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Reliance Capital
F3Q11: Core Profit Trends
Improve
Reliance Capital reported F3Q11 profit before tax of
Rs1.06 bn, up 48% YoY and 24% QoQ. PBT from AMC,
broking and consumer finance businesses was up 58%
YoY and 28% QoQ. There was no contribution from
capital gains this quarter.
Key trends across the various business segments:
Life insurance: Market share (APE basis) was lower at
7.3% average in QE Dec-10 (8.6% in QE Sep-10). NBP
margins were at 18.02% in F9M2011 vs. 17.9% in
F1H11 and 17.7% in F1Q11. Renewal premium growth
was robust at 25% YoY but new business premiums
were down 36% YoY.
Asset management: Domestic mutual fund AUMs were
down 6% QoQ. Market share was stable QoQ and
equity AUM proportion ticked up, as there were higher
outflows in the debt component. PBT was up 30% QoQ
and 23% YoY, driven by lower costs and increase in
yields.
Consumer finance: PBT in the consumer finance
business was at Rs793 mn up 30% QoQ /108% YoY.
AUMs were at Rs123 bn up 2% QoQ and 29% YoY.
Reported NIM declined to 5.4% from 5.7% in 2Q, driven
by increase in cost of funds and shift in loan mix.
Broking and distribution business: Profits in this
business improved to Rs108 mn from Rs77 mn in QE
Sep10 and Rs0.7 mn in QE Dec-09. The key reason for
the sequential uptick was an improvement in revenues.
General Insurance: The business continued to suffer
from losses on the health insurance and an account
policy change with regard to losses on motor pool.
However, the loss narrowed from Rs282 mn in the
previous quarter to Rs242 mn in the current quarter.
Market share: Average market share among private players
(APE basis) moved lower to 7.3% in QE Dec-10 (on our
computations) from 8.6% in QE Sep-10. New business
premium (NBP; APE basis) was down 53% YoY in QE Dec 10
– this compares with 1% in QE Sep-10.
First year premium collections for the quarter were down 55%
QoQ and 46% YoY, but this was partially offset by single
premium collections (+77% QoQ , +127% YoY). Total new
business premium collections were down 26% QoQ and 36%
YoY.
Renewal premiums: Renewal premiums were robust at Rs.
8.6 bn this quarter (+25% YoY/+10% QOQ vs. +49% YoY / +
31% QoQ in the previous quarter).
NBAP margins: The company indicated that its NBAP margins
(on their computations) were at 18.02% in F9M2011 from
17.9% in F1H11. This implies that margins moved up in
F3Q11.
We believe that a clearer picture on margin, growth outlook
and impact of regulations will only emerge in the QE Mar-11 –
the busiest quarter, with a major portion of the year’s business
being concentrated in the month of March. We expect to get
further clarity on the emerging trends in the company’s
conference call scheduled for February 14.
Capital infusion: The company did not infuse any capital this
quarter vs Rs0.5bn in F2Q11. A total of Rs31.0 billion (US$ 690
mn) has been invested to date .
Asset Management
Average domestic AUM were at Rs1021 bn (US$23 bn), down
6% QoQ and 15% YoY. The sequential decline was driven
mainly by outflows in the debt segment (-8% QoQ, -22% YoY)
as bank investments in debt mutual funds declined owing to
tight interbank liquidity conditions (banking system investments
in mutual funds declined from an average Rs431 bn for the
QE-Sep-10 to Rs272 bn for the QE-Dec-10).
Equity MF AUMs at ~Rs378 bn were down 3.5% QoQ but up
1.5% YoY. The proportion of equity assets to total assets ticked
up to 37% against 36% in the previous quarter, as there were
relatively higher outflows in the debt segment.
The AUM under PMS business (ex-EPFO) was stable QoQ at
Rs. 32 bn. The company now manages around Rs406 bn
(+29% YoY) of EPFO money. However, fee income on this is
relatively less. AUM under offshore fund was up 5% QoQ and
62% YoY at US$ 299 mn.
Reported PBT in the business was up 30% YoY and 23% QoQ.
The improvement in PBT was driven by a higher component of
retail (contributed by both higher equity and higher retail
component in the debt segments) and lower costs. The
reported PBT to average AUM ratio was at 36 bps (+33% YoY)
vs 30 bps reported in the previous quarter. This reflected an
increase in the share of retail long term debt to 19% of total
debt component from 15.5% in Sep-10 and 5.7% in Dec-09.
General Insurance
Gross written premium was down 19% YoY. Reliance General
Insurance’s markets-share amongst private players improved
marginally to 9.6% from 9.4% as of Sep-10 (10% as on Jun-10
and 14% as of Mar-10).
At the accounting level, the loss narrowed to Rs242 mn from
Rs282 mn in the previous quarter. The key driver of the losses
has been higher claims from its legacy health portfolio. To
address these losses, the company has re-priced its individual
health products beginning July 2011 (as per management) and
has also reduced exposure to the unprofitable group medical
segment.
The combined ratio increased to 124% from 118% in F2Q11
and 112% in F3Q10. The company made provisions towards
third-party motor pool losses for the nine months in this quarter,
in line with its accounting policy, which led to the sequential
increase in the combined ratio. As per management, the delay
in provisioning stemmed from delayed communication from the
third party pool regarding the losses.
Consumer Finance
PBT in the consumer finance business was at Rs793 mn, up
30% QoQ and 108% YoY. The growth was driven by revenues
moving up even as credit costs continued to normalize and
operating costs stayed under control.
The key highlights include:
Volume growth: The consumer finance loan book (retained on
balance sheet) was up 7% QoQ and 37% YoY at Rs107 bn
(US$2.4 bn). Total AUMs (including securitized portfolio) were
at Rs123 bn, up 2% QoQ and 29% YoY. The company did not
securitize any loans this quarter. New loan disbursements
were at Rs. 23 bn (up 63% YoY). The unsecured loan book
continued to shrink (down 29% QoQ and 68% YoY).
NII growth: NII grew by 2% QoQ and 19% YoY. This
compares with AUM growth of 2% QoQ and 29% YoY.
Reported NIM declined sequentially to 5.4% from 5.8% in the
previous quarter mainly driven by increase in cost of funds
(8.7% vs. 8.4% in 2Q) and continued shift towards in loan mix
towards secured products. Management expects NIM to
stabilize around 5-5.2% over the next two quarters.
Credit Costs/asset quality: The key positive was that credit
cost continued to normalize and moved lower to 107 bps in QE
Dec-10 from 170 bps in QE Sep-10 and 339 bps in QE Dec-09.
GNPLs have continued to trend down to Rs1.9 bn (1.8% of
loans) from Rs2.5bn (2.5% of loans) in QE Sep-10 and Rs5.1
bn (6.6% of loans) in QE Dec-09. Coverage improved to 79%
from 72% as of previous quarter end.
Operating costs: Operating costs were down 13% YoY and
up 3% QoQ. Cost: income ratio was marginally lower at 37%
from 37.5% as of previous quarter end and 40.5% in the same
quarter last year.
Standard provisioning: Management indicated that they
have been maintaining provisioning on the company’s
standard assets at 0.3-0.4%. Hence, they did not have to make
material additional provisions in the wake of the recent RBI
notification, whereby NBFCs are required to maintain a 25bp
provisioning on their standard assets.
Reliance Money / Securities
Profits in this business improved to Rs108 mn from Rs.77 mn in
QE Sep-10 and Rs. 0.7 mn in QE Dec-09. The key reason for
the sequential uptick was a material improvement in revenues
(+24% QoQ) while costs were stable (+4% QoQ).
• Total income was up 49% QoQ (24% YoY). This was
driven by improvement in average daily equity value
traded (+20% QoQ) while yields were stable QoQ at 2.5
bps (as per management). Third party product distribution
revenues were also up 219% QoQ but were down 12%
YoY.
• Reliance Money’s market share in equity volumes was at
2.2% in QE Dec-10 (+50 bps QoQ, +60 bps YoY)
• Operating costs were under control (+ 4% QoQ; +51%
YoY).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Reliance Capital
F3Q11: Core Profit Trends
Improve
Reliance Capital reported F3Q11 profit before tax of
Rs1.06 bn, up 48% YoY and 24% QoQ. PBT from AMC,
broking and consumer finance businesses was up 58%
YoY and 28% QoQ. There was no contribution from
capital gains this quarter.
Key trends across the various business segments:
Life insurance: Market share (APE basis) was lower at
7.3% average in QE Dec-10 (8.6% in QE Sep-10). NBP
margins were at 18.02% in F9M2011 vs. 17.9% in
F1H11 and 17.7% in F1Q11. Renewal premium growth
was robust at 25% YoY but new business premiums
were down 36% YoY.
Asset management: Domestic mutual fund AUMs were
down 6% QoQ. Market share was stable QoQ and
equity AUM proportion ticked up, as there were higher
outflows in the debt component. PBT was up 30% QoQ
and 23% YoY, driven by lower costs and increase in
yields.
Consumer finance: PBT in the consumer finance
business was at Rs793 mn up 30% QoQ /108% YoY.
AUMs were at Rs123 bn up 2% QoQ and 29% YoY.
Reported NIM declined to 5.4% from 5.7% in 2Q, driven
by increase in cost of funds and shift in loan mix.
Broking and distribution business: Profits in this
business improved to Rs108 mn from Rs77 mn in QE
Sep10 and Rs0.7 mn in QE Dec-09. The key reason for
the sequential uptick was an improvement in revenues.
General Insurance: The business continued to suffer
from losses on the health insurance and an account
policy change with regard to losses on motor pool.
However, the loss narrowed from Rs282 mn in the
previous quarter to Rs242 mn in the current quarter.
Market share: Average market share among private players
(APE basis) moved lower to 7.3% in QE Dec-10 (on our
computations) from 8.6% in QE Sep-10. New business
premium (NBP; APE basis) was down 53% YoY in QE Dec 10
– this compares with 1% in QE Sep-10.
First year premium collections for the quarter were down 55%
QoQ and 46% YoY, but this was partially offset by single
premium collections (+77% QoQ , +127% YoY). Total new
business premium collections were down 26% QoQ and 36%
YoY.
Renewal premiums: Renewal premiums were robust at Rs.
8.6 bn this quarter (+25% YoY/+10% QOQ vs. +49% YoY / +
31% QoQ in the previous quarter).
NBAP margins: The company indicated that its NBAP margins
(on their computations) were at 18.02% in F9M2011 from
17.9% in F1H11. This implies that margins moved up in
F3Q11.
We believe that a clearer picture on margin, growth outlook
and impact of regulations will only emerge in the QE Mar-11 –
the busiest quarter, with a major portion of the year’s business
being concentrated in the month of March. We expect to get
further clarity on the emerging trends in the company’s
conference call scheduled for February 14.
Capital infusion: The company did not infuse any capital this
quarter vs Rs0.5bn in F2Q11. A total of Rs31.0 billion (US$ 690
mn) has been invested to date .
Asset Management
Average domestic AUM were at Rs1021 bn (US$23 bn), down
6% QoQ and 15% YoY. The sequential decline was driven
mainly by outflows in the debt segment (-8% QoQ, -22% YoY)
as bank investments in debt mutual funds declined owing to
tight interbank liquidity conditions (banking system investments
in mutual funds declined from an average Rs431 bn for the
QE-Sep-10 to Rs272 bn for the QE-Dec-10).
Equity MF AUMs at ~Rs378 bn were down 3.5% QoQ but up
1.5% YoY. The proportion of equity assets to total assets ticked
up to 37% against 36% in the previous quarter, as there were
relatively higher outflows in the debt segment.
The AUM under PMS business (ex-EPFO) was stable QoQ at
Rs. 32 bn. The company now manages around Rs406 bn
(+29% YoY) of EPFO money. However, fee income on this is
relatively less. AUM under offshore fund was up 5% QoQ and
62% YoY at US$ 299 mn.
Reported PBT in the business was up 30% YoY and 23% QoQ.
The improvement in PBT was driven by a higher component of
retail (contributed by both higher equity and higher retail
component in the debt segments) and lower costs. The
reported PBT to average AUM ratio was at 36 bps (+33% YoY)
vs 30 bps reported in the previous quarter. This reflected an
increase in the share of retail long term debt to 19% of total
debt component from 15.5% in Sep-10 and 5.7% in Dec-09.
General Insurance
Gross written premium was down 19% YoY. Reliance General
Insurance’s markets-share amongst private players improved
marginally to 9.6% from 9.4% as of Sep-10 (10% as on Jun-10
and 14% as of Mar-10).
At the accounting level, the loss narrowed to Rs242 mn from
Rs282 mn in the previous quarter. The key driver of the losses
has been higher claims from its legacy health portfolio. To
address these losses, the company has re-priced its individual
health products beginning July 2011 (as per management) and
has also reduced exposure to the unprofitable group medical
segment.
The combined ratio increased to 124% from 118% in F2Q11
and 112% in F3Q10. The company made provisions towards
third-party motor pool losses for the nine months in this quarter,
in line with its accounting policy, which led to the sequential
increase in the combined ratio. As per management, the delay
in provisioning stemmed from delayed communication from the
third party pool regarding the losses.
Consumer Finance
PBT in the consumer finance business was at Rs793 mn, up
30% QoQ and 108% YoY. The growth was driven by revenues
moving up even as credit costs continued to normalize and
operating costs stayed under control.
The key highlights include:
Volume growth: The consumer finance loan book (retained on
balance sheet) was up 7% QoQ and 37% YoY at Rs107 bn
(US$2.4 bn). Total AUMs (including securitized portfolio) were
at Rs123 bn, up 2% QoQ and 29% YoY. The company did not
securitize any loans this quarter. New loan disbursements
were at Rs. 23 bn (up 63% YoY). The unsecured loan book
continued to shrink (down 29% QoQ and 68% YoY).
NII growth: NII grew by 2% QoQ and 19% YoY. This
compares with AUM growth of 2% QoQ and 29% YoY.
Reported NIM declined sequentially to 5.4% from 5.8% in the
previous quarter mainly driven by increase in cost of funds
(8.7% vs. 8.4% in 2Q) and continued shift towards in loan mix
towards secured products. Management expects NIM to
stabilize around 5-5.2% over the next two quarters.
Credit Costs/asset quality: The key positive was that credit
cost continued to normalize and moved lower to 107 bps in QE
Dec-10 from 170 bps in QE Sep-10 and 339 bps in QE Dec-09.
GNPLs have continued to trend down to Rs1.9 bn (1.8% of
loans) from Rs2.5bn (2.5% of loans) in QE Sep-10 and Rs5.1
bn (6.6% of loans) in QE Dec-09. Coverage improved to 79%
from 72% as of previous quarter end.
Operating costs: Operating costs were down 13% YoY and
up 3% QoQ. Cost: income ratio was marginally lower at 37%
from 37.5% as of previous quarter end and 40.5% in the same
quarter last year.
Standard provisioning: Management indicated that they
have been maintaining provisioning on the company’s
standard assets at 0.3-0.4%. Hence, they did not have to make
material additional provisions in the wake of the recent RBI
notification, whereby NBFCs are required to maintain a 25bp
provisioning on their standard assets.
Reliance Money / Securities
Profits in this business improved to Rs108 mn from Rs.77 mn in
QE Sep-10 and Rs. 0.7 mn in QE Dec-09. The key reason for
the sequential uptick was a material improvement in revenues
(+24% QoQ) while costs were stable (+4% QoQ).
• Total income was up 49% QoQ (24% YoY). This was
driven by improvement in average daily equity value
traded (+20% QoQ) while yields were stable QoQ at 2.5
bps (as per management). Third party product distribution
revenues were also up 219% QoQ but were down 12%
YoY.
• Reliance Money’s market share in equity volumes was at
2.2% in QE Dec-10 (+50 bps QoQ, +60 bps YoY)
• Operating costs were under control (+ 4% QoQ; +51%
YoY).
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