SBI Cards Hits New High After Q3 Results

On Thursday, shares of SBI Cards and Payment Services Ltd rose nearly 5% after the payments solution provider reported its financial results for the December-ended quarter. There was a nearly 52% dip in the company's net profit during the period to Rs 210 crore, on higher provisions.

The pure-play credit card company, promoted by SBI, had posted a net profit of Rs 435 crore for October-December 2019.

Its total income grew marginally to Rs 2,540 crore during the December-ended quarter against Rs 2,563 crore in the year-ago period, the company said in a statement.

SBI Cards said its total management overlay provision stood at Rs 1,113 crore at the end of December 2020, against Rs 758 crore at the end of the preceding quarter

The impact of COVID-19 has led to a significant volatility in global and Indian financial markets, which may persist after restrictions related to the pandemic outbreak are lifted, it said in a regulatory filing.

"While there have been some improvements in economic activities in the current quarter, the continued slowdown has impacted new credit card originations, use of credit cards by customers and the efficiency in collection efforts," it added.

The company said it is offering a one-time resolution to eligible customers by offering an option to convert credit card dues into equated-monthly instalments of up to 24 months, following an RBI directive in August with regard to the resolution framework.

On the asset front, the company's gross non-performing assets (NPAs) stood at 1.61% and net NPAs at 0.56% at the end of December 2020.

However, if the company had classified such borrower accounts as NPA (stage-3) after August 31, the proforma gross and net NPA ratio would have been at 4.51% and 1.58%, respectively.

Among others, SBI Cards said its interest income during the third quarter of 2020-21 fell to Rs 1,168 crore, from Rs 1,282 crore a year ago. However, income from fees and services rose to Rs 1,107 crore from Rs 1,081 crore, while other income grew 62% to Rs 137 crore, primarily due to higher bad debt recovery.

The stock has hit a new record high for the second consecutive day largely due to positive comments from analysts.

As structural demand begins to roll in and shock absorbers in place to tackle credit quality, SBI Cards geared to return to normalcy sooner than expected with increased spends (25% YoY growth) and fee income (20% YoY growth) for FY22-23E, analysts at Prabhudas Lilladher said ahead of SBI Cards' Q3 results.