Tag - SBI card

30 Sep

Expect yearly addition of cards to be 2.4 million – SBI Cards

Update on the Indian Equity Market:

On Thursday, NIFTY closed 0.5% lower at 17,618. Top gainers in NIFTY50 were Bajaj Finance (+2.1%), Bajaj Finserv (+2.1%), and Tata Motors (+1.0%). The top losers were Power Grid (-2.8%), Asian Paints (-2.3%), and Shree Cement (-2.2%). The top gaining sectors were Realty (+1.5%), Consumer Durables (+1.0%), and PSU Banks (+0.8%), while the top sectoral losers were Media (-0.9%), Metal (-0.9%), and Bank (-0.8%).

Experts of an interview with Mr. Rama Mohan Rao Amara, MD & CEO at SBI Cards aired on CNBC TV18 on 29th September 2021:

  • The industry has recorded strong spending at the aggregate level. SBI Cards crossed pre- pandemic levels in terms of run rate.
  • The company adopted sustainable strategy and leveraged on every opportunity that they have that is reflected in improvement in market share. Both channels- direct sources and the parent company SBI are contributing equally to improvement in market share.
  • The results of strategy they implemented are reflecting in their improvement in market share, the market share was improving steadily and they have aim for very sustainable performance. This has also helped in diversification of risk and profitability of portfolio.
  • Gradual unlocking has a positive impact on spends per card. In 1QFY22, online spends were contributing to the card spend. With the unlocking, point of sale (POS) contribution is increasing, discretionary spends improved due to categories like jewelry, apparel, and restaurant spends are increasing. Non-discretionary categories such as insurance, health and wellness are also contributing in a big way.
  • SBI Cards aimed for 10,000 new accounts per day and they reached that level and they maintaining it consistently. They have to manage attrition for net growth of the company.
  • SBI Cards has open market and banca customer channel in open market they have many collaborations.
  • He expects growth of around 4 million card additions in a year & India is still an underpenetrated market when it comes to credit cards.
  • They are planning to expand their market into tier-III and tier-IV cities with the help of their bank channels which beneficiary for SBI Cards in customer addition.
  • The market expansion in tier-III and tier-IV cities takes slightly longer time compared to tier-I and tier-II.
  • If they are growing at 2 million, then it is safe to presume that it will be five times minimum for the industry, he mentioned.

Asset Multiplier comments:

  • The company is expected growth in tier-III and tier-IV cities, which might be lucrative for the industry.
  • SBI Cards might be have an advantage than other peers are their branch channels in tier-III and tier-IV cities which beneficiary for SBI Cards in customer addition.
  • The risk from growth of the Fintech organizations might be contraction in the market share of SBI cards.

Consensus Estimate: (Source: market screener websites)

  • The closing price of SBI Cards was ₹ 1,027/- as of 30-September-2021.  It traded at 12x/ 10x/ 7x the consensus book value estimate of ₹ 84/108/139 for FY22E/23E/24E respectively.
  • The consensus price target is ₹ 1,185/- which trades at 9x the book value estimate for FY24E of ₹ 139/-

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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05 Feb

SBI Cards IPO to hit the market this quarter: SBI Chairman

Update on the Indian Equity Market:

On Tuesday, NIFTY ended positive at 11,979 (+2.3%). The top gainers in NIFTY were TITAN (+7.3%), Infratel (+5.7%) and IOC (+5.6%). ZEE (-5.3%), Bajaj Auto (-3.8%) and Yes Bank (-2.8%) were the top NIFTY losers. All the sectors were in the green. The top sectoral gainers were Metal (+3.3%), Financial Service (+2.9%) and Realty (+2.8%).

Excerpts from an interview with Mr Rajnish Kumar, Chairman, State Bank of India (SBI) that was published in Economic Times on 03rd February 2020:

  • SBI believed that no one needed an insurance cover as far as deposits in SBI are concerned. But as far as the system is concerned, after the problems with the cooperative bank which happened in Mumbai, there was a demand that the limit for insurance cover which was set some 27 years ago needs to be revised. This move was much needed and will create more confidence in the minds of the people about banks.
  • AGR Telecom problems: According to him, the matter is sub judice and will be waiting for the Supreme Court decision. The hearing is on 4th February. He thinks and believes that the matter will ultimately be sorted out to the satisfaction of both the parties – the government and the telecom operators. He had a general discussion with a lot of people in the telecom sector where they hinted that they will have at least three to four large telecom operators and the country cannot be served with a lesser number of telecom operators. This has given Mr Kumar  confidence and hope that this matter will get sorted out.
  • Barring one HFC account, things are looking up at least on the corporate recovery front.  This HFC account was in trouble, and SBI was readying for it since September and had started providing for it. Mr Kumar had said in the past that from the recovery and resolution perspective, December and March quarters are likely to be very good for the banking system. SBI is expecting some good resolution and implementation of resolution plans in respect of a couple of large accounts.
  • The loan growth for SBI was around 7% in this quarter coming from their international banking book. There is more demand for foreign currency borrowings from Indian corporates. The retail story is intact and SBI is growing very well. The only thing is the corporate sector demand revival. The loan pipeline is fairly good. As these loans get disbursed, FY21E growth numbers may turn out to be better than FY20. The utilization of limits definitely improved in the last two months and SBI may end up somewhere around 9% YoY growth.
  • The loan processing fee has improved significantly on a QoQ basis for SBI. It indicates that during the December quarter, SBI has processed more proposals. The loan pipeline is of more than Rs 1 lakh crore and all of these loans will get disbursed eventually over the next six months and that is a good indicator from a recovery point of view.
  • SBI Card valuation: According to him, the penetration of credit cards in India is very low and as the economy develops, there will be demand for credit and credit cards. At the same time, SBI card business is growing decently. SBI IPO is expected to happen in this quarter.
  • He said that the move by the government to divest stake in IDBI Bank and list LIC are two measures that stand out in this year’s budget.

Consensus Estimate: (Source: market screener website)

The closing price of SBI was ₹ 306/- as on 4-February 2020. It traded at 1.2x/ 1.1x/ 1.0x the consensus book value of ₹ 249/ 280/ 317 for FY20E/ FY21E/ FY22E respectively.

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