SBI Cards rallies 6% to hit record high on healthy June quarter results

Shares of SBI Cards and Payment Services have rallied 6 per cent to Rs 794.50 in intra-day trade on the BSE on Tuesday after the company reported 14 per cent year on year (YoY) rise in net profit at Rs 393 crore in the April-June quarter (Q1FY21) on higher interest income. The State Bank of India (SBI)-promoted company had recorded a profit of Rs 346 crore in a year ago quarter. The stock is trading at highest level since its listing on March 16, 2020. It has surpassed its previous high of Rs 769 hit on March 18.

Net interest income (interest earned less interest expended) for Q1FY21 grew 52 per cent YoY to Rs 1,138 crore as against Rs 747 crore in a year ago quarter. On asset quality, the company's gross non-performing assets were at 1.35 percent of gross advances as on June 30, 2020 as against 2.68 percent as on June 30, 2019 and 2.01 per cent as on March 31, 2020.

“While NPA (down 133bps YoY/33bps QoQ to 1.35 per cent) and provisioning (42 per cent down QoQ) for the quarter witnessed sharp decline, the same stands masked due to moratorium dispensation. Hence, we build-in elevated NPA (4.5 per cent in FY21) and credit costs (6.3 per cent), albeit lower than earlier estimates as controlled delinquencies (morat decline), suitable customer mix (85 per cent salaried) and robust data analytics and risk management systems are gradually paying off,” analyst at Prabhudas Lilladher said in result update.

The brokerage expects SBI Cards to return to normalcy sooner-than-expected with emergence of greenshoots (fall in unemployment rate to pre-COVID levels, digital transactions uptick), improving corporate spends led by non-discretionary focus (vendor, tax & utility payments & gradual pick-up in domestic travels) and increasing banca potential (55 per cent SBI sourcing). It maintains ‘buy’ rating on the stock with 12-month target price of Rs 974 per share.

NCD issue

Meanwhile, SBI Card said the board of directors at a meeting also approved raising of fund by way of issuance of non-convertible debentures (NCDs) aggregating to Rs 1,500 crore in one or more tranches over a period of time.

SBI Cards is the second largest credit card issuer in India. It offers various types of credit cards considering the need of retail clients (viz. Lifestyle Cards, Rewards, Shopping, Travel and Fuel). It also offers corporate cards and is the largest co-brand credit card issuer in India. It also issues card in partnership with smaller or regional banks.

At 09:35 am; SBI Cards was trading 5 per cent higher at Rs 787 on the BSE, as compared to 1.2 per cent rise in the S&P BSE Sensex. The counter has seen huge trading volumes with a combined around 3.2 million equity shares changing hands on the NSE and BSE.