IndusInd Bank Analysts Meet FY 2006-07
Disclaimer This presentation and subsequent discussions may contain forward-looking statements with respect to IBL s financial condition, objectives and strategies. By their nature such forward-looking statements are based on current expectations of the IBL Management and involve numerous assumptions, uncertainties and opportunities, both general and specific.the risk exists that these statements may not be fulfilled. Forward-looking statements may be influenced by factors such as the effect of competition in the areas in which we operate, changes in economic, political, regulatory and technological conditions, fluctuations in interest rates, exchange rates, stock indices, etc. When relying on forward-looking statements to make decisions, investors should carefully consider the aforementioned factors as well as other uncertainties and events. This document does not constitute an offer or recommendation to buy or sell any securities of IBL or any of its associate companies. This document does not also constitute an offer or recommendation to buy or sell any financial products offered by IBL. Analysts Meet May 25, 2007 2
2006-07 07 An Overview Net profit of Rs. 68 crores vis-à-vis Rs. 37 crores last year (increase of 84%) Healthy growth in business balance sheet size crosses Rs. 20,000 crores Net worth now in excess of Rs. 1000 crores Capital Adequacy Ratio of 12.54% - up from 10.54% last year Branch network touches 170, against 137 last year Significant growth in non-interest income Rs. 244 crores vis-à-vis Rs. 189 crores Total income has grown, and operating expenses have also been contained by and large, but interest expense has continued to rise Analysts Meet May 25, 2007 3
Profit & Loss Statement (Rs. in crores) Q 4 FY 2006 Q 4 FY 2007 FY 2006 FY 2007 Income Interest Income 315 426 1188 1500 Non-interest Income 36 57 189 244 Total Income 351 483 1377 1744 Expenditure Interest Expense 236 341 873 1229 Operating Expense 84 96 317 344 Total Expense 320 437 1190 1573 Operating Profit 31 46 187 171 Provisions & Contingencies 93 25 150 103 Net Profit (-) 62 21 37 68 Analysts Meet May 25, 2007 4
Balance Sheet (Rs. in crores) CAPITAL & LIABILITIES March 2006 March 2007 Capital 291 320 Reserves & Surplus 576 737 Deposits 15006 17645 Borrowings 535 592 Other Liabilities and Provisions 1215 1633 17623 20927 ASSETS March 2006 March 2007 Cash and Balance with RBI 604 1021 Balances with Banks and Money at Call and Short Notice 876 1574 Investments 5410 5892 Advances 9311 11084 Fixed Assets 340 370 Other Assets 1082 986 17623 20927 Analysts Meet May 25, 2007 5
Key Ratios and Parameters FY 2006 FY 2007 Net Worth (Rs. in crores) 866 1057 Capital Adequacy Ratio (%) 10.54 12.54 Proportion of CASA Deposits (%) 12.87 14.92 Cost of Deposits (%) 5.87 6.73 Yield on Advances (%) 9.44 9.76 Yield on Investments (%) 6.73 6.84 Net Interest Margin (%) 1.91 1.37 NIM (%) - excluding effect of securitisation 1.61 1.37 Gross NPA Ratio (%) 2.86 3.07 Net NPA Ratio (%) 2.09 2.47 Return on Assets (%) 0.22 0.34 Return on Equity (%) 12.67 21.32 Earnings per share (Rs.) 1.27 2.31 Analysts Meet May 25, 2007 6
The Business Numbers Business has continued to grow - total business (deposits plus advances) of Rs. 28,729 crores against Rs. 24,317 crores a year ago On a point-to-point basis, deposits have grown by 18 per cent and advances by 19 per cent Average business, a better indicator, also validates the growth momentum Average deposits have grown by 19 per cent up from Rs. 13,244 crores to Rs. 15,756 crores Average advances have moved up from Rs. 8851 crores to Rs. 10,707 crores a growth rate of 21 per cent Analysts Meet May 25, 2007 7
Deposits Low-cost deposits (CASA) has grown by Rs. 702 crores from Rs. 1931 crores in March 2006 to Rs. 2633 crores in March 2007 The proportion of CASA deposits has moved up from 12.87 per cent to 14.92 per cent. We aim to raise this to 20 per cent by March 2008 There has also been significant broad-basing of customers. There are now more than 6 lacs of retail liabilities customers, against a figure of 4.62 lacs a year ago Another notable fact is our much reduced dependence on interbank deposits. A year ago, as of March 2006, interbank deposits made up 23 per cent of total deposits. This has now come down to 9 per cent Analysts Meet May 25, 2007 8
Credit Portfolio The Bank s credit portfolio is undergoing a paradigm change, and is gravitating towards an optimum and high-earning business mix The factors that have helped in this include Stoppage of asset securitisation and consequent retention of highyielding vehicle loans in our books Strong growth in vehicle loan disbursement, with a sharp focus on the higher-yielding segments such as two/three-wheelers Our SME thrust, and acquisition of new borrowers from this segment. Also, a conscious emphasis on cash credit loans Re-pricing of loans, relating to both vehicle finance and corporate banking Analysts Meet May 25, 2007 9
Credit Portfolio Overall, the yield on advances during 2006-07 was 9.76% p.a. against 9.44% p.a. last year The actual comparable figures are 9.76% p.a. and 8.97% p.a., if we leave out the exceptional item of additional revenue (Rs. 42 crores) that accrued last year through upfronting of securitisation income The yield on advances has improved throughout the year. The sequential figures are - 9.09% p.a. (Q1), 9.43% p.a. (Q2), 9.89% p.a. (Q3) and 10.51% p.a. (Q4) The overall yield will continue to rise, as more and more new loans (being disbursed at significantly higher rates) replace the older loans Analysts Meet May 25, 2007 10
Net Interest Margin Net interest margin (NIM) has dropped from 1.91 per cent (or 1.61 per cent, if we remove the beneficial effect of securitisation) last year to 1.37 per cent this year This is mainly because of the sizeable rise in cost of deposits, in line with the overall hardening interest rate scenario The fall in NIM will get reversed during 2007-08, as the yield on advances is already going up and because we expect any further rise in our cost of deposits to be contained (partly because of higher CASA levels, and partly because of the overall interest rates situation for the remainder of the current year) Analysts Meet - May 25, 2007 11
Non-interest Income Non-interest income has registered a healthy 29 per cent growth - from Rs. 189 crores to Rs. 244 crores The main growth drivers in this regard are Retail initiatives like distribution of third-party products, sale of gold coins, debit cards, gift cards, depository income, etc. Advisory services related to Investment Banking Foreign Exchange transactions Transaction Banking cash management, RTGS, etc. Trade Finance transactions - letters of credit, bank guarantees Miscellaneous income from service charges, processing charges, etc. Analysts Meet May 25, 2007 12
Performance Highlights - VFD Outstanding credit level of Rs. 6405 crores as on March 31, 2007 against Rs. 3733 crores a year ago. These however are strictly not comparable, as last year s level was low because of securitisation Commercial Vehicles make up 57 per cent of this portfolio Total disbursement has increased from Rs. 4642 crores to Rs. 5141 crores Three-wheelers and construction equipments were the focus segments in 2006-07 and disbursements in these increased by 35 per cent and 33 per cent respectively Disbursements kept at low levels for cars and utility vehicles, as the yields are relatively lower in these segments Analysts Meet May 25, 2007 13
Performance Highlights - Retail Retail deposits have grown by 48 per cent up from Rs. 4045 crores to Rs. 6000 crores Even in a rising interest rate scenario, the cost of deposits (for retail) was actually brought down - from 5.12 per cent to 5.10 per cent. CASA component in retail deposits was 35 per cent Retail advances (excluding VFD loans) too increased by 25 per cent (from Rs. 1267 crores to Rs. 1584 crores) and the yield on such loans was up from 7.89 per cent to 9.39 per cent Non-interest income in retail (excluding VFD) too went up by 82 per cent, from Rs. 22 crores to Rs. 40 crores Analysts Meet May 25, 2007 14
Performance Highlights - Wholesale Thrust on increasing fee-based income, by accelerating non-fund based business, forex business, etc. Non-fund based credit (comprising letters of credit and bank guarantees) grew by 54 per cent, from Rs. 2280 crores to Rs. 3521 crores Forex Merchant turnover up by 25 per cent, from Rs. 22,605 crores to Rs. 27,288 crores Inward remittance average inflow of Rs. 2.50 crores per day, through some 300 transactions Cash Management number of customers up from 38 to 87 and total throughput grows from Rs. 1936 crores to Rs. 3026 crores Analysts Meet May 25, 2007 15
Recoveries and NPAs Our Bank continued its recovery during the year of historical bad debts and written-off amounts, which contributed Rs. 97 crores to operating profit The Bank also sold Rs. 49 crores worth NPAs to an ARC, during this year The overall NPA level (and the gross and net NPA ratios) have gone up, but this is because of only one major account, the last of such legacy accounts in the Bank, which was aggressively identified as sub-standard during the year Analysts Meet May 25, 2007 16
Network As of now the Bank has 170 branches and 99 off-site ATMs (spread over 141 locations in 24 States and Union Territories), as against 137 branches and 83 off-site ATMs a year ago In addition there are licences in hand for 10 more branches, and 84 more off-site ATMs The customer touch-points will increase vastly over the coming months, as the Bank is now finalising plans for the addition of another 750 or so outlets through the Business Correspondent model approved by RBI some time ago The Business Correspondents will be able to distribute a range of products and services comprising small deposits, loans, third-party products, etc. Analysts Meet May 25, 2007 17
Network Existing Branch Network in India Analysts Meet May 25, 2007 18
Capital The Bank took major strides during the year in enhancing its capital. These included A maiden GDR issue of Rs. 147 crores (which also raised the paidup capital by Rs. 30 crores) Tier-II issue of Rs. 50 crores Upper Tier-II issues (in two tranches) of Rs. 209 crores The Bank now has a very healthy CRAR of 12.54 per cent The CRAR would be even higher as per the new capital adequacy framework (in line with Basel-II guidelines) and would come to 13.24 per cent, largely because of the retail portfolio comprising schematic loans such as vehicle loan, housing loan, etc. and small-ticket loans to small businesses Analysts Meet May 25, 2007 19
Major Initiatives The Bank took several major initiatives during the year. Among these are Launch of new products and services like Mobile Banking, Visa Gold Debit card, Gift Card, On-line issuance of insurance policies, Sunday Banking, 8-to-8 banking, etc. Tie-up with Aviva Life Insurance for bancassurance Tie-up with the National Financial Switch (NFS), and now allowing our customers access to more than 19,000 ATMs in India Strategic alliance with Doha Bank, Qatar and launch of e-remittance product Additional tie-ups with Exchange Houses in respect of inward remittance. We now have 16 such tie-ups Analysts Meet May 25, 2007 20
Key Focus Areas During 2007-08 08 Retail Banking, with clear and well-defined target markets Vehicle Finance, especially the higher-yielding segments, e.g., two/three-wheelers Credit Card Rural Banking NRI Banking Wealth Management aimed at separate verticals of HNIs and the Mass Affluent SME Segment Analysts Meet May 25, 2007 21
Key Focus Areas During 2007-08 08 International Banking Capital and Commodity Markets M&A Advisory Rapid scale-up of alternate distribution channels such as ATMs, Internet Banking, Contact Centre, Direct Sales Force (e.g., Business Facilitators and Business Correspondents), etc. Effective re-branding in the marketplace Implementation of new technology relating to data warehousing, customer relationship management, Basel-II compliance, kiosk banking, online share trading and mutual funds purchase and redemptions, cheque truncation, etc. Analysts Meet May 25, 2007 22
Shareholding Pattern Promoters 28.45 Foreign Institutional Investors (FIIs) 16.10 Domestic Institutions 3.15 Private Corporate Bodies 16.21 NRIs / Overseas Corporate Bodies 5.41 Indian Public and Others 21.46 Shares held by Custodians against DR 9.22 Total 100.00 (Figures as of March 31, 2007) (in %) Analysts Meet May 25, 2007 23
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