Part 1: Financial Statement Analysis

Chapter 1

Research Design and Methodology

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Introduction

Research Topic-

"A Study: Comparative Analysis of Financial Statements of Axis Bank & its
Comparative Analysis for financial year 2016/17, along with Customer Satisfaction
for Axis Bank, Indiranagar Branch, Lucknow."

Objective:

i. To analyse the performance of the company on the basis of financial data

& figures available from the company's financial Statements.
ii. Comparative analysis of financial statements of the company &analysing
the performance over the last three financial years.
iii. To figure out growth patterns or fall during the particular period of time.

Literature Review:
Annual Financial Statements published by Axis Bank for the previous financial year,
available on official website of Axis Bank..

Research design:

Descriptive Research: It is used to describe characteristics of a population or

phenomenon being studied. It does not answer questions about how/when/why the
characteristics occurred. Rather it addresses the "what" question. The characteristics
used to describe the situation or population is usually some kind of categorical
scheme also known as descriptive categories. For example, the periodic
table categorizes the elements.

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Research Methodology: Use of various Accounting and Financial ratios to analyze
the performance and the growth patterns during last financial year.

Tools of analysis:

 Accounting Ratios: Accounting and Financial Ratios are the ratios which are
applied on various figures/components of financial statements of the company.
There are formulas for each type of ratios which give results as per the
purpose.
 Pie charts: A pie chart displays data, information, and statistics in an easy-to-
read pie-slice format with varying slice sixes telling you how much of one
data element exists. The bigger the slice, the more that particular data was
gathered.
 Bar graphs: A bar chart or bar graph is a chart or graph that presents grouped
data with rectangular bars with lengths proportional to the values that they
represent. The bars can be plotted vertically or horizontally.

Limitations:

 The ratio analysis is hampered by potential limitations with accounting and the
data in the financial statements themselves. This includes errors as well as
accounting mismanagements, which involves distorting the raw data
 Ratio Analysis can also omit important aspects of a firm’s success, such as key
intangibles.
 It may present an overly simplistic view of the company by distilling a great
deal of information into a single number or series of number.

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Chapter 2

Company Profile

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INDUSTRY PROFILE

Indian Banking Sector: As per the Reserve Bank of India (RBI), India’s banking
sector is sufficiently capitalized and well-regulated. The financial and economic
conditions in the country are far superior to any other country in the world. Credit,
market and liquidity risk studies suggest that Indian banks are generally resilient and
have withstood the global downturn well. Indian banking industry has recently
witnessed the roll out of innovative banking models like payments and small finance
banks. The central bank granted in-principle approval to 11 payments banks and 10
small finance banks in FY 2015-16. RBI’s new measures may go a long way in
helping the restructuring of the domestic banking industry.

The Indian banking system consists of 26 public sector banks, 25 private sector banks,
43 foreign banks, 56 regional rural banks, 1,589 urban cooperative banks and 93,550
rural cooperative banks, in addition to cooperative credit institutions. Public-sector
banks control nearly 80 percent of the market, thereby leaving comparatively much
smaller shares for its private peers. Banks are also encouraging their customers to
manage their finances using mobile phones.

The largest bank, and the oldest still in existence, is the State Bank of India (S.B.I). It
originated as the Bank of Calcutta in June 1806. In 1809, it was renamed as the Bank
of Bengal. This was one of the three banks funded by a presidency government; the
other two were the Bank of Bombay and the Bank of Madras. The three banks were
merged in 1921 to form the Imperial Bank of India, which upon India's independence,
became the State Bank of India in 1955. For many years the presidency banks had
acted as quasi-central banks, as did their successors, until the Reserve Bank of India
was established in 1935, under the Reserve Bank of India Act, 1934. In 1960, the
State Banks of India was given control of eight state-associated banks under the State
Bank of India (Subsidiary Banks) Act, 1959. These are now called its associate banks.
In 1969 the Indian government nationalized 14 major private banks. In 1980, 6 more
private banks were nationalized. These nationalized banks are the majority of lenders
in the Indian economy. They dominate the banking sector because of their large size
and widespread networks.

Currently, the Indian banking sector is broadly classified into scheduled banks and

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non-scheduled banks.All banks included in the Second Schedule to the Reserve Bank
of India Act, 1934 are Scheduled Banks. These banks comprise Scheduled
Commercial Banks and Scheduled Co-operative Banks. Scheduled Co-operative
Banks consist of Scheduled State Co-operative Banks and Scheduled Urban
Cooperative Banks. Scheduled Commercial Banks in India are categorized into five
different groups according to their ownership and/or nature of operation:

 State Bank of India and its Associates

 Nationalized Banks

 Private Sector Banks

 Foreign Banks

 Regional Rural Banks.

Generally banking in India is fairly mature in terms of supply, product range and
reach-even though reach in rural India and to the poor still remains a challenge. The
government has developed initiatives to address this through the State Bank of India
expanding its branch network and through the National Bank for Agriculture and
Rural Development (NABARD) with facilities like microfinance.

By 2013 the Indian Banking Industry employed 1,175,149 employees and had a total
of 109,811 branches in India and 171 branches abroad and manages an aggregate
deposit of ₹67,504.54 billion (US$1.0 trillion or €960 billion) and bank credit of
₹52,604.59 billion (US$820 billion or €750 billion). The net profit of the banks
operating in India was ₹1,027.51 billion (US$16 billion or €15 billion) against a
turnover of ₹9,148.59 billion (US$140 billion or €130 billion) for the financial year
2012–13.

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Company Profile

Axis Bank

 The Bank was promoted in 1993, jointly by Specified Undertaking of Unit

Trust of India (SUUTI) (then known as Unit Trust of India), Life Insurance
Corporation of India (LIC), General Insurance Corporation of India (GIC),
National Insurance Company Ltd., The New India Assurance Company Ltd.,
The Oriental Insurance Company Ltd. and United India Insurance Company
Ltd. The share holding of Unit Trust of India was subsequently transferred to
SUUTI, an entity established in 2003.Axis Bank Ltd. has been promoted by
the largest and the best Financial Institution of the country, UTI.

 The Bank was set up with a capital of Rs. 115 crore, with UTI contributing Rs.
100 crore, LIC - Rs. 7.5 crore and GIC and its four subsidiaries contributing
Rs. 1.5 crore each.

 The registered office of Axis Bank is located at :‘Trishul',3rd Floor,Opposite

Samartheshwar Temple,Near Law Garden, Ellisbridge,Ahmedabad,Gujarat -
380 006

 Capital Structure: The Bank has authorized share capital of Rs. 850 crores
comprising 4,250,000,000 equity shares of Rs.2/- each.As on 31st March
2016, the Bank has issued, subscribed and paid-up equity capital of Rs. 476.67
crores, constituting 2,38,28,31,826 equity shares of Rs.2/- each. The Bank’s
shares are listed on the National Stock Exchange of India Limited and the BSE
Limited. The GDRs issued by the Bank are listed on the London Stock
Exchange (LSE). The Bonds issued by the Bank under the MTN program are
listed on the Singapore Stock Exchange.

 The Bank has a large footprint of 2904 domestic branches (including

extension counters) and 12,743 ATMs spread across the country as on 31st
March 2016. The overseas operations of the Bank are spread over nine
international offices with branches at Singapore, Hong Kong, Dubai (at the

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 DIFC), Colombo and Shanghai; representative offices at Dhaka, Dubai, Abu
Dhabi and an overseas subsidiary at London, UK. The international offices
focus on corporate lending, trade finance, syndication, and investment banking
and liability businesses.

Product Profile

 Accounts: (Savings, Salary, Current, Axis Direct Invest Account, National

Pension System, Pension Disbursement Account, etc)

 Deposits: (Fixed, Recurring, Tax Saver Fixed Deposit, Fixed Deposit Plus,
etc)

 Cards: (Credit Cards, Debit Cards, Commercial Credit & Debit Cards, Digital
Payments)

 Loans: (Personal Loans, Car Loans, Loan against property, Gold Loans, Loan
against Securities, Loans against FD, Education Loan, etc)

 Forex

 Investment

 Insurance

Achievement of the Organization

2012:

Bank of the Year' at the Money Today FPCIL Awards 2012-13

Best Financial Website - India Digital awards

Axis Bank voted for Most Trusted Private Sector Bank in the country in the Most
Trusted Brands survey 2013 by Brand Equity.

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2011:

Opens the 10,000th ATM - Largest ATM network amongst private sector banks in
India

Reached 2 lakh installed EDC machines – the highest for any bank in India

Becomes the first Bank in the world to reach $2 billion loading on prepaid Travel
Currency Cards

2010:

Launches India travel card - India's first and only Indian currency prepaid travel card
for foreign nationals

The Bank inaugurates Axis House, its new Corporate Office at Worli, Mumbai.

Competitors of the Organization

 HDFC BANK

 ICICI BANK

 KOTAK MAHINDRA BANK

 INDUSIND BANK

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Chapter 3

Literature Review

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Financial Statement Analysis:

Financial statement analysis is the process of reviewing and evaluating a

company's financial statements (such as the balance sheet or profit and loss
statement), thereby gaining an understanding of the financial health of the company
and enabling more effective decision making. Financial statements record financial
data; however, this information must be evaluated through financial
statement analysis to become more useful to investors, shareholders, managers and
other interested parties.

Financial statement analysis is an evaluative method of determining the past, current

and projected performance of a company. Several techniques are commonly used as
part of financial statement analysis including horizontal analysis, which compares two
or more years of financial data in both dollar and percentage form; vertical analysis,
where each category of accounts on the balance sheet is shown as a percentage of the
total account; and ratio analysis, which calculates statistical relationships between
data.

Financial statement analysis allows analysts to identify trends by comparing ratios

across multiple time periods and statement types. These statements allow analysts to
measure liquidity, profitability, company-wide efficiency and cash flow. There are
three main types of financial statements: the balance sheet, income statement and cash
flow statement. The balance sheet is a snapshot in time of the company's assets,
liabilities and shareholders' equity. Analysts use the balance sheet to analyze trends in
assets and debts. The income statement begins with sales and ends with net income. It
also provides analysts with gross profit, operating profit and net profit. Each of these
is divided by sales to determine gross profit margin, operating profit margin and net
profit margin. The cash flow statement provides an overview of the company's cash
flows from operating activities, investing activities and financing activities.

Use of Financial/Accounting Ratios: Accounting ratios assist in measuring the

efficiency and profitability of a company based on its financial reports. Also called
financial ratios, accounting ratios provide a way of expressing the relationship
between one accounting data point and another, which is intended to provide a useful

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comparison. Accounting ratios form the basis of fundamental analysis.An accounting
ratio compares two aspects of a financial statement, such as the relationship (or ratio)
of current assets to current liabilities. The ratios can be used to evaluate the financial
condition of a company, including the company's strengths and weaknesses.
Examples of financial ratios include the gross margin ratio, operating margin ratio, the
debt-to-equity ratio and the payout ratio. Each of these ratios requires the most recent
data in order to be relevant.

Every year companies publish an annual report. The annual report contains three
financial statements: the income statement, balance sheet and cash flow statement.
Each statement provides the investor with information about the performance of the
company over the most recent fiscal year. Analysts rely on the financial statements to
provide the data needed to update accounting ratios.

Types of Accounting Ratio:

Combined Ratio:

The combined ratio is a measure of profitability used by an insurance company to

indicate how well it is performing in its daily operations.

The combined ratio is calculated by taking the sum of incurred losses and expenses
and then dividing them by earned premium. The ratio is typically expressed as a
percentage. A ratio below 100% indicates that the company is
making underwriting profit while a ratio above 100% means that it is paying out more
money in claims that it is receiving from premiums. Even if the combined ratio is
above 100%, a company can potentially still make a profit, because the ratio does not
include the income received from investments.

Many insurance companies believe that this is the best way to measure the success of
a company because it does not include investment income and only includes profit
that is earned through efficient management.

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Operating Ratio:

The operating ratio shows the efficiency of a company's management by

comparing operating expense to net sales. The smaller the ratio, the greater the
organization's ability to generate profit if revenues decrease. When using this ratio,
however, investors should be aware that it doesn't take debt repayment or expansion
into account. Analysts have many ways of analyzing performance trends. One of the
most popular, because it concentrates on core business activities, is the operating
ratio. The operating ratio is viewed as a measure of operational efficiency. It is often
used, along with return on assets and return on equity, to measure a company's
efficient use of capital and managerial resources. Analysts also like to track the
operating ratio over a period of time to identify trends in operational efficiency or
inefficiency. An operating ratio that is going up is indicative of an inefficient
operating environment that might need to implement cost controls for margin
improvement. An operating ratio that is decreasing is indicative of an efficient
operating environment in which operating expenses are increasingly a smaller
percentage of sales.

The operating ratio is calculated by dividing operating expenses by sales. Operating

expenses are essentially all expenses except taxes and interest. Occasionally, a
company has non-operating expenses as well, which are also deducted. All of these
line items are listed on the income statement. Companies must clearly state which
expenses are operational and which are designated for other uses.

Efficiency Ratio:

The efficiency ratio is typically used to analyze how well a company uses its assets
and liabilities internally. An efficiency ratio can calculate the turnover of receivables,
the repayment of liabilities, the quantity and usage of equity, and the general use of
inventory and machinery. This ratio can also be used to track and analyze the
performance of commercial and investment banks. Analysts use efficiency ratios, also
known as activity ratios, to measure the performance of a company's short-term or
current performance. All of these ratios use numbers in a company's current assets or

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current liabilities, quantifying the operations of the business.An efficiency ratio
measures a company's ability to use its assets to generate income. For example, an
efficiency ratio often looks at aspects of the company, such as the time it takes to
collect cash from customers or the amount of time it takes to convert inventory to
cash. This makes efficiency ratios important, because an improvement in the
efficiency ratios usually translates to improved profitability. These ratios can be
compared to peers in the same industry and can identify businesses that are better
managed relative to the others. Some common efficiency ratios are accounts
receivable turnover, fixed asset turnover, sales to inventory, sales to net working
capital, accounts payable to sales and stock turnover ratio.

The efficiency ratio also applies to banks. For example, a bank efficiency ratio
measures a bank's overhead as a percentage of its revenue. Like the efficiency ratios
above, this allows analysts to assess the performance of commercial and investment
banks. For a bank, an efficiency ratio is an easy way to measure the ability to turn
assets into revenue. Since a bank's operating expenses are in the numerator and its
revenue is in the denominator, a lower efficiency ratio means that a bank is operating
better. I's believed that a ratio of 50% is the maximum optimal efficiency ratio. If the
efficiency ratio increases, it means a bank's expenses are increasing or its revenues are
decreasing.

Activity Ratio:

Activity ratios measure a firm's ability to convert different accounts within its balance
sheets into cash or sales. Activity ratios measure the relative efficiency of a firm
based on its use of its assets, leverage or other such balance sheet items and are
important in determining whether a company's management is doing a good enough
job of generating revenues and cash from its resources.

Companies typically try to turn their production into cash or sales as fast as possible
because this will generally lead to higher revenues, so analysts perform fundamental
analysis by using common ratios such as the total assets turnover ratio and turnover.
Activity ratios measure the amount of resources invested in a company's collection

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and inventory management. Because businesses typically operate using materials,
inventory and debtors, activity ratios determine how well an organization manages
these areas. Activity ratios are one major category in which a ratio may be classified;
other ratios may be classified as measurements of liquidity, profitability or leverage.
Activity ratios gauge an organization's operational efficiency and profitability.
Activity ratios are most useful when compared to competitor or industry to establish
whether an entity's processes are favorable or unfavorable. Activity ratios can form a
basis of comparison across multiple reporting periods to determine changes over time.

Current Ratio:

The current ratio is a liquidity ratio that measures a company's ability to pay short-
term and long-term obligations. To gauge this ability, the current ratio considers the
current total assets of a company (both liquid and illiquid) relative to that company’s
current total liabilities.

The formula for calculating a company’s current ratio, then, is:

Current Ratio = Current Assets / Current Liabilities

The current ratio is called “current” because, unlike some other liquidity ratios, it
incorporates all current assets and liabilities.

The current ratio is also known as the working capital ratio.

The current ratio is mainly used to give an idea of the company's ability to pay back
its liabilities (debt and accounts payable) with its assets (cash,
marketable securities, inventory, and accounts receivable). As such, current ratio can
be used to take a rough measurement of a company’s financial health. The higher the
current ratio, the more capable the company is of paying its obligations, as it has a
larger proportion of asset value relative to the value of its liabilities.

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Chapter 4

Data Presentation and Analysis

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Profit & Loss Account
(as on 31/03/2017)

Standalone
Profit & Loss (in cr.)
account
Mar 17 Mar-16 Mar-15

INCOME
Interest / Discount 33,124.96 30,040.56 25,867.82
on Advances / Bills
Income from 9,622.82 9,377.59 9,117.09
Investments
Interest on Balance 503.84 295.25 231.26
with RBI and Other
Inter-Bank funds
Others 1,290.54 1,274.64 262.43

Total Interest 44,542.16 40,988.04 35,478.60

Earned
Other Income 11,691.31 9,371.46 8,365.05

Total Income 56,233.47 50,359.50 43,843.64

EXPENDITURE
Interest Expended 26,449.04 24,155.07 21,254.46

Payments to and 3,891.86 3,376.01 3,114.97

Provisions for
Employees
Depreciation 508.8 443.91 405.67

Operating Expenses 7,799.24 6,280.90 5,683.10

(excludes Employee
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Cost & Page 17
Depreciation)

Total Operating 12,199.91 10,100.82 9,203.75

Expenses
Provision Towards 4,988.90 4,241.96 3,852.37
Income Tax
Provision Towards -3,200.62 -71.87 -153.36
Deferred Tax
Provision Towards 0 -0.05 0.93
Other Taxes
Other Provisions 12,116.96 3,709.91 2,327.68
and Contingencies
Total Provisions and 13,905.24 7,879.95 6,027.62
Contingencies
Total Expenditure 52,554.19 42,135.84 36,485.82

Net Profit / Loss for 3,679.28 8,223.66 7,357.82

The Year
Net Profit / Loss 3,679.28 8,223.66 7,357.82
After EI & Prior
Year Items
Profit / Loss 23,766.46 17,623.49 13,501.45
Brought Forward
Total Profit / Loss 27,445.74 25,847.15 20,859.27
available for
Appropriations
APPROPRIATION
S
Transfer To / From 919.82 2,055.92 1,839.46
Statutory Reserve
Transfer To / From 1.75 1.74 -1.27
Reserve Fund
Transfer To / From 755.57 62.04 63.14
Capital Reserve

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Transfer To / From -87.17 -41.81 25.49
Investment Reserve
Equity Share 1,197.52 1,191.42 1,087.54
Dividend
Tax On Dividend 209.91 213.19 221.42

Balance Carried 24,448.33 22,364.65 17,623.49

Over
Total 27,445.74 25,847.15 20,859.27
Appropriations
OTHER
INFORMATION
EARNINGS PER
SHARE
Basic EPS (Rs.) 15.4 34.59 31

Diluted EPS (Rs.) 15.34 34.4 31

DIVIDEND
PERCENTAGE
Equity Dividend 250 250 230
Rate (%)

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BALANCE-SHEET
(as on 31/03/2017)

Standalone Balance Sheet ------------------- in Rs. Cr. -------------------

Mar '17 Mar '16 Mar '15

Capital and Liabilities:

Total Share Capital 479.01 476.57 474.10

Equity Share Capital 479.01 476.57 474.10
Reserves 55,283.53 52,688.34 44,202.41
Net Worth 55,762.54 53,164.91 44,676.51
Deposits 414,378.79 357,967.56 322,441.94
Borrowings 105,030.87 99,226.38 79,758.27
Total Debt 519,409.66 457,193.94 402,200.21
Other Liabilities & Provisions 26,295.47 15,108.77 15,055.67

Total Liabilities 601,467.67 525,467.62 461,932.39

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 Mar '17 Mar '16 Mar '15

Assets

Cash & Balances with RBI 30,857.94 22,361.15 19,818.84

Balance with Banks, Money at
19,398.24 10,964.29 16,280.19
Call
Advances 373,069.35 338,773.72 281,083.03
Investments 128,793.37 122,006.20 132,342.83
Gross Block 3,746.89 3,316.20 2,413.05
Net Block 3,746.89 3,316.20 2,413.05
Capital Work In Progress 0.00 206.97 101.26
Other Assets 45,601.87 27,839.08 9,893.19

Total Assets 601,467.66 525,467.61 461,932.39

Comparative Analysis:

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(a)Interest Income:

Interest Income comprises of more than 60% of bank’s total operating income. The
performance and profits earned by the banks greatly depends upon the interest earning
capacity of the bank. There has been a consistent increase in the interest income
earned over the last three financial years which shows the consistency in the
performance of the bank.

Interest Income
44,542.16
45,000.00 40,988.04

40,000.00 35,478.60
35,000.00
30,000.00
25,000.00 Interest Income
20,000.00
15,000.00
10,000.00
5,000.00
0.00
Mar'15 Mar'16 Mar'17

(b)Total Income

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Bank generates income from various sources such as Interest on Loans, Interest on
Investments, Discounts, Commission & Brokerage,etc. There has been a regular
increase in the Total Income generated by the bank over the period of last three years.

Total Income
60,000.00 56,233.47
50,359.50
50,000.00
43,843.64

40,000.00

30,000.00
Total Income

20,000.00

10,000.00

0.00
Mar'15 Mar'16 Mar'17

(c)Interest Expended

Bank pays interest on deposits of its customers and interest on the loan taken from
RBI or other banks.

Interest Expended
30000
26449.04
24155.07
25000
21254.46
20000

15000
Interest Expended
10000

5000

0
Mar'15 Mar'16 Mar'17

(d) Total Expenditure

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Major bank expenses are: Operational Costs - employee salaries; Capital Costs -
buying equipment and or buildings; Financing Costs - interest expense for loans and
bonds.

Total Operating Expenses

14000
12199.91
12000
10100.82
10000 9203.75

8000

6000 Total Operating Expenses

4000

2000

0
Mar'15 Mar'16 Mar'17

(e)Net Profit/ Loss of the year

Net Profit/Loss
9000
8000 8223.66
7357.82
7000
6000
5000
4000 Net Profit/Loss
3679.28
3000
2000
1000
0
Mar'15 Mar'16 Mar'17

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(f)E.P.S

Earnings per share (EPS) is the portion of a company's profit allocated to each
outstanding share of common stock. Earnings per share serve as an indicator of a
company's profitability. There has been a great fall in the Earning per share of the
bank during the last financial year, which fell from 34.59 to 15.40, which is not a very
good sign.

EPS
40
35
30
25
20
EPS
15
10
5
0
Mar'15 Mar'16 Mar'17

(g)Total Share Capital

Share capital consists of all funds raised by a company in exchange for shares of
either common or preferred shares of stock. An increase in the total of capital stock
showing on a company's balance sheet is bad for investors, because it represents the
issuance of additional stock shares, which dilute the ownership value of investors'
existing shares. However, the increase in capital stock may, in the long run, benefit
investors in the form of increased return on equity through capital gains, an increase
in dividend payouts or both

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 Share Capital

Mar'17 479.01

Mar'16 476.57 Share Capital

Mar'15 474.1

471 472 473 474 475 476 477 478 479 480

(h)Deposits

Deposits

414378.79
450,000.00
400,000.00 357967.56
322,441.94
350,000.00
300,000.00
250,000.00 Deposits
200,000.00
150,000.00
100,000.00
50,000.00
0.00
Mar'15 Mar'16 Mar'17

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(i)Investment

Investment
134000 132342.83
132000
130000 128793.37
128000
126000
124000 Investment
122006.2
122000
120000
118000
116000
Mar'15 Mar'16 Mar'17

(f)Branches

Branches

Mar'17 3304

Mar'16 2904 Branches

Mar'15 2589

0 1000 2000 3000 4000

IMDR 2017-18 Page 27

(g)Employees

Employees

Mar'17 56617

Mar'16 50135
Employees

Mar'15 42230

0 10000 20000 30000 40000 50000 60000

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Ratio Analysis

 Net Profit Margin

Net Profit margin is part of a category of profitability ratios calculated as net income
divided by revenue, or net profits divided by sales. Net income or net profit may be
determined by subtracting all of a company’s expenses, including operating costs,
material costs (including raw materials) and tax costs, from its total revenue. Profit
margins are expressed as a percentage and, in effect, measure how much out of every
rupee of sales a company actually keeps in earnings.

The formula for Net Profit Margin is:

Net Income/Sales Revenue

2016/17: 8.26%
2015/16: 20.06%
2014/15: 20.73%

The net profit margin of Axis Bank has fallen to more than twice to its last year value.
The direct reason being the fall in the total earnings of the company which resulted in
even less profit generation. In the FY2015/16, it managed to retain the net profit
margin as it only fell down to less than a point, however there has been a great fall in
the last Financial Year.

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  Return on Asset

Return on assets (ROA) is an indicator of how profitable a company is relative to its

total assets. ROA gives an idea as to how efficient management is at using its assets to
generate earnings. Calculated by dividing a company's annual earnings by its total
assets, ROA is displayed as a percentage.

The formula for return of assets is:

Net Income/Total Assets

2016/17: 0.61%
2015/16: 1.56%
2014/15: 1.59%

Them net income of Axis Bank has increased consistently, however there has been a
fall in the Return on Asset value, this is due to reason that the increase in the Total
Asset of the company is in greater proportion to the increase in net income, resulting
in lower ROA, especially for the FY 2016/17.

 Return on Equity

Return on equity (ROE) is the amount of net income returned as a percentage of

shareholder’s equity. Return on equity measures a corporation's profitability by
revealing how much profit a company generates with the money shareholders have
invested. The ROE is useful for comparing the profitability of a company to that of
other firms in the same industry.

ROE is expressed as a percentage and calculated as:

Return on Equity = Net Income/Shareholder's Equity

2016/17: 6.59
2015/16: 15.46
2014/15: 16.46

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There has been a constant fall in the ROE which is a worrying sign for the company.
There was fall in the increase of Shareholder's fund in the year 2016/17, in contrast to
2015/16 which may reflect diminishing confidence of the public on the company.

 Net Interest Margin:

Net interest margin is a performance metric that examines how successful a firm's
investment decisions are compared to its debt situations. A negative value denotes
that the firm did not make an optimal decision, because interest expenses were greater
than the amount of returns generated by investments.

It is calculated as:

Net Interest Margin= (Investment Returns/Investment Expenses)/Average

Earning Asset

2016/17: 3.00
2015/16: 3.20
2014/15: 3.07

The ratio shows a positive & consistent return in all the years,therefore we can say
that the bank or investment firm has invested their funds efficiently.

 Interest Income/Total Assets

This ratio shows the relationship between the Interest Income earned by the bank and
its total assets. Higher is the ratio, more desirable it is for the company.

Formula:

Interest Income/ Total Assets

2016/17: 7.40
2015/16: 7.80
2014/15: 7.68

IMDR 2017-18 Page 31

The ratio reflects decent performance of the bank in terms of interst income earned in
relation to its assets. There is consistency & the ratio doesn't vary too much over the
years.

IMDR 2017-18 Page 32

PART II :Customer Satisfaction

Chapter 1:

Research Design And Methodology

IMDR 2017-18 Page 33

Topic: Customer Satisfaction for Axis Bank, Indiranagar Branch, Lucknow."

Objective:

i. To determine the customer satisfaction level on the basis of certain qualitative

& quantitative parameters related to operations & service of the concerned
branch.
ii. To study the satisfaction level of existing customers of Axis Bank.
iii. To find out the issues which customers are facing while using the services of
Axis Bank.
iv. To know what are the expectations of the users for future from the bank.

Significance of the study:

i. This research will help in knowing the factors which affects the satisfaction
level of Customers
ii. How Axis Bank can improve its services related to the services offered.
iii. This research will help in knowing problems faced by customers.
iv. Organization will come to know what they can add on to increase the
satisfaction level of their customers, and work on their problem areas which
will help in increasing customer base.

Research design:

Descriptive Research: It is used to describe characteristics of a population or

phenomenon being studied. It does not answer questions about how/when/why the
characteristics occurred. Rather it addresses the "what" question. The characteristics
used to describe the situation or population is usually some kind of categorical
scheme also known as descriptive categories. For example, the periodic
table categorizes the elements.

Exploratory Research: As when the purpose of research is to gain familiarity with a

phenomenon or acquire new insight into it order to formulate a more accurate
problem or develop hypothesis, the exploratory study come in handy.

IMDR 2017-18 Page 34

The main objective of this research is to accumulate preliminary information that will
help identify problems .This research helps to determine the best research design, data
collection method and selection of subjects

Research methodology:

 Questionnaire:

Sampling method:

Simple random sampling

Sample Design-
Sample type: Questionnaire Survey
Sample size: 30
Method: Simple Random Sampling

*The sample includes only the customers who have any account or are involved in
any transaction with Axis Bank.

Data Collection-
After the preparation of Questionnaire, a survey would be conducted for customer
coming to the branch. They would be further assisted in filling up the questionnaire
and after the completion of desired number of sample, analysis of the data will take
place.

Scope of Study-

 The factors influencing customers to opt for Axis Bank services will be
known.
 Level of satisfaction which users has with existing services provided
 This will also give a idea to the company what are the things they have to add
to their services to make them best and easy for users.
 To evaluate the employees behaviour and attitude towards customers

IMDR 2017-18 Page 35

Limitations of the study

The limitations of the study are the following.

1. The response from the respondents may not be accurate.

2. The respondents were unable or unwilling to give a complete and accurate
response to certain questions.
3. The period of study is limited.
4. From theoretical point of view, the framework of the research is restricted to
its objectives.

IMDR 2017-18 Page 36

Chapter 2

Literature review

IMDR 2017-18 Page 37

Customer Satisfaction:

Customer satisfaction measures how well the expectations of a customer concerning

a product or service provided by your company have been met.

Customer satisfaction is an abstract concept and involves such factors as the quality of
the product, the quality of the service provided, the atmosphere of the location where
the product or service is purchased, and the price of the product or service. Businesses
often use customer satisfaction surveys to gauge customer satisfaction. These
surveys are used to gather information about customer satisfaction. Typical areas
addressed in the surveys include:

 Quality of product
 Value of product relative to price - a function of quality and price
 Time issues, such as product availability, availability of sales assistance, time
waiting at checkout, and delivery time
 Atmosphere of store, such as cleanliness, organization, and enjoyable
shopping environment
 Service personnel issues, such as politeness, attentiveness and helpfulness.
 Convenience, such as location, parking, and hours of operations.

Methods of Measuring Satisfaction:

 Customer Satisfaction Surveys: The customer satisfaction survey is the

standard approach for collecting data on customer happiness. It consists of
asking your customers how satisfied they are, with or without follow up
questions. Three useful variations:In-App Surveys, Post-Service Surveys,
Long Email Surveys.

Customer Satisfaction Score: This is the most standard customer satisfaction metric,
asking your customer to rate her satisfaction with your business, product, or service.
Your CSAT score is then the average rating of your customer responses. The scale
typically ranges between 1 – 3, 1 – 5, or 1 – 10. A larger range is not always better,
due to cultural differences in how people rate their satisfaction. An article in

IMDR 2017-18 Page 38

Psychological Science, for example, showed that people in individualistic countries
choose the more extreme sides more frequently than those in collectivistic countries.
An American is more likely to rate a service as “amazing” or “terrible” than for
example a Japanese, who will stick to “fine” or “not satisfactory”. Such differences
are important to be aware of with an international customer base.

 Net Promoter Score:

The Net Promoter Score (NPS) measures the likeliness of a customer referring
you to someone, and it’s probably the most popular way of measuring
customer loyalty. Customer are asked how likely they are to recommend you
on a scale from 1 to 10. The strength from this metric is that its question isn’t
about an emotion (“How satisfied am I?”), but about an intention (“How likely
am I to refer?”), which is easier to answer. It cuts down to the question of
whether the product is good enough to refer it and put your own reputation on
the line.Calculating your NPS score is quite easy. Take the percentage of
respondents who fall within the ‘promoter’ category (10 - 9) and subtract the
percentage of ‘detractors’ (0 - 6).

 Customer Effort Score:

With this method, customers aren’t asked for their satisfaction or likeliness of
referring, but for the effort it took them to have their issue solved — generally on
a scale from 1 (very low effort) to 7 (very high effort).Your aim is, of course, to
lower this average score. According to CEB, 96% of customers with a high effort
score showed reduced loyalty in the future, while that was the case with only 9%
of those who reported low effort scores.

 Social Media Monitoring:

Social media has had an immense impact on the relationship between business
and customer. Where before, a great or poor service experience would maybe be
shared with the closest family and friends, social media offered an outlet and
reach to potentially millions of people.Because of that, it’s the perfect place to
hear what your customers are really thinking about you. If you have the right tools

IMDR 2017-18 Page 39

 to track this, that is.Facebook and Twitter are of course relevant platforms to
track, but also platforms like Quora, Yelp, TripAdvisor, etc.

 Things Gone Wrong: This metric originates from the Lean Six Sigma
approach, and measures the number of complaints, or "Things Gone Wrong",
per 100, 1000, or up to a 1,000,000 units of survey responses, units sold, or
other.The standard approach to measure TGW is through complaint sections in
customer surveys, but you could also maintain internal metrics. In the worst
case scenario your score is 1 or higher, meaning that you get at least 1
complaint per chosen unit.

(www.userlike.cpm/proven-methods-for-measuring-your-customer-satisfaction)

Importance of Customer Satisfaction:

Customer satisfaction is important because it provides marketers and business

owners with a metric that they can use to manage and improve their businesses.

Reasons why customer satisfaction is important:

 It’s a leading indicator of consumer repurchase intentions and loyalty

 It’s a point of differentiation

 It reduces customer churn

 It increases customer lifetime value

 It reduces negative word of mouth

 It’s cheaper to retain customers than acquire new one

(http://blog.clientheartbeat.com/why-customer-satisfaction-is-important/)

IMDR 2017-18 Page 40

Chapter 3

Data Presentation And Analysis

IMDR 2017-18 Page 41

Customer Satisfaction Analysis

Ques.1)Gender

Gender

12
M
F
18

Out of 30 people surveyed, 18 were male and 12 were female.

Ques.2) Age

Age Group
13
14
12
9
10
8 6 Age Group
6
4
1 1
2
0
18-21 22-28 28-40 40-60 >60

IMDR 2017-18 Page 42

Majority of people surveyed (43.33%)belong to the age group 22-28.
30% of people surveyed belong to the age group 28-40,
followed by 20% people of age group 40-60.
3.33% of people surveyed belong to age group 18-21&>60 respectively.

Ques.3) Occupation

Occupation

2 Business
13
Service
Student
Others
11

Out of 30 people, 13 people(43.33%) were from Business Background, 11

people(36.66%) were from service. 2 (6.66%) were student and 4(13.33%) from
others.(housewife,etc)

IMDR 2017-18 Page 43

Ques.4)Types of Service

Type of Account
24
25

20

15
9 Type of Account
10
5
3
5

0
Fixed A/C Savings A/C Current A/C Loan A/C

Most of people had Savings A/C:(24), followed by Current A/C (9), Fixed
A/C:(5)& Loan A/C:(3).

Ques.5)Customer for (duration)

Customer for( duration)

10 years < 1

5-10 years 4

Customer for( duration)

2-5 years 14

0-2 years 11

0 5 10 15

IMDR 2017-18 Page 44

14 people have been customers for time range between 2-5 years.
11 people have been customers for time range between 0-2 years.
4 people have been customers for time range between 5-10 years
& only 1 person has been a customer for 10 or more years.

Ques.6)Does bank caters all your needs?

Does bank caters all your needs?

No, 3

Yes
No

Yes, 27

Out of 30 people surveyed, 27 believed that the bank fulfils all their needs. On the
other hand, 3 people disagreed. Which means out of the total people surveyed, 90%
people agreed that the bank is able to cater to all their needs.

IMDR 2017-18 Page 45

Ques.7)Staff Behavior& Services

Staff Behaviour & Services

0

3
7

Highly Unsatisfactory
Unsatisfactory
Satisfactory
Highly Satisfactory

20

66.66% of people surveyed were satisfied with Staff Behavior & services, 23.33% of
people surveyed were highly satisfied with the staff behavior & services. 10% of
people surveyed were not satisfied with the staff behavior &services. Majority of
people were satisfied with the staff behavior & services.

IMDR 2017-18 Page 46

Ques.8)Availability of Branches

Availability of Branches
0

10 Situated Nearby
Situated at fair distance
20 Sttuated far by

66.66% of people had Bank branches nearby their home. While 26.66 % thought that
the branches were located at a fair distance from their place. While 6.66% people had
branches located far by from their place.

Ques.9)Availability of ATM’s

Availability of ATM's
0

10
Situated Nearby
Situated at fair distance
Sttuated far by
20

66.66% of people surveyed had ATM’s situated nearby their residence &33.34%
said that the ATM’s were not situated nearby their residence but was situated at fair
distance.

IMDR 2017-18 Page 47

Ques.10) Service Quality of Bank

Service Quality of Bank

12
12
10
10

6 5 Service Quality of Bank

4 3

2
0
0
Excellent Very Good Good Average Poor

Around 90% of people surveyed were satisfied with the service quality of the
bank. Out of these 90%, 16.66% rated the services as excellent,33.33% rated the
services as very good, 40% think that it is good. Only 10% of people regarded the
services as average.

Ques.11) Competitive Service Charges

Competitive Service Charges

40%
Yes
No
60%

IMDR 2017-18 Page 48

People Opinion on the competitiveness of service charges of the banks were fairly
divided with 60% of people surveyed believed that the service charges are
reasonable, while 40% of the people surveyed thought that the charges are
unreasonably high.

Ques.12) Competitive Interest Rates

Competitive Interest Rate

37%
Yes
No
63%

Greater number of people (19) think that the interest rates offered by bank are
competitive,
Out of 30, 11 people didn’t find the interest rate offered by the bank competitive
in contrast to other players in the banking sector.

IMDR 2017-18 Page 49

Ques13)Online Banking Services

Online Banking Services

27%
Yes
No
73%

22 out of 30 people surveyed use or have used online banking services offered by
the bank. Only 8 people didn’t have access to these online banking services.

Ques.14)Perception about the Bank

Perception

10% 13%
7% Personalised Service
Wide branch network
20% Customer Service
Computerised Banking
Core Banking
50%

IMDR 2017-18 Page 50

Half of the total number of people surveyed have a perception of “Customer
Service” about the bank. Out of remaining half, 20% think about Axis Bank as
“Wide Branch Network”. 13% think of it as Personalized Service. 7% & 10% as
Computerized Banking & Core Banking respectively.

Ques.15) Attendant’s knowledge on Products & Services offered by bank.

Attendants Knowledge
0%

10%
17%

Highly Satisfactory
Satisfactory
Unsatisfactory
Highly Unsatisfactory

73%

22 out of 30 people find attendant’s knowledge about the products and services
offered by the bank satisfactory. 5 considered it highly satisfactory and the
remaining 3 considered it unsatisfactory.

IMDR 2017-18 Page 51

Ques.16) Professionalism in handling transactions.

Professionalism in handling transactions

3%

17%
Highly Satisfactory
40%
Satisfactory
Unsatisfactory
Highly Unsatisfactory
40%

80% of people surveyed were satisfied with the professionalism of employees in

handling transactions. 40% being Highly Satisfactory and other 40% being
Satisfactory. 17% of people surveyed were unsatisfied and only 3% were highly
unsatisfied with the professionalism of employees in handling the transactions.

Ques.17) Effective Communication Skills of Employees

0% 0%
Effective Communication
27%

Highly Satisfactory
Satisfactory
Unsatisfactory
Highly Unsatisfactary
73%

IMDR 2017-18 Page 52

Every person surveyed was completely satisfied with the communication skills of the
employees of the bank. 73% of the people surveyed regarded the communication
skills as highly satisfactory. Other 27% regarded the communication skills as
satisfactory.

Ques.18) Courtesy & Friendliness in Employees

Courtesy & Friendliness

0%

13%
Highly Satisfactory
Satisfactory
20%
Unsatisfactory
67%
Highly Unsatisfactory

20 out of 30 people surveyed were highly satisfied with the courtesy, friendliness
& the attitude of the employees towards them. 6 people rated it satisfactory, while
the remaining 4 said that the attitude of the employees towards them was
unsatisfactory.

Ques.19) Rate the services of the bank out of 10.

The average rating out of 30 surveyed people was 7.48

IMDR 2017-18 Page 53

Ques.20) Services of alternate bank.

Service of Alternate Banks

29
30
25
20
Service of Alternate Banks
15
10
5 1

0
Yes No

29 out of 30 people surveyed use the services of another bank(s)

Quess.21) Recommend the bank to others

Recommend to friends and relatives

24
25
20
15 Recommend to friends and
relatives
10 6

5
0
Yes No

24 out of 30 people had no issues in recommending this bank to others, while the
remaining 6 weren’t as sure.

IMDR 2017-18 Page 54

 Findings

Part I: Financial Statement Analysis.

Demonetization, which happened towards the end of the last year had an adverse
effect on the whole banking industry and therefore Axis Bank, like other private and
public sector banks suffered the ill effects of it, which is clearly reflected in its
financial statements. There was a huge fall in the net profit earned by the bank during
the financial year 2016/17, with Net Profit falling from 8233.66 cr to 3679.28 cr. Due
to which, there was a sharp fall in the Earning Per Share too, with EPS falling from
34.59 per share to 15.40 .Other such numbers easily reflects the effect of
demonetization on the performance of the bank. Looking on the key ratios, makes the
picture clearer.

Net Profit Margin, which measure how much out of every rupee of sales a company
actually keeps in earnings, fell from 20.73% to 20.06% from FY 2014/15 to 2015/16,
but the sharp fall to 8.26% in the FY 2016/17 is definitely not a good sign for the
company. There was a fall in Return on Asset (ROA),(ROA-is an indicator of how
profitable a company is relative to its total assets) with ROA for the year 2016/17 fell
to 0.61% from 1.56%( ROA of 2015,16). There was a huge fall in the Return on
Equity(ROE)(ROE-is the amount of net income returned as a percentage of
shareholders equity) too, the ROE for FY 2014/15 & 2015/16 were 15.46 & 16.46,
respectively which fell down to 6.59 in the FY 2016/17. The bank has somehow
managed to have consistency in the Net Interest Margin.( Net Interest Margin is a
performance metric that examines how successful a firm's investment decisions are
compared to its debt situations) The ratio shows a positive & consistent return in all
the years, therefore we can say that the bank or investment firm has invested their
funds efficiently.

With the economy catching back its pace, the things will get better and the
performance of the bank will be much better than the previous financial year.
Incidents like Demonetization are completely out of hands of any individual bank or a
company and after considering the whole banking sector, we can say that Axis Bank
did well to sustain to the unfavorable situation. Tackling external factors of this

IMDR 2017-18 Page 55

magnitude is not an easy task but we expect big players like Axis & other private
players in the banking sector to see through these situations, and with time, things are
supposed to get back to normal.

Part II: Customer Satisfaction

The perception of customers of Axis Bank is of "Customer Service", with 50% of

people surveyed choose this option, when it comes to the first thing that comes into
their mind when they think about Axis Bank. 20% did go with "Wide Branch
Network" option, 13% chose "Personalized Service", 10% did go for Core Banking,
while the remaining 7% opted for "Computerized Banking. What can be understood
from these figures is that probably the Bank &this specific branch has done well in
terms of understanding its customers and has provided them quality & effective
services and facilities, resulting in the creation of this perception of "Customer
Service" in its customer's mind. Further Analysis did come with some important
findings about the customer satisfaction levels of the employees.

One of the most positive finding from the whole survey was related to attitude,
behavior and performance of staff/employees of the branch. The satisfaction levels of
customers in the area related to staff & employees was extremely good. 23.33% of
people surveyed were "extremely satisfied" with the Staff Behavior& Service, &over
43% of people were "satisfied" with the same,i.e; in all 66% people found the
behavior& services of the staff/employees of the branch desirable. About the
professionalism of staff in handling transactions, 40% of the customers surveyed were
"highly satisfied", while another 40% were "satisfied", in all 80% of customers were
satisfied with the professionalism & in the way their transactions were being handled
by the bank staff/employees, which is a great thing. Customer Satisfaction levels
related to the communication skills of the staff/employees of the bank was fantastic as
100% of people surveyed were satisfied with the communication skills of the staff,
out of 100, 73% found it "highly satisfactory". Talking specifically about the attitude
&behavior of the staff, 67% of the people surveyed were "highly satisfied" with the
courtesy & friendliness of the branch employees towards.
The employee/staff side of the branch has been tremendous in keeping the customer

IMDR 2017-18 Page 56

satisfaction level high. Other than this, the availability of branch & ATM's were in
good number & they were situated mostly at fair distance from its customers,
therefore there were no convenience problems faced by the customers related to
location of branches & ATM's.

A few points which were not as desirable and resulted in lower customer satisfaction
level were related to service charges charged by the bank and the interest rates. 40%
of people surveyed said that the service charges were not very competitive and a few
other bank offer reasonable lower service charges on the transactions. For Interest
Rates, 37% of people surveyed didn't find the interest rates as appealing as some of
the other public & private players in the banking sector. Another point, which could
be a concerning point for the bank is that around 27% of people surveyed were not
using the online banking services, this could go down with the attitude & preference
of the customers, but there could be a probability that there are some issues with the
ease of use or understanding of these online transaction services provided by bank.
With the continuous initiatives taken by the Government to encourage & promote
cashless economy, e-transactions & other such things, it is the duty of the bank to
maximize the number of customers & encouraging them to make use of these
services.

IMDR 2017-18 Page 57

 Learnings

One of the key learning from this entire internship program was that I understood that
how different things look from outside and what they actually are in real. There is a
misconception among people that Bank jobs are comparatively more comfortable &
easier than other jobs in the corporate world. This is completely false. The amount of
work, pressure and expectations in this sector is immense. Going on with long and
never ending operational work, dealing with variety of customers with variety of
attitude, dealing with pressure of achieving individual as well as group targets is not
an easy task. It needs a lot of hard work, dedication, character and a great attitude to
fulfill these objectives.

I learned & understood about the structure of a bank and how it operates. Various
departments, process & function- the way they are assembled and the way they work
in order to achieve desirable knowledge. I got in depth knowledge of certain
operational functions, such as Money Transfer/Settlement Systems(RTGS,NEFT),
Demand Drafts, Cheque Returns & Clearing, Deliverables. Manual Recording of
various transactions for audit purpose. Knowledge about the ERP System used by the
branch,etc.

To conclude, it was a great experience to intern with Axis Bank and learn the insights
and understand the working and operations of a bank. I understood that what all
quality and features are required to become a decent bank employee and excel in this
industry.

IMDR 2017-18 Page 58

 Conclusion

The Indian banking sector was greatly affected due to various factors, mainly due to
Demonetization towards the end of last year and this was clearly reflected in the
financial statements of the company. The growth patterns were greatly affected. There
was a fall in the various ratios which we have been applied for the purpose of
analysis. There was increase in some of the ratios but the rate of increase has
diminished. Although this is not a very serious issue as all the players in the banking
sector are facing the same issue but the bank needs to put in some additional efforts to
bring things moving in proper way. On the other hand, the results of Customer
Satisfaction survey conducted in the Indiranagar Branch, Lucknow, reflected positive
results in terms of factors involving employee behavior and services offered by them.
There were some reservations regarding service charges and interest rates offered by
the bank. The customers didn’t found these as competitive in contrast to rates and
charges provided by competing organizations.

Getting exposure to the industry and getting basic insights to the banking industry and
how everything works was a great learning. The whole internship was great learning
curve as it was the first practical and real exposure to the corporate world. The report
preparation on the topic selected was important in relation to understand the current
scenario of the banking sector in the Indian Economy.The trends, standings and
existing patterns have been studied. The work in the organization was important in
learning basic things such as desirable behavior and attitude in the organization to
more complex tasks such dealing with customers and handling various critical issues
which an employee deals with.

IMDR 2017-18 Page 59