Positioned for growth in a challenging market€¦ · Over the last 10 years, Axis Bank has built...

Positioned for growth in a challenging market

Axis Capital Conference, May 2019

NSE: AXISBANK BSE: 532215 LSE (GDR): AXB

Macro-Economic indicators point towards a tough market environment …

2

5.3%

4.5%3.8%

7.0%6.5%

4.8% 4.6%

8.4%

0.2%

2.5%

1.4%

0.1% -0.1%

-2%

0%

2%

4%

6%

8%

Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19

Contribution to IIP (%)

Consumer non-durables Consumer durables Infra./const. goods

Intermediate goods Capital goods Primary goods

FY19 GDP growth slowdown, capex contraction, moderate expected inflation, will provide space for monetary easing

3Source: MOSPI, Axis Bank Research

*FY19 GDP% based on 2nd Advance Estimates

5.5%

6.4%7.4%

8.0% 8.2%

7.2%7.0%

-2%

0%

2%

4%

6%

8%

10%

12%

Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19

GDP Agriculture Industry Services

YoY%

GDP Growth Industrial Growth

%

5.0

9.2 9.9

6.8

7.8 5.52.8

3.4

3.2

14.6

20.4

18.6

FY17 FY18 FY19^

Adjusted non-food Bank Credit Non Bank Sources - Domestic Non Bank Sources - Foreign

Tight liquidity conditions have kept lending rates high, flow of financial resources slower despite rising bank loan growth

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9.7%

8.7%

6.0%

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19

WALR(Fresh Rupee Loans) MCLR Repo Rate [R]

Source: RBI, Axis Bank Research

Note: WALR: Weighted Average Lending Rate, MCLR: Marginal Cost of funds based Lending Rate

Bank lending rates Flow of Financial Resources to the Commercial Sector

^ April’18 till 15th Mar’19

Note: Figures in bracket represent % contribution to flow of financial resources

(34%)

(47%)

(19%)

(45%) (53%)

(38%) (30%)

(17%)

(17%)

All figures in ` Trillion

The Axis Bank Story – Recent Performance

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Over the last 10 years, Axis Bank has built an enviable franchise

Balance Sheet CASA Deposits Advances Branches

Credit Cards Operating Profit Subsidiaries Brand

827

4,050

FY09 FY19

81,557

4,94,798

FY09 FY19

50% retail

20% retail50,644

2,43,394

FY09 FY19

4x

3,725

19,005

FY09 FY19

2.1%

10.2%

FY11 FY19

Market Share on spends

1,47,722

8,00,997

FY09 FY19

` crore

5x 6x 4x

5x 5x

` crore ` crore

` crore

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36% 38%43% 45%

50%55%

61%


33%38% 40% 41%

45% 47%50%


68%

75%78%

81% 81%84%

81%


The Bank has become increasingly Retail over these years

Share of Retail in Deposits Share of Retail in Advances Share of Retail in Fee Income

* Includes CASA and Retail TD

Retail Deposits* CAGR^ 17% Retail Advances CAGR^ 25% Retail Fees CAGR^ 21%

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All numbers in ₹ bn

^ 6 year CAGR

65,497

88,028

1,11,932

1,38,521

1,67,993

2,06,464

2,45,812


25% CAGR*

33%

38%

40%41%

45%47%

50%

Share of Retail Advances

54% 50% 48% 45% 44%40% 38%

18%15%

16%17% 16%

15%14%

11%

10%8% 9% 10%

11%11%

6%

6%7% 8% 8%

10% 12%

6%

7%7% 8% 8%

8% 9%

2%

2%2% 3% 4%

4% 5%1% 2% 3% 3%

3%10% 12% 9% 8% 9% 8%


…with significant dispersion in mix over time

Home loans Rural lending Auto loans PL LAP CC SBB Others

The Retail Lending business has been built steadily and is now well diversified

* 6yr CAGR (FY13-FY19)

Retail Advances have shown strong growth…

3 core components of the Bank’s strategy in Retail Lending

Cross sell to existing deposit customers

Distribution through branches

Strong analytics engine driving underwriting

PL – Personal Loan, SBB – Small Business Banking, LAP – Loan against Property, CC – Credit Cards

All figures in ` Crores

8

5.0%6.5%

7.7% 8.4%

10.6%11.5%

12.7%


3.9%5.8%

7.1%8.0% 8.7%

9.6% 10.2%

FY13 FY14 FY15 FY16 FY17 FY18 FY19

Credit Cards in Force – Market Share*

Credit Cards Spends – Market Share

Source: RBI Data Reports | *Market share based on average data for the year

The Cards business of the Bank has been a huge success over the last few years

Premium Cards

Co-branded Cards

Featured Cards

Market share has more than doubledover the last 6 years

9

10

However, the last 2-3 years have been extremely challenging for the Bank

1,179 1,2961,789

3,800

11,157

16,599

10,221


Provision for non-performing assets*

2,023 2,548 2,854

7,345

21,782

33,419

13,871


Gross Slippages

*including bad debts written off and write backs


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During FY19, the Bank crossed the inflection point on this tough journey

5,179

6,218

7,358

8,224

3,679

276

4,677


1.06% 1.22% 1.34%1.67%

5.04%

6.77%

5.26%

0.32% 0.40% 0.44%0.70%

2.11%

3.40%

2.06%


GNPA% NNPA%


Gross and Net NPA ratios have moderated Profit after tax improved in FY19

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The asset quality challenges of recent years have largely been overcome

0.61% 0.62% 0.61%

1.11%

2.82%

3.57%

1.91%


27,411

19,685

8,9947,467

7.3%

4.7%

1.8%1.3%

-4.0%

-2.0%

0.0 %

2.0 %

4.0 %

6.0 %

8.0 %

0

500 0

100 00

150 00

200 00

250 00

300 00

Jun-16 Mar-17 Mar-18 Mar-19

As a % of Gross Customer Assets79% 78% 78%

72%

65% 65%

77%


BB & Below pool size has been shrinking Credit cost has moderated Provision Coverage ratio is now at 77%

68%

74%

81%79% 79%

85% 86%

95%

FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19

Percentage of sanctions rated A- & above

On an incremental basis, credit underwriting has been significantly more conservative

287%

209%

155% 154%162%

142%

124% 121%112%

Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19

Exposure to Top 20 single borrowers as a % of Tier I Capital

Fresh originations are predominantly from entities rated A- or better

Concentration Risk has reduced significantly from peak

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2.21% 2.22%

2.08%

2.15%2.17%

2.13%

FY14 FY15 FY16 FY17 FY18 FY19

Opex to Average Assets

We have also started focusing rigorously on the cost efficiency of our business All figures in ` Crores

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14%

16%

10%

21%

15%

13%

19%

17% 16%

14%

-1%

18%


Operating Expense growth Operating Revenue growth

Positive Jaws

Opex to assets ratio moderated in FY19… … resulting in positive jaws after a 2 year gap

18.23 18.5717.49

7.22

0.53

8.09


Return on Equity (in %)

All this has resulted in a slow but noticeable improvement in shareholder return metrics

1.78 1.831.72

0.65

0.04

0.63


Return on Assets (in %)

26.45

30.85

34.93

15.34

1.12

18.09


Diluted EPS (`)

163

188

223233

247259

Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Mar-19

Book Value Per Share (`)

15

The Axis Bank Story – Strategy for FY20-22

16

Three vectors of our strategy for the next three years

17

rowth rofitability ustainability

• Grow deposits in line with loans

• Step up growth in Wholesale Bank

• Continue momentum in Retail Bank

• Establish leadership in digital and

payments

• Scale-up subsidiaries materially

• Optimize business mix

• Improve operating efficiency

• Sweat existing infrastructure

• Reduce credit cost below long term

average

• Strengthen the Core - technology,

operations, credit risk and process

excellence

• Focus on disciplined execution

• Embed conservatism in the Bank’s

internal policies and practices

Our goal is to deliver 18% ROE sustainably

19.7%

8.1%

18%

Avg FY11-15 FY19 Medium termAspiration

ROE

The ROE path back to 18% would be driven by three elements

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3 drivers of the return to 18% ROE

Risk normalization

Business mix optimization

Improvement in Operating efficiency

Reduce credit cost below long term average

Reduce Cost to Assets to 2%

Portfolio choices based on RaRoC

1

2

3

We have re-organized the Wholesale Bank, creating anintegrated franchise

Re-Oriented Coverage Groups

Large Corporate Mid Corporate Commercial BankingFocused Segmental

Coverage

CreditLiabilities and Transaction

BankingTreasury

Bank and Subsidiary Products

Strengthened Operations and Service Infrastructure

Note: Classification based on client annual revenue – Commercial ( `10 cr- `250 cr); Mid (` 250 cr- ` 1000 cr); Large ( > ` 1000 cr)19

• Has been the leader in Equity and Equity linked dealsover the last decade

• Offers investors and companies with the spectrum offinancial needs in the areas of Equity CapitalMarkets, M&A, Private Equity, Structured Financeand Institutional Equities.

• Axis Securities is one of the fastest growing stock brokerage firms in India,

• Currently ranked 3rd among brokerages in India in terms of total client base.

• Axis Bank was one of the three entities allowed by RBI to set up the Trade Receivables Discounting System (TReDS), an electronic platform for facilitating cash flows for MSMEs

• Our digital invoice discounting platform ‘Invoicemart’continues to be India’s leading TReDS platform with market share of nearly 40%

• One of the fastest growing NBFCs with loan book of `8,040 crores (as of Mar’19)

• Offers complementary product offerings to Bank customers that include Structured Financing, Special Situations Funding, etc

FINANCE

We are also tightly integrating the key subsidiaries of the Bank and investing in scaling them as key value drivers

• Axis Mutual Fund is among the fastest growing AMC since launch in ‘09

• Has market share of 3.67% as at end of Mar’19

• Acquired in Sep’17, it is among the top non-bank financial services platform in the industry with a significant customer franchise footprint

• Freecharge is being positioned by the Bank as an engine that generates a large base of new to bank customers that are young and digitally native

20

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Axis Bank has built an enviable franchise over the last 10 years

Amidst tough macro environment, the Bank remains positioned for growth

We remain committed to our 3 year Execution Strategy, with an aspiration of delivering 18% ROE sustainably

In Summary

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

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”, “future”,

“objective”, “goal”, “strategy”, “philosophy”, “project”, “should”, “will pursue” and similar

expressions or variations of such expressions may constitute "forward-looking statements".

These forward-looking statements involve a number of risks, uncertainties and other factors that

could cause actual results to differ materially from those suggested by the forward-looking

statements. These risks and uncertainties include, but are not limited to our ability to

successfully implement our strategy, future levels of non-performing loans, our growth and

expansion, the adequacy of our allowance for credit losses, our provisioning policies,

technological changes, investment income, cash flow projections, our exposure to market risks as

well as other risks. Axis Bank Limited undertakes no obligation to update forward-looking

statements to reflect events or circumstances after the date thereof.

Safe Harbor

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Thank You

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