Festive boost can’t save SBI credit card stock from credit crunch, says CLSA By Investing.com
On Wednesday, CLSA maintained its hold rating on SBI Cards and Payment Services (SBICARD:IN) stock with an unchanged target price of INR750.00. The company’s analyst cited a challenging quarter for the company, with debt costs exceeding those in the first quarter, resulting in a 37% profit after tax (PAT) miss compared to their estimates.
SBI cards, according to CLSA, are facing a tough credit card environment in India and are not immune to these challenges. The increase in debt costs from already high levels in the first quarter to 9% has been one of the factors affecting the company’s performance.
This increase, along with the short-term compression of net interest margin (NIM) and operational overhead costs (Opex), affected the company’s earnings. Higher Opex was attributed to promotional offers during the holiday season.
Management at SBI Cards indicated that while they are taking corrective measures, the cost of credit is expected to remain high for the next few quarters before leveling off. They also expressed difficulty in providing guidance for specific debt costs for the 2026 fiscal year.
Despite these challenges, retail spending showed strong growth, up 24% year-on-year, while corporate spending remained manageable. However, due to the current circumstances, CLSA has reduced its PAT rates for SBI cards for the financial year 2025 to 2027 by 3% to 18%.
The review has been pushed forward to September 2026, but the company decided to maintain a price target of INR750 and a Hold rating, citing a lack of major and minor factors that could impact the stock’s performance.
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