Introduction Objectives Broad Objective: To identify and analyze the Key Performance Indicators and formulate best suited Strategic Plan for 2020
Specific Objectives: To identify the Key Performance Indicators for the bank Determining the desired perceived Identity for the bank Setting specific strategic goals for 2020 Methodology Primary sources: Depth interviews with bank officials, semi-structured questions, 60-90 minutes
Secondary sources: Annual & Half Yearly Reports of peer banks Bangladesh Bank publications Other financial news Company Overview Highlights Launched on July 04, 2001 86 Branches 21 SME Service Centers 48 SME/Krishi Branches 333 ATMs Over 400 SME Unit Offices More than 1,300,000 customers accounts Vision, Mission and Values Vision Statement Building a profitable and socially responsible financial institution focused on Markets and Business with growth potential, thereby assisting BRAC and stakeholders build a "just, enlightened, healthy, democratic and poverty free Bangladesh. Vision, Mission and Values Mission Statement Sustained growth in Small & Medium Enterprise sector Continuous low cost deposit growth with controlled growth in Retained Assets Corporate Assets to be funded through self-liability mobilization. Growth in assets through Syndications and Investment in faster growing sectors. Continuous endeavor to increase fee based income Vision, Mission and Values Mission Statement (Cont.) Keep our Debt Charges at 2% to maintain a steady profitable growth Achieve efficient synergies between the banks branches, SME unit Offices and BRAC field officers for delivery of Remittance and Banks other products and services Manage various lines of business in a fully controlled environment with no compromise on service quality Keep a diverse, far flung team fully motivated and driven towards materializing the banks vision into reality Vision, Mission and Values Core Values Value the fact that are a member of the BRAC family Creating an honest, open and enabling environment Have a strong customer focus and build relationships based on integrity, superior service and mutual benefit Strive for profit & sound growth Vision, Mission and Values Core Values (Cont.) Work as team to serve the best interest of our owners Relentless in pursuit of business innovation and improvement Value and respect people and make decisions based on merit Base recognition and reward on performance To be responsible, trustworthy and law-abiding in all that we do Industry Analysis PESTEL Analysis Political Factors Strength of Factor: 1 (Strong) Duration of Effect: Mostly Short-term
Political Uncertainties and Unrest Tax and Profit Repatriation policies Entry mode regulations for local banks PESTEL Analysis Economic Factors Strength of Factor: 1 (Strong) Duration of Effect: Long-term
Interest rates Credit accessibility PESTEL Analysis Social Factors Strength of Factor: 2 (Medium) Duration of Effect: Long-term
Population demographics Changes in lifestyles and trends PESTEL Analysis Technological Factors Strength of Factor: 1 (Strong) Duration of Effect: Both Long-term and Short-term
New Innovations in Financial Services Technological Advances and Electronic Platforms PESTEL Analysis Environmental Factors Strength of Factor: 2 (Medium) Duration of Effect: Long-term
Environmental Protection Laws Popular and Government Attitude towards Environmental Safety PESTEL Analysis Legal Factors Strength of Factor: 1 (Strong) Duration of Effect: Both Long-term and Short-term
Employment Regulations Operational Regulations Porters Five Forces HIGH LOW HIGH HIGH MODERATE EAKNESSES TRENGTHS SWOT Analysis Young, energetic and dedicated resource pool Wide range online distribution channel Unique SME model Strong technological platform Strong brand Diversified Business Model Largest customer base among PCBs including Mobile banking Organizational flexibility Asset quality Inconsistent customer experience Absence of focused technology roadmap High CIR (Cost Income Ratio) Low Non Funded Income PPORTUNITIES HREATS Trade Finance E-commerce bKash infrastructure Customer mining from parent & subsidiaries Growth in Medium, Emerging and Small sectors Derivative and FX products Social Networking Mobile phone based banking Agent Banking New Competition Talent Attrition, Staff turnover Unstable capital market Country Image crisis may result withdrawal of facilities like GSP Industrial Unrest causing investors interest shift to Myanmar, Vietnam, Sri Lanka etc. SWOT Analysis Financials Industry Highlights: December 2012 INDUSTRY SCENARIO Operating Profit PBT FUM CIR NPL As on 31st December 2012 BDT_M Growth BDT_M Growth BDT_M % % Islami Bank Bangladesh 15,608 10.9% 12,096 16.9% 758,324 36.2% 3.8% National Bank 3,725 -61.2% 3,275 -65.1% 283,500 69.1% 4.3% Prime Bank 8,551 15.1% 5,335 -21.1% 342,943 36.6% 3.8% UCBL 5,762 -3.5% 3,739 -27.7% 306,602 43.4% 3.7% Southeast Bank 5,434 -6.5% 3,584 -16.9% 280,217 29.5% 4.5% Pubali Bank 11,511 21.7% 4,317 -20.2% 272,487 46.7% 5.1% Eastern Bank 8,844 13.5% 5,581 9.3% 188,501 36.9% 3.2% Dutch Bangla Bank 5,205 0.9% 4,816 5.9% 217,034 81.1% 3.0% BRAC Bank 5,145 3.5% 1,988 -33.9% 238,271 52.8% 7.4% AB Bank 8,435 8.9% 3,190 7.9% 246,092 70.4% 3.3% Dhaka Bank 5,343 -14.2% 1,440 -60.6% 197,567 39.7% 6.3% Bank Asia 5,052 25.0% 2,723 -20.7% 202,391 48.6% 5.7% NCC Bank 4,027 -4.5% 2,743 -24.4% 176,866 61.0% 5.5% The City Bank 4,537 6.3% 1,763 -49.2% 177,432 46.6% 14.9% Mercantile Bank 6,209 0.6% 3,351 -4.3% 225,705 45.2% 4.4% Industry Highlights: December 2012 INDUSTRY SCENARIO Ranking As on 31st December 2012 Op. Profit PBT FUM CIR NPL Islami Bank Bangladesh 1 1 1 14 11 National Bank 15 10 4 3 9 Prime Bank 4 3 2 13 10 UCBL 7 6 3 10 12 Southeast Bank 8 8 5 15 7 Pubali Bank 2 5 6 7 6 Eastern Bank 3 2 13 12 14 Dutch Bangla Bank 10 4 10 1 15 BRAC Bank 11 14 8 5 2 AB Bank 5 11 7 2 13 Dhaka Bank 9 16 12 11 3 Bank Asia 12 13 11 6 4 NCC Bank 14 12 15 4 5 The City Bank 13 15 14 8 1 Mercantile Bank 6 9 9 9 8 Findings Desired Perceived Identity Think SME, Think BBL Delightful Customer Experience Socially Responsible & Sustainable Preferred Trade Bank Q & A: Depth Interview What are the main goals for 2020? The main goals for 2020 are to be within top five banks in terms of Operating Profit and be the 2nd largest bank in terms of Fund under Management.
What are the main challenges ahead? The major challenges are political unrest, NPL reduction and cost income ratio reduction
What is the desired growth in the SME sectors? BBL aims to achieve a greater market share at the end of 2020.
Would the loan mix change to focus on Corporate and Retail more? Retail and Corporate must grow but the focus would still be SME.
What is the desired deposit mix? The deposit mix should change with greater focus on CASA.
Q & A: Depth Interview What is the aspired ranking in the industry in terms of Profit? The aspired ranking in the industry in terms of Profit is to remain within top 5.
What is the aspired ranking in the industry in terms of FUM? The aspired ranking in the industry in terms of FUM is 2nd.
What should be the communication strategy? Effective but efficient (less costly) communication strategy should be used.
Are there probable going international plans? BBL will focus on internal consolidation first then extend footprints internationally
What are the technological prospects? Innovation & Technological Advances are continuous processes. BBL aims to turn its IT into a profit centre through the launching of biTS, BRAC IT Services Ltd.
Q & A: Depth Interview
How can you improve the efficiency of the workforce? BBL has a separate Learning & Development Division for training thus efficiency improvement of their employees.
How can you reduce the costs? Staff cost can be reduced through efficiency and specialization/ job rotation where relevant.
Are there any plans of leveraging subsidiaries? bKash channel could be used to reduce dependency on corresponding bank.
What ROE would you like to offer the shareholders? Shareholder wealth maximization thus higher ROE offering is essential and one of the major goals for 2020.
Analysis & Recommendations
Strategic Objectives : 2020
SME Market Share Present Status: 6% market Share Recommendations: Focus on the medium segment A 2% increase per year would make the share 20% at the end of 2020
Year 2013 2014 2015 2016 2017 2018 2019 2020 SME Market Share 6% 8% 10% 12% 14% 16% 18% 20%
Strategic Objectives : 2020
Operating Profit Present Status: 11 th position in 2012 Recommendations: Increase the ranking by 2 from 2014 to 2017 and reach 5 th position Aim for the 2 nd position in 2020 Focus on Non-Funded Income such as LC
Strategic Objectives : 2020
Fund Under Management Present Status: 8 th position in 2012 Recommendations: Reach 2 nd position by 2020 Loans and Advances and Deposits should grow at 30% per year Deposit mix should increase its share of CASA so that low cost funds are more and net interest margin is higher
Strategic Objectives : 2020
Operating Cost Present Status: 5 th position in 2012 in terms of cost income ratio Recommendations: A fundamental redesign of the way the bank operates to reduce cost sustainably Approach: A small team should be formed from various departments of the bank to conduct a series of bottom-up and top- down analyses to develop aggressive goals Team: Banks leadership team must visibly lead the effort and must illustrate both their vision for short-term changes and their long-term view in town hall meetings, electronic newsletters, social- networking sites, and Q&A sessions for small groups Engagement: The entire organization must be mobilized throughout the process by a systematic change program that ensures the right amount of information is communicated to the right people at the right time.
Strategic Objectives : 2020
Non Performing Loans Present Status: 2 nd position in 2012 Recommendations: The credit division needs to be more careful and obtain relevant trainings if required from experts / organizations. The collection team also needs to be more aggressive and motivated to reduce the NPL
Strategic Objectives : 2020
Return on Equity Present Status: 5.47% in 2012 Recommendations: It should be around 10% in 2013 and increase in the following way in the coming years: Year 2013 2014 2015 2016 2017 2018 2019 2020 ROE 10% 12% 14% 16% 18% 20% 22% 25%
Conclusion Strategic Management is very important to ensure that employees and other stakeholders are working toward common goals
The bank should focus on few specific areas rather than too many targets for achieving their desired position in 2020: SME market share, Profit, FUM, Costs, NPL & ROE
BBL must think ahead of time and act ahead of competitors to retain leadership in innovative banking
Mr Najmul Hoque Jewel Head of Business Planning and Analysis Finance Division, Brac Bank Limited
Mr. Benozeer Ahmed Senior Manager, Business Planning and Analysis Finance Division, Brac Bank Limited
Mr. Salman Ahmed Senior Manager, Business Planning and Analysis Finance Division, Brac Bank Limited