Comparative
Analysis
Banks Story …
Akshaya Lakshminarasimhan(19008)
Neeraj Singh Shekhawat(19052)
1. ABOUT THE BANKS
CONTENTS 2. FINANCIAL RATIOS
3. EQUITY SHARE DATA
4. BALANCE SHEET DATA
5. CREDIT RATING
6. NEWS ABOUT THE BANKS
About HDFC
• HDFC Bank is
India’s largest private sector
lender in terms of assets.
• The company has been the
fastest-growing bank in India since
the last decade.
• It is also the largest bank in India
by market capitalization as of
March 2020 and operates across 3
verticals namely Retail Banking,
Wholesale Banking and Treasury
Services.
About SBI
• SBI provides banking services primarily to
retail and corporate clients in India.
• In addition to the banking services, the
Bank through their subsidiaries, provides
a range of financial services, which
include life insurance, merchant banking,
mutual funds, security trading, and
pension fund management.
• In the year 2001, the SBI Life Insurance
Company was started by the Bank. They
are the only Bank that have been
permitted 74 % stake in the insurance
business.
• Credit Deposit Ratio is a commonly used statistic
for assessing a bank’s liquidity by dividing the
CREDIT DEPOSIT banks total loans by its total deposits.
RATIO • Credit Deposit Ratio = Credit/Deposits
• An Ideal CD ratio is 65-75. CD ratio tells us that
how much a bank is keeping with themselves to
meet any unforeseen need of fund.
SBI
CD
RATIO 0.72
HDFC
CD
RATIO 0.87
DEPOSIT TO TOTAL •The deposit to total assets ratio is an indicator of financial
leverage. It describes the percentage of total assets that were
ASSETS RATIO financed by creditors, liabilities and debt.
•Deposit to Total Assets Ratio = Deposit/Total Assets
•As this ratio establishes the extent of the bank’s Assets being
funded by Deposits.
SBI
DEPOSIT TO TOTAL
ASSETS RATIO 0.83
HDFC
DEPOSIT TO TOTAL
ASSETS RATIO 0.75
•This ratio measures the extent to which assets of the financial
EQUITY
institutions are funded with equity relative to debt. Equity Multiplier
measures the value of assets funded per equity capital. The higher this
ratio, the more leverage or debt the bank is using to fund its assets. The
formula to calculate the Equity Multiplier Ratio is
MULTIPLIER RATIO •Equity Multiplier Ratio = Total Assets/Total Equity Capital
•This involves more risk for the investors because the SBI is highly
levered with Debt.
SBI
EQUITY
MULTIPLIER
RATIO 4400.90
HDFC
EQUITY
MULTIPLIER
RATIO 2791.22
•It measures the amount of net income after taxes earned for Equity
RETURN ON Capital contributed by the bank’s stock holders. The formula to calculate
the return on
•Equity ratio is Return on Equity Ratio = Net income/Total Equity Capital
EQUITY RATIO •This indicates how well the SBI is making effective use of the
shareholder’s capital. In other words Higher the Return on Equity will be
better
SBI
RETURN ON
EQUITY RATIO 16.23
HDFC
RETURN ON
EQUITY RATIO 47.89
INTEREST EXPENSES •Interest expenses constitute the major part of Total expenses
incurred by any bank. Interest is paid on the amount
deposited by customers on various schemes like Fixed Deposit
TO OPERATING Schemes and Savings bank account. The formula to calculate
the interest expenses ratio is,
INCOME RATIO • Interest Expenses = Interest Expenses Ratio/Total Operating
Income
SBI
IETOR 0.62
HDFC
IETOR 0.51
•Profit Margin measures bank’s ability to control expenses and thus its
PROFIT MARGIN
ability to produce net income from its operating income (or revenue).
These ratios measure the proportion of total operating income that goes
to pay the particular expense item. The formula to calculate the Profit
Margin Ratio is,
RATIO •Profit Margin Ratio = Net Income/Total Operating Income
•This low profit margin of SBI indicates the expenses are too high and
need to cut expenses.
SBI
Profit Margin
Ratio 0.06
HDFC
Profit Margin
Ratio 0.23
•The most important ratio when it comes to banks is the Net
NET INTEREST Interest margin. Net Interest Margin is the difference between
the interest income generated and the amount of interest paid
out to their lenders deposit divided by total assets. The Net
MARGIN RATIO Interest Margin is calculated by using the formula,
•Net Interest Margin= Interest Earned-Interest Expended/
Total Assets
SBI
NET INTEREST
MARGIN RATIO 0.02
HDFC
NET INTEREST
MARGIN RATIO 0.04
NPA TO ADVANCE •NPA is defined as a credit facility in respect of which the interest
and/ or instalment of principal has remained past due for a
specified period of time. In simple terms, asset is tagged as
RATIO nonperforming when it ceases to generate income for the lender
the net NPA to loans (advance) ratio is used as a measure of the
overall quality of the bank’s loan. An NPA are those assets for
which interest is overdue for more than 90 days (or 3 months).
•NPA Ratio = (Net Non-Performing Assets)/Loans
SBI
NPA TO
ADVANCE
RATIO 2.23%
HDFC
NPA TO
ADVANCE
RATIO 1.27%
OTHER RATIOS AND
QUANTITATIVE
COMPARISONS
Provision Coverage Ratio 0.65 0.71
CASA Ratio 44.22 42.23
Profit Before Tax 25062.76 36607.16
Cr. Cr
Profit After tax 14488.11 26257.32
Cr. Cr.
CAR 13.13 % 18.52%
Asset Turnover ratio 0.07 0.09
•HDFC Bank is significantly better & receives premium valuation because of its
stable performance, asset quality & strong management over SBI Bank.
EQUITY SHARE •SBI , Due to merger with its associated banks, it is got bigger in market
capitalization but NPA too, with the investment in Yes Bank Share and its
DATA NPAs.
•The reason behind this is, the CEO Mr. Aditya Puri than main aspects of the
success of HDFC bank going to retire in 2020 as his age reached to 75.
HDFC
HDFC BANK SBI BANK/
Units Mar-20 Mar-19 SBI
High Rs 1,304 321 406.5%
Low Rs 739 233 316.6%
Earnings per share Rs 49.7 2.6 1,928.9%
Book value per share Rs 321.6 262.8 122.4%
Shares outstanding m 5,483.29 8,924.59 61.4%
Avg P/E ratio x 20.6 107.5 19.1%
Avg Price/Bookvalue ratio x 3.2 1.1 301.2%
Dividend payout % 5.0 0 -
Avg Mkt Cap Rs m 56,01,181 24,73,004 226.5%
No. of employees `000 117.0 257.3 45.5%
BALANCE SHEET DATA
BALANCE SHEET DATA Units HDFC BANK
Mar 20'
SBI
Mar 20'
HDFC BANK/
SBI
Advances Rs m 42.7%
9,93,70,28,781 23,25,28,95,607
35.4%
Deposits Rs m 11,47,50,22,947 32,41,62,07,343
Net fixed assets Rs m 4,43,19,155 38,43,92,818 11.5%
Share capital Rs m 54,83,286 89,24,612 61.4%
Borrowings Rs m 1,86,83,43,231 3,14,65,56,521 59.4%
Investments Rs m 10,15,25,94,987 10,46,95,45,175 97.0%
Net NPA to
Advances % 0.36 2.23 16.0%
Shareholders 4,15,166 8,55,889 48.5%
Credit Rating-SBI
CREDIT RATING-HDFC
CREDIT RATING
HDFC
STRENGTHS-HDFC
• The important factors leading to
this is the market presence, CASA
ratio (Current Account Savings
Account) and low Non-Performing
assets (NPAs).
• HDFC bank has been able to
achieve all of these with its pan
India presence with 5000+ banking
outlets in 2748+ cities in India, the
CASA ratio of approximately 45%
and a low Gross and Net NPA of
1.36% and 0.39% respectively.
News-HDFC
• As one of India’s largest banking
institutions, HDFC Bank has embraced
sophisticated information technology to
pursue its expansion from corporate
banking to become a world-class
provider of wholesale and retail
financial services.
• SAS provides a broad range
of analytics to help HDFC Bank make
credit decisions, enhance its cross-sell
and up-sell marketing, and comply with
strict regulations.
News-SBI
• State Bank of India (SBI) has played the role
of godfather proudly.
• It first infused ₹6,050 crore into Yes Bank as
part of the rescue package, for a 48.2%
stake
• SBI invested another ₹1,760 crore in the
private sector lender’s follow-on public
issue.
SBI AND MERGERS
• The cost rationalisation process which will provide
operational cost savings after the completion of
merger process is the big plus point which encouraged
this merger.
• The stronger capital base of all the SBI and its
associate banks after the successful merger is another
strong plus point.
• This merger stands to carve a strong foothold for the
SBI in the banking sector. An increase in the market
share from 17% to 23% will ensure that the SBI will be
able to give tough competition to the private banks
with its 370 million customer base, 58,000 ATM
vending outlets and 22,500 branches.
• This merger also aims to provide greater operational
benefits to the customers at no additional cost as the
Core Banking System is already implemented.