SBI Cards & Payment Services conducted a conference call on 25 January 2024 to discuss its financial results for the quarter ended December 2023. Abhijit Chakravorty, MD&CEO addressed the call:

Highlights:

Credit card industry has been experiencing robust growth. The industry cards base has increase 20% yoy to 97.9 million end December 2023. The credit cards spend touched a record high level of Rs 1.78 lakh crore in October 2023.

While industry continuous to grow, the regulator has introduced important changes in the last few months that will shape up the future of the industry.

The higher risk weight for credit cards outstanding it expected to lead to prudent growth and acquisition of good quality customers.

The other important changes include increase in UP limits for certain transactions, guidelines on national ombudsman for strengthening customer protection etc.

Indian credit card industry has a good growth potential and SBI Cards is well placed to tap the growth opportunities.

The company is on a steady path of accounts sourcing and its card base has increased 16% yoy to 1.85 crore end December 2023. The company has market share of 18.9% in cards base and it added 11 accounts in Q3FY2024.

Spends growth is driven by retail as well as the corporate segment. The market share in cards spend stands at 18.3%.

The credit cards receivables have increased sharply by 26% to Rs 48850 crore on account of higher spend. The share of interest earning receivable has increased to 62% from 61% last year, while the revolver receivables have reduced marginally to 23%.

The cost of borrowings of the company has increased to 7.6% from 7.1% in the previous quarter on account of the increase in the cost of borrowings after RBI risk weight for NBFCs.

The higher risk weights have led to 25 to 30 bps increase in the bank lending rate to the company. The full impact of this change is expected to be observed in Q4FY2024. So, the company expects further increase in cost of borrowings in Q4FY2024.

As the cost of borrowings rise, the company looks to passing on the increase in cost to customers to minimize the impact on margins.

The company is well capitalized even after risk weights hike leading to decline in CRAR to 18.4%. The profit adds to CRAR, while the company has raised Tier II capital to support capital ratios.

With the heighten risk environment, the company has taken actions such as a reduced limit and cross-sell.

New sourcing is better based on the early delinquency trends.

However, some of the existing accounts are witnessing stress. Thus, the company expects the credit cost to remain elevated at current level for next two quarters. The company will continue recovery efforts.

The company expects health business momentum to continue.