State Bank of India Profile - Case Study Example

Financial Concepts Banking sector is very vital in economic development of any or country. This is so because banks mobilize people to save in which later they mobilize these funds deposited into different productive sectors. A good characteristic of the Bank of India is that it has large networks of bank branches, which gives a very wide variety of financial services to people (Investment Corporation of India, 2002). This bank is widely known as SBI and it’s among the leading private bank sector in India. ICICI has 2,533 branches and 6,800 ATMs in India and second largest bank. This project gives detailed financial status of these banks. Data used is entirely secondary information from the year 2008 to year 2012 a period of five years. STATE BANK OF INDIA PROFILE (SBI) This is one of the largest leading banks in India. It has met its strategies of reaching widest number of people in India by setting up its subsidiaries that is 9,000 in number and 54 international offices. These include its branches overseas. Its headquarters is in Mumbai. It has 14 Local Head Offices and 57 Zonal Offices located in well known cities all over the country (Investment Corporation of India, 2002). Has 130 branches oversees. Its market share is 20% among Indian Commercial banks. It has about 46,000 branches with regional ties. It was constituted on 1st July 1955. This was after the State Bank of India Act of 1955. As at the 31st December the banks total assets was Rs 1,335,519.24 while as at December 2011 it was Rs, 1,223,736.21. On the other hand its total liabilities were Rs 1,335,519.22 in December 2012 while in December 2011 it was Rs 1,223,736.20. Its total equity on the same dates was Rs 83,951.20 and Rs 64,986.04 respectively. Its balance in bank was Rs $ 43,087.23 and $ 28,478.65 as at December 2011. The net income for the year ending December 2012 is$ 5,133.87 and $ 4,764.19 for the year 2011. The bank offers banking services and insurance services to its customers. The governance of the bank is directed by its mission statement. Its mission is ‘to provide superior, proactive banking services to niche markets globally, while providing cost effective, respective, responsive services to others in our role as development bank and in doing so, meet the requirement of our stakeholders.’ Its strategy is providing quality services by becoming bank of choice by providing Superior, Proactive, and State of the Art Banking services with the attitude of care and concern for the customers and patrons.” Interest rates for the bank are different depending on the period of tenure. For example for less than 1 year it is 7.5% while in more than an year is 9.0%. The bank has gone digital and can be accessed through http://bankofindia.co.in/. The managing director of the bank is Arundhati Bhattacharya (Investment Corporation of India, 2002). ICICI BANK PROFILE It is the second largest bank in India having its headquarters in Mumbai. It has 2,533 branches and 6,800 ATMs in India. It offers wide range of banking products and services. In addition, it offers venture capital investment banking, assets management and both life and other insurances. It has 2,035 branches and pre sent in 18 countries (Asian Development Bank, 2000). Its peers include Karur Vysya among others Bank Ltd.A good example of directors of the bank is Ms. Chanda Kochhar among others who have made the bank prosper (Investment Corporation of India, 2002). It driving Mission statement ‘to leverage their people, technology, speed and financial capital, to be a bank of first choice, expand their frontiers of their business globally, play a proactive role, maintain healthy financial profit and diversify their earning across business and geographic regions, maintain high standard of governance and Ethics and create value for their shareholders.’ Its website is www.icicibank.com. In terms of liabilities, equity, its assets and net income as at 31st December 2011 and 2012 is as shown in the tables below. ASSETS ICICI BANK SBI BANK YEAR 2012 2011 2010 2009 2008 2012 2011 2010 2009 2008 Cash & Balances with RBI 19,052.73 20,461.29 20,906.97 27,514.29 17,536.33 65,830.41 54,075.94 94,395.50 61,290.87 55,546.17 Balance with Banks, Money at Call 22,364.79 15,768.02 13,183.11 11,359.40 12,430.23 48,989.75 43,087.23 28,478.65 34,892.98 48,857.63 Advances 290,249.44 253,727.66 216,365.90 181,205.60 218,310.85 1,045,616.55 867,578.89 756,719.45 631,914.15 542,503.20 Investments 171,393.60 159,560.04 134,685.96 120,892.80 103,058.31 350,927.27 312,197.61 295,600.57 285,790.07 275,953.96 Gross Block 4,647.06 4,614.69 4,744.26 7,114.12 7,443.71 6,595.71 5,133.87 4,764.19 11,831.63 10,403.06 Accumulated Depreciation 0.00 0.00 0.00 3,901.43 3,642.09 0.00 0.00 0.00 7,713.90 6,828.65 Net Block 4,647.06 4,614.69 4,744.26 3,212.69 3,801.62 6,595.71 5,133.87 4,764.19 4,117.73 3,574.41 Capital Work In Progress 0.00 0.00 0.00 0.00 0.00 409.31 332.68 0.00 295.18 263.44 Other Assets 29,087.07 34,937.10 16,347.47 19,214.93 24,163.62 47,892.03 53,113.02 43,777.85 35,112.76 37,733.27 Total Assets 536,794.69 489,068.80 406,233.67 363,399.71 379,300.96 1,566,261.03 1,335,519.24 1,223,736.21 1,053,413.74 964,432.08 Garph below is a summary of the table above. It helps to show the comparision for trend changes for the 5 years. The graph is drawn as, percentage change in assets agaist the years. On the graphs the red curves represent the trends in the ICICI bank while the blue shows trends in the SBI bank. From the graph it is evident that ICICI has increased its assest more than SBI bank. LIABILITIES AND CAPITAL ICIC BANK SBI BANK Total Share Capital 1,153.64 1,152.77 1,151.82 1,114.89 1,463.29 684.03 671.04 635.00 634.88 634.88 Equity Share Capital 1,153.64 1,152.77 1,151.82 1,114.89 1,113.29 684.03 671.04 635.00 634.88 634.88 Share Application Money 4.48 2.39 0.29 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Preference Share Capital 0.00 0.00 0.00 0.00 350.00 0.00 0.00 0.00 0.00 0.00 Reserves 65,547.84 59,250.09 53,938.82 50,503.48 48,419.73 98,199.65 83,280.16 64,351.04 65,314.32 57,312.82 Revaluation Reserves 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Net Worth 66,705.96 60,405.25 55,090.93 51,618.37 49,883.02 98,883.68 83,951.20 64,986.04 65,949.20 57,947.70 Deposits 292,613.63 255,499.96 225,602.11 202,016.60 218,347.82 1,202,739.57 1,043,647.36 933,932.81 804,116.23 742,073.13 Borrowings 145,341.49 140,164.91 109,554.28 94,263.57 67,323.69 169,182.71 127,005.57 119,568.96 103,011.60 53,713.68 Total Debt 437,955.12 395,664.87 335,156.39 296,280.17 285,671.51 1,371,922.28 1,170,652.93 1,053,501.77 907,127.83 795,786.81 Other Liabilities & Provisions 32,133.60 32,998.69 15,986.35 15,501.18 43,746.43 95,455.07 80,915.09 105,248.39 80,336.70 110,697.57 Total Liabilities 536,794.68 489,068.81 406,233.67 363,399.72 379,300.96 1,566,261.03 1,335,519.22 1,223,736.20 1,053,413.73 964,432.08 The graph shows a summary of the banks liability changes over 5 year. Y-axis represent the years while the X-axis is the percentage change in liabilities. From the graph it is evident that the ICICI bank has increased it liabilities in the five years as compared to the SBI bank. LIABILITIES TREND OVER THE FIVE YEAR PERIOD INCOME ICCI Bank SBI Bank Interest earned 91,667.01 10,0080.73 11,3636.44 147,197.39 1,67,978.14 92,304.07 82,250.24 61,901.76 78,325.47 96,465.26 Interest expended 62,626.46 66,637.51 68,086.40 89,319.55 106,817.91 61,562.11 62,639.27 63,069.87 65,209.19 108,808.50 Net Interest Income 29,040.55 33,443.22 45,550.04 57,877.84 61,160.23 28,407.29 37,261.16 63,208.19 77,502.76 80,345.70 Other income 21,426.08 33,771.10 34,207.48 29,835.43 32,581.69 17,894.83 18,682.02 19,919.75 24,612.80 25,881.81 TOTAL INCOME 204,760.1 233,932.56 261,480.36 324,950.21 368,537.97 200,168.30 200,832.65 208,099.57 245,650.22 331,501.27 EXPENDITURES Interest expended 6,562.11 6,639.27 6069.87 26,209.19 22, 808.50 11,178.40 11,689.50 10,098.65 11,178.40 10,098.65 Operating expenses 2,407.29 2,261.16 2,221.64 9,012.88 7,850.44 4,144.06 4,049.18 3,445.25 4,144.06 3,445.25 Employee cost 999.74 940.64 1,103.10 3,893.29 3,515.28 1,562.35 1,597.73 1,319.51 1,562.35 1,319.51 Other operating expenses 1,407.55 1,320.52 1,118.54 5,119.59 4,335.16 2,483.30 2,482.50 2,301.59 2,483.30 2,301.59 TOTAL EXPENDITURE 8,969.40 8,900.43 8,291.51 35,222.07 30,658.94 19,367.31 18,936.91 17,165.00 19,368.11 14,164.5 NET INCOME 195,790.7 225,032.13 253,188.86 289,728.14 337,879.03 180,800.99 181,895.75 205,797.98 226,282.98 317,336.77 Above data represent the income and expenditure. All organizations incur cost as they have to purchase factors of production so as to produce output. The graph below compares the net income percentages of both companies for the five years. From the graph it is evident that SBI bank made more profits as compared to the ICICI bank in the five year period. SWOT ANALYSIS SBI BANK: this is the leading bank in India as it enjoys it strengths and makes their weaknesses into important tool in the banking industry both internally and externally. Among its strength is that it has very strong home market portions which has enabled it gain competitive advantage. This has enabled pursue growth initiative. It has been able to sweet talk other industries forming a merger that has enabled it to hasten its associate banks hence able to defend its leadership positions. Despite is strengths it has weaknesses (ICICI Bank Limited SWOT Analysis). First is that it has a remarkable reduction of assets ratio quality which has led to increased nonperforming assets. Second is that it is prone to political intervention due to its publicity. In addition the bank has some viable opportunities. First is the presence of E-transactions. If the company adopt this it could make more profits, second is to increase its investment so as to make the best out of it. In addition opportunities exist whereby the bank can invest into any other business to increase its revenues. On the other hand are the threats. The bank is facing a lot of threat from the stiff competition from its peers and that can lead to losses especially from the opened Indian banking sector. Next is economic slowdown that could dramatically affect the banks operations. ICICI BANK: the bank has high number has quite number of strength. First is the fact that it makes use of technology which has enabled it operations to be easy and accurate. In addition it provides a wide variety of products and services to its customers. Also it has high experience in its service deliverance hence high competitive advantage. In addition is that it has very many branches and its subsidiaries and therefore able to provide service to a wider market. On the other hand it has some weaknesses which include too much competition in the banking sector affecting employees and customer management (ICICI Bank Limited SWOT Analysis). It incurs a lot of cash on the banks situated in urban areas. Some of the opportunities that the banks have include increased number of chances to open up banks in the rural areas. The other one is that it can venture into countries that they have not ventured into. Next to maximize use of technology to reap maximum profits. Threats that the bank encounter are not limited to inability to adopt changing and dynamic environment due to its large size. Next are the problems of ever changing terms and conditions the RBI more so the increased competitions. From the above analysis of the information of the banks I would prefer to work or be associated with the SBI bank as compared to ICICI bank. The reason behind my choice is the fact the bank is stable and does not face a lot of challenges to the changing environmental trend as evident in the comparisons for the five years. In addition it’s consistent in its profit stimulation and therefore, for example, if am s shareholder in such a bank I would receive more income due to the increased dividends. Also such banks have wider portfolio of risks and there its fall is almost impossible even during critical economics times. In the granting of our money I would not. The reason behind this is that such a customer is not well known to the bank and therefore this would be a very big risk. Remember, loosing such a huge amount as bad debts is not a joke and could lead to a big Loss. 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