Ratio Analysis of kotak Mahindra Bank:

Sr No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Ratio Current Ratio Quick Ratio Gross Profit Margin Net Profit Margin Operating Profit Margin Return on Assets Return on Net worth Total Assets Turnover Ratio Debt-Equity Ratio Interest Income / Total Funds Interest Expended / Total Funds Interest Expended / Interest Earned Credit Deposit Ratio Earning per share Dividend per share Dividend Payout Ratio P/E Ratio 2011 0.04 8.50 24.30 8.55 26.38 92.74 12.71 0.08 4.28 8.39 4.29 51.13 79.90 11.10 30.00 26.03 52.57 2010 0.04 9.07 22.18 10.54 24.64 130.40 13.89 0.09 5.26 8.52 4.69 55.04 75.96 16.12 30.00 23.36 49.87

Ratio Analysis of IDBI Bank:

Sr No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Ratio Current Ratio Quick Ratio Gross Profit Margin Net Profit Margin Operating Profit Margin Return on Assets Return on Net worth Total Assets Turnover Ratio Debt-Equity Ratio Interest Income / Total Funds Interest Expended / Total Funds Interest Expended / Interest Earned Credit Deposit Ratio Earning per share Dividend per share Dividend Payout Ratio P/E Ratio 2011 0.62 26.78 11.26 8.12 11.89 128.69 13.02 0.08 14.24 10.74 4.66 44.38 84.82 16.76 3.50 24.23 2010 0.55 19.49 11.66 5.95 12.19 113.50 12.53 0.08 20.38 11.05 4.23 38.28 86.28 14.23 3.00 24.14

Comparison between Kotak Mahindra bank and IDBI Bank:

Let us interpret all the ratios one by one.

Liquidity Ratios:
While looking at current and quick ratios of both the banks, they are more in case of IDBI than those of KOTAK MAHINDRA bank. It means the ability of the IDBI bank to meet its short-term, immediate obligations is more than that of KOTAK MAHINDRA bank. a higher ratio means a more liquid current position. Hence, the liquid position of IDBI is more than that of KOTAK MAHINDRA. This is ratio is very important for creditors.

Profitability Ratios:
The gross profit margin is more in case of KOTAK MAHINDRA bank. It means that a company is using its human resources, fixed assets and all basic resources efficiently to generate profits. A higher margin percentage is a favorable profit indicator. The Net profit is obtained after deducing operating expenses, interest and taxes. So it is an actual profit of the organization. This ratio is more for KOTAK MAHINDRA bank as compared to IDBI bank. Hence, KOTAK MAHINDRA bank is more profitable than IDBI bank. The operating profit is more important from the point of view of all investors (lenders and owners) as it is an appropriate measure of profit. Taxes are not controlled by management, so to separate the influences of interest and taxes, EBIT is computed which is nothing but an operating profit. This ratio is also more in case of KOTAK MAHINDRA bank. Return on Assets is more for IDBI bank when compared to KOTAK MAHINDRA bank. It means the management of IDBI bank is employing the company's total assets in an effective manner to make a profit. The higher the return, the more efficient management is in utilizing its asset base. The Return on Net worth ratio is an important measure of a company's earnings performance. It tells common shareholders how effectively their money is being employed. In general, financial analysts consider return on equity ratios in the 15-20% range as representing attractive levels of investment quality. It is 12.71 for KOTAK MAHINDRA bank and 13.02 for IDBI bank on March 2011. So it is better to invest in IDBI bank as compared to KOTAK MAHINDRA. Considering all the above profitability ratios, HDFC is better option to invest as compared to ICICI bank.

Total Assets Turnover ratio:

This ratio shows the firms ability in generating sales from all financial resources committed to total assets. For HDFC, it is 0.10. It implies that HDFC bank generate a sale of Rs. 0.10 for one rupee investment in fixed and

current assets together. For ICICI, it is 0.08. It implies that ICICI bank generate a sale of Rs. 0.08 for one rupee investment in fixed and current assets together. Thus, HDFC bank ability to generate sales from all financial resources committed to total assets is more as compared to ICICI bank.

Debt-Equity Ratio:
It compares a company's total liabilities to its total shareholders' equity. The industry norm is 2:1. A lower the percentage means that a company is using less leverage and has a stronger equity position. In this case, ICICI bank has a stronger equity position as its ratio is less when compared to HDFC bank.

Interest Income/ Total Funds & Interest Expended/ Total Funds:

This ratio represents the income and expenses over total funds. Income is more than the expenses for both banks. But in case of ICICI, income is approx. 1.91 times the expenditure while in case of HDFC, income is approx. 2.6 times the expenditure which again represents that HDFC is a good performing bank.

Interest Expended / Interest Earned

This ratio is lower for HDFC bank when compared to ICICI bank which represents that expenses are less than earnings. Hence, HDFC performs very well than ICICI.

Credit to Deposit Ratio:

This ratio up to 75% is the best. Because banks have to deposit upto 25% with RBI to meet emergencies. If this ratio is beyond 75%, which means they are borrowing some funds from outside. This ratio again favours to HDFC bank as it is 76.02 % which is little more than 75% while it is 87.81% in case of ICICI bank.

Earning per share:

It an amount of income earned during a period per share of common stock. It is more i.e. Rs. 84.40 for HDFC bank in March, 2011 as compared to ICICI bank whose EPS is Rs. 44.70. HDFC gives more earning to its shareholders.

Dividend per share:

It is an amount of cash dividends paid during a period, per share of common stock. HDFC bank has given Rs. 16.50 as a dividend while ICICI bank has given Rs. 14 as dividend to its shareholders in year 2011.

Dividend Payout Ratio:

It is the percentage of earnings paid to shareholders in dividends. This ratio is more in case of ICICI bank as compared to HDFC. It means, ICICI bank has distributed more percentage of dividends out of its earnings to its shareholders.

P/E Ratio:
PE ratio is one of the most important ratio on which most of the traders and investors keep watch. The PE ratio tells you whether the stocks price is high or low compared to its forward earnings. The high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. This generally happen in bull market and share price keeps on increasing. Basically in bull market share prices keep increasing without giving more importance to its current valuation and once market realizes that it is over priced then they start selling. In bear market, the low PE stocks having high growth prospects are selected as best investment options. But, the P/E ratio doesn't tell us the whole story of the company. Generally the P/E ratios are compared of one company to other companies in the same sector/industry and not in other industry. Nowadays, the market is a bear market and HDFC bank has low P/E ratio than ICICI bank. So, HDFC is a better investment option as compared to ICICI bank. Considering all the factors and ratios, the HDFC bank has high growth prospects and expansion plans than ICICI bank. HDFC bank is financially more sound & stronger than ICICI bank. In this way, a financial analysis can be done using ratios.