SBI Card expects a healthy recovery in spends as economic activity normalises. With the onset of the second wave, spends have taken a hit. The management believes recovery in spends and asset quality to be better as compared to the first wave.
In the light of the second wave, spends fell by approximately 10-15% in the month of April and May`21 as compared to H2FY21 levels. Owing to the current situation, June`21 onwards spends are back to its earlier levels.
In Q4FY21 retail spends stood at 113% as compared to Q4FY20 levels owing to a lower base. The Corporate spend in Q4 neared the last year's levels. CS is of the opinion lower spends, restructuring 2.0 and tighter credit filters may keep a share of revolvers lower than historic levels. Continued moderation in funding cost may partly offset NIM impact. NII growth will likely lag asset growth in FY22.
Over the past year, management has tightened credit filters and increased the share of sourcing through the banca channel 55%, witnessed better outcomes through the 1st wave. Which along with Stage 2 loans back to pre-COVID levels at 7.5% will help contain future slippages.
Builds higher slippages around 10% in FY22 partly led by stress from exiting restructuring. Elevated credit costs are seen at 9% in year FY22E as compared to 6-6.5% pre covid level.
CS expects healthy profitability with Return on Asset nearing around 6% despite the higher credit cost. It Expects the company to benefit from rising digitization. Cut FY22/23 EPS by 8% on the back of lower spending and higher credit cost.
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