Project Synopsis

On
A Study on Financial Performance With Reference to ICICI Bank

SUBMITTED BY
Arshiya Naaz
160620672005

In Partial Fulfillment for the Award of the Degree Of

MASTER OF BUSINESS ADMINISTRATION

Department Of Business Management

Stanley College of Engineering and Technology for Women
Affiliated to Osmania University, Hyderabad
2020-2022
 INDEX

Introduction
Need for the Study
Objective of the Study
Scope of the Study
Research Methodology
Limitation of the Study
Introduction
The banking sector as service sector, and as one of the components of financial system, plays an
important role in the performance of any economy. Banking institutions in our country have been
assigned a significant role in financing the process of planned economic growth. The efficiency
and competitiveness of banking system defines the strength of any economy. Indian economy is
not an exception to this and banking system in India also plays a vital role in the process of
economic growth and development. The banking sector is the lifeline of any modern economy. It
is one of the important financial pillars of the financial system which plays a vital role in the
success / fail of an economy. 'The banking system is fuel injection system which spurs economic
growth by mobilizing savings and allocating them to high return investment. Research confirms
that countries with a well-developed banking system grow faster than those with a weaker one.
The banking system reflects the economic health of the country. The strength of the economy of
any country basically hinges on the strength and efficiency of the financial system, which, in
turn, depends on a sound and solvent banking system.

A sound banking system efficiently deploys mobilized savings in productive section and a
solvent banking system ensures that the bank is capable of meeting its obligation to the
depositors. The banking sector is dominant in India as it accounts for more than half the assets of
the financial sector.

The banking sector has shown a remarkable responsiveness to the needs of the planned economy.
It has brought about a considerable progress in its efforts at deposit mobilization and has taken a
number of measures in the recent past for accelerating the rate of growth of deposits. The
activities of commercial banking have growth in multi-directional ways as well as multi-
dimensional manner.
In a way, commercial banks have emerged as key financial agencies for rapid economic
development. By pooling the savings together, banks can make available funds to
specialized institutions which finance different sectors of the economy, needing capital for
various purposes, risks and durations.

By contributing to government securities, bonds and debentures of term –lending institutions in

the fields of agriculture, industries and now housing, banks are also providing these institutions
with an access to the common pool of savings mobilized by them, to that extent relieving them of
the responsibility of directly approaching the saver.

A Bank is a financial institution licensed to receive deposits and make loans. Two of the most
common types of banks are commercial/retail and investment banks. Depending on type, a bank
may also provide various financial services ranging from providing safe deposit boxes and
currency exchange to retirement and wealth management.

 Safeguard your cash

 Manage your finances – record keeping and budgeting
 Receive your paycheck quickly using direct deposit
 Facilitate financial transactions
 Insure your liquid assets
 Use debit and credit card services
 Earn interest
 Borrow loans
 Invest your money

This intermediation role of banks is particularly important in the early stages of economic
development and financial specification. A country like India, with different regions at
different stages of development, presents an interesting spectrum of the evolving role of banks,
in the matter of inter-mediation and beyond.
Financial performance is a subjective measure of how well a firm can use assets from its
primary mode of business and generate revenues. The term is also used as a general measure of
a firm's overall financial health over a given period.
Analysts and investors use financial performance to compare similar firms across the same
industry or to compare industries or sectors in aggregate.

 Financial performance tells investors about the general well-being of a firm. It's a
snapshot of its economic health and the job its management is doing.
  A key document in reporting corporate financial performance is Form 10-K, which all
public companies are required to publish annually.
 Financial statements used in evaluating overall financial performance include the
balance sheet, the income statement, and the statement of cash flows.
 Financial performance indicators are quantifiable metrics used to measure how well a
company is doing.
 No single measure should be used to define the financial performance of a firm.
Financial Performance

Financial performance is a complete evaluation of a company’s overall standing in categories

such as assets, liabilities, equity, expenses, revenue, and overall profitability. It is measured
through various business-related formulas that allow users to calculate exact details regarding a
company’s potential effectiveness.

 Trade creditors: interested in the liquidity of the firm (appraisal of firm’s liquidity)

 Bond holders: interested in the cash-flow ability of the firm (appraisal of firm’s capital
structure, the major sources and uses of funds, profitability over time, and projection of future
profitability)

 Investors: interested in present and expected future earnings as well as stability of these
earnings (appraisal of firm’s profitability and financial condition)

 Management: interested in internal control, better financial condition and better performance
(appraisal of firm’s present financial condition, evaluation of opportunities in relation to this
current position, return on investment provided by various assets of the company etc.)

 For internal users, financial performance is examined to determine their respective

companies’ well-being and standing among other benchmarks. For external users, financial
performance is analyzed to dictate potential investment opportunities and to determine if a
company is worth their while. Before calculations can be made on certain financial indicators
that establish overall performance, a financial statement analysis must occur.

There are many stakeholders in a company, including trade creditors, bondholders, investors,
employees, and management. Each group has its own interest in tracking the financial
performance of a company. The financial performance identifies how well a company
generates revenues and manages its assets, liabilities, and the financial interests of its stake-
and stockholders.
There are many ways to measure financial performance, but all measures should be taken in
aggregate. Line items, such as revenue from operations, operating income, or cash flow from
operations can be used, as well as total unit sales. Furthermore, the analyst or investor may
wish to look deeper into financial statements and seek out margin growth rates or any declining
debt. Six Sigma methods focus on this aspect.
Recording Financial Performance
A key document in reporting corporate financial performance, one heavily relied on by
research analysts, is Form 10-K. The Securities and Exchange Commission (SEC) requires all
public companies to file and publish this annual document. Its purpose is to provide
stakeholders with accurate and reliable data and information that provide an overview of the
company's financial health.
Independent accountants audit the information in a 10-K, and company management signs it
and other disclosure documents. As a result, the 10K represents the most comprehensive
source of information on financial performance made available to investors annually.
Financial analysts often assess the firm's production and productivity performance (total business
performance), profitability performance, liquidity performance, working capital performance,
fixed assets performance, fund flow performance and social performance. Various financial
ratios analysis includes

1. Working capital Analysis

2. Financial structure Analysis

3. Activity Analysis

4. Profitability Analysis

ICICI Bank
ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and
representatives of Indian industry. The principal objective was to create a development financial
institution for providing medium-term and long-term project financing to Indian businesses.
Until the late 1980s, ICICI primarily focused its activities on project finance, providing long-
term funds to a variety of industrial projects. With the liberalization of the financial sector in
India in the 1990s, ICICI transformed its business from a development financial institution
offering only project finance to a diversified financial services provider that, along with its
subsidiaries and other group companies, offered a wide variety of products and services.
As India’s economy became more market-oriented and integrated with the world economy,
ICICI capitalized on the new opportunities to provide a wider range of financial products and
services to a broader spectrum of clients. ICICI Bank was incorporated in 1994 as a part of the
ICICI group. In 1999, ICICI became the first Indian company and the first bank or financial
institution from non-Japan Asia to be listed on the New York Stock Exchange.
The issue of universal banking, which in the Indian context meant conversion of long-term
lending institutions such as ICICI into commercial banks, had been discussed at length in the late
1990s. Conversion into a bank offered ICICI the ability to accept low-cost demand deposits and
offer a wider range of products and services, and greater opportunities for earning non-fund
based income in the form of banking fees and commissions. After consideration of various
corporate structuring alternatives in the context of the emerging competitive scenario in the
Indian banking industry, and the move towards universal banking, the managements of ICICI
and ICICI Bank formed the view that the merger of ICICI would be the optimal strategic
alternative for both entities, and would create the optimal legal structure for ICICI group's
universal banking strategy.
The merger would enhance value for ICICI shareholders through the merged entity's access to
low-cost deposits, greater opportunities for earning fee-based income and the ability to
participate in the payments system and provide transaction-banking services. The merger would
enhance value for ICICI Bank shareholders through a large capital base and scale of operations,
seamless access to ICICI's strong corporate relationships built up over five decades, entry into
new business segments, higher market share in various business segments, particularly fee-based
services, and access to the vast talent pool of ICICI and its subsidiaries.
Functions and Activities of ICICI Bank
The objective of ICICI bank is to meet the needs of the private industry for long and medium-
term funds in the private sector. In general terms, the main functions are:
  Assistance in the formation, development, and modernization of business in the non-
public sector.
 Provides medium and long-term loans in rupees and foreign currencies.
 Underwrites new issues of debentures and shares.
 Provides equipment finance
 Promoting and supporting the expansion of markets and motivating private ownership of
the industrial investment.

The Activities of the ICICI Bank Include the Following

 A guaranteed loan from other private investment sources.
 Provides finance in the form of long term or medium-term loans or equity participation
 Provides funding for reinvestment by rapidly increasing investment.
 Underwriting and sponsorships on new issues of shares and debentures.

Need of the study

The financial performance of ICICI Bank has become a fascinating topic for conversation,
comment and debate. There is growing evidence of concern by the authorities on the declining
financial performance of the banking system due to unsecured loans and advances. The RBI
pressures on banks profitability and suggest various methods to reduce the unsecured loans and
advances, with changes in the social and economic objective of ICICI banks particularly of State
Bank of India and its associates. It becomes extremely over and finds remedial measures to
reduce the financial performance in the value of new banking philosophy. The approach of
policy makers towards financial performance has changed, with the result that low profits have
become a fact of life. Therefore, it is high time to concentrate on analysis of the financial
performance of ICICI Bank.

Research Methodology
In the present study, an attempt has been made to measure, evaluate and compare the financial
performance of ICICI Bank. The study is based on secondary data that has been collected from
annual reports of the respective banks, magazines, journals, documents and other published
information. The study covers the period of 5 years i.e. from year 2016 to year 2021. Ratio
Analysis was applied to analyze and compare the trends in banking business and financial
performance such as Credit Deposit Ratio, Interest Expenses to Total Expenses, Interest Income
to Total Income, Other Income to Total Income, Net Profit Margin, Net worth Ratio, Percentage
Change in Total Income, Percentage Change in Total Expenditure, Percentage Change in
Deposits, and Percentage Change in Advances. Mean, Standard Deviation, Standard Error,
Coefficient of Variance and Compound Annual Growth Rate (CGR) have been used to analyze
the trends in banking business profitability.

Scope of the Study

The study greatly giving attention on appraising any changes that perceived and revealed in the
financial performance of ICICI Bank. Furthermore, the study attempted to identify areas so as to
improve the financial performance of ICICI Bank. The study of financial performance helps to
understand the overall profitability position, liquidity position and long term financial
performance of the ICICI banks. The study helps to evaluate ICICI bank and provide suggestions
to the investors.

Period of the Study

The study covers the five years period from 2016 to 2021.
Objectives of the Study
 To study the financial performance of ICICI Bank.
 To compare the financial performance of ICICI Bank.
 To find out the Capital adequacy, Asset quality, Management efficiency, Earnings
and Liquidity of the ICICI bank
 To forecast and prepare the plans for future.

Limitations of the Study

 Due to constraints of time and resources, the study is likely to suffer from certain
limitations. Some of these are mentioned here under so that the findings of the study may
be understood in a proper perspective.
 The study is based on the secondary data and the limitation of using secondary data may
affect the results. The secondary data is taken from the annual reports of the ICICI Bank.
It may be possible that the data shown in the annual reports may be window dressed
which does not show the actual position of the banks.