PROFITABILITY ANALYSIS OF PUNJAB NATIONAL

BANK IN INDIA
GEETABEN AMRUTLAL GORIYA
(M.B.A., M.Phil., Ph.D. in management pursuing in S.K. University Visnagar,
Gujarat.)
Contact detail:
55/shyam vihar banglow-2,Radhanpur cross road,Mehsana-384002
Mbl no-9687888783, E-mail: gita_goriya25@yahoo.co.in
 ABSTRACT
The main objective of this research paper was to analyse the profitability of
Punjab National Bank in India. The analysis of the profitability of bank mainly done
through ratio analysis techniques. The ratio analysis included the ratios like return on
net worth, return on long term funds, operating margin etc. profitability mainly define
the efficiency of any organisation. Also it helps to control the cost factors, so it is
necessary to analyse the profitability of organisation. For analysis purpose researcher
has selected five yours data base. The data collected through secondary sources like
websites of bank.
Key words: Punjab National bank, Profitability, Ratio Analysis.
 INTRODUCTION
Punjab National Bank, India’s first Swedish Bank, commenced its operations on
April 12, 1895 from Lahore, with an authorised capital of Rs 2 lac and working
capital of Rs 20,000. Far-sighted visionaries and patriots like Lala Lajpat Rai, Mr. E C
Jessawala, Babu Kali Prasono Roy, Lala Harkishan Lal and Sardar Dyal Singh
Majithia displayed courage in giving expression to the spirit of nationalism by
establishing the first bank purely managed by Indians with Indian Capital. During the
long history of the Bank, 7 banks have merged with PNB. Despite facing a
challenging business environment in FY’18, the Bank relying on its core strengths,
has been able to steer through the tough times. The Bank’s brand image and trust
reposed by its customers have been reflected in the growing customer base and rising
business graph of the Bank. Domestic Business of the Bank crossed the milestone of
Rs.10 lakh crore and the Bank continued to maintain its forte in low cost CASA
deposits. The Bank has been able to reach out to its customers across the nation with
it more than 6900 branches, of which nearly 62% branches are in Rural and Semi
Urban Areas (RU-SU).
 REVIEWS OF LITERATURE
Reviews of literature is prominent condition for successful investigation on
particular research work. Here some past research studies on profitability analysis
of banks are available.
o Karam pal narwal and Sweta patenjah (2015), they gave their views on

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determinant of profitability and productivity of Indian banking sectors. They

used Data Envelope Analysis methods and regression analysis for their respective
studies. They concluded through comparing public sectors banks and private
sectors banks, it founds that productivity of private sectors banks are more
productive that public sectors banks during period 2009 to 2014. But no
significance differences in term of profitability of this two sectors.
o Md. Imtiaj Rahman ,Debasish Adhikari, and Salahuddin Yushuf, (2014) in
their study, they explained , “ productivity and profitability analysis of
nationalized commercial bank in Bangladesh”.In this study, it has been
tried to find out the performance of NCBs within a very short period (2008 to
2012). There are four nationalized commercialized banks in Bangladesh. For
the convenient of this research study three banks have been taken. The study
relies on secondary sources of data. The tables in the study highlights
movements of banking variables as reflected in the branch expansion, deposit
mobilization, deployment of credit, operational efficiency and relative risk
measures. The results so far achieved through ratio analysis are not very
encouraging. In the light of this finding, it can be realized that the confidence
of the general public, who wants to rely on these NCBs, in the soundness of
the banking system, remains unimpaired and the financial strength of the
banks gets increased.
o K. Sarala Rao, Tata Institutes of Social Science Mumbai, India, (2013) carried
her research study on productivity, cost and profitability performance of
scheduled commercial banks in India comparative evaluation, The study
aims to examine the productivity, cost and profitability performance of
Traditional banks Vis a Vis Modern banks for the period from 2005-2011. A
total number of 12 variables/ratios have been selected with a minimum of
three and maximum of five in each category to examine the extent of Gap
between the modern and traditional banks. The study reveals that the gap
between the modern and traditional banks significantly reduced during the
study period.
 RESERCH GAP
From the above literature reviews studied indicate that there were many
studies have been taken place related to profitability of Indian banks
simultaneously. But as per researcher view, no single bank profitability
analysed through ratio techniques in given periods. So researcher has selected
the profitability analysis of Punjab national bank as study.
 OBJECTIVES OF RESERCH STUDY
 To analyse the profitability of Punjab national bank in India.
 To offer necessary finding and suggestion.
 HYPOTHESIS STATEMENTS
Ho: There is no significance difference in profitability ratio of Punjab National
Bank during 2013-2017.

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H1: There is significance difference in profitability ratio of Punjab National

Bank during 2013-2017.
 SCOPE OF THE RESEARCH STUDY
A study only deals with the profitability analysis of Punjab national bank in
India. Also profitability analysis indicates the financial soundness of bank. For
this study depend on ratio tool and techniques.
 STUDY PERIOD
Research study period is 2013 to 2017. That is five years.
 RESERCH METHODOLOGY
Research methodology includes that the necessary data collection for research
study is based on secondary data that is from annual report and website of bank.
For analysis of data, researcher take ratio analysis for checking of profitability
performance.
 LIMITATIONS
Research study is only limited to Punjab national bank in India. Also study
covers only five years data for analysis purpose. Data collection is based on
secondary data only. The analysis of study only depend on ratio technique.
 PROFITABILITY ANALYSIS OF PUNJAB NATIONAL BANK.
Profitability:
Profit is main object for each organization. For maintain profit of an
organization, it is necessary to analyse the profitability of organization on time to
time bases. Without profitability, bank or any organisation cannot survive. Also
profitability analysis gives us idea about corrective steps for any weakness of an
organization. So here profitability analysis of Punjab national bank has been
carried out on bases of ratio tool. For that purpose following ratios used.
 Operating Margin
 Adjusted Cash margin
 Adjusted Return on net worth
 Reported return on net worth
 Return on long term funds

RATIO 2017 2016 2015 2014 2013

Operating margin (%) 12.77 12.09 13.89 16.56 16.73
Adjusted Cash Margin (%) 3.11 -6.59 6.57 7.73 10.98
Adjusted Return on net Worth (%) 3.47 -11.20 8.12 9.69 15.19
Reported return on net worth (%) 3.47 -11.20 8.12 9.69 15.19
Return on long term funds (%) 88.21 74.36 89.45 92.11 101.71
Source from https://www.goodreturns.in/company/punjab-national-bank/ratios.html

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PROFTABILITY RATIOS OF PANJAB NATIONAL BANK

120
100
80
60
40
20
0
Operating margin (%) Adjusted Cash Margin Adjusted Return on net Reported return on net Return on long term
-20
(%) Worth (%) worth (%) funds (%)

2017 2016 2015 2014 2013

 ANALYSIS:

 Operating margin ratio

Operating margin ratio = (net interest income-operating expense)/ total interest
income
The operating margin of Punjab national bank is in decreasing trend from
16.73% to 12.77 % during periods of 2013 to 2017. Which indicates banks profit falls
during selected period. That means cost or bank expense increment during five year
periods. Main causes concluded that operational inefficiency.
 Adjusted Cash margin ratio
Adjusted cash margin ratio= (cash flow from operation)/Net sale
The adjusted cash margin ratio or margin ratio indicates that how well bank can
transform its services into cash. From table it can be observed that adjusted cash
margin ratio of Punjab national bank during five selected years is decreasing from
2013 to 2017 very vastly that is 10.98% to 3.11%. That is approximate 7.87%
decreasing compare to year 2013.
 Adjusted return on net worth ratio
Adjusted return on net worth= (net profit after tax) / equity share holders fund
This ratio indicates how efficiently bank is working. That means the bank is
smooth with their efficiency or not. Investor get idea about their money is safe or not
in banks. Which is negatively define in Punjab national bank during last five years.
That shows that higher risk of return uncertainty in bank for investors. Ratio vary
from 15.19% to 3.47%.
 Reported return on net worth
Reported return on net worth= reported return / net worth
This ratio has same situation as adjusted return on net worth ratio of Punjab
national bank. Which indicates negative impact on profitability of bank during
selected study periods.
 Return on long term funds
Return on long term funds= Return / long term funds
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The return that bank received from long term fund is falling in year 2017 compare to
year 2013, that is from 101.71% to 88.21%. So it reflects negatively impact on
profitability of Punjab national bank. But at same time compare to previous year that
2016, it raised slightly. So improvement in profitability of Punjab national bank.
 FINDING AND CONCLUSION
In summary of this research paper, it can be found that profitability of Punjab national
banks went down from year 2013 to 2017 that is five years data analysis. All the
respective ratios of profitability analysis fall down during study period. Also the
profitability ratio varies from 2013 to 2017, so the basic assumption related to
significant different of profitability ratio during selected period will be accepted. The
main reason behind this includes the bad loan outrage of Punjab national bank during
year 2016, at the same time weakness in management system. The main impact of
down profitability during year 2016 is Rs. 11,000 corer bad loan with respect to Nirav
Modi and Mehul Chokshi group. This issue has major negative impact on bank
profitability. Also its impact on Indian economy as whole.
 REFERENCES
 https://www.goodreturns.in/company/punjab-national-bank/ratios.html
 www.indiantimes.com
 www.investopidia.com
 www.equitymaster.com
 www.rbi.org.in
 Karam Pal NARWAL, Shweta PATHNEJA, Determinants of Productivity and
Profitability of Indian Banking Sector: A Comparative Study Eurasian Journal
of Business and Economics 2015, 8(16), 35-58. DOI:
10.17015/ejbe.2015.016.03
 K. Sarala Rao,, Assistant Professor, Tata Institute of Social Sciences, Mumbai,
India ,productivity, cost and profitability performance of scheduled
commercial banks in india- a comparative evaluation, International Monthly
Refereed Journal of Research In Management & Technology
www.abhinavjournal.com, 140 ISSN – 2320-0073 Volume II, March’13.
 Md. Imtiaj Rahman ,Debasish Adhikari, and Salahuddin Yushuf, (2014),“
productivity and profitability analysis of nationalized commercial bank in
Bangladesh “International Journal of Economics, Finance and Management
Sciences ,Volume 2, Issue 2, April 2014, Pages: 197-205.
 R. Keshvanathan, Banking and Insurance management, Academic Excellence
publication.
 Budgeting and Finance (first book for business) by Peter Engel, (MC Graw
Hill-1996).

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