http://rbidocs.rbi.org.in/rdocs/notification/PDFs/55663.

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Comparative analysis of HDFC Bank and Canara bank for

Quarter 3 (2011)
PROFITABILITY:
Canara Bank

1.
2.
3.
4.
5.
6.

PBT / Total Income

10755.6/85911.5=12.5%
PAT / Total Income
8755.6/85911.5=10.2%
PBP / Total Income
13767.4/85911.5=16.03%
PAT / Operating Income
10%
PBT/Operating Income
12.5%
PBP/Operating Income
16%

HDFC Bank

20487.9/86226.4 =23.76%
14296.6/86226.4 =16.5%
17589/86226.4 = 20.39%
19.84%
28.44%
24.42%

As we can see from above data that for a government bank like Canara Bank profits before
and after tax of total and operating income are lower than a private bank like HDFC. It
indicates that the performance of private sector bank is better than the public sector bank
for this quarter.
Cost as % to operating income
1.
2.
3.
4.
5.

Salaries and Wages

Rent and Lease
Other Expenses
Interest Expenses
Provision & Contingencies

9.1%
0%
5.2%
75.4%
9%

12%
0%
17.9%
56.73%
4.57%

COSTS AS % TO TOTAL EXPENSES

1.
2.
3.
4.
5.

Salaries and Wages

Rent and Lease
Other Expenses
Interest Expenses
Provision & Contingencies

9.23%
0%
5.3%
76.38%
6.5%

12.05%
0%
17.9%
56.8%
4.57%

From the above data, we can see that for the quarter ending on Dec 2011 salaries and
wages for HDFC Bank is greater than the expense incurred by Canara bank on its
salaries. It shows that a private sector bank incurs much expense on salaries and wages
of its employees than a public sector bank.
Other expenses as part of total expenses are also more for HDFC than Canara which
shows that a private sector bank incurs much on its sales marketing and advertising to
attract more and more number of customers.
Interest expenses are more for a public sector bank than a private sector bank for the
quarter ending on Dec 2011. Interest paid by a public sector bank is more than HDFC.
As we know that a public sector bank comes under the undertaking of Govt. Of India,
therefore it works for the benefit of people by paying more interest than a private sector
bank.
Provision & Contingencies are more for Canara Bank than HDFC Bank. Provisions &
Contingencies are kept to meet any unforeseen expenses like underwriting commissions,
expenses incurred for court cases, etc. For Dec 2011 Canara Bank has kept more
money for its contingencies to meet unforeseen expenses. It shows the pessimistic
approach of the bank. Provisions & Contingencies are also kept for Non Performing
Assets(NPA).

Loan to Deposit Ratio

2,192,533.50/ 3,154,562.30
= 69.5%

1957880/2325080
=84.2%

Loan to deposit ratio for HDFC is higher than Canara Bank. It shows the extent or the ability
of the bank to attract customers to borrow from bank at attractive rates and shows the failure of
a public sector bank in advancing loans to its customers. As we all know the efforts put by a
private sector bank in attracting customers are much higher than a public sector bank which is
depicted by loan to deposit ratio.
Interest on Deposit with RBI (in millions)

563.5

345.9

The interest earned by Canara Bank is much higher than HDFC Bank because of the higher
amount kept by the public sector bank with RBI.

Capital Adequacy Ratio

13.2

16.3

Capital adequacy ratio is the ratio which determines the bank's capacity to meet the time
liabilities and other risks such as credit risk, operational risk, etc. In the most simple formulation,
a bank's capital is the "cushion" for potential losses, and protects the bank's depositors and other

lenders. Banking regulators in most countries define and monitor CAR to protect depositors,
thereby maintaining confidence in the banking system.

So, higher the ratio the organization will have problem raising the capital. According to the RBI,
the capital adequacy ratio should be 9% as it is considered the ideal situation.

NPA Ratio
1. % of gross NPAs to advances
2. % of net NPAs to advances

1.8
1.5

1
0.2

All those assets which generate periodical income are called as Performing Assets (PA).
While all those assets which do not generate periodical income are called asNonPerforming Assets (NPA).
If the customers do not repay principal amount and interest for a certain period of time
then such loans become non-performing assets (NPA). Thus non-performing assets are
basically non-performing loans.
It shows that out of the total loan disbursed, what ratios of NPAs are there? The higher the ratio,
more number of NPAs are there and vice versa.
Thus, looking over the ratios it can be inferred that the HDFC has lesser amount of
NPAs in comparison to Canara Bank. Therefore, giving a higher edge to HDFC as, they wont
have to create more provision for it.
Reasons for high NPA in public sector bank:
1. A major portion of bad debts arose out of lending to the priority sector, at the dictates of
politicians and bureaucrats.
2. Another factor that can contribute to the low level of expertise in many big public sector
banks is the constant rotation of duties among officers and the apparent lack of training in
lending principles for the loan officers. Public sector banks are asked to frown upon
specialisation of officers in any particular branch of banking; this also makes it hard for
developing a fully trained cadre of lending officers.
3. One of the primary reasons for NPA could be that the lending decision was, ab initio,
incorrect.