1. NSB Bank - India Entry Strategy for
Wealth Management
Chanakya, Ahvan 2012
Hoshin Kanri, IIM Indore
Peeyush Kumar | Sayan Maiti | Vaibhav Rastogi
Evaluating India’s
Potential
Internal & External
Analysis
STP
Prioritization of
Regions
Key Initiatives
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Strategy

2. Agenda
Hoshin Kanri, IIM Indore Chanakya 2012 | 1
Environment Scanning
Comparison of India vs. existing locations of NSB Bank
Analysis of NSB Bank and its services
Analysis of Competition
Evaluation of Entry Options
Segmentation of Customers
Characteristics of products for different segments in India
Lifetime Revenue Opportunity of segments in Indian context
Regions prioritized on the basis of opportunity size and existing competition
Priority listing shows the regions of high attractiveness and underexploited regions
Key initiatives that can be undertaken
Entry Strategy
Sustaining Growth
Attracting and Retaining Talent – HR Strategy
Risk and Mitigation Strategies
Evaluating India’s
Potential
Internal & External
Analysis
STP
Prioritization of
Regions
Key Initiatives
Recommended
Strategy

3. Hoshin Kanri, IIM Indore Chanakya 2012 | 2
Environment Scanning
No. of HNWI individuals
Medium Term-High
Long Term-Low
Indian Market is very
small as compared to
developed market
Growth in No. of HNWI individuals
Medium Term-Low
Long Term-High
 India boasts a growth of 20.8 %
 In other developed market it is around 2-3 %
Wealth of HNWI
Medium Term-high
Long Term-High
U.S scores
highest and
India is
among the
least
scorers
GDP Growth
Medium Term-Low
Long Term-High
India - 5.8
US- 2.4
Japan- 1.5
U.K. 2.3
In US $ Terms
Evaluating India’s
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4. Environment Scanning…Continued
Hoshin Kanri, IIM Indore Chanakya 2012 | 3
Demography
Medium Term-high Long Term-High
India 73 % of
HNWI are
under 50 vis a
vis 23 % of U.S.
Competition
Medium Term-high Long Term-Low
India scores low on competition as
compared to developed nations
In India major players are Kotak,
HDFC, ICICI, HSBC, Axis, Deutsche, BNP
Paribas, Morgan Stanley
Existing Portfolio of HNWI Individuals
Medium Term-high Long Term-Low
India seems
to be best
with 8% total
investment in
equity
market vis-à-
vis 43% of
U.S.
Taxes and Regulation
Medium Term-high Long Term-High
Country Rank
India 72
US 3
Japan 36
UK 16
Evaluating India’s
Potential
Internal & External
Analysis
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Prioritization of
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5. Comparison of India vs. existing locations of NSB
Bank
0
2
4
6
8
10
No. of HNWI
individuals
Growth in No. of
HNWI
Wealth of HNWI
GDP Growth
Demography
Competition
Existing Portfolio
of HNWI
Taxes and
Regulation
India
North America
Western Europe
Japan
Hoshin Kanri, IIM Indore Chanakya 2012 | 4
India does well as compared to NSB Bank’s existing locations in most of the parameters
Evaluating India’s
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Analysis
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6. Analysis of NSB Bank and its services
Hoshin Kanri, IIM Indore Chanakya 2012 | 5
 Operates in highly established wealth
management destinations
 125 year old heritage
 Wealth management contributed to 75%
of revenues in 2011
 Customers include ultra-high-networth and
high networth clients, serving over two
hundred thousand individuals
 Significantly higher employee cost as
compared to competitors
 Operates in Western Europe, North America
and Tokyo
 14.35% CAGR growth in revenues from
1997 to 2009.
 Negative growth in revenues in 2010 and
2011.
NSB BANK Service Offerings
 Offers clients a distinct value proposition,
focusing on structured advisory process,
sophisticated products and services.
 Their wealth management services include
portfolio management, financial planning,
insurance, and tax planning, among others.
 Focus on providing the best quality service
which is evident as they hire only the best and
their employee salaries are among the best in
the industry.
Assuming that NSB banks falls in the Global
Investment bank category, the market
position of similar banks in India is poor as
they use an institutional approach to serve
clients and are focused on UHNI and HNI’s
only.
Evaluating India’s
Potential
Internal & External
Analysis
STP
Prioritization of
Regions
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Recommended
Strategy

7. Analysis of Competition
Hoshin Kanri, IIM Indore Chanakya 2012 | 6
Universal
Banks
Wealth
Management
specialists
Global
Investment
banks
Brokers/
Dealers
Family Office Others
Major Players
Kotak,
HDFC,ICICI,
HSBC, AXIS
Deutsche Bank,
BNP Paribas,
Citibank
Morgan Stanley
DSP Merrill
Lynch, ICICI
Direct
Client
Associates
Independent
fund/ Insurance
advisors
Present
Market
Position
Strong Medium Weak Strong Weak Medium
Analysis of competition in the segment
 Competition intensity increasing as many global
players like NSB planning to enter the market.
 Existing players are increasing their operations
aggressively.
 Existing players looking to use cross selling to sell
more products.
 Fragmented industry ( If a company can penetrate
2% it will mean 25000 crores assets under mgmt )
 Scope of M&A limited due to early days in the
industry
Future Challenges
 Expected entry of public sector banks into the
wealth management sector can change the market
dynamics. Given their brand equity, reach, old
corporate relationships and ability to invest in top-of-
the-line technology platforms, public sector banks will be
a formidable competitor, particularly in the mass
affluent segment.
 Developing and retaining advisors will be critical to
succeed in the country which has high rates of attrition.
As people are the source of competitive advantage, it
will become increasingly critical to retain key talent in
wake of increasing competition.
Evaluating India’s
Potential
Internal & External
Analysis
STP
Prioritization of
Regions
Key Initiatives
Recommended
Strategy

8. Evaluation of Entry Options
Hoshin Kanri, IIM Indore Chanakya 2012 | 7
Option Pros Cons
Operate as a
foreign bank
No major structural changes
required – current operational
model can be extended
•Higher priority sector lending targets
(for foreign banks with 20 or more
branches) – sectors in which NSB has no
expertise
•Limits on increasing number of branches
and other regulatory issues
Enter India in
partnership with
a Universal Bank
(Most
preferred
option)
•Leverage on the existing network
of the bank
•Access to existing customers of
the bank
•Less regulatory requirements
•Develop market understanding
before opening own branch
•Share profits with the partner bank who
might retain majority control
•In the long-term it is better to go alone
Wholly owned
Indian
subsidiary*
•Tax benefits announced by the
government for subsidiarisation
•No limit on branches
•High stamp duty and 30% capital gains
tax when converting branches
* If the law comes into effect
Evaluating India’s
Potential
Internal & External
Analysis
STP
Prioritization of
Regions
Key Initiatives
Recommended
Strategy

9. Segmentation of Customers
Hoshin Kanri, IIM Indore Chanakya 2012 | 8
Segment Age Typical Profession
Preferred
Channels of
service
Level of
Service
Technology
Adoption
The Young
and Affluent
25-50
Years
INHERITORS - Businessmen
Online
Standard
Services
Expert
SELF MADE - Entrepreneurs
PROFESSIONAL – MBA’s, IT
and other service
professionals
NRI
25-65
Years
Any profession in developed
countries
Online +
personal
Customized
Services
Expert/
Proficient/
Conversant
Middle Aged
Rich
50-65
Years
Occupying VP or above level in
organizations, CXO’s,
businessmen
Almost entirely
personal
Individual
Services
Conversant /
Beginner
Retired 65+ Years
Retired from jobs or in the
twilight of their careers
Entirely personal
Individual
Services
Beginner
Evaluating India’s
Potential
Internal & External
Analysis
STP
Prioritization of
Regions
Key Initiatives
Recommended
Strategy

10. Characteristics of products for different
segments in India
Hoshin Kanri, IIM Indore Chanakya 2012 | 9
The Young and Affluent ( 76% )
Primary Motive – Building Wealth
Ease of Service – Provide services at arms length. E.g.
Online services can be offered to this segment as its
comfortable using the internet and is proactive in
reviewing its investments regularly.
 Standardized Services – Standardized structured
based products can be provided to this segment.
 More risk appetite – As this segment has more risk
taking ability, the bank should try to keep on offering
innovative products to this segment to retain them.
This segment will provide the highest revenue
lifetime value to the bank.
Middle Aged Rich ( 15%)
Primary Motive – Accumulating Wealth, Retirement
Planning
Exclusivity – As this class of customers are from the
high strata of the society, individual level of services
should be provided.
 Personal touch–Provide personal attention to this
segment as the customers in this segment are highly
valued.
Retired (9%)
Primary Motive – Protecting Wealth, succession
planning
Individualized attention – Such class of customers
are small in size but have more wealth. So special
attention should be provided to them.
 Tax considerations & QOS – Since there is no tax
levied on transfer of assets in India, the propensity to
invest for such customers in low. Hence quality of
service becomes the differentiating factor for this
segment.
NRI
Primary Motive – Accumulating Wealth
Convenience – Again for NRI customers, convenience
should be of paramount importance given the
location constraints.
 Regulatory issues– Given few cases of tax evasion,
regulatory tightening is expected to happen in future.
 Special attention – Along with young and affluent
segment this segment is growing and hence care
should be taken to provide both online as well
personal attention
Evaluating India’s
Potential
Internal & External
Analysis
STP
Prioritization of
Regions
Key Initiatives
Recommended
Strategy

11. Lifetime Revenue Opportunity of segments in
Indian context
Hoshin Kanri, IIM Indore Chanakya 2012 | 10
LifetimeRevenueOpportunityperaccount
RelativeScale
UHNW
HNW
Affluent
Young
Affluent
Older
Upscale
Middle
Core
Mass
Market
Successful
beginners
Older
Lower
Younger
Mass
25 Crores
Size of the opportunity
= Earning potential X number of potential customers
Out of
bounds
Neglected
segments with
greatest
potential in
Indian context
Income
25 lakhs – 5 crores
per annum
Evaluating India’s
Potential
Internal & External
Analysis
STP
Prioritization of
Regions
Key Initiatives
Recommended
Strategy

12. Regions prioritized on the basis of opportunity
size and existing competition
Hoshin Kanri, IIM Indore Chanakya 2012 | 11
Problem
• Current regulation limits the number of branches that NSB can have
• Data about HNIs in each city not available
Approach
• Luxury car brand presence used as an indicator of the attractiveness of the region
• Luxury car brands have one of the best penetration levels amongst luxury goods
• The top 12 cities were then graded as per the current level of competition for
example the presence of banks like Deutsche Bank and BNP Paribas increased the
existing competition
• A final rank was arrived at considering the opportunity size and the level of
competition already present
Results
• The 4 metros emerge as regions of “high” attractiveness
• Cities like Hyderabad, Bangalore and Ahmadabad also score high on
attractiveness
• Some highly attractive cities like Chandigarh do not have significant
competition – opportunity to be the first mover in such cities
Evaluating India’s
Potential
Internal & External
Analysis
STP
Prioritization of
Regions
Key Initiatives
Recommended
Strategy

13. Priority listing shows the regions of high
attractiveness and underexploited regions
Hoshin Kanri, IIM Indore Chanakya 2012 | 12
City Attractiveness based on luxury car
presence*
Foreign Competitors present Overall Rating
Delhi/NCR High High High
Mumbai High High High
Chennai High High High
Hyderabad High Medium High
Ahmadabad High High High
Bangalore High High High
Chandigarh Medium High Low High
Ludhiana Medium High Medium Medium
Indore Medium High Low Medium
Kolkata Medium High High Low
Pune Medium Low High Low
Jaipur Medium Low Low Low
*The dealership information for luxury brands like BMW, Mercedes, Audi, Rolls Royce, Bentley and Jaguar were used to calculate
attractiveness
Evaluating India’s
Potential
Internal & External
Analysis
STP
Prioritization of
Regions
Key Initiatives
Recommended
Strategy

14. Key initiatives that can be undertaken
Hoshin Kanri, IIM Indore Chanakya 2012 | 13
Build Trust
Invest in brand building exercises to improve trust
Invest in education programmes to educate
customers about different asset classes, its risks and
benefits
Invest in advisors
 Invest in employees through various training and
benefits to improve productivity and retention of
advisors
 Retaining advisors will help in retaining customers in
the long run
Joint Ventures and partnerships
Given the reach of incumbent players, partnerships are a
good way to reach to the new customers. NSB can
provide the capital and expertise and the local
incumbents can provide the systems to reach customers.
Effective use of technology should also be used to
increase reach, particular to the technologically expert
customer.
Transparency and Compliance
The investments should be made transparent and
compliant with the GOI regulations.
Bouquet of Products
NSB has traditionally focused on its quality of service. In
the Indian context, it should target customers with
attractive segment focused products.
Increase use to technology & embrace mobility
Technology should be used to improve reach and
improve processes
Mobility solutions provide wealth management firms
with the ability to conduct business in locations that
are not covered by the branch network.
Integrated view to advisors
Provide advisors with a panoramic view of clients
which will help in enhancing advisor productivity and
enable advisors to deliver high-quality services
360
Customer
View
Portfolio
View
Financial
Profile
Transactions
Accounts
Customer
Profile
Evaluating India’s
Potential
Internal & External
Analysis
STP
Prioritization of
Regions
Key Initiatives
Recommended
Strategy

15. Entry Strategy
Hoshin Kanri, IIM Indore Chanakya 2012 | 14
Identify the key strengths and offerings of the bank
Identify the targeted segments ( which the bank wants to
target) based on various parameters
Design products based on the customers needs
Identify and prioritize the regions in which to open branches
and target customers
Identify the mode through which customers will be served
eg. Online Banking, Personal Banking, Individual Banking
Evaluate the best way to make entry based on various
parameters like regulatory constraints, tax structure etc
Evaluate performance based on medium and long term
benchmarks
1
2
3
4
5
6
7
Evaluating India’s
Potential
Internal & External
Analysis
STP
Prioritization of
Regions
Key Initiatives
Recommended
Strategy

16. Sustaining Growth
Hoshin Kanri, IIM Indore Chanakya 2012 | 15
Control the major drivers of cost
Front office including portfolio managers and
product management, often comprises the largest
component of cost, approximately 30-40% of
revenue. Most of the control must be done here as
back office costs like IT are mostly fixed and
difficult to control.
Use Cost Management Frameworks to monitor costs
and take appropriate action
Use cost management framework to balance profitability vs.
growth and take appropriate actions.
Cost
Cutting
Lending
Losing
Ground
Investing
PretaxMargin
Revenue Growth Rate
Higher
HigherLower
Penetration into tier I and II cities
Once major metros and cities have been covered
use the expertise and knowledge to make inroads
into tier I and tier II cities. Contrary to common
opinion most of these cities offer better options
due to less competition.
Source : Deloitte Achieving profitable growth in Wealth Management
Cross Sell structured products
Cross sell various investment products to clients
to keep the client in house.
Design products for middle class
One of the major reasons which emerging markets is so attractive is the increasing middle class. To be successful in
the future, NSB bank should also try to come out with products for the burgeoning middle class population in India
which primarily keeps their income in savings accounts.
Evaluating India’s
Potential
Internal & External
Analysis
STP
Prioritization of
Regions
Key Initiatives
Recommended
Strategy

17. Attracting and Retaining Talent – HR Strategy
Hoshin Kanri, IIM Indore Chanakya 2012 | 16
Demographics of HNIs are changing requiring change in the skills and profile of managers
Younger HNIs may prefer a team with a few young wealth managers
Poaching rampant in the industry as wealth managers bring clients with them
Apart from hiring, promote internal employees e.g priority bankers to wealth managers
Banks like Credit Suisse and UBS have their own training academies
For retaining employees job rotation and career progression are necessary
• Lateral Hires
• Campus
Graduates
• Internal
Transfers
Hire
• Internal
Training
• External
training/certific
ations
Training • Career progression
• Job rotation –
exposure to
multiple roles
• Competitive
remuneration
Retention
Evaluating India’s
Potential
Internal & External
Analysis
STP
Prioritization of
Regions
Key Initiatives
Recommended
Strategy

18. Risk and Mitigation Strategies
Inflation - India is currently experiencing high inflation with food price rises hovering around
17% and Wholesale Price Index around 7.9. Inflationary concerns can force the Reserve Bank of
India (RBI) to tighten monetary supply. This in turn will raise interest rates and impact liquid
funds.
Withdrawal of stimulus - The economic recovery in India in 2009 was aided by the economic
stimulus provided by government through interest rate subvention, reduction in excise duty etc.
The fiscal deficit moved up to 6.7% of the GDP which is unsustainable in the medium run.
Regulatory changes - As wealth market is yet to developed India can see some major
regulatory changes in future. This might impact the profitability of the bank.
Exchange Rate risk - Profitability of a company may decrease if currency depreciates.
Capital Market Volatility - High volatility may lead to uneven returns for individuals.
Risk related to Inflation, exchange rate can be hedged while capital market volatility
can be mitigated though well diversified portfolio.
In case of regulatory changes and Stimulus withdrawal, these can be diversified by
entering other emerging markets like China.
Risks
Mitigation Strategies
Hoshin Kanri, IIM Indore Chanakya 2012 | 17
Evaluating India’s
Potential
Internal & External
Analysis
STP
Prioritization of
Regions
Key Initiatives
Recommended
Strategy

19. Chanakya, Ahvan 2012
Thank You
Contact
Peeyush Kumar – p11peeyushk@iimidr.ac.in
Sayan Maiti – p11sayanmaiti@iimidr.ac.in
Vaibhav Rastogi – p11vaibhavr@iimidr.ac.in
Evaluating India’s
Potential
Internal & External
Analysis
STP
Prioritization of
Regions
Key Initiatives
Recommended
Strategy