India’s SBI Cards and Payment Services reported second-quarter profit below expectations on Friday, hurt by higher operating costs even as its asset quality improved.
The company’s profit after tax rose 10% to 4.45 billion rupees for the three months ended September 30, but fell short of analysts’ average expectations of 5.79 billion rupees, according to data compiled by LSEG.
Operating costs rose 24% from the year-ago quarter as the company increased spending on customer campaigns and offers, and paid out higher incentives to its corporate partners, the credit card firm said.
Finance cost and provisions were largely stable year-on-year.
SBI Card – majority-owned by the country’s largest lender by assets, State Bank of India – has struggled with asset quality stress and higher delinquencies on credit cards. The company had tightened underwriting over the last few quarters, which helped it improve asset quality.
Its gross non-performing assets ratio improved to 2.85% from 3.07% in the previous quarter and 3.27% in the year-ago quarter.
While loan losses and bad debt expenses rose 7% year-on-year to 12.93 billion rupees, they were down 4% sequentially.
SBI Card also saw an uptick in consumer spending, aided by the festive season shopping and cuts in consumption taxes, analysts said.
Overall spending by cardholders rose 31% to 1.07 trillion rupees, while cards-in-force, or the sum of all credit cards issued, rose 10% from last year.
The company’s total revenue from operations rose 12% on-year to 49.61 billion rupees.
SBI Card’s net interest margin (NIM) rose 61 basis points year-on-year to 11.2%.
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