Analysis of the banking sector with respect to six banks: Public sector & private sector

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Analysis of the banking sector with respect to six banks: Public sector & private sector

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Abstract

In this project six banks are taken on the basis of highest profits after tax. Three Banks are from the Public Sector and three from the Private Sector. First comes an analysis of the banking system which tells you about the Basel II norms which are applicable in India in every bank from 31st March 2007. There are many banks in India which are not in the position to follow these laws. After analyzing the Whole banking Sector individual bank are analyzed on the basis of developments made in the bank, net interest income or margin, non performing assets and net margin. This is done to give the overall value of the individual banks and recent developments. This individual analysis id done till the 3rd Quarter of 2007. To know the stock prices, first of all, the forward PAT is found out on the basis of compounded annual growth rate. Then on the basis of Forward PAT, future cash flows are found out. Then using two methods Future Prices of Banks are found out. These methods are the Discounting Cash Flows Method and the PE X EPS Method. Then the actual value of Shares is compared with the found out value to find out if the share is undervalued or overvalued.

Introduction
Objective of the study
1. Main objective
2. Sub objective
Hypothesis and method of study
1. Research methodology
2. Data collection technique
Indian banking industry profile
Major reforms undertaken by the industry
Micro economic scenario and its impact on creding banking
1. Analysis of various banks
References and Bibliography
Annexures
Conclusion

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[...] After the second phase of financial sector reforms and liberalization of the sector in the early nineties, the Public Sector Banks (PSB) s found it extremely difficult to compete with the new private sector banks and the foreign banks. The new private sector banks first made their appearance after the guidelines permitting them were issued in January 1993. Eight new private sector banks are presently in operation. These banks due to their late start have access to state-of-the-art technology, which in turn helps them to save on manpower costs and provide better services. [...]

[...] Punjab National Bank Key Highlights Net Interest Income of PNB grew by Year on Year to Rs bn on the back of better than expected NIMs at (based on average of period ended earning assets). While advances grew by 29% Year on Year, deposit growth has been Year on Year. Provisions grew sharply mainly on account low base of the previous year. PAT of the bank grew by YoY to Rs. 5050mn, broadly in line with expectation. Excellent Net Interest Margin: Bank has shown a robust performance on their margin front. [...]

[...] With the economic growth picking up pace and the investment cycle on the way to recovery, the banking sector will have to transform its role as an intermediary between the demand and supply of funds. In order to speed up the growth process in the economy, the banks need to play a greater and diversified role in the economy in the coming years. In India, the most significant achievement of the financial sector reforms is the improvement in the financial health of commercial banks in terms of capital adequacy, profitability and asset quality as well as greater attention to risk management. [...]

[...] According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding and respectively. The remarkable growth story of the Indian banking market is appreciated globally now. Between 2000 and 2005, the total assets of the industry grew from $265 billion to $520 billion, profits grew from $ 1.7 billion to billion. Current projections suggest that in 2010, industry assets would exceed trillion, with total profits pegged between $10-$12 billion. [...]

[...] It is amongst the leading private sector banks with 585 branches in the top 228 cities and over 1,380 ATM's. The key promoter HDFC Ltd holds 22% stake, with FIIs and public holding the remaining. HDFC BANK is among the top three players in areas of auto loans, personal loans, commercial vehicles, cash management, and supply chain management. The bank's strengths include its brand equity, professional management, reach, and focus on profitability. HDFC BANK's Q3FY07 results were in line with our estimates. [...]

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