SBICARD - SBI CARDS AND PAYMENT SERVICES LIMITED Share Price

The management of SBI Cards and Payment Services Limited provided an optimistic outlook during the Q4 and FY '26 earnings call. They highlighted a commitment to supporting the evolving digital payment landscape in India, projecting a GDP growth rate of approximately 6.9% for FY '26-'27. The company noted that credit card spends grew 12% year-over-year, reaching INR 23.62 trillion, with cards-in-force surpassing 118.6 million.

Key forward-looking points include:

1. The expectation to maintain a quality-led approach to customer acquisition with a target of adding between 9 lakh to 10 lakh new accounts quarterly. In Q4 FY '26, the company added 917,000 accounts.
2. The management anticipates continued growth in digital channels, as they enhance data-driven customer engagement and leverage their digital onboarding platform, SBI Card Sprint, to improve acquisition speeds.
3. The cost of funds declined, with Q4 FY '26 recorded at 6.4% (down by 82 bps YoY), and the net interest margin (NIM) has improved to 11.1%. The NIM for FY '26 was 11.2%, a 31 bps increase YoY, with expectations for stability in FY '27.
4. The company declared a dividend of INR 2.50 per equity share, reflecting confidence in financial resilience and shareholder value.
5. Despite fluctuating external conditions, management maintains a strong capital adequacy ratio of 25.5% and anticipates credit costs to moderate further in FY '27.

In essence, the management remains cautiously optimistic about sustainable growth, while also acknowledging external uncertainties and preparing to adapt strategies as necessary.

1. Question: "Our new account addition has been significantly lower than previous year. How do you see and attribute it going forward?"

   Answer: We targeted an acquisition of 900,000 to 1 million accounts for the quarter, and ended with around 917,000. We are on track and plan to maintain similar acquisition rates going forward. Our focus is on attracting high-value, quality customers that enhance our overall financials.

2. Question: "This year, the cost-to-income ratio is around 57.2%, which is 6% higher than last year. How do you see this going forward?"

   Answer: We expect the cost-to-income ratio to remain in the range of 55% to 58% next year. The rise is mainly due to increased corporate spending. While growth will be steady, we don't foresee dramatic cost increases affecting this ratio significantly.

3. Question: "What are your thoughts on card closure attrition?"

   Answer: We are performing better than the industry regarding attrition. Our extensive customer engagement efforts have helped retain customers, as evidenced by our improving market share in transaction numbers.

4. Question: "How should we think about growth in cards-in-force?"

   Answer: While underwriting has tightened due to past asset quality issues, applications are not slowing down. Existing customers are gaining cards from new issuers, but we're still actively onboarding new credit customers through our Banca channel.

5. Question: "What's the strategy to maintain profitability if revolver rates fall?"

   Answer: We plan to offset any downward pressure from revolver rates through increased focus on our installment lending portfolios. Balancing this with customer engagement strategies is key to maintaining profitability.

6. Question: "Can you comment on the outlook for cost of funds in FY27?"

   Answer: It's too early to provide guidance on cost of funds due to macroeconomic uncertainties. We will manage our portfolio closely and seek opportunities to reduce costs wherever possible.

7. Question: "What can you share about your receivables growth in light of economic uncertainties?"

   Answer: Currently, I'm not giving specific guidance on asset growth. It will follow card acquisitions. We are closely monitoring the economic environment for any adjustments that may be necessary.

8. Question: "Will the write-backs of provisions continue?"

   Answer: While we've written back INR47 crores this quarter, we retain INR220 crores as a management overlay to ensure we're prepared for any emerging risks. Continuation will depend on the evolving economic environment.

9. Question: "What are your expectations for credit cost moderation?"

   Answer: We anticipate further moderation in credit costs. The ongoing reduction in Stage 2 and Stage 3 stocks indicates we are on a downward trajectory. Our goal is to achieve ROA of 4% to 4.5% in the medium term.

10. Question: "Is there potential for upward trends in recoveries?"

    Answer: While we don't disclose written-off portfolio specifics, we've intensified recovery efforts, and expect recoveries to stay consistent with current levels, driven by declining write-offs.