SBI Cards and Payment Services Ltd Q2 FY23 Earnings Conference Call Insights

Key highlights from SBI Cards and Payment Services Ltd (SBICARD) Q2 FY23 Earnings Concall

Management Update:

• [00:05:57] SBICARD said it had over 14.8 million cards in force as of 2Q23 and added about 1.3 million new accounts during 2Q23, its highest ever during a quarter.

Q&A Highlights:

• [00:12:40] Anuj Singla from Bank of America asked about the NIM outlook, when it can be expected to increase to 13% or more in coming quarters. Rama Mohan MD replied that the company is confident that it will be in that range maybe with a 10-20 bp plus minus variation, but would be around the same range.

• [00:13:53] Anuj Singla from Bank of America asked about cost of funding, what kind of increase can be seen in 3Q23. Rama Mohan MD answered that cost of funds can be increased by 40-50 bp minimum.

• [00:14:43] Nilanjan of Nomura enquired about revolver balance on a quarterly average basis. Rama Mohan MD said that last 10 days of Sept. witnessed a good growth on account of the campaign with Amazon. The ballpark estimate indicate that the percentage of customers who are revolving is more or less stable.

• [00:18:00] Nilanjan of Nomura asked about the lower employee cost sequentially and if there is any change in headcount numbers. Rama Mohan MD answered there is no change on headcount. It’s marginally higher.

• [00:25:06] Ajit Kumar with Goldman Sachs asked about the driver of high attrition rate in the portfolio.  Rama Mohan MD said that from last quarter to 2Q23, SBICARD has a 7 lakh kind of attrition. Out of this about 3.6 lakh is on account of cards that are inactive for more than 12 months that have been closed. The rest is the normal BAU attrition; both voluntary and involuntary.

• [00:26:53] Ajit Kumar with Goldman Sachs enquired about the reason for corporate spends coming down. Rama Mohan MD replied that competition intensity is very much there which is impacting margins. SBICARD is revisiting its strategy for the last few months and exited a few low margin relationships. In the medium-term SBICARD would like to take the share back to 22-25% of overall spend.

• [00:33:19] Abhishek Murarka of HSBC enquired that if there’s any one-off in opex. Rama Mohan MD said there are no one-offs, but it has an impact of higher sourcing vs. last quarter.

• [00:38:36] Karthik Chellappa from Buena Vista asked about revolver, even if it’s normalized for the spend increase towards the end of 2Q, at which cohort the deterioration was steepest. Aparna K Chief Risk Officer answered that it’s even across all. There’s no particular one to point out, but it’s in line with the overall distribution.

• [00:48:24] Nitin Agarwal from Motilal Oswal asked about the revolve rate on the self-employed segment, what is the proportion of revolve rate in the segment. Aparna K Chief Risk Officer said in the self-employed portfolio the propensity to revolve is higher which is continuing.

• [00:50:20]Nitin Agarwal from Motilal Oswal enquired about the economics of the newly launched cashback card, if it will take longer to scale up on the profitability curve. Rama Mohan MD said that in the present scenario, SBICARD looked at the cost that had to be incurred. So the card is available if the customer applies on their own through digital channels, saving cost for SBICARD.

• [00:51:24] Rohan Mundhra from Equirus asked about the fresh slippages in 2Q23. Aparna K Chief Risk Officer said that the increase in Stage 3 is largely made up of mostly fresh slippages. Overall looking at the GNPA, it’s 2.14, which was down slightly from 1Q23.