2. Strong, Stable Growth Your Service
Deal Team – At
•
India’s medium term growth prospects remain strong on account of
− Favourable demographics
− Resilient economic structure
− Stable democratic institutions
− Continued infrastructure
•
While growth has averaged at 8.5% between FY06 – 11, even in the face of a
severe and persistent global slowdown, GDP growth is expected to be around
5.0% in 2012-13.
•
The private sector plays a key role in driving investment. Economic growth is
largely domestically generated by high savings / investment, making it less
vulnerable to adverse external developments
CA Kajal Gandhi
2
3. Commitment to fiscal consolidation and reforms
Deal Team – At Your Service
•
The finance ministry has been diligently following the fiscal consolidation path.
Fiscal deficit has been restricted to 5.2% of GDP in 2012-13 below the revised
estimate of 5.3%.
•
Finance minister has set a target of fiscal deficit of 4.8% for 2013 - 14 and
reduce it to 3.0% by 2017.
•
Several structural reforms marks a shift in governments approach towards fiscal
consolidation, including
− reduction in fuel subsidy
− targeted cash delivery of subsidies
− proposed introduction of Goods & Services Tax
− further PSU divestment
− liberalized FDI regime for multi-brand retail, insurance, pensions, domestic
airlines and broadcasting
− amendment in Banking Regulation Act and Companies Act.
− setting up of Cabinet Committee on Investments
− increase in rail haulage rates and passenger fares after 10 years
CA Kajal Gandhi
3
4. Macroeconomic Performance Service
Deal Team – At Your
Favourable Change in Macroeconomic Variables since FY06
Key Parameters
2005-06
2011-12
Change
32,542
52,220
60% higher
33,548
46,221
38% higher
Investment / GDP (%)2
35.8
37.6**
5% higher
Exports (US $ bn)1
103
303
194 % higher
General Government Gross Debt (% GDP) 1
77.4
64.9**
16% lower
Workers Remittances (US$ bn) 2
28.0+
63.7++
127% higher
Gross International Reserves (US$ bn) 1
151#
294 ##
94% higher
Foreign Direct Investment inflow (US $ bn)
9.1
46.8
414 % higher
Foreign Direct Investment outflow (US $ bn)
6.1
25.8**
323% higher
Real GDP (INR billion)1
Real Per Capita GDP (INR)
1
Sources:
1 Reserve Bank of India data (as on March 2012)
2 IMF WEO Database April 2012
** For FY 2010-11
+ for calendar year 2006
++ for calendar year 2011
# As on 31 March 2006
## As on 30 March 2012
CA Kajal Gandhi
4
5. Macro Deal Team – At Your Service
Indicators - GDP
5.5
5.3
Jun-12
Sep-12
4
4.5
5.3
Mar-12
6.0
3.5
6.5
7.5
9.2
8.2
5.9
5.8
%
8
6
8.5
9.6
Dec-07
7.7
9.5
Sep-07
9.3
9.7
Jun-07
8.5
9.8
Mar-07
9.8
9.4
Dec-06
8.6
9.8
Sep-06
9.9
Mar-06
9.3
9.6
Dec-05
8.9
10
9.4
12
7.6
11.4
GDP growth has averaged at 8.5% between FY06 – 11 ,
2
Dec-12
Dec-11
Sep-11
Jun-11
Mar-11
Dec-10
Sep-10
Jun-10
Mar-10
Dec-09
Sep-09
Jun-09
Mar-09
Dec-08
Sep-08
Jun-08
Mar-08
Jun-06
Sep-05
Jun-05
0
Source: RBI, CSO
The Indian economy has been decelerating since March 2011. GDP growth reached mere 4.5% in Q3FY13 with
moderation in all three sectors of economy.
Weak monsoon impacted agricultural performance
Policy constraints, supply and infrastructure bottlenecks, reduced govt. spending impacted industrial growth.
Subdued growth in other sectors and weak external demand pulled down growth in services sector as well
CA Kajal Gandhi
5
6. Macro Deal Team – At Your Service
Indicators – GDP breakup
Services constituting close to 66% of GDP
16
)
YoY (%
12
8
4
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
-4
FY06
FY07
FY08
Agri
FY09
Services
FY10
Industry
FY11
FY12
FY13
Source: RBI, CSO
It continues to drive growth in GDP, while both Manufacturing and Agricultural growth have been under pressure due
to various reasons
CA Kajal Gandhi
6
7. Macro Deal Team – At Your Service
Indicators – Channelising savings to investments
Gross Domestic Savings as % of GDP
32
35
%
30
25
24
25
26
29
33
35
37
35
35
32
28
29
30
31
25
%
40
Gross Fixed Capital Formation as % of GDP
20
23
25
24
25
30
31
33
32
30
29
26
20
15
15
10
10
5
5
0
0
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12
FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12
Source: RBI, CSO
Source: RBI, CSO
Savings rate continue to be greater than 30%, far higher than other emerging economies
The private sector, comprising households and corporates, remains the main contributor to saving.
To mobilize savings for the huge plan expenditure target, the FM has tried to incentivise households to invest in
financial instruments, rather than investing in physical assets like gold.
The liberalization of RGESS and proposal to introduce inflation linked bonds or saving certificates are steps in the
right direction
CA Kajal Gandhi
7
8. Capital Flows facilitating financing of CAD
Deal Team – At Your Service
Robust FDI and FII inflow
40.0
32.4
30.0
22.4
$ billion
7.7
22.1
18.0
15.9
20.0
10.0
30.3
27.4
17.2
9.4
7.1
0.0
-10.0
FY
07
-20.0
FY
08
FY
09
FY
10
-14.0
FDI
Source: RBI
CA Kajal Gandhi
8
FII
FY
11
FY
12
9. Focus Deal Team – At Your Service
on Infrastructure spending
Infrastructure investment has grown massively since 2007 supported by increased private sector participation
12
DP
%to G
10
8
6
4
1.3
2.2
2.4
2.6
2.9
3.3
5
3.9
4.2
4.8
4.9
5
5.1
5
10Th plan actual
2
FY08
FY09
FY10
FY11
FY12E
12th Plan Projected
0
Public
Private
Source: Secretariat for Infrastructure
12th 5 Year Plan: Emphasis on Infrastructure Investment
Infrastructure Debt Funds (IDFs) – a new step to fund long term projects
Promoting Public-Private Partnerships (PPPs) for funding and execution
CA Kajal Gandhi
9
10. Financial Markets – At Your Service
Deal Team
Key Statistics of Indian Financial Services Industries
Industry
Life Insurance Annual Premiums
- New Business
- Renewals
Unit
FY
12
Y FY
TD 13
Rs Crore
Rs Crore
113,699
169,616
69,184
111,000
MF Industry
- AUM
- Annual Inflow
Rs Crore
Rs Crore
587,217
-22,023
813,530
184,585
Banking Industry
- Credit
- Credit G
rowth
- Deposit
- Deposit G
rowth
Rs Crore
%
Rs Crore
%
4,700,000
19.0
6,100,000
14.2
5,126,000
16.3
6,560,000
12.8
Source: Life Insurance Council, AMFI, RBI
Asset class wise allocation of financial savings trend Rs Crore
Y
ear
FY
02
FY
03
FY
04
FY
05
FY
06
FY
07
FY
08
FY
09
FY
10
FY
11
FY
12
Currency Bank deposits Non- banking deposits Life insurance fund Provident and pension fund Shares & debentures
28,160
113,030
-350
41,240
44,220
9,830
28,630
122,700
12,500
52,010
45,950
7,120
42,680
155,930
1,950
52,240
48,950
9,080
36,980
175,050
80
67,990
55,790
8,110
52,150
265,720
520
83,490
61,950
33,860
67,190
429,280
4,580
114,850
72,500
50,850
81,280
389,010
1,290
169,850
71,540
74,310
92,190
417,830
14,740
152,860
73,400
-2,330
96,940
398,140
18,520
259,820
129,850
44,840
137,130
440,470
4,390
220,730
138,980
1,730
109,020
492,670
14,850
223,430
151,610
-6,510
Source: RBI Handbook
CA Kajal Gandhi
10
O
thers Change in Financial Savings assets
49,904
286,034
54,462
323,372
78,643
389,473
103,165
447,165
86,502
584,192
25,421
764,671
-14,895
772,385
-21,801
726,889
41,688
989,798
47,878
991,308
-15,991
969,079
11. Companies – At Your Service
Deal Team Market share in Insurance NBP and MF AUM
MF AUM market share (Avg Dec’12) – (|793000 crore)
H FC
D
13%
O
thers
22%
R
eliance
12%
ID
FC
4%
D Blackrock
SP
K
otak 4%
IC I
IC
10%
Birla
10%
U
TI
9%
4%
Franklin
SBI
5%
7%
Life Insurance NBP market share (Q3FY13)
SBI Life
18%
O
thers
29%
HDFC Standard
14%
Birla Sunlife
6%
K
otak
Mahindra O
ld
Mutual
3% Reliance Life
Source: RBI Handbook
Source: Life Insurance Council, AMFI, RBI
CA Kajal Gandhi
Bajaj Allianz
10%
ICICI Prudential
17%
5%
11
12. Credit to GDP ratio
20.0
10.0
Credit growth
Deposit growth
3.0
2.0
2.9
1.0
13*
FY
12
FY
11
FY
10
FY
09
FY
08
FY
07
FY
0.0
4.0
(X)
80.0
78.0
76.0
74.0
72.0
70.0
68.0
)
(%
)
(%
30.0
2.4
2.6
FY08
FY09
2.5
2.6
FY11
FY12
2.1
0.0
FY07
FY10
CD ratio
Credit multiplier
Historically, it has been observed that credit has grown at ~2.5x the GDP growth of India. Considering GDP
growth is estimated to remain modest at 6% for FY14E and 7%, thereafter, we believe credit to grow at ~16%
for the next year and then may pick up some pace
CA Kajal Gandhi
12
15. Banking sector – Dupont Analysis (% of average assets)
2007
Net Interest Income
Other income
Total income
Operating exp.
Wage
Other cost
Provision
Net profit
2008
2009
2010
2011
2012
2.86
1.38
4.24
2.12
1.16
0.97
1.11
1.00
2.61
1.52
4.13
1.98
1.02
0.96
1.05
1.10
2.62
1.57
4.19
1.87
1.00
0.87
1.22
1.10
2.55
1.39
3.94
1.77
0.98
0.79
1.16
1.01
2.92
1.20
4.12
1.86
1.09
0.77
1.19
1.06
2.90
1.11
4.01
1.77
1.01
0.76
1.18
1.06
Fee based income and trading gains have seen declining trend
Cost rationalisation with growing assets but wage provisions to be high
PCR – provisions have been rising due to NPAs
CA Kajal Gandhi
15
16. Banking sector – Key Ratios
Further breakup of RoA depicts private Sector Banks more profitable
Public sector banks
1.1 Nationalised banks
1.2 SBI G
roup
Private sector banks
2.1 O private sector banks
ld
2.2 New private sector banks
Foreign banks
All SCBs
CA Kajal Gandhi
RoA (%
)
2010-11
2011-12
0.96
0.88
1.03
0.88
0.79
0.89
1.43
1.53
1.12
1.2
1.51
1.63
1.75
1.76
1.1
1.08
16
RoE (%
)
2010-11
2011-12
16.9
15.33
18.19
15.05
14.11
16
13.7
15.25
14.11
15.18
13.62
15.27
10.28
10.79
14.96
14.6
17. Banking sector – Asset quality pressures surging
Exhibit 1: Stressed assets (SA) including NNPA & RA increase significantly
2.9
2.5
2.4
100000
1.8
1.2
FY09
0
183000
94360
1.0
137102
61500
1.1
97922
41813
1.1
84747
38723
50000
2.4
68973
31424
(| crore)
150000
FY10
FY11
FY12
500000
6.5
300000
200000
100000
10.0
7.9
400000
(| crore)
3.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
)
(%
200000
3.2
2.2
91803
4.1
8.0
5.3
3.6
6.1 6.0
4.0
3.0
2.7
136557 148672 311500
)
(%
Exhibit 1: NPA trend over the years
2.0
414360
0.0
9MFY13
0
FY09
RA
GNPA
NNPA
Source: RBI, Capitaline, ICICIdirect.com Research
GNPA ratio
SA
FY10
FY11
FY12E 9MFY13
RA as %of advances
SA as %of advances
NNPA ratio
Source: RBI, Capitaline, ICICIdirect.com Research
For the past couple of years, the asset quality deterioration has been creating a lot of uncertainties in the
bottomline of banks.
The absolute gross NPA of the industry has increased from | 97,922 crore in FY11 to | 137102 crore in
FY12 and further to | 1,83,000 crore in Q3FY13. Similarly, restructured assets (RA) have increased from |
1,06,859 crore in FY11 to | 2,57,000 crore in FY12 and further to ~| 3,20,000 crore as on Q3FY13. Going
forward, we believe the economic slowdown will continue to keep the trend of slippages and restructuring
at elevated levels. Albeit, the pace may reduce as most of the pain seems to be taken in the books.
CA Kajal Gandhi
17
18. Basel III requirement estimates
The domestic banking industry will require | 2.7 lakh crore capital by March 2018 to meet its
tier-I capital requirement under Basel III framework as per Crisil estimates.
The tier-I capital of most PSU banks is on the lower side at ~8-9% in FY13. They will be
required to raise significant capital for funding their future growth two years down the line. A
challenge for government and need for more capital instruments.
Basel III requires total capital of 9% +2.5% countercyclical Buffer
Tier I capital required at 7% by 2018 (as per RBI)
Basel II
Capital funds (i+ ii)
i) Tier I capital
ii) Tier II capital
Risk-weighted assets
CRAR (A as %of
of which: Tier I
Tier II
CA Kajal Gandhi
Rs. Crore
2010-11
2011-12
6,703
7,780
4,745
5,672
1,958
2,109
47,249
54,623
14.2
14.2
10
10.4
4.1
3.9
18
Tier I capital accounted for more than 70
% of the total capital of Indian banks
both under Basel I and II, reflecting the
sound capital position of banks.
19. Banking sector – Key statistics (FY12)
Balance Sheet operations
Total Liabilities/Assets
Deposits
Borrowings
Loans and Advances
Investments
O
ff-balance Sheet E
xposure (As percentage
Total C
onsolidated International C
laims
Profitability
Net Profit
R
eturn on Asset (R
oA) (Per cent)
R
eturn on E
quity (R ) (Per cent)
oE
Net Interest Margin (NIM) (Per cent)
Asset Q
uality
G
ross NPAs
Net NPAs
Total Provisions made
G
ross NPA R
atio (G
ross NPAs as percentage of G
ross Advances)
Net NPA R
atio (Net NPAs as percentage of Net Advances)
Provisioning C
overage R
atio (Per cent)
Slippage R
atio (Per cent)
Written-off R
atio (Per cent)
Sectoral Deployment of Bank C
redit
Total Non-food G
ross Bank C
redit
Agriculture and Allied Activities
Industry
Services
Personal Loans
CA Kajal Gandhi
19
82,994
64,537
8,401
50,746
22,305
175.9
2,809
817
1.08
14.6
2.9
1,423
649
747
3.1
1.4
53
3
4
42,897
5,226
19,659
10,330
7,683
21. Bank NIMs
NIM (%)
Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13
PSU coverage
Bank of India
2.9
2.8
3.1
2.9
2.2
2.4
2.6
2.9
2.3
2.4
2.4
Bank of Baroda
2.9
3.0
3.2
3.5
2.9
3.1
3.0
3.0
2.7
2.7
2.7
Dena Bank
2.8
3.5
3.3
3.1
2.9
3.2
3.3
3.2
3.1
2.9
2.9
Indian Overseas Bank 2.9
3.0
3.3
3.2
2.9
2.9
2.6
2.7
2.6
2.3
2.5
IDBI Bank
1.6
2.3
2.3
2.1
2.1
2.0
1.9
2.1
2.1
2.1
2.3
Punjab National Bank 3.9
4.1
3.9
3.9
3.8
4.0
3.9
3.5
3.6
3.5
3.5
State Bank of India
3.2
3.4 3.4(Q3-3.61)
3.32(Q4-3.07) 3.6
3.8
4.1
3.9
3.6
3.3
3.3
Syndicate Bank
3.1
3.6
3.4
3.4
3.2
3.4
3.5
3.6
3.2
3.3
3.3
Private coverage
Axis Bank
3.7
City Union Bank
3.6
Development Credit Bank
3.1
Dhanlaxmi bank
2.6
Federal Bank
4.2
HDFC Bank
4.3
Jammu & Kashmir Bank
Kotak Mahindra Bank 5.4
South Indian Bank
2.8
Yes Bank
3.1
CA Kajal Gandhi
3.7
3.7
3.1
2.4
4.4
4.2
3.7
5.2
3.0
3.0
3.8
3.5
3.1
2.6
4.3
4.2
3.7
5.4
3.0
2.8
3.4
3.8
3.2
3.0
4.0
4.2
3.7
5.3
2.8
2.8
3.3
3.6
3.1
2.0
3.9
4.2
3.8
5.0
2.8
2.8
21
3.8
3.4
3.4
2.2
3.8
4.1
3.8
4.8
3.0
2.9
3.8
3.2
3.4
1.8
3.9
4.1
3.6
4.7
3.1
2.8
3.6
3.4
3.1
1.8
3.6
4.2
3.9
4.8
3.1
2.8
3.4
3.2
3.2
2.5
3.4
4.3
3.8
4.7
3.2
2.8
3.5
3.3
3.2
2.0
3.6
4.2
3.9
4.7
3.1
2.9
3.6
3.5
3.4
~2.54
3.5
4.1
4.1
4.6
3.2
3.0
22. Market Share
Deal Team – At Your Service
Market Share in Advances
FY06
Public Sector Banks
BO
B
BO
I
Dena
IO
B
O
BC
PNB
SBI
Syndicate Bank
UBI
Private Sector Banks
Axis
City Union Bank
DCB
Dhanlaxmi
Federal Bank
HDFC Bank
Kotak Bank
SIB
Yes
CA Kajal Gandhi
FY07
FY08
FY09
FY10
FY11
FY12
FY13E
3.3
3.5
0.9
2.2
2.2
5.0
15.6
2.4
3.5
3.5
3.5
0.9
2.3
2.3
5.0
15.5
2.7
3.2
3.6
3.8
1.0
2.4
2.3
5.1
15.3
2.7
3.1
3.9
4.1
1.0
2.4
2.5
5.4
16.5
2.9
3.5
4.1
4.1
1.1
2.2
2.6
5.5
16.5
2.8
3.7
4.3
4.1
1.1
2.6
2.4
5.8
16.5
2.7
3.8
4.4
3.8
1.2
2.7
2.4
5.9
15.9
2.7
3.9
4.3
3.9
1.2
2.8
2.4
6.1
16.2
2.7
3.9
1.5
0.2
0.1
0.1
0.8
2.3
0.4
0.4
0.2
1.9
0.2
0.1
0.1
0.8
2.4
0.6
0.4
0.3
2.5
0.2
0.2
0.1
0.8
2.7
0.7
0.4
0.4
2.9
0.2
0.1
0.1
0.8
3.6
0.6
0.4
0.4
3.2
0.2
0.1
0.2
0.8
3.9
0.6
0.5
0.7
3.6
0.2
0.1
0.2
0.8
4.1
0.7
0.5
0.9
3.7
0.3
0.1
0.2
0.8
4.2
0.8
0.6
0.8
3.8
0.3
0.1
0.3
0.8
4.3
0.9
0.6
0.8
22
23. Indian Deal Team – At–Your Service
Capital Markets some key statistics
•
•
•
India has 21 stock exchanges with NSE and BSE as premier exchanges with
combined daily average turnover of over Rs 1662 billion.
FII investment of $24.8 billion in Equities and $4.7 billion in debt in YTD FY13
Market Regulators
− Reserve Bank of India (RBI)
− Securities and Exchange Board of India (SEBI)
Key Statistics
•
Market Capitalization
− BSE: $ 1176 billion
− NSE: $ 1153 billion
− Corporate Debt: $ 200 billion
− Government Securities: $ 722 billion
CA Kajal Gandhi
23
24. Indian Deal Team – At Your Service
Capital Markets
Participation in Markets
Average daily turnover of Rs 1662 billion
1%
8%
18%
17%
6%
50%
25%
DII
FII
Prop
75%
Retail
BSE cash
Source: BSE, NSE
Source: BSE, NSE
BSE derivatives
NSE cash
NSE derivatives
Net Investment by the FIIs in India (US$ billion)
40.0
USD Billion
30.0
20.0
10.0
0.0
-10.0
FY02
FY03
FY04
FY05
FY06
FY07
FY08
-20.0
Source: Bloomberg
FII Debt
CA Kajal Gandhi
24
FII Equity
FY09
FY10
FY11
FY12
FY13 YTD