Release Date: July 26, 2024
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) reported an 11% year-on-year growth in cards in-force, reaching 1.99 crores.
- The company remains the second-largest credit card issuer in India with an 18.5% market share.
- Total revenue grew to INR 4,483 crores, marking an 11% year-on-year increase.
- Installment-based transactions saw a 37% year-on-year growth, indicating customer comfort with affordability options.
- The company introduced a new travel-centric credit card, SBI Card Miles, which has received a positive response from consumers.
Negative Points
- Credit costs increased to 8.5% in Q1 FY25 from 7.5% in Q4 FY24, indicating elevated risk.
- Gross non-performing assets (GNPA) rose to 3.06% from 2.9% in the previous quarter.
- Write-offs increased by INR 105 crores quarter-on-quarter, reflecting higher delinquencies.
- The company noted that customers are increasingly over-leveraging, impacting payment capacities.
- Despite various portfolio actions, credit costs are expected to remain elevated in the near future.
Q & A Highlights
Highlights of SBI Cards and Payment Services Ltd (BOM:543066) Q1 FY25 Earnings Call
Q: What are the levers to offset credit costs apart from collections?
A: Abhijit Chakravorty, CEO - We are not considering increasing the interest rates on revolvers as it may not be beneficial. Instead, we are focusing on fee income from services like rental fees and other incremental fees to offset credit costs.
Q: Can you provide a breakdown of new customer acquisitions?
A: Abhijit Chakravorty, CEO - 60% of new customers are existing credit card users, while 40% are new to credit or new to credit cards. Most new customers are acquired through our banking channels.
Q: Are delinquencies spread across all customer cohorts?
A: Abhijit Chakravorty, CEO - Yes, delinquencies are spread across all segments, including salaried and self-employed customers, and across different city tiers. No specific cohort is more affected.
Q: What actions are being taken to manage credit costs?
A: Abhijit Chakravorty, CEO - We have implemented several measures, including reducing credit limits for high-risk accounts, enhancing collection infrastructure, and refining our predictive models for portfolio management.
Q: How are you managing the balance between growth and asset quality?
A: Abhijit Chakravorty, CEO - We are focusing on growing our installment lending book, which has lower risk, and being selective in acquiring new customers. We are also taking actions to manage delinquencies and credit costs.
Q: What is the outlook for credit costs in the near future?
A: Abhijit Chakravorty, CEO - We expect credit costs to remain elevated in the near term but anticipate a downward trend towards the later part of the financial year. We are targeting a range of 7% to 8%.
Q: How are you addressing the issue of over-leveraging among customers?
A: Abhijit Chakravorty, CEO - We continuously monitor customer behavior and take actions such as reducing credit limits and enhancing collection efforts to manage over-leveraging.
Q: What is the impact of new underwriting measures on customer acquisition?
A: Abhijit Chakravorty, CEO - We have been more selective in acquiring new customers, focusing on improving credit quality. Despite this, we acquired 9 lakh new customers in Q1, with a balanced mix of new to credit and existing credit card users.
Q: How are you managing operational expenses (OpEx)?
A: Abhijit Chakravorty, CEO - OpEx was lower this quarter due to reduced corporate expenses and lower card additions. We expect OpEx to stabilize around mid-50s levels as corporate card business recovers.
Q: What is the status of your ECL (Expected Credit Loss) coverage?
A: Abhijit Chakravorty, CEO - The ECL model is reviewed annually and is in line with regulatory guidelines. Coverage ratios have been adjusted based on long-term data, and we continue to monitor and adjust as necessary.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
