What will it take to restock SBI Cards? | Rare Techy


SBI Cards and Payment Services Ltd’s Q2FY23 revenue performance was unimpressive, driven by a poor net interest margin (NIM) and revolver mix. Card service providers benefit when more users ‘roll over’ their credit, or pay off some of their balance during the next billing period, rather than paying it all off at once. On Friday, the stock market fell 5.58%.

As interest rates rise, the cost of funds increases for the credit industry. As the loan book of SBI Cards is less than 12 months in nature, it works against the company.

Going south

See Full Image

Going south

You might like it too

Indian highways attract retail investors

After Musk’s takeover, what’s next for Twitter?

What do bank loan growth figures tell us?

“Their borrowing from banks is primarily tied to treasury bills and repo rates. We have seen a 190 basis point increase in the repo rate since May and treasury bills have increased significantly at the short end of the yield,” said Abhinesh Vijayaraj, director, equity research, Spark Capital Advisors (India). Even if the cost increases. The funding is not a surprise, it is worse than what Spark had estimated three months ago, Vijayaraj said. SBI Cards management noted that NIM collection is expected to remain high as cost of funds.

What adds to the frustration is the lack of performance. In CY22 so far, SBI Cards stock has declined by almost 13% against positive returns of 2.49% in the Nifty 50 index.

“Borke has not done well due to continued fierce competition, as other banks such as HDFC Bank, Axis Bank, and Federal Bank are trying to capture market share. In addition, the trade discount rate (MDR) is still continuing,” he said. Akshay Ashok, research analyst at Prabhudas Lilladher Pvt. Ltd.

The stock may also lose due to the presence of bank stocks in outstanding valuations. The ratings of public, regional, and tier 2 private banks have seen a sharp improvement in equity returns, driven by lower credit costs and credit growth in line with top banks, it said in a report on October 28. . . “We have also seen this underperformance in some of the most expensive stocks with similar characteristics, such as HDFC Bank and Bajaj Finance,” the Kotak report said.

Due to the rapid pace of digital adoption, the credit card industry will see higher growth and profitability. SBI Cards, the only listed company in this space, is a likely beneficiary. However, the above-mentioned concerns undermine this advantage that SBI Cards have. In addition to improving NIM, a better loan mix is ​​critical for higher interest rates and net interest income. In short, a lot needs to fall into place for SBI Cards stock to see a meaningful recovery.

Elsewhere in Mint

In Rayi, Manu Joseph tells how Rishi Sunak is made the ideal ambassador of Hinduism. Data analysis by Jayati Sharma & Sahil Deo shows India has taken pride in the USA. Sandipan Deb says why “Garden” of Europe It is under severe attack. The Long Story predicts the future of the current energy crisis.

Get all Business News, Market News, Breaking News Updates and Latest News Updates on Live Mint. Download Mint News App to get Daily Market Updates.

More Less


Source link

Related Articles

Back to top button