SBI Card Shares Tank Over 7% As Q2 Results Fail To Meet Market Expectations

SBI Cards and Payment Services reported a 15 per cent increase in its net profit to Rs 603 for the quarter under review from Rs 525 crore in the year ago period

Outlook Business Desk

Updated on: 30 October 2023 2:34 pm

SBI Cards

SBI Cards and Payments Services stock price tanked over 7 per cent in early trade on Monday after the company announced its financial results for the July-September quarter of FY24. The stock price fell as much as 7.45 per cent to Rs 732.05 per share on the BSE. The stock traded below its listing price of Rs 755 per share.

The company reported a 15 per cent increase in its net profit to Rs 603 for the quarter under review from Rs 525 crore in the year ago period. The revenue grew 22 per cent to Rs 4,221 crore from Rs 3,453 crore, YoY.

SBI Cards’ credit costs for the company remained high for the 19th consecutive quarter. The company’s net interest margins (NIMs) are at the lowest ever as the resolver rate remains at 24 per cent.

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“SBIC has seen strong growth in spends on both the retail and corporate spends with healthy traction in discretionary and travel spends. New customer additions continue to remain healthy and the company’s focus on the self-employed segment for incremental sourcing remains unwavering. Backed by a strong consumption pattern, we expect SBIC to deliver healthy CIF/Spends growth of 20/27% CAGR over FY23-25E,” said Axis Securities in its report.

As the festive season has begun, the company management remains confident of maintaining growth momentum with spending growth visible across categories.

According to the firm, business growth has been healthy and expected to remain buoyant but SBIC continues to face headwinds in terms of NIMs and asset quality. It is expected to witness margin pressures during the second half with improvement on the back of a better product mix.

The brokerage maintained a “hold” rating on the stock and kept the target price at Rs 850 per share.

On a year-to-date (YTD) basis, the stock has plunged nearly 6 per cent and over 10 per cent in the last one year.

SBI Cards reported poor quality earnings with "worrisome commentary on overall portfolio" citing stress building in unsecured loans, brokerage firm Goldman Sachs said in its report.