SBI Cards and Payment Services Ltd. has seen its stock price surge following a favorable upgrade from global brokerage Macquarie, which has reclassified the stock from 'Neutral' to 'Outperform'. This significant shift has driven the stock to reach new heights, with the price jumping by over six percent on February 13, 2025, marking two consecutive days of gains.
On the Bombay Stock Exchange (BSE), share prices soared to as high as ₹867.20, making it the highest the stock has traded in the past year. The latest trading session also saw the stock close at ₹866.85, up from ₹816.75 previously. Overall, shares of SBI Cards have increased by 27% since the start of 2025.
The reasoning behind Macquarie's upgrade includes stronger market conditions evidenced by channel checks indicating credit card slippages are plateauing. According to Macquarie researchers, “While we can't predict when it will come down meaningfully, this is the first comfort factor.” This news has provided renewed confidence among investors.
Macquarie has also increased its target price for SBI Cards from ₹735 to ₹1,000, implying more than 22% upside potential compared to previous closing levels. Other favorable factors include decreasing interest rates, eased liquidity conditions, and India’s Reserve Bank’s gentler stance toward unsecured loans. Analysts believe these conditions will facilitate sustainable growth for SBI Cards moving forward.
Despite the positive outlook, Macquarie has lowered its earnings predictions for SBI Cards for fiscal years 2025-27 by between 13% to 15%, noting slower loan growth and declines in net interest income. Yet, the brokerage emphasized the declining credit costs and improving credit quality as strong indicators for future performance.
For the third quarter of FY25, SBI Cards reported a 30% decrease year-on-year net profit, which fell to ₹383.2 crore from ₹549.1 crore. This drop is attributed to rising delinquencies amid other economic challenges. Their revenue from operations was relatively stable, climbing marginally to ₹4,767 crore from ₹4,742 crore year-on-year, showcasing the company's ability to maintain operation levels even amid tough financial conditions.
The financial health of SBI Cards appears to be on the mend, with net interest income decreasing by 3.5% to ₹3,790.1 crore compared to the previous fiscal year. Encouragingly, the gross non-performing assets (NPAS) dropped from 3.27% to 3.24%, signaling improved asset quality. Meanwhile, net NPAS also showed slight improvement, decreasing from 1.19% to 1.18%.
Market analysts have responded positively to the latest findings, noting the firm commitment of SBI Cards to restoring investor confidence through operational improvements. The company, which maintains considerable ties to the State Bank of India (SBI), utilizes its vast customer network to continue growing its credit offerings. Notably, more than 70% of its customer base is comprised of individuals under 45, predominantly from non-Tier-1 cities across India.
With SBI Cards poised for possible gains, investors remain focused on the upcoming Board of Directors meeting on February 17, 2025. The Board is expected to discuss the declaration and payment of interim dividends for the fiscal year 2024-25. The 'Record Date' for dividend eligibility has been set for February 25, 2025.
While the market has reacted favorably to the upgrade, it’s warranted to observe how upcoming economic factors might influence SBI Cards' performance and whether the projected upward trends will materialize. With financial keys pointing to improvements and optimism surrounding credit trends, SBI Cards might just be on the brink of sustained growth.