Good evening, Anuj. Regarding the market share, our strategy has always been, and we stated earlier also that we would like to maintain or grow the market share. With respect to cards in force, we are at around 18.6%. As we stated, two quarters back, we had done some cleaning of our portfolio where there were inactive accounts and there, we were unable to get some KYCs from the customers, so closed those accounts. On the spends piece, in fact, we were doing better till quarter three, RBI data is published. Until quarter three, we are doing quite well. In quarter four, the impact has come essentially because of the business-to-business payments which we stopped from mid-February. If you see the data, this brought the share of the corporate spends on the overall spend mix down. And because of this, you see a decline in share. We would get this back on track from June -July onwards. We have already started working on this front. So, you should see at least the baseline coming back very quickly and growth from there. On the transactions piece, we are betting on UPI, and you have seen the RuPay data, which has also been put across. So, in Tier 2 plus towns, we see a far better pickup of RuPay customers using it on UPI terminals. So, these are the three action points that we are taking. But on a strategic basis, we would want to maintain and grow market share on all three fronts.
SBI Cards and Payment Services Limited analyst Q&A
Got it. And just to delve a bit more on the guidance. So, the two 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 Y-o-Y 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?
I'll take the first question, Anuj. On the NIM, we've said earlier that we do expect the cost of funds to be marginally higher but also expect that we should be able to transmit that increased cost, whatever marginal increase that might be there on the ass et side as well. So, I expect the NIM to be in the around the same level, plus , minus obviously, depending on where finally the cost of funds happen, how soon can we transmit that on the asset side, but around these levels only. And this is, again, I'll qualify based on the current understanding of when the rate cuts are going to happen, nothing in the first half of the year for sure, and this is based on that understanding.
Coming to the credit cost part. We had stated in the previous earnings call also that based on the portfolio analysis and an account level scrub, we had identified, and we have been monitoring closely the accounts, which are having early trends of delinquency. And we have taken actions on that part. Now what happens is that as the recent acquisition component increases and the portfolio mix stabilizes, definitely , there will be improvements and that's where we are seeing that there will be a reduction. But whether it will come down below 7%, it will be difficult to estimate and comment as of now.
Okay. Got it, sir. Thank you very much.
Thank you. The next question is from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead.
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 cost income ratio for the year?
So, we are working on getting our corporate spends back to maintain the market share and grow it. This would take this first quarter to get us back to almost close to normalcy. So, from second quarter onwards, you can estimate, as was stated in the opening remarks also, we will grow back to the 55% plus opex to CV ratios. This quarter, you would see a lower number.
Okay. And secondly, on margins, while we have said that the cost of funds has gone up, but sequentially, like 7.6% from there, it has come down to 7.4%, but the yields have als o come down by 40 basis points.
Nitin, I would suggest that instead of looking at the 2-point average, which is where it is showing at 7.6% to 7.4% on page number 31, we have also given the weighted daily average cost, where you will see it's gone up from 7.3% to 7.5%. And that is a true reflection of where the cost of funds is.
Okay. And alongside on the yields then, that...?
The yields dropped marginally by 10 basis points, 11 to 10.9 on a like -to-like basis monthly average basis.
So, yield actually went up.
Sorry, not yield. NIM.
So, yield went up from 16.6% to 16.7%. And cost of funds went up from 7.3% to 7.4%. The NIM from 11% to 10.9%.
10.9%, yes.
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, let's say, RuPay portfolio is there, how is the non -UPI spend on those RuPay cards? How is that trending?
So monthly average spend per customer is in the range of INR 1,48,000 which comes to around INR12,000, INR13,000 per customer per month. But because 50% of them are active every month, spend per active customer goes up to INR25,000 - 26,000 per month. So, this INR13,000 that you see is an active customer spend. These all customers are active. So like -to-like these customers are spending INR13,000 on UPI and the balance INR12,000, INR13,000 is happening on the card.
We have a next question from the line of Piran Engineer from CLSA. Please go ahead.
Congrats on the quarter. Just a 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?
So basically, we provide them some headroom to pay out. So basically, it will be converted into EMIs. And like any amortized loan, it is allowed to be paid over a certain period, can vary up to 12 months or more also . So that depending upon their own cash flows, they are able to pay us out comfortably without asking for the entire delinquent amount to be paid upfront after they have turned NPA.
No. These are Stage 3 customers.
Stage 3, okay. Okay. Fair enough. And sir, secondly, I just wanted to understand what parameters network incentives depend on. Because I see this year, 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.
Piran, network incentives depend on various variables, but they also vary from network to network. We look at, essentially, there is a cost of using a network and then there is an incentive with kind of a return back for certain performances that we do, which we get from the network. Essentially, we are interested in the net cost. Net cost for us for all 3 networks, which is Visa, MasterCard and RuPay is broadly similar. RuPay, as a network, last year, if you see, we have done many more cards on RuPay. We have increased the total volume to almost close to 3 million plus. Given that scenario, in case of RuPay the net work incentive amount is lower, but the cost of RuPay network of using the RuPay network is also fairly low. So, you don't see that in the cost line, but you don't also see that in the network incentive line al so. Net cost wise it is all similar.
But sir, the interchange would also be lower, right, then?
Yes. It will show in a cost line also.
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, has it come off and are we still charging INR200 bucks per transaction on that?
We are still charging a fee for every rental transaction. However, rental -spend growth has reduced considerably. So, if the overall retail spends has grown close to 27% year-on-year, rental spends growth rates would be half of that.
We'll take the next question from the line of Nishant Shah from MLP. Please go ahead.
So, I just want to go back to this cost bit a little again. On the P&L summary slide which is slide number 12. So sequentially, we've seen a fee and other revenue decline of about INR300 crores. So, from INR 2,500 crores down to INR 2,200 crores. And the operating cost is down from INR2,400 crores down to INR1,900 crores. So, about INR 500 crores. What part of this is attributable to corporate spends coming off? If you could help understand that? Because I'm trying to understand that what part of this cost reduct ion is more sustainable. Is it to do just because corporate spends came off so the cost came off the moment they are back, the spends come -- like this opex comes back or is there an element of like higher promotional costs during the festive period in the base and like net-net to the fee income and the cost income of corporate cards and spend is about similar. Could you help me understand that a bit, please?
I think the way to look at it would be, look at the cost -to-income ratio for a non-festive quarter and this quarter because that's comparable. Don't compare to quarter 3 cost -to-income to a quarter 4 cost-to-income because quarter 3 is any way influenced by higher cash back spend that we do for the various campaigns that we do which is where we said earlier that we expect that the cost-to-income ratio for the full year to be in that range of 58%, 59%, 60%. This quarter will be lower because as we pick up the corporate spend it will be around 55 -odd percent or maybe a little lower than that as well. So, 51% reported for quarter 4, we're talking about 55% kind of a range for quarter 1. That should just give you an idea in terms of if the corporate spends come back. What element of the operating expense will be back with the spends back. And also, one last comment on the fee income. The fee obviously is lower because of the, as you mentioned the corporate spends were lower and therefore the interchange also goes lower. So, to that extent as the corporate spends come back this number will go up as well.
Usually, the interchange that you receive on corporate spends is 1.9% to 2.1% depending on the kind of spending. So, for every, let's say, INR1,000 crores, it's close to INR 20 crores worth of revenue line which you can add there and that will also give you the sense of drop because of the corporate card spending from a quarter-to-quarter revenue.
Yes. But simultaneously you need to add it to the cost also.
Simultaneously, you need to reduce the cost there. Just one more point. You should look at our interest income growth on quarter-to-quarter that has grown. So that's going to go stable because that is a baseline asset buildup which has already happened in that sense. And this particular part if the revenue comes in then the cost will also come in and both are very directly linked to each other.
Got it. And that’s perfect. That's clear. And our second question, one of a small, midsized private sector banks mentioned in their call that they're expecting a circular on credit cards. So, it didn't really specify what that was around, b ut like if you've been engaging with the regulator, could you comment about what's in the pipeline in terms of regulation because the comment was also that it's perceived to be a little more stringent whatever that means. So, if anything in the pipeline could you just talk about it what nature of this regulation is coming in?
No, we won't venture into regulators ’ area. It is for regulator to come out with whatever guidelines. They have been coming out with various guidelines and we fall in line, we complied with them. We won't like to speculate on what regulator would like to do.
Okay. Yes. The context of the question was just like ther e is a heightened regulatory scrutiny around that and there are monoline company. So, the anxiety levels are a little higher. All right. Perfect. Those are my two questions.
Thank you. The next question is from the line of Shubhranshu Mishra from Philip Capital. Please go ahead.
So, when I look at the job openings on SBI Cards websites, I think almost 50% -50% of the job openings are either for recoveries or collections. Is this because of heightened delinquencies, a sticky delinquency of very high churn and those deals that's the first. Second is 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 we look at other business models like microfinance where there are hordes of new to credit customers and we get a slightly lower cre dit cost of similar credit cost and the quality of customers also would be different based of the income levels. So how do we compare these two business models , microfinance and credit cost a nd the demographic cohort should also be different and it's just a bit overwhelming to get similar kind of credit cost?
I'll take the first part first. The second part, I was not very clear. The first part regarding jobs. Well, there are jobs to offer, jobs to be taken in the entire industry. So, people join us. We do need people; we do need hands at various point of time. So, job openings will keep on coming, and we are part of the industry. There will be some amount of churn, some amount of heightened business activity. So, it's a combination of all taken together where we require people, and we keep on augmenting our strength as and when wherever we require. So , I won't be able to join you in your assessment whether to what extent this is linked to attrition or the credit cost part of it. But then this is about process. The second question, I could not understand.
Sir, second question is why our credit cost is comparable to a microfinance business where the income level and demographics cohorts is inferior to the income level than the demo graphics that we offer. And there will be a lot more new to credit customers in the microfinance business system?
So, I think you should look at all the metrics together, not just the credit cost number . Look at the net interest margin that other businesses deliver. And finally, the proof of the pudding is the ROE that we deliver and the kind of capital base that we have. So, we deliver 20% plus ROE on 20% plus of capital adequacy.
The next question is from the line of Gao Zhixuan from Schonfeld. Please go ahead.
Congratulation on the quarter. Just wanted a little more on the comments of the new vintage is better. First of all, which vintage are you talking about? Is it FY '24 vintage?
Yes. The vintage is '22, '23, '24. That is now contributing to about 45% of our book. This number used to be about 40% in the last quarter.
Yes. So, when you say new vintage is doing better, are you just referring to FY '24 vin tage in the last 12 months?
This is 23-24.
Okay. So - and also, do you mind elaborating a little bit on what do you mean by new vintage is better?
I will complete, why '23-'24 because somewhere during the beginning of calendar year '23, we started initiating the corrective actions. So that's where the recent acquisitions are helping us out. As we have stated out in our call also that after we have initiated various steps beginning from the calendar year of '23 we have now getting the results out of it, and we expect that to continue. Sorry, I interrupted you, but I thought I will complete that.
Thank you so much for that. So just wanted to understand when you say the new vintage is better, do you mean that it's better than the average credit cost, let's say, the new vintage credit cost now is better than average credit cost of delinquency or you mean it from a vintage analysis basis b ecause if I recall correctly, the credit cost takes about 24 mo nths in which peak delinquency and the start is pretty benign. So, just wondering whether you can share more color on that?
Yes. So, this is a like -to-like comparison of the early delinquency performance of the new sourcing versus the performance of sourcing done in the prior period at the same point of their life. So, this is called the M6 30 plus, 6 months on book, 30 -plus delinquency it’s a standard industry metric. That's performing better for our new sourcing versus the sourcing done in the prior period.
Got it. And the magnitude of how much better, is there any way you can share the magnitude with us?
We don’t provide that level of detail in our disclosures.
Thank you. The next question is from the line of Shweta Daptardar from Elara Capital. Please go ahead. Shweta Daptardar Thank you sir for the opportunity. 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?
Yes. So, I will invite my Chief Credit Officer to respond. Nandini Malhotra Shweta, we have rebuilt all our models right from acquisition to portfolio to collection , using the spends, repayment and cash flow data that is available for these customers. And we have started utilizing these models to take corrective actions, whether it is in terms of better selection of customers or in terms of identifying existing customer segments for corrective actions, which could be limit reduction, which would be basically early payment reminders, et cetera., to also looking at customers who are delinquent, so that we can identify the right type of offers for them. We talked about hardship. We talked about reaching out to them in a slightly different manner. So, we are doing all those actions basis newly developed predictive analytical models.
The next question is from the line of Rohan Mandora from Equirus Securities. Please go ahead. Rohan Mandora Good evening, sir. Thanks for the opportunity. 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?
The first part first. Answer is no. We do not have a anything from the regulator, which is a red flag. As you all are aware, being a regulated entity, we are subjected to periodical oversights. That continues. We submit our compliances, that's a regular process. Beyond that, we don't have anything else. You're right. Competitive intensity has reduced in the last quarter or so. Our stated position is that we would want to maintain and gain market share. In the next 2 quarters, we are looking at close to 1 million to 1.1 million only. This has to be done in a balanced way. We will want to increase our new customer sourcing and gain share. But while getting our credit costs at a much more reasonable level. So, these are both the things will go hand in hand. It cannot be that we , in the pursuit of market shar e, we will not look at the credit cost. So, both things will continue to get balanced. As our Chief Credit Officer was mentioning, new models have been developed, new work has happened on some of these areas. We should be able to have much better selection of customers with these actions.
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 comes up? 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 vis-a-vis in the December quarter?
On the first part, it's a deal -to-deal basis. So, it is dependent on what kind of deal you've done with which partner. So whatever return goes out of that, which is called pass back or return back to the customer is deal -to-deal dependent. It is a confidential information. So really, we don't declare that particular line.
Ballpark range, average?
Won't be, but it's a competitive number. It's a market -- proprietary information.
The next question is from the line of Abhishek Murarka from HSBC. Please go ahead.
Hi, good evening. 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...
We are looking at their spends and repayment behaviour with us. We do look at if there are any issues that we see in the Bureau records. We also see if there is an increase in leverage of that customer and we feel that even if there is no stress that observe right now, it could be ensuing stress because of the leverage that is building up. So, these are some of the key features, besides we have also started looking at the transaction spend with the customer, seeing how if there is any shift in the transaction pattern over a period of time, which may indicate that there are some signs of economic stress.
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?
So, for all our customers, we get the Bureau data at least once in a quarter. These days, we have increased the frequency of Bureau hits for a certain set of customers, as per our model, becomes high risk. Apart from that, there are a lot of triggers that we take from Bureau. So, if the customer takes another trade line or takes suddenly 3 or 4 personal loans, all that information comes back to us as trigger and gets fed into these models.
And that happens on a quarterly basis?
No. Triggers are on a daily basis.
Triggers are on whenever the Bureau gets updated.
Okay. All right. Got it. Thank you so much.
Thank you. The next question is from the line of Saurabh Kumar from JPMorgan. Please go ahead.
I am on the Slide 15 of your Presentation. 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?
It is similar to company average.
Despite the higher sourcing costs and the delinquencies here?
If we have higher sourcing costs, it has slightly higher delinquency as this one, but it has higher revenues.
Yes, I understand. So, the revolve basically is on the interest...
Higher spend, higher fees, higher interest income, more premium.
Hi, good evening. Thanks for taking my question. 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?
We don't give that level of detail in our disclosures.
Okay. No worries. Thank you.
Thank you. We'll take that as a last question for today. I now hand the conference over to Mr. Abhijit Chakravorty for closing comments. Over to you, sir.
Thank you, everyone, for being with us and interacting with us. SBI Card has continuously proven its metal to achieve strong growth and set new benchmarks. Going ahead to, we will ensure that SBI Card continues its sustainable and profitable path. I would like to share my gratitude towards our shareholders, investors and business partners for their continued trust and support to SBI Card. Thank you.
Thank you, sir. On behalf of SBI Cards and Payment Services Limited, that concludes the conference. Thank you for joining us, and you may now disconnect your lines.