Operator: Ladies and gentlemen, good day, and welcome to the SBI Cards and Payment Services Limited Q2 FY27 earning conference call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Salila Pande, MD & CEO, SBI Cards. Thank you, and over to you, Ms. Pande.
Salila Pande: Thank you, Swapnali. A very good afternoon to everyone who is present on the call today. Along with the management team of SBI Cards, I extend a warm welcome and sincere thanks for joining us for the Q2 FY27 earnings call. India's growth outlook remains resilient despite an uncertain global environment. As per RBI, real GDP growth for FY27 is projected to be 7.1%, up from 6.7% projected earlier, reflecting the strength of domestic economic activity. The International Monetary Fund has also recently raised India's economic growth forecast to 7% for both FY27 and FY28, citing resilient domestic demand and strong services activity. The upward revision reinforces India's position as the world's fastest-growing major economy, despite rising global oil prices and persistent geopolitical tensions.
Salila Pande: Against this macroeconomic backdrop, the growing scale of digital transactions and increasing access to formal credit are contributing to the development of more integrated payments and credit ecosystems. Digital payments ecosystem continues to scale rapidly, with UPI remaining at the center of this expansion. UPI transaction volumes grew 27% YoY to approximately 145 billion transactions during the H1 of FY27, underscoring the increasing frequency and ubiquity of digital payments in India. The credit card industry continues to maintain a healthy growth trajectory, with cards in force increasing by around 10.5% YoY to over 124 million as of August 2026. Cumulative credit card spends for the first five months of FY27 stood at more than INR 10 trillion, reflecting the growing scale of the credit card ecosystem.
Salila Pande: The industry continues to witness evolution both in terms of customer demographics and usage patterns. As per the industry reports, credit card customer base is becoming younger and more diverse. Nearly half of the first-time credit card users are now aged 30 or below, while approximately 46% of the new users are coming from semi-urban, tier 2, tier 3, and rural markets. This reflects the growing democratization of credit and the expanding opportunity to serve customers beyond traditional metropolitan centers. As a customer-centric organization, SBI Card understands this and is well-positioned to make the best of these opportunities. Our strategy is focused on building a more robust credit card business, leveraging differentiated products, strategic partnerships, and digital capabilities as key growth levers.
Salila Pande: During Q2 of FY27, we continued to focus on building a healthy, sustainable, and well-balanced portfolio while maintaining our priorities around profitable customer acquisition, customer engagement, operating efficiency, and portfolio quality. During this quarter, we augmented our co-branded credit card portfolio with the launch of Google Pay Flex SBI Card. This credit card is designed to simplify and elevate the everyday payment experience, delivering a convenient blend of rewards, flexibility, and security. We also launched the Advantage SBI Card on SBI YONO to offer a seamless digital journey that enables SBI customers to avail a secured credit card backed by a fixed deposit. We continue to roll out customer-centric national and regional offers with many revered brands, including Amazon, Flipkart, Myntra, Air India, Bosch, LG, Sony, HP, among others.
Salila Pande: We continued the long-term strategic partnership with Apple for instant discount across different Apple products, including the newly launched iPhone 18 Pro. We continue to strengthen our AI capabilities across customer engagement, sales, and employee productivity. We are happy to share that CII National Artificial Intelligence, AI, awarded our hyper-personalization program under the innovative category. Coming to the business performance, our robust business model, disciplined portfolio management, and prudent risk management have enabled us to deliver strong results. Let me share the key metrics. Cards in force have grown to around 2 crore 32 lakh with 8% growth YoY. In line with our guidance, we added more than 1 million new accounts during the quarter, witnessing 18% increase YoY. The net card addition for FY27 till August is at 860,000 new cards, which is highest in the industry.
Salila Pande: We will continue to maintain quarterly run rate of more than 1 million new accounts during the year. Our new account sourcing distribution remains balanced, with about 49% sourcing from banker and 51% from open market this quarter. SBI Card continues to be India's second-largest credit card issuer with cards in force market share at 18.5%. As regards spends, as per RBI August 2026 data, our spends market share has grown to 19% in FY27. Total spends during the quarter reached INR 110,689 crore, with a growth of around 3% year over year. Retail spends reached the highest ever level of INR 95,299 crore with a 6% growth YoY. This is despite the festive sales being in Q3 this year and there being a seasonality impact on Q2 spends. We have seen robust growth across most POS and online spends categories.
Salila Pande: Online spends contributed 62.8% of the total retail spends in the H1 of the financial year, witnessing strong growth across discretionary categories. Key categories include consumer durables, furnishing and hardware, apparel, restaurants, and jewelry, among others. Corporate spends were at INR 15,390 crore during the quarter. UPI spends on credit cards continued to grow 17% quarter over quarter, majorly in department stores, groceries, utilities, fuel, electronics, and apparel categories driven by RuPay and QR acceptance expansion. Tier 2 plus markets have the highest UPI active cards in force and UPI spends, adding to the growth momentum. With festive sales and Diwali starting in October and November this year, we expect the spends to pick up further. Coming to the financial performance for the quarter, revenue from operations was INR 5,141 crore, registering a 4% YoY growth.
Salila Pande: PAT was strong at INR 778 crore with an increase of 75% year over year, mainly driven by improved credit cost. Operating cost during the quarter was INR 2,649 crore with 7% increase YoY. The cost-to-income ratio for the quarter was 68.7%, up 193 basis points year over year. We expect cost to income to remain around 57% to 59% for the year. Receivables for the quarter were INR 58,376 crore. We continue to focus on building the EMI book. With festive season and sales now underway, spends and receivables are expected to pick up in Q3 of FY27. The interest earning assets were stable at 55%, with revolver rate at 22%. Portfolio yield for the quarter was 16.1%. The daily weighted average cost of funds for Q2 was 6.8%. The cost is up by 18 basis points quarter over quarter. Net interest margin for the quarter was 10.8%.
Salila Pande: With cost of funds expected to increase over the next few quarters, we expect NIM to be range bound. We will continue to optimize our borrowing mix to minimize the impact of increase in cost of funds and continue building a bigger EMI-based portfolio to keep the NIM stable. Speaking about the asset quality, our actions taken over the last 2, 3 years have led to continued improvement in the asset mix, with NPAs now being the lowest post COVID-19. Continuing the reducing trends witnessed over the last 5 quarters, gross credit cost has improved further by 98 basis points quarter over quarter and 342 basis points year over year to 5.6%. Gross NPA has reduced by 14 basis points quarter over quarter and 95 basis points year over year to 1.9%. Net NPA is at 0.77%. Slippage ratio is also showing continual reduction.
Salila Pande: Company was carrying an additional provision of INR 70 crore up to the previous quarter. The prolonged conflict in West Asia and the resulting higher energy prices, inflation, and interest rates may impact household cash flows. Accordingly, an additional provision of INR 30 crore has been made to prudently provide for the heightened macroeconomic uncertainty. With this, the company now carries an additional provision of INR 100 crore as of quarter ended 30 September 2026. With disciplined customer acquisition, prudent portfolio management, we expect gross credit costs to stay around 6% for the current financial year, provided subject to any adverse impact of the ongoing geopolitical crisis on asset quality. Our liquidity position continues to be strong. Our capital adequacy ratio was at a comfortable level of more than 26%. ROA for the quarter was 4.4%, 180 basis points higher YoY, while ROE was at 18.4%, 631 basis points higher YoY.
Salila Pande: To conclude, India's credit card industry continues to offer significant opportunities for growth and SBI Card is well-positioned to capitalize on them. We will continue to focus on strengthening customer relationships, enhancing our market position, and driving sustainable, profitable growth. Our forward agenda rests on five levers: expanding our footprint into tier 2 and tier 3 markets, focusing on banker penetrations, deepening premiumization and spend per card, optimization of credit cost, enhancing our digital and data analytics capabilities, and sustained cost discipline. Now we are open to take questions. Thank you.
Operator: We have the first question from the line of Anuj Chhibber from JP Morgan. Please go ahead. Mr. Anuj, please proceed with the question. Mr. Anuj, please proceed with the question. Due to no response, we will take the next participant. We have the next question from the line of Kunal Shah from Citi. Please go ahead.
Kunal Shah: Thanks for taking the question. Firstly, on the overall spends growth as well as that translating into the receivables, we were of the view that Q2 could be an inflection point with respect to the receivables growth. Maybe spends growth should also get into double-digit kind of a number. Should we see that traction going forward getting into Q3? Maybe Q2 last year had a higher base and that's the reason spend growth appears to be still in a low single digit kind of a number. How long would that entire journey take in terms of spends moving to that level and receivables also improving? That's the first question. Second, with respect to overall margins, if we see the cost of funds, it's been up on a daily average basis by almost 20 odd basis points.
Kunal Shah: We have not seen that kind of an impact on margins in this particular quarter. If we have to look at it in terms of the margin profile, looking at the rate hikes which are now expected, how do we see the margin trajectory from 10.8 odd percent currently?
Salila Pande: Yeah. Kunal, for your first question as to when we had spoken, I think last quarter or the quarter before that, we had given this guidance that because the festive season as well as the acquisitions that we have been doing, the upticks in the acquisitions which have happened, we had guided that the receivable growth will be witnessed in the H2 of the current financial year. We stick to that guidance that you are right about the base being higher this time because the festival has started as of 22 September 2025 along with the GST benefits, whereas this year most of the festivities have started from 11 October. Obviously the spends and they are getting translated into receivables will be happening in this quarter.
Salila Pande: Actually we are seeing very encouraging results already in respect of the spends, but it is still early days and we stick to the guidance that we had given that the spends getting translated into receivables will happen in the H2 and will start from Q3 itself.
Kunal Shah: Yeah, but overall, sorry, just on this in terms of just having started the festive period, maybe how has been the traction in the first few days and when we look at it maybe in terms of that entire trajectory of maybe a double-digit or mid-teens kind of a retail spends growth. If we have to look at it, is that very much visible?
Salila Pande: Yeah. Yes, as I mentioned, we are seeing very good encouraging results the way the EMI offtake is happening, the way the conversion of spends into EMIs is happening. In the early days, whatever we have witnessed till now, the results are very encouraging. As of now as we had said, we will not give a guidance on the asset growth because we still need to see how the entire quarter will play out. The guidance we had given was that in the H2, the receivables will grow. We are already witnessing it and as regards the spend, we will stick to that in the retail spends category. We continue to see good traction. Festivities have just started and we are expecting the spends growth to be somewhere from the mid-teens to the high teens for the entire year.
Kunal Shah: Mid-teens to high teens for the entire year?
Salila Pande: For the entire year. We have been in the range of somewhere around, I think 16%.
Kunal Shah: Yeah.
Salila Pande: For-
Kunal Shah: Yeah, 16%.
Salila Pande: 16 as of now also. We will continue to see somewhere around the same range from mid-teens to high teens for the whole year. I hope that answers your first question.
Kunal Shah: Yeah. Thank you. Yeah.
Salila Pande: The second one for the margins, you are right. Now the thing is the way the repo rate has already increased, there is definitely very high expectation of one another at least around 50 basis point increase going forward. As we have been again guiding, that is where we will be working, one, on optimizing the lending cost, borrowing cost that we have been working on. We will continue to do that going forward as well. The second thing is that we have been working on changing the mix of the receivables. As we have been indicating that if we can convert more and more transactors where we have a negative carry to EMIs, that will definitely improve the yields overall and will keep the NIM stable.
Salila Pande: Yes, uncertain days, I would say, in terms of COF, but definitely a lot of work can happen and already happening on the yield side, and we will continue with the guidance that for us, we will work on keeping the NIM stable.
Kunal Shah: In percentage terms from EMI, the current proportion of 33-odd percent, maybe where do we stand? Maybe it should at least get towards maybe 2 to 3 percentage points higher to offset any increase in cost of funds. Otherwise, there would be still pressure on margins, which will continue. Apart from that, there would be no lever on the yield side apart from the mix shift.
Salila Pande: Yes, you are right. Because revolvers have. The good thing is that despite, as we had said initially also, the revolvers have a negative bias, but revolvers have been stable. On the EMI side, as I mentioned earlier also, we are seeing good uptick. For one reason is that some of the things like as you also know mobile phones and all have become more expensive. There we are finding more takers for EMIs as well. All those things are resulting in a higher uptake of EMIs. That is the biggest lever on the. Yes, and Rashmi?
Rashmi Mohanty: Yes. I was just adding to what ma'am said that we can also increase the rates on the incremental growth EMI book that we are building. The ability to pass on or increase cost of funds on the newer book that we are generating, that also should improve on the portfolio mix.
Kunal Shah: Okay, got it. Okay, perfect. Yes, that helps. Thanks for answering all the questions.
Salila Pande: Thank you.
Operator: Thank you. We have the next question from the line of Piran Engineer from Citic International. Please go ahead.
Piran Engineer: Yes. Hi, team. Thanks for taking my question and congrats on the quarter. Firstly on the NIM question again, if I dissected it in two parts, have we started taking any yield hikes in our EMI portfolio or are we relying only on mix from a yield on loans perspective?
Salila Pande: Yes, we have already started yield hikes on the portfolio. Gulshan?
Girish Budhiraja: Piran, if you notice, 3 months back we were giving subvention, which is the point-of-sale EMI at around 16.5%, that is up to 17%. Close to 6 months to 9 months back, that was almost around 16%. So there have been hikes both on the point-of-sale installment lending as well as before the payment due date when the customer wants to convert their loans into lending, that has also been increased.
Piran Engineer: Okay, so about 50 basis points. Okay. On the borrowing side today, when you say you can optimize your borrowings, what exactly do you mean by that?
Salila Pande: When we say we optimize, one is what is the instrument that we are looking at? What is the tenor we are looking at? Who is the lender? Those are a couple of levers that we continue to scan the market for. What is basically the term? We have certain policy guidelines in terms of what should be the mix of the short-term, long-term. There within the policy guidelines, obviously, if we look at our ALM, basically most of the assets are short-term. So there we have a lot of, I would say, headroom to look at short-term lendings. Having said that, we also are mindful that the rates are going to increase. So we have to continue to balance locking the rates at an optimal level so that we are not impacted by a very high-interest cost going forward on one hand.
Salila Pande: On the other hand, to the extent possible, if we can negotiate better rates with the lenders, then we work on that. As I said, instruments as well. Last year, for example, when we found that there were very good, attractive rates available on CP, we had even used that as a borrowing instrument. Right now since the CP rates are not so good, we have not been doing it. At least on the three compositions that we have of our borrowing, which is the working capital loan, term loan, and the NCD, we keep on scanning the market, looking at what is going to yield the best results for us and accordingly work on the best, I would say cost of funds. You want to add something, Rashmi?
Rashmi Mohanty: That's enough. Yes.
Piran Engineer: Rashmi, today between a working capital loan and a CP, what would be cheaper and by how much?
Rashmi Mohanty: At this point in time, it is a working capital loan which is cheaper by almost about 50 to 60 basis points. Actually more, 70 to 80 basis points.
Piran Engineer: Sorry, could you repeat that? Your line is a bit crazy.
Rashmi Mohanty: 70 to 80 basis points. Yes.
Piran Engineer: Got it. Lastly, on your credit cost outlook. Ma'am, you mentioned a 6% number for FY27, but we are already at 5.5%. Is 6% just a number based out of conservatism or is it more realistic, because that implies an inch up from two-year levels?
Salila Pande: First thing, if you look at the H1 credit cost, it is 6.05%.
Piran Engineer: 6.05.
Salila Pande: 6.05%. Coming to the scene, there will be certain seasonality impact also once in a while, because when you have festival. Overall, the thing is that we believe that 5.5% to 6% is a pretty good credit cost to have, because ultimately you have to keep on optimizing the risks and the returns. That is why we are giving an estimation of 6%, and if we are at 6% also, we are comfortable, provided we can ensure that is the credit cost, which is stable. That is why we have given a guidance of 6% as of now.
Piran Engineer: Understood. Okay. That is it from my end. Thanks, and wish you all the best.
Salila Pande: Thank you.
Operator: We have the next question from the line of Anuj Singla from JP Morgan. Please go ahead.
Anuj Singla: Yeah. Good afternoon, everyone. Apologies, ma'am. I had some tech issues earlier. My first question is on the credit cost side. I think if I exclude the INR 30 crore provision which has been built this quarter, we are at INR 545. So how much scope further do you think we have from here? This is already a very benign credit cost. So how much scope on the based on early delinquency trends, the data which you have, do you think it can undershoot further from here?
Salila Pande: First of all, this is not a provision, this is a write-back that we have done. We have retained INR 30 crore as a management overlay, Anuj.
Anuj Singla: Yeah.
Salila Pande: But in terms of the credit cost, we would say that more or less stable now. We do not expect, as we have given a guidance of 6%, that this is somewhere we would like to be. Because see, ultimately, we are in the business of risk-taking as well, and as I mentioned earlier to Piran, we will have to continue to optimize our risk and return. So as we grow the asset, there will be certain seasonalities also. So we are comfortable between 5.5% to 6%, and we do not expect the credit cost to moderate much beyond that. That is where I would like to pause right now.
Anuj Singla: Got it. No, that is very helpful, ma'am. The second thing on the mix side, I think, can you give us some sense of on the revolver side and I think if I look at the sequential basis the mix has not changed, the interest earning assets, but the overall receivables have come down. So the IEA on an absolute basis has come down actually on a Q-on-Q basis. So my question here is when you look at from a new sourcing basis where the quality of, and you had tightened your risk filters earlier, and obviously that portfolio has seasoned a bit, so you would be getting some more data points on how the IEA in that portfolio is. Is that portfolio doing better in terms of the book IEA or it is similar or lower? Just to understand how the IEA movement can be going forward.
Salila Pande: So, first of all, we have been guiding that we are seeing a downward bias on the revolvers. Actually, we are pleasantly happy to see that the revolvers have been stable for this quarter. We have been saying that since we have been stringent in the new acquisitions, the revolver rates have been lower for the new acquisitions, and we hold by that. The encouraging thing that we observed in the current quarter has been that the interest-earning assets have improved moderately. But the thing is, see, I cannot compare Q2 of 2026 to Q2 of 2027. So right now we are not comparing, I would say comparable time zones. As I mentioned earlier as well, that we will start getting better clarity in terms of how the interest-earning assets, the receivables are trending by the end of this quarter.
Salila Pande: But again, on the campaigns, we are seeing very encouraging results on the EMI side and revolvers are also holding on. So watching the trend.
Anuj Singla: Got it, ma'am. Lastly, if we were to assume a 70 basis points interest hike cycle, let's say in this year only from RBI, 25 is already done. Let's say your assessment of 50 also comes through. What kind of NIM pressure do we see for the next year? Any kind of pro forma numbers or whatever guidance you can provide, that will be very helpful. Thank you.
Salila Pande: Anuj, first of all, the entire 50 basis points, even if it comes in in this particular year, it will come and hit us with a lag. As you know, our book can reprice back in about 60 to 75 odd days, as we've been telling you. It will come and hit us with a lag so the entire cost pressure will not come in this financial year. Second, as we mentioned that we have the ability to pass on the increased cost of funds on our incremental book. Which obviously as Girish earlier on another question mentioned that we have been doing that and we will continue to do that as well. That incrementally whatever book that we are building, we do it at a higher yield as well.
Salila Pande: There are certain measures, as I just said, which would be available to us to make sure that the impact of the 50 basis points additional if it comes in, doesn't come and hit us at day one or in one particular quarter. If you remember in Q1, our cost of funds just went up by about, I think, 3 basis points, whereas the market benchmark rate had gone up because we had positioned our liability book in a manner where the maturities were bunched up in a certain way to avoid the pressure in Q1. This quarter, obviously we felt the impact of the entire cost of funds going up. There are such levers available to put a lag our portfolio yield with the increasing cost of funds.
Anuj Singla: Got it. Any guidance you can provide for next year, Rashmi, FY28? Not this year. I understand the dynamics around this year.
Salila Pande: Not as of now.
Anuj Singla: Okay, noted. Thank you. Thanks a lot.
Operator: Thank you. We will take the next question from the line of M. B. Mahesh from Kotak Securities. Please go ahead.
M. B. Mahesh: Good afternoon, ma'am. Just two questions. One is on the spend and the other one is on the receivables, and both kind of broadly similar to each other in terms of the question here. If you look at the spend, have you started seeing, let's say, the riskier part of the customer cohort starting to spend more than what you've seen in the past? And two, when you look at, let's say, that translation into the receivable side as well, either in the EMI side or on the revolver side, if you could just kind of broadly comment, what is the texture of the book that is being built at this point of time? Any trends that is worsening, remains the same or improving? Thank you.
Salila Pande: I will ask Girish to respond to the first part of the question, but as far as the portfolio is concerned, again, we are very comfortable right now. We have a very diversified portfolio, and we are not seeing anything which concerns us as of now.
Girish Budhiraja: Mahesh, spend per customer, per account, per card, all of it is going up. The only reason that you see the data in Q2 versus Q2 is because of the festival in the baseline. Otherwise, on the retail spends, we see a continuous increase. The overall growth of spends is actually coming from both the factors, the increase in number of cards and the spend per card, both going up.
M. B. Mahesh: Sorry, if I can just step in there. The question is more about what is the kind of customer base which is now starting to spend in the book. Are these a lot more of the traditional better-rated customers? Are you starting to see some of the slightly riskier cohorts, even they are starting to spend more than normal? I am just trying to understand as to what is the kind of spend that is coming through in terms of customer profile.
Girish Budhiraja: Mahesh, the scenario has slightly changed in the last 3 years since the time RBI has put in a guidance that any customer who is inactive for 12 months, you have to get them out of your books.
M. B. Mahesh: Sure.
Girish Budhiraja: If you actually look at 12-month activity of the customers, it is almost close to 100%. Whatever is inactive in the 13th month, we have to ensure that that customer is exited out of the portfolio. As far as the increase in the spend portion is coming, what we see typically at this point of time is that people who are taking RuPay UPI cards is where the spend is increasing, and it is just that because their number of options or outlets for using the card has gone up. We have figured out that trend almost 1 and a half, 2 years back. That trend still continues, and this trend is even more significant in Tier 2, Tier 3 cities.
M. B. Mahesh: Okay.
Salila Pande: Yeah. Basically what Girish is trying to say is that in terms of the spend patterns, in terms of the categories of the customers, there is not that a riskier cohort is spending more and the less risky is spending less. The pattern is more or less same. The increase which is happening in spends is also attributable to the RuPay cards, which were not there in the ecosystem 1 or 2 years back. Now that is an additional mode via which we are seeing a contribution. This quarter itself, INR 21,300 crores of spends have occurred through.
M. B. Mahesh: Sure
Salila Pande: Spends through UPI.
M. B. Mahesh: Okay. Ma'am, one last question. For a brief period a couple of years back, the predictability of the cohort in terms of slippages was something which you said that was getting difficult for you to identify. Have you seen any normalization of trend in those things, that the recent cohorts are better as compared to the earlier cohorts? Are you seeing that trend or it is still all over the place?
Salila Pande: No. So predictability of cohorts, I didn't get your question.
M. B. Mahesh: If you were.
Salila Pande: I'll try to respond. We categorize our customers into different risk categories, basis what we are seeing within our portfolio, within our own customers' spend behavior. And we also look at the ecosystem, what is this borrowing and how he's behaving outside in the market. And basis that, we categorize them into different risk categories. We find that the models are working very well and because of sometimes the early actions that we have taken in respect of the risky customers, we've been able to save quite a bit of loss as well for the customers who defaulted later. I believe that we have a pretty good understanding of the portfolio right now, and that is the reason that you are seeing the GCC where it is.
Salila Pande: That has also enabled us to understand which kind of customers to acquire, what are the indicators that we should look at. And in addition to that, the kind of tools which are available now. See, account aggregator, I don't know, 2 to 3 years back, how much dependency. We were hardly using account aggregators to understand even if he's not my customer or.
Salila Pande: How he is behaving. All those things are available with me now. We are utilizing it, and that is enabling us to understand the overall portfolio better. Hope that answers your question.
M. B. Mahesh: Yeah, sure. Okay. Thank you.
Operator: adies and gentlemen, that will be the last question for today. I now hand the conference back to the management for the closing comments. Thank you, and over to you, ma'am.
Salila Pande: Just a minute. I think there are some more people in the queue. Swapnali?
Operator: Yes, ma'am. Now they are in the queue.
Salila Pande: Let them, if they have to ask questions, let them ask questions.
Operator: Sure. We will take the next question from the line of Pranav Shah from Three Pine Investment Managers. Please go ahead.
Pranuj Shah: Hi, thanks for taking my question. Just one thing, I think your interchange income or your spends, this income to your spends has risen quite materially in this quarter. What is driving that?
Girish Budhiraja: Yes, interchange income has increased in this quarter. On certain categories, networks have increased the interchange rates, which is showing up in the benefits that we have got through this quarter.
Pranuj Shah: So this 1.35% odd number that you are getting this quarter, is it sustainable going forward?
Girish Budhiraja: Within a range, I would keep it, because there is seasonality variation which keeps on happening. But there is a definitive increase from the past trend line.
Pranuj Shah: Understood. Perfect. Thank you. That is it from my side.
Operator: Thank you. We will take the next question from the line of Chetan Gindodia from Mahindra Manulife Mutual Fund. Please go ahead.
Chetan Gindodia: Yes. Hi, ma'am. Just wanted to understand that credit cost you said is likely to be in the range of 5.5% to 6%. Do you expect that, given all this macro situation, do you expect that the credit costs have sort of bottomed out and from here on it would stay the same and there would be marginal inch up? Or is this more because we will be utilizing some of the lower credit cost to create additional provisions as what we have done this quarter? Any sort of color on this if you do not mind.
Salila Pande: First of all, as I have spoken my speech also, the Middle East crisis has been more prolonged than what it was expected initially when it started. It was expected that the issue will be resolved in a couple of months, but now this has stretched beyond the initial expectations. As the conflict is getting prolonged, we are seeing certain inflation prints. We are seeing the interest rates rising as well. The good thing is that, as I mentioned, the GDP continues to be very resilient to all these factors. So we are watching the environment. This is something which is, I do not think anybody has complete clarity on how this whole crisis is going to play out. The thing that the company could do and is doing is how do we buffer ourselves against, first of all, any adversities which might happen in the macros.
Salila Pande: To that extent, we have tried to look forward, build INR 100 crore of management overlay. If we believe that the situation is worsening, we will take a call at that point of time. Right now, as I mentioned, looking at where the credit cost is, we are very comfortable. Looking at our portfolio, we are pretty comfortable. Yes, we do believe that now this credit cost has more or less reached a level where there is not much of a scope to reduce it further.
Chetan Gindodia: Understood. Got it, ma'am. Lastly, in the new cohorts of the new acquisitions that we have done, where would be the revolver and the EMI as a mix for you? Would it be materially different compared to the current book, which is 33% and 22%?
Salila Pande: As we have indicated earlier also, because in the last, I would say 1 and a half years, we have been a bit stringent in customer acquisition. Because of that, the new cohorts have been lower in terms of the revolver offtake. But EMI, we see equal takers from the new cohorts as well as the old vintages.
Chetan Gindodia: Okay, got it. Thank you.
Operator: Thank you. A reminder to all the participants, in order to ensure that the management will be able to address all the questions from the participants in the question queue, we request you to kindly limit your questions to 2 per participant. If you have a follow-up question, please rejoin the queue again. We have the next question from the line of Bhaskar Basu from Jefferies India. Please go ahead.
Bhaskar Basu: Yeah. Good afternoon. I just had one question. Since your liability side is mostly linked to T-bills, and T-bills are already up 50, 55 basis points over the last one and a half months, how should we think about cost of fund? Is the repo the right number to look at, or it is basically the T-bill which we should look at for modeling the cost of fund going forward?
Salila Pande: I will ask Rashmi to respond, but see, it is a mix. Our borrowing has both the reference rates, both T-bill as well as repo. I do not think we divulge the numbers specifically, and it is a moving number. As of now, we also understand that T-bills have already risen in the last quarter itself. Repo again increased during the recent MPC. So overall, yeah, the cost of fund has, as you can see in our numbers also, that around 18 basis points of cost has already increased. That is why we were focused, one, as I mentioned, on our borrowing strategy in terms of the mix, the lenders, the players, the instruments, and overall work towards a stable NIM. Anything else, Rash?
Operator: Thank you. We will take the next question from the line of Ameya Khandekar from HDFC ERGO. Please go ahead.
Ameya Khandekar: Hello, team. Congratulations on a good set of numbers. My just one question is on the corporate spend. We have seen them growing QoQ, YoY for the last few quarters, but this quarter we have seen some dips. So just anything to highlight here. Thank you.
Girish Budhiraja: Nothing to highlight here. As we had said earlier also, in principle we would keep corporate spends as less than 20% of our overall spends, and also we go for margins. It is an opportunistic play here. We will go to increase our margins and this quarter we have let go of certain spends and continued to build certain other spends for the margin purposes.
Ameya Khandekar: Okay. Just another one on, you have recently launched this Eternal SBI Card. Just wanted to understand what is our thinking over here because I think in the last few years we have not tied up with Amazon, Flipkart or likes of those e-commerce players or what other competitors have done. This is for the first time we are launching such kind of card. I just want to understand what is our thinking here and how are we seeing in terms of spends coming in from these kind of cards. Thank you.
Salila Pande: I don't think we have a couple of co-brand partnerships. Some of our co-brand partnerships are pretty strong. Flipkart, we already have a tie-up. We tied up last year with Google Pay also. In fact, one of our strongest co-brand partners is BPCL. Towards that direction to capture, as we have been saying, the different lifestyle needs and the spend requirements of these customers, we have been selectively going for co-brand partnerships. That is part of our strategy and portfolio since long. Spend distribution, I don't know whether you have-
Girish Budhiraja: No. On the new customer acquisition, on the first wave of four years, five years back, when Amazon and Flipkart went with co-brand partners, we did not participate and for profitability reasons.
Ameya Khandekar: Okay.
Girish Budhiraja: This time now when some of them have come for renewal and others, so as ma'am was mentioning, we have a co-brand with Tata Neu, we have co-brand with PhonePe, we have co-brand with Google Pay, Flipkart.
Salila Pande: These are the four prominent ones. Eternal also.
Girish Budhiraja: The latest in that line is Eternal. Our customer base is going digital. We also want to acquire our customers digitally and co-brand partnerships wherever we get a product where we can create great customer value and profitability for us, we will definitely go for that.
Ameya Khandekar: Understood. Thanks for highlighting the other cards as well. Thank you.
Salila Pande: Thank you.
Operator: Thank you. We will take the next question from the line of Meghna Luthra from InCred Equities. Please go ahead.
Meghna Luthra: Hi, madam. Thank you for the opportunity. I just have a few questions. One is, despite a fall in our corporate spends, our OPEX has not declined substantially. My understanding is that higher OPEX, I mean, corporate spends carry a higher OPEX. Is it that we've shed a little extra for retail acquisition?
Salila Pande: The OPEX has been flattish quarter-on-quarter, Meghna. You're right that given that there's been a slight dip in the corporate spend, there should have been a marginal dip in the OPEX as well. But there have been investments done and for the business growth, you're right about that, yes.
Meghna Luthra: Okay, fine. Thank you. On slide 14, actually, there is a refinement in account classification, which has bumped up SBI's share to 46% in CIF. Can you explain a little bit about this? What has changed?
Rashmi Mohanty: On that one, see, we keep looking at the tagging of the classification of our cards in the entire portfolio. As we looked at the entire portfolio in a little bit more granularity in terms of channels, et cetera, we realized that certain classifications, the way the accounts have been classified need to change, and that is what was carried out in Q2. The result of that has been incorporated in the results this time as you see it. The number wasn't that big enough because you also stated that if we were to do the same classification in the previous quarter, the numbers between bank and open market would have remained the same.
Meghna Luthra: Last quarter, I think it was 36% CIF that was SBI. This quarter, the CIF is now 46%.
Rashmi Mohanty: Yeah.
Meghna Luthra: The reinvent is due to-
Rashmi Mohanty: 10%. Yes. 10% of the portfolio, we had to reclassify them based on the granularity as we looked at the
Girish Budhiraja: 5 plus.
Rashmi Mohanty: Yeah, exactly.
Meghna Luthra: Okay.
Rashmi Mohanty: In terms of the account features, parameters.
Meghna Luthra: Got it. Lastly, what is the proportion of RuPay linked credit cards in CIF?
Rashmi Mohanty: We do not disclose that.
Girish Budhiraja: Yeah, but it is more than one third of our base now is
Meghna Luthra: Okay. Cool. Thank you.
Operator: Thank you. We have the next question from the line of Anand Dhama from Nuvama. Please go ahead.
Anand Dhama: Yeah, ma'am. Thank you and congratulations for the great set of numbers. My question was on slide 7, where the spends per card has been around INR 167,000 odd rupees for a while now. Is there any strategy that we have in mind where basically we would want to increase the spend per card? Because even if we add up cards in force meaningfully, I think until the retail spend moves up, I think the spend growth will remain largely muted. As we basically rely more on the corporate spend, I think that is not going to bring in much profitability. Any thoughts over there?
Rashmi Mohanty: Yeah, Anand. First of all, as I mentioned earlier, if we are comparing Q2 to Q2, it would not be a right comparison because the spends will start growing in the current quarter. Festivities have started in the current quarter. The second thing is that the customer acquisition has, in the last two quarters, we have done better than what we have been doing in the past. After the acquisition, the spends start building up. There is a little bit of a lag effect over there. We totally agree with you that ultimately, if I am acquiring a customer, the idea is to engage, enhance spend, and the next step would be to enhance the receivables. A lot of initiatives are being done towards this end, and corporate is definitely not something that we look at in terms of the customer.
Rashmi Mohanty: I would say this is a retail spend that we are speaking about over here. On the corporate side, we look at it with a different lens in terms of the margins, in terms of the profitability. These numbers, when we look at them, 167, this is the number that we look at in terms of the customer engagement. Having said that, it is not so that this engagement is not happening. If you look at our slide number on the market share, I do not know which slide it is. If you look at the market share slide, you will see that we are one of the players where the transaction volumes market share has also grown. This will only happen when we are engaging more with our customers.
Rashmi Mohanty: We are not just growing in terms of the market share, in terms of the spends, we are also growing in terms of the transaction volume. This is something that we will continue to work on. As we have acquired more customers in the last 2 quarters and with the festive already underway this quarter, you will see better numbers in the next quarter.
Anand Dhama: Sure. Then the second-
Girish Budhiraja: Just want to add one thing.
Anand Dhama: Yeah.
Girish Budhiraja: Just want to add one thing, Anand. If you look at the chart below that on the same page, 30 days spend active rate is at 53%. This is without the festive season. Last year with the festive season, it was 53%. That itself shows the increase in the engagement of the existing customers and hence the spend per account increase that we are getting from existing customers.
Anand Dhama: So maybe in next quarter, where should we basically look at this spend per card? Should it be somewhere about 170, more than 170 or so? What is broadly our expectation? How that spend will basically convert into overall, I think mid-teen growth is what you have guided on the spends.
Rashmi Mohanty: I-
Girish Budhiraja: If it is 167 for this quarter, next quarter it will definitely be above 170.
Anand Dhama: Okay. Have you guided on the receivables growth for FY27 now?
Rashmi Mohanty: No, not as of now. But we have said that we will start seeing uptick growth for the H2. We stick to that.
Anand Dhama: Could we assume a single digit, mid-single digit kind of
Rashmi Mohanty: As of now, it is early days, Anand, and we would like to get more clarity before we give any guidance. 45% of the portfolio is transactor, and transactor volumes can move overnight. It is too early to give a guidance in terms of the growth. But definitely there will be a growth going forward.
Anand Dhama: This GS2 increase which has happened on a quarter-on-quarter basis, it is very minor. Does that worry you? Is there a trend or it is more seasonality and basically it will come back?
Rashmi Mohanty: What did you say? GST?
Anand Dhama: The stage 2 assets have marginally gone up.
Rashmi Mohanty: Anand, if you see, stage 2 marginally is up there. But if you total the stage 2 and stage 3, it is the same spend. It is, we can say the quarterly usage will be.
Salila Pande: See, one thing is there, Anand, now that I think we have more or less plateaued in terms of the credit cost. There will definitely be certain months where we will see more spends happening, a little bit of delay happening. As long as we are in a range of, say, 5.5% to 6% in terms of the credit cost, we are comfortable.
Rashmi Mohanty: Yes.
Salila Pande: We think we have a pretty good grip over the portfolio, so we will continue to monitor that.
Anand Dhama: Sure. That's helpful. Thanks a lot.
Rashmi Mohanty: Thank you.
Operator: Thank you. We have the next question from the line of Anuj Singla from JP Morgan. Please go ahead.
Anuj Singla: Yeah, thanks for the opportunity again. One thing is on the OpEx side. I think if I look at the levers there, you are pushing new card addition, which tends to be OpEx intensive. I think the festive season is coming as well. Do you think the OpEx guidance, which we had articulated earlier, we could be at the higher end given you might need more engagement from the customers, a need for more promotions maybe. How do you see the trajectory maybe going forward in the quarters and FY28 as well?
Salila Pande: Q3 definitely, as you are also aware, OpEx does increase.
Anuj Singla: Yeah
Salila Pande: Most of the spends will happen. But we will adhere to the guidance which we have given that cost to income will be in the range of 57% to 59%. Anything else, Rashmi, on the OpEx side?
Rashmi Mohanty: I think as of now the same here.
Anuj Singla: Okay. Good. Lastly, on the fee income side, we have seen across the various lending entities as well, there has been a lot of regulatory focus on cutting down the fee income. Can you just give us some handholding on how to see that line maybe for FY28 and FY29? Is it going to, let's say, the receivable growth, or should we anticipate a low single digit? Any kind of color you can give, given that we have seen that across the lending entities, that seems to be a bit of moderating at the moment. Thank you.
Girish Budhiraja: So Anand, on the fee side, there are two fees: interchange fees and the rest of the other instance-based fees. What we have said earlier also that interchange is going to grow along with the spends because
Anuj Singla: Yeah
Girish Budhiraja: typically that rate has been constant or slightly increasing over a period of time. So that is a growth along with the flow of spends. On the instance-based fees, last time we said that should grow in line with our cards growth. So whatever the number of cards that is growing, it should grow similarly in line with that. So these are the two things that we had stated. On the third part of the receivables, we have not given any guidance as well.
Anuj Singla: So just to clarify, Girish, this would be growth in CIF, the non-
Girish Budhiraja: Yeah. Broadly growth in CIF. Yes.
Anuj Singla: Okay. Got it. Thank you. Thanks a lot.
Operator: Thank you. We will take the next question from the line of Nitin Aggarwal from Motilal Oswal Financial Services. Please go ahead.
Nitin Aggarwal: Hi. Thanks for the opportunity and congrats on a good set of numbers. I have two questions. The first is on the origination metrics. Now that there has been a fair bit of improvement in credit cost over last one year, should we, or rather, do we look to relax some of our origination criteria and underwriting standards to grow the card at a faster rate? Do you also track what is the card rejection rate and how has that changed over the last couple of years? Any color around that?
Salila Pande: First of all, Nitin, thank you for the compliments. The team has worked for the last, I think one or two years, to reach in terms of the profit numbers. Coming to your first point, see, as of now, we have not relaxed the filters. We keep on dabbling. We do pilots. We keep on looking at which are the cohorts which will give better income. The less is more in terms of the overall profitability, rather than just looking at the risk. That is something we are working on. We have been working for almost a year now. We do not concede this, as we have been saying earlier also that there is no dearth of applications, there is no dearth of eligible candidates. As we have been able to sharpen our underwriting skills, we continue to get good applications and we continue to underwrite them.
Salila Pande: And despite our guidance of 1 million plus, I think this quarter we have done 11 lakh 6,000 cards. If we get a good customer, we will definitely look at them. We will definitely approve the cards as well. And yes, to your second question
Nitin Aggarwal: If I may please interrupt you, sorry.
Salila Pande: Yeah, the rejection analysis, the reasons, improving the journey, those are some things that we continuously work on. We have a very close eye on, and we do not speak a lot about it, but that is something which is basically something very critical and important for us, and we continue to monitor it very closely.
Nitin Aggarwal: Right. Got that. Second is on the OPEX, like while you have indicated a slight rise in cost income, but if I look back over the last four, five years also, our margins has come a long way over these years. But still we have maintained cost income ratio in the 50s. So that is something very commendable as in maintaining such a narrow range. But now that margins will be a little bit more under pressure probably as the funding cost increases, banks passes on the rate, and at the same time you are looking for a better asset growth also. So how should one look at cost-income ratio for next year now? Any color around that?
Salila Pande: I see for this year we have given a guidance of 57% to 59%. As of now, we are not giving guidance for the next year. But definitely, as I mentioned earlier in my speech as well, that on one hand, we will continue to work on profitable acquisition of customers. On the other hand, we will also ensure cost discipline so that we have, as I mentioned, in the last couple of years, we have been able to maintain the cost to income, and if possible, we reduce this further going forward.
Nitin Aggarwal: Okay. Thank you, ma'am.
Salila Pande: Thank you.
Operator: Thank you very much. Ladies and gentlemen, we will take that as the last question for today. That concludes the question and answer session. I now hand the conference over to Ms. Salila Pande for the closing comments. Thank you, and over to you, ma'am.
Salila Pande: Thank you, Swapnali. I sincerely thank our shareholders, customers, partners, employees, and everyone who is present in today's call for their unwavering support, continued trust and confidence in the company. Thank you once again for your time and participation. On behalf of the entire SBI Card team, as we start with the festival season, I wish you all seasonal greetings and a very happy Diwali. Have a good evening. Thank you.
Operator: Thank you, members of the management. On behalf of SBI Cards and Payment Services Limited, we conclude this conference. Thank you everyone for joining with us today, and you may now disconnect your lines. Thank you.
