Fundamental analysis of banking sector SBI AND HDFC BANK

“FUNDAMENTAL ANALYSIS IN BANKING SECTOR SBI AND HDFC BANK”
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TOPIC:- FUNDAMENTAL ANALYSIS OF BANKING
SECTOR
BLACK BOOK PROJECT
JEETU MATTA

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OBJECTIVE:
• The main objective of project is to do fundamental analysis of a banking
sector of companies.
• Secondly to study the present banking system in india.
• Analyze the information collected on balance sheet, profit & loss statement,
market price etc.
• To do Ratio Analysis for the selected companies and make necessary
comments on it so as to provide complete idea and core ideology of the
company. So that investors can easily get idea about the fundamental
analysis of banking companies.
• To carry out financial and non-financial analysis of banking Sector as a
whole for the selected period

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EXECUTIVE SUMMARY
In the growing global competition, the productivity of any business concern depends
upon the behavioural aspect of consumers. This topic deals with the customers' perception towards
other advanced products from SBI and HDFC investment.
This project report contains 5 different units.
The report begins with the introduction to Fundamental Analysis, its various types, its overall
information industry, company, economy etc.
The second unit is to introduce the banking sector which gives a brief idea regarding the banking
sector in India. It also contains the market size, participants and the structure of the banking sector
in India.
The third unit comprises all about SBI, its market share, its achievements, analysis of its balance
sheet and profit & loss statement.
The fourth unit, is the introduction to HDFC, its market share, its achievements, analysis of balance
sheet and profit & loss statement which shows the analysis of data through balance sheets, profit
& loss statement of data collected from surveys.
The fifth unit shows the comparison between SBI and HDFC with the help of analyses of ratio
with its charts and deals with the findings, suggestions & conclusion which is very much important
after analysis is made.
As we know that only analysis is not the end of a research, so in the sixth chapter
the Conclusion part is covered which is made after an in-depth study of the analysis part of the
thesis.
In each of the five chapters as described above, every chapter has been scheduled in a manner so
as to enable the reader to appreciate the contents easily. The report is supported by figures and data
wherever necessary with a view to assist the reader in developing a clear-cut understanding of the
topic.
I hope this report will be extremely useful for those it is meant for. Constructive and healthy
suggestions for improvements of the report shall be gratefully appreciated.

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FUNDAMENTAL ANALYSIS
INDEX
CHP
NO.
PARTICULARS
1
1.1 INTRODUCTION 1
1.2
MEANING AND DEFINITION 2
1.3 TYPES OF FUNDAMENTAL ANALYSIS 2
2. BANKING SECTOR IN INDIA 9
2.1 INTRODUCTION 9
2.2 MARKET SIZE 9
2.3 PARTICIPANTS 10
2.4 STRUCTURE OF BANKING SECTOR IN INDIA 13
3. ANALYSIS OF “SBI” BANK 19
3.1 HISTORY 19
3.2 PRODUCTS AND SERVICES 21
3.3 MARKET SHARE OF SBI BANK 25
3.4 BALANCE SHEET OF SBI BANK (2 YEARS) 26
PAGE
NO.
1.

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3.5 PROFIT & LOSS STATEMENT OF SBI BANK 27
4. ANALYSIS OF HDFC BANK 28
4.1 HISTORY 23
4.2 PRODUCTS AND SERVICES 31
4.3 MARKET SHARE OF HDFC BANK 36
4.4 BALANCE SHEET OF HDFC BANK 37
4.5 PROFIT & LOSS STATEMENT HDFC BANK 38
5. RATIO COMPARISION BETWEEN “SBI AND
“HDFC” BANK
39
5.1 RATIO ANALYSIS 39
5.2 LIQUIDITY RATIO 46
5.3 INVESTMENT VALUATION RATIO 49
6. CONCLUSION 53

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UNIT1: INTRODUCTION OF FUNDAMENTAL ANALYSIS
1.1: INTRODUCTION
So, you want be a stock analyst? Perhaps not, but since you're reading this we'll assume that you
at least want to understand stocks. Whether it's your burning desire to be a hotshot analyst on Wall
Street or you just like to be hands-on with your own portfolio, you've come to the right spot.
Fundamental analysis is the cornerstone of investing. In fact, some would say that you aren't
really investing if you aren't performing fundamental analysis. Because the subject is so broad,
however, it's tough to know where to start. There are an endless number of investment strategies
that are very different from each other, yet almost all use the fundamentals.
The goal of this tutorial is to provide a foundation for understanding fundamental analysis. It's
geared primarily at new investors who don't know a balance sheet from an income statement.
While you may not be a "stock-picker extraordinaire" by the end of this tutorial, you will have a
much more solid grasp of the language and concepts behind security analysis and be able to use
this to further your knowledge in other areas without feeling totally lost.
The biggest part of fundamental analysis involves delving into the financial statements. Also
known as quantitative analysis, this involves looking at revenue, expenses, assets, liabilities and
all the other financial aspects of a company. Fundamental analysts look at this information to gain
insight on a company's future performance. A good part of this tutorial will be spent learning about
the balance sheet, income statement, cash flow statement and how they all fit together.
But there is more than just number crunching when it comes to analyzing a company. This is
where qualitative analysis comes in - the breakdown of all the intangible, difficult-to-measure
aspects of a company. Finally, we'll wrap up the tutorial with an intro on valuation and point you
in the direction of additional tutorials you might be interested in. (Also, although it's not required,
you might find it helpful to read our Investing 101 tutorial, as well as our tutorial on Stock Basics,
before starting.)

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1.2: MEANING & DEFINITION
Fundamental analysis is defined as an evaluation of company’s internal and external forces to
forecast the earnings, profit and loss with respect to the movement of the company’s stock price.
Fundamental analysis is one of the most common tools to analyze whether one should invest in a
stock or not. It’s made to deepen the financial statements of a company. Also known as quantitative
analysis, it analyzes the environment to income, expenses, assets, liabilities and all other financial
aspects of a company. The idea is to look at each of these aspects in order to get an idea of the
possible future performance of the company. But there is more than numerical calculations when
it comes to analyzing a business. The qualitative analysis is needed here, that is, to measure the
intangibles of the company.
What is Fundamental Analysis?
In this section, we are going to review the basics of fundamental analysis, examine how it can be
broken down into quantitative and qualitative factors, introduce the subject of intrinsic value and
conclude with some of the downfalls of using this technique
1.3: TYPES OF FUNDAMENTAL ANALYSIS
1.3.1: Qualitative Factors:
Each industry has differences in terms of its customer base, market share among firms, industry-
wide growth, competition, regulation and business cycles. Learning about how the industry works
will give an investor a deeper understanding of a company's financial health.
• Customers:
Some companies serve only a handful of customers, while others serve millions. In general, it's a
red flag (a negative) if a business relies on a small number of customers for a large portion of its
sales because the loss of each customer could dramatically affect revenues. For example, think of
a military supplier who has 100% of its sales with the U.S. government. One change in government

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policy could potentially wipe out all of its sales. For this reason, companies will always disclose
in their 10-K if any one customer accounts for a majority of revenues.
• Market Share:
Understanding a company's present market share can tell volumes about the company's business.
The fact that a company possesses an 85% market share tells you that it is the largest player in its
market by far. Furthermore, this could also suggest that the company possesses some sort of
"economic moat," in other words, a competitive barrier serving to protect its current and future
earnings, along with its market share. Market share is important because of economies of scale.
When the firm is bigger than the rest of its rivals, it is in a better position to absorb the high fixed
costs of a capital-intensive industry.
• Industry Growth:
One way of examining a company's growth potential is to first examine whether the amount of
customers in the overall market will grow. This is crucial because without new customers, a
company has to steal market share in order to grow. In some markets, there is zero or negative
growth, a factor demanding careful consideration. For example, a manufacturing company
dedicated solely to creating audio compact cassettes might have been very successful in the '70s,
'80s and early '90s. However, that same company would probably have a rough time now due to
the advent of newer technologies, such as CDs and MP3s. The current market for audio compact
cassettes is only a fraction of what it was during the peak of its popularity.
• Competition:
Simply looking at the number of competitors goes a long way in understanding the competitive
landscape for a company. Industries that have limited barriers to entry and a large number of
competing firms create a difficult operating environment for firms. One of the biggest risks within
a highly competitive industry is pricing power. This refers to the ability of a supplier to increase
prices and pass those costs on to customers. Companies operating in industries with few
alternatives have the ability to pass on costs to their customers. A great example of this is Wal-
Mart. They are so dominant in the retailing business, that Wal-Mart practically sets the price for

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any of the suppliers wanting to do business with them. If you want to sell to Wal-Mart, you have
little, if any, pricing power.
• Regulation:
Certain industries are heavily regulated due to the importance or severity of the industry's
products and/or services. As important as some of these regulations are to the public, they can
drastically affect the attractiveness of a company for investment purposes. In industries where one
or two companies represent the entire industry for a region (such as utility companies),
governments usually specify how much profit each company can make. In these instances, while
there is the potential for sizable profits, they are limited due to regulation. In other industries,
regulation can play a less direct role in affecting industry pricing. For example, the drug industry
is one of most regulated industries. And for good reason - no one wants an ineffective drug that
causes deaths to reach the market. As a result, the U.S. Food and Drug Administration (FDA)
require that new drugs must pass a series of clinical trials before they can be sold and distributed
to the general public. However, the consequence of all this testing is that it usually takes several
years and millions of dollars before a drug is approved. Keep in mind that all these costs are above
and beyond the millions that the drug company has spent on research and development. All in all,
investors should always be on the lookout for regulations that could potentially have a material
impact upon a business' bottom line. Investors should keep these regulatory costs in mind as they
assess the potential risks and rewards of investing
1.3.2: QUANTITATIVE FACTORS
• The Balance Sheet:
The balance sheet represents a record of a company's assets, liabilities and equity at a particular
point in time. The balance sheet is named by the fact that a business's financial structure balances
in the following manner:
Assets = Liabilities + Shareholders' Equity

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Assets represent the resources that the business owns or controls at a given point in time. This
includes items such as cash, inventory, machinery and buildings. The other side of the equation
represents the total value of the financing the company has used to acquire those assets. Financing
comes as a result of liabilities or equity. Liabilities represent debt (which of course must be paid
back), while equity represents the total value of money that the owners have contributed to the
business - including retained earnings, which is the profit made in previous years.
• The Income Statement:
While the balance sheet takes a snapshot approach in examining a business, the income statement
measures a company's performance over a specific time frame. Technically, you could have a
balance sheet for a month or even a day, but you'll only see public companies report quarterly and
annually. The income statement presents information about revenues, expenses and profit that was
generated as a result of the business' operations for that period.
Revenue as a investor signal Revenue, also commonly known as sales, is generally the most
straightforward part of the income statement. Often, there is just a single number that represents
all the money a company brought in during a specific time period, although big companies
sometimes break down revenue by business segment or geography. The best way for a company
to improve profitability is by increasing sales revenue. For instance, cafe Coffee has aggressive
long-term sales growth goals that include a distribution system of 20,000 stores worldwide.
Consistent sales growth has been a strong driver of café’s profitability. The best revenue is those
that continue year in and year out. Temporary increases, such as those that might result from a
short-term promotion, are less valuable and should garner a lower price-to-earnings multiple for a
company.
• Operating profit margin and non-operating margin:
If company’s revenue is increasing from its normal business than a company’s fundamentals are
strong if company had shown growth in revenue from a business which is not a regular business
of company than that is not good for a company. For example appreciation on company’s
investment in real estate is not a part of core business of company it is the part non-operating profit
of company.

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• What are the Expenses?
There are many kinds of expenses, but the two most common are the cost of goods sold (COGS)
and selling, general and administrative expenses (SG&A). Cost of goods sold is the expense most
directly involved in creating revenue. It represents the costs of producing or purchasing the goods
or services sold by the company. For example, if Wal-Mart pays a supplier $4 for a box of soap,
which it sells to customers for $5. When it is sold, Wal-Mart’s cost of goods sold for the box of
soap would be $4. Next, costs involved in operating the business are SG&A. This category includes
marketing, salaries, utility bills, technology expenses and other general costs associated with
running a business. SG&A also includes depreciation and amortization. Companies must include
the cost of replacing worn out assets. Remember, some corporate expenses, such as research and
development (R&D) at technology companies, are crucial to future growth and should not be cut,
even though doing so may make for a better-looking earnings report. Finally, there are financial
costs, notably taxes and interest payments, which need to be considered.
Profits = Revenue – Expenses
Profit, most simply put, is equal to total revenue minus total expenses. However, there are several
commonly used profit subcategories that tell investors how the company is performing. Gross
profit is calculated as revenue minus cost of goods sold. Returning to Wal-Mart again, the gross
profit from the sale of the soap would have been $1 ($5 sales price less $4 cost of goods sold = $1
gross profit). Companies with high gross margins will have a lot of money left over to spend on
other business operations, such as R&D or marketing. So be on the lookout for downward trends
in the gross margin rate over time. This is a telltale sign of future problems facing the bottom line.
When cost of goods sold rises rapidly, they are likely to lower gross profit margins - unless, of
course, the company can pass these costs onto customers in the form of higher prices. Operating
profit is equal to revenues minus the cost of sales and SG&A. This number represents the profit a
company made from its actual operations, and excludes certain expenses and revenues that may
not be related to its central operations. High operating margins can mean the company has effective
control of costs, or that sales are increasing faster than operating costs. Operating profit also gives
investors an opportunity to do profit-margin comparisons between companies that do not issue a

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separate disclosure of their cost of goods sold figures (which are needed to do gross margin
analysis). Operating profit measures how much cash the business throws off, and some consider it
a more reliable measure of profitability since it is harder to manipulate with accounting tricks than
net earnings.
1.3.3: Economic Analysis
Every common stock is susceptible to the market risk. This feature of almost all types of common
stock indicates their combined movement with the fluctuations in the economic conditions towards
the improvement or deterioration.
Stock prices react favorably to the low inflation, earnings growth, a better balance of trade,
increasing gross national product and other positive macroeconomic news. Indications that
unemployment is rising, inflation is picking up or earnings estimates are being revised downward
will negatively affect the stock prices. This relationship is reasonably reliable that the US economy
is better represented by the Standard & Poor 500 stock index, which is famous market indicator.
The stock market will forecast an economic boom or recession properly from the signs in front of
average citizen. The Federal bank of New York has conducted a research that describes that the
slope of the yield curve is the perfect indicator of the economic growth more than three months
out. Recession is indicated by negative slope while positive slope is considered as good one.
The implications of market risk should be clear to the investor. When there is recession in the
economy, the prices of stocks moves downward. All the companies suffer the effects of recession
despite of the fact that these are high performing companies or low performing ones. Similarly
the stock prices are positively affected by the boom period of the economy.
1.3.4: Industry Analysis:
It is clear there is certain level of market risk faced by every stock and the stock price decline
during recession in the economy. Another point to be remembered is that the defensive kind of
stock is affected less by the recession as compared to the cyclical category of stock. In the industry

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analysis, such industries are highlighted that can stand well in front of adverse economic
conditions.
In 1980, Michael Porter proposed a standard approach to industry analysis which is referred to
as competitive analysis frame work. Threats of new entrants evaluate the expected reaction of
current competitors to new competitors and obstacles to entry into the industry. In certain
industries it is quite difficult for new company to compete successfully.
For example new producers in the automobile industry face difficulty in competing the
established companies, like General Motors and Ford etc. There are certain other industries where
the entry of new company is easier like financial planning industry. No extraordinary efforts are
required in such kind of industries to establish any new company. The growth in the industry is
slowed down through the rivalry among the current competitors. Profits of the company are
reduced when it tries to cover more market share because under existing rivalry the company has
to invest a large portion of its earnings in this enhancing market share. The industry where the
rivalry is friendly or modest among competitors provides greater opportunity for product
differentiation & increased profits. The intense competition is favorable for the customer but not
good for the producer of the product. In case of airline industry there are common fare price wars
among the competitors. When one airline company reduces its price then the other must also adjust
its price accordingly in order to retain the existing customers.
1.3.5: Company Analysis:
In company analysis different companies are considered and evaluated from the selected industry
so that most attractive company can be identified. Company analysis is also referred to as security
analysis in which stock picking activity is done. Different analysts have different approaches of
conducting company analysis like

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UNIT 2: BANKING SECTORS IN INDIA
2.1: INTRODUCTION
A bank is a financial institution and a financial intermediary that accepts deposits and channels
those deposits into lending activities, either directly or through capital markets. A bank connects
customers that have capital deficits to customers with capital surpluses. Due to their critical status
within the financial system and the economy generally, banks are highly regulated in most
countries. They are generally subject to minimum capital requirements which are based on an
international set of capital standards, known as the Basel Accords. Banking in India originated in
the last decades of the 18th century. The first banks were The General Bank of India, which started
in 1786, and Bank of Hindustan, which started in 1790; both are now defunct. The oldest bank in
existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806,
which almost immediately became the Bank of Bengal. This was one of the three presidency banks,
the other two being the Bank of Bombay and the Bank of Madras, all three of which were
established under charters from the British East India Company. For many years the Presidency
banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to
form the Imperial Bank of India, which, upon India's independence, became the State Bank of
India in 1955.
2.2: Market Size
The Indian banking system consists of 27 public sector banks, 26 private sector banks, 46 foreign
banks, 56 regional rural banks, 1,574 urban cooperative banks and 93,913 rural cooperative banks,
in addition to cooperative credit institutions. Public-sector banks control more than 70 per cent of
the banking system assets, thereby leaving a comparatively smaller share for its private peers.
Banks are also encouraging their customers to manage their finances using mobile phones.
ICRA estimates that credit growth in India’s banking sector would be at 7-8 per cent in FY 2017-
18.

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2.3: PARTICIPANTS
Investments/developments:
Key investments and developments in India’s banking industry include:
• The Reserve Bank of India (RBI) has proposed to allow banks to invest in real estate investment
trusts (REITs) and infrastructure investment trusts (InvITs) which is expected to benefit both
real estate and banking sector in diversifying investor base and investment avenues
respectively.
• The Canada Pension Plan Investment Board (CPPIB) and the Caisse de Depot Quebec (CDPQ)
have acquired a 1.5 per cent stake in Kotak Mahindra Bank from Mr. Uday Kotak, Executive
vice-chairman and Managing director, Kotak Mahindra Bank, for a total consideration of Rs
2,254 crore (US$ 350.0 million).
• Fullerton India Credit Co Ltd, a non-banking finance company (NBFC), has raised Rs 500 crore
(US$ 75 million) through masala bonds, to support its onward lending and other financing
activities.
• The Insurance Regulatory and Development Authority of India (IRDA) has allowed insurers to
invest up to 10 per cent in additional tier 1 (AT1) bonds, that are issued by banks to augment
their tier 1 capital, in order to expand the pool of eligible investors for the banks.
• Qatar’s Doha Bank plans to apply to the Qatar Central Bank and Reserve Bank of India for
permission to establish a local subsidiary in India, with the vision to create a retail branch
network in India.
• Fairfax Financial Holdings, a Canada-based financial services firm, has received an approval
from the RBI to acquire a majority 51 per cent stake in Kerala-based Catholic Syrian Bank for
Rs 1,000 crore (US$ 150 million), which will be the first takeover of an Indian bank by a non-
banking financial entity, after RBI tweaked ownership norms.
• India Post has received the final license from RBI to start its payment bank operations, thus
becoming the third entity in India after Bharti Airtel and Paytm to receive payment bank license
from RBI.

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• Microfinance firm Ujjivan Financial Services Ltd has announced starting of banking services
across its branches under the name of Ujjivan Small Finance Bank Ltd, thus becoming the
largest among five small banks which are scheduled to start their operations or have already
started.
Government Initiatives:
• Finance Minister Mr. Arun Jaitley has proposed various measures to quicken India's transition
to a cashless economy, including a ban on cash transactions over Rs 200,000 (US$ 3,100), tax
incentives for creation of a cashless infrastructure, promoting greater usage of non-cash modes
of payments, and making Aadhaar-based payments more widespread.
• The Government of India has announced demonetization of high denomination bank notes of
Rs 1000 and Rs 500, with effect from November 08, 2016, in order to eliminate black money
and the growing menace of fake Indian currency notes, thereby creating opportunities for
improvement in economic growth.
• The RBI has cut its key repo rate by 25 basis points to 6.25 per cent, in order to boost growth
as according to RBI, the inflation momentum has moderated because of a normal monsoon.
The government and the regulator have undertaken several measures to strengthen the
Indian banking sector.
• Government of India has decided to amend Section 35 A of the Banking Regulation Act that
will allow the Reserve Bank of India (RBI) to direct banks for the recovery of non-performing
assets (NPAs)
• The Reserve Bank of India (RBI) has proactively instructed banks to increase their levels of
provision on the loans provided to the telecom sector as a prudent measure, which will help to
shore up provisions for future recognition of any non-performing assets arising out of the sector.
• The RBI has allowed banks in India to raise funds through issuance of rupee-denominated
bonds overseas, also called masala bonds, within the current limit of Rs 2,44,323 crore (US$
36.6 billion) set for foreign investment in corporate bonds.
• The Ministry of Labour and Employment has successfully opened around 3,840,863 bank
accounts as on December 26, 2016, for workers especially in the unorganised sector, as part of
its campaign to promote and ensure cashless transfer of wages to workers.

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• The National Bank for Agriculture and Rural Development (NABARD) plans to provide
around 200,000 point-of-sale (PoS) machines in 100,000 villages and distribute RuPay cards to
over 34 million farmers across India, to enable farmers to undertake cashless transactions.
• The Government of India’s indigenous digital payments application, BHIM (Bharat Interface
for Money), has recorded 18 million downloads since its launch on December 30, 2016,
according to Mr Amitabh Kant, Chief Executive Officer, NITI Aayog.
• The Ministry of Finance has lowered the threshold for making electronic payments to suppliers,
contractors or institutions from Rs 10,000 (US$ 150) to Rs 5,000 (US$ 75), in order to attain
the goal of complete digitization of government payments.
Indian banking sector credit growth has grown at a healthy pace:
• Credit off-take has been surging ahead
over the past decade, aided by strong
economic growth, rising disposable
incomes, increasing consumerism and
easier access to credit
• Total credit extended went up to US$
1,089 billion by FY15
• Credit to non-food industries
increased 9.75 per cent to US$ 1,073.4
billion in FY15, from the previous
financial year
• Demand has grown for both corporate
and retail loans

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2.3: STRUCTURES OF BANKING SECTOR IN INDIA
Reserve Bank of India (RBI):
The country had no central bank prior to the establishment of the RBI. The RBI is the supreme
monetary and banking authority in the country and controls the banking system in India. It is called
the Reserve Bank’ as it keeps the reserves of all commercial banks.
Scheduled & Non –scheduled Banks:
A scheduled bank is a bank that is listed under the second schedule of the RBI Act, 1934. In order
to be included under this schedule of the RBI Act, banks have to fulfill certain conditions such as
having a paid-up capital and reserves of at least 0.5 million and satisfying the Reserve Bank that
its affairs are not being conducted in a manner prejudicial to the interests of its depositors.

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Scheduled banks are further classified into commercial and cooperative banks. Non- scheduled
banks are those which are not included in the second schedule of the RBI Act, 1934. At present
these are only three such banks in the country.
1. Commercial Banks:
Commercial banks may be defined as, any banking organization that deals with the deposits and
loans of business organizations. Commercial banks issue bank checks and drafts, as well as accept
money on term deposits. Commercial banks also act as moneylenders, by way of installment loans
and overdrafts. Commercial banks also allow for a variety of deposit accounts, such as checking,
savings, and time deposit. These institutions are run to make a profit and owned by a group of
individuals.
Scheduled Commercial Banks (SCBs):
Scheduled commercial banks (SCBs) account for a major proportion of the business of the
scheduled banks. SCBs in India are categorized into the five groups based on their ownership
and/or their nature of operations. State Bank of India and its six associates (excluding State Bank
of Saurashtra, which has been merged with the SBI with effect from August 13, 2008) are
recognised as a separate category of SCBs, because of the distinct statutes (SBI Act, 1955 and SBI
Subsidiary Banks Act, 1959) that govern them. Nationalised banks and SBI and associates
together form the public sector banks group IDBI ltd. has been included in the nationalised banks
group since December 2004. Private sector banks include the old private sector banks and the new
generation private sector banks- which were incorporated according to the revised guidelines
issued by the RBI regarding the entry of private sector banks in 1993.
Foreign banks are present in the country either through complete branch/subsidiary route presence
or through their representative offices.
Types of Scheduled Commercial Banks:
a. Public Sector Banks:
These are banks where majority stake is held by the Government of India.
Examples of public sector banks are: SBI, Bank of India, Canara Bank, etc.

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b. Private Sector Banks:
These are banks majority of share capital of the bank is held by private individuals. These banks
are registered as companies with limited liability. Examples of private sector banks are: ICICI
Bank, Axis bank, HDFC, etc.
c. Foreign Banks:
These banks are registered and have their headquarters in a foreign country but operate their
branches in our country. Examples of foreign banks in India are: HSBC, Citibank, Standard
Chartered Bank, etc.
d. Regional Rural Banks:
Regional Rural Banks were established under the provisions of an Ordinance promulgated on the
26th September 1975 and the RRB Act, 1976 with an objective to ensure sufficient institutional
credit for agriculture and other rural sectors. The area of operation of RRBs is limited to the area
as notified by GoI covering one or more districts in the State.
Type of Commercial
Banks
Major Shareholders Major Players
Public Sector Banks Government of India SBI, PNB, Canara Bank, Bank of
Baroda, Bank of India, etc
Private Sector Banks Private Individuals ICICI Bank, HDFC Bank, Axis
Bank, Kotak Mahindra Bank, Yes
Bank etc.
Foreign Banks Foreign Entity Standard Chartered Bank, Citi
Bank, HSBC, Deutsche Bank,
BNP Paribas, etc.
Regional Rural Banks Central Govt,
Concerned State Govt and
Sponsor Bank in the ratio of 50 :
15 : 35
Andhra Pradesh Grameena Vikas
Bank, Uttranchal Gramin Bank,
Prathama Bank, etc.

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RRBs are jointly owned by GoI, the concerned State Government and Sponsor Banks (27
scheduled commercial banks and one State Cooperative Bank); the issued capital of a RRB is
shared by the owners in the proportion of 50%, 15% and 35% respectively.
Prathama bank is the first Regional Rural Bank in India located in the city Moradabad in Uttar
Pradesh.
2. Cooperative Banks:
A co-operative bank is a financial entity which belongs to its members, who are at the same time
the owners and the customers of their bank. Co-operative banks are often created by persons
belonging to the same local or professional community or sharing a common interest. Co-operative
banks generally provide their members with a wide range of banking and financial services (loans,
deposits, banking accounts, etc.).
They provide limited banking products and are specialists in agriculture-related products.
Cooperative banks are the primary financiers of agricultural activities, some small-scale industries
and self-employed workers.
Co-operative banks function on the basis of “no-profit no-loss”.
Anyonya Co-operative Bank Limited (ACBL) is the first co-operative bank in India located in the
city of Vadodara in Gujarat.
The co-operative banking structure in India is divided into following main 5 categories:
• PRIMARY URBAN CO-OP BANKS
• Primary Agricultural Credit Societies
• District Central Co-op Banks
• State Co-operative Banks

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• Land Development Banks
Difference between Scheduled Commercial and Schedule Co-operative Banks:
The basic difference between scheduled commercial banks and scheduled cooperative banks is
in their holding pattern. Scheduled cooperative banks are cooperative credit institutions that are
registered under the Cooperative Societies Act. These banks work according to the cooperative
principles of mutual assistance. Also, unlike commercial banks, these banks work on the basis of
“no-profit no-loss”.
How Banks Function:
Banks make money by lending your money out at interest and by charging you for services
provided. Banks keep on lending money.
The other big revenue items generated by banks are the fees they charge. Bank charge for every
service, whether it is for an electronic transaction, or permitting a transfer through the Internet
banking system.

23
Types of Businesses of Banks:
The banking business can be broadly categorized into Retail Banking, Wholesale or Corporate
Banking, Treasury Operations and Other Banking Activities
Business Segmentation
Retail Banking Loans to individuals (Housing loan, Auto loan,
Education loan and other personal loan) or
small businesses.
Wholesale banking Loans to mid and large corporate (Project
Finance, Working Capital Loans, Terms
Loans, Lease Finance, etc.)
Treasury Operations Investment in bonds, equity, Mutual Funds,
commodities, derivatives; trading and forex
operations
Other Banking Activities Hire purchase activities, leasing business,
merchant banking, Syndication services, etc.
Retail banking also known as Consumer Banking is the provision of services by a bank to
individual consumers, rather than to companies, corporations or other banks. Services offered
include savings and transactional accounts, mortgages, personal loans, debit cards, and credit
cards. Retail banking segment is the highest margin business as compared to other business
segments in the banking industry. Currently, ICICI Bank is the largest players in this segment in
India. Other major players in this segment are SBI, PNB, HDFC Bank, etc.

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UNIT 3: ANALYSIS OF "STATE BANK OF INDIA"
3.1: HISTORY
The origin of the State Bank of India goes back to first decade of the nineteenth century with the
establishment of the Bank of Calcutta in 1806 in Calcutta. Three years later the bank received its
charter and was re–designed as the Bank of Bengal (2 January 1809). A unique institution, it was
the first joint–stock bank of British India sponsored by the Government of Bengal. The Bank of
Bombay (15 April 1840) and the Bank of Madras (1 July 1843) followed the Bank of Bengal.
These three banks remained at the apex of modern banking in India till their amalgamation as the
Imperial Bank of India on 27 January 1921.
Primarily Anglo–Indian creations, the three presidency banks came into existence either as a
result of the compulsions of imperial finance or by the felt needs of local European commerce and
were not imposed from outside in an arbitrary manner to modernize India's economy. Their
evolution was, however, shaped by ideas culled from similar developments in Europe and England,
and was influenced by changes occurring in the structure of both the local trading environment
and those in the relations of the Indian economy to the economy of Europe and the global economic
framework.
The State Bank of India, the country’s oldest bank and a premier in terms of balance sheet size,
number of branches, market capitalization and profits is today going through a momentous phase
of change and transformation – the two hundred-year-old public sector behemoth is today stirring
out of its public sector legacy and moving with an agility to give the private and foreign banks a
run for their money.
The bank is entering into many new businesses with strategic tie ups – Pension Funds, General
Insurance, Custodial Services, Private Equity, Mobile Banking, Point of Sale Merchant
Acquisition, Advisory Services, structured products etc – each one of these initiatives having a
huge potential for growth.

25
The bank is forging ahead with cutting edge technology and innovative new banking models, to
expand its rural banking base, looking at the vast untapped potential in the hinterland and proposes
to cover 100,000 villages in the next two years. At the end March, 2011, the total number of
branches was 13,542 while the number of ATMs stood at 20,084 across the country.
It is also focusing at the top end of the market, on whole sale banking capabilities to provide India’s
growing mid / large corporate with a complete array of products and services. It is consolidating
its global treasury operations and entering into structured products and derivative instruments.
Today, the bank is the largest provider of infrastructure debt and the largest arranger of external
commercial borrowings in the country. It is the only Indian bank to feature in the Fortune 500 list.
The bank is actively involved since 1973 in non–profit activity called Community Services
Banking. All branches and administrative offices throughout the country sponsor and participate
in large number of welfare activities and social causes. Their business is more than banking
because they touch the lives of people anywhere in many ways. State Bank of India (SBI) has
received an approval from the Government of India (GOI) for acquisition of SBI Commercial and
International Bank (SBICI Bank). The government had issued the 'Acquisition of SBICI Bank
Order 2011' vide order dated July 29, 2011.
SBI entered the UK's home loan market, the bank started with mortgages for landlords, best known
as buy–to–let mortgages, with amounts ranging from £50,000 to £1.5 million, and loan to value of
ratios of up to 60 per cent.
Foreign Subsidiaries Non-banking Subsidiaries
SBI International (Mauritius) Ltd. SBI Capital Markets Ltd
State Bank of India (California) SBI Funds Management Pvt Ltd
State Bank of India (Canada) SBI Factors & Commercial Services Pvt Ltd
INMB Bank Ltd, Lagos SBI Cards & Payments Services Pvt. Ltd.
(SBICPSL)
BANK SBI Indonesia (SBII) SBI General Insurance Company Limited

26
In April 2014 State Bank of India launched three digital banking facilities for the convenience of
SBI customers. Two at the customer’s door step using TAB banking – one for customers opening
Savings Bank accounts and another for Housing Loan applicants. The third is e–KYC (Know your
Customer).
Listings and shareholding:
As on 31 March 2017, Government of India held around 61.23% equity shares in SBI. Life
Insurance Corporation of India is the largest non-promoter shareholder in the company with 8.82%
shareholding.
Shareholders Shareholding
Promoters: Government of India 61.23%
FIIs/GDRs/OCBs/NRIs 11.17%
Banks & Insurance Companies 10.00%
Mutual Funds & UTI 8.29%
Others 9.31%
Total 100.0%
The equity shares of SBI are listed on the Bombay Stock Exchange, where it is a constituent of the
BSE SENSEX index, and the National Stock Exchange of India, where it is a constituent of the
CNX Nifty. Its Global Depository Receipts (GDRs) are listed on the London Stock Exchange.
3.2 PRODUCTS AND SERVICES
1. Working Capital Finance:
SBI offers working capital finance to meet the entire range of short-term fund requirements that arise within
a corporate's day-to-day operational cycle.

27
The SBI working capital loans can help your company in financing inventories, managing internal cash
flows, supporting supply chains, funding production and marketing operations, providing cash support to
business expansion and carrying current assets.
SBI's working finance products comprise a spectrum of funded and non-funded facilities ranging from cash
credit to structured loans, to meet the different demands from all segments of industry, trade and the services
sector. Funded facilities include cash credit, demand loan and bill discounting. Demand loans are
considered also under the FCNR (B) scheme. Non-funded instruments comprise letters of credit (inland and
overseas) as well as bank guarantees (performance and financial) to cover advance payments, bid bonds
etc.
2. Project Finance:
The SBI has formed a dedicated Project Finance Strategic Business Unit to assess credit proposals from
and extend term loans for large industrial and infrastructure projects. Apart from this, project term loans
for medium sized projects and smaller clients are delivered through the CAG and the NBG.
In general, project finance covers greenfield industrial projects, capacity expansion at existing
manufacturing units, construction ventures or other infrastructure projects. Capital intensive business
expansion and diversification as well as replacement of equipment may be financed through the project
term loans.
Project finance is quite often channeled through special purpose vehicles and arranged against the future
cash streams to emerge from the project.
The loans are approved on the basis of strong in-house appraisal of the cost and viability of the ventures as
well as the credit standing of promoters.
3. Differed Payment Guarantees:
Q. What is the SBI deferred payment guarantee?
SBI can extend deferred payment guarantees to industrial projects for obtaining imported equipment. The
DPG is a standby credit guaranteeing deferred payments, usually for payments for capital goods, turnkey
contracts etc.
4. Corporate Term Loan:
The SBI corporate term loans can support your company in funding ongoing business expansion, repaying
high cost debt, technology upgradation, R&D expenditure, leveraging specific cash streams that accrue into
your company, implementing early retirement schemes and supplementing working capital.

28
Corporate term loans can be structured under the FCNR (B) scheme as well, with the option of switching
the currency denomination at the end of interest periods. This will help you take advantage of global interest
rate trends vis-a-vis domestic rates to minimize your debt cost.
The bank's corporate term loans are generally available for tenors from three to five years, synchronized
with your specific needs.
SBI corporate term loans may carry fixed or floating rates, as befits the exact requirement of the client and
the risk context. Again, these rates will be linked to the bank's prime lending rate.
SBI corporate term loans can have a bullet or periodic repayment schedule, as required by the client. The
repayment mode may be linked to the cash accruals of the company.
The Bank's expert credit crew gauges the applicant's particular fund requirements and evaluates the
company's credit worthiness, factoring in the cash flows generated by it.
5. Structured Finance:
SBI structured finance involves assembling unique credit configurations to meet the complex fund
requirements of large industrial and infrastructure projects. Structured finance can be a combination of
funded and non-funded facilities as well as other credit enhancement tools, lease contracts for instance, to
fit the multi-layer financial requirements of large and long-gestation projects.
Q. What is the SBI advantage in structured finance?
Being India's largest bank and with the rich experience that it brings with it, SBI commands formidable
expertise in engineering financial packages that address complex requirements with minimum risk.
Further, SBI has firm relationships across the financial map of the world, which can be leveraged to
structure solutions that may necessitate the participation of several credit agencies.
6. Dealer Financing:
SBI extends financial support to the corporate distribution networks, by providing both working capital
finance and term loans to select dealers of identified companies. This gives dealers to leverage their business
relationship with major corporates to avail low cost credit. Also, this type of financial solutions allows the
corporate negotiate a better price with dealers. Dealer financing may be extended in the bill discounting
form or simply as cash credit.

29
7. Channel Financing:
Channel financing is an innovative finance mechanism by which the bank meets the various fund necessities
along your supply chain at the supplier's end itself, thus helping you sustain a seamless business flow along
the arteries of the enterprise.
Channel finance ensures the immediate realization of sales proceeds for the SBI client's supplier, making it
practically a cash sale. On the other hand, the corporate gets credit for a duration equaling the tenor of the
loan, enabling smoother liquidity management.
SBI has the world's largest banking network of over 9,000 branches and this enables it to deliver the
financial solution at your suppliers’ doorsteps, across the span of the country.
Equipment Leasing:
The SBI's has deployed a dedicated Strategic Business Unit for lease financing that is richly experienced in
arranging lease contracts for procuring expensive equipment for your project or plant. At SBI, we arrange
lease agreements as stand-alone contracts or as part of a structured package.
Loan Syndication:
The SBI leverages its vast network of relationships to arrange syndicated credit products for corporate
clients and industrial projects.
With its rich experience and strong reputation, SBI's syndication desk can assemble large loan packages
involving a ring of reputed financial entities, domestic and international, that match the large credit
requirements of infrastructure projects.

30
3.3: MARKET SHARE OF SBI BANK
The above table displays the data comparing public and private sector banks analyzing various
parameters like the Net Interest Income, Provisions, Net Profit and Advances.
As it can be seen from the above table, amongst all the Public Sector Banks, the State Bank of
India grabbed the highest market share, with an earnings of approximately ₹134.7 billion, ie.
Around 28% of the entire market share toppling all the others by a substantial margin

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3.4: BALANCESHEET OF "SBI" (2 YEARS)
Parameter MARCH-17
(₹ Cr.)
MARCH-16
(₹ Cr.)
YoY
%Change
SOURCES OF FUNDS
Share Capital 797.35 776.28 22.71%
Share warrants & Outstandings 0.00 0.00 0.00%
Total Reserve 1,87,488.71 1,43,498.16 30.66%
Shareholder's Funds 1,88,286.06 1,44,274.44 30.51%
Deposits 20,44,751.39 17,30,722.44 18.14%
Borrowings 3,17,693.66 3,23,344.59 -1.75%
Other Liabilities & Provisions 1,55,235.19 1,59,276.08 -2.54%
TOTAL LIABILITIES 27,05,966.30 23,57,617.54 14.78%
APPLICATION OF FUNDS:
Cash and balance with Reserve Bank of India 1,27,997.62 1,29,629.33 -1.26%
Balances with banks and money at call and short
notice
43,974.03 37,838.33 16.22%
Investments 7,65,989.63 5,75,651.78 33.06%
Advances 15,71,078.38 14,63,700.42 7.34%
Gross Block 57,817.65 23,185.78 149.37%
Less: Accumulated Depreciation 15,472.66 13,366.62 15.76%
Less: Impairment of Assets 0.00 0.00 0.00%
Net Block 42,344.99 9,819.16 331.25%
Lease Adjustment 0.00 0.00 0.00%
Capital Work in Progress 573.93 570.12 0.67%
Other Assets 1,54,007.72 1,40,408.41 9.69%
TOTAL ASSETS 27,05,966.30 23,57,617.54 14.78%
Contingent Liability 10,46,440.93 9,71,956.01 7.66%
Bills for collection 65,640.42 92,211.65 -28.82

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3.5: PROFIT & LOSS OF "SBI" (2 YEARS)
Parameter MAR'17
(₹ Cr.)
MAR'16
(₹ Cr.)
Change %
I. INCOME
Interest Earned 1,75,518.25 1,63,998.30 7.02%
Other Income 35,460.93 27,845.37 27.35%
Total Income 2,10,979.16 1,91,843.66 9.97%
II. EXPENDITURE
Interest Expended 1,13,658.51 1,06,803.49 6.42%
Operating Expenses 46,472.77 41,782.37 11.23%
PBIDT 50,847.88 43,257.80 17.55%
Provisions and Contingencies 35,992.72 29,483.76 22.08%
Profit Before Tax 14,855.16 13,774.04 7.85%
Taxes 4,371.07 3,823.40 14.32%
Total 2,00,495.07 1,81,893.02 10.23%
III. Profit & Loss
PAT 10,484.10 9,950.65 5.36%
Extraordinary Items 0.00 0.00 0.00%
Profit brought forward 0.32 0.32 -2.46%
Adjusted Net Profit 0.00 0.00 0.00%
Total Profit & Loss 10,484.10 9,950.65 5.36%
Appropriations 10,484.42 9,950.98 5.36%
Equity Dividend (%) 260.00 260.00 0.00%
Earnings Per Share (in ₹) 13.15 12.82 2.58%
Book Value (in ₹) 196.53 185.85 5.74%

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UNIT 4: FUNDAMENTAL ANALYSIS OF "HDFC" BANK
4.1: HISTORY
The HDFC Bank was incorporated on August 1994 by the name of 'HDFC Bank Limited', with
its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled
Commercial Bank in January 1995. The Housing Development Finance Corporation (HDFC) was
amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set
up a bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry
in 1994.
HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of over
1416 branches spread over 550 cities across India. All branches are linked on an online real–time
basis. Customers in over 500 locations are also serviced through Telephone Banking. The Bank
also has a network of about over 3382 networked ATMs across these cities.
The promoter of the company HDFC was incepted in 1977 is India's premier housing finance
company and enjoys an impeccable track record in India as well as in international markets. HDFC
has developed significant expertise in retail mortgage loans to different market segments and also
has a large corporate client base for its housing related credit facilities. With its experience in the
financial markets, a strong market reputation, large shareholder base and unique consumer
franchise, HDFC was ideally positioned to promote a bank in the Indian environment.
The shares are listed on the Bombay Stock Exchange Limited and The National Stock Exchange
of India Limited. The Bank's American Depository Shares (ADS) are listed on the New York Stock
Exchange (NYSE) under the symbol 'HDB' and the Bank's Global Depository Receipts (GDRs)
are listed on Luxembourg Stock Exchange.
On May 23, 2008, the amalgamation of Centurion Bank of Punjab with HDFC Bank was formally
approved by Reserve Bank of India to complete the statutory and regulatory approval process. As
per the scheme of amalgamation, shareholders of CBoP received 1 share of HDFC Bank for every
29 shares of CBoP.

34
The merged entity now holds a strong deposit base of around Rs. 1,22,000 crore and net advances
of around Rs. 89,000 crores. The balance sheet size of the combined entity would be over Rs.
1,63,000 crores. The amalgamation added significant value to HDFC Bank in terms of increased
branch network, geographic reach, and customer base, and a bigger pool of skilled manpower.
In a milestone transaction in the Indian banking industry, Times Bank Limited (another new
private sector bank promoted by Bennett, Coleman & Co. / Times Group) was merged with HDFC
Bank Ltd., effective February 26, 2000. This was the first merger of two private banks in the New
Generation Private Sector Banks. As per the scheme of amalgamation approved by the
shareholders of both banks and the Reserve Bank of India, shareholders of Times Bank received
1 share of HDFC Bank for every 5.75 shares of Times Bank.
HDFC Bank offers a wide range of commercial and transactional banking services and treasury
products to wholesale and retail customers. The bank has three key business segments:
1. Wholesale Banking Services:
The Bank's target market ranges from large, blue–chip manufacturing companies in the Indian
corporate to small & mid–sized corporates and agri–based businesses.
2. Retail Banking Services:
The objective of the Retail Bank is to provide its target market customers a full range of financial
products and banking services, giving the customer a one–stop window for all his/her banking
requirements.
3. Treasury:
Within this business, the bank has three main product areas – Foreign Exchange and Derivatives,
Local Currency Money Market & Debt Securities, and Equities. The Treasury business is
responsible for managing the returns and market risk on this investment portfolio.
HDFC Securities (HSL) and HDB Financial Services (HDBFSL) are its subsidiaries.

35
Services offered by the company
Personal Banking NRI Banking Wholesale Banking
Accounts & Deposits Accounts & Deposits Corporate
Loans Investments & Insurance
Loans Payment Services
Small & Medium
Enterprises
Cards Remittances Financial Institutions &
Trusts
Investments & Insurance Government Sector
Forex
4. Listings and shareholding:
The equity shares of HDFC Bank are listed on Bombay Stock Exchange and the National Stock
Exchange of India. Its American Depository Shares are listed on NYSE and the Global
depository receipt are listed on the Luxembourg Stock Exchange where two GDRs represent one
equity share of HDFC Bank.
Shareholders (as of 31 December-2015) Shareholding
Promoter Group (HDFC) 21.57%
Foreign Institutional Investors (FII) 32.4%
Individual shareholders 8.5%
Bodies Corporate 7.5%
Insurance companies 5.38%
Mutual Funds/UTI 8.65%
NRI/OCB/Others 0.29%
Financial Institutions/Banks 2.75%

36
4.2: PRODUCTS AND SERVICES
1. Accounts & Deposits:
Experience banking of the future with a bank account from HDFC Bank. A world of smart features,
multiple banking channels and prompt customer service awaits you.
(a) Savings Account:
• Choose an account to suit your needs – from a basic banking account to a feature rich
premium option
• Our accounts come with everything you require to make your day to day banking easy.
Plus more.
(b) Salary Accounts:
• Customized salary accounts to suit the needs of every corporate
• Expect benefits beyond the ordinary like our Free Insurance Cover
(c) Current Accounts:
• Cost effective banking solutions for your businesses to maximize your cash-flow
• Fast and efficient transactions to help you take advantage of every opportunity
(d) Deposits:
• Whether you want to save regular amounts every month or in lump sum, we have a solution
for you
• Competitive interest rates and flexibility to do more with your money
(e) Safe Deposit Locker:
• Get one close to your work or home
• Range of sizes to choose from
(f) Rural Accounts:
• Everyday banking solutions for farmers
• Accounts that understand your unique requirements
ADS/GDRs 18.78%

37
2. Cards:
Explore a world of convenience, customized benefits, rewards and Smart buy cashback offers with
credit and debit cards from HDFC Bank.
(a) Credit Cards:
• Customised credit cards to match your needs
• State-of-the-art security for online transactions
• Great discounts, cash back offers and reward points 365 days a year
• Quick credit with easy EMIs
(b) Debit Cards:
• Exciting cash back, discounts, miles and waivers throughout the year
• Exclusively tailored debit cards that suits your schedule and lifestyle
• Multi-layered online and offline protection
• Card security for misplaced or stolen cards
(c) Credit Cards:
• Customised credit cards to match your needs
• State-of-the-art security for online transactions
• Great discounts, cash back offers and reward points 365 days a year
• Quick credit with easy EMIs
(d) Debit Cards:
• Exciting cash back, discounts, miles and waivers throughout the year
• Exclusively tailored debit cards that suits your schedule and lifestyle
• Multi-layered online and offline protection
• Card security for misplaced or stolen cards
(e) Pre-paid Cards:
• Right partner for international travel
• Affordable and accessible prepaid Forex cards for destinations across the globe
• Multi-purpose advanced payment tool for your every need

38
• Cash backs and upgrades easily available
(f) Credit Card Reward Program:
• More value on the same expenses with extensive credit card reward program gift catalogue
• Quick and hassle-free way to redeem points online and offline
• Option to convert your reward points in miles and online or offline gift vouchers available
3. Demat:
Presenting flexible Demat accounts. From simple demat accounts to 3 in 1 accounts offering a
combination of Demat, trading and savings accounts making investing easy!
(a) Demat Account:
• Store your equity, mutual funds, IPOs, ETFs (gold & indices), bonds, NCDs investments
in risk-free & paper-free Demat account.
• Avail free Demat account trial with no account opening fee and waiver on 1st year AMC.
• Use this safe, easy and affordable mode of tracking and storing your investments.
(b) 2 in 1 Account:
• Get HDFC Bank's Demat and securities trading account in a single package.
• Invest in stocks, IPOs, bonds, and NCDs, via seamless online mode. Then store them in
risk-free and paper-free Demat form.
• Get state-of-the-art trading platform across all devices.
(c) 3 in 1 Account:
• Get HDFC bank's savings account, Demat account, and online trading account for a
profitable investment or trading portfolio.
• Make transactions via seamless, secure, and multi-device platforms to fulfil your banking
and trading needs.
• Receive a Customised banking and investment solution to match your needs.

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4. Investments
Ensure your hard-earned money is working hard for you. Explore investment opportunities with
HDFC Bank. Choose from an array of financial products like mutual funds, stocks, etc
(a) Investment Products:
• Buy and sell mutual funds, equities and derivatives effortlessly.
• Monitor real time movement of stocks.
• Invest in bonds and Assay certified Gold and Silver bars.
(b) Investment advisory reports:
• Receive accurate and detailed reports about Union budget, investment strategy, etc.
• Refer to result updates of companies listed on stock exchange with unique insights into
organization
5. Insurance:
Get comprehensive assistance in identifying and investing in insurance policies. We help you choose
from a host of life and non-life insurance products under one roof.
(a) Life Insurance:
• Insurance policies for pension, term insurance, endowment, life coverage and accident
deaths
• Flexible insurance plans with affordable premium to fulfil your requisites in terms of sum
assured, coverage and returns
• Consistent post-purchase support
(b) Health Insurance:
• Insurance policies for protection against personal accident, critical illness, and
hospitalization available
• Flexible insurance plans to cover your expenses due to hospitalization, post-
hospitalization treatment, disability, injuries, surgical procedures, domiciliary treatment,
etc.
• Renewal bonus for claim-free renewal of insurance policies

40
(c) Motor Insurance:
• Cashless claim service over 3400+ authorised network of garages across India
• HDFC ERGO has been recognized as one of the fastest claims settling Insurance
Companies among private insurers
• Comprehensive coverage options such as personal accident cover for owner and driver,
third party liability, and protection against loss or damage of vehicle due to accident,
theft, terrorism, riots, strikes, malicious acts, etc.
• Insurance policies for all kinds of commercialised and private vehicles available
(d) Two-Wheeler Insurance:
• Cashless claim service over 3400+ authorised network of garages across India
• Online purchases and renewals at competitive premium rates
• Comprehensive coverage options such as personal accident cover for owner and driver,
third party liability, and protection against loss or damage of vehicle due to accident,
theft, terrorism, riots, strikes, malicious acts, etc.
(e) Home Insurance:
• Insurance policy for home structure and its contents
• Insurance protection against losses and damages due to fire, theft, burglary, larceny,
natural disasters, terrorism, etc.
• Low cost optional cover for Burglary including Theft and Larceny available
6. Forex:
Benefit from HDFC Bank's wide network of correspondent banks and representatives across the
globe. Organize all your foreign exchange when travelling abroad through us - from cash to a
multicurrency Forex card, you can get it all from any HDFC Bank branch.
7. Premium Banking:
Experience personalized banking like never before. HDFC Bank extends the services of a
dedicated relationship manager for delivering customized banking and investments solutions to
meet your needs.

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8. Private Banking:
Bespoke banking and advisory services for the truly discerning. Make the much awarded Private
Banking service from HDFC Bank your preferred choice.
4.2 MARKET SHARES OF HDFC BANK
HDFC Bank Ltd, India’s most profitable bank, is the most valuable bank in India with a market
cap of Rs3.68 trillion, followed by state-run State Bank of India (Rs2.34 trillion) and ICICI Bank
Ltd (Rs1.62 trillion). Kotak Mahindra Bank is No.4, followed by Axis Bank Ltd, IndusInd Bank
Ltd, Yes Bank Ltd, Bank of Baroda and Punjab National Bank.

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4.3: BALANCESHEET OF "HDFC" (2 YEARS)
Parameter MAR'17
(₹ Cr.)
MAR'16
(₹ Cr.)
YoY
%Change
SOURCES OF FUNDS
Share Capital 512.51 505.64 1.36%
Share warrants & Outstanding 0.00 0.00 0.00%
Total Reserve 88,949.84 72,172.13 23.25%
Shareholder's Funds 89,462.35 72,677.76 23.09%
Deposits 6,43,639.66 5,46,424.19 17.79%
Borrowings 74,028.87 84,968.98 -12.88%
Other Liabilities & Provisions 56,709.32 36,725.13 54.42%
TOTAL LIABILITIES 8,63,840.19 7,40,796.07 16.61%
APPLICATION OF FUNDS:
Cash and balance with Reserve Bank of India 37,896.88 30,058.31 26.08%
Balances with banks and money at call and short
notice
11,055.22 8,860.53 24.77%
Investments 2,14,463.34 1,95,836.28 9.51%
Advances 5,54,568.20 4,64,593.96 19.37%
Gross Block 10,157.66 9,252.62 9.78%
Less : Accumulated Depreciation 6,486.68 5,865.22 10.60%
Less : Impairment of Assets 0.00 0.00 0.00%
Net Block 3,670.98 3,387.40 8.37%
Lease Adjustment -44.25 -44.25 0.00%
Capital Work in Progress 0.00 0.00 0.00%
Other Assets 42,229.82 38,103.84 10.83%
TOTAL ASSETS 8,63,840.19 7,40,796.07 16.61%
Contingent Liability 8,17,869.59 8,53,318.11 -4.15%
Bills for collection 30,848.04 23,490.00 31.32%

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4.4: PROFIT & LOSS OF "HDFC BANK" (2 YEARS)
Parameter MAR'17
(₹ Cr.)
MAR'16
(₹ Cr.)
Change %
I. INCOME
Interest Earned 69,305.96 60,221.45 15.09%
Other Income 12,296.50 10,751.72 14.37%
Total Income 81,602.46 70,973.17 14.98%
II. EXPENDITURE
Interest Expended 36,166.73 32,629.93 10.84%
Operating Expenses 19,703.34 16,979.70 16.04%
PBIDT 25,732.38 21,363.54 20.45%
Provisions and Contingencies 3,593.31 2,725.61 31.83%
Profit Before Tax 22,139.07 18,637.93 18.79%
Taxes 7,589.43 6,341.71 19.67%
Total 67,052.81 58,676.95 14.27%
III. Profit & Loss
PAT 14,549.64 12,296.21 18.33%
Extraordinary Items 0.00 0.00 0.00%
Profit brought forward 23,527.69 18,627.80 26.30%
Adjusted Net Profit 0.00 0.00 0.00%
Total Profit & Loss 14,549.64 12,296.21 18.33%
Appropriations 38,077.33 30,924.01 23.13%
Equity Dividend (%) 550.00 475.00 15.79%
Earnings Per Share (in ₹) 56.78 48.64 16.74%
Book Value (in ₹) 349.12 287.47 21.44%

44
UNIT 5: RATIO COMPARISION BETWEEN “SBI” AND “HDFC”
BANKS
5.1: RATIO ANALYSIS
The relationship between two accounting figures, expressed mathematically, is known as financial
ratio (or simply as a ratio). Ratio helps to summarise large quantities of financial data and to make
qualitative judgment about firm’s financial performance. The ratio analysis is the most powerful
tool of financial analysis. Many diverse groups of people are interested in analysing the financial
information to indicate the operating and financial efficiency, and growth of the firm.
Ratio analysis plays an important role in the corporate world. It is a widely used tool of financial
analysis. Ratio Analysis is relevant in assessing the performance of a firm in respect of liquidity
position, long-term solvency, operating efficiency, overall profitability, inter-firm comparison and
trend analysis.
With the help of ratio analysis, one can determine:
• The ability of firm to meet its current obligations;
• The extent to which the firm has used its long-term solvency by barrowing funds;
• The efficiency with which the firm is utilising its assets in generating sales revenue;
• The overall operating efficiency and performance of the firm;

45
PROFITABILITY RATIO:
Profitability ratios are the financial ratios which talk about the profitability of a business with
respect to its sales or investments. Since the ratios measure the efficiency of operations of a
business with the help of profits, they are called profitability ratios. They are quite useful tools to
understand the efficiencies / inefficiencies of a business and thereby assist management and
owners to take corrective actions.
Profitability ratios are the tools for financial analysis which communicate about the final goal of a
business. For all the profit oriented businesses, the final goal is none other than the profits. Profits
are the life blood of any business without which a business cannot remain a going concern. Since,
the profitability ratios deal with the profits, they are as important as the profits.
The purpose behind calculating the profitability ratios is to measure the operating efficiency of a
business and returns which the business generates. The different stakeholders of a business are
interested in the profitability ratios for different purposes. The stakeholders of a business include
owners, management, creditors, lenders etc.

46
1. GROSS PROFIT MARGIN:
Gross profit margin is a financial metric used to assess a company's financial health and business
model by revealing the proportion of money left over from revenues after accounting for the cost
of goods sold (COGS). Gross profit margin, also known as gross margin, is calculated by
dividing gross profit by revenues. Also known as "gross margin."
Gross profit margin (%) 2012 2013 2014 2015 2016
SBI 7.5 5.0 2.2 0.8 2.3
HDFC BANK 12.7 12.9 15.6 17.4 17.8

47
2. NET PROFIT MARGIN:
Net Profit Margin Ratio A ratio of profitability calculated as net income divided by revenues, or
net profits divided by sales. It measures how much out of every dollar of sales a company actually
keeps in earnings. Profit margin is very useful when comparing companies in similar industries. A
higher profit margin indicates a more profitable company that has better control over its costs
compared to its competitors. Profit margin is displayed as a percentage; a 20% profit margin, for
example, means the company has a net income of $0.20 for each dollar of sales. The equation to
calculate net profit margin is:
Net profit margin (%) 2012 2013 2014 2015 2016
SBI 10.4 10.7 7.5 8.2 5.5
HDFC BANK 18.6 19.2 20.5 21.1 20.3
𝐍𝐄𝐓 𝐌𝐀𝐑𝐆𝐈𝐍 =
𝐍𝐞𝐭 𝐩𝐫𝐨𝐟𝐢𝐭
𝐍𝐞𝐭 𝐬𝐚𝐥𝐞

48
3. RETURN ON NET WORTH:
Return on Net Worth The amount of net income returned as a percentage of shareholders equity.
Return on net worth measures a corporation's profitability by revealing how much profit a
company generates with the money shareholders have invested.
The equation to calculate Return on net worth is:
Return on equity (%) 2012 2013 2014 2015 2016
SBI 14.4 14.3 9.6 10.5 6.8
HDFC BANK 17.4 18.7 19.8 16.9 17.2
Return on net worth =
𝑁𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
𝑁𝑒𝑡 𝑤𝑜𝑟𝑡ℎ

49
4. DIVIDEND PAYOUT RATIO:
Dividend Payout Ratio The dividend payout ratio is the amount of dividends paid to stockholders
relative to the amount of total net income of a company. The amount that is not paid out in
dividends to stockholders is held by the company for growth. The amount that is kept by the
company is called retained earnings.
The equation to calculate Dividend payout ratio is:
Dividend payout ratio 2013 2014 2015 2016
SBI 20.12 20.56 19.51 20.28
HDFC BANK 19.46 19.38 19.62 19.53
Dividend payout ratio =
Dividend
Net income
18.6
18.8
19
19.2
19.4
19.6
19.8
20
20.2
20.4
20.6
20.8
2013 2014 2015 2016
Dividend payout ratio
SBI HDFC

50
Analysis on profitability ratios:
• Every firm is most concerned with its profitability. One of the most frequently used tools of
financial ratio analysis is profitability ratios which are used to determine the company's bottom
line and its return to its investors. Profitability measures are important to company managers and
owner’s a like. If a small business has outside investors who have put their own money into the
company, the primary owner certainly has to show profitability to those equity investors.
• The gross profit ratio of HDFC Bank is strong as compare to SBI Bank
• The net profit margin ratio of HDFC is strong as compare to SBI Bank
• The return on net worth ratio of HDFC Bank is very strong as compare to SBI Bank • The
dividend payout ratio of SBI Bank is strong as compare to HDFC Bank. The SBI bank has paid
more dividend as compare to HDFC bank over the last Three Year But in 2015 HDFC has paid
more dividend as compare to SBI Bank

51
5.2: LIQUIDITY RATIO:
Liquidity ratios measure the firm’s ability to meet current obligations. It is extremely essential for
a firm to be able to meet its obligations as they become due liquidity ratio's measure. The ability
of the firm to meet its current obligations. In fact analysis is of liquidity needs in the preparation
of cash budgets and cash and funds flow statements, but liquidity ratios by establishing a
relationship between cash and other current assets to current obligations provide a quick measure
of liquidity. Main types of liquidity ratios are:
Liquidity Ratios Current Ratio Quick Ratio.
1. LIQUIDITY RATIO;
2. CURRENT RATIO;
3. QUICK RATIO;

52
2. CURRENT RATIO:
The ratio is worked out by dividing the current assets of the concern by its current liabilities.
Current ratios indicate the relation between current assets and current liabilities. Current liabilities
represent the immediate financial obligations of the company. Current assets are the sources of
repayment of current liabilities. Therefore, the ratio measures the capacity of the company to meet
financial obligation as and when they arise.
The equation to calculate Dividend payout ratio is:
CURRENT RATIO 2013 2014 2015 2016
SBI 0.50 0.45 0.49 0.87
HDFC BANK 0.54 0.60 0.58 1.04
CURRENT RATIO =
CURRENT ASSEST
CURRENT LIABILITY
0
0.2
0.4
0.6
0.8
1
1.2
2013 2014 2015 2016
CURRENT RATIO
SBI HDFC

53
3. QUICK RATIO/ACID TEST RATIO:
Quick assets represent current assets excluding stock and prepaid expenses. Stock is excluded
because it is not immediately realizable in cash. Prepaid expenses are excluded because they
cannot be realized in cash. One of the defects of current ratio is that it does not measure accurately
to meet financial commitments as and when they arise. This is because the current assets include
also items that are not easily realizable, such as stock. The acid test ratio is a refinement of current
ratio and is calculated to measure the ability of the company to meet the liquidity requirements in
the immediate future. A minimum of 1: 1 is expected which indicates that the concern can fully
meet its financial obligations. This also called as Liquid ratio or Quick ratio.
QUICK RATIO 2013 2014 2015 2016
SBI 12.15 13.88 10.78 10.84
HDFC BANK 7.84 8.55 12.69 14.51
𝑄𝑈𝐼𝐶𝐾 𝑅𝐴𝑇𝐼𝑂 =
(𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡 − 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑖𝑒𝑠)
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑦
0
2
4
6
8
10
12
14
16
2013 2014 2015 2016
QUICK RATIO
SBI HDFC

54
Analysis on liquidity ratios:
• Current Ratio is a liquidity ratio that measures company's ability to pay its debt over the
next 12 months or its business cycle
• Acceptable current ratio values vary from industry to industry. Generally, a current ratio
of 2:1 is considered to be acceptable. The higher the current ratio is, the more capable the
company is to pay its obligations.
• Quick Ratio is an indicator of company's short-term liquidity. It measures the ability to use
its quick assets (cash and cash equivalents, marketable securities and accounts receivable)
to pay its current liabilities.
• Quick ratio specifies whether the assets that can be quickly converted into cash are
sufficient to cover current liabilities. Ideally, quick ratio should be 1:1.
• In Current Ratio Analysis graph shows SBI Bank is strong as compare to HDFC Bank
• The Quick Ratio graph is shows year 2013 and 2014 of SBI Bank is strong as compare to
HDFC Bank. But in last two years 2015 and 2016 HDFC is perform well as compare to
SBI Bank.
5.3: INVESTMENT VALUATION RATIO:
Investment Valuation Ratio ratios can be used by investors to estimate the attractiveness of a
potential or existing investment and get an idea of its valuation. Investment Valuation Ratio
Operating Profit Per Share Earning Per Share Dividend Per Share.

55
1. OPERATING PROFIT PER SHARE:
Operating Profit Per Share Profit earned after subtracting from revenues those expenses that are
directly associated with operating the business, such as cost of goods sold, administration and
marketing, depreciation and other general operating costs. Operating earnings are an important
measure of profitability, and since this metric excludes non-operating expenses such as interest
and taxes, it enables an assessment of the company's core business profitability to be made.
The equation to calculate operating profit per Share ratio is:
OPERATING PROFIT
PER SHARE RATIO
2013 2014 2015 2016
SBI 236.63 199.45 23.38 21.64
HDFC BANK 21.97 29.65 36.16 44.77
𝑂𝑃𝐸𝑅𝐴𝑇𝐼𝑁𝐺 𝑃𝑅𝑂𝐹𝐼𝑇 𝑃𝐸𝑅 𝑅𝐴𝑇𝐼𝑂 =
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑝𝑟𝑜𝑓𝑖𝑡
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑠ℎ𝑎𝑟𝑒
0
50
100
150
200
250
2013 2014 2015 2016
OPERATING PROFIT PER SHARE (RS)
SBI HDFC

56
2. EARNINGS PER SHARE:
Earnings Per Share The portion of a company's profit allocated to each outstanding share of
common stock. Earnings per share serve as an indicator of a company's profitability.
The equation to calculate Earnings per share ratio is:
Earnings per share (Rs) 2012 2013 2014 2015 2016
SBI 228.6 261.9 189.9 22.8 15.7
HDFC BANK 22.4 28.9 36.4 42.6 50.6

57
3. DIVIDEND PER SHARE:
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.
The equation to calculate Dividend per share ratio is:
Dividends per share (Rs) 2012 2013 2014 2015 2016
SBI 35.00 41.50 30.00 3.50 2.60
HDFC BANK 4.30 5.50 6.85 8.00 9.50
DIVIDEND PER SHARE =
Dividend
Number of share

58
Analysis on investment valuation ratios:
• Ratios that can be used by investors to estimate the attractiveness of a potential or existing
investment and get an idea of its valuation.
• The operating profit per share of SBI Bank is much higher than HDFC Bank in the year
2013-14. But in 2015-6 SBI Fall.
• The earnings per share of HDFC Bank is much higher than SBI Bank.
• The dividend per share for HDFC showing the increasing trend over the last five years. As
compare to SBI Bank.
COMPARISION RESULT OF SBI AND HDFC BANKS:
SBI:
SBI is India's largest bank in the country with an asset size of over Rs 13 trillion. Although the
bank's loan book is largely skewed towards corporate (large, mid and small) loans (50% of total
advances in FY12), the retail side is also fast catching up. SBI has a network of almost 14,270
branches and over 22,141 ATMs across the country.
HDFC BANK:
HDFC Bank With 4.2% share of India's total non-food credit disbursements in FY12, HDFC Bank
is the second largest private sector bank in the country (after ICICI Bank) in terms of asset size.
The bank has tripled its share from 1.2% of total non-food credit in FY02 to 4.2% in FY12. Retail
assets constituted 51.3% of advances in FY12. Its group companies, HDFC Standard Life
(insurance), HDFC AMC (mutual funds) and HDFC Securities (equities) add scalability to the
bank's offerings.

59
CONCLUSION
Financial reports are required by law and are published both quarterly and annually. Management
discussion and analysis (MD&A) gives investors a better understanding of what the company does
and usually points out some key areas where it performed well. Audited financial reports have
much more credibility than unaudited ones. The balance sheet lists the assets, liabilities and
shareholders' equity. For all balance sheets: Assets = Liabilities + Shareholders' Equity. The two
sides must always equal each other (or balance each other).
The income statement includes figures such as revenue, expenses, earnings and earnings per
share. For a company, the top line is revenue while the bottom line is net income.
The income statement takes into account some non-cash items, such as depreciation.In
Fundamental analysis is very useful to understand the overall company, industry, and economy.
From the comparison thus drawn, it can be concluded that HDFC Bank which a private sector bank
offers a larger number of products and services than the State Bank of India although the SBI has,
in fact, a much better overall earning, being a PSU, than the HDFC Bank.
Always read the notes to the financial statements. They provide more in-depth information on a
wide range of figures reported in the three financial statements.
Ratio Analysis is the basic tool of financial analysis and Financial analysis itself is an important
part of any business planning process as SWOT, being basic tool of the strategic analysis plays a
vital role in a business planning process and no SWOT analysis would be complete without an
analysis of companies’ financial position. In this way Ratio Analysis is very important part of
whole business strategic planning.

Fundamental analysis of banking sector SBI AND HDFC BANK

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