FINANCIAL ANALYSIS

(For the years 2006-2010)

Under the kind guidance of Prof. V.K.Nangia

Anant Dhingra Deep Pathak L Nikhil Reddy Laxmi Narasimha Boddu Vema Jagadish Vineeth Chama
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Table of Contents 1. Banking in India ................................................................................................................................. 3 2. History of Bank of Baroda ................................................................................................................. 6 2.1 Formation ..................................................................................................................................... 6 2.2 Global presence ............................................................................................................................ 7 3. 4. 5. 6. Products and Services: .................................................................................................................... 7 Share holding pattern ...................................................................................................................... 8 Present financial scenario ............................................................................................................... 9 Liabilities ...................................................................................................................................... 10 6.1 Deposits ...................................................................................................................................... 10 6.2 Capital and Reserves .................................................................................................................. 16 6.2.1 Capital .................................................................................................................................. 16 6.2.2 Reserves ............................................................................................................................... 17 6.2.3 Profit and Loss ..................................................................................................................... 19 7. Assets ............................................................................................................................................ 23 7.1 Advances .................................................................................................................................... 23 7.2 Investments................................................................................................................................. 28 References ............................................................................................................................................ 32

1. Banking in India
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 defunct. 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 presidency 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 Presidency 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.(Joint Stock Bank: A company that issues stock and requires shareholders to be held liable for the company's debt) It was not the first though. That 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. When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States, promoters opened banks to finance trading in Indian cotton. With large exposure to speculative ventures, most of the banks opened in India during that period failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. 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 Puducherry, 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. Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had

improved. Indians had established small banks, most of which served particular ethnic and religious communities. The presidency 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. The fervour of Swadeshi movement lead to establishing of many private banks in Dakshina Kannada and Udupi district which were unified earlier and known by the name South Canara ( South Kanara ) district. Four nationalised banks started in this district and also a leading private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian Banking". During the First World War (1914-1918) through the end of the Second World War (1939-1945), and two years thereafter until the independence of India were challenging for Indian banking. The years of the First World War were turbulent, and it took its toll with banks simply collapsing despite the Indian economy gaining indirect boost due to war-related economic activities. 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 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:

* The Reserve Bank of India, India's central banking authority, was nationalized on January 1, 1949 under the terms of the Reserve Bank of India (Transfer to Public Ownership) Act, 1948 (RBI, 2005b).[Reference www.rbi.org.in] * 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 or SBI, continued to be owned and operated by private persons. By the 1960s, the Indian banking industry had become an important tool to facilitate the development of the Indian economy. At the same 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. Nationalisation Thereafter, her move was swift and sudden. 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. Liberalisation 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
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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 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 set up 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 ushered 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. 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 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.

2. History of Bank of Baroda 2.1 Formation

Bank of Baroda was incorporated on July 20, 1908 as a as a private bank with the name The Bank of Baroda Ltd. The Bank was established with a paid up capital of Rs 1 million and was founded by
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Maharaja Sayajirao Gaekwad III of Baroda. In the year 1910, the Bank opened their first branch in the city of Ahmedabad. In the year 1919, they opened their first branch in Mumbai City. In the year 1953, the Bank opened first international branch at Mombasa, Kenya. During the period 1953-1969, the Bank opened three branches in Fiji, five branches in Kenya, three branches in Uganda and one each in London and Guyana. In the year 1958, The Hind Bank merged with the Bank and in the year 1962, The New Citizen Bank Ltd amalgamated with the Bank. In the year 1964, The Umargaon Peoples' Bank & Tamilnadu Central Bank amalgamated with the Bank. In July 1969, the Bank was nationalized and the name was changed from 'The Bank of Baroda Ltd' to 'Bank of Baroda'.

2.2 Global presence

In its international expansion, the Bank of Baroda followed the Indian diaspora, especially that of the Gujaratis. It has significant international presence with a network of 78 offices in 25 countries, six subsidiaries, and four representative offices. Among the Bank of Barodas 42 overseas branches are ones in the worlds major financial centers (e.g., New York, London, Dubai, Hong Kong (which it has upgraded recently), Brussels and Singapore), as well as a number in other countries. The bank is engaged in retail banking via 17 branches of subsidiaries in Botswana, Guyana, Kenya, Tanzania, and Uganda. The Bank of Baroda also has a joint-venture bank in Zambia with nine branches. The Bank of Baroda maintains representative offices in Malaysia, China, Thailand, and Australia. It plans to upgrade its offices in China and Malaysia shortly to a branch and joint-venture, respectively. The Bank of Baroda has received permission or in principle approval from host country regulators to open new offices in Trinidad and Tobago and Ghana, where it seeks to establish joint ventures or subsidiaries. The bank has received Reserve Bank of India approval to open offices in The Maldives, and New Zealand. It is seeking approval for operations in Bahrain, South Africa, Kuwait, Mozambique, and Qatar and is establishing offices in Canada, New Zealand, Sri Lanka, Bahrain, Saudi Arabia, and Russia. It also has plans to extend its existing operations in the United Kingdom, the United Arab Emirates, and Botswana.

3. Products and Services:

Bank of Baroda is one of the leading commercial banks in India. The Bank's solutions includes personal banking, which includes deposits, gen-next services, retail loans, credit cards, debit cards, services and lockers; business banking, which includes deposits, loans and advances, services and lockers; corporate banking, which includes wholesale banking, deposits, loans and advances and
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services, and international business, which includes non-resident Indian (NRI) services, foreign currency credits, ECB, offshore banking, export finance, import finance, correspondent banking, trade finance and international treasury. The Bank offers services, such as domestic operations and foreign exchange operations. They also offer rural banking services, which include deposits, priority sector advances, remittance, collection services, pension and lockers. They also offer fee based services such as cash management and remittance services.

4. Share holding pattern

Non Government Promoter Corporate Total holdings (Institutions) bodies Public 64.47 28.28 1.53 5.72 53.81 34.77 5.4 6.02 59.41 29.53 2.67 5.24 73.17 21.03 0.9 4.9 57.8 37.33 0.96 3.91 Custodian against depository recipts

Bank/Stake holder Bank of India Bank of Baroda SBI canara bank Punjab National Bank

3.15

Shareholding Pattern
64.47 53.81 59.41 73.17 57.8 BOI BOB SBI canara bank PNB

28.28 34.77 29.53 21.06 37.3

1.1 5.31 2.54 0.9 0.96

5.72 6.02 5.24 4.9 3.91

Government has the greatest share in all the banks and among all Government holds largest share of 73% in Canara Bank. In case of SBI 3.15% of the shares are in custodian against Depository Receipts. Total Public holds 4-6.5 % shares in each bank.
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3.15

5. Present financial scenario

Bank of Baroda has come out with the strong performance for the quarter ended September 2010 with humble 47% rise in the NII at Rs 2038.14 crore and robust 61% jump in the Net Profit at Rs 1019.30 crore (q-o-q). There is also a growth of 14% rise in the other income at Rs 681.30 crore which was decreased by 12% in the previous quarter .The total income is increased by 24% and there is dip in the cost to income ratio in the quarter under review. The growth in the profits was supported by a strong growth in the NII, core fee base income and control on expenses.
Particulars Interest Earned Interest Expended Net Interest Income Other Income Net Total Income Operating Expenses Operating Profits Provisions & Contingencies EO Profit Before Tax Provision for Tax Net Profit EPS*(Rs) Jun-10 Jan-09 5158.66 4135.42 3120.52 2746.82 2038.14 681.3 1388.6 595.33 % Change 25 14 47 14 37 12 61 59 0 61 61 61 Mar-10 Mar-09 16698.34 15091.58 10758.86 5939.48 2724.91 8664.39 3810.58 4853.81 697.2 81.45 4238.06 1179.73 3058.33 83.7 9968.17 5123.41 2662.64 7786.05 3576.06 4209.99 962.06 95.01 3342.94 1115.74 2227.2 60.9 % Change 11 8 16 2 11 7 15 -28 -14 27 6 37

2719.44 1983.93 1062.7 952.34 1656.74 1031.59 185.49 0 1471.25 451.95 1019.3 111.5 116.33 0 915.26 281.08 634.18 69.4

On Y-O-Y basis Bank of Baroda has posted 37% jump in the Net Profit to Rs 3058.33 crore on the back of 16% rise in the NII. Further, 7% increase the operating expenses coupled with 28% dip in provisions and contingencies and 14% dip in the profit on sale of investment has together has driven PBT up by 27% . Finally 6% increase in provisions for taxation to Rs 1179.73 crore has led Net Profit up by 37% on y-o-y basis. The authorised capital of the bank has increased from 1500 crore to 3000 crores in Nov 2009. Also a sum of Rs 45.05 crore has been charged to Profit and Loss A/c during all quarters of 2010, on proportionate basis of the Transitional liability of Rs 901crore up to 31.03.2007, at the time of first adoption of Revised Accounting Standard (AS) 15 on Employee Benefits. The balance amount of Rs 360.40 crore is to be charged proportionately by the end of March 2012. Asset Quality: The asset quality of the bank has declined on y-o-y basis. In absolute terms Gross NPA has increased by 39%
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on y-o-y basis. The Net NPA has spiked up by 80% on y-o-y basis .While the % GNPA stood at 1.39% in 2009-2010. The Provision coverage ratio stood 85.56% including technical write off. It has been steadily improving its market share. It expanded its global business level by 24.0% (y-o-y) during the year FY10. The Banks domestic low-cost grew by an unprecedented 25.1% taking the share of domestic CASA deposits to 35.63% in FY10 versus 34.87% in FY09 helping bank to have a good control over the cost of deposits. Also net Profit of International Operations during FY10 increased by 108.08% over that of the previous year. This substantial increase came from some improvement in global market conditions. The contribution of international operations to the Banks global Net Profit was 28.65% during the financial year 2010.

6. Liabilities
6.1 Deposits The deposits constitute a major portion of the liabilities for Bank of Baroda. Observing the data for the past 5 years we can have actual proportion of deposits in liabilities.
Liabilities (in Crore Rupees) 2007 2008 2009 2010 1249159793 1520341272 1923969517 2410442642

Deposits Total liabilities % proportion

2006 936619916

1133925273 1431461746 1795995162 2266722377 2783167028 82.5 87.2 84.6 84.8 86.6

Deposits 143146.17 152034.12

Total liabilities 179599.51 192396.95

93661.99

2006

113392.52

124,915.97

2007

2008

2009

226672.23

241044.26
2010

278316.70

Deposits Bank of Baroda across five years

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Observations: 1. Deposits constitute the major portion of Liabilities and its proportion is more than 80% of the Liabilities. 2. In 2009-2010 deposits constitue 86.6% of total liabilities. It has a growth of 25.28% from previous year. Comparisons of total deposits for various banks
Total deposits (In Crore Rupees) 2006 2007 2008 93661.99 124915.98 152034.13 380046.06 435521.09 537403.94 93932.03 119881.74 150011.98 116803.23 142381.45 154072.42

Bank/Year Bank of Baroda SBI Bank of India Canara Bank

2005 81333.46 367047.52 78821.44 96795.92

2009 192396.95 742073.13 189708.48 186892.51

2010 241044.3 804116.2 229761.9 234651.4

900000 537403.94 800000 380046.06 435521.09 700000 600000 500000 400000 81333.46 300000 200000 100000 0 2005 Bank of Baroda 2006 SBI 2007 2008 Bank of India 367047.52

742073.13

Total Deposits

241044.26

804116.23 189708.48 186892.51 2010 Canara Bank 229761.94 234651.44

78821.44 96795.92

93661.99

93932.03 116803.23

119881.74 142381.45

124915.98

150011.98 154072.42

152034.13

192396.95

2009

Observations: 1. Bank of Baroda has comparable deposits with the similar banks like Bank of India and Canara Bank, which all are far behind the industry leader State Bank of India. 2. Also Canara Bank used to have greater deposits than Bank of Baroda till 2007, but from 2008 Bank of Baroda has surpasses the Canara Bank in terms of deposits. 3. Bank of Baroda is having the highest growth in Deposits in the year 2010.
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Demand, Savings and Term Deposits Break up for Bank of Baroda (in Crore Rupees) Deposit Type/Year 2006 2007 2008 2009 2010 Demand Deposits 8378.72 9874.8 11696.01 14451.22 18923.59 Savings Deposit 27160.44 31577.28 35776.38 42487.28 52543.92 Term Deposits 58122.83 83463.9 104561.7 135458.5 169576.8 Total 93661.99 124915.98 152034.1 192397 241044.3

Observations: 1. There is a increasing trend in all deposits from year 2006 to 2010. 2. Demand, saving and Term deposits all are growing at a rate between 20-30 % but the major proportion of increase in total deposits is due to increase in term deposits which are the major part of total deposits. Percentage concentration of Demand, Saving and Term Deposits for all Bank

Percentage concentration of Demand, Saving and Term Deposits

Demand Deposit Saving Deposit Term Deposit

52.45

51.52

53.04

62.06

64.98

66.71

66.82

67.78

68.48

68.78

69.39

68.51

58.36

69.95

70.41

70.35

52.74

29.66

29.65

28.70

73.24

29.00

27.13

24.51

25.28

22.78

24.40

23.53

22.29

22.89

26.71

22.37

22.08

21.80

32.02

72.16
BOI 6.91 20.92

BOI 6.63 20.13

18.83

17.89

18.26

BOB 8.95

Canara Bank 8.79

Canara Bank 8.74

Canara Bank 8.60

BOB 7.91

BOI 8.31

BOI 7.89

14.92

BOB 7.85

15.24

2006

2007

2008

2009

2010

Canara Bank 7.84

BOI 7.81

BOB 7.69

Canara Bank 7.68

BOB 7.51

SBI

SBI

SBI

SBI

SBI

21.26

70.91

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Observations: Bank of Baroda has comparable concentration of Demand, Savings and Term deposits with similar bank like Bank of India and Canara Bank (all have term deposit in range of 62-72 % in the five year period), which all are behind the Industry leader State Bank of India who have term Deposits 52-58 % in the five year period. As term deposits are the costlier ones the State Bank of India pays less cost for same amount of deposits. Demand Deposits which are the cheapest deposit are highest of the State Bank of India across the five year. Bank of Baroda has Demand Deposits almost equal to Canara Bank and slightly higher than Bank of India. Bank of Baroda used to have slightly lower percentage of Term deposits than Canara Bank till 2007 but after that it has almost equal percentage. As Bank of Baroda has slightly increased its total deposits than Canara bank after 2008 this might be due to increase in Term Deposit percentage. Term Deposits percentage of almost all banks are highest in the 2008 2009 period as rate of interest on Term Deposits increased in the period encouraging people to invest in them.
Cost of Deposits (Crore Rupees)/Year Bank of Baroda State Bank of India Bank of India Canara Bank

2006 4.02 4.85 4.05 4.52

2007 4.56 4.59 4.31 5.32

2008 5.35 5.57 5.23 6.71

2009 5.33 5.93 5.76 6.72

2010 4.56 5.61 5.16 5.83

Cost of Deposit (%)

7.00
6.71 6.72

6.50 6.00
5.57 5.93 5.76 5.33 5.16 5.83 5.61 5.35 4.85 4.59 4.52 4.02 4.05 4.56 4.31 4.56 5.23

5.50 5.00 4.50 4.00

5.32

2006 Bank of Baroda

2007

2008

2009 Bank of India

2010 Canara Bank

State Bank of India

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Observations: Bank of India and Bank of Baroda are having the best Cost of deposits with Bank of India leading in 2006 and 2007 and then Bank of Baroda going ahead in 2009, 2010. In 2008 and 2009 cost of deposit of all banks rises significantly this is because term deposit of all banks rises by greater % as banks started giving more rate of interest on term deposits in 2008 and 2009. Deposits in Foreign countries and India In terms of Domestic deposits Bank of Baroda is almost equal to Bank of India but lagging behind a Industry leader state Bank of India and also Canara Bank. Canara Bank has low foreign Deposit as compare to Bank of Baroda. Bank of Baroda has highest foreign deposits for the last 4 years and it is far ahead of all banks (even the industry leader SBI) in foreign deposits. Foreign Deposits in last 2 years have grown at rate of more than 35%, this might also be the reason for overtaking Canara Bank in terms of total deposits

366.23

419.94

514.68

710.03

764.72

Deposits of Branches in India

138.67

113.45

99.73

79.05

BOB SBI BOI Canara Bank 2006

77.85

BOB SBI BOI Canara Bank 2007

94.74

BOB SBI BOI Canara Bank 2008

122.48

125.42

149.57

BOB SBI BOI Canara Bank 2009

151.41

159.49

182.98

BOB SBI BOI Canara Bank 2010

185.28

196.58

228.44

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Deposits of Branches Outside India

40.99

55.76 39.40 30.22

25.19

25.14

29.55

16.08

14.61

13.82

15.58

22.73

24.60

32.04

33.18

4.51

BOI

3.35

BOI

3.71

BOI

BOI

3.91

BOB

BOB

BOB

BOB

Canara Bank

Canara Bank

Canara Bank

Canara Bank

BOB

BOI

SBI

SBI

SBI

SBI

SBI

2006

2007

2008

2009

2010

Credit-Deposit Ratio:
Credit-Deposit (%) 2006 2007 68.23 74.35 62.13 73.46 59.04 65.67 65.47 68.65 69.87 70.29

Bank\Year Industry State Bank of India Bank of Baroda Canara Bank Bank of India

2008 74.65 77.51 68.72 69.4 73.58

2009 76.08 74.97 72.57 71.99 75.47

2010 70.74 75.96 73.43 72.96 74.24

Percentage
80

Credit-Deposit Ratio

75

70

65

60

55 2006
Industry

2007
State Bank of India

2008
Bank of Baroda

2009
Canara Bank

2010

Year
Bank of India

Canara Bank

6.21

15

Observation: Every bank has maintained the credit-Deposit ratio of more than the mandatory requirement of 60%. The credit to deposit ratio of Bank of Baroda is increasing that indicates that bank has given more advances /credit as a % of deposits, the ratio has surpassed industry average in the year 2010 generating more Revenues for the Bank.

6.2 Capital and Reserves 6.2.1 Capital

Date 02/02/2006 21/02/1997 05/12/1996 31/03/1996 1991 - 95 Capital Reason 367 296 196 577 2172 Public Issue Public Issue Capital Restructuring Restructuring - Trans. to Cap. Res. Capital contributed by Goverment Premium -unit 220 75 0 0 0

The bank for its initial functioning was provided with 2170 Crores by the government between the years 1991 to 1996. The company came with an IPO in the year 1997 and collected a capital of Rs 296 crore with Rs. 75 as a premium amount. The bank come with an FPO in the year 2006 collecting Rs 71 crore with a premium of Rs 220 per share. Capital Adequacy Ratio Capital adequacy ratio (CAR), also called Capital to Risk (Weighted) Assets Ratio (CRAR), is a ratio of a bank's capital to its risk. Almost all the banks CAR is greater than 9 as per RBI norms.
Capital Adequacy Ratio (%) 2006 BOI BOB SBI CANARA 10.75 13.65 11.88 11.22 2007 11.75 11.8 12.34 13.5 2008 12.04 12.91 13.54 13.25 2009 13.21 12.88 12.97 14.1 2010 12.63 12.84 12 13.43

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Capital Adequacy Ratio

14.5 14 13.5 13 12.5 12 11.5 11 10.5 10 2006 2007 2008 2009 2010 BOI BOB SBI CANARA

Observation: The capital adequacy ratio of Canara Bank is more than other banks in the year 2009-10. The capital adequacy ratio of all banks has decreased in the year 2010. It does not follow a particular pattern for Bank of Baroda.

6.2.2 Reserves
Breakup of reserves
Year Statutory Reserve Revenue & other Reserves Share Premium Capital Reserves Taxation Reserve Total reserves excluding revaluation reserves 2006 1693.45 3112.85 2273.88 398.73 0 7478.91 2007 1949.08 3659.26 2273.88 402.19 0 8284.41 2008 2304.97 4309.61 2273.89 1789.93 0 10678.4 2009 2879.52 4817.02 2273.89 2079.58 420 12514.19 2010 3637.32 6074.02 2273.89 2079.07 690 14740.86

Observation: 1. There is a steep growth in the capital reserve in the year 2008 due to banking of profits in the capital reserve. 2. In the year 2009 and 2010 bank has maintained Taxation reserve for payment of Taxes. 3. The share premium is constant at 2273.88 crores indicating that bank had not brought an IPO or FPO in the above years.

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Growth of Reserves and Capital

Reserves and Capital (in Crore Rupees) 2005 2006 2007 2008 2009 SBI 24,180.84 27,752.79 31,298.26 49,033.19 57,947.82 BOB 5,628.23 7,843.91 8,649.41 11,043.40 12,879.19 BOI 4,464.87 4,983.89 5,895.37 10,589.48 13,495.01 CANARA 6,108.97 7,132.25 10,354.00 10,500.50 12,207.78 INDUSTRY 4,748.09 5,491.32 7,011.52 8,512.47 8,772.78

2010 65,949.32 15,105.86 14,230.08 14,671.78 10300

Percentage growth of Reserves and Capital

90.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 2006 2007 2008 2009 2010

SBI BOB BOI CANARA INDUSTRY

Observations: 1. In the year 2008 the Reserves and Capital of BOI showed the maximum growth of about 80%.In the year 2009 the growth of Reserves and capital of all the banks is more than the average growth of the banking industry. SBI has the largest number of Capital and Reserves thus increasing its Net Worth. 2. It is important to observe that values under the various sub-heads of Reserves and Surplus also show an increasing trend except value for share premium which remains constant at Rs. 3654,285,000 for the last five years. This implies that the company did not come out with an IPO or FPO during these years.

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6.2.3 Profit and Loss

Income, Expenditure and Net Profit
Total Income Total Expenditure Adjusted Net Profit

19,910.65 17,876.11 13,892.18 12,456.66 15,648.91 16,852.32

8,444.00 7,617.04

10,438.12 9,411.66

827.16 2006

1,018.45 2007

1,435.30 2008

2,164.91 2009

3,002.21

2010

Observations: 1. The growth of income of BOB is more in the years 2008 and 2009. 2. The percentage change in the Expenditure in the year 2010 is less as compared to the percentage change in the profit due to which the Net Profit has increased by 37% in the year 2010 as compared to change of 16% in the income. Expenses:
Breakup of Expenses
0.95 21.59 6.62 11.38 2.06 4.76 17.47 20.01 6.13 8.89 1.86 4.34 15.28 7.13 8.47 1.47 4.22 15.01 7.00 9.05 1.37 4.78 13.95

1.46 5.21

Provision for Tax Other Expenses, Provisions & Contingencies Depreciation Operating Expenses & Administrative Expenses Payments to/Provisions for Employees

57.66 50.87

63.43

63.70

63.84

2006

2007

2008

2009

2010

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Observations: 1. The share of interest Expended in Expenses is constantly increasing over the years. 2. The share of payment of Employees is decreasing over the years.

Interest Expended-Interest Earned (%) Bank\Year 2006 2007 2008 Industry 58.46 62.23 69.72 State Bank of India 56.67 59.57 65.23 Bank of Baroda 54.97 60.27 66.89 Canara Bank 58.89 64.57 75.09 Bank of India 62.55 61.5 65.77

2009 70.57 67.28 66.05 72.44 66.36

2010 65.79 66.66 64.43 69.71 67.8

Percentage
74

Interest Expended-Interest Earned Ratio

69

Industry State Bank of India

64

Bank of Baroda Canara Bank

59

Bank of India

54 2006 2007 2008 2009 2010

Year

Observations: The Interest Expended to Interest Earned ratio of Bank of Baroda is increasing that indicates that the difference in the interest earned to interest paid is decreasing thus affecting the profits. As shown from the above data that the interest expended to the interest Earned ratio of Bank of Baroda is less than the industry average and thus the difference is more making more profits.
Cash-Deposit (%) 2006 2007 9.14 9.79 5.15 6.22 3.45 4.46 6.04 6.56 5.5 5.98

Bank\Year Industry State Bank of India Bank of Baroda Canara Bank Bank of India

2008 9.98 8.29 5.7 7.58 7.02

2009 10.75 8.37 5.8 6.86 6.08

2010 9.53 7.56 5.57 6.11 5.84 20

Percentage
11 10 9 8 7 6 5 4 3 2006 2007

Cash-Deposit Ratio

Industry State Bank of India Bank of Baroda Canara Bank Bank of India

2008

2009

2010

Year

Observations: The cash to Deposit ratio of Bank of Baroda is lesser than other banks and also less than the industry average which indicates the bank is utilizing more money in its revenue earning operations. The cash to Deposit ratio is increasing in the year 2006 and 2007 while it is decreasing in the year 2010. Price Earnings Ratio
Price Earnings ratio (P/E) 2006 2007 2008 9.46 7.46 6.74 10.51 7.93 7.49 11.84 11.83 15.38 8.39 5.82 6.12

Bank of India Bank of Baroda SBI Canara Bank

2009 3.94 3.95 7.63 3.37

2010 10.66 7.87 14.78 5.7

Price Earning Ratio (P/E)

18 16 14 12 10 8 6 4 2 0 2006 2007 2008 2009 2010

Bank of India Bank of Baroda SBI Canara Bank

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Observations: 1. SBI has the largest PE ratio as it has the largest value of Capital and Reserves and assets which is reflected in its share price. 2. In the year 2009 due to recession the share prices of the entire bank stocks went down thus the PE ratio of all the banks went down, and when the market moved up the PE ratio of all the banks doubled in the year 2010. 3. On comparing the PE ratio with the share holding pattern we found that Institutions (Non Promoters) and Public holds the minimum percentage shares in bank and thus its PE ratio is less as compared to the other banks. Business per employee
Business Per Employee (Rs. Cr) 2006 2007 2008 2009 3.81 4.98 6.52 8.33 3.96 5.55 7.1 9.14 2.99 3.57 4.56 5.56 4.42 5.49 6.09 7.8

BOI BOB SBI CANARA

2010 10.11 9.81 6.36 9.83

Business Per Employee

12 10 8 6 4 2 0 2006 2007 2008 2009 2010 Bank of India Bank of Baroda SBI Canara Bank

Observations: The Business brought by per Employee is increasing Y-O-Y for all the banks. The Business per Employee of SBI is lowest as compared to other banks while it provides more employee benefits as compared to other banks. In the year 2009 Employees of BOB brought the maximum business.

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7. Assets
7.1 Advances Advances of Bank of Baroda contribute 63% to the size of the balance sheet. The accounting policy followed by Bank of Baroda as regard to advances is similar to that followed by State Bank of India (SBI), Bank of India (BOI), Punjab National Bank (PNB) and Canara Bank. The volume of advances has risen steadily across the banking industry. The percentage growth in the volumes of advances of Bank of Baroda was higher as compared to BOI, PNB and Canara Bank over the last 5 years. Total Advances (% change)
45.00 40.00 35.00 30.00 25.00 20.00 15.00 10.00 5.00 0.00 2007 2008 2009 2010 Bank of Baroda Canara Bank Bank of India PNB SBI

Bank of Baroda Canara Bank Bank of India PNB SBI

2006 599117784 794256998 651737444 746273712 2618009359

Total Advances 2007 2008 836208698 1067013241 985056870 1072380409 851158944 1134763264 1020158514 1195015662 3373364935 4167681962

2009 1432514084 1382194005 1429093738 1547029887 5425032042

2010 1750352859 1693346306 1684907098 1866012080 6319141520

The ratio of term loans to total advances is almost equal to the ratio of cash credit, overdraft, and loans repayable on demand to total advances over the last four years. In 2006, the ratio of cash credits was greater than ratio of term loans for Bank of Baroda. A similar trend is seen in the ratios of BOI, PNB and Canara Bank. But in case of SBI, the ratio of term loans has always been higher than ratio of cash credits.

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Bank /Year Bank of Baroda Canara Bank Bank of India PNB State Bank of India

Cash Credits, Overdrafts and Loans Repayable on Demand 2006 2007 2008 2009 307878083 385151926 324511074 327930456 958567732 369686516 470298861 409309785 431609583 1254761729 482648712 455641277 535081653 559371311 1519999996 665210401 641419986 641060085 689178629 2236799268

2010 796314689 798922426 706463601 822070686 2751504964

Cash Credits, Overdrafts and Loans Repayable (% change)

50.00 40.00 30.00 20.00 10.00 0.00 2007 -10.00 2008 2009 2010 Bank of Baroda Canara Bank Bank of India PNB State Bank of India

Term Loans
Bank /Year Bank of Baroda Canara Bank Bank of India PNB State Bank of India Term Loans 2006 2007 234145531 378649622 359844748 457606485 245988416 332060860 380938717 488041159 1410904135 1810732192 2008 2009 2010 495846089 627951184 761378844 554836630 677936723 831134818 439490658 606410473 723709418 591966156 813851641 999353605 2280347064 2716393114 3139889238

The percentage growth in term loans of SBI has decreased constantly from the year 2008 to 2010 while for the other banks there is no fixed pattern.

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70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 2007

Term Loans (% change over years)

Bank of Baroda Canara Bank Bank of India PNB State Bank of India 2008 2009 2010

The Priority Sector Advances There has been a steady growth in volumes of priority sector lending though the ratio of Priority sector lending to the total advances has decreased. Bank of Baroda has been able to maintain the RBI norm of keeping the priority sector advances more than 40% of the Adjusted Net Banking Credit (ANBC).
Priority Sector Advances 2006 2007 2008 2009 2010 175881313 240525388 294745436 382500461 461218855 299268653 366803255 419797991 459911163 566909290 205312105 257729361 322389728 375450654 429288969 340934256 365276123 462168838 492123451 666154744 800128797 1020158514 1192305118 1436375631 1705682080

Bank/Year Bank of Baroda Canara Bank Bank of India PNB State Bank of India

Priority Sector advances to Total advance ratio - Trend Analysis

30 29 28 27 26 25 24 2006 2007 2008 Bank of Baroda 2009 2010 29.36 28.76 27.62 26.57 26.35

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Ratio of priority sector advances to total advances Bank /Year 2006 2007 2008 2009 Bank of Baroda 29.36 28.76 27.62 26.57 Bank of India 31.5 29.87 28.41 26.27 Canara Bank 37.68 37.24 39.15 33.27 Punjab National Bank 45.68 37.81 38.67 31.81 State Bank of India 42.45 36.31 28.61 26.48

2010 26.35 25.47 33.47 35.69 26.99

Secured Advances The ratio of secured advances to total advances for Bank of Baroda showed a dip in the year 2008. A similar trend was seen in BOI and PNB. The dip for SBI was sharper as compared to other banks. Canara Bank managed a steady ratio during that period but suffered a dip in 2010 when the ratios of the banks in comparison had increased.
Ratio of secured advances to total advances (%) Bank/Year 2006 2007 2008 2009 Bank of Baroda 80.61 77.53 73.74 76.59 Bank of India 82.47 82.58 76.93 77.33 Canara Bank 74.25 78.5 78.09 76.47 Punjab National Bank 85.09 85.38 83.18 86.12 State Bank of India 86.09 88.4 73.06 79.01

2010 75.6 78.05 66.47 89.37 78.49

Secured Advances to Total Advances Ratio - Trend Analysis

90 85 80 75 70 65 2006 Bank of Baroda 2007 Bank of India 2008 Canara Bank 2009 2010 SBI Punjab National Bank

Net NPA Ratio The Net NPA ratio for Bank of Baroda has steadily decreased since 2006 due to the restructuring of Advances accounts employed by Bank of Baroda to recover the NPAs. Even though the Indian
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banking industry suffered from growing slippages, Bank of Baroda managed to restrict its net NPA ratio to 0.34% in FY10.
Net NPAs to Net Advances Ratio
1.78 1.76 2 1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 1.49 1.72 1.31 1.06 0.17

1.12

0.6 0.74 0.94 0.76 0.45

0.87

0.84 0.64

0.74

1.09

0.47 0.52

0.31 0.44

2006 Bank of Baroda

0.29

2007 Bank of India

2008 Canara Bank

2009 Punjab National Bank

0.34

2010 SBI

Net NPAs to Net Advances Ratio - Trend Analysis

1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 0.87

0.6 0.47 0.31 0.34

2006

2007

2008 Bank of Baroda

2009

2010

Bank /Year Bank of Baroda Bank of India Canara Bank Punjab National Bank State Bank of India

Ratio of Net NPAs to Net Advances 2006 2007 2008 0.87 0.6 0.47 1.49 0.74 0.52 1.12 0.94 0.84 0.29 0.76 0.64 0.74 0.45 1.78

2009 0.31 0.44 1.09 0.17 1.76

2010 0.34 1.31 1.06 0.53 1.72

Yield on Advances Yield on advances ratio is almost similar for Bank of Baroda, Bank of India and State Bank of India. Canara Bank shows higher yield on advances and PNB has lower yield as compared to other banks in comparison.
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0.53

Yield on Advances Ratio - Trend Analysis

11.00% 10.50% 10.00% 9.50% 9.00% 8.50% 8.00% 7.50% 7.00% 2006 BoB BoI 2007 2008 Canara Bank 2009 PNB 2010 SBI

Bank /Year Bank of Baroda Bank of India Canara Bank Punjab National Bank State Bank of India

Yield on Advances (%) 2006 2007 7.43 8.37 7.58 8.52 8.24 8.95 7.28 7.48 7.78 8.67

2008 9.53 9.34 10.22 8.01 9.90

2009 9.50 9.78 10.79 8.43 10.15

2010 8.55 8.42 9.81 7.89 9.66

7.2 Investments
Comparison with other banks Bank of Barodas investments are comparable with that of top nationalized banks in India. However the percentage growth of the investments decreased from 2006 to 2010. Whereas BoBs major competitors investments grew year on year. In the year 2010 Bank of Indias investments crossed BoBs investments.

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300,000.00 250,000.00 200,000.00 150,000.00 100,000.00 50,000.00 0.00 Bank of Baroda Bank of India Canara Bank PNB SBI

2006 35,114.22 31,781.75 36,974.18 41,055.31 162,534.24

2007 34,943.63 35,492.76 45,225.54 45,189.84 149,148.88

2008 43,870.07 41,802.88 49,811.57 53,991.71 189,501.27

2009 52,445.88 52,607.18 57,776.90 63,385.18 275,953.96

2010 61,182.37 67,080.18 69,676.95 77,724.47 285,790.07

Global business Investments in India constitute 94% of BoBs global business. From 2006 to 2008, investments outside India are kept constant whereas investments in India have been growing. In 2009 business outside India is 8.55% of total business, but in 2010 it is decreased to 4%. India is a growing economy and attracting more investors globally. Increasing investments in India is good direction of investments.

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I Investments in India (Gross) (Rs. In Crores)

II Investments Outside India (Gross) (Rs. In Crores) 57911.71 49157.38

40652.49 32498.03 31704.73

3250.01 2006

3685.72 2007

3656.65 2008

4205.82 2009

3798.46 2010

Investments as a part of Assets

Investments & Advances

70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Return on Investments Return on Advances Investments/Assets Advances/Assets

2006 8.75% 7.43% 30.97% 52.84%

2007 7.72% 8.37% 24.41% 58.42%

2008 7.45% 9.53% 24.43% 59.41%

2009 8.03% 9.50% 23.14% 63.20%

2010 7.16% 8.55% 21.98% 62.89%

The above graph shows that advances are increasing y-o-y and hence forth return on advances is increasing. Trend suggests that the investments by BOB seem to be taking a back seat year by year and hence Income on investment is decreasing. That means the bank is keen in lending more than Investing. As per the RBI Guidelines, during the year, the bank has transferred a portion of Government Securities (SLR) kept in Available for Sale category to Held to Maturity Category. Due to which percentage of return on investment is decreased.

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Break up of investments
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2006 2007 2008 2009 2010 ii) Other Approved Securities i) Government Securities v) Subsidiaries and/or Joint Ventures iv) Debentures and Bonds iii) Shares vi) Other Investments

Investments constitute 21.98% of total assets. Out of total investments 87.63% is in Government Securities. Remaining investments are on investment options like: a) Approved Securities 1.38% b) Shares 2.14% c) Debentures and bonds 4.09% d) Subsidiaries and/or Joint Ventures 1.89% e) Others Investments 9.16% Bank of Barodas investment outside India is 5.9% of the total assets. 53% of total investments maturity is more than 5 years which infers Bank is having good base of investments.

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References
1. Website of Reserve Bank of India 2. Website of Bank of Baroda 3. BSE/NSE websites 4. Indian institute of Banking and Finance 5. Website of SBI, BOI, CANARA bank. 6. Companies Act. 7. Indian Banks Association website 8. Ministry of Finance website

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