Pacific Business Review International

Volume 13 issue 5 November 2020

Financial Performance Appraisal of Indian Banks: A Comparative Study of

BOB and HDFC Bank

Shikha Agrawal Abstract

Research Scholar, Faculty of Commerce, Banks are the lifeline of any economy. They play pivotal role in the
B.H.U, Varanasi. growth and development of a nation. Large number of reforms has
been introduced from time to time in Indian banking sector by central
Prof. R. S. Meena bank of India. New technologieslike ATM, NEFT, RTGS etc has been
Professor, Faculty of Commerce, introduced in Indian banking system to improve quality of banking
B.H.U, Varanasi. services, customer satisfaction and their overall performance. There
are number of other factors which have influence over the performance
of the banks. Few of them are government reforms, growth rate of
nation, introduction of new technology, inflation etc. Indian banking
sector is mainly classified into public sector, private sector and foreign
bank. On 30th August, 2019, Nirmala Sitharaman, Finance minister of
India has made an announcement regarding merger of ten public sector
banks into four banks. As a result the number of total public sector bank
will fall down to 12 from 27. This measure was taken with the motive to
improve the financial health and performance of Indian public sector
banks. Therefore, it becomes important at this time to conduct a study
in this regard. The aim of this study is to analyse and compare the
performance of one public sector (Bank of Baroda) and one private
sector (HDFC) Indian bank using CAMEL model. Secondary data i.e.
annual report of Bank of Baroda and HDFC bank has been used to
accomplish the purpose of this study.Financial year 2008-09 to 2017-
18is the period of this study.Statistical tools like ratio analysis, mean,
standard deviation, t-test are used to analyse financial performance of
Indian banks. Financial performance of banks are measured based on
five parameters that are capital adequacy, asset quality,
managerialability, earning capability and liquidity. Performance of
HDFC bank is found to be better than Bank of Baroda over these ten
years.
Keywords: BOB, HDFC, Financial Performance, CAMEL Model,
Financial Ratios, Commercial Banks.

Introduction
Indian banking system is going through a new era. This is technology
driven phase where every Indian and foreign banksare trying to
innovate new way to serve their customer. Information technology
definitely has impact on the overall performance of bank and over
customer's satisfaction. IT in banking sector brings new opportunity
and challenges for the banks. Therefore, it becomes important to study
and analyse the performance of Indian bank in technology based

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banking system. more than private sector for year 2009 & 2010. They also
observed that sub-standard and loss asset of private banks
Bank of Baroda (BOB)
are more than public sector bank in 2009 & 2010. The
Bank of Baroda is the second largest Indian bank which authors have suggested ways in which bank could improve
was established in 1908. It's headquarter is in Vadodara, the quality of their asset.
Gujarat. It was established by Maharaja Sayajirao
Malhotra D. K., Poteau R., & Singh, R.(2011) have
Gaekwad III. It serves around 82 million customersin
evaluated the Indian banks performance. the period of this
around twenty two countries. It has 5573 branches and
study was 2005-09. The authors talk about the 2007
55662 employees up to March 2018. All its branches are
economic crisis in their paper. The objective of this study is
connected to core banking solution.
to compare the performance of Indian banks between pre
Housing Development Finance Corporation Limited and post crisis period. They found that Indian banks were
(HDFC) not much affected by the crisis. Indian Bank's financial
position was healthy even after the crisis. They used ratio
HDFC stands for Housing Development Finance
analysis to measure and analyse the banks performance.
Corporation limited. It was started in 1994 with
headquarter in Mumbai. It has 4787 branches and 88252 Objectives of the study
employees up to March 2018.The bank has introduced new
To analyse the financial performance of Bank of Baroda
banking services using latest technology. These services
and HDFC bank.
include paper less auto loan within 30minute using
biotechnology, personal loan using Net banking in just 10 To compare thefinancial performance of Bank of Baroda
sec, instant loan at ATM, missed call recharge etc. and HDFC bank.
Review of Literature Hypothesis
Yadav, M. (2015) has analysed the performance of Indian H0: There is no significance difference in the financial
scheduled commercial bank. The period of this study was performance of public and private sector Indian banks.
2008-2012. He evaluates and compares the performance of
H1: There is significance difference in the financial
new private bank, old private bank, public bank and foreign
performance of public and private sector Indian banks.
banks using CAMEL model. He found that there is constant
growth in the no. of branches and deposit of all the banks Research Methodology
over the study period. But growth in new private banks was
a) Period of study
exceptionally high as compared to other banks. The author
discovered that the performance of private sector banks Financial data of banks for the financial year 2008-09 to
and foreign banks were better as compared to public sector 2017-18 has been collected for the analysisof their
banks and old private sector banks. performance.
Chaudhuri, B. (2018)has compared the financial b) Data Collection
performance of SBI and ICICI bank using CAMEL model.
Data has been collected using secondary sources like
The period of this study was 2011-2015. This study is
annual report of banks of different years from the website
analytical in nature and based on secondary data. The
of respective bank, RBI report on trend and progress and
author found that the performance of both the banks is
profile of Indian bank from RBI website.
satisfactory. Return on asset, return on Equity and return on
networth of ICICI bank is more than SBI which means c) Tools and Techniques
profitability of ICICI is better than SBI. Current and quick
Descriptive statistics like Mean, Standard Deviation,
ratio of ICICI bank is more than SBI which indicates that
Percentageand Ratio analysis and t test are the statistical
liquidity position of ICICI is superior than SBI.
tools are used for analysis of bank's financial data. CAMEL
Chaudhary, K., & Sharma, M. (2011) havecompared the model has been used for analysing the financial
performance of public and private sector Indian banks. The performance of banks over the years.
authors take asset quality as the parameter for judging the
Data Analysis
performance of Indian bank. They compared net
performing asset, standard asset, doubtful asset and loss Capital Adequacy Ratio
asset of all public sector banks with all the private sector
Capital Adequacy Ratio is used to analyse the financial
Indian banks. They found that NPA of public sector bank is
strength of a firm. Higher the ratio healthier is the financial

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position of the firm. Every bank should have sufficient well to protect itself from bankruptcy.
amount of capital to provide assurance to stakeholders as

Table 1 displays capital adequacy ratio and debt equity banks are above 8%. BOB has higher Debt/Equity ratio
ratio of BOB and HDFC bank. It is explored from above than HDFC for all ten year. Ideal debt equity ratio is 2. But
table that CRAR of HDFC is more than BOB for all ten both these banks have debt/equity much higher than the
years. As per Basel III, Tier I and Tier II Capital should be ideal ratio which indicates that bank should take measures
8% of risk weighted asset. It is found that CRAR of both the to lower it.

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Table 2 shows the comparative analysis of the performance asset of HDFC was more than BOB. There is a growth in
of Bank of Baroda and HDFC bank on the basis of advance the advance to total asset in HDFC while Bank of Baroda
to total asset and equity to total asset ratios. It is found that shows decline over the year.Percentage of equity to total
from the year 2008-2012 advances to total assetof BOB asset is more in BOB than HDFC. There is a fluctuating
was more than HDFC but from 2013-2017 advance to total trend in this ratio over the year of both the banks.

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In above the above Table 4, p value of levene's test for more in BOB.
CRAR and Equity/ Advance is less than 0.05 which means
Asset Quality
homogeneity of variance is not present in these ratio of both
the banks but homogeneity of variance is present in Asset quality ratio calculates what percentage of total
Debt/Equity and Advance/Total asset of banks as the p advance is comprised of non-performing asset. Bank
value of levene's test is more than 0.05. The p value of t test should try to keep it's NPA as low as possible. Therefore,
for all the ratio except advance/total asset is less than 0.05 lower the value of these ratios better is the quality of bank's
which means that there is significance difference in these asset.
ratio of both the bank. The mean value of CRAR is more in
HDFC bank while debt/equity and equity/advance ratio is

In the above table 5, it is observed that BOB has but there is decline in the gross NPA to gross advanceratio
highergross NPA to gross advanceand net NPA to net of HDFC bank which means that HDFC bank had made
advance ratio than HDFC bank which indicates that asset efforts to improve the quality of it's asset but net NPA to net
quality of HDFC bank is better than BOB. It is also found advance ratio of HDFC fall in 2008-2011 and rises
that there is a continuous growth in both these ratio of BOB thereafter.

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In the above table 6, it is observed that BOB has higherNet fluctuating trend in both these ratios of HDFC bank over
NPA to Total Asset and Gross NPA/Total Asset than HDFC these 10 year.Therefore, It could be concluded on the basis
bank which means HDFC bank is in a better position than of the above ratios that the asset quality of HDFC is better
BOB in terms of asset quality. It is observed that there is a that BOB.
continuous growth in both these ratios of BOB but there is a

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From the above table 8, it is found that homogeneity of Management Efficiency

variance is present in all the four ratio of both the banks. It is
Management Efficiency ratios is used to evaluate the
also observed that the p value or significance values of t test
ability of managers to generate revenue, their decision
for all the four ratios of asset quality is less than 0.05 which
making and leadership skill etc. Higher the ratio better is
means that there is a significance difference in the asset
the management efficiency.
quality of both the banks. From the mean values of these
four ratios, it is found that all the asset quality ratios of BOB
has higher value than HDFC bank which indicates that the
asset quality of HDFC bank is better than BOB.

Table 9 analyses the management efficiency of both the employee of BOB increases in 2008-2011 but declines
banks. It is assumed that the higher the value of these thereafter while there is a continuous growth in profit per
ratiosbetter is the efficiency of management. It is observed employee of HDFC bank over these ten years.
from the above table that there is constant growth in the
business per employees of both the banks but the rate of
growth in HDFC bank is more than BOB. Profit per

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From the above table 10, it could be concluded that return performance while on the other hand HDFC had
on equity of BOB is more than HDFC bank from 2008- fluctuating ROE. on the other side, return on asset of HDFC
2011 but ROE of HDFC bank is more than BOBfrom 2012- is more than BOB . Steady and constant growth is seen in
2017. It is observed that ROE of BOB is constantly the ROA of HDFC bank except in 2013,2014& 2016 while
declining over these ten year which indicates poor there is a constant decline in ROA of BOB.

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In the above table12, homogeneity of variance is observed employee and ROA of both the banks as p value of t-test for
in case of business per employee and profit per employee as these ratios is less than 0.05. But the p value of ROE is more
p value of levene's test in both these cases is more than 0.05 than 0.05 which indicates that there is no significant
while homogeneity of variance is not assumed in ROE and difference in ROE of both the banks. The p value of profit
ROA as p value of levene's test is less than 0.05. It is found per employee is equal to 0.05 which means there is a
that there is a significant difference in business per significant difference in profit per employee of both banks.

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Mean value of business per employee of BOB is more than Earning

HDFC while mean value of profit per employee and ROA
Earnings ratio analyses the earning capability of a firm.
is more in case of HDFC bank. Therefore, it could be
Higher the value of these ratio means better is the earning
concluded that management efficiency of HDFC is
capacity of that firm.
superior to BOB.

From the above table 13, it is explored that operating profit more than BOB for all ten years. There is fluctuating trend
to total asset and net interest to total income of HDFC is in both these ratios of both banks.

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From the above table 14, it is explored that dividend payout banks. That is there is rise and fall in both these ratio of both
and net profit to total asset of HDFC is more than BOB. the banks over past ten years.
There is fluctuating trend in both these ratios of both the

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In the above table 16, p value of levene's test for operating ratio of HDFC is more than BOB, therefore it is concluded
profit to total asset, net interest to total income and net that HDFC bank has better earning capability than BOB.It
profit to total asset is more than 0.05 therefore it could be is found that p value of dividend payout ratio is more than
concluded that there is homogeneity of variance in all these 0.05 therefore it indicates that there is no significance
ratio while dividend payout ratio does not have equal difference in the dividend pay-out of both these banks.
variance as the p value is more than 0.05. It is also observed
Liquidity
that there is significance difference in the operating profit
to total asset, net interest to total income and net profit to Liquidity refers to the ability of a firm to meet its current
total asset of both the as the p value of t-test for all these liability as and when it arises. Higher the value of these
three ratio is less than 0.05. The mean value of these three ratios better is the liquidity position of a firm.

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From the above table 17, it is explored that liquid asset to total deposit is more in BOB than HDFC. Therefore, it
total asset and liquid asset to total deposit of BOB is could be clearly concluded that BOB has better liquidity
increasing constantly except in year 2015 & 2017 while position than HDFC bank.
there is fluctuating trend seen in case of HDFC. It is also
observed that liquid asset to total asset and liquid asset to

From the above table 18, it is found that credit deposit ratio constant rise in credit deposit ratio of HDFC bank besides
of BOB is more than HDFC in year 2008-2015 but credit 2014 & 2017.
deposit ratio of HDFC exceed BOB from 2015-2017. There
is fluctuating trend observed in BOB while there is a

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In the above table 20, on applying levene's test,p value of https://www.hdfcbank.com/aboutus/cg/annual_report

liquid asset to total asset, liquid asset to total depositand s.htm
credit deposit ratiocomes out to bemore than 0.05 therefore
https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/APB30
it is concluded that there is homogeneity of variance in
091213F.pdf
these ratio. On applying t test, it is observed that there is
significance difference in the liquid asset to total asset and Kaur, P. (2015). A Financial Performance Analysis of the
liquid asset to total deposit of both the banks as the p value Indian Banking Sector Using CAMEL Model. IUP
of these ratios is less than 0.05. The mean value of these Journal of Bank Management, 14(4),19-33.
ratios of BOB is more than HDFC, therefore it is concluded
Koley, J. (2019). Analysis of Financial Position and
that BOB has better liquidity position than HDFC. Since
Performance of Public and Private Sector Banks in
the p value of t test for Credit deposit ratio is more than
India? : A Comparative Study on SBI and HDFC Bank.
0.05, therefore there is no significance difference in the
A multidisciplinary Online Journal of Netaji Subhas
mean value of credit deposit ratio of both these banks.
Open University, India, 2(1), pp unknown.
Findings
Malhotra D. K., Poteau R., & Singh, R.(2011). Evaluating
From the above discussions, it is found that capital the Performance of Commercial Banks in India. Asia
adequacy ratio and debt equity ratio of HDFC is better than Pacific Journal of Finance and Banking Research,
BOB while BOB has superior advance to asset and equity 5(5),15-37.
to total asset ratio. Therefore, both banks are equally good
Pawan, Gorav, & Singh (N.A.). A comparative study on
in terms of capital adequacy.
financial performance of selected Indian private sector
Asset quality, Management efficiencyand earning banks. pp:46-60
capability of HDFC bank is better than Bank of Baroda.
Singh, B. (2017). Financial Analysis of SBI:A study with
Liquidity position of Bank of Baroda is superior to HDFC special reference to Indian Banking Industry.
bank.Therefore, it could be concluded that the overall International Journal of Contemporary Research and
performance of HDFC is better than Bank of Baroda. Review, 8(07), 20271-20278. https://doi.org/10.15520
/ijcrr/2017/8/07/281
Conclusion
Subbiramani, M., Ranjith, G., &Balagurusamy, A. (2018).
From the above finding, it could be concluded that there is a
A Camel Analysis on Performance of Public and
significance difference in the performance of public and
Private Sector Banks (With Special Reference to
private sector Indian commercial banks. Hence, the null
Canara Bank and HDFC Bank). International Journal
hypothesis is rejected.
of Computational Research and Development.3(1),
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