Financial performance analysis of Cooperative

Bank

By : Neeraj Singh

Reg. No : 11110503

Presentation on

INTRODUCTION

HISTORY

VISION

COMPANY PROFILE

Cooperatives have played a vital role in improving the economic conditions of farmers and accelerating the pace of development in Punjab.

Cooperatives constitute the major source of institutional credit for agriculture. Cooperatives are playing a pivotal role in socio-economic development of the State.

The Bank has been serving the people of Punjab in area such as agriculture, housing, spinning, sugar production, weaving and dairy etc.

VALUES & PRINCIPLES

Voluntary and open membership

Democratic member Control

Members Economic Participation

Autonomy and Independence

Education, Training and Information

Cooperation among Cooperatives

Concern for Community

TO BE A QUALITY FINANCIAL SERVICE PROVIDER MAINTAINING THE

HIGHEST STANDARDS IN BANKING PRACTICES

TO BE A STRONG AND STABLE FINANCIAL INSTITUTION OFFERING INNOVATIVE PRODUCTS AND SERVICES WHILE CONTRIBUTING TOWARDS

THE NATIONAL ECONOMIC AND SOCIAL DEVELOPMENT

TYPES OF CO-OPERATIVE BANKS

OBJECTIVES OF STUDY

To find out the shortcomings in cooperative Bank.To analysis the financial statement of the

cooperative bank of Punjab to assess it true financial

position.

To see whether cooperative bank is going well or

not in different areas.

Research Problem-

“TO MAKE A FINANCIAL ANALYSIS OF FINANCIAL STATEMENTS OF PSCBBANK

RESEARCH DESIGN USED IN THE STUDY:

Descriptive research design is used in this study because it will ensure the minimization of bias and maximization of reliability of data collected. Descriptive study is based on some previous understanding of the topic. Research has got a very specific objective and clear cut data requirements The researcher had to use fact and information already available through financial statements of earlier years and analyse these to make critical evaluation of the available material. Hence by making the type of the research conducted to be both Descriptive and Analytical in nature. From the study, the type of data to be collected and the procedure to be used for this purpose were decided.

TYPE OF DATA USED IN THE STUDY

The required data for the study are basically secondary in nature and the data are collected from-

The audited reports of the bank.

INTERNET – which includes required financial data collected form COOPERATIVE Bank’s official website and some other websites on the internet for the purpose of getting all the required financial data of the bank and to get detailed knowledge about cooperative Bank for the convenience of study.Other published accounts of the Bank.The valuable cooperation extended by staff members and principle of ACSTI ,jalandhar contributed a lot to fulfill the requirements in the collection of data in order to complete the project.

Assessment of the firm’s past, present and future financial conditions

Done to find firm’s financial strengths and weaknesses

Primary Tools:◦ Financial Statements

◦ Comparison of financial ratios, to past, industry, sector and all firms

Comparative analysis

Trend analysis

Ratio analysis

Breakeven analysis

FINANCIAL STATEMENT ANALYSIS

Comparative Balance Sheet Of PSCB From 2007-2008 To 2010-2011

(Rs. in lakh)

PARTICULARS 2007-2008 2008-2009 2009-2010 2010-2011

Absolute

change

% of

change

Absolute

change

% of

change

Absolute

change

% of

change

Absolute

change

% of

chang

e

CAPITAL

AND

LIABILITIES:

Capital 153.08 14 9.51 0.8 213.34 17 0.61 .04

Reserves and

surplus

9502.96 80 2097.76 10 21943.61 94 3062.2 7

Deposits 65264.39 65 65427.02 40 13920.86 6 (26083.23) (11)

Borrowings 4977.41 15 12734.12 33 14392.4 28 1675.26 2.5

Other Liabilities

and Provisions

3831.71 18 13000.76 51.5 4666.75 12 851.04 2

TOTAL CAPITAL

AND LIABILITIES

83729.55 50 93269.17 37 55136.96 16 (20494.12) (5.1)

ASSETS:

Investments 21060.04 42 19710.45 27.5 20196.5 22 (8396.03) (7.5)

Advances 54757.96 60 49702.49 34 29750.48 15 (7305.23 (3.25)

Fixed assets (57.32) (1.4) (57.3) (1.4) 185.47 5 (307.27) (7.5)

Capital Work In

Progress

51.64 54 41.72 28.2 (189.66) -100 0.00 0.00

Current assets 7917.23 37 23871.8 81 5194.17 10 (4485.58) (8)

TOTAL

ASSETS:

83729.55 50 93269.16 37 55136.96 16 (20494.11) (5.1)

The capital of bank increased by 14% in 2007-08,0.8% in 2008-09,17% in 2009-10,and 0 .04 % in 2010-11.This show that there is fluctuation in the rate of increase in the capital. In 2007-08 and 2009-10 the rate of increase in capital is more than that of 2008-

09 and 2010-11.

There is a huge fluctuation in the rate of increase in reserves and surplus also. This shows that bank is

effectively utilizing its reserves and surplus.

In 2007-08 deposits increase by 65%, in 2008-09 it increased by 40%,and an increase of 6% in 2009-10. in 2010-11 deposits fall by 11%.this shows that the bank

has repaid its deposits in this year

The borrowings are also showing a fluctuating rate of increase. in 2010-11 the borrowings have

increased at a very low rate. this shows that bank has repaid a large amount of borrowings in this year and thereby reducing the dependence

on outside debt.

There has been a consistent decline in the fixed assets over years. in 2007-08 and

2008-09 it decreased by 1.4 % ,increased by 5% in 2009-10 and again decreasing by

7.5% in 2010-11.this is mainly due to increase in the rate of depreciation in the

subsequent years

Comparative Income Statement Of PSCB Bank From 2007-2008 To 2010-2011 (Rs. in lakh)

PARTICULARS 2007-2008 2008-2009 2009-2010 2010-2011

Absolute

change

% of

change

Absolute

change

% of

change

Absolute

change

% of

change

Absolute

change

% of

chan-

ge

INCOME:

Operating income

5941

46.3

10156

54.1

10676

37

(902.84)

(2.3)

EXPENDITURE:

Interest expended 3026.56 46 6761.05 70.4 7125.74 43.5 (758.31) (3)

Operating

expenses

1180.36 36 2211.05 49.3 1463.62 22 (1109.07 (14)

Total expenses 4206.92 43 8972.1 64 8589.36 37.2 (1867.38) (5.9)

Operating profit 1734.67 59 1183.73 25.2 2086.29 35.5 964.54 12.1

Provision and

contigencies 1199.8 126.1 613.58 28.5 1038.78 37.5 1364.14 36

Net profit for the

year

Extraordinary

items

534.87 0.00

27 0.00

570.15 0.00

22.4 0.00

1047.51 0.00

34 0.00

(399.6) (0.58)

(10) 0.00

Profit brought

forward

135.13

254.5

105.22

56

704.83

21

1438.05

144

TOTAL

PROFIT/(LOSS):

670

32.55

675.37

25

1752.34

51.4

1037.87

20

The net profit shows a fluctuating trend i.e it increased by 27% in 2007-08,22.4% increase in 2008-09,and increased by 34% in 2009-10 and

finally if falls by 10% in2010-11.this may be due to decline in operating income and increased tax

liability in the year 20010-11.

The interest expenses from the period 2007 to 2010 showed an increasing trend

but decreased in 2010-11 due to repayment of borrowings.

TREND ANALYSIS

Trend Percentage of PSC Bank from 2007-2008 to 2010-2011 (Base year 2006-07) Percentage (%) figures

Particulars 2007 2008 2009 2010 2011 Deposits 100 165 231 245 219

Advances 100 160 214 247 239

Net profit 100 127 155 207 187

There is a continuous increase in the deposits till the year ending 20010 followed by a downfall in the year

ending 2011 due to repayment do deposits in this year.

Similarly advances also shows as increasing trend till the year ending 2010 followed by a slight downfall in

the year ending 2011

There has been a substantial increase in net profit till the year year ending 2010.In four years it has been

more than double

The overall performance of the bank is satisfactory.

To track individual firm performance over time

To make comparative judgments regarding firm performance.

FINANCIAL RATIOS

PROFITABILITY RATIO

LIQUIDITY RATIORISK MANAGEMENT

RATIO

CURRENT RATIO= CURRENT ASSETS / CURRENT LIABILITY

Year Current Assets(Rs. In lacs)

Current Liabilities(Rs. In lacs)

Current Ratio

2007 21632.56 21396.16 1.01

2008 29549.79 25227.88 1.17

2009 53421.59 38228.64 1.39

2010 58615.76 42895.38 1.36

2011 54130.18 43746.43 1.23

Here the current ratio is less than 2 and more than 1 which shows that the bank have current assets just equal to the current liabilities which is not satisfactory as

the safety margin is very less or zero. Therefore the bank should keep more current assets so that it can maintain a satisfactory safety margin

LIQUID RATIO= LIQUID ASSETS / CURRENT LIABILITY

YEAR Liquid assets Current liability liquid ratio

2007 12929.97 21396.16 0.60

2008 17040.22 25227.88 0.67

2009 37121.33 38228.64 0.97

2010 38041.13 42895.38 0.88

2011 29966.56 43746.43 0.68

Here this ratio is less than 1 in 2007,2008 & 2011 but in 2009 & 2010 it is close to 1 which is not

satisfactory.

This means the bank has not managed its funds properly in this particular period.

Therefore bank should rationally utilize its funds to maintain an ideal liquid ratio.

Earning per share=N/P after tax-preference dividend / no. of equity share

Year Net Income Available

For Shareholders(Rs. In lscs)

No. Of Equity

Shares(Rs. In lacs)

EPS

2007 2005.2 73.6716 27.22

2008 2540.07 88.9823 28.55

2009 3110.22 89.9266 34.59

2010 4157.73 111.2687 37.37

2011 3758.13 111.325 33.78

Earning Per Share is the most commonly used data which reflects the performance and

prospects of the company. it affects the market price of shares.

Here the Earning Per Share is shows a persistent increase till the year 2010 after that in the year 2011 Earning Per share is followed by a downfall due to decline in

profits.

Dividend per share=dividend paid to equity shareholder/ no. of equity share

Year Dividend Paid(Rs. In lacs)

No. Of Equity

Shares(Rs. In lacs)

DPS

2007 632.96 73.6716 8.59

2008 759.33 88.9823 8.53

2009 901.17 89.9266 10.02

2010 1227.7 111.2687 11.03

2011 1224.58 111.325 11

Here the Dividend Per Share is increasing year after year except a little decline in 2011. otherwise the dividend per share ratio of the bank is quite satisfactory which

shows the bank has a good dividend paying capacity.

Net profit ratio=net profit / net sales *100

Year Net Profit(Rs. In lacs)

Sales(Rs. In lacs)

Net Profit Ratio

(in %)

2007 2005.2 9409.9 21.3

2008 2540.07 13784.49 18.42

2009 3110.22 22994.29 13.52

2010 4157.73 30788.34 13.5

2011 3758.13 31092.55 12.08

Although both the sales and net profit have increased during the above period but the Net

Profit Ratio of the bank is declining continuously.

This is because of the reason that net profits have not increased in the same

proportion as of the sales.

Operating profit ratio=operating profit / net sales *100

Year Operating Profit(Rs. In lacs)

Sales(Rs. In lacs)

Operating Profit

Ratio (in %)

2007 2956 9409.9 31.41

2008 4690.67 13784.49 34.02

2009 5874.4 22994.29 25.54

2010 7960.69 30788.34 25.85

2011 8925.23 31092.55 28.7

In the year 2007 & 2008 the operating profit is 31.41% & 34.02% respectively. After that it has been consistently declined from the

year 2007 till 2008 and again gaining momentum in 2011.

This may be due to the reason that operating expenses have been increased more as compared to sales during the above period consequently reducing the operating

profits.

. Therefore the bank should check on unnecessary operating expenses to correct this situation and to

provide a sufficient return.

Return on net worth= N/P after interest & tax / shareholder’s fund *100

Year Net Profit After Interest

And Tax(Rs. In lacs)

Shareholder's Fund(Rs. In lacs)

Return On Net

Worth (in %)

2007 2005.2 12899.97 15.54

2008 2540.07 22555.99 11.26

2009 3110.22 24663.26 12.61

2010 4157.73 46820.21 8.88

2011 3758.13 49883.02 7.53

The net profit after interest and tax have increased slowly till the year 2008 followed by a downfall due to high interest

payments, operating expenses and taxation liability. consequently the net worth ratio has declined considerably and has reduced to more than half in the year 2009 than it

was in 2007.

Return on capital employed= N/P before interest & tax / capital employed*100

Year Net Profit Before

Interest And Tax(Rs. In lacs)

Capital Employed(Rs. In lacs)

Return On Capital

Employed (in %)

2007 9098.09 146263.25 6.22

2008 12694.05 226161.17 5.61

2009 20006.54 306429.48 6.52

2010 28540.34 356899.69 7.99

2011 27842.9 335554.53 8.29

The above table exhibit the return on capital employed ratio of the bank for last five years. This ratio measures the earning of the net assets of the business.

The ratio was 6.22% in year 2007. After that it rised to the tune of 5.61%,6.52%,7.99% and 8.29% in year 2008, 2009, 2010 and year 2011 respectively. It lead to the conclusion bank rising but very little proportion of return on capital employed.

Debt equity ratio = debt/equity*100Year Debt

(Rs. In lacs)

Equity(Rs. In lacs)

Debt Equity Ratio

2007 154759.45 12899.97 11.99

2008 228832.96 22555.99 10.14

2009 319994.86 24663.26 12.97

2010 352974.87 46820.21 7.53

2011 329417.94 49883.02 6.6

The ratio shows the extent to which funds have been provided by long-term creditors as compared to the funds provided by the owners.

. Here the Debt-Equity ratio for the above period is always high. this shows that the bank is more relying on outside funds as compared to internal sources of capital, in its capital structure. From the long-term lenders point of view this ratio is not satisfactory.

Proprietory ratio = shareholder’s fund/ total assetsYears Shareholder's Funds

(Rs. In lacs)

Total Assets(Rs. In lacs)

Proprietory Ratio

2007 12899.97 167659.4 0.07

2008 22555.99 251388.95 0.08

2009 24663.26 344658.11 0.07

2010 46820.21 399795.07 0.12

2011 49883.02 379300.96 0.13

Above table exhibits the proprietary ratio of the bank for last five years . It was 7% in 2007, After that was 8% in year 2008. Similarly it was once again reduced to 7 % in the year 2009.

After 2009 it registered increase and was 12% and 13% in the year 2010 and 2011 respectively. Hence it leads to the conclusion owners have less than 13% stake in the total assets of the bank.

It is not a good sign as far the long term solvency is concerned.

Fixed assets turnover ratio = cost of good sold or sales/ net fixed assets

Year Sales(Rs. In lacs)

Net Fixed Assets(Rs. In lacs)

Fixed Assets

Turnover Ratio

2007 9409.9 4038.04 2.33

2008 13784.49 3980.72 3.46

2009 22994.29 3923.42 5.86

2010 30788.34 4108.89 7.49

2011 31092.55 3801.62 8.17

Here the fixed assets employed in the business shows a decreasing trend except in the year 2010 where fixed assets have again increased. This may be due to increase in rate of depreciation in subsequent years.

The fixed assets turnover ratio has been consistently increasing. It indicates that fixed assets have been effectively used in the business without much additional investment in the period of study and also the capital is not blocked in fixed assets.

Credit deposit ratio =credit / deposit *100Year Advances

(Rs. In lacs)

Deposits(Rs. In lacs)

Credit Deposit Ratio (in%)

2007 91405.15 99818.78 91

2008 146163.11 165083.17 88

2009 195865.6 230510.19 84

2010 225616.08 244431.05 92

2011 218310.85 218347.82 99

Above table exhibits credit deposit ratio of the bank during last 5 years. In the year 2007 ratio was 91% and it declined to 88% and 84%in the year 2008 and 2009 respectively.

. In the year 2010 and 2011 ratio was increased to 92% and 99% respectively. it leads to conclusion that credit performance of the bank is very good.

PARTICULARS

AMOUNT

2011 % ON

ASSETS

AMOUNT

2010 % ON

ASSETS

Yield on assets 31092.55 8.19 30788.34 7.70

Less-

Cost of fund

(22725.93) 5.99 (23484.24) (5.88)

FINANCIALMARGIN-

8366.62 2.205 7304.10 1.82

Less-

Cost of

Management

(7045.11) (1.86) (8154.18) (2.04)

Less-

Risk cost

(3808.26) (1.00) (2904.59) (0.73)

Add-

Other income

7603.72 2.00 8810.77 2.20

Net margin before

Tax

5116.97 1.35 5056.10 1.26

Less-

Provision for tax

(1358.81) (0.36) (898.37) (0.22)

NET

MARGIN-

3758.13 0.99 4157.73 1.04

Breakeven point=com + risk cost + provision – other income / financial margin(%)

OF THE YEAR 2011-

7045.11 + 3808.26 + 1358.81 – 7603.722.205

= 2090.00 (RS IN LAC)OF THE YEAR 2010-

8154.18 + 2904.59 + 898.37 – 8810.771.82

= 1728.77 (RS IN LAC)

Working fund=net profit / net margin(%)

YEA

R NET PROFIT

Amount(Rs in

lac)

NET MARGIN

PERCENTAGE

WORKING FUND

Amount (Rs in lac)

2011 3758.13

0.99

3796.09

2010 4157.73

1.04

3997.82

In the year 2011 and 2010, the break- even point is 2090.00 lacks and 1728.77 lacks. Which shows that in the year 2011 breakeven point is more than as compare to year2010.

In the year 2010 non-operating income is more as compare to current year.

As in year 2011 and 2010 the average working fund is Rs 3796.09 lac and Rs 3997.82 lac. Which shows that working capital is increase during the year.

In the year 2011, non-operating expenses is 1.00 percent of assets which is more than percentage of 2010 as 0.73.

On the basis of various techniques applied for the financial analysis of cooperative Bank we can arrive at a conclusion that the financial position and overall performance of the bank is satisfactory. Though the income of the bank has increased over the period but not in the same pace as of expenses. But the bank has succeeded in maintaining a reasonable profitability position. The bank has succeeded in increasing its share capital also which has increased around 50% in the last 5 years.The major achievement of the bank has been a tremendous increase in its deposits, which has always been its main objective. Fixed and current deposits have also shown an increasing trend.. Due to increase in advances, the interest received by the bank from such advances is proving to be the major source of income for the bank.

Although the short term liquidity position is quite satisfactory as per revealed by liquid ratio but the current ratio is below the ideal ratio of 2:1.So the bank should make efforts to increase its current assets to maintain a safety margin and to maintain a better liquidity position.Higher trend of credit deposit ratio reveals that the bank has performed satisfactorily as regard to granting loans and advances to generate income. It suggests that the credit performance of bank is good and it is performing its business well by fulfilling the major objective of granting credit and accepting deposit. So in order to have more creditability in the market the bank should maintain its credit deposit ratio.Bank should try to finance more and more projects. Financing will help it to earn higher amount of profits.The bank is having a greater reliance on debt capital. The increasing reliance on external equities may prove hazardous in the long run. So in order to remedy this situation bank should increase its focus on internal equities and other sources of internal financing.