PEST & POTER Analysis of State Bank of India

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State Bank of India

SUBJECT : PEST & POTER Analysis of State Bank of India

This assignment’s main objective is to provide PEST and POTER’s five force analysis.The service provider ‘State Bank of India’ is the subject of investigation in this assignment.State Bank of India is a well know financial provider in banking industry and is an state owned entity. SBI is a regional banking behemoth and is one of the largest financial institutions in the world.

PEST analysis stands for “Political, Economic, Social and Technological analysis” and describes a framework of macro environmental factors used in the environmental scanning component of strategic management.

Political Analysis
The expected integration of various intermediaries in the financial system would require a strong regulatory framework . It would also require a number of legislative changes to enable the banking system to remain contemporary and competitive.The principal governing body of all financial providers in India is RBI(Reserve Bank of India) and SEBI (Securities and Exchange Board of India ). SBI has to always adjust with the new policies regulated by RBI & SEBI , sometimes it leads to uncomfortable situations , not only for SBI but other financial providers. For example : RBI’s guidline to limit banks' exposure to their own group non-financial and financial entities. Such guidlines lead to credit negative for group companies that rely on parent banks for capital and brand support. Frequent changes in interest rates to manage inflation. There is also rifts between RBI and SBI over high percentage of CRR . International legislations like BASEL II and policies of IMF also effect the bank to a certain extent. Though being a public sector bank SBI enjoys surplus funds and government backing.But Political policies sometimes hamper the gworth of bank and not let them perform as they wish.

Economic Analysis
The growth of the banking industry is closely linked with the growth of the overall economy. According to a Mckinsey report, the Indian banking sector is heading towards being a high-performing sector. The rising per capita income is driving the growth of retail credit. Public sector bank has grown its deposits, advances and business per employee by the highest rate – 21.7%, 23% and 21.1% in last 3 years. As far as net interest income is concerned, private banks are ahead in the race by reporting 24.2% growth, followed by pubic banks (21.4%). Since March 2002, Bankex (Index tracking the performance of leading banking sector stocks) has grown at a compounded annual rate of about 31%.

Here is comprasion of SBI’s performance over other banks in India. (54.24 INR= US$1)

SBI’s key figure :
Revenue : US$ 36.980 billion (2012)
Profit : US$ 3.309billion (2012)
Total Assets : US$365billion (2012)
Total Equity : US$20.864billion (2012)
SBI not only helps small and medium size industries , it finances big coperations like TATAwith US$ 7billion to expand its base oversea and within India.  In spite of showing a 12.3 per cent year-on-year growth in September quarter's net profit, higher slippages in non-performing assets (NPA) led to the SBI stock slide down.SBI has slashed its interest rates in order to increase the lending ( from 13.75% to 12.70%).Post rate cuts ,SBI sees demand for home and auto loans triple. Banking sector in India is in good health and as a public sector bank SBI’s market share is growing but still needs to catch up with Private sector in long run.

Social Analysis :
As integral members of society, companies owe their own existence to the very existence of society. Consequently, no company can function concern without contributing...
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