Changing Face of State Bank of India: Strategic Priorities in Maintaining Market Leadership
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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SBI: An Overview
SBI in the Millennium
In the new millennium, SBI adopted multi-faceted strategies not only to grow into a global organization but also to re-establish itself as the top Indian bank. It introduced first of its kind products like the SBI International card and the SBI Global Card for global travellers in India that were accepted at over 20 million Visa outlets worldwide and at more than 100,000 outlets in India...
SBI Under OP Bhatt
Since the structural reforms in the Indian economy, there had been a plan to unify all the associated banks with SBI to create a mega bank and streamline operations. By the end of December 2005, SBI's market cap on BSE stood at Rs. 469.53 billion, while that of ICICI Bank stood at Rs. 508.31 billion. According to one observer, "ICICI's balance sheet was about half of SBI's, but growing between 40% and 50%, compared with SBI's 13% to 15% growth. If the same thing continued, then five years down the line, ICICI would overtake SBI."...
Pratip Chadhuri: Setting a New Direction
Chaudhuri succeeded Bhatt on April 7, 2011, as chairman of SBI. Chaudhuri had joined the bank as a probationary officer in 1974. One of the biggest challenges he faced as he took the reins of the bank, was the special loan rates or teaser rates on home loan products, publicly disliked by the RBI. However, SBI gained a critical edge on the mortgage sector and the RBI also raised the provision requirements for such loans. Another crucial issue was the merger of the associate banks with the parent SBI...
The Impact and Challenges
The news of the shocking 2011 Q1 financial results spread like wildfire and forced SBI stocks down. On October 4, 2011, Moody's Investors Service cut down SBI’s standalone rating, or bank financial strength rating from 'C-' to 'D+' on the main concern that the lender’s bad loan would continuously rise, ultimately lowering the core capital. In a chain reaction set off by Moody's downgrading, SBI’s shares were traded at Rs. 1,765, a 5.35% drop from the previous close on BSE...
With all the reforms initiated by Chaudhuri, analysts opined that the country's largest lender was set to bounce back. They argued that regaining the position might take a while as the State Bank group's market share had fallen from around 30% early in the last decade to around 24% as of 2011. However, Vaibhav Agarwal, an analyst at Angel Broking Ltd., said, "The most interesting aspect...now is that it is more focused on margins rather than balance sheet growth, the strategy it was following earlier...
Exhibit I: Comparative Financials of Top 10 Indian Banks (Rs. billion)
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