SBI Card crashes 7% on elevated credit cost, weak NIM

SBI Card tanked more than 7 percent in the early trade on October 30 following disappointing July-September quarter earnings.

While the credit card company reported a net profit of Rs 603 crore, up 15 percent from the year-ago quarter, elevated cost of funds and weak NIM hurt the bottom line.

The total income came in at Rs 4,221 crore, higher than Rs 3,453 crore in the year-ago quarter. Net interest income stood at Rs 1,902 crore, up 28 percent. The net interest margin (NIM) slipped 20 basis points (bps) to 11.3 percent on rising cost of funds.

One basis point is one-hundredth of a percentage point.

New accounts volume was down 12 percent at 11.42 lakh from the year-ago period.

Brokerage calls

SBI Cards and Payment Services Limited indicated that it is keeping close track of its portfolio while taking corrective measures to limit incremental stress. The company lost some market share in spends, possibly due to th edevaluation of the high-selling cashback card, domestic brokerage Emkay Global said.

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Goldman Sachs said the management commentary was worrisome, with stress building in unsecured loans. The global brokerage flagged concerns about the company’s overall earnings, calling it “poor quality” with NIM below estimates on higher-than-expected credit costs.

Jefferies maintained its “buy” call on the company but cut the target price to Rs 1,020. Unlike Goldman Sachs, Jefferies said the calculated NIM was steady but might dip in the upcoming quarter on the higher cost of funds. Credit costs may take longer to recover due to the uptick in stress in unsecured loans.

At 10.33 am, SBI Card was trading lower at Rs 750 on the National Stock Exchange, down 5.05 42 percent from the previous close.

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