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Positioned for growth in a challenging market
Axis Capital Conference, May 2019
NSE: AXISBANK BSE: 532215 LSE (GDR): AXB
Macro-Economic indicators point towards a tough market environment …
2
5.3%
4.5%3.8%
7.0%6.5%
4.8% 4.6%
8.4%
0.2%
2.5%
1.4%
0.1% -0.1%
-2%
0%
2%
4%
6%
8%
Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19
Contribution to IIP (%)
Consumer non-durables Consumer durables Infra./const. goods
Intermediate goods Capital goods Primary goods
FY19 GDP growth slowdown, capex contraction, moderate expected inflation, will provide space for monetary easing
3Source: MOSPI, Axis Bank Research
*FY19 GDP% based on 2nd Advance Estimates
5.5%
6.4%7.4%
8.0% 8.2%
7.2%7.0%
-2%
0%
2%
4%
6%
8%
10%
12%
Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
GDP Agriculture Industry Services
YoY%
GDP Growth Industrial Growth
%
5.0
9.2 9.9
6.8
7.8 5.52.8
3.4
3.2
14.6
20.4
18.6
FY17 FY18 FY19^
Adjusted non-food Bank Credit Non Bank Sources - Domestic Non Bank Sources - Foreign
Tight liquidity conditions have kept lending rates high, flow of financial resources slower despite rising bank loan growth
4
9.7%
8.7%
6.0%
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
11.0
Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19
WALR(Fresh Rupee Loans) MCLR Repo Rate [R]
Source: RBI, Axis Bank Research
Note: WALR: Weighted Average Lending Rate, MCLR: Marginal Cost of funds based Lending Rate
Bank lending rates Flow of Financial Resources to the Commercial Sector
^ April’18 till 15th Mar’19
Note: Figures in bracket represent % contribution to flow of financial resources
(34%)
(47%)
(19%)
(45%) (53%)
(38%) (30%)
(17%)
(17%)
All figures in ` Trillion
The Axis Bank Story – Recent Performance
5
Over the last 10 years, Axis Bank has built an enviable franchise
Balance Sheet CASA Deposits Advances Branches
Credit Cards Operating Profit Subsidiaries Brand
827
4,050
FY09 FY19
81,557
4,94,798
FY09 FY19
50% retail
20% retail50,644
2,43,394
FY09 FY19
4x
3,725
19,005
FY09 FY19
2.1%
10.2%
FY11 FY19
Market Share on spends
1,47,722
8,00,997
FY09 FY19
` crore
5x 6x 4x
5x 5x
` crore ` crore
` crore
6
36% 38%43% 45%
50%55%
61%
Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
33%38% 40% 41%
45% 47%50%
Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
68%
75%78%
81% 81%84%
81%
Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
The Bank has become increasingly Retail over these years
Share of Retail in Deposits Share of Retail in Advances Share of Retail in Fee Income
* Includes CASA and Retail TD
Retail Deposits* CAGR^ 17% Retail Advances CAGR^ 25% Retail Fees CAGR^ 21%
7
All numbers in ₹ bn
^ 6 year CAGR
65,497
88,028
1,11,932
1,38,521
1,67,993
2,06,464
2,45,812
Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
25% CAGR*
33%
38%
40%41%
45%47%
50%
Share of Retail Advances
54% 50% 48% 45% 44%40% 38%
18%15%
16%17% 16%
15%14%
11%
10%8% 9% 10%
11%11%
6%
6%7% 8% 8%
10% 12%
6%
7%7% 8% 8%
8% 9%
2%
2%2% 3% 4%
4% 5%1% 2% 3% 3%
3%10% 12% 9% 8% 9% 8%
Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
…with significant dispersion in mix over time
Home loans Rural lending Auto loans PL LAP CC SBB Others
The Retail Lending business has been built steadily and is now well diversified
* 6yr CAGR (FY13-FY19)
Retail Advances have shown strong growth…
3 core components of the Bank’s strategy in Retail Lending
Cross sell to existing deposit customers
Distribution through branches
Strong analytics engine driving underwriting
PL – Personal Loan, SBB – Small Business Banking, LAP – Loan against Property, CC – Credit Cards
All figures in ` Crores
8
5.0%6.5%
7.7% 8.4%
10.6%11.5%
12.7%
Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
3.9%5.8%
7.1%8.0% 8.7%
9.6% 10.2%
FY13 FY14 FY15 FY16 FY17 FY18 FY19
Credit Cards in Force – Market Share*
Credit Cards Spends – Market Share
Source: RBI Data Reports | *Market share based on average data for the year
The Cards business of the Bank has been a huge success over the last few years
Premium Cards
Co-branded Cards
Featured Cards
Market share has more than doubledover the last 6 years
9
10
However, the last 2-3 years have been extremely challenging for the Bank
1,179 1,2961,789
3,800
11,157
16,599
10,221
FY13 FY14 FY15 FY16 FY17 FY18 FY19
Provision for non-performing assets*
2,023 2,548 2,854
7,345
21,782
33,419
13,871
FY13 FY14 FY15 FY16 FY17 FY18 FY19
Gross Slippages
*including bad debts written off and write backs
All figures in ` Crores
11
During FY19, the Bank crossed the inflection point on this tough journey
5,179
6,218
7,358
8,224
3,679
276
4,677
FY13 FY14 FY15 FY16 FY17 FY18 FY19
1.06% 1.22% 1.34%1.67%
5.04%
6.77%
5.26%
0.32% 0.40% 0.44%0.70%
2.11%
3.40%
2.06%
Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
GNPA% NNPA%
All figures in ` Crores
Gross and Net NPA ratios have moderated Profit after tax improved in FY19
12
The asset quality challenges of recent years have largely been overcome
0.61% 0.62% 0.61%
1.11%
2.82%
3.57%
1.91%
FY13 FY14 FY15 FY16 FY17 FY18 FY19
27,411
19,685
8,9947,467
7.3%
4.7%
1.8%1.3%
-4.0%
-2.0%
0.0 %
2.0 %
4.0 %
6.0 %
8.0 %
0
500 0
100 00
150 00
200 00
250 00
300 00
Jun-16 Mar-17 Mar-18 Mar-19
As a % of Gross Customer Assets79% 78% 78%
72%
65% 65%
77%
FY13 FY14 FY15 FY16 FY17 FY18 FY19
BB & Below pool size has been shrinking Credit cost has moderated Provision Coverage ratio is now at 77%
68%
74%
81%79% 79%
85% 86%
95%
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19
Percentage of sanctions rated A- & above
On an incremental basis, credit underwriting has been significantly more conservative
287%
209%
155% 154%162%
142%
124% 121%112%
Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
Exposure to Top 20 single borrowers as a % of Tier I Capital
Fresh originations are predominantly from entities rated A- or better
Concentration Risk has reduced significantly from peak
13
2.21% 2.22%
2.08%
2.15%2.17%
2.13%
FY14 FY15 FY16 FY17 FY18 FY19
Opex to Average Assets
We have also started focusing rigorously on the cost efficiency of our business All figures in ` Crores
14
14%
16%
10%
21%
15%
13%
19%
17% 16%
14%
-1%
18%
FY14 FY15 FY16 FY17 FY18 FY19
Operating Expense growth Operating Revenue growth
Positive Jaws
Opex to assets ratio moderated in FY19… … resulting in positive jaws after a 2 year gap
18.23 18.5717.49
7.22
0.53
8.09
FY14 FY15 FY16 FY17 FY18 FY19
Return on Equity (in %)
All this has resulted in a slow but noticeable improvement in shareholder return metrics
1.78 1.831.72
0.65
0.04
0.63
FY14 FY15 FY16 FY17 FY18 FY19
Return on Assets (in %)
26.45
30.85
34.93
15.34
1.12
18.09
FY14 FY15 FY16 FY17 FY18 FY19
Diluted EPS (`)
163
188
223233
247259
Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19
Book Value Per Share (`)
15
The Axis Bank Story – Strategy for FY20-22
16
Three vectors of our strategy for the next three years
17
rowth rofitability ustainability
• Grow deposits in line with loans
• Step up growth in Wholesale Bank
• Continue momentum in Retail Bank
• Establish leadership in digital and
payments
• Scale-up subsidiaries materially
• Optimize business mix
• Improve operating efficiency
• Sweat existing infrastructure
• Reduce credit cost below long term
average
• Strengthen the Core - technology,
operations, credit risk and process
excellence
• Focus on disciplined execution
• Embed conservatism in the Bank’s
internal policies and practices
Our goal is to deliver 18% ROE sustainably
19.7%
8.1%
18%
Avg FY11-15 FY19 Medium termAspiration
ROE
The ROE path back to 18% would be driven by three elements
18
3 drivers of the return to 18% ROE
Risk normalization
Business mix optimization
Improvement in Operating efficiency
Reduce credit cost below long term average
Reduce Cost to Assets to 2%
Portfolio choices based on RaRoC
1
2
3
We have re-organized the Wholesale Bank, creating anintegrated franchise
Re-Oriented Coverage Groups
Large Corporate Mid Corporate Commercial BankingFocused Segmental
Coverage
CreditLiabilities and Transaction
BankingTreasury
Bank and Subsidiary Products
Strengthened Operations and Service Infrastructure
Note: Classification based on client annual revenue – Commercial ( `10 cr- `250 cr); Mid (` 250 cr- ` 1000 cr); Large ( > ` 1000 cr)19
• Has been the leader in Equity and Equity linked dealsover the last decade
• Offers investors and companies with the spectrum offinancial needs in the areas of Equity CapitalMarkets, M&A, Private Equity, Structured Financeand Institutional Equities.
• Axis Securities is one of the fastest growing stock brokerage firms in India,
• Currently ranked 3rd among brokerages in India in terms of total client base.
• Axis Bank was one of the three entities allowed by RBI to set up the Trade Receivables Discounting System (TReDS), an electronic platform for facilitating cash flows for MSMEs
• Our digital invoice discounting platform ‘Invoicemart’continues to be India’s leading TReDS platform with market share of nearly 40%
• One of the fastest growing NBFCs with loan book of `8,040 crores (as of Mar’19)
• Offers complementary product offerings to Bank customers that include Structured Financing, Special Situations Funding, etc
FINANCE
We are also tightly integrating the key subsidiaries of the Bank and investing in scaling them as key value drivers
• Axis Mutual Fund is among the fastest growing AMC since launch in ‘09
• Has market share of 3.67% as at end of Mar’19
• Acquired in Sep’17, it is among the top non-bank financial services platform in the industry with a significant customer franchise footprint
• Freecharge is being positioned by the Bank as an engine that generates a large base of new to bank customers that are young and digitally native
20
21
Axis Bank has built an enviable franchise over the last 10 years
Amidst tough macro environment, the Bank remains positioned for growth
We remain committed to our 3 year Execution Strategy, with an aspiration of delivering 18% ROE sustainably
In Summary
However, the last 2-3 years have been extremely challenging for the Bank
During FY19, the Bank crossed the inflection point on this tough journey
Except for the historical information contained herein, statements in this release which contain
words or phrases such as “will”, “aim”, “will likely result”, “would”, “believe”, “may”, “expect”,
“will continue”, “anticipate”, “estimate”, “intend”, “plan”, “contemplate”, “seek to”, “future”,
“objective”, “goal”, “strategy”, “philosophy”, “project”, “should”, “will pursue” and similar
expressions or variations of such expressions may constitute "forward-looking statements".
These forward-looking statements involve a number of risks, uncertainties and other factors that
could cause actual results to differ materially from those suggested by the forward-looking
statements. These risks and uncertainties include, but are not limited to our ability to
successfully implement our strategy, future levels of non-performing loans, our growth and
expansion, the adequacy of our allowance for credit losses, our provisioning policies,
technological changes, investment income, cash flow projections, our exposure to market risks as
well as other risks. Axis Bank Limited undertakes no obligation to update forward-looking
statements to reflect events or circumstances after the date thereof.
Safe Harbor
22
Thank You
23