SBI Cards Upgraded To Neutral By UBS After Noticing Positive Factors

SBI Cards and Payment Services Ltd.'s stock was upgraded to 'neutral' from 'sell' by UBS Global Research as positive factors suggest growth improvement. The brokerage raised the target price to Rs 800 from Rs 600 apiece, which implied a potential 8.81% upside from the previous close.

UBS noticed a decline in the delinquencies, improvement in incremental underwriting, which are signs of stabilisation in SBI Cards' business. The brokerage expects credit cost to peak in the second half of financial year 2025. Credit costs are expected to decline by 110 basis points by fiscal 2026.

UBS raised the earning-per-share estimates for SBI Cards by 4% and 5% for fiscals 2026 and 2027 respectively. The brokerage also sees its net interest margins increasing 11.8% by fiscal 2027.

SBI Cards' new card additions to accelerate in financial year 2026 as credit cycle turns, which will support income fee, the brokerage said. Revolver mix will likely improve gradually by 25% by the financial year 2027, which will support margins.

UBS expects return on asset and return on equity to improve to 4.6% and 23% by financial year 2027. Sustained improvement in delinquency trends will make it more constructive.

The revised target price factors in a 4–5% in FY2026 and 2027 EPS and 100-bps increase in steady-state return on equity to 16% resulting in expansion in target FY26E price-to-book to 4.5 times, UBS said. However, UBS will look for substantial improvement in delinquency trends before turning more bullish.