CRISIL Limited · NSE:CRISIL

CRISIL — India Outlook Banking Sector

18 slides from CRISIL's investor presentation, Mar 11, 2016

Slide 1: Banking Sector Outlook
Banking Sector Outlook - Asset quality whirlwind to dent banks’ credit profiles © 2016 CRISIL Ltd. All rights reserved. Krishnan Sitaraman Senior Director, CRISIL Ratings March 11, 2016
Slide 2: Key Messages
Key Messages  Banking system weak assets to rise to 8.9% by Mar-17 – Outlook for key investment led sectors which banks are exposed to remains weak – Nearly Rs.2.1 lakh crore (5.5%) of large corporate exposures to slip to NPAs by Mar-17  Provisioning costs surge to subsume profits of PSBs – Impact
Slide 4: Slippages from large corporate exposures to be high
Slippages from large corporate exposures to be high  Rs.2.1 lakh crore of large corporate loans could slip to NPAs in near term – Constitutes nearly 5.5% of overall corporate sector advances  Slippages will be mainly from 3 different categories: – Loans which have been recognized as NPA in some ba
Slide 5: Weak Assets to touch a high of 8.9% by March-17
Weak Assets* to touch a high of 8.9% by March-17 Gross NPAs to rise to Rs.7.0 lakh crore Weak assets to reach ~Rs.8.0 lakh crore 9.0 8.9 10.0 8.5 8.0 7.0 8.0 6.1 Rs. lakh Crore 6.0 5.1 6.0 Per cent 5.0 4.3 4.0 8.0 6.9 4.0 3.0 © 2016 CRISIL Ltd. All rights reserved. 2.0 4.6 3.5 2.0 1.0 2.5 0.0 0.0 Ma
Slide 7: NIMs of PSBs to decline in FY17
NIMs of PSBs to decline by 10 bps in FY17 due to  Application of Marginal cost of funds based lending rate (MCLR) from Apr-16  ~7% of loan book slipping to NPAs in 2015-17 will cease to generate income  Conversion of SEB loans to lower yielding bonds under UDAY scheme © 2016 CRISIL Ltd. All right
Slide 8: Provisioning costs to equal pre-provisioning profits for PSBs
Provisioning costs to equal pre-provisioning profits for PSBs Profitability to remain at a decadal low for PSBs © 2016 CRISIL Ltd. All rights reserved.  Provisions as proportion of total assets to touch a high of 1.4% in 2015-16  To remain at elevated levels in 2016-17 due to – Continued high leve
Slide 9: Lower impact on private banks due to revenue diversity
Lower impact on private banks due to revenue diversity High share of retail advances Lower exposure to vulnerable sectors 50% 45% 20.0% 44% 42% 42% 38% 40% 16.0% 14.1% 30% 12.0% 10.8% © 2016 CRISIL Ltd. All rights reserved. 17% 7.7% 20% 15% 15% 15% 8.0% 14% 6.0% 5.6% 4.2% 10% 4.0% 0% 0.0% Mar-12 Mar
Slide 10: Earnings of private banks to remain healthy in 2016-17
Earnings of private banks to remain healthy in 2016-17 Private banks benefits from higher NIMs and stronger fee income 5.0 1.8 2.3 4.0 Per cent 3.0 0.7 0.7 2.0 © 2016 CRISIL Ltd. All rights reserved. 3.4 1.0 1.6 0.0 NIM Other income Opex Provisions Tax RoA PSB’s to report negligible profits due to l
Slide 12: PSBs need to raise Rs. 1.7 lakh crore Tier I capital upto 19
PSBs need to raise Rs. 1.7 lakh crore Tier I capital upto 2019  Tier I capital raising requirement has increased from earlier estimate of Rs.1.3 lakh cr – Sharp fall in profitability has diminished capital generation from internal accruals  Ability to raise capital from external sources severely i
Slide 14: Banking system adequately poised to meet credit demand in 16-17
Banking system adequately poised to meet credit demand in 2016-17  Investment growth to witness only a slight pickup in 2016-17  No significant credit demand growth expected  Private banks well placed to lead credit growth supported by strong capitalization Private banks to gain market share in m
Slide 16: Recent rating action on PSBs
Recent rating action on PSBs  Credit alert issued in February on increasing asset quality problems in PSBs  Recent rating actions: Rating downgrades of 9 banks and revision in outlooks to “Negative from “Stable” for 6 banks  Rating of most PSBs for now continue to remain in high safety category T
Slide 17: Rating transition for Tier I bonds have been sharper
Rating transition for Tier I bonds (Under Basel III) have been sharper  Higher notch-down of ratings from corporate credit rating/Tier II Bonds rating  Sharper rating transitions on Tier I bonds in line with earlier articulation in CRISIL’s rating rationales  Reflect inherent risks in Tier I bond

CRISIL — India Outlook Banking Sector on 6ix

CRISIL — India Outlook Banking Sector

Slide 1: Banking Sector Outlook

Slide 2: Key Messages

Slide 3: Asset quality challenge to continue to impinge banks' credit profile

Slide 4: Slippages from large corporate exposures to be high

Slide 5: Weak Assets to touch a high of 8.9% by March-17

Slide 6: High provisioning costs to weaken banks earning profile

Slide 7: NIMs of PSBs to decline in FY17

Slide 8: Provisioning costs to equal pre-provisioning profits for PSBs

Slide 9: Lower impact on private banks due to revenue diversity

Slide 10: Earnings of private banks to remain healthy in 2016-17

Slide 11: Capital raising remains a challenge for PSBs

Slide 12: PSBs need to raise Rs. 1.7 lakh crore Tier I capital upto 19

Slide 13: Banking system to meet credit requirements in 2016-17

Slide 14: Banking system adequately poised to meet credit demand in 16-17

Slide 15: Rating Actions by CRISIL

Slide 16: Recent rating action on PSBs

Slide 17: Rating transition for Tier I bonds have been sharper

Slide 18: CRISIL Limited