Banking sector and opportunities in indiar

Banking Sector and Opportunities in India March 2004

Agenda Economic backdrop Banking sector - overview & opportunities In summary

Indian economy - Strong fundamentals GDP growth Forex reserves Exports ,[object Object],[object Object],[object Object]

Indian economy - Strong fundamentals Interest rates Short term debt External debt ,[object Object],[object Object],[object Object]

Diversified composition, robust growth Sectoral share of GDP Sector 22.1 Agriculture 21.8 Industry 56.1 Services Projected growth FY2004 (%) 10.7 5.0 7.3 GDP 7.4

Strong growth drivers… Services ,[object Object],[object Object],[object Object],[object Object],Industry ,[object Object],[object Object],[object Object],Agriculture ,[object Object],[object Object]

…underpinned by strong infrastructure growth… Roads ,[object Object],[object Object],[object Object],Industry ,[object Object],[object Object],[object Object]

…though certain areas require close attention ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Power Urban infrastructure

Changing demographic profile … high proportion of younger, working population driving growth Source: Ministry of Home Affairs, Government of India

Robust household savings pattern Source: Economic Survey 2002-2003, Ministry of Finance 10.1% 22.5% Household savings as a % of GDP 2001-02

Large inflows of foreign currency Gross forex inflows (US$ billion) 58.25 67.13 79.44 25.60 ~ ~ Source: Economic Survey 2002-2003, Ministry of Finance; RBI 95.23

Strong external position Forex reserves & external debt (US$ billion) ~ ~ Source: RBI

Enhanced corporate competitiveness Return on Equity (PAT / Equity) Asset turnover (Revenue / Assets) Source: Deutsche Bank

The above developments are the result of a decade of reform… ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

..driving transformational change ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

The underlying fundamentals are based on a deep structural change in the economy and provide a sustainable platform for continued growth. The opportunities in the banking sector have to be viewed in this context.

A decade of change and evolution… Pre-reform ,[object Object],[object Object],The 1990s Today Indian economy Financial sector ..financial sector mirroring macro-economic change ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

The banking sector today Depth ,[object Object],[object Object],[object Object],Technology ,[object Object],[object Object],Diversification ,[object Object],[object Object],[object Object],Regulation ,[object Object],[object Object]

Sector snapshot Size ,[object Object],[object Object],Number of banks ,[object Object],[object Object],[object Object],[object Object],[object Object],Branch network ,[object Object],[object Object],[object Object],[object Object],[object Object]

Structural issues ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],The Indian banking sector has responded to these structural issues by adopting certain strategic imperatives

Legacy issues addressed… ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

…with significant success in resolution ,[object Object],[object Object],Source: E&Y, RBI US$ bn Net NPAs of banks & FIs Gross NPAs as % of GDP

A new orientation among banks… ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Traditional/ public sector New/ private sector

Technology- the ICICI Bank experience Share of transactions in March 2000 Channel 2% Internet 3% ATMs 94% Branches Share of transactions in July 2003 10% 51% 28% Call centre 11% 1%

Retail credit opportunity… % Source: SSKI, CLSA ..penetration currently low, with growth driven by strong fundamentals… 60 36 27 14

Retail credit drivers Declining retail loan interest rates ,[object Object],Increasing availability ,[object Object],[object Object],Changing demographic profile ,[object Object]

Retail market size 7.3 9.4 12.9 16.5 CAGR of 31% Annual disbursement (US$ billion)

Changing profile of corporate banking… ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Financial services potential: insurance Source: Swiss Re, Economic Research & Consulting (June 2002) 14.2% 12.1% 9.0% 5.2% 2.9% 2.7% 2.2% Premium as a % of GDP … the opening up of the sector provides a major opportunity for financial services players

The “international Indian” opportunity Canada (0.42 mn) US (1.2 mn) West Indies UK (0.72 mn) GCC (4.1 mn) Nepal Singapore/ Malaysia (0.14 mn NRIs) Fiji Zimbabwe/ Uganda South Africa Area of large NRI population Areas of large PIO population Number of NRIs () Australia and New Zealand (< 0.1 mn) … the Indian diaspora, the emergence of Indian multinationals and resultant economic flows have created a new opportunity

In summary ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

In summary (contd). ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Banking sector and opportunities in indiar

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