Swot analysis of banking industry

Written by john p. gross
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Swot analysis of banking industry
A banking industry SWOT analysis could look like this. (Chart analysis image by Dmitriy Lesnyak from Fotolia.com)

SWOT analyses take into account the strengths, weaknesses, opportunities and threats facing a business, organisation or operation, in terms of serving customers, stakeholders and their own employees. A SWOT analysis of the banking industry will list these four components and illustrate for executives and management the areas the industry is performing well in not so well in. The SWOT also highlights the areas where there is opportunity to develop further and areas where there is potential to be hurt in the future.

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Strengths

The "Strengths" portion of the banking industry’s SWOT analysis is a list of the internal operational elements where the banking industry is succeeding or excelling. These elements need to refer to features the industry can control and has a direct power to change. For example, the banking industry’s strengths can include record-high annual returns, diversified investment portfolio offerings, decreases in transaction and trading fees, an increase in the number of ATM machines and increased market share.

Weaknesses

The "Weaknesses" element of the banking industry’s SWOT analysis is a list of the internal operational elements the banking industry needs to improve upon. These elements need to refer to features the industry can control and has a direct power to change. For example, the banking industry's weaknesses can include high loan rates, low bond credit ratings, an increased number of outstanding junk bonds, an increase in loan-sharking activity and an increased number of high-risk investment options.

Opportunities

The "Opportunities" part of the banking industry’s SWOT analysis is a list of the external environmental elements the banking industry can potentially take advantage of in the near future or long-term. These external environmental elements should not reflect the internal components of the industry, but rather the factors or features outside the industry’s control. For example, the banking industry’s opportunities can include a growing economy, banking deregulation, increased client borrowing, an increase in the number of banks, an increase in the money supply, low government-set credit rates and larger customer current account balances.

Threats

The "Threats" component of the banking industry’s SWOT analysis is a list of the external environmental elements that can potentially harm the banking industry. These external environmental elements do not reflect the internal components of the industry, but the factors or features outside the industry’s control. For example, the banking industry’s threats could include a declining economy, increased banking regulations, larger capital gains taxes, new high-risk investment vehicles or higher health care costs. It’s important to realise these examples are not black and white. For example, “new high-risk investment vehicles” are inherently a liability because they include increased risk, but depending on the financial stake and position, it could be an opportunity or threat.

Designing the SWOT Analysis Chart

SWOT analyses feature a two-by-two chart, where one of the four topics is listed in one of the four boxes. Strengths and weaknesses appear in the top row, with the strengths on the left and weaknesses on the right. Opportunities and threats appear in the bottom row, with opportunities on the left and threats on the right.

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