SBI Cards stock falls as analysts downgrade ratings post Q1 show
SBI Cards shares fell following downgrades from analysts citing high credit costs. Brokerages like Morgan Stanley, HSBC, and Bernstein have reduced price targets.
- Jul 28, 2025,
- Updated Jul 28, 2025 12:54 PM IST
Shares of SBI Cards and Payment Services fell over 6% on Monday, July 28, following the announcement of the firm's June quarter results. The stock fell 6.10% to Rs 834.75 on BSE against the previous close of Rs 889.05. Analysts from major brokerages have responded to the results with downgrades and reduced price targets. This reaction reflects concerns over the company's financial health, particularly the rising credit costs that have been a focal point for investors.
Morgan Stanley downgraded SBI Cards to "underweight" and set a new price target of Rs 710, citing missed credit cost estimates and higher stressed asset creation. Bernstein also placed an "underperform" rating with a target of Rs 690, highlighting that elevated credit costs remain a consistent challenge.
HSBC joined in reducing price targets, reflecting a broader shift in sentiment as analysts reassess optimistic market estimates. These downgrades indicate a cautious outlook on the stock, with analysts predicting potential difficulties in maintaining profitability. Additionally, the downgrades suggest that the market may need to adjust its expectations regarding the company's earnings and asset quality.
On the other hand, Macquarie maintained a "neutral" position on the stock, suggesting optimism with a price target of Rs 1,040. It noted that the decline in funding costs might help cushion margins this financial year and described the stock's valuation as "inexpensive" at 4.3 times its financial year 2027 price-to-book valuation. Despite the positive outlook on funding costs, it reported increase in credit costs to 9.6%, the highest in 16 quarters, which remains a concern for investors. This increase underscores the challenges faced by SBI Cards in managing its asset quality and maintaining investor confidence.
SBI Cards and Payment Services logged a 6.4% year-on-year decline in net profit at Rs 556 crore for the June quarter against Rs 594 crore in Q1FY25.
Operating costs climbed 17% YoY to Rs 2,123 crore, while finance costs rose 6% to Rs 813 crore, attributed to higher receivables. The company’s return metrics weakened, with return on average assets (ROAA) falling to 3.4% from 4.1% and return on average equity (ROAE) falling to 15.8% from 19.1% a year ago.
Net interest income (NII) rose 13.8%, coming at Rs 1,680 crore against Rs 1,476 crore in the corresponding quarter of FY25.
Shares of SBI Cards and Payment Services fell over 6% on Monday, July 28, following the announcement of the firm's June quarter results. The stock fell 6.10% to Rs 834.75 on BSE against the previous close of Rs 889.05. Analysts from major brokerages have responded to the results with downgrades and reduced price targets. This reaction reflects concerns over the company's financial health, particularly the rising credit costs that have been a focal point for investors.
Morgan Stanley downgraded SBI Cards to "underweight" and set a new price target of Rs 710, citing missed credit cost estimates and higher stressed asset creation. Bernstein also placed an "underperform" rating with a target of Rs 690, highlighting that elevated credit costs remain a consistent challenge.
HSBC joined in reducing price targets, reflecting a broader shift in sentiment as analysts reassess optimistic market estimates. These downgrades indicate a cautious outlook on the stock, with analysts predicting potential difficulties in maintaining profitability. Additionally, the downgrades suggest that the market may need to adjust its expectations regarding the company's earnings and asset quality.
On the other hand, Macquarie maintained a "neutral" position on the stock, suggesting optimism with a price target of Rs 1,040. It noted that the decline in funding costs might help cushion margins this financial year and described the stock's valuation as "inexpensive" at 4.3 times its financial year 2027 price-to-book valuation. Despite the positive outlook on funding costs, it reported increase in credit costs to 9.6%, the highest in 16 quarters, which remains a concern for investors. This increase underscores the challenges faced by SBI Cards in managing its asset quality and maintaining investor confidence.
SBI Cards and Payment Services logged a 6.4% year-on-year decline in net profit at Rs 556 crore for the June quarter against Rs 594 crore in Q1FY25.
Operating costs climbed 17% YoY to Rs 2,123 crore, while finance costs rose 6% to Rs 813 crore, attributed to higher receivables. The company’s return metrics weakened, with return on average assets (ROAA) falling to 3.4% from 4.1% and return on average equity (ROAE) falling to 15.8% from 19.1% a year ago.
Net interest income (NII) rose 13.8%, coming at Rs 1,680 crore against Rs 1,476 crore in the corresponding quarter of FY25.