Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SBI Cards and Payment Services Ltd (BOM:543066, Financial) reported a strong 36% year-on-year growth in credit card transaction volume, indicating robust consumer spending.
- The company maintained its position as India's second-largest credit card player with a CIF market share of 18.5%.
- Retail spends per card increased to INR1.58 lakh, showing a significant rise from INR1.39 lakh in Q2 FY24.
- SBI Cards launched a strategic alliance with Singapore Airlines to introduce a co-branded credit card, targeting the super-premium segment.
- The liquidity position remains strong with a capital adequacy ratio of 22% and a liquidity coverage ratio of 108%, well above the statutory requirement.
Negative Points
- Profit after tax decreased to INR404 crore from INR603 crore in Q2 FY24, primarily due to higher credit costs and increased operational expenses.
- Gross NPS increased to 3.27% from 3.06% in Q1 FY25, reflecting rising delinquency levels in the credit card industry.
- Credit costs rose to 9% from 8.5% in the previous quarter, driven by customers' cash flow challenges and increased leverage.
- The cost to income ratio increased to 53.4%, indicating higher operational expenses.
- Fee income growth was negative year-on-year, impacted by external actions and tighter portfolio management.
Q & A Highlights
Q: With credit costs peaking, can we expect some moderation soon, especially since delinquencies on new acquisitions are decreasing?
A: We are closer to the peak of credit costs, but it will take one or two more quarters to fully understand the pattern. Various actions we've taken indicate that we are nearing the peak. - Abhijit Chakravorty, CEO
Q: Will operating expenses (OpEx) remain high in the near term, or will they stabilize?
A: Typically, Q2 and Q3 are high OpEx quarters, which normalize in Q4. We advise looking at the full-year OpEx number, which should be in the 55% range for cost to income. - Rashmi Mohanty, CFO
Q: The revolver share has decreased. Is this due to strategic decisions or customer behavior?
A: The revolver share is around 23%, primarily due to new spends during the festival season. We expect normalization by the end of this quarter. - Abhijit Chakravorty, CEO
Q: How do you plan to manage the decline in SBI sourcing, given these customers are less delinquent?
A: The reduction is not active. We are working with the bank on a new model for customer acquisition, and we expect the mix to return to around 55% from Banca and 45% from open market channels. - Abhijit Chakravorty, CEO
Q: What is the outlook for credit costs, and could they exceed 10% in the coming quarters?
A: We expect credit costs to remain elevated around current levels, but there are indicators suggesting a downward trend in the future. - Abhijit Chakravorty, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
