Financial Soundness in Post-Merger of Private Sector Bank with Reference to ICICI and HDFC Bank

Abstract

This study aimed to examine the financial soundness and post-merger performance of two selected private sector banks, ICICI Bank and HDFC Bank. The study found that both banks have their strengths and weaknesses in terms of financial performance and management capability. The study observed that ICICI Bank has better liquidity compared to HDFC Bank, while HDFC Bank has enough capital to absorb losses. The credit-deposit ratio of both banks has fluctuated over the years, with both banks facing potential financial risk due to granting more credit to customers than receiving deposits. ICICI Bank's management capability is good, with consistent profit per employee and growing ROA and ROE. However, HDFC Bank needs to improve its efficiency in generating revenue and profits from its operations and assets, as reflected in its declining business per employee and ROA ratios.
The study suggests that both banks should focus on improving their financial performance and management capabilities to remain competitive in the market. This could include improving efficiency in generating revenue, managing credit-deposit ratios, and increasing ROA and ROE. Additionally, both banks should work to maintain liquidity and reduce financial risk.