SBI Cards and Payments Services Ltd reported a 52% dip in its net profit to Rs 209.7 crore due to higher provisioning for bad loans.

The pure-play credit card company of the State Bank of India (SBI) wrote off Rs 648 crore worth of loans during the quarter as borrowers missed repayments. The company had written off Rs 218 crore of loans in the preceding quarter.

The write-off helped keep the gross non-performing assets (NPA) ratio under control at 1.61%. This is versus 4.3% of NPAs a quarter ago for the company, which is the only listed credit card entity in India. Net NPAs were at 0.56% against 0.83% in the July-September quarter.

The Supreme Court had put a standstill clause on accounts which had turned stressed until 31 August from being classified as NPAs, until further notice. If the company had classified these accounts as NPAs, then its gross NPAs would have been at 4.51%.

Under the Covid relief package, SBI Cards allowed its customers for a one-time restructuring to customers by offering them the option of converting credit card dues into EMIs of up to 24 months. As of 31 December 2020, the outstanding balance in such accounts is Rs 2,343.81 crore. This has increased the provisioning from Rs 1,113 crore in December 2020 to Rs 758 crore a year ago. The provisioning coverage ratio (PCR) stood at 65.6 % in December.

SBI Cards’ total income fell marginally to Rs 2,540 crore in the December quarter, from Rs 2,563 crore a year ago. Revenue from operations declined 3% over the previous year to Rs 2,403 crore.

Interest income fell 9% over the previous year to Rs 1,168 crore. However, income from fees and services rose to Rs 1,107 crore from Rs 1,081 crore. Other income rose 62%, though on a low base, to Rs 137 crore.

Profitability was also impacted by higher credit costs. “The credit costs recovered to 10.44% from 14.6% in Q2 but remained high,” HSBC said in a note.

The new account sourcing for the company surpassed the pre-Covid level. The company was able to source 918,000 new accounts during the quarter, compared to 688,000 cards sourced in the preceding quarter. Similarly retail spends has crossed pre-covid levels and so has corporate spends.

Spends witnessed an almost 8% rise to Rs 37,797 crore during the quarter, compared to Rs 35,135 core a year ago. However, average spend per card declined over the year-ago period.

The company has a healthy capital adequacy ratio of 23.7% at the end of December quarter, with tier I capital at 19.8 %.

SBI Cards was set up as a joint venture between SBI and GE Capital 23 years ago. Three years ago, SBI and private equity player Carlyle Group had acquired GE's stake. SBI holds 69.4% stake in the company.