Bank of Baroda (BOB) is a public financial institute which provides services like personal banking, business banking, corporate banking etc. It primarily operates in India. BOB generated revenues of INR 196,837 million during FY 2016. Bank of Baroda is headquartered in Baroda, Gujarat. It has grown by leaps and bounds due to various acquisitions and due to consistent widening of its branches and network.
Here is the SWOT analysis of Bank of Baroda
Strengths in the SWOT Analysis of Bank of Baroda :
- Diversified branch network: Bank of Baroda, being the second largest bank in India, has a diversified branch network mix which sustains low cost resource mobilisation. Bank of Baroda has about 5330 branches throughout the country and has penetrated into the rural India too with about 1964 branches in rural India.
- Complete Banking products portfolio – Bank of Baroda has the complete portfolio of Banking services and financial products, many of which are availed by their customers.
- Government accounts – There are multiple government accounts which support the operation of Bank of Baroda. For example – Railways pensioners get their pension from Bank of Baroda accounts. Similarly, differenti government profiles need to have a government bank account to receive salary or pension in which case Bank of baroda benefits over private banks.
- Strong Capital Position: Bank of Baroda has maintained at good capital adequacy ratio (CAR) of 13.2% as on March 31, 2016.The bank’s net worth was at INR 305,860 million. The strong capital position helps the bank to sustain its solvency levels in the time of adverse market conditions.
- Second Largest Bank: Bank of Baroda is the second largest bank in India with its global business at INR 9,578,080 million as on March 31, 2016.
Weaknesses in the SWOT Analysis of Bank of Baroda :
- High growth in NPAs: The growth in Bank of Baroda’s NPAs is outpacing the growth in its advances. In FY2016, BOB’s NPA was 9.9% of gross advances. From 0.9% in 2009, the bank’s NPA has grown to 5% in 2016. Higher growth in NPAs is offsetting benefits of growth.
- Low overseas presence: Bank of Baroda is in the top 25 banks in Asia, yet the bank is over dependent on its Indian market, i.e. 89.6%. BOB’s contribution of operations to revenue and profits is very low when compared to the top 10 largest banks in Asia.The low overseas presence increase business risks.
- Forex Scam : Several employees over the years have been caught in Forex scam who were operating out of Bank of Baroda and HDFC. Even the RBI penalized Bank of Baroda for the forex scam which was close to 6000 crores in amount. Similarly, there were other scams involving bank employees.
- Low brand equity being government banks – Government banks are known to advertise very less and only as per budget available. As a result, the bank has very low brand equity when compared with private banks. In terms of Government banks, State bank of India and other such state bank branches as well as Bank of India has higher brand equity.
Opportunities in the SWOT Analysis of Bank of Baroda :
- Transformation to Bankassurance model: BOB has the vision to transform itself into a bancassurance driven financial institution. BOB has ventured into a Joint Venture with Andhra banks and a UK based company Legal and general, to form a life insurance company called IndiaFirst Life Insurance. This model may yield results in the long run for Bank of Baroda.
- Favourable interest rate policies: Improvement in business confidence in India has driven RBI to exit from an expansionary monetary policy (low interest) to a more calibrated monetary policy (high-interest rate). This will boost net interest margins for Indian banks.
- Increasing adoption of technology: Online cash transactions are gaining popularity, especially after the move of demonetization and launch of platforms like BHIM app. The increasing use of E-transactions allows BOB to improve the return on technology spend.
- Bank Audits – Conducting bank audits can help HDFC in avoiding the scams happening within branches. Even during demonetisation, there were several scams which surfaced. Bank audits will keep employees in check and will increase the overall reputation of the brand.
Threats in the SWOT Analysis of Bank of Baroda :
- Intensifying Competition: RBI has allowed foreign banks to invest up to 74% in Indian banks. This allows competition to raise funds from the foreign banks and give competitions to existing large public and private sector banks in India.
- Lukewarm global interbank lending: Post the sub-prime crisis, the global market for interbank lending has been lifeless. The sub-prime crisis has exposed various banking institutes of US, UK and many European countries. This has made raising money in foreign currencies all the more difficult for the existing banks
- Private banks – Private banks are a major competitor to government banks due to facilities provided and because of the high functionality of Private banks over government ones.