Nomura upgrades SBI Cards to ‘Buy’, raises target price to ₹825 on improving asset quality outlook

Nomura has upgraded SBI Cards to a “Buy” rating, raising the target price to ₹825 from ₹625. The brokerage cites improving asset quality as a key factor for the upgrade, driven by several positive trends:

  1. The share of metro regions in credit card debt has been rising since FY23, along with lower leverage among non-metro customers.
  2. The share of top 8 metro cities in new customer acquisitions has been steadily increasing.
  3. Net card additions in November 2024 rose by ~231,000, the highest since December 2023.

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Nomura expects credit costs to stabilize at 9.1% in FY25F before falling to 7.5% and 7% in FY26F and FY27F, respectively. Additionally, the brokerage views SBI Cards as the biggest beneficiary of a potential policy rate cut in FY26, which could enhance its return profile further.