It is my pleasure to present to you RBL Bank's Annual Report for FY 2019-20.
I hope all of you and your families are keeping safe and well.
We are living through unprecedented times as the COVID-19 pandemic continues to impactevery aspect of our lives and livelihoods- across countries societies and economies. Thesize and scale of the challenge leads us to believe that India as also the rest of theworld will experience a prolonged and significant impact on the economy and all itscomponents. In view of this we at RBL Bank continue to be cautious conservative andcommitted to preservation of this very valuable franchise.
Our primary focus has been on taking care of the health and safety of our employees asonly then can they effectively serve the customers and community. Our employees haveworked tirelessly over the last few months ever since the nation-wide lockdown was firstimplemented.
98% OF OUR BRANCH NETWORK AND 95% OF OUR ATMS REMAINED OPERATIONAL AND OPEN TO SERVEOUR CUSTOMERS THROUGH THE LOCKDOWN.
98% of our branch network and 95% of our ATMs remained operational and open to serveour customers. While our frontline branch staff ensured continuity while adhering tostrict safety protocols more than 75% of our employees are currently 'Working from home'without any impact on operations. We have substantially strengthened our informationsecurity and cyber security risk measures to mitigate potential risk and threats duringthis period.
In the backdrop of all the challenges our Bank has demonstrated stability growth andsatisfactory profitability.
EFFORTS IN THE SHORT TERM TO RESHAPE THE BANKING LANDSCAPE IN THE LONG TERM
2020 started with great hope for the financial sector given emerging signs of economicgrowth and healthier balance sheets for the industry. However the COVID-19 pandemic andsubsequent lockdowns across the country has caused significant upheaval to our economyindustries small businesses as well as individuals. The government and the regulator havealready initiated several measures to the best of their ability to restore confidencemitigate the impact and hasten recovery.
I believe our return to normalcy is going to be a gradual and protracted process andthe banking sector's role is critical in enabling this recovery. As such the overridingemphasis at our Bank shall be on balance sheet protection and we will therefore continueto tighten risk filters further to manage and preserve credit quality maintain surplusliquidity and remain well capitalised even as we cautiously look for opportunities for
growth in certain areas.
RBL BANK: CONSOLIDATING BUT WELL-POSITIONED
The title Consolidating but well- positioned' - best sums up the essenceof FY20 as far as RBL Bank is concerned.
Despite the challenging economic environment our revenue growth momentum was strongthrough the year with total revenue at Rs. 5540 Crore reflecting a growth of 39%.
Our net interest margin (NIM) stood at 4.56% which was 42 basis points higher than theprevious year and Net interest income (NII) was Rs. 3630 Crore 43% higher than theprevious fiscal.
Non-interest income grew 32% to -Rs. 1910 Crore and core fee income grew 29% to Rs.1746 Crore. Our pre-provision operating profit was extremely healthy at Rs. 2752 Croreregistering a growth of 42% over the previous year reflecting the franchise strength ofthe Bank and its strong earning capacity despite economic slowdown and lockdown in thelast few days of March. After taking necessary provisions profit after tax for the yearwas Rs. 506 Crore.
During the year our Bank faced some stress emanating from a few names in the corporatesector. However we proactively identified this pool of assets fully recognised the sameand made adequate provision on an accelerated basis during the year. With the aggressiverecognition and provisioning we undertook during the fiscal year we believe that thestress of the legacy corporate book is now largely behind us.
Our advances grew 7% to Rs. 58019 Crore over the preceding year. The retail wholesaleadvances mix was 56% and 44% respectively. During the year the Bank undertook steps toright size and granularise its wholesale exposures.
As a consequence our wholesale business declined 16% Y-O-Y.
We continued to see a strong traction in the non-wholesale businesses with a growth of35% during the year.
Deposits marginally declined 1% Y-O-Y to Rs. 57812 Crore due to specificcircumstances prevailing in March 2020 even though CASA deposits grew 17% and CASA ratioincreased to 29.6%. Moreover we are pleased to share that all the deposit segments pickedup subsequently and are now stable and growing. We maintained significant surplusliquidity throughout the full year. Our Liquidity Coverage Ratio which is a measure ofthe short-term resilience of banks to take care of their near-term liquidity needs was anaverage of 151% for the full year as against a regulatory requirement of 100%.
During the year even as the financial sector went through a turbulent phase wemanaged to successfully raise capita from notable high-quality investors to the tune ofRs. 2701 Crore through a preferential allotment and Qualified Institutions Placement.
This is an endorsement of the management our business plan and strategy. I am humbledby the consistent support and confidence shown by our investors in the Bank. This supporthas helped augment our capital adequacy position with capital adequacy ratio at 16.45% andTier-I ratio of 15.33%.
CHARACTER AND CULTURE
Over the last 10 years we have built a high quality professional institution with asolid pan India franchise and strong business fundamentals. It is founded on stronggovernance standards and has robust controls modern infrastructure and a customer centricculture.
Our customer base has grown from 1.5 Lakh to 85 Lakh customers net worth has grownfrom Rs. 340 Crore to Rs. 10291 Crore our business mix deposits and advances have grownfrom Rs. 2200 Crore to approximately Rs. 115000 Crore.
We are now present across 28 Indian states and union territories through a network of386 branches & 1245 Business Correspondent outlets.
Though we have come a long way in terms of growth statistics our core values and theshared vision of building a "best in class" institution highly respected forits governance and professional standards has not changed.
IN THE BACKDROP OF ALL THE CHALLENGES OUR BANK HAS DEMONSTRATED STABILITY GROWTH ANDSATISFACTORY PROFITABILITY.
OVER THE LAST FEW YEARS WE HAVE BUILT NICHES IN OUR CREDIT CARDS AND FINANCIALINCLUSION BUSINESSES WITH SIGNIFICANT POTENTIAL TO BECOME MARKET LEADING FRANCHISES."
Over the last year we have taken a number of measures to consolidate the Bank and arewell positioned to take advantage of opportunities in a post COVID-19 environment in ourchosen segments.
As we navigate these uncertain times I want to assure you that our experiencedmanagement team has considerable depth and gravitas to navigate challenges of this newbusiness environment and take the Bank to greater heights.
I will briefly touch upon the steps that the Bank is taking to emerge as a highlyresponsive and resilient organisation standing on stronger pillars in the future
DE-BULKING OF THE CORPORATE PORTFOLIO
We took a number of steps in the year gone by to significantly right size our entireportfolio and implement our new target operating model for the wholesale business. Ourlearnings from the challenges that we saw in the handful of accounts has led us toconsolidate and granularise our corporate portfolio. We have tightened our risk assessmentcriteria across the board and we continue to reduce exposures through timely interventionand proactive management.
We also continue to drive the focus of our wholesale franchise towards flow ledtransaction banking business. In this environment our imperative is to ensure that thequality of the portfolio is maintained. We will focus our growth in wholesale as and whenwe see the definite turnaround in the economy.
GROWTH ENGINES FOR THE BANK
Retail remains an important growth engine for the Bank and we continue to furtherdiversify and make the portfolio more granular. We believe that our plans for thisbusiness dovetail well with government's development agenda for this segment. Over thelast few years we have built niches in our credit cards and financial inclusionbusinesses with significant potential to become market leading franchises. We believe thatthese businesses will remain the key drivers of our future growth and profitability andhelp us gain market leadership. Our endeavour is to continue to invest in these businessesas they gain size and scale to create and add value for our stakeholders.
Our credit card business crossed an important milestone of 2.5 million cards during theyear making us the sixth largest franchise in the country. Our current card count standsat 2.8 million cards and we currently rank among the top 4 issuers on average retailspends per card.
This business which we have built over the last 6 years into one of the market leadersis an important cornerstone of the Bank. We have made large investments in the areas ofportfolio analytics risk collections etc. and remain confident of the long-termopportunity in this segment.
We have built a significant business in the microfinance space over the last few yearsand now have a pan India footprint of 1245 BC branches including our own subsidiary RBLFinServe Limited.
Our business growth has been driven by geographical expansion rather than ticket sizegrowth.
Our geographical diversification in the microfinance portfolio model has helped usinclude more and more women into organized finance and ensures that we don't haveconcentration in any geography. 97% of districts have less than 1% concentration to theportfolio. Our average ticket sizes of loans are lower than the industry and almost 74% ofour loans are disbursed to customers in their first cycle with us. This helps us keep acheck on the exposure per customer thereby providing more granularity in the portfolio. Wefinance local livelihood and economic activity and we believe that this business willbounce back very quickly as soon as things start to normalize.
OUR TECHNOLOGY FOCUS HAS LED US TO RAMP UP OUR DIGITAL OFFERINGS SIGNIFICANTLY OVER THELAST FEW YEARS."
DIGITAL OFFERINGS / PAYMENTS
Our technology focus has led us to ramp up our digital offerings significantly over thelast few years.
Here are a few achievements of the Bank in the year gone by:
No. 1 player in the total number of PoS terminals with 25% market share
No. 3 player in Aadhaar Enabled Payment Services (AEPS) transactions processed
Amongst the Top 5 banks in the MEITY rankings in terms of digital paymenttransactions
More than 100 APIs across various products and services offered - 40% share ofthe total MFI disbursement in the country
Aligning ourselves to the 'New Normal' in the current scenario of physical distancingand contactless transactions we have launched several contactless banking initiativeseliminating the need for physical contact amidst COVID-19.
We introduced a host of digital initiatives including WhatsApp banking opening instantbank accounts from anywhere in India with a completely paperless on boarding powered byVideo KYC. We also launched a virtual debit card in our mobile banking app enablingcontactless transactions without the need for plastic cards.
We have been advising customers to use these tools to fulfil their banking needs. Thishas led to a surge in the number of digital transactions. The number of digital savingsaccount too has gone up significantly and we expect it to increase going forward.
We launched our chatbot "RBL cares" in January this year which has alreadyseen high adoption. We are seeing more than 1 million conversations per month on thisplatform.
Our people have been an integral part of our journey. With over 14000 employees in ourtalent pool (including our subsidiary RBL FinServe Limited) we are consistently workingtowards creating an employee-friendly organisation. As I mentioned earlier the health andsafety of our employees remain our utmost priority and the Bank has launched severalinitiatives to ensure their physical and mental wellness. We proactively set up a QuickResponse Team (QRT) to handle the entire COVID-19 situation.
The QRT provided holistic support and clear direction to the entire organisation froman on-premises perspective and any other decision making that had to be dealt with.
I believe the Bank has emerged a stronger institution from the challenges andlearnings of the past year. We have focussed on tackling the challenges we facedfortifying the balance sheet and building on our core and lasting strengths. Today ourBank is a financially sound well capitalised institution with robust risk managementarchitecture and strong technology led customer focus which will hold us in good stead inthe coming years.
I would like to take this opportunity to thank all our external and internalstakeholders for supporting us in our journey.
We remain focused on our priorities and will continue to build a trusted compliant andfinancially strong bank which will remain at the forefront to find new ways to generatevalue for all our stakeholders.
Managing Director and CEO