9 overall performance and rating of banks under fhes

Overall Performance and Rating of Banks Under FHES Model
9
OVERALL PERFORMANCE AND
RATING OF BANKS UNDER FHES
MODEL
Over-all performance of banks means the composite performance of
banks in all the eight major parameters selected for the study, such as Capital
adequacy, Asset quality, Managerial efficiency, Earnings quality, Liquidity
position, Growth rates, Social banking, and Customer satisfaction. The
performance of banks in each parameter is studied on the basis of the average
of the ranks obtained for all the sub-parameters (ratios used). All the major
parameters are grouped under three heads, namely, Financial health and
soundness, Efficiency and Social banking performance.
Figure.1 shows the grouping of the major indicators.
315
Chapter -9
Financial Health
and Soundness
(FH)
Weightage 40%
Efficiency
(E)
Weightage 50%
Social Banking
Performance
(S)
Weightage 10%
Fig.9.1 FHES Model
In the present chapter, an attempt is made to evaluate the overall
performance of selected banks using the overall evaluation model developed
by the researcher, known as FHES Model (Financial Health and Soundness,
Efficiency and Social Banking Performance Model) by incorporating all the
major indicators. The performance is analysed under three heads.
9.1 Financial health and Soundness
Performance under this head is the aggregate of Capital Adequacy, Asset
quality, Growth Performance and Liquidity performance. Firstly the mean of
the ranks obtained by banks in all the ratios under each indicator is calculated
and then the average ranks for all the four indicators are computed and, on the
basis of the size of the average rank, the performance under this head is
assessed. The lower the average rank, the better the performance of the bank.
316
Overall Performance and Rating of Banks Under FHES Model
Table 9.1 shows the ranks of selected banks in various financial health
indicators.
Table 9.1 Financial health and Soundness of banks
Sl.
N
o
Bank/
indicator
ranks
C
A
1
SBI
4.00
4.
4
4.
6
4.
2
4.
0
6.
4
3.
8
3.
6
3.
8
2
SBT
2.50
3
PNB
3.75
4
BOB
5.00
5
BOI
4.50
6
7
8
CB
ICICI
HDFC
4.50
5.75
6.00
L
G
Total
Average
rank
Banks’
positio
n
FH
3.00
7.33
18.73
4.68
VII
5.25
5.33
17.68
4.42
V
4.75
3.66
16.36
4.09
II
3.50
6.16
18.66
4.66
VI
6.00
5.50
22.40
5.60
VIII
3.75
5.00
17.05
4.26
III
4.25
1.16
14.76
3.69
I
5.50
1.83
17.13
4.28
IV
Source: Data Analysis
The financial health and soundness of ICICI Bank Ltd is better than that
of all the other banks, followed by PNB. The position of all the public sector
banks irrespective of the group they belong to is more or less the same, except
for Bank of India (BOI). BOI is placed in the last position among the eight
banks. This is mainly due to poor performance in Asset quality and Liquidity.
9.2 Efficiency of banks
The efficiency of banks is ascertained by incorporating three major
parameters, namely, Managerial Efficiency, Earnings Quality, and Customer
service and Satisfaction. The efficiency performance implies the extent of
317
Chapter -9
efficiency of the banks in relation to their productivity, profitability,
operational performance, managerial competency and quality of customer
service and satisfaction. The performance in other areas depends on the
efficiency factors. A firm can attain better capital adequacy position, asset
quality, better liquidity and high growth rates, sufficient funds for meeting the
requirements of the priority sector and act as a fuel for the growth and
development of the social sector and the economy as a whole only through
high efficiency. The performance of banks in each indicator is assessed and
the overall efficiency is measured on the basis of the average of ranks for all
the three efficiency indicators. Figure 2 and Table 9.2 show the major areas
considered under the efficiency indicator and the efficiency position of banks
respectively.
318
Overall Performance and Rating of Banks Under FHES Model
Fig.9.2. Managerial efficiency, Earnings quality and Customer satisfaction
Indicators
319
Chapter -9
Table 9.2 Efficiency of Banks
Ranks
Sl.
No
Banks
1
2
3
4
5
6
7
8
SBI
SBT
PNB
BOB
BOI
CB
ICICI
HDFC
ME
EQ
C.S
6.00
4.12
6.00
5.25
4.50
3.00
2.00
3.63
Source: Data Analysis
6.87
3.50
4.62
4.75
4.75
4.12
4.12
3.25
5.10
5.80
3.40
6.40
5.10
4.70
2.40
2.10
Total
Average
rank
Banks
position
E
17.97
13.42
14.02
16.40
14.35
11.82
9.72
8.98
5.99
4.47
4.67
5.46
4.78
3.94
3.24
2.99
VIII
IV
V
VII
VI
III
II
I
It is seen from Table 9.2 that HDFC Bank Ltd is the most efficient
among the selected banks, followed by ICICI Bank Ltd. PNB, CB and SBT
also perform well whereas the performance of BOB, SBI and BOI is not
satisfactory.
9.3 Social banking performance
Banks are financial warehouses and so they have the responsibility to
meet the needs of urban as well as rural people, corporate houses and
agriculturists, educated and uneducated, big business houses and small scale
industrial units, etc. They should try to extend banking facilities to all,
channelise the funds to productive sectors and pave the way for the
development of the nation. Under this indicator, the researcher compares the
social banking performance of banks mainly between the public sector banks
and the new generation private sector banks. Table 9.3 shows the position of
banks in this indicator.
320
Overall Performance and Rating of Banks Under FHES Model
Table 9.3 Social banking performance of banks
Sl.No
Bank
1
SBI
2
SBT
3
PNB
4
BOB
5
BOI
6
CB
7
ICICI Bank Ltd
8
HDFC Bank Ltd
Source: Data Analysis
Social Commitment
Ranks
Banks’
position
4.33
2. 67
2.33
5.00
5.67
4.00
5.00
5.33
IV
II
I
V
VII
III
V
VI
Though the new generation banks outscored other banks in the first two
indicators, their performance is not up to the mark in social banking
performance. It is seen that PSB lends more money to the priority sector and
has opened more number of branches in rural areas. The Punjab National Bank
has performed well in social banking, followed by SBT. The performance of
CB and SBI is also good, but that of other banks (BOI, HDFC Bank Ltd,
ICICI Bank Ltd. and BOB) is comparatively poor.
9.4 Overall performance of banks under FHES Model
The overall performance of banks under the FHES Model is the
aggregate of the performance scores (ranks) under each of the three FHES
indicators, after assigning due weightage to each component on the basis of its
importance. A weightage of 40 is assigned for FH, 50 for E and 10 for S. The
ranks in each indicator are multiplied by respective weights and then the total
weighted rank is computed. Again the total weighted average rank is
calculated by dividing total weighted rank by 100 (total weight). On the basis
of the average weighted rank, the FHES ranks are assigned and the banks are
rated. The lower the average weighted score, the better the performance of the
bank.
321
Overall Performance and Rating of Banks Under FHES Model
WT
WTD.RANK
E
WT
WTD.RANK
S
WT.
Total Wtd. Rank
(3+6+9) 10
Total wtd. Av.
Rank
1
SBI
7
40
280
8
50 400
4
10 40
720
7.20 VIII
2
SBT
5
40
200
4
50 200
2
10 20
420
4.20 V
3
PNB
2
40
80
5
50 250
1
10 10
340
3.40 IV
4
BOB
6
40
240
7
50 350
5
10 50
640
6.40 VI
5
BOI
8
40
320
6
50 300
7
10 70
690
6.90 VII
6
CB
3
40
120
3
50 150
3
10 30
300
3.00 III
7
ICICI
1
40
40
2
50 100
5
10 50
190
1.90 I
8
HDFC
4
40
160
1
50 50
6
10 60
270
2.70 II
FHES RANK
Bank
WTD.RANK
Sl
No
FH
Table 9.4 FHES Model - Overall performance rating of banks
Source: Data Analysis
It is obvious from Table 9.4 that the two new generation private sector
banks selected for the study, shared the top ranks i.e., ICICI Bank Ltd, (Wtd.
Av. Rank 1.90) is the best bank followed by HDFC Bank Ltd (Wtd. Av. Rank
2.70) in terms of overall performance under FHES Model. They are rated as
the best banks. Canara Bank comes third with a score of 3.00; PNB comes
fourth with a score of 3.40. SBT has the fifth position with a score of 4.70.
The performance of SBI, BOI and BOB is very poor compared to the other
banks. SBI lies in the last position with an average score of 7.20. Banks of the
new generation private sector banks group (NGPB) are the best banks; it is the
best group, and the best sector in overall performance. Table 9.5 shows the
ranks of banks, the group and sector they belong to.
323
Chapter -9
Table 9.5 Ranks of banks under FHES Model
Rank
Bank
I
ICICI BANK LTD
II
HDFC BANK LTD
Bank
Grou
Banking category
p
NGP NEW GENERATION
B PRIVATE SECTOR
NGP BANKS (NGPB)
B
III
CANARA BANK
ONB
IV
PUNJAB NATIONAL BANK
(PNB)
V
STATE BANK OF
TRAVANCORE (SBT)
ONB PUBLIC SECTOR
BANKS
(PSB)
SBG
VI
BANK OF BARODA (BOB)
ONB
VII
BANK OF INDIA (BOI)
ONB
VIII STATE BANK OF INDIA ( SBI)
SBG
Source: Data Analysis
The details of the performance of selected banks, bank groups and bank
sectors in each ratio under the different indicators of study are given below.
Table 9.6 Ratio-wise performance of banks, bank groups and bank sectors
CRAR
HDFC
NGPB
BEST
SECTO
R
NGPB
TIER I CRAR
HDFC
NGPB
NGPB
TIER II CRAR
CB
ONB
PSB
DER
SBT
SBG
PSB
Adv .to TA
SBT
ONB
PSB
Inv. in GS to TI
SBT
SBG
PSB
INDICATOR
CAPITAL
ADEQUACY
RATIOS
OVERALL CAPITAL
ADQUACY
ASSET
QUALITY
324
BEST
BANK
BEST
GROUP
SBT FOLLOWED BY PNB
NNPA to TA
ICICI
NGPB
NGPB
NNPA to NA
HDFC
NGPB
NGB
TI to TA
HDFC
SBG
NGPB
Overall Performance and Rating of Banks Under FHES Model
GROWTH
PERFORMAN
CE
LIQUIDITY
MANAGERIA
L
EFFICIENCY
%ge Change in NPA
SBT
SBG
PSB
PC to TA
ICICI
NGPB
NGPB
OVERALL ASSET
QUALITY
ICICI Bank Ltd FOLLOWED BYCB
AND HDFC
Growth in Deposits
ICICI
NGPB
NGPB
Growth in Advances
ICICI
NGPB
NGPB
Growth in Investments
ICICI
NGPB
NGPB
Growth in Equity
ICICI
NGPB
NGPB
Growth in Business
HDFC
NGPB
NGPB
Growth in Total assets
ICICI
NGPB
NGPB
OVERALL GROWTH PERFORMANCE
ICICI FOLLOWED BY
HDFC
LA to DD and SD
ICICI
NGPB
NGPB
LA to TD
SBI
NGPB
NGPB
Inv. in G.S to TA
SBT
SBG
PSB
Inv .in AS to TA
PNB
ONB
PSB
OVERALL GROWTH
LIQUIDITYPERFORMANCE
SBI FOLLOWED
BYBOB
CDR
ICICI
NGPB
NGPB
PPE
ICICI
NGPB
NGPB
BPE
ICICI
NGPB
NGPB
ROE
SBT
SBG
PSB
OE to TE
SBT
SBG
PSB
WB to TE
ICICI
NGPB
NGPB
PPB
ICICI
NGPB
NGPB
BPB
ICICI
NGPB
NGPB
MANGERIALCOMPETE
NCE
SBT FOLLOWED BY CB
EMPLOYEE
PRODUCTIVITY
ICICI FOLLOWED BY HDFC
BRANCH
PRODUCTIVITY
ICICI FOLLOWED BY HDFC
OPERATING
EFFICIENCY
ICICI FOLLOWED BY CB
OVERALL MANAGERIAL
EFFICIENCY
OP to WF
ICICI FOLLOWED BY
CB
HDFC
NGPB
NGPB
325
Chapter -9
EARNINGS
QUALITY
SOCIAL
BANKING
PERFORMAN
CE
CUSTOMER
SATISFACTIO
N
326
OE to TI
SBT
ONB
PSB
B to II
ICICI
NGPB
NGPB
Growth IN NP
ICICI
NGPB
NGPB
NIM
HDFC
NGPB
NGPB
ROA
HDFC
NGPB
NGPB
II to WF
SBT
SBG
PSB
NII to TI
ICICI
NGPB
NGPB
OPERATIONAL
PERFORMANCE
SBT & CB FOLLOWED BY BOI &
ICICI
PROFITABILITY
HDFC FOLLOWED BY SBT,ICICI &
BOB
SOURCE OF
EARNINGS
HDFC FOLLOWED BY SBT
OVERALL EARNINGS
QUALITY
PERFORMANCE
HDFC BANK LTD FOLLOWED BY
SBT
RASU to TB
SBT
SBG
PSB
PSA to TADV.
PNB
SBG
PSB
GROWTH IN PSA
ICICI
NGPB
NGPB
OVERALL SOCIAL
BANKING
PERFORMANCE
PNB FOLLOWED BY SBT
UPKKEP OF
PREMISES AND
INFRASTRUCTURAL
FACILITIES
ICICI
STAFF ATTITUDE AND
BEHAVIOUR
HDFC
CREDIT SERVICES
HDFC
SPEED
HDFC
CHARGES
BOI
TECHNOLOGY-BASED
SERVICES
HDFC
SERVICES AND
PRODUCTS
HDFC
CUSTOMER
AWARENESS AND
EDUCATION
ICICI
CUSTOMER FEEDBACK SYSTEM
ICICI
OVERALL
CUSTOMER
SATISFACTION
HDFC FOLLOWED BY
ICICI
AMONG BANK
GROUPS
SBG - SBI
ONB –PNB
NGPB – HDFC Bank
Ltd
Overall Performance and Rating of Banks Under FHES Model
CUSTOMER
GRIEVANCES
REDRESS
MECHANISM
OVERALL
HDFC
FINANCIAL HEATH
AND SOUNDNESS
FH
ICICI FOLLOWED BY
PNB
EFFICIENCY
E
HDFC FOLLOWED BY
ICICI
SOCIAL BANKING
S
PNB FOLLOWED BY
SBT
OVERALL PERFORMANCE
UNDER FHES MODEL
ICICI BANK LTD
followed by HDFC BANK LTD
Among SBG-
SBT
Among ONB-
CB
Among NGPB- ICICI Bank Ltd
…..…..
327

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