Banking Sector Update - FY18 - v2

India Banking Sector
FY18 update
JUNE 2018
India banking – key takeaways
1 Profitability takes a hit with increased provisioning for bad loans
2 Sharp fall in deposits growth, credit growth reviving slowly
3 Inflation and capex have fallen, resulting in sub-par credit growth in recent years
Copyright © 2017 by The Boston Consulting Group, Inc. All rights reserved.
4 NPA rise after recent tight prudential norms released by RBI
5 Asset resolution under IBC – one successful resolution out of 12 from NCLT list- 1
6 Valuation gap between private and PSU banks gets wider
7 Outlook – market rates to head higher, slippages to decline, bond yields to remain sticky
1
1 Banking sector overview
FY18 banking sector–earnings snapshot

Profitability takes a hit on the back of increased provisioning
Rs Bn Only 2 out of 21 PSU banks able

10,000 9,618 to generate profit in FY18.
Total net loss of PSU banks at
8,000
Rs ~87,000 Cr.
6,000 1,810 5,158
4,000 3,348
-6,270
2,000 -2,500
0 275
-3,370 -437
-2,000
Interest Interest NII Other Total Income Opex Provisions Taxes Net Profit
Earned expense Income
Growth
1% -2% 7% 3% 1% 9% 56% NM -246%
yoy (%)
Note: Data for 40 SCBs

Source: Capitaline, press releases, BCG Analysis 2
Player performance | Banks (I/III)
Advances Deposits CASA Other
Period Rs Cr Rs Cr Ratio(%) NIM (%) Inc.1 (%) CIR(%) GNPA(%) ROA3(%)
Q4'18 19.35L ▲4% 27.06L ▲5% 45.68 ▲128 bps 2.50 ▼ 24 bps 0.62 ▼0.01 bps 50.18 ▲64 bps 10.91 ▲180 bps (0.19) ▼13 bps
Q3'18 19.25L 26.51L 45.13 2.45 0.69 49.84 10.35 0.05
Q4'18 4.34L ▲3% 6.42L ▲ 3% 43.85 ▼212 bps 2.30 ▼ 8 bps 0.37 ▼0.35 bps 61.50 ▲1847 bps 18.38 ▲ 585 bps (1.60) ▼179 bps
Q3'18 4.75L 6.48L 45.52 2.15 0.70 39.96 12.11 0.12
PSU L
Q4'18 4.27L ▲12% 5.75L ▼ 0.1% 41.18 ▲174 bps 2.43 ▲31 bps 1.41 ▼ 0.01 bps 53.23 ▲1847 bps 12.26 ▲180 bps (0.34) ▼54 bps
Q3'18 4.17L 5.73L 40.57 2.72 1.56 39.84 11.31 0.07
Q4'18 3.41L ▼ 7% 5.21L ▼ 4% 41.43 ▲159 bps 1.70 ▼19 bps 0.36 ▼ 0.10 bps 70.24 ▲3012 bps 16.58 ▲336 bps (0.91) ▼64 bps
Q3'18 3.80L 5.26L 40.36 1.88 0.27 61.77 16.93 (1.36)
Q4'18 3.82L ▲12% 5.25L ▲ 6% 34.28 ▲143 bps 2.42 ▲ 19 bps 0.35 ▼ 0.29 bps 50.03 ▲118 bps 11.84 ▲ 221 bps (0.75) ▼ 95 bps
Q3'18 3.73L 5.04L 33.83 2.39 0.30 47.36 10.38 0.15
Q4'18 6.58L ▲19% 7.89L ▲23% 43.50 ▼500 bps 4.31 ▲ 10 bps 2.46 ▲ 0.35 bps 40.62 ▼ 180 bps 1.30 ▲ 25 bps 1.90 0 bps
Q3'18 6.31L 6.99L 44.00 4.31 2.47 41.2 1.29 2.01
Q4'18 5.12L ▲10% 5.61L ▲14% 45.9 ▼ 60 bps 3.23 ▼ 2 bps 1.16 ▲ 0.54 bps 35.8 ▼ 730 bps 8.84 ▲95 bps 0.50 ▼60 bps
Q3'18 5.05L 5.17L 45.7 3.14 0.67 43.0 7.82 0.83
Pvt New
Q4'18 4.40L ▲18% 4.54L ▲ 9% 54.00 ▲300 bps 3.44 ▼ 23 bps 2.42 ▲ 0.04 bps 47.22 ▲632 bps 6.77 ▲173 bps 0.04 ▼215 bps
Q3'18 4.21L 4.09L 49.00 3.14 3.07 47.41 5.28 0.44
Q4'18 2.04L ▲54% 2.01L ▲41% 36.51 ▲ 20 bps 3.50 ▲ 10 bps 0.85 ▲ 0.02 bps 40.32 ▼ 130 bps 1.28 ▼ 24 bps 1.61 ▼20 bps
Q3'18 1.72L 1.72L 38.01 3.51 0.83 39.5 1.72 1.71
Q4'18 1.70L ▲25% 1.93L ▲22% 50.81 ▲680 bps 4.35 ▼ 15 bps 2.55 ▲ 0.33 bps 47.32 ▼ 111 bps 2.22 ▼ 37 bps 1.73 ▼ 379 bps
Q3'18 1.59L 1.81L 46.71 4.21 1.91 46.9 2.31 1.90
1. Other income is a percentage of total advances; Top 5 Banks in each category have been selected basis advances, 2. Annual Number
3. Annualized xxx Change vs. last year same qtr 3
Source: Capitaline
Player performance | Banks (II/III)
Q4'18 2.11L ▲6% 2.73L ▲5% 33.33 ▲101 bps 2.44 ▲7 bps 2.03 ▼0.34 bps 60.5 ▲1125 bps 11.53 ▲ 303 bps (2.9) ▼301 bps
Q3'18 2.19L 2.72L 32.19 2.36 2.21 64.6 9.62 (1.1)
Q4'18 1.72L ▼ 10% 2.48L ▼ 8% 37.15 ▲569 bps 1.81 ▲19 bps 1.49 ▲1.11 bps 34.67 ▼2087 bps 27.95 ▲ 670 bps (6.7) ▼332 bps
Q3'18 1.83L 2.37L 36.14 1.62 0.73 36.55 24.72 (1.8)
PSU M
Q4'18 1.57L ▲12% 2.95L ▼ 1% 42.46 ▲326 bps 2.47 ▼ 23 bps 2.91 ▼0.34 bps 74.78 ▲1581 bps 21.48 ▲ 367 bps (2.75) ▼200 bps
Q3'18 1.62L 2.95L 40.68 2.39 2.81 65.91 18.08 (2.13)
Q4'18 1.36L ▼ 14% 2.07L ▼ 5% 31.68 ▲118 bps 2.19 ▼37 bps 0.28 ▼ 0.22 bps 73.93 ▲ 2751 bps 17.63 ▲390 bps (2.63) ▼66 bps
Q3'18 1.63L 2.16L 29.29 1.95 0.15 50.87 16.95 (3.07)
Q4'18 1.52L ▲1% 2.14L ▲ 6% 46.50 ▲71 bps 2.20 ▼ 34 bps 0.30 ▼ 0.16 bps 91.03 ▲4192 bps 15.96 ▲287 bps (5.77) ▼ 596 bps
Q3'18 1.62L 2.11L 45.14 2.48 0.40 50.38 14.38 (2.09)
Q4'18 0.92L ▲25% 1.12L ▲15% 33.26 ▲66 bps 3.21 ▲ 55 bps 0.38 ▲ 0.02 bps 52.82 ▲166 bps 3.00 ▲67 bps 0.46 ▼41 bps
Q3'18 0.85L 1.01L 32.96 3.33 0.32 52.37 2.52 0.96
Q4'18 0.57L ▲14% 0.80L ▲10% 50.89 ▼ 81 bps 3.19 ▼31 bps 2.08 ▼ 0.05 bps 67.82 ▲327 bps 9.96 ▲124 bps 0.13 ▲281 bps
Q3'18 0.58L 0.73L 49.87 4.02 1.80 56.90 10.08 0.36
Pvt Old
Q4'18 0.55L ▲18% 0.72L ▲ 9% 23.80 ▼ 2 bps 2.7 ▼ 2 bps 0.35▲ 0.07 bps47.162 ▲327 bps 3.6 ▲110 bps 0.6 ▲20 bps
Q3'18 0.52L 0.68L 24.86 2.9 0.33 50.59 3.4 0.6
Q4'18 0.45L ▲10% 0.57L ▲6% 29.14 ▲141 bps 3.86 ▲16 bps 0.49 ▼ 0.05 bps 43.73 ▲618 bps 6.56 ▲298 bps 0.30 ▼109 bps
Q3'18 0.45L 0.57L 28.05 3.71 0.49 46.45 5.94 0.43
Q4'18 0.47L ▲28% 0.63L ▲11% 27.99 ▼105 bps 3.18 ▲113 bps 2.84 ▼ 0.24 bps 43.14 ▼726 bps 4.92 ▲71 bps 0.49 ▼ 25 bps
Q3'18 0.44L 0.58L 28.23 3.09 1.81 50.18 3.97 0.53
1. Other income is a percentage of total advances; Top 5 Banks in each category have been selected basis advances 2. Annual Number 3.
Annualized xxx Change vs. last year same qtr 4
Source: Capitaline
Player performance | Other Select Banks (III/III)
Q4'18 0.65L ▼ 15% 1.06L ▼ 7% 40.03 ▲ 210 bps 2.19 ▲ 19 bps 0.00 ▼ 0.42 bps 78.7 ▲1346 bps 22.04 ▲ 577 bps (1.50) ▼ 92 bps
Q3'18 0.72L 1.05L 38.46 2.45 0.20 66.1 19.56 (1.27)
Q4'18 1.45L ▲ 28% 1.52L ▲ 20% 44.00 ▲ 710 bps 3.97 ▲ 50 bps 0.94 ▼ 0.07 bps 44.98 ▼ 40 bps 1.17 ▲ 24 bps 1.90 ▲ 4 bps
Q3'18 1.29L 1.46L 42.09 3.99 1.41 45.98 1.16 1.96
Q4'18 0.40L ▲ 37% 0.44L ▲ 27% 24.30 ▲ 230 bps 4.00 ▲ 50 bps 0.90 ▲ 0.18 bps 52.90 ▲ 80 bps 1.40 ▲ 20 bps 1.21 ▲ 5 bps
Q3'18 0.37L 0.39L 24.00 3.90 0.57 54.00 1.56 1.22
Q4'18 0.52L ▲ 6% 0.48L ▲ 20% 11.80 ▲ 660 bps 1.70 ▼ 50 bps 0.22 ▲ 0.09 bps 89.70 ▲3630 bps 3.31 ▲ 32 bps 0.72 ▼ 32 bps
Q3'18 0.47L 0.42L 10.10 1.90 0.44 56.60 5.62 0.50
1. Other income is a percentage of total advances 2. Annualized xxx Change vs. last year same qtr 5
Source: Capitaline
2 Credit and deposit growth
Sharp fall in deposits growth, credit growth reviving slowly
Credit and deposit growth rate (%)
Growth % yoy
21.5
22
20 18.2
18 16.9 17.0
16 17.5
14.1 13.9 13.9
14 15.8 15.3
14.2 13.8
12 10.9
13.3 10.2 10.0
10 8.2
8 9.9 7.0
9.0
6
4
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18
Credit growth Deposit growth
Source: RBI, CMIE, BCG Analysis 6

PSU banks have experienced majority of the challenge in credit growth
Credit growth by bank category
Growth % yoy
30
20.9
20
10
4.7
3.9
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-10
PSU Private Foreign
Note: March ending data

Source: RBI, CMIE, Literature search 7
Market share in lending for PSU banks under PCA is falling rapidly
List of 11 PSU banks under PCA PCA banks advances as % of
(prompt corrective action) total SCBs advances
Figures for FY18

PCA banks GNPA NNPA ROA CRAR
30%
Bank of India 16.6 8.3 -0.9 12.9
United Bank (I) 24.1 16.5 -1.0 12.6
Dena Bank 22.0 12.0 -1.6 11.1
20%
Bank of Maha 19.5 11.2 -0.7 11.0
UCO Bank 24.6 13.1 -1.9 10.9
26 24
Oriental Bank 17.6 10.5 -2.3 10.5 22
10% 20
18
IDBI Bank 28.0 16.7 -2.5 10.4
IOB 25.3 15.3 -2.3 9.3
Corporation 16.2 11.7 -1.7 9.2 0%
Central Bank 21.5 11.1 -1.6 9.0 FY14 FY15 FY16 FY17 FY18
Allahabad Bank 16.0 8.0 -2.0 8.7
Source: Capitaline, BCG Analysis 8

Early signs of PSU banks stronghold over deposits weakening
Deposit growth by bank category

Growth % yoy
25
20 17.7
15
10
5.8
5
2.3
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
PSU Private Foreign
Note: March ending data

Source: RBI, CMIE, Literature search 9
3 Credit growth
Key drivers of banking system credit growth- inflation and capex have fallen in
the recent years, resulting in four years of sub-par credit growth
(%)
5.0
1.8 0.1
4.0
3.1
11.8
11.1 5.8
12.6
9.0
5.8
3.6 4.8
3.9 4.8 5.8
2.5 2.0
5.3 4.6 4.1 4.6 1.9 0.8
3.7 3.9 2.5 2.2 1.7 1.8
Non-inflation non-capex Capex led credit growth Inflation led credit growth
Source: RBI, CMIE, Broker report, BCG Analysis 10
Funding from bond market remains constant over FY17-18
Sources of funding composition (%)

(%)
10 9 10 11 12 12 12 12 10 10
17 18 17 16 17 17 18 19 21 22
73 73 73 72 71 71 69 69 68 68
External funding (ECB/FCCB) Corporate Bond market O/s SCBs Non food credit

Private banks were more proactive in raising MCLR from Jan’18 and PSU banks
were more reactive raising rates only in Mar’18
MCLR change Dec 2017 to Mar 2018 (bps) for select banks
40 40
25
20 20
15 15 15 15
10 10 10
5
0 0
-20
DCB
RBL
YES
BoB
Kotak
Axis
PNB
SBI
Canara
ICICI
KVB
Indusind
Federal
HDFC
City Union
SouthIndian

4 Asset quality
Asset quality has become an area of concern
Gross and net non-performing loans (%)
NPA (%)
13 12.3
12
11
9.6
10
9 7.9
8
7 6.2
6 5.3
4.5 4.6
5 4.0
3.6
4 3.1
3 2.2 2.5
1.7
2 1.4
1
FY12 FY13 FY14 FY15 FY16 FY17 FY18
Gross NPA Net NPA
Source: Capitaline, RBI Financial Stability report, BCG Analysis 13

NPA rise after tougher stressed assets framework put in place by RBI in
February 2018
Gross NPA Trend Net NPA Trend
Rs Trn Rs Trn
15 9
+32%
12 +20%
+31% 10.2
2% 6 +25%
5%
9 10%
5.2
+90% 7.8 2%
+99%
6%
2% 6% 4.3 10%
22% 2% 6%
+24% 10%
5.9 +25% 3.5 9% 21%
6 4% 2% 2%
7% 23% 5% 4% 23%
21%
3 20%
3.1 1.7 2%
3 2.5 2% 4% 8% 2% 60% 1.4 5% 3%
2% 61%
7% 4% 24% 59% 4% 4% 22% 61%
32% 66% 30% 69%
55% 62% 60% 67%

0 0
Old Private New PSU (IDBI) New Private SBI Nationalised
Source: Capitaline, press releases 14

5 Asset resolution
India’s Insolvency & Bankruptcy Code has a long way to go before it becomes
comparable to more efficient economies
NCLT Cases status check
Time for resolution (in years)
As on Nov'17, over 4,300 applications
6 Sub-par recovery rate of 26.4% with avg.
resolution time at 4.3 years, while avg. under Corporate insolvency resolution
cost of resolution at ~9% of estate process (CIRP) were filed in the
various benches of NCLT
India Economies with recovery ~500 applications have been rejected,

Economies characterized
4 rate of ~40% and resolution by recovery rate in excess dismissed or withdrawn
time <3.0 years of 80% and resolution time
<1.5 years 470 cases admitted by NCLT for
insolvency process
50 cases (11% of admitted cases) have

2 South Africa Russia South Korea
seen successful closure, with
Singapore
Germany • 6 cases (1%)—approval of
Norway
United Kingdom resolution plans
China United States Hong Kong • 19 cases (4%)—commencement of
Japan liquidation
0 • 25 cases (5%)—admission of cases
0 20 40 60 80 100 have been set aside by the orders
Size of the bubble indicates the cost of resolution (% of estate)
of appellate authorities i.e.,
Recovery rate (%)
NCLAT/the Supreme Court

NCLT accounts status check - list #1
Account Admitted Resolution Days since admission

Bhushan Steel July 26, 2017 May 15, 2018 293 • Of the 12 NPA accounts
Lanco Infratech August 7, 2017 Pending 310
with combined
exposure of Rs. 2.5 trn,
Essar Steel August 2, 2017 Pending 315 referred to NCLT by RBI
Bhushan Power and Steel July 26, 2017 Pending 322
as part of its first list,
only 1 a/c has seen
Alok Industries July 18, 2017 Pending 330 resolution, while
Amtek Auto July 24, 2017 Pending another is pending with
324
NCLT.
Monnet Ispat and Energy July 18, 2017 Pending 330
Electrosteel Steels July 21, 2017 In NCLAT since April 17, 2018 327
• Of the remaining 10
accounts under process,
Era Infra Engineering September 21, 2017 Pending 265 all barring one account
Jaypee Infratech August 9, 2017 Pending 308
have already crossed
the 180 day + 90 day
ABG Shipyard August 1, 2017 Pending 316 (extra time) that was
Jyoti Structures July 4, 2017 Pending 344
prescribed under the
IBC

NCLT accounts status check - list #2 : resolutions likely to be a FY20 event
Second list of NCLT accounts constituted 28 accounts with combined exposure of Rs. 1.5 trn to the banking
28 accounts system.
Despite the RBI set deadline for referring these 28 accounts to NCLT of Dec-17, only 11 out of 28 accounts have
11 admitted
been admitted to NCLTs till date.
Outcome One account has already crossed 300 days since admission without any resolution.
delayed in many Another 4 accounts have crossed 150 days since admission. The remaining accounts have only been admitted in
cases the last 3 months. The NCLTs going on vacation during the months of Apr-Jun for summer has also further
delayed the outcomes in many cases.
Haircuts to be While RBI has stipulated that banks make 50% provisions on all NCLT accounts, SBI has made higher provisions for
higher than list 1 the list-2 accounts which indicates that while the expected haircuts in the list-1 accounts could be ~55%, the
accounts haircut on list-2 accounts could be as high as ~75%.

6 Valuation
PSU banks valuation below book value, while private banks commanding
premium
Price to book ratio (As on 18th June, 2018)
New Private Old Private PSU

Central 1.3
RBL 3.5
Kotak 6.7 SBI 1.3
Indian 1.1
CUB 3.0
IDBI 1.1
BOB 0.8
HDFC 5.0 DCB 2.1 Vijaya 0.8
IOB 0.7
LVB 1.4 PNB 0.7
IndusInd 5.0 Canara 0.7
Federal 1.4 Allahabad 0.6
UCO 0.6
KVB 1.2 BOI 0.6
Yes 3.0 Syndicate 0.5 Below 1x
SIB 0.9 Corporation 0.5
Oriental 0.5
Axis 2.1 Dhanlaxmi 0.7 Union 0.5
Below 1x United 0.5
Karnataka 0.7 Dena 0.5
Andhra 0.4
ICICI 1.8 BOM 0.4
J & K Bank 0.6 PSB 0.3
0 2 4 6 8 0 1 2 3 4 0.0 0.5 1.0 1.5

Source: Capitaline 18
PSU banks market cap 1/3rd of private banks
Market cap (As on 18th June, 2018)
New Private Old Private PSU Figures in Rs Bn
SBI 2398
RBL 227
HDFC 5354 BOB 323
IDBI 242
Federal 163 PNB 230
Canara 187
Kotak 2503 CUB 122 Central 182
Indian 165
KVB 74 BOI 163
ICICI 1913 Union 122
DCB 54 UCO 77
13,030 779 IOB 73 4,604
SIB 42 Vijaya 72
Axis 1318 Syndicate 65
Karnataka 33 Oriental 49
Corporation 46
IndusInd 1174 J & K Bank 30 Allahabad 46
Andhra 41
LVB 30 Dena 37
BOM 35
Yes 767 United 34
Dhanlaxmi 5
PSB
18
0 2000 4000 6000 0 100 200 300 0 500 1000 1500 2000 2500
Source: Capitaline 19
7 Outlook for banking sector
Outlook for FY19
Credit growth Slippages/NPAs to Market rates to Bond yields to
expected to pickup head lower led by head higher led by remain sticky at
sharply to ~13% higher quality tightening liquidity 8% – 8.3% led by
with deposit book build of and falling real supply demand
growth at 11% FY15 – FY18 and rates, yield curve dynamics altering
RBI’s asset quality to flatten in favour of supply
initiatives
Source: Broker reports, press search, BCG Analysis 20

Appendix
21
Industry indicators (I/II)
Bank advances1 Advances2 - NBFCs Deposits1

(in Rs trillion) (in Rs trillion) (in Rs trillion)
105 108 106 109 109 114

78 77 80 82 86 17
89 87 91 92 97 95 101
68 66 68 71 75 72 75 74 13 12 14 14
8 8 9 10 11 11
Mar’15
Jun’15
Sep’15
Mar’16
Sep’16
Mar’17
Mar’18
Dec’15
Jun’16
Dec’16
Jun’17
Sep’17
Dec’17
Jun’15
Jun’16
Jun’17
Mar’15
Sep’15
Mar’16
Sep’16
Mar’17
Sep’17
Mar’18
Mar’13
Sep’13
Mar’14
Sep’14
Mar’15
Sep’15
Mar’16
Sep’16
Mar’17
Sep’17
Mar’18
Dec’15
Dec’16
Dec’17
YoY YoY YoY
Growth
11% 9% 11% 12% 13% 9% 12% 6% 7% 6% 7% 10% 10% Growth
15% 17% 16% 18% 21% 17% 16% 11% 9% 15% 22% Growth
15% 11% 13% 11% 13% 9% 13% 15% 15% 11% 8% 5% 4%
Delinquency3 Banking` Profitability (RoA) Market cap

+0.8% 200
+3.3% 0.8%
+3.5% 1.0%
11.3% 12.1% 0.7% 0.7% 0.7% 0.7%
9.4% 9.6% 0.4% 100
7.9% 0.3% 0.3%
5.2% 0.2%
4.4%
0
-0.3%
Jun’15
Jun’16
Jun’17
Mar-18
Mar’15
Sep’15
Mar’16
Sep’16
Mar’17
Sep’17
Dec’15
Dec’16
Dec’17
Sep’15
Sep’16
Sep’17
Mar’15
Mar’16
Mar’17
Mar’18
Mar’13
Sep’13
Mar’14
Sep’14
Mar’15
Sep’15
Mar’16
Sep’16
Mar’17
Sep’17
Mar’18
NPA
(Rs Tn) ~3 ~4 ~6 ~7 ~7 ~8 ~9 Bank Nifty Nifty
Note: 1. Includes to global banking advances and deposits; 2. Advances of select NBFCs (top 30 basis advances) 3. Delinquencies exclude foreign participants 4. Market Cap is 22
indexed to 100. Source: RBI; Capitaline
Industry indicators (II/II)
Rise in interest rates

observed over last quarter
after series of falling rate
Increase in MCLR
Credit to Deposit Ratio % MCLR % observed in Mar'18 GSec rate %
scenario
across banks
-1.3 +0.8
77 76 77 76 7.8 7.8 7.6 7.4 7.5 7.6
75 76 74 73 72 73 75
75 9.5 9.4 9.2 8.6 8.5 8.4 8.3 6.6 6.6 6.8 6.6 7.0 6.6 6.8
70 8.3 8.3
Jun-15
Sep-15
Jun-16
Sep-16
Jun-17
Sep-17
Mar-15
Mar-16
Mar-17
Mar-18
Dec-15
Dec-16
Dec-17
Jun-16
Sep-16
Jun-17
Sep-17
Jun-18
Mar-17
Mar-18
Dec-16
Dec-17
Mar-15
Jun-15
Sep-15
Mar-16
Jun-16
Sep-16
Mar-17
Jun-17
Sep-17
Mar-18
Dec-15
Dec-16
Dec-17
Demonetisation effect
Transactions Currency with the public Capitalization levels

+125%
(in trillion) (in rs. trillion) +6%
204 247 220 250 15.1% 13.8%
197 217
190 202 208 17 17 16 18 13.3% 12.2% 12.2% 12.6% 12.6% 13.0%
179 167
151 156 14 14 14 15 16 13 15 15
8
Jun-15
Sep-15
Jun-16
Sep-16
Jun-17
Sep-17
Mar-15
Dec-15
Mar-16
Dec-16
Mar-17
Dec-17
Mar-18
Jun-15
Sep-15
Jun-16
Sep-16
Jun-17
Sep-17
Mar-15
Dec-15
Mar-16
Dec-16
Mar-17
Dec-17
Mar-18
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
YOY
Growth 18 12 -2 1 10 14 35 29 26 9 8 7 1
(%) Demonetisation effect
Demonetisation effect
23
Note: 'Currency with the public' refers to physical currency held by public. It does not include money held in banks & demand deposits
Source: RBI; Capitaline
Player performance | NBFCs (I/II)
Advances
Period (Rs. '000 Cr) NIM (%) CIR (%) GNPA (%) RoE(%)
Q4'18 399.1 ▲4% 4.3 ▲0 bps 7.6 ▼ 20 bps 1.15 ▼ 4 bps 16.8 ▼370 bps
Q4'17 384.2 4.3 7.4 1.11 20.5
Q4'18 166.4 ▲15% 2.5 ▼48 bps 20.5 ▲250 bps 0.8 ▲ 40 bps 17.0 ▼200 bps
Q4'17 144.5 3.0 18.0 0.4 19.0

Q4'18 123.0 ▲ 35% 4.9 ▼10 bps 12.51 ▼ 80 bps 0.8 ▲ 8 bps 31.0 ▲290 bps
Q4'17 91.3 5.0 13.3 0.9 28.1
Q4'18 111.1 ▲ 33% 3.0 ▼ 1 bps 22.9 ▼149 bps 1.0 ▲2 bps 18.6 ▲274 bps
Q4'17 83.6 3.0 24.4 0.9 15.9

Q4'18 95.3 ▲ 21% 7.5 ▲ 55 bps 20.5 ▲116 bps 9.2 ▲ 99 bps 4.6 ▼70 bps
Q4'17 78.8 7.0 19.4 8.2 5.3

Q4'18 84.0 ▲ 40% 10.0 ▲ 53 bps 42.0 0 bps 1.5 ▼ 20 bps 4.5 ▼30 bps
Q4'17 60.0 9.5 42.0 1.7 4.8

Q4'18 57.0 ▲ 48% 3.0 ▼40 bps 30.0 ▲740 bps 0.3 ▲11 bps 14.0 ▼92 bps
Q4'17 38.5 3.4 22.6 0.2 14.9

Q4'18 42.9 ▲ 25% 8.6 ▲70 bps 42.5 ▲110 bps 2.9 ▼180 bps 23.6 ▲236 bps
Q4'17 34.2 7.9 41.4 4.7 21.2

1. Annual Numbers xxx Change vs. last year same qtr
24
Source: Analyst reports
Player performance | NBFCs (II/II)
Advances
Period (Rs. '000 Cr) NIM (%) CIR (%) GNPA (%) RoE(%)
Q4'18 29.1 ▲ 3% 5.9 ▼1116bps 25.4 ▼ 331bps 0.4 ▼164bps 22.1 ▲1228bps
Q4'17 28.3 8.1 28.7 2.1 19.8
Q4'18 27.5 ▲ 19% 11.4 ▲240 bps 56.9 ▲ 370bps 5.0 ▲240bps 11.2 ▲610bps
Q4'17 23.1 9.0 53.2 2.6 5.1

Q4'18 27.0 ▲ 36% 10.2 ▲90 bps 55.4 ▲2450 bps 1.6 ▼3bps 14.8 ▲233bps
Q4'17 19.8 9.3 50.7 1.7 12.5
Q4'18 24.7 ▲ 19% 6.1 ▼ 40bps 36.6 ▼ 30bps 1.3 ▼25bps 13.8 ▼20bps
Q4'17 20.7 6.5 36.9 1.5 14.0

Q4'18 15.6 ▲ 18% 4.4 ▲ 20bps 14.2 ▼ 171bps 0.5 ▲14bps 29.0 ▼100bps
Q4'17 13.2 4.2 15.9 0.3 30.0

Q4'18 43.2 ▲ 25% 4.3 ▼ 30bps 34.0 ▼ 100bps 0.9 ▲45bps 10.0 ▲200bps
Q4'17 34.7 4.6 35.0 0.5 8.0

Q4'18 14.8 ▲ 30% 5.6 ▼ 180bps 28.7 ▲1537bps 0.6 ▲50bps 4.6 ▲20bps
Q4'17 11.3 7.4 13.3 0.1 4.6

Q4'18 84 ▲ 26% 5.3 ▲ 28bps 35.6 ▲ 510bps 4.8 ▼231bps 15.1 ▲36bps
Q4'17 67 5.0 30.5 7.1 14.7

xxx Change vs. last year same qtr
Source: Analyst reports 25
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Banking Sector Update - FY18 - v2

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Banking Sector Update - FY18 - v2

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India Banking Sector

1 Profitability takes a hit with increased provisioning for bad loans

2 Sharp fall in deposits growth, credit growth reviving slowly

6 Valuation gap between private and PSU banks gets wider

FY18 banking sector–earnings snapshot

Rs Bn Only 2 out of 21 PSU banks able

6,000 1,810 5,158

Note: Data for 40 SCBs

Sharp fall in deposits growth, credit growth reviving slowly

Credit and deposit growth rate (%)

Credit growth Deposit growth

Source: RBI, CMIE, BCG Analysis 6

Credit growth by bank category

Note: March ending data

Figures for FY18

Source: Capitaline, BCG Analysis 8

Deposit growth by bank category

PSU Private Foreign

Note: March ending data

Sources of funding composition (%)

Source: RBI, CMIE, Broker report, BCG Analysis 11

Source: RBI, CMIE, Broker report, BCG Analysis 12

Asset quality has become an area of concern

Gross and net non-performing loans (%)

Gross NPA Net NPA

Source: Capitaline, RBI Financial Stability report, BCG Analysis 13

55% 62% 60% 67%

Old Private New PSU (IDBI) New Private SBI Nationalised

Source: Capitaline, press releases 14

India Economies with recovery ~500 applications have been rejected,

50 cases (11% of admitted cases) have

Source: RBI, CMIE, Broker report, BCG Analysis 15

Account Admitted Resolution Days since admission

Source: RBI, CMIE, Broker report, BCG Analysis 16

Source: RBI, CMIE, Broker report, BCG Analysis 17

New Private Old Private PSU

0 2 4 6 8 0 1 2 3 4 0.0 0.5 1.0 1.5

Market cap (As on 18th June, 2018)

New Private Old Private PSU Figures in Rs Bn

Outlook for FY19

Source: Broker reports, press search, BCG Analysis 20

Bank advances1 Advances2 - NBFCs Deposits1

105 108 106 109 109 114

Delinquency3 Banking` Profitability (RoA) Market cap

Rise in interest rates

Transactions Currency with the public Capitalization levels

Q4'17 144.5 3.0 18.0 0.4 19.0

Q4'17 91.3 5.0 13.3 0.9 28.1

Q4'17 83.6 3.0 24.4 0.9 15.9

Q4'17 78.8 7.0 19.4 8.2 5.3

Q4'17 60.0 9.5 42.0 1.7 4.8

Q4'17 38.5 3.4 22.6 0.2 14.9

Q4'17 34.2 7.9 41.4 4.7 21.2

Q4'17 23.1 9.0 53.2 2.6 5.1

Q4'17 19.8 9.3 50.7 1.7 12.5

Q4'17 20.7 6.5 36.9 1.5 14.0

Q4'17 13.2 4.2 15.9 0.3 30.0

Q4'17 34.7 4.6 35.0 0.5 8.0

Q4'17 11.3 7.4 13.3 0.1 4.6

Q4'17 67 5.0 30.5 7.1 14.7

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