To this end, the industry is involved in 3 types of businesses broadly: wholesale or corporate banking, retail Nanking and investment banking. The industry has seen wild swings and earnings through boom and bust years of the economy and has to grapple with internal scandals, and heavy regulations. The late ass and the ass, were boom years for western banks punctuated in part by the stock market crisis of 1997, the Asian financial crisis of 1997, the dotcom crisis of 2001 and the great financial crisis of 2008, the last of which has signaled an end of light regulation in the banking industry.
Barclay, HASH and Standard Charted are all British banks, with both retail and corporate banking services. All three banks have had a high focus on investment Nanking, trading and corporate banking as in the industry, these are the highest fee based businesses. All three banks are British based banks, and were heavily impacted by the 2008 financial crisis which implicated American, British and European banks, of selling dubious mortgage-backed securities to investors with little knowledge of the underlying assets backing the products.
HASH and Standard Charted escaped most of the financial hardship of the 2008 turmoil, because of their predominance of their Asian and emerging market businesses. Founded in 1865, HASH is a multinational bank, headquartered in London. Currently, the bank operates with about 7200 branches across 85 countries with the total employee strength of 254,066 people. The bank deals in credit cards, corporate banking, investment banking, consumer banking, private banking, and mortgage and wealth management.
Headquartered in London, Standard Charted was founded in 1969, and currently operates with about 1700 branches across 70 countries with the total employee strength of 87,000 people. The bank deals in corporate and institutional banking, consumer banking and treasury services. Both listings on the stock exchange of Hong Kong. Standard Charted bank also has significant business interest in India and lists Indian depositories receipts on both the Bombay Stock Exchange (BASE) and the National Stock Exchange (ONES). In addition to their geographic pivot in Asia, both banks have a large presence in other emerging markets as well.
Standard Charted has significant business interests in a number of African countries, whereas HASH is active in Latin America. HASH further has positioned itself as a global leader and expert in all transactions involving rapidly expanding Chinese currency, the Remain. Although, most Asian banks have soused on expanding their Remain business, HASH has made the currency and its internationalization a key business strategy. Both HASH and Standard Charted, have intensive retail presence in Asia and abroad along with large corporate and investment banking arms.
Barclay, on the other hand, with its business focus in the west, suffered extreme withdrawal of investor and regulator confidence. Barclay currently operates with about 4750 branches across 50 countries with the total employee strength of 139,900 people. It deals in wealth and investment management, retail and business banking and corporate banking. It was in the market, for a EYE billion, the British government bailout in 2008, but later was able to raise E. 5 billion of new capital from private investors. It also acquired Lehman brothers investment banking and trading operations.
It continues to have retail banking, commercial banking and investment banking operations. It was also involved in the investment management business through its global investor’s unit but it sold it to Black Rock in 2009. Furthermore, it bought INNING Direct I-J from the INNING group in 2012. It also has stakes in South African financial services firm, the Abs group, and has a private and offshore banking arm, n the form of Barclay wealth. It has retail-banking branches in over 50 countries. After the global financial crisis, banking regulation can be considered a major factor impacting bank profitability.
All three banks are subject to international as well as local regulations in all the countries that they operate in. International banking regulations called Basel Ill has imposed greater capital costs on banks especially pertaining to capital deployed in risky security straightens business, to prevent banks from using customer deposits to make risky investment. With the advent of Basil Ill ND other global regulations which are binding on the 620 countries, the cost of capital has sky rocketed while the supply of liquid and investment grade securities has one down.
Since last one year the exchange rate is stable which also shows the stability of I-J economy. 1. 1. 3. Balance of Trade: Balance of trade is the difference between Export and Import. If the different between Export and Import is negative then it is called trade deficit and if the difference in positive then it is called surplus. Trade deficit on I-J trade in goods and services has been increased to GAP 4. 3 billion and GAP 1. 6 billion in May 2012. Lowering down the exports of oil, chemical and cars has fallen down exports of goods. The below figure 3 shows the balance of trade in I-J since past 7 years.
Figure 3 – I-J balance of trade Consumer confidence signifies the confidence of consumers in performance of country’s economy. Since 1982 until 2012, the average consumer confidence value is on average -9. 2. Higher the value, more the consumers have confidence in country performance. The below figure Figure 4 – Consumer Confidence 1. 1. 5. Business Confidence: Business confidence signifies the confidence business having in the performance of country. The business confidence has been declined in 2012 at 12. The below graph 5 shows the business confidence score in past 8 years.
Business confidence was lower in 2009 and grown up in 2010 then decline in 2011 to 1st quarter of 2012 due to the Euro crisis. Figure 5 – Business Confidence 1. 1. 6. Interest Rate: The interest rate signifies the monetary policy and overall economic strength in terms of monetary policy and fiscal policy and control the liquidity position of the country. Lower the interest rate, stronger the monetary and fiscal policy of the country. Interest rate benchmark in I-J was reported at 0. 0% in 2012. The below figure 6 shows the interest rate movement in past 7 years. Figure 6 – I-J Interest Rate 1. . 7. Employment Rate: The unemployment rate signifies the state of Job opportunities and predicts the strength of economy. Further it shows the number of people looking for Job as percentage of labor force. In June 2012, the unemployment rate was reported at 8%. The below figure 7 shows the employment rate movement in I-J since 2007. In January 2012, the unemployment rate was highest at 8. 4%. Figure 7 – Unemployment Rate Industrial production rate provided the industrial sector and growth and its nutrition in the GAP growth overall economic growth of the country.
It is an important indicator to forecast the economic growth and measure the inflation pressure on industrial sector. According to the below figure 8, the industrial growth was significantly low at -13% in 2009 and it improved until January 2010. Industrial production rate is still low in 1st quarter 2012. Figure 8 – Industrial Production 1. 1. 9. Stock Market Stock market or exchange is a center of network of securities’ transaction and buyer meets with the seller at certain price. Stock market is an economic indicator of overall business performance in the country. E I-J stock market registered significant decline in 2009 due to the global financial crisis and then after it has improve significantly until 2012 as presented in the below figure 9. Figure 9 – Stock Market 1. 2. I-J Banking Industry Analysis: The I-J banking industry analysis has been conducted using the PESTLE framework as it indicates the likely factors which can affect the industry players. These factors are uncontrollable in nature and impact of such factors cannot be eliminated but it can be reduced. 1. 2. 1 .
PESTLE Framework: Political Factors: I-J government has now tightening its eye on banking industry after the financial rises happened in 2009. Politicians have greater influence on controlling the policies related the UK banking industry. Due to such influence, the I-J government has imposed stricter regulations and lowers down the power of banking industry. The I-J government is also thinking to get back the money of taxpayers invested in the financial institutions which is quite De-motivating for banks (Tragicomedies. Com, 2012) (Infringer, John and Asia, 2012).
Environmental Factors: Environment has lower impact on UK banking industry though banks in I-J are actively participating into environment related corporate social responsibility initiative. Apart from this the I-J government has initiated and asked all companies to minimize their carbon emission by taking more green initiatives in their business processes(Tragicomedies. Com, 2012) (Ferguson and Likeliest, 2011). Socio-economic Factors: population in the country such as high net worth individuals are continue to invest in banking products.
The tax rate of 50% has been imposed by deterring them. In 2012, the banking industry has gained the confidence in general consumers as retail banking growth has been registered at 30% over the past year 2011 (Tragicomedies. Com, 2012). Legal Factors: I-J government has imposed strict regulations for banks both public and private banks. The legal conditions are imposed in every bank document to safeguard the shareholders interest. Economic Factors: UK has seen higher interest rate in 2007 and then after it is stable until 2012 referring to figure 6.
Liquidity position in banks has been improved since January 2011 however nothing is happening with the interbrain market. Presently the banks in I-J are trying building the confidence and strengthening their balance sheet. Loans are offered by most of the banks at interest rate of 22%. Stock market conditions and exchange rates are improving to strengthen the I-J economy. In addition to this the overall economy has been improving after global financial crisis and Euro crisis Technology: The technology has been changing every point of time which needs huge investment for banks to improve their services.
This is bit challenging for banks to grow with the changing technology. On the other hand research & development has been forming up new form of investments. 1. 2. 2. Competition Analysis: In order to analyze the competition, Porter Five Forces model have been used. Buyers Power: In investment and relationship banking, businesses are the customers of banks. There are several choices available in the market offering the investment and relationship banking services. Therefore buyer’s power is high.
Suppliers Power: Money is the major need of banks and Investors, lenders, shareholders and customers are the suppliers of banks. There are several industry sectors available for investors, lenders and shareholders to invest and gain return on investments. Suppliers are not restricted to banking sector only. Therefore supplier’s power is high. Banking products such as debit card, credit cards,saving account and checking count does not have any substitute available in the market though for investment service server other non banking institutions provide their offerings.
