Corporate vs. Retail Banking

Prasad Kaipa

Corporate vs. Retail Banking

• Small number of customers • Narrow client base• Large value transactions• Large number of transactions• Inter-bank transactions• Larger sum of money• Inter-bank markets• Funds for business

undertakings• Low cost of processing• Bank has Lower spreads

• Mobilitation of deposits for individuals

• Lending to small business and retail local markets

• Large volume and low value transactions

• Liabilities are mostly related to various types of deposits accounts

• Loan portfolio is dominated by the consumer loans

• High processing cost• Higher interest spread

• High level of customer relationship

• Concept of a personal banker

• Close attention and quick service to customers

• Each customer has unique requirements

• Custom solutions and total service approach

• Moderate level of customer relationships

• Range of options with high technology component

• Value differentiation comes from customer service

• Dedicated, highly professional employees at junior and middle management level value differentiation

• Product needs to be well defined, easily serviceable and potentially profitable.

Transformation in retail banking

• In the past, customers were happy with moderate-yield, low-risk and low-cost savings deposits

• New generation prefers to invest to build wealth, • demand very high levels of convenience, • expect better working technology,• Require information and advice that can be acted upon,

and• Prefer wide range of alternative products• They are highly individualistic and require customized

solutions to what they perceive to be unique needs

Role of information Technology

• It contributed to major upheaval in wholesale banking though its impact on retail bank is increasing.

• Technology based delivery channels such as ATMs did not differentiate retail banks.

• Corporate clients are more familiar with automation than retail customers in India.

• Internet banking has not taken root in India though it is growing. It still represents a small % of banking transactions.

Why move to retail banking?

• Downfall in the demand of credit

• Slackness in the economic activities

• To attract rich middle class with consumer finance and housing finance products

• Increase lending business to growing number of entrepreneurs and startups

Elements of Leadership: Franklin D. Roosevelt

as illustrated by Prof. David Gergen (MS Thesis: Leadership perspectives (2003) by Rajnish Jain)

• Second class mind but first class temperament (Justice Holmes, 1933)• A contagious confidence in the future• Capacity to relax, reflect, recharge• Extraordinary Emotional Intelligence• World-class communicator (Through the press, mass media and through symbolism

(knew how to avoid over-exposure)• Consesual leadership style• Skill in building coalitions (voters, members of congress and international allies)• Set moral objectives and followed pragmatic means• His strengths were his weaknesses (devious, secretive, manipulative and ruthless)• Magnet for a strong team• An Indispensable partner and co-leader: Eleanor

Roosevelt’s Rules of Leadership• Embrace “the strenuous life”• Learn to be fearless• Keep learning about life• Ride ahead of black care• In your ambition, focus on the job at hand• Exercise power to the hilt• Speak softly, carry a big stick• Choose and use your team wisely• Know right from wrong• Charisma (and publicity) help• Face the future with indomitable optimism• Serve Others

Roosevelt quotes• Strenuous life: I wish to preach, not the doctrine of ignoble ease, but the doctrine of the strenuous life, the life of toil

and effort, of labor and strife; to preach that highest form of success which comes, not to the man who desires mere easy peace, but to the man who does not shrink from danger, from hardship, or from bitter toil, and who out of these wins the splendid ultimate triumph.

• Being Fearless: There were all kinds of things of which I was afraid at first, ranging from grizzly bears to ‘mean’ horses and gun-fighters; but by acting as if I was not afraid I gradually ceased to be afraid. Most men can have the same experience if they choose. They will first learn to bear themselves well in trials which they anticipate and which they school themselves in advance to meet. After a while the habit will grow on them, and they will behave well in sudden and unexpected emergencies which come upon them unawares.

• Learning: As soon as any man has ceased to be able to learn, his usefulness as a teacher is at an end. When he himself can’t learn, he has reached the stage where other people can’t learn from him.

• Indomitable optimism: Life brings sorrows and joys alike. It is what a man does with them---not what they do to him---that is the true test of his mettle.

• Serve others: The Man in the Arena---It is not the critic who counts; not the man who points out how strong man stumbles, or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, and comes short again and again, because there is no effort without error or shortcoming; who knows the great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who know neither victory nor defeat.

Principles of Officership

• Duty• Loyalty• Honor• Competence• Subordination• Honor• Service to country• Teamwork• Leadership---West Point model of leadership

West Point Training and Leadership Model

BE

Know DoEducate Train

Develop

Inspire

Leadership As Calibration Larry Summers, President,

Harvard University• Rule #1: The world is an uncertain place, and one must be quite uncertain as to

how world events will play out. (proper decision- making requires recognizing the probabilistic elements and recognizing multiple uncertainties.)

• Rule #2: Make decisions with a long-term horizon but with the awareness that you need to get through the short term.

• Rule #3: Decide when you need to decide. Don’t decide because someone else wants you to. Always preserve the ability to make choices later.

• Rule #4: Make sure you hear the voice contrary to the one you are inclined to favor. If somebody suggests doing “x”, he likes to ask “ what are the best reasons not to do X?”

• Rule #5: With any people the more people employed to proffer insight and solutions, the better.

From Leadership, Winter 2003 -- a summary of Harvard University Leadership Roundtable, Spring 2002.

Managing vs. Leading

Plan Vision

AlignOrganize

MotivateControl

Values

Direction

Involvement

What Leaders Do based on Jim Fisher, Dean, Rotman School of Management, U of Toronto

Key elements of persuasion

• Credibility that assures

• Empathy that bonds

• Explanations that inform

• Logic that convinces

• Words and ideas that inspire

--- David Gergen as quoted by Rajnish Jain in his MS Thesis (2003)

Participative Decision-making

No influence by others

High influence by others

Autocratic Decision

Consultation Joint Decision Delegation

Source: Rajnish Jain 2003 from Yuki

How U.S. Banks Stack Up in 2004

• Citigroup $1.19 trillion• J.P. Morgan-Bank One $1.1 trillion• Bank-America-FleetBoston $966.4 billion• Wells Fargo $369.6 billion• Wachovia $364.3 billion• Washington Mutual $241.9 billion• U.S. Bancorp $194.9 billion• National City Corp. $123.4 billion• SunTrust Banks $120.9 billion• Bank of New York $99.6 billioncompiled by American Banker --Assets as of 6/30/03

Leadership

• A prince….ought to choose the fox and the lion; because the lion cannot defend himself against traps and the fox cannot defend himself against wolves. Therefore, it is necessary to be a fox to discover the traps and a lion to terrify the wolves. Those who rely simply on the lion do not understand this. -- Machiavelli, The Prince (1513)

Guidelines for transformational leadership (Yuki 2002)

• Articulate a clear and appealing vision• Explain how the vision can be achived• Act confidently and optimistically• Express confidence in followers• Use dramatic, symbolic actions to emphasize key

values• Lead by example• Empower people to achieve the vision

Crucibles of Leadership (Bennis and Thomas 2002)

• Adaptive Capacity– Hardiness (transcend adversity)– First Class Noticer– Learning– Proactively seizing

opportunities– Creativity

• Engaging Others by Creating Shared Meaning– Encourage dissent– Empathy– Obsessive communication

• Voice– Purpose– Self-awareness, self-

confidence– EQ

• Integrity– Ambition– Competence– Moral compassFrom interviews of extra-

ordinary achievers under 35 (geeks) and over 70 (geezers)

EQ Vs. IQ

• 90% of the difference in the profiles of star performers with aver average ones in senior leadership positions was attributable emotional intelligence rather than cognitive abilities. -- Daniel Goleman based on research at nearly 200 large, global companies.

• Woodrow Wilson is the only US president who has had a ph.d.

Spiritual Leadership

• Worldview—underlying beliefs by which a leader views and brings forth into the world.

• Authenticity— genuineness based on a principle-oriented approach.

• Mastery—pursuit of mastery of self and others.

• Service—action based on an other-focused approach.

Authenticity

1. Communication—defined as the leader’s ability to effectively exchange information, objectives, and vision with followers.

2. Connection—defined as a bond between leader and followers based on the leader’s ability to affiliate at the followers’ level.

3. Consistency—defined as a leader’s ability to retain constancy in words, deeds, and actions with minimal variation.

4. Conviction—defined as the leader’s firmly held belief in the vision.

Authenticity

5. Courage—defined as the leader’s ability to stay true to the vision and course of action regardless of sacrifice, difficulty, or uncertainty.

6. Equality—defined as equal opportunity and treatment among followers in relation to the vision.

7. Exemplar—defined as the leader’s ability to be an ideal example of those principles fundamental to his worldview.

8. Values—defined as the core qualities demonstrated by the leader.9. Vision—defined as the leader’s future ideal for self and

followers.

Soulful Leadership Model - Kathleen Fleming Dissertation 2004

Worldview(transcendent-focused)

Authenticity(inner-directed /other-focused)

Mastery(inner-directed /other-focused)

Service(other-focused)

Worldview(transcendent-focused)

Authenticity(inner-directed /other-focused)

Authenticity(inner-directed /other-focused)

Mastery(inner-directed /other-focused)

Mastery(inner-directed /other-focused)

Service(other-focused)

Service(other-focused)

Soulful Leadership Model Kathleen Fleming Dissertation 2004

(transcendent-focused)

Leader(inner-directed)

Mutual Actualization

Service

Authenticity

Mastery

ConsistencyConvictionCourageValuesVision

CommunicationConnectionEqualityExemplar

Self-Mastery

Teacher

HumilityServant

Follower(other-focused)

Belief in transcendentSpiritual PracticeChangeInterconnectedness

Worldview(transcendent-focused)

Leader(inner-directed)

Mutual Actualization

Service

Authenticity

Mastery

ConsistencyConvictionCourageValuesVision

CommunicationConnectionEqualityExemplar

Self-Mastery

Teacher

HumilityServant

Follower(other-focused)

Belief in transcendentSpiritual PracticeChangeInterconnectedness

Worldview