S.No.	Research paper name	Author	Year	Objective	Conclusion
1.	Analysis of financial performance of selected commercial banks in India	Palamalai Srinivasan, John Britto	2017	To evaluate performance of 11 public sector and 5 private sector banks.	NPA’s increasing level is the most challenging task faced by banks, private banks need to improve turnover and public banks need to improve liquidity positions.
2.	Financial liberalization and bank efficiency: a comparative analysis of India and Pakistan	Ali ataullah, Hang le, Tony cockerill	2014	To make comparative analysis of banks of India and Pakistan	There is still room for improvement in efficiency of banks of both countries.
3.	Measuring financial performance of selected banks using Camel model	Ashish M. joshi, K.G. Sankaranarayanan	2018	To investigate factors that affects financial performance of selected banks	Profit per employee, debt equity ratio, total assets to total deposit ratio, net NPA’s to total advances ratio are major factors impacting financial performance of banks.
4.	Comparative analysis of financial performance of private sectors banks in India	Sumeet gupta, Renu verma	2000	Analyze overall financial performance of major private banks in India	Financial performance of private sectors is needed to be improved more.
5.	Analysis of leverage ratio in selected Indian public and private banks	shipra gupta	2012	To measure financial performance of public and private sector banks	Public banks are different from private banks in terms of various financial ratios
6.	A study on comprehensive problems of HDFC and SBI home loan takers in Andhra Pradesh state	S. Tarakeswara rao	2013	to examine the housing policy framework in India	Reforms have brought many changes in the housing finance.
7.	Financial performance of banks in India: are banks sound enough to be banked upon	Sunita Chaki, Anita Daryal, Dr. Kshamta	2019	to compare financial stability of private and public sector banks	In the past 10 years banking sector has been exposed to external and internal volatility
8.	Analysis of financial performance of banks in India	Jeevan Jayant nagarkar	2015	To check the performance of banks in two time periods and analyze the difference	Commercial banks need to check credit appraisal process to reduce NPA
9.	Impact of monetary policy on profitability of banking sector	Priti Singh, Amit Singla	2013	To find out the effect of determinants of monetary policy on the bank’s profitability	Bank rate, cash reserve ratio, reverse repo rate have great significance on bank’s profitability

OBJECTIVES:

The main aims of this study are described as Follows:

· To compare the financial performance of SBI (state bank of India) and HDFC (housing development finance corporation) bank.

· To observe the difference in the financial performance of banks on the basis of accounting ratios.³

· To study the changes in the performance of both the banks during the 5 years (2015 to 2020).

· To observe the significant factors impacting overall financial performance of both the banks.²

METHODOLOGY USED: -

To provide a comparative analysis of SBI and HDFC bank’s financial performance, various ratios are calculated under this study. All ratios are calculated on the basis of data collected from the financial statements of both the banks through world wide web. Data collected is of the period starting from 2015 to 2020.

Background of selected Banks:

The study is based on comparing the performance of HDFC and SBI bank.

HDFC bank limited is an Indian banking and financial services company headquartered in Mumbai, Maharashtra. It has a base of 104154 permanent employees as of 30^th june, 2019. HDFC bank is India’s largest private sector lender by assets. It is the largest bank in India by market capitalization as of march 2020. HDFC bank has been ranked India’s number 1 bank in FORBES’ world’s best bank report.

SBI bank is a government corporation statutory body headquartered in Mumbai, Maharashtra. SBI is ranked as 236^th in the Fortune global 500 list of world’s biggest corporations of 2019. It is the largest bank in India with a 23% market share in assets, besides a share of one fourth of the total loans and deposit market.

Market Capitalisation As of 4 MAY, 2020 IS AS Follows:

SBI BANK = 1.6 LAKH CRORE RUPEES

HDFC BANK=5 LAKH CRORE RUPEES

Ratios Calculated:

Following ratios are calculated on the basis of which observations are made;

A. Capital Adequacy Ratio:

This is a balance sheet ratio. It is calculated by combining tier1 and tier 2 capitals of banks and dividing it by risk weighted assets of the banks. Stronger ratio indicates higher the position of bank and higher ratio also indicates that more protection will be given to the investors by the banks.

Year	SBI’S Ratio	HDFC’S Ratio
2016	13.12	15.53
2017	13.11	14.55
2018	12.60	14.82
2019	12.72	17.11
2020	13.06	18.52

B. DEBT Equity Ratio⁴

It indicates how much portion of the banking business is financed through debt and how much through equity. It is calculated by dividing the total borrowings by total equity which is shareholder’s net worth. Higher ratio represents poor performance and lower ratio indicates good performance for the shareholders.

Year	SBI’S Ratio	HDFC’S Ratio
2016	14.24	8.25
2017	15.08	8.02
2018	15.79	8.58
2019	16.89	6.97
2020	12.94	7.56

C. Current Ratio:

It is a leverage ratio. It indicates the liquidity or short term solvency ratio of the bank. It is calculated by dividing the current assets of the bank by its current liabilities.

Year	SBI’S Ratio	HDFC’S Ratio
2015	0.33	--
2016	0.36	0.07
2017	0.40	0.06
2018	0.43	0.04
2019	0.38	0.05
2020	0.38	0.04

D. Quick Ratio:

It is a leverage ratio. It indicates the liquidity or short term solvency ratio of the bank. It is calculated by dividing the quick assets of the bank by its current liabilities.

Year	SBI’S Ratio	HDFC’S Ratio
2015	11.92	--
2016	16.03	14.51
2017	12.94	11.19
2018	13.56	17.48
2019	14.07	16.61
2020	10.17	16.62

E. Operating Profit Per Share Ratio:

It is a profit and loss account ratio used to find the operating profit earned per share of the bank.

Year	SBI’S Ratio	HDFC’S Ratio
2015	23.58	--
2016	21.80	33.98
2017	20.98	55.44
2018	20.12	69.06
2019	24.36	57.70
2020	--	26.52

F. Interest Expanded to Interest Earned Ratio:

It is also a profit and loss account ratio. It is calculated by dividing interest expanded by interest earned of the bank in a particular year.

Year	SBI’S Ratio	HDFC’S Ratio
2015	64.04	53.86
2016	64.84	53.94
2017	64.71	51.92
2018	64.03	49.69
2019	61.53	51.08

G. Other Income to Total Income Ratio:

It is also a profit and loss account ratio. It is calculated by dividing other income of the bank to the total income of the bank in a particular year.

Year	SBI’S Ratio	HDFC’S Ratio
2015	19.17	15.85
2016	19.32	15.07
2017	22.83	14.95
2018	19.32	15.84
2019	19.17	15.27

H. Operating Expense to Total Income Ratio:

It is also profit and loss account ratio and is calculated by dividing operating expenses to total income of the bank in a particular year.

Year	SBI’S Ratio	HDFC’S Ratio
2015	27.85	23.08
2016	26.35	22.98
2017	28.25	23.06
2018	30.36	22.66
2019	33.66	21.33

Some other important points of Comparison:

*Net Interest Margin=It is calculated by subtracting interest expenses from interest income and dividing it from average earning assets of the bank. Higher net interest margin would increase profitability of the lender.

HDFC bank’s net interest margin % as of june 2020 = 17.28%

SBI bank’s net interest margin % as of 31^st march 2020=2.94%

In terms of net interest margin % hdfc is better as compared to sbi.

*Return on Equity %= It represents efficiency of banks in utilizing investments to generate income. It is calculated by dividing net income by total equity of the bank and multiplying it by 100.

SBI’s return on equity as of march 2020=10.81%

HDFC’s return on equity as of December 2019=17.64%

*Enterprise Value of The Banks (In Crores) are as Follows:

Year	SBI’s Value	HDFC’s Value
MARCH 2020	35651,310.60	1692,584.96
MARCH 2019	3423,771.88	1624,316.38
MARCH 2018	3141,292.12	1298,053.53
MARCH 2017	2467,752.16,	1049,367.58
MARCH 2016	2075,268.45	840,203.70

CONCLUSION:

It can be concluded from this study that overall performance of HDFC is better as compared to SBI in terms of ratio analysis. It is also observed that overall performance of commercial banks have gone down⁵. Capital adequacy ratio of HDFC was constantly high during the past 5 years as compared to SBI which indicates stronger position of HDFC bank. Similarly debt equity ratio of HDFC was low as compared to SBI during the past 5 years which represents better performance of HDFC as compared to SBI. The liquidity or leverage ratios of HDFC are also better than SBI’ s ratio. All the profit and loss account ratios which are calculated in this study clearly indicates better performance of HDFC as compared to SBI. HDFC bank has also been ranked as India’s number one bank in Forbes’ World’s best bank report (April, 2019) while SBI’ s rank is much lower. SBI bank needs to improve its liquidity position and various other aspects in order to improve its overall performance and ranking. HDFC (Ali Ataullah, 2014) bank emerged as India’s number 1 bank by customers in India, as per Forbes world’s best bank survey. Customers were asked to rate banks on overall recommendations and satisfaction and on 5 key attributes namely trust, terms and conditions, customer services, digital services and financial advice. SBI was ranked 11^th by the customers. Besides all above observations among PSU (Public Sector Undertaking) banks, SBI remains the best play on the gradual recovery in the Indian economy. There is a possibility of improved profitability of SBI in the upcoming years. On the basis of ratio analysis and customer satisfaction level HDFC is better than SBI needs to improve its overall performance. There is still room for improvement of efficiency of banks in India¹. Service and product innovations are key tools for success at present⁷.

RECOMMENDATIONS:

The banks internally need to strengthen themselves by being more competitive along with high degree of transparency and accountability⁸. It is necessary to identify the strengths and weakness of each bank separately. Weak banks may be liquidated or merged with stronger banks to derive the advantage of economies of scale⁸.

REFERENCES:

1. Ali Ataullah, T. C. (2014). Financial liberalization and bank efficiency: A comparative analysisi of India and Pakistan. Applied economics.

2. Ashish M. Joshi, K. S. (2018, December). Measuring financial performance of selected banks using CAMEL model. International journal of research and analytical Reviews, 5(4).

3. Gupta, S. (2012). Analysis of leverage ratio in selected Indian public sector and private sector banks. Asian Journal of Management Research, 3(1).

4. Kankipati Ajay Kumar, D. A. (2017, April). Financial performance of selected public and private sector banks based on CAMEL model with reference to Indian banking sector. International Journal in Management and Social Science, 5(4).

5. Nagarkar, J. J. (2015). Analysis of financial performance of banks in India. Annual Research Journal of Symbiosis Centre for Management Studies, 3.

6. Priti Singh, A. S. (2013). Impact of monetary policy on profitability of banking sector A study of public and private sector banks in India. International journal of Engineering Research and Technology.

7. Rao, S. (2013). A study on comprehensive problems of HDFC and SBI homeloan takers in Andhra Pradesh state. Innovative Journal of Business and Management.

8. Sunita Chaki, D. K. (2019, July). Financia performance of banks in India: Are banks sound enough to be banked upon. International Journal of Innovative Technology and exploring Engineering, 8(95).

Received on 27.07.2020 Modified on 20.11.2020

Asian Journal of Management. 2021; 12(2):111-114.

DOI: 10.52711/2321-5763.2021.00016