CHAPTER - 2

FINANCIAL & MARKET ANALYSIS

4.1 RESEARCH APPROACH AND DESIGN

The nature of study of this project is descriptive and analytical. In analytical study, one has
to use facts or information already available and analyze these to make critical evaluation of
the material.

Secondary data are those data which have already been collected and stored. Secondary data
may be collected from:

• Annual reports of the bank

• Bulletins

• Periodicals

• News letters

• Internal reports of the bank

The study has been conducted with reference to the data related to Axis Bank. The study
examines the financial performance of some variables and compares the performance of
the bank over a period of five years.

4.2 SAMPLING DESIGN

For performance analysis of Axis Bank over the years, the study has been taken during the
period from 2016 to 2020(five years).To know the financial performance of the banks by
using ratio analysis and camel rating. Financial performance of the bank can be
analyzed through their financial reports

4.3 DATA ANALYSIS TOOLS

In this study, data was analyzed by using tabular representation of data to ease comparing
and to enable readers visually appreciate the findings from the study. Different scales will be
used for data analysis. Various financial ratios, bar charts are used to know financial
performance of the bank.
For the analysis of the financial performance the following tools are used:

a) Ratio Analysis

b) CAMEL Rating

c) Comparative balance sheet

a)RATIO ANALYSIS

Ratio analysis is one of the most powerful tools of financial analysis. It is a yardstick
which measures relationship between variables. In layman’s terms a ratio represents for
every amount one thing how much there is of another thing. Ratio analysis is a widely- used
tool of financial analysis. It can be used to compare the risk and return relationship of firms
of different sizes. It is defined as the systematic use of ratio interprets the financial statements
so that the strength and weakness

b) CAMEL Rating

CAMEL is a proportion based model to assess the execution of banks. It represents Capital

Adequacy, Asset Quality, Management Efficiency, Earning Quality and Liquidity. This model

identifies the strength and weakness of banks and helps in improving future development of

banking. The period for evaluating performance through CAMEL in this study is 5 years, i.e. from

financial year 2016 to 2020.

c) Comparative balance sheet

Comparative balance sheet is a balance sheet which provides financial figures of Assets, Liability

and equity for the “two or more period of the same company” or “two or more than two company of

same industry” or “two or more subsidiaries of same company” at the same page format so that this

can be easily understandable and easy to analysis. The comparative balance sheet has two-column

of amount against each balance sheet items; one column shows the current year financial position
whereas another column will show the previous year’s financial position so that investors or other

stakeholders can easily understand and analyze the company’s financial performance against last

year.
TABLE 5.1 RETURN ON EQUITY

YEAR %
2019 15.46
2020 6.59
2021 0.43
2022 7.01
2023 1.91

INTERPRETATION:

ROE is the most important indicator of a bank’s profitability and growth

potential. It is the rate of return to shareholders or the percentage return on
each of equity invested in the bank. Usually, there is higher ROE for high
growth companies. Axis Bank has higher ROE of 15.46% in the year 2019.

DIAGRAM 5.1.1 RETURN ON EQUITY

TABLE 5.2 RETURN ON ASSETS

YEAR %
2019 1.56
2020 0.61
2021 0.03
2022 0.58
2023 0.17

INTERPRETATION:

This ratio indicates how much net income is generated of assets. ROA can be
increased by Banks either by increasing profit margins or asset turnover but
they can’t do it simultaneously because of competition and trade-off between
turnover and margin. So bank maintain higher ROA will make more the
profit. Axis Bank has the highest ROA of 1.56% in year 2019.

DIAGRAM 5.2.1 RETURN ON ASSETS

TABLE 5.3 NET INTEREST MARGIN

YEAR %
2019 3.20
2020 3.00
2021 2.69
2022 2.71
2023 2.75

INTERPRETATION:

A positive net margin indicates a bank invests efficiently, while a

negative return implies investment efficiency. Axis Bank has a higher
Net Margin of 3.20 in the year 2019.

DIAGRAM 5.3.1 NET INTEREST MARGIN

RISK RATIO

TABLE 5.4 LEVERAGE RATIO

YEAR %
2019 0.76
2020 0.78
2021 0.74
2022 0.76
2023 0.79

INTERPRETATION:

Leverage ratio is any one of several financial measurement that assesses the
ability of a company to meet its financial obligations. A high leverage ratio
also increases the risk of insolvency. A figure of 0.5 or less is ideal. The most
ideal is 0.74% in year 2021.

DIAGRAM 5.4.1 LEVERAGE RATIO

TABLE 5.5 TOTAL CAPITAL RATIO

YEAR %
2019 0.96
2020 0.95
2021 0.96
2022 0.96
2023 0.95

INTERPRETATION:

It indicates the relationship between shareholders fund, long term debt, and
reserve to total assets. It shows the long term solvency. Axis Bank has the
highest Capital ratio of 0.96% in the years 2019, 2021 & 2023.

DIAGRAM 5.5.1 TOTAL CAPITAL RATI

TABLE 5.6 LOAN RATIO

YEAR %
2019 0.20
2020 0.17
2021 0.21
2022 0.19
2023 0.16

INTERPRETATION:

It measures the percentage of assets that is tied up in loans. Net loan to total
assets ratio (NLTA) is also another important ratio that measures the liquidity
condition of the bank. The higher the ratio, the less liquid the bank is.
 DIAGRAM 5.6.1 LOAN RATIO

CAPTIAL ADEQUACY

TABLE5.7 CAR RATIO

YEAR %
2019 15.67
2020 18.00
2021 16.57
2022 15.84
2023 17.53

INTERPRETATION:

This capital gives lesser shield to depositors. The highest CAR ratio is
preferred and will be rated at 1.the Bank has highest CAR ratio of 18% in the
year 2020.
 DIAGRAM 5.7.1 CAR RATIO

TABLE 5.8 DEBT- EQUITY RATIO

YEAR %
2019 8.60
2020 9.31
2021 9.48
2022 10.52
2023 9.28

INTERPRETATION:

This ratio shows how much debt is taken up by the company to fund its
assets. If the ratio is more then it means creditor financing is more than the
investor financing. This contributes to greater financial distress if earnings do
not surpass the borrowing cost. Lower debt to equity ratio is preferred and will
be ranked as 1. Lowest of 9.28% is achieved in year 2023.
 DIAGRAM 5.8.1 DEBT - EQUITY RATIO

TABLE 5.9 ADVANCE/TOTAL ASSET RATIO

YEAR %
2019 62.75
2020 62.00
2021 63.59
2022 61.77
2023 62.82

INTERPRETATION:

This ratio helps in identifying how violent a bank is, in lending, which results in improved
profitability. The larger the ratio, the better the profit and is ranked 1.the
highest ratio is achieved is 63.59% in the year 2021.

DIAGRAM 5.9.1 ADVANCE/ TOTAL ASSET RATIO

ASSET QUALITY

5.10 NET NPA TO NET ADVANCE

YEAR %
2019 0.70
2020 2.11
2021 3.40
2022 2.06
2023 1.56

INTERPRETATION:

Net Non-Performing Assets are measured as a percentage of net advances.

Lower ratio will be preferred. Lowest ratio of 0.70% is achieved in the year
2019.
 DIAGRAM 5.10.1 NET NPA TO NET ADVANCE

TABLE 5.11 NET NPA TO TOTAL ASSETS

YEAR %
2019 0.47
2020 1.43
2021 2.39
2022 1.40
2023 1.02

Interpretation:

This Ratio Helps In Identifying The Competency Of The Bank In Predicting The
Credit Risk And Its Ability In Recovering The Debts. Lower Ratio Is Preferred.
The Bank has a lower ratio of 0.47% in the year 2019.
DIAGRAM 5.11.1 NET NPA TOTOTAL ASSET
TABLE 5.12 GROSS NPA TO TOTAL ASSETS

YEAR %
2019 1.15
2020 3.53
2021 4.95
2022 3.71
2023 3.30

INTERPRETATION:

Here the lower ratio is chosen. The Bank has a lower ratio of 1.15% in the year 2019.

DIAGRAM 5.12.1 GROSS NPA TO TOTAL ASSET

 TABLE 5.13 TOTAL ADVANCE TO TOTAL DEPOSITS

YEAR %
2019 94.63
2020 90.03
2021 96.91
2022 90.21
2023 89.27

INTERPRETATION:

Total advance to deposit ratio is used to assess a bank’s liquidity by

comparing a bank’s total advance to its total deposits for the same periods.
Typically the ideal loan to deposit ratio is 80 % to 90%. The Bank has the most
ideal ratio of 89.27% in year 2023.

DIAGRAM 5.13.1 TOTAL ADVANCE TO TOTAL DEPOSIT

TABLE 5.14 PROFIT PER EMPLOYEE

YEAR %
2019 16.40
2020 6.49
2021 0.46
2022 7.66
2023 2.25

INTERPRETATION:

Ratio indicates the employees‘ contribution towards the profit of the banks.
The larger ratio is chosen. The Bank has the larger ratio of 16.40% in the
year 2019.

DIAGRAM 5.14.1 PROFIT PER EMPLOYEE

 TABLE 5.15 BUSINESS PEREMPLOYEE

YEAR %
2019 13.09
2020 9.79
2021 6.87
2022 5.75
2023 4.83

INTERPRETATION:

This ratio shows how effectively the human resources are utilized by the
business. The Larger the ratio, the better the human resources are utilized. The
higher ratio is chosen. The Bank has a higher ratio of 13.09% in the year 2019.

DIAGRAM 5.15.1 BUSINESS PER EMPLOYEE

TABLE 5.16 INTEREST INCOME TO TOTAL INCOME

YEAR %
2019 0.78
2020 0.82
2021 0.97
2022 0.93
2023 0.89

INTERPRETATION:

This ratio helps in finding out the portion of the income from interest out of
income in total. The higher ratio is chosen. The Bank has a higher ratio of
0.97% in the year 2021.

DIAGRAM 5.16.1 INTEREST INCOME TO TOTAL INCOME

 TABLE 5.17 NON INTEREST INCOME TO TOTAL INCOME

YEAR %
2019 18.60
2020 20.79
2021 19.32
2022 19.27
2023 24.80

INTERPRETATION:

It is a profitability metric that measures how much a bank earns in other

income compared to the total income. The bank has a higher ratio of 24.80%
in the year 2023.

DIAGRAM 5.17.1 NON INTEREST INCOME TO TOTAL

INCOME
TABLE 5.18 CURRENT RATIO

YEAR %
2019 2.20
2020 1.91
2021 1.65
2022 2.03
2023 2.30

INTERPRETATION

It shows the liquidity position of the bank. A range between 1.5-3 is

considered healthy. The bank has a more ideal ratio of 2.30% in the year 2023.

DIAGRAM 5.18.1 CURRENT RATIO

TABLE 5.19 CREDIT DEPOSIT RATIO

YEAR %
2019 91.65
2020 90.03
2021 96.92
2022 90.21
2023 89.27

INTERPRETATION:

Total advance to deposit ratio is used to assess a bank’s liquidity by comparing a

bank’s total advance to its total deposits for the same periods. Typically the ideal
loan to deposit ratio is 80 % to 90%. The Bank has ideal ratio of 89.27% in year
2023.

DIAGRAM 5.19.1 CREDIT DEPOSIT RATIO

 COMPARATIVE BALANCE SHEET OF AXIS BANK

TABLE 5.20 COMPARATIVE BALANCE SHEET FOR YEAR ENDING MARCH, 2023 AND

MARCH, 2022

Year ending 31st March Increase/Decrease

Particulars
2023 2022 Amount Percentage
Liabilities 12 Months 12 Months
Share Capital 564.34 514.33 50.01 9.72
Reserves & Surplus 84383.51 66161.97 18221.54 27.54
Net Worth 84947.84 66676.3 18271.54 27.40
Secured Loan 147954.13 152775.78 -4821.65 -3.16
Unsecured Loan 640104.94 548471.34 91633.6 16.71
TOTAL LIABILITIES 873006.91 767923.42 105083.49 13.68
Assets
Gross Block 3838.59 3763.94 74.65 1.98
(-) Acc. Depreciation 0 0 0 0.00
Net Block 3838.59 3763.94 74.65 1.98
Capital Work in 474.31 272.69 73.94
201.62
Investments 156734.32 174969.28 -18234.96 -10.42
Inventories 0 0 0 0.00
Sundry Debtors 0 0 0 0.00
Cash and Bank 97268.28 67204.64 30063.64 44.73
Loans and Advances 656849.32 554785.98 102063.34 18.40
Total Current Assets 754117.6 621990.62 132126.98 21.24
Current Liabilities 42157.9 33073.12 9084.78 27.47
Provisions 0 0 0 0.00
Total Current 42157.9 33073.12 27.47
9084.78
NET CURRENT 711959.7 588917.5 20.89
123042.2
Misc. Expenses 0 0 0 0.00
TOTAL 873006.91 767923.42 13.68
ASSETS(A+B+C+D+E) 105083.49
 TABLE 5.21 COMPARATIVE BALANCE SHEET FOR YEAR ENDING MARCH, 2022 AND
MARCH, 2021.

Year ending 31st March Increase/Decrease

Particulars
2022 2021 Amount Percentage
Liabilities 12 Months 12 Months
Share Capital 514.33 513.31 1.02 0.20
Reserves & Surplus 66161.97 62931.95 3230.02 5.13
Net Worth 66676.3 63445.26 3231.04 5.09
Secured Loan 152775.78 148016.14 4759.64 3.22
Unsecured Loan 548471.34 453622.72 94848.62 20.91
TOTAL LIABILITIES 767923.42 665084.13 102839.29 15.46
Assets
Gross Block 3763.94 3625.59 138.35 3.82
(-) Acc. Depreciation 0 0 0
Net Block 3763.94 3625.59 138.35 3.82
Increase/Decrease
Year ending 31st March
Capital Work in
Particulars 272.69 346.09 -73.4 -21.21
Investments 2021
174969.28 2020
153876.08 Amount
21093.2 Percentag
13.71
Progress
Liabilities
Inventories 12 Months
0 12 Months
0 0 e
Share Capital
Sundry Debtors 513.310 479.01
0 34.3
0 7.16
Reserves
Cash & Surplus
and Bank 62931.95
67204.64 55283.53
43454.89 7648.42
23749.75 13.83
54.65
Net Worth
Loans and Advances 63445.26
554785.98 55762.54
490026.93 7682.72
64759.05 13.78
13.22
TotalLoan
Secured Current Assets 621990.62
148016.14 533481.82
105030.87 88508.8
42985.27 16.59
40.93
CurrentLoan
Unsecured Liabilities 33073.12
453622.72 26245.45
414378.79 6827.67
39243.93 26.01
9.47
TOTALProvisions
LIABILITIES 0
665084.13 0
575172.2 0
89911.93 15.63
Total Current
Assets 33073.12 26245.45 6827.67 26.01
GrossNET CURRENT
Block 3625.59
588917.5 3465.93
507236.36 4.61
16.10
Liabilities 159.66
81681.14
(-) Acc.
Misc.Depreciation
Expenses 0 0 00 00
Net Block
TOTAL 3625.59 3465.93 159.66 4.61
767923.42 665084.13 15.46
Capital Work in
ASSETS(A+B+C+D+E) 346.09 280.96 65.13
102839.29 23.18
Investments
Progress 153876.08 128793.37 25082.71 19.48
Inventories 0 0 0
Sundry Debtors 0 0 0
Cash and Bank 43454.89 50256.18 -6801.29 -13.53
Loans and Advances 490026.93 418671.22 71355.71 17.04
Total Current Assets 533481.82 468927.41 64554.41 13.77
Current Liabilities 26245.45 26295.47 -50.02 -0.19
Provisions 0 0 0
Total Current Liabilities 26245.45 26295.47 -50.02 -0.19
NET CURRENT 507236.36 442631.94 64604.42 14.60
Misc.
ASSETSExpenses 0 0 0
TOTAL 665084.13 575172.2 89911.93 15.63
ASSETS(A+B+C+D+E)
TABLE 5.22 COMPARATIVE BALANCE SHEET FOR YEAR ENDING MARCH, 2021
AND MARCH, 2020.
 TABLE 5.23 COMPARATIVE BALANCE SHEET FOR YEAR ENDING MARCH, 2020
AND MARCH, 2019.

Year ending 31st March Increase/Decrease

Particulars
2020 2019 Amount Percentage
Liabilities 12 Months 12 Months
Share Capital 479.01 476.57 2.44 0.51
Reserves & Surplus 55283.53 52688.34 2595.19 4.93
Net Worth 55762.54 53164.91 2597.63 4.89
Secured Loan 105030.87 99226.38 5804.49 5.85
Unsecured Loan 414378.79 357967.56 56411.23 15.76
TOTAL LIABILITIES 575172.2 510358.85 64813.35 12.70
Assets
Gross Block 3465.93 3316.2 149.73 4.52
(-) Acc. Depreciation 0 0 0
Net Block 3465.93 3316.2 149.73 4.52
Capital Work in 280.96 206.97 73.99 35.75
Investments
Progress 128793.37 122006.2 6787.17 5.56
Inventories 0 0 0
Sundry Debtors 0 0 0
Cash and Bank 50256.18 33325.44 16930.74 50.80
Loans and Advances 418671.22 366612.8 52058.42 14.20
Total Current Assets 468927.41 399938.24 68989.17 17.25
Current Liabilities 26295.47 15108.77 11186.7 74.04
Provisions 0 0 0
Total Current 26295.47 15108.77 11186.7 74.04
NET CURRENT
Liabilities 442631.94 384829.47 57802.47 15.02
Misc. Expenses
ASSETS 0 0 0
TOTAL 575172.2 510358.85 64813.35 12.70
ASSETS(A+B+C+D+E)