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HomeNewsBusinessEarningsSBI Cards and Payment’s cost of funds may increase by 5-10 bps in Q2: CFO Rashmi Mohanty

SBI Cards and Payment’s cost of funds may increase by 5-10 bps in Q2: CFO Rashmi Mohanty

In April-June quarter, cost of funds of the company increased 197 basis points (bps) on-year and 37 bps on-quarter

July 28, 2023 / 18:43 IST
On July 28, the company reported a 5 percent drop in net profit at Rs 593 crore in the June quarter of the current financial year.

The cost of funds of the SBI Cards and Payment Services is likely to increase by 5-10 basis points in the July-September quarter of the FY24, Rashmi Mohanty, Chief Financial Officer of the company said during an earnings call on July 28.

“Our long-term book, which we borrowed three years back was at a much lower price, so factoring all of that, we expect a 5-10 bps increase in the cost of funds in Q2,” Mohanty said.

In the April-June quarter, the cost of funds of the company increased 197 basis points (Bps) on-year and 37 bps on-quarter. One basis point is one-hundredth of percentage point.

According to the investor presentation, the cost of funds of the company stood at 7.1 percent as on June 30, 2023, as against 6.8 percent in the quarter-ago period and 5.2 percent in the year-ago period.

The company said the cost of funds rose due to an increased proportion of long-term borrowings.

SBI Card's cost of funds is on a constant rise over the past year since the Reserve Bank of India (RBI) started increasing interest rates to battle higher inflation.

Since May 2022, the central bank increased the repo rate by 250 bps before taking a pause in April and June policy in 2023.

Mohanty further said even if the RBI doesn’t increase rates any further, we do expect our cost of funds to go up further as some of the other liabilities will come up for re-pricing both on the short-term and long-term as well.

The rise in interest rates has impacted other companies too, which have faced an increase in the cost of funds. To combat this, some companies have started increasing their dependence on public deposits.

The borrowings of the SBI Cards have also increased around 6 percent on-quarter in April-June to Rs 32,957 crore.

Earlier on July 28, the company reported a 5 percent drop in its net profit at Rs 593 crore in the June quarter of the current financial year due to deterioration in asset quality and compression in the net interest margins of the company.

The company reported a net profit of Rs 627 crore in the year-ago period. In the April-June quarter, the asset quality of the company deteriorated with gross non-performing assets (NPA) rising to 2.41 percent of gross advances as of June 30, 2023, as against 2.24 percent as of June 30, 2022.

Similarly, its net non-performing assets stood at 0.89 percent as of June 30, 2023, as against 0.79 percent as of June 30, 2022.

Manish M. Suvarna
Manish M. Suvarna is Senior Correspondent at Moneycontrol. He writes on the Indian money markets, RBI, Banks and NBFCs. He tweets at @manishsuvarna15. Contact: Manish.Suvarna@nw18.com
first published: Jul 28, 2023 06:25 pm

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