Financial Performance Of SBI & ICICI Bank – a Comparative Study
Keywords – Financial Performance, Bank, Financial Institutions, SBI Bank, ICICI Bank
Introduction
To put it simply, a country’s economic growth is directly tied to the success of its banking sector. It provides the industry’s lifeblood—the funds that sustain and promote expansion across all sectors. The expansion of the banking industry can be tracked by looking at metrics such the growth in the number of bank branches, deposits, and loan applications.
The health of the financial system can be used as an early warning system for economic trends in the country. Over 88 commercial banks operate in India; these include 31 private banks, 27 public sector banks, and 38 international banks with a combined 53,000 branches and 17,000 automated teller machines (ATMs). Seventy-five percent of the sector’s total assets are controlled by public sector banks, making them the dominant player. The two biggest banks in India, both in the public and private sectors, are the State Bank of India (SBI) and ICICI Bank.
Studying The Two Key Players
The State Bank of India (SBI) was founded in 1806, making it the nation’s oldest and largest commercial bank. The bank’s efficient network allows it to offer a full suite of banking services to customers in India and beyond. The bank is responsible for 20% of all loans in India and operates over 18,266 branches (including 4,724 branches of its five Affiliate Banks). Over 8500 ATMs can be found in different states.
ICICI Bank is the second-largest private bank in India, with 2,552 locations and 7,440 automated teller machines (ATMs). It is a leading commercial bank in India, offering a comprehensive suite of services through a number of channels. ICICI is a leader in the fields of investment banking, venture capital and asset management, and life and non-life insurance, in addition to providing cutting-edge banking services including Internet banking, Tele Banking, and Mobile Banking. The bank has branches in 18 different countries. These nations include the UK, Canada, Russia, and others.
Analysis
The effectiveness and efficiency of a country’s financial system are directly tied to the performance and efficiency of commercial banks. The primary goal of the Indian government’s banking sector reforms has been to boost the financial viability and productivity of the banking industry as a whole. Before the banking industry was liberalised, public sector banks effectively held a monopoly. As a result of the new banking regulations, however, a number of private and foreign banks are expanding into the market with more independence. Efficiency in operations is a metric that can be used by the general public, as well as management, regulators, and supervisors, to evaluate the performance of various financial institutions. Consequently, the purpose of this study is to compare the efficiency and solvency of SBI and ICICI Bank through the application of Profitability ratios, Solvency ratios, and Managerial efficiency ratios.
Studying the Statitics
Table 1
Both SBI and ICICI Bank’s Net Profit Ratios showed volatility during the study period, as seen in Table 1. In 2013-14, SBI’s Net Profit Ratio was 9.67%, whereas ICICI Bank’s was 10.38 percnt;. SBI’s Net Profit Ratio rose to 11.53% in 2014-15 and ICICI’s to 10.48% , respectively. In comparison to SBI’s 10.29% Net Profit Ratio, ICICI Bank’s 11.64% Net Profit Ratio is 1.35 percentage points higher, making ICICI the more profitable financial institution overall.
Table 2
SBI and ICICI Bank’s Operational Profit Ratios fluctuated across the study period, as seen in Table 2. SBI’s best Operational Profit Ratio was 16.56% in 2013-14, and ICICI Bank’s was 12.66%. Although SBI’s Operational Profit Ratio was 16.56% and ICICI Bank’s was 12.66% they are now significantly higher. SBI’s Operational Profit Ratio is 1.66% higher than ICICI Bank’s, given that SBI’s average Operating Profit Ratio is 17.65% and ICICI Bank’s average Operating Profit Ratio is 15.99%.
Table 3
Table 3 shows that during the study period, the Return on Net Worth Ratio of both SBI and ICICI Bank varied. In 2008–09, SBI’s RONA was 15.74 percent, whereas ICICI Bank’s RONA was 12.61 percent in the same period. When compared to ICICI Bank’s 7.53% in 2008-09 and SBI’s 11.34% in 2010-11, the former has a lower Return on Net Worth Ratio. The average Net Worth Ratio of SBI is 13.83 percent. While the average Net Worth Ratio of ICICI bank is 9.23 percent. This means that the SBI average is 4.6 percent higher than the ICICI bank average.
Table 4
Table 4 shows that SBI and ICICI Bank’s Earnings per Share fluctuated across the study period. When comparing SBI and ICICI Bank, the best EPS was 144.39 in 2009–10 and 44.70 in 2010–11. Conversely, ICICI Bank’s EPS in 2008–09 was 33.75 and SBI’s EPS in 2006–07 was 86.30. When comparing the two banks, SBI’s average Earnings per Share of 82.11 is higher than ICICI bank’s common Earnings per Share of 37.29.
Observations on financial performance
• SBI’s average Net Worth Ratio is 13.83 percent, whereas ICICI bank’s is 9.23 percent. This means that SBI’s common Net Worth Ratio is 4.6 percent, which is higher than ICICI bank’s.
• SBI’s common EPS is 119.40, whereas ICICI bank’s is 37.29; therefore, SBI’s EPS on average is 82.11, which is higher than ICICI bank’s.
• ICICI Bank’s Net Profit Ratio is 1.35%, which is higher than SBI’s Net Profit Ratio of 10.29%. This is because ICICI Bank has a higher total revenue percentage.
• SBI’s Operational Profit Ratio is 1.66% higher than ICICI bank’s, given that SBI’s Operating Profit Ratio is 17.65% and ICICI bank’s is 15.99%.
Conclusion
The studies looked at how the banking industry in India fared financially between 2006 and 2011. The State Bank of India (SBI) and the ICICI Bank are the country’s two major financial institutions. There are a number of ratios that can be used to compare the profitability, solvency, and managerial effectiveness of different banks. The study found that all the banks met their regulatory expectations and were making a profit. As shown by an evaluation of the two banks’ financials there is a large gap between the overall performance. This is in terms of deposits, advances, investments, net profit, and total assets. SBI is thought to have a larger footprint than ICICI Bank. Researchers and academics can use this knowledge to better investigate the issue.
Author – Vedangee Borikar
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