AXIS/CO/CS/1024/2018-19
1 9th March 2019
Shri Kautuk Upadhyay Shri Khushro Bulsara The Chief Manager (Listing & Compliance) The Deputy General Manager (Listing) tock Exchange of India Limited BSE Limited Exchange Plaza, 5th Floor 1st Floor, New Trading Ring, Rotundo Plot No. C/1, "G" Block Building Bandra-Kurla Complex, P. J. Towers, Dalal Street Mumbai - 400 051 Fort, Mumbai- 400 001
NSE Code: AXISBANK BSE Code: 532215
Dear Sir(s),
SUB.: DISCLOSURE UNDER REGULATION 30 READ WITH PARA A OF SCHEDULE Ill AND REGULATION 46(2) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2015.
Enclosed, please find the schedule of Analyst I Investor meeting I interactions held at Mumbai on 19h March 2019, alorig with the presentations made therein, in relation to Banks strategy and its business segment in terms of the captioned subject.
The same is being uploaded on the website of the Bank www.axisbank.com
You are requested to take note of above and arrangeto bring it to the notice of all concerned.
Thanking You.
Yours sincerely,
Encl.: as above
Axis House, Wadia International Centre, Pandurang Budhkar Marg, Worli, Mumbai 400 025 REGISTERED OFFICE : "Trishul" - 3rd Floor Opp. Samartheswar Temple, Near Law Garden, Ellisbridge, Ahmedabad - 380006. Telephone No. 079-26409322 Fax No. - 079-26409321 CIN: L6511 OGJ 1993PLC020769 Website - www.axisbank.com Schedule of the Analyst Day Place: Mumbai Date: 19th March 2019 Sr. No. lnstffutfon Name 1 Alliance Bernstein 2 Ambit Capital 3 Antique Stock Broking 4 Bank of Arnerico ML 5 BNP Paribas 6 CIMB 7 Citibank 8 CLSA 9 Credit Suisse 10 Daiwa Securities 11 Deutsche Bank 12 Edelweiss Securities 13 Elora Securities 14 Emkay Global 15 Goldman Sachs 16 Haitong International 17 HSBC Securities 18 ICICI Securities 19 IDFC Securities 20 IIFL Institutional Equities 21 Investec Research 22 Jefferies 23 JM Financial 24 JP Morgan India 25 Kotak Institutional Equities 26 Macquaire Securities 27 Morgan Stanley 28 Motilal Oswal Securities 29 Nomura 30 Phillip Securities 31 Prabhudas Liladher 32 SBICAP Securities 33 Spark Capital Advisors 34 UBS Securities 35 Sunidhi Securities 36 ICICldirect.com 37 HDFC Securities 38 Sharekhan Ltd 39 B & K Securities 40 t'Jirmal Bang Institutional Equities 4-r" Centrum Broking 42 Reliance Securities 43 India Nivesh Securities 44 Equlrus Capital 45 Dolat Capital 46 Almondz Global -- 47 SMC Global Securities Ltd. .�t>BAN� 48 Dalal and Broacha ,c-g, 49 BP Wealth �k,.\ A • \ � �-'lt 5<-�� � Session 1 - Presentations Session 1
Strategy FY20-22 Strategy FY20-22 Wholesale Risk and Wholesale Risk and Credit Underwriting Credit Underwriting Wholesale Banking Wholesale Banking Axis Bank Strategy FY20-22 Axis Bank has built an enviable franchise over the years
Balance Sheet CASA Deposits Advances Branches
` crore 7,56,176 ` crore ` crore 49% retail 2,35,552 3,964 5x 4x 5x 4,75,105 4x
20% retail 1,47,722 50,644 81,557 827
FY09 9M FY19 FY09 9M FY19 FY09 9M FY19 FY09 9M FY19
Credit Cards Operating Profit Subsidiaries Brand
Market Share on spends ` crore 13,991
5x 10.0% 5x
2,586 2.1%
FY11 9M FY19 9MFY09 9M FY19
2 However, the Bank’s recent performance has moderated compared to its past trends
Asset quality deteriorated significantly, driven by corporate slippages
CASA growth trended lower than the Bank’s historical growth rates
Corporate loan growth trailed the Bank’s long term average growth rates
Fee income growth moderated to low teens
Cost to Assets remained sticky even as the Bank gained scale
Operational risk was elevated
3 Three vectors of our strategy for the next three years
rowth rofitability ustainability
• Grow deposits in line with loans • Optimize business mix • Strengthen the Core - technology, operations, credit risk and process excellence • Step up growth in Wholesale Bank • Improve operating efficiency • Build a bench of senior talent
• Continue momentum in Retail Bank • Sweat existing infrastructure • Focus on disciplined execution
• Establish leadership in digital and • Reduce credit cost below long term • Embed conservatism in the Bank’s payments average internal policies and practices • Scale-up subsidiaries materially
Our goal is to deliver 18% ROE sustainably
4 The ROE path back to 18% would be driven by three elements
ROE 3 drivers of the return to 18% ROE
19.7% Risk normalization 18% 1 Reduce credit cost below long term average
Business mix optimization 7.3% 2 Portfolio choices based on RaRoC
Improvement in Operating efficiency 3 Avg FY11-15 9M FY19 Medium term Reduce Cost to Assets to 2% Aspiration
5 We are augmenting the talent bench strength and clarifying organizational structures for effectiveness
MD & CEO
ED ED ED Head Digital Wholesale Retail Corporate CRO CCO CFO Head IT Banking Banking Banking Center
MD & CEO – Managing Director and Chief Executive Officer; ED – Executive Director; CRO – Chief Risk Officer; CCO – Chief Credit Officer; CFO – Chief Financial Officer Clarifying Organizational Structures – Key Principles
Retail Wholesale Operations
Clearly defined Product and Coverage Structure Centralized Operations Team independent of lines of business Separation of Underwriting and Product / Coverage functions
Single Bank-wide owner for customer Continue to buttress capabilities in digital, risk management and analytics service
Dedicated owner for Customer Experience Focus on both assets and liabilities through a Commercial banking group and Service Quality 6 6 End of deck
7 Wholesale Risk and Credit Underwriting The Bank has gone through a tough period on Credit Risk in the last few years driven primarily by corporate stress
Gross Slippages NPA Ratios In ` Crores
6.77% 33,419
5.75%
5.04%
21,782
3.40%
2.36% 10,860 2.11% 1.67% 7,345
0.70%
FY16 FY17 FY18 9M FY19 FY16 FY17 FY18 9MFY19
Gross Slippages Gross NPA % Net NPA %
2 The stress recognition phase is now largely behind us
BB & below pool* has reduced in size and proportion … … and continues to be the main contributor to new NPA formation
BB & below pool Corporate slippages from BB & below In ` Crores 5.34%
4.70% 93% 91% 84%
19,412 19,685 1.80% 1.40%
8,994 7,645
Mar-16 Mar-17 Mar-18 Dec-18 FY17 FY18 9MFY19
Fund Based Outstanding As a % of total customer assets
*Only includes corporate book 3 Risk in SME lending has normalized after peaking in FY17
Risk performance in SME Focus remains on building a high rated SME Book
Net slippage ratio* in SME 86% of SME exposure* has a rating of at least ‘SME3’
6% 6% 8%
14% 16% 11%
2.2%
67% 66% 66% 1.6% 1.6% 1.4% 0.9% 1.0%
9% 6% 8% 5% 6% 6% FY14 FY15 FY16 FY17 FY18 Q3FY19 Mar-17 Mar-18 Dec-18
SME 1 SME 2 SME 3 SME 4 SME 5-7 * Net slippage ratio = Net slippages / Opening Net Advances, annualized * Only includes standard exposure
4 Credit cost has come down from peaks reached in FY18
Bank Credit cost
3.57%
2.82%
2.17%
1.11%
FY16 FY17 FY18 9MFY19
5 We have learned some important lessons from this experience
Key Learnings
. Our Credit filters for new credit proposals need to . We need to reduce our exposure to project loans be raised.
. We need to diversify our portfolio and reduce . Our Early Warning Systems for potential stress concentration. need to be sharpened.
. We needed to have an independent credit function with full accountability, which has been implemented
6 We are moving towards a better rated credit portfolio
Fresh originations are predominantly … resulting in a better rated … and with reduced project from entities rated A- or better … portfolio exposure
Percentage of sanctions rated A- & 82% of corporate exposure* is rated Exposure to projects ` above ‘A-’ or better In Cr 94% 46,234
85% 86% 12% 13% 14% 34,933 79% 31,608 25% 34% 36%
22,989
31%
30% 32%
22% 18% 14% 10% 5% 4% FY16 FY17 FY18 9MFY19 Mar-17 Mar-18 Dec-18 FY16 FY17 FY18 9MFY19
BB or below BBB A AA AAA
* Only includes standard exposure 7 We have also strengthened the risk framework in the wholesale bank
Risk Appetite Statement and Guardrails
Stronger Rating Models Agile EWS Architecture
Organization Structure Changes
8 Way Forward
Reduced exposure to project loans with increased Portfolio diversification with reduction in focus on transaction banking and working capital concentration risk business
Leverage learnings from the past towards Strengthened Early Warning Systems improved policy, processes and organization structure
Set up mid-market underwriting function
9 End of deck
10 Wholesale Banking We are transforming the Wholesale Bank, creating an integrated franchise
Re-Oriented Coverage Groups
Focused Segmental Large Corporate Mid Corporate Commercial Banking Coverage
Bank and Subsidiary Products
Liabilities and Transaction Credit Treasury Banking
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) 2 The last 3 years have been challenging for Corporate loan growth, even as our flow business has continued to thrive
Corporate Loan growth has been sluggish recently Transaction Banking Fees has continued to grow strongly
Y-o-Y growth Y-o-Y growth 22% 15% 20% 13% Transaction Banking fee 11% 9% 12% 4%
5% 4% 2%
0% -6% -11% -13% Corporate credit-linked fees Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Dec-18 -21% FY15 FY16 FY17 FY18 9MFY19
FY20-22 strategy elements FY20-22 strategy elements
• Segmental focus for strengthened coverage • Build non-credit share of wallet • Profitable growth, quantified by RAROC • Increase penetration in payments • Continued focus on Asset Quality • Become a preferred digital partner 3 Domestic corporate loan growth remains strong
Domestic loan growth remains strong while international Share of Domestic loans in total Corporate Loans continues book de-grew to increase
Trend in domestic and overseas corporate Proportion of Domestic in Corporate loan book loan growth (YoY) 26% 26%
22% 15% 13%
11% 3%
4% 82% -6% 76% 74% 72% 69%
-23%
Mar-15 Mar-16 Mar-17 Mar-18 Dec-18 Mar-15 Mar-16 Mar-17 Mar-18 Dec-18
Domestic advances Overseas advances
Note: Corporate Loan book includes Large and Mid Corporates, but does not include Commercial Banking clients 4 We have revamped our risk appetite and internal processes to ensure new lending business is of much healthier quality
Fresh originations are predominantly from entities rated A- Concentration Risk has reduced significantly from peak or better
Percentage of sanctions rated A- & above Exposure to Top 20 single borrowers as a % of Tier I Capital
94% 287%
85% 86% 81% 79% 79% 209% 74% 154% 162% 142% 68% 124% 121% 124% 155%
FY12 FY13 FY14 FY15 FY16 FY17 FY18 9M FY19 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Dec-18
5 The Bank has a leadership position in some key segments
Government Business Commercial Banking
• We have maintained a strong position in Government CASA • Crafted a deposit plus lending strategy for SMEs – 22% CASA market share# among private banks – 6% market share # in CA • Grew footprint in select high potential sectors like chemicals, – 7% market share # in SA engineering and pharma. • Smart city offerings- Raipur • Developed and scaled new age digital lending capabilities – 1st Smart City of Axis Bank – Fastest Smart City Deployment across India • Full product suite to serve SME promoters and management – Most Comprehensive Smart City Solution by any bank in India
Debt Capital Markets Current Accounts
• Ranked No. 1 arranger* for rupee denominated bonds for 12 consecutive years. • Current Account balance has grown at 20% CAGR in last 3 yrs • Had market share of over 29% during CY19 • Have Leveraged Merchant Acquiring Business relationships to grow CA customers 29% 24% Axis Bank 20% • Focused on digital partnerships by simplifying customer market share in onboarding INR Bonds • Focused on driving growth in Government business CY17 CY18 CY19
* Source- Bloomberg # Source - RBI 6 We are steadily gaining traction in corporate payments and are innovating on solutions to gain share in flow business
Market Share across Payment channels Integrated Digital Platform
9.8% • Across payments, trade finance and forex 9.2% • User-friendly portal • Mobile app to be launched shortly
5.7% 5.4% 5.7% 4.5%
GST Payments RTGS Volume NEFT Volume
Dec-17 Dec-18 Source: RBI
CMS Throughput (` Trillion) Customized solutions – select examples
28% YOY 87 82 Dairy • End-to end digitization 68 • Multi-mode collection and payment solutions 44 Smart Cities • Deployment for first smart city (Raipur) in progress • Citizen payments and transit • Smart card, mobile app and portal FY16 FY17 FY18 9MFY19
7 Commercial Banking is a significant opportunity for the Wholesale Bank
Risk levels in SME lending have However, recent growth rates have Business has strong franchise value normalized after peaking in FY17 been modest
RAROC (9MFY19) Y-o-Y SME loan growth 1.3x Net slippage ratio* in SME 0.80 x 0.70 0.60
Corporate SME 0.50 2.2% 0.40 Sole Banking Relationships 1.6% 1.6% 0.30 1.4% 0.20 19% 19% 17% 1.0% Y 0.9% 13% 51% 0.10 10% 8% - FY14 FY15 FY16 FY17 FY18 Q3FY19 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Dec-18
* Net slippage ratio = Net slippages / Opening Net Advances, annualized
Note: Commercial Banking covers clients with an annual revenue between `10 cr and `250 cr 8 Way Forward
Strengthen the Coverage model Deliver higher growth and better profitability • Focus on mid-corporate and commercial banking business • Focus on RAROC based lending • Mid-corporate segment remains a key focus area
Integrated Credit + Transaction + Maintain focus on asset quality Investment Banking • Prudent risk taking with conservative policies • Focus on improving Working Capital to Term • Separation of underwriting and other Loan ratio business operations • Leadership in ECM and DCM
9 End of deck
10 Safe Harbor
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. Session 2 - Presentations Session 2
Strategy FY20-22 Retail Deposit Franchise Wholesale Risk and Retail Lending Credit Underwriting Wholesale Banking Cards and Retail Payments Retail Deposit Franchise Over the long term, Axis Bank’s deposit franchise has delivered steady and strong growth
Savings Account (SA) Average Balances Current Account (CA) Average Balances (In ‘000 `Crores) (In ‘000 `Crores) 63 137 60 21% 10yr CAGR 15% 10yr CAGR 120 49 19% 3yr* CAGR 103 18% 3yr* CAGR 40 83 35 73 31 62 27 29 52 23 43 18 36 27
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 9MFY19 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 9MFY19
Retail Term Deposits (RTD) Average Balances (In ‘000 `Crores) 158 25% 9yr CAGR 136 129 116 12% 3yr* CAGR 98
71 56 41 20 23
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 9MFY19 *3yr period: 9MFY16 to 9MFY19 2 We continue to increase our branch network, with improving productivity per branch
in ` Cr Branch Count CASA+RTD per Branch
3,956 91 3,695 85 85 3,295 83 79 2,895 71 2,580 70 69 2,393
1,938 60 1,613 1,383
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Q3FY 19 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 9MFY19
Note: Based on cumulative daily average balances (CDAB)
3 The Bank continues to invest in Branches ...
(CASA+RTD)* per Branch by region type Size of new branches opened Mix of branches by Maturity (yrs)
<1 yrs, 190 100% In ` Cr 10%
1 - 2 yrs, 10% 117 55%
40% 39% 2 - 3 yrs, >5 yrs, 10% 58% 39 17 3 -4 yrs, 6%
Metro Urban Semi-Urban Rural FY13 FY14 + FY15 FY16 + FY17 FY18 + 4 -5 yrs, FY19YTD 6%
Metro and Urban branches have higher Average new branch size has reduced by 60% 30% branches have a vintage less than productivity since FY13 3 years
Focus on higher productivity branch Reduced opex, leading to faster Upside potential exists from prior formats breakeven investments made
* As on 31st Jan, CASA is CDAB and RTD is Month End Balances (MEB) ^ Branch area indexed to area till FY13, excludes unbanked branches 4 Cross Sell and Digital remain the core of our growth strategy in Deposits
Strategy elements that have worked well and would be strengthened further New elements of Strategy
. Increase products per customer (PPC) Shift focus from CASA to CASA+RTD
PPC Indexed to FY13 SA growth 263% Segmented SA strategy 216% . Focus on Priority, Burgundy, NRI and Government savings
100% New engines for growth . Scale up digital SA . Leverage other platform businesses of the Bank FY13 FY18 9MFY19 RTD growth . Invest in Branches . Increase penetration in existing SA base . Enhance digital experience and service delivery CA growth Proportion of Savings accounts sourced Do more of the core through Tab banking . Leverage Merchant Acquiring Business relationships . Focus on government business
Digital . Simplify onboarding and drive digital activations 55% 63% 47% 49% 50% . Embed Axis Bank in all digital payments of clients
Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 5 Axis Bank is now amongst the leading players in the financial savings and investment industry
Distributor MF AUM MF customers .In ` bn In mn
495 1.45 458 1.18 412 1.03 340 0.87 289 0.63 0.74
FY14 FY15 FY16 FY17 FY18 9MFY19 FY15 FY16 FY17 FY18 9MFY19 Source - MF Dex
Broking customers Huge Upside Potential in mn Product Penetration within SA base remains low
2.05 1.84 9.7% 1.39 1.01 0.69 4.2% 4.1%
FY15 FY16 FY17 FY18 9MFY19 Mutual Fund Life Insurance Broking Investing in digital channels: Option to invest, redeem and manage portfolio through Mobile App, Internet Banking and RM tablets As on 31st Dec’18
6 Way Forward
Simplify Branch Banking New Customer Acquisition • Streamline and strengthen processes across all • Regular banking channels branches • Leverage other platform businesses of the group • Shift focus from CASA to CASA+RTD
Cross Sell and deepening • Non-SA customers Focus on scaling up digital origination of • Focus on float business deposits • Increase share of RTD in existing SA base
Focus on Government segment
7 End of Deck
8 Retail Lending Axis Bank has grown the Retail Lending portfolio steadily and strongly over the last decade
Axis Bank Retail Advances 27% CAGR In ₹ Crores 49% 47% 45% 41% 40% 38% 35% 32% 32% 2,32,397 2,06,465 1,67,993 1,38,521 1,11,932 88,028 53,960 68,805 35,971
Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Dec-18
Retail Advances Retail as % of Total Advances
Leverage Branch Channel Focus on cross sell % Sourcing through branches % Sourcing from existing deposit customers of the Bank
47% 50% 50% 48% 81% 45% 75% 41% 72% 36% 70% 68% 69% 65%
FY13 FY14 FY15 FY16 FY17 FY18 9MFY19 FY13 FY14 FY15 FY16 FY17 FY18 9MFY19 2 The proportion of higher yielding Retail Lending products has consistently increased over the years
Retail Lending Portfolio Mix
• Personal Loan • Credit Cards 29% 31% 37% • Rural • Small Business Banking • Asha Home Loans
• Home Loan • LAP 71% 69% 63% • Auto Loan • Commercial Vehicle / Equipment
FY 13 FY 16 9M 19
High Yield Products Regular Yield Products
3 Our Risk Management architecture in Retail works across three lines of defense
Choice of business
Portfolio Choice ― Enhanced Business Mix Control ― Customer type (ETB/ NTB) ― Channel (Branch / DSA/ Alternate)
Key focus area: Originate retail loans from existing deposit customers
Core lines of defense
Monitoring Credit Models Credit Policy ― Portfolio Mix ― Scorecard monitoring
Key focus area: Use of proprietary risk models Key focus area: Low LTV* and steady Key focus area: Automated Early Warning FOIR* norms Systems and Behaviour scorecards
Final line of defense
Collections
Key focus area: Analytically optimized queuing strategy and channel selection
*LTV – Loan to Value, FOIR – Fixed obligation to income ratio 4 Higher the risk of the underlying product, the higher is the Bank's reliance on internal deposit customers
Focus on deposit base is sloped positively with underlying risk of the product High
CC PL
SBB
AL
HL
Proportion of Internal Bank Customers Customers Bank Internal of Proportion Low
Low High Risk
HL – Home loan, AL – Car Loan, SBB – Small Business Banking, PL – Personal loan, CC – Credit card 5 The Bank has held steady low levels of LTV and FOIR for new originations
Average LTV – HL Sanctions Average FOIR – HL Sanctions 61% 62% 48% HL 47%
Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18
Average LTV - LAP Sanctions Average FOIR – LAP Sanctions
LAP 55%
39% 42% 38%
Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16 Apr-17 Apr-18
FOIR – Fixed obligation to income ratio LAP – Loan against Property 6 The portfolio choices and conservative underwriting policies have resulted in better risk outcomes than peer average
Delinquency benchmarking
Peer Private Bank average = x
0.89x 0.83x
0.68x 0.66x
0.46x 0.43x
Axis Bank
Loan against Credit Card Loan Personal Loan Commercial Home Loan New Car loan Property Vehicle
7 The Bank adopts conservative NPA recognition and Provisioning norms in retail
NPA recognition – Daily stamping Provisioning policy on Retail NPAs
• In H2FY18, the Bank tightened its process for recognition of NPAs in the retail segment • The Bank has adopted a provisioning policy more stringent than minimum RBI requirements • This move to a more stringent daily NPA recognition has resulted in elevation of gross slippages since Q3FY18 • This results in a higher level of provisions than the regulatory minimum • The increase in net slippages has been modest and has since then stabilized.
Net Slippage Ratio in Retail – Impact of Daily Stamping Provisions held by the Bank in Retail 1.4x 1.19%
0.87% 0.84% x
Regulatory Provisions held Q1'FY17 to Q2'FY18 H2'FY18 9M'FY19 minimum by the Bank 8 Digital is becoming increasingly important as a source of account origination in Retail Lending
% Contribution of digital lending in Personal Loan % Contribution of digital lending in Business Loan
58% 46%
25%
5%
Dec-17 Dec-18 Dec-17 Dec-18
9 Developments in key businesses
Home Loan Loan against Property Auto Loans
We are seeing a lot of buyer interest in the Competition intensity has come off in the past Auto loans segment is now dominated by banks affordable and budget homes segment few months on account of slow down by HFC/NBFCs Consumers are doing a lot of research online Consumer’s preference is towards fully before finalizing their choice constructed properties Balance Transfers have come down Sector Used car loans eco system is gradually moving Incremental yields have improved over the Incremental yields have improved over the last to a more organized set-up last 6 months 6 months
Continue to see healthy growth driven Asha Home Loans has crossed Rs.5000 crores 73% of our LAP portfolio comprises of the by increased bank branch originations from the portfolio Bank’s existing deposit customers branches 2/3rd of our incremental home loans are for 50% of our LAP is originated from the Used car now contributes 15% of the incremental ready and resale properties
branches originations AxisBank 2/3rd of our incremental home loan sanctions We have maintained consistent LTV of ~40% Cost of acquisition is coming down on account of are for loans less than Rs 30 lacs for our LAP portfolio change in channel mix
10 Developments in key businesses
Focus Growth Areas
Personal Loans Small Business Banking Rural Lending
Personal Loans segment is dominated by Huge potential in MSME segment Healthy traction in some of the rural banks segments – farm equipment, microfinance, Significant competition from banks and NBFC’s agri value chain High percentage of incremental originations are coming from existing customers for the Digital foot prints are on the upswing Sharp fall in the commodity business Sector industry Credit culture impacted in the farmer loan Analytics being used extensively to offer segment due to loan waiver announcements Personal Loans
100% of the PL portfolio comprises of salaried 58% of incremental Business loans are end to customers Witnessing robust growth in farm equipment, end digital micro finance and rural MSME segments 92% of incremental originations is from ~81% of the incremental originations from existing deposit customers of the Bank Offer rural loans from more than 551 districts existing deposit customers of the Bank
AxisBank End to end paperless underwriting capabilities Rise in farm loan NPAs for industry and Axis Average ticket size of the portfolio at Rs.18 contributing 50 % of the incremental Bank lacs disbursements
11 Way Forward
Continue Core Strategies that has worked well: Expand cross-sell strategy to cover entire • Sourcing from existing deposit customers. • Analytics driven underwriting Strategies. Axis franchise. • Leverage branches for Sourcing
Accelerate growth in identified new areas of Invest heavily in digital originations : focus • Deliver customer experience • Small Business Banking • Continuously decrease cost of acquisition. • Affordable Housing • Personal Loans
Launch new businesses to cover product white Continue to focus and sharpen risk tool kit to spaces. deliver outperformance
12 End of Deck
13 Cards and Retail Payments Payments businesses play four important roles in a Bank’s strategy
1 Face of the franchise 2 Increasing customer engagement 3 Driving profitability
• Higher credit and debit card usage leads • Highest penetration among all the Bank to higher balances in customers’ CASA deposit customers leading to deepening accounts • Granular retail businesses with • Merchant acquiring business brings predictable revenue and profit streams engaged CA clients with high levels of activity and balances • Among the highest return generating businesses
4 Driving partnerships Cobrands Usage Unified Payments Interface Merchant Acquiring Business
2 Retail electronic payments in India are growing at a tremendous pace, which has rubbed off positively on cards businesses
$498 Bn
$348 Bn 208
15 While cards have led the payments in US 185 20 and wallets have dominated the $143 Bn 65 payment space in China, the payment industry in India can take a very different 11 1 65 route. 57 46 6 46 22 126 34 58 23 2016 2017 2018 Immediate Payment Service (IMPS) Credit card Usage at POS Debit card Usage at POS PPI cards & m-wallet UPI Mobile Banking
* Excluding PPI Wallets. Source: RBI,NPCI, All values in $Bn 3 Axis Bank has a strong market position across most digital products
Axis Bank Market Standing Across Products
Product
1 2 Mobile Debit Cards Credit Cards Merchant Acquiring UPI4 Forex Cards Banking3 Business
Market share 7% 12% 13% 14% 14% 46%
4th th rd rd st Ranking 4 3 3 1
Source: RBI Jan 2019, Internal Data 1 – based on card transaction volumes at point of sale terminals ; 2 – based on cards issued 4 3 – based on volumes (RBI Sept. 2018 data), 4 – market share based on volumes, ranking data not available from authenticated sources Our Credit Cards business has grown strongly in the last 5 years and is now the 4th largest in the country
Featured Cards Credit Cards in Force – Market Share*
12.0% 12.3% 11.2% 9.8% 8.2% 7.2% 5.6%
Co-branded Cards Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Dec-18 Market share has more than doubled over the last 5 years
Credit Cards Spends – Market Share
Premium Cards 9.6% 10.2% 8.7% 7.1% 7.5% 5.7% 3.9%
FY13 FY14 FY15 FY16 FY17 FY18 9MFY19
Source: RBI Data Reports | *Market share as of the year ending period 5 Cards business has delivered consistent strong growth …
All figures in ` Cr
Credit Cards Spends Debit Cards Spends Merchant Acquiring Throughput
41% CAGR* 33% CAGR* 14% CAGR* 85,829 86,277
64,660 44,329 45,502
32,926 32,957 45,869 45,920 41,077 28,730 39,249 24,816
18,255 13,602 13,259 10,681 8,613 8,849 6,797 4,821
FY13 FY14 FY15 FY16 FY17 FY18 9M FY19 FY13 FY14 FY15 FY16 FY17 FY18 9MFY19 FY13 FY14 FY15 FY16 FY17 FY18 9MFY19
On track to see over `2 lakh crore of cards spends going through Axis Bank cards network in FY19
*CAGR calculated for period FY14 to 9MFY19 6 …which has resulted in strong fee income contribution over the years
In `. Cr
Fee Contribution of Cards Businesses 24%
21%
19% 1,876 16% 1,738
13% 1,469 11% 10% 9% 1,208 7% 7% 7% 911
659 525 405 251 177 191
FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 9MFY19
Card Fees as % of Total Bank Fees
7 The Bank has been a leading innovator in payments use cases
Innovation Business Value Underwriting & Acquisition • Ability to underwrite new to bureau customer – 55% of them in portfolio Ability to card outside tier 1: 60%+ of cards issued • Tab based sourcing since 2015 outside tier 1 markets
Issuing Driving instant card delivery & digital adoption - • Instant Credit card since Aug 2018 significant driver of ‘digital native’ customers’ • Leading player in contactless payments – 6.5X growth in 10 months experience and behaviour
Merchant Acquiring Business • Single integration for various payment modes like Cards, QR, etc Ability to add features to terminal and service • Designed for Physical (UNIPoS) and Digital world (UNIPG) remotely - capability, cost and service re- • Bharat QR: India’s first of its kind in-home “smart bill pay initiative” engineering
Unified Payment Interface: st 1 Indian Bank Preferred partner of choice for large payment apps • to launch UPI SDK – Taxi aggregators and merchants • to launch UPI @ POS - Launched with Future Group • to create API based integration architecture for partner payment Apps
Transit • Bangalore Bus – Partnership with BMTC Kochi metro - India’s first open loop, inter modal • Transit solutions deployment for Raipur Smart City in progress transit solution 8 Ambition to scale the leadership charts while following prudent risk management
• HDFC – 20% # CIF Growth Industry : 19% Top 3 banks • SBI – 23% Axis Bank 33% • ICICI – 14%
• HDFC – 24% Spends Growth## Industry : 25% Top 3 banks • SBI – 38% Axis Bank 41% • ICICI – 25% Prudent Risk* Management Axis Bank risk significantly lower than peer average Mobile App 29% Higher* activity 53% Customers on mobile app Penetration** 129% Higher* spends/month
Technology as • Drive higher Straight through process & re-engineer costs • Reduce friction from customer experience through value chain from card application to Business Enabler usage & service
# CAGR calculated Dec18 over Mar14 • versus those who don’t use mobile banking ##CAGR calculated 9MFY19 over FY14 ** In the Bank’s Credit Card customer base 9 Significant headroom remains for continuing our strategy of acquiring cards customers from the Bank’s deposit base
Penetration of credit cards in the Bank’s savings account customer …with lower risk levels base has been increasing…
15% 19%
97%
85% 81%
3%
Non Carded Carded Existing deposit customers of the Bank Non deposit customers of the Bank
Risk X 1.5X 2016 2019
Saving Account customer Savings Account customer base = 18.1 million base = 22.5 million
*SA Base excludes ASAP account
10 Way Forward
Expanding the acquisition funnel Leverage digital to deliver instant • Cross sell to multiple customer bases within solutions the Bank • Cards onboarding • Invest in significant new partnerships for • Merchant onboarding future expansion • Service
Optimize portfolio profitability and reduce risk Transform “initiatives” to “businesses” • Upgrades • UPI • Activity rates • Transit • Portfolio actions
11 End of Deck
12 Safe Harbor
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. Event Agenda and Presentations Session 3
Strategy FY20-22 Business Analytics Wholesale Risk and Wealth Management Credit Underwriting Wholesale Banking Subsidiaries The path to sustainable RoE expansion and Closing Remarks Business Intelligence Unit Applying Analytics to drive business value We have invested in a centralized Business Intelligence Unit that provides analytical services to various functions of the Bank
MD & CEO
ED ED ED Head Digital Wholesale Retail Corporate CRO CCO CFO Head IT Banking Banking Banking Center
• Transaction • Retail Lending • Financial Banking Crime • Cards • SME Lending • Operations • Retail • Corporate Liabilities Lending • Branch Banking
Central Business Intelligence Unit (BIU) team supports various businesses and support functions
2 The agenda of the BIU is to monetize data assets of the Bank for risk management, growth, and operational optimization Decisions Audio Businesses generate large amounts of Data Assets continuously Strategic, Business, Policy Decisions are made all the time Images Unstructured Data text ANALYTICS
Video Structured Bank data
Connecting the dots to drive value and create new insights
1 Reporting and conducting Business Reviews 4 Building proprietary prediction models
Key Areas 2 Driving business growth through data and insights 5 Setting up key analytical infrastructure and delivery systems
3 Managing risk outcomes through analytical 6 Monetizing AI and Big Data proof of concepts toolkits 3 We have a 300+ member dedicated analytics team Young, techno-functional group with continuously evolving skillsets
Current Role Mix and Focus Talent Pool & Features
Role Mix Focus Area
Business Analysts 57% Business Growth Risk Outcomes . Average employee age of 28 years
. 50% have Masters and Post Graduate degrees Reporting Analysts 24% Report & Review . Large campus recruitment program • 20 campus visits Data Scientists 8% Proprietary Models • Big internship program w PPO AI and Big Data Data Engineers 11% Analytical Infra . In-house training program • 2,000+ man hours of instructor led training • Functional , Technical and Algorithms areas • Self paced training – partnering with Coursera and Simplilearn Technical Skillset . Hackathons & Contests
4 The Bank’s proprietary risk scorecards form the core of our risk management strategy in Retail
Personal Loan Application Scorecard
100%
. Risk scorecards in place for all major Decline Approve products 80%
. Proprietary risk scores = f(Bureau variables, 60% application information, internal bank variables) % of % Risk 40% No Model . Significant competitive advantage over more CIBIL Score vanilla bureau users 20% App Score
0% 0% 20% 40% 60% 80% 100% % of population
5 The Bank has a data driven, ‘always on’ pre-approved lending program
Analytics plays a pivotal role in Bank’s pre-approved strategy Significant coverage and revenue generation
% of Savings Account customers Data Preparation + Risk Scoring (At least one lending offer available) ― Data Procurement ― Risk Scoring and Eligibility cut-offs
Offer Creation ― Initial Loan and Credit Limit Amount ― Rate Offer/ Product Offer 34% 29% 24%
Marketing ― Channel and Campaign Management Apr'17 Apr'18 Jan'19 ― Customer Personalization
Fulfillment ― Portfolio Insights ― Feedback into data preparation 6 Personalisation and customer UI/UX are emerging as key areas of application of non-traditional analytical techniques
Customer facing transaction narrations were … before text mining algorithms complicated and hard to understand … entered the scene
NLP Engine
#DADS_RECHARGE
7 Over the years, the Bank has invested in 3 key pillars to build a world class Analytics team …
Adoption of Analytics culture Robust data assets and technology Right people & skill mix
• ‘Datafication’ of processes • Analytics specialists Senior management sponsorship • Transform data from raw to suitable for • Algorithm experts analytics Business buy-in • Solid technology team • Analytics workbench and tool kits Constant reinforcement • Continuous training and sharpening • Robust workflow systems & rules of skillset engines
8 …with the latest tech architecture to aid new-gen Analytics
Manage risk outcomes Drive business growth Report & review Systems of …
Engagement
Analytics
Data
9 New use cases are being developed that leverage emerging Artificial Intelligence capabilities
What does it do? Bank use cases
• Transforms unstructured text into • Self-synthesis of unstructured bank Natural Language Processing meaningful data documents • Chat-bots
• Intelligently identifies defined objects in • Branch and ATM e-surveillance Computer Vision images and videos • Face recognition in case of Re-KYC
• Identifies and responds to sound produced • Robotic call centers Speech Recognition in human speech • Voice authentication
10 Way Forward
Cost initiatives and Ops Risk Deep Learning
Drive more value by specifically focusing Adopt higher use of Deep Learning on cost reduction and operational risk networks which have higher prediction related initiatives than normal Machine Learning techniques
Customer Personalization ‘Think and Do’ Agile
Create and harvest value from our • Working as an agile team across customer personalization platform to drive different functions higher engagement • Use different skillsets – business, data science, engineering and technology to solve critical problems in an agile fashion
11 End of deck
12 Wealth Management at Axis Bank The Burgundy Proposition India Wealth Management opportunity
1.1 mn families have wealth > USD 100,000 HNI wealth pool in India is over USD 1 Tn
# HNIs in India (‘000) HNI individual* wealth in India ($B)
13% CAGR# 11% CAGR#
14% CAGR# 1,066 727
# 322 16% CAGR 877 91 785 797
0.1 - 0.25 m 0.25 - 1 m > 1 m FY15 FY16 FY17 FY18
*HNI Individual with > $1M in assets. Individual wealth includes financial and *CAGR for the period 2017-2022 physical assets, onshore and offshore. Source: BCG Global Wealth 2018 Market Sizing # CAGR over FY15 to FY18 Source: Karvy Wealth Reports, Capgemini Wealth Reports
Favorable macro indicators… … are driving greater investment appetite • Continued GDP growth of 7-8%, Inflation expected to remain • Continued investments in financial assets vis-à-vis physical assets benign • Increasing focus on growth oriented assets with higher risk-return • Various policy measures taken by Government to formalize profile the economy and improve ease of doing business to • Rise of HNIs in Tier 2 cities, along with continued growth in Tier 1 encourage entrepreneurship cities 2 3 Axis Bank is now a leading player in the Wealth Management business
Launched in 2014, Burgundy is positioned well to ride the projected growth in HNIs and their wealth
Relationship Management and Wealth Specialist Eligibility criteria for Burgundy team of over 500 • Total Relationship Value of Rs.30 lakhs • Total Relationship Value of Rs.100 lakhs including holdings in demat account AUM* over USD 18.5 bn • Net monthly salary credit of Rs.3 lakhs & above
4th largest Wealth Management business in India Burgundy Performance (FY14-18) (Asian Private Banker**)
29.6 AUM ^ 45% Fee Revenue 55%
17.7 13.3 12.7 Touch Points Customer Base 36% 15% (RMs & ICs) Bank 1 Non Bank Wealth Non Bank Wealth Axis Bank Wealth Mgr 1 Mgr 2 Management
* As of 31st December 2018 (Reference rate US$ 1 = INR 70); ^ CAGR growth for 2 yrs ** India 2017 AUM League Table, in terms of AUM ($ Bn) 4 We offer a full-service product suite for Burgundy clients
Equity Investments Fixed Income Products Alternate Assets Commodity
• Mutual Funds, • Bank Fixed Deposits • Discretionary & Non Discretionary • Sovereign Gold Bonds • Mutual Funds Portfolio Management (PMS), • Gold Mutual Funds • Bonds & Debentures • Alternate Investment Funds (AIF) • Axis Direct (ETFs, Stocks & Derivatives, • Gold ETF * • Company Deposits * Offshore Equity) * • Commodities Trading * Foreign Exchange Life Insurance General Insurance Will & Legacy Planning
Term, Endowment, ULIP, Whole Life and General insurance for Vehicles, Travel, Legacy Planning – assistance in creation of other plans offered by our partners Health, Home and Business offered by • Forward contracts, a Will or Trust for succession or Estate • Max Life Insurance Co. • Tata AIG General Ins. • NRI Pro Deposits ^ Planning • LIC of India • Apollo Munich Health Ins.
Research based product solutions – synergies from in-house group expertise
Economic Research Equity Research Product Due Diligence Mutual Fund Selection Senior Economist supported by a team of 5 Research team at Axis Capital and Axis Investment Research team brings A scientifically designed AMC and scheme analysts tracking Global and Indian macro Securities provides regular equity investment product ideas and solutions selection process which includes a mix of economic indicators investment ideas and derivative strategies after a detailed due diligence quantitative and qualitative factors.
* Products offered by Axis Securities ^ For NRI customers. Includes Bank Products, Axis Group Products and Third Party Products distributed by the Bank 5 Way Forward
Leverage customer base across Axis Bank • Retail Bank premium customers • Salaried senior and middle management of corporate clients • New economy companies and their promoters • Promoters of small and medium enterprises • Large and Mid corporates – Promoters, treasury and management team
Become primary banker for existing base of clients • Provide financial products and services across the full life cycle of the customer’s personal and business needs • Leverage advanced analytics to drive customer activity and sales • Continue to broaden customer relationships, grow revenues with focus on recurring income and execute with discipline and prudent risk management
Leverage Tech to deliver products and increase efficiencies • Complete front-to-back automation for client on-boarding, product offering and servicing • Continue to enhance our digital capabilities, increasing efficiency and self-service capabilities • Further improve digital tools provided to relationship managers, an optimal mix of ‘High Touch’ and ‘High Tech’
6 End of Deck
7 Axis Finance Axis Finance was setup to complement the Bank’s Lending business
Profitable from 1st AUM touches `5,000 Launch of LAP & year of its `100 crs PAT crores Micro LAP operations
June’13 Mar’14 Sept’15 Mar’16 Dec’16 Sept’17 Mar’18 Dec’18
Dual Rated Incorporation of Opens first 3 AAA/A1+ by • Net worth crosses `1000 crs Axis Finance Ltd centers CRISIL • ~22% RoE
Key principles driving the Business
Expand Product reach Expand customer segment reach Leverage Axis Brand 360o Solution Offer products which are Onboard customers across segments Maximize Group’s Provide 360° solution to clients by not part of the Bank’s that are not catered to by the Bank Revenue by leveraging offering an alternate lending offerings Axis Brand/ Reach platform
2 Key highlights
Current product offerings
Retail Loans Structured Corporate Loans
Funding to HNIs against portfolio of Established groups + Exclusive asset shares, property charge + Defined exit strategy Book Highlights • LAS(Shares, MF) > Rs. 20 lacs • Acquisition Funding, PE Buyouts, Special . AUM Growth CAGR (FY 2014-18) of 55% • ESOP Funding Situation Funding . Wholesale & Retail mix of Advances 83% & 17% • Loan against property • Short to Medium Term exposure Financial Highlights • Clearly defined exit mechanism . Income and PAT Growth CAGR (FY 2014-18) of 76% & 59% respectively . RoE of 18% for 9MFY19 . Rated AAA & A1+ by CRISIL & ICRA LAS Real Estate Loans
Exposure to top company scrips 80% exposure towards late-stage projects Asset Quality . NPA ratio of 0.36% as at end of Dec’18. We have Listed, Large & select Mid cap Focused on ready inventory/last-mile Real • • had only 1 account as NPA so far • Short Term Exposure Estate assets • AA & above comprise 88% of all loans • Early stage to select reputed developers
3 Significantly reduced our dependency on Market funding
In ` Crs. Liability Book Mix Strong growth in Loan Book 57% CAGR* 21% YOY
16% 7,914 27% 6,624
4,292 3,104 29% 2,095 1,104 28%
FY14 FY15 FY16 FY17 FY18 9MFY19 Banks Commercial Papers NCD Equity * 4 yr CAGR
Trend in Income and PAT 76% CAGR* In ` Crs.
59% CAGR* 722 23% YoY 651 575 0% YOY 373
224 209 165 155 76 78 111 33
FY14 FY15 FY16 FY17 FY18 9MFY19
* 4 yr CAGR Income PAT 4 Way Forward
Build retail book Strong ROE
Introduction of new products for granularity: • High credit ratings leading to efficient cost of • Collateralised loans borrowings • Low-ticket mortgage • Deliver best-in-class Returns • Consumer durables
Industry leading technology infrastructure Future proof the business
• Move towards paper less sourcing (to the extent • Effective Risk Management through robust allowed by regulator) credit score cards and defined guardrails • Improve productivity of sales force by providing tech-enabled tools
5 End of Deck Axis AMC Axis Mutual Fund has been the fastest growing AMC in the industry …
2010 20181
Reliance 1,10,413 1st HDFC 3,34,964 1st
nd HDFC 88,780 2 ICICI 3,07,735 2nd
ICICI 80,989 3rd SBI 2,64,353 3rd
UTI 80,218 4th Aditya Birla 2,42,344 th Sunlife 4 Aditya Birla 62,343 th Sunlife 5 Reliance 2,36,256 5th LIC 42,304 6th UTI 1,57,586 6th SBI 37,417 7th Kotak 1,39,391 7th Kotak 34,681 8th Franklin th Franklin 1,09,525 8 33,290 th Templeton Templeton 9 th rd Axis MFAxis 81,622 9 th IDFC 25,604 10th 23 9
DSP 79,245 th Axis MFAxis 23rd 10
Source: AMFI Data Source: AMFI Data as on Dec-2018 2 … and has climbed to 9th position in the AUM leader board, with one of the highest equity mix
Rank AMC Name *Q AAUM Dec-18 1 Year Growth 5 Year Growth Asset mix – (Equity/Hybrid) 1 HDFC 334,964 16% 25% 49% 2 ICICI Prudential 307,735 5% 26% 51% 3 SBI 264,353 29% 33% 65% 4 Aditya Birla Sun Life 242,344 1% 23% 38% 5 Reliance 236,256 -3% 18% 52% 6 UTI 157,586 3% 16% 48% 7 Kotak Mahindra 139,427 16% 31% 43% 8 Franklin Templeton 109,525 10% 20% 51% 9 Axis 81,622 11% 41% 60% 10 DSP 79,245 -9% 19% 54% 11 L&T 69,080 15% 32% 58% 12 IDFC 64,583 -10% 9% 36% 13 Tata 49,293 1% 20% 46% Total 2,362,041 6% 22% 51%
*Q AAUM – Quarterly AAUM AMFI as on Dec-2018, Source: Asset mix – AMFI Data as on Dec-2018
3 Strong fund performance, gaining market share
Fund performance (relative to peer group) Number of folios and market share Count in Mn 4.5% 0.3% 47% CAGR* 12.4% 3.9% 4.0% 3.5% 2.82 3.59 63.6% 2.5% 2.17 93.0% 1.67 87.6% 1.5% 1.03 36.1% 0.6 7.1% Equity & Hybrid Debt Liq & USTF Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Dec-18 Quartile 1 Quartile 2 Quartile 3 Axis Folio Count Folio Market Share Source: Performance data MFI and Ace, quartile performance refers to each fund’s Source: Folio data AMFI relative performance to peers in its category *CAGR over last 5 years
Trend in PAT Amount in ` Crores 57 45% YOY* 43
32 24
8 2
FY14 FY15 FY16 FY17 FY18 9MFY19 4 Way Forward
Consistent investment performance Invest to achieve Top 5 level scale
Broad-base distribution channels Enhance PMS/AIF capabilities
5 End of Deck
6 Axis Capital Axis Capital – India’s Leading Investment Bank & Equity House
Rechristened as Axis Capital Successfully completed 35 ECM post acquisition of Enam’s transactions, highest by any Investment Banking & Investment Bank in India in a Institutional Business by Axis financial year Bank
1984 2012 2015 2018 Mar-19
Awarded Best Investment India’s #1 Investment Bank with Bank, Best ECM House, Best leadership positions across Enam Securities DCM House by Finance Asia, ECM, Advisory & DCM. Servicing was incorporated Best secondary placement by over 250 pedigreed investors The Asset Triple A Regional across the globe Awards
2 Key Highlights
INVESTMENT BANKING INSTITUTIONAL EQUITIES
• Awarded Best Investment Bank in India for the 4th year in a row • Strong relationships built over last 20 years with all key (2018, 2017, 2016, 2015) by Finance Asia investors across geographies
• Awarded Best ECM House in India for 2018, 2015 and 2013 by • Existing coverage of over 230 stocks representing more Finance Asia than 75% of Market Cap
• Our M&A bankers were ranked #1 and #2 M&A advisors in Asia • Our on ground, in-depth research followed by investors Pacific region in 2018 by Mergermarket across the globe
Trend in Revenue and PAT Amount in ` Crores
402 12% CAGR* Income and PAT impacted by muted activity and volatility in the capital markets 309 319 289 9% CAGR* 42% YoY
59% YoY 151 128 139 108 113 50
FY15 FY16 FY17 FY18 9MFY19
* 3yr CAGR Revenue from Operations PAT 3 Way Forward
Investment Banking Institutional Equities
• Maintain leadership in the ECM space • Be the preferred research house for top-tier funds globally • Provide top quality corporate access to investors across the globe • Build leadership position in M&A Advisory • Favored Equity House for executing and placing large blocks • Offer solutions across products to large corporate houses • Sought-after investor conference destination • Reduce market dependent cyclicality of IB business by increasing share from non-ECM / broking business • Emerge as the preferred full-service Investment Bank
4 End of deck
5 Axis Securities The Journey so far…
2010 2011 2012 2013 2018
• Axis Sales Ltd renamed to • Launched ‘Axis Direct’ • Added Mutual • Introduced Mobile • Crossed over 2 million Axis Securities & Sales a Digital platform for funds and equity trading app for all our customer base. Ltd. capital market SIP on the digital customers • Reached #6 in Unique • Regulatory approvals to investments platform trading clients. start broking operations • Launched Commodities in MCX and NCDEX
Growth through Innovation
Chatbot Real Time mailers Award Winning Web Portal Wise Advisor 2.0 Industry 1st AI-based International awarding winning Simple UX/UI Leverage technology to provide chatbots marketing campaign simplified investment solutions
2 Strong growth in customer addition, mobile adoption and revenue over the years
Ranked 3rd in total customer base One of the Highest in Mobile Adoption Mobile contribution in Volumes (Turnover) Cumulative customer base Count in Mn 65% 2.08 1.84 42% 1.38 1.00 18% 13%
FY 16 FY 17 FY 18 YTD FY 19 FY 16 FY 17 FY 18 YTD FY 19 * YTD FY 19 till Jan 19
Trend in Revenue growth 32% CAGR* in ` Crores 951 14% YoY
756 769
562 455 314
FY14 FY15 FY16 FY17 FY18 9MFY19
* 4 year CAGR 3 Way Forward
Acquisition Digital Prowess Onboard customers through digital channels Hyper-personalized mobile app and web and open trading account of customers with trading platform leveraging Machine any Bank account Learning and Artificial Intelligence
Investment Products Improve Market Share Enhance product bouquet by introducing Increase daily trading volumes by on products like Currency Trading, Debt boarding high volume customers through Advisory, Online Insurance, to increase customized plan products per customer End of Deck A.TReDs Fintech platform offering Trade Receivables Discounting System Factoring solutions for Small Businesses are a large market opportunity globally
Factoring is seen as a convenient solution to help MSMEs optimize cash flows without taking loan liabilities
Factoring Volume (USD billion) 2017
479 Top 5 Countries in factoring volume
383 343
274 270
Other Asian economies
58 55 52 44 15 5
China UK France Germany Italy Taiwan Hong Kong Singapore Japan Korea India
Source: FCI statistics, 2015-16; RBI white paper on TReDS
2 A.TReDs is an online, 3-party ecosystem facilitating interaction between MSMEs, their buyers and financiers
Large Corporates (Buyer)
Buys good from seller and has to pay at the end of the credit period
Enables financiers to buy invoices from sellers and also settles the payment from financier to seller
MSMEs (Sellers) Financiers
Provides goods / services to large “Buys” seller’s invoices and assumes buyers and raises invoice on buyer ownership of receivables to be paid for payment after credit period by buyer on due date
Incorporated in May-16, A.TReDs is a 67/33 joint venture with mjunction
*TReDS – Trade Receivables Discounting System 3 Government is strongly backing TReDS for SMEs and MSMEs
In Oct-17, Government of India mandated all major PSUs, PSBs to join TReDS platform to facilitate payments to MSME vendors.
In Budget February 2018, Govt. has announced integration of TReDS with GSTN A.TReDs is one of only 3 entities, and the only Bank promoted entity, to be licensed by RBI to set up a TReDs The Public Procurement Policy wants 20% of all procurement by PSUs to be made from platform MSEs.
Government notification dated 2nd Nov 2019 directed companies having turnover of more than Rs 500 crores to register on TReDs
4 Business volumes at A.TReDs have been growing very strongly
Invoicemart Ecosystem – Current participation
Total Buyers 145
Total Sellers Total Financiers 1577 23
Cumulative Financed Throughput (` Crores ) Cumulative No. of Invoices
1,696 1,19,614
1,163 73,408
663 415 28,972 174 14,304 55 1,594 6,607
Q2 FY18 Q3 FY18 Q4 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Q2 FY18 Q3 FY18 Q4 FY18 Q1 FY19 Q2 FY19 Q3 FY19
5 Way Forward
• Drive order of magnitude growth to achieve • Leverage technology to maintain leadership scale position • Deliver segmented solutions and differentiated client servicing
• Achieve operating break even
6 End of Deck
6 Transforming The FinTech Landscape Freecharge is among the top non-bank financial services platforms in the industry …
Based on App Annie intelligence data Dec ’18 for Android users of Financial apps in India 2 … With a significant consumer franchise
Registered with FreeCharge 70 MN
Transacted on FreeCharge 34 MN Potential franchise for various Axis Bank products Quarterly Active Users 19 MN
Monthly Active Users 9 MN
12 million new users have been registered since acquisition by Axis Bank 3 FC Is primarily targeted at the young, upwardly mobile segment of the population which is ‘Digital Native’ but underserved.
Why is this segment interesting for Freecharge?
Large segment, under penetrated by banks
18% of banked population Who is the customer? 1% of banking revenues . 18-30 years in age
. Annual income of Rs. 2 2.9 products per customer – 6 lakh
. Urban Digitally native
50%+ of consumers use digital for financial services
Consumers of tomorrow
Up-migrating into higher income group consumers Rs. 6-25 lakh is fastest growing population segment
4 Post acquisition by Axis Bank, Freecharge has focused on evolving from a leading Digital payments platform to a Digital Financial Services platform
DIGITAL PAYMENTS DIGITAL FINANCIAL SERVICES
FC CREDITLINE MOBILE RECHARGES
DTH, UTILITIES FC DEBIT EMI
BUS TICKETS
MUTUAL FUND & INVESTMENTS DEALS
UPI P2P GIFT CARDS
MERCHANTS SAVINGS ACCOUNT & DIGITAL DEPOSITS
... 5 The portfolio of financial services solutions is being expanded steadily to offer multiple propositions…
Digital Savings Accounts
Digital product Co-Create small ticket, high Virtual Credit cards platform frequency, digital only products, offered exclusively on the platform Small ticket loans
Freecharge Digital Fixed deposits Payments solutions Personal Loan
Credit cards Collaborate as a channel with partners to offer standard non Digital channel for exclusive products to target existing products Investments existing consumers Insurance
6 Our goal is to combine the product breadth of Axis Bank and the capability of a fintech to create value for the Bank and Freecharge customers
Target young, digitally native, mass
Tailor products and experiences for them
Next generation experimentation
7 Thank you
8 The path to sustainable ROE expansion After consistently strong delivery till FY16, the Bank’s ROA and ROE have fallen sharply
1.83% 1.78% 1.72% 1.67% 1.68% 1.68% 1.70%
19.9% 21.2% 20.5% 19.9% 20.1% 1.44% 18.2% 18.6% 17.5%
0.65% 7.3%
7.2% 0.60%
0.04%
0.5%
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 9MFY19*
RoE RoA
*Annualized 2 The fall in ROA has been driven by both revenue lines and credit costs NII to Average Assets Fee to Average Assets NII margin has reduced by ~ 50 bps from peak levels Fees have reduced by ~ 50 bps from peak levels
1.86% 1.88% 3.43% 3.46% 1.81% 1.82% 1.76% 3.35% 1.68% 1.64% 3.21% 1.54% 3.13% 3.18% 3.09% 3.09% 1.39% 1.38% 1.31% 2.96% 2.89% 2.80%
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 9M * FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 9M* FY19 FY19
Cost to Average Assets Provisions to Average Assets Cost efficiency has improved by ~ 20 bps Provisions are ~110 bps over FY 11-16 levels 2.38% 2.40% 2.31% 2.13% 1.72% 2.21% 2.21% 2.22% 2.17% 2.28% 2.17% 2.15% 2.15% 2.08% 0.89% 0.72% 0.76% 0.61% 0.56% 0.59% 0.56% 0.44%
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 9M * FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 9M * FY19 FY19
*Annualized 3 The path to sustainable ROE expansion would be driven by three elements
ROE 3 drivers of ROE expansion
19.7% Risk normalization 18% 1 Reduce credit cost below long term average
Business mix optimization 7.3% 2 Portfolio choices based on RaRoC
Improvement in Operating efficiency 3 Avg FY11-15 9M FY19 Medium term Reduce Cost to Assets to 2% Aspiration
4 The most significant driver of ROE improvement is likely to be credit cost normalisation
We expect credit costs to reduce below long term average
Credit Costs: FY03 to FY18
3.57% 3.53%
Credit Cost 2.82% Credit cost net of recoveries 2.78% 2.30% 2.17%
1.73% 1.85% 1.35% 1.11% 0.99% 1.11% Credit Costs (Avg)* = 110 bps
0.99% 1.19% 0.70% 1.06% Net Credit Costs (Avg)* = 97 bps 0.61% 0.89% 0.61% 0.62% 0.61% 0.50% 0.54% 0.21% 0.53% 0.54% 0.55% 0.46% 0.48% 0.02% 0.37% 0.25% 0.14% * For the period from FY03 to FY18 -0.14% FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 9MFY19*
*Annualized 5 Business mix optimization is expected to be yield accretive and positive for margins
The book is now more Retail… … and Retail is moving towards more high yielding assets
37% 49% 31% 41% 29% 35% More Retail + More high-yield Retail + Mid-Corporate = Support for yield
Mar-13 Mar-16 Dec-18 Mar-13 Mar-16 Dec-18
Retail as % of Total Advances High Yield Products
NIM vs Net NPA movement NIM 4.00% 3.92% 4.00% Net NPA % 3.90% 3.90% 3.4% 3.81% 3.50% 3.80% 3.75% 3.00% 3.70% 3.65% 3.67% 3.59% 2.50% As NPA ratios normalize, some of the 3.60% 2.4% 3.50% 3.53% 2.1% 2.00% margin loss is likely to be regained 3.40% 3.33% 3.44% 3.43% 1.50% 3.30% 1.00% 3.20% 0.4% 0.4% 0.4% 0.3% 0.4% 3.10% 0.3% 0.3% 0.7% 0.50% 3.00% 0.00% Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Dec-18
*Annualized 6 There is opportunity for improvement in both Fees and Costs
Corporate Credit and Retail Cards contribution to Total Fees
32% 29% 28%
23% 21% 18% As Corporate Credit fees have declined, Cards business 18% 16% 14% 13% has emerged as a strong fee source 11% 9%
FY14 FY15 FY16 FY17 FY18 9M FY19
Corporate Credit Fees Cards Fees
Retail as % of Total Advances
49% 45% 47% 41% Even as Retail has increased in proportion, Cost / Asset 38% 40% 35% 32% ratios have been stable. With stability in Retail 30% 32% 25% proportion going forward, room for C/A to improve.
Mar-09 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Dec-18
*Annualized 7 Capital Ratios remain healthy to support growth
Avg CET1 consumption per year (excl. capital raise) = 47 bps
27% 27%
22%
Average loan growth = 18% 18% 17% 16% 15% 14% 14%
Advances 9% Growth 7%
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 9MFY19
• As at end of Dec-18, the Bank’s CET1 level stood at 11.77% • Expect around 48 bps accretion to CET1 on conversion of warrants issued as part of the previous capital raise
8 End of deck
9 Safe Harbor
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.