SBI Card shares slip 5% as analysts warn of de-rating, see limited upside ahead

Shares of SBI Cards and Payment Services Ltd. declined 5% on Monday, October 27, in response to its September quarter results, which came in below market expectations.

The company's performance was impacted by higher operating expenses and lower interest income, though lower credit costs and strong growth expectations could lend support to sentiment going forward.

During the quarter, festive season spending toward the end of Q2 led to a lower share of revolver customers, with the transactor mix rising to 44% from 40% in the previous quarter. As a result, revenue grew 12% year-on-year, largely driven by higher fee income.

(₹cr)	Q1FY26	Q2FY26	QoQ
Revenue	4,877	4,961	1.7%
Interest Inc	2,493	2,490	-0.1%
Fee and other rev	2,384	2,471	3.7%

Brokerage firm Macquarie has a 'Neutral' rating on the stock, with a price target of ₹990. According to the brokerage, the company's PAT miss was driven by higher operating expenses and that investor focus will now shift to the trajectory of credit costs.

Macquarie expects net interest margins (NIMs) to improve in the coming quarters but added that the stock looks expensive at 4.5x FY27E price-to-book for a return on assets trajectory of around 3%.

Jefferies has a 'Hold' rating on the stock but raised its price target to ₹1,010. Most asset quality metrics improved sequentially, indicating that stress is abating, the brokerage said.

Jefferies expects credit costs to moderate and NIMs to recover as the revolver mix normalises, though it flagged that asset growth is likely to remain modest and fee income pressures could persist.

The brokerage cut its FY26-FY27 earnings estimates by 7-14%, adding that while earnings and ROA should improve, current valuations already price in much of the upside.

Morgan Stanley maintained an 'Underweight' rating on SBI Card with a price target of ₹700.

The brokerage said PAT missed its estimate by about 6% and that market expectations for credit costs and earnings remain too optimistic. Morgan Stanley cautioned that structural risks to growth and return on equity could lead to further de-rating in the stock.

Nuvama Institutional Equities downgraded the stock to 'Hold' and assigned a price target of ₹1,025. The brokerage said that the stock, trading at 40x FY26E and 27x FY27E earnings, leaves limited room for further upside.

13 analysts have a 'Sell' rating on SBI Card, while seven each have a 'Buy' and 'Hold' recommendation.

Shares of SBI Cards are trading 2.81% lower in early trade at ₹902.85. On a year-to-date basis, the stock has risen over 33%.