Ladies and gentlemen, good day and welcome to SBI Cards and Payment Services Limited Q4 FY 2022 Earnings 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 Mr. Rama Mohan Rao Amara, Managing Director and Chief Executive Officer of SBI Cards. Thank you, and over to you, sir.
Thank you, Stanford. Good evening, everyone. I extend a warm welcome to all of you. Thank you for attending the earnings call for Q4 FY 2022 and financial year 2022 today. We are grateful for your presence and continued support. I hope you and your loved ones are safe and healthy. As you are aware, India's GDP grew at 8.9% in FY 2022, which points towards the sharp economic rebound. It is also important to note that RBI's consumer confidence survey for March 2022 shows continued recovery with contact-intensive activities, including travel regaining traction. Domestic consumption also improved over the previous year. Owing to many factors, digital payments have seen a substantial growth, and along with growing digital payments, credit card adoption and usage has also increased.
This is evident from healthy growth witnessed by the industry in credit card volume and spends over the past one year with some new milestones being. In February 2022, credit card base for the industry reached 71.7 million. The month marked the highest growth in past 21 months on a year-on-year basis at 16.3% when it comes to new card additions. Card spends also saw healthy growth, crossing the pre-COVID-19 levels during FY 2022. In October 2021 itself, spends crossed INR 1 trillion mark, which was a first in terms of monthly spends. As per RBI, in February 2022, card spends stood at over INR 86,000 crore. Despite the strong growth shown by the credit card industry, the penetration in the country still has immense growth potential, knowing fully well that it is a very low penetration as of now.
In fact, the year was marked by several progressive steps introduced by the regulators to further increase the penetration of digital payments and enhance the safety for users. For example, extending digital payments to feature phones and permitting card-on-file tokenization to enhance security and convenience. Just now, let me take you to the business overview in FY 2022. I am happy to share with everyone that even amidst uncertain environment, SBI Card was able to emerge with a robust business performance and stronger financial health in FY 2022. Please allow me to take you through just three important aspects of our business to corroborate this. In terms of consistent performance, I will read out a few which will corroborate the consistency in the performance. Our new accounts registered 33% year-on-year growth in FY 2022 as we added over 3.5 million new accounts.
In Q4 FY 2022, we added 1 million new accounts with over 27% growth over the corresponding period last year. SBI Card cards in force has grown to over 13.7 million after having crossed the 12 million mark and 13 million mark during FY 2022. The market share in terms of cards in force stood at 18.9% as per the February data. Overall card spends reached INR 186,353 crore, having seen increase of 52% year-on-year. In Q4 FY 2022, card spends grew by over 50% versus Q4 FY 2021, standing at INR 54,134 crore. Retail spends at INR 146,457 crore have seen a growth of 43% year-on-year in the financial year FY 2022.
Last quarter, retail spends reached INR 41,872 crores with a growth of over 40% versus Q4 in FY 2021. Corporate spends have also grown by 99% year-on-year, standing at INR 39,895 crores in FY 2022. Last quarter, corporate spends were at INR 12,263 crores, which is 100% growth over the corresponding period previous financial year. Online spends have also shown grown significantly in FY 2022, and its proportion in the overall spends is well over 54%. Some of the following things will demonstrate that the growth attained by SBI Card is sustainable. Our profitability has consistently grown each quarter throughout the year, financial year. In FY 2022, our receivables have grown by 25%.
GNPA, gross NPAs remain low at 2.22% as of the end of March 2022. With sustainable growth as a goal, we have been calibrating our credit filters for new customer acquisition to address the uncertainties of the times. In terms of leveraging the changing consumer trends to center our product portfolio, we have undertaken several initiatives. Our customer-centric approach has always been our guiding light. In line with this approach, during the year, we introduced products like SBI Card PULSE and Fabindia SBI Card that have been designed keeping in mind consumers' changing lifestyles, spends requirements and interests. We also partnered with Nature's Basket to roll out first of its kind credit card for gourmet lovers, a segment fast growing in India.
Further, I am pleased to inform you that we have also strengthened our presence on the RuPay platform with the rollout of our popular cards, BPCL SBI Card, Yatra and Yatra SBI Card in FY 2022. Lastly, as a responsible company, we ensure to be compliant with the new regulatory changes during the year. A couple of major changes are like, we have successfully switched to the new mechanism for recurring payments as per the deadline mandated by RBI. We are also ready with the card-on-file tokenization implementation and will roll out the same as per RBI's deadline of June 30th 2022. Now a few core financial perforance highlights. The company has achieved net profit of INR 1,616 crores in FY 2022, a growth of 64% over previous year.
For Q4, the PAT stood at INR 581 crores, which is 231% higher than the Q4 of previous financial year. Similarly, receivables stood at INR 31,281 crores with a growth of 25%. Revolve balance as of March 2022 is at 25% of overall NEA. Partly it is also on account of elevated trends what we have seen in the month of March to the extent of around INR 3,000 crores over February 2022, which haven't got the opportunity to get converted into revolver. Our total revenues stood at INR 11,302 crores and has grown at 16% in FY 2022 over the previous year. In Q4, our total revenues stood at INR 3,016 crores, a 22% year-on-year growth.
On asset quality, the gross NPA has come down to 2.22% as compared to 2.4% sequentially as compared to the previous quarter and 4.99% as of March 2021. Net NPA for the period is at 0.78% as compared to 0.83% in Q3 and 1.15% at Q4 of FY 2021. Overall, RBI RE book stands at less than 1% of the total receivables as against 2% in the previous quarter. Write-off to average as six-month quarter is at 7%, which is higher by 192 basis points as compared to 5% for Q3 in FY 2022.
ROAE is over 30%, which is higher by 914 basis points as compared to over 21% for Q3 in FY 2021. Our liquidity position continues to be strong. Capital adequacy is at 23.8% for the period ending March 2022. On the way forward, the Indian economy seems to be in a gradual recovery path as of now. The road has not been without hurdles, though, and the situation remains volatile with several external and geopolitical factors coming into play now. We continue to closely track the prevailing environment and fine-tune our strategies accordingly. One of the key regulatory changes that we'll see starting July 1st, 2022 is the implementation of Master Direction of RBI on credit cards.
It is a welcome move in the direction of ensuring customer protection and transparency, and as a prudent and progressive organization, we are well covered with most of the aspects. Let me reiterate that at SBI Card, we have built a robust, reliable and a resilient business that has stood the test of time over the past two decades. Going forward too, we are committed to keep creating value for our shareholders, employees and customers as we pursue sustainable growth. Now we are open for questions. Hansel?
Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may please press star then one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star then two. Participants are requested to use handsets while asking a question. Also as a reminder, in order to ensure that the management is able to address questions from all participants in this conference call, please limit your questions to two per participant. For any further questions, you may come back for a follow-up. The first question is from Anuj Singla from Bank of America. Please go ahead.
Yeah. Thank you for the opportunity, sir. The first question relates to the asset mix. We have seen revolver declining to 25%. Every quarter, we believe that the revolver has bottomed out and, you know, and we see a decline in the next quarter. How should we see this number? Is this more structural in nature? Secondly, is this a SBI Card specific phenomenon, or do you have any feedback, other portfolio or maybe the bank side, they are seeing the same thing happening in their portfolio as well?
Yes, I think you are right. I mean, the revolvers, you know, which was at 27% as of December, came down to 25%. When we look at internal analysis, the revolve rate has been marginally increasing from October 2021 to February 2022. That is, amount of spends that get converted into revolvers. Of course, we have payments in revolvers, et cetera. Overall, that rate is either stagnant in some of the months or otherwise slightly increasing in a couple of months. When it comes to March 2022, we did run some special campaigns, which has resulted in around INR 3,500 crores of incremental spends as compared to February. These spends will take some time. Some part of it may get converted into revolver.
It's an industry phenomenon. We know like a lot of customers who have revolved in the past, I'm talking about the vintage customers, bulk of it got restructured and then the portfolio, most of it is revolved and our portfolio is hardly at 1%. Only a few of them have actually renewed interest to take the card and again start using the card. Bulk of them have been very circumspect in terms of again activating the card. The last two years, of course, the first year, I mean, 2020, 2021, if we talk about, it was more of a containment. 2021, 2022, obviously, we have recalibrated the trade filters.
We have been slowly allowing the kind of segments like a self-employed and a taxi kind of customers in a calibrated manner. As and when we are confident about the CRED cost declining, we were doing it. In this, we are not again doing it blindly. We are also considering some alternative data and with that benefit only we are doing. In fact, in terms of the sourcing when we look at, I think the self-employed, the sourcing has increased at least by 2 percentage points quarter-on-quarter, which shows our increased appetite for this segment. But it will take some time. It will definitely take. It's taking longer time than what we have expected, but it's an industry phenomenon. Everyone is looking at it and making attempts to improve the revolver.
I get it, sir. The second question relates to OpEx. There was a sequential decline in OpEx. Is it more seasonal in nature or we have taken some steps consciously to cut back? If I may, the third question is on Master Directions on credit cards. Is there any impact on our relationship with the co-brand partners given the new, you know, maybe stricter data sharing regulations around that?
I will answer you with the last question, the Master Directions. As we reiterated, this is more in terms of enhancing the consumer protection, et cetera. Our internal preliminary analysis indicates that we are largely compliant. Obviously, some changes will be required in the system to exactly comply with it, and we anyway will be complying it by the deadline. In terms of co-branding partnerships, our partnerships are exactly in compliance with the guidelines, so we don't anticipate any impact or anything because there is no sharing of data in a reverse way with the co-branding partners. Second one, in terms of OpEx, yes, you are correct.
Typically Q3 OpEx is higher because the spend-based costs, when we launch a lot of marketing campaigns during the Q3, the spend-based cost will be higher. Marketing costs, cashback kind of components will be higher. That has reduced in Q4. Nalin, would you like to add any other comments?
Yeah. Anuj, as said, one is obviously the spend-based cost on a quarter-on-quarter basis has come down, and that is typically the seasonality factor and associated with the spend-based cost because as I said, during the festival time, this cost tends to be on the higher side. We've also been taking steps on the other side. We're looking at our acquisition costs and other costs and, you know, sequentially all other costs basis for cards are coming down and there is greater focus on the acquisition cost side as well. Then other as well, we'll be focusing a lot more on the digital initiatives to improve our, you know, cost of acquisition. Yes, it's both the things.
One is the seasonal factor and companies are also taking steps to ensure that, you know, the costs are controlled.
Okay. Thank you very much, sir. All the best.
Thank you.
The next question is from the line of Bhavik Dave from Nippon India Mutual Fund. Please go ahead.
Yeah. Hi. Good evening, sir. Thank you for the opportunity. Couple of questions. One is similar to the previous participant on the cost of acquisition, right? When we see newer players, cost of acquisition wherein they go full digital is almost half or 60%-70% of our cost. Is there a line of sight that we can improve our cost of acquisition materially over a period of next two-three quarters or a year wherein we become equally competitive in terms of cost of acquisition? That is question number one. Question number two is, sir, on the active 30-day active card rates where we were at 52, now it's 50. What is changing here?
How do we make it like back to just 50% somewhere around 50%-54% that we were before COVID? How do we reach there? What are the steps that we are taking to keep the customer more active? That is the question number one. Last question is, sir, on the Tier 3 customer segment where we've added like reasonably higher number of cards in that geography. If you could explain how the economics work there, like how does the spend behavior pan out? How much time does it take to maybe break even or when does the inflection point come in those customers when on the spend front? These are the three questions. Thank you, sir.
I think with regard to cost of acquisition, we have been taking a number of initiatives. Particularly we have shared during the last analyst meet also around having an end-to-end digital journey for existing customers, where somebody wants to opt for an upgrade or whether somebody is asking for an additional card. Their journey is completely end-to-end, and that's only just a fraction of the normal acquisition costs. We also showed lately we are also working on creating the digital journey for new to SBIC customers.
Yeah.
The pilot has been completed. We are actually rolling out on a full-blown way in the production. It will be calibrated. Only a few product types will be available initially, and then they will be ramped up because we need to fine-tune the configuration, et cetera. This entire thing is expected to stabilize by end of the current quarter, that is the June quarter.
Sure. That will get the acquisition cost, like, down reasonably, like good?
I think we have been. In fact, as compared to a completely manual process, as and when we digitize certain journeys, actually part of the journey, we were actually able to get the benefit. The moment it is a completely end-to-end digital and that's originated by the customer, definitely the cost of acquisition will be much lower.
Sure.
For Tier 3 customers, I think broadly this segment we acquired through the banker channel, and mostly through the Shikhar kind of program, which you are aware, like it's a pre-approved and a pre-qualified kind of program.
Okay.
Where the cost of acquisition of the banker is generally lower than the open market. I think now when we look at the customer behavior, et cetera, I think Tier 3 , Tier4 customers are also equally savvy as far as the Tier 1, Tier 2 .
Right.
They are also trying it mostly online. The share of SBI online is actually more than 50%.
Sure.
That way, I think they are no different. Slightly, yes. If you are giving a card to a NTC kind of customer or NTC customer, it will take longer time for them to start using the card and accelerate the spends. To that extent, there can be a kind of a delta in terms of the break-even period, et cetera. Otherwise, not a very great difference between a Tier 1, Tier 2 customer and a Tier 3 customer.
Correct. On the activation rates, yeah?
Yeah. On the activation rate, what you see here is the number is the average of January, February and March. January was impacted minorly for some period of time by Omicron. February is a 28-day month, but by March it's the number is around 51%+ again, back again on a exit basis. Because March spends, if you see, the total retail spends were almost INR 15,800 crores+, which essentially means that in the lifetime of the organization. It was even higher than October. March was a very strong month coming back.
A couple of reasons for that were that travel, which was picking up in Q3, was suddenly impacted in the month of January and again came back in the month of March. Why the 30-day active rate is at 52%? There are some steps that we do essentially in three buckets. Reiterating the product value propositions to people who are not using the card. Giving them the right credit line or the right product as per their requirement. Thirdly, the kind of offers that we do, which is either in terms of cashback offer or segmented offer. If the customers in their categories where they are spending or where we want them to spend, they get special offers. These are some four or five steps broadly that we take for keeping the customers active.
For example, if a customer is inactive with us for 90 days, we would give him an offer after looking at his past behavior so that the customer starts spending on the card. If I look at a 365-day period, more than 90% of our customers are either spend or balance active.
Sure. Sorry, just one last question. Question is, when we give out the card, and there is RBI guidelines talks about activating the customer within 30 days, how do you think about that clause in that guideline, for us? Because, we have like cards where we are taking an annual fee. How do we incentivize them to start activating? Or is there a, you know, area that we need to work on? Or do you think that it doesn't matter because the customer generally starts activating the card online particularly within 30 days. How would you think about it?
You are right. We will have to do certain set of changes. First point is in terms of the definition of activation, which we will have to work with the regulator, because that is not defined. Because activation can be when the customer comes online and switches on the online spending switches or international switches or does some other activity. However, you are right, because typically from the date of the issue, on an average, it takes anywhere between five-10 days for the customers to receive the card.
Correct.
Which is a very less period of time at this hour. This is across the industry. From a definition perspective, work is required. I think RBI here is looking at the safety and security of the customer, that it should not happen that the customer is levied a fee where the customer does not have any intent of using the card.
Sure.
That needs to be worked with RBI in that sense. Even in present state, what we do is that we are giving the customer, as soon as the card is approved, to a certain set of segments where we send e-cards to the customer, which are utilizable from that instant itself. That is one initiative which is very much in progress. There we have seen that the activation rates are very high because customer delight is there. You can't do it to all. You have to do it with safety and keeping certain.
What percentage? What percentage of 1 million, if you could, the gross additions that we have a month? Sorry, for a quarter. What percentage of it would be the e-cards? Rough or in a broad range would have helped.
Just the detail. E-card we issue for all the customers now. You know, the only check that we do is whether the mobile and the email is validated. By default an e-card is sent as soon as the card is generated. A link is sent and, using that the customer can generate the e-card online. Then subsequently the physical plastic is also dispatched. We do this as a norm in our system.
Sure. Thank you, sir. Thank you so much. Bye.
Thank you. Next question is from Dhaval Gada from DSP. Please go ahead.
Yeah. Hi, sir. Congratulations on a good set of numbers. I had three questions. The first one is for Aparna. So on credit costs, this quarter, you know, we've seen that reversal of INR 76 crore provision that we created last quarter. If you look at the annualized credit cost, it's around 6.5%, give or take few percentage points. Should we expect, you know, this level to sustain and improve in FY 2023? That is a similar level that we used to see pre-COVID. Just trying to confirm that part. The second question is for Girish.
On the revolve book, you know, I mean, if I look at the incremental sourcing in the last two quarters, directionally it's moving towards, you know, more customer segment where the revolve rate should be much better, you know, compared to the salaried and even the self-employed segment share is increasing. Just trying to understand, you know, when one should expect this incremental sourcing to get reflected in a better revolve rate and revolve book growth being much higher. Any, you know, like, two quarters down the line, three quarters is just, you know, when I mean, indicatively how much time it could take. Last question is for Rao sir .
In terms of ROE for the year, we've ended at about 23 odd % ROE in FY 2022. Do you think, you know, 25%+ ROE for next couple of years on a sustainable basis is doable or any challenges that one should be cognizant of? Yeah, those are the three questions. Thanks.
Let's start with the credit cost one first. Specifically the INR 76 crore was a discretionary provision we had taken last quarter just to be able to see whether there is any impact of Delta. Since we did not see any deterioration in our collectibility or flow rates or whatever, we have reversed that provision. Now, as far as the overall credit cost goes, if you see the number for this quarter, the number is 5.2% on a
Dhaval, on the revolve, as MD sir was mentioning, we have seen from October, in the month of November, December, January, February, both the revolve rate as well as the percentage of assets landing at around close to 27% also. In the month of March, we did a program with Flipkart, and we have done some other. We've seen very good spends coming back in the month of March, and that too, in the nature of discretionary spends, which is essentially travel, lodging, restaurants coming back. This spend was. February versus March, the difference was almost INR 3,500 crore, which has got added into the denominator, but that spend has not got an opportunity to decide whether to revolve or to pay back or to get.
Some part of it has already got converted to EMIs, and that trend we are already able to see. Regarding the new customer sourcing, yes, you are right. We have already started moving towards some of those segments where we have seen better revolve rates in the past. Those segment percentage in the new acquisition mix has increased. However, these segments take, as we have mentioned earlier also, anywhere between nine to 12 to 15 months to mature, and some of these segments are only 3 to 6 months because the earliest that data that we have is from November month onwards. We see a slight uptick compared to what we were doing earlier in those segments, which is a very minor thing, but it has to be on a weighted average basis.
We will have to see the total as to how much impact it will have on the overall asset, revolve asset balance. That is where the state is as of now. We will, as we see more data and information around these segments and how they are behaving now, we will keep, everyone posted.
Yes, Dhaval, with regard to your query around ROE, what will be the level in a year or so? I will not be able to give a number, but the philosophy-wise, we will be looking at sustaining the core performance. I mean, by core performance, what I mean is knocking off for any extraordinary items like your, kind of PSLC on what we got during the year or otherwise that kind of trade cost reverse to what we have seen.
Whatever is the core operating performance, the attempt is to continue or sustain that operating performance. One or two things we need to really look at as things pan out. Funding cost-wise, we have seen the bottom. No way it can go down further. Rather, the bias is upward actually, like given the kind of interest rate environment what we are seeing and the kind of inflation going up, the funding cost is likely to increase, particularly when we are also increasing our share of long-term sourcing, sorry, long-term resources to reduce or address a kind of interest rate sensitivity.
Obviously, that will also can elevate the funding cost, et cetera. We will be like the way we have increased the share of EMI loans or closed-ended loans quarter-over-quarter. The attempt will be to improve it further to the extent possible. I'm not factoring in any positive benefit on account of revolver or anything, but these things actually overall will help us. Of course, the second lever we will be the acquisition cost. As I said earlier, definitely increasing the percentage of digital sourcing is the target area. To that, in that initiative, we have a couple of strategic initiatives that are already there. We are hopeful of actually reducing the cost of acquisition, which can compensate for any other headwinds.
At minimum, we will be attempting to sustain the core operating performance.
Got it, sir. Thanks, and all the best.
Thank you.
The next question is from Nitin Agarwal from Motilal Oswal Securities. Please go ahead.
Yeah. Thanks for the opportunity. Couple of questions. Firstly, this is on slide 11. The spreads across apparel and jewelry has come down sharply and, probably due to the volatility in gold prices and, at the same time the revolve rate has also dipped. Just trying to understand if there's a correlation here.
Mr. Agarwal, your voice is not very clear. Maybe just mute your mic please.
Is it any better now?
Low now. Sounding low.
Okay. Am I audible?
Yes, now you are. Thank you.
Okay, sir, the question is around the composition of spends. If I look at slide 11, across apparel and jewelry, there is a decline, sharp decline, and probably due to the volatility in gold prices, and at the same time, the revolve rate has also dipped. Just trying to understand if there is a correlation here, as in the customers who spend on jewelry typically have a higher propensity to revolve. Is that the case?
No, no. No, no correlation.
Sir, secondly, on the ECL provisioning now for stage two, we are seeing a decline in ECL provisioning for last few quarters and while expense rates have settled down for stage one and two. Where do you see this now and trending for 2023 and how do you see the gap between the credit cost and ECL now?
Stage two decline to a large extent is driven by the runoff of the RBI RE. That's why you're seeing that shift. The all of RBI RE less than 90 days was all sitting in stage two. That's why you're seeing the decline. I think the number to look at, as I mentioned earlier, is the overall ECL rate. On that slide you actually see on slide 18, you see how the ECL rate has been dropping. We are now at a 3.3% overall ECL rate, and the distribution also is now pretty much close to 89% of the book is sitting in stage one. Both of these trends are actually pointing towards a increase in the asset quality. If you look at how it's going, it's much better. We're back at pre-COVID here.
Right. Thanks. Lastly, any thoughts on change in MDR? Is that still in process? Any discussion with the regulator on this?
We haven't heard anything from the regulator because the announcement was more around coming out with a discussion paper by RBI. We haven't seen any discussion paper in the domain, public domain.
Okay. That possibility is still open despite these recent circular that has come around the Credit card, that possibility is still open. That's it.
We don't know. I cannot comment because the announcement is in December, so we don't know the thought process so far. We don't know.
Okay, sure. Thanks so much.
Thank you.
Thank you. The next question is from Param Subramanian from Macquarie Capital. Please go ahead.
Hi. Thank you for the opportunity. Yeah, my question is again on the revolvers. I wanted to ask if there is any change that you are seeing behaviorally in the customer base compared to pre-COVID for this decline in revolvers, because this is clearly a bit of a city issue. Is it that there are more alternative products, say, in Flexi loans, for example, or are customers getting more prompts from, say, digital medium to make repayments on time? Is there any particular change you are seeing behaviorally from customers? That's my first question. I'll come back once again.
Param, you are right, there is some changes that we see. That is why even in our last commentaries that we stated that we would do not in the near term foresee going into 33, which we used to be pre-COVID. That change is there. There is definitely a preference towards planned purchases moving to EMI because that growth we are already seeing in our portfolio also, and that has become more popular.
However, the revolve as the stability remains, it has been seen across the world in all places, and we have also seen over a period of last 20 years, that as the stability continues and the people continue to spend on the card over a period of time when they have some amount of comfort with respect to their income spending patterns, the short-term lending needs of the customers, they fulfill through revolve. So that continues. That does come back over a period of time. It does take time. This is our, as we said, we are also adding more self-employed. Some of those segments which we saw earlier had higher potentialities to revolve. So both the mix is now moving in that favor as well as the existing customers, once they see the stable environment, they also change some of their behavior.
Is it being led, say, by the availability of alternative products? Say for example, you know, flexible term loans for example, which are, you know, a cheaper way to revolve than revolvers? Or is it, say, prompts from digital media, say CRED for example, for making the payments on time? Are all these things a part of? Is there any sense that this is a bit of a structural or a sticky issue or do you think that, you know, they should bounce back quickly?
See, some of these payment options were always available to the customer. A Creit card customer has since 1990 been the most premium customer in the industry. People always had options of TL and other kind of loans, and they were taking all of these options. It is not that those options were not available. Yes, more proliferation has happened as of now. Ease of availability is also there. Some of that might have an impact, but basic consumer behavior does not change that fast.
Perfect. The third question was on the Credit card. Now that, you know, the revolvers are low, the NPAs are also very low and, you know, restructuring is also very low, does it mean Credit card should undershoot even the pre-COVID sort of levels? Any sort of guidance that you are giving over there? Yeah, those are my two questions. Thank you.
Sir, I don't think we are in a position to give a guidance on the Credit card right now. Actually you have seen that number coming down quarter-over-quarter. For this quarter we are actually at 5.2% and for the full year we are down to 8.9%. We are confident the idea, like we said last time, is to. We are in the business of taking risk. I don't think the plan is to keep bringing that down. There used to be a band at which we used to operate pre-COVID and the idea is we will optimize the Credit card. We are not saying targeting to bring it down absolutely.
The number to look at is if you look at our ECL rate, we are now at 3.3%, ex management to drop, which is largely on account of the RBI RE. That is a good number to look at because that's the kind of number at which we'll be operating at in the future.
Perfect. Thanks, Aparna. Thanks, team. All the best. Thank you.
Thank you.
The next question is from Nilang Mehta from HSBC. Please go ahead.
Thanks for taking my question. Most of my questions has been answered. Just one quick one on competitive landscape and while we've seen some marginal dip in the market share and we've seen revival of few of the banks also at the margin improving their market share and one large bank gaining a lot. So could you give a context on how does management think about market share and is there a relevant metrics to focus on? Or we think that that's probably just an outcome and not something we are targeting.
Yes. Yes, you are right. There is a kind of action by the existing players and there is also, I mean, entry of new players, which has expanded the card issuance on a monthly basis when we look at it, has expanded it almost by 80%, 90% from a stable scenario what we used to see. Like INR 0.8 million-INR 0.9 million we used to see per month kind of issuance, but now which has increased to 1.9 million also. Yes, I mean, in terms of retaining the market share, that will call for existing players will have to increase the issuance.
One has to look at the kind of customer segment we are looking at, what is the opportunity, what is the cost of acquisition, what is the managing and what is the value of the customer over lifecycle, et cetera, and what are the internal profitability metrics. That way our approach has always been a kind of calibrated approach. You would have seen like we have ramped up our issuance. In fact, for a large part of the time, we have been the largest issuer, but we had some kind of attrition. That way the net growth is slightly lower than the overall issuance. I think our aim will be to look at opportunities.
Of course, we have a good partnership with parent bank like SBI through the Shikhar kind of program, where we acquire the customers of even tier three, tier four kind of towns without having a physical infra. At a much cheaper cost that we'll continue to leverage. Through the digital YONO SBI, that channel is expected to be fully operational very soon. That will also help us. Partnerships of course. We had very good partnerships where we continuously look for the opportunities. Overall approach is to ramp up but in a prudent way and which can give us a kind of sustainable growth.
Sure, sir. Thank you for that. Last bit, so how are we doing on YONO app of SBI? In terms of market share there or trend, if you could give some color there, it would help.
Yeah. Basically, we've got given two sets of servicing on the YONO app. We are, as a business, you know, tightly integrated with the YONO app. What it means is that existing customers of the bank who come onto YONO can seamlessly apply for the SBI Card. That's on the acquisition side. Now, one other set of features that we've given on YONO is around the servicing part. What it means is that once you've onboarded and you've gotten a card from us through the YONO route, or even, I would say, outside of the YONO route, any of our existing customers can go onto YONO and avail a set of full services on the YONO app, which includes seamless ability to pay.
From you know your bank account you can seamlessly view your CRED card statement, you can view the bill and you can make a payment. In terms of integrating and embedding ourselves in the YONO ecosystem, we do already have a very, very strong integration. I think sir also mentioned previously that our focus for the coming year is going to be on digital. We have put a digital journey, for which pilot has been completed. A couple of products on our website are already there for an end-to-end digital acquisition. A similar roadmap we put it on one of our digital transformation slides in the investor day is being thought for the YONO route also. An end-to-end digital journey via YONO is also.
That's our play on YONO.
Thank you, sir. Thank you so much.
Okay.
Thank you. The next question is from M. B. Mahesh from Kotak Securities. Please go ahead.
Yeah, yeah. Another question to what the previous person highlighted. This year, you've grown the overall card base about 17%. In your assessment, how are you looking at for the year 2023?
My students really understand the question. Can you repeat that?
Just trying to understand what is in your assessment, target growth that you're looking at in terms of cards for next year?
I think, more than the top line, what we're looking at is I said, like, we also have a kind of attrition, so the determining factor will be improving the net addition. That we have been improving over a period of time. We used to be around 180,000, kind of net growth per month. Now we have even in the month of March, we have taken it around 240,000, approximately. Idea is to increase it to at least a kind of 300,000 over a period of time.
Okay. Sir, just one additional question. When you are looking at your spends of your customers, are you seeing more traction where existing customers are increasing limits and increasing spends or are you seeing more traction with new customers coming in and increasing their spends?
Good question. This year was very interesting. We have seen both coming in. Okay? The average spend per customer, if you see, and that is declared, which is there on, I think slide number nine. The average spend per customer in last year's Q4 was around INR 123. That has gone up to INR 161. Not only existing customers have started spending more, and this is what we have been stating in earlier discussions, that a lot of new categories have come in for the customer to spend. The existing categories which had gone out, travel is slowly coming back, not fully. Restaurant is slowly coming back. Railways is coming back. There is still a whole lot of room to catch up on these ones. Both have happened in this year.
Oh, okay. One last question. How many of your total card base, about 15 odd million, how much would be today's tap-and-pay cards available? Tap-and-pay.
Close to 100% of our issuance that we do, they can do tap-and-pay transactions. Okay? All cards issued by SBI Card can be used for tap-and-pay. Of the point of sale transactions, we see one-fourth of the transactions are coming as tap-and-pay.
The customers, for you, a tap-and-pay customer is a lot more active as compared to a customer who dips the card?
You are absolutely right. That customer is more active, and that customer's number of transactions in a month is higher.
Okay. Why can't you just replace all of the cards with tap-and-pay? Sorry, this is just a follow-on question to this. That's my last one.
My students couldn't get that. Yeah.
No, just trying to understand if the success of a tap-and-pay card is much more, is it possible for you to kind of increase penetration by replacing existing cards to the tap-and-pay?
What happens is that with a tap-and-pay customer, a lot many more low-value transactions also start to come in. Because tap-and-pay typically now works with less than INR 5,000. Earlier the limit was INR 2,000. What we have seen is that the tap-and-pay ticket size is less than four-digit number. Okay? It remains in that degree. You will have more transactions, but spends-wise, the difference is there, but not very high.
Okay. That's it. Thanks a lot .
Thank you. Ladies and gentlemen, we request you to please limit your questions to one per participant. The next question is from Karthik Chellappa from Buena Vista Fund Management. Please go ahead.
Yeah. Thank you for the opportunity, sir. My question is basically on the competitive intensity per se. Do you feel that the competitive intensity of the industry relative to the last four or five years is possibly now at its highest level? The context in which I ask this question is, the number one player is now back in the game. The number two player in spends continues to be very aggressive. The number four player just did an acquisition, and if I look at their last quarter net adds, it's almost equal to us in terms of number of cards. None of these happened together anytime in the last four or five years. Is it fair to say that the competitive intensity is probably at its highest? In that context, what is the spend market share aspiration that we can have?
You are right. Competitive intensity is among the highest that we have seen. It is not only within the players within the industry, it is from some of those prepaid players giving OD limits on the card, so that is also whether you call it neobanks or a low ticket size BNPL kind of a player. There is competitive density from within the industry and outside the industry. As was stated earlier, we will continue to follow profitable growth. We have been in this business for more than 25, 23, 24 years, so more than two decades. We know how to play this. Even among all these changes, we have continued to sustain our market share. We will strive to grow it, but we will want to do it in a profitable fashion.
For example, we have increased our corporate card spends, but we have not taken it to a level where, which was possible, but at a impact of either a cost to income or in terms of profitability. We will look at growth, but also keep looking at profitability and sustainability in the long run. Competition is good. It gives us more opportunities. It also enables us to be nimbler. It also enables us to cut costs at places where we can do it. We will also go more digital, as was stated earlier. All these actions we will continue to do and stay sharper in the market.
Just one clarification, sir. The Q-on-Q decline in the income from fees despite the strong growth in spends, is that due to the March promotion campaigns?
Income from fee, if you look at it, the spends have, on a quarter-on-quarter basis, spends are lower, so that impacts the interchange fees. However, membership fees are higher because we've been sourcing now 1 million cards, so on a quarter-on-quarter basis, those have gone up. The interchange fees purely because festival spends were higher, so interchange accordingly was also higher.
Okay. This is very helpful. That's all from my side, sir. Wish you all the best. Thank you.
Thank you. The next question is from Ravi Singh from Motilal Oswal Asset Management. Please go ahead.
Thank you for the opportunity. My question is about co-branded cards. Are you expecting any major impact because of the clarification from the RBI in their recent Master Directions on the cards businesses? How are you expecting industry practices to change or any impact on your co-branded cards? Can you also use this opportunity to just share some numbers on co-branded cards? I mean, what percentage of your open cards are co-branded card, assuming bank cards are mainly core cards or maybe as a percentage of spends? How is the industry evolving, assuming that bulk of the major merchants would already be having some partnerships? How do you expect this product to evolve and what role SBI Card will play? Thank you.
Three parts to your question. First is co-branded cards, as per the new regulation, can only be a distribution partner, can sell those products to their customers, but there has to be no data around those customers' spending pattern and other things to be kept with some of these co-branded partners. In the industry, this practice of some co-branded partners having the data started with some of these online co-brands. Before that, with offline co-brands or fuel co-brands, this kind of practice was never there because there the co-brand was used as a tool for building loyalty. However, with some of these online players, they use some of these data for further cross-selling their own products to some of these customers. That practice will have to stop, as per the new guideline.
The data cannot be shared. Co-branded partners will remain very, very key, especially in going further in the digital environment as more new customer acquisition will go digital. Having those partners so that customer purchases the card in the path of purchase journey is very critical. Some of these partners also have lot of data which can be used as alternative data for underwriting at all stages. Co-branding will continue. I think it will continue to grow. It is already, with some players, they either do their bank cards or some of these co-brands. While we do co-brands, bank cards, as well as open market. This is how it's going to play.
Thank you. The next question is from Prakhar Agarwal from Edelweiss. Please go ahead.
Hi, sir. Just couple of housekeeping questions and then probably I have a call now. What was your reward provisions for this full year FY 2022? Could you clarify that number?
Are you looking at the quarter number or?
Full year number.
Full year, you know, well, we have, I'll give you the specific number, but in the beginning of the year, there was hardly any accruals because the spends had not started coming in. During the course of the year, we made a provision of something like INR 100 odd crore, a crore provision. But this is increasing on a quarter-on-quarter basis. Do not go by what has happened during the course of the year, but over a period of time, this will increase. This is a good cost because this means that the customers are doing the spends and are using the card and are also redeeming the reward points.
Okay. Just in terms of your fee, in terms of while I understand the fact that you said that your spends have increased, that's why your spend base fee has increased. When I looked at, from a year-on-year perspective, when I look at that MDR as a percentage of every spend, that number seems to have gone up, and substantially. What explains this, right? MDR or interchange fee that is probably charged, on average spend basis for FY 2022, that number seems to have gone up.
You're saying the interchange fees has gone up?
Yes. If I look at your spend-based fees, which is as a percentage of your average spend, that number has gone up from FY2021 to FY2022. What explains that materially?
Because the spends have gone up, the number has also gone up, because interchange fee is earned on the spends. A little bit of Forex markup is also coming back. Since we are having higher spend, the network incentive, et cetera, some of the milestones have also kicked in, and that's the reason why the interchange fees or the, you know, spend-based income is going up.
Okay. Got it. Just one last data-keeping question. What was the write-offs that you did for the full year FY 2022? Rough sum?
It is in the region of INR 2,400-INR 500 crores. I'll give you the exact numbers.
2,800. 2,800 odd.
Sure. Thank you so much.
INR 2,800 odd crores, including the settlement losses.
Yeah.
Thank you. The next question is from Piran Engineer from CLSA. Please go ahead.
Yeah. Hi, good evening. My first question is that the share of new card sourcing from tier three locations has gone up from 19% to 30% QOQ. What really explains that? Correspondingly, the share of SBI Bank in, you know, in the sourcing has gone down. This seems a bit counterintuitive because I thought SBI was more for the tier two, three locations. You know, have we started open market sourcing in tier three to get more revolver type of customer?
I mean, besides the SBI, we also have partnership with some of the banks. That will also give us actually, foothold into tier three, tier four. Yes, you are right. Slightly, during the month of January, I think our SBI sourcing has slightly come down. That got reflected in the lower numbers for the month of January. That was partly compensated by the sourcing from the partner banks.
No, in that case, the market share should go up, right? It's gone down 300 basis points.
Banking is pure SBI sourcing. The co-brand banking include part of the open market.
Okay. Got it. Just one other question, and this may be a bit silly, but through credit bureaus, would you come to know if your customer is using another credit card more often?
Yes, we do get. See, some people report limit. We do a quarterly bureau pull for most of our customers. For some we do monthly also. You do figure out whether they have other cards, whether they are building balance with the other cards. All of that information is actually consumed not just from a CRED perspective. That information is also used by the marketing team to design appropriate offers, run activation offers and things like that.
Okay. Got it. That's good to know. Thank you and all the best.
Thank you. The next question is from Shubhranshu Mishra from Systematix. Please go ahead.
Hi. Thanks for the opportunity. Just couple of questions. One is how do we look at the collection.
Shubhranshu can't hear you. If you can be a little bit louder.
Am I audible?
You're audible, but the voice is slightly on the lower side. Go ahead, maybe we can hear you.
Sure. Just wanted to check what was the cost of collections in FY 2022, and how do we look at the cost of collections as a you know proportion of a OpEx going forward as the situation normalize in FY 2023 and 2024? The first one. Second is that the offer in cash just wanted to clarify, we offer in cash only to the transactors or is it offered across the board to revolvers as well? And what is it as a proportion of the receivables?
I'll answer the second question first. Yes, we offer in cash to transactors, primarily. Some revolvers, low infrequent revolvers, we do offer in cash. We do not offer in cash to continuous revolver or people who have been consistently revolving. The rates are different, based on the way that we look at risk profiling of some of these customers. We have not declared the in-cash number separately in our term balances, but as you can see that the term balance on an overall basis is now almost 35%, 34% of the total overall asset. There is a growth, substantial growth that we are doing on the in cash asset.
The cost of collection is around about 2% of the INR collected and INR recovered. We don't see that this cost is gonna go up now that we are stabilizing and we are out of the COVID period. It should be around this number or maybe improve. That's how we see this.
2% of what, sir? I couldn't figure-
Of the rupee recovered and rupee collected.
Right. That remains same and business as usual?
Yeah.
Right. One last question, if I can squeeze in, just a data keeping question. What is the NUNP, never used, never paid, proportion of our cards?
Don't have the number at this point of time. What we do is that if a customer is a NUNP customer and he flows into 90 days, we automatically reverse all the charges of that customer and block those customers. Over a period of 12 months, we exit them out of our portfolio. It is not that we will continue to keep NUNP customers with us forever, on a constant basis.
All right. Thank you. That's enough.
Thank you. The next question is from Rahul Jha from Bay Capital. Please go ahead.
Hello? Hello?
Yeah, Rahul, go ahead, please.
Yeah. My question is, the employee cost number has come down significantly this year. What is it related to, and how can we build it going forward?
Look, employee cost is more or less stable, and we had answered this.
No, as a percentage of income, I'm saying.
No, that's the beauty of that we don't have to employ that many people to increase as the business increases. On a year-on-year basis, one thing that you have to keep in mind is that we have the ESOP cost, which is always front-loaded. In the initial year the cost is higher, and then because ours was a fixed options that were given at the time of IPO. Those in the subsequent years come down, and that is also impacting this. We do use a lot of outsourced staff also for certain specific activities. As the volume of business grows, it's not necessary that we have to hire employees. We use technology as well as outsourced staff to manage the operations.
Okay. Second thing I have noted that over the years, from Q3 to Q4, generally the receivables go down. This year that has not been the case, despite revolvers being lower as a percentage of total receivables. Why is that happening this year? Some spending differences or something else?
Actually that is what I was trying to explain. In the month of March, the spends came back very strongly. If you see month-on-month movement, in March had close to we did almost INR 15,800 crores plus spend on retail, which was higher than even the October season month.
Mm-hmm.
A whole lot of that has got added into the denominator. That you see as an asset at this point of time.
Okay.
In the denominator of the balance, the asset does increase. The increase is not that high. In the month, in the JFM quarter compared to OND, there is usually an increase. It does not go down, but it's a marginal increase usually.
Thank you. Ladies and gentlemen, we take the last question from the line of Rohan Mandora from Equirus. Please go ahead.
Sir, thanks for the opportunity. Just two data keeping questions. One, sir, on the revolve, how has the average quarterly balance moved through Q-on-Q, but in Q3 and Q4?
On an absolute basis, the revolver balance has actually increased. Although in the percentage terms, you see, it has declined. It is more or less, as explained earlier, that towards the last week we had a campaign, which led to increase in spend and that's why the percentage-wise it has dropped. However, in absolute terms, the revolver balance has actually increased from Q3 to Q4.
Sir, can you quantify the increase? Average, quarterly average?
In the sense, are you asking about the revolve rate?
Yes. No, no. Revolving balances for October, November, December average.
Yeah. Q3 to Q4, the revolve rate has been stable. It has not moved. It's the same.
Quarterly balance. The second one, if you look at the slide, there is sharp dip in the cost of funds by around 50 basis points.
Cost of?
Fund.
There's a little bit of play of averages. We've always stated that our daily cost of funds have been around 5.3-5.4. As you know, towards the end of the quarter, if you increase the spend and increase the NEA, the cost of borrowing seems to be on the lower side. That's the reason why you're seeing it at 4.9%. However, on a daily cost of funds basis, it's been somewhere around 5.3-5.4. Throughout the year that has been stable.
Having said that, as was pointed out earlier, the interest rate have, you know, the environment has changed, the cost have started increasing and so would be the case for us also. The cost of funds would go up. The numbers that are presented here is the averages of receivables. That sometimes it may be-
Sure, sir. Since lastly, as interest rates are likely to go up, will we look to increase the yields that we charge on the EMI portfolio? Or will that remain a function of the competition?
At this point of time, we look at both the cost of funds as well as what is the competitive rate. Whatever we give to our customers at is at fixed rate. We are not issuing, giving loans on variable or floating rates. It's only on fixed rate that whatever is said. We review this every quarter, and if it is required, we will increase it depend looking at both the scenarios. Competitive scenario is also as critical. While it has to be above the benchmark rates, we will look at competitive scenario also to build the balances.
Sure, sir. Hypothetically, in case the competition doesn't move, then we will also not move. That will be a fair assumption to take.
Yes.
Okay, cool. Sure, sir, thanks a lot.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Rao, MD & CEO of SBI Card for closing comments.
Thank you, Sanford. I must thank all my colleagues at SBI Card who have worked diligently and tirelessly while helping SBI Card to navigate through the volatile environment. I would also like to thank our shareholders and business partners, who showcased continued faith in us and supported us throughout our journey. I would like to reiterate that as an agile and adaptive organization, we will take all measures to safeguard our business while pursuing sustainable and profitable growth. As I conclude, I will request everyone not to lower their guard and continue to take all measures to stay healthy and safe. Thank you all, and have a good evening.
Thank you very much. Ladies and gentlemen, on behalf of SBI Cards and Payment Services, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.