HDFC Financial Analysis
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Transcript of HDFC Financial Analysis
FINANCIAL STATEMENTS
Anubha JindalAnushka AnandChavi GoelKriti SharmaRishabh ChowdhryShruti Jain
Financial Analysis of
Introduction
HDFC Bank is an Indian banking and financial services company headquartered in Mumbai, Maharashtra.
The MD and CEO of the company is Amitabh Chaudhry, ED and CFO is Vibha Padalkar
Amitabh Chaudhry Vibha Padalkar
It is largest bank in India by market capitalization as of February 2016.
Products
Retail Banking Treasury Car Loans
Personal Loans Loans against property Credit Cards
Objective of this Study
• Financial analysis refers to collecting the financial data
• Making comparisons amongst different variables
Balance Sheet
P&L Statment
• Financial ratios allow logical relationships between different variables
• The main source of financial information is the balance sheet and the income statement.
Methodology
Ratio analysis is the process of determining and interpreting numerical relationships based on financial statements
Analyzing Financial Statements
Judging Efficiency Locating weakness Formulating plans Comparing Performance
Focus areas
Profitability Operational SolvencyLiquidity
Ratios
Mar '12
Mar '13
Mar '14
Mar '15 Mar '160
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.090.08
0.06 0.06
0.04
0.07
Current ratio
CURRENT RATIO:• The current ratio is a liquidity ratio that measures a company's ability to pay
short-term and long-term obligations.• a current ratio below 1 shows that the bank is not in good financial health
Since current ratio for all the year is below 1 , it is not a good sign.
RatiosQUICK RATIO• The quick ratio measures a company’s ability to meet its short-term obligations
with its most liquid assets.• The higher the quick ratio, the better the company's liquidity position.
Quick ratio is increasing in every next year highest being in 2016.
Mar '12 Mar '13 Mar '14 Mar '15 Mar '1602468
10121416
QUICK RATIO
RatiosInterest spread • Interest spread is the difference between the average lending rate and the
average borrowing rate for a bank or other financial institution. • The greater the spread, the more profitable the financial institution is likely to
be; the lower the spread, the less profitable the institution is likely to be.
Over the past 5 years the interest spread has lowered, indicating that the institution is not as profitable as it was before.
Mar '12 Mar '13 Mar '14 Mar '15 Mar '166.5
7
7.5
8
8.5
9
8.42
8.78
8.01 8.01
7.52
Interest Spread
RatiosNet Profit Margin• Net profit margin is the ratio of net profits to revenues for a company or business
segment • Net profit margin indicates a business's financial health• Business can use its net profit margin to forecast profits based on revenues.
The fall in this margin indicates that the bank is making some decisions which are lowering the profits.
Mar '12 Mar '13 Mar '14 Mar '15 Mar '1617.5
18
18.5
19
19.5
20
20.5
21
21.5
18.9319.18
20.61
21.07
20.41
Profit Margin
RatiosReturn on Equity• Return on equity (ROE) is the amount of net income returned as a percentage
of shareholders equity. • The ROE is useful for comparing the profitability of a company to that of other firms in
the same industry.
The fall from 2014-2015 indicates how the investors had lost faith in the bank. Now the rise has indicated more profitability for the banks
Mar '12 Mar '13 Mar '14 Mar '15 Mar '1614
15
16
17
18
19
20
17.26
18.57
19.5
16.4716.91
Return on Equity
RatiosCredit deposit ratio• It is the ratio of how much a bank lends out of the deposits it has mobilized.• A higher ratio indicates more reliance on deposits for lending and vice-versa.
The credit deposit ratio is high which indicates that HDFC bank is more reliance on deposits for lending.
Mar '12 Mar '13 Mar '14 Mar '15 Mar '1675
76
77
78
79
80
81
82
83
84
78.06
80.14
81.79 81.71
83.24
Credit deposit ratio
RatiosLoan-to-deposit ratio (LTD)• The loan-to-deposit ratio (LTD) is used for assessing a bank's liquidity • If the ratio is too high, it means that the bank may not have enough liquidity • Conversely, if the ratio is too low, the bank may not be earning as much as it could be.
The ratio is not too high and not too low, putting the bank in a comfortable position
Mar '12 Mar '13 Mar '14 Mar '15 Mar '1630
31
32
33
34
35
36
37
38
39
36.99
38.51
35.05 35.13
33.13
LTD
RatiosEarnings per share (EPS) • It the portion of a company's profit allocated to each outstanding share of common stock.• Earnings per share serves as an indicator of a company's profitability..• High-quality EPS means that the number is a relatively true representation of what the
company actually earned • A low-quality EPS number does not accurately portray what the company earned
HDFC bank has continuously increased from year 2012 to year 2016 which shows a positive impact of decisions taken by the management
1 2 3 4 50
10
20
30
40
50
60
22.11
28.49
35.47
42.15
48.84
Chart Title
RatiosTOTAL DEBT TO OWNERS FUND• A measurement of a company’s financial leverage• Calculated as the company’s debt divided by its total capital. • A lower debt to equity ratio usually implies a more financially stable business.• Companies with a higher debt to equity ratio are considered more risky to creditors and investors
As per the given data in the previous years 2012 and 2013 debt to equity ratio was more stable as compared to later years 2014 and 2015 where either it was extremely high or low which are both considered as risky condition
1 2 3 4 57
7.5
8
8.5
9
9.5
9.04 9.09
9.36
8
8.25