Q1 , fy 25 earnings.
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Net profit up 0.2% at ₹594.5 cr vs ₹593.3 cr (YoY)
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Revenue up 11.4% at ₹4,358.6 cr vs ₹3,911.9 cr (YoY)
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Gross NPA at 3.06% vs 2.76% (QoQ)
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Net NPA at 1.11% vs 0.99% (QoQ)
Very disappointing results. Asset quality deteriorating.
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broad level question - this looks like similar to AMC industry the high margin - high expense ratio led businesses of active management got replaced by very low fee passive fund management.
Initially, everybody pictured the doomsday scenario for AMC’s in market then bcoz of unprecedented shift in saving pattern in india recently the sheer volume of move to index fund compensated for it and also cost rationalization help AMCs recover margins and back to growth path.
Can Credit Card industry see the same fate? the easy money business model of charging high interest on revolvers is gone. All fintech’s like CRED , Paytm etc and fin influencers have disrupted it by continuously reminding user about the late fee and charges now revolvers are going down. All companies are left with is
a) EMI products (somebody buying online on EMI using card)
b) Annual Fee on credit cards
c) Cut backs on cashbacks and offers.
This i believe will have temporary impact on earning but eventually this is highly healthy business model but hard to gauge here how fast this shift is happening and what steady state growth we will see over a long run.
I welcome your thoughts here let me know ?
7 Likes
I exited yesterday after holding for a year with minor losses.
I am very very bullish on credit cards. It is a secular theme and will have double digit growth for years to come. But Somehow SBI CC tested my patience. Credit cost is increasing consistently for 5-6 quarters. Turnaround may come but till asset quality doesn’t show improvement I am out of this counter. They are also loosing market share as well on top of increasing GNPA. I wish there there were other pure play CC companies.
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But if you see, sales have been growing consistently. Yes, the Market Share and Asset Quality issues are a bit concerning but that is what supposed to happen in a high Interest Rate scenario. Sales are good, In Mar22 Revenue was 10,000CR and now we are at TTM of 16,500Cr. This is huge. The stock price is in a time correction period. If you remember, during lockdown when SBICC got listed, the valuations were insane. It almost went 2x from IPO price. Now we are just seeing some Rationalization in the stock price.
Don’t get me wrong, I am also holding for the last 2 years and it has tested my patience as well but if the business is growing and the stock price and valuations are in a correction period, I would not stress so much about it. When the Rates go down and they will soon, we will see reduction in credit costs. This will automatically improve the Return Ratios and bottom line.
I will wait for the Interest Rate cuts to play out and their effect on the Financials. If even after the positive developments the results are not good, I will exit the stock.
13 Likes
How are people here looking at SBI Cards now especially when RATE cycle will reverse soon
Last two days have been good for the script but it still lacks a firm footing
Visa and MasterCard have been a different trajectory - of course we are comparing apples vs a pineapple (SBI Card) as later doesn’t have its own “network pipes”
Any quick thoughts
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I have been staying away from this stock due to the rapid increase in the number of credit card users in india.This means that they might not grow at the same pace they were before and these are unsecured loans so when times are good these are good but when times are bad npas could take a hit and this is evident in there results.
I have been tempted by the valuation but i feel a i might get it at a great price in a black swan event.
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Although the rate at which the number of credit cards issued might slow down, the average expenditure per card user will continue to rise, given the spending profile of the youth and earning growth. Also, the linking of Rupay Credit Card in UPI shall give a boost.
Regarding unsecured loans, one can not deny the possibility of default; however, tightening KYC norms and bank due diligence before issuing credit cards are also increasing. I think this company shall do better than banks in longer terms.
Disc. biased view, top 5 holding.
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