.
? Non Performing Assets which are considered to be the most critical part of a bank?s
portfolio have been remained steady with increasing in the years 2006-?07 and 2007-„08
in comparison to net advances which gives a picture of vigorous efforts in advancing
loans and also in recovering the same. Apart from these, investments to total assets ratio
has also decreased from which is a fine signal as bank by decreasing investments can
now advance more funds and earn interest income which is its core area of operation.
? Management efficiency ratios shown a rising trend over the years.
? Total advances to total deposits ratio has tremendously rose to the tune of 15% over the
five years which shows dynamic efforts of the bank in towards optimum utilization of the
funds available with the bank. With the increasing number of employees over the years
bank has managed to increase its business coupled with significant improvement in
profitability per employee has improved by Rs. 4 lacs which shows operational
excellence of the bank in reducing costs which results into rising profits. Return on net
worth i.e. shareholders? funds have stabilized with increasing-decreasing trend year after
year.
? Earnings capacity ratios have witnessed robust performance from 2004-?05 to 2008-?09.
? Net interest margin has declined by a nominal 40 bps. Return on average assets and
return on equity shareholders? funds have followed upward trend. It is interesting to note
that non-interest income and non-interest expenses have shown relatively similar change.
However, encouraging trend in net interest income has resulted into superior efficiency
Fundamental and Technical Analysis of Indian Banking Sector

for the bank. Interest income to working funds, non-interest income to working funds and
operating profit to working funds have observed an insignificant decline.
? Liquidity ratios appear to have observed average performance over the years.
? Liquid assets though witnessing an upward trend have failed to be in line with an increase
in the deposits and assets as a result of which these ratios have steady. Not having enough
liquidity on the hand to meet the requirement of the bank?s stakeholders can prove to be
dangerous. However, bank has maintained the tune of investment in the government
securities in line with the assets.

Fundamental and Technical Analysis of Indian Banking Sector

Z-score Analysis
Z = 6.56T
1
+ 3.26T
2
+ 6.72T
3
+ 1.05T
4

Altman Z Score Model 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
(CA-CL)/Total Assets (T1) 0.2546 0.3726 0.3564 0.3797 0.3652
Acc. Retained Earnings/ Total Assets (T2) 0.0621 0.0623 0.0623 0.0603 0.0581
EBIT / Total Assets (T3) 0.0515 0.0478 0.0504 0.0604 0.0687
B. V. of Equity / Total Liabilities (T4) 0.0622 0.0624 0.0638 0.0542 0.0532
Z-score 2.28 3.03 2.95 3.15 3.10

Technical Analysis
2.28
3.03
2.95
3.15
3.10
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Z
-
S
c
o
r
e

Year
Graph showing Z-score for 5 years
Fundamental and Technical Analysis of Indian Banking Sector

Exponential Moving Average (EMA) Chart
Fundamental and Technical Analysis of Indian Banking Sector

In PNB we can see the downward trend in the month of January to March It goes sharply down
and reaches the lowest point of the year which is 290 and from that month it rises in the next
months. In the month of April, May and June it rises very sharply from 290 to 700. Then there is
stable trend in coming months. It also touched the highest point of 1000 in December. Due to
recent stability in EMA it will better to invest in the company.
Moving Average Convergence Divergence (MACD) Chart
As per the MACD chart, it is advisable to go for this company. The reason behind is that in the
first quarter of the year it shows the down fall trend and which is below the expectation. In the
month of May only it increases sharply to 30 and rises sharply to 50 in June. Then it shows the
mix trend and stables which is quite satisfactory and the mix trend mostly upward side.
Relative Strength Index (RSI) Chart
In RSI chart we have shown the Upward Control line (UCL) at 70 points and Lower Control
Line (LCL) at 30 points. Company have shown sharp fall in the first quarter but then it is an
upward trend and it is satisfactory. So it is advisable to invest in this company because the RSI is
high and it touches the highest of 83 in October.
Accumulation/Distribution Chart
PNB is showing the continues decrease in the first three months and after March there is a
continuous accumulation and shown upward trend for one and half month and there is a stable
trend. There is not continuous buying or selling is going on, so if someone wants stability they
can go for PNB.

State Bank of India
Fundamental and Technical Analysis of Indian Banking Sector

The State Bank of India, the country?s oldest Bank and a premier in terms of balance sheet size,
number of branches, market capitalization and profits is today going through a momentous phase
of Change and Transformation – the two hundred year old Public sector behemoth is today
stirring out of its Public Sector legacy and moving with an ability to give the Private and Foreign
Banks a run for their money.
The bank is entering into many new businesses with strategic tie ups – Pension Funds, General
Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale Merchant
Acquisition, Advisory Services, structured products etc – each one of these initiatives having a
huge potential for growth.
The Bank is forging ahead with cutting edge technology and innovative new banking models, to
expand its Rural Banking base, looking at the vast untapped potential in the hinterland and
proposes to cover 100,000 villages in the next two years.
It is also focusing at the top end of the market, on whole sale banking capabilities to provide
India?s growing mid/large Corporate with a complete array of products and services. It is
consolidating its global treasury operations and entering into structured products and derivative
instruments. Today, the Bank is the largest provider of infrastructure debt and the largest
arranger of external commercial borrowings in the country. It is the only Indian bank to feature
in the Fortune 500 list.
The Bank is changing outdated front and back end processes to modern customer friendly
processes to help improve the total customer experience. With about 8500 of its own 10000
branches and another 5100 branches of its Associate Banks already networked, today it offers the
largest banking network to the Indian customer. The Bank is also in the process of providing
complete payment solution to its clientele with its over 8500 ATMs, and other electronic
channels such as Internet banking, debit cards, mobile banking, etc.
With four national level Apex Training Colleges and 54 learning Centers spread all over the
country the Bank is continuously engaged in skill enhancement of its employees. Some of the
training programs are attended by bankers from banks in other countries.

Fundamental and Technical Analysis of Indian Banking Sector

The bank is also looking at opportunities to grow in size in India as well as internationally. It
presently has 82 foreign offices in 32 countries across the globe. It has also 7 Subsidiaries in
India – SBI Capital Markets, SBICAP Securities, SBI DFHI, SBI Factors, SBI Life and SBI
Cards - forming a formidable group in the Indian Banking scenario. It is in the process of raising
capital for its growth and also consolidating its various holdings.
Throughout all this change, the Bank is also attempting to change old mindsets, attitudes and
take all employees together on this exciting road to Transformation. In a recently concluded
mass internal communication programme termed „Parivartan? the Bank rolled out over 3300 two
day workshops across the country and covered over 130,000 employees in a period of 100 days
using about 400 Trainers, to drive home the message of Change and inclusiveness. The
workshops fired the imagination of the employees with some other banks in India as well as
other Public Sector Organizations seeking to emulate the programme.
The CNN IBN, Network 18 recognized this momentous transformation journey, the State Bank
of India is undertaking, and has awarded the prestigious Indian of the Year – Business, to its
Chairman, Mr. O. P. Bhatt in January 2008. Shri Om Prakash Bhatt declared as one of the "25
most valuable Indians" by The Week Magazine for 2009.
State bank of India has been adjudged the Best Bank 2009 by Business India (August-2009).
State bank of India has been ranked as no.1 in the 4Ps B & M & ICMR survey on India's best
marketed banks (august-2009).
State Bank of India is the country's premier financial institution. It is a crucial wheel in the
economy with the ability to move markets. SBI has produced many stalwarts, and its chairman
Om Prakash Bhatt stands out among them. For Bhatt has put the bank on a high growth path.

Trend Analysis
Fundamental and Technical Analysis of Indian Banking Sector

2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 31682.73 35979.57 37242.33 48950.30 63788.44
Expenses 35277.52 39101.06 40147.53 51711.37 67419.32
Net Profit 4304.52 4406.67 4541.31 6729.12 9121.23
Retained Earnings 3552.90 3566.51 3679.27 5205.60 7032.04
Dividend per Share 12.50 14.00 14.00 21.50 29.00
Earnings per Share 81.79 83.73 74.13 106.56 143.67
Reserves 23545.82 27117.78 30772.25 48401.19 57312.82
Deposits 367047.53 380046.05 435521.09 537403.95 742073.12
Borrowings 22649.15 35627.05 55872.83 73016.75 84058.09
Net Fixed Assets 2697.68 2752.94 2818.87 3373.49 3837.84
Loans & Advances 202374.46 261800.93 337336.49 416768.20 542503.21
Investments 197097.90 162534.24 149148.88 189501.27 275953.96
Net Current Assets 28688.84 26546.52 32617.10 41914.77 65543.07
Particulars
Rs. Crore

Particulars 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 100.00 113.56 117.55 154.50 201.34
Expenses 100.00 110.84 113.80 146.58 191.11
Net Profit 100.00 102.37 105.50 156.33 211.90
Retained Earnings 100.00 100.38 103.56 146.52 197.92
Dividend per Share 100.00 112.00 112.00 172.00 232.00
Earnings per Share 100.00 102.37 90.63 130.28 175.66
Reserves 100.00 115.17 130.69 205.56 243.41
Deposits 100.00 103.54 118.66 146.41 202.17
Borrowings 100.00 157.30 246.69 322.38 371.13
Net Fixed Assets 100.00 102.05 104.49 125.05 142.26
Loans & Advances 100.00 129.36 166.69 205.94 268.07
Investments 100.00 82.46 75.67 96.15 140.01
Net Current Assets 100.00 92.53 113.69 146.10 228.46

Interpretation
Fundamental and Technical Analysis of Indian Banking Sector

From the above trend anal ysis of sel ected financi al dat a we can
observe:
? Generall y, t rends are in favour for the company.
? Expenses have shoot up sharpl y at a pace sl ower than that for core
interest i ncome whi ch result ed i nto ri sing profi ts of the bank.
? However, increasi ng profit has result ed into increasi ng ret ained
earnings over t he fi ve years.
? Dividend per share has boost ed by over 2 times so as the Earnings per
share whi ch has considerabl y shown a fourfold increase over t he years.
? The bank has also managed t o add an enormous val ue to the
sharehol ders? kitt y, whi ch can be wit nessed from almost 2. 5 times
increase in t he reserves.
? SBI bei ng the oldest bank of Indi a, it is definit el y in a position to
advance t he funds it has received as deposits.
? Fixed assets have almost grown by 2. 5 times, rapi dl y than int erest
income. This shows inadequat e util izati on of resources availabl e t o
achi eve t argets by t he bank.
? Net current assets have shown a gradual i ncrease over the five years.
On t he whol e, from the t rends it is apparent that the company
has become more affluent than is was 5 years ago.

CAMEL Analysis
Fundamental and Technical Analysis of Indian Banking Sector

Capital Adequacy Ratios
? Capital Adequacy Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Capital Adequacy Ratio (%) 12.45 11.88 12.34 13.47 14.25

? Leverage Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Debt 386,231.84 410,687.30 475,224.43 589,131.35 795,786.81
Shareholders' Funds 24,072.12 27,644.08 31,298.55 49,032.66 57,947.70
Leverage Ratio (Times) 16.04 14.86 15.18 12.02 13.73

? Debt Equity Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Deposits 367047.53 380046.05 435521.09 537403.95 742073.12
Shareholders' Funds 24,072.12 27,644.08 31,298.55 49,032.66 57,947.70
Debt Equity Ratio (Times) 15.25 13.75 13.92 10.96 12.81

? Advances to Total Assets Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Advances 202374.46 261800.93 337336.49 416768.20 542503.21
Total Assets 459882.84 494160.60 566806.14 722125.09 965042.96
Advances to Total Assets
Ratio (%)
44.01 52.98 59.52 57.71 56.22

? Government Securities to Total Investment Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Govt. Securities 171943.51 135291.39 118270.83 141128.27 226960.06
Total Investment 197097.90 162534.24 149148.88 189501.27 275953.96
Govt. Sec. to Total Inv.
Ratio (%)
87.24 83.24 79.30 74.47 82.25

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Asset Quality Ratios
12.45
11.88
12.34
13.47
14.25
10.00
10.50
11.00
11.50
12.00
12.50
13.00
13.50
14.00
14.50
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Capital Adequacy Ratio (%)
16.04
14.86
15.18
12.02
13.73
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
2004-'052005-'062006-'072007-'082008-'09
Year
Leverage Ratio (Times)
15.25
13.75
13.92
10.96
12.81
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
2004-'052005-'062006-'072007-'082008-'09
Year
Debt Equity Ratio (Times)
44.01
52.98
59.52
57.71
56.22
0.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Advances to Total Assets Ratio
(%)
87.24
83.24
79.30
74.47
82.25
65.00
70.00
75.00
80.00
85.00
90.00
2004-'052005-'062006-'072007-'082008-'09
Year
Govt. Sec. to Total Inv. Ratio (%)
Fundamental and Technical Analysis of Indian Banking Sector

? Net NPA to Net Advances
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net NPAs 5,362.92 4,921.86 5,262.45 7,418.47 9,548.06
Net Advances 202374.46 261800.93 337336.49 416768.20 542503.21
Net NPA to Net
Advances (%)
2.65 1.88 1.56 1.78 1.76

? Net NPA to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net NPAs 5,362.92 4,921.86 5,262.45 7,418.47 9,548.06
Total Assets 459882.84 494160.60 566806.14 722125.09 965042.96
Net NPA to Total
Assets (%)
1.17 1.00 0.93 1.03 0.99

? Total Investments to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Investments 197097.90 162534.24 149148.88 189501.27 275953.96
Total Assets 459882.84 494160.6 566806.14 722125.09 965042.96
Total Investments to
Total Assets (%)
42.86 32.89 26.31 26.24 28.59

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Management Efficiency Ratios
? Total Advances to Total Deposits
2.65
1.88
1.56
1.78 1.76
0.00
0.50
1.00
1.50
2.00
2.50
3.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net NPA to Net Advances (%)
1.17
1.00
0.93
1.03
0.99
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Net NPAs to Total Assets (%)
42.86
32.89
26.31 26.24
28.59
0.00
10.00
20.00
30.00
40.00
50.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Total Investments to Total Assets (%)
Fundamental and Technical Analysis of Indian Banking Sector

PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Total Advances 202374.46 261800.93 337336.49 416768.2 542503.21
Total Deposits 367047.53 380046.05 435521.09 537403.95 742073.12
Total Advances to Total
Deposits (%)
55.14 68.89 77.46 77.55 73.11

? Business per Employee
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Deposits+Advances 569,421.99 641,846.98 772,857.58 954,172.15 1,284,576.33
No. of Employees 205515 198774 185388 179205 205896
Business per
Employee (Rs. Cr.)
2.77 3.23 4.17 5.32 6.24

? Profit per Employee
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Operating Profit 9786.34 11151.44 10,249.19 11,810.11 15,440.83
No. of Employees 205515 198774 185388 179205 205896
Profit per Employee
(Rs. Lacs)
4.76 5.61 5.53 6.59 7.50

? Return on Net Worth
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 4304.52 4406.67 4541.31 6729.12 9121.23
Average Net Worth 22151.70 25858.10 29471.31 40165.61 53490.18
Return on Net Worth (%) 19.43 17.04 15.41 16.75 17.05

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

Earnings Capacity Ratios
55.14
68.89
77.46 77.55
73.11
0.00
20.00
40.00
60.00
80.00
100.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Total Advances to Total Deposits
(%)
2.77
3.23
4.17
5.32
6.24
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Business per Employee (Rs. Cr.)
4.76
5.61
5.53
6.59
7.50
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
2004-'052005-'062006-'072007-'082008-'09
Year
Profit per Employee (Rs. Lacs)
19.43
17.04
15.41
16.75
17.05
0.00
5.00
10.00
15.00
20.00
25.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Return on Net Worth (%)
Fundamental and Technical Analysis of Indian Banking Sector

? Net Interest Margin
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Interest Income 13,944.62 15,635.64 16,054.21 17,021.23 20,873.14
Avg. Int. Earning Assets 371,541.19 411,903.77 455,410.27 546,377.42 712,363.32
Net Interest Margin (%) 3.75 3.80 3.53 3.12 2.93

? Return on Average Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 4304.52 4406.67 4541.31 6729.12 9121.23
Average Total Assets 433849.06 477021.72 530483.37 644465.62 843584.03
Return on Average
Assets (%)
0.99 0.92 0.86 1.04 1.08

? Return on Equity
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Net Profit 4304.52 4406.67 4541.31 6729.12 9121.23
Shareholder's Funds 24,072.12 27,644.08 31,298.55 49,032.66 57,947.70
Return on Equity (%) 17.88 15.94 14.51 13.72 15.74

? Non-Interest Income to Average Assets Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Income 7,119.90 7,388.69 7,446.76 9,398.43 12,691.35
Average Total Assets 433,849.06 477,021.72 530,483.37 644,465.62 843,584.03
Non-Int. Income to
Avg. Assets Ratio (%)
1.64 1.55 1.40 1.46 1.50

? Overhead Ratio
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Expenses 11,278.18 11,872.89 13,251.78 14,609.55 18,123.66
Average Total Assets 433,849.06 477,021.72 530,483.37 644,465.62 843,584.03
Overhead Ratio (%) 2.60 2.49 2.50 2.27 2.15

? Efficiency Ratio
Fundamental and Technical Analysis of Indian Banking Sector

PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Expenses 11,278.18 11,872.89 13,251.78 14,609.55 18,123.66
Net Int. Income+Non-
Int. Income
21,064.52 23,024.33 23,500.97 26,419.66 33,564.49
Efficiency Ratio (%) 53.54 51.57 56.39 55.30 54.00

? Interest Income to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Interest Income 32428.00 35794.93 39491.03 48950.31 63788.43
Working Funds 459882.84 494160.60 566806.14 722125.09 965042.96
Interest Income to
Working Funds (%)
7.05 7.24 6.97 6.78 6.61

? Non-Interest Income to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Non-Interest Income 7,119.90 7,388.69 7,446.76 9,398.43 12,691.35
Working Funds 459882.84 494160.60 566806.14 722125.09 965042.96
Non-Int. Income to
Working Funds (%)
1.55 1.50 1.31 1.30 1.32

? Operating Profit to Working Funds
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Operating Profit 9786.34 11151.44 10,249.19 11,810.11 15,440.83
Working Funds 459882.84 494160.60 566806.14 722125.09 965042.96
Operating Profit to
Working Funds (%)
2.13 2.26 1.81 1.64 1.60

Graphs
Fundamental and Technical Analysis of Indian Banking Sector

3.75
3.80
3.53
3.12
2.93
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
2004-'052005-'062006-'072007-'082008-'09
Year
Net Interest Margin (%)
0.99
0.92
0.86
1.04
1.08
0.00
0.20
0.40
0.60
0.80
1.00
1.20
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Return on Average Assets (%)
17.88
15.94
14.51
13.72
15.74
0.00
5.00
10.00
15.00
20.00
2004-'052005-'062006-'072007-'082008-'09
Year
Return on Equity (%)
1.64
1.55
1.40
1.46
1.50
1.20
1.30
1.40
1.50
1.60
1.70
2004-'052005-'062006-'072007-'082008-'09
Year
Non-Int. Income to Avg. Assets
Ratio (%)
2.60
2.49 2.50
2.27
2.15
0.00
0.50
1.00
1.50
2.00
2.50
3.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Overhead Ratio (%)
53.54
51.57
56.39
55.30
54.00
49.00
50.00
51.00
52.00
53.00
54.00
55.00
56.00
57.00
2004-'052005-'062006-'072007-'082008-'09
Year
Efficiency Ratio (%)
Fundamental and Technical Analysis of Indian Banking Sector

7.05
7.24
6.97
6.78
6.61
6.20
6.40
6.60
6.80
7.00
7.20
7.40
2004-'052005-'062006-'072007-'082008-'09
Year
Interest Income to Working
Funds (%)
1.55
1.50
1.31
1.30
1.32
1.10
1.20
1.30
1.40
1.50
1.60
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Non-Int. Income to Working
Funds (%)
2.13
2.26
1.81
1.64
1.60
0.00
0.50
1.00
1.50
2.00
2.50
2004-'052005-'062006-'072007-'082008-'09
Year
Op. Profit to Working Funds
(%)
Fundamental and Technical Analysis of Indian Banking Sector

Liquidity Ratios
? Liquid Assets to Demand Deposits
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 57237.11 66823.04 77261.01 111841.31 141109.49
Demand Deposits 56612.32 67995.65 81997.97 98133.53 110753.57
Liquid Assets to
Demand Deposits (%)
101.10 98.28 94.22 113.97 127.41

? Liquid Assets to Total Deposits
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 57237.11 66823.04 77261.01 111841.31 141109.49
Total Deposits 367047.53 380046.05 435521.09 537403.95 742073.12
Liquid Assets to
Total Deposits (%)
15.59 17.58 17.74 20.81 19.02

? Liquid Assets to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Liquid Assets 57237.11 66823.04 77261.01 111841.31 141109.49
Total Assets 459882.84 494160.60 566806.14 722125.09 965042.96
Liquid Assets to
Total Assets (%)
12.45 13.52 13.63 15.49 14.62

? Government Securities to Total Assets
PARTICULARS 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Government Securities 171943.51 135291.39 118270.83 141128.27 226960.06
Total Assets 459882.84 494160.60 566806.14 722125.09 965042.96
Government Sec. to
Total Assets (%)
37.39 27.38 20.87 19.54 23.52

Fundamental and Technical Analysis of Indian Banking Sector

Graphs

101.10
98.28
94.22
113.97
127.41
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Liquid Assets to Demand Deposits
(%)
15.59
17.58 17.74
20.81
19.02
0.00
5.00
10.00
15.00
20.00
25.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Liquid Assets to Total Deposits (%)
12.45
13.52 13.63
15.49
14.62
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
18.00
2004-'052005-'062006-'072007-'082008-'09
Year
Liquid Assets to Total Assets (%)
37.39
27.38
20.87
19.54
23.52
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Year
Government Sec. to Total Assets
(%)
Fundamental and Technical Analysis of Indian Banking Sector

Interpretation
? Capital adequacy ratios have shown satisfactory performance over the years for the bank.
? Core capital adequacy ratio has remained above the regulatory requirements of RBI and
witnessed a gradual improvement which is a good indication for the bank. On the other
hand, leverage and debt equity ratio have stabilized which were at their peak during
2004-?05. Moreover, advances to total assets ratio has boosted significantly coupled with
government securities to total investment ratio depicting a tale of handsome efforts
leading to healthier business opportunities while keeping hands safe.
? Asset quality ratios seem to have become strength for the bank.
? Non Performing Assets which are considered to be the most critical part of a bank?s
portfolio have shown a sharp fall over the five years in comparison to net advances which
gives a picture of vigorous efforts in advancing loans and also in recovering the same.
Apart from these, investments to total assets ratio has also decreased from which is a fine
signal as bank by decreasing investments can now advance more funds and earn interest
income which is its core area of operation.
? Management efficiency ratios shown a rising trend over the years.
? Total advances to total deposits ratio has tremendously rose to the tune of 18% over the
five years which shows dynamic efforts of the bank in towards optimum utilization of the
funds available with the bank. With the increasing number of employees over the years
bank has managed to increase its business coupled with significant improvement in
profitability per employee has improved by Rs. 2.5 lacs which shows operational
excellence of the bank in reducing costs which results into rising profits. Return on net
worth i.e. shareholders? funds have stabilized with increasing-decreasing trend year after
year.
? Earnings capacity ratios have witnessed robust performance from 2004-?05 to 2008-?09.
? Net interest margin has declined by a considerable 80 bps. Return on average assets and
return on equity shareholders? funds have followed steady trend. It is interesting to note
that non-interest income and non-interest expenses have shown relatively similar change.
However, encouraging trend in net interest income has resulted into superior efficiency
Fundamental and Technical Analysis of Indian Banking Sector

for the bank. Interest income to working funds, non-interest income to working funds and
operating profit to working funds have observed an insignificant decline.
? Liquidity ratios appear to have observed average performance over the years.
? Liquid assets though witnessing an upward trend have managed to be in line with an
increase in the deposits and assets as a result of which these ratios have steady. Not
having enough liquidity on the hand to meet the requirement of the bank?s stakeholders
can prove to be dangerous. However, bank has maintained the tune of investment in the
government securities in line with the assets.

Fundamental and Technical Analysis of Indian Banking Sector

Z-score Analysis
Z = 6.56T
1
+ 3.26T
2
+ 6.72T
3
+ 1.05T
4

Altman Z Score Model 2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
(CA-CL)/Total Assets (T1) 0.2231 0.2477 0.2789 0.3194 0.3486
Acc. Retained Earnings/ Total Assets (T2) 0.0512 0.0549 0.0543 0.0670 0.0594
EBIT / Total Assets (T3) 0.0544 0.0552 0.0521 0.0587 0.0592
B. V. of Equity / Total Liabilities (T4) 0.0523 0.0559 0.0541 0.0679 0.0600
Z-score 2.05 2.23 2.41 2.78 2.94

2.05
2.23
2.41
2.78
2.94
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
3.00
3.25
2004-'05 2005-'06 2006-'07 2007-'08 2008-'09
Z
-
S
c
o
r
e

Year
Graph showing Z-score for 5 years
Fundamental and Technical Analysis of Indian Banking Sector

Technical Analysis

Fundamental and Technical Analysis of Indian Banking Sector

Exponential Moving Average (EMA) Chart
In SBI we can see the downward trend in the month of January to March It goes sharply down
and reaches the lowest point of the year which is 500 and from that month it rises in the next
months. In the month of April, May and June it rises very sharply from 500 to 2020. Then there
is downward trend in coming few months. It also touched the highest point of 2500 in October.
Due to recent stability in EMA it will better to invest in the company.
Moving Average Convergence Divergence (MACD) Chart
As per the MACD chart, it is advisable to go for this company. The reason behind is that in the
first quarter of the year it shows the down fall trend and which is below the expectation. In the
month of May only it increases sharply to 78 and rises sharply to 180 in June. Then it shows the
mix trend and stables which is quite satisfactory and the mix trend mostly upward side.
Relative Strength Index (RSI) Chart
In RSI chart we have shown the Upward Control line (UCL) at 70 points and Lower Control
Line (LCL) at 30 points. Company have shown stable trend in the first quarter and then it
increases above the upper few times so it is satisfactory and advisable to invest in this company
because the RSI is moderate.
Accumulation/Distribution Chart
SBI is showing the continues decrease in the first three months and after March there is a
continuous accumulation and shown upward trend for one and half month and there is a stable
trend till September. After that there is a continuous buying is going on, so it is the perfect time
to get in this company.

Fundamental and Technical Analysis of Indian Banking Sector

7. Key Findings
Z-score comparative analysis for Public Sector Banks
Z Score Deviation Z Score Deviation Z Score Deviation Z Score Deviation Z Score Deviation
BOB 2.65 0.11 3.09 0.00 3.13 0.00 3.47 0.00 3.58 0.00 3.33 0.01 1
BOI 2.76 0.00 2.99 0.11 3.06 0.07 3.15 0.32 3.16 0.42 3.09 0.25 2
Canara Bank 2.62 0.14 2.98 0.11 3.03 0.10 3.06 0.41 3.21 0.37 3.07 0.28 3
IDBI 0.73 2.03 1.14 1.95 1.58 1.55 1.60 1.87 1.60 1.98 1.48 1.86 6
PNB 2.28 0.47 3.03 0.06 2.95 0.18 3.15 0.32 3.10 0.48 3.02 0.32 4
SBI 2.05 0.71 2.23 0.86 2.41 0.72 2.78 0.69 2.94 0.64 2.64 0.70 5
2008-'09 Weighted
Average
Z Score
Weighted
Average
Deviation
Rank
Public Sector
Banks
2004-'05 2005-'06 2006-'07 2007-'08

Z-score comparative analysis for Private Sector Banks
Z Score Deviation Z Score Deviation Z Score Deviation Z Score Deviation Z Score Deviation
Axis Bank 2.26 0.00 1.65 0.00 1.96 0.00 2.48 0.00 2.42 0.00 2.23 0.00 1
HDFC 1.01 1.25 1.29 0.36 1.53 0.44 1.86 0.62 2.08 0.34 1.73 0.50 3
ICICI 1.45 0.81 1.65 0.00 1.91 0.06 2.19 0.30 2.29 0.12 2.04 0.19 2
Kotak Mahindra
Bank
0.27 1.99 0.11 1.54 0.30 1.66 1.10 1.38 1.41 1.00 0.86 1.37 4
2008-'09 Weighted
Avgerage
Z Score
Weighted
Avgerage
Deviation
Rank
Private Sector
Banks
2004-'05 2005-'06 2006-'07 2007-'08

Fundamental and Technical Analysis of Indian Banking Sector

Z-score comparative analysis for Public & Private Sector Banks
Z Score Deviation Z Score Deviation Z Score Deviation Z Score Deviation Z Score Deviation
BOB 2.65 0.11 3.09 0.00 3.13 0.00 3.47 0.00 3.58 0.00 3.33 0.01 1
BOI 2.76 0.00 2.99 0.11 3.06 0.07 3.15 0.32 3.16 0.42 3.09 0.25 2
Canara Bank 2.62 0.14 2.98 0.11 3.03 0.10 3.06 0.41 3.21 0.37 3.07 0.28 3
IDBI 0.73 2.03 1.14 1.95 1.58 1.55 1.60 1.87 1.60 1.98 1.48 1.86 9
PNB 2.28 0.47 3.03 0.06 2.95 0.18 3.15 0.32 3.10 0.48 3.02 0.32 4
SBI 2.05 0.71 2.23 0.86 2.41 0.72 2.78 0.69 2.94 0.64 2.64 0.70 5
Axis Bank 2.26 0.50 1.65 1.44 1.96 1.17 2.48 0.99 2.42 1.17 2.23 1.11 6
HDFC 1.01 1.75 1.29 1.80 1.53 1.61 1.86 1.61 2.08 1.50 1.73 1.61 8
ICICI 1.45 1.31 1.65 1.44 1.91 1.23 2.19 1.29 2.29 1.29 2.04 1.30 7
Kotak Mahindra
Bank
0.27 2.49 0.11 2.98 0.30 2.83 1.10 2.37 1.41 2.17 0.86 2.48 10
2008-'09 Weighted
Average
Z Score
Weighted
Average
Score
Rank Banks
2004-'05 2005-'06 2006-'07 2007-'08

Fundamental and Technical Analysis of Indian Banking Sector

Here, comparative analysis of Z-score has been done for public sector banks, private sector
banks and for both together. As it can be seen from the above tables Z-score has been derived for
all the five years for all the banks and then deviation is found out for the same by assigning zero
value in the deviation column for the bank with highest z-score for any given year. All other
banks? deviation has been derived by deducting the highest Z-score from their respective Z-score
for any given year.
Thereafter, weighted average Z-score is found out by multiplying Z-score for all years with their
respective weightage assigned. Weightages have been assigned as follows:
Year Weightage
2004-?05 1
2005-?06 2
2006-?07 3
2007-?08 4
2008-?09 5
In the same manner weightage average deviation has been found out for all the banks and on the
basis of that a bank with the least deviation has been given the 1
st
rank and so on.
? Z-score comparative analysis for the public sector banks shows that the Bank of Baroda has
achieved the 1
st
rank.
? Z-score comparative analysis for the private sector banks shows that the Axis Bank has
achieved the 1
st
rank.
? Z-score comparative analysis for the public and private sector banks together shows that the
Bank of Baroda and Bank of India have achieved 1
st
and 2
nd
ranks respectively. As far as
private sector banks are concerned, Axis Bank has achieved the highest rank i.e. 6
th
.

Fundamental and Technical Analysis of Indian Banking Sector

Z-score comparative analysis for Public & Private Sector Banks
Safe
Zone
Grey
Zone
Distress
Zone
Safe
Zone
Grey
Zone
Distress
Zone
Safe
Zone
Grey
Zone
Distress
Zone
Safe
Zone
Grey
Zone
Distress
Zone
Safe
Zone
Grey
Zone
Distress
Zone
BOB 2.65 3.09 3.13 3.47 3.58
BOI 2.76 2.99 3.06 3.15 3.16
Canara Bank 2.62 2.98 3.03 3.06 3.21
IDBI 0.73 1.14 1.58 1.60 1.60
PNB 2.28 3.03 2.95 3.15 3.10
SBI 2.05 2.23 2.41 2.78 2.94
Axis Bank 2.26 1.65 1.96 2.48 2.42
HDFC 1.01 1.29 1.53 1.86 2.08
ICICI 1.45 1.65 1.91 2.19 2.29
Kotak Mahindra
Bank
0.27 0.11 0.30 1.10 1.41
2008-'09
Banks
2004-'05 2005-'06 2006-'07 2007-'08

Fundamental and Technical Analysis of Indian Banking Sector

Z-score formula for Banks is as follows:
Z = 6.56T
1
+ 3.26T
2
+ 6.72T
3
+ 1.05T
4

Zones of Discrimination
Z > 2.60 - “Safe” Zone
1.10 < Z < 2.60 - “Grey” Zone
Z < 1.10 - “Distress” Zone
Based on the zones of discrimination as given by the Z-score model, banks have been classified
for all the five years to be either in “Safe zone”, “Grey zone” or ”Distress zone”.
? Bank of Baroda, Bank of India and Canara Bank have continued to be in the Safe zone for
all the five years.
? Punjab National Bank which was in Grey zone for the year 2004-?05 has attained the Safe
zone for all the four remaining years. Following the same State Bank of India was in Grey
zone till 2006-?07 and has attained Safe zone after that.
? Axis Bank and ICICI Bank have remained in Grey zone for all the five years but their Z-
score has shown a significant increase and in the coming years they are likely to be in the
Safe zone.
? HDFC Bank and IDBI Bank were in the Distress zone for the year 2004-?05 but thereafter
both the banks moved to Grey zone for the remaining years. However, HDFC Bank shown a
remarkable increase in its Z-score as compared to IDBI Bank.
? Kotak Mahindra Bank has been at its worst as far as Z-score is concerned. Till the year
2006-?07 it was in the Distress zone and thereafter entered the Grey zone but still its has a
long way to go before it reaches Safe zone.

Fundamental and Technical Analysis of Indian Banking Sector

Ranking Methodology
Capital Adequacy Ratios Score
Capital Adequacy Ratio (%) 4.00
Leverage Ratio (Times) 4.00
Debt Equity Ratio (Times) 4.00
Advances to Total Assets Ratio (%) 4.00
Govt. Sec. to Total Inv. Ratio (%) 4.00
Total 20.00

Asset Quality Ratios Score
Net NPA to Net Advances (%) 7.00
Net NPA to Total Assets (%) 6.00
Total Investments to Total Assets (%) 7.00
Total 20.00

Management Efficiency Ratios Score
Total Advances to Total Deposits (%) 5.00
Business per Employee (Rs. Cr.) 5.00
Profit per Employee (Rs. Lacs) 5.00
Return on Net Worth (%) 5.00
Total 20.00

Earnings Capacity Ratios Score
Net Interest Margin (%) 3.00
Return on Average Assets (%) 3.00
Return on Equity (%) 3.00
Non-Int. Income to Avg. Assets Ratio (%) 1.50
Overhead Ratio (%) 2.50
Efficiency Ratio (%) 2.50
Interest Income to Working Funds (%) 1.50
Non-Int. Income to Working Funds (%) 1.50
Operating Profit to Working Funds (%) 1.50
Total 20.00

Liquidity Ratios Score
Liquid Assets to Demand Deposits (%) 5.00
Liquid Assets to Total Deposits (%) 5.00
Liquid Assets to Total Assets (%) 5.00
Government Sec. to Total Assets (%) 5.00
Total 20.00

Grand Total 100.00

In order to derive CAMEL comparative analysis all the five parameters i.e. Capital Adequacy
Ratios, Asset Quality Ratios, Management Efficiency Ratios, Earnings Capacity Ratios and
Fundamental and Technical Analysis of Indian Banking Sector

Liquidity Ratios which comprise of certain specific ratios have been assigned scores as shown
above. For any ratio a bank achieving most favourable outcome is assigned the score stated in
the table. All other banks are assigned scores in proportionate to the bank getting the highest
score. Each parameter consists of a total score of 20 and collectively 100.
Apart from these all the years have also been assigned specific weightage as follows:
Year Weightage
2004-?05 1
2005-?06 2
2006-?07 3
2007-?08 4
2008-?09 5
Two types of analysis have been done in order to rank banks and they are:
? CAMEL comparative analysis for all the banks (Parameter-wise)
? CAMEL comparative analysis for all the banks (Year-wise)

Fundamental and Technical Analysis of Indian Banking Sector

CAMEL comparative analysis for Public & Private Sector Banks (Parameter-wise)
Total
WAR
Rank
Total
WAR
Rank
Total
WAR
Rank
Total
WAR
Rank
Total
WAR
Rank
BOB 13.43 8 14.44 2 10.89 7 12.70 8 15.61 2 67.07 5
BOI 13.03 9 12.56 5 12.08 4 13.86 4 14.23 5 65.76 6
Canara Bank 13.86 6 10.11 6 10.49 8 12.82 6 12.89 9 60.17 9
IDBI 15.05 3 9.54 7 13.90 3 10.55 10 14.37 4 63.42 7
PNB 13.92 5 16.54 1 11.29 6 14.25 3 13.30 7 69.30 3
SBI 13.68 7 8.15 10 10.42 9 13.43 5 14.44 3 60.12 10
Axis Bank 12.42 10 12.61 4 15.16 2 14.91 2 11.98 10 67.09 4
HDFC 14.40 4 13.91 3 11.78 5 16.35 1 13.71 6 70.15 2
ICICI 16.53 2 9.21 9 16.04 1 12.80 7 16.53 1 71.11 1
Kotak Mahindra
Bank
18.81 1 9.27 8 9.14 10 12.68 9 13.07 8 62.97 8
L
Total of
Total
WAR
Rank Banks
C A M E

C - Capital Adequacy Ratios A - Asset Quality Ratios M - Management Efficiency Ratios
E - Earnings Capacity Ratios L - Liquidity Ratios
Fundamental and Technical Analysis of Indian Banking Sector

Here, comparative analysis of CAMEL model has been done for public and private sector banks
together based on Parameters. All the five parameters i.e. Capital Adequacy Ratios, Asset
Quality Ratios, Management Efficiency Ratios, Earnings Capacity Ratios and Liquidity Ratios
have been evaluated independently for all the banks for all the years based on the scores as
mentioned earlier in the ranking methodology. Weighted Average Ratio is found out by
multiplying all the ratios in any parameter with their respective scores. Weighted Average Ratio
is found out individually for all years.
Now, the Total Weighted Average Ratio is found out by making the sum total of multiplication
of weightage assigned to each year with their respective WAR and dividing it by the total
weightage. This is done for all parameters which results into derivation of Total WAR for all the
banks.
Hence, banks have been ranked based on each of these individual parameters with the help of
their respective Total WAR. Lastly, a composite ranking is given to all the banks based on Total
of Total WAR.
? As far as Capital adequacy ratios are concerned Kotak Mahindra Bank attained 1
st
rank and
ICICI Bank is ranked 2
nd
.
? For Asset quality ratios Punjab National Bank attained 1
st
rank and Bank of Baroda is
ranked 2
nd
.
? In Management efficiency ratios ICIC Bank attained 1
st
rank and Axis Bank is ranked 2
nd
.
? In Earnings capacity ratios HDFC Bank attained 1
st
rank and Axis Bank is ranked 2
nd
.
? In Liquidity ratios ICICI Bank attained 1
st
rank and Bank of Baroda is ranked 2
nd
.
? Overall ICIC Bank attained 1
st
rank and HDFC Bank is ranked 2
nd
.
? It can be seen that State Bank of India being India?s largest bank is ranked 10
th
which is
quite surprising. However, if we look at the individual parameters it scores least in Asset
Quality parameter which is the least score attained by any bank in any of the parameter.
Fundamental and Technical Analysis of Indian Banking Sector

? Private sector banks are found to be strong when it comes to parameters like Management
efficiency and Earnings capacity which again speaks out loud the old saga of inefficiency of
the public sector banks in comparison to private sector banks.
? However, in contradiction to that Kotak Mahindra Bank score the least in these two
parameters whereas banks like BOI and to certain extent PNB, IDBI proves to be promising
when it comes to their management?s efficiency or their profitability.

Fundamental and Technical Analysis of Indian Banking Sector

CAMEL comparative analysis for Public & Private Sector Banks (Year-wise)
Total
WAR
Rank
Total
WAR
Rank
Total
WAR
Rank
Total
WAR
Rank
Total
WAR
Rank
BOB 52.85 8 60.44 8 69.32 4 70.66 5 68.34 4 67.07 5
BOI 44.93 10 54.70 10 64.97 6 70.90 4 70.70 2 65.76 6
Canara Bank 51.90 9 60.88 6 64.10 8 61.33 10 58.27 8 60.17 9
IDBI 63.30 4 69.37 4 69.61 3 62.88 8 57.79 10 63.42 7
PNB 66.64 1 72.88 1 64.37 7 65.45 7 74.44 1 69.30 3
SBI 53.53 7 59.13 9 61.45 9 61.86 9 59.64 7 60.12 10
Axis Bank 55.45 6 60.58 7 67.21 5 73.22 1 67.04 5 67.09 4
HDFC 66.05 2 67.25 5 78.19 1 71.95 3 65.86 6 70.15 2
ICICI 63.74 3 70.99 3 74.64 2 72.85 2 69.13 3 71.11 1
Kotak Mahindra
Bank
62.18 5 72.85 2 61.22 10 65.99 6 57.80 9 62.97 8
2008-'09
Average
of Total
WAR
Rank Banks
2004-'05 2005-'06 2006-'07 2007-'08

Fundamental and Technical Analysis of Indian Banking Sector

Here, comparative analysis of CAMEL model has been done for public and private sector banks
together based on Years. All the five parameters i.e. Capital Adequacy Ratios, Asset Quality
Ratios, Management Efficiency Ratios, Earnings Capacity Ratios and Liquidity Ratios have been
evaluated collectively for all the banks for a particular year based on the scores as mentioned
earlier in the ranking methodology. Weighted Average Ratio is found out by multiplying all the
ratios in any parameter with their respective scores. Weighted Average Ratio is found out
individually for all parameters.
Now, the Total Weighted Average Ratio is found out by making the sum total of WAR of all
parameters. This is done for all years which results into derivation of Total WAR for all the
banks. Based on this Total WAR banks are ranked with for all the years separately with the bank
getting highest Total WAR being ranked 1
st
.
Thereafter, Average of Total WAR is found out by making the sum total of multiplication of
weightage assigned to each year with their respective Total WAR and dividing it by the total
weightage. Lastly, a composite ranking is given to all the banks based on Average of Total
WAR.
? In the year 2004-?05, Punjab National Bank attained 1
st
rank and HDFC Bank is ranked
2
nd
.
? In the year 2005-?06, Punjab National Bank attained 1
st
rank and Kotak Mahindra Bank is
ranked 2
nd
.
? In the year 2006-?07, HDFC Bank attained 1
st
rank and ICICI Bank is ranked 2
nd
.
? In the year 2007-?08, Axis Bank attained 1
st
rank and ICICI Bank is ranked 2
nd
.
? In the year 2004-?05, Punjab National Bank attained 1
st
rank and Bank of India is ranked
2
nd
.
? Overall ICIC Bank attained 1
st
rank and HDFC Bank is ranked 2
nd
.
? It can be seen that State Bank of India being India?s largest bank is ranked 10
th
which is
quite surprising. However, if we look at the ranks of the individual years it was ranked 9
th
for
3 years and ranked 7
th
for other two years.
Fundamental and Technical Analysis of Indian Banking Sector

? Private sector banks are found to be strong amongst all for all years to a great extent.
However, Punjab National Bank seems to be a tough competitor as it ranked 1
st
for three
years.

Fundamental and Technical Analysis of Indian Banking Sector

8. Conclusion
It has been witnessed in past few years that global turmoil that was caused due to Sub-prime Crisis in
U.S., the banks were the foremost victim and especially the banks having significant global exposure. The
competition was so stiff that every bank in order to increase their business was allowing advances on such
liberal terms and conditions that anyone could opt for that.
However, this was the global scenario in general but Indian banks showed their resistance in being part of
such scenario by the efficiency of their operation, policies and procedures which do aim at increasing
their business but not at the cost of the bank itself. Indian banks showed how sound they are even when
all the banks across the world were passing by a critical situation and some of them even filing petition
for bankruptcy. Banks of Indian origin usually are found to follow the conservative principles till date
which have facilitated them in stabilizing their operations in the state of global slowdown and again
walking on the path of development with not much difficulty.
As can be derived from the analysis done, Indian banks seem to be quite exceptional when it comes to
excellence in their area of operation. All the banks? CAMEL analysis reveals an upward trend over the
past five years which is a good indication. Not only the private sector banks but also the public sector
banks are in the race. All the five parameters i.e. capital adequacy, asset quality, management efficiency,
earnings capacity and liquidity are found to be positive for most of the banks. Also, the Z-score model
which is a tool to analyze proximity to bankruptcy indicated that initially i.e. in 2004-?05 many banks
were in the distress or grey zone but as we look forward to 2008-?09 the situation has become exactly the
opposite.
Moreover, the trend analysis for all the banks show that all the banks in order to enhance their turnover
are deploying more assets by borrowing capital and are attracting more deposits to advance to the
customers. However, net interest income which is a critical factor remains an area of concern for few of
the banks.
However, all these analysis tools are not the only means of measuring a bank?s performance. In modern
consumer centric era, service quality has become the most vital factor in achieving success as far as there
prevails monopolistic competition. Apart from that, all these tools of analysis tend to be of no use when
unstable or unusual circumstances occur which may prove to be critical for a bank. No matter how sound
a bank is, no matter how old a bank is, just one wrong decision and everything gets out of the way.
If we take the case of Satyam, no one was even having a sigh of anything to happen the way it happened.
When a company publishes its financials or annual report or quarterly results, it also attaches its
Fundamental and Technical Analysis of Indian Banking Sector

credibility with it which makes us believe that no information can be as truthful as this is. But now there
is also a question mark as to what extent all these information are viable and genuine for that matter.
Thus, analysis help only to make believe ourselves that whether there is anything erroneous with the
company or not which may not actually turn out to be. All these analysis proves to be insignificant and
hopeless when faced with situation that is of Satyam. Only the senior management of any company is
involved into integrities like this and knows what the truth is.
Lastly to conclude it can be said that there are many tools available which help in analyzing a company?s
strength which is again subjective i.e. it differs from person to person but usually influence seems to be
the only means as we look around which force people or magnetize them to develop liking towards a
company or organization irrespective of what its offerings are, what is its credibility in the market and
whether it is ethical in its operations or not.

Fundamental and Technical Analysis of Indian Banking Sector

Bibliography
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com/Market-Research-Reports/Report-on-Indian-Banking-Sector.html
? Evolution - retrieved available athttp://en.wikipedia.org/wiki/Banking_in_India
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/rbi.html
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analysis
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Analysis_Tool
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shareholderscorner/Share-Holders-Corner.asp
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aboutus/default.htm
Fundamental and Technical Analysis of Indian Banking Sector

? Annual Reports of ICICI Bank - retrieved available athttp://www.icicibank.com/
aboutus/invest-relations.html
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asp
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Kotak_GroupSite/investor/overview.htm
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? Annual Reports of SBI - retrieved available athttp://www.statebankofindia.com/user.htm

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