SBI Cards shares fall over 7%: Know the reason in details

SBI Cards & Payment Services Limited, one of India’s leading credit card companies, witnessed a significant dip in its stock prices, falling nearly 8% during the morning session on October 31st. This drop came despite the company’s impressive performance in the second quarter of the fiscal year.

SBI Cards reported a robust 14.71% year-on-year rise in its Q2 net profit, reaching a staggering Rs 602.98 crore. Additionally, the company’s total revenue experienced a substantial growth of 22% on a yearly basis, amounting to Rs 4,221 crore.

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Know the reason here – 

The decline in SBI Cards’ stock value also finds its roots in several key financial indicators. Notably, the Net Interest Margin (NIM) has hit an all-time low, standing at 11.3% compared to 11.5% in the previous quarter. This decrease, combined with a persistent low revolver rate of 24%, has impacted the company’s overall revenue stream. Additionally, the credit cost remains high, recorded at 6.7% as opposed to 6.8% in the previous quarter and 5.6% in the same period last year.

Furthermore, SBI Cards faced challenges in its business momentum. The company experienced a slight loss in market share, dropping from 19.6% to 19.2% quarter-on-quarter. The number of new accounts opened also witnessed a decline of 11.8% year-on-year, indicating a slowdown in customer acquisition. Although the total number of cards increased by 20.95% year-on-year, the growth rate saw a marginal dip when compared to the previous quarter.

In terms of spending patterns, while quarterly spends showed a significant increase of 27.1% year-on-year, the growth rate decelerated to 7.1% quarter-on-quarter. Retail spends, a vital revenue source, experienced a slowdown, rising by 20.7% year-on-year and 5.3% quarter-on-quarter. On the other hand, corporate spends surged by 55.3% year-on-year and 13.8% quarter-on-quarter, demonstrating a shift in expenditure patterns.

The company’s profit and loss statement also fell below analysts’ estimates. While the net income showed a positive growth of 17.2% year-on-year and 4.1% quarter-on-quarter, it still fell short of the estimates. Provisions increased significantly by 35.8% year-on-year, reflecting a cautious approach towards managing credit risks. The Profit After Tax (PAT) stood at Rs 603 crore, up by 14.7% year-on-year but below the estimated Rs 650 crore.

This unexpected downturn in SBI Cards’ stock value has raised eyebrows in the financial market, especially considering the backdrop of their stellar financial results.

At 9:41 am the shares of SBI Cards were trading at ₹735.45, 6.95% lower against the previous close

Also: Industry analysts speculate that this decline can be temporary as India’s financial sector might see the collaboration between Reliance Industries, led by India’s richest man, Mukesh Ambani, and the State Bank of India.

Mukesh Ambani, known for his ambitious business ventures, has been making waves in both the online retail and financial sectors. His brainchild, Reliance Industries, is gearing up for another major disruption, this time in the realm of credit cards.

Reliance has partnered with the State Bank of India, the country’s largest and most trusted bank, to launch two co-branded credit cards on the indigenous RuPay network.

These innovative cards, likely to be named ‘Reliance SBI Cards,’ are poised to redefine the credit card landscape in India.

This strategic alliance between Reliance and SBI marks a crucial moment in the Indian financial industry. Reliance Industries, with its vast resources and ambitious vision, is expected to bring a fresh perspective and innovative offerings to the credit card market.

The co-branded cards, operating on the RuPay network, are anticipated to offer unique benefits and privileges to cardholders, setting them apart from existing offerings in the market.

About SBI Cards

SBI Cards & Payment Services Limited, originally founded in May 1998 by the State Bank of India and GE Capital, has grown into a prominent credit card issuer and payment provider in India.

In December 2017, State Bank of India and The Carlyle Group acquired stakes in the company, solidifying its position as a market leader. The company’s headquarters in Gurugram, Haryana/Delhi NCR, serves as the hub of its operations.

As the only publicly listed pure-play credit card issuer in India, SBI Cards has consistently delivered value to its shareholders and customers alike.

However, with the advent of this groundbreaking partnership between Reliance and SBI, the dynamics of the credit card industry in India are on the verge of a paradigm shift.

The introduction of the co-branded ‘Reliance SBI Cards’ is expected to bring unparalleled convenience and exclusive privileges to cardholders, setting a new benchmark for the industry.

While the recent dip in SBI Cards’ stock prices might have raised concerns among investors, the long-term implications of this collaboration are likely to redefine the financial landscape in India.