Symbiosis Institute of Management, Khadki 

Pune -Maharashtra  
 

Introduction to Financial Markets and Institutions

ASSIGNMENT NO: 1 
 
 
 
Report  
on 
CORPORATE BANKING
 
 

Prof. Name:  Prof. Aneesh Day

 
Course/ Program and Batch: MBA Executive Batch B 
 
 
Prepared By: 

Vipul Trivedi 19020448069 

Abhishek Ranjan 19020448080
Shreya Maske 19020448084
Jhilik Pradhan 19020448094
Lalit Bhonge 19020448151

 
 
 
Date of submission:  15-August-2020  
 
Submitted to SMS Portal (word doc) and via e-Mail
  

CORPORATE BANKING: AN OVERVIEW

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 According to American author and humorist Mark Twain “A banker is a fellow who lends his
umbrella when the sun is shining and wants it back the minute it begins to rain.” Many troubled
businesses seeding credit in recent years might agree with Mr. Twain. Indeed securing the large
amounts of credit that many businesses require can be a complicated and challenging task loan
requests. Moreover, business loans, often called commercial and industrial loans, rank among the
most important assets that commercial banks and their closest competitors hold.

Corporate banking is the tailor-made financial services that financial institutions offer to
corporations in the context of corporate financing and raise capital. Typically, corporate banking
is a specialized division of a commercial bank that offers various banking solutions, such as
credit management, asset management, cash management, and underwriting to large corporations
as well as to small and medium-sized enterprises (SMEs).

Corporate banking, also

known as business banking,
typically serves a diverse
clientele, ranging from small-
to mid-sized local businesses
with a few million in revenue
to large conglomerates with
billions in sales and offices
across the country.

Corporate banking represents

the wide range of banking and
financial services provided to
domestic and international
operations of large local
corporate and local operations of multinational corporations. Services include access to
commercial banking products, including working capital facilities such as domestic and
international trade operations and funding channel financing in foreign and overdrafts as well as
domestic and international payments, INR term loans (including external commercial borrowings
in foreign currency), letters of guarantee, etc.

Corporate banking services are an integral part of the corporate investment, Banking and markets
(CIBM) structure, which focuses on offering a full range of services to multinational, large
domestic corporate and institutional clients. The investments banking and markets division
brings together the advisory and financing, equity securities, asset management, treasury and
capital markets, and private equity activities of the group to the complete the CIBM structure and
provide a complete range of financial products to the clients.

Corporate banking is a part of commercial banking but the part that average depositor with
deposits account never sees. It is a division of commercial banking which extends the financial
support to the corporate for helping them achieve their organizational goals and objectives.
While banks hold money and mortgages, lend money, extend or open up a line of credit for the
average depositors, it is business that needs major financial services to build plant, erect

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 buildings, make structural improvements on old ones and start new business ventures. This is one
of the most competitive, risky and financially lucrative areas of doing business in today’s world.

As a part of commercial banking, corporate banking is focused on analyzing and assessing the
risk of the business, establishing the creditworthiness of the business and trying to predict the
likelihood of success or failure of business endeavour. These are the professionals who help
decide what business initiatives will be taken and when, whether or not to expand the existing
businesses, help develop new markets so that new clients can be found and help develop new
products for e-commerce, the internet and the international market.

CHARACTERISTICS OF CORPORATE BANKING

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  1. Clientele

A bank’s business banking unit usually serves small to middle-sized businesses and large
conglomerates.

2. Authority

A company’s corporate banking accounts can only be opened after obtaining consensus from the
board of directors of the company. It means that they must be authorized by an official vote or a
corporate resolution. The company’s treasurer usually opens corporate accounts.

 3. Liability

Since companies are recognized as separate legal entities under the law, all contents of corporate
accounts are the property of the company and not of the individual board members. It means that
there is a certain degree of independence to corporate accounts. It also indicates that the personal
creditors of the board of directors are not entitled to the contents of the corporate account of a
company.

 4. Credit rating

The conduct or functioning of the corporate account forms part of the credit history of the
company. It affects the valuation and share prices of the company, the interest rates applicable to
loans extended to the company, etc.

 5. Bankers

Corporate banking requires a degree of expertise in the industry. Thus, corporate bankers are
extremely well paid. JP Morgan Chase, Bank of America Merrill Lynch, and Goldman Sachs are
some of the largest commercial banks in the world.

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 Corporate Banking Service
The product offerings are suitably structured

taking into account a client's risk profile and

specific needs. Based on superior product

delivery, industry benchmark service levels and

strong customer orientation, significant inroads

into the formal banking services have been

made

1. Credit

Loans and related credit products are offered to corporate customers. Credit facilities form the
largest share of profits for commercial banks. The interest rates imposed on the loans are
significantly high due to the amount of risk prevalent in lending to corporate customers.

2. Treasury services

Treasury services are used by companies to

manage their working capital requirements. Such
services are extremely important
for multinational companies as they facilitate
currency conversion.

 3. Fixed asset requirement financing

Fixed asset requirement financing services are important for corporates involved in capital-
intensive industries such as transportation, information technology, and heavy machinery

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 manufacturing. Banks facilitate customized loans and lease agreements for the purchase of
equipment, machinery, etc.

 4. Employer services

Commercial banks also provide services such as the selection of retirement plans and healthcare
plans, as well as payroll facilities, for employees.

 5. Commercial services

Banks also provide services such as portfolio analysis, leverage analysis, debt and equity
restructuring, analyses of real assets, etc. Other services that are of importance to corporate
clients include asset management services and underwriters for initial public offering (IPOs), etc.

The services are undertaken by the investment banking arm of the commercial bank. Investment
banking and corporate banking were separated under the provisions of the Glass-Steagall Act.

Corporate Banking Services

1. Credit
Loans and related credit products are offered to corporate customers. Credit facilities
form the largest share of profits for commercial banks. The interest rates imposed on
the loans are significantly high due to the amount of risk prevalent in lending to
corporate customers.

 
2. Treasury services

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 Treasury services are used by companies to manage their
working capital requirements. Such services are extremely
important for multinational companies as they facilitate
currency conversion.
 

3. Fixed asset requirement financing

Fixed asset requirement financing services are important for corporates involved in
capital-intensive industries such as transportation, information technology, and heavy
machinery manufacturing. Banks facilitate customized loans and lease agreements for
the purchase of equipment, machinery, etc.

4. Employer services
Commercial banks also provide services such as the selection of retirement plans and
healthcare plans, as well as payroll facilities, for employees.

5. Commercial services
Banks also provide services such as portfolio analysis, leverage analysis, debt and
equity restructuring, analyses of real assets, etc. Other services that are of importance
to corporate clients include asset management services and underwriters for initial
public offering (IPOs), etc.

The services are undertaken by the investment banking arm of the commercial bank.
Investment banking and corporate banking were separated under the provisions of
the Glass-Steagall Act.

Characteristics of Corporate Banking

1. Clientele

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 A bank’s business banking unit usually serves small to middle-sized businesses and
large conglomerates.

2. Authority
A company’s corporate banking accounts can only be opened after obtaining
consensus from the board of directors of the company. It means that they must be
authorized by an official vote or a corporate resolution. The company’s treasurer
usually opens corporate accounts.

 
3. Liability
Since companies are recognized as separate legal entities under the law, all contents of
corporate accounts are the property of the company and not of the individual board
members. It means that there is a certain degree of independence to corporate
accounts. It also indicates that the personal creditors of the board of directors are not
entitled to the contents of the corporate account of a company.

4. Credit rating
The conduct or functioning of the corporate account forms part of the credit history of
the company. It affects the valuation and share prices of the company, the interest
rates applicable to loans extended to the company, etc.

5. Bankers
Corporate banking requires a degree of expertise in the industry. Thus, corporate
bankers are extremely well paid. JP Morgan Chase, Bank of America Merrill Lynch,
and Goldman Sachs are some of the largest commercial banks in the world.

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 BASIS FOR
RETAIL BANKING CORPORATE BANKING
COMPARISON

Meaning Retail banking indicates that Corporate Banking implies that

division or unit of the bank division or unit of the bank
which deals with retail which handles large corporate
customers, to provide basic clients to provide specialized
banking services. banking services.

Nature of Products Standardized Tailor-made

and Services
offered

Customer/Client Large Small

base

Processing cost Low Comparatively High

Loan size Up to 5 crores More than 5 crores

Value of Lower value of transactions High value of transactions

transactions

Profitable Less Comparatively more

Key Differences Between Retail and Corporate Banking

The difference between retail and corporate banking can be drawn clearly on the
following grounds:

1. Retail Banking is a business model which the banks implement with the aim of
acquiring maximum customer base, by offering various products and services

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 to the individuals, and small business enterprises. Conversely, Corporate
banking is another business model adopted by the banking companies so as to
earn maximum revenue, by offering products and services to the business
enterprises and government agencies.
2. Under retail banking, the products and services offered to the customers are
usually standardized, also called as off-the-shelf products/services. As against,
under corporate banking, customized products and services are offered to the
clients, depending on their preferences and requirement.
3. Talking about the customer base, retail banking often brings a large customer
base to the banks, whereas corporate banking does not have a large customer
base but the clients are affluent.
4. In retail banking, the processing cost is low, whereas in the case of corporate
banking there is a high processing cost.
5. With retail banking, one can avail loan upto Rs. 5 crores only, depending on
factors like credit score, history, etc. In contrast, with corporate banking, the
entities can apply for a loan more the Rs. 5 crores.
6. Although the volume of transactions in terms of clientele, is high in retail
banking, but the value of transactions is low, because the customer base
includes individuals and small businesses such as sole proprietorships,
partnership firms, one-man company, etc. On the opposite side, the volume of
transactions is low in corporate banking, but the value is quite high, as the
client base includes business enterprises and high net worth individuals.
7. When it comes to profitability, corporate banking is more profitable in
comparison to the retail banking division of the banks.

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 Digitization in corporate banking:

-A digitized banking relationship increases customer touch points and cross-sell opportunities and provides a
bank with a better understanding of client transaction behaviors.

-Digitization also improves the customer experience by enabling flexibility, tailored services and fast response
times. Digital disruption, which began reshaping retail banking years ago, has finally come to corporate
banking. 

-The disruption started with new competition from digitally nimble fintechs (agile financial technologies) that
offered standalone products such as low-cost international transfers and supply-chain financing solutions.

-Such developments were followed by an accelerating wave of digital innovations—most notably involving
platforms, artificial intelligence, and blockchain—as well as by product and service enhancements generated in
response to clients’ changing expectations.

-The financial stakes are high for corporate banks, whose profitability varies significantly by region. Over the
next five years, we expect new digital platforms and channels to attract 30% of traditional corporate banking
revenues.

-In order to keep up, corporate banks need to undertake front-to-back digital transformations. Only those
institutions that manage this extraordinarily challenging transition will survive and thrive.

Corporate banks can get on the right trajectory by acting on the following four imperatives:

 Reinvent the customer journey:

Learn what matters most during critical points, and how key concerns vary among different customer
segments, to improve the overall experience.

 Discover the power of data:

Use data analytics to understand customers better, identify new business opportunities, and reduce
costs.

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  Redefine the operating model:
Alter the corporate banking relationship model to better account for shifting customer needs, and be
open to collaboration with industry partners.

 Build a digitally driven organization:

Clearly articulate that digital transformation is a strategic priority—and support that strategy with
appropriate funding, talent recruitment, openness to agile ways of working, and a willingness to take
risks.

Implementations / Examples of Digital Banking in the US

Banks need to draft a “Digital Strategy” to move and align with the digital wave. Each Banking services be it
in Corporate Banking or Cards and Payments now has a Digital Solution available. What Banks need to work
on is analyzing all aspects of Digitization and evolving truly as Digital Institution. Let’s take a closer look at
some of the banks in the US who followed banking trends and emerged victorious in serving tech-savvy
millennials.

American Express

AmEx or American Express is a brand that doesn’t

need an introduction in the US. Popularly known as
“premium brand” it has been one of the banks that
understand “How customer and relationship need to
be nurtured while offering comfort and
convenience.” An article covered by The Financial
Brand dictates some of the “good things” that make
AmEx a top choice in customers, sample these –

   Onboarding Simple and Quick

AmEx bid goodbye to long paper forms,
quick and easy onboarding process helps
in saving customer’s valuable time. In fact
the application for an American Express
card is so simple that it takes ~30 seconds.
Digitization Rocks!
 Compatible With All Devices
Is your Banking form only compatible
with Desktop? How about opening it on
Tab? AmEx made sure that all the screen
sizes and device compatibility is
applicable for the application form to
avoid any inconvenience to the customer
 Integration of Third Party Plugins
AmEx always shows its value to its
customers by displaying the comparison
chart and dictating the actual value

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 customer would derive. Does your banking software allow the customer to integrate with other
third-party plugins to compare and make informed decisions?
 Using Data effectively
AmEx uses data points not only to mitigate risks but also to detect fraud. Are you using your data
effectively? Above features may not be “newer innovations” but are making customer life more
straightforward and that’s what distinguish you from your competitor.

Wells Fargo

Wells Fargo another leading bank in the US who led the Digital Banking initiative implemented Balance
Scorecard [BSC] to track and measure the online financial services [OFS]. The case study that studies the
implementation in the year 1997 and 1998 came up with the following conclusions –

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 Challenges in corporate banking:

-The banking industry isn’t limited to loan financing and managing interest rates on savings accounts anymore.
It is changing into a more dynamic front with several pre-defined and highly specialized business processes
that go from customer onboarding all the way to customer service. 

-In the retail banking sector, banking entities now have to worry about social media presence as well as quick
grievance redressal systems before a complaint turns into a social media storm. 

-However, the challenges in the corporate banking sector are much different. Here, banks don’t just have to
manage their customers but also ensure that their strategic decisions fall in line with their current goals. Here
are some of the biggest challenges in corporate banking that could pose a threat to the banking companies.

-Digital revolution

About 15 years ago, having a website that could tell users about a bank’s offerings was considered to be an
online revolution. Since then, times have changed quickly, and a fully-functional, low downtime and highly
interactive website and app are considered the bottom line for any bank.

The roots of the digital revolution go deeper into an organization. 

For instance, the software used to facilitate transactions, cross-bank settlement systems, intra-bank settlement
systems, online services, etc. are important for banks now. Not only this, experimentation with blockchains, AI
and other emerging technologies are also becoming a sign of banks that are innovative and leading the industry
from the front. Other banks only follow the trends, and some not so effectively.

-Changing organizational structure

Banks are not only becoming more digital, but their organizational structures are changing drastically as well.
Now, banks’ business models are being driven by data, automation and secure cloud-based computing which is
demanding front-to-back transformation at companies. Not all banks are completely comfortable with this
change.

-Competition from startups

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 In the corporate banking sector, a startup with deep pockets, VC funding, and an innovative idea is nothing
short of a headache. Unfortunately for banks, the fintech industry is growing rapidly and creating more space
for corporate lenders who work in more technologically advanced ways and have leaner business models.

-Valuation problems

Acquisitions and mergers are two of the most important aspects of corporate banking. However, valuation
troubles always haunt banks in these situations. Regardless of the tag that a company decides for its
acquisitions, banks have to remain proactive, study the entire industrial outlook and then decide a viable and
feasible evaluation for a company that is being acquired or merged. As the acquisition is being financed in part
or whole by the bank, finding appropriate valuation is crucial.

-Creating a service identity

Banks are being bombarded with competition from left, right, and center. In the wake of these situations, the
least they can do is ensure that they maintain a brand image that revolves around the quality of their service as
well as their willingness to innovate in the face of challenges.