SML 720Business Environment & Corporate Strategy

ContentsIndian Banking Sector : an OverviewAbout the companyOrganizational structureFinancialsSWOT & PEST analysis

Indian Banking Sector: Overview 222 commercial banks in India Operating with 68,681 branches (March 06)Nearly 70% of branches are in rural/semi-

urban areasBulk of commercial bank finance is for short-

term working capital needs of industry, trade, agriculture & personal segment.

Banks are supporting growth in the economy by financing productive sectors

Vibrant Indian Banking Sector

• Due to growing competition, market share of various groups of banks has changed, though public sector banks still dominate the market.

6 times

Banking Potential in IndiaSkilled managerial and technical manpowerHuge middle class provide India with a

distinct cutting edge in global competition.A well established judiciarySophisticated legal and accounting system User friendly intellectual infrastructureFree and vibrant press

Industry SegmentsNationalised/Public Sector Banks :

Dominate the banking system in India. Nationalization of banks in India took place in 1969

by Mrs. Indira Gandhi. .

Private Banks : Made banking more efficient and customer friendly. Jolted public sector banks out of complacency and

forced them to become more competitive.

Foreign Banks : Have brought latest technology and latest banking

practices in India. Have helped made Indian Banking system more

competitive and efficient.

Public Sector Banks 88.41 87.23 75.24 73.25 73.62

Private Sector Banks 11.33 10.76 19.42 20.24 16.95

Foreign Banks 0.26 2.01 5.44 6.51 9.43

ASCB Total Banks 100.00 100.00 100.00 100.00 100.00

Branches Staff Deposits Advances Net Profit

% Share in the Total

Major Key Players

New Initiatives by PSBsSpecialized branches New products targeted at specific groupsChange in structure, systems and

procedures involving quick turnaround time to meet world standards

Marketing orientationChange in ambienceRecruitment of specialistsTie-ups, sharing networks, and strategic

alliances

Present Heads

History• 1895: PNB Established in Lahore by Lala

Lajpat Rai• 1939: PNB acquired Bhagwandas Bank• 1947: Partition of India and Pakistan at

Independence. PNB lost its premises in Lahore, but continued to operate in Pakistan

• 1961: PNB acquired Universal Bank of India• 1965: After the Indo-Pak war the government

of Pakistan seized all the offices• 1969: The Government of India (GOI)

nationalized PNB and 13 other top banks

1978: PNB opened a branch in London1988: PNB acquired Hindustan Commercial

Bank in a rescue1993: PNB acquired New Bank of India,

which the GOI had nationalized in 19802002: PNB introduces its IPO2003: PNB took over Nedungadi Bank, the

oldest private sector bank in Kerala

About the Company• Distinction of being the first Indian bank to have

been started solely with Indian capital• Largest branch network in India - 4525 Offices

including 432 Extension Counters and more than 58300 employees spread throughout the country

• Serves over 3.5 crores customers• Strong correspondent banking relationships with

more than 217 international banks of the world• More than 50 renowned international banks

maintain their Rupee Accounts with PNB

Vision ” To evolve and position the bank as a world class progressive, cost effective and customer friendly institution providing comprehensive financial and related services; integrating

frontiers of technology and serving various segments of society especially

the weaker sections; committed to excellence in serving the public and also

excelling in corporate values”

Mission“To provide excellent professional services and

improve its position as a leader in financial and related services; build and maintain a

team of motivated and committed workforce with high work ethos; use latest technology aimed at the customer satisfaction and act as an effective catalyst for socio

economic development”

Values & EthicsBonding and integrity.

Ethical conduct (specially in conflicts of interest).Periodic disclosures.Compliance with rules and regulations.Confidentiality and fair dealing.

Products and ServicesCorporate banking Personal banking Industrial finance Agricultural finance Financing of trade International bankingHome loanAuto loanATM/DEBIT CardDeposit Interest ratesCredit Interest ratesOther Services :

Locker Facilities, Senior Citizen Schemes, Merchant Banking, Electronic Fund Transfer & Clearing Services,etc.

SubsidiariesPNB Gilts Ltd. : A subsidiary of  Punjab National Bank which

was amongst the first ones to get the license for undertaking activities in the Government Security market, as a primary dealer in 1996.

PNB Housing Finance Ltd. : This is a wholly owned subsidiary of Punjab National Bank, is engaged in providing housing loans for purchase, construction and upgradation of a dwelling unit. The company offers Loans for:- Construction or for purchase of house/flat

- Renovation/ repairs- Construction of residential projects- Loans to NRIs are also provided for purchase/ construction of house/ flat along with a resident/ non-resident co-borrower

PNB Capital Services Limited :Stands merged with PNB

Organizational Structure

PNB Branches (National & International)Branches in all the 7 metropolitan and cosmopolitan cities in

India New Delhi, Mumbai, Calcutta, Chennai, Bangalore, Hyderabad

and Ahmedabad. It has branches in both urban as well as rural areas.

PNB is always focusing on expanding abroad and till date has identified some emerging economies. Some of them are in these places. Almaty Kazakhktan Shanghai China London Kabul Afghanistan

Hierarchy

Legal framework The Banking Regulation Act, 1949 and the Reserve Bank of India Act,

1934 authorize the RBI to regulate the banking sector IT ACT 2000 ,bankers book act new way of banking can be safe,

secure and adaptive. India had adopted Basel I guidelines in 1999. India to adopt Basel II Under Basel I, risk-weights were pre-decided by regulator In Basel II,

risk-weights linked to the external ratings by accredited rating agencies Banks allowed to develop there own internal ratings of different assets

and risk-weight them based on those ratings. supervisory review process by national regulators disclosure by banks of key information regarding their risk exposures

and capital positions and aims at improving market discipline. The deadline for implementing Basel II, originally set for March 31,

2007, has now been extended to March 31, 2009.

FinancialsGrowth RateOperating ProfitNet ProfitNon Interest IncomeKey Financials Ratio

Growth RatePARTICULARS

30/06/07 30/06/06 Growth (%)

Own Funds 10,858 9,634 12.7

Deposits 1,42,609 1,17,173 21.7

Net Advances 95,640 77,546 23.3

Investment 48,942 43,088 13.6

Total Business 2,38,249 1,94,719 22.4

Total Assets 1,65,319 1,37,767 20.0

Figures in Rs crores

Operating ProfitPARTICULARS 30/06/07 30/06/06 GROWTH

(%)

Interest Income 3363 2630 27.9

Interest Expense 1985 1348 47.3

Net Interest Income 1378 1282 7.5

Non-Interest Income 432 293 47.4

NET TOTAL INCOME 1810 1575 25.8

Operating Expenses 877 697 25.8

a) Staff Expense 641 479 33.8

b) Other Operating Expense

236 218 8.4

Operating Profit ( Excl. Loss On Transfer Of Securities)

933 878 6.2

Figures in Rs crores

Net ProfitPARTICULARS 30/06/07 30/06/06 GROWTH

(%)

Operating Profit ( Excl. Loss On Transfer Of Securities)

933 878 6.2

LESS: Loss of Transfer of Securities

69 Nil

LESS: Provisions Fora) NPAsb) Dep. On Investments(Net of Dep. Held Against Securities transferred)c) Others

13886

14

26 364

-26

PROFIT BEFORE TAX 626 514 21.7

LESS: Provision For Taxes

201 146

PROFIT 425 368 15.4

Figures in Rs crores

Non Interest IncomePARTICULARS 30/06/07 30/06/06 GROWTH

(%)

Commission, Exchange & Brokerage

275 243 13.2

Trading Profit 131 49 167.3

Profit on Exchange Transaction

58 32 81.3

Recovery In Written Off A/C

23 11 109.1

Others 22 28 -21.4

TOTAL 509 364 39.8

Figures in Rs crores

Key Financial RatiosPARTICULARS 30/06/07 30/06/06

Net Interest Margin 3.80 4.07

Cost to Income Ratio 66.82 58.62

Cost to Inc. Ratio (excl. Loss incurred on securities transfer)

48.45 44.23

ROA 1.02 1.06

MARKET VALUATIONS

EPS (Rs.)-(Annualised) 53.92 46.64

EPS Growth % 15.6 2.6

Return on Equity 16.09 15.75

Focus Areas• Technology

– 100% Computerization of all branches– SFMS has been Implemented in 1398 branches for

intra bank funds transfer– Enables bank’s customers to have access to 23000

ATMs across the country

PARTICULAR 30/06/07 30/03/07 Growth (%)

CBS branches 2557 2304 10.98

ATM Network 1092 879 24.23

Internet Banking Customer Base

235990 166000 42.23

• Global Ventures

– The bank converted its representative office at London (UK) into a wholly owned subsidiary on May 10, 2007

– In addition Bank has Representative Offices at Almaty (Kazakhstan), Shanghai (China) & Dubai (UAE)

– Shortly, opening, Branch at Hong Kong, Subsidiary at Canada, Offshore banking unit at Singapore

FOREX BUISNESS 30/06/07 30/06/06 Growth (%)

Export Turnover 7030 5999 17.2

Import Turnover 8770 6727 30.4

Forex Turnover 15800 12726 24.2

Agriculture & SME

2/3 of the branches are in Rural/ Semi-urban area with predominance in the Indo-Gangetic plain where major economic activity is agriculture which gives us a natural advantage in disbursing agriculture credit

Towards empowering farmers bank has set up 8 ‘Farmers’ Training Centres’ which provide free training to farmers, rural women & unemployed youth.

FOREX BUISNESS 30/06/07 30/06/06 Growth (%)

Credit to Agriculture 18732 15295 17.2

Credit to SME 15236 11696 30.4

Credit to SSI 11674 8434 24.2

Figures in Rs crores

Retail Credit Retail credit constitutes

22.7% of Net credit as on 30th June 2007

Education loan is the area of thrust for the bank

Awards & RecognitionsRanked 21st amongst top 500 companies by the

leading financial daily, Economic Times. Ranked as 323rd biggest bank in the world by

Bankers Almanac (January 2006), London. Earned 9th place among India's Most Trusted top

50 service brands in Economic Times- A.C Nielson Survey.

Ranked 368 amongst the top 1000 banks in the world according to "The Banker" London.

Golden Peacock Award for Excellence in Corporate Governance - 2005 by Institute of Directors.

FICCI's Rural Development Award for Excellence in Rural Development - 2005.

Objective

Analysis of PNB

Strengths

•Wide network •Large no. of customers•Fast adaptability to technology•Brand recognition•Excellent Training Facilities

Weaknesses

•Casual behavior•High gross NPA•Corruption & Red Tapism•Slow decision making-due to large hierarchy

Opportunities

•Fast growing Indian economy•High growth in banking sector•Liberal markets•Micro financing

•Home to home banking services•Diversification towards other fields•Globalization

•Decentralized decision making•Awards & Incentives

Threats

•Large no. of market players•Expansion of foreign banks in India•Instability of government•Informal financing

•Providing better services•Building long term customer relationships

•Fast Decision making•Competitive edge•Changing culture

SuggestionsDeveloping strong cultural values

Social IntegrityBonding with customersResponsiveness

Fast & Decentralized decision makingDiversificationAwards and Incentives based pay structureGlobalization

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