Consumer spending is set to return sharply in the coming days: Rama Mohan Rao Amara, SBI Card

We have also seen behaviour where discretionary spending comes back very sharply once things open up, said Rama Mohan Rao Amara, MD and CEO of SBI Card. Last year, we were the first to return to pre-COVID levels in October, while the industry caught up on pre-COVID levels in November, he added. Excerpts Processed:

Your first quarter earnings were down and the NII was under pressure as earnings improved sequentially. What explains this drop in profitability?
In terms of profitability, based on gross income, this means a sequential year-on-year increase of 12% compared to the previous quarter. We stood firm even though we were hit by the second wave that affected card spending. On the other hand, the cost of the funds is still a good story. We continue to see an improvement in financing costs. Operating costs, insofar as our procurement during the quarter is higher than in the first quarter of the previous year. Operating costs rose slightly.
Overall, we see earnings before borrowing costs, which is our primary operating output, improving both quarter-over-quarter and year-over-year. The cost of borrowing is a bit high, but despite the high cost of borrowing, the PAT is at a very satisfactory level of Rs 305 crore, an improvement of 74% in a row, a decrease of 23% over the previous year. which leaves an average return on assets of 4.5%.As already mentioned, despite high borrowing costs, we have outperformed due to strong earnings.
How do you see Q2 in motion?
One way of looking at this RBRE portfolio is – we have also made it very clear in the previous interactions – that as payments are received and loaded, the portfolio will gradually grow over a period of gradually time. Period evidenced by a 2 percentage point decrease in the composition of the RBRE, which rose from 8% in March to 6% in June 2021.Accompanying this, it can be assumed that the cost of borrowing will follow the same path, provided that the external environment has not deteriorated and our collection efficiency has so far been particularly in the month of July.

It’s almost as good as the efficiency we saw in April. Recovery will take a little longer. Hence, we expect the recovery efficiency to return in a couple of months. All I can say is that wave two delayed our downward trend in the cost of borrowing, but we are certainly aiming for borrowing costs down for a period of time.
During the second wave, customer behaviour was no different from what we saw in the first quarter of last year, particularly in the way they tend to postpone discretionary spending while non-discretionary spending persists. On the other hand, customers migrated effortlessly to online channels, so discretionary spending has declined as expected, while non-discretionary spending has held up well in both percentage and absolute terms, and was roughly the same in absolute terms as of the last quarter.

There appears to be a period of aberration, especially with the discretionary elements; In fact, people used to feel very comfortable ordering clothes online using POS.

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