SBI Cards Upgraded To 'Outperform' By Macquarie As Tailwinds Aid In Turning Tide

SBI Cards and Payment Services Ltd. received a target and rating hike from Macquarie Research, citing that the "tide may be turning" with falling costs and easing liquidity.

The brokerage upgraded the stock to 'outperform' from 'neutral' and hiked the target to Rs 1,000 per share from Rs 735 apiece, implying an upside of 22.5% from the previous close.

Channel checks indicate credit card slippages are plateauing and expect credit costs to start declining materially in the next two quarters, analysts at Macquarie said in a note. "While we can't predict when it will come down meaningfully, this we believe is the first comfort factor."

Vintage delinquencies in credit cards have been consistently coming down, Macquarie said, quoting Cibil data, while adding that the data points towards declining incremental delinquencies in the credit cards book.

Other catalysts include falling rates, easing liquidity, tax cuts, and RBI's incrementally softer stance towards unsecured loans, Macquarie said.

SBI Cards reported a 30% fall in net profit to Rs 383 crore for the third quarter that ended December 2024 on rising delinquencies. Its total income grew marginally to Rs 4,767 crore during the October-December quarter from Rs 4,742 crore in the year-ago period.

The gross non-performing assets rose to 3.24% during the quarter under review against 2.64% a year ago. The net NPA also increased to 1.18% from 0.96% at the end of the December quarter of the previous financial year.

Prior track record of guidance by management has been patchy, Macquarie said adding that they hope the decline in slippages is a secular trend. The brokerage cut their earnings by 13-15% for fiscal 2025-27 driven by slower loan growth, NIl and fees.

Shares of SBI Cards have risen 13.23% in the last 12 months. The relative strength index was at 52.06.

Seven of 27 analysts tracking the company maintain a 'buy' rating, 10 recommend a 'hold,' and 10 suggest 'sell,' according to Bloomberg data. The average 12-month consensus price target implies a downside of 7.6%.