F022 Satya Jaiswal

INDUSIND BANK- MD&A ANALYSIS
MACROECONOMIC IMPACTS
At the global level growth was robust across all regions in 2017 with faster growth in
developing countries like Japan, US, Europe. Global Upswing was powered by growing trade
and investment. US Administrations decision of sizable expansion has been supporting global
growth. On domestic level due to implementation of GST and IBC as well as coupled with
high inflation and rising crude prices led to fiscal slippages. Domestic growth by IndusInd bank
was led by introduction of innovative and flexible programs like Indus Freedom, Indus Green,
WhatsApp banking. With governments focus on infrastructure, roads and highways, Public
sector CAPEX remains a key driver for picking up investment activities and greater resource
mobilisation.
COMPANY STRATEGIES
The Bank has taken significant steps towards Digital India agenda, driving digital payment
acceptance at merchant establishments including Bharat QR, UPI and Aadharpay. The Bank
has entered into partnerships with Fintech and government entities namely Mobikwik and
Delhi Metro to offer mobile wallet cards to facilitate seamless payments.
The Bank’s foreign exchange portal, IndusForex.com was enhanced and simplified to help
the clients. All these strategies are leading to improved customer traffics. The Bank has also
started its journey towards Customer experience (CEX) transformation and the Customer
first philosophy has made good progress.
Business banking group ,with the focus of maintaining pricing in a competitive market has a
measured year of growth. The business was able to gain traction with the strategy of adding
new segments that had been implemented in earlier years.
IndusInd bagged another market first by being the firsts in India to introduce WhatsApp
banking for its customers, adding to it on the go social banking service available on Twitter,
FB messenger etc.
The Bank has crossed the 7 lakh customer mark, in the area of credit card. The product suite
has been strengthened with innovative product launches, offerings and tie-ups. The Bank has
product offerings across all three leading network partners, Master Card, Visa and Amex. In
the area of consumer finance, the focus was on optimising the product mix to maximise
yields, while ensuring portfolio quality.
During the year, the Global Markets Group unit of the bank has increased its operations in the
IFSC Banking unit established in GIFT city. The bank has the best cash management
solution, trade finance solution and the best structured trade finance solution.
COMPARISON OF FINANCIAL PERFORMANCE WITH
LAST YEAR(RATIO ANALYSIS)
A bank's basic business is to accept deposits and give out loans. It makes money by charging
a higher rate of interest on its loans than the rate it pays its depositors. So the conventional way
of measuring like P/E ratio falls flat for banks. Thus the banks get their value from their book
size rather than the earnings. One key ratio that helps in measuring value for banks is Price to
Average book value (P/ABV) ratio. The P/ABV ratio for IndusInd bank stands around 5.11
which is the highest amongst all the banks with similar market cap.
Now, in order to check for efficiency in case of Indian banks the first ratio that we look at is
Credit to deposit ratio. The CDR for IndusInd bank is 92.75. A higher CDR indicates optimum
utilization of funds by bank.
To check for efficiency, we compare the Net Interest margin (NIM) ratio. Net interest margin
(NIM) is the net interest income as a percentage of average earning assets. It shows how
profitable a bank's lending and deposit-taking activities are. The NIM for IndusInd bank stands
at 3.99%.
To compare profitability, we look at Return on Average Equity (ROAE) and Return on
Average Assets (ROAA). The ROAE stands at 16.5% which is amongst the highest across its
peers. The return on average equity (ROAE) can give a more accurate depiction of a company's
corporate profitability, especially if the value of the shareholders' equity has changed
considerably during a fiscal year. The ROAA is around 1.80%. It is a measure of profitability
which shows how efficiently a company is utilizing its assets.
Next ratio we compare is Capital Adequacy ratio. The CAR for IndusInd bank is 15%. This
ratio ensures that banks do not expand their business without having an adequate buffer of
capital. CAR ratio has been constantly on the decline for IndusInd bank. Next ratio that we
compare is CASA ratio which shows the amount of deposit in Current and savings account to
total deposits with banks. With a 44% CASA it shows that IndusInd bank has been successful
in borrowing low
Ratios FY-18 FY-17 cost of funds as
CDR 92.75 91.77 compared to its
peers.
CAR 15% 15.3%
Finally, the Loans
ROAE 16.50% 15.27% growth stands at a
ROAA 1.80% 1.78% healthy 28% due to
its great branch
NIM 4.19% 4.20% network which helps
CASA 44% 36.9% them in distributing
diverse loans across
sectors. (Refer Exhibit)
ENTERPRISE OPPORTUNITIES AND RISKS
The Bank has an integrated Risk Management department.
Credit Risk- Credit risk at the time of credit assessment are gauged by means of risk rating
models, stress testing of credit risk is carried out periodically. The credit quality is measured
by means of Weighted Average Credit Rating method.
Market Risk- A robust Market risk management system is in place which supports
monitoring of risk sensitivities and computation of capital charge through standardised
approach and Internal Model approach.
Liquidity Risk- The Bank carries out stress tests on liquidity position periodically to assess
the impact of stressed liquidity scenarios on funding and liquidity position.
Interest Rate sensitivity- It is monitored through prudential limits for Rate -Sensitive Gaps,
Earning at risk, Modified duration of risk and other risk parameters.
Operational Risk- The Bank has adopted Risk and control self- assessment, KRIs monitoring
and Loss data analysis. Review on the risk of SWIFT system is also conducted.
Enterprise opportunities- The bank is up for all the opportunities by adopting digitisation, as
Indus Mobile Banking App got rated Best App by a survey done by UBS. The group has
been widening its client base for higher growth and greater diversification of risk. Setting up
the Global Markets Group in Gujarat’s GIFT city has led the bank increase its operations.
EXHIBIT

F022 Satya Jaiswal

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INDUSIND BANK- MD&A ANALYSIS

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