Vintage loans haunt SBI Cards’ credit

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₹593 crore. This is mainly on account of stress from a certain customer pool acquired in 2019. While some may consider this as a prudent measure, investors are not particularly thrilled.

The stock closed flattish on Monday at ₹855 apiece. In an earnings call, the management explained that the covid restructuring had delayed the identification of structural stress in 2019 vintage loans. These customers account for about 16% and 20% of SBI Cards loan portfolio and non-performing assets (NPA), currently.

Against this backdrop, credit costs inched up from 6.3% in Q4FY23 to 6.8% in Q1FY24. The company has now taken necessary actions, such as curtailing credit limit, cross-selling products and write-offs. Accordingly, SBI Cards expects credit cost to be at 5.8-6.2% in the second half of FY24.

Furthermore, the management indicated that the quality of customer cohorts after 2019 were better. This should aid in reining in the credit costs. For now, asset quality metrics deteriorated last quarter with gross NPA rising by six basis points (bps) sequentially to 2.41% and net NPA up two bps to 0.89%.

Some remain cautious on the asset quality. Analysts from Nuvama Institutional Equities believe high credit cost along with the vintage bad loans is a concern. “Management attributed high credit cost to 2019 customers, a very high vintage for a low tenor product, especially when all other lenders—even those with higher duration loans—have weeded out stressed customers of pre-covid days," they said in a report.