Edelweiss Financial Services Limited · NSE:EDELWEISS
Edelweiss Financial Services — Q3 FY2016 Earnings Presentation
56 slides from Edelweiss Financial Services's earnings presentation, January 2016
Slide 1: Edelweiss Financial Services Limited Q3FY16 Earnings Update
ED ELWEISS FINANCIAL SERVICES L IMITED Q3FY16 EARNING S UPDATE
Slide 2: Contents
CONTENTS 1 FINANCIAL HIGHLIGHTS 2 BUSINESS HIGHLIGHTS 3 E N T E R P R I S E U P D AT E S 4 MACRO-ENVIRONMENT 5 D E TA I L E D F I N A N C I A L S 2
Slide 3: Financial Highlights
FINANCIAL HIGHLIGHTS
Slide 4: Q3FY16 Key Performance Highlights
Q3FY16 KEY PERFORMANCE HIGHLIGHTS 1 28% YoY growth in consolidated profits • 36% growth in Ex Insurance PAT • 17th quarter of consistent growth in profits 2 Improved capital efficiency Key Highlights • Consolidated RoE 13.0% • Ex Insurance RoE 18.5% 3 Calibrated Growth in Balance Sheet • Diversified
Slide 5: A Quarter of Sustained Growth
A Q U A R T E R O F S U S TA I N E D G R O W T H ` in million Consol PAT PAT Ex-Insurance RoE Ex-Insurance Q3FY16 1,057 Q3FY16 1,329 Q3FY16 18.5% 28% 36% 280 YoY YoY bps Q3FY15 829 Q3FY15 981 Q3FY15 15.8% Balance Sheet Credit Book Spread RoA Ex-Insurance Q3FY16 309,982 Q3FY16 5.5% Q3FY16 1.8% 34% 20
Slide 6: Profitability Trajectory
P R O F I TA B I L I T Y T R A J E C TO R Y Profit after Tax (` in million) 1400 PAT ex-insurance Consol PAT 1329 1201 1200 1114 1034 981 1000 895 903 1057 957 912 800 721 884 702 692 679 829 624 792 782 568 600 510 460 484 607 578 557 348 511 400 461 460 272 416 398 388 294 200 263 0 Q2'FY12 Q3'FY1
Slide 7: Ex-Insurance RoE Improved to 18.5%
EX-I NS URANCE R O E I MPR O VED TO 1 8 .5 % Consolidated RoE % Tangible RoE % Ex-Insurance 13.0% 18.5% 11.3% 15.6% 12.3% 8.2% 11.3% 7.6% FY13 FY14 FY15 Q3FY16 FY13 FY14 FY15 Q3FY16 7
Slide 8: RoA Attribution (Ex Insurance)
R O A ATT R I B U TI O N ( E X I N S U R A NC E ) 9M‘FY16 FY15 FY14 NII 5.1% 5.6% 5.3% Interest 12.7% 12.0% 11.6% Treasury 1.2% 2.2% 1.9% Interest Cost -8.9% -8.7% -8.1% Non-interest income 2.6% 2.9% 2.6% Fee & commission 2.3% 2.7% 2.4% Other income 0.3% 0.2% 0.2% Expenses -5.2% -5.7% -5.1% Employee
Slide 9: Credit Business Major Growth Vector
CREDIT BUSINESS MAJOR GROWTH VECTOR Ex-Insurance ` in million Revenue Profit after Tax 9MFY16 9MFY16 43% 15,310 3,320 20,340 57% 36% 1,300 2,345 64% Non Credit Businesses Credit Business 9
Slide 10: Financial Highlights: Balance Sheet & ALM
FINANCIAL HIGHLIGHTS BALANCE SHEET & ALM
Slide 11: Diversified Asset Mix
DIVERSIFIED ASSET MIX AS ON DEC 31, 2015 On Balance Fixed, tax assets Sheet Liquidity and others Insurance cushion 1% LAS and Others 5% 3% 10% SME & Agri Retail Financing Mortgages 8% 13% Gsecs 18% Distressed Asset Credit Real Estate Credit 10% 189 bn Finance 310 bn 61% Mortgages 25% Agency 12% Stru
Slide 12: $12.7 Billion of Assets
$12.7 BILLION OF ASSETS As on 31 Dec 2015 ` bn USD bn Assets on Balance Sheet 310 4.7 Assets Under Management 295 4.5 Assets Under Advice 234 3.5 Total Assets 839 12.7 12
Slide 13: Diversified Sources of Borrowings
DIVERSIFIED SOURCES OF BORROWINGS FY11 Q3 FY16 OTHERS 5% 4% RETAIL 5% 14% ASB 14% 20% BANK 26% 26% DEBT MARKET 50% 37% Total Borrowings ` 78.58 bn ` 271.40 bn STEADY DIVERSIFICATION OF SOURCES OF BORROWINGS LEADING TO LOWER DEPENDENCE ON DEBT MARKET BORROWINGS 13
Slide 14: Comfortable ALM Profile
C O M F O RTA B L E A L M P R O F I L E Dec’15 ` 308.42 bn1 % of Assets and Liabilities 100% 100% 78% 55% 74% 44% 40% 54% 40% 43% 17% 17% ASB 0-3 Mnth 3-6 Mnth 6-12 Mnth 1-3 years 3+ years Assets Liabilities POSITIVE ALM ALCO MANAGES AND MONITORS ALM, INTEREST RATE RISK AND LIQUIDITY 1For footnotes,
Slide 15: Share of Long Term Funds Increasing
SHARE OF LONG TERM FUNDS INCREASING Long Term Borrowing (` in billion) Long Term Borrowing Breakup Sub-debt Structured 8% 106.31 Product 10% 59.39 Term NCD Loan 55% 27% Q3FY15 Q3FY16 LTB as % of Total 36% 47% Borrowing ex- Average Tenure ASB 3.07 (years) 15
Slide 16: Comfortable Capital Adequacy Ratio
C O M F O R TA B L E C A P I TA L A D E Q U A C Y R AT I O Liability Structure, Dec’15 (` in billion) Tier I 37.33 Tier II 9.68 Consolidated Capital Adequacy2 17.8% Total Capital 47.01 Risk Weighted 264.65 Assets 16
Slide 17: Liquidity Cushion at ₹30 bn
L I Q U I D I T Y C U S H I O N AT ` 3 0 B N I S 1 0 % O F B A L A N C E S H E E T Liquidity Cushion ` in billion Including off balance sheet lines 30 17 4 FY14 FY15 Q3FY16 17
Slide 18: Business Highlights
BUSINESS HIGHLIGHTS
Slide 19: Growing Business Presence
GROWING BUSINESS PRESENCE MUMBAI INDIA GLOBAL PRESENCE 1 Strong clients/accounts base of 3 6,156 employees across 233 offices over 730,000 across businesses in 120 cities including eight international offices 2 Over 298,000 Depository 4 Touch points include over 4,700 Authorised Participant Accounts
Slide 20: Edelweiss Operating Structure
E D E LW E I SS O P E R ATI N G S T R U C T U R E CREDIT Present across the spectrum of Wholesale and Retail credit : • Mortgages • SME & Agri-Financing. • Structured Collateralized Credit • Distressed Assets Credit • Loans against securities & others NON CREDIT BUSINESSES Strong product franchise s
Slide 21: Business Highlights: Credit Business
BUSINESS HIGHLIGHTS CREDIT BUSINESS
Slide 22: Credit Book Scale Up Without Diluting Underwriting Standards
CREDIT At the end of (` in billion ) Q3FY16 Q2FY16 Q3FY15 Total Credit Book 188.66 173.21 120.15 Mortgages 72.49 67.48 49.37 Structured Collateralized Credit 63.74 60.35 46.65 Distressed Assets Credit 17.99 14.42 8.37 SME & Agri Finance 14.59 13.28 6.59 Loans against Securities, Rural Finance & othe
Slide 23: Credit Book Growth and Exposures
CREDIT BOOK GROWTH AND EXPOSURES Credit Book Growth & Composition as Top Ten Sector Exposures as on on Dec 31, 2015 Dec 31, 2015 200 180 160 Real Estate & Const Co. 140 4% 3% 5% Mortgages/LAP 120 Distressed Asset Credit 6% 29% ` in bn Consumer 100 6% Diversified & Others 80 BSFI & Cap Mkt related 6%
Slide 24: Retail Finance Spreading Footprint
CREDIT At the end of Q3FY16 Q2FY16 Q3FY15 Average Interest Yield 16.2% 16.0% 16.1% Average Cost of Borrowing 10.7% 10.8% 10.6% Interest Spread 5.5% 5.2% 5.5% Net Interest Margin 6.8% 6.6% 7.1% Average collateral cover on Structured 2.1x 2.1x 2.6x Collateralised book 46 cities & 44 cities & 29 cities
Slide 25: Credit: Good Asset Quality
CREDIT : GOOD ASSET QUALITY At the end of (` in million) Q3FY16 Q2FY16 Q3FY15 Gross NPLs Net NPLs Total Credit Book 188,659 173,215 120,154 1.4% 1.3% Gross NPLs 2,717 2,504 1,550 0.9% Gross NPL % 1.44% 1.45% 1.29% Net NPLs % 0.50% 0.44% 0.19% 0.5% 0.4% 0.4% Total Provision Held3 2,334 2,333 1,637 0.
Slide 26: Business Highlights: Non Credit Businesses
BUSINESS HIGHLIGHTS NON CREDIT BUSINESSES
Slide 27: Non Credit Businesses Scaling Up Rapidly
N O N C R E D I T B U S I N E S S E S S C A L I N G U P R A P I D LY ` in billion AUM Wealth AUA4 234 295 267 195 214 154 Q3'15 Q2'16 Q3'16 Q3'15 Q2'16 Q3'16 ARC Assets Credit Alternatives Equity 27
Slide 28: Non Credit Businesses Update
N O N C R E D I T B U S I N E SS ES U P D AT E At the end of 9MFY16 9MFY15 Number of IB & DCM Deals 75 74 Research Coverage Institutional 214 206 Retail 38 52 Broking ADV (` in billion ) 50 48 Retail Financial Markets clients 479,000 445,000 Depository Participant accounts 298,000 278,000 Agri Servi
Slide 29: Balance Sheet Management Unit Highlights
BALANCE SHEET MANAGEMENT UNIT HIGHLIGHTS Key Objectives BMU & Corporate Assets, December’15 ` in billion Liquidity management; Others Fixed & 4 Liquidity cushion raised Tax Assets to ` 30 bn 10 Asset Liability On BS Management Liquidity cushion Manage Treasury assets 9 Corporate Fixed Assets and Inv
Slide 30: Business Highlights: Life Insurance Business
BUSINESS HIGHLIGHTS LIFE INSURANCE BUSINESS
Slide 31: Life Insurance: FIPB Approval for Foreign Stake Increase
LIFE INSURANCE Life Insurance business with JV partner Tokio Marine Holdings, Inc. Focus on performance including achieving growth in premium and expansion of distribution footprint Edelweiss Tokio funds have been rated top performers by Morningstar with all Individual ULIP funds are in top deci
Slide 32: Enterprise Updates
ENTERPRISE UPDATES
Slide 33: Awards and Accolades
AWARDS AND ACCOLADES BEST BROKERAGE FOR ROADSHOWS & COMPANY VISITS 2015 (ASIAMONEY), MSME BANKING EXCELLENCE AWARD 2015 (CIMSME) 33
Slide 34: Key HR Metrics
KEY HR METRICS At the end of 9MFY16 H1FY16 9MFY15 Head Count 6,156 5,937 5,275 Senior Hiring 24% 23% 50% Senior Attrition 11% 9% 19% During Q3FY16 Q2FY16 Q3FY15 Learning & Training man days 5,065 5,528 5,639 Development Employees covered 1,962 2,172 1,542 BUILDING LEADERSHIP CAPABILITY THROUGH A FOU
Slide 35: Corporate Social Responsibility – EdelGive Foundation
C O R P O R AT E S O C I A L R E S P O N S I B I L I T Y – E D E L G I V E F O U N D AT I O N Philanthropic initiative to drive sustainable social change Impacted over 3,00,000 lives Financially supported over 72 organizations till date Committed nearly ` 360 mn Over 12,000 hours of pro-bono support
Slide 36: Shareholding Pattern
S H A R E HO L D IN G PATT E R N NON INSTITUTIONS (INCL. CORPORATES TOP INSTITUTIONAL SHAREHOLDERS ABOVE 1%5 AND INDIVIDUALS) AS ON DEC 31, 2015 Name Percent 18% 1 Carlyle 8.4% PROMOTERS, EMPLOYEES 2 Fidelity 5.7% 52% & EMPLOYEE 30% TRUSTS 3 BIH SA 5.4% 4 SAIF Advisors 3.2% 5 Amansa Investments 1.5%
Slide 37: Macro-Environment
MACRO-ENVIRONMENT
Slide 38: Cautiously Optimistic
Cautiously -ve Global Risks Optimistic +ve Domestic Strength 38
Slide 39: Cautiously Optimistic: Global Risks
Cautiously -ve Global Risks Optimistic +ve Domestic Strength 39
Slide 40: Oil Below $30 Level
OIL BELOW $30 LEVEL Brent Crude ($/Barrel) Forecasted to fall to 112 $10-20 levels; Iran to start Oil crash is taking toll on: oil exports 1. Oil exporting countries, and 2. Commodity corporates 29 China Brazil OPEC Aug'15 May'14 Mar'15 Dec'13 Jan'16 Oct'14 Russia Countries 40
Slide 41: China Once Engine for Global Growth
CHINA ONCE ENGINE FOR GLOBAL GROWTH… 2016 GDP Forecast 8 6 2015 GDP Growth (%) 4 Russia Brazil 2 7% 16% 16% 10% 12% 0 India China Japan Australia Canada Euro Area Other EM Mexico Other DM USA UK Indonesia Turkey South Korea -2 -4 0 10 20 30 40 50 60 70 80 90 Country Weight in PPP GDP(%) Source: Gold
Slide 42: Now Rattling Global and EM Markets
… I S N O W R ATT L I NG G LO B A L A N D E M M A R K E T S Percentage Return since 31 Dec 2014 80% Shanghai Composite Index SCI has given negative 60% returns after going up 60% during the year 40% 20% 0% -20% Emerging Markets MSCI -40% Dec'14 Feb'15 Apr'15 Jun'15 Aug'15 Oct'15 Dec'15 China has tri
Slide 43: US Fed Rate Hike
U S F E D R AT E H I K E However, absorbed well by markets US Fed increased the rate after a USD/INR decade of wait and watch 68 67 66 65 US Fed rate review - Dec 64 63 So far liquidity has been adequate due to Japan and EU Reduction in liquidity can impact EM markets adversely 43
Slide 44: Further Trouble Brewing Up in Europe
FURTHER TROUBLE BREWING UP IN EUROPE Anti-austerity parties have won the elections held in 2015 in PIIGS countries Greece Portugal Spain Sep’15 Oct’15 Dec’15 Will result in more political upheaval and stress on Euro economy 44
Slide 45: Cautiously Optimistic: Domestic Strength
Cautiously -ve Global Risks Optimistic +ve Domestic Strength 45
Slide 46: Despite Many Positives, Negative Returns in CY15
D E S P I T E M A N Y P O S I T I V E S, N E G AT I V E R E T U R N S I N C Y 1 5 A host of positives for India: 9,500 Nifty 50 Commodity price crash 9,000 Contained inflation -4% RBI rate cut of 125 bps 8,500 Most sound CAD situation in a decade Reforms focused government 8,000 “Despite a
Slide 47: Weak Global Cues Are Rubbing Off
WEAK GLOBAL CUES ARE RUBBING OFF Manufacturing PMI is now in Industry credit growth remains contraction zone flattish India manufacturing PMI Credit to industry 56 20 16 54 12 (% YoY) (X) 52 8 50 4 48 0 Nov-12 Nov-13 Nov-14 Nov-15 May-13 May-14 May-15 Dec-12 Dec-13 Dec-14 Dec-15 Apr-13 Apr-14 Apr-15
Slide 48: Continue to Be Cautiously Positive on India
C O N T I N U E T O B E C A U T I O U S LY P O S I T I V E O N I N D I A , D U E T O . . . Negative GDP deflator auguring further rate cuts? Consumer Price Index Wholesale Price Index GDP Deflator 10 Annual inflation rates in percent 7 CPI 4 Deflator 1 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14
Slide 49: Cautiously Positive on India: Reforms on Anvil
C A U T I O U S LY P O S I T I V E O N I N D I A , D U E T O . . . Reforms on anvil • Creation of a state level real estate regulator Real Estate • Developers to register all the projects with authority and will be graded by authority Regulatory Bill • 70% of cost to be deposited in escrow account W
Slide 50: Key Things to Watch Out For
K E Y T H I N G S TO WATC H O U T F O R 1 Global stress can pull liquidity out of system 2 Currency volatility 3 RBI’s view on interest rates 4 Government’s ability to push reforms 50
Slide 51: Detailed Financials
DETAILED FINANCIALS
Slide 52: Consolidated Results
C O N S O L I D A T E D R E S U LT S ` in million FY16 FY16 FY15 FY16 FY15 FY15 Q3 Q2 Q3 9M 9M Annual Fee and Commission Income 1,807 1,480 1,597 4,916 3,929 5,727 Fund based Income 10,940 10,260 7,573 30,761 21,761 31,001 Premium from Life Insurance Business 637 576 399 1,515 1,020 1,866 Other Oper
Slide 53: Consolidated Results Ex-Insurance
C O N S O L I D A T E D R E S U LT S E X - I N S U R A N C E ` in million FY16 FY16 FY15 FY16 FY15 FY15 Q3 Q2 Q3 9M 9M Annual Fee and Commission Income 1,807 1,480 1,597 4,916 3,929 5,727 Fund based Income 10,772 10,081 7,326 30,165 21,038 30,064 Other Operating Income 204 164 86 508 176 385 Other I
Slide 54: Life Insurance
LIFE INSURANCE Edelweiss Tokio Life Insurance Company Limited Standalone (ETLI) ` in million Q3FY16 Q2FY16 Q3FY15 FY15 Gross Premium Income 662 599 416 1,931 Investment Income & Other Income 168 185 256 972 Total Income 830 784 672 2,903 Total Expenses 1,198 1,113 877 3,613 Profit Before Tax (368) (
Slide 55: Summary Balance Sheet
SUMMARY BALANCE SHEET Dec 31 ’15 Sept 30 ’15 Dec 31 ‘14 As on (` in million) ( Unaudited) ( Unaudited) (Unaudited) Equity and Liabilities Shareholders’ Funds 35,025 33,915 31,698 Minority Interest 3,553 3,654 3,711 Borrowings 271,404 256,883 196,692 Total 309,982 294,452 232,101 Assets Credit Book A
Slide 56: Safe Harbor
SAFE HARBOR DISCLAIMERS: This presentation and the discussion may contain certain words or phrases that are forward - looking statements, based on current expectations of the management of Edelweiss Financial Services Ltd. or any of its subsidiaries and associate companies (“Edelweiss”). Actual resu
Edelweiss Financial Services — Q3 FY2016 Earnings Presentation on 6ix