Project Report on HSBC

Bank
Strategic Management of Banks

Submitted to: Prof. Jayant Bose

Submitted by
Mallikarjuna Swami S (P301413CMG324)
Mrini Mishra (P301413CMG388)
Nukaraju Maroju (P301413CMG331)
Ramya N (P301413CMG340)
Vivek Menon K (P301413CMG385)

Table of Contents
Introduction...........................................................................................................................................4
Executive Summary...............................................................................................................................4
HSBC Vision & Mission.......................................................................................................................5
Mission..............................................................................................................................................5
Vision................................................................................................................................................6
Principal Business Groups and Divisions..............................................................................................6
Commercial Banking.........................................................................................................................7
Global Banking & Markets................................................................................................................7
Global Private Banking......................................................................................................................7
Retail Banking and Wealth Management...........................................................................................7
Group Service Centres.......................................................................................................................7
HSBC Group Entities in India...............................................................................................................9
The Hongkong and Shanghai Banking Corporation Limited (HSBC)...............................................9
Personal Banking...........................................................................................................................9
Non Resident Indian Banking........................................................................................................9
Financial Planning Services...........................................................................................................9
Corporate Banking.........................................................................................................................9
Business Banking..........................................................................................................................9
Payments and Cash Management..................................................................................................9
Trade (international and domestic) and Factoring Services.........................................................10
Institutional Banking...................................................................................................................10
Treasury and Capital Markets......................................................................................................10
Custody and Clearing..................................................................................................................10
Technology......................................................................................................................................10
Asset Management Asset Management............................................................................................11
HSBC Global Resourcing................................................................................................................11
Insurance..........................................................................................................................................11
Data Processing...............................................................................................................................11
Audit Service...................................................................................................................................11
Investment Banking.........................................................................................................................11
Software Development....................................................................................................................11
HSBC InvestDirect (India) Limited.................................................................................................12
PEST Analysis of HSBC Bank............................................................................................................12

Political Analysis.............................................................................................................................12
Economic Analysis..........................................................................................................................13
Social Analysis................................................................................................................................13
Technological Analysis....................................................................................................................13
Environmental Analysis...................................................................................................................14
Legal Analysis.................................................................................................................................14
Porter 5 Forces.....................................................................................................................................14
Threat of New Entrants: High..........................................................................................................15
Bargaining Power of Customers: High............................................................................................15
Bargaining Power of Suppliers (Low).............................................................................................15
Threat of New Substitutes (High)....................................................................................................16
Competitive Rivalry (High):............................................................................................................16
EFAS (External Factor Analysis Summary).........................................................................................16
EFAS: HSBC......................................................................................................................................17
IFAS (Internal Factor Analysis Summary)...........................................................................................17
IFAS: HSBC.......................................................................................................................................18
Strategic Factor Analysis Summary (SFAS) Matrix............................................................................18
TOWS Matrix......................................................................................................................................19
Scenario Planning................................................................................................................................19
HSBC Strategy....................................................................................................................................22
Strategic Priorities...............................................................................................................................24
Grow................................................................................................................................................24
Implement........................................................................................................................................24
Streamline........................................................................................................................................24
Ansoffs Matrix for HSBC Bank.........................................................................................................26
Market Penetration..........................................................................................................................26
Market Development.......................................................................................................................26
Product Development......................................................................................................................26
Diversification.................................................................................................................................27
Interview of Ms. Naina Lal Kidwai, Country Head of HSBC India....................................................27
Recommendations and Conclusion......................................................................................................32
References...........................................................................................................................................34

Introduction
The Hong Kong and Shanghai Banking Corporation was founded by Scotsman Sir
Thomas Sutherland in the then British colony of Hong Kong on 3 March 1865 and
in Shanghai a month later, benefiting from the start of trading into China,
including opium trading. In 1980, HSBC acquired a 51% shareholding in US-based
Marine Midland Bank, which it extended to full ownership in 1987.
HSBC Holdings plc was established in the United Kingdom in 1991 as the parent
company to the Hongkong and Shanghai Banking Corporation in preparation for
its purchase of the UK-based Midland Bank and the impending transfer of
sovereignty of Hong Kong to China. HSBC Holdings' acquisition of Midland Bank
was completed in 1992 and gave HSBC a substantial market presence in the
United Kingdom. As part of the takeover conditions for the acquisition, HSBC
Holdings plc was required to relocate its world headquarters from Hong Kong to
London in 1993.
HSBC Holdings plc is a British multinational banking and financial services
company headquartered in London, United Kingdom. It is the world's second
largest bank. It was founded in London in 1991 by the Hongkong and Shanghai
Banking Corporation to act as a new group holding company. The origins of the
bank lie in Hong Kong and Shanghai, where branches were first opened in 1865.
The HSBC name is derived from the initials of the Hongkong and Shanghai
Banking Corporation. As such, the company refers to both the United Kingdom
and Hong Kong as its "home markets".
HSBC has around 6,600 offices in 80 countries and territories across Africa, Asia,
Europe, North America and South America, and around 60 million customers. As
of 2012, it was the world's largest bank in terms of assets and sixth-largest
public company, according to a composite measure by Forbes magazine.

Executive Summary
HSBC is organised within four business groups: Commercial Banking; Global
Banking and Markets (investment banking); Retail Banking and Wealth
Management; and Global Private Banking.
HSBC has a dual primary listing on the Hong Kong Stock Exchange and London
Stock Exchange and is a constituent of the Hang Seng Index and the FTSE 100
Index. As of 6 July 2012 it had a market capitalisation of 102.7 billion, the
second-largest company listed on the London Stock Exchange, after Royal Dutch
Shell. It has secondary listings on the New York Stock Exchange, Euronext Paris
and the Bermuda Stock Exchange.
HSBC has a significant presence in each of the world's major financial markets,
with the Americas, Asia Pacific and Europe each representing around one third of
its business. HSBC is the largest bank in Hong Kong and prints most of Hong
Kong's local currency in its own name. As of 2 April 2008, according to Forbes
magazine, HSBC was the fourth-largest bank in the world by assets (with
$2,348.98 billion), the second largest in terms of revenues (with $146.50 billion)
and the largest in terms of market value (with $180.81 billion). It was also the
most PROFITABLE BANK in the world with $19.13 billion in net income in 2007
(compared to Citigroup's $3.62 billion and Bank of America's $14.98 billion in the
same period). In June 2006, The Economist stated that since the end of 2005
HSBC has been rated the largest banking group in the world by Tier 1 capital. In

June 2014 The Banker ranked HSBC first in Western Europe and 5th in the world
for Tier 1 capital. In February 2008, HSBC was named the world's most valuable
banking brand by The Banker magazine. HSBC is known for a conservative and
risk-averse approach to business a company tradition going back to the 19th
century. This reputation has been brought into question in the 21st century.
In its technical management, however, HSBC has recently suffered a series of
headline-making incidents in which some customer data were allegedly leaked or
simply went missing. Although the consequences turned out to be small, the
embarrassing effect on the group's image did not go unnoticed.
HSBC is currently audited by one of the Big Four auditors, KPMG. The HSBC and
KPMG headquarters are adjacent to one another, with KPMG occupying 15
Canada Square. HSBC Main Building, Hong Kong is also adjacent to KPMG office
located in Prince's Building. A decision on 2 August 2013 made public that
PricewaterhouseCoopers will take on the HSBC audit in 2015.In the six months to
30 June 2014, the bank reported a 7.33 billion ($12.34 billion) profit before tax,
down from $14.07 billion for the comparable period in 2013.
Major acquisitions in South America started with the purchase of the Banco
Bamerindus of Brazil for $1bn in March 1997 and the acquisition of Roberts SA de
Inversiones of Argentina for $600m in May 1997. In May 1999, HSBC expanded
its presence in the United States with the purchase of Republic National Bank of
New York for $10.3bn. Expansion into Continental Europe took place in April 2000
with the acquisition of Crdit Commercial de France, a large French bank for
6.6bn. In September 2003 HSBC bought Polski Kredyt Bank SA of Poland for
$7.8m.In June 2004 HSBC expanded into CHINA BUYING19.9% of the Bank of
Communications of Shanghai. In the United Kingdom HSBC acquired Marks &
Spencer Retail Financial Services Holdings Ltd for 763m in December 2004.
Acquisitions in 2005 included Metris Inc, a US credit card issuer for $1.6bn in
August and 70.1% of Dar es Salaam INVESTMENT Bank of Iraq in October. In April
2006, HSBC bought the 90 branches in Argentina of Banca Nazionale del Lavoro
for $155m. In December 2007 HSBC acquired the Chinese Bank in Taiwan. In May
2008, HSBC acquired IL&FS INVESTMENT, an Indian retail broking firm.

HSBC Vision & Mission

Mission
Having regard to ethical values; to meet its customers financial needs in the
fastest and most appropriate way, to continue innovative works in order to
achieve: human resource with superior qualities, technological infrastructure and
service packages.
Our Values:
1. To exceed customer expectations in service quality.
2. To be a pioneer in the implementation of technologies those create
distinction for its customers, employees and shareholders.
3. To keep its reliability at the utmost level with the contribution of its strong
capital structure and liquid assets.
4. To make a positive contribution to the community.
5. To respect meritocracy during hiring processes, improving knowledge and
skills of its employees, creating the mostly preferred work environment.

Vision
Our vision is to be the world's leading financial services company. We want HSBC
to be the first choice for our customers and for our employees the best place to
bank, and the best place to work. We also believe that we can play a role in
helping to address the formidable challenges facing society today and by helping
to make the world a better place to live, we will also make our own business
more sustainable. At HSBC, our response is inevitably shaped by the views of our
shareholders, our customers, our colleagues and the wider community; and
sustainability is clearly a theme of growing importance to all of these
constituencies. If our owners, customers and staff consider these issues to be
important, this clearly means that our social responsibilities and sustainability
must be at the very core of our business; not just an addon to it. This is why,
our primary objective in our strategic plan states that we aspire to be one of the
worlds leading brands for customer experience and corporate responsibility.
We believe a company that behaves ethically, responsibly and believes in
sustainability will ultimately be more successful than its competitors because it
addresses issues on which its longterm success depends, and thereby gains the
confidence of investors, customers and employees. The companies that will be
our sector's leaders in five, 10 and 50 years time already know that a
commitment to environmental and social sustainability is not a secondary issue;
it is a defining strategy that will help build financially successful global
companies of the future.
Our goal is not, and never has been, profit at any cost because we know that
tomorrow's success depends on the trust we build today.

We look to address the expectations of our customers, shareholders,

employees and other stakeholders. Our frequently asked question covers a
range of issues including the size of HSBCs profits, customer
indebtedness and executive pay.
Being one of the worlds biggest banks means the decisions we make can
have a big impact. We aim to lend and invest responsibly, avoiding
projects where the potential for social and environmental damage
outweighs the economic benefits.
Companies like ours must share responsibility for the environment with
governments and citizens for minimising the damaging effects of human
activity pollution of land, water and air and the depletion of resources.
The world is a rich and diverse place. The better our people reflect this
diversity, the better we can anticipate and meet our customers needs.
Involving our employees in the community brings many benefits. Our
employees gain understanding, confidence and selfesteem. Being
recognised in the community also helps HSBC to attract great people.
Education is crucial to the development and prosperity of every country.
By investing in education, we seek to build the confidence and abilities of
young people on whom, as customers or employees, our business and
future success will depend

Principal Business Groups and Divisions

HSBC organises its customer-facing activities within four business groups:
Commercial Banking; Global Banking and Markets (investment banking);

Personal Financial Services (retail banking and consumer FINANCE); and Global
Private Banking.

Commercial Banking
HSBC provides financial services to small, medium-sized and middle-market
enterprises. The group has more than 3 million of such customers, including sole
proprietors, partnerships, clubs and associations, incorporated businesses and
publicly quoted companies.

Global Banking & Markets

Global Banking and Markets is the investment banking arm of HSBC. It provides
investment banking and FINANCING solutions for corporate and institutional
clients, including corporate banking, investment banking, capital markets, trade
services, payments and cash management, and leveraged acquisition finance. It
provides services in equities, credit and rates, foreign exchange, money markets
and securities services, in addition to asset management services. Global
Banking and Markets has offices in more than 60 countries and territories
worldwide, and describes itself as "emerging markets-led and financing-focused".

Global Private Banking

HSBC Private Bank is the marketing name for the private banking business
conducted by the principal private banking subsidiaries of the HSBC Group
worldwide. HSBC Private Bank, together with the private banking activities of
HSBC Trinkaus, known collectively as Group Private Banking, provides services to
high-net-worth individuals and their families through 93 locations in some 42
countries and territories in Europe, the Asia-Pacific region, the Americas, the
Middle East and Africa. According to the Scorpio Partnership Global Private
Banking Benchmark 2014, the bank had 382 USD Bn of assets under
management (AuM) a decrease of 4% on the 2013 figure.
In September 2008, HSBC announced that it would combine its two Swiss private
banks under one brand name in 2009, with HSBC Guyerzeller and HSBC Private
Bank to be merged into one legal entity, under the newly appointed CEO of HSBC
Private Bank, Alexandre Zeller.

Retail Banking and Wealth Management

HSBC provides more than 54 million[88] customers worldwide with a full range of
personal financial services, including current and savings accounts, mortgage
loans, car financing, insurance, CREDIT CARDS, loans, pensions and investments.
Retail Banking and Wealth Management (also known as RBWM) was previously
referred to as Personal Financial Services (PFS). This rename was announced
during HSBC's 2011 INVESTOR Day.

Group Service Centres

As a cost-saving measure HSBC is off-shoring processing work to lower cost
economies in order to reduce the cost of providing services in developed
countries. These locations take on work such as data processing and customer
service, but also internal software engineering at Pune (India), Bangalore (India),

Chennai (India), Hyderabad (India), Vishakhapatnam (India), Calcutta (India),

Guangzhou (China), Curitiba (Brazil) and Kuala Lumpur (Malaysia).
Currently, HSBC operates centres out of nine countries, including; United
Kingdom (Leeds, Hamilton, Edinburgh, Swansea, Manchester, Coventry &
Leicester), Brazil (Curitiba), the Czech Republic (Ostrava), India (Calcutta,
Chennai (India), Hyderabad, Bangalore, Visakhapatnam, Bombay, Gurgaon and
Pune), China (Shanghai, Guangzhou and Shenzhen), Malaysia (Kuala Lumpur),
Poland (Krakw), Sri Lanka (Rajagiriya) and the Philippines (Manila). The Malta
trial for a UK high value call centre has resulted in a growing operation that
country. An option under consideration is reported to be a processing centre in
Vietnam to access the French skills of the population and therefore cut costs in
the bank's French operations.
HSBC today is a universal bank with a presence in 74 markets, including all of
the top 15 countries by GDP. Their universal banking model gives them two
major advantages in their pursuit of a greater share of the market. First, it
enables them to offer an integrated service between our global businesses and
geographies. Secondly, it increases their resilience as a Group and our ability to
react to local circumstances and policy developments, whilst adhering to global
standards.
HSBC Latest Performance Standards

HSBC Group Entities in India

The Hongkong and Shanghai Banking Corporation Limited (HSBC)

HSBC Asset Management (India) Private Limited
HSBC Global Resourcing / HSBC Electronic Data Processing (India) Private
Limited
HSBC Insurance Brokers (India) Private Limited
HSBC Operations and Processing Enterprise (India) Private Limited
HSBC Professional Services (India) Private Limited
HSBC Securities and Capital Markets (India) Private Limited
HSBC Software Development (India) Private Limited
HSBC InvestDirect (India) Limited

The Hongkong and Shanghai Banking Corporation Limited

(HSBC)
Personal Banking
HSBC offers a wide range of retail banking and wealth management services,
including personal lending and deposit products, through its branch network in
Ahmedabad, Bangalore, Chennai, Chandigarh, Coimbatore, Gurgaon, Hyderabad,
Jaipur, Kochi, Kolkata, Ludhiana, Mumbai, New Delhi, Noida, Pune, Thane,
Trivandrum and Visakhapatnam. Also offered branch-wide are international Gold
and Classic credit cards from VISA and MasterCard and debit cards from Visa.
Customers have access to 24-hour banking services through an extensive
network of automated teller machines (ATMs), an integrated Call Centre, and
internet banking - online@hsbc.
Non Resident Indian Banking
HSBC's Non Resident Indian Banking (NRI) centres located in Asia-Pacific, the
Middle East, Europe and North America, together with HSBC's offices worldwide,
provide the international Indian Diaspora access to a range of products and
services. These include NRI related investment (both international and
domestic), transactional and deposit products, together with a full range of
personal and private banking products in India and overseas. Internet banking
also provides easy access to HSBC's services.
Financial Planning Services
Services include investment and custodian management and access to stock
broking and insurance services, which are offered to resident as well as nonresident Indians.
Corporate Banking
HSBC has well-established, long-term corporate banking relationships with large
domestic Indian corporations and foreign multinationals operating in India.
Services include term and working capital finance, trade facilities, corporate
deposits, syndications, payments and cash management services and factoring.
Business Banking
HSBC's Extra Mile Business Banking offers two types of account to small and
medium-sized businesses - The Business Account and the BusinessVantage
Account. Services include Business Phone Banking, Business Doorstep Banking
and Multi Branch Business Banking.
Payments and Cash Management
HSBC provides integrated domestic and regional transaction support to corporate
clients through a sophisticated range of cash management solutions, including
collection and payment services and integration with customer back-end
systems. Operations and client services are ISO 9001 certified. Hexagon, the
HSBC Group's dedicated electronic banking service allows users to perform
financial transactions, obtain international financial markets information, and
review details of their domestic and international accounts, from anywhere in the
world, 24 hours a day.
Trade (international and domestic) and Factoring Services
A wide range of solutions tailored to meet customer's requirements for both
domestic and international businesses is offered. HSBC is also one of the leading
banks involved in the bullion business through its offices in Ahmedabad,

Bangalore, Chennai, Hyderabad, Kolkata, New Delhi and is supported by the

Group's global expertise in the precious metal business. HSBC is the leading
provider of trade services in India and its trade centres are ISO 9002 certified.
Institutional Banking
Working closely with Group offices in India and overseas, trade services,
payments and cash management, treasury and capital markets, custody and
clearing, and correspondent and electronic banking activities are offered to
banks, financial institutions, securities houses, insurance companies, asset
management companies and other non-banking companies, non-government
and development organisations operating in India.
Treasury and Capital Markets
Clients consistently rate HSBC's Treasury business as one of the best in India. Its
dealing room in Mumbai is one of the largest in the country, serving clients in
Mumbai and in the major metropolitan centres across the country. It provides a
comprehensive range of products which include - foreign exchange, money
market and fixed income products and derivatives in both rupees and major
currencies.
Custody and Clearing
The leading custodian in Asia, HSBC's custody and clearing services are available
in 28 markets in Asia-Pacific and the Middle East. With experienced staff and the
latest technology, HSBC is the premier provider of sub-custodian and clearing
services to foreign institutional investors (FIIs) in India. HSBC clients include the
domestic fund management sector in both the retail and institutional segments.
Institutional Fund Services launched by the bank offers a comprehensive suite of
products to domestic mutual funds and insurance companies ranging from
custody, fund administration services, unit distribution and Cash Management
Services.

Technology
The HSBC Group develops and applies advanced technology to the efficient and
convenient delivery of banking and related financial services. In India, the Group
provides:

Self-Service Banking with over 150 in-branch and off-branch ATMs and 24hour Phone Banking
Trade and Corporate Banking services with real-time access to a
centralised information database
Instantaneous inter-city transactions through online connections between
all branches
A state-of-the-art treasury dealing system
A sophisticated card system supporting debit and credit cards, domestic
and international VISA, MasterCard, and co-branded cards
A dedicated acquiring system for both MasterCard and Visa transactions
online@hsbc, HSBC's internet banking service, provides customers with an
integrated and secure platform to access their accounts.

Asset Management Asset Management

HSBC Asset Management (India) Private Limited provides a comprehensive range
of investment management solutions to a diverse client base and is committed
for aiming to deliver consistent investment performance, world-class service and

a broad range of solutions for all types of investors. Our range of offerings in
India comes under two broad categories Mutual Fund and Portfolio Management
Services.

HSBC Global Resourcing

HSBC Global Resourcing is the largest, captive, banking and financial services off
shoring organization in the world. A vital part of the HSBC Group's global
strategy, Global Resourcing plays a key role in delivering shareholder value and
seamlessly integrates and helps the Group remain competitive in the ever
changing world of banking and finance. Global Resourcing is present in India as
HSBC Electronic Data Processing India Pvt. Ltd., and operates out of 7 Group
Service Centres (GSC) in Hyderabad, Bangalore, Kolkata, and Vishakhapatnam.

Insurance
HSBC Insurance Brokers (India) Private Limited is licensed by the Insurance
Regulatory Development Authority (IRDA) to operate as a composite insurance
broking company, which will function as a direct and a reinsurance broker.

Data Processing
HSBC Operations and Processing Enterprise (India) Private Limited, through two
centres in Mumbai and Chennai, provides operational processing services for
HSBC offices in India.

Audit Service
HSBC Professional Services (India) Private Limited provides internal audit
services to the HSBC Group's internal audit units worldwide, with particular
emphasis on the IT, Treasury, Asset Management, Private Banking and Insurance
functions.

Investment Banking
HSBC Securities and Capital Markets (India) Private Limited has two main
business lines. Its Institutional and proprietary broking business is based in
Mumbai and, has seats on two of India's premier stock exchanges, the Bombay
Stock Exchange and the National Stock Exchange. It deals in Indian securities for
both Indian and international institutions and for select retail clients and is
backed by an extensive research team. The Corporate Finance and Advisory
business, with offices in Mumbai and New Delhi, offers a full range of integrated
investment banking services in India and internationally.

Software Development
HSBC Software Development (India) Private Limited has established a software
centre in Pune to develop solutions for HSBC's Group offices worldwide.

HSBC InvestDirect (India) Limited

HSBC Invest Direct (India) Limited (HIDL) with its headquarters in Mumbai, offers
Securities related financing to individuals and corporates through its fully owned
subsidiary HSBC Invest Direct Financial Services (India) Limited (NBFC entity).

PEST Analysis of HSBC Bank

Political Analysis
Govt is responsible for protecting
the public Interest
Political Stability affects business
decision
Consumer Protection
Regulations of Business Activities

Social Analysis
Work Life Balance
Trends in Consumer Behaviour
Leisure
Lifestyle

Economic Analysis
Competitor Activity
Competiton for Resources
Savings
Unemployment Numbers

Technology Analysis
Technological arrange is speeding
up
Technology develops new products
Improved Communication
Internet Business

Political Analysis
HSBC banking has been sheltered by the regulations and policies made by
different governments in the countries where they are working. The company
has been able to remain to the policies agreed by each government to make sure
that the company will be able to accomplish business operation successfully and
effectively.
HSBC Company also formulates their own defence strategies besides any
governmental restrictions and limitations.
HSBCs management had to make an appearance in 2012 before the US Senates
Permanent Subcommittee on Investigations (PSI). The political hearings were
related to an investigation by the PSI into potential risks to the US financial
system from HSBC inadequate compliance with US regulations around money
laundering and financial sanctions (HSBC Interim Report 2012). According to BBC
(2012), US government held HSBC responsible for money laundering from
criminal activities by drug lords amounting to more than $2.6bn in assets. The
bank is now required to strengthen their compliance and risk management
infrastructure and culture which is likely cost it a lot of money.

Economic Analysis
Being one of the worlds leading and completive businesses in conditions of
banking and finance HSBC said to have a secure and successful economic
strength. In spite of lots of dangers that they meet in many parts of the world,
the management of HSBC make what they need to be able to go beyond such
struggles and to have a better economic condition and create a shield against
unemployment.

Many financial institutions are still feeling the effects of the 2008 financial crisis
and the very real liquidity problem that led to the failure of others like Northern
Rock. According to Franks (2009), banks like HSBC have been saved by the fact
they are universal with product offerings all over many geographical locations.
The HSBC chairman says is surviving and doing well because its underlying
revenue growth is driven by Global Banking and Markets and Commercial
Banking particularly in the faster-growing regions of Hong Kong, Rest of AsiaPacific and Latin America where the economic outlook is more positive (HSBC
Interim Report 2012).

Social Analysis
HSBC is being affected by the circumstances of the society in which they are in
use. By the side of this HSBC tries harder to make sure that each society is given
the same chances to take the benefit of the resources given by the organization.
The company adhere to having good name and relations in the society that
belong to secure that everything will be customary and under control.
Social issues like climate change and criminal money laundering are some of the
social issues that HSBC is dealing with currently. In 2012, US government held
HSBC accountable for criminal money laundering amounting to $2.6bn and asked
the company to contribute considerable time and resources to monitor millions
of potential crime transactions. HSBC is also gearing towards supporting a move
to a low carbon economy and as a result, its providing climate financing,
including environmental markets, debt and equity investment and insurance.
The bank is functioning in a dynamic environment where the habit of banking
and its nature is different in each of the region in functions. The Bank is
considered as a provider of sophisticated financial solutions in the West, where
the financial literacy is quite high; while a bank is considered as a tool for
financial inclusion and social change in the developing countries, which still seek
welfare economic solutions for their social and economic miseries. The bank has
been quite adaptive in its operations considering the social factors in different
markets. In spite of its global reach, HSBC maintains a local bank philosophy
local learnings, local customers and local products. The company wants to be
the best place to bank and the best place to work and its seven global pillars
around our customers, our culture etc communicate the actions it is taking.
The bank, which mainly sought to serve the elite customer group world over has
been spending corporate social responsibility in developing countries, where the
spending is mainly channelized towards education and social inclusion.

Technological Analysis
The urgent situation of information technology, internet and generally the
improvement of technology effects how HSBC has been working in the past
years. The company search for different systems and used internet to get to their
costumer all over the world and also help them know the latest trends in the
global business. Except from these, the company also uses special facilities
which help then to advance their productions and operations and also make
them to achieve their goal. Technological breakthroughs can create new
industries which might prove a danger to presented organizations.
As the low carbon technology takes hold to support a low carbon economy, HSBC
is beginning to invest in climate and clean tech research. For example, in 2011,
HSBC provided structured finance for low carbon emission bus systems in cities

like Johannesburg and Panama making HSBC the market leader in climate
technology financing.

Environmental Analysis
HSBC recognises the current trends in climate change and governments
demanding organizations to reduce their carbon foot prints. HSBC says its
committed to reducing its own carbon foot print by reducing recycling waste,
transport emissions as well as improving energy efficiency in their buildings.

Legal Analysis
According to Frank (2009), increased governmental regulation from the EU,
higher capital requirements as well as new anti-money laundering requirements
mean that HSBC has to deal with legal compliance that is costly and time
consuming.
To summarise PEST analysis looks at the business strategies to understand the
environment that the company is working and also to take the advantages and
benefits to minimize the threats and the dangers for the business.

Porter 5 Forces

Threat of New Entrants: High

Bargaining Power of Cutomers :

High

Threat of New Entrants: High

Buyer
Ratio to
to Firm
Firm
Buyer Concentration
Concentration Ratio
Easy
Concentration
Ratio
Easy Entry
Entry of
of non
non financial
financial organisations
organisations
Concentration Ratio
Competitive
Buyer
Availability
Competitive Advantage
Advantage
Buyer Information
Information Availability
Strong
Brand
Names
into
Banking
Business
Buyer
Price
Sensitivity
Strong Brand Names into Banking Business
Buyer Price Sensitivity
Efficient standards of business
Avaliability
of Existing
Existing Substitute
Substitute Products
Products
Avaliability of
High Standards
Standards of
of Competiton
Competiton
Competitive Rivalry : High
High
High Competition
Large No of Players
Strong Presence of Public &
Private Sector Banks
Bargaining Power of Suppliers :
Low
Bank Capital Supplier
Computer Equipment
Computer
Equipment Supplier
Supplier
Credit Card
Card Supplier
Supplier
Credit

Threat of New Substitutes : High

Same Services at lesser costs
Financial Services
Services of
of Non
Non Banking
Banking Channels
Channels
Financial
High Efficiency
Efficiency Services
Services at
at cheaper
cheaper prices
prices
High

Threat of New Entrants: High

When many countries and cities join WTO and the Internet effect, the barrier of
bank become disappear. Many financial even non-financial organizations can

easily entry to bank industry. They can use more little money to build a website;
they can also integrate with other organizations. The switching cost of this
behaviour become smaller than before and the advantage is larger than before
also.
HSBC has many threats from Tesco, Sainsburys and a large number of other
markets consider to enter into banking industry as a result of high profits that
the specific kind of industry offers. Large super-markets in UK seek to enter
without considering that those threats sometimes breakdown organisations such
as HSBC. Although, HSBC received several threats from the market, they were
still able to create high standards for the competition. Strong branding images
are used from HSBC make sure that their customers will remain loyal to them.

Bargaining Power of Customers: High

An organisation created a value which has affected the occupation from one of
the two important forces customers power. The role of this force contains the
customers concentration along with the size. In other words, HSBC managed
their customers as a result of allowing the company to gain customer loyalty. The
strategy that was used by HSBC allows them to have a chance becoming a world
leader in banking industry.
Buyer Concentration to Firm Concentration Ratio:
Bank industry is a high buyer concentration industry, many people use bank
service, such as deposit money, mortgage, loan, investment, insurance and
currency exchange (High).
The concentration ratio of international bank industry is medium, many large
bank exist in Bangladesh, such as Standard Chartered, CitiBank, HSBC and Dutch
Bangla Bank (Medium).
Buyer Information Availability (High):
When Internet becomes changing peoples life, customer can easily obtain
information through Internet, they can easily compare the price and service.
Buyer Price Sensitivity (High):
Interest Rate and service charge is sensitive indicator for customer in bank
industry, customer may due to those indicators to draw out all or a lot amount of
capital from bank to bank/ other financial institution. The switching cost of this
action is low.
Availability of Existing Substitutes Products (High):
Many substitute product or service present in recent year, such as currency
exchange, insurance and loan. They mainly provided by other financial
institution.

Bargaining Power of Suppliers (Low)

Customer power mirrors to supplier power. This force focus on two important
points. The first one is the significant size and concentration of suppliers and the
second one the differentiation in the materials being supplied. HSBC use the
strategy of charging markets with different prices according to differences of the
price of each buyer. This usually implies that the audience is described by high
supplier power.
Bank Capital Supplier (Low):

Depositor also is capital supplier of bank, they will compare with other financial
product to see whether draw out capital or not.
Computer Equipment Supplier (Low):
The concentration ratio of computer is high, many companies use IBM, but it
doesnt mean other computer companies are not good, such as Sun
Microsystems, Fujitsu and Hewlett-Pack also provide similar computer equipment
and solution.
Credit Card Supplier (Medium):
Credit Card industry is a high concentration ratio industry, VISA, Master Card and
American Express is the most popular credit card in the world. Although other
organization also release credit card system, such as JCB, there market share in
the world is much less than these three organizations. Moreover, these three
organizations brand name is louder than other organizations, so the switching
cost from these organizations to others may be too large.

Threat of New Substitutes (High)

Internet makes many organizations can use smaller amount of money relatively
to provide similar even same service, and the service charge become smaller.
Customer will due to convenience, low cost and high efficiency to change the
service to other organization. Real-time money transfer (i.e. Western Union), realtime payment (i.e. Paypal), currency exchange (i.e. Xe.com) and insurance (i.e.
InsWeb.com), they through Internet to provide a high quality but low service
charge service. This threat gives the opportunity to the company to work hard as
a result of being sustain to its position. HSBCs strategy focuses on the four
different customers sections.

Competitive Rivalry (High):

There have many rivals in the banking and financial sectors. HSBC used efficient
strategies to ensure its leadership position in the market among rivalries.
Moreover, due to the capabilities of other rival companies, HSBC develops
strategic plans to confirm that they are permanently being the first choice of
their customers in banking industries. Nowadays, as we cross the mountain of
financial crisis, a number of banks went to liquidation.
There are many banks in the world, as The Banker magazine mentioned, the
Earning Before Interest and Tax (EBIT) in 2010 of top 1000 banks in the world is
6451 billion US dollars, higher than 2009. Due to technology becomes improve;
financial control become release and the change of environment in the society,
competition between banks become violent and the maturity of financial market
in western country is very high, so the competitiveness force bank to find other
profit continuously.

EFAS (External Factor Analysis Summary)

Opportunity and Threats
Gives position of a firm w.r.t. external environment, considering the
following factors
o Political
o Economical
o Social
o Technological

o Research and Development

o Environmental
Helps organize the External factors into the generally accepted
categories of opportunity and threats
To analyze how well the industry is responding to external factors in
light of the perceived importance of these factors to the company.
Helps to formulate new strategies and policies on the basis of a
firms current position

EFAS: HSBC

HSBC India fares slightly below average in our opinion in responding to the
external environment.

IFAS (Internal Factor Analysis Summary)

Strengths and Weakness
IFAS Table is one way to organize the internal factors into the generally
accepted categories of Strengths and Weaknesses.
It gives position of a firm w.r.t. internal environment, considering the
following factors

o
o
o
o
o
o

Financial
Management
Human Resource
Research & development
Legal
Competitive

Helps organize the internal factors into the generally accepted

categories of strengths and weaknesses
To analyze how well a particular companys management is responding
to these specific factors
Helps to formulate new strategies and policies on the basis of a
firms current position

IFAS: HSBC

In our opinion, HSBC bank performs above average in responding to its internal
environment.

Strategic Factor Analysis Summary (SFAS) Matrix

In our opinion, the bank performs slightly below average.

TOWS Matrix
Internal
Factors/External
Factors

Supply more credit in

future years
Growth
Stable Government
Capture share of global
capital flows into India
Threats
Legal Issues
Regulatory Norms
Threat from global
operations

Strengths
Experienced Top
Management
Good corporate relations
Global Reputation
SO Strategies
Utilize positive business
environment to increase
income
Finance UK businesses
capital flows into India
ST Strategies
Experienced
management can help
with structures to
overcome regulatory
obstacles

Weaknesses
Low Retail Deposits
Inadequate Branding
Distribution Channels
WO Strategies
Low number of branches
can be overcome with
digital channels
Inadequate branding in
India can be overcome by
high profile global deals
WT Strategies
Settle with regulators to
pay off fines
Use structures to ring
fence from parents
losses

Scenario Planning
It would be an understatement to state that the global and Indian banking
system is in a state of flux. The financial crisis of 2008 has led the RBI and the
government to make decisions that continue to affect the banking system at
present. From the initial days when funds made their way to safe haven banks,
especially SBI, after the collapse of Lehmann Brothers, when corporates rushed
to public sector banks who aggressively grew their loan while every other global
financial institution was conserving cash, the time has now come when the very
survival of several public sector banks is being questioned due to the rise in NPAs
arising from poor lending practices and excess exposure to the infrastructure
sector by the PSBs. The new provisioning norms laid down by the RBI and the
capital adequacy ratios laid down under Basel III mean that Indian PSBs need
around INR 4.6 lakh crore of capital by March 31, 2019, the deadline to
implement the Basel III norms. With the government, their principal shareholder,
unwilling and unable to pump in the required money, and with an equity market
that doesnt favour PSBs many PSBs trade at 0.5x book value, compared to
private sector banks like Axis Bank, ICICI Bank and HDFC Bank which trade at 2-4
times book value, this is a very tall order for these banks. The consequence of
being unable to meet the Basel III norms would mean that banks would not be
able to undertake any further lending till the norms are satisfied. The major

investor during disinvestment sales has the LIC of India, which itself is a
government owned life insurer.
In addition, there are several cases of corruption, interference, and
mismanagement in PSBs. The selection of the top management is far from
transparent, loan appraisal is not adequate, and corruption is a major problem.
United Bank of India had the ignominy of facing a lending curb by the RBI when
its chairman quit last year amid record NPAs. It initially couldnt lend for above
INR 10 crores, a pittance for even a mid-size company, let alone a bank. Though
the lending restrictions have been recently lifted, the bank has to maintain CRAR
(capital to risk weighted assets ratio) above 9.5%, higher than others, and its
credit to deposit ratio cannot exceed 70%. Prolonged tepidness in the Indian
economy has led to the aggregate NPAs of Indias 40 listed banks standing at INR
2.93 trillion at the end of the December quarter, having risen by 20.5% in a year.
With no real pick up in the capex cycle expected in the next year or so, and
volatile economic conditions being the norm, there is a distinct possibility of
further slippages. There are two problems with this banks will have to make
higher provisions for these loans, hurting their profitability, and the risk weight
on some of these assets is high, meaning that higher capital will have to be kept
aside, restricting use of capital for lending. The government has urged these
banks to recover NPAs through legal means. To that end, RBI has come up with
norms for willful defaulters, Joint Lenders Forum for stressed asset, and norms
on sale of NPAs to asset reconstruction companies. Banks are creating special
verticals in some cases to recover NPAs.
The collapse of Lehmann Brothers, the near collapse of Citi, the merger of Merill
Lynch with Bank of America, and other such cases highlighted that there are
certain banks and financial institutions, who are, due to their sheer size and
interconnectedness with other institutions, too big to fail. Basel III proposes
increased capital requirements for G-SIFI (Global Systemically Important Financial
Institutions), the list of which also includes HSBC. The RBI has also said said foursix banks in the country can be termed as Domestic Systemically Important
Banks (D-SIB), the failure of which can severely strain the entire banking system
and affect the real economy. These banks will be subjected to differentiated
supervisory requirements and higher intensity of supervision based on the risks
they pose to the financial system, RBI said in its framework for dealing with
such big banks. While foreign banks have much smaller balance sheet sizes, they
are quite active in the derivatives market and provide specialized services not
easily available with domestic banks. It is, therefore, appropriate to include a
few large foreign banks also in the sample of banks to compute the systemic
importance, the RBI said. The list will be updated every August, starting 2015.
The RBI recently allotted banking licenses to two companies, Bandhan and IDFC.
It has also made it clear that if favours differentiated banking licenses rather
than the run of the mill universal banks. In addition to this, in order to promote
financial inclusion, RBI has issued guidelines for setting up small banks and
payment banks. RBI in its guidelines said that both payment banks and small
banks are niche or differentiated banks, with the common objective of
furthering financial inclusion. The purpose of the small banks will be to provide a
whole suite of basic banking products such as deposits and supply of credit, but
in a limited area of operation. The objective for these Small Banks is to increase
financial inclusion by provision of savings vehicles to under-served and unserved
sections of the population, supply of credit to small farmers, micro and small
industries, and other unorganized sector entities through high technology-low
cost operations. Objective of payments banks is to increase financial inclusion by

providing small savings accounts, payment/remittance services to migrant

labour, low income households, small businesses, other unorganised sector
entities and other users by enabling high volume-low value transactions in
deposits and payments/remittance services in a secured technology-driven
environment. Those who can promote a payments banks can be a non-bank PPIs,
NBFCs, corporates, mobile telephone companies, super market chains, real
sector cooperatives companies and public sector entities. Even banks can take
equity in Payments Banks. Unlike small banks, payment banks cannot lend
credit, and can only accept CASA deposits with a limit of INR 100,000 per
customer.
There are new age digital players such as Paytm, Freecharge, etc. who are digital
wallets. Wallets provide greater flexibility than cash, but without the process of
opening a bank account. One merely has to download an app on their phone,
fund the wallet from your bank account, and you can pay merchants using this
cash. Paytm also allows users to transfer money into a bank account (or of a
friend). In addition, it plans to open retail outlets where customers can load cash
into their wallets, obviating the need to transfer funds from a bank account to
their wallet. These, and other services, such as m-pesa, mean that for a peer to
peer payments and for transacting in ecommerce websites (several major apps
and sites such as BookMyShow, Uber, etc. support wallets like Paytm,
PayUMoney, etc.) one doesnt need a bank account at all. The number of active
users of some of these digital wallets exceed the total number of credit cards in
India! The only noteable attempts at competing with this are ICICI Banks
Pockets, which is a digital bank, and Chillr from HDFC. Kotak and ICICI Bank are
promoting using Twitter and Facebook as a means to conduct banking
transactions. Some of these digital wallet companies have applied for a payment
bank license, in addition to telecom companies and retailers. All this means that
banks will have increasing competition for basic banking activities and also for
their specialized activities.
HSBC, despite its push to diversify revenues, earns its lion share from the Asian
markets. HSBC Holdings Plc, the UK listed parent company, has seen a fall in its
share price after HSBC has had to lower its financial targets. This marks a change
in fortune for the bank, which managed to ride out the financial crisis by wooing
investors with the promise of returns higher than other larger European banks
due to its exposure to emerging economies. Now, Asian markets, especially
China, are slowing, interest rates are falling, and the bank is struggling to cut
costs. If mismanagement and fierce competition were problems before the crisis,
the regulatory backlash after it has been brutal. American officials have begun to
enforce strict rules on money-laundering, tax evasion and sanctions, meaning
that global banks must know their customers, and their customers customers, if
they want to maintain access to Americas financial systemwhich is essential
given that the dollar is the worlds reserve currency. Huge fines have been
imposed on Standard Chartered, BNP and HSBC, among others, for breaking
these rules. HSBC warned it was braced for a $378m (237m) penalty for rigging
currency markets. HSBC admitted it could no longer stick to targets on the cost
of running its business in 74 countries because of the expense of hiring 5,000
more legal staff to try to avoid scrapes with regulators. HSBC said it faced a fine
for breaches of systems and controls in its currency arm by the Financial
Conduct Authority (FCA) but insisted the $378m did not relate to penalties to be
imposed by other jurisdictions, particularly the US, with which it has a crucial
deferred prosecution agreement (DPA) relating to its $1.9bn fine two years ago
for money laundering breaches.

The global universal bank model adopted by HSBC and Citi is in trouble for three
reasons: First, these giant firms proved hard to manage. Their subsidiaries
struggled to build common IT systems, let alone establish a common culture.
Synergies have been elusive and global banks cost-to-income ratios, bloated by
the costs of being in lots of countries, have rarely been better than those of local
banks. As a result these firms have all too often been tempted to make a fast
buck. Second, competition proved to be fiercer than expected. The banking
bubble in the 2000s led firms such as Barclays, Socit Gnrale, ABN Amro and
Royal Bank of Scotland (RBS) to expand globally, eroding margins. In 2007 RBS
bought ABN in a bid to rival the big network banks. It promptly went bust,
proving that two dogs do not make a tiger. The global giants also lost market
share in Asia to so-called super-regional banks, such as ANZ of Australia and
DBS of Singapore. Big local banks in emerging markets, such as ICBC in China,
Ita in Brazil and ICICI in India, also began to build out cross-border operations.
Thirdly, as mentioned earlier, bank supervisors, have imposed higher capital
standards on global banks. Most face both the international Basel 3 regime and
a hotch-potch of local and regional regimes. A rule of thumb is that big global
banks will need buffers of equity (or core tier one capital) equivalent to 12-13%
of their risk-adjusted assets, compared to about 10% for domestic firms. National
regulators increasingly demand that global banks ring-fence their local
operations, limiting their ability to shift capital around the world. The cost of
operating the systems that keep regulators happy is huge. HSBCs compliance
costs rose to $2.4 billion in 2014, 50% higher than the year before.
The financial arguments for global banks no longer appear convincing. Yet
unscrambling these firms would be extremely complicated. And in any case both
managers and investors see two possible rays of light. One is the possibility of
gradually rising interest rates in America: JPMorgan Chase reckons these might
add a fifth to its profits by 2017. The other is declining competition, which would
allow them to raise their prices. The withdrawal of second-tier banks should help
on February 26th RBS said it would shrink its commercial and investmentbanking operations down to 13 countries from over 50 in 2008.

HSBC Strategy
First, HSBC strategy is designed to further grow the business and dividends. They
will continue to recycle risk-weighted assets from lower return to higher return
parts of the Group. Their capital strategy aims to increase dividends
progressively. If they are unable to deploy the remaining capital themselves in
such a way that it provides incremental value for their shareholders, they may
seek to neutralise the effect of scrip dividends through share buy-backs, subject
to regulatory capital requirements and shareholder approval. They shall also
continue to wind down and thus reduce the impact of their portfolio of legacy
businesses.
Second, they will continue to implement their Global Standards programme
which they believe will increase the quality of the Groups earnings. Global
Standards governs all of their activity and will drive consistently high standards
through HSBC globally. They have made substantial investment in risk and
compliance capabilities across all businesses and regions to strengthen their
response to the ongoing threat of financial crime, and will continue to do so. This
is the right thing to do, in line with their values, and they believe that it will also
become a source of competitive advantage.

Third, they aim to deliver a further US$2-3bn of sustainable savings by

streamlining their processes and procedures without in any way compromising
their commitment to compliance and Global Standards. There remains
considerable scope within the business to globalize and simplify many of our
operations and practices.
Long-Term Trends
Strategy is aligned to two long-term trends:
The world economy is becoming ever more connected, with growth in world
trade and cross-border capital flows continuing to outstrip growth in average
gross domestic product. Over the next decade we expect 35 markets to generate
90% of world trade growth with a similar degree of concentration in cross-border
capital flows.
Of the worlds top 30 economies, we expect those of Asia-Pacific, Latin America,
the Middle East and Africa to have increased by around four-fold in size by 2050,
benefiting from demographics and urbanisation. By this time they will be larger
than those of Europe and North America combined. By 2050, we expect 18 of the
30 largest economies will be from Asia-Pacific, Latin America or the Middle East
and Africa.
Competitive advantages
What matters in this environment are:

Having an international network and global product capabilities to capture

international trade and movements in capital
Being able to take advantage of organic growth markets and maintaining the
capacity to invest.

HSBCs competitive advantages come from:

Meaningful presence in and long-term commitment to our key strategic

markets
Strong ability to add to capital base while also providing competitive rewards
to staff and good returns to shareholders; stable funding base with about
US$1.5 trillion of customer accounts of which 73% has been advanced to
customers;
Business network, which covers over 90% of global trade and capital flows
Local balance sheet strength and trading capabilities in the most relevant
financial hubs

A Two-Part Strategy
Based on these long-term trends and our competitive advantages, we have
developed a two-part strategy:
A Network of Businesses Connecting the World
HSBC is well positioned to capture growing international trade and capital flows.
Their global reach and range of services place them in a strong position to serve
clients as they grow from small enterprises into large multi-nationals through

their Commercial Banking and Global Banking & Markets businesses.

Wealth Management and Retail with Local Scale
They will capture opportunities arising from social mobility and wealth creation in
their priority growth markets across Asia-Pacific, Latin America and the Middle
East, through their Premier proposition and Global Private Banking business.
They will invest in full scale retail businesses only in markets where they can
achieve profitable scale, namely in their home markets of the United Kingdom
and Hong Kong.

Strategic Priorities
Grow
Profit underpins long-term business sustainability and growing profit is an
integral part of their strategy. The conditions for creating value and generating
profits are reflected in business and operating models, which determine how
global businesses, geographical regions and functions interact. Delivering
organic growth will support a progressive dividend.

Implement
A global bank needs global standards consistent operating principles that are
fundamental to the way they do business and which help them to detect, deter
and protect against financial crime. Implementing Global Standards affects how
they govern the Group, the nature of their core business and the performance,
recognition and behaviours of all their people in managing high quality customer
relationships. It starts with embedding our HSBC Values in everything they do.

Streamline
This initiative is critical to the long-term sustainability of their business. Societys
expectations of the financial services industry are evolving and becoming more
demanding. At the same time, the digital revolution is reducing barriers to new
entrants to the industry and markets are becoming increasingly competitive. In
this environment, it is essential that they focus relentlessly on improving
efficiency, ensuring that all parts of the Group streamline their processes and
procedures and, as a consequence, reduce their costs. In doing so, they must
remain cognizant of our wider obligations to the community, including human
rights, and the environment.

Ansoffs Matrix for HSBC Bank

Market Penetration
The market penetration strategy is implemented when an organization seeks to
increase market share of its current products/services. This strategy is the least
risky as the organization is already equipped with the experiences, capabilities
and resources to market and support its products/services. If the market is a high
growth market, simply maintaining market share would suffice. However, as the
market reaches the saturation stage, a new strategy must be implemented.
HSBC is able to use this strategy to gain market share from competitors that
have lost confidence in banks that have failed in the recent sub-prime mortgage
crisis.

Market Development
Market development is a strategy used to obtain growth by targeting new
markets with existing products. New markets may include new market segments
or new geographical regions. This strategy is good for organisations with
products/services that are suitable for different target markets. Due to the
organisation moving into a completely new market, market development is
considered more risky than market penetration. China and India holds the
biggest current account market that HSBC needs to implement the market
development strategy. As the economic slowdown in these two countries is not
as severe as in the advanced economies, HSBC may find it more profitable to
concentrate resources to gain a better foothold in Asia.

Product Development
The product development strategy requires the organisation to develop new
products for existing market segments. This strategy is suitable for organisations
that have a good understanding of their customers needs and wants. Existing
products/services can be used as a platform for cross selling new products
tailored to a specific customer base. As with market development, product
development carries more risk than market penetration. HSBC could use this

strategy by developing a new prepaid card product that O2 has launched

recently together with its current account. The new prepaid card would signal a
change in the psychology of spending among customers and would likely portray
HSBC as a more responsible financial institution that does not just encourage
people to spend.

Diversification
Diversification is the strategy of diversifying into a completely new business by
developing new products for new markets. Due to the uncertainty of untested
products and potentially hostile new markets, diversification is the most risky
strategy of the Ansoff matrix. Furthermore, the company may be trying to
develop products and markets beyond the core competencies of the
organisation. However, innovative products hold the highest potential for highest
returns. This strategy is particularly useful should the organisation have the first
mover advantage in entering the market. Diversification would not be a suitable
strategy for HSBC in times when capital is tight and economic activity is
deteriorating. Furthermore, new products in Asian markets are known to not
perform well in the early years of development.

Interview of Ms. Naina Lal Kidwai, Country Head of HSBC

India
Naina Lal Kidwai, a Padma Shri recipient, a chartered accountant by profession, is
an Indian banker and business executive. She is currently the Group General
Manager and Country Head of HSBC India. She is the Former President of the
Federation of Indian Chambers of Commerce and Industry (FICCI). She also holds
a Bachelor's degree in Economics from University of Delhi and an MBA from
Harvard Business School in 1982. Kidwai was the first Indian woman to graduate
from Harvard Business School and also the first woman to guide the functioning
of a foreign bank in India. She has also completed her Bachelors of Arts in the
year 1977. As the group GM and country head of HSBC India, Kidwai has been
instrumental in charting the growth path of HSBC in India for the past 10 years.
In this interview, Kidwai talks about the changes shaping the banking sector.
Interview Questions
Q: What are some of the most significant shifts that you've witnessed in
the banking sector?
Naina Lal Kidwai:
There are two significant shifts that I have witnessed in the banking sector: One
is rapid technological development, and the other is the volatile nature of the
retail business. This is true not only at HSBC, but also for the industry because
every change brings a new model for growth.
On the technology front, what we have today is a banking sector, which
including public sector banksis driven off a strong technology platform. But ten
years ago, the public sector was wary of adopting technology as unions opposed

it. Today, public sector banks easily work off these platforms, and as a result, the
sector is very well connected. Technology solutions are being provided by the
best in the IT industry, hence there is no compromise on quality.
I think this sets the standard because the private sector has to be technologically
better when competing against well-funded public sector banks. The private
sector scores for the fact that it is more agile. It is able to easily adapt and bring
in new technologies into play faster.
Banks like HSBC brought the first ATM to the country. I must say that foreign
banks do help in bringing in cutting-edge technology. And this ensures that we
have a global offering in India.
Q: Could you elaborate what technology changes are shaping the
banking sector?
Naina Lal Kidwai:
I think the big change, going forward, will be around Internet and mobile
banking. The Internet banking platforms of banks in India are truly secure and
to that extentwe do have strong security technologies available in India. Also,
our customers today are adopting technology at a much faster rate than ever
before, given the youthful nature of our population.
On the other hand, an element that we have not leveraged effectivelywhich if
youd asked me five years ago I would have said was the technologyis
mobile telephony banking that isnt just SMS-led. We are yet to reach a stage
where your mobile phone is your wallet.
I think the next leg of this mobile telephony banking is going to be an important
one for us.
Q: How does IT help you stay compliant with regulatory mandates?
Naina Lal Kidwai:
I think, with respect to keeping pace with regulatory changes, there is very little
that constrains you. Sometimes, when you are a part of a larger organization, the
decision-making is such that you cannot have a technology in one location,
which is different from what you have in others.
This is because it is important to ensure that all the technology platforms are
linked together. Also, you cant easily add on something that makes your global
systems insecure.
So, in some ways, being a big organization and functioning across geographies
poses its own constraints. But it also helps because you can easily import
innovations. However, in order to keep all your systems and processes intact,
there are multiple layers of checks and balances that you need to go through.
Here's where technology can help. In terms of security, technology definitely
plays a big role. The ability to screen and know exactly what is happening is
important. Also, the ability to put security walls and ensure that central systems
do not get impacted is part of a security technology's evolution process.

I think no one will get it right all the time because technology evolves
continuously, and sometimes, you learn things the hard way. But the good news
is as long as we can learn about something that didnt work somewhere else in
the world we can avoid repeating those mistakes.
Technology must continue to evolve. The worst we could do is implement a
change, sit back and relax, only to find out that six months down the line,
something else has come out that is far superior to what has been achieved or
implemented by us.
Q: How can organizations avoid falling into this trap?
Naina Lal Kidwai:
You need to be able to move ahead, abandon whats not working, and make sure
you are always listening to your customer. If we rely only on the technology guys,
we will have an excellent system, but it may not be the best for the customer.
However, we cant get our relationship manager to drive a customer-friendly
technology initiative which doesnt meet other IT criteria like security, controls,
and integration with other IT systems.
We should be able to check what our customers have to say. Having customer
engagements in the front-end, and bringing out technology solutions that are
customer-centric is vital.
We need to ensure that all the voices on social media platforms get heard,
assembled, and due consideration is given to them. You have to keep all
channels open for ideas and innovative solutions.
Q: HSBC India is enjoying healthy profit margins. How did you manage
this in a down economy?
Naina Lal Kidwai:
We tend to be a conservative lender. By not having an aggressive lending
strategy in periods which were not that good for the economy, we were spared
the large NPAs (non-performing assets) that other banks accumulated.
We also took a view of certain sectors like power and airlines where we either got
out in time or just werent there. So we didnt get hit by those. We got the full
benefit of the growth sectors without getting hit by those that didnt do well. I
think our risk strategies, analysis, and experience helped us enormously in terms
of our lending book.
Q: How has IT helped you achieve this?
Naina Lal Kidwai:
The risk models are developed with two things: Degrees of refinement, and
inputs that come in from Hong Kong and the U.K. But at the end of the day, we
are dependent on a system that captures data. And here it is all about MI
(management information).

It is about data that is captured in a way that reminds you of what may have
happened in the past. The analysis of the information and the financials are all,
at some level, IT-enabled. So ITs role is very big.
The reports that our risk head presents to us at the APAC board-level meetings
are phenomenal. It includes data across all the countries in this part of the world,
which represents close to 66 percent of the profits of HSBC. We are able to
understand this because of systems that have been set up and are able to pull
together data in meaningful ways. To have good risk processes is important and
to have the MI around riskenabled by ITis also very important.
Q: What are your expectations from a CIO and what does the role
entail?
Naina Lal Kidwai:
First of all, a CIO needs to understand the business. If he doesnt understand the
business, he wouldnt be able to drive change. While he has to be customercentrictowards external customersthe CIO should also focus on his internal
customers, the employees of the bank.
For a large multi-national like us, the CIO needs to be constantly aware of the
next wave of technology. It is important that he inputs and implements those
technologies in the country or in his sector. If the technology is relevant, he
should put his hand up early enough to get it here. That way, we are at an
advantage, since 60 percent of all IT software development for the global HSBC
group happens in Pune and Hyderabad.
Our CIO is on the board of our IT Company in India so that he has moral authority
to understand what is happening right under his nose. There was a danger,
otherwise, of a disconnect between our software team reporting to the U.S. and
our India team reporting to Hong Kong.
Externally, the CIO needs to keep an eye on what the competition is doing. I
think knowing what the competitive landscape looks like in ones immediate
vicinity is very important. He needs to know what technologies are being
implemented at say ICICI or HDFC bank, so that we can pick up on that.
It may not be a technology we can implement, but we should make sure we
know whats happening and explore every avenue to ensure that we too can.
And if we cant, we should have a good reason.
It is also about having a good team. The CIO obviously cant do everything
himself. So, it becomes important for him or her to show a commitment to the
team.
We also have the added need to have fraud control and security, and this goes
beyond what you do in-house. How do you engage with external agencies like
the police and know the system and processes necessary to take action once you
detect fraudulent activities? The whole chain, therein, needs to be understood as
well.

Q: What is the role of a foreign bank in helping the cause of financial

inclusion?
Naina Lal Kidwai:
What we are going to see in the spirit of financial inclusion is an ease of opening
bank accounts for the financially excluded. This is important as 40-50 percent of
Indians still dont have a bank account.
HSBC has leveraged an IT-enabled financial inclusion eCard solution in rural India
to help a womens co-operative bank, potato farmers, and even dairy farmers.
These are groups that do not have the capability to do Internet banking. The
solution enables them to access basic information.
Getting past the entire KYC (know your customer) issue was tough. But the
Aadhaar card will help in this regard as the RBI has said it will be accepted as
proof of identification. We will be able to simplify the entire KYC process with the
electronic model.
The counter-point to this is that banks are also going to be far more securityconscious. The emphasis on security of information will also mean that the
customer will have to put in more effort when he fulfills the KYC norms. However,
hell need to do it just once.
At the end of the day, there are multiple ways by which money can move
through banks. And banks do not always have the ability to trace the source or
check if the person depositing the money has paid his taxes.
Q: Is consolidation really inevitable in the banking sector?
Naina Lal Kidwai:
Consolidation will happen and it is good that it is happening. India needs a bigger
banking sector and that will come in two ways: More big banks and more banks
in general. Consolidation is a natural process. Some banks outlive their utility
and their strength comes in being absorbed by others.
You can have small banks which have every reason to exist because of the niche
they serve. So, it doesnt always have to be just big banks. You need a variety of
banks but at least two or three banks should make it into the top 50 banks in the
world. This is not asking for much. For a large economy like ours, we need bigger
banks that stack up in the context of global scale.
I am also pretty sure that we do not need 70 percent of the banking sector to be
government-owned. Thats a big problem for the government as it has to keep
pumping money into these banks. Let the government own somesay the SBI
but why 70 percent of the banking sector?
There is certainly room for the government to shed some of the public sector
banks, consolidate others, and allow for a mix of healthy private sector banks
which provide a competitive landscape. Ultimately, competition is good for the
customer and it definitely strengthens the banking sector.

Recommendations and Conclusion

HSBC is well positioned to capture growing international trade and capital flows.
Their global reach and range of services place them in a strong position to serve
clients as they grow from small enterprises into large multinationals through
Commercial Banking and Global Banking and Markets businesses. With wealth
management and retail with local scale, they aim to capture opportunities arising
from social mobility and wealth creation in priority growth markets across Asia,
Latin America and the Middle East, through our Premier proposition and Global
Private Banking business. They expect to invest in full scale retail businesses
only in markets where we can achieve profitable scale.
Although HSBC is one of the largest banks in UK and is increasing its operations
in other counties. There are strong competitors from the worlds leading financial
services organizations. To achieve constant growth in business HSBC is
persuading a managing for growth strategy. Their strategic human resource
management strategy involves developing comprehensive values among their
employees. The strategic management initiative was launched to ensure
competitive advantage from each business unit. The intensity of strategy
formulation is primarily focused on Private Banking, Personal Financial Services,
Commercial Banking and Corporate and Investment Banking. In current
economic slow-down, HSBC is emphasising on helping domestic customers with
additional products and advisory services as well intensify on brand strategy to
focus on globalisation. HSBC plans to carry on building its strengths on
international connectivity and global business development with aims to invest
primarily in fast growing emerging markets.
The marketing strategies employed by HSBC focused on advertising with the use
of its already established brand name of being seen as 'the world's local bank',
market segmentation of products and services to consumer groups at different
locations worldwide. In addition, the company also applies customer relationship
management approach so as to maintain good relation among their target all
over the world. The use of the information technology, specifically the internet,
has enabled to reach different customers from all over the globe.
Fundamental Operating Strategy
Customer-driven company that stay close to customers
International teamwork
Strong capital and financial position
Conservative, sound risk management
Disciplines expense control
Ethical behaviour, observing the letter and the spirit of rules and
regulations
Customers remain at the center of HSBC strategic policy having a specific
strategy for each of the five worldwide customer groups. In addition, HSBC
position as the worlds local bank enables to approach each country uniquely,
blending local knowledge with a worldwide operating platform HSBC is continuing
to enhance certain products which are core to customer group offering.
Customer Proposition will be calibrated along a spectrum of strategic advisory
relationship between Corporate, Investment Banking and Markets, and Group

Private Banking. Premier International sets an example of enhanced personalized

banking. The Brand has been already a great success and HSBC is continuing
with the next phase. The brand is now sufficiently strong that can accommodate
brand variety at customer, product and even country level as and when required
by the business model. Reputation is the key element of the brand proposition
and cannot be overstated. HSBCs policies for corporate and social responsibility
are part of the brand. HSBC will treat employees with the same values as
treating with customers. Managing costs strategically will greatly help in
achieving maximum efficiency and flexibility. HSBC independent credit function
has an excellent track record in a testing environment. The substantially
increased size of the Group means that it is imperative to invest fully on
people. The management of Group talent is at the heart of the Groups
competitive advantage and needs to be strengthened.
HSBC has very few numbers of branches in India. They should expand their
branches as this will not only increase their business area but also give chance to
serve more customers. They are more concerned with the global and corporate
customer group. In addition to that, they can also give some special service and
facilities to other customer groups as well. HSBC has always stepped ahead in
terms of bringing new technological advantage in products and services. They
also put focus on providing and ensuring quality service to all of their customers.
Even though RBI has many rules and regulation for the banks operating in India,
but then also competitors are increasing day by day in this sector. So considering
this factor they should have proper strategic plans, both short term and long
term, so that they can face any type of challenge and their business can have
smooth running.
HSBC has some sort of hidden charges and interests in their loans and credit
facilities. These things hamper customers and may create some negative
feelings towards them. So these sorts of fees or interests should be clearly
defined to the customers.
The main revenue of HSBC comes from the corporate banking category, which is
one of the reasons that they dont have varieties of loan categories. But most of
the banks are earning revenue from the loan sector and they have number of
loan categories (like- any purpose load is providing by Prime Bank). HSBC can
also introduce different types of loan facilities for their customers. This can help
their existing customers as well as can enhance new customers to them.
They can plan further move to gain competitive advantage over the rivals. In
pursuing advantage over rivals, they may pursue several competitive moves. For
example- lowering or changing interest rates in their services, improving
features, implementing innovations in the service etc.
HSBC is among one of those banks which has taken number of corporate social
activities and tried to put local touch with their business in India. Such respectful
attitudes towards our country and culture have been appreciated by the India
people.

References

www.academia.edu
www.hsbc.co.in
www.hsbcnet.com
en.wikipedia.org/wiki/