SBI Cards Target Price Slashed As Morgan Stanley Downgrades Stock — Here's Why

Morgan Stanley has downgraded its rating on SBI Cards to "underweight," setting a new target price of Rs 710. This is a significant dip from its previous target of Rs 1,040. The brokerage's trim in the target price comes from the company's first quarter results for the financial year 2026, which showed a notable rise in credit costs that were higher than their estimates. This increase in stressed asset creation is a key concern.

SBI Cards reported a 6.4% year-on-year decline in the net profit for the June quarter, amounting to Rs 556 crore, compared to Rs 594 crore in the first quarter of the financial year 2025. This was despite a 13.8% rise in Net Interest Income.

The core issue lies with the sharp increase in credit costs, which reached 9.6%—the highest in 16 quarters. Operating costs also saw a significant increase, climbing 17% year-on-year to Rs 2,123 crore, while finance costs rose by 6%. As a result, the company's return metrics have weakened, with Return on Average Assets and Return on Average Equity both showing a decline compared to the previous year.

The brokerage highlights that the elevated credit costs are a persistent challenge for the company. Morgan Stanley's cautious stance is based on its belief that the market may be overestimating the pace of the company's recovery from its financial difficulties.

There could be a benefit from acceleration in corporate spending, which declined sharply last year owing to regulatory changes. The company's market share in the number of credit cards in force or outstanding stock was 19.0% as of July 2025.