SBI Card Q3: Spends hold up as credit costs ease; analysts' views divided

SBI Card Q3 results review: SBI Cards and Payment Services’ December quarter performance has drawn a mixed response from brokerages. While improving asset quality and resilient spending trends are supporting profitability, growth in cards-in-force (CIF) and receivables remains muted.

 

The credit card issuer reported a Q3FY26 profit after tax (PAT) of about ₹560 crore, broadly in line with Street expectations. A sharp improvement in credit costs and strong fee income from higher spends helped offset pressure on margins and slower balance-sheet growth.

 

Emkay Global Financial Services highlighted that while overall CIF and assets under management (AUM) growth remained soft, mirroring broader industry trends, spending momentum was robust. Retail festive demand and a sharp pick-up in corporate spends supported fee income, while moderating provisions lifted return on assets to 3.2 per cent from 2.7 per cent in the previous quarter (Q2FY26). Emkay noted that credit costs eased to 8.3 per cent in Q3 from 9 per cent in Q2, aiding profitability.  ALSO READ | MCX stock rallies 18% in 3 days post Q3 results; brokerages see more upside 

 

Looking ahead, Emkay expects spends growth to remain healthy, with CIF growth likely to accelerate once management gains confidence on asset quality trends. While margins are expected to stay range-bound unless there are further repo rate cuts, the brokerage sees scope for RoA improvement driven by better fee income and lower credit costs. Despite cutting FY27 and FY28 earnings estimates to factor in slower growth, Emkay upgraded the SBI Cards & Payments stock to ‘Buy’, citing an improved risk-reward after the recent share price correction. The brokerage also reduced the target price to ₹970 from ₹1,025 earlier.

 

Motilal Oswal Financial Services described the quarter as in line, pointing to early signs of easing credit costs. The brokerage flagged a 20 basis point (bp) sequential contraction in net interest margins to around 11 per cent, noting that most benefits from lower funding costs have already been realised, while yields face mild near-term pressure. Operating expenses rose, partly due to labour code-related costs, but were broadly manageable.

 

Motilal Oswal also highlighted strong spends growth of 33 per cent year-on-year (Y-o-Y), led by an outsized jump in corporate spends, while retail spends posted moderate growth. Asset quality metrics were largely stable, with a marginal uptick in gross NPAs and a slight improvement in net NPAs. Provision coverage improved sequentially. However, given margin pressures and slower receivables growth, the brokerage trimmed its earnings estimates and reiterated a ‘Neutral’ stance, with expectations of a gradual improvement in returns by FY27. The brokerage cut SBI Card’s target price to ₹875.

 

Anand Rathi struck a more constructive tone, describing SBI Card as being at an inflection point. The brokerage noted that while receivables growth remained subdued at mid-single digits, strong spending growth and a sharp decline in credit costs drove a 45 per cent Y-o-Y rise in profit. Management commentary around improving delinquency trends in newer cohorts added comfort on asset quality, it said.  ALSO READ | CarTrade Tech gains 5% intraday after Q3 results; JM Fin upgrades stock 

Anand Rathi expects a gradual recovery in growth as card acquisition picks up and the mix shifts toward higher-EMI usage, even as operating costs remain range-bound. With credit costs projected to decline further, the brokerage sees scope for a healthy earnings compound annual growth rate over the medium term and maintains a ‘Buy’ rating, with a target price of ₹992.

 

Contrastingly, Morgan Stanley remained cautious. The global brokerage reportedly maintained an ‘Underweight’ rating and cut its target price to ₹665 from ₹700, citing weaker-than-expected adjusted profit due to pre-provision operating profit pressures. It flagged a sequential decline in receivables and highlighted management’s decision to withdraw FY26 growth guidance as a negative signal.

 

Morgan Stanley also pointed to risks to net interest margins from a declining revolver mix and guided cost-to-income ratios of 55-57 per cent. Earnings estimates for FY27 and FY28 were cut, with the target price reduction attributed to earnings downgrades and expectations of structurally lower returns on equity.

 

That said, brokerages agree that SBI Card’s near-term story hinges on sustaining spending momentum and translating improving asset quality into higher, more stable returns. While opinions diverge on valuation and growth visibility, easing credit costs have clearly emerged as a key support for profitability.

   

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