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8/2/2019 A Project on Banking Sector
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Presented To-
Prof. Sanjeev Patkar
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Huned Ali M.G. 36
Huzefa Husein 37
Moin Inamdar 58
Suraj Digawalekar 270 Swati Porwal 271
Tarannum Dhange 274
Tejas Chotai 276
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Industry Overview
Value Chain of the industry
Porters Five Force Theory
Factors that determine Demand & Supply
Business model of the company and its sustenance
Comparative performance matrixbusiness
The comparative matrixvaluation
To find intrinsic value of the stock and hence the proposed action
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Phase IThe Starting
Creation of The Reserve Bank of India on April 1, 1935.
State Bank of India (Subsidiary Banks) Act passed in1959.
Nationalisation of Banks in 1969.
Phase IILiberalisation Narsimham Committee Recommendations, 1991.
Relaxation in FDI norms.
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Phase IIITransition
Focus on Customer Service.
Securitisation Act, 2002. Mergers and Acquisition.
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51%
3%
2%
3%
41%
Loan Break up forAug97
(%)Residential Mortgages Credit Cards Consumer Durables
Education Loans Others
Source : RBI, Duetsche bank
48%
5%
1%
5%
41%
Loan Break up for Dec'08
(%)
Residential Mortgages Credit Cards Consumer Durables
Education Loans Others
Source : RBI, Duetsche Bank
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14%
13%
11%
2%
13%
47%
Corporate Loan Break up for FY 98 (%)
Engineering Textiles Chemicals
Infrastructure Metals Others
6%11%
7%
23%
19%
34%
Corporate Loan Break up for FY 08
(%)
Engineering Textiles Chemicals
Infrastructure Metals Others
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India - Strategic Map
ServiceQua
lity
Rural Urban
Low
High
Regional
Citibank
ABN Amro
State Bank of India
ICICI Bank
HDFC
IndusInd Bank
Vysya Bank
Karur Vysya
PNB
Andhra BankCanara Bank
Co-operative Banks
Rural Banks
Bank of Baroda
Bank of India
Stan C
HSBC
Geographical Spread
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Banking Sector Value Chain
ProductDevelopment
Back EndProcessing
Riskmanagement
DistributionTechnology
Market Knowledge Clearance Credit Controls Online BankingBest practices transfer Settlement CRM Expertise Cross-selling
Introducingsuccessfulmarketingvehicles to bettertarget newsegments withinnovativeproducts
Efficiency & costmgt allows forprice flexibility,creatingcompetitiveadvantage
Experience inmanaging riskallows banks tocharge higherpremiums, whilemanaging theirNPLs
Expanding branchnetworks anddistributionplatformsimprove directaccess tocustomer base
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Rivalry among Competing Firms
Services which banks offer is more of homogeneous, which
makes the company to offer the same service at a lower rate
and eat their competitor markets share
Market Players use all sorts of aggressive selling strategies
and activities from intensive advertisement campaigns to
promotional stuff
Even consumer switch from one bank to another, if there is a
wide spread in the interest
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Potential Entry of New Competitors Reserve Bank of India has laid out a stagnant rules and
regulation for new entrant in Banking Industry.
Hence, the industry is less prone of new competitor.
Potential Development of Substitute Products Banks are not limited to tradition banking , today banks offers
loans for all products, derivatives, Forex, Insurance, Mutual
Fund, Demat account etc
Hence, The wide range of choices and needs give a sufficient
room for new product development and product enhancement.
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Bargaining Power of Suppliers
Rules and regulation are laid down by RBI
Hence, Reserve Bank of India is the authority to take
monetary action which leads to direct impact on circulation of
money in the Economy
Bargaining Power of Consumers
Banks offers different services according to clients need and
requirement They offer loans at Prime Lending Rate (PLR) to their trust
worthy clients and higher rate to others clients
Hence, Bargaining Power of Consumers is little high as
Customer is the King
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DEMAND DRIVERS
Growing Economy
Improvement in standard ofliving
Higher Disposable income
Expansionary plans of
Corporates
SUPPLY DRIVERS
Regulation by RBI
Technology
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Business Model of Union
Bank of India
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Targeting customers from all demographic and economic profiles andintroducing products and services to meet their needs
Operates in all the areas including Retail lending
Personal banking
Corporate banking
International banking
Investments & treasury
Caters to-
The rural and semi urban centers Financing agriculture and allied activities
Rural artisans
Micro & medium enterprises in these areas
It has opened 198 Village Knowledge Centres
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Offers third party products Life And General Insurance,
Mutual Funds
On-line Trading
Wealth Management Services through tie- up with other FIs.
Bank has initiated a large scale transformation process named
Nav Nirman to adress four key activities:
Retail Asset ( marketing & processing)
SME marketing & processing)
Branch sales and services( improving the customer experience in the branch)
Centralisation of key processes
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Alternate delivery channels1. ATMs
2. Internet banking
3. Phone banking
4. Mobile banking.
Technology based services like
1. RTGS
2. Online NEFT free of cost
3. On line application for products and services
4. Online redressal of grievances.
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Bank has a network of more than1. 2500 service outlets which includes specialized branches for MSME (SME
SARALS)
2. corporate credit
3. Union Loan points for Retail Products
Full fledged overseas branches
Bank plans to open 500 new branches in the next six months
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Diversification
Partnership with Bank of India and Dai-Ichi of Japan fordistribution of Life insurance products
Agreement with Belgian KBC group for setting up a jointventure AMC in India
MoU with NSIC
MoU with NCMSL
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Union bank has promised 4 key deliverables to customers
based on the strength built in-
1) Value for money2) Committed turnaround time for delivery of products and
services
3) Choice of banking channels for customers and
4) Transparency in product offerings and prices
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Year
Credit-Deposit
Ratio(%)2004 61.17
2005 67.96
2006 75.5
2007 76.46
2008 75.55
61.17
67.96
75.5 76.46 75.55
Credit-Deposit Ratio(%)
Credit-Deposit Ratio(%)
2004 2005 2006 2007 2008
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Year
Net Interest
Spread(%)
2004 3.24
2005 3.31
2006 3.03
2007 3.05
2008 2.80
3.24
3.31
3.033.05
2.8
Net Interest Spread(%)
2004 2005 2006 2007 2008
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Year
Capital
AdequacyRatio(%)
2004 12.32
2005 12.09
2006 11.41
2007 12.8
2008 12.51
12.32
12.09
11.41
12.8
12.51
Capital Adequacy Ratio(%)
2004 2005 2006 2007 2008
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No. of
Branches Year
2020 2004
2051 2005
2082 2006
2206 2007
2361 2008
2020
2051
2082
2206
2361
1800
1900
2000
2100
2200
2300
2400
No. of Branches
2004 2005 2006 2007 2008
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Metro
21%
Rural
32%
Urban
23%
Semi-Urban
24%
Area Wise Branch Network
AREA Percentage
Metro 21.52
Rural 32.33
Urban 22.7
Semi-
Urban 23.55
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Rs.in Crores
Year Total DepositTotal
AdvancesTotal
Business
2003-04 50559 30928 81487
2004-05 61831 41103 102934
2005-06 74094 54644 128738
2006-07 85180 63658 148838
2007-08 103859 75878 1797372003-04 2004-05 2005-06 2006-07 2007-08
50559
6183174094
85180
103859
3092841103
5464463658
7587881487
102934
128738
148838
179737
Growth over the Years
Rs.in Crores Total Deposit Rs.in Crores Total Advances
Rs.in Crores Total Business
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473
769
1146
0
200
400
600
800
1000
1200
1400No.of ATM's
2006 2007 2008
Year No.of ATM's
2006 473
2007 769
2008 1146
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Credit Deposit Ratio
Net NPA
Net Interest Margin
CASA
No. of ATMs
Capital Adequacy Ratio
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0.10.2
0.1
1.1
Union Bank ofindia
Indian Bank Andhra Bank Dena Bank
Net NPA (%)
Net NPA
2.6
3.91
3.35
2.88
Union Bank ofindia
Indian Bank Andhra Bank Dena Bank
Net Interest Margin (%)
NIM
34.8632 33.6
41.13
Union Bank ofindia
Indian Bank Andhra Bank Dena Bank
CASA (%)
CASA
71 71
69
67
Union Bank of
india
Indian Bank Andhra Bank Dena Bank
CDR (%)
CDR (%)
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Union
Bank ofindia
Indian
Bank
Andhra
BankDena Bank
No. of ATM's 1146 608 656 316
0
200
400
600
800
1000
1200
1400
Number of ATMs
Contd.
12.212.1 12.1
11.3
Union Bank of
india
Indian Bank Andhra Bank Dena Bank
Capital adequacy ratio (%) as onjune 08
CAR (%) as on june 08
Source : systematix group
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5.27
6.21
4.11
7.4
6.3
0
1
2
3
4
5
6
7
8
Union Bank Vijaya Bank Dena Bank Uco Bank IOB
P/E Ratio (As on 31/03/2008)
P/E Ratio (As on
31/03/2008)
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1.271.02
0.93
1.19
1.56
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
Union
Bank
Vijaya
Bank
Dena
Bank
Uco Bank IOB
P/BV (As on 31/03/2008)
P/BV (As on 31/03/2008)
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Years 2009E 2008 2007 2006 2005 2004
PAT 1581.18 1387 845 674 720 713
PAT
CAGR Growth of 14% over 5 years is
assumed for 2009
Dividend Payout rato
CAGR Growth of 18% over 5 years is
assumed for 2009
Dividend Amount (in Rs. Crore) 284.6124
Retained Earnings 1296.568
Networth 6919.568
Book Value 136.9886
P/BV for 2009E 1.0X
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