Intership Weekly Report

Intership Weekly ReportWeek-1 Retail Banking

Submitted by,

Ashwin Paldano P301313CMG419Leoprabhu EkambaramP301313CMG443Suresh VenkatesanP301313CMG479

Table of ContentsINTRODUCTION City Union Bank2History of Bank:2Branches and location:2Major Shareholder:3Financial Analysis:4CAPITAL ADEQUACY4ASSET QUALITY5MANAGEMENT SOUNDNESS7EARNINGS & PROFITABILITY7LIQUIDITY9

INTRODUCTION City Union BankHistory of Bank:'The Kumbakonam Bank Limited' as it was then called was incorporated as a limited company on 31st October, 1904. The bank in the beginning preferred the role of a regional bank and slowly but steadily built for itself a place in the Delta District Thanjavur. In April, 1965, two other local banks viz., 'The City Forward Bank Limited' and 'The Union Bank Limited' were amalgamated with the Bank under a scheme of amalgamation with the resultant addition of six more branches viz., Kumbakonam-Town, Nannilam, Koradacherry, Tiruvidaimarudur, Tirupanandal and Kuttalam. Consequently, the Bank's name was changed to 'The Kumbakonam City Union Bank Limited'. The first branch outside the state of TamilNadu was opened at Sultanpet, Bangalore in Karnataka in September,1980.In tune with the national image attached to the Bank, the Bank's name was changed to 'City Union Bank Limited' with effect from December, 1987.

Branches and location:A network of 382 branches of which 336 branches are located in South India and 251 in Tamil Nadu alone

State No. of Branches% of Business

Tamilnadu25171

Andhra Pradesh499

Karnataka246

Maharashtra177

Kerala122

Gujarat61

Others234

Total382

Most of the banks operation is in Semi urban (40%) region and in TamilNadu (71%).

Major Shareholder:

Major Institutional Shareholders % Share holding

Regal Investment and Trading Co. Pvt Ltd2.03

L&T Unnati Finance Ltd.4.59

Argonaut Ventures4.36

FMO, Nederlandse4.35

LIC of India4.02

Acacia Partners2

Wasatch Core Growth Fund1.95

Emblem1.66

Morgan Stanley Asia1.09

Financial Analysis:We have chosen the CAMELS Model for Financial analysis purpose. It measures theperformance of the banks from each parameter i.e. Capital, Assets, Management, Earnings, Liquidity and Sensitivity toMarket risks. CAMELS evaluate banks onthe following six parameters

CAPITAL ADEQUACYIt is important for a bank to maintain depositors confidence and preventing the bank from going bankrupt. It reflects the overall financial condition of banks and also the ability of management to meet the need of additional capital. The following ratios measure capital adequacy

Capital Adequacy Ratio (CAR): The capital adequacy ratio is developed to ensure that banks can absorb a reasonable level of losses occurred due to operational losses and determine the capacity of the bank in meeting the losses. As per the latest RBI norms, the banks should have a CAR of 9 per cent

Capital to Risk Weighted Asset =Tier1_capital+TierII_CapitalRisk weighted assets

=1964.63+78.8813617.19

= 15.01%CAR for the City union bank is greater than the required rate of 9% by RBI also higher than the overall bank average of 13.9%

Tier I Capital to Risk Weighted Asset =Tier1_capitalRisk weighted assets

=1964.63+78.8813617.19

= 14.43%

The average Tier I capital to risk weighted Asset ratio is 10.9% in 2013, the above calculation shows that the ratio for City union bank is greater than the national average which shows that it that better capital adequacy ratio.

Non-performing loans net off provisions to capital =Gross_NPA-Provisioncapital

=293.06-95.772024.93

= 9.74%

Debt-Equity Ratio (D/E): This ratio indicates the degree of leverage of a bank. It indicates how much of the bank business is financed through debt and how much through equity.

Debt-Equity ratio =DebtEquity

=304.982024.93

= 15.06%

Government Securities to Total Investments (G-sec/Inv): It is an important indicator showing the risk-taking ability of the bank. It is a banks strategy to have high profits, high risk or low profits, low risk

G-sec to total investments =G-secTotal Investment

=5318.975953.56

= 89.34%The bank as invested about 89.34% of its total investment in government securities which are more secure, however this leads the bank to have low profit as the risk involved is also low.

Advance to Assets Ratio (Adv/Ast): This is the ratio indicates a banks aggressiveness in lending which ultimately results in better profitability.

G-sec to total investments =Total_advanceTotal Assets

=16096.8424993.84

= 64.40%

The advance to asset ratio of Indian banks on an average is 61 %( 2013 data) considering this the City Union bank as provided advances in line with the other banks.

ASSET QUALITY

The quality of assets is an important parameter to gauge the strength of bank. The prime motto behind measuring the assets quality is to ascertain the component of non-performing assets as a percentage of the total assets. The ratios necessary to assess the assets quality are:

NPAs to Total Assets (NNPAs/TA): This ratio discloses the efficiency of bank in assessing the credit risk and, to an extent, recovering the debts.

Non-performing loans to total gross loans =Non_performing_loansTotal Advances

=293.0616096.84

= 1.82%

The Gross NPA percentage for the City Union Bank is lower the average of 3.6% for Indian banks. This shows that the bank is assessing their credit risk and have a sound credit lending policy.

Net NPAs to Net Advances (NNPAs/NA): It is the most standard measure of assets quality measuring the net non-performing assets as a percentage to net advances.

Net NPA to Net advances =Net_NPA Net Advances

=197.2916096.84

= 1.23%The Net NPA percentage for the City Union Bank is lower the average of 1.7% for Indian banks. This shows that the bank is having good asset quality.

Sectorial Distribution of loans :

priority sectors loanstotal advances=7409.8416096.84

Public sectots loansTotal advances=298.1116096.84

Total Investments to Total Assets (TI/TA): It indicates the extent of deployment of assets in investment as against advances.

Total investment to Total Assets =Total_Investment Total Asset

=5953.2624993.82

= 23.82%

MANAGEMENT SOUNDNESS

Management efficiency is another important element of the CAMEL Model. The ratio in this segment involves subjective analysis to measure the efficiency and effectiveness of management. The ratios used to evaluate management efficiency are described as:

Credit Deposit Ratio (TA/TD): This ratio measures the efficiency and ability of the banks management in converting the deposits available with the bank excluding other funds like equity capital, etc. into high earning advances.

Credit Deposit Ratio =Total_advances Total Deposits

=16096.8422016.89

= 73.11%

This shows that the management of City Union Bank as lend 73.11% of the deposits received, which is lesser than the average of Indian banks of about 79.1%. This shows that the management of CUB has to perform better and find ways/customers to lend our more deposits available.

Return on Net worth (RONW): It is a measure of the profitability of a bank. Here, PAT is expressed as a percentage of Average Net Worth.

Return on Net-worth =PATNet worth

=347.072006.38

= 17.30%

EARNINGS & PROFITABILITY

The quality of earnings is a very important criterion that determines the ability of a bank to earn consistently. It basically determines the profitability of bank and explains its sustainability and growth in earnings in future. The following ratios explain the quality of income generation.

Operating expense to Total assets: This ratio indicates how much a bank spends for its operations against total assets.

Return on Net-worth =Operating_expensesTotal assets

=2266.1724993.82

= 9.07%

Return on equity: This ratio indicates the returns earned to the shareholders fund inested in the entity

Return on equity =PATShareholders Equity

=347.072024.93

= 17.30%This ratio is higher than the Indian bank average ROE of 13.84%. This show that the bank is earning higher returns than many other Indian Banks.

Return on Asset: This ratio measures return on assets employed or the efficiency in utilization of assets. Return on equity =PATTotal Asset

=347.0724993.82

= 1.39%

This ratio is higher than the Indian bank average ROA of 1.03%. This show that the bank is earning higher returns than many other Indian Banks.

Interest income to Total asset: This ratio depicts the asset utilization. The assets of the banks consists of the loans and advances and the investments portfolio.Interest income to total asset =Interest_income_+_othersTotal Asset

=347.0724993.82

= 11.39%

Interest income to Total asset: Interest expense constitutes the largest operating cost of a bank, it is be useful to analyze its relationship to interest income. The ratio of interest expense to income would reflect the efficiency of raising resources and their deployment

Interest Expense to Interest income =Interest_expenseInterst income

=1786.542847.13

= 62.75%

Net Interest Income as a percentage of Total Assets: This ratio signifies the percentage of net interest income earned on total assets .This ratio is significant as net interest income is the largest source of income for the banks in India

Net interest Margin =Interst_Income-Interest_expenseTotal asset

=2847.13-1786.5424993.82

= 4.24%

This shows that the net interest margin of CUB is higher than the average of Indian banks 2.8%.

LIQUIDITY

Risk of liquidity is curse to the image of bank. Bank has to take a proper care to hedge the liquidity risk; at the same time ensuring good percentage of funds are invested in high return generating securities, so that it is in a position to generate profit with provision liquidity to the depositors. The following ratios are used to measure the liquidity

Liquid Assets to Demand Deposits (LA/DD): This ratio measures the ability of bank to meet the demand from depositors in a particular year. To offer higher liquidity for them, bank has to invest these funds in highly liquid form

Liquid asset to Demand Deposits =Liquid_assetDemand Deposit

=2179.613917

= 0.56

Liquid Assets to Total Deposits (LA/TD): This ratio measures the liquidity available to the total deposits of the bank.

Liquid asset to Total Deposits =Liquid_assetTotal Deposit

=2179.6122016.89

= 9.90%

Liquid Assets to Total Assets (LA/TA): It measures the overall liquidity position of the bank. The liquid asset includes cash in hand, balance with institutions and money at call and short notice. The total assets include the revaluation of all the assets

Liquid asset to Total assets =Liquid_assetTotal Assets

=2179.6124993.82

= 8.72%

G-Sec to Total Assets (G-Sec/TA): It measures the risk involved in the assets. This ratio measures the Government securities as proportionate to total assets.

G-Securities to Total assets =G-secTotal Assets

=5318.9724993.82

= 21.28%

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