banking sector analysis- how

SAPM Project

Banking Sector AnalysisBy P132004 Amit Kumar Jain

P132019 Prashil TekadeP132021 Purva ShrivastavaP132028 Ritika GuptaP132033 Sayan BanerjeeP132043 Vipul SrivastavaP132045 Yashpal Raghav

Economic Analysis

• GDP Growth Slowest In Four Years; Sinks To 4.4% in Q1

• Q1 (2013-14)=4.4% vs Q1 (2012-13)=4.8%

Rupee ValuationRupee Depreciation

Industry Analysis

Major Challenges• Deteriorating Asset Quality

– Deteriorating NPA’s• Basel-III Implementation:

– Will be in force from 31st March 2018– As Per RBI domestic bank need a common Tier –I Capital (Core Capital) :-

• 5.5% of Risk Weighted Asset (RWAs)• 2.5% capital conservation buffer (CCB)

– Additional 5 lakh Crore in next 5year• 1.75laks Crore of above in form of equity capital, this means we government need to put

money in equity of around 70k-100k

– As per S&P forecast Domestic bank need to raid 2.6Lakh crore to meet new capital standards.

• Increased Competition:– Large no of players and homogenous service, competition is very high– Demand for cutting edge technology to increase operation efficiency.

Positive for Sectors

• Uptick in Credit and Deposit growth

Positive for Sectors

• Financial Inclusion Program:– 40% of Indian does not have access to any kind of

banking services– RBI mandated for the banks to open 25% branches

in rural area and 40% credit to priority sector– Numbers of rural branches have crossed 31,000 in

number

Positive for Sectors

• Mobile banking, next major technological leap– As per RBI, As of March 2013, 55 banks with a

customer base of around 23mn were providing Mobile Banking Service in India compared to 49 banks and 13million as of March 2012

– The regulatory relaxations in the transaction limits on Mobile Banking and for transactions ,has resulted in over 53 billion Transactions aggregating Rs 60 billion being processed during 2012-13

RECENT DEVELOPMENTS

• RBI tightens loan restructuring norms; raises provision to 5% from June 1 from 2%

• RBI relaxes branch opening norms for banks– RBI has relaxed its norms for banks to open branches in Tier I cities

to push financial inclusion, i.e., the process of spreading banking services to unbanked areas. Now banks can open branches in such centers without its prior permission.

• RBI eased rules to avail Swap Facility on Foreign Currency Borrowings– RBI lowered the three-year minimum maturity requirement to avail

the swap facility for banks foreign currency borrowings to one year.– However, RBI has allowed this facility up to 3 years.

Effective Date

Fix Range LAF Rates Bank Rate

Repo Reverse Cash Reserve Ratio

Marginal Standing Facility

Statutory Liquidity Ratio

29-10-2013 8.75 7.75 6.75 - 8.75 -07-10-2013 9.00 - - - 9.00 -20-09-2013 9.50 7.50 6.50 - 9.50 -15-07-2013 10.25 - - - 10.25 -03-05-2013 8.25 7.25 6.25 - 8.25 -19-03-2013 8.50 7.50 6.50 - 8.50 -09-02-2013 - - - 4.00 - -29-01-2013 8.75 7.75 6.75 - 8.75 -03-11-2012 - - - 4.25 - -22-09-2012 - - - 4.50 - -11-08-2012 - - - - - 23.0017-04-2012 9.00 8.00 7.00 - 9.00 -10-03-2012 - - - 4.75 - -13-02-2012 9.50 - - - - -28-01-2012 - - - 5.50 - -25-10-2011 - 8.50 7.50 - 9.50 -16-09-2011 - 8.25 7.25 - 9.25 -26-07-2011 - 8.00 7.00 - 9.00 -16-06-2011 - 7.50 6.50 - 8.50 -03-05-2011 - 7.25 6.25 - 8.25 -17-03-2011 - 6.75 5.75 - - -25-01-2011 - 6.50 5.50 - - -18-12-2010 - - - - - 24.0002-11-2010 - 6.25 5.25 - - -16-09-2010 - 6.00 5.00 - - -

Price To Earning

10-Nov-0

3

16-Feb-04

24-May

-04

30-Aug-0

4

06-Dec-

04

14-Mar-

05

20-Jun-05

26-Sep-05

02-Jan-06

10-Apr-0

6

17-Jul-0

6

23-Oct-

06

29-Jan-07

07-May

-07

13-Aug-0

7

19-Nov-0

7

25-Feb-08

02-Jun-08

08-Sep-08

15-Dec-

08

23-Mar-

09

29-Jun-09

05-Oct-

09

11-Jan-10

19-Apr-1

0

26-Jul-1

0

01-Nov-1

0

07-Feb-11

16-May

-11

22-Aug-1

1

28-Nov-1

1

05-Mar-

12

11-Jun-12

17-Sep-12

24-Dec-

12

01-Apr-1

3

08-Jul-1

3

14-Oct-

130

5

10

15

20

25

30

P/EExponential (P/E)

Price to Book Ratio

10-Nov-0

3

01-Mar-

04

21-Jun-04

11-Oct-

04

31-Jan-05

23-May

-05

12-Sep-05

02-Jan-06

24-Apr-0

6

14-Aug-0

6

04-Dec-

06

26-Mar-

07

16-Jul-0

7

05-Nov-0

7

25-Feb-08

16-Jun-08

06-Oct-

08

26-Jan-09

18-May

-09

07-Sep-09

28-Dec-

09

19-Apr-1

0

09-Aug-1

0

29-Nov-1

0

21-Mar-

11

11-Jul-1

1

31-Oct-

11

20-Feb-12

11-Jun-12

01-Oct-

12

21-Jan-13

13-May

-13

02-Sep-13

0

1

2

3

4

5

6

P/BExponential (P/B)

Dividend Yield

10-Nov-0

3

16-Feb-04

24-May

-04

30-Aug-0

4

06-Dec-

04

14-Mar-

05

20-Jun-05

26-Sep-05

02-Jan-06

10-Apr-0

6

17-Jul-0

6

23-Oct-

06

29-Jan-07

07-May

-07

13-Aug-0

7

19-Nov-0

7

25-Feb-08

02-Jun-08

08-Sep-08

15-Dec-

08

23-Mar-

09

29-Jun-09

05-Oct-

09

11-Jan-10

19-Apr-1

0

26-Jul-1

0

01-Nov-1

0

07-Feb-11

16-May

-11

22-Aug-1

1

28-Nov-1

1

05-Mar-

12

11-Jun-12

17-Sep-12

24-Dec-

12

01-Apr-1

3

08-Jul-1

3

14-Oct-

130

0.5

1

1.5

2

2.5

3

3.5

Div YieldExponential (Div Yield)

Price Analysis of Bank Index

•Thank You