Financial ratios of

Banks
You don't run a business hoping you don't have
a recession." -- Jamie Dimon, chairman and CEO
of JPMorgan Chase
 State Bank of India
1 • In year 1955 Imperial
Bank was Acquired by 2 • Punjab National Bank
RBI and was renamed as
SBI.
• State Owned Bank ,
Headquartered at
Mumbai.
• 190 foreign offices in 36
countries.
• 15,000 branches in India
Punjab National Bank
was registered on 19
May 1894 under the
Indian Companies Act,
with its office in Anarkali
Bazaar, Lahore.
• Owned by government
of India, currently
headquartered at New
Delhi .
• Has its subsidiaries in
more than 5 countries.
• 7,036 branches in India
ICICI Bank
3 • Established by ICICI in
the year 1994,
registered office in
Vadodara , Gujarat.
• Private sector bank ,
headquartered at
Mumbai.
• Well Established in 16
foreign countries .
• 4,882 Branches across
India.
 Ratios
Bank’s Assets Net Income
Leverage Ratio= Return on Equity=
Bank’s Capital Average Total Equity

Net Income Average Total Assets

Return on Assets= Equity Multiplier=
Average Total Assets Average Total Equity

Avg Interest received Net Interest Income

InterestRate Spread= - Net Interest Margin=
Avg Interest Paid Avg Total Assets
 NII-Operating Exp. Operating expenses
Operating Profit Margin= Cost to income ratio =
Total Interest Income (NII + non-interest income)

Non Interest Expenses

Efficiency Ratio=
Operating Income-loan Loss Provision
 Leverage Ratio
PNB SBI ICICI
8.41 42.41 7.47

•The leverage ratio is the proportion of debts that a bank has compared to its capital. The
higher the tier 1 leverage ratio, the higher the likelihood of the bank withstanding negative
shocks to its balance sheet.

Bank assets/Bank capital

•As calculated above we realized that SBI has a very High Leverage ratio of 42.41 times;
which means that assets of the bank are 42times the capital of the bank; similarly PNB has a
leverage ratio of 8.41 and ICICI has a leverage ratio of 7.47 .
•Ideal Leverage ratio is when Bank’s Assets are 12 times its capital.
•SBI’s leverage ratio is high as the bank is doing exceptionally well according to the sources ,
its income earnings have increased drastically, moreover its NPA’s have declined .
 Return on Equity
PNB SBI ICICI
-13.545 0.001020 0.00365

•This reveals how effectively a corporation is generating profit from the money that investors have put into the
business, in the case of banks, money generated through getting interest on loans given.

Return on Equity= Net Income/ Average Total Equity

•As Calculated above the ROE of PNB is in negative figures as its net income is very low according to its cash
flow statement , where as SBI and ICICI have a ROE of 0.001020 and 0.00365 respectively .

•PNB’s Managing Director Mr. Sunil Mehta revealed that PNB is facing a situation of set back due to several
major scams( Nirav Modi) and hence reported a loss of 9,975.49 crore Rs. Hence ROE of PNB depicts a negative
figure.
 Return on Assets

PNB SBI ICICI

-0.01294 0.0010 0.00364

• ROA is a profitability ratio and shows how profitable a bank is relative to its total assets. ROA also gives
an idea as to how efficient management is at using its assets to generate earnings.

Return on Assets= Net Income/ Average Total Assets

•ROA of PNB is -0.01294 which is negative due to the loss incurred by PNB in the last Fiscal , the ROA of
SBI and ICICI are 0.0010 and 0.00364 , Both the figures are showing a very less difference which means
that these banks are equally profitable.
•Ideal ROA should be around 0.05%.
 Equity Multiplier
PNB SBI ICICI

1046.068613 4.222764473 1.00139

•The equity multiplier is a financial leverage ratio that measures the amount of a firm's assets that are
financed by its shareholders by comparing total assets with total shareholder's equity.

Equity Multiplier= Average total assets/Average total equity

•Equity multiplier among the three banks is highest for PNB (1046.068) and lowest for ICICI (1.0013). A
lower value indicates a company has lower financial leverage. It is considered better to have a low
equity multiplier as that means company needs less debt to finance its assets. Ideally the value for
equity multiplier should be 13 to 14 times .
 Interest Rate Spread
PNB SBI ICICI
160393566.5 816012955.5 250203217

•It is the difference between the average interest received by a bank from loans—along with other
interest-accruing activities and the average interest paid by it on deposits and borrowings. The net
interest rate spread is a key determinant of a financial institution’s profitability.

Interest Rate Spread = Net interest income - Average total Assets

•The Interest rate spread for SBI is Rs 816012955.5 which is highest among the three banks , followed by
ICICI and PNB. The greater the interest rate spread the better it is for the bank because it earns more
income from this and the bank’s worth increases.
 Net Interest Margin
PNB SBI ICICI
0.022269651 0.024762614 0.0293

•Net interest margin is a measure of the difference between the interest income earned by banks
and the amount of interest paid out to their lenders (for example, deposits) in relation to the
amount of their (interest-earning) assets.

NIM = Net interest income/Average total Assets

•NIM has varied between 2.5% to 3% in recent times. The NIM is highest for ICICI (0.0293) followed
by SBI (0.0247) and ICICI (0.0222). A higher NIM would increases the profitability of the lender. A
negative NIM indicates that the lender has been unable to make good use of its assets, as returns
produced by investments has failed to offset interest expenses.
•
 Operating Profit Margin

SBI PNB ICICI

0.3637 0.4476 0.1407

•Operating expenses for a bank would mainly be more of administrative expenses. The main expense
heads would include salaries, marketing and advertising and rent, amongst others. Operating margins are
profits earned by the bank on its total interest income.
•The SBI has 36.37% profit margin.
•The PNB has 44.76% profit margin.
•The ICICI has 14.07% profit margin.
•A good margin will vary considerably by industry, but as a general rule of thumb, a 10% net profit margin
is considered average, a 20% margin is considered high (or “good”), and a 5% margin is low. Again, these
guidelines vary widely by industry and company size, and can be impacted by a variety of other factors.
•Therefore, the PNB has a good profit margin & ICICI has lowest profit margin.
 Cost to Income Ratio

SBI PNB ICICI

0.2103 0.1685 0.4355

•The ratio gives investors a clear view of how efficiently the firm is being run – the lower it is,
the more profitable the bank will be.
•Therefore, the ratio of the PNB is the lowest i.e. 0.1685.
•It is most profitable bank is PNB.
•Least profitable bank is ICICI with the value of 0.4355.
 Efficiency Ratio
SBI PNB ICICI
1.528 1.406 1.544

•The efficiency ratio is important for two reasons. First, it tells us approximately how much of the
bank's net revenue will be available for: Setting aside for future loan losses or loan loss provisions.
•The SBI has Rs. 1.52 per Rs. 1.
•The PNB has Rs. 1.40 per Rs. 1.
•The ICICI has Rs. 1.54 per Rs. 1.
•A general rule of thumb is that 50% is the maximum optimal efficiency ratio.
•None of the banks good efficiency ratio.
•Still, PNB has the value closer to 50% & ICICI has value far from the 50%.
 Conclusion
According to the ratios calculated it is visible that though PNB is incurring
losses but still it is able to maintain its efficiency and is carrying its 125 years
old legacy.

ICICI being the second largest provider of financial services is a leading choice
of customers for investments as well as savings.

SBI is the largest provider of financial services to the customers and has build a
customer relationship with them.
Thank You!