The first four months of Salila Pande, new managing director and CEO of SBI Cards and Payments Services, have been fraught with challenges, as the country’s only listed pure-play card issuer finds itself relegated to the third place in terms of market share.
While HDFC Bank is sitting pretty at the top at over 27% of market share in credit card spends, SBI Cards and ICICI Bank have been involved in a slug fest for almost three years. While the former barely managed to hold on to its position in FY23 and FY24, the previous fiscal was a turning point, when ICICI Bank cornered an 18.9% of market share and SBI Cards fell to 15.7%.
In June, ICICI Bank had a market share of 18.2% while SBI Cards stood at 16.7%. However, the company’s market share in cards-in-force improved to 19.10% as on June 30, compared to 18.5% a year ago.
For the June quarter, SBI Cards net profit fell to Rs 556 crore, from Rs 594 crore a year ago. While the decline was not a steep one, it reflected the strain of elevated credit costs and a more cautious growth strategy that’s beginning to show up in the bottom line.
In an analyst call, SBI Cards’ top brass acknowledged that while the company is exercising caution in onboarding new customers — especially in light of early delinquencies — the stress isn’t confined to recent additions.
According to Pande, even long-standing customers are showing signs of financial strain, often triggered by unforeseen life events. This suggests that the issue runs deeper than just underwriting practices, and points to broader structural vulnerabilities within the portfolio.
She noted that a significant portion of stressed accounts — those classified under Stage-2 and Stage-3 — comprise older customers. While resolution efforts are underway, the company admits that this segment remains at risk, and the clean-up process is still in progress. The candid admission underscores the complexity of managing legacy stress, even as the company tightens controls on new acquisitions.
Playing a lone hand
For many years, SBI had the comfort of having GE Capital as a partner. The arrangement – 60:40 between SBI and GE Capital was simple – SBI Cards, with its massive branch network, focused on the marketing and distribution of credit cards while GE Capital handled the back-end technology and processing.
Things changed in 2017, when GE Capital exited the company by selling its stake to SBI and private equity firm Carlyle. While this was a larger business revamp for General Electric to exit all consumer and commercial businesses across the world, SBI lost a partner who was key to its business growth.
Tough times
In the June quarter, the credit card major was able to maintain its margins on a sequential basis at 11.2%. The management remains hopeful that margins will inch up from the second quarter onwards, banking on a reduction in cost of funds.
However, new accounts in Q1 hit a multi-quarter low, with sourcing from open market channels significantly declining, which the management has attributed to a deliberate shift toward more selective portfolio acquisition. While that sounds strategic, it also signals a retreat from aggressive expansion — perhaps a necessary course correction after earlier missteps.
Despite these efforts, credit costs were at a four-year high at 9.6% for the June quarter. The management expects the credit cost to remain elevated in Q2FY25 and be in the range of 9–9.6%. This signals that the clean-up is far from over, and the portfolio continues to carry legacy risk. It has also projected receivables growth of 10–12% in FY26 — lower than the earlier estimate of 12–14%.
The company aims to add 0.9–1 million cards each quarter. “It is very easy to gain market share, but the most important thing is identifying the right customer segment. I think SBI Cards picked up customers from segments which other banks were rejecting, leading to higher delinquencies,” a bank analyst said.
Top management challenges
Pande took charge on April 1 for a period of two years, a typical tenure for a MD and CEO for SBI Cards. However, there are concerns over the period being too short to turn around such a big business.
Recently, chief risk officer Shantanu Srivastava resigned. Emkay in its report said the attrition in key managerial personnel is one of the many risks the company faces.
SBI Cards now finds itself in a phase of quiet repair — balancing portfolio clean-up with cautious growth. The stock price, which stood at over Rs 1,100 per share in 2021, closed at Rs 804 on Friday.