EUR 120.00 For Business Accounts Only

MOSL:SBI CARDS AND PAYMENT SERVICES: Earnings getting its mojo back; revolve rate indicating early signs of recovery

Spends growth robust; margins stable QoQ

• SBICARD reported a robust quarter on key business metrics and its net earnings delivered a strong beat aided by lower provisions. PAT thus grew 106% YoY to INR6.3b (MOSLe: INR5.3b).
• Margin was stable QoQ at 13.2% in 1QFY23. Revolver mix increased to 26% from 25% in 4QFY22. Trends in both retail and corporate spends were strong at 68% YoY and 130% YoY, respectively. Overall spends thus rose 79% YoY.
• GNPA/NNPA ratio stood stable QoQ at 2.24%/0.79% with PCR at ~65%. RBI-RE book declined to INR1.5b. 1QFY23 RoA/RoE stood robust at 7.0%/30.8%.
• We estimate SBICARD to deliver 52% earnings CAGR over FY22-24, leading to an RoA/RoE of 7.4%/31.4%. Maintain BUY with an unchanged TP of INR1,100 (premised on 28x FY24E EPS).

 

Spends growth robust; RBI-RE book declines to insignificant levels

• SBICARD reported PAT of INR6.3b (+106% YoY/+8% QoQ), primarily driven by lower provisions that came in at INR4.5b on improving asset quality. Gross and Net credit costs stood at 5.6% and 3.7%, respectively.
• NII grew 17% YoY to INR10.8b (in line), while margin was stable QoQ at 13.2%. This was led by an increase in revolver mix to 26% (from 25% in 4QFY22). Other income grew 7% QoQ with fee income rising 8% QoQ.
• Opex grew higher at 42% YoY (+6% QoQ) to INR16.6b. Thus, PPoP rose 23% YoY while cost-to-income ratio moderated to 56.3% (-106bp QoQ).
• Cards-in-force grew 19% YoY and 4% QoQ to 14.3m. New account sourcing stood at ~900k (+48% YoY and -10% QoQ), with the open market channel contributing 68% to the total sourcing (58% on an outstanding basis).
• Overall spends surged 79% YoY/10% QoQ, within which retail/corporate spends rose 68%/130% YoY, respectively. The share of online retail spends increased to 55.2% in 1QFY23 from 54.4% in FY22 due to rapid digitization and growing comfort as well as convenience of shopping online.
• GNPA/NNPA ratio stood stable QoQ at 2.24%/0.79% with PCR being healthy at ~65%. The RBI-RE book declined to insignificant levels at INR1.5b (v/s 1% in 4QFY22 and 6% in 2QFY22). ECL declined to 3.4% (v/s 3.5% in 4QFY22).