A STUDY ONPROFITABILITY ANALYSIS WITH SPECIAL

REFERENCE TO SOUTH INDIAN BANK LTD

ByVINOD K S

Introduction

• Objectives • Tool for the analysis- ratio analysis, trend

analysis.• Limitations.

Industry

• Banking industry• Bank of Hindustan was established in1779 and it was the 1st

bank.• Allahabad Bank, established in 1865 was the oldest public

sector bank in India working even today.• The first Indian commercial bank, which was wholly owned

and managed by Indians, was Central Bank of India which was established in 1911.

• In 1934 Reserve Bank of India act was passed• On 1st April 1934 RBI established. It was established with

initial share capital worth Rs. 5 crore.

• The RBI was nationalized on June 1, 1949 under the terms of the RBI Act 1948.

• The Banking Regulation Act also provided that no new bank or branch of an existing bank could be opened without a license from the RBI.

• Services provided by banks.

South Indian Bank Ltd.

• In 1929 South Indian Bank established at Trichur, Kerala State.

• In 1963 The Bank took over the assets and liabilities of the Kshemavilasam Banking Co., Ltd., Trichur, and the Ambat Bank Private Ltd.

• Board of directors-Sri. Amitabha guha, Dr. V.A. Joseph, Sri. Jose Alappat, Sri. Paul Challissery, Sri. Mathew .L. Chackola, Dr. N.J.Kurian, Sri. Mohan E Alappat, Sri. K. Thomas Jacob, Sri. H. Suresh Prabhu.

• Vision statement To emerge as the most preferred bank in the country in terms of brand,

values, principles with core competence in fostering customer aspirations, to build high quality assets leveraging on the strong and vibrant technology platform in pursuit of excellence and customer delight and to become a major contributor to the stable economic growth of the nation.

Mission statement• To provide a secure, agile, dynamic and conducive banking environment to

customers with commitment to values and unshaken confidence, deploying the best technology, standards, processes and procedures where customer convenience is of significant importance and to increase the stakeholders’ value.

Major achievements

• The FIRST private sector bank to open a NRI branch in November 1992.

• The FIRST Kerala based bank to implement Core Banking System.

• South Indian Bank has bagged the Business world India’s Best Bank 2010 Award.

• Award for the best bank in asset quality among all private sector banks in India

• The best “Asian Banking Web Site” award from Asian Banking & Finance Magazine

• Organisational structure.• Net profit increasing in every year. 2007-2008,

Rs.151.62 Crore, 2008-2009, Rs.194.75 crore, 2009-2010, Rs.233.76 Crore, 2010-2011, Rs.292.56 Crore.

• Upcoming initiatives- Online Debit Card Payments,Online Tax Payments, Prepaid Travel Cards, Automated Dataflow from Bank to RBI as per the RBI directions on the same.

Data analysis

• Advance yield ratio.• Yield on investment.• Earning per share.• Return on equity.• Return on asset.• Credit deposit ratio.• Price earning ratio.• Business productivity.• Profit per employees.

• Investment deposit ratio.• Cost income ratio.• NPA total asset ratio.• Staff expense ratio.

2007 2008 2009 2010 2011advance yield ratio 8.77 9.19 10.73 9.6 9.42yield on investment 6.38 6.36 5.92 5.28 5.4earning per share 147.8 167.72 172.34 206.86 258.89returnn on equity 14.38 13.06 14.93 15.74 15.86return on asset 0.76 0.89 0.96 0.92 0.89book value per share 102.84 128.42 115.4 131.44 163.46credit deposit ratio 64.7 68.97 65.48 68.76 68.94price earning ratio 670.55 919.5 940.05 867.33 893.82business productivity 4243.79 5081.25 5671.33 6721 7946.33profits per employees 26917.38 35904.22 40615.77 45549.59 52066.93investment deposit ratio 28.03 30.17 33.58 31.1 30.03cost income ratio 62.37 69.9 69 70.64 67.66NPA total asset ratio 2.35 1.1 1.28 0.83 0.07staff expense ratio 1171.04 1027.59 1261.14 1063.63 105.96

Trend analysis

• TOTAL LIABILITIES-1.25,1.19,1.25, 1.29

• TOTAL ASSETS-1.25,1.19,1.25, 1.29

• TOTAL INCOME-1.33, 1.71,1.99,2.45

• TOTAL EXPENDITURE-1.31, 1.70,1.96, 2.41

• PROFIT/LOSS-1.45, 1.84,2.25, 2.84

•

Business productivity

1 2 3 4 50.00

1000.00

2000.00

3000.00

4000.00

5000.00

6000.00

7000.00

8000.00

9000.00

4243.79

5081.15

5671.13

6721.03

7946.37

BUSINESS PRODUCTIVITY

BUSINESS PRODUCTIVITY

Profits per employees

1 2 3 4 50.00

10000.00

20000.00

30000.00

40000.00

50000.00

60000.00

26917.68

35904.22

40615.77

45549.59

52066.93

PPE

PPE

Earning per share

1 2 3 4 50.00

50.00

100.00

150.00

200.00

250.00

300.00

147.88

167.72 172.34

206.86

258.89

EARNING PER SHARE

EARNING PER SHARE

findings

• Advance yield ratio is showing a decreasing trend. This may be due to the increase in temporarily non performing advances.

• Cost deposit ratio is showing a decreasing trend. So the banks profit by way of interest is increasing.

• Net NPA to total assets ratio is showing a decreasing trend. The capability and strength of a bank lies on the quality of its asset.

• The deposits of the bank are increasing continuously

• Investment deposit ratio is decreasing so the bank seems to be less interested in deployment of its funds in investments, even when there is a boom in the investment sector.

• Profits per employees are showing a steady increase in all the years.

• Business productivity is increasing they are efficient in its performance

• Book value per share is increasing so we can conclude that the SIB is having strong market position.

Suggestions

• Adequate measures should take to reduce the operating expenses.

• The policies to reduce the NPA should continue effectively.

• The bank should increase the proportion of demand deposits and saving deposits in the total deposits. This will help to reduce the cost of deposits.

• More funds should be employed in investments, because it is major source of income for the bank.

Conclusion

• I have done the ratio analysis and trend analysis to complete my project. From the study I realized that the total business of the bank is improving year by year.

• If you check the business productivity, NPA and the performance of the staff expense ratio shows the ability and efficiency of the bank.

• During the financial year 2008-09, the Bank instituted an Employee Stock Option Scheme to enable its employees to be a partner in the future growth and financial success of the Bank

Thank you