Industry Analysis of Indian Banking Industry by ngf48893


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Indian Retail Banking Industry: An Analysis

Description:    This report analyzes the Indian retail banking industry taking into perspective the growth of the
                Indian economy and the sustainability of this industry in the present scenario. The report also
                contains an assessment based on the PEST model, covering the relevant political, economic, social
                and technological factors. Additionally, it evaluates the industry within the Michael Porters
                framework. The report goes on to describe the competitive landscape and provides a comparative
                financial study of the major players in the industry. It also captures the important trends and key
                issues and provides an outlook for the industry.

Contents:       1. Introduction

                 1.1 Industry Definition
                 The Indian Retail banking industry comprises segments that provide comprehensive banking
                services to individuals and small businesses

                 1.2 Industry Segments
                 Public Sector Banks
                 Private Sector Banks
                 Foreign Banks

                 2. Market Dynamics

                 2.1 Market Overview
                 The retail market for mortgages, credit cards, automobile loans, and other consumer loans has
                increased from US$9.7 billion to US$36.7 billion in 2004

                 2.2 Trend Analysis
                 Indian Banks Eyeing International Markets
                 Declining NPA Ratio
                 Increasing Number of Mergers

                 2.3 Key Drivers
                 Technological Innovations
                 Improvements in the Regulatory Environment
                 Low Penetration in the Consumer Loans Segment

                 2.4 Major Issues & Implications
                 Ownership of Foreign Banks
                 Outsourcing by Banks
                 Growing Number of Educational Loan Defaulters

                 3. PEST Analysis

                 3.1 Political Factors
                 Focus on Regulations
                 High Capital Adequacy Ratio (CAR) for Implementation of Basel II

                 3.2 Economic Factors
                 Growing Economy
                 Low Interest Rates
3.3 Social Factors
Loyalty Factor
Increased Penetration of Cards
Increased Usage of Online Banking

3.4 Technological Factors
IT Services
Mobile Banking

4. Michael Porter’s Five Forces Analysis

4.1 Buyer Power
Options in the Auto Finance Sector
Specialized Products for Women and Students

4.2 Supplier Power
Fragmented Mobile Payment Solutions Market
Low Bargaining Power of ATM Providers

4.3 Intensity of Competition
Intense Competition in Urban Areas
Consolidating the Competition
New Entrants Intensifying the Competition

4.4 Threat of New Entrants
Focus on Niche Segments
Regulatory Reforms Limiting Foreign Presence

4.5 Threat of Substitute Products
Informal Financing in the Rural Sector

5. Competitive Landscape

State Bank of India
Punjab National Bank

5.1 Competitive Positioning
Total Retail Advances: Market Share
Housing Loan Market: Market Share
No. of Branches and ATMs
Number of Credit Card Holders
Customer Base
Fee Income

5.2 Competition Strategies

State Bank of India

Core Banking System

Increased Penetration of SBI Cards

JV with Grameen USA

Employs Film Star as Brand Ambassador
 Punjab National Bank

Introduces Joint Debit Program
Increases Rural Presence
 HDFC Bank

Restructures IT services

Expands Rural Operations

5.3 Financial Analysis

5.3.1 Income Statement Analysis

 Net Income – SBI had the highest net income (US$1.2 billion in 2005) in the peer group due to
increased focus on retail operations which resulted in an increase in deposits by 12.2%.
 Operating Margin
SBI has registered significant improvements in its operating margins since 2003. Technology
upgradation has enabled the bank to reduce inconsistencies.

5.3.2 Balance Sheet Analysis

 Debt Equity Ratio
ICICI Bank plans to finance its expansion plans over the next few years by raising capital through
equity, and not debt
 Return on Equity
Despite the decline in returns on equity in 2004-05, SBI generated healthy returns on equity in
 Return on Assets
 Non Performing Assets (NPAs) to Total Assets Ratio

 5.4 Stock Market Performance
 During 2005, SBI’s stock underperformed but during the last few months, investors have showed
significant interest in SBI, driven by the likelihood of a lower limit on government ownership in the

6. Industry Outlook
Indias retail banking business is expected to grow at 16% during the period 2005-2009

Appendix 1: International Conferences and Annual Meetings
Appendix 2: Industry Associations and Organizations

List of Tables/Figures

Table   2.1   Overseas Operations of Indian Banks (As on October 20, 2005)
Table   2.2   Banks Merged since Nationalization of Banks in India
Table   2.3   ATMs of Scheduled Commercial Banks (As at March 31, 2005)
Table   2.4   Paper-based versus Electronic Transactions 2002-2005
Table   5.1   Retail Advances as Percentage of Total Advances 2005
Table   5.2   Competitive Positioning

Figure   1.1   Industry Segments
Figure   2.1   Banking Assets (1991, 1996, 2004)
Figure   2.2   Total Indian Retail Lending Market 1999-2004
Figure   2.3   Break-up of Housing Loans Market 2005
Figure   2.4   Share of Housing to Total Loans of Leading Banks 2002-2005
Figure   2.5   Gross NPAs 2002-2005
Figure   2.6   Percentage to Gross Advances 2002-2005
Figure   2.7   Percentage to Total Assets 2002-2005
Figure   2.8   Consumer Loans/GDP Ratio 2004
Figure   3.1   Effective Interest Rates 1997-2005
Figure   4.1   Mortgage Lending Market Share 2005
Figure   4.2   Credit Card Market Share 2005
Figure   5.1   SBI Core Banking Systems – Project Timeline 2001-2007
            Figure   5.2 Net Income Comparison 2003-2005
            Figure   5.3 Operating Margin 2003-2005
            Figure   5.4 Profit Margin Comparison 2003-2005
            Figure   5.5 Debt Equity Ratio 2003-2005
            Figure   5.6 Non Performing Assets (NPAs) to Total Assets Ratio 2003-2005
            Figure   5.7 Return on Assets 2003-2005
            Figure   5.8 Return on Equity 2003-2005
            Figure   5.9 Stock Performance Comparison (Apr 2004 – Feb 2006)
            Figure   5.10 Market Capitalization
            Figure   6.1 Savings Growth 2005-2015

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