SBI Cards & Payment Services conducted a conference call on 24 January 2023 to discuss its financial results for the quarter ended December 2022. Rama Mohan Rao Amara, MD&CEO addressed the call:

Highlights:

The repo rate hike has led to an increase in cost of funds for the company. The company has taken measures to pass on the impact of increasing cost of funds to customers to the extent possible.

The company has focused on a strong customer sourcing to improve market share. The company has added 1.6 million new customers in the quarter ended December 2022 recording a growth of 62%.

The card sourcing has picked up to a monthly rate of 5.4 lakh from 3.4 lakh in the previous quarter.

The share of SBI in cards sourcing has increased 49% in Q3FY2023 from 37% in Q3FY2022.

An effective utilization of traditional and digital ecosystem channels for customer acquisition has led to an increase in cards in force by 21% to 15.8 million by December 202. The market share has improved to 19.3% in cards and force.

The company aims to maintain the monthly card edition rate of 5 lakh per month which would give quarterly net edition of 0.9 to 1 million cards

Cards spends have increased 24% to Rs 68835 crore in Q3FY2023. The retail spends have increased two times of pre-covered level, which is up by 29% to Rs 54560 crore. Retail spends from online channels accounted for 57% of the overall retail spend.

The company has recorded a strong growth in spends across categories such as consumer durables, apparel furnishing and jewellery etc.

 The travel spends have increased by 32%, equally contributed by online and POS channel. The corporate spends increased by 10%.

The spends per card has increased to 1.79 lakh in Q3FY2023 from Rs 1.72 lakh in Q3FY2022.

Credit cost has declined to 5.6% from 6.2% in the previous quarter

Receivables increased 33% to Rs 38626 crore end December 2022

The focus continued on sustainable and profitable growth. The company has continued to invest to build a scale.

The opex cost has increased by 15% due to festival spends.

Cost of funds has increased by 50 bps in Q3FY2023. The cost of funds is expected to further increase by 30-40 bps in Q4FY2023, while this would be largely offset by judicious pricing of new loans.

About 65% of the borrowings of the company are in a short term nature and the last repo rate hike of 35 bps in December 2022 would be having an impact on cost of funds in Q4FY23. However, the bank expects to minimize its impact on the margins.

The company is able to pass on the impact of borrowing cost increase on EMI loans and new disbursals but not on the existing loans.

The cost to come ratio is expected to be below 60% in FY2023. As the Q4 is not a festive quarter, there will not be festive spend pressure and the company expects moderation in the costly income ratio in Q4FY23.

The company is comfortable with the credit cost around 6%.

The employee cost depends upon the credit card acquisition volumes.

The Rupay Card base stands at 1.3-1.5 million, while the spends per card in Rupay Cards is low.

Given the low penetration of the credit cards in India, the opportunity for growth remains very strong in the credit card industry