Financial performance analysis of selected public sector banks: A CAMEL Model approach

Abstract

Banking industry is one of the crucial and important industry of Indian economy. There are many banking companies working in India. Banking Industry is growing at a faster pace and thus the competition too. Due to passage of time there has been a constant change in the performance of banks, which leads to change in ranking and position of the banks every year. It may be very difficult to compare the performance and ranks and this study will helps to find out which bank is better among leading banks and where the investors and customers should invest money into. There are many aspects to measure the performance of banks like WACC, Regression Analysis and CAMEL Model is one important of them and thus it is being used in study to measure and compare the financial performance of leading five public sector banks, on the basis of total assets and consolidated basis, in India for 5 years from 2009-2014. The banks include Bank of Baroda, State Bank of India, Punjab National bank, Bank of India, and Canara Bank. The data is collected from annual reports of these banks and various ratios have been calculated measuring the aspects of CAMEL which includes capital adequacy, asset quality, management efficiency, earning quality and liquidity. After calculating these ratios, it is found that Bank of Baroda is leading in all the aspects of CAMEL followed by Punjab National Bank in Capital Adequacy, Management efficiency and Earning capacity and Bank of India in Asset Quality.

Full text

I J A B E R, Vol. 13, No. 6 (2015): 4327-4348
FINANCIAL PERFORMANCE ANALYSIS OF
SELECTED PUBLIC SECTOR BANKS: A CAMEL
MODEL APPROACH
Jaspreet Kaur1, Manpreet Kaur2 and Dr. Simranjit Singh3
Abstract: Banking industry is one of the crucial and important industry of Indian economy.
There are many banking companies working in India. Banking Industry is growing at a
faster pace and thus the competition too. Due to passage of time there has been a constant
change in the performance of banks, which leads to change in ranking and position of
the banks every year. It may be very dicult to compare the performance and ranks and
this study will helps to nd out which bank is beer among leading banks and where the
investors and customers should invest money into. There are many aspects to measure
the performance of banks like WACC, Regression Analysis and CAMEL Model is one
important of them and thus it is being used in study to measure and compare the nancial
performance of leading ve public sector banks, on the basis of total assets and consolidated
basis, in India for 5 years from 2009-2014. The banks include Bank of Baroda, State Bank
of India, Punjab National bank, Bank of India, and Canara Bank. The data is collected
from annual reports of these banks and various ratios have been calculated measuring
the aspects of CAMEL which includes capital adequacy, asset quality, management
eciency, earning quality and liquidity. After calculating these ratios, it is found that
Bank of Baroda is leading in all the aspects of CAMEL followed by Punjab National Bank
in Capital Adequacy, Management eciency and Earning capacity and Bank of India in
Asset Quality.
Key Words: Banking, CAMEL Model, Financial Performance, Ratios.
1. INTRODUCTION
1.1 Banking Sector
Bank is a nancial intermediary that accepts deposits and lend money to the
people and an institution providing the service of transferring money and
generating income. The word ‘Bank’ basically means ‘bench or counter’ and comes
from the middle French word named banque. Due to the signicance of banks in
1. Asst. Prof., School of Business, Lovely Professional University, Punjab.
Email: jaspreetmphillpu@gmail.com
2. Asst. Prof., School of Business, Lovely Professional University, Punjab.
Email: manpreetkaurvirdi@hotmail.com
3. Associate Prof., DIPSIMT, Punjab Email: arorasimranjit@yahoo.com

4328 • Jaspreet Kaur, Manpreet Kaur and Dr. Simranjit Singh
the nancial system and national economies, they are highly regulated in most
countries and now become the part and parcel of everybody’s life.
1.2 DierenttypesofBanksintheworld
There are dierent types of banks being present in the world. Some of the types are:
Commercial Banks, Community Development Banks, Cooperative Bank, Credit
Unions, Ethical Banks, Exchange Bank, Federal or National Banks, Indigenous
Bank, Industrial Development Bank, Internet Banking, Investment Bank, Islamic
Banks, Land Development Bank, Merchant Banks, Mortgage Banks, Postal Savings
Bank, Private Bank, Savings Banks.
1.3 TypesofBanksinIndia
(a) Public Sector Banks
(b) Private Sector Banks
1.4 CAMELRatingSystem
1.4.1 Concept
It was developed in USA to describe the bank’s overall condition. It is applied
to approximate 8000 institutions i.e. covering every bank and credit union in
USA and now being implemented in other parts of the world by various banking
supervisory regulators.
1.4.2 Components of CAMEL Rating System
The banks are rated on the basis of camel where ‘C’ means Capital adequacy, ‘A’ is
for Assets Quality, ‘M’ for Management Eciency, ‘E’ is for Earnings Quality and
‘L’ for Liquidity.
Table4.1
ShowingTheCAMELModelwithItsRatios
Camel Ratios Formulas Elaborated Formula Content:
C Capital Adequacy
Ratio
Tier 1 Capital + Tier 2
Capital/ Risk Weighted
Assets
Tier 1 Capital= (Paid Up Capital +
Statutory Reserves + Disclosed Free
Reserves)-(Equity Investments In
Subsidiary + Intangible Assets + Current
& B/F Losses)
Debt-Equity Ratio Total Debt/Total
Shareholder’s Funds
Tier 2 Capital= A) Undisclosed Reserves
+ B) General Loss Reserves + C) Hybrid
Debt Capital Instruments

Financial Performance Analysis of Selected Public Sector Banks… • 4329
Advance to Asset Ratio Total Advances/ Total
Assets
And Risk Can Be either Weighted Assets
Or Minimum Capital Requirement
Government Securities
to Total Investment
Government Securities/
Total Investments
Total Debt= Long-Term + Short-Term
Borrowings
A Net NPA to Total Assets Total Non-Performing
Assets/ Total Assets
Net NPA to Net
Advances
Total Non-Performing
Assets/Total Advances
Total Investments to
Total Assets
Total Investments/Total
Assets
Percentage Change In
NPA
M Total Advances to Total
Deposits
Total Advances/Total
Deposits
Prot Per Employee Revenue – Operating
Expenses/ Full Time
Equivalent
Business Per Employee Revenue/Number of
Employees
Return On Net Worth Net Income/ Shareholder’s
Equity
E Operating Prot to
Average Working
Funds
Operating Prot/ Working
Funds
Working Funds= Average of Total Assets
/ Liabilities
Percentage Growth in
Net Prot
Net Prot to Average
Assets
Net Prot/ Average Assets
L Liquid Assets to
Demand Deposits
Liquid Assets/Demand
Deposits
Liquid Assets = Cash In Hand, Balance
With The RBI, Balance With Other Banks
(Both In India And Abroad), and Money
At Call And Short Notice.
Liquid Assets to
Total Deposits
Liquid Assets/ Total
Deposits
Total Deposits = Demand Deposits,
Savings Deposits, Term Deposits And
Deposits Of Other Financial Institutions.
Liquid Assets to
Total Assets
Liquid Assets/ Total Assets
Government Securities
to Total Assets
Government Securities/
Total Assets
Approved Securities to
Total Assets
Approved Securities/ Total
Assets
Approved Securities = Investments
made in The State-Associated Bodies
Like Electricity Boards, Housing Boards,
Corporation Bonds, Share Of Regional
Rural Banks
Source: Aspal P.K. (2013), “A Camel Model Analysis of State Bank Group”, World Journal of Social Sciences, Vol. 3,
No. 4 accessed from www.econjournals.com /index.php/ ije/article /viewl e/814 /pdf on 20-Sept-2014.

2. LITERATURE REVIEW
Sangmi and Nazir (2010) have taken two major banks of north India namely,
Punjab national bank and Jammu and Kashmir Bank on the basis of their role and
participation in inuencing the nancial condition of North India. They applied
the Camel Model on these two banks by taking the annual report data from 2001-
2005, and found out that both the banks were nancially sound and suitable as
far as their capital adequacy, asset quality, management capability and liquidity is
concerned.
Mishra and Kumari (2011) selected 12 public and private sector banks on the basis
of market capture and measured the eciency and soundness by Camel Model.
From the analysis they ranked the banks. They said that HDFC takes the lead
followed by ICICI and Axis Bank. Bank of Baroda and Punjab National Bank
follows the fourth position holded by IDBI and Kotak Mahindra Bank. Public
Sector Banks like SBI and Union Bank takes the back seat. It donates that Private
Sector Banks are performing beer than Public Sector Bank.
Jha and Hui (2012) tried to nd out the factors aecting the performance of
Nepalese Commercial Banks By using various camel ratios such as return on
asset (ROA), return on equity (ROE), capital adequacy ratio (CAR) etc. As Public
sector banks have higher total assets compared to joint venture or domestic private
banks, thus ROA was found higher whereas overall performance of public sector
was unsound because ROE and CAR of joint venture and private banks was found
superior. The nancial performance of public sector banks is being eroded by other
factors such as poor management, high overhead cost, political intervention, low
quality of collateral etc.
Kumar (2012)has given a denition to camel rating system, according to him it is
a mean to categorize bank based on the overall health, nancial status, managerial
and operational performance. In his study he has chosen the SBI and its associates
for checking the performance and concludes that State Bank of India is always in
the lead than its associates in every aspect of camel.
AspalandMalhotra(2013) measured the nancial performance of Indian public
sector banks’ asset by camel model and applying the tests like Anova, f test and
arithmetic test for the data collected for the year 2007-2011. They concluded that
the top two performing banks are bank of Baroda and Andhra bank because of
high capital adequacy and asset quality and the worst performer is united bank of
India because of management ineciency, low capital adequacy and poor assets
and earning quality. Central bank of India is at last position followed by UCO bank
and bank of Maharashtra.
4330 • Jaspreet Kaur, Manpreet Kaur and Dr. Simranjit Singh

Kumar and Sharma (2013)analyzed the performance of top 10 and highest market
capitalized banks in India with the help of camel model approach, for the year
200610, their study found that Kotak Mahindra Bank is on the lead and on highest
position in terms of capital adequacy followed by ICICI bank and they both are
more ecient in managing their liquidity. SBI has highest NPA level among their
peer group followed by ICICI bank whereas PNB is highly management ecient
with the highest grading in this parameter. Earning quality of SBI and PNB are on
top but overall SBI is ranked rst followed by PNB and HDFC.
Lakhtaria (2013) has selected the top 3 public sector banks, i.e. Bank of Baroda,
Punjab National Bank and State Bank of India for his study using camel model
and has ranked the banks according to the performance and data interpreted.
According to him Bank of Baroda stood rst followed by Punjab National Bank
and State Bank of India is on third position as per the data analyzed.
Matkar (2013) has conducted a study on MSC banks by using camel model. From
his study he concluded that there has been an increase in the prots and business
per employee and capital adequacy ratio is also enhanced. Due to the increase in
the net non-interest income and decrease in operating expenses, sta level cost for
the last few years, the banks have displayed a good growth. Retail banking and its
products has also shown a progress in MSC banks.
MisraandAspal(2013) did the study on whole state bank group by using camel
model approach and applying the tests like Anova, kolmogorov-smirnov, and
shapirowilk and found out that though state bank of India is bigger entity than
its other associates It got the lowest rank in every aspect whether the liquidity or
the asset quality while state bank of Bikaner and Jaipur and state bank of Patiala
is at the top position. The reason for geing lowest rank for SBI is that SBI has not
been able to perform well in debt-equity, government securities to total investment
ratios, advances to assets etc.
Chaudhary(2014)conducted a study to measure the right performance of public
and private sector banks by the use of secondary data collected from annual
reports, periodicals, website etc. for the year 2009-2011 and found out that in every
aspect private sector bank has performed beer than public sector banks and they
are growing at faster pace.
HotiandAlshiqi(2014)need to analyze the nancial performance of the banking
system in Kosovo from 2006-2012 using camel model and by calculating return on
investment. They concluded that they did not nd any signicance dierence in
the overall performance of the banks and this thing can only happen in the times
of global nancial crisis which was earlier faced by Kosovo, leing less sensitive
eect. Most banks were found with health balance sheet with a small level of
reserves for loans.
Financial Performance Analysis of Selected Public Sector Banks… • 4331

3. RESEARCH METHODOLOGY
3.1 ObjectiveoftheStudy
1. To Evaluate the Financial Performance of Selected Public Sector Banks using
the CAMEL model approach.
2. To Compare the Banks and their Performance of 5 years.
3.2 Research Design
3.2.1 Type of Research
The present study is a descriptive research.
3.2.2 Sources of Data
The secondary data has been used for the study, which is taken from the annual
reports of the banks.
3.2.3 Samples
For conducting this research, Leading 5 Public sector banks have been nominated
based on the total assets namely State Bank of India, Bank of Baroda, Punjab
National bank, Bank of India and Canara Bank as per consolidated basis.
3.2.4 Parameters for Measuring Financial Performance:
CAMEL Model has been used to conduct the Research.
4. ANALYSIS AND INTERPRETATION
4.1 CapitalAdequacy
4.1.1 Capital to Risk-weighted Assets Ratio (CRAR)
Table4.1.1
ShowingCRARofSelectedBanks
SR
No.
Banks BASEL II – CRAR (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 12.96 12.92 13.86 11.98 13.39 13.02 3
2 BOB 12.87 13.30 14.67 14.52 14.36 13.94 1
3 PNB 12.69 13.16 12.63 12.42 14.16 13.01 4
4 BOI 11.15 11.11 12.03 12.24 13.00 11.91 5
5 CB 11.14 12.40 13.76 15.38 13.43 13.22 2
4332 • Jaspreet Kaur, Manpreet Kaur and Dr. Simranjit Singh

AnalysisandInterpretation
All the four Banks namely Bank of Baroda, Canara Bank, State Bank of India
and Punjab National Bank has approximately equal amount of CRAR with
13.94,13.22,13.02,13.01. It Implies that these banks have greater capacity to adapt
to the loss if occurs though Bank of Baroda has highest ranking in CRAR in Basel
II. On the other hand Bank of India has taken the last positions with CRAR 11.91%,
which is the least. So, Bank of Baroda does not have much capacity to adapt to its
losses. But all the banks have followed the guidelines of RBI and has maintained
the CRAR of 9%.
4.1.2 Debt-Equity Ratio
Table4.1.2
ShowingDebt-EquityRatioofSelectedBanks
SR
No.
Banks Debt-Equity Ratio (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 13.54 14.16 14.30 16.17 14.44 14.52 2
2 BOB 16.23 15.24 13.77 14.28 15.65 15.03 3
3 PNB 13.51 12.80 13.65 14.55 15.36 13.97 1
4 BOI 17.08 17.05 16.37 18.18 15.12 15.16 5
5 CB 14.69 14.80 14.76 14.97 16.02 15.05 4
AnalysisandInterpretation
Punjab National bank Secures rst Position in Debt-Equity ratio with 13.97 followed
by State Bank of India with 14.52. Canara Bank and Bank of India stands at last
with average of 15.05 and 15.16 times. It means that the Creditors and depositors
of Punjab National Bank and State Bank of India are more secured as they are
using less debt than other 3 banks, Whereas Creditors and Depositors of Bank of
Baroda and Bank of India are at higher risk as they are focusing more on Debt than
the shareholder’s wealth and Bank of India stays last with the highest risk and by
Debt-Equity Ratio of 15.16
Financial Performance Analysis of Selected Public Sector Banks… • 4333

4.1.3 Advances to Assets Ratio:
Table4.1.3
ShowingAdvancestoAssetsRatioofSelectedBanks
SR
No.
Banks Advances to Asset Ratio (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 65.87 65.28 63.59 61.07 59.95 63.15 2
2 BOB 59.71 59.64 63.85 63.37 62.51 61.82 4
3 PNB 63.68 64.49 64.05 64.13 62.95 63.86 1
4 BOI 64.45 63.68 64.43 60.54 61.05 62.83 3
5 CB 60.31 57.81 61.39 62.34 63.58 61.09 5
AnalysisandInterpretation
Punjab National Bank has got the highest position in advances to assets ratio by
63.86% followed by State Bank of India with 63.15%, Whereas Bank of Baroda and
Canara Bank holds the last positions with 61.81% and 61.09%. Though the average
of all the Banks were approximately same, it means that all the banks have a good
lending policy. But Punjab National Bank and State Bank of India has adopted a
beer lending policy than other banks because there ratios are higher, which will
denitely increase the prots of the banks.
4.1.4 Government Securities to Total Investments Ratio
Table4.1.4
ShowingGovernmentSecuritiestoTotalInvestmentsofSelectedBanks
SR
No.
Banks Government Securities to Total Investment (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 76.36 76.33 78.88 76.29 75.14 77.00 5
2 BOB 83.12 84.98 84.61 85.13 83.4 84.25 1
3 PNB 77.91 82.39 84.61 85.13 83.40 82.69 4
4 BOI 83.40 83.82 84.04 80.21 87.81 83.86 3
5 CB 80.94 80.80 84.34 83.06 90.88 84.00 2
4334 • Jaspreet Kaur, Manpreet Kaur and Dr. Simranjit Singh

AnalysisandInterpretation
The four Banks namely, Bank of Baroda, Canara Bank, Bank of India, Punjab
National Bank has invested equal amount of money in government securities in
proportion of its total investments. It indicates that Investments of Bank of Baroda
Canara Bank, Bank of India, and Punjab National Bank are on safer side though
Bank of Baroda secures rst position with 84.25% of investments in government
securities. On the other hand State Bank of India secures last position with low
percentage of 77.00% which states that investments of State Bank of India in debt
instruments are at higher risk as compared to other four Banks.
4.2AssetsQuality
4.2.1 Net NPAs to Net Advances Ratio
Table4.2.1
ShowingNetofAssetstoNetAdvancesRatioofSelectedBanks
SR
No.
Banks NNet NPA to Net Advances (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 2.57 2.10 1.82 1.63 1.72 1.97 5
2 BOB 1.52 1.28 0.54 0.35 0.34 0.81 1
3 PNB 2.85 2.35 1.52 0.85 0.53 1.62 4
4 BOI 2.00 2.05 1.47 0.91 1.31 1.55 2
5 CB 2.00 2.17 1.46 1.10 1.06 1.56 3
AnalysisandInterpretation
Bank of Baroda secures rst position with lower NPA of 0.81% against Net
Advances followed by Bank of India and Canara Bank with 1.55 and 1.66%. It
states that Bank of Baroda has adopted a beer lending policy and managing the
Non-performing assets in a beer way than other four banks. Whereas State Bank
of India has higher NPA with 1.97% and securing the last position indicating the
poor management and lending policy.
Financial Performance Analysis of Selected Public Sector Banks… • 4335

4.2.2 Total Investments to Total Assets Ratio
Table4.2.2
ShowingTotalInvestmentstoTotalAssetsRatioofSelectedBanks
SR
No.
Banks Total Investments to Total Assets (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 24.15 24.34 25.19 25.43 27.77 25.37 3
2 BOB 18.06 22.45 18.95 20.24 22.21 20.38 1
3 PNB 25.96 25.12 26.72 25.08 26.10 26.20 4
4 BOI 20.14 21.11 22.71 24.55 24.60 22.62 2
5 CB 27.03 30.41 28.09 25.50 26.68 25.54 5
AnalysisandInterpretation
Bank of Baroda stands at rst position in Investments to assets ratio with 20.38%
followed by Bank of India with 22.62%. It means that both the Banks are focusing
on advancing the money rather investing, for the future growth of the business
and adopting an aggressive policy. Whereas, Punjab national Bank and Canara
Bank is focusing on making a cushion against Nonperforming assets by investing
the money more with the investments to assets ratio of 26.20 and 25.54%. These
both banks are using conservative policy and are more feared of nonperforming
assets.
4.2.3 Net NPAs to Total Assets Ratio
Table4.2.3
ShowingNetNPAtoTotalAssetsRatioofSelectedBanks
SR
No.
Banks Net NPA to Total Assets (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 1.76 1.34 0.86 0.75 0.75 1.09 5
2 BOB 0.89 0.75 0.33 0.21 0.21 0.48 1
3 PNB 1.72 1.45 0.95 0.53 0.32 0.99 4
4 BOI 1.28 1.30 0.94 0.55 0.80 0.97 3
5 CB 1.2 1.25 0.89 0.69 0.67 0.94 2
4336 • Jaspreet Kaur, Manpreet Kaur and Dr. Simranjit Singh

AnalysisandInterpretation
Bank of Baroda secures rst position with the lowest NPA of 0.48 followed by
Canara Bank with 0.94%, Bank of India, Punjab National Bank and State Bank
of India with 0.97, 0.99 and 1.09%. It states that Bank of Baroda has beer Credit
Policy and are able to recover the loan from the debtors than the other banks. They
are at lower risk of increasing Non-performing assets. Whereas, the NPA of other
four banks is comparatively high, it means that these banks are not making much
eorts to decrease their NPA’s as Bank of Baroda is doing.
4.2.4 Percentage Change in Net NPAs Ratio
Table5.2.4
ShowingPercentageChangeinNetNPARatioofSelectedBanks
SR
No.
Banks Percentage change in NPA (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 46.63 36.44 28.12 13.59 12.32 25.42 1
2 BOB 43.95 171.57 95.18 31.30 34.14 75.23 3
3 PNB 37.04 62.46 118.5 107.7 272.06 119.55 5
4 BOI 24.71 62.66 87.99 -11.88 251.38 82.97 4
5 CB 13.02 55.86 45.34 30.43 19.40 32.81 2
AnalysisandInterpretation
State Bank of India stands at rst position with average change in NPA of 25.32
followed by Canara Bank with 32.81. It is comparatively lower than Bank of Baroda,
Bank of India and Punjab National Bank with 75.23, 82.97, and 119.5. It means that
State Bank of India and Canara Bank has less uctuations in their NPAs. They are
constantly increasing or decreasing at lower rate. Whereas, other three banks are
showing greater uctuations. Like in Bank of India percentage change in NPA was
251.38% and in 2011 it goes negative with -11.38% and rises again with 87.99%.
Which shows high uctuation and is bad for bank. On the other hand Punjab
National Bank stands at last position with average of 119.5. Though it is at last,
the percentage change in NPA is constantly decreasing which is a good sign for
the bank. In addition, State bank of India stands at rst but their NPA is increasing
constantly.
Financial Performance Analysis of Selected Public Sector Banks… • 4337

4.3ManagementEciency
4.3.1 Total Advances to Total Deposits
Table4.3.1
ShowingTotalAdvancestoTotalDepositsRatioofSelectedBanks
SR
No.
Banks Total Advances to Total Deposits (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 85.82 85.57 82.25 80.16 77.88 82.34 1
2 BOB 69.60 69.12 74.39 74.48 72.25 72.25 4
3 PNB 79.37 80.27 78.39 78.34 62.95 75.86 2
4 BOI 77.85 75.86 78.18 71.34 73.36 75.32 3
5 CB 71.64 68.16 71.19 72.10 72.26 71.07 5
AnalysisandInterpretation
State Bank of India Stands at First Position with Advances to Deposits ratio of 82.34%
followed by Punjab National Bank with 75.86%, Bank of India with 75.32%, and
Bank of Baroda with 72.25% and Canara Bank secures last position with 71.07%. It
states that State Bank of India has made ecient and appropriate utilization of Its
Depositor’s deposits by advancing the money for maximum growth of the bank.
Whereas, other four banks namely, Bank of Baroda, Punjab National Bank, Bank
of India, Canara Bank has approximately equal Ratio of Advances to Deposits
following State Bank of India. It means that they have utilized the money in good
way but not as ecient as State Bank of India.
4.3.2 Return on Net Worth
Table4.3.2
ShowingReturnonNetworthRatioofSelectedBanks
SR
No.
Banks Return on Net worth (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 9.83 14.65 14.90 13.39 14.46 13.45 4
2 BOB 14.59 13.00 19.11 21.42 22.19 18.06 1
3 PNB 9.69 15.19 15.2 20.22 23.08 17.07 2
4 BOI 8.87 11.20 12.49 14.11 13.35 12.00 5
5 CB 8.58 11.72 14.09 19.00 21.80 15.04 3
4338 • Jaspreet Kaur, Manpreet Kaur and Dr. Simranjit Singh

AnalysisandInterpretation
Bank of Baroda is at the peak with 18.06% of Return on Net worth followed by Punjab
National Bank with 17.07%. It means that Bank of Baroda and Punjab National Bank
are earning good amount of Prots which in result beneing the shareholders.
Higher the Prots, Higher the return on equity or money invested in the banks.
Canara Bank stands at middle position with good rate of return, whereas State Bank
of India and Bank of India has least Rate of Return with 13.45 and 12.00%.
4.3.3. Prot per Employee
Table4.3.3
ShowingProtperEmployeeofSelectedBanks
SR
No.
Banks Prot per employee (Cr.)
2014 2013 2012 2011 2010 Average Rank
1 SBI 0.048 0.064 0.053 0.038 0.044 0.05 5
2 BOB 0.098 0.10 0.12 0.106 0.078 0.10 1
3 PNB 0.054 0.080 0.084 0.083 0.073 0.075 2
4 BOI 0.062 0.064 0.064 0.062 0.044 0.06 4
5 CB 0.05 0.069 0.082 0.097 0.073 0.074 3
AnalysisandInterpretation:
Higher the Prot Per employee, beer is it for the employees and company. In
this Bank of Baroda stands at rst position with prot per employee of 10 lakhs
followed by Punjab National Bank with 5.5 lakhs and Canara Bank with 5.4 Lakhs.
It states that employees of Bank of Baroda are earning good amount of prots than
other four banks. Whereas, employees of Bank of India and State Bank of India are
earning least amount of prots with 6 lakhs and 5 lakhs.
4.3.4 Business per employee
Table5.3.4
ShowingBusinessperEmployeeofSelectedBanks
SR
No.
Banks Business per employee (Cr.)
2014 2013 2012 2011 2010 Average Rank
1 SBI 10.64 9.44 7.98 7.04 6.36 8.29 5
2 BOB 18.65 16.89 14.66 12.29 9.81 14.46 1
Financial Performance Analysis of Selected Public Sector Banks… • 4339

3 PNB 12.83 11.65 11.32 10.18 8.08 10.81 4
4 BOI 19.63 15.82 13.60 12.84 10.11 14.40 2
5 CB 14.42 14.20 13.74 11.96 9.83 12.83 3
AnalysisandInterpretation
Higher the business per employee, higher is the productivity of the human
resources. The above table shows that Bank of Baroda and Bank of India stands
at leading positions in case of business per employee i.e. having a good amount
of business per an individual worker with 14.46 and 14.40 crores. It means that
Human Resources of these both banks is more ecient. Whereas, State Bank of
Indian stands at last with a low business per employee of 8.29 Crore, which is
lower than other four banks. The eciency and productivity of Employees of State
Bank of India is quite low.
4.4 EarningQuality
4.4.1 Operating Prot to Total Assets
Table4.4.1
ShowingOperatingProttoTotalAssetsofSelectedBanks
SR
No.
Banks Operating Prot to Total assets (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 1.34 1.46 2.38 2.17 1.75 1.82 3
2 BOB 1.61 1.88 2.19 2.22 2.03 1.99 2
3 PNB 1.98 2.19 2.59 2.72 2.70 2.44 1
4 BOI 1.46 1.63 1.81 1.78 1.88 1.71 4
5 CB 1.51 1.56 1.72 2.15 1.50 1.69 5
AnalysisandInterpretation
Higher the operating prot, beer are the operations. Punjab National Bank has
properly utilized the Money invested in the assets and thus leads in operating
prot to assets ratio with 2.44%. Followed by Bank of Baroda with 1.99%. Whereas,
Bank of India and Canara Bank could not utilize the rupee in an ecient way as
stands at last with Ratio of 1.71 and 1.69%.
4340 • Jaspreet Kaur, Manpreet Kaur and Dr. Simranjit Singh

4.4.2 Net Prot to Total Asset
Table4.4.2
ShowingNetProttoTotalAssetsofSelectedBanks
SR
No.
Banks Net Prot to Total Assets (Times)
2014 2013 2012 2011 2010 Average Rank
1 SBI 0.64 0.93 0.91 0.72 0.87 0.81 4
2 BOB 0.74 0.86 1.27 1.36 1.22 1.09 1
3 PNB 0.58 0.95 1.03 1.14 1.28 1.00 2
4 BOI 0.53 0.65 0.72 0.79 0.70 0.68 5
5 CB 0.56 0.74 0.90 1.28 1.17 0.93 3
AnalysisandInterpretation
Higher the net prot, beer is the earning potential of the bank. The above table
shows that Bank of Baroda is leading in net prot to assets ratio with 1.09 followed
by Punjab National Bank with 1.00. It means that both the banks are earning good
amount of return on their assets. Whereas, the condition for Bank of India is Poor.
The earning potential of Bank of India is 0.68 like half of that of Bank of Baroda.
4.4.3 Percentage Change in Net Prot
Table4.4.3
ShowingPercentageChangeinNetProtofSelectedBanks
SR
No.
Banks Percentage Change in Net Prot (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI -20.89 16.77 43.6 -8.93 5.11 5.53 3
2 BOB 4.09 -8.47 18.38 39.46 33.36 15.36 1
3 PNB -26.99 -1.41 9.85 15.16 24.26 4.17 4
4 BOI 6.03 3.49 5.18 42.26 -42.11 3.37 5
5 CB -10.85 -11.06 -15.17 34.49 46.90 8.46 2
AnalysisandInterpretation:
A lot of uctuation have been found in the Net prots of all the ve banks for ve
years but the negative uctuation was less for Bank of Baroda i.e. why Bank of
Baroda leads in Average change in Net prots with the highest ratio of 15.36% and
currently is in prots. Whereas, Punjab National Bank and Bank of India has got
bigger uctuation and stands at last with the ratio of 4.17 and 3.37%. Canara Bank
Financial Performance Analysis of Selected Public Sector Banks… • 4341

is in continuous losses from 3 years though it ranks second. Beside the uctuations,
three banks, State Bank of India, Punjab National Bank, and Canara Bank is in
losses currently.
4.5 Liquidity
4.5.1 Liquid Assets to Total Assets
Table4.5.1
ShowingLiquidAssetstoTotalAssetsofSelectedBanks
SR
No.
Banks Liquid Assets to Total Assets (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 6.97 6.80 6.97 9.43 8.40 7.71 4
2 BOB 16.99 13.14 14.38 14.04 12.86 14.28 1
3 PNB 8.15 5.66 6.4 7.78 7.98 5.19 5
4 BOI 10.68 12.13 9.15 10.67 11.36 10.80 2
5 CB 8.9 8.3 5.45 9.07 5.4 8.22 3
AnalysisandInterpretation
Higher the Liquidity, Beer is the solvency and working capital of the banks, which
is required for day to day operations. Bank of Baroda stands at rst position with
Liquid assets of 14.28% followed by Bank of India with 10.80%. Whereas Punjab
National Bank and State Bank of India has low liquid assets of 5.19 and 7.71%.
It means that Bank of Baroda and Bank of India is more solvent and has great
potential to full demand than State bank of India and Punjab National Bank.
4.5.2 Liquid Assets to Total Deposits
Table4.5.2
ShowingLiquidAssetstoTotalDepositsofSelectedBanks
SR
No.
Banks Liquid Assets to Total Deposits (times)
2014 2013 2012 2011 2010 Average Rank
1 SBI 0.09 0.09 0.09 0.12 0.11 0.10 3
2 BOB 0.19 0.15 0.17 0.165 0.15 0.165 1
3 PNB 0.10 0.07 0.07 0.09 0.09 0.084 5
4 BOI 0.13 0.14 0.11 0.13 0.14 0.13 2
5 CB 0.10 0.09 0.086 0.10 0.084 0.092 4
4342 • Jaspreet Kaur, Manpreet Kaur and Dr. Simranjit Singh

AnalysisandInterpretation
Higher the Liquid Assets to Total Deposits, Higher is the amount of cash available
for the Depositors of the banks. The above table state that Bank of Baroda and Bank
of India is Keeping 17% or 0.17 times and 13% or 0.13 times of the money for their
depositors to full their demand, Whereas Canara Bank and Punjab National Bank
has kept only 9.2% and 8.4% cash. It states that Bank of Baroda and Bank of India has
greater capacity to full the demand and advance the money to the people.
4.5.3 Liquid Assets to Demand Deposits
Table4.5.3
ShowingLiquidAssetstoDemandDepositsofSelectedBanks
SR
No.
Banks Liquid Assets to Demand Deposits (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 118.59 106.78 105.25 100.74 84.00 103.47 5
2 BOB 225.43 201.69 223 217 189 211.22 2
3 PNB 144.76 92.4 104.51 110.90 101.56 110.83 4
4 BOI 283.91 270.82 196.4 222.67 198 234.36 1
5 CB 253 236.24 192.7 125.83 108.06 183.17 3
AnalysisandInterpretation
Higher the liquid assets to demand deposits, beer ability to full the short term
or emergency demand of the customer or the depositors. Bank of India stands at
rst position with 234.36% followed by Bank of Baroda with 211.22% which shows
that both the banks have greater ability to full the demand of the depositors.
On the other hand Punjab national Bank and State Bank of India has very low
liquidity ratio of 110.83 and 103.47, and has taken the back seat in Liquid assets to
Demand Deposits.
4.5.4 Government Securities to Total Assets
Table4.5.4
ShowingGovernmentSecuritiestoTotalAssetsofSelectedBanks
SR
No.
Banks Government Securities to Total Assets (%)
2014 2013 2012 2011 2010 Average Rank
1 SBI 12.86 12.76 19.86 19.40 21.95 15.37 4
2 BOB 15.01 19.08 16.03 15.2 18.51 15.17 5
Financial Performance Analysis of Selected Public Sector Banks… • 4343

3 PNB 20.22 22.35 21.79 20.89 22.07 21.46 2
4 BOI 16.80 15.49 19.09 19.7 21.61 18.94 3
5 CB 21.88 24.57 23.56 21.05 24.05 23.02 1
AnalysisandInterpretation
Higher is the government securities, lesser is the risk, more are the safe assets.
Canara Bank and Punjab National Bank has Government securities of 23.02% and
21.46% in proportion of total assets. It states that Assets of these two banks are on
safer side and less chances of geing insolvent. Whereas, State Bank of India and
Bank of Baroda has lesser Government securities with 15.37 and 15.17% of assets.
It states that these banks Prefers to take more risk.
4.5.5 Approved Securities to Total Assets
Table4.5.5
ShowingApprovedSecuritiestoTotalAssetsofSelectedBanks
SR
No.
Banks Approved Securities to total assets (%)
2014 2011 2012 2011 2010 Average Rank
1 SBI 0.16 0.13 0.11 0.16 0.20 0.152 2
2 BOB 0.16 0.16 0.08 0.17 0.30 0.174 1
3 PNB 0.05 0.04 0.04 0.09 0.16 0.076 3
4 BOI 0.025 0.021 0.039 0.079 0.16 0.064 4
5 CB 0.033 0.035 0.024 0.09 0.13 0.062 5
AnalysisandInterpretation
Higher is the Approved securities, lesser is the risk, more are the safe assets. Bank
of Baroda and State Bank of India has approved securities of 0.174% and 0.152%
in proportion of total assets. It states that Assets of these two banks are in safer
hands, Canara Bank and Bank of India has lesser Approved securities with 0.062
and 0.064% of assets. It states that these banks Prefers to take more risk.
5. FINDINGS
According to research conducted by CAMEL Model for Leading Five Public Sector
Banks It is found out that:
4344 • Jaspreet Kaur, Manpreet Kaur and Dr. Simranjit Singh

Bank of Baroda has performed beer in Capital Adequacy followed by Punjab
National Bank. It states that both these Banks has good risk management system
and has greater capacity to meet’s its additional capital needs. The Findings of our
study are similar to Lakhtaria (2013)
Bank of Baroda has good quality assets and performs beer than other four
Banks followed by Bank of India. It shows that these two banks have managed
their Assets and NPA’s in a beer way and has invested their assets at right place.
The Findings of our study are similar to Ravinder and Prasad (2012), Aspal and
Malhotra (2013), Lakhtaria (2013).
Bank of Baroda has beer management eciency and ranks at rst position
followed by Punjab National Bank. So, both these banks has greater productivity
and good working management and takes the corrective measures if any conict
occurs. The Findings of our study are similar to Lakhtaria (2013).
Bank of Baroda has beer earning capacity and secures rst position in earning
quality followed by Punjab National Bank. It shows that both these banks have
capacity to earn regular cash inows and can earn beer prots in future so as to
sustain in the market. The Findings of our study are similar to Lakhtaria (2013).
Bank of Baroda has secured rst position in Liquidity followed by Bank of
India. It shows that both these banks have invested their cash in High return
securities and has good amount of working capital. The Findings of our study
are similar to Ravinder and Prasad (2012), Aspal and Malhotra (2013), Lakhtaria
(2013), Gupta (2014).
6. CONCLUSION
The results of study shows that Bank of Baroda is leading in all the aspects of
CAMEL followed by Punjab National Bank in Capital Adequacy, Management
eciency and Earning capacity and Bank of India in Asset Quality, which is
almost Similar to Lakhtaria (2013), whereas State Bank of India has not performed
well according to the study though it hold highest amount of assets and cash
reserves. Canara Bank has always remained in the middle position. There has
been a signicant change in the performance of these banks throughout the years.
Bank of Baroda has really performed well. Due to radical change in the banking
sector in the recent years Central banks all around the world has increases their
supervision quality and techniques. According to the Study conducted by Aspal
and Malhotra (2013), Punjab National Bank Leads in Earning Quality and Canara
Bank in Capital Adequacy but as the time passes both Bank of Baroda and Punjab
National Bank shares rst position in earning quality as shown in the study of
Lakhtaria (2013) and as the performance of Bank of Baroda increases it surpasses
Financial Performance Analysis of Selected Public Sector Banks… • 4345

Punjab National Bank in earning quality and Canara bank in Capital Adequacy.
If we compare the overall Performance of the Selected Banks, study is similar to
every study. Whether it is Lakhtaria (2013), Aspal and Malhotra (2013) or Gupta
(2014), in which Bank of Baroda has performed beer than all other selected banks.
But due to passage of time there is uctuations in the performance of other four
Banks.
7. SUGGESTIONS
1. The Study recommends that State Bank of India needs to improve its Assets
Quality, Management eciency and Liquidity. Similarly Punjab National Bank
has to improve its Liquidity and Assets Quality and Bank of India should focus
on Capital Adequacy and Earning Quality.
2. Due to Passage of time, the ranking of Canara Bank and Punjab National
bank has decreased, which is a negative sign for the Banks. They both need to
increase their overall productivity and eciency in order to compete with the
tough banks like Bank of Baroda.
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Financial Performance Analysis of Selected Public Sector Banks… • 4347

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4348 • Jaspreet Kaur, Manpreet Kaur and Dr. Simranjit Singh