A Project on Banking Sector

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


Net Interest Margin (%)

NIM

34.8632 33.6

41.13

Union Bank ofindia


CASA (%)

CASA

71 71

69

67

Union Bank of

india


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


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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Documents

A Project on Banking Sector