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SWOT ANALYSIS

STATE BANK OF INDIA


ABHISHEK JHAVERI (SEC-A) -13005

STATE BANK OF INDIA

Executive Summary
Mammoth Thats the word to describe State Bank of India. It accounts for almost 20% of the deposit base of the entire banking system, and nearly 20% of the credit portfolio. SBI ranks at 363 in 2010 Fortune Global 500 list, and ranked 150 in 2010 Forbes Global 2000. It is three times the second-largest public sector bank, and nearly two and a half times the size of its biggest private sector rival. Porters Five Forces analysis shows that the Banking Industry is getting more and more competitive with the number of players in the Industry growing rapidly & also due to arrival of foreign players and increase in the buyer power. A strong brand name, a significant presence courtesy its huge distribution network and resources and low cost deposit base are a few strengths of SBI which allows it to grow more rapidly than its competitors. In todays environment, where even the private banks are being cautious, SBI is regaining market share it has lost in past years, increasing it from 17% in FY08 to almost 20% in the first two quarters of FY10. While competition have been busy rebalancing their portfolios and protecting, SBI has been increasing its retail asset base, sweetening its product offerings such as housing loans, for instance with lower introductory interest rates that attract price-sensitive customers Technology has given SBI some more wind beneath its wings. Today, it competes with the new-age private banks, both in terms of services and product offerings. Even in a more competitive market, SBI has been able to increase its distribution reach at lower incremental costs. But some of the hurdles in front of SBIs future growth are the risks associated with both business and managerial capabilities. Asset quality has become a matter of concern; lower profitability and rising non-performing assets could become a drag on the companys balance sheet. Also there is impending retirement of a big slice of senior management when the re-engineering process is underway. This would impact leadership and vision at SBI. SBI needs to make a smooth transition from an old mammoth to a new age bank. Continuity and Legacy would be important considerations for SBI in the coming years.

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STATE BANK OF INDIA

Contents
Executive Summary ................................................................................................................................. ii Company Overview ................................................................................................................................. 1 Financial Performance ............................................................................................................................ 2 Mission statement .................................................................................................................................. 2 Vision ....................................................................................................................................................... 3 Values ...................................................................................................................................................... 3 Strategies employed by State Bank of India ........................................................................................... 3 Porters Five Forces Analysis ................................................................................................................... 4 SWOT Analysis......................................................................................................................................... 7

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STATE BANK OF INDIA

Company Overview Banking in India originated in the early 18th century. State Bank of India is the oldest bank in existence in India, it was earlier known as "The Bank of Bengal and started its operations in 1806. It was one of the three presidency banks, the other two being Bank of Bombay and Bank of Madras. The three banks merged in 1921 to form the Imperial Bank of India, which upon India's independence, became the State Bank of India. State bank of India is one of the oldest and most trusted retail banks in India. It has the largest customer base and offers a wide range of products. State Bank is a pioneer in many fields from financing agriculture and small-scale industry to the recently liberalized insurance sector. With more than 10000 branches and a further 4500+ associate bank branches, State Bank of India offers the largest banking network to the Indian customer. State Bank of India has electronically networked most of its metropolitan, urban and semiurban branches under Core Banking System. State Bank of India is also in the process of providing complete payment solution to its clientele with its over 8500 ATMs, and other electronic channels such as Internet banking, debit cards, mobile banking, etc. State Bank of India has the following six Associate Banks (ABs) with controlling interest ranging from 75% to 100%. 1. 2. 3. 4. 5. 6. State Bank of Bikaner and Jaipur (SBBJ) State Bank of Hyderabad (SBH) State Bank of Indore (SBIr) State Bank of Mysore (SBM) State Bank of Patiala (SBP) State Bank of Travancore (SBT)

The bank is also looking at opportunities to grow in size in India as well as internationally. It presently has 82 foreign offices in 32 countries across the globe. It also has 7 Subsidiaries in India SBI Capital Markets, SBICAP Securities, SBI DFHI, SBI Factors, SBI Life and SBI Cards forming a formidable group in the Indian Banking scenario.
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STATE BANK OF INDIA Financial Performance

State Bank of India


1000 800 in Crores 600 400 200 0 2004 2005 2006 2007 Net Profit 2008 2009 2010 2011

Net Profit increased by 35.55% to Rs. 9121.23 Crore in FY 11. Deposits up by Rs 204,669 Crores (International deposits up by Rs 9314 Crore), growth of 38.08%.

Advances up by Rs 126,231 Crore (International advances up by Rs 30,070 Crore), yoy growth of 29.88%.

Other income increased by 45.96% to Rs. 12,691 Crore in FY 11

Mission statement To retain its position as the premier Indian financial services group. SBI also aims to be a group with world class standards and significant global business commitments to excellence in customer, shareholder and employee satisfaction so as to play a leading role in expanding and diversifying financial services while continuing emphasis on its development banking role.

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STATE BANK OF INDIA Vision To be a premier Indian financial services group with global perspective, world class standard of the efficiency and professionalism and also its core institutional values, To retain its position in the country as a pioneer in developing countries, It also aims to maximize its shareholders value through high sustained earnings per share, To become an institution with a culture of mutual care and commitment. It also focuses on a pleasant working environment to have continuous learning opportunities.

Values Excellence in customer service. Profit orientation. Belonging and commitment towards bank. Emphasis on Corporate Governance. Fairness in all dealings and relations. Risk taking and innovations. Work as a team. Learning culture. Integrity. Transparency and discipline in its policies and systems.

Strategies employed by State Bank of India To counter the intense competition from private and foreign banks, SBI carried out a major Organizational restructuring exercise. The key aspects involved: Redesigning of Branches. Technological upgradation (Core Banking System). Providing alternate channels. Focus on a lean structure.

The objective being to increase customer satisfaction &convenience, simplifying processes for employees, enhancing SBI's competitiveness in the market and in turn
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STATE BANK OF INDIA increasing the profitability through higher market share and improved process efficiency. Launched new products and services to enhance its image as a customer friendly Bank. SBI has also entered into several alliances and tie-ups with automobile, insurance, mutual fund, project finance and medical equipment companies. Marketing initiatives to improve its reach, e.g. aggressive marketing through print and television media.

Porters Five Forces Analysis

Buyer Power: High

Threat of New Entrants: Low

Competitive Rivalry: High

Supplier Power: Low

Threat from Subsitutes: Low

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STATE BANK OF INDIA 1. Competitive Rivalry: High Top Performing Public Sector Banks a. Andhra Bank b. Allahabad Bank c. Punjab National Bank Top Performing Private Sector Banks a. HDFC Bank b. ICICI Bank c. AXIS Bank Top Performing Foreign Banks a. Citibank b. Standard Chartered c. HSBC Bank The banking industry is highly competitive. The financial services industry has been around for hundreds of years and just about everyone who needs banking services already has them. Because of this, banks must attempt to lure clients away from competitor banks. They do this by offering lower financing, preferred rates and investment services. The banking sector is in a race to see who can offer both the best and fastest services. 2. Buyer Power: High With the emergence of larger number of players in the Banking Industry, the switching cost of the buyer has gone done significantly. The onus is now on the effectiveness and speed with which the services are provided to the customers. Financial institutions - by offering better exchange rates, more services, and exposure to foreign capital markets work extremely hard to get high-margin corporate clients. Options in the Auto Finance Sector also give the customers more power to decide upon the kind of financing. Introduction of specialized products for Women and Students etc also show that the buyer power is high in this Industry.
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STATE BANK OF INDIA 3. Supplier Power: Low The suppliers of capital do not pose a big threat, but the threat of suppliers taking away the human resource. If a talented individual is working in a smaller regional bank, there is the chance that person will be enticed away by bigger banks, investment firms, etc.

4. Threat of New Entrants: Low Starting a bank in a country like India is not as easy as any other industry, but if a new bank is started that is mainly targeted on Niche Segments might pose a threat to SBI. The new entrants from a different country are always discouraged to take part in the financial and banking sector by regulatory reforms limiting foreign presence. Threat from other non banking financial services could also pose a threat especially equity investment, insurance etc. Entrant of a larger player can cause a drastic effect on the not so strong name in banking or the bank with low income but would not cause any significant affect on SBI.

5. Threat from Substitutes: Low As you can probably imagine, there are plenty of substitutes in the banking industry. Banks offer a suite of services over and above taking deposits and lending money, but whether it is insurance, mutual funds or fixed income securities, chances are there is a non-banking financial services company that can offer similar services. On the lending side of the business, banks are seeing competition rise from unconventional companies. Sony, General Motors and Microsoft all offer preferred financing to customers who buy big ticket items. But these substitutes do not affect SBI due to its huge brand name and presence in the market.

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STATE BANK OF INDIA SWOT Analysis

Strengths 1. Brand Name 2. Market Leader 3. Wide Distribution Network 4. Diversified Portfolio 5. Government Owned

Weakness 1. Hierarchical structure 2. High Non Performing Assets 3. Lack of Modernisation

Opportunity 1. Increasing Trade 2. Growing Economy 3. Untapped market segments 4. Mergers with Associate Banks 5. Global Expansion

Threat 1. Consumer Expectations 2. Advent of MNC Banks 3. Employee Strikes 4. Pvt. Banks - Retail Banking

Strengths Brand name: SBI Bank has earned a reputation in the market over the period of time (Being the oldest bank in India tracing history back to 1806). Market Leader: SBI ranks at 363 in 2010 Fortune Global 500 list, and ranked 150 in
2010 Forbes Global 2000. It is three times the second-largest public sector bank, and

nearly two and a half times the size of its biggest private sector rival. Wide Distribution Network: Excellent penetration in the country with more than 10000 core branches and more than 5100 branches of associate banks. Diversified Portfolio: SBI Bank has all the products under its belt, which help it to extend the relationship with existing customers Bank has umbrella of products to offer their customers, if once customer has relationship with the bank. Government Owned: Government owns 60% stake in SBI. This gives SBI an edge over private banks in terms of customer security.
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STATE BANK OF INDIA Weakness Hierarchical Structure: The existing hierarchical management structure of the bank, although strength in some respects, is a barrier to change. High Non Performing Assets: it has the highest Non Performing Assets (NPAs) in the industry. Lack of Modernisation: SBI lags with respect to private players in terms of modernisation of its processes, infrastructure, centralisation, etc. Opportunity Increasing Trade: Increasing trade and business relations and a large number of expatriate populations offers a great opportunity. Growing Economy: The economy growing rapidly would lead to an increase in the amount of deposits and advances for SBI. Untapped market segments: There is further scope in segments such as rural India, young generation etc. Mergers with Associate Banks: Merger of all the associate banks into SBI will create a huge bank which streamlines operations and unlocks value. Global Expansion: SBI has already expanded globally and started its operations internationally in 32 countries like Australia, Bangladesh etc. and it has been very profitable. Thus future expansion in other global markets should be planned. Threat Consumer Expectations: Consumer expectations have increased many folds and require effective and quick services. Advent of MNC Banks: Large numbers of MNC banks are mushrooming in the Indian market due to the friendly policies adopted by the government. This can increase the level of competition and prove a potential threat for the market share of SBI bank. Employee Strikes: There was an employee strike in the year 2006 which disrupted SBIs activities. This might happen again in the future if the employees are not taken care of.

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STATE BANK OF INDIA Pvt. Banks - Retail Banking: Private Banks have started venturing into Retail Banking in the rural and semi-urban sector, which used to be the bastion of the State Bank and other PSU banks.

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