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4Ps
Banking Challenge?!
4Ps
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 And they are flaunting it in
style! Buoyed in part because of the shadow cast upon private banking in the wake of the global financial meltdown, albeit late, but public sector banks have started responding well to competition and in the language that their private sector counterparts speak – super slick advertising,
chic logos, savvy undercutting and smart marketing! If Bank of Baroda is peddling its technological edge; then IDBI bank is letting go of its image as an institutional lender with a baby elephant (remember not just for the big boys!). Canara Bank is saying that they changed for their consumers (hum badle aapke liye) and Union Bank of India is insisting that they can protect your dreams as well as that of the next generation.
Publicity, PR and visibility is also at an all time high. If the finance minister took the Interim Budget as an opportunity to drive home the NPA salience of
these PSBs (as per Pranab Mukherjee NPAs of state-run banks have dropped from 7.8% to 2.3% over the last four years); the nation’s largest bank, SBI – with 11,000 branches no less – announced a strategic drop in its home and auto loan interest rates at a time when large private players would balk at the very thought.
But the perceptual change sweeping the Indian banking space is not merely a SBI story, although it all started when AK Purwar, then SBI Chairman, decided to bell the cat and went ahead with O&M’s Surprisingly the SBI campaign in 2004 followed by Pure Banking; Nothing Else taking on the too many frills that private banks offered. Purwar got tremendous limelight, paving the way for his next plum job at Nicholas
Piramal to launch their health fund. The events caught the imagination of other PSB honchos. Every chairman now wanted to leave behind a legacy. In another first, Bank of Baroda re-branded in 2005 with the tagline , roped in HP to upgrade technology and brought in Rahul Dravid to communicate its new positioning.
State-run banks are not behind in profitability either (see ‘How PSB’s managed to beat the slowdown’ on pg 78). If you compare the Q3 earning reports of major banks, the obvious gets reiterated. PSBs have increased profitability (in net profit, PSBs showed an increase of 48.4% in net profits as against an increase of 25.4% for private banks during Q3’08), improved asset quality and lowered their bad debts (or non-performing assets – NPAs – if you please). The largest state-run entity SBI, for instance, despite the challenging market conditions, reported a net profit of Rs.37.14 billion, an increase of 52% against Rs.24.42 billion in the third quarter of the last fiscal, while the largest private lender ICICI Bank reported a net profit of Rs.12.72 billion, a modest growth of 3.41% compared to Rs.12.30 billion in the third quarter of 2008. And the better returns are despite the social service placards that hang around every PSB’s neck like the proverbial noose! As per a Motilal Oswal Report the Q3 results, “demonstrate the pricing power enjoyed by banks, especially state-owned banks, which posted higher yield on loans and strong fee income in the quarter.”
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 So Alan Greenspan, once the high priest of capitalism and recently converted supporter of nationalisation (of BoA and Citibank) can gleefully point toward the valuation charts of SBI, ICICI, HDFC Bank or indeed even Citibank to convince his detractors of his new stance. The Indian stock market has put a higher valuation to state-run SBI as opposed to others. While ICICI’s market cap rests at Rs.37,906 crore and HDFC has gravitated to Rs.36,756 crore, SBI sits pretty at almost double the valuation at Rs.65,885 crore. If the proof of the pudding is in the eating then SBI’s eminently edible now! Small wonder that even corporates are rethinking their options. During the last nine months, Infosys Technologies drastically reduced its deposits with private & foreign banks, parking money with state-run banks instead. When Ratan Tata wanted to finance his expensive Corus deal, SBI cleared $1billion in 5 minutes flat! Did someone say PSBs are slow on their customer response?
Changing for deep-pocked corporates however is one thing and quite another for the average retail customer. Can it be done merely by brandishing a new logo and hiring expensive ad agencies and image consultants? The most-hyped President of the United States, Barack Obama is already finding out that selling ‘hope’ and ‘change’ on his campaign trail was one thing, but actually selling a 1,100 page stimulus package is quite another uphill task. Points out Anand Halve of Chlorophyll: “Logo change is just a part of the story and not the most important part either. For a PSB with 8,000-10,000 branches for example – it’s not so easy to communicate and monitor the huge change.”
State-run banks are quick to counter such assumptions. M.V. Nair, CMD of of Union Bank of India (which went for a logo change and re-branding exercise – Good People to Bank With – a few months ago) argues that the ‘change’ being communicated is actually the culmination of a back-breaking, 18-month process change that the bank underwent. “The real expenditure was in the area of process change in terms of investment of technology and training of our 27000 workforce,” he says. The supposedly fuddy-duddy bank smartly teamed up with Infosys Technologies to roll out its Core Banking Solution across its 1000 branches within a record time of 4 months; Boston Consulting Group developed their game plan for transforming employee mindset, while Mudra Communications was handed the task to study, assess and change the market perception of the bank! Nair finds it difficult to hide his delight. “The customer response has been overwhelming,” he says. While it is tough to say whether retail consumers are going to Union Bank out of sheer desperation (thanks to the global financial strain) or due to their makeover gambit, fact is it’s tough to ignore the state-run bank’s brand messages that fill up television sets across the nation’s living rooms every evening. Coupled with their Internet banking services, ATM proliferation, personalised cheque books and focus on customer service, the icing on the cake is all but complete.
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