SBI Cards and Payment Services Ltd. share price target

SBI Cards (SBICARD) is the second-largest player in the card industry (in terms of CIF) with an 18.5% market share in cards-in-force (CIF) and 15.9% share in total industry spends.

Amid rising hopes of a policy rate cut in CY25, we believe SBI Cards with its fixed rate asset portfolio and higher share of borrowings maturing in <1 year, could benefit on the margins front which has stabilized after a prolonged contraction cycle.

SBI Cards (SBICARD)’s PAT was 8% below estimate at INR5.9b due to lower revenue from operations and higher provisions. NII inched up 4.4% QoQ.

Credit cost soared 50% YoY to Rs 9.4bn (7.9% of loans) in Q4; stress expected to continue in FY25 as well

SBI Cards (SBICARD) reported a healthy beat on PAT in 4QFY24 amid lower
opex (20% lower than our estimate). PAT jumped 21% QoQ to INR6.6b,
while NII inched up 2% QoQ (in line).

BJAUT: Healthy revival but priced in; downgrade to SELL. TVSL: On a fast track raise to BUY. SBICARD: Asset quality concerns persist; downgrade to HOLD. LAURUS: Challenges galore cut to SELL. CIPLA: Healthy revenue growth, strong margins. MAHGL: Volume growth accelerating, reiterate BUY. DCBB: NII sequentially flat on high interest cost. SBILIFE: ULIP-led growth; maintains market leadership

Credit cost soared 66% YoY to Rs 8.8bn in Q3 amid industry-wide stress in unsecured loans; uncertainty persists

Credit card spends climbed 27% YoY to a record high of Rs 792bn in Q2; debut on UPI platform promising

SBI Cards (SBIC) reported QoQ PPOP growth of 6% but 14% higher credit cost led to flattish PAT of INR 5.9bn in Q1FY24. While earnings growth has faced challenges of adverse change in mix (delay in revolver build up post covid), higher cost of funds (rate hikes), higher opex (BNPL competition), regulatory challenges (RBI master circular) and higher credit costs including a long-tailed impact of covid (as seen from ~14bps impact from a FY19 cohort in Q1FY24), it has still reported 27% earnings CAGR over the last 5 years ending FY23.

Q1 credit cost climbed 130bps YoY to 7.1% of loans (calc.) owing to stress from customers acquired in CY19, inducing a 5% fall in net profit