Hold SBI Cards and Payment Services: target of Rs 884: ICICI Securities

ICICI Securities's research report on SBI Cards and Payment Services

SBI Cards (SBIC)’s Q1FY26 results remained modest with 60bps higher credit cost QoQ and lower receivables growth guidance of ~10–12% vs. 12–14% earlier. We maintain that only directionally better credit cost may not suffice given the business environment’s tough history; any exuberance should be tempered with the experience of lingering challenges faced in the last four years, viz.: 1) higher credit cost during Covid-19 and its escalation in FY24; 2) higher cost to income during the BNPL surge; 3) structural decline in revolver mix; 4) higher CoF post-Covid-19; 5) increase in risk weights; and 6) now, a resurgence of the credit cost cycle in FY26.

Outlook

Maintain HOLD; INR 884 TP unchanged We expect PAT of INR 24bn/INR 30bn for FY26E/FY27E. This results in RoAA of ~3.5%/3.8% for FY26E/FY27E and RoAE of ~16.1%/17.4% in FY26E/FY27E. RoAA/RoAE stood at 3.4%/15.8% in Q1FY26 and 3.1%/14.8% in FY25.