Page 40 - Banking Finance October 2015

ARTICLE

Table.3. Profitability performance of SBI from 2008-09 functioning under the firm regulations

to 2012-13. of the RBI.

Year Interest Other Net interest Net Profit Return on Net Profit Margin:-
income as income as income as margin Assets
2008-09 % to total % to total % to total Net profit margin reveals the financial
2009-10 income income assets 13.11 1.04 results of the business activity and
2010-11 83.40 16.59 2.16 10.54 0.88 efficiency of management in operation.
2011-12 82.58 17.41 2.25 8.55 0.71 Net profit margin is the percentage of
2012-13 84.49 16.27 2.66 9.73 0.88 revenue remaining after all operating
Total 88.12 11.87 3.24 9.01 0.91 expenses, interest, taxes and
Mean 88.18 11.81 2.83 50.94 4.42 preferred stock dividend have been
value 426.77 73.95 13.14 deducted from Total revenue. The
formula for net profit margin=Net
85.35 14.79 2.63 10.18 0.88 Profit/Total Revenue. This is used for
measuring the profitability of the
banks.

Source: Various RBI Reports on trend and progress of Indian Banking Table 3. shows a slight and steady
increase only from 2010-11 to 2011-
Interest income as % to total assets:- Interest income is the interest amount 12. But it suddenly declined to 9.01 in
which banks charge on the amount they lend to different people and 2012-13 from 9.73 in 2011-12. Highest
organizations. State bank of India has to fix the interest rates obliging RBI rules margin showed in 2008-09 as 13.11
and regulations or norms. Interest income being the major source of income and lowest margin recorded in 2010-
for banks, has been analyzed in terms of percentage of total income. 11 as 8.55. Net profit margin has been
fluctuating due to interest rates on
A glance through Table 3. shows that the interest income to total income ratio deposits, lending rates, monetary and
has been fluctuating. The ratio had varied between the lowest of 82.58% in fiscal policies and the like. It is
2009-10 and the highest of 88.18% in 2012-13. The ratio is lower in 2009-10 observed that the profitability level has
than the beginning period of 2008-09. However, the ratio depicted a rise in the been a declining trend for SBI.
following years under study. It may be said that interest income as % to total
assets paved the way to high expectations for SBI. Return On Assets:- This ratio
expresses the productivity and optimal
Other income to total income: - Other income to total income reveals the use of the assets. ROA reveals how
proportionate share of other income to total income. Other income includes much income management has been
non-interest income and operating income. Total income includes interest able to squeeze from each rupees
income, on-interest income and operating income. worth of assets. The best operating
system of banks, which undertakes
Table 3. shows fluctuations in this income. It registered a highest percent ie; retail banking products and value
17.4% in 2009-10 and the lowest of 11.81% in 2012-13. Further it may be added services which can increase its
observed that, other income was on decreasing trend but interest income on return on assets and capital
an increasing trend under study. infrastructures.

Net interest income as % to total assets:- Net interest income is the difference R.O.A=Net income/Average Total
between the interest paid by the banks on for lending various loans. It is evident Assets
that the net interest income registered a lowest rate of 2.16% in 2008-09 and
the highest rate of 3.24% in 2011-12. It may be said that, SBI has been Table 3 shows that it varied between

40 | 2015 | OCTOBER | BANKING FINANCE

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