Analysis and comparison of Key Performance Indicators:

Efficiency and Expense Control Ratios:

No. Efficiency and Expense Control Ratios Yes Bank HSBC BOB
1 Operating Efficiency 2.16% 2.08% 1.36%
2 Cost of Funds 6.54% 3.93% 4.63%
3 Efficiency Ratio 20.20% 20.54% 13.80%
4 Overhead Efficiency Ratio 62.75% 48.40% 35.78%
5 Income Productivity per employee (in 000) 1,654.71 5,593.63 271.20
6 Break Even Volume of incremental cost per employee (in 000) 9,750.54 37,701.49 14,022.82
7 Tax Ratio 37.17% 45.11% 57.17%
8 Tax Ratio (2) 9.56% 8.13% 2.71%
9 Tax Ratio (3) 0.99% 1.33% 0.21%

1. YB and HSBC have similar operating efficiency whereas BOB has a better operating efficiency. This
might be because of higher total asset base and subsequent economies of scale enjoyed by the
public banks

2. The cost of funds for YB is the highest. All the 3 banks have similar levels of borrowings outside
India. The reason for higher cost of funds can be two:

Higher interest given to depositors

Higher interest rate charged by lenders due to comparatively poor credit ratings of the bank

3. YB and HSBC have similar efficiency ratio. Being private banks, the variety of other services
offered will be higher. This is proved from the commission income which is 1/3 and 3/4 of the other
income for HSBC and YB respectively. The same for BOB is less than 1/4. This can be looked as
diversifying but at the same time, such services come with their own risks.

4. Since private banks focus on the different services offered, they enjoy better economies along
with high end technology and human resources resulting in better overhead efficiency as seen

5. The income productivity of HSBC is the highest. This may be because of the back-end support it
might be receiving from its foreign counterparts. The productivity is lowest for the public bank as
expected due to very high number of employees and low PAT

6. Cost per employee is very low for YB and BOB due to high number of employees resulting in lower
break even volume. For HSBC, cost per employee is very high due to low numbers hence higher
break even volume

7. This ratio compares tax payments made in the current year to the PBT. The higher tax ratio may
just be due to higher payments made in the current year and might not have link with the actual
taxes for the year

Liquidity Ratios:

No. Liquidity Ratios Yes Bank HSBC BOB

1 Demand-to-time deposits 17.51% 45.60% 9.29%
2 Demand Deposit Ratio 7.89% 17.40% 5.65%
 3 Non-deposit borrowing ratio 20.30% 10.09% 4.69%
4 Credit-asset ratio 60.60% 37.30% 56.14%
5 Net loans - asset ratio 60.21% 36.95% 55.68%
6 Short-term investments - total assets ratio 20.45% 33.22% 16.72%
7 SLR investment - total investment ratio 71.51% NA 48.40%
8 Cash to demand deposits ratio 92.52% 57.96% 368.60%
9 Cash to total deposits 6.61% 9.18% 17.20%
10 Cash to total assets 7.30% 15.25% 20.81%

1. HSBC has very high demand to time deposit ratio. This indicates that HSBC is mainly used by
corporates. Also being a foreign bank, it might be the preferred bank by MNCs. (Savings deposits
being both time and demand in nature have been exclued for calculations). Also, higher the ratio,
higher is the liquidity requirement

2. Higher demand deposit ratio indicates higher need to maintain liquid assets as such money can be
withdrawn by customers at any time. High demand deposit ratio of HSBC again shows that it has
high percentage of corporate clients

3. Non deposit borrowings is a source of fund wherein money is borrowed from RBI, other banks,
refinancing etc. In short it is debt taken by banks. Higher non-deposit borrowing shows a higher
leverage but at the same time higher risks (both default and reputational). YB has the highest
leverage whereas BOB being a public bank has the lowest leverage

4. Higher credit asset ratio shows that bank has given higher amounts as loans to customers Higher
the ratio, higher will be the risk of default by customers and higher risk of NPAs. At the same time,
the interest income earned from such credits will also be high. HSBC has low credit ratio showing
that it gives lower amounts as loans. This may be because the bank deals majorly with corporates
resulting in low/no credit to individuals

5. For all the three banks, this ratio is not different than the credit asset ratio by more than 0.5%.
This shows that comparatively all three banks have equally healthy credit portfolio

6. The ratio is high for HSBC as it should be due to the higher requirement of liquidity as mentioned
above due to high demand deposits. Hence it validates the requirement for high liquidity and shows
prudence on part of HSBC to maintain high liquidity

7. SLR investments shows the liquid portion of the investments. Since SLR investment for HSBC is not
available in the annual report, it is not possible to comment on the same. YB has higher ratio
indicating higher need for liquidity which can be confirmed by higher demand to time deposit ratio

8. Higher ratio indicates higher liquidity. However, the ratio is the lowest for HSBC bank despite need
for higher liquidity. But we also need to look at the fact that, HSBC has high demand deposits which
increases the numerator for the ratio. If we look at the ratio individually for each bank, it seems
sufficiently high as per their requirements. The ratio is irrationally high for BOB indicating
conservativeness by maintaining higher cash as can also be seen by the next ratio

9. Similar to the ratio above

10. Higher ratio indicates higher liquidity similar to above 2 ratios. But at the same time higher cash
to total assets shows dormant funds which might lead to low profitability. HSBC needs to maintain
higher liquidity hence its ratio might be appropriate but for BOB such a high ratio indicates
inefficiency and lower profitability

Risk Ratios:

No. Risk Ratios Yes Bank HSBC BOB

1 Equity Multiplier 10.61 6.90 16.97
2 Equity Ratio 9.42% 14.49% 5.89%
3 Capital Adequacy ratio 11.23% 18.73% NA
4 Adjusted capital adequacy 10.85% 18.57% NA
5 Provision ratio 0.39% 0.35% 0.46%
6 Net NPA to Assets ratio 0.36% 0.15% 2.74%
7 Net NPAs to equity Ratio 3.79% 1.06% 46.57%
8 Average risk-weighted assets 83.95% 77.37% NA
9 Incremental risk of asset portfolio 101.50% 82.50% NA

1. & 2. The equity multiplier is the highest for BOB resulting in the lowest equity ratio. Lower equity
ratio shows higher riskiness because the equity cover for the assets is lower. Hence the flexibilty for
default of assets is lower

3. & 4. This CAR is calcuated using a different formula as mentioned in the annexure. Basel 2 norms
provide a different formula. The norms provide for a minimum ratio (9%) to be maintained in order
to maintain solvency of the banks. A higher ratio denotes less riskiness

5. It shows the provisions made as compared to the total assets. All three banks seem to have a
similar ratio that too within 0.5%

6. & 7. The Net NPA ratios are very high for BOB. Being a public bank, the risk of NPA is always high
due to poor credit portfolio. The NPA to Equity ratio is very high mainly because of lower equity to
total assets

Profitability Ratios:

No. Profitability Ratios Yes Bank HSBC BOB

1 Earnings per Share ( EPS) 72.95 NA 6.00
2 ROE 18.58% 12.16% 3.44%
3 ROA 1.75% 1.76% 0.20%
4 Profit Margin 16.18% 21.61% 2.83%
5 Asset Utilization 10.82% 8.15% 7.17%
6 Yield on assets 9.20% 7.27% 6.48%
7 Interest cost to assets ratio 5.59% 2.93% 4.20%
8 Cost of funds 6.54% 3.93% 4.63%
9 P/E Ratio 21.23 NA 28.81
10 Net operating margin 6.47% 4.39% 4.82%
11 Yield Spread NA NA NA
12 Net interest margin ( NIM) 6.47% 4.39% 4.82%
13 Income before security gains or losses ( IBSGI) 10.45% 7.82% 6.78%
In general as can be seen in the table, the profitability ratios for YB and HSBC are higher as compared
to BOB. This clearly shows that public banks are less profitable as compared to the private banks.

The asset utilisation is also comparatively higher for private banks as compared to BOB

BOB being a public bank enjoys a lower cost of fund as compared to YB. HSBC has even lower cost of
funds however the reason for the same could not be judged