ICICI Securities Maintains 'Hold' Rating on SBI Cards and Payment Services with Target Price of Rs 665.

SBI Cards Faces Challenges in Revenue Growth

SBI Cards and Payment Services achieved an improvement in asset quality in Q4FY26, with a credit cost of 6.1% excluding the management overlay of INR 2.2 billion. However, the directionally better credit costs may not be sufficient to offset the lower growth and reducing revolver mix that the company is experiencing. To overcome these challenges, SBI Cards will need to execute strongly and source alternative revenue streams, such as higher fee income and a higher EMI mix.

Outlook for SBI Cards

ICICI Securities has issued a research report recommending that investors hold SBI Cards, with a target price of INR 665 based on 22x FY28E EPS. The company is expected to report a profit after tax (PAT) of INR 24.9 billion and INR 28.6 billion for FY27 and FY28E, respectively. This translates to a return on assets after provisions (RoAA) of approximately 3.6% and 3.7%, and a return on equity (RoAE) of approximately 14.8% and 14.9% for FY27 and FY28E, respectively.

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Key Risks and Opportunities

There are several key risks and opportunities that investors should be aware of when considering SBI Cards. The main downside risk is an adverse decline in the receivable mix, which could negatively impact the company's revenue and profitability. On the other hand, a positive surprise in net interest margin (NIM) and growth could provide a significant upside opportunity for the company.