Report on Punjab National Bank

7/27/2019 Report on Punjab National Bank

1/20


2/20

PUNJAB NATIONAL BANK

Prepared by HSK


PUNJAB NATIONAL BANK HOLDS 38TH

RANK I N TOP 100

COMPANIES OF INDIA BY CAPITALI SATION


3/20


Prepared by HSK

PROFI LE OF PUNJAB NATIONAL BANK

With over 56 million satisfied customers and 5002 offices including 5 overseas branches, PNB has

continued to retain its leadership position amongst the nationalized banks. The bank enjoys strong

fundamentals, large franchise value and good brand image. Besides being ranked as one of India's top

service brands, PNB has remained fully committed to its guiding principles of sound and prudent banking.

Apart from offering banking products, the bank has also entered the credit card, debit card; bullion

business; life and non-life insurance; Gold coins & asset management business, etc.

Since its humble beginning in 1895 with the distinction of being the first Swadeshi Bank to have been

started with Indian capital, PNB has achieved significant growth in business which at the end of March

2010 amounted to Rs 435931 crore. PNB is ranked as the 2nd largest bank in the country after SBI in

terms of branch network, business and many other parameters. During the FY 2009-10, with 40.85%

share of CASA deposits, the Bank achieved a net profit of Rs 3905 crore. Bank has a strong capital base

with capital adequacy ratio of 14.16% as on Mar10 as per Basel II with Tier I and Tier II capital ratio at

9.15% and 5.01% respectively. As on March10, the Bank has the Gross and Net NPA ratio of 1.71% and

0.53% respectively. During the FY 2009-10, its ratio of Priority Sector Credit to Adjusted Net Bank

Credit at 40.5% & Agriculture Credit to Adjusted Net Bank Credit at 19.7% was also higher than the

stipulated requirement of 40% & 18% respectively.


4/20


Prepared by HSK

BOARD OF DIRECTORSOF PUNJAB

NATIONAL BANK

Sh. M .V.TanksaleExecutive Directo r

Sh.K.R.Kamath

Chairman & Mana in Direc to r

Sh. Nagesh Pydah

Executive Director


5/20


Prepared by HSK


6/20


Prepared by HSK

Profit & Loss account of Punjab National Bank

Particulars---------------- in Rs . Cr . ----------------

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

Income

Interest Earned 9,584.15 11,537.48 14,265.02 19,326.16 21,466.91

Other Income 1,478.23 1,343.64 1,997.56 2,919.69 3,565.31

Total Income 11,062.38 12,881.12 16,262.58 22,245.85 25,032.22

Expenditure

Interest expended 4,917.39 6,022.91 8,730.86 12,295.30 12,944.02

Employee Cost 2,114.97 2,352.45 2,461.54 2,924.38 3,121.14

Selling and Admin Expenses 638.79 1,032.50 884.19 1,406.42 1,701.46

Depreciation 186.65 194.80 170.23 191.06 222.83

Miscellaneous Expenses 1,765.27 1,738.38 1,966.98 2,337.80 3,137.42

Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.00

Operating Expenses 3,263.15 3,926.05 3,902.55 5,026.81 5,761.36

Provisions & Contingencies 1,442.53 1,392.08 1,580.39 1,832.85 2,421.49

Total Expenses 9,623.07 11,341.04 14,213.80 19,154.96 21,126.87

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

Net Profit for the Year 1,439.31 1,540.08 2,048.76 3,090.88 3,905.36

Extraordionary Items 0.00 0.00 0.00 0.00 0.00

Profit brought forward 0.00 183.49 15.52 0.00 7.64

Total 1,439.31 1,723.57 2,064.28 3,090.88 3,913.00Preference Dividend 0.00 0.00 0.00 0.00 0.00

Equity Dividend 189.18 409.89 409.89 630.61 693.67

Corporate Dividend Tax 26.53 63.11 69.66 107.17 116.43

Per share data (annualised)

Earning Per Share (Rs) 45.65 48.84 64.98 98.03 123.86

Equity Dividend (%) 60.00 100.00 100.00 200.00 220.00

Book Value (Rs) 287.79 321.65 341.98 416.74 514.77

Appropriations

Transfer to Statutory Reserves -1,512.23 435.06 596.14 1,155.46 1,532.46

Transfer to Other Reserves 2,552.34 800.00 988.59 1,190.00 1,570.44

Proposed Dividend/Transfer to Govt 215.71 473.00 479.55 737.78 810.10

Balance c/f to Balance Sheet 183.49 15.52 0.00 7.64 0.00

Total 1,439.31 1,723.58 2,064.28 3,090.88 3,913.00


7/20


Prepared by HSK

Balance Sheet o f Punjab National BankCapital and

Liabi l i t ies:

---------------- in Rs . Cr . ----------------


Total Share Capital 315.30 315.30 315.30 315.30 315.30

Equity Share Capital 315.30 315.30 315.30 315.30 315.30

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

Reserves 8,758.68 9,826.31 10,467.35 12,824.59 15,915.63

Revaluation Reserves 302.38 293.85 1,535.70 1,513.74 1,491.99

Net Worth 9,376.36 10,435.46 12,318.35 14,653.63 17,722.92

Deposits 119,684.92 139,859.67 166,457.23 209,760.50 249,329.80

Borrowings 6,687.18 1,948.86 5,446.56 4,374.36 19,262.37

Total Debt 126,372.10 141,808.53 171,903.79 214,134.86 268,592.17

Other Liabilities & Provisions 9,518.93 10,178.51 14,798.23 18,130.13 10,317.69

Total Liabilities 145,267.39 162,422.50 199,020.37 246,918.62 296,632.78

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

Cash & Balances with RBI 23,394.56 12,372.03 15,258.15 17,058.25 18,327.58

Balance with Banks, Money at Call 1,397.14 3,273.49 3,572.57 4,354.89 5,145.99

Advances 74,627.37 96,596.52 119,501.57 154,702.99 186,601.21

Investments 41,055.31 45,189.84 53,991.71 63,385.18 77,724.47

Gross Block 2,106.92 2,247.74 3,699.64 3,930.36 4,215.21Accumulated Depreciation 1,076.69 1,237.92 1,384.12 1,533.25 1,701.74

Net Block 1,030.23 1,009.82 2,315.52 2,397.11 2,513.47

Capital Work In Progress 0.00 0.00 0.00 0.00 0.00

Other Assets 3,762.79 3,980.80 4,380.84 5,020.20 6,320.07

Total Assets 145,267.40 162,422.50 199,020.36 246,918.62 296,632.79

Contingent Liabilities 39,860.40 52,884.89 80,606.88 79,270.65 68,124.47

Bills for collection 18,878.91 21,815.59 23,448.99 31,941.43 33,215.78Book Value (Rs) 287.79 321.65 341.98 416.74 514.77


8/20


Prepared by HSK

Cash Flow of Pun jab National Bank

CONCLUSION:

In 2006 cash flow from Operating Activities is Rs.14961.44 crores which has been

decreased to Rs. -10144.34 crores in 2007 which is very low total which shows

that bank is earning less through these activities. In 2008 the total has increased

to Rs.1756.13 crores and it has increase to Rs.2105.16 crores in 2009 which

indicates that the bank can recover its losses in this year. In 2010 the bank has

increased its cash flows from operating activities to Rs.1835.99 crores.

In 2006 cash used Investing Activities is Rs. 465.64 crores which has beenincreased to Rs. 159.41 crores in 2007 which shows that bank is not earning

through these activities. In 2008 the bank is again in losses as the cash outflow is

now Rs. 444.46 crores and in 2009 also the outflow is of Rs. 395.84 crores which

Particulars ---------------- in Rs . Cr . ----------------


Net Profit Before Tax 2033.87 2169.13 3295.91 4766.92 5904.78

Net Cash From Operating Activities 14961.44 -10144.34 1756.13 2105.16 1835.99

Net Cash (used in)/fromInvesting Activities

-465.64 -159.41 -444.46 -395.84 -409.41

Net Cash (used in)/from FinancingActivities -793.13 1157.57 1873.54 873.11 633.84

Net (decrease)/increase In Cash andCash Equivalents

13702.66 -9146.17 3185.21 2582.42 2060.42

Opening Cash & Cash Equivalents 11089.03 24791.69 15645.52 18830.72 21413.14

Closing Cash & Cash Equivalents 24791.69 15645.52 18830.72 21413.14 23473.56


9/20


Prepared by HSK

indicates that the bank has more outflows than inflows through Investing

Activities. In 2010 also the cash is going out and is of Rs. 409.41 crores. This

indicates that the bank is not having any proceeds from these activities from last5 years.

In 2006 cash flow from Financing Activities is Rs.793.13 crores and in 2007 cashoutflow is of Rs. 1157.57 crores which shows that during this year bank has not

earned any proceeds. In 2008 the total has been increased to Rs.1873.54 crores

which indicates that bank has work efiiciently in this year. And in 2009 it has

been reduced to Rs.873.11 crores and in 2010 total has decreased to 633.84

crores indicating that inflows are very few during this year.


10/20


Prepared by HSK

ACCOUNTING RATIOS

Meaning of Accounting Ratios:

As stated earlier, accounting ratios are an important tool of financial statement analysis. A ratio is a

mathematical number calculated as a reference to relationship of two or more numbers and can be

expressed as a fraction, proportion, percentage, anda number of times. When the number is calculatedbyreferring to two accounting numbers derived from the financial statements, it is termed as accounting ratio.

Objectives of Ratio Analysis:

Ratio analysis is indispensable part of interpretation of results revealed by the financial statements. Itprovides users with crucial financial information andpoints out the areas which require investigation. Ratio

analysis is a technique.

To know the areas of the business which need more attention;

To know about the potential areas which can be improved with the effort in the desired direction;

To provide a deeper analysis of the profitability, liquidity, solvency and efficiency levels in the

business;

To provide information for making cross sectional analysis by comparing the performance with

the best industry standards;

To provide information derived from financial statements useful for making projections and

estimates for the future.


11/20


Prepared by HSK

Advantages of Ratio Analysis:

The ratio analysis if properly done improves the users understanding of the efficiency with which the

business is being conducted. The numerical relationships throw light on many latent aspects of thebusiness.

Helps understand efficacy of decisions

Simplify complex figures and establish relationships

Helpful in comparative analysis

Identification of problem areas

Enables SWOT analysis

Various comparisons

L imi tations of Ratio Analysis:

Since the ratios are derived fromthe financial statements, any weakness in theoriginal financial statementswill also creep in the derived analysis in the form of limitations of the ratio analysis.

Ignores Price-level Changes

Ignore Qualitative or Non-monetary Aspects

Variations in Accounting Practices

Forecasting

Types of Ratios:

There is a two way classification of ratios:

(1) Traditional classification(2)Functional classification.

The traditional classification has been on the basis of financial statements towhich the determinants of ratios belong. On this basis the ratios are classified asfollows:


12/20


Prepared by HSK

I. Income Statement Ratios: A ratio of two variables from the income statement is known as

Income Statement Ratio. For example, ratio of gross profit to sales known as gross profit ratio is

calculated usingboth figures from the income statement.

II. Balance Sheet Ratios:In case both variables are from balance sheet, it is classified as Balance

Sheet Ratios. For example, ratio of current assets to current liabilities known as current ratio is

calculated using both figures from balance sheet.

III. Composite Ratios:If a ratio is computed with one variable from income statement and another

variable from balance sheet, it is called Composite Ratio. For example, ratio of credit sales to

debtors and bills receivable known as debtor turnover ratio is calculated using one figure from

income statement (credit sales) and another figure from balance sheet (debtors and bills

receivable).

Although accounting ratios are calculated by taking data from financialstatements but classification of ratios on the basis of financial statements israrely used in practice. As such, the alternative classification (functionalclassification) based on the purpose for which a ratio is computed, is the mostcommonly used classification which reach as follows:

I. Liquidity Ratios: To meet its commitments, business needs liquid funds. The ability of the

business to pay the amount due to stakeholders as and when it is due is known as liquidity, and the

ratios calculated to measure it are known as Liquidity Ratios. They are essentially short -term innature. The two ratios included in this category are Current Ratio and Liquid Ratio.

Current Ratio:Current ratio is the proportion of current assets to current liabilities. It is expressed

as follows:


13/20


Prepared by HSK

Quick Ratio:It is the ratio of quick (or liquid) asset to current liabilities. It is expressed as follows:

II. Solvency Ratios: Solvency of business is determined by its ability to meet its contractual

obligations towards stakeholders, particularly towards external stakeholders, and the ratios

calculated to measure solvency position are known as Solvency Ratios. They are essentially long -

term in nature.

Debt-Equity Ratio: Debt Equity Ratio measures the relationship between long-term debt and

equity. Normally, it is considered to be safe if debt equity ratio is 2:1. It is computed as follows:

Debt Ratio: The Debt Ratio refers to the ratio of long-term debt to the total of external and

internal funds (capital employed or net assets). It is computed as follows:

Proprietary Ratio: Proprietary ratio expresses relationship of proprietors (shareholders) funds to

net assets and is calculated as follows :

Total Assets to Debt Ratio: This ratio measures the extent of the coverage of long-term debt by

assets. It is calculated as

Current Ratio = Current Assets : Current Liabilities

Quick ratio = Quick Assets : Current Liabilities

Debt-Equity ratio = Long-term Debts/ Shareholders Fund

Debt ratio = Long-term Debt/Capital Employed (or Net Assets)

Proprietary Ratio = Shareholders Funds/Capital employed (or net assets)

Total assets to Debt Ratio = Total assets/Long-term debt


14/20


Prepared by HSK

Interest Coverage Ratio: It is a ratio which deals with the servicing of interest on loan. It is a

measure of security of interest payable on long-term debt. It is calculated as follows:

III. Activity (or Turnover) Ratios:This refers to the ratios that are calculated for measuring the

efficiency of operation of business based on effective utilisation of resources. Hence, these are alsoknown as efficiency ratios.

Stock (or Inventory) Turnover Ratio: It determines the number of times stock is turned in sales

during the accounting period under consideration. It expresses the relationship between the cost

of goods sold and stock of goods. The formula for its calculation is as follows:

Debtors (Receivables) Turnover Ratio: It expresses the relationship between credit sales and

debtors. It is calculated as follows :

Creditors (Payable) Turnover Ratio:Creditors turnover ratio indicates the pattern of payment of

accounts payable. As accounts payable arise on account of credit purchases, it expresses

relationship between credit purchases and accounts payable. It is calculated as follows :

Interest Coverage Ratio = Net Profit before Interest and Tax/

Interest on long term debt

Stock Turnover Ratio = Cost of Goods Sold/ Average Stock

Debtors Turnover ratio = Net Credit sales/ Average Accounts Receivable

Creditors Turnover ratio = Net Credit purchases/ Average accounts payable


15/20


Prepared by HSK

Investment (Net Assets) Turnover Ratio:It reflects relationship between employed in the business.

Higher turnover means better liquidity and profitability. It is calculated as follows :

Capital turnover which studies turnover of capital employed (Net Assets) is analysed further by

following two turnover ratios :

Fixed Assets Turnover :It is computed as follows:

Working Capital Turnover:It is calculated as follows :

IV. Profitability Ratios: It refers to the analysis of profits in relation to sales or funds (or assets)

employed in the business and the ratios calculated to meet this objective are known as

Profitability Ratios.

Gross Profit Ratio: Gross profit ratio as a percentage of sales is computed to have an idea about

gross margin. It is computed as follows:

Operating Ratio: It is computed to analyse cost of operation in relation to sales. It is calculated as

follows:

Investment (Net Assets) Turnover ratio = Net Sales/Capital Employed

Fixed asset turnover = Net Sales/Net Fixed Assets

Working Capital Turnover = Net Sales/Working Capital

Gross Profit Ratio = Gross Profit/Net Sales 100

Operating Ratio = (Cost of Sales + Operating Expenses)/ Net Sales 100


16/20


Prepared by HSK

Operating Profit Ratio:It is calculated to reveal operating margin. It may be computed directly or

as a residual of operating ratio.

Alternatively, it is calculated as under:

Net Profit Ratio: Net Profit Ratio is based on all inclusive concept of profit. It relates sales to net

profit after operational as well as non-operational expenses and incomes. It is calculated as under:

Return on Capital Employed or Investment (ROCE or ROI): It explains the overall utilisation of

funds by a business enterprise. Capital employed means the long-term funds employed in the

business and includes shareholders fund, debentures and long-term loans. Thus, it is computed as

follows:

Return on Shareholders Fund: This ratio is very important from shareholders point of view in

assessing whethertheir investment in the firm generates a reasonable return or not. It should be

higher than the return on investment otherwise it would imply that banks funds have not beenemployed profitably. It is calculated as under :

Operating Profit Ratio = Operating Profit/ Sales 100

Net Profit Ratio = Net profit / Sales 100

Return on Investment (or Capital Employed) = Profit before

Interest and Tax/ Capital Employed 100

Return on Shareholders Fund = Profit after Tax/ Shareholders Fund

Operating Profit Ratio = 100Operating Ratio


17/20


Prepared by HSK

Earnings Per Share: The ratio is defined as

In this context, earnings refer to profit available for equity shareholders which is worked out as

Profit after TaxDividend on Preference Shares.

Book Value Per Share: This ratio is calculated as

Equity shareholder funds refer to Shareholders FundsPreference Share Capital.

Dividend Payout Ratio: This refers to the proportion of earning that are distributed against the

shareholders. It is calculated as

Price Earning Ratio:The ratio is defined as

P/E ratios vary from industry to industry and bank to bank in the same industry depending upon

investors perception of their future.

E P S = Profit available for equity shareholders/ No. of Equity Shares

Book Value per share = Equity shareholders funds/No. of Equity Shares

Dividend Payout Ratio = Dividend Per Share/ Earnings Per Share

P/E Ratio = Market price of a Share/Earnings per Share


18/20


Prepared by HSK

Key Financ ial Ratios of Pun jab National Bank

Particulars ---------------- in Rs . Cr . ----------------Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

Investm ent Valuation Ratios:Face Value 10.00 10.00 10.00 10.00 10.00

Dividend Per Share 6.00 10.00 10.00 20.00 22.00

Operating Profit Per Share (Rs) 57.00 74.53 109.81 151.48 191.63

Net Operating Profit Per Share (Rs) 310.53 383.89 505.09 694.81 777.82

Free Reserves Per Share (Rs) 69.61 64.29 63.79 64.04 63.79

Bonus in Equity Capital -- -- -- -- --

Prof i tabi l i ty Rat ios:Interest Spread 3.94 4.40 4.18 4.18 4.46

Adjusted Cash Margin(%) 16.35 14.10 13.72 14.60 16.52

Net Profit Margin 14.50 12.53 12.68 13.76 15.64

Return on Long Term Fund(%) 74.57 80.76 111.52 129.83 116.11Return on Net Worth(%) 17.01 16.03 19.00 23.52 24.06

Adjusted Return on Net Worth(%) 15.83 15.17 18.99 23.50 24.04

Return on Assets Excluding Revaluations 0.99 321.65 341.98 416.74 514.77

Return on Assets Including Revaluations 0.99 330.97 390.68 464.75 562.09

Management Eff ic iency Rat ios:Interest Income / Total Funds 7.23 7.88 8.86 9.89 9.07

Net Interest Income / Total Funds 3.60 3.96 4.00 4.34 4.28Non Interest Income / Total Funds 0.10 0.12 0.13 0.25 0.16

Interest Expended / Total Funds 3.63 3.92 4.86 5.55 4.79

Operating Expense / Total Funds 2.27 2.43 2.08 2.18 2.05

Profit Before Provisions / Total Funds 1.29 1.53 1.96 2.32 2.31

Net Profit / Total Funds 1.06 1.00 1.14 1.40 1.45

Loans Turnover 0.15 0.14 0.15 0.16 0.14

Total Income / Capital Employed(%) 7.33 8.00 8.99 10.14 9.24

Interest Expended / Capital Employed(%) 3.63 3.92 4.86 5.55 4.79

Total Assets Turnover Ratios 0.07 0.08 0.09 0.10 0.09

Asset Turnover Ratio 4.75 5.48 4.35 5.64 5.89

Prof it And L oss Acc ount Ratios:Interest Expended / Interest Earned 51.31 52.20 61.20 63.62 60.30


19/20


Prepared by HSK

Other Income / Total Income 1.33 1.52 1.43 2.46 1.75

Operating Expense / Total Income 31.00 30.36 23.10 21.53 22.19

Selling Distribution Cost Composition 0.20 0.14 0.14 0.14 0.16

Balanc e Sheet Ratios :Capital Adequacy Ratio 11.95 12.29 13.46 14.03 14.16

Advances / Loans Funds(%) 64.26 72.04 76.19 80.15 77.31

Debt Coverage Ratios :Credit Deposit Ratio 60.60 65.97 70.55 72.88 74.34

Investment Deposit Ratio 41.16 33.23 32.38 31.20 30.74

Cash Deposit Ratio 14.74 13.78 9.02 8.59 7.71

Total Debt to Owners Fund 13.19 13.79 15.44 15.96 15.36Financial Charges Coverage Ratio 1.39 1.42 1.42 1.43 1.50

Financial Charges Coverage Ratio Post Tax 1.33 1.29 1.25 1.27 1.32

Leverage Ratios:Current Ratio 0.03 0.03 0.02 0.02 0.02

Quick Ratio 10.69 11.10 9.40 9.75 20.47

Cash Flow Indicator Rat ios:

Dividend Payout Ratio Net Profit 14.98 30.71 23.40 23.86 20.74Dividend Payout Ratio Cash Profit 13.26 27.26 21.61 22.47 19.62

Earning Retention Ratio 84.99 69.28 76.59 76.12 79.25

Cash Earning Retention Ratio 86.72 72.73 78.38 77.51 80.37

AdjustedCash Flow Times 73.73 80.65 75.05 63.95 60.43


Earnings Per Share 45.65 48.84 64.98 98.03 123.86

Book Value 287.79 321.65 341.98 416.74 514.77


20/20


Prepared by HSK

CONCLUSION:

By comparing the net profits of2006 07 it is analysed that the bank is

earning profit less than previous year with a difference ofRs. 0.06

crores.


earning profit with a difference ofRs. 0.14 crores .This shows that bank

is performing good.


earning profit with a difference ofRs. 0.26 crores .This shows that bank

is performing efficiently during this period. The profit has increasedmore than previous year.


earning profit with a difference ofRs. 0.05 crores. This shows that bank

is earning profit at less rate.

Year 2006 2007 2008 2009 2010Net profits 1.06 1.00 1.14 1.40 1.45

Documents

Report on Punjab National Bank