Release Date: January 28, 2025
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) achieved a significant milestone by surpassing the INR2 crore cards in force mark, reflecting an expanding customer base and market presence.
- The company reported a 10% year-on-year growth in retail spends, indicating strong consumer engagement.
- SBI Cards has launched a hyper-personalization platform to enhance customer lifetime value through personalized engagement, which is expected to drive future growth.
- The company maintained a stable cost of funds at 7.4%, providing a solid foundation for financial stability.
- SBI Cards continues to focus on ESG initiatives, maintaining an A rating from MSCI and a low-risk category rating from Sustainalytics, demonstrating a commitment to sustainability.
Negative Points
- Profit after tax for the quarter was INR383 crores, a 30% decrease year-on-year, indicating financial pressure.
- The gross credit cost increased by 40 basis points to 9.4%, reflecting challenges in managing credit risk.
- The company's GNPA remained stable at 3.24%, suggesting persistent asset quality issues.
- There is a continued stress in the unsecured portfolio, with defaults remaining elevated in the credit card industry.
- The company anticipates a slower growth rate in receivables, projecting a 12% to 15% growth for the next year, which is lower than previous growth rates.
Q & A Highlights
Q: What gives you confidence that write-offs will taper off from the fourth quarter, and when do you expect credit costs to improve?
A: Abhijit Chakravorty, CEO: The lesser provision indicates a better asset mix, with reduced stage 2 and stage 3 compositions. We are seeing a reduction in delinquency, suggesting improvements from the next quarter. The extent of improvement will depend on the stage 3 pool and our ability to manage NPAs. We anticipate an inflection point in our credit cycle, expecting improvements by year-end.
Q: How do you plan to manage the high credit costs and write-offs, given the challenging collection environment?
A: Unidentified Company Representative: We focus on identifying customers likely to face stress and take proactive actions to reduce exposure. Our early warning framework helps us manage these risks. Abhijit Chakravorty, CEO: Performance metrics show improvement, with a reduction in 30-day delinquency and better flows into delinquency. We are seeing the beginnings of improvement in results.
Q: How are the revolve trends for new customers compared to earlier vintages?
A: Girish Budhiraja, EVP, Chief Sales and Marketing Officer: Revolve rates for new vintages are slightly lower than the portfolio average. We continue to monitor these trends over time.
Q: What actions do you take when an NPL customer pays back?
A: Nandini Malhotra, EVP, Chief Credit Officer: If a customer becomes current and is deemed creditworthy, we may reinstate their credit line, but not necessarily at the same limit.
Q: How is the scenario for customers with strong repayment history and higher credit limits?
A: Abhijit Chakravorty, CEO: The NPA pool composition remains varied, with some customers defaulting despite good history. We continue to monitor and take portfolio actions to manage this.
Q: What is the outlook for receivables loan growth next year?
A: Unidentified Company Representative: We expect receivable growth in the range of 12% to 15% next year, considering our selective customer acquisition strategy.
Q: How do you view the revolver portfolio and its potential impact on NPAs?
A: Abhijit Chakravorty, CEO: The revolver rate has been stable for the last few quarters. We are not inducing customers to revolve but are focusing on point-of-sale EMI conversions and FlexPay options.
Q: How do you manage leverage levels of customers and take corrective actions?
A: Nandini Malhotra, EVP, Chief Credit Officer: We monitor leverage levels and take actions like reducing credit limits and early blocking. We use bureau trigger products to get timely updates on customer behavior.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
