Financial Performance of Indian Public Sector Banks Before and During COVID-19 Pandemic

Abstract

Purpose: The present study aims to examine the financial performance before and during the COVID-19 pandemic with respect to profitability ratios, liquidity ratios, solvency ratios and economic value added (EVA) of select Indian public sector banks listed in the Bombay Stock Exchange (BSE). Design/Methodology/Approach: In total, 12 public sector banks listed on the BSE were chosen for the analysis, which spans the years 2018–2019 to 2019–2020. Financial statements and monthly closing prices of public sector banks are the data that were gathered for this study. The tools used in this study are as follows: (1) EVA, (2) financial ratios, (3) descriptive statistics, (4) Shapiro–Wilk normality test and (5) paired samples t-test. Findings of the study are as follows: The empirical findings of the study revealed that the COVID-19 pandemic has a negative effect on earnings per share, net profit ratio, return on capital employed, return on asset and return on equity and a positive effect on current ratio, debt to equity ratio and EVA of select public sector banks. Research Limitations/Implications: The findings of this study provide several avenues for more research. As one of the research ramifications, future researchers would need to explain discrepancies in the statistical findings of various academics in the finance field. Social Implications: As the expansion of the banking industry is correlated with India’s economic growth, developing nations like India rely on the accuracy of the information. With the information provided, the COVID-19 pandemic has a negative effect on profitability variables and positive effect on liquidity, solvency and shareholder’s wealth creation variables, so that it has no serious harmful consequences on the economy in respect to profitability position of select banks. Originality/Value: The study is conducted on the financial performance before and during the COVID-19 pandemic with respect to profitability ratios, liquidity ratios, solvency ratios and EVA of select Indian public sector banks listed in BSE and also highlighted how banks adapted the pandemic situation, which is a new phenomenon.