Edelweiss Financial Services Limited · NSE:EDELWEISS
Edelweiss Financial Services — Q1 FY2016 Earnings Presentation
52 slides from Edelweiss Financial Services's earnings presentation, Jul 21, 2015
Slide 1: Q1 FY16 Earnings Update
EDELWEISS FINANCIAL SERVICES LIMITED Q1 F Y16 EAR N ING S U P DATE J U LY 2 1 , 2 0 1 5
Slide 2: Contents
CONTENTS • FINANCIAL HIGHLIGHTS • BALANCE SHEET AND ALM • B U S I N E SS H I G H L I G H T S • E N T E R P R I S E U P D AT E S 2
Slide 3: Financial Highlights
“Lh FINANCIAL HIGHTIGHS | a Ideas create, values prog™ict
Slide 4: Environment: Improving, Yet Challenges Remain
E N V I R O N M E N T: I M P R O V I N G , Y E T C H A L L E N G E S R E M A I N Improving Macro-economic environment ● India GDP to grow at 7.5% ● Crude continues to be low ● CPI has stabilized at 5-6% ● Resilient currency However, ● Poor corporate earnings ● Interest rate cuts have slowed down ● P
Slide 5: Key Performance Highlights
KEY PERFORMANCE HIGHLIGHTS 1 17% YoY growth in consolidated profits Consistent profit growth; Ex Insurance PAT CAGR of 35% (4 yrs) 2 Improved capital efficiency Consolidated RoE 12% Ex Insurance RoE 17% 3 Balance sheet grew while maintaining diversified borrowings mix Credit book adequately collater
Slide 6: Financial Highlights Q1FY16
FINANCIAL HIGHLIGHTS Q1FY16 ` in million Q1FY16 Q4FY15 Q1FY15 YoY Growth Revenue 11,678 12,151 8,153 43% Profit After Tax 912 884 782 17% Profit After Tax – ex-ins 1,114 1,034 895 24% Tangible RoE – ex-ins 17.0% 16.2% 15.5% ROBUST BUSINESS MODEL DRIVING PROFITABILITY 6
Slide 7: Profitability Trajectory
P R O F I TA B I L I T Y T R A J E C T O R Y Profit after Tax (` in million) 1200 1114 1034 981 1000 895 903 800 884 912 702 692 721 679 829 624 782 792 600 568 510 460 484 578 607 557 400 331 348 511 460 461 272 388 398 416 332 200 263 294 0 PAT ex-insurance PAT CONSISTENT IMPROVEMENT IN PROFITABIL
Slide 8: Ex-Insurance RoE Improved to 17%
E X-I N S U R A N C E R OE I M PR OV E D TO 17% Consolidated RoE % Tangible RoE % Ex-Insurance 17.0% 12.0% 15.6% 11.3% 12.3% 11.3% 8.2% 7.6% FY13 FY14 FY15 Q1FY16 FY13 FY14 FY15 Q1FY16 8
Slide 9: Consolidated Results
C O N S O L I D AT E D R E S U LT S ` in million FY16 FY15 FY15 FY15 Q1 Q4 Q1 Annual Fee and Commission Income 1,628 1,798 1,058 5,727 Fund based Income 9,561 9,241 6,812 31,001 Premium from Life Insurance Business 302 845 213 1,866 Other Operating Income 141 210 49 385 Other Income 46 57 21 140 Tot
Slide 10: Consolidated Results Ex-Insurance
C O N S O L I D AT E D R E S U LT S E X - I N S U R A N C E ` in million FY16 FY15 FY15 FY15 Q1 Q4 Q1 Annual Fee and Commission Income 1,628 1,798 1,058 5,727 Fund based Income 9,312 9,026 6,605 30,064 Other Operating Income 141 210 49 385 Other Income 37 49 11 104 Total Revenue 11,118 11,083 7,723
Slide 11: Capital & Agency Based Revenue & Assets
C A P I TA L & A G E N C Y B A S E D R E V E N U E & A S S E T S At the end of Q1FY16 Q4FY15 Q1FY15 (` in million) Revenue Capital based 9,748 9,508 6,882 Agency based incl Ins. 1,930 2,643 1,271 Total 11,678 12,151 8,153 Assets Capital based 233,840 215,590 144,540 Agency based incl Ins. 47,640 53,
Slide 12: Balance Sheet and ALM: Balance Sheet
BALANCE SHEET AND ALM BALANCE SHEET
Slide 13: Balance Sheet Highlights
BALANCE SHEET HIGHLIGHTS • Focus on: • Managing Liquidity with overnight liquidity cushion at `20 bn • Strengthening Balance Sheet • Diversifying sources of borrowings • Ideal mix of short and long term sources with matched ALM profile • Maintaining a comfortable Capital Adequacy Ratio • BMU assets
Slide 14: Summary Balance Sheet
SUMMARY BALANCE SHEET As on June 30’15 Mar 31 ’15 June 30 ‘14 (` in million) ( Unaudited) (Audited) (Unaudited) Equity and Liabilities Shareholders’ Funds 32,845 31,606 29,632 Minority Interest 3,699 3,709 3,660 Borrowings 246,498 235,404 149,4222 Total 283,042 270,719 182,714 Assets Fixed & Non Cur
Slide 15: Balance Sheet and ALM: ALM
BALANCE SHEET AND ALM ALM
Slide 16: Diversified Sources of Borrowings
DIVERSIFIED SOURCES OF BORROWINGS FY11 Q1FY16 OTHERS 5% 5% RETAIL 5% 14% ASB 14% 17% BANK 26% 26% DEBT MARKET 50% 38% Total Borrowings ` 78.58 bn ` 246.50 bn STEADY DIVERSIFICATION OF SOURCES OF BORROWINGS LEADING TO LOWER DEPENDENCE ON DEBT MARKET BORROWINGS 16
Slide 17: Comfortable ALM Profile
C O M F O RTA B L E A L M P R O F I L E June ’15 - ` 281.48 bn 3 % of Assets and Liabilities 100% 82% 100% 60% 78% 46% 39% 59% 45% 39% 15% 15% ASB 0-3 Mnth 3-6 Mnth 6-12 Mnth 1-3 years 3+ years Assets Liabilities ALCO MANAGES AND MONITORS ALM, INTEREST RATE RISK AND LIQUIDITY 17
Slide 18: Business Highlights
BUSINESS HIGHLIGHTS
Slide 19: Edelweiss Operating Structure
E D E LW E I S S O P E R AT I N G S T R U C T U R E Diversified Business Mix with 4 Businesses 19
Slide 20: Growing Business Presence
GROWING BUSINESS PRESENCE MUMBAI INDIA GLOBAL PRESENCE 1 Strong clients/accounts base of over 586,000 across businesses 5,760 employees across 247 offices in 129 cities including eight 3 international offices 2 Over 288,000 Depository Participant Accounts Touch points include over 4,800 Authorised P
Slide 21: Business Highlights: Credit Business
BUSINESS HIGHLIGHTS CREDIT BUSINESS
Slide 22: Credit
CREDIT At the end of Q1FY16 Q4FY15 Q1FY15 Priorities (` in billion ) Total Credit Book 164.31 150.36 95.54 Creating capabilities on collections in retail, resolutions in Mortgages 65.32 57.13 37.25 distressed assets and sell down in Structured Collateralised structured finance 63.45 59.91 37.14 Cred
Slide 23: Credit: Yields, Spreads and Retail Finance
CREDIT At the end of Q1FY16 Q4FY15 Q1FY15 (` in billion ) Average Interest Yield 16.1% 16.0% 15.2% Average Cost of Borrowing 10.8% 10.8% 10.9% Interest Spread 5.3% 5.2% 4.4% Net Interest Margin 6.7% 6.7% 6.0% Average collateral cover on Structured 2.2x 2.3x 2.9x Collateralised book 41 cities & 36 ci
Slide 24: Credit: Good Asset Quality
CREDIT : GOOD ASSET QUALITY At the end of Q1FY16 Q4FY15 Q1FY15 (` in million) Total Credit Book 164,310 150,358 95,541 Gross NPLs 2,169 1,963 985 Gross NPL % 1.32% 1.31% 1.03% Net NPLs % 0.39% 0.38% 0.30% Total Provision Held4 2,101 1,839 993 Total Provision Cover4 97% 94% 101% RISK MANAGEMENT ENSUR
Slide 25: Business Highlights: Agency Businesses
BUSINESS HIGHLIGHTS AGENCY BUSINESSES
Slide 26: Financial Markets
FINANCIAL MARKETS Financial Markets: Despite volatile markets, Business gearing up to grow Priorities Q4’15 Q1’16 Focus on low cost online acquisition of clients Wealth AUM (` in billion) 99 102 Further developing cross-sell revenue IB & DCM deals 31 20 within retail business Scaling up Insurance Br
Slide 27: Financial Markets
FINANCIAL MARKETS Q1FY16 Q4FY15 Q1FY15 Investment Banking & DCM Advisory Deals 20 31 10 Average Daily Volumes5 (` in billion) 150.40 151.90 85.30 Average Broking Yield (Gross) 2.5 bps 2.6 bps 2.6 bps Stocks under IE Research Coverage 206 208 204 Stocks under Retail Research Coverage 39 54 41 Wealth
Slide 28: Fixed Income Advisory – Leading Player in the Country
F I X E D I N C O M E A D V I S O R Y – L E A D I N G P L AY E R I N T H E C O U N T R Y • Over 400 active clients among Banks, MFs, Ins. Cos., PDs, PFs and FIIs • Comprehensive research and analytics support to clients • 16 transactions across Fixed Income Advisory including: • NCD placements for l
Slide 29: Asset Management
ASSET MANAGEMENT • Alternatives - Illiquids • Edelweiss ARC among the AuMs/AuAs over `26 bn equivalent leading players in India – a crucial through five funds; ESOF II Fund vehicle to unlock productive first close achieved at US$205 mn assets and assist Banks • Mutual Fund average AuMs of • Alternat
Slide 30: Agri & Commodity Services
AGRI & COMMODITY SERVICES • Commodity Services – strategic agency business • Agri Commodities: • Sourcing, distribution & dealing in agri commodities • International sourcing for key commodities like pulses & oilseeds • Warehousing and Collateral Management services • Warehousing -143 warehouses und
Slide 31: Business Highlights: Life Insurance Business
BUSINESS HIGHLIGHTS LIFE INSURANCE BUSINESS
Slide 32: Life Insurance
LIFE INSURANCE Life Insurance business with JV partner Tokio Marine Holdings, Inc. • Focus on performance including achieving growth in premium and expansion of distribution footprint • Edelweiss Tokio funds have been rated top performers by Morningstar with five of six individual ULIP funds rated “
Slide 33: Life Insurance: Edelweiss Tokio Standalone
LIFE INSURANCE Edelweiss Tokio Life Insurance Company Limited Standalone (ETLI) ` in million Q1FY16 Q4FY15 Q1FY15 FY15 Gross Premium Income 324 864 227 1,931 Investment Income & Other Income 258 224 216 972 Total Income 582 1,088 443 2,903 Total Expenses 855 1,291 594 3,613 Profit Before Tax (273) (
Slide 34: Enterprise Updates
ENTERPRISE UPDATES
Slide 35: Key HR Metrics
KEY HR METRICS At the end of/During Q1FY16 Q4FY15 Q1FY15 End of Period Head Count 5,760 5,555 4,285 Senior Attrition 9% 17% 17% Learning & Training man days 6,804 4,255 4,511 Development Employees covered 2,271 1,417 1,382 BUILDING LEADERSHIP CAPABILITY THROUGH A FOUR-TIER LEADERSHIP STRUCTURE FOR F
Slide 36: Corporate Social Responsibility - EdelGive Foundation
C O R P O R AT E S O C I A L R E S P O N S I B I L I T Y - E D E L G I V E F O U N D AT I O N Philanthropic initiative to drive sustainable social change Impacted over 2,60,000 lives Financially supported over 60 organizations till date Committed nearly ` 330 mn Over 10,000 hours of pro-bono support
Slide 37: Shareholding Pattern
S H A R E H O L D I N G PATT E R N NON INSTITUTIONS TOP INSTITUTIONAL SHAREHOLDERS ABOVE 1%6 (INCL. CORPORATES AND INDIVIDUALS) AS ON JUNE 30, 2015 Name Percent 17% 1 Carlyle 8.5% 2 BIH SA 5.5% 51% 32% 3 Fidelity 4.3% PROMOTERS, EMPLOYEES & 4 Govt. of Singapore 3.9% EMPLOYEE TRUSTS* 5 SAIF Advisors
Slide 38: Environment
ENVIRONMENT
Slide 39: A Mixed Environment
A MIXED ENVIRONMENT Positive Macro Weak Micro Environment Environment for India India is growing well amidst an On ground conditions uncertain global economy yet to improve 39
Slide 40: A Mixed Environment
A MIXED ENVIRONMENT Positive Macro Weak Micro Environment Environment • India GDP to grow at 7.5% • Poor corporate earnings • Crude continues to be low • Interest rate cuts have slowed down • CPI has stabilized at 5-6% • Poor investment climate • Resilient currency • FII flows have reduced • Better
Slide 41: India to Become Fastest Growing Major Economy
1 I N D I A TO B E C O M E FA S T E S T G R O W I N G M A J O R E C O N O M Y GDP growth % 9.5 7.7 7.7 7.9 8 7.4 7.5 7.3 7.1 7 6.9 6.6 6.9 5.1 India to grow faster than China for the first time in 3 decades 2011 2012 2013 2014 2015E 2016E 2017E India China Slow down in China could lead to softening
Slide 42: Low Crude Prices, a Key Positive Continues
2 LOW CRUDE PRICES, A KEY POSITIVE CONTINUES Crude prices have been at ~$60 level for past 6 … helping India contain deficit months Brent crude Current Account Deficit $/barrel % of GDP 120 111 100 -0.2 -0.2 80 -0.89 56 -1.18 -1.58 -1.6 60 -2 40 48 20 -3.6 0 -4.6 Dec-13 Mar-13 Mar-14 Dec-14 Mar-15 J
Slide 43: CPI Has Stabilized in Range
3 C P I H A S S TA B I L I Z E D I N 5 - 6 % R A N G E CPI & WPI % 10 7.9 8 5.4 6 4 5.1 2 0 -2 -2.4 -4 Jun-14 Jan-15 Jun-15 Jul-14 Nov-14 Aug-14 Apr-14 Apr-15 Sep-14 Mar-14 Dec-14 Mar-15 Feb-14 Oct-14 Feb-15 May-14 May-15 CPI WPI WPI has been in negative range 43 Source: Bloomberg
Slide 44: INR Has Shown Lot of Resilience Against USD
4 Source: Bloomberg Jan-14 Jan-14 Mar-14 Mar-14 JPY/INR USD/INR May-14 May-14 Jul-14 Jul-14 3% Sep-14 Sep-14 11% Nov-14 Nov-14 Jan-15 Jan-15 Mar-15 Mar-15 May-15 May-15 44 Jan-14 Jan-14 Mar-14 Mar-14 EUR/INR relative to other currencies May-14 Index/ INR May-14 Jul-14 Jul-14 Sep-14 Sep-14 16% Rupee
Slide 45: A Mixed Environment
A MIXED ENVIRONMENT Positive Macro Weak Micro Environment Environment • India GDP to grow at 7.5% • Poor corporate earnings • Interest rate cuts likely to slow • Crude continues to be low down • CPI has stabilized at ~5% • Poor investment climate • Resilient currency • FII flows have reduced • Volat
Slide 46: Despite Improving Macro, Corporate Earnings Subdued
1 D ES PI T E I M PR OV I N G M A CR O, COR P O R AT E EA R N I N G S S UBD U E D Sensex companies INR ‘000 Cr Revenue PAT 2,165 2% 2,202 246 -16% 206 2014 2015 2014 2015 46 Source – Edelweiss research
Slide 47: Interest Rate Cuts Likely to Slow Down
2 I N T E R E S T R AT E C U T S L I K E LY T O S L O W D O W N Despite 75 bps rate cut in CY2015; Gsec Yields have not further corrected 10 year Gsec Yield and Repo 9 8.5 8 7.5 7 6.5 6 Source – Bloomberg 47
Slide 48: Poor Investment Climate
3 P O O R I N V E S T M E N T C L I M AT E SCBs Bank credit growth (% YoY) 13.1 8.8 Subdued Credit off- ` take growth Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 3 MMA –Export growth (% YoY) 20 15 10 5 Weak export 0 -5 momentum -10 -15 -20 Jun-12 Jan-13 Aug-13 Mar-14 Oct-14 May-15 48 Source – RBI, Edelweiss
Slide 49: FII Flows in Equity Have Reduced
4 FII FLOWS IN EQUITY HAVE REDUCED Net Equity flows INR ‘000 cr 13 13 11 12 12 9 9 3 -1 -3 -6 -8 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 FII DII FIIs have been net seller while markets are being supported by DIIs 49 Source – Bloomberg
Slide 50: Volatile and Sideways Equity Markets
5 … R E S U LT I N G I N V O L A T I L E A N D S I D E W A Y S E Q U I T Y M A R K E T S Sensex 31,000 29,000 27,000 25,000 Volatility has gone up 23,000 21,000 19,000 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jun-15 50 Source – Bloomberg
Slide 51: Key Things to Watch Out For
K E Y T H I N G S TO WATC H O U T F O R India Global • Credit growth and NPAs • US fed rate hike • Corporate earnings • China slowdown • Monsoon • Greece • Government spending • Crude prices 51
Slide 52: Safe Harbor
SAFE HARBOR DISCLAIMERS: This presentation and the discussion may contain certain words or phrases that are forward - looking statements, based on current expectations of the management of Edelweiss Financial Services Ltd. or any of its subsidiaries and associate companies (“Edelweiss”). Actual resu
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