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Analyst Meet / AGM
30-Oct-24
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Conference Call
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SBI Cards & Payment Services
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Expects to be at peak of the NPA cycle, NPA flows to early buckets improving
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SBI Cards & Payment Services conducted a conference call on 29 October 2024 to discuss its financial results for the quarter ended September 2024. Abhijit Chakravorty, MD&CEO addressed the call:
Highlights:
The company continues to be selective and focus on quality of new customer acquisition. The card base of the company has increased by 10% to 1.96 crore end September 2024.
The new card acquisition was at 9 lakh in Q2FY25. The company expects new card acquisition to be in this range in the near term.
The company remains the second largest credit card player by number of cards in force and third largest player by the card spends.
The market share in cards base stands at 18.5%, while the cards acquisition through banca accounted for 41% and the open market for 59%.
The retail spends increased to Rs 76000 crore and overall spends rose 3% to Rs 81893 crore in Q2FY2025. The corporate spends stood at Rs 5495 crore.
The market share in the card spends was at 13.7%.
There is strong growth in the POS as well as online channel spends.
Spends have grown as per the strategy of the company to grow in a profitable manner.
The cards spends per card has increased to Rs 1.58 Lakh yoy from 1.39 lakh.
Online spends accounted for 60% of the retail spend.
All the cards of the company are compliant with the RBI regulations. All customers now have the option to use the network of their choice.
The revenues of the company have grown by 8% to Rs 4556 crore in Q2, while profit has declined 33% to Rs 404 crore on account of higher credit cost and higher expenses at the fag end of the quarter on account of festive season.
Spends and related expenses were higher for the quarter due to onset of the festive season in the last few days of September 2024.
This also impacted margin slightly as the spend came in the last few days impacting the asset mix.
The outstanding receivables per card have increased to Rs 28387 crore yoy from Rs 25220 crore. The overall receivables have increased 23% to Rs 55601 crore end September 2024. The share of revolver balances was around 23%.
Interest earning assets were at 60% and EMI receivable were at 37%.
Margins and asset mix with will normal Eyes in next humans
The cost of funds was steady at 7.4% and will start moderating once the interest rate cycles reverses.
The credit card industry has continued to witness higher delinquency on accounts of environmental challenges impacting the repayment capacity of the customers. There is increased household indebtedness and overleveraged retail loans.
The credit card industry witnessed further acceleration in the stress in H1FY2025 in addition to FY2024.
GNPA rose to 3.27% end September 2024 from 3.06% end June 2023. The credit cost increased to 9% in Q2FY2025 from 8.5% in Q1FY2025. The customers are finding it difficult to repay due to cash flow challenges and increase in leverage.
The company is observing that once the customer becomes NPA, the possibility of repaying the rest of the debt is becoming difficult.
The company believes that it is at the peak of the NPA cycle, while it is witnessing NPA flows to early buckets are improving.
The company has been focusing on tight underwriting and effective management of the portfolio. There is a strong focus on collection through digital as well as follow up routes.
The share of prime and above prime customers has increased by 15% over 1-1/2 years. The delinquency of new acquisitions has reduced.
The company believes it is difficult to predict the timing and quantum of the improvement in the delinquency, which depends upon the overall unsecured lending space and the macroeconomic environment.
The liquidity position of the company continues to be strong.
The company is optimistic about the growth prospectus of the credit card industry.
The company expects to be closer to the peak of the credit cost and the delinquency cycle while it would take one or two more quarters to see the pattern.
The company is able to improve the delinquency trend, but the trend of delinquency to write offs is not improving.
In the first half of the year, the company has reduced limits for 10 lakh customers.
As per the market report, India''s credit card base is expected to rise to 20 crore by FY2029 rising at a CAGR of 15% establishing credit card as a one of the major payment instruments.
The demand for credit cards remains strong. The number of credit card volumes surged 36% to 0.39 billion end September 2024, while the spends increased by 17.8% driven by strong growth in consumer spending.
Supportive regulatory measures, Technology changes and positive behavioural changes would contribute to the strong growth of the credit cards industry.
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