Edelweiss Financial Services Limited · NSE:EDELWEISS
Edelweiss Financial Services — Q2 FY16 Earnings Presentation
61 slides from Edelweiss Financial Services's earnings presentation, October 2015
Slide 1: Q2 FY16 Earnings Update
E D E LWE ISS FINA NC IA L S E RV IC E S LIMITE D Q2 F Y 1 6 E ARN IN GS UP D AT E
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: Q2FY16 Key Performance Highlights
Q2FY16 KEY PERFORMANCE HIGHLIGHTS 1 21% YoY growth in consolidated profits • 33% growth in Ex Insurance PAT • 16th quarter of consistent growth in profits 2 Improved capital efficiency Key Highlights • Consolidated RoE 12.1% • Ex Insurance RoE 17.4% 3 Calibrated Growth in Balance Sheet • Diversified
Slide 5: A Quarter of Sustained Growth
A Q U A RT 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 Q2FY16 957 Q2FY16 1,201 Q2FY16 17.4% 21% 33% 230 YoY YoY bps Q2FY15 792 Q2FY15 903 Q2FY15 15.1% Balance Sheet Credit Book Spread RoA Ex-Insurance Q2FY16 292,894 Q2FY16 5.2% Q2FY16 1.7% 60% 50 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 1201 1200 1114 1034 981 1000 895 903 957 912 800 721 884 702 692 679 829 624 792 782 600 568 484 510 460 607 578 557 348 511 400 461 272 460 416 398 388 294 200 263 0 Q2'FY12 Q4'FY12 Q2'FY13
Slide 7: Ex-Insurance RoE Improved to 17.4%
EX-INSURANCE ROE IMPROVED TO 17.4% Consolidated RoE % Tangible RoE % Ex-Insurance 12.1% 17.4% 11.3% 15.6% 12.3% 8.2% 11.3% 7.6% FY13 FY14 FY15 Q2FY16 FY13 FY14 FY15 Q2FY16 7
Slide 8: RoA Attribution (Ex-Insurance)
R O A ATT R I B U T I O N ( E X - I N S U R A N C E ) H1FY16 FY15 FY14 NII 5.0% 5.6% 5.3% Interest & Treasury 13.9% 14.3% 13.4% Interest Cost -8.9% -8.7% -8.1% Non-interest income 2.5% 3.0% 2.6% Fee & commission 2.2% 2.7% 2.4% Other income 0.2% 0.2% 0.2% Expenses -5.1% -5.7% -5.1% Employee cost -2.6
Slide 9: Credit Business Major Growth Vector
CREDIT BUSINESS MAJOR GROWTH VECTOR Ex-Insurance ` in million Revenue Profit after Tax H1FY16 H1FY16 5% 16% 120 3,610 3,320 12,660 55% 33% 750 1,440 62% 29% 6,570 3,493 Credit Business Agency Businesses BMU & Corporate 9
Slide 10: Financial Highlights: Balance Sheet & ALM
FINANCIAL HIGHLIGHTS BALANCE SHEET & ALM
Slide 11: Diversified Asset Mix
DIVERSIFIED ASSET MIX AS ON SEPT 30, 2015 Insurance On Balance Fixed, tax assets 2% Sheet Liquidity and others LAS and Others cushion 5% 10% 5% SME & Agri Mortgages Financing 39% 8% Distressed Gsecs Assets Credit 17% 8% 173 bn 293 bn Credit 59% Agency 12% Structured Collateralized Credit 35% Balance
Slide 12: $11.6 Billion of Assets
$11.6 BILLION OF ASSETS As on 30 Sep 2015 ` bn USD bn Assets on Balance Sheet 293 4.5 Assets Under Management 267 4.1 Assets Under Advice 195 3.0 Total Assets 755 11.6 12
Slide 13: Diversified Sources of Borrowings
DIVERSIFIED SOURCES OF BORROWINGS FY11 Q2 FY16 OTHERS 5% 4% RETAIL 5% 14% ASB 14% 19% BANK 26% 24% DEBT MARKET 50% 39% Total Borrowings ` 78.58 bn ` 256.88 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 Sep’15 ` 292.89 bn1 % of Assets and Liabilities 100% 83% 100% 57% 77% 46% 38% 55% 44% 38% 16% 16% 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 Liabilities (` in billion) Long Term Liabilities Breakup 128.26 Term Loan 104.75 33% NCD 65.16 45% Sub-debt 7% H1 FY 15 H2 FY 15 H1 FY 16 Structured Product LT as % of 15% Total 48% 49% 55% Average Borrowing 3.9 Tenure (years) 15
Slide 16: Comfortable Capital Adequacy Ratio
C O M F O RTA B L E C A P I TA L A D E Q U A C Y R AT I O Liability Structure, Sep’15 (` in billion) Tier I 36.58 Tier II 9.45 Consolidated Capital Adequacy2 18.3% Total Capital 46.03 Risk Weighted 252.08 Assets 16
Slide 17: Liquidity Cushion
L I Q U I D I T Y C U S H I O N AT ` 2 9 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 29 17 4 FY14 FY15 H1 FY 16 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 5,937 employees across 248 offices over 630,000 across businesses in 128 cities including eight international offices 2 Over 293,000 Depository 4 Touch points include over 4,700 Authorised Participant Accounts
Slide 20: Edelweiss Operating Structure
E D E LW E I S S O P E R AT I N G S T R U C T U R E CREDIT Present across the spectrum of Wholesale and Retail credit : • Loans against securities & others • SME & Agri-Financing • Structured Collateralized Credit • Mortgages • Distressed Assets Credit AGENCY Strong product franchise serving diverse
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 ) Q2FY16 Q1FY16 Q2FY15 Total Credit Book 173.21 164.31 105.95 Mortgages 67.48 65.32 41.73 Structured Collateralized Credit 60.35 63.45 42.25 Distressed Assets Credit 14.42 12.64 8.06 SME & Agri Finance 13.28 10.83 5.47 Loans against Securities, Rural Finance & othe
Slide 23: Credit Book Growth and Exposures
CREDIT BOOK GROWTH AND EXPOSURES Credit Book Growth & Composition as on Sept 30, 2015 Top Ten Sector Exposures as on Sept 30, 2015 180 160 140 4% Real Estate & Const Co. 5% Mortgages/LAP 120 5% 25% Distressed Asset Credit 100 5% BSFI & Cap Mkt related ` in bn 80 Consumer 6% SME Finance 60 Infrastruc
Slide 24: Retail Finance Spreading Footprint
CREDIT At the end of Q2FY16 Q1FY16 Q2FY15 Average Interest Yield 16.0% 16.1% 15.8% Average Cost of Borrowing 10.8% 10.8% 11.1% Interest Spread 5.2% 5.3% 4.7% Net Interest Margin 6.6% 6.7% 6.2% Average collateral cover on Structured 2.1x 2.2x 2.4x Collateralised book 44 cities & 41 cities & 26 cities
Slide 25: Credit: Good Asset Quality
CREDIT : GOOD ASSET QUALITY At the end of (` in million) Q2FY16 Q1FY16 Q2FY15 Gross NPLs Net NPLs 1.4% Total Credit Book 173,215 164,310 105,955 1.3% Gross NPLs 2,504 2,169 1,213 0.9% Gross NPL % 1.45% 1.32% 1.14% Net NPLs % 0.44% 0.39% 0.18% 0.4% 0.4% 0.4% 0.2% Total Provision Held3 2,333 2,101 1,2
Slide 26: Business Highlights: Agency Businesses
BUSINESS HIGHLIGHTS AGENCY BUSINESSES
Slide 27: Agency Businesses Scaling Up Rapidly
A G E N C Y 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 AUA 267 251 195 212 170 127 Q2'15 Q1'16 Q2'16 Q2FY15 Q1FY16 Q2FY16 ARC Assets Credit Alternatives Equity 27
Slide 28: Agency Businesses Update
A G E N C Y B U S I N E S S E S U P D AT E At the end of H1FY16 H1FY15 Number of IB & DCM Deals 58 48 Research Coverage Institutional 210 207 Retail 36 47 Broking ADV (` in billion ) 50 46 Retail Financial Markets clients 464,000 437,500 Depository Participant accounts 293,000 273,000 Agri Services
Slide 29: Business Highlights: BMU & Corporate
BUSINESS HIGHLIGHTS BMU & CORPORATE
Slide 30: Balance Sheet Management Unit Highlights
BALANCE SHEET MANAGEMENT UNIT HIGHLIGHTS Key Objectives BMU & Corporate Assets, September’15 ` in billion Liquidity management; Others Fixed & 4 Liquidity cushion raised Tax Assets to ` 29 bn 10 Asset Liability Management Manage Treasury assets On BS Liquidity Corporate Fixed Assets cushion 14 and I
Slide 31: Business Highlights: Life Insurance Business
BUSINESS HIGHLIGHTS LIFE INSURANCE BUSINESS
Slide 32: 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 rated 5 Star as
Slide 33: Enterprise Updates
ENTERPRISE UPDATES
Slide 34: Edelweiss Appoints Saina Nehwal as Brand Ambassador
E DE LW E I SS A P P O I NTS SA I NA NE H WA L AS B R A ND A M B ASSA DO R 34
Slide 35: Edelweiss Among Most Valuable Brands
E DE LW E I SS A M O NG M O S T VA L UA B L E B R A ND S 2 0 1 5 35
Slide 36: Awards and Accolades
AWARDS AND ACCOLADES & Edelweiss eas cena, values protect Congratulations! Edelweiss Broking for winning ‘Best Equity Broking House’ witsie) by BSE - Dun & Bradstreet Equity Broking Awards 2015 Nitin Jain -CEO, Global Asset & Wealth Management, Harish Sharma - Business Head, HNI Broking receive the
Slide 37: Key HR Metrics
KEY HR METRICS At the end of/During Q2FY16 Q1FY16 Q2FY15 End of Period Head Count 5,937 5,760 4,739 Senior Attrition 9% 9% 20% Learning & Training man days 5,528 6,804 5,177 Development Employees covered 2,172 2,271 1,875 BUILDING LEADERSHIP CAPABILITY THROUGH A FOUR-TIER LEADERSHIP STRUCTURE FOR FU
Slide 38: 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 2,60,000 lives Financially supported over 65 organizations till date Committed nearly ` 340 mn Over 12,000 hours of pro-bono support
Slide 39: Shareholding Pattern
S H A R E H O L D I N G PATT E R N NON INSTITUTIONS (INCL. CORPORATES TOP INSTITUTIONAL SHAREHOLDERS ABOVE 1%5 AND INDIVIDUALS) AS ON SEPT 30, 2015 Name Percent 19% 1 Carlyle 8.4% PROMOTERS, EMPLOYEES 2 BIH SA 5.4% 52% & EMPLOYEE 29% TRUSTS 3 Fidelity 5.4% 4 SAIF Advisors 3.2% 5 Amansa Investments 1
Slide 40: Macro-Environment
MACRO-ENVIRONMENT
Slide 41: Key Events in Q2 FY16
KEY EVENTS IN Q2 FY16 1 China slowdown impacted global markets 2 Uncertainty around US Fed actions 3 Some traction from government on policies 4 Surprise 50 bps rate cut by RBI 41
Slide 42: Repo Rate
Repo Rate “RBI surprised 8.5 market with 50bps rate cut” 8.0 7.5 7.0 6.5 6.0 Sep'14 Nov'14 Jan'15 Mar'15 May'15 Jul'15 Sep'15 Could this be the trigger for Positive Investment Climate? 42
Slide 43: Development Speed Breakers and Enablers
Development Speed Breakers Development Enablers 1. Weak global markets 1. Roads cleared for FIIs 2. Weak exports 2. Low inflation & crude prices 3. Risk of China dumping goods 3. Improving credit quality 4. Investment climate has not yet 4. Rate cut transmission improved 5. Government commitment to
Slide 44: Global Turmoil, Creating Market Shocks
1 G L O B A L T U R M O I L , C R E AT I N G M A R K E T S H O C K S World Indices 3 month returns -5% -6% • Chinese markets crash -7% -9% • US Fed interest rate hike -14% -15% put on hold -21% • Emerging markets sell off – Indian markets also got impacted -29% Korea India UK Europe Japan Brazil Hon
Slide 45: Domestic Demand Is Needed to Drive Growth
2 INDIAN EXPORTS ARE WEAK… Indian exports continue to fall 20 Export Growth (% YoY): 3 Month Moving Average 15 10 5 0 -5 -10 -15 -20 -21 -25 Aug'13 Nov'13 Feb'14 May'14 Aug'14 Nov'14 Feb'15 May'15 Aug'15 Domestic demand is needed to drive growth Source: Bloomberg 45
Slide 46: Domestic Market Needs Some Protection
3 …HOWEVER, DOMESTIC MARKET NEED SOME PROTECTION 46
Slide 47: Investment Environment Remains Subdued
4 INVESTMENT ENVIRONMENT REMAINS SUBDUED SCBs Bank credit growth (% YoY) Subdued 14.5 Credit 8.2 ` off- take growth Dec'13 Apr'14 Aug'14 Dec'14 Apr'15 Aug'15 PMI 51.2 PMI` 49.6 remaining flat Sep'13 Dec'13 Mar'14 Jun'14 Sep'14 Dec'14 Mar'15 Jun'15 Sep'15 Source: RBI, Bloomberg 47
Slide 48: Roads Cleared for Foreign Investments
1 ROADS CLEARED FOR FOREIGN INVESTMENTS FII flows in Equity have been reducing… …Prompting Government action to USD bn improve flows 14 13 12 12 • MAT removal for 11 Foreign Portfolio Investors 5 • FDI approvals on fast track (FIPB 1 meeting frequency increased) -3 • Increased FDI Commitments from -
Slide 49: Low Inflation and Commodity Prices
2 L O W I N F L AT I O N A N D C O M M O D I T Y P R I C E S 8.33 Positive Drivers 4.41 5.55 Lower global commodity prices Negative Drivers Monsoon deficit -4.95 May'14 Aug'14 Nov'14 Feb'15 May'15 Sep'15 CPI % WPI % Source: MOSPI, Bloomberg 49
Slide 50: Low Crude Prices a Big Positive for India
2 LOW CRUDE PRICES A BIG POSITIVE FOR INDIA Crude prices are at ~$50 level for a month Brent crude Low crude prices has been a major $/barrel positive for India 120 • Inflation control 100 111 • Reduced current account deficit 80 • Fiscal deficit has dropped 60 48.7 • Currency stability has improved
Slide 51: Improving Lead Indicators of Credit Quality
3 I M P R O V I N G L E A D I N D I C ATO R S O F C R E D I T Q U A L I T Y Improving credit ratio Restructured asset buildup on decline Ratio of upgrades/downgrades by CRISIL Restructured assets approved INR 000’cr 2.1 103 1.8 1.8 79 63 0.9 39 0.8 16 16 H1 FY14 H2 FY14 H1 FY15 H2 FY15 H1 FY16 FY10
Slide 52: Rate Cut Transmission Beginning to Take Place
4 R AT E C U T T R A N S M I S S I O N B E G I N N I N G TO TA K E P L A C E (In bps) Pre Sept Post Sept Total 75 50 125 30 40 70 40 25 65 30 35 65 25 40 65 25 25 50 Source: Press Search 52
Slide 53: Government Commitment to Spending
5 GOVERNMENT COMMITMENT TO SPENDING 8.5 Lac Cr over 5 years 1 Lac Cr over 5 years for infrastructure for developing 100 up-gradation smart cites 0.7 Lac Cr announced for ports development Railways Smart City Ports Source: Press Search 53
Slide 54: Improving Debt Market Volumes
6 IMPROVING DEBT MARKET VOLUMES Outstanding Debt INR Lac Cr 28% 29% 29% 32% 34% CAGR 39 40 41 Bonds 22% 30 34 19 21 Banks 10% 14 16 11 FY12 FY13 FY14 FY15 Q1'16 Bank credit Corporate Bonds + Commercial Paper Share of (CP+CB) in total outstanding credit 54 Source: RBI, SEBI
Slide 55: Key Things to Watch Out For
K E Y T H I N G S TO W ATC H O U T F O R Corporate earnings growth Increase in investments by corporates Domestic consumer demand Rate hike by US Federal Reserve Growth in Chinese economy 55
Slide 56: Detailed Financials
DETAILED FINANCIALS
Slide 57: Consolidated Results
C O N S O L I D AT E D R E S U LT S ` in million FY16 FY16 FY15 FY16 FY15 FY15 Q2 Q1 Q2 H1 H1 Annual Fee and Commission Income 1,480 1,628 1,275 3,109 2,333 5,727 Fund based Income 10,260 9,561 7,376 19,821 14,188 31,001 Premium from Life Insurance Business 576 302 409 877 622 1,866 Other Operating
Slide 58: Consolidated Results Ex-Insurance
C O N S O L I D AT 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 Q2 Q1 Q2 H1 H1 Annual Fee and Commission Income 1,480 1,628 1,275 3,109 2,333 5,727 Fund based Income 10,081 9,312 7,108 19,393 13,713 30,064 Other Operating Income 164 141 41 305 89 385 Other Inco
Slide 59: Life Insurance
LIFE INSURANCE Edelweiss Tokio Life Insurance Company Limited Standalone (ETLI) ` in million Q2FY16 Q1FY16 Q2FY15 FY15 Gross Premium Income 599 324 424 1,931 Investment Income & Other Income 185 258 277 972 Total Income 784 582 701 2,903 Total Expenses 1,113 855 851 3,613 Profit Before Tax (329) (27
Slide 60: Summary Balance Sheet
SUMMARY BALANCE SHEET Sept 30 ’15 Mar 31 ’15 Sept 30 ‘14 As on (` in million) ( Unaudited) (Audited) (Unaudited) Equity and Liabilities Shareholders’ Funds 33,915 31,606 30,504 Minority Interest 3,654 3,709 3,708 Borrowings 256,883 235,404 150,168 Total 294,452 270,719 184,380 Assets Credit Book Ass
Slide 61: 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
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