SBI Cards Shares Surge 6% as Macquarie Upgrades to ‘Outperform,’ Sees 22% Upside
Shares of SBI Cards & Payment Services Ltd surged 6% to ₹866 on February 13, marking a second consecutive session of gains. The rally came after Macquarie, a leading international brokerage, upgraded the stock to ‘outperform’ and raised the target price, citing strong growth prospects.
With a new target price of ₹1,000, Macquarie sees a potential upside of 22.5% from the previous close of ₹816 on the National Stock Exchange (NSE). Over the past month, SBI Cards’ stock has jumped 13%, reflecting investor confidence in the company’s future.
Macquarie’s Bullish Outlook on SBI Cards
The brokerage firm expects credit costs to decline significantly over the next two quarters, driven by factors such as:
✅ Falling interest rates
✅ Improved liquidity in the market
✅ Potential tax cuts to boost consumer spending
Additionally, Macquarie highlighted that the Reserve Bank of India’s (RBI) softened stance on unsecured loans could serve as another key catalyst for SBI Cards’ stock.
However, despite its bullish outlook, Macquarie has trimmed earnings estimates for FY25-27 by 13-15% due to:
⚠️ Slower loan growth
⚠️ Declining net interest income (NII)
⚠️ Lower fee income
Even with these adjustments, the brokerage sees an improvement in the company’s sustainable return on assets (ROA) by 30 basis points to 4.5%, indicating strong profitability in the long run.
SBI Cards Q3 Performance: Mixed Financial Results
SBI Cards’ third-quarter earnings for FY24 were a mixed bag, with a decline in net profit but stable asset quality.
📉 Net Profit: The company’s consolidated net profit fell 30% YoY to ₹383.2 crore, down from ₹549.1 crore in the same period last year.
📊 Revenue Growth: Despite the profit decline, consolidated revenue from operations increased marginally by 1% YoY to ₹4,767 crore, compared to ₹4,742 crore in the previous year.
💰 Net Interest Income (NII): SBI Cards reported a 3.5% decline in NII at ₹3,790.1 crore, compared to ₹3,926.2 crore in Q3 FY23.
Asset Quality Shows Stability
SBI Cards maintained stable asset quality, showing only a slight improvement in its non-performing assets (NPA) levels:
| Metric | Q3 FY24 | Q2 FY24 | Change |
|---|---|---|---|
| Gross NPA (%) | 3.24% | 3.27% | ⬇️ Improved |
| Net NPA (%) | 1.18% | 1.19% | ⬇️ Slight Improvement |
| Provision Coverage Ratio (PCR) | 64.3% | 64.4% | 🔻 Marginally Lower |
Despite the small decline in provision coverage ratio (PCR), the overall stability in NPAs suggests that SBI Cards has managed risks effectively.
Stock Performance and Market Sentiment
At 10:30 AM on February 13, SBI Cards’ share price was trading at ₹859, reflecting a 5.2% gain from the previous close on the NSE.
Key Stock Highlights:
📈 Share price up 6% to ₹866 on February 13
📊 23% year-to-date (YTD) gain
💹 13% gain in the past month
Investors have been bullish on the stock, and with Macquarie’s target price of ₹1,000, many expect further upside.
What’s Driving SBI Cards’ Growth?
Several factors make SBI Cards a strong long-term bet:
1️⃣ Expanding Credit Market: India’s growing digital payments and credit card penetration support long-term growth.
2️⃣ Supportive RBI Policy: A softer stance on unsecured lending reduces regulatory risks.
3️⃣ Lower Credit Costs: Falling interest rates and improved liquidity could boost profitability.
4️⃣ Strong Parentage: SBI Cards benefits from State Bank of India’s strong brand and customer base.
Final Thoughts: Is SBI Cards a Good Buy?
With a bullish outlook from Macquarie, stable asset quality, and strong market momentum, SBI Cards appears well-positioned for long-term growth.
While short-term challenges such as slower loan growth and lower NII persist, the company’s strong fundamentals and improving return on assets (ROA) suggest that investors could see solid returns in the future.
With an upside potential of 22% and a revised target of ₹1,000, SBI Cards remains a stock to watch in the Indian financial sector.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.