SBI Card trades higher for third straight day; stock up 8% on heavy volumes

Shares of SBI Cards and Payment Services were trading higher for the third straight day, advancing 8 per cent to Rs 976 on the BSE in the intra-day trade on Friday, on the back of heavy volumes. In the past three days, the stock has gained 10 per cent after correcting 22 per cent from its record high level of Rs 1,149 touched on February 24, 2021.

At 01:05 pm, SBI Cards was trading 7 per cent higher at Rs 970 on the BSE as against a 0.31 per cent rise in the S&P BSE Sensex. Trading volumes on the counter more-than-doubled as nearly 4.33 million equity shares changed hands on the NSE and BSE till the time of writing of this report.

SBI Cards and Payment Services is a subsidiary of State Bank of India (69 per cent stake) and is the second largest credit card issuer in India with 19 per cent market share (as of December 2020) in terms of spends and number of cards. It offers an extensive credit card portfolio to individual cardholders and corporate clients, including lifestyle, travel, etc, and corporate cards covering all major segments.

According to reports, global lender Citi's exit from retail banking business in India is likely to pave the way for consolidation in the Indian financial sector, eying for an increased market share across business verticals, say analysts. SBI Cards, they believe, could be another beneficiary.

"Private Banks and credit card companies like SBI Cards can be key beneficiaries of market share gains in the credit card segment. Some smaller private banks might be interested buyers of India portfolio as they are looking to scale-up in the segment. Foreign banks might also look to expand their presence,” wrote Prakhar Sharma, Parameswaran Subramanian and Bhaskar Basu of Jefferies in an April 16 note. CLICK HERE FOR FULL REPORT

Meanwhile, analysts at ICICI Securities said SBI Cards is set to forge ahead on a healthy growth trajectory as "under penetrated market (three cards/100 population), potential within the group (existing-to-bank customers at around 49 per cent) and increasing digital transactions (73 per cent CAGR in FY15- 20)" would lever growth.

Industry spends have grown at 29 per cent CAGR in FY13- 20, FY21E being an exception due to pandemic. Industry growth, in terms of spends, is set to be 20 per cent plus, going ahead, with SBI Cards in a comfortable position to benefit and gain market share as well, it said.

"SBI Cards is a multiyear growth story and provides a unique opportunity to participate in high potential credit segment with strong profitability. It is a proxy to the fast-growing digital payments with a strong parentage. We believe SBI Cards would post a healthy profit after tax growth of 45 per cent CAGR in FY21EFY23E and reach RoA, RoE of 5.9 per cent, 25.6 per cent, respectively, by FY23E," the brokerage firm said in recent report.