ICICI Group: Strategy & Performance. Motilal Oswal Conference September 2, 2013

Transcription

1 ICICI Group: Strategy & Performance Motilal Oswal Conference September 2, 2013

2 Certain statements in these slides are forward-looking statements. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors. More information about these factors is contained in ICICI Bank's filings with the US Securities and Exchange Commission. All financial and other information in these slides, other than financial and other information for specific subsidiaries where specifically mentioned, is on an unconsolidated basis for ICICI Bank Limited only unless specifically stated to be on a consolidated basis for ICICI Bank Limited and its subsidiaries. Please also refer to the statement of unconsolidated, consolidated and segmental results required by Indian regulations that has, along with these slides, been filed with the stock exchanges in India where ICICI Bank s equity shares are listed and with the New York Stock Exchange and the US Securities and Exchange Commission, and is available on our website 2

3 Agenda Operating environment ICICI Bank s approach & execution Going forward 3

4 Economic developments Other Growth concerns Monetary policy Continued moderation in in GDP GDP growth to to ~5% Industrial growth continues to to remain subdued Current account deficit and and global factors leading to to exchange rate rate volatility Large fiscal deficit Near term focus on on managing exchange rate rate fluctuation resulting in in increase in in short term rates Continued economic slowdown combined with volatility in financial markets 4

5 Impact on banking sector: growth FY2011: 21% Non-food credit FY2013: 14% Credit Continued moderation in overall loan growth However, retail loan growth holding up FY2011: 16% Total deposits FY2013: 14% Deposits Trends in deposit growth mirroring credit growth Challenges in CASA deposit mobilisation continue 5

6 Impact on banking sector: asset quality Gross NPA ratio 1 FY % FY % Net NPA ratio 1 1.2% Restructured loans to gross advances 1 4.7% 1.7% 5.8% Retail portfolio asset quality trends remain healthy 6 1. Source: RBI annual report

7 Agenda Operating environment ICICI Bank s approach & execution Going forward 7

8 Our approach Balanced approach in view of operating environment Return on equity Across business lines 8

9 9 Enhancing retail franchise

10 Healthy trends in retail segment Pickup in portfolio growth Sustained growth in granular deposits Growth in fee income Healthy asset quality trends The Bank continues to scale up its retail business and invest in strengthening the franchise and distribution infrastructure 10

11 Healthy retail loan growth Organic retail ~32% y-o-y increase in disbursements; 27% increase in portfolio at June 30, 2013 Primarily driven by secured products Q Disbursements: Outstanding: Home loans 36% 20% Auto loans 17% 21% Along with continued focus on risks: Calibrated approach to CV lending Unsecured portfolio size continues to remain low 11

12 Strong deposit franchise Granular deposit base Retail deposits account for ~70% of total domestic deposits Continued growth in savings deposits ~60% of domestic term deposits are retail CAGR since March 2009 Savings Retail term deposits deposits 20% 17% Granular retail deposits resulting in relative stability in funding base and costs even in volatile markets 12

13 Other highlights Growth in retail fee income Healthy growth in retail fees driven by liability fees, third party distribution and asset linked fees Offsetting impact of reduced corporate lending linked fee streams Healthy asset quality trends Near zero credit costs for retail portfolio over last several quarters Retail portfolio asset quality continues to remain healthy 13

14 Continued investments in key enablers Significant scale up in physical presence Network of 3,350 at June 2013; largest in private sector banks Supplemented by ~11,000 ATMs Largest rural branch network among private sector banks ~70% of branch additions since March 2012 in rural and semi-urban areas 3,500 3,000 2,500 2,000 1,500 1, Branch network Metro Urban Semi Urban Rural 3,350 3,100 2,752 2,529 1,707 Mar-10 Mar-11 Mar-12 Mar-13 Jun-13 14

15 With focus on enhancing productivity Increased traction for both assets & liabilities Increase in branch based origination of retail loans ~30% home loans originated through branches Healthy trends in savings account deposits and third party distribution ~50% CAGR in life insurance regular premium through branches since FY

16 Continued innovation in technology offerings Leveraging social networking platforms Advanced mobile banking platform 24x7 electronic branch Enhanced ATM functionality Money2India Mobile App for NRIs MySavings Rewards program 16

17 Strategic approach: retail banking Profitability Continued focus on granular deposits Low credit costs Sustaining fee income growth Return on equity Growth Healthy growth in secured products like mortgages and auto loans Strengthening of deposit franchise Continued investments in physical and technology platforms Risk management Secured lending portfolios driving growth 17

18 Cautious approach to corporate & SME lending 18

19 Domestic corporate & SME business Domestic corporate (33% of total loans) Trends Impact of economic slowdown on growth Weak corporate profitability Approach Moderation in growth with focus on working capital Continued focus on credit selection Close monitoring SME (<5% of total loans) Continued challenges in current environment Maintain low share Description of of SME in the near the contents term 19

20 International business Overseas branches Lending primarily to Indian corporates Growth calibrated to global funding markets; continued focus on margins ALM profile matched; no refinancing requirement Banking subsidiaries Regulatory expectations impacting business model High capital levels Consolidation of balance sheet Continued focus on capital rationalisation: USD 100 mn from UK & CAD 75 mn from Canada received 20

21 Strategic approach: corporate & SME Profitability Improvement in international margins Focus on granular fees like transaction banking and forex & derivatives Focus on containing credit costs Return on equity Growth Moderate growth expectations in view of environment; focus on working capital Growth in international business calibrated to funding Risk management Cautious approach in incremental lending Close monitoring 21

22 Enhancing diversified financial services franchise 22

23 Healthy trends in subsidiaries Insurance Life insurance: sustained profitability resulting in healthy returns on invested capital and dividend payouts General insurance: significant improvement in profitability Asset management & broking Focus on maintaining market position Business performance linked to market conditions; however, franchises remain profitable 23

24 Contributing to profitability improvement Consolidated RoE FY2013 FY % 13.0% Q % ` billion FY2012 FY2013 Growth Dividend from subsidiaries % Consolidated profits % 24

25 Performance over the years CASA ratio 43.2% 43.2% At June 30, % At March 31, 2009 FY2009: 0.98% Q1-2014: 1.75% NIM Cost-toincome 3.27% 43.2% Q % FY % 43.2% Q % FY2008 Standalone RoA Q1-2014: 15.6% FY2009: 7.8% Consolidated RoE Basel III tier 1 ratio at 11.7% at June 30,

26 Q1-2014: Performance highlights (1/2) Profitability 25.3% increase in standalone profit after tax from ` bn in Q (April -June 2012) to ` bn in Q (April -June 2013) Net interest income increased by 19.6% year-onyear; net interest margin improved from 3.01% in Q to 3.27% in Q % increase in consolidated profit after tax from ` bn in Q to ` bn in Q Consolidated return on equity (annualised) for Q at 15.6% compared to 13.3% for Q

27 Q1-2014: Performance highlights (2/2) Balance sheet Advances increased by 12.3% year-on-year to ` 3, billion at June 30, 2013 Year-on-year growth of 26.6% in organic retail portfolio (excluding buyouts) at June 30, 2013 Period end CASA ratio at 43.2% at June 30, 2013 compared to 41.9% at March 31, 2013 Average CASA ratio at 39.0% for Q compared to 38.1% for Q Net NPA ratio of 0.69% at June 30, 2013 (March 31, 2013: 0.64%; June 30, 2012: 0.61%) 27

28 Agenda Operating environment ICICI Bank s approach & execution Going forward 28

29 Our approach Balanced approach in view of operating environment Return on equity Across business lines 29

30 Key focus areas Profitability Targeting improvement in full year margins and fee income growth Continue to strengthen funding profile Stable operating costs Strong profitability in insurance businesses 2 Growth Domestic loan growth targeted at 2%-3% higher than system, driven by retail Continued focus on secured retail loan products; leveraging increased presence to improve market share Cautious approach in corporate & SME Focus on growth in insurance businesses Risk management Diversified portfolio Selective underwriting Close monitoring 30

31 31 Thank you

32 Loan book classification: new reporting Nature of loan Builder finance Loans to small businesses Dealer funding Rural retail i.e. portfolios like jewel loans, farm equipment loans etc. Loans to SMEs related to agriculture Loans to corporates related to agriculture Earlier reported in Retail - home SME Retail - other secured Rural Rural Rural Now reported in Domestic corporate Retail - business banking Retail - business banking Retail - others SME Domestic corporate 32

33 Composition of loan book (y-o-y) June 30, 2012 SME 5.7% June 30, 2013 SME 4.6% Overseas branches 28.0% 1 Retail business 35.9% 3 Overseas branches 26.9% 1 Retail business 36.0% 3 Domestic corporate 30.4% 2 Domestic corporate 32.5% 2 Total loan book: ` 2,684 bn Total loan book: ` 3,014 bn Including impact of exchange rate movement 2. Domestic corporate loans include builder finance 3. Including buyouts & inter-bank participation certificates

34 Composition of retail loan book (y-o-y) June 30, 2012 Credit cards 2.6% Personal loans Business 1.0% banking 7.3% June 30, 2013 Credit cards 2.8% Business banking 5.8% Personal loans 1.7% Others 10.6% Others 12.1% Vehicle loans 26.8% 1 Home 51.7% Vehicle loans 22.7% 2 Home 54.9% Total retail loan book: ` 964 bn Total retail loan book: ` 1,085 bn Retail loan growth (excluding buyouts) of 26.6% June 30, 2012: Vehicle loans includes auto loans 9.4%, commercial business 17.4% 2. June 30, 2013: Vehicle loans includes auto loans 10.2%, commercial business 12.5%

35 Composition of loan book (q-o-q) March 31, 2013 SME 5.2% June 30, 2013 SME 4.6% Overseas branches 25.3% 1 Retail business 37.0% 3 Overseas branches 26.9% 1 Retail business 36.0% 3 Domestic corporate 32.5% 2 Domestic corporate 32.5% 2 Total loan book: ` 2,902 bn Total loan book: ` 3,014 bn Including impact of exchange rate movement 2. Domestic corporate loans include builder finance 3. Including buyouts & inter-bank participation certificates

36 Composition of retail loan book (q-o-q) March 31, 2013 Credit cards 2.5% Business Personal loans banking 1.5% 5.9% June 30, 2013 Credit cards 2.8% Business banking 5.8% Personal loans 1.7% Others 12.3% Others 12.1% Vehicle loans 24.2% 1 2 Home 53.6% Vehicle loans 22.7% 2 Home 54.9% Total retail loan book: ` 1,074 bn Total retail loan book: ` 1,085 bn March 31, 2013: Vehicle loans includes auto loans 10.2%, commercial business 13.9% 2. June 30, 2013: Vehicle loans includes auto loans 10.2%, commercial business 12.5%

37 Asset quality and provisioning (` billion) June 30, 2012 March 31, 2013 June 30, 2013 Gross NPAs Less: Cumulative provisions Net NPAs Net NPA ratio 0.61% 0.64% 0.69% Gross retail NPLs at ` bn and net retail NPLs at ` 7.76 bn at June 30, Provisioning coverage ratio of 75.4% at June 30, 2013 computed in accordance with RBI guidelines Net loans to companies whose facilities have been restructured at ` bn at June 30, 2013 compared to ` bn at March 31, 2013 and ` bn at June 30, 2012 Outstanding general provision on standard assets: ` bn at June 30, Based on revised definition of retail loans 37

38 38 Key ratios

39 Key ratios (consolidated) Return on average networth 1,2 Weighted avg EPS (`) 2 Book value (`) Q Based on quarterly average networth 2. Annualised for all interim periods Q Q (Percent) FY

40 Key ratios (standalone) Q Q Return on average networth Return on average assets 1, Weighted avg EPS (`) Book value (`) Net interest margin Fee to income Cost to income CASA ratio (period end) Average CASA ratio Q (Percent) FY Annualised for all interim periods 2. Since December 31, 2012, the Bank has presented the mark-to-market gain or loss on forex and derivative transactions on gross basis. Figures for previous periods have been reclassified accordingly and return on average assets has been re-computed to reflect this change. 40

41 41 Unconsolidated financials

42 Profit & loss statement NII Non-interest income - Fee income -Other income - Treasury income Total income Operating expenses 1 Operating profit Q (0.21) Q Q Q1-o-Q1 growth 19.6% 32.1% 8.9% 13.4% % 17.2% 29.3% (` billion) FY Includes commissions paid to direct marketing agents (DMAs) for origination of retail loans and lease depreciation 42

43 Profit & loss statement (` billion) Q Q Q Q1-o-Q1 growth FY2013 Operating profit % Provisions % Profit before tax % Tax % Profit after tax %

44 Balance sheet: Assets Cash & bank balances Investments -SLR investments - Equity investment in Subsidiaries -RIDF 1 and related Advances 2 Fixed & other assets Total assets 2 June 30, , , , Rural Infrastructure Development Fund 2. Including impact of exchange rate movement March 31, , , , June 30, , , , (` billion) Y-o-Y growth -9.9% 12.6% 19.6% -3.4% 10.5% 12.3% -9.8% 8.8% Net investment in security receipts of asset reconstruction companies was ` bn at June 30, 2013 (March 31, 2013: ` bn) Net credit derivative exposure (including off balance sheet exposure) was US$ 31 mn at June 30, 2013 compared to US$ 56 mn at March 31, 2013 and US$ 186 mn at June 30, 2012 Underlying comprises Indian corporate credits 44

45 Equity investment in subsidiaries ICICI Prudential Life Insurance June 30, March 31, (` billion) June 30, ICICI Bank Canada ICICI Bank UK ICICI Lombard General Insurance ICICI Home Finance ICICI Bank Eurasia LLC ICICI Securities Limited ICICI Securities Primary Dealership ICICI AMC ICICI Venture Funds Mgmt Others Total

46 Balance sheet: Liabilities Net worth - Equity capital -Reserves Deposits -Savings -Current Borrowings 1,2 Other liabilities 3 Total liabilities 2 June 30, , , , March 31, , , , Borrowings include preference shares amounting to ` 3.50 bn 2. Including impact of exchange rate movement June 30, , , , Credit/deposit ratio of 80.7% on the domestic balance sheet at June 30, 2013 (` billion) Y-o-Y growth 11.2% 0.1% 11.4% 8.7% 14.0% 20.3% 13.6% -12.9% 8.8% 46

47 Composition of borrowings (` billion) June 30, 2012 March 31, 2013 June 30, 2013 Domestic Capital instruments Other borrowings Overseas Capital instruments Other borrowings Total borrowings 2 1, Includes preference share capital ` 3.50 bn 2. Including impact of exchange rate movement 1, , Capital instruments constitute 45.9% of domestic borrowings 47

48 Capital adequacy Basel III Total Capital 1 -Tier I -Tier II Risk weighted assets -On balance sheet -Off balance sheet June 30, 2013 ` bn % % % % 4, , , In line with applicable guidelines, the Basel III capital ratios reported by the Bank for the quarter ended June 30, 2013 do not include the profits for the quarter On a comparable basis, the total capital adequacy ratio as per Basel II norms is 18.35% and Tier-1 capital adequacy is 12.48% Including the profits for Q1-2014, the capital adequacy ratio for the Bank as per Basel III norms would have been 17.39% and the Tier I ratio would have been 12.07%. 48

49 49 Overseas subsidiaries

50 India linked investments 7.4% ICICI Bank UK asset profile March 31, 2013 Bonds/notes of financial Asset backed institutions securities 2.3% 2.1% 2 Other assets & investments 3.2% Cash & liquid securities % Bonds/notes of financial institutions 2.3% India linked investments 2 7.1% June 30, 2013 Asset backed securities Other assets & 1.9% investments 2.7% Cash & liquid 1 securities % Loans & advances 64.5% 3 Loans & 3 3 advances 65.1% Total assets: USD 3.6 bn 1. Includes cash & advances to banks, T Bills 2. Includes India-linked credit derivatives US$ 15 mn at March 31, Includes securities re-classified to loans & advances Total assets: USD 3.8 bn 50

51 ICICI Bank UK liability profile Syndicated loans & interbank borrowings 13.9% March 31, 2013 June 30, 2013 Other liabilities 3.9% Net worth 17.3% Syndicated loans & interbank borrowings 16.8% Other liabilities 3.1% Net worth 16.7% Long term debt 14.7% Term deposits 32.8% Demand deposits 17.4% Long term debt 15.3% Term deposits 31.2% Demand deposits 16.9% Total liabilities: USD 3.6 bn Total liabilities: USD 3.8 bn Profit after tax of US$ 5.4 mn in Q compared to US$ 4.4 mn in Q Capital adequacy ratio at 26.6% Proportion of retail term deposits in total deposits at 45% at June 30,

52 ICICI Bank Canada asset profile Cash & liquid securities % March 31, 2013 India linked 2 investments 0.0% Insured mortgage3 33.7% Cash & liquid 1 securities 12.8% June 30, 2013 India linked Insured 2 3 investments mortgage 0.0% 35.2% Other assets & investments 9.2% Other assets & investments 10.6% Asset backed securities 0.3% Loans to customers 41.4% Asset backed securities 0.3% Loans to customers 41.1% Total assets: CAD 5.4 bn 1. Includes cash & advances to banks and government securities 2. Includes India-linked credit derivatives of nil at June 30, Based on IFRS, securitised portfolio of CAD 1,745 mn and CAD 1,781 mn considered as part of Insured mortgage portfolio at March 31, 2013 and June 30, 2013 respectively Total assets: CAD 5.2 bn 52

53 ICICI Bank Canada liability profile March 31, 2013 Other liabilities 2.2% Net worth 19.1% Other liabilities 2.4% June 30, 2013 Net worth 17.8% Borrowings % Term deposits 29.9% 1 Borrowings 35.6% 1 Term deposits 30.0% Demand deposits 15.0% Total liabilities: CAD 5.4 bn Profit after tax of CAD 14.4 mn in Q compared to CAD 11.9 mn in Q Capital adequacy ratio at 31.0% 1. As per IFRS, proceeds of CAD 1,743 mn and CAD 1,811 mn from sale of securitised portfolio considered as part of borrowings at March 31, 2013 and June 30, 2013 respectively Demand deposits 14.2% Total liabilities: CAD 5.2 bn 53

54 ICICI Bank Eurasia asset profile March 31, 2013 Other assets & investments 0.7% June 30, 2013 Other assets & investments 0.8% Cash & cash 1 equivalents 30.2% Loans to corporates & banks 53.4% Cash & cash equivalents % 1 Loans to corporates & banks 46.4% Retail loans 14.9% Corporate bonds 0.8% Total assets: USD 245 mn Retail loans 14.1% Total borrowings of USD 154 mn at June 30, 2013 Capital adequacy of 24.5% at June 30, 2013 Corporate bonds 0.7% Total assets: USD 244 mn Net profit of USD 0.9 mn in Q compared to USD 1.2 mn in Q Includes cash & call placements with banks, balances with central bank, government securities and nostro balances

55 55 Domestic subsidiaries

56 ICICI Home Finance Investments and other assets 9.5% March 31, 2013 Investments and other assets 11.3% June 30, 2013 Loans 90.5% Loans 88.7% Total assets: ` bn Total assets: ` bn Profit after tax of ` mn in Q compared to ` mn in Q Capital adequacy ratio of 29.2% at June 30, 2013 Net NPA ratio: 0.9% At June 30, 2013: Networth ` bn; Deposits ` 3.74 bn and Borrowings & other liabilities ` bn 56

57 ICICI Life (` billion) Q Q FY2013 New business received premium Renewal premium Total premium Annualised premium equivalent (APE) New Business Profit (NBP) NBP margin 15.0% 15.0% 15.0% Statutory profit Assets Under Management Expense ratio % 23.1% 19.2% Sustained leadership in private space with a market share of 6.6% 2 for Q Expense ratio: All expenses (including commission and excluding unit costs) / (Total premium 90% of Single Premium) 2. Source: IRDA (based on new business retail weighted premium) 57

58 ICICI General (` billion) Q Q FY2013 Gross premium PAT Market share based on gross written premium was 9.4% 3 for Q Excluding remittances from third party motor pool (the Pool) and including premium on reinsurance accepted 2. Includes impact of third party motor pool losses on account of actuarial valuation of the liability for the period FY2007 to FY Source: IRDA 58

59 Other subsidiaries (` billion) Profit after tax Q Q FY2013 ICICI Securities (Consolidated) ICICI Securities Primary Dealership ICICI Venture ICICI Prudential Asset Management % increase in consolidated profit after tax from ` bn in Q to ` bn in Q Consolidated return on average net worth (annualised) for Q at 15.6% compared to 13.3% for Q