After Digital Banking & the Fintech Revolution successful India, the adjacent mobility is really to publication the banks down those products and partnerships. Key banking metrics springiness an interview-ready scorecard for judging a bank’s profitability, backing strength, plus quality, efficiency, and return floor plan utilizing FY24 benchmarks from awesome Indian banks.
- NIM (Net Interest Margin) is calculated arsenic (Interest Income - Interest Expense) / Avg Earning Assets, pinch backstage slope benchmark astatine 3.5-4.5% and PSU benchmark astatine 2.5-3.2%.
- CASA Ratio is (CA + SA Deposits) / Total Deposits, wherever >40% = beardown and <30% = costly funding.
- GNPA Ratio is Gross NPA / Gross Advances, pinch backstage <2% and PSU <5% = healthy.
- NNPA Ratio is Net NPA / Net Advances, wherever <1% = beardown and <0.5% = excellent.
- PCR (Provision Coverage) is Provisions / Gross NPA, wherever >70% = prudent and >80% = very safe.
- Credit Cost is Provisions / Avg Loan Book, pinch normalised 0.5-1.0% and <0.5% = benign cycle.
- ROA, ROE, and C/I Ratio complete the scorecard for return floor plan and efficiency.
Banking Metrics Scorecard
Banks require a abstracted group of metrics owed to their unsocial business exemplary - they intermediate betwixt depositors and borrowers, making accepted profitability ratios insufficient. The scorecard beneath compares HDFC Bank, SBI, and Kotak Bank connected FY24 metrics and benchmarks.
Source: Company Quarterly Reports, HDFC Bank/SBI/Kotak Mahindra Bank FY2024.
Profitability: NIM
NIM (Net Interest Margin) is calculated arsenic (Interest Income - Interest Expense) / Avg Earning Assets. Higher NIM = amended dispersed betwixt lending and deposit rates.
In FY24, HDFC Bank reported 4.3%, SBI reported 3.3%, and Kotak Bank reported 5.0%. The benchmark is Private: 3.5-4.5%; PSU: 2.5-3.2%.
Funding Strength: CASA Ratio
CASA Ratio intends Current Account + Savings Account deposits arsenic a stock of full deposits. The look is (CA + SA Deposits) / Total Deposits.
Higher CASA = cheaper funding; CASA deposits are near-zero cost. HDFC Bank reported 38%, SBI reported 43%, and Kotak Bank reported 49%, pinch >40% = beardown and <30% = costly funding.
Asset Quality: GNPA, NNPA, PCR and Credit Cost
GNPA Ratio is Gross NPA / Gross Advances. NPA intends Non-Performing Asset - indebtedness overdue >90 days; stressed asset. For FY24, HDFC Bank reported 1.24%, SBI reported 2.24%, and Kotak Bank reported 1.73%, pinch Private <2% and PSU <5% = healthy.
NNPA Ratio is Net NPA / Net Advances. It is nett of provisions and is simply a cleaner measurement of existent in installments quality. HDFC Bank reported 0.33%, SBI reported 0.57%, and Kotak Bank reported 0.34%, pinch <1% = beardown and <0.5% = excellent.
PCR (Provision Coverage) is Provisions / Gross NPA. Provision Coverage Ratio - higher = much blimpish provisioning. HDFC Bank reported 74%, SBI reported 91%, and Kotak Bank reported 73%, pinch >70% = prudent and >80% = very safe.
Credit Cost is Provisions / Avg Loan Book. It is the yearly in installments nonaccomplishment complaint and a cardinal driver of nett profit for banks. HDFC Bank reported 0.4%, SBI reported 0.3%, and Kotak Bank reported 0.5%, pinch normalised: 0.5-1.0% and <0.5% = benign cycle.
Return Profile: ROA and ROE
ROA is Net Profit / Avg Total Assets. HDFC Bank reported 1.9%, SBI reported 1.0%, and Kotak Bank reported 2.2%, pinch Private >1.5% and PSU >0.8%.
ROE is Net Profit / Avg Shareholders' Equity. HDFC Bank reported 17.0%, SBI reported 18.9%, and Kotak Bank reported 14.5%, pinch >15% for backstage and >12% for PSUs.
Efficiency: C/I Ratio
C/I Ratio (Cost-to-Income) is Operating Expenses / Net Revenue. Lower = better; <45% = efficient; >60% = concern.
In FY24, HDFC Bank reported 42%, SBI reported 55%, and Kotak Bank reported 46%. This makes the C/I Ratio a useful ratio cheque alongside profitability, funding, plus quality, and return metrics.
How to Use the Scorecard
Always quote a range, not a azygous number - it signals you understand that metrics alteration by slope type (PSU vs private), size, and in installments cycle. Anchoring to HDFC Bank and SBI arsenic reference points is ever well-received.
Conclusion
Key banking metrics activity champion arsenic a scorecard: NIM for profitability, CASA for backing strength, GNPA and NNPA for plus quality, PCR and in installments costs for consequence prudence, ROA and ROE for returns, and C/I Ratio for efficiency.
The astir predominant correction is quoting 1 banking metric successful isolation aliases utilizing a azygous number without a range. Always comparison by slope type, size, and in installments rhythm - for example, backstage slope NIM benchmarks and PSU slope NIM benchmarks are not the same.
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