A STUDY ON FINANCIAL PERFORMANCE USING RATIO ANALYSIS AT ING VYSYA BANK
PROJECT REPORT Submitted To UNIVERSITY OF MADRAS In partial fulfillment of the requirement for the award of MASTER OF COMMERCE SUBMITTED BY N.SABARISUDHA (KC10557) UNDER THE GUIDANCE OF Mrs. S. DEVA PRASANNA,M.com, M.Phil., MBA Assistant Professor Department of Commerce
DEPARTMENT OF COMMERCE CHEVALIER T.THOMAS ELIZABETH COLLEGE FOR WOMEN Sembium, Chennai - 600 011 (Affiliated to the University of Madras) 1
CHEVALIER T.THOMAS ELIZABETH COLLEGE FOR WOMEN SEMBIUM, CHENNAI - 600 011 DEPARTMENT OF COMMERCE
CERTIFICATE
This is to certify that the Project work entitled “A STUDY ON FINANCIAL PERFORMANCE USING RATIO ANALYSIS AT ING VYSYA BANK” is a bonafide work done by N. SABARI SUDHA of the DEPARTMENT OF COMMERCE OF CHEVALIER T.THOMAS ELIZABETH COLLEGE FOR WOMEN for the award of the Degree of Master Of Commerce batch 2011-2013 under the Guidance of Mrs. S. DEVA PRASANNA,M.com, M.Phil., MBA, faculty incharge.
Head of the Department
Faculty In-Charge
Internal Examiner
External Examiner 2
DECLARATION
I hereby declare that this project work “A STUDY ON FINANCIAL PERFORMANCE USING RATIO ANALYSIS” is a record of original project work undertaken by me under the valuable guidance and supervision of Mrs.S.DEVA PRASANNA M.com., M.phil., MBA in partial fulfillment of master degree in commerce. This project is done at ING VYSYA BANK. It has not been submitted elsewhere for any degree or diploma.
Place : Chennai Date :
N.SABARISUDHA
3
ACKNOWLEDGEMENT
I profoundly express my sincere gratitude to Dr.HANIFA GHOSH, M.A, M.PHIL, PH.D, PRINCIPAL OF C.T.T.E COLLEGE FOR WOMEN for enabling me to undergo PROJECT WORK AT ING VYSYA BANK. I wish to express my sincere thanks to Mrs. R.RAJALAKSHMI, M.COM, M.PHIL, DEAN OF THE COLLEGE AND HEAD OF THE DEPARTMENT OF COMMERCE for her encouragement to the completion of my project. I wish to express my deep sense of gratitude and thanks to Mrs.DEVA PRASANNA, M.COM, M.PHIL,MBA, Assistant professor in DEPARTMENT OF COMMERCE for her guidance. I have great pleasure in thanking MR. MURALI KRISHNAN, MBA, Branch Operations and Service Head for the continuous support and timely help rendered to me during my training period.
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TABLES OF CONTENTS
CHAPTER NO.
CHAPTER NAME
PAGE NO.
I.
Introduction
7
1.1 Objectives of the Study
22
1.2 Scope of the study
23
1.3 Limitations of the study
25
II.
Company profile
28
III.
3.1 Review of literature
55
3.2 Research Methodology
57
IV.
Analysis and Interpretation
60
V.
5.1 Findings
86
5.2 Suggestions
88
5.3 conclusion
90
Bibliography
92
Annexure
93
5
6
INTRODUCTION The institutional training gives the students, as practical knowledge about the functioning of the company as such there is a wide difference between doing things practically and learning the same things theoretically. The institutional training enlightens the mind of the students about various policies, procedures and program of the organization. In addition, it helps to keep in touch with the person holding high position which enriches. Institutional training may be described as process of placing the students before an organization, making them familiar with its line of function and asking them to perform some duties, which involves technical skills. This training bridges of group between for fetch theory and down to earth really in an organization. Such training is an added significance because kinds of jobs. So the students are become more adaptable and efficient in the future. The subject of institution training is almost very important among the entire subject that a student comes across during their course.
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8
FINANCE (MEANING) Finance is the life blood and nerve centre of a business, just as circulation of blood is essential in the human body for maintaining life. Finance is very essential for smooth running of business. Right from the very beginning i.e., conceiving an idea to business, finance is needed to promote or establish the business, acquire fixed assets, make investigations such as market surveys etc., develop product, keep men and machines at work, encourage management to make progress and create values. Even an existing firm may require further finance for making improvement or expanding the business.
ORGANIZATION OF THE FINANCE FUNCTION Many tasks of financial management and allied areas (like accounting) which are specialised in nature and which are attended to by specialists. These tasks will be performed by two financial officers of the firm, the treasurer and the controller. The treasurer is responsible mainly for financing and investment activities and the controller is concerned primarily with accounting and control.
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FUNCTIONS OF TREASURER AND THE CONTROLLER
TREASURER
CONTROLLER
Obtaining finance
Financial accounting
Banking relationship
Internal auditing
Cash management
Taxation
Credit administration
Management accounting
Capital budgeting
And control
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ORGANIZATION OF FINANCE FUNCTION
11
FINANCIAL SYSTEM The financial system comprises of a variety of intermediaries, markets, and instruments. It provides the principal means by which savings are transformed into investments. The financial system is divided into six sections Functions of the financial system Financial assets Financial markets Financial market returns Financial intermediaries Regulatory infrastructure
FUNCTIONS OF THE FINANCIAL SYSTEM It provides a payment system for the exchange of goods and services. It enables the pooling of funds for undertaking large scale enterprises. It provides a mechanism for spatial and temporal transfer of resources. It provides a way for managing uncertainty and controlling risk It generates information that helps in coordinating decentralized decision making. It helps in dealing with the incentive problem when one party has an informational advantage.
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13
FINANCIAL MANAGEMENT In order to manage finance, a new management discipline was conceived. Such discipline is known as financial management. Financial management was a branch of Economics till 1890. Later it was developed into a separate subject. Financial management refers to the management of flow of funds in the firm.
DEFINITION SOLOMON financial management is concerned with the efficient use of an important economic resource, namely capital funds. PHILLIOPPATUS financial management is concerned with the managerial decisions that result in the acquisition and financing of short term and long term credits for the firm.
IMPORTANCE OF FINANCIAL MANAGEMENT The importance of financial management cannot be overemphasized. In every organization, where funds are involved, sound financial management is necessary. Finance manager must realize that when a firm makes a major decision, the effect of the action will be felt throughout the enterprise. Sound financial management is essential in both profit and nonprofit organizations. The financial managements help in monitoring the effective deployment of fund in fixed assets and in working capital. Financial management also helps in ascertaining how the company would perform in future. It helps in indicating whether the firm will generate enough funds to meet its various obligations. 14
OBJECTIVES OF FINANCIAL MANAGEMENTS 1. Basic objectives 2. Other objectives
Basic Objectives Maintenance of liquid assets Profit maximization Wealth maximization
Other objectives 1. Ensuring a fair return to shareholders. 2. Building up reserves for growth and expansion. 3. Ensuring maximum operational efficiency by efficient and effective utilization of finances. 4. Ensuring financial discipline in the organization.
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Methods of financial management Financial management is concerned with raising financial resources and their effective utilization towards achieving the organization‟s goals. This requires application of appropriate financial methods or tools. The term „financial method‟ refers to any logical method or technique to be employed for the purpose of accomplishing the following two goals
1. Measuring the effectiveness of firm‟s actions and decisions 2. Measuring the validity of the decisions regarding accepting or rejecting future projects The important financial tools or methods used by the financial manager in perform of his job Cost of capital Financial leverage or trading on equity Capital budgeting appraisal methods Abc analysis Ratio analysis Fund flow analysis and cash flow analysis
16
Financial statement (meaning) Financial statements refers to formal and original statement prepared by a business concern to disclose its financial information. AICPA (American Institute Of Certified Public Accountants) says “financial statements are prepared for the purpose of presenting a periodical review or report on the progress by the management and deal with 1. The status of investments in the business and 2. The results achieved during the period under review
Nature of financial statement Financial statements are prepared to review the state of investment in a business and result achieved during a specific period. The reflect recorded facts, accounting conventions and personal judgments.
Functions or Important of financial statements Financial statements provide meaningful, useful and valuable information periodically regarding financial position and future prospects of the business concern. Various parties interested can utilise the information provided by the financial statements for analysis and interpretation
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For management
Management will be able to take effective decisions only when correct and reliable information is at its disposal.
If information is not
available management can neither plan nor fulfill the functions of operations and control. For financiers
Financial statements are also of great importance to the financiers and lenders.
Lenders need information regarding customer‟s financial
position, solvency, credit standing, profitability, etc.
Financial
statements help the banker and lenders to decide whether to extend loans to the customers. For creditors
Trade creditors are another class for whom financial statements are important.
Trade credit implies extending facilities of deferred
payment for credit purchase by seller to buyer. Financial position of a creditor can be revealed by financial statements with a help of solvency ratios, cash and fund flow analysis, etc.
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For investors
Present and prospective investors are interested in studying financial statements to assess earning capacity, growth potential and efficiency of management.
Limitation of financial statements 1. Information show in financial statements is not precise. 2. Financial statements do not always disclose the correct financial positions of business concerns. 3. Balance sheet of concern is a static document as it discloses the financial position of a concern on a particular date. 4. Information disclosed by profit and loss account may not be real profit. 5. Financial statement of one period may not be comparable as such with the statement of other periods.
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FINANCIAL STATEMENT ANALYSIS DEFINITION According to myres, “financial statements analysis is largely a study of the relationship among the various financial factors in a business as disclosed by a single set of statements and a study of the trend of these factors as shown in a series of statements.”
OBJECTIVES i.
To interpret the profitability and efficiency of various business activities with the help of profit and loss account.
ii.
To measure managerial efficiency of the firm
iii.
To measure short-term and long-term solvency of the business.
iv.
To ascertain earning capacity in future period.
v.
To determine the future potential of the concern.
vi.
To measure utilization of various assets during the period.
vii.
To compare operational efficiency of similar concerns engaged in the same industry.
LIMITATIONS a. Based on past data b. Financial statement analysis cannot be a substitute for judgment. c. Reliability of figures d. Different interpretations e. Change in accounting methods f. Price level changes g. Limitations of the tools of analysis 20
21
OBJECTIVES OF THE STUDY The objectives of the study are furnished below:
PRIMARY OBJECTIVES To study and analyze the financial performance of the ING VYSYA BANK LTD. To analyze the profitability and solvency position of the bank.
SECONDARY OBJECTIVES To study the working capital management of the bank. To access the factors influencing the financial performance of the organization. To study financial strengths and weaknesses of the firm. To find out the performance of the study through ratio analysis. To understand the overall financial position of the bank.
22
SCOPE OF THE STUDY This study clearly defines the financial status of the concern during the working period. The study report being made here brings out the financial structure and the position of the ING VYSYA BANK comparing from different years. The financial study helps us to analyze the financial background and the utilization of the income earned through the organization process.
NEED FOR THE STUDY To understand the meaning, significance and limitation of financial statement analysis. To calculate liquidity, solvency, profitability and activity ratios of the organization. To make a comparative study and give solutions for the organisational improvement.
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LIMITATIONS The limitations of the study are furnished below: The financial details of the bank are collected for 4 years only. ING Vysya Bank is a multinational company cannot be studied in a month so time is considered as main constrain. The information given from the bank was limited.
Time is 6 weeks, so much of economic fluctuations are not seen. In this study, only selected ratios are used. Since the study relates only to the financial performance of ING VYSYA BANK, the findings and suggestions cannot be generalised.
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26
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INTRODUCTION The Origin of ING Group ING group originated in 1990 from the merger between “Nationale Nederlanden” the largest Dutch Insurance Company and “NMB Post Bank” Group. Combining roots and ambitions, the newly formed company called Internationale Nederlanden Group M a r k e t c ir c le s s o o n a b b re v ia te d t he n a me to I - N G . T he c o mp a n y fo llo w e d s u it b y c ha n g in g t h e s ta t u t o r y na me t o IN G G r o u p . IN G is a g lo b a l financial services company providing banking, investments, and life insurance and retirement services and operates in more than 50 countries.
PROFILE The ING VYSYA bank is a premier player in the Indian private banking sector. It operates 530 branches in all over the country. With more than 28000employees. ING is a global financial institution of Dutch origin offering banking, investments, life insurance and retirement services. ING serve more than 85 million private, corporate and institutional customers in Europe, North and Latin America, Asia and Australia. They draw on their experience and expertise, their commitment to excellent service and their global scale to meet the needs of a broad customer base, comprising individuals, families, small businesses, large corporations, institutions and governments
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STRATEGY ING‟s ove ra ll mis s ion is to he lp c us to me rs ma na ge t h e i r f i n a n c i a l f u t u r e . Capitalizing on changing customer preferences and building on our solid business capabilities, ING‟s strategic focus is on banking, investments, and life insurance and retirement services. They provide retail customers with the products they need during their lives to grow savings, manage investments and prepare for retirement with confidence. With wide range of products, innovative distribution models and strong footprints in both mature and developing markets, ING has the long -run e c o n o mic , te c h n o lo g ic a l a n d d e mo g ra p h ic t re n d s o n t h e ir s id e . IN G a li g n s its business strategy around a universal customer ideal saving and investing for the future should be easier. While steering the business through turbulent times, ING will execute efforts across all its business lines to strengthen customer confidence and meet their needs, preserve a strong capital position, further mitigate risks and bring its costs in line with revenue expectations.
STRATEGIC INTENT VISION We are committed to providing quality and door step banking service to our customer, service quality being our paramount importance.
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CORPORATE RESPONSIBILITY ING wants to pursue profit on the basis of sound business ethics and respect for its stakeholders. Corporate responsibility is therefore a fundamental part of ING‟sstrategy ethical, social and environmental factors play an integral role in business decisions ING Vysya Bank Ltd., is an entity formed with the coming together of erstwhile, Vysya Bank Ltd, a premier bank in the Indian Private Sector and a global financial powerhouse, ING of Dutch origin, during Oct 2002. The origin of the erstwhile Vysya Bank was pretty humble. It was in the year 1930 that a team of visionaries came together to form a bank that would extend a helping hand to those who weren‟t privileged enough to enjoy banking services. It‟s been a long journey since then and the Bank has grown in size stature to encompass every area of present-day activity and has carved a distinct identity of being India‟s Premier Sector Bank. In 1980, the bank completed 50 years of services to nation and the post 1985; the bank made rapid strides to reach the coveted position of being the number one private sector bank. In 1990, the bank completed its Diamond Jubilee year. At the Diamond Jubilee Celebrations, the Finance Minister Prof. Madhu Dandavate, had termed the performance of the bank „Stupendous‟. The 75 th anniversary, the Platinum Jubilee of the bank was celebrated during 2005.
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The long journey of seventy-five years has had several milestones……
1930
Set up in Bangalore
1948
Scheduled Bank
1985
Largest Private Sector Bank
1897
The Vysya Bank Leasing Ltd Commenced
1988
Pioneered the concept of Co branding of Credit cards
1990
Promoted Vysya Bank housing finance ltd
1962
Deposits cross Rs.100 Crores
1993
Number of Branches crossed 300
1996
Signs Strategic Alliance with BBL., Belgium. Two National Awards by Gem & Jewellery Export Promotion Council for excellent performance in Export Promotion
1998
Cash management Services & Commissioning of VSAT, Golden Peacock Award – for the best HR Practices by institute of Directors. Rated as Best Domestic Bank in India by Global Finance (International Finance Journal – June 1998)
2000
State – of – the – art Date centre art ITPL, Bangalore RBI clears setting up off ING Vysya Life Insurance Company
2001
ING Vysya Bank commenced Life Insurance Company
2002
The Bank launched a range of products & services like the Vys Vyapar Plus,
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the range of loan schemes for traders, ATM services, Smartsev, personal assistant service, Save & secure, an account that provides accident hospitalization and insurance cover, Sambandh, the international debt card and the mi-bank net banking service. 2002
ING takes over the Management of the Bank from October 7th, 2002 RBI clears the new name of the Bank as ING Vysya Bank Ltd, vide their letter of 17.12.02
2003
Introduced customer friendly products like Orange Savings, Orange Current and Protected Home Loans
2004
Introduced Protected Home Loans – a housing loan product
2005
Introduced Solo – My own Account Youth and Customer Service Line – Phone Banking Service
2006
Bank has networked all the branches to facilitate „AAA‟ transactions i.e. Anywhere, Anytime & Anyhow Banking
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In terms of pure numbers, the performance over the decades can better be appreciated from the following table Rs. In Millions YEAR
NETWORTH DEPOSITS ADVANCES PROFITS OUTLETS
1940
0.001
0.400
0.400
0.001
4
1950
1.40
5.30
3.80
0.09
16
1960
1.60
20.10
13.50
0.13
19
1970
3.00
91.50
62.80
0.74
39
1980
11.50
1414.30
813.70
1.13
228
1990
162.10
8509.40
4584.80
50.35
319
2000
5900
74240
39380
443.10
481
2001
6527
81411.10
43163.10
371.90
484
2002
6863.24
80680
44180
687.50
483
2003
7067.90
91870
56120
863.50
456
2004
7473.20
104780
69367
590.01
523
2005
7094
125693.10
90805.90
(381.80)
536
2006
10196.90
133352.50
102315.20
90.60
562
2007
11101.90
154185.70
119761.70
889
626
2008
14260
204980
146500
1569
677
2009
15940
248900
167510
1888
857
2010
2223
258650
185070
2422
866
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Outlets comprises of 468 branches, 13 ECs, 28 Satellite Offices and 357 ATMS as of March 31st 2010. Additionally the bank also has Internet Banking, Mobile Banking Customer Service Line for Phone Banking Services.
THE ORIGIN OF ING GROUP On the other hand, ING group originated in 1990 from the merger between Nationale - Nederlanden NV the largest Dutch Insurance Company and NMB Post Bank Group NV. Combining roots and ambitions, the newly formed company called “Internationale Nederlanden Group”. Market circles soon abbreviated the name to I-N-G. the company followed suit by changing name to “ING Group N.V.”
PROFILE ING has gained for its, integrated approach of banking, insurance and asset management. Furthermore, the company differentiates itself from other financial service providers by successfully establishing life insurance companies in countries with emerging economies, such as Korea, Taiwan, Hungary, Poland, Mexico and Chile. Another specialization is ING Direct, an Internet and direct marketing concept with which ING is rapidly winning retail marketing share in mature markets. Finally, ING distinguishes itself internationally as a provider of „employee benefits‟ i.e. arrangements of nonwage benefits, such as pension plans for companies and their employees.
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MISSION ING‟s mission is to be a leading, global, client-focused, innovative and lowcost provider of financial services through the distribution channels of the client‟s preference in markets where ING can create value.
THE NEW IDENTITY The immediate benefit to the bank, ING Vysya Bank, has been the pride of having become a Member of the global financial giant ING. As at the end of the year December 2010, ING‟s total assets exceeded 1247 billion Euros, with a underlying net profit of 3893 million Euros, employed around 105000 people, serves over 85 million customers, across 40 countries. This global identity coupled with the backup of a financial power house and the status of being the first Indian International Bank, would also help to enhance productivity, profitability, to result in improved performance of the bank, for the benefit of all the stake holders.
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ING VYSYA MANAGEMENT TEAM Name (Sri) Arun Thiagarajan part-time Chairman Shailendra Bhandari Managing Director & Chief Executive Officer Aditya Krishna Director Richard Cox Director Santhosh Ramesh Desai Director M. Damodaran Director Vaughn Nigel Richtor Director Peter Henri Maria Staal Director Lars Kramer Director Vikram Talwar Director Mark Edwin Newman Director 36
EXECUTIVE MANAGEMENT COUNCIL (IN ALPHABETICAL ORDER) (UPDATED AS OF 28.07.10)
NAMES
DESIGNATION
SBU/FUNCTION
PLACE
Ashok Rao B
Chief of Staff
Legal and
Bangalore
compliance Jan Van
Chief Risk Officer
Credit Optional &
Wellen
Bangalore
Market Risk Country Head –
Treasury &
wholesale Banking
Wholesale Banking
Jayant
Chief Financial
Finance &
Mehrotra
Officer
Accounts
Meenakshi A
Head-Operations
Operations
Bangalore
MSR
Chief Audit
Internal Audit
Bangalore
Manjunatha
Executive
Department
Prasad C V G
Chief Information
Information &
Officer
Technology
Janak Desai
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Mumbai
Bangalore
Bangalore
SWOT ANALYSIS
STRENGTHS
WEAKNESS
ING as one on the biggest
Very few branches
financial MNC. 7th in 500
Less variety of
fortunes
financial/banking products
Only foreign bank which has acquired an Indian Private Bank (ING Vysya Bank) Higher rate of interest than other private banks Most of the financial plans are legalized under 80 (ccc) Top notch customer care and staff behavior Unique features with different kinds of accounts Working hours
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location
OPPORTUNITIES
THREATS
New segments of Doctors, Presence of two top private
Students and CAs as they like innovation in their
banking players in the
financial needs and like to
market (ICICI & HDFC) Large market share already
enjoy the services High class (upper strata)
captured Non willingness of
population of city Increase in different kind of
Muzaffarnagar citizens to
financial products
change for something new,
NGO and public relations
or to try innovation in their banking
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BRANCHES OF ING VYSYA BANK
STATE ANDHRA PRADESH
BRANCH NAME ADONI, AMALAPURAM, ARYA VYSYA SANGHAM ,ANAKAPALLE
UTTAR PRADESH GUJARAT MAHARASHTRA RAJASTAN UTTAR PRADESH RAJASTAN WEST BENGAL TAMIL NADU
AGRA, ALLAHABAD, BAREILLY AHMEDABAD, MANI NAGAR, BARODA AHMED NAGAR, AURANGABAD ALWAR ALAHABAD, ALIGARH, MATHURA ALWAR ASANSOL ADYAR, ANNA NAGAR, ASHOK NAGAR, G.N. STREET, GUINDY, KILPAUK, MADIPAKKAM, MOUNT ROAD, MYLAPORE, PERUNGUDI,
KARNATAKA
BANGALKOT, BAGDAL, AVENUE ROAD, BANASHANKARI (DEVAGIRI) BRANCH, BANGALORE TURF CLUB, BOMMANAHALLI
ORISSA
BARBIL, BERHAMPUR, BHUBANESWAR
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PRODUCT PROFILE ING Vysya Bank Ltd The ING Vysya Bank Ltd is one of the well known financial organizations in India. It is applicable for both short term and long term financial solutions. It is mainly an entity or a venture which has been formed with the global financial giant ING of Netherlands. The ING Vysya Bank Ltd is a trusted name in the banking and commercial sector of the country.
GROWTH OF ING Vysya Bank Ltd The ING Vysya Bank Ltd was established in the month of October in the year 2002. The bank came into existence when the Vysya Bank Ltd went into a venture with global financial giant ING. Vysya Bank Ltd was one of the first private sector banks in the country and was set up in the year 1930. The main objective of setting up the bank was to provide financial support to the various sectors of the economy. In the year 1948, the Vysya Bank was listed among the Scheduled Banks. In order to increase its profit and add to its operations, the Vysya Bank Ltd merged with ING. Currently, it is one of the well known banks in the country and has around 677 branches across various parts of the country. The headquarters of the bank is located in the city of Bangalore. Among the total number of branches, there are 407 regular branches, 28 satellite offices, 39 extension counters. The number of ATMs is around 203 which are expected to increase within the next few years. The deposit of the bank amounts to around ` 204980.00 millions while the net worth is around` 14260.00 millions. The profits of the bank amount to around ` 1569.00 millions. 41
PRODUCTS AND SERVICES OF ING Vysya Bank Ltd Being a well known name in the domain of financial and banking services in the country, the ING Vysya Bank Ltd has come up with a number of financial solutions and services in a number of areas. Some of the well known segments in which the bank offers customized and specialized services are
Accounts and deposits
Short and long term loans
Private banking
NRI services Personal Banking The personal banking department of ING Vysya Bank Ltd
offers high quality services and solutions to cater to the financial needs and preferences. The high end solutions make them a one stop organization to fulfill the needs and requirements of the customers. Some of the well known services offered in the segment of personal banking are
Mutual Funds
Tax Savings Bonds
NRI Services
Internet Banking
Phone Banking
Mobile Banking
Self Banking
Term deposits
Demat accounting
Wealth management 42
Wealth Management services the wealth management services of the ING Vysya Bank Ltd offers the best services in order to take care of the needs and preferences of the consumers in various wealth management sectors. The secure services
offered
by
the
bank
also
minimize
the
risk
processes.
In addition to these, ING Vysya Bank Ltd also offers business banking facilities and services of high standards. The services are meant to take care of the business needs and also provide high degree of financial stability to the various corporate organizations and business sectors. Some of the well known services that are offered include
Long and term loans in the agro based sector
SME- Power Business account and loans
Financial market analysis
Market trading
Asset liability management services
Financial market sales
Cash management services
Corporate and investment banking services
Off shore borrowing services
Trade and community finance services In addition to these, ING Vysya Bank Ltd also carries out research and
development to add more stability to the Indian economic scenario. The customers are also given useful guidance about investing their assets and funds.
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PRODUCTS
Accounts & Deposits Savings Orange Saving Advantage Salary Aspira Corporate Salary Solution Orange Salary Solo Saral General Freedom ING Formula Savings Account
Current Accounts Orange Current Advantage Current General Current Comfort Current Flexi Current Account
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Term Deposits Fixed Deposit Cumulative Deposit Akshaya Tax Advantage Deposit Demat Account Jiyo Easy Hand Book – Terms & Conditions
Loans Home Loan Home Equity Loan Personal Loans NRI Loan Education Loan Model Policy
Private Banking Features Products & Services Special Services
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NRIs Country Head Speaks Latest Market Updates Private Banking Program Our Team Contact us About us
Wealth Management General Insurance Life Insurance Investment Products Wealth Management process
NRI Services Accounts and Deposits RSA NRE Savings Account NRO Savings Account RCA NRE Current Account NRO Current Account RFD
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NRE Fixed Deposit NRO Fixed Deposit NRE Akshaya Deposit NRO Akshaya Deposit NRE Cumulative Deposit NRO Cumulative Deposit FCD FCNR Akshaya Deposits FCNR Fixed Deposits ARI RFC Savings Account RFC Fixed Deposit RFC Akshaya Deposit Downloadable CIF & NRI A/C opening Forms NRI Home Loan Mi-remit Telegraphic / Wire Transfers Funds Transfer cheques / DDs / TCs NRI FAQs Access Points ATM Branch Customer Service Line
47
Net Banking Self Banking SMS Contact Us Business Continuity Management
Cards ING Gold Credit Card Debit Card Most Important Terms & Conditions [MITC] Card member Terms & Conditions Fair practice code for credit card operation DSA's code of conduct Master Circular on Credit Card Operations of Banks Debit Collection Standards in India
Easy Banking Internet Banking mi-bank Features Become mi-bank User Log into mi-bank Online Security Guidelines Phone Banking
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Current Functionalities How to use IVR? Mobile Banking ATM Kiosks FAQs on ATMs Payment Services Electronic Funds Transfer RTGS NEFT Bill Pay Smartserv Collection Service Doorstep Banking Service Important Policies Cheque Collection Policy Compensation Policy Safe Deposit Locker Policy Interest Rates Domestic & NRO Term Deposit Rates NRE Deposit Rate FCNR & RFC Rates
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Service Charges Savings Bank Accounts Orange, Salary, Solo & Freedom Accounts Saral, General Savings Bank Account & its variants Current Accounts Demat Account DD PO TT Charges Term Deposit Accounts Safe Deposit Lockers Rental Safe Custody of Articles Cheques /DD/ Bills Purchased Credit Card Miscellaneous Loans Processing Fee Retail Assets Agri & Social Banking Wealth Management Services - Charges and Commissions Trade Finance Products & Services
50
BUSINESS SME Business Loans- M Power BLT Business Loans - Rent Business Loans (Small Scale Industries) - CGTSI Business Loans (Small Scale Industries) –M Power SSI M Power Business Account Code of Commitment to Micro & Small Enterprises Policy for Lending to Micro and Small Enterprises(MSE) Micro and Small enterprises (MSE) Rehabilitation Policy OTS for MSMEs Contact Us About us
Agri Term Loan Short term Loan Wholesale Banking Corporate & Investment Banking Emerging Corporates
51
Banks & Financial Institutions Group Product Offerings Credit Products & Structured Finance Offshore Borrowings Investment Banking, Local Debt Syndication and Securitisation Trade & Commodity Finance Cash Management Services
Financial Market Market Making and Trading Asset Liability Management Financial Market Sales Products and Services Research and Analysis Careers in Financial market
CUSTOMER SERVICE ING Customer Contact Us Know Your Customer (KYC) Guidelines Fair Practice Code 52
Citizen Charter Code Of Commitment Complaints Do Not Disturb Registry Protected Disclosure Scheme
ABOUT US Company Overview Our Corporate Statement Shareholders Information Financial Results
CONTACT US Email Us Call Us Branch Network
CAREERS Security Features General Tips FAQs Privacy Policy Disclaimer Complaints 53
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REVIEW OF LITERATURE REVIEW RELATED TO LITERATURE This part provides a review of some notable, theoratical and empirical research works done by various institutions and authors in evaluating the financial performance. Mr. K. Veerakumar in his study on “ An evaluation of the Performance of the Ramanathapuram District Central Co- operative Bank Limited” mainly concluded that for improving the Performance of the Bank , its reserves and capital should be strenghtened. Miss. H. Rehana Praveen in her study on “ Performance Evaluation of Ponnambalam Finance , Coimbatore” mainly suggested that for improving the performance of the Finance the firm must recovered all its bad debts within time. Miss. P. Uchimahali in her study on “ Performance Analysis of Lakshmi Engineering Works , Kovilpatti ” analyzed and suggested that the company must take efforts to reduce the stock level and utilize investments in fixed and current assets to strenghten the position of the company.
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RESEARCH METHODOLOGY Methodology is usually a guideline system for solving a problem, with specific components such as phases, tasks, methods, techniques and tools. It can be defined also as follows 1. “The analysis of the principles of methods rules and postulates employed by a discipline.” 2. “The systematic study of methods that are, can be, or have been applied within a discipline”; 3. “The study or description of methods” A methodology can be considered to include multiple methods, each as applied to various facets of the whole scope of the methodology. The research can be divided between two parts; they are qualitative research and quantitative research
PRIMARY DATA Data that has been collected from first-hand-experience is known as primary data. Primary data has not been published yet and is more reliable, authentic and objective. Primary data has not been changed or altered by human beings, therefore its validity is greater than secondary data.
IMPORTANCE OF PRIMARY DATA Primary data can‟t be neglected A research can be conducted without secondary data. But a research based on only secondary data is least reliable and may have biases In statistical surveys it is necessary to get information from primary sources and work on Primary data 57
SECONDARY DATA Data collected from a source that has already been published in any form is called as secondary data. The review of literature in any research is based on secondary data. Mostly from books, journals and periodicals.
IMPORTANCE OF SECONDARY DATA Secondary data can be less valid but its importance is still there. Sometimes it is difficult to obtain primary data. In these cases getting information from secondary sources is easier and possible. Sometimes the primary data is present but the respondents are not willing to reveal it.
PURPOSE The main purpose of this study is to study the financial performance of
ING
VYSYA BANK LTD.
METHOD OF DATA COLLECTION The information needed for this study was collected from the organization in the form of secondary data.
TOOLS USED IN ANALYSIS Ratio analysis
PERIOD OF STUDY The study covers the period of (2011-12 to 2012-13) ING VYSYA BANK 58
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RATIO ANALYSIS Ratio analysis is one of the techniques of financial analysis where ratios are used as a yardstick for evaluating the financial condition and performance of a firm. Ratio analysis was pioneered by Alexander wall who presented a system of ratio analysis in the year 1909.
RATIO (MEANING) A ratio is a mathematical relationship between two items expressed in a quantitative form.
MODES OF EXPRESSION OF RATIOS a. In proportion b. In rate or times or coefficient c. In percentage
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ADVANTAGES OF RATIO ANALYSIS a) Forecasting b) Managerial control c) Facilitates communication d) Measuring efficiency e) Facilitating investment decisions f) Useful in measuring financial solvency g) Inter firm comparison
LIMITATIONS a. Practical knowledge b. Ratios are means c. Inter-relationship d. Non availability of standards or norms e. Accuracy of financial information f. Consistency in preparation of financial statements g. Detachment from financial statements h. Time lag i. Change in price level
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CLASSIFICATION OF RATIOS A. CLASSIFICATION OF RATIOS BY STATEMENTS
BALANCE SHEET RATIOS
PROFIT&LOSS A/C RATIOS
B/S AND P&L A/C RATIOS
• Liquidity Ratio • Current ratio • Proprietary Ratio • Debt-Equity Ratio • Fixed Asset Ratio • Capital Gearing Ratio
• Gross Profit Ratio • Operating Ratio • Operating Profit Ratio • Expense Ratio • Net Profit Ratio
• Return on Investment • Return on Shareholders Funds • StockTurnover • Debtors Turnover • Creditors Turnover • Fixed assets Turnover • Earnings Per Share
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B. CLASSIFICATION BY USERS Under this classification ratios are grouped on the basis of the parties who are interested in making use of the ratios. The following is the classification on this basis.
Ratios For management • Operating Ratio • Return on Investment • Stock Turnover • Debtors Turnover • Debt equity • Fixed Asset Turnover • Creditors Turnover • Net Profit Ratio • Short-Term Liquidity • Long-Term Liquidity • Working capital Turnover • Net Profit Ratio • Gross Profit Ratio
Ratios For Creditors
• Current Ratio • Solvency Ratio • Debt-Equity Ratio • Creditors Turnover Ratio • Fixed asset Ratio • Assets Cover • Interest Cover
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Ratios For Shareholders
• Return on Shareholders Fund • Payout Ratio • Capital Gearing • Dividends Cover • Dividend Yeild
C. CLASSIFICATION BY RELATIVE IMPORTANCE This classification is being adopted by the British Institute Of Management where there are three types of ratios
1. PRIMARY RATIOS a) Return on capital employed b) Assets turnover c) Profit ratios 2. SECONDARY PERFORMANCE RATIOS a) Working capital turnover b) Stock to current assets c) Current asset to fixed assets d) Stock to fixed assets e) Fixed assets to total assets 3. SECONDARY CREDIT RATIOS a) Debtors Turnover b) Liquid Ratio c) Current Ratio d) Creditors Turnover e) Average Collection Period 4. GROWTH RATIOS a) Growth Rate in Sales b) Growth Rate in Net Assets
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RATIO ANALYSIS OF ING VYSYA BANK
CURRENT RATIO Current ratio is an indicator of firm‟s commitment to meet its short term liabilities. Current ratio is an index of the concern‟s financial stability since it shows the extent of the working capital which is the assets exceeds the current liabilities. As stated earlier a higher current ratio would indicate inadequate employment of funds while a poor current ratio is a danger signal the management. It shows the business is trading beyond its sources. The idea ratio is 2:1.
Current ratio = Current Assets / Current Liabilities
CURRENT RATIO YEAR
CURRENT RATIO
2009
0.07
2010
0.05
2011
0.04
2012
0.05
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CURRENT RATIO 0.08 0.07 0.06 0.05 0.04
CURRENT RATIO
0.03 0.02 0.01 0 2009
2010
2011
2012
Sources: Secondary Data
INTREPRETATION: The ideal current ratio is 2:1 From the above calculation it is inferred that current assets for meeting current liabilities are more during the year 2009 and later starts decreasing during the year 2010 and 2011. But, later it starts increasing during the year 2012 which shows that current assets are more than current liabilities.
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LIQUID RATIO OR CASH POSITION RATIO Liquid Ratio is also known as Acid test ratio. This is the ratio of liquid assets and liquid liabilities. The liquid assets are the assets that are converted into cash and include cash balances, bills receivables, Debtors and short term investments. Inventory and prepaid expenses are not including in liquid ratio. Liquid liability includes all liability except bank over draft the ideal ratio is 0.5:1.
Liquid Ratio = Liquid Assets / Liquid Liabilities
LIQUID RATIO YEAR
LIQUID RATIO
2009
6.57
2010
11.04
2011
13.25
2012
15.28
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LIQUID RATIO 18 16 14 12 10 LIQUID RATIO
8
6 4 2 0 2009
2010
2011
2012
Sources: Secondary Data INTERPRETATION The ideal liquid ratio is 1:1 From the above said table reveals that the liquid ratio during the year 20092012 generally shows increasing trend. Liquid assets are sufficient to meet the current liabilities. This shows the liquid position of assets is found to be very good.
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DEBT-EQUITY RATIO This ratio is ascertained to determine long- term solvency position of a company. Debt equity ratio is also called “external internal equity ratio” . The ratio is calculated to measure the relative portion of outsider‟s funds and shareholders‟ funds invested in the company. The best equity ratio shows the long- term financial position of an organization. A lower debt equity ratio implies that a company as a better capacity to meet in commitments.
Debt Equity Ratio = Long – Term Debts / Shareholders Funds
DEBT-EQUITY RATIO YEAR
DEBT EQUITY RATIO
2009
15.66
2010
11.65
2011
11.99
2012
9.08
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DEBT-EQUITY RATIO 18 16 14
12 10
DEBT-EQUITY RATIO
8 6 4 2 0 2009
2010
2011
2012
Sources: Secondary Data
INTERPRETATION An ideal debt equity ratio is “1” From the above calculation it is observed that debt equity ratio is declined during the year 2010 and later it starts increasing during the year 2011 and atlast it decreased in the year 2012. This reveals that the debt is less when compared the owners fund in the year 2012.
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NET PROFIT MARGIN RATIO Net profit margin (or profit margin, net margin, return on revenue) is a ratio of profitability calculated as after-tax net income (net profits) divided by sales (revenue). Net profit margin is displayed as a percentage. Net profit margin is a key ratio of profitability. It is very useful when comparing companies in similar industries. A higher net profit margin means that a company is more efficient at converting sales into actual profit.
Net Profit Margin Ratio = Profit (After Tax) / Revenue
NET PROFIT MARGIN RATIO YEAR
NET PROFIT MARGIN RATIO
2009
6.77
2010
8.48
2011
9.56
2012
10.08
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NET PROFIT MARGIN RATIO 12 10 8 6
NET PROFIT MARGIN RATIO
4 2 0 2009
2010
2011
2012
Sources: Secondary Data
INTERPRETATION From the above said table it is revealed that during the year 2009 there is a low net profit ratio and there is a upward trend in the net profit ratio which shows the ING VYSYA BANK is earning more profits in the years 2011 and 2012 when compared to the previous years.
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EARNING RETENTION RATIO Earning Retention Ratio is also called as Plowback Ratio. As per definition, Earning Retention Ratio or Plowback Ratio is the ratio that measures the amount of earnings retained after dividends have been paid out to the shareholders. The prime idea behind earnings retention ratio is that the more the company retains the faster it has chances of growing as a business. There is always a conflict when it comes to calculation of Earnings retention ratio, the managers of the company want a higher earnings retention ratio or plowback ratio, while the shareholders of the company would think otherwise, as the higher the plowback ratio the uncertain their control over their shares and finances are. This ratio shows the amount that has been retained back into the business for the growth of the business and not being paid out as dividends. The investors prefer to have a higher retention ratio in a fast growing business, and lower retention ratio in a slower growing business.
Earnings Retention Ratio = Retained Earnings / Net Profit After
tax and
Preference Dividend * 100 EARNING RETENTION RATIO YEAR
EARNING RETENTION RATIO
2009
86.97
2010
85.51
2011
86.11
2012
82.53
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EARNING RETENTION RATIO 88 87 86 85 84
EARNING RETENTION RATIO
83 82 81 80 2009
2010
2011
2012
Sources: Secondary Data INTERPRETATION From the above calculation it is analyzed that during the year 2009, earning retention ratio is increased to 86.97 and in 2010 it is declined to 85.51 and in the year 2011 it is increased to 86.11 and in the year 2012 it is decreased to 82.53. it indicates that the bank is not following uniform policy in retaining the funds.
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EARNINGS PER SHARE EPS measures the profit available to the equity shareholders on a per share basis, that is, the amount that they can get on every share held. It is calculated by dividing the profits available to the equity shareholders are represented by net profits after taxes and preference dividend. Thus,
EPS = Net Profit available to equity-holders / Number of Ordinary Shares outstanding
EPS is a widely used ratio. Yet, EPS as a measure of profitability of a firm form the owner‟s point of view should be cautiously as it does not recognize the effect of increase in equity capital as a result of retention of earnings. EARNINGS PER SHARE YEAR
EARNINGS PER SHARE
2009
18.40
2010
20.19
2011
26.34
2012
30.40
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EARNINGS PER SHARE 35 30 25 20 EARNINGS PER SHARE
15 10 5 0
2009
2010
2011
2012
Sources: Secondary Data INTERPRETATION From the above said table it is observed that during the year 2009, the earnings per share is decreasing and later it starts increasing. In other words, the EPS has increased over the years. It shows that the firm‟s profitability has improved.
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ASSETS TURNOVER RATIO Asset turnover (total asset turnover) is a financial ratio that measures the efficiency of a company's use of its assets to product sales. It is a measure of how efficiently management is using the assets at its disposal to promote sales. The ratio helps to measure the productivity of a company's assets.
Assets Turnover = Revenue / Average Total Assets
OR
In Days = 365 / Assets Turnover The numerator of the asset turnover formula shows revenues which are found on a company's income statement (statement of comprehensive income) and the denominator shows total assets which is found on a company's balance sheet (statement of financial position). Asset turnover is a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue or sales income to the company. Companies with low profit margins tend to have high asset turnover, while those with high profit margins have low asset turnover.
ASSETS TURNOVER RATIO YEAR
ASSETS TURNOVER RATIO
2009
0.10
2010
0.09
2011
0.10
2012
0.11
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ASSETS TURNOVER RATIO 0.12 0.1 0.08 0.06
ASSETS TURNOVER RATIO
0.04 0.02 0 2009
2010
2011
2012
Sources: Secondary Data
INTERPRETATION From the above calculation it is obtained that the ratio during the year 2009, it is increased and later it starts diminishing during the year 2010 and the next year 2011 and 2012 it begins increasing which indicates that there is an efficient utilization of assets of a business concern.
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FIXED CHARGES COVERAGE RATIO A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated as the following:
Fixed Charges Coverage Ratio = EBIT + Fixed Charge (before tax) / Fixed Charge (before tax) + Interest
FIXED CHARGES COVERAGE RATIO YEAR
FIXED CHARGES COVERAGE RATIO
2009
1.23
2010
0.32
2011
0.30
2012
0.28
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FIXED CHARGES COVERAGE RATIO 1.4 1.2 1 0.8 FIXED CHARGES COVERAGE RATIO
0.6 0.4 0.2 0
2009
2010
2011
2012
Sources: Secondary Data
INTERPRETATION From the above calculation it is inferred that during the year 2009 the fixed charges coverage ratio is high and later it started declining. It shows the firm‟s inability to satisfy fixed financing expenses.
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CAPITAL ADEQUACY RATIO According to the present norm, the Capital Adequacy Ratio of bank as defined earlier should be at least 9%. Capital Adequacy Ratio (CAR), also called Capital to Risk (Weighted) Assets Ratio (CRAR), is a ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss and complies with statutory Capital requirements. Capital adequacy ratios (CARs) are a measure of the amount of a bank's core capital expressed as a percentage of its risk-weighted asset. Capital adequacy ratio is defined as: TIER 1 CAPITAL - (paid up capital + statutory reserves + disclosed free reserves) - (equity investments in subsidiary + intangible assets + current & b/f losses) TIER 2 CAPITAL -A) Undisclosed Reserves, B) General Loss reserves, C) hybrid debt capital instruments and subordinated debts where Risk can either be weighted assets ( ) or the respective national regulator's minimum total capital requirement. If using risk weighted assets, The percent threshold varies from bank to bank (10% in this case, a common requirement for regulators conforming to the Basel Accords) is set by the national banking regulator of different countries. Two types of capital are measured: tier one capital (
above), which can absorb
losses without a bank being required to cease trading, and tier two capital ( above), which can absorb losses in the event of a winding-up and so provides a lesser degree of protection to depositors.
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Capital adequacy ratio is the ratio which determines the bank's capacity to meet the time liabilities and other risks such as credit risk, operational risk etc. In the most simple formulation, a bank's capital is the "cushion" for potential losses, and protects the bank's depositors and other lenders. Banking regulators in most countries define and monitor CAR to protect depositors, thereby maintaining confidence in the banking system. CAR is similar to leverage; in the most basic formulation, it is comparable to the inverse of debt-to-equity leverage formulations (although CAR uses equity over assets instead of debt-to-equity; since assets are by definition equal to debt plus equity, a transformation is required). Unlike traditional leverage, however, CAR recognizes that assets can have different levels of risk.
Capital Adequacy Ratio = (Tier I Capital + Tier II Capital) / Risk Weighted Assets (RWA)
CAPITAL ADEQUACY RATIO YEAR
CAPITAL ADEQUACY RATIO
2009
11.65
2010
14.91
2011
12.94
2012
14.00
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CAPITAL ADEQUACY RATIO 16
14 12 10 8
CAPITAL ADEQUACY RATIO
6 4
2 0
2009
2010
2011
2012
Sources: Secondary Data INTERPRETATION From the above said table it is inferred that during the year 2009, the capital adequacy ratio is 11.65 and in the year 2010 it is increased to 14.91 in the year 2011 it is diminished to 12.94 and in the year 2012 it is increased to 14.0. It shows that the capital adequacy ratio is not stable it is fluctuating and in the year 2012 the capital adequacy ratio is 14. It indicates that bank has a capacity to meet the liabilities and other risks.
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FINDINGS The important findings recorded in this research report are consolidated as follows: On comparative study of current ratio and liquid ratio it is observed that there is an adequate current assets and liquid assets to meet the current obligations, and it is revealed that the firm is in a good liquidity position. The debt equity ratio is declining from the year 2009 to 2012 where it is indicating the bank has lowered the investments in Long-Term Debt. From the study, it is noted that there is a tremendous increase in the net profit margin ratio which shows that the bank is earning more profits. From the analysis of assets turnover ratio it is observed that the bank has effective utilization of assets in the years 2011 and 2012 when compared to the previous years. The bank has effectively increased earnings per share over the years, which indicates that bank profitability is very good and it is a positive indicator for the equity shareholders and they will get more earnings per share. The bank has negative effect on the earning retention ratio and capital adequacy ratio which was fluctuating. The bank can have a uniform retention policy of the profits. The fixed charges coverage ratio is dissatisfied, the bank is unable to meet all fixed payment obligations in time. Hence the bank can plan accordingly to suit the circumstance so as to meet the fixed charges in time.
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SUGGESTIONS
The bank‟s current and liquid asset is sufficient to meet the current liabilities of the bank which shows the sound liquid position. This has to be maintained for the following years.
The bank should make efforts to increase the earning retention ratio for its further business growth and development.
The bank has to take necessary steps to improve the capital adequacy ratio. The debt capital is not utilized effectively and efficiently. So the bank can extend its debt capital in the years to come.
The bank earnings per share is tremendously increased and it is advised that it should be continued for the following years.
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CONCLUSION Indian Banking sector contributes 8.6% for the Indian economy in 2010 The phenomenal growth of the banking industry is the positive sign for the growth and development of the country as the more number of investors are interested to operate the banks. In this current economic scenario ING vysya bank is performing outstanding manner its consistent profit from the last 4 years and it is performing well in the sector.
MY LEARNING I got to know in detail about Banking products and services Practical exposure to the corporate world It also helped me enhance my knowledge in banking sector Time management skills and working in a team Preparation and presentation of the research reports I got to meet a lot of people and have learnt a lot during this period
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BIBILIOGRAPHY A. Murthy , financial management , margham publishares. Prasanna chandra , financial management(theory & practice ) , tata mc graw hill publishers.
Dr.S.N. maheshwari , elements of financial management , sultan chand & sons publishers.
Dr.S.N. maheshwari , financial management(principles &practice) , sultan chand & sons publishers.
M.Y. khan, P.K. jain, management accounting(text problems & cases) the Mc Graw Hill publishers. T.S.Reddy, Y.Hari Prasad Reddy, management accounting, margham publishares. Saravanavel , Research Methodology, Kitab Mahal publishers.
Ravilochan , Research Methodology, margham publishares. WEBSITES: www.ingvysyabank.com REPORTS Annual Report of ING VYSYA Bank 2010-2011. Annual Report of ING VYSYA Bank 2011-2012.
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