Financial statement analysis of HDFC bank & ICICI bank

1. Financial Analysisof Banking Sector :
HDFC & ICICI BANK
1
RishaBagchi,
16PGDM-BHU040

2. Financial Analysisof Banking Sector :
HDFC & ICICI BANK
2
RishaBagchi,
16PGDM-BHU040
Objectives:
 To studyabout ICICIandHDFC Bankand relatedaspectslike itsproducts&services,history,
organisational structure andsubsidiarycompanies.
 To analyse the financial statementsi.e.P&Laccountand Balance sheetof boththe
companies
 To learnaboutP&L account,Balance sheetanddifferenttypesof AssetsandLiabilities
 To portray the financial positionof ICICI&HDFC withthe helpof balance sheet,andP&L.
 To evaluate the financial soundnessof boththe companies.
Historic Pricingof ICICI
(Source : Moneycontrol)
Timeline forevents:-
1. 2011-12 : Singapore government's investment arm Temasek Holdings' unit Allamanda
Investments on Wednesday sold shares worth USD 300 million (about Rs 1,500 crore) in
India's largest private sector lender ICICI Bank.
2. 2012-13 : Top private sector lenders ICICI Bank(ICBK.NS), HDFC Bank(HDBK.NS) and Axis
Bank(AXBK.NS) said they were investigating allegations of widespread money laundering
practices at their branches.
3. 2013-14 :
 NetNPA increased
 ICICIannouncedthatitsboard had approvedthe splittingof eachequityshare into
five.Thiswasthe firsttime ICICIBank has gone for a share split
4. From thenon,NPA has graduallyincreased,andinMar’ 2016, NetProfitwasworstin 11
years.
5. 2015-16 : ICICIissued$500 milliondollarbondsinthe International market

3. Financial Analysisof Banking Sector :
HDFC & ICICI BANK
3
RishaBagchi,
16PGDM-BHU040
Historic Pricingof HDFC
Timeline forevents:
1. 2011-12 : Citigroupsolditsstake inHDFCafterhuge tax gain
2. 2012-13 :
 Top private sector lenders ICICI Bank(ICBK.NS), HDFC Bank(HDBK.NS) and
Axis Bank(AXBK.NS) said they were investigating allegations of widespread
money laundering practices at their branches
 Fined by RBI for violating KYC norms
3. 2013-14 : HDFC & HDFC Bank mergerledtorise in the pricesof shares
4. 2014-15 : Payzappwaslaunched,andtheyraisedINR90,000 crore from NCDs
5. 2015-16 : HDFC StandardLife Insurance raised IPO
Non-performingassets’comparison
NetNPA Mar' 16 Mar' 15 Mar' 14 Mar' 13 Mar' 12
HDFC 0.28 0.2 0.3 0.2 0.2
ICICI 2.98 1.61 0.97 0.77 0.73
The trendsof HDFC has beenfairlyconstantinthe last5 years.

4. Financial Analysisof Banking Sector :
HDFC & ICICI BANK
4
RishaBagchi,
16PGDM-BHU040
• Whereas,incase of ICICI,ithas beenincreasingyearbyyear.The ICICIofficialssaid: sharp
downturnincommoditycycle &gradual nature of domesticeconomicrecovery are to
blame.
RATIO ANALYSIS:
Current Ratio
The current ratio is a liquidity ratiothatmeasuresacompany'sabilitytopayshort-termandlong-
termobligations.Togauge thisability,the currentratio considersthe current total assetsof a
company(bothliquidandilliquid) relativetothatcompany'scurrent total liabilities.
If current liabilitiesexceed currentassets(thecurrentratio isbelow 1),thenthe companymay have
problemsmeetingitsshort-termobligations.If the currentratio istoo high,thenthe companymay
not be efficientlyusingits currentassetsoritsshort-termfinancingfacilities.
But beingfinancial organisations, they’re supposedtohave acurrentratio of lessthan1.
HDFC has maintaineditsCurrentRatiobetween0.23to 0.38 whichis healthyfora bank.
But ICICIhas miserable levelsof CurrentRatio whichprovesthatitwill notbe able tomeetitsshort
termobligations.
Return on Assets
Returnon assets (ROA) isa financial ratiothatshowsthe percentage of profitacompanyearnsin
relationtoitsoverall resources.Itiscommonlydefinedasnet income dividedbytotal assets.The
higherthe return,the more efficientmanagementisinutilizingits assetbase.The ROA ratio is
calculatedbycomparingnetincome toaverage total assets,andis expressedasa percentage.
The needforinvestmentin currentandnon-currentassetsvariesgreatlyamongcompanies.Capital-
intensivebusinesses(withalarge investmentinfixedassets) are goingtobe more assetheavythan
technologyorservice businesses.
In the case of capital-intensive businesses,whichhave tocarry a relativelylarge assetbase,will
calculate theirROA basedona large numberinthe denominatorof thisratio.
0
0.5
1
1.5
2
2.5
3
0.03
0.13
0.23
0.33
Mar' 12 Mar' 13 Mar' 14 Mar' 15 Mar' 16
Current Ratio & Return on Assets
ICICI HDFC ROA - ICICI ROA - HDFC

5. Financial Analysisof Banking Sector :
HDFC & ICICI BANK
5
RishaBagchi,
16PGDM-BHU040
In case banks, theystrive tomaintaina ROA ratio of 1.5% or above.
In thiscase,HDFC has beenmaintaininganROA of above 2% since the last 5 years,but ICICIhas had
a fluctuatingROA rangingbetween1.3to1.5. Thisshowsthat HDFC isin a betterpositionintermsof
gettingreturnfromassetsinvested,andinvestorsare gettingtheirreturns.
Profit after& before Tax
ProfitAfterTax has decreasedby17% for ICICI,whichrecordsthe worstNetProfitperformance in
the past 11 years.
HDFC on the otherhand,has had a gradual increase initsprofits,andthe shareholdershave
recognizedit.
Conclusion
By conductingthe above comparative analysis,itisproventhatHDFC isina more financiallystable
and soundposition,basinguponitsCurrentRatio,ROA,andHistoricPrice Movements.
0%
29%
18%
14%
-17%
-20%
0%
20%
40%
0
5000
10000
15000
20000
March' 12 March' 13 March' 14 March' 15 March'16
PBT PAT Percentage Change 2 per. Mov. Avg. (PAT)
ICICI
0%
18%
12%
10%
18%
0%
5%
10%
15%
20%
0
5000
10000
15000
March' 12 March' 13 March' 14 March' 15 March' 16
HDFC
PBT PAT Percentage Change