Corporate Presentation May 2019
Corporate Presentation May 2019
Strictly confidential Disclaimer
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. This presentation should not be construed as legal, tax, investment or other advice. This presentation is may not be copied, distributed or disseminated, directly or indirectly, in any manner. Furthermore, no person is authorized to give any information or make any representation which is not contained in, or is inconsistent with, this presentation. Any such extraneous or inconsistent information or representation, if given or made, should not be relied upon as having been authorized by or on behalf of the Bank. This presentation contains statements that constitute forward-looking statements. These statements include descriptions regarding the intent, belief or current expectations of the Bank or its directors and officers with respect to the results of operations and financial condition of the Bank. These statements can be recognized by the use of words such as “expects,” “plans,” “will,” “estimates,” “projects,” or other words of similar meaning. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those specified in such forward-looking statements as a result of various factors and assumptions. The risks and uncertainties relating to these statements include, but are not limited to, (i) fluctuations in earnings, (ii) the Bank’s ability to manage growth, (iii) competition, (iv) government policies and regulations, and (v) political, economic, legal and social conditions in India. The Bank does not undertake any obligation to revise or update any forward-looking statement that may be made from time to time by or on behalf of the Bank. Given these risks, uncertainties and other factors, viewers of this presentation are cautioned not to place undue reliance on these forward-looking statements. The information contained in this presentation is only current as of its date and has not been independently verified. The Bank may alter, modify or otherwise change in any manner the contents of this presentation, without obligation to notify any person of such revision or changes. No representation, warranty, guarantee or undertaking, express or implied, is or will be made as to, and no reliance should be placed on, the accuracy, completeness, correctness or fairness of the information, estimates, projections and opinions contained in this presentation. None of the Bank or any of its affiliates, advisers, directors, officers, agents or representatives accept any liability whatsoever for any loss howsoever arising from any information presented or contained in this presentation. Please note that the past performance of the Bank is not, and should not be considered as, indicative of future results. This presentation does not constitute or form part of and should not be construed as, directly or indirectly, any offer or invitation or inducement to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of the Bank by any person in any jurisdiction, including in India or the United States, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any investment decision or any contract or commitment therefore. This presentation is not a prospectus, a statement in lieu of a prospectus, an offering circular, an advertisement or an offer document under the Companies Act, 2013, as amended, the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended, or any other applicable law in India.
2 Table of Contents
1 Lakshmi Vilas Bank - Overview
2 Business Highlights
3 Strategy
4 Financials of FY 2019
6 Merger with Indiabulls - Update
3 1 Lakshmi Vilas Bank- Overview
4 Lakshmi Vilas Bank- Overview
Overview Shareholding (as of 31st March 2019)
One of the oldest banks in the history of banking in India; instituted in 1926 Mainly caters to the South of India with 48 % concentration of business in Tamil Promoter & Nadu & Puduchery Promoter group 7.1% Wide coverage and distribution network with presence in 18 states and 1 Union Territory across India Instn Holdings Consistent growing bank book since FY14 ( Loan book 2x of FY18 wrt.. FY14) 19.9% Highly experienced management team with an average of 22-29 years of experience Focus on CASA; Retail and MSME the cash cows of future; Corporate Adv. continues Others 73.0% to be 34% of book Bank recently announced the amalgamation with Indiabulls Housing Finance, subject to RBI and other regulatory and statutory approvals
4,908 Over 20 lakh 22.5 lakh 19 states 569 1,046 employees customers accounts incl. UT branches ATMs
Deposit and Advances Evolution
Deposits (INR cr) Advances (INR cr)
33,309 30,553 25,768 29,279 23,729 25,431 21,964 19,644 20,103 18,573 16,352 12,888
FY14 FY15 FY16 FY17 FY18 FY19 FY14 FY15 FY16 FY17 FY18 FY19
5 Offering Diverse Range of Products and Services
Retail Banking Group
Deposits
Caters to individuals, HUFs, trusts and clubs As of 31st March 2019, 10 % of Bank’s Retail Banking loans and advances to retail banking Group customers
Insurance Loans Agri, Commercial & Development Banking group
Strategic Business Caters to MSMEs, emerging businesses with revenues up to INR 75 crore Units annually, and agricultural and allied rural services businesses Corporates Agri, Commercial & st Banking As of 31 March 2019, 56% of Bank’s Development loans and advances to MSME group Banking group /Rural//Commercial banking customers
Corporates Banking group
Mutual Fund Internet Caters to business with revenues above Distribution Banking INR 75 crore annually As of 31st March 2019, 34%]of Bank’s loans and advances to Corporate banking customers
6 Guided by Experienced Board of Directors
Shri. Parthasarathi Mukherjee Shri. Kusuma R Muniraju Managing Director and Chief Executive Officer Independent and Non-Executive director With Bank since 2016 With Bank; rejoined in 2016 Former Group Executive at Axis Bank High Court Advocate in Karnataka
Shri. B K Manjunath Smt. Anuradha Pradeep Non-Executive Chairman and Independent Director Non-Independent and Non-Executive Director With Bank since 2017 With Bank Since 2017 Independent Legal practitioner by profession practicing in the High Practicing Chartered Accountant Court of Karnataka
Dr. Y.N. Lakshminarayana Murthy Shri. G Sudhakara Gupta Independent and non – executive Director Non-Independent and Non-Executive Director With Bank since 2016 With Bank since 2017 Former Director at XS Real Properties Private Limited Ph.D. holder in Soil Science and Agricultural Chemistry
Shri. H S Upendra Kamath Shri.Suvendu Pati Independent and non-executive Director RBI nominee Director With Bank since 2018 General Manager at RBI Former Director at Canara Bank, Chairman and Managing Director at Vijaya Bank, Former MD and CEO at Tamilnad Mercantile Bank 7
Shri. N Saiprasad Shri. Rajnish Kumar Non-Independent and Non-Executive Director RBI nominee Director With Bank; rejoined in 2019 General Manager at RBI Managing Partner in M/s Venkateswara Exports, Karur
7 Awards
IDRBT BANKING TECHNOLOGY EXCELLENCE AWARDS NATIONAL PAYMENTS CORPORATION OF INDIA Felicitates 2014-15 - BEST BANK AWARD (AMONG SMALL BANKS) LAKSHMI VILAS BANK for FASTEST CTS for MANAGING IT INFRASTRUCTURE AMONG SMALL IMPLEMENTATION in CHENNAI BANKS
NATIONAL PAYMENTS EXCELLENCE AWARDS BEST CIO CLUB IT AWARD 2017 FINALIST 2014 – Winner (Scheduled Banks – Small Bank Category) for BSE – CIO KLUB OF THE YEAR 2017 Excellent Performance in National Automated Clearing for Banking Category House - 3rd December 2014
CIO100 SPECIAL AWARDS 2015 - Winner - CLOUD CONQUEROR HONOREE 2015 -IDG award for Cloud MEDAL OF HONOUR for SUCCESSFUL DIGITAL Implementation ODYSSEY 2017
DQLIVE BUSINESS EXCELLENCE AWARDS IDC INSIGHTS AWARDS 2018 for 2015 for EXCELLENCE IN THE IMPLEMENTATION & EXCELLENCE IN OMNI EXPERIENCE USE OF TECHNOLOGY FOR BUSINESS BENEFITS
8 2 Business Highlights
9 Pan India Digital Capital Income Asset Deposits reach Transformation Position Trends Quality
Strong South India Focused Franchise with Pan India Reach
Branch distribution (March, 2019) Distribution Mix
East North Urban Branch Count (569) 4% 3% West 22% 6% Metro 1 29%
1 Semi 4 9 Urban 30% 2 2 South Rural 87% 19%
13 4 2 4 4 5 11% 24 8% Mar’14 vs 52 Coverage Mar ’14 Mar’19 Mar’19 Change 44% 569 69 branches 60 States 16 19 3 28% 5 Districts 108 147 39 295 13 Branches 362 569 207 9% Total staff 3,292 4,908 1,616 < 1 yr 1-2 yrs 2-5 yrs 5-10 yrs > 10 yrs
North includes Madhya Pradesh, Uttar Pradesh, Uttarakhand, Haryana, Himachal Pradesh, Jammu & Kashmir, Punjab, Rajasthan, Chandigarh and Delhi; East includes Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Bihar, Chhattisgarh, Jharkhand, Odisha, Sikkim, West Bengal and Andaman & Nicobar Islands; West includes Goa, Gujarat and Maharashtra; South includes Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, Puducherry and Telangana
10 Pan India Digital Capital Income Asset Deposits reach Transformation Position Trends Quality Architectural Initiatives to Streamline the Transaction Lifecycle, from Sourcing to Processing to Servicing
Sourcing Processing Servicing
CRM Tool Automated loan origination Enhanced banking platform
100% completion achieved on CRM Fully automated loan origination App with convenient options such Implementation system to ensure uniform processing as Favourites, Quickpay, utility through standardized enforcement of payments, and quick recharges etc. Key features: credit terms and conditions; integration Salesforce Automation and with credit rating modules, and App launched across iOS, Android, Leads Management automatic reporting and Windows platforms Campaign Management and Customer Segmentation to Tabs to feet on street for instant Digital penetration supported by ensure mass reachout notifications to Corporate office for customer education, marketing Analyse leads and take informed commencement of processing and expansion in branch network decisions, such as automated responses to FAQs, automated Spreadsheet based upload, followed Supreme 2 factor authentication escalation, and fixing service by automatic application of defined banking channels across internet levels based on segmentation business rules and eligibility norms and mobile
Improve cross-selling and up- Reduced time for data entry Better customer satisfaction selling capability Low error rate More cross sell opportunities Drive CASA to targeted levels Lower TAT Improve account balances and Improvement in income due to better partner sales employee productivity management and reduced churn Standardized borrower evaluation of customers Improved document handling
11 Pan India Digital Capital Income Asset Deposits reach Transformation Position Trends Quality Digital Transformation New Digital platform for Hosting Internet Banking
Find your total Net worth and plan your targets accordingly Track your recent activities and your spends Get a consolidated look of your account
Keep track of all your Get information on your account in one place. upcoming payments Your current and savings account, Term Deposit account, Recurring deposit Keep tab on your bills and account, Loan and pay instantly through your Finance and Credit account. Its that easy!!!! card. All the facilities at one place!! Get instant notification on offers and transactions, Track the status of your service requests and Track all your payments
12 Pan India Digital Capital Income Asset Deposits reach Transformation Position Trends Quality Digital Transformation Multifunction Mobile App with Intuitive Functioning
Login page Landing page Fund transfer page
Smart memorization of previous Login with PIN or payment choices exercised – Internet Banking Leading to one-step payment ID
Information not specific to an account is available One step instant payee without login addition
Recharge Bill payments
13 Pan India Digital Capital Income Asset Deposits reach Transformation Position Trends Quality Digital Transformation Bank aims to be a front runner in digital offerings
Transaction Value in Digital Channels (INR cr) Share of digital and non-digital volume of transactions
Non digital volume (cr) Digital volume (cr) Digital value (INRcr) POS ATM Mobile Ecom Internet 7.0 50,000 34398.62 6.5 47,096 45,000 6.0 5.3 5.1 40,000 21,683 5.0 35,000 3.9 29,930 30,000 4.0 3.5 14,006 25,000 3.0 6292.88 2.3 20,000 6,317 5,184 5748.87 17,258 2.0 15,000 2,271 1,920 2,524 918 500.46 1.2 109 50 30 359 55 423 116 155.09 1.0 10,000 1.0 8,777 2016 2017 2018 2019 5,000 0.0 0 2016 2017 2018 2019 Mobile Transactions (INR cr) • RTGS & NEFT transactions1 (INR cr)
65,523 2,039 61,637 56,012 56,635 1,741 53,972 1,526 45,218 1,350 1,095 844 646 466
Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY18 Q1 FY19 Q2 FY19 Q3 FY19 Q4 FY19 Q1 FY18 Q1 FY19 Q2 FY18 Q2 FY19 Q3 FY19 Q4 FY19
Source: Company information, RBI Note: 1 Denotes total transaction value for outward and inward NEFT transactions and consumer inward and outward spends on RTGS
14 Pan India Digital Capital Income Asset Deposits reach Transformation Position Trends Quality
Capital Position
Capital Position ( Basel III) | RWA | Tier 1 & II Ratios Distribution10% of Book Across Pricing Mechanism
7.57% 7.72% 7% 0.1% 9.0% 5.72% 5.57%
16.6% 19380 1521 1425 17957 4% 1106 1027 2.00% 2.00% [INR 21,956 Cr] 415 398 Q4’19 74.4% 300 1% Q3FY19 Q4FY19 Tier-I Capital Tier-II Capital Total Capital Total Risk Weighted Assets Tier I CRAR (%) Tier II CRAR(%) CRAR(%) BPLR Base Rate Fixed Rate MCLR
Capital Conservation Bank has Demonstrated Ability to Raise Capital
Capital Ratios have been impacted by increased provisioning for the Date Amount (INR cr) Type non performing book FY2014 78.4 Tier II
Rebalancing RWA’s has been taken up by bank FY2015 406 Rights Issue
Bank anticpates to better its rating of book qoq FY2016 140 Tier II FY2017 167.5 QIP Bank has undertaken repricing of its book in the last 2 quarters; yields of book has move up. FY2018 780.6 Rights Issue FY2018 69.7 Tier II 74% of the Book is linked to its MCLR with majority to its 1 year rate FY2019 459.6 QIP Placement FY2020* 188.2 Pref. Allotment to IHFL *Resolution undertaken; process underway
15 Pan India Digital Capital Income Asset Deposits reach Transformation Position Trends Quality On Track to Build a “Retail & SME Focused” Bank Build a strong CASA franchise
Steady Deposit Base Stagnated Cost of Deposits
Bank term CASA Retail term 7.30%
30,553 33,309 29,279 113 2,142 2,396 5,844 7,015 7,515 6.75% 6.75%
22,567 23,898 21,651
FY17 FY18 FY19 FY17 FY18 FY19
Consistent growth in CASA deposits Increasing Number of CASA accounts
INRcr Savings Current % of total deposits Savings Current
1,520,600 1,769,965 25.7% 1,808,358 21.1% 21.1% 21.4% 22.2% 22.8% 7,515 7,015 6,964 7,036 6,482 6,890 1,963 2,090 1,870 1,719 1,771 1,909
5,552 4,573 4,925 5,093 5,171 5,265 89,647 1,09,765 1,70,108
FY17 FY18 FY19 Q3FY18E Q4FY18E Q1FY19E Q2FY19E Q3FY19E Q4FY19E
16 Pan India Digital Capital Income Asset Deposits reach Transformation Position Trends Quality On Track to Build a “Retail & SME Focused” Bank Building a Strong CASA franchise (cont’d.)
Product differentiation and aggressive marketing New branches showing positive results on CASA accumulation
CASA proportion in branches aged <5 years
CASA Savings account CASA 26.7% 18.7% CASA 32.0% Term High interest rates of 5% and 6% to drive CASA growth in 81.3% select categories
Capitalize existing customers to acquire HNI accounts and build client base to cross sell Term 2017 2018 68.0% 213 branches 261 branches Term 73.3% 2019 Current account [186 branches] Strategy for increasing CASA
Add-on services on current accounts like cash pickup, cash Potential to increase CASA as vintage branches turn profitable management and door step banking Focus on Business Correspondent model to increase CASA Enlarging sales force with adequate training to offer trade and Shift on measuring CASA on a CDAB (Cumulative Daily Average Balance) basis foreign exchange services than on a period end basis CDAB of CASA saw an increase of 167 bps YoY and 67 bps QoQ Focus on onboarding customers through Digital channels with Insta opening Promotions optionality Branches to be redefined as sales outlets with defined CASA targets with a specific focus on HNI & NRI customers Print, OOH, FM, television and mobile van campaigns Product innovation and extension of existing products Online tests for product education for staff; coupled with Expansion of “Crown” franchise to include NRE, NRO accounts incentives to market CASA products Attractive interest rates for savings & flexi current account facilities Aggressive advertising on both digital & offline platforms
17 Pan India Digital Capital Income Asset Deposits reach Transformation Position Trends Quality
Interest Income
Net Interest Income and Non Interest Income (INR Cr) Diversified loans and Advances…
783 791 Commercial 16% Corporate 560 Retail 34% 503 10%
347 INR [21,956] cr 250 Q4FY19 130 151 139 140 61 71 61 57 MSME 22%
FY17 FY18 Q1'19 Q2'19 Q3'19 Q4'19 FY19 Rural Net Interest Income Non-Interest Income 18% Yield on Advances, Cost of Funds and Net Interest Margin …Across Sectors
9.17% 9.09% 9.09% 8.85% Other industries 8.26% 7%
All Engineering 5.82% 6.02% 5.87% 5.87% 5.86% 8% Infrastructure 38%
INR [21,956] cr Basic Metal and Q4FY19 Metal Products 1.74% 1.73% 1.34% 1.48% 1.65% 20%
Textiles Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 27% Yield on Advances Cost of Funds Net Interest Margin
18 Pan India Digital Capital Income Asset Deposits reach Transformation Position Trends Quality Income Trend Diverse Revenue Base
Other Income Breakdown (INR Cr) Fee income evolution (INR Cr)
Fee income % of total income 116.5 Others 15.5% 10.4% 10.7% 14.3% 22.4 Bad Debts Recovery 1.9 Dividend
11.7 Exchange Profit 147 134 122 116 Profit on sale of Asset
-18.6 loss on Investments 116 Commission 2016 2017 2018 2019 Multiple avenues to boost fee income
Product Overview Partners
Insurance Tie ups with insurance behemoths for life, general, and health insurance
MFs and PMS Investing opportunities customized for small amounts; developing advisory app with manual intervention for sale of mutual fund products 13 Mutual Fund affiliations Credit cards Launched co-branded credit card in partnership with SBI Cards in 2015
Forex travel cards High growth high margin exchange rate driven product, irrespective of amounts remitted
Others Money transfer and pension schemes
19 Pan India Digital Capital Income Asset Deposits reach Transformation Position Trends Quality Prudent Management of Asset Quality Adopting Clean-up of Corporate Loan Book…
Overview Close tracking of watch list through FY18 & 19 comes to an end
Gross slippages of total book (INRcr) Announced watch list of INR2,500cr in March 2017
Accelerated NPA recognition in 4Q18 under new RBI guidelines 386 636 286 1,608 633 572 207 INRcr
Watch list reduced from INR2,500cr as of March 2017 to nil as of March, 2019. 2,500 2,250 1,725 The residual stress in corporate book is now contained; additional slippage 1,560 shall be overcome by net recovery 400 200 MSME and Rural Book has incremental stress reported; shall stagnate 0 0 hereafter Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 H1FY19 Q3FY19 Q4FY19
Increased provisioning to augment rising NPAs Corporate NPAs already identified in the book
63.0% 65.2% 68.1% 67.7% 73.5% 69.7% 71.9% 70.4% Gross NPA % 2.67% 3.78% 5.50% 5.66% 9.98% 12.31% 13.95% 15.30% 2,420 2,366 Net NPA % 1.76% 2.84% 4.33% 4.27% 5.66% 6.88% 7.64% 7.49% INRcr 1,982 2,068 Provision 59.5% 51.3% 46.7% 46.7% 55.1% 55.4% 55.9% 62.08% coverage ratio (%) INRcr 1,785 871 967 1579 1335 573 1169 403
305 Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 H1FY19 Q3FY19 Q4FY19 170 165 217 % of total gross NPAs Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 H1FY19 Q3FY19 Q4FY19
20 Pan India Digital Capital Income Asset Deposits reach Transformation Position Trends Quality Prudent Management of Asset Quality … has led to a better quality loan mix
Distribution by Internal ratings Distribution by external ratings
LVB 1/2/3 LVB 4/5 LVB 6/7/8/9 Need not be rated Unrated A & above BBB < BBB Unrated
0.0% 4.7% 11.9% 13.7% 19.5% 22.6% 14.8% 21.9% 32.6% 40.4% 14.8% 7.1% 17.3% 13.6% 28.8% 21.8% 7.0% 17.7% 4.8% 6.1% 30.4%
13.4% 17.4% 28.4% 27.5% 29.6% 28.2%
55.6% 14.3% 43.0% 42.9% 40.1% 28.9% 29.4% 32.0% 17.8%
FY16 FY17 FY18 FY19 FY16 FY17 FY18 FY19
Bank continues to focus on capital preservation
Most of the slippages arose from the lower rated book; higher run off’s of higher rated paper attributed to lessening of weightage in high rated buckets
21 Pan India Digital Capital Income Asset Deposits reach Transformation Position Trends Quality
Overview of NPAs (FY19)
NPA movement QoQ (INRcr) NPA overview
INRcr Mar-19 Dec-18 Sep-18 Mar-18 Dec-17 Gross NPA 3,359 3,364 2,965 2,694 1427 207 115 98 Net NPA 1,506 1,716 1,560 1,458 1060
Gross NPA % 15.30% 13.95% 12.3% 10.0% 5.6% 3,364 3,364 3,364 3,359 3,267 Net NPA % 7.49% 7.6% 6.9% 5.7% 4.2%
Provision Coverage Ratio % 62.08% 55.9% 55.4% 55.1% 46.7%
Opening GNPA Gross Slippage Recoveries/ Tech write off Closing GNPA / upgradation Opening GNPA
2500 Industry Classification of GNPA on FY19
Infrastructure 18% 2000 Basic Metal and Metal Products 12%
1500 Beverages 1%
Textiles 5% 1000 All Engineering 2%
500 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19 Q4FY19 Other Industries 1% Gross NPA 1427.01 2694.21 2804.72 2964.89 3364.28 3358.99 Net NPA 1060.46 1457.89 1478.09 1560.08 1716.22 1506.29 Gems and Jwellery 1%
22 SMA – Segmental breakdown Continuous Improvement on account of stringent monitoring Corporate MSME Commercial
100% 3100100% 1,800100% 3011 0% 3000 13% 2900 11% 90% 14% 280090% 19% 18% 1,486 90% 18% 20% 23% 22% 2700 25% 28% 1,550 22% 2600 10% 29% 80% 9% 250080% 1,484 80% 410 2400 12% 2300 50% 70% 59% 220070% 19% 13% 1,30070% 352 20% 21% 2100 1,208 25% 21% 2000 60% 190060% 60% 274 310 56% 1800 1,050 277 43% 1700 50% 160050% 50% 36% 1500 53% 1400 800 40% 79% 130040% 40% 210 1200 25% 79% 60% 905 1100 62% 70% 30% 100030% 63% 735 55030% 57% 887 57% 41% 900 57% 446 800 182 20% 70020% 20% 110 34% 600 19% 35% 30% 500 300 10% 224 40010% 24% 10% 300 200 0% 1000% 10450 0% 28 10 Q4FY18E Q1FY19E Q2FY19E Q3FY19E Q4FY19E Q4FY18E Q1FY19E Q2FY19E Q3FY19E Q4FY19E Q4FY18E Q1FY19E Q2FY19E Q3FY19E Q4FY19E SMA2 SMA1 SMA0 Total SMA2 SMA1 SMA0 Total SMA2 SMA1 SMA0 Total
Rural Retail Bank Total portfolio
100% 100% 100% 5,816 5,8105,910 8% 5,6105,710 90% 18% 90% 90% 16% 5,4105,510 26% 22% 23%619 610 23% 24% 5,2105,310 31% 5,0105,110 80% 41080% 40% 37% 80% 39% 4,8104,910 14% 4,6104,710 51% 4,4104,510 70% 22% 70% 55% 51070% 4,2104,310 350 20% 19% 17% 4,0104,110 24% 55% 3,8103,910 60% 22% 31060% 60% 3,245 3,6103,710 257 22% 410 3,4103,510 321 3,2103,310 50% 250 100% 50% 338 50% 2,958 3,0103,110 23% 27% 0% 2,8102,910 310 30% 2,6102,710 40% 21040% 372 40% 2,4102,510 25% 70% 2,2102,310 59% 58% 2,0102,110 30% 30% 45% 21030% 59% 1,8101,910 58% 37% 1,6101,710 51% 47% 53% 1,4101,510 20% 11020% 20% 1,2101,310 37% 36% 1,649 1,0101,110 136 110 31% 810910 10% 24% 10% 10% 595 610710 0% 410510 210310 0% 0% 10 0% 11 10 0% 10110 Q4FY18E Q1FY19E Q2FY19E Q3FY19E Q4FY19E Q4FY18E Q1FY19E Q2FY19E Q3FY19E Q4FY19E Q4FY18E Q1FY19E Q2FY19E Q3FY19E Q4FY19E SMA2 SMA1 SMA0 Total SMA2 SMA1 SMA0 Total SMA2 SMA1 SMA0 Total
*CC/OD interest debited on 31.01.19 has not been considered for SMA0 SMA0 data for Q3FY18 is not reported. Bank has reported SMA0 post Feb 2018 circular of RBI SMA nos. for Q4FY19 are unauditied and may vary subject to the same
23 Pan India Digital Capital Income Asset Deposits reach Transformation Position Trends Quality Credit Risk Management Framework Bank has enhanced its way of assessing business
Steps taken to manage credit risk
Industry exposures tracked and dynamically set up Focus on increasing MSME exposures
Achieve granularity of exposures Retail Asset rollout through dedicated Credit teams
Cap exposures to below-BBB rated exposures Improvement in sanction and disbursement TAT
Generate 2/3rd of corporate advances incrementally from A and above Tighter management of portfolio/market risk/ ALM borrowers Tight management of capital Tighten rating standards and target higher RAROC on exposures
Ongoing steps to manage credit risk
Preparing for ECL under Ind AS regime Engaging with external providers of information on borrower universe and taking up special informational reports Limiting exposures largely to A and above rated borrowers Build work flow based sanction processes drawing external inputs Setting credit risk policy Transitioning into credit operations through special branches Complete review and bringing in IMaCS Rating System Mandating cleaning of historic data and separate credit operations and Use of external inputs from rating agencies, credit information bureaus monitoring
Standardizing documentation and improving customer experience
24 Strong asset liability management framework ( as on 31st March, 2019)
Established ALM framework Review and Monitoring of Funding Plans on an ongoing basis ALM policy Creation of Balance Sheet Management Group to manage CFU Stress Testing Policy Bank maintains surplus SLR for liquidity purposes
Counterparty Risk Management Policy Integral part of ALM is building up Retail Term deposits Liabilities Market Risk Management Policy ALM group runs MCLR computation Reporting Hedging policy for Balance Sheet Management in place ALCO Derivatives capabilities being built in upgraded Treasury system Managing ALM using system driven environment Counterparty Limits managed out of ALM
Assets 14,000 Deposits Borrowings Advances Investments
12005 12,000
10,000 8431 8,000 6908
INRcr 6,000
4,000 3605 2647 2397 1735 1928 1841 2,000 1595 1613 1090 1065 1110 1281 727 903 848 826 904 696 622 628 359 491 349 128 253 229 178 126 209 153 347 351 78 240 0 0 0 0 0 0 0
0
1 Day 1
2-7 Days 2-7
1-3 Years 1-3 Years 3-5
8-14 Days 8-14
3-6 Months 3-6
15-30 Days 15-30
months
Over 5 5 Years Over
6 Months-1 Year 6 Months-1
31 days & upto 2 upto & days 31 upto 3 3 months upto
Audited statement More than 2 months & months 2 than More
25 3 Strategy
26 Strategic Initiatives for Business Structuring
1 . Separate retail lending group established . Focus on profitable gold loans, business credit and home loans Loan Book: . Project TRANSME: Transformation of the MSME business model Retail & MSME . Relationship management team: One-stop shop for all financial needs of customers Focus . Focus on high-rated clients . Conscious de-focusing on the wholesale business segment
2 . Branch expansion; Potential to increase CASA with new branches turning profitable . Branches being redefined as sales outlets with defined CASA targets Liability: . Specific focus on HNI & NRI customers Increasing . Product innovation and extension of existing products CASA . Attractive interest rates for savings account & flexi current account facilities to drive CASA growth . Aggressive advertising on both digital & offline platforms
3 . Transaction Banking vertical launched to boost fee income Fee Income . Focus on trade finance, bill discounting, guarantees, LCs, cash management, government banking . Tie-up with third parties for insurance, mutual funds, credit cards, money transfer, forex travel cards
4 . Initiatives across the transaction lifecycle - CRM tool, automated loan origination . Multifunction mobile app with intuitive functioning for a state-of-the-art customer interface Technology . 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 5 Asset Quality: . Overhaul of risk management framework to enhance credit risk management systems & processes Revamped Risk . Separate Recovery Vertical & empanelment of recovery agencies to reduce TAT of recovery Management . Demarcate operations between business setups & improve asset quality in the future Framework . Conduct of high value credit portfolio under constant monitoring guided by technology
27 Transformation Work Streams : Strategy for Next 3 Years
People Transformation Business Transformation Organization design, recruitment, Omni-channel strategy | market capture training and performance management Full scale relationship management Relationship Management structure implementation Less focus on Treasury Income Branding & Communication Drive to enhance cross-sell Active brand endorsement Extensive analyst coverage Proactive communication with customers
Regulatory & Business restructuring Technology Transformation Provisioning Applications and Hardware NCLT Case(s) exits implementation Capital Raise OFSAA Launch Business unit individual Core Banking upgrade and assessment Digital Banking full suite launch
Risk, Compliance, Finance and Service Delivery, Processes, Policies Treasury & Capital Markets and Manuals Implementation of support and control Design and documentation of operating functions principles Robust early warning signal system implementation
28 4 Financials
29 2 Key Performance Highlights - FY 2019
30 Key Performance Highlights – FY19
. As of 31st March 2019 Gross Loan book stands at INR 21956 cr Loan book . (-)18.70 % Y-o-Y growth in loan book; (-) 8.98% Q-o-Q growth in loan book . MRC book : 17 % Y-o-Y growth ; and Corporate Book reduced by 46 % Y-o-Y
. Total net interest income at INR 560.14 cr; down 29.15 % Y-o-Y. Profitability . Operating loss at INR 11.97 cr; . Net Loss at INR 894.10 cr; up 53 % Y-o-Y.
. Tier 1 CRAR at 5.72 % Capital position . Tier 2 CRAR at 2.00 %
. Provision coverage ratio at 62.08 % Asset Quality . Gross NPA at 15.30 % vs Gross NPA at 13.95 % in Q3’19 . Net NPA at 7.49 % vs Net NPA at 7.64 % in Q3’19
Deposits . As of 31st March 2019, total deposit stands at INR 29,279 cr . CASA ratio at 25.67 %
. Total customer base around 2.19 million Operational . 569 branches :– of which 162 in Metros, 125 in Urban, 173 in Semi Urban and 109 in rural Centers in 18 states and 1 union territory
31 Key Performance Highlights – Q4 FY19
Y-o-Y Growth Q-o-Q Growth
Net Interest INR 140.20 cr Income 16.37% 1.01 %
Other Income INR 57.48cr 50.07 % (5.96)%
Total Income INR 739.73 cr (0.16) % (2.98) %
Operating Profit INR (21.19) cr 69.38 % 15.55 %
Net Profit INR (264.43 ) cr 57.50 % 29.20%
32 Key Performance Highlights – Balance Sheet
Y-o-Y Growth Q-o-Q Growth
Loans & Advances INR 21,956 cr (18.7) % (9.0) %
Investments + Cash INR 10,367 cr Balances (17.5) % (9.1)%
Deposits INR 29,279 cr (12.1)% (4.9) %
CASA INR 7515 cr 7.1 % 6.8 %
Borrowings INR 921 cr (77)% (63.6)%
33 Key Performance Highlights – Key Ratios
Y-o-Y Growth Q-o-Q Growth
Net interest Margin 1.73% 39 bps 8 bps
Gross NPA 15.30% 532 bps 135 bps
Net NPA 7.49% 183 bps (15) bps
Tier 1 CRAR 5.72% 233 bps 15 bps
INR 7514.76 cr CASA Ratio (25.67%) 7.12 % 6.80 %
34 Income Statement
INRcr FY17 FY18 FY19 Y-o-Y Change Q3’19 Q4’19 Q-o-Q Change
Interest earned 2,847 3,042 2840 (6.64)% 701 682 (2.71)%
Interest expended 2,064 2,251 2280 1.29 562 542 (3.56)%
Net interest income 783 791 560 (29.20)% 139 140 0.72%
Other income 503 347 250 (27.95)% 61 57 (6.56)%
Total income 1,285 1,137 810 (28.82)% 200 197 (1.50)%
Total Operating expenses 651 782 822 5.12% 225 219 (3.11)%
Employees cost 335 392 401 2.30% 111 111 0
Other operating expenses 317 390 421 7.95% 114 107 (6.14)%
PPOP 634 355 (12) (25) (21)
Provisions and Contingencies 254 1,306 1276 (2.30)% 431 479 11.14%
Profit before tax 380 (951) (1288) (456) (500) 9.65%
Tax expenses 124 (366) (394) 7.79% (83) (236) 184.34%
Net income 256 (585) (894) (373) (264)
Earnings Per Share
Basic 14.07 (28.29) (34.66) (14.59) (10.02)
Diluted 13.95 (28.11) (34.59) (14.54) (10.00)
35 Balance Sheet
INRcr FY17 FY18 FY19 Y-o-Y Change
Capital 191 256 320 24.96%
Reserves & Surplus 1,945 2,072 1573 (24.10)%
Deposits 30,553 33,309 29,279 (12.10)%
Borrowings 1,773 4,013 921 (77.04)%
Other Liabilities &. Provisions 782 779 953 22.32%
Total liabilities and equity 35,245 40,429 33,046
Cash & balances with RBI 1,455 1,698 1654 (2.59)%
Balances with banks, money at call & short notice 169 317 515 62.74%
Investments 8,652 10,768 8,430 (21.71)%
Advances 23,729 25,768 20,103 (21.98)%
Fixed Assets 359 402 470 16.90%
Other Assets 881 1,476 1874 26.94%
Total assets 35,245 40,429 33,046
36 5 Merger with Indiabulls
37 Transaction Details
Transaction overview Lakshmi Vilas Bank announced on 5th April 2019 and 3rd May 2019 the amalgamation of Indiabulls Housing Finance (IBH) & Indiabulls Commercial Credit Limited (ICCL), a 100% subsidiary of IHFL into and with Lakshmi Vilas Bank Limited (LVB) subject to approvals including from RBI and other regulatory and statutory authorities
Share swap ratio: 7,143 equity shares of face value of Rs. 10 each held in LVB for every 1,000 equity shares of face value of Rs. 2 Swap ratio held in IBH has been agreed upon by the respective Board of Directors
All the staff and employees of LVB on the Effective Date(1) shall become the staff and employees of IHFL, without any break or Employees interruption in services and on same terms and conditions on which they are engaged by LVB as on the Effective Date
Mr. Sameer Gehlaut to be proposed as Vice Chairman of the amalgamated entity Proposed Management Mr. Parthasarathi Mukherjee and Mr. Gagan Banga to be proposed as Joint M.D. and shareholding Mr. Ajit Mittal to be proposed as Executive Director structure Mr. K.R. Pradeep shall be appointed as non-independent, non-executive Director Existing LVB shareholders to hold c.[7.5%] of the combined entity
Shareholder value Proposed swap ratio indicates a substantial premium on market price as on the date of announcement for shareholders of LVB creation
LVB and IBH have submitted an application to RBI seeking an approval of the proposed scheme of merger Status update Applications for approval from CCI is also underway
38 Combined Entity to be Amongst the Top 10 Private Banks by Size and Profitability
Strong Capital and Financial Position As on December 31, 2018 Amalgamated Entity • Well Capitalized combined entity with CAR at over 20%, well in excess of regulatory requirement of 10.875% Net Worth (Rs. Crs) 19,472 • Healthy Credit Profile with Net NPAs down to c.2.0% • Improvement in ROAs/ROEs from -2%/-41% to 2%/19% due to better profitability of IBH Loan Book (Rs. Crs) 1,23,393 • Negates need for additional capitalization in the next three years Operating Profit (Rs. Crs) 4,630
Opportunity for growth and diversification Net Profit (Rs. Crs) 2,455 • Ability to diversify loan book from largely wholesale to retail • Opportunity to cross-sell banking products given large retail customer base, as well as Capital Adequacy Ratio 20.6% geographical spread of IBH
• Cost efficiency through adoption of IBH’s technology Tier 1 ratio 14.4%
Improved market perception and access to key shareholders of IBH Return on Assets (Annualized) 2.0% • Successful track record of capital raising
• Healthy Credit profile with long term rating of AAA from all leading rating agencies in Return on Equity (Annualized) 19.2% India, including CRISIL • Strong Liability profile backed by business relationships with 622 institutions which Gross NPA 3.5% includes 21 PSU banks, 26 Private and Foreign Banks and 575 Mutual Funds, Provident Funds, Pension Funds, Insurance Companies and Corporates Net NPA 2.0%
(1) As on 31 December 2018 (2) All financial metrics based on pro-forma analysis as on 31 December 2019
39 Appendix Movement in Gross NPAs
Movement of GNPA (INRcr)
1894 (478) 2694 (0) 1022 1278
640 (172) (212))
Opening GNPA Gross Slippage Recov./upgrad./wo Tech write off Closing GNPA / Gross Slippage Recov./upgrad./wo Tech write off Closing GNPA / Opening GNPA Opening GNPA March 2018 March 2017 September 2017
(362) 780 3359 633 (300) 2694 2965 86
Opening GNPA Gross Slippage Recov./upgrad./wo Tech write off Closing GNPA / Gross Slippage Recov./upgrad./wo Tech write off Closing GNPA / Opening GNPA Opening GNPA
March 2019 March 2018 September 2018
41 Overview of Restructured Assets
Restructured assets (INRcr) Industry wise restructured assets (FY19)
Infrastructure 303 Restructured fund based SDR Flexible structuring S4A Iron 166
Power 158
1,035 Metals & Minerals 86 25 926 14 877 Communication 86 283 14
264 Pharma 24 267
Others 25
Textiles 19
727 648 596 Gems & Gold 6
Shipyard 3
Print Pack 1 2017 2018 2019
42 Sectoral GNPA classification across industry
Infrastructure Basic Metal and Metal Products Textiles All Engineering Beverages (excluding Tea & Coffee) and Tobacco Gems and Jwellery Other Industries Glass & Glassware Food Processing Wood and Wood Products Rubber, Plastic and their Products Cement and Cement Products Mining and Quarrying Paper and Paper Products Vehicles, Vehicle Parts and Transport Equipments Chemicals and Chemical Products (Dyes, Paints, etc.) Leather and Leather products
0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0 Q4FY19 Q3FY19
43 Sectoral GNPA classification across Non-industry
Other Non-food Credit, if any, please specify Retail Trade Wholesale Trade (other than Food Procurement) Advances against Fixed Deposits (incl. FCNR(B), etc.) Other Services Transport Operators Other Retail Loans Commercial Real Estate Educational Loans Housing Loans (incl. priority sector Housing) Tourism, Hotel and Restaurants Consumer Durables Vehicle /Auto Loans Computer Software Professional Services Agriculture and Allied Activities NBFCs 0 100 200 300 400 500 600 700 800 900 1000 Q4FY19 Q3FY19
44 Thank You