ICICI Group: Performance & strategy. September 2014

Transcription

1 ICICI Group: Performance & strategy September 2014

2 Certain statements in these slides are forward-looking statements. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors. More information about these factors is contained in ICICI Bank's filings with the US Securities and Exchange Commission. All financial and other information in these slides, other than financial and other information for specific subsidiaries where specifically mentioned, is on an unconsolidated basis for ICICI Bank Limited only unless specifically stated to be on a consolidated basis for ICICI Bank Limited and its subsidiaries. Please also refer to the statement of unconsolidated, consolidated and segmental results required by Indian regulations that has, along with these slides, been filed with the stock exchanges in India where ICICI Bank s equity shares are listed and with the New York Stock Exchange and the US Securities and Exchange Commission, and is available on our website 2

3 Agenda Performance highlights Strategy & outlook 3

4 Our objective Sustainable & profitable growth Balance sheet strength Healthy loan mix & growth Robust funding profile Profitability improvement Building granular & stable income streams Efficiency of operations Sustaining strong diversified financial services franchise 4

5 Lending Healthy mix and calibrated growth ` 2,164 bn 7% 25% 28% ` 2,537 bn 6% 27% 29% ` 2,902 bn 5% 25% 33% ` 3,387 bn ` 3,471 bn 4% 4% 26% 26% 30% 30% 37% 37% 36% 37% 37% 2% 1% 1% 2% 2% Mar 2011 Mar 2012 Mar 2013 Mar 2014 Jun 2014 Unsecured retail Secured retail Domestic corporate Overseas branches SME 15.2% y-o-y credit growth at June 2014 driven by robust retail loan growth 5

6 Retail lending Secured lending driving 20%+ portfolio growth Home loans Auto loans Business banking June 2013 June 2014 June 2013 June 2014 Along with healthy growth in rural loans June 2013 June 2014 Continued focus on risks: Calibrated approach to CV lending Unsecured portfolio size continues to remain low 6

7 Funding Building a low cost and granular base CASA deposits 45% 42% 43% 42% 43% 43% Retail deposits ~76% 1 29% ~50% ~50% ~24% Mar 2009 Mar 2010 Mar 2011 Mar 2012 Mar 2013 Mar 2014 Jun 2014 Mar 2009 Jun 2014 Savings Current Retail/domestic Wholesale/domestic 1. Includes FCNR(B) deposits Increasing proportion of CASA and retail deposits 7

8 Funding Growth driven by retail deposit franchise Savings deposits Retail deposits June 2013 June 2014 June 2013 June 2014 Driven by continued investments in physical and technological infrastructure 8

9 Granular income Sustained improvement across businesses Domestic NIM Improvement in funding base International NIM 1.34% 1.23% 0.88% 1.71% 1.63% Bond/loan repayments covered by asset maturities; no refinancing risk; higher liquidity maintained on June 30, 2014 FY2011 FY2012 FY2013 FY2014 Q

10 Granular income Substantial increase in overall NIMs Overall NIM 2.64% 2.73% 3.11% 3.33% 3.40% Driven by profit and margin focus across domestic and international businesses FY2011 FY2012 FY2013 FY2014 Q ~70 bps improvement in overall NIM since FY

11 Granular income Steady fee streams Focus on building granular and stable revenues Key growth areas ~45% ~55% Retail fees Forex & derivative Commercial banking Retail Non-retail Overall fee growth at 8% y-o-y for Q1-2015; healthy growth in retail fees 11

12 Granular income Regular and increasing dividend income FY2010 FY2013 FY2014 Remains healthy with increased payout by ICICI Life Diversified financial services franchise yielding high returns Dividend income of over ` 4 billion in Q Contributing to increase in non-interest income 12

13 Operating efficiency Driving efficiency on larger network and business Cost-income % 42% 43% 41% Best in class cost-income ratios 38% 38% Despite significant scale up in infrastructure FY2011 FY2012 FY2013 FY2014 Q Focus on cost efficiency to continue 13

14 Return profile Consistent delivery against stated objectives Standalone RoA FY2013 FY % <1.0% FY % About 80 bps improvement over FY2009 FY2009 <8.0% Consolidated RoE FY2014 FY % 14.7% Near doubling of consolidated RoE since FY2009 Q1-2015: standalone RoA of 1.82% 1 and consolidated RoE of 14.6% 1 1. annualised 14

15 Agenda Performance highlights Strategy & outlook 15

16 Key strengths Well positioned for recovery in economic activity Diversified business lines Investments in distribution network Strong capital position Continued focus on sustaining and enhancing franchise across financial service businesses Largest branch network among private sector banks supplemented with large ATM network Leadership in leveraging technology Strong capital base with CAR of 17.39% 1 with Tier 1 ratio of 12.62% 1 at June 30, Including profits for Q

17 Diversified business lines Strong franchise across segments (1/2) Largest private sector bank in India Continued focus on enhancing retail franchise; investing in semi-urban & rural markets Well established corporate franchise along with overseas presence Renewed growth momentum Leadership among private sector players Healthy profitability Leadership among private sector players Focus on strengthening franchise and profitability 17

18 Diversified business lines Strong franchise across segments (2/2) Improved market position to second largest mutual fund in India in terms of overall AUM Strong fund performance Increase in market share in broking Focus on maintaining profitability Improvement in market conditions favourable for business outlook 18

19 Investments in distribution Significant scale up in branch & ATM network Network of 3,763 at Jun 2014; largest in private sector banks Supplemented by >11,000 ATMs Largest rural branch network among private sector banks ~75% of branch additions since March 2012 in rural and semi-urban areas Branch network Metro Urban Semi Urban Rural 3,753 3,763 3,100 2,529 2,752 1,707 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Jun-14 19

20 Technology Continued leadership in technology Facilitating faster and more convenient processes Reducing transaction costs and improving customer experience 20

21 Technology Key initiatives during recent years Leveraging social networking platforms Tab banking Supporting customer service & cost efficiency Focus on mobile banking; Money2India Mobile App for NRIs 24x7 touch banking: facilitating day-to-day transactions Redesigned & customised website Comprehensive solutions: online tendering, electronic toll collection Leveraging mobility, digitisation and innovations in payments technology 21

22 Technology Improving throughput & productivity Tab banking Significantly reduced processing time for opening accounts About 25-30% of the savings accounts opened every month are sourced using tab banking Mobile banking 6x increase in number of transactions since March 2012 ~25% market share based on value of transactions Touch banking & kiosks Network of 101 touch banking branches; facilitating banking transactions 24x7 Self service kiosks installed in several other branches; basic transactions facilitated through such platforms Scale benefits of these initiatives are yet to be realised 22

23 Capital position Healthy capital ratios Standalone capital 17.4% % 1 Tier I CAR June 30, 2014 Consolidated Basel III total capital adequacy ratio at 18.0% 1, tier 1 ratio at 12.9% 1 at June 30, 2014 Among the best capitalised large Indian banks 1. Including profits for Q

24 24 Key priorities for FY2015

25 Our approach Key priorities We are targeting credit growth with focus on selected areas; retail lending to be a key driver We will continue to support this growth with a robust funding profile We will continue to focus on productivity & operating efficiency as a profitability driver 25

26 Lending Targeting healthy growth and mix Targeting 2-4% higher than system domestic loan growth Retail portfolio to continue to be the key driver for growth Growth in corporate (including overseas branches) & SME portfolios to be calibrated to the environment 26

27 Retail assets Focus on traditional segments to continue Home loans Sustaining momentum in disbursements Auto loans Calibrated disbursement growth given underlying market trends and pricing However, book growth would be relatively high CV Moderate growth given economic scenario Unsecured loans Significant growth off low base with close monitoring of asset quality trends; portfolio size to be low proportion of total loans 27

28 Retail assets New growth areas Small business loans Small value and well collateralised lending to small businesses Closely linked to current account deposits Rural markets Building granular and diversified portfolio while maintaining focus on portfolio asset quality Leveraging increase in geographical presence and larger distribution to increase volumes 28

29 Domestic corporate & SME Calibrated approach to continue Domestic corporate & SME loans Moderate improvement in growth over FY2014 levels expected, with Focus on higher rated credit Focus on working capital and short term loans Continued close monitoring of portfolio 29

30 International business Focus on profitability and returns Branches Lending primarily to Indian corporates Subsidiaries Regulatory expectations impacting business model High capital levels Growth calibrated to global funding markets & Indian corporate credit demand Focus on commercial banking, including working capital facilities for Indian companies abroad and MNCs engaged in trade with India Continued focus on optimising capital Focus on short term loans, working capital lines, trade & transaction banking products to MNCs, select local market corporates & Indian companies abroad 30

31 Funding profile Targeting healthy growth in CASA deposits Expanded branch network Significant investments made in technology Focus on leveraging investments made so far Average CASA ratio maintained in 38-40% range since FY

32 In summary Sustained focus on strengthening franchise Achieved significant improvement in balance sheet & operating parameters 2009 onwards Driving structural improvements Scaled up retail business; continued investments in distribution & technology 2011 onwards Focus on profitable credit growth; enhancing franchise Focus on sustaining profitability metrics & leveraging growth opportunities Outlook going forward Well-positioned for economic recovery 32

33 33 Thank you

34 Q1-2015: Performance highlights Profitability 16.8% increase in standalone profit after tax from ` bn in Q (April-June 2013) to ` bn in Q (April-June 2014) Net interest income increased by 17.6% year-on-year; net interest margin improved from 3.27% in Q to 3.40% in Q Consolidated profit after tax at ` bn in Q1-2015; consolidated return on average networth (annualised) at 14.6% 34

35 Q1-2015: Performance highlights Balance sheet Advances increased by 15.2% year-on-year to ` 3, billion at June 30, 2014 Retail advances growth at 26.4% year-on-year at June 30, 2014 Domestic corporate loan growth at 7.7% Period end CASA ratio at 43.0% at June 30, 2014 compared to 43.2% at June 30, 2013 and 42.9% at March 31, 2014 Average CASA ratio at 39.5% for Q compared to 39.1% in Q Net NPA ratio at 0.87% at June 30, 2014 (March 31, 2014: 0.82%; June 30, 2013: 0.69%) 35

36 36 Standalone results

37 Profit & loss statement (` billion) Q Q Q Q1-o-Q1 growth FY2014 NII % Non-interest income % Fee income % Other income % Treasury income (3.7)% Total income % Operating expenses % Operating profit % Includes ` 2.22 billion and ` 1.03 billion of exchange rate gains on repatriation of retained earnings from overseas branches in Q and Q respectively 37

38 Profit & loss statement Q Q Q Q1-o-Q1 growth (` billion) FY2014 Operating profit % Provisions % Profit before tax % Tax % Profit after tax % The Reserve Bank of India (RBI), through its circular dated December 20, 2013, had advised banks to create deferred tax liability (DTL) on the amount outstanding in Special Reserve, as a matter of prudence. In accordance with RBI guidelines, during the year ended March 31, 2014 the Bank created DTL of billion on Special Reserve outstanding at March 31, 2013, by reducing the reserves. Further, tax expense for Q4-2014, FY2014 and Q includes impact of DTL on Special Reserve, of 0.89 billion, 3.04 billion and 0.95 billion respectively. No provision for DTL on Special Reserve was made in Q

39 Key ratios (Percent) Movement in yield, costs & margins Q Q Q FY 2014 Yield on total interest earning assets Cost of funds Net interest margin Q Q4- Q1- FY Return on average networth Return on average assets Weighted avg EPS (`) Book value (`) Fee to income Cost to income Average CASA ratio Annualised for all interim periods 39

40 Balance sheet: Assets (` billion) June 30, 2013 March 31, 2014 June 30, 2014 Y-o-Y growth Cash & bank balances % Investments 1, , , (2.6)% - SLR investments (2.7)% - Equity investment in subsidiaries RIDF 1 and related % Advances 2 3, , , % Fixed & other assets (27.4)% Total assets 2 5, , , % Net investment in security receipts of asset reconstruction companies was ` 9.25 bn at June 30, 2014 (March 31, 2014: ` 8.84 bn) 1. Rural Infrastructure Development Fund 2. Including impact of exchange rate movement 40

41 Composition of loan book (y-o-y) June 30, 2013 SME 4.6% June 30, 2014 SME 4.4% Overseas branches 26.9% 1 Domestic corporate 32.5% 2 Overseas 1 branches Retail % Retail business business 36.0% 39.6% Domestic corporate 30.4% 2 3 Total loan book: ` 3,014 bn Total loan book: ` 3,471 bn Including impact of exchange rate movement 2. Domestic corporate loans include builder finance 3. Including buyouts & inter-bank participation certificates

42 Composition of retail loan book (y-o-y) June 30, 2013 Cre dit cards 2.8% Business banking 5.8% Personal loans 1.7% Credit cards 2.6% Business banking 5.6% June 30, 2014 Personal loans 3.4% Others 12.1% Ve hicle loans 22.7% 1 Home 54.9% Others 14.0% Vehicle loans 20.3% 2 Home 54.1% Total retail loan book: ` 1,085 bn Total retail loan book: ` 1,372 bn Total retail advances growth of 26.4% June 30, 2013 :Vehicle loans includes auto loans 10.2%, commercial business 12.5% 2. June 30, 2014: Vehicle loans includes auto loans 11.8%, commercial business 8.5%

43 Composition of loan book (q-o-q) March 31, 2014 SME 4.4% June 30, 2014 SME 4.4% Overseas branches 26.5% 1 Retail business 39.0% 3 Overseas branches 25.6% 1 Retail business 39.6% 3 Domestic corporate 30.1% 2 Domestic corporate 30.4% 2 Total loan book: ` 3,387 bn Total loan book: ` 3,471 bn Including impact of exchange rate movement 2. Domestic corporate loans include builder finance 3. Including buyouts & inter-bank participation certificates

44 Composition of retail loan book (q-o-q) Credit cards 2.5% March 31, 2014 Personal loans 3.0% Credit cards 2.6% June 30, 2014 Personal loans 3.4% Business banking 6.0% Business banking 5.6% Others 14.1% Vehicle loans 20.9% 1 Home 53.5% Others 14.0% Vehicle loans 20.3% 2 Home 54.1% Total retail loan book: ` 1,320 bn Total retail loan book: ` 1,372 bn 1. March 31, 2014: Vehicle loans includes auto loans 11.5%, commercial business 9.4% 2. June 30, 2014: Vehicle loans includes auto loans 11.8%, commercial business 8.5% 44

45 Equity investment in subsidiaries June 30, 2013 March 31, 2014 (` billion) June 30, 2014 ICICI Prudential Life Insurance ICICI Bank Canada ICICI Bank UK ICICI Lombard General Insurance ICICI Home Finance ICICI Bank Eurasia LLC ICICI Securities Limited ICICI Securities Primary Dealership ICICI AMC ICICI Venture Funds Mgmt Others Total

46 Balance sheet: Liabilities June 30, 2013 March 31, 2014 June 30, 2014 (` billion) Y-o-Y growth Net worth % - Equity capital % - Reserves % Deposits 2, , , % - Savings , % - Current % Borrowings 2,3 1, , , (6.4)% Other liabilities (2.0)% Total liabilities 3 5, , , % 1. During the three months ended December 31, 2013, the Bank has created a DTL of ` billion on Special Reserve outstanding at March 31, 2013, by reducing the reserves 2. Borrowings include preference shares amounting to ` 3.50 bn 3. Including impact of exchange rate movement Credit/deposit ratio of 80.5% on the domestic balance sheet at June 30,

47 Composition of borrowings (` billion) June 30, 2013 March 31, 2014 June 30, 2014 Domestic Capital instruments Other borrowings Overseas Capital instruments Other borrowings Total borrowings 2 1, , , Includes preference share capital ` 3.50 bn 2. Including impact of exchange rate movement Capital instruments constitute 62.0% of domestic borrowings 47

48 Capital adequacy Standalone Basel III March 31, 2014 June 30, ,2 ` bn % ` bn % Total Capital % % - Tier I % % - Tier II % % Risk weighted assets 4, , On balance sheet 3, , Off balance sheet 1, , In line with the applicable guidelines, the Basel III capital ratios reported by the Bank for the interim periods do not include profits for the period 2. Capital ratios at June 30, 2014 include the impact of credit value adjustment on derivative exposures and capital charge required for borrowers with unhedged foreign currency exposures, in accordance with the Reserve Bank of India guidelines Including the profits for Q1-2015, the capital adequacy ratio for the Bank as per Basel III norms would have been 17.39% and the Tier I ratio would have been 12.62% 48

49 Asset quality and provisioning (` billion) June 30, 2013 March 31, 2014 June 30, 2014 Gross NPAs Less: Cumulative provisions Net NPAs Net NPA ratio 0.69% 0.82% 0.87% Gross retail NPLs at ` bn and net retail NPLs at ` 8.46 bn at June 30, 2014 compared to ` bn and ` 7.76 bn respectively at June 30, 2013 Provisioning coverage ratio of 68.4% at June 30, 2014 computed in accordance with RBI guidelines Net loans to companies whose facilities have been restructured at ` bn at June 30, 2014 compared to ` bn at March 31, 2014 and ` bn at June 30, 2013 Outstanding general provision on standard assets: ` bn at June 30, Including general provisions on standard restructured loans 49

50 Movement of NPA (` billion) Q Q Q Opening gross NPA Add: Gross additions Less: Gross deletions Net additions Less: Write-offs & sale Closing balance of gross NPAs Gross NPA ratio % 2.56% 2.69% 1. Based on customer assets 50

51 Distribution network At March 31, 2012 At March 31, 2013 At March 31, 2014 At June 30, 2014 % of mix at Jun 30, 2014 Branches Metro % Urban % Semi Urban ,114 1, % Rural % Total branches 2,752 3,100 3,753 3, % ATMs Total ATMs 9,006 10,481 11,315 11,447-51

52 52 Consolidated results

53 Consolidated profit & loss statement Q Q Q FY2014 (` billion) Q1-o-Q1 growth NII % Non-interest income % - Fee income % - Premium income % - Other income (20.9)% Total income % Operating expenses % Operating profit % 53

54 Consolidated profit & loss statement (` billion) Q1-o-Q1 Q Q Q FY2014 growth Operating profit % Provisions % Profit before tax % Tax % Minority interest (10.7)% Profit after tax % 54

55 Consolidated balance sheet June 30, 2013 March 31, 2014 June 30, 2014 (` billion) Y-o-Y growth Cash & bank balances % Investments 2, , , % Advances 3, , , % Fixed & other assets (26.0)% Total assets 6, , , % Net worth % Minority interest % Deposits 3, , , % Borrowings 1, , , (3.9)% Liabilities on policies in force % Other liabilities (6.7)% Total liabilities 6, , , % 55

56 Key ratios (consolidated) Q Q Q (Percent) FY 2014 Return on average networth 1,2 (consolidated) Weighted avg EPS (`) Book value (`) Based on quarterly average networth 2. Annualised for all interim periods Consolidated Basel III March 31, 2014 June 30, Total Capital 18.34% 17.57% - Tier I 13.11% 12.52% - Tier II 5.23% 5.05% 1. In line with the applicable guidelines, the Basel III capital ratios reported by the Bank for the interim periods do not include profits for the period Including the profits for Q1-2015, the capital adequacy ratio for the Bank as per Basel III norms would have been 17.95% and the Tier I ratio would have been 12.90% 56

57 57 Overseas subsidiaries

58 ICICI Bank UK asset profile India linked investments 5.6% March 31, 2014 Bonds/notes of financial institutions 1.0% Asset backed securities 1.7% Other assets & investments 3.0% Cash & liquid 1 securities 26.7% Bonds/notes of financial institutions 0.9% India linked investments 7.0% June 30, 2014 Asset backed securities 1.9% Other assets & investments 5.3% Cash & liquid 1 securities % Loans & 2 advances 62.0% Loans & 2 advances % Total assets: USD 4.5 bn Total assets: USD 4.1 bn 1. Includes cash & advances to banks, T Bills 2. Includes securities re-classified to loans & advances 58

59 ICICI Bank UK liability profile Syndicated loans & interbank borrowings 17.4% March 31, 2014 June 30, 2014 Other Other liabilities Syndicated loans liabilities 2.3% Net worth & interbank 2.8% Net worth 14.1% borrowings 15.5% 13.7% Long term debt 9.5% Term deposits 32.1% Demand deposits 24.6% Long term debt 7.9% Term deposits 35.7% Demand deposits 24.4% Total liabilities: USD 4.5 bn Total liabilities: USD 4.1 bn Profit after tax of US$ 6.3 mn in Q compared to US$ 5.4 mn in Q Capital adequacy ratio at 23.3% Proportion of retail term deposits in total deposits at 42% at June 30,

60 ICICI Bank Canada asset profile March 31, 2014 June 30, 2014 Other assets & investments 0.6% Asset backed securities 0.3% Cash & liquid 1 sec urities 11.2% Insured mo rtgage 36.2% 2 Other assets & investments 1.4% Asset backed securities 0.3% Cash & liquid securities % Insured mo rtgage % Lo ans to customers 51.7% Lo ans to customers 45.5% Total assets: CAD 5.5 bn Total assets: CAD 5.6 bn 1. Includes cash & advances to banks and government securities 2. Based on IFRS, securitised portfolio of CAD 1,973 mn and CAD 2,035 mn considered as part of Insured mortgage portfolio at March 31, 2014 and June 30, 2014 respectively 60

61 ICICI Bank Canada liability profile March 31, 2014 June 30, 2014 Other liabilities 1.1% Net worth 17.3% Other liabilities 0.7% Net worth 17.0% 1 1 Borrowings 37.0% 1 Bo rrowings 37.1% Term deposits 32.5% T erm deposits 33.9% Demand deposits 12.1% Demand deposits 11.3% Total liabilities: CAD 5.5 bn Profit after tax of CAD 14.0 mn in Q compared to CAD 14.4 mn in Q Capital adequacy ratio at 30.6% 1. As per IFRS, proceeds of CAD 1,967 mn and CAD 2,039 mn from sale of securitised portfolio considered as part of borrowings at March 31, 2014 and June 30, 2014 respectively Total liabilities: CAD 5.6 bn 61

62 ICICI Bank Eurasia asset profile March 31, 2014 Other assets & in vestmen ts 1.3% June 30, 2014 Other assets & in vestments 0.9% Cash & cash equ ivalen ts 25.0% 1 Loans to corporates & banks 48.8% Cash & cash equ ivalents 37.7% 1 Loans to corporates & banks 38.3% Retail loan s 24.9% Total assets: USD 118 mn Retail loans 23.1% Total assets: USD 127 mn Total borrowings of USD 53 mn at June 30, 2014 Capital adequacy of 48.0% at June 30, 2014 Net profit of USD 0.2 mn in Q compared to USD 0.9 mn in Q Includes cash & call placements with banks, balances with central bank, government securities and nostro balances

63 63 Domestic subsidiaries

64 ICICI Home Finance March 31, 2014 Investments and other assets 8.4% Investments and other assets 8.6% June 30, 2014 ` ` Loans 91.6% Loans 91.4% Total assets: ` bn Total assets: ` bn Profit after tax of ` mn in Q compared to ` mn in Q Capital adequacy ratio of 30.9% at June 30, 2014 Net NPA ratio: 0.8% At June 30, 2014: Net worth ` bn; Deposits ` 3.59 bn and Borrowings & other liabilities ` bn 64

65 ICICI Life (` billion) Q Q FY2014 New business received premium Renewal premium Total premium Annualised premium equivalent (APE) New Business Profit (NBP) NBP margin 15.0% 10.9% 12.4% Statutory profit Assets Under Management Expense ratio % 20.4% 18.8% Sustained leadership in private space with an overall market share of 7.2% 3 for FY2014 Private sector market share increased to 18.9% in FY2014 from 18.5% in FY On Traditional Embedded Value basis; post tax 2. All expenses (including commission) / (Total premium 90% of single premium) 3. Source: IRDA (new business retail weighted premium)

66 ICICI General (` billion) Q Q FY2014 Gross premium PAT Market share based on gross written premium was 9.6% 2 for April-May Excluding remittances from motor declined pool and including premium on reinsurance accepted 2. Source: IRDA 66

67 Other subsidiaries (` billion) Profit after tax Q Q FY2014 ICICI Prudential Asset Management ICICI Securities Primary Dealership ICICI Securities (Consolidated) ICICI Venture ICICI AMC: 64.9% year-on-year increase in profit after tax to ` 0.61 billion in Q Sustained market position as 2nd largest AMC in India Profit after tax for ICICI Securities increased from ` 0.13 billion in Q to ` 0.61 billion in Q