SBI Cards and Payment Services Ltd Q4 2025 Earnings Call Transcript

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

Question: Anuj Singla - Bank of America - Analyst : Coverage for the Stage 1 to 3. So there has to be -- there has been a significant change on a quarter-on-quarter basis. Stage one and three have risen -- have actually come down where Stage two has risen. So can you just run us through the thought process and what is driving this change?

Question: Anuj Singla - Bank of America - Analyst : Okay. So going forward, we should see it as a steady state from here on?

Question: Anuj Singla - Bank of America - Analyst : Okay. Got it. And the second question relates to the opening remarks by ma'am. So two things. One is, if I understood it correctly, you said the NIMs are going to be steady from here on. So should not the lower cost of funding drive a NIM expansion during the course of the year? So that's one. And the second, while you mentioned the credit cost normalization will be -- will reflect the macroeconomic, how the macro plays out. But when we, let's say, roll forward, let's say, 6, seven quarters down the line, when can we look at a sustainable level of credit cost? What would that number be?

Question: Anand Dama - Emkay Global - Analyst : Sorry for joining late. So my question again is on the margin front, I think which was a question of the previous candidate as well. So in case of margin side, you are saying that the cost of funds will come down, whereas you run a typically fixed rate assets book and that the interest reversals on the NPAs also should come down as you see in asset quality improvement. And why shouldn't we have an exit margin in FY26, which should be far better as compared to what we see in FY25?

Question: Anand Dama - Emkay Global - Analyst : Sure. Secondly, the corporate spends have actually gone up during the quarter. Is there any reason why there is a lumpiness in terms of corporate spend or it's more seasonal in nature? And secondly, your depreciation is negative during the quarter. Any reason for that?

Question: Anand Dama - Emkay Global - Analyst : And lastly, if you can tell us like what's the share of our RuPay card portfolio in our overall CIF?

Question: Shweta Daptardar - Elara - Analyst : A couple of questions. So ma'am, the gross write-off pool continues to remain elevated. Could you just throw light on what is the customer cohort behavior and profiling here? And also, I remember last quarter, you sort of alluded on minimum due balance customers. So has there been any sort of curtailing of movement from this pool towards write-off or, say, delinquency pool? 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 24, 2025 / 1:45PM, SBIC.NS - Q4 2025 SBI Cards and Payment Services Ltd Earnings Call That's question number one. And just related to that, so I understand you explained quite in an elaborate fashion. But still why this kind of significant spike in Stage two ECL? I mean, has it got to do also with any sort of customer behavior that might portend risk -- potential risk in future? So yes, that's my first question.

Question: Shweta Daptardar - Elara - Analyst : Okay. Just a follow-up there. So are you satisfied with the new customer acquired portfolio behavior?

Question: Shweta Daptardar - Elara - Analyst : And any color on minimum due balance paying customers?

Question: Shweta Daptardar - Elara - Analyst : Okay. And my second question is, is the OpEx benefits on a sequential basis is coming from scaling back of rewards and benefits that has happened April 1 onwards?

Question: Rohan Mandora - Equirus Securities - Analyst : Sir, just on the asset quality, please, I wanted to understand any quantifiable pool that you have in terms of the stressed assets as we speak as of 4Q end? Like how should one look at it on -- the potential stress that will come into FY26, if we have to get some sense on that, if you could give some color around that.

Question: Rohan Mandora - Equirus Securities - Analyst : But sir, maybe on the flow rates, if you can qualitatively give from the peak level, how much would it have improved?

Question: Zhixuan Gao - Schonfeld - Analyst : Just on your comment on that, we are talking about margin may be stable because on the new side, there may be some changes in mix on the revolver, EMI and transactor. So I just want to understand on your new sourcing, what's the difference between the EMI percentage or revolver percentage or your new source customers in the last one year versus the average portfolio? Any rough quantification on the gap?

Question: Zhixuan Gao - Schonfeld - Analyst : So is the bias say, below 20% or any rough range?

Question: Mahrukh Adajania - Nuvama - Analyst : So my question -- I had two questions. Firstly, on growth, when do you see it improving to, say, mid-teens, right? Because I guess a bit of discussion on this happened last quarter as well. But what is your view now? When do you see it improving to mid-teens? And there has been already a lot of discussion around margins. But all I want to know is that will you -- I mean, usually, credit card yields are quite sticky. They don't fall much and they don't fall very steeply like, say, home loans or other rates. So are you expecting to cut yields? I mean, how does it -- I know that the investment book can reprice. But just in terms of card yields, are you -- would you be doing major cuts as the rate cut cycle progresses? Or how do we view this?

Question: Mahrukh Adajania - Nuvama - Analyst : Got it. Got it. And just one clarification. There is no regulatory nudge on credit card yields as such, right?

Question: Punit Bahlani - Macquarie Capital - Analyst : Just on the new sourcing mix, the 4Q mix towards BANCA is like 63%. Am I audible?

Question: Punit Bahlani - Macquarie Capital - Analyst : Yes. The 4Q mix towards BANCA is 63%, and it's like the highest ever seen. So is this like a new strategy where we are shifting towards more BANCA mix? Or is this like this quarter, we took a break from our sourcing or something like that? Any comments on that? Yes.

Question: Hardik Shah - Goldman Sachs - Analyst : I have two questions. First is on the cost side. Why is the OpEx on an absolute basis higher in 4Q versus 3Q? I understand cost to income is lower. But on an absolute level, why is it higher?

Question: Hardik Shah - Goldman Sachs - Analyst : I am looking at -- so it's INR2,074 crores versus INR2,058 crores. This is from your update that you've given out.

Question: Hardik Shah - Goldman Sachs - Analyst : Okay. This could be maybe because of restatement. Okay. That's okay. My second question is -- that's okay. And this could be because of restatement. I will look into this. The second question...

Question: Hardik Shah - Goldman Sachs - Analyst : Understood. Okay. And my second question is on the Stage three coverage being lower. So I understand the logic of increasing the Stage two coverage, but what's the logic of reducing the Stage three coverage?

Question: Himanshu Taluja - Aditya Birla Sun Life AMC Limited - Analyst : Sorry, I joined the call a bit late. There's another company. If you have already indicated, can you just repeat your comments since you have mentioned that slippages have improved, flow rates are showing improvement, Stage 2, there's an improvement in the Stage 1 numbers as well as well as some bit of the pace of write-offs is also showing, by when -- so how do you expect the credit cost to behave in the coming quarters? And second, by when do you expect you can reach a normalized credit cost between 6% to 7%? So that's my first question.

Question: Himanshu Taluja - Aditya Birla Sun Life AMC Limited - Analyst : Yes.

Question: Himanshu Taluja - Aditya Birla Sun Life AMC Limited - Analyst : Sorry, ma'am, I'm not expecting 6% to 7% credit cost in FY26, but can you give some color, can we expect the similar trajectory around this trajectory in FY27? 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 24, 2025 / 1:45PM, SBIC.NS - Q4 2025 SBI Cards and Payment Services Ltd Earnings Call

Question: Himanshu Taluja - Aditya Birla Sun Life AMC Limited - Analyst : Fair. And second question is, since you're acquiring customers around one million new card addition or the new accounts addition every quarter, how do you expect this trajectory going ahead? And lastly, how do you expect the -- how should you expect the cost-to-income ratio to settle around?

Question: Tanuj Jain - JPMorgan - Analyst : So I would just want to circle back to the -- an earlier question where you said your revolve rates on your newer vintages are around 10% to 15% lower. So like if we take that to be at around 20.5% to 21.5% revolve rate, so should we see this 24% slowly inching up to that particular level if your tightened underwriting standards that you have had over the last one year remains? And do you see any reason why the tightened underwriting standards would reverse going ahead? That's my first question.

Question: Tanuj Jain - JPMorgan - Analyst : Okay. Understood. So as the vintage of these newer acquisitions increase, you still expect your revolve rate to settle between that 24% mark on average over time?

Question: Tanuj Jain - JPMorgan - Analyst : Okay. Understood. And just one thing -- my second question is, I think your spend-based income, which is largely interchange, has seen a strong increase QoQ. So is the primary reason for that is that you have higher interchange on your corporate spend relative to your retail spend?

Question: Mohit Jain - Tara Capital Partners - Analyst : Hello, can you hear me sir?

Question: Mohit Jain - Tara Capital Partners - Analyst : Ma'am, just wanted to ask regarding the growth we are expecting in our receivable balance considering the fact that the revolver may be slightly lower and we'll continue (inaudible) quarter. What kind of growth we expect (inaudible)?

Question: Mohit Jain - Tara Capital Partners - Analyst : Hello.

Question: Mohit Jain - Tara Capital Partners - Analyst : Yes, yes ma'am. Yes, ma'am. I was asking as to what is the rate we can expect in terms of the receivable growth for the next year, considering the fact that revolver may be slightly lower and the credit card addition rate is going to be at the same rate of 1.1 million. So what kind of a growth should we expect?

Question: Rohan Mandora - Equirus Securities - Analyst : This is more on the spend growth at an industry level. So if you look at the first 9, 10 months, it's been around 15% overall. And our spend growth is also at around 15-odd percent if you look at it. I just want to understand with some players going slow on credit cards, is there a likelihood of we 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 24, 2025 / 1:45PM, SBIC.NS - Q4 2025 SBI Cards and Payment Services Ltd Earnings Call gaining spend market share? And second, over the next two to three years' timeframe, what kind of spend growth are you envisaging for the industry?

Question: Rohan Mandora - Equirus Securities - Analyst : Sure, sir. And sir, second was on what was the share of UPI-based spend in total retail spend?

Question: Rohan Mandora - Equirus Securities - Analyst : UPI spends on -- in total retail spends. Share of UPI spends.

Question: Piran Engineer - CLSA - Analyst : I just had one simple question. Out of our loan book of INR55,000-odd crores, how much would come from customers acquired in FY25? 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 24, 2025 / 1:45PM, SBIC.NS - Q4 2025 SBI Cards and Payment Services Ltd Earnings Call

Question: Piran Engineer - CLSA - Analyst : No, no, '25, this year, in the last 12 months?

Question: Piran Engineer - CLSA - Analyst : Okay. But let's say, something acquired two years back, that would be -- would have reached a sort of steady state in terms of, say, spends per month and revolve share translating to loans per card?

Question: Piran Engineer - CLSA - Analyst : Understood. And is there a way I can think about, let's say, drop-off rate or fatigue rate that, say, five years later, people switch to another card? I'm just trying to back calculate what percentage of your book comes from what vintages. That's my exercise. For example, something you acquired in 2015, if you acquired one million cards in 2015, for example, how many of them would still be with you and how many would have dropped off?

Question: Venkata Krishnan Krishnan - HDFC Securities - Analyst : I had a couple of queries. One, what are the levers available, Girish, to improve corporate card profitability? When the mix does [ refleet ], what are the levers available with SBI Card to be able to pull back or lift your IRRs there? 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 24, 2025 / 1:45PM, SBIC.NS - Q4 2025 SBI Cards and Payment Services Ltd Earnings Call

Question: Venkata Krishnan Krishnan - HDFC Securities - Analyst : The reason I'm asking that, Girish, is you said you voluntarily let go off some market share there because you were trying to recalibrate your own approach and strategy as well.

Question: Hardik Shah - Goldman Sachs - Analyst : Next question comes from the line of Hardik Shah with Goldman Sachs. My next question is on the fee income growth. Given your corporate spends growth has increased and even cards in force growth has increased, what explains tepid fee income growth of 5% YoY? And how should we think about that in the next year?

Question: Hardik Shah - Goldman Sachs - Analyst : Understood. Okay. And one clarification again on the previous question that I asked. So with the Stage three coverage going down, does that imply your loss given default was lower with these ECL refresh?

Question: Zhixuan Gao - Schonfeld - Analyst : Just a couple of follow-up questions. Number one is the cost to income 55% to 57% you're talking about for FY26 because for FY25, we are at 52-odd percent, right? So why would there be such a big jump?

Question: Zhixuan Gao - Schonfeld - Analyst : Got it. And next one is you say you're not giving quantum of improvement from a Q-on-Q basis in terms of 30-day flow rate or 90-day flow rate. So -- but in terms of the rate of improvement, if you compare this quarter's rate of improvement versus last quarter's Q-on-Q rate of improvement, how does that compare? Is the rate of improvement accelerating, getting faster or is it similar or it's actually diminishing?

Question: Venkata Krishnan Krishnan - HDFC Securities - Analyst : This one is on cost of funds. Last time around when you saw low interest rates in the system, SBI Cards had benefited disproportionately. I'm just wondering structurally, has anything changed between then and now in terms of elasticity on cost of funds.

Question: Venkata Krishnan Krishnan - HDFC Securities - Analyst : And on the liabilities side, then versus now, there is not much of a structural change, right? Because you benefited immensely in that stage of the cycle then. I'm just wondering is there any reason why you may be -- 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 24, 2025 / 1:45PM, SBIC.NS - Q4 2025 SBI Cards and Payment Services Ltd Earnings Call

Question: Vikram Subramanian - Marshall Wace - Analyst : Am I audible?

Question: Vikram Subramanian - Marshall Wace - Analyst : It pertains to gross Stage two and gross Stage 3. Basically, if I look at the trajectory of gross Stage two from first quarter, it's been going down steadily. And in fact, we have had a reasonably significant improvement in this quarter. This is on gross Stage 2, but Stage three is kind of sticky. So how should we look at this? What could be the outlook? Should we expect Stage three to remain at these levels, but Stage two to continue to reduce at the pace?

Question: Vikram Subramanian - Marshall Wace - Analyst : My question properly. My question was this reduction in Stage 2, is it -- is there also some nonbusiness reason, meaning some kind of reclassification?