SBI Cards hits 12-week high on heavy volumes, zooms 28% in a month

Shares of SBI Cards and Payment Services rose 6 per cent on Monday to hit 12-week high of Rs 655, on the BSE on the back of heavy volumes.

The stock was trading at its highest level since March 30, 2020. In the past month, it has rallied 28 per cent, as compared to 14 per cent rise in the S&P BSE Sensex. The trading volumes on the counter nearly doubled with a combined 3.56 million shares changing hands on the NSE and BSE till 12:41 pm.

SBI Cards is the second largest credit card issuer in India. It offers various types of credit cards considering the need of retail clients (viz. Lifestyle Cards, Rewards, Shopping, Travel and Fuel). It also offers corporate cards and is the largest co-brand credit card issuer in India. It also issues card in partnership with smaller or regional banks.

SBI Cards made its stock market debut on March 16, 2020. The stock hit an all-time low of Rs 495 on May 22, had fallen 34 per cent against its issue price of Rs 755 per share. It touched a high of Rs 769 on the BSE in intra-day trade on the BSE.

For the January-March quarter (Q4FY20), the company had reported a 71 per cent year-on-year decline in pre-tax profit to Rs 112 crore in March 2020 quarter (Q4), due to additional bad loan provisioning of Rs 489 crore factoring in Covid-related disruption. Had it not been for Covid-19 impact, the company would have reported a sharp 80 per cent year-on-year jump in its pre-tax profit to Rs 692 core.

SBI Cards' May-month business update threw a few positive surprises. Amidst lockdown challenges, around 27,000 new card additions in April 2020, increase in new card additions per day to 2,500 in May’20 from 1,000 in Apr’20, spends per day at Rs 2000 million in last 7 days of May’20 (Rs 2900 mn in Q4), online spends share up to 55 per cent in May’20 (44 per cent in Q4) and moratorium customers stood steady at 12 per cent between Apr-May’20.

Analysts at Prabhudas Lilladher reckon that the May’20-month business stands largely driven by pent-up demand and the same should moderate in H1FY21 on account of macro headwinds (job layoffs, salary cuts). To combat such challenges, company has been focusing on new spend categories (education, online health & pharmacies) and utility spends (D&G, fuel, electronic, wellness).

“Moreover, continued interest income and repayments from moratorium customers (24 per cent at Apr-end) could act as cushions. We expect moderation in per card spends (0.5-1 per cent vs 6 per cent pre-COVID era) and card additions (2 per cent in H1FY21 vs avg 27 per cent pre-COVID era) in H1FY21. While near term challenges stand imminent, sufficient capital, liquidity buffers and robust risk management would support balance sheet resilience,” the brokerage firm said in company update.