SBICARD - SBI CARDS AND PAYMENT SERVICES LIMITED Share Price

In the Q3 FY '26 earnings call, SBI Cards management highlighted a positive outlook amidst a resilient Indian economy, projecting GDP growth from $4.18 trillion to $7.3 trillion by 2030. Key metrics included a 33% YoY growth in spend, reaching an all-time high of INR 114,702 crores, and 8% YoY growth in cards-in-force, totaling approximately 2.18 crores. The company aims to strengthen its customer acquisition strategy, targeting 900,000 to 1 million new accounts quarterly, emphasizing quality while focusing on sustainable growth and premium accounts.

Management also provided significant insights into financial performance: revenue from operations soared to INR 5,127 crores, an 11% YoY increase, while profit after tax grew 45% YoY to INR 557 crores. The cost-to-income ratio stood at 56.8%, with operating costs impacted by increased corporate spend and remuneration due to regulatory changes, including a one-time gratuity expense of INR 12 crores.

Asset quality improvements were noted with gross credit costs reducing from 9% to 8.3%, aided by lower gross write-offs and improved NPA figures, which remained flat at 2.86%. SBI Card's capital adequacy ratio reached 24.4%, reflecting strong financial health.

Overall, management's strategies focus on leveraging digital partnerships, broadening the customer base, and enhancing risk management practices to foster long-term profitability while navigating the challenges posed by evolving consumer behavior and competitive pressures.

1. Question: "You said that there has been a release of INR121 crores, which you have not written back. So it would have been written back in the gross credit cost? Is it means the provisions would have declined by INR121 crores. Is that what you meant?" Answer: Yes, that's correct. The provisions would have declined by INR121 crores, leading to a decrease in gross credit cost. If we had written it back, profits would have also increased by approximately the same amount.

2. Question: "What's the real reason behind the 5% to 7% decline in receivables across the sector? Is it that credit cards are losing share to other payment products?" Answer: It's not a structural issue. Retail payments and transactions are growing consistently. Customers are using cards for low-value transactions, showing increased integration into their lifestyles. We're cautious with asset growth but our focus is on quality over quantity.

3. Question: "Is the spend increasing or are we going to focus more on the EMI assets?" Answer: We're seeing consistency in spend growth. The quality of spend is also improving, and expenditure per card has increased. We're focusing on installment assets, which are growing faster than retail spends, and believe there's ample opportunity for sustainable growth.

4. Question: "Where do you see the margin bottoming out?" Answer: We anticipate a slight downward trend in yield due to a decline in the revolver asset percentage over the next few quarters. However, we expect costs of funds to remain stable relatively, so margins may shrink towards the second half of the year.

5. Question: "What changes led to the release of provisions?" Answer: No changes were made to the model itself; we refreshed the data with new quarterly data. Stage 2 and Stage 3 loans decreased, resulting in a lower overall ECL, which led to the provision release, but we chose to retain some provisions as a management overlay.

6. Question: "Can you provide guidance for FY'27 asset growth?" Answer: We haven't provided specific guidance this time due to the current portfolio mix not supporting previous growth estimates of 10% to 12%. Our focus is on profitability rather than aggressive growth at this stage.

7. Question: "What trajectory are you seeing on the opex front and cost-to-income ratio?" Answer: Our guidance for the cost-to-income ratio remains at 55% to 57% for FY'26, in line with expectations of higher corporate spending. Given ongoing customer acquisition efforts, we expect this range to continue next year.

8. Question: "How is SBI Card refining its customer acquisition portfolio mix?" Answer: We are leveraging co-brand partnerships and Banca partnerships to grow sustainably. Our strategy prioritizes not just acquiring customers but keeping them engaged. We continuously assess market conditions to ensure sustainable, profitable growth moving forward.