Teji mandi: SBI Cards and Payment Services’ Net Profit declines 66% on a YoY basis in Q4FY20 earnings

SBI Cards and Payment Services Limited (formerly known as SBI Cards and Payment Services Private Limited) (“SBI Card”) is a non-banking financial company that offers extensive credit card portfolio to individual cardholders and corporate clients which includes lifestyle, rewards, travel & fuel and banking partnerships cards along with corporate cards covering all major cardholders’ segments in terms of income profile and lifestyle. It has a diversified customer acquisition network that enables to engage prospective customers across multiple channels. SBI Card is a technology-driven company.

The share price of SBI Cards fell ~4% intraday on 8th May 2020 om the day of its results. The results were declared during market hours.

SBI Cards has reported a decline in net profit in the March quarter as COVID-19 pandemic stalled economic activity and spending across the globe.

The Profit After Tax for the company stood at Rs 84 crores, down by 66% as compared to Rs 249 crores in the previous quarter ended in March 2019.

The company has also declared an interim dividend of Rs 1 per equity share (10%) of the face value of Rs 10 per equity share for FY20.

Key Highlights (YoY):

  • Revenue increased by 23% to Rs 2,433 crores as compared to Rs 1,983 crores.

  • EBITDA declined by 30% to Rs 475 crores as compared to Rs 674 crores.

  • EBITDA margin and PAT margin contracted to 19.5% and 3.4% respectively.

  • Return on average assets (ROAA) stood at 1.3% as compared to 5.1%

  • Return on average equity (ROAE) stood at 6.5% as compared to 27.8%

  • Net Interest Margin (NIM) stood at 16.6% as compared to 15.1%

  • Earnings per Share (EPS) stood at Rs 0.89 from Rs 2.67

The COVID-19 global pandemic has given rise to unprecedented challenges in the economic situation. The Government of India mandated a nation-wide “Lockdown” from March 25, 2020. To ease the financial burden, the RBI allowed institutions to extend a payment moratorium from March 01, 2020, to May 31, 2020, for its customers.

SBI Card has also complied with RBI guidelines on the same. Considering the possible effects from the pandemic relating to COVID-19, Company has performed sensitivity analysis and based on current estimates have created specific COVID19 related provision of Rs 489 crores

The company has reported an increase in total income by 34% to Rs 9,752 crores as compared to Rs 7,287 crores in FY19. This increase in total income was because of an increase in interest income by 35% to Rs 4,841 crores as compared to Rs 3,576 crores in FY19 due to a 29% increase in the average amounts of credit card receivables in FY20 as compared to FY19.

Key Metrics:

  • Cards grew by 28% to 1.05 Cr, Spends grew by 27% to Rs 1,30,915 crores, Receivables grew by 30% to Rs 24,141 crores

  • Market share – Number of Cards at 18.2%, up 68bps; Spends at 17.9%, up 77bps (Till Jan’20)

  • Cost to Income ratio improved by 388bps to 56.6%

  • GNPA improves by 43bps to 2.01%

The Gross non-performing assets (NPAs) were at 2.01% of gross advances as on March 31, 2020, as against 2.44% as on March 31, 2019. The Provision Coverage Ratio (PCR) increased to 67.20% as against 66.48% as of March 31, 2019.

As per the capital adequacy norms issued by the RBI, the Company’s capital to risk ratio consisting of tier I and tier II capital should not be less than 15% of its aggregate risk-weighted assets on - balance sheet and of the risk-adjusted value of off-balance sheet items. As of March 31, 2020, Company’s CRAR was 22.4% compared to 20.1% as of March 31, 2019. The tier I capital in respect of an NBFC-ND-SI, at any point in time, is required to not be less than 10%. Company’s Tier I capital was 17.7% as of March 31, 2020, compared to 14.9% as of March 31, 2019.

During the FY20, Company got successfully listed on BSE and NSE. The shareholders diluted 14% of their holding and the Company raised fresh equity capital of Rs 499 crores for augmenting Company’s capital base to meet future capital requirements.

The company's total Balance Sheet size as of March 31, 2020, stands at Rs 25,303 crores as against Rs 20,146 crores as of March 31, 2019, a growth of 25.6% with a Net worth as of March 31, 2020, at Rs 5,413 crores as compared to Rs 3,659 crores as of March 31, 2019, a growth of 47.9%.

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