Financial Services

Tutorial “3”

Financial Instruments Financial Markets Financial Institutions

Commercial Banks

Retail Banking Investment Banking Corporate Banking

Wealth
Private Banking Management

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 Commercial banks are the main financial institutions operating in all major
international financial systems.

 Retail Banking: Also known as consumer-banking , is a typical mass-market in

which individual customers use local branches of larger commercial banks.

 Service offered include;

Savings and checking accounts , mortgages,personal loans,debit /credit card and
certificates of deposit (CDs).

 Checking & saving account: customers are generally charged a monthly fee for
checking accounts,savings account offers slightly higher interest rates than
checking accounts.

 Credit cards: The high interest rates charged on most credit cards make this a
lucrative source of interest income for banks.

 Foreign Currency services: The increase in cross-boarder banking transactions

by retail clients and higher spreads on currencies paid by them ,make these
services a profitable offering for retail banking.

 Automobile financing: Banks offer loans for new and used vehicles,as well as
refinancing for existing car loans.

 Objectives of Retail Banking

The following are some of the aims of retail banking.

 Provide consumers with a one-stop-shop experience:

Retail banking attempts to provide a full range of financial services to a wide range of
customers in one convenient location. It’s a one-stop-shop for clients who don’t want
to switch banks. Accept depositing, credit card disposal, cash management, online
banking, debit card, MasterCard, and a variety of other services are among them. The
integration of these services in one location provides added convenience to the client.

 One of the essential tasks that retail banking plays are to stimulate the
economy.

It stimulates the economy by boosting the movement of money between people,

resulting in the country’s overall growth and development. The availability of greater
monetary services has an impact on voters’ capacity to find work, acquire skills, and
get access to educational opportunities.

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 Provide Consumers with Tailored Services:

Retail banking provides maximum happiness to customers by providing services that

are tailored to their needs. It tailors monetary services to people’s abilities and
preferences. Customers are happier when they get access to personalised services
from their personal bankers.

 Improve Market Liquidity:

Another important goal of retail banking is to increase market liquidity. It gives credit
facilities to people, allowing them to acquire expensive items with ease. By increasing
cash flow, the market’s liquidity situation improves, resulting in more job chances.

 Provide Credit at a Reasonable Rate:

People can get credit at a lower cost through retail banking than they can through
other financial institutions. It modifies the rate of borrowing in accordance with
economic considerations. Interest rates are increased during periods of inflation and
then reduced whenever the economy enters a period of depression.

 Functions of Retail Banking

The following will help you understand the many functions of retail banking:

 Providing a secure location for cash deposits

Customers can deposit money and other important financial items at a retail bank,
which is a secure location. They entice customers to deposit money by promising a
higher rate of return and ensuring the safety of their investment. People are therefore
encouraged to put their ideal laying cash in financial institutions in order to receive
interest.

 Providing credits for Spending

These financial institutions provide credit to their consumers based on their credit
scores. Consumer spending is facilitated by retail banks’ provision of various sorts of
loans, including house loans, vehicle loans, mortgages, and a variety of other products.
The availability of credit allows consumers to spend their future profits now,
increasing the economy’s liquidity rate.

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 Finance Management

Customers may manage their money utilising a variety of bank cards and online
utility services through retail banking. They may quickly use their money to do
transactions utilising online payment systems at any moment. Customers do not need
to physically visit their branch and may access their accounts from the comfort of
their own homes.

 Increases monetary flow in the economy

It contributes to the efficient generation of money in the economy. A customer’s loan

from one bank becomes a deposit at another bank. This deposit is now being utilised
to extend more credit to a new group of clients. In this way, the loan and depositing
cycle continues, resulting in a sufficient amount of money in an economy.

 Assists With Economic Revitalization

The retail bank plays an important part in the nation’s economic recovery. It enables a
better flow of money in the market by providing individuals with loans at a minimal
rate of interest. When individuals have enough money, they can easily carry out
manufacturing activities, which results in economic growth.

 Note: One of the biggest trends in retail banking today is the shift to mobile
and online banking. Specifically, banks are adding more tools and features,
such as the ability to put temporary holds on cards, view recurring charges,
or scan a fingerprint to log into an account, to retain their existing
customers and attract new ones.

 Retail banking clients may also be offered the following services, generally
through another division or affiliate of the bank:

 Private Banking :
Private Banking, as the name clearly implies, entails extremely specialized banking.
This is primarily targeted at High Net Worth Individuals and would also cover
investment banking and wealth management. For instance, high-net-worth individuals
may want specialized banking that takes tax liabilities and portfolio diversification
into account. Private banking would then enter the scene at this point. Private banking
is a highly customized kind of banking, and banks offer the highest level of service in
this area.
 On the contrary, Retail banking encompasses almost every aspect of banking that
people do on a daily basis. This includes credit cards, fixed deposit overdrafts,
savings accounts, personal loans, and credit cards. Therefore, practically all facets
of daily banking are covered by retail banking.

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 Wealth Management:

It is an investment advisory service that mixes various other financial services to meet
the requirements of wealthy clients. Through the implementation of the consultative
technique, the advisor learns more about the client’s particular demands and specific
situation, and formulates a customized plan, using a wide variety of financial services
and products.

Within wealth management, a holistic strategy is frequently used. A wide range of

services, including tax services, investment advice, estate planning, accountancy, and
retirement, may be offered to fulfill the complex demands of a client.

While fee structures for complete wealth management services vary, fees are often
determined by the assets that a client has under management.

 (The fee is a % of the client’s assets).

 Corporate Banking:

Corporate banking, also known as business banking, typically serves a diverse

clientele, ranging from small- to mid-sized local businesses with a few million
dollars in revenue to large conglomerates with billions in sales.

 Corporate banking under the umbrella of commercial banks offers the following
products and services to corporations and other financial institutions:

 Loans & other credit products: This is typically the biggest of business within
corporate banking.

 Equipment lending : Commercial banks structure customized loans and and

leases for a range of equipment used by companies in diverse sectors such as
transportation ,manufacturing and IT.

 Trade Finance: involves letter of credit.

 Commercial real estate: Services offered by banks in this area include portfolio
analysis, debt & equity structuring real estate analysis.

 Treasury and cash management services: used by companies for managing

their working capital and currency conversion requirements.

 Employer services: such as payroll and group retirement plans are typically
offered by specialized affiliates of bank.

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 Investment Banking:

Investment banking is a type of banking that organizes large, complex financial

transactions such as mergers or initial public offering (IPO) underwriting. These
banks may raise money for companies in a variety of ways,
including underwriting the issuance of new securities for a corporation, municipality,
or other institution. They may manage a corporation's IPO. Investment banks also
provide advice in mergers, acquisitions, and reorganizations.

 In essence, investment bankers are experts who have their fingers on the pulse of
the current investment climate. They help their clients navigate the complex
world of high finance.

 Investment banking deals primarily with raising money for companies,

governments, and other entities.
 Investment banking activities include underwriting new debt and equity
securities for all types of corporations.
 Investment banks will also facilitate mergers and
acquisitions, reorganizations, and broker trades for institutions and private
investors.
 Investment bankers work with corporations, governments, and other groups.
They plan and manage the financial aspects of large projects.

 Note: Commercial banks can only trade securities but not with the same
strength of investment banks and does not have the same roles of investment
banks.

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Barclay’s Case study:

05 October 2016
Cairo - Barclays Bank PLC (“Barclays”) has today agreed to sell its Retail and
Corporate Banking business in Egypt (“Barclays Bank Egypt”) to Attijariwafa Bank
S.A.
Barclays Bank Egypt has approximately 1500 employees and 56 branches.
Completion is subject to, among other things, regulatory approvals, and is currently
expected to occur by the end of 2016.
Jes Staley, Barclays Group CEO, said “I am pleased to be announcing further
reduction in our Non-Core business. Today’s announcement demonstrates our
continued focus on improving the Group’s returns and our ability to execute our
strategy quickly.”
“I want to take this opportunity to thank our colleagues in Egypt. It is their hard work,
professionalism and strong customer and client relationships that have made this
business so attractive to Attijariwafa Bank.”
Halla Sakr, Managing Director, Barclays Bank Egypt commented “Upon reaching this
important milestone, our primary focus as Barclays Egypt Management
is to ensure that the transition to Attijariwafa Bank is seamless and smooth. The
strong interest in Barclays Egypt is a testament to the high quality of our business,
portfolio and talent. We remain committed to fully servicing our clients and
customers. All Barclays employees will be diligently looking after the integration
process towards an efficient completion.”
About Barclays
Barclays is a transatlantic consumer, corporate and investment bank offering products
and services across personal, corporate and investment banking, credit cards and
wealth management, with a strong presence in our two home markets of the UK and
the US.
With over 325 years of history and expertise in banking, Barclays operates in over 40
countries and employs approximately 130,000 people. Barclays moves, lends, invests
and protects money for customers and clients worldwide.

Read the following case and answer the following questions:

1-Discuss the different functions of the retail banking business of Barclays.
2-Differentiate between the corporate banking and retail banking services offered by
Barclays bank.
3-List points on the difference between investment banking and commercial banking
in essence of Barclays bank.