Edelweiss Financial Services Limited · NSE:EDELWEISS
Edelweiss Financial Services — Q3 FY2019 Earnings Presentation
60 slides from Edelweiss Financial Services's earnings presentation, Jan 30, 2019
Slide 1: Cover letter to National Stock Exchange
EW/Sec/2019/40 January 30, 2019 National Stock Exchange of India Limited Exchange Plaza, Bandra Kurla Complex, Bandra (E), Mumbai- 400 051. Dear Sirs, Ref.:- Symbol: nnm.wmss Sub: Investor Presentation in US Dollar Please find enclosed the revised Investor Presentation in US Dollar on Earnings Updat
Slide 2: Edelweiss Financial Services Limited Q3FY19 Earnings Update
US $ version Edelweiss Financial Services Limited Q3FY19 Earnings Update
Slide 3: Contents
Contents 1 Quarterly Performance Highlights 2 Q3FY19 Analysis 3 Business Performance Highlights 4 Balance Sheet Highlights 5 ESG at Edelweiss 2
Slide 4: Quarterly Performance Highlights
Quarterly Performance Highlights
Slide 5: Financial Snapshot – Q3FY19
Financial Snapshot – Q3FY19 $ Mn EOP Equity Profit after Tax RoA RoE Total Pre Minority 1,260 37 Credit 914 45 2.8% 19.8% Franchise & Advisory 22 11 Life & General Insurance 156 (11) BMU, Corp & Others 168 (8) Minority Interest (MI) 148 5 Total Consolidated Post MI 1,112 32 1.8% 11.9% Total Ex-Insur
Slide 6: Consolidated 9MFY19 PAT Up 22% YoY
Consolidated 9MFY19 PAT Up 22% YoY Y-o-Y ($ Mn) Q3FY18 Q3FY19 9MFY18 9MFY19 Growth PAT Consolidated 34 32 89 109 22% PAT 40 39 102 130 27% Ex-Insurance Balance 7,026 8,007 7,026 8,007 14% Sheet PAT growth expected to be ~15% for FY19 5
Slide 7: PAT Distribution Across Businesses
PAT Distribution Across Businesses Y-o-Y EOP PAT ($ Mn) Q3FY18 Q3FY19 9MFY18 9MFY19 Growth Equity Total Consolidated 34 32 89 109 22% 1,112 Credit 27 37 67 107 58% 842 Franchise & Advisory 12 11 31 33 7% 22 Life & General Insurance (6) (7) (13) (21) - 87 BMU, Corp & Others 2 (8) 4 (10) - 161 6
Slide 8: Diversified Business Model Reduced Volatility Impact
Diversified Business Model Reduced Volatility Impact 9MFY19 Pre MI PAT Business Segments % Contribution ($ Mn) Credit Business Retail Mortgage 10 7% LAS, SME, Agri and Business Loans 14 10% Structured Collateralised Credit 26 17% Wholesale Mortgage 33 22% Distressed Credit 42 28% Franchise & Advisor
Slide 9: Key Performance Parameters
Key Performance Parameters Key Ratios Consolidated Q3FY18 Q3FY19 9MFY18 9MFY19 RoA 2.0% 1.8% 2.0% 1.8% RoE 16.6% 11.9% 16.3% 13.9% Cost to Income Ratio 59% 64% 59% 62% Ex-Insurance Q3FY18 Q3FY19 9MFY18 9MFY19 RoA 2.7% 2.4% 2.5% 2.4% RoE 21.6% 15.6% 20.3% 18.1% Cost to Income Ratio 45% 51% 47% 49% Ro
Slide 10: 9MFY19 Consolidated PAT at $109 Mn
9MFY19 Consolidated PAT at $109 Mn Profit after Tax ($ Mn) 146* 128 109 87 59 47 26 32 18 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 *Annualised 9 Numbers for FY19 are as per IndAS and for prior periods as per IGAAP
Slide 11: Steady growth in Balance Sheet and Customer Assets
Steady growth in Balance Sheet and Customer Assets As on 31st Dec’18 $ Bn YoY Growth Balance Sheet Assets 8.0 14% Customer Assets 27.5 19% Distressed Credit (ARC Assets) 5.5 (1%) Assets Under Advice (Wealth Management) 14.4 18% Funds under Management (Asset Management) 5.1 36% Assets under Custody &
Slide 12: Good Funding Support from All Sources
Good Funding Support from All Sources Q3FY19 ($ Mn) By Instrument By Source Fresh Borrowings 1,262 Fresh Borrowings 1,262 NCDs and others 587 Mutual Funds 516 CP 396 Banks 430 Term Loans 280 Retail & Others 316 Recently closed NCD public issue with good Retail participation 11 Note: Excluding episod
Slide 13: Liquidity at a Glance
Liquidity at a Glance • Currently we hold balance sheet liquidity of ~$ 2 Bn, almost half of this is from our Liquidity Cushion of $1Bn; can be converted into cash within 24-48 hours • We have Other Liquid Assets (OLA) comprising $ 1 Bn, which includes our highly liquid treasury assets plus liquid c
Slide 14: Q3FY19 Analysis
Q3FY19 Analysis
Slide 15: Q3 at a Glance
Q3 at a Glance Liquidity : We entered Q3 with liquidity adequate for ~1 year • Liquidity cushion increased by $ 0.2 Bn to 15% of borrowings • Balance sheet assets provided incremental liquidity of $ 0.8 Bn • All repayments and redemptions were seamlessly met Liabilities : Successfully raised fresh b
Slide 16: Key Actions Taken this Quarter
Key Actions Taken this Quarter Liquidity • Remained conservative on liquidity throughout the quarter • Quick conversion of assets to cash: LAS book scaled down by ~$ 316 Mn; Corporate book by ~$ 473 Mn Liabilities • Reduced dependence on CPs: share of CPs in borrowings down from 18% as at Q2FY19 to
Slide 17: Business Highlights
Business Highlights • Businesses scaled back growth without compromising existing customer franchise • Credit NIMs maintained despite higher cost of funds; helped by marquee resolution of Binani Cement and lowering of D/E • Largest distressed fund raised in India - Closed EISAF II fund at $1.3 Bn •
Slide 18: Profit Change Attribution: Q2FY19 to Q3FY19
Profit Change Attribution: Q2FY19 to Q3FY19 Profit After Tax $ Mn Comments Q2FY19 39 Binani resolution 7 Fee & carry income on resolution of Binani cement Scale down of Corporate Credit and LAS Book (5) Average book size reduced by ~$ 430 Mn Higher liquidity cushion & increased cost of holding Cost
Slide 19: Business Performance Highlights – Credit
Business Performance Highlights CREDIT Retail Credit – Corporate Credit – Distressed Credit
Slide 20: Credit Business Mix
Credit Business Mix Capital Employed % As on 31st Dec’18 ($ Mn) Share Retail Credit 2,547 42% Retail Mortgage 1,215 20% Blend of loans to home owners and home buyers SME & Business Loans 569 9% Underserved and highly scalable, focus area for future Loan against Securities 680 11% Catering to Retail
Slide 21: Credit Business at a Glance
Credit Business at a Glance Credit Business ($ Mn) Q2FY19 Q3FY19 Capital Employed 7,030 6,079 Average Interest Yield 16.0% 17.4% Average Cost of Borrowing 9.5% 10.3% Net Interest Margin 7.7% 8.6% Net Revenue 131 137 Cost to Income 37% 37% Provisions & Write Offs 19 15 PAT 41 45 RoA 2.4% 2.8% RoE 18.
Slide 22: Asset Quality at a Glance
Asset Quality at a Glance At the end of 31st Dec’18 ($ Mn) Q2FY19 Q3FY19 Credit Book 5,984 5,100 Of which Stage 3 107 94 ECL Provision 119 115 Of which Stage 3 59 54 Specific Provision Cover 56% 58% Total Provision Cover 112% 123% Average Collateral cover on Corporate Book 1.9x 1.9x Average Loan-To-
Slide 23: Credit Business Performance Snapshot
Credit Business Performance Snapshot Q3FY19 ($ Mn) Total Y-o-Y Retail Y-o-Y Corporate Y-o-Y Distressed Y-o-Y EOP Capital Employed 6,079 18% 2,547 25% 2,553 10% 979 22% EOP Equity 914 31% 250 19% 425 29% 239 53% Net Interest Income 137 48% 34 48% 63 20% 40 136% PAT 45 57% 7 14% 17 55% 21 85% Net Inte
Slide 24: Highest NIMs in this Quarter
Highest NIMs in this Quarter Quarterly evolution of NIM of the Credit Business NIM Quarterly Avg. 10 Yr. G Sec. Yield 10% Declining interest rates Stable interest rates Rising interest rates 9% 8.6% 8% 8.4% 7.7% 7.8% 7.7% 7.6% 7.5% 7% 7.3% 6.9% 6.9% 7.0% 6% 5% 4% Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q
Slide 25: Retail Credit
Retail Credit Capital Employed SME Retail Mortgage ($ Mn) Secured Unsecured HL LAP Average Yields % 14% 21% 10% 12% Median Ticket Size - $ Mn ~0.22 0.01 0.02 0.03 2,547 2,322 RoA 1.50% - 2.00% 1.00% - 1.50% Locations (#) 107 79 1,284 • Conserved liquidity by reduction mainly in LAS book 865 • Disbur
Slide 26: Corporate Credit
Corporate Credit Capital Employed Structured Wholesale Collateralised Credit Mortgage ($ Mn) Average Yields % 15% - 17% 17% - 19% RoA 1.75% - 2.50% 2.50% - 3.00% 2,800 Portfolio Granularity 80 accounts 174 projects 2,553 Typical Ticket Size $ 14 Mn – $ 22 Mn 1,990 1,734 • Focus on asset quality and
Slide 27: Distressed Credit Witnessed Good Recoveries this Quarter
Distressed Credit Witnessed Good Recoveries this Quarter Capital Employed Top 10 industry exposure% by SRs outstanding ($ Mn) 979 903 Steel 686 Power 19% 21% Infrastructure Paper 272 Real Estate 176 3% 4% Textiles 4% 13% Chemicals FY15 FY16 FY17 FY18 9MFY19 5% Ship Building 6% EPC 11% ARC Recoveries
Slide 28: Business Performance Highlights – Franchise & Advisory
Business Performance Highlights FRANCHISE & ADVISORY Wealth Management – Asset Management – Capital Markets
Slide 29: Franchise & Advisory Business Performance Snapshot
Franchise & Advisory Business Performance Snapshot Wealth Asset Capital Q3FY19 ($ Mn) Total Y-o-Y Y-o-Y Y-o-Y Y-o-Y Mgmt Mgmt Mkts Net Revenue 51 12% 26 27% 13 160% 12 (42%) PAT 11 (8%) 6 18% 4 111% 2 (70%) Cost to Income 65% 67% 52% 76% Assets under Assets under Assets under Advice Management Custo
Slide 30: Wealth Management
Wealth Management Assets Under Advice ($ Bn) As on Number of AUA Number of 31st Dec’18 Clients ($ Bn) RMs Ultra High Net ~2000 11 180 Worth Individuals 14.4 Affluent Investors ~4,75,000 3.4 1,000 12.9 Wealth AUA Breakup 8.6 6% 11% 27% 26% 27% 96,300 4.2 94% 89% 73% 74% 73% 2.5 FY15 FY16 FY17 FY18 Q3
Slide 31: Asset Management
Asset Management Alternative Assets ($ Bn) Alternative Assets AUM as on 31st Dec 2018 ($ Bn) 3.6 Distressed Assets 24% 2.5 Structured Debt 39% 1.6 $ 3.6 Bn Infrastructure 0.3 0.5 16% Real Estate Multi Strategy Funds 10% 11% FY15 FY16 FY17 FY18 9MFY19 and PMS Mutual Funds AUM ($ Bn) • Increased deplo
Slide 32: Steady Growth in Net New Flows
Steady Growth in Net New Flows Wealth Management AUA Movement in Q3FY19 Asset Management AUM Movement in Q3FY19 ($ Bn) ($ Bn) 0.4 0.10 0.04 101,100 (0.04) 14.1 14.4 5.1 5.2 Opening AUA Net New Market Closing AUA Opening Net New Currency & Closing AUM Money Movement AUM Money Market Movement 31
Slide 33: Capital Markets
Capital Markets Key Equity Capital Market & Advisory Transactions • Ranked 1st as QIP banker of 2018 with 7 issuances • Closed one of the largest PE IPO Largest PE Placement Buyback transaction in infrastructure space for $ 235Mn In Road Sector BRLM Sole Advisor Sole Manager Cube Highways with minor
Slide 34: Business Performance Highlights – Life Insurance
Business Performance Highlights Life Insurance
Slide 35: Life Insurance Performance Snapshot
Life Insurance Performance Snapshot Y-o-Y Y-o-Y ($ Mn) Q3FY18 Q3FY19 9MFY18 9MFY19 Growth Growth Net Premium Income 18 26 43% 43 69 59% Investment Income & Other 4 12 207% 18 19 6% Income Total Business 22 38 72% 62 88 43% Profit After Tax (10) (8) - (21) (29) - Minority (5) (4) - (10) (14) - Edelwe
Slide 36: Life Insurance – Long Term Value Creation
Life Insurance – Long Term Value Creation Product Mix Investments Capability (5 Year CAGR%) New Business Premium Q3FY19 12.6% Fund Benchmark 11.5% 11.3% 10.1% 18% 8.7% 8.3% 20% 27% 36% Equity Large Cap Bond Fund Managed Fund Traditional Par Traditional Non Par ULIP Group Fund Channel Mix • Multi-cha
Slide 37: One of the Fastest Growing Life Insurers in Individual APE
One of the Fastest Growing Life Insurers in Individual Annual Premium Equivalent Collected Individual Annual Premium Equivalent CAGR growth since Q3FY16 • Robust growth during the quarter 43% 20% 17% o Collected Individual Annual Premium Equivalent (APE) - $ 11 Mn grew 49% YoY Edelweiss Tokio Peer S
Slide 38: Balance Sheet Highlights
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Slide 39: Key Highlights – Balance Sheet
Key Highlights – Balance Sheet 1 Liquidity cushion at 15% of Borrowings 2 Diversified Borrowings mix 3 Matched Asset-Liability profile 4 Comfortable capital adequacy ratio at 17.8% and D/E of 4.2x 5 Stable business model reflected in credit ratings 38
Slide 40: Liquidity Cushion – Consistently a Clear Focus Area
1 Liquidity Cushion – Consistently a Clear Focus Area Liquidity Cushion $ Mn 1,018 • Increase in on-book liquidity 746 229 o Government Securities, Mutual Funds etc.: $ 688 Mn 581 351 416 194 o Fixed Deposits and bank 244 789 balance: $ 100 Mn 234 132 387 394 o Banking Lines: $ 229 Mn 112 182 FY15 F
Slide 41: Diversified Borrowing Profile By Instruments
2 Diversified Borrowing Profile By Instruments… Total Borrowings 3.4 4.0 4.8 6.8 6.7 ($ Bn) 6% 2% 6% 5% 8% 27% 33% 42% 42% 51% 22% 20% 25% 32% 29% 22% 32% 25% 14% 17% 17% 7% 5% 7% 5% FY15 FY16 FY17 FY18 Q3FY19 CBLO CPs Term Loans NCD Others CPs are down to 7% of total borrowings ; 40
Slide 42: …And By Source
2 …And By Source Total Borrowings 3.4 4.0 4.8 6.8 6.7 ($ Bn) 4% 5% 7% 11% 10% 14% 14% 15% 11% 19% 17% 5% 7% 17% 5% 31% 27% 30% 41% 44% 38% 42% 34% 30% 22% FY15 FY16 FY17 FY18 Q3FY19 Mutual Funds Banks Asset Specific Borrowings Retail Others Mutual Funds are now 22% of total borrowings 41
Slide 43: Increasing Percentage of Long Term Borrowings
2 Increasing Percentage of Long Term Borrowings… % of Total Borrowings 62% 58% 51% 34% 36% FY15 FY16 FY17 FY18 Q3FY19 We continue to strengthen our long term liability profile 42
Slide 44: Leading to Positively Matched ALM Profile
3 …Leading to Positively Matched ALM Profile Assets Liabilities 100% 100% % of Assets and Liabilities 69% 48% 64% 39% 29% 32% 4% 22% 17% 4% Asset Specific 0-3 Mnth 3-6 Mnth 6-12 Mnth 1-3 years 3+ years Borrowing • Positive asset-liability matching across durations • BMU manages ALM under the aegis o
Slide 45: Comfortable Capital Adequacy Ratio
4 Comfortable Capital Adequacy Ratio Capital Structure as on 31st Dec 2018 ($ Bn) Core Equity Tier I 1.2 14.2% Additional Tier I 0.05 0.6% Capital Adequacy Ratio Tier II 0.3 3.0% 17.8% Total Capital 1.5 Risk Weighted 88% of gross assets of 8.4 $ 9.5 Bn Assets 44 Capital Adequacy Ratio is based on RB
Slide 46: Debt to Equity Ratio Reduced
4 Debt to Equity Ratio Reduced Capital Structure as on 31st Dec 2018 ($ Bn) Total Balance Sheet 8.0 Less: Equity 1.3 Less: Cash & Liquid Assets 1.4 Debt 5.3 Equity 1.3 D/E ratio (Ex-Cash & Liquid Assets) 4.2 Cash & Liquid Assets include on balance sheet liquidity cushion of $ 0.8 Bn and voluntary ho
Slide 47: Stable Business Model Reflected in Credit Ratings
5 Stable Business Model Reflected in Credit Ratings Purpose (Debt Programme) Rating agency Rating Short term CRISIL A1+ Short term CARE A1+ Short term ICRA A1+ Long term BWR AA+ CARE revised its Long term outlook Long term CARE AA from ‘Stable’ to ‘Positive’ Long term CRISIL AA Long term ICRA AA Lon
Slide 48: Our Risk Governance Structure
Our Risk Governance Structure… Oversight by Board Risk Committee Global Risk Committee Business Risk Group Risk Enterprise Risk Management Council Corporate Controller & audit • Define Organisation Business • Implementation of risk • Review “High Impact & risk framework framework Low Probability” ri
Slide 49: Ensures Prudent Risk Management and Responsible Growth
…Ensures Prudent Risk Management and Responsible Growth Market Risk Regulatory Reputational Business Risk Credit Risk Liquidity Risk Risk Risk Physical Operational & Technology Fraud Risk Infrastructure People Risk Process Risk Risk Risk Enterprise risk management approach : 11 Risk Framework 48
Slide 50: Significant Institutional Ownership
Significant Institutional Ownership Key Shareholders above 1% (As on 31st Dec 2018) Shareholding Pattern Name Percent 1 BIH SA 4.1% Employee 2 HDFC Mutual Fund 2.6% Trust 3 Goldman Sachs Funds 2.2% DIIs, Non 4.8% Promoters Institutions & Employees 4 Vanguard 1.7% & Others 24.3% 5 Steadview Capital M
Slide 51: Detailed Financials
Detailed Financials Ge Edelweiss Ideas create, values protect
Slide 52: Consolidated Financials – P&L
Consolidated Financials – P&L ($ Mn) Q3FY18 Q3FY19 Total revenue from operations 316 398 Other income 3 2 Total Income 319 400 Expenses (a) Finance costs 142 174 (b) Employee benefits expense 46 63 (c) Depreciation and amortisation expense 3 5 (d) Change in insurance policy liability - actuarial 14
Slide 53: Bridge to Reported Financials
Bridge to Reported Financials Profit Before Tax ($ Mn) Profit After Tax ($ Mn) YoY YoY Pre MI Q3FY18 Q3FY19 Pre MI Q3FY18 Q3FY19 Growth Growth Consolidated 50 66 31% Consolidated 31 37 18% Ex-Insurance 61 76 25% Ex-Insurance 43 48 12% YoY YoY Post MI Q3FY18 Q3FY19 Post MI Q3FY18 Q3FY19 Growth Growth
Slide 54: ESG at Edelweiss
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Slide 55: Our Framework is based on the UN Sustainable Development Goals
Our Framework is based on the United Nations Sustainable Development Goals People Focused Goals No Poverty, Zero Hunger & Economic Growth Quality Education Gender Equality Planet Focused Goals Affordable & Clean Energy Responsible Consumption Climate Support 54
Slide 56: EdelGive Foundation - Unique Philanthropic Platform
EdelGive Foundation - Unique Philanthropic Platform PARTNERSHIPS CAPACITY BUILDING IMPACT Non-Financial Support Foundations Build Stronger Organizations Organizational Capacity Towards a high impact social sector EdelGive platforms EdelGive Non-Profit Corporates Foundation Organization Enhanced Soci
Slide 57: EdelGive Partners
EdelGive Partners BILL¢ MELINDA GATES IATE O85. FORD 9° FOUNDATION TATA TRUSTS BOROSIL G GREAT EASTERN CSR FOUNDATION atDta o& dalyan SDMC Trust ENTERPRISES Insight | Intellect | Integety CREDIT suisse VOLKART FOUNDATION INDIAN TRUST G genpact 56
Slide 58: EdelGive Foundation - Key Metrics
EdelGive Foundation - Key Metrics Employee Engagement Employee Engagement % More than 60% engaged in financial and non financial giving Man Hours spent till date 30,500 hrs Field Visits till date 107 Capacity Building – Non financial support Employees provided skills and time pro bono in over 90 pro
Slide 59: Strong and Diverse Board of Directors with Rich Experience
Strong and Diverse Board of Directors with Rich Experience Board Comprises Majority of Independent Directors Mr. P N Venkatachalam Mr. K Chinniah • Banking sector expert and former • Served as Managing Director & Global member of the Interim Pension Fund Head Infrastructure, Portfolio, Strategy Regu
Slide 60: Safe Harbour
Safe Harbour DISCLAIMERS: This presentation and the discussion may contain certain words or phrases that are forward - looking statements, which are tentative, based on current expectations of the management of Edelweiss Financial Services Ltd. or any of its subsidiaries and associate companies (“Ed
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