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    Case Study of HSBC Bank

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    Ajay Mehta
    HSBC Bank's financial position for the year ending March 2010 is analyzed. Key figures shown include total deposits of Rs. 55748 Cr, total assets of Rs. 90425 Cr, and net profit of Rs. 810 Cr. Gross and net NPA ratios increased from the previous year to 6.84% and 2.31% respectively in 2010. Various asset quality and capital ratios of HSBC, ICICI Bank, and Bank of India are also calculated and compared.

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    Case Study of HSBC Bank

    Uploaded by

    Ajay Mehta
    94 views8 pages
    HSBC Bank's financial position for the year ending March 2010 is analyzed. Key figures shown include total deposits of Rs. 55748 Cr, total assets of Rs. 90425 Cr, and net profit of Rs. 810 Cr. Gross and net NPA ratios increased from the previous year to 6.84% and 2.31% respectively in 2010. Various asset quality and capital ratios of HSBC, ICICI Bank, and Bank of India are also calculated and compared.

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    HSBC Bank's financial position for the year ending March 2010 is analyzed. Key figures shown include total deposits of Rs. 55748 Cr, total assets of Rs. 90425 Cr, and net profit of Rs. 810 Cr. Gross and net NPA ratios increased from the previous year to 6.84% and 2.31% respectively in 2010. Various asset quality and capital ratios of HSBC, ICICI Bank, and Bank of India are also calculated and compared.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    94 views8 pages

    Case Study of HSBC Bank

    Uploaded by

    Ajay Mehta
    HSBC Bank's financial position for the year ending March 2010 is analyzed. Key figures shown include total deposits of Rs. 55748 Cr, total assets of Rs. 90425 Cr, and net profit of Rs. 810 Cr. Gross and net NPA ratios increased from the previous year to 6.84% and 2.31% respectively in 2010. Various asset quality and capital ratios of HSBC, ICICI Bank, and Bank of India are also calculated and compared.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 8

    Case study

    of
    HSBC Bank

    Financials of HSBC
    HSBC is one of the leading private sector (Foreign) bank of India. The financial
    position of the bank for the year ending 31 March, 2010 is given below.

    ➢ Total Deposit 55748 Cr

    ➢ Total Investment 41289 Cr

    ➢ Total Advances 23475 Cr

    ➢ Total Assets 90425 Cr

    ➢ Total Income 7301 Cr

    ➢ Total Expenditure 3865 Cr

    ➢ Net Profit 810 Cr

    ➢ Non Performing Assets

    March 31,2009 March 31, 2010


    Gross NPA 13,161,444 16,832,926
    Less: Provision 9,251,100 11,401,585
    Net NPA 3,910,344 5,431,341
    Net NPA ratio 1.42% 2.31%

     Classification of Assets
    Rs ‘000
    Category As at 31 March 2010
    Sub standard assets 11,571,850
    Doubtful assets 1 year 2,789,001
    Doubtful assets 2 year 662,165
    Doubtful assets 3 year 239,436
    Loss assets 1,570,474
    Total 16,832,926

     Percentage of Net NPA in various sectors

    Sector % of NPA to Advances


    Agriculture & allied activities 0%
    Industry 4.38 %
    Services 6.49 %
    Personal Loans 18.36 %

    CALCULATION OF RATIO’S
    ➢ Gross NPA ratio
    Gross NPA Ratio is the ratio of gross NPA to gross advances of the Bank.
    Gross NPA is the sum of all loan assets that are classified as NPA.

    Gross NPA ratio = Gross NPA * 100


    Gross Advances
    = 16832926 * 100
    246095409.36
    = 6.84 %

    ➢ Net NPA ratio


    The net NPA percentage is the ratio of net NPA to net advances, in which
    the provision is to be deducted from the gross advance. The provision is to
    be made for NPA account.

    Net NPA ratio = Net NPA * 100


    Net Advances
    = 5431341 * 100
    235122987.01
    = 2.31%

    ➢ Problem Asset ratio

    It is the ratio of gross NPA to total asset of the bank.


    Problem Asset ratio = Gross NPA * 100
    Total Asset
    = 16832926 * 100
    904253924
    = 1.86 %

    ➢ Capital Adequacy ratio

    Capital Adequacy Ratio can be defined as ratio of the capital of the Bank,
    to its assets, which are weighted or adjusted according to risk attached to
    them.

    Capital Adequacy ratio = Total Capital * 100


    Risk Weighted assets
    = 99144501 * 100
    549930324
    = 18.03 %

    ➢ Sub Standard Asset ratio

    It is the ratio of Total Substandard Assets to Gross NPA of the bank.

    Substandard Asset ratio = Total Substandard Asset * 100


    Gross NPA
    = 11,571,850 * 100
    16832926
    = 68.74 %

    ➢ Doubtful Asset Ratio

    It is the ratio of Total Doubtful Assets to Gross NPAs of the bank.

    Doubtful Asset Ratio = Total Doubtful asset * 100


    Gross NPA
    = 3690602 * 100
    11,571,850
    = 34.23 %

    ➢ Loss Asset ratio

    It is the ratio of total loss assets to Gross NPA of the bank.

    Loss Asset Ratio = Total Loss asset * 100


    Gross NPA
    = 1570474 * 100
    11,571,850
    = 13.57 %

    COMPARISON OF RATIO’S BETWEEN BANKS

    Name of Ratio ICICI bank Bank of India HSBC


    Gross NPA ratio 6.52 % 2.85 % 6.84 %

    Net NPA ratio 2.12 % 1.31 % 2.31 %

    Problem Asset ratio 2.6 % 5.99 % 1.86 %

    Capital Adequacy ratio 19.15 % 12.94 % 18.03 %

    Sub standard asset ratio 52.9 % 57.81 % 68.74 %

    Doubtful asset ratio 42.5 % 28.01 % 34.23 %

    Loss asset ratio 6.1 % 14.17 % 13.57 %

    Interpretation

    • The first table shows the Gross NPA ratio of the three banks. The gross
    NPA means the NPA of the banks irrespective of the provisions. Gross
    NPA reflects the quality of loans made by the bank and its credit
    appraisal policy. High gross NPA reflects liberal appraisal policy. The
    Gross NPA ratio for HSBC bank is the highest at 6.84% while Bank of
    India has a lower G.P ratio.

    • The Net NPA ratio is obtained after deducting Provisions from the Gross
    NPA. It shows the degree of risk in a bank’s portfolio and the actual
    burden the bank has to bear. The net NPA of HSBC bank is the highest at
    2.31 %. It shows they have less funds to make provisions against Gross
    NPA.

    • The Problem asset ratio shows the percentage of risk attached to the
    assets of the bank. High Problem-Asset ratio signifies more risk on the
    assets. This ratio is very high for Bank of India where 5.99% of its assets
    face risk while it’s the lowest for HSBC.

    • Capital Adequacy Ratio can be defined as ratio of the capital of the Bank,
    to its assets, which are weighted/adjusted according to risk attached to
    them. The banks with higher Capital adequacy ratio are in a better
    position to manage their NPA. ICICI bank has a high capital adequacy
    ratio of 18.93% while Bank of India has the lowest.

    • This ratio shows the percentage of Sub-Standard assets in the Gross NPA
    of the bank. High Sub-Standard ratio means more proportion of
    Sub-Standard asset in the Gross NPA. High ratio shows that there is a
    chance of recovery of assets is high. The Sub standard asset ratio for
    HSBC is at 68.74% while ICICI is at 52.9%.

    • This ratio shows the percentage of Doubtful assets in the Gross NPA of
    bank. High Doubtful assets ratio means more proportion of Doubtful
    asset in the Gross NPA. More Doubtful assets means Bank should take
    action through recovery policy to reduce the level of Doubtful assets.
    42.5% of the assets of ICICI bank are doubtful in nature so the bank
    should take quick actions.
    • This ratio shows the percentage of loss assets in the Gross NPA of bank.
    The high ratio indicates that bank has more fraudulent account and it
    would not be possible to recover that amount. The loss assets are those
    which the bank is certain that it would not be able to recover back. Bank
    of India has the highest loss asset at 14.17% of its Gross NPA.

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