Axis Bank Limited · NSE:AXISBANK
Axis Bank — CLSA Investors' Forum 2019
35 slides from Axis Bank's conference presentation, Sep 9, 2019
Slide 1: Cautious, Conservative and Consistent Growth
Cautious, Conservative and Consistent Growth CLSA Investors’ Forum 9th September 2019
Slide 2: Macro Environment showing signs of weakness
Macro Environment showing signs of weakness 2
Slide 3: Global economy is slowing, reflected in India too with growth weakening
Global economy is slowing, reflected in India too with growth weakening Global growth has slowed down recently India GVA growth 3.77% 8.0% 7.9% 6.9% 6.6% 3.58% 3.58% 3.44% 5.3% 5.0% 4.9% 4.8% 4.8% 3.37% 4.3% 3.22% 1.9% 2.7% 1.4% 1.4% 1.0% 0.8% 0.4% 0.1% 0.4% 0.3% CY14 CY15 CY16 CY17 CY18 CY19E* FY16
Slide 4: High frequency indicators point towards slowdown in industry and services sectors
High frequency indicators point towards slowdown in industry and services sectors % YoY % YoY CV Sales 25% Traffic movement 55% 20% 45% 15% 35% 25% 10% 15% 5% 5% 0% -5% Cargo traffic: All airports Passenger traffic: All airports -5% -15% -10% Q1 FY18 Q3 FY18 Q1 FY19 Q3 FY19 Q1 FY20 Q1 FY18 Q3 FY18 Q
Slide 5: Liquidity has improved and rates have begun to come down, but offtake is still sluggish
Liquidity has improved and rates have begun to come down, but offtake is still sluggish Bank Lending Rates Non-food credit growth (%, YoY) % % 11.0 9.5 WALR(Fresh Rupee Loans) MCLR 9.0 18% Repo Rate [R] 8.5 10.0 15% 8.0 12% 7.5 9.0 7.0 9% 6.5 6% 8.0 6.0 3% 5.5 7.0 5.0 0% Aug-16 Feb-17 Aug-17 Feb-18
Slide 6: Some other factors affecting corporates
Some other factors affecting corporates Promoter leverage remains high NBFCs with ALM/asset quality concerns Resolutions taking some time have faced funding issues Though recovery rates are almost twice as high... Average recovery under various recovery regimes Category wise 3-month CP spreads over
Slide 7: Government's measures to boost growth
Government’s measures to boost growth Banks/NBFCs MSMEs • Upfront release of `70,000 Crore Capital for PSBs • Repayment of future GST refunds to MSMEs within 60 days • Additional liquidity support of `20,000 Crore to HFCs by NHB • Amendment to MSME Act being considered • Co-origination of loans by P
Slide 8: The Axis Bank Story – Recent Performance
The Axis Bank Story – Recent Performance 8
Slide 9: Over the last 10 years, Axis Bank has built an enviable franchise
Over the last 10 years, Axis Bank has built an enviable franchise Balance Sheet CASA Deposits Advances Branches ` crore ` crore ` crore 52% retail 4,094 7,74,566 2,23,474 5x 4x 6x 5x 4,97,276 20% retail 1,47,722 50,644 827 81,557 FY09 Q1FY20 FY09 Q1FY20 FY09 Q1FY20 FY09 Q1FY20 Credit Cards Operating
Slide 10: The Bank's Retail franchise continues to remain robust
The Bank’s Retail franchise continues to remain robust All numbers in ₹ bn Share of Retail in Deposits Retail Loan mix and share in Total Advances Share of Retail in Fee Income Retail Deposits* CAGR^ 16% Retail Advances CAGR^ 25% Retail Fees CAGR** 21% 50% 52% 45% 47% 38% 40% 41% 84% 81% 81% 81% 80%
Slide 11: Granular deposits have seen strong growth during the last four years
Granular deposits have seen strong growth during the last four years All figures in ` Crores 24% 24% 21% 21% 19% 18% 19% 16% 17% 17% 17% 15% Axis Bank Market share in Term Deposits Medium term average = 17% 15% 14% 13% 13% 13% 14% 11% 4.00% 2,07,361 1,86,835 1,70,460 1,58,789 1,45,303 1,41,508 1,38,
Slide 12: The Bank has historically grown at much higher pace than industry
The Bank has historically grown at much higher pace than industry Share of Private Banks in Advances has FY14-19 CAGR growth in Advances been consistently rising in recent years 80% Private Banks 19% 70% 60% Axis Bank (Domestic) 19% 50% FY19 Market Share of 5% 40% 33% Axis Bank (Overall) 17% 30% 27%
Slide 13: Our Credit Cards business has grown strongly in the last 6 years
Our Credit Cards business has grown strongly in the last 6 years and is now the 4th largest in the country Featured Cards Credit Cards in Force – Market Share* New Launch 12.0% 12.7% 12.6% 11.2% 9.8% 8.2% Flipkart Axis Bank Credit Card 7.2% 5.6% Co-branded Cards Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Ma
Slide 14: We are among the top rated players in mobile banking
We are among the top rated players in mobile banking Axis Bank Mobile App Mobile Transactions Market Share for Q1FY20 (by Volume) 2018 Global Rank #14 vs. #32 in 2017 21.8% Among 42 leading banks worldwide 15.2% Store Rating 9.3% 7.9% 4.6 4.6 Player 1 Player 2 Axis Bank Player 4 People’s Choice Sour
Slide 15: Digital Channels contribute substantially to overall transaction, sourcing and disbursement volumes
Digital Channels contribute substantially to overall transaction, sourcing and disbursement volumes 78% of all financial 59% of Savings Accounts 54% of Personal loans were transactions* were digital were sourced through Tab sourced through Digital channels Branches, 5% ATM, 17% Physical, Digital, 41
Slide 16: However, the last 2-3 years have been extremely challenging for the Bank
However, the last 2-3 years have been extremely challenging for the Bank All figures in ` Crores Gross Slippages Provision for non-performing assets* GNPA and NNPA ratios 16,599 6.77% 33,419 5.26% 5.25% 5.04% 11,157 10,221 21,782 3.40% 13,871 2.11% 2.06% 2.04% 3,800 1.67% 7,345 1.34% 2,886 1.06% 1.2
Slide 17: The asset quality challenges of recent years have moderated
The asset quality challenges of recent years have moderated BB & Below pool size has been shrinking Credit cost has moderated Provision Coverage ratio is now at 78% 300 00 7.3% 8.0 % As a % of Gross Customer Assets 250 00 6.0 % 3.57% 4.7% 79% 78% 2.82% 78% 200 00 4.0 % 78% 2.45%* 72% 77% 1.8% 150 00
Slide 18: We have re-organized the Wholesale Bank, creating an integrated franchise
We have re-organized the Wholesale Bank, creating an integrated franchise Re-Oriented Coverage Groups Focused Segmental Large Corporate Mid Corporate Commercial Banking Coverage Bank and Subsidiary Products Liabilities and Credit Treasury Transaction Banking Strengthened Operations and Service Infra
Slide 19: Wholesale Credit Underwriting environment at Axis Bank has been decisively reset
Wholesale Credit Underwriting environment at Axis Bank has been decisively reset Enhanced Credit Underwriting framework – Exposure levels commensurate with ratings Strengthening of Early Warning System (EWS) framework Adopting conservative approach towards downgrading into BB & Below book Formula ba
Slide 20: New originations in Corporate Credit are more granular and Bond book is being right sized
New originations in Corporate Credit are more granular and Bond book is being right sized Concentration Risk has reduced Corporate Bond portfolio significantly from peak Exposure to Top 20 single borrowers as a % of Tier I Capital Outstanding Non SLR Corporate bond* book 287% 209% 162% 155% 154% 142
Slide 21: In Retail, the Bank has held steady low levels of LTV and FOIR for new originations
In Retail, the Bank has held steady low levels of LTV and FOIR for new originations Average LTV – HL Sanctions Average FOIR – HL Sanctions 61% 62% HL 48% 43% Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-19 Average LTV - LAP Sanctions Av
Slide 22: Conservative underwriting in Retail has resulted in better risk outcomes than peer average
The portfolio choices and conservative underwriting policies in Retail have resulted in better risk outcomes than peer average Delinquency benchmarking (as of Mar’19) Peer Private Bank average = x 0.93x 0.76x 0.78x 0.67x 0.40x 0.40x Axis Bank Loan against Property Credit Card Home Loan Personal Loan
Slide 23: We have also started focusing rigorously on the cost efficiency of our business
We have also started focusing rigorously on the cost efficiency of our business All figures in ` Crores Opex to assets ratio moderated even further… … resulting in widening of positive jaws Opex to Average Assets 21% 20% 19% 18% Positive 17% 2.22% 16% Jaws 2.21% 15% 14% 2.17% 2.15% 16% 2.13% 14% 2.0
Slide 24: Slow but noticeable improvement in shareholder return metrics
All this has resulted in a slow but noticeable improvement in shareholder return metrics Return on Assets (in %) Return on Equity (in %) 1.83 18.23 18.57 1.78 1.72 17.49 9.19* 8.09 0.65 0.63 0.69 * 7.22 0.04 0.53 FY14 FY15 FY16 FY17 FY18 FY19 Q1FY20 FY14 FY15 FY16 FY17 FY18 FY19 Q1FY20 Diluted EPS (
Slide 25: Operating performance metrics were strong during the quarter
Operating performance metrics were strong during the quarter 1 Operating Profit Margin 2 Fee income growth 24% 26% 23% 2.87% 2.90% 2.97% 17% 16% 2.39% 2.32% 2.47% 2.60% 2.20% 2.21% 12% 9% 6% 1% Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q
Slide 26: The Axis Bank Story – Strategy for FY20-22
The Axis Bank Story – Strategy for FY20-22 26
Slide 27: Three vectors of our strategy for the next three years
Three vectors of our strategy for the next three years rowth rofitability ustainability • Grow deposits in line with loans • Optimize business mix • Strengthen the Core - • Step up growth in Wholesale technology, operations, credit risk Bank • Improve operating efficiency and process excellence • Co
Slide 28: The Bank continues to increase conservatism in all its business choices
The Bank continues to increase conservatism in all its business choices Credit Underwriting Consolidation of all Underwriting operations under one separate vertical headed by CCO Risk Management Balance Sheet strengthening Systematically increase Strengthen Operational provisioning across identified
Slide 29: The ROE path back to 18% would be driven by three elements
The ROE path back to 18% would be driven by three elements ROE 3 drivers of the return to 18% ROE 19.7% 18% Risk normalization 1 Reduce credit cost below long term average 9.2%* Business mix optimization 2 Portfolio choices based on RaRoC Improvement in Operating efficiency Avg FY11-15 Q1FY20 Medium
Slide 30: We now have the entire team in place to turn our aspiration into reality
We now have the entire team in place to turn our aspiration into reality in the medium term MD & CEO ED ED ED Head Wholesale Retail Corporate CRO CCO CFO Head IT Digital Banking Banking Center Banking Pralay Mondal* Deepak Maheshwari Sameer Shetty (joined in April 2019) (joined in Jan 2019) (joined
Slide 31: Tightly integrating key subsidiaries and investing in scaling them as value drivers
We are also tightly integrating the key subsidiaries of the Bank and investing in scaling them as key value drivers • Axis Bank was one of the three entities allowed • Has been the leader in Equity and Equity by RBI to set up the Trade Receivables linked deals over the last decade Discounting System
Slide 32: In Summary
In Summary Axis Bank has built an enviable franchise over the last 10 years However, the last 2-3 years have been extremely challenging for the Bank During FY19, the Bank crossed the inflection point on this tough journey The Bank continues to increase conservatism in all its business choices Amidst
Slide 33: Safe Harbor
Safe Harbor Except for the historical information contained herein, statements in this release which contain words or phrases such as “will”, “aim”, “will likely result”, “would”, “believe”, “may”, “expect”, “will continue”, “anticipate”, “estimate”, “intend”, “plan”, “contemplate”, “seek to”, “futu
Slide 34: Thank you
Thank you A's BANK
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y A SECURITIES y A CAPITAL freecharge y A BANK UK 35