Abu Dhabi Islamic Bank and Bank of Broda, Research Paper Example

The Bank of Baroda (BoB), founded on July 1908 by Maharaja Sayajirao Gaekwad, the company is a pioneer in a wide range of customer based initiatives in the Indian banking sector. The Bank was one of the first in its industry to establish and complete an all-inclusive rebranding project. Bank of Baroda is Indian state-owned headquartered in Vadodara. It gets its name from Gujarat, India, which was originally known as Baroda. The bank is now the second largest bank in India, second only to the State Bank of India. Bank of Baroda provides a wide range of financial services and products specifically for corporations and consumer retails through extensive branch reach and subsidiaries.

Fitch bank issuer default rating of BBB, with a Stable outlook, an Issuer Default Rating of F3 with a viability rating of bb+, and a support Rating of 2. The bank’s ROAA, Net Income / Average Equity for 2013 was 14.11, while in 2012 it reported a ratio of 15.58 and in 2011 it reported a ratio of 20.89. The bank’s ROAE, Operating Profit / Average Equity or return on average equity was 17.09 in 2013, in 2012 it was 17.01 and in 2011 it was 25.20. The return on average equity (ROAE) assesses the rate of return on ownership interest, or shareholders’ equity, of the common stock owners. It breaks down the firm’s efficiency at generating profits from every unit of shareholders’ equity (also known as net assets or assets minus liabilities). Baroda bank reported an NIM, net interest margin ratio of 2.66% in 2013, a ratio of 2.97 in 2012 and a ratio of 3.12 in 2011. The company reported a capital adequacy ratio of 12.09 in 2013. Operating Profit / Average Equity ratio in 2014 of 17.09, in 2013 a ratio of 17.01, and in 2012 a ratio of 25.20. Baroda reported a Equity / Total Assets ratio for 2014 of 5.62 down from 5.97 in 2013 and 6.25 in 2012. The Loan Loss Prov / Net Int Rev for Baroda Bank in 2014 was 27.41, in 2013 it was 32.59, and in 2012 it was 19.00. The Loans / Customer Deposits ratio was 85.59 in 2014 and 81.64 in 2013 while in 2012 it was 86.35. Finally, the Customer Deposits / Total Funding ratio for 2014 was 77.08, with a ratio of 81.05 in 2013 and in 2012 it was 82.26.

Abu Dhabi Islamic bank

Abu Dhabi Islamic bank reported a Moody’s Investor service long term ranking of A2, with a short term ranking of P1. Moody’s states that the outlook for the bank is stable. The Fitch long term rating is A+ with a Fitch short term rating of F1 and a stable outlook. The bank reported a RAM longterm rating of AAA and a short term rating of P1 with a stable outlook. As Moody’s notes, “Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk,” while “Issuers (or supporting institutions) rated Prime-1[or P1] have a superior ability to repay short-term debt obligations” (Moody’s, 2014). ROAA, Net Income / Average Equity 22.95 in 2014, 20.38 for 2013, and 19.39 for 2012. ROAE, Operating Profit / Average Equity or return on average equity for the bank was 20.48 for 2014, 17.60 for 2013, while it was 18.52 for 2012. Return on average equity (ROAE) assesses the rate of return on ownership interest, or shareholders’ equity, of the common stock owners. It measures a firm’s efficiency at generating profits from every unit of shareholders’ equity (also known as net assets or assets minus liabilities). NIM, The bank had a net interest margin ratio of 3.42% in 2013 improved from 3.28% in 2012. Capital adequacy Ratio of 21.21%. Abu Dhabi Islamic bank’s net revenue from funding is 3,066.4 for 2013, 2,905.3 for 2012, 2,841.2 for 2011, 2,595.7 for 2010 and 2,108.6 for 2009. The fees, commissions and foreign exchange income for the company was 616.4 in 2013, 432.4 in 2012, and 459.4 in 2011. All of this data reveals that Abu Dhabi Islamic bank is substnatially more stable than compeitors within its market as well as Baroda Bank.

Ahbu Dhabi Islamic bank represents a significantly more stable bank because it focuses its skills on many aspects of banking; foreign exchange, investing, estate and trust services, insurance. The company follows the belief that through an enhanced understanding of the investment environment leads to more sound investment decisions. Some of the bank’s weaknesses however entail over expansion, which gives Baroda a substantial advantage over the bank as it can lead to reduced 1 on 1 personal interaction with customers. Over expansion can also leave Ahbu Dhabi vulnerable to counterfieters and security risks that aren’t necessarily prevalent within the Baroda’s market. The bank’s minimal size reduces it as a viable option for compeitors despite being one of the largest in its market.

Company Strengths

Ahbu Dahbi also has sertain strengths that stem from its A+ credit rating as a strong financial institution. This is especially true in regards to the bank’s ability to operate as a lending company, due to their substantially high cash volume. Another key advantage the bank has over Baronda Bank is their distribution reach, as it provides them with a significant advantage within the industry to have a large number of branches through which they can provide their services in a more conveniently to clients. Another advantage the bank has over its competitors is that through lending, the company establishes relationships with substantially more stakeholders. This can also be seen as a disadvantage the bank has compared to Baronda Bank as it being a smaller bank it can cut branch costs, and consolidate its location enabling it to utilize significantly more tech options for consumer use and financial service products. branch costs through the creation of mini-branches, these are locations that provide traditional banking services utilizing half the resources through incorporating technology such as folding walls and tablets and other aspects of the latest technology available to make banking more convenient.

  Company Weaknesses

Abu Dhabi Islamic bank’s Moody’s Investor service long term ranking of A2, short term ranking of P1, and the the Fitch long term rating of A+ with a Fitch short term rating of F1 compared to Broda’s Fitch bank issuer default rating of BBB, and Issuer Default Rating of F3 with a viability rating of bb+, and a support Rating of 2, reveals that Abu Dhabi Islamic bank is much more stable than Broda.

Abu Dhabi Islamic bank still represents one of the leading banks in its market, but data shows in many aspects it is being outperformed by Broda Bank. Despite this for the most part, Abu Dhabi bank is ranked as being much more stable according to bank scope, especially in respect to assets. The reason for this success has to do with the bank being readily available within its market. The company is also expanding human cpaitla through innovating outside sources and activities. Human capital, in the form of helpful staff members plays a significant role in foreign market and domestic growth. In the case of professional service SMEs in India, Broda however is enhancing service value through improving the skills possessed by professional service personnel through specialized training programs. This is one of the main competitive strategy edges that Broda bank has over Abu Dhabi Islamic bank and it it has used this strategy to develop a slight edge within its industry representing Abu Dhabi’s key weakness. Both banks currently use a pricing strategy that entails a system to determine pricing for different products based on interest rates. Following this aspect of the pricing strategy, both banks breakdown the prices of their competitors as it relates to the market and the industry. In this way they are able to best determine the most profitable way to charge consumers. The data reveals Abu Dhabi Islamic bank to be the prefered option choice for large banks, specifically within the global market based on Bankscop reports, while the main weakness Broad has is that it’s only relevant within its local market.

Benefit of Using Bank Scope

BANKSCOPE serves as the ideal tool to assess the competetive value of banks as it’s a global databse that provides comprehensive information from over 23,000 private and public banks. The datbase combines data retrieved from seven sources, through the use of software structured specifically for the purpose of analysis. BANKSCOPE is also valuable because it has exclusive access to (BvDEP), the Bureau of van Dijk Electronic Publishing. Most importantly, BANKSCOPE is effective in evaluating these banks because it has access to 16 years financial information stemming from private and public banks, specifically the top 7,000 European banks, as well as 12,000 North American banks, nearly 3,000 major banks, 800 Japanese banks, banks in Russia which contain consolodated bank sheet informations.