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SBI Cards Stock Analysis | Latest Update

4 min read
3 years ago
SBI Cards business is seen recovering in the month of May 2020, mainly driven by pent-up demand post relaxation of lockdown. Lets see the latest business updates of SBI Cards for April and May 2020.

SBI Cards Latest Business Update on COVID-19

Introduction

SBI Cards business is seen recovering in the month of May 2020, mainly driven by pent-up demand post relaxation of lockdown. Lets see the latest business updates of SBI Cards for April and May 2020.

Detailed Stock Analysis by Invest Yadnya
Stock Analysis by Invest Yadnya

SBI Cards Business Recovering (May-2020 Update)

SBI Cards Business Recovering in May-2020

Impact of COVID-19 on Business of SBI Cards

  • SBI Card said it has been focusing on business continuity since the first lockdown (late March) was announced. It has been continuously scaling up business operations since then.
  • The company has undertaken a detailed scenario analysis of the unprecedented economic situation caused by the COVID-19 crisis and has developed strategies to manage its business impact.
  • This includes entire spectrum of its business model encompassing customer acquisition, generating spends, portfolio monitoring and collections, customer servicing, cost optimization etc.

SBI Cards Latest Business Update on COVID-19

1. New Account per Day
SBI Cards - New Account per Day
SBI Cards – New Account per Day
  • SBI Cards issued 8.5 Lakh new cards in Q4 FY20 at a daily rate of 10,000 cards per day till mid March 2020 (from Jan’20 to mid-Mar’20).
  • In the second half of March 2020, the rate of new cards per day declined by almost 60% to 4,000 cards per day from 10,000 cards per day due to Nationwide lockdown.
  • In April 2020, around 27,000 new cards were issued primarily from the applications already in the pipeline at a daily run rate of less than around 1,000 cards per day.
  • While, in May 2020 with zone-based relaxations, sourcing of new accounts has gradually increased and new cards run rate has reached to 2,500+ cards per day.
  • Thus, a recovery in New cards issued per Day is seen in May month, which is a positive sign for the company.
2. Average Spends per Day
SBI Cards - Average Spends per Day
SBI Cards – Average Spends per Day
  • On the spending side, credit card as a product has an advantage of continuous customer engagement due to the unique nature of business.
  • As a result, spends on credit cards continued during lockdown through online and merchant outlets open during this period.
  • In Q4 FY20, between Jan-20 to mid-March-20, the average daily spends was Rs.376 Cr per day. While in the second half of March-20, during lockdown, the average daily spends has declined by almost 47% to Rs.256 Cr per day.
  • Post relaxation of lockdown average spends per day in the month of May 2020 is trending at Rs.175 Cr per day vs Rs. 290 Cr per day for April 2020.
  • The daily spend level in last 7 days of May 2020 was trending at Rs.200 Cr per day. SBI cards is now averaging at 60%+ of the pre lockdown daily average spend.
  • Online spends for Q4 FY 20 were 44% of the total retail spends which is trending at 55% of total spends in May 2020.
  • Top online categories are departmental stores & groceries (D&G), utilities & services and top point of sale categories are D&G, fuel, electronics and health and wellness.
  • While certain categories of spends like travel, dining and lodging have remained weak. Whereas, the new categories like education, online health and pharmacies have come up.
3. Moratorium Repayment
  • Around 8.4% of customers opted for the Moratorium in March-20. It covers around 16% of the balance under moratorium.
  • The number of customers under moratorium in April 2020 and in May 2020 (up to 22nd May) were 12.3% and 11.8% respectively.
  • 24% of the customer base under Moratorium repaid back in part/ full as of April 30, 2020.
4. Risk Management against COVID
  • The disruption of collection s process along with the moratorium availed to customers has impacted repayments.
  • The company continues to closely monitor its portfolio and is taking appropriate actions to mitigate risk in specific customer segments.
    • The actions range from credit limit decrease, blocking of cards, restricting cash withdrawal etc.
  • In FY20, the company created additional COVID-Related provisions of Rs.490 Cr to cover probable credit losses that may result in future resulting from COVID-19 economic deterioration and RBI moratorium.
  • On 22nd May, RBI has extended the moratorium for additional three months till August 2020.
5. Liquidity & Capital Adequacy
  • The liquidity position of the company is comfortable with diverse funding options available.
  • Presently, the company has around 35% of total sanctioned banking lines as unutilized limit available for drawdown.
  • The unutilized lines are sufficient for meeting the future short-term requirements. Capital Adequacy Ratio at Mar’20 stood at 22.4% and Tier 1 at 17.7%.
  • With a strong parentage of – State Bank of India, Liquidity would never be an issue for SBI Cards.
6. Collections
  • In the initial phase of lock-down, the field and tele-calling channels were impacted. Since then, the company has operationalized around 80% of its tele-calling infrastructure by enabling resources to operate remotely.
  • While field collections continue to be impacted, the resources have been redeployed to tele-calling operations.
  • Additionally, digital m odes are being used to build the communication intensity with the customers.
  • The company is continuously monitoring State notifications on lock-down and with easing of restrictions, the field activities are gradually getting operationalized.

7. Operations

  • More than 70% workforce is operational, since lockdown relaxation.
  • Since partial relaxation of lockdown,
  • 1.4 Lakh+ physical cards (including renewals and reissues) have been delivered
  • 70,000+ customer verification has been completed.
  • 1 Lakh+ new accounts h ave so far been booked during the lockdown period through remote operations.

COVID Impact on the Business in Near Future

  • Due to the COVID crisis, the company foresees adverse impact on its revenues resulting from :
    • Lower spends and
    • Disruption in new account acquisitions
  • This revenue loss may not be compensated through higher interest income following the payment moratorium offered to its customers.
  • Also, the credit costs in the near term may be higher. Accordingly, the company has provided additional COVID-Related provision of Rs.490 Cr in FY20 based on our internal assessment to cover future losses.
  • Mr.Hardayal Prasad, MD & CEO, SBI Cards updated that the company is closely assessing the external situation and its impact on portfolio. Thus, it may revise this credit provision if there is a significant change from its previous assessment.

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Tags: Average Spends per Day capital adequacy ratio COVID Related Provisions customers under moratorium Hardayal Prasad Impact of COVID-19 on Business of SBI Cards Liquidity Coverage Ratio Moratorium Moratorium Repayment New Account per Day Risk Management against COVID SBI cards SBI Cards Business Recovering SBI Cards Business Recovering (May-2020) SBI Cards COVID Provisions SBI Cards customers under moratorium SBI Cards Latest Business Update on COVID-19 SBI Cards MD SBI Cards Risk Management against COVID Spends per Day

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Previous DII vs FII | DII Holdings at Record High (in Q4 FY20)
Next SBI Stock Analysis | Latest Quarter Results

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