CORPORATE PRESENTATION - Personal, NRI & Premium Banking Presentation.pdf · Formation of...
Transcript of CORPORATE PRESENTATION - Personal, NRI & Premium Banking Presentation.pdf · Formation of...
CORPORATE PRESENTATION JULY 2017
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Disclaimer
NOT FOR PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES This presentation has been prepared by The Lakshmi Vilas Bank Limited (the “Bank”) solely for information purposes without regard to any specific objectives, financial situations or informational needs of any particular person. 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Table of Contents
Evolution into a new age financial platform 1
Strategy to drive growth 2
Stabilization of asset quality 3
Appendix 4
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1. EVOLUTION INTO A NEW AGE FINANCIAL PLATFORM
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Demand 6%
Savings 13%
Term 81%
Retail 9%
SME/MSME 17%
Rural 17% Mid-
Commercial 6%
Wholesale 51%
Evolution into a new age financial platform
Customers Branches2 ATMs States Employees1
2.96 Mn 481 958 16 4,0431
Branches
Product diversification New age financial
platform
Launched multiple new savings bank products
Launched digital initiatives - SMS alert, mobile banking services
Launched LVB Crown suite of products in 2015
Mr. P. Mukherjee joins as CEO
New retail liabilities strategy
Revamp of risk management framework
Reduced dependence on Tamil Nadu*
63 103 130 198 240 91
141 186
254
306
154
244
316
452
545
2010 2012 2014 2016 2017
Deposits (INR Bn)Gross Advances (INR Bn)
50% 49%
271 290 361 460 481
42%
Key Milestones
Large diversified platform with significant potential to be leveraged
265
8 4
2
12
19 31
48
12
4
2
2
4
4
3
5
56
Branch Count
As of March 2017
1) Figure excludes sales executives 2) Includes one satellite branch *Dependency is as % of Total Business (Deposits+ Gross Advances)
Deposits Mix Advances Mix
Legacy spanning 9 decades with good track record
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Senior management team
Past: Axis Bank
Qualification: Bachelors in Science
P. Mukherjee Managing Director and CEO
Past: IDBI Bank
Qualification: B.Sc., CA, Diploma in Financial Services, CAIIB
N.S. Venkatesh Executive Director & CFO
Meenakshi Sundaram R.M President, Wholesale Banking
Akkidas Jacob Vidya Sagar President, Retail Banking
R.V.S. Sridhar President and Chief Risk Officer
Team strengthened with experienced lateral hires to support the strategic growth plans of the bank
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Execution delivering results
1) Business defined as summation of Net Advances and Deposits
220 254
306
164 196
237
FY15 FY16 FY17
Deposits (INR Bn) Net Advances (INR Bn)
Healthy Growth in Business1 Stable NIMs and strong growth in NII
5,267 6,453
7,827
2.73% 2.78% 2.85%
FY15 FY16 FY17NII (INR Mn) NIM
Improvement in operating expense ratio & growth in profitability
3,577 4,071
6,341
1,323 1,802 2,561
54.6%
57.1%
50.7%
FY15 FY16 FY17
Operating profit (INR Mn) Net Profit (INR Mn) Cost to Income Ratio
Increase in return ratios
10.78% 11.74%
14.39%
0.61%
0.70%
0.83%
FY15 FY16 FY17
ROE ROA
CAGR FY15-17 18% 20% CAGR FY15-17 22%
Source: Annual reports
CAGR FY15-17 33% 39%
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Key strategic initiatives
1) Branch Productivity = (Gross Advances+ Deposits)/ # of Branches; # of branches includes satellite branches
Key Strategic Initiatives in FY17
Revamp of Risk Management Framework
Induction of new CRO
Formation of new Recovery vertical
Centralisation of Loan Processing
SME/ MSME loan processing at MSME Recap centres and Corporate Loans at Central office
Implementation of Loan Automation Project (LAMP)
Reduce the TAT and improve quality of processing
Creation of Corporate Relationship Management Group
360 Degree coverage of the Corporate Customers
Formation of Commercial Banking Operations (CBO) Department underway
Improve the documentation and monitoring standard of Corporate and MSME accounts
Source: Annual reports
Improvement in Branch productivity 1
400 460 481
962 984
1,133
FY15 FY16 FY17
# of Branches Branch Productivity (INR Mn)
37 44
58
16.67% 17.36% 19.11%
FY15 FY16 FY17CASA (INR Bn) % CASA
Increase in CASA
CAGR FY15-17 26%
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Stable GDP growth outlook Services driving growth; Industries growth moderated
Decreasing interest rates Re-monetisation – Cash is coming back Credit growth has been muted in FY17
Inflation expected to remain moderate
India growth fundamentals remain robust amidst recent policy changes
-0.2%
5.9%
10.3%
1.2%
7.4% 8.9%
4.1% 5.2%
8.8%
Agriculture Industries Services
(YoY GVA growth%)
2015 2016 2017
India projected to continue its growth trajectory GST likely to impact GDP growth positively
Source: IMF, Real GDP Growth
8.5
10.3
6.6 5.5
6.5 7.2
7.9 6.8 7.2 7.7 7.8 7.9 8.1 8.2
FY1
0
FY1
1
FY1
2
FY1
3
FY1
4
FY1
5
FY1
6
FY1
7
FY1
8
FY1
9
FY2
0
FY2
1
FY2
2
FY2
3
Source: Economic Survey of India FY2016-17, GVA growth by sector Source: IMF, Consumer Prices
10.6 9.5 9.5 9.9 9.4
5.9 4.9 4.9 4.8 5.1 5.0 4.9 4.9 5.0
FY1
0
FY1
1
FY1
2
FY1
3
FY1
4
FY1
5
FY1
6
FY1
7
FY1
8
FY1
9
FY2
0
FY2
1
FY2
2
FY2
3
(YoY %) Consumer Price Inflation
14.1% 13.9%
9.0% 10.9%
4.6%
14.2% 14.1%
10.7% 9.3% 11.3%
FY13 FY14 FY15 FY16 FY17
Credit Growth (YoY) Deposit Growth (YoY)
774 870 994
1,460 1,356 951 1,104 1,047
16.6 17.0
9.1 7.8
9.1 10.6
12.6 13.5
Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17
Digital Transactions* (Mn) Currency with public (INR Tn)
Demonetization
7.50%
8.00%
6.75% 6.75%
6.25%
FY13 FY14 FY15 FY16 FY17
Agri growth positively impacted due to good monsoon Industries growth : Execution of policy initiatives is key to
catalyse growth
Aggressive inflation focus by RBI Outlook for inflation within RBI target of 4% (+/-2%)
Policy Repo Rate (End of year)
Declining interest rates coupled with recent strengthening of rupee against USD from 68.02 in January 2017 to 64.73 in July 20171
Demonetisation and delay in capex led growth Asset quality pressure continues – Revamp of lending policies
and risk management a key focus for banking sector
Cash inflow into economy to spur growth Growth in digital transactions – Banking services to adapt to
changing customer behaviour
Source: RBI Source: RBI Source: RBI
(YoY %)
1) USD/INR exchange rate at 68.02 as on 02/01/2017 & 64.73 as on 07/07/2017 *Digital transactions comprises of RTGS, CTS, NEFT, IMPS, NACH, Credit Card (POS), Debit Card (POS), PPI & Mobile Banking Transactions
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2. STRATEGY TO DRIVE GROWTH
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Key strategies to drive growth
LOAN BOOK:
RETAIL & MSME
FOCUS
LIABILITY:
INCREASING
CASA
FEE INCOME
TECHNOLOGY
Given recent branch expansion, there is potential for increase in CASA as new vintage branches turn profitable
Redefining branches as sales outlets with defined CASA targets with a specific focus on HNI & NRI customers
Product innovation and extension of existing products (eg: expansion of “Crown” franchise to include NRE, NRO accounts)
Attractive interest rates for savings account & flexi current account facilities to drive CASA growth in the future
Aggressive advertising on both digital & offline platforms along with the launch of plethora of new initiatives (Eg: FISDOM, FINFIT,
LVB UDAAY, Rupay Card etc.)
Launch of the Transaction Banking vertical to significantly boost fee income – Focus on trade finance, bill discounting, guarantees,
LCs, cash management, government banking etc.
Tie-up with third parties for related services such as insurance, mutual funds, credit cards, money transfer, forex travel cards etc. to
provide fillip to fee based income
Formation of a separate retail lending group to be led by the newly hired Head of Consumer Lending
Focus on profitable gold loans, business credit and home loans
Project TRANSME: Working with a top tier global management consulting firm on the transformation of the MSME business model
Relationship management team to function as a one-stop shop for the fulfillment of all financial needs of loyal customers
Focus on high-rated clients
Conscious de-focusing on the wholesale business segment
ASSET QUALITY:
REVAMPED RISK
MANAGEMENT
FRAMEWORK
Overhaul of risk management framework to enhance credit risk management systems & processes in line with growth of business
Introduction of separate Recovery Vertical & empanelment of recovery agencies to reduce TAT of recovery
Key modifications in the lending policy to demarcate operations between business setups & improve asset quality in the future
Conduct of high value credit portfolio under constant monitoring guided by technology
Initiatives across the transaction lifecycle - CRM tool, automated loan origination
Multifunction mobile app with intuitive functioning for a state-of-the-art customer interface
Implementation of large-scale technological reforms - upgrade core banking suite, develop business intelligence unit, enhance
digital banking & omni-channel presence, multi function e-lounge, Oracle Financial product suite
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Portfolio diversification with focus on retail & MSME segment
Customer Characteristics
Gross Advances (INR Bn)
Retail MSME/Rural/Mid Commercial Wholesale
Individuals, HUF, and trusts; with special focus on NRIs
and HNIs
Trading, business and small manufacturing entities as designated by RBI, sole proprietorship & partnership
firms
All business entities
Separate retail lending group and product expansion with a focus on
innovation
Conversion of existing Recap centres to specialized MSME centres for faster loan processing and reduced Turn
Around Time
Emphasis on being a multiple banking partner and channeling high-rated**
relationships towards cross-selling opportunities
Strategic Initiatives
19.8
26.4 22.0
FY15 FY16 FY17
34.4 41.7 41.7
24.1 30.7
40.7 13.0
14.2 13.4
71.5
86.5 95.9
FY15 FY16 FY17
SME/MSME Rural Mid-Commercial
73.9 85.3
121.8
FY15 FY16 FY17
*
*FY17 retail advances is not comparable with historical fiscal years given re-classification of certain loans out of retail and into MSME in FY17
**Rating of customers is done internally
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Focused customer segmentation asset strategy
Retail
MSME/
Rural/
Agri
Wholesale
Relationship Management Group
Formation of a specialised core relationship management team to become a one-stop shop
Branch-wise strategies drawn up and performance of sales executives monitored
Development of Retail Asset Centre
Ensure specialised underwriting norms to improve customer turnaround times and quality of assets
Product expansion with a focus on innovation
Product reengineering by launching bundled products
Focus on value added services
Focus on moving up the value chain by offering competitive and neighbourhood-oriented products
Relationship Management Group
Corporate Relationship Management Group aiming for a 360 Degree coverage of Corporate Customers
Focus on high-rated Clients* leading to reduction in credit costs
Development of sales channels for proactive origination of quality loan proposals through DST and DSA strategy
Competitiveness | Matching price to market
Rationalizing pricing across the product portfolio and improving lending to Micro Enterprises
Customer Deliverance
Loan processing automation under implementation to provide technology in the delivery of products
Specialized MSME centres
Conversion of existing Recap centres to specialized MSME centres for faster loan processing and reduced Turn Around Time
Focus on loan syndication and becoming a co-lender to reputable corporates and minimizing restructured portfolio
Multiple banking partner channeling high-rated* relationships towards cross-selling opportunities
Corporate Relationship Management Group aiming for a 360 Degree coverage of corporate customers
Well diversified retail advances book with a strong focus on profitable gold loans and home loans
Transformation of MSME business model underway with top tier management consulting firm
Conscious de-focusing on wholesale business segment
*Rating of customers is done internally
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Centralization of the wholesale credit process to the Corporate Office
Development of Retail Asset Centre to ensure specialised underwriting norms to improve customer TAT and quality of assets
Development of sales channels for proactive origination of quality loan proposals through DST* and DSA* strategy
21.6%
Diversified loan book
Key industries exposure (based on fund-based exposure in FY17)
Exposure to borrowers (based on fund-based exposure in FY17)
16.4%
Top 10 borrowers
Top 20 borrowers
Top 50 borrowers
32.1%
7.55%
4.83% 4.72%
1.70% 1.10% 0.99% 0.98% 0.93% 0.90% 0.74% 0.56% 0.38% 0.34% 0.25% 0.11%
1.42%
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Key initiatives
*DST: Direct Sales Team; DSA: Direct Service Associates
Note: The remaining share in fund based exposure is residual advances which comprises of educational loans, housing loans, gold loans, loan against deposits, personal loan, staff loan, consumer loan, vehicle loan etc.
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Strategic initiatives to drive CASA growth
Offline Marketing Digital Marketing
Promotion in print, outdoor media, FM radio, television, and mobile van campaigns
Official Facebook page created to have a presence on the social networking platform
Staff Motivation
Online tests implemented to improve staff’s product knowledge and the implementation of incentives including ESOP for all staff
ADVERTISING AND PROMOTION
Flexi Current Account Debit Card for Entities Flexible current account with add-on services like cash pick-up, cash management, and door step banking etc.
One of the first banks to offer debit cards for partnerships and private entities
Robust Sales Force Doubling of the sales force on the streets; along with providing additional training for the sales force to offer trade and foreign exchange services. CURRENT ACCOUNTS
Competitive Interest Rates Launched Crown | NRI Banking Product
CASA strategy of relatively higher interest rate of 5%-6%
Capitalized on the broad base network to acquire HNI accounts and build a client base for cross-selling opportunities
Mobile Banking
Launched in 2016; capitalized on cross-selling opportunities to existing and new customers
SAVING ACCOUNTS
FISDOM
App to provide investment solutions via the better understanding of clients objectives & priorities.
FINFIT
App based online wealth management platform to provide simple, jargon-free approach to managing money
Multi Function E-Lounge
Automated branch to provide advanced banking facilities- cheque deposit, passbook printing etc
Rupay Platinum Card
Introduced Rupay Platinum Card which can be used in e-commerce, point of sale & ATM
LVB UPAAY Dynamic Current Account
Balances in the linked SB account can be swept into the CA & balances in the CA above the threshold limit will be moved to the linked SB
UPI application of LVB NEW INITIATIVES
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Significant potential for increasing CASA and NIM growth
37 44 58
16.67% 17.36%
19.11%
FY15 FY16 FY17
CASA (INR Bn) CASA Ratio
Robust growth in CASA with strategic efforts
400 460 481
92 96
121
FY15 FY16 FY17
# Branch CASA/ Branch (INR Mn)
Aggressive branch expansion with 25% of the branches as on March 2017 within 3 years of vintage
Improvement in branch productivity to drive future growth in CASA
Renewed focus on TASC Accounts- Trusts, Association & Societies, Schools, & Charitable Institutions
Significant NIM expansion expected from CASA initiatives; potential head room to give away some of the gains in NIM to add high-rated clients and reduce credit costs
360 Degree coverage of corporate customers to get Low Cost Deposits – Corporate Salary Account, operating Current Account, supporting fee based income growth out of FB and NFB business and Cash management services.
17
Focus on fee income products
*NPS: National Pension Scheme
3rd PARTY PRODUCTS TRANSACTION BANKING GROUP
New transaction banking vertical created
Boost non-interest income via booking of non-fund / off balance sheet business
Potential to significantly increase fee income via multiple product offerings
Key product offerings
Trade finance
Bill discounting
Guarantees
Letter of Credit
Cash management
Government banking
Traction with multiple recent business wins
Product Product Partners
Insurance
Life Insurance: Birla Sun Life, Max Life, DHFL Pramerica
General Insurance: Future Generali
Health insurance: Cigna TTK
Mutual funds and PMS
Sundaram Asset Management, UTI, Reliance Asset Management, 10 other affiliations
Credit cards SBI Cards and Payment Services Private Limited
National pension scheme
Money transfer Weizmann Forex
Life Insurance
78%
General Insurance
18%
Mutual Fund 2%
Forex 1%
NPS 0.1%
FY16 INR 62mn
Life Insurance
76%
General Insurance
15%
Mutual Fund 1%
Health Insurance
8%
NPS 0.1%
CAGR FY16-17: 60%
FY17 INR 99mn
*
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Technology enabling automation and enhanced customer experience
DIGITAL BANKING AND
OMNICHANNEL PRESENCE
Strong presence across banking
mediums for a seamless customer
interface
BUSINESS INTELLIGENCE UNIT
Customer segmentation based on analytics
providing bespoke financial products and
services based on differentiated
requirements
AUTOMATED LOAN ORIGINATION
Uniform processing and standardised
enforcement of credit terms and reporting
improving productivity
MOBILE BANKING
Multifunction mobile app with intuitive
functions for a
state-of-the-art customer interface
SALES AUTOMATION
CRM Tool for salesforce automation and
leads management
UPGRADING CORE BANKING SUITE
Upgrade of the hardware and network setup to the
latest scalable technologies underway to enhance
core banking and internet banking platform for
long term sustainability
REVAMPED TECHNOLOGY
ARCHITECTURE
E LOUNGE
Automated branch for advanced banking
facilities such as cheque deposit with
T+1 clearing and passbook printing
Funds transfer pricing
Profitability Management System
Analytical Applications Infrastructure
Business Intelligence
ORACLE FINANCIAL PRODUCT SUITE
19
Revamped risk management framework
8
BRANCH SETUP
Exclusion of lending decision from branches
Branches will have authority to sanction only LADs, JDLs, and LAS, and government sponsored schemes
Centralization of the wholesale credit process to the Corporate Office
NEW RECOVERY VERTICAL
Separate Recovery vertical at Regional level and monitored at corporate level
Recovery agencies empanelled to assist the bank in reducing the TAT of recovery
Strong retail collections to ensure better repayment controls and diligence on customers to repay on time
NEW COMMERCIAL BANKING OPERATIONS DEPARTMENT
Separate specialised branches in 7 cities (covering all regions) to handle the entire Post Sanction Credit Operations pertaining to Corporate and MSME Segment
Relieve branches from credit & related operations and enhance focus on business
Commercial Branches to be monitored at Corporate Office
OVERHAUL OF RISK MANGEMENT SYSTEM
Appointment of CRO & strengthening of operations risk department
Developed risk management systems and new risk rating models
Comprehensive policies and procedures to identify, measure, monitor and control risk throughout organization
LAD: Loan against Deposits, JDL: Jewel Deposit loan, LAS: Loan against shares/securities
20
3. STABILISATION OF ASSET QUALITY
21
Stabilization in asset quality as a result of revamped risk management framework
2.75%
1.97%
2.67%
1.85%
1.18%
1.76%
FY15 FY16 FY17
GNPA NNPA
4.55 3.91 6.40
13.15 9.91
7.74
17.69
13.82 14.14
10.82%
7.04% 5.96%
FY15 FY16 FY17
Restructured Gross NPA Total stressed assets as % of net advances
60.84%
68.55%
59.51%
FY15 FY16 FY17
GNPA & NNPA Total stressed assets1 (INR Bn)
Provision coverage ratio2
1) Total stressed assets= Gross NPA+ Total restructured assets (including doubtful assets) 2) Provision Coverage Ratio = Provision/ Gross NPA
22
Conscious de-risking of portfolio 4
,546
3,9
13 6
,402
1,969
212
693
1,698
5,972
265
915
2,303
Gro
ss
NP
A F
Y1
5
Ad
ditio
ns
Upg
rad
atio
ns
Write
-off
s
Reco
very
/A
RC
Sa
le
Gro
ss
NP
A F
Y1
6
Ad
ditio
ns
Upg
rad
atio
ns
Write
-off
s
Reco
very
/A
RC
Sa
le
Gro
ss
NP
A F
Y1
7
INR Mn
Increase in slippages and GNPA due to clean-up of balance sheet in FY17 post Asset Quality Review by RBI
Sale of some NPAs to ARCs and upgradation of some stressed accounts via efficient recovery follow-up enabled stabilisation in asset quality
Credit monitoring and the follow up methodology has been further improved and enabled by technology
23
Diversification of portfolio risk
Top 5 Borrowers 55.3%
6-10 25.1%
11-15 15.1%
16-20 4.0%
Others 0.4%
Food Processing 20.6%
Other Non-food Credit 15.6%
Wholesale Trade 8.6%
Retail Trade 8.1%
Vehicles, Vehicle Parts & Transport Equipments
7.9%
Mining and Quarrying 6.2%
Other Retail Loans 5.3%
Textiles 5.0%
Chemicals & Chemical Products
4.6%
Other Industries 8.0%
Gems and Jwellery 3.2%
Agriculture & Allied Activities
3.2%
Other (Non-Industry) 3.6%
Restructured standard assets: Borrower concentration
GNPA: Industry concentration
Infrastructure 31.9%
Iron 27.9%
Power 8.1%
Metals & Minerals
6.6%
Shipyard 3.7%
Aluminium 4%
Food Processing 4.2%
Pharma 2.9%
Others 11.1%
Restructured assets: Industry concentration
GNPA: Borrower concentration
Top 5 Borrowers 47.4%
6-10 15.5%
11-15 8.7%
16-20 5.3%
Others 23.0%
Figures above for FY17
24
4. APPENDIX
25
Balance Sheet
(INR Mn) FY15 FY16 FY17
Shareholders Funds 15,561 17,636 21,363
Share Capital 1,792 1,795 1,914
Reserves and Surplus 13,770 15,841 19,449
Deposits 219,642 254,310 305,534
Current Deposits 15,099 16,365 18,447
Saving Deposits 21,525 27,791 39,996
Term Deposits 183,018 210,154 247,090
Borrowings 4,581 7,230 17,731
Other Liabilities & Provisions 7,270 7,529 7,819
Total Liabilities and Shareholder Funds 247,054 286,705 352,447
Cash and Bank 13,187 13,686 16,239
Investments 60,512 65,454 86,517
Advances 163,520 196,437 237,289
Secured by Tangible Assets 155,222 188,786 233,146
Secured by Government 599 - -
Unsecured 7,700 7,651 4,143
Fixed Assets 2,434 3,670 3,591
Others 7,401 7,457 8,811
Total Assets 247,054 286,705 352,447
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Income Statement
(INR Mn) FY15 FY16 FY17
Interest Earned 22,145 25,683 28,467
Interest Expended 16,879 19,230 20,640
Net Interest Income 5,267 6,453 7,827
Other income 2,840 3,045 5,028
Operating Income 8,107 9,498 12,854
Employee Expenses 2,384 2,754 3,347
Other Operating Expenses 2,146 2,674 3,167
Provisions & Contingencies 1,802 1,769 2,540
Exceptional Items (107) - -
Total Expenses 6,225 7,196 9,053
Tax 559 500 1,240
Net Profit 1,322 1,802 2,561
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(%) FY15 FY16 FY17
CASA 16.7% 17.4% 19.1%
Yield on Advances 12.8% 12.2% 11.3%
Cost of Deposits 8.6% 8.2% 7.3%
Net Interest Margin 2.7% 2.8% 2.9%
Average Yield on Investments 8.1% 8.0% 7.6%
Credit / Deposit Ratio 75.2% 77.9% 78.4%
Cost / Income Ratio 54.6% 57.1% 50.7%
Tier-1 Ratio* 9.3% 8.7% 8.8%
Tier-2 Ratio* 2.0% 2.0% 1.6%
Capital Adequacy* 11.3% 10.7% 10.4%
GNPA 2.8% 2.0% 2.7%
NNPA 1.9% 1.2% 1.8%
Provision Coverage Ratio 60.8% 68.6% 59.5%
ROA 0.6% 0.7% 0.8%
ROE 10.8% 11.7% 14.4%
BVPS (INR /sh) 82.5 88.7 102.7
EPS (INR / sh) 9.2 10.1 14.1
Key Financial Metrics
* As per Basel III Credit / Deposit Ratio = Gross Advances / Deposits
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CONTACT US
The Lakshmi Vilas Bank Ltd. Corporate Office LVB House, 4/1, Sardar Patel Road, Guindy, Chennai - 600032 Tamil Nadu, India Toll Free: 1800-425-2233 Email: [email protected]