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Informist, Tuesday, Jan. 28, 2025

 

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--SBI Cards: Expect receivables to grow at lower rate 
--SBI Cards: Have undertaken steps to strengthen underwriting practices
--SBI Cards: Cost of funds to remain at current level till rate cut 
--SBI Cards: Seeing flows in delinquencies going down 
--CONTEXT: Comments by SBI Cards mgmt in post-earnings analyst concall 
--SBI Cards: May see asset quality improving in Jan-Mar 
--SBI Cards: See growth in receivables at 12-15% in FY26 
--SBI Cards:Enhancing early warning framework before client enters delinquency
--SBI Cards: Don't expect revolver rates to inch up hereon 
--SBI Cards: Difficult to give guidance on credit cost for FY26 
--SBI Cards: See growth rate moderating to 18-20% in next 3-4 quarters 

 

MUMBAI – SBI Cards and Payment Services Ltd. expects asset quality to improve in the next quarter, the management said in a post-earnings call with analysts Tuesday. "The asset quality composition is also improving and moving towards higher bureau scores as indicated by the increased proportion of prime and above prime segments in the newer acquisitions as well as the overall portfolio," the management said.   

 

The gross non-performing assets ratio for the quarter improved to 3.24% from 3.27% a quarter ago and the management sees the improvement continuing. The net non-performing assets ratio declined to 1.18% from 1.19% a quarter ago. The company posted a 30.2% on-year slump in net profit for the December quarter at INR 3.83 billion, the second time in a row that its profit had slumped. 

 

SBI Cards said stage-2 and stage-3 compositions have been reduced and will continue to decrease during the next quarter. "We are also seeing a reduction in the flows into delinquency," the management said. "All these taken together now gives us an indication that things are going to improve from here, and we see that from next quarter the improvement should be visible. The extent of that will depend on how the larger portion of our stage-3 will behave," the management said.

 

The company has also increased its focus on underwriting standards, portfolio management and collections, which should contribute to improve asset quality in the coming quarters. It has also enhanced an early warning framework to prevent customers entering into delinquency. The company said tightened underwriting practices will push for moderation in the credit cost as well. However, the credit card player said it would be difficult to give guidance on credit cost for the next financial year in spite of seeing an improvement.

 

"We will see how it goes, but then, we are seeing a gradient, an inflexion point reached. The aspiration can be anything, but having seen so much happening in the market and in our portfolio, impacting our portfolio over the last 4-5 quarters, it will be unfair to give a number without seeing how the gradient takes shape," the management said. 

 

While policy rate cuts are expected in the coming quarters, SBI Cards said the cost of funds would remain at the current level until any action by the central bank's Monetary Policy Committee. Cost of funds remained stable at 7.4% on quarter. 

 

Despite expecting better asset quality going ahead, SBI Cards estimated growth to moderate at 18-20% in the next 3-4 quarters. Regardless, the company will continue to add new customers and grow its market share, the management said. 

 

On receivables, the credit card lender forecast growth at a lower rate in the total credit card receivables and sees it in the range of 12-15% in the next financial year. Receivables stood at INR 547.73 billion for the December quarter, up 1% on quarter and 12% on an annual basis. Meanwhile, the lender does not see revolver rates, which refers to revolving credit, inching up as some vintages show slightly lower credit-revolving behaviour than the average spectrum. Of the total receivables, the revolver mix stood at 24% for Oct-Dec, compared to 23% a quarter ago. 

 

On Tuesday, shares of SBI Cards closed 0.7% higher at INR 759.10 on the National Stock Exchange.  End

 

Reported by Christina Titus 

Edited by Rajeev Pai

 

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