Contents

1.

INTRODUCTION ............................................................................................................................... 2

2. KEY PARAMETERS................................................................................................................................ 2
State Bank of India Key parameters.................................................................................................... 2
HDFC Bank Key parameters ................................................................................................................ 3
3. ASSET QUALITY RATIOS ....................................................................................................................... 3
SBI ....................................................................................................................................................... 3
HDFC.................................................................................................................................................... 4
Observations: ...................................................................................................................................... 4
4. PROFIT AND LOSS PARAMETERS: ........................................................................................................ 5
Interest income and expenses: ........................................................................................................... 6
Non-interest income: .......................................................................................................................... 6
Operating expenses: ........................................................................................................................... 6
Provisions and contingencies:............................................................................................................. 6
Profit after tax: .................................................................................................................................... 6
5. PERFORMANCE AND PROFITABLE RATIOS .......................................................................................... 7
Net Interest Margin ............................................................................................................................ 8
Cost to Income Ratio ........................................................................................................................... 8
Equity Multiplier ................................................................................................................................. 8
Asset Utilization .................................................................................................................................. 9
Net Profit Margin ................................................................................................................................ 9
Return on Assets ................................................................................................................................. 9
6.

PRODUCTIVITY RATIOS:................................................................................................................... 9
SBI: ...................................................................................................................................................... 9
HDFC: ................................................................................................................................................ 10
Analysis: ............................................................................................................................................ 10
Average Profit per Employee: ........................................................................................................... 10
Average Business per Employee: ...................................................................................................... 11
Average Profit per Branch:................................................................................................................ 11
Average Business per Branch: ........................................................................................................... 12

7.

VULNERABILITY RATIOS ................................................................................................................ 12

1. INTRODUCTION
State Bank of India (SBI) is a multinational banking and financial services company
based in India. It is a government-owned corporation with its headquarters in Mumbai,
Maharashtra. As of December 2013, it had assets of US$388 billion and 16,000 branches,
including 190 foreign offices, making it the largest banking and financial services company
in India by assets.
No.of Employees: 228296
No.of Branches: 14816
No.of ATM: 32752
HDFC Bank Limited is an Indian financial services company based in Mumbai,
Maharashtra. It was incorporated in 1994. HDFC Bank is the fifth largest bank in India by
assets and the largest bank by market capitalization as of 1 November 2012. The bank was
promoted by the Housing Development Finance Corporation, a premier housing finance
company (set up in 1977) of India.
No.of Employees: 60965
No.of Branches: 3062
No.of ATM: 10743

2. KEY PARAMETERS
State Bank of India Key parameters
Parameter

FY 2010

FY 2011

FY 2012

FY 2013

Deposits (INR Crores)

8,04,116.23

9,33,932.81

10,43,647.36 12,02,739.57

Growth/change(YOY)(%)

8.36

16.14

11.75

15.24

Advances(INR Crores)

6,31,914.15

7,56,719.45

8,67,578.89

10,45,616.55

Growth(%)

16.48

19.75

14.65

20.52

Total business mix

(deposits+advances)

14,36,030.38

16,90,652.26 19,11,226.25 22,48,356.12

Growth(%)

11.79

17.73

13.05

17.64

CASA ratio

47.51

47.89

46.64

46.5

Shareholders equity(INR
Crores)

634.88

635

671.04

684.03

TOTAL ASSETS(INR Crores)

10,53,956.61

12,24,693.81 13,37,409.43 15,68,748.96

(CASA/Total deposits)

HDFC Bank Key parameters

Parameter

FY 2010

FY 2011

Deposits (INR Crores)

1,67,404.44

2,08,586.41 2,46,706.44 2,96,246.99

Growth/change(YOY)(%)

17.22

24.60

Advances(INR Crores)

1,25,830.59

1,59,982.67 1,95,420.03 2,39,720.64

Growth(%)

27.25

27.14

Total business mix

(deposits+advances)

2,93,235.03

3,68,569.08 4,42,126.47 5,35,967.63

Growth(%)

21.32

25.69

19.96

21.22

CASA ratio

52

51

48.4

47.4

Shareholders equity(INR
Crores)

457.74

465.23

469.34

475.88

TOTAL ASSETS(INR Crores)

2,22,556.89

2,77,428.78 3,37,971.51 4,00,389.85

FY 2012

FY 2013

18.28

20.08

22.15

22.67

(CASA/Total deposits)

3. ASSET QUALITY RATIOS

SBI
Parameter

03/10

03/11

03/12

03/13

641480

771802

19535

25326

39676

51189

3.NPA provisions (Crores)

8665

12979

23857

29233

4.Net NPA (2-3) (Crores)

10870

12347

15819

21956

632815

758823

3.05%

3.28%

4.44%

4.75%

1.72%

1.63%

1.82%

2.09%

1.Gross loans or Credit (Crores)

2.Gross NPA (Crores)

5. Net loan or credit (1-3) (Crores)

6. Gross NPA ratio (Gross NPA to Gross Credit)=
2/1
7. Net NPA ratio (Net NPA to Net Credit) = 4/5

893613 1078557

869756 1049324

8.Povision Coverage Ratio (PCR) = 3/2

44.36%

51.25%

60.13%

57.11%

HDFC
Parameter

03/10

03/11

03/12

03/13

1.Gross loans or Credit (Crores)

125830.6 159982.6 195420.0 239720.6

6
3
6

2.Gross NPA (Crores)

1816.76

1698.48

2003.17

2373.92

3.NPA provisions (Crores)

1424.71

1399.86

1648.97

1882.91

4.Net NPA (2-3) (Crores)

392.05

298.62

354.2

491.01

5. Net loan or credit (1-3) (Crores)

6. Gross NPA ratio (Gross NPA to Gross
Credit)= 2/1
7. Net NPA ratio (Net NPA to Net Credit) = 4/5
8.Povision Coverage Ratio (PCR) = 3/2

124405.8 158582.8 193771.0 237837.7

9
6
5
1.44%

1.06%

1.03%

0.99%

0.32%

0.19%

0.18%

0.21%

78.42%

82.42%

82.32%

79.32%

*RBI target for PCR is 70% by Sept. 2010 for All Commercial Banks

Observations:
1. In absolute figures SBI has assets which is almost 4.5 times that of HDFC
2. Advance growth rate (CAGR) for SBI is about 18.9% while for HDFC its about
23.9%. HDFC is better performer in growth terms while SBI is a bank with larger
assets.
3. Nonperforming assets of SBI is obviously greater than HDFC. However HDFC is
better performer in terms of NPA ratios as well. While for HDFC it is at only 0.99%,
for SBI it is as large as 4.75%.
4. While NPAs for SBI is gradually increasing every year, for HDFC it is gradually
decreasing. Thus HDFC is a better performer even in these terms.
5. Provisioning Coverage Ratio (PCR) of 70 percent of gross NPAs was prescribed by
RBI, as a macro-prudential measure, with a view to augmenting provisioning buffer in
a counter-cyclical manner when the banks were making good profits. Though SBI has
this ratio increasing it is still very much less at 57%.
6. HDFC has not only achieved Provisioning Coverage Ratio (PCR) target of 70 percent
right from 2010 but is much greater at around 80% which is much greater than SBI.

4. PROFIT AND LOSS PARAMETERS:

This section gives a birds eye view of the comparison of SBI and HDFC by relating various
elements of the profit and loss statements for the consecutive years from 2010 to 2013. The
subsections given below explore the causes for the difference. The explanation given in this
section is just the simple description of the difference, the intricate differences are explored in
the following sections.
SBI
2010
1,00,080.73
66,637.51

2011
1,13,636.44
68,086.40

2012
1,47,197.39
89,319.55

2013
1,67,978.14
1,06,817.91

33,443.22

45,550.04

57,877.84

61,160.23

33,771.10

34,207.48

29,691.58

32,581.70

1,33,851.83

1,47,843.92

1,76,888.97

2,00,559.84

67,214.32
4,863.63
62,350.69
26,016.04
36,334.65

79,757.52
5,667.34
74,090.18
32,078.85
42,011.33

87,569.42
6,261.63
81,307.79
33,383.20
47,924.59

93,741.93
7,568.33
86,173.60
34,313.20
51,860.40

2011

2012

2013

16,232.74

20,043.33

28,193.40

35,861.02

7,797.60

9,425.15

15,106.12

19,695.45

8,435.14

10,618.18

13,087.28

16,165.57

4,209.57

4,585.05

5,992.32

7,132.96

20,442.31

24,628.38

34,185.72

42,993.98

12,644.71

15,203.23

19,079.60

23,298.53

7. Operating expenditure

1,820.58

2,090.52

2,391.44

2,891.77

8. Operating profit (6-7)

10,824.13

13,112.71

16,688.16

20,406.76

9. Provisions & contingencies

3,611.77

3,669.24

4,893.42

5,537.70

10. Profit after tax (8-9)

7,212.36

9,443.47

11,794.74

14,869.06

Parameter
1.Interest income(SBI)
2. Interest expenditure
3. Net interest income (NII) (12)
4. Non-interest income
5. Total Operating income
(1+4)
6. Net operating income(3+4)
7. Operating expenditure
8. Operating profit (6-7)
9. Provisions & contingencies
10. Profit after tax (8-9)

Parameter
1.Interest income(HDFC)
2. Interest expenditure
3. Net interest income (NII) (12)
4. Non-interest income
5. Total Operating income
(1+4)
6. Net operating income(3+4)

HDFC
2010

Interest income and expenses:

INTEREST INCOME

INTEREST EXPENSE

2,00,000.00

2,00,000.00

1,00,000.00

1,00,000.00

0.00

0.00

2010

2011

2012

2013

2010

2011

2012

1.Interest income(SBI)

2. Interest expenditure

1.Interest income(HDFC)

2. Interest expenditure

2013

Looking at the graphs it is clearly seen that there is a substantial difference in the interest
income and expenses is considerably high. But if the percentage of interest expense on
interest income for SBI is close to 66%, whereas for HDFC it is less than 50%. This
difference can be attributed to the fact that SBI is a much established and a public sector bank
and hence a higher risk appetite. HDFC being a private player is playing safe on its expenses.

Non-interest income:
The percentage of non-interest income on the interest income for HDFC is close to 25%, and
for SBI it is close to 33%. This is due to the fact that the advisory services provided by SBI
with a network of over 13000 branches is quite huge compared to HDFC.

Operating expenses:
The operating expenses as a percentage of interest income is around 4% for SBI and close to
6% for HDFC, which again is due to the fact of the learning curve position of SBI.

Provisions and contingencies:

The percentage of provisions and contingencies on the interest income for HDFC is
approximately 22% and for SBI is more than 26% which again is due to the higher risk
appetite of a well-established bank like SBI.

Profit after tax:

The profit after tax as a percentage of interest income for SBI is 36% and for HDFC it is
45%. This is due to lower interest expenses and lower provisions and contingencies for
HDFC.

5. PERFORMANCE AND PROFITABLE RATIOS

Parameter
NIM

Mar-10

SBI
Mar-11 Mar-12

Mar-13

3.40%

3.32%

3.85%

3.34%

Cost to income ratio (Operating Expenses)

47.79%

47.60%

45.23%

48.51%

% of Non-interest income to Total operating income

17.41%

16.28%

11.87%

11.82%

Overhead efficiency (Non Int. Income/Non Int. Exp.)

Efficiency Ratio (Non Int. Exp/(Net Int. Income +
Non Int. Income)
ROA (AU*NPM)

81.05%

68.36%

55.05%

54.75%

47.79%

47.87%

45.23%

48.51%

3.09%

2.72%

3.68%

3.95%

0.29

0.32

0.38

0.38

NPM

10.66%

8.50%

9.68%

10.39%

ROE (ROA*EM)

14.04%

12.84%

16.05%

15.94%

EM (A/E)

4.53962 4.71836 4.36133 4.03573

AU

Net interest margin of the SBI is very less when compared to the net interest margin of HDFC.
This would have major impact on the return on assets and other profit measuring rations. Lower
NIM may be contributed due to the government restrictions on lending to priority sector by
public sector banks. But over the time both the banks have increased their NIM. It means that
overall lending rates of the industry might have increased or deposit rates might have reduced.
Return on assets of the SBI is less than HDFC. This can be attributed to the fact that NIM is
less. It is clearly observed that NPM and sales turn over (AU) of SBI is less than HDFC. It
means that SBI is not able to utilize its assets efficiently.
Equity multiplier of SBI is high compared to HDFC but still ROE is less than the HDFC. SBI
needs to increase the equity because it is an indicator of CAR (capital adequacy ratio). To
maintain higher CAR as per the new Basel norms it is important to increase equity. Recently
government has infused capital into public sector banks and this ratio is expected to come down
in new financial year.
Non-interest income as percentage of total income has reduced considerable for both the banks.
It means that core bank operations have improved (lending) and tells that they are playing more
important role. It can be observed that HDFC has higher percentage when compared to SBI.
This may be due to the fact that more cross selling of products is done in HDFC than SBI. It
also indicates that HDFC is diversifying in other areas.
Overhead efficiency of SBI has reduced considerable when compared to HDFC. HDFC is less
efficient than SBI which is indicated by efficiency ratio. It may be due to high operating cost
like salary to staff etc. It means that HDFC has scope to increase the PAT margin by just
increasing the efficiency.

All the above factors led to the lower NPM (net profit margin) of SBI when compared to HDFC.
6.00%
4.00%

HDFC

2.00%

SBI

0.00%
2010

2011

2012

2013

Net Interest Margin

51.00%
50.00%
49.00%
48.00%
47.00%
46.00%
45.00%
44.00%
43.00%
42.00%

HDFC
SBI

2010

2011

2012

2013

Cost to Income Ratio

6
4

HDFC

SBI

0
2010

2011

2012

2013

Equity Multiplier
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0

HDFC
SBI

2010

2011

2012

2013

Asset Utilization
20.00%
15.00%
HDFC

10.00%

SBI

5.00%
0.00%
2010

2011

2012

2013

Net Profit Margin

8.00%
6.00%
HDFC

4.00%

SBI

2.00%
0.00%
2010

2011

2012

2013

Return on Assets

6. PRODUCTIVITY RATIOS:
SBI:
(All values in
Rupees)
Parameters
Average Profit Per Employee
Average Business Per
Employee
Average Profit Per Branch
Average Business Per Branch

2010
457615.864
3
71694317
7335147.24
7
1149191741

2011
370739.190
7
75836776.0
7
6103234.38
2
1248450746

2012
543296.160
7
88695801.4
9
8304603.81
6
1355767894

2013
617838.245
1
98484204.7
2
9520113.39
1
1517518224

HDFC:
(All values in
Rupees)
Parameters
Average Profit Per Employee

2010
568339.500
5
59002081.4
1
17095652.1
7
1774782609

Average Business Per

Employee
Average Profit Per Branch
Average Business Per Branch

2011
704189.984
2
66108659.7
8
19768378.6
5
1855835851

2012
781978.328
66911738
20310534.5
9
1737916667

2013
973865.199
4
77603417.0
7
21966035.2
7
1750385369

Analysis:
Average Profit per Employee:

Average Profit Per Employee

1200000
1000000
800000

600000
400000
200000
0
2010

2011
SBI

2012

2013

HDFC

Over past four years from 2010 to 2013, HDFC Bank has higher Average Profit per
Employee figures when compared to SBI Bank. This can be supported by Average Profit per
Employee chart distribution given above.

Average Business per Employee:

Average Business Per Employee

120000000
100000000
80000000
60000000
40000000
20000000
0
2010

2011
SBI

2012

2013

HDFC

Over past four years from 2010 to 2013, SBI Bank has higher Average Business per
Employee figures when compared to HDFC Bank. This can be supported by Average
Business per Employee chart distribution given above.

Average Profit per Branch:

Average Profit Per Branch

25000000
20000000
15000000
10000000
5000000

0
2010

2011
SBI

2012

2013

HDFC

Over past four years from 2010 to 2013, HDFC Bank has higher Average Profit per Branch
figures when compared to SBI Bank. This can be supported by Average Profit per Branch
chart distribution given above.

Average Business per Branch:

Average Business Per Branch

2E+09
1.8E+09
1.6E+09
1.4E+09
1.2E+09
1E+09
800000000
600000000
400000000
200000000
0
2010

2011
SBI

2012

2013

HDFC

Over past four years from 2010 to 2013, HDFC Bank has higher Average Business per
Branch figures when compared to SBI Bank. This can be supported by Average Business per
Branch chart distribution given above.

7. VULNERABILITY RATIOS
Tier-I Capit al:
A firms core equity capital is known as its Tier-I capital and it is the measure of banks
financial strength based on sum of its equity capital and reserves, and sometimes nonredeemable, non-cumulative preferred stock.
A firm must have a Tier 1 capital ratio of 6% or greater, and not pay any dividends or
distributions that would affect its capital, to be classified as well-capitalized.
We have taken two banks to identify their Tier-I Capital trends in the last four years:

Tier-II Capital Ratio

Tier-I Capital Ratio

15

10

0
Jan-10

Jan-11
SBI

Tier-II Capital Ratio

Jan-12
HDFC

Jan-13

Jan-10

Jan-11
SBI

Jan-12
HDFC

Jan-13

Tier 2 capital is supplementary bank capital that includes items such as revaluation reserves,
undisclosed reserves, hybrid instruments and subordinated term debt. Tier-II capital is further
divided into two levels: Upper Tier-II capital is being perpetual, senior to preferred capital
and equity; having deferrable coupons and Lower Tier 2 is relatively cheap for banks to
issue; has coupons not deferrable without triggering default.
HDFC bank has shown higher Tier-I capital ratio than SBI throughout the period of time
which was a good sign. However, the difference between their respective ratios has shown a
decrease in the last two years.
Tier-II Capital ratio of HDFC bank has shown a steep increase in the last couple of years,
which was initially equal to SBIs Tier-II Capital ratio.
Non-performing asset ratio
The net NPA to loans (advances) ratio is used as a measure of the overall quality of the
bank's loan book. An NPA are those assets for which interest is overdue for more than 90
days (or 3 months). Net NPAs are calculated by reducing cumulative balance of provisions
outstanding at a period end from gross NPAs. Higher ratio reflects rising bad quality of loans.
The NPA ratio is one of the most important ratios in the banking sector. It helps identify the
quality of assets that a bank possesses. If we look at the chart below, we can clearly see a
differentiation between those two banks:

Net NPA Ratio

2.5
2
1.5
1
0.5
0
Jan-10

Jan-11
SBI

Jan-12

Jan-13

HDFC

SBI has continued to maintain higher net NPA ratio than its private counterpart HDFC.
Summary of the Vulnerability Ratios of two banks SBI and HDFC is given as follows:
STATE BANK OF INDIA
Parameter
Mar-13 Mar-12 Mar-11 Mar-10
Tier-I Capital
8.23%
8.5%
6.93%
8.46%

Tier-II Capital
Total Capital
% of NPA to
Net Advance
CAR (Basel - II)

2.99%
11.22%

3.55%
12.05%

3.76%
10.69%

3.54%
12.00%

2.1
11.22%

1.82
12.05%

1.63
10.69%

1.72
12.00%

Parameter
Tier-I Capital
Tier-II Capital
Total Capital
% of NPA to Net Advance
CAR (Basel - II)

HDFC Bank
Mar-13 Mar-12 Mar-11 Mar-10
10.51%
11.0% 11.56% 12.50%
5.43%
4.67%
3.76%
3.95%
15.94% 15.71% 15.32% 16.45%
0.2
15.94%

0.18
15.71%

0.19
15.32%

0.31
16.45%