- 29% increase in Revenue, operating profit and Profit after Tax
- 35% increase in net Interest Income
- Increase in net interest income is not just because of Increase in liquidity as even in 9 months the net interest income grew by 35%
- Core fee income grew by 22%
- Deposit grew by 38%. Deposit growth looks to be lower than past quarter because of moving out of Rs 8,000 Cr IPO money
- Current Account grew by 46%.
- Biggest challenge in this quarter was balance sheet management
- Balance sheet management is not about only the deployment of funds but also about movement of cash out of the vault to currency chest so as to recognise cash reserve ratio
- Growth in credit and debit card spends and also huge increase in mobile transaction.
- Foreign exchange income gone up slightly on QoQ basis. Year on year it is 5% but In Q3 itis15 percent
- New accounts added in this Q3FY17 is 280000. Average ticket size is Rs. 45,000
- Total credit card and debit card swipe transactions increases by 2.5 times and 3.5 times in November, 2016 respectively
- Bank has sold 850 Cr of advances in this qtr, and it has not bought any
Key Financial Indicators
- CRAR remains at 15.31 vs 15.32 QOQ. Tier 1 is 14.72
- Cost to Income ratio moved up by only 20 bps at 47.47% vs 47.28% in Q3FY16
- Net interest margin improved to 4% in Q3 FY17 vs 3.91% in Q3 FY16
- RoA declined to 1.88% in Q3 FY17 vs 1.92% in Q3 FY16 and 1.93% in Q2 FY16
- RoE improved to 15.72% vs 14.05% in Q3 FY16 and 15.38% in Q2 FY17
Effect of Demonetization
- Initially there was huge liquidity increase in banks and then RBI imposed CRR, so there was a crunch on liquidity. Then RBI relaxed CRR, so there was again increase in liquidity. This affects the interest income.
- Demonetization effect on retail book
- Significant impact on CASA book which has moved up to 37% last qtr it was 36.4
- Last Quarter, due toIPOs, huge amountwent out. Despite this, CASA has grown.
- Growth in CASA is 50 % normal and 50% due to demonetization
- Customer acquisition around 133000 accounts in December which is almost double thenormal addition
- Longer theme of Banks due to demonetization effects:
- In the long term, Bank may play in a segment where cash used to dominate operations
- 20% of two wheeler are actually financed rest are given in cash
- Banks have big opportunities due to this cash diminishing or vanishing
- Increase in deposit flow in segment like insurance or real estate
- Management thinks that even if just 10% of demonetization flow goes in mutual fund, it would lead to a big great opportunity to the Bank as a distributor
- Mortgage business would become more attractive because of low house prices, low rates and interest subsidy announced by PM.
- Corporate loan book is growing 25%.
- Vehicle finance group grew by 21%
- Non vehicle retail group grew by 42%.
- Major part of banks loan book is fixed in nature. As rates fall bank will benefit.
- Benefit is in the interest income side of the book
- The loan book configuration is showing improvement in retail part. Thereis1 percent shift in favour the retail part which is a beneficial shift. Target is tomove isto 50 50 over next 3 yrs
Outlook on Loan against Property Book
- No adverse effect in the portfolio of Loan against Property due to demonetization effect
- In November, there was a dip in the LAP bookings. It was more internal
- In December, it is back on track
- There is no major blip on the delinquency front
- Vehicle business had drop in enquiries in November, but it picked up in 10-15 days. Total business in October was 2100 Cr, 2100 Cr in Nov. and 1800 In Dec. Total for the Quarter was 6000 Crore.
- Vehicle Finance retail grew by 21% in this qtr and bank has gained market share in vehicle financing in segments like Tractors, commercial vehicle, cars and three wheeler only on two wheeler areas market share has been quite lost.
- Non Vehicle - Slowdown in LAP book in November, butitwas back in December
- In home loans, company is a distributor, it saw a dip in demand in November and for December, it saw 70% of the normal business
- Credit Card and personal loans are showing good demand
- Business Loans business slows down
- No slowdown in gold loans
- Retail client base is 4 million and it is growing in different products
- Increasing tie up around the world and finance is growing pretty good
- Slippages are constant for the Quarter.
- ARC book has shrunk which means recovery is more than sales and the book is down to 223 crores and net recovery is of 14 Cr during the Quarter.
- The Retructured book is at 41 bps and two accounts slipped from re- structured book into NPA book, but are smaller accounts.
- Vehicle finance book has shown improvement in GNPA figures. Cars loan book GNPA has moved up by an absolute figure of Rs 13 Cr
- There is an Improvement in Risk Weight age (RWA) Profile. Percentage of RWA to the total asset has fallen below 79%. It was 82-83% earlier. This means that the quality of the book has improved.
- Total movement in terms of loan book on which RBI dispensation was sought is about Rs 52 Cr
- Outstanding Security receipt book at the end of 31st December is 223 Crore.
- Composition of term deposit share is 37% of CASA
- Approx 25% is retail deposit and rest is wholesale. In Q3Fy17, there is reduction of 24-25 bps in deposit cost.
- Bulk deposit is similar to money market. The easiest way to figure out is to look at the CB rate market
- Branch network now at 1075 branches. By Q4, it should reach 1200 branches.
- 1700 new branches 339 new ATM and added 3500 employees during the year to support the growth of all business units
- Infra bond of 1500 crores added to borrowing and regrouping for the purpose of last qtr where repo borrowing has been netted now been grossed up which results in borrowing and investment going up by Rs 4000 Cr compared with Q2FY17
- Bond books will do well with lower rates but in next 12 months there could be seen some issue on re-investment risk in the books of Banks.
- Refinancing opportunity will increase and some of the Bonds may convert into banks loan book because of pricing
- All Investment banking income is related to debt market either structured or distribution
Insurance and MF bussines
- Insurance and mutual fund products industryhas seen a big expansion .
- Growth rate for the insurance sector and investments product will increase In March Quarter
- Fee Income of the company is diversified and some of them is builtin by solid annuity plans. Fee income from investment banking is stabilized.
- Loan processing fee is dependent on both new loans and renewals.
- Retention rate in CA are higher than SA rates
- Microfinance business is back to normal.
- Microfinance is 2.5 % ofthetotal loan book. 3000 crores total portfolio out of which 2600 Crin loan book and a small amount in investment book
- Cumulative collection efficiency ofthe micro finance portfolio is approx. 99% plus
- 3 yr loan book target is 10,000 Cr