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ANALYSIS OF PRIVATE SECTOR BANKS - INVESTOR’S PERSPECTIVE

Analysis of Financial Statements

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This is an attempt to make a comparative analysis of 3 major private sector banks as on dated 17th march

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ANALYSIS OF PRIVATE SECTOR BANKS

- INVESTOR’S PERSPECTIVE

Why banking sector???• Steady progress since 2002.• Indian banking is unaffected from the global

financial crises• Indian banking will adopt for more of

defensive approach & follow stringent norms for credit disbursal.

• Indian banking focus on analyzing borrower financial health rather than capability.

Contd…

• Retail banking industry reached a value of $66 billion in 2005.

• In future the retail banking industry in India is likely to reach a value of $300 billion by 2010.

• Sukhani told CNBC-TV18, "When the Nifty started moving up after the Budget announcement the banking sector outperformed, it roared almost 6% while the Nifty was underperforming

GROUP 4

Introduction Monal Bhattad 5

HDFC Bank Nilesh Shingade 50

Akshada Wagh 57

Kotak Mahindra Bank Shailesh Gajare 13

Anjali Rodrigues 43

Axis Bank Ashutosh Rathod 40

Simeen Khalfay 21

HDFC Bank

HDFC BANK• Housing Development Finance Corporation

• Founded in 1977 by Hasmukh bhai Parakh

• HDFC Bank was incorporated in August 1994

• Certificate of Commencement of Business was received on 10th October 1994 from RBI

• Opened first Branch in Ramon House at Churchgate

• IPO in India in 1995

Mission

• World Class Indian Bank

• Benchmarking against international standards.

• Best practices in terms of product offerings, technology, service levels, risk management and audit & compliance.

• To build sound customer franchises across distinct businesses.

BOARD OF DIRECTORS

Mr. Aditya Puri, Managing Director

Mr. Jagdish Kapoor , Chairman of HDFC Bank.

Mr. Harish Engineer,Executive Director

Mr. Parekh Sukthakar, Executive Director

TRULY GLOBAL !!!

Capital Structure

• The authorized capital of HDFC Bank is Rs550 crore (Rs5.5 billion).

• The paid-up capital is Rs455.23 crore (Rs.4.2 billion).

• The HDFC Group holds 23.87% of the bank's equity

• 16.94 % of the equity is held by the ADS Depository (in respect of the bank's American Depository Shares (ADS) Issue).

• Roughly 27.46% of the equity is held by Foreign Institutional Investors (FIIs) and the bank has about 458683 shareholders

Business Strategy

• Increasing market share in India’s expanding banking.

• Delivering high quality customer service.

• Delivering more products to more customers.

• Maintaining current high standards for asset quality through disciplined credit risk management.

• Develop innovative products and services that attract targeted customers and address inefficiencies in the Indian financial sector.

NETWORK• 1725 branches• 4000 ATM’s in the country• 771 cities in India• All branches are OLRT

connected• Customers in over 500

locations are also serviced through Telephone Banking

• Representative offices in Hong Kong, NewYork, London & Singapore

Achievements

• Merged with Centurion Bank of Punjab in 2008.

• Merged with TIMES BANK in 2000.

• HDFC Bank ties up with Qatar National Bank.

• Best Local Bank in India & Best Private Banking Services overall –Euromoney Private Banking & Wealth Management Poll 2010.

Growth by Acquisition !!

HDFC Asset Management Company Ltd.HDFC Standard Life Insurance Company Ltd.HDFC Developers Ltd.HDFC Holdings Ltd.HDFC Investments Ltd.HDFC Trustee Company Ltd.GRUH Finance Ltd.HDFC Realty Ltd.HDFC Ergo General Insurance Company Ltd. (formerly HDFC Chubb General Insurance Company Ltd.)HDFC Venture Capital Ltd.HDFC Ventures Trustee Company Ltd.HDFC Sales Pvt. Ltd. (formerly Home Loan Services India Pvt. Ltd.)HDFC Property Ventures Ltd.

Enterprises under common control of the promoter

HDFC Bank balance sheet

• Balance sheet

• Profit & Loss Statement

• Cash Flow Statement

Director’s Report

• The Banks Fixed Deposit program has been rated AAA by CARE, CRISIL, Fitch Ratings India Private Limited

• 16.78 lacs shares were allotted to the employees under the Employee Stock Option Scheme of the Bank

Auditor’s report

• The Auditors M/s. Haribhakti & Co

• No default on the part of the company interms of payment of Taxes & providing dividend.

• The financial data furnished by the company is authentic & true to their knowledge.

• The company operates on ethical grounds.

Percentage growth since April2009 69.81%

Ratio Analysis

PER SHARE RATIOS 2009 2008 2007

Reported EPS (Rs) 52.77 44.87 35.74

Net operating income per share (Rs) 464.77 348.57 259.98

Gross profit margin (%) 18.05 28.58 30.50

Net profit margin (%) 11.35 12.82 13.57

Adjusted Net worth 15.29 13.82 17.75

Dividend pay out ratio 22.16 22.16 22.91

Kotak Mahindra Bank

• The company was incorporated as Kotak Capital Management Finance Ltd on 21st November 1985.

• Promoters- Mr. Uday Kotak, Mr. Sidney Pinto and Kotak & Company.

• Harish Mahindra and Anand Mahindra took a stake in the company.

• The company’s name was change on 8th April, 1986 to Kotak Mahindra Finance Ltd.

• In 1987 company enters the Lease and Hire purchase market

• In 1990 the company started auto finance division. • In 1991 company started investment banking division.• 1995- brokerage and distribution businesses : Kotak

Securities• Investment banking division: Kotak Mahindra

Capital Company• 1996- Auto finance business: Kotak Mahindra prime

Ltd

• In 1998 company entered into mutual fund market with the launch of Kotak Mahindra Asset Management Company.

• In 2000 Kotak securities launches its online broking site (www.kotaksecurities.com)

• 2003 Kotak Mahindra Finance Ltd converted to the commercial bank.

Company profile

• Chairman K.M.Gherda• Executive vice chairman Uday Kotak & managing director• Chairman of Board of Shankar Acharya directors• Registered office Nariman bhavan Nariman point Mumbai

• Employees base 8000+• 5.9 million customers• More than 217 branches• Spread across 126 locations in the country• Future Plans:-• Setting up additional branches in major cities.• Increase its market share in vehicle financing

business

Shareholding pattern as on 31/12/2009

No. of shares % holding

Promoters holdingIndian Promoters 167845144 48.27

Non promoters holdingBanks Fin. Inst. And insurance 9028514 2.60FII’s 100573927 28.93Sub Total 33.70 Other InvestorsPrivate corporate bodies 9560512 2.75NRI’s/OCB’s/Foreign Others 4424575 1.27Others 939045 0.27Sub total 4.29General Public 47756178 13.74Grand total 347695925 100.00

Rs Crore Annual Results

Mar 09 08 07 06 05

• Sales 3065 2535 1354 694 420

• Operating profit 1614 1243 618 269 181

• Interest 1546 1309 699 339 94

• Gross Profit 679 669 325 210 33

• EPS (Rs) 7.99 8.53 4.33 3.82 6.88

Kotak Mahindra Bank

• Balance Sheet kotak\balance sheet.xls

• Profit and Loss Account kotak\P& L Account.xls

• Cash Flow Statement kotak\Cash Flow.xls

Ratio Analysis

2009 2008 2007

Net operating income per share (Rs) 94.39 81.83 48.81

Operating margin (%) 13.85 19.93 14.54

Gross profit margin (%) 11.72 18.13 12.35

Net profit margin (%) 8.35 10.37 8.84

Adjusted return on net worth (%) 7.06 8.14 8.47

Dividend payout ratio (net profit) 10.07 10.29 18.91

Highlights of the Director’s Report

• DIVIDEND

• The Directors recommend a dividend of Rs. 0.75 per share (previous year Rs.0.75 per share), entailing a payout of Rs. 27.82 crore including dividend distribution tax

• Against the backdrop of the economic slowdown not only in India but across the globe, the bank is moderating the network expansion plans.

• Bank was ranked among the top five in Corporate Governance Practices in Asia/Pacific in the IR Global Rankings 2009

Auditors

• Messrs S.R. Batliboi & Co., Chartered Accountants –Auditors for the annual year.

• The transactions of the Bank which have been conducted within its powers;

• There has been no term loans availed during the year.• The Balance Sheet, Profit and Loss Account and Cash

Flow Statement dealt with by this report are in agreement with the books of account;

• The information provided by the bank gives a true and fair view in conformity with the accounting principles generally accepted in India;

AXIS BANK

INTRODUCTION

• Public BSE.

• Previously called UTI bank ,was the 1st of the all new private banks.

• The bank was promoted jointly by administrator.

• General insurance corporation ltd. ,National insurance company ltd. ,The New India Assurance company. , The Oriental insurance corporation.

• The UTI hold special position.

• The bank changed its name to Axis bank.

• SHIKHA SHARMA-April 2009.

• As on the year ended march,2009--13,745crores -- 1,812crores. • On Feb,2010-”AXIS CALL AND PAY ON ATOM”.

PROMOTER OF AXIS BANK

• Axis bank has been promoted by largest financial institution.

• Set up with a capital of 115 crores.

• The Government of India has currently appointed shri.K.N. Prithviraj.

• The government has continuing obligation and commitment to the investor of Axis bank, which it will support to them.

BOARD OF DIRECTOR

• Smt. Shikha sharma Managing Director and CEO.• Shri.M.N.Agarwal Deputy Managing Director• Shri.N.C.Singhal Director

BRANCH NETWORK

• At the end of October 2009, the Bank has a very wide network of more than 925 Branch offices and Extension Counters.The Bank has a network of over 3900 ATM's (as on 31st October 2009).

• The Bank has loans now (as of June 2007) account for as much as 70 per cent of the bank’s total loan book of Rs 2,00,000 crore.

Axis Bank

• Balance Sheet of Axis Bank Ltd.doc

• Profit loss account of Axis Bank Ltd

Cash Flow Mar ' 09 Mar ' 08 Mar ' 07

Profit before tax 2,785.19 1,646.27 996.24

Net cash flow from operating activity

10,551.63 5,960.45 5,295.53

Net cash used in investing activity

-9,741.96 -4,702.52 -3,655.58

Net cash generated from financing activity

1,692.32 4,325.79 1,637.01

Net increase in cash and equivalent

2,512.66 5,585.94 3,276.46

Cash and equivalnt begin of year

12,504.24 6,918.31 3,641.84

Cash and equivalnt end of year

15,016.90 12,504.24 6,918.31

Annual results in brief

Mar ' 09 Mar ' 08 Mar ' 07

Sales 10,835.48 7,005.31 4,560.40

Operating profit 7,037.59 4,270.75 2,979.45

Interest 7,149.27 4,419.96 2,993.32

Gross profit 3,724.88 2,225.92 1,362.60

EPS (Rs) 50.57 29.94 23.40

Director’s Report Highlights• Profit after tax up by 69.50% to Rs. 1815.36 crores

• Net interest income up by 42.58% to Rs. 3686.21 crores

• Fee & Other Income up 63.63% to Rs.2523.02 crores

• Earning per share increased from Rs. 32.15 to Rs. 50.61

• Proposed dividend up from 60% to 100%

Auditor’s Report Highlights

• Audit has been conducted by S.R. Batliboi & Co. Chartered Accountants

• The balance sheet and profit and loss account are drawn up in conformity with Forms A and B (revised) of the Third Schedule to the Banking Regulation Act, 1949, read with Section 211 of the Companies Act, 1956.

• True and fair view in conformity with the accounting principles generally accepted in India;

Ratio Analysis  2009 2008 2007

Reported EPS (Rs) 50.57 29.94 23.40

Net operating income per share (Rs)

377.46 244.63 193.93

Operating margin (%) 22.13 23.25 21.84

Gross profit margin (%) 20.74 21.44 19.79

Net profit margin (%) 13.31 12.22 12.01

Adjusted return on net worth (%)

17.85 12.38 19.45

Dividend payout ratio (net profit)

23.16 23.49 22.57

Graphical Analysis

Comparison

• BALANCE SHEET• Profit & loss A/C• Cash flow

Value of investment????

INVESTED(Rs.)1 year ago

HDFC BANK LTD. (Rs.)

KOTAK MAHINDRA BANK LTD. (Rs.)

AXIS BANK LTD. (Rs.)

100 214.47 298.14 335.74

Attribute Date HDFC BANK LTD.

KOTAK MAHINDRA BANK LTD.

AXIS BANK LTD.

PE ratio 17/03/10 34.24 95.50 22.66

EPS (Rs) Mar, 09 52.78 7.99 50.57

Dividend payout ratio (np)

Mar,09 22.16 10.07 23.16

Face Value (Rs) 10 10 10

Net profit margin (%) Mar, 09 11.35 8.35 13.31

Last dividend (%) 23/04/09 100 7.5 100

Return on average equity Mar, 09 15.32 7.06 17.77

REPORT CARD

Expert comments..

• Buy Axis Bank at Rs 1080, says Technical Analyst, Ashwani Gujral

• Gujral told CNBC-TV18, "Axis Bank is one of the strongest private banks, much stronger than probably a Kotak or Reliance Capital or any of those guys but it could decline towards Rs 1,080 where it becomes a good buy.”

• He further added, “We could see much higher targets probably closer to Rs 1,350 on Axis Bank because generally it seems to be breaking away from the pack and whereas other stocks are unable to breakout of their ranges, this stock generally tends to make fresh intermediate highs more often."