FINANCIAL STATEMENT ANALYSIS OF INDIAN OVERSEAS BANK
Indian Overseas bank is one of the oldest banks in India. It is having its strong base in South India. The bank has undergone many structural changes in the past and is serving crores of people all over the world. There are some unique characteristics for this bank. In this research, the financial performance of the select bank is analyzed with the data collected for a period of 10 years. The data are current and are in accordance with the Banking rules and regulations. Hence the study is highly unique and is an updated one. INTRODUCTION:
Analysis of a bank’s financial statements requires a distinct approach that recognizes a bank’s somewhat unique risks. Banks take deposits from savers, paying interest on some of these accounts. They pass these funds on to borrowers, receiving interest on the loans. Their profits are derived from the spread between the rate they pay for funds and the rate they receive from borrowers. This ability to pool deposits from many sources that can be lent to many different borrowers creates the flow of funds inherent in the banking system. Banks assume two primary types of risk as they manage the flow of money through their business. Interest rate risk is the management of the spread between interest paid on deposits and received on loans over time. Credit risk is the likelihood that a borrower will default on its loan or lease, causing the bank to lose any potential interest earned as well as the principal that was loaned to the borrower. The primary business of a bank is managing the spread between deposits (liabilities, loans and assets). Basically, when the interest that a bank earns from loans is greater than the interest it must pay on deposits, it generates a positive interest spread or net interest income. Net interest income will vary, due to differences in the timing of accrual changes and changing rate and yield curve relationships. Changes in the...
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