SBI Cards profit drops 46% to Rs 206 cr in Q2, asset quality deteriorates

SBI Cards and Payment Services, the credit card arm of State Bank of India, has reported 46 per cent decline in net profit at Rs 206 crore in the second quarter (Q2) of 2020-21 (FY21), compared to Rs 381 crore in the same period last financial year.  The decline is due to huge rise in provisions for bad debts in the quarter. However, its pre-provisioning profit grew 37 per cent to Rs 1,140 crore in Q2FY21, compared to Rs 831 crore in Q2 of 2019-20 (FY20).

Interest income of the company grew 10 per cent to Rs 1,275 crore in the reporting quarter, compared to Rs 1,162 crore in the corresponding quarter last financial year. Net revenue from operations grew 9 per cent to Rs 2,249 crore in the quarter, compared to Rs 2,057 crore. Net interest margin increased 185 basis points (bps) to 17 per cent, as opposed to 15.1 per cent.

On the other hand, the company saw its impairment losses and bad debts rise 162 per cent in Q2FY21 to Rs 862 crore, compared to Rs 329 crore in the same period last financial year. It took an additional management overlay provision of Rs 268 crore in the reporting quarter, thereby taking the total management overlay provision to Rs 758 crore as of September.

Its asset quality took a hit, as gross non-performing assets (NPAs) increased 196 bps to 4.3 per cent in Q2FY21, compared to 2.33 per cent in Q2FY20. Although it has not declared accounts which were not NPA until August 31 due to the apex court’s interim order, had it had done so, its proforma gross NPAs would have increased to 7.46 per cent, and net NPAs would have been 2.7 per cent. “Pending disposal of the case, the company as a matter of prudence has, in respect of such accounts, made an additional provision as management overlay, which is included in the overall expected credit loss provision,” it said.

Shares closed 4.8 per cent lower at Rs 851.9 on the NSE after the results.

Considered an important metric of pick-up in economic activity, retail credit card spends for Q2FY21 is at 90 per cent of pre-Covid levels (December 2019-February 2020). Similarly, compared to the last quarter (Q1FY21), retail spends have increased 50 per cent. While the daily average pre-Covid spend was Rs 307 crore, in Q2FY21, it was Rs 270 crore. In September, it was Rs 284 crore.

Similarly, the daily average pre-Covid corporate spend hovered around Rs 74 crore; in Q2FY21, it has reached Rs 51 crore. The company reported spends to the tune of Rs 29,950 crore in Q2FY21, compared to Rs 33,176 crore in Q2FY20.

The receivables have also seen 4 per cent rise to Rs 23,978 crore in Q2FY21, compared to Rs 23,038 crore in Q2FY20. The company is improving collections and recoveries, and has offered RBI RE (resolution plan) and EPP (easy payment plan) to its customers. Till September, it has restructured 9 per cent of its portfolio.