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.