sathya's iob project
TRANSCRIPT
A STUDY ON THE FINANCIAL PERFORMANCE OF INDIAN
OVERSEAS BANK FOR THE PERIOD
2009-2012
Submitted as a part of MBA I year Course Requirement
By
SATHYA. S
3511140229
Under the guidance of
Mr. Ganesh Kumar MBA
Faculty, SRM B-School,
VadapalaniCampus, Chennai
SRM B-SCHOOL
FACULTY OF ENGINEERING AND TECHNOLOGY
SRM UNIVERSITY (RAMAPURAM II)
VADAPALANI, CHENNAI
BONAFIDE CERTIFICATE
This is to certify that SATHYA.S is a Bonafide Student of SRM B-School, SRM
University, Vadapalani, Chennai. She is in the I year of Masters Degree Program in
Business Administration (MBA). She / He has done this project under my guidance and
supervision towards part fulfillment of I year MBA course.
Project Guide HOD
Date:
Place:
DEPARTMENT SEAL
DECLARATION
I SATHYA.S (3511140229) studying in I year MBA program at SRM B-School, SRM
University, Vadapalani, Chennai, hereby declare that this project is an original work of
mine and I have not verbatim copied / duplicated any material from sources like internet
or from print media, excepting some vital company information / statistics, which are
provided by the company itself.
Signature of the Student
Date:
Place:
ACKNOWLEDGEMENT
I wish to place on record my thanks for our esteemed institution S.R.M University for
providing me with opportunity to pursue my studies in this institution
I am extremely thankful and indebted to my supervisor, Mr.Ganesh Kumar BE MBA,
Lecturer at S.R.M B-School,Vadapalani, for his valuable guidance and advice at each
and every stage in the progress of my project work by for sharing with me his time,
knowledge and helping in every step during the process of data collection for my study.
I also express my sincere thanks to all my dear teachers of the Department of
Business Administration for their constant support and encouragement. Special and warm
thanks to Ms. Gayathri,M.Phil; Senior Lecturer at S.R.M B School,Vadapalani for her
help and motivation to go ahead with this topic for study.
My heartfelt thanks goes to the staffs of Indian Overseas Bank, Chintadripet branch,
Chennai; for providing me with the opportunity to conduct my summer internship project
at their organisation and for providing me the inspiration to work on this topic as well as
for being so cooperative during my data collection.
I would finally like to thank my family and friends for the constant support and
encouragement.
ABSTRACT
Banks play an important role in the economic development of every nation. They have
control over a large part of the supply of money in circulation. A bank is a financial
intermediary that accepts deposits and channels those deposits into lending activities.
Banks are a fundamental component of the financial system and are also active players in
financial markets. Financial performance refers to the achievement of the bank in terms
of profitability. The profitability of a bank denotes the efficiency with which a bank
deploys its total resources to optimize its net profits and thus serve as an index to the
degree of asset utilization and managerial effectiveness. In this study an attempt is made
to see the financial performance of Indian Overseas Bank with the different norms.
For this study, Indian overseas bank was chosen on the basis of opportunity obtained;
however the summer internship project served an excellent exposure to get valuable
insights into the financial performance of an international public bank. Further in the
study, the bank at a glance can be found along with a thorough and systematic procedure
at deriving financial solutions to the crucial issues extracted out of the data.
The result of the study has been largely positive on the growth trend of the bank. With
adequate policy adjustments and enhancing performance the bank can be ensured high
productivity and efficiency. The methods to arrive at such results are discussed in this
study with sufficient reference to the past and current trends on the financial functioning
and positioning of the bank.
TABLE OF CONTENTS
Page Number
CHAPTER 1 INTRODUCTION
1.1 INDUSTRY PROFILE
1.2 COMPANY PROFILE
1.3 OBJECTIVE OF THE STUDY
1.4 NEED FOR THE STUDY
1.5 SCOPE AND SIGNIFICANCE
CHAPTER 2 DATA ANALYSIS & INTERPRETATION
2.1 PROBLEM IDENTIFIED
2.2 ANALYSIS
2.3 MAJOR FINDINGS
CHAPTER 3 CONCLUSION& SUGGESTIONS
3.1 CONCLUSIONS
3.2 SUGGESTIONS FOR IMPROVEMENT
CHAPTER 1
INTRODUCTION
1.1 INDIAN BANKING INDUSTRY PROFILE
A good bank is not only the financial heart of the community, but also one with an
obligation of helping in every possible manner to improve the economic conditions of
the common people
A bank is a financial intermediary that accepts deposits and channels those deposits into
lending activities. Banks are a fundamental component of the financial system, and are
also active players in financial markets. The essential role of a bank is to connect those
who have capital (such as investors and depositors), with those who seek capital (such as
individuals wanting a loan or business wanting to grow). Banks thus play an important
role in the economic development of every nation. They have control over a large part of
the supply of money in circulation. Through their influence over the volume of bank
money, they can influence in nature and character of production in any country.
Economic development is a dynamic and continuous process. Banks are the main stay of
economic progress of a country, and in the modern economy, banks have become a part
and parcel of all economic activities in India.
Indian Banking Industry Vs Global Economy
Currently, amidst all the turmoil of global economic recession, India’s banking industry
has been amongst the few to maintain resilience. The tempo of development for the
Indian banking industry has been remarkable over the past decade. It is evident from the
higher pace of credit expansion; expanding profitability and productivity similar to banks
in developed markets, lower incidence of non-performing assets and focus on financial
inclusion have contributed to making Indian banking vibrant and strong. Indian banks
have begun to revise their growth approach and re-evaluate the prospects on hand to keep
the economy rolling.
Structure of Indian Banking Industry
Banking industry in India functions under the sunshade of Reserve Bank of India-
The regulatory, central bank. Banking industry mainly consists of:
Commercial banks
Co-operative banks
The commercial banking structure in India consists of : schedules Commercial Banks and
Unscheduled Bank. Scheduled commercial banks constitute those banks which have been
included in the second schedule of Reserve Bank of Indian (RBI) Act. 1934.
RBI in turn includes only those banks in this schedule which satisfy the criteria laid down
vide section 42 (60) of the Act. Some co-operative banks are scheduled commercial
banks although not all co-operative banks are. Being a part of the second schedule
confers some benefits to the banks in terms of access to accommodation by RBI during
the times of liquidity constraints. At the same time, however this status also subjects the
bank certain conditions and obligation towards the reserve regulation of RBI.
For the purpose of assessment of performance of banks the RBI categories them as public
sector banks, old private sector banks, new private sector banks and foreign banks.
Figure 1.1 Structure of Indian Commercial Banking Sector
S.NO NATIONALISED
BANKS
OLD PRIVATE
BANKS
NEW PRIVATE
BANKS
FOREIGN BANKS
1 Allahabad Bank Ltd Catholic Syrian bank Ltd. Axis Bank Ltd AbuDhabi
Commercial Bank
2 Andhra Bank Ltd City Union Bank Ltd Development Credit
Bank Ltd
American Express
Bank
3 Bank of Baroda Ltd Dhanalakshmi Bank Ltd HDFC Bank Ltd Bank International
Indonesia
4 Bank of India Ltd Federal Bank Ltd ICICI Bank Ltd Standard Chartered
Bank
5 Bank of Maharashtra Ltd ING Vysya Bank Ltd Induslnd Bank Ltd Bank of America
6 Canara Bank Ltd Jammu and Kashmir
Bank Ltd
Kotak Mahindra
Bank Ltd
Bank of Ceylon
7 Central Bank of India Ltd Karnataka Bank Ltd Yes Bank Ltd Bank of Nova Scotia
8 Corporation Bank Ltd KarurVysya Bank Ltd Bank of Tokyo
Reserve Bank of India
Bank Financial Institution
Scheduled Commercial
banks
All India Financial Institution
Co-Operative credit
institutions
State level Instituition
Other Institution
Public Sector Banks
Private Sector Banks
Foreign Banks Regional Rural Banks
Urban Cooperative
Rural Cooperative Cedit Institutions
Mitsubishi UFJ
9 Dena Bank Ltd Lakshmi Vilas Bank Ltd Barclays Bank PLC
10 Idbi Bank Ltd Nainital Bank Ltd BNP Paribas
11 Indian Bank Ltd Ratnakar Bank Ltd Caylon Bank
12 Indian overseas Bank Ltd SBI Commercial and
International Bank Ltd
China trust
Commercial
13 Oriental Bank of
Commerce Ltd
South Indian Bank Ltd Citi Bank N.A
14 Punjab and Sind Bank Ltd Tamil Nadu Mercantile
Bank Ltd
DBS Bank
15 Punjab National Bank Ltd Deutsche Bank AG
16 Syndicate Bank Ltd HSBC
17 UCO Bank Ltd JPMorgan Chase
Bank
18 Union Bank of India Krung Thai Bank
19 United Bank of India Ltd Mashreq Bank psc
20 Vijaya Bank Ltd Mizuho Corporate
Bank
21 State Bank of Bikaner and
Jaipur Ltd
Royal Bank of
Scotland
22 State Bank of Hyderabad
Ltd
Shinhan Bank
23 State Bank of India Ltd Societe Generale
24 State Bank of Mysore LTd Sonali Bank
25 State Bank of Patiyala Ltd State Bank of
Mauritius
26 State Bank of Travancore UBS
27 VTB
Challenges Faced By Indian Banking Industry
Developing countries like India, still has a huge number of people who do not have
access to banking services due to scattered and fragmented locations. But if we talk about
those people who are availing banking services, their expectations are raising as the level
of services are increasing due to the emergence of information technology and
competition. Since, foreign banks are playing in Indian market the number of services
offered has increased and banks have laid emphasis on meeting the customer
expectations.
Now, the existing situation has created various challeneges and opportunity for Indian
commercial banks. In order to encounter the general scenario of banking industry we
need to understand the challenges and opportunities lying with banking industry of India.
Rural Market
Banking in India is generally fairly mature in terms of supply, product range and
reach, even though reach in rural India still remains a challenge for the private
and foreign banks. In terms of quality of asset and capital adequacy, Indian
banks are considered to have clean, strong and transparent balance sheets relative
to other banks in comparable economies in this region.
Management of Risks
The growing competition increases the competitiveness among banks. But,
existing global banking scenario is seriously posing threats for Indian Banking
Industry. We have already witnessed the bankruptcy of some foreign banks.
However according to certain studies there is a positive association between
changes in risk and capital.
Market Discipline and Transparency
Transparency and disclosure norms as part of internationally accepted corporate
governance practices are assuming greater importance in the emerging
environment. Banks are expected to be more responsive and accountable to the
investors. Banks have to disclose in their balance sheets a plethora of information
on the maturity profiles of assets and liabilities, lending to sensitive sectors,
movements in NPAs, capital, provisions, shareholdings of the government, value
of investment in India and abroad, operating and profitability indicators, the total
investments made in the equity share, units of mutual funds, bonds, debentures,
aggregate advances against shares and so on.
Human Resource Management
When relations between human resources management (HRM), work climate and
organizational performance in the branch network of a retail bank. Significant
correlations were found between work climate, human resource practices, and
business performance. The results showed that the correlations between climate
and performance cannot be explained by their common dependence on HRM
factors, and that the data are consistent with a mediation model in which the
effects of HRM practices on business performance are partially mediated by work
climate.
Global Banking
It is practically and fundamentally impossible for any nation to exclude itself from
world economy. Therefore, for sustainable development, one has to adopt
integration process in the form of liberalization and globalization becomes
challenges for the domestic enterprises as they are bound to complete with global
players.
If we look at the Indian banking industry, then we find that there are 36 foreign
banks operating in India, which becomes a major challenge for nationalize and
private sector banks, these foreign banks are larger in size, technically advanced
and having presence in global market, which gives more and better options and
services to Indian traders.
Financial Inclusion
Financial inclusion has become a necessity in today’s business environment.
Whatever is produced by business houses that have to be under the check from
various perspectives like environmental concerns, corporate governance social
and ethical issues. Apart from it to bridge the gap between rich and poor the poor
people of the country should be given proper attention to improve their economic
condition.
Employee’s Retention
The banking industry has transformed rapidly in the last ten years, shifting from
transactional and consumer service-oriented to an increasingly aggressive
environment, where competition for revenue is on top priority. Long-time banking
employees are becoming disenchanted with the industry and are often resistant to
perform up to new expectations. The diminishing employee morale results in
decreased revenue. Due to the intrinsically close ties between staff and clients,
losing those employees completely can mean the loss of valuable customer
relationships. The retail banking industry is concerned about employee retention
from all levels: from tellers to executives to customer service representatives
because competition is always moving in to hire them away.
Customer Retention
The major determinants of customer satisfaction and future intentions in the retail
bank sector include service quality dimensions (such as getting it right the first
time), service features (such as competitive interest rates), service problems,
service recovery and products used. It was found, in particular, that service
problems and the bank’s service recovery ability have a major impact on
satisfaction and intentions to switch.
Thus, these challenges and opportunities like rural market, transparency, customer
expectations, management of risks, growth in banking sector, human factor,
global banking, environment concern, social, ethical issues, employee and
customer retentions, banks are striving to combat the competition. The
competition from global banks and technological innovation has compelled the
banks to rethink their policies and strategies.
INDIAN OVERSEAS BANK
– THE COMPANY PROFILE
Company information :
Full name: Indian Overseas Bank
Legal Form: Public Limited Company (BSE 532388)
Legal Address/HQ: 763 Anna Salai, Central Office, ; Chennai; Tamil Nadu;
Tel: 044-28524212 / 28415702 / 28519491
Incorporation Date: February 10, 1937
Total Employees: 25,626
Revenue: INR 34,550 cr
Net Income: INR 19,578 cr
Total Assets: INR 921,841 cr
Website: www.iob.in
Company Description
At home or abroad, Indian Overseas Bank wants to provide a safe haven for clients'
rupees. Indian Overseas Bank (IOB) is one of India's largest state-controlled banks and
provides banking and financial services throughout the country. Established with a focus
on foreign exchange and overseas banking, IOB has some 1,800 domestic branches and
about a half-dozen international branches. It provides deposit, lending, mortgage,
currency transfer, agri-business consultation, and credit card services. Specialized
branches offer services related to such concerns as commercial and industrial credit,
industrial finance, and high-tech agriculture.
Organizational expansion
Pre-World War II
In 1937, Thiru.M. Ct. M. Chidambaram Chettyar establishes the Indian Overseas Bank
(IOB) to encourage overseas banking and foreign exchange operations. IOB started up
simultaneously at three branches, one each in Karaikudi, Madras (Chennai) and Rangoon
(Yangon). It then quickly opened a branch in Penang and another in Singapore. The bank
served the Nattukottai Chettiars, who were a mercantile class that at the time had spread
from Chettinad in Tamil Nadu state to Ceylon (Sri
Lanka), Burma(Myanmar), Malaya, Singapore, Java, Sumatra, and Saigon. As a result,
from the beginning IOB specialized in foreign exchange and overseas banking (see
below).
After World War II
In the 1960s, the banking sector in India was consolidating by the merger of weak private
sector banks with the stronger ones; IOB absorbed five banks, including Kulitali Bank
(est. 1933). Then in 1969 the Government of India nationalized IOB. At one point,
probably before nationalization, IOB had twenty of its eighty branches located overseas.
After nationalization it, like all the nationalized banks, turned inward, emphasizing the
opening of branches in rural India.
In 1988-89, IOB acquired Bank of Tamil Nadu in a rescue.
The new millennium
In 2000, IOB engaged in an initial public offering (IPO) that brought the government's
share in the bank's equity down to 75%. In 2001 it acquired the Mumbai-based
AdarshaJanataSahakari Bank, which gave it a branch in Mumbai. Then in 2009 IOB took
over Shree SuvarnaSahakari Bank, which was founded in 1969 and had its head office
in Pune. Shree SuvarnaSahakari Bank has been in administration since 2006. It had nine
branches in Pune, two in Mumbai and one in Shirpur. The total employee strength was
estimated to be little over 100.
International expansion
As mentioned above, IOB was international from its inception with branches in Rangoon,
Penang, and Singapore. In 1941, IOB opened a branch in Malaya that presumably closed
almost immediately because of the war.
In 1946, after the War, IOB opened a branch in Ceylon. More overseas branches
followed quickly. In 1947, IOB opened a branch in Bangkok and re-opened others. In
i948 United Commercial Bank (see below) opened a branch in Malaya. In 1949, IOB
opened a branch in Bangkok.
Then in 1963, The Burmese government nationalized IOB’s branch in Rangoon. In 1973,
IOB, Indian Bank and United Commercial Bank established United Asian Bank
BerhadinMalaysia. (Indian Bank had been operating in Malaysia since 1941 and United
Commercial Bank Limited had been operating there since 1948.) The banks set up United
Asian to comply with the Banking Law in Malaysia, which prohibited foreign
government banks from operating in the country. Also, IOB and six Indian private banks
established Bharat Overseas Bank as a Chennai-based private bank to take over IOB's
Bangkok branch.
In 1977: IOB opened a branch in Seoul. Two years later, IOB opened a Foreign Currency
Banking Unit in Colombo, Sri Lanka.
International expansion slowed thereafter, for a while. In 1992 Bank of Commerce
(BOC), a Malaysian bank, acquired United Asian Bank (UAB).
In the new millennium, international expansion picked up once again. In 2007, IOB took
over Bharat Overseas Bank. Three years later, Malaysia awarded a commercial banking
license to a locally incorporated bank to be jointly owned by Bank of Baroda, Indian
Overseas Bank and Andhra Bank. The new bank, India International Bank (Malaysia),
will reside in Kuala Lumpur, which has a large population of Indians. Andhra Bank will
hold a 25% stake in the joint-venture, Bank of Baroda will own 40% and IOB the
remaining 35%.
Product and Service Profile
Constituents accounts
Savings account
Current and cash credit account
Term deposits
Safe deposits- Lockers & safe custody service
Nominations and settlement
Advances :
1. Advances against bank’s term deposits & RD
2. Advances against LIC policies
3. Advances against Central & State Govt
4. Advances against NSC/IVP/KVP securities
5. Advances against units of mutual funds
6. Advances against shares & debentures
7. Advances against gold ornaments
8. Advances against goods
9. Advances against immovable properties
10. Clear advances
11. Personal loans
12. Pensioner’s loan scheme
13. Advances to HP concerns
14. Advances to leasing concerns
15. Loans/overdrafts to NRI’s & their relatives
16. Advances against book debts
Bank guarantees: Advances to staff members
1. Staff housing loans
2. Loan against NSC
3. Loan against gold ornament
4. Staff consumer loan
5. Vehicle loan for supervisory staff
6. Vehicle loan for clerical staff
7. Conveyance loan from subordinate staff
8. Car loan for clerical staff
Management of non-performing assets
Rehabilitation of sick industrial units
Suit filed accounts
Foreign Exchange Operation
1. Rupee A/C of NRI
2. Foreign currency A/C in India
3. Remittances
4. Foreign travel
5. Exports
6. Imports
7. Forward Contract
8. Foreign currency loans
9. Precious Metal Business
10. Import of gold
I.O.B Gold Deposit Scheme
Government accounts, Accounting procedures & other matters
1. Cash & currency chest
2. Civil, defense, railway pension
3. SwatantraSainikSamman Pension scheme
4. Telecom pension
5. State Govt Pension
6. Chennai Port Trust Pension
7. T.N.E.B Pension
8. Employees PF organisation& Pension scheme
9. Malaysian Govt Pension Scheme
10. PPF Scheme 1968
11. Collection of Income Tax & other Direct Taxes
12. Collection of central excise, customs and other duties
13. Special deposit scheme
14. Deposit scheme for retiring Govt Employees,1998
15. Accounting of planning commission and national information centre
16. Post office collection A/C
17. Compulsory deposit (Income Tax Payers) scheme
Priority sector advances (other than SSI)
Agricultural advances:
1. Crop loans
2. Term loans for land development/reclamation
3. Term loan for plantation and horticulture
4. Term loan for dry land development
5. Term loan for farm forestry/waste land development
6. Term loan for tractor/power tiller/agricultural machinery and implement
7. Term loan for combine harvesters
8. Term loan for bullocks/bullock carts
9. Term loan for farmers for purchase of vehicle from transport/conveyance
10. Term loan for pisciculture
11. Credit facilities for animal husbandry
12. Term deposit for gobar gas plants
13. Financial appraisal of agricultural projects
Small & Micro enterprises Small Loans
Forest collections services
Agri business consultancy
Personal banking
Corporate banking
E- banking
Atm services
Trading services
CHAPTER 2: DATA ANALYSIS &
INTERPRETATION
2.1 PROBLEMS IDENTIFIED
An analysis of the factors responsible for the steep increase in the capital from
2011 to 2012
Enquiry into the reason why there has been no increase in the Net Profit of the
Bank for the period 2011-2012, although there has been commendable increase
in the Net Income
Generally fixed assets will decline every year due to the deductions of
depreciation. Although the Bank has declared an increase in its fixed assets.
The causes for sudden increase in loan advances in 2012 when compared to any
other financial year of the Bank.
These are few of the prominent issues identified by the researcher while analyzing
financial statements of the Bank for the period 2011-2012. The study has been thus
designed on basis of these questions, such that a systematic analysis and reasoning can be
provided. The issues have been analysed and resolved from the point of view of the
Bank’s policy as well as the overall Public Sector Banking Scenario.
2.2 OBJECTIVES
To study the financial performance and positioning of the Indian Overseas Bank
through assessment of financial statements for the period 2011-2012
To identify critical financial phenomenon in the functioning of the Bank and its
performance.
To reveal the trend of profits and other important facts, through a comparative
study of the financial statements for the Bank.
2.3 NEED FOR THE STUDY
To understand the banking industry functioning overall
To analyse and understand the financial statement by using financial analysis
techniques.
To forecast and prepare the plans for the future as suggestions for Bank’s further
improvement.
2.4 DATA COLLECTION:
Primary data :
Interview with the Manager.
Discussions with other personnel such as advisors and trainers.
Secondary data:
Annual Report.
IOB web site.
2.5 SCOPE & SIGNIFICANCE :
In this study the method comparative statement is used to find, analyze and interpret
the data of the bank to know the financial position of the bank and then arrive at
suggestions to improve or contribute to improvement of the Bank’s functioning.
2.6 LIMITATION OF THE STUDY:
Time constraint
Restriction on the availability of primary data on bank financials
Lack of availability of empirical secondary data
2.7 DATA ANALYSIS AND INTERPRETATION
Analysis and interpretation is used by the financial manager to ascertain the financial
performance of their firm. It has become a useful tool in the analytical kit. This is because
the financial statement, i.e., the “Balance Sheet” has a limited role to perform. .The
Balance Sheet is merely a static statement. It is a statement of asset and liabilities as on a
particular date.
1. COMPARATIVE STATEMENTS:
The elements of financial position are shown in a comparative form so as to give an idea
of financial position at two or more periods .Any statement prepared in a comparative
form will be covered in comparative statements. From practical point of view, generally
financial statements (balance sheet) are prepared in comparative form for financial
analysis purpose.
A comparative statement showS:
Absolute figures ( rupee amounts )
Changes in absolute figures i.e., increase or decrease in absolute figures.
Absolute data in terms of percentages.
Increase or decrease in terms of percentages.
The financial data will be comparative only when same accounting principles are used in
preparing these statements. In case of any deviation in the use of accounting principles
this fact must be mentioned at the foot of financial statements and the analyst should be
careful in using these statements.
COMPARATIVE BALANCE SHEET:
The comparative balance sheet analysis is the study of the trend of the same items, group
of items and computed items in two or more balance sheet of the same bank on different
dates. The changes in periodic balance sheet items reflect the conduct of a business. The
changes can be observed by comparison of the balance sheet at the begining and at the
end of period and these changes can help in forming an opinion about the progress of an
enterprise.
PROCEDURE OF PREPARE A COMPARATIVE BALANCE SHEET:
The Comparative balance sheet has two columns for the data of original balance
sheet.
Third column is used to show increases in figures.
The Fourth column is use to give percentages of increase or decrease
Comparative Balance Sheet of IOB For The Year Ending
2011-12
PARTICULARS SCHEDULES 2011 2012ABSOLUTE
INCRESE/DECREASE%
INCREASE/DECREASECAPITAL & LIABILITES EQUITY SHARE CAPITAL 1 61,87,493 79,69,982 17,82,489 28.8RESERVE & SURPLUS 2 8,70,61,807 11,13,06,540 2,42,44,733 27.84
DEPOSITS 3 1,45,22,87,511 1,78,43,41,764 33,20,54,253 22.86
BORROWINGS 4 19,35,54,046 23,61,38,471 4,25,84,425 22CURRENT LIABILITES 5 4,87,51,928 5,67,24,995 79,73,067 16
TOTAL LIABILITES 1,78,78,42,785 2,19,64,81,752 40,86,38,967 22.85
ASSETS
CASH BALANCE 6 10,01,08,943 10,19,89,124 18,80,181 1.87
BANK 7 2,00,77,614 6,06,21,862 4,05,44,248 20
INVESTMENT 8 48,61,04,540 55,56,58,811 6,95,54,271 14.3
ADVANCES 9 1,11,83,29,775 1,40,72,44,443 28,89,14,688 25.83
FIXED ASSETS 10 1,68,11,068 1,74,40,479 6,29,411 3,74
OTHER ASSETS 11 4,64,10,845 5,35,27,033 71,16,188 15.33
TOTAL ASSETS 1,78,78,42,785 2,19,64,81,752 40,86,38,967 22.85
MAJOR FINDINGS FROM THE COMPARATIVE BALANCE SHEET:
From the above Balance Sheet of IOB it is clear that the bank is progressing
well. This analysis is made by comparing it with the past year balance sheet i.e.,
2011 with the 2012.
The Net Profit of the Bank has been decreased from 10725427 to 10501262. The
reason for the decline in Net Profit is because of huge number of deposits.
Deposits have risen from 145228711 to 1784341764. There is an increase of 22.86%.
This increase in % is mainly due to the increase of term deposit where it is the deposit
held at a financial institution that has a fixed term. These are generally short term with
maturities ranging anywhere from a month to a few years. When a term deposit is
purchased, the lender (the customer) understands that the money can only be withdrawn
after the term has ended.
By having the money tied up he’ll generally get a higher rate with a term deposit
compared with any other deposits. Since there is huge number of deposits from 2011 to
2012 there is a decline in Net Profit though there is increase in Net Income.
Bank, on the other hand lends loans to the Customers with a higher rate of interest and
hence, the Term Deposit amount is rotated in this way.
This leads to pay higher interest to them and thus, Net Profit decreases.
Advances have increased to 25.83%.The interest earned from these loans also
would have given rise to Net Profit but since there was a dealing with
Shareholders they were to give it to the Shareholders as dividend.
The reason for the increase in Share Capital from 6187493 to 7969982 is
because the Bank promised to pay the Shareholders a dividend of 45%.
Dividends are payments given to Shareholder members. When they earn
Profit a portion of amount is given as Dividend.
The reason attribute for the increase in borrowings from 2011 to 2012 is
because of the expansion of IOB. The borrowing has been increased to 22%
because of opening of branches. During the year the Bank opened 44% branches
across the Country, highest in the history of Bank. The maximum amount of
borrowing has been borrowed from RBI Rs 6, 50, 00,000.
Fixed Assets have also been increased from 16811068 to 17440479. This rise is
because of introduction of New Asset (fixed) like furniture & fittings, premises,
etc. Though there is some amount of deductions from depreciation for the
existing asset, the cost of purchasing New Asset is more. The reason for
purchasing Fixed Assets like furniture & fittings & premises is because of the
expansion of Banks in an around the World.
2. TREND ANALYSIS
The second popular method for analysis of financial performance of an institution
is through a trend analysis. Trend analysis is a form of comparative analysis that
is often employed to identify current and future movements of an investment. The
process may involve comparing past and current figure in order to project how
long the current trend will continue. This type of information is extremely helpful
to investors who wish to make the most from their investments.
To calculate the percentage change between two periods:
Calculate the amount of the increase/(decrease) for the period by subtracting the
earlier year from the later year.
If the difference is negative, the change is a decrease and if the difference is
positive, it is an increase.
Divide the change by the earlier year's balance. The result is the percentage
change.
Now this method is used to perform a trend analysis on the deposits and profit
acquired by Indian Overseas Bank, for the period 2011-2012.
TREND ANALYSE FOR THE YEAR 2011-2012
YEAR DEPOSITS(In Lakhs) RATIO %
2008 1,652 0 0
2009 1,956 118 18%
2010 2,162 130 30%
2011 2,856 172 72%
2012 3,507 212 112%
YEAR NET PROFIT (In Lakhs) RATIOS %2008 1202 0 02009 1326 110 10%2010 707 58 -42%2011 1073 90 -10%2012 1050 87 -13%
TREND ANALYSIS INTERPRETATION:
From the above two graph it is very clear that the Net Profit varies in significant to the
amount of deposits. This shows the inverse effect. Meaning to say they are inverse
relationship.
When there is decrease in NP there is increase in deposit. In the year 2011 Net
Profit is decreased from 1326 to 707 say (+10% to -42%) but there is increase in
deposits from 195550 to 216229 say (18% to 30%)
On comparing 2011 with 2012, as said above it is verified. When Net Profit
declines from 1073 to 1050 deposit on the other hand increase from 285610 to
350653.
This makes us understand better that Banking refers to accepting deposits and lending
loans. Therefore Banks are concentrating on both aspects by rendering service along with
profit motive.
From the above analysis it is clear that why the Net Profit of 2012 is have reduced from
2011. This is just because of huge amount of domestic as well as global deposits
especially term or fixed deposit.
CHAPTER 3
CONCLUSIONS & SUGGESTIONS
3.1 SUGGESTIONS
The performance of the Bank is commendable from the financial records it has
declared. The Director, Mr.Narendra has come forward with a promise of greater
increase in the share value of the Bank for following financial year. To make this
a reality the bank has few agendas that it has to seriously focus on.
There has to wider propaganda of the brand among the people, to make them
aware about the benefit of becoming IOB Bank customers.
The Bank should provide life time valid ATM card to all its customers, which can
encourage them for active participation in banking endeavours. Simultaneously it
is important to make people understand about the various benefits of its products.
Thus propagating the marketability of the brand among the focus group.
From observation as an intern in the branch, the service speed and efficiency can
be further improved through adequate quality control measures in the every
branch. The employees are mostly excessively occupied with work load and so,
there is no proper response to the customers at times. Thus, it creates
dissatisfaction in the minds of the customers on overall public sector banks.
To avoid this, there can be a person allotted to meet the queries of the customers
like to help fill the vouchers or guide them with banking procedures, thus
enhancing Bank’s productivity as well as customer satisfaction.
Add finaicial suggestions
3.2 CONCLUSIONS:
The main aim of the training was to understand Banking activities and management. The
objective was to bridge the gap between the theories and practice, in an actual working
bank environment.
Thus, during the course of the training I learnt many things about the Bank working and
its functions. The bank already has good number of employees on board and is still
recruiting to increase the head count. It is on the brim of increasing its customers through
its attractive schemes and offer.
The demand for banking sector is increasing day by day. There is tough competition
ahead for the company from its major competitors in the banking sector.
From the Financial Analysis, it can be concluded that the Net Profit can be risen even
more by attracting more number of customers through their financial schemes.
Last but not the least I would like to thank IOB Bank and SRM University for giving me
an opportunity to work in the field of finance.
REFERENCES
1. “Spice Telcom takes a giant leap in VAS”, www.thetimesofindia.com, 21st June
2010.
2. “TRAI holds back number portability”, Business Line, 6th April 2008.
3. http://www.hoovers.com/company/Indian_Overseas_Bank/rckscri-1-1njht4-
1njhft.html
4. http://www.hoovers.com/company/Indian_Overseas_Bank/rckscri-1.html
5. http://www.securities.com/Public/company-profile/IN/
Indian_Overseas_Bank_en_1624469.html
6. http://economictimes.indiatimes.com/indian-overseas-bank/stocks/companyid-
11713.cms
7. http://in.reuters.com/finance/stocks/analyst?symbol=IOBK.BO
8. http://www.indiainfoline.com/Markets/Company/Background/Company-Profile/
Indian-Overseas-Bank/532388
ANNEXURES
CHAIRMAN OF IOB
HEAD OFFICE AT ANNA SALAI