Target: ₹980
CMP: ₹781.55
Despite continued margin pressure and higher provisions, SBI Cards and Payment Services (SBIC) reported in-line PAT at ₹600 crore (3 per cent YoY/17 per cent QoQ), driven by higher fees which, in turn, were led by business development fees on higher volume milestones and other fees including charge on rental spends.
Higher provisions were mainly because of some inch-up in NPAs (Gross stage 3 up 14bps QoQ to 2.4 per cent) from the vintage pool and tightening of the ECL model, leading to a 20bps (₹20 crore) increase in LLP.
SBIC clocked healthy new card addition at 1.4 milion (CIF@16.8mn), leading to slight improvement in the CIF market share (up 40bps QoQ) to 19.7 per cent. Spends growth, too, was strong at 32 per cent YoY/4 per cent QoQ, with corporate spend coming back and leading to increase in its share at 23 per cent vs 21 per cent in Q3.
Receivables growth tracked the spends growth, at 32 per cent YoY/5 per cent QoQ.
Key downside risks to our TP: Slower than expected spends-growth/market-share, prolonged funding cost pressures, and industry-wide regulatory cut in MDR/ICF.