 "SBI Cards")
The weak market sentiment has led to a big selloff in SBI Cards and Payments despite results, which many analysts say matched expectations. The NBFC declared net revenue of Rs 2,441 crore, with Interest Income of Rs 1,173 crore and fees and other income (includes fee income, service charges, etc) of Rs 1,522 crore. This was up 8.1 per cent year-on-year (YoY) and up 9.9 per cent sequentially (QoQ).
While Net Interest Income (NII) was lower by 9.1 per cent YoY and down 1 per cent QoQ, fees and other income was up 23 per cent YoY and up 17 per cent QoQ. PAT was up by 67 per cent YoY at Rs 345 crore, and up 13 per cent QoQ.
Gross NPAs were held at 3.4 per cent, down from 3.9 per cent (QoQ) and down from 4.3 per cent YoY. Net NPAs were held at 0.9 per cent, the same as in Q1, 2021-22 and down versus 1.5 per cent YoY. Gross write offs were at Rs 670 crore.
The Provisioning Coverage Ratio (PCR) was around 74 per cent, which is healthy but lower than 78 per cent in Q1, 2021-22. Cost of borrowing was at 5.5 per cent, versus 5.2 per cent (QoQ) and versus 6.6 per cent YoY. The Yield on loans also dropped to 18 per cent versus 18.5 per cent (QoQ) and 21.4 per cent (YoY). Return on Assets rose to 4.9 per cent while Return on Equity was at 20.1 per cent, both substantial improvements sequentially and annualised. Customers are revolving credit less, which accounts for the lower yields.
The number of cards in force has risen to 12.6 million, from 12 million in Q1, and 11 million, a year ago. New accounts were at 950,000 in Q2, up by 56 per cent QoQ over new accounts of 610,000 in Q1. Spends are up by 47 per cent YoY but pre-provision operating profit has declined 7 per cent YoY and there’s clearly margin pressure due to the lower revolving rate. Operating expenses has also grown by 25 per cent YoY.
This was a record in terms of the highest-ever quarterly spends. Retail spends grew by 21 per cent while Corporate spends grew by 80 per cent YoY. Online retail was 54 per cent of total retail spends. Spend per card has risen to Rs 1.42 lakh versus Rs 1.11 lakh in Q1.
In segments such as Departmental stores, Health, Utilities, Education, Direct Marketing, Consumer Durables, Furnishing, Hardware, Apparel, and Jewellery, spends are now above pre-covid levels. Economic activity picking up should drive up spends in Travel and Hospitality, which are still weak.
Going forward, credit costs may decline as NPAs reduce, but NIM is also likely to see compression as revolving credit eases down. This does mean more stable asset quality however. In terms of overall market share, SBI Cards may have lost a little ground due to competitors picking up in the corporate market. The market is clearly disappointed in terms of near-term expectations due to the lower NIM and the higher operating costs.
However, industry analysts seem to be positive. The stock declined 6.3 per cent to Rs 1,054 on the results. Various brokerages which have maintained buy ratings, have target prices ranging from around Rs 1,199 to Rs 1,320 with expectations of 30 per cent earnings growth in FY 2021-22. There is support at Rs 1,000-1,015, with another support at Rs 975-98
