Execution Strategy for FY19

Transcription

1 Execution Strategy for FY19

2 Four elements of our FY19 strategy Return To Predictability Normalize 01 Credit Risk 02 Deliver Profitable Growth 03 Enhance capabilities 04 Invest in the Future 2

3 30, , , , , 000 5, Q4 FY16 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY % 7.0 % 6.0 % 5.0 % 4.0 % 3.0 % 2.0 % 1.0 % 0.0 % 01 Normalize Credit Risk New NPA formation would come down from elevated levels by H2 FY19 Normalize Credit Risk Vulnerable Corporate loan book has reduced significantly NPA Recognition phase of this credit cycle is nearly complete. Will be complete in H1. 7.3% The vulnerable pool has shrunk significantly. 5.3% 5.6% 5.3% 4.7% 4.4% Consequently, we expect new NPA formation this year to be significantly lower than last year. 3.4% 3.4% 1.8% We have increased confidence in normalization of credit costs by H2. 19,412 27,411 21,929 20,788 19,685 19,460 15,815 16,120 8,994 We start the year with high Provision Coverage. We will continue to maintain PCR at conservative levels. BB& Below (Rs. Cr) % of Gross Customer Assets 3

4 01 Normalize Credit Risk Corporate Lending will continue to move towards better rated customers and Working Capital loans. Business Mix has changed materially in recent years Rating Mix is Better A or better rated clients form 77% of loans, up from 61% in FY14. AAA AA A 12% 13% 20% 63% 77% 34% 31% 30% Loans to stressed sectors (Power, Iron & Steel) has reduced from 9.2% in FY16 to 4.5% today. BBB BB & Below 27% 10% 18% 5% FY16 FY18 Concentration risk has reduced. Exposure to top 20 borrowers is down from 287% of tier 1 capital in FY11 to 121% today. Share of Term Loans is Lower Working Capital 21% 23% 32% We will continue to pursue this new-look corporate lending business in FY19. Term Loans 79% 77% 68% FY16 FY17 FY18 4

5 02 Deliver Profitable Growth Growth opportunities are abundant on both sides of the Balance Sheet Business Mix goals of the Bank have largely been achieved Retail + SME account for 59% of advances today The Bank has a high quality deposit franchise. We expect strong growth here in FY19. Corporate Retail + SME 42% 60% Our loan book has grown 6-10% points faster than industry in the last 9 years. We expect to continue the outperformance this year. FY10 FY18 Loan growth has consistently been higher than industry CAGR 23% 14% Axis We see great opportunities to grow both Retail and Corporate loans this year. We will prioritize based on where we find better risk adjusted returns. FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 as has CASA growth Industry Our Cost to Assets ratio has averaged 2.14% in the last 5 years. We would like to bring this down to 2.0% in the medium term. CAGR 20% 16% Axis Industry FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 5

6 03 Enhance Capabilities We plan to focus on two major areas of capability development this year Operational Risk Management Reinvent the Corporate Bank We are creating a centralized operations team independent of line business We are re-evaluating businesses with high tail risks / disproportionate operational risks Infuse additional talent in Compliance Strengthen talent pool in corporate lending Strengthen tech and product capabilities in Transaction Banking Reorient the business model to deliver sustainable returns through the cycle 6

7 04 Invest in the Future We will invest in three areas in FY19 to build a strong foundation for the future Digital Analytics Subsidiaries Maintain leadership in Mobile Leverage RPA/AI to create straight through customer journeys (lower ops risk, better customer experience) Maintain Market Leadership Axis Capital, Axis Securities Invest in new Digital Assets Freecharge, Digital SA, Digital CA Pivot from Traditional to Big Data Bulk Up / Diversify Established Subs Axis Finance, Axis Mutual Fund Scale Up New Subsidiaries Freecharge, A.Treds Increase penetration of Digital sourcing in retail loans Strengthen our muscles for digital underwriting, leveraging new data sources Evaluate New Opportunities 7

8 Summary of our FY19 strategy: Return to Predictability Normalize 01 Credit Risk 02 Deliver Profitable Growth 03 Enhance Capabilities 04 Invest in the Future Complete NPA recognition of last cycle in H1 Grow loans and CASA materially faster than industry Heighten focus on Operational Risk Continue investment in digital and analytics Continue shaping business mix in corporate loan book Bring down Cost to Assets Reinvent the Corporate Bank Scale up subsidiaries and fill white spaces 8

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