Int ern a tio na l Jo u rna l of Appli ed R esea rch 201 7; 3(2): 449 -4 5 2
ISSN Print: 2394-7500
ISSN Online: 2394-5869
Impact Factor: 5.2
Analysis of financial performance of state bank of
IJAR 2017; 3(2): 449-452
www.allresearchjournal.com
India using camels approach
Received: 21-12-2016
Accepted: 22-01-2017
Ramya S, Narmadha NKB, Lekha S, Nandhitha Bagyam VR and
Ramya S Keerthana A
Assistant Professor,
Department of B. Com(PA),
PSGR Krishnammal College Abstract
for Women, Coimbatore, Tamil Financial performance of a bank indicates the strength and weakness of that particular bank by properly
Nadu, India establishing the association between the items of the balance sheet and profit and loss account. The
objective of the present paper is to analyse the financial performance of SBI (State Bank of India) over
Narmadha NKB a period of five years (2012-2016). For this purpose, financial ratio analysis has been used. With the
Students, Department of B. help of this analysis, it was inferred that in the public-sector banks, SBI is the top-ranking bank in
Com (PA), PSGR India, with its performance in terms of financial soundness being the best. For this analysis, investment
Krishnammal College for valuation ratio, profitability ratio, management efficiency ratio, balance sheet ratios were used. Results
Women, Coimbatore, Tamil indicate that the performance of SBI in the study period has been excellent. SBI's excellent
Nadu, India performance can be attributed to the adoption of modern technology, banking reforms, and good
recovery mechanisms. However, SBI needs to improve its position with regards to a few parameters
Lekha S
including debt-equity, operating profit, and non-interest income to total income.
Students, Department of B.
Com (PA), PSGR
Krishnammal College for Keywords: Financial Performance, Capital Adequacy, Asset Quality, Liquidity, Investment,
Women, Coimbatore, Tamil Profitability.
Nadu, India
1. Introduction
Nandhitha Bagyam. V.R Camels rating system is used by the bank supervisory authorities in order to evaluate an
Students, Department of B.
Com (PA), PSGR
overall performance and rate the financial institutions based on the financial statement of the
Krishnammal College for banks according to six factors represented by the acronym CAMELS. Soundness of a bank is
Women, Coimbatore, Tamil measured on a scale of 1 (strongest) to 5 (weakest). Banks that are given a score of less than
Nadu, India two are considered to be high-quality institutions. Banks with scores greater than three are
considered to be less-than-satisfactory institutions
Keerthana A
Students, Department of B.
Com (PA), PSGR Objectives
Krishnammal College for To find out how capital adequacy, asset quality, management soundness, earnings and
Women, Coimbatore, Tamil profitability, liquidity and systems and control affect the performance of the bank,
Nadu, India
To analyze the bank’s performance through CAMELS model and give suggestions for
improvement if necessary.
Statement of the problem
In the recent years the financial system especially the banks have undergone numerous
changes in the form of reforms, regulations and norms. CAMELS framework for the
performance evaluation of banks is an addition to this. This study is conducted to analyse the
strength of bank using CAMELS framework as a tool for performance evaluation of SBI.
Scope of the study
Performance evaluation of SBI ltd. Based on various parameters of CAMELS rating system
Correspondence is useful for banks as well as for those who deal with the bank in order to identify the
Ramya S weakness and take corrective measures. This also helps the prospective investors as they can
Assistant Professor, evaluate the bank based on this study and take decision about their investments.
Department of B. Com (PA),
PSGR Krishnammal College
for Women, Coimbatore, Tamil
Nadu, India
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International Journal of Applied Research
Research methodology MAHINDRA and ICICI BANK. DANALALSHMI
Period of the study BANK had the worst performance.
Data for the study has been collected from for 10 years from
2005-2006 to 2015-2016. Analysis and interpretation
Capital adequacy ratio
Area of study: The study has been done in the state bank of The idea of capital adequacy norms is that the long run
India for a period from 2011-2012 to 2015-2016. source of finance in a bank should be a descent percentage
of the assets of the bank after considering their risk
Sources of data: Analysis and interpretation has been given realization. However, as per RBI norms, Indian scheduled
based on data’s collected from secondary sources. commercial banks are required to maintain a CAR of 9%
Tools used for the study while Indian public sector banks are emphasized to maintain
Ratio analysis a CAR of 12%.
Percentage analysis
Table 1
Limitations of the study capital advances to
The accuracy and reliability of the study depends upon financial
adequacy
debt-equity
total assets
the correctness of secondary data collected. year ratio
ratio ratio
There are lots of qualitative factors that affect the 2015-2016 13 1.01 0.687
performance of the bank which is out of the scope of 2014-2015 12 1.01 0.653
this study. 2013-2014 12 0.95 0.688
The scope of the study is confined to state bank of India 2012-2013 13 1.02 0.685
only as the model is often used for comparative study 2011-2012 13 0.84 0.674
between banks. Source: secondary data
The methods discussed pertain only to banks though it
Interpretation
can be used for performance evaluation of other
During the period 2011-2012 to 2015-2016, THE STATE
financial institutions.
BANK OF INDIA is in a position to maintain more than the
minimum requirement as specified by RBI (CAR). In 2011-
Review of literature
2012 it was 13% and shows an increasing trend up to 2012-
1. CA Ruchi Gupta, (2014) [1]. An analysis of Indian
2013. Then from 2013-2014 onwards it shows a decreasing
public sector banks using CAMELS approach”. In this
trend. Generally, any bank that has a debt to equity ratio of
project an analysis has been made on the progression of
over 40% to 50% should be looked at more carefully to
the economy that significantly depends upon the
make sure there are no liquidity problems. The debt-equity
deployment as well as optimum utilization of resources
ratio of the state bank of India shows a mixed trend. But this
and most importantly operational efficiency of various
ratio indicates that the bank is not able to maintain its
sectors. This study attempts to evaluate the performance
liquidity position. The total advances to total asset ratio
of public sector banks in India for the period 2009-
shows a mixed trend. It shows an increasing trend from
2013.The resource shows that there is statistically
2011-2012 to 2013-2014 and it shows a decreasing trend in
significant difference between the camel ratios of all the
the year 2014-2015 and again it has increased in the
public sector banks.
previous year 2015-2016. This indicates that the bank has
2. Anita Makkar, Shveta Singh, (2013) [2], “Analysis of the
used more of its advances to grow its business in the years
financial performance of Indian commercial banks: a
2011-2012 to 2013-2014 and in 2015-2016 and less of its
comparative study”, financial performance of the banks
advances in the year 2014-2015.
indicates the strength and weakness of that particular
bank by properly establishing the associations between
Asset quality
the items in the balance sheet and the profit and loss
Asset quality determines the healthiness of financial
account. The study considered a sample of 37 banks (22
institutions against loss of value in the assets. The
public se tor and 15 private sector) from the period
weakening value of assets, being prime source of banking
2006-2007and 2010-2011.Camels rating methodology
problems, directly pours into other areas, as losses
was used. The study found that IDBI BANK was the
best performing bank followed by the KOTAK
Table 2
financial net NPA to net NPA to total gross NPA to investment percentage
year total asset advances total loan to total asset change in net npa
2015-2016 0.026 0.073 0.129 0.224 1.02
2014-2015 0.013 0.043 0.089 0.242 -0.11
2013-2014 0.017 0.057 0.113 0.227 0.41
2012-2013 0.014 0.051 0.122 0.230 0.38
2011-2012 0.012 0.046 0.117 0.242 0.28
Source: secondary data
Interpretation it decreases in the year 2014-2015 and again increases in the
The ratio of Net NPA to Total Asset in 2011-2012 was year 2015-2016. This indicates that the STATE BANK OF
0.012 and it shows an increasing trend up to 2013-2014 and INDIA is not able to manage the NPAs to Total Asset.
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International Journal of Applied Research
During the year 2011-2012 the ratios of Net NPA to Total in net NPA shows a mixed trend. It even becomes negative
Advances was 0.046 and it shows an increasing trend up to in the year 2014-2015.
2013-2014. It decreases in the year 2014-2015 and again
increases in the year 2015-2016.In 2011-2012 the state bank Management soundness
of India’s gross NPA is 0.117 and it shows a fluctuating Management is the most important ingredient that ensures
trend. It is less in the year 2014-2015. Total investment to sound functioning of banks. With increased competition in
total assets ratio shows a mixed trend. The highest ratio of the Indian banking sector, efficiency and effectiveness have
0.242 is recorded in the year 2011-2012 and the same ratio become the rule as banks constantly strive to improve the
is recorded in the year 2014-2015. And the lowest ratio of productivity of their employees.
0.224 is recorded in the year 2015-2016. Percentage change
Table 3
Financial year total advances to total deposits profit per employee business per employee
2015-2016 0.845 0.047 0.923
2014-2015 0.824 0.061 0.820
2013-2014 0.867 0.051 0.726
2012-2013 0.869 0.063 0.611
2011-2012 0.831 0.051 0.529
Source: secondary data
Interpretation
The total advances to total deposit ratio shows a mixed Earnings
trend. Profit per employee of the bank also shows mixed Earnings and profitability, the prime source of increase in
trend. It is high in the year in the year 2012-2013 and this capital base, is examined with regards to interest rate
indicates that per employee gets more benefit out of the policies and adequacy of provisioning. In addition, it also
profit earned by the bank. Business per employee of state helps to support present and future operations of the
bank of India also shows an increasing trend from 2011- institutions.
2012 to 2015-2016.
Table 4
spread to percentage change interest income non-interest income
Financial year
total asset in net profit to total income to total income
2015-2016 0.026 -0.240 0.853 0.146
2014-2015 0.076 0 0.870 0.129
2013-2014 0.028 0.203 0.880 0.119
2012-2013 0.029 -0.227 0.881 0.118
2011-2012 0.033 0.913 0.881 0.118
Source: secondary data
Interpretation Liquidity
State bank of India shows highest spread of 0.076 in the The business of banking is all about borrowing and lending
year 2015. In 2016 it is 0.026 and shows a decreasing trend. money. Timely
In 2012 the ratio was 0.913 and negative in 2013 and again Repayment of deposits is of crucial importance to avoid a
positive of 0.203 in 2014 and it becomes zero in 2015 and run on a bank. Hence banks have to ensure that they always
again negative in the previous year 2016. Interest income to maintain liquidity. Through mandatory SLR and CRR, RBI
total income is high in the year 2011-2012 and 2012- ensures that banks maintain ample liquidity.
2013,this indicates that interest earned by the bank
constitutes less of its total income.
Table 5
financial liquid asset to total liquidity asset to government security liquidity asset to
year total asset total deposits to total asset demand deposit
2015-2016 0.078 0.096 0.169 11.926
2014-2015 0.087 0.110 0.189 1.403
2013-2014 0.075 0.095 0.175 1.170
2012-2013 0.075 0.095 0.176 1.018
2011-2012 0.075 0.093 0.198 0.816
Source: secondary data
Interpretation highest. By comparing the last five year data we can
The ratio of Liquid asset to Total Assets shows an ascertain that State bank of India has made investments in
increasing trend up to the year 2015and decreasing in Govt. securities (inside India) around 0.175 of its total asset.
2016.The percentage of Liquid Asset to Total Deposits is
showing a mixed trend. During the year 2015 the ratio is
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International Journal of Applied Research
Findings 2. Anita Makkar, Shveta Singh. Analysis of the financial
State bank of India has maintained more than the performance of Indian commercial banks: a
minimum requirement of CAR during the last five comparative study, Indian journal of finance, 2013; 7(5)
years. It has raised its capital.
In 2013-2014 the shareholders of the bank are benefited
with more earnings due to less debt. In 2011-2012 and
2012-2013 the bank has been aggressive in financing in
growth with debt.
In 2014-2015 the bank has used more of its advances to
grow its business and less of its advances in the year
2015-2016.
The asset quality of the bank is high in the year 2014-
2015 and less in the year 2015-2016 due to more NPA
in the bank in that year 2015-2016.
In the year 2011-2012 and 2014-2015 there are more
investments computing the total assets.
The low spread situation is an indicator of the
inefficiency of the management, there was inefficiency
in the management in the year 2015-2016.
In the year 2011-2012 and 2012-2013 the income
earned by the bank is more and it is less in the year
2015-2016.
The state bank of India has made investments in
government securities both inside India and outside
India during the last 5 years.
Suggestions
A year over year decrease in total advances to total
assets ratio may suggest a company is progressively
becoming less dependent on debt to grow its business.
Lower the net NPA to total advances ratio, lower the
risk therefore the bank has to maintain less NPA.
By maintaining high total investment to total asset ratio
the bank can increase its reputation.
It may be turned out risky for the bank if it would have
maintained more total advances to total deposit ratio.
The management of the bank can maximize the
efficiency of its employees by maintaining business per
employee
Conclusion
Due to radical changes in the banking sector in the recent
years, the central banks all around the world have improved
their supervision quality and techniques. In evaluating the
function of the banks, many of the Developed countries are
now following uniform financial rating system (CAMEL
RATING) along with other Existing procedures and
techniques. Various studies have been conducted in India as
well on various banks using CAMEL framework. Different
banks are ranked according to the ratings obtained by them
on the five Parameters. The results show that there is a
statistically significant difference between the CAMEL
ratios of all The Public Sector Banks in India, thus,
signifying that the overall performance of Public Sector
Banks is Different. Also, it can be concluded that the banks
with least ranking need to improve their performance to
come up to the desired standards.
Reference
1. CA Ruchi Gupta. An analysis of Indian public sector
banks using CAMELS approach. (IOSR journal of
business and management. 2014; 16(1)
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