PNB Project Report on Financial Analysis

A PROJECT REPORT

ON FINANCIAL ANALYSIS

OF PNB BANK SUBMITTED IN PARTIAL FULLFILLMENT OF STUDY OF “MASTERS MASTERS OF BUSINESS ADMINISTRATION”

Submitted to:

Submitted by:

MEDHAVI THAKUR (Assistant Prof.)

SUNIL KUMAR SHARMA MBA 4th Sem. Roll no: MB4010003

Abhilashi Institute of Management Studies Ner- Chowk Mandi (HP)

HIMACHAL PRADESH TECHNICAL UNIVERSITY, HAMIRPUR 1

DECLARATION

I Sunil Kumar Sharma student of MBA 4 th  semester declare that I have done the project report on “FINANCIAL ANALYSIS OF PNB BANK” has been personally done by me under the

guidance of Ms. MEDHAVI THAKUR (Assistant Prof.) at  Abhilashi Institute of Management Studies Ner-chowk Mandi (Himachal Pradesh Technical University Hamirpur) in partial fulfillment of MBA Program- during academic year-2015-16. All the data represented in this project is true & correct to the best of my knowledge & belief.

I also declare that this project report is my own preparation and not copied from anywhere else.

Signature SUNIL KUMAR SHARMA

2

CERTIFICATE BY THE GUIDE This is to certify that the contents of this report entitled “FINANCIAL ANALYSIS OF PNB BANK” BANK” by Sunil Kumar Sharma, Roll No.MB4010003 submitted to Abhilashi Institute of Management Studies for the Award of Master of Business  Administration is original research work carried out by him under my supervision. This report has not been submitted either partly or fully to any other University or Institute for award of any degree or diploma.

(Name of the Guide), MEDHAVI THAKUR (Assistant Prof.) Date : Place :

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ACKNOWLEDGEMENT

I take this opportunity to express my deep sense of gratitude, thanks and regards towards all of those who have directly or indirectly helped me in the successful completion of this project. I also thank Ms. MEDHAVI THAKUR [Assistant Prof. (Guide)] who has sincerely supported me with the valuable insights into the completion of this project. I am grateful to all faculty members of Abhilashi Institute of Management Studies (AIMS) and my friends who have helped me in the successful completion of this project. Last but not the least I am indebted to my PARENTS who provided me their time, support and inspiration needed to prepare this report.

. SUNIL KUMAR SHARMA Roll. No-MB4010003

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CONTENTS

i.

TITLE PAGE

ii.

DECLARATION

iii.

CERTIFICATE OF GUIDE

iv.

ACKNOWLEDGEMENT

v.

TABLE OF CONTENT (INDEX)

INDEX Chapter No. 

1.

2.

5

Topics

Page No.

  Introduction 1.1 Objective of the study 1.2 Introduction to the topic 1.3 Features of financial analysis 1.4 Purpose of financial analysis 1.5 Procedure of Financial Statement Analysis 1.6 Tools of financial analysis Company profile 2.1 History of Banking 2.2 Banking structure in India 2.3 Profile of PNB Bank

7 7 8 9



9 10 11 25 25 27 29

2.4 Board of directors 2.5 Vision and mission 2.6 Achievements and  Awards

6

35 36 37

Research Methodology 3.1 Objective of the study 3.2 Meaning of the Research 3.3 Research Problem 3.4 Research Design 3.5 Data collection method 3.6 Analysis and Interpretation 3.7 Limitation of Study Data analysis and interpretation 4.1 Balance Sheet 4.2 Profit & Loss Account 4.3 Cash Flow Statement 4.4 Key Financial Ratios 4.5 Results and findings Recommendations and Conclusion Bibliography

7

38 38 40 40 41 43 44 44 45 45 47 49 50 54 55 57

CHAPTER NO.1 INTRODUCTION

1.1

OBJECTIVE OF THE STUDY

The main objectives of this project are the following:











To study about PNB BANK and its related aspects like its products & services, history, organizational structure, subsidiary companies etc.   To analyze the financial statement i.e. P&L account and Balance sheet of PNB BANK. To learn about P&L Account, Balance-sheet and different type of Assets& Liabilities. To understanding the meaning and need of Balance Sheet and profit and loss account. The purpose is to portray the financial position of PNB BANK with the help of Balance sheet and profit and loss account. To evaluate the financial soundness, stability and liquidity of PNB BANK.

1.2

INTRODUCTION TO THE TOPIC

MEANING OF FINANCIAL STATEMENT:-

Financial statement refers to such statement which contains financial information about an enterprise. It gives report of profitability and the financial position of the business at the end of accounting period. The term financial statement includes at least two statements which the accountant prepares at the end of an accounting period. 8

The two statements are:a) Balance Sheet b) Profit and Loss Account

They provide some extremely useful information to the extent that balance sheet mirror the financial position on a particular date in terms of the structure of assets, liabilities and owners equity and the profit and loss account shows the results of operations during a certain period of time in terms of the revenues obtained and the cost incurred during the year. Thus the financial statement provides a summarized view of financial positions and operations of a firm.

MEANING OF FINANCIAL ANALYSIS:-

The term financial analysis is also known as “Analysis and interpretation of financial statement”. It refers to the process of determining financial strength and weakness of the firm by establishing strategic relationship between the items of the balance sheet, profit and loss account and other operative data. The first task of financial analysis is to select the information relevant to the decision under consideration to the total information contained in the financial statement. The second step is to arrange the information in a way to highlight significant relationship. The final step is interpretation and drawing of inference and conclusion. Financial statement is the process of selection, relation and evaluation. 9

1.3

FEATURES OF FINANCIAL ANALYSIS

The main Features of Financial Analysis are the following:





1.4

To present a complex data contained in the financial statement in simple and understandable form.

To classify the items contained in the financial statement in convenient and rational groups.

To make comparison between various groups to draw various conclusions.

PURPOSE OF FINANCIAL ANALYSIS

The main purposes of financial analysis are the following:       

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To know the earning capacity or profitability. To know the solvency. To know the financial strengths. To know the capability of payment of interest & dividends. To make comparative study with other firms. To know the trend of business. To know the efficiency of mgt. To provide useful information to mgt.

1.5

PROCEDURE OF FINANCIAL STATEMENT ANALYSIS

The following procedure is adopted for the analysis and interpretation of financial statements:-







11

The analyst should acquaint himself with principles and postulated of accounting. He should know the plans and policies of the management so that he may be able to find out whether these plans are properly executed or not.

The extent of analysis should be determined so that the sphere of work may be decided. If the aim is find out. Earning capacity of the enterprise then analysis of income statement will be undertaken. On the other hand, if financial position is to be studied then balance sheet analysis will be necessary.

  The financial data be given in statement should be recognized and rearranged. It will involve the grouping similar data under same heads.

1.6

TOOLS OF FINANCIAL ANALYSIS

The tools and techniques of financial analysis are following:-

(a) Horizontal and vertical analysis (b) Ratio analysis

(a) Horizontal and vertical analysis:

Horizontal Analysis or Trend Analysis:

Comparison of two or more year ’s financial data is known as horizontal analysis, or trend analysis. Horizontal analysis is facilitated by showing changes between years in both Rupees/Dollars and percentage form. Graphical Representation of Horizontal and Trend Analysis: Data of PNB bank :  Year Total Revenues

(In Rs. Cr.

12

Mar-2014

25,032

Mar-2015

30,599

Mar-2016

40,630

Graph:-

Horizontal & Trend Analysis

50000

40000

2014

30000

2015 20000

2016

10000

0

Trend Percentage:-

Horizontal analysis of financial statements can also be carried

out

by

computing

trend

percentages .

Trend

percentage states several years ’  financial data in terms of a base year. The base year equals 100%, with all other years stated in some percentage of this base.

13



Vertical Analysis: Vertical analysis  is the procedure of preparing and

presenting common size statements. Common size statement is one that shows the items appearing on it in percentage form as well as in dollar form. Each item is stated as a percentage of some total of which that item is a part. Key financial changes and trends can be highlighted by the use of common size statements.

b) RATIO ANALYSIS

It refers to the systematic use of ratios to interpret the financial statements in terms of the operating performance and financial position of a firm. It involves comparison for a meaningful interpretation of the financial statements.

TYPE OF RATIO ANALYSIS:-

In view of the needs of various uses of ratios the ratios, which can be calculated from the accounting data are classified into the following broad categories: A. Liquidity Ratio B. Turnover Ratio C. Solvency or Leverage ratios D. Profitability ratios

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A. LIQUIDITY RATIO:-

It measures the ability of the firm to meet its short-term obligations that is capacity of the firm to pay its current liabilities as and when they fall due. Thus these ratios reflect the shortterm financial solvency of a firm. A firm should ensure that it does not suffer from lack of liquidity. The failure to meet obligations on due time may result in bad credit image, loss of creditors confidence, and even in legal proceedings against the firm on the other hand very high degree of liquidity is also not desirable since it would imply that funds are idle and earn nothing. So therefore it is necessary to strike a proper balance between liquidity and lack of liquidity. The various ratios that explains about the liquidity of the firm are:1. Current Ratio

Current Ratio =

Current Asset Current Liabilities

2. Acid Test Ratio / quick ratio Acid Test Ratio =

Quick Assets Current liabilities

3. Absolute liquid ration / cash ratio Absolute liquid ratio = Absolute liquid assets

Current liabilities

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B. Turnover ratios:-

Turnover ratios are also known as activity ratios or efficiency ratios with which a firm manages its current assets. The following turnover ratios can be calculated to judge the effectiveness of asset use.

1. Inventory Turnover Ratio Inventory Turnover Ratio = Cost of goods sold

 Average Inventory 2. Debtor Turnover Ratio

Debtor Turnover Ratio =

Net Credit Sales

 Average Trade Debtors 3. Creditor Turnover Ratio Creditor Turnover Ratio =

Net Credit Purchases  Average Trade Creditor

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4. Assets Turnover Ratio a) Total asset turnover

Total asset turnover  =

Total Sales Total Assets

b) Net asset turnover Net asset turnover =

Total Sales Net Assets

c) Fixed asset turnover

Fixed asset turnover =

Total Sales Net Fixed Assets

d) Current asset turnover

Current asset turnover =

Total Sales Current Assets

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e) Net working capital turnover ratio Net working capital turnover ratio =

Total Sales Working Capital

C. SOLVENCY OR LRVERAGE RATIOS

The solvency or leverage ratios throws light on the long term solvency of a firm reflecting it’s ability to assure the long term creditors with regard to periodic payment of interest during the period and loan repayment of principal on maturity or in predetermined installments at due dates. There are thus two aspects of the long-term solvency of a firm. a. Ability to repay the principal amount when due b. Regular payment of the interest. The ratio is based on the relationship between borrowed funds and owner’s capital it is computed from the balance sheet, the second type are calculated from the profit and loss a/c. The various solvency ratios are:-

1. Debt equity ratio Debt equity ratio =

Outsider Funds (Total Debts) Shareholder Funds or Equity

2. Debt to total capital ratio Debt to total capital ratio =

Total Debts Total Assets

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3. Proprietary (Equity) ratio Proprietary (equity) ratio =

Shareholder funds Total assets

4. Fixed assets to net worth ratio Fixed assets to net worth ratio =

Fixed Assets X 100 Net Worth

5. Fixed assets to long term funds ratio

Fixed assets to long term funds ratio = Fixed Assets X 100

Long-term Funds

6. Debt service (Interest coverage) ratio

Debt Service Ratio=Earnings before interest and tax (EBIT)

Interest Charges

19

D. PROFITABILITY RATIOS

The profitability ratio of the firm can be measured by calculating various profitability ratios. General two groups of profitability ratios are calculated. a. Profitability in relation to sales. b. Profitability in relation to investments. a. Profitability in relation to sales:1. Gross profit margin or ratio Gross profit margin or ratio =

Gross profit X 100 Net sales

2. Net profit margin or ratio Net profit margin or ratio =

Earnings after tax X 100 Net Sales

3. Operating profit margin or ratio

Operating profit Margin or ratio

20

=

Operating Profit X 100 Net sales

4. Operating Ratio

Operating ratio

=

Operating expenses X 100 Net sales

5. Expenses Ratio

Cost of goods sold = Cost of goods sold X 100

Net Sales

Administrative

=

Administrative Expenses X 100 Net sales

Expenses Ratio

Selling and distribution Expenses ratio = Selling and distribution expenses X 100

Net sales

21

b. Profitability in relation to investments:-

1. Return on gross capital employed

Return on gross

=

Earnings After Tax (EAT) X 100 Gross capital employed

Capital employed

2. Return on net capital employed

Return on

= Earnings Before Interest & Tax (EBIT) X 100

Net capital

Net capital employed

Employed

3. Return on shareholder’s capital employed.

Return on

=

Earnings after tax (EAT) X 100 Shareholder capital employed

Share capital Employed

4. Return on equity shareholder capital employed. Return on

=

Earnings after tax (EAT),

Equity share

preference dividends X 100

Capital employed

Equity share capital employed

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5. EARNINGS PER SHARE

Earnings = Earnings after tax  – Preferred dividends (if any)

Equity shares outstanding

Per share

6. DIVIDEND PER SHARE

Dividend Per share

=

Earnings paid to the ordinary shareholders Number of ordinary shares outstanding

7. DIVIDENDS PAY OUT RATIO (PAY OUT RATIO)

Dividend pay = Total dividend paid to equity share holders

Total earnings available to

Out ratio

Equity share holders

Or

=

Dividend per share Earnings per share

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8. DIVIDEND AND EARNINGS YIELD

Dividend Yield

=

Dividend Per share Market value of ordinary share

Earnings yield

=

Earnings per share Market value of ordinary share

9. PRICE EARNING RATIO

Price earnings (P/E) ratio =

Market price of share Earnings per share

ADVANTAGES OF RATIO ANALYSIS:-

1. It simplifies the financial statements. 2. It helps in comparing companies of different size with each other. 3. It helps in trend analysis which involves comparing a single company over a period. 4. It highlights important information in simple form quickly. A user can judge a company by just looking at few numbers instead of reading the whole financial statements.

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LIMITATIONS OF RATIO ANALYSIS:-

Despite usefulness, financial ratio analysis has some disadvantages. Some key demerits of financial ratio analysis are:-

1. Different companies operate in different industries each having different environmental conditions such as regulation, market structure, etc. Such factors are so significant that a comparison of two companies from different industries might be misleading.

2. Financial accounting information is affected by estimates and assumptions. Accounting standards allow different accounting policies, which impairs comparability and hence ratio analysis is less useful in such situations.

3. Ratio analysis explains relationships between past information while users are more concerned about current and future information.

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CHAPTER NO. 2 COMPANY PROFILE

2.1



HISTORY OF BANKING

Definition Of Bank:-

Banking Means “ Accepting Deposits for the purpose of lending or Investment of deposits of money from the public, repayable on demand or otherwise and withdraw by cheque, draft or otherwise. ” (Banking Companies (Regulation) Act, 1949)

Banking is nearly as old as civilization. The history of banking could be said to have started with the appearance of money. The first record of minted metal coins was in Mesopotamia in about 2500B.C. the first European banknotes, which was handwritten appeared in1661, in Sweden. Cheque and printed paper money appeared in the 1700’s and 1800’s,

with many banks created to deal with increasing trade. The history of banking in each country runs in lines with the development of trade and industry, and with the level of political confidence and stability. The ancient Romans developed an advanced banking system to serve their vast trade network, which extended throughout Europe, Asia and Africa.

26

Modern banking began in Venice. The word bank comes from the Italian word “ban co”,  meaning bench, because

moneylenders worked on benches in market places. The bank of Venice was established in 1171 to help the government raise finance for a war.  At the same time in England, merchant started to ask goldsmiths to hold gold and silver in their safe return for a fee. Receipts given to the Merchant were sometimes used to buy or sell, with the metal itself staying under lock and key. The goldsmith realized that they could lend out some of the gold and silver that they had and charge interest, as not all of the merchants would ask for the gold and silver back at the same time. Eventually, instead of charging the merchants, the goldsmiths paid them to deposit their gold and silver. The bank of England was formed in 1694 to borrow money from the public for the government to finance the war of  Augsburg against France. By 1709, goldsmith were using bank of England notes of their own receipts. New technology transformed the banking industry in the 1900’s round the world, banks merged into larger and fewer

groups and expanded into other country.

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2.2

BANKING STRUCTURE IN INDIA

In today’s dynamic world banks are inevitable for the

development of a country. Banks play a pivotal role in enhancing each and every sector. They have helped bring a draw of development on the world’s horizon and developing country like India is no exception. Banks fulfills the role of a financial intermediary. This means that it acts as a vehicle for moving finance from those who have surplus money to (however temporarily) those who have deficit. In everyday branch terms the banks channel funds from depositors whose accounts are in credit to borrowers who are in debit. Without the intermediary of the banks both their depositors and their borrowers would have to contact each other directly. This can and does happen of course. This is what has lead to the very foundation of financial institution like banks. Before few decades there existed some influential people who used to land money. But a substantially high rate of interest was charged which made borrowing of money out of the reach of the majority of the people so there arose a need for a financial intermediate. The Bank have developed their roles to such an extent that a direct contact between the depositors and borrowers in now known as disintermediation. Banking industry has always revolved around the traditional function of taking deposits, money transfer and making advances. Those three are closely related to each other, the objective being to lend money, which is the profitable activity of the three. Taking deposits generates funds for lending and money transfer services are necessary for the attention of 28

deposits. The Bank have introduced progressively more sophisticated versions of these services and have diversified introduction in numerable areas of activity not directly relating to this traditional trinity.

INDIAN BANKING SYSTEM

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2.3

PROFILE OF PNB BANK

Punjab national bank is the third largest bank in India. It was registered on May 19, 1894 under the Indian companies act with its office in Anarkali bazaar Lahore. Today, the bank is the second largest state owned commercial bank in India with about 5000 branches across 764 cities. It serves over 37 million customers. The bank has been ranked 248 th biggest bank in the world by the bankers almanac, London. The bank ’s total assets for financial year 2007 were about us$60 billion. PNB has a banking subsidiary in the UK, as well as branches in Hong Kong, Dubai and Kabul, and representative offices in Almighty, Dubai, Oslo, and Shanghai.Punjab national bank is one of the big four banks of India, along with ICICI bank, state bank of India and Canara bank.



HISTORY:1895:

PNB commenced its operations in Lahore. PNB has the distinction of being the first Indian bank to have been started solely with Indian capital that has survived to the present. (The first entirely Indian bank, the Oudh commercial bank, was established in 1881 in Faizabad, but failed in 1958.) PNB’s founders included several leaders of the Swadeshi movement such as Dyal Singh Majithia and Lala Harkishen Lal,[2] Lala Lalchand, Shri Kali Prosanna Roy, Shri E.C. Jessawala, Shri Prabhu Dayal, Bakshi Jaishi Ram, and Lala Dholan Dass. Lala Lajpat Rai was actively associated with the management of the bank in its early years. 1904:

PNB established branches in Karachi and Peshawar. 1940:

PNB absorbed Bhagwan Dass Bank, a scheduled bank located in Delhi circle. 30

1947:

Partition of India and Pakistan at independence.PNB lost its premises in Lahore, but continued to operate in Pakistan. 1951:

PNB acquired the 39 branches of Bharat Bank (est. 1942); Bharat Bank became Bharat Nidhi Ltd. 1961:

PNB acquired universal bank of India. 1960:

PNB amalgamated indo commercial bank (est. 1933) in a rescue. 1996

- A package was developed for corporate customers for fast remittance of funds from different up-country branches to the controlling office. - The concept of ‘Chief Host’ introduced by the bank for Resolving customers ’ complaints in the minimum possible time has resulted in substantial improvement in customer service. - The company also entered into new activity of arranging Mergers, Acquisitions and Takeovers which has been quite rewarding in terms of return. 2000

- The Credit Rating Information Services of India has suspended its rating for the fixed deposit programmers of  Amruntanjan Finance. - The Bank has introduced a scheme for providing finance against mortgage of immovable property.

- Punjab National Bank and Bank of Baroda will tie up to 31

form a subsidiary for a foray into life insurance business, banking industry. - The Bank is the first amongst the public sector banks to come out with Voluntary Retirement Scheme. 2002

- Punjab National Bank is in a joint venture with Infosys for the implementation of a Centralized Banking Solution for it. The bank plans to implement Centralized Banking Solutions establishing connectivity between its branches to cover 1,500 to 2,000 branches and all ATMs by 2004. - Punjab National Bank has launched a special loan scheme called ‘Fin-Basket’, a composite package of retail loans, for a minimum size of Rs 5 lakhs. - Punjab National Bank (PNB) has been presented with the `Best Bank Award ’ for excellence in banking technology. 2003

- Punjab National Bank (PNB) has entered into an alliance with New India Assurance for selling its general insurance products. - Punjab National Bank has informed that Shri V K Sibal, a director on the Board of the Bank has resigned from the Board. Ministry of Finance, Govt. of India, vide its letter dated May 09, 2003 has conveyed the acceptance of resignation w.e.f. May 07, 2003. - Punjab National Bank has informed the Exchange that the Bank has signed a Memorandum of Understanding (MOU) on June 24, 2003 with Principal Financial Services Inc. (USA) and Vijaya Bank for joint venture partnership in Life Insurance, Pensions and Asset Management’s  (MF) business.

32

- New Delhi: Punjab National Bank has entered an agreement with Oriental Bank of Commerce, Indian Bank, UTI Bank and Global Trust Bank for sharing ATMs spread across the country. -Punjab National Bank (PNB) has decided to amalgamate its merchant banking arm 'PNB Caps' with itself. 2004

-PNB acquires Hindustan Transmission Limited (HTPL) assets under Sarfaesi.

Product

-Export Credit Guarantee Corporation of India Ltd (ECGC) and Punjab National Bank (PNB) sign a corporate agency agreement for marketing ECGC's export credit insurance products through the network of PNB branches. -Tata Consultancy Services (TCS) has joined hands with PeopleSoft to handle a Rs 5-10 crore worth project mandated by Punjab National Bank(PNB) to implement human capital management and payroll solution. -Punjab National Bank has informed that the Bank has entered into money transfer arrangement with Western Union Through their agent M/s Weizmann Forex Ltd. -Launches corporate internet banking facility on November 18, 2004. 2006

-Punjab National Bank today tied up with MasterCard International to launch a signature-based debit card. -PNB opens branch in Uttaranchal. -Punjab National Bank (PNB) has tied up with Indian  Airlines for online booking of air tickets. 33

2008

- Punjab National Bank entered into a memorandum of understanding (MoU) with IL&FS Cluster Development Initiative Ltd in order to provide impetus to financing of industrial infrastructure projects. -Punjab National Bank (PNB), has tied up with Networth Stock Broking Ltd (NSBL) for an Internet trading alliance. - Punjab National Bank cut its prime lending rate by 50 bps. - Punjab National Bank has informed that Government of India has nominated Shri Vinod Kumar Mishra as part-time non-official Director on the Board of the Bank for a period of three years from the date of Notification of his appointment or until further orders, whichever is earlier. 2009

- Punjab National Bank (PNB) has entered into a pact with Ashok Leyland to extend finance to the latter ’s commercial vehicle customers. - Sh. K R Kamath, has been appointed as Chairman and Managing Director (MD) of the Bank by Government of India, Ministry of Finance, Deptt. Of Economic Affairs (Banking Division) vide notification dated October 27, 2009 for a period of 5 years from the date of taking charge and / or until further orders, whichever is earlier. Accordingly, Shri. K R Kamath has taken charge of Chairman and Managing Director on October 28, 2009.

34

2010

- Punjab National Bank has appointed Shri Mohinder Paul Singh as Workmen Employees Director on the Board of the Bank w.e.f. January 28, 2010. - Punjab National Bank has forged an alliance with Oriental Insurance Company Limited, to offer a floater Health Insurance Policy covering the proposer and family under one sum insured. 2011

- Acquisition Of 33% Stake in Metlife By Punjab National Bank. - PNB  – Agreement with Weizmann Forex Ltd & BFC Forex & Financial Services Ltd. - PNB has launched two new deposit schemes- FCNR Premium Linked Deposit Scheme and NRE Rupee Flexible Deposit Scheme- which would provide special benefits to the NRIs. - PNB & Metlife partner for life insurance venture. - PNB’s Mega Recovery Camps receives excellent response from small agricultural 35orrower in recovering the loan amount. 2015

- In a move to bring cheers for the loan seekers, India’s second largest public sector lender, Punjab National Bank (PNB) has reduced interest rates on housing and car loans by up to 50 basis points. - PNB raised interest rates on domestic and NRE term deposits. 35

- PNB sold stake to LIC for Rs 1,590 cr. -PNB Awarded Overall Responsibility Awards 2012.

Best

Corporate

Social

2016

-India’s second largest public sector lender Punjab National Bank.

2.4 VISION AND MISSION Vision:

To be the leading provider of financial services in India and a major global bank. Mission:-

We will leverage our people, technology, speed and financial capital to: 

Be the banker of first choice for our customers by delivering high quality, world-class products and services.



Expand the frontiers of our business globally.



Play a proactive role in the full realization of India’s potential.



36

Maintain a healthy financial profile and diversify our earnings across businesses and geographies.







Maintain high standards of governance and ethics.

Contribute positively to the various countries and markets in which we operate.

Create value for our stakeholders.

2.5 ACHIEVEMENTS AND AWARDS ACHIEVEMENTS:-

-Punjab National Bank announced its Q1FY2010 results on 29 July 2009, delivering 62% y-o-y growth in net profits to Rs832 crore (Rs512cr), substantially ahead of expectations on account of large treasury gains, apart from healthy operating performance. -While the bank’s deposit growth was reasonably robust at 4.4% sequentially and 26.5% y-o-y, unlike the peers its growth in advances also remained strong at 38% y-o-y. -Other Income surged 113% y-o-y, driven by strong treasury gains of Rs355 crore during the quarter in line with industry trends, even as Fee income was also robust at 45% yo-y, on the back of strong balance sheet growth. -Operating expenses were higher than expected on account of Rs150 crore of provisions for imminent wage hikes. -Gross and Net NPA ratios remained stable sequentially at 1.8% and 0.2%, with the bank not adopting the guidelines of treating floating provisions as part of tier 2 capital instead of adjusting against NPAs on express permission from the RBI. 37

AWARDS AND DISTINCTIONS:-

-Ranked among top 50 companies by the leading financial daily, Economic Times. -Ranked as 323 rd  biggest bank in the world by Bankers  Almanac (January 2006), London. -Earned 9th  place among India ’s Most Trusted top 50 service brands in Economic Times- A.C Nielson Survey. -Golden Peacock Award for Excellence in Corporate Governance  – 2005 by Institute of Directors.

CHAPTER NO. 3 RESEARCH METHODOLOGY The procedure adopted for conducting the research require a lot of Attention as it has direct bearing on accuracy, reliability and adequacy of results. It is due to this reason that research methodology, which we used at the time of conducting the research, needs to be elaborated upon. It may be understood as a science of study how research methods, but also considers the logic behind the method used in the context of the research study. Research methodology is a way to systematically study and solve the research problem. If a researcher wants to claim his study as a good study, he must clearly state the methodology adopted in conducting the research, so that it was be judged by the reader whether the methodology of work done is sound or not. The research methodology includes:1) Objective of the study 2) Meaning of research 3) Research problem 38

4) Research design 5) Data collection method 6) Analysis and interpretation of data 7) Limitation of study

3.1

OBJECTIVE OF THE STUDY

Objectives are the ends that states specifically how goal be achieved. Every study must have an objective for which all the efforts have been done. Without objective no research can be conducted and no result can be obtained. On the basis of objective all the research process is followed. Objectives are the main aspect of every study. The objective of the study gives direction to go through the research problem. It guides the researcher and keeps him on track. I have two objectives regarding my research project. These are shown below: A. Primary objective B. Secondary objective

 A. Primary objective:1) To study the software used in PNB Bank. 2) To analyze the financial statements of the corporation to assess its true financial position by the use of ratios. B. Secondary objective:1) To find out the shortcomings in PNB Bank. 2) To see whether PNB Bank is going well or not in different areas. 39

IMPORTANCE OF THE STUDY

-By “FINANCIAL PERFORMANCE ANALYSIS OF ICICI Bank” we would be   able to get a fair picture of the financial position of ICICI Bank. -By showing the financial performance to various lenders and creditors it is possible to get credit in easy terms if good financial condition is maintained in the company with assets outweighing the liabilities. -Protecting the property of the business -Compliance with legal requirements. 3.2

MEANING OF RESEARCH

Research is defined as “a scientific and systematic search for pertinent information on a specific topic”. Research is an art

of scientific investigation. Research is a systematized effort to gain new knowledge. It is a careful investigation or inquiry especially through search for new facts in any branch of knowledge. Research comprises defining and redefining problem, formulating, hypothesis or suggested solutions. Making deductions and research conclusion to determine whether they if the formulating hypothesis. Research is thus, an original contribution to the existing stock of knowledge making for its advancement. The search for knowledge through objective and systematic method of finding solutions to a problem is research .

3.3

RESEARCH PROBLEM

The first step while conducting research is careful definition of research problem. In this world no one is the perfect. Every 40

researcher has to face many problem which conducting any research that’s why problem statement is defined to know which type of problem a researcher has to face while conducting any study.

It is said that: “Problem well defined is problem half solved” .

Basically a problem statement refers to some difficulty, which researcher experience in the context of either a theoretical or practical solution or wants to obtain the solution for the same. Hare the problem statement is: “To make financial analysis statement of PNB Bank”.

3.4

RESEARCH DESIGN

 A research design is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure. Research design is the conceptual structure with in which research in conducted. It constitutes the blueprint for the collection measurement and analysis of data. Research design includes an outline of what the researcher will do form writing the hypothesis and it operational implication to the final analysis of data. A research design is a framework for the study and used as guide in collection and analyzing the data. It is strategy 41

specifying which approach will be used for the gathering and analyzing the data. It also include the time and cost budget since most studies are done under these two constraints. The design is such studies must be rigid and not flexible and most focus attention on the following:       

What is the study about? Why is the study being made? Where will the study be carried out? What type of data is required? What period of time will the study include? What will be sample design? How will the data analyzed?

Type of research design:I. II. III. IV.

I.

II.

III.

IV.

42

Exploratory research design Experimental research design Descriptive research design Diagnostic research design

Exploratory research design:- This research design is

preferred when researcher has a vague idea about the problem the researcher has to explore the subject. Experimental Research Design:-   The research design is used to provide a strong basis for the existence of casual relationship between two or more variables. Descriptive Research Design:- It seeks to determine the answers to who, what, where, when and how questions. It is based on some previous understanding of the matter. Diagnostic Research Design:-  It determines the frequency with which something occurs or its association with something else.

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 analyze 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. 3.5

DATA COLLECTION METHOD

The process of data collection begins after a research problem has been defined and research design ahs been chalked out. There are two types of data  – 

PRIMARY DATA -

It is first hand data, which is collected by researcher itself. Primary data is collected by various approaches so as to get a precise, accurate, realistic and relevant data. The main tool in gathering primary data was investigation and observation. It was achieved by a direct approach and observation from the officials of the company. 

SECONDARY DATA -

It is the data which is already collected by someone else. Researcher has to analyze the data and interprets the results. It has always been important for the completion of any report. It provides reliable, suitable, adequate and specific knowledge. 43

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 company.   INTERNET:- which includes required financial data collected from PNB Bank official website i.e. www.pnbindia.in and some other website on the internet for the purpose of getting all the required financial data of the bank.

3.6

ANALYSIS AND INTERPRETATION

The data collected were edited, classified and tabulated for analysis. The analytical tools used in this study are:-

  

3.7

Comparative balance sheet Ratio analysis Cash flow statement

LIMITATION OF THE STUDY

Difficulty in data collection.  Limited knowledge about the bank in initial stage.   The analysis and interpretation are used on secondary contained in the published annual reports of PNB bank for the study period.  Ratio itself will not completely show the company’s good or bad financial position. 

44

  Inter 

firm comparison was not possible due to the non availability of competitors data. The study of financial performance can be only a mean to know about the financial condition of the company and cannot show a through picture of the activity of the company.

CHAPTER NO. 4 DATA ANALYSIS AND INTERPRETATION 4.1

BALANCE SHEET OF PNB BANK

Balance Sheet

------------------- in Rs. Cr. -------------------

Mar '16

Mar '15

Mar '14

Mar '13

Mar '12

12 months 12 months 12 months 12 months 12 months

Capital and Liabilities:

Total Share Capital

339.18

316.81

315.30

315.30

315.30

Equity Share Capital

339.18

316.81

315.30

315.30

315.30

Share Application Money

0.00

0.00

0.00

0.00

0.00

Preference Share Capital

0.00

0.00

0.00

0.00

0.00

Reserves Revaluation Reserves

45

26,028.37 19,720.99 15,915.63 12,824.59 10,467.35 1,449.53

1,470.76

1,491.99

1,513.74

1,535.70

Net Worth

Deposits Borrowings Total Debt

Other Liabilities & Provisions Total Liabilities

46

27,817.08 21,508.56

17,722.92

14,653.63

12,318.35

379,588.48 312,898.73 249,329.80 209,760.50 166,457.23 37,264.27 31,589.69 19,262.37

4,374.36

5,446.56

416,852.75 344,488.42 268,592.17 214,134.86 171,903.79

13,524.18 12,328.27 10,317.69 18,130.13 14,798.23 458,194.01 378,325.25 296,632.78 246,918.62 199,020.37

Mar '16

Mar '15

Mar '14

Mar '13

Mar '12

12 months 12 months 12 months 12 months 12 months

Assets

Cash & Balances with RBI

18,492.90 23,776.90 18,327.58 17,058.25 15,258.15

Balance with Banks, Money at Call

10,335.14

5,914.32

5,145.99

4,354.89

3,572.57

Advances

293,774.76 242,106.67 186,601.21 154,702.99 119,501.57

Investments

122,629.47

95,162.35

77,724.47

63,385.18

53,991.71

Gross Block

5,265.08

4,981.60

4,215.21

3,930.36

3,699.64

 Accumulated Depreciation

2,096.22

1,876.01

1,701.74

1,533.25

1,384.12

3,168.86

3,105.59

2,513.47

2,397.11

2,315.52

0.00

0.00

0.00

0.00

0.00

9,792.88

8,259.42

6,320.07

5,020.20

4,380.84

Net Block

Capital Work In Progress Other Assets Total Assets

458,194.01 378,325.25 296,632.79 246,918.62 199,020.36

Contingent Liabilities

173,768.84 101,465.73 68,124.47 79,270.65 80,606.88

Bills for collection Book Value (Rs)

47

50,981.22 37,449.53 33,215.78 31,941.43 23,448.99 777.39

632.48

514.77

416.74

341.98

4.2

PROFIT AND LOSS ACCOUNT

Profit & Loss account

------------------- in Rs. Cr. -------------------

Mar '16

Mar '15

Mar '14

Mar '13

Mar '12

12 months

12 months

12 months

12 months

12 months

Income

Interest Earned Other Income Total Income

36,428.03 26,986.48 21,466.91 19,326.16 14,265.02 4,202.60

3,612.58

3,565.31

2,919.69

1,997.56

40,630.63 30,599.06 25,032.22 22,245.85 16,262.58

Expenditure

Interest expended

23,013.59 15,179.14 12,944.02 12,295.30

8,730.86

Employee Cost

4,723.48

4,461.10

3,121.14

2,924.38

2,461.54

Selling and Admin Expenses

3,353.59

2,813.45

1,701.46

1,406.42

884.19

292.26

255.85

222.83

191.06

170.23

4,363.51

3,456.02

3,137.42

2,337.80

1,966.98

0.00

0.00

0.00

0.00

0.00

Operating Expenses

9,405.85

8,367.96

5,761.36

5,026.81

3,902.55

Provisions & Contingencies

3,326.99

2,618.46

2,421.49

1,832.85

1,580.39

Depreciation Miscellaneous Expenses Preoperative Exp Capitalized

Total Expenses

48

35,746.43 26,165.56 21,126.87 19,154.96 14,213.80

Mar '16

Mar '15

Mar '14

Mar '13

Mar '12

12 months

12 months

12 months

12 months

12 months

4,884.20

4,433.50

3,905.36

3,090.88

2,048.76

Extraordinary Items

7.88

0.00

0.00

0.00

0.00

Profit brought forward

0.00

0.00

7.64

0.00

15.52

4,892.08

4,433.50

3,913.00

3,090.88

2,064.28

0.00

0.00

0.00

0.00

0.00

Equity Dividend

746.19

696.99

693.67

630.61

409.89

Corporate Dividend Tax

121.05

113.07

116.43

107.17

69.66

Earnings Per Share (Rs)

144.00

139.94

123.86

98.03

64.98

Equity Dividend (%)

220.00

220.00

220.00

200.00

130.00

Book Value (Rs)

777.39

632.48

514.77

416.74

341.98

Transfer to Statutory Reserves

1,390.32

1,258.39

1,532.46

1,155.46

596.14

Transfer to Other Reserves

2,634.53

2,365.05

1,570.44

1,190.00

988.59

867.24

810.06

810.10

737.78

479.55

0.00

0.00

0.00

7.64

0.00

4,892.09

4,433.50

3,913.00

3,090.88

2,064.28

Net Profit for the Year

Total

Preference Dividend

Per share data (annualized)

Appropriations

Proposed Dividend/Transfer to Govt. Balance c/f to Balance Sheet Total

49

4.3

CASH FLOW STATEMENT

Cash Flow Statement

Net Profit Before Tax

Net Cash From Operating  Activities Net Cash (used in)/from Investing Activities Net Cash (used in)/from Financing  Activities Net (decrease)/increase In Cash and Cash Equivalents

Opening Cash & Cash Equivalents

------------------- in Rs. Cr. -------------------

Mar '16

Mar '15

Mar '14

Mar '13

Mar '12

12 months

12 months

12 months

12 months

12 months

7037.04

6563.72

5904.78

4766.92

3295.91

-811.22

8045.67

1835.99

2105.16

1756.13

-492.34 -1083.66

-409.41

-395.84

-444.46

440.38

-744.36

633.84

873.11

1873.54

-863.18

6217.65

2060.42

2582.42

3185.21

29691.21 23473.56 21413.14 18830.72 15645.52

Closing Cash & Cash Equivalents 28828.03 29691.21 23473.56 21413.14 18830.72

50

4.4

FINANCIAL RATIOS

Key Financial Ratios Mar '16

Mar '15

Mar '14

Mar '13

Mar '12

Face Value

10.00

10.00

10.00

10.00

10.00

Dividend Per Share

22.00

22.00

22.00

20.00

13.00

223.61

205.58

191.63

151.48

109.81

Net Operating Profit Per Share (Rs)

1,170.81

940.76

777.82

694.81

505.09

Free Reserves Per Share (Rs)

130.21

69.25

63.79

64.04

63.79

--

--

--

--

--

4.51

4.67

4.46

4.18

4.18

 Adjusted Cash Margin(%)

12.80

15.39

16.52

14.60

13.72

Net Profit Margin

12.09

14.56

15.64

13.76

12.68

113.95

108.49

116.11

129.83

111.52

18.52

22.12

24.06

23.52

19.00

18.50

22.11

24.04

23.50

18.99

777.39

632.48

514.77

416.74

341.98

820.13

678.91

562.09

464.75

390.68

Investment Valuation Ratios

Operating Profit Per Share (Rs)

Bonus in Equity Capital Profitability Ratios

Interest Spread

Return on Long Term Fund(%) Return on Net Worth (%)  Adjusted Return on Net Worth (%) Return on Assets Excluding Revaluations Return on Assets Including Revaluations

51

Management Efficiency Ratios

Interest Income / Total Funds

9.53

8.87

9.07

9.89

8.86

4.01

4.35

4.28

4.34

4.00

0.16

0.19

0.16

0.25

0.13

Interest Expended / Total Funds

5.52

4.52

4.79

5.55

4.86

Operating Expense / Total Funds

2.19

2.41

2.05

2.18

2.08

Profit Before Provisions / Total Funds

1.91

2.05

2.31

2.32

1.96

Net Profit / Total Funds

1.17

1.32

1.45

1.40

1.14

Loans Turnover

0.15

0.14

0.14

0.16

0.15

9.69

9.06

9.24

10.14

8.99

5.52

4.52

4.79

5.55

4.86

Total Assets Turnover Ratios

0.10

0.09

0.09

0.10

0.09

 Asset Turnover Ratio

0.10

0.09

0.10

0.11

4.35

Interest Expended / Interest Earned

63.18

56.25

60.30

63.62

61.20

Other Income / Total Income

1.68

2.12

1.75

2.46

1.43

22.56

26.64

22.19

21.53

23.10

0.09

0.13

0.16

0.14

0.14

Capital Adequacy Ratio

12.63

12.42

14.16

14.03

13.46

 Advances / Loans Funds (%)

77.17

78.98

77.31

80.15

76.19

Net Interest Income / Total Funds Non Interest Income / Total Funds

Total Income / Capital Employed (%) Interest Expended / Capital Employed (%)

Profit And Loss Account Ratios

Operating Expense / Total Income Selling Distribution Cost Composition Balance Sheet Ratios

52

Debt Coverage Ratios

Credit Deposit Ratio

77.39

76.25

74.34

72.88

70.55

Investment Deposit Ratio

31.45

30.75

30.74

31.20

32.38

6.10

7.49

7.71

8.59

9.02

14.40

15.62

15.36

15.96

15.44

0.36

0.47

0.50

0.43

0.42

1.22

1.31

1.32

1.27

1.25

0.02

0.03

0.02

0.02

0.02

23.81

22.24

20.47

9.75

9.40

Dividend Payout Ratio Net Profit

17.75

18.27

20.74

23.86

23.40

Dividend Payout Ratio Cash Profit

16.75

17.27

19.62

22.47

21.61

Earning Retention Ratio

82.23

81.72

79.25

76.12

76.59

Cash Earning Retention Ratio

83.24

82.72

80.37

77.51

78.38

 Adjusted Cash Flow Times

73.39

66.77

60.43

63.95

75.05

Mar '16

Mar '15

Mar '14

Mar '13

Mar '12

Earnings Per Share

144.00

139.94

123.86

98.03

64.98

Book Value

777.39

632.48

514.77

416.74

341.98

Cash Deposit Ratio Total Debt to Owners Fund Financial Charges Coverage Ratio Financial Charges Coverage Ratio Post Tax Leverage Ratios

Current Ratio Quick Ratio Cash Flow Indicator Ratios

53

CAPITAL STRUCTURE OF PNB BANK

Punjab National Bank Capital Structure Period

Instrument

From To

--- CAPITAL (Rs. cr) ---

-PAIDUP-

Authorized

Issued

2015 2016 Equity Share

3000

339.18

339178683

10 339.18

2014 2015 Equity Share

3000

316.81

316812157

10 316.81

2013 2014 Equity Share

3000

315.3

315302500

10

315.3

2012 2013 Equity Share

1500

315.3

315302500

10

315.3

2011 2012 Equity Share

1500

315.3

315302500

10

315.3

2010 2011 Equity Share

1500

315.3

315302500

10

315.3

2009 2010 Equity Share

1500

315.3

315302500

10

315.3

2008 2009 Equity Share

1500

315.3

315302500

10

315.3

2007 2008 Equity Share

1500

265.3

265302500

10

265.3

2006 2007 Equity Share

1500

265.3

265302500

10

265.3

2005 2006 Equity Share

1500

265.3

212241300

10 212.24

54

Shares (nos) Face Value Capital

4.5

RESULTS AND FINDINGS

Finding-1. The profitability ratio of PNB Bank is not

sound in last three years. Finding- 2.

In the last three years no profit balance is transfer to the balance sheet of the PNB Bank. Finding- 3. The current ratio has shown in the statement

is non fluctuating trend as 0.02, 0.02, 0.03, 0.02 during 2013, 2014, 2015, 2016 respectively. Finding- 4. The quick ratio is increased from 9.75 to 23.81

in the year 2013-2016. Finding- 5. Earnings per share ratio are also increased

from 98.03 to 144.00 during 2013-2016. Finding- 6. The capital adequacy ratio is decreased from

14.03 to 12.63 during 2013 to 2016, shown in the financial ratio table. Findung-7 The operating expenses ratio has shown is

fluctuating trend as 2.18, 2.05, 2.41, 2.19 in the years 2013, 2014, 2015, 2016 respectively. Finding- 8 The PNB bank has raised 50% equity share

capital during 2013-2014. Therefore banks profit is reduced because of dividend that’s paid for the shareholders. Finding- 9 Increase the profit of bank, bank should

decrease their operating expenses and increase their income.  Also increase its liquidity, bank should keep some more cash in its hand instead of giving more and more advances.

55

CHAPTER NO. 5 RECOMENDATIONS AND CONCLUSION 6.1

RACOMENDATIONS:-

With regard to banking products and services, consumers respond at different rates, depending on the cons umer’s characteristics. Hence, PNB should try to bring their new product and services to the attention of potential early adopters.  Due

to the intense competition in the financial market, PNB should adopt better strategies to attract more customers.   Return on investment company reputation and premium outflow are most preferred attributes that are expected by the respondents. Hence greater focus should be given to these attributes.  PNB should adopt effective promotional strategies to increase the awareness level among the consumers.  PNB should ask for their consumer feedback to know whether the consumers are really satisfied or dissatisfied with the service and product of the bank. If they are dissatisfied, then the reasons for dissatisfaction should be found out and should be corrected in future.   The PNB brand name has earned a lot of goodwill and enjoys high brand equity. As there is intense competition, PNB should work hard to maintain its position and offer better service and products to consumers.   The bank should try to increase the Brand image through performance and service then, only the customers will be satisfied. Majority of the people find banking important in their life, so PNB should employ the strategies to convert the want in to need which will enrich their business. 56

6.2

CONCLUSION:-

On the basis of various techniques applied for the financial analysis of PNB Bank we can arrive at a conclusion that the financial position and overall performance of the bank is satisfactory. The income of the bank has increased over the period but not in the same pace 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 around50% in the last 3 years. Individuals are the major shareholders. 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. Equity shareholders are also enjoying an increasing trend in the return on their capital. Though current assets and liabilities (current liquidity) of the bank is not so satisfactory but bank has succeeded in maintaining a stable solvency position over the years.  As far as the ratio of external and internal equity is concerned, it is clear that bank has been using more amount of external equity in the form of loans and borrowings than owner’s equity. Bank’s investments are also showing 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.

57