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IDFC BANK STRATEGY
JULY 27, 2016
INDEX
1. Context and Direction 4‐7
2. Retail Banking 8‐21
3. Corporate Banking 22‐30
4. Transformation Road Map : Goals for FY17 31‐35
4
1. CONTEXT AND DIRECTION
5
Extreme Concentration of Banking Credit
Top 300 Corporates (and even fewer groups) account for more than 45% of banking credit
As on March 31, 2016 (RBI Data)Category INR Crore %
Corporate 32,85,812 50%SME 9,85,932 15%Retail 13,92,216 21%Agri 8,82,942 13%Total 65,46,902 100%
Corporate 50%
SME 15%
Retail 21%
Agri14%
Banking Credit – Non Food as on March 31, 2016
6
Extreme Concentration of Banking System’s Depositary Franchise
F inancial Phys i cal Total2014‐15 7.5 11.1 18.7 40%
YearHouseho ld Sav ings as a %
GDPFinancia l as % of Tota l
Proportion of Household Financial Savings Declining
Metro and urban CASA depositFY15, Rs. '000 Cr (Mckinsey Data)
Overall 2,073 100% Overall 2,073 100%Mass Market (and below) 288 14% Top 50 1,679 81%Mass Affluent/ Affluent/ HNI 1,784 86%
7
1 2 3 4 5 6 7 8 9 10
Asset Yield and Cost of Funds (%)
Asset Yield % Cost of Funds %
ILLUSTRATIVE
Strategic Direction : Building a Mass Retail Bank
Given previous context, our goal is to penetrate progressively deeper into the customer base on both sides of the balance sheet
Retail Banking
1. Rapidly increase retail share in total advances across all customer segments to raise average asset yield
2. Pursue cost effective acquisition at scale especially of mass affluent and mass retail customers for deposit mobilisation to bring down cost of funds
Corporate Banking
3. Diversification of corporate customer base beyond large corporate segment to raise spreads
4. Diversification of corporate banking revenues beyond funded products to non‐funded and fee based sources to improve RoAs
Time
1 2 3 4 5
Non‐Funded and Fee Based Revenues
Non‐Funded/ Funded Share of fee based revenue in total corporate revenue
ILLUSTRATIVE Time
8
2. RETAIL BANKING
9
Introduction
A. What customer segments are we targeting?
B. How are we acquiring customers?
C. How are we managing costs?
D. What have we achieved so far?
10
A. Penetrating the retail customer base : what segments are we focused on?
Bharat Plus
Bharat
Affluent
Mass Affluent
Mass Market
Focus on self employed Business Banking (less than INR 75 crore turnover)
Focus on Salaried
Focus on self employed MSME
Focus on self employed women
11
B. Customer Acquisition : How are we going about it?
B. 1. By filling identified product and service gaps within our targeted customer segments
B. 2. Through judicious use of price incentives
12
B. 1. Acquiring customers by addressing product and service gaps
Segment Gap Solution
Affluent (Business Banking)
Customer not recognised as one for personal and business needs
Truly one account (integrated CA + SA offering)
Standardized products that do not address customer needs
World business account – single account for domestic and international transactions
Bulk cash handling Door‐Step‐Banking
Mass Affluent (Salaried)
Cumbersome paper based processes Aadhaar based account opening in minutes
Standardised asset products without consideration for earnings and savings
profile
Differentiated “Booster” home loan where EMIs are tailored flexibly to changing customer
cash flows
Mass Market (MSME and women)
Last mile access Mobile tablet enabled sales force and BC partners providing last mile connectivity. RSD, first in industry, available from August 2016
Illustrative and not comprehensive list
13
B. 2. Acquiring customers through price incentives
Segment Product/ Feature Pricing/ Benefit
All FD 8.25% p.a. rate; no charges for early withdrawal; free sweep‐in to SA in case of shortfall
Affluent and Mass Affluent
Debit card Unlimited free ATM transactions; lost card protection 48 hours prior to reporting; Cash‐back, accident insurance, Bookmyshow.com and a host
of other benefits
Affluent and Mass Affluent
Mortgage “Short and Sweet” and “Max Saver” home loans which offer attractive price benefits to customers
Mass Market Loan Products JLG, MEL and Vehicle Loans at lower rates than typical non‐bank competitor
Illustrative and not comprehensive listJLG – Joint Liability GroupMEL – Micro Enterprise Loan
14
ATM’s / E Lobbies
Banker On Call
Mobile App
Door Step Banking
Internet Banking
FoS/ RM
Micro ATM’s
Branch
C. Customer connect : How are we managing the cost of acquiring and servicing the customers?
A branch agnostic architecture allows us to :1. Significantly reduce the number of bank branches per customer2. Significantly reduce the number of bank employees per customer
BC/ DSA
15
No need to wait ‐ Choose your own user name and
set/ change passwords online
Full transaction capability for assets and liabilities
Full Service capability for assets and liabilities
Full service capability for Business needs
Pay 200+ bills from the comfort of your home, with
Bill Pay Online
Digital Banking – As Good as Best‐in‐Class
Internet Banking
By end September will have Straight‐through‐Processing – can open an account without meeting anyone
Mobile Banking
Simple, Easy and Secure
Perform over 40 types of transactions on Phone –
comparable to the best in the market place
Manage your transaction limits yourself
Pay Bills, View statements, book deposits, transfer funds,
Add nominees, block debit card, recharge mobiles, order
cheque books and many more
16
Door Step Banking for Bharat Plus
Full service coverage – Cash pick up, cheque pick up and document
pick up
17
Micro ATMs (Bank‐in‐a‐Box) for Bharat
• Kirana stores offering services for bank &non bank customers
• Withdrawals, deposits, balance enquiry• Service requests• Remittances• Collection of EMIs
• Aadhaar and Card based transactionspossible
• Implementation of government schemesand their last mile availability to customers
• Social Security Pension schemes,• Cashless Public Distribution System(PDS)• Direct Benefits Transfer
18
BC, FoS, RM and DSA
BC, FoS, RM & DSA
Physically reaching out vast geographical coverage withoutcreating incremental physical infrastructure
BranchMicro‐ATM BC
Micro‐ATM BC
Micro‐ATM BC
Hoshangabad District
RM/ FoS
RM/ FoS
South Mumbai
Sales Hub
FoS
Sales Hub
FoS
19
D. What have we achieved so far?
Network
408 Points of Presence across 5 states, 22
districts and 15 cities.
No. of customers• ~60k direct customers • Monthly run rate of 14000 (11000 Bharat and 3000 Bharat Plus)
June ‘16 customer acquisition run rate at ~14,000 p.m. (11,000 Bharat and 3000 Bharat Plus)
With only 65 branches reach
extended through 330 Micro-ATMs, 14
e-Lobbies
1st bank in India to do Cashless DBT – successfully tested it in Krishna district with over 200 PDS points allottedto IDFC Bank
Over 1,00,000 acquirer transactions recorded in June 2016 making IDFC Bank as the market leader in acquiringtransactions in the Micro‐ ATM channel with 22% market share‐ ahead of SBI, Bank of Baroda, PNB & others
First bank to offer instant FD and RD account opening on Micro‐ATM
20
D. What have we achieved so far?
Assets
• ~4500 crore of Advances (including on‐lending and PTCs )
Segment (INR)CASA percustomer
TD per customer
Bharat 2,346 1,10,000
Bharat Plus 94,212 6,53,061
Liabilities
• 412 crore of term deposits• 123 crore CASA
21
D. What have we achieved so far?
Product BusinessBanking
Affluent & Mass Affluent
Mass Market
Secured Assets
‐Working Capital √ NA √
‐ CV , 2 wheelers √ NA √
‐Mortgage , LAP √ √ √
‐ EHL NA NA √
‐ Digital Credit √ √
Unsecured Assets
‐ PL/BIL/JLG / MEL √ √ √
Liabilities
‐ CA √ NA NA
‐ SA √ √ √
‐ TD √ √ √
Fee Products
‐Wealth ( Insurance , MF etc.) √ √ √
‐ Trade & Cash √ NA NA
‐ FX √ NA NA
‐ Payment Solutions, Bill Pay, Debit Card √ √ √EHL ‐ Equipment Hypothecation Loan; PL – Personal Loan; BIL – Business Instalment Loan; JLG – Joint Liability Group; CV – Commercial Vehicles , MEL – Micro Enterprise Loans
Comprehensive Product Suite
22
3. CORPORATE BANKING
23
Introduction
A. Diversifying customers beyond the large corporate segment
B. Diversifying revenues beyond funded products : how are we competing?
C. What have we achieved so far?
24
A. Diversifying customers beyond the large corporate segment
> Rs. 1750crore
Turnover
Rs 500 – 1750 croreTurnover
Mid‐Market
Rs 75 – 500 croreTurnoverSMEs
Government Banking
Large Corporate Infra and Non‐Infra
Special focus on expanding the share of mid‐market, SME and Government Banking customer segments
25
B. Diversifying revenues beyond funded products : How are we competing?
B. 1. Comprehensive product suite
B. 2. Customised solutions for transaction banking (Cash, Trade and Corporate Linked Finance)
B. 3. Customer friendly technology interface
26
B. 1. Comprehensive Product SuiteCUSTOMER SEGMENT TURNOVER Rs. Cr KEY PRODUCTS
Large Corporate
Infra(>1750)
• Project Finance• Escrow /LC/BG• DCM
Non‐Infra(>1750)
• Working Capital, Term Loans• FX & DCM• Investment Banking• LC, CMS, CLF
Mid Market 500‐1750
• Working Capital & Term Loans• FX & DCM• ECM & Private Equity• Trade, CMS, CLF
SME 75‐500
• Working Capital & Term Loans(selective basis)
• FX conversions• CLF & Trade
Government Banking• E Governance Initiatives• CMS
Special focus on cash, trade, FX and treasury products
27
B. 2. Customized solutions (Cash Management)
Receivables Mandates Payables Mandates
1. Utility company• Drop box collection for utility payments• Geo‐Tagging of 62+drop boxes enabling real
time tracking• Centralized reporting and control over
collections
2. University• Online fee collections mechanism• Supported by Virtual Accounts for IMPS based
collections• Enriched MIS for ease of reconciliation
3. Hospital chain• Cash collections across multiple hospitals• Multiple pick ups during the day• Secured mechanism
1. Consumer durable• Online Cheque printing and dispatch for
payments• Pan India mandate for refund of a scheme• Electronic payouts using NEFT/RTGS
2. Retail chain• Managing entire Utility bill payments pan India• Single solution for physical and online bill
payments• Paper to electronic solutioning for client
reducing cost of oeprations
3. Super Bazaar• IMPS based payments to fish farmers• Digitization of cash and reduced cost of
operations• Simplified account reconciliation
28
B. 2. Customized solutions (Trade & Corporate Linked Finance)
1. Oil and Gas Major • About 12% of Letter of Credit wallet• Targeting Dealer Finance share of 20% • WIP‐ 50% share of Vendor Finance
4. Conglomerate• About 13% of Letter of Credit Wallet• Vendor Finance deal in progress
5. South based group• Buyer’s Credit structures• Receivable Purchase Deal
7. Airline• Stand by LC and LC structures • Trade limit wallet share of about 7 %
3. Conglomerate • Entertainment : About 40% of Buyer’s Credit
Wallet• Infra : Structured LC for Coal Purchase• Consumer durable : Standby LC and Exports
solutions
2. Infrastructure player• PO Based LC issuance solution• Structuring of Import transactions• About 20% of the LC/BC wallet
6. Engineering major• For a division about 6% of Bank Guarantee
wallet• In process to take it to 16%
29
B. 3. Customer friendly technology interface
Integrated platform for:• Cash• Trade & Supply Chain (CLF)• Treasury
Unified Dashboard for IDFC Bank and other bank accounts
Single view for Authorized Signatory for multiple group entities
Addresses all payments, trade and FX needs on a single platform
Facilitates design of own dashboards
Business eXperience Platform
30
C. What have we achieved so far?
• Traction on customer acquisition – 663 customers as on June 30, 2016 with 190 new to bank customers in Q1 FY17. Of 663, 74 are SME and 78 are Government/ Transaction Banking customers.
• 89 unique clients for cash management and 150 active customers for trade and CLF
• In a tepid environment for corporate credit growth, funded credit grew 4% q‐o‐q
• Non‐funded to funded volumes ~13%• Franchise based fee income (from clients) gaining momentum – at 40% of
non‐interest income and at 10% of operating income in Q1 FY17• Trade assets of over USD 1 billion
31
4. TRANSFORMATION ROADMAP : GOALS FOR FY17
32
Introduction
A. Bank Network
B. Retail Banking
C. Corporate Banking
33
Branches (74)
Micro ATMs (1000)
GVMFL network (306 branches in 6 states)
Empanelled business correspondents (~ 30 dedicated branches)
Bank Network : 1400 points of presence pan India by March 31, 2017
~ 1400 Points of Presence in 10 states, 55 districts and 20 cities
34
Retail Banking
1. Customers acquired : ~1.5 million customers including customers from Grama Vidiyalacquisition
2. Retail share of Advances : ~ Rs. 18000 crore ofdirect and indirect retail advances which will be ~20% of bank’s total advances
3. Retail share of Liabilities : ~ Rs. 2800 crore ofretail deposits which will be ~12% of total deposits of the bank
35
Corporate Banking
1. Segment Diversification : A. 25% of advances outside of large corporates;B. Mid‐corporate and SME to contribute ~5% to funded credit
2. Revenue Diversification : A. Non‐Fund/ Fund volumes ~20%B. Franchise based fee income to contribute a third to non‐interest
incomeC. 10% contribution from fees in total corporate revenues
Thank You