Strategic Audit- People's Bank

Appendix 2: Strategic Audit – People’s Bank Figure 1- Vision, Mission, Values and corporate goals of People’s bank Vision

To be the Bank of the aspiring People of Sri Lanka: empowering people to become value creating, competitive and self-reliant

Mission

For our Customers To take pride in providing an excellent service in the most caring, responsive and professional manner. For our Owners To generate benefits for the national economy whilst being independent and commercially viable. For our Employees To create opportunities for our employees to benefit from their high performance by becoming value creating, skilled, self confident and professional individuals who are also team players. For Society To support empowerment and sustainable development by contributing to the upliftment of education, culture and environment island wide. Create value for all the people of the Nation by becoming a major source of high quality capital information, Exercise utmost care in the interest of the depositors, promote long-term ethical relationship, empower people and require them to be accountable, create an environment of mutual respect and trust, encouraging high performing teams, comply with laws and regulations, promote ethical environment and sustainable development. To help upgrade economic development of the country by increasing the banking network island wide. To empower employees by giving them more authority in carrying out business activities Focus on macro development by ensuring that the rural economy is fuelled to become an integral part of macro development.

Values

Corporate goals/objectives

Figure 2- Stakeholder Map of People’s Bank Media

General Public

Figure 3-Strategic stance of People’s Bank

Niches CEO Management (General Managers and other managers) Executives Staff members Staff union

Board of Directors Government Shareholders (Subsidiaries & Associates)

Customers (borrowers, depositors, credit card holders etc.) Advertising agencies Suppliers (stationery & other supplies) Competitors

Pressure groups

Central Central BankBank

Pressure Groups

Challengers Pioneers Leaders- People’s Bank

People’s Bank is the market leader of Pawning Services and financial services

Figure 5 - Competitive strategies for People’s Bank (Porter’s Generic Strategies)

Figure 4- Bowman’s strategy clock Differentiation

High

Focused differentiation

Hybrid

Perceived User Value

Followers

Leadership CostCost Leadership

Differentiation

Cost Focus

Differentiation Focus

Low Price

Low price Strategies destined to ultimate failure

‘No frills’

Low Low

Price

High

Low price and medium Perceived User Value – People’s Bank

People’s Bank adopts cost leadership as its competitive strategy. It charges low interest rates for loan products and pawning.

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Figure 6- Porters five forces Threat of new entrants- Medium

Bargaining power of suppliers- low

A large investment is required to enter the industry Have to comply with Central bank regulations and other regulatory requirements

Due to the increasing number of suppliers of ATM, safety lockers, stationery, electronic equipment and systems etc.the bargaining power is low

Rivalry- High The major competitor is Bank Of Ceylon which is the other public bank in the industry.high competition from local private banks like sampath bank, Commercial bank, HNB etc.Global banks like HSBC also create competition by attracting business and urban clients

Bargaining power of customers- High Since there are increasing number of banks and other financial institutions available the customers demand more value added facilities from the banks

Threat of substitutes- High Other financial institutions like leasing companies,finance companies etc.financial securities like debentures,shares etc

Figure 8 – McKenzie’s 7S Framework for PB Strategy

Adopt market penetration strategy and cost leadership as the competitive strategy, low risk approach with low diversification

Structure

Tall hierarchical structure with Number of layers. There is no direct communication or close relationship between top management and lower level employees. Takes a long time for decision making

System

100 branches adopt PABS manual system and other branches use a core-banking system- Real Time Gross Settlement System

Figure 7- Cultural web Control systems Real Time Gross Settlement System and PABS system

Organization structure Tall hierarchical structure

Stories High bureaucracy and government influence

Paradigm Focus on achieving prosperity and value for customers Rituals Formal lines of communication to top management

Symbols Logo and corporate colors Interior layout Vision, mission & values Power structure Power is based on the seniority

Staff

Nearly 8861 dedicated workforce representing different religions and cultures Figure 8- McKinseys 7S framework Skills

Bureaucratic skills, risk management skills, staff skills- for recruitment and talent management, Customer service skills, financial management skills

Style

Top management adopts democratic leadership style, branches adopt autocratic style. High bargaining power from trade unions thereby collective agreements exist between parties

Shared values

Compliance with laws and ethical conduct, caring for the depositors and adding value, long term relationships with customers, staff empowerment

Figure 9 – Ansoff’s Growth Matrix Existing

Market

Existing

Products

New

Market penetration

Product Development

Attract new customers and retain existing customers by charging low interest rates for loans and pawning

Introduction of SMS Banking Palm top banking

Market Development

New

Starting banking operations in North and East

Diversification

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Figure 10- People’s Bank positioning/ perceptual map Low cost People’s Bank

HNB

BOC

Technologically backward

Commercial

Standard Chartered

Sampath

Innovative/ Technologically advanced

HSBC

High cost

Figure 11- Value chain analysis of People’s Bank Infrastructure- More than 329 branches, 241 service centers and 300 ATMs Island wide (branch network), customer care facilities, lending policies and procedures HR Management- 8861 staff members, training and development, recruitment policies, promotions, transfers and other staff benefits

Margin

Procurement- use a Procurement Management System Technology- PABS system, RTGS system, ATM, SMS banking, use of intranet Inbound Logistics Accepting deposits Branch network Branch ambiance

Operations Maintaining accounts Maintenance Calculation of interest rates on loans and deposits

Outbound Logistics Service centers ATM Branch network

Marketing & Sales Use of marketing communication channels, promotions, branding and positioning strategies

After sales Services Handling customer complaints Standing orders Bank statements Transaction history

Margin

Figure 12- 7Ps for People’s Bank Product Wide product portfolio that cater to the needs of customers from cradle to twilight years. Consist of savings, fixed deposits, credit cards, NRFC and RFC accounts etc. Price Savings accounts interest rate is 4% per annum, Fixed deposit interest rate is 8% per annum Charges Low interest rates for loans – Agriculture- 9.5%, Constructions- 11.5%, Tourism- 12% Pawning – 1.16% interest rate and the for 24 carat gold bank is paying Rs.33000 and for 22 carat gold Rs.30000 Place 329 branches,341 service centers, 300 ATMs Island wide Promotion Advertising in newspapers, television, radio, website promotions, promotions such as scholarships for Sisu Udana Account holders who excelled in their studies, Organizing pilgrimage for Parinatha account holders, Sponsoring CIMA conference and Kandy Asela perehara. CSR activities like refurbishing Yal Devi train. Process Most of the branches adopt the SLIP ( Silver Lake Inter-bank Payment), RTGS system, PABS Sytems for branches that are not interlinked. Physical People’s bank logo,tag line”Pulse of the People” ambiance. corporate colors, uniform for women staff is ‘saree’ and for men evidence staff formal attire( shirt and trouser) People 8861 employees representing different religions and cultures speaking the main three languages tamil, Sinhala and English

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Figure 14- Major competitors of People’s Bank Figure 13 - Strategic groups in the banking industry

High

People’s Bank

BOC HNB



Major competitor



Other competitors



Indirect competitors

Commercial

Relative market share

NSB

Nations Trust bank Sampath bank NDB bank Seylan bank HSBC bank Standered Chartered bank

Low Local

International

Other financial institutions like finance companies, leasing companies etc Eg LB Finance, LOLC Company

Figure 15- Competitor Financial Analysis

Key Indicators Total assets

PB 501,070

BOC 547,421

CB 322,545

HNB 287,511

Loans and advances Deposits Borrowings

323,769 396,228 58,139

283,298 411,460 87,849

176,742 234,731 44,848

172,800 213,819 20,651

22,221 4,174

27,534 3,300

28,721 4,192

26,374 4,483

4.5 1.4 45.7 3.0 8.9 28.6 28.5 6.9

6.1 1.7 56.9 4.4 9.3 22.8 40.6 2.2

Equity Net Income (%) Net Interest Margin Return On Assets Cost/Income Operating costs/Average assets Equity/Assets Net NPL/Equity Loan loss reserves/ NPL NPL/ Gross loans

6.3 1.1 49.7 3.4 4.6 40.9 53.4 6.7

3.4 0.6 64.1 3.3 5.0 26.4 52.1 5.7

Sampath 158,00 2 98,914 125,97 4 12,352 12,612 2,072 5.8 1.4 45.9 3.7 8.0 26.0 54.8 7.8

PB- Peoples Bank, BOC- Bank Of Ceylon, CB- Commercial Bank, HNB- Hatton National Bank, Sampath bank Source: Interim financial reports of respective companies, Fitch ratings

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