portfolio analysis indian banking sector

Strategic Management - II

Portfolio Analysis Indian Banking Sector

Group-7, Section-C PGP-1

Participant Roll Number Abhimanyu Malhotra 2011PGP504

Akshay Gupta 2011PGP526 Archita Joshi 2011PGP568

Dinabandhu Kejriwal 2011PGP625 Kunal Biswal 2011PGP703 Richa Singh 2011PGP823

Shivendra Raizada 2011PGP876

Group-7 | Section-C Portfolio Analysis – Indian Banking Sector

PGP 2011-2013

CONTENTS

S. No. Topic Page

1. Industry Overview 3

2. Market Divisions 5

3. Banks Selected for study 9

4. Portfolio Analysis 12

5. References 23


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1. Industry Overview

1.1 Definition

The banking industry consists of financial institutions that receive demand deposits and term

deposits from customers and channelize this money into lending activities. The banking industry

can be broadly divided into retail banking, corporate banking, treasury services, wealth

management and agricultural banking.

1.2 Size, Growth and Growth Drivers

The banking industry in India has witnessed a constant growth in the last decade. The most

common form of measuring the size of the banking industry is measuring the total assets of the

banks. According to BMI India

Commercial Banking Report, in 2011,

the assets of the banking sector of India

were valued at $1,267.7 billion. The

banking industry in India grew at a rate

of 13.92% between 2008 and 2011 and

is expected to grow at 27.59% between

2012 and 2016As on 31st March 2011,

the banking sector in India comprised

of 170 commercial banks.

The growth in this sector has primarily been driven by increasing globalization and liberalization

of Indian economy. Realising the potential of the Indian banking sector, many foreign banks are

entering the industry which in turn is further driving the growth and opportunities of the industry.

1.3 Breakup of Loan Assets – Growth of retail banking in last two decades

The loan assets of the banks can be divided into four broad categories – industrial lending,

personal lending, services lending and farm & other sector lending. According to IBEF, during

the past two decades, the share of industrial lending has reduced to 44%( was 50% in

1990s).This decline can be attributed to increase in the share of personal lending which almost

857 1,033 1,276 1,267 1,632

2,069 1255.0

3,482

4,352

2008 2009 2010 2011 2012F2013F2014F2015F2016F

Asset Size of the Industry ($ billion, 2008-2016F)

CAGR: 27.59%

CAGR: 13.92%


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doubled during the same period. Within personal lending, the semi-urban and rural segments are

driving the growth of the industry.

Increased purchasing power of consumers has also led to increase in demand for personal items,

which has contributed towards the growth of this sector. The retail loans amount to 6% of the

GDP of India (FICCI, 2010).

1.4 Structure of Indian Banking Sector

The banks in India can be divided into four broad categories

Public Sector – Major Nationalized banks are State Bank of India, Punjab National Bank

and Canara Bank.(GOI owned and run)

Private Sector – These banks are owned by

individuals and are headquartered in India.

Major banks in this segment are ICICI Bank,

HDFC Bank and Axis Bank.

Foreign Banks – These banks are

headquartered outside India but have

operations in India. Major foreign banks

include Citi Bank, HSBC, Standard Chartered Bank and The Royal Bank of Scotland.

Co-operative Institutions – These banks belong to its members, who are simultaneously

the owners and the customers of the bank. Some of the co-operative banks operating in

Home

Mortgages

52%

Personal

Loans

16%

Credit

Card

Outstandin

gs

3%

Other

Loans

29%

Breakup of Personal Lending

(%, 2010)

Industrial

44%

Personal

Lending

19%

Services

24%

Farm and

other

sectors

13%

Share of Loan Assets

(%, 2010)

Public

Sector

Banks

74.0% Private

Sector

Banks

19.0%

Foreign

Banks

7.0%

Share of Total Deposits

(%)


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India are Delhi State Co-operative Bank, Maharashtra State Co-operative Bank and

Punjab State Co-operative Bank.

The public sector, private sector and foreign banks are collectively known as scheduled

commercial banks (SCBs). The banking industry in India is dominated by SCBs while the co-

operative banks have a very limited reach. Within SCBs, the public sector banks account for

78% of the total assets of the industry.

2. Market Divisions of Indian Banking Sector

The divisional structure of the Indian banking sector is as follows:

2.1 Retail Banking

Retail banking is banking in which banking institutions execute transactions directly with

consumers, rather than corporations or

other banks. Services offered include:

savings and transactional accounts,

mortgages, personal loans, debit cards,

credit cards. Retail banking comprises of

services offered to retail individuals. It

includes savings account, current

account, loans, credit cards facility etc.

The largest bank in retail banking sector is State Bank of India, followed by ICICI Bank. This

sector has grown at a CAGR of 30% over the past five years.

Within retail banking, the semi-urban and rural segments have been driving the growth.

Increased purchasing power of consumers has also contributed towards growth in personal loans.

Banking Sectors

Retail Banking Corporate

Banking Treasury

Private Wealth

Management

Agribusiness

Banking

Home Mortgages

52%

Personal Loans 16%

Credit Cards

3%

Other Loans 29%

Breakup of Personal Lending (%, 2011)


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2.2 Corporate Banking

Corporate banking typically refers to financial services offered to large clients ('wholesale

clients'). Although many wholesale clients are large corporations, they may also include other

institutions like pension funds, governments and other (semi-) public entities. Corporate banking

is generally a very profitable division for banks, far more profitable than retail banking, which is

aimed towards households and small and medium enterprises (SME's). Corporate banking

comprises of services offered to industries, both manufacturing and services. These services

mostly include corporate credit i.e. advancing loans. This sector has grown at a CAGR of

21.20% over the past few years.

2.3 Treasury

Treasury management (or treasury operations) includes management of an enterprise's holdings,

with the ultimate goal of maximizing the firm's liquidity and mitigating its operational, financial

and reputational risk. Treasury Management includes a firm's collections, disbursements,

concentration, investment and funding activities. In larger firms, it may also include trading in

bonds, currencies, financial derivatives and the associated financial risk management. Most

banks have whole departments devoted to treasury management and supporting their clients'

needs in this area. Treasury manages both SLR (80%) and non-SLR (20%) investments. smaller

banks are increasingly launching and/or expanding their treasury management functions and

38% 39% 40% 43% 44% 45% 46%

23% 24% 24% 24% 24% 24% 24%

2007 2008 2009 2010 2011 2012E 2013E

Sector wise credit growth

Industry Services

26%

26%

21%

24%

24%

21%

27%

11% 11%

4%

17%

13%

2007 2008 2009 2010 2011 2012

Industry Services

Growth Rate (%)


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offerings, because of the market opportunity afforded by the recent economic environment. Bank

Treasuries may have the following departments:

A Fixed Income or Money Market desk that is devoted to buying and selling interest

bearing securities

A Foreign exchange or "FX" desk that buys and sells currencies

A Capital Markets or Equities desk that deals in shares listed on the stock market.

Treasury services include trading in foreign exchange, money markets, bonds and derivatives

both proprietary and on behalf of the customers. This segment is one of the most important

sources of income for any bank.

2.4 Private Wealth Management

Private banking includes banking, investment and other financial services provided by banks to

private individuals investing sizable assets. The term „private‟ refers to the customer service

being rendered on a more personal basis than in mass-market retail banking, usually via

dedicated bank advisers. It comprises personalized asset management services provided to High

Net worth Individuals. The major players in this sector include Reliance Money, Edelweiss

Capital and Karvy Broking Ltd. Most commercial banks also offer these services; however, they

are not very prominent. This sector is projected to grow at a CAGR of 32% between 2009 and

2013.

23.70% 23.10%

18.60%

2008 2009 2010

Growth Rate

13724 14240 14804 15458 15860 16158 16572 17421

Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10

Net Investments (Billion Rupees)


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The number of people with more than

$1 million of financial assets is

estimated to double between 2008 and

2013. By 2012, the country‟s wealth

management market is expected to be

USD 1 trillion.

2.5 Agribusiness Banking

Agribusiness banking comprises of banking services provided to farmers and people employed in

agricultural business. These services include savings account, loans, debit cards facility etc. The

banking regulator, the Reserve Bank of India, has prescribed that a portion of bank lending

should be for developmental

activities, which it calls the priority

sector. The agricultural sector has

been declared as a priority sector by

government of India and commercial

banks are required to lend a minimum

ratio of their total advances to

agricultural sector. While for local

banks, both the public and private

sectors have to lend 40 % of their net

bank credit, or NBC, to the priority sector as defined by RBI, foreign banks have to lend 32% of

their NBC to the priority sector. This sector comprises of mostly nationalized banks and regional

rural banks.

Commercial banks, most nationalized banks, hold a major chunk of agricultural lending. The

commercial banks benefit from their vast networks to reach the rural areas.

84000

105840 118720

132966 148922

166793

2008 2009 2010 2011 2012E 2013E

Number of people having more than $1 million assets

Commercial Banks

70%

RRBs 12%

Cooperative Banks

18%

Breakup of Agricultural Lending


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3. Banks selected for study

3.1 Axis Bank

Axis Bank Limited, formerly UTI Bank, is an Indian financial services firm that had begun

operations in 1994, after the Government of India allowed new private banks to be established.

The bank changed its name to Axis Bank in April 2007 to avoid confusion with other unrelated

entities with similar name. After the Retirement of Mr. P. J. Nayak, Shikha Sharma was named

as the bank's managing director and CEO on 20 April 2009. Axis Bank is the third largest private

sector bank in India. The bank operates through treasury, retail banking, corporate/wholesale

banking and other businesses divisions. The Bank's Registered Office is at Ahmedabad and its

Central Office is located at Mumbai. At the end of December 2011, the Bank has a very wide

network of more than had a network of 1,493 domestic branches and extension counters and

8,324 ATMs situated in 971 cities and town.

Interest margins of Axis bank, while they have declined from the 3.15 per cent seen in 2003-04,

are still hovering close to the 3 per cent mark. (The comparable margins for ICICI Bank and

HDFC Bank are around 2.60 per cent and 4 per cent respectively. The margins for ICICI Bank

are lower despite its much larger share of the higher margin retail business, since funding costs

also are higher).

1.1 1.24

1.44

1.67 1.68

21.84

16.09

19.93

19.89 20.13

2007 2008 2009 2010 2011

ROA ROE

7,32,572

10,95,778

14,77,220

18,06,479

24,27,133

2007 2008 2009 2010 2011

Total Assets (INR million, 2007-2011)

Key Ratios


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3.2 ICICI Bank

ICICI (Industrial Credit and

Investment Corporation of

India) Bank Ltd. is an Indian

diversified financial services

company headquartered in

Mumbai, Maharashtra. It is a

wholly owned subsidiary of

ICICI Ltd. Established in 1994,

it is the second largest bank in

India by assets and third largest

by market capitalization. It offers a wide range of banking products and financial services to

corporate and retail customers through a variety of delivery channels and through its specialized

subsidiaries in the areas of investment banking, life and non-life insurance, venture capital and

asset management. The Bank has a network of 2,575 branches and 8,003 ATM's in India, and

has a presence in 19 countries, including India. ICICI Bank is one of the Big Four banks of India,

along with State Bank of India, Punjab National Bank and HDFC Bank. Established in 1994,

ICICI Bank is India‟s second largest bank. It is a wholly owned subsidiary of ICICI Ltd. The

bank has a network of 2533 branches and 6800 ATMS in India. Between 2004 and 2009, the

total assets of the bank increased at a CAGR of 30%.

1.32 1.55

1.42

0.83 0.79 0.79

21.91 23.92 18.75

12.11 10.1 7.82

102.31 102.06 95.66

89.25 94.73 109.91

2004 2005 2006 2007 2008 2009

ROA ROE Loan/Deposit Ratio

13,07,476 17,84,336

27,72,296

39,43,347

48,56,166 48,26,910

2004 2005 2006 2007 2008 2009


Key Ratios


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3.3 State Bank of India

State Bank of India (SBI) is the largest banking and financial services company in India by

revenue, assets and market capitalization. It‟s a state-owned corporation with its headquarters in

Mumbai, Maharashtra. As of March 2011, it had assets of US$ 370 billion with over 13,000

outlets including 150 overseas branches and agents globally. Between 2004 and 2009, the total

assets of the bank increased at

a CAGR of 19%.

SBI provides a range of

banking products through its

vast network of branches in

India and overseas, including

products aimed at non-resident

Indians (NRIs). The State

Bank Group, with over 16,000

branches, has the largest

banking branch network in

India. SBI has 14 Local Head Offices situated at Chandigarh, Delhi, Lucknow, Patna, Kolkata,

Guwahati (North East Circle), Bhuwaneshwar, Hyderabad, Chennai, Trivandram, Bangalore,

Mumbai, Bhopal & Ahmedabad and 57 Zonal Offices that are located at important cities

throughout the country. It also has around 130 branches overseas.

Established in 1806, State Bank of India (SBI) is the oldest and the largest bank of India. SBI has

14 local head offices and 57 regional offices across India. The bank has 8,500 ATMs, about

18,000 SBI branches and 5,100 associate branches. Between 2004 and 2009, the total assets of

the bank increased at a CAGR of 19%.

1.05

1.69 1.67

0.95 0.97 0.94

22.14

33.2 31.74 18.04 17.27

16.4

52.65

58.42

70.56

77.76 79.46 75.46

2004 2005 2006 2007 2008 2009ROA ROE Loan/Deposit Ratio

55,09,844 62,85,776

69,68,324 81,51,744

1,02,72,700

1,30,48,260

2004 2005 2006 2007 2008 2009


Key Ratios


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4. Portfolio Analysis

4.1 Approach

4.2 Market Attractiveness

For measuring the market attractiveness, we translated the standard parameters to proxies which

were relevant for the banking industry. The proxies were chosen in such a way that most of them

were objective and provided quantified results which could be easily compared with others. After

obtaining data for all these parameters, weights were assigned to each one of them in the order of

their importance in determining market attractiveness of banking industry. Thereafter, the rating

points for each banking segment were obtained by taking a weighted mean of the proxies. The

results thus obtained are displayed below.

Identified the business segments of the industry

Identified the three biggest banks in the industry

Identified the factors governing the market attractiveness and competitive strength

Translated these factors into measurable and quantifiable indicators relevant for banking industry

Found the values of these indicators for each bank in each business segment

Assigned weights to each factor and calculated overall rating of each business segment of each bank

Plotted the different business segments on BCG matrix and obtained the GE matrix

Identified the stronger and weaker areas of respective banks and generated recommendations


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Retail Corporate Credit Private Wealth Agricultural

Related

Treasury

6.02 6.45 7.97 2.99 5.12

4.3 Competitive Strength

For measuring competitive strength, we translated the standard parameters to proxies which were

relevant for the banking industry. The proxies were chosen in such a way that most of them were

objective and provided quantified results which could be easily compared with others. After

obtaining data for all these parameters, weights were assigned to each one of them in the order of

their importance in determining competitive strength of respective banks. Thereafter, the rating

Market Attractiveness Parameter Weight

Market Size Aggregate Lending or AUM or Investment 15%

Market Growth CAGR over 5 years 20%

Profitability Income/Advances and Income/Investment 15%

Pricing trends Spread between lending and deposit rate 5%

Opportunity to Differentiate Average Deposits/Customer 5%

Entry Barriers Regulation and licensing requirements 5%

Competitive rivalry Number of Competitors, Herfindahl index 10%

Distribution Structure

Requirements

Number of channels and ease of set-up and

maintenance 10%

Necessary Investments Licensing cost & set-up cost 5%

Risk of return Overall risk exposure of the bank 10%


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points for each bank were obtained by taking a weighted mean of the proxies. The results thus

obtained are displayed below.

Competitive Strength Parameter Weight

Company Image Awards received and law suits filed 10%

Strength of Assets and Competencies NPA/Advances 20%

Market Share Investment or Advances 25%

Distribution Strength ATMs/branches/sales reps/telephone expenses 15%

Access to Financial Resources Deposits 15%

Cost Position Expenses 10%

Record of Innovation No of Products launched last year 3%

Sales Force No of Sales Reps 2%

Retail Corporate

Credit

Private

Wealth

Agricultural

Related

Treasury

Axis Bank 3.1 4.3 1.2 2.9 4.2

ICICI Bank 4.1 4.7 5.5 3.0 3.5

SBI 8.3 6.2 4.7 6.9 7.7

4.4 BCG Matrix

Three BCG matrices were plotted for the three banks respectively. Agribusiness banking was

found to be a dog for Axis Bank and ICICI Bank while for SBI it was a cash cow because of

high market share. Retail banking and corporate banking were found to stars for all the banks

because of their high growth rates and high market shares. Treasury was question mark for Axis

Bank and ICICI Bank because they have a low market share in this segment.


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4.5 GE Matrix

Based on the rankings obtained as described in the previous section, the GE matrix was obtained

for the banking industry. The competitive strength of respective banks was plotted on the X-axis

while market attractiveness of each banking segment was plotted on Y-axis. The GE matrix thus

obtained is displayed below


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4.6 Observations from GE Matrix

4.6.1 Market Attractivess

4.6.1.1 Retail Banking

Retail banking lies at number three in terms of market attractiveness followed by treasury and

agribusiness banking. Profitability in this segment is a direct function of the number of branches

and reach of the bank. This sector has maintained a good growth in the recent few years and the

profitability is also high. However, the spread between the lending and deposit rates is

decreasing which could reduce the profitability of the sector in future. This segment is

characterized by huge expenditure in setting up distribution channels as compared to other

banking segments. This reduces its attractivess in comparison to wealth management and

corporate banking. In terms of risk of return, this sector ranks on a medium level because of

chances of bad debts. Moreover, this sector does not provide a wide scope of differentiation as

retail banking services have been commoditized over the past few years, thereby further reducing

its attractiveness.


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4.6.1.2 Corporate Banking

This sector ranks at number two in terms of market attractiveness, behind wealth management.

Corporate banking has a higher market size as compared with retail banking. The cost efficiency

of this sector is high because of lower fixed costs in setting up distribution channels. This

segment does not require setting up of a large number of branches and ATMs which reduces the

fixed costs. The average deposit per customer being higher in corporate banking, the opportunity

to differentiate is also higher. Though the growth of retail banking sector is expected to be higher

than corporate banking sector, the huge capital investments and intense competitive rivalry make

it less attractive than corporate banking sector.

4.6.1.3 Private Wealth Management

Private wealth management is a niche segment with a focused set of customers. This sector has

not grown much in comparison to other banking segments such as corporate banking and retail

banking. However, the increasing number of millionaires and billionaires is expected to drive its

growth. There is a very high scope of innovation in this segment due to personalized services.

This segment offers a very high degree of profitability and very less provisions for bad debts.

Further, there are not much stringent entry regulations in terms of license requirements. The

capital investment is very low as most of the communication is done directly with the customers

and no branches and ATMs are required. This sector has a very high growth potential and it is

recommended to innovate and invest in this sector.

4.6.1.4 Treasury

This segment has the lowest market size among all the banking segments. This segment is

involved in investing in SLR and non-SLR securities i.e. shares, bonds, commercial papers of

other companies on its own behalf and that of its clients. Because of government regulations,

80% of treasury investment is SLR investment. These investments are done in government

securities. The returns from these securities being low, this segment ranks very low in terms of

profitability. The growth of this segment is linked to the growth of other segments namely retail

and corporate banking. As a result, it possesses medium growth potential. This segment ranks

best in terms of ease of entry. There are minimal entry barriers for this segment as the

government itself promotes investment by this segment. The competitive rivalry is also not very


PGP 2011-2013

high in this segment. Moreover, the requirement of capital investment is minimal and the risk on

returns is also very low.

4.6.1.5 Agribusiness Banking

This segment ranks lowest on the scale of market attractiveness. This is a generally unattractive

segment. It is characterized by high default risk and political interference. The risk on returns is

also very high because of high chances of bad debts. The profitability is also very low because

there are upper limits on the interest rate being charged on advances made to farmers and other

people employed in agricultural sector. Furthermore, setting up a branch network in rural areas is

a daunting task because of poor infrastructure and technological support. Since this sector has

been declared as a priority sector by the Indian government, the banks are required to lend a

minimum percentage of their total loans to this sector.

4.6.2 Competitive Strength

4.6.2.1 Axis Bank

Axis Bank has the lowest NPA percentage resulting in its high growth. This bank has the least

amount of spending on advertising as a percentage of net profit. It is only 1.2% as against 1.73%

and 3.12% by ICICI and SBI respectively. The bank does not have an as extensive distribution

channel as ICICI bank and State Bank of India do. The market share of this bank is lowest in

comparison with other two banks. Overall, the reputation of the company is lesser as compared

to SBI and ICICI. The bank was previously named UTI Bank and has changed its name a couple

of years back. However, the awareness about the bank is on a rise and is expected to match other

major banks because of its high growth.

4.6.2.2 State Bank of India

State Bank of India is the oldest and largest bank of India. Hence it is a clear winner in terms of

company reputation and image. It has a very extensive distribution network and has reach in

remote areas also. This makes it possible for this bank to serve rural areas too. SBI is clear

winner in retail because of its extensive distribution network and high deposits. However, this

bank suffers from higher NPA percentage as compared to other banks. At the same time, the

advertising budget is highest among the three banks. It is a long established bank, resulting in


PGP 2011-2013

high level of trustworthiness. But it has a lower operating efficiency. Because of its high market

share in most of the business segments, this bank has high competitive strength.

4.6.2.3 ICICI Bank

ICICI Bank is the largest private sector bank of India. It has high competitive strength in private

wealth management segment because of international presence. It has highest market share in

domestic private wealth management segment. The NPA levels are also satisfactory. Its

performance during recent financial turmoil shows that the bank has strong fundamentals. It is

accompanied by moderate expenditure in advertisement. It operates with high operating

efficiency. However, it has high international exposure in risky assets which increases its risk on

returns. This bank ranks second in all the business segments except private wealth management

where it is ranked 1.

4.7 Position of Cost Advantage

COST PARAMETERS (in Rs 000)

AXIS Bank SBI ICICI Bank

Total Income 19,78,69,396 972189580 61,59,47,044

Total expenditure 16,39,84,490 889544390 55,27,65,103

Tot. expenditure as % of Total income 83% 91% 90%

Payments to and provisions for employees 1,61,39,001 144801678 43925959

% of total income 8% 15% 7%

Rent, taxes and lighting 67,98,464 17944879 97,23,158

% of total income 3.4% 1.8% 1.6%

Advertisement and publicity 7,90,153 2578761 38,74,585

% of total income 0.40% 0.27% 0.63%

Profit per employee 14.35 lacs 3.84 Lacs 10 Lacs

From the above table it can be inferred that SBI has the highest percentage of total expenditure

as a percentage of its income. Also the profit per employee is the lowest and there is a substantial

difference between in this regard between SBI and the other two banks in comparison. The total

expenditure of Axis bank is the lowest and its cost per employee is the highest which puts it in

the position of a cost leader amongst the three banks.


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Further it can be noticed that the measure factor of difference for the expenditure amongst the

three banks is the payments to and provisions for the employees. SBI is the least cost efficient in

this parameter owing to being a public sector bank with bureaucracy and government

interferences. However due to economies of scale and due to long years of establishment it

enjoys some advantage in the expenditure in rent taxes and lighting. With regards to advertising

ICICI spends the most as proportion of its total income owing to its aggressive advertisement

campaign compared to the other two banks.

4.8 Recommendations and Suggestions

1. Axis Bank is a recent entrant in Private Wealth Management segment. Hence, either it

has to wait for a long time to be among the top players or it has to look for alliances to

acquire capabilities and resources to survive in this segment. Also since the segment is

very much prone to innovation and differentiation, it is recommended for Axis Bank to

switch from transactional model to advisory model. This will cement its place as value-

added services provider and will help it retain customers and acquire new ones.

2. Axis Bank and ICICI Bank lag behind SBI by a very huge margin in Retail Banking. To

increase their market shares and competitive strength in this segment, it is adviable for


PGP 2011-2013

them to look to acquire small regional banks to develop synergies. Currently, there are a

large number of regional banks. This results in a lot of ATMs and branches setting up in

an area. By consolidating these branches and ATMs, Axis Bank and ICICI Bank can gain

economies of scale and provide competition to a large bank like SBI. Also these banks

have to focus on tier II and III cities and develop a strong foothold there.

3. The agribusiness banking segment is not at all attractive and Axis Bank and ICICI Bank

have very low penetration in this segment. These banks can look forward to exiting from

this business segment. However, due to governmental regulations, they have to allot a

certain minimum percentage of their loans to this segment. Hence, to minimize the losses

due to bad debts, these banks should allocate limited resources to this segment for

ensuring recovery.

4. Axis Bank and ICICI Bank do not fare very well in treasury segment. It is recommended

that they focus on active management of resources in this segment. The source of revenue

from this segment is the interest income and capital gains realised on investing in various

securities. Hence these banks have to identify the securities which provide high returns

and are less risky to invest in.

5. The corporate banking sector is moderately high in market attractiveness, yet none of

these banks is very strong in this sector. To strengthen their presence in this segment, the

banks have to develop competencies to provide core solutions to their clients ranging

from insurance to investment banking. If the banks are able to develop themselves as one-

stop service provider, they will be able to retain their clients for a longer duration and will

lead themselves to a position where they will have high bargaining power.

6. The private wealth management sector is characterized by the presence of a large number

of non-banking financial corporations such as Edelweiss Capital and Reliance Money.

Since these organisations are specialised in this area, they are able to provide better and

more profitable services to their clients. Thus pure banks lag behind in this sector. In

order to develop themselves, all the banks have to work towards building reputation and

establishing offshore presence.


PGP 2011-2013

7. State Bank of India has a very extensive distribution network in terms of number of

branches and ATMs. Yet it suffers from low efficiency because of duplication of

resources. The bank has to work towards achieving economies of scale and should

leverage its unmatched presence. For this, it is recommended that SBI consolidates its

branches and increases productivity in order to increase the operating efficiency. The

bank has already taken measure in this direction and has consolidated some of its

umbrella banks. It is recommended that they continue the trend.

8. SBI holds a competitive advantage over Axis Bank and ICICI Bank in treasury segment.

In order to safeguard its position, it is suggested that the bank invest more in high return

assets and minimize risky assets.

9. The agribusiness banking sector has been declared as a priority sector and being a

nationalised bank, SBI has to cater to this segment. The bank already holds an advantage

over other banks in this segment. Going forward, it is suggested that the bank focuses on

improving its efficiency in this segment by minimizing the scope of bad debts. The bank

should also innovate and come up with customised banking products for agricultural

customers.


PGP 2011-2013

5. References

2011-12 RBI report on Bank profiles

„Banking‟, Indian Brand Equity Foundation (November 2011)

“BMI India Commercial Banking Report Q2 2012” from

www.businessmonitor.com

Information about SBI from its website

http://www.statebankofindia.com/user.htm

Information about Axis Bank from its website

http://www.axisbank.com/

Information about ICICI Bank from its website

http://www.icicibank.com/

„Financial Markets and Banking Update – Vol. 3: FY2011-12‟, ICRA Research

Crisil Reports

„India Wealth Management Research‟, Northbridge Capital (February 2011)

„Wealth Management in India: Challenges and Strategies‟, Cognizant (June 2011)

„Competitiveness of the Indian Banking Sector – Public Sector Banks‟, State Bank of

India

Report by TRAI

http://www.trai.gov.in/NFCNPrts/session2/2-SCBhatnagar.pdf

http://www.businessmonitor.com/

http://www.statebankofindia.com/user.htm

http://www.axisbank.com/

http://www.icicibank.com/

http://www.trai.gov.in/NFCNPrts/session2/2-SCBhatnagar.pdf

portfolio analysis indian banking sector

Documents