10 HARSH ANAND Bank of Baroda vs ING Vysya - Productivity and lit

8/3/2019 10 HARSH ANAND Bank of Baroda vs ING Vysya - Productivity and lit

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JBFSIR Volume 1, Issue 4 (July, 2011) ISSN 2231-4288

Sri Krishna International Research & Educational Consortium

http://www.skirec.com - 120 -

The Journal of Sri Krishna Research & Educational Consortium

J O U R N A L O N B A N K I N G

F I N A N C I A L S E R V I C E S &I N S U R A N C E R E S E A R C H

Internationally Indexed & Listed Referred e-Journal

PRODUCTIVITY AND PROFITABILITY IN BANKING

BANK OF BARODA VS ING VYSYA BANK

MR. HARSH ANAND

Assignments in Strategic Planning, Operations Management, Business Developmentwith leading organisations in the Banking / Financial Services sectors

Research Scholar, MMH College, Ghaziabad

ABSTRACT:

The purpose of this paper is to compare the productivity and profitability of Public Sector Banks

with that of Private Sector Banks. There is a general notion that staffs of private sector banks

perform better than the staff of public sector banks and this study has been conducted to compare

the business per employee and profit per employee to the two groups. The study has been donethrough the comparison of 5 years profit and loss and balance sheet of two banks and A Profile

of Banks 2009-10' released by the RBI,

Analysis of profit per employee and business per employee showed that Bank of Baroda is

doing better than ING Vysya bank and this is mainly because of two reasons; first being the

computerisation and the second being the entry of Bank of Baroda in retail loans and SME

loans. The retail and SME loans on the one side increase the margins and on the other side are

helpful in controlling the NPAs. The public sector banks understand the Indian market better

than the private banks. They have a nationwide presence and can follow local sentiments, the

general public has greater confidence in the public sector banks. Lastly and more significantly

the public sector banks have been able to adapt well post liberalization. They have reduced their

work force, outsourced where ever economical and computerize all the banking functions, now

even the smallest public sector bank offers ATM/debit cards, RTGS fund transfer, internet

banking, telephone banking etc. The staff in public sector banks is now motivated and they

realise the importance of a good performance whereas the private bank staff is generally offered

contractual employment and therefore, they lack the sense of belongingness with their


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organization, which is generally seen in public sector banks. The DSA (Direct Sales Agent)

culture in private sector banks is also tarnishing their image

Bank of Baroda is doing quite well and it seems that in coming years also it will be proving itself

as the strong pillars of Indian economy.

To compare the productivity and profitability of ING Vysya Bank Ltd with Bank of Baroda, their

Balance Sheets and Profit Loss Accounts for the last five years have been compared.

The study has been done on basis of Ratio Analysis. In financial analysis, ratios are generally

used as benchmarks for evaluating a firms position or performance. The absolute values may

not provide us meaningful values until and unless they are related to some other relevant

information. Ratios represent the relationship between two or more variables. Ratios help to

summarize large data to draw qualitative judgments about the firms performance. The common

denominator used for developing the various profitability ratios is business volume (deposits +investments + advances). The banks generally calculate spread ratio as % of total assets. The

total assets are accounting (Balance sheet) figures, which are based on historical costs and hence

are not very suitable to evaluate the current performance of the banks. In order to have a suitable

indicator for evaluating current bank performance we are using the volume of business

(Advances + Investments + Deposits) in the denominator. It is like using Gross profit ratio

(Gross profit / sales) as a substitute for Return on Total Asset (Profit / Total asset) as an indicator

of the profitability of a business organisation.

The following ratios are being used for measuring the profitability of the banks:

1. Interest earned ratio (R)= Total interest earned / Volume of business2. Interest paid ratio (P)= Total interest paid / Volume of business3. Non-interest income ratio (N)= Other Incomes / Volume of business4. Other operating expenses ratio (O)= Operating expenses / Volume of business

The following equations have been derived from the above ratios:

1. Spread Ratio (S)= Interest earned ratio Interest paid ratio (R-P)2. Burden Ratio (B)= Other operating expenses ratioNon-interest income ratio(O-N)

The profitability ratio is being worked out as follows:

Profitability ratio = Spread RatioBurden Ratio

The following ratios have been calculated for Bank of Baroda


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Items 2005-06 2006-07 2007-08 2008-09 2009-10

Interest earned ratio R 0.037363 0.03698 0.039039 0.038886 0.034987

Interest paid ratio P 0.020537 0.022289 0.026112 0.025685 0.022543

Non-intrest income

ratio N 0.005973 0.005676 0.006778 0.007106 0.005879Other operatingexpenses ratio O 0.01264 0.010448 0.010027 0.009214 0.007985

Spread Ratio R-P 0.016827 0.014691 0.012927 0.013201 0.012444

Burden Ratio O-N 0.006667 0.004772 0.003249 0.002109 0.002106

Profitability Ratio 0.01016 0.009919 0.009678 0.011093 0.010338

The following ratios have been calculated for ING Vysya bank

Items 2005-06 2006-07 2007-08 2008-09 2009-10

Interest earned ratio R 0.043738 0.039721 0.04059 0.042959 0.040715

Interest paid ratio P 0.026522 0.025749 0.028552 0.0305 0.025581

Non-intrest income ratio N 0.004975 0.008959 0.01011 0.010504 0.011305

Other operating expenses

ratio O 0.018576 0.015819 0.014722 0.014815 0.014732

Spread Ratio R-P 0.017216 0.013971 0.012038 0.012459 0.015134

Burden Ratio O-N 0.013601 0.00686 0.004612 0.004312 0.003428

Profitability Ratio 0.003615 0.007111 0.007427 0.008148 0.011706

COMPARISON OF PROFITABILITY OF THE TWO BANKS AS PER THESE RATIOS

Items 2005-06 2006-07 2007-08 2008-09 2009-10

ING Vysya Bank 0.003615 0.007111 0.007427 0.008148 0.011706

Bank of Baroda 0.01016 0.009919 0.009678 0.011093 0.010338


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Profitability ratio which is spread ratio minus burden ratio has remained at around 1% for Bank

of Baroda during the full study period but in case of ING Vysya Bank it has increased from 0.3%

to 1.1%.

Productivity is being measured in terms of the outputs (like Business, Deposits, Advances)

per input (employee / branch)

The following ratios are being used for measuring productivity:

1. Deposit per employee = Total Deposit / Total Staff2. Advances per employee Ratio = Total Advances / Total Staff3. Total Business per employee = Total Business / Total Staff4. Deposit per Branch = Total Deposits / No. of Branches5. Advances per Branch = Total Advances / No. of Branches6. Total Business per Branch = Total Business / No. of Branches

0

0.002

0.004

0.006

0.008

0.01

0.012

0.014

2005-06 2006-07 2007-08 2008-09 2009-10

ING Vysya Bank

Bank of Baroda


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The following ratios have been calculated for Bank of Baroda

Items 2005-06 2006-07 2007-08 2008-09 2009-10

Deposit per employee 2.415588 3.23583 4.080358 5.279829 6.186961

Advances per employee 1.545159 2.166123 2.863696 3.931147 4.492685

Total Business per

employee 3.960747 5.401953 6.944054 9.210976 10.67965

Deposits per employee 33.72776 44.42248 53.43906 65.97975 78.05829

Advances per Branch 21.57436 29.7372 37.50486 49.12586 56.68232

Total Business perBranch 55.30212 74.15967 90.94392 115.1056 134.7406

The following ratios have been calculated for ING Vysya Bank

Items 2005-06 2006-07 2007-08 2008-09 2009-10

Deposit per employee 2.733702 2.987021 3.583387 4.08955 4.231147

Advances per employee 2.097581 2.320031 2.566045 2.753204 3.027482

Total Business peremployee 4.831283 5.307052 6.149431 6.842754 7.258629

Deposits per employee 34.36856 37.33414 48.59277 52.95532 52.4645

Advances per Branch 26.37113 28.99758 34.79703 35.65106 37.53955

Total Business per

Branch 60.73969 66.33172 83.3898 88.60638 90.00406

1. DEPOSITS PER EMPLOYEE

2005-06 2006-07 2007-08 2008-09 2009-10

ING Vysya Bank 2.733702 2.987021 3.583387 4.08955 4.231147

Bank of Baroda 2.415588 3.23583 4.080358 5.279829 6.186961

(Amount in rupees crore)


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Deposits per employee2005-06 2009-10

Absolute

change % Change

ING Vysya Bank 2.733702 4.231147 1.497445 54.77718

Bank of Baroda 2.415588 6.186961 3.771373 156.1265

Deposits per employee in case of ING Vysya Bank have increased by 54.77% whereas in case of

Bank of Baroda they have increased by 156.12%. In the year 2005-06 deposit per employee of

ING Vysya were more than Bank of Baroda but during the -5- years period of study the picture

has totally reversed.

2. ADVANCES PER EMPLOYEE2005-06 2006-07 2007-08 2008-09 2009-10

ING Vysya Bank 2.097581 2.320031 2.566045 2.753204 3.027482

Bank of Baroda 1.545159 2.166123 2.863696 3.931147 4.492685


0

1

2

3

4

5

6

7

2005-06 2006-07 2007-08 2008-09 2009-10

ING Vysya Bank

Bank of Baroda


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Advances per employee 2005-06 2009-10

Absolute

change % Change

ING Vysya Bank 2.097581 3.027482 0.929901 44.33207

Bank of Baroda 1.545159 4.492685 2.947526 190.7588

Advances per employee in case of ING Vysya Bank have increased by 44.33 % whereas in case

of Bank of Baroda they have increased by 190.75%. In the year 2005-06 the advances per

employee were higher in case of ING Vysya Bank but in the year 2009-10 the advances per

employee of Bank of Baroda are approximately 1.5 times those of ING Vysya Bank.

3. TOTAL BUSINESS PER EMPLOYEE

2005-06 2006-07 2007-08 2008-09 2009-10

ING Vysya Bank 4.831283 5.307052 6.149431 6.842754 7.258629

Bank of Baroda 3.960747 5.401953 6.944054 9.210976 10.67965


0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2005-06 2006-07 2007-08 2008-09 2009-10

ING Vysya Bank

Bank of Baroda


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Total Business per

employee 2005-06 2009-10

Absolute

change

%

Change

ING Vysya Bank 4.831283 7.258629 2.427346 50.24226

Bank of Baroda 3.960747 10.67965 6.718903 169.6373

The total business per employee of ING Vysya Bank in the year 2005-06 was 4.83 crores and it

rose to 7.25 crores in the year 2009-10 whereas in case of Bank of Baroda, the total business per

employee in the year 2005-06 was 3.96 cores and it rose to 10.67 cores in the year 2009-10. The

rise in case of ING Vysya Bank was 50.24% whereas the rise in case of Bank of Baroda during

these -5- years 169.63%, which again shows that the total business per employee has risen much

more in case of Bank of Baroda than in ING Vysya Bank.

4. DEPOSITS PER BRANCH2005-06 2006-07 2007-08 2008-09 2009-10

ING Vysya Bank 34.36856 37.33414 48.59277 52.95532 52.4645

Bank of Baroda 33.72776 44.42248 53.43906 65.97975 78.05829


0

2

4

6

8

10

12

2005-06 2006-07 2007-08 2008-09 2009-10

ING Vysya Bank

Bank of Baroda


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Deposits per Branch 2005-06 2009-10

Absolute

change % Change

ING Vysya Bank 34.36856 52.4645 18.09594 52.6526

Bank of Baroda 33.72776 78.0582 44.33053 131.4363

Deposits per Branch of ING Vysya during the year 2005-06 were 34.36 crores whereas those of

Bank of Baroda were 33.72 cores, which shows that ING Vysya had better productivity but inthese -5- years the deposit per branch of ING Vysya grew by 52.65% to Rs.52.46 cores whereas

those of Bank of Baroda rose by 131.43% to Rs.42.33 crores. This shows that now Bank of

Baroda is more productive than ING Vysya Bank.

5. ADVANCES PER BRANCH2005-06 2006-07 2007-08 2008-09 2009-10

ING Vysya Bank 26.37113 28.99758 34.79703 35.65106 37.53955

Bank of Baroda 21.57436 29.7372 37.50486 49.12586 56.68232


0

10

20

30

40

50

60

70

80

90

2005-06 2006-07 2007-08 2008-09 2009-10

ING Vysya Bank

Bank of Baroda


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Advances per Branch 2005-06 2009-10

Absolute

change % Change

ING Vysya Bank 26.37113 37.53955 11.16842 42.35

Bank of Baroda 21.57436 56.68232 35.10796 162.73

Advances per Branch of ING Vysya Bank in the year 2005-06 were 26.37 crores where those ofBank of Baroda were 21.57 crores which showed that per branch productivity of ING Vysya

Bank was better. In the year 2009-10 the Advances per Branch of ING Vysya are Rs.37.53

crores and that of Bank of Baroda are Rs.56.68 crores, this shows that Advances per Branch of

ING Vysya Bank has grown by 42.35 % whereas those of Bank of Baroda have grown by

162.73%.

6. TOTAL BUSINESS PER BRANCH

2005-06 2006-07 2007-08 2008-09 2009-10

ING Vysya Bank 60.73969 66.33172 83.3898 88.60638 90.00406

Bank of Baroda 55.30212 74.15967 90.94392 115.1056 134.7406


0

10

20

30

40

50

60

2005-06 2006-07 2007-08 2008-09 2009-10

ING Vysya Bank

Bank of Baroda


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Total Business per

Branch 2005-06 2009-10

Absolute

Change % Change

ING Vysya Bank 60.73969 90.00406 29.26437 48.17

Bank of Baroda 55.30212 134.7406 79.43848 143.64

Total business per branch of ING Vysya Bank was more than that of Bank of Baroda during

2005-06 but year by year the position of Bank of Baroda is improving faster than that of ING

Vysya. During the -5- years period of study the total business per branch of Bank of Baroda has

increased by 143.64% whereas that of ING Vysya Bank has increased by only 48.17%.

CONCLUSION

The Bank of Baroda is doing quite well and it seems that in coming years also is will be proving

itself to be the strong pillars of Indian economy. The findings in this paper show that the fast

growth in productivity and profitability of Bank of Baroda Vs ING Vysya Bank can be summed

us as follows

1. The entry of Bank of Baroda in retail loans and SME loans has probably been the mainreason for increase in their profit margins and business per employee. The retail and SME

loans on the one side increase the margins and on the other side are helpful in controlling the

NPAs.

2. The general public has greater confidence in the public sector banks. There is also a greaterlevel of comfort which private banks have yet to gain.

0

20

40

60

80

100

120

140

160

2005-06 2006-07 2007-08 2008-09 2009-10

ING Vysya Bank

Bank of Baroda


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3. Lastly and more significantly the public sector banks have been able to adapt well postliberalization. They have reduced their work force, outsourced where ever economical and

computerize all the banking functions. Now even the smallest public sector banks offer

ATM/debit cards, RTGS fund transfer, internet banking, telephone banking etc. The staff is

now motivated and they realise the importance of a good performance. The interest rates on

term deposits are comparable with the private banks. The staff is offered not just a job but a

career.

4. The private bank staff is generally offered contractual employment and therefore, they lackthe sense of belongingness with their organization, which is generally seen in public sector

banks. The DSA (Direct Sales Agent) culture in private sector banks is also tarnishing their

image.

COMPARISON OF THE LAST FIVE YEARS BALANCE SHEET OF ING VYSYA

BANK AND BANK OF BARODA

ING Vysya Bank

Industry : Banks - Private Sector

Balance Sheet -- in Rs. Cr. --

Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

12 mths 12 mths 12 mths 12 mths 12 mths

Capital and Liabilities:

Total Share

Capital90.72 90.90 102.47 102.60 119.97

Equity Share

Capital90.72 90.90 102.47 102.60 119.97

Share

Application

Money

0.00 0.00 0.00 4.47 2.99

Preference

Share

Capital

0.00 0.00 0.00 0.00 0.00

Bank Of Baroda

Industry : Banks - Public Sector

Balance Sheet -- in Rs. Cr. --



Capital and Liabilities:

Total Share

Capital365.53 365.53 365.53 365.53 365.53

Equity Share

Capital365.53 365.53 365.53 365.53 365.53

Share

Application

Money

0.00 0.00 0.00 0.00 0.00

Preference

Share

Capital

0.00 0.00 0.00 0.00 0.00


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Reserves 817 901 1,323 1,487 2,099

Revaluation

Reserves111.54 110.78 109.52 108.77 108.02

Net Worth 1,019 1,103 1,535 1,702 2,330

Deposits 13,335 15,418 20,498 24,889 25,865

Borrowings 1,107 843 1,249 2,152 3,673

Total Debt 14,442 16,262 21,747 27,042 29,536

Other

Liabilities &

Provisions

1,304 1,920 2,256 3,111 2,012

Total

Liabilitie16,766 19,286 25,539 31,856 33,880



Assets

Cash &

Balances

with RBI

841.65 945.81 2,263 1,791 2,329

Balance with

Banks,

Money at

Call

281.68 645.89 921.23 491.23 697.46

Advances 10,231 11,976 14,649 16,750 18,507

Investmen 4,372 4,527 6,293 10,495 10,472

Gross Block 676 681 706 754 773

Accumulated

Depreciation383 394 429 468 485

Net Block 293.21 286.73 277.51 285.32 288.33

Capital112.20 109.24 121.70 151.88 207.60

Reserves 7,478 8,284 10,678 12,470 14,740

Revaluation

Reserves0.00 0.00 0.00 0.00 0.00

Net Worth 7,844 8,649 11,043 12,835 15,106

Deposits 93,661 124,915 152,034 192,396 241,044

Borrowings 4,802 1,142 3,927 5,636 13,350

Total Debt 98,464 126,058 155,961 198,033 254,394

Other

Liabilities &

Provisions

7,083 8,437 12,594 16,538 8,815

Total

Liabilities113,392 143,146 179,599 227,406 278,316



Assets

Cash &

Balances

with RBI

3,333 6,413 9,369 10,596 13,539

Balance with

Banks,

Money at

Call

10,121 11,866 12,929 13,490 21,927

Advances 59,911 83,620 106,701 143,985 175,035

Investmen 35,114 34,943 43,870 52,445 61,182

Gross Block 1,873 2,244 3,787 3,954 4,266

Accumulated

Depreciation952 1,155 1,360 1,644 1,981

Net Block 920 1,088 2,427 2,309 2,284

Capital0.00 0.00 0.00 0.00 0.00


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Work In

Progress

Other Assets 634 794 1,013 1,891 1,377

Total Assets 16,766 19,286 25,539 31,856 33,880

Contingent

Liabilities10,986.42 17,462.28 32,959.36 38,734.68 72,851.44

Bills for

collection2,850.1 3,033.3 3,096.6 4,303.0 4,570.4

Book Value

(Rs)100.10 109.18 139.17 154.93 185.04

Work In

Progress

Other Assets 3,991 5,212 4,301 4,578 4,347

Total Assets 113,392 143,146 179,599 227,406 278,316

Contingent

Liabilities34,678.87 54,999.86 75,364.33 64,745.82 77,997.01

Bills for

collection10,407. 12,976. 15,105. 22,584. 27,949.60

Book Value

(Rs)215.35 237.46 303.18 352.37 414.71

COMPARISON OF THE PROFIT LOSS ACCOUNT OF LAST 5 YEARS OF ING

VYSYA BANK AND BANK OF BARODA

ING Vysya Bank

Private Sector

Profit & Loss account -- in Rs. Cr. --



Income

Interest Earned 1,222.43 1,401.38 1,680.44 2,239.89 2,232.89

Other Income 190.31 248.57 418.57 547.67 620.22

Total Income 1,412.74 1,649.95 2,099.01 2,787.56 2,853.11

Expenditure

Bank Of Baroda

Public Sector

Profit & Loss account -- in Rs. Cr. --



Income

Interest Earned 7,100.00 9,212.64 11,813.48 15,091.58 16,698.34

Other Income 1,191.69 1,381.79 2,051.04 2,757.66 2,806.36

Total Income 8,291.69 10,594.43 13,864.52 17,849.24 19,504.70

Expenditure


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Interest expended 741.25 859.31 1,182.05 1,590.27 1,403.05

Employee Cost 234.19 238.48 302.39 392.22 428.85

Selling and

Admin Expenses 161.58 170.16 140.70 231.68 374.15

Depreciation 37.20 37.98 38.93 40.82 40.96

Miscellaneous

Expenses229.47 255.10 279.99 343.78 363.87

Preoperative Exp

Capitalised0.00 0.00 0.00 0.00 0.00

Operating

Expenses572.17 576.51 645.49 878.80

1,037.72

Provisions &

Contingencies90.27 125.21 116.52 129.70 170.11

Total Expenses 1,403.69 1,561.03 1,944.06 2,598.77 2,610.88



Net Profit for the

Year9.06 88.91 154 188 242

Extraordionary

Items0.00 0.00 0.00 0.00 0.00

Profit brought

forward-34.60 1.29 18.44 103.5 206.5

Total -25.54 90.20 173.3 292.3 448.7

PreferenceDividend

0.00 0.00 0.00 0.00 0.00

Equity Dividend 0.00 5.91 15.37 20.52 29.99

Corporate

Dividend Tax0.00 1.00 2.61 3.49 5.10

Interest expended 3,875.09 5,426.56 7,901.67 9,968.17 10,758.86

Employee Cost 1,523.79 1,644.06 1,803.76 2,348.13 2,350.88

Selling and

Admin Expenses 714.77 646.25 927.20 885.24 1,627.56

Depreciation 111.1 194.28 232.00 230.50 230.86

Miscellaneous

Expenses1,016.85 1,656.81 1,564.36 2,189.99 1,478.21

Preoperative Exp

Capitalised0.00 0.00 0.00 0.00 0.00

Operating

Expenses2,724.77 2,771.45 3,370.27 3,844.66 4,711.23

Provisions &

Contingencies641.77 1,369.95 1,157.05 1,809.20 976.28

Total Expenses 7,241.63 9,567.96 12,428.99 15,622.03 16,446.37



Net Profit for the

Year

1,050 1,026 1,435 2,227 3,058

Extraordionary

Items-223.1 0.00 0.00 0.00 0.00

Profit brought

forward0.00 0.00 0.00 0.00 0.00

Total 826.9 1,026.4 1,435.5 2,227.2 3,058.3

Preference

Dividend0.00 0.00 0.00 0.00 0.00

Equity Dividend 207.6 252.46 340.94 383.56 639.26

Corporate

Dividend Tax0.00 0.00 0.00 0.00 0.00

Per share data

(annualised)


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Per share data

(annualised)

Earning Per

Share (Rs)1.00 9.78 15.12 18.40 20.19

Equity Dividend

(%)0.00 6.50 15.00 20.00 25.00

Book Value (Rs) 100.1 109.1 139.1 154.9 185.0

Appropriations

Transfer to

Statutory

Reserves

-26.84 64.85 53.85 61.77 83.45

Transfer to Other

Reserves0.00 0.01 0.00 0.00 -0.01

Proposed

Dividend/Transfer

to Govt

0.00 6.91 17.98 24.01 35.09

Balance c/f to

Balance Sheet1.29 18.44 103.53 206.53 330.22

Total -25.55 90.21 175.3 292.3 448.7

Earning Per

Share (Rs)28.83 28.18 39.41 61.14 83.96

Equity Dividend

(%)50.00 60.00 80.00 90.00 150.00

Book Value (Rs) 215.3 237.46 303.18 352.37

414.71

Appropriations

Transfer to

Statutory

Reserves

-828.7 271.50 444.23 1,136.2 1,162.0

Transfer to Other

Reserves1,448 502.50 650.35 707.41 1,257.0

Proposed

Dividend/Transfer

to Govt

207.6 252.46 340.94 383.56 639.26

Balance c/f to

Balance Sheet0.00 0.00 0.00 0.00 0.00

Total 826.9 1,026.4 1,435.5 2,227.2 3,058.3

REFERENCES:-

1. Balance sheets and Profit & Loss of Bank of Baroda2. Balance sheets and Profit & Loss of ING Vysya3. Profiles of Banks 2009-10 released by RBI

Documents

10 HARSH ANAND Bank of Baroda vs ING Vysya - Productivity and lit