SBI Cards and Payment Services has received a positive outlook from global brokerage UBS, which upgraded its rating on the stock from "Sell" to "Neutral" and increased the target price to ₹800 per share, up from ₹600 earlier.

 

UBS highlighted signs of improvement in SBI Cards’ financial performance, including stabilizing delinquencies and better underwriting practices. The brokerage anticipates credit costs to peak in the latter half of FY25, followed by a decline of 110 basis points in FY26.

 

Key Insights from UBS:

 

Credit Costs: Revised down to 7.3% for FY26 and 7.1% for FY27.

 

Earnings Growth: FY26 and FY27 EPS estimates raised by 4% and 5%, respectively.

 

Valuation Shift: Over three years, SBI Cards' stock has seen a correction, now trading at 4.2x FY26E price-to-book value, compared to 9.1x earlier.

 

 

UBS also noted a potential increase in the revolver mix (the portion of loans not fully paid by the due date), currently at 23%, with projections of gradual growth to 25% by FY27. This, combined with a supportive credit environment, could bolster margins.

 

Margin and Growth Outlook:

 

NIMs (Net Interest Margins): Expected to rise from 11.2% currently to 11.8% by FY27.

 

Card Additions: A rebound in new card issuances is anticipated in FY26, aligning with an improving credit cycle, which could further enhance fee income.