SBI Cards and Payment Services tanks 7 per cent on muted Q2 earnings

Shares of SBI Cards and Payment Services plunged 7 per cent to Rs 800 on the BSE in Friday’s intra-day trade after the company reported a modest set of earnings for Q2 after market hours yesterday.

The company reported net interest income (NII) growth of 21.4 per cent year-on-year (YoY) and 3.4 per cent quarter-on-quarter (QoQ) at Rs 1,116 crore.

Net profit was up 52.4 per cent YoY and down 16.4 per cent QoQ to Rs 526 crore. The higher YoY profit growth was due to a spike in income and lower provisions. The company, however, missed the Street estimates on net profit as analysts at Bloomberg had predicted a net profit of Rs 627 crore.

Net interest margin for the quarter declined by 90 bps to 12.3 per cent on a sequential basis mainly due to increase in cost of funds. Provisions for the quarter were down 8.1 per cent YoY but up 21.3 per cent QoQ mainly due to increase in stage 1 assets.

Asset quality improved with gross non-performing assets (NPAs) at 2.14 per cent, down 10 basis points (bps) sequentially and 122 bps YoY. Net NPA was down 13 bps to 0.78 per cent during the same time.

SBI Card reported a modest quarter with net earnings impacted due to higher provisions. The margin fell QoQ as the revolver mix declined to 24 per cent, coupled with rising funding cost.

Motilal Oswal Financial Services expects the revolver mix to increase gradually as spends mature as the festive season progresses, while margin may remain under pressure as borrowing cost increases. Growth in spends remains strong and is likely to stay healthy, thus aiding loan growth. Moderation in ECL will keep credit costs under control, the brokerage firm said in result update with ‘buy’ rating on the stock and target price of Rs 1,000 per share.

At 09:35 AM, SBI Card traded 4.5 per cent lower at Rs 819.35, as compared to 0.43 per cent rise in the S&P BSE Sensex. In past one month, the stock has declined 10 per cent, as against 6 per cent rally in the benchmark index.