Comparative Study Of Rbl And Cub.pptx

Comparative Study on the Performance of RBL Bank and City Union Bank Subject :- Management of Financial Institutions and Banking Services Semester :- 4

V/S Presented To:- Dr. Ashish Mehta Presented By:- Sagar Patel (17F33) Shubham Raval (17F80)

FLOW OF PRESENTATION • INTRODUCTION TO RBL BANK • INTRODUCTION TO CITY UNION BANK • CAMELS APPROACH – – – – – –

Capital Adequacy Assets quality Management Quality Earning Capacity Liquidity Sensitivity

• CASA RATIO AND DIVIDEND POLICY COMPARISON • CONCLUSION

INTRODUCTION TO RBL BANK RBL BANK Business Group

Indian Private

Sector

Banking

Incorporation Year

1943

Incorporation Date

14-Jun-1943

Chairman

Prakash Chandra

Managing Director

Vishwavir Ahuja

Company Secretary

Vinay Tripathi

Registered Office

1st Lane Shahupuri, Kolhapur, 416001, Maharashtra

Website

http://www.rblbank.com

Branches (Dec 2018)

342

Number of employees

5300

INTRODUCTION TO RBL BANK • RBL Bank, formerly Ratnakar Bank, is one of India's fastest growing private sector banks with an expanding presence across the country. • On 14 June 1943, Ratnakar Bank Limited was incorporated as a regional bank in Maharashtra with two branches in Kolhapur and Sangli. It mainly served small and medium enterprises (SMEs) and business merchants in the Kolhapur-Sangli belt. • In August 1959, the bank was categorized as a scheduled commercial bank as per the Reserve Bank of India Act, 1934. In 1970, it received a banking license from the Reserve Bank of India (RBI). • The name of the bank was changed from Ratnakar Bank to its present name RBL Bank pursuant to a fresh certificate of incorporation issued by the RoC on 24 November 2014.

MANAGEMENT TEAM

Awards and Recognition of RBL BANK • •

• • •

FASTEST GROWING SMALL BANK , 2014 by Business WorldPWC Best Bank . INDIA’S BEST BANK AWARD in mid-size bank segment by Business Today-KPMG for 4 consecutive year starting from 2014. BEST BANK AWARD FOR CYBER DEFENCE ,2016 by Asian Banker Technology Implementation Agency. BEST IT RISK & CYBER SECURITY INITIATIVE + BEST PAYMENT INITIATIVE,2017 by IBA Banking Technology. MOST PROMISING COMPANY OF THE YEAR,2018 by CNBC TV18 India.

INTRODUCTION TO CITY UNION BANK CITY UNION BANK Business Group

Indian Private

Sector

Banking

Incorporation Year

1904

Incorporation Date

31-Oct-1904

Chairman

S. Mahalingam Dr. N. Kamakodi

Managing Director Company Secretary Registered Office

V. Ramesh 149, T.S.R (Big) Street,

Website

Kumbakonam - 612001. Tamilnadu http://www.cityunionbank.com

Branches (Dec 2018)

600

Number of employees

5319

INTRODUCTION TO CITY UNION BANK • The City Union Bank Limited is an Indian bank. The Kumbakonam Bank Limited, as it was at first called, was incorporated as a limited company on 31 October 1904. The bank, in the beginning, preferred the role of a regional bank • In April 1965, two other local banks, viz. "The City Forward Bank Limited" and "The Union Bank Limited" were amalgamated with the bank. Consequently, the bank's name was changed to 'Kumbakonam City Union Bank Limited'. • The first branch outside the state of Tamil Nadu was opened at Sultanpet, Bangalore in Karnataka in September 1980. • In tune with the national image attached to the bank, the bank's name was changed to "City Union Bank Limited" with effect from December 1987. • Reserve Bank of India have granted an "Authorised Dealers License" to deal in Foreign Exchange business with effect from October 1990

MANAGEMENT TEAM

Awards and Recognition of City Union Bank Ltd BANK • Best Mid-sized Bank on Profitability and Efficiency Business Today Survey Nov 2011 • City Union Bank Ltd received Industrial Economist Excellence Award –2012 • Best Old Private Sector Bank by Financial Express for the year of 2015-2016 • IDRBT Banking Technology Excellence Awards for the Year 2016-17 • Best Bank Award for Cyber Security and Defense among Small Banks, 2018 Asian Banker Technology Implementation Agency.

CAMELS APPROACH 1. CAPITAL ADEQUACY o

Capital Adequacy’ is therefore the statutory minimum capital reserve that a financial institution or investment firm must have available and regulatory capital adequacy provisions thus require relevant firms to maintain these minimum levels of capital,.

Capital Adequacy Ratio RBL Bank 16.00%

RBL Bank

15.50% 15.33%

15.00% 14.50%

14.00%

14.64%

13.50%

13.72%

13.00%

13.13%

12.50%

As per RBI norms, Indian scheduled commercial banks are required to maintain a CAR of 9% in Basel-II and 10.5% in Basel-III.

12.94%

12.00% 11.50%

FY14

FY15

FY16

FY17

FY18

City Union Bank

City Union Bank

17.00%

Indian public sector banks are emphasized to maintain a CAR of 12%. Average capital adequacy ratio maintained by private banks in India was 16 and above

16.72%

16.50%

16.22%

16.00% 15.50% 15.00%

15.58%

15.41%

15.80%

14.50% FY14

FY15

FY16

FY17

FY18

TIER 1 & TIER 2 Capital 16.00% 14.00% 12.00%

Tier 2

Tier 1 14.17%

13.64% 13.13%

11.54% 11.72%

10.00% 8.00% 6.00% 4.00% 2.00% 0.00%

1.40% 0.00%

0.00%

FY14

FY15

FY16

2.00%

FY17

Tier 1 Capital include share capital and disclosed reserves. Since this capital is fully available to cover the core losses, it is also called Core Capital. For this reason this is considered as the highest quality capital.

1.16%

FY18

Tier 2 Capital is supplementary capital. It include certain reserves and certain types of subordinated debt. Any loan which are repayable after other debts have been paid, it is called subordinated debt

City Union Bank

Tier 2 Tier 1 18.00% 16.00% 16.03% 15.81% 15.07% 15.27% 14.61% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 0.90% 0.69% 0.51% 0.53% 0.41% 2.00% 0.00% FY14 FY15 FY16 FY17 FY18

CAMELS APPROACH 2. ASSETS QUALITY Asset quality is one of the most critical areas in determining the overall condition of a bank. The primary factor affecting overall asset quality is the quality of the loan portfolio and the credit administration program. Loans typically comprise a majority of a bank's assets and carry the greatest amount of risk to their capital. Securities may also comprise a large portion of the assets and also contain significant risks.

GROSS AND NET N.P.A. Gross NPA

1.60%

Net NPA

1.40%

1.40%

1.20%

1.20%

1.00% 0.80% 0.60% 0.40%

0.79% 0.31%

0.77%

0.98% 0.59%

0.64%

0.74%

From RBI Report, we found that Average Gross NPA of Private banks have increased from 2.5% to 4 % during 2015-18,whereas average Net NPA of Private banks also increased from 1.22% to 2% during 2015-18.

0.27%

0.20%

Gross NPA

3.50%

0.00% FY14

FY15

FY16

FY17

FY18

Net NPA

3.00%

2.83%

2.50% 2.40%

2.00%

So we can say that Asset Quality of RBL Bank is far better than other private sector banks like City Union Bank.

1.50%

1.00%

3.03%

1.80% 1.20%

1.90% 1.50%

1.71% 1.70%

1.30%

0.50% 0.00% FY14

FY15

FY16

FY17

FY18

SLIPPAGE RATIO Slippage Ratio 3.00%

RBL Bank

2.50%

Slippage is the Fresh accretion of NPAs during the year/Total standard assets at the beginning of the year.

2.51%

2.00% 1.93%

1.50% 1.00%

So lower the Slippage ratio indicates better asset quality.

1.38% 1.00%

0.50% 0.48% 0.00%

FY14

FY15

FY16

FY17

FY18

Slippage Ratio

City Union Bank

3.00% 2.50%

In Normal Business Operations, Slippage Ratio of a Bank is 1.25%- 1.50%.

2.81% 2.35%

2.00%

2.09%

1.99%

2.03%

FY16

FY17

FY18

1.50% 1.00% 0.50% 0.00% FY14

FY15

BILLS COLLECTION TO TOTAL INCOME Bills for collections to total income

RBL Bank

30.00%

25.00% 20.00%

21.78%

18.41%

15.00% 10.00%

25.43%

23.87%

12.43%

5.00% 0.00%

FY14

FY15

FY16

FY17

FY18

City Union Bank 30.00% 25.00% 20.00%

24.06%

21.73%

15.00%

19.49%

17.02%

18.11%

FY17

FY18

10.00% 5.00% 0.00% FY14

FY15

FY16

CAMELS APPROACH 3. MANAGEMENT QUALITY Assessment of management determines ability of an institution to diagnose and react to financial stress. This component rating is reflected by the management's capability to identify, measure, and control risks of the institution's daily activities. It ensures safe operation of the institution with effective policies and guidelines.

REVENUE PER EMPLOYEE RBL Bank

Revenue per employees (In Rs crore)

350 300

318

250

268 231

200 150 100

172 125

Revenue per employee (also called sales per employee) is a financial ratio that measures the revenue generated by each employee of the company on average. It equals the company's total revenue divided by the average number of employees for the period

50 0

FY14

FY15

FY16

FY17

City Union Bank

FY18 120

113

100

Revenue per employee shows how effectively an average employee of particular bank in comparison to other Banks. Over a long run, it shows the effectiveness of policies designed by management.

80

89

92

FY14

FY15

98

101

FY16

FY17

60 40 20 0 FY18

NET PROFIT PER EMPLOYEE Net profit per employees (In Rs)

RBL Bank

1400000 1200000 1191535

1000000

909925

800000 755579

600000 597907

400000

200000

Net profit per employee (NIPE) is a company's net profit divided by the number of employees. This number shows the company how efficient it is with its employees.

331200

0

FY14

FY15

FY16

FY17

FY18

Net profit per employee (in RS) City Union Bank

1400000 1200000

Both of the Bank’s Management is quite impressive in managing their employees and fetching higher profit per employees.

1000000

800000

909972

984487

1072230 1112987

1203872

600000 400000

200000 0 FY14

FY15

FY16

FY17

FY18

COST TO INCOME RATIO Cost to Income Ratio (%) RBL Bank 45.00% 40.00% 39.44% 35.00% 34.25% 30.00% 31.62% 31.93% 31.44% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% FY14 FY15 FY16 FY17 FY18

Industry standard cost to income is around 40%.

The cost-to-income ratio shows a company’s costs in relation to its income. To get the ratio, divide the operating costs (administrative and fixed costs, such as salaries and property expenses, but not bad debts that have been written off) by operating income. Cost to…

46.00% 44.00%

44.10%

42.00%

Increase in the ratio can also highlight potential problems: which could suggest that the company has taken its eye off the ball in the drive to attract more business

City Union Bank

42.80%

40.00%

40.00%

38.00%

40.80% 38.30%

36.00% 34.00% FY14

FY15

FY16

FY17

FY18

CAMELS APPROACH 4. EARNING CAPACITY Earnings are based on the financial institution's ability to create returns on its assets. These returns enable the institution to expand, retain competitiveness, and provide adequate capital. It can be measured as the return on asset ratio. company's growth, stability, valuation allowances, net interest margin, net worth level and the quality of the company's existing assets are assessed to rate the Earnings.

NET PROFIT MARGIN RBL Bank

Net Profit Margin (%) 16.00% 14.00%

14.08%

12.00%

12.01%

10.00%

10.60% 10.65%

8.00% 6.00%

6.85%

Net Profit Margin (also known as “Profit Margin” or “Net Profit Margin Ratio”) is a ratio used to calculate the percentage of profit a company produces from its total revenue.

4.00% 2.00% 0.00%

FY14

FY15

FY16

FY17

City Union Bank

FY18 20.00%

In FY14, RBL Bank’s Net Profit Margin was any 6.85% and it was struggling to compete against other banks. But after that RBL management changed their strategies to focus on digital model and their efforts succeeded, After FY14, Net Profit Margin of RBL Bank has been continually improving and reached at 14.08% in FY18.

15.00% 13.63%

15.84% 14.63% 15.10%

17.39%

10.00% 5.00% 0.00% FY14

FY15

FY16

FY17

FY18

RETURN ON EQUITY RBL Bank

ROE (%()

12.00% 10.00% 9.29%

8.00%

9.78%

10.29%

9.50%

The Return On Equity ratio essentially measures the rate of return that the owners of common stock of a company receive on their shareholdings.

6.00% 4.00%

Return on equity signifies how good the company is in generating returns on the investment it received from its shareholders.

4.91%

2.00% 0.00% FY14

FY15

FY16

FY17

FY18

City Union Bank

14.80%

14.60%

According to RBI annual report, Average return earned on equity by private sector bank has come down from 12.5% to 11% during 2015-18.

14.65%

14.40%

14.57%

14.20%

14.21% 14.20%

14.00%

14.08%

13.80%

13.60% FY14

FY15

FY16

FY17

FY18

RETURN ON ASSETS RBL Bank

ROA (%) 1.40% 1.20%

1.20%

1.00% 0.91%

0.80% 0.76% 0.74%

0.60% 0.40%

0.50%

Return on Assets also gives an idea as to how efficient management is at using its assets to generate earnings. ROA is the ratio of annual net income to average total assets of a business during a financial year

0.20%

City Union Bank

0.00%

FY14

FY15

FY16

FY17

FY18

ROA of City Union Bank is always higher than RBL Bank in last Five Years. ROA of RBL Bank show improvement of 140% in last five years, whereas ROA OF City Union Bank raise only 7%.

1.55% 1.50% 1.48%

1.45% 1.40%

1.41%

1.50%

1.42% 1.42%

1.35% FY14

FY15

FY16

FY17

FY18

NET INTEREST MARGIN RBL Bank

Net interest Margin(%) 3.00%

2.85%

2.50%

2.50%

2.00% 1.50%

1.87%

2.08% 2.09%

1.00%

Net interest margin (NIM) is a measure of the difference between the interest income generated by banks or other financial institutions and the amount of interest paid out to their lenders (for example, deposits), relative to the amount of their (interest-earning) assets

0.50% 0.00%

FY14

FY15

FY16

FY17

City Union Bank

FY18

Report shows that Net interest margin of banking sector as a whole was remain 2.7%, RBL Bank is performing good, but City Union Bank is performing even better than RBL Bank by efficiently focusing on MSME.

4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00%

3.88% 2.89%

FY14

3.13%

FY15

3.39%

FY16

FY17

3.58%

FY18

INTEREST INCOME TO TOTAL ASSETS Interest Income to Total Assets (%)

RBL Bank

7.80%

10.50%

7.60% 7.40%

City Union Bank

10.00%

7.62%

9.50%

7.42%

7.20%

7.28%

7.20%

7.00%

9.00%

6.80%

8.00%

6.60%

7.50% FY15

FY16

9.68%

9.42% 8.99%

8.50%

7.00%

FY14

10.18%

FY17

FY18

8.51%

FY14

FY15

FY16

FY17

FY18

This ratio measures the income from lending operations as a percentage of the total Assets generated by the bank in a year.

Normally the higher this ratio the better indicating the bank is earning a high interest rate or the proportion of interest earning assets (loans) to total assets is high or both of these effects. Too high of interest income to total assets ratio would be attributed to the high interest income (rate) derived from high risk loans (subject to default).

EARNING PER SHARE RBL Bank

Earning per share ( in RS) 18.00 16.00

15.79

14.00 12.00

12.59

10.00 9.60

8.00 6.00

Earnings per share serves as an indicator of a company's profitability.

7.23

4.00 2.00

Earnings per share (EPS) is the portion of a company's profit allocated to each share of common stock.

3.63

City Union Bank

0.00

FY14

FY15

FY16

FY17

FY18

10.00 8.00 6.00

Important factor need to consider here is that Face Value of RBL Bank is Rs.10while Face 4.00 Value of City Union Bank is Rs.1

6.82

7.44

8.39

9.18

9.35

FY17

FY18

2.00

0.00 FY14

FY15

FY16

CAMELS APPROACH 5. LIQUIDITY To meet unexpected withdrawals from depositors without affecting the daily operations, the bank must maintain liquid cash and assets that can be easily converted into cash. The ratio of liquid cash to asset ratio can be used as a parameter to measure banks liquidity.

CURRENT RATIO RBL Bank

CURRENT RATIO 0.06 0.05

0.05

0.04

0.04

0.03

0.03

0.03

FY15

FY16

0.03

0.02

Current ratio is a liquidity ratio that measures a company's ability to pay shortterm obligations or those due within one year. It tells investors and analysts how a company can maximize the current assets on its balance sheet to satisfy its current debt and other payables.

0.01 0.00

FY14

FY17

City Union Bank

FY18

Current ratio of RBL Bank and City Union Bank is somewhat same since last five years. Standard maintained by Banking Industry for current ratio range from 0.04 to 0.06.

0.05 0.04 0.04 0.03 0.03 0.02 0.02 0.01 0.01 0.00

0.03

0.03

FY14

FY15

0.04

0.04

0.04

FY16

FY17

FY18

CREDIT TO DEPOSIT RATIO RBL Bank

Credit/deposite ratio 94.00% 92.00%

91.70%

90.00%

88.00% 87.20%

86.00% 84.00%

This ratio is determined by dividing the bank's loan amounts by its total amount of deposits. It is also known as Loan to Deposit Ratio.

85.10%

84.80% 84.50%

Credit/ Deposit ratio is used in determining the amount of loans that a bank has out versus the amount of current deposits on hand at that same time.

82.00% 80.00%

FY14

FY15

FY16

FY17

City Union Bank

FY18

Tradition and prudence indicate that the ideal loan-to-deposit ratio is 80 to 90 percent. The loan-to-deposit ratio is used to assess a bank's liquidity by comparing a bank's total loans to its total deposits for the same period.

86.00% 84.00% 82.00% 80.00% 78.00% 76.00% 74.00% 72.00% 70.00% 68.00% 66.00%

84.38%

77.50%

73.10%

FY14

79.10%

74.60%

FY15

FY16

FY17

FY18

CASH TO DEPOSIT RATIO RBL Bank

Cash/deposite ratio 5.40% 5.30%

5.31%

5.20% 5.10% 5.07%

5.00% 4.90% 4.80%

4.97%

4.93%

Cash Deposit ratio is the ratio of how much a bank lends out of the deposits it has mobilised. It indicates how much of a banks core funds are being used for lending, the main banking activity. It can also be defined as Total of Cash in hand and Balances with RBI divided by Total deposits.

4.86%

4.70% 4.60%

FY14

FY15

FY16

FY17

City Union Bank

FY18

Cash Deposit Ratio is the amount of cash balance branches maintain to meet their liabilities. It is usually 4.75% of total deposit.

9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00%

8.49% 6.74%

6.38%

FY14

FY15

FY16

7.28%

7.05%

FY17

FY18

Sensitivity to Market Risk • Sensitivity to market risk reflects the degree to which changes in interest rates, foreign exchange rates, commodity prices, or equity prices can adversely affect a financial institution's earnings or capital. For most community banks, market risk primarily reflects exposure to changing interest rates.

CASA Ratio 30.00% 25.00% 20.00% 15.00% 10.00% 5.00%

0.00% RBL Bank City Union Bank

FY14 20.40% 17.80%

FY15 18.50% 19.20%

FY16 18.60% 20.40%

FY17 22% 23.40%

FY18 24.30% 24.20%

Dividend Policy RBL Bank

City Union Bank

DPS (RS)

Dividend(%)

DPS (RS)

Dividend(%)

FY 14

0.9

9%

1.1

110%

FY15

1.2

12%

1.2

120%

FY16

1.5

15%

1.3

130%

FY17

1.8

18%

0.3

30%

FY18

2.1

21%

0.3

30%

CONCLUSION • Although RBL Bank and City Union Bank is performing well by focusing on Small and Medium enterprises, • RBL Bank has performed better than City Union Bank in term of Assets Quality and Management, • while Capital adequacy, Earning, profitability and Liquidity is very well managed in City Union Bank than RBL Bank