Presented ToProf.

Sanjeev Patkar

Huned Ali M.G. Huzefa Husein Moin Inamdar Suraj Digawalekar Swati Porwal Tarannum Dhange Tejas Chotai

36 37 58 270 271 274 276

Industry Overview Value Chain of the industry Porters Five Force Theory

Factors that determine Demand & Supply

Business model of the company and its sustenance Comparative performance matrix business

The comparative matrix valuation

To find intrinsic value of the stock and hence the proposed action

Phase I The Starting

Creation of The Reserve Bank of India on April 1, 1935. State Bank of India (Subsidiary Banks) Act passed in 1959. Nationalisation of Banks in 1969.

Phase II Liberalisation
Narsimham Committee Recommendations, 1991. Relaxation in FDI norms.

Phase III Transition

Focus on Customer Service. Securitisation Act, 2002. Mergers and Acquisition.

Loan Break up for Aug97 (%)

Residential Mortgages Education Loans Credit Cards Others Consumer Durables

Loan Break up for Dec'08 (%)

Residential Mortgages Credit Cards Consumer Durables

Education Loans

Others

41% 51%

41%

48%

3%

3%

5%

5%

2%
Source : RBI, Duetsche bank

1%
Source : RBI, Duetsche Bank

Corporate Loan Break up for FY 98 (%)

Engineering Infrastructure Textiles Metals Chemicals Others

Corporate Loan Break up for FY 08 (%)

Engineering Infrastructure Textiles Metals Chemicals Others

6%
34% 14% 47% 13%

11% 7%

23%

11%
13% 2%

19%

India - Strategic Map

High
Stan C HSBC ICICI Bank Karur Vysya

Citibank ABN Amro

HDFC
IndusInd Bank

Service Quality

Vysya Bank State Bank of India Bank of Baroda

Bank of India
PNB Andhra Bank Canara Bank Co-operative Banks

Low

Rural Banks

Rural

Regional Geographical Spread

Urban

Banking Sector Value Chain

Product Development
Market Knowledge Best practices transfer

Back End Processing

Clearance Settlement

Risk management
Credit Controls CRM Expertise

Distribution Technology
Online Banking Cross-selling

Introducing successful marketing vehicles to better target new segments with innovative products

Efficiency & cost mgt allows for price flexibility, creating competitive advantage

Experience in managing risk allows banks to charge higher premiums, while managing their NPLs

Expanding branch networks and distribution platforms improve direct access to customer base

Rivalry among Competing Firms

Services which banks offer is more of homogeneous, which makes the company to offer the same service at a lower rate and eat their competitor markets share Market Players use all sorts of aggressive selling strategies and activities from intensive advertisement campaigns to promotional stuff Even consumer switch from one bank to another, if there is a wide spread in the interest

Potential Entry of New Competitors

Reserve Bank of India has laid out a stagnant rules and regulation for new entrant in Banking Industry. Hence, the industry is less prone of new competitor.

Potential Development of Substitute Products

Banks are not limited to tradition banking , today banks offers loans for all products, derivatives, Forex, Insurance, Mutual Fund, Demat account etc Hence, The wide range of choices and needs give a sufficient room for new product development and product enhancement.

Bargaining Power of Suppliers Rules and regulation are laid down by RBI Hence, Reserve Bank of India is the authority to take monetary action which leads to direct impact on circulation of money in the Economy Bargaining Power of Consumers Banks offers different services according to clients need and requirement They offer loans at Prime Lending Rate (PLR) to their trust worthy clients and higher rate to others clients Hence, Bargaining Power of Consumers is little high as Customer is the King

DEMAND DRIVERS

SUPPLY DRIVERS

Growing Economy
Improvement in standard of

Regulation by RBI Technology

living Higher Disposable income Expansionary plans of Corporates

Business Model of Union Bank of India

Targeting customers from all demographic and economic profiles and introducing products and services to meet their needs Operates in all the areas including
Retail lending Personal banking Corporate banking International banking Investments & treasury

Caters to The rural and semi urban centers

Financing agriculture and allied activities Rural artisans Micro & medium enterprises in these areas

It has opened 198 Village Knowledge Centres

Offers third party products

Life And General Insurance, Mutual Funds On-line Trading Wealth Management Services through tie- up with other FIs.

Bank has initiated a large scale transformation process named Nav Nirman to adress four key activities:

Retail Asset ( marketing & processing) SME marketing & processing) Branch sales and services( improving the customer experience in the branch) Centralisation of key processes


1.
2. 3. 4.

Alternate delivery channels

ATMs Internet banking Phone banking Mobile banking.

1. 2. 3. 4.

Technology based services like

RTGS Online NEFT free of cost On line application for products and services Online redressal of grievances.


1.
2. 3.

Bank has a network of more than

2500 service outlets which includes specialized branches for MSME (SME SARALS) corporate credit Union Loan points for Retail Products

Full fledged overseas branches Bank plans to open 500 new branches in the next six months

Diversification Partnership with Bank of India and Dai-Ichi of Japan for distribution of Life insurance products Agreement with Belgian KBC group for setting up a joint venture AMC in India MoU with NSIC MoU with NCMSL

Union bank has promised 4 key deliverables to customers based on the strength built in1) Value for money 2) Committed turnaround time for delivery of products and services 3) Choice of banking channels for customers and 4) Transparency in product offerings and prices

Credit-Deposit Ratio(%)
Credit-Deposit Ratio(%)

Credit-Deposit Year Ratio(%) 2004 2005 2006 2007 61.17 67.96 75.5 76.46
67.96 61.17

75.5

76.46

75.55

2008

75.55
2004 2005 2006 2007 2008

Net Interest Spread(%)

3.31

Net Interest Year Spread(%) 2004 2005 2006 2007 2008 3.24 3.31 3.03 3.05

3.24

3.03

3.05

2.8

2004

2005

2006

2007

2008

2.80

Capital Adequacy Ratio(%)

12.8

Year
2004 2005 2006

Capital Adequacy Ratio(%) 12.32

12.51 12.32 12.09

11.41

12.09 11.41

2007
2008

12.8
12.51
2004 2005 2006 2007 2008

2400

No. of Branches

2361

No. of Branches 2020 2051

2300

Year
2200

2206

2004
2100 2082 2051 2020

2005

2082
2206 2361

2006
2007 2008

2000

1900

1800

2004

2005

2006

2007

2008

Area Wise Branch Network

AREA
Metro Rural Urban SemiUrban

Percentage
21.52 32.33 22.7 23.55
Urban 23%

Semi-Urban 24%

Metro 21%

Rural 32%

Growth over the Years

Rs.in Crores Total Deposit Rs.in Crores Total Advances

Rs.in Crores Year 2003-04 2004-05 2005-06 2006-07 2007-08 Total Total Total Deposit Advances Business 50559 61831 74094 85180 103859 30928 41103 54644 63658 75878 81487

Rs.in Crores Total Business 179737

148838 128738 102934 103859 85180 74094 61831 63658 54644 75878

102934 128738 148838 179737

50559

81487

41103
30928

2003-04

2004-05

2005-06

2006-07

2007-08

No.of ATM's 1400

1200

1146

1000

Year 2006 2007 2008

No.of ATM's
800 769

473
600 473

769 1146

400

200

2006

2007

2008

Credit Deposit Ratio Net NPA Net Interest Margin CASA No. of ATMs Capital Adequacy Ratio

CDR (%)
CDR (%)

Net NPA (%)

Net NPA

71

71 69 67
0.1 0.2 0.1

1.1

Union Bank of india

Indian Bank

Andhra Bank

Dena Bank

Union Bank of india

Indian Bank

Andhra Bank

Dena Bank

Net Interest Margin (%)

NIM 3.91 3.35 2.6 2.88 34.86 32 33.6

CASA (%)
CASA

41.13

Union Bank of india

Indian Bank

Andhra Bank

Dena Bank

Union Bank of india

Indian Bank

Andhra Bank

Dena Bank

Contd.
Number of ATMs
1400

Capital adequacy ratio (%) as on june 08

CAR (%) as on june 08

1200

1000

800

12.2
600

12.1

12.1

400

11.3
200

No. of ATM's

Union Bank of india 1146

Indian Bank 608

Andhra Bank 656

Dena Bank 316

Union Bank of india

Indian Bank

Andhra Bank

Dena Bank

Source : systematix group

P/E Ratio (As on 31/03/2008)

8 7 6 6.21 7.4 6.3

5.27
4.11 P/E Ratio (As on 31/03/2008)

5
4 3 2 1 0

Union Bank Vijaya Bank Dena Bank Uco Bank

IOB

P/BV (As on 31/03/2008)

1.8 1.6 1.4 1.2 1.27 1.02 0.93 P/BV (As on 31/03/2008) 1.19 1.56

1
0.8 0.6 0.4 0.2

0
Union Bank Vijaya Bank Dena Bank Uco Bank IOB

Years PAT

2009E 1581.18

2008 1387

2007

2006

2005

2004

PAT
Dividend Payout rato
Dividend Amount (in Rs. Crore) Retained Earnings Networth Book Value P/BV for 2009E

845 674 720 713 CAGR Growth of 14% over 5 years is assumed for 2009 CAGR Growth of 18% over 5 years is assumed for 2009
284.6124 1296.568 6919.568 136.9886 1.0X