performance and outlook - axis bank...november 2016 1 macro picture asset quality growth earnings...

Performance and Outlook

November 2016

1

Macro Picture

Asset Quality

Growth

Earnings Quality

Retail Franchise

2

Growth in industrial production has slowed in recent months

3

Growth in IIP and Components

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Aug-14 Feb-15 Aug-15 Feb-16 Aug-16

Mining Manufacturing Electricity IIP

(% YoY, 3MMA)

However, output parameters have improved on the margin

44

Select output indicators

15

17

19

21

23

25

27

29

-5%

0%

5%

10%

15%

20%

Sep-14 Mar-15 Sep-15 Mar-16 Sep-16

Mn Tn

ThousandsCement Production (RHS)

YoY %

5

6

7

8

9

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%


Mn Tn

ThousandsSteel Production (RHS)

YoY %

30

40

50

60

70

80

90

-30%

-20%

-10%

0%

10%

20%

30%


000sCV Production (RHS)

YoY %

200

220

240

260

280

300

320

340

360

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%


000sCar Production (RHS)YoY %

Cement shows moderate growth Steel production picks up

HCV production declined sharply Car production jumps

Inflation continues to be benign, supported by lower food prices post the monsoon; likely to meet RBI target of 5% in March 2017

5

CPI Inflation and components …

… Urban vs Rural

4.12%

3.07%

4.88%

4.31%

2%

3%

4%

5%

6%

7%

8%


Food+ (45.9%) Fuel+ (6.8%)

Core (47.3%) CPI Combined

3%

4%

5%

6%

7%

Sep-15 Dec-15 Mar-16 Jun-16 Sep-16

CPI_Rural CPI _Urban CPI _Combined

%YoY

3%

4%

5%

6%

7%


Core_RuralCore_UrbanCore _Combined

%YoY

In line with falling inflation, RBI continues to ease rates and the easing is being transmitted by banks

6

Repo Rate vs Axis Bank Lending Rates

• 175 bps rate cut by RBI since Jan’15

• Bank responded with a reduction of 80 bps in the Base Rate

10.15%

9.35%

9.50%

9.20%

8.00%

6.25%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

10.0%

10.5%

Apr-14 Oct-14 Apr-15 Oct-15 Apr-16 Oct-16

Trend in Base, MCLR and Repo Rates

Axis Bank Base Rate

Axis Bank MCLR Rate (1yr)

Repo Rate

Credit and deposit growth remain near multi year lows, but credit optics are worse because of UDAY discom loans shifted to bonds

7

Banking system credit and deposit growth

8%

11%

14%

17%

20%

23%

Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16

Non-food credit growth (%, YoY)

Deposit growth (%, YoY)

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Apr Jun Aug Oct Dec Feb

Industry Incr. Credit (FYTD, Rs Tn)

FY12 FY13

FY14 FY15

FY16 FY17

-0.3

0.2

0.7

1.2

1.7

2.2


Services Incr. Credit (FYTD Rs Tn )

FY12 FY13

FY14 FY15

FY16 FY17

-0.2

0.2

0.6

1.0

1.4

1.8

2.2


Retail Incr. Credit (FYTD, Rs Tn)

FY12 FY13

FY14 FY15

FY16 FY17

Macro Picture

Asset Quality

Growth

Earnings Quality

Retail Franchise

8

Gross and Net NPAs have increased in Q2FY17

9

1.38%1.68% 1.67%

2.54%

4.17%

6.2%

5.4%

3.5%


Gross NPA and Watch List (WL)

GNPA

2.65%

2.31%2.25%

1.99%

1.74%


Net Restructured Assets(% of Net Customer Assets)

0.48%0.75% 0.70%

1.08%

2.02%


Net NPA

81% 79% 78% 78%72%

60%

Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Sep-16

Provision coverage ratio

WL

22,628

13,789

315 32

2,680

149 694

7,288

61

Mar-16 Devolvementof NFB

Movementin Balances

Slippageinto NPA

Exitout of WL

Sep-16

Watch List Activity, H1FY17 Q2 Q1

Most of the slippages in Corporate Lending were from the Watch List

10

22,628 20,295

13,789

2,626 2,562 1,899

Mar-16 Jun-16 Sep-16

Watch List Outstanding

All figures in ` Crores

FB Outstanding

NFB Outstanding

Slippages in Corporate LendingCumulative Dissolution Rate

Net Reduction in WL Outstanding

Original WL Outstanding=

92% 89%

8% 11%

Q1FY17 Q2FY17

Non- Watch list

Watch list

10.3%

39.1%

Jun-16 Sep-16

11

Sectoral composition of Watch ListTop 10 Sectors

3%

97%

AA

A

AA A

BB

B

< B

BB

or

Un

rate

d

Internal Rating Mix (by value)

With significant slippage from Iron & Steel and Textile Sector, the remaining Watch List portfolio is now dominated by Power

41%

13% 12%8%

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

Po

wer

Oil

and

Gas

Iro

n &

Ste

el

Infr

astr

uct

ure

Co

nst

ruct

ion

Ce

me

nt

Ind

ust

rial

s

Engi

nee

rin

g

Infr

astr

uct

ure

Ro

ads

Co

nst

ruct

ion

oth

er t

han

Infr

astr

uct

ure

Tele

com

1.11%

2.30%

0.02%

0.50%

0.21%

0.61%

0.99%

1.35%

0.70%

0.54% 0.61% 0.62% 0.61%

1.11%

3.05%

FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 H1FY17

Trend in credit cost : FY03 to H1FY17

The Long term average credit cost at the bank has been 81 bps

12

Long Term Average* = 81bps

* For the period from FY03 to FY16

Credit Cost (excluding WL)for H1FY17 = 0.89%

The business mix and quality has changed materially after 2012

13

29%

42%

18%

13%

54%45%

FY12 H1FY17

Retail

SME

Corporate

283% 287%

209%155% 154% 162% 142% 152%

Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Sep-16

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

Concentration Risk is reducing …

57%

69%73% 75%

85%92%

FY12 FY13 FY14 FY15 FY16 H1FY17

% of Top 20 exposure* rated A or better

…and it is to better quality borrowers

The portfolio is now more Retail

* Includes fund based and non fund based

24%

14% 15%

20%16%

7%

FY12 FY13 FY14 FY15 FY16 H1FY17

Corporate loan sanctions post 2012 have been of much better quality

14

100

31

48

28

FY12 FY13 FY14 FY15

Year of Sanction

30+ days delinquency in first 2 years

Recent sanctions have been biased towards better rated corporates …

68%74%

81% 79% 79% 80%

FY12 FY13 FY14 FY15 FY16 H1 FY17

Percentage of sanctions rated A- & above

… and away from challenged sectors*

… Resulting in much better credit quality for post-2012 sanctions

* sanctions to power, iron and steel, and other infrastructure construction (excluding airports, roads and ports) as a percentage of total sanctions for the year

Figures indexed to 100 in FY12

15

Rating profile remains stable

11% 11% 12% 16% 15%

28% 27% 26% 20% 22%

31% 31% 30% 30% 29%

18% 20% 20% 22% 22%

12% 11% 12% 12% 12%


AAA AA A BBB <BBB or unrated

63% of corporate advances have rating of at least ‘A’ in September 2016

7% 8% 8% 9% 8%

8% 8% 8% 8% 8%

64% 64% 63% 63% 64%

15% 14% 14% 14% 13%

6% 6% 7% 6% 7%


SME 1 SME 2 SME 3 SME 4 SME 5-7

84% of SME advances have rating of at least ‘SME3’ in September 2016

Corporate Lending SME Lending

Macro Picture

Asset Quality

16

Growth

Earnings Quality

Retail Franchise

We have delivered strong growth on key balance sheet parameters

17

12%

16%

20%

18%

20%


Savings Bank Deposits

13%

17%17%

18%19%


CASA

All figures in YOY growth

20%

18%

14%

18%17%


Balance Sheet

23%

21% 21% 21%

18%


Advances

1,38,550

1,58,029

Sep-15 Sep-16

Corporate Advances

14% YOY

18

Loan Mix (As on September 30, 2016)

Diversified loan mix with growth driven by retailAll figures in ` Crores

1,38,550 1,48,385 1,55,384 1,58,155 1,58,029

40,068 41,186 44,869 43,611 45,857

1,19,448 1,25,796

1,38,521 1,43,159 1,49,284


Corporate SME Retail

3,53,170

3,15,3673,38,774

Total Advances

Corporate45%

SME13%

Retail42%

40,068 45,857

Sep-15 Sep-16

SME Advances

14% YOY

1,19,448

1,49,284

Sep-15 Sep-16

Retail Advances

25% YOY

3,44,925

18% YOY

2,98,066

Deposit franchise continues to be robust

19*as % of total deposits

89,717 92,758 1,05,793 1,00,185

1,07,839


Savings Bank Deposits

20% YOY

53,692 53,564

63,652

55,229

62,122


Current Account Deposits 16% YOY

1,15,194

1,20,352 1,21,955

1,30,357

1,36,099


Retail Term Deposits 18% YOY

44% 43% 47% 43% 45%

80% 79% 81% 80% 81%


Trend in CASA and Retail Term Deposits

CASA

CASA+RTD


*

*

Macro Picture

Asset Quality

Earnings Quality

Retail Franchise

20

Growth

3.11%3.29%

3.43% 3.41%

2.95%

3,628 3,985

4,399 4,469

4,100

Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17

Operating Profit and Operating Profit Margin

13% YOY 3,894

1,875

H1FY16 H1FY17

Operating Profit delivery has been steady even as Net Profit has dipped due to credit provisions

21

4,062 4,162 4,553 4,517 4,514

2,041 2,338 2,694 2,738 2,540


Operating Revenue

Net Interest Income Non-Interest Income

6,1036,500

7,247 7,255

16% YOY

7,054


2.10%2.03% 2.06%

1.99%1.92%

2.13%

FY12 FY13 FY14 FY15 FY16 H1FY17*

Opex to Assets

1,916

319

Q2FY16 Q2FY17

52% YOY

Net Profit

83% YOY

* annualized

NIM has moderated during the quarter

22

5.99% 5.86% 5.84% 5.81% 5.68%


Cost of Funds

3.85% 3.79%3.97%

3.79%3.64%

4.11% 4.04%4.24%

4.04%3.93%


NIM - Global NIM - Domestic

H1FY17 Global NIM is at 3.71%


Movement in NIM

4,062 4,162

4,553 4,517 4,514


Net Interest Income11% YOY

3.64%0.32%

0.10%3.85%

0.21%

Q2 FY 16 Yield onAssets

Cost ofFunds

InterestReversal

Q2 FY 17

Unfavourable Favourable

Fee growth has moderated but Granular fees continue to grow

23


1,813 1,885

2,254

1,719

1,935


Fee Income

7% YOY

Corporate, 25% Treasury &

DCM, 1%

SME, 5%

Transaction Banking, 26%

Retail, 43%

Fee Composition

17%

9% 8%

-4%

Retail SME Transcn. Banking Corporate Credit

Fee Growth (YOY)

25% 26% 25% 26% 25%

64% 64% 64%69% 69%


Trend in Granular and Corporate Fees

Corporate fees

Granular fees**

**Retail + Transaction Banking Fee as % of total fee income

Macro Picture

Asset Quality

Retail Franchise

24

Growth

Earnings Quality

48% 49% 51% 52%54%

38% 37%36% 36%

34%

14% 14% 13% 12%12%


Transaction Mix*

Digital

ATM

Branches

Retail Bank has market leading digital capabilities

25

10,566

17,598

20,861 22,053

23,279


Mobile Banking Spends (`Cr)

32%

6% -1%

18%

Digital ATM Branches Total

Transaction Volume Growth YOY

* Based on all financial transactions by individual customers

120% YOY

3.4%

13.2%

Deposits Mobile transactions (by value)

Market Share*

* Source : RBI as on March 2016

46,366 47,876 50,135

52,398 56,098


Employee Strength

We have also been opening new branches with renewed pace

26

84

52

31

-

154

62

99 102 100

Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17

New Branches Opened

25% 26% 26% 27% 27%

24% 23% 24% 24% 24%

30% 30% 30% 30% 30%

21% 21% 20% 19% 19%


Branch Mix*

Metro Urban Semi-Urban Rural

3,1062,743 2,805 2,904

12,352

12,631 12,743

12,871

13,448


ATMs

3,006

* Includes extension counters

9,732

YOY

33%

38%40% 41% 42%

Mar-13 Mar-14 Mar-15 Mar-16 Sep-16

Retail as % of Advances

Retail Lending continues to grow steadily

27

1,19,448 1,25,796 1,38,521 1,43,159 1,49,284


Retail Advances

25% YOY


Home Loans, 45%

Retail Agri Lending, 15%

Loans Against Property, 9%

Auto Loans, 9%

Personal Loans &

Credit Cards, 12%

Others, 10%

Retail Advances Mix • Sourcing strategy focused on internal customer

base of the Bank

• 72% of sourcing in Q2 was from existing customers

• 94% of Credit Card and 83% of Personal Loan

originations in the quarter were from existing

customers

• 49% of overall sourcing was through Bank branches

• FCNR deposit linked retail assets at `6,724 crores

included in others

7,526

10,453

255 297

0

100

200

300

400

500

600

700

800

900

1,000

0

2,000

4,000

6,000

8,000

10,000

12,000


Cards Spends

39% YOY

Payments businesses continue to drive deep customer engagement

28

14.1 14.5

15.5

16.3

16.8


Debit Cards - Cards In Force

19% YOY

Credit and Debit Cards, ` Cr

Forex Cards, USD Mn (RHS)

All figures in mn

2.0 2.2

2.4 2.6

2.8


Credit Cards - Cards In Force

Strong positioning in the payments space

17% YOY

1 – based on cards issued; 2 – based on card spends

40% YOY

*Based on RBI data as on July 2016 except for Forex Cards

Product Market share* Ranking*

Credit Cards1 10.3% 4th

Debit Cards2 5.8% 4th

Forex Cards 45% 1st

Merchant Acquisition

18.7% 3rd

Capital adequacy remains strong

29

12.21% 12.35% 12.51% 12.38% 12.03%

3.21% 3.12% 2.78% 3.29% ** 3.17%

15.42% 15.47% 15.29% 15.67% 15.20%

Sep-15* Dec-15* Mar-16 Jun-16* Sep-16*

Tier 1 CAR Tier 2 CAR Total CAR

* including unaudited Net Profit for the quarter / half year / nine-months** includes `2,430 crores mobilized through issuance of subordinated debt during Q1FY17

22 bps YOYTrend in Capital Adequacy Ratio

Summary

30

• Asset Quality: o Significant part of Watch List risks have already crystallized

• Growth:o Healthy growth on both sides of the balance sheet with CASA growth at 19% and loan

growth at 18%

• Earnings Quality: o Underlying Operating profitability metrics remain healthy

• Retail Franchise:o Healthy business growth with a diversified fee base and market leading digital capabilities

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

31

Thank You

32

performance and outlook - axis bank...november 2016 1 macro picture asset quality growth earnings...

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