SBI Cards and Payment Services Ltd Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Mahrukh Adajania - Nuvama Wealth Management - Analyst : Good afternoon, sir. Sir, my first question is on credit cost only. So you said flows have peaked. And I know that the environment is uncertain and now other lenders are also seeing a spike in credit cost on cards. But if your flows have peaked, does it mean at least some moderation or at least the peaking of your credit cost now or how does it pan out, because your only delinquencies on new acquisitions are also coming off? Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee So what we stated just now is that we see ourselves closer to the peak. It will take a couple of quarters more, at least one or two quarters more to understand the pattern. But then yes, as I said, a combination of all the factors taken together, the flow rates into flows into delinquency, all the actions, various actions that we have taken together, all of that indicate that we are closer to the key. We have been very specific (inaudible) REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 10:30AM, SBIC.NS - Q2 2025 SBI Cards and Payment Services Ltd Earnings Call

Question: Mahrukh Adajania - Nuvama Wealth Management - Analyst : Okay. Got it. And just my last question on margins that given that third quarter is also festivals. I did not catch your last comment on margins when you were giving the commentary. So would the margins be a little soft even in the third quarter, and then come back in the fourth quarter?

Question: Mahrukh Adajania - Nuvama Wealth Management - Analyst : Okay. Okay. Thanks a lot.

Question: Shweta Daptardar - Elara Securities Pvt. Ltd. - Analyst : Thank you sir, for the opportunity (inaudible) questions. The first one being for our revolver share has come down. So is it that we have categorically chosen or is it that customers are not revolving and they are just defaulting? That's question number one. Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee So if you see revolver share is around 23%. The primary reason for this is that during the last week of September, the festival season started. So you have new spends coming in which goes into the denominator, and that takes time for the customer after some billing cycles. So as stated in the speech, we see normalization of this happening by the end of this quarter.

Question: Shweta Daptardar - Elara Securities Pvt. Ltd. - Analyst : So yeah. So as for the strategy, our corporate spend calibration on the lower side has worked out. So for last two quarters, so this quarter as well as last quarter, we've seen INR5,000 crore-odd plus kind of a number on corporate spend. Going forward, do we see this number settling here and therefore retail spend traction catching up much faster? Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee So on the corporate spends in Q3, we will go slightly because we are at INR5,000 crore for last two quarters. It will go slightly up, but we will continue to be on the retail spends because this quarter is festival season. Going further, as we have stated, we are looking at more profitable spends coming out of the corporate< spends rather than just the past two (inaudible)

Question: Piran Engineer - CLSA - Analyst : Yeah, hi. Thanks for taking my question. One of them is just an extension to Shweta's question on revolver share. Now I'm not referring to the quarter, but in general, in the past, we've seen when we've tried to tighten our underwriting standards, the revolver share has dropped. Like during COVID, it went from mid 30s to mid-20s. What steps will we take to ensure that does not happen, given that it's a big profit contributor for us, or are (inaudible) we can proactively take? Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee We are not taking any steps to increase proactively the number of revolvers. However, what we have seen from data is that because these steps on the underwriting and other things have been continuing the last one year now, and it has stabilized at 24%. And even in last calls, we have stated that it will continue to range between 23%, 24%, 25% depending on seasonality or what is happening at the end of the month. It should continue to be in that range at least a foreseeable two to three quarters. But we are also seeing is that an absolute amount, the revolver balance are continuing to increase.

Question: Piran Engineer - CLSA - Analyst : Okay, so this is just a temporary thing. Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee Absolutely.

Question: Shubhranshu Mishra - PhillipCapital - Analyst : Hi, good afternoon. Thanks for this opportunity. So three questions. The first one is around the credit cost. What would be the proportion from SBI customers versus open source customers in the 9% gross credit cost that we see? Second is that are we going to see a strong spend growth in Q3, Q4, especially the festive season, that's so much being spoken about the urban consumption coming off, and the festive season has been just about okay. So how are we thinking about that? And when -- third is around the new originations. So how much are we carding the carded there in the new originations which could be probably the SBI or non-SBI? But what is the proportion of people who come in with a card in the new originations? Thanks. Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee I take the first question which is about the channel wise makeup of the asset quality. We don't do credit cost calculations by channel because it's a fairly detailed calculation. It's not possible to attribute credit costs by channel with that level of precision. But we know that the SBI sourcing is of much better quality in terms of delinquency. And that is mentioned in our slide as well. If you see the investor deck, there are only two slides, one of the slides explains that. So index delinquency of SBI is about 0.77 which basically means it's 23% better than the overall average. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 10:30AM, SBIC.NS - Q2 2025 SBI Cards and Payment Services Ltd Earnings Call On the spends portion -- spends, retail spends are earning really strong as you rightly said. Our urban consumption is going up and we have seen this spend season thus far doing quite okay. And there is no issue that we see primarily on this front. On the new acquisition front where you stated that what is the mix. So the way that we look at it slightly different. We, the Banca channel primarily operates when we look at the bank. We are able to get the customers banking transaction data and look at underwrite from there. So we have more new to credits from there and less of people who already hold a credit card on the open market because the data is required. So there are people with (inaudible) which we look at. People need not be that people are already carded. They might be running some personal loans, but they have a good credit history or a record at the Credit Bureau to be looked at. And we looking at a lot of other data apart from just credit score to be to give the card to the customer.

Question: Rohan Mandora - Equirus Securities - Analyst : Good afternoon, sir. Thanks for the opportunity. Sir, in your opening remarks, you mentioned that the flow rates have improved. But if you look at this quarter, the [GNP] has one of the write off are also higher. So is it for a particular month that you were talking about the flow rate, if you can elaborate further here. Second, you also commented that there's a 15% improvement in prime and (inaudible) prime customer. I just want to clarify that 15% or 15 percentage points because if it's 15% then the mix wise there's no meaningful improvement. So just clarity here. And third, in the recent origination that we're doing on new cards, how is the breakeven period with say two, three years ago on the new relationship that we are originating in terms of duration? Thanks. Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee So the -- in terms of the flow rate, the statement made in the opening speech was around the early delinquency, the flows into delinquency, that's been improving. But other flow rates are from, for example, from delinquent to write off, that is not improving. And that is what is also witnessed in our write off numbers and they are really going up. So there are two parts to the flow rate story. In terms of the asset mix, the improvement in the portfolio -- the percentage number isn't percentage number, percentage of 100%.

Question: Kao-Shu Hwang - Sconfir - Analyst : Hey, I thank you for the opportunity. Firstly, is on the asset quality on the commentary that maybe one to two quarters time, we could see the peaking of credit costs. So just wondering, what's our best guess of what happens after the credit costs peaked, i.e., if I look at FY26, how fast do you think credit costs can come down, or is it likely to remain at a 9% level for some time? How should we think about this, sir? Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee We won't be able to guess those numbers or estimate those numbers as of now. As I said, we take actions at our end, but a larger part of the impact comes from the overall ecosystem. So a lot will depend, the overall ecosystem improving and contributing towards our efforts also. So giving a firm number at this stage or estimating what can be the gradient will be a bit difficult at this stage. But yes, as we stated earlier also, we expect that during the end of the year onwards, we expect it to improve further.

Question: Kao-Shu Hwang - Sconfir - Analyst : Got it. So that's very helpful. And I think just on the fee and commission income growth, how should we think about the growth there versus your

Question: Kao-Shu Hwang - Sconfir - Analyst : Sorry sir, I mean the fee growth, fee income, because fee income is like I think a bit negative year-on-year, right? So I'm just wondering, spends growth is strong, but then why are we seeing the divergence with the fee income growth? Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee So fee income, there are two elements to fee income. One is the interchange part which is growing fairly strongly and in line with the spends. But on some of the other key lines, for example, the late fee and over limit fee, either because of external actions or because of the tightness and directives that we are showing with our portfolio and actions we are taking. Some of those fee lines are not showing the kind of growth that we would have expected. So other part and it is good if late fee does not grow to that level at this point of time because of the credit cost that we are running at. We believe that should give us some benefits at a later day. One other fee, which is the rental fee that we were charging. The rental fee also now is degrowing in a way compared to what it happened just to earlier years that it was a large part of the overall fee. So there are those elements on the fee part. We are however taking certain actions and we will be looking at revision of certain fees in certain lines to get the fee income to continue to grow.

Question: Pranav Gundlapalle - Bernstein Research - Analyst : Hey, good afternoon. Thanks for taking the question. Just two questions. One on your earlier comment that you're seeing a significant drop or write off once customer becomes delinquent. Is that simply a function of lenders across the board tightening their dispersals, and therefore resulting in default, so is that the driver? The second question is on your shift in the quality of customers, if you're going more towards prime, what's the difference in profitability between a prime versus the average customer? Does that -- or would that lead to a significantly lower profitability in the medium term, if you shift to a greater share of prime customers? Thank you. Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee So the first part, we can't comment what other lenders are doing. We can only state what actions we have taken and what results we are able to see. And regarding the prime customers, well, these are the recent acquisitions and the trends are moving as we have stated. Typically, customer matures, the card matures over a period of 12 to 18 months. And the contribution from the profitability part varies between a prime or a non-prime, near prime customer, also depends on the card variant that the typically the customer holds. So it's a combination of various factors taken together, that the profitability of a customer comes out. Why we have stated about the prime part is because that is an indicator of the overall client health composition and that gives some confidence and strength to overall portfolio.

Question: Rohan Mandora - Equirus Securities - Analyst : Sir, just if you could help in quantification of how the flow rates have improved in the early delinquencies? Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee That will be difficult to give that level of (technical difficulty) REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 10:30AM, SBIC.NS - Q2 2025 SBI Cards and Payment Services Ltd Earnings Call

Question: Rohan Mandora - Equirus Securities - Analyst : Sure, sir. Thanks.

Question: MB Mahesh - Kotak Securities - Analyst : Sir, have just one question. The outstanding regarding that you have reported this quarter, which is about INR133 crore, any color on one, what (inaudible) there in the portfolio, and two, when do you see to its contribution starting (inaudible) a period of time?

Question: MB Mahesh - Kotak Securities - Analyst : Yeah.

Question: MB Mahesh - Kotak Securities - Analyst : In the sense that it's still flat YoY, despite, we kind of writing off nearly (technical difficulty) to INR1,500 crore every year. Just trying to understand how should we look at this number (technical difficulty) REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 10:30AM, SBIC.NS - Q2 2025 SBI Cards and Payment Services Ltd Earnings Call Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee So, let us look at it from the customer profile. Nearly getting written off doesn't change the profile of the customer. The customer was not able to pay a month back, is not able to pay even after three months later, after getting written off. It's once the customer is generally able to generate cash flows, has ability to pay, then only the repayment starts. So being written off doesn't mean that suddenly there is a repayment capacity coming up out of the customer. So what happens is it's a matter of time like today also when we are on a collection drive, the most of the customers, I have two responses. One, yes, I will pay. Second, I don't have money, I can't pay right now, I will pay you the day I have it. So, the while the writing of the account is on a certain date, when the customer will have money and when they will pay off, well is a matter of time and we keep on following, we can keep on chasing, we keep on making our collection efforts. That's how the entire scenarios prevails. Unidentified Company Representative I will add just one data point, which is that in our recoveries these days, or always, we see vintages as high as 10 years. So people pay up even after 10 years. And the part of the flattening of the recovery pool or recovery numbers in the last few quarters is also driven by the stress that is getting in the overall ecosystem and the other delinquency bucket. So the same kind of reasons apply to the written off pool as well.

Question: MB Mahesh - Kotak Securities - Analyst : Okay, got it. Thank you.

Question: Ken Yang - Pinpoint Asset Management - Analyst : Yeah, thanks for taking my question. Can I ask with regards to credit cost. Do you think that credit costs --where do you think credit costs would be for the next two quarters, and would it go above 10%? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 10:30AM, SBIC.NS - Q2 2025 SBI Cards and Payment Services Ltd Earnings Call Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee We have stated that we expect it to remain elevated around these levels. But then as we have simultaneously, we have also stated that there are other indicators that help us in estimating that there will be some downward gradient in times to come.

Question: Ken Yang - Pinpoint Asset Management - Analyst : All right. Thank you.

Question: Shubhranshu Mishra - PhillipCapital - Analyst : Hi, thanks for the follow up. Two questions. The first one is what we do -- we would be doing our bureaus scrub almost every month. So what the proportion of our customers have a more than two cards, what portion of our customers have more than three cards. And the second question is that I understand that the customers are delinquent and have over leverage, but in case they are not paying us, who are they paying or are they delinquent everywhere? Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee Nandini, would you like to supplement? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 29, 2024 / 10:30AM, SBIC.NS - Q2 2025 SBI Cards and Payment Services Ltd Earnings Call

Question: Shubhranshu Mishra - PhillipCapital - Analyst : They are delinquent with everyone.

Question: Shubhranshu Mishra - PhillipCapital - Analyst : Okay. Sure, thanks. Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee And that's a bureau data available for anyone to see and check.