Conducting a SWOT analysis of a bank is identical to doing this analysis for any other type of product, industry, or company. A SWOT analysis is a business planning tool that is used to determine strengths, weaknesses, opportunities, and threats. The first two concepts describe internal factors, while the latter two focus on external forces. Competitor, industry, market trends and potential activity are all considered in the analysis.
When constructing a SWOT analysis of a bank it is sometimes easier to start with internal strengths and weaknesses. These can include attributes of a bank's products, services, management team, and organizational structure. For example, one of the strengths of a bank could be its brand name recognition. This may be on a national or regional scale and can make the new customer acquisition process less costly. In contrast, brand name recognition may also be a weakness if the institution was tied to a financial scandal or rumors of likely bank failure.
Since most banks and financial institutions tend to offer similar products, strengths and weaknesses are often linked to technological, service or strategic capabilities. Some banks design preferred packages for high-value customers who keep large deposit amounts in several accounts. These customers may receive exclusive discounts on loan products, fee waivers and increased interest earnings on investments. Their investment accounts may be serviced by other firms that the bank has a partnership agreement with due to its dominant market presence.
Other banks may position themselves on the strength of their personalized service or exclusive membership. For example, some public credit unions are only available to employees of school districts. In exchange for banking with the public credit union, account holders may have access to interest rate reductions on home and car loans that they wouldn't be able to obtain with commercial banks. Small banks often use the strength of being able to treat customers as a name and face rather than a number.
Opportunities and threats are external factors that are beyond a bank's control. Some of these factors can include legal regulations that may increase operating costs. In a SWOT analysis of a bank, such regulations are classified as a threat. For a small, local bank an example of a threat would be the market expansion of a national bank. The factors identified in a SWOT analysis will vary according to the size, nature, and location of the institution.
An important consideration when formulating a SWOT analysis of a bank is the presence of opportunities. These are external factors that a bank may be able to take advantage of to gain market share. For example, the advent of mobile phone technology opened up the door for banks to introduce mobile banking. Adding this capability to the bank's service offerings can give the customer convenience and flexibility and may even become an expectation among certain consumer segments.