HDFC Bank

Presented By: Group 4

Financial Analysis of HDFC

Financial Analysis of HDFC Bank – Group 4

Contents

Introduction.......................................................................................3

Financial Sector of India – An Overview..........................................7

HDFC Bank.....................................................................................10

Financial Analysis...........................................................................12

Financial Statement analysis of HDFC Bank..................................16

Comparative Statement Analysis.....................................................16

Ratio Analysis of HDFC Bank........................................................21

Common Size Analysis of HDFC Bank..........................................33

Trend Analysis of HDFC Bank.......................................................37

Managers Perspective……………………………………………………………47

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Financial Analysis of HDFC Bank – Group 4

Introduction

Financial statement analysis is very helpful in spanning bank’s internal operations and
its relations with the outside world. Therefore, the financial information must be
organized into an understandable, coherent and sufficiently limited set of data. Data
from the financial statement analysis can be used to quickly calculate and examine
financial ratios. An attempt has been made here to analyse the financial statements of
HDFC Bank.

The investors rely on the financial statement to judge the performanceof the bank and
ensure that these statements are correct, complete, consistent and comparable. The
accuracy of the financial statement can be identified from the report of the auditors.
The financial statement analysis can be used by investors for deciding about their
investments. The financial institutions also use these statements while granting loans to
the banks. The debenture holders, creditors, employees and government can also use
the financial statements for different purposes.
The bank itself and outside providers of capital – creditors and investors – all
undertake financial statement analysis. The type of analysis varies according to the
specific interests of the party involved. Creditors are primary interested in the liquidity
of a bank. Their claims are short term, and the ability of the bank to pay these claims
quickly is best judged by an analysis of the bank’s liquidity. The claims of bond
holders, on the other hand, are long term. Accordingly, bond holders are more
interested in the cash – flows ability of the bank to service debt over a long period of
time.

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Financial Analysis of HDFC Bank – Group 4

Inflation Rate

Inflation rate in double-digit and resulted in hike in policy rates by 150 bps,

which put the liquidity situation under high stress. Although, further rate hike is not
imminent, but inflation would drive the monetary policy further and interest rate
expected to remain high.

Headline inflation is always considered as a major vexation for the India’s

central bank. Since, inflation was reading in a double-digit figure, it was a challenge
for the Reserve Bank of India to fix the inflation problem under the condition of fragile
global economic recovery without denting the recovery process. In response to that,
RBI revised its policy rates by over 100 bps and now it does seem that the policy
action is working but the money supply is still at 20.34 per cent. Both trend lines are
now acting inversely, and inflation is falling down to 8 per cent. According to VMW
Research, inflation is projected at 7.48 per cent for the month of Nov, 2010. It is also
evident that in the past three months, schedule commercial banks and non-banking
financial companies have started borrowing from the RBI’s window of Liquidity

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Financial Analysis of HDFC Bank – Group 4

Adjustment Facility (LAF) at the rate of 6.25 per cent. Since, banks are now left with
the limited amount of liquidity; they’re again focusing on deposits from customers.
Several banks have revised their deposit rates between 50 bps and 150 bps to attract
funds, however, going forward, banks will see a narrow interest rate spread, resulted in
lower earnings. Discomfort levels of inflation and money supply will keep interest
rates higher for the next few months. Moreover, to reduce the impact of tight liquidity,
RBI has already started the Open Market Operation (OMO) to infuse liquidity by way
of purchasing government bonds in exchange of money.

Financial Sector of India – An Overview

Financial Sector of India is intrinsically strong, operationally sundry and
exhibits competence and flexibility besides being sensitive to India’s economic aims of
developing a market oriented, industrious and viable economy. An established
financial sector assists greater standards of endowments and endorses expansion in the
economy with its intensity and exposure. The fiscal sector in India entails banks,
financial organization, markets and services.

Fiscal transactions in an organized industry are executed by a number of financial

organizations which are commercial in nature and offer monetary services to the
society. Further classification includes banking and non-banking enterprises, often
recognized as activities that are client specific. The chief controller of the finance in
India is the Reserve Bank of India (RBI) and is regarded as the supreme organization
in the fiscal structure. Other significant fiscal organizations are business banks,

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Financial Analysis of HDFC Bank – Group 4

domestic rural banks, cooperative banks and development banks. Non-banking fiscal
organizations entail credit and charter firms and other organizations like Unit Trust of
India, Provident Funds, Life Insurance Corporation, Mutual funds, GIC, etc.

Indian Banking Sector

After a difficult FY09 Indian banks managed to grow their balance sheets in
FY10 albeit at a lower average rate than that projected by the RBI. The monetary
stimuli (reduction in repo rate, cash reserve ratio (CRR) and statutory liquidity ratio
(SLR) offered to the banks by the RBI early in the fiscal made it easier to sustain
margins But what really helped was the accretion of low cost deposits (CASA). Indian
banks grew their advances and deposits by 16.9% YoY and 17.2% YoY respectively in
FY10. The growth was mainly driven by a expansion in low cost deposits and growth
in agricultural and large corporate credit.

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Financial Analysis of HDFC Bank – Group 4

With lesser avenues of credit disbursal, banks had to park most of the liquidity
available with them with the RBI. In the retail portfolio, while home loans grew by
11% YoY, personal loans enjoyed a much smaller growth of 6% YoY due to bank's
reluctance towards uncollateralized credit. Credit card outstanding in fact dropped by
27% YoY.

Indian banks, however, enjoyed higher levels of money supply, credit and
deposits as a percentage of GDP in FY10 as compared to that in FY09 showing
improved maturity in the financial sector.

Despite poor pricing power lower cost of funds helped Indian banks grow their
net interest margins in FY10. While few like ICICI Bank chose to reduce their balance
sheet size, most entities chose to reasonably grow their franchise as well as assets.
Public sector banks outdid their private sector counterparts in terms of growth and
franchise expansion in the last fiscal. Improved capital adequacy also helped banks to

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Financial Analysis of HDFC Bank – Group 4

comfortably comply with Basel II. The higher efficiency levels were the hallmarks of
better performance of Indian banks last year.

Most banks had to restructure some loans in their portfolio during FY10 which
deferred their interest income. Further the PSU banks had also to provide for the loss
of interest on the agri-loans waived by the government.

HDFC Bank
In August, 1994 the Housing Development FinanceCorporation Limited
(HDFC) was incorporated in the name ofHDFC Bank Limited. The Reserve Bank of
India has approved in principle to set up private banks. HDFC was one of the
firstorganizations to receive in principle approval from RBI. The HDFC
Bank has its registered office in Mumbai. In January 1995, theoperations of HDFC
Bank as a commercial bank has commenced.In India and in international markets
HDFC has an impeccabletrack record. HDFC has maintained a healthy growth and
aconsistency in its operations and remained as a leader in market ofmortgages. The
portfolio of HDFC’s outstanding loan has a milliondwelling units. HDFC has a large
corporate client base for housingrelated credit facilities. HDFC was ideally positioned
to promote abank in the Indian market with its experience and strong reputationin
market of finance.HDFC Bank has 1,725 branches in India.

Objective:

 HDFC Bank is a young and dynamic bank, with a youthfuland

enthusiastic team determined to accomplish the vision ofbecoming
a world-class Indian bank.

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Financial Analysis of HDFC Bank – Group 4

 Bank’s business philosophy is based on four core values- Customer

Focus, Operational Excellence, ProductLeadership and People.
Bank believes that the ultimateidentity and success of bank will
reside in the exceptionalquality of our people and their
extraordinary efforts. For thisreason, bank is committed to hiring,
developing, motivatingand retaining the best people in the industry.

Mission:
The Bank’s mission is to be “a World Class Indian Bank”,benchmarking bank
against international standards and bestpractices in terms of product offerings,
technology, service levels,risk management and audit & compliance. The objective is
to buildsound customer franchises across distinct businesses so as to bea preferred
provider of banking services for target retail and wholesale customer segments, and to
achieve a healthy growth inprofitability, consistent with the Bank’s risk appetite. Bank
iscommitted to do this while ensuring the highest levels of ethicalstandards,
professional integrity, corporate governance andregulatory compliance.HDFC Bank
has been recognized as 'Best Bank in India' inthe magazine rankings as well as surveys
year on year. HDFC
Bank is the most preferred employer in banking industry in India.Bank business
strategy emphasizes the following:

 Increase bank’s market share in India’s expanding bankingand financial

services industry by following a disciplinedgrowth strategy focusing on
quality and not on quantity anddelivering high quality customer service.

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Financial Analysis of HDFC Bank – Group 4

 Leverage technology platform and open scalable systems todeliver more

products to more customers and to controloperating costs.

 Maintain current high standards for asset quality throughdisciplined

credit risk management.

 Develop innovative products and services that attract targeted customers

and address inefficiencies in the Indianfinancial sector.

 Continue to develop products and services that reduce costof funds.

 Focus on high earnings growth with low volatility.

Capital Structure:

At present, HDFC Bank boasts of an authorized capital of Rs.550 crore (Rs5.5 billion),
of this the paid-up amount is Rs 424.6 crore (Rs.4.2 billion). In terms of equity share,
the HDFC Group holds 19.4%. Foreign Institutional Investors (FIIs) have around 28%
of the equity and about 17.6% is held by the ADS Depository (in respect of the bank's
American Depository Shares (ADS) Issue). The bank has about 570,000 shareholders.
Its shares find a listing on the Stock Exchange, Mumbai and National Stock Exchange,
while its American Depository Shares are listed on the New York Stock Exchange
(NYSE), under the symbol 'HDB'.

Capital Adequacy Ratio:

Bank’s total Capital Adequacy Ratio (CAR) calculated in line with the Basel II
framework stood at 17.4%, well above the regulatory minimum of 9.0%. Of this, Tier I
CAR was 13.3%.

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Financial Analysis of HDFC Bank – Group 4

Financial Analysis

Financial Analysis:
Financial analysis is a study of relationship among the various financial factors in a
business. The process of financial statement analysis can be described in various ways
depending on the objective to be obtained. Financial analysis can be used as a
preliminary screening tool in the selection of the stock in theprimary and secondary
market. It can be used as a forecasting tool of future financial condition and result. It
may be used as a process of evolution and diagnosis’s of managerial, operating or other
problem area. Financial analysis is an integral part of the interpretation of result
disclosed by financial statements. It supplies to decision makers, crucial financial
information and points out the problem areas, which can be investigated. Financial
analysis reduce reliance on institution guesses and thus narrows the areas of
uncertainty that is present in all decision making process.

Tools of Financial Analysis:

Common Size Statement:

The statement is prepared to bring out the ratio of each asset or liability to the total of
balance sheet and the ratio of each item of expense or revenue to interest earned. These
common size statements are often called common measurement or component
percentage statement, since each statement is reduced to the total of 100 and each
individual component of the statement is represented as a percentage of the total of
100, which invariably serves as the base.

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Financial Analysis of HDFC Bank – Group 4

Comparative Financial Statement:

Comparative financial statements are statement of financial position of a business so

designed as to facilitate comparison of different accounting variables from drawing
useful inferences.

Preparation of Comparative Financial Statement

These statements are prepared by placing the various items in rows and years in the
columns. This is done to facilitate easy identification of their significant differences.
Columns may be drawn to accommodate absolute changes as well as percentage
changes side by side. In order to calculate the percentage change, the absolute change
in the various account figures are divided by their respective base year figures and
multiplied by 100.

Comparative Income Statement:

A comparative income statement shows the absolute figures for two or more periods,
and the absolute change from one period to another since the figure are shown side by
side the user can quickly understand the operation.

Comparative Balance Sheet:

Balance sheet as on two or more different dates is used to compare the assets, liabilities
and net worth of the bank. Comparative balance sheet is useful to study the trends in
the financial position of a bank.

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Financial Analysis of HDFC Bank – Group 4

Ratio Analysis:

Ratio analysis is the method or process by which the relationship or item or group of
item in the financial statement are computed determine and presented to determine a
particular aspect of organization or company. Ratio analysis is an attempt to drive
quantities measure or guide concerning the financial health and profitability of a
business enterprise. Ratio analysis can be used both in trends and static analysis. There
are several ratios at the disposal of an analysis but the group of the ratio would prefer
depends on the purpose and the objective of analysis.

Types of Financial Ratios:

1. Liquidity Ratios:
2. Profitability Ratios:
3. Solvency Ratios:
4. Capital Market Ratio

Financial Statement analysis of HDFC Bank

Comparative Statement Analysis

Here we analyse the comparative financial statements of HDFC Bank as at 31 st
March 2008, 2009, 2010. Analysis with respect to its competitors namely ICICI Bank,
Axis Bank and the public sector giant State Bank of India all of which fall among the
top banks in India is also done.

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Financial Analysis of HDFC Bank – Group 4

Comparative Balance Sheet of HDFC Ltd as at 31st March 2008, 2009 and
2010 (in Rs Cr.)

Capital &
Mar'08 Inc/Dec % Mar'09 Inc/Dec % Mar'10
Liabilities

Total Share
354.43 70.95 20.02 425.38 32.36 7.61 457.74
Capital

Equity Share
354.43 70.95 20.02 425.38 32.36 7.61 457.74
Capital

Share
Application 0 400.92 0 400.92 -400.92 -100 0
Money

Preference
0 0 0 0 0 0 0
Share Capital

Reserves 11,142.80 3083.63 27.67 14,226.43 6838.32 48.07 21,064.75

Revaluation
0 0 0 0 0 0 0
Reserves

Net Worth 11,497.23 3555.5 30.9 15,052.73 6469.76 42.98 21,522.49

1,42,811.5
Deposits 1,00,768.60 42042.98 41.7 24592.86 17.22 1,67,404.44
8

Borrowings 4,478.86 -1793.02 -40.03 2,685.84 10229.85 380.88 12,915.69

1,45,497.4
Total Debt 1,05,247.46 40249.96 38.24 34822.71 23.93 1,80,320.13
2

Other
Liabilities & 16,431.91 6288.71 38.27 22,720.62 -2104.68 -9.26 20,615.94
Provisions

Total 1,83,270.7
1,33,176.60 50094.17 37.61 39187.79 21.38 2,22,458.56
Liabilities 7

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Financial Analysis of HDFC Bank – Group 4

Assets Mar'08 Inc/Dec % Mar'09 Inc/Dec % Mar’10

Cash &
Balances 12,553.18 974.03 7.76 13,527.21 1,956.07 14.46 15,483.28
with RBI
Balance
with Banks, 10,479.7
2,225.16 1,754.25 78.84 3,979.41 263.35 14,459.11
Money at 0
Call
26,947.5 1,25,830.5
Advances 63,426.90 35,456.15 55.9 98,883.05 27.25
4 9

Investments 49,393.54 9,424.01 19.08 58,817.55 -209.93 -0.35 58,607.62

Gross Block 2,386.99 1,569.64 65.76 3,956.63 751.34 18.99 4,707.97

Accumulate
d
1,211.86 1,038.04 85.66 2,249.90 335.26 14.9 2,585.16
Depreciatio
n

Net Block 1,175.13 531.6 45.24 1,706.73 416.08 24.37 2,122.81

Capital
Work In 0 0 0 0 0 0 0
Progress
Other
4,402.69 1,954.14 44.39 6,356.83 -401.68 -6.32 5,955.15
Assets

1,33,176.6 1,83,270.7 39,187.7 2,22,458.5

Total Assets 50,094.18 37.61 21.38
0 8 8 6
-
Contingent 5,82,835.9 3,96,594.3 69,641.9 4,66,236.2
1,86,241.6 -31.95 17.56
Liabilities 4 1 3 4
3
Bills for
17,092.85 846.77 4.95 17,939.62 3,000.51 16.73 20,940.13
collection
Book Value
324.38 20.06 6.18 344.44 125.75 36.51 470.19
(Rs)

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Financial Analysis of HDFC Bank – Group 4

Comparative Income Statement of HDFC Ltd for the periods 31st March
2008, 2009 and 2010 (in Rs. Cr)

Income Mar '08 %  Mar '09 %  Mar '10

10,115.0
Interest Earned 61.47 16,332.26 -0.98 16,172.90
0
Other Income 2,205.38 57.37 3,470.63 9.8 3,810.62
12,320.3
Total Income 60.73 19,802.89 0.91 19,983.52
8
Expenditure          
Interest expended 4,887.12 82.34 8,911.10 -12.62 7,786.30
Employee Cost 1,301.35 71.99 2,238.20 2.28 2,289.18
Selling and Admin
974.79 192.5 2,851.26 19.1 3,395.83
Expenses
Depreciation 271.72 32.46 359.91 9.58 394.39
Miscellaneous
3,295.22 -2.97 3,197.49 -0.89 3,169.12
Expenses
Preoperative Exp.
0   0   0
Capitalized
Operating Expenses 3,935.28 85.26 7,290.66 5.66 7,703.41
Provisions &
1,907.80 -28.91 1,356.20 13.93 1,545.11
Contingencies
Net Profit 1,590.18 41.18 2,244.94 31.35 2,948.70
10,730.2
Total Expenses 63.63 17,557.96 -2.98 17,034.82
0
Extraordinary Items -0.06 883.33 -0.59 57.63 -0.93
Profit brought
1,932.03 33.26 2,574.63 34.22 3,455.57
forward
Total 3,522.15 36.82 4,818.98 32.88 6,403.34
Preference Dividend 0   0   0
Equity Dividend 301.27 41.2 425.38 29.13 549.29
Corporate Dividend
51.2 41.19 72.29 26.2 91.23
Tax
Per share data
         
(annualized)
Earnings Per Share
44.87 17.61 52.77 22.08 64.42
(Rs.)

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Financial Analysis of HDFC Bank – Group 4

Equity Dividend (%) 85 17.65 100 20 120

Book Value (Rs.) 324.38 6.18 344.44 36.51 470.19
Appropriations          
Transfer to Statutory
436.05 47.06 641.25 45.83 935.15
Reserves
Transfer to Other
159.02 41.18 224.5 31.35 294.87
Reserves
Proposed
Dividend/Transfer to 352.47 41.19 497.67 28.7 640.52
Govt.
Balance c/f to
2,574.61 34.22 3,455.57 31.17 4,532.79
Balance Sheet
Total 3,522.15 36.82 4,818.99 32.88 6,403.33

Interpretation of Comparative Statements

Comparative Balance Sheet:

The total assets and liabilities have increased by 21.38% compared to 2008-
2009 to reach Rs. 2,22,458.56 crore but this rise is less when compared to the previous
period’s rise of 37.6%. The increase in total assets can be attributed mainly by the rise
in Advances and Balances with Banks and Money at Call and Short notice. This could
be an indication of the healthy position the bank is in. Cash and Balance with RBI has
also increased over the period by 14.46% further contributing to the rise in total assets.
Investments have reduced by 0.36% over the period.
According to the schedules to the accounts, there has been addition of fixed
assets, mainly to premises including land worth Rs.2,735,762,000 further adding to rise
in value of fixed assets. This increase in assets is met by a 7.61% rise in Capital,
increase in deposits by 17.22% and a large increase in borrowingswhich shows the
company has raised money through borrowings.This is an indication of the bank
planning for expansion to cover more areas and increase its operations. But the large
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Financial Analysis of HDFC Bank – Group 4

part of this expansion is funded by deposits and borrowings which may not be good
sign as far as the bank and its shareholders are concerned.
There is a 14.46% increase in cash balances with the RBI which could be
explained by the various policies adopted by the central bank, 263.35% increase in
balance with banks and money at call and short notice, 27.25% in advances and
24.38% in fixed assets. Contingent liabilities have increased by 17.56% and Bills for
collection by 16.73%. Book value has increased by 36.5% to 470.19.
Capital has increased by 7.61%. It consists of 55,00,00,000 Equity Shares of Rs.
10/- each of Authorised Capital and 45,77,43,272 Equity Shares of Rs. 10/- each of
Issued, Subscribed and Paid-up Capital. Reserves have increased by 48.06% compared
to the previous period where there was only 27.67% rise. This rise can be attributed to
the rise in profits. The deposits have grown by 17.22% which is a good indication of
the bank’s healthy position and the confidence it enjoys with the public.

Comparative Income Statement:

We notice that the interest earned has decreased by 0.98% over the period
ending March 2010 whereas there was in increase by 61.47% over the previous period.
This change is not favourable to the bank as far as shareholders and the management
are concerned. But the interest expense has also gone down by -12.62% whereas there
was a rise by 82.34% over the previous period. The decrease in interest expense is

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Financial Analysis of HDFC Bank – Group 4

mainly due to the reduction in interest on deposits and interest on RBI/Inter-Bank

Borrowings. The decrease in interest earned has gone down mainly due to decreases in
Interest / discount on advances / bill, income from investments, Interest on balance
with RBI and other inter-bank funds. From the balance sheet we have noticed that
investments had gone down.There is decrease in investments from 32.09% to 26.35%,
which shows that bank has sold some of its investments Since there has been a much
greater descent in interest expense, the profit had increased over the period. There has
been a decrease in the rate of depreciation from 32.46% to 9.58%. Employee cost and
Selling and Administrative expenses has increased down by 2.28% and 19.10%
respective whereas in the previous year it was 71.99% an 192.50% respectively.
Net profit for the period was Rs.2948.70 crore which represents an increase by
31.35% compared to a rise of 41.18% over the previous period. The decrease in
interest income could have contributed to the decline in the rate. Profit brought forward
from the previous year was Rs.3,455.57 crore. Equity dividend rose by 29.13% to
549.29 crore compared to 41.20% over the previous period and corporate dividend tax
rose by 26.2% to Rs. 91.23 crore.
Equity dividend percentage rose by 20% to 120% from the previous 100%. The
book value has increased by 36.51% to 470.19 which is good news for the
investors.Transfers to statutory and other reserves rose by 45.83 and 31,83%
respectively. Proposed Dividend rose by 28.7% to 640.52 which indicates the healthy
position of the bank.

Comparative Balance Sheet of HDFC Bank with respect to ICICI as

of 31st March 2010.

  HDFC Bank ICICI

  Mar. 2010 % Mar.2010 %

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Financial Analysis of HDFC Bank – Group 4

Total share capital 457.74 14.46 1,114.89 -23.81

Equity share capital 457.74 263.38 1,114.89 0.14
Share Application
0 27.251 0  
money
Preference share
0 -0.256 0 -100
capital
Reserves 21064.8 14.901 50,503.48 4.3
Revaluation reserves 0 24.2787 0  
Net worth 21522.5 0 51,618.37 3.48
Deposits 167404.5 -6.3188 2,02,016.60 -7.48
Borrowings 12915.7 21.382 94,263.57 40.02
Total debt 180320.1 21.382 2,96,280.17 3.71
Other liablities and 20615.94 17.56 15,501.18 -64.57
Provisions        
         
Total liabilities 222458.6 21.38 3,63,399.72 -4.19
         
Cash & balances
15483.28 23.35 27,514.29 56.9
with RBI
Balances with banks        
Money at call 1459.11 27.25 11,359.40 -8.61
1,81,205.6
Advances 125830.6 18.989 -17
0
Investments 58607.62 24.39 1,20,892.80 17.31
Gross block 4707.97 -6.31 7,114.12 -4.43
         
Accumulated
2585.16 21.383 3,901.43 7.12
depreciation
Net block 2122.81 17.599 3,212.69 -15.49
Capital work in
0 16.7 0  
progress
Other assets 5955.15 36.5 19,214.93 -20.48
Total assets 222458.6 21.39 3,63,399.71 -4.19

Here we, observe that share capital has increased by a greater extent for HDFC
bank than ICICI but still ICICI is shown to be having a much larger share capital than
HDFC. Reserves rose about 14.9% as of March 2010 when compared to ICICI where it
is only 4.3%. ICICI has a much larger amount in investment where they seek to
increase their wealth but the growth is larger for HDFC bank for the period. Advances
grew at 19% for HDFC bank whereas in the case of ICICI bank, there is decrease by

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Financial Analysis of HDFC Bank – Group 4

17%. HDFC is a smaller bank than ICICI but when comparing profitability, efficiency
etc it is not behind ICICI in any manner. ICICI bank gets funds by borrowings and the
rate of increase is more than that of HDFC. Total assets rose by 21.39% for HDFC
bank whereas it went down by 4.19% for ICICI bank.

Ratio Analysis of HDFC Bank

Here a ratio analysis of HDFC Bank for three periods with respect to its
competitors namely ICICI Bank, Axis Bank and the public sector giant State Bank of
India is performed (FY ending March of that year).

Profitability Ratios

1. Profit Margin

Profit Margin = (Profit After Tax / Net Revenue) * 100

HDFC Bank:
Year 2008 2009 2010
Profit Margin 12.82 11.35 14.76

ICICI Bank:
Year 2008 2009 2010
Profit Margin 10.51 9.74 12.17

Axis Bank
Year 2008 2009 2010
Profit Margin 12.22 13.31 16.10

State Bank of India

Year 2008 2009 2010
Profit Margin 11.65 12.03 10.54

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Financial Analysis of HDFC Bank – Group 4

2. Return on Assets

Return on Assets = (Profit After Tax / Average Total Assets) * 100

HDFC Bank:
Year 2008 2009 2010
Return on Assets 1.20 1.20 1.3

ICICI Bank:
Year 2008 2009 2010
Return on Assets 1.12 0.98 1.13

Axis Bank
Year 2008 2009 2010
Return on Assets 1.24 1.44 1.67

State Bank of India

Year 2008 2009 2010
Return on Assets 0.93 1.04 0.91

3. Asset Turnover

Assets Turnover = (Net Revenue / Average Operating Assets) * 100

HDFC Bank:
Year 2008 2009 2010
Assets Turnover 5.18 5.0 4.24

ICICI Bank:
Year 2008 2009 2010
Assets Turnover 5.61 5.14 4.60

Axis Bank
Year 2008 2009 2010
Assets Turnover 6.32 7.78 7.31

State Bank of India

Year 2008 2009 2010
Assets Turnover 6.32 7.20 7.26

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Financial Analysis of HDFC Bank – Group 4

4. Return on Equity

Return on Equity = (Profit After Tax / Average Shareholders’ Equity) * 100

HDFC Bank:
Year 2008 2009 2010
Return on Equity 13.83 15.32 13.7

ICICI Bank:
Year 2008 2009 2010
Return on Equity 8.94 7.58 7.79

Axis Bank
Year 2008 2009 2010
Return on Equity 12.21 17.77 15.67

State Bank of India

Year 2008 2009 2010
Return on Equity 13.72 15.74 13.89

5. Earnings Per Share

Earnings Per Share (EPS) = (Profit After Tax / Weighted Average No. of Equity
Shares) * 100

HDFC Bank:
Year 2008 2009 2010
EPS 44.87 52.77 64.42

ICICI Bank:
Year 2008 2009 2010
EPS 37.37 33.76 36.10

Axis Bank
Year 2008 2009 2010
EPS 29.94 50.57 62.06

State Bank of India

Year 2008 2009 2010

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Financial Analysis of HDFC Bank – Group 4

EPS 106.56 143.67 144.37

Interpretation of Profitability Ratios

The Profit Margin has increased by over 30% to 14.76 as of March 2010 over

the period where as there was a slight fall as of March 2009 over the period. The net
profit had gone up by 31% for the period 2009-10 although for the period 2008-09, the
rise in profits was 41%. Though there was a fall by 0.98% in interest income, other
income rose by 9.8% over the period due to increase in fees and commissions earned
and income from foreign exchange and derivatives offset in part by lower bond gains
than those in the previous financial year as per the annual report of the bank. Total
income rose by 0.91% over the period. Total expenses had gone down by 2.98%, thus
explaining the rise in profit margin. Although total income had increased by 60.73%
for the period ending March 2009, there was a higher increase in total expenses by
63.63%. Hence total expenses rose at a higher percentage than total income thus
causing a reduction in profit with respect to income thus causing a fall in Profit margin
during the period.
The rise in profit margin over the period 2009-10 shows the good health the
bank is in. Investors have reason to feel satisfied as an increase in profit cause increase
in wealth. Increase in capital value signals a healthy position for the management too.
The profitability is in good shape and hence potential investors can take a favourable
decision as the profit margin shows the bank in good health. Operating efficiency
could have increased over the period and it shows effective cost control. This outcome
is favourable to the management. Creditors too can take comfort in the fact that the
situation is favourable to them also as there rise in profits and there is less risk of
returns.

24
Financial Analysis of HDFC Bank – Group 4

Comparing with the competitors (here Axis Bank, ICICI Bank and SBI are
taken), only Axis Bank shows a larger profit margin due to its consistently good
performance. Other banks show a fall in profit margin in the period 2008-09, Axis
Bank show an increase in profit margin. Hence HDFC Bank should take measures to
prevent investors to consider the opportunity cost with respect to Axis Bank and
arriving at a conclusion that Axis Bank was a better choice.
There is a slight increase in Return On Assetsratio to 1.3 from 1.2 over the

period ending March 2010. There has been an increase in profits over the period
though assets have also increased over the period. An increase in ROA indicates higher
efficiency and here the costs have shown to be effectively controlled. From the three
other banks, only Axis Bank is shown to have a higher ROA due to its consistently
better performance when compared to other banks including HDFC.
There was a fall in Assets Turnoverratio to 4.24 from 5.00 during the period.

We can see that there was a fall in this ratio over the previous period also. This could
be due to the lesser rise in Net Revenue when compared to the rise in assets over the
period. A fall in this ratio indicates lesser efficiency in utilising the assets to generate
revenue. We see that the ratios for the other three banks too have fallen during the
period, but they are still higher than that of HDFC bank indicating higher efficiency.
The management has to consider this seriously and take steps to improve the operating
efficiency of the bank.
There was a fall in Return on Equityratio over the period ending March

2010 to 13.7 from 15.32 though there was a rise in the previous period from 13.82.
This indicates that the efficiency to generate profits from every unit of shareholder’s
equity has gone down which should be of concern to the shareholders as well as the

25
Financial Analysis of HDFC Bank – Group 4

management. The opportunity cost has to be considered in the case of Return on

Equity. We can see that this ratio has fallen for most other banks except ICICI Bank
which shows a marginal increase. Axis Bank has a highest value of this ratio and there
is very little difference between the ratios for SBI and HDFC. There is a chance that
investors could prefer Axis Bank over HDFC.
There has been in increase in Earnings Per Share(EPS) over the period to

64.42 from 52.77. Thisshows strong foundation of the bank to achieve this growth rate
by increasing the netincome. This is good news for the shareholders as well as the
management because this results in maximization of wealth which is the objective of
any firm. According to the Annual Report, post merger of the erstwhile Centurion
Bank of Punjab with the bank, 26,200,220 warrants convertible into an equivalent
number of equity shares were issued to HDFC Limited on a preferential basis at a rate
of Rs. 1,530.13 each. On November 30, 2009 these said warrants were converted by
HDFC Limited and consequently the bank issued them 26,200,220 equity shares.
During the year under review, 61.59 lac shares were allotted to the employees of the
bank pursuant to the exercise of options under the employee stock option scheme of
the bank. These include the shares allotted under the employee stock option scheme of
the erstwhile Centurion Bank of Punjab. Correspondingly there was a large rise in net
revenue and profit contributing to the higher EPS. Hence shareholders can find the
situation more favourable.

Liquidity Ratios

1. Current Ratio

26
Financial Analysis of HDFC Bank – Group 4

Current Ratio = (Current Assets / Current Liabilities)

HDFC Bank:
Year 2008 2009 2010
Current Ratio 0.26 0.27 0.28

ICICI Bank:
Year 2008 2009 2010
Current Ratio 0.72 0.78 1.94

Axis Bank
Year 2008 2009 2010
Current Ratio 0.36 0.37 0.63

State Bank of India

Year 2008 2009 2010
Current Ratio 0.53 0.34 0.43

2. Quick Ratio

Quick Ratio = (Quick Assets / Current Liabilities)

HDFC Bank:
Year 2008 2009 2010
Quick Ratio 4.89 5.23 7.14

ICICI Bank:
Year 2008 2009 2010
Quick Ratio 6.42 5.94 14.70

Axis Bank
Year 2008 2009 2010
Quick Ratio 9.23 9.52 19.19

State Bank of India

27
Financial Analysis of HDFC Bank – Group 4

Year 2008 2009 2010

Quick Ratio 6.15 5.74 9.07

Interpretation of Liquidity Ratios

The Current Ratiois mainly used to give an idea of the company's ability to

payback its short-term liabilities with its short-term assets. The higher the current ratio,
themore capable the company is of paying its obligations. Hence creditors are most
concerned about these liquidity ratios. A lesser current ratio leads to higher creditor
concern. A ratio under 1 suggests that thecompany would be unable to pay off its
obligations if they came due at that point. Due to a rise in current assets the ratio shows
a rise, but is very low as current assets are only 28% of current assets. ICICI Bank is
shown to have the highest Current Ratio and the ratio for all the other three banks are
shown to have increased substantially when compared to HDFC bank.
The Quick Ratiois an indicator of a company's short-term liquidity. Itmeasures

a company's ability to meet its short-term obligations with its most liquidassets. The
higher the quick ratio, the better the position of the company. Hence creditors are most
concerned about the quick ratios. A lesser quick ratio leads to higher creditor concern.
The quick ratiois more conservative than the current ratio. When short-term obligations
need to be paid off immediately, there are situations in which the current ratio would
overestimate a company's short-term financial strength. The quick ratio has been 7.14
in the year 09-10 which indicates the bank’s robustness and financial soundness in
paying off its short term obligations. The figures indicate that there is excess liquidity
in the bank except in 2009-10. But the other three banks show a higher liquidity when
compared to HDFC. But thebanks are under the guidance of RBI and they have to
follow the liquidity norms laiddown by RBI.

28
Financial Analysis of HDFC Bank – Group 4

Solvency Ratios

1. Total Debt To Equity Ratio

Total Debt to Equity Ratio = (Total Debt /Shareholders’ Equity)

HDFC Bank:
Year 2008 2009 2010
Total Debt to
8.76 9.75 7.78
Equity Ratio

ICICI Bank:
Year 2008 2009 2010
Total Debt to
5.27 4.42 3.91
Equity Ratio

Axis Bank
Year 2008 2009 2010
Total Debt to
9.99 11.49 8.81
Equity Ratio

State Bank of India

Year 2008 2009 2010
Total Debt to
10.96 12.81 12.19
Equity Ratio

2. Interest Coverage Ratio

Interest Coverage Ratio = (Earnings Before Income Tax / Interest Expenses)

HDFC Bank:
Year 2008 2009 2010
Interest Coverage
1.79 1.44 1.63
Ratio

ICICI Bank:
Year 2008 2009 2010
Interest Coverage
1.25 0.25 0.33
Ratio

29
Financial Analysis of HDFC Bank – Group 4

Axis Bank
Year 2008 2009 2010
Interest Coverage
1.46 1.43 1.62
Ratio

State Bank of India

Year 2008 2009 2010
Interest Coverage
1.37 1.36 0.33
Ratio

3. Loan to Depost Ratio

Loan to Deposit Ratio = (Total Loans Lent / Total Deposit)

HDFC Bank:
Year 2008 2009 2010
Loan to Deposit
65.28 66.64 76.00
Ratio

ICICI Bank:
Year 2008 2009 2010
Loan to Deposit
84.99 91.44 90.04
Ratio

Axis Bank
Year 2008 2009 2010
Loan to Deposit
65.94 68.89 71.87
Ratio

State Bank of India

Year 2008 2009 2010
Loan to Deposit
77.51 74.97 75.96
Ratio

Interpretation of Solvency Ratios

30
Financial Analysis of HDFC Bank – Group 4

The Total Debt To Equityratio indicates what proportion of equity and debt

the company is usingto finance its assets. A high total debt/equity ratio generally
means that a company has beenaggressive in financing its growth with debt. This can
result in volatile earnings as aresult of the additional interest expense. In the case of
HDFC Bank, this ratio has decreased over the period ending March 2010. There is
growth of the bank and it is able to manage its funds fromthe internal sources. The
equity capital has increased its share in the liabilities in balancesheet in comparison to
the outside debts. This helps the bank to maintain highcredit reputation in market. The
other banks were able to reduce the ratio substantially.
The Interest Coverageratio is used to determine how easily a company can

pay interest on outstanding debt. The interest coverage ratio is calculated by dividing a
bank's earnings before interest and taxes (EBIT) of one period by the bank's interest
expenses of the same period. The lower the ratio, the more the company is burdened by
debt expense. When a company's interest coverage ratio is 1.5 or lower, its ability to
meet interest expenses may be questionable. An interest coverage ratio below 1
indicates the company is not generating sufficient revenues to satisfy interest expenses.
The ratio for the year ending 2010 is 1.63 which is reasonable and not below1.5. This
indicates that the bank is in a sound financial health and is able to pay theinterest on its
outstanding debts. The ratio was best in 2007-08 among the three financialyears. But
has reduced in the year 2009 to 1.44 and increased to 1.63 in 2009-10. The bank has
maintained a somewhat healthy ratioover the years. The ratios for SBI and ICICI are
substantially lower.
The Loan To Depositratio is indicative of the percentage of funds lent by the

bank out of the total amount raised through deposits. Higher ratio reflects ability of the

31
Financial Analysis of HDFC Bank – Group 4

bank to make optimal use of the available resources. The point to note here is that
loans given by bank would also include its investments in debentures, bonds and
commercial papers of the companies. This ratio forms an integral part of analysis as it
indicates theamount of reliability the bank has earned in the minds of its customers and
evidence of itsrobustness. The ratio has increased over the period ending March 2010
to 76 which is a healthy sign. The ratio of ICICI bank is the highest though it shows a
slight decline in the ratio over the period.

Capital Market Ratios

1. Price - earnings Ratio

Price – earnings Ratio = Average Stock Price / Earnings Per Share

HDFC Bank (30/12/10):35.74

ICICI Bank (30/12/10): 31.50
Axis Bank (30/12/10): 21.42
State Bank of India (30/12/10): 19.04

2. Dividend Per Share

HDFC Bank:
Year 2008 2009 2010
Dividend Per
8.50 10.00 12.00
Share

ICICI Bank:
Year 2008 2009 2010
Dividend Per
11.00 11.00 12.00
Share

Axis Bank
Year 2008 2009 2010
Dividend Per
6.00 10.00 12.00
Share

32
Financial Analysis of HDFC Bank – Group 4

State Bank of India

Year 2008 2009 2010
Dividend Yield
21.50 29.00 30.00
Ratio

3. Book Value Per Share

Book Value Per Share = (Equity Share Capital + Reserves &
Surplus / No. of Equity Shares)

HDFC Bank:
Year 2008 2009 2010
Book Value Per
324.38 344.44 470.19
Share

ICICI Bank:
Year 2008 2009 2010
Book Value Per
417.64 444.94 463.01
Share

Axis Bank
Year 2008 2009 2010
Book Value Per
245.13 284.50 395.99
Share

State Bank of India

Year 2008 2009 2010
Book Value Per
776.48 912.73 1,038.76
Share
Interpretation of Capital Market Ratios

33
Financial Analysis of HDFC Bank – Group 4

The Price – Earningsratio (P/E Ratio) is a valuation ratio of a company's

current share price compared to its per-share earnings. In general, a high P/E suggests
that investors are expecting higher earnings growth in the future compared to
companies with a lower P/E. However, the P/E ratio doesn't tell us the whole story by
itself. It's usually more useful to compare the P/E ratios of one company to other
companies in the same industry, to the market in general or against the company's own
historical P/E. Here we can see that HDFC Bank has a higher P/E ratio of 35.74. When
compared to the other three banks HDFC has the highest ratio with ICICI Bank close
behind at 31.50.
Dividends Per Share(DPS) is the sum of declared dividends for every ordinary
share issued. Dividend per share (DPS) is the total dividends paid out over an entire
year (including interim dividends but not including special dividends) divided by the
number of outstanding ordinary shares issued. Dividends are a form of profit
distribution to the shareholder. Having a growing dividend per share can be a sign that
the company's management believes that the growth can be sustained. HDFC Bank has
a growing DPS value which is 12.00 for the period ending March 2010 while it was
10.00 for the period ending March 2009 thus representing an increase of 20% which is
a very healthy sign for investors as well as the management which can be confident
that the growth can be sustained. The increase in the ratios of the other three banks is
also similar with State Bank of India showing the highest DPS of 30.0.
The Book Value Per Share (BV)relates the shareholder's equity to the

number of shares outstanding, giving the shares a raw value. It is measure used by
owners of common shares in a firm to determine the level of safety associated with

34
Financial Analysis of HDFC Bank – Group 4

each individual share after all debts are paid accordingly. Should the company decide
to dissolve, the book value per common indicates the dollar value remaining for
common shareholders after all assets are liquidated and all debtors are paid. In simple
terms it would be the amount of money that a holder of a common share would get if a
company were to liquidate.The BV value for HDFC Bank for the year ending March
2010 has substantially increased to 470.19 from 344.44 from the previous year which
can be interpreted as a healthy sign as far as investors are concerned and also for the
management. The share price as of 31-12-2010 is 2346.50 and BV value is 464.14.
This could be interpreted as a healthy situation. The book values of ICICI Bank, Axis
Bankand SBI have risen in the period with SBT having the highest Book Value Per
Share value of 1038.76 in the period ending March 2010.

35
Financial Analysis of HDFC Bank – Group 4

Common Size Analysis of HDFC Bank

Here a common size financial statement analysis of HDFC Bank for three
periods is performed (FY ending March of that year).

Common Size Balance Sheet of HDFC Bank Ltd as on 31st March 2008, 09, 10
(Rs. million)

31-Mar-10 %BT 31-Mar-09 %BT 31-Mar-08 %BT

  Equity Capital 4577.43 0.21 4253.84 0.23 3544.33 0.27
  Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00
Share Capital 4577.43 0.21 8263.00 0.45 3544.33 0.27
Reserves and Surplus 210618.37 9.47 142209.46 7.76 111428.08 8.37
Deposits 1674044.39 75.25 1428115.80 77.92 1007685.91 75.67
Borrowings 129156.93 5.81 91636.37 5.00 45949.24 3.45
Other Provisions and
206159.44 9.27 162428.23 8.86 163158.48 12.25
Liabilities
Capital and Liabilities (BT) 2224585.70 100.00 1832707.73 100.00 1331766.03 100.00
Fixed Assets 21228.11 0.95 17067.29 0.93 11750.92 0.88
Investments 586076.16 26.35 588175.49 32.09 493935.38 37.09
Advances 1258305.94 56.56 988830.47 53.95 634268.93 47.63
Cash & Money at Call 299423.99 13.46 175066.17 9.55 147783.39 11.10
Other Current Assets 59551.50 2.68 63568.31 3.47 44027.41 3.31
Properties and Assets (BT) 2224585.70 100.00 1832707.73 100.00 1331766.03 100.00

Common Size Income Statement of HDFC Bank Ltd for the periods
ending 31st March 2008, 09, 10

  31-Mar-10 31-Mar-09 31-Mar-08

Profit/Loss A/C Rs. mln %OI Rs. mln %OI Rs. mln %OI
Interest Income 80.
161729 163322.61 83.23 101150 81.58
Earned 9
Commission,
14.
Exchange and 28305.86 24572.97 12.52 17145 13.83
2
Brokerage Income
Lease Income 0 0 0 0 0 0
Dividend Income 0 0 0 0 0 0
4.8
Miscellaneous Income 9770.25 8333.07 4.25 5686.5 4.59
9
19.
Other Income 38076.11 32906.04 16.77 22831.5 18.42
1
Total Income (OI) 199805.11 100 196228.65 100 123981.5 100

36
Financial Analysis of HDFC Bank – Group 4

Interest Expenditure 77862.99 39 89111.04 45.41 48871.2 39.42

Employee 11.
22891.76 22381.98 11.41 13013.5 10.5
Expenditure 5
1.9
Depreciation 3943.92 3599.09 1.83 2717.2 2.19
7
Other Operating 15.
30809.15 29346.99 14.96 21725.5 17.52
Expenditure 4
Provision and 17.
34810.28 29340.15 14.95 14843.3 11.97
Contingencies 4
85.
Total Expenditure 170318.1 173779.25 88.56 101170.7 81.6
2
14.
Pretax Income 29487.01 22449.4 11.44 22810.8 18.4
8
Tax 0 0 0 0 6909 5.57
Extra Ordinary and
0 0 0 0 0 0
Prior Period Items Net
14.
Net Profit 29487.01 22449.39 11.44 15901.8 12.83
8
14.
Adjusted Net Profit 29487.01 22449.39 11.44 15901.8 12.83
8
Dividend - Preference 0 0 0 0 0 0
2.7
Dividend - Equity 5492.92 4253.84 2.17 3012.7 2.4
5

Interpretation

From the common size balance sheet, we notice that as on 31 st March 2010,
equity capital of HDFC bank forms only 0.21% of its liabilities. This ratio is
decreasing from 2008 when it was 0.27% and 0.23% in 2009. Share capital had
become 0.45% of the total liabilities in 2009 but has decreased to 0.21%. Share capital
ratio falling may not be favourable for the investors. But reserves and surplus shows a
marked increase to 9.47% of total liabilities in 2010 which indicates the healthy
profitability situation. But the bulk of the share of liabilities ie. 75.25% is deposits.
Though the percentage has decreased over the previous period, deposits have increased
signaling the confidence the public has in the bank. This is a favourable situation for
investors and the management. Borrowings have also risen to 5.81% of total liabilities
which shows the company has raised money through borrowings. Fixed assets form
37
Financial Analysis of HDFC Bank – Group 4

just 0.95% of the total liabilities. Investments and Advances form the bulk i.e. 26.35%
and 56.56% of the total liabilities. Investments have reduced from the previous period
where it accounted for 32.09 of total liabilities.
From the common size income statement we notice that, interest income has
reduced over the period ending March 2010 and it now constitutes 80.94% of the total
income whereas in the previous period ending March 2009, it was 83.23% of total
income.The decrease in interest earned has gone down mainly due to decreases in
Interest / discount on advances / bill, income frominvestments, Interest on balance with
RBI and other inter-bank funds. There is decrease in investments from 32.09% to
26.35%, which shows that bank has sold some of its investments.However there was
an increase in Commission, Exchange and Brokerage Income and Other Income which
constitutes 14.17% and 19.06% of the total income respectively. This is a rise from
12.52% and 16.77% which these components constituted in the total income of the
period ending 31st March 2009. Operating expenditures is 15.42% of the total income
and provision and contingencies 17.42% of the total income. The total income has
increased over the previous period and the net profit is 14.76% of the total income
which is shows the healthy profitability situation of the bank. This is more favourable
compared to the previous year where it was only 11.44% of the total income.

Common Size Statement Analysis of HDFC Bank and Competitor

HDFC % ICICI % SBI %

Income
Interest Earned 16,172.90 80.9 25,706.93 77.9013 70,993.92 82.58749
Other Income 3,810.62 19.1 7,292.43 22.0987 14,968.15 17.41251
Total Income 19,983.52 100 32,999.36 100 85,962.07 100
Expenditure 0 0 0

38
Financial Analysis of HDFC Bank – Group 4

Interest expended 7,786.30 39 17,592.57 53.3119 47,322.48 55.05042

Employee Cost 2,289.18 11.5 1,925.79 5.83584 12,754.65 14.83753
Selling and Admin
3,395.83 17 6,056.48 18.3533 7,898.23 9.188041
Expenses
Depreciation 394.39 1.97 619.5 1.87731 932.66 1.084967
Miscellaneous Expenses 3,169.12 15.9 2,780.03 8.4245 7,888.00 9.17614
Preoperative Exp
0 0 0 0 0 0
Capitalised
Operating Expenses 7,703.41 38.5 10,221.99 30.9763 24,941.01 29.01397
Provisions &
1,545.11 7.73 1,159.81 3.51464 4,532.53 5.272709
Contingencies
Total Expenses 17,034.82 85.2 28,974.37 87.8028 76,796.02 89.3371
Net Profit for the Year 2,948.70 14.8 4,024.98 12.1972 9,166.05 10.6629
Extraordionary Items -0.93 -0 0 0 0 0
Profit brought forward 3,455.57 17.3 2,809.65 8.51426 0.34 0.000396
Total 6,403.34 32 6,834.63 20.7114 9,166.39 10.6633
Preference Dividend 0 0 0 0 0 0
Equity Dividend 549.29 2.75 1,337.95 4.05447 1,904.65 2.215687
Corporate Dividend Tax 91.23 0.46 164.04 0.4971 236.76 0.275424
Per share data
0 0 0
(annualised)
Earning Per Share (Rs) 64.42 0.32 36.1 0.1094 144.37 0.167946
Equity Dividend (%) 120 0.6 120 0.36364 300 0.348991
Book Value (Rs) 470.19 2.35 463.01 1.40309 1,038.76 1.208393
Appropriations 0 0 0
Transfer to Statutory
935.15 4.68 1,867.22 5.65835 6,495.14 7.555821
Reserves
Transfer to Other
294.87 1.48 1.04 0.00315 529.5 0.615969
Reserves
Proposed
Dividend/Transfer to 640.52 3.21 1,501.99 4.55157 2,141.41 2.49111
Govt
Balance c/f to Balance
4,532.79 22.7 3,464.38 10.4983 0.34 0.000396
Sheet
Total 6,403.33 32 6,834.63 20.711 9,166.39 10.6633

Interpretation

Comparing the common size income statements of HDFC, ICICI and SBI
Banks, we see that interest earned forms 81% of the total income of HDFC bank
whereas it forms 77.9% and 82.5% of the total incomes of ICICI and SBI respectively.
39
Financial Analysis of HDFC Bank – Group 4

The public sector giant SBI is much larger than both other banks when we compare
their interest incomes. Interest expense is just 38% of the total income of HDFC
whereas it is much larger in the case of the other two banks. Operating expenses is at
the highest ratio with total income for HDFC bank when compared t the other two
which indicates that it needs to improve its operational efficiency. But when comparing
the net profits, HDFC has the highest ratio of net profit to total income at 14.76%
whereas it is 12.19% for ICICI bank and 10.67% for SBI which indicates that HDFC’s
profitability is good when compared to the other two as 14.76% of its total income
constitutes profit. Hence from the management’s, creditors’ and from shareholders’
perspective profitability situation is good for HDFC bank. HDFC bank gives equity
dividend of 2.75% of total income but it is ICICI bank which gives a highest dividend
of 4.05% of total income.

Trend Analysis of HDFC Bank

Here a trend analysis of HDFC Bank is performed from a Managerial,

Creditor’s and Investor’s perspective.

40
Financial Analysis of HDFC Bank – Group 4

41
Financial Analysis of HDFC Bank – Group 4

3000

2500

2000

Iratio
1500
Eratio
Pratio

1000

500

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Creditor’s perspective:

The financial performance during the fiscal year 2009-10 remained healthy with
total net revenues (net interest income plus other income) increasing by 0.91% to Rs.
12,320.38 crores from Rs. 19,802.89crore in 2008-09. The revenue growth was driven
both by an increase Commission, Exchange and Brokerage Income and Other Income.

Shareholders perspective:

The Bank’s basic earnings per share increased from Rs. 52.9 to Rs. 64.42 per equity
share. Bank has had a consistent dividend policy of balancing the dual objectives of
appropriately rewarding shareholders through dividends and retaining capital to
maintain a healthy capital adequacy ratio to support future growth. It has had a
consistent track record of moderate but steady increases in dividend declarations over
its history with the dividend payout ratio rangingbetween 20% and 25%.Net profit

42
Financial Analysis of HDFC Bank – Group 4

increased by 31.35% from Rs. 2244.95 crores in 2008-09 to Rs. 2498.70 crores in
2009-10.

43
Financial Analysis of HDFC Bank – Group 4

44
Financial Analysis of HDFC Bank – Group 4

3000

2500

2000

1500 Eratio
Dratio
Pratio
1000

500

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

45
Financial Analysis of HDFC Bank – Group 4

46
Financial Analysis of HDFC Bank – Group 4

4000

3500

3000

2500

Dratio
2000
Lratio
Pratio
1500

1000

500

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Managers’ perspective:

The financial performance during the years remained healthy. An increment in

providing loan shows that the bank is in a sound position, as it is an asset to the bank.
The percentage of deposits has been increasing but by comparing the percentage
change of loans and deposits, loans have more increase in its percentage change.
Deposits and lending rates spiked up sharply. Net profit increased by 31.35% from Rs.
2244.95 crores in 2008-09 to Rs. 2498.70 crores in 2009-10.

GROUP MEMBERS

47
Financial Analysis of HDFC Bank – Group 4

Karthik Kutty

Abhirup Sen

Rohan Kurian John

Abhimanyu Kumar

Vivin

Bobby

Rohini

Vineet Matthew George

Abhinandan Bose

Vinay

48