#1IDFC FIRST Bank | आई डी एफ सी फर्स्ट बैंक BKC BRANCH Corporate Presentation - Q3 FY21 IDFC FIRST Bank ווי#2Disclaimer This presentation has been prepared by and is the sole responsibility of IDFC FIRST Bank (together with its subsidiaries, referred to as the "Company"). By accessing this presentation, you are agreeing to be bound by the trailing restrictions. This presentation does not constitute or form part of any offer or invitation or inducement to sell or issue, or any solicitation of any offer or recommendation to purchase or subscribe for, any securities of the Company, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contractor commitment therefore. In particular, this presentation is not intended to be a prospectus or offer document under the applicable laws of any jurisdiction, including India. No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained in this presentation. Such information and opinions are in all events not current after the date of this presentation. There is no obligation to update, modify or amend this communication or to otherwise notify the recipient if information, opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate. Certain statements contained in this presentation that are not statements of historical fact constitute “forward-looking statements." You can generally identify forward-looking statements by terminology such as "aim", "anticipate", "believe", "continue", "could", "estimate", "expect", "intend", "may", "objective", "goal", "plan", "potential", "proforma", "project", "pursue", "shall”, “should”, “will”, “would”, or other words or phrases of similar import. These forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or other projections. Important factors that could cause actual results, performance or achievements to differ materially include, among others: (a) material changes in the regulations governing our businesses; (b) the Company's inability to comply with the capital adequacy norms prescribed by the RBI; (c) decrease in the value of the Company's collateral or delays in enforcing the Company's collateral upon default by borrowers on their obligations to the Company; (d) the Company's inability to control the level of NPAs in the Company's portfolio effectively; (e) certain failures, including internal or external fraud, operational errors, systems malfunctions, or cyber security incidents; (f) volatility in interest rates and other market conditions; and(g) any adverse changes to the Indian economy. This presentation is for general information purposes only, without regard to any specific objectives, financial situations or informational needs of any particular person. The Company may alter, modify, regroup figures wherever necessary or otherwise change in any manner the content of this presentation, without obligation to notify any person of such change or changes. 2 IDFC FIRST Bank#3ASS Rs. 53,871 Cr Rs. 54,084 Cr Particulars Status of our achievements vis-à-vis Guidance provided at the time of the merger Pre Merger Mar-18 Post Merger At merger Sep-18 Dec-18 Guidance given at the time of merger for FY24-FY25 Retail Funded Assets Rs. 7,038 Cr Rs. 9,916 Cr Rs. 36,236 Cr Rs. 100,000 Cr Retail as a % of Total Funded Assets 10% 13% 35% 70% Wholesale Funded Assets Dec-20 Status Rs. 66,665 Cr On Track 60% On Track Rs. 56,809 Cr ~Rs. 40,000 Cr Rs. 34,809 Cr On Track - of which Infrastructure loans Rs. 26,832 Cr Rs. 23,637 Cr Rs. 22,710 Cr Nil in 5 years Rs. 11,602 Cr On Track E Top 10 borrowers as % of Total T 18.75% 17.97% 12.8% < 5% 6.3% On Track Funded Assets (%) S S GNPA (%) 3.31% 1.63% 1.97% 2-2.5% 1.33%* On Track NNPA (%) Provision Coverage Ratio (%) 1.69% 0.59% 0.95% 1.1.2% 0.33%* On Track 50% 64% 52% ~70% 75% On Track *These figures include the impact of the Supreme Court notification to stop NPA classification post August 31, 2020 till further orders. Without this impact the GNPA as on 31 December 2020 would have been 4.18% and the NNPA would have been 2.04%. 3 IDFC FIRST Bank#4Status of our achievements vis-à-vis Guidance provided at the time of the merger Particulars Pre Merger Mar-18 Sep-18 At merger Post Merger Guidance given at the time of Dec-18 Dec-20 Status merger for FY24-FY25 30% (FY24), 11.54% 12.98% 8.68% 48.31% Achieved 50% thereafter L CASA as a % of Deposits (%) | A Retail CASA + Retail Term Deposits as 5.41% 8.91% 8.04% B 50% (FY24) 46.83% On Track a % of Total Deposits & Borrowings | Branches (#) 150 203 206 800-900 576 On Track T Additional Achievements | Revised Guidance S ES Customer Deposits <=5 crore as a % 28% 30% 31% 80% 78% Achieved of Total Customer Deposits (%) Top 20 Depositors concentration (%) 42% 40% 40% ~5% 10% On Track 4 IDFC FIRST Bank#5PR Status of our achievements vis-à-vis Guidance provided at the time of the merger Pre Merger At merger Particulars Mar-18 Sep-18 Post Merger Dec-18 Guidance given at the time of merger for FY24-FY25 Dec-20 Status 5-5.5% 4.65% On Track F Net Interest Margin % 1.58% 1.56% 2.89% | T A Cost to Income Ratio (%)* 90.35% 94.47% 80.55% 55% 79.20% On Track B | L Return on Asset (%) 0.13% -1.15% 0.37% 1.4-1.6% 0.32% On Track | T Y Return on Equity (%) 1.11% -9.71% 3.66% 13-15% 2.92% On Track *excluding trading gains 5 IDFC FIRST Bank#6Results at a glance: IDFC FIRST Bank: Strong Strides across all the Strategic Priorities We are happy to report that we are making strong progress on the guidance given at the time of merger. 1. Strong Growth in Retail Assets: · . Retail Book increased 24% YoY to Rs. 66,665 crore as on Dec 31, 2020 from Rs. 53,685 crore as on Dec 31, 2019 Retail constitutes 65% of funded loan assets as on Dec 31, 2020 including Inorganic PSL buyouts, where underlying assets are retail loans as compared to 57% as on Dec 31, 2019 • • Wholesale funded book decreased by 21% to Rs. 34,809 crore as on Dec 31, 2020 from Rs. 44,329 crore as on Dec 31, 2019 Infrastructure loans (part of wholesale) decreased by 26% to Rs. 11,602 crore as on Dec 31 2020 from Rs. 15,601 crore as on Dec 31, 2019. 2. Strong growth in retail Liabilities . CASA Deposits increased to Rs. 40,563 crore as on Dec 31, 2020 from Rs. 16,204 crore as on Dec 31, 2019, Y-o-Y increase of 150% • • • CASA Ratio improved to 48.31% as on Dec 31, 2020 from 24.06% as on Dec 31, 2019. Average CASA Ratio also improved to 44.66% as on December 31, 2020 from 20.88% as on December 31, 2019. Core Deposits (Retail CASA and Retail Term Deposits) (A) increased 100% YOY to Rs. 58,435 crore as on Dec 31, 2020 from Rs. 29,267 crore as on Dec 31, 2019. Wholesale deposit (wholesale CASA and Wholesale FD) (B) reduced 26% YOY to Rs. 18,854 crore (Dec 31, 2020) from Rs. 25,364 crore as of Dec 31, 2019 as per strategy to reduce bulk deposits. • Thus, Total Customer Deposits (A + B) increased to Rs. 77,289 crore as on Dec 31, 2020 from Rs. 54,631 crore as on Dec 31, 2019, Y-o-Y increase of 41%. (IDFC First Bank Fixed Deposit program have the highest safety rating of FAAA by CRISIL) 6 IDFC FIRST Bank#7Results at a glance: IDFC FIRST Bank: Strong Strides across all the Strategic Priorities a. b. 3. Strong growth in Core Earnings: Strong NII Growth: NII grew by 14% YOY to Rs. 1,744 crore in Q3 FY21 from Rs. 1,534 crore in Q3 FY20. It grew by 5% QOQ from Rs. 1,660 crore in Q2 FY21. NII for the current quarter includes the impact of provision for interest reversal for proforma NPA cases. Strong NIM improvement: NIM has improved to 4.65% in Q3 FY21 as compared to 3.86% in Q3 FY20 and 4.57% in Q2 FY21. C. d. e. f. g. Strong growth in Total Income (NII + Fees and Other Income+ Trading Gain): Total income grew 24% YOY to Rs. 2,616 crore in Q3 FY21 from Rs. 2,113 crore in Q3 FY20. It grew by 14% QOQ from Rs. 2,288 crore in Q2 FY21. Total Income (Excluding Trading Gain) grew by 18% YOY to Rs. 2,326 crore in Q3 FY21 from Rs. 1,972 crore in Q3 FY20. It grew by 19% QOQ from Rs. 1,951 crore in Q2 FY21 Growth in Pre-Provisioning Operating Profit: PPOP including trading gains (Rs.290 cr) grew 13% YOY to Rs. 773 crore in Q3 FY21 as compared to PPOP (including trading gains of Rs. 142 cr) of Rs. 682 crore in Q3 FY20. It de-grew by 4% QOQ from PPOP (including trading gains of Rs. 337 cr) Rs. 803 crore in Q2 FY21. Provision: The total provisions for Q3 FY21 was Rs. 595 crore as compared to Rs. 2,305 crore (including provision of Rs. 1,622 crore on one telecom exposure) in Q3 FY20 and as compared to Rs. 676 crore in Q2 FY21. This includes additional COVID provisions of Rs. 390 crore made during the quarter. Profit After Tax: The PAT for Q3 FY21 is reported at Rs. 130 crore as compared to Loss of Rs. 1,639 crore for Q3 FY20 and as compared to PAT of Rs. 101 crore in Q2 FY21. 7 IDFC FIRST Bank#8Results Update: IDFC FIRST Bank: Strong Strides across all the Strategic Priorities 4. Asset Quality of the Bank remains high • Bank's Gross NPA reduced sequentially from 1.62% as of Sept 30, 2020 to 1.33% as of Dec 31, 2020. • Bank Net NPA reduced sequentially from 0.43% as of Sept 30, 2020 to 0.33% as of Dec 31, 2020. • • • Provision Coverage Ratio (PCR) was 75.14% as of Dec 31, 2020 as compared to 57.34% as of Dec 31, 2019. The above figures include the impact of the Hon. Supreme Court notification to stop NPA classification post August 31 2020 till further orders. Without this impact, the Proforma GNPA as on Dec 31, 2020 would have been 4.18% and the Proforma NNPA would have been 2.04%. As compared to Long Term Avg. of 4 pre-COVID quarters, the proforma GNPA is higher by 155 bps. Provision Coverage including the General Provision, COVID19 provision, Specific Provisions on NPAs was 309% on reported NPA and 99% on Proforma NPA as of 31 Dec 2020 (without the SC order impact). Asset Quality on Retail Loan Book: • Retail Asset Gross NPA stood at 0.27% as of Dec 31, 2020 as compared to 0.41% as of Sept 30, 2020 and 2.26% as of Dec 31, 2019. • Retail Asset's Net NPA stood at 0.13% as of Dec 31, 2020 as compared to 0.17% as of Sept 30, 2020 and 1.06% as of Dec 31, 2019. • ● Without the impact of Hon. Supreme Court's order, the Proforma GNPA for retail as on Dec 31 2020 would have been 3.88% and the Proforma NNPA would have been 2.35%. As compared to Long Term Avg. of 4 pre-COVID quarters, the proforma GNPA is higher by 161 bps. The overall collection efficiency for standard loans stood at 98% of the pre-covid levels (Jan-20 and Feb-20) as of 31 Dec 2020. *Long term Average mentioned above is Average of Bank's GNPAs for the 4 quarters prior to COVID pandemic. (i.e. Mar-19, Jun-19, Sept-19 and Dec-19) 8 IDFC FIRST Bank#9Results Update: IDFC FIRST Bank: Strong Strides across all the Strategic Priorities 5. Strong Capital Adequacy: . Capital Adequacy Ratio is strong at 14.33% with CET-1 Ratio at 13.82% as of Dec 31, 2020. 6. Franchise: . The Branch Network now stands at 576 branches and 541 ATMs across the country as on Dec 31, 2020. 9 IDFC FIRST Bank#10Table of Contents ווי 8 SECTION 1: THE FOUNDING OF IDFC FIRST BANK 13 SECTION 2: VISION & MISSION OF IDFC FIRST BANK 16 SECTION 3: PRODUCT OFFERING 19 SECTION 4: FINANCIAL PERFORMANCES 48 SECTION 5: DIRECTORS & SHAREHOLDERS 53 SECTION 6: STRATEGY GOING FORWARD FOR THE COMBINED ENTITY 58 SECTION 7: CAPITAL FIRST STRATEGY, LOAN GROWTH AND PROFITABILITY TRENDS FOR 8 YEARS (BEFORE MERGER WITH IDFC BANK) IDFC FIRST Bank#11SECTION 1: The Founding of IDFC FIRST Bank = Events Leading to Merger - ✓ Erstwhile IDFC Bank - Origin & History ✓ Erstwhile Capital First - Origin & History ✓ Merger between Erstwhile IDFC Bank and Erstwhile Capital First IDFC FIRST Bank#12Section 1: The Founding of IDFC FIRST Bank.. IDFC + IDFC BANK - CAPITAL FIRST IDFC FIRST Bank IDFC FIRST Bank was founded by the merger of Erstwhile IDFC Bank and Erstwhile Capital First on December 18, 2018. Section 1: The Founding of IDFC FIRST Bank 12 IDFC FIRST Bank#13Section 1: The Founding of IDFC FIRST Bank.. Erstwhile IDFC BANK IDFC Limited was set up in 1997 to finance infrastructure focusing primarily on project finance and mobilization of capital for private sector infrastructure development. Whether it is financial intermediation for infrastructure projects and services, whether adding value through innovative products to the infrastructure value chain or asset maintenance of existing infrastructure projects, the company focused on supporting companies to get the best return on investments. The Company's ability to tap global as well as Indian financial resources made it the acknowledged experts in infrastructure finance. Dr. Rajiv Lall joined the company in 2005 and successfully expanded the business to Asset Management, Institutional Broking and Infrastructure Debt Fund. He applied for a commercial banking license to the RBI in 2013. In 2014, the Reserve Bank of India (RBI) granted an in-principle approval to IDFC Limited to set up a new bank in the private sector. Following this, the IDFC Limited divested its infrastructure finance assets and liabilities to a new entity - IDFC Bank- through demerger. Thus IDFC Bank was created by demerger of the infrastructure lending business of IDFC to IDFC Bank in 2015. Section 1: The Founding of IDFC FIRST Bank Contd.. Erstwhile CAPITAL FIRST LIMITED Mr Vaidyanathan who had built ICICI Bank's Retail Banking business from 2000-2009 and was then the MD and CEO of ICICI Prudential Life Insurance Company in 2009-10, quit the group for an entrepreneurial foray acquired stake in an existing NBFC with the stated intent of converting it to a commercial bank financing small businesses. During 2010-12, he acquired a significant stake in a real-estate financing NBFC through personal leverage, and launched businesses of financing small entrepreneurs and consumers. The key focus was customers and purposes not financed by existing banks by using advanced technology led models. He built a prototype for such financing (Rs 12000-Rs. 30,000, ~$300- $500), built a loan book of Rs. 770 crore ($130m, March 2011) within a year, and presented the proof of concept to many global private equity players for a management Buyout. In 2012, he concluded India's largest Management Leveraged Buyout, got fresh equity of Rs. 100 crore into the company and founded Capital First as a new entity with new shareholders, new Board, new business lines, and fresh equity infusion. Contd.. 13 IDFC FIRST Bank#14Section 1: The Founding of IDFC FIRST Bank.. Erstwhile IDFC BANK Continued from page 6 The bank was launched through this demerger from IDFC Limited in November 2015. During the subsequent three years, the bank developed a strong and robust framework including strong IT capabilities for scaling up the banking operations. The Bank designed efficient treasury management system for its own proprietary trading, as well as for managing client operations. The bank started building Corporate banking businesses. Recognizing the change in the Indian landscape, emerging risk in infrastructure financing, and the low margins in corporate banking, the bank launched retail business for assets and liabilities and put together a strategy to retailise its loan book to diversify and to increase margins. Since retail required specialized skills, seasoning, and scale, the Bank was looking for inorganic opportunities for merger with a retail lending partner who already had scale, profitability and specialized skills. Erstwhile CAPITAL FIRST LIMITED Continued from page 6 Between March 31, 2010 to March 31, 2018, the Company's Retail Assets under Management increased from Rs. 94 crore ($14m) to Rs. 29,625 crore ($4 b, Sep 2018). The company financed seven million customers for Rs. 60,000 crore ($8.5b) through new age technology models. The company turned around from losses of Rs. 30 crore and Rs. 32 crore in FY 09 and FY 10 respectively, to PAT of Rs. 327 crore by 2018, representing a 5 year CAGR increase of 56%. The loan assets grew at a 5 year CAGR of 29%. The ROE steadily rose from losses in 2010 to 15% by 2018. The market capitalization of the company increased ten-fold from Rs. 780 crore on in March 2012 at the time of the LBO to over Rs. 8,282 crore in January 2018 at the time of announcement of the merger. As per its stated strategy, the company was looking out for a banking license to convert to a bank. As part of its strategy to diversify its loan book from infrastructure, the bank was looking for a merger with a retail finance institution with adequate scale, profitability and specialized skills. Section 1: The Founding of IDFC FIRST Bank Erstwhile Capital First, as part of its stated strategy, was on the lookout for a commercial banking license in order to access retail deposits. 14 IDFC FIRST Bank#15Section 1: The Founding of IDFC FIRST Bank.. In January 2018, Erstwhile IDFC Bank and Erstwhile Capital First announced a merger. Shareholders of Erstwhile Capital First were to be issued 13.9 shares of the merged entity for every 1 share of Erstwhile Capital First. Thus, IDFC FIRST Bank was founded as a new entity by the merger of Erstwhile IDFC Bank and Erstwhile Capital First on December 18 2018. ● After the merger, in the last 2 years, the Bank invested in the people, processes, products, infrastructure and technology to put together all the necessary building blocks of a stronger foundation who is essential for a long term sustainable growth engine. Between 2018-2020 the Bank accounted for Infrastructure and Corporate loan that turned bad during this period and thus the Book Value per share reduced from Rs. 38.4 as at December 31, 2018 to Rs. 31.90 as at March 31, 2020. The Bank now has a strong liability engine driven by the Retail Deposits including CASA and poised for the Balance Sheet growth from here onwards. Section 1: The Founding of IDFC FIRST Bank 15 IDFC FIRST Bank#16ווי 8 SECTION 1: THE FOUNDING OF IDFC FIRST BANK 13 SECTION 2: VISION & MISSION OF IDFC FIRST BANK 16 SECTION 3: PRODUCT OFFERING 19 SECTION 4: FINANCIAL PERFORMANCES 48 SECTION 5: DIRECTORS & SHAREHOLDERS 53 SECTION 6: STRATEGY GOING FORWARD FOR THE COMBINED ENTITY 58 SECTION 7: CAPITAL FIRST STRATEGY, LOAN GROWTH AND PROFITABILITY TRENDS FOR 8 YEARS (BEFORE MERGER WITH IDFC BANK) IDFC FIRST Bank#17" Section 2: Key excerpts from MD & CEO's Letter - Annual Report 2018-19 Theme of inaugural Annual Report after merger AR 18-19: "A New Beginning" Our founding philosophy: "The founding years, which I call the next five years, are particularly important, as the DNA we establish now will be hard to correct later. We will make every effort to sell the right products to customers, avoid mis-selling, avoid selling such third-party products that make wonderful fees for us but at the cost of expensive products for the customer. If we make a mistake, we will apologise and correct it. After all, we do not want to take this Bank to great heights in profits and profitability while having earned any penny that truly does not belong to us." Strategy for the Bank: We plan to implant the erstwhile Capital First's tried and tested model of financing small entrepreneurs and consumers [a retail franchise, growing at 29% per annum and 5-year profit CAGR of 55%, (FY18 PAT grew by 37%)], on a bank platform, (IDFC Bank's strong branch network of 242 and growing, excellent technology stack, quality internet and mobile banking, and strong rural presence). " V Vaidyanathan, MD & CEO, IDFC FIRST Bank Section 2: Vision and Mission Our Vision We want to create the world's best bank, right here in India, for aspiring Consumers and Entrepreneurs. Our Mission We want to touch the lives of millions of Indians in a positive way by providing high-quality banking products and services to them, with particular focus on aspiring consumers and entrepreneurs of our new India, using contemporary technologies. #alwaysyoufirst When IDFC FIRST Bank was formed with the merger between erstwhile Capital First and erstwhile IDFC Bank, we deliberated a lot on what our founding theme should be and finalised on the theme 'Always You First' - where 'You' refers to our customer. This theme cuts across the entire organisation and binds the bank to a single theme. 17 IDFC FIRST Bank#18Section 2: Key excerpts from MD & CEO's Letter - Annual Report 2019-20 Theme of 2nd Annual Report after merger: AR 19-20: "Building a Strong Foundation" “ The financial year 2019-20 was a year of building the foundation for the Bank. This was a year of non-stop, high octane action at our Bank; we completed the merger, integrated two systems, technology, processes and people, re-defined reporting hierarchies, energised the teams, went all out for retail liabilities (up 157%), grew retail loans (up 40%), changed the composition of the balance sheet, reduced dependence on institutional deposits, reduced Top-20 borrower exposure percentages, reduced Top-20 depositor percentages, dealt with unexpected hits on some wholesale banking accounts, appointed a brand ambassador, dealt with COVID-19 and lockdowns, raised 2,000 crore of equity capital in the midst of the lockdown, and are submitting this annual report to you from behind screens. Our Bank enjoys an excellent brand image. Q4 FY20 was, without doubt, the most trying period of our lifetime. Global indices crashed 20-25%, and NYSE shut down at lower circuit breakers, twice in March 2020. Our own stock exchanges were crashing by the day due to COVID-19. There was total panic in the markets. At the same time, news about one private sector bank was quite negative and that bank was put on moratorium by the regulatory authorities. You will be happy to note even in a quarter of such chaos, the Retail Deposits of our Bank grew by 4,658 crore in Q4 FY20 alone, representing a sequential QoQ growth of 16%. Such is the confidence our Bank enjoys in the market. " " GE Growth, you will agree, is not an issue in India. Mid-teens ROE can be built for sure, most good banks have achieved it. Our incremental margins are strong. Our business is highly scalable. We have a very high level of corporate governance. We focus on the customer. I believe it is inevitable that value will be created in this approach. GE Culture is not just about how things get done around here, it's a much longer list such as, about how people conduct themselves in office and in society, how committed they are to the mission, how to resolve conflicts, not using offensive or abusive words, imbibing the organisation's policy that the customer comes first and so on. Section 2: Vision and Mission 18 " IDFC FIRST Bank#19ווי 8 SECTION 1: THE FOUNDING OF IDFC FIRST BANK 13 SECTION 2: VISION & MISSION OF IDFC FIRST BANK 16 SECTION 3: PRODUCT OFFERING 19 SECTION 4: FINANCIAL PERFORMANCES 48 SECTION 5: DIRECTORS & SHAREHOLDERS 53 SECTION 6: STRATEGY GOING FORWARD FOR THE COMBINED ENTITY 58 SECTION 7: CAPITAL FIRST STRATEGY, LOAN GROWTH AND PROFITABILITY TRENDS FOR 8 YEARS (BEFORE MERGER WITH IDFC BANK) IDFC FIRST Bank#20Section 3: Product Offering (Assets) - IDFC FIRST Bank offers a bouquet of loan products.. .. across varied customer segments including MSMEs and Consumers in different parts of India Loan Against Property: Long term loans to MSMEs after proper evaluation of cash flows; against residential or commercial property Business Loans: Unsecured Loans to the self- employed individual or entity against business cashflows Consumer Durable Loans: financing to individuals for purchasing of LCD/LED panels, Laptops, Air-conditioners etc Two Wheeler Loans: To the salaried and self- employed customers for purchasing new two wheelers Home Loans: To the salaried and self- employed customers for purchasing house property Micro Enterprise Loans: Loan solutions to small business owner Commercial Vehicle Loans: Term Loans for individuals and firms for purchasing new and pre-owned CVs JLG Loan for Women: Sakhi Shakti loan is especially designed as the livelihood advancement for women, primarily in rural areas New and Pre-owned Car Loan: To salaried and self-employed customers for purchasing a new car or a pre-owned car Personal Loans: Unsecured Loans to the salaried and self-employed customers for fulfilling their financial needs Apart from these products, IDFC FIRST Bank also offers Working Capital Loans, Corporate Loans for Business Banking and Corporate Customers in India. Section 3: Product Offering 20 IDFC FIRST Bank#21Section 3: Product Offering (Assets) - Credit Card launched in January 2021 INDUSTRY Multiple Fees (Annual/ Over Limit) Charges for spending over limit IDFC FIRST Bank Credit Cards Lifetime Free (No Annual Fees ever) A Credit Card, like no other Customer friendly card launched by the Bank, keeping in line with the ethos of Classic FIRST No Charges for spends upto 10%* FIRST always customer first. FIRST Millennia VISA Platinum FIRST Millennia VISA Platinum Static and high interest rates (36% to 48% APR) (since last 30 years) Complicated Reward Points with T&Cs and Rewards expiry date Dynamic Interest Rate (9% to 36% APR) $ Up to 10X reward points. Unlimited earn. No expiry. In-store and online redemption Interest-Free Cash Withdrawal (up to next IDFC FIRST Interest on ATM cash withdrawal from Day 1 billing cycle or 48 days, whichever is earlier) Wealth FIRST Select IDFC FIRST IDFC FIRST Bank Family Lifetime free Credit Card 10X Super Rewarding Program ล VISA Signature Super Saver Interest Rate (% APR Starting from 9%) '' Interest Free Cash Withdrawal (up to next billing cycle or 48 days, whichever is earlier) *This is usually inadvertent by customers as a customer friendly measure. Bank will intimate the customers if their spends are going above limit to avoid any charges incurred by them. $Customer rates depending on algorithm, factoring in credentials, relationship with the bank and many other parameters Section 3: Product Offering 21 IDFC FIRST Bank#22Section 3: Product Offerings - Liabilities, Payments and other Services IDFC FIRST Bank provides wide range of Deposit facilities along with Wealth Management, Forex Services, Cash Management Services and Insurance services to its customers across different segments. Get up to 6% Wealth Management Services, ✓ Investment Solutions Investments and Insurance Distribution: interest p.a. on your ✓ Personal Insurance Solutions IDFC FIRST Bank ✓ Business Insurance Solutions Savings Account ✓ Mutual Funds distribution Earn on the entire balance ✔ starting from the first rupee For balances upto Rs. 1 crore Life, Health and General Insurance distribution Payments and Online Services: ✔ Debit Cards & Prepaid Cards ✓ NACH & BHIM UPI Deposit Accounts: ✓ Savings Account ✓ Current Account ✓ Corporate Salary Account ✓ Fixed Deposit Recurring Deposit Section 3: Product Offering Forex Services: Import and Export Solutions ✓ Domestic Trade Finance ✓ Forex Solutions and Remittances ✓ Overseas Investments & Capital A/C Transactions 22 IDFC FIRST Bank#23ווי 8 SECTION 1: THE FOUNDING OF IDFC FIRST BANK 13 SECTION 2: VISION & MISSION OF IDFC FIRST BANK 16 SECTION 3: PRODUCT OFFERING 19 SECTION 4: FINANCIAL PERFORMANCES 48 SECTION 5: DIRECTORS & SHAREHOLDERS 53 SECTION 6: STRATEGY GOING FORWARD FOR THE COMBINED ENTITY 58 SECTION 7: CAPITAL FIRST STRATEGY, LOAN GROWTH AND PROFITABILITY TRENDS FOR 8 YEARS (BEFORE MERGER WITH IDFC BANK) IDFC FIRST Bank#24= SECTION 4: FINANCIAL PERFORMANCE OF THE BANK FOR Q3 FY21 Assets Update Assets Quality Update on Liabilities Key Business & Financial Parameters Income Statement Balance Sheet Net Interest Margin Capital Adequacy IDFC FIRST Bank#25• • • Section 4: Retail loans as a % of total loans has improved to 65% (including PSL buyouts). The Bank proposes to follow the strategy guided earlier - building strong capabilities on financing consumers, MSMEs, small businesses and other retail loans which is a large opportunity in India. This is a crying social need in India for credit as large part of India is underserved. This is also in line with our mission statement. We have strong capabilities on this front, and aligned with our cost of funds, and the portfolio is diversified. Retail Funded Assets Wholesale Funded Assets (incl Inorganic Portfolio) Total Funded Assets Rs. 73,051 Cr Rs. 75,337 Cr Rs. 1,04,660 Cr Rs. 1,10,400 Cr Rs. 1,09,698 Cr Rs. 1,07,004 Cr Rs. 1,06,828 Cr Rs. 1,10,469 Cr (on merger) 10% 13% 65% 90% 87% 35% 63% 37% 40% 51% 49% 46% 44% 54% 56% 60% Mar-18 Sep-18 Dec-18 Mar-19 Dec-19* Mar-20* Sep-20 Dec-20 The inorganically acquired portfolio, through various modes like direct assignments, buyouts, PTC for mostly PSL purposes, has the underlying assets as retail loans. Including this as part of Retail Loan Book, the Retail contribution to the overall Loan Assets is 65% as of Dec 31. The figures above are gross of Inter-Bank Participant Certificate (IBPC) transactions. 25 Section 4: Assets Update IDFC FIRST Bank#26Section 4: Together, the Consumer and SME business has a rich history of 10 years with stable growth and high Asset quality. • • Capital First focused on growing the SME Loans including LAP, Consumer Loans and Housing Loans The retail loan book of erstwhile Capital First sustainably grew at CAGR of 35% over last 5 years and CAGR of 96% over last 8 years since 2010 to reach Rs. 29,625 crore from Rs. 94 crore in 2010. Erstwhile IDFC Bank which started its retail loan book in 2016, primarily focused on prime home loans and rural micro finance Given the opportunity in the retail financing in India and our skillsets and capabilities in this space, we are confident that we can sustain the growth of this business at ~ 25% over the next many years. PRE MERGER HISTORY* All amounts are in Rs. crore unless specified GROWTH CONTINUES POST MERGER OF THESE BUSINESSES ON BANK PLATFORM $ Y-o-Y Increase by Rs. 12,980 crore, growth of 24% 66,665 59,860 57,310 56,043 53,685 39,233 40,812 CAPITAL FIRST+IDFC BANK 36,236 32,281 IDFC FIRST Bank 20,634 Erstwhile IDFC Bank 13,876 Erstwhile CFL 10,113 7,883 5,560 3,460 94 771 Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Sep-18 Dec-18 Mar-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 *Gross of loans assignment $Net of loan assignment Section 4: Assets Update 26 IDFC FIRST Bank#27Section 4: Wholesale loan Assets have 10 years track record • Wholesale loan Assets have steadily reduced over the last two years . Erstwhile IDFC Bank had a significant corporate and infrastructure loan book of Rs. 54,084 crore. Post merger, the Bank has gradually reduced the overall Wholesale Funded Assets of the combined entity, in order to diversify the loan book and for better margins. All amounts are in Rs. crore unless specified 40,195 Y-o-Y Decrease by Rs. 9,520 crore, down by 21% 61,625 58,545 56,607 55,532 55,626 57,137 56,809 53,760 53,649 51,613 44,329 39,388 37,928 36,987 34,809 26,379 III Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Sep-18 Dec-18 Mar-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 | Erstwhile CFL Erstwhile IDFC Bank IDFC FIRST Bank From FY10 to FY15, the erstwhile IDFC Bank book figures are Gross Advances of IDFC Limited. Section 4: Assets Update 27 IDFC FIRST Bank#28Section 4: As per stated strategy at merger, the Infrastructure Loan Book has been reduced by 26% YOY. The Infrastructure book reduced by 49% (Rs. 11,108 crore) since merger All amounts are in Rs. crore unless specified 26,832 26,553 23,637 22,710 21,459 20,322 17,211 Y-o-Y Decrease by Rs. 3,999 crore, down by 26% 15,601 14,840 13,416 12,502 11,602 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Section 4: Assets Update 28 IDFC FIRST Bank#29Section 4: Total Funded Assets Breakup Growth% Growth% In Rs. Crore Mortgage Loans Consumer Loans Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 (YoY) (QoQ) 19,023 20,314 20,288 22,034 24,379 28% 11% 19,152 19,971 19,211 20,205 23,431 22% 16% MSME Loans 9,559 10,338 9,775 10,676 11,608 21% 9% Rural Micro Finance and KCC 5,951 6,687 6,769 6,944 7,247 22% 4% Total Retail Funded Assets (A) 53,685 57,310 56,043 59,860 66,665 24% 11% Corporates 28,728 24,548 24,512 24,485 23,207 -19% -5% - Conglomerates 1,747 839 1,354 1,915 1,401 -20% -27% -Large Corporates 2,121 1,540 1,832 1,943 1,782 -16% -8% - Emerging Large Corporates 7,419 6,629 6,411 6,166 6,864 -7% 11% - Financial Institutional Group 13,604 12,645 12,036 11,562 10,876 -20% -6% - Others 3,838 2,894 2,878 2,899 2,283 -40% -21% Infrastructure 15,601 14,840 13,416 12,502 11,602 -26% -7% Total Wholesale Funded Assets (B) 44,329 39,388 37,928 36,987 34,809 -21% -6% PSL Inorganic (C) 8,913 7,954 7,732 7,682 6,694 -25% -13% SRs and Loan Converted into Equity (D) 2,770 2,351 2,347 2,300 2,300 -17% 0% Total Funded Assets (A)+(B)+(C)+(D) 109,698 107,004 104,050 106,828 110,469 1% 3% Section 4: Assets Update 29 IDFC FIRST Bank#30Section 4: Initiative to reduce concentration risk on Assets 12.8% Exposure to Top 10 Borrowers as a % of Total Funded Assets has been reduced to 6.3% currently from 12.8% as on March- 2018 to reduce balance sheet risks 9.8% 9.1% 8.3% 7.4% 7.2% 7.3% 7.1% 6.3% 31 Dec 18 31 Mar 19 30 Jun 19 30 Sep 19 31 Dec 19 31 Mar 20 30 Jun 20 30 Sep 20 31 Dec 20 Section 4: Assets Update 30 IDFC FIRST Bank#31SECTION 4: FINANCIAL PERFORMANCE OF THE BANK FOR Q3 FY21 Assets Update Assets Quality Update on Liabilities Key Business & Financial Parameters Income Statement Balance Sheet Net Interest Margin Capital Adequacy IDFC FIRST Bank#32Section 4: Bank maintains strong overall Asset Quality, Retail Asset quality remains high In Rs. Crore GNPL Provisions for GNPL NNPL GNPA (%) NNPA (%) Provision Coverage Ratio % Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 2,511 2,280 1,742 1,486 1,289 1,440 1,471 1,305 1,095 969 1,071 809 437 391 321 2.83% 2.60% 1.99% 1.62% 1.33% 1.23% 0.94% 0.51% 0.43% 0.33% 57.35% 64.53% 74.93% 73.69% 75.14% • As of Dec 31, 2020, the Gross NPA % of the Retail Loan Book was at 0.27% (as compared to 0.41% as of Sept 30, 2020) and Net NPA % of the Retail Loan Book of the Bank was at 0.13% (as compared to 0.17% as of Sept 30, 2020). The above figures include the impact of the Supreme Court notification to stop NPA post August 31, 2020 till further orders. Without this impact the Proforma GNPA as on 31 December 2020 would have been 4.18% and the NNPA would have been 2.04%. For the retail loans, in the same way, Proforma GNPA and NNPA would be 3.88% and 2.35%. As of 31 Dec 2020, including retail and wholesale segment, the Bank's restructured pool (already approved and implemented) stood at 0.80% of the total funded assets. Considering the loans where restructuring has been invoked and awaiting approval / implementation, it may go up to 1.8% 2.0% of the total funded assets by the end of next quarter. • Provision Coverage including the General Provision, COVID19 provision, Specific Provisions on NPAs was 309% on reported NPA and 99% on Proforma NPA as of 31 Dec 2020 (without the SC order impact). Thus, the Bank is adequately provided for Proforma NPAs. Section 4: Assets Quality 32 IDFC FIRST Bank#33Section 4: Gross and Net NPA of the Bank have reduced over the last quarters. These figures include the impact of the Supreme Court notification to stop NPA classification post August 31, 2020 till further orders. Without this impact the GNPA as on 31 December 2020 would have been 4.18% and the NNPA would have been 2.04%. GNPA - - GNPA (Long Term Avg.) NNPA Proforma GNPA as of Dec-20: 4.18% (for 4 quarters prior to COVID-19) Due to moratorium related standstill, the NPA levels came down from the normalized level in Q1 and Q2 of FY21. After withdrawal of Standstill the NPA levels went up in Q3 FY21. It is likely to come back to normalized levels in the next 2-3 quarters. 2.83% 2.66% 2.62% 2.60% 2.63% 1.35% 1.17% 1.23% 1.99% 1.62% 1.33% 0.94% 0.51% 0.43% 0.33% Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Section 4: Assets Quality 155 bps higher due to COVID from Long Term Avg. Though the NPAs appear low, they are not representative because of COVID-19 related moratorium and subsequent impact of Supreme Court order on non- declaration of NPA 33 IDFC FIRST Bank#34Section 4: In addition to declared NPA accounts in Wholesale Loan Assets, Bank has proactively identified the following wholesale accounts, which are standard on the books but are stressed or potential NPAs, and taken provisions for the same proactively. Client Description (Rs. Crore) Comments o/s Exposure Provision PCR% 904 154 17% The repayment has been consistently delayed (SMA2) but regular prior to the lockdown. The revenue from the tolls have been impacted but improving gradually. 545 545 100% There have been delayed payment receipts from three discoms due to PPA related dispute. 252 13 5% Certain developments at the company have delayed the repayments. Account is being closely monitored. Toll Road Projects in MH Thermal Power Project in Orissa Toll Road (BOT) project in MH Diversified Financial Conglomerate in Mumbai 215 215 100% Wind Power Projects in AP, GJ, KN, RJ 161 92 57% Logistics Company in Karnataka Financial Institution in MH 100 100 100% 89 89 100% Solar Projects in RJ 85 0% Coal beneficiation & thermal power in 82 16 20% Chattisgarh Toll Road Projects in TN 42 10 23% Wind Power Projects in KN and RJ 19 18 95% Microfinance Institution in Orissa 19 19 100% Toll Road Project in Punjab 16 16 100% Total Stressed Pool Identified 2,528 1,285 51% These companies have been in significant stress and have defaulted on repayments. We expect significant principal loss from these accounts against our exposure and adequate provisions have been made. Repayments have been regular in the past. The company has experienced delay in repayment from certain discoms; repayment may be delayed. The group has been under financial stress and company's activity levels have reduced significantly resulting in default on debt obligations. The Bank has initiated legal proceedings against the company. The company is facing financial stress due to COVID19 situation and is being monitored closely. This account has been identified as Proforma NPA. Repayments have been regular in the past. Due to Operations and Maintenance issues, the generation of cash flows is under some stress lately. Post the COVID Pandemic the account has classified as Proforma NPA; This account has also been approved for restructuring by the lenders, implementation is awaited The account has been regular based on its repayment track record. It may require additional cash flows for maintenance which has been pending. Repayments were regular in the past. No delay in discom payments in Karnataka but there is delay in discom payments in Rajasthan; The account has been identified as stressed as financial fraud allegations have surfaced against the firm based in Orissa. This account has been identified as Proforma NPA. The company has been servicing the lenders with delays as toll receipts have reduced due to alternate road; This account has been identified as Proforma NPA. The above table includes 4 accounts that are now identified as Proforma NPA. The O/s Exposure on such accounts is Rs. 206 crore against which there is a provision of Rs. 139 crores (PCR at 67%). 34 Section 4: Assets Quality IDFC FIRST Bank#35Section 4: Exposure to identified Stressed Assets mentioned in previous slide, has reduced by Rs. 1,611 crore since March 31, 2019, a reduction of 39%. PCR at 51%. All amounts are in Rs. crore unless specified O/s Exposure Provision Provision coverage 23% 47% 47% 50% 49% 52% 48% 51% 4,138 3,804 3,544 3,518 3,205 3,195 2,717 2,528 957 Mar-19 1,786 1,663 1,773 1,569 1,668 1,303 1,285 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Apart from the accounts mentioned above, the Bank had also marked one large telecom account as stressed and provisioned 25% against the total outstanding of Rs. 3,244 Cr (Funded - Rs. 2,000 crore and Non-Funded - Rs. 1,244 crore). The said account is current and has no overdues as of Dec 31 2020. Section 4: Assets Quality 35 IDFC FIRST Bank#36Section 4: Since Retail Loans model imported from Capital First is the key model for loans going forward, we present asset quality trends over the last 8 years at Capital First as below as a demonstration of our trend in asset quality and our capabilities in this space. The incipient retail loan of erstwhile IDFC bank is also demonstrating strong asset quality. Since most of the loan book in the merged entity has been built and seasoned in Capital First prior the merger and the same model is being scaled up now, we present below the asset quality trends of the book in Capital First which have stayed continuous steady over the years, i.e. Gross NPA ~2% and Net NPA ~1%. The portfolio remained stable even after being stress tested through economic slowdown in 2010-2014, demonetization (2016), GST implementation (2017) and economic slowdown in recent times. Hence gives us confidence to grow in future on this strong asset quality model. Largely Wholesale Loan 5.28% Book during this phase CFL-GNPA CFL-NNPA During this phase, the Company transformed into a Retail Financing Player with introduction of many Retail Loans products and scaling up businesses with high asset quality 3.78% Demonetization Nov 8th 2016 GST Launched July 1st 2017 1.74% 1.21% 1.71% 1.52% 1.59% 1.65% 1.72% 1.63% 1.59% 1.62% 1.57% 1.13% 0.97% 1.00% 1.00% 1.04% 1.00% 0.97% 1.00% 1.00% " 31-Mar-10 31-Mar-16 30-Jun-16 30-Sep-16 31-Dec-16 31-Mar-17 30-Jun-17 30-Sep-17 31-Dec-17 31-Mar-18 30-Jun-18 Note: NPA recognition norm migrated to 90 dpd effective from 01 April, 2017. Section 4: Assets Quality 36 IDFC FIRST Bank#37Section 4: Gross and Net NPA pertaining to Retail Loans have broadly remained steady, and showed a reducing trend over the last quarters on the banking platform. These figures include the impact of the Supreme Court notification to stop NPA classification post August 31, 2020 till further orders. Without this impact the proforma GNPA as on 31 December 2020 would have been 3.88% and the NNPA would have been 2.35%. We will like to share that the number are appearing low only because of Standstill by Honorable Supreme Court's order on NPA, the GNPA and NNPA for the retail loan assets are likely to stabilize around 2.3% and 1.2% respectively within the next 2-3 quarters GNPA GNPA (Long Term Avg.) NNPA 2.32% 2.31% 2.26% 1.77% Proforma GNPA as of Dec-20: 3.88% 2.27% 161 bps higher due to COVID from Long Term Avg. 1.14% 1.08% 1.06% 0.87% 0.67% Not representative 0.41% 0.27% 0.24% because of Standstill 0.17% 0.13% Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Long term Average mentioned above is Average of Bank's GNPAs for the last 4 quarters Pre-COVID pandemic. (i.e. Mar-19, Jun-19, Sept-19 and Dec-19) Section 4: Assets Quality 37 IDFC FIRST Bank#38Section 4: Retail Loans - Gross and Net NPA Proforma Mar-19 Jun-19 Sep-19 Dec-19 Average Dec-20 Change (bps) Dec-20 Gross NPA - Retail 2.19% 2.33% 2.31% 2.26% 2.27% 3.88% Net NPA Retail 161 1.25% 1.15% 1.08% 1.06% 1.14% 2.35% 121 Provision Coverage Ratio (%) 43% 51% 54% 54% 51% 41% • • • For the analysis, it is stated that the reported NPAs in the last 3 quarters including quarter ending December 31, 2020 are low and not representative of the real situation due to supreme Court's order on non recognition of NPAs due to standstill driven by COVID situation. Hence the bank would bring attention to the Pre-COVID NPA levels of the bank and would compare the same with the proforma NPA as of December 31, 2020 (Post COVID). As a result of the COVID, the Gross NPA of the retail assets for the bank as of December 31, 2020 has increased by 161 bps as compared to Pre-COVID average. Similarly the Net NPA of the retail assets for the bank as of December 31, 2020 has increased by 121 bps. We guide that the Gross and Net NPA levels will stabilize at around to 2.3% and 1.2% respectively within the next 3 quarters. Section 4: Assets Quality 38 IDFC FIRST Bank#39SECTION 4: FINANCIAL PERFORMANCE OF THE BANK FOR Q3 FY21 Assets Update Assets Quality Update on Liabilities Key Business & Financial Parameters ✓ Income Statement Balance Sheet Net Interest Margin ✓ Capital Adequacy IDFC FIRST Bank#40Section 4: The Bank has made rapid progress in retailization of Liabilities. Retail liabilities now comprise 76% of customer deposits, up from 27% at merger. . The Bank recognises that large institutional deposits pose concentration risk to the Bank. • Hence, the Bank is focused for retailization of the liabilities which is reflected in the growth in its Core Deposits. Such Deposits are sticky and sustainable in nature in comparison to institutional borrowings. We are happy to report that the Bank has increased the Core Deposits (Retail CASA + Retail Term Deposits) as a % of Total Customer Deposits of the Bank as on December 31, 2020 to 76% as on December 31, 2020 from 27% as on December 31, 2018 (merger quarter). Core Deposits (Retail CASA + Retail TD) Other Deposits Total Customer Deposits (Excl. CD) Rs. 28,370 Cr Rs. 36,196 Cr Rs. 38,455 Cr Rs. 40,504 Cr Rs. 54,631 Cr Rs. 57,719 Cr Rs. 69,368 Cr Rs. 77,289 Cr 80% Mar-18 20% 75% Sep-18 25% 73% 27% 67% 33% 46% 54% 41% 59% 28% Dec-18 Mar-19 Dec-19 Mar-20 Sep-20 Section 4: Update on Liabilities 72% 24% Dec-20 76% 40 IDFC FIRST Bank#41Section 4: Granularization / Diversification of Liabilities (Deposits <= Rs. 5 crore) Customer Deposits have become more granular since merger. 78% of the total Customer Deposits have outstanding balances Rs. 5 crore or below as compared to 31% as on December 31, 2018. All figures are in Rs. crore unless specified. 78% 74% Deposits <= 5 crores <= 5crs as % Total Customer Deposits 60,349 65% 59% 51,147 55% 49% 40,582 34,267 41% 30,199 37% 24,987 31% 30% 28% 28% 18,730 14,834 10,684 12,021 7,906 9,035 Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Section 4: Update on Liabilities 41 IDFC FIRST Bank#42Section 4: CASA deposits have registered a strong YOY growth of 150% . With the healthy growth of CASA deposits which translated to 48% CASA ratio as on 31 December 2020, the Bank has been carrying excess liquidity. • Thus, with effect from 1 Feb 2021, the Bank is reducing the highest Savings Account rate offered from 7% to 6% for deposits upto Rs. 1 crore with the intention of draining out the excess liquidity and to save negative carry cost currently incurred by the bank on excess liquidity. • This will help in reducing the excess liquidity during the quarter and will help to decrease the negative carry due to excess liquidity 23,491 20,661 16,204 12,473 9,594 7,893 5,274 All figures are in Rs. crore unless specified. 30,181 40,563 $ 31 Dec 18 30 Jun 19 30 Sep 19 31 Dec 19 31 Mar 20 30 Jun 20 30 Sep 20 31 Dec 20 31 Mar 19 $Excluding deposits from NHB which are one-time/temporary in nature and are considered as non-sustainable in nature with fluctuating balance. Otherwise the Total CASA balance as of Dec 31, 2020 would have been Rs.40,894 crore. Section 4: Update on Liabilities 42 IDFC FIRST Bank#43Section 4: CASA Ratio has improved rapidly over last quarters since merger to reach 48.31% CASA Ratio is computed in terms of CASA as a percentage of Total deposits (CASA+ Certificate of Deposits+ Term Deposits). Consistent growth in CASA and decreasing dependency on Certificate of Deposits and Wholesale Term Deposit has helped the Bank to improve its CASA ratio significantly. CASA Total Deposits STRONG GROWTH IN CASA RATIO 40.37% 33.74% 31.87% 48.31% 24.06% 18.70% 14.57% 11.40% 8.68% 31 Mar 20 30 Jun 20 31 Dec 18 31 Mar 19 30 Jun 19 30 Sep 19 31 Dec 19 30 Sep 20 31 Dec 20 Note: The figure as of 31 Dec 2020 is excluding CASA deposits of Rs. 332 crore from NHB which was raised under special high rate scheme. This has now been reduced at our standard rack rate. The Bank now has no special schemes for large ticket saving balance and in fact disincentivises such large deposits by keeping the interest offering low. Including this, the CASA to total deposits ratio would have been 48.51%. Section 4: Update on Liabilities 43 IDFC FIRST Bank#44Section 4: Average CASA Ratio has also improved rapidly over last quarters since merger to reach 44.66% Average CASA Ratio is computed in terms of Average CASA as a percentage of Average Total deposits. Average CASA Ratio also reflected a sharp growth and is reported at 44.66% as on Dec 31, 2020. Avg. CASA Avg. Total Deposits STRONG GROWTH IN AVERAGE CASA RATIO 36.52% 32.00% 27.72% 20.88% 15.82% 12.09% 9.53% 9.40% 44.66% 31 Dec 18 31 Mar 19 30 Jun 19 30 Sep 19 31 Dec 19 31 Mar 20 30 Jun 20 30 Sep 20 31 Dec 20 Section 4: Update on Liabilities 44 IDFC FIRST Bank#45Section 4: The Bank continues to see strong growth in Retail Deposits. This has reduced the dependence on wholesale deposits and has provided greater stability. In Rs. Crore Legacy Long Term Bonds Infra Bonds Refinance - Legacy Portfolio - New Portfolio Other Borrowings Total Borrowings (A) CASA Term Deposits* Total Customer Deposits (B) Certificate of Deposits (C) Money Market Borrowings (D) Borrowings + Deposits (A)+(B)+(C)+(D) CASA % of Deposits Customer Deposits as % of Borrowings + Deposits * Dec-19 Sep-20 Dec-20 QOQ % YOY% 12,705 10,331 9,460 -8% -26% 10,434 9,522 9,514 0% -9% 13,478 10,566 8,297 -21% -38% 2136 1349 601 -55% -72% 11,342 9,217 7,696 -17% -32% 15,196 11,310 8,997 -20% -41% 51,812 41,729 36,267 -13% -30% 16,204 30,181 40,563 34% 150% 38,427 39,187 36,726 -6% -4% 54,631 69,368 77,289 11% 41% 12,720 5,399 6,673 24% -48% 15,213 5,984 4,538 -24% -70% 134,377 122,479 124,768 2% -7% 24.06% 40.66% 40.37% 56.64% 48.31% 61.95% Though the customer Term Deposits are Rs. 36,726 crores, the underlying composition of Terms Deposits have improved substantially. Retail Term Deposits were up 27% over last year and Wholesale Term Deposits were reduced by 29% YOY, resulting in overall reduction of 4% YoY in Term Deposits. Section 4: Update on Liabilities 45 IDFC FIRST Bank#46• Section 4: The bank has reduced Certificate of Deposits as per the stated Strategy to reduce short term institutional borrowings to strengthen the balance sheet. In March 2019, we started the process to reduce our dependence on Certificate of Deposits and have consciously brought it down every quarter since then by repaying the same through Retail Deposits which is stable and long term by nature. The borrowing through Certificate of Deposits (CD) of the Bank has reduced by 48% on YOY basis to Rs. 6,673 crore as on Dec 31, 2020 from Rs. 12,720 crore as of Dec 31, 2019. • The Bank plans to maintain the Certificate of Deposits balance sustainably at around Rs. 10,000 crore. In Rs. Crore Growth % 28,754 22,312 20,058 15,283 12,720 Y-o-Y Growth -6,047 -48% Q-o-Q Growth 1,274 24% 7,111 7,212 6,673 5,399 31 Dec 18 31 Mar 19 30 Jun 19 30 Sep 19 31 Dec 19 31 Mar 20 30 Jun 20 30 Sep 20 31 Dec 20 Section 4: Update on Liabilities 46 IDFC FIRST Bank#47Section 4: The Bank has sharply reduced the concentration of Top 20 Depositors as a % of Total Customer Deposits and made the liabilities side more resilient. Top 20 Depositors as a % of Total Customer Deposits has reduced from 39.98% as on 31 December 2018 to 9.69% as on 30 September 2020. 39.98% 35.35% 28.84% 26.12% 23.02% 20.36% 16.86% 12.40% 9.69% 31 Dec 18 31 Mar 19 30 Jun 19 30 Sep 19 31 Dec 19 31 Mar 20 30 Jun 20 30 Sep 20 31 Dec 20 Section 4: Update on Liabilities 47 IDFC FIRST Bank#48= SECTION 4: FINANCIAL PERFORMANCE OF THE BANK FOR Q3 FY21 Assets Update Assets Quality Update on Liabilities Key Business & Financial Parameters ✓ ✓ Income Statement Balance Sheet Net Interest Margin Capital Adequacy IDFC FIRST Bank#49Section 4: Income Statement - Nine months ending December 31, 2020 Growth (%) In Rs. Crore 9M FY20 9M FY21 Y-o-Y Interest Income Interest Expense Net Interest Income Fee & Other Income Operating Income (Excl Trading Gain) Trading Gain 11,911 11,585 -3% 7,840 6,555 -16% 4,072 5,030 24% 1,117 1,022 -9% 5,189 6,051 17% 293 964 229% Operating Income 5,482 7,015 28% Operating Expenses 3,893 4,547 17% Pre-Provisioning Operating Profit (PPOP) 1,589 2,468 55% Core Pre-Provisioning Operating Profit (Ex Trading Gain) 1,296 1,504 16% Provisions 4,075 2,035* -50% Profit Before Tax (2,486) 433 Tax 450 108 -76% Profit After Tax (2,936) 324 *During the nine months the Bank has created COVID provisions of Rs. 2,165 crores Section 4: Key Business & Financial Parameters 49 IDFC FIRST Bank#50Section 4: Quarterly Income Statement Growth (%) Growth (%) In Rs. Crore Interest Income Interest Expense Net Interest Income Fee & Other Income Operating Income (Excl Trading Gain) Trading Gain Q3 FY20 Q2 FY21 Q3 FY21 Y-o-Y Q-o-Q 4,100¹ 3,801 3,9522 -4% 4% 2,566 2,141 2,209 -14% 3% 1,534 1,660 1,744 14% 5% 437 291 582 33% 100% 1,972 1,951 2,326 18% 19% 142 337 2903 105% -14% Operating Income 2,113 2,288 2,616 24% 14% Operating Expense 1,432 1,486 1,842 29% 24% Pre-Provisioning Operating Profit (PPOP) 682 803 773 13% -4% Core Pre-Provisioning Operating Profit (Ex. Trading gain 540 465 484 -10% 4% Provisions 2,305 676 5954 -74% -12% Profit Before Tax (1,623) 126 179 41% Tax 16 25 49 97% Profit After Tax (1,639) 101 130 28% 1. This included one time interest on Income tax refund of Rs. 38 crores. 2. Net of provision for interest reversal on Proforma NPA cases on Dec 31, 2020 3. The Bank sold its entire exposure in NCD of a stressed financial service company in secondary market, net of provision reversal held on this case (Gain of Rs. 2 crore) 4. During this quarter, the Bank has made additional provision of Rs. 390 crore for COVID provision to further strengthen its balance sheet. Section 4: Key Business & Financial Parameters 50 IDFC FIRST Bank#51Section 4: Balance Sheet Growth (%) Growth (%) In Rs. Crore Dec-19 Sep-20 Dec-20 (Y-o-Y) (Q-o-Q) Shareholders' Funds 15,240 17,538 17,668 16% 1% Deposits 68,697 75,800 84,294 23% 11% - Retail Deposits 29,267 49,610 58,435 100% 18% - Wholesale Deposits (including CD) 39,431 26,190 25,859 -34% -1% Borrowings 67,025 47,713 40,805 -39% -14% Other liabilities and provisions 9,722 11,611 12,909 33% 11% Total Liabilities 160,684 152,661 155,676 -3% 2% Cash and Balances with Banks and RBI 7,111 5,257 7,141 0% 36% Net Funded Assets 100,418 102,534 106,263 6% 4% -Net Retail Funded Assets 51,268 59,979 66,731 30% 11% - Net Wholesale Funded Assets* 49,150 42,556 39,532 -20% -7% Investments 44,244 35,600 33,037 -25% -7% Fixed Assets 1,029 1,131 1,233 20% 9% Other Assets 7,882 8,139 8,003 2% -2% Total Assets 160,684 152,661 155,676 -3% 2% *includes credit investments (Non-Convertible Debentures, RIDF, PTC, SRS and Loan Converted into Equity) Section 4: Key Business & Financial Parameters 51 IDFC FIRST Bank#52Section 4: Gradual improvement in Net Interest Margins from 2.89% (merger quarter) to 4.65% in Q3 FY21. . The NIM of the standalone Bank IDFC bank was 1.56% in September 2018, which was the last quarter prior to the merger in December 2018. On merger, the NIM increased to 2.89%. Since then, this gradually accelerated to 4.65% (Q3-FY21). This includes the roll back of interest income on the proforma NPAs (without the impact of the SC order on NPA classification) NIMs have increased every quarter due to gradual shift towards retail banking businesses. • As per our earlier guidance, we aspire to take it to 5-5.5% in the next 5 years. We are confident of getting there. 4.53% 4.57% 4.65% (Pre - Merger) 1.56% 4.24% 3.86% Post - Merger 3.43% 3.03% 3.01% 2.89% Q2 FY19 Q3 FY19 Q4 FY19 Q1 FY20 Section 4: Key Business & Financial Parameters Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 Q3 FY21 IDFC FIRST 52 Bank#53Section 4: Capital Adequacy Ratio is 14.33% with CET-1 Ratio at 13.82% In Rs. Crore Common Equity Tier 2 Capital Funds Total Capital Funds Total RWA CET 1 Ratio (%) Total CRAR (%) Dec-19 14,638 Sep-20 17,146 Dec-20 17,287 6 475 629 14,644 17,621 17,917 1,10,228 1,19,659 1,25,052 13.28% 14.33% 13.82% 13.29% 14.73% 14.33% The regulatory requirement for the Capital Adequacy Ratio is 10.875% with CET-1 Ratio at 7.375% and Tier I at 8.875% as per the RBI Guidelines. Section 4: Key Business & Financial Parameters 53 IDFC FIRST Bank#54ווי 8 SECTION 1: THE FOUNDING OF IDFC FIRST BANK 13 SECTION 2: VISION & MISSION OF IDFC FIRST BANK 16 SECTION 3: PRODUCT OFFERING 19 SECTION 4: FINANCIAL PERFORMANCES 48 SECTION 5: DIRECTORS & SHAREHOLDERS 53 SECTION 6: STRATEGY GOING FORWARD FOR THE COMBINED ENTITY 58 SECTION 7: CAPITAL FIRST STRATEGY, LOAN GROWTH AND PROFITABILITY TRENDS FOR 8 YEARS (BEFORE MERGER WITH IDFC BANK) IDFC FIRST Bank#55Section 5: Board of Directors With over two decades in financial services in India, V. Vaidyanathan has seen India through many lens - first as a banker (1990-2010, Citibank), then as an entrepreneur (2010-2019, Capital First) and a professional banker again (2019- date, after merging Capital First with IDFC Bank). He worked with Citibank Consumer Banking from 1990-2000, then set up ICICI Group's retail banking from 2000-2009 since its inception, built ICICI Bank's branch network to 1411 branches and 28 million customers, built a large CASA and retail deposits franchise, and built the retail lending businesses including mortgages, auto loans, credit cards and personal credit businesses to Rs. 1.35 trillion ($30 bn). He was appointed at the Board of ICICI Bank in 2006 at age 38. In 2009, he became the MD and CEO of ICICI Prudential Life Insurance Company in India. In 2010, he quit ICICI Group for an entrepreneurial opportunity to acquire an NBFC with an idea to convert it to a bank focused on consumer and MSME lending. On acquiring equity stake, he shut down all non-core businesses like broking and real estate financing, and instead used the NBFC platform to build MSME and Consumer Financing businesses, based on new technologies and algorithms. Between 2010 to 2018, he grew the loan book from start- up stage to Rs. 29,600 crores (US$4.05 bn), grew the equity capital from Rs. 691 crores (US$118 mn) to Rs. 3,993 crores (US$600 mn), reduced Gross NPA from 5.28% to 1.94%, reduced Net NPA from 3.6% to 1%, acquired 7 million customers, got the long-term credit rating upgraded from A+ to AAA, turned around the company from losses of US$5 mn (2010) to profit of US$50 mn (2018), increased ROE from -6% to +15%, and increased the market cap 10 times from Rs. 780 crores (US$120 mn) to Rs. 8,200 crores (US$1.2 bn) in 8 years. Capital First was growing at a 5-year CAGR of loan growth of 30%, and 55% in PAT between 2013-2018. Then, in order to secure a commercial banking license, he agreed to merge Capital First with IDFC Bank in December 2018 and took over as the MD and CEO of the merged entity. Since then in seven quarters, between December 2019 to September 2020, he has increased retail loan book from 13.16% pre-merger to over 60% (Rs. 59,860 crores, US$8.14 bn) of the total funded assets, increased Net Interest margin from 1.68% pre-merger to 4.57%, increased CASA from 8.68% to 40.37%, turned the bank into profitability, and is currently busy converting the bank into a world- class retail bank in India. The bank now has over 10 million customers and loan book of more than Rs. 1 lac crores (~US$14 bn). He believes India provides unlimited opportunity in financial services in India. During his career, he and his organization have received a number of domestic and international awards including the prestigious CNBC Awaaz Entrepreneur of the year 2020, CNBC Asia's "Innovative company of the year" India Business Leader Awards-2017, "Most Inspirational Leveraged Management Buyout, India 2018" by CFI Awards, "Entrepreneur of the Year" Award at Asia Pacific Entrepreneurship Awards 2017, "Transformational Leader 2018" by CFI Awards UK, "Financial Services Company of the Year, 2018 - VC Circle", "Outstanding contribution to Financial Inclusion, India, 2017" from Capital Finance International, London, "Most Promising Business Leaders of Asia" 2016 by Economic Times, 'Outstanding Entrepreneur Award' in Asia Pacific Entrepreneurship Awards 2016, Greatest Corporate Leaders of India- 2014, Business Today - India's Most Valuable Companies 2016 & 2015, Economic Times 500 India's Future Ready Companies 2016, Fortune India's Next 500 Companies 2016, Dun & Bradstreet India's Top 500 Companies & Corporates 2016 & 2015. During his prior stint, awards included "Best Retail bank in Asia 2001", "Excellence in Retail Banking Award" 2002, "Best Retail Bank in India 2003, 2004, and 2005" from the Asian Banker, "Most Innovative Bank" 2007, "Leaders under 40" from Business Today in 2009, and was nominated "Retail Banker of the Year" by EFMA Europe for 2008. He is an alumnus of Birla Institute of Technology and Harvard Business School. He has run 23 half-marathons and 8 full marathons. Section 5: Directors and Shareholders 55 IDFC FIRST Bank#56Section 5: Board of Directors DR. SANJAY KUMAR - NON-EXECUTIVE NON INDEPENDENT DIRECTOR (REPRESENTING THE GOVT. OF INDIA) (w.e.f June 22, 2020) Dr. Sanjay Kumar joined Board of Directors of IDFC FIRST Bank w.e.f. June 22, 2020. He belongs to 2003 batch of Indian Post & Telecom accounts and Finance Service. He has joined Department of Financial Service as Director on September 21, 2017. Prior to joining this Department, He worked in Department of Telecommunication (DOT) and Department of Post (DOP). Dr. Kumar has been on the Board of Syndicate Bank, as a Government Nominee Director, from April 05, 2018 till March 31, 2020. MR. SUNIL KAKAR - NON-EXECUTIVE NON INDEPENDENT DIRECTOR (REPRESENTING IDFC LIMITED) Mr. Sunil Kakar is the Managing Director & CEO of IDFC Limited. He started his career at Bank of America where he worked in various roles, covering Business Planning & Financial Control, Branch Administration and Operations, Project Management and Internal Controls. After Bank of America, Mr. Kakar was the CFO at Max New York Life Insurance. He led numerous initiatives including Planning, Investments / Treasury, Finance and Accounting, Budgeting and MIS, Regulatory Reporting and Taxation. MR. ANAND SINHA - INDEPENDENT DIRECTOR Mr. Anand Sinha joined the Reserve Bank of India in July 1976 and rose to become Deputy Governor in January 2011. He was Adviser in RBI up to April 2014 after demitting the office of Deputy Governor in RBI on 18th January 2014. As Deputy Governor, he was in-charge of regulation of commercial banks, Non-Banking Financial Companies, Urban Cooperative Banks and Information Technology, among others. MR. HEMANG RAJA - INDEPENDENT DIRECTOR Mr. Hemang Raja, is an MBA from Abeline Christian University, Texas, with a major in finance. He has also done an Advance Management Program (AMP) from Oxford University, UK. He has vast experience in the areas of Private Equity, Fund Management and Capital Markets in companies like Credit Suisse and Asia Growth Capital Advisers in India as MD and Head - India. He has served on the executive committee of the board of the National Stock Exchange of India Limited; also served as a member of the Corporate Governance Committee of the BSE Limited. MR. SANJEEB CHAUDHURI - INDEPENDENT DIRECTOR Mr. Sanjeeb Chaudhuri is a Board member and Advisor to global organizations across Europe, the US and Asia. He has most recently been Regional Business Head for India and South Asia for Retail, Commercial and Private Banking and also Global Head of Brand and Chief Marketing Officer at Standard Chartered Bank. Prior to this, he was CEO for Retail and Commercial Banking for Citigroup, Europe, Middle East and Africa. He has an MBA in Marketing and has completed an Advanced Management Program. Section 5: Directors and Shareholders 56 IDFC FIRST Bank#57Section 5: Board of Directors DR.(MRS.) BRINDA JAGIRDAR - INDEPENDENT DIRECTOR Dr. (Mrs.) Brinda Jagirdar, is an independent consulting economist with specialization in areas relating to the Indian economy and financial intermediation. She is on the Governing Council of Treasury Elite, a knowledge sharing platform for finance and treasury professionals. She retired as General Manager and Chief Economist, State Bank of India, based at its Corporate Office in Mumbai. She has a brilliant academic record, with a Ph.D. in Economics from the Department of Economics, University of Mumbai, M.S. in Economics from the University of California at Davis, USA, M.A. in Economics from Gokhale Institute of Politics and Economics, Pune and B.A. in Economics from Fergusson College, Pune. She has attended an Executive Programme at the Kennedy School of Government, Harvard University, USA and a leadership programme at IIM Lucknow. MR. PRAVIR VOHRA - INDEPENDENT DIRECTOR Mr. Pravir Vohra is a postgraduate in Economics from St. Stephen's College, University of Delhi & a Certified Associate of the Indian Institute of Bankers. He began his career in banking with State Bank of India where he worked for over 23 years. He held various senior level positions in business as well as technology within the bank, both in India & abroad. The late 1990s saw Mr. Vohra as Vice President in charge of the Corporate Services group at Times Bank Ltd. In January 2000, he moved to the ICICI Bank group where he headed a number of functions like the Retail Technology Group & Technology Management Group. From 2005 till 2012 he was the President and Group CTO at ICICI Bank. MR. AASHISH KAMAT - INDEPENDENT DIRECTOR Mr. Aashish Kamat has over 30 years of experience in the corporate world, with 24 years being in banking & financial services & 6 years in public accounting. Mr. Kamat was the Country Head for UBS India, from 2012 until his retirement in January 2018. Prior to that he was the Regional COO/CFO for Asia Pacific at JP Morgan based out of Hong Kong. Before moving to Hong Kong, Mr. Kamat was in New York, where is was the Global Controller for the Investment Bank (IB) at JP Morgan in New York; & at Bank of America as the Global CFO for the IB, and, Consumer and Mortgage Products. Mr. Kamat started his career with Coopers & Lybrand, a public accounting firm, in 1988 before he joined JP Morgan in 1994. MR. VISHAL MAHADEVIA - NON-EXECUTIVE NON INDEPENDENT DIRECTOR Mr. Vishal Mahadevia joined Warburg Pincus in 2006 & is a member of the firm's executive management group. Previously, he was a Principal at Greenbriar Equity Group, a fund focused on private equity investments in the transportation sector. Prior to that, Mr. Mahadevia worked at Three Cities Research, a New York-based PE fund, & as a consultant with McKinsey & Company. He received a B.S. in economics with a concentration in finance & B.S. in electrical engineering from the University of Pennsylvania Section 5: Directors and Shareholders 57 IDFC FIRST Bank#58Section 5: Shareholding Pattern as of December 31, 2020 Scrip Name IDFC FIRST Bank (BSE: 539437, NSE:IDFCFIRSTB) : Public (Incl. NRIs), 22.7% Key Shareholders % Holding (through their respective various funds and affiliate companies wherever applicable) President of India, 4.6% Other Body Corporate, 1.1% IDFC Financial Holding Company Limited Trusts and Clearing Members, 0.3% Warburg Pincus through its affiliated entities President of India ICICI Prudential Life Insurance 40.00 9.94 4.61 4.56 Odyssey 44 4.03 Aditya Birla Asset Management 1.88 Promoters, 40.0% Bajaj Allianz Life Insurance 1.67 HDFC Life Insurance Company 1.53 MF/Insurance/B ank/AIF/FI, 11.4% Vanguard 1.50 Ishares 0.59 FII/FPI/Foreign Corporate, 19.9% Total # of shares as of Dec 31, 2020: 567.24 Cr Book Value per Share as of Dec 31, 2020: Rs. 31.15 Market Cap. as on Dec 31, 2020: Rs. 21,016 Crore Section 5: Directors and Shareholders V Vaidyanathan* *On a fully diluted basis, including shares and options, Mr. Vaidyanathan holds 2.33% of the equity of the Bank including shares held in his social welfare trust. 58 IDFC FIRST Bank Wellington 0.58 0.55#59ווי 8 SECTION 1: THE FOUNDING OF IDFC FIRST BANK 13 SECTION 2: VISION & MISSION OF IDFC FIRST BANK 16 SECTION 3: PRODUCT OFFERING 19 SECTION 4: FINANCIAL PERFORMANCES 48 SECTION 5: DIRECTORS & SHAREHOLDERS 53 SECTION 6: STRATEGY GOING FORWARD FOR THE COMBINED ENTITY 58 SECTION 7: CAPITAL FIRST STRATEGY, LOAN GROWTH AND PROFITABILITY TRENDS FOR 8 YEARS (BEFORE MERGER WITH IDFC BANK) IDFC FIRST Bank#60= SECTION 6: STRATEGY GOING FORWARD FOR THE COMBINED ENTITY Key Strategies for the combine entity - ✓ Asset Strategy Growth of Assets Diversification of Assets Gross Yield expansion ✓ Liability Strategy . • CASA Growth Diversification of Liability Branch Expansion ✓ Profitability Expand Net Interest Margin Reduce Cost to Income Ratio Improve RoA and RoE IDFC FIRST Bank#61Section 6: Asset Strategy for IDFC FIRST Bank as guided at the time of merger in December 2018. • Growth of Assets: . • • The Bank plans to grow retail loan assets from Rs. 36,236 crore (December 31, 2018) to over Rs. 100,000 crore in the next 5 years The Bank plans to wind down loans to infrastructure to NIL within five years ( Rs. 22,710 as of 31 December 2018). The Bank plans to reduce the total Wholesale loan assets (including the Infrastructure Loans) from Rs. 56,809 crore (December 31, 2018) to Rs. 40,000 crore by March 2020 in order to rebalance and diversify the overall Loan Book. Thereafter, the Bank plans to maintain it at the similar levels for the next 5 years and would grow the business based on opportunities available at the marketplace. Diversification of Assets: We recognize that loan book of the bank needs to be well diversified across sectors and a large number of consumers. The Bank plans to increase the retail book composition from 34.62% to 70% within 5 years and set the target to take it to 80% thereon. Gross Yield Expansion: As a result of the growth of the retail loan (at a relatively higher yield compared to the wholesale loans), the gross yield of the Bank's Loan Book was initially guided to increase from 9.4% (as per Q2-FY19, pre-merger) to more than 12% in the next 5 years, however we now upgrade our guidance and project the yield to be at 13.5% in the next 5 years. The bank will expand Housing loan portfolio as one of its important product lines. Section 6: Strategy Going Forward 61 IDFC FIRST Bank#62Section 6: Liability Strategy for IDFC FIRST Bank as guided at the time of merger in December 2018. • • CASA Growth: This is a key focus and growth area for the bank. We plan to increase the CASA Ratio from 8.68% as of December 31, 2018 on a continuous basis year on year and strive to reach 30% CASA ratio within 5 years, and increase it to 40-50% from there on. An array of digital savings & current accounts are planned to be offered to the customer base (more than 7 million customers) of Erstwhile Capital First. Diversification of Liabilities: We will focus on Retail CASA and Retail Term Deposits in order to diversify the liabilities of the bank. As a percentage of the total borrowings, the Retail Term Deposits and Retail CASA is proposed to increase from 8.04% as of December 31, 2018, to over 50% in the next 5 years and set up a trajectory to reach 75% thereafter. Branch Expansion: In order to grow Retail Deposits and CASA, the bank plans to set up 600-700 more bank branches in the next 5 years from the branch count of 206 (as of 31 Dec 2018). This would be suitably supported by the attractive product propositions and other associated services as well as cross selling opportunities. Section 6: Strategy Going Forward 62 IDFC FIRST Bank#63Section 6: Profitability . • Net Interest Margin: The bank plans to expand the NIM to about 5.0% - 5.5% in the next 5 years based on better cost of funds and carefully selecting the product segments where we have strong proven capabilities over the years. Asset Quality: Over 90% of the Retail Loan Book of the bank constitutes of loan book brought from erstwhile Capital First. The book is seasoned over 8 years across business and loan cycles and has had stable performance throughout, and has been adequately stress tested across significant events such as high interest rate cycle (2010-2014), high inflation rate cycle (2010- 2014), Demonetization (2016, where over 86% of the cash of the country was withdrawn overnight), GST implementation (2017, which changed the business environment and methods for MSMEs) and yet asset quality remained high over the period. Cost to Income: The Bank plans to improve Cost to Income ratio to ~50-55% over the next 5 years, down from ~80% (post merger results, Quarter ended December 31, 2018) ROA and ROE: With the improvement in the NIM and cost to income ratio, the bank aims to reach the following benchmarks in the next 5-6 years. • ROA of 1.4%-1.6% • ROE of 13%-15% Section 6: Strategy Going Forward 63 IDFC FIRST Bank#64ווי 8 SECTION 1: THE FOUNDING OF IDFC FIRST BANK 13 SECTION 2: VISION & MISSION OF IDFC FIRST BANK 16 SECTION 3: PRODUCT OFFERING 19 SECTION 4: FINANCIAL PERFORMANCES 48 SECTION 5: DIRECTORS & SHAREHOLDERS 53 SECTION 6: STRATEGY GOING FORWARD FOR THE COMBINED ENTITY 58 SECTION 7: CAPITAL FIRST STRATEGY, LOAN GROWTH AND PROFITABILITY TRENDS FOR 8 YEARS (BEFORE MERGER WITH IDFC BANK) IDFC FIRST Bank#65SECTION 7: CAPITAL FIRST STRATEGY, LOAN GROWTH AND PROFITABILITY TRENDS FOR 8 YEARS (BEFORE MERGER WITH IDFC BANK) History of Capital First Limited Transformation into Retail Franchise Business Areas of Focus Past Financial Performances IDFC FIRST Bank#66Section 7: Extract from Capital First investor Presentation of September 2018, which is the last quarter prior to merger. Presented here to demonstrate the capability of the core loan book and the track record of growth and profitability. Since the business model of Capital First is an important part of the business to be built in the merged bank, we present to you the business model, business lines, business and profitability trajectory, and financial trends of Capital First Limited. The following slides are essentially an extract of the last official investor presentation of Capital First just prior to the merger (Period ending September 30 2018) and are meant to give the reader a picture of what the merged bank could look like in the years to come. Section 7: History of Capital First 66 IDFC FIRST Bank#67Section 7: Successful Trajectory of Growth and Profits at Capital First History of Capital First Limited The Company was first listed on Stock Exchanges in January 2008. Between 2010 to 2012, Mr Vaidyanathan acquired a stake in the company and executed a Management Buyout (MBO) of the Company with equity backing of Rs. 810 crore from Warburg Pincus, and created a new brand and entity called Capital First. As part of the MBO, the company raised fresh equity, reconstituted a new Board and got new shareholders, including open offer to public. A brief history of the company is as follows: 2008-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 The Company was largely in the business of Wholesale Financing, PE, Asset Management, Foreign Exchange and Retail Equity Broking. The total AUM of the Company was Rs. 935 crore of which Retail AUM was 10%, Rs. 94 crore. Mr. V Vaidyanathan joined the Company and prepared the ground for executing a Management Buyout by taking significant corporate actions including divesting Forex JV to JV partner, merging a subsidiary NBFC with itself, by winding down other non core businesses and launching retail businesses in the Company. The Company launched technology driven financial businesses for the consumer and SME segments. The Retail loan book crossed Rs. 700 crore by March 2011. The Company presented this as proof of concept to many global private equity players for Buyout. The company continued to present the concept to prospective PE players throughout the year. The Company undertook additional corporate actions and further wound down non-core business subsidiaries and launched more retail financing businesses. The concept, model and volume of retail financing businesses gained traction and reached to Rs. 3,660 crore, 44% of the overall AUM. Mr. Vaidyanathan secured equity backing of Rs. 810 crore from Warburg Pincus for an MBO and thus Capital First was founded. As part of the transaction an open offer was launched, the Company raised Rs. 100 crore of fresh equity capital, a new Board was reconstituted and a new brand and entity "Capital First" was created. The Company further raised Rs. 178 crore as fresh equity at Rs. 153/ share. It acquired HFC license from NHB and launched housing finance business under its wholly owned subsidiary. Company's Assets under Management reached Rs. ~12,000 crore and the number of customers financed since inception crossed 10 lacs. The Company raised Rs. 300 crore through QIP at Rs. 390 per share from marquee foreign and domestic investors. The Company received recognition as "Business Today - India's most Valuable Companies 2015" and "Dun & Bradstreet - India's top 500 Companies, 2015". The Company scrip was included in S&P BSE 500 Index. Company's Assets under Management reached Rs. 20,000 crore and the number of customers financed since inception crossed 4.0 million. The Company raised fresh equity capital of Rs. 340 crore from GIC, Singapore through preferential allotment @ Rs. 712 per share. The Company received recognition as "CNBC Asia Innovative Company of the Year, IBLA, 2017", "Economic Times - 500 India's Future Ready Companies 2016" and "Fortune India's Next 500 Companies, 2016". The Company's Asset Under Management touch ~Rs. 27,000 crore and number of customers financed crossed 6.0 million. The Company received "Best BFSI Brand Award 2018" at The Economic Times Best BFSI Brand Awards 2018 and "Financial Services Company of the Year 2018" at VC Circle Awards 2018. In January 2018, the Company announced the merger with IDFC Bank subject to regulatory approvals. Section 7: History of Capital First 67 IDFC FIRST Bank#68Section 7: Successful Trajectory of Growth and Profits at Capital First. This page is an extract from Capital First investor Presentation of September 2018, which is the last quarter prior to merger. Presented here to demonstrate the capability of the core loan book and the track record of growth and profitability. From 31-March-2010 to 31-Mar-2018, the company has transformed across all key parameters including: • The total Capital has grown • The Assets under Management increased from Rs. 691 crore to Rs. 3,993 crore from Rs. 935 crore to Rs. 26,997 crore 8-Yr CAGR % % Growth - FY18 Total Capital 25% 17% • The Retail Assets Under Management increased from Rs. 94 crore to Rs. 25,243 crore . The long term credit rating has upgraded Total AUM 52% 36% • The number of lenders increased Retail AUM 101% 38% • The Gross NPA reduced • The Net NPA reduced • Cumulative customers financed reached • The Net Profit/(Loss) increased from A+ to AAA from 5 to 297 from 5.28% to 1.62% from 3.78% to 1.00% over 7 million from loss of Rs. 32.2 crore in FY 09 to Profit of Rs. 327.4 crore (FY18) The 5 year CAGR for key parameters are as follows: Total Asset Under Management has grown at a CAGR of O Total Income has grown at a CAGR of Profit After Tax has grown at a CAGR of Earning Per Share has grown at a CAGR of 29% from Rs. 7,510 crore (FY13) to Rs. 26,997 crore (FY18) 47% from Rs. 357.5 crore (FY13) to Rs. 2429.6 crore (FY18) 56% from Rs. 35.1 crore (FY13) to Rs. 327.4 crore (FY18) 46% from Rs. 4.94 (FY13) to Rs. 33.04 (FY18) Section 7: History of Capital First 68 IDFC FIRST Bank#69Section 7: Successful Trajectory of Growth and Profits at Capital First. This page is an extract from Capital First investor Presentation of September 2018, which is the last quarter prior to merger. Presented here to demonstrate the capability of the core loan book and the track record of growth and profitability. Since 2010, the company has consistently stayed with the founding theme of financing entrepreneurs, MSMEs and consumers through the platform of technology & has grown the retail franchise A highly diversified portfolio across 600 industries and over 70 lakh customers Retail Loan Assets becoming 91% of the Overall Loan Assets *As per Ind - AS Rs. 32,622 Cr* $ 4.47 bn Rs. 26,997 Cr $ 4,15 bn 9% This transformation & diversification has resulted in high asset quality, consistency of growth, and sustained increase in profits. Rs. 19,824 Cr $ 3.05 bn 6% Retails loans Rs. 16,041 Cr Real Estate & Corporate Loans Total AUM $ 2.47 bn 7% 94% Rs. 11,975 Cr $ 1.84 bn 14% Rs. 9,679 Cr $ 1.49 bn 16% Rs. 7,510 Cr $ 1.16 bn 19% 86% 84% Rs. 6,186 Cr $ 0.95 bn 26% 81% Rs. 2,751 Cr 74% Rs. 935 Cr $ 0.42 bn $ 0.14 bn 44% 56% 28% 10% 72% 93% 91% As a result, the growth in the net profit of the Company has outpaced the growth of the loan book demonstrating increased efficiency in use of capital. The company plans to continue to build in this strategic direction and aims to grow the loan book at a CAGR of 25% over the next three years. FY10 FY11 FY12 FY13 FY14 FY15 Section 7: Transformation into a Retail Franchise FY16 FY17 FY18 Q2 FY19 69 IDFC FIRST Bank#70Section 7: Successful Trajectory of Growth and Profits at Capital First This page is an extract from Capital First investor Presentation of September 2018, which is the last quarter prior to merger. Presented here to demonstrate the capability of the core loan book and the track record of growth and profitability. The company's product launches had been highly successful in the marketplace and the company had emerged as a significant player in Indian retail financial services within eight years of inception with the Retail Loan Book crossing Rs. 29,625 crore (USD 4.06 bn) Rs. 94 Cr ($15 Mn) Rs. 771 Cr ($119 Mn) (28% of AUM) Rs. 3,460 Cr ($532 Mn) (56% of AUM) Rs. 5,560 Cr ($855 Mn) (74% of AUM) (10% of AUM) 31-Mar-10 31-Mar-11 *Under Ind- AS Rs. 7,883 Cr ($1,213 Mn) (81% of AUM) 5-Yr CAGR 35% Rs. 10,113 Cr ($1,556 Mn) (84% of AUM) Rs. 13,756 Cr ($2,116 Mn) (86% of AUM) Rs. 18,353 Cr ($2,824Mn) (93% of AUM) Rs. 25,243 Cr ($3,891Mn) (94% of AUM) Rs. 29,625 Cr* ($4,058Mn) (91% of AUM) 31-Mar-12 31-Mar-13 31-Mar-14 31-Mar-15 31-Mar-16 31-Mar-17 31-Mar-18 30-Sept-18 Section 7: Transformation into a Retail Franchise 70 IDFC FIRST Bank#71Section 7: Successful Trajectory of Growth and Profits at Capital First This page is an extract from Capital First investor Presentation of September 2018, which is the last quarter prior to merger. Presented here to demonstrate the capability of the core loan book and the track record of growth and profitability. LINES OF BUSINESS: Capital First provided financing to select segments that are traditionally underserved by the existing financing system . • By staying focused on a specific niche (small entrepreneurs and Indian consumers), the company avoided competing with traditional large players. Capital First provides financing to select segments that are traditionally underserved by the existing financing system. • Traditionally these end uses are underserved by the financial system as ticket sizes are small, credit evaluation is difficult, collections is difficult, and business is often unviable owing to huge operating and credit costs. Loans for Plant & Machinery Loans for office display panels Loans for Business Expansion MSMES Consumers Loans for Air- Conditioners Section 7: Business Areas of Focus Loans for Office Automation - PCs, Laptops, Printers Short Term Business funding Loans for Two Wheeler purchase Loans for Office Furniture 71 IDFC FIRST Bank#72Section 7: Successful Trajectory of Growth and Profits at Capital First This page is an extract from Capital First investor Presentation of September 2018, which is the last quarter prior to merger. Presented here to demonstrate the capability of the core loan book and the track record of growth and profitability. SPECIALITY: MSME Financing - A key area of focus for Capital First Capital First has emerged as a Specialized Player in financing MSMEs by offering different products for their various financing needs Typical Loan Ticket Size From CFL Rs. 10 lacs - Rs. 2 crore - Rs. 1 lakh Rs. 10 lacs Rs. 15k - Rs. 1 lakh Section 7: Business Areas of Focus Typical Customer Profile To Small and Medium Entrepreneurs financing based on customised cash flow analysis and references from the SME's customers, vendors, suppliers. To Small Entrepreneurs/partnership firms in need of immediate funds, for say, purchase of additional inventory for an unexpected large order. To Micro business owners and consumers for purchase of office PC, office furniture, Tablets, Two-Wheeler, etc. 72 IDFC FIRST Bank#73Section 7: Successful Trajectory of Growth and Profits at Capital First This page is an extract from Capital First investor Presentation of September 2018, which is the last quarter prior to merger. Presented here to demonstrate the capability of the core loan book and the track record of growth and profitability. Credit Framework STRONG RISK MANAGEMENT PROCEDURES: Capital First is structured with inherent checks and balances for effective risk management Credit Policy (For defining Business Origination Team Lending Norms) Credit Underwriting Team Loan Booking & Portfolio Monitoring & Operations Team Collections Sales, credit, operations and collections are independent of each other, with independent reporting lines for checks and balances in the system Section 7: Business Areas of Focus 73 IDFC FIRST Bank#74Section 7: Successful Trajectory of Growth and Profits at Capital First This page is an extract from Capital First investor Presentation of September 2018, which is the last quarter prior to merger. Presented here to demonstrate the capability of the core loan book and the track record of growth and profitability. Rigorous Credit Underwriting Process helped in maintaining high asset quality 100 2-3 X 38-40 X In the Mortgages business at Capital First, about 38% of the total applications were disbursed after passing through several levels of scrutiny and checks, mainly centred around cash flow evaluation, credit bureau and reference checks. Most rejections were because of the lack of visibility or inadequate cash flows to service the 2-4 X loan. 5-7 X 10-12X Application Logged in CIBIL / Credit Bureau Rejection Section 7: Business Areas of Focus Rejection Due to Insufficient Cashflow / Documentation Rejection after Personal Interview 38 Rejection due to Legal & Technical Reasons Rejection for Other Net Disbursals Reasons 74 IDFC FIRST Bank#75Section 7: Successful Trajectory of Growth and Profits at Capital First This page is an extract from Capital First investor Presentation of September 2018, which is the last quarter prior to merger. Presented here to demonstrate the capability of the core loan book and the track record of growth and profitability. STABLE ASSET QUALITY: The Company's asset quality consistently remained high consistently over 8 years. Over 8 years, the GNPA was ~1.7% and NNPA was ~1.0% which came down from 5.28% and 3.78% respectively (31-March-10) GNPA 5.28% Demonetization Nov 8th 2016 GST Launched July 1st 2017 -CFL-GNPA -CFL-NNPA NNPA 3.78% 1.74% 1.71% 11.59% 1.65% 1.72% 1.52% 1.63% 1.59% 1.62% 1.57% I 1.21% 1.13% I 0.97% 1.00% 1.00% 1.04% 1.00% 0.97% 1.00% 1.00% 31-Mar-10 31-Mar-16 30-Jun-16 30-Sep-16 31-Dec-16 31-Mar-17 30-Jun-17 30-Sep-17 31-Dec-17 31-Mar-18 30-Jun-18 This is despite the fact that the company was providing finance in a less banked segment. Further the portfolio has been stress tested over three significant events since inception : a) FY 2010-2014 where there was high inflation, elevated interest rates and sharp Rupee Depreciation, b) Demonetization (FY16) where 86% of the country's currency was invalidated and c) GST Implementation (FY17) which affected our target segment directly. Note: NPA recognition norm migrated to 90 dpd effective from 01 April, 2017. Section 7: Past Financial Performance 75 IDFC FIRST Bank#76Section 7: Successful Trajectory of Growth and Profits at Capital First This page is an extract from Capital First investor Presentation of September 2018, which is the last quarter prior to merger. Presented here to demonstrate the capability of the core loan book and the track record of growth and profitability. Asset Under Management (In Rs. Crore) CAGR - 52% 19,824 16,041 11,975 9,679 7,510 6,186 2,751 935 FY10 FY11 FY12 FY18: YoY Growth 32,622 37% 26,997 FY13 FY14 FY15 FY16 FY17 FY18 H1-FY19 76 IDFC FIRST Bank Section 7: Past Financial Performance#77Section 7: Successful Trajectory of Growth and Profits at Capital First This page is an extract from Capital First investor Presentation of September 2018, which is the last quarter prior to merger. Presented here to demonstrate the capability of the core loan book and the track record of growth and profitability. Yearly Return on Equity (%) Note: RoE for Q4-FY18 (quarterly annualized) was 15% and trending consistently upwards. New Management took over in 2010 -2.12% -3.92% -4.44% -6.08% 0.47% 4.93% 3.63% 14.51% 13.31% 11.93% 10.14% 8.33% FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 H1-FY19 Note: FY13 onwards, the Company amortized securitization income. Prior periods are normalized for such items for consistency to arrive at normalized profitability Section 7: Past Financial Performance 77 IDFC FIRST Bank#78Section 7: Successful Trajectory of Growth and Profits at Capital First This page is an extract from Capital First investor Presentation of September 2018, which is the last quarter prior to merger. Presented here to demonstrate the capability of the core loan book and the track record of growth and profitability. In FY 08 and 09, the Company had made losses. Even after the new leadership took over, for two years the company continued to post losses as the building blocks for new age retail lending were prepared. Once the company turned around and became profitable in FY 12, there was no looking back, Capital First posted a CAGR growth in profits of 56% for last 5 years, latest year profit up 37%. Profit After Tax (Normalized) – Rs. crore - New Leadership takes over in 2010. ■ New Retail Product Lines launched. ■ Retail Team, Systems, Processes designed. ■Closed down subsidiaries, prepared company for PE equity backing ■ Platform set for Business growth and Profitability. -15.7 -28.8 -32.1 -46.2 ▪ Company turned profitable in FY12 and since then consistently increased profit for the next 6 years with a CAGR of 45% 3.8 53.2 35.1 5 Year CAGR - 56% 166.2 114.3 238.9 * For Half Year H1-FY19 327.4 206.1* FY08 FY09 Section 7: Past Financial Performance FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 H1-FY19 78 IDFC FIRST Bank#79Section 7: Successful Trajectory of Growth and Profits at Capital First This page is an extract from Capital First investor Presentation of September 2018, which is the last quarter prior to merger. Presented here to demonstrate the capability of the core loan book and the track record of growth and profitability. Earning per Share (EPS) has consistently grown at CAGR of 46% in the last 5 years, this created value for all shareholders. Earning Per Share (Rs.) 6.44 4.94 0.59 Year CAGR 46% 12.56 18.22 24.52 33.04 (2.47) (4.55) (5.05) (7.13) FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Section 7: Past Financial Performance 79 IDFC FIRST Bank#80Section 7: Successful Trajectory of Growth and Profits at Capital First This page is an extract from Capital First investor Presentation of September 2018, which is the last quarter prior to merger. Presented here to demonstrate the capability of the core loan book and the track record of growth and profitability. The Cost to Income ratio, which was high at ~130% in the early stages of the company, reduced to <50% once the business model stabilized over the years. Cost to Income ratio (%) 128% 115% ~ 70-80% 78% 80% 72% 74% 71% < 50% 59% 53% 51% 51% 48% FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 H1-FY19 Section 7: Past Financial Performance 80 IDFC FIRST Bank#81Section 7: Successful Trajectory of Growth and Profits at Capital First This page is an extract from Capital First investor Presentation of September 2018, which is the last quarter prior to merger. Presented here to demonstrate the capability of the core loan book and the track record of growth and profitability. During this phase, the Company - • built the Retail Platform, technologies for chosen segments, divested/closed down non-core businesses like broking, property services, Forex services etc, Merged NBFC subsidiary with the parent brought down high NPA levels (GNPA 5.28% and NNPA 3.78%) 1,174 31-Mar-10 Market Capitalization (Rs. crore) 1,478 1,152 902 782* 31-Mar-11 31-Mar-12 31-Mar-13 1000% growth 3,937 3,634 8,282# 7,628 Post-Merger Announcement 6,096 31-Mar-14 31-Mar-15 31-Mar-16 31-Mar-17 12-Jan-18 31-Mar-18 * Market Cap as on 31-March-2012, the year of Management Buyout # Market Cap on the day before the announcement of merger with IDFC Bank (Jan 13, 2018). Section 7: Past Financial Performance 81 IDFC FIRST Bank#82Section 7: Successful Trajectory of Growth and Profits at Capital First This page is an extract from Capital First investor Presentation of September 2018, which is the last quarter prior to merger. Presented here to demonstrate the capability of the core loan book and the track record of growth and profitability. The Company has been steadily increasing dividend pay-out every year starting from 10% in FY10 to 28% in FY18. Dividend (as % of face value per share) 28% 26% 24% 10% FY10 22% 20% 18% 15% 15% FY11 FY12 FY13 FY14 FY15 FY16 FY17 Section 7: Past Financial Performance FY18 82 IDFC FIRST Bank#83Section 7: Summary - Strategy for IDFC FIRST Bank In summary, under our stated strategy for the combined entity, IDFC FIRST Bank, the same successful model of Capital First lending business is now being built on a Bank platform from IDFC Bank, thus the business becomes more profitable, robust and sustaining because of availability of low cost and more abundant funding. 83 IDFC FIRST Bank#84GANT ווי THANK YOU IDFC FIRST Bank