Idfc First Bank Ltd. · NSE:IDFCFIRSTB
Idfc First Bank — Q1 FY20 Earnings Presentation
65 slides from Idfc First Bank's earnings presentation, Jul 24, 2019
Slide 1: IDFC FIRST Bank filing cover letter
IDFC FIRST Bank IDFCFIRSTBANK/SD/SE/121/2019-20 July 24, 2019 The Manager-Listing Department The Manager-Listing Department National Stock Exchange of India Limited BSE Limited Exchange Plaza, Phiroze Jeejeebhoy Towers, Bandra Kurla Complex, Bandra (East) Dalal Street, Fort, Mumbai — 400 051. Mumbai
Slide 2: Corporate Presentation – Q1 FY20
Corporate Presentation – Q1 FY20
Slide 3: Disclaimer
Disclaimer This presentation has been prepared by and is the sole responsibility of IDFC FIRST Bank (together with its subsidiaries, referred to as the “Company”). By accessing this presentation, you are agreeing to be bound by the trailing restrictions. This presentation does not constitute or form
Slide 4: Table of Contents
4 SECTION 1: THE FOUNDING OF IDFC FIRST BANK 11 SECTION 2: FINANCIAL PERFORMANCE 14 SECTION 3: ASSETS Table SECTION 4: LIABILITIES of 20 Contents 25 SECTION 5: FINANCIAL STATEMENTS 28 SECTION 6: DIRECTORS & SHAREHOLDERS 33 SECTION 7: Excerpts from Q2 FY19 Investor Presentation OF CAPITAL FIRST PRIOR
Slide 5: Section 1: The Founding of IDFC FIRST Bank
SECTION 1: The Founding of IDFC FIRST Bank • Events Leading to Merger – IDFC Bank - Origin & History Capital First - Origin & History Merger between IDFC Bank and Capital First IDFC Bank Financials Trends leading to merger Capital First Financials Trend leading to merger
Slide 6: IDFC FIRST Bank is founded by the merger of IDFC Bank and Capital First
Section 1: The Founding of IDFC FIRST Bank.. IDFC FIRST Bank is founded by the merger of Erstwhile IDFC Bank and Erstwhile Capital First on December 18, 2018. 5
Slide 7: Events leading to the merger: IDFC Bank side
Section 1: The Founding of IDFC FIRST Bank.. EVENTS LEADING TO THE MERGER in January 2018- At IDFC Bank side. IDFC Limited was set up in 1997 to finance infrastructure focusing primarily on project finance and mobilization of capital for private sector infrastructure development. Whether it is finan
Slide 8: Events leading to the merger: Capital First side
Section 1: The Founding of IDFC FIRST Bank.. EVENTS LEADING TO THE MERGER in January 2018- At Capital First side Around the same time (2010-2017), while these events were playing out at IDFC Group, certain events were playing out in parallel at Capital First. Mr Vaidyanathan who had built ICICI Bank
Slide 9: Merger announcement, approvals and share swap
Section 1: The Founding of IDFC FIRST Bank.. In January 2018, IDFC FIRST Bank and Capital First announced that they had reached an understanding to merge with each other and shareholders of Capital First were to be issued 139 shares of the merged entity for every 10 shares of Capital First. The Comp
Slide 10: Key Strengths
Section 1: Key Strengths • Strong Systems and Processes • Strong Retail Franchise in niche • Strong Loan assets of more than Rs. segments with strong credit skills 104660 Cr • Launched retail liability operations. Opened 200 bank branches (mostly • Track record of continuous growth • 34.62% of loans
Slide 11: Key Excerpts from MD and CEO's letter to Shareholders
Section 1: Key Excerpts from MD and CEO’s letter to Shareholders in Annual Report 2019 On Strategy for the new Bank: “Our strategy for the new combined bank is very simple. We simply plan to implant the erstwhile Capital First’s tried and tested model of financing small entrepreneurs and consumers [
Slide 12: Section 2: Financial Performance of the Bank for Q1-FY20
SECTION 2: FINANCIAL PERFORMANCE OF THE BANK FOR Q1-FY20 • Key Business & Financial Parameters
Slide 13: Snapshot of Key Parameters for the Quarter Q1 FY20
Section 2: Snapshot of Key Parameters for the Quarter Q1 FY20 Rs. 1,12,558 Cr 40% Rs. 1,42,269 Cr 15.08%, 7.02% Funded Assets Retail Assets/Total Borrowing & Deposits CASA Ratio Funded Assets (as % of Total Deposit, as % of Total Borrowing & Deposits) Rs. 17,545 Cr 2.66%, 1.35% 279 14.01% Net Worth-
Slide 14: Snapshot for the Quarter Q1 FY20
Section 2: Snapshot for the Quarter Q1 FY20 • The Net Interest Income for the quarter ended on 30 June 2019 was Rs. 1,174* Cr as compared to Rs. 1,113 Cr for the quarter ended on 31 March 2019, strong annualized growth of 22%. • The Total Operating Income (net of Interest Cost) for the quarter ended
Slide 15: Section 3: Assets
SECTION 3: ASSETS • Asset Break up • Increasing Retailization • Improving NIM Trend • Asset Quality • Capital Adequacy
Slide 16: Loan Assets Breakup
Section 3: Loan Assets Breakup Pre - Merger Post - Merger In Rs. Cr Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Loan Against Property 622 776 997 8,046 9,123 9,945 MSME Loans 1,342 1,597 2,069 5,891 7,122 7,925 Housing Loans 1,617 1,923 2,246 4,509 5,145 5,675 Consumer Loans 416 528 689 13,541 14,885
Slide 17: Retail loans as a % of total loans improved to 40%
Section 3: Retail loans as a % of total loans has quickly improved to 40% as of 30 June 2019 from 13% pre-merger, and from 35% as of 31 Dec 2018, at merger. We plan to take it to 70% in five years. Retail Funded Assets (includes Home Loan, Business Loans, Rural, MSME and Consumer Loans) 5 Years Plan
Slide 18: Net Interest Margin increased from 1.56% to 3.01%
Section 3: The Net Interest Margin of the bank has increased from 1.56% pre merger to 3.01% post merger The bank expects that this trend will continue in the next few years Post - Merger 3.03% 3.01%* 2.89% (Pre – Merger) 1.56% Q2 FY19 Q3 FY19 Q4 FY19 Q1 FY20 * NIM % would have been 3.15% in Q1 FY20
Slide 19: Asset Quality
Section 3: Asset Quality In Rs. Cr Mar-19 Jun-19 GNPL 2,136 2,419 Provisions for GNPL 1,029 1,203 NNPL 1,107 1,216 GNPA (%) 2.43% 2.66% NNPA (%) 1.27% 1.35% • In addition to the above, the bank has identified certain additional exposures for watch list, and as a prudent practice, has taken provision
Slide 20: Capital Adequacy
Section 3: Capital Adequacy Mar-19 Jun-19 Tier 1 Capital Funds 17,373 16,340 Tier 2 Capital Funds 219 156 Total Capital Funds 17,592 16,496 Total RWA 1,13,744 1,17,733 Tier 1 CRAR (%) 15.27% 13.88% Total CRAR (%) 15.47% 14.01% RWA/Total Assets 68.04% 69.79% 1. We have capital headroom available thro
Slide 21: Section 4: Liabilities
SECTION 4: LIABILITIES • Borrowings and Deposit Composition • CASA Growth • Trends of Deposit Ratios • Expanding Network
Slide 22: Breakup of Liabilities
Section 4: Breakup of Liabilities In Rs. Cr Jun-18* Mar-19 Jun-19 YOY % Legacy Long Term Bonds 18,909 15,752 13,865 Infra Bonds 10,434 10,434 10,434 Refinance 627 4,047 13,379 Other Borrowings 4,700 23,256 23,966 Total Borrowings (A) 34,671 53,490 61,644 78% CASA 6,083 9,114 9,987 64% Term Deposits
Slide 23: Improving CASA Deposit Ratio
Section 4: Improving CASA Deposit Ratio. CASA to Total Deposits (%) The conventional computation of CASA% in the 30.00% industry is CASA/Total deposits (CASA+ Certificate of Deposits+ Term Deposits). Under this conventional computation method, the bank has sharply improved its CASA percentage within
Slide 24: Improving Core Retail Deposit Ratio
Section 4: Improving Core Retail Deposit Ratio. Core Deposits (Retail CASA + Retail TD) to Total Deposits & Borrowings (%) The bank has a large proportion of liabilities in the form of other borrowings because of our unique history i.e. IDFC Limited was an infrastructure financing Domestic 50.00% Fi
Slide 25: Presence across the country, branch network expanded to 279
Section 4: The combined entity has presence across the length and breadth of the country, expanding its branch network to 279 Urban Bank Branches 162 Rural Bank Branches 117 ATMs 199 Asset Service Branches 102 (Erstwhile Capital First Branches) Rural BC Branches (IFBL) 354 Other BC Branches 166 24
Slide 26: Section 5: Financial Statements
SECTION 5: FINANCIAL STATEMENTS • Income Statement • Balance Sheet
Slide 27: Income Statement
Section 5: Income Statement In Rs. Cr (Pre-Merger) Jun-18 Mar-19 Jun-19 Interest Income 2,321 3,629 3,793* Interest Expense 1,831 2,516 2,619 Net Interest Income 490 1,113 1,174* Fee & Other Income 103 291 301 Trading Gain 96 (18) 9 Core Operating Income 689 1,386 1,485 Operating Expense 446 1,148 1
Slide 28: Balance Sheet
Section 5: Balance Sheet (Pre-Merger) In Rs. Cr Mar-19 Jun-19 Jun-18 Shareholders' Funds 15,438 18,159 17,545 Deposits 54,057 70,479 66,226 Borrowings 47,591 69,983 76,044 Other liabilities and provisions 5,934 8,563 8,891 Total Liabilities 1,23,021 1,67,185 1,68,705 Cash and Bank Balances 2,545 5,4
Slide 29: Section 6: Directors & Shareholders
SECTION 6: DIRECTORS & SHAREHOLDERS • Board of Directors • Shareholding Pattern
Slide 30: Board of Directors
Section 6: Board of Directors Mr. V. Vaidyanathan is the first Managing Director and CEO of IDFC FIRST Bank, a bank founded by the merger of Capital First and IDFC Bank in December 2018. He is a banker turned entrepreneur turned banker by merging the NBFC he founded with an existing commercial bank.
Slide 31: Board of Directors
Section 6: Board of Directors DR. RAJIV B. LALL - PART-TIME NON-EXECUTIVE CHAIRMAN Dr. Rajiv Lall is the Non-Executive Chairman of IDFC Bank. He was the Founder MD & CEO of IDFC Bank from October 1, 2015 till December 18, 2018. Previously, he was the Executive Chairman of IDFC Limited. A veteran eco
Slide 32: Board of Directors
Section 6: Board of Directors DR.(MRS.) BRINDA JAGIRDAR - INDEPENDENT DIRECTOR Dr. (Mrs.) Brinda Jagirdar, is an independent consulting economist with specialization in areas relating to the Indian economy and financial intermediation. She is on the Governing Council of Treasury Elite, a knowledge s
Slide 33: Shareholding Pattern as of 30th June 2019
Section 6: Shareholding Pattern as of 30th June 2019 Scrip Name : IDFC FIRST Bank (BSE: 5394437, NSE:IDFCFIRSTB) Key shareholders % Holding IDFC Financial Holding Company Limited 40.00 Other Body Trusts and Corporate, Clearing Warburg Pincus through its affiliated entities 9.99 PRESIDENT 2.8% Member
Slide 34: Section 7: Excerpts from Q2 FY19 Capital First presentation
SECTION 7: Excerpts from Q2 FY19 Investor Presentation OF CAPITAL FIRST PRIOR TO MERGER • History of Capital First Limited • Transformation into Retail Franchise • Business Areas of Focus • Past Financial Performances
Slide 35: Capital First business model and pre-merger extract
Since the business model of Capital First is an important part of the business to be built in the merged bank, we present to you the business model, business lines, business and profitability trajectory, and financial trends of Capital First Limited. The following slides are essentially an extract o
Slide 36: History of Capital First Limited
Section 7: Excerpts from Q2 FY19 Investor Presentation of Capital First prior to merger – History of Capital First Limited The Company was first listed on Stock Exchanges in January 2008. Between 2010 to 2012, Mr Vaidyanathan acquired a stake in the company and executed a Management Buyout (MBO) of
Slide 37: History of Capital First Limited: transformation
Section 7: Excerpts from Q2 FY19 Investor Presentation of Capital First prior to merger – History of Capital First Limited From 31-March-2010 to 31-Mar-2018, the company had transformed across all key parameters including: • The total Capital has grown from Rs. 691 Cr to Rs. 3,993 Cr • The Assets un
Slide 38: Retail franchise growth and diversified portfolio
Section 7: Excerpts from Q2 FY19 Investor Presentation of Capital First prior to merger – Since 2010, the company has consistently stayed with the founding theme of financing entrepreneurs, MSMEs and consumers through the platform of technology & has grown the retail franchise * As per Ind - AS A
Slide 39: Growth in Retail Assets
Section 7: Excerpts from Q2 FY19 Investor Presentation of Capital First prior to merger – Growth in Retail Assets The company’s product launches had been highly successful in the marketplace and the company had emerged as a significant player in Indian retail financial services within eight years of
Slide 40: Financing to underserved segments
Section 7: Excerpts from Q2 FY19 Investor Presentation of Capital First prior to merger – Capital First provided financing to select segments that are traditionally underserved by the existing financing system Traditionally these end uses are underserved by the financial system as ticket sizes are s
Slide 41: MSME Financing focus
Section 7: Excerpts from Q2 FY19 Investor Presentation of Capital First prior to merger – MSME Financing – A key area of focus for Capital First Capital First emerged as a Specialized Player in financing MSMEs by offering different products for their various financing needs Typical Loan Ticket Size
Slide 42: Rigorous Credit Underwriting Process
Section 7: Excerpts from Q2 FY19 Investor Presentation of Capital First prior to merger – Rigorous Credit Underwriting Process helped in maintaining high asset quality In the Mortgages business at Capital First, about 38% of the total applications were disbursed after passing through several levels
Slide 43: Asset Quality
Section 7: Excerpts from Q2 FY19 Investor Presentation of Capital First prior to merger – Asset Quality The Company’s asset quality consistently remained stable over 8 years even though there were stressed situations like high inflation (FY 2010-2014), elevated interest rates (FY 2010-2014), Rupee D
Slide 44: Key Shareholders of Capital First
Section 7: Excerpts from Q2 FY19 Investor Presentation of Capital First prior to merger – Reputed marquee FIIs and DIIs had invested in Capital First Key Shareholders of Capital First Limited (as of 30 September 2018) Warburg Pincus, through its affiliate entities V. Vaidyanathan GIC, Sovereign Weal
Slide 45: Assets Under Management
Q1-FY14 8,024 Q2-FY14 8,244 Q3-FY14 9,071 Q4-FY14 9,679 Q1-FY15 10,603 Q2-FY15 11,045 Q3-FY15 11,695 Q4-FY15 11,975 Q1-FY16 12,644 Q2-FY16 13,604 Q3-FY16 14,973 Q4-FY16 16,041 Q1-FY17 17,212 Q2-FY17 17,937 Assets Under Management (Rs. Cr) Q3-FY17 18,784 Q4-FY17 19,824 Q1-FY18 21,410 Q2-FY18 22,974 T
Slide 46: Profit After Tax grew steadily
Section 7: Excerpts from Q2 FY19 Investor Presentation of Capital First prior to merger – The Profit After Tax grew steadily Profit After Tax (Rs. Cr) 104.6 101.5 95.3 87.0 78.3 70.8 67.0 61.4 57.6 47.5 49.2 44.5 41.0 36.5 33.1 29.9 27.0 20.8 15.6* 10.1 5.5 7.2 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Q1 FY1
Slide 47: Yearly Profit Growth Trend
Section 7: Excerpts from Q2 FY19 Investor Presentation of Capital First prior to merger – Yearly Profit Growth Trend.. Profit After Tax (Rs Cr) 327 239 206# 166 114 53 37* FY13 FY14 FY15 FY16 FY17 FY18 H1 FY19 * Net of exceptional items (sale of one commercial property), for accurate comparison 46
Slide 48: Cost to Income ratio
Section 7: Excerpts from Q2 FY19 Investor Presentation of Capital First prior to merger – Cost to Income ratio consistently came down from over 100% to ~ 50 % over 8 years. Cost to Income % 74% 70% 59% 53% 51% 51% 48% FY13 FY14 FY15 FY16 FY17 FY18 H1 FY19 47
Slide 49: Return on Equity
Section 7: Excerpts from Q2 FY19 Investor Presentation of Capital First prior to merger – With enhanced business operations, the RoE consistently improved over the quarters… Return on Equity (%) 14.51% 13.31% 11.93% 10.14% 8.33% 3.57% FY14 FY15 FY16 FY17 FY18 H1 FY19 48
Slide 50: Market Capitalisation growth
Section 7: Excerpts from Q2 FY19 Investor Presentation of Capital First prior to merger – The Market Capitalisation of the Company had grown more than 10X in the last 6 years.. Market Capitalisation (Rs. Cr) Rs. 8,282 Cr# Rs. 7,628 Cr ($ 1,274 Mn) ($ 1,174 Mn) Rs. 6,096 Cr ($ 938 Mn) Rs. 3,937 Cr Rs
Slide 51: Dividend pay-out increased every year
Section 7: Excerpts from Q2 FY19 Investor Presentation of Capital First prior to merger – The Company steadily increased dividend pay-out every year.. Dividend (as % of face value per share) 28% 26% 24% 22% 20% 18% 31-Mar-13 31-Mar-14 31-Mar-15 31-Mar-16 31-Mar-17 31-Mar-18 50
Slide 52: Six-year returns and CAGR table
Section 7: Excerpts from Q2 FY19 Investor Presentation of Capital First prior to merger – With the increasing assets size, returns showed a consistent growth over the last six years… FY13 FY14 FY15 FY16 FY17 FY18 CAGR AUM (Rs. Cr) 7,510 9,679 11,975 16,041 19,824 26,997 29% Total Income (Rs. Cr) 357
Slide 53: Summary of strategy for the combined entity
SECTION 7: In summary, under our stated strategy for the combined entity, IDFC FIRST Bank, the same successful model of Capital First lending business is now being built on a Bank platform from IDFC Bank, thus the business becomes more profitable, robust and sustaining because of availability of low
Slide 54: Section 8: Strategy Going Forward
SECTION 8: STRATEGY GOING FORWARD • Key Strategies for the combine entity – Asset Strategy • Growth of Assets • Diversification of Assets • Gross Yield expansion Liability Strategy • CASA Growth • Diversification of Liability • Branch Expansion Profitability • Expand Net Interest Margin • Redu
Slide 55: Disclaimer
Section 8: Disclaimer Certain statements contained in this presentation that are not statements of historical fact constitute “forward- looking statements.” You can generally identify forward-looking statements by terminology such as “aim”, “anticipate”, “believe”, “continue”, “could”, “estimate”, “
Slide 56: Asset Strategy
Section 8: Asset Strategy • Growth of Assets: • The Bank plans to grow retail loan assets from Rs. 36,236 Cr (December 31, 2018) to over Rs. 100,000 Cr in the next 5 years • The Bank plans to wind down loans to infrastructure to NIL within five years ( Rs. 22,710 as of 31 December 2018). • The Bank
Slide 57: Liability Strategy
Section 8: Liability Strategy • CASA Growth: This is a key focus and growth area for the bank. We plan to increase the CASA Ratio from 10.4% as of December 31, 2018 on a continuous basis year on year and strive to reach 30% CASA ratio within 5 years, and increase it to 40-50% from there on. An array
Slide 58: Profitability
Section 8: Profitability • Net Interest Margin: The bank plans to expand the NIM to about 5.0% - 5.5% in the next 5 years based on better cost of funds and carefully selecting the product segments where we have strong proven capabilities over the years. • Asset Quality: Over 90% of the Retail Loan B
Slide 59: Thank You
THANK YOU IDFC FIRST Bank
Slide 60: Management Commentary on the Q1 FY20 results
Management Commentary on the Q1 FY20 results for IDFC FIRST Bank Disclaimer: Certain statements contained in this note that are not statements of historical fact constitute “forward-looking statements.” You can generally identify forward-looking statements by terminology such as “aim”, “anticipate”,
Slide 61: Commentary: assets and strategy
continuously and consistently from 10% of the total loan book to 90% within a span of just eight years. During the period of its operation, between March-2010 to Sep- 2018, the company never wavered on the strategy and never got distracted into any other direction (such as providing financing to rea
Slide 62: Commentary: watch-list accounts and liabilities
3. In addition to the above, the bank has identified certain additional exposures as watch-list accounts, and as a prudent practice, has taken provisions against these as appropriate. These are: Two identified accounts (One HFC and one Financial Company). Total exposure: Rs. 1,461 crores. Provisio
Slide 63: Commentary: deposits, branches and capital adequacy
basis points within six months. We plan to take this to 50% within the next 5 years. The Bank is well placed to achieve its target of improving the deposit ratios as targeted in the next 5 years. 6. As of 30th June 2019, the Bank has distribution set up through 279 Bank branches and 199 ATMs across
Slide 64: Commentary: fee income and net loss
2. The Fee and Other Income from the normal business operations has increased to Rs. 301 Cr in Q1-FY20 as compared to Rs. 291 Cr in Q4-FY19. This includes loan related fees, Trade and Cash management fees, wealth management and third party distribution and debit card, digital transaction fees and su
Slide 65: Commentary: progress on key priorities
a. Increase in the retail assets loan book quarter after quarter consistently (retail loan book grew Rs. 3830 crores in Q1 20. b. Increase in low cost retail liabilities at a fast pace in every quarter. (CASA up 64% YOY substantiates this. Also Casa grew 471 bps in six months since merger) c. Divers