mbfi ppt (2)
Transcript of mbfi ppt (2)
Retail Banking
Current scenario and Future prospects
“Retail banking is typical mass-market banking where individual customers use local branches of larger commercial banks. Services offered include: savings and checking accounts, mortgages, personal loans, debit cards, credit cards, and so”.
• It refers to the dealing of commercial banks with individual customers, both on liabilities and assets sides of the balance sheet.
Retail Bank Components
Liabilities
Wealth Management Assets
Fee Based
Personal LoanCredit CardsMortgageAuto
Checking AccountsSavings AccountsTime Deposit
Pillars of Retail Banking (New)Paradigm
• Multiple Products
• Multiple Channels of Distribution
• Multiple Customers Groups
Today’s retail banking sector is characterized by three basic characteristics:
○ Multiple products (deposits, credit cards, insurance, investments andsecurities)
○ Multiple channels of distribution (call center, branch, internet)
○ Multiple customer groups (consumer, small business, and corporate)
Present scenario
• Indian retail banking sector registered a decline in share of 5.02 per cent during the first quarter of FY ’10.
• the private banks are performing better than the public banks in terms of their revenue from retail segment.
• The private and public banks have registered about 54.27 per cent and 35.47 per cent share in retail banking during Q1 FY ’10 respectively
• Revenue wise comparison the public sector banks registered a growth of 28.96 per cent
in total income while their income from the retail segment grew only 9.92%.
private banks registered only 13.52 per cent growth in total income during the period but their income from retail segment registered a minimal decline of 0.16 per cent
• Share wise comparison Share of retail banking for public banks declined 6.14 percentage points
during the period from 41.61 per cent in Q1 FY ’09 to 35.47 per cent in Q1 FY ’10.
The share of retail banking for private banks declined by 7.44 percentage points during the period from 61.71 per cent in Q1 FY ’09 to 54.27 per cent in Q1 FY ’10.
Quarter wise growth of banking sector in India
Total Income Growth
Retail Income Growth
% change in share of retail banking
Private Bank 3.52 -0.16 -7.44
Public Bank 28.96 9.92 -6.14
All Bank 24.3 6.03 -5.02
Source: ASSOCHAM Financial Pulse
Key Players•
Public Sector Banks1 Bank of Baroda2 State Bank of India3 Allahabad Bank4 Canara Bank5 Punjab National Bank
• Private Sector Banks1 HDFC Bank2 Axis Bank3 ICICI Bank4 Kotak Mahindra Bank5 Ing Vysya Bank
• Foreign Sector Banks1 Citibank2 Standard Chartered Bank3 HSBC Bank4 ABN AMRO Bank5 American Express
PSB and their share of retail banking segment
• State Bank of Hyderabad - 81.84 %• Andhra Bank - 42.14% • State Bank of India- 39.81%• Indian Bank - 38.01 %. • Punjab National Bank - 35.14 % • UCO Bank - 37.42 %, • Central Bank of India 34.45 % • Canara Bank - 33.42 %• Union bank of India - 31.36 %
private banks share of retail banking
• Ing Vysya Bank Limited - 80.20 %• Kotak Mahindra Bank Limited - 75.36 % • HDFC Bank of India - 74.82 %• ICICI Bank Limited - 53.52%• Axis Bank -47.16 %• South Indian Bank - 46.92 % • J&K Bank - 45.90 %• IDBI Bank -43.45 %• The Bank of Rajasthan Limited - 22.91 %
Banks which registered Decline in share of retail banking
• Oriental Bank of commerce - 33.96 % • Allahabad Bank - 10.54 %• Corporation Bank - 7.81% • Bank of India - 7.71 %• Indian Overseas Bank - 6.64 % • Bank of Baroda - 5.88 %• The Federal Bank Limited - 20.07 %• IndusInd Bank - 16.22 %• Dhanalakshmi Bank - 15.89% • Karnataka Bank - 13.29 %
Drivers Of Retail Growth
CHANGING CONSUMER DEMOGRAPHICSGrowing disposable incomesYoungest population in the worldIncreasing literacy levels Higher adaptability to technologyGrowing consumerismFiscal incentives for home loansChanging mindsets-willingness to borrow/lendDesire to improve lifestylesBanks vying for higher market share
Industry’s response to the change“Any where”, “Any time” Banking Improved processes/Bundled product offerings Faster service/Reduced TATs Customer specific products/offerings on a regular basis ‘Bank’ customer has replaced ‘Branch’ customer Focus on understanding customer needs/ preferences Segmentation/Differentiation of customers Customer driven strategies Building relationships
The accelerated retail growth has been on a historically low base
Penetration continues to be significantly low compared to global bench marks
Share of retail credit expected to grow from 22% to 36%
Retail credit expected to grow to Rs.575,000 crs by 2010 at an annual growth rate of 25%
Source: Cygnus industry insight
Future Of Retail Banking
Future of Retail Banking Contd….
Dramatic changes expected in the credit portfolio of Banks in the next 5 years
Housing will continue to be the biggest growth segment, followed by Auto loans
Banks need to expand and diversify by focussing on non urban segment as well as varied income and demographic groups
Rural areas offer tremendous potential too which needs to be exploited
Strategic prerequisites….
Performance oriented leadership
Sophisticated marketing and sales
Efficient distribution channels
Process efficiency and ease of scalability
Superior credit policy, procedures and skills
Source: Mckinsey
Challenges
Sustaining Customer loyalty – according to Harvard Business review 5% increase in
customer retention can increase profitability by 35% and 1% in consumer credit card market.
Information technology-Insuring that all bank product and service are available at all time
and across the entire organisation.
NPA reduction & Fraud prevention
Bringing Rural masses into mainstream banking
KYC issue and money Laundering
• “It takes months to find a good customer but only seconds to lose one.” Thus, strategy of Knowing Your Customer (KYC) is important. So the banks are required to adopt innovative strategies to meet customer’s needs and requirements in terms of services/products etc.
• The issue of money laundering is very important in retail banking. This compels all the banks to consider seriously all the documents which they accept while approving the loans.
• One of the crucial impediments for the growth of this sector is theacute shortage of manpower talent of this specific nature, a modernbanking professional, for a modern banking sector
Strategies for Future…
Reaching to masses : Need to customize
Customer segmentation/differentiation
Data mining/CRM based campaigns
Products per customer/loyalty
Promoting low risk retail lending products
Offer an array of products and financial advisory.
Strategies for Future… Contd.
Cost effective expansion
Renewed emphasis on superior execution by front-line employees
Grow through Alliances:
Hospitality Education
Retailers Automobiles
Consumer Durables Housing/Construction
The bank that best addresses and anticipates
customers needs, delivers consistently higher
quality service and connects to the customer
via their channel of choice wins
Winning Strategy