IDBI Bank Reinvesting in building blocks, for growth

1
IDBI Bank- Reinvesting in building blocks, for
growth
2
Way forward towards rebuilding a strong foundation

• IDBI Bank is changing
• Capital Formation- Human and technological
  capital to generate financial capital
• Strategic initiatives going forward
• Financials for the year ended March 31,2001

3
Operating Model at IDBI Bank is undergoing
metamorphosis

• Traditional focus of the bank has been on
  corporate banking business
• 95 of assets have been corporate assets
• 77 of liabilities have been corporate
  liabilities
• Technology has been deployed mainly as business
  support and not to create business opportunities
• Organization structure has been branch driven
  with no clear focus on product suite delivery to
  the customer
• Key performance attribute continued to be
  building of assets and total deposits as against
  profitability

4
Way forward towards rebuilding a strong foundation

• IDBI Bank is changing
• Capital Formation- Human and technological
  capital to generate financial capital
• Strategic initiatives going forward
• Financials for the year ended March 31,2001

5
Recognizing Key Value Drivers
Q3FY02
Build Sales Focus

• Q4FY02

De-risk Credit Portfolio

Q3FY02
Enhance Operational Productivity
Build Product Superiority
Q2FY02
Complete Technology Revamp
New Skilled Senior Management Team
Completed
6
Value Driver 1 - People
New Org. structure Functional
Erstwhile Org. Structure Branch driven
Top mgmt.
Ops.Tech
Retail
Corp.
Treasury
Retail Bank Corporate Bank Ops. At all branches
Within each business group, creation of Product
and Sales Matrix to ensure superior product suite
delivery to customers
7
Building up Human Capital has been a priority

• Reconstitution of Senior Management Team with
  significant experience from foreign banks and
  private sector banks CEO, Retail Bank Head,
  Retail Risk Head, Product Heads, Treasurer,
  Treasury Marketing Head, CFO, CTO, Ops. Head, HR
  Head,
• Performance Assessment changed to focus on
  leading indicators and profits
• Formulation of KRAs, Tiering process to
  differentiate performers
• Performance linked ESOP scheme initiated in Oct.
  2000 covering 75 of employees
• Significant training initiatives undertaken
• Relationship and sales management
• New technology platforms
• Young Professionals (85 CAs/MBAs)with average
  age of 31 years
• Lower cost base than foreign banks

8
Value Driver 2 Technology

• Corp. Banking and Trade Finance- Finacle (Q1)
• Cash Management- CashTeck (Q1)
• Credit Rating System- CRISIL (Q1)
• Treasury F/Office- Reuters B/Office- ITMS (Q1)
• Retail Lending- (Q2)
• Internet Banking- Bancaway (Q2)
• Tele banking- BK Systems (Q2)
• WAP/SMS- Hexaware (Completed)
• ATM Switch- Oasis (Q2)
• Networking Talisma/Network Solutions (Q2)
• Fixed Asset Systems ,Payables Systems, FTP, ALM
  (Q2)

9
Large initial investments to establish Product
Superiority

• In FY01, 44 of total operating expenses on
  people and technology v/s 33 in FY00
• Technology to
• Create strong back-end foundation
• Create product delivery platforms
• Free human resources to concentrate on product
  design and sales
• Investments in human capital and technological
  capital will create long term value

103
23
63
21
14
8
41
59
10
Cost Management - a Challenge

• Increase in Operating Expenses/Total Income ratio
  mainly due to
• Higher Investment costs
• Accelerated depreciation policy
• Lag between costs and resultant revenue benefits
• Big focus to control consumable costs
• Premises renegotiation (Rs. 2 crores p.a. savings
  expected)
• All vendors and supliers (Rs. 2 crores p.a.
  savings)
• Technology renegotiations (Rs.5 crores p.a.)
• Media Spend Negotiation (Rs. 70 lacs p.a.)
• CTC concept for employees
• Target ratio of 50 in FY03/04

11
Value Driver 3 De-Risk Corporate Portfolio
Rs. in crs.
12
Over 70 exposure to mid-size, large companies
13
Establishing a new Credit Risk Regime

• Implementation of Credit Rating Model from CRISIL
  by Q1 FY02
• Formation of Remedial Team focusing on remedial
  accounts since Q3 FY01
• Reduced exposures of Rs.248 crs. across 5 of
  customer base since Q3 FY01
• Migrating up in credit quality for new exposures
  along with building Industry Approach to risk
  management
• No industry over-concentration of exposures
• Across products, re-priced exposures to reflect
  RAROC and credit risk
• Strategy 25 growth towards a superior risk
  adjusted credit portfolio

14
Value Driver 4 Enhance Operational Productivity
and build Product Superiority

• Operations initiative of establishing
  Central/Regional Processing Units by Q3 FY02
• 2/3 shift operation proposed in a low cost
  location
• Handling of increased volumes without any
  business disruption
• Main objective to take away transaction
  processing from branches and increase thrust on
  sales, knowing the customer
• From Good bankers to Good salesmen

15
Way forward towards rebuilding a strong
foundation

• IDBI Bank is changing
• Capital Formation- Human and technological
  capital to create financial capital
• Strategic initiatives going forward
• Financials for the year ended March 31,2001

16
Strategic Focus Areas

• Manage for ROE
• Capital Leverage
• Net Interest Income
• Other income
• Cost Management
• New Retail Thrust
• Reposition Corporate Banking
• Reposition Treasury

17
Retail Banking Customer Service, cornerstone of
strategy

• Focused on taking market share in 2nd and 3rd
  tier towns before intensifying focus on Metros
• Re-branding of Bank
• Logo, Color (Teal)
• Customer proposition what can i do for you?
• Retail banking thrust with twin objective of
• Building up distributed, lower risk asset base
  (target to have 25 of total asset base in retail
  by FY03)
• Lowering cost of funding ( 50 of total deposits
  to be retail and 40 to be low cost deposits by
  FY03)

18
Making rapid moves

• Launched Mobile Banking during FY01 in 29 cities
  with 4000 plus customers
• Newsletter for customers, UI to build credible
  communication channel for cross sell
• Aggressive Third Party Distribution
• MFs/Flexibonds/RBI Bonds
• Insurance to follow soon

• Proposed deployment of sales team for retail
  asset acquisition
• Upgrading ATMs for Bill Payment Presentation and
  personalization
• Upgraded Tele-banking in 17 cities
• Debit Card Launch in FY02
• Internet Banking Launch in
• Q2 FY02
• Retail Broking
• Credit Cards

19
Leading indicators
20
Corporate Banking RAROC will be the driver

• Balance focus between mid-market corporate
  customers and top-tier customers
• Decline in asset yields due to improved risk
  profile to be arrested by lower cost of deposit
  and increased fee income (Cash Mgmt., Treasury,
  Trade Finance,Re-Pricing)
• Focus on FI and PSU clients
• Dynamic risk management policy (No losses during
  recent capital markets downturn)
• Aggressive provisioning policy aimed at achieving
  Provision Cover well above statutory stipulations

36 cover
20 Cover
21
In Summary,

• Management Quality
• Brand
• Reach (Pan-India)
• Investment Resources (Technology/People)
• Process Management
• Risk Management
• Size ?

22
I
Surat
Mhow
Jabalpur
77 ATMs countrywide
23
Way forward for rebuilding a strong foundation

• IDBI Bank is changing
• Capital Formation- Creating human, technological
  and financial capital
• Strategic initiatives going forward
• Financials for the year ended March 31,2001

24
Profitability Review
Rs. in crs.
25
Key Performance Indicators
Rs. in crs
26
Safe Harbor
Except for the historical information contained
herein, statements in this release which contain
words or phrases such as will, aim, will
likely result, would, believe, may,
expect, will continue, anticipate,
estimate, intend, plan, contemplate,
seek to, future, objective, goal,
project, should, will pursue and similar
expressions or variations of such expressions may
constitute "forward-looking statements". These
forward-looking statements involve a number of
risks, uncertainties and other factors that could
cause actual results to differ materially from
those suggested by the forward-looking
statements. These risks and uncertainties
include, but are not limited to our ability to
successfully implement our strategy, future
levels of non-performing loans, our growth and
expansion, the adequacy of our allowance for
credit losses, our provisioning policies,
technological changes, investment income, cash
flow projections, our exposure to market risks as
well as other risks.IDBI Bank Limited undertakes
no obligation to update forward-looking
statements to reflect events or circumstances
after the date thereof.