July/August - 2009
Disclaimer This presentation has been prepared by IndusInd Bank Limited (the Bank ) and is being furnished to you, the recipient, solely for your information and may not be reproduced, delivered or transmitted (in whole or in part), directly or indirectly, by any means to any other person in any manner. Certain statements in this presentation may not be based on historical financial information or facts and are or may be forward-looking statements. These statements are based on current expectations and assumptions and are based on currently available information. Actual results are subject to a number of risks and uncertainties, which could cause the Bank s actual performance to differ materially from those anticipated, including future changes or developments in the Bank s business, its competitive environment and political, economic, legal and social conditions. Any reference to past performance should not be taken as an indication of future performance. Due to the risks, uncertainties and assumptions inherent in forward-looking statements, prospective investors in the Bank s securities should not place undue reliance on these forward-looking statements. The information contained in this presentation is only current as of its date. The Bank may alter, modify or otherwise change in any manner the content of this presentation, and the Bank does not intend or assume any obligation to update any of these statements. This presentation is for general information purposes only, without regard to any specific objectives, financial situations or informational needs of any particular person. This presentation has been prepared for persons outside the United States and should not be released or distributed in the United States. This presentation does not constitute an offer or invitation to purchase or subscribe for any securities of the Bank by any person in any jurisdiction, including India and the United States. No part of this presentation should form the basis of or be relied upon in connection with any investment decision or any contract or commitment to purchase or subscribe for any securities. The Bank s equity shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the Securities Act ), or any state securities laws in the United States and, as such, may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to the registration requirements of the Securities Act. 2
Agenda Overview of IndusInd Bank Bank in Transformation Key Takeaways Financial Performance 3
Overview of IndusInd Bank
A New Generation Private Sector Bank Incorporated in 1994 Overview Widespread & loyal customer base of ~ 2.02 million as at June 30, 2009 Pan India presence through a network of 180 branches, 410 marketing offices, 378 ATMs, representative offices in Dubai and London and strategic alliances in UAE and Qatar as at June 30, 2009 Received RBI authorization for 30 new branches, 50 offsite ATMs (14 opened) and 6 mobile ATMs 2nd largest financier of Commercial Vehicles Expertise in Commercial and Small Business Sectors; major player in cross border remittances Strong enterprise risk management framework and a robust technology platform Total Assets of Rs 278 billion as at June 30, 2009 CAR at 12.1% as at June 30, 2009 Income (Rs Mn) Net Profit (Rs Mn) Total Assets (Rs Mn) CAGR: 25.9% 4,563 CAGR: 47.5% CAGR: 14.9% 2,842 14,602 2,976 18,807 23,095 682 751 1,483 209,271 232,619 276,147 FY07 FY08 FY09 Interest Income Other Income FY07 FY08 FY09 Net Profit FY07 FY08 FY09 Total Assets 5
With 15 years of Operating History 2009 Launched new Brand Campaign RBI approval received for 30 new branches and 50 off site ATM Appointed as Clearing & Settlement Bank at all major Tea Auction centres Tied up with BONY Mellon for on line remittances from United States to India 2008 GDR Issue - raised Rs 2,222 million; Ratings: ICRA Highest A1+ - CDs, Crisil Highest P1+: CDs, FDs New Launch/Rollout: Mid market Investment Bank, 3 rd Party Distribution Platform, Warehouse Receipt Finance Awards/Recognition: The Smart Workplace - Economic Times, Best CSR Practice Company BSE/NASSCOM Extended microfinance to 300,000+ women by partnering leading MFIs like SKS Mircofinance Extensive deployment IT initiatives Became clearing/settlement bank for NSE currency futures exchange New management team headed by Romesh Sobti inducted from ABN AMRO Bank NV 2006 2007 GDR - raised Rs 1,460 million, tied up with Cholamandalam MS for bancassurance Signed an agreement with National Multi Commodity Exchange Ltd as clearing banker Tied-up with Religare Securities for offering 3-in-1 account covering banking, depository & securities trading Tied up with Aviva Life Insurance for bancassurance 2004 2003 2005 Signed an agreement with NCDEX as clearing banker Opened its second representative office in London Ashok Leyland Finance Ltd, a leading NBFC merged with the Bank (total 115 branches), opened representative office in Dubai IndusInd Enterprises & Finance Ltd, a NBFC & one of the promoters of the Bank amalgamated with the Bank Increased branch network to 53 1997-00 1995 2002 1st to implement the RBI - EFT scheme with MoneyGram International & Zoha Inc. USA; similar tie ups with exchange houses in Middle East IPO - raised Rs 1,800 million, became clearing bank to First Commodities Clearing Corporation of India 1997,1998 Ranked Best Bank by Financial Express. 2000 Became clearing/settlement bank for BSE/NSE Raised Rs 1,000 million through preferential issue of shares 1994 Incorporated in 1994; Promoted by a group of Non Resident Indians. Started operations with Rs 1000 Mn Capital 6
In Growth Mode Net Interest Margin (NIM) RoA RoE 2.6% 1.3% 22.8% 2.0% 1.4% 1.5% 0.6% 10.4% 0.3% 0.3% 6.5% 6.8% FY07 FY08 FY09 Q1FY10 FY07 FY08 FY09 Q1FY10 FY07 FY08 FY09 Q1FY10 Cost to Income Ratio Net NPA Revenue/Employee (Rs Mn) 66.7% 67.2% 59.8% 48.8% 2.5% 2.3% 2.0 2.1 2.2 3.0 1.1% 1.0% FY07 FY08 FY09 Q1FY10 FY07 FY08 FY09 Q1FY10 FY07 FY08 FY09 Q1FY10 Significant improvement in operating metrics since the new management took charge in February 2008 7
A Bank in Transformation Key Takeaways
What Changed Since February 2008 1 New execution-focused management brought on board from a prominent foreign bank 2 Mission and measurable targets set 3 Business segments reorganized to boost profitability 4 Ramped up workforce and branch network 5 Focus on improving the liability side of balance sheet 6 Right pricing the asset book 7 Thrust on fee income 8 Achieving efficiency to boost profitability 9 Risk organization revamped 9
New Execution-focused Management Management Team Romesh Sobti Paul Abraham Designation Managing Director & CEO Chief Operating Officer Previous Assignments Executive Vice President Country Executive, India and Head, UAE & Sub-continent at ABN AMRO bank N.V. Has been associated with ANZ Grindlays Bank plc & State Bank of India in his 33 year career MD of ABN AMRO Central Enterprise Services COO of ABN AMRO Bank in India Sumant Kathpalia Head Consumer Banking Head - Consumer Banking, ABN AMRO Bank India Suhail Chander Head Corporate & Commercial Banking Head - Consumer & Commercial Banking, ABN AMRO Malaysia & Singapore KS Sridhar Chief Risk Officer Country Risk Officer, ABN AMRO India J Moses Harding Head Global Markets Group Head - Treasury, International & Capital Markets since 2003 at IndusInd Various positions at State Bank & Centurion Bank SV Parthasarathy Head Consumer Finance Executive Director, Ashok Leyland Finance Ramesh Ganesan Head - Transaction Banking Head - Transaction Banking, ABN AMRO India SV Zaregaonkar Suresh N Pai Chief Financial Officer & Head - Investor Relations Head Corporate Services & Communication Joined IndusInd in 1995 as Head Operations Various positions at Dena Bank Joined IndusInd in 1996 Various positions at Corporation Bank Zubin Modi Head Human Resources HR head, ICICI Lombard 4,251 Employees as at March 31, 2009 vs.2,869 as at March 31, 2008; significantly ramped up client-facing employee base Senior management team drawn from top private sector and foreign banks Majority of the Board of Directors are Independent Directors 10
Stated Ambition with Measurable Targets Mission Statement To position IndusInd Bank as a Top 3 performer in the new private bank space in 3 years RoA Profitability RoE Objectives Productivity Measured By Net Interest Margins Cost to Income Ratio Revenue per Employee Efficiency Net NPAs 11
Reorganization of Business Segments Global Markets Transaction Banking Product Groups Client Groups Consumer Banking Consumer Finance Retail Liabilities Banking Channel Management & Services Wealth Management & Third Party Distribution Corp. & Commercial Banking Corporate & Investment Banking Commercial Banking Business Banking Financial Institutions & Public Sector Reorganized business into client based units and product groups that work across client groups with the objective to enhance focus and customer orientation and service levels; also restructured geographical structure, regional offices and branch structure Various initiatives undertaken within each business segment to enhance customer acquisition and visibility Each vertical headed by competent personnel with extensive experience 12
Revitalizing Distribution and Workforce Distribution infrastructure being strengthened FY07 FY08 FY09 Q1FY10 Branch Network 170 180 180 180 ATMs 178 336 356 378 Distribution Centres 410 410 410 410 30 new Branches and 36 Off Site ATM licenses are on hand Work force additions to help drive business growth 2,613 No. of Employees 2,869 4,251 4,500 Ramped up work force (specially client-facing) to match its business expansion initiatives Pool drawn from peer banks and foreign banks Branch/Representative Office Strategic Alliance FY07 FY08 FY09 Q1FY10 Variable pay structure introduced in line with industry practices 13
Improving Liability side of Balance Sheet Top priority of the management towards CASA Uptick Building CASA Increasing the retail proportion in the term deposits Broad basing the wholesale deposits Tenor mapping 50,000 40,000 30,000 20,000 10,000 14.9% 26,327 15.7% 29,883 19.2% 42,549 20.2% 43,709 22% 20% 18% 16% 14% 12% New product launches, restructuring of branch network & focus on self employed and small business has accelerated the CASA momentum evident in the rise in CASA ratio from 15.7% in FY08 to 20.2% in Q1FY10 0 FY07 FY08 FY09 Q1FY10 CASA (Rs.Mn) Ratio 10% Maturity profile of Deposits (Rs Mn) Structural Shift: Retailisation of Liability Products 176,448 14% 190,374 12% 221,103 12% 216,388 12% 14% 13% 12% 12% 31,220 32,546 30% 35% 37% 37% 23,307 24,456 26,788 42% 39% 38% 40% 20,788 FY07 FY08 FY09 Q1FY10 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 June-09 <1 Year 1-3 Years 3-5 Years >5 Years Below 15 Lacs (Rs. Mn.) 14
Right Pricing of Asset Book impacting NII Differential risk-based loan pricing for each customer segment Increased focus on Small Business & Mid - Corporates Strong traction in the high yielding consumer finance division Churning of old loans with new higher yielding loans Priority Sector Lending Achieved the RBI-prescribed target as well as sub-targets for Priority Sector Advances Direct agricultural advances, warehouse financing, finance to small enterprise and micro finance 15
Thrust on Driving Revenues from Fee Income (Rs Mn) FY08 FY09 Growth Q1FY09 Q1FY10 Growth L/C, BG, FIBC/FOBC 324 414 27.7% 102 104 2.1% Processing fees 435 471 8.2% 60 114 89.1% Foreign exchange profit 289 719 148.8% 119 174 45.4% Insurance 386 638 65.3% 122 172 40.3% Mutual funds 31 36 16.1% 9 24 164.4% AQB, collection, etc 392 519 32.4% 92 114 24.3% Others 322 430 33.6% 194 240 23.2% Total core fee 2,179 3,227 48.1% 700 940 34.3% Committed to broaden the fee income base and its contribution to the profits Introduction of dedicated product portfolio to provide cash management, trade and financing, supply chain financing, global remittances, commodity financing, and electronic banking services to clients across business groups Realignment of pricing on its basic products such as demand drafts and lockers and increased focus on building momentum in the third party sales of insurance and mutual funds Thrust on cross selling to existing client base using Relationship Managers and Managed Sales Witnessed considerable acceleration in fees from transactional services, third party distribution fees, trade and foreign exchange fees, as well as basic services like loan processing charges, and average quarterly balance penalties over the last fiscal year 16
Achieving Efficiency to Boost Profitability Cost to Income Ratio Net NPA Revenue/Employee (Mn) 70.9% 65.5% 58.3% 51.8% 48.8% 2.4% 2.2% 2.1 2.0 2.4 2.9 3.0 1.3% 1.1% 1.0% Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Cost to Income ratio has improved considerably on the back of centralization of operations and rationalization of distribution channels Thrift mind set and various cost control measures adopted by the management has also helped to curtail costs Centralized risk functions and strong risk management systems has helped to keep credit risk in check Net NPA has come down significantly over the last fiscal as the management has reinforced risk management systems with best industry practices and resolved some long standing NPLs Rationalization of compensation structure to a variable pay model has boosted productivity Employees have been redeployed / retrained for suitable job roles to improve productivity Consequently, the bank has achieved a 42% rise in revenue per employee in Q1FY10 as compared to Q1FY09 17
Employee Efficiency - Key Metrics (Rs Mn) FY08 FY09 Growth Q1FY09 Q1FY10 Growth Revenue / Employee 2.09 2.15 3.2% 2.06 3.02 47.0% Staff Cost / Employee 0.43 0.44 3.5% 0.49 0.54 11.1% Staff Cost / Revenue 20.4% 20.5% 0.4% 23.6% 17.9% -24.4% 18
Revamped Risk Organisation - All Risk Classes Unified Integrated Risk Management - New Functions Created Risk Organisation Credit Approval & Monitoring Credit Risk Mgmt Market Risk Mgmt & ALM Operational Risk Mgmt Fin Restr & Reconstnn CQA & Loan Review Credit Appraisal/ Approval process revamped Credit standards tightened Credit Admin reinforced and centralised in hubs Early waning signals/ Exceptions tracking Enhanced monitoring mechanism Risk Rating Models revised and benchmarked against external rating Basel II implementation ICAAP Stress testing Portfolio Mgmt & Credit Quality Monitoring reinforced Proactive Monitoring of Risk & exposures Daily valuation VaR & PV01 Based Limit. Online monitoring of Risk parameter Liquidity Gaps monitoring Daily Parallel monitoring of intra-day liquidity position. Duration based gap approach Stress testing for Liquidity, interest and foreign exchange risk Robust ALM system Fund Transfer Pricing (FTP) Risk and Self Control Assessment (RCSA) Key Risk Indicators (KRIs.) Loss Data Collection Risk Profiling of branches Operational Risk Assessment Process for New Products Business Continuity Plan (BCP) Separate group monitors NPLs Account-wise monitoring & recovery mechanism Quality check on entire credit process Revalidation of credit rating Tracking of portfolio quality 19
Financial Performance
Profit and Loss Account (Rs Mn) FY08 FY09 Growth Q1FY09 Q1FY10 Growth Net Interest Income 3,008 4,590 52.6% 929 1,674 80.1% Non Interest Income 2,976 4,563 53.3% 649 1,728 166.1% Total Net Income 5,984 9,153 53.0% 1,579 3,401 115.5% Operating Expenses 4,022 5,470 36.0% 1,120 1,658 48.1% Operating Profit 1,962 3,683 87.7% 459 1,743 280.0% Provisions & Contingencies 819 1,408 71.9% 154 343 123.0% Profit before Tax 1,143 2,275 99.1% 305 1,400 359.2% Provision for Tax 392 792 101.8% 114 535 369.9% Profit after Tax 751 1,483 97.6% 191 865 352.8% 21
Balance Sheet (Rs Mn) FY08 FY09 Growth Q1FY09 Q1FY10 Growth Capital & Liabilities Capital 3,200 3,552 11.0% 3,552 3,552 0.0% Reserves and Surplus 10,297 13,092 27.1% 12,294 13,952 13.5% Deposits 190,374 221,102 16.1% 181,160 216,388 19.4% Borrowings 10,954 18,565 69.5% 29,134 23,413-19.6% Other Liabilities and Provisions 17,793 19,836 11.5% 17,501 20,667 18.1% TOTAL 232,618 276,147 18.7% 243,641 277,972 14.1% Assets Cash and Balances with RBI 15,263 11,908-22.0% 16,295 14,024-14.0% Balances with Banks 6,518 7,329 12.4% 5,160 6,218 20.5% Investments 66,297 80,834 21.9% 72,704 75,845 4.3% Advances 127,953 157,706 23.3% 132,682 164,516 24.0% Fixed Assets 6,251 6,232-0.3% 6,280 6,213-1.1% Other Assets 10,336 12,1438 17.4% 10,520 11,156 6.1% TOTAL 232,618 276,147 18.7% 243,641 277,972 14.1% Core Banking (Advances + Deposit) 318,327 378,808 19.0% 313,842 380,904 21.4% 22
Other Income (Rs Mn) FY08 FY09 Growth Q1FY09 Q1FY10 Growth Fee Based Income 1,890 2,509 32.7% 523 715 36.7% Profit on Exchange Transactions 289 719 148.8% 120 174 45.5% Profit on Sale of Investments 194 1,216 525.3% (51) 868 1801.2% Profit/(Loss) on sale of assets (7) (306) (63) (86) NPA Recovery 423 238 63 5 Lease Rentals 187 187 57 52 Total 2,976 4,563 53.3% 649 1,728 166.1% 23
Operating Metrics Net Interest Margin (NIM) RoA RoE 2.5% 2.6% 1.3% 22.8% 1.7% 1.8% 2.0% 0.5% 0.7% 0.8% 9.8% 12.6% 14.1% 0.3% 5.7% Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Cost to Income Ratio Net NPA Revenue/Employee (Rs Mn) 70.9% 65.5% 58.3% 51.8% 48.8% 2.4% 2.2% 2.1 2.0 2.4 2.9 3.0 1.3% 1.1% 1.0% Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 QoQ delivery of strong operating performance 24
Well Diversified Asset Book 110,842 41.5 Asset Book (Rs Mn) 157,706 164,516 127,953 54.8% 55.8% 43.2% 58.5% 56.8% 45.2% 44.2% FY07 FY08 FY09 Q1FY10 Consumer Finance Division Corporate & Commercial Banking Risk Diversification Analysis of Bank s Exposure (incl NFB) Industry-wise Corp. & Comm. Banking Exposure Segment-wise Cons. Finance Exposure 37.4% 32.1% 4.3% 3.7% 3.7% 1.1% 3.0% 2.9% 2.1% 1.9% 1.8% 1.8% 1.6% 1.6% 1.1% Construction Gems & Jew ellery Steel NBFCs(Excl. HFCs) Trading - Wholesale Pharmaceuticals Real Estate Food Credit Textiles Petroleum & Products Telecom MFI Engg. & Mach. Other Industry Consumer Finance 18.4% 5.2% 4.3% 3.5% 2.7% 2.5% 0.7% Commercial Vehicles 0.3% Equipment Financing Tw o w heelers Three w heelers Car Loans Utility Vehicles Housing Loans Staff Loans, Personal Loans & Others 62.5% CCB Advances 25
Favourable Yield / Cost Movement Yield on Advances Cost of Deposits 16% 14% 13.2% 13.4% 9% 8% 7.8% 8.2% 7.7% 12% 11.8% 7% 6.7% 10% 9.8% 6% 8% 5% 4% 6% 3% 4% 2% 2% 1% 0% FY07 FY08 FY09 Q1FY10 0% FY07 FY08 FY09 Q1FY10 26
Loan Portfolio - Movement in NPA (Rs Mn) FY08 FY09 Q1FY10 CCB CFD Total CCB CFD Total CCB CFD Total Opening Balance 1,898 1,529 3,427 2,234 1,689 3,923 756 1,795 2,551 Additions 539 1016 1,555 926 1,264 2,190 86 397 483 Deduction 203 857 1,060 2,404 1,158 3,562 278 345 623 Gross NPA 2,234 1,689 3,923 756 1,795 2,551 564 1,847 2,411 Provisions 566 447 1,013 339 420 759 343 403 746 Net NPA 1,669 1,241 2,910 411 1,374 1,792 221 1,444 1,665 Total Advances 55,333 72,620 1,27,953 86,432 71,274 1,57,706 91,729 72,787 1,64,516 % of Gross NPA 4.0% 2.3% 3.0% 0.9% 2.5% 1.6% 0.6% 2.5% 1.5% % of Net NPA 3.0% 1.7% 2.3% 0.5% 1.9% 1.1% 0.2% 2.0% 1.0% Provision Coverage 25.3% 26.5% 25.8% 44.9% 23.4% 29.8% 60.8% 21.8% 30.9% CCB - Corporate and Commercial Banking CFD - Consumer Finance Division 27
CFD - Segment wise NPA (Rs Mn) Q1FY10 CV CE 3W TW Cars BILLS HL TOTAL Net Book Assets 41,361 10,166 6,213 8,356 5,161 111 1,444 72,812 Add: Provision 217 29 8 95 54 - - 403 Gross Book Assets 41,578 10,195 6,221 8,451 Gross NPA Asset 920 158 44 463 5,215 262 111 1,444 73,214 - - 1,847 Net NPA Asset 703 129 36 367 209 - - 1,444 Gross NPA Asset / Gross Book Asset Net NPA Asset / Net Book Asset 2.2% 1.5% 0.7% 5.5% 5.0% 0.0% 0.0% 2.5% 1.7% 1.3% 0.6% 4.4% 4.0% 0.0% 0.0% 2.0% CFD - Consumer Finance Division 28
Loan Portfolio Restructured Standard Advances Q1-10* 10* Q1-09 Q4-09* No. Rs Mn No. Rs Mn No. Rs Mn Restructured Loans (Net) 129 760 18 20 126 380 Advances 164,520 134,680 157,710 Restructured Loans 0.5% 0.0% 0.2% * Includes restructuring of consumer / vehicle loans 118 borrowal accounts involving Rs 72.9 Mn 29
Shareholding Pattern Shares held by Custodians & against w hich Depository Receipts have been issued 18.2% NRIs / Director / Others 5.5% Promoters 25.6% Individuals 17.1% Private Corporates 12.7% FIIs 18.3% MFs / Banks / Insurance Co 2.6% As at June 30, 2009 30
Management Outlook Continued focus on Productivity, Profitability & Efficiency Expected to derive benefit from the current interest rate scenario with Consumer Loan portfolio carrying historically high fixed yields Benefit is expected to accrue from the short tenor bulk liability book due to re-pricing Other income from core business is expected to grow significantly Increased thrust on Wealth Management (including Non Resident coverage) & third party distribution of investment / products Significant growth expected in forex revenue with special emphasis on small and mid size business clients Investment Banking business expected to grow with the infrastructure in place Focus on garnering a decent market share in debt and equity raising program of mid sized corporate clients Continue to manage the credit risk of both corporate and Consumer Finance portfolios to keep delinquencies under control 31
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