Edelweiss Financial Services Limited · NSE:EDELWEISS
Edelweiss Financial Services — Q4 FY2019 Earnings Presentation
63 slides from Edelweiss Financial Services's earnings presentation, May 15, 2019
Slide 1: Edelweiss filing cover letter
Edelweiss Ideas create, values protect EW/Sec/2019/130 May 15, 2019 National Stock Exchange of India Limited Exchange Plaza, Bandra Kurla Complex, Bandra (E), Mumbai - 400 051. Dear Sirs, Ref.:- Symbol: EDELWEISS Sub: Investor Presentation Please find enclosed the Investor Presentation in US Dollar
Slide 2: Q4FY19 & FY19 Earnings Update
US $ version Edelweiss Financial Services Limited Q4FY19 & FY19 Earnings Update
Slide 3: Contents
Contents 1 FY19 Performance Overview 2 Business Performance Highlights 3 Balance Sheet Highlights 4 ESG at Edelweiss 5 Detailed Financials 2
Slide 4: FY19 Performance Overview
FY19 Performance Overview
Slide 5: Edelweiss at a Glance: FY19
Edelweiss at a Glance: FY19 Ex-Insurance PAT Balance Sheet EOP Net Worth $ 172 Mn $ 7.8 Bn $ 1.3 Bn Market Cap BVPS Basic EPS as on 31st March’19 $ 2.7 Bn $ 1.2 $ 0.2 4
Slide 6: Ex-Insurance PAT CAGR of 36% over 8 years
Ex-Insurance PAT CAGR of 36% over 8 years Profit after Tax (Post MI) ($ Mn) Ex-Insurance PAT Consolidated PAT 172 145 143 103 124 75 55 88 39 60 32 20 47 26 32 18 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 5
Slide 7: FY19 Financial Snapshot
FY19 Financial Snapshot FY19 ($ Mn) EOP Equity Profit After Tax RoA RoE Total Pre Minority 1,253 150 Credit 700 108 2.0% 15.7% Distressed Credit 269 60 6.2% 28.4% Advisory 28 42 Life & General Insurance 151 (47) BMU, Corp & Others 106 (13) Minority Interest (MI) 149 7 Total Consolidated Post MI 1,10
Slide 8: Capital Light Businesses Contribute over 50% to PAT
Capital Light Businesses Contribute over 50% to PAT Business Segments ($ Mn) FY19 Pre MI PAT % Contribution Retail Mortgage 14 7% SME, ESOP and Other Business Loans 17 9% Structured Collateralised Credit 31 16% Wholesale Mortgage 45 23% Distressed Credit Business 60 30% Wealth Management and Asset M
Slide 9: FY19 Performance Overview
FY19 Performance Overview 1 First half of the year was robust, however second half witnessed market headwinds 2 FY19 Ex-Insurance PAT grew 18% YoY; Consolidated PAT grew 15% YoY 3 Ex-Insurance RoA remained steady at 2.4% while RoE was at 17.6% 4 Raised fresh long term borrowings of $ 1,121 Mn in H2F
Slide 10: FY19 Business Performance Overview
FY19 Business Performance Overview 6 NIM and Asset Quality maintained across business cycles 7 ECL Finance raised equity of $ 250 Mn; first tranche of $ 150 Mn received in May’19 8 Distressed Credit benefited from strong recoveries 9 Wealth Management: AUA crossed $ 15 Bn and scaled well 10 Asset Ma
Slide 11: Key Actions Taken
Key Actions Taken Liquidity: We entered Q4 with comfortable levels of liquidity • Overnight liquidity of $ 762 Mn - 12% of borrowings • Additional high quality assets liquid-able in less than 120 days at $ 683 Mn Liability Management: Emphasis on long term borrowings • Continued to increase the shar
Slide 12: FY19 Ex-Insurance PAT Up 18% YoY
FY19 Ex-Insurance PAT Up 18% YoY Y-o-Y ($ Mn) Q4FY18 Q3FY19 Q4FY19 FY18 FY19 Growth Ex-Insurance PAT 43 39 41 145 172 18% Consolidated PAT 35 32 33 124 143 15% Balance Sheet 8,031 8,026 7,754 8,031 7,754 (3%) Non linear profitability growth: Ex Insurance PAT grew 18% YoY while Balance Sheet remained
Slide 13: PAT Distribution Across Businesses
PAT Distribution Across Businesses EOP PAT ($ Mn) Q4FY18 Q3FY19 Q4FY19 FY18 FY19 Y-o-Y Equity Total Consolidated 35 32 33 124 143 15% 1,104 Credit 25 37 36 92 143 55% 894 Advisory 12 11 9 43 42 (3%) 28 Life & General Insurance (8) (7) (8) (21) (28) - 85 BMU, Corp & Others 6 (8) (3) 10 (13) - 97 Stro
Slide 14: Key Profitability Ratios
Key Profitability Ratios Ex-Insurance Q4FY18 Q3FY19 Q4FY19 FY18 FY19 RoA 2.6% 2.4% 2.4% 2.5% 2.4% RoE 20.2% 15.6% 16.1% 20.3% 17.6% Cost to Income Ratio 45% 51% 52% 47% 50% Consolidated Q4FY18 Q3FY19 Q4FY19 FY18 FY19 RoA 1.7% 1.8% 1.7% 1.9% 1.8% RoE 14.4% 11.9% 12.0% 15.7% 13.4% Cost to Income Ratio
Slide 15: Demonstrated Ability to Raise Long Term Funding in H2
Demonstrated Ability to Raise Long Term Funding in H2 Fresh Long Term Borrowings ($ Mn) By Instrument H1FY19 H2FY19 Total 1,042 1,121 NCDs 814 904 Term Loans 229 217 By Source H1FY19 H2FY19 Total 1,042 1,121 Mutual Funds 219 184 Banks 240 326 Retail & Others 584 611 14
Slide 16: Debt to Equity Ratio Set to Improve Further
Debt to Equity Ratio Set to Improve Further D/E Excluding Treasury Assets 10 9 8 QIP of Post ECLF Equity ~ $216 Mn Infusion 7 Internal threshold 6 5.2 5.0 5.2 5 5.0 4.4 3.9 4 3.1 3.1 3 2.7 2 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 15
Slide 17: Cost to Income Higher…
Cost to Income Higher… Cost to Income Ratio (Ex-Insurance) 59% 60% 53% 54% 52% 52% 50% 47% FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 …on account of continued investments in Retail Businesses – Retail Credit, Affluent in Wealth and Life Insurance 16
Slide 18: Credit: Maintained NIM across Business Cycles
Credit: Maintained NIM across Business Cycles Credit Business (Retail and Corporate Book) 10% NIM Quarterly Avg. 10 Yr. G Sec. Yield Declining interest rates Stable interest rates Rising interest rates 9% 8% 7.8% 7.7% 7.5% 7.4% 7.3% 7.4% 7.1% 7.1% 7.2% 7.2% 7.2% 7.1% 7.0% 7.0% 7.5% 7% 6.7% 6.6% 6.5%
Slide 19: Credit: Stable Asset Quality In Spite of Headwinds
Credit: Stable Asset Quality In Spite of Headwinds Demonetization RERA + GST 4.0% 3.5% 3.0% 2.5% 2.0% GNPA 1.78% 1.84% 1.87% 1.5% 1.71% 1.74% 1.74% 1.75% 1.75% 1.53% 1.59% 1.45% 1.44% 1.40% 1.40% 1.46% 1.32% 1.0% 0.83% 0.68% 0.70% 0.74% 0.79% 0.78% 0.55% 0.60% 0.61% 0.66% NNPA 0.39% 0.44% 0.50% 0.47
Slide 20: Advisory: Customer Assets cross $ 28 Bn
Advisory: Customer Assets cross $ 28 Bn As on 31st March’19 $ Bn YoY Growth Customer Assets 28.9 19% Assets Under Advice (Wealth Management) 15.2 18% Distressed Credit (ARC Assets) 5.6 4% Funds under Management (Asset Management) 5.1 26% Assets under Custody & Clearing 2.9 56% Balance Sheet Assets 7
Slide 21: Business Performance Highlights: Credit
Business Performance Highlights CREDIT Retail Credit – Corporate Credit – Distressed Credit
Slide 22: Credit Business Mix
Credit Business Mix Capital Employed As on 31st March’19 % ($ Mn) Retail Credit 2,599 42% Retail Mortgage 1,293 21% Blend of loans to home owners and home buyers SME & Business Loans 660 11% Underserved and highly scalable market, key focus area ESOP and Margin Financing 588 9% Catering to customers
Slide 23: Credit Business Performance Snapshot
Credit Business Performance Snapshot FY19 ($ Mn) Total Y-o-Y Retail Y-o-Y Corporate Y-o-Y Distressed Y-o-Y EOP Capital Employed 6,256 4% 2,599 12% 2,596 (8%) 1,061 17% EOP Equity 969 24% 275 21% 426 15% 269 48% Net Interest Income 514 38% 135 42% 255 23% 124 75% PAT 168 61% 32 11% 76 78% 60 81% Net
Slide 24: Asset Quality at a Glance
Asset Quality at a Glance As on 31st March’19 ($ Mn) Q3FY19 Q4FY19 Credit Book (Ex - Distressed Credit) 5,112 5,195 Of which Stage 3 94 97 ECL Provision 116 117 Of which Stage 3 54 54 Specific Provision Cover 58% 56% Total Provision Cover 123% 120% Average Collateral cover on Corporate Book 1.9x 1.8
Slide 25: Retail Credit Growth Continues
Retail Credit Growth Continues Capital Employed SME Retail Mortgage ($ Mn) Secured Unsecured HL LAP Average Yields % 14% 21% 11% 12% Median Ticket Size ($ Mn) ~0.17 0.01 0.02 0.03 2,599 2,328 RoA 1.50% - 2.00% 1.00% - 1.50% Locations (#) 108 96 • Key focus areas - SME and Retail Mortgage 1,287 • Con
Slide 26: Corporate Credit will Grow in Fund Form
Corporate Credit will Grow in Fund Form Capital Employed Structured Wholesale ($ Mn) Collateralised Credit Mortgage Average Yields % 15% - 17% 17% - 19% 2,807 2,596 RoA 1.75% - 2.50% 2.50% - 3.00% 1,995 Portfolio Granularity 76 accounts 162 projects 1,738 Typical Ticket size $ 14 Mn - $ 18 Mn 1,383
Slide 27: Wholesale Mortgage: Lending Philosophy
Wholesale Mortgage: Lending Philosophy Focus on mid-income residential RE projects; ~77% of inventory within $ 0.14 Mn category Provide funding to projects of mid-sized developers having an execution track record Financing projects only after key approvals are in place Senior Secured Sole Lender at
Slide 28: Seasoned book with Robust Risk Management Track Record
Seasoned book with Robust Risk Management Track Record Wholesale Mortgage H1FY19 H2FY19 1 Loan Book $ 1,691 Mn $ 1,668 Mn 2 5 accounts amounting to 3 accounts amounting to Stage 3 Accounts $ 50 Mn $ 30 Mn 84% cash recovery and 84% cash recovery and 3 Historical recovery on default cases rest in othe
Slide 29: Distressed Credit Pipeline Robust
Distressed Credit Pipeline Robust Capital Employed ARC Recoveries ($ Mn) ($ Mn) 1,061 1,009 905 687 370 273 176 156 FY15 FY16 FY17 FY18 FY19 FY17 FY18 FY19 SR Issued: Resolution Strategy wise Break-up Top 10 industry exposure% by SRs outstanding Steel 5% Power 19% 23% Infrastructure 10% Restructurin
Slide 30: Business Performance Highlights: Advisory
Business Performance Highlights ADVISORY Wealth Management – Asset Management – Capital Markets
Slide 31: Advisory Business Performance Snapshot
Advisory Business Performance Snapshot Wealth Asset Capital FY19 ($ Mn) Total Y-o-Y Y-o-Y Y-o-Y Y-o-Y Mgmt Mgmt Mkts Net Revenue 188 - 104 30% 35 88% 49 (45%) PAT 42 (3%) 23 49% 9 52% 10 (55%) Cost to Income 66% 67% 58% 69% PAT Yield 17 bps 19 bps - Assets under Assets under Assets under Advice Mana
Slide 32: Wealth Management
Wealth Management Assets Under Advice ($ Bn) As on Number of AUA Number of 31st March’19 Clients ($ Bn) RMs Ultra High Net ~2000 11.8 186 Worth Individuals Affluent Investors ~4,85,000 3.4 874 15.2 13.0 Wealth AUA Breakup 6% 11% 8.7 27% 26% 30% 96,300 4.2 94% 89% 73% 74% 70% 2.5 FY15 FY16 FY17 FY18
Slide 33: Asset Management
Asset Management Alternative Assets ($ Bn) Alternative Assets AUM as on 31st March’19 3.7 Distressed Credit Fund 24% 2.5 Structured Debt Fund 39% 1.6 Infrastructure Fund $ 3.7 Bn 0.3 0.5 16% Real Estate Credit Fund Multi Strategy Funds 10% 11% FY15 FY16 FY17 FY18 FY19 and PMS Mutual Funds AUM ($ Bn)
Slide 34: Steady Growth in Net New Flows
Steady Growth in Net New Flows Wealth Management AUA Movement in FY19 Asset Management AUM Movement in FY19 ($ Bn) ($ Bn) 1.0 0.1 0.6 1.7 101,100 15.2 4.2 5.3 13.0 Opening AUA Net New Market Closing AUA Opening Net New Market Closing AUM Money Movement AUM Money Movement 33
Slide 35: Market Leading Position in Equity and Debt Capital Markets
Market Leading Position in Equity and Debt Capital Markets Key Equity Capital Market & Advisory Transactions QIP QIP PE PE $ 108 Mn $ 73 Mn $ 32 Mn $ 36 Mn March 2019 January 2019 January 2019 March 2019 Left Lead GCBRLM Sole BRLM Buy side Advisor Financial Advisor Key Debt Capital Market Transactio
Slide 36: Business Performance Highlights: Life Insurance
Business Performance Highlights Life Insurance
Slide 37: Life Insurance Performance Snapshot
Life Insurance Performance Snapshot ($ Mn) FY18 FY19 Y-o-Y Growth Net Premium Income 87 123 42% Investment Income & Other Income 21 29 36% Total Business 108 152 41% Profit After Tax (34) (39) - Minority (17) (19) - Edelweiss’ Share in PAT (17) (20) - Net Worth 167 134 36
Slide 38: Life Insurance – Long Term Value Creation
Life Insurance – Long Term Value Creation Product Mix VNB Margin % (Overall) New Business Premium FY19 42% 33% 22% 18% 24% 25% 26% 34% FY 16 FY 17 FY 18 FY 19 Traditional Par Traditional Non Par ULIP Group Channel Mix 13th Month Overall Renewal Rate Persistency Individual New Business Premium FY19 6
Slide 39: 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 FY16 • Collected Individual Annual Premium Equivalent 35% (APE) - $ 49 Mn grew 36% YoY 23% 16% • Gross premium of this business in FY19 was $ 127 Mn compa
Slide 40: Balance Sheet Highlights
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Slide 41: Key Highlights – Balance Sheet
Key Highlights – Balance Sheet 1 Maintained adequate Liquidity Cushion at 12% of Borrowings 2 Diversified Borrowings mix 3 Matched Asset-Liability profile 4 Comfortable capital adequacy ratio at 18.0% and D/E (Ex- Treasury) of 4.4x 40
Slide 42: Maintained Liquidity Cushion of 12% of Borrowings
1 Maintained Liquidity Cushion of 12% of Borrowings Liquidity Cushion $ Mn • A well diversified liquidity cushion 748 762 comprising: 582 o Banking Lines: $ 331 Mn 352 331 417 194 o Fixed Deposits and bank balance: $ 129 Mn 244 234 388 395 431 o Government Securities, Mutual 132 183 Funds etc.: $ 30
Slide 43: Liquidity Cushion Bolstered by High Quality Liquid Assets
1 Liquidity Cushion Bolstered by High Quality Liquid Assets As on 31st March’19 ($ Mn) Overnight Liquidity 762 Assets Liquid-able in less than 120 days 683 Total 1,445 In addition ~$ 1,294 Mn of business inflows expected over the next one year 42
Slide 44: Diversified Borrowing Profile By Instruments…
2 Diversified Borrowing Profile By Instruments… NCDs 27% 33% 41% 41% 54% Bank Loans 26% 28% 27% CBLO 37% 17% 17% 5% 39% CPs 7% 29% 25% 22% 14% ICDs 5% 1% 1% 2% FY15 FY16 FY17 FY18 FY19 Total Borrowings 3.4 4.0 4.8 6.9 6.5 ($ Bn) 93% of borrowings are from NCDs and Bank Loans; Reduced reliance on CPs
Slide 45: …And By Source
2 …And By Source Bank 23% 30% 31% 41% 45% Retail 12% 14% 15% 13% MF 23% 32% 35% 42% 29% Corporates 15% 2% 1% 4% PF & Insurance 2% 6% 8% 2% 4% 14% 17% 5% 4% ASB 5% 7% 5% FY15 FY16 FY17 FY18 FY19 Total Borrowings 3.4 4.0 4.8 6.9 6.5 ($ Bn) 33 banking relationships include all major private and public
Slide 46: Increasing Percentage of Long Term Borrowings
2 Increasing Percentage of Long Term Borrowings % of Total Borrowings 61% 58% 51% 34% 36% FY15 FY16 FY17 FY18 FY19 45
Slide 47: Positive ALM Across Durations
3 Positive ALM Across Durations Assets Liabilities 100% 100% % of Assets and Liabilities 66% 44% 63% 34% 24% 32% 4% 22% 17% 4% Asset Specific 0-3 months 3-6 months 6-12 months 1-3 years 3+ years Borrowing • BMU manages ALM under the aegis of Asset Liability Committee 46
Slide 48: Comfortable Capital Adequacy Ratio
4 Comfortable Capital Adequacy Ratio Capital Structure as on 31st March’19 ($ Bn) Core Equity Tier I 1.2 14.5% Additional Tier I 0.05 0.6% Capital Adequacy Ratio Tier II 0.2 2.9% 18.0% Total Capital 1.5 Risk Weighted 89% of gross assets of 8.3 $ 9.4 Bn Assets 47 Capital Adequacy Ratio is based on RB
Slide 49: Debt to Equity Ratio Reduced from Last Year
4 Debt to Equity Ratio Reduced from Last Year Capital Structure as on 31st March’19 ($ Bn) Total Debt 6.5 Less: Overnight Liquidity 0.4 Net Debt 6.1 Less: Treasury Assets 0.5 Net Debt (Ex-Treasury Assets) 5.6 Equity 1.3 D/E ratio (Ex- Treasury Assets) 4.4 48
Slide 50: 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 Business • Define Organisation • Review “High Impact & • Implementation of risk risk framework Low Probability” risk framewo
Slide 51: …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 50
Slide 52: 13 Member Board Comprises Majority of Independent Directors
13 Member Board Comprises Majority of Independent Directors Mr. K Chinniah Mr. Biswamohan Mahapatra Independent Director Independent Director • Served as Managing Director & Global Head • Former RBI Executive Director, chaired various committees of RBI Infrastructure, Portfolio, Strategy & Risk Grou
Slide 53: Significant Institutional Ownership
Significant Institutional Ownership Shareholding Pattern as on 31st March’19 Key Shareholders above 1% Percent 1 BIH SA 4.1% Employee 2 Pabrai Investment Fund 2.7% Trust 3 HDFC Mutual Fund 2.6% DIIs, Non 4.8% Promoter Group 4 Goldman Sachs Funds 1.8% Institutions & Others 5 Vanguard Group 1.6% 23.8%
Slide 54: ESG at Edelweiss
ESG at Edelweiss
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 HT Parekh Foundation & CDPQ have recently partnered with EdelGive 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 32,500 hrs Field Visits till date 110 Capacity Building – Non financial support Employees provided skills and time pro bono in over 95 pro
Slide 59: Detailed Financials
Detailed Financials Ge Edelweiss Ideas create, values protect
Slide 60: Consolidated Financials – P&L
Consolidated Financials – P&L ($ Mn) FY18 FY19 Total revenue from operations 1,276 1,553 Other income 7 12 Total Income 1,283 1,564 Expenses (a) Finance costs 557 679 (b) Employee benefits expense 198 237 (c) Depreciation and amortisation expense 15 19 (d) Change in insurance policy liability - actu
Slide 61: Bridge to Reported Financials
Bridge to Reported Financials Profit Before Tax ($ Mn) Profit After Tax ($ Mn) YoY YoY Pre MI FY18 FY19 Pre MI FY18 FY19 Growth Growth Consolidated 194 251 29% Consolidated 120 150 25% Ex-Insurance 232 298 29% Ex-Insurance 158 198 25% YoY YoY Post MI FY18 FY19 Post MI FY18 FY19 Growth Growth Consoli
Slide 62: Bridge to Reported Financials
Bridge to Reported Financials Profit Before Tax ($ Mn) Profit After Tax ($ Mn) YoY YoY Pre MI Q4FY18 Q4FY19 Pre MI Q4FY18 Q4FY19 Growth Growth Consolidated 43 58 36% Consolidated 31 35 15% Ex-Insurance 58 71 23% Ex-Insurance 46 48 6% YoY YoY Post MI Q4FY18 Q4FY19 Post MI Q4FY18 Q4FY19 Growth Growth
Slide 63: Safe Harbour
Safe Harbour DISCLAIMER : 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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