SBI Cards and Payment Services Ltd. share price target

RBI proposed to issue a discussion paper in the next one month (link to RBI statement) to cover aspects related to charges involved in various digital payment modes covering Credit Cards, Debit Cards, PPIs, UPIs, etc. This is with the intent to make digital transactions affordable to users and economically viable to providers. SBICARD has corrected ~9% over the past two days on fears of a reduction in MDR charges, which can adversely impact profitability. SBICARD's spend-based fee constitutes 45-54% of total fees and corresponds to 18-23% of total revenue. As per our sensitivity analysis, we estimate 8-17% earnings impact in case MDR on Credit Cards is reduced by 10-20%. As...

Total spends in Q2FY22 came in at Rs434bn, up 47% YoY and 31% QoQ. Retail spends grew 29% QoQ while corporate increased 36% QoQ. Retail spend suggests that, except for travel, hotels and entertainment, most other categories saw an improved performance in Q2FY22
over Dec’19-Feb’20 (pre-covid) levels.

Net interest income declined 9.3% YoY in Q2FY22 to reach Rs. 919cr due to NIM contraction (-286bps YoY to 14.1%). Pre-provision operating profit dropped 7.2% YoY to Rs. 1,058cr,...

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SBICARD reported a steady 1QFY22, with a sharp beat in earnings, supported by lower provisions, as operating performance came in line. Overall spends/receivables witnessed a sequential decline due to the lockdown during Apr-May'21, while showing a gradual improvement from Jun'21 onwards. Margin too witnessed an expansion of ~160bp, led by an improving loan mix, while fee income stood largely stable QoQ. Asset quality ratios saw a significant improvement, led by higher write-offs, while the RBI RE book declined to INR13.8b (6% of loans v/s 8% in 4QFY21)....

Net interest income declined 18.3% YoY in Q4FY21, due to NIM contraction, impacted by lower interest income yield (-507bps YoY) Pre-provision profit dropped 7.6% YoY to Rs. 878cr, while PAT jumped...

SBICARD's Q4FY21 earnings stood mixed as business cyclicality dampened spends traction but asset quality held up. Asset quality continues to show signs of improvement in the nature of 1) mere 48bps spike in GNPAs at 4.99% for Q4FY21 as against our expectations of 5.7%. 2) perceivably stressed book declines from 13.8% in Q3FY21 to 12.6% in Q4FY21 3) RBI RE book at Rs19bn (7.6% of overall receivables) stood down 19% QoQ 4) 36% of RBI RE book (Rs6.9bn) carry 80% provision cover and has already slipped into NPA 5) 51% of RBI RE book exhibiting >2 EMI repayments 6) recoveries surged 10% QoQ;...

SBICARD's Q3FY21 earnings was characterized by sharp improvement in asset quality (proforma GNPAs fell 295bps QoQ, credit costs declined ~430bps, recoveries surged 29%QoQ) and continued business traction (QoQ growth in CIF of 5%, new accounts acquisition at 33% and spends 27%). However, the RBI RE book expanded 11%QoQ to Rs23.4bn, but ~50% of such stock exhibited almost full repayments and only 33% lie under stress. With this 3% stock (Rs7.7bn) carrying 65% provision, ECL at 65% and Rs11bn additional provisions (between Q4FY20-Q3FY21) coupled with improving...