Banking and Finance

Banking and Finance - Overview

Financial
Services

Commercial Investment Advisory

Insurance
Bank Services Services

• Private banking • Asset • Insurance • Stock brokers

Management Brokerage (private client
• Investment
services) and
Banks • Hedge Fund • Insurance
discount brokers
Managers Underwriting
• Bank cards
• Custody services • Reinsurance
• Credit card
machine services
and networks
Evolution of Industry
 Flexible exchange rates
 Further trade liberalization in goods and services
 Increases in the level of FDI
 Trade liberalization in financial services
 Deregulation of financial markets both in developed and in a number of emerging countries
 Securitization
 Macroeconomic coordination and global financial stability
 Consolidation of financial institutions
 Increased mergers and acquisitions
 The gradual integration of stock markets around the world
 Internalization of the securities markets
 An increase in the role of corporate governance in national and international investment
strategies
 Regional integration such as those experienced in Europe, Asia and America
 The Asian currency crisis and the call for a New International Financial Architecture
 Coordination amongst the central banks through the BIS and financial globalization are
amongst some of the developments
Major Players

 Global  Indian
 JP Morgan Chase  SBI
 Bank of America  ICICI
 HSBC  PNB
 Citigroup  HDFC
 Deutsche Bank  Bank of Baroda
 Goldman Sachs  Corporation Bank
 Morgan Stanley  IDBI
 Merrill Lynch  UTI
 BNP Paribas
 Market Share
Top ten banking groups in the world ranked by tier 1 capital

Tier 1 Capital
Rank Company (US$ billions) Country
1 Citigroup 73 US
2 JP Morgan Chase 69 US
3 HSBC 67 UK
4 Bank of America 64 US
5 Credit Agricole Group 63 France
6 Royal Bank of Scotland 43 UK
7 Mitsubishi Tokyo Financial Group 40 Japan
8 Mizuho Financial Group 39 Japan
9 HBOS 36 UK
10 BNP Paribas 35 France
 India - Strategic Map
Citibank
Stan C
High

ABN Amro
HSBC

ICICI Bank
Karur Vysya HDFC
IndusInd Bank
Service Quality

Vysya Bank
State Bank of India

Bank of Baroda
Bank of India

PNB
Andhra Bank
Canara Bank
Co-operative Banks
Low

Rural Banks

Rural Regional Urban

Geographical Spread
Global Finance Industry

 Increased Fee Revenue is the Goal as One-Stop Shopping is

Offered by Financial Services Firms, including Banks plus
Traditional and Discount Brokerages - Meanwhile, Financial
Planning and Private Banking are Targeted
 Branch Banking Booms
 Property and Casualty Underwriters Recover from a Disastrous
2001
 Insurance Sells Well on the Internet
The India Scenario - A Comparison
 Only one Indian Bank in the top 100 Banks in the world
 India's best and brightest, the SBI, is roughly one-tenth the size of the
world's biggest bank - Citigroup
 Six Chinese banks feature among the top 25 Asian banks while India
has only two representatives - SBI and ICICI Bank.
 Similarly, SBI's consolidated pre-tax profit is $1.9 billion against
Citigroup's $29 billion, Bank of America's $25 billion and HSBC's $21
billion
 The one area where Indian banks are able to compete with their global
peers is their return on assets (RoA). Among big Indian banks, ICICI
Bank, PNB, Canara Bank and HDFC Bank have a return on assets of
over 1 per cent return, while SBI's return on assets is 0.89 per cent.
Among Indian banks, HDFC Bank has the highest return on assets --
1.71 per cent.
 This is lower than that of Citigroup (1.97 per cent) but much better than
the RoA of HSBC (1.40 per cent). Our banks are small but efficient.
However, if the economy has to grow at over 8 per cent, they must build
the scale. India Inc has already announced over Rs 650,000 crore (Rs
6,500 billion) of investment plans. Without the scale, local banks can't
possibly support this growth story
Key Success Factors

 Consolidation: Achieving Strategic Balance

 Retail Renaissance: Bonding with Customers
 The Offshoring Decision
 Transforming the Finance Function
 Monitoring Credit Quality
 Achieving Comprehensive Governance of Risk Management
 Corporate Governance