Changing Face of State Bank of India: Strategic Priorities in Maintaining Market Leadership

<< Previous

Excerpts

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...

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."...

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 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)
Exhibit II: Financial Sector Reforms: A Summary
Exhibit III: Growth of State Bank of India (SBI.BO) at BSE 2003-2005
Exhibit IV: Differences Between the Market Cap Growth of SBI and ICICI
Exhibit V-A: Growth of SBI Share Prices During the Period from July 2006 to March 2011
Exhibit V-B: Falling Share Prices of SBI During the Period from March 2011 to October 2011
Exhibit VI: Profit & Loss Account of State Bank of India
Exhibit VII: Performance during Q1 FY11-12 (in Rs. billion.)
Exhibit VIII-A: Customer-Focused Organisation Structure of SBI - Before OP Bhat
Exhibit VIII-B: Organisation Structure of SBI - OP Bhatt

---

Custom Search

---

Case Studies in Business Strategy Volume VI Case Study Volumes Collection	Business Strategy Workbooks Collection