SBI Card reports 66% YoY growth in PAT riding on spending growth | Analysts predict upto 24% upside

In Q2 FY22, SBI Cards saw an increase in loan growth by 10% QoQ and the gross cards added increased to 950k- its highest levels. Spending seems to be growing too and slowly reaching the pre-Covid levels. EMI loans grew by 10% QoQ and 32% YoY. Gross non-performing assets fell by 55bps to 3.4%. With the second wave far behind, the return on assets are expected to improve to 7%. A 20% spending CAGR for the period of FY 20-24 has been estimated.

According to the RBI, the spending by both corporate and retail grew by 50% YoY in October. As employees in the IT and banking sectors get more salary hikes, the propensity to spend is likely to increase more. Online spends account for 55% of the total spends in the first half of FY22. SBI cards grew by 14% YoY and they have continued their trend of gaining market share. Due to restructuring of the books the slippages stand at 2.5%. Restructured loans fell by 150bps QoQ and they have a 28% cover.

PAT increased to Rs.345 crore in Q2 FY22 from Rs.304 crore Q1 FY22, reporting a growth of 13% QoQ and 66% YoY. Even the EPS increased from Rs.3.24 in Q1 FY22 to Rs.3.77 in Q2 FY22. The total income of SBI Cards, backed by the largest lender of the country i.e. SBI, increased from Rs.2,450 crore in Q1 FY22 to Rs.2,695 crore in Q2 FY22.

Bad debt expenses and impairment losses witnessed a drastic decrease of 31.09% in Q2 FY22 from the last quarter. The finance costs decreased by 4% this quarter whereas the operating cost increased by 25%.

Average receivables per card increased by 4.8% QoQ and the cards in force increased by 5% QoQ. The asset quality saw improvement post the second wave and a strong growth in spending as well as loans outstanding.

These positives have played a part in analysts predicting an approximate upside of 24.3% with a BUY call, maintaining the price target in the range of Rs.1350-Rs.1400.