CHAPTER 5
FINANCIAL ANALYSIS
SWOT ANALYSIS OF BAL
“A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) and weaknesses (W), and those external to the firm can be classified as opportunities (O) and threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis.
The SWOT analysis provides information that is helpful in matching the firm’s resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection.
STRENGTHS
A firm’s strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage. Examples of such strengths include:
· Patents
· Strong brand names
· good reputation among customers
· cost advantages from proprietary know-how
· exclusive access to high grade natural resources
· Favorable access to distribution networks”.
Strengths of BAL
1. Reputation
BAL has a very good reputation for its auto finance, home finance and agriculture finance. They have been the pioneers of auto finance and have carved a name for them selves in this field.
2. Web of branches
BAL is rapidly working on spreading a web of branches all over Pakistan
3. Market Leader
BAL has been the market leader in auto finance since its early days. Auto finance was offered by other banks as well but BAL was far ahead of other banks because of better service and low mark up rate.
4. Deal with Auto Dealers
BAL has signed a contract with Suzuki motors BAL can provide any Suzuki vehicle which the other banks can’t so in this way BAL has got the product to be delivered.
5. Better service
BAL’s management pays a lot of attention to customer service. They make sure that the customers are treated in a nice way and their complaints and suggestions are always welcomed.
6. Better Environment
BAL has got a very friendly working environment. The clients are treated as guests and are given proper place to sit and discuss different issues.
7. Quick processing
BAL sanctions the auto loan for your car much faster than any other bank.
8. High Financing Limit
BAL finances up to Rs: 2000,000 amount for your car which is not offered by other major banks other than MCB so you can finance your car up Rs:2000,000.
9. Credit Rating
BAL has been rated as AA (double A) and Al + (A one plus) in the long run and short run respectively. These rating donate high credit quality and very low expectations of credit risk.
WEAKNESSES
“The absence of certain strengths may be viewed as a weakness. For example, each of the following may be considered weaknesses:
· Lack of patent protection
· A weak brand name
· poor reputation among customers
· High cost structure
· Lack of access to the best natural resources
· Lack of access to key distribution channels
In some cases, a weakness may be the flip side of strength. Take the case in which a firm has a large amount of manufacturing capacity. While this capacity may be considered a strength that competitors do not share, it also may be a considered a weakness if the large investment in manufacturing capacity prevents the firm from reacting quickly to changes in the strategic environment.
1. Lack of Commitment
The staff members are not very committed to their position in Auto finance department and Remittances department. Most of the officers show negligence to customer’s complaints.
2. Insurance Company
The bank makes the deal with insurance company on behalf of the customer but once the car is financed the customer comes in contact with insurance company which makes the customer go through a lot of problems faced by the virtue of the insurance company thus damaging the image of the bank.
3. Risk Management
The risk management department is not very developed and faces shortage of employees and resources.
4. Employees Comfort
There is too much burden of work on employees. The official bank timing is from 9:00 a.m. to 5:00 p.m but they are insisted to sit up to 7.00 p.m or 8.00p.m or more to complete their work thus their comforts are ignored. Most employees are unhappy with this heavy work burden.
5. Limited Number Of Products
Still the products offered are in a narrow range, alternatives are easily found by the customers in the market.
OPPORTUNITIES
“The external environmental analysis may reveal certain new opportunities for profit and growth. Some examples of such opportunities include:
· An unfulfilled customer need
· Arrival of new technologies
· Loosening of regulations
· Removal of international trade barriers”.
1. Strong Promotional Campaign
BAL is already the market leader and has brought its rate down to 8.5%. So the market department should increase its potential and get as much customers as possible through corporate deals, discounts for organizations and promotional campaign. They can utilize their image to maintain their image.
2. Insurance Agent
The bank should have an involving agent who should deal with the complaints of the customer from the insurance company and should help the customer in solving their problem.
3. Skillful Employees Of Recruitment
Fresh graduates having administrative, commerce and computer technology backgrounds are to be taken as the bank employees.
Threats
“Changes in the external environmental also may present threats to the firm. Some examples of such threats include:
· Shifts in consumer tastes away from the firm’s products
· Emergence of substitute products
· New regulations
· Increased trade barriers ,,
1. Arrival of Other Banks
MCB and HBL have entered the market but with dynamic rates and much better features. So BAL’s superiority and leadership might not last long if it didn’t make a major change in the marketing strategy and rates as well.
2. Insurance Problems
The attitude and performance of insurance companies are bothering the customers a lot and people are regretting to have financed their car from BAL. because they come in contract with insurance company through BAL so they consider BAL for all the misshapen.
Financial Analysis
Before we discuss on the complex subject of analyzing bank performance, it should be kept in mind that the balance sheets are at the best, a single snapshot of a train that has been moving for 365 days of the year. It cannot lend itself effectively to an examination of the dynamic aspects of any business, let alone banking, because balance sheets are merely the summation of all asset and liability account balances as on the last working day of the year. Balance sheets can represent the realities of the business on a day to day basis. First the balance sheet summarizes the assets, liabilities and owner’s equity of a business at a moment in time, usually the end of a year or a quarter. Next, the income statement summarizes the revenues and expenses of the firm over a particular period of time, again usually a year or a quarter. While the balance sheet represents a snap shot of the firm’s financial position at a moment in time, the income statement depicts a summary of the firm’s profitability over time.
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