Crisil Reaffirms 'AAA' Rating On SBI Cards' Bank Facilities

Related Industry : Finance

MUMBAI, JAN 25 (TickerNews Service): Text of Crisil press release on bank facilities and debt
instruments of SBI Cards & Payment Services Pvt Ltd. (TickerNews has underlined key sections of the
text.)

CRISIL reaffirms ratings on SBI CARDS & PAYMENT SERVICES

Rs.14.50 bln Cash Credit/Working Capital Demand Loan (Reduced from Rs.24.69 bln) AAA/Stable
(Reaffirmed)
Rs.1.25 bln Lower Tier II Bonds AAA/Stable (Reaffirmed)
Rs.3.50 bln Short-Term Bank Loan (Reduced from Rs.4.25 bln) P1+ (Reaffirmed)
Rs.15.00 bln Short-Term Debt Programme P1+ (Reaffirmed)

CRISIL's ratings on SBI Cards & Payment Services Pvt Ltd's (SBI Cards') bank facilities and debt
instruments continue to be based on the support SBI Cards receives from its parents State Bank of India
(SBI, rated 'AAA/FAAA1/StableP1+' by CRISIL) and GE Capital Corporation, USA (GECC, rated
'AA+/Stable/A-1+' by Standard & Poor's).
The ratings are primarily based on the strong financial, operational, and management support SBI Cards
receives both from SBI and GECC. CRISIL believes that the ownership pattern, together with the shared
name, implies a strong moral obligation on the parents to continue supporting SBI Cards on a regular
basis and in servicing its debt in a timely manner. The support is reflected in the equity infusions by the
parents from time to time-Rs.1.3 billion infused in 2009-10 (refers to financial year, April 1 to March 31)
and Rs.0.3 billion, so far, in 2010-11. These infusions have helped SBI Cards maintain its capitalisation in
line with regulatory norms. CRISIL believes that both SBI and GECC will continue to extend their support
to SBI Cards on account of the strong moral obligation of the parents that remains undiminished, despite
the limited economic benefits that SBI and GECC are expected to derive from SBI Cards over the
medium term on account of its weak, albeit improving, financial profile.
SBI Cards' standalone credit risk profile is marked by good competitive position in the credit card market,
weak, albeit improving, asset quality and profitability, adequate resource profile and capitalisation. SBI
Cards continues to enjoy a healthy market share (11.7 per cent as on September 30, 2010), in terms of
total cards in force. It had 2.3 million cards in circulation with Rs.17.5 billion of card receivables as on
September 30, 2010. The company's asset quality has improved with 90+ days past due delinquency
level at 11.5 per cent as on September 30, 2010, against 29.9 per cent as on September 30, 2008. This
follows the series of measures taken by SBI Cards to improve its asset quality, such as tightened
underwriting norms, compulsory credit check with Credit Information Bureau (India) Ltd (CIBIL), and
enhanced focus on secured cards (cards issued against the security of fixed deposit with SBI). Currently,
about 70 per cent of new card issuances fall under the secured card segment. Furthermore, SBI Cards is
focussing on the premium client segment, where defaults are expected to be lower. Although,
delinquency levels continue to be higher than the steady-state default rate for the personal loan segment,
CRISIL believes that because of the focus on secured cards and premium client segment, SBI Cards'
delinquency levels will decline over the next few quarters. CRISIL will continue to closely monitor SBI
Cards' delinquency levels. SBI Cards' high credit costs - a corollary of high delinquency levels - continue
to keep its profitability under pressure. However, CRISIL believes that with the improvement in SBI Cards'
asset quality, the pressure on its earnings would significantly reduce over the next few quarters.
SBI Cards' resource profile is adequately supported by borrowings from SBI and associate banks that
account for over 85 per cent of its borrowings. The long-term debt and commercial papers are the other
sources of funds for the company. SBI Cards' capitalisation is adequate, with its parents infusing capital
as and when required. Its Tier I and overall capital adequacy ratio, as on September 30, 2010, was
comfortable at 11.3 per cent and 16.4 per cent respectively, against 9.4 per cent and 14.1 per cent
respectively as on March 31, 2010. 

OUTLOOK STABLE
CRISIL believes that SBI Cards will continue to benefit from the strong financial, management, and
operational support it receives from SBI and GECC. A rating or outlook change on SBI may result in a
corresponding revision in the rating or outlook on the debt instruments of SBI Cards. Furthermore, the
outlook may be revised to 'Negative' in case of a diminution, in CRISIL's view, on the extent of support
that SBI Cards can expect from SBI and GECC, or significant deterioration in SBI Cards' asset quality and
earnings. 

ABOUT THE COMPANY

SBI Cards is a 6040 joint venture (JV) between SBI and GE Capital (Mauritius) Overseas Investment
(GECMOI), a wholly owned subsidiary of the US-based GECC, which, in turn, is a wholly owned
subsidiary of General Electric Corporation (GE rated 'AA+/Stable/A-1+' by Standard & Poor's).
SBI is India's largest bank, with assets aggregating Rs.10.50 trillion as on March 31, 2010 (Rs.9.65 trillion
as on March 31, 2009). GECC, along with its subsidiaries and associates, is the largest non-banking
financial company in the world, with an asset base of USD623.00 billion as on December 31, 2009. SBI
Cards ranks among India's top five players in the credit card business, with a market share of about 11.8
per cent.
For 2009-10, SBI Cards reported a net loss of Rs.1.50 billion on a total income of Rs.6.70 billion, against
a net loss of Rs.3.20 billion on a total income of Rs.8.10 billion for the previous year. For the half year
ended September 30, 2010, the company reported a profit after tax of Rs.76.00 million on a total income
of Rs.3.70 billion.
1The rating pertains only to State Bank of Indore's (SBoI's) fixed deposit programme rated by CRISIL,
which has been transferred to SBI following the merger of SBoI with SBI. (End)