Ratio Analysis of Bank of India

Only available on StudyMode
  • Download(s) : 195
  • Published : March 31, 2012
Open Document
Text Preview
Analysis of Financial Ratios On Bank Of India

By S Raj Sharan Roll No. 28

Index

Topics

Page No

1. Introduction..…………………………………………………………... 2 2. Spread Analysis …………………………………………………….... 3 3. Efficiency Ratios ………………………………………………………. 5 4. Growth Ratios …………………………………………………………. 7 5. Profitability Ratios …………………………………………………… 8 6. Valuation Ratios ………………………………………………………. 9 7. Asset Quality & Capital..…………………………………………..11 8. Overall Analysis against the Competitors …………………12

Page | 1

Bank Of India
Introduction Bank Of India was started by a group of business men in 1906 with a paid up capital of 50lakh rupees. It was under the private partnership till 1969, when it was nationalised along with 13 other banks. In due course the bank has spreaded all over the country with the growth of 26% and now it has more than 3000 branches nationwide and 29 branches abroad. The Bank of India has headquarters at Mumbai and today it occupies a premier position in terms of business volume with a business mix of 515040 crores. It’s the first nationalised bank to computerise all its branches and also the founder of SWIFT message in India. The bank has been ranked 8th in TOP 50 SERVICE BRANDS in ‘The Most Trusted Brands Survey 2010’ and 2nd among all Public Sector Banks. Its first public offering was done in 1997 and as per 30-Sept-2009 the number of shareholders amounts to 2, 15,790. Financial ratios are guides or shortcuts that are helpful in analysing the financial health, position and operations of a company. By comparing them with the ratios of the previous years or to that of the other companies of the same industry we can get a picture of the current position of the firm with respect to its fellow competitors. The main purpose is to investigate the company in its general understanding and its environment. In this report the financial ratios of Bank Of India has been analysed, compared and interpreted accordingly to show how it flares with other players of the same industry.

Page | 2

Spread Analysis The main function of the bank is to accept deposits and lend loans to the customers. However the customers can be ordinary people, corporates, small scale Industries and sometimes government and governmental institutions. Spread is measured from the interest that the banks charge on deposits and that of on loans. The following are some of the ratios by which we can calculate spread

1. Yield on Advances: Banks give loan and advances and the yield obtained on the advances given to the customers is called ‘Yield on Advances’. This depends on the type of customers and the schemes they opt for their advances. In addition to this many other factors are also included economic situation, etc. Years 2011 2010 2009 2008 2007 Yield on Advances 8.62 8.42 9.78 9.34 8.52 (%) Observation & Analysis: The yield has increased in 2011 compared to the earlier year due to a hike of lending rates which was imposed by RBI due to inflation. This has an effect on the Net Income of the bank and the Net Income Margin.

2. Cost of Funds/Cost of Liabilities: This is the interest that is paid to the depositors of a financial institution or a bank which includes SB and FD accounts. In general term, this is the cost incurred by an organization to gain access to the capital. The

Page | 3

difference between the cost of funds and the lending rate contributes to the income of the bank. Years 2011 2010 2009 2008 2007 Cost of 4.57 4.84 5.37 5.07 4.32 Liabilities (%) Observation & Analysis: The cost of funds decrease because of the increase in the Purchasing Power of the people as there is a huge burgeoning of middle class. As a result this results in the fall of savings and term deposits to satisfy their needs and wants. Increase of cost of funds contributes to the net income of the bank.

3. Net Interest Margin: NIM is calculated by the following formula.

This shows how good the bank or a financial institution is, in terms of making...
tracking img