Kotak Annual Global Investor Conference 2011 Chasing Growth Mr. Bipin Kabra February 11, 2011
Agenda 1 Macro update 2 Dhanlaxmi Bank - An overview 3 A Bank in Transformation 4 Financials - How the Numbers Stack up? 5 Way Forward 3
1 Macro update 4
India: Positive Investment Environment Declining External Debt as a % of GDP (%) Return to Peak Foreign Currency Reserves (US$ Bn) 17.1 16.5 18.2 18.3 18.5 19.9 17.6 15.9 142 152 199 310 252 279 285 308 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11E FY 12E Source RBI, CSO, Morgan Stanley Research FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11E FY 12E Source RBI, CSO, Morgan Stanley Research 7.2 6.5 Regaining Control After Financial Crisis Fiscal Deficit as a % of GDP (%) 5.4 4.0 8.6 9.8 7.6 7.3 3.8 4.2 Consumer Price Index Outlook Stable (Avg y-o-y Increase %) 12.3 9.1 6.8 6.2 9.6 6.8 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11E FY 12E Source RBI, CSO, Morgan Stanley Research FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11E FY 12E Source RBI, CSO, Morgan Stanley Research 5
Indian Markets have seen significant uptick in last 24 months Indian Markets rebased to 100 82% 76% 72% Jan-09 Mar-09 Jun-09 Aug-09 Nov-09 Jan-10 Apr-10 Jun-10 Sep-10 Nov-10 Feb-11 Sensex NIFTY BSE500 Source Bloomberg as on February 9, 2011 Liquidity has been the primary driver of Indian equity markets in 2010 FIIs have pumped in more than $29 bn Domestic insurance companies have invested more than $6 bn Primary market volumes have been robust with more than $25 bn raised Correction in 2011 has been a function of rising inflation and consequent negative fallout from tightening monetary policy on growth 6
2 Dhanlaxmi Bank - An overview 7
Dhanlaxmi: An Emerging Private Sector Bank History Incorporated at Thrissur, Kerala in 1927 Growth Total asset base rose to Rs. 124 billion as at Dec 31, 2010 (+73% on a y-o-y basis) Breadth A broad and loyal customer base of 1.5 million as at Dec 31, 2010 Reach Bank launched its 275 th branch in Jan 2011; ATM network expanded to 454 Security Capital adequacy of 13.4% with a Tier-I ratio of 10.7% as at Dec 31, 2010 Efficiency Today Employee strength increased from 1,402 as of Mar 31, 2009 to 4,351 as on Dec 31, 2010 Emerging nationwide banking franchise with retail, SME and corporate banking focus 8
Investment Phase Organisation restructuring, branch addition, technology updation, staffing of relevant functions - Completed Initiated & strengthened alternate channels since Mar 09 - ATMs, Internet Banking, Mobile Banking, IVR Head Count (No. of employees) Business Mix (%) Cost / Income Ratio (%) 1,411 1,402 4,080 4,351 5 4 4 15 21 20 64 40 38 68 56 83 86 16 35 38 FY 08 FY 09 FY 10 9M 11 Mar-10 Sep-10 Dec-10 FY 08 FY 09 FY 10 9M 11 Retail Corp TAG Agri Growth in Total Income Growth in Operating Cost Opex / Assets (%) 275 237 3.1 232 193 2.8 201 2.6 101 2.3 141 79 91 42 97 113 175 99 122 141 FY 08 FY 09 FY 10 9M 11 Net Interest Income Noninterest Income Total FY 08 FY 09 FY 10 9M 11 Operating Expense FY 08 FY 09 FY 10 9M 11 9
Re-Booting the Franchise Credit - Deposit Ratio (%) Non - Interest Income (%) 58 64 71 74 30 39 39 37 FY 08 FY 09 FY 10 9M 11 FY 08 FY 09 FY 10 9M 11 CASA Asset Quality (%) 2,127 2.95 1,055 1,208 1,552 1.99 1.54 1.05 FY 08 FY 09 FY 10 9M 11 CASA CASA % FY 08 FY 09 FY 10 9M 11 Gross NPA (%) 10
Front-ended Investments to provide Long Term Structurally Strong Franchise Product Suite - Created an Extensive Bouquet of Services Customer Touch Points (Almost 3x in 18 Months) Across Product Spectrum Retail Loans - Mortgages, Commercial Property, Loan against Property, CE Financing, Dealer Financing, Auto Loan, Loan against Gold / Securities 275 Branches 454 ATMs Wholesale Banking - Working Capital Finance, BGs, LCs, Bills Discounting, Term Loans, Project Finance PB 7 1 HP 1.5m Loyal Customer Base Trade & Advance Group / Microfinance & Agriculture, Credit Card, Debit Card Third-Party Products - MF, Insurance, Forex, Depository, Online Brokerage etc. 5x Increase since Dec 2009 Internet Banking Retail Transactions GUJ HAR 6 3 RAJ 22 MP 3 97 MAH New Delhi 39 UP(E) 16 18 WB IVR, Voice chat in FY11 Liabilities - Current, Saving, Term, Recurring, Roaming Account etc. Goa 3 59 KK 68 AP Mobile Banking KER 449 142 TN Payment Services - Bill Pay, Money Transfer, Charity, Religious Offerings, Mobile Banking etc. Rebranding 11
3 A Bank in Transformation 12
Deposits - Advances Growth Continuously Better than the Industry 90% 76.3% 77.0% 75.5% 60% 49.4% 56.6% 42.8% 52.7% 52.8% 68.7% 30.1% 30% 17.8% 17.1% 22.0% 19.1% 24.1% 13.6% 17.0% 15.1% 14.2% 16.2% 0% Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Bank Advances Bank Deposits Industry Deposits Industry Credit 13
Revamp Towards a Favourable Business Mix on Track - Growth in Loan Book +164% 5,006 5,329 7,057 7,771 2,939 3,196 Dec-08 Mar-09 Mar-10 Jun-10 Sep-10 Dec-10 As at Mar 31, 2010 As at Sept 30, 2010 As at December 31, 2010 Agri 5% Retail 16% WBG 64% Retail 35% WBG 40% Retail 38% WBG 38% TAG 15% Agri 4% TAG 21% Agri 4% TAG 20% 14
Revamp Towards a Favourable Business Mix on Track - Liabilities 2,400 1,600 25% 1,166 24% 1,208 22% 1,126 2,127 2,047 1,324 1,552 1,656 22% 22% 22% 21% 22% 1,245 20% 30% 20% 800 10% 0 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 0% CASA (Rs. Cr) Ratio Change of culture at Branches from Lending to Liabilities Approx. 36% of the incremental liabilities from new branches 15
Revamp Towards a Favourable Business Mix on Track - Region - wise Loan book By State (%) By Geographic Region (%) 56 73 79 19 43 58 44 27 21 81 58 42 FY09 FY10 9M FY11 FY09 FY10 9M FY11 Kerala Non-Kerala South India Non-South Deposits 32 52 56 8 25 40 68 48 44 91 75 60 FY09 FY10 9M FY11 FY09 FY10 9M FY11 Kerala Non-Kerala South India Non-South 16
Trend in Net Interest Margin 12% 10% 10.6% 10.4% 9.9% 10.0% 9.3% 9.7% 8% 6% 6.9% 6.4% 6.4% 6.6% 6.2% 6.5% 4% 2% 1.9% 2.5% 2.7% 2.6% 2.4% 2.6% 0% Q2 - FY2010 Q3 - FY2010 Q4 - FY2010 Q1 - FY2011 Q2 - FY2011 Q3 - FY2011 Yield on Advances Cost of Funds NIM 17
Retail Growth and Share of Various sub-segments (Dec 31, 2010) 3,200 2,944 2,400 2,438 Others 20% Mortgages 10% 1,600 Vehicle Loans 30% 800 810 Gold Loans 34% Construction Equip. 6% 0 Mar-10 Sep-10 Dec-10 Business Size (Rs. in crores) 18
Leverage Our Multichannel Distribution Network Insurance distribution tie up with Bajaj Allianz 93 Insurance business (Rs in Cr.) 28 44 60 FY 2010 Q1-2011 Q2-2011 Q3-2011 MF product distribution tie-ups with ICICI Prudential, Kotak, UTI, Fidelity & HDFC ~26,000 MF SIP accounts opened in Q3 as compared to 21,000 in Q2 FY2011 Continues to be the 2 nd largest private sector bank in terms of fresh SIPs mobilised (CAMS) Strengthened existing relationship with Destimoney Securities 19
Nearly 50,000 Shareholders Form Part of the Dhanlaxmi Family Shareholding Pattern as at December 31, 2010 Banks / Financial Institutions 0.2% Non Resident Indians 5.2% Corporate Bodies 15.0% Others * 6.8% Resident Individuals 33.0% Foreign Institutional Investors 39.8% The Bank plans to raise equity by issue of upto 5.50 crore shares to augment its Tier I capital base * Includes insurance companies, Mutual funds, Trusts and Clearing members 20
4 Financials - How the Numbers Stack up? 21
Balance Sheet (Rs. in Crores) Dec 31, 2010 Sept 30, 2010 June 30, 2010 Mar 31, 2010 Dec 31, 2009 Y-o-Y growth Capital 85 85 64 64 64 32.8% Reserves 751 743 382 376 378 98.6% Deposits 10,532 9,497 7,747 7,098 6,002 75.5% Borrowings 479 350 398 121 299 60.3% Other Liabilities 526 737 436 428 406 29.7% Total 12,373 11,413 9,027 8,087 7,149 73.1% Cash / bank balance 847 1,230 920 750 546 55.3% Investments 3,287 2,711 2,474 2,028 1,940 69.4% Advances 7,771 7,057 5,329 5,006 4,391 77.0% Fixed assets 124 111 86 79 55 125.5% Other Assets 343 304 218 223 217 58.2% Total 12,373 11,413 9,027 8,087 7,149 73.1% 22
Composition of the Investment Book Particulars December 31, 2010 (Rs. in Crores) (%) Held-to-maturity 1,935.7 58.9 SLR 1,807.8 55.0 Non - SLR 127.9 3.9 Available for Sale 1,305.7 39.7 SLR 804.9 24.5 Non - SLR 500.8 15.2 Held-for-trading 45.4 1.4 Total 3,286.9 100.0 23
Profit and Loss Statement (Rs. in Crores) Q3 - FY2011 Q3 - FY2010 Y-o-Y growth 9M - FY2011 9M - FY2010 Y-o-Y growth Interest income 249.9 139.8 78.7% 610.3 384.1 58.9% Interest expenses 176.3 100.7 75.1% 435.5 287.4 51.5% Net interest income 73.6 39.1 87.9% 174.8 96.7 80.7% Non Interest income 33.4 16.6 100.7% 100.7 59.1 70.5% Operating expenses 89.3 53.0 68.6% 236.5 128.8 83.7% Staff cost 54.1 30.2 79.3% 143.3 74.4 92.6% Provisions 7.9 2.7 188.7% 18.2 6.9 161.0% Profit before tax 9.7 0.1-20.6 20.0 3.2% Provisions for tax 2.5 (1.3) - 5.7 2.3 148.3% Profit after tax 7.3 1.3 447.0% 14.9 17.7 (15.8%) 24
(Rs. in Crores) Trend in Operating Expenses 100 89 75 50 25 0 25 44 29 31 32 18 28 12 13 14 14 12 26 13 16 17 17 18 77 70 35 64 28 53 30 29 23 54 49 40 35 30 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Staff Cost Others 25
Key Ratios (%) Q3 - FY2011 Q3 - FY2010 9M - FY2011 9M - FY2010 FY2010 Cost / Income ratio 83.49 94.94 85.89 82.67 83.29 Credit - Deposit ratio 73.48 75.31 73.79 75.31 70.53 Return on Equity 3.44 1.19 2.37 5.32 5.30 Return on Assets 0.24 0.07 0.19 0.37 0.35 Dec 31, 2010 Sept 30, 2010 June 30, 2010 Mar 31, 2010 Dec 31, 2009 Gross NPAs (Rs. in crores) 82.02 89.71 75.66 77.50 77.88 Net NPAs (Rs. in crores) 40.42 50.41 40.36 41.94 39.14 Basel I Capital adequacy 11.76% 13.09% 10.36% 12.47% 13.36% - Tier I 9.38% 10.47% 7.39% 8.45% 9.14% Basel II Capital adequacy 13.39% 14.60% 11.01% 12.99% 14.29% - Tier I 10.68% 11.68% 7.85% 8.80% 9.78% 26
Asset Quality 2.5% 2.0% 1.99% 1.92% 1.73% 1.76% 1.5% 1.54% 1.41% 1.26% 1.0% 0.88% 0.96% 0.86% 0.89% 0.84% 0.76% 0.71% 1.05% 0.5% 0.52% 0.0% Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Net NPA Ratio Gross NPA Ratio 27
5 Way Forward 28
Sweating the Asset Build Up and Improving Productivity Capacity National Franchise Workforce Technology Profit, return dilution reflects on-going capacity creation Huge Scope to improve productivity by pushing volume, generating fee and CASA Banking Sector in India Private Sector Banks Dhanlaxmi Bank Business per employee (Rs. mn) 87 80 37 Advances per branch (Rs. mn) 486 609 258 Deposits per branch (Rs. mn) 660 792 348 Cost per employee (Rs. mn) 1.06 1.24 0.82 Balanced Book Well established high volume / low risk corporate banking group Focus on high yielding SME / Retail offset higher funding cost and improved fee income from processing & service charges Credit risk in retail remains low - as book is mostly secured 29
Business Strategy 1 Focus on incremental asset creation in the retail and SME segments 2 Growth in Non fund income (Treasury, LCs, BGs, Forex, etc.) 3 Enhancing income from distribution of third party products 4 Ramped up low cost as well as retail liabilities franchise 5 Enhance productivity per branch / per employee 6 Priority banking 30
31 Thank You