Bank Internship report : Over View of Standard Chartered Bank Bangladesh (SCB)
ORGANIZATIONAL OVERVIEW
The Standard Chartered Bank PLC is an international banking and financial services group that is incorporated in the U.K. with its headquarters in London. It has a unique international network. It now spans in the developed and emerging economies of the world, after been built over 140 years.
Standard Chartered Bank PLC primarily focuses its activities in Asia, Africa, and Middle East. This bank plays an invigorating role in linking the world’s developed economies with emerging markets and provides personal banking, corporate baking, institutional banking consumer finance and custodial services. The act of the bank is to provide the most efficient, consistent and timely services and to be the bank of choice in its principal territories.
Globally, the key resources of Standard Chartered Bank includes: – a network of over 600 offices in 48 countries and, a staff of about 25,000 people managing assets of around 47 billion pounds. Standard chartered bank’s international businesses in personal banking, corporate banking and standard chartered markets are its special strengths.
Global strategies of Standard Chartered Bank are to build and grow strong businesses in East and South East Asia – the Asia Pacific Region; to enhance historical position in the MESA region; and, to concentrate operations in the OECD in those activities that support Standard Chartered Bank’s remarkable franchise in newly industrialized and emerging markets
MISSION, VISION AND OBJECTIVES OF STANDARD CHARTERED BANK
Mission
The mission of the bank is to become a highly competitive modern and transparent institution comparable to any of this kind at home and abroad.
Vision
A Bank with Vision is the motto of Standard Chartered Bank. The vision is to be the most efficient financial intermediary in the country. The relentless journey to achieve that vision started in 1995, since the very inception of the Bank. The journey still continues and will never stop. Standard Chartered Bank sets a high standard for itself and every achievement of the bank is a striving agent to reach a new height.
Objectives
Whether in treasury, consumer, or corporate banking, Standard Chartered Bank is committed to provide the best. Meeting the demand of discerning customers is not the sole objective. The Bank believes that to provide standard financial services is to deliver a quality that makes every transaction a pleasurable experience. The bank also believes that Customer is always right and in the core of everything. So providing them friendly and personalized service, tailor-made solutions for business needs, global reach in trade and commerce at the doorsteps and high yield on investments are the core objectives of the bank. But the bank also tries to do the best in conjunction with achieving the ultimate objective of a business organization – Wealth Maximization.
BACKGROUND OF STANDARD CHARTERED BANK
Standard Chartered Bank has a history of about 150 years. The name “Standard stems from the two original banks from which it was founded – the “Chartered Bank” of India, Australia and China and the “Standard Bank” of British South Africa. A Royal Charter granted by Queen Victoria of England established the “Chartered Bank” in 1853. Another Scot, John Paterson in 1862, founded the “Standard Bank”.
The two banks expanded and prospered with time and decided to merge in 1969. On January 30, 1970 the new shares of the Standard and Chartered Banking Group Limited were listed in the London Stock Exchange. Queen Elizabeth II opened headquarters of the Standard Chartered Bank PLC on March 20, 1986. Becoming stronger after the merger, Standard Chartered Bank embarked upon serious expansion in Europe and the United States, The Standard Chartered Merchant Bank was built up from a number of acquisitions made during the 1990s. In the last thirty years, Standard Chartered Bank has experienced continuous growth, which led to its becoming one of the top 100 listed banks in the world. It was also judged the best bank in the Asia-Pacific region in 1993 and 1994 for its rate and excellent service.
In August 2000 Standard Chartered Bank as its strategy to grow acquired the ‘Grindlays’ part from ANZ. Buying Grindlays from ANZ now propels it from number five to number one among international banks in India, with some choice extra footholds in the Middle East.
At 1.3bn U.S dollars, it is hard to complaint hat Standard Chartered has overpaid. The financial ease is less compelling for ANZ shareholders, as there are advantages to getting out of a strategically peripheral business. This acquisition of Grindlays Bank has added 6000 employees and 4 countries to Standard Chartered’s existing network of 27,000 employees and 570 offices in 50 countries.
The end result is that Standard Chartered, which went into the 1997 Asian Crisis with strong business in Hong Kong, Singapore and Malaysia, emerges with additional core markets in India and Thailand.
The deal has made Standard Chartered the largest foreign bank by assets in India, Pakistan and Bangladesh and the second largest in Sri Lanka and the United Arab Emirates. The bank had been seeking to expand in the region since the end of the Asian economic crisis, and has finally become successful in its expansion. The primary goal of the integration is to combine the best of both companies.
Company Image and Logo
Standard Chartered Bank is a solid, forward looking, modem foreign bank with a long record of sound performance. The effort that Standard Chartered Bank makes in order to portray the Bank as a brand image is very strong and successful. The general image of Standard Chartered Bank is that it is “Trustworthy, efficient, helpful and committed.” The logo of the bank depicts the merger of two banks.
STANDARD CHARTERED BANK IN BANGLADESH
The Chartered Bank started operating in Bangladesh in 1948, opening a branch in Chittagong. The branch was opened mainly to facilitate the post-war reestablishment and expansion of South and Southeast Asia. The Chartered Bank opened another branch in Dhaka in 1966, where it is still headquartered. After the merger of the Chartered Bank with the Standard Bank in 1969, the Standard Chartered Bank took up a program of expansion. It increasingly invested in people; technology and premises as its business grew in relation to the country’s economy. In 1993, there was an organizational re-structuring, which led to a substantial expansion of the Bank’s business. Today the bank has in total four branches in Dhaka apart from the Chittagong branch, including an offshore branch at the Savar Export Processing Zone.
Bangladesh is under the MESA region, with the controlling office in Dubai. Its correspondent relationship with Sonali Bank, the largest bank in Bangladesh, gives its customers access to all major centers in the country. Standard Chartered Bank’s worldwide network facilitates convenient connections with foreign trade and remittance business. Standard Chartered Bank’s branch banking license in Bangladesh allows it to offer a full range of banking services.
Since the organizational restructuring in 1993, the amount of deposits and loans in 1997 has increased by more than five times. There is an overall increasing trend of Standard Chartered Bank’s market share in terms of deposits and advances. In 1995, the market share in terms of advances was 20%, which peaked to 29% in 1996 and fell by 3% in 1997. In the case of deposits, the market share of Standard Chartered Bank increase 16% in 1995 to 18% in 1996, and increased by another 2% in1997. In terms of profit before taxes, there is a rise from eight million BDT in 1990 to its highest amount of 750 million BDT in 1998. The largest increase of 438% took place in 1991. Although the growth rate began to decline gradually from 1993 (from a 170% to 5% in 1998) the overall increase reflects a substantial positive trend. Standard Chartered Bank’s growth in terms of profit and market share depicts an overall positive trend.
Branches of Standard Chartered Bank all over the country:
After acquisition
This acquisition has made Standard Chartered/Standard Chartered Grindlays bank the largest foreign bank in this country. An integration team from Standard Chartered Bank in London is to come time to time in Dhaka to settle the process of the acquisition of the ANZ Grindlays Bank. The team comprising of officials from both Standard Chartered and Grindlays are working on staff and branch rationalization.
But the whole process will take about one and a half years and meanwhile both the banks will continue to work as legal entities. Though there may not be many changes at the lower and mid-levels of the banks, there may be some changes and redundancies in the higher level. But those who will have to leave will get a handsome compensation package.
The integration was comprehensive and is being managed as a distinct process. Meanwhile, the business is kept going to provide uninterrupted customer service and to deliver the desired results.
Standard Chartered Bank after acquiring Grindlays expects to relocate its own and acquired branches upon regulatory consent. There are places where both Standard Chartered Bank and SCGB have branches and there are other places with perceived demand for branches, but the Bangladesh Bank does not want to give permission for opening any new ones. Standard Chartered Bank, known for its technological edge is the forerunner in automated teller machines, telebanking, treasury and lately corporate banking solutions. Grindlays is the market leader in credit cards, corporate advisory services and personal banking.
The Organization Structure
The Standard Chartered Bank in Bangladesh has its headquarters and three branches in Dhaka and one branch in Chittagong, while they are going to open one in Sylhet very soon. While the full range of services is available at the headquarters, other branches offer specific services appropriate for the location. At the headquarters, the bank mainly consists of two divisions:
The first one is “Business” and another is “Support”.
The business division has the following departments:
± Corporate Banking Group (CBG)
± Treasury (TSY)
± Institutional Banking Group (IBG)
± Consumer Banking (CB)
± Custodial Services (CUS)
Standard Chartered Bank is primarily corporate driven. Corporate banking generates more than 40% of its revenue group while Treasury contributes more than 20% to the overall revenue. The rest is generated from Personal Banking, Custodial services and Institutional Banking.
The Support division provides assistance to the above business activities and consists of some departments. And these departments are: – Operations, Finance, Administration and Risk Management, Information Technology Center, Human Resource Department, Legal and Compliance, External Affairs and, Credit department
Chain of Command
Chartered Bank in Bangladesh follows a hierarchical pattern of command. The Chief Executive Officer (CEO), Osman Morad reports to the Regional General Manager, MESA in Dubai. All the department heads at the headquarters report to the CEO. A manager or senior manager who reports to the head of the division heads the s. In Chittagong, however, since there are two major business activities, a manager or senior manager, who reports directly to the head of the respective division in Dhaka, heads each. The Custodial Service division at the headquarters reports to the Head of Corporate Banking.
The respective branch managers are responsible for the performance of their unit. Each branch is organized functionally along line divisions with some support facilities and the manager assigns tasks to his/her subordinate personnel and supervises their performance, instructions are often given without necessary details and clarifications.
Management
The goal of Standard Chartered Bank is to be the “Bankers of First Choice.” Towards that goal, the overall planning in the Organization is done at the headquarters level in Dhaka by a Management Committee (MANCO), headed by the CEO and consisting of the business heads of Corporate Banking, Consumer Banking, Treasury, and from the support divisions the heads of Human Resource, Operations and Finance Departments. They meet once a month, or when a special situation arises, to plan the strategic decisions.
BANKING SERVICES OF THE STANDARD CHARTERED BANK IN BANGLADESH
There are two types of services provided by the Standard Chartered Bank; and they are –
1) Business or Corporate Financial Services
2) Retail or Consumer Financial Services
But these two services can be classified further by the following ways:
Figure 2: Banking Services of Standard Chartered Bank
ACTIVITIES OF STANDARD CHARTERED BANK
Corporate Banking Group
Standard Chartered Bank offers its local customers a wide variety of financial services. All the accounts of corporate clients, which mainly comprise the top local and multinational companies operating in Bangladesh, are assigned a Relationship manager who maintains regular and close contact to cater to their needs. The objective of this department is to maintain a thorough knowledge of the client’s business and to develop positive relationships with them. This is maintained through interactions to offer timely advice in an increasingly competitive business environment. The expertise of the Institutional Banking and Treasury groups is also available whenever required. The unique Offshore Banking Unit (OBU) in Savar a full range of facilities to overseas investors. The Corporate Banking Group in Bangladesh has displayed a spirit of community involvement by working with NGOs to underwrite soft loans. Standard Chartered Bank offers its corporate customers:
± The wide variety of lending needs are catered to with skilled and responsive attention
± Project finance and investment consultancy
± Syndicated loans
± Bonds and Guarantees
± Local and International Treasury products
The trade finance of Standard Chartered Bank takes care of the commercial activity related issues, particularly those related to import and export finance services. Some of the services are:
± Trade finance facilities including counseling, confirming export L/Cs and issuing of import L/Cs, backed by its international branch and correspondent loan network
± Bond and Guarantees
± Project finance opportunities for import substitution and export oriented project
Treasury
The foreign exchange and money market operation of the Standard Chartered Bank in the world is extensive. Exotic currencies happen to be one of its specials areas of strength. A 24 hour-service is provided to customers in Bangladesh through the rd Bank’s network of dealing centers placed in the principal of the world. The Bank’s treasury specializes in offering solutions to who wish to manage interest rate and currency exposures that result from trade, investment and financing activities of other dynamic economies of the region. Treasury operations are developed in line with changing market conditions to Y’-! the best services to its customers. According to BAFEDA (Bangladesh Exchange Dealers Association), Standard Chartered Bank presently controls 42% of the local foreign exchange market’s traded volume.
Institutional Banking Group
The IBG of Standard Chartered Bank offers a wide variety of products and services to banks and financial institutions. It has global links with leading banking institutions and agency arrangements through its network of offices in 40 countries. The Bank offers a full range of clearing, payment collection and import-export handling services. The bank offers foreign missions, voluntary organizations, consultants, airlines, shipping lines, and their personnel the following financial services:
± Current accounts in both Taka and other major foreign currencies
± Convertible Taka accounts (these funds are freely convertible to major international currencies)
Following are the variety of financial products offered by this department:
Vostro Accounts
IBG, Bangladesh maintains Vostro Accounts of banking and financial institutions worldwide. Customers maintaining such accounts can remit funds throughout the country through the Standard Chartered Bank branch network as well as through – Chartered Bank’s local correspondent relationships.
Nostro Accounts
In order to increase and promote the correspondent banking business worldwide, IBG uses Nostro accounts to Bangladeshi banks and financial institutions in almost all the Standard Chartered Bank global network. Group branches and sides provide full clearing and payment services in the UK, USA, Hong Kong, Malaysia, Singapore and many African countries. Worldwide payments services are facilitated by a network of branches supported by electronic cash management (available in select locations), fund transfer system and membership of SWIFT.
Consumer Banking
Superior retail banking services comprising a wide range of deposit and loan products are offered by the Standard Chartered Bank to its individual customers. The Consumer Banking division constantly faces challenges and meets them by developing new products and services to fulfill the specific requirements of local TU Bank offers a 24-hour service in Bangladesh through its Moneylink ATM network and Phone-link Phone Banking services.
THE CLIENT RELATIONSHIPS
Client Relationships unit conducts direct business with different corporate business entities of Bangladesh. It has over 300 corporate customers in Dhaka & Chittagong. The clients are served by different teams of trained and dedicated professionals.
- Global Corporate: This team deals with the corporate customers who have business with Standard Chartered Bank in other countries of the world.
- Large Local Corporate: This team deals with local corporate houses who have an annual turnover of USD 300 million or more along with the their subsidiaries.
- Local Corporate: This team deals with local corporate houses that have an annual turnover in between USD 50 million to 300 million and its subsidiaries.
- Channel Finance: This team provides services to the suppliers of the corporate customers. The volume here is earmarked with the linked corporate customers.
- Transactional Sales: This team deals with clients who do no need capital financing or credit facilities, but need to have better cash management solutions.
SWOT ANALYSIS
Figure 2: Banking Services of Standard Chartered Bank
PRODUCTS OFFERED BY STANDARD CHARTERED BANK
Products
- Personal Banking
- Commercial Banking
- Trade service
Personal Banking
A. Deposits
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B. Loans
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2.8.3 Personal Banking
Standard Chartered offers premium retail banking services to individual customers with a large variety of deposit and loan products. Standard Chartered Bank’s Consumer Banking business continuously meets the challenges of developing new products and services to match the specific requirements of customers.
A. Deposits
Savings Account
Standard Chartered Savings Account is a convenient and right way to manage money. Standard Chartered Bank work hard to give its customers the best return on their investment. It provides customers the following facilities:
ü Earn Interest
ü Banking through ATM
ü Any Branch Banking
ü 24-hour Banking Convenience
ü State-of-the-art 24-Hour Call Centre
ü SMS Banking and e-Statements
ü Paying Customers’ Bills is as easy as pressing a button
ü Regular additional benefits
Access Account
Access is a non-branch banking solution that gives the customer more flexibility with:
ü Access to 24 ATMs in six major districts
ü Access to free e-Statement facilities
ü Access to state-of-the-art Call Centre facilities
ü No chequebook, all transactions done electronically
ü Annual ATM fee of only BDT 150
Current Account
A frequent transaction account that provides customers both convenience and flexibility. Put an end to your worries about carrying large sums of money when they need it. Standard Chartered Bank Current account is an efficient and convenient way of handling their daily finances. It provides customers:
ü 24-hour Banking convenience
ü Any Branch Banking
ü State-of-the-art 24-Hour Call Centre
ü Debit Card
ü Regular additional benefits
Fixed Deposit
Standard Chartered Fixed Deposits make your money work for you. With the advantage of Standard Chartered’s expertise, resources and experience, you can assure of maximizing the growth potential of your savings safely.
ü Any Branch Banking
ü Perfect combination of liquidity and returns
ü Debit Card
ü Any Branch Banking
ü State-of-the-art 24-Hour Call Centre
ü Regular additional benefits
Foreign Currency Current Account
Applicable to Bangladeshis working abroad, it can be opened in USD, GBP and Yen without restriction on transaction frequency. It can be operated through nominees in absence of the accountholder. Fund remains in foreign currency and is freely remittable.
Graduate Account
Graduate Account is a customized Savings Account for ongoing graduate and post-graduate university / college students, who are at least 18 years old.
ü Interest bearing Savings Account
ü Sure return!
ü Graduate Account Debit Card
ü I-Banking
ü Paying your bills is as easy as pressing a button
ü Graduate Account – Tuition Protection Accidental Death Insurance plan
Millionaire Scheme
Start with BDT 100,000 and deposit BDT 10,000 per month and become a millionaire in just 5 years 9 months.
Figure3: Millionaire Scheme
Non-Resident Foreign Currency Deposit (NFCD)
A short-term foreign currency deposit account suitable for Bangladeshis living abroad, offering competitive interest rates available in both local and international markets.
Resident Foreign Currency Deposit (RFCD)
Resident Foreign Currency Deposit Account is allowed for Bangladeshi residence only. RFCD Account offers you the convenience and flexibility of managing your foreign currency related issues to some extent:
- Interest bearing foreign currency account
- Multi-currency deposit facility: USD, EUR, GBP
- International Credit Card issuance facility against RFCD account
STD Account
Standard chartered Call account offers you the convenient way to save for the future, as well as enjoying easy access to your money.
ü Earn Interest on Daily Basis
ü Affordable Minimum Balance
ü Any Branch Banking
ü 24-hour Banking Convenience
ü SMS Banking and e-Statements
ü State-of-the-art 24-Hour Call Centre
ü Debit Card
B. Loans
Personal Loan
Personal Loans from Standard Chartered are the most flexible of their kind in the market. Unlike the conventional banking at Standard Chartered, you do not need to provide any cash security to avail Personal Loan from us. The loan amount may range from BDT 60,000 to BDT 1,000,000 depending on your income.
Auto Loan
With Standard Chartered Auto Loan, it is easier than ever to buy the car of your dream. It offers you a flexible and affordable loan with easy repayment options, all wrapped in a very convenient package. We finance a maximum of 75% of the car value. The loan amount may range from BDT 200,000 to BDT 5,000,000 for new / reconditioned cars and from 200,000 to BDT 1,000,000 for used cars.
Flexi Loan
Flexi Loan from Standard Chartered is a loan facility that has been custom designed to fit your needs. Highest Loan amount is BDT 1200K depending on income assessment.
SME Banking
Our Business Financial Services (BFS) is now SME Banking. SME Banking supports the banking needs of Small & Medium Enterprises (SMEs). This is a one-stop solution for all sorts of banking requirements. SME Banking offers the following products:
- Business Loan
- Overdraft facility
- Trade Finance & Working Capital
OTHER SERVICES
Credit Card
Standard Chartered Bank (STANDARD CHARTERED BANK) issues both VISA and MasterCard Credit Cards, the two renowned Credit Card brands. Our product range includes:
Local Card
- Visa Silver Credit Card
- Visa Mini Card
- MasterCard Silver Credit Card
- MasterCard Gold Credit Card
- MasterCard Platinum Credit Card
- MasterCard Cricket Card
International Card
- Visa Silver Credit Card
- Visa Gold
Priority Banking – an exclusive service offer
Priority Banking – a privileged service offered to our selected customers. Bank promises you services that are personal, professional, privileged, private and profitable. This unique service, offered by only Standard Chartered Bank in Bangladesh, comes with a range of attractive benefits.
Phone Banking Service
Standard Chartered Bank is the first bank in the country to offer automated 24-hour Phone banking service. Our phone banking services include balance enquiry, fund transfer, change of TIN, cheque-book request, statement request, foreign currency exchange rate etc., which are available through telephones from the comfort of home, office or car.
THE BANKING INDUSTRY OF BANGLADESH
The gradual improvement in the overall policy environment has enabled Bangladesh to improve its economic performance in recent years. Successive governments in Bangladesh have been confronted with the problem of stimulating the economic growth rate in a country where a substantial segment of the population lives below the subsistence level. Economic policies are still guided by five year plans. Nevertheless, some progress has been made over the years, such as self -sufficiency in food grain production, reducing the population growth rate, poverty alleviation and boosting export income. The GDP growth per annum has been about 5 percent on an average from 1994-2000; Per capita GDP was $363 in 1999-2000.
The Banking Industry in Bangladesh is one characterized by strict regulations and monitoring from the central governing body, the Bangladesh Bank. The chief concern is that currently there are far too many banks for the market to sustain. As a result, the market will only accommodate only those banks that can transpire as the most competitive and profitable ones in the future.
Currently, the major financial institutions under the banking system includes:-
- Bangladesh Bank
- Commercial Banks
- Islamic Banks
- Leasing Companies
- Finance Companies
Of these, there are four nationalized commercial banks (NCB), 5 specialized banks, 11 foreign banks, 26 domestic private banks and 4 Islamic Banks currently operating in Bangladesh.
Figure 4: Schedule of Banks (Source: Bangladesh Bank Annual Report 2004-2005)
All local banks must maintain a 4% Cash Reserve Requirement (CRR), which is non-interest bearing and a 16% Secondary Liquidity Requirement (SLR). With the liberalization of markets, competition among the banking products and financial services seems to be growing more intense each day. In addition, the banking products offered in Bangladesh are fairly homogeneous in nature due to the tight regulations imposed by the central bank.
Competing through differentiation is increasingly difficult and other banks quickly duplicate any innovative banking service.
MARKET SEGMENT
The banking industry of Bangladesh is mainly divided into two sectors, such as Specialized Banks (SBs) and Commercial Banks (CBs). The Specialized Banks are those banks that deal with specific sectors or industry of an economy. For instance, Bangladesh Krishi Bank (BKB) only deals with the agricultural sector of the economy; Bangladesh Shilpa Bank (BSB) only deals with the industrial sector of the economy, etc.
On the other hand, Commercial Banks are Scheduled Banks that are operating in the country under the rules and regulations of the Central Bank. Commercial banks in turn can be grouped as Nationalized Commercial Banks (NCBs); Foreign Commercial Banks (FCBs) and Private Commercial Banks (PCBs) with three different segments, such as 1st Generation Private Commercial Banks, 2nd Generation Private Commercial Banks, and 3rd Generation Private Commercial Banks.
The Bangladesh Bank (BB) Order created in 1972, authorized Bangladesh Bank (BB) as the central bank of the country. Bangladesh Bank Order 1972 and the Banking / Companies Act 1991 mainly guide the commercial banks in Bangladesh. Commercial Banks in Bangladesh are not allowed to do business other than just banking. Normal activities include borrowing, raising or taking up of money, lending or advancing of money with or without security. They are also authorized to issue letters of credit, trade in precious commodities and buying and selling of foreign goods excluding foreign bank notes. They are also authorized to trade in bills of exchange, promissory notes, coupons, drafts, debentures, certificates and other instruments approved by Bangladesh Bank (BB). Banking companies are required to provide safe vaults and are authorized to collect money and securities.
All banks operating in Bangladesh with different paid-up capital and reserves having a minimum of an aggregate value of Tk. 5 million and conducting their affairs to the satisfaction of the Bangladesh Bank have been declared as scheduled banks in terms of section 37(2) of Bangladesh Bank Order 1972. Now in terms of section 13 of Bank Company Act, 1991, the minimum aggregate capital is Tk. 200 million.
After liberation, the banks operating in Bangladesh (except those incorporated abroad) were nationalized. These banks were merged and grouped into six commercial banks. Of the total six commercial banks, Pubali Bank Ltd. and Uttara Bank Ltd. have subsequently been transferred to the private sector with effect from January 1985. Moreover at present there are 51 scheduled banks operating all over the country. Out of these, 9 are state-owned (including five specialized banks), 30 are private commercial banks (including four Islami banks) and the remaining 12 are foreign commercial banks (including one Islami bank).
The name of all the banks operating in Bangladesh and their year of incorporation are given in table 1.
Table 1: Name of the Banks operating in Bangladesh
Source: Bangladesh Bank.
OTHER BANK STATUS
CURRENT STATUS OF THE BANKING INDUSTRY
The Banking Industry of Bangladesh at present is in the growth stage. Almost every year new private banks are coming up, new branches are opening within two to three months, new customers are coming to open an account in different banks. As a result, according to July 30, 2004 there are 4 nationalized commercial banks, 5 specialized banks, 30 local private commercial banks and 12 foreign commercial banks operating in this country. Moreover, as on July 30, 2004 there are 27,881,322 numbers of deposit accounts and 7,462,785 numbers of advance accounts in the banks.
MARKET SIZE AND MARKET GROWTH RATE
Market size of an industry can be measured by many ways, such as Total Revenue, Volume of production number of customers and so on. However, in case of the Banking sector the measurement of market size is quite peculiar as both the total amount of deposits and advances are taken into consideration.
The following figure shows that the percentage of total branches of all the banks in the year 2004:
Source: Scheduled Bank Statistics, Bangladesh Bank, July – Sept 2004; Economic Trends, March 2004.
The largest provider of advances among all the banks is the Nationalized Commercial Banks. With their high number of branches scattered throughout the country NCBs topped the list with Tk. 290,800 million in 2005 (September) remotely followed by Private Banks (Tk. 181,380 million). The share of advances of the SBs and PCBs are increasing at an alarming speed than the NCBs.
However, the share of FCBs is consistent. Therefore, table 2 shows advances by category of banks.
Table 2: Advances by Category of Banks (Amount in million Taka)
Source: Scheduled Bank Statistics, Bangladesh Bank, July – Sept 2003.
Again NCBs also dominate in the total deposits. It can be seen from the table below that over the years the share of NCBs, FCBs, and SBs are decreasing, whereas the share of PCBs is increasing significantly. Therefore, Figure 6 shows the deposits by category of banks.
Source: Scheduled Bank Statistics, Bangladesh Bank, July – Sept 2004.
INDUSTRY’S COMPETITIVE FORCES
Rivalry among the Competitors
In the banking industry, rivalry among the competing banks is moderate to high due to the following reasons:
– Major rivals are equal or close to in size and capability (revenue and volume).
– Exit barriers are high.
– New private banks are snatching share from the NCBs and each other’s customers by providing extra benefits.
– Slow market growth due to the sluggish economy.
– Depositor’s cost of switching banks is low.
Substitutes
There are substitute financial institutions that do many of the activities and transactions of a bank in the leasing field but these financial and leasing institutions are too small in size. These institutions can shrink the profit margin of commercial banks. Industrial Leasing and Development Company Ltd. (IDLC), Industrial Promotion and Development Corporation (IPDC), United Leasing Company are the key players. They provide industrial leasing to many companies in the country. Vanik Bangladesh Ltd., a merchant bank provides investment counseling and credit services among its other financial activities. But some of the operations of the banks like exporting / importing have no substitutes.
Power of Suppliers
Depositors are considered to be the suppliers of the banks. There are thousands of depositors from all walks of life. There are businessmen, service holders, farmers, students and people from virtually any other professions who are depositors of the banks. Big amount depositors have strong powers in determining interest rate of their deposits. However, the following table (table 3) would provide information regarding depositors of different categories of banks:
Table 3: Deposits (no. of accounts) of Different Categories of Banks as on 30.09.2004 (Amount in million Taka):
Bangladesh Bank, July – Sept 2004.
Sector wise distribution of deposits is given in table 4 for individual types of banks:
Table 4: Deposits Distributed by Sectors and Types as on 30.09.2004 (Amount in million Taka):
Source: Scheduled Bank Statistics, Bangladesh Bank, July – Sept 2004.
Power of Buyers
Creditors are considered to be the buyers of the banks. There are thousands of creditors from all walks of life. Mainly businessmen are the major buyer of Bank’s credit. Big amount creditors have strong powers in determining interest rate of their credit amounts. Banks distinguish their prime customers from others by setting a prime interest rate for them. However, the following table (table 5) would provide information regarding creditors of different categories of banks:
Table 5: Advances (no. of accounts) of Different Categories of Banks as on 30.09.2004
(Amount in million Taka):
If amount of advances were distributed sector wise, it would look like the following table:
Source: Scheduled Bank Statistics, Bangladesh Bank, July – Sept 2005.
MARKET CAPITALIZATION
The total market capitalization of 1st generation PCBs is TK. 5,420.87 million as on September 22, 2002 with the highest capitalization of IBL of Tk. 1,649.76 million and the lowest capitalization of Tk. 298.24 million of Uttara Bank Ltd. In the table (table 6) below it can be seen that for all the banks market value is lower than the book value, which implies that public cannot trust these banks.
Table 6: Market Capitalization of 1st Generation Banks:
Source: Scheduled Bank Statistics, Bangladesh Bank, September 22, 2002.
The total market capitalization of 2nd generation PCBs is Tk. 6,988.15 million as on September 22, 2002 with the highest capitalization of Tk. 1,680 million of Eastern Bank Ltd. and the lowest capitalization of Tk. 322.38 million of Al-Arafa Islami Bank. In the table below (table 7) it can be seen that the market value is greater than the book value for most of the banks, which implies that public’s acceptability for these bank is higher.
Table 7: Market Capitalization of 2nd Generation Banks:
Source: Scheduled Bank Statistics, Bangladesh Bank, September 22, 2002.
STANDARD CHARTERED BANK’S MARKET STANDING IN THE BANKING SECTOR
FINANCIAL HEALTH OF STANDARD CHARTERED BANK
Income Statement
Standard Chartered Bank (STANDARD CHARTERED BANK) reported interest income for the year 2005 to be BDT 1,216.9 M and it was 13.3% higher than previous year (BDT 1073.6 M in 1999). Most of this income was from discounted credit bill negotiation (BDT 413.0 M) followed by loans and advances (BDT 345.8 M), fixed loans (BDT 150.9 M) and revolving loans (BDT 142.4M). Other than that the bank also earned form loans to Bangladesh Bank and other banks, personal lending and call money.
Table 8: Analysis of Income Statement (STANDARD CHARTERED BANK) at a Glance (2004-2005)
All Figures in BDT (Mio.)
Balance Sheet
During the year 2005 the bank had BDT 224.2 M cash in hand and it was 56.1% less than previous year. The also decreased the amount of money they deposited with Bangladesh bank. This was mainly due to the huge balance of BDT 722.2 M they maintained with other financial institutions and the call money of BDT 395.0 M.
Standard Chartered Bank decreased their investment by 30% (From BDT 2,875.8 M in 1999 to BDT 2,012.3 M in 2005) and increased the amount of credit given to customers in the form of loans, cash credits, overdraft, etc by 26.6% (BDT 7,355 M in 2004 and BDT 9,310.6 M in 2005). Other than that total amount of bills discounted and purchased during the year was BDT 693.6 M.
The company also mentioned fixed asset of BDT 8.5 M in 2005 and other assets of BDT 1,513.6 M. The other assets were mainly the increase in assets due to exchange fluctuation and the banks balance with head office and other foreign branches.
Total liabilities of the company were BDT 14,869.8 M and it was 18.9% higher than previous year. This increase was manly due to the borrowings from other banks and financial institutions and deposit of SCGB.
Net worth of the company changed due to the additional retained earnings for the year.
MARKET SCENARIO
Competitive Standing of STANDARD CHARTERED BANK
Standard Chartered Bank has a large capital base that gives it an edge over competitors. It is currently a provider of the highest range of products. It has a leading market position in Cash Management and Trade-related services, which provides the platform to drive future growth.
Figure 8: Competitive position of Standard Chartered Bank in 2003
Source: Annual Review, STANDARD CHARTERED BANK, Bangladesh 2003.
It is very much evident from the figure above that STANDARD CHARTERED BANK’s current position in the market is still commanding and likely to stronger than the other banks in the near future.
- Nationalized Commercial Banks (NCB) are less regulated than Standard Chartered Bank but NCBs are burdened with inefficiency and low quality lending portfolio, though those banks continue to dominate government businesses (90%) mainly due to regulatory advantages and geographic reach.
- Foreign Commercial Banks (FCB) continue to hurt the margin. They are the major competitors in Cash with a strong product range.
– HSBC and Citi Bank NA, have limited capital and network
– American express has already wrapped up its corporate operations and thereby has decreased its competitive position in the market.
- Private Commercial Banks (PCB) with migrated skills from foreign banks are slowly moving away from vanilla products and age-old systems to higher value added products.
Source: Activities of Banks And Financial Institutions, 2003-2004
Competitive Performance of Standard Chartered Bank
As per the Annual Review Standard Chartered Bank, Bangladesh (2004), Standard Chartered Bank’s product mix seems to be more profitable compared to that of the market. The market, on the whole, is more dependent on cash management and deposit products to generate revenue. In contrast,
Figure 10: Competitive position on lending, trade, cash
Source: Annual Review Standard Chartered Bank, Bangladesh, 2004
Standard Chartered Bank enjoys the number one position in Cash Management, and Trade activities. Due to a more conservative approach in lending activities Standard Chartered Bank has reduced its exposure in this area.
Table 9: Competitive standing of STANDARD CHARTERED BANK Products; Source- Annual Review STANDARD CHARTERED BANK Bangladesh 2004
- Competitive position of Standard Chartered Bank IN Cash Management Services
The cash management service of the bank is clearly ahead of the competitors, thanks largely to a strong product range and the bank’s appetite in this segment. It is hoped that the competitive edge the bank holds in this segment will provide the platform needed to drive the future growth of the bank.
In this field of activity the immediate competitors are the foreign banks, namely HSBC and Citibank who also offer a diverse range of products, similar to those of Standard Chartered Bank.
B .Competitive position of Standard Chartered Bank in Trade
Standard Chartered Bank enjoys the number one position in the market in trade-related activities.
FINDINGS
- It is the second largest private bank of the country having a market dominance of roughly 67% among foreign banks.
- It has one of the largest capital bases.
- Its portfolio includes the biggest names.
- Long standing presence in the country and therefore longest standing relationships.
- It has a technological edge over its competitors.
- It has the widest distribution network among foreign banks through its own branches and correspondent banks.
- It has the intention of working only with the upper class people. So, the blue-collar people are deprived of having the service of STANDARD CHARTERED BANK.
- A limited branch is one of the major concerns for STANDARD CHARTERED BANK in comparison to other commercial banks.
- STANDARD CHARTERED BANK has more and high fees and charges like minimum balance fee, ledger fee etc. compared to its rivals. These hidden costs hinder STANDARD CHARTERED BANK to grow with customers.
RECOMMENDATION
STANDARD CHARTERED BANK has some threats and weaknesses that will turn down the operation of this bank to a great extent. It is been seen that customer complaint has increased recently than before for this reason it is high time that the employees are trained up more to avoid future mishaps. Some recommendations are proposed below.
- In the deposit accounts the new emerges in the market are providing a higher rate of interest compared to STANDARD CHARTERED BANK and for this reason the MANCO might give a second thought about re-fixing the rate.
- The latest entrant BRAC Bank is planning to launch a similar product like Personal Loan for Consumers with a lower rate and charge. STANDARD CHARTERED BANK should take precautionary measures to keep their products viable to customers both new and old.
- STANDARD CHARTERED BANK should lower its charges immediately to prevent the loss of customers.
- STANDARD CHARTERED BANK senior officials should be more cooperative to their subordinates and arrange for workshops/ training programs to keep them motivated in their work.
- The establishment of more branches may boost up the chance of becoming more customer base for STANDARD CHARTERED BANK.
CONCLUSION
As an organization the Standard Chartered Group has earned the reputation of top foreign banks operating in Bangladesh. The organization is much more structured compared to any other foreign bank operating in Bangladesh. It is relentless in pursuit of business innovation and improvement. It has a reputation as a leader in financing manufacturing sector.
With a bulk of qualified and experienced human resource, Standard Chartered can exploit any opportunity in the banking sector. It is pioneer in introducing many new products and services in the banking sector of the country. Moreover, in the retail-banking sector, it is unmatched with any other foreign banks because of its wide spread branch networking thought the country.
This report tries to figure out most of the indicators of problems and strengths of STANDARD CHARTERED BANK as a foreign bank in the competitive banking sector of Bangladesh. A severe cut throat competition is going on currently in this sector and that’s why STANDARD CHARTERED BANK has to work out with different dimensions like – product diversification, market forecasting, proactive activities undertaken by STANDARD CHARTERED BANK and some suggestion to get rid of the predicaments that exist.