Industry Analysis on Banking Industry by rbw10113


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Sweden Retail Banking: Industry Analysis

Description:    This report examines the various aspects of the Swedish retail banking industry, along with an
                outlook for potential developments. Apart from studying the key drivers and critical issues in the
                industry, the report focuses on scanning the environment through a PEST analysis. It examines the
                competitive dynamics along with the industry supply chain within Porter’s Five Forces framework.

                Additionally, the report contains a section on product pricing, as well as small and medium
                enterprises (SME) banking. An outlook for the sector has also been provided in the report.

                Over the past decade, Sweden’s leading banks have evolved into financial groups with extensive
                international activities. This development is partly due to the fact that areas, such as life insurance,
                fund management and mortgage lending, have become an increasingly important part of the
                groups’ business activities, alongside traditional retail banking.

                One of the key trends in the Swedish financial services market in recent years has been the
                increase in the number of customers carrying out their banking transactions via the internet or

                Cash still accounts for a very large part of total payment transactions in Sweden. The availability of
                cash has increased as a result of the growing number of ATMs. The bulk of non-cash payments are
                made through the giro system.

Contents:       1. Introduction

                 1.1 Industry Definition
                 The banking industry in Sweden comprises banks and financial institutions that offer a wide range
                of financial services. Although deposit-taking, lending and money transmission remain at the core
                of banking activities, many banks also provide services such as fund management, insurance,
                personal finance services and financial advice.

                 1.2 Industry Segments

                 Deposits and Withdrawals
                 Credit Cards

                 2. Market Dynamics

                 2.1 Market Overview
                 The financial industry accounts for almost 4% of Sweden’s Gross Domestic Product (GDP).

                 2.2 Trend Analysis
                 Growth of Internet Banking
                 Shifting Product Portfolio
                 Consolidation in the Swedish Banking Industry

                 2.3 Key Drivers
                 Rising Household Incomes & Borrowings
                 Deregulation & Globalization
                 Technology Innovation
                 Advances in Retail Payment Systems

                 2.4 Major Issues and Implications
                 Hike in Interest Rates
Aging Population
Lack of Integration in the EU Banking Market
Failure of Big Consolidated Enterprises

3. PEST Analysis

3.1 Political Factors
Government regulations
M&A regulations

3.2 Economic Factors
Low savings rate
Growing asset base
Declining GDP growth rate
Household sector important in retail

3.3 Social Factors
Consumer perception

3.4 Technological Factors
Investment in IT
Prominence of internet banking

4. Michael Porter’s Five Force Analysis

4.1 Buyer Power
(Medium/ Low)

4.2 Supplier Power

4.3 Intensity of Competition

4.4 Barriers to Entry

4.5 Threat of Substitute Products

5A. Competitive Landscape
Skandinaviska Enskilda Banken (SEB)

5A.1 Brief Company Profiles

5A.2 Competitive Positioning

5A.2.1 Internet Banking Market Shares

5A.3 Key Strategies

Focus on Retail Banking
Increase Customer Focus and Customer Loyalty
IT applications consolidation

Focus on Growth in Emerging Markets
Increasing Reach through Regional Tie-Ups
High Focus on Credit Card Market
High Asset Quality
Focus on Core Business

Decentralized Operations for Enhanced Customer Service
Focus On Mortgage Market
Focus On Mortgage Market

Skandinaviska Enskilda Bankens (SEB)
Following a ‘3C’ Strategy
Leveraging Life Insurance Business

5A.3.1 Focus on Internet Banking
5A.4 Financial Analysis

5A.4.1 Income Statement Analysis
5A.4.2 Balance Sheet Analysis

5A.5 Stock Market Performance

5A.6 Market Capitalization

5B. Competitive Landscape – Internet Banks
ICA Banken

5B.1 Brief Company Profiles

5B.2 Competitive Positioning

5B.3 Key Strategies

ICA Banken
Increased Stress on Marketing Communication
Cooperation with Nordea and Föreningssparbanken
Investments on Increasing Contact Points

Broader Customer Focus
Use of Online Channels for Marketing
Focus on Young Customers

5B.4 Operational Summary

 6. Product Pricing
 Price bundling means that a customer is offered certain discounts on a large number of services if
the customer fulfils the requirements in terms of the number of services availed such as current
account, savings and loans. There are several reasons behind the popularity of price bundling in

 7. SME Banking
 An SME is defined by the European Union as an independent company with fewer than 250
employees and either an annual turnover not exceeding US$47 million or a balance sheet not
exceeding US$32 million. Firms like NGO’s and labor Unions are included in this category.

8. Industry Outlook
Savings Rate to Remain Low
Increasing Household Wealth and Saving
Internet Banking

Appendix I: Summary of Commercial Banks in Sweden, 2004
Appendix II: Methodology for Internet Banking Customers Forecasting
Appendix III: Swedbank Case Study
Appendix IV: International Conferences and Annual Meetings
Appendix V: Industry Associations and Organizations

List of Tables/Figures

 Figure 2.1 Total Assets as on December 31, 2004
 Figure 2.2 Bank Deposits & Lending as on December 31, 2004
 Figure 2.3 Growth of Private Internet Customers, 2000-2004
 Figure 2.4 Changing Composition of Household Financial Assets, 1990-2004
 Figure 2.5 Evolution of Payment Systems, 1990-2004
 Figure 3.1 Bank Deposits and Lending (in US$ Billions)
 Figure 3.2 Number of Bank Branches in Sweden, 1980-2004
 Figure 3.3 Number of I-Bank Customers as of 31 Dec 2004
 Figure 4.1 Michael Porter’s Five Forces analysis
 Figure 4.2 Market Concentration in Household Deposits
 Figure 4.3 Household Assets, 1990-2004
 Figure 5A.1 Household Deposits Market Share-Sweden, 2004
 Figure 5A.2 Household Deposits Market Share, 2000-2004-Handelsbanken (Sweden)
 Figure 5A.3 Household Lending Market Share
Sweden, 2004
 Figure 5A.4 Swedbank-Swedish Retail Market Shares , Q305
 Figure 5A.5 Cost to Income Comparison, 2004
 Figure 5A.6 Cost to Income – Nordea, Q103-Q205
 Figure 5A.7 Cost to Income – Swedbank, Q304-Q305
 Figure 5A.8 Cost to Income-Handelsbanken, 2001-2005
 Figure 5A.9 Cost to Income-SEB, 2001-2005
 Figure 5A.10 Market share- Swedish Internet Banking, 2004
 Figure 5A.11 Internet Banking Customers-Nordea Bank, Sweden, 2001-2004
 Figure 5A.12 Internet Banking Custoemrs- Swedbank, Sweden, 2002-2005
 Figure 5A.13 Internet Banking Customers, SEB, Sweden, 2000-2004
 Figure 5A.14 Internet Banking Customers-Handelsbanken, Sweden, 2001-2004
 Figure 5A.15 Swedbank- Credit Card Customers, Q303-Q305
 Figure 5A.16 Profit from Life Insurance, 2001-Q305
 Figure 5A.1 Retail Operating Revenue Composition: 2004 (in US$ Millions)
 Figure 5A.2 Retail Operating Profit Growth: 2003-2004
 Figure 5A.3 Retail Divisions Capital Adequacy
 Figure 5A.4 Return on Capital (Group-wise), 2002-2004
 Figure 5A.5 Retail Deposits & Lending: 2004
 Figure 5A.6 Assets & Liabilities-Retail Division 2004
 Figure 5A.7 Retail Return on Equity 2004
 Figure 5A.8 Return on Equity (Group-wise), 2002-04
 Figure 5A.9 Share Price Movement, Dec 2004-Nov 2005
 Figure 5A.10 Market Capitalization, Nov 2004 & Nov 2005
 Figure 6.1 Annual Weighted Price of Core Banking Services 2005
 Figure 6.2 Deposit and Lending Rates to General Public, 2002-2004
 Figure 7.1 Internet Banking Customers 2000-2010

Table   2.1 Product Segments
Table   2.2 Banks in Sweden, Dec 2000 & Dec 2004
Table   2.3 Historical account of Consolidation
Table   2.4 Market Drivers
Table   4.1 Supply Chain of Swedish Banking Industry
Table   4.2: Entry and exit since 1995
Table   5A.1 Nordea Key Statistics
Table   5A.2 Swedbank Key Statistics
Table   5A.3 Handelsbanken Key Statistics
Table   5A.4 Skandinaviska Enskilda Banken (SEB) Key Statistics
Table   5A.5 Size and Reach- Swedish Operations
Table   5A.6 Internet banking customers of major banks in Sweden
Table   5A.1 Financials as of December 31, 2004
            Table   5B.1 ICA Banken’s brief overview of the company’s financial performance, 2003-04
            Table   5B.2 SkandiaBanken’s brief overview of the company’s financial performance, 2003-04
            Table   6.1 Annual Fees and Annual Percentage Charge (APR) In Various Countries
            Table   6.2 Company Interest Margins

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