SBI Cards Stock Analysis | Latest Update
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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.

SBI Cards Business Recovering (May-2020 Update)

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 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

- 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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