A

PROJECT REPORT
ON
“COMPARATIVE ANALYSIS OF CAPITAL STRUCTURE &
FINANCIAL PERFORMANCE OF SBI AND ICICI BANK”
Submitted in the partial fulfillment for the award of

MASTER OF BUSINESS ADMINISTRATION

(FINANCE)

SUBMITTED TO
Dr APJ Abdul Kalam Technical University, Lucknow (U.P.)

SUBMITTED BY:

Akanksha Singh
1716370002

Guided By:
Dr. Ziaul Haque

DR. M.C. SAXENA COLLEGE OF MANAGEMENT & TECHNOLOGY,

LUCKNOW
Session: 2018-2019
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 CERTIFICATE

This is to certify that the project entitled “COMPARATIVE ANALYSIS OF CAPITAL

STRUCTURE & FINANCIAL PERFORMANCE OF SBI AND ICICI BANK”

submitted by Akanksha Singh, in the partial fulfillment of the requirement for the award of

MASTER OF BUSINESS ADMINISTRATION of Dr. A.P.J. Abdul Kalam Technical

University, is a record of students’ own work under our supervision and guidance. The

project report embodies result of original work and studies carried out by students and the

content of the report do not form the basis for award of any other degree to the candidate or

to anybody else.

Guide By
Dr. Ziaul Haque

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 CANDIDATE'S DECLARATION

We hereby declare that the project entitled “COMPARATIVE ANALYSIS OF CAPITAL

STRUCTURE & FINANCIAL PERFORMANCE OF SBI AND ICICI BANK”

submitted by us in the partial fulfillment of the requirement for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION of Dr. A.P.J. Abdul Kalam Technical

University, is record of our own work carried under the supervision and guidance of Dr.

Ziaul Haque, to the best of my knowledge this project has not been submitted to Dr. A.P.J.

Abdul Kalam Technical University or to any other university or institute for the award of any

degree.

Akanksha Singh

1716370002

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 ACKNOWLEDGEMENT

We would like to acknowledge the help provided by our project guide Dr. Ziaul Haque for

his valuable guidance, constant encouragement and kind of help at different stages for the

execution of this project work. He was a constant companion while troubleshooting

difficulties in the project and feeding us with new ideas.

Akanksha Singh
1716370002

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 TABLE OF CONTENTS

S.No. Description

1 Introduction
2 Industry profile of SBI bank

3 Company profile
4 Industry profile of ICICI bank

5 Literature review
6 Objective of research
7 Research Methodology
8 Data Analysis & Interpretation

9 Findings
10 Suggestions
11 Conclusions
Bibliography

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 INTRODUTION

Capital play an important role in any business.For any organization adequate caipal is

required to carry out its business activity in the most efficient way .The success of business

depend to a great extent on the efficiency with which capital is acquired and utilized .The

potential source of capital are owner`s equity, retained earning and the borrowed money. In

many business organization owner`s equity is supplemented with borrowed

fund.Supplementowner`s equity with borrowed money can only be justified if return on

investment (ROI) is sufficiently large enough to meet all the fixed charge including cost of

capital .it should definitely result in wealth maximization.

In the current scenario it has been

observed that many business organization have a tendency of making a lavish use of

borrowed money with out considering its earning potential and ultimately leading to wealth

destruction. Management should follow the suitable debt policy in order to increase the

earning per share (EPS). As stated by many studies ,debt can be recommended in the year of

prosperity but should be careful in the period of depression.

The term ‘leverage’ is used to utilized the fixed cost assets or

fund to increase the returns to the owner of the firm. Every firm tries to increase the

owner`s wealth and often it is by using fixed cost fund which are generally available at lower

cost. The use of leverage is always associated with the risk of uncertainty of return but the

same time with possibility of increasing the size of return. Capital structure decision made by

companies have great impact on their success. An optimal capital structure is usally defined

as one that will minimize a firm`s cast of capital while maximizing firm value.

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Theoretical Background
Capital structure:
Capital structure refers to the kinds of securities and

proportionate amounts that make up capitalization. It is the mix of different sources of long-

term source such as equity share, preference shares, debentures, long-term loans and retained

earnings.

Operating leverage:

Operating leverage may be defined as the

company`s ability to use fixed operating cost to magnify the effects of changes in sales on its

earnings before interest and taxes. The leverage associated with investment activities is

called operating leverage. It is caused due to fixed operating expenses in the company.

Financial leverage:
The use of the fixed-charges source of fund, such as debt and preference capital along with

the owner`s equity in the capital structure, is descrice as financial leverage or financial

gearing or trading on equity.

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Degree of operating leverage (DOL):

The degree of operating leverage is defined as the percentage change in earnings before

interest and taxes relative to a given percentage change in sales.

DOL= %Chages in EBIT

%change in sales

Degree of financial leverage (DFL):

The degree of financial leverage defined as the percentage change

in earning per share (EPS) that result from a given percentage change in earnings before

interest and taxes (EBIT) and is calculated as follows:

DLF ⁼%change of EPS

%change in EBIT

Combined Leverage:
Combined leverage is said to exist when the company uses both
financial amd operating leverage to the magnification of any change in sales in to a larger relative
changes in earning per share. It is also composite leverage or total leverage. It can be calculated with
the help of the following formula.

CL⁼OPERATING LRVERAGE ⁺FINANCIAL LEVERAGE

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INDUSTRY PROFLE OF STATE BANK OF INDIA (SBI)

The evolution of State Bank of India can be traced back to the first decade of the 19th

century. It began with the establishment of the Bank of Calcutta in Calcutta, on 2 June 1806.

The bank was redesigned as the Bank of Bengal, three years later, on 2 January 1809. It was

the first ever joint-stock bank of the British India, established under the sponsorship of the

Government of Bengal. Subsequently, the Bank of Bombay (established on 15 April 1840)

and the Bank of Madras (established on 1 July 1843) followed the Bank of Bengal. These

three banks dominated the modern banking scenario in India, until when they were

amalgamated to form the Imperial Bank of India, on 27 January 1921.

An important turning point in the history of State Bank of India is the launch of

the first Five Year Plan of independent India, in 1951. The Plan aimed at serving the Indian

economy in general and the rural sector of the country, in particular. Until the Plan, the

commercial banks of the country, including the Imperial Bank of India, confined their

services to the urban sector. Moreover, they were not equipped to respond to the growing

needs of the economic revival taking shape in the rural areas of the country. Therefore, in

order to serve the economy as a whole and rural sector in particular, the All India Rural

Credit Survey Committee recommended the formation of a state-partnered and state-

sponsored bank.

The All India Rural Credit Survey Committee proposed the take over of

the Imperial Bank of India, and integrating with it, the former state-owned or state-associate

banks. Subsequently, an Act was passed in the Parliament of India in May 1955. As a result,

the State Bank of India (SBI) was established on 1 July 1955. This resulted in making the

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State Bank of India more powerful, because as much as a quarter of the resources of the

Indian banking system were controlled directly by the State. Later on, the

State Bank of India (Subsidiary Banks) Act was passed in 1959. The Act enabled the State

Bank of India to make the eight former State-associated banks as its subsidiaries.

The State Bank of India emerged as a pacesetter, with its operations carried out by the 480

offices comprising branches, sub offices and three Local Head Offices, inherited from the

Imperial Bank. Instead of serving as mere repositories of the community's savings and

lending to creditworthy parties, the State Bank of India catered to the needs of the customers,

by banking purposefully. The bank served the heterogeneous financial needs of the planned

economic development.

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BRANCHES

The corporate center of SBI is located in Mumbai. In order to cater to different functions,

there are several other establishments in and outside Mumbai, apart from the corporate

center. The bank boasts of having as many as 14 local head offices and 57 Zonal Offices,

located at major cities throughout India. It is recorded that SBI has about 10000 branches,

well networked to cater to its customers throughout India.

ATM Services

SBI provides easy access to money to its customers through more than 8500 atms in India.

The Bank also facilitates the free transaction of money at the atms of State Bank Group,

which includes the atms of State Bank of India as well as the Associate Banks – State Bank

of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Indore, etc. You may also

transact money through SBI Commercial and International Bank Ltd by using the State Bank

ATM-cum-Debit (Cash Plus) card.

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SUBSIDIARIES

The State Bank Group includes a network of eight banking subsidiaries and several non-

banking subsidiaries. Through the establishments, it offers various services including

merchant banking services, fund management, factoring services, primary dealership in

government securities, credit cards and insurance.

The eight banking subsidiaries are:

• State Bank of Bikaner and Jaipur (SBBJ)

• State Bank of Hyderabad (SBH)

• State Bank of India (SBI)

• State Bank of Indore (SBIR)

• State Bank of Mysore (SBM)

• State Bank of Patiala (SBP

) • State Bank of Saurashtra (SBS)

• State Bank of Travancore (SBT)

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PRODUCTS AND SERVICES

Personal Banking

• SBI Term Deposits SBI Loan For Pensioners

• SBI Recurring Deposits Loan Against Mortgage Of Property

• SBI Housing Loan Loan Against Shares & Debentures

• SBI Car Loan Rent Plus Scheme

• SBI Educational Loan Medi-Plus Scheme

Other Services

• Agriculture/Rural Banking

• NRI Services

• ATM Services

• Demat Services

• Corporate Banking

• Internet Banking

• Mobile Banking

• International Banking

• Safe Deposit Locker

• RBIEFT

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• E-Pay

• E-Rail

• SBI Vishwa Yatra Foreign Travel Card

• Broking Services

• Gift Cheques

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 COMPANY PROFILE

State Bank of India is an India-based bank. In addition to banking, the Company, through its

subsidiaries, provides a range of financial services, which include life insurance, merchant

banking, mutual funds, credit card, factoring, security trading, pension fund management and

primary dealership in the money market. It operates in four business segments: Treasury,

Corporate/Wholesale Banking, Retail Banking and Other Banking Business. The Treasury

segment includes the investment portfolio and trading in foreign exchange contracts and

derivative contracts. The Corporate/Wholesale Banking segment comprises the lending

activities of Corporate Accounts Group, Mid Corporate Accounts Group and Stressed Assets

Management Group. The Retail Banking segment consists of branches in National Banking

Group, which primarily includes personal banking activities, including lending activities to

corporate customers having banking relations with branches in the National Banking Group.

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 PRODUCT PROFILE

SBI offers Corporate and Retail Internet Banking Products and Other Value Added Services-:

 E-Ticketing

 Bill Payment

 eztrade@sbi

 RTGS/NEFT

 E-Payment

 Fund Transfer

 Third Party transfer

 Demand Draft

 Cheque Book Request

 Account opening request

 Demat Account Statement

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INDUSTRY PROFILE OF ICICI BANK

ICICI Bank started as a wholly owned subsidiary of ICICI Limited, an Indian financial

institution, in 1994. Four years later, when the company offered ICICI Bank's shares to the

public, ICICI's shareholding was reduced to 46%. In the year 2000, ICICI Bank offered made

an equity offering in the form of adrs on the New York Stock Exchange (NYSE), thereby

becoming the first Indian company and the first bank or financial institution from non-Japan

Asia to be listed on the NYSE. In the next year, it acquired the Bank of Madura Limited in an

all-stock amalgamation. Later in the year and the next fiscal year, the bank made secondary

market sales to institutional investors. With a change in the corporate structure and the

budding competition in the Indian Banking industry, the management of both ICICI and

ICICI Bank were of the opinion that a merger between the two entities would prove to be an

essential step. It was in 2001 that the Boards of Directors of ICICI and ICICI Bank

sanctioned the amalgamation of ICICI and two of its wholly-owned retail finance

subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited,

with ICICI Bank. In the following year, the merger was approved by its shareholders, the

High Court of Gujarat at Ahmedabad as well as the High Court of Judicature at Mumbai and

the Reserve Bank of India.

Present Scenario
ICICI Bank has its equity shares listed in India on Bombay Stock Exchange and the National

Stock Exchange of India Limited. Overseas, its American Depositary Receipts (adrs) are

listed on the New York Stock Exchange (NYSE). As of December 31, 2008, ICICI is India's

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second-largest bank, boasting an asset value of Rs. 3,744.10 billion and profit after tax Rs.

30.14 billion, for the nine months, that ended on December 31, 2008

Branches & ATMs

ICICI Bank has a wide network both in Indian and abroad. In India alone, the bank has 1,420

branches and about 4,644 atms. Talking about foreign countries, ICICI Bank has made its

presence felt in 18 countries - 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. The Bank

proudly holds its subsidiaries in the United Kingdom, Russia and Canada out of which, the

UK subsidiary has established branches in Belgium and Germany.

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PRODUCT PROFILE

Personal Banking
• Deposits

• Loans

• Cards

• Investments

• Insurance

• Demat Services

• Wealth Management

NRI Banking
• Money Transfer

• Bank Accounts

• Investments

• Property Solutions

• Insurance

• Loans

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Business Banking

• Corporate Net Banking

• Cash Management

• Trade Services

• FXOnline

• SME Services

• Online Taxes

• Custodial Services

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COMPANY PROFILE OF ICICI BANK

ICICI Bank Limited (the Bank) is a banking company engaged in providing a range of

banking and financial services, including commercial banking and treasury operations. It

operates under four segments: retail banking, wholesale banking, treasury and other banking.

The Bank’s subsidiaries include ICICI Prudential Life Insurance Company Limited, ICICI

Lombard General Insurance Company Limited, ICICI Trusteeship Services Limited, ICICI

Prudential Pension Funds, Management Company Limited, ICICI Home Finance Company

Limited and ICICI Securities Limited.

PRODUCT PROFILE

ICICI Bank is the one-stop shop for all your forex needs.

Whether your destination is Paris, Mauritius or enchanting Rome, ICICI Bank offers the best

of both worlds. They buy and sell the following :

ICICI Bank Travel Card

Travelers Cheques

Foreign Currency

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 LITERATURE REVIEW

In this chapter I will first show the evolution of capital structure theories (Modigliani and

Miller, trade-off, pecking-order end others) and then present the most influential empirical

papers.

Theoretical studies
One of the first works about the role of debt is Modigliani and Miller (1958). They claim that

owners of the firms are indifferent about its capital structure, because the value of the firm

does not depend on debt-to-equity ratio. Authors consider “an ideal world” without taxes and

any transaction costs. Later Modigliani and Miller (1963) introduce taxes into their model

and show that the value of a firm increases with more debt due to the tax shield.

Modigliani and Miller’s work

initiated further discussions about optimal capital structure. Since their theory predicts 100%

debt financing (due to substantial corporate tax benefit), which is not observed in practice1,

there should be some trade-off costs against the tax shield. The actual level of debt is

determined by tax advantage and these costs. Economists consider bankruptcy costs, personal

tax, agency costs, asymmetric information and corporate control considerations as possible

trade-off options against tax shield. This is the essence of the trade-off theory, according to

which higher profitability is related to higher leverage due to the tax shield, but is not at the

level of 100% of assets due to trade-off costs.

Myers and Majluf (1984) developed a “pecking order” theory of capital structure, according

to which firms initially use internal funds, then debt, and, if a project requires more funding,

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equity. Therefore, firms which are very profitable and generate sufficient cash flows will use

less debt.

Further studies of the relationship between leverage and firm performance can be divided into

two groups. The first one is based on the information asymmetries and signaling. Ross (1977)

came up with a model that explained the choice of debt-to-equity ratio by a willingness of a

firm to send signals about its quality. The core idea of Ross (1977) is that it is too costly for a

low-quality firm to abuse the market and signal about its high quality by issuing more debt.

As a result, low quality firms have low amount of debt, and the leverage increases with the

value of a firm. A similar model was developed by Leland and Pyle (1977): the higher is the

quality of the project manager wants to invest in, the higher is the willingness of the manager

to attract financing. That is why a risky firm will end up with lower debt.

The second group of studies explains the relationship between capital structure and firm

performance through the agency costs theory, developed by Jensen and Meckling (1976) and

Myers (1977). Agency costs are related to conflicts of interest between different groups of

agents (managers, creditors, stockholders). There could be two types of agency problems.

 An agency problem between managers and shareholders.

It arises whenever managers own less than 100% of shares of firm’s assets due to

unwillingness of managers to do their best in order to maximize firm value (which is

preferable for shareholders). Jensen (1986) considered benefit of debt as a restriction

of managerial discretion and stated that “the problem is how to motivate managers to

disgorge the cash rather than invest it below the cost of capital or waste it on

organizational inefficiencies”. Managers of low-indebted firms are inclined to spend

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free cash flows more freely, thus taking less effective projects and generating lower

return. In the opposite situation, when a company has debt in its capital structure,

managers are committed to make interest payments, thus having less free cash flow

left and choosing a more effective way to distributing these cash flows. An alternative

point of view is that shareholders delegate some part of their control over managers to

debtholders, giving possibility to evaluate firm performance to capital markets.

A similar idea, but from a slightly different point of view, was suggested by

Grossman and Hart (1982). Firms, which are mostly equity financed, have very low

risk of bankruptcy. Managers of such firms are not penalized in case of low profits

and have no incentives to be more effective. Besides, bankruptcy implies some

personal costs for managers, such as loss of reputation etc. Thus, the addition of debt

disciplines managers, as the incentive effect arises from the desire to avoid

bankruptcy. To sum up, an increase of leverage is followed by better corporate

performance according to this type of agency problem.

Another theory about managers acting in their own interests

was proposed by Harris and Raviv (1988). They explain higher leverage as an

antitakeover instrument: – firms with a large amount of debt will be less likely to

become a target for acquisition. That is why managers, who are afraid to lose their job

after takeover, may be willing to accumulate higher than necessary amount of debt.

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  An agency problem between stockholders and debt holders
This type of a problem is rooted in the conceptual difference between stockholders

and debt holders. The former take more risks and demand higher return, whereas the

latter take less risk and agree with lower return. Hence, shareholders may want to take

projects with higher risk than debt holders would prefer. In the case of success of

these projects stockholders will earn extra return, while in the case of failure all losses

will be between debt holders and stockholders (Jensen and Meckling, 1976). As a

consequence, more indebted firms take lower-risk projects. On the other side, Myers

(1977) showed that discrepancies in goals between debt holders and shareholders

could lead to underinvestment. As a result, higher leverage might as well lead to

poorer corporate performance.

Summary of all capital structure theories is shown in Table 1:

Theory Relationship Causality

Modigliani and Miller (1963) Positive Performance affects debt

Trade-off Positive Performance affects debt

Pecking-Order Negative Performance affects debt

Pecking-Order Positive Debt affects performance

Signaling Positive Performance affects debt

Agency problem Negative Debt affects performance

Thus, theories provide quite alternative views on the relationship between leverage and firm

performance. This is when empirical studies are appealed to decide between them.

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Empirical evidence
All empirical studies on the relationship between leverage and firm performance can be

divided into two groups. Researchers from the first group consider leverage as the dependent

variable and try to seek for its determinants, including indicators of firm performance. The

second one looks at determinants of the firm performance, including leverage as one of

explanatory variables. We will design this study in accordance with the second group,

considering leverage as the choice variable for maximizing the firm value.

Berger and Bonaccorsi di Patti (2006) examined the dualistic relationship between leverage

and firm performance for the U.S. banking industry, using a parametric measure of profit

efficiency as an indicator to measure agency costs. They confirmed the agency cost theory:

higher leverage is associated with better firm performance. Margaritis and Psillaki (2007)

considered a similar relationship for a sample of New Zealand small and medium sized

enterprises using distance functions as a measure of firm performance, and also found support

for the agency cost theory.

Many recent studies addressed influence of leverage on firm performance for developing

markets. Majumdar and Chhibber (1999) showed, that in India leverage was negatively

related to firm performance measured as profitability. Pushner (1995) found negative effect

of leverage on firm performance measured as the total factor productivity (TFP) in Japan.

Nickell et al (1997) and Nickell and Nikolitsas (1999) in their studies for the United

Kingdom observed some positive relationship between indebtedness and TFP. Booth et al.

(2001) in their study of 10 developing countries found negative relation between leverage and

firm performance. Onaolapo and Kajola (2010) found a significant negative impact of

leverage on financial measures of firm performance in Nigeria.

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The idea that high leverage disciplines managers was initially associated with leveraged buy-

out (LBO) procedures, where it was noted that an increase in debt increases productivity. The

boom of LBO in the USA was followed be several studies on the post-LBO firm performance

(Lichtenberg and Siegel, 1990). Since LBO procedure implies an increase in debt-to-equity

ratio, researchers appealed to performance of firm after LBO. Palepu (1990) showed the

increase in operational efficiency of firms involved in leveraged buyouts. Kaplan (1989) and

Smith (1990) also considered leveraged buyouts and discovered the increase in return on

equity after LBO. Denis and Denis (1993) found the increase in return on equity in the firms

after leveraged recapitalization.

There were several empirical papers regarding Ukrainian practice. Myroshnichenko (2004),

Zheka (2010), and Talavera et al. (2011) considered leverage as dependent variable and

studied its determinants. They found that in Ukraine, the pecking order theory holds for short-

term financing, and the tradeoff theory holds for long-term financing (Myroshnichenko,

2004); observed leverage is not a desired leverage (Zheka, 2010), and financial frictions and

access to capital markets strongly affect the choice of debt maturity. Zheka (2010) also

showed that profitability has no effect on leverage. Grechaniuk (2009) studied the influence

of CEO gender on firms leverage controlling on ROA and discovered that ROA negatively

affects debt-to-equity ratio. All these studies aim to find out which factors affect a particular

choice of debt level. Still, to the author’s knowledge, there are no studies about the effect of

leverage on firm performance controlling for other performance determinants. Besides, it is

worth differentiating long- and short-term debt as those with different risk-return profiles, as

well as investigating the relationship between leverage and firm performance across different

industries.

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To sum up, there is no consensus on the relation of leverage and firm performance, and

further research is called for. This paper provides empirical evidence for existing capital

structure theories and thus contributes to the abovementioned literature.

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 OBJECTIVE OF STUDY

 To comparatively analyze the capital structural position of SBI and ICICI bank.

 To study the financial performance of SBI and ICICI Bank.

 To compare the financial performance of SBI and ICICI Bank.

 To make company analysis & determine company having an effective capital mix.

 To determine the effect of changes in capital structure over the period of time on the

company’s performance.

 To find out the cost of different financial sources of project financing.

 To know the portion of debt and equity in capital structure.

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 RESEARCH METHODOLOGY

Meaning of research
Research in common parlance refers to a search of knowledge. One can also define research

as a scientific & systematic search for pertinent information on a specific topic. Infact,

research is an art of scientific investigation. The advanced learner dictionary of current

English lays down the meaning of research as a’ careful investication as inquiry especially

through search for new facts in any branch of knowledge.’ Redman &Mory define it as a

‘systematic effort to gain knowledge’.

Research Design
A Research design is a framework or a blueprint for conducting the research project. It

specifies the details of the procedure necessary for obtaining the information needed to

structure or to solve the research problem.

The type of research design used by me is Qualitative research here I focused on the

understanding & expectations of the respondents. A major chunk of my research was based

on the conclusive research design.

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 DATA COLLECTION TECHNIQUES

There are mainly two broad classification of the data collection technique that are as follows:

Secondary source:
The data in the secondary source is already published and is in the form of government

publication , census, personnel record, client history and service records.

My source of data collection is also through the secondary data available from the site of

sbi&icici banks.

Primary data:

The data which is not been published at all and is used by the researcher the very first time is

known as the primary data.

The major part of my project report is based on the primary data which

I have collected through the questionnaires & personal interviews from the respondents.

Sampling technique:

I took the technique of random sampling as well as non random sampling technique. In

random sampling I did not asked the respondents that in which bank do you have an account

but in non random sampling I asked them that do they use online banking and then I made

them to fill the questionnaire. Sample size: 50

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Ratio Analysis:

A ratio analysis is a quantitative analysis of information contained in a company’s financial

statements. Ratio analysis is used to evaluate various aspects of a company’s operating and

financial performance such as its efficiency, liquidity, profitability and solvency.

Liquidity Ratios:

Liquidity ratios measure a company's ability to pay off its short-term debts as they come due

using the company's current or quick assets. Liquidity ratios include current ratio, quick ratio,

and working capital ratio.

Solvency Ratios:

Also called financial leverage ratios, solvency ratios compare a company's debt levels with its

assets, equity, and earnings to evaluate whether a company can stay afloat in the long-term by

paying its long-term debt and interest on the debt. Examples of solvency ratios include debt-

equity ratio, debt-assets ratio, and interest coverage ratio.

Profitability Ratios:

These ratios show how well a company can generate profits from its operations. Profit

margin, return on assets, return on equity, return on capital employed, and gross margin ratio

are examples of profitability ratios.

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Efficiency Ratios:

Also called activity ratios, efficiency ratios evaluate how well a company uses its assets and

liabilities to generate sales and maximize profits. Key efficiency ratios are the asset turnover

ratio, inventory turnover, and days' sales in inventory.

Coverage Ratios:

These ratios measure a company's ability to make the interest payments and other obligations

associated with its debts. Times interest earned ratio and debt-service coverage ratio are two

examples of coverage ratios.

Market Prospect Ratios:

E.g. Dividend yield, p/e ratio, earnings per share, and dividend payout ratio. These are the

most commonly used ratios in fundamental analysis. Investors use these ratios to determine

what they may receive in earnings from their investments and to predict what the trend of a

stock will be in the future. For example, if the average p/e ratio of all companies in the s&p

500 index is 20, with the majority of companies having a p/e between 15 and 25, a stock with

a p/e ratio of 7 would be considered undervalued, while one with a p/e of 50 would be

considered overvalued. The former may trend upwards in the future, while the latter will

trend downwards until it matches with its intrinsic value.

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 Common Size Income Statement

Common size income statement is an income statement in which each account is expressed as

a percentage of the value of sales. This type of financial statement can be used to allow for

easy analysis between companies or between time periods of a company. Common size

income statement analysis allows an analyst to determine how the various components of the

income statement affect a company's profit.

Example and Usage:

Company A has an income statement with four different line items, revenue, cost of goods

sold, salaries and net income. Net income is calculated by subtracting the cost of goods sold

and salaries from revenue. If revenue is $100,000, cost of goods sold is $50,000, and salaries

are $25,000, then net income is $25,000. The common size version of this income statement

is to divide each line item by revenue, or $100,000. Revenue divided by $100,000 is 100%.

Cost of goods sold divided by $100,000 is 50%. Salaries divided by $100,000 is 25%, and net

income divided by $100,000 is also 25%. This tells us that the cost of goods sold takes up

50% of revenues as opposed to 25% of revenues like salaries. Large changes in the

percentage of revenue used by different expense categories over a given period of time could

be a sign that the business model is changing.

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Comparative Balance Sheet

In order to analyze the financial statementsfor a business, more information is needed from

the balance sheets. The owner must look at the last two years of the firm's balance sheets and

compare the differences between the two in order to develop the Statement of Cash Flows.

The table below gives you sample Comparative Balance Sheets for a firm. With sample

information from an income statement and the information from these comparative balance

sheets, you can develop your Statement of Cash Flows.

The business owner must also have information

from both the income statement. The primary information needed from the income statement

is net income (or loss) and depreciation as both are considered cash flows to the firm.

Analysis of Comparative Balance Sheets

In order to analyze your comparative balance sheets and develop your Statement of Cash

Flows, you first consider any increases or decreases in your current asset and current liability

accounts between the two years of balance sheet information.

Here's the rule you should always remember when developing your Statement of Cash Flows:

 Increases in current asset accounts, decrease cash.

 Decreases in current asset accounts, increase cash.
 Increases in current liability accounts, increase cash.
 Decreases in current liability accounts, decrease ca

35
 Trend Analysis

WHAT IT IS:
Trend analysis is a technical analysis of the movement of a stock based on past performance.

HOW IT WORKS (EXAMPLE):

A trend analysis is a method of analysis that allows traders to predict what will happen with

a stock in the future. Trend analysis is based on historical data about the stock's performance

given the overall trends of the market and particular indicators within the market.

Trend analysis takes into account historical data points for a stock and, controlling for

other factorslike the general changes in the sector, market conditions, competition for

similar stocks, it allows traders to forecast short, intermediate, and long term possibilities for

the stock.

36
 DATA ANALYSIS

PERCENTAGE OF RESPONDENTS HAVING ACCOUNT IN SBI & ICICI BANK

Sales

SBI
ICICI
OTHER

COMMENT:
In the above pie chart there are 38% of the respondents who use SBI Bank

online services & 35%f the respondents use ICICI Bank online services. The respondents

who use other online bank services are 27% which shows that there are more customers of

SBI Bank.

37
INDUCED THE RESPONDENTS TO BEGIN E-BANKING

300%

250%

200%

150%

100%

50%

0%
EASY & QUICK

EASY & QUICK Series 2 Series 3 Series 4 Series 5 Series 6

38
COMPARISON OF CAPITAL STRUCTURE OF SBI AND ICICI

The capital structure which maximize the value of firm, minimize the cost of capital is called

optimum capital structure.

BANK SBI ICICI

YEAR/SOURCE Equity DEBT EQUITY DEBT

2017 370.91 48,034.41 479.81 39,438.99

2018 362.07 45,670.55 501.30 45,213.56

Interpretation:
It is clear from the study that equity used by ICICI is more than SBI. Debt used by SBI more

than ICICI. Debt & Equity used by ICICI Bank at increasing rate, and Debt & Equity used by

SBI bank at decreasing rate.

COMPARISON OF EQUITY CAPITAL:

Equity capital is owner’s capital and most costly source of finance but least risky then the

preference and debt source of finance.

Interpretation:
It is clear from the study that equity used by ICICI Bank is more than SBI Bank. The

equity is used by ICICI at increasing rate whereas used by SBI at decreasing rate. Equity

capital is owners capital it means a good indicator for health of an organization.

39
COMPARISON OF DEBT
Debt are least costly source of finance because the rate of interest

is lower than the rate of dividend and interest paid on debenture is deducted from the profit

while calculating the taxes but these are most risky.

Interpretation:
It is clear from the study that debt used by SBI is more than ICICI. The debt used by SBI at

decreasing rate & by ICICI at increasing rate.

SBI
Debt-Equity Ratio = Debt ÷ Equity
2017 48034.41/370.91 129.5

2018 45670.55/362.07 126.13

ICICI
Debt-Equity Ratio = Debt ÷ Equity

2017 39438.99/479.81 82.19

2018 45213.56/501.30 90.19

40
It is clear from the study that Cost of equity of ICICI is more than SBI. On the basis of

study it is clear that cost of debt of ICICI is more than SBI for the year 2014 whereas cost

of debt of SBI is more than ICICI for the year 2015 and cost of debt is increasing and cost

of equity is increasing more in SBI as compared to ICICI Bank.

41
 Analysis of Debt Equity Ratio

 Indicates the relationship between loan and the net worth of the company,

which is known as gearing.

 If the proportion of the debt to the equity is low, a company is said to be low geared,

and vice-versa.

 A debt equity ratio of 2:1 is norm accepted. The higher the gearing, the more volatile

the return to the shareholders.

 Debt-Equity Ratio= Long Term Debt/ Shareholders funds or Net Worth

 SBI is emphasizing more on owned capital or net worth which is increasing.

 ICICI is also emphasizing more on owned capital or net worth which is increasing.

42
 TABLE-1 DEBT EQUITY RATIO OF SBI AND ICICI BANK.

YEAR STATE BANK OF INDIA ICICI BANK

Debt Rs. Equity rs. ratio Debt Rs. Equity RS. Ratio
carores carores carores carores
2013-14 410,687.30 27,644.09 14.856 203,605.08 22,555.99 9.02

2014-15 475,224.43 31,298.56 15.184 281,766.22 24,663.26 11.42

2015-16 589,131.35 49,032.66 12.015 310,079.48 46,820.21 6.62

2016-17 795,786.81 57,947.70 13.733 285,671.51 49,883.02 5.72

2017-18 907,127.83 65,949.20 13.755 296,280.17 51,668.37 5.73

Compound 120.88% 138.56% 45.51% 128.84%

growth
rate

Debt equity ratio of SBI and ICICI bank

16

14

12

10

8 sbi
1cici
6

0
2013-14 2014-15 2015-16 2016-17 2017-18

43
Analysis of Funded Debt to Total Capitalization Ratio
 The funded debt to total capitalization ratio establishes the relationship

between the long term fund raised from outsiders and total long term

funds available from the owners of the business.

 Explains the capital structure position of the company.

 Normally the smaller the ratio the better it will be.

 Total capitalization = Total Debt + Equity.

 The dependence of SBI on outsider’s long term fund is stable, so high, which is the

financial burden on Firm. Firm is more dependent on debt as a source of fund.

 The dependence of ICICI on outsider’s long term fund is stable, so high, which is the

financial burden on Firm. Firm is more dependent on debt as a source of fund.

44
TABLE-2 TOTAL CAPITALIZATION RATIO OF SBI AND ICICI
BANK
YEAR STATE BANK OF INDIA ICICI
Funded Total Ratio Funded Total Ratio
Debt Rs. Capitalization Debt Rs. Capitalization
Crores RS. Crores Crores RS. Crores

2013-14 410,687.30 438,331.39 0.937 203,605.08 226,161.07 0.900

2014-15 475,224.43 506,522.99 0.938 281,766.22 306,429.48 0.919

2015-16 589,131.35 638,164.01 0.923 310,079.48 356,899.66 0.868

2016-17 795.786.81 853,734.51 0.932 285,671.51 335,554.53 0.851

2017-18 907.127.83 973,077.03 0.9325 296,280.17 347,898.54 0.851

Compound 120.88% 120.99% 45.514% 53.82%

growth
rate

45
GRAPH 2: TOTAL CAPITALIZATION OF SBI AND ICICI BANK

0.96
0.94
0.92
0.9
0.88 SBI
0.86 ICICI
0.84
0.82
0.8
2013-14 2014-15 2014-15 2016-17 2017-18

Analysis of Solvency Ratio

 It shows the relationship between total liabilities to outsiders to

total assets.

 It provides a measurement of how likely a company will be continue

meeting its debt obligations.

 Lower ratio i.e. Outsiders liabilities in the total capital of company the better

is the long term solvency of the company.

 Both the banks have greater dependence on external sources of finance

thereby resorting to the favorable financial device of trading on equity.

46
 .TABLE 3: Solvancy Ratio Of SBI And ICICI Bank

YEAR STATE BANK OF INDIA ICICI BANK

External Total Ratio External Total AssestsRs. Ratio

Liabilities Rs. AssestsRs. Liabilities Crores

Crores Crores Rs. Crores

2013-14 410,687.30 493,869.54 0.832 228,832.96 251,388.95 0.910

2014-15 475,224.43 566,565.24 0.839 319,994.86 344,658.11 0.928

2015-16 589,131.35 721,526.32 0.817 352,974.87 399.795.07 0.882

2016-17 795,786.81 964,432.08 0.825 329,417.94 379,300.96 0.868

2017-18 907,127.83 1053,413.74 0.861 311,781.35 363,3699.71 0.857

COMPOUND 120.88% 113.09% 36.24% 44.55%

GROWTH

RATE

47
GRAPH 3 Solvancy Ratio Of SBI And ICICI Bank
0.94

0.92

0.9

0.88

0.86
SBI
0.84 ICICI

0.82

0.8

0.78

0.76
2013-14 2014-15 2015-16 2016-2017 2017-18

48
Analysis of Interest Coverage Ratio
 The coverage ratio establishes relationship between fixed claims & the

firm’s profitability out of which these claims are to be paid.

 This measure tries to relate profitability to level of debt payments to

assess the degree of comfort with which the firm can meet these

payments.

 It helps to analyze the firm’s ability to service the fixed interest claim.

 Interest Coverage Ratio= EBIT/Interest.

 Trend of SBI is highly volatile while that of ICICI Bank is quite stable.

 SBI has earnings increased the interest to be paid whereas ICICI Bank

has earnings decreased due to the interest paid .

 SBI having balance earning to be paid to shareholders thereby increases

their returns. While ICICI Bank having balance earning to be paid to

shareholders thereby decreases their returns.

49
 TABLE 4: Interest Coverage Ratio of SBI And ICICI Bank

YEAR STATE BANK OF INDIA ICICI BANK

EBIT FIXED INT. RATIO EBIT FIXED INT. RATIO

RS.CRORES CHARGES RS.CRORES CHARGES
RS. CRORES RS. CRORES

2013-14 26,996.65 20,159.29 1.339 2540.07 9597.45 0.264

2014-15 31,061.19 23,436.82 1.325 3110.22 16,358.50 0.190

2015-16 42,367.98 31,929.08 1.327 4157.73 23,484.24 0.177

2016-17 57,095.93 42,915.29 1.330 3758.13 22,725.93 0.165

2017-18 61,248.58 47,322.48 1.294 4024.98 17,592.97 0.228

COMPOUND 126.98% 134.74% 58.45% 83.30%

GROWTH
RATE

50
GRAPH 4: Interest Coverage Ratio Of SBI And ICICI Bank

1.6

1.4

1.2

0.8 SBI
ICICI
0.6

0.4

0.2

0
2013-14 2014-15 2015-16 2016-17 2017-18

51
 Analysis of Capital Gearing Ratio
 It is the relationship between the loan and net worth of the company.

 The firm SBI is low levered. For a firm like SBI being low geared is good. It means

firm is taking advantage of it by increasing the return of shareholders.

 The firm ICICI is low levered. For a firm like ICICI being low geared is good. It

means firm is taking advantage of it by increasing the return of shareholders.

TABLE 5: Capital Gearing Ratio of SBI And ICICI Bank

YEAR STATE BANK OF INDIA Icici bank

Equity RS. Funded debt Ratio Equity Funded debt Ratio

crores RS. crores RS. RS. crores
crores

2013-14 27,644.09 410,687.30 0.067 22,555.99 203,605.08 0.110

2014-15 31,298.56 475,224.43 0.066 24,663.26 281,766.22 0.087

2015-16 49,032.66 589,131.35 0.083 46,820.21 310,079.48 0.150

2016-17 57,947.70 795,786.81 0.073 49,883.02 285,671.51 0.174

2017-18 65,949.20 907,127.83 0.073 51,618.37 296,280.17 0.174

Compound 138.56% 120.88% 128.84% 45.51%

growth rate

52
GRAPH 5: Capital Gearing Ratio Of SBI And ICICI Bank

0.2

0.18

0.16

0.14

0.12

0.1 SBI
ICICI
0.08

0.06

0.04

0.02

0
2013-14 2014-15 2015-16 2016-17 2017-18

53
Analysis of Earnings per share (EPS) Ratio

 Indicates whether or not the form’s earning power on per share basis has changed

over that period.

 Earnings per share (EPS) Ratio = (NPAT− Preference dividend) / No. Of equity

shares (common shares)

 EPS simply shows the profitability of the firm on a per share basis.

 It does not reflect how much is paid as dividend and how much is retained in the

business.

 As a profitability index, it is a valuable and widely used ratio.

 Both the banks have good earning available to the shareholders, reason being high use

of the debt in SBI and high use of the owned fund in ICICI Bank. Increase use of debt

and owned fund has reduced the overall cost of capital of SBI and ICICI Bank

respectively and improved earnings of shareholders which is very good indicator of

sound capital structure.

54
 TABLE 6 : Earning Per Share Of SBI And ICICI Bank

STATE BANK OF INDIA ICICI BANK

YEAR Earning per share Percentag Earning per share Percenta
e in ge in
proportion proportio
to face n to face
value value

2013-14 83.73 (Face value 10) 837.30 20.55 (Face value 10) 285.50

2014-15 86.29 (Face value 10) 862.90 34.59 (Face value 10) 345.90
2015-16 106.56 (Face value 10) 1065.60 `37.37 (Face value 10) 373.70

2016-17 143.67 (Face value 10) 1436.70 33.76 (Face value 10) 337.60

2017-18 144.37 (Face value 10) 1443.70 36.10 (Face value 10) 361.00

55
(Face
1600
value 10)

1400

1200

1000

800 SBI
ICICI

600

400

200

0
2013-14 2014-15 2015-16 2016-17 2017-18

56
 FINANCIAL PERFORMANCE
CREDIT DEPOSIT RATIO:-
Credit-Deposit Ratio is the proportion of loan-assets created by a bank from the deposits

received. Credits are the loans and advances granted by the bank. In other words it is the

amount lent by the bank to a person or an organization which is recovered later on. Interest is

charged from the borrower. Deposit is the amount accepted by bank from the savers and

interest is paid to them.

TABLE 1.1 - CREDIT DEPOSIT RATIO

(percentage)

YEAR SBI ICICI

2013-14 77.57 84.99

2014-15 74.97 91.44

2015-16 73.56 90.04

2016-17 76.32 87.81

2017-2018 78.50 92.23

MEAN 76.184 89.302

CGR 1.19 8.51

57
Credit deposit ratio
100

90

80

70

60

50 SBI
40 ICICI

30

20

10

0
2013-14 2014-15 2015-16 2016-17 2017-18

Table 1.1 depicts that over the course of five financial periods of study the mean of Credit

Deposit Ratio in ICICI was higher (89.302%) than in SBI (76.184%). But the Compound

Growth Rate in SBI lowers 1.19% than in ICICI (8.51%). In case of SBI the credit deposit

ratio was highest in 2011-12 and lowest in 2009-10. But in case of ICICI credit deposit ratio

was highest in 2011-12 and lowest in 2007-08. This shows that ICICI Bank has created more

loan assets from its deposits as compared to SBI.

58
INTEREST EXPENSES TO TOTAL EXPENSES:
Interest Expenses to Total Expenses reveals the

expenses incurred on interest in proportion to total expenses. Banks accepts deposits from

savers and pay interest on these accounts. This payment of interest is known as interest

expenses. Total expenses include the amount spent in the form of staff expenses, interest

expenses, overhead expenses and other operating expenses etc.

TABLE 1.2:- INTEREST EXPENSES TO TOTAL EXPENSES

YEAR SBI ICICI

2013-14 61.85 66.135

2014-15 63.27 64.10

2015-16 61.62 60.71

2016-17 54.93 60.70

2017-18 57.90 65.19

MEAN 59.9 63.36

CGR -6.38 -1.46

59
FIG.NO.1.2:- INTEREST EXPENSES TO TOTAL EXPENSES

70

60

50

40

30 SBI
20 ICICI

10

0
2013-14 2014-15 2015-16 2016-17 2017-18 MEAN CGR
-10

-20

The table 1.2 shows that the ratio of interest expenses to total expenses in SBI was highly

volatile it increased from 61.85 per cent to 63.27 per cent during the period 2012-13 to 2013-

14. Afterwards it was decreased till 2014-15 and then again increased to 57.90 per cent. The

ratio of interest expenses to total expenses in ICICI was also decreased from 66.135 per cent

to 64.10 per cent during the period 2012-13 to 2013-14. It remain stable from 2014-15 to

2010-2011 but Further it was increased to 65.19 per cent in 2016-17 . It has been found that

the share of interest expenses in total expenses was higher in case of SBI as compared to

ICICI, which shows that people preferred to invest their savings in SBI than ICICI.

60
INTEREST INCOME TO TOTAL INCOME:-
Interest Income to Total Income shows the proportionate contribution of interest income in

total income. Banks lend money in the form of loans and advances to the borrowers and

receive interest on it. This receipt of interest is called interest income. Total income includes

interest income, non-interest income and operating income.

TABLE 1.3:-INTEREST INCOME TO TOTAL INCOME IN

SBI AND ICICI

YEAR SBI ICICI

2013-14 83.89 77.61

2014-15 83.40 79.29

2015-16 82.58 77.29

2016-17 84.49 80.92

2017-18 88.12 78.84

MEAN 84.49 4.26

61
FIG.NO.1.3 INTEREST INCOME TO TOTAL INCOME IN SBI
AND ICICI
(IN PERCENTAGE)

90

88

86

84

82
SBI
80
ICICI
78

76

74

72
2013-14 2014-15 2015-16 2016-17 2017-18

The table 1.3 represents that the ratio of interest income to total income in SBI and ICICI

both is quite stable and volatile over the years. The growth rate of SBI is 5.04 while that of

ICICI is 4.26. Thus, the proportion of interest income to total income in SBI was higher than

that of ICICI, which shows that people preferred SBI to take loans and advances.

62
OTHER INCOME TO TOTAL INCOME:-
Other income to total income reveals the

proportionate share of other income in total income. Other income includes non-interest

income and operating income. Total income includes interest income, non-interest income

and operating income.

TABLE 1.4:-OTHER INCOME TO TOTAL INCOME IN SBI

AND ICICI

YEAR SBI ICICI

2013-14 16.10 22..38

2014-15 16 20.70

2015-16 17 22.09

2016-17 16 21.48

2017-18 11 19.07

MEAN 15.22 21.44

CGR -31.6 -14.7

63
FIG.NO.1.4 OTHER INCOME TO TOTAL INCOME IN SBI
AND ICICI

25

20

15

SBI
10 ICICI

0
2013-14 2014-15 2015-16 2016-17 2017-18

The table 1.4 shows that the ratio of other income to total income was decreased from 16.10

per cent in 2007-08 to 11.00 per cent in 2011-12 in case of SBI. However, the share of other

income in total income of ICICI was also decreased from 22.38 per cent in 2007-08 to 19.07

64
per cent 2011-12. The table shows that the ratio of other income to total income was

relatively higher in ICICI (21.44%) as compared to SBI (15.22%) during the period of study.

NET PROFIT MARGIN:-

Net Profit Margin reveals the financial results of the business activity and efficiency of

management in operations. The table 5.8 shows the net profit margin in SBI and ICICI during

the Period 2005-06 to 2012--17.

TABLE-1.5:-NET PROFIT MARGIN IN SBI AND ICICI

YEAR SBI ICICI

12.64 11.81
2013-14

2014-15 13.11 11.45

2015-16 10.54 13.64

2016-17 8.55 17.52

2017-18 9.73 17.45

MEAN 10.91 14.37

CGR 23.02 47.7

65
FIG. NO.1.5 NET PROFIT MARGIN IN SBI AND ICICI

20

18

16

14

12

10 SBI
8 ICICI

0
2013-14 2014-15 2015-16 2016-17 2017-18

The table 1.5 reveals that the ratio of net profits to total income of ICICI was varied from

11.81 per cent to 17.45 percent whereas in case of SBI it is not stable. It increased to 13.11

percent from 12.64 percent in 2008-09 then further decreased to 10.54 percent in 2009-10 and

8.55 percent in 2010-11 and finally increased to 9.73 percent in 2011-12 during the period of

5 years of study. However, the net profit margin was higher in ICICI (14.37%) as compared

to SBI (10.91%) during the period of study. But it was continuously decreased from 2007-08

to 2011-12 in ICICI. Thus, the ICICI has shown comparatively lower operational efficiency

than SBI.

66
NET WORTH RATIO:-
Net worth Ratio is used for measuring the overall efficiency of a firm.

This ratio establishes the relationship between net profit and the proprietor‟s funds.

TABLE 1.6 NET WORTH RATIO

YEAR SBI ICICI

2013-14 13.70 8.94

2014-15 15.74 7.58

2015-16 13.91 7.79

2016-17 12.84 9.35

2017-18 14.36 10.70

MEAN 14.11 8.87

CGR 4.87 19.68

67
FIG.NO.1.6 NET WORTH RATIO

18

16

14

12

10
SBI
8
ICICI
6

0
2013-14 2014-15 2015-16 2016-17 2017-18

It is clear from the table 1.6 that the net worth ratio of SBI was increased from 13.70 per cent

to 14.36 per cent during 2012-13 to 2014-15, and decreased in 2012-12 and 2014-2015.

Whereas the ratio was increased from 8.94 per cent to 10.70 per cent in ICICI. The table

showed that the net worth ratio was higher in SBI (14.11%) as compared to ICICI (8.87%)

during the period of study, which revealed that SBI has utilized its resources more efficiently

as compared to ICICI.

68
GROWTH OF PROFIT:-
Net profit Ratio is used for measuring the profitability of the firm. It is

calculated by dividing net profit by net sales multiplied by 100. It establishes the relationship

between the net profit and sales.

TABLE 1.6 GROWTH OF PROFIT IN SBI AND ICICI

(IN CARORE)
YEAR SBI ICICI

PROFIT % PROFIT % CHANGE

CHANGE

2013-14 6729 ……… 4157.73 ……….

2014-15 9121 35.5% 3758.13 -9.61

2015-16 9161 49% 4024.98 7.10

2016-17 8265 -9.8% 5151.38 27.9

2017-18 11707 42% 6465.26 25.50

MEAN 8996.6 4711.49

CGR 73.97 55.49

69
FIG.NO.1.6 GROWTH OF PROFIT IN SBI AND ICICI
14000

12000

10000

8000
SBI
6000 ICICI

4000

2000

0
2013-14 2014-15 2015-16 2016-17 2017-18

The table 1.8 highlights that the mean value of net profit was higher in SBI (Rs. 8996.6
crores) as compared to that in ICICI (Rs. 4711.9 crores) during the period of study. Further
the growth rate of Net Profits was also higher in SBI (73.97%) than that in ICICI (55.49%)
during the study period. The table also shows that the annual growth rate of profit in SBI was
highest in the year 2014-15 and was negative (-9.8%) in the year 2010-11. In ICICI, the
annual growth rate of profit was highest in the year 2017-18(27.9%) and was negative in the
year 2013-14 (-9.61%).

70
TOTAL INCOME:-
The total income indicates the rupee value of the income earned during a period. The higher
value of total income represents the efficiency and good performance.

TABLE 1.7 GROWTH IN TOTAL INCOME OF SBI AND ICICI

YEAR SBI ICICI

INCOME %CHANGE INCOME %CHANGE

2013-14 58,348.74

……….. 39,667.19 …………

2014-15 39,210.31 -1.15%

76,479.78 31%

2015-16 85,962.07 12.3% 32,999.36 -15.8%

2016-17 96,329.45 12.06% 33,082.96 0.25%

25.4% 41,450.75 25.2%

2017-18 120,872.90

MEAN 87,598.58 37282.144

CGR 107.15 4.49

71
FIG.NO.1.7 GROWTH IN TOTAL INCOME OF SBI AND ICICI

140,000.00

120,000.00

100,000.00

80,000.00
SBI
60,000.00 ICICI

40,000.00

20,000.00

0.00
2013-14 2014-15 2015-16 2016-17 2017-18

The table 1.9 highlights that the mean value of total income was higher in SBI (Rs. 87,598.58

corers) as compared to that in ICICI (Rs. 37282.114 corers) during the period of study.

However the rate of growth regarding total income was higher in SBI (107.15 %) than in

ICICI (4.49 %) during the period of study.

72
TOTAL EXPENDITURE:-
The total expenditure reveals the proportionate share of total expenditure

spent on the development of staff, interest expended and other overheads. The higher value of

total

TABLE 1.8:- TOTAL EXPENDITURE OF SBI AND ICICI

( CRORES)

SBI ICICI

YEAR

EXPENDITURE % CHANGE EXPENDITURE % CHANGE

2013-14

51,619.622 ……….. 35,509.47 ………

2014-15 35,452.17 0.16%

67,358.55 30.4%

2015-16 76.796.02 14.01% 28,974.37 -18.2%

2016-17 88,959.12 15.83% 257.931.58 -3.59%

2017-18
109,186.99 22.73% 34,985.50 25.25%

MEAN 78,784.06 32,570.61

73
FIG.NO.1.8 TOTAL EXPENDITURE OF SBI AND ICICI

120,000.00

100,000.00

80,000.00

60,000.00 SBI
ICICI
40,000.00

20,000.00

0.00
2013-14 2014-15 2015-16 2016-17 2017-18

The table 1.8 discloses that the mean value of total expenditure was higher in SBI (Rs.

78,784.06 crores) as compared to that in ICICI (Rs. 32570.61 crore) during the period of

study. But the rate of growth regarding expenditure in ICICI was (-1.47 %) than that in SBI

(111.52%) during the same period. It is clear that ICICI is successful in decreasing their total

expenditure as compared to SBI. The table also highlights that the annual growth rate of

expenditure in SBI was highest (30.04) in the year 2008-09 and was lowest (14.01) in the

year 2009-10. In ICICI, the annual growth rate of expenditure was negative in the year 2009-

10 and 2010-11 i.e. (-18.20) and (-3.59) respectively. Hence it is clear that ICICI is more

efficient as compared to SBI in terms of managing expenditure.

74
ADVANCES:-
Advances are the credit facility granted by the bank. In other words it is the amount borrowed
by a person from the Bank. It is also known as „Credit‟ granted where the money is disbursed
and recovery of which is made later on.

TABLE 1.9- TOTAL ADVANCES OF SBI AND ICICI

( IN CRORES )

YEAR

SBI ICICI
ADVANCES % CHANGE ADVANCES % CHANGE

2013-14 416,768.20 ……….. 225,616.08 ……..

2014-15 542,503.20 30.16% 218,310.85

2015-16 631,914.15 16.48% 181,205.60 -3.25%

2016-17 756,719.45 19.75% 216,365.90 -16%

2017-18 867,578.89 14.6% 253,727.66 19.40%

MEAN 646,578.89 224,645 17.26%

CGR 108.16 12.45

75
FIG.NO.1.9- TOTAL ADVANCES OF SBI AND ICICI

1,000,000.00

900,000.00

800,000.00

700,000.00

600,000.00

500,000.00 SBI
400,000.00 ICICI

300,000.00

200,000.00

100,000.00

0.00
2013-14 2014-15 2015-16 2016-17 2017-18

Table 1.9 presents that the mean of Advances of SBI was higher (646,578.89) as compared to

mean of Advances of ICICI (224,645). Rate of growth was also higher in SBI (108.16 %)

than in ICICI (12.45%). Table also shows the per cent Change in Advances over the period of

5 years. In case of SBI Advances were continuously increased (with a decreasing trend) over

the period of study. However Advances in ICICI were decreased till 2013-14 but these were

increased in the subsequent years.

76
DEPOSITS:-
Deposit is the amount accepted by bank from the savers in the form of current

deposits, savings deposits and fixed deposits and interest is paid to them

TABLE 1.10-TOTAL DEPOSITS OF SBI AND ICICI

( IN CRORES)

YEAR SBI ICICI

DEPOSITS % DEPOSITS % CHANGE
CHANGE

2013-14 537,403.94 ………. 244,431.05 ………..

2014-15 742,073.13 38.08% 218,347.82 -10.6%

2015-16 804,166.23 8.36% 202,016.60 -7.40%

2016-17 933,932.81 16.14% 225,602.11 11.6%

2017-18 104,647.36 11.7% 255,499.96 13.2%

MEAN 812.234 229,179

FIG. NO.1.10:- TOTAL DEPOSITS OF SBI AND ICICI

77
 1,000,000.00

900,000.00

800,000.00

700,000.00

600,000.00

500,000.00 SBI
400,000.00 ICICI

300,000.00

200,000.00

100,000.00

0.00
2013-14 2014-15 2015-16 2016-17 2017-18

Table 1.10 presents that the mean of Deposits of SBI was higher (812,234) as compared to

mean of deposits of ICICI (229,179%). However the rate of growth was higher in SBI

(94.20%) than that in ICICI (4.52%) during the period of study. Table also shows the per cent

Change in Deposits over the period of 5 years. In case of SBI Deposits were continuously

fluctuating over the period of study. However deposits in ICICI were decreased in 2014-15

and 2013-14 but these were increased in the year 2016-17 and 2017-18 with 11.6% and

13.2% respectively.

78
 FINDINGS

 The average Net Profit Ratio of SBI is 7.48% and ICICI bank is 16.04% which

implies that the Net Profit Ratio of ICICI bank is 8.56, which is more than that of the

SBI.

 The average Operating Profit Ratio of SBI is 22.26% and that of ICICI bank is

29.61% which implies that the Operating Profit Ratio of ICICI 7.35% which is more

than that of SBI bank.

 The average Net worth Ratio of SBI is 10.20% and that of ICICI bank is 8.046%

which implies that the average net worth Ratio of SBI i.e. 2.154% more than the

ICICI bank.

 The average Earnings per Share of SBI is 153.97 and ICICI bank is 74.56, which
implies that the Average Earnings per share of SBI is 79.41, which is more than that

of ICICI bank.

 The average Total Assets Turnover Ratio of SBI is 0.078 times and of ICICI bank is

0.087 times, which implies that the average Total Assets of SBI Bank is more than

that of the ICICI bank.

 The average Interest Expended to Interest Earned Ratio of SBI is 62.86% and that of
ICICI bank is 63.11%, which implies that the average interest Expended to Interest

Earned Ratio of ICICI bank is more than that of the SBI bank with 0.25%.

 The study found that the mean of Credit Deposit Ratio in ICICI was higher (89.302
%) than in SBI (76.184%).This shows that ICICI Bank has created more loan assets

from its deposits as compared to SBI.

79
 The share of interest expenses in total expenses higher in ICICI (63.36 %) as compare to SBI
(59.99 %) and the proportion of interest income to total income was higher in case of

SBI(84.49 % ) as compared to ICICI (78.84%), which shows that people prefer ICICI to

invest their savings and SBI to take loans & advances.

The ratio of other income to total incomewas relatively higher in ICICI (21.44 %) as
compared to SBI (15.22 %.

The Net Profit Margin of ICICI is higher (14.37 %) whereas in SBI it was (10.99 %),
which shows that ICICI has shown comparatively better operational efficiency than

SBI.

The growth rate of net profit is 73.97% in SBI which is higher than ICICI which is
55.49%. This shows that SBI performed well as compared to ICICI.

80
SUGGESTIONS:

 As Earnings per share (EPS) of ICICI bank is low as comparative to SBI. Therefore,
the ICICI bank needs to take some measures to increase its income over its

expenditure.

 Interest expended to interest earned ratio of SBI is less as comparative to ICICI. So,

SBI bank need to take some effectives steps in order to increase its more earning

capacity.

 Average net worth ratio of ICICI bank is less. Therefore, ICICI should increase its net
worth more as comparative to other banks.

 In private sector banks return on long term fund found poor as compared to public
sector banks. It is necessary for the private sector banks to utilize their long term fund

very effectively to generate enough return. So, as they can compete to public sector

banks.

In the case of higher debt, profitability will tend to decline. The reason behind this
may be due to the high interest bearing securities engaged in the total debt.

The return on equity for private sector banks is less than that of public sector banks.
So, researcher may suggest to private sector banks to improve their profitability. Thus

private sector banks are required to increase their profit after tax to satisfy the share

holders with adequate return.

81
CONCLUSIONS:-
The capital structure of a firm should be a balanced one and suitable to the companies`

operation. As a general rule, no investment project should be accepted where the rate of

return is less than the cost of capital. As far as banking industry in India concerned because of

higher growth rate and higher profitability, internally generated resource proved to be3 the

major source of finance. Taking the above said advantage the industry as a whole has also

tried to minimize the rating its total capital structure. This should be one of the major reasons

for, recession having a short run impact on banking industry. Pecking order theory by

Stewart C Myers and Nicolas Majluf in 1984 can be referred to in contest.

On the basis of study conclude that ICICI is better than SBI because it continue to focus

decreasing the cost of debt as compared to SBI

 ICICI have the better capital structure than SBI.

 Cost of debt of SBI is more than ICICI.

 Cost of equity of ICICI is more than SBI.

 Cost of equity of SBI&ICICI is increasing per year.

 Cost of debt of ICICI is increasing more as compared to SBI.

82
BIBLIOGRAPHY

Website

1. www.sbi.com

2. www.icici.com

3. www.moneycontrol.com

83
 APPENDIX

Personal Details:

Name: - _____________________________________________

Address: -
___________________________________________________________________________
_________________________________________________________________

Age: - __________________ contact no: - __________________

(1) Profile of respondent

(a) Businessman (b) Self employed

(c) Working professional (d) Government Service Employee

(2) Which bank would you prefer for personal loan?

(a) ICICI Bank

(b) SBI Bank

(c) Others

(3) What make you believe to take the personal loan from any particular bank?

(a) Advertisement (b) friend

(c) Family member (d) others

(4) What will you consider while taking loan?

(a) Interest rate (b) scheme

(c) Duration (d) others

(5) For what time interval you have taken loan?

(A) 1-2 years (b) 2-3 years

84
 (c) 3-4 years (d) more than 4 years

(6).Do you fully consider the policies of the bank regarding personal loan ?when taking
loan.

(a) Yes (b) no

(7).Rate the ICICI Bank among following on the basis of bank scheme and services?

(a) Good (b) very good (c) average (d) below average

(8).Rate the SBI bank among following on the basis of bank scheme and services?

(a) Good (b) very good (c) average (d) below average

(9).How will you see the formalities of the bank while taking the personal loan?
Comment

(10) On the basis of interest rate, services, image, scheme. Which bank you prefer
HDFC & SBI and why?

85