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Hello. My name is Alex Coad,
and today we will be looking at the case on "Banco de la Gente"
and how to withstand competition and not perish trying.
Banco de la Gente, by the way,
is a fictitious name although the case is
a realistic representation of the challenges faced in the Peruvian banking sector.
It all started on a Monday morning in February 2016 when Renato Uribe,
CEO of Banco de la Gente,
got news of a strategic shift by
BCP and Scotiabank regarding their segmentation strategy.
These heavy weight banks were no longer focusing on large corporate companies,
but were also also making plans to include
small and medium-sized enterprises as part of their core segments.
This was troubling news for Banco de la Gente.
It meant a direct competitive threat.
Banco de la Gente would have to draw on its experience in
the small and medium-sized firms segment if it wanted to
compete with these new viables and their impressive financial strength.
Experience in the sector is an advantage,
of course, but how much do customers appreciate it?
Renato Uribe, the CEO,
called for an urgent meeting to discuss the available strategic options.
To begin, let's have a look at the Peruvian banking sector.
The banking sector in Peru is characterized by total assets of
$115 billion and the total credit portfolio of $66 billion.
This is split between 17 active banks.
However, there are also many different banks in
the Peruvian financial industry including non-bank financial institutions,
state-owned non-bank financial institutions,
and specialized leasing companies.
These latter attend mainly to
small and micro-sized enterprises as well as the natural persons.
Banco de la Gente's competitors are the other banks.
There were three clearly differentiated types of banks in the banking sector.
First of all, there are universal banks and
then there are pure commercial banks as well as retail banks.
BCP and Scotiabank are both from the category of universal banks,
which is the category of large banks that together
account for 83 percent of the total credit portfolio.
These giants offer commercial banking to companies and
natural persons as well as providing services of investment banking,
funds management and asset management.
BCP and Scotiabank therefore constitutes a formidable competitive threat.
Respectively, they account for 34 percent and 16 percent of the market share occupying
the first and third positions in the ranking of
Peruvian banks in terms of total credit portfolio.
In particular, they can draw on
the financial resources in the deep pockets of their holding companies.
The pure commercial banks also cater to companies and natural persons,
while the retail banks only offer banking services to natural persons.
In comparison, Banco de la Gente had a market share of only 2.8 percent.