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A project report on analysis of financial statement of icici bank

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A project report on analysis of financial statement of icici bank

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A project report on analysis of financial statement of icici bank

  1. 1. Projectsformba.blogspot.com MINOR PROJECT REPORT ON THE STUDY OF ANALYSIS OF FINANCIAL STATEMENT OF ICICI BANK Submitted in the partial fulfillment of required for the award of degree of Bachelor of Business Administration. Submitted By: Under the guidance KASTURI RAM COLLEGE OF HIGHER EDUCATION (AFFILATED TO GURU GOBIND SINGH UNIVERSITY, DELHI) Projectsformba.blogspot.com
  2. 2. Projectsformba.blogspot.com ACKNOWLEDGEMENT Getting a project ready requires the work and effort of many people. I would like to pay my sincere gratitude and thanks to those people, who directed me at every step in this project work. The present report is based on “ ANALYSIS OF FINANCIAL STATEMENT- CASE STUDY OF ICICI BANK”. I extended my sincere thank and gratitude to …………….., internal faculty, for her help and valuable support throughout the term of the project. It was a learning experience to work under her guidance. I am also very thankful to ………………… who has given me the opportunity to do this project report. I am also thankful to my parents, all my friends and other sources who gave me their much needed support and inspiration in preparing this project report. Projectsformba.blogspot.com
  3. 3. Projectsformba.blogspot.com CERTIFICATE This is to certify that ………………. has accomplished the project titled “ANALYSIS OF FINANCIAL STATEMENT- CASE STUDY OF ICICI BANK” under my guidance and supervision. She has submitted this project in the partial fulfillment for the award of degree of Bachelor of Business Administration (B.B.A[B&I]) from Guru Gobind Singh Indraprastha University. The work has not been anywhere else for the award of degree. All source of information have been duly mentioned. (Kasturi Ram College Of Higher Education) Projectsformba.blogspot.com
  4. 4. Projectsformba.blogspot.com CONTENT PAGE NO. 1. INTRODUCTION 1-25 A Brief Introduction 2 Objectives 2 ICICI Bank 3 History 4 Board of Directors 5 Board Committees 6 Organisational Structure 7 Products & Services 12 Risk Aspects 18 Subsidiary companies 21 Key Group Companies 22 Public Recognition 24 2. FINANCIAL STATEMENT AND IT’S ANALYSIS 26-44 2.1 Study of Profit & Loss A/C 27 2.2 Study of Balance-Sheet 28 2.3 Study of cash flow statement 38 2.3 Financial Statement Analysis 40 3. ANALYSIS OF FINANCIAL STATEMENT OF ICICI BANK 45-61 3.1 Management Discussion & Analysis 46 3.2 Comparative Income Statement 53 3.3 Comparative Financial Position Statement 55 3.4 Ratio Analysis- Financial Statement 57 3.5 Cash Flow Statement 60 4. CONCLUSION 62-64 5. RECOMMENDATION & SUGGESTION 65-66 BIBLIOGRAPHY 67 ANNEXURE 68-70 Projectsformba.blogspot.com
  5. 5. Projectsformba.blogspot.com Profit & Loss Account 69 Balance-Sheet CHAPTER-1 INTRODUCTION Projectsformba.blogspot.com
  6. 6. Projectsformba.blogspot.com 1.1 A BRIEF INTRODUCTION In any organization, the two important financial statements are the Balance sheet & Profit and loss account of the business. Balance sheet is a statement of the financial position of an enterprise at a particular point of time. Profit and loss account shows the net profit or net loss of a company for a specified period of time. When these statements of the last few year of any organization are studied and analyzed, significant conclusions may be arrived regarding the changes in the financial position, the important policies followed and trends in profit and loss etc. Analysis and interpretation of the financial statement has now become an important technique of credit appraisal. The investors, financial experts, management executives and the bankers all analyze these statements. Though the basic technique of appraisal remains the same in all the cases but the approach and the emphasis in analysis vary. A banker interprets the financial statement so as to evaluate the financial soundness and stability, the liquidity position and the profitability or the earning capacity of borrowing concern. Analysis of financial statement is necessary because it help in depicting the financial position on the basis of past and current records. Analysis of financial statement help in making the future decision and strategies. Therefore, it is very necessary for every organization whether it is a financial or manufacturing etc. to make financial statement and to analyse it. Projectsformba.blogspot.com
  7. 7. Projectsformba.blogspot.com 1.2 OBJECTIVE The main objective of this report are the following:  To study about ICICI BANK and its related aspects like its products & services, history, organizational structure, subsidiary companies etc.  To analyse the financial statement i.e P&L account and Balance sheet of ICICI BANK.  To learn about P&L Account, Balance-sheet and different type of Assets& Liabilities.  To understanding the meaning and need of Balance Sheet and profit and loss account.  The purpose is to portray the financial position of ICICI BANK with the help of balance sheet and profit and loss account.  To evaluate the financial soundness ,stability and liquidity of ICICI BANK. 1.3 ICICI BANK ICICI Bank is India’s second-largest bank with total assets of Rs. 3,446.58 billion (US$ 79 billion) at March 31, 2007 and profit after tax of Rs. 31.10 billion for fiscal 2007. ICICI Bank is the most valuable bank in India in terms of market capitalization and is ranked third amongst all the companies listed on the Indian stock exchanges. In terms of Projectsformba.blogspot.com
  8. 8. Projectsformba.blogspot.com free float market capitalization*. The Bank has a network of about 950 branches and 3,300 ATMs in India and presence in 17 countries. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customer through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in Singapore, Bahrain, Hong Kong, Sri Lanka and Dubai International Finance Center and representative offices in the United States, United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. UK subsidiary has established a branch in Belgium. ICICI Bank's equity shares are listed in India on Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE). 1.3.1HISTORY ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to Projectsformba.blogspot.com
  9. 9. Projectsformba.blogspot.com create a development financial institution for providing medium-term and long-term project financing to Indian businesses. 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. After consideration of various corporate structuring alternatives in the context of the emerging competitive scenario in the Indian banking industry, and the move towards universal banking, the managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities, and would create the optimal legal structure for the ICICI group's universal banking strategy. The merger would enhance value for ICICI shareholders through the merged entity's access to low-cost deposits, greater opportunities for earning fee- based income and the ability to participate in the payments system and provide transaction-banking services. The merger would enhance value for ICICI Bank shareholders through a large capital base and scale of operations, seamless access to ICICI's strong corporate relationships built up over five decades, entry into new business segments, higher market share in various business segments, particularly fee-based services, and access to the vast talent pool of ICICI and its subsidiaries. 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 ICICI Bank. The Projectsformba.blogspot.com
  10. 10. Projectsformba.blogspot.com merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Citst of Gujarat at Ahmedabad in March 2002, and by the High Citst of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's financing and banking operations, both wholesale and retail, have been integrated in a single entity. ICICI Bank has formulated a Code of Business Conduct and Ethics for its directors and employees. 1.3.2 BOARD OF DIRECTORS  MR. N.Vaghul (CHAIRMAN)  MR. Sridar Iyengar  MR. Lakshmi N. Mittal  MR. Narendra Murkumbi  MR. Anupam Puri  MR. Vinod Rai  MR. M. K. Sharma  MR. P.M. Sinha  Prof. Marti G. Subrahmanyam  MR. T. S. Vijayan  MR. V. Prem Wasta  MR. K. V. Kamath (MANAGING DIRECTOR & CEO)  MR. Chanda Kochhar (JOINT MANAGING DIRECTOR)  MR. Nachiket Mor (DEPUTY MANAGING DIRECTOR)  MR. V. Vaidyanathan, (EXECUTIVE DIRECTOR)  MR. Sonjoy Chatterjee (EXECUTIVE DIRECTOR) Projectsformba.blogspot.com
  11. 11. Projectsformba.blogspot.com 1.3.3 BOARD COMMITTEES Projectsformba.blogspot.com
  12. 12. Projectsformba.blogspot.com Audit Committee Board Governance & Mr. Sridar Iyengar Remuneration Committee Mr. Narendra Murkumbi Mr. N. Vaghul Mr. M. K. Sharma Mr. Anupam Puri Mr. M. K. Sharma Mr. P. M. Sinha Customer Service Committee Prof. Marti G. Subrahmanyam Mr. N. Vaghul Mr. Narendra Murkumbi Credit Committee Mr. M.K. Sharma Mr. P.M. Sinha Mr. N. Vaghul Mr. K. V. Kamath Mr. Narendra Murkumbi Mr. M .K. Sharma Mr. P. M. Sinha Fraud Monitoring Committee Mr. K. V. Kamath Mr. M. K. Sharma Mr. Narendra Murkumbi Risk Committee Mr. K. V. Kamath Mr. N. Vaghul Ms. Chanda D. Kochhar Mr. Sridar Iyengar Mr. V. Vaidyanathan Prof. Marti G. Subrahmanyam Mr. V. Prem Watsa Mr. K. V. Kamath Share Transfer & Shareholders/ Investors Asset-Liability Management Grievance Committee Committee Mr. M. K. Sharma Ms. Chanda D. Kochhar Mr. Narendra Murkumbi Dr. Nachiket Mor Ms. Chanda D. Kochhar Ms. Madhabi Puri-Buch Ms. Madhabi Puri-Buch Mr. V. Vaidyanathan Committee of Directors - Mr. K. V. Kamath Ms. Chanda D. Kochhar Dr. Nachiket Mor Ms. Madhabi Puri-Buch Mr. V. Vaidyanathan Projectsformba.blogspot.com
  13. 13. Projectsformba.blogspot.com 1.3.4 ORGANISATIONAL STRUCTURE OF ICICI BANK ICICI Bank’s organisation structure is designed to be flexible and customer- focused, while seeking to ensure effective control and supervision and consistency in standards across the organisation and align all areas of operations to overall organisational objectives. The organisation structure is divided into six principal groups – Retail Banking, Wholesale Banking, International Banking, Rural (Micro-Banking) and Agriculture Banking, Government Banking and Corporate Center. RETAIL BANKING The Retail Banking Group is responsible for products and services for retail customers and small enterprises including various credit products, liability products, distribution of third party investment and insurance products and transaction banking services. WHOLESALE BANKING The Wholesale Banking Group is responsible for products and services for large and medium-sized corporate clients, including credit and treasury products, investment banking, project finance, structured finance and transaction banking services. INTERNATIONAL BANKING The International Banking Group is responsible for its international operations, including operations in various overseas markets as well as Projectsformba.blogspot.com
  14. 14. Projectsformba.blogspot.com its products and services for non-resident Indians and its international trade finance and correspondent banking relationships. RURAL AND AGRICULTURAL BANKING The Rural, Micro-Banking & Agri-Business Group is responsible for envisioning and implementing rural banking strategy, including agricultural banking and micro-finance. GOVERNMENT BANKING The Government Banking Group is responsible for government banking initiatives. CORPORATE CENTER The Corporate Center comprises the internal control environment functions (including operations, risk management, compliance, audit and legal); finance (including financial reporting, planning and strategy, asset liability management, investor relations and corporate communications); human resitsces management; and facilities management & administration. Projectsformba.blogspot.com
  15. 15. Projectsformba.blogspot.com BUSINESS REVIEW During fiscal 2007, the Bank continued to grow and diversify its asset base and revenue streams by leveraging the growth platforms created over the past few years. It maintained its leadership position in retail credit, achieved robust growth in its fee income from both corporate and retail customers, grew its deposit base and significantly scaled up its international operations and rural reach. RETAIL BANKING ICICI is the largest provider of retail credit in India. ICICI’s total retail disbursements in fiscal 2007 were approximately Rs. 777.00 billion, compared to approximately Rs. 627.00 billion in fiscal 2006. It’s total retail portfolio increased from Rs. 921.98 billion at March 31, 2006 to Rs. 1,277.03 billion at March 31, 2007, constituting 65% of it’s total loans at that date. It continued its focus on retail deposits to create a stable funding base. At March 31, 2007 it had more than 25 million retail customer accounts. During fiscal 2007, it expanded its branch network. At March 31, 2007, it had 755 branches and extension counters compared to 614 branches and extension counters at March 31, 2006. Pursuant to the amalgamation of The Sangli Bank Limited with it effective April 19, 2007, it acquired over 190additional branches and extension counters. It continued to expand its electronic channels, namely internet banking, mobile banking, call centres, point of sale terminals and ATMs, and migrate customer transaction volumes to these channels. During fiscal Projectsformba.blogspot.com
  16. 16. Projectsformba.blogspot.com 2007, over 80% of customer induced transactions took place through these electronic channels. It increased its ATM network to 3,271 ATMs. SMALL AND MEDIUM ENTERPRISES In this segment it’s strategy has been focused around customer convenience in transaction banking services, and working capital loans to suppliers or dealers of large corporations and clusters of small enterprises that have a homogeneous profile. During fiscal 2007, it’s customer base increased by more than 50% to over 900,000 transaction banking customers. These customers are serviced by over 580 branches of the Bank, covering over 200 locations. During fiscal 2007, the Emerging India Award entered in the Limca Book of Records as the biggest business award in India. CORPORATE BANKING It’s corporate banking strategy is based on providing comprehensive and customized financial solutions to its corporate customers. It offer a complete range of corporate banking products including rupee and foreign currency debt, working capital credit, structured financing, syndication and transaction banking products and services. Fiscal 2007 saw continuing demand for credit from the corporate sector, with growth and additional investment demand in almost all sectors. It is now a preferred partner for Indian companies for syndication of external commercial borrowings and other fund raising in international markets. Projectsformba.blogspot.com
  17. 17. Projectsformba.blogspot.com RURAL BANKING It’s rural strategy is based on enhancing value at every level of the supply chain in all important farm and non-farm sectors. Towards this end, it offer a range of financial products and services that cater to the rural masses in all the important sectors like infrastructure, horticulture, food processing, dairy, poultry, seeds, fertiliser and agrochemical industries. Customised financial solutions are offered to individual customers, agri small & medium enterprises, agri corporates and members of their supply chains. On the rural retail side, the Bank offers crop loans, farm equipment financing, commodity-based loans, working capital loans for agri-enterprises, microfinance loans, jewel loans as well as savings, investment and insurance products. In addition bank is introducing products like rural housing finance to cater to the needs of rural customers. During fiscal 2007, it introduced loans to rural educational institutions for expansion of their facilities. it have developed a hybrid distribution channel strategy, a combination of branch and non-branch channels (credit access points). It has embarked on a “no white spaces” strategy wherein it aim to setup an ICICI Bank touch point within 10 km of any customer. The amalgamation of Sangli Bank would extend its outreach in rural areas. During fiscal 2007, a provision of Rs. 0.9 billion (USS$ 22 million) was made on account of identified frauds in warehouse receipt financing business of agricultural credit. INTERNATIONAL BANKING ICICI Bank has established a strong franchise among non-resident Indians (NRI). It has established strong customer relationships by offering a comprehensive product suite, technology-enabled access for overseas customers, a wide distribution network in India and alliances with local banks in various markets. It has over 450,000 NRI customers. It has undertaken significant brand-building initiatives in international markets and have emerged as a well-recognised financial services brand for NRIs. It’s market share in inward remittances into India has Projectsformba.blogspot.com
  18. 18. Projectsformba.blogspot.com increased to over 25%. It has consolidated it’s global remittance initiative, targeting non-Indian communities, by leveraging it’s core capabilities of technology-based service delivery. A large number of remittance products were introduced to complement the existing suite of products. The business focus has been on rolling out successful products across multiple geographies and getting into high volume correspondent arrangements. 1.3.5 PRODUCTS AND SERVICES BANKING ACCOUNTS ICICI Bank offers a wide range of banking accounts such as Current, Saving, Life Plus Senior, Recurring Deposit, Young Stars, Salary Account etc. tailor-made for every customer segments, from children to senior citizens. Convenience and ease to access are the benefits of ICICI Bank accounts.  YOUNG STARS ACCOUNT A special portal for children to learn banking basics, manage personal finances and have a lot of fun.  BANK@CAMPUS This student banking services gives students access to their account details at the click of a mouse. Plus, the student gets a chequebook, debit card and annual statements.  SAVINGS ACCOUNTS Convenience is the name of the game with ICICI bank’s savings account. whether it is an ATM/debit card, easy withdrawal, easy loan options or internet banking, ICICI bank’s saving account always keep you in touch of money.  FIXED DEPOSITS Projectsformba.blogspot.com
  19. 19. Projectsformba.blogspot.com ICICI Bank offers a range of deposit solutions to meet varying needs at every stage of life. It offers a range of tenures and other features to suit all requirements. INSURANCE The ICICI group offers a range of insurance products to cover varying needs ranging from life, pensions and health, to home, motor and travel insurance. The products are made accessible to customers through a wide network of advisors, banking partners, Corporate agents and brokers with the added convenience of being able to buy online.  LIFE INSURANCE The ICICI group provides the many life insurance product through ICICI Prudential Life Insurance Company.  GENERAL INSURANCE The ICICI group provides the many general insurance products like motor, travel and home insurance through ICICI Lombard General Insurance Company. LOANS ICICI bank offers a range of deposits solutions to meet varying needs at every stage of life. It offers a range of tenures and other features to suit all requirements.  HOME LOAN The No. 1 Home Loans Provider in the country, ICICI Bank Home Loans offers some unbeatable benefits to its customers - Projectsformba.blogspot.com
  20. 20. Projectsformba.blogspot.com Doorstep Service, Simplified Documentation and Guidance throughout the Process. It's really easy !  PERSONAL LOAN ICICI Bank Personal Loans are easy to get and absolutely hassle free. With minimum documentation you can now secure a loan for an amount upto Rs. 15 lakhs.  VEHICLE LOANS The No. 1 financier for car loans in the country. Network of more than 2500 channel partners in over 1000 locations. Tie-ups with all leading automobile manufacturers to ensure the best deals. Flexible schemes & quick processing are the main advantages are here. Avail attractive schemes at competitive interest rates from the No 1 Financier for Two Wheeler Loans in the country . Finance facility upto 90% of the On Road Cost of the vehicle, repayable in convenient repayment options and comfortable tenors from 6 months to 36 months CARDS ICICI Bank offers a variety of cards to suit different transactional needs. Its range includes Credit Cards, Debit Cards and Prepaid cards. These cards offer you convenience for financial transactions like cash withdrawal, shopping and travel. These cards are widely accepted both in India and abroad.  CREDIT CARD ICICI Bank Credit Cards give you the facility of cash, convenience and a range of benefits, anywhere in the world. These benefits range from life time free cards, Insurance benefits, global Projectsformba.blogspot.com
  21. 21. Projectsformba.blogspot.com emergency assistance service, discounts, utility payments, travel discounts and much more.  DEBIT CARD The ICICI Bank Debit Card is a revolutionary form of cash that allows customers to access their bank account around the clock, around the world. The ICICI Bank Debit Card can be used for shopping at more than 3.5 Lakh merchants in India and 24 million merchants worldwide.  TRAVEL CARD ICICI Bank Travel Card. The Hassle Free way to Travel the world. Traveling with US Dollar, Euro, Pound Sterling or Swiss Francs; Looking for security and convenience; take ICICI Bank Travel Card. Issued in duplicate. Offers the Pin based security. Has the convenience of usage of Credit or Debit card. MOBILE BANKING Bank on the move with ICICI Bank Mobile Banking. With ICICI Bank, Banking is no longer what it used to be. ICICI Bank offers Mobile Banking facility to all its Bank, Credit Card, Demat and Loan customers. ICICI Bank Mobile Banking can be divided into two broad categories of facilities: Alert facility : ICICI Bank Mobile Banking Alerts facility keeps you informed about the significant transactions in yits Accounts. It keeps you updated wherever you go. Request facility : ICICI Bank Mobile Banking Requests facility enables you to query for yits account balance. Projectsformba.blogspot.com
  22. 22. Projectsformba.blogspot.com INVESTMENT PRODUCTS: Along with Deposit products and Loan offerings, ICICI Bank assists you to manage yits finances by providing various investment options ranging from ICICI Bank Tax Saving Bonds to Equity Investments through Initial Public Offers and Investment in Pure Gold. ICICI Bank facilitates following investment products: • ICICI Bank Tax Saving Bonds • Government of India Bonds • Investment in Mutual Funds • Initial Public Offers by Corporates • Investment in "Pure Gold" • Foreign Exchange Services • Senior Citizens Savings Scheme, 2004 TRADE-SERVICES: ICICI Bank offers online remittances as well as online processing of letters of credit and bank guarantees. ASSET-MANAGEMENT: Prudential ICICI Asset Management Company offers a wide range of retail mutual fund products tailored to suit varied risk and maturity profiles. Projectsformba.blogspot.com
  23. 23. Projectsformba.blogspot.com CASH MANAGEMENT: ICICI Bank offers a complete range of highly customized solutions for managing both the collections and payments requirements of clients by leveraging technology. Daily customized transactions reports and real time web-enabled downloads, provide on-tap information facilitating effective working capital management. CORPORATE BANKING: ICICI Bank offers comprehensive and customized financial solutions for its corporate clients, including rupee and foreign currency debts, working capital credit, structured financing syndication and transaction banking products and services. INTERNET BANKING: Internet banking is available to all ICICI bank savings and deposit account holders, credit card, demat and loan customers. Internet banking service offers customers a world of convenience with services such as balance enquiry, transaction history, account statement, bill payments, fund transfers and accounts related service requests. ATMs: With more than 2500 ATMs across the country, ICICI Bank has one of the largest ATM networks in India Projectsformba.blogspot.com
  24. 24. Projectsformba.blogspot.com PHONE BANKING: Phone banking offers 24*7 service across liability, asset and investment products to both retail and corporate customers. NRI-BANKING: A gamut of services to take care of all NRI banking needs including deposits, money transfers and private banking. MONEY2INDIA: A complete range of online and offline money transfer solutions to send money to India. PROPERTY: For millions of home buyers across the country, ICICI Bank offers not just great deals on home loans but also a wealth of expert advice. ICICI Bank offers home search service which can help a customer identify the property of his choice based on his budget and other requirements. DEMAT ACCOUNTS: ICICI Bank’s demat services after unique features like e-constructions, consolidation, digitally signed statements, mobile requests and corporate benefit tracking. RURAL-BANKING: Bank offers technology-based solutions, financial innovations and multiple delivery channels to meet the financial needs of rural areas. MICROFINANCE: ICICI Bank assists over 2.5 million low income clients to build livelihoods by partnering With over 100 microfinance institutions. BRANCHES: ICICI Bank has a network of over 630 branches ( of which 51 are extension counters) across the country. The network puts a wide Projectsformba.blogspot.com
  25. 25. Projectsformba.blogspot.com range of banking products and financial services with in easy reach of retail and corporate customers. 1.3.6 RISK ASPECTS OF ICICI BANK RISK MANAGEMENT Risk is an integral part of the banking business and bank aim at delivering superior shareholder value by achieving an appropriate trade-off between risk and returns. Bank is exposed to various risks, including credit risk, market risk and operational risk. Bank’s risk management strategy is based on a clear understanding of various risks, disciplined risk assessment and measurement procedures and continuous monitoring. The policies and procedures established for this purpose are continuously benchmarked with international best practices. Bank has two dedicated groups, the RISK MANAGEMENT GROUP (RMG) and COMPLIANCE & AUDIT GROUP (CAG) which is responsible for assessment, management and mitigation of risk in ICICI Bank. These groups from part of the corporate center are completely independent of all business operations and are accountable to the Risk and Audit committees of the Board of directors. RMG is further organized into the Credit Risk Management group, Market Risk Management group, Retail Risk Management group and Operational Risk Management group. CAG is further organised into the Credit Policies, RBI Inspection & Anti-Money Laundering Group and the Internal Audit Group. CREDIT RISK Credit risk is the risk that a borrower is unable to meet its financial obligations to the lender. Bank measure, monitor and manage credit risk for each borrower and also at the portfolio level. Bank has standardized credit-approval processes, which include a well- established procedure for comprehensive credit appraisal and rating. ICICI Bank has well developed internal credit rating Projectsformba.blogspot.com
  26. 26. Projectsformba.blogspot.com methodologies for rating obligors. The rating factors in quantitative, qualitative issues and credit enhancement features specific to the transaction. The rating serves as a key input in the approval as well as post-approval credit processes. Industry knowledge is constantly updated through field visits and interactions with clients, regulatory bodies and industry experts. In retail credit operations, the Board or a Board Committee approves all products, policies and authorizations. Credit approval authority lies only with the credit officers who are distinct from the sales team. Credit scoring models are used in the case of certain products like credit cards. External agencies such as field investigation agencies and credit processing agencies are used to facilitate a comprehensive due diligence process including visits to offices and homes in the case of loans to individual borrowers. MARKET RISK Market risk is the risk of loss resulting from changes in interest rates, foreign currency exchange rates, equity prices and commodity prices. The objective of market risk management is to minimize the impact of losses on earnings and equity capital due to market risk. Market risk policies include the Investment Policy and the Asset-Liability Management (ALM) Policy. The policies are approved by the Board of Directors. The Asset Liability Management Committee (ALCO) of the Board of Directors stipulate liquidity and interest rate risk limits, monitors adherence to limits, articulates the organisation’s interest rate view and determines the strategy in light of the current and expected environment. These policies and processes are articulated in the ALPM policy. The investment policy addresses issues related to investment in various trading products. RMG exercises independent control over the process of market risk management and recommends changes in process and methodologies for measuring market risk Interest rate risk is measured through the use of re-pricing gap analysis and duration analysis. Liquidity risk is measured through gap analysis. Bank ensure adequate liquidity at all time through systematic funds planning and maintenance of liquid investment as well as focusing on more stable funding sitsces such as retail deposits. ICICI Bank limit exposure to exchange rate risk by stipulating position limits. The treasury Middle Office Group monitors the asset-liability position under the supervision of the ALCO. The Treasury Middle Office Group is also responsible for processing treasury transactions, tracking the daily funds position and complying with all treasury related management and regulatory reporting requirements. OPREATIONAL RISK Operational risk is the risk of loss that can result from a variety of factors, including failure to obtain proper internal authorizations, improperly documented transactions, failure of operational and information security procedures, computer systems, software or equipment, fraud, inadequate training and employee errors. Bank’s approach to operational risk management is designed to mitigate operational risk by maintaining a comprehensive system of internal controls, establishing systems and procedures to monitor transactions, maintaining key back-up procedures and undertaking regular contingency planning. Effective operational risk management system would ensure that bank has sufficient information to make appropriate Projectsformba.blogspot.com
  27. 27. Projectsformba.blogspot.com decisions about additional controls, adjustments to controls, or other risk responses. Operational risk management policy aims at minimizing losses and customer dissatisfaction due to failure in processes, focusing on flaws in products and their design that can expose the bank to losses due to fraud, analyzing the impact of failures in systems, developing mitigants to minimize the impact and developing plans to meet external shocks that can adversely impact continuity in the bank’s operations. 1.3.7 SUBSIDIARY COMPANIES • DOMESTIC SUBSIDIARIES  ICICI Home Finance Company Limited  ICICI Investment Management Company Limited  ICICI Lombard General Insurance Company Limited  ICICI Prudential Life Insurance Company Limited  ICICI Securities Limited  ICICI Trusteeship Services Limited  ICICI Venture Funds Management Company Limited  ICICI Securities Primary Dealership Limited  ICICI Prudential Asset Management Company Limited  ICICI Prudential Trust Limited • INTERNATIONAL SUSIDIARIES  ICICI Bank Canada  ICICI Bank Eurasia Limited Liability Company  ICICI International Limited  ICICI Securities Holding Inc Projectsformba.blogspot.com
  28. 28. Projectsformba.blogspot.com  ICICI Securities Inc  ICICI Bank Uk Limited 1.3.8 KEY GROUP COMPANIES ICICI PRUDENTIAL INSURANCE COMPANY ICICI Life continued to maintain its market leadership among private sector life insurance companies with a market share of 29% on the basis of weighted received premium. Life insurance companies worldwide make losses in the initial years, in view of business set-up and customer acquisition costs in the initial years as well as reserving for actuarial liability. While the growing operations of ICICI Life had a negative Projectsformba.blogspot.com
  29. 29. Projectsformba.blogspot.com impact of Rs. 480 crore (US$ 110 million) on the Bank’s consolidated profit after tax in FY2007 on account of the above reasons, the company’s unaudited New Business Achieved Profit (NBAP) for FY2007 was Rs. 881 crore (US$ 203 million) as compared to Rs. 528 crore (US$ 121 million) in FY2006. ICICI LOMBARD GENERAL INSURANCE COMPANY ICICI Lombard General Insurance Company (ICICI General) enhanced its leadership position with a market share of about 35% among private sector general insurance companies and an overall market share of about 12.4% during April 2006-February 2007. ICICI General’s gross written premium grew by 89% from Rs. 1,592 crore (US$ 366 million) in FY2006 to Rs. 3,004 crore (US$ 691 million) in FY2007. ICICI General is required to expense upfront, on origination of a policy, all sitscing expenses related to the policy. While ICICI General’s profit after tax for FY2007 was Rs. 68 crore (US$ 16 million), its combined ratio for FY2007 was 97%. The combined ratio is the sum of net claims and expenses as a percentage of premiums and indicates the surplus generated on an annualised basis from the business written during a period (excluding investment income). The surplus based on the combined ratio, and investment income aggregated Rs. 180 crore (US$ 41 million) on a pre tax basis in FY2007. ICICI PRUDENTIAL AMC & TRUST At March 31, 2007, ICICI Prudential Asset Management Company (ICICI AMC) was among the top two asset management companies in India with assets under management of over Rs. 37,900 crore (US$ 8.7 billion). ICICI Projectsformba.blogspot.com
  30. 30. Projectsformba.blogspot.com AMC’s profit after tax increased by 55% to Rs. 48 crore (US$ 11 million) in FY2007 from Rs. 31 crore in FY2006 (US$ 7 million). ICICI SECURITIES LIMITED The securities and primary dealership business of the ICICI group have been reorganised. ICICI Securities Limited has been renamed as ICICI Primary Dealership Limited. ICICI Brokerage Services Limited has been renamed as ICICI Securities Limited and has become a direct subsidiary of ICICI Bank. Erstwhile ICICI Webtrade Limited was amalgamated with ICICI Securities Limited during fiscal 2007. ICICI Securities achieved a profit after tax of Rs. 0.63 billion and ICICI Securities Primary Dealership achieved a profit after tax of Rs. 1.33 billion, in fiscal 2007. ICICI VENTURE FUNDS MANAGEMENT COMPANY LIMITED ICICI Venture Funds Management Company Limited (ICICI Venture) strengthened its leadership position in private equity in India, with funds under management of about Rs. 98.00 billion at year-end fiscal 2007. ICICI Venture achieved a profit after tax of Rs. 0.70 billion in fiscal 2007 compared to Rs. 0.50 billion in fiscal 2006. 1.3.9 PUBLIC RECOGNITION Projectsformba.blogspot.com
  31. 31. Projectsformba.blogspot.com During fiscal 2007, ICICI Bank received several prestigious award in recognition of overall business strategies, specific objectives and technology focus:  Bank of the Year 2006 India by The Banker  Best Transaction Bank in India by Asset Triple AAA  Best Trade Finance in India by Asset Triple AAA  Best Domestic Custody in India by Asset Triple AAA  Best Bank of the Year 2006 by Business India  Business Leadership Award in the Banking category by NDTV Profit  National Award for Excellence in Energy Management by CII  Most Admired Bank by Business Baron  Best Integrated Consumer Bank Site in Asia by Global Finance  Best Presentment and Payment in Asia by Global Finance  Best Consumer Internet Bank in India by Global Finance  Best Corporate/Institutional Internet Bank in India by Global Finance  Best Retail Bank India by Asian Banker  Excellence in Multi Channel Distribution by Asian Banker  Excellence in Automobile Lending Award by Asian Banker  Most Trusted Brand Award by Readers Digest Projectsformba.blogspot.com
  32. 32. Projectsformba.blogspot.com CHAPTER-2 STUDY OF FINANCIAL STATEMENT AND IT’S ANALYSIS Projectsformba.blogspot.com
  33. 33. Projectsformba.blogspot.com 2.1 STUDY OF PROFIT& LOSS A/C MEANING: It is a financial statement, which shows net loss of a company for a specified period. The accounting year means calendar year of 12 months or less or more than 12 months. CONTENTS: This presents the revenues and expenses of a company and shows the excess of revenues over expenses for profit and vice versa for a loss. FORMAT: The Companies act does not provide any specific format for this account. However it is required to be prepared on the basis of the instructions given in part ii of schedule (vi) of the companies act. MAIN ITEMS OF PROFIT AND LOSS ACCOUNT Turnover or sales: The aggregate amount of sales and connected items with the sales such as commission paid to sole-selling agents and other selling agents and brokerage and discounts on sales other than usual trade discount. Depreciation: The amount of depreciation of fixed assets and the arrears of depreciation as per section 205(2) shall be disclosed by way of foot-note. Interest on loans and debentures: Interest on loans and debentures has to be stated separately. It will include the amount of interest paid as well as outstanding. Miscellaneous expenses: In this head items such as rates and taxes, insurance premium etc., must be stated separately. Preliminary expenses: Such expenses include the costs of formation of a company and since their amount is usually large, it is not desirable to write off them in one year. Provision for taxation: The profit and loss account of a company must be debited with the estimated liabilities for tax on the current profits at current rates of taxation. Projectsformba.blogspot.com
  34. 34. Projectsformba.blogspot.com Unclaimed dividends: it is shown on the liabilities side of the balance sheet under the heading ‘current liabilities ‘. Interim dividends: It is an item of appropriation. It is transferred to the debit side of the Profit and loss appropriation account. Final dividend as an item of the trial balance: This is shown in the debit side of the appropriation section of the profit and loss account. Proposed dividend or final dividend proposed: Since it is an adjustment item, it has to be shown at two places- In the debit side of the profit and loss appropriation account and on the liabilities side of the balance sheet under the head ‘current liabilities and provisions’. Political donations: It must be shown as a separate item in the profit and loss account. Dividend on interest income: This item is transferred to the credit side of the profit and loss account. Payment to auditors: It must be stated separately. This will include consultancy fee, auditing fees management services etc. Managerial remuneration: This includes the payments made to managerial remuneration director’s fee, pension, other allowances and commission. 2.2 STUDY OF BALANCE SHEET MEANING: The balance sheet is a financial snapshot of a company's condition at a single point in time. A balance sheet contains a listing of the company's asset, liability and Capital accounts. When someone, whether a creditor or investor, asks you how your company is doing, you'll want to have the answer ready and documented. The way to show off the success of your company is a balance sheet. A balance sheet is a documented report of your company's assets and obligations, as well as the residual ownership Projectsformba.blogspot.com
  35. 35. Projectsformba.blogspot.com claims against your equity at any given point in time. It is a cumulative record that reflects the result of all recorded accounting transactions since your enterprise was formed. You need a balance sheet to specifically know what your company's net worth is on any given date. With a properly prepared balance sheet, you can look at a balance sheet at the end of each accounting period and know if your business has more or less value, if your debts are higher or lower, and if your working capital is higher or lower. By analyzing your balance sheet, investors, creditors and others can assess your ability to meet short-term obligations and solvency, as well as your ability to pay all current and long-term debts as they come due. The balance sheet also shows the composition of assets and liabilities, the relative proportions of debt and equity financing and the amount of earnings that you have had to retain. Collectively, external parties to help assess your company’s financial status, which is required by both lending institutions and investors before they will allot any money toward your business, will use this information. LEARN THE DIFFERENT ASSETS Current assets: Current assets include cash and other assets that in the normal course of events are converted into cash within the operating cycle. For example, a manufacturing enterprise will use cash to acquire inventories of materials. These inventories of materials are converted into finished products and then sold to customers. Cash is collected from the customers. This circle from cash back to cash is called an operating cycle. In a merchandising business one part of the cycle is eliminated. Materials are not purchased for conversion into finished products. Instead, the finished products are purchased and are sold directly to the customers. Several Projectsformba.blogspot.com
  36. 36. Projectsformba.blogspot.com operating cycles may be completed in a year, or it may take more than a year to complete one operating cycle. The time required to complete an operating cycle depends upon the nature of the business. It is conceivable that almost all of the assets that are used to conduct your business, such as buildings, machinery, and equipment, can be converted into cash within the time required to complete an operating cycle. However, your current assets are only those that will be converted into cash within the normal course of your business. The other assets are only held because they provide useful services and are excluded from the current asset classification. If you happen to hold these assets in the regular course of business, you can include them in the inventory under the classification of current assets. Current assets are usually listed in the order of their liquidity and frequently consist of cash, temporary investments, accounts receivable, inventories and prepaid expenses. Cash: Cash is simply the money on hand and/or on deposit that is available for general business purposes. It is always listed first on a balance sheet. Cash held for some designated purpose, such as the cash held in a fund for eventual retirement of a bond issue, is excluded from current assets. Marketable Securities: These investments are temporary and are made from excess funds that you do not immediately need to conduct operations. Until you need these funds, they are invested to earn a return. Accounts Receivable: Simply stated, accounts receivables are the amounts owed to you and are evidenced on your balance sheet by promissory notes. Accounts receivable are the amounts billed to your customers and owed to you on the balance sheet's date. You should label all other accounts receivable appropriately and show them apart from the accounts receivable Projectsformba.blogspot.com
  37. 37. Projectsformba.blogspot.com arising in the course of trade. If these other amounts are currently collectible, they may be classified as current assets. Inventories: Your inventories are your goods that are available for sale, products that you have in a partial stage of completion, and the materials that you will use to create your products. The costs of purchasing merchandise and materials and the costs of manufacturing your various product lines are accumulated in the accounting records and are identified with either the cost of the goods sold during the fiscal period or as the cost of the inventories remaining. Prepaid expenses: These expenses are payments made for services that will be received in the near future. Strictly speaking, your prepaid expenses will not be converted to current assets in order to avoid penalizing companies that choose to pay current operating costs in advance rather than to hold cash. Often your insurance premiums or rentals are paid in advance. Investments: Investments are cash funds or securities that you hold for a designated purpose for an indefinite period of time. Investments include stocks or the bonds you may hold for another company, real estate or mortgages that you are holding for income-producing purposes. Your investments also include money that you may be holding for a pension fund. Plant Assets: Often classified as fixed assets, or as plant and equipment, your plant assets include land, buildings, machinery, and equipment that are to be used in business operations over a relatively long period of time. It is not expected that you will sell these assets and convert them into cash. Plant assets simply produce income indirectly through their use in operations. Projectsformba.blogspot.com
  38. 38. Projectsformba.blogspot.com Intangible Assets: Your other fixed assets that lack physical substance are referred to as intangible assets and consist of valuable rights, privileges or advantages. Although your intangibles lack physical substance, they still hold value for your company. Sometimes the rights, privileges and advantages of your business are worth more than all other assets combined. Other Assets: During the course of preparing your balance sheet you will notice other assets that cannot be classified as current assets, investments, plant assets, or intangible assets. These assets are listed on your balance sheet as other assets. Frequently, your other assets consist of advances made to company officers, the cash surrender value of life insurance on officers, the cost of buildings in the process of construction, and the miscellaneous funds held for special purposes. LEARN THE DIFFERENT LIABILITIES Current Liabilities: On the equity side of the balance sheet, as on the asset side, you need to make a distinction between current and long-term items. Your current liabilities are obligations that you will discharge within the normal operating cycle of your business. In most circumstances your current liabilities will be paid within the next year by using the assets you classified as current. The amount you owe under current liabilities often arises as a result of acquiring current assets such as inventory or services that will be used in current operations. You show the amounts owed to trade creditors that arise from the purchase of materials or merchandise as accounts payable. If you are obligated under promissory notes that support bank loans or other amounts owed, your liability is shown as notes payable. Other current liabilities may include the estimated amount payable for income Projectsformba.blogspot.com
  39. 39. Projectsformba.blogspot.com taxes and the various amounts owed for wages and salaries of employees, utility bills, payroll taxes, local property taxes and other services. Long-Term Liabilities: Your debts that are not due until more than a year from the balance sheet date are generally classified as long-term liabilities. Notes, bonds and mortgages are often listed under this heading. If a portion of your long-term debt is due within the next year, it should be removed from the long-term debt classification and shown under current liabilities. Deferred Revenues: Your customers may make advance payments for merchandise or services. The obligation to the customer will, as a general rule, be settled by delivery of the products or services and not by cash payment. Advance collections received from customers are classified as deferred revenues, pending delivery of the products or services. Owner's Equity: Your owner's equity must be subdivided on your balance sheet: One portion represents the amount invested directly by you, plus any portion of retained earnings converted into paid-in capital. The other portion represents your net earnings that are retained. This rigid distinction is necessary because of the nature of any corporation. Ordinarily, stockholders, or owners, are not personally liable for the debts contracted by a company. A stockholder may lose his investment, but creditors usually cannot look to his personal assets for satisfaction of their claims. Under normal circumstances, the stockholders may withdraw as cash dividends an amount measured by the corporate earnings. The distinction in this rule gives the creditors some assurance that a certain portion of the assets equivalent to the owner's investment cannot be arbitrarily withdrawn. Of course, this portion could be depleted from your balance sheet because of operating losses. The owner's Projectsformba.blogspot.com
  40. 40. Projectsformba.blogspot.com equity in an unincorporated business is shown more simply. The interest of each owner is given in total, usually with no distinction being made between the portion invested and the accumulated net earnings. The creditors are not concerned about the amount invested. If necessary, creditors can attach the personal assets of the owners. Basis of balance-sheet: Assets = Liability + Equity BALANCE-SHEET STRUCTURE The following Balance sheet structure is just an example. It does not show all possible kind of assets, equity and liabilities, but it shows the most usual ones. It could be a consolidated balance sheet. Monetary values are not shown and summary (total) rows are missing as well. Assets Current Assets Cash and cash equivalents Inventories Account receivable Investment held for trading Other current assets Non-Current Assets Property, plant and equipment Goodwill Other intangible fixed assets Investment in associates Deferred tax assets Projectsformba.blogspot.com
  41. 41. Projectsformba.blogspot.com Miscellaneous Expenditure Equity And Liabilities Capital & Reserve Share capital reserve Revaluation reserve Translation reserve Retained earnings Minority interest Non-Current Liabilities Bank loan Issued debt securities Deferred tax liability Current Liabilities Accounts payable Current income tax liability Short-term part of bank loans Short-term provisions Other current liabilities EQUITY VALUATION:The real value to a purchaser of the business or a shareholder may be different from the net assets shown by the balance sheet. This is because factors that affect the value of a business may not be recorded yet. For example, a purchaser will be interested in the future earnings of the business, whether assets such as property have been revalued Projectsformba.blogspot.com
  42. 42. Projectsformba.blogspot.com recently, and whether there are potential liabilities in the future such as lawsuits. The value of the assets in the balance has also been based on the assumption that the business is a going concern, otherwise the break-up value of the assets may be far less than the value in the balance sheet. PREPAIRING A BALANCE-SHEET Title and Heading: In practice, the most widely used title is Balance Sheet; however Statement of Financial Position is also acceptable. Naturally, when the presentation includes more than one time period the title "Balance Sheets" should be used. Heading: In addition to the statement title, the heading of your balance sheet should include the legal name of your company and the date or dates that your statement is presented. For example, a comparative presentation might be headed: XYZ CORPORATION BALANCE SHEETS December 31, 2006 Format: There are two basic ways that balance sheets can be arranged. In Account Form, your assets are listed on the left-hand side and totaled to equal the sum of liabilities and stockholders' equity on the right-hand side. Another format is Report Form, a running format in which your assets are listed at the top of the page and followed by liabilities and stockholders' equity. Sometimes total liabilities are deducted from total assets to equal stockholders' equity. Captions: Captions are headings within your statement that designate major groups of accounts to be totaled or subtotaled. Your balance sheet should Projectsformba.blogspot.com
  43. 43. Projectsformba.blogspot.com include three primary captions: Assets, Liabilities and Stockholders' Equity. In the report form of presentation, the placement of your primary captions would be as follows: 2006 ASSETS, LIABILITIES AND STOCKHOLDER’S EQUITY. Except in certain specialized industries your balance sheet should include the following secondary captions: CURRENT ASSETS CURRENT LIABILITIES Order of Presentation of Captions: First, start with items held primarily for conversion into cash and rank them in the order of their expected conversion. Then, follow with items held primarily for use in operations but that could be converted into cash, and rank them in the order of liquidity. Finally, finish with items whose costs you will defer to future periods or that you cannot convert into cash. Following these guidelines, your major assets should normally be presented in the following order: • Cash • Short-term marketable securities • Trade notes and accounts receivable • Inventories • Long-term investments • Property and equipment • Intangible assets • Deferred charges Liabilities are ordinarily presented in the order of maturity as follows: Projectsformba.blogspot.com
  44. 44. Projectsformba.blogspot.com • Demand notes • Trade accounts payable • Accrued expenses • Long-term debt • Other long-term liabilities Components of stockholders' equity are usually presented the following order: • Preferred stock • Common stock • Additional paid-in capital • Retained earnings • Accumulated other comprehensive income • Treasury stock 2.3 STUDY OF CASH FLOW STATEMENT MEANING: Cash flow statement or statement of cash flows is a financial statement that shows a company's incoming and outgoing money (sources and uses of cash) during a time period (often monthly or quarterly). The statement shows how changes in balance sheet and income accounts affected cash and cash equivalents, and breaks the analysis down according to operating, investing, and financing activities. As an analytical tool the statement of cash flows is useful in determining the short-term viability of a company, particularly its ability to pay bills. PURPOSE: The cash flow statement reflects a firms liquidity or solvency. The main purpose to make cash flow statement are as follows: Projectsformba.blogspot.com
  45. 45. Projectsformba.blogspot.com 1. provide information on a firm's liquidity and solvency and its ability to change cash flows in future circumstances 2. provide additional information for evaluating changes in assets, liabilities and equity 3. improve the comparability of different firms' operating performance by eliminating the effects of different accounting methods 4. indicate the amount, timing and probability of future cash flows ACTIVITIES INVOLVED IN CASH FLOW: The cash flow statement is partitioned into cash flow resulting from operating activities, cash flow resulting from investing activities, and cash flow resulting from financing activities. Operating activities: Operating activities include the production, sales and delivery of the company's product as well as collecting payment from its customers. This could include purchasing raw materials, building inventory, advertising. Investing activities: Investing activities focus on the purchase of the long- term assets a company needs in order to make and sell its products, and the selling of any long-term assets. Financing activities: Financing activities include the inflow of cash from investors such as banks and shareholders, as well as the outflow of cash to shareholders as dividends as the company generates income. Other activities which impact the long-term liabilities and equity of the company are also listed in the financing activities section of the cash flow statement. Analysis of cash flow statement is necessary for every organisation to depict its cash inflow and outflow. Projectsformba.blogspot.com
  46. 46. Projectsformba.blogspot.com 2.4 FINANCIAL STATEMENT ANALYSIS MEANING: Financial statement analysis is the process of examining relationships among financial statement elements and making comparisons with relevant information. It is a valuable tool used by investors and creditors, financial analysts, and others in their decision-making processes related to stocks, bonds, and other financial instruments. With a great understanding of the balance sheet & p&l account and how it is constructed, we can look at some techniques to analyze the information contained within the balance sheet & p&l account. PURPOSE: The main purpose of analyzing the financial statement are the following:-  To assess past performance and current financial position.  To make predictions about the future performance of a company. TOOLS FOR ANALYSING 1. PERCENTAGE CALCULATION There are two popular methods by which we can analyze the financial statement by calculating percentage as taking a common base. Horizontal Analysis When an analyst compares financial information for two or more years for a single company, the process is referred to as horizontal analysis, since the analyst is reading across the page to compare any single line item, such as sales revenues. In addition to Projectsformba.blogspot.com
  47. 47. Projectsformba.blogspot.com comparing dollar amounts, the analyst computes percentage changes from year to year for all financial statement balances, such as cash and inventory. Alternatively, in comparing financial statements for a number of years, the analyst may prefer to use a variation of horizontal analysis called trend analysis. Trend analysis involves calculating each year's financial statement balances as percentages of the first year, also known as the base year. When expressed as percentages, the base year figures are always 100 percent, and percentage changes from the base year can be determined. If we want to calculate % change in sales then we apply the following formula: Percentage=change in sales /Base Year Sales*100 Vertical Analysis When using vertical analysis, the analyst calculates each item on a single financial statement as a percentage of a total. The term vertical analysis applies because each year's figures are listed vertically on a financial statement. The total used by the analyst on the income statement is net sales revenue, while on the balance sheet it is total assets. This approach to financial statement analysis, also known as component percentages, produces common-size financial statements. Common-size balance sheets and income statements can be more easily compared, whether across the years for a single company or across different companies. If we want to calculate % change of current assets then we apply the following formula: Projectsformba.blogspot.com
  48. 48. Projectsformba.blogspot.com Percentage: current assets/total assets*100 2. RATIO ANALYSIS Financial ratio analysis uses formulas to gain insight into the company and its operations. For the balance sheet, using financial ratios (like the debt-to-equity ratio) can show you a better idea of the company’s financial condition along with its operational efficiency. It is important to note that some ratios will need information from more than one financial statement, such as from the balance sheet and the income statement. Ratio analysis facilitates inter-firm and intra- firm comparison. Ratios are often classified using the following terms: LIQUIDITY RATIO Liquidity ratios are measures of the short-term ability of the company to pay its debts when they come due and to meet unexpected needs for cash. • Current Ratio: The current ratio is a rough indication of a firm ability to service its current obligations. Generally, the higher the current ratio, the greater the cushion between current obligations and a firm ability to pay them. The stronger ratio reflects a numerical superiority of current assets over current liabilities Current ratio is calculated as follows: Current ratio= Current Assets/Current Liabilities • Quick Ratio: It is also known as the “acid test” ratio, this is a refinement of the current ratio and is a more conservative measure of liquidity. The quick ratio expresses the degree to which a company’s current liabilities are recovered by the most liquid current assets. quick ratio is calculated as follows: Projectsformba.blogspot.com
  49. 49. Projectsformba.blogspot.com Quick ratio= (cash + marketable securities + Receivables)/current liabilities SOLVENCY RATIO Solvency ratios indicate the ability of the company to meet its long-term obligations on a continuing basis and thus to survive over a long period of time. • Debt/Worth Ratio: This ratio expresses the relationship between capital contributed by creditors and that contributed by owners. It expresses the degree of protection provided by the owners for the creditors. The higher the ratio, the greater the risk being assumed by creditors. The lower the ratio, the greater the long-term financial safety. A firm with a low debt/worth ratio usually has a greater flexibility to borrow in the future. A more highly leveraged company has a more limited debt capacity. Debt/worth ratio=Total Liabilities / Tangible Net Worth PROFITABILITY RATIO Profitability ratios are gauges of the company's operating success for a given period of time. • Return On Assets: Return on assets is a measure of how effectively the firm’s assets are being used to generate profit. It is calculated as follows: Return On Assets= Net Income/Total Assets Projectsformba.blogspot.com
  50. 50. Projectsformba.blogspot.com • Return On Equity: Return on equity is the bottom line measure for the shareholders, measuring for the profits earned for each rupee invested in business. It is calculated as follows: Return on Equity= Net income/shareholder’s equity Fixed/Worth Ratio: This ratio measures the extent to which owner’s equity (capital) has been invested in plant and equipment (fixed assets). A lower ratio indicates a proportionately smaller investment in fixed assets in relation to net worth and a better cushion for creditors in case of liquidation. Similarly, a higher ratio would indicate the opposite situation. The presence of substantial leased fixed assets (not shown on the balance-sheet ) may deceptively lower this ratio. Fixed Worth Ratio=Net Fixed Assets/ Tangible Net Worth Projectsformba.blogspot.com
  51. 51. Projectsformba.blogspot.com CHAPTER-3 ANALYSIS OF FINANCIAL STATEMENT OF ICICI BANK Projectsformba.blogspot.com
  52. 52. Projectsformba.blogspot.com 3.1 MANAGEMENT DISCUSSION & ANALYSIS SUMMARY: • Profit before provisions and tax increased 51.1% to Rs. 58.74 billion in fiscal 2007 from Rs. 38.88 billion in fiscal 2006 primarily due to an increase in net interest income by 40.9% to Rs. 66.36 billion in fiscal 2007 from Rs. 47.09 billion in fiscal 2006 and an increase in non- interest income by 39.4% to Rs. 59.14 billion in fiscal 2007 from Rs. 42.42 billion in fiscal 2006, offset, in part, by an increase in non- interest expenses by 33.8% to Rs. 66.91 billion in fiscal 2007 from Rs. 50.01 billion in fiscal 2006. • Provisions increased significantly during fiscal 2007 due to higher provisions created on standard assets and lower level of write-backs. Profit before general provisioning and tax increased 27.4% to Rs. 43.79 in fiscal 2007 from Rs. 34.36 billion in fiscal 2006. Profit after tax increased 22.4% to Rs. 31.10 billion in fiscal 2007 from Rs. 25.40 billion in fiscal 2006. • Net interest income increased 40.9% to Rs. 66.36 billion in fiscal 2007 from Rs. 47.09 billion in fiscal2006, reflecting an increase of 49.8% in the average volume of interest-earning assets. Projectsformba.blogspot.com
  53. 53. Projectsformba.blogspot.com • Non-interest income increased by 39.4% to Rs. 59.14 billion in fiscal 2007 from Rs. 42.42 billion in fiscal 2006 primarily due to a 45.4% increase in fee income. • Non-interest expenses increased 33.8% to Rs. 66.91 billion in fiscal 2007 from Rs. 50.01 billion in fiscal 2006 primarily due to 49.4% increase in employee expenses and 41.9% increase in other administrative expenses. • Provisions and contingencies (excluding provision for tax) increased to Rs. 22.26 billion in fiscal 2007 from Rs. 7.92 billion in fiscal 2006 primarily due to higher provisions created on standard assets in accordance with the revised guidelines issued by RBI, a higher level of specific provisioning on retailloans due to change in the portfolio mix towards non collateralised loans and seasoning of the loan portfolio and lower level of write-backs. • Total assets increased 37.1% to Rs. 3,446.58 billion at year-end fiscal 2007 from Rs. 2,513.89 billion at year-end fiscal 2006 primarily due to an increase in loans by 34.0% and an increase in investments by 27.5%. • FEE INCOME Fee income increased by 45.4% to Rs. 50.12 billion in fiscal 2007 from Rs. 34.47 billion in fiscal 2006 primarily due to growth in fee income from retail products and services, including fee arising from Projectsformba.blogspot.com
  54. 54. Projectsformba.blogspot.com retail assets products and retail liability related fee income like account servicing charges and third party distribution fees. Fees from corporate banking and international business also witnessed a strong growth. • TREASURY INCOME The gross treasury income increased to Rs. 10.14 billion in fiscal 2007 from Rs. 7.40 billion in fiscal 2006 primarily due to higher level of gains from equity divestments, offset in part by 24.6% increase in premium amortisation on Government securities to Rs. 9.99 billion in fiscal 2007 from Rs. 8.02 billion in fiscal 2006 and lower profits on proprietory trading as a result of the sharp fall in the equity markets in May 2006 and adverse conditions in debt markets. The amortisation of premium on Government securities which was earlier shown as provisions and contingencies has been reclassified under income from treasury-related activities as per the revised guidelines of RBI. • LEASE & OTHER INCOME Lease income decreased by 34.1% to Rs. 2.38 billion in fiscal 2007 from Rs. 3.61 billion in fiscal 2006 primarily because of a decrease in leased assets to Rs. 10.03 billion at year-end fiscal 2007 compared to Rs. 11.74 billion at year-end fiscal 2006 since we are not entering into new lease transactions. Other income increased by 53.0% to Rs. 6.64 billion for fiscal 2007 compared to Rs. 4.34 billion in fiscal 2006 primarily due to increase in income by way of dividend from our Projectsformba.blogspot.com
  55. 55. Projectsformba.blogspot.com subsidiary companies and increase in profit on sale of land, buildings and other assets. • PROVISIONS AND TAX Provisions and contingencies (excluding provision for tax) increased to Rs. 22.26 billion in fiscal 2007 from Rs. 7.92 billion in fiscal 2006 primarily due to higher provisions created on standard assets, in accordance with the revised guidelines issued by RBI, a higher level of specific provisioning on retail loans due to change in the portfolio mix towards non collateralised loans and seasoning of the loan portfolio and lower level of write-backs. • It’s total assets increased by 37.1% to Rs. 3,446.58 billion at year-end fiscal 2007 from Rs. 2,513.89 billion at year-end fiscal 2006 primarily due to increase in advances and investments. Net advances increased by 34.0% to Rs. 1,958.66 billion at year-end fiscal 2007 from Rs. 1,461.63 billion at year-end fiscal 2006 primarily due to increase in retail advances in accordance with our strategy of growth in our retail portfolio, offset, in part, by reduction in advances due to repayments and securitisation. Retail advances increased 38.5% to Rs. 1,277.03 billion at year-end fiscal 2007 from Rs. 921.98 billion at year-end fiscal 2006. • Total investments at year-end fiscal 2007 increased by 27.5% to Rs. 912.58 billion compared to Rs. 715.47 billion at year-end fiscal 2006 primarily due to 31.9% increase in investment in Government and Projectsformba.blogspot.com
  56. 56. Projectsformba.blogspot.com other approved securities in India to Rs. 673.68 billion at year-end fiscal 2007 from 510.74 billion at year-end fiscal 2006 in line with the increase in our net demand and time liabilities. Banks in India are required to maintain a specified percentage, currently 25.0%, of their net demand and time liabilities by way of liquid assets like cash, gold or approved unencumbered securities. Other investments (including debentures and bonds) increased by 16.7% to Rs. 238.90 billion at year-end fiscal 2007 compared to Rs. 204.73 billion at year-end fiscal 2006, reflecting an increase in investments in insurance and international subsidiaries, pass through certificates and credit linked notes. Total assets (gross) of overseas branches (including overseas banking unit in Mumbai) increased by 90.2% to Rs. 524.71 billion at year-end fiscal 2007 from Rs. 275.86 billion at year-end fiscal 2006. • It’s equity share capital and reserves at year-end fiscal 2007 increased to Rs. 243.13 billion as compared to Rs. 222.06 billion at year-end fiscal 2006 primarily due to retained earnings for the year and exercise of employee stock options. • As per the transition provision of Accounting Standard 15 - (Revised) on “Accounting for retirement benefits in financial statements of employer”, the difference in the liability on account of retirement benefits created by the Bank at March 31, 2006 due to the revised standard have been adjusted in “Reserves and Surplus”. Total deposits increased 39.6% to Rs. 2,305.10 billion at year end fiscal 2007 from Rs. 1,650.83 billion at year-end fiscal 2006. This is commensurate Projectsformba.blogspot.com
  57. 57. Projectsformba.blogspot.com with our focus of increased funding through deposits. Our savings account deposits increased to Rs. 288.38 billion at year-end fiscal 2007 from Rs. 209.37 billion at year-end fiscal 2006, while current deposits increased to Rs. 213.76 billion at year-end fiscal 2007 from Rs. 165.73 billion at year-end fiscal 2006. Term deposits increased by 41.3% to Rs. 1,802.96 billion at year-end fiscal 2007 from Rs. 1,275.73 billion at yearend fiscal 2006. Total deposits at year-end fiscal 2007 constituted 76.5% of our funding (i.e. deposit, borrowings and subordinated debts). Borrowings (including subordinated debt) increased to Rs. 706.61 billion at year-end fiscal 2007 from Rs. 486.66 billion at year-end fiscal 2006 primarily due to increase in borrowings of foreign branches. • Contingent liabilities increased by 42.5% or Rs. 1,679.25 billion to Rs. 5,629.60 billion at year-end fiscal 2007 from Rs. 3,950.35 billion at year-end fiscal 2006 primarily due to a 35.4% increase in interest rate swaps and currency options and a 45.0% increase in liability on account of outstanding forward exchang econtracts. • NPAS (NON PERFORMING ASSETS) The ratio of net non-performing assets to net customer assets increased to 0.98% at year-end fiscal 2007 compared to 0.71% at year-end fiscal 2006. At year-end fiscal 2007, the gross non- performing assets (net of write-offs and unpaid interest) were Rs. 41.68 billion compared to Rs. 22.73 billion at year end fiscal 2006. Gross of technical write-offs, the gross non-performing assets at year- end fiscal 2007 were Rs. 48.50 billon compared to Rs. 29.63 billion at Projectsformba.blogspot.com
  58. 58. Projectsformba.blogspot.com year-end fiscal 2006. The coverage ratio (i.e. total provisions and technical write-offs made against non-performing assets as a percentage of gross non performing assets) at year-end fiscal 2007 was 58.37% compared to 63.72% at year-end fiscal 2006. In addition, total general provision made against standard assets was Rs. 12.95 billion at year-end fiscal 2007. Our investments in security receipts issued by Asset Reconstruction Company (India) Limited, a reconstruction company registered with RBI were Rs. 25.38 billion at year-end fiscal 2007. Our net restructured standard loans decreased from Rs. 53.16 billion at year-end fiscal 2006 to Rs. 48.83 billion at year-end fiscal 2007. • The effective tax rate of 14.7% for fiscal 2007 was lower compared to the statutory tax rate of 33.66% primarily due to concessional rate of tax on capital gains, exemption of dividend income, deduction towards special reserve and deduction of income of offshore banking unit. (RS. IN BILLION) YEAR ENDED March 31, 2005 March 31, 2006 March 31, 2007 GROSS NPA 34.37 22.73 41.68 NET NPA 19.83 10.75 20.19 NET CUSTOMER 978.94 1,520.07 2,053.74 ASSETS Projectsformba.blogspot.com
  59. 59. Projectsformba.blogspot.com % OF NET NPA TO 2.03% 0.71% 0.98% NET CUSTOMER ASSETS • DIVIDEND The Board has recommended a higher dividend of 100% for FY2007 i.e. Rs. 10 per equity share (equivalent to US$ 0.46 per ADS) as compared to 85% for FY2006 primarily due to higher provisions created on standard assets ,a higher level of specific provisioning on retail loans. • CONSOLIDATED PROFIT The consolidated profit after tax increased 14% to Rs. 2,761 crore (US$ 635 million) in FY2007 from Rs. 2,420 crore (US$ 557 million) in FY2006. The consolidated profit was lower than the standalone profit due to the accounting losses of ICICI Prudential Life Insurance Company (ICICI Life). Its profit under US GAAP accounts was Rs. 31.27 billion as compared to consolidated profit of Rs. 27.61 billion under Indian GAAP in fiscal 2007. 3.2 COMPARATIVE INCOME STATEMENT TREND ANALYSIS SUMMARISED PROFIT & LOSS A/C (ON 31 MARCH, 2007) (RS. IN BILLION) PARTICULARS 2005 2006 2007 %Change %Change (RS.) (RS.) (RS.) (2006) (2007) Interest income 94.10 143.06 229.94 46.5% 60.7% Interest expense 65.71 95.97 163.8 46.1% 70.4% Projectsformba.blogspot.com
  60. 60. Projectsformba.blogspot.com Net interest income 28.39 47.09 66.36 47.5% 40.9% Non-interest income 27.05 42.42 59.14 49.9% 39.4% – Fee income 20.98 34.47 50.12 55.3% 45.4% – Lease income 4.01 3.61 2.38 (10.0) (34.1) – Others 2.06 4.34 6.64 111.2% 53.0% Core operating income 55.44 89.51 125.50 48.7% 40.2% Operating expenses 25.17 35.47 49.79 40.9% 40.3% Direct marketing agency 4.85 11.77 15.24 35.1% 29.5% (DMA) expense Lease depreciation, net of 2.97 2.77 1.88 (6.7) (31.9) lease equalization Core operating profit 22.45 39.50 58.59 67.6% 48.3% Net treasury income - (0.62) 0.15 - - Operating profit 29.56 38.88 58.74 58.7% 51.1% Provisions, net of write- 4.29 7.92 22.26 84.61% 181.1% backs Profit before tax 25.27 30.97 36.48 22.6% 17.8% Tax, net of deferred tax 5.22 5.56 5.38 6.7% (3.2) Profit after tax 20.05 25.40 31.10 26.7% 22.4% By anlysing the summarized profit & loss account of ICICI Bank, the following trends are presented:  Operating profit increased 51% to Rs. 5,874 crore for FY2007 from Rs. 3,888 crore for FY2006 which is less than as compared to increased 58.7% to Rs. 3,888 crore for FY 2006 from Rs. 2,956 crore for FY2005.  Profit after tax increased 22% to Rs. 3,110 crore for FY2007 from Rs. 2,540 crore for FY2006 which is less than as compared to increased 26.7% to Rs. 2,540 crore for FY2006 from Rs. 2,005 crore for FY2005. Projectsformba.blogspot.com
  61. 61. Projectsformba.blogspot.com  Profit before tax increased 18% to Rs. 3,648 crore for FY2007 from Rs. 3,097 crore for FY2006 which is also less than as compared to increased to 22.6 % to Rs. 3,097 crore for FY2006 fom Rs. 2,527 crore for FY2005.  Net interest income increased 41% to Rs. 6,636 crore for FY2007 from Rs. 4,709 crore for FY2006 which is less than as compared to increased 47.5% to Rs. 4,709 crore for FY2006 from Rs. 2,839 crore for FY2005.  Fee income increased 45% in 2007 which is less than as compared to 55.3% increased in 2006  Interest expenses increased at a very high rate from 46.1% in FY2006 to 70% in FY2007.  Interest income is increased at a higher rate than the previous year i.e. 47% in 2006 to 61% in 2007.  Increase in non-interest income is less than in 2007 49% as compared to increase in 2006 39%.  Provision is increased at a high rate as compared to previous years 85% in 2006 to 181% in 2007. 3.3 COMPARATIVE FINANCIAL POSITION STATEMENT TREND ANALYSIS SUMMARIZED BALANCE-SHEET Projectsformba.blogspot.com
  62. 62. Projectsformba.blogspot.com (ON MARCH 31, 2007) (RS. In crore) PARTICULARS 2005 2006 2007 %Change %Change (RS.) (RS.) (RS.) (2006) (2007) Cash balance with 47,412 68,115 104,489 43.7% 53% banks & SLR -Cash & bank balances 12,930 17,040 37,121 31.8% 118% -SLR investment 34,482 51,075 67,368 48.1% 32% Advances 91,405 146,163 195,866 59.9% 34% Other Investment 2,854 20,473 23,890 41.9% 17% Fixed and other Assets 12,836 16,638 20,413 29.61% 23% TOTAL ASSETS 167,659 251,389 344,658 49.9% 37% Net Worth 12,550 22,206 24,313 76.9% 9% -Equity Capital 737 890 899 20.8% 1% -Reserves 11,813 21,316 23,414 80.4% 10% Preference Capital 350 350 350 - - Deposits 99,819 165,083 230,510 65.4% 40% Erstwhile ICICI 19,348 13,190 10,837 (31.16%) (18%) Borrowings Other Borrowings 22,405 35,477 59,823 58.2% 69% Other Liabilities 13,187 15,083 18,824 14.4% 25% TOTAL 167,659 251,389 344,658 49.9% 37% LIABILITIES By anlysing the balance sheet of ICICI Bank, the following trends are presented:  Total assets and total liabilities are increased in 2007 from Rs. 251389 crore to Rs. 344658 Crore i.e. 37% which is less than as compared to increase in 2006 from Rs. 167659 crore to Rs. 251389 crore i.e. 49.9%. Projectsformba.blogspot.com
  63. 63. Projectsformba.blogspot.com  Increase in cash balance with bank in 2007 is more than in the previous year 2006. In 2006 it is 32% and in 2007 it is 118%.  But increase in SLR investment in 2007 is less than the previous year. In 2006 it is 48% and in 2007 it is 32%.  Increase in advances in 2007 is 60% from 2006 which is less than as compared to increase in advances in 2006 is 34% from 2005.  Increase in fixed and other assets is also less than in 2007 from 2006 i.e 23% as compared to 30% in 2006 from 2005.  Erstwhile ICICI borrowings is decreasing in both years but rate of decreasing is less in 2007 i.e. 18% but in 2006 it is 31%.  Increase in net worth is also less than from previous year in 2007 i.e 80% in 2006 to 9% in 2007.  Increase in equity capital is only 1% in 2007 whereas in 2006 it is 21% and increase in reserve in 2007 is very less as compared to increase in 2006 i.e. from 10% to 80%. Projectsformba.blogspot.com
  64. 64. Projectsformba.blogspot.com  40%Deposits is increased in 2007 from 2006 which is less than as compared to 65% increase in deposits in 2006 from 2005.  Increase in other liabilities is more in 2007 than in 2006 i.e from 14% in 2006 to 25% in 2007.  69%borrowing is increased in 2007 from 2006 which is more than as compared to 58% increase in borrowing in 2006 from 2005. 3.4 RATIO ANALYSIS 1) CURRENT RATIO: Current Ratio= Current Assets/Current Liabilities In 2006: Current Assets=170.40+1461.63=1632.03 billion (cash + advances) Current Liabilities=165.73+354.77+131.90=652.40billion (short-term deposits+ borrowings) Current Ratio=1632.03/652.40=2.5:1 In 2007: Current Assets=371.21+1958.66=2329.87billion (cash + advances) Current Liabilities=213.76+108.37+598.23=920.36 billion (short-term deposits+ borrowings) Current Ratio=2329.87/920.36=2.6:1 2) QUICK RATIO: Projectsformba.blogspot.com
  65. 65. Projectsformba.blogspot.com Quick Ratio=Quick Assets/Current Liabilities In 2006: Quick Assets=170.40billion (cash in hand and other bank) Current Liabilities=652.40billion Quick Ratio=170.40/652.40=0.26:1 In 2007: Quick Assets=371.21billion (cash in hand and other bank) Current Liabilities=920.30billion Quick Ratio=371.21/920.30=0.40:1 3) RETURN ON AVERAGE ASSETS: Return on average assets= Net income/average assets*100 average assets= total assets at the beginning + total assets at the end/2 In 2006: net income=25.40 billion Average assets= (1676.59+ 2513.89)/2= 2095.24 Return on average assets= 25.40/2095.24*100 = 1.21% In 2007: net income= 31.10 billion Average assets= (2513.89+ 3446.58)/2= 2980.24 Return on average assets= 31.10/2980.24*100=1.04% 4) RETURN ON AVERAGE EQUITY: Return on average equity = Net income/average equity*100 average equity= total equity at the beginning + total equity at the end/2 In 2006: net income=25.40 billion Projectsformba.blogspot.com
  66. 66. Projectsformba.blogspot.com Average equity= (129.00+225.56)/2= 177.28 Return on average equity= 25.40/177.28*100 = 17.54% In 2007: net income= 31.10 billion Average equity= (225.56+246.63)/2= 236.10 Return on average equity = 31.10/236.10*100=13.17% 5) FIXED/WORTH RATIO: Fixed Worth Ratio=Net Fixed Assets/ Tangible Net Worth In 2006: Net Fixed Assets= 39.80 billion Tangible Net Worth= 225.55 billion Fixed Worth Ratio=39.80/225.55= 0.18:1 In 2007: Net Fixed Assets= 39.23 billion Tangible Net Worth= 246.62 billion Fixed Worth Ratio=39.23/246.62 = 0.16:1 6) OPERATING PROFIT TO WORKING FUNDS Operating Profit To Working Funds=operating profit/ average assets*100 In 2006: Operating profit=38.80 billion Average assets=2095.24 Operating profit to working fund=38.80/2095.24*100= 1.85% In 2007: Operating profit=58.84 billion Average assets=2980.84 Operating profit to working fund=58.84/2980.84*100= 1.98% Projectsformba.blogspot.com
  67. 67. Projectsformba.blogspot.com (approximately) RATIOS IN 2006 IN 2007 Current Ratio 2.5:1 2.6:1 Quick Ratio 0.26:1 0.40:1 Return On Assets 1.21% 1.04% Return On Equity 17.54% 13.17% Fixed/worth Ratio 0.18:1 0.16:1 Operating profit to working funds 1.85% 1.98% The above table shows that:- both current ratio and quick ratio is liquidity ratio. The ideal ratio for current ratio is 2:1 and ideal ratio for quick ratio is 1:1. In these table current ratio of both year is higher than the ideal ratio which shows that there is enough current assets which make the bank able to pay its current liabilities on time but quick ratio is lower than the ideal ratio which shows that bank have not enough liquid assets to pay their current liabilities. Therefore bank should keep some assets in the form of liquid assets such as cash, marketable securities etc. Return on equity, return on assets and operating profit to working funds are profitability ratio. The higher the profitability ratio of any organization is show the better position of that organization. The profitability ratio of ICICI bank is very low. It is deceasing from the previous year. Fixed/worth ratio measures the extent to which owner’s equity has been invested in plant and equipment . A lower ratio indicates a proportionately smaller investment in fixed assets. This ratio shows that bank has invested more in current assets Projectsformba.blogspot.com
  68. 68. Projectsformba.blogspot.com than the fixed assets. It could be a good position in case of liquidation. 3.5 CASH FLOW STATEMENT (AS ON YEAR ENDED ON 31ST MARCH, 2007) (rs. In “000’s) PARTICULARS FY2007 FY2006 Cash flow from operating activities Net profit before taxes . 36,480,391 30,966,076 Adjustments for: Depreciation and amortisation 7,639,002 9,021,206 Net (appreciation) / depreciation on 9,918,419 8,301,403 investments Provision in respect of non-performing 21,592,999 7,947,244 assets Provision for contingencies & others 251,311 226,801 Dividend from subsidiaries (4,484,915) (3,386,929) (Profit) / Loss on sale of fixed assets (1,152,224) (71,222) 70,244,982 53,004,579 Adjustments for: (19,666,157) (141,019,247) Increase/decrease in investments Increase/decrease in advances (511,255,267) (552,112,941) Increase/decrease in borrowings 57,039,927 65,476,052 Increase/decrease in deposits 654,270,149 652,643,939 Increase/decrease in other assets (28,758,999) (36,704,232) Increase/decrease in other liabilities and 26,886,199 13,861,469 provisions 178,515,85 2,145,040 2 (18,141,312) (8,620,283) Refund/(payment) of direct taxes Net cash generated from operating 230,619,52 46,529,336 activities(A) 2 Cash flow from investing activities Projectsformba.blogspot.com
  69. 69. Projectsformba.blogspot.com Investments in subsidiaries and/or joint (15,758,166) (8,509,194) ventures Income received on above investments 4,484,915 3,386,929 Purchase of fixed assets (4,924,623) (5,474,001) Proceeds from sale of fixed assets 4,347,300 942,843 (Purchase)/sale of held to maturity (171,776,134) (69,286,381) securities Net cash generated from investing (183,626,70 (78,939,804) activities(B) 8) Cash flow from financing activities Proceeds from issue of share capital 2,074,414 79,813,833 Net proceeds/(repayment) of bonds 160,717,380 869,592 Dividend and dividend tax paid (8,646,021) (7,174,390) Net cash generated from financing 154,145,77 73,509,035 activities(C) 4 Effect of exchange fluctuation on (327,587) 3,955 translation reserve(D) Net increase/(decrease) in cash and cash 200,811,00 41,102,522 equivalents)(A+B+C+D) 1 Cash and cash equivalents at 1st April 170,402,245 129,299,723 Cash and cash equivalents at 31st March 371,213,247 170,402,245 Projectsformba.blogspot.com
  70. 70. Projectsformba.blogspot.com CHAPTER-4 CONCLUSION Projectsformba.blogspot.com
  71. 71. Projectsformba.blogspot.com The balance-sheet along with the income statement is an important tools for investors and many other parties who are interested in it to gain insight into a company and its operation. The balance sheet is a snapshot at a single point of time of the company’s accounts- covering its assets, liabilities and shareholder’s equity. The purpose of the balance-sheet is to give users an idea of the company’s financial position along with displaying what the company owns and owes. It is important that all investors know how to use, analyze and read balance- sheet. P & L account tells the net profit and net loss of a company and its appropriation. In the case of ICICI Bank, during fiscal 2007, the bank continued to grow and diversify its assets base and revenue streams. Bank maintained its leadership in all main areas such as retail credit, wholesale business, international operation, insurance, mutual fund, rural banking etc. Continuous increase in the number of branches, ATM and electronic channels shows the growth take place in bank. Projectsformba.blogspot.com
  72. 72. Projectsformba.blogspot.com Trend analysis of profit & loss account and balance sheet shows the % change in items of p & l a/c and balance sheet i.e. % change in 2006 from 2005 and % change in 2007 from 2006. It shows that all items are increased mostly but increase in this year is less than as compared to increase in previous year. In p & l a/c, all items like interest income, non-interest income, interest expenses, operating expenses, operating profit, profit before tax and after tax is increased but in mostly cases it is less than from previous year but in some items like interest income, interest expenses, provision % increase is more. Some items like tax, depreciation, lease income is decreased. Similarly in balance sheet all items like advances, cash, liabilities, deposits is increased except borrowings which is decreased. % increase in some item is more than previous year and in some items it is less. Ratio analysis of financial statement shows that bank’s current ratio is better than the quick ratio and fixed/worth ratio. It means bank has invested more in current assets than the fixed assets and liquid assets. Bank have given more advances to its customer and they have less cash in their hand. Profitability ratio of bank is lower than as compared to previous year. Return on equity is better than the return on assets. Projectsformba.blogspot.com

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