PROFITABILITY ANALYSIS

OF

Submitted in partial fulfilment of the requirement of B.Com

In
“BUSINESS RESEARCH METHODS AND PROJECT WORK”
Submitted by
B SWETALI SUBUDHI
Roll No.- BC16-002
Exam Roll No.- 011603CM062
B.Com Final Year (2016 - 2019)
Under the guidance of
“Smt. ANNAPURNA SAHOO”

KHALLIKOTE AUTONOMOUS COLLEGE

BERHAMPUR (GANJAM)
PIN – 760001
 CERTIFICATE

This is to certify that B SWETALI SUBUDHI, student of

B.Com Honours in Accountancy of Khallikote Autonomous
College has worked under my supervision and guidance for her
Project Work and prepared a Project Report with the title
“PROFITABILITY ANALYSIS OF ICICI BANK” which she is
submitting, is her genuine and original work to the best of my
knowledge.

Date: Signature:
Place: Berhampur (Smt. Annapurna Sahoo)

2
 DECLARATION

I hereby declare that the Project Work with the title

“PROFITABILITY ANALYSIS OF ICICI BANK” submitted
by me under the guidance of Smt. Annapurna Sahoo for the
partial fulfilment of the degree of B.Com. Honours in
Accountancy under KHALLIKOTE AUTONOMOUS
COLLEGE is my original work and has not been submitted
earlier to any other University /Institution for the fulfilment of
the requirement of any course of study.

I also declare that no chapter of this manuscript in whole or in

part has been incorporated in this report from any earlier work
done by others or by me. However, extracts of any literature
which has been used for this report has been duly acknowledged
providing details of such literature in the references.

Signature:
Name: B SWETALI SUBUDHI
Place: BERHAMPUR
Date:

3
 ACKNOWLEDGEMENT
Project work is never the work of an individual. It is more a
combination of ideas, suggestions, and contribution and work
involving many jobs. One of the most important parts of writing
a report is the opportunity to thank all those who have
contributed to it. The list of expression of thanks, no matter how
extensive, is always incomplete and inadequate. This
acknowledgement is no exception.
I want to express my sincere gratitude towards who provided me
with her expert guidance and invaluable suggestion.
I would like to thank my classmates and all those who directly
or indirectly helped me in one or the other way in the successful
completion of the project.

B SWETALI SUBUDHI

4
CONTENTS:- page

Chapter 1- Commercial banks in India 7

1.1 Meaning

1.2 Role

1.3 Primary Functions

1.4 Classification

1.5 Top Commercial Banks

Chapter 2 - Profile of ICICI Bank 15

2.1 Introduction

2.2 Vision and Mission

2.3 History

2.4 Key Members

2.5 Acquisitions

2.6 Recent Awards and Achievements

Chapter 3 - Products and Services of ICICI Bank 22

3.1 Services Offered

3.2 Financial Services

5
Chapter 4 - Profitability Analysis – An Overview 29

4.1 Introduction

4.2 Concept of Profitability

4.3 Analysis of Profitability

Chapter 5 - Data Analysis and Interpretation 38

5.1 From View Point of Management

5.2 From View Point of Shareholders

Chapter 6 – Conclusion 43

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 CHAPTER-1
COMMERCIAL BANKS IN INDIA
1.1 MEANING OF COMMERCIAL BANK:

A commercial bank is a type of bank that provides services such as

accepting deposits, making business loans, and offering basic
investment products that is operated as a business for profit.

It can also refer to a bank, or a division of a large bank, which deals with
corporations or large/middle-sized business to differentiate it from
a retail bank and an investment bank. A commercial bank is where most
people do their banking, as opposed to an investment bank.

1.2 ROLE:
The general role of commercial banks is to provide financial services to
general public and business, ensuring economic and social stability and
sustainable growth of the economy.

In this respect, credit creation is the most significant function of

commercial banks. While sanctioning a loan to a customer, they do not
provide cash to the borrower. Instead, they open a deposit account
from which the borrower can withdraw. In other words, while
sanctioning a loan, they automatically create deposits.

1.3 PRIMARY FUNCTIONS:

Commercial banks accept various types of deposits from public
especially from its clients, including saving account deposits, recurring
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account deposits, and fixed deposits. These deposits are returned
whenever the customer demands it or after a certain time period.

Commercial banks provide loans and advances of various forms,

including an overdraft facility, cash credit, bill discounting, money at call
etc. They also give demand and term loans to all types of clients against
proper security.

1.4 CLASSIFICATION:

Commercial banks in India are broadly classified into three categories:

Public Sector Banks: The term “public sector banks” refers to a

situation where the majority equity stake in the banks is held by the
government. The Indian Government keeps default holdings of
minimum 51% shareholding, but management control is only with the
Central Government, thereby classifying them as Public Sector Banks.

Public sector banks include the State Bank of India and its Associates,
Nationalized Banks (including Industrial Development Bank of India Ltd
(IDBI) since December 2004), and Regional Rural Banks.

Private Sector Banks: They are the banks in which individuals and
corporations are the majority shareholders. In India, banks were
nationalized in two phases, in 1969 and 1980. In 1993, the Reserve
Bank of India (RBI), the regulating body for all the country’s banking
organizations, allowed many new commercial banks in India to start
operations. Some of the major commercial banks in India that were

8
given licenses are ICICI Bank, HDFC Bank, Axis Bank, Yes Bank,
and Kotak Mahindra Bank.

Private sector banks are recognized as the banks for the new
generation, providing innovative products, better IT support system and
competitive pricing for their products. As of the end of March 2017,
there are 21 private sector banks in India. Besides these, four local
areas banks are also categorized as private banks.

Foreign Banks: They are the final category of banks that serve as an
important segment of the commercial banking sector. They are
headquartered outside India, and they operate from their wholly-
owned subsidiaries or branches in the country. The foreign banks
include Royal Bank of Scotland, Bank of America, Barclays Banks,
Deutsche Bank, etc.

1.5 TOP 10 COMMERCIAL BANKS:

1. State Bank of India (SBI):

State Bank of India is the largest and one of the oldest banks operating
in India. It is a government-owned company established in 1955 and
has its headquarters in Mumbai. SBI deals in banking and financial-
related services having a presence internationally. Forbes has ranked
this bank at the 216th position in its “Fortune Global 500” list which
contains the names of the largest corporations all over the world in
2017. After merging with its 5 associate banks and Bharatiya Mahila
Bank on April 1, 2017, this bank has accomplished in serving more than

9
42 crore customers through more than 24,000 branches and over
59,000 ATM facilities. The bank also enjoys an international presence
with 195 offices set up in 36 counties.

Market Capitalisation: Rs. 263,230.71 crores

Total Assets: Rs. 2,868,721.08 crores

2. ICICI Bank (Industrial Credit and Investment Corporation of India)

ICICI Bank is India’s largest private sector bank. The bank, which was a
wholly owned subsidiary of ICICI Limited, is a multinational banking and
financial company based in Mumbai, Maharashtra, India with its
registered office in Vadodara, Gujarat.

ICICI Bank was the first Indian bank to list on the NYSE in 2000, along
with its 5 million American Depository Shares, which was
oversubscribed 13 times the offer size. It operates a network of 4,850
branches and 14,404 ATMs in India and is present in 19 countries
worldwide.

3. HDFC Bank

Founded in 1994, HDFC Bank is headquartered in Mumbai,

Maharashtra. HDFC is India’s largest private sector bank in terms of
assets and market capitalization. It employs around 84,325 staff as of
March 2017 and operates a distribution network of 4,727 branches and
12,220 ATMs across 2,666 cities.

10
The bank is also present in Bahrain, Hong Kong, and Dubai. The
company’s financials as of March 2016 are below:

Total Revenues: 74,373 crores (US$12 billion)

Total Assets: 86,384,021 lakhs (US$130 billion)

Profits: 12,817 crores (US$2 billion)

4. Axis Bank

Axis Bank is the third largest private sector bank in India after ICICI and
HDFC. It manages 3,304 branches and 14,200 ATMs across the country
as of March 2017. The bank’s financial data as of March 2016 is as
follows:

Revenue: US$6.5 billion

Net Income: US$1.3 billion

Total Assets: US$82 billion

Total Equity: US$74 million

No. of Employees: 56,086

5. Kotak Mahindra Bank

Kotak Mahindra Bank is considered one of the upcoming commercial

banks in India and is the fourth biggest private-sector bank in the
country according to market capitalization. The bank was founded by
Uday Kotak in 1985. It operates a network of 1,369 branches across 689

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locations and 2,163 ATMs in the country. It employs 46,500 staff
following its Rs 15,000 crore (US$2.3 billion) merger with ING Vyasa
Bank in 2015. The bank’s financial results as of March 2016 numbers
are as follows:

Revenues: INR 27,974 crores (US$4.4 billion)

Net Income: INR 3,431 crores (US$540 million)

Total Assets: US$15.8 billion

6. IndusInd Bank

The bank was founded in 1994 by Hinduja Group. Known for its strong
remittance business, IndusInd Bank’s market capitalization is Rs 50,100
crores (US$7.8 billion). The bank employs around 15,500 staff through a
network of 1,000+ branches and around 2,000 ATMs across the world.
As of March 2016, total revenue was US$1.3 billion and total assets
were US$15.7 billion.

7. Bank of Baroda (BOB)

Established in 1908, Bank of Baroda is the second largest nationalized

bank having its headquarters in Vadodara in Gujarat and corporate
office in Mumbai. The bank provides services relating to banking and
finance. Currently, it has 5,573 branches functioning all over the world
(including 104 overseas branches) and more than 1600 ATM facility
centers across India. BOB caters to more than 78 million customers in

12
around 25 countries all over the world. Its services include debit and
credit card facilities, loans, and wealth management.

Market Capitalisation: Rs. 39,960.52 crores

Total Assets: Rs. 573,265.55 crore

8. Punjab National Bank (PNB)

Punjab National Bank was established on 12th April 1895 in Lahore

under the leadership of Lala Lajpat Rai as a part of the Swadeshi
movement. It became the first bank on the Indian soil to be solely
managed by the Indians by utilizing Indian capital. PNB has its
headquarters in New Delhi. Since the bank came into operations, it has
merged with seven banks. There are over 10,000 ATM centers and 6900
branches of this bank which includes 62% of the branches set up in
semi-urban and rural areas.

Market Capitalisation: Rs. 23,699.52 crores

Total Assets: Rs. 596,475.62 crore

9. YES Bank

Founded in 2004 by Mr. Rana Kapoor and Mr. Ashok Kapoor, YES Bank
is known as a “Full-Service Commercial Bank.” The bank is known for its
excellent Non-Performing Assets (NPA) ratio, which is the lowest in the
industry. YES Bank lists total assets of INR 215,060 crores (US$14
billion) as of March 2017. It also posted total revenues of INR 9,954
crores and a net profit of INR 3,300 crores in the same period.

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10. IDBI Bank

IDBI Bank (Industrial Development Bank of India) is counted among the

largest commercial banks of India. The bank was established in 1964
and is headquartered in Mumbai. IDBI has played a major role in
building the nation during the last 55 years. It functioned as a pinnacle
Development Financial Institution (DFI) from 01st July 1964 to 30th
September 2004 in the industrial sector and from 01st October 2004
onwards, the bank became a full-fledged commercial bank. The bank
has about 3900 ATM centers and 2000 branches including one in Dubai.
The Life Insurance Corporation of India (LIC) has received a final
approval on 29th June 2018 from Insurance Regulatory and
Development Authority of India (IRDAI) to hold up to 51% stake in IDBI.

Market Capitalisation: Rs. 25,087.14 crores

Total Assets: Rs. 252,130.23 crore

14
 CHAPTER 2
PROFILE OF ICICI BANK
2.1 INTRODUCTION

ICICI Bank is India's largest private sector bank with total consolidated
assets of Rs. 11,242.81 billion (US$ 172.5 billion) at March 31, 2018 and
profit after tax of Rs. 67.77 billion (US$ 1.0 billion) for the year ended
March 31, 2018. The Bank currently has a network of 4,867 Branches
and 14,367 ATMs across India, and has a presence in 19 countries,
including India. ICICI Bank offers a wide range of banking products and
financial services to corporate and retail customers through a variety of
delivery channels and through its specialized subsidiaries in the areas of
investment banking, life and non-life insurance, venture capital and
asset management. The Bank currently has subsidiaries in the United
Kingdom, Russia and Canada, branches in United States, Singapore,
Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance
Centre and representative offices in United Arab Emirates, China, South
Africa, Bangladesh, Thailand, Malaysia and Indonesia. The UK subsidiary
has established branches in Belgium and Germany. ICICI Bank's equity
shares are listed in India on Bombay Stock Exchange and the National
Stock Exchange of India Limited and its American Depositary Receipts
(ADRs) are listed on the New York Stock Exchange (NYSE).

 ICICI Bank was the first private sector bank in India to offer PPF
account facility at all bank branches.
 Among the first banks to introduce account portability and also
the only bank to offer portability on two additional channels -
Internet Banking and Phone Banking.

15
  ICICI Bank launches first Electronic Toll Collection project on NH-1.
A first of its kind project initiated by the Ministry of Road,
Transport & Highways, National Highway Authority of India (NHAI)
and ICICI Bank.
 ICICI Bank receives approval from RBI to set up an Infrastructure
Debt Fund. It is the first debt fund to get government's go ahead.
 ICICI Bank launches its official Facebook Page. First bank in India
to offer one-of-its kind "Your Bank Account" App, which allows
access to bank account information on Facebook.

2.2 VISION

To be the leading provider of financial services in India and a major

global bank.

MISSION

It will leverage the people, technology, speed and financial capital to:

 Be the banker of first choice for the customers by delivering high

quality, world-class products and services.
 Expand the frontiers of the business globally.  Play a proactive
role in the full realization of India‟s potential.
 Maintain a healthy financial profile and diversify the earnings
across businesses and geographies.
 Maintain high standards of governance and ethics.
16
  Contribute positively to the various countries and markets in
which we operate.
 Create value for the stakeholders.

2.3 HISTORY

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian

financial institution, and was its wholly-owned subsidiary. ICICI's
shareholding in ICICI Bank was reduced to 46% through a public offering
of shares in India in fiscal 1998, an equity offering in the form of ADRs
listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of
Madura Limited in an all-stock amalgamation in fiscal 2001, and
secondary market sales by ICICI to institutional investors in fiscal 2001
and fiscal 2002. ICICI was formed in 1955 at the initiative of the World
Bank, the Government of India and representatives of Indian industry.
The principal objective was to create a development financial
institution for providing medium-term and long-term project financing
to Indian businesses. In the 1990s, ICICI transformed its business from a
development financial institution offering only project finance to a
diversified financial services group offering a wide variety of products
and services, both directly and through a number of subsidiaries and
affiliates like ICICI Bank. In 1999, ICICI become the first Indian company
and the first bank or financial institution from non-Japan Asia to be
listed on the NYSE.

2.4 KEY MEMBERS

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KEY EXECUTIVES
Chairman (Non-Executive): Mr. Girish Chandra Chaturvedi
Managing Director & CEO: Mr. Sandeep Bakshi

BOARD OF DIRECTORS
Board Members
Mr. Girish Chandra Chaturvedi , Chairman
Mr. Lalit Kumar Chandel, Govt. Nominee Director
Ms. Rama Bijapurkar
Mr. Uday Chitale
Mr. Dileep Choksi
Ms. Neelam Dhawan
Mr. Hari L. Mundra
Mr. Radhakrishnan Nair
Mr. V. K. Sharma
Mr. B. Sriram
Managing Director & CEO
Mr. Sandeep Bakshi
Executive Director
Ms. Vishakha Mulye
Executive Director
Mr. Vijay Chandok
Executive Director

18
Mr. Anup Bagchi

2.5 ACQUISITIONS
 1996: ICICI Ltd. A diversified financial institution with
headquarters in Mumbai.
 1997: ITC Classic Finance. incorporated in 1986, ITC Classic was a
non-bank financial firm that engaged in hire, purchase, and
leasing operations. At the time of being acquired, ITC Classic had
eight offices, 26 outlets, and 700 brokers.
 1998: Anagram (ENAGRAM) Finance. Anagram had built up a
network of some 50 branches in Gujarat, Rajasthan, and
Maharashtra that were primarily engaged in retail financing of
cars and trucks. It also had some 250,000 depositors.
 2001: Bank of Madurai
 2002: The Darjeeling and Shimla branches of Grindlays Bank.
 2005: Investitsionno - Kreditny Bank (IKB), a Russian bank.
 2007: Sangli Bank. Sangli Bank was a private sector unlisted bank,
founded in 1916, and 30% owned by the Bahte family. Its
headquarters were in Sangli in Maharashtra, and it had 198
branches. It had 158 in Maharashtra and 31 in Karnataka, and
others in Gujarat, Andhra Pradesh, Tamil Nadu, Goa, and Delhi. Its
branches were relatively evenly split between metropolitan areas
and rural or semi-urban areas.
 2010: The Bank of Rajasthan (BOR) was acquired by the ICICI Bank
in 2010 for ₹ 30 billion. RBI was critical of BOR's promoters not
reducing their holdings in the company. BOR has since been
merged with ICICI Bank.

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2.6 RECENT AWARDS AND ACHIEVEMENTS

2019

 ICICI Bank was recognised as the ‘Best Foreign Exchange Provider’

in India as part of ‘The World’s Best Foreign Exchange Providers
2019’ list released by Global Finance magazine.

2018

 ICICI Bank won multiple awards at the 17th edition of the Energy
Efficiency Summit. The Bank won the ‘Excellence in Energy
Management’ award for the fourth consecutive year. ICICI Bank’s
corporate office in BKC, Mumbai was declared as the ‘National
Energy Leader’ at the summit. Additionally, the Bank received the
‘Excellent Energy Efficient Unit’ awards for various units.
 ICICI Bank was recognised as the ‘FX House of the Year’ in India at
the inaugural edition of the FX Week Asia Awards 2018.
 ICICI Bank was recognised as the winner in the ‘Smart Data
Centre’ category at the maiden edition of the DCD 'Best in India'
Awards 2018.
 ICICI Foundation for Inclusive Growth (ICICI Foundation) won the
‘Foundation of the Year’ award at the fifth edition of CSR Impact
Awards.
 The bank was declared winner in the categories of ‘Online
Banking Initiative of the Year – India’, ‘Website of the Year – India’
and ‘Credit Card Initiative of the Year – India’ at the Asian Banking
& Finance Retail Banking Awards 2018
 ICICI Bank secured the top spot in The Forrester Banking Wave:
Indian Mobile Apps, Q2 2018 report. The report is published by
Forrester, an American research agency. The bank secured the top
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 spot in this report with a combined score of 78, which was 11
points ahead of its nearest competitor. The report also mentions
ICICI Bank's mobile banking app among the world's best app. The
scores are given on the basis of an evaluation of the services
offered by seven large retail banks in the country.
 ICICI Bank won two awards at the Intelligent Enterprise Awards
2018. The bank won awards in the ‘Artificial Intelligence’ and
‘Blockchain’ categories.
 ICICI Bank was recognised as one of the ‘Prestigious Brands of
India’ in a list published by Herald Global, a portal that features
national and international news as well as brand reviews.
 ICICI Bank was declared winner in the ‘Best Use of Data Analytics’
category at the Retail Banker International Awards 2018.
 ICICI Bank won at the Celent Model Bank Awards 2018 in the
‘Emerging Innovation’ category for initiatives undertaken in the
trade, finance and supply chain segment.
 ICICI Bank won an award in the ‘Commercial Vehicle Financers’
category at the seventh edition of the Mahindra Transport
Excellence Awards.
 ICICI Bank won the ‘Best Retail Bank’ in India award at The Asian
Banker Excellence in Retail Financial Services International Awards
2018. The Bank has won this award for the fifth year in a row. This
year, ICICI Bank has also won an award in ‘The Best Digital Retail
Operational Risk Initiative, Application or Programme’ category.
 ICICI Bank ranked first among private sector banks in the eighth
edition of ‘The Brand Trust Report, India Study 2018’.

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 CHAPTER – 3
PRODUCTS AND SERVICES OF ICICI BANK

3.1 SERVICES OFFERED

ICICI Bank offers wide variety of deposit products to suit the
requirements of customers. It gives convenience of networked
branches/ ATMs and facility of E-channels like Internet and Mobile
Banking by which ICICI Bank brings banking at your doorstep. The
details of services offered by ICICI Bank are as follows;
(a) Saving account
ICICI Bank offers saving account with added features which are as
follows:
The ICICI Bank Ncash debit card is a debit-cum-ATM card; it provides
the convenience of acceptance at merchant establishments and cash
withdrawals at ATMs. Internet Banking is offered free of cost.
Anywhere Banking - This facility entitles the account holder to
withdraw or deposit cash up to a limit of Rs.50,000 across all ICICI Bank
branches. Customer can give various types of standing instructions like
transferring to fixed deposit accounts at regular intervals. An average
quarterly balance of Rs. 5,000 only. Interest is payable half- yearly.

(b) Current account

The advantage of roaming current account from the ICICI bank is that it
travels through distance and time along with the business. So while
customer takes care of his business, roaming current account simplifies

22
business for customer. It offers a current account, which suits the
banking requirement. Following are the different types of accounts and
their minimum balance requirements:
Types of current account with average balance:

Standard 10,000

Classic 25,000

Premium 50,000

Gold 100,000

Platinum 500,000

It offers the following facility:

Payment facility
Collection facility
Phone banking facility
Intemet banking facility
Mobile banking facility

(c) Fixed deposit account

Fixed Deposit account that allows customer to deposit their money for
just as long as they wish. ICICI banks Fixed Deposit allows them just that
- deposits can be opened for periods ranging from 15 days to l0 years. .
The added features of fixed deposit are the following 2 investment
Plans;
Traditional .
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 Interest payable monthly, quarterly or half-yearly as per customers
convenience . Maturity period ranges from 15 days to l0 years.
Reinvestment .
Interest is compounded quarterly and reinvested with principal amount
. Maturity period ranges from 6 months to l0 years Minimum Balance
Customer can avail of ICICI Bank Fixed Deposits for a minimum deposit
of Rs 10,000 and thereafter in multiples of just Rs 1,000.

(d) NRI Account

The NRI easy rupee account helps customer to take care of all his
financial needs quickly and conveniently. In addition to attractive rupee
interest rates, they get free money transfers, easy access and much
more.
The NRI easy rupee account has the following advantages
(l) Free and easy money transfer
(2) Anytime, anywhere easy access and monitoring
(3) Low minimum balance
Easy access for mandate
(5) Wide international easy access

Non-resident ordinary Account

Through this rupee account, the customer can manage their income in
India.
NRO account Advantages:

24
Allow the customer to hold their earnings like rent, dividend, pension,
etc in India.
The interest is repatriable and taxable in India.
Can be opened jointly with a resident Indian.

Foreign curency Non Resident (FCNR) Account

ICICI banks this account enables customer to send their overseas
earnings without converting them to INR.
Benefits:
(i) Customer can maintain funds as term deposits in USD, GBP,
EUR and JPY.
(ii) The principal and interest are fully repatriable.
(iii) The interest is not taxable in India.
(iv) Customer has a choice of tenures from 12 months to 36
months.

Resident Foreign Currency (RFC) account ICICI banks this account helps
returning Indians hold their overseas earning in foreign curency. It has
the following facilities.
(i) Customer can maintain funds as term deposits in USD, EUR and
JPY.
(ii) The principal and interest are fully repatriable.
(iii) Customer has a choice of tenures from I month to 36 months.
3.2 FINANCIAL SERVICES OF ICICI BANK

25
Home loans and Personals are the two financial services offered by ICICI
bank
(a) Home loan
Features of home loan
(i) Attractive interest rates
(ii) Loans starting from Rs 2lakh
(iii) Term of loan up to 20 years
(iv) Presence in more than 1000 locations
(v) Free personal accident insurance with every home loan
Rate and fees for home loan
There are two type of rate
Adjustable Rate Loans:
Home Loans /Land loans
Office premises Loan.
Home Equity Loans-Loans against property
Fixed Rate Loans:
Home Loans /Land loans
Office premises Loan.
Home Equity Loans-Loans against property.

(b) Personal loan:

26
ICICI banks personal loan is available for the salaried and self-
employed. Loans are given without any security and guarantors.
Amount of loan is Rs 20,000 to Rs 15 Lakhs. It has minimum of 12
months and maximum tenure of 60 months. It considers the criteria
such as the age of candidate, profession of candidate, stay in current
residence, net salary earned by the candidate who has applied for the
personal loan for providing loans.

Credit Cards:
A credit card is a card by which a cardholder can purchase goods or
travel or dine without making immediate payment. The credit cards
relive the consumers of the burden of carrying cash. There are different
types of credit cards depending upon the purpose for which they are
used. Corporate credit cards, Business cards, smart card, charge card, in
store card, etc. are the cards in circulation. There are three parties to a
credit card - the credit card holder- the issuer and the member
establishments.
ICICI Bank is the country's largest player in credit card business. ICICI
Bank credit card gives the facility of cash, convenience and range of
other facilities such as life time free card, insurance benefits, discount
facility, utility payment, travel discount and more. Close to 70 percent
of the cards spends in India is from top 10 cities. The rest of India
accounts for mere 30 percent.

Debit cards:
ICICI Banks debit card is a revolutionary form of cash that allows
customers to access their bank account around the clock, around the
27
world. It can be used for shopping at more than 100,000 merchants in
India and 13 million merchants worldwide.

ICICI Bank Travel card:

With ICICI Bank travel card, we can travel hassle free. It offers Pin based
security and has the convenience of usage of credit or debit card.

Demat services:
ICICI Bank Demat service has growing customer base of over 8.5 lacs
account holders. It has following features:
Online access to demat account by customer. He can check his
holdings, transactions, details of bills and status of requests etc.
Digitally signed transaction statement by e-mail.
Country wide network of over 2l4 branches from an ICICI Bank demat
service outlet.

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 CHAPTER – 4
PROFITABILITY ANALYSIS – AN OVERVIEW

4.1 INTRODUCTION
Profit is an excess of revenues over associated expenses for an activity
over a period of time. Terms with similar meanings include ‘earnings’,
‘income’, and ‘margin’. Lord Keynes remarked that ‘Profit is the engine
that drives the business enterprise’. Every business should earn
sufficient profits to survive and grow over a long period of time. It is the
index to the economic progress, improved national income and rising
standard of living. No doubt, profit is the legitimate object, but it should
not be over emphasised. Management should try to maximise its profit
keeping in mind the welfare of the society. Thus, profit is not just the
reward to owners but it is also related with the interest of other
segments of the society. Profit is the yardstick for judging not just the
economic, but the managerial efficiency and social objectives also.

4.2 CONCEPT OF PROFITABILITY

Profitability means ability to make profit from all the business activities
of an organization, company, firm, or an enterprise. It shows how
efficiently the management can make profit by using all the resources
available in the market. According to Harward & Upton, “profitability is
the ‘the ability of a given investment to earn a return from its use.”
However, the term ‘Profitability’ is not synonymous to the term
‘Efficiency’. Profitability is an index of efficiency; and is regarded as a
measure of efficiency and management guide to greater efficiency.
29
Though, profitability is an important yardstick for measuring the
efficiency, the extent of profitability cannot be taken as a final proof of
efficiency. Sometimes satisfactory profits can mark inefficiency and
conversely, a proper degree of efficiency can be accompanied by an
absence of profit. The net profit figure simply reveals a satisfactory
balance between the values receive and value given. The change in
operational efficiency is merely one of the factors on which profitability
of an enterprise largely depends. Moreover, there are many other
factors besides efficiency, which affect the profitability.
PROFIT & PROFITABILITY
Sometimes, the terms ‘Profit’ and ‘Profitability’ are used
interchangeably. But in real sense, there is a difference between the
two. Profit is an absolute term, whereas, the profitability is a relative
concept. However, they are closely related and mutually
interdependent, having distinct roles in business.
Profit refers to the total income earned by the enterprise during the
specified period of time, while profitability refers to the operating
efficiency of the enterprise. It is the ability of the enterprise to make
profit on sales. It is the ability of enterprise to get sufficient return on
the capital and employees used in the business operation.
As Weston and Brigham rightly notes “to the financial management
profit is the test of efficiency and a measure of control, to the owners a
measure of the worth of their investment, to the creditors the margin
of safety, to the government a measure of taxable capacity and a basis
of legislative action and to the country profit is an index of economic
progress, national income generated and the rise in the standard of
living”, while profitability is an outcome of profit. In other words, no

30
profit drives towards profitability. Firms having same amount of profit
may vary in terms of profitability. That is why R. S. Kulshrestha has
rightly stated, “Profit in two separate business concern may be
identical, yet, many a times, it usually happens that their profitability
varies when measured in terms of size of investment”.

4.3 ANALYSIS OF PROFITABILITY

Apart from the short term and long term creditors, owners and
management or a company itself also interests in the soundness of a
firm which can be measured by profitability ratios. Profitability ratios
are of two types those showing profitability in relation to revenue and
those showing profitability in relation to investment. Together, these
ratios indicate firm’s overall effectiveness of operation.
With a view to appraise profitability, the analysis has been made from
the point of view of management and shareholders. The management
of the firm is naturally eager to measure its operating efficiency.
Similarly, the owners invest their funds in the expectation of reasonable
returns. The operating efficiency of a firm and its ability to ensure
adequate returns to its shareholders depends ultimately on the profits
earned by it. The analysis throws the light on the following questions:
1. Is the profit earned by the firm adequate?
2. What rate of return does it represent?
3. What is the rate of profit for various segments of the firm?
4. What is the rate of return to equity holders?

31
To evaluate the profitability and answer above questions, two fold
analyses is undertaken as shown under:

A Profitability Analysis from the View Point of Management

1. Gross Profit to Net Revenue Ratio

2. Net Operating Profit to Net Revenue Ratio

3. Return on Capital Employed Ratio

B Profitability Analysis from the View Point of Shareholders

4. Net Profit to Net Revenue Ratio

5. Return on Owners’ Equity Ratio

A Profitability Analysis from the View Point of Management

In order to pin-point the causes which are responsible for low / high
profitability, a financial manger should continuously evaluate the
efficiency of a firm in terms of profit. The study of increase or decrease
in retained earnings, various reserve and surplus will enable the
financial manger to see whether the profitability has improved or not.
An increase in the balance of these items is an indication of
improvement in profitability, where as a decrease indicates a decline in
profitability. Following ratios are calculated to analyse the profitability:

1. Gross Profit Ratio

Gross profit ratio is important for management because it highlights the

efficiency of operation and also indicates the average spread between
the operating cost and revenue. Any difference position in this ratio is

32
the result of a change in the operating cost or revenue or both. The
main objective of computing this ratio is to determine the efficiency
with which operations are carried on.

The Gross Profit Ratio expresses the relationship between gross profit
and net revenue. Gross profit is taken as the excess of total revenue
over operating expenses. It is figured as shown below:
Gross Profit
Gross Profit Ratio= × 100
Net Revenue

Gross Profit = Total Revenue – Operating Expenses

A high ratio of gross profit to revenue is a sign of good management as

it implies that (i) the operating cost is relatively low; (ii) increase
revenue income, operating cost remains constant; (iii) operating cost
decline, revenue income remains the same.

On the contrary, a low gross profit to revenue is definitely a danger

signal. It implies that (i) the profit is relatively low; (ii) the operating
cost is relatively high (due to purchase of inputs on unfavourable terms,
inefficient utilisation of current as well as fixed assets and so on); (iii)
low revenue income (due to sever competition, inferior quality of
services, lack of demand and so on).

2. Net Operating Profit Ratio

The Net Operating Profit Ratio expresses the relationship between net
operating profit and net revenue. Net Operating profit is taken as the
excess of gross profit over non operating expenses and depreciation. In
other words we can say profit before interest and taxes (EBIT). This
ratio helps to find out the profit arising out of the main business. In
other words this ratio helps to determine the efficiency with which

33
affairs of business are being managed. A high ratio indicates the
improvement in the operational efficiency of the business and vice
versa. It is figured as shown below:
Net Operating Profit
Net Operating Profit Ratio= ×100
Net Revenue

Net Operating Profit =Gross Profit - (Non Operating Expenses +

Depreciation)

3. Return on Net Capital Employed Ratio

This is the most important ratio for testing profitability of a business. It

measures satisfactorily the overall performance of a business in terms
of profitability. This Ratio expresses the relationship between profit
earned and capital employed to earn it. The term ‘capital employed’
refers to long-term funds supplied by the creditors and owners of the
firm. The term ‘return’ signifies operating profit before interest and
taxes (EBIT).

This ratio is more appropriate for evaluating the efficiency of internal

management. It indicates how well the management has utilised the
funds supplied by the owners and creditors. In other words, this ratio
intends to measure the earning power of the net assets of the business.
It is figured as shown below:
Earnings Before Interest ∧Tax
Returnon Net Capital Employed= × 100
Net Capital Employed

Net Capital Employed=Share Capital + Reserves + Long Term Loan –

Losses.

34
 A high ratio is a test of better performance and a low ratio is an
indication of poor performance. Higher the ratio, more efficient the
management is considered to have been using the funds available.

B Profitability from the View Point of Shareholders

Being the real owners of the business, the shareholders should

continuously evaluate the efficiency of a firm in terms of profit because
they have permanent stake in business. So, they are directly affected by
the prosperity of higher profit and adversity of losses suffered by the
business.

An increase in the net profit after tax is an indication of improvement in

profitability and in turn improved financial welfare of the owners and
larger the share of dividend to them and vice versa. Following ratios are
calculated to analyse the profitability from the shareholders point of
view:

• Net Profit Ratio

• Return on Owner’ Equity Ratio

4. Net Profit Ratio

The net profit ratio indicates the ability of management to operate the
business with sufficient success not only to recover from revenues of
the period, all the expenses including depreciation and interest, but
also to leave a margin of reasonable compensation to the owners for
providing their capital at risk. In other words, this ratio is the overall
measure of the firm’s ability to turn each rupee of revenue into profit.

The Net Profit Ratio expresses the relationship between net profit and
net revenue. Net profit is taken as the excess of net operating profit

35
over interest charges. It is the reserve of the operating Expenses ratio.
It is figured as shown below:
Net Profit
Net Profit Ratio= ×100
Net Revenue

Net Profit (EBT) = Net Operating Profit – Interest Charges A high ratio of
net profit to revenue is a sign of good management as it ensures
adequate return to the owners as well as enables a firm to withstand
adverse economic conditions.

On the contrary, a low net profit to revenue is definitely a danger

signal. It has the opposite implications. If this ratio is not adequate, the
firm will fail to achieve satisfactory return on shareholder’s funds.

In order to have a better idea of profitability, the gross profit ratio and
net profit ratio may be simultaneously considered. If the Gross profit is
increasing over last five years, but the net profit is declining, it indicates
that administrative expenses are slowly rising.

5. Return on Owner’s Equity (Proprietary Ratio)

The ordinary shareholders, who bear all risks, participate in

management and are entitled to all the profits remaining after outside
claims, are the real owners of the business. Therefore, the profitability
of a firm, from the owner’s point of view should be assessed in terms of
the return to the ordinary shareholders.

Return on Owner’s Equity Ratio is a single most important ratio for

judging the profitability of an organization in terms of return to the
owners. This ratio reflects that how much the firm has earned on the
funds invested by the shareholders (Either directly or through retained

36
earnings). This ratio is expressed in the percentage form of net profit
earned to the owner’s equity. It is figured as shown below:
' Net Profit
Returnon Owne r s Equity= '
×100
Owne r s Equity

In order to judge the efficiency with which the proprietor’s Funds are
employed in business, this ratio is ascertained.

CHAPTER – 5
37
 DATA ANALYSIS AND INTERPRETATION

5.1 PROFITABILITY ANALYSIS FROM THE VIEW POINT OF

MANAGEMENT

1. GROSS PROFIT RATIO

Gross Profit
Gross Profit Ratio= × 100
Net Revenue

Table 5.1

Gross Profit Ratio (percentages) in ICICI

From 2013-14 to 2017-18 (Rs. in crores)

Serial No. Year Gross Profit Net Revenue Ratio

1 2013-14 33870 44178 76.66
2 2014-15 37597 49091 76.58
3 2015-16 40056 52739 75.95
4 2016-17 39402 54156 72.75
5 2017-18 39263 54965 71.43

Interpretation:

The Gross Profit Ratio of ICICI has been presented in the Table No. 5.1.
In ICICI, the Gross Profit Ratio shows declining trend. It ranged between
76.66 per cent in the year 2013-14 and 71.43 per cent in the year 2017-
18 with an average ratio of 74.67 per cent.

38
2. NET OPERATING PROFIT RATIO
Net Operating Profit
Net Operating Profit Ratio= ×100
Net Revenue

Table 5.2

Net Operating Profit Ratio (Percentages) In ICICI

From 2013-14 to 2017-18 (Rs. in crores)

Serial No. Year Net Net Revenue Ratio

Operating
Profit
1 2013-14 6742 44178 15.26
2 2014-15 8202 49091 16.70
3 2015-16 9238 52739 17.51
4 2016-17 7739 54156 14.29
5 2017-18 8102 54965 14.74

Interpretation:

The Net Operating Profit Ratio of ICICI has been presented in the Table
No. 5.2. In ICICI, the Net Operating Profit Ratio shows fluctuating trend.
It ranged between 15.26 per cent in the year 2013-14 and 14.74 per
cent in the year 2017-18 with an average ratio of 15.7 per cent.

3. RETURN ON CAPITAL EMPLOYED RATIO

Earnings Before Interest ∧Tax
Returnon Net Capital Employed= × 100
Net Capital Employed

39
 Table 5.3

Return on Capital Employed Ratio (Percentages) In ICICI

From 2013-14 to 2017-18 (Rs. in crores)

Serial No. Year EBIT Net Capital Ratio

Employed
1 2013-14 44297 559886 7.91
2 2014-15 49771 614409 8.10
3 2015-16 55378 685968 8.07
4 2016-17 58905 740588 7.95
5 2017-18 56681 851995 6.65

Interpretation:

The Return on Capital Employed Ratio of ICICI has been presented in

the Table No. 5.3. In ICICI, the Return on Capital Employed Ratio shows
fluctuating trend. It ranged between 7.91 per cent in the year 2013-14
and 6.65 per cent in the year 2017-18 with an average ratio of 7.73 per
cent.

5.2 PROFITABILITY FROM THE VIEW POINT OF SHAREHOLDERS

4. NET PROFIT RATIO

Net Profit
Net Profit Ratio= ×100
Net Revenue

40
 Table 5.4

Net profit Ratio (Percentages) In ICICI

From 2013-14 to 2017-18 (Rs. in crores)

Serial No. Year Net profit Net revenue Ratio

1 2013-14 9810 44178 22.20
2 2014-15 11175 49091 22.76
3 2015-16 9726 52739 18.44
4 2016-17 9801 54156 18.09
5 2017-18 6777 54965 12.32

Interpretation:

The Net Profit Ratio of ICICI has been presented in the Table No. 5.4. In
ICICI, the Net Profit Ratio has merely increased from 22.20 in 2013-14
to 22.76 in 2014-15 and then shows a declining trend. It ranged
between 22.20 per cent in the year 2013-14 and 12.32 per cent in the
year 2017-18 with an average ratio of 18.76 per cent.

5. RETURN ON OWNER’S EQUITY

' Net Profit
Returnon Owne r s Equity= '
×100
Owne r s Equity

Table 5.5

Return on Owner’s Equity (Percentages) In ICICI

41
 From 2013-14 to 2017-18 (Rs. in crores)

Serial No. Year Net profit Owner’s Ratio

equity
1 2013-14 9810 73213 13.39
2 2014-15 11175 80429 13.89
3 2015-16 9726 89735 10.83
4 2016-17 9801 99951 9.80
5 2017-18 6777 105158 6.44

Interpretation:

The Return on Owner’s Equity Ratio of ICICI has been presented in the
Table No. 5.5. In ICICI, the Return on Owners’ Equity Ratio shows
increasing trend from 2013-14 to 2017-18 and then shows a declining
trend. It ranged between 13.39 per cent in the year 2013-14 and 6.44
per cent in the year 2017-18 with an average ratio of 10.87 per cent.

CHAPTER-6
CONCLUSION
A commercial bank is a type of bank that provides services such as
accepting deposits, making business loans, and offering basic
investment products that is operated as a business for profit.

42
It can also refer to a bank, or a division of a large bank, which deals with
corporations or large/middle-sized business to differentiate it from
a retail bank and an investment bank. A commercial bank is where most
people do their banking, as opposed to an investment bank.

Commercial banks in India are broadly classified into three categories:

Public Sector Banks: The term “public sector banks” refers to a

situation where the majority equity stake in the banks is held by the
government. The Indian Government keeps default holdings of
minimum 51% shareholding, but management control is only with the
Central Government, thereby classifying them as Public Sector Banks.

Public sector banks include the State Bank of India and its Associates,
Nationalized Banks (including Industrial Development Bank of India Ltd
(IDBI) since December 2004), and Regional Rural Banks.

Private Sector Banks: They are the banks in which individuals and
corporations are the majority shareholders. In India, banks were
nationalized in two phases, in 1969 and 1980. In 1993, the Reserve
Bank of India (RBI), the regulating body for all the country’s banking
organizations, allowed many new commercial banks in India to start
operations. Some of the major commercial banks in India that were
given licenses are ICICI Bank, HDFC Bank, Axis Bank, Yes Bank,
and Kotak Mahindra Bank.

Private sector banks are recognized as the banks for the new
generation, providing innovative products, better IT support system and
competitive pricing for their products. As of the end of March 2017,
43
there are 21 private sector banks in India. Besides these, four local
areas banks are also categorized as private banks.

Foreign Banks: They are the final category of banks that serve as an
important segment of the commercial banking sector. They are
headquartered outside India, and they operate from their wholly-
owned subsidiaries or branches in the country. The foreign banks
include Royal Bank of Scotland, Bank of America, Barclays Banks,
Deutsche Bank, etc.

ICICI Bank is India's second-largest bank with total assets of ` 4,062.34

billion (US$ 91 billion) at March 31, 2011 and profit after tax ` 51.51
billion (US$ 1,155 million) for the year ended March 31, 2011. The Bank
has a network of 2,752 branches and 9,225 ATMs in India, and has a
presence in 19 countries, including India. ICICI Bank offers a wide range
of banking products and financial services to corporate and retail
customers through a variety of delivery channels and through its
specialized subsidiaries in the areas of investment banking, life and
non-life insurance, venture capital and asset management. The Bank
currently has subsidiaries in the United Kingdom, Russia and Canada,
branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka,
Qatar and Dubai International Finance Centre and representative
offices in United Arab Emirates, China, South Africa, Bangladesh,
Thailand, Malaysia and Indonesia. The UK subsidiary has established
branches in Belgium and Germany. ICICI Bank's equity shares are listed
in India on Bombay Stock Exchange and the National Stock Exchange of

44
India Limited and its American Depositary Receipts (ADRs) are listed on
the New York Stock Exchange (NYSE).

 ICICI Bank was the first private sector bank in India to offer PPF
account facility at all bank branches.
 Among the first banks to introduce account portability and also
the only bank to offer portability on two additional channels -
Internet Banking and Phone Banking.
 ICICI Bank launches first Electronic Toll Collection project on NH-1.
A first of its kind project initiated by the Ministry of Road,
Transport & Highways, National Highway Authority of India (NHAI)
and ICICI Bank.
 ICICI Bank receives approval from RBI to set up an Infrastructure
Debt Fund. It is the first debt fund to get government's go ahead.
 ICICI Bank launches its official Facebook Page. First bank in India
to offer one-of-its kind "Your Bank Account" App, which allows
access to bank account information on Facebook.

ICICI Bank offers wide variety of deposit products to suit the

requirements of customers. It gives convenience of networked
branches/ ATMs and facility of E-channels like Internet and Mobile
Banking by which ICICI Bank brings banking at your doorstep. The
details of services offered by ICICI Bank are as follows;
(a) Saving account
ICICI Bank offers saving account with added features which are as
follows:

45
The ICICI Bank Ncash debit card is a debit-cum-ATM card; it provides
the convenience of acceptance at merchant establishments and cash
withdrawals at ATMs. Internet Banking is offered free of cost.
Anywhere Banking - This facility entitles the account holder to
withdraw or deposit cash up to a limit of Rs.50,000 across all ICICI Bank
branches. Customer can give various types of standing instructions like
transferring to fixed deposit accounts at regular intervals. An average
quarterly balance of Rs. 5,000 only. Interest is payable half- yearly.

(b) Current account

The advantage of roaming current account from the ICICI bank is that it
travels through distance and time along with the business. So while
customer takes care of his business, roaming current account simplifies
business for customer.

Profit is an excess of revenues over associated expenses for an activity

over a period of time. Terms with similar meanings include ‘earnings’,
‘income’, and ‘margin’. Lord Keynes remarked that ‘Profit is the engine
that drives the business enterprise’. Every business should earn
sufficient profits to survive and grow over a long period of time. It is the
index to the economic progress, improved national income and rising
standard of living. No doubt, profit is the legitimate object, but it should
not be over emphasised. Management should try to maximise its profit
keeping in mind the welfare of the society. Thus, profit is not just the
reward to owners but it is also related with the interest of other
segments of the society. Profit is the yardstick for judging not just the
economic, but the managerial efficiency and social objectives also.

46
In order to pin-point the causes which are responsible for low / high
profitability, a financial manger should continuously evaluate the
efficiency of a firm in terms of profit. The study of increase or decrease
in retained earnings, various reserve and surplus will enable the
financial manger to see whether the profitability has improved or not.
An increase in the balance of these items is an indication of
improvement in profitability, where as a decrease indicates a decline in
profitability.

Major findings:

The Gross Profit Ratio of ICICI has been presented in the Table No. 5.1.
In ICICI, the Gross Profit Ratio shows declining trend. It ranged between
76.66 per cent in the year 2013-14 and 71.43 per cent in the year 2017-
18 with an average ratio of 74.67 per cent.

The Net Operating Profit Ratio of ICICI has been presented in the Table
No. 5.2. In ICICI, the Net Operating Profit Ratio shows fluctuating trend.
It ranged between 15.26 per cent in the year 2013-14 and 14.74 per
cent in the year 2017-18 with an average ratio of 15.7 per cent.

The Return on Capital Employed Ratio of ICICI has been presented in

the Table No. 5.3. In ICICI, the Return on Capital Employed Ratio shows
fluctuating trend. It ranged between 7.91 per cent in the year 2013-14
and 6.65 per cent in the year 2017-18 with an average ratio of 7.73 per
cent.
47
The Net Profit Ratio of ICICI has been presented in the Table No. 5.4. In
ICICI, the Net Profit Ratio has merely increased from 22.20 in 2013-14
to 22.76 in 2014-15 and then shows a declining trend. It ranged
between 22.20 per cent in the year 2013-14 and 12.32 per cent in the
year 2017-18 with an average ratio of 18.76 per cent.

The Return on Owner’s Equity Ratio of ICICI has been presented in the
Table No. 5.5. In ICICI, the Return on Owners’ Equity Ratio shows
increasing trend from 2013-14 to 2017-18 and then shows a declining
trend. It ranged between 13.39 per cent in the year 2013-14 and 6.44
per cent in the year 2017-18 with an average ratio of 10.87 per cent.

OBJECTIVES OF THE STUDY

• To study the financial performance of ICICI Bank.
• To study the profitability of ICICI Bank.

SCOPE OF THE STUDY

The study greatly giving attention on appraising any changes that
perceived and revealed in the financial performance of ICICI Bank.
Furthermore, the study attempted to identify areas so as to improve
the financial performance of ICICI Bank.

LIMITATIONS OF THE STUDY

Due to constraints of time and resources, the study is likely to suffer
from certain limitations. Some of these are mentioned here under so
that the findings of the study may be understood in a proper
perspective. The study is based on the secondary data and the

48
limitation of using secondary data may affect the results. The secondary
data is taken from the annual reports of the ICICI Bank. It may be
possible that the data shown in the annual reports may be window
dressed which does not show the actual position of the banks.
Financial analysis is mainly done to compare the growth, profitability
and financial soundness of the respective banks by analysing the
information contained in the financial statements. Financial analysis is
done to identify the financial strengths and weaknesses of the bank by
properly establishing relationship between the items of Balance Sheet
and Profit & Loss Account. It helps in better understanding of bank’s
financial position, growth and performance by analysing the financial
statements with various tools and evaluating the relationship between
various elements of financial statements.

RESEARCH METHODOLOGY
In the present study, an attempt has been made to measure and
evaluate the financial performance of ICICI Bank. The study is based on
secondary data that has been collected from annual reports of the
respective banks, magazines, journals, documents and other published
information. The study covers the period of 5 years i.e. from year 2013-
14 to year 2017-18. Profitability Analysis was applied to analyse and
compare the trends in banking business and financial performance such
as Net profit, gross profit, net operating profit, return on capital
employed and return on owner’s equity.

BIBLIOGRAPHY

Websites:

49
www.mapsofindia.com

https://corporatefinanceinstitute.com

https://en.wikipedia.org

www.icicibank.com

Books:

Accountancy, R. K. Mittal, A. K. Jain

Financial Management – Theory and Practice, Shashi K. Gupta, R. K.

Sharma

50