I.

Institute

Institute for Financial Management & Research (IFMR), Chennai, Plot 24 Kothari Road
Nungambakkam Chennai 600034

II. Participants

Name Course Contact Mail

Saurabh Fasate PGDM – Full Time 9381335044 saurabh.fasate@ifmr.ac.in

Srikant Rajan PGDM – Full Time 9962552824 srikant.rajan@ifmr.ac.in

Vamsi Krishna PGDM –Full Time , 9962382820 vamsi.krishna@ifmr.ac.in

Financial
Engineering

III. Team Name - Zeitgeist

Executive Summary

In the first part of the report we evaluate the growth & allied business strategy for TPBoI.
This is done by identifying its existing strength with regards to banking services and profitable
growth avenues for its core business. A suitable match is identified with regards to growth
strategy. Next we identified some allied business and evaluate their feasibility with regards to
the proposed growth strategy and other parameters. Business insurance is identified as the
service that would aid TPBoI achieving its objectives of profitability and standalone operation
of that business in the coming years. Top line financial projections are evaluated based on
current market size, competitor action and anticipated market share of TPBoI based on its
number of branches.

In the second part we investigate alternatives for building a strong consumer brand. Here we
first identify the user perception about services and brands in the BFSI vertical. We focus on
respondents from tier 2 cities as the size and potential of these areas is higher compared to
metros. Based on current user perception we evaluate the branding construct to be employed
for TPBoI, in line with its growth and allied business strategy. Exclusivity and innovation are
identified as branding constructs for TPBoI and a branding strategy is crafted.
PART 1 - GROWTH AND ALLIED BUSINESS STRATEGY

I. Growth Strategy

The Bank has already made investments in retail banking and is expected to expand to 750+
branches by 2015. Such expansion is likely to give it access to cheaper source of funds,
lowering its cost of capital.

However retail expansion in tier 1 cities may not be profitable as these cities already have a
large number of players and the competition is fierce (reference). The new branches have to be
located in Tier –II and Tier- III cities to push the bank into the next growth trajectory. This may
be profitable as there is a large untapped market1 for customized banking solutions offered by
premium banking2 players like TPBoI. We are expecting TPBoI to target the upper middle
class and position itself as a premium brand in banking. In these cities the bank will operate in
both wholesale and retail lines of businesses.

The current strengths of TPBoI are:

1. Expertise in understanding different businesses

2. Superior relationship management with clients

Since TPBoI would be in wholesale banking business in even Tier II and Tier III cities they
would understand the local SME businesses and maintain superior relationships with clients.

II. Allied Business Strategy

Thus we see that profitable expansion is in retail and wholesale banking in tier 2 and tier 3
cities. We now consider TPBoI with regards to new business which should help it to

1. Achieve sustainable growth in business

2. Diversify revenue streams to mitigate impact of adverse business conditions
                                                            

1 India Today, Tier II cities ahead in Job creation, November 2009 

2 Rediff Business, Foreign Bank Warm up to Small Towns , February 2010, & RBI  
 Some of such possible allied businesses are evaluated on the following criteria:

1. Synergy for TPBoI based on its current strengths

2. Profitability of the business
3. Non-Cyclicality of the business to reduce variability in revenue
4. Regulatory compatibility

Brokerag Mutual Private Microfina Life Business Housing

e fund Equity NBFC nce Insurance Insurance finance
Synergy for
TPBoI Low High High Low Low Low High Low
Profitability Low Med High High High High High Med
Non-Cyclicality Low Low Low Low High High High Low
Regulatory
compatibility High High Low Med Med High High High
Exhibit 1 - Allied Business Profitability

The synergy for businesses like brokerage, housing finance is low because these businesses
need scale. Mutual fund, private equity and NBFCs are all cyclical businesses hence the
variability in revenue streams are high. Microfinance business needs reach in rural areas and
does not match with the current strengths of TPBoI.

Life insurance business is not synergistic to TPBoI as it needs scale for operation and TPBoI
will not be willing to offer services under its name to all because it could result in deterioration
of its premium brand image. Non-Life insurance business lines like health and retail vehicle
insurance also are not synergistic with TPBoI for the same scalability and branding issues.

Business insurance will comprise of lines of business such as corporate, industrial, liability,
marine, shop and fire insurance. Inclusion of business insurance in its service portfolio will:

1. Offer consistent revenue as insurance industry is relatively non - cyclical and offers high
margins even in adverse economic conditions.
2. The revenue for an insurance service provider stems from 2 sources
 a. Underwriting
b. Investment of premiums which gives majority of profits
3. As seen from the growth strategy TPBoI’s existing relation expertise is likely to get
strengthened when it extends its business to wholesale clients (SMEs) in tier 2 and 3
cities.
TPBoI is uniquely positioned to profit from business insurance as it can leverage its
expertise by investing insurance premiums in profitable sectors of which it has knowledge.
Thus we propose that TPBoI start a new subsidiary that provides general insurance services
for corporate and SME clients.

III. Financial Projections

The General Insurance (GI) industry is valued at 28805 Cr which is split between the public
sector and private sector participants in the ratio of 68% and 32 % respective. The biggest
public sector player is New India (22%), and in the private sector ICICI Lombard (11.5%)
dominates. Business Insurance (BI) comprises of 33% of GI services3.
We assume market share to be directly
correlated to no of branches. In the private
sector ICICI Lombard has 11.5 % market
share, with 1500+ operational branches4
across all tier 2 and 3 cities. Since TPBoI plans
to expand to 750+ branches in next 5 years it
is 150 branches per year, we assume in first
year 100 branches to be offering insurance
services and that is 0.8% markets share.

Exhibit 2 - Market Share of TPBoI Services

                                                            

3Insurance Regulatory Development Authority( IRDA) Annual report 2009 

4 ICICI Bank Website 
 All figures in Cr. (INR) 2010-11 2011-12 2012-13 2013-14 2014-15
General Insurance Industry 37975.65 42478.12 47514.42 53147.82 59449.14
Business Insurance Industry 12658.55 14159.37 15838.14 17715.94 19816.38
TPBoI Market share (% of overall
Business Insurance) 0.80% 1.60% 2.40% 3.20% 4.00%
Revenue From BI Services for TPBoI 101.2684 226.55 380.1153 566.9101 792.6552
Profit * 5.06342 11.3275 19.00577 28.34551 39.63276
Exhibit 3 - Top Line Projection for TPBoI Business Insurance Services5

* The above table indicates profits only from underwriting services. Profits are likely to
increase if investment income is taken into account.

The underwriting profit has been computed after providing for claims and operational
expenses which are estimated at around 70% and 25% of the premium collected respectively.
Thus expenses account for 95% of premiums collected and give an approximate margin of 5%.

Per year market share for TPBoI is assumed to increase in same proportions as the increase in
number of branches.

The GI services growth rate is assumed historical and BI share is assumed constant at 33%.

PART 2 – CONSUMER BRANDING FOR TPBOI

I. Objective

To build a consumer brand for TPBoI we plan to

1. Identify current perceptions of brand among retail users

2. Establish brand positioning and values for TPBoI
3. Leverage TPBoI existing strength to create a suitable new association

II. Methodology

A qualitative * research was undertaken to

                                                            
5
 Insurance Regulatory Development Authority (IRDA), Annual report 2009 & Deloitte 
 1. Establish current association of retail customers with regards to financial & banking
services
2. Identify existing players and their associations
a. For instance SBI was the top of mind recall and showed a uniform association of
common peoples bank
3. Identify unfulfilled associations such as exclusivity, access to a particular service (not
necessarily financial).

III. Results

Target Group – 15 people, equal split of gender, age group – 20-25

Area of upbringing – Tier 2 cities such as Cuddalore, Durgapur, Puri, Bhartpur

1. Common financial services not necessarily to be available in a bank – trading, asset

management, insurance
2. The must have services in a bank were – Deposits, loans, internet banking, ATMs and
lockers in that order of utility.
3. The top of mind associations were SBI, ICICI, HSBC and Citibank. Some other
associations included public sector banks such as PNB, Federal bank.
4. YES Bank was not recalled; however aided recall scores were 100%
5. In terms of similarity, YES bank was considered at par with Citibank and HSBC, and
least similar to SBI.
6. SBI was rated as being a people centric bank, whereas Citibank’s and HSBC were
considered rich peoples bank (not for common man)

IV. Inferences

1. TPBoI has a retail presence only in the wealth management space which derives its
equity from TPBoI’s existing expertise in relationship management from
wholesale/corporate banking.
 2. The same equity is transferred in the form of high similarity rating scores with Citibank
and HSBC.In fact one respondent opined that having an account with Citibank in his
town (incidentally Puri) was considered somewhat of a status symbol.
Thus there exists an opportunity for TPBoI to expand aggressively in Tier 2 cities as unlike
its foreign competitors it is

1. High market potential in these areas as identified in part 1 of analysis

2. Not bound by any regulatory hurdles.
3. It enjoys a high aspirational appeal among users which creates an aura of exclusivity.

V. Branding Construct - Type & Channel

The above identified services are broadly classified as

A. Checks trading accounts, Savings, Deposits

These are transaction based services and augur well with a purely functional construct such as
speed of service, availability. However, these services are commodity based, susceptible to
competition and not ideal differentiator for a brand.

B. Customized Banking solutions

These are relationship based service hence require an emotional construct such as trust.
Simultaneously, functional constructs of expertise & knowledge are also desired. Thus these
services offer a potential for brand building.

C. Branding Construct Type

For a financial services provider branding is preferably done on an emotional construct rather
than on a functional one as the latter is susceptible to imitation.

D. Branding Channel

The available options for brand building are

 1. Service – (What to deliver, the types of services)
2. Operations (How to deliver whatever you are delivering to different people?)
a. Online , phone, branch, ATM
3. Control, Feedback and Maintenance (How well is the delivery?)
a. This would focus on the benefits one would incur pre and post service use.
b. CRM and data analytics
Since TPBoI has technology investments, it is capable of providing functional benefits such as
speed, reliability, secure internet banking in a better manner vis-à-vis competitors.

Additionally its expertise in relation management and customized banking solutions gives
it an opportunity to create a competitive point of differentiation (POD).Instead of just
focusing on providing a good service(which is subject to commoditization), TPBoI should
emphasize on the benefits incurred from superior delivery and use of services.

VI. Brand Positioning & Values for TPBoI

A. Positioning Statement

To provide everyday financial service to people in the age group of 18-55 in tier 2 cities whose
annual income is more than 10lkpa.This would be done in a manner that is innovative for
instance SMS and phone banking. This in turn gives them access to an exclusive group.

The values for TPBoI are exclusive and innovation. The positioning here would be similar to
Virgin, which has an aura of elitism and innovation in its brand.

VII. Brand Strategy

The salience of the brand measure in terms of ease of recall is very low. Thus the objective in
the immediate future is to build brand salience by creating awareness, which can be done by
communicating the various services and available channels of distribution. The stress should
be on technology as being innovative. Other Options include spokesperson endorsements,
events sponsorship, third party activities (TPBoI endorsed reviews and awards), Co- branding.

The above activities would increase the frequency of recall as more customers would be
coming in touch with TPBoI activities.

The next phase would be to communicate the superiority of TPBoI of service offerings, in
terms of customer satisfaction. This could entail inclusion of testimonials of key customers
of the bank in its offer documents.