SBI Cards and Payments Services has demonstrated a strong track record of growing its earnings, enabling it to strengthen its lead as the second largest card player in terms of both outstanding cards and spends, Motilal Oswal Institutional Equities said on Thursday.
While COVID-19 disrupted its growth trajectory, the recovery has been fairly sharp and retail spends have exceeded pre-COVID levels, it said.
SBI Cards has a market share of 19 per cent in outstanding cards and 20 per cent in overall spends. The company has an outstanding card base of 11.5 million and doubled its base over past three years at an average incremental market share of 23 per cent.
Motilal said SBI Cards stock corrected 11 per cent since its initiation and is trading at 35xFY23 estimated earnings with strong fundamentals, earnings growth and long-term structural story.
The credit card base and spends has increased by 22 per cent and 31 per cent CAGR respectively over past five years, credit card penetration levels remain much lower at 3.8 per cent versus most other countries.
The credit card industry has demonstrated strong resilience as both cards spend and new customer acquisitions have reached close to pre-COVID levels. Motilal said SBI Cards spend rate has touched pre-COVID levels while it has gained 50bp market share in outstanding cards.
The core profitability for business that remained strong which allows absorption of asset quality shocks, despite the elevated credit cost of 9 per cent over FY20.
Robust NII and a superior margin profile along with healthy fee income have resulted in a strong operating performance by SBI Cards. A higher proportion of interest-earning book coupled with an increase in fee income would remain the key earnings driver even as credit cost may remain elevated especially up to FY22 estimated, said Motilal.
( With inputs from ANI )
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