Brokerage firms have delivered mixed ratings on SBI Cards following its Q3 FY25 results. While some analysts remain bullish on the company’s long-term growth, others express concerns over rising credit costs and slow loan growth.
Brokerages bullish on SBI Cards
Goldman Sachs (GS) – Buy | Target Price: ₹912
GS maintains a ‘Buy’ rating on SBI Cards, highlighting a strong Q3 performance, with PAT beating estimates by 4%, driven by a 2% operating profitability beat and stable loan loss provisions. The brokerage expects asset quality to improve, citing:
- A sequential improvement in Stage 2 assets.
- Absolute recoveries up 23% YoY.
- Encouraging management commentary, suggesting an inflection point in the asset quality cycle.
- Quality of new sourcing improving, adding to long-term stability.
Nuvama – Buy | Target Price: ₹885 (up from ₹850)
Nuvama reiterated its ‘Buy’ call with an increased target price, despite credit costs rising by 8% QoQ to 9.4% in Q3. The firm is optimistic that credit costs will decline from Q4FY25 onwards. Nuvama also believes SBI Cards will benefit from an RBI repo rate cut, improving the overall asset mix.
Brokerages maintaining a cautious stance
UBS – Neutral | Target Price: ₹800
UBS has a ‘Neutral’ rating, citing a miss on estimates due to higher credit costs and weak fee income. While Q3 spends declined by 11% YoY, the brokerage noted that margins remained stable at 10.6%. Management believes that credit costs are near peak levels, which could support recovery in the coming quarters.
CLSA – Hold | Target Price: ₹780
CLSA maintains a ‘Hold’ stance, citing a 3Q PAT miss of 8% due to higher credit costs. Loan growth slowed, and while NIMs remained stable, the brokerage noted that fee income was weak. SBI Cards managed another strong quarter on opex, but credit costs increased from 9% to 9.5% QoQ and are up 200bps YoY, raising concerns.
Bearish brokerages on SBI Cards
Bernstein – Underperform | Target Price: ₹620
Bernstein has an ‘Underperform’ rating, highlighting that while management has confirmed that credit costs have peaked, there was no guidance on the pace of improvement or new normal for credit costs. The brokerage remains cautious, noting that while the worst may be over, clarity is still lacking.
HSBC – Reduce | Target Price: ₹580
HSBC has the most bearish stance, maintaining a ‘Reduce’ call due to a weakened growth outlook post-Q3. The brokerage cut EPS estimates by 10.8%/11.2% for FY25/FY26, factoring in higher credit costs. HSBC also noted that asset quality remains uncertain, with no immediate signs of improvement.
SBI Cards’ Q3 results have triggered mixed reactions from brokerages. While GS and Nuvama remain optimistic, citing strong operating profitability and potential repo rate benefits, CLSA and UBS have taken a more neutral stance, citing credit cost concerns and slower loan growth. On the other hand, Bernstein and HSBC remain bearish, expecting continued uncertainty around asset quality.
Investors will likely watch credit cost trends and spending growth closely in the coming quarters to assess the company’s long-term performance.
Disclaimer
This article is for informational purposes only and does not constitute financial advice. Investors should conduct their own research or consult a professional before making investment decisions. Business Upturn is not responsible for any gains or losses arising from investment activities related to this report.
