SBI Cards and Payment Services Ltd Q4 2024 Earnings Call Transcript

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

Question: Mahrukh Adajania - Nuvama Wealth Management Ltd - Analyst : So my first one is that you did give a commentary around credit costs and even delinquencies December versus September at sector level, but is there any sign or any data that you've picked up that they are improving in Jan, Feb, March? I know that Bureau data may not be available -- published Bureau data may not be available for the March quarter, but in general, your market intelligence. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 26, 2024 / 1:00PM, SBIC.NS - Q4 2024 SBI Cards and Payment Services Ltd Earnings Call

Question: Mahrukh Adajania - Nuvama Wealth Management Ltd - Analyst : Okay, sir. And sir, if you see excluding the standard asset provisioning also, there's probably a slight uptick in credit costs. So -- I mean the delinquencies

Question: Anuj Agarwal - Bank of America Merrill Lynch - Analyst : The first question is from Slide #28. So you talk about taking a more cautious view on new sourcing. But if I look at the market share across various parameters, cards, spends and transactions, we have seen a significant decline over the last 12 months or so. So can you talk about maybe the strategy around that? Would it be taking precedence over growth in the near term, and we could see this trend in the next coming years? Or is there some strategy to have a reversal there?

Question: Anuj Agarwal - Bank of America Merrill Lynch - Analyst : Got it. And just to delve a bit more on the guidance. So the 2 parameters, one is credit cost and NIM, I think, which are of interest. Firstly, on the NIM side, is it fair to assume this is the bottom? And unless there is a further rate hike by the regulator, we are not going to see any further NIM deterioration. And second part on the credit cost. So sir, talk about YoY decline and -- but still elevated at 7% plus for the next year. So how do we see the trend line in the second half? Like should we see a number closer to 7% and maybe declining below 7% in FY '26, if I were to take extrapolated to the next year?

Question: Nitin Agrawal - Motilal Oswal Financial Services - Analyst : Sorry, am I audible?

Question: Nitin Agrawal - Motilal Oswal Financial Services - Analyst : Am I audible?

Question: Nitin Agrawal - Motilal Oswal Financial Services - Analyst : Sorry for this. Sir, I have two questions. One is on OpEx, where in the cost ratios have improved considerably this quarter, which we have attributed to the lower corporate spends and this being a non-festive quarter. So how should we view the corporate spends now in FY '25? And any color around the -- therefore the cost income ratio for the year?

Question: Nitin Agrawal - Motilal Oswal Financial Services - Analyst : Okay. And secondly, on margins, while we have said that the cost of funds have gone up, but sequentially, like 7.6% from there, it has come down to 7.4%, but the yields have also come down by 40 basis points. So...

Question: Nitin Agrawal - Motilal Oswal Financial Services - Analyst : Okay. And alongside on the yields then, that like...

Question: Nitin Agrawal - Motilal Oswal Financial Services - Analyst : Okay. Got that. And lastly, if you can share some color on the UPI spends because if you look at the monthly UPI spends that is running very close to the overall average spend per card. So whatever is the RuPay portfolio is there, how is the non-UPI spend on those RuPay cards? How is that trending?

Question: Piran Engineer - CLSA India Private Limited - Analyst : Congrats on the quarter. Couple of questions. Firstly, Sir, mentioned that you are resorting to restructuring of loans, I think I heard something like that. Can you just elaborate a bit more on that?

Question: Piran Engineer - CLSA India Private Limited - Analyst : Okay. So -- sorry, these are before they turn -- these are like Stage 2 customers? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 26, 2024 / 1:00PM, SBIC.NS - Q4 2024 SBI Cards and Payment Services Ltd Earnings Call

Question: Piran Engineer - CLSA India Private Limited - Analyst : Stage 3, okay. Okay. Fair enough. And sir, secondly, I just wanted to understand what parameters do network incentives depend on? Because I see this year, our spend -- retail spends are higher, but our number of card sourcing is lower and our network incentive seems to be lower than what I thought would have come through.

Question: Piran Engineer - CLSA India Private Limited - Analyst : But sir, the interchange would also be lower, right, then?

Question: Piran Engineer - CLSA India Private Limited - Analyst : Got it. Got it. Fair enough. And just lastly, in terms of rental spends, we used to track about 10%, 12% of our total spend used to be rental-related spend. Has that sustained as it come out? And are we still charging INR 200 per transaction on that?

Question: Shubhranshu Mishra - Philip Capital Pty Limited - Analyst : So when I look at the job openings on SBI Cards websites, I think almost 50%-50% of the job offerings are either for recoveries or collections. So is this because of heightened delinquencies, strictly delinquencies of very high churn and those [ deals ] that's the first. Second and also around credit cost, I think has been much spoken about it. We are speaking of close to 7% kind of credit cost in our credit card business where we get so much of data in one spend versus, say, when you look at other business models like microfinance, where there are hordes of new to credit customers and we get a slightly lower credit cost of similar credit cost. So -- and the quality of customers also would be different based of the income levels. So how do we compare these 2 business models, microfinance and credit cost? And the demographic cohort should also be different and it's just a bit overwhelming to get similar kind of credit cost.

Question: Shubhranshu Mishra - Philip Capital Pty Limited - Analyst : Sir, second question is why is credit cost comparable to a microfinance business where the [indiscernible] level and demographics are also [indiscernible] than the income level than the demographics that we [indiscernible]. And there will a lot more new to credit customers in the microfinance business system.

Question: Shweta Daptardar - Elara Capital - Analyst : Sir, you did mention in the opening comments that we have been taking corrective actions with respect to the customer cohort, which has availed multiple credit lines and later on added to our delinquency. But have you revamped or rebuilt predictive analytical models wherein customer data or cash flows that are easily available to us sort of give us some early warning indicators and therefore, there might be certain credit cost guidance that we can provide. So are we sort of working on these lines?

Question: Rohan Mandora - Equirus Securities Private Limited - Analyst : So just wanted to understand, have you got any recommendations from the regulator on any corrective actions? Similarly, considering the fact that recently, a lot of entities have got some updates from the regulator. That was one. And second, from a strategy perspective, if you look at it, right now, whatever actions have been taken on card industry, the competitive intensity is reducing because many players are going slow on that business. So how should we look at SBI Card over the next 2 years, would you look to aggressively gain market share or would like to be conservative given the macro environment right now?

Question: Rohan Mandora - Equirus Securities Private Limited - Analyst : As just a data driven question, sir. You alluded to that on the corporate spend the interchange is between 1.9% to 2.1%. How should we think on the cost and that will come up and the spend [indiscernible] if you can bolt a guide on that? And secondly, on the 30-plus DPD flows during March at a portfolio level, how would that be [visible] in the December 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. APRIL 26, 2024 / 1:00PM, SBIC.NS - Q4 2024 SBI Cards and Payment Services Ltd Earnings Call

Question: Rohan Mandora - Equirus Securities Private Limited - Analyst : Ballpark range, average?

Question: Abhishek Murarka - HSBC Securities & Capital Markets - Analyst : So I just wanted to understand that you've been saying that you've been reducing limits of, let's say, 1.5 lakh accounts last quarter and so on. Can you help me understand what -- maybe 1 or 2 attributes that you observed, which gives the trigger for you to cut back on limits. So how do you go back identify that, let's say, for somebody who's been given a card 12 months back or 15 months...

Question: Abhishek Murarka - HSBC Securities & Capital Markets - Analyst : And to get this data apart from the transaction data, which of course you get automatically, but to get the other data of leverage, et cetera., how often do you have to hit the Bureau or maybe do you have to ask the customer for consent? How does that work?

Question: Abhishek Murarka - HSBC Securities & Capital Markets - Analyst : And that happens on a quarterly basis?

Question: Saurabh Kumar - JPMorgan Chase & Co. - Analyst : I am on the Slide 15 of yours. So just a question on this open market channel. So now you have a history of more than 6 years of this business. Given the delinquency, given the operating cost of the channel, do you think that the profitability of this channel is better than the company average? Or it will be lower than the company average?

Question: Saurabh Kumar - JPMorgan Chase & Co. - Analyst : Despite the higher sourcing costs and the delinquencies here?

Question: Saurabh Kumar - JPMorgan Chase & Co. - Analyst : Yes, I understand. So the revolve basically is on the interest...

Question: Pranav Gundlapalle - AllianceBernstein - Analyst : You have guided on the credit cost for next year, that it would be about the 7%. Would you also be able to provide a sense of where your Stage 2, Stage 3 numbers, the share could trend to by end of next year?