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FUNDAMENTAL AND TECHNICAL ANALYSIS OF INDIAN BANKS FOR
OPERATING 2011-2018
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SHODH SANCHAR BULLETIN
ISSN - 2229-3620
Vol. 10, Issue 40, October-December, 2020
Page Nos. 23-27
APPROVED UGC CARE
SSS
AN INTERNATIONAL BILINGUAL PEER REVIEWED REFEREED RESEARCH JOURNAL
FUNDAMENTAL AND TECHNICAL ANALYSIS OF
Priyanka Jha*
INDIAN BANKS FOR OPERATING 2011-2018
Dr. N. Subburaj**
ABSTRACT
Background : To know the financial condition, it is essential to evaluate banking sector. Objective : An attempt has
been made by comparing performing and non-performing assets between the two major public sector (SBI and PNB),
and private sector (ICICI and AXIS)banks for the operating period 2011-2018.Method : The financial ratio analysis
(FRA) has been used to draw an overview about financial performance. Result : We have found a significant negative
correlation between Gross NPA and Net Profit and Net NPA and Net Profit in all four banks except ICICI. The SBI
bankgains the trust of customers and has higher growth in deposits. The bank's share price is also reasonable (i.e., the
bank makes more earning than the other bank). The dividend pay-out ratio,return on assets, growth in net profit, and Net
profit margin of ICICI bank is greatest and Retention ratio and Debt equity ratio are also less. AXIS bank is practically
well oriented on its advances in the management of NPAs and operates very effectively to produce the profit by using its
assets. Conclusion : We concluded that private sector banks performed better in management of NPAs than the public
sector bank during 2011-2018.
Keywords : Public Sector banks; Private sector bank; Indian bank, Financial performance, NPA.
term stability and the potential prospects of growth in the
banking sector [11]. Technical interventions tend to be
doing well through market upturns equalled with market
downturns
2.
Objective
This study helps to know among public sector
banks (SBI and PNB) and private sector banks (ICICI and
AXIS), which bank performs better than other banks
based on fundamental and technical analysis.We thoughtDuring the financial period 2011-2018
The Null hypothesis (H0)-Performing and nonperforming assets have no significant impact on the
performance of these bank
The alternative hypothesis (H1)-Performing and
non-performing assets have a significant impact on the
performance of these bank.
Suppose our analysis shows that the performing
1.
Introduction
The Banking industry's success (in terms of
profitability) depends primarily on performing assets as
well as Non-Performing Assets (NPAs) [1].The NPA's
problem of not limited to Public sector Banks; the Private
sector Bank is also suffering equally in India.The
fundamental analysis [3, 4, 7, 8] and technical analysis [9,
10] has been used to analyse the different financial
metrics (e.g., performing assets, earnings, expenses,
liabilities, and NPAs) [5]. The Moving Average
Convergence/Divergence indicator (MACD) helps in
detecting and verifying patterns, finding support and
resistance level, and improving trading systems.Relative
Strength Index (RSI)- The rise in percentage change in
price occurs with higher ROC value. The Price Rate of
Change (ROC) is a price based momentum oscillator to
measure the rate of price change from one period to
another.Fundamental analysis offers details on the long*Sarvepalli Radhakrishnan (SRK) University, Bhopal, India
**Sarvepalli Radhakrishnan (SRK) University, Bhopal, India
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October to December 2020
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BI-LINGUAL INTERNATIONAL RESEARCH JOURNAL
non-performing assets significantly impact the
performance ofthese banks. In that case, we will reject the
null hypothesis and accept the alternative hypothesis and
vice versa.
3.
Methodology
The data is available publically and collected from
a secondary source. The principal source of the data is the
NSE India's website (trading of equity market) and the
respective banks' annual report. The present study spans
a study period of seven years, from 2011-12 to 2017-18
Fundamental and Technical analysis The Financial ratio
analysis [12-13] have been used to evaluate to determine
the financial status.The technical analysis has been
carried out using MACD, ROC, and RSI. One-way
ANOVA test followed by Tukey's multiple comparison
tests to assess the relative significance (significant) of
each variable in affecting the Bank's performance. The
significance level has been fixed at p< 0.05.
4.
Findings and interpretation
Performing assets
The comparative data with the percentage change
in been briefed in Mean ± SD (in Table)-We found that in
SBI and PNB, the Credit deposit ratio is similar and
significantly higher for ICICI compared to SBI and PNB,
While it is significantly higher for AXIS than PNB and
significantly lower than ICICI.We observed that there is
no significant difference in the net profit growth, the total
income, the total expenditure the total advances and the
total deposits, however the profit growth rate is not
consistent (mixed pattern of rising and falling) for each
subsequent yearamong four banks. Relative to PNB, the
net profit margin is significantly higher with ICICI and
AXIS; However, SBI and PNB are comparable. Above
all, ICICI bank's net profit margin is highest. As
compared to SBI, the operating profit margin is
significantly higher with PNB, ICICI, and AXIS.
However, Operating profit growth is comparable among
all four banks. The net worth ratio (return on
Shareholder's investment) is equivalent among all four
banks. AXIS bank performs well because it has the
highest return on shareholder investment. In contrast, the
other three banks have a declining trend, and the bank
cannot generate revenue (income). With ICICI and AXIS,
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October to December 2020
the Return on assets is significantly higher than the PNB
Bank. However, Return on equity is comparable among
all the four banks. Compared with SBI and PNB, the total
asset turnover ratio is substantially higher with AXIS and
is comparable among SBI, PNB, and ICICI. Earnings per
share and Dividend per equity share are equivalents
between all four banks. The Dividend pay-out ratio is
significantly higher with ICICI compared to PNB, and it
is comparable with SBI, PNB, and AXIS. ICICI pays the
highest Dividend among all four banks. The retention
ratio, as opposed to PNB, is significantly lower with
ICICI; and it is comparable between SBI, PNB, and
AXIS. The debt-equity ratio, as opposed to SBI and PNB,
is significantly lower with ICICI and AXIS.
Non-Performing assets
We found that the Gross NPAs / Gross Advances
ratio and the Gross NPAs / Total Assets ratio is
significantly lower with AXIS than with PNB. But the
ratio is comparable between SBI, PNB, and ICICI. We
didn't observe a significant change in Net NPAs/Net
advances ratio and Net NPAs/ Total assets ratio among
SBI, PNB, and ICICI. However, as compared with PNB,
this ratio is significantly lower with AXIS. Net NPAs
represent a bank's actual burden. The overall provision
ratio is significantly higher in ICICI and AXIS than PNB.
This indicates that ICICI and AXIS have made better
provisions than PNB for their Gross NPAs. Mostly all
four banks showed a mixed pattern for the Total Provision
ratio. At ICICI and AXIS, the Shareholder's risk ratio is
significantly lower than PNB. The capital adequacy ratio
with ICICI and AXIS is significantly higher than SBI and
PNB. We have found a significant negative correlation
between Gross NPA and Net Profit [r(5) = -0.95; P= 0.01]
and Net NPA and Net Profit [r(5) = -0.93; P= 0.01] in SBI.
In PNB, the negative correlation between Gross NPA and
Net Profit [r(5) = -0.93; P= 0.01] and Net NPA and Net
Profit [r(5) = -0.917; P= 0.01] is significant. We also
found a negative correlation in ICICI between Gross NPA
and Net Profit [r (5) = -0.17; P = 0.70], and Net NPA and
Net Profit [r(5)=-0.10; P= 0.82], but this is not significant
as it is in other banks. A significant negative correlation
between Gross NPA and Net Profit [r(5) = -0.80; P= 0.05],
and Net NPA and Net Profit [r(5) = -0.81; P= 0.05] is
24
BI-LINGUAL INTERNATIONAL RESEARCH JOURNAL
observed in AXIS . This means that the effect of
increasing both Gross NPAs and Net NPAs has an adverse
impact on the Net Profit of the bank. AXIS has
significantly higher investments in the priority sector
compared with ICICI, and significantly lower
investments than PNB. ICICI and AXIS have slightly
lower investments in the public sector as opposed to SBI
and PNB. All four banks have comparable investments
for the banking sector. ICICI has significantly higher
investments in other sectors than PNB.
Table: The performing and non-performing assets for banks
Parameter
Credit deposit ratio (%)
SBI
81.73 ±5.65
PNB
74.15±4.73
ICICI
AXIS
a,b
99.57±5.30
b,c
86.53±7.84
[-23.30±63.95]
[-166.42±394.48]
2.28±20.09
[-10.79±45.02]
Growth in Total income
12.08±7.58
4.99±4.76
8.64±7.13
11.21±8.20
Growth in Total expenditure
(%)
14.32±10.82
10.33±10.91
9.73±6.27
13.85±8.64
Growth in Total advances (%)
12.39±8.12
5.80±4.59
10.69±5.72
14.78±7.55
Growth in Total deposits (%)
14.92±9.72
7.93±5.72
12.03±5.87
11.0±5.39
Operating profit growth (%)
13.33±9.55
3.07±15.88
15.97±11.45
14.17±12.41
Net profit margin (%)
6.38±3.48
5.35±4.79
15.15±3.15a,b
12.47±6.38 b
Net worth ratio (Return on
Shareholder’s Investment)
(%)
8.15±5.89
1.73±16.62
11.08±2.53
12.78±6.65
Return on assets (%)
0.55±0.38
0.19±0.98
1.49±0.32 b
1.34±0.70b
Return on equity (%)
9.02±6.47
1.57±17.95
11.45±2.59
14.82±7.83
Total assets turnover ratio
(%)
8.40±0.49
8.43±0.74
9.04±0.53
9.44±0.58a,b
Earnings per share
83.91±94.94
47.80±81.48
13.92±2.73
21.90±11.16
Dividend per equity share
16.45±18.15
8.90±11.32
3.70±1.33
3.62±1.74
Dividend Pay-Out Ratio (%)
16.74±7.39
9.11±9.04
26.36±7.69b
15.33± 9.39
Retention ratio
0.83±0.07
0.90±0.09
0.73±0.07b
0.84±0.09
Debt-Equity Ratio
12.04±0.58
13.70±1.33
4.65±0.36a,b
7.59±0.94a,b,c
(Gross NPA / Gross
Advances) × 100
6.11±2.34
5.45±2.82
2.84±2.58b
(Gross NPA / Total Assets) ×
100
3.91±1.26
5.68±3.47
3.29±1.80
1.81±1.71b
(NET NPA / NET Advances)
× 100
3.12± 1.39
5.48±3.70
2.56±2.10
1.20±1.33
Total provision ratio
51.39±5.65
42.40±4.55
60.40±15.29
Shareholder’s risk ratio
29.86±11.34
56.33±39.90
12.12 ±10.15
Capital adequacy ratio
12.86±0.59
11.60±1.19
17.76±0.81
Growth in net profit (%)
a-
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8.98±5.71
Significant change as compare with SBI, bSignificant changeas compare with PNB, CIssue 40
October to December 2020
b
b
b
a,b,d
b
62.58±8.13
b
8.02±9.30
13.22±5.93
Significant changeas compare with ICICI, dSignificant change ascompare with AXIS.
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BI-LINGUAL INTERNATIONAL RESEARCH JOURNAL
Technical analysis
The MACD, RSI, and ROCof SBI, PNB,
ICICIand AXIS have been displayed (Figure)-We
observed that bullish crossover has occurred to a
maximum for SBI Bankand AXIS Bank, indicating that
investors have more trust, and the stock has been oversold, i.e., traders buy the trade to the limit. For PNB Bank,
bullish crossover occurred less, meaning the small stock
has been sold, i.e., traders have minimally purchased the
trade.. As RSI measures the percentage price change over
a given period, and for SBI, a higher RSI value (> 70)
implies that traders have purchased the maximum trade
from SBI as opposed to PNB, ICICI, and AXIS. The
price-based, indicator i.e., ROC. In all four banks, the
momentum of rising and falling trends in both bullish and
bearish markets is less variable for SBI and more variable
for ICICI and AXIS.
Figure: Moving Average Convergence and Divergence
(MACD) Relative strength index (RSI) line and Rate of
change (ROC) of SBI bank, PNB bank, ICICI bank and
AXIS bank. (Red- signalling line and Green- line of
MACD, RSI and ROC respectively, c- crores)
Limitation of the study
This study is limited to the seven-year period
alone, which may not give the exact results. Secondary
data were used in the study, which is itself a limitation.
Also, only two public-sector banks have been compared
here with two private sector banks that may not give an
exact financial status scenario for Indian banking.
Conclusion
We concluded that private sector banks perform
better in management of NPAsthan the public sector bank
during 2011-2018 and performing assets and nonperforming assets meaningfully impact; hence we reject
the null hypothesis and accept the alternative hypothesis.
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BI-LINGUAL INTERNATIONAL RESEARCH JOURNAL
8.
Conflict of Interest :
The authors had identified no conflicts of interest.
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