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About HDFC
Housing Development Finance Corporation Limited, more popularly known as HDFC Bank Ltd, was established in the year 1994, as a part of the liberalization of the Indian Banking Industry by Reserve Bank of India (RBI). It was one of the first banks to receive an 'in principle' approval from RBI, for setting up a bank in the private sector
The bank was incorporated with the name 'HDFC Bank Limited', with its registered office in Mumbai. The following year, it started its operations as a Scheduled Commercial Bank. Today, the bank boasts 1412 branches and over 3275 ATMs across India
About HDFC
Network
More than 2000 branches and 5998 ATMs in the country Operating in more than 990 cities All branches are OLRT connected 500 locations serviced through internet banking Representatives in Hong Kong, New York, London and Singapore
Amalgamations
In 2002, HDFC Bank witnessed its merger with Times Bank Limited (a private sector bank promoted by Bennett, Coleman & Co. / Times Group). With this, HDFC and Times became the first two private banks in the New Generation Private Sector Banks to have gone through a merger. In 2008, RBI approved the amalgamation of Centurion Bank of Punjab with HDFC Bank. With this, the Deposits of the merged entity became Rs. 1,22,000 crore, while the Advances were Rs. 89,000 crore and Balance Sheet size was Rs 163000 crore
Capital Structure
At present, HDFC Bank boasts of an authorized capital of Rs 550 crore (Rs5.5 billion), of this the paid-up amount is Rs 424.6 crore (Rs.4.2 billion). In terms of equity share, the HDFC Group holds 19.4%. Foreign Institutional Investors (FIIs) have around 28% of the equity and about 17.6% is held by the ADS Depository (in respect of the bank's American Depository Shares (ADS) Issue). The bank has about 570,000 shareholders. Its shares find a listing on the Stock Exchange, Mumbai and National Stock Exchange, while its American Depository Shares are listed on the New York Stock Exchange (NYSE), under the symbol 'HDB'
Awards
CNBC TV18's Best Bank & Financial Institution Awards Best Bank Dun & Bradstreet Banking Awards 2011 - Best Private Sector Bank SME Financing ISACA 2011 award for IT Governance - Best practices in IT Governance and IT Security Euromoney Awards for Excellence 2011 - Best Bank in India FINANCE ASIA Country Awards 2011: India - Best Bank, Best Cash Management Bank, Best Trade Finance Bank Asian Banker - Strongest Bank in Asia Pacific Bloomberg UTV's Financial Leadership Awards 2011 - Best Bank
Awards
IBA Banking Technology Awards 2010 Winner 1) Technology Bank of the Year 2) Best Online Bank 3) Best Customer Initiative 4) Best Use of Business Intelligence 5) Best Risk Management System IDC FIIA Awards 2011 - Excellence in Customer Experience The Banker and PWM 2010 Global Private Banking Awards-Best Private Bank in India
Awards
Forbes Asia- Fab 50 Companies - 5th year in a row NDTV Business Leadership Awards 2010- Best Private Sector Bank Business Today Best Employer Survey- Listed in top 10 Best Employers in the country Asian Banker Excellence Awards 2010 Best Retail Bank in India Excellence in Automobile Lending Best M&A Integration Technology Implementation
Stock prices
Facts
Despite macroeconomic headwinds, the bank was able to maintain its net non-provisioning assets at 0.2 per cent on a sequential basis. At 81.3 per cent, the provision coverage ratio was also healthy It is better placed than many peers to maintain its asset quality. However, it has significant exposure (around 15 per cent) to the small and medium enterprises (SME) segment HDFC Banks loan growth stood at a healthy 25.6 per cent, up 560 basis points over the June quarter. According to the management, while retail loan growth remained on track, growth in the corporate lending segment was mainly led by working capital loans and ongoing loans. The loan book was boosted by 38-40 per cent year-on-year growth in business banking loans to SMEs, commercial vehicle, construction equipment and home segments
Facts
Though the deposit growth has nearly halved from 30.4 per cent in the year-ago quarter, at 18.1 per cent, it was higher than the 15.4 per cent seen in the June quarter, and in line with the managements aim Despite the tough macroeconomic environment, at 4.1 per cent, the bank was able to control its net interest margin compression to 10 basis points. This is within the managements target range of 3.9-4.2 per cent
Porters Forces
Bargaining power of suppliers RBI rules and regulations
Threat of competitors Large number of banks Strong exit barriers Low switching costs
Threat of substitutes Deposits in posts Non Banking financial sector growing rapidly
Bargaining power of consumer Numerous alternatives Low switching costs Increasing consumer awareness
Porters Forces
Threat of Competitors Large number of banks There are so many banks competing against each other for the same set of people
Strong exit barriers There are a lot of customers who are at stake and numerous legal obligations which need to be fulfilled Low switching cost Costumers switching cost is very low, they can easily switch from one bank to another bank
Porters Forces
Bargaining power of suppliers RBI rules and regulations RBI lays down rules and regulations according which the banks are governed
Porters Forces
Bargaining power of consumers Numerous Alternatives There are numerous banks competing against each other for the same set of people
Low switching cost Costumers switching cost is very low, they can easily switch from one bank to another bank
Increasing consumer awareness With the increasing amount of information available to the consumer, banks have to be more competitive and customer friendly to serve them. If not, the consumer can easily switch to their competitors
Porters Forces
Threat of new entrants Product differentiation very difficult Services provided by banks are not highly differentiated which increases the bargaining power of consumers
Entry Barriers Reserve Bank of India has laid out a stagnant rules and regulation for new entrant in Banking Industry
Porters Forces
Threat of substitutes Non-Banking financial sector These are financial resources outside the traditional banking system which has witnessed a tremendous growth in recent years in India NBFC is a close substitute of banking in respect of raising funds. Deposit in Posts Post office provides services like fixed deposits, savings account, recurring account etc. The interest rate of saving account is higher than private banks. Since it is fully secured by the government, people who do not want to take risks look at post office saving as a good substitute
Industry Size
Indias GDP (USD Billion PPP) 4057 Share of Services (% of GDP) 55.2 Banking and Insurance Size (USD Billion) 395.96
00
11.36% 9.40%
Transport
Railways Hotels & Rest. Commu. Banking & Insurance Trade
14.67%
20.61%
26.94%
Source:http://www.interlinkre.com
Growth
Annual growth in Banking and Insurance sector which forms a part of Indias services
25.00%
20.60%
20.00% 15.90% 16.70% 14% 11.30%
15.00%
10.00% 5.00% 0.00%
Annual Growth
Segmental Analysis
Reserve Bank of India
Foreign24
Regional rural6
Urban Bank
State Bank
Public Sector26
Private Sector22
SBI Group7
Nationalized19
New7
Old15
Segmental Analysis
PSU Banks Government of India holds majority of stakes in PSU banks. They are the largest category in the Indian banking system Regional Rural Banks Established during 1967-1987, they are jointly owned by the Central government, State Government and a sponsoring public sector commercial bank Private Sector Banks They have major portion of the share capital with private individuals and corporates. Non-nationalized are old private banks and nationalized in 1993 are termed as new private banks Foreign Banks They have their head offices in a foreign country but operate their branches in India
Segmental Analysis
50000 40000 30000 20000 10000 0 39257 44901 Profit during the year Public Sector Banks 13111 4741 2010 100.00% 50.00% 0.00% 2011
Source:http://rbidocs.rbi.org.in
Growth in profit during the year Public Sector Banks Private Sector Banks Foreign Banks
Basis of Competition
The following factors have influenced the increase in competition in the banking sector Profitability - Higher profitability compared to the past or international standards. This attracts new entrants which increases the competition in the industry Technological Changes This enable quicker and more efficient service Product Innovations Features such as home banking, ATMs etc are making the industry fiercely competitive Entry/Exit Norms Though regulatory barriers have been eased, desirable barriers exist in the form of capital and other requirements Increasing consumer awareness - consumers of banking services are getting increasingly agile, enlightened, cost and quality conscious. They are already forcing the pace of competition on price, product and quality products
Diversified Products
New Technology
Managing NPAs
IT and New technology Technology has the potential to change approached to marketing, advertising, designing, pricing and distributing financial products and services and cost savings in the form of an electronic, self-service medium. Technology holds the key to the future success of Indian Banks
Features like internet banking, anytime, anywhere banking, tele-banking, remote access, multi city chequing facilities etc have become a key differentiator Low employee cost Focusing on increasing employee efficiency by adopting people centric policies. There are various methods that are used to achieve this.
Demand Drivers
High Economic Growth
Retail
Infrastructure
Telecom
Rural Markets
Exports/Imports
Demand Drivers
Retail Increase in demand for housing, car, personal loans etc
Rural Markets As the economy grows there will be more penetration of private banks in rural areas
Exports/ Imports An increase in the export and imports would directly increase the business of banks through their transactions, loans, bills etc
Key Events
Main mergers and acquisitions in the Indian banking sector
Regulations
Banks in India are governed by the Reserve Bank of India.
Banking Regulation Act, 1949 As per Section 5(c) of Banking Regulation Act, 1949 a "Banking Company" means any company which transacts the business of banking in India.
Explanation: Any company which is engaged in the manufacture of goods or carries on any trade and which accepts the deposits of money from public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause. As per Section 5(b) of Banking Regulation Act, 1949 , banking means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise.
Regulations
Banking Regulation Act, 1949 (continued) As per Section 5(d) of Banking Regulation Act, 1949 , company means any company as defined in Section 3 of the Companies Act, 1956 and includes a foreign company within the meaning of Section 591 of that Act. As per section 51 of Banking Regulation Act, 1949 , certain provisions of the Banking Regulation Act are also applicable to the State Bank of India , any corresponding new bank, a regional rural bank and any subsidiary bank. "Corresponding new bank" has been defined under clause(ee)of section 2 of the DICGC Act to mean a corresponding new bank constituted under the Banking Companies (Acquisition and Transfer of Undertakings ) Acts of 1970 or 1980.
Source: http://fiuindia.gov.in
Competitor Analysis
Strategies to enhance revenue
Efficient delivery of products and services can strengthen customer relationship which will reduce operational costs.
Banks are automating routine transaction and redesigning branches to suit local preferences for products , services and pricing. Banks are also adding customer facing functions that are specifically designed for their business.
ICICI
HDFC
AXIS
12.65%
ICICI
HDFC
AXIS
BUSINESS MODEL
Business Strategy
Increase the market share in India Expand the product range and the customers Improve the quality of customer service Innovate on the product and service range to attract more customers and address the existing inefficiencies Maintain a disciplined credit risk management Reduce banks cost of funds
HDFCs diverse loan portfolio along with superior lending practices de-risks its business model
Lower operating costs along with stable margins and high asset quality ensures sustainable profitability
Business Philosophy
Operational Excellence
People
Customer Focus
Product Leadership
Retail
Retail mortgage accounts for around 2/3rds of the total loan Majority is of individual borrowers default rates are minimal Majority is for middle class, salaried employees; greater focus in Tier 2 and 3 cities ensures diversification of the retail portfolio
Wholesale
HDFC is a financier to real estate developers increased chance of defaults Stringent norms like low loan-to-value(LTV) ratio of less than 65% [proportion of loan value to property value] Funding highly rated corporate Loans for acquisition of property in IT parks and industrial zones
HDFC Services
2001
2% 1% 14% 40% 43% Branches ATMs 25% Phone Banking Internet Mobile 12% 1% 17%
2008
Branches ATMs Phone Banking 45% Internet Mobile
Key Segments
Treasury
ASSOCIATED COMPANIES
HDFC Bank HDFC Asset Management Company Ltd HDFC Standard Life Insurance Company Limited HDFC Sales
Retail Services
Loan Product Auto Loan Loan Against Property Personal loan Credit card Commercial vehicles finance Home loans Retail business banking Working Capital Finance Health Care Finance Education Loan Gold Loan Deposit Product Saving a/c Current a/c Fixed deposit Demat a/c Safe Deposit Lockers Investment & Insurance Mutual Fund Bonds Insurance Equity and Derivatives Mudra Gold Bar Cards and Services Credit Card Debit Card Prepaid Card Bill pay Direct Pay Visa Money Transfer Online Payment of Direct Tax Mobile Banking ATM Phone Banking Email Statements Branch Network
Comparison
70 60 50 40 30 1200 1000 800
Wholesale Retail
Wholesale
600 400
Retail
20
10 0 2006 2007 2008 200 0 2006 2007 2008
HDFC Bank is a consistent player in the private sector bank and have a
well-balanced product and business mix in the Indian as well as overseas markets. Customer segments (retail & wholesale) account for 84% of Net revenues ( FY 2008) Higher retail revenues partly offset by higher operating and credit costs. Equally well positioned to grow both segments
Treasury
Foreign Exchange and Derivatives Local Currency Money Market & Debt Securities Equities
To comply with statutory reserve requirements, the bank is required to hold 25% of its deposits in government securities. The Treasury business is responsible for managing the returns and market risk on this investment portfolio
Treasury
The treasury group is responsible for compliance with reserve requirements and management of liquidity and interest rate risk on the Banks balance sheet During the financial year ended March, 2011, revenues from foreign exchange and derivative transactions grew by 26.2% to Rs. 786.3 crore These revenues were distributed across large corporate, emerging corporate, business banking and retail customer segments
Revenue has been increased from 2006 to 2010 and is still growing at acceptable pace There is a negative growth in terms of domestic revenues
Semi-Urban
Urban 28% Metro-Politian
Segmental Growth
FY07 Retail Banking Wholesale Banking FY08 FY09 94% 99% FY10 77% 78%
Treasury
Life Insurance General Insurance Venture Fund Management
191%
331%
101%
115% 121%
83%
112% 107% 53%
In the last few years Retail Banking has been shrinking Venture Fund Management has added another revenue potential
Total deposits were 230,676 crore, up by 18.1% from last year Savings account deposits at 69,017 crore increased 15.9% The Banks branch network stood at 2,150 branches in 1,141 cities (an increase of 385 branches from 1,765 branches
Information Technology
Bank has made substantial investments in its technology platform and systems, built multiple distribution channels That including an electronically linked branch network, automated telephone banking, internet banking and banking through mobile phones, to offer its customers convenient access to various products.
Highlights of 2010-11
Net Profits of Rs. 3926 Crore, an increase of 33% over the previous
year
Balance Sheet Size Rs. 277,353 Crore as on 31st March, 2011 Total Deposits of Rs. 208,586 Crore, an increase of 24.6% over previous year Network of 1986 Branches and 5471 ATMs in 996 cities as on 31st March, 2011 Banks Capital Adequacy Ratio as on 31st March ,2011 stood at 16.2% as against regulatory minimum of 9% Total Advances were Rs. 159,983 Crore, an increase of 27.1% over the previous year
Net Revenues
2006-07 : 498,471 Lacs 2007-08 : 751,103 Lacs 2008-09 : 1,071,176 Lacs 2009-10 : 1,236,953 Lacs 2010-11 : 1,487,828 Lacs
3000
2500 2000 1500 1000 500 0 Years 1141
2007
2008
2009
2010
2011
0.48%
Year
2009
2010
2011
DPS (Rs.)
18 16 14
16.5
12
10 8 6 4 2 0 7 8.5
12
10
Year
2007
2008
2009
2010
2011
EPS (Rs.)
90 80 70 67.6 52.9 46.2 36.3 85
60
50 40 30 20 10 0
Year
2007
2008
2009
2010
2011
183271
222459
277353
4.2
4
4.2
4.2
16.8
16.5
16
15.5 Year 2009 2010 2011
ATMs (Nos.)
6000 4000 2000 0 Year 3295 4232 5471
2009
2010
2011
Cities (Nos.)
1500 1000 500 0 Year 2009 2010 2011
100
50
90.8
98.3
115.5
0
Year 2009 2010 2011
14.82%
62.18%
31.62%
222,980.5
180,320.1
Advances
Total Income Profit before Depreciation and Tax Net Profit Profit brought forward Total Profit available for Appropriation
159,982.7
24,263.4 6,316.1 3,926.4 4,532.8 8,459.2
125,830.6
20,155.8 4,683.5 2,948.7 3,455.6 6,404.3
Financial Analysis
As shown in the graphs : HDFC Bank has a consistent high CAR Ratio, which signifies the solid position of the bank. NPAs of HDFC Bank are very low. This shows the banks good relations with its customer. Deposits are increasing continuously which shows the good services provided by the bank. NIM for the bank is also good which further solidifies its position in the market. Profit margins are increasing year by year.
Market Capitalization
Market Capitalization depends upon the future performance of the company to a large extent It is different from profit margin and profitability PE Ratio = Market Capitalization Profit
ICICI
PNB IDBI HDFC AXIS Bank
Private
Private Government Private Private
25.26
7.6 2.9 22.2 11.6
Capital Structure
As on 30th June 2010, the authorized capital is Rs 550 Crore The paid up capital is 459,60,07,030 HDFC Group holds 23.63% of the banks equity American Depository shares hold around 17.05% of equity 27.45% is held by Foreign Institutional Investors ( FII) The bank has about 433078 number of shareholders
Competitive Analysis
Indias banks have grown at a rapid pace over the past 2 decades after the financial liberalization This growth has still lacked in meeting the massive demand in the need of financial intermediation. It has led to the growth on non-banking financing companies (NBFCs) and microfinance companies Major banks in India are either state owned or previous government owned institutions which have been fully privatized like ICICI and HDFC Bank
Competitive Analysis
State Bank of India (SBI)
SBI is Indias Largest Bank which is majority owned by the government. The Company has a number of Subsidiaries and has been a market outperformer in recent times. Revenues of $22 billion. The SBI has 7 subsidiaries of which 2 have been merged and 5 are remaining
State Bank Bikaner Jaipur State Bank of Hyderabad State Bank of Mysore State Bank of Patiala State Bank of Travancore
Competitive Analysis
ICICI Bank
This is the largest Indian Private Bank with operations in all Financial Services Sectors. The Company has faced a bad time during the Lehman downturn but has recovered well Revs of $12.5 billion. ICICI Bank is also strong in almost all sectors of the financial industry and has one of the strongest management teams in the country The company which overextended itself in the 2007-2008 boom has now reduced the size of its risky segments and is again back on the growth trajectory.
Competitive Analysis
Punjab National Bank
Punjab National Bank (PNB) , is the second largest PSU bank with about 5000 branches across 764 cities
The Bank like BOB and SBI has shown good growth while at the same time managed to control bad debt
Competitive Analysis
Axis Bank
Axis Bank has been the best performing private bank along with HDFC Bank showing excellent growth in top line and bottom line
The Bank has been expanding into insurance and investment banking (acquired Enam)
The Bank was promoted jointly by UTI, LIC and other state owned general insurers
Competitive Analysis
Market Share
12.32% 30.07%
ICICI HDFC Axis 26.34%
Kotak
YES Bank Others
4.05%
10.46%
16.76%
The bank's net non-performing asset ratio fell to 1.61 percent in the quarter from 1.88 percent a year ago as improved consumer and business sentiment resulted in slowdown in bad loans pile up
Inference
HDFC has an edge of 51.22 % on Axis Banks numbers in Q2 in respect of interest on Advances
Axis Bank has a clear edge of 13.67% in respect of lower interest expended compared to HDFC Bank
In this expense item, Axis has a huge edge of 75.32% over HDFC Bank
Axis Bank has an edge of 28.1% over HDFC Bank in this item of expense
HDFC Bank has an edge of 21.58% over Axis Bank at operating level
HDFC Bank has 24.08% more in net profit level over Axis Bank
Paid-up Equity HDFC Banks equity is Rs.462.60 Cr while Axis has Rs.408.84 cr. HDFC Bank has 13.15% more of equity
Key Focus
Understanding of customers financial needs and providing banking solutions
Wide range of products and services to cater both retail and wholesale customer segments
Market Leaders in various products of retail banking such as Credit Cards and Auto Loans Main focus on balancing growth with diversified revenues, appropriate margins and healthy asset quality
Key Focus
Providing financial services to the under banked and rural sector Helping Farmers with products like Tractor Loan, Kissan Gold Card, Loan against Warehousing Receipts etc In line with growth strategy today 30% of the branches are located in rural and under banked areas
To continue developing products and services that reduce the cost of funds.
Segmentation Strategy
Demographic variables Location Targeting the Metro cities and the developing cities Occupation They are also focusing on targeting the business men and the salaried class people Age Their main focus is on the middle aged grouped people but they are trying to attract the senior citizens and the minors also.
Segmentation Strategy
Psychographic Variables
Lifestyle They are targeting people who believe in modern banking with higher set of services , i.e internet banking , mobile banking etc. Class
They are focusing on lower middle class, middle class , upper middle class and upper class people as a major chunk of people who avails the banking facility fall in this category and is still growing.
Targeting Strategy
Target market Corporate Banking Market This market target the industries and fulfills the financial needs Capital Market This segment is targeted on the long term needs of the individuals
Positioning strategy
HDFC has positioned itself as a bank which gives higher standard of services through product innovation for the diverse needs of the individuals and other corporate clients. So they look at highlighting the following points in their positioning : Customer centric Service oriented Product Innovation
Acquisition Strategy
Customer Segment as an acquisition strategy Banks are now not targeting customer who want to associate themselves with foreign banks just for status symbol as it wastes a lot of banks resources Value Proposition as an acquisition strategy The bank has to provide world class services to all types of customers if it wants to retain them and increase the value of the bank. Pricing as an acquisition strategy HDFC has come up with a strategy of giving better services to its customers by reducing the minimum balance requirements. Otherwise in international banks the minimum balance required is Rs 10,000 but HDFC has brought it down to Rs 5000
It is acquiring banks in the north and south parts of the country which will get them more customers and will help them grow faster
Marketing Strategy
Scientific marketing campaigns are being undertaken using customer data, usage pattern , preferences etc The marketing analytics initiatives helps the bank come up with different ways in which they can measure the efficacy of the campaigns that they organize This also helps then to test or try new campaigns the way they want , experimenting with creatives etc.
Other strategies
Building the trust of the customers Providing a large number of products and services
SCENARIO
Growth in mortgages, business banking, commercial vehicle loans and auto loans (2010-11) Customer base grew to 21.9 million customers Increased its network and product penetration initiatives Increased visibility of net banking and phone banking
SCENARIO
Success of banks multi-channel strategy 80% of customer initiated transactions serviced through the non-branch channels Focus on the credit card portfolio 5 million credit cards as of March 2011
Additional features
Additional features include industrys best netbanking features like online back-up card activation, online hotlisting, statements and e-commerce transactions Free SMS alert across the world on the customers local number
VODAFONE INDIA
Mobile Bank account with Vodafone m-paisaTM aimed at rural areas Basic banking transactions on the mobile phone and even deposit and withdraw cash at appointed Vodafone m-paisaTM outlets, without having to go to bank branches Open a savings account and transact Sense of trust and security
ZAFIN LABS
Product called miRevenue Used in the retail business area Planning to extend the scope Attained reduction in the time for charging the customers
Loans
Available for all new home loan customers of Indian origin applying before January 31,2010 Same fixed rate, irrespective of the amount Very attractive rates compared to the other large players in the market offering similar products Overwhelming response
QUICKREMIT
Online remittance service From Singapore and UK Completely online mode to remit money to India, without the need to visit a bank Tie-up with DBS Bank in Singapore Accessible through any bank in UK
SWIFT
Personal loans Processed in 24 hours Available for all those who holds an account with HDFC Bank From September 2011
ICICI Bank
ICICI Bank Second largest bank in India Strong diversified financial services franchise in India ICICI Bank has taken up specific initiatives to ramp up financial literacy as well as intermediation to the underserved and under-banked segments in both rural and urban areas ICICI Bank offers a complete suite of products and services to meet the individual financial requirements of customer segments. Savings, investments and insurance products are made available to its rural and agri customer base The Bank also offers microfinance services to low-income households and crop loans, farm equipment loans, commodity based loans to farmers.
Axis Bank
3rd largest private sector bank Aggressive branch and ATM expansion to 1021 branches and 371 ATMs to be upcoming in tier II and Tier III cities. Expanding global reach by way of setting up 3 branch offices in Singapore , Dubai and Hong Kong and 2 representative offices in Shanghai and Dubai recently Axis Bank offers a vast spectrum of services encompassing Large and MidCorporate Banking, SME Banking, Agri-Business Banking, Retail Banking and International Banking.
Axis Bank
Axis Bank's network of over 1,200 branches and 4,900 ATMs is spread across more than 680 cities and towns across the country Instead of piecemeal efforts of promoting their debit card, the bank has launched what it calls the first ever filmi Platinum debit and credit card across 25 cities in India. The objective to offer movie deals on movie tickets through one exclusive card. The bank therefore hopes to carve out a niche in a space not fully explored by competition
STRENGTH
Indian banks have compared favourably on growth, asset quality and profitability with other regional banks over the last few years. The banking index has grew at a compounded annual rate of over 51 per cent since April 2001 as compared to a 27 per cent growth in the market index for the same period Bank lending has been a significant driver of GDP growth and employment Extensive reach through vast networking & growing number of branches & ATMs The government's regular policy for Indian bank since 1969 has paid rich dividends with then nationalization of 14 major private banks of India According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75% of total assets of the banking industry, with the private and foreign banks holding 18.2% and6.5% respectively
WEAKNESS
PSBs need to fundamentally strengthen institutional skill levels especially in sales and marketing, service operations, risk management and the overall organizational performance ethic & strengthen human capital The cost of intermediation remains high and bank penetration is limited to only a few customer segments and geographies Structural weaknesses such as a fragmented industry structure, restrictions on capital availability and deployment, lack of institutional support infrastructure, restrictive labour laws, weak corporate governance and ineffective regulations beyond Scheduled Commercial Banks (SCBs) Refusal to dilute stake in PSU banks: The government has refused to dilute its stake in PSU banks below 51% Opposition from Left and resultant cautious approach from the North Block in terms of approving merger of PSU banks may hamper their growth prospects in the medium term
OPPORTUNITY
Growth driven by new products and services that include opportunities in credit cards, consumer finance and wealth management on the retail side, and in fee-based income and investment banking on the wholesale banking side
With the growth in the Indian economy expected to be strong for quite some time especially in retail banking, mortgages and investment services Reserve Bank of India (RBI) has approved a proposal from the government to amend the Banking Regulation Act to permit banks to trade in commodities and commodity derivatives Given the demographic shifts resulting from changes in age profile and household income, consumers will increasingly demand enhanced institutional capabilities and service levels from banks
THREAT
Threat of stability of the system: failure of some weak banks has often threatened the stability of the system Rise in inflation figures which would lead to increase in interest rates Increase in the number of foreign players would pose a threat to the PSB as well as the private players Increase in CRR rate
STRENGTH
Leader in home loan segment Right strategy for products Distribution structure Brand image High degree of customer satisfaction Alliance between HDFC and Standard Life giving a strong brand backing Robust Risk control Framework Network of 500 branches and agents across 700 cities
WEAKNESS
Strict policy of funding Not very aggressive on M&A Mere international presence Standard Life were accused of smearing a policy-holder. Controversies like job cuts, racism and data loss have affected image
OPPORTUNITIES
Untapped rural market Home loan segment Fast growing insurance business
THREAT
Risk of fraud and NPA Major private players RBI policies Increase in funding cost Economic instability and global crisis
SWOT - ICICI
STRENGHTS ICICI is now a global player in International Banking through its operations 18 countries ICICI is considered as the pioneer in usage of Internet services for Online Banking Advanced infrastructure with sound IT base
SWOT - ICICI
WEAKNESS High Bank Service Charges: ICICI bank charges highly to customers for the services provided by them when compared to other bank & that is why it is only in the reach of higher class of society Less Credit Period: ICICI bank provides credit facilities but only up to limited period
SWOT - ICICI
OPPURTUNITIES Rise in upper and middle class population due to increase in GDP, therefore could introduce economical version of their services Largely unexplored market in regions where only PSBs operate
SWOT - ICICI
THREATS ICICI Bank is facing tight competition locally as well as internationally. Bank like CITI Bank, HSBC, ABM, Standard Chartered, HDFC also provide equivalent facilities like ICICI do and also ICICI do not have consistency in its international operation ICICI levies higher service charges for various transactions making it expensive for major sections of the society ICICI Bank provides all services through electronic computerized machines. This creates problems to the less educated people
Higher cost
Customer service
SWOT - SBI
STRENGTH Strong domestic market position, sustaining reach and customer confidence SBS merger further hastens SBI and its associate banks merger and helping defend its leadership position Wide Distribution Network: Excellent penetration in the country with more than 10000 core branches and more than 5100 branches of associate banks (subsidiaries) Government owns 60% stake in SBI. This gives SBI an edge over private banks in terms of customer security SBI offers very low transition costs which attracts small customers
SWOT - SBI
WEAKNESS The existing hierarchical management structure of the bank, although strength in some respects, is a barrier to change Though SBI cards are the 2nd largest player in the credit card industry, it has the highest non performing assets (NPAs) in the industry, which stand out to be at 16.28 % (Dec 2007) Susceptible to political intervention SBI lags with respect to private players in terms of modernisation of its processes, infrastructure, centralisation, etc.
SWOT - SBI
OPPORTUNITIES SBI could be the highest beneficiary from increasing adoption of Etransactions Investment in information technology will decrease transaction cost Growth in general insurance will help increasing market share Merger of all the associate banks (like SBH, SBM, etc) into SBI will create a mega bank which streamlines operations and unlocks value Planning to add 2000 branches and 3000 ATMs in 2008-2009. This will further increase its reach
SWOT - SBI
THREATS Opening of Indian Banking Sector in 2009 will cause intense competition. Large numbers of MNC banks are mushrooming in the Indian market due to the friendly policies adopted by the government. This can increase the level of competition and prove a potential threat for the market share of SBI bank Large numbers of MNC banks are mushrooming in the Indian market due to the friendly policies adopted by the government. This can increase the level of competition and prove a potential threat for the market share of SBI bank Private banks have started venturing into the rural and semi-urban sector, which used to be the bastion of the State Bank and other PSU banks here was an employee strike in the year 2006 which disrupted SBIs activities. This can be repeated in the future
Threat of competitors
Threat of Substitute
Threat of Buyer
Nature of suppliers Few alternatives RBI rules and regulations Suppliers are not concentrated forward integration
Threat of Supplier
5 S of Kaizen
SORT - It focus on eliminating unnecessary items from the work place. It is excellent way to free up valuable floor space. It segregate items as per require and wanted. Frequently Less Required Frequently Remove Required everything from workplace Wanted but not Required Junk SYSTEMATIZE - Systematize is focus on efficient and effective Storage method. That means it identify, organize and arrange retrieval. It largely focus on good labelling and identification practices. Objective :- A place for everything and everything in its place SPIC- n SPAN - Spic-n-Span focuses on regular clearing and self inspection. It brings in the sense of ownership
5 S of Kaizen
STANDERDIZE - It focus on simplification and standardization. It involve standard rules and policies. It establish checklist to facilitates autonomous maintenance of workplace. It assign responsibility for doing various jobs SUSTAIN - It focuses on defining a new status and standard of organized work place. Sustain means regular training to maintain standards developed. It brings in self- discipline and commitment towards workplace organization
Successful Strategies
Focusing on the expansion of retail and rural banking Increasingly customer - centric in their approach Mergers and acquisitions Strong national network Mission is to be "a World Class Indian Bank", benchmarking themselves against international standards.
Successful Strategies
Best practices in terms of product offerings, technology, service levels, risk management and audit & compliance Develop new product and technology is the main business strategy Increase market share in Indias expanding banking and financial services industry by following a disciplined growth strategy focusing on quality and not on quantity and delivering high quality customer service.
Successful Strategies
Leverage our technology platform and open scalable systems to deliver more products to more customers and to control operating costs Develop innovative products and services that attract the targeted customers that reduce banks cost of funds Focus on high earnings growth with low volatility
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