SBI Card Q3 profit misses estimates on higher costs; shares drop

Shares of the company, backed by the country's top lender State Bank of India, tumbled 4.6% to its lowest level since lowest since June 23

SBI Cards and Payment Services Ltd reported a smaller-than-expected rise in quarterly profit, as higher costs offset robust consumer spending, sending shares to a seven-month low.

Profit for the three months ended Dec. 31 rose about 32 per cent to Rs 509 crore from the previous year, but fell short of analysts' expectations for a profit of Rs 577 crore , according to Refinitiv IBES data.

Shares of the company, backed by the country's top lender State Bank of India, tumbled 4.6 per cent to its lowest level since lowest since June 23.

Rising interest rates pushed the cost of funds at the credit card issuer up 91 basis points to 6.3 per cent from last year, while net interest margins, a key measure of profitability, compressed 67 basis points to 11.6 per cent in the quarter.

Additionally, finance costs surged nearly 68 per cent to Rs 464 crore.

While consumer spending and demand for credit have held up amid an economic rebound, interest rates have climbed as the central bank moved to curb surging inflation.

Total spends on the company's credit cards grew 24 per cent to Rs 68,835 crore, while total revenue from operations rose 21.4 per cent to Rs 3,507 crore from a year earlier.

Card-in-force, or the number of cards issued and outstanding, grew 21 per cent to Rs 1.59 crore as of quarter-end, the company said in an exchange filing.

Gross bad loans as a percentage of gross advances - a measure of asset quality – deteriorated slightly to 2.22 per cent at the end of December, from 2.14 per cent at the end of September.