DESIGN OF THE STUDY

TOPIC:

“ANALYSIS OF FINANCIAL PERFORMANCE OF ICICI BANK

LIMITED”
INTRODUCTION:

A study on Financial Performance of ICICI Bank limited is under taken In

order to know the financial position, liquidity position of the bank and to
know the strength & weakness of the bank & to assess the profitability of
the bank.Ratio analysis is the tools used as a yardstick for evaluating the
financial condition and performance of business firm. To establish and
carry on business of banking in any part of India or outside India. To
carry on the business of accepting, for the purpose of lending or
investments, of deposits of money repayable on demand or otherwise and
withdraw able by cheque, draft, order or otherwise. To borrow, raise or
take up money, lend or advance money with or without interest either
upon or without security. To draw, make, execute, issue, endorse,
negotiate, accept, discount, buy, sell, collect and deal with bill of
exchange, hundi, promissory notes, coupons, drafts, bills of lading,
railway receipts, warrants, debentures, bonds, mortgage-backed
securities, letter of credit or obligations, certificate, scripts and other

instruments and securities whether transferable or negotiable or

mercantile or not. To grant and issue letter of credit, traveler’s cheque
and circular notes, buy sell and deal in bullion and specie. To receive all

1
kinds of bonds, scripts or valuables on deposits or for safe custody or
otherwise, provide safe deposit vaults, collect and transmit money,
negotiable instruments and all securities. To act as a foreign exchange
dealer and to buy sell or otherwise deal in all kinds of foreign currencies.
To carry on activities of bill discounting, rediscounting bills, factoring,
dealing in commercial papers, treasury bills, certificate of deposits and
other financial instruments.

SCOPE OF STUDY:
The Study is totally confined to ICICI Bank. The Annual Reports of
the company are the primary data for the report. The financial
information regarding balance sheet items are based on the balance sheet
figures on the P&L account figures. The annual reports of the past five
years consisting of P&L Account and Balance Sheet are analyzed and
interpreted to arrive at the ratios.

PLAN OF THE STUDY:

The financial statement analysis and interpretation is used to study
the performance of the company. The ratios belonging to different groups
are calculated and the trend of each ratio over the years is worked out.
Graphs are drawn for a better understanding of the concepts and
theories.

OBEJECTIVES OF THE STUDY:

2
 ➢ To study the financial position of the ICICI Bank Limited.
➢ To find long term and short term liquidity position of ICICI Bank
Limited.
➢ To know the strength and weakness of the ICICI Bank Limited.
➢ To assess the profitability of the ICICI bank Limited.
➢ To compare the ratios of the various years.

RESEARCH METHODOLOGY

For the purpose of preparing the report the necessary information

collected are divided into two heads that is primary and secondary data.

3
Primary data:-
Primary data is collecting from Finance Executive and various
departments of Bank.

Secondary Data:-
➢ Past records
➢ Annual reports of the company
➢ Induction material provided by the co.
➢ Company’s publications
➢ Internet

Analytical tools used:

➢ Ratios
➢ Income Statement
➢ Balance Sheet

LIMITATIONS:
➢ Some data are confidential to the bank which was not possible to be
used in the project.
➢ Ratios are generally calculated on past financial statement and thus
forecast for the future is based on past data.

THEORETICAL BACKGROUND OF THE STUDY

FINANCE AND RELATED CONCEPTS:

Meaning of Finance:
Finance is the support to any business in terms of money or
money’s worth. It is the lifeblood of the economy. Finance includes

4
determining what has to be paid for raising the money on the best terms
available and utilizing the available funds in the best possible way.
Definition of Business Finance:
“The activity concerned with planning, raising, controlling and
administering of funds used in business” – Guttmann and Dongall.
Sources of Finance:
• Short-term requirements are required for meeting working capital
needs usually needed for a period within one year.
• Long-term requirements are required to a great extent for meeting
fixed capital requirements, usually needed for a period exceeding
one year.

Chart-2

5
 Retained
According
Short
Own
Borrowed
Internal
Debenture
Capital
term to
Ownership
Capital
Sources
Public
Earnings
Deposit
Depreciation
Loans
Fund

According to According to Source

Period of Generation

Long Term External

Sources

Shares Public Shares Securities

Debentures Deposits Capital Loans
Long term Trade Retained
loans Creditors Earnings
Advance Surplus
from
commercia
l
Customer

6
 SOURCES OF FINANCE

Functions of Finance:
1) Investment Decision.
• Capital Budgeting
• Working Capital Management
2) Financing Decision.
3) Dividend Policy Decision.

Financial Statements:
They refer to two statements, which are prepared by an organization at
the end of the year:

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Income statement or Profit and Loss Account to know the profit
earned and loss sub stained during a specific period.

Position statement or Balance Sheet in order to known its financial

position as on a particular point of time, usually one year.

Analysis of Financial Statement Interpretation:

By Myer:
“Financial Statements’ analysis is largely a study of relationship
among the various financial factors in a business as disclosed by a single
set of statements and a study of the trend if these factors as shown in a
series of statements”

By Kennedy & Meaullar:

“The analysis and interpretation of financial statements are an
attempt to determine the significance and meaning of the financial
statements data so that a forecast may be made of the prospects for
future earnings, ability to pay interest and debt maturities and
profitability of a sound dividend policy”.

Tools of financial analysis:

1. Comparative Statements Analysis

2. Common Size Statement Analysis
3. Trend-Percentage Analysis
4. Ratio Analysis
5. Funds Flow Statement Analysis

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Limitations of financial statement analysis:

• Historical nature of financial statements.

• Non substitute for judgment
• Reliability of figures
• Single year analysis is not of much value and useful
• Results may have different interpretations
• Change in accounting methods
• Pitfalls in inter firm comparison.
• Price level changes reduce validity of analysis.
Financial Analysis becomes a need, a requirement due to the above
significance it provides to the people involved.

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 RATIO ANALYSIS
Ratio analysis, ratio technique or ratio accounting is an important
quantitative technique used for the analysis and interpretation of financial
statements. In fact it is a powerful tool of financial position and
performance of the firm.
Before going to study about the financial ratio one should know the
meaning of the “Ratio”.
A ratio is defined as the indicated quotient of two mathematical
expressions and as “The relationship between two or more things”.
Financial statements, no doubt, contain the items relating to the
profit or loss and the financial position of a concern. But the financial
figures reported in financial statement do not provide a meaningful
understanding of the performance and financial position of a firm. The
items or figures found in the financial statements will not be of much use,
if they are considered independently (i.e. individually) the accounting
figure conveys meaning when it is related to some other relive and
information. For instance the item of the net profit will be meaningful,
not when it is considered in isolation, but only when it is compared in the
light of sales or capital employed in the business.
For instance a Rs. 5 Crore net profit figure may look impressive, but the
firm’s performance can be said to be good or bad only when the net profit
figure is related top the firm’s investment. So if the items appearing in
the financial statements are to be really meaningful and useful to a
financial analysis, they should be analyzed (i.e. classified and arranged) in
such a way that one item can be compared with other items.

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 Ratio analysis or ratio technique is one of the tools available to a
financial analyst for the financial statements.

MEANING OF RATIO ANALYSIS:

Ratio analysis is the technique of calculating a number of accounting
ratios from the data or figures in the financial statements, comparing the
computed accounting ratios.
With those of the previous years or with those of others concerns
engaged in similar line of activities or with those of standard or ideal
ratios, and interpreting the comparison.
Functions of ratio analysis:
The Functions of ratio analysis are as follows
i. Ratio analysis measure the firms ability to meet current obligation
ii. Ratio analysis show the proportions of debt and equity in financing
the firms assets
iii. Analysis of ratios reflect the firms efficiency in utilizing its assets
iv. Ratio analysis measures over all performance and effectiveness of
the firm
v. Ratio analysis will determine in future the financial strength.
vi. Ratio analysis technique attracts the investors. As the investors are
interested on their return on investment so they use this technique
to calculate their return there by get attracted by the companies.
This through ratio analysis.

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Objectives of Ratio analysis:
i. To evaluate the profitability of the firm
ii. To Evaluate & measure the financial strength of the firm
iii. To highlight the liquidity and profitability of the firm
iv. To know whether the firm is in a position to meet its current
obligation
v. To measure the firms’ performance with the other firms that is inter
firm comparison.

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Advantages of Ratio Analysis:
i. Lee observed that the process of producing financial ratios is
essentially concerned with the identification of the significant
accounting data relationships given the decision maker insights into
the company that is assured.
ii. A ratio analysis involves a study of the total financial picture. By
basing conclusion upon a thorough understanding of the importance
of each ratio, the analyst can recommend and indicate positive
action with confidence.
iii. One of the most fruitful areas for the use of traditional financial
ratios seems to be that of predicting company failures.
iv. Rations are a tool, which enables management to analyses business
situation and to monitor their performance as well as that of their
competitors.
v. Ratio analysis helps the management to diagnose the situation,
monitor the performance and help plan forward.

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Limitations of ratio analysis
1. Every firm adopts its own accounting procedures and practices.
Hence these accounting procedures and practices differ from one
firm to another. It is therefore not advisable to compare the ratios
of the firm with those of another firm.
2. Another limitation of the ratio analysis is that it will not take into
account non-accounting data for computation. The performance of
an organization cannot be measured only on the basis of the
accounting data.
3. Ratio can never be the substitute of raw figures. At the time of
interpretation, raw figures should also be considered.
4. Ratios are computed on the past data. Such ratios may not be
relevant for future forecasting because of change in time and price
levels.
5. Ratios are not universally applicable. They are not useful to well-
established companies as they do not depend upon external sources
of finance.
6. Financial standard data are not exact. Statements are only like
interim reports. Moreover, many management ratios are based on
data, some or all of which are known and factual and, have,
therefore, to be treated with great caution.

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 DATA ANALYSIS AND ITS INTERPRETATION
BANKING SPECIFIC RATIO

1. AVERAGE COST OF FUNDS EMPLOYED

= Total interest paid X 100

Total deposit received

TABLE –1

(In Lakhs)
Years 2003-04 2004-05 2005-06 2006-07 2007-08
Total interest paid 83767 155892 794400 701,525 6570890
Total deposit received 1637821 3208511 4816931 6,810,858 9981877
Average cost of fund
employed % 5.11 4.86 16.49 10.30 65.83

INFERENCE:

According to analysis it is seen that over the year from 2003 to

2008 the interest rate is fluctuating. Initially it was in 2003-04 is 5.11%
but next it was reduced to 4.86.then in the year 2004-05 its 16.49% in
the year 2006-07 it was again reduced to 10.30% The reduction in the
last year is most attributable to the managerial efficiency by the bank.
On the other hand the total deposit received was positive from2003 to
2008 it is not a good sign according to the analysis.
Overall the average cost of fund employed is very fluctuating
starting from 2003-04 to 2007-08 i.e. 5.11, 4.86, 16.49, 10.30 and 65.83
according to above figure it is a healthy sign for the bank. This will
increase the profitability of the bank.

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 FIGURE – 1

Figure-2

2. CREDIT DEPOSIT RATIO:

=Loans & Advances X 100

Deposits

Table-2

Years 2003-04 2004-05 2005-06 2006-07 2007-08

Loans and advances 703146 4703487 5327941 6,209,552 9140515
Total deposit received 1637821 3208511 4816931 6,810,858 9981877
Average 42.93 146.59 110.61 91.17 91.57

INFERENCE:

According to the data, though there is an increase in deposits in all

the years’ i.e. from 2003-04 to 2007-08 (51.05,66.61,70.72,and 68.23
respectively) but has not matched by increase in advances which are as
follows from 2003 to 2008 (14.95, 88.28,85.80 and 67.93).
Finally we can notice that the credit deposit ratio is as follows in the
following year 2003 to 2008 i.e. 29.29, 132.53, 121.32 and 99.56 which
shows there is a decline in the percentage of increase from last one year. So we
can conclude that the funds that have been raised by the banks are not utilized to
desired level.

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The following chart justifies the above inference.

FIGURE-3

Figure-4

3. CREDIT CAPITAL RATIO

= Advances *100
Equity Capital

TABLE-3
(In Lakhs)
Years 2003-04 2004-05 2005-06 2006-07 2007-08

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Advances 703146 4703487 5327941 6,209,552 91,405,15
Equity Capital 22036 96303 96266 96,640 1,086,775
Times 31.91 48.84 55.35 64.25 84.11

INFERENCE:
The advances made by the bank were high in first 2 years i.e.2003-04
& 2004-05 (14.94, 88.27 resp.) and decline in 2004-05 and 2005-06
(85.85 and 67.93).
Since the Credit Capital Ratio is first two years increasing (65.33 to
88.25) but later it is decreasing it is not healthy to the bank.

FIGURE-5

FIGURE-6

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4. CREDIT NETWORTH RATIO

= Advances X 100
Net worth

Years 2003-04 2004-05 2005-06 2006-07 2007-08

Advances 703146 4703487 5327941 6,209,552 91,405,15

Capital 22036 96303 96266 96,640 108677

Reserves & Surplus 109226 563554 632065 739,416 1181319
Share holders fund 131262 659857 728331 836055.73 1,289,996
Times 5.36 7.13 7.32 7.43 7.74

TABLE-4

INFERENCE:
According to analysis the advances made by the bank were high in first
two years in 2003 & 2004 i.e. 68.67, 429.26 and decline in 2004-05 i.e.
2.07 and also increased in 2008 (85.85%).The capital of the bank was
high in 2003-04 (337.03%) and then there was a negative growth of
-0.04% and then in 2007-08 it managed at lost of 0.39%.
Reserve & Surplus of the bank was increasing from 109226 IN 2003-04
to 1181319 Lakhs (2007-08)
The Credit Net worth Ratio as calculated from the table shows that
there was increase in beginning to end 2003-04 to 2007-08 i.e 5.36,
7.13, 7.32 ,7.43 and 7.74 respectively.Since the Credit Net worth Ratio is
increasing from starting to end which will help the bank to grow at higher
rate.

FIGURE-7

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 FIGURE-8

5. CREDIT TO CURRENT LIABILITIES AND PROVISIONS

= Advances X 100
CL & Provision

TABLE-5

(In Lakhs)
Years 2003-04 2004-05 2005-06 2006-07 2007-08
Advances 703146 4703487 5327941 6,209,552 9140515

Other liabilities 101297 1620758 1705693 1,801,949 2139616

A. Demand deposits 262186 273615 368944 521,665 954524
B. Savings bank deposits 188064 249700 379321 536,338 1139182
CL & provisions 551547 2144073 2453958 2859952 4233322
Times 1.27 2.19 2.17 2.17 2.18

INFERENCE:

According to analysis the advances made by the bank were high in first
two years in 2004 & 2005 i.e. 68.67, 429.26 and decline in 2006-07
i.e.2.07 and also increased in 2008 (85.85%).
On other hand current liabilities were increasing in first two years 2004
& 2005 i.e. 105.31 to 288.74 respectively and then it decline by 14.45 in
2006 and then it increased by 16.54% in the last year.
By the table we can conclude that the credit to current liabilities &
provisions ratio 1.36 times in the beginning and was 2.19 in 2004-05 and
then declined 2.18 and remain stagnant in next year also that show there

20
was no change in credit and current liabilities & provision. It is the good
sign to the bank.

FIGURE-9

FIGURE-10

6. DEPOSIT CREDIT RATIO

= Deposit X 100
Credit (Advances)

TABLE-6
(
In Lakhs)
Years 2003-04 2004-05 2005-06 2006-07 2007-08
Deposit 1637821 3208511 4816931 6,810,858 9,981,877
Credit (advances) 1842397 9751135 9952866 18,497,69091,405,151
Credit ratio 88.90 32.90 48.40 36.82 10.92

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INFERENCE:

The advances by the bank was in increasing mode from 2003-04

(7908738 Lakhs) to 2007-08 (72907461 Lakhs) and the deposit to the
bank were also increased form 2003-04 (1570690) to 2007-08
(3171019).
The deposit credit ratio was low in 2004-05 (32.90) and ended of at
10.92% in 2007-08 but it was lower than the 2006-07 (36.82). Since the
advances by the bank were lower than the deposit in 2007-08 which
shows the fund have not been utilize properly.

FIGURE-11

Figure-12

7. DEPOSIT CAPITAL RATIO

= Deposit X 100

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 Equity capital

TABLE-7
(In Lakhs)
Years 2003-04 2004-05 2005-06 2006-07 2007-08
Deposit 1637821 3208511 4816931 6,810,858 9981877
Equity Capital 22036 96303 96266 96,640 108677
Times 74.32 33.32 50.04 70.48 91.85

INFERENCE:

The equity capital of the bank was high in 2003-04 (74.32%) and
then there was a declaimed to 33.32% in 2004-05 and then it is
increasing gradually from 2004 to 2008 as 33.32, 50.04, 70.48 and 91.85
respectively. On the other hand the total deposit received was positive
from2003 to 2007 and later on it declined from 70.72% to 68.23% in
2008, which is not a good sign according to the analysis.
Deposit capital ratio started from 74.32% in 2003 then it was
declaimed to 33.32% in 2004 and then it is gradually increasing from
33.32% to 91.85%. There was a low Deposit Capital Ratio of 5 years in
2004 to 2005 (33.32).
By this ratio we can conclude that the bank has satisfactory growth in
deposit comparable to capital.

FIGURE-13

FIGURE-14

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8. INVESTMENT TO DEPOSIT RATIO

= Investment + Balance with bank X 100

Deposits

Table-8

(In lakhs)
Years 2003-04 2004-05 2005-06 2006-07 2007-08
Investments 818686 3589108 3546230 4,274,286 5048735
Bal with RBI 113092 152857 454967 503,559 63449
Bal with banks in India 54284 281821 81058 154,881 658507
Bal with banks o/s
India 3607 143852 15484 29,586 30685
Investment + balance
with bank 989669 4167638 4097739 4962312 5801376
Deposits 1637821 3208511 4816931 6,810,858 9981877
Ratio in % 60.43 129.89 85.07 72.86 58.12

INFERENCE:

RBI requires commercial banks to maintain CRR (Cash reserve

ratio) and SLR (Statutory Liquidity Ratio) at the following rates i.e. 4.5%
& 25% respectively. Therefore if 30% of the funds kept in investments
that will satisfy the RBI requirements

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Figure-15

FIGURE NO 16

9. DEPOSITS TO NETWORTH RATIO

= Deposit X 100
Net Worth

TABLE-9

(In lakhs)
Years 2003-04 2004-05 2005-06 2006-07 2007-08
Deposit 1637821 3208511 4816931 6,810,858 9981877
Share holders fund
Capital 22036 96303 96266 96,640 108677
Reserves & Surplus 109226 563554 632065 739,416 1181319
Total 131262 659857 728331 836056 1289996
Times 12.48 4.86 6.61 8.15 7.74

INFERENCE:

Deposit to the bank were also increased from 1637821 Lakhs

(2003-04) to 9981877 Lakhs (2007-08) and shareholders fund has
increased from the last five years and recorded the highest of 1289996
Lakhs in 2007-08.
The capital of the bank was also increasing 2003-04 to 2004-05 is
respectively 22036 and 96303 then there was a negative growth of
-0.04% in 2005-06 and then in 2006-07 and 2007-08 it was increased.
Reserve and Surplus of the bank was increasing from 109226 Lakhs
(2003-04) to 1181319 Lakhs (2007-08).

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 The Deposit to Net worth Ratio as calculated from the table shows that
there was increase in the beginning for 2003-04 but in 2003-04 it was
decreased. Then it is increased in two years and last year is again
declaimed.

FIGURE-17

10.CASH BALANCE TO TOTAL DEPOSIT RATIO

26
 = Cash balance *100
Deposit

TABLE-10
(In Lakhs)
Years 2003-04 2004-05 2005-06 2006-07 2007-08
Cash balance 10074 24590 33647 37,241 47412
Total deposits 1637821 3208511 4816931 6,810,858 9981877
% 0.62 0.77 0.70 0.55 0.47

INFERENCE:

According to the data. Cash balance from 2003-04 to 2007-08 is

increasing year to year from 10074 to 47412.And the total deposit is also
increase from 2003-04 to 2007-08 is from 1637821 to 9981877
respectively so by considering the increase (decrease) of both cash
balance and total deposit received we can calculated the cash balance to
total deposit ratio from 2003-04 to 2007-08 is 0.62, 0.77, 0.70, 0.55 and
0.47 respectively. In the year 2003 to 2004 the ratio was higher which
indicates less efficiency that is 0.77 but in the year 2004 to 2005 the ratio
has been decreased to 0.5 and 0.47, which indicates high efficiency.
Efficiency increases with the decrease in cash balance to total deposit
ratio.

FIGURE-18

FIGURE-19

27
 GENERAL RATIOS

11.CURRENT RATIO

= Current Asset
Current Liabilities

TABLE-11

(In lakhs)
Years 2003-04 2004-05 2005-06 2006-07 2007-08
Current assets 359,369 1,278,635 648,899 847,064 1,280,772
a. Bill purchase & discounted 108,704 165,412 43,764 51,006 247,366
b. Cash credits, o/d & loans 497,091 240,251 313,402 365,260 123,344
9.other Assets 54,346 415,828 752,052 786,344 879,889
1,019,5102,100,1261,758,1172,049,6742,531,371
Current liabilities
Other liabilities 101,297 1,620,758 1,705,693 1,801,949 2,139,616
A. Demand deposits 262,186 273,615 368,944 521,665 1,139,200
B. Savings bank deposits 188,064 249,700 379,321 536,338 1,139,820
551,547 2,144,0732,453,9582,859,952 4,418,636
Times 1.85 0.98 0.72 0.72 0.57

INFERENCE:

The actual current ratio ascertained with the help of the relevant
financial figures has to be compared with the ideal or standard ratio of
2:1 that means the current asset are fixed at two times the current
liabilities the idea behind this fixation is to leave a margin of safety to
cover any fall. In the value of current asset and also to leave sufficient
working capital after the payment of current liabilities.

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 In this case of ICICI Bank the current asset from the past 5 years is
increasing. But current liabilities were increasing by year to year
considering current asset and current liabilities the current ratio
calculated is in decreasing trend for the last 5 years and it was stagnant
this year to 0.57.

The current ratio falls bellow the current ideal ratio however the firm is
not in a good position to meet its current obligations out of its current
asset.

FIGURE-20

FIGURE-21

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12. RETURN ON INVESTMENT RATIO

= Profits X 100
Shareholders fund

TABLE-12
Years 2004-04 2004-05 2005-06 2006-07 2007-08
Profits 16110 25830 120618 163,711 200520
Share holders fund
Capital 22036 96303 96266 96,640 108677
Reserves & Surplus 109226 563554 632065 739,416 1181310
Sub total 131262 659857 728331 836056 1289987
PERCENTAGE 12.27 3.91 16.56 19.58 15.54

INFERENCE:
The term investment here refers to total assets or net assets. The
conventional approach of calculating ROI is to divide profits by equity plus
Reserve. Investment represents pool of funds supplied by shareholders
and lenders.

30
 In banking profits represents the interest from the lenders while
equity plus reserves are the net assets of the bank. It is the percentage
of deposits lend as advances it reveals that if it is too high than it has a
high risk involved in it and if it is too low then it has a low profitability
involved in it.
The above table show an increase in profits from 2005 to 2008 i.e.
52.99, 60.34 and 366.97 respectively. But in the year 2006-07 it
decreased by 35.73% and again it is increased last year.
On the other hand shareholders fund also shows an increasing trend
from the year2003 to 2005 it sharply increased 14.99% to 402.70% and
dipped down by 10.38, 14.79 in subsequent years. Total percentage
increased in shareholders fund is 627.31%.
Finally we can conclude from the calculations from the above table
that for the first two years viz.2003-04 Return on Investment ratios is
12.27. For the year 2005 it sharply decreased to 3.91%. Thus we can
say that profitability is low for the corresponding period. For the year
2006 & 2007 percentage of ratios increased from 16.56 to 19.58
respectively. And again last year it is decreased to 15.54 this shows high
risk and high profitability.

FIGURE-22

31
13. OPERATING OVERHEADS TO TOTAL INCOME RATIO

= Operating Expenses X100

Total Income

TABLE-13
(In Lakhs)
Years 2003-04 2004-05 2005-06 2006-07 2007-08
Operating exp. 33429 62258 201169 257,123 329915
Total income 146214 272659 1252688 1,195,896 1282604
% 22.86 22.83 16.06 21.50 25.72

INFERENCE:

The operating expenses calculated form the profit and loss account
was initially high and latter on at the end of 2007-08 it was pretty low
32.81% which is a very good mark for the bank. At the same time the
total income of the bank was good at the end of 2007-08 at (4.95) which
shows the growth in the last year. By the above table the operating ratio
which was fluctuating and started at 22.86% in 2003-04 and ended at
25.72% in 2007-08 with lot of fluctuation in between this figure. i.e.
25.72%, which was higher than the last year of 21.50% (2006-07),
shows that the bank showed improve on its activities.

32
 FIGURE-23

15. INCOME TO ASSET RATIO

= Income X 100
Asset

TABLE-15 (In lacks)

Years 2003-04 2004-05 2005-06 2006-07 2007-08
Income 146,214 272,659 1,252,688 1,195,896 1,282,568
Assets 1,973,659 10,410,992 10,681,197 12,522,888 16,765,940
PERCENTAGE 7.41 2.62 11.73 9.55 7.65

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INFERENCE:

From the above table we can clearly that the income of the bank is
increasing from 2003-04 to 2004-05 i.e. 186.48 to 459.43 but was
decrease in year 2005-06 95.47 and again increase to107.25 in 2006-07.
By considering the above data the income to asset ratio calculated
shows that the trend was declining from 2003-04 to 2004-05 from 7.41%
to 2.62% and finally it ended at a lower as compare to previous
year(9.55) to 7.65%.because assets are increase in more.
This figure shows that the bank is in a good position.

The following chart justifies the above inference.

FIGURE 24

34
16. NET PROFIT RATIO

= Net Profit X 100

Total Income

TABLE-16
(in lakhs)

Years 2003-04 2004-05 2005-06 2006-07 2007-08

Net profit 16,110 25,830 120,618 163,711 200,520
Total income 146,214 272,659 1,252,688 1,195,8961,282,604
RATIO 11.02 9.47 9.63 13.69 15.63

INFERENCE:

The net profit ratio indicates the quantum of profit available for the
owners. A higher net profit ratio indicates that the profitability of the
concern is good. On the other hand a low net profit ratio indicates that
the profitability of the enterprise is poor.

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 According to the table the net profit of ICICI Bank was remarkably
good in all years but the total Income was good till 2006 at 359.43%.
But it showed a negative growth in last year by (4.53). By considering
this the net profit ratio calculating is 11.02, 9.47, 9.63 13.69 and 15.63
respectively for 2003-04 to 2007-08. The ratio was declined after 3
years but it made a come back in the 2004-2005 and was in a same
increasing face and lastly made a record of 15.63 % which is the high net
profit ratio and good to any business. The net profit should be capable for
covering all the operating expenses and also should leave sufficient
amount of profit to for the owners that has been fulfilled by the ICICI
Bank performance.

FIGURE-25

FIGURE-26

17. NET PROFIT TO NET ASSET RATIO

= Net Profit X 100

Net Asset

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 TABLE-17

(In Lakhs)
Years 2003-04 2004-05 2005-06 2006-07 2007-08
Net profit 16110 25830 120618 163,711 200,520
Net assets
6.Investments 818,686 3,589,108 3,546,230 4,274,286 5,048,735
c. Term loans 97,350 4,297,824 4,970,776 5,793,286 7,225,889
8. Fixed Assets 38,113 423,934 406,074 405,641 403,803
Net current assets 467,963 -43,947 -695,841 -810,278 129,299
Net assets 1,422,112 8,266,919 8,227,239 9,662,935 12,807,726
% 1.13 0.31 1.47 1.69 1.57

INFERENCE:

Net profit from the analysis part shows that it was a very good path

for the bank from 2003-04 (16110) to 2007-08 (200,520) which has
increased.
The net asset of ICICI Bank was 1,422,112 in 2003-04 and increased to
12,807,726 in 2007-08, which shows healthiness to the bank.
The profitability ratio from the table was shows that it was very low
0.31% in 2004-05 and managed to 1.69% in 2006-07 and then it was
decreased to 1.57 in 2007-08 because it has this year current assets
129,299 previous years it was negative.

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 FIGURE-27

FIGURE-28

SUMMARY OF FINDINGS

➢ Average Cost of Fund Employed Ratio is showing an upward trend

due to increase in Total Interest payment and competition in 2003-
04, It is 5.11 % and increase to 65.83 % in 2006-07, which
drastically affect the companies profit margin.

➢ The ICICI Bank is focusing on full utilization of the available sources

without keeping any assets idle. The deposits of the bank are
raised over the year and the advance also moving upward. The
bank use deposits as well as other financial sources to provide for
advances. So as to earn maximum profit these by contributing to
the value of the company.

➢ Investment to Deposit Ratio is also increasing tendency. It

increases from 51.50% (2003-04) to 72.86% (2006-07). Such

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 investments are less risky than the usual advances paid by the
bank, but it brings low returns.

➢ Cash Balance to Total Deposit Ratio is raising tendency. It

increases from 0.32% to 0.55%. The increased cash balance will
provide liquidity but Lowers Company’s profitability as such cash
balance kept idle which earn nothing.

➢ Income to Asset Ratio is moving upward, this reflects the banks

effective use of resources to contribute more towards profit and
there by increase the value of shareholders.

➢ Current Ratio is decreasing tendency. It decreases from 2.63% to

0.72%. The bank is following the aggressive financial policy by
keeping its working capital low and even negative. It took a huge
risk of short-term solvency, which is unfair to the operation of the
company even though it brings high return.
➢ The Return on Investment Ratio has enlarged by 155.45% in last 5
Years, which reflects company’s effectiveness in using its funds.
➢ The Earning Capacity of the bank is increased over the years after a
set back in the year 2004-05 bank moving upward by contributing
more on profit.
➢ The bank is keeping the Cash Reserve Ratio at a higher than the
minimum required rate with RBI, which bring a low return than
other advances.

➢ The bank is investing more on fixed assets of appreciating nature.

The total assets of the company is enhancing which raised from
38,113 lakes in 2003-04 to reach up to 403,803 lakes in 2007-08.

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 SUGGESTIONS

➢ Bank has to take steps to cut down its cost of fund employed, which
is showing sharp fluctuations over the years necessary actions to be
taken to cut down the operating expenses which is increasing.
➢ Bank has to implement few new strategies to enlarge its turnovers,
which are showing a slow raise after 2001-02.
➢ The short-term solvency position of the bank is under threat; Bank
has to keep some liquid assets to strengthen its liquidity position.
The negative current ratio must be brought nearly to the standards.

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➢ Bank has to provide effective services to customers for maintaining
and building the brand image that helps the banks to have a
competitive edge even other banks.
➢ Business expansion is needed; the bank can enter into the wide
rural market where it has wide scope for business.
➢ Bank can enter into the rural market by opening branches and ATM
facility in Taluk head quarters, as there is lack of ATM facilities in
most of Taluk head quarters.
➢ The portion of accrued interest in total current asset is increasing
drastically. It is suggested to accelerate the interest collection
process and then advance the same so as to increase the
profitability.

CONCLUSION

Various ratios have been analyzed and this helps to know credit
analyses of the bank. The bank has been providing various useful
services to the society through its favorable programs, procedures
and policies. The result of which is satisfactory solvency position
increased operational expenses and increasing trend of profitability.
The bank has made favorable progress in all fields viz, Deposits,
Loans, Investments, Profits etc and all staff members actively
Support and coordinate the activities. To conclude, it can be stated
that the bank is bound to have very prosperous years to come in
the future. The over all performance of ICICI Bank is satisfactory,

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 company utilizes its available funds effectively. The aggressiveness
shown by the bank in its financial operations helped it to maximize
its earnings.

BIBLIOGRAPHY

BOOKS

• Financial management by prasann chandra

• Financial management by I M Pandey

• Corporate finance

MAGAZINES

• Banker

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 • Financial risk

WEBSITES

• www.icici.com

• www.google.com

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