SBI Cards and Payment Services delivered a headline profit beat for the fourth quarter of FY26, yet the stock fell 2.35% to Rs 654.95 on Tuesday morning. The numbers looked good on the surface — but the management concall gave the market enough reasons to pause.
Net profit for Q4 FY26 rose 14% year-on-year to Rs 609 crore from Rs 534 crore. Total income grew 7% to Rs 5,187 crore. For the full year FY26, net profit climbed 13% to Rs 2,167 crore, with total income up 11% to Rs 20,708 crore. Asset quality improved meaningfully, with gross NPA falling to 2.41% from 3.08% a year ago and net NPA declining to 1.04% from 1.46%.
So far, so strong. The problem is in what lies beneath.
Why the stock is falling
The first red flag is new account additions, which dropped 17% year-on-year to 917,000 in Q4 FY26. For a credit card company, growth in cards-in-force is the engine of future revenue — and management’s own guidance for the next quarter is more of the same: 9 lakh to 10 lakh new card acquisitions per quarter, with a deliberate focus on high-value, quality customers rather than volume. That is a strategic pivot, but it also means the topline growth story is being consciously narrowed.
Second, earnings before credit costs — a measure of the operating engine stripping out provisioning — actually declined 3% to Rs 1,913 crore in Q4. Total operating costs jumped 24% to Rs 2,561 crore in the quarter, even as the company brought in only 7% more total income. The cost-to-income ratio guidance for FY27 of 55% to 58% signals that this pressure is not going away quickly.
Third, management flagged that the revolver balance — the portion of outstanding debt on which SBI Cards earns the highest interest — is expected to have a slight downward bias in FY27. Revolvers are the most profitable segment of a credit card book, and any sustained decline there directly pressures net interest margins. Management said it would try to offset this through installment lending rather than tweaking reward programmes or raising fees, but that is a longer-dated fix.
Finally, while NIM is expected to remain stable, management explicitly flagged risk from any increase in cost of funds — a live concern given uncertain macro conditions. Credit costs are expected to moderate further in FY27, but the pace depends on the geopolitical and macroeconomic environment, which the company has no control over.
The medium-term ROA target of 4% to 4.5% is a credible aspiration for a business of this quality, but the path there involves navigating slowing card additions, elevated operating costs and a revolving book under pressure — none of which the market found particularly reassuring on Tuesday morning.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Please consult a qualified financial advisor before making investment decisions.