SBI Card gains 4% on strong June quarter results

Asset quality improved with GNPA at 3.91 per cent versus 4.99 per cent QoQ while RBI RE book was down from 8 per cent to 6 per cent, sequentially

Shares of SBI Cards and Payment Services (SBI Card) rose 4 per cent to Rs 991.95 on the BSE in Monday's intra-day trade on asset quality improvement in the June 2021 quarter (Q1FY22), with gross non-performing assets (GNPA) at 3.91 per cent as against 4.99 per cent in the March 2021 quarter (Q4FY21). Net NPA was down to 0.88 per cent from 1.15 per cent in Q4FY21. As of June 2020 (Q1FY21), GNPA and NNPA stood at 1.35 per cent and 0.43 per cent, respectively.

The Reserve Bank of India (RBI) RE (Resolution Plan) book was down from 8 per cent to 6 per cent sequentially.  The management overlay provision was at Rs 258 crore as on Q1FY22.

SBI Card is a non-banking financial company that offers an extensive credit card portfolio to individual cardholders and corporate clients which includes lifestyle, rewards, travel and fuel and banking partnerships cards along with corporate cards covering all major cardholders’ segments in terms of income profile and lifestyle.

In Q1FY22, SBI Card saw a sequential revenue increase of 2 per cent, and 10 per cent year-on-year (YoY), to Rs 2,362 crore. The net profit was up 74 per cent at Rs 304.61 crore against Rs 175.42 crore QoQ. Net interest margin improved 159 basis points (bps) sequentially at 14.8 per cent from 13.2 per cent the previous quarter.

The management said income lines were steady QoQ, NIM improvement sequentially was driven by lower interest expense and higher interest yield. The lower operating expenses were driven by higher business volumes. ROAA and ROAE increase sequentially was driven by higher profits, it said.

New accounts volume was at 609K accounts, up 111 per cent YoY. Spends were up 74 per cent YoY to Rs 33,260 crore while sequentially it was down 7 per cent. The monthly trend shows spend in June increased meaningfully over April and May, indicating fast recovery, ICICI Securities said in a note.

According to Motilal Oswal Securities, SBI Card reported a steady 1QFY22, with a sharp beat in earnings, supported by lower provisions, as the operating performance came in line. "Overall spends/receivables witnessed a sequential decline due to the lockdown during Apr-May’21, while showing a gradual improvement from Jun’21 onwards. Margin too witnessed an expansion of ~160bp, led by an improving loan mix, while fee income stood largely stable QoQ," it said.

Asset quality ratios saw a significant improvement, led by higher write-offs, while the RBI RE book declined to Rs 1,380 crore (6 per cent of loans v/s 8 per cent in 4QFY21). It has provided a further 65 per cent/100 per cent on 30-90/90 days delinquent RBI RE book. This, along with a strong PCR (~78 per cent) and management overlay provisions of Rs 258 crore, should keep credit costs under control, the brokerage firm added.