Initiating Coverage: SBI Cards & Payment Services Ltd
18-05-2023

SBI Cards and Payment Services Limited is a subsidiary of the State Bank of India (SBI), which is India's largest public sector bank. The company is primarily engaged in the business of issuing credit cards and providing related services to customers. SBI Card was launched in 1998 as a joint venture between SBI and GE Capital. It is the second largest and only listed credit card issuer company in India

Industry

Indian credit card industryis estimated by FY 2027, the total value of credit card transactions will reach INR 51.72 trillion, growing at a CAGR of 39.22% between FY 2022 and FY 2027.

Despite a drastic increase in credit card consumers, the rate of credit card penetration in India remains low. In India, only 3 out of every 100 people have credit cards, which are well below the World Bank's benchmark, which is set at 30%. There were about 73 million credit cards issued in FY22 expected to grow at CAGR of 24.8% to reach 337 million credit cards by 2030 in India.

Business Segments

Interest Income

On EMI- SBI Card earns interest on the credit card accounts, which have opted for EMI payment model. This segment generates yield 12-18% p.a.

On Revolvers- Revolvers are cardholder who carry a balance on their credit card from month to month and pays interest on the outstanding balance. These cards revolve debt and are charged interest on outstanding balance. This segment generates yield of 42% p.a.

Merchant Discount Rates (MDR)

SBI cards charges a merchant discount rate on transactions made using its credit cards. The MDR is a fee charged to merchants for accepting credit card payments. This segment yield 1.4-1.6% on value of these transactions.

Non-Interest Income

SBI cards revenue from card issuance charges, Annual fees, late payment fees, cash withdrawal fees, over-limit fees, foreign currency transaction fees.

Business Performance

	FY23	FY22	Change YoY
Advances (In Cr)	40,722	30,553	15.5%
Non-Interest Income	4,505	3,838	17.4%
Net Interest Margin (NIM)	11.3%	12.6%	-1.3%
Credit Cost	5.4%	7.4%	-2.0%
PAT	2,258	1,616	39.7%
Borrowings	22,982	31,110	35.4%

Risks

SBI Cards operate in very competitive industry, with various banks, neo-banks and Fintechs fighting to gain credit usage of card holders.

Buy now pay later (BNPL) can shift credit usage from credit card issuers towards fintechs & BNPL providers.

Reduction in MDR rates can reduce non-interest income component of revenue from SBI cards, thereby reducing discounts and offers for attracting customers.