SWOT Analysis On Standard Chartered Bank Finance Essay
I have mentioned introduction and history of standard chartered bank. It is related banking industry. Its product is financial services. Its revenue is $ 12.926 billion for the year of 2009. I have to compare Standard Chartered Bank with 5 private sector banks(Axis Bank, HDFC Bank, Bank of Rajasthan, ICICI Bank, and Yes Bank). The operating income of Standard Chartered Bank is $5.151 billion for the year of 2009. Its net income is $3.279 billion for the year of 2009. Its total assets are $435.068 billion for the year of 2009. Its employees are 73800.
INTRODUCTION OF STANDARD CHARTERED BANK
Standard Chartered Bank is a British bank headquartered in London with operations in more than seventy countries. It operates a network of over 1,700 branches and outlets (including subsidiaries, associates and joint ventures) and employs 73,000 people. Despite its British base, it has few customers in the United Kingdom and 90% of its profits come from Asia, Africa, and the Middle East. Because the bank’s history is entwined with the development of the British Empire, its operations lie predominantly in former British colonies, though over the past two decades it has expanded into countries that have historically had little British influence. It aims to provide a safe regulatory bridge between these developing economies. It now focuses on consumer, corporate, and institutional banking, and on the provision of treasury services-areas in which the Group had particular strength and expertise.
HISTORY OF STANDARD CHARTERED BANK
The early years
The name Standard Chartered comes from the two original banks from which it was founded and which merged in 1969 – The Chartered Bank of India, Australia and China, and The Standard Bank of British South Africa.The Chartered Bank was founded by Scotsman James Wilson following the grant of a Royal Charter by Queen Victoria in 1853, while The Standard Bank was founded in the Cape Province of South Africa in 1862 by another Scotsman John Paterson. Both companies were keen to capitalise on the huge expansion of trade and to earn the handsome profits to be made from financing the movement of goods from Europe to the East and to Africa. In those early years, both banks prospered. Standard Chartered Bank has a major branch in Kolkata. Chartered opened its first branches in Bombay, Kolkata and Shanghai in 1858, followed by Hong Kong and Singapore in 1859. With the opening of the Suez Canal in 1869 and the extension of the telegraph to China in 1871, Chartered was well placed to expand and develop its business.
Recent alliances and developments
In 2000, Standard Chartered acquired Grindlays Bank from ANZ Bank increasing its presence in private banking and further expanding its operations in India and Pakistan. Standard Chartered retained Grindlays’ private banking operations in London and Luxembourg and the subsidiary in Jersey, all of which it integrated into its own private bank. On 15 April 2005, the bank acquired Korea First Bank, beating HSBC in the bid. Since then the bank has rebranded the branches as SC First Bank.Standard Chartered completed the integration of its Bangkok branch and Standard Chartered Nakornthon Bank in October, renaming the new entity Standard Chartered Bank (Thailand). Standard Chartered also formed strategic alliances with Fleming Family & Partners to expand private wealth management in Asia and the Middle East, and acquired stakes in ACB Vietnam, Travelex, American Express Bank in Bangladesh and Bohai Bank in China.
SWOT ANALYSIS OF STANDARD CHARTERED BANK
STRENGTHS:
BRAND NAME: Standard Chartered Bank has earned a reputation in the market over the period of time (Being the oldest bank in the banking history).
Market Leader: Standard Chartered Bank is ranked at 380 in 2008 Fortune Global 500 list, and ranked 219 in 2008 Forbes Global 2000. With an asset base of Rs43,335 million.
Wide Distribution Network: Excellent penetration in the country with more than 10000 core branches and more than 5100 branches of associate banks (subsidiaries).
Diversified Portfolio: Standard Chartered Bank has all the products under its belt, which help it to extend the relationship with existing customer. Standard Chartered Bank has umbrella of products to offer their customers, if once customer has relationship with the bank. Some Products, which Standard Chartered Bank is offering are: Retail Banking, Business Banking, Merchant Establishment Services (EDC Machine) Personal loans & Car loans, Insurance, Housing Loans.
Low Transition Costs-Standard Chartered Bank offers very low transition costs which attracts small customers.
WEAKNESSES:
The existing hierarchical management structure of the bank, although strength in some respects, is a barrier to change.
Though Standard Chartered Bank cards are the 3rd largest player in the credit card industry, it has some non performing assets (NPAs) in the industry, which stand out to be at 1.28 % (Dec 2007).
Modernisation: Standard Chartered Bank lags with respect to private players in terms of modernisation of its processes, infrastructure, centralisation, etc.
Opportunities:
Merger of associate banks with Standard Chartered Bank:
Merger of all the associate banks into Standard Chartered Bank will create a mega bank which streamlines operations and unlocks value.
Planning to add 2000 branches and 3000 ATMs in 2008-2009. This will further increase its reach.
Increasing trade and business relations and a large number of expatriate populations offers a great opportunity to expand on foreign soil.
Threats:
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 Standard Chartered Bank.
Consumer expectations have increased many folds in last few years and the bank has not been responsive enough to meet them on time.
Private banks have started venturing into the rural and semi-urban sector, which used to be the bastion of the Standard Chartered Bank and other PSU banks.
Employee Strike: There was an employee strike in the year 2006 which disrupted Standard Chartered Bank’s activities. This can be repeated in the future.
NET INCOME
(Standard Chartered Bank, HDFC Bank, ICICI Bank, Axis Bank, Yes Bank and Bank of Rajasthan)
SL.
NO.
NAME OF THE BANK
NET INCOME
1
Standard Chartered Bank
$ 3.279 billion
2
HDFC Bank
$ 2.24 billion
3
ICICI Bank
$ 2.19 billion
4
Axis Bank
Rs. 655.98 crore
5
Yes Bank
Rs. 592.43 crore
6
Bank of Rajasthan
Rs 392 crore
INTERPRETATION: In this way by this facts it can be said that net income of Standard Chartered Bank is very high than other four private sector banks. Lowest net income is for Bank of Rajasthan. Net Income of HDFC Bank is $2.24 billion just after Standard Chartered Bank that is second highest position among these five private sector banks in the sense of net income. ICICI Bank about net income has 3rd position means $ 2.19 billion. Thereafter Axis Bank has fourth position having net income of Rs. 655.98 crore and Yes Bank having position in net income Rs. 592.43 crore than other four private sector banks. Bank of Rajasthan has lowest income 392 crore rupees.
EQUITY SHARE CAPITAL(till March 2010)
(Standard Chartered Bank, HDFC Bank, ICICI Bank, Axis Bank, Yes Bank and Bank of Rajasthan)
SL.
NO.
NAME OF THE BANK
EQUITY SHARE CAPITAL
(till March 2010)
1
Standard Chartered Bank
Rs 9,306.66 crore
2
ICICI Bank
Rs 1,113.29 crore
3
HDFC Bank
Rs 425.38 crore
4
Yes Bank
Rs 296.98 crore
5
Axis Bank
Rs 359.01 crore
6
Bank of Rajasthan
Rs 161.35 crore
INTERPRETATION: From this table we can say that the highest equity share capital is of ICICI Bank and the lowest equity share capital is of Bank of Rajasthan. 1,113.29 crore equity share capital is for ICICI Bank. Standard Chartered Bank is having second position in equity share capital that is 9,306.66 crore for the year of March 2010. HDFC Bank is having 3rd position in equity share capital in all six private sector banks. Yes Bank is having 4th position in equity share capital with the amount of 296.98 crore rupees. Bank of Rajasthan is having 161.35 crore rupees as a equity share capital.
TOTAL ASSETS
(Standard Chartered Bank, HDFC Bank, ICICI Bank, Axis Bank, Yes Bank and Bank of Rajasthan)
SL.
NO.
NAME OF THE BANK
TOTAL ASSETS
1
Standard Chartered Bank
Rs 43,335 million
2
ICICI Bank
Rs 97,497.56 crore
3
HDFC Bank
Rs 44,160.49 crore
4
Yes Bank
Rs 5,656.90 crore
5
Axis Bank
Rs 41,200.72 crore
6
Bank of Rajasthan
Rs 6,176.21 crore
INTERPRETATION: Through this information it can be said that total assets of Standard Chartered Bank is high that is 43,335 million. ICICI is having 2nd position for total assets. Total assets of ICICI Bank is 97,497.56 crore rupees. Total assets of Yes Bank is 5,656.90 crore means it is having lowest total assets among all 6 private sector banks. HDFC Bank is having 3rd position in terms of total assets that is 44,160.49 crore. Total assets of Axis Bank is 41,200.72 crore that is having 4th position among these private sector banks. Bank of Rajasthan is having 5th ranking according to the total assets that is 6,176.21 crore.
CAPITAL ADEQUACY
(Standard Chartered Bank, HDFC Bank, ICICI Bank, Axis Bank, Yes Bank and Bank of Rajasthan)
Capital adequacy is measured by the ratio of capital to risk- weighted assets (CRAR). A sound capital base strengthens confidence of depositors.
CAPITAL RISK ADEQUACY RATIO: CRAR is a ratio of Capital Fund to Risk Weighted Assets. Reserve bank of India prescribes Banks to maintain a minimum Capital to risk-weighted Assets Ratio (CRAR) of 9 % with regard to credit risk, market risk and operational risk on an ongoing basis, as against 8 % prescribed in Basel documents.
CRAR= Capital / Total Risk Weighted Credit Exposure
(Standard Chartered Bank, HDFC Bank, ICICI Bank, Axis Bank, Yes Bank and Bank of Rajasthan)
SL.
NO.
NAME OF THE BANK
Capital Risk Adequacy Ratio
(2008-2009)
1
Standard Chartered Bank
17.43%
2
ICICI Bank
19.84%
3
HDFC Bank
16.29%
4
Yes Bank
11.04%
5
Axis Bank
10.07%
6
Bank of Rajasthan
9.53%
INTERPRETATION: By this data it is clear that Capital Risk Adequacy Ration of ICICI Bank in India is more well among all the private sector banks. Standard Chartered Bank has 2nd position in maintaining the Capital Risk Adequacy Ratio with 17.43% but ICICI has 19.84%. Bank of Rajasthan has less Capital Risk Adequacy Ratio with 9.53%. HDFC Bank has 3rd position with 16.29% in Capital Risk Adequacy Ration. Yes Bank has 4th position in Capital Risk Adequacy Ratio with 11.04%. Axis Bank is less than Yes Bank means it has only 10.07% Capital Risk Adequacy Ration.
Debt-Equity Ratio: The Debt to Equity Ratio measures how much money a bank should safely be able to borrow over long periods of time. Generally, any bank that has a debt to equity ratio of over 40% to 50% should be looked at more carefully to make sure there are no liquidity problems.
Debt-Equity Ratio= Borrowings / Share Capital + Reserves
(Standard Chartered Bank, HDFC Bank, ICICI Bank, Axis Bank, Yes Bank and Bank of Rajasthan)
SL.
NO.
NAME OF THE BANK
Debt-Equity Ratio
(March 2009)
1
Standard Chartered Bank
22.21%
2
ICICI Bank
19.06%
3
HDFC Bank
18.67%
4
Yes Bank
16.89%
5
Axis Bank
16.01%
6
Bank of Rajasthan
15.78%
INTERPRETATION: The Debt to Equity Ratio measures how much money a bank should safely be able to borrow over long periods of time.
Here Debt-Equity Ratio of Standard Chartered Bank is 22.21% that is highest among all the six compared private sector banks in India. Bank of Rajasthan is lowest in Debt-Equity Ratio that is 15.78%. HDFC Bank is again in 3rd position in Debt-Equity Ratio also with 18.67%. Yes Bank and Axis Bank are close to each other in Debt-Equity Ratio that is 16.89% and 16.01% respectively.
ASSETS QUALITY
(Standard Chartered Bank, HDFC Bank, ICICI Bank, Axis Bank, Yes Bank and Bank of Rajasthan)
One of the indicators for asset quality is the ratio of non-performing loans to total loans (GNPA). The gross non-performing loans to gross advances ratio is more indicative of the quality of credit decisions made by bankers. Higher GNPA is indicative of poor credit decision-making.
GROSS NPA RATIO: This ratio is used to check whether the bank’s gross NPAs are increasing quarter on quarter or year on year. If it is, indicating that the bank is adding a fresh stock of bad loans. It would mean the bank is either not exercising enough caution when offering loans or is too lax in terms of following up with borrowers on timely repayments.
Gross NPA= Gross NPA / Total Loan
SL.
NO.
NAME OF THE BANK
GROSS NPA RATIO
(March 2009)
1
Standard Chartered Bank
0.93%
2
ICICI Bank
2.16%
3
HDFC Bank
0.97%
4
Yes Bank
1.89%
5
Axis Bank
1.21%
6
Bank of Rajasthan
1.08%
INTERPRETATION: Here Gross NPA Ratio of Standard Chartered Bank is less than all the compared six private sector banks mean it is 0.93%. Gross NPA Ratio of ICICI Bank is highest by 2.16% in the year of March 2009. HDFC Bank has less 2nd position in Gross NPA Ratio by the year of March 2009. HDFC Bank is having 0.97% Gross NPA Ratio. Yes Bank is having 1.89% Gross NPA Ratio that is second highest after ICICI Bank. Standard Chartered Bank and HDFC Bank are maintaining the minimum Gross NPA Ratio. Axis Bank is having 1.21% by the year of March 2009.
MANAGEMENT QUALITY
(Standard Chartered Bank, HDFC Bank, ICICI Bank, Axis Bank, Yes Bank and Bank of Rajasthan)
The ratio of non-interest expenditures to total assets (MGNT) can be one of the measures to assess the working of the management. This variable, which includes a variety of expenses, such as payroll, workers compensation and training investment, reflects the management policy stance.
PROFIT PER EMPLOYEE: Profit per employee is a measure of how efficiently a particular bank is utilizing its employees. Ideally, a bank wants the highest profit per employee.
Profit per Employee = Net Profit
________________
No. of Employees
( Amount in Rs lac )
SL.
NO.
NAME OF THE BANK
PROFIT PER EMPLOYEE
(March 2009)
1
Standard Chartered Bank
14.49
2
ICICI Bank
15.24
3
HDFC Bank
13.32
4
Yes Bank
11.12
5
Axis Bank
9.34
6
Bank of Rajasthan
8.42
INTERPRETATION: Here profit per employee of ICICI Bank is 15.24 lac that is higher than all the six compared private sector banks that I have taken in my term paper. Second position Standard Chartered Bank is having with the performance of 14.49 lac. Standard Chartered Bank comes after ICICI Bank. HDFC Bank is having 3rd position with the performance of 13.32lac. Profit per employee of Yes Bank is 11.12lac and it is having 4th position among all the six private sector banks. Axis Bank is having 5th position in profit per employee with the performance of 9.34lac. Bank of Rajasthan is lowest position in profit per employee with the income of 8.42lac. In this interpretation it is clear also that Axis Bank and Bank of Rajasthan are having about one lac difference in profit per employee.
EARNINGS QUALITY
(Standard Chartered Bank, HDFC Bank, ICICI Bank, Axis Bank, Yes Bank and Bank of Rajasthan)
Dividend Payout Ratio: Dividend payout ratio shows the percentage of profit shared with the shareholders. The more the ratio will increase the goodwill of the bank in the share market.
Dividend Payout Ratio = Dividend / Net Profit
SL.
NO.
NAME OF THE BANK
DIVIDEND PAYOUT RATIO
( 2008-2009)
1
Standard Chartered Bank
18.49%
2
ICICI Bank
19.20%
3
HDFC Bank
16.31%
4
Yes Bank
13.42%
5
Axis Bank
12.34%
6
Bank of Rajasthan
12.42%
INTERPRETATION: Dividend payout ratio of ICICI Bank is higher than all the compared six private sector banks. Dividend payout ratio of ICICI Bank is 19.20%. Standard Chartered Bank is having 2nd position in dividend payout ratio with 18.49% that is after ICICI Bank. It is clear that in spite of recession ICICI Bank has maintained its system of operation. The lowest dividend payout ratio is Axis Bank that is 12.34%. Again HDFC Bank is having 3rd position in dividend payout ratio with the operation of 16.31%. Bank of Rajasthan is having 5th position in terms of dividend payout ratio with the maintenance of 12.42%. the dividend payout ratio of Yes Bank is 13.42%.
RETURN ON ASSET: Return on Asset Ratio shows that how much return bank can get from their total asset. Higher the ratio is good for the bank. Because if ratio is higher than we can say that the return of bank is high.
Return on Asset = Net Profit / Total Asset
SL.
NO.
NAME OF THE BANK
RETURN ON ASSET
( 2008-2009)
1
Standard Chartered Bank
2.89%
2
ICICI Bank
3.23%
3
HDFC Bank
3.31%
4
Yes Bank
2.42%
5
Axis Bank
1.24%
6
Bank of Rajasthan
1.72%
INTERPRETATION: Return on asset of HDFC Bank and ICICI Bank are higher than all the compared six private sector banks in terms of return on asset 3.31% and 3.23% respectively. Return on asset of Standard Chartered Bank is having 3rd position with the operation of 2.89%. Bank of Rajasthan is having 5th position in case of return on asset with the performance of 1.72%. Axis Bank is having 6th position in case of return on asset with 1.24%. Again Yes Bank is having 4th position in terms of return on asset with the operation of 2.42% that is after Standard Chartered Bank.
LIQUIDITY
(Standard Chartered Bank, HDFC Bank, ICICI Bank, Axis Bank, Yes Bank and Bank of Rajasthan)
Cash maintained by the banks and balances with central bank, to total asset ratio (LQD) is an indicator of bank’s liquidity. In general, banks with a larger volume of liquid assets are perceived safe, since these assets would allow banks to meet unexpected withdrawals.
Liquidity Asset to Total Asset: Liquidity for a bank means the ability to meet its financial obligations as they come due. Bank lending finances investments in relatively illiquid assets, but it fund its loans with mostly short term liabilities. Thus one of the main challenges to a bank is ensuring its own liquidity under all reasonable conditions.
Liquidity Asset to Total Asset = Liquid asset
________________
Total assets
SL.
NO.
NAME OF THE BANK
LIQUIDITY ASSET TO TOTAL ASSET
( 2008-2009)
1
Standard Chartered Bank
13.19%
2
ICICI Bank
13.23%
3
HDFC Bank
14.41%
4
Yes Bank
12.12%
5
Axis Bank
11.54%
6
Bank of Rajasthan
9.82%
INTERPRETATION: Liquidity asset to total asset of HDFC Bank is 14.41% that is higher than all the six compared private sector banks. ICICI Bank is having 13.23% and Standard Chartered Bank is having 13.19%. ICICI Bank is having second position after HDFC Bank and Standard Chartered Bank is having 3rd position in case of liquidity asset to total asset. Bank of Rajasthan is having lowest liquidity asset to total asset with 9.82%. Yes Bank is having 12.12% and Axis Bank is having 11.54% of liquidity asset to total asset.
CONCLUSION
On the basis of study I came to know that the Standard Chartered Bank is performing well in India in case of total assets and capital adequacy ratio. In some cases Standard Chartered Bank is well than other compared 5 private sector banks but in some cases like liquidity asset to total asset, return on asset and dividend payout ratio ICICI Bank and HDFC Bank is better than Standard Chartered Bank. But being a foreign bank its over all performance is good and it seems that in future its performance will be increasing.
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