Retail Banking Industry

Retail Banking Industry

Vikas Bairoliya (4) Khagesh Chitalangiya (6) Niket Khatri (17) Jaimin Patwa (19)

Retail Banking 

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Dealing of commercial banks with individual customers, both on liabilities and assets side of the balance sheet. Comprises of three basic characteristics 

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Multiple Products (deposits, credit cards,insurance,etc) Multiple channels of distribution (call centre,branch,internet,etc) Multiple customer group (consumers,small businesses)

Retail Banking Industry 

RBI’s policy stance : Unpredictability becoming the norm  

RBI on tightening spree Key monitorables flashing mixed signals   

Credit growth slowdown Inflation too moving within a tolerance level Forex inflow-unabated growth

Cash Reserve Ratio

Repo Rate

Contd… 

Earnings momentum to gather pace  

 

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Moderation in credit growth likely Retail credit growth to come off the highs However, corporate capex increasing Infrastructure lending offers huge potential SME-small getting bigger for banks

Contd…    

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Deposit growth to mirror loan growth Slight moderation in margins ahead Continued momentum in NII growth Non-trading other income – healthy growth Provisioning expenses to moderate

ICICI Bank 

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 

ICICI Bank is the best play on the ‘Emerging India’ story A diversified play on the India growth story Strong Management Sum of parts greater than the whole

Demand Forecasting Multiple Regression Model

Dependent •



variable

Profit after Tax( PAT)(Y)

Independent Variable •

•

Advances (X1 ) Interest Received (X 2)

ICICI

BANK

Year

PAT(Y)

Advances(X1)

Income Received(X2)

2003

1,210.89

53,279.41

9,368.06

2004

1,638.75

62,647.62

9,002.39

2005

2,006.85

91,405.15

9,409.89

2006

2,534.47

146,163.11

14,306.13

2007

3,024.85

195,865.60

22,994.29

Advances CAGR = 38.47%% Income Received CAGR = 25%

Regression Equation 

Y = a1 + b1X1 + b2 X2 + e



Y= 935.7641 + 0.016506X1 - 0.05118X2 + 145.0689

  

 

a1 = 935.7641 b1 = 0.016506 b2 = -0.05118 R2 = 0.979515 Standard error( se) = 145.0689

Expected & Actual values Year PAT (Estimated) 2 1480 3 1654 4 2107 5 2761 6 3136 7 4086

PAT( Actual) 1210 1638 2006 2534 3024 -----------

PAT Estimated Vs Actual 6000 5000 4000 PAT(Estimated)

3000

PAT(Actual)

2000 1000 0 2003

2004

2005

2006

2007

2008

2009

Opportunities   

Rise of the Indian Middle Class Increase in Purchasing Power Liberal Attitudes towards Personal Debt

Challenges 

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Retention of customers is going to be a major challenge. Rising indebtedness could turn out to be a cause for concern in the future. Information technology poses both opportunities and challenges. KYC Issues. Money laundering risks in retail banking

Path Ahead…  

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Product Development and Differentiation Innovation and Business Process Reengineering Micro-planning Marketing Prudent pricing Home/Electronic/Mobile Banking Cost Reduction Cross Selling

Conclusion 

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Need of constant innovation in retail banking. A paradigm shift in bank financing through innovative products and mechanisms. The kind of technology used and the efficiency of operations would provide the much needed competitive edge for success in retail banking business.