BackLockdown impact: SBI Card sees retail spends drop 60%
Daily average run rate of retail spends for last 15 days of March was lower by 31% compared with first 16 days of MarchCorporate card spends have also declined at similar rates
PremiumMUMBAI: SBI Cards and Payment Services Ltd, India's second-largest credit card company, has seen retail spends slump nearly 60% during the period of extended lockdown when compared with the first half of March.
In a stock exchange filing last week, SBI Card said the daily average run rate of retail spends for the last 15 days of March was lower by 31% when compared with the first 16 days of March.
With the extension of the lockdown, average daily retail spends are lower by 60% when compared to the first half of March, the credit card company added.
Corporate card spends have also declined at similar rates, it added.
According to a 21 April report by Bank of America, SBI Card customers had an average monthly spend of ₹10,815 per card for the first 10 months of FY20, slightly lower than the industry monthly average of ₹11,031 per card. In the same period, SBI Card had a 18% share of overall credit card spends, second to market leader HDFC Bank's 29% share. SBI Card had approximately 10 million outstanding credit cards at the end of this 10-month period.
"The company is keeping a close watch on portfolio and is drawing up plans to mitigate the impacts post lifting of lockdown with special focus on online spends. Repayments from retail customers are higher than retail spends leading to decrease in transactor receivables," SBI Card said.
The covid-19 pandemic is expected to hit the growth of credit card industry as well as asset quality in the near term, analysts believe.
"We expect deterioration in the growth and asset quality outlook for the Indian credit-card industry as well as SBI Card, at least in the near term, on account of covid-19-related disruptions. While 85% of SBIC’s accounts in force belong to salaried cardholders (Dec’19) where the NPA risk has historically been low, the upside risk to NPAs emanates from significant rise in risk of job losses owing to weak economic activity," said the Bank of America in its research report.
Stress in business cash flows is likely to impair ability of self-employed (MSMEs) customers as well leading us to factor much higher credit costs in FY21, the report added.
However, Bank of America noted that despite the near-term impact, it remains positive on the long-term growth outlook supported by significant under-penetration and prospects of rising disposable income and credit card spend once things normalize.
"For SBI Card, we factor 4% lower spend vs a 5% YoY decline in industry spend during the Global Financial Crisis," the report added.
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