SBI CARDS AND PAYMENTS BUSINESS REPORT CARD

The State Bank of India (Sbi) is the largest Public sector bank in India. They issue their credit cards and other payment services under SBI Cards. SBI Cards is the second-largest player in the credit card market, it is a non-banking financial company of (SBI) and launched its Ipo in 2020. . Sbi Cards Q3 FY2023 results just arrived. They have gained 1 million+ Net cards addition in Q3 FY23, net profit stands 509cr & revenue stands 3507cr. 16.39lacs new A/C s registered with Sbi cards in this quarter, Retail spending increase 29% YOY & 7% ON QOQ.

The most popular SBI credit cards available in the market are:

• SBI Elite Credit Card.
• SBI Card PRIME.
• SBI Simply Click Card.
• BPCL SBI Card.
• SBI Simply SAVE Card.
• BPCL SBI Credit Card.

1. SBI CARDS Q3 Results and Analysis

• Estimates
• SBI CARDS Q3 REVENUE
• SBI CARDS Q3 EXPENSES
• SBI CARDS Q3 PROFIT 
• My Opinion
• Brokers Report & Target
• Key Business Metrics 
• Sbi cards Technicals 

2. Credit card growth in India 

3. REPORT CARD

 

SBI CARDS Q3 Results and Analysis

SBI CARDS EXPECTATION: -  

Prabhudas Lilladher saw SBI Card reporting a net profit up 43.5% year-on-year (up 5.3% quarter-on-quarter). Net Interest Income (NII) was expected to rise 23.3 percent Y-o-Y (up 10 percent Q-o-Q) to Rs 1,228.2 crore, according to Prabhudas Lilladher.

 

SBI CARDS Q3 REVENUE

• Sbi cards Q3  Revenue jumps 21.38% yoy and 6.38% QOQ %( excluding other income)
• Total revenue climbed 16% YoY to Rs 3,656 crore against Rs 3140 crore in the Q3 of the previous fiscal.
•  Interest income rose by Rs 336 crore to Rs 1,609 Cr for Q3 against Rs 1,273 Cr for Q3 FY22.  YOY JUMP 26.35%

• Income from fees and services rose Rs 213 cr to  Rs 1,670 Cr for Q3 FY23 against Rs 1,457 cr in the corresponding quarter of the last fiscal.  
• Gross non-performing assets (NPAs) fell to 2.22% of gross advances as on December 31, 2022, as against 2.40% as on December 31, 2021. 
• Net non-performing assets were at 0.80% as of December 31, 2022, as against 0.83% as on December 31, 2021.

	Dec 31,2022	YOY%	QOQ%	Sep30,2022	Dec 31,2021
Revenue from Operations (TOTAL)	3507.32	21.38%	6.38%	3297.08	2889.46
INTEREST INCOME	1608.87	26.35%	8.38%	1484.46	1273.32
Fees and commission income	1669.89	14.61%	3.67%	1610.76	1457.01
SALES OF SERVICE	46.81	25.13%	19.93%	39.03	37.41
Business development incentive income	180.73	49.86%	11.47%	162.14	120.6
Insurance commission income	1.02	-8.93%	47.83%	0.69	1.12
Other income	149.03	-40.44%	-4.61%	156.24	250.2
SBI CARDS Q3 EXPENSES SBI CARDs total expenses rose 13.38% YOY%,8.16% QOQ%. Employee Benefits expenses rose 17.55% & 10.18% YOY% & QOQ% respectively.			FOR THE QUARTER END
	Dec 31,2022	YOY%	QOQ%	Sep30,2022	Dec 31,2021
TOTAL EXPENSES	2971.82	13.38%	8.16%	2747.56	2621.13
Finance costs	464.28	67.73%	26.26%	367.71	276.81
Fees and Commission expense	349.26	12.36%	20.86%	288.98	310.83
Net1oss on fair value changes	0	0.00%	0.00%	0	0.74
Net loss on derecognition of financial instruments under - 1.71 1.71 amortized cost category	0	0.00%	0.00%	0	0
Impairment on financial instruments	533.04	-14.78%	-2.37%	545.99	625.48
Employee benefits expenses	142.14	17.55%	10.18%	129.01	120.92
Depreciation, amortization, and impairment	41.03	11.07%	6.35%	38.58	36.94
Operating and other EXPENSES	1442.07	15.42%	4.70%	1377.29	1,249.41
			FOR THE QUARTER END
SBI CARDS Q3 PROFIT SBI CARD profit before tax rose 32.01% YOY lower than its estimates, Net profit stands at 509cr
	Dec 31,2022	YOY%	QOQ%	Sep30,2022	Dec 31,2021
Profit before tax	684.53	32.01%	-3.01%	705.76	518.53
Profit before tax (WITHOUT OTHER INCOME)	535.5	99.57%	-2.55%	549.52	268.33

 

My Opinion

Via the above charts, it is clearly visible that Sbi cards revenues are growing at a speed of approx 20-25% YOY but their expenses are growing exponentially which hits their operating profit margins & it reflects on their profit & loss statement. We all know that in recent times interest rates are high for that reason you can see that their financial cost or the cost of borrowing money grows at a higher pace  67.73%, & their employee benefits expenses rose 17.55% & 10.18% YOY% & QOQ% respectively, which affects their margins and profit.

 If rate hikes continue then it will affect profit margins, but if it slows down then Sbi cards can show a great profit. If you look current valuation of a company that grows at a speed of 20-25% cagr in an emerging sector, from my point of view it is very cheap now. The current PE is 30.2 and TTM EPS stands for 23.77.

 If we think that the company will grow with a speed of  25% CAGR, then after 2 years eps will be 37.14 and we took a conservative approach, I think that after 2 years avg PE of this company will be 30 then its price will become 1114.22 or we can compare its valuation with Bajaj Finance, its 5 years median PE is 50.5 if we consider this number than the price of Sbi card will become 1875.57 after 2 years. For the short-term horizon, it can be anything but if you have a horizon of more than 2 years then I think Sbi cards will generate profit from its current valuation unless it has some management Issue or government interference with their business or any kind of guidelines issued by RBI.

Brokers Report & Target:-

Sbi cards miss expert estimates for that reason it has seen a sharp correction on 25/01/2023.

In spite of this result, several brokers do not change their buy calls, though they have downgraded this stock from its previous report.

Targets of several brokers

• HDFC Securities  - 1020

• ICICI  Securities - 1040

• BOB CAPITAL MARKETS LIMITED - 1034

• MOTILAL OSWAL - 960

Key Business Metrics

• #1 in Net additions in FY23,

• #2 in spends in Q3 FY23^

•  1 million+ Net cards addition in Q3 FY23 

•  New accounts from SBI sourcing increased to 49% in Q3 FY23 from 37% in Q2 FY23

•  Steady growth in receivables  33% YoY 

• Average retail spends per card  8 % YOY

• NEW A/C registered 16.39 lacs in this quarter,

Sbi cards Technicals

First Resistance763.7

---

Second Resistance782.3

---

Third Resistance798.2

First Support729.2

---

Second Support713.3

---

Third Support694.7

Credit card growth in India

In terms of credit card growth in India, India is still an underpenetrated market. If you look at the chart below it shows only 7.3cr (march 2022) people have their own credit cards & the population of India is approx 140 cr which means only 5.21% of people have their own credit card, if you compare it with the USA, the number stands approx 83% (According to a May 2021 Federal Reserve report on the economic well-being of U.S. households, 83% of U.S. consumers had at least one credit card in 2020)

Over the past years, credit card issuers have laid the foundation for constant technological advancements and growth. With the focus now on expanding the customer base with better fraud management techniques, competitive product offerings, loyalty, and benefits, the credit card industry is expected to grow exponentially in the upcoming years.

 If the credit card market grows at such a decent pace then we can easily say that SBI cards can utilize this market and can grow their business. From a long-term view, we can easily say that this business will grow . 

 

Credit Card Issuance Volume In India (In cr)
Month-Year	Issuance Volume	YOY%
March 2018	3.7
March 2019	4.7	27.03%
March 2020	5.7	21.28%
March 2021	6.2	8.77%
March 2022	7.3	17.74%
March 2023  (Expected)	9.2	26.03%

Source: PWC & Reserve Bank of India Credit Card Data (2022)

Who issues most Credit Cards

HDFC Bank 20.9%

SBIN 19.5%

ICICI Bank 16.6%

Axis Bank 11.6%

Kotak Bank 5.8%

RBL Bank 5.2%

CITI Bank 3.1%

IndusInd Bank 2.5%

Bank of Baroda 2.2%

Yes Bank 1.72%

IDFC First 1.68%

(As of Dec 2022)

REPORT CARD 

NOTE:- This is clearly my opinion, I am not a SEBI registered advisor, and I also have sbi cards. If you want you can ignore this.