Banking Industry Factors In Capital Markets Finance Essay

Banking industry perform maps such as to accept sedimentations and channels those sedimentations into loaning activities, either straight or by utilizing capital markets. And therefore we call it fiscal intermediary. Banks provide really indispensable service of linking clients with capital shortages to clients with capital excess. Furthermore it supply services such as checking and nest eggs, sedimentations, loans, rentals, mortgages, recognition cards, ATM webs, securities securities firm, investing banking, insurance, common financess and pension financess.

Banking industry is by and large extremely regulated industry. Of class, Government limitations on fiscal activities by Bankss have varied over clip and location. Current set of planetary bank capital criterions are the 2nd of the Basel agreements, which are recommendations on banking Torahs and ordinances issued by the Basel Committee on Banking Supervision.

Besides in United States, the banking industry is extremely regulated industry with elaborate and focussed regulators. In United States Bankss are prohibited from having non fiscal companies. All Bankss with FDIC -insured sedimentations have the FDIC as a regulator. However, the Federal Reserve is the primary federal regulator for Fed-member province Bankss ; the Office of the Comptroller of the Currency ( “ OCC ” ) is the primary federal regulator for national Bankss, State non-member Bankss are examined by the province bureaus every bit good as the FDIC. National Bankss have one primary regulator that is the OCC. Each regulative bureau has their ain set of regulations and ordinances to which Bankss must adhere.

New CHALANGE:

In a current state of affairs, Bankss are fighting to pull off their involvement rates efficaciously because of the consequence of economic recession and altering economic environment. They have to maintain low rates on loans and on the other manus have to confront a rate competition for sedimentations and the general market alterations. In this state of affairs it seems really hard to bring forth high return to their stockholders as the consequence of the alterations in rates on consumers and concern is non predictable.

PORTER ‘S FIVE Forces

COMPETITIVE RIVALRY WITHIN AN Industry:

The banking industry has been functioning as a fiscal service industry for more than two hundred old ages and right now it is extremely competitory industry. It is really hard to acquire large market portion within this industry. Banks have other Bankss every bit good as non banking fiscal services suppliers as their rivals. Banks can pull more clients by merely distinguishing its services as it ca n’t alter its merchandise “ money ” . But the job is when any banking company tries to distinguish its service by using new engineering or by adding new service they ca n’t pull as much big part of market portion because their rivals adopt that engineering or service really rapidly. For banking industry whoever can offer both the best and fastest service will win but it is really hard to acquire these both together as it causes Bankss to see a lower ROA. And that ‘s why alternatively of passing money in selling larger Bankss preferred to take over or unify with another bank to cut down competition.

BARGAINING POWER OF SUPLIER:

The Bankss have three providers of money, its depositors, the recognition market and the cardinal bank. The depositors may non hold much dickering power as they are the provider every bit good as the purchasers for this industry but it depends upon the involvement rate that the bank will pay or have from its clients vary from bank to bank. The recognition market is the unfastened beginning for all the Bankss to acquire limitless sum of money based on the bank ‘s making to acquire it. The Central bank would be considered as a last beginning of supply for money which besides provides liquidness to the banking system in virtually limitless measures at really sensible cost.

BARGAINING POWER OF Customers:

This is the good thing in favour of the Bankss that retail clients and ordinary persons have no bargaining power because of high exchanging cost for the clients. Furthermore, clients would wish money that they are acquiring by loan and the Bankss want involvement on loan, in both status Bankss will win in dialogue as Bankss are acquiring more involvement on increasing recognition bounds on which clients would wish to negociate.

THREATS OF NEW ENTRANTS:

New entity entryway in the banking industry creates troubles for bing Bankss to keep their current clients every bit good as to acquire new clients. In response, the traditional Bankss have to follow new engineerings and improved services which would make higher cost. For banking industries there is non a really big market to acquire into in as it required large sum of capital. So, the mean individual can non come and get down up with this concern but on the other manus it is besides non an unusual for any entity to arrange a new bank. There are many enterprisers who can capitalise in this concern. Furthermore it is non merely banking industries but new entryway of any other private fiscal services supplier can besides impact the hard currency flow of bing Bankss. Right now due to increasing involvement rates the large endeavors or companies would likely happen profitable to put their money in fiscal services concern by supplying mortgages every bit good as any other bank like services to clients.

THREATS OF SUBSTITUTES PRODUCTS:

There is non any issue of replacements in the banking industries as it does n’t hold any existent replacements except borrow money from friends or household and salvage money in ain house. There are many non banking fiscal services provide similar services as Bankss, but we can see them every bit rivals as they are viing with Bankss for same services taking sedimentations, give involvement and imparting money, charge involvement.

BANK OF AMERICA

MISSION STATEMENT:

“ We believe, really merely, that it is the actions of persons working together that construct strong communitiesaˆ¦and that concern has an duty to back up those actions in the communities it serves. ”

History:

The Massachusetts bank opened for concern on July 5, 1784. John Hancock signed the bank ‘s charter one of merely three commercial Bankss in being in US at that clip. In the late twentieth century, it has begun a series of acquisitions that finally drew more than several thousand Bankss and formed today ‘s Bank of America. They have maintained their central offices in Charlotte, North Carolina, and have grown to be an international organisation.

Right now Bank of America has its subdivisions in 32 provinces and more than 6149 banking centres in US, in more than 30 foreign states, banking centres, more than 18753 ATMs and nonpareil e- banking services.

BANK OF AMERICA ‘s top rivals: JPM ( JPMORGAN CHASE & A ; CO ) , C ( CITI GROUP INC ) and WFC ( WELLS FARGO & A ; CO NEW )

Cardinal FACTS:

Head Office: 100 N. Tryon Street

Charlotte, NC

28255

United States

Telephone: 704-386-5681

Facsimile: 704-386-6699

Web Address: hypertext transfer protocol: //www.bankofamerica.com

Fiscal Year End: December

PRODUCT AND SERVICES:

Asset-based finance, BAC ML Factor Model, Broadcort, Card Solutions, Corporate Access, Debt and Liquid Products, Employee Stock Ownership Plans, Endorsed Programs, Equities, Foreign Exchange, Futures, Global Execution Services, Investment Solutions, Leasing, Merchant Services, Mergers & A ; Acquisitions Advisory, NYSE Specialist Firm, Prime Brokerage, Private Equity Investments, Research, Retirement & A ; Benefit Plan Services, Trade services, Treasury Management Services.

hypertext transfer protocol: //www.bankofamerica.com/index.cfm? page=corp

SWOT ANALYSIS

Strength:

Strong place in the market as a retail banking

Handiness of big Numberss of retail subdivisions Strong relationship with national every bit good as international companies as a little concern disposal loaner.

Strong equilibrate sheet for enlargement.

Brand acknowledgment

Advanced scheme to pull clients

Convenient services such as online banking and nomadic banking.

Failings:

Procedure and operations complexness

Decreasing addition public assistance border

Not effectual in sweeping banking operations

Opportunities:

Handiness of easy expandible international market

Constantly bettering and up rating procedures of banking industry.

Favorable Countrywide Financial Corporation Acquisition and the Acquisition of Countrywide Home Loans.

Countrywide ‘s broader mortgage capablenesss.

THREAT Second:

Restrictions in capital markets due to security issues and black money issues around the universe.

Menaces to market portion from betterment in schemes and policies of viing Bankss to increase market portion

Menaces from increasing unemployment

Menaces due to fiscal economic convulsion

CITI BANK

MISSION STATEMENT:

“ Money is n’t everything, but it can turn your dreams into world. And the broad scope of merchandises that Citi offers can assist you make merely that ”

History:

Citibank is consumer and corporate banking fiscal company. It is a division of Citigroup. It was founded in 1812 as the Citibank of New York under the ownership and direction by individual individual Moses Taylor. The first president of Citibank was Samuel Osgood. In 1863, the bank joined U.S ‘s new national banking system and became The National Citibank of New York. By 1868, it was considered one of the largest Bankss of United States. And in 1897 it became the first major U.S bank to set up a foreign section. After 1921 the bank expanded really quickly. After 1955, it merged with The First National Bank ; it changed its name to First National City Bank in 1962.

Right now the company has expanded its operations in around 1700 locations, in more than 40 states worldwide. Citibank provides services from basic banking histories and investing services, through such trade names as Citicorp investing services, Citi Term life insurance and Citi Phone banking.

CITI BANK ‘S Top Rival: HBC ( HSBC HLDGS PLC ) , BAC ( BANK OF AMERICA CORPORATION ) , JPM ( JPMORGAN CHASE & A ; CO )

Cardinal FACTS:

Head office: Citibank, N.A.

399 Park Avenue

New York

NY 10022

United States

Telephone: +1 212 559 1000

Facsimile: +1 212 793 3946

Web Address: hypertext transfer protocol: //www.citibank.com

Fiscal Year End: December

PRODUCT AND SERVICES:

Customer banking services, online banking services, investing services, general insurance, life insurance, nest eggs programs, recognition card services, personal every bit good as place loans, loans against belongings, stock power, ready recognition.

hypertext transfer protocol: //www.online.citibank.co.in/products-services/products-services.htm

SWOT Analysis:

Strength:

Growth of online banking

Effective supply concatenation

Strong trade name equity

Customers trueness

Effective direction

Advanced schemes

Strong back up of Citigroup

Strength of the place and web in the planetary market

Individually focused two market sections: planetary finance division and planetary consumer division.

Failing:

big and complex organisation

Management challenges

Exploit growing

Lack of effectual common apprehension of gross revenues squad

Using drawn-out procedures

Menace:

State street Corporation ‘s joint venture

New entryway of rivals

Fluctuation in foreign exchange

Regulatory forces

Opportunities:

Effective cognition sharing web across the state

Opportunity of a better beginning of fiscal merchandises and services

Handiness of expandible free market

Opportunity in the market of China

BALANCED SCORE CARD

CUSTOMER PERSPECTIVE:

BANK OF AMERICA

Bank of America is a fundamentally retail bank which is supplying look intoing history, salvaging history and recognition card services to clients with attractive program of maintain the alteration.

It besides supply services such as mortgage, loans, refinance, insurance service, car loans to its clients and supply online every bit good as nomadic banking for client ‘s convenience.

Bank of America has applied pupil banking and offer better services and programs for pupils for recognition card.

Bank of America maintain bettering its services by taking feedbacks from its bing clients and besides adding new services to remain in the market with high clients satisfaction.

CITI BANK

Citibank offers different merchandises and services as per different client ‘s demands.

It supply private banking services such as checking and salvaging history service, recognition card service, loans every bit good as mortgages and insurance service.

It play an of import function as a corporate bank by supplying corporate/institutional services, plus direction, little concern services, investings, concern insurance service.

It besides provides planning/retirement solutions to their clients.

Citibank continuously do studies to acquire feedbacks from current clients and react them by continuously bettering its service.

Citibank besides try to fulfill its current clients every bit good as to pull more and more new clients by supplying uninterrupted betterment in online every bit good as nomadic banking and by opening subdivisions at different location to do them experience convenient.

INTERNAL PROCESS PERSPECTIVE:

BANK OF AMERICA

Bank of America has return on mean plus ratio of 0.26 % for the twelvemonth 2009. Which is little better than the twelvemonth 2008 which went down to 0.22 % than of all time before because of fiscal crisis. Bank of America ‘s efficiency ratio is 55.16 % for the twelvemonth 2009 which was 56.14 % for the twelvemonth 2008.

CITI BANK

Citi bank has return on mean plus ratio of 0.52 % for the twelvemonth 2009. Citi bank ‘s efficiency ratio is 58.29 % for the twelvemonth 2008 and 61.30 % for the twelvemonth 2009. In the twelvemonth 2009 they have cut their one-year disbursals by $ 11 billion and the size of this company is being steadily reduced by the divestiture of non -core assets in Citi retentions.

Learning AND INNOVATION PERSPECTIVE:

BANK OF AMERICA:

Bank of America is turning right manner by using advanced scheme. Right now in these economic crises there is most pressing demand has been loan alterations, to assist households and concerns manage their monthly hard currency flow to acquire through the crisis. And Bank of America has continuously worked to fit these turning demands. They have lead the state in the figure of place loans they have modified. They have done about 700,000 test and lasting alterations since 2008.

In this economic system another country that needs focal point is little and average size concerns. They lent more than $ 16 billion to little and average concerns and besides they have mark to increase loaning by $ 5 billion in the twelvemonth 2010. They have besides modified more than 60,000 little concern card loans.

CITI BANK:

Citi bank is developing nomadic banking market in most states really successfully. And right now they are concentrating on one of their most of import ends of invention to be a digital bank of the hereafter. By utilizing the strength and range of the international web, Citi is seeking to scale up inventions really rapidly around the universe. They are holding a benefit of taking a new merchandise or any new engineering to one state and incorporate it into other states quickly.

FINANCIAL PERSPECTIVE:

Year

BAC Revenue ( in one million millions )

CITI gross ( in one million millions )

2004

$ 49.60

$ 76.22

2005

$ 56.90

$ 80.08

2006

$ 74.20

$ 86.32

2007

$ 68.10

$ 78.49

2008

$ 73.90

$ 52.79

2009

$ 93.10

$ 80.29

Conclution:

From the survey of above informations and chart of entire gross of BAC and CITI bank for the twelvemonth 2004 to 2009, we can reason that the gross for both BAC and CITI had dramatically increased from $ 49.6 B and $ 76.22 B in twelvemonth 2004 to $ 56.9 B and $ 80.08 B in twelvemonth 2005 severally. But during 2006 Bank of America raised its gross to $ 74.2 B which was about twice the rise of the gross of Citi bank to $ 86.32. In the twelvemonth 2007, get downing of economic downswing leads the fiscal crisis in the economic system which became a ground of lessening of the gross for both the Bankss. During 2008 inspite of the consequence of economic recession as a retail bank BAC started to retrieve its gross from $ 68.1 B in 2007 to $ 73.9 B in 2008 but on the other manus as Citi bank is fundamentally corporate bank, it was severely affected by fiscal crisis and droped its gross from $ 78.49 B in 2007 to $ 52.79 B in 2008. When economic system starts to acquire better Citi bank starts raising its gross as the same velocity it droped and became $ 80.2 in 2009 but BAC has drametic addition in its gross to $ 93.1 in 2009.

hypertext transfer protocol: //www.dailyfinance.com/quotes/bank-of-america-corporation/bac/nys

hypertext transfer protocol: //www.dailyfinance.com/quotes/citigroup-incorporated/c/nys

hypertext transfer protocol: //www.citibank.com/citi/press/2010/100315a_en.pdf

hypertext transfer protocol: //media.corporate-ir.net/media_files/irol/71/71595/reports/2009_AR.pdf