On Wednesday, CLSA maintained its Hold rating on SBI Cards and Payment Services (SBICARD:IN) stock with an unchanged price target of INR750.00. The firm's analyst cited a challenging quarter for the company, with credit costs surpassing those of the first quarter, leading to a 37% miss in profit after tax (PAT) compared to their estimates.
SBI Cards, according to CLSA, is facing a tough macro environment for credit cards in India and is not immune to these challenges. The rise in credit costs from already high levels in the first quarter to 9% was one of the factors impacting the company's performance.
This increase, along with a temporary compression in net interest margin (NIM) and higher operating expenses (Opex), affected the company's earnings. The higher Opex was attributed to promotional offers during the festive season.
Management at SBI Cards has indicated that while they are taking remedial actions, credit costs are expected to remain elevated for the next few quarters before moderating. They also expressed difficulty in providing a specific credit cost guidance for the fiscal year 2026.
Despite these challenges, retail spending showed strong growth, with a 24% year-over-year increase, while corporate spending remained under control. However, due to the current conditions, CLSA has reduced its PAT estimates for SBI Cards for the fiscal years 2025 to 2027 by 3% to 18%.
The valuation was rolled forward to September 2026, but the firm decided to maintain the INR750 price target and Hold rating, citing a lack of macro and micro triggers that could affect the stock's performance.
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