SBI Card shares plunge 7% as RBI move on risk weights to hit earnings, capital adequacy ratio

Shares of SBI Cards and Payment Services Ltd (SBI Card) were hit hard, falling nearly 7 per cent in Friday's trade, as a hike in the risk weights on unsecured loans is likely to impact capital ratios. Among NBFCs, the fresh RBI move is seen to have a maximum impact on SBI Card, analysts said.

The SBI Card stock fell 6.70 per cent to hit a low of Rs 720.40 on BSE. With this, SBI Card shares have fallen 17.35 per cent in the last six months. SBI Card could have an impact on earnings and capital adequacy ratios, Kotak Institutional Equities said in a note.

"For NBFCs , we expect the impact on Tier 1 ratios to be in the range of 30-450 bps with the maximum impact on SBI Card and could warrant a capital raise. After SBI Card, Bajaj Finance will likely see a 250 bps impact on its Tier 1 ratio but it has already raised capital recently. Increase in cost of funds should be in the range of 10-30 bps with the maximum increase expected for SBI Card. Overall, SBI Card looks to be look the one with the maximum negative impact," Nomura India said.

In another note, Motilal Oswal Securities expected a 30-85 bps hit on capital ratios on account of the increase in risk weight. Its calculations suggested SBI Card remains the most vulnerable with a 416 basis points impact among NBFCs.

"While all lead lenders will correct, we particularly call out SBI Cards, Axis Bank (lower capital), state-owned banks, ABFRL, RBL, and Kotak as they would lose growth or have low capital. Lenders that are least affected are IIB, LICHF and City Union due to their immaterial exposures," said Nuvama Institutional Equities.

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