SBI Cards and Payment Services Ltd Q3 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 evening, sir. Sir, I have a few questions. that if you see your write-offs, they continue to increase and other provisions are declining. So what would give you the confidence that write-offs would taper on -- taper off from fourth quarter because that is essentially what will bring down credit costs, right? Or is it that asset quality will start improving and then credit cost will improve with the lag? I mean how do we view this? When do we see credit costs improving? And what would drive that write-offs they have been continuously rising and sharply. So will they taper off now? Is this the peak? That's my first question. Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee So thank you. Thank you for the question. But then what we have seen in the financials also, the lesser provision is indicating towards a better asset mix. Somewhere, the stage 2 and stage 3 composition has reduced, and we are seeing it to continue during the quarter. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 12:30PM, SBIC.NS - Q3 2025 SBI Cards and Payment Services Ltd Earnings Call And as we stated just now, we are also seeing reduction in the 2x that is into delinquency. All this taken together now gives us an indication that things are going to improve from here onwards. And we see that from next quarter, the improvement should be visible. Now to what extent will that will depend on how the larger portion of our stage 3 will be here. If you strictly speak about write-offs, you will be knowing that we have an NPA pool. We continue to work upon them. NPA pool has reduced, but then how we continue to work upon them and extract most out of it will depend to what extent the write-offs will be reducing. But we do see inflection point, whether it is gross NPA and the credit cost, both concerned.

Question: Mahrukh Adajania - Nuvama Wealth Management - Analyst : Okay. And then -- Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee And let me go back to my -- some -- to a couple of quarters earlier call, where we had indicated that what we are seeing over the quarters with that by year-end, we were expecting the improvements to come up. And I -- today, what we can see is that probably we will be adhering to what we expected.

Question: Mahrukh Adajania - Nuvama Wealth Management - Analyst : Got it. Okay. Thanks a lot. Thank you.

Question: Krishnan ASV - HDFC Securities - Analyst : Yeah, hi, many thanks (inaudible) as Girish just mentioned, it's been nearly two years since our origination has been improved listing kind of get better at the quality of store sales. Despite that, the write-offs or the overall credit costs seem to be hitting a record high almost in the quarter. Also, it's fairly evident that the collection environment is -- I mean has been fairly tight has been fairly difficult both banks and NBFCs. And this, I just wanted to understand what is it that SBI Cards is able to control other than sourcing because you do have job in sourcing now. But other than sourcing, is there anything else in your control because that's what the franchise gets put value for. What is it that you're able to control in the rest of the variable. Unidentified Company Representative So basically, if you look at our portfolio, so the to identify customers who are likely to go through some stress. So we've seen and even the market reports suggest that because of the rapid buildup of the retail lending going through a boom, especially personal loans, the leverage has built up in the portfolio. So what we have done is, of course, is to understand customers who have that increase in leverage or who will display tendency to increase leverage basis their behavior based on their transaction pattern and take broad actions so that we can at least reduce our exposure to these customers. So we are able to do that, and we have talked about limited res in the past as well. And we continue to enhance our early warning framework. So that we continue to identify and take action before these customers go into delinquency. Because once they go into delinquency, as you rightly said, the environment is tough. And if there are too many -- so basically, we have to cut our losses before if we identify the right set of customers, we managed through that successfully over the last few quarters. Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee And the success of these actions is being felt in the performance metrics that we track. So for example, for the first time in several quarters, the

Question: Krishnan ASV - HDFC Securities - Analyst : Okay. Okay, understood. Just one other question. This was majorly to do with what proportion of your customers have actually been defaulting. I mean I just -- so one is obviously the value that we can report in this quarter. But what proportion of these customers are actually reflecting in that credit cost of 9% last quarter, 9.4% this quarter. How many of these customers are still there in the pool who can stream the surprise only. Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee We don't disclose these numbers, Krishnan, first of all. And two, in case of a product like a credit card, which is revolving where customers can come and pay you any time of the day, any time of the month, it's very difficult to track and at our point in time measure as to how many have departed and how many have not discounted. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 12:30PM, SBIC.NS - Q3 2025 SBI Cards and Payment Services Ltd Earnings Call

Question: Krishnan ASV - HDFC Securities - Analyst : Yes, that's correct, Girish. I was just wondering whether these are customers who have leverage even more than the average balance. That's what I'm trying to get at. Is that the reason why they are defaulting? Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee Obviously, they have leverage over the -- they have high leverage, yes.

Question: Krishnan ASV - HDFC Securities - Analyst : Okay. Fine. Thank you. Thank you. All the best.

Question: Piran Engineer Engineer - CLSA - Analyst : Yeah, hi, thanks for taking my question. Firstly, just a clarification on the previous thing. Did you mean that the average.

Question: Piran Engineer Engineer - CLSA - Analyst : The (inaudible) ticket size is one is that what you meant in the answer to the previous question? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 12:30PM, SBIC.NS - Q3 2025 SBI Cards and Payment Services Ltd Earnings Call

Question: Piran Engineer Engineer - CLSA - Analyst : One second. Am I audible now? Is it better.

Question: Piran Engineer Engineer - CLSA - Analyst : So just a clarification on what you said as an answer to the previous question, what was INR1 lakh. Is it the average ticket size of an NPA account?

Question: Piran Engineer Engineer - CLSA - Analyst : Yes. So the NPL average is INR1 lakh. The average NPA customer has INR1 lakh with you.

Question: Piran Engineer Engineer - CLSA - Analyst : Fair enough. So my first question really is on you have spoken about how the new customers have lower delinquency trends, the cards that you sourced in the last one year or two years. How are the revolve trends versus earlier vintages that were sourced?

Question: Piran Engineer Engineer - CLSA - Analyst : Okay. Fair enough. And just secondly, in terms of what happens when an NPL customer pays you back. Do you reinstate the same limit? Or how does it work? Or is this credit card just cut off? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 12:30PM, SBIC.NS - Q3 2025 SBI Cards and Payment Services Ltd Earnings Call

Question: Piran Engineer Engineer - CLSA - Analyst : Okay. Fair enough. That answers my question. Wish you all the best. I'll get back in queue.

Question: Nishant Shah Shah - Millennium - Analyst : Hi, sir. Thank you for the opportunity. So just a couple of questions from me. Just a follow-up question. First of all, Mahrukh question, that this quarter, you see like a 40 bps rise and you're saying categorically that this is the peak. But how should we think about modeling for severe cost going ahead? You answered this a bit qualitatively that it depends on the macro environment. But any initial kind of like guidance or in a range that is this something which is like a peak and a plateau or is it a peak kind of reversal? Like will the normalization be much sharper given the kind of sourcing we've done. How should we think about like the downward normalization of the credit costs? Like say, for FY26 or '27, more longer term? If you could give some guidance about how we should thought where the fed costs should settle at? That's question one. I'll ask my next question later. Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee Yes. So very difficult -- I will repeat it very difficult to give a firm number of credit costs. Considering what uncertainties we have seen over a period of time. As I said, as I said that the customer behavior has been changing very sharply over a period of time. And there is a segment of customer, which I have stated it earlier also, there is a segment of customer which was flowing into a write-off straightaway without paying me a single penny with all that taken together and on one side. And on the other side, whatever portfolio actions we have taken, whatever collection efforts that we continue to make on early into the buckets. All that taken together has already given us this has brought us a stage where we are seeing the stage 1, stage 2 composition significantly better even the stage 3 composition has come down. Now this should not be related to the present credit cost. When we are saying if there is an improvement in the asset quality and the stages, definitely, it will translate to the credit cost. How much -- to what extent it will depend on when we would like to see it over a period of time ourselves and very difficult to give a guidance for entire FY26 at this stage.

Question: Pranav Gundlapalle - Sanford C. Bernstein & Co. - Analyst : Hey, good evening. Thanks for taking my question. We just had one question on your sourcing shift that you have done, think you look back pre-COVID, you had a certain model for sourcing, which hasn't helped on the underwriting front, but it will allow you to grow or maintain a use market share. Now that you have tightened your sourcing strategy. Do you think the growth will be a lot lower versus the industry or is it more just now throttled it down because of the environment. But even with this new approach, we'll be able to grow at the same pace as you did pre-COVID, let's say.

Question: Pranav Gundlapalle - Sanford C. Bernstein & Co. - Analyst : If you're sourcing better customers, can you still grow at the same pace? What usually in the past.

Question: Pranav Gundlapalle - Sanford C. Bernstein & Co. - Analyst : Okay. 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. JANUARY 28, 2025 / 12:30PM, SBIC.NS - Q3 2025 SBI Cards and Payment Services Ltd Earnings Call

Question: Roshan Chutkey Chutkey - ICICI Prudential Mutual Funds - Analyst : Yes. I wanted to understand how the minimum new paying customers, just about minimum view paying customers, not necessarily the entire revolver pool. But just the minimum you paying customers, how has that been trending for us past few quarters. Unidentified Company Representative What is in (inaudible) -- so people are -- so that data has been improving. We even. That data will not be available.

Question: Roshan Chutkey Chutkey - ICICI Prudential Mutual Funds - Analyst : I don't want the data, just the trend of it, if you can talk a little bit about it?

Question: Roshan Chutkey Chutkey - ICICI Prudential Mutual Funds - Analyst : And you -- I guess sir -- Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee Combination. Look, you have to look at the combination. It's where the minimum deal being paid entire deals being paid all through that together has contributed to the improvement that you are seeing now. It's not -- it's not a stand-alone activity result that were only minimum view is being paid. It's a combination of both the entities, minimum dues as well as the total deals being paid, all that taken to weather has contributed to the improvements what we are seeing.

Question: Roshan Chutkey Chutkey - ICICI Prudential Mutual Funds - Analyst : Right. Understood. Okay. And the other question I had is, I just mentioned that the return of -- the pool of incoming pool into the return of bucket is improving. But when I look at the data to 22% increase sequentially, right? What was 90 plus for us at the end of Q2 has probably been written off end of this third quarter now. right? If that is an increase of 22%, how are we saying that the write-off pool is also improving?

Question: Roshan Chutkey Chutkey - ICICI Prudential Mutual Funds - Analyst : Thank you so much. That's all from me.

Question: Manan Agarwal - ICICI Securities - Analyst : Yes. I want to ask about the collection efficiency for the last month of December.

Question: Manan Agarwal - ICICI Securities - Analyst : I attended all the con calls of micro loans, microfinance companies. So they were -- it is estimated that peak out for the microfinance industry for credit cards and all. So what's your take on FY26? In particular about the credit cost ROA?

Question: Manan Agarwal - ICICI Securities - Analyst : Yes.

Question: Manan Agarwal - ICICI Securities - Analyst : Okay. Thanks.

Question: Bhavik Dave - Nippon Mutual Fund - Analyst : Hi, good evening. Just a question, again, I'm talking back to the credit cost or the write-off comment that you're trying to address here. So if I do a very simple math where I take your gross write-offs and I get a number of INR450 crores-odd that we may be doing, obviously, do not like exactly, but that will be the number that we'll be clocking monthly. And even like doing INR350 crores-odd previously in the previous quarter is what I see, if I divide the gross write-off number by three, right? Very, very basic math. Are we saying that this INR450 crores-odd monthly that we were maybe writing off, that number has significantly come off because without data point, just qualitatively talking about this number going down makes sense, right? Because if you give us a trend line that this number is like coming back to that INR300 crores-odd level, and that's the way to think about it. It will be great if you could just help us with this, where are we going in terms of monthly write-offs because unfortunately, we're not seeing any like good trends in terms of slippages because when I see our slippage numbers that are still like on the higher side. So just wanted to get a sense on this one here. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 12:30PM, SBIC.NS - Q3 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 again, I will repeat. So it's too early to give any numbers, too early to predict what will be the production. We have to see a scenario where there is a segment of customers who are sitting in an NPA pool. And proceeding towards write-off unless we are able to collect from them and/or hold on to them wherever they are. So it's a combination of all these actions taken together will define how much will be -- how much or how many of them will get written off and what will be the amount. So it varies quarter-over-quarter. But as we said, that since we have seen a lesser inflow into stage 3 altogether. Somewhere, it will result into a lower write-off.

Question: Nitin Aggarwal - Motilal Oswal - Analyst : Hi. Thanks for the opportunity. Sir, firstly, if I look at the proportion of salaried customer, like this quarter in terms of new sourcing has come. So while you mentioned that we are pretty much close to the peak in terms of credit cost and things should likely improve. So how do you really compare between the sales employed and (inaudible) in terms of their repayment behavior? That's one. And secondly, where you said that revolve rate, we are not expecting any improvement from here. I just wanted to check on as to how is the rate difference between UPI and because UPI is something which, while it is small today, but it is growing fairly fast. So how should one look at it in the medium term.

Question: Nitin Aggarwal - Motilal Oswal - Analyst : Am I audible? Unidentified Company Representative Yes. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 12:30PM, SBIC.NS - Q3 2025 SBI Cards and Payment Services Ltd Earnings Call

Question: Jignesh Shial - InCred Research - Analyst : Hi. Thanks for the opportunity. Basically, I have one data keeping question quickly. We are seeing a surge in investment sequentially. Anything to add into it?

Question: Jignesh Shial - InCred Research - Analyst : And my (inaudible).

Question: Jignesh Shial - InCred Research - Analyst : Understood. And just a trend on fee income side. I think it's more or less flat. If you see sequentially, and overall trend has been consistently been declining on a Y-o-Y basis. So how do you see the with more cool ending cards coming up together, along with it, obviously, online spends coming with space basically needs we goal take a little lesser cut on it. So how do you see the fee income trend going forward? You see that improvement can come up or what's the view? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 12:30PM, SBIC.NS - Q3 2025 SBI Cards and Payment Services Ltd Earnings Call

Question: Jignesh Shial - InCred Research - Analyst : So as your issuances increases, so fee income will be increasing going forward. That's a fair assumption, right?

Question: Jignesh Shial - InCred Research - Analyst : Perfect. Sounds good. Thank you so much.

Question: Rohan Mandora - Equirus Securities - Analyst : Good evening. Thanks for the opportunity. So to touch on that flow rate question again. So if you look at your stage 2 plus stage 3 in F4 and the percentage or absolute out in are still higher. And the comment that we gave in [2Q] was still that in the first half of current financial year, the flow rates have improved. So what you said in the call today also is that the floor rates into delinquency is lower delinquencies to write-off is higher. But this is not reflecting in the stage 2 numbers that we are seeing right now. So if you can share what is the 30% plus, how is it moving the last two quarters, three quarters? And also, what is our share of exposure in, say, very high risk and high risk category of Bureau rating customers. Something around that would help to get some sense on how the improvement is happening?

Question: Rohan Mandora - Equirus Securities - Analyst : Sir, if you quantify these numbers, that would help. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 12:30PM, SBIC.NS - Q3 2025 SBI Cards and Payment Services Ltd Earnings Call

Question: Rohan Mandora - Equirus Securities - Analyst : The presentation data that comes out. So I'm comparing 4Q versus 3Q, 4Q, '24, 3Q '25, right?

Question: Rohan Mandora - Equirus Securities - Analyst : If you look at numbers was 5.7% to 2.8%.

Question: Rohan Mandora - Equirus Securities - Analyst : Yes, there's a margin increment from --

Question: Rohan Mandora - Equirus Securities - Analyst : There's margin improvement on 2Q, even in absolute amount from 2Q to [3Q], what I'm saying is, in the previous quarter also, the commentary was that flow rates and to delinquencies have been coming down. If I'm comparing and this was the commentary for the first half as well of current financial year. So if I'm trying to look at from the 4Q FY24 numbers, bearing our Stage 2 and Stage 3 was 5.7%, [2.8%], respectively, and if you look at stage 2 plate combined, it was around INR4,300 crores. That thing has now gone up to INR4,900 crores. So that flow rate come down does not match with the data far comparing with the year-end number and the nine months for the current financial year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 12:30PM, SBIC.NS - Q3 2025 SBI Cards and Payment Services Ltd Earnings Call

Question: Rohan Mandora - Equirus Securities - Analyst : Got it. Got it. Thanks. And just to reconfirm, for FY26, any guidance that we give on the receivable group? Or spend note?

Question: Shubhranshu Mishra - PhillipCapital (India) Pvt. - Analyst : Hi. So the first question is around the management position. So you've got quite a few people as directors from the parent, why do we need someone at the NDA who would or who may only not have like to the professional experience in cards business. Why don't we hire professional and CEO from the credit or industry to run the business, whereas we can have Board member representation from the parent. Second, through cycles, what has been the recovery from write-off accounts in year one, year two and year three. And third is the number of customers who have two cards, number of customers who are three cards and number of customers who are four plus cards. Abhijit Chakravorty - SBI Cards and Payment Services Ltd - Chief Executive Officer, Managing Director, Director - State Bank of India Nominee The first one, I think we do need not comment. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 28, 2025 / 12:30PM, SBIC.NS - Q3 2025 SBI Cards and Payment Services Ltd Earnings Call

Question: Rohan Mandora - Equirus Securities - Analyst : Was that --

Question: Rohan Mandora - Equirus Securities - Analyst : What I'm asking is that through cycles, what percentage have we recovered from the written-off pools, not in the last 12 months, 18 months. Through cycles, what is that number?

Question: Rohit Jain - Tara Capital Partners - Analyst : Can you hear me? Unidentified Company Representative Yes, please.