Banking Sector Roundup Q1FY23

Banking Sector
Roundup – Q1FY23
SEPTEMBER 2022
Glossary: Classification of Indian banks used in this document
PSU (12 banks) Private—New (10 banks) Private—Old (9 banks)
Copyright © 2020 by Boston Consulting Group. All rights reserved.

Small Finance (4 banks)
1
Q1FY23 Results: Banking Industry Snapshot
Total Deposits Total Advances Retail Advances1 Corporate Advances

Business
₹162.1L Crore ₹123.4L Crore ₹36.9L Crore ₹42.2L Crore

10% YoY 17% YoY 19% YoY 11% YoY
Total Income Net interest income Pre-Provision Profit PAT

Profitability
₹3.6L Crores ₹1.45L Crore ₹89K Crores ₹44K Crore

4% YoY 14% YOY -9% YoY 37% YoY
GNPA (%) CASA Cost-Income ROA

Key Ratios
5.7% Reduced by 43.56% 52% Increased by 0.9% Increased

184 bps YoY 37 bps YoY 549 bps YoY by 18 bps YoY
1. Retail loans include home loan, auto loans, personal loans, and other retail loans 2
Summary Snapshot (I/II)
• India's FY23 GDP is forecasted to grow between 7.0 – 7.4% YoY, revised downwards during Jul'22-Aug'22
• Most high-frequency indicators including BFSI indicators have improved vs. pre-COVID levels
• RBI hiked repo rate three times in the current financial year, aggregating 140 bps to 5.4%
Macro Trends
• Bank credit witnessed double-digit growth (16%); the highest level in past decade showing post-pandemic
recovery;
– Retail loans and MSME loans fastest growing segments; corporate loan growth shows an uptick
• Deposits growth stagnant at 10%, term deposits growth offsets subdued CASA deposits growth
Business – Term deposits to continue to see an uptick with rising interest rates

• NIMs to expand in the near term as banks increase lending rates faster compared to deposit rate
• Other income of banks impacted as MTM losses mount with an increase in g-sec yields; PSU banks most
impacted due to higher share of g-secs in the overall investment book
Key • Thereby, pre-provisioning profits were reduced by 40 bps YoY to 1.9% of average assets. Nevertheless,
42% reduction in credit costs helps sustain profitability
Performance
• With most levers bottoming out - lower interest expenses, high treasury income, and lower credit cost,
Indicators
banks will have to re-focus on core business levers
• Comfortable capitalization levels providing an adequate buffer for future growth
3
Summary Snapshot (II/II)
• Overall industry NPAs improved and now stand at 5.7%; Asset quality stable for Private banks; NPAs for
PSU banks declined drastically
NPA & • Bounce rates comfortably lower than pre-covid average; potential macro-economic or covid-induced
disruptions to be a monitorable
Risk Mgmt.
• Most PSU banks valued below book value; private banks continue to command premium
• Overall, value creation by Financial institutions below that of broader market in past five years; with the
gap widening over the last year
Valuation

• Value creation witnessed a shift with PSU banks creating higher shareholder value more recently
• Continued uptake in end-to-end digital adoption by Indian Banking Industry – across new accounts,
deposits, investments, cards, loans
• Digital Transactions continue to gain share - ~91% of transactions are now digital (vs 80% in FY21)
Digital – 50% contribution from mobile & internet banking alone; UPI at 41%
4
Macro Indicators
Business: Advances & Deposits
Key Performance Indicators
Banking sector NPA & Risk Management

overview Valuation
Digital in Banking

Key Regulatory Measures
Quarterly Player Performance
5
Macro Indicators
India's FY23 GDP forecasted to grow between 7.0% to 7.4% YoY
India GDP growth forecast for FY23 (YoY,%)
Mar-Apr'22 Mar-Jun'22 Jul-Aug'22
ICRA 7.2 OECD 6.9 Nomura 7.0

RBI 7.2 ICRA 7.2 FICCI 7.0
Nomura 7.4 RBI 7.2
CARE Ratings 7.1
Ficci 7.4 S&P 7.3
ADB 7.2
ADB 7.5 Nomura 7.3

RBI 7.2
Morgan Stanley 7.9 SBI 7.5
Morgan Stanley 7.2
World Bank 8.0 World Bank 7.5
IMF 8.2 Morgan Stanley 7.6 Crisil 7.3
Fitch 8.5 Fitch 7.8 IMF 7.4
7.0% to 8.5% 6.9% to 7.8% 7.0% to 7.4%

No change Downward revision Upward revision
Data as of 23rd Aug'22

Note: Upper-limit has been included where agencies reported forecast range. Latest forecasts considered in case of revision by agency within same month
Source: Analyst reports, BCG analysis 6
Macro Indicators
Most high frequency indicators showing healthy growth trajectory (1/2)
Growth Growth
Latest Vs. Vs. Vs. Latest Vs. Vs. Vs.
month Pre-covid Last year Last month month Pre-covid Last year Last month
Industry Jul’22 Jul’19 CAGR1 Jul’21 YoY Jun’22 MoM Logistics Jun’22 Jun'19 CAGR1 Jun’21 YoY Jun’22 MoM
IIP (Index)* 137.8 129.3 2% 122.8 12% 137.7 0% E-way Bills (Mn) 75.8 52.2 13% 64.2 18% 74.5 2%
Power Consumption ('000 MUs) 4.1 3.8 3% 4.0 2% 4.5 -7% JNPT Traffic ('000 TEUs) 503.0 431.3 5% 433.5 16% 493.0 2%
Petroleum Consumption (MMT) 17.6 18.0 -1% 16.6 6% 18.7 -6% Rail Freight (Mn Tons) * 125.5 101.4 7% 112.8 11% 132.0 -5%
Steel Consumption (MMT) 9.2 8.6 2% 8.2 12% 8.9 3% Air Freight (K Tons) * 270.4 273.4 0% 237.3 14% 271.1 0%
Cement Production (MT) * 33.8 28.3 6% 28.3 19% 33.8 10%
Growth Growth

Latest Vs. Vs. Vs. Latest Vs. Vs. Vs.
month Pre-covid Last year Last month month Pre-covid Last year Last month
Trade and Investment Jul’22 Jul’19 CAGR1 Jul’21 YoY Jun’22 MoM Auto Jul’22 Jul’19 CAGR1 Jul’21 YoY Jun’22 MoM
Merchandize Exports ($ Bn) 35.2 26.3 10% 35.4 -1% 37.9 -7% PV Sales ('000 Units) 347.9 251.0 12% 316.8 10% 332.0 5%
Merchandize Imports ($ Bn) 66.3 39.8 19% 46.4 43% 63.6 4% Tractor Sales ('000 Units) 67.0 52.0 9% 76.4 -12% 107.0 -37%
Services Exports ($ Bn) * 24.8 18.6 10% 19.7 26% 23.3 6% 2W Sales ('0000 Units) 173.8 181.8 -1% 163.1 7% 170.4 2%
Services Imports ($ Bn) * 16.1 11.8 11% 11.2 44% 14.4 12% EV Registrations ('000 Units) 79.7 12.2 87% 26.1 205% 73.3 9%
* Data available only upto Jun'22 as on 26 Aug – hence growth comparisons are for Jun and not July. Jun'22 data has been compared with Jun'19, Jun'21 &
May'22 data for the pre-COVID CAGR, YoY & MoM growth comparisons.
1. CAGR calculated by taking 2022 month-wise data vs. 2019 levels (for respective month) 7
Macro Indicators
Most high frequency indicators showing healthy growth trajectory (2/2)
Fiscal deficit rose in the past few months, driven by an GST Collections1 (INR Tn) grew by 28% YoY in Jul'22
increase in govt. expenditure
2.0
Apr'22 May'22 Jun'22
1.5
1.16
Govt. Expenditure (INR Tn) 2.7 3.1 3.6 1.49
Govt. Receipts (INR Tn) 1.9 1.8 2.1 0.0
May-21
May-22
Jan-21
Jan-22
Jul-21
Sep-21
Jul-22
Mar-21
Mar-22
Nov-21
Fiscal Deficit (INR Tn) 0.7 1.3 1.5

Jan Dhan Deposits (INR Tn) grew by 20% YoY in Jul'22 RBI's policy rates (%) has increased by 140 bps since May'22
1.7
1.75 10 8.3 8.5
1.50 1.4 4.0 5.4

5
3.4 3.4
May-21
May-22
May-21
May-22
Jan-21
Jul-21
Jan-22
Jul-22
Jan-21
Jul-21
Jan-22
Jul-22
Mar-21
Sep-21
Mar-22
Mar-21
Sep-21
Mar-22
Nov-21
Nov-21
Repo rate Reverse Repo rate Base Rate
1.GST Collections include all components: CGST, SGST, IGST, Cess

Source: Ministry of Finance, GST Council, GST Network , RBI, Jan Dhan Yojana BCG analysis 8
Macro Indicators
BFSI indicators on an upward trajectory

UPI continues to witness an uptick supported by rapid Mutual Funds AUM (INR Tn) sees a sharp rebound in the
digital adoption past few months
10.6 40 38
10 6.1 35
6.3 35
5
3.2
0 30
May-21
Jan-22
May-22
Jan-21
Jan-21
Apr-21
Jan-22
Apr-22
Jul-22
Jul-21
Sep-21
Jul-21
Oct-21
Jul-22
Mar-21
Nov-21
Mar-22
Value (INR Tn) Volumes (INR Bn)
Aggregate deposits & credit (INR Tn) remained near May'22 Life insurance premium (INR '000 Cr) continues to see
levels in Jun'22 healthy increase

166
153 62
150 41
109 122
100
May-21
May-22
Apr-21
Apr-22
Jan-21
Jul-21
Oct-21
Jan-22
Jul-22
Jan-21
Jul-21
Sep-21
Jan-22
Jul-22
Mar-21
Mar-22
Nov-21
Aggregate Deposits Aggregate Credit Life Insurance Premium Non Life Insurance Premium
1.Mutual funds Assets Under Management (AUM) represented as recorded at end of every month shown. Mutual Funds AUM include investments from individuals (50.5%) & institutions (49.5%);
institutions include domestic and foreign institutions and banks; Provisional figures data used for non-life as on 21st July 2022. 2.Non-Life Insurance includes Fire, Marine, Motor, Engineering,
Health, Cop Insurance, Credit Guarantee, Aviation, Personnel accident and Miscellaneous
Source: DBIE, NPCI, IRDAI, AMFI, GIC, Life Insurance Council of India BCG analysis 9
Macro Indicators

overview Valuation
Digital in Banking

10
Bank credit growth at a decadal high

Credit growth continues to exceed deposit growth with gap further widening
Credit and deposit growth rate (%)
Growth % YoY
Credit growth1 Deposit growth
20 18.0
16.0
14.8 16.9
15 13.0
15.6 11.5
14.9 14.6 10.4
10.3 10.4
10 7.2 7.5 7.9 9.9

9.5 10.1
8.8 5.3
5 7.2
6.0 6.2
3.2
0
FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 Q1FY232
CD Ratio3 78% 79% 79% 78% 78% 73% 74% 75% 74% 70% 69% 74%
1. Credit growth are Net Advances growth 2.Growth Q1FY23 over Q1FY22 3. Credit-Deposit Ratio is calculated as Net Advances/Total Deposits
Note: Analysis has been made based on 35 Banks: 12 PSU, 10 Private-New, 9 Private-Old Banks and 4 Small Finance Banks
Source: RBI; Capitaline; Press releases; BCG analysis 11
Retail credit continues to remain the fastest growing segment; corporate

credit witnessing uptick
Split of Domestic Loan Book ('000 Crs)
PSU Private New Private Old SFB Industry YoY Industry

Growth
Total Advances 17%
16% 19% 14% 34% Q1FY23 FY22
YOY Growth
6,641 7,554 3,531 4,175 454 514 71 96 10,697 12,337
25% 26% 29% 29% 27% 29% 19% 14%

30% 30%
37% 38%
14% 14% 12% 12%

15% 15% 12% 12% 14% 12%
6% 7%

14% 14% 17% 17%
21% 22% 33% 31% 16% 15%
27% 26%
46% 46% 42% 41%

36% 34% 11% 9%
29% 30% 29% 28%
Q1FY22 Q1FY23 Q1FY22 Q1FY23 Q1FY22 Q1FY23 Q1FY22 Q1FY23 Q1FY22 Q1FY23
Retail Agri MSME Corporate + Others
Note: MSME includes SME, LAP, Business Banking and CV/CE loans; Agri includes Rural Loans, Kisan gold card loans and Tractor Loans; Others include Micro finance, PSL Inorganic + SRs and
Loan Converted into Equity and credit substitutes
Analysis has been made based on 35 Banks: 12 PSU, 10 Private-New, 9 Private-Old Banks and 4 Small Finance Banks 12
Source: RBI; Capitaline; Press releases; BCG analysis
Bank lending to corporates to get bolstered

by rising interest rates
Arbitrage available in borrowing from Change in rates in

%
12 the capital market reducing post the
140-bps rate hike to help pivot bank Q1FY23
lending to corporates
8.0
8 7.3 7.0 7.5
7.0 7.0 7.1
6.3 6.1 4.5

6.5 140 145 40

4.1
4 5.1 bps bps bps
4.4
Repo Rate Corporate SBI 1 Year

0 AAA 1-Yr MCLR
Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Bond Rate
19 19 19 20 20 20 20 21 21 21 21 22 22
Corporate AAA 1Yr Rate SBI MCLR
Note: MCLR - Marginal cost of funds-based lending rate

13
Source: RBI; Bloomberg; BCG analysis
Credit growth seen across bank groups; deposit growth remains moderate
Credit growth by bank category Deposits growth by bank category

Growth % YoY Growth % YoY
% %
60 59% 34% 110

SFB 107%
37%
Private New 36%
36%
24% Industry 35% 17%
19% 17% 15%
22% 20% PSU 15 13% 15%
20 17%
18%16% 17% Private Old 11%
16% 12% 10%
13% 10
9% 9% 10%
10% 14% 7% 8% 8%
8%

10 11% 10% 11% 8%
4% 7% 7% 8%
9% 5 6%
7% 3%
5% 6% 3%
5%
0 0
FY19 FY20 FY21 FY22 Q1FY23 FY19 FY20 FY21 FY22 Q1FY23
PSU 64% 63% 61% 60% 61% PSU 69% 69% 67% 66% 66%
Market share (%)

Market share (%)
Private-N 31% 32% 34% 35% 34% Private-N 26% 26% 28% 29% 30%
Private-O 5% 4% 4% 4% 4% Private-O 4% 4% 4% 4% 3%
SFB 1% 1% 1% 1% 1% SFB 1% 1% 1% 1% 1%
Note: Analysis has been made based on 35 Banks: 12 PSU, 10 Private-New, 9 Private-Old Banks and 4 Small Finance Banks 14
Term deposits witnessing an uptick with increasing interest rates
CASA growth YoY by bank category (%) Term Deposits growth YoY by bank category (%)
% %
30 30
25%
25
20% 19%
18% 21% 15%

16%

12%
15 13%
15% 13% 11% 11%
10 9%
10% 12% 8% 9%
12% 7%
11% 12% 6% 7% 7%
10 9% 10%
6% 4%
8% 5%
8% 5% 2%
9%
8% 3%
0 7% 7% 0 2%
Private New Private Old Industry PSU
Note: Analysis has been made based on 35 Banks: 12 PSU, 10 Private-New, 9 Private-Old Banks 15
Macro Indicators

overview Valuation
Digital in Banking

16
Pre-provision profit impacted due to high mark-to-market losses; reduction in

credit cost helps in reporting healthy profits
Impact of mark-to-market
Rs Bn losses on 'Other Income'
3,171
63%
PSU 59%
415 1,872
36% 45%
1,457 54% 54%
1% 1% 52%
Private -1,714 44%

54% 899
2%
40% 50% 71% 1%
-972 28% 440
47% 54% 45%
45% -334 35%
SFBs 49% -125 2% 64%
1% 2% 1% 1% 1%
Interest Interest NII Other Total income Opex PPOP Credit Cost Taxes Net profit
earned expense Income (Net)
Growth
YoY 10% -7% 14% -28% 1% 13% -9% -42% 34% 37%
Analysis has been made based on 35 Banks: 12 PSU, 10 Private-New, 9 Private-Old Banks and 4 Small Finance Banks 17
Source: Capitaline; Press releases; BCG analysis
RoA driver tree: Credit costs major determinant in overall profitability

RoA Tree PSU Banks Private New Private Old SFBs Industry
Particulars1 UoM Q1FY23 Q1FY22 Q1FY23 Q1FY22 Q1FY23 Q1FY22 Q1FY23 Q1FY22 Q1FY23 Q1FY22
Net interest Margin (%) 2.6 2.5 3.8 3.7 3.2 3.1 7.9 7.0 3.0 2.9
Fee + Other Income (%) 0.6 1.2 1.4 1.6 0.9 1.3 1.4 1.7 0.9 1.3
Operating expenses (%) 1.7 1.8 2.5 2.2 2.3 2.2 5.9 5.2 2.0 2.0
Pre-Provision Profit2 (%) 1.5 1.9 2.7 3.0 1.8 2.1 3.4 3.6 1.9 2.3

Credit costs (%) 0.8 1.2 0.5 1.5 0.6 1.4 0.8 3.9 0.7 1.3
Tax (%) 0.2 0.2 0.4 0.3 0.3 0.2 0.6 0.0 0.3 0.2
Return on Assets (%) 0.5 0.5 1.7 1.3 0.9 0.6 2.0 -0.3 0.9 0.7
With most levers bottoming out - lower interest expenses, high treasury income, and lower credit cost, banks will
have to re-focus on core business levers, and may lead to increase competitiveness in the market
1. All the above #s are as a % of average assets; 2. Pre-provision profit may not tally due to rounding off differences
Note: Analysis has been made based on 12 PSU, 10 Private-New, 9 Private-Old and 4 Small Finance Banks
Source: Capitaline, Press releases, BCG analysis 18
Banks increasing lending rates faster vis-a-vis

deposits rate
Lending rates on fresh

In % loans is up 43 bps
compared to 10 bps
7.82 7.82 7.86 7.94 increase in deposit
7.63 7.51
rates in Q1FY23
Increase in banking
5.03 5.02 5.03 5.03 5.07 5.13 system spreads is led

by faster increase in
lending yields vs.
deposits rates in last
Q1FY23
Apr’22
Jun’22
Jan’22
Oct’21
Mar’22
May’22
Nov’21
Feb’22
Dec’21
WALR (RHS) WATDR (RHS)
Note: WALR is Weighted Average Lending Rates on fresh loans and WATDR is Weighted Average Domestic Term
Deposit Rates; All figures at an aggregate industry level 19
Source: RBI; BCG analysis
Yields see sharper upward movement vis-a-vis cost of funds in Q1FY23
Yield1 by bank category (%) Cost of Funds2 by bank category (%) Spread3 by bank category (%)
(%) (%)
(%)
20 20 20
17.2
15
15 15
10 10.6
9.2 10

10 6.6
8.5
4.9
8.0 5 4.4 4.3 4.1
4.2 3.8
7.2
4.1 3.1
0 0 0
FY19 FY20 FY21 FY22 Q1FY23 FY19 FY20 FY21 FY22 Q1FY23 FY19 FY20 FY21 FY22 Q1FY23
SFB Private-New Private-Old Industry PSU
1Yieldis calculated as Interest Earned on Advances/Average Net Advances Annualized 2CoF is calculated as Interest Expended/(Deposits + Borrowings) annualized 3Spread is the difference
Note: Analysis has been made based on 35 Banks: 12 PSU, 10 Private-New, 9 Private-Old Banks and 4 Small Finance Banks
Treasury income of banks takes a hit as bond

yields rise sharply
%
7.2 7.3 7.3
7.2
• Mark-to-market (MTM) losses increased
6.6 in Q1FY23 as yields on government
6.5
securities rose
6.1
5.9 5.9
3.2
3.0 3.1 3.1 • PSU Banks are worst impacted due to
higher share of govt. securities in their
portfolios
1.9
• As per ICRA estimates, MTM losses were

1.5 1.5
Rs 8,000-9,000 crore for PSU Banks and
0.9 Rs 2,400-3,000 crore for Private Banks
0.7 in Q1FY23
Jan-20 Jul-20 Jan-21 Jul-21 Jan-22 Jul-22 P Jan-23 P
US 10 year bond yield India 10 year bond yield
Note: 1. Calculated as % of FY22 PAT; P: Projected

Source: Bloomberg, Press articles, BCG analysis 21
Nevertheless, decrease in credit costs reduce impact on profitability

Credit costs are at their lowest levels since FY17
PSU Banks Private Banks

5 5
2.9
2.4
1.9 2.0 2.1
1.7 1.5
1.3 1.2 1.3 1.4
0.9 1.6
0.5
0.0 0.1
1.3 1.1 1.1
0 0 0.9 0.9
0.5 0.4
0.3 0.2
-0.2

-0.9 -0.7
-5 -5
FY17 FY18 FY19 FY20 FY21 FY22 Q1FY232 FY17 FY18 FY19 FY20 FY21 FY22 Q1FY232
Credit Cost1 ROA
Note: 1. Credit cost is overall provisions by average total assets ; annualized

Analysis has been made based on 35 Banks: 12 PSU, 10 Private-New, 9 Private-Old Banks and 4 Small Finance Banks
Source: RBI; Capitaline; Care Ratings, Press releases; BCG analysis 22
Overall profit momentum remained steady

SFBs show significant improvement on profitability metrics
Return on Assets1 by bank category Return on Equity2 by bank category

(%) (%)
2.0%
2 20
1.8% 1.7% 14.8%
1.6% 1.7% 12.7% 12.4% 14.1%
12.0% 14.2%
1.5% 10.5% 10.5% 11.0%
1.2% 10 7.6% 7.8% 11.0%
8.9%
6.1%
1 0.8% 7.5% 8.8%
0.9% 4.2%
0.8% 7.8%
0.6% 0.6% 0.9% 5.4% 3.3% 4.6%
0.6% 0.7%
0.6% 0.4% 0.5% 0 -0.4%

0.3% 0.3% 0.5%
-4.2%
-3.5%
0 0.0%
-0.3% -0.2% -10
-11.5%
-0.7%
-1 -20
SFB Private New Industry Private Old PSU
1Return on Assets is calculated as net profit/average assets 2Return on Equity is calculated as net profit/average shareholders' fund
Note: Analysis has been made based on 35 Banks: 12 PSU, 10 Private-New, 9 Private-Old Banks and 4 Small Finance Banks 23
Comfortable capitalization levels providing adequate buffer for future growth
Capital to Risk-weighted assets ratio (%) (Jun' 22)
36
25 25
22
20 19 20 19 20 19
18 18 18 18 17 17 18
17 17 16 16 16 15
15 15 15 15 15 14 15
14 13 13 13 12 Minimum
requirement

9%
City Union
Bank of Maha
Kotak Mah.
IDBI
ICICI
RBL
Union
Bandhan
South Ind.
Ujjivan
PNB
IOB
DCB
Indian
BOB
Federal
J&K
IndusInd
SBI
AU
HDFC
Dhanlaxmi
Yes
Axis
PSB
Equitas
Bank of India
UCO
CSB
IDFC First
Central Bank
Karnataka
Suryoday
Canara
Karur Vysya
Credit 29 12 22 18 21 22 14 14 7 22 8 9 29 19 15 5 20 12 16 10 16 11 17 12 15 18 11 13 17 8 28 28 22 24 43
Growth
(%)
Private New banks PSU banks Private Old banks SFB
Source: Capitaline, Investor presentation, Press release, RBI, CARE Ratings, BCG Analysis 24
Macro Indicators

overview Valuation
Digital in Banking

25
NPA and Risk Management
Gross Non-Performing assets (%)
As per RBI FSR: Macro-stress tests for credit risk show

that SCBs’ NPA ratio may fall to 5.3% by Mar '23
% under the baseline scenario and increase to 8.3%
15 under a severe stress scenario
11.6%
10.3%
Consistent decline in NPAs 10 9.2%

8.5% 7.4% 7.3% 6.9%
seen in Q1FY23 5.1% 5.4%
9.1%
5.9% 5.7%

5 4.9% 4.8%
5.5% 5.8%
4.7%
5.2% 4.1% 3.7%
5.0%
3.7% 3.7%
1.9% 1.9%
0
FY19 FY20 FY21 FY22 Q1FY23
PSU Private New Private Old SFB Industry
Note: Analysis has been made based on 35 Banks: 12 PSU, 10 Private-New, 9 Private-Old Banks and 4 SFBs 26
Reduction in GNPAs and credit costs seen across banks
Select Banks
Gross Non-Performing assets (%)
22.7
19.9
15.6
14.3
13.5 13.6 13.5
11.3 11.5
10.2
9.3 9.1 8.9 9.3 9.8 9.5 10.0
8.0 8.0
6.3 6.4 6.4 6.5
5.3 5.9
5.2 5.2 4.9 4.8
3.9 4.3 4.1
3.4 3.6 3.9 2.8 3.7

3.5
2.2 2.7
1.5 1.3 1.8 2.0
Equitas
HDFC
Yes
Ujjivan
Axis
IDBI
Kotak
CSB
BOM
Suryoday
AU
ICICI
IOB
BoB
Federal
BOI
Dhanlaxmi
PNB
SBI
Karur Vyasa
South Ind.
Union
Provisions
Growth (in %) -48 -62 -60 -97 -89 -34 -4 -4 -20 -52 -58 -27 -56 +130 -37 -72 -98 -74 -100 -37 -81 -6
(Q1FY23 over
Q1FY22)
Private New Banks PSU Banks Private Old Banks Small Fin. Banks
Q1FY22 Q1FY23
Source: Investor Presentation, Analyst Report BCG Analysis 27
Healthy coverage against NPAs across banks

Select Banks
Provision coverage ratio1 (%) (Jun'22)
98 95 92 92 98
90 89 88 88 88 87 91
82 80 85 85 83 83 81 81
77 75 77 75 72
73 73 73 72 71 70 69
65 64
48

Central
UCO
Ujjivan
Indian
IOB
Equitas
BOM
Suryoday
CSB
AU
BOI
Canara
PNB
SBI
BOB
PSB
Union
South Ind.
RBL
Bandhan
Karnataka
Federal
Dhanlaxmi
IndusInd
Karur Vysya
Kotak Mah.
City Union
Yes
ICICI
DCB
IDFC First
Axis
J&K
IDBI
HDFC
Gross
20 14 3 3 7 1 3 4 2 2 4 9 7 4 6 9 8 11 15 7 10 11 2 5 9 6 4 6 4 3 5 7 10 2 4
NPA
(%)
Private New Banks PSU Banks Private Old Banks Small Fin. Banks
1. All the above PCR% are including Technical write-offs, wherever separately disclosed by banks
Source: Capitaline, Investor presentation, Press release, BCG Analysis 28
Bounce Rates: Back to pre-COVID levels, trend expected to continue
Bounce rates remained stable between Jun-Aug '22 Encouraging improvement in last few months
Bounce rate, volume (%) Bounce rate, value (%)
45.4
38.1

29.5
21.7
Mar-20 Jul-20 Jan-21 Jul-21 Mar-22 Aug-22 Mar-20 Jul-20 Jan-21 Jul-21 Mar-22 Aug–22
Source: NPCI, BCG Analysis 29

Macro Indicators

overview Valuation
Digital in Banking

30
Valuation
Most PSU banks valued at a discount to book value

Select Banks
PSU banks Private New banks Private Old banks

SBI 1.8 471
Kotak Mah. 5.1 365 City Union 2.0 13
CSB 1.4 4
IOB 1.6 34
615
ICICI 3.5 Federal 1.2 23
BOM 1.0 12 DCB 0.7 3

HDFC 3.4 839
PSB 0.8 10 KVB 0.7 5
Bandhan 2.7 46 Dhanlaxmi 0.4 0.3
BOB 0.7 65 Below 1x

J&K 0.4 3
Canara 0.7 43 Axis 2.0 237

Karnataka 0.4

3
Below 1x South Ind. 0.3 2

UCO 0.7 14 IndusInd 1.8 84
Central 0.7 16
IDFC First 1.4 29
Small finance banks
Indian 0.6 23
IDBI 1.3 44
PNB 0.4 38 AU 4.5 43
Yes 1.2 41 Ujjivan 1.4 4

BOI 0.4 38
Equitas 1.3 6
Union 0.4 38 RBL 0.5 6
Suryoday 0.7 1
Price to book Market Cap (Rs in '000 crores) (as on 17th August 2022) 31
Note: Dotted line represents price to book ratio of 1 time
Source: Capitaline, BCG analysis
Valuation
Value creation by Financial Institutions below broader market in past five years
Gap between banking sector vs broader index has widened over the last one year
Over period
July 2017 – July 2022
TSR Index: July 2017 = 100 5 Yr. average 1 Yr. average
annual annual
200 TSR % TSR %
S&P BSE 200 13% 10%
150
Small Finance Bank 2% -34%

100

Private New Banks -2% 3%
Overall Industry -11% -9%
50 Private Old Bank -15% -14%
PSU Bank -16% -9%
0
Jul Jul Jul Jul Jul Jul
2017 2018 2019 2020 2021 2022
Note: TSR is calculated between 31st July 2017 through 31st July 2022 in the company's reporting currency. Please refer to annexure page for detailed list of constituents within each
tier considered for analysis.
32
Source: S&P Capital IQ; BCG ValueScience® Center
Valuation
Financial Institutions value creation over time

Value creation among banking institutions witnessed a shift with PSU banks creating more value for shareholders more recently
5-year Total Shareholder Return 3-year Total Shareholder Return 1-year Total Shareholder Return
(TSR1 ) (TSR2 ) (TSR)
Companies Ranked by TSR

(200 companies in background curve)
BOB 49%
SBI 24%
1st qtr 1st qtr Federal 24% 1st qtr
Yes 17%
= 24.7% = 31.8% ICICI 20% = 20.4%
ICICI 22%
Kotak 9%
AU Small finance 15% ICICI 25% CUB 7% Union 9%
Kotak 12% AU Small finance 20% AXIS 2% Median
Median
HDFC Bank 11% SBI 12% = 12.2% Median HDFC Bank 2% = 1.5%
SBI 18%
= 20.3% AU Small finance (3%)

AXIS 7%
3rd qtr HDFC Bank 9% 3rd qtr 3rd qtr
= 5.0% = 8.9% = (13.7%)
CUB 0% Federal 6% Kotak 6%
Federal (1%) AXIS 2% BOB 4%
Central Bank (28%)
BOB (6%) CUB (6%) Central Bank 0% Central Bank (27%)
Yes (47%) Yes (45%)
Union (24%) Union (16%)
-60 -40 -20 0 20 40 60 80 100 120 140 -60 -40 -20 0 20 40 60 80 100 120 140 -60 -40 -20 0 20 40 60 80 100 120 140
Annualized TSR (31.Jul.2017 - 31.Jul.2022) Annualized TSR (31.Jul.2019 - 31.Jul.2022) Annualized TSR (31.Jul.2021 - 31.Jul.2022)
Private New Banks Private Old Bank: PSU Bank Small Finance Bank:
1. Equitas, Ujjivan small finance bank, Suryoday Small finance have been excluded from this period, since the first pricing date of the banks fall beyond the start date of the analysis;
2. Equitas, Ujjivan small finance bank, Suryoday Small finance have been excluded from this period, since the first pricing date of the banks fall beyond the start date of the analysis. 33
Note: Background Curve: S&P BSE 200, Based on data ending in July; TSRs use company reporting currency;
Source: S&P Capital IQ; BCG ValueScience® Center
Macro Indicators

overview Valuation
Digital in Banking

34
Digital in Banking
Emergence of end-to-end digital adoption by Indian Banking Industry Select Banks
Q1FY23
Saving Account sourced 700 300

68%1 NC NA 65%6 87%3 NA 30%3
digitally bps bps
400 100
FD sourced digitally 68% NC 60%2 NA 66%3 NA 42%3
bps bps
1100 1800
SIPs initiated digitally 46% 78%2 ~INR 650 Cr7 ~2.4x NA 98%3 NC
bps bps

Credit Card issued 700 700 60k Cards 4000
digitally
81%2 bps 84%2 NA 90%3
bps (+30% YoY) bps
Personal Loans sourced 800 200 ~INR 4.4K Cr6 900

52%8 94%2 71% NA 54%3
digitally bps bps (+81% YoY) bps
Volume of MB Transaction NA ~2.0x

and YoY growth
123% 1.5x times5 NA 92%4
Y-o-Y NC = No
Note: 1.Digital Tablet based account opening process for Q1FY23; 2.Issuance through Phygital and digital mode; 3.Quarterly Data (Q1 FY23) 4.YoY growth change Change
from June'22 to June'23 5.YoY growth in number of transactions for UPI – iMobile Pay 6.Opened through YONO 7.MF sales through YONO
8. E2E Digital Source: NPCI, Investor presentations, Analyst reports, BCG analysis 35
Digital in Banking
Continuing surge in transactions with increasing share of UPI, MB/IB: ~91%
Split of Financial Transactions2 (%) by volume
No. of
transactions
(bn) 11 15 18 23 36 50 67 121 46
0% 0% 0% 4% Average Ticket
YoY Change
14% 15% 17% 15% (Q1'22 vs Q1'23)
Size
22% 25% (Rs, Q1FY23)
3% 33%
10% 38% 41%
13% 11% UPI 118% 1,747
13% 11% 29%
8% MB + IB 90% 22,974

19%
6% NACH 9% 7,780
21% 39%
6% 8%
POS 52% 2,533
47%
5% 17% 50% Cheque 24% 104,098
62% 6% 50%
55% 3% ATM 23% 4,805
46% 10%
38% 2% 4%
27% 4% 2%
18% 1% 4% 2%
10% 1%
5% 0% 4% 2%
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 Q1FY23
Notes: 1. Financial Transactions do not include cash transactions at branches; 3.Internet transactions include RTGS, ECS, NEFT and IMPS financial
transactions . ATM and Mobile transactions included are financial transactions only; 4. CAGR is calculated as FY19-FY22 5. Total may not sum to 100 because
of differences due to rounding off 6. Ticket Size calculated basis Value/Volume 36
Source: RBI data, National Payments Corporation of India (NPCI) statistics, BCG analysis
Digital in Banking
Account Aggregator ecosystem is finally off the ground with 1 billion live
accounts and 1 million already linked
Number of accounts live (in Million) Number of accounts linked (In Million)
0.97
1,250 1.0
1,100
0.78
1,000 0.8 Number of
accounts
linked
0.57
750 0.6
650

550
500 0.4 0.31
310 310
0.19
250 215 215 0.2 0.12
180 0.09
0.07
0 0.0
09/21 12/21 04/22 05/22 06/22 07/22 07/22 08/22 12/21 01/22 02/22 03/22 04/22 05/22 06/22 07/22
Number of consent
requests successfully 0.06 0.07 0.11 0.18 0.29 0.47 0.72 0.93
fulfilled
Source: Sahamati Ecosystem Dashboard, BCG Analysis 37
Macro Indicators

overview Valuation
Digital in Banking

38
Key Recent Regulatory Measures
The RBI has permitted the establishment of Digital Banking Units by commercial banks. This
Establishment of Digital Banking Units
was done to increase the digital delivery of financial services by banks
The RBI allowed UPI Payments to be made through Credit Cards using the RuPay payment
Linking of UPI to Credit Cards
network. The same has been proposed to increase the digitization of transactions in India
To facilitate integration of ATMs and UPI, all ATM Networks may now provide the ICCW
Interoperable Cardless Cash

feature. The same shall be processed without the levying of any charges other than
Withdrawal Feature
Customer charges and Interchange fees
This regulation permits lending of up to 5% for commercial banks and 10% for Small Finance
Banks of their total priority sector lending amount to NBFCs.
Lending to NBFCs for on-lending to
SFBs can only lend to NBFC-MFIs with a Gross Loan Portfolio of up to 500 Crores.
Priority Sectors
This regulation was rolled out to continue the synergies between the banking sector and
NBFCs for smooth credit creation in the economy
Source: RBI 39
Macro Indicators

overview Valuation
Digital in Banking

40
Quarterly player performance (I/IV)

Net Advances Deposits CASA
Period Rs Cr Rs Cr Ratio (%) NIM1 (%) CIR2 (%) GNPA (%) ROA1 (%)
Q1FY '23 14.0L ▲ 22% 16.0L ▲ 19% 46% ▼ 44 bps 4.0% ▼ 9 bps 41% ▲ 557 bps 1.3% ▼ 19 bps 1.9% ▲ 3 bps
Q1FY '22 11.5L 13.5L 46% 4.1% 35% 1.5% 1.9%
Q1FY '23 9.0L ▲ 21% 10.5L ▲ 13% 47% ▲ 96 bps 4.0% ▲ 30 bps 42% ▲ 190 bps 3.4% ▼ 174 bps 2.1% ▲ 53 bps
Q1FY '22 7.4L 9.3L 46% 3.7% 40% 5.2% 1.6%
Q1FY '22 6.1L 7.1L 42% 3.3% 44% 3.9% 0.9%
Q1FY '23 2.8L ▲ 29% 3.2L ▲ 10% 58% ▼ 207 bps 4.6% ▲ 51 bps 53% ▲ 774 bps 2.2% ▼ 132 bps 2.0% ▲ 32 bps
Private new banks
Q1FY '22 2.2L 2.9L 60% 4.1% 45% 3.6% 1.7%

Q1FY '23 2.5L ▲ 18% 3.0L ▲ 13% 43% ▲ 107 bps 1.5% ▼ 7 bps 78% ▲ 617 bps 2.4% ▼ 53 bps 1.6% ▲ 51 bps
Q1FY '22 2.1L 2.7L 42% 1.6% 72% 2.9% 1.1%
Q1FY '22 1.6L 1.6L 27% 2.1% 68% 15.6% 0.3%

Q1FY '22 1.2L 2.2L 52% 3.4% 32% 22.7% 0.8%
Q1FY '22 1.1L 0.9L 51% 5.5% 67% 4.6% -1.6%
Q1FY '22 0.7L 0.8L 43% 8.2% 28% 8.2% 1.4%
Q1FY '22 0.6L 0.7L 34% 3.9% 53% 5.0% -1.8%
1. RoA and NIM are calculated as % of average assets 2. CIR is calculated as Opex by Total Income (NII + Other Income) xxx Change vs. last year
Quarterly player performance (II/IV)

Q1FY '23 28.2L ▲ 16% 40.5L ▲ 9% 46% ▼ 64 bps 2.6% ▲ 6 bps 62% ▲ 1005 bps 3.9% ▼ 141 0.5% ▼ 9 bps
Q1FY '22 24.3L 37.2L 46% 2.5% 52% 5.3% 0.6%
Q1FY '23 7.4L ▲ 12% 11.4L ▲ 4% 45% ▲ 106 bps 2.3% ▲ 2 bps 47% ▲ 418 bps 11.3% ▼ 306 0.1% ▼ 23 bps
Q1FY '22 6.6L 11.0L 44% 2.3% 42% 14.3% 0.3%
Q1FY '23 8.0L ▲ 20% 10.3L ▲ 11% 44% ▲ 96 bps 2.9% ▲ 14 bps 55% ▲ 689 bps 6.3% ▼ 260 0.7% ▲ 29 bps
Q1FY '22 6.7L 9.3L 43% 2.8% 48% 8.9% 0.4%
Q1FY '23 7.5L ▲ 15% 11.2L ▲ 9% 34% ▼ 183 bps 2.2% ▲ 0 bps 45% ▼ 210 bps 7.0% ▼ 152 0.7% ▲ 24 bps
Q1FY '22 6.5L 10.2L 36% 2.2% 47% 8.5% 0.4%
Q1FY '23 6.8L ▲ 16% 9.9L ▲ 9% 36% ▼ 19 bps 2.7% ▲ 11 bps 48% ▲ 52 bps 10.2% ▼ 338 0.6% ▲ 12 bps
Q1FY '22 5.8L 9.1L 36% 2.6% 47% 13.6% 0.4%
PSU banks
Q1FY '22 3.7L 6.2L 38% 1.7% 50% 13.5% 0.4%

Q1FY '22 3.9L 5.4L 41% 2.7% 41% 9.7% 0.8%
Q1FY '23 1.7L ▲ 11% 3.4L ▲ 3% 50% ▼ 186 bps 2.2% ▼ 7 bps 59% ▲ 61 bps 14.9% ▼ 102 0.2% ▲ 2 bps
Q1FY '22 1.6L 3.3L 51% 2.3% 58% 15.9% 0.2%
Q1FY '22 1.3L 2.4L 49% 2.2% 46% 11.5% 0.5%
Q1FY '22 1.1L 2.1L 39% 2.4% 49% 9.4% 0.2%
Q1FY '23 1.4L ▲ 29% 2.0L ▲ 12% 56% ▲ 304 bps 3.1% ▲ 15 bps 40% ▼ 715 bps 3.7% ▼ 261 0.8% ▲ 39 bps
Q1FY '22 1.1L 1.7L 53% 2.9% 47% 6.4% 0.4%
Quarterly player performance (III/IV)

Q1FY '22 0.6L 1.0L 31% 2.2% 58% 13.3% 0.7%
Q1FY '22 1.3L 1.7L 35% 3.1% 45% 3.5% 0.8%
Q1FY '22 0.7L 1.1L 56% 3.4% 69% 9.7% 0.4%
Q1FY '22 0.6L 0.8L 30% 2.3% 49% 8.0% 0.0%
Private old banks
Q1FY '22 0.5L 0.8L 69% 2.7% 50% 4.8% 0.5%
Q1FY '23 0.6L ▲ 15% 0.7L ▲ 11% 36% ▲ 118 bps 3.8% ▲ 22 bps 50% ▼ 135 bps 5.2% ▼ 276 bps 1.2% ▲ 55 bps
Q1FY '22 0.5L 0.6L 35% 3.6% 51% 8.0% 0.6%

Q1FY '22 0.4L 0.4L 28% 3.5% 41% 5.6% 1.4%
Q1FY '22 0.3L 0.3L 22% 3.1% 53% 4.9% 0.3%
Q1FY '22 0.1L 0.2L 33% 4.7% 48% 4.9% 1.1%
Q1FY '23 0.1L ▲ 28% 0.1L ▲ 8% 33% ▼ 2 bps 3.5% ▲ 100 bps 105% ▲ 2020 bps 6.4% ▼ 292 bps -0.8% ▼ 99 bps
Q1FY '22 0.1L 0.1L 33% 2.5% 85% 9.3% 0.2%
Quarterly player performance (IV/IV)

Small Finance Banks
Q1FY '22 0.3L 0.4L 27% 6.1% 49% 4.3% 1.7%

Q1FY '22 0.2L 0.2L 40% 8.0% 71% 4.8% 0.2%
Q1FY '22 0.1L 0.1L 20% 7.9% 65% 9.8% -4.8%
Q1FY '23 0.0L ▲ 28% 0.0L ▲ 21% 20% ▲ 414 bps 9.3% ▲ 140 bps 58% ▼ 521 bps 10.0% ▲ 51 bps 0.4% ▲ 345 bps
Q1FY '22 0.0L 0.0L 16% 7.9% 63% 9.5% -3.0%

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Banking Sector Roundup Q1FY23

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Banking Sector

PSU (12 banks) Private—New (10 banks) Private—Old (9 banks)

Copyright © 2020 by Boston Consulting Group. All rights reserved.

Total Deposits Total Advances Retail Advances1 Corporate Advances

₹162.1L Crore ₹123.4L Crore ₹36.9L Crore ₹42.2L Crore

Total Income Net interest income Pre-Provision Profit PAT

₹3.6L Crores ₹1.45L Crore ₹89K Crores ₹44K Crore

Copyright © 2020 by Boston Consulting Group. All rights reserved.

GNPA (%) CASA Cost-Income ROA

5.7% Reduced by 43.56% 52% Increased by 0.9% Increased

Copyright © 2020 by Boston Consulting Group. All rights reserved.

Copyright © 2020 by Boston Consulting Group. All rights reserved.

Banking sector NPA & Risk Management

Copyright © 2020 by Boston Consulting Group. All rights reserved.

India's FY23 GDP forecasted to grow between 7.0% to 7.4% YoY

India GDP growth forecast for FY23 (YoY,%)

Mar-Apr'22 Mar-Jun'22 Jul-Aug'22

ICRA 7.2 OECD 6.9 Nomura 7.0

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Fitch 8.5 Fitch 7.8 IMF 7.4

7.0% to 8.5% 6.9% to 7.8% 7.0% to 7.4%

Data as of 23rd Aug'22

Most high frequency indicators showing healthy growth trajectory (1/2)

Cement Production (MT) * 33.8 28.3 6% 28.3 19% 33.8 10%

Copyright © 2020 by Boston Consulting Group. All rights reserved.

Most high frequency indicators showing healthy growth trajectory (2/2)

Govt. Receipts (INR Tn) 1.9 1.8 2.1 0.0

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1.50 1.4 4.0 5.4

1.GST Collections include all components: CGST, SGST, IGST, Cess

BFSI indicators on an upward trajectory

Copyright © 2020 by Boston Consulting Group. All rights reserved.

Banking sector NPA & Risk Management

Copyright © 2020 by Boston Consulting Group. All rights reserved.

Bank credit growth at a decadal high

Credit and deposit growth rate (%)

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Retail credit continues to remain the fastest growing segment; corporate

PSU Private New Private Old SFB Industry YoY Industry

25% 26% 29% 29% 27% 29% 19% 14%

14% 14% 12% 12%

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46% 46% 42% 41%

Retail Agri MSME Corporate + Others

Bank lending to corporates to get bolstered

Arbitrage available in borrowing from Change in rates in

6.3 6.1 4.5

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Repo Rate Corporate SBI 1 Year

Corporate AAA 1Yr Rate SBI MCLR

Note: MCLR - Marginal cost of funds-based lending rate

Credit growth by bank category Deposits growth by bank category

60 59% 34% 110

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Market share (%)

Term deposits witnessing an uptick with increasing interest rates

18% 21% 15%

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Private New Private Old Industry PSU

Banking sector NPA & Risk Management

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Pre-provision profit impacted due to high mark-to-market losses; reduction in

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