TOPIC: COMPARATIVE STUDY ON PUBLIC AND PRIVATE

SECTOR BANKS

INDEX
SR.NO TOPIC PAGE.
NO
1. CHAPTER I

PROLOGUE 03
EVOLUTION OF BANKS IN INDIA 05
PUBLIC SECTOR 09
PRIVATE SECTOR 10
BANKS PROFILE
i. CITI BANK 11
ii. ICICI BANK 13
iii. CANARA BANK 16
iv. STATE BANK OF INDIA
18
NEED OF THE STUDY
21

2. CHAPTER II

RESEARCH OBJECTIVES 23
HYPOTHESIS 23
STATEMENT OF PROBLEM 24
LIMITATIONS 24

3. CHAPTER III

LITERATURE REVIEW 25

4. CHAPTER IV

29
METHODOLOGY

1
 a) OPERATING PROFIT PER SHARE
b) NET PROFIT MARGIN
c) EARNING PER SHARE
d) DIVIDEND PER SHARE

5. CHAPTER V
39
CONCLUSION
40
RECOMMENDATION

6. ANNEXURE 41

2
 PROLOGUE

Banks serve as the backbone to the financial sector, which facilitate the proper
utilization of financial resources of a country. The banking sector is increasingly
growing and it has witnessed a huge flow of investment. In addition to simply
being involved in the financial intermediation activities, banks are operating in a
rapidly innovating industry that urges them to create more specialized financial
services to better satisfy the changing needs of the customer. A sound financial
system is indispensable foe a healthy and vibrant economy. The banking sector
constitutes a predominant component of the financial services industry. The
performance of any economy to a large extent is dependent on the performance
of the banking sector. The banking sectors performance is seen as the replica of
economic activities of the nation as a healthy banking system acts as the
bedrock of social, economic and industrial growth of the nation.

The economic reforms in India started in early nineties, but their outcome is
visible now. Major changes took place in the functioning of Banks in India only
after liberalization, globalization and privatization. It has become very
mandatory to study and to make a comparative analysis of services of Public
sector Banks and Private Sector banks. Increased competition, new information
technologies and thereby declining processing costs, the erosion of product and
geographic boundaries, and less restrictive governmental regulations have all
played a major role for Public Sector Banks in India to forcefully compete with
Private and Foreign Banks. In recent years the Banking Industry has been
undergoing rapid changes, reflecting a number of underlying developments. The
most significant has been advances in communications and information
technology, which have accelerated and broadened the dissemination of
financial information while lowering the costs of many financial activates.

3
Public Sector Banks and Private Sector Banks play an important role in
economic development of the country. These are banking financial institutions
and they are also social organizations rendering savings, investments in the
form of deposits and security and providing their needful helps to the society
members to borrow loans at affordable interest rates. Public Sector Banks and
Private Sector Banks have had the distinction of being recognized as banking
institutions, which provides satisfying services to its customers or account
holders. As a result of this the customers expects the best of services from the
banking institution.

In recent years the Banking Industry has been undergoing rapid changes,
reflecting a number of underlying developments. The most significant has been
advances in communications and information technology, which have
accelerated
and broadened the dissemination of financial information while lowering the
costs of many financial activates. Public Sector Banks and Private Sector Banks
play an important role in economic development of the country. These are
banking financial institutions and they are also social organizations rendering
savings, investments in the form of deposits and security and providing their
needful helps to the society members to borrow loans at affordable interest
rates. Public Sector Banks and Private Sector Banks have had the distinction of
being
recognized as banking institutions, which provides satisfying services to its
customers or account holders. As a result of this the customers expects the best
of services from the banking institution.
With Reference to State Bank of India, Canara Bank (Vs) CITY Bank, ICICI
Bank this project formulates the financial position and performance of the said
bank.

4
 EVOLUTION

1949 REGULATION
Banking Companies Act.
1955 NATIONALIZATION PHASE I
State Bank of India.
1959 NATIONALIZATION PHASE II
SBI Subsidiaries.
1961 INSURANCE TO DEPOSITS
Deposit Insurance Corporation.
1968 SOCIAL CONTROL
National Credit Council.
1969 NATIONALIZATION PHASE III
14 Commercial Banks.
1971 - CREDIT GUARANTEE
Credit Guarantee Corporation.
1975 NEW RURAL BANKS
Regional Banks.
1980 NATIONALIZATION PHASE IV
6 Commercial Banks.
1985 RE-ORGANISATION OF BANKING
Private Banks.
1991 BANKING REFORMS

Banks play a very important role in the economic development of every modern
state. Banks operate at the heart of the modern economy. Traditionally, banking
had been restricted from private participation in India and public sector banks
had been enjoying complete protection. This scenario has changed since 1990.

5
The decade of 90s witnessed a sea change in the working of banking in India.
Technology made tremendous impact by introducing anywhere banking
and anytime banking. The financial sector now operates in a more
competitive environment than before and involves relatively large volume of
international financial flows. In the wake of greater financial deregulation and
global financial integration, the biggest challenge before the public sector banks
is to match the market requirement rather than being promoted by Government
or regulator.
Deregulation, liberalization and globalization have produced intense
competition in banking industry resulting into declining margins in traditional
businesses, increased cost pressures and greater risks. Market positioning, cost
of intermediation and service delivery are likely to be determinants of the
efficiency of banks with respect to their competitiveness. In the changed
environment creating new customers and retaining the existing ones have
become difficult tasks for banks. To meet the competition, creating satisfaction
of customers has become primary objective of each bank.
The last decade has seen many positive developments in the Indian banking
sector. The policy makers, which comprise the Reserve Bank of India (RBI),
Ministry of Finance and related government and financial sector regulatory
entities, have made several notable efforts to improve regulation in the sector.
The sector now compares favorably with banking sectors in the region on
metrics like growth, profitability. A few banks have established an outstanding
track record of innovation, growth and value creation.

Banking in India was defined under Section 5(A) as "any company which
transacts banking, business" and the purpose of banking business defined under
Section 5(B),"accepting deposits of money from public for the purpose of
lending or investing, repayable on demand through cheque/draft or otherwise".

6
In the process of doing the above-mentioned primary functions, they are also
permitted to do other types of business referred to as Utility Services for their
customers (Banking Regulation Act, 1949). During Bruisers' time, three
Presidencies Banks were opened in Bengal (1809), Bombay (1840) and Madras
(1843) with powers to issue notes. In the year 1921, due to banking crisis during
First World War, the three Presidency Banks merged to form Imperial Bank of
India. In the year 1955, after Independence, Imperial Bank of India was
nationalized and renamed as State Bank of India (SBI) with a primary mandate
to go to rural areas by opening at least 400 branches immediately. In the year
1957, the seven banks that were earlier catering to the rulers of different areas or
States viz., Patiala, Bikaner, Jaipur, Indore, Saurashtra, Hyderabad, Mysore,
Travancore, became subsidiaries of SBI. In 1969 and 1980, Government of
India nationalized 14 and 6 major banks respectively. After the merger of New
Bank of India with Punjab National Bank during the era of Financial Sector
Reforms, the number of PSBs became 27, which are under present study.
This is reflected in their market valuation. While the onus for this change lies
mainly with bank managements, an enabling policy and regulatory framework
will also be critical to their success.

RESERVE BANK OF INDIA

7
SCHEDULED BANKS AND NON-SCHEDULED BANKS

STATE CO-OPERATIVE BANKS AND COMMERCIAL BANKS

INDIAN BANKS AND FOREIGN BANKS

PRIVATE AND PUBLIC SECTOR BANKS SECTOR BANKS

SBI AND ITS ASSOCITES NATIONALIZED BANKS REGIONAL

RURAL BANKS

PUBLIC SECTOR BANKS

8
Public Sector Banks (PSBs) are banks where a majority stake (i.e. more than
50%) is held by a government. The shares of these banks are listed on stock
exchanges. There are a total of 27 PSBs in India [19 Nationalised banks + 6
State bank group (SBI + 5 associates) + 1 IDBI bank (Other Public Sector-
Indian Bank) = 26 PSBs + 1 recent Bhartiya Mahila Bank]. The Central
Government entered the banking business with the nationalization of the
Imperial Bank Of India in 1955. A 60% stake was taken by the Reserve Bank of
India and the new bank was named as the State Bank of India. The seven other
state banks became the subsidiaries of the new bank when nationalized on 19
July 1960. The next major nationalisation of banks took place in 1969 when the
government of India, under Prime Minister Indira Gandhi, nationalized an
additional 14 major banks. The total deposits in the banks nationalized in 1969
amounted to 50 crores. This move increased the presence of nationalized banks
in India, with 84% of the total branches coming under government control. The
next round of nationalisation took place in April 1980. The government
nationalized six banks. The total deposits of these banks amounted to around
200 crores. This move led to a further increase in the number of branches in the
market, increasing to 91% of the total branch network of the country. The
objectives behind nationalisation where:

To break the ownership and control of banks by a few business families,

To prevent the concentration of wealth and economic power,
To mobilize savings from masses from all parts of the country,
To cater to the needs of the priority sectors.

PRIVATE SECTOR BANKS

The part of the economy that is not state controlled, and is run by individuals
and companies for profit. The private sector encompasses all for-profit

9
businesses that are not owned or operated by the government. Companies and
corporations that are government run are part of what is known as the public
sector, while charities and other nonprofit organizations are part of the voluntary
sector.

INVESTOPEDIA EXPLAINS 'PRIVATE SECTOR'

In most free-market economies, the private sector is the sector where most jobs
are held. This differs from countries where the government exerts considerable
power over the economy, like in the People's Republic of China. The Bureau of
Labor Statistics tracks and reports both private and public unemployment rates
for the U.S

BANKS PROFILE

10
CITI BANK
Citigroup Inc. (Citigroup and, together with its subsidiaries, the Company) is a
global diversified financial services holding company whose businesses provide
a broad range of financial services to consumer and corporate customers.
Citigroup has more than 200 million customer accounts and does business in
more than 100 countries. Citigroup was incorporated in 1988 under the laws of
the State of Delaware. The Company is a bank holding company within the
meaning of the U.S. Bank Holding Company Act of 1956 registered with, and
subject to examination by, the Board of Governors of the Federal Reserve
System (FRB). Some of the Companys subsidiaries are subject to supervision
and examination by their respective federal and state authorities. At December
31, 2007, the Company had approximately 147,000 full-time and 13,000 part-
time employees in the United States and approximately 227,000 full-time
employees outside the United States.

The Company has completed certain strategic business acquisitions and

divestitures during the past three years, details of which can be found in Notes 2
and 3 to the Consolidated Financial Statements on pages 122 and 125,
respectively. The principal executive offices of the Company are located at 399
Park Avenue, New York, New York 10043, telephone number 212 559 1000.

Citibank is the consumer division of financial services multinational Citigroup.

Citibank was founded in 1812 as the CITY BANK OF NEW YORK later First

11
National City Bank of New York. As of March 2010, Citigroup is the largest
bank holding company in the United States by total assets, followed by Bank of
America and JPMorgan Chase.

Citibank is a global bank with 3,777 branch locations in 36 countries. The

United States is the largest single market with approximately 26% of branches,
generating 51% of revenues. Citibank's 983 North American branches are
concentrated in major metropolitan areas including New York
City, Chicago, Los Angeles, San Francisco, Washington, D.C., Miami, Boston,
Philadelphia (now closed as of March 2014), Houston, Dallas and San
Antonio (closed as of July 2014). Latin America markets make up 25% of
revenues, Asia 20%, and Europe / Middle East / Africa 4%. In addition to
standard banking transactions, Citibank markets insurance, credit cards and
investment products. Their online services division is among the most
successful in the field claiming about 15 million users. As a result of the global
financial crisis of 20082009 and huge losses in the value of its subprime
mortgage assets, Citibank was bailed out by aid from the U.S. government
under plans agreed for Citigroup. On November 23, 2008, in addition to initial
aid of $25 billion, a further $25 billion was invested in the corporation together
with guarantees for risky assets amounting to $306 billion. Since this time,
Citibank has repaid its government loans in full.

12
ICICI Bank

ICICI Bank is an Indian multinational banking and financial services company

headquartered in Vadodara. As of 2014 it is the second largest bank in India in
terms of assets and market capitalization. It offers a wide range of banking
products and financial services for corporate and retail customers through a
variety of delivery channels and specialized subsidiaries in the areas of
investment banking, life, non-life insurance, venture capital and asset
management. The Bank has a network of 3,800 branches and 11,162 ATMs in
India, and has a presence in 19 countries.

ICICI Bank is one of the Big Four banks of India, along with State Bank of
India, Punjab National Bank and Bank of Baroda. The bank has subsidiaries in
the United Kingdom, Russia, and Canada; branches in United States, Singapore,
Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre;
and representative offices in United Arab Emirates, China, South Africa,
Bangladesh, Thailand, Malaysia and Indonesia. The company's UK subsidiary
has also established branches in Belgium and Germany.

In March 2013, Operation Red Spider showed high-ranking officials and some
employees of ICICI Bank involved in money laundering. After a government
inquiry, ICICI Bank suspended 18 employees and faced penalties from the
Reserve Bank of India in relation to the activity

13
ICICI Bank was established by the Industrial Credit and Investment Corporation
of India (ICICI), an Indian financial institution, as a wholly owned subsidiary in
1994. The parent company was formed in 1955 as a joint-venture of the World
Bank, India's public-sector banks and public-sector insurance companies to
provide project financing to Indian industry. The bank was initially known as
the Industrial Credit and Investment Corporation of India Bank, before it
changed its name to the abbreviated ICICI Bank. The parent company was later
merged with the bank. ICICI Bank launched internet banking operations in
1998.

ICICI's shareholding in ICICI Bank was reduced to 46 percent, through a public

offering of shares in India in 1998, followed by an equity offering in the form of
American Depositary Receipts on the NYSE in 2000. ICICI Bank acquired
the Bank of Madura Limited in an all-stock deal in 2001 and sold additional
stakes to institutional investors during 2001-02.

In the 1990s, ICICI transformed its business from a development financial

institution offering only project finance to a diversified financial services group,
offering a wide variety of products and services, both directly and through a
number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become
the first Indian company and the first bank or financial institution from non-
Japan Asia to be listed on the NYSE.

In 2000, ICICI Bank became the first Indian bank to list on the New York Stock
Exchange with its five million American depository shares issue generating a
demand book 13 times the offer size.

In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the
merger of ICICI and two of its wholly owned retail finance subsidiaries, ICICI
Personal Financial Services Limited and ICICI Capital Services Limited, with

14
ICICI Bank. The merger was approved by shareholders of ICICI and ICICI
Bank in January 2002, by the High Court of Gujarat at Ahmedabad in March
2002 and by the High Court of Judicature at Mumbai and the Reserve Bank of
India in April 2002.

In 2008, following the 2008 financial crisis, customers rushed to ICICI ATMs
and branches in some locations due to rumors of adverse financial position of
ICICI Bank. The Reserve Bank of India issued a clarification on the financial
strength of ICICI Bank to dispel the rumors.

15
Canara Bank

Canara Bank is an Indian state-owned bank headquartered in Bangalore,

Karnataka. It was established in 1906, making it one of the oldest banks in the
country; the bank was nationalized in 1969. As of July 2014, the bank had a
network of 5111 branches and more than 6000 ATMs spread across India. The
bank also has offices abroad in London, Hong Kong, Moscow, Shanghai, Doha,
and Dubai. Canara Bank was ranked at 816 in the Forbes Global 2000 list
Ammembal Subba Rao Pai, a philanthropist, established the Canara Hindu
Permanent Fund in Mangalore, India, on 1 July 1906. The bank changed its
name to Canara Bank Limited in 1910 when it incorporated.

Canara Bank's first acquisition took place in 1961 when it acquired Bank of
Kerala. Bank of Kerala had been founded in September 1944 and at the time of
its acquisition on 20 May 1961 had three branches. The second bank that
Canara Bank acquired was Seasia Midland Bank (Alleppey), which had been
established on 26 July 1930 and had seven branches at the time of its takeover.

In 1958, the Reserve Bank of India had ordered Canara Bank to acquire G.
Raghumathmul Bank, in Hyderabad. This bank had been established in 1870,
and had converted to a limited company in 1925. At the time of the acquisition
G. Raghumathmul Bank had five branches. The merger took effect in 1961.
[6]
Later in 1961, Canara Bank acquired Trivandrum Permanent Bank.

16
Trivandrum Permanent Bank had been founded on 7 February 1899 and had 14
branches at the time of the merger. Next, Canara Bank acquired four banks in
1963: the Sree Poornathrayeesa Vilasam Bank, Thrippunithura, Arnad
Bank, Tiruchirapalli, Cochin Commercial Bank, Cochin, and Pandyan
Bank, Madurai. Sree Poornathrayeesa Vilasam Bank had been established on 21
February 1923 and at the time of its acquisition it had 14 branches. Arnad Bank
had been established on 23 December 1942 and at the time of its acquisition had
only one branch. Cochin Commercial Bank had been established on 3 January
1936, and at the time of its acquisition had 13 branches.

The Government of India nationalised Canara Bank, along with 13 other major
commercial banks of India, on 19 July 1969. In 1976, Canara Bank inaugurated
its 1000th branch. In 1985, Canara Bank acquired Lakshmi Commercial
Bank in a rescue. This brought Canara Bank some 230 branches in northern
India.

In 1996 Canara Bank became the first Indian Bank to get ISO certification for
"Total Branch Banking" for its Seshadripuram branch in Bangalore. Canara
Bank has now stopped opting for ISO certification of branches. Canara Bank
established its International Division in 1976. In 1983, Canara Bank opened its
first overseas office, a branch in London. Two years later, Canara Bank
established a subsidiary in Hong Kong, Indo Hong Kong International Finance.
In 2008-9, Canara Bank opened its third foreign operation, this one a branch in
Shanghai. Later Canara Bank established a branch each in Leicester and
Bahrain, and converted its Hong Kong subsidiary into a branch. It also has a
representative office in Sharjah. Together with State Bank of India, Canara
Bank established a joint venture in Moscow, Commercial Bank of India LLC.

Canara Bank provides the general manager and the branch managers for Al
Razouki Intl Exchange Co (LLC), which a number of business leaders and Non-

17
Resident Indians (NRIs) established in 1981 int the United Arab Emirates to
facilitate remittances to India by tourists and NRIs. Since 1983, Canara Bank
has been responsible for the management of Eastern Exchange Establishment,
Doha, Qatar, which Abdul Rahman M.M. Al Muftah had established in 1979.
Canara Bank opened its seventh overseas branch in New York, USA on 10 June
2014

State Bank of India (SBI)

STATE BANK OF INDIA is a multinational banking and financial

services company based in India. It is a government-owned corporation with its
headquarters in Mumbai, Maharashtra. As of December 2013, it had assets
of US$388 billion and 17,000 branches, including 190 foreign offices, making it
the largest banking and financial services company in India by assets.

State Bank of India is one of the Big Four banks of India, along with ICICI
Bank, Punjab National Bank and HDFC Bank. The bank traces its ancestry
to British India, through the Imperial Bank of India, to the founding, in 1806, of
the Bank of Calcutta, making it the oldest commercial bank in the Indian
Subcontinent. Bank of Madras merged into the other two "presidency banks" in
British India, Bank of Calcutta and Bank of Bombay, to form the Imperial Bank
18
of India, which in turn became the State Bank of India. Government of
India owned the Imperial Bank of India in 1955, with Reserve Bank of
India (India's Central Bank) taking a 60% stake, and renamed it the State Bank
of India. In 2008, the government took over the stake held by the Reserve Bank
of India. State Bank of India is a regional banking behemoth and has 20%
market share in deposits and loans among Indian commercial banks.

The roots of the State Bank of India lie in the first decade of the 19th century,
when the Bank of Calcutta, later renamed the Bank of Bengal, was established
on 2 June 1806. The Bank of Bengal was one of three Presidency banks, the
other two being the Bank of Bombay (incorporated on 15 April 1840) and
the Bank of Madras(incorporated on 1 July 1843). All three Presidency banks
were incorporated as joint stock companies and were the result of royal charters.
These three banks received the exclusive right to issue paper currency till 1861
when, with the Paper Currency Act, the right was taken over by the Government
of India. The Presidency banks amalgamated on 27 January 1921, and the re-
organised banking entity took as its name Imperial Bank of India. The Imperial
Bank of India remained a joint stock company but without Government
participation.

Pursuant to the provisions of the State Bank of India Act of 1955, the Reserve
Bank of India, which is India's central bank, acquired a controlling interest in
the Imperial Bank of India. On 1 July 1955, the Imperial Bank of India became
the State Bank of India. In 2008, the government of India acquired the Reserve
Bank of India's stake in SBI so as to remove any conflict of interest because the
RBI is the country's banking regulatory authority. In 1959, the government
passed the State Bank of India (Subsidiary Banks) Act, which made eight state
banks associates of SBI. A process of consolidation began on 13 September
2008, when the State Bank of Saurashtra merged with SBI.

19
SBI has acquired local banks in rescues. The first was the Bank of Bihar (est.
1911), which SBI acquired in 1969, together with its 28 branches. The next year
SBI acquired National Bank of Lahore (est. 1942), which had 24 branches. Five
years later, in 1975, SBI acquired Krishnaram Baldeo Bank, which had been
established in 1916 in Gwalior State, under the patronage of Maharaja Madho
Rao Scindia. The bank had been the Dukan Pichadi, a small moneylender,
owned by the Maharaja. The new bank's first manager was Jall N. Broacha, a
Parsi. In 1985, SBI acquired the Bank of Cochin in Kerala, which had 120
branches.

SBI was the acquirer as its affiliate, the State Bank of Travancore, already had
an extensive network in Kerala.

The State Bank of India and all its associate banks are identified by the same
blue keyhole logo. The State Bank of India word mark usually has one standard
typeface, but also utilizes other typefaces.

On October 7, 2013, Arundhati Bhattacharya became the first woman to be

appointed Chairperson of the bank.

20
 NEED OF THE STUDY

Significance of performance evaluation in an organization, for sustainable

growth and development, has been recognized since long. This calls for a
system that first measures and evaluates the performance, and then brings out
the strengths and weaknesses of the organization for the purpose of further
improvement. Efficient performance evaluation system encompasses all aspects
of an organization. With the advances in computational tools, performance
evaluation systems have evolved over a period of time from single-aspect
systems to more comprehensive systems covering all aspects of an organization.
Moreover, almost every industry, that envisages importance of evaluation, can
adopt many methods to evaluate the performance. It prove to be better for
performance measurement, evaluation and strategic planning for future growth
and development of the Indian banks in the light of changing requirements of
this sector so to analyze the comparative profitability performance of banks for
the financial periods 2007-2011. The banks will be ranked based on their
profitability performance and growth percentage.
Significance of performance evaluation in an organization, for sustainable
growth and development, has been recognized since long. This calls for a

21
system that first measures and evaluates the performance, and then brings out
the strengths and weaknesses of the organization for the purpose of further
improvement. Efficient performance evaluation system encompasses all aspects
of an organization. With the advances in computational tools, performance
evaluation systems have evolved over a period of time from single-aspect
systems to more comprehensive systems covering all aspects of an organization.
Moreover, almost every industry, that envisages importance of evaluation, can
adopt many methods to evaluate the performance. It prove to be better for
performance measurement,
evaluation and strategic planning for future growth and development of the
Indian banks in the light of changing requirements of this sector so to analyze
the comparative profitability performance of banks for the financial periods
2007-2011. The banks will be ranked based on their profitability performance
and growth percentage. This will help the banking industry for the improvement
or change in their business model.

22
 CHAPTER-II

RESEARCH OBJECTIVES

1. To analyze the balance sheet of the given banks.

2. To study the profit and loss account of these banks.
3. To interpret the cash flow statements
4. To determine the financial feasibility of the said banks
5. To compare the profit earning of the selected
public sector banks and private sector banks from the year 2007 to 2011
6. To investigate the factors affecting the profit earning of the selected
banks during the period.

HYPOTHESIS

23
1. To evaluate the financial performance or Profitability position of the said
banks.
2. To evaluate the financial position of the said banks.
3. To Offer suggestions to improve the banking business of Public Sector banks
to compete with Private sector banks in coming years.

STATEMENT OF THE PROBLEM

Public Sector Banks and Private Sector Banks play an important role in
economic development of the country. These are banking financial institutions
and they are also social organizations rendering savings, investments in the
form of deposits and security and providing their needful helps to the society
members to borrow loans at affordable interest rates. Public Sector Banks and
Private Sector Banks have had the distinction of being recognized as banking
institutions which provides satisfying services to its customers or account
holders. As a result of this the account holders expects the best of services from
the banking institution. This Project focuses on how far Public Sector Bank Vs
Private Sector Bank is doing their business in a banking industry after
liberalization and banking reforms. And what is the impact of functioning of
their banking operations due to the competition in banking industry.

LIMITATIONS OF THE STUDY

24
 1. Most of the data is taken from the published sources.
2. Since it is a secondary data, there will be fluctuations in the figures and
numbers mentioned.
3. Since the profit ratios and other figures mentioned dare fluctuating,
accurate data cannot be analyzed.

CHAPTER III

LITERATURE REVIEW

Jha and Sarangi (2011) analyzed the performance of seven public sector and
private sector banks for the year 2009-10. They used three sets of ratios,
operating performance ratios, financial ratios, and efficiency ratios. In all eleven
ratios were used. They found that Axis Bank took the first position, followed
ICICI Bank, BOI, PNB, SBI, IDBI, and HDFC, in that order.

Dangwal and Kapoor (2010) evaluated the financial performance of

nationalized banks in India and assessed the growth index value of various
parameters through overall profitability indices. The data for 19 nationalized
banks, for the post-reform period from 2002-03 to 2006-07, was used to
calculate the index of spread ratios, burden ratios, and profitability ratios. They
found that while four banks had excellent performance, five achieved good
performance, four attained fair performance, and six had poor performance.

Sharma (2010) assessed the bank failure resolution mechanism to analyze the
powers given by the countries to their regulators to carry out resolution of

25
failed banks among 148 countries during 2003. She used 12 variables for
correlation and regression analysis. Her study revealed that the countries which
had faced systemic crisis were more prone to providing liquidation powers to
their regulators. These countries had a tendency to protect their regulators
through immunity, rather than any legal action. Systemic crisis did not
significantly influence the regulators powers for the restructuring of the banks.

Pat (2009) made an assessment of the RBIs Report on Trend and Progress of
Banking in India, 2007-08, which reported a relatively-healthy position of the
Indian banking system. He noted that the various groups of banks reported
improvements in net profits, return on assets and return on equity. Two basic
indicators of sound banking system, namely, capital to risk weighted assets and
quality of assets, also revealed considerable improvements over the years.

Singla HK (2008), in his paper, financial performance of banks in India, in

ICFAI Journal of Bank Management No 7, has examined that how financial
management plays a crucial role in the growth of banking. It is concerned with
examining the profitability position of the selected sixteen banks of banker
index for a period of six years (2001-06). The study reveals that the profitability
position was reasonable during the period of study when compared with the
previous years. Strong capital position and balance sheet place, Banks in better
position to deal with and absorb the economic constant over a period of
time.

Makesh (2008) evaluated the financial management practices of Federal Bank

and Dhanlakshmi Bank, along with the SBI, for the financial year 2006-2007.

26
He revealed that all the three banks maintained capital in excess of the
stipulated norms of the RBI. Federal Bank had the lowest NPA Ratio to net
advances and had the maximum return on equity. Dhanalakshmi Bank
maintained a very high liquidity. But Federal Bank performed well in cost
management, as compared to the SBI and Dhanalakshmi Bank.
Joshi Vijaya (2007) observed that on the eve of banking reforms Indian Banking
Sector was financially unsound, unprofitable and inefficient. They made a
critical examination of the changes that have taken place in the banking sector
after reforms. Further, what remains to be done with respect of pre-emption of
bank resources, directed credit, deregulation of interest rates, etc. in the field of
banking sector were also elaborately discussed.

SamwelKakukuLopoyetum (2005) in his article elaborated that the profitability

performance of the UCBs can be improved by strengthening the magnitude
of burden ratio. The spread ratio can be increased by increasing the interest
receipts faster than the interest payments. The burden ratio can be lowered by
decreasing the manpower expenses, other expenses and increasing other
incomes.

Qamar (2003) identified the differences in terms of endowment factor, risk

factor, revenue diversification, profitability, and efficiency that might have
existed among 100 scheduled commercial banks, divided into three groups for
the year 2000-2001. His study revealed that the public sector banks were better
endowed in terms of their assets base, share capital and shareholders equity
than other banks, whereas foreign banks and old private sector banks operated
at a very high capitalization ratio.

De (2003) The panel regression techniques were used to examine the effect of
ownership on bank performance in the context of Indian commercial banks. He

27
noted that in case of public sector banks, old private sector banks and new
private sector banks, the ownership had no effect on the return on assets.

However, public sector banks had a higher ratio of net interest margin and
operating cost. He also found that new private sector banks were showing a
higher return on assets when the SBI and its associates were dropped from the
sample.

Muniappan (2002) studied paradigm shift in banks from a regulator point of

view in Indian Banking: Paradigm Shift, IBA Bulletin, and No 24 3. He
concluded the positive effect of banking sector reforms on the performance of
banks. He suggested many effective measures to strengthen the Indian banking
system. The reduction of NPAs, more provisions for standards of the banks, IT,
sound capital bare are the positive measures for a paradigm shift. A regulatory
change is required in the Indian banking system

Madhavankutty (2007) concludes the banking system in India has attained

enough maturity and is ready to address prudential management practices as
comprehensively as possible, which an integral part of policy is making.
Banking in India is poised to enter yet another phase of reforms once the door
opens further to foreign players in 2009. This requires further improvement in
finance, human resource management and the ability to foresee rapid changes in
the financial landscape and adopt quickly. At present, there is a huge hiatus
between the top management earnings of state owned banks and private, as well
as foreign banks. Banks have to lay down sound risk management strategies and
internal capital adequacy assessment committees to ensure that they do not
diverge from the prudential requirements.

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 CHAPTER IV

METHODOLOGY

Only secondary data is applicable to the study. The secondary data is collected
through annual reports, websites and the companys brochures, comprehensive
reference were made from the reference books, journals and magazines and so
on. Judgmental technique is used to analyze and interpret the performance and
position of the said banks. To analyze the performance and position of the said
banks the five years financial statements from March 2007 to March 2011 are
used in this project work. I.e. Balance Sheets, P/L A/cs and Cash Flow
statements.

RESEARCH DESIGN
This present study is conducted by following a Descriptive Design.

SAMPLE UNIT
Any private and public sector banks operating in India.

SAMPLE SIZE

29
 For the in-depth analysis of the profitability, three major public sector and three
private sector banks are selected on the basis of their Total Assets from the year
2007 to 2011.

TABLE NO: 1 TOTAL ASSETS OF THE BANKS (Rs. In Crores)

2007 2008 2009 2010 2011

YEAR
BANKS

SBI 526,954.6 810,796.4 723,699.7 1,053,956.6 1,224,693.8

6 8 5 1 1

CANARA 165,961.04 180,528.69 219,645.80 264,741.09 336,078.76

ICICI 344,658.11 399,795.07 379,300.96 363,399.71 406,233.67

SAMPLING TECHNIQUE
Judgmental sampling.

DATA COLLECTION
Data was collected through Reserve Bank of India monthly bulletins, annual
reports, moneyrediff, moneycontrol, banks websites etc. Three private sector
and three public sector banks were selected on the basis of their total assets.

30
DATA ANALYSIS
Suitable statistical techniques are used for data analysis like ratios and
coefficient correlation.

TABLE NO 2: OPERATING PROFIT PER SHARE (Rs.)

Operating March March March March March

profit 2011 2010 2009 2008 2007
per share

SBI 255.39 229.63 230.04 173.61 147.72

CANARA 89.40 73.99 47.02 33.29 33.15

BANK

ICICI 64.08 49.80 48.58 51.29 42.19

BANK

CITY BANK 6.24 3.56 4.61 3.31 31.38

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INTERPRETATION

From the above table and graph we can summarize that the Operating Profit Per
Share (Rs) of the said banks from Mar 07 to Mar 11 indicates that it is in
Positive trend. Whereas on a comparative basis we can interpret that public
sector banks as shown good performance when compare to private sector banks.
I.e. SBI and Canara bank as performed quite good in terms of Operating Profit
per share from Mar 07 to Mar 11. On the other way the City bank Operating
profit Per share as come down to 6.24 from 31.3.Even though recently the city
bank Operating Profit Per Share as increased from Rs.3.56 to Rs.6.24. Overall
the performance of City bank is not satisfactory when compare to Public sector
banks like SBI and Canara bank. Private Sector banks performance in this
aspect need to be improved i.e. CITY bank.

32
INFERENCE

The City bank Operating profit Per share as come down to 6.24 from 31.3.Even
though recently the city bank Operating Profit Per Share as increased from
Rs.3.56 to Rs.6.24. Overall the performance of City bank is not satisfactory
when compare to Public sector banks like SBI and Canara bank . Private Sector
banks performance in this aspect need to be improved i.e. CITY bank.

TABLE NO 3: NET PROFIT MARGIN (%)

NET PROFIT March March March March March

MARGIN (%) 2011 2010 2009 2008 2007

SBI 8.55 10.54 12.03 11.65 10.12

CANARA 15.65 13.77 10.89 9.61 11.60

BANK

ICICI BANK 15.91 12.17 9.74 10.51 10.81

CITY BANK 15.72 13.94 13.26 14.96 15.98

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INTERPRETATION
The above table indicates that the Net Profit Margin of the said banks from Mar
07 to Mar 11. We can analyze the profitability position of the said banks. This is
the key aspect of the performance of the said banks. On a comparative basis we
can summarize that the SBI Net Profit Margin as come down in Mar 11 i.e.
8.55% from Mar 10, 10.54% on the other side the Canara bank Net profit
Margin is showing positive sign and even Private sector banks Net Profit
Margin is good and increasing year by year. Finally the Public sector banks like
SBI has to take right strategy to improve and to regain the market share and Net
profit Margin in the coming Years.

INFERENCE

The Public sector bank like SBI has to hunt right strategy to improve and to
regain the market share and Net profit Margin in the coming Years.

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TABLE NO 4: EARNINGS PER SHARE (Rs.)

EARNINGS MARCH MARCH MARCH MARCH MARCH

PER SHARE 2011 2010 2009 2008 2007

SBI 116.07 114.37 143.67 106.56 86.29

CANARA 90.88 73.69 50.55 38.17 34.65

BANK

ICICI 44.73 36.10 33.76 37.37 34.59

BANK

CITY 5.31 3.83 3.82 3.18 28.50

BANK

35
INTERPRETATION

The above table highlights Earning per share of the said banks in terms of EPS
(Rs) position and depicts that all four banks is able to match the shareholders
expectations. On the comparative basis we can analyze and make out that the
EPS (Rs) Position of SBI is reduced when compare to previous year i.e. 144.37
in Mar10 to 116.07 per share which is not good from shareholders point of view.
On the other way Canara Bank EPS (Rs) position is sound. In case we analyze
the Private Sector banks EPS (Rs) position i.e. ICICI and City Bank both the
banks have performed well and satisfied shareholders dreams. Finally the City
Bank EPS (Rs) position is positive on a comparative basis the EPS (Rs) is in
single digit therefore it is recommended to improve the EPS (Rs) Performance
so that the market per share can be improved in coming years.

36
INFERENCE

The EPS (Rs) Position of SBI is reduced when compare to previous year i.e.
144.37 in Mar10 to 116.07 per share which is not good from the shareholders
point of view. The City Bank EPS (Rs) position is positive on a comparative
basis the EPS (Rs) is in single digit therefore it is recommended to the EPS (Rs)
Performance of City bank so that the market price per share can be improved in
coming years.

TABLE NO 5: DIVIDEND PER SHARE (Rs.)

DIVIDEND MARCH MARCH MARCH MARCH MARCH

PER SHARE 2011 2010 2009 2008 2007

SBI 30.00 30.00 29.00 21.50 14.00

CANARA 11.00 10.00 8.00 8.00 7.00

BANK

ICICI 14.00 12.00 11.00 11.00 10.00

BANK

CITY 0.85 0.75 0.75 0.50 4.00

BANK

37
INTERPRETATION

The above table explains the Dividend per share of the said banks. On a
comparative basis Public sector banks have shown good performance in
distributing dividend which is a return to the shareholders investment i.e. SBI
and Canara Bank which is Rs.30 and Rs.37 per share respectively. This is
satisfactory and quite rewarding to the shareholders of the respective banks. On
the other way the Private sector banks ICICI Bank and City banks Dividend per
share is Rs.14 and 0.85 per share. Finally the Dividend distribution of Private
sector banks is still underpaid. Therefore it can be suggested to improve the
present dividend position of ICICI Bank and City Bank in coming years.

INFERENCE

The Private sector banks ICICI Bank and City bank Dividend per share is Rs.14
and 0.85 per share. Finally the Dividend distribution of Private sector banks is
still underpaid. Therefore it can be suggested to improve the present dividend
distribution position of ICICI Bank and City bank in coming years.
38
 CHAPTER-V
CONCLUSION

While public sector banks i.e. SBI and Canara bank are in the process of
restructuring, private sector banks i.e. ICICI and City bank are busy
consolidating through mergers and acquisitions (the sector has been recently
opened up for foreign investments). Public Sector Banks need to improve in the
services like ATMs, Credit and Debit cards. They lack behind in providing
facilities like loans and other accounts. These branches are not interlinked with
each other and working hours are less. In case of Private sector banks i.e. ICICI
and City banks customers are not aware of the facts and hidden costs in view, as
there are various products and facilities provided by the banks.
All four banks are performing well and strewing hard to compete in the current
competitive Indian banking sector. Public sector Banks. i.e. SBI and Canara
banks are performing well. In fact recent statistics says SBI has lost its market
share and Canara bank is performing well in all most all parameters. Whereas
Private sector banks i.e. ICICI and City bank are also doing well. In fact City
bank has adopted un ethical ways to collect dues from customers which is quite
not acceptable.

39
RECOMMENDATIONS

1. Private Sector banks performance in Operating Profit per Share ratio need to
be improved i.e. CITY bank in coming years.

2. The Public sector bank like SBI has to take right strategy to improve and to
regain the market share and Net profit Margin in the coming Years.

3. It is recommended to improve the EPS (Rs) Performance of City bank so that

the market price per share can be improved in coming years.

4. It can be suggested to improve the present dividend per share distribution

position of ICICI Bank and City Bank in coming years.

5. It can be suggested to improve the present Return on net worth ratio

performance of ICICI Bank in coming years.

6. The Management of SBI and Canara Bank has to look upon to current debt to
owners funds ratio.

7. ICICI and City bank as to strive hard to reduce the interest cost so that the
profit can be increased in the coming years.

8. It can be advisable to invest excess funds so that the banks like SBI, Canara
bank and ICICI, City bank can enhance their liquidity position in coming years.

ANNEXURE
40
BIBLIOGRAPHY

WEBSITES

1. online.citibank.com
2. www.bankingonline.com
3. www.bankingservices.com
4. www.canarabank.com
5. www.icicibank.com
6. www.investopedia.com
7. www.moneycontrol.com
8. www.statebankofindia.com

SEARCH ENGINES

1. www.google.com

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