Performance and Outlook December 2015
Agenda Macro Picture Performance Highlights Q&A 2
Agenda Macro Picture Performance Highlights Fundamentals (IIP) Output conditions Inflation Rates Credit and Deposit growth Q&A 3
Core fundamentals have improved moderately in recent months 14% 12% 10% 8% 6% 4% 2% (% YoY, 3MMA) Growth in IIP and Components Mining Manufacturing Electricity IIP On FYTD basis, IIP growth of 3.9% vs 2.9% last year Manufacturing up almost 2X (4.1% vs 2.2%) Electricity up sharply in recent months, particularly thermal power generation Within manufacturing, capital goods sector has been the star performer 0% -2% Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Source: MOSPI; Axis Bank Research 4
However, signals from output indicators are mixed Select output indicators Source: MOSPI; Axis Bank Research Cement and steel production growth remain weak Car production is increasing, but at a moderating pace CVs had a better year, reflecting stronger commercial activity 5
Inflation benign, extent of pricing weakness likely even higher CPI Inflation and components CPI vs WPI vs GDP Deflator 10% Food+ (45.9%) Fuel+ (6.8%) Core (47.3%) 8% CPI Combined 12% YoY% Inflation 10% GDP Deflator CPI 8% WPI 6% 6% 4% 5.34% 5.32% 5.00% 4.4% 4% 2% 0% -2% -4% 2% Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15-6% Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Source: MOSPI; Axis Bank Research Retail inflation (CPI) is ~5% in October, while Wholesale inflation is currently negative GDP deflator, broadest inflation measure, is more aligned to WPI, reflects deflation in tradables 6
RBI continues to ease rates and the easing is being transmitted by banks, both on deposit and lending side Repo Rate vs Axis Bank Lending and Deposit Rates (%) 11.0 10.25 Base Rate 50 bps rate cut by RBI in September 10.0 9.0 8.0 9.00 7.75 1 year FD Rate Repo Rate 9.50 7.90 Banks responded with significant transmission; 35 bps in the case of Axis Bank 7.0 6.75 6.0 Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Source: Bloomberg; Axis Bank 7
Credit and deposit growth are near multi year lows, but retail credit growth remains strong 20% Banking system credit and deposit growth Non-food credit growth (%, YoY) Deposit growth (%, YoY) Non-food credit growth at 9.2%; deposit growth at 11.1% 17% 14% Sectorally, the credit story is all in Retail Incremental credit to Industry and Services continue to be negative, YTD 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0-0.5 11% 8% Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 Sectoral Credit Growth Industry Credit Growth (FYTD, Rs Tn) FY11 FY13 FY15 FY12 FY14 FY15 2.2 1.7 1.2 0.7 0.2-0.3 Apr MayJun Jul AugSep Oct NovDec Jan Feb Mar Services Credit Growth (FYTD Rs Tn ) FY11 FY13 FY15 FY12 FY14 FY16 Apr MayJun Jul AugSep Oct NovDec Jan Feb Mar Retail growth strong, at 18%YOY, led by unsecured lending and housing 1.8 1.4 1.0 0.6 0.2-0.2 Retail Credit Growth (FYTD, Rs Tn) FY11 FY13 FY15 FY12 FY14 FY16 Apr MayJun Jul AugSep Oct NovDec Jan Feb Mar 8
Agenda Macro Picture Performance Highlights Q&A 9
The Bank continues to deliver strong growth and consistent shareholder returns Consistently strong shareholder returns 1 1 2 3 1 Includes profits for the half year; 2 Include extension counters; 3 Includes overseas subsidiary in UK 10
H1FY16 has seen satisfactory performance on most key outcomes Strong financial performance in H1FY16 1 Retail franchise continues to gain traction Strong CASA and RTD growth CASA+RTD = 80% of total deposits Retail advances growth of 27% YOY Retail Loans now 40% of total loans Strong growth in core operating revenue and profits Strong capital position Tier1 CAR 12.2% and Total CAR 15.4% Conservatively provisioned 78% provision coverage ratio 2 2 1 1 As on 30 th September 2015; 2 Includes profits for H1FY16 11
Core revenue streams have been growing steadily, providing a powerful and predictable revenue engine Net Interest Income (` Cr) Steady growth in NII (CAGR of 21% since FY12) Robust growth in core fee line Continued diversification in sources of Fee Income Increasing amounts of fee coming from granular retail business, and flow based transaction banking solutions Fee Income (` Cr) Fee Share H1FY16 12
Resulting in steady PAT delivery year on year 13
Our time-tested CASA franchise drives steady cost of funds and healthy NIMs CASA growth of 14%YOY on daily average basis RTD forms 64% of total TDs CASA+RTD forms 80% of total deposits 14
Asset quality of the Bank has been steady in turbulent times In Q2, the Bank sold two assets, worth `1,820 cr to ARCs, against a consideration of `650 cr We utilised `850 cr from contingent provisions built in prior quarters to absorb the write-off against these loans 15
The retail franchise continues to grow strongly Retail Lending Portfolio Mix 1 Card Spends 1 Including extension counters 154 new branches opened in H1 Continued momentum in Retail Advances now 40% of advances book Growth in Cards business continues to be extremely strong 16
17 With Digital now front and center in the Bank s retail strategy, clear customer outcomes are starting to become visible The Awardwinning Mobile App Lime: An integrated money management platform Ping Pay: The multi-social Payments App
The Corporate Bank is delivering robust growth in a slow market Advances Transactions Fees Corporate Banking Current Accounts SME CMS Accounts SME loans (including non-retail agriculture loans) grew 9% YOY 18
The growth in Corporate Banking has come with steadily improving rating distribution, even in the face of significant downgrades Rating Distribution - Corporate Banking Rating Distribution - SME 11% 11% 10% 11% 12% 7% 6% 8% 6% 6% 15% 15% 20% 18% 18% 16% 16% 15% 14% 15% 35% 34% 32% 31% 31% 57% 60% 61% 63% 64% 30% 31% 29% 29% 28% 9% 9% 9% 11% 11% Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 <BBB or unrated BBB A AA AAA 12% 11% 9% 9% 8% 8% 7% 7% 8% 7% Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 SME 5-7 SME 4 SME 3 SME 2 SME 1 61% of corporate advances are rated A or better in September 2015 85% of SME advances are SME3 or better in September 2015 19
In Summary, the Bank is in a great position in the competitive environment Financially strong: o Healthy capital ratios; strong profitability ratios; moderate risk levels Conservative provisioning Solid retail franchise: o Strong on both deposit and lending side; extensive network; loyal customer base Strong capabilities in Corporate Banking: o Increasing focus on Transaction Banking, over and above traditional strengths Powerful Brand that resonates with the youth Demonstrated, and continued, delivery of profitable growth 20
Agenda Macro Picture Performance Highlights Q&A 21