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

            
 
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Case Details:

Case Code : BSTR411
Case Length : 17 Pages
Period : 2006-2012
Pub Date : 2012
Teaching Note :Not Available
Organization : State Bank of India
Industry : Banking
Countries : India

To download Changing Face of State Bank of India: Strategic Priorities in Maintaining Market Leadership case study (Case Code: BSTR411) click on the button below, and select the case from the list of available cases:

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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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Excerpts

SBI: An Overview

In 2011, SBI, ranked third in Fortune India 500, was the largest and oldest state-owned banking and financial services company in India with assets worth Rs. 12,000 billion. Incorporated in 1806, it had the largest distribution network with 13,542 branches and 20,084 ATMs at the end of March 2011. SBI's business units consisted of corporate banking, international banking, and domestic banking for concentrating on core business areas, an associate banks unit for looking after these banks, and a credit division unit to monitor overall credit and other business units including finance, corporate development, and inspection for in-house work...

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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...

Looking Ahead

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...

Exhibits

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


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