Consistent
Performance in Key Operating Dimensions: A Study of the Selected Public Sector
and Private Sector Banks in India
Dr. Adinath
B. Kuchanur,
Director,
JSPM’s Jayawant Technical Campus,
S No: 82/2, Pune-Mumbai Bypass Highway, Tal: Mulsi,
Dist:
Pune-411033,Maharashtra
*Corresponding Author E-mail: adinathbk@gmail.com
ABSTRACT:
Banks
are the integral part of the Indian financial system and they may be
characterized as the resilient financial intermediaries as they stood to the
testimony of the financial meltdown in the recent past. Banks- public sector
and private sector mobilize, lend and invest the funds. These activities are to
be carried on viably and consistently since there exists a cut throat
competition in the market. The main objective of the banks is to earn income by
striking a healthy balance between incomes and expenses. This article analyzes
the operating dimensions i.e. incomes, expenses and profits of the ten banks
i.e. five each from public sector and private sector for the period from
2005-2011. The objective of the study is to analyze the consistency in
performance of the selected banks with regard to their key operating dimensions
and to award an overall rank based on the average t-Test score of all ranks
secured for each operating dimension. The consistency in performance is assessed
with the help of two-tailed t-Test 7-1, 0.10 = 
1.943. The analysis reveals that Canara Bank (among PSBs) has emerged as the most consistent
overall performer in respect of all operating dimensions whereas Kotak Mahindra Bank (among PvtSBs)
has exhibited the least consistency in its overall performance during the study
period. The main limitation of this study is that the stakeholders may or may
not consider the consistency in performance of the selected PSBs and PvtSBs while dealing with them since these banks do not
represent the whole Indian banking industry as well as financial system.
KEYWORDS: Operating Dimensions, Interest Income, Other
Incomes, Interest Expense, Manpower Cost, Selling and Administrative Expenses,
Miscellaneous Expenses, Net Profit, Earnings Per Share, Equity Dividend (%),
Book Value Per Share.
Indian
financial system plays a significant role in socio-economic development in the
country through its various financial intermediaries. Among them, the banks-public
and private sectors are the frontrunners in the Indian financial system as they
mobilize deposits and lend them to borrowers i.e. from a common man to a
billionaire. These commercial activities evolve income generation, incurring
expenses and profit making. Hence, there is a need for the banks to carry on
their activities feasibly and consistently. Public sectors banks have dominated
the banking industry in India. On the other hand, the private sector banks pose
a cut throat competition in the market. Generally, all banks strive to generate
higher income by incurring lesser expenses at the same time.
However,
they need to maintain a consistency in performance with regard to their banking
operations to ensure perpetuity for their long-term survival and their ability
to override the crisis. Moreover, the banks with inconsistent performance
invite problems.
Theoretically, the economic cycle influences on all
business activities including banking business. The financial risk and the
business risk assume different intensities at each stage of business cycle that
would affect the funds and incomes of the banks. The abrupt decline in business
and income may affect banks badly causing difficulties while refunding the
deposits and paying interest and dividend. There is a need to test empirically
whether or not the banks can sustain themselves during the adversity. It is
accompanied through measuring the consistency in their performance in key
operating dimensions. The present study is conducted on the premise that a bank
with consistent performance in operating dimensions can have a perpetual life
amidst the critical times such as recession. It is, therefore, imperative that
a bank should earn steady incomes, incur few expenses and generate adequate
profits.
REVIEW OF
LITERATURE:
PvtSBs had been registering a high rate of growth
in sources and applications of funds as compared to PSBs (Chidanbaram and Alamelu,
1994). Parasuraman (2000) studied that 18 out of 28 banks
in India were not creating any economic value for the shareholder. The
performance of PSBs was not statistically different from PvtSBs
(Mathur, 2002) whereas D’ Souza (2002) doubted about the performance of PSBs vis-ŕ-vis PvtSBs and foreign banks as well. Kohli and Chawla (2006) studied the
profitability trends in banks on the basis of interest income, interest
expenditure, non-interest income, non-interest expenditure, operating
expenditure, deposits and advances and total assets. Uppal and Kaur (2007) emphasized that the cost
should be properly managed in improving the profitability of banks. Gunjan (2009) revealed that there was no
clear-cut evidence to the improvement in efficiency levels of the public sector
banks over the years. Mehta and Diwan (2010) examined growth, profitability, efficiency
and credit quality of public and private sector banks. Ashish shrivastava (2010) found that on an
average, new PvtSBs have performed better than their
older counterparts. PSBs have on many counts shown better performance than SBI
Group. PNB out of four PSBs and ICICI
out of four PvtSBs have demonstrated more consistency
in performance with regard to their sources and applications of funds (Adinath B. K, 2011).
RESEARCH GAPS:
What matters most for the
banks’ long-term success is not only the size of incomes, expenses and profit
but the consistency in their banking operations as the case may be. A bank with
high average income with inconsistency in generation of income overtime is not
the desired one. Similarly, a bank with lower incidence of cost would not be a
good indicator if its performance is not consistent overtime. In this context, the
present study is conducted as gap filler as it not only analyzes the trends in
operating dimensions of banks but also examines their consistency in
performance with regard to the selected operating dimensions.
SCOPE OF THE
STUDY:
Indian
banks are well known worldwide for their unprecedented growth as tough norms
and regulations have saved them from the greed of rogue banking practices. They
have been operating perpetually over the decades and have edge over the banks
of advanced countries in respect of maintaining standards like Basel-I and II
norms, adopting rigid lending policies and rendering hi-tech services at
affordable costs. In India, banking
sector is characterized as Public Sector Banks (PSBs), Private Sector Banks (PvtSBs), Cooperative Banks, etc. However, they differ in
many respects of banking activities such as deposits, borrowings, loans and
advances and investments. These activities lead to revenue generation,
incurring on various expenses and further earning profit from their operations. Hence, the present study is an effort to
analyze ten banks i.e. five each out of 25 PSBs and out of 19 PvtSBs and to make a comparison between them in respect of
each operating dimension. The present study guides the stakeholders to surmise
well whether they should take into account the enduring consistent performance
in bank’s operations while choosing a bank for the purpose of their banking
business.
OBJECTIVES OF THE
STUDY:
The following objectives have been set for
this study:
i) To analyze the consistent performance in
key operating dimensions of the selected PSBs and PvtSBs
and
ii) To rank these banks based on the average
t-Test scores.
LIMITATION OF THE
STUDY:
The limitation of this study
is that the stakeholders may or may not consider the consistent performance of
the selected PSBs and PvtSBs with regard to their
operating dimensions while dealing with them since these banks do not delineate
the whole banking industry and control the entire Indian financial system.
Moreover, these banks are overseen, regulated and controlled by the regulators
namely RBI, SEBI, ministry of finance, etc.
METHODOLOGY:
An attempt is made to
analyze the key operating dimensions namely income, expense and profit items
selected for this study and to make a comparison between the selected PSBs and PvtSBs, the details of which are as follows.
Table1-Sectorwise Banks and Their Operating
Dimensions
|
Sector wise Banks
|
Operating
Dimensions
|
|
PSBs
|
1
|
Bank
of Baroda (BOB)
|
Income Items
1.
Interest income
2.
Other incomes
Expense Items
1.
Interest expenses
2.
Employees’ cost
3.
Selling and Admin expenses
4.
Miscellaneous expenses
Profit Items
1.
Net profit
2.
Earnings per share
3.
Equity dividend(%)
4.
Book value per share
|
|
2
|
Bank
of India (BOI)
|
|
3
|
Canara Bank
(CAN)
|
|
4
|
Punjab
National Bank (PNB)
|
|
5
|
Union
Bank of India (UBI)
|
|
Pvt SBs
|
1
|
Axis
Bank (AXIS)
|
|
2
|
HDFC
Bank (HDFC)
|
|
3
|
ICICI
Bank (ICICI)
|
|
4
|
Kotak Mahindra Bank (KMB)
|
|
5
|
Yes
Bank (YB)
|
It is important to note that the net profits of these
banks are higher than other banks in the respective sectors during 2011. The
secondary data collected from websites of respective Banks and Money Control
for the last seven-year period i.e. from 2005 to 2011 is used. The same is
presented in the form of tables and analyzed with the help of statistical tools
namely Average, Standard Deviation (SD), Coefficient of Variation (CV) and
t-Test. The t-Test 7-1, 0.10
= ± 1.943 is used for testing the consistency
in performance of banks with regard to each key operating dimension and for
ranking each bank. It is important to note that the values of average and
t-Test are shown in brackets against each bank wherever it is necessary. The consistency in performance deviates from
one bank to others due to their structure, life span, operations, etc. These
factors lead to a variation in performance of banks from time to time. The
analysis enables us to understand as to which bank has demonstrated the greater
consistency in its performance in respect of all operating dimensions
identified for this study as the consistency in performance is a stronger
indicator of a bank’s resilience to withstand the business cycles.
HYPOTHESES:
In view of the objectives of the study, the
hypotheses are designed for the present study.
HO = “Banks have demonstrated a
consistent performance in respect of each operating dimension” and
HA = “Banks have not demonstrated
a consistent performance in respect of each operating dimension”.
ANALYSIS
AND INTERPRETATION:
The analysis and
interpretation is carried out in four phases. The first phase covers the
analysis of all the selected operating dimensions i.e. income items, expense
items and profit items while the second phase presents the hypotheses tested in
the summary form and the third phase deals with awarding the overall ranks to
each bank based on their performance in respect of each operating dimension. In
the fourth phase, the overall rankings are awarded to each bank for their
overall consistent performance in all operating dimensions.
ANALYSIS OF OPERATING DIMENSIONS:
The key operating dimensions identified for this study
are analyzed in this section. This analysis covers (A) Analysis of Income
Items, (B) Analysis of Expense Items and (C) Analysis of Profit Items.
ANALYSIS OF INCOME ITEMS:
1. Interest Income:
Banks lend funds in the form of loans and advances and
investments in various investment schemes as per the prevailing norms. They
receive periodic interest from borrowers of funds and investment clienteles as
per schedule. It is obvious that the higher the loans, advances or investments,
the higher is the interest income and vice versa. The data pertaining to
interest income of the selected PSBs and PvtSBs from
2005 to 2011 is given in Table 2.
Table 2:
Interest Income (
in Crores)
|
S.
No
|
Year
|
PSBs
|
PvtSBs
|
|
BOB
|
BOI
|
CAN
|
PNB
|
UBI
|
AXIS
|
HDFC
|
ICICI
|
KMB
|
YB
|
|
1
|
2005
|
6431.42
|
6031.53
|
7571.97
|
8459.85
|
4969.79
|
1924.16
|
3093.49
|
9409.89
|
420.30
|
29.98
|
|
2
|
2006
|
7100.00
|
7028.70
|
8711.51
|
9584.15
|
5863.71
|
2888.79
|
4475.34
|
13784.50
|
694.02
|
190.18
|
|
3
|
2007
|
9212.64
|
9180.33
|
11364.56
|
11537.48
|
7382.18
|
4560.40
|
6889.02
|
22994.29
|
1354.10
|
587.61
|
|
4
|
2008
|
11813.48
|
12355.22
|
14200.74
|
14265.02
|
9447.30
|
7005.32
|
10115.00
|
30788.34
|
2535.36
|
1310.83
|
|
5
|
2009
|
15091.12
|
16347.36
|
17119.05
|
19326.16
|
11889.38
|
10835.49
|
16332.26
|
31092.55
|
3065.14
|
2003.32
|
|
6
|
2010
|
16698.34
|
17877.99
|
18751.96
|
21466.91
|
13302.68
|
11638.02
|
16172.90
|
25706.93
|
3255.62
|
2369.71
|
|
7
|
2011
|
21885.92
|
21751.72
|
23064.01
|
26986.48
|
16452.62
|
15154.81
|
19928.21
|
25974.05
|
4303.56
|
4041.75
|
|
Total
|
88232.92
|
90572.85
|
100783.0
|
111626.5
|
69307.66
|
54006.99
|
77006.22
|
159750.5
|
15628.10
|
10533.38
|
|
Average
|
12604.70
|
12938.98
|
14397.69
|
15946.58
|
9901.09
|
7715.28
|
11000.89
|
22821.51
|
2232.59
|
1504.77
|
|
S D
|
5621.75
|
5927.17
|
5621.87
|
6862.63
|
4195.55
|
4962.52
|
6553.27
|
8283.65
|
1445.89
|
1426.82
|
|
C V
|
44.60
|
45.81
|
39.05
|
43.04
|
42.37
|
64.32
|
59.57
|
36.30
|
64.76
|
94.82
|
|
t-Test
|
-0.24
|
-0.09
|
0.54
|
1.00
|
-1.90
|
-0.66
|
0.73
|
4.07
|
-11.56
|
-12.96
|
|
Ranking
|
II
|
I
|
III
|
VI
|
VII
|
IV
|
V
|
VIII
|
IX
|
X
|
Table 3: Other Incomes (
in Crores)
|
Sl
No
|
Year
|
PSBs
|
PvtSBs
|
|
BOB
|
BOI
|
CAN
|
PNB
|
UBI
|
AXIS
|
HDFC
|
ICICI
|
KMB
|
YB
|
|
1
|
2005
|
1304.83
|
1155.80
|
1543.83
|
1854.54
|
766.10
|
403.51
|
637.36
|
3416.23
|
132.13
|
18.17
|
|
2
|
2006
|
1191.69
|
1184.38
|
1377.51
|
1478.23
|
625.10
|
713.71
|
1213.64
|
5036.62
|
237.33
|
99.78
|
|
3
|
2007
|
1381.79
|
1562.95
|
1511.80
|
1343.64
|
841.80
|
986.49
|
1510.24
|
6962.95
|
287.83
|
200.71
|
|
4
|
2008
|
2051.04
|
2116.93
|
2308.31
|
1997.56
|
1232.67
|
1750.59
|
2205.38
|
8878.85
|
310.48
|
360.67
|
|
5
|
2009
|
2757.66
|
3051.86
|
2427.10
|
2919.69
|
1482.55
|
2896.88
|
3470.63
|
8117.76
|
157.56
|
435.02
|
|
6
|
2010
|
2806.36
|
2616.64
|
3000.82
|
3565.31
|
1974.74
|
3945.78
|
3810.62
|
7292.43
|
420.97
|
575.53
|
|
7
|
2011
|
2809.19
|
2641.77
|
2826.98
|
3612.58
|
2038.78
|
4632.13
|
4433.51
|
7108.91
|
507.56
|
623.27
|
|
Total
|
14302.6
|
14330.3
|
14996.5
|
16771.5
|
8961.74
|
15329.9
|
17281.8
|
46813.75
|
2053.86
|
2313.15
|
|
Average
|
2043.22
|
2047.19
|
2142.34
|
2395.94
|
1280.25
|
2189.87
|
2468.77
|
6687.68
|
293.41
|
330.45
|
|
S D
|
751.38
|
759.99
|
665.22
|
959.45
|
575.42
|
1661.27
|
1448.11
|
1866.09
|
135.44
|
232.81
|
|
C V
|
36.77
|
37.12
|
31.05
|
40.05
|
44.95
|
75.86
|
58.66
|
27.90
|
46.16
|
70.45
|
|
t-Test
|
0.20
|
0.21
|
0.59
|
1.06
|
-2.99
|
-0.30
|
0.13
|
5.64
|
-37.99
|
-21.71
|
|
Ranking
|
II
|
III
|
V
|
VI
|
VII
|
IV
|
I
|
VIII
|
X
|
IX
|
Table 2 presents that PNB has earned the highest
average interest income whereas UBI has generated the lowest average interest
income among PSBs. On the other hand, among PvtSBs,
ICICI has earned the highest average interest income while YB has generated the
lowest average interest income.
HO = “Banks have demonstrated a consistent performance
in earning interest income”
Table 2 presents that there is a consistent performance
in interest income earned by BOI, BOB, CAN, AXIS, HDFC, PNB and UBI as their
t-Test values < ± 1.943 and
rejected in the case of remaining banks.
2. Other incomes:
Banks also render various other services and thereby
generate other incomes. A bank having variety of attractive services, network
of operations, a strong customer base, etc is believed to earn higher other
incomes. The other incomes of the selected PSBs and PvtSBs
are presented in Table 3
Table 3 portrays that among PSBs, PNB has generated the
highest average other incomes but UBI has the lowest average other incomes. On
the other hand, ICICI has generated the highest average other incomes whereas
KMB earned the lowest average other incomes among PvtSBs.
HO = “Banks have demonstrated a consistent performance
in earning other incomes”
HDFC, BOB, BOI, AXIS, CAN and PNB have demonstrated a
consistent performance in generating other incomes as their t-Test values <± 1.943 but that is not the
case with other banks.
ANALYSIS OF EXPENSE ITEMS:
1. Interest expense:
Banks pay interest periodically to depositors and
lenders of funds. The quantum of interest expense depends on the size of
deposits mobilized and funds borrowed. A bank which has accepted more deposits
and borrowed hefty funds will have to incur a huge interest expense. Thus,
interest expense is a major item of expenses for banks. The data interest
expense of the selected PSBs and PvtSBs is presented
in Table 4.
Analysis of interest expense reveals (Table 4) that UBI
has incurred the lowest average interest expense but CAN incurred the highest
average interest expense among PSBs. On
the other hand, YB has the lowest average interest expense whereas ICICI has
incurred the highest average interest expense among PvtSBs.
HO = “Banks have demonstrated a consistent performance
in paying interest expense”
Table 4 portrays that there is consistent performance
in interest expended by BOI, HDFC, BOB, PNB, CAN, AXIS and UBI as their t-Test
values are < ± 1.943 and
disproved in respect of remaining banks.
Table 4:
Interest Expense ( in Crores)
|
Sl
No
|
Year
|
PSBs
|
PvtSBs
|
|
BOB
|
BOI
|
CAN
|
PNB
|
UBI
|
AXIS
|
HDFC
|
ICICI
|
KMB
|
YB
|
|
1
|
2005
|
3452.15
|
3794.64
|
4421.50
|
4453.11
|
2905.24
|
1192.98
|
1315.56
|
6570.89
|
194.82
|
11.85
|
|
2
|
2006
|
3875.09
|
4396.72
|
5130.01
|
4917.39
|
3489.42
|
1810.56
|
1929.50
|
9597.45
|
339.09
|
104.72
|
|
3
|
2007
|
5426.56
|
5739.86
|
7337.73
|
6022.91
|
4591.96
|
2993.32
|
3179.45
|
16358.50
|
699.24
|
416.26
|
|
4
|
2008
|
7901.67
|
8125.95
|
10662.94
|
8730.86
|
6360.95
|
4419.96
|
4887.12
|
23484.24
|
1309.56
|
974.11
|
|
5
|
2009
|
9968.17
|
10848.45
|
12401.25
|
12295.30
|
8075.81
|
7149.27
|
8911.10
|
22725.93
|
1546.60
|
1492.14
|
|
6
|
2010
|
10758.86
|
12122.04
|
13071.43
|
12944.02
|
9110.27
|
6633.53
|
7786.30
|
17592.57
|
1397.48
|
1581.76
|
|
7
|
2011
|
13083.66
|
13941.03
|
15240.74
|
15179.14
|
10236.42
|
8591.82
|
9385.08
|
16957.15
|
2058.49
|
2794.82
|
|
Total
|
54466.16
|
58968.69
|
68265.60
|
64542.73
|
44770.07
|
32791.44
|
37394.11
|
113286.73
|
7545.28
|
7375.66
|
|
Average
|
7780.88
|
8424.10
|
9752.23
|
9220.39
|
6395.72
|
4684.49
|
5342.02
|
16183.82
|
1077.90
|
1053.67
|
|
S D
|
3681.54
|
3977.74
|
4175.30
|
4292.11
|
2852.70
|
2843.74
|
3361.56
|
6251.63
|
683.87
|
991.74
|
|
C V
|
47.32
|
47.22
|
42.81
|
46.55
|
44.60
|
60.71
|
62.93
|
38.63
|
63.45
|
94.12
|
|
t-Test
|
-0.36
|
0.07
|
0.84
|
0.52
|
-1.65
|
-0.85
|
-0.24
|
4.12
|
-16.44
|
-11.40
|
|
Ranking
|
III
|
I
|
V
|
IV
|
VII
|
VI
|
II
|
VIII
|
X
|
IX
|
Table 5:
Manpower Cost ( in Crores)
|
Sl
|
Year
|
PSBs
|
PvtSBs
|
|
No
|
BOB
|
BOI
|
CAN
|
PNB
|
UBI
|
AXIS
|
HDFC
|
ICICI
|
KMB
|
YB
|
|
1
|
2005
|
1381.05
|
1263.21
|
1380.15
|
2121.23
|
806.52
|
176.85
|
276.56
|
737.41
|
85.13
|
21.27
|
|
2
|
2006
|
1523.79
|
1328.13
|
1515.30
|
2114.97
|
866.91
|
240.20
|
486.82
|
1082.29
|
171.39
|
50.12
|
|
3
|
2007
|
1644.06
|
1614.00
|
1609.29
|
2352.45
|
873.80
|
381.35
|
776.86
|
1616.75
|
292.98
|
117.47
|
|
4
|
2008
|
1803.76
|
1657.01
|
1661.28
|
2461.54
|
845.68
|
670.25
|
1301.35
|
2078.90
|
519.23
|
202.41
|
|
5
|
2009
|
2348.13
|
1937.41
|
1877.15
|
2924.38
|
1152.36
|
997.66
|
2238.20
|
1971.70
|
583.63
|
218.02
|
|
6
|
2010
|
2350.88
|
2296.07
|
2193.70
|
3121.14
|
1354.99
|
1255.82
|
2289.18
|
1925.79
|
583.48
|
256.89
|
|
7
|
2011
|
2916.78
|
3475.44
|
2954.84
|
4461.10
|
2600.25
|
1613.90
|
2836.04
|
2816.93
|
783.83
|
362.34
|
|
Total
|
13968.45
|
13571.27
|
13191.71
|
19556.81
|
8500.51
|
5336.03
|
10205.01
|
12229.77
|
3019.67
|
1228.52
|
|
Average
|
1995.49
|
1938.75
|
1884.53
|
2793.83
|
1214.36
|
762.29
|
1457.86
|
1747.11
|
431.38
|
175.50
|
|
S D
|
556.74
|
764.11
|
541.22
|
828.90
|
643.33
|
546.67
|
1002.17
|
685.01
|
253.28
|
120.37
|
|
C V
|
27.90
|
39.41
|
28.72
|
29.67
|
52.98
|
71.71
|
68.74
|
39.21
|
58.71
|
68.59
|
|
t-Test
|
0.13
|
-0.09
|
-0.37
|
2.45
|
-2.86
|
-0.68
|
1.33
|
2.98
|
-4.68
|
-15.04
|
|
Ranking
|
II
|
I
|
III
|
VI
|
VII
|
IV
|
V
|
VIII
|
IX
|
X
|
2. Manpower cost:
Number of employees and monetary and non-monetary
benefits offered to them by banks decide the quantum of manpower cost. The
manpower cost is another major expense for a bank. Hence, the size of manpower
cost depends on the number of employees as well as monetary and non-monetary
benefits given to the employees. The information pertaining to manpower cost of
the selected banks is displayed in Table 5.
Table 5 shows the average manpower cost incurred by
each bank and it confirms that UBI has spent the lowest average manpower cost
while PNB has incurred the highest average manpower cost among PSBs. On the
other hand, YB has incurred the lowest average manpower cost whereas ICICI has
spent the highest average manpower cost among PvtSBs.
HO = “Banks have demonstrated a consistent performance
in incurring on manpower cost”
Table 5 indicates that there is a consistent
performance in manpower cost incurred by BOI, BOB, CAN, AXIS and HDFC as their
t-Test values < ± 1.943 but that is not
the case with the remaining banks. Marketing agenda in a bid to suit to their
deposit and loan schemes. On the other hand, the administrative expenses
3. Selling and Administrative expenses:
Banks ought to market their financial products
rigorously. This marketing activity is carried out through different means of
marketing and the marketing strategies adopted differ from bank to banks since
the banks follow their own
include rent of premises hired, electricity charges and
maintenance of capital assets from time to time. The selling and administrative
expenses of the selected PSBs and PvtSBs are shown in
Table 6.
Table 6 presents the average selling and administrative
expenses incurred by each bank and it proves that UBI has spent the lowest
average selling and administrative expenses but CAN has incurred the highest
average selling and administrative expenses among PSBs. On the other hand, YB
has incurred the lowest average selling and administrative expenses and ICICI
has spent the highest average selling and administrative expenses among PvtSBs.
HO=“Banks have demonstrated a consistent performance
in incurring on selling and administrative expenses”
BOI, PNB, HDFC, BOB, AXIS, UBI and CAN have
demonstrated a consistent performance in spending on their selling and
administrative expenses as their t-Test values < ± 1.943 while the remaining banks have failed to
demonstrate the consistent performance.
Table 6: Selling and Administrative Cost ( in crores)
|
Sl
No
|
Year
|
PSBs
|
PvtSBs
|
|
BOB
|
BOI
|
CAN
|
PNB
|
UBI
|
AXIS
|
HDFC
|
ICICI
|
KMB
|
YB
|
|
1
|
2005
|
757.74
|
642.15
|
1174.32
|
618.28
|
439.64
|
207.10
|
506.44
|
1040.49
|
103.78
|
7.40
|
|
2
|
2006
|
714.77
|
858.15
|
1061.42
|
638.79
|
414.23
|
406.12
|
943.03
|
2360.72
|
142.87
|
19.23
|
|
3
|
2007
|
646.25
|
957.63
|
957.77
|
1032.50
|
620.16
|
589.31
|
727.53
|
4900.67
|
286.82
|
29.44
|
|
4
|
2008
|
927.20
|
1122.39
|
1491.09
|
884.19
|
946.34
|
952.61
|
974.79
|
5834.95
|
326.66
|
60.27
|
|
5
|
2009
|
885.24
|
1120.62
|
1540.27
|
1406.42
|
1082.54
|
1572.83
|
2851.26
|
5977.72
|
552.91
|
125.49
|
|
6
|
2010
|
1627.56
|
2334.80
|
2164.65
|
1701.46
|
1225.57
|
2443.05
|
3395.83
|
6056.48
|
648.07
|
182.76
|
|
7
|
2011
|
1885.00
|
1720.85
|
1817.82
|
2813.45
|
1814.19
|
2406.59
|
2510.82
|
3785.13
|
487.82
|
185.25
|
|
Total
|
7443.76
|
8756.59
|
10207.34
|
9095.09
|
6542.67
|
8577.61
|
11909.70
|
29956.16
|
2548.93
|
609.84
|
|
Average
|
1063.39
|
1250.94
|
1458.19
|
1299.30
|
934.67
|
1225.37
|
1701.39
|
4279.45
|
364.13
|
87.12
|
|
S D
|
488.63
|
583.10
|
432.95
|
775.61
|
499.17
|
929.67
|
1178.13
|
1969.10
|
206.43
|
76.66
|
|
C V
|
45.95
|
46.61
|
29.69
|
59.69
|
53.41
|
75.87
|
69.25
|
46.01
|
56.69
|
87.99
|
|
t-Test
|
-0.69
|
0.21
|
1.45
|
0.31
|
-1.31
|
-0.81
|
0.35
|
3.42
|
-13.85
|
-46.15
|
|
Ranking
|
IV
|
I
|
VII
|
II
|
VI
|
V
|
III
|
VIII
|
IX
|
X
|
Table 7:
Miscellaneous Expenses ( in crores)
|
Sl
No
|
Year
|
PSBs
|
PvtSBs
|
|
BOB
|
BOI
|
CAN
|
PNB
|
UBI
|
AXIS
|
HDFC
|
ICICI
|
KMB
|
YB
|
|
1
|
2005
|
1386.65
|
1048.44
|
897.38
|
1528.37
|
792.15
|
345.38
|
634.49
|
1881.77
|
60.36
|
10.15
|
|
2
|
2006
|
1016.85
|
831.91
|
894.05
|
1765.27
|
956.93
|
568.35
|
1035.10
|
2616.78
|
130.17
|
54.90
|
|
3
|
2007
|
1656.81
|
1211.89
|
1402.58
|
1738.38
|
1206.30
|
812.03
|
2113.28
|
3426.32
|
186.79
|
119.72
|
|
4
|
2008
|
1564.36
|
1484.26
|
958.76
|
1966.98
|
1038.15
|
1483.94
|
3295.22
|
3533.03
|
345.60
|
215.45
|
|
5
|
2009
|
2189.99
|
2416.02
|
1481.42
|
2337.80
|
1198.08
|
2008.57
|
3197.49
|
4098.22
|
193.91
|
268.75
|
|
6
|
2010
|
1478.21
|
1899.36
|
1146.44
|
3137.42
|
1351.53
|
2502.55
|
3169.12
|
2780.03
|
396.47
|
415.84
|
|
7
|
2011
|
2324.94
|
2626.91
|
1700.34
|
3456.02
|
1602.94
|
3496.55
|
5205.97
|
3809.93
|
564.53
|
560.64
|
|
Total
|
11617.81
|
11518.79
|
8480.97
|
15930.24
|
8146.08
|
11217.37
|
18650.67
|
22146.08
|
1877.83
|
1645.45
|
|
Average
|
1659.69
|
1645.54
|
1211.57
|
2275.75
|
1163.73
|
1602.48
|
2664.38
|
3163.73
|
268.26
|
235.06
|
|
S D
|
457.09
|
689.65
|
320.39
|
746.40
|
267.01
|
1143.91
|
1553.24
|
773.09
|
175.43
|
198.56
|
|
C V
|
27.54
|
41.91
|
26.44
|
32.80
|
22.94
|
71.38
|
58.30
|
24.44
|
65.39
|
84.47
|
|
t-Test
|
0.37
|
0.19
|
-2.90
|
2.25
|
-3.92
|
0.03
|
1.70
|
5.00
|
-18.41
|
-16.68
|
|
Ranking
|
III
|
II
|
VI
|
V
|
VII
|
I
|
IV
|
VIII
|
X
|
IX
|
4. Miscellaneous expenses:
Banks are required to spend money on various
miscellaneous items of expenses namely travelling and dearness allowance,
printing and stationery, postage and telegram, refreshments, community
services, etc. Such expenses form miscellaneous expenses for banks and the
amount of miscellaneous expenses vary from one bank to others. Hence, the
miscellaneous expenses of the selected PSBs and PvtSBs
are portrayed in Table 7.
Analysis of miscellaneous expenses reveals (Table 7)
that among PSBs, UBI has spent the lowest average miscellaneous expenses
whereas PNB has the highest average miscellaneous expenses. On the other hand,
YB has the lowest average miscellaneous expenses but ICICI has the highest
average miscellaneous expenses among PvtSBs.
HO= “Banks have demonstrated a consistent performance
in incurring on miscellaneous expenses”
It may be inferred from Table 7 that there is a
consistent performance in miscellaneous expenses incurred by AXIS, BOI, BOB and
HDFC as their t-Test values < ± 1.943 and the said hypothesis is disproved for the remaining
banks.
ANALYSIS OF PROFIT ITEMS:
1. Net profit:
The main motto of every
business is to earn profit from its activities. Similarly, banks also strive to
generate profit from their banking activities. Thus, the profit is a
prerequisite for bank’s perpetuity. In this context, a bank has to strike a
healthy balance between its incomes and expenses so as to earn profits from its
banking operations. The higher the income as well as the lesser the expenses,
the higher would be the net profits and vice versa. The data relating to net
profit of the selected PSBs and PvtSBs are shown
Table 8.
Table 8 shows that the average net profit of PNB is the
highest whereas UBI has the lowest average net profit among PSBs. Among PvtSBs, the average net profit of ICICI is the highest but
YB has the lowest average net profit.
HO=“Banks have demonstrated a consistent performance
in generating net profit”
BOB, AXIS, CAN, BOI, HDFC and PNB have exhibited the
consistent performance in earning net profits since their t-Test values <
± 1.943 but that is not the case with the remaining
banks.
Table 8: Net
Profit ( in Crores)
|
Sl
No
|
Year
|
PSBs
|
PvtSBs
|
|
BOB
|
BOI
|
CAN
|
PNB
|
UBI
|
AXIS
|
HDFC
|
ICICI
|
KMB
|
YB
|
|
1
|
2005
|
676.80
|
340.05
|
1109.50
|
1410.12
|
719.06
|
323.78
|
853.62
|
2005.20
|
84.89
|
(3.76)
|
|
2
|
2006
|
1050.07
|
701.44
|
1343.22
|
1439.31
|
675.18
|
485.08
|
1115.94
|
2540.07
|
118.23
|
55.32
|
|
3
|
2007
|
1026.46
|
1123.17
|
1420.81
|
1540.08
|
845.39
|
659.03
|
1382.54
|
3110.22
|
141.37
|
94.37
|
|
4
|
2008
|
1435.52
|
2009.40
|
1565.01
|
2048.76
|
1387.03
|
1071.03
|
1590.18
|
4157.73
|
293.93
|
200.02
|
|
5
|
2009
|
2227.20
|
3007.35
|
2072.42
|
3090.88
|
1726.55
|
1815.36
|
2244.94
|
3758.13
|
276.10
|
303.84
|
|
6
|
2010
|
3058.33
|
1741.07
|
3021.43
|
3905.36
|
2074.92
|
2514.53
|
2948.70
|
4024.98
|
561.11
|
477.74
|
|
7
|
2011
|
4241.68
|
2488.71
|
4025.89
|
4433.50
|
2081.95
|
3388.49
|
3926.40
|
5151.38
|
818.18
|
727.14
|
|
Total
|
13716.06
|
11411.19
|
14558.28
|
17868.01
|
9510.08
|
10257.30
|
14062.32
|
24747.71
|
2293.81
|
1854.67
|
|
Average
|
1959.44
|
1630.17
|
2079.75
|
2552.57
|
1358.58
|
1465.33
|
2008.90
|
3535.39
|
327.69
|
264.95
|
|
S D
|
1297.75
|
963.83
|
1069.06
|
1257.06
|
620.75
|
1154.09
|
1104.19
|
1064.66
|
269.69
|
261.37
|
|
C V
|
66.23
|
59.12
|
51.40
|
49.25
|
45.69
|
78.76
|
54.96
|
30.11
|
82.30
|
98.65
|
|
t-Test
|
0.08
|
-0.73
|
0.37
|
1.24
|
-2.20
|
-0.12
|
1.08
|
4.64
|
-10.83
|
-11.77
|
|
Ranking
|
I
|
IV
|
III
|
VI
|
VII
|
II
|
V
|
VIII
|
IX
|
X
|
Table 9:
Earnings Per Share (Amount in )
|
Sl
No
|
Year
|
PSBs
|
PvtSBs
|
|
BOB
|
BOI
|
CAN
|
PNB
|
UBI
|
AXIS
|
HDFC
|
ICICI
|
KMB
|
YB
|
|
1
|
2005
|
23.08
|
6.98
|
27.06
|
44.72
|
15.63
|
11.83
|
27.55
|
27.22
|
6.88
|
(0.19)
|
|
2
|
2006
|
28.83
|
14.39
|
32.76
|
45.65
|
13.37
|
17.41
|
35.64
|
28.55
|
3.88
|
2.05
|
|
3
|
2007
|
28.18
|
23.04
|
34.65
|
48.84
|
16.74
|
23.40
|
43.29
|
34.59
|
4.33
|
3.37
|
|
4
|
2008
|
39.41
|
38.26
|
38.17
|
64.98
|
27.46
|
29.94
|
44.87
|
37.37
|
8.53
|
6.76
|
|
5
|
2009
|
61.14
|
57.26
|
50.55
|
98.03
|
34.18
|
50.57
|
52.77
|
33.76
|
7.99
|
10.23
|
|
6
|
2010
|
83.96
|
33.15
|
73.69
|
123.86
|
41.08
|
62.06
|
64.42
|
36.10
|
16.12
|
14.06
|
|
7
|
2011
|
108.33
|
45.54
|
90.88
|
139.94
|
39.71
|
82.54
|
84.40
|
44.73
|
11.10
|
20.95
|
|
Total
|
372.93
|
218.62
|
347.76
|
566.02
|
188.17
|
277.75
|
352.94
|
242.32
|
58.83
|
57.23
|
|
Average
|
53.28
|
31.23
|
49.68
|
80.86
|
26.88
|
39.68
|
50.42
|
34.62
|
8.40
|
8.18
|
|
S D
|
32.57
|
17.67
|
23.91
|
39.70
|
11.77
|
26.10
|
19.06
|
5.84
|
4.21
|
7.47
|
|
C V
|
61.14
|
56.59
|
48.13
|
49.10
|
43.80
|
65.78
|
37.80
|
16.86
|
50.10
|
91.35
|
|
t-Test
|
0.37
|
-2.38
|
0.13
|
2.00
|
-4.47
|
1.07
|
2.85
|
2.67
|
-11.55
|
-6.59
|
|
Ranking
|
II
|
V
|
I
|
IV
|
VIII
|
III
|
VII
|
VI
|
X
|
IX
|
2. Earnings per share (EPS): EPS plays a crucial role in deciding the healthy
financial status of a bank. The distributable profits belong to the equity
shareholders who bear the burden of any eventuality. It is essential to arrive
at EPS by dividing such distributable profits by the number of outstanding
equity shares. EPS is a key indicator of bank’s performance in a year since a
soaring EPS enables a bank to declare higher dividend to its shareholders as
well as pushes up the market price of its shares. Hence, the shareholders of
banks smartly eye on the distributable profits year-on-year basis as well as
they are worried of the creation of wealth for them by their bank. Hence, EPS
has its own significance from the view point of shareholders. The data relating
to EPS of the selected PSBs and PvtSBs are portrayed
in Table 9.
Table 9 portrays that average earnings per share of PNB
is the highest whereas UBI has the lowest average earnings per share among
PSBs. On the other hand, the average earnings per share of HDFC is the highest
but YB has the lowest average earnings per share among PvtSBs.
HO=“Banks have demonstrated a consistent performance
in earnings per share”
Table 9 presents that there is a consistent performance
in earnings per share of CAN, BOB and AXIS, since their t-Test values < ± 1.943 and the said hypothesis is invalidated for the
remaining banks.
3. Equity dividend:
Out of distributable profits, some portion is retained in the business for
various purposes. The remaining amount of distributable profit is distributed
among the equity shareholders as equity dividend every year subject to profit
earned by a bank. Equity dividend is first declared and paid to the
shareholders when the profits are sufficient to do so. The information relating
to equity dividend declared and paid by the selected PSBs and PvtSBs is presented in Table 10.
It may be inferred from Table 10 that the average
equity dividend paid by PNB to its equity shareholders is the highest whereas
UBI paid the lowest average equity dividend to its equity shareholders among
PSBs. On the other hand, among PvtSBs ICICI has paid
the highest average equity dividend while YB paid the least average equity
dividend to its equity shareholders.
HO=“Banks have demonstrated a consistent performance
in paying equity dividend”
CAN, BOB, AXIS and PNB have demonstrated the consistent
performance in paying equity dividend to their shareholders since their t-Test
values < ±
1.943 but that is not the
case with the remaining banks.
Table 10: Equity
Dividend (In percentage)
|
Sl
No
|
Year
|
PSBs
|
PvtSBs
|
|
BOB
|
BOI
|
CAN
|
PNB
|
UBI
|
AXIS
|
HDFC
|
ICICI
|
KMB
|
YB
|
|
1
|
2005
|
50.00
|
20.00
|
55.00
|
60.00
|
35.00
|
28.00
|
45.00
|
85.00
|
12.50
|
0.00
|
|
2
|
2006
|
50.00
|
34.00
|
66.00
|
60.00
|
35.00
|
35.00
|
55.00
|
85.00
|
6.00
|
0.00
|
|
3
|
2007
|
60.00
|
35.00
|
70.00
|
100.00
|
35.00
|
45.00
|
70.00
|
100.00
|
7.00
|
0.00
|
|
4
|
2008
|
80.00
|
40.00
|
80.00
|
100.00
|
40.00
|
60.00
|
85.00
|
110.00
|
7.50
|
0.00
|
|
5
|
2009
|
90.00
|
80.00
|
80.00
|
200.00
|
50.00
|
100.00
|
100.00
|
110.00
|
7.50
|
0.00
|
|
6
|
2010
|
150.00
|
70.00
|
100.00
|
220.00
|
55.00
|
120.00
|
120.00
|
120.00
|
8.50
|
15.00
|
|
7
|
2011
|
165.00
|
70.00
|
110.00
|
220.00
|
80.00
|
140.00
|
165.00
|
140.00
|
10.00
|
25.00
|
|
Total
|
645.00
|
349.00
|
561.00
|
960.00
|
330.00
|
528.00
|
640.00
|
750.00
|
59.00
|
40.00
|
|
Average
|
92.14
|
49.86
|
80.14
|
137.14
|
47.14
|
75.43
|
91.43
|
107.14
|
8.43
|
5.71
|
|
S D
|
47.25
|
23.02
|
19.24
|
73.42
|
16.55
|
44.36
|
41.40
|
19.55
|
2.19
|
10.18
|
|
C V
|
51.27
|
46.18
|
24.01
|
53.54
|
35.10
|
58.81
|
45.29
|
18.25
|
25.95
|
178.10
|
|
t-Test
|
0.56
|
-3.34
|
-0.15
|
1.86
|
-5.05
|
0.98
|
2.00
|
6.20
|
-55.09
|
-12.50
|
|
Ranking
|
II
|
VI
|
I
|
IV
|
VII
|
III
|
V
|
VIII
|
X
|
IX
|
Table 11: Book
Value Per Share (Amount in)
|
Sl
No
|
Year
|
PSBs
|
PvtSBs
|
|
BOB
|
BOI
|
CAN
|
PNB
|
UBI
|
AXIS
|
HDFC
|
ICICI
|
KMB
|
YB
|
|
1
|
2005
|
191.90
|
88.21
|
146.15
|
248.93
|
68.23
|
87.96
|
145.86
|
170.35
|
61.38
|
10.85
|
|
2
|
2006
|
215.35
|
99.03
|
171.19
|
287.79
|
81.02
|
103.06
|
169.24
|
249.55
|
27.95
|
21.21
|
|
3
|
2007
|
237.46
|
117.89
|
197.83
|
321.65
|
93.71
|
120.88
|
201.42
|
270.37
|
50.95
|
28.11
|
|
4
|
2008
|
303.18
|
168.06
|
202.33
|
341.98
|
111.33
|
245.13
|
324.38
|
417.64
|
104.26
|
44.59
|
|
5
|
2009
|
352.37
|
224.39
|
244.87
|
416.74
|
139.66
|
284.50
|
344.44
|
444.94
|
112.98
|
54.69
|
|
6
|
2010
|
414.71
|
243.75
|
305.83
|
514.77
|
174.37
|
395.99
|
470.19
|
463.01
|
130.40
|
90.96
|
|
7
|
2011
|
536.16
|
292.26
|
405.00
|
632.48
|
211.31
|
462.77
|
545.53
|
478.31
|
92.74
|
109.29
|
|
Total
|
2251.13
|
1233.59
|
1673.20
|
2764.34
|
879.63
|
1700.29
|
2201.06
|
2494.17
|
580.66
|
359.70
|
|
Average
|
321.59
|
176.23
|
239.03
|
394.91
|
125.66
|
242.90
|
314.44
|
356.31
|
82.95
|
51.39
|
|
S D
|
123.28
|
79.08
|
89.74
|
136.77
|
52.32
|
148.30
|
153.26
|
123.32
|
37.01
|
36.68
|
|
C V
|
38.33
|
44.87
|
37.54
|
34.63
|
41.63
|
61.06
|
48.74
|
34.61
|
44.61
|
71.38
|
|
t-Test
|
1.39
|
-2.33
|
-0.34
|
2.57
|
-5.89
|
0.55
|
1.68
|
2.91
|
-8.38
|
-10.57
|
|
Ranking
|
III
|
V
|
I
|
VI
|
VIII
|
II
|
IV
|
VII
|
IX
|
X
|
4. Book value of shares:
A portion of distributable profits is retained in the
business for various purposes. Hence, it remains in the business as long as it
is not spent for the purposes intended. Thus, a bank gradually starts creating
wealth once it has been well positioned in the industry by catering to the
needs of its stakeholders. The so created wealth wholly belongs to the bank
itself and it leads to increase in the book value per share. The book value of
shares is calculated by dividing the net worth of a bank by the number of its
equity shares outstanding. The higher the book value the higher is the market
price of shares and vice versa. The book value demonstrates the bank’s
financial strength. The data pertaining to the book value per share of the
selected PSBs and PvtSBs is portrayed in Table 11.
Table 11 indicates that the average book value per
share of PNB is the highest while the same is the lowest in the case of UBI
among PSBs. On the other hand, the average book value per share of ICICI is the
highest but it is the lowest in respect of YB.
HO=“Banks have demonstrated a consistent performance
in creating book value per share”
Table 11 reveals that there is a consistent performance
in book value per share of CAN, AXIS, BOB and HDFC as their t-Test values <±
1.943 but, the said hypothesis is rejected in the
case of other banks.
A SUMMARY OF HYPOTHESES
TESTED:
The hypotheses tested for all operating dimensions are
summarized for their easy understanding in this section. The summary covers (A)
Hypotheses tested for income items, (B) Hypotheses tested for expense items and
(C) Hypotheses tested for profit items.
SUMMARY OF HYPOTHESES TESTED FOR INCOME ITEMS:
Income items are (i) Interest
income and (ii) Other incomes. The hypotheses set for these two income items
are tested previously with the help of t-Test value. Now, they are summarized
for their easy interpretation. The information pertaining to summary of
hypotheses tested for income items are presented in Table 12.
Table 12: Summary of
Hypotheses Tested for Income Items
|
Item
|
PSBs
|
PvtSBs
|
|
Hypothesis
|
Hypothesis
|
|
Accepted
|
Rejected
|
Accepted
|
Rejected
|
|
Income
|
1
|
BOB, BOI, CAN, PNB, UBI
|
--
|
AXIS, HDFC,
|
ICICI, KMB, YB
|
|
2
|
BOB, BOI, CAN, PNB
|
UBI
|
AXIS, HDFC
|
ICICI, KMB, YB
|
Sources: Table from 2 to 3
It may be inferred from Table 12 that among all PSBs,
both the hypotheses of income items are proved in the case of BOB, BOI, CAN and
PNB but only one hypothesis i.e. (1) is proved in respect of UBI. On the other
hand, both the hypotheses of income items are also accepted in the case of AXIS
and HDFC among PvtSBs.
SUMMARY OF HYPOTHESES TESTED FOR EXPENSE ITEMS:
Interest expense, manpower cost, selling and
administrative and miscellaneous expenses are the main expense items. The
hypotheses tested for these expense items are now summarized. The information
relating to summary of hypotheses tested for expense items is portrayed in
Table 13.
Table 13: Summary of Hypotheses Tested for Expense Items
|
Item
|
PSBs
|
PvtSBs
|
|
Hypothesis
|
Hypothesis
|
|
Accepted
|
Rejected
|
Accepted
|
Rejected
|
|
Expense
|
1
|
BOB, BOI, CAN, PNB, UBI
|
--
|
AXIS, HDFC
|
ICICI, KMB, YB
|
|
2
|
BOB, BOI, CAN,
|
PNB, UBI
|
AXIS, HDFC
|
ICICI, KMB, YB
|
|
3
|
BOB, BOI, CAN, PNB, UBI
|
--
|
AXIS, HDFC
|
ICICI, KMB, YB
|
|
4
|
BOB, BOI
|
CAN, PNB, UBI
|
AXIS, HDFC
|
ICICI, KMB, YB
|
Sources: Table from 4 to 7
Table 13 portrays that all the four hypotheses of
expense items are accepted in the case of BOB and BOI, three hypotheses i.e.
(1) to (3) in the case of CAN and two hypotheses i.e. (1) and (3) in respect of
PNB and UBI among PSBs. On the other hand, all the four hypotheses of expense
items are proved in the case of AXIS and HDFC among PvtSBs.
SUMMARY OF HYPOTHESES TESTED FOR PROFIT ITEMS:
The equity shareholders of banks always eye on the
distributable profits of their banks. The distributable profits are used either
to pay dividend on equity shares or to retain in the business for creation of
book value per share. The hypotheses tested for the profit items are
summarized. The information regarding the summary of hypotheses tested for
profit items is displayed in Table 14.
Table 14 reveals that all the four hypotheses of profit
items are proved in respect of BOB and CAN, two hypotheses i.e. (1) and (3) in
the case of PNB and only one hypothesis i.e. (1) in respect of BOI among PSBs. On the other
hand, all the four hypotheses of profit items are proved in the case of AXIS
and only two hypotheses i.e. (1) and (4) are validated for HDFC among PvtSBs.
Table 14: Summary of Hypotheses Tested for Profit Items
|
Item
|
PSBs
|
PvtSBs
|
|
Hypothesis
|
Hypothesis
|
|
Accepted
|
Rejected
|
Accepted
|
Rejected
|
|
Profit
|
1
|
BOB, BOI, CAN, PNB
|
UBI
|
AXIS, HDFC
|
ICICI, KMB, YB
|
|
2
|
BOB, CAN
|
BOI, PNB, UBI
|
AXIS
|
HDFC, ICICI, KMB, YB
|
|
3
|
BOB, CAN, PNB
|
BOI, UBI
|
AXIS
|
HDFC, ICICI, KMB, YB
|
|
4
|
BOB, CAN
|
BOI, PNB, UBI
|
AXIS, HDFC
|
ICICI, KMB, YB
|
Sources: Table
from 8 to 11
OPERATING DIMENSIONWISE RANKINGS:
Banks are assigned the ranks separately to reveal their
consistent performance in respect of their income, expense and profit items
because one bank may secure the first rank for one operating dimension but
another rank for another operating dimension. Thus, the overall ranking varies
from bank to banks.
INCOME ITEMWISE RANKINGS:
The banks generate incomes from their operations but
such income generation is subject to a variation from year to year. For example
one bank may generate more income in a particular year and lower income in
another year. Hence, the income generation fluctuates from one to another bank
and thereby their ranking is also influenced. The information relating to
income item wise raking of banks is shown in Table 13.
Table 13 indicates that BOB has shown the most
consistent performance in generating income from its operations whereas KMB has
indicated the least consistent performance in generating income from its
operations. In terms of consistency in performance with regard to income
earning, the selected banks have been ranked in the order from one to ten as
follows: 1. BOB, 2. BOI, 3. HDFC, 4. AXIS, 5. CAN, 6. PNB, 7. UBI, 8. ICICI. 9.
YB and 10. KMB.
PROFIT ITEMWISE RANKINGS:
Banks must strive to strike a healthy balance between
incomes and expenses in bid to earn higher profits for paying dividends as well
as for creating wealth for the equity shareholders year on year basis. However,
the profit earnings of banks depend much on how their incomes are adjusted
against their expenses. In other words, the higher the profits and the lower the
expenses, the greater are the profit earnings of banks and vice versa. The information regarding the profit itemwise rankings is presented in Table 15.
Table 13: Income
Itemwise Rankings Based on Average t-Test Scores
|
Operating
dimension
|
PSBs
|
PvtSBs
|
|
BOB
|
BOI
|
CAN
|
PNB
|
UBI
|
AXIS
|
HDFC
|
ICICI
|
KMB
|
YB
|
|
Income
|
1
|
-0.24
|
-0.09
|
0.54
|
1.00
|
-1.90
|
-0.66
|
0.73
|
4.07
|
-11.56
|
-12.96
|
|
2
|
0.20
|
0.21
|
0.59
|
1.06
|
-2.99
|
-0.30
|
0.13
|
5.64
|
-37.99
|
-21.71
|
|
Total
|
-0.04
|
0.12
|
1.13
|
2.05
|
-4.89
|
-0.96
|
0.85
|
9.71
|
-49.55
|
-34.67
|
|
Average
|
-0.00
|
0.01
|
0.11
|
0.21
|
-0.49
|
-0.10
|
0.09
|
0.97
|
-4.95
|
-3.47
|
|
Ranking
|
I
|
II
|
V
|
VI
|
VII
|
IV
|
III
|
VIII
|
X
|
IX
|
Sources: Table from 2 to 3
Table 14: Expense Itemwise
Rankings Based on Average t-Test Scores
|
Operating
dimension
|
PSBs
|
PvtSBs
|
|
BOB
|
BOI
|
CAN
|
PNB
|
UBI
|
AXIS
|
HDFC
|
ICICI
|
KMB
|
YB
|
|
Expense
|
1
|
-0.36
|
0.07
|
0.84
|
0.52
|
-1.65
|
-0.85
|
-0.24
|
4.12
|
-16.44
|
-11.40
|
|
2
|
0.13
|
-0.09
|
-0.37
|
2.45
|
-2.86
|
-0.68
|
1.33
|
2.98
|
-4.68
|
-15.04
|
|
3
|
-0.69
|
0.21
|
1.45
|
0.31
|
-1.31
|
-0.81
|
0.35
|
3.42
|
-13.85
|
-46.15
|
|
4
|
0.37
|
0.19
|
-2.90
|
2.25
|
-3.92
|
0.03
|
1.70
|
5.00
|
-18.41
|
-16.68
|
|
Total
|
-0.55
|
0.38
|
-0.97
|
5.52
|
-9.74
|
-2.30
|
3.14
|
15.51
|
-53.38
|
-89.27
|
|
Average
|
-0.05
|
0.04
|
-0.10
|
0.55
|
-0.97
|
-0.23
|
0.31
|
1.55
|
-5.34
|
-8.93
|
|
Ranking
|
II
|
I
|
III
|
VI
|
VII
|
IV
|
V
|
VIII
|
IX
|
X
|
Sources: Table from 4 to 7
Table 15: Profit
Itemwise Rankings Based on Average t-Test Scores
|
Operating dimension
|
PSBs
|
PvtSBs
|
|
BOB
|
BOI
|
CAN
|
PNB
|
UBI
|
AXIS
|
HDFC
|
ICICI
|
KMB
|
YB
|
|
Profit
|
1
|
0.08
|
-0.73
|
0.37
|
1.24
|
-2.20
|
-0.12
|
1.08
|
4.64
|
-10.83
|
-11.77
|
|
2
|
0.37
|
-2.38
|
0.13
|
2.00
|
-4.47
|
1.07
|
2.85
|
2.67
|
-11.55
|
-6.59
|
|
3
|
0.56
|
-3.34
|
-0.15
|
1.86
|
-5.05
|
0.98
|
2.00
|
6.20
|
-55.09
|
-12.50
|
|
4
|
1.39
|
-2.33
|
-0.34
|
2.57
|
-5.89
|
0.55
|
1.68
|
2.91
|
-8.38
|
-10.57
|
|
Total
|
2.40
|
-8.78
|
0.02
|
7.68
|
-17.62
|
2.49
|
7.61
|
16.42
|
-85.86
|
-41.42
|
|
Average
|
0.24
|
-0.88
|
0.00
|
0.77
|
-1.76
|
0.25
|
0.76
|
1.64
|
-8.59
|
-4.14
|
|
Ranking
|
II
|
VI
|
I
|
V
|
VIII
|
III
|
IV
|
VII
|
X
|
IX
|
Sources: Table from 4 to 7
Table 15 indicates that CAN has exhibited the most
consistent performance in earning from its operations whereas KMB has indicated
the least consistent performance in profit making from its operations. In terms
of consistency in performance with regard to profit making, the selected banks
have been ranked in the order from one to ten as follows: 1. CAN, 2. BOB, 3.
AXIS, 4. HDFC, 5. PNB, 6. BOI, 7. ICICI, 8. UBI. 9. YB and 10. KMB.
XIII. OVERALL RANKING OF BANKS BASED ON AVEARGE T-TEST
SCORES:
In the preceding discussion, each bank is rated against
each operating dimension of income, expense and profit on the basis of their
consistency in performance. The banks with the least t-Test scores in the
selected operating dimension have earned the highest performance rating (ranks)
and vice versa. In furtherance of the inquiry into the consistency in
performance, an overall rank matrix is constructed to accord the final
performance ratings to the selected banks on the basis of their average t-Test
scores of ranks obtained in each operating dimension. The lower the number of
rank earned, the better is the overall performance of a bank and vice versa.
The details are presented in Table 16.
Table 16 reveals that CAN has demonstrated the most
consistency in its performance with regard to all operating dimensions
identified for this study by securing the overall first rank among all the
banks. On the other hand, KMB has exhibited the least consistency in its
overall performance since it has succeeded in securing the overall tenth rank.
In terms of consistency in overall performance, the selected banks have been
ranked in the order from one to ten as follows: 1. CAN, 2. AXIS, 3. BOB, 4.
BOI, 5. HDFC, 6. PNB, 7. UBI, 8. ICICI. 9. YB and 10. KMB.
It may be inferred from Table 17 that CAN has emerged
as the most consistent performer by securing the overall first rank among PSBs
in respect of operating dimensions identified for this study. The remaining
PSBs that fall in the order include BOB (Rank-II), BOI (Rank-III), PNB
(Rank-IV) and UBI (Rank-V). On the other hand, AXIS has also emerged the most
consistent performer by obtaining the overall first rank among PvtSBs in respect of all operating dimensions. The
remaining PvtSBs that line up in the declining order
include HDFC (Rank-II), ICICI (Rank-III), YB (Rank-IV) and KMB (Rank-V).
SUGGESTIONS:
The preceding discussion throws light on how the banks
which have performed better in the selected indicators could not maintain
consistency in those areas of performance. In the volatile environment, a
consistency in banks’ performance holds key to their sustainability. Therefore,
banks have to perform consistently by striking a happy balance between the
associated incomes and costs. The banks can afford to pay the interest to
depositors and lenders, dividend to shareholders and create the book value of
shares provided they have earned higher income.
All along, the banks also face challenges posed by business cycles that
can affect their business. The study has found that the majority of selected
banks have demonstrated inconsistency in performance in one or the other
operating dimensions during the study period. These banks are prone to invite
difficulties for themselves during the financial downturn. On the other hand,
banks that have demonstrated a consistent performance in their operating
dimensions can show resilience during the difficult times. Hence, a consistency
in performance in operating dimensions is a key to their perpetual sustenance
during crisis. Banks need to be consistent rather than zigzag in generating
income and spending on costs. A steady and consistent performance helps them
survive any crisis and achieve the desired goals. In addition, the efforts are
to be made in maintaining a consistent growth in EPS with view to create a
higher book value of shares subsequently leading to rise in market value of
business. Above all, the depositors and shareholders need to deal with those
banks that have ensured consistency in
their performance in respect of key operating dimensions. Such banks
would ensure the safety of deposits and investments during the economic
turbulence in particular.
Table 16:
Overall Rank Matrix Based on Average t-Test scores
|
Operating
dimension
|
PSBs
|
PvtSBs
|
|
BOB
|
BOI
|
CAN
|
PNB
|
UBI
|
AXIS
|
HDFC
|
ICICI
|
KMB
|
YB
|
|
Income
|
1
|
-0.24
|
-0.09
|
0.54
|
1.00
|
-1.90
|
-0.66
|
0.73
|
4.07
|
-11.56
|
-12.96
|
|
2
|
0.20
|
0.21
|
0.59
|
1.06
|
-2.99
|
-0.30
|
0.13
|
5.64
|
-37.99
|
-21.71
|
|
Expense
|
1
|
-0.36
|
0.07
|
0.84
|
0.52
|
-1.65-
|
-0.85-
|
-0.24
|
4.12
|
-16.44
|
-11.40
|
|
2
|
0.13
|
-0.09
|
-0.37
|
2.45
|
-2.86
|
-0.68
|
1.33
|
2.98
|
-4.68
|
-15.04
|
|
3
|
-0.69
|
0.21
|
1.45
|
0.31
|
-1.31
|
-0.81
|
0.35
|
3.42
|
-13.85
|
-46.15
|
|
4
|
0.37
|
0.19
|
-2.90
|
2.25
|
-3.92
|
0.03
|
1.70
|
5.00
|
-18.41
|
-16.68
|
|
Profit
|
1
|
0.08
|
-0.73
|
0.37
|
1.24
|
-2.20
|
-0.12
|
1.08
|
4.64
|
-10.83
|
-11.77
|
|
2
|
0.37
|
-2.38
|
0.13
|
2.00
|
-4.47
|
1.07
|
2.85
|
2.67
|
-11.55
|
-6.59
|
|
3
|
0.56
|
-3.34
|
-0.15
|
1.86
|
-5.05
|
0.98
|
2.00
|
6.20
|
-55.09
|
-12.50
|
|
4
|
1.39
|
-2.33
|
-0.34
|
2.57
|
-5.89
|
0.55
|
1.68
|
2.91
|
-8.38
|
-10.57
|
|
Total
|
1.82
|
-8.28
|
0.18
|
15.25
|
-32.25
|
-0.78
|
11.60
|
41.64
|
-188.79
|
-165.36
|
|
Average
|
0.18
|
-0.83
|
0.02
|
1.52
|
-3.22
|
-0.08
|
1.16
|
4.16
|
-18.88
|
-16.54
|
|
Overall
ranking
|
III
|
IV
|
I
|
VI
|
VII
|
II
|
V
|
VIII
|
X
|
IX
|
Sources: From Table 2 to 11
Table 17: Sector
wise Final Rank-Matrix
|
PSBs
|
PvtSBs
|
|
|
Sr no
|
Bank
|
Average t-Test
score
|
Final Rank
|
Sr no
|
Bank
|
Average t-Test
score
|
Final Rank
|
|
1
|
CAN
|
0.02
|
I
|
1
|
AXIS
|
-0.08
|
I
|
|
2
|
BOB
|
0.18
|
II
|
2
|
HDFC
|
1.16
|
II
|
|
3
|
BOI
|
-0.83
|
III
|
3
|
ICICI
|
4.16
|
III
|
|
4
|
PNB
|
1.52
|
IV
|
4
|
YB
|
-18.88
|
IV
|
|
5
|
UBI
|
-3.22
|
V
|
5
|
KMB
|
-16.54
|
V
|
Sources: From
Table 16
CONCLUSION:
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WEBSITES:
i.
Respective Banks
ii.
www.moneycontrol.com
iii.
www.rbi.org
iv.
www.bseindia.com