1.

Introduction
1.1. Origin of the report
Professor Dr. A.K.M. Saiful Majid, the Course Instructor assigned the course participants on
August 19, 2013 to prepare an analytical report on Strategic Management of the particular
company participants work for. Thus, the report has been prepared as requirement of the
EMBA Course Strategic Management at Institute of Business Administration (IBA) with a
view to relating course contents with the particular practical field the students involved with.

1.2. Objective of the report

The main purpose of this report is:

To have an overview of the Strategic Management of Southeast Bank Limited

To assess different strategies applying different analytical concepts, tools and
techniques of Strategic Management
To provide suggestions for possible strategic direction for the bank in the coming days
based on findings of the report.

1.3. Methodology
The company websites, annual reports, vision & mission, values and objectives, other booklets
& manuals etc were studied to identify the strategies of the bank. Top level executives and
other employees were also consulted to have their opinion on the rationale of different
strategic moves of the company.
The theoretical bases for the reports are primarily those taught as part of Strategic
Management course. The industry competitiveness and outlook have been reviewed. The tools
and techniques such as Strategic group mapping,PESTEL analysis, Porters five forces model
of competition, SWOT analysis, Key Success Factors (KSF), five basic generic business
strategies and other strategies like alliance, diversification, etc were applied.

1.4. Scope and limitations

This report has covered key business strategies of the bank in relation to target customers. It
also covered Banks strategies in network expansion, operational strategies i.e. internal control
& compliance, asset liability management, loan monitoring and recovery etc. The report also
has attempted to give insights in the strategies of product offering and differentiations,
customer services, strategic alliance with other partners, diversifications, industry
competitiveness, Ethics and CSR, Corporate culture and leadership etc. Despite the fact that
the report has been prepared as part of an academic course study, it may be useful for different
stakeholders like equity investors, creditors and regulatory agencies.
The report also has certain limitation too. It has not been possible to produce in-depth
comparison with industry players as relevant data could not be managed due to time
constraint.
1

2. Organizational Overview
2.1. Southeast Bank Limited (SEBL) at a glance
Southeast Bank Limited is a scheduled private commercial bank established in 1995 under the
Banking Company Act 1991 and incorporated in Bangladesh as a public limited company
under the Companies Act 1994 to carry out banking business in Bangladesh. With a
commitment to bring quality and excellence in service, the Bank was established by leading
business personalities and eminent industrialists of the country with stakes in various
segments of the national economy. The incumbent Chairman of the Bank is Mr. AlamgirKabir,
FCA, a professional Chartered Accountant. Mr. M. A. Kashem and Mr. Yussuf Abdullah
Harun, two honorable board members were past Presidents of the Federation of Bangladesh
Chamber of Commerce and Industries (FBCCI). The Bank believes it is run by a team of
efficient professionals who work in a congenial environment of trust and discipline that
encourages and motivates everyone in the Bank to work together for achieving the objectives
of the Bank.
As on June 30, 2013, after 18 years of its operation, Southeast Bank Limited has consolidated
its position as one of the leading banks of the country with an asset base of Tk.126.68 billion,
deposit of Tk. 166.47 billion and before tax profit (without provisioning) of 3.12 billion with
96 branches all over the country. But most importantly, Bank has established a loyal customer
base and skilled & equipped low cost work force that may not be easier for its competitors to
imitate instantly.
Today the Bank offers the diversified financial solution according to the needs of its
customers. The Bank has developed second largest Islamic Banking operation (being
mainstream conventional bank compared to its conventional counterparts) along-side its core
conventional Banking Operation. Besides, Capital Services, SME financing. Agri-financing
and many more specialized services have been introduced by the bank in addition to its core
banking activities. Keeping pace with the emergence of modern ICT based development
around the industry, the bank has introduced mobile banking, internet banking, 24/7 ATM
service and many other e-products.

2.2. Financial performance over the last five years

The last 05 years growth of the company may indicate its success in the country. The bank
showed consistent performance under different parameters.

Table 2.1: Five years financial performance at a glance

Tk. in million
Particulars
2012
Authorized Capital
10,000.00
Paid up Capital
8,732.86
Reserve Fund / Others
10,864.68
Deposit
152,901.24
Advance
126,968.97
Investment
37,656.56
Import Business
111,537.50
Export Business
84,464.20
Guarantee Business
21,506.65
Remittance Business
41,455.40
Total Income
23,134.18
Total Expenditure
17,638.99
Operating Profit
5,495.19
Net Profit after Tax and
1,648.72
Provision
Fixed Assets
7,677.51
Total Assets
189,921.58
Source: Annual Report of SEBL, 2012

2011
10,000.00
8,317.01
10,683.05
127,178.22
107,288.56
29,846.60
99,509.01
75,982.06
25,673.90
49,544.10
19,931.91
13,846.24
6,085.66
1,912.19

2010
10,000.00
6,930.84
10,165.06
107,729.58
92,452.62
18,327.65
103,726.70
58,158.06
22,781.19
28,082.25
16,071.33
9,316.39
6,754.94
2,763.13

2009
10,000.00
3,422.64
6,504.62
96,669.05
77,497.57
21,350.23
69,582.92
46,724.47
11,916.74
23,800.00
13,702.25
9,087.79
4,614.66
1,870.19

2008
3,500.00
2,852.20
4,804.81
68,714.67
60,281.26
12,299.61
58,019.77
42,178.60
15,078.99
15,221.87
10,250.13
7,237.55
3,012.58
887.24

7,373.11
158,078.59

4,463.08
131,943.48

4,338.35
112,676.98

2,685.56
81,181.5

Table 2.2: Employee and branch growth

Particulars

2012

2011

2010

2009

2008

Employee(permanent)

1855

1526

1373

1254

1080

94

84

76

56

46

Branch

Source: Annual Report of SEBL, 2012

3. Direction for Southeast Bank Limited

3.1. Vision
3

The Banks vision is to be a premier banking institution in Bangladesh and contribute

significantly to the national economy.
The characteristics and quality of its vision can be evaluated under following parameters:

Figure 3.1: Characteristics and quality of vision of SEBL

3.2. Mission
In harmony with the vision, the bank has tried to set its mission statements which are pivotal to
understand the present state, activities and striving of the Bank. The mission statements are
well constructed as those fulfill 03 essential key elements i.e. what is being satisfied, who is
being satisfied and how customers needs are satisfied. The mission is presented below with
relevance with above key elements:

Figure 3.2: Evaluation of Banks Mission

Overall the mission statements define the current business activities, nature of products and
services fairly well.

3.3. Values
The values for the bank are as follows:
Integrity
Respect
Fairness
Harmony
Team Spirit
Courtesy
Commitment
5

 Service Excellence
Insight & Spirit
Enthusiasm for work
Business Ethics

Most of the banks offer same kind of values. One might argue that there are too many values.
Besides, there could have been little explanation of what these values mean to bank in its
annual report.

3.4. Objectives
Strategic objectives
Strategic objectives of the Bank are mainly designed to gain competitive advantage in the
long-run. These objectives are:
a. Achieving long term sustained growth in shareholders value and operational

performance through introducing Excellence in Banking

b. Generating surplus at a least cost combination through mobilization of savings from

relatively lower income group by expanding branch network and by way of efficient
deployment of investment resources on best economic considerations.
c. Maintaining asset quality through diversification of credit portfolio both sector wise and

client base wise, constant monitoring and follow up of the disbursed loans, nursing of
SMA accounts to regularize loans and strengthen recovery drives.
d. Establishing a fully compliant Bank, meeting all regulatory requirements, maintaining

adequate capital base through appropriately blending the set risk-reward parameters and
disclosure in line with international standard, core risk management guidelines
including green banking and environmental risk management principles.
e. Invest in Research and Development (R & D) with focus on integration of state of the

art technology to achieve (i) full automation in banking (ii) excellence in banking
operations and iii) implementation of best banking practices in line with changing
global banking scenario.
f.

Customers as first priority and company philosophy is to establish its brand image as a
customer friendly Bank through efficient and prompt Customer Service, Event
Management, product Diversification, Positioning, Repositioning etc. Striving to
establish long-term profitable relationship with its customers through providing total
banking solutions to customer problems and creating a win-win situation both for the
customers and the Bank.

g. Committed to explore new market niches

6

h. Serving the distressed humanity in fulfillment of our corporate social responsibility

(CSR) and abiding by all rules and regulations including paying taxes to the national
exchequer
i.

Produce more skilled human resource by training and development who will pledge
their head, heart and soul to establish a leading financial institution that our future
generation can be proud of.

Financial objectives
Short term objectives of Southeast Bank Limited mainly include financial objectives. For
example, the bank is aiming a profit target of Tk.750.00 Crore with 20% increase of its
deposit and credit portfolio in 2013.Financial objectives are not constant and changes every
year.

3.5. Strategic intent

The strategic intent is obvious from the goals and objectives set by the bank as mentioned
above. The intent and focus of the bank is as follows:
Achieving long term sustained growth
Generating surplus at a least cost
Maintaining asset quality through diversification of credit portfolio
Establishing a fully compliant Bank
Invest in research and Development (R & D)
Customers as first priority
Striving to exploring new market niche
Produce more skilled human resource
All these objectives and relevant action suggests that the Bank is willing to attain sustainable
competitive advantage.

3.6. Business Model

In line with its mission to make steady return on share holders equity, Southeast Bank
Limited has developed a business model that has been able to generate enough revenue to
provide them a fair return over the years. The Business model of Bank has been outlined
below:

The Bank initially decided that it will limit its operation to corporate banking only
with limited number of branch not exceeding 20. Although there is a shift from that
standpoint of the bank notably in the last 06 years with expansion of branches that
reached to a number of 96, corporate banking still remains the major concentration of
financing. Corporate clients include large corporate firms involved in garments &
textiles, pharmaceuticals, ship building, leather and large scale commodity trading.

The Bank finances both working capital and capital investments

The bank has emphasize and priority for export and import business, through L/C and
BG. The objective is to increase non-interest income through fees and commission

The Bank practices a Credit Policy that only encourages financing the projects and
businesses that are productive and self-liquidating.

Although the bank finances the businesses mainly based on their cash flows, financial
strengths and creditworthiness, there is also emphasizes on obtaining collateral
security to secure the lending.

While corporate financing is main concentration on investment, the bank targets all
types of depositors such as people belong to lower income group, small and medium
business concerns and corporate clients as their depositors.

The bank is aiming to expand its SME portfolio as corporate financing has become
imbalanced capturing about 85% of the credit portfolio.

Recently, special focus is being given for taking advantage on the spread of deposit
and lending rate. Relatively lower income group of depositors have been targeted to
procure low cost deposit. High cost deposit has been identified as the major weak
point of the bank.

The Bank is expanding its agri-finance as a requirement of regulatory compliance.

Though its SME Branches are devoted to make agri-finance, the major disbursement
is being aimed through micro finance institutes for their expertise in this sector.

The success of the business model can be evaluated by comparing the return on equity (ROE)
and return on assets (ROA) with the relevant industry players. Besides, non-performing loans
(NPL) is also a key component for measuring success of the Bank.

Last 5 years ROE, ROA & NPL of Southeast Bank Limited in comparison with industry
average (Private Commercial Banks):

Table 3.1: Comparison of Return on Equity

Year

Return on Equity (%) of PCBs

Return on Equity (%) of SEBL

2008

16.04

31.1

2009

21.0

32.4

2010

20.9

37.7

2011

15.7

23.3

2012

10.17

18.9

Source: Half Yearly Business Conference of SEBL, 2013

Table 3.2: Comparison of Return on Assets
Year

Return on Assets (%) of PCBs

Return on Assets (%) of SEBL

2008

1.4

1.09

2009

1.6

1.66

2010

2.1

2.26

2011

1.6

1.32

2012

0.92

095

Source: Half Yearly Business Conference of SEBL, 2013

Table 3.3: Comparison of NPL
Year

NPL of PCBs (%)

NPL of SEBL (%)

2008

3.9

4.12

2009

3.2

3.73

2010

2.9

4.26

2011

3.8

3.51

2012

4.58

4.47

Source: Half Yearly Business Conference of SEBL, 2013

The above figures indicate that the bank has consistent performance following its existing
business model.

3.5. Balanced Scorecard

The balanced scorecard of Southeast Bank Limited involves both financial and strategic
objectives with special emphasis to pursue strategic outcomes that strengthen Banks business
position and give it a growing competitive advantage over rivals. As clarified in its business
model that the bank has consistent financial performance over the years does indicate the
rationale for pursuing strategic objectives for long term competitiveness and sustainability.
The bank has recognized that to maintain sustainable profitability for a long term, there
should be linkage between financial and strategic objectives which inspired the bank to set
strategic objectives for achieving overall lower cost deposits than its rivals. The Retail
Banking Division was mainly formed couple of years back to procure low cost deposit in line
with banks strategic objective of Generating surplus at a least cost combination through
mobilization of savings from relatively lower income group. The Bank is also committed to
establish its brand image as a customer friendly Bank through efficient and prompt
Customer Service, Event Management, product Diversification, Positioning, Repositioning
etc which stresses Banks strive for attaining long term competitive advantage.

4. Situation Analysis
4.1. PESTEL Analysis
4.1.1. Political factors
Political stability: Progression of the industry is directly related with the stability of the
government. Investors are unwilling to take new projects if the state of government is
unstable. It has been observed over the years that the position of ruling parties become
unstable in the pre-election year due to different issues raised by opposition parties.
Consequently Hartals/Strikes become the regular practice that disrupts the economic
activities. The country is at present passing such phase. Until August 2013, there were 38
Hartals called by opposition parties in the current year. Naturally economic activities suffer
and slow down resulting in slow expansion of credit by the Bank.
Uncertainty about continuation of Government Policy: Businessmen or entrepreneurs are
uncertain about the sustainability of government policies fearing possible changes of
government after election may result in major shift in policies. This hinders the entrepreneurs
to undertake new projects. Along-with the entrepreneurs, Banks are even cautious to invest in
new projects. This scenario may continue until formation of post election government, may
there be any change or not. Thus, despite recent urges of Bangladesh Bank to commercial
banks for expansion of loan flows in the economy, the prospect for the industry is slow
growth in the next 01 year. However, the situation is expected to become to its normal from
July 2014 after publication of next years budget.

10

4.1.2. Economic Factors

GDP: For the second consecutive year, GDP growth rate in FY2013 has failed to attain the
target. According to the provisional estimates from Bangladesh Bureau of Statistics (BBS),
GDP growth for the current fiscal year is expected to be 6.0 per cent; i.e. 1.2 percentage
points lower than the target (7.2 per cent) and 0.2 percentage point lower from final GDP
growth estimate for FY2012.
The Banking business is closely tied with the GDP growth of the country. Bangladesh as a
growing economy has immense opportunity for investment in industrialization, agri-sector
and in service sector. The Banks play the key role in financing new industrial projects and
infrastructure development. Although GDP growth rate of Bangladesh is slowing down,
around 6% growth rate is still pretty much acceptable and presents further opportunity for
growth of the Banking sectors.
Faltering Private Investment: FY2013 has been one of worst years for private investment.
The provisional estimate by BBS for FY2013 anticipates a distinctive fall in the share of the
private investment in GDP. It shows that private investment is expected to decline as a share
of GDP to 19.0 per cent in FY2013 from 20.0 per cent in FY2012. This is an outlier because
such a fall in private sectors share has never been experienced in the history of Bangladesh
(since FY1981). Indeed, almost all private investment related indicators gives a subdued
scenario. Import payments for capital machineries declined by (-) 10.6 per cent during JulyMarch period of FY2013 compared to the corresponding period of FY2012. So, Banks import
business is not achieving expected growth.
Credit growth: Growth of credit to private sector continued to fall since July 2012. As of
March 2013, growth of Private sector credit declined to 12.7 per cent. The target for private
sector credit growth at the end of FY2013 was 18.5 per cent. The lack of demand for private
sector credit also resulted in significant excess liquidity in the banking system. At the end of
June 2013, excess liquidity at the banking sector is about 70 thousand crore and credit
deposit ratio is now about 72 percent whereas just in middle of 2012 it was 85% due to which
Bangladesh Bank had to check the loan disbursement of commercial banks. Share of
classified loans also increased from 7.2 percent in July 2012 to 11.7 percent in July 2013.
Interestingly enough, industrial loan has increased 27% from July 2012 to March 2013 after
new rescheduling rules passed by Bangladesh Bank in October 2012. This does not match
with slow private credit growth and hints about illegitimate rescheduling of the bank. A
number of scams afflicting the banking sector led to restrained behavior on the part of the
banks. Frequent labor unrest in the RMG may have also discouraged investors in making new
investments in the industrial sector.
Public Investment: In contrast to the depressed private investment, public investment has
increased steadily since FY2009 and surpassed the SFYP target in FY2013 (6.9 per cent of
GDP) by about 1 percentage point. According to provisional estimates of BBS, public
investment is expected to be about 7.9 per cent of GDP in FY2013. This implies that public

11

investment (as a share of GDP) will improve by 1.4 percentage points in a single fiscal year.
This further indicates that Bank will have opportunity to finance in public projects.
Inflation: Inflationary pressure is easing out in the economy. General inflation was about 7.8
percent in April 2013 compared to 10.6 percent in April 2012. Such trends suggests that
interest rate on deposit may be lower in the banking sector.
Monetary & Fiscal Policy: New monetary policy unveiled by Bangladesh bank on July 25,
2013 aimed at keeping the inflation rate at 7.0 percent while targeting 15.5 percent private
sector credit growth which may be a realistic one considering current state of political
situation. It may be mentioned here that the last monetary policy for the last January to June
period targeted 18.5 percent credit growth but achieved only around 11.5 percent. So, slow
credit growth aimed by Bangladesh Bank is setting a benchmark for private commercial
banks to fix their target. The annual development budget, taxation rate etc are outlined
through fiscal policies which affect economic activities and business growth in the country
and thereby influence the banking business. Naturally, pre-election budget includes ambitious
target in public spending which creates opportunity to invest in government financed projects
through private sector investment.
4.1.3. Socio-cultural factor
Literacy growth & religious view point plays a vital role for inclusion of people in the
banking channel. People are becoming conscious about their savings and now started
preferring banking channel for depositing their money. Recent scams of organizations like
Destiny, Unipay and cheating by number of co-operative firms have also made people
conscious about the necessity of Banks.
Due to interest elements involved in banking, many people did not used banking channel
earlier. However, emergence of number of Islamic Banks and Islamic Banking Branches of
Conventional Banks has also lifted this barrier.

4.1.4. Technological Factors

All the banks are going through a phase of technological up-gradation. Even State-owned
Commercial Banks (SCBs) are now offering on-line banking through their selected branches.
Most of the branches of the PCBs have now come under on-line banking facility. Besides, inhouse software up gradation is being undertaken by number of Banks to secure competitive
edge. IT infrastructure not only presents better customer service, but also reduces cost of
employing costly human resources. All the PCBs (Private Commercial Banks) are now under
way of offering internet banking. Lately mobile banking has opened new opportunities for
banks for inclusion of large number of people in the banking channel.

12

4.1.5. Environmental Factors

As per Bangladesh Bank Guidelines, every bank has to formulate its green banking policy.
Banks are required to allocate a considerable amount for green banking in their annual
budgets, which will include (i) Budget for green finance (ii) Budget for Climate Risk Fund
and (iii) Budget for Green Marketing, Training & Capacity Building. Banks now also
performs Environment Risk Rating of projects as a pre-condition of approving new projects.
In-house operation of banks is likely to be done with minimization of paper usages through
increased use of internal network via internet.
4.1.6. Legal Factors
The industry is dominated by different regulations of Bangladesh Bank. Different policies
and guidelines formulated by Bangladesh Bank is one of the driving forces of the industry.
One may recall the stringent rescheduling rules of Bangladesh Bank that increased the NPL
of banking sector and caused drastic fall of the profitability.

4.2. Industry lifecycle

As the economy of the County is growing, the banking industry is still in its growth stage. The
country currently has 56 banks in total, most of which are domestic private banks. However,
there is huge competition among these banks. The problem is not that the industry is shrinking,
rather it is chasing of selective customers by too many banks. All the banks are competing in
selective locations where other locations are overlooked. There are many regions in the
country where banking facilities are not available. Any Bank has the opportunity to explore
prospective locations for their growth. Even existing business of the banks have tremendous
potential of expansion if proper strategies are implemented.

4.3. Industry Attractiveness

As previously mentioned, the economy of the country is moving ahead. So, naturally there is
scope for banks to expand their business. Despite current years slow progress of the banks due
to several reasons such as political turmoil, tight monetary policy etc., the industry is still
attractive. Bangladesh as a country has tremendous potential for economic growth in the next
decade and banking activities are integrated with the economic activities of the country. The
concept of industry attractiveness for banking industry, thus, has to be assessed with long term
prospect which is pretty promising. Even in the current dismal situation, choosing business
location and targeting right group of customers is important and can be a major strategic move
for any banks to become successful. There is still scope for product differentiation to attract
untouched customers whose needs are overlooked. Despite new entrance of 09 banks, entry
exit barrier is still high which can be considered as an added advantage. Besides, there is
possibility of horizontal integration by establishing subsidiaries in related areas.
13

4.4. Driving forces of the industry

National Economic trend and growth
The Banking business is closely tied with the economic growth of the country. Bangladesh as
a growing economy has immense opportunity for investment in industrialization, agri-sector
and in service sector. The Banks play the key role in financing new industrial projects and
infrastructure development. The GDP growths of Bangladesh have been around 6% for last
one decade which have shown growth and maturity of the Banking sectors.
Monetary and fiscal policy
The monetary and fiscal policies influence the banking business closely. The interest rate and
inflation in the country are tackled through monetary policy by Bangladesh BankThe annual
development budget, taxation rate etc are outlined through fiscal policies which affect
economic activities and business growth in the country and thereby influence the banking
business.
International trade, performance of global economy and globalization
The volume of export and import transactions account for significant income for the banks.
The export basket of our country heavily depends of RMG exports to Europe and the USA.
Good performance of global economy increases volume of both export and import. In
addition to that, the inflow of foreign remittance depends on the overseas employment
market. The inflow of remittance also contributes for commission earnings of banks. The
globalization of world economy, increasing international trade among the nations, movement
of people and workforce across the globe has significantly changed banking business and
moved it forward.
Technological innovation and advancement
Banking business has been revolutionized due to Information technology, internet and
software development. The introductions of computerized software and online transactions
have made banking activities virtual. The international banking transactions have been much
easier. The safety and time saving have made banking much more reliable and attractive to
people.
Financial market diversification
The capital market of the country has emerged and developed which have helped
entrepreneurs to raise equity fund and establish new business. Banks have opportunities to
extend working capital loan and mid-term financing to large corporations. The growth of
leasing companies, Microfinance institutions, insurance companies have also posed
competitions for the banks

14

4.5. Porters Five Forces Model

4.5.1. Rivalry among industry players
Rivalry among existing banks is remarkably high. The factors that have contributed to
increase rivalry are:
a. Saturated market: The industry believed to be saturated with too many players. Entry of
new banks have intensified the competition. Besides, there are number of non-financial
institutions that are fighting for the same customers.
b. Low demand for investment: The demand for loans has been slowed down considerably.
As a result, most of the banks are finding themselves with excess liquidity. Too many banks
are simply chasing relatively smaller number of established investment clients.
c. Low switching cost & alternative options: Customers have many alternative options for
both in case of taking loan and placement of deposit. As switching cost is very low, customers
tend to switch from one bank to another bank and show little loyalty to any banks.
d. Similarity of products: Marked differentiation in services and products is hard to create in
banking industry. There is remarkable similarity in different services provided by most of the
banks. Every bank instantly copies the services and technological advantage offered by other
banks that intensifies competition.

4.5.2. Threat of new entrants

The policy of Bangladesh Bank was that of restriction in respect to giving license to new
banks for a period from 2001 to 2012. But Bangladesh Bank has recently allowed 09 Banks
to enter into the market. These new banks will intensify the competition in the industry in
respect of deposit mobilization and loan disbursement. Though it is generally considered that
the entry exit barrier in the banking industry is high, recent move of Bangladesh bank may
challenge this notion as more new banks may enter into the market, especially under political
consideration.

4.5.3. Bargaining power of suppliers

The suppliers for the bank are grouped into 02 groups. One is depositors of the bank who
have great bargaining power. The institutional customers who deposit large amount of fixed
deposit can bargain for better interest rate to some extent. Other is those who provide office
equipment, stationery, computers, and software etc. The second group does not have much
bargain power to put the bank in trouble. There are too many suppliers in the market who are
ready to supply the materials and services at a competitive rate.

15

4.5.4. Bargaining power of buyers

The borrowers fall into this category. Large corporate customers can bargain for lower
interest rate for credit facilities. Other SME loan customers and individual depositors have no
bargain power for interest rate. Despite presence of too many banks in the market, the pricing
of the products move within a narrow range. The Banks have associations who form some
sort cartel to fix up the range for deposits rate and deny competition. However, due to rise in
competition among banks, even good ranked SME customers are getting bargaining power
due to comparatively lower switching cost.

4.5.5. Threat of substitutes

The most dominant substitute for conventional banking products is Islamic Banking products.
Islamic Banking is growing at a faster rate in the economy. Approximately 21% market share
in term of deposit is held by Islamic Banking. So, real threat for conventional banking
industry comes from Islamic banking products.
The substitute asset products within conventional realm include lease finance, fixed-income
debt securities like bond, debentures etc and equity security through stock market. The
substitute deposit products are offered by insurance companies (insurance policy), Treasury
bills and bond by the government, stocks and mutual fund by investment firm and companies
and time deposits by NBFI. The banks need to adjust product offerings in an attractive way to
maintain edge over these substitutes. However, there are no imminent threats from these
products.

4.6. SWOT Analysis

16

Strength
1. Expertise in corporate financing
2. Sound Risk Management system

Weakness
1. High cost of deposit in comparison with
peer banks

2. Unfair recruitment in the early years

resulting in some unproductive human
Sizable & growing Islamic Banking
resources
portfolio adding related diversification
3. Exposed to credit concentration risk.80%
Efficient and talented human resource
of the Banks loan is large loans
with good leadership
4. Moderate number of ATM booths, more
Excellent IT infrastructure & Modern
expansion needed
technology based online banking
5. Few no of SME customers
Wide product lines
6. Loan documentation procedures not still
Strong Brand image
centralized

3. Good asset quality

4.
5.
6.
7.
8.

Opportunities

Threat

1. Greater opportunities for financing in Ship 1. Slow credit growth aimed by Bangladesh
Building Industry, Ceramic Tableware
bank in its monetary policy may make it
Industry, Agriculture and agro processing
difficult for bank to achieve expected
business
growth
2. Southeast Bank Limited can further 2. New Banks may snatch away the
qualified employees
strengthen its Islamic Banking Operation
through its Islamic Banking Branch and IBSD 3. New Banks may capture a portion of
existing market share
3. Retail Banking Operation can be further
strengthened for mobilizing low cost deposit. 4. Capital base may need to be enhanced
with the advent of Basel iii Accord
5. Human Resource cost may increase due
to entrance of new banks

4.7. Strategic Group Mapping

17

Under broad perspective, all the PCBs can be included in Strategic Group of Southeast Bank
Limited. Most of the PCBs pursue corporate banking strategy though the structure of offering
service may be different. Some of them follow centralized process whereas other follow
decentralized branch banking process. In its business conference held in January 2013, the
bank included 16 to 17 banks in its strategic group mapping as competitors considering their
market share and performance (Annexure-I).

4.8Key success factors of the Industry

Bank reputation and good image: Reputation and image is vital for deposit
mobilization. People still prioritize the safety of their money before considering the
profit while depositing their money. Sound ability to mobilize deposit is the one of the
most vital key factors for success in the banking industry. Liquidity crisis is a
nightmare for any banks. Even in the financing activities, corporate clients value the
reputation of the bank as their required funding in the future would depend on the
soundness of the bank.

Effective Business strategies: A bank must have a set of strategic priorities for
business and operations and a certain business model that will generate revenue for
the bank. The business focus must be set i.e. whether to target the corporate banking,
or SME segment or Consumer banking or trade finance etc. The product offering and
pricing to be competitive

Banking Practices: Banking practices are industry standards such as how the bank
handles cash, deposits, withdrawals, payments and financial records. The successful
bank will always have statements accurate to the penny and on schedule. Although no
bank is perfect, the successful bank has a reputation for fewer mistakes and satisfied
customers. Vigilant management, conscientious employees and always improving in
areas of technology and customer service keeps successful banks in the lead.

Marketing: Banking is a business and as such must always search for new customers
and expand market share. A successful bank will market services, convenience and
financial advantages. In an increasingly competitive market, effective marketing of
banks products and offers is key to its success. Many of the old banks in Bangladesh
are lagging behind the new comers due to absence of effective marketing. Burning
example is the performance of most of the second generation banks who have already
challenged the first generation banks with limited number of branches.
Brand image plays an important role in selecting the product or bank. Banks need to
build-up its brand image and advertise to attract both asset and liability customers in
print and tele media. Banks need to conduct CSR activities that brighten the image of
the bank.
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Superior Customer Service and relationship: As a service industry, the degree of

differentiation in product offerings is very small. Ultimately, it is the superior and
faster customer service that account for success in banking business. Usually, the
business customers continue for a longer and firm relationship with the relationship
managers. The Bank must consider for retaining and recruiting employees who have
good skills for maintaining relationship with the customers

Efficient and trained Workforce: The human resources of a bank are the main
architects of a bank. Bank needs to provide prompt customer service as well as ensure
regulatory compliances. The financing activities and financial markets, products and
risks have gradually been complex and diverse. In addition to that the number of
creditworthy customers and deposits are limited compared to number of market
players. It is the employees who need to mobilize the asset and liability marketing as
well as proper risk assessment and management, compliance etc. The pools of
efficient and trained workforces are the key to revenue generations.

Spread Management: Difference between lending rate and cost of deposit is main
earnings of the bank. Accordingly, the banks that manage higher spread do better than
their competitors.

Asset Liability Management (ALM): It is an integral part of bank management. It is

essential to have a structured and systematic process for managing the balance sheet.
According to the guidelines of the Central Bank, banks must have a committee
comprising of their senior management to make important decisions related to their
balance sheets.

Adoption of Information Technology and Online service: Banking industry is in

the midst of an IT revolution in Bangladesh today. The arrival of foreign and some
private Banks on the scene with their superior technology-based services pushed the
overall banking industry to follow suit by going in for the latest technologies so as to
meet the threat of competition and retain their customer base.
Information Technology has basically been used under two different
avenues in banking. One is communication and connectivity, and the
other is business process reengineering.
Information technology enables sophisticated product development,
better market infrastructure, control of risks and reaching
geographically distant and diversified markets.

Risk management: Banks deal with different types of risks. The sustainable growth
and long-term success of a bank solely depends on proper risk management. Risk
management is at the core of bank business and risk is generated from both external
and internal sources and may make the way hazardous for Banks existence if not
mitigated or minimized properly. Introduction of Basel II has envisioned a
19

comprehensive set of Risk Management practices for a sound banking system across
the globe. Accordingly the Central Bank has identified five core areas of risk and
outlined various processes to effectively manage them.
The risk areas are:
Credit Risk
Asset and Liability/ Balance sheet Risk
Foreign Exchange Risk
Internal Control and Compliance Risk
Money Laundering Risk
The performance of a bank depends on managing all these risk prudently and efficiently.

Key Success factors for Southeast Bank Limited

Effective and efficient risk management system has contributed superior asset quality
and reduced the rate of non-performing or classified loans
Prudent Asset Liability management and money market operation and treasury
management
The dynamic top management and qualified employees have contributed for
operational excellence, quality service and revenue growth
Adoption of Information Technology and Online banking etc
Superior Customer service and maintenance of relationship
Risk based competitive pricing and attractive product offering
Brand image

4.9. Competencies
Corporate Financing

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Over the years bank has developed itself a bank for corporate customers in case of loan
disbursement. Corporate customers i.e. large firms, while considered to be a particular market
niche, have been main source of earning of the bank from financing activities. The employees
of the bank are well trained in serving the needs of this group of customers. Their needs are
fulfilled with utmost importance both from branch and head office level. Quick processing of
the loans with genuine assessment of the fund requirement has been special expertise of the
bank.
The genuine assessment of the fund requirement, though heard simpler, has not been easy for
many of its competitors to execute successfully as apparent from the different recent scams
related to corporate customers around the industry whereas Southeast Bank Limited stood
reasonably firm despite having a dominated portfolio of corporate customers that covers 80%
of its overall investment portfolio.
Credit Administration
Loan monitoring is one of the most crucial factors of any banks success. Southeast Bank
Limited has developed a team comprising officials who are experts in this field. While recent
years profitability of many banks were considerably higher than the bank, in the current year
most of the banks profitability are faltering after strict stance by Bangladesh Bank in respect
of rescheduling due to non-performing loans. Southeast Bank is showing impressive
performance in the turmoil situation due to its sound credit administration.

4.10. Value Chain

The Banks primary activities in the value chain starts with deposit mobilization and then
lending the deposit at a higher rate. Both of these activities are performed through marketing
of retail banking division and branch. The spread between lending and deposit is banks main
income. Other primary activities include non-funded income derived from LC and Bank
Guarantee business along-side fee based ancillary services. Then administrative cost and
others costs related to marketing and sales have to be deducted to get the profit before taxes
and depreciation.

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Primary Activities

Net
Profit

Supporting activities
Human
resources
Management

Financial
Credit
Treasury
Control and Administration Operations
Accounts
Division

General
Others
Administration

Figure 4.1: Value Chain of SEBL

Analyzing banksabove value chain, it has been revealed that cost of deposit is its weak link.
The spread of the bank compared to its competitor is very low (annexure-I). The Bank is
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falling behind in low cost deposit mobilization. Branches seem to concentrate on term deposit
mobilization rather than focusing on CD and SB account. Although deposit marketing is
performed by both retail banking division, branches are under performer here who rely
heavily on high cost term deposit. Interestingly enough there is a major flow in banks policy
making which is the main drawback for low cost deposit mobilization. Southeast bank
follows a policy that encourages branch to mobilize even high cost deposit as branches will
get 0.50% higher return that the maximum rate of FDR for idle deposit. This policy should be
reversed so that branches do not have any incentives for high cost deposit mobilization. If this
critical activity is managed well, banks profitability will increase considerably and bank
would be able to offer lower interest rates to its customers.

5. Strategies of Southeast Bank Limited

5.1.

Basic Strategy

5.1.1. Focused differentiations

The Bank focuses at Corporate Banking sectors for its asset portfolio. Southeast Bank
Limited has now a network of 96 branches across the country offering a range of asset
products to serve the unique needs of corporate customers. The Bank extends different types
of Working Capital Loans (Overdraft, Time Loan, Term Loan, Revolving Demand Loan,
Bank Guarantee etc); undertakes Project Finance and Syndicated Term Loan; facilitates
international trade: Imports and exports (Letter of Credit, Acceptance of Bill, Local and
Foreign Bill Purchase and Discount, Loan against Trust Receipts etc).
The differentiations in product offerings and services are achieved through the following
strategies:

1. Flexibility in issuing loan facilities according to the business demand of the customer.
Many banks are reluctant to response to customers emergency requirement of fund
after sanctioning a particular facility or facilities. But Southeast Bank tries to assist
customers whenever there is a business opportunity for the customer or they are in
trouble.
2. Collateral is not a strong defense. Southeast Bank Limited follows this policy and
offers financing based on financial strengths and cash flows of the clients. Banks offer
post-import fianc, project loans, Working capital etc without collateral
3. Faster processing/approval, quick documentation, smooth disbursement, minimum
documents handling

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4. Customers having good credit rating are offered lower prices. The loan pricing is done
based on the risk of weight
5. Convenient service is provided through Online and other information Technology
related services
5.1.2. Overall low cost provider strategy
The Bank follows overall low cost provider strategy for its liability or deposit customers
especially for collecting term deposit. Low cost for depositors means providing them higher
return on their deposit. The Bank usually offers highest deposit rate available in the market to
make available required deposit ratio.
Overall low cost provider strategy for liability products is a common strategy for domestic
PCBs most of which provides similar rates against term deposit. However, the concept of
meaningful lowercosts than rivals is difficult to apply for the cases of PCBs due to
standardized deposit products across the industry. Despite this, banks that can manage low
cost deposit through its current and savings account can do better than their rivals following
this strategy. But Southeast Bank Limited has shown little success for low cost deposit
mobilization over the years which is a major weakness for the bank.

5.2. Complementary Business strategy

5.2.1 Strategic Alliance

Southeast Bank Limited has strategic alliance with Dutch Bangla Bank Limited and
Brac Bank Limited for its card holders who can use the ATM booths of these 2 banks
without any cost.

Alliance with Western Union, Ria, Express Money and other moneychangers for
bringing remittance from abroad.

Agency services are provided for collection of bills, subscriptions for different
organizations like Mobile Phone companies, WASA, DPDC etc.

5.3. Strategy Making Hierarchy

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The strategy making hierarchy of the banks follows following diagram:

Figure 5.1: Strategy Making Hierarchy

There is also two way influence in the above hierarchy. For example, business strategies are
complemented by different functional strategies. Similarly, operating strategies are
complemented by operating strategies. The Heads of different Functional Departments
communicate important information to the Managing Director and Managing Directors pass
the decision to Functional Departments for communication with branches.

6. Diversification
6.1. Related diversification
The Bank has chosen related diversification by choosing Islamic Banking operation in
addition to its conventional banking operation. The main aim was to explore low cost deposit
and ensure free flow of deposit in case of tight liquidity in the market in addition to
diversifying investment portfolio. Besides, this diversification through Islamic Banking is a
25

strategic-fit for the bank since same employee can be used for the operation through moderate
level of training.
Islamic Banking operation initially started from 2004 through by setting 05 Islamic Banking
branches. But bank took anothers strategic move in 2012 when Islamic Banking Service Desk
was opened in every conventional branch for deposit mobilization. The aim was to explore
depositors who are inclined to Islamic Bank across the country.

6.2. Product diversification

As stated earlier, Southeast Banking Limited initially started with Corporate Banking.
But gradually, the Bank diversified its product lines by introducing SME products,
consumer and retail banking products.

The Bank also offers Offshore banking services through its offshore unit

Southeast Bank Capital Services Limited, which is a separate subsidiary of the bank,
carries on merchant banking operation.

Southeast Financial Services (UK) Limited, Southeast Financial Services (Australia)

Pty Limited Southeast Exchange Company (South Africa) Pty Limited have been
established to collect remittance from Bangladeshi expatiates for their beneficiaries in
Bangladesh.

6.3. Further scopes for diversification

Bank can acquire an Insurance company and conduct insurance business

A full-fledged Credit-Rating agency can be formed as subsidiary. This is an emerging

market which has good prospect

An accounting and Audit firm can be acquired to offer services to other Banks and FIs

7. Internal Operations and execution of Strategy

7.1. Staffing
Higher Executives in the Head Office are recruited based on the track record, qualification
etc. In the Management hierarchy, both internal employees and outside recruitments are
chosen to build-up a core executive group capable of implementing Banks strategy
execution.
26

Proper staffing at the branch level is one of the key factors for implementation of these
strategies. Typically, most of the branch managers are carefully chosen who have reputation
in the industry. Corporate financing requires special marketing efforts along-with service
excellence to be rendered by the branch employees. So, both fresh and experienced
employees with good educational qualifications are recruited at lower levels for the branch
and Head Office.
They talented employees are being tried to retain by offering attractive salary, good working
environment and career progress.

7.2. Building competencies and competitive capabilities

Corporate financing and credit administration is the competence of the Bank and hence tried
to be sustained by ensuring employee skills through training and on-job learning. In addition,
the bank also recognizes that low cost deposit mobilization is its weak link and working on to
be competitive in this area. Recent establishment of separate Retail Banking Division with
main focus towards low cost deposit mobilization is a major move in this arena. Besides, KPI
of each employee include target of low cost deposit mobilization which is showing gradual
improvement in this weak link.

7.3. Organization structure matched with strategy

The bank is following 02 basic business strategies- focused differentiation for its asset
products and low cost strategy for its liability products. For focused differentiation, service
excellence is pursued whereas critical activities in the value chain are being monitored for
low cost strategy. In addition to these business strategies, the ultimate goal of the bank is to
attain sustainable competitive advantages by fulfilling its long term strategic objectives for
which the bank follows following:

7.3.1. Expansion of delivery channel

The Bank has so far established 96 Branches, 36 own ATMs, Internet Banking, and Mobile
Banking to give customers easy access to the banking facilities. Besides, customers of the
bank can use ATMs of Brac Bank Limited and Dutch Bangla Bank Limited without any cost.
To facilitate foreign trade, offshore unit has also been established.

7.3.2. Aiming improved performance of the branches

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Both of the business strategies are performed mainly through branch banking where branches
are the main marketing and operating force. The bank has designed the branches to
implement these strategies with the followings:

Setting target for the branches: Branches are given target with special focuses on
deposit or loan. Some of the branches are given priorities for deposit mobilization
whereas other branches are instructed to pursue loan disbursement. There are also few
branches that are given equal priorities for maintaining adequate loan and deposit
portfolio depending on locations and performances.
Performance measuring and rewards: The Bank measures performances of both
branches and employees. Branch are ranked under category of Corporate, A, B, C, D
according to their performance. Employee performance are also measured based on Key
Performance Indicators (KPI), a tool recently used discarding age old technique of
evaluating performance through the subjective judgment of Managers.

7.3.3. Retail banking division to aid deposit mobilization and consumer financing
To aid low cost deposit mobilization and consumer financing, retail banking division has also
been set up. The marketing force of the retail banking is recruited on commission basis with
disbursement of salary subject to fulfilling the targets. This division has minimal staffing
cost.

7.3.4. Aiding strategy execution through different departments of Head Office

There are number of departments to aid overall operation of the banks. These departments
plays key role in strategy execution of the bank by performing their assigned tasks.
Internal Control and Compliance
There is an Internal Control and Compliance Department (ICCD) headed by an Executive
Vice president. The head of ICCD is responsible for compliance and control related tasks
which include compliance with laws and regulations, audit and inspection, monitoring
activities and risk assessment.
Technology and Innovation
Through its Information Technology Division, Southeast Bank Limited developed online
banking, established ATM at different locations, introduced SMS and internet banking
services in the bank. This technology based services also provide customer fund transfer
through internet, Debit/ Credit Card facility, free SMS service, and special type facility of
withdrawal from ones account.
Corporate Banking Division
28

The Bank has developed this division to fulfill the needs of its corporate customers. Besides,
this division takes decision regarding financing of corporate clients through loan proposal
processing. This division also process loan proposal of important SME clients.
Risk Management
Southeast Bank Limited takes a holistic approach to the risk associated in its banking
business knowing that one kind of risk can potentially affect others. Bank has identified some
core risk areas that are taken special care through its different divisions:
Table 7.1: Risk Management of SEBL
Type of Risk

Managed or encountered/supervised by

Credit Risk

Credit Risk Management Department, Credit

Administration Department and Recovery and
Legal Affairs Department.

Asset and Liability/ Balance Sheet Risk

Asset Liability Committee (ALCO)

Foreign Exchange Risk

International Division and Treasury Division

Money Laundering Risk

Internal Control and Compliance Department

of Head Office and BAMELCO (Branch AntiMoney Laundering Officer)

8. Ethics & CSR

8.1. Compliance approach to business ethics
The bank believes that in its efforts to become a leading bank in the private sector,
maintaining ethical standard is important. Strictly follow ethical banking practice is its main
ethical principles. It believes in transparency in operations and governance with fair treatment
to all of its customers.
Despite banks lofty aim to follow a ethical culture approach, its business ethics are guided by
compliance approach. Banking industry is highly regulated industry and any unethical
approach is punished severely by the bank. The activities of the officials are monitored on
regular interval through internal audit under internal control and compliance department
which act as ethics compliance office. The bank even conducts ethics training for its
employees from time to time. So, its ethical practices fall under the category of compliance
approach.

8.2. Corporate Social Responsibility (CSR)

29

The CSR activities of the bank mainly include scholarship programme for school, college &
graduate level students managed by Southeast bank foundation. Besides, there is assistance in
medical treatment for individual as well as in other fields. Total spending of the bank in these
stated areas was Tk. 2.27 crore (Details enclosed as annexure-II).
The CSR activity of the bank is done voluntarily though it helps in building brand image of
the bank. However, there is a traditional belief by many that banks CSR activities are directed
towards gaining tax rebate which is completely baseless. None of the banks were able to get
tax rebate in 2012-13 due to cumbersome laws of NBR. Majority portion of the banks CSR
activities are spent on education and continue to be same as there was directive by
Bangladesh bank to spent at least 30% of CSR spending in this area.

9. Corporate Culture and Leadership

9.1. Corporate Culture
The culture of Southeast Bank Limited is partly manifested in its values & business
principles. Being a financial institution, it is mandatory for the bank to pursue transparency in
every act. The bank issues different circulars & guidelines for moral practices in everyday
activities of the employees. The values such as integrity, fairness, courtesy, service excellence
are often talked and preached by the higher Executives and Branch Managers. There is a
common preaching in the bank that one can get away with mistakes but not with unfair means
or financial scam. So, employees have demonstrated their honesty over the years.
The company culture is tried to be perpetuated through senior management efforts to
reinforce core values with preaching and storytelling. There are training programmes held at
the training institute of the bank on issues such as avoiding malpractices of the bank.
The focused differentiation which is the business strategy of the bank requires service
excellence. So, a culture is being tried to be developed to enroot this value into each and
every employee of the bank. From branch level, Managers try to reward employees, who
display cultural ideals, with promotion and incentive bonus.
The Bank also believes in gender equality and recruited large number of woman employees
in recent years though at the lower grade.
However, one of the major drawbacks of the bank is unfair recruitment in the early years of
the bank. The bank being established by directors who are mostly from Feni region
generously employed their relatives in the bank with little concern for quality of the
recruitment. These recruitments are still proving costly for the bank. It is ironical that bank
believes human resource is its most precious asset and yet they tinted this asset by unfair
recruitment policy. These recruitments are also a threat for developing a corporate culture in
the bank. Though in recent years the bank is following an impersonal recruitment policy, it
would take some time to balance the human resource cost as well as align these employees
30

(nepotism based recruitment) with its strategy execution with an aim to achieve service
excellence.

9.2. Leadership
The Managing Director of Southeast Bank Limited plays the role of corporate leader of the
bank. Present Managing Director is a dynamic person under whose leadership the bank is
displaying better performance even at this slow growth phase for the industry. One notable
change he brought is participation of employees to provide information regarding problems
of different levels.
Different sets of questionnaires are provided on regular intervals for opinion of the
employees on different issues. There is quarterly business meeting involving all head of
branches to review their performance. He also reorganized the role of research and training
institute to strengthen existing competencies of the bank as well as turning several activities
into competencies by enhancing knowledge level of the employees. Ethical practices are
encouraged by him and any violation of it is strictly punished and circulated amongst
employees through circular. Managing Director is aided by one Additional Managing
Director and 5 deputy Managing Directors.
However, one barrier still exists for effective leadership. No doubt the present board of
directors are efficient and highly qualified in guiding the business. But they are too much
involved in decision making specially in financing related decisions which is a hindrance for
the management to work independently. The Banks performance may not that bad compared
to its competitors, but things could have been much better without interruptions of directors
in everyday banking.

Conclusion and Recommendations

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Southeast Bank Limited has the strength and opportunities to continue its success in future.
However, the Bank needs to respond to its weaknesses. The following strategic moves may
be made:
1. High cost deposit is a major problem for bank to sustain competitiveness. To overcome this
situation, low cost deposit may be mobilized by concentrating on the following:

Salary account of Big Firms / Teachers of nearby School, College, University /

Doctors of nearby Hospital, Clinic, Diagnostic Center

Remittance generated accounts

Identifying low-cost deposit basket & Opening of new accounts accordingly

Cash Management Service of Big Firms / Multinational Companies

Reversing existing policy that branches will get 0.50% higher return that the
maximum rate of FDR for idle deposit. The policy should be rectified to such that
branches would not have any incentives for high cost deposit mobilization.

2. The Bank must continue to strengthen its capital base. The fixed assets of the bank have
increased considerably. According to new directives of Bangladesh Bank, bank can maintain
fixed asset no more than 30% of its capital base. So, bank cannot increase its asset unless
capital base is increased.
3. Special attention to be provided so that existing employees are not lost to the rivals
4. Marketing activities to be conducted from corporate office as well as from branches. The
corporate assets to be originated and nurtured primarily from corporate office
5. Training Institute to be developed and equipped properly

In short, the Strategic Management of SEBL should aim at attaining long-term

competitiveness in the industry rather than focusing too much on current financial gain.

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