HDFC AMC fourth quarter net up 26% on higher income
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Assets under management rose 24 per cent to ₹3.95 lakh crore
Published on
April 27, 2021
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Tag: fourth quarter
SBI Cards Q4 spends point to a worsening Covid impact, BFSI News, ET BFSI
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SBI Cards and Payment Services Ltd’s showing a slowdown in business in the fourth quarter, when the new Covid wave was not prominent in India.
The company reported a weak fourth quarter, with a sequential decline in receivables/spending.
The spends
While overall spends rose 11% year on year (YoY) they logged a 5% decline sequentially, within which retail spends were up 13% YoY (-4% QoQ), while corporate spends declined 10% QoQ (flat YoY).
Retail spends remained higher than pre-Covid levels, while corporate spends reached pre-COVID levels – on the back of new use cases making up for the loss in travel spends. Online retail spends form ~52% of the total retail spends.
This development comes when a major rival HDFC Bank is hamstrung as RBI has barred it from issuing new credit cards.
According to the management, spends across categories, barring travel and entertainment, have reached pre-Covid levels. Corporate spends have also reached pre-Covid levels, while corporate travel remains impacted. New use cases across corporates have been making up for the loss in travel spends.
However, the YoY growth is far lower than the pre-pandemic growth trend, which remains a worry.
Also, the gross non-performing assets (GNPA) ratio increased to 4.96% (versus proforma 4.51% in the December quarter), while the NNPA ratio declined to 1.15% (versus 1.58% in the third quarter of FY21).
Total receivables
Total receivables grew 4% YoY (2.5% QoQ decline) to Rs 25110 crore. The receivables mix indicated a marginal increase in the number of transactors and decline in revolvers – resulting in moderation in yields and an impact on the margins. Receivables per card continued to decline, reaching Rs 21,000 crore in the fourth quarter.
With the spends towards essentials are small in size than discretionary, the second wave of the pandemic poses significant risks to growth for SBI Card.
SBI Cards results
SBI Cards reported net profit growth of 110% YoY to Rs 175 crore, which was below analyst estimates. It was affected by a 21% YoY/8% sequential decline in interest income and modest fee income. Although, lower opex supported pre-provision operating profit (PPoP). For FY21, NII (net interest income)/PPOP was up 9.7%/9.6% YoY, while PAT declined ~21% YoY. NII declined 18.3% YoY, with margins down 130bp QoQ to 13.2%. Income from fees and services was stable QoQ at INR11.1b (+16% YoY) as overall spends declined ~5% QoQ. Thus, total income grew 2% YoY to INR22.2b, while opex declined 4.6% QoQ, resulting in stable PPoP (9% miss).
Cards in force grew 12% YoY to 11.8 million. New account sourcing for the fourth quarter stood at 93% of 4QFY20 levels. SBI contributed ~54% to new cards sourced, which accounts for ~44% of the overall card base.
For the financial year ended March 31, total income was at Rs 9,714 crore for FY21 vs Rs 9,752 crore for FY20. The profit after tax came at Rs 985 crore for FY21 versus Rs 1,245 crore in the previous fiscal.
The total balance sheet size as of March 31, 2021, was Rs 27,013 crore as against Rs 25,307 crore as on the same date of last year.
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Marginal impact of SC verdict on moratorium on earnings
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With banks gearing up to close the financial year and announce results for the fourth quarter and full fiscal 2020-21 in the coming weeks, analysts and experts believe that the Supreme Court verdict on loan moratorium will have marginal impact in terms of their earnings. It is expected that most lenders are likely to move into expansion mode now thanks to signs of economic recovery and improved credit demand.
“Our analysis indicates the earnings impact of the residual exposure is not very material,” said Edelweiss Research in a recent report.
Also read: Loan moratorium: SC orders full waiver of interest on interest
It has worked out three scenarios of such loans being 15 per cent, 20 per cent and 25 per cent of the moratorium books of its coverage banks. “The impact of a hit from loss of interest on interest for this moratorium period will, at most, result in a few basis points dent to the annual net interest margin, even if incremental costs are entirely borne by the banks and with no further government contribution,” it said.
Private sector lenders are set to announce their fourth quarter results in the coming weeks in April followed by public sector banks. HDFC Bank is scheduled to announce its results for the quarter ended March 31, 2021 and the fiscal year 2020-21 on April 17 while ICICI Bank will announce it on April 24.
A report by Axis Securities said it is not yet clear whether this incremental hit will be absorbed by the government or passed on to the banks.
“Even so, it will be a one-time hit and not have a material impact as it only pertains to interest on interest for five months period only. We expect that with NPA standstill withdrawn, banks will report actual NPAs in the fourth quarter of 2020-21 instead of reporting proforma NPAs, which could lead to some margin compression,” it said, adding that with better clarity on asset quality, banks with excess provisions such as ICICI Bank could result in some provision write-backs.
“On overall basis, we remain positive on banks due to improving macro-economic recovery feeding into better credit growth and limited asset quality disruption,” said Emkay Financial Services in a recent note.
Improved credit demand
Bankers have also been talking about increased credit demand in recent months.
CARE Ratings noted bank credit growth has stood largely stable compared to the last fortnight and returned to the levels observed in the early months of the pandemic (the bank credit growth ranged between 6.1 per cent to 7 per cent during March and February 2020).
“The credit growth stood at an almost similar level during the last two fortnights at 6.6 per cent and 6.5 per cent, marginally higher compared with last year’s level of around 6.1 per cent, as economic activities gather pace,” it said.
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