INDEX

SR. NO. CHAPTERS PAGE NO.

1 ABSTRACT 1

2 INTRODUCTION 2

3 OBJECTIVES 3

4 HYPOTHESIS 4

5 IMPORTANCE AND SCOPE OF STUDY 5

6 DATA COLLECTION 6

7 DATA ANALYSIS 10

8 CONSLUSION 19

9 LIMITATION 20

10 BILIOGRAPGY 21
ABSTRACT

Banking sector has been working in India from 18th century, but at that time only a few banks
were providing their services. After Narasimha Committee, 1991 competition in banking sector
has increased due to entry of many private and foreign banks. So to remain in competition the
banks should increase their efficiency so that they can provide better services to the customers,
as the role of banking sector has changed form money lending to more socially relevant services.
As banking sector plays a crucial role in the development of an economy, these should be more
organized and developed. The bank acts as a bridge between those having finance and those in
need of finance and mobilizes the nation’s saving into profitable investments. Many private
sector banks like HDFC, ICICI, Axis Bank, Canara Bank, Oriental Bank of Commerce etc. are
providing their services in an efficient manner. Sothis report talks about the profitability of a
business with respect to its sales or investments of two private banks HDFC and ICICI. The
performance of both banks is compared to find out which one is more profitable. The analysis
about the performance is done on the basis of Total Income, Total Expenses, Net Profit,
Operating Profit etc. and on the basis of this analysis it is found that the performance and
efficiency of HDFC bank is better than ICICI.
INTRODUCTION

A sound financial system is important for a healthy and vibrant economy. The banking sector
constitutes a main element of financial service industry. The performance of an economy to a
large extent is dependent on the performance of the banking sector. A healthy banking sector acts
as a bedrock of social, economic, and industrial growth of a nation. Banking in India was defined
under Section 5(A) as “any company which transacts banking business” and the purpose of
banking business defined under Section 5(B), “accepting deposits of money from public for the
purpose of lending or investing, repayable on demand through cheque/draft or otherwise”. The
banking system in India should not only be hassle free but it should be able to meet the new
challenges posed by technology and any other internal or external factor. The Indian banking
system passed through a revolution in the sixties which unleashed a chain reaction of rapid
chances. Commercial banking was converted into mass banking from class banking, (Kumar
2013). Till the year 1980 approximately 80% of the banking segment in India was under
government ownership. On the suggestion of Narasimha committee, the Banking Regulation Act
was amended in 1993 and thus the gates for new private sector banks were opened. Private sector
banks came into existence to supplement the performance of public sector bank and serve the
needs of the economy better. HDFC and ICICI are the two major private sector banks flourishing
in India.

 COMPANY’S PROFLIE

ICICI bank has it’s headquarter at Mumbai and was incorporated in 1954. It is the second largest
bank by assets in India. It provides financial service to corporate and retail customers in the area
of Investment Banking, Life and non – life insurance, venture capital and asset management.

HDFC bank has its headquarters at Mumbai and was incorporated in 1994. It is the fifth largest
bank in India by assets. Its main objective is to provide loan for housing development. Increased
competition, new technology and thereby declining processing cost, the erosion of product and
product boundaries and less restrictive governmental regulations have played a major role for the
private banks to compete with each other.
OBJECTIVES OF THE STUDY

 To know about banking sector.

 To study the Income and Expenditure pattern of ICICI bank and HDFC bank in India
 To analyze and compare the profitability performance of ICICI and HDFC bank on the
bases of net sales.
 To analyze and compare the profitability performance of ICICI and HDFC bank on the
bases of investment
 To evaluate the financial performance of Public Sector Banks and Private Sector Banks under
study.
HYPOTHESIS
A Hypothesis is a important research equipment and the main work is observed from new
experiments.Hypothesis is usually considered as the principal instrument in research. Its main
function is to suggest new experiments and observations. In the simple meaning, hypothesis
means a mere assumption or some supposition to be proved or disproved. A hypothesis is a
special proposition formulated to be tested in a certain given situation as a part of a research
which stats what the researcher is looking for. Thus, a hypothesis may be defined as a
proposition or a set of propositions set forth as an explanation for the occurrence of some
specified group of phenomena either asserted merely as a provisional conjecture to guide some
investigation or accepted as highly probable in the light of established facts.86 For the present
study, the researcher has formulated null hypothesis.

The hypotheses are as under: Null Hypothesis (H0):

 There is no significant difference between the productivity ratios of the ICICI Bank and
HDFC Banks.
 There is no significant difference between the profitability ratios of the ICICI Bank and
HDFC Bank
 Productivity and profitability performance of banks under study is not independent of
banking sector reforms.
 Financial performance of banks unit under study is not independent of banking sector
reforms.
IMPORTANCE AND SCOPE OF STUDY
A business starts with a motto of making a profit and thus one of the most commonly used
financial ratios is the profitability ratios. Management and investors calculate these ratios often
and they are always present in the annual reports of the company. Since every business wants to
generate profit and the investors also want returns on their investments, it is mandatory to
showcase how the company is working and generating profit. Thus, profitability ratios analysis is
an important evaluation criterion for companies.

Profitability ratios are the tools for financial analysis which communicate about the final goal of
a business. For all the profit-oriented businesses, the final goal is none other than the
profits. Profits are the lifeblood of any business without which a business cannot remain a going
concern. Since the profitability ratios deal with the profits, they are as important as the profits.
The purpose of calculating the profitability ratios is to measure the operating efficiency of a
business and returns which the business generates. The different stakeholders of a business are
interested in the profitability ratios for different purposes. The stakeholders of a business include
owners, management, creditors, lenders etc.

 TYPES OF PROFITABILITY RATIOS

Profitability ratios are a bunch of financial metrics which measures the profit generated by the
company and its performance over a period. The profit of the company which is assessed by
these ratios can be simply defined or explained as the amount of revenue left after deducting all
the expenses and losses which incurred in the similar time period to generate that revenue.

Ultimately, these ratios are nothing but a simple comparison of various levels of profits with
either SALES or INVESTMENT. So, these ratios can be further classified as Margin Ratios
(Sales based Ratios) and Return Ratios (Investment based Ratios)
DATA COLLECTION
The present study is mainly based on secondary data obtained from the annual report of ICICI
Bank and HDFC Bank.

PROFIT AND LOSS ACCOUNT OF ICICI BANK

BALANCE SHEET OF ICICI BANK
PROFIT AND LOSS ACCOUNT OF HDFC BANK
BALANCE SHEET OF HDFC BANK
DATA ANALYSIS

Profitability ratios are the financial ratios which talk about the profitability of a business with
respect to its sales or investments. Since the ratios measure the efficiency of operations of a
business with the help of profits, they are called profitability ratios. They are quite useful tools to
understand the efficiencies/inefficiencies of a business and thereby assist management and
owners to take corrective actions.
  NET PROFIT RATIO
Net Profit Ratio helps in determining the efficiency with which affair of the business are
managed. An increased in the ratio over the previous period indicates improvement in the
operational efficiency of the business.When doing a simple profitability ratio analysis, the net
profit margin is the most often margin ratio used. The net profit margin shows how much of each
sales rupees shows up as net income after all expenses are paid This ratio is thus an efficient
measure to check the profitability of business.

NET PROFIT RATIO = NET PROFIT X100

NET SALES

ICICI BANK HDFC BANK

NET PROFIT NET PROFIT
YEAR NET PROFIT NET SALES NET PROFIT NET SALES
RATIO RATIO
2017-18 6,777.42 54,965.89 12.33 17,486.73 80,241.36 21.79
2016-17 9,801.09 54,156.28 18.10 14,549.64 69,305.96 20.99

NET PROFIT RATIO

25 21.79 20.99
20 18.1

15 12.33
10
5
0
2017-18 2016-17

ICICI BANK HDFC BANK

 INTERPRETATION

It can be interpreted that HDFC Bank is more efficient than ICICI Bank. Sales of HDFC Bank
has increased from 2016-17 to 2017-18 but net profit margin has a steady increase this is because
net profit has not increased in the same proportion as net sales. Whereas net profit margin of
ICICI Bank has dipped from the previous year though sales being constant since decrease in net
profit.
  OPERATING PROFIT RATIO
Operating profit is also known as EBIT and is found on the company's income statement. EBIT
is earnings before interest and taxes. The operating profit margin looks at EBIT as a percentage
of sales. The operating profit margin ratio is a measure of overall operating efficiency,
incorporating all of the expenses of ordinary, daily business activity. Both terms of the equation
come from the company's income statement.

OPERATING PROFIT = OPERATING PROFIT X 100

RATIO SALES

Chart Title
60
48.91
50 45.01
40.66
37.13
40
30
20
10
0
2017-18 2016-17

ICICI BANK HDFC BANK

 INTERPRETATION

ICICI Bank is more efficient in managing operations ( purchase made at low cost, more sale of
profitability funds ,etc ) It has a very good control on indirect costs (overheads) relating to
administration, sales, distribution and also have more margin to meet non-operating expenses
and earn net profits. HDFC bank should check on unnecessary operating expenses.
  RETURN ON ASSET
Return on assets (ROA) is a financial ratio that shows the percentage of profit a company earns
in relation to its overall resources. In other words, the return on assets ratio or ROA measures
how efficiently a company can manage its assets to produce profits during a period. A
company's return on assets (ROA) is calculated as the ratio of its net income in a given period to the
total value of its assets. The higher the ROA, better the management. But this measure is best
applied in comparing companies with the same level of capitalization. The more capital-intensive
a business is, the more difficult it will be to achieve a high ROA. The profit percentage of assets
varies by industry, but in general, the higher the ROA the better. For this reason, it is often more
effective to compare a company's ROA to that of other companies in the same industry or against
its own ROA figures from previous periods

RETURN ON ASSET = NET INCOME/ TOTAL ASSETS

RETURN ON ASSETS
2 1.64 1.68
1.5 1.2
1 0.77

0.5
0
2017-18 2016-17

ICICI BANK HDFC BANK

  INTERPRETATION

Return on Assets of HDFC Bank is higher than that od ICICI Bank. The return on assets ratio
measures how effectively a company can earn a return on its investment in assets. In other
words, ROA shows how efficiently a company can convert the money used to purchase assets
into net income or profits It only makes sense that a higher ratio is more favorable to investors
because it shows that the company is more effectively managing its assets to produce greater
amounts of net income. A positive ROA ratio usually indicates an upward profit trend as well.
ROA is most useful for comparing companies in the same industry as different industries use
assets differently. For instance, construction companies use large, expensive equipment while
software companies use computers and servers.
RETURN ON EQUITY
The return on equity ratio or ROE is a profitability ratio that measures the ability of a firm to generate
profits from its shareholders investments in the company.ROE is a profitability ratio from the investor’s
point of view—not the company. In other words, this ratio calculates how much money is made based on
the investors’ investment in the company, not the company’s investment in assets or something else .
ROE tells company shareholders how effectually their money is being utilized or reinvested. It is a useful
ratio when analyzing company profitability or the management effectiveness given the capital invested by
the shareholders. ROE shows how efficiently a company utilizes investments to generate income.

RETURN ON EQUITY = NET INCOME E

SHAREHOLDER’S FUNDS

RETURN ON EQUITY
20 16.45 16.26
15
9.8
10 6.44
5
0
2017-18 2016-17

ICICI BANK HDFC BANK

INTERPRETATION

For most industries Return on Equity between 10% and 30% are considered desirable to provide
dividends to owners and have funds for future growth of the company. Investors should be very careful
using ROE as the only efficiency indicator because ROE can be high if a company is heavily leveraged.

HDFC Bank have a better efficiency in in utilizing investment to generate profits.

  RETURN ON CAPITAL EMPLOYED
Return on capital employed (ROCE) is a financial ratio that measures a company's profitability
and the efficiency with which its capital is employed. ROCE is useful because unlike other
fundamentals such as return on equity (ROE), which only analyzes profitability related to a
company’s common equity, ROCE considers debt and other liabilities as well. This provides a
better indication of financial performance for companies with significant debt. ROCE is a useful
metric for comparing profitability across companies based on the amount of capital they use. There
are two metrics required to calculate the Return on Capital Employed - earnings before interest
and tax and capital employed. Earnings before interest and tax (EBIT), also known as operating
income. Capital employed is the total amount of capital that a company has utilized in order to
generate profits. It is the sum of shareholders' equity and debt liabilities

ROCE = Earnings Before Interest and Tax (EBIT) / Capital Employed

RETURN ON CAPITAL EMPLOYED

14 12.09
12 10.7
9.91
10 8.59
8
6
4
2
0
2017-18 2016-17

ICICI BANK HDFC BANK

  INTERPRETATION

There is no standard return on capital employed ratio. Each concern has to determine its own
standard ratio bases on i) its own part ratios; or ii) ratios of other concern in the same industries;
or iii) average from the entire industries

It can be interpreted that HDFC Bank has high probability on each rupee of sale and larges
returns available to take care interest, taxes, reserves, ect. than ICICI Bank. ICICI Bank has low
productivity.
CONSLUSION

Profitibility ratio of the bank under the study period is not statisfactory. Profits of HDFC bank is
has increased but not with the pase of expenditure due to higher reliance on debt capital in the
form of borrowings and loan for financial capital stucture. So in order to improve profitibility,
the bank should reduce its dependence on external equlities for meeting capital requirement.
HDFC bank should also concentrate on its expenses which is increasing year by year.

Profits of ICICI bank have reduce from previous years. ICICI bank should concentrate more on
its sales as its sales have been constant for both the years . ICICI bank should reduce its
dependence on external equlities for meeting capital requirement

.
LIMITATION
The researcher is well aware of the following limitations with which the study are undertaken as
under.

 This study is related to ICICI and HDFC Banks only.

 The secondary data, which used for this study is based on annual reports of the bank. The
quality of this research depends on quality and reliability of data published in annual
reports of banks.
 There are different methods to measure the productivity and profitability of the banks.
View of expert can be different in this matter from one another.
 The present study of common size analysis has been made but common size analysis has
its own limitations, which also applies to the study
 The present study is largely based on ratio analysis; such analysis has its own limitations,
which also applies to the study.
 This study is in the nature of a positive empirical research. It is not being proposed to
enter in the normative aspect and offer suggestion for improvement in the working
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