INDUSTRIAL REPORT ON BANKING INDUSTRY (HDFC AND IDBI BANK)

Submitted in partial fulfillment of the Pace Programme

POST GRADUATE DIPLOMA IN INSURANCE AND RISK MANAGEMENT (2008-2010)

Under Supervision of: Dr. D.K. Sharma Lecturer SMS

By: Mohit Wahi PGDM-IRM-Ist sem Roll No. IRM/03/31

PREFACE
It is a matter of great satisfaction and privilege for me place before the esteemed faculty members the PACE report on any industry so I selected banking sector and surveyed private banks. The report incorporated the comparison between two banks i.e. HDFC and IDBI Bank by comparing their balance sheet this study also bring out the progress of each bank separately on the basis of the balance sheet of five years. Hope this study will bring out clearly what is the condition of each bank separately and in comparison to other banks.

. Mohit Wahi

ACKNOWLEDGEMENT
Gratitude is hardest of emotion to express and often does not find adequate words to mention our feeling towards other. I am grateful to my Director Prof. P.N. Jha, I am also thankful to my mentor Dr. D.K. Sharma. Who gave us such a wonderful project which will enhance our knowledge & also helps in building our personality. My special thanks to my brother Puneet who guided me and motivated me to complete this report.

CONTENT
1) INTRODUCTION a) What is Bank b) An overview of Banking Sector 2) ANALYSIS OF DIFFERENT PRIVATE SECTOR BANKS

A)
a) b)

HDFC BANK

Balance Sheet of HDFC BANK Analysis of the Balance Sheet & Ranking of HDFC BANK

B) IDBI BANK
a) b) Balance Sheet of IDBI BANK Analysis of the Balance Sheet & Ranking of IDBI BANK 3) COMPARISON OF HDFC AND IDBI BANK 4) CONCLUSION

INTRODUCTION What is a bank? Bank is an institution which deals in money and credit. It is often described as a credit institution. It performs a large variety of functions in the modern society. It accepts deposits from the public and lends money. On deposits, the bank pays interest and for lending money, it charges a higher rate of interest. The difference between the two rates is the profit of the banks. Acc. to Banking Regulation Act of India, Banking means the accepting, for the purpose of lending or investment of deposits of money from the public repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise. Acc. to R.P. KENT, An organization whose principal operations are concerned with the accumulation of the temporarily idle money of the general public for the purpose of advancing to

others for expenditure. Acc. to CROWTHER, The bankers business is to take the debts of other people to offer his own in exchange, and thereby create money. Evolution of Banks:The first bank called the Bank of Venice was established in Venice in 1157 to finance the monarch during wars. The first bank in India was the Bank of Hindustan started in 1770 by Alexander & Co. an English agency house in Calcutta which failed in 1782 with closure of the agency house. But the first bank in the modern sense was established in the Bengal Presidency as the Bank of Bengal in 1806. It was the merchant bank who first evolved the system of banking by trading in commodities than money. Their trading activities required the remittance of money from one place to another.

WHAT IS A BANKING SECTOR? Banking sector refers to a wide industrial sector which deals in finance for business, education, etc. Banking sector is divided into two types:Public sector. Private sector. Public sector bank:-These are owned and controlled by government that is its complete functioning is in the hands of the government. Its directly rules and regulation of Reserve bank of India (RBI). Private sector bank:- These are owned and controlled by the Private individual i.e. there is no role of government in these types of sectors. They are also under the rules and regulation of Reserve Bank of India (RBI). For dealing with the Banking industry I am going to compare the balance sheet of three private sector banks in order to know the condition of an individual bank and even the comparison between the two. This will tell us about the actual position of these sector banks.

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HDFC Bank net rises despite loss in portfolio valuation

Mumbai, July 14 DESPITE loss on valuation of investments, HDFC Bank has registered an over 30 per cent jump in net profit for the first quarter ended June 30, 2004, at Rs 139.97 crore, up from Rs 107.28 crore in the same period the previous year.

Net interest income of the bank increased over 43 per cent to Rs 398.79 crore (Rs 277.69 crore). Other income fell 18 per cent to Rs 108.04 crore (Rs 132.19 crore). "While core banking income and fee income increased, the profit on sale and revaluation investments declined leading to fall in fee income. This was due to the fall in prices of Government securities. We had to provide Rs 65 crore from our profits towards valuation losses of the portfolio," said Mr. Paresh Sukthankar, Country Head-Risk, HDFC Bank. The Government securities market saw a 0.7 per cent rise in yields in the first quarter and HDFC Bank provided for the loss in valuation of its portfolio from the profit and loss account. Other income includes fees and commissions at Rs 144 crore (Rs 60.8 crore), foreign exchange products & derivatives at Rs 27.9 crore (Rs 29.1 crore) and profit on sale and revaluation of investments which registered a net loss of Rs 65 crore as against a profit of Rs 42 crore in the previous year period. Total income increased 14 per cent to Rs 810.6 crore (Rs 709.26 crore) and total expenditure increased 11 per cent to Rs 534.59 crore (Rs 481.33 crore). As on June 30, 2004, total deposits were Rs 31,406 crores, an increase of 34.6 per cent from Rs 23,340 crores in June 2003. Total assets grew 54 per cent to Rs 18,400 crore (Rs 11,900 crore) while retail loans (net of Rs 740 crore loans securitised out) grew 82.4 per cent on a year-on-year basis to Rs 7,871 crore (Rs 4,300 crore). Portfolio quality as on June 30, 2004 remained healthy with net non-performing assets at 0.2 per cent of advances and the capital adequacy ratio was at 11 per cent, said a press note from the bank.

HDFC Bank's share price fell marginally by 0.05 per cent on BSE to Rs 365.00 and by 0.07 per cent on NSE to Rs 365.05.

This Weeks Hot Stock: HDFC

Submitted by TheIndiaStreet on September 22, 2007 - 11:21am. 28 thumbs up

Sundaramurthy Vadivelu

Introduction:
Housing Development Finance Corporation (HDFC) was founded by Hasmukhbhai T. Parekh, who was a General Manager at Industrial Credit and Investment Corporation of India (ICICI). HDFC was incorporated in 1977 with the primary objective of providing long term home loans. Now HDFC has diversified into banking, general/life insurance, mutual funds etc. Business Overview: HDFC provides loans for resident Indians and NRIs for purchase of house, flat or bungalow from developers as well as for self constructed houses. Several options are available to the customers, including:

Maximum amount (up to 85% of cost of property) Maximum term (20 years) Fixed interest rate / adjustable interest rates

For repayment of loans, HDFC provides following options:

Flexible loan installment plans Trench based EMI (i.e. customers can fix the installments they wish to pay till the time the property is ready for possession) Accelerated Repayment Scheme (i.e. increasing the EMI and replaying faster)

HDFC also provides home improvement loans for external repairs, tiles fixing/flooring, painting, plumbing, waterproofing etc. For

adding space or additional rooms, it provides home extension loans. Other type of loans include short term bridging loan (selling old property to buy a new/bigger home), land purchase loan, loans to professionals for non residential purpose (such as clinic, office etc.) and mortgage loans for marriage/education/medical expenses. HDFC offers two kinds of deposits, at fixed and variable interest rates and it has been awarded AAA rating for its deposits from both CRISIL and ICRA for the twelfth consecutive year, representing highest safety as regards timely payment of principal and interest. Several plans are available, including monthly/annual income, cumulative/non-cumulative and senior citizen deposits. HDFC Realty, the real estate property division of HDFC, helps customers in finding opportunities for buying/selling/leasing/renting of residential property and commercial plot/land across various cities in India. HDFC Realty is managed by Home Loan Services India Private Limited, a wholly owned subsidiary of HDFC. HDFC has promoted HDFC Bank, which offers personal, corporate and forex banking solutions. HDFC Mutual Fund has wide range of schemes to suit the investors equity funds, debt funds, balanced funds and liquid funds. HDFC Standard Life Insurance meets the insurance needs of individuals as well as corporate and offers insurance, gratuity, leave encashment and superannuation products. HDFC has joined hands with Barclays of UK to promote Intel net, a BPO company that provides IT solutions to banking, finance, retail, telecom etc.

Financial Performance:

HDFC has registered consistent growth in net profits and EPS in the last five financial years. Its net profits have more than doubled between 2002 and 2007 from Rs.690 crores to Rs.1482 crores and EPS has surged from 28.3 to 69.5.

Stock Market Performance:

HDFC is a constituent of Sensex (Scrip Code: 500010, Free float market capitalization: Rs.57,269 crores; weightage: 5.23%) and Nifty (Ticker: HDFC, FFMC: Rs.53,050 crores; weightage: 2.27%). HDFC Bank, promoted by HDFC, is listed at New York Stock Exchange (NYSE) and traded on ticker HDB. Foreign Institutional Investors (FIIs) have a huge stake in HDFC (68.31%). Foreign Financial Institutions have 10.4% stake in the company. The face value of the stock was split in the year 1999 (from Rs.100 to Rs.10) and HDFC issued 1:1 bonus in 2002. At NSE, it is also traded in Futures & Options segment with a lot size of 150 shares. Let us now discuss the short / medium / and long term outlook for the stock.

Short term outlook:

The daily chart of the stock is displayed above. Its short term resistance at 2100 was broken on September 6. It has gained about 12% after the breakout. But, it has made a high of 2424 from a low of 1786 or about 36% without any significant correction. Short term investors need to take note of this and consider 2100 as a support for entering the stock. It is also close to 50% ret cement level at 2106. 2031 may be considered as another major support. So, short term investors may wait for corrective declines.

Medium term outlook:

There are no major reversal signs in the weekly chart of the stock. Medium term investors may continue to hold the stock. When calculated from a low of 962 the technical target for the stock works out to 2519. Support exists at 1828. Since the stock has already touched a high of 2424, it may not be wise to enter at this stage; however, if a sharp correction occurs, entry may be considered at support levels.

Long term outlook:

We dont see any reversal signs in the monthly chart either. After adjusting for split/bonus, the stock has appreciated 12.72 times between September 1997 and now. Long term investors may book partial profits. But entry may be avoided at the current levels. Conclusion:

Short term investors may enter the stock on declines at support levels Medium term investors may consider booking profits Long term investors may continue to hold/book partial profits

CONCLUSION

HDFC Bank is much better and reliable in comparison to IDBI Bank as we can see from the above table that the net current assets of the HDFC Bank is greater than that of IDBI Bank. We can further see that the goodwill and the long term investment of HDFC Bank are also greater than that of IDBI Bank. As the assets are more liabilities are also much more. The current liabilities of the HDFC Bank is greater than that of IDBI Bank. In the same way long term Debts, common stock, retained earning, capital surplus and net tangible assets are also more than that of IDBI Bank.