Banking Industry
Banking Industry
Banking Industry
Cody Bailey
Sara Joseph
Jason Van Osdell
Gary Whittle
Key statistics
Revenue Growth 06-11
$570.9bn -2.3%
Profits Annual growth 11-16
$52.0bn 5.5%
Industry snapshot
The industry
• Capital levels are at unusually high levels
Return on assets
2.00%
Interest Rate
1.50%
1.00%
0.50%
0.00%
2009 2008 2007 2006
-0.50%
-1.00%
Financial analysis
Profitability measures
Average BofA JP Morgan Citi Wells
Net charge-offs
4.00%
Interest Rate
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
2009 2008 2007 2006
Financial analysis
• Citi : least efficient bank with lowest ROA and ROE ratios.
Also highest non performing loans while having the most
conservative portfolio. But, grade out well on long term
measures such as liquidity and capital ratios.
General environment
Economic • Corporate profits • Stock market • Interest rates
• Employment • Housing starts
Economic drivers
Corporate profits L Employment L Demand L
Corporate profits q Employment q Demand q
Sociocultural drivers
The big four’s losses
• 2008 Sub-prime crisis
• Consumers changed behavior $79.1bn
• Consumers saving more, spending
less
• Consumers spread their money out
• Banks failed
• Mergers and Acquisitions
• 1.3% annual decrease since 2008
• Down from more than 14,000 in
1980s
External analysis
Political/legal
• Federal intervention Bank of America
$25bn
Wells Fargo
$25bn
External analysis
Political/legal drivers
• Frank-Dodd, 2010
• Increased transparency
• Fee reductions for interchange fees
• Lowers limits on fees charged for debit card transactions
from and average of 44¢ to between 7¢ and 12¢
• Expected to reduce related revenues by 57%
• Negative economic impact
• Lower profits
• Costs likely passed to consumers
12%
Profit losses
near 2016
External analysis
Political/legal
• Rising fees
• Pilot programs to increase revenues from fees
• No free checking
• Chase: $3 monthly debit card fee; $15 monthly checking
• BoA: $6, $9 monthly checking fees
• Wells Fargo: $5 monthly fees
External analysis
Technological drivers
• Online banking
• Lowered costs
• Opened up new markets
• Increased new forms of competition
Globalization
• Low but increasing
• More uniform regulations – lower entry barriers
• Crisis shifted focus back to US, will reverse
External analysis
General environment
Regulation level HEAVY
Technological change MEDIUM
Globalization LOW, RISING
Life cycle stage MATURE
Competition HIGH
Barriers to entry MEDIUM
External analysis
Porter’s 5 forces
Threat of New Entrants
LOW
Capital Difficult to State or local
requirements develop product regulations are
high to establish unique enough to very thorough and
bank switch banks bureaucratic
Internal analysis
Value chain
Marketin
Operat Delivery
g
Revenue
ions Channels & Sales streams
• Regulatory
• Branch network • Product mix • Banking products
reporting and
compliance • ATM network • Branding; • Insurance products
• Investment products
•Deposit services • Internet Advertising
• Business services
• Loan admin • Telephone banking • Account acquisition
• Wealth management
• Treasury
• Mobile banking • Deposit acquisitions
operations
• Call centers • Cross sales
• Item processing
• Fee revenue
• Payment
generation
processing
• Community relations
Technology Development
Human Resources
Competitive
Client Selection d d Parity
Temporary
Cross-selling Capabilities d d d Advantage
Continuous Investment Temporary
in Growth d d d Advantage
Competitive
Expense Management d d d Parity
Manage Real Estate and Temporary
Cyclical Exposure d d d Advantage
Internal analysis
Bank of America
Resource/Capability V R I N O SCA?
Temporary
Largest Market Share d d d d Advantage
Competitive
Cross-selling Capabilities d d Parity
Temporary
Technological Innovation d d d Advantage
Competitive
Corporate Relationships d d Parity
Customer Service / Competitive
Transparency d d Parity
Internal analysis
Competitive
Diversified Products d d Parity
Competitive
Technology/Online Services d d Parity
Temporary
#1 in Customer Service d d d Advantage
Education – Internal and Temporary
External d d d Advantage
Conservative Lending Competitive
Principles d d Parity
Internal analysis
Citigroup, Inc.
Resource/Capability V R I N O SCA?
Competitive
Client selection d d Parity
Temporary
Largest network d d d d Advantage
Temporary
Modernized banking d d d Advantage
Competitive
Investor perception d d Parity
Resources