The analysis of the banking sector in India

1. FINANCIAL SERVICES IN INDIA BANKING INDUSTRY KHUSHAL PURI RAHUL AGARWAL SOURAV MISHRA

2. Structure of the Banking Industry

3. Policy and Regulation Framework for Banking System

4. Evolution of Banking Reforms in India

5. Evolution of Banking Reforms in India … contd.

8. Population Group-wise distribution of Deposits and Credits of SCBs

17. Key Players – Performance Analysis Private Banks, though low in market share, have over-performed the Public banks in terms of EPS growth. PNB has emerged as one of the highly efficient among Public banks. Key Players in Indian Banking Sector Name of Bank Credit Portfolio as in March-11 (Rs. billion) Market Share (%) NIMs (2010-11) Tier I Capital % as in March-2011 Return on Net worth (2010-11) Gross NPA % as in March-2011 State Bank of India 7,567 16.44% 2.90% 7.80% 13% 3.30% ICICI Bank 2,164 5.51% 2.30% 13.20% 10% 4.50% Punjab National Bank 2,421 5.17% 3.50% 8.40% 24% 1.80% Canara Bank 2,125 4.36% 2.60% 10.90% 26% 1.50% Bank of Baroda 2,287 4.17% 2.80% 10.00% 24% 1.40% Bank of India 2,131 4.12% 2.50% 8.30% 17% 2.20% HDFC Bank 1,600 4.10% 4.20% 12.20% 17% 1.10% IDBI Bank 1,571 3.50% 1.80% 8.10% 16% 1.80% Axis Bank 1,424 3.35% 3.10% 9.40% 19% 1.10% Central Bank of India 1,297 2.79% 2.70% 6.40% 18% 2.20% Total Banking Sector 42,874 100% 2.90% 9.70% 17% 2.30% Source: Annual Reports Financial details of top 3 cos in terms of Mcap Name of Bank Profit / Emp (Cr.) EPS Growth YoY % EV/EBITDA P/BV P/E CD Ratio (%) Int Expended/ Int Earned % State Bank of India ( Pub) 0.04 -10.22% 17.07 2.70 21.92 79.90% 60.04% ICICI Bank (Private) 0.10 24.08% 17.68 2.33 25.90 92.97% 65.28% Punjab National Bank (Pub) 0.08 13.48% 16.07 1.93 8.95 76.25% 56.25%

18. Industry Concentration – Herfindahl-Hirschman Index Since the HHI of top 10 cos is 429 compared to overall industry value of 495, the Bank industry in India seems to be Oligopolistic market. Due to the unavoidable service requirement of financial intermediation and high regulations the industry is not attractive to Pvt. plalyers. The Fee based services of banks is still in nascent stage. Company Name NoC Full Year Data (Rs. Cr) Year ended - 2011-Mar Price Information as on 30-09 -2011 Equity Sales Sales MCAP NP LTP Eq MCAP Banks - Public Sector 28 14253.7 426935.4 72.18% 46774.6 3,22,178.15 Bank of Baroda 394.28 24,695.10 4.17% 4,241.80 764 30,122.99 Bank of India 546.48 24,393.50 4.12% 2,488.71 316 17,268.77 Canara Bank 443 25,767.04 4.36% 4,025.53 444 19,669.20 Central Bank 646.61 16,485.61 2.79% 1,252.48 102 6,595.42 IDBI Bank 984.61 20,684.47 3.50% 1,652.14 103 10,141.48 Punjab Natl.Bank 316.81 30,599.06 5.17% 4,431.46 952 30,160.31 St Bk of India 634.99 97,218.96 16.44% 8,274.75 1,911 1,21,346.59 Banks - Private Sector 116 37944.6 164578.7 27.82% 25857.9 3,34,906.27 Axis Bank 412.32 19,786.94 3.35% 3,392.82 1,021 42,097.87 HDFC Bank 467.41 24,263.36 4.10% 3,926.90 467 1,09,140.24 ICICI Bank 1,152.32 32,621.95 5.51% 5,120.00 875 10,08,280.00 Source: www.capitaline.com All 144 Banks Top 10 in Sales HHI (Sales) 494.95 428.73 (87%) Concentration Ratio (Top 10 Cos.) 53.51% Rest 21 Public banks accounts for 31% of MCAP.

20. M. Porter’s Five Forces Analysis > Read Speaker’s Notes

21. Current Outlook: Inverted Yield Curve & Asset Liability Mismatch In developing countries, like India, the inverted yield curves are true reflection of Inflationary pressure and the effectiveness of the Hawkish monetary policies to contain the inflationary expectation in future. Because of the high interest rates, the short-term deposits seem to be high than in the long-term G-sec. Lower deposits in long-term bonds can also exacerbate ALM. Maturity (Yrs) Maturity (Days) Mar-11 Apr-11 May-11 06-Jun-11 07-Jun-11 Jul-11 Aug-11 0.997 363.998 7.846 7.852 8.512 8.196 8.608 8.592 8.555 9.992 3646.984 8.166 8.081 8.235 8.376 8.334 8.415 8.375 Spread (bps) 32 23 -28 18 -27 -18 -18