Profit Rises Amid Asset Quality Gains

SBI Cards and Payment Services (SBIC) reported mixed results for the fiscal fourth quarter. The company saw a notable strengthening in asset quality along with ongoing worries about growth speed and diversifying revenue sources. While credit costs eased and profitability increased year-over-year, the credit card market's underlying trends and SBIC's portfolio suggest significant strategic challenges. Investors are considering the progress in risk management against the need to boost expansion in a competitive payments market.

Q4 Financial Highlights

SBI Cards reported a net profit after tax (PAT) of INR 609 crore for the fourth quarter ended March 2026, a 14% increase from the previous year. This profit improvement was supported by a 7% year-on-year rise in total income to INR 5,187 crore. The company showed better asset quality, with Gross Non-Performing Assets (NPAs) falling to 2.41% and Net NPAs declining to 1.04%. Credit costs settled at 6.1%, excluding a management overlay of INR 2.2 billion, reflecting careful risk management. This improved risk profile helped reduce loan losses and bad debts, which fell 12% year-on-year to INR 1,097 crore. The company's Return on Equity (ROE) was approximately 14.82% for FY26.

Despite these positive results, the stock's market performance has been weak, with a year-to-date return of -26.28% as of May 5, 2026. Its 52-week range was INR 615.50 to INR 1,027.25. The current trading price is around INR 639-645, showing a Price-to-Earnings (P/E) ratio of roughly 28-30 times trailing twelve-month earnings.

Challenges in a Competitive Market

SBI Cards is India's second-largest credit card issuer with an estimated 18-20% share of cards in circulation. It operates in a market led by HDFC Bank (about 22-24% share). While SBI Cards holds about 18-19% of card spending, it faces strong competition from HDFC Bank, ICICI Bank, and Axis Bank, which often trade at lower valuations.

The Indian credit card market historically saw strong annual growth of over 20%. However, recent trends show a slowdown. Credit card spending growth eased to 8.1% year-on-year in January 2026, down from 11% a year earlier, indicating that consumer spending is normalizing. Adding to this, SBI Cards' receivables growth slowed to just 2% year-on-year in Q4 FY26.

Revenue Challenges and Growth Concerns

A key concern for SBI Cards is the fundamental shift in its revenue sources and slower asset growth. The company is seeing fewer 'revolvers' (customers who carry balances and pay interest) and more 'transactors' (customers who repay in full each cycle). This change directly affects earning potential. Revolver interest rates, a major profit driver, are expected to fall, reducing overall interest income. This pressure is made worse by slower receivables growth, which has lagged behind overall spending growth. Although fee income grew 13% in Q4 FY26, it may not fully offset the lower interest earnings from revolving balances.

New account additions have also been slow, with the growth in Cards-in-Force (CIF) falling below one million per quarter recently. This slowdown is partly due to a careful approach to acquiring customers after past asset quality issues (FY20-23 saw significant loan problems), limiting the base for future growth. The company's P/E ratio of about 28-30x is high compared to some banking competitors, leading some analysts to suggest it might be overvalued or in a potential value trap. While past performance does not guarantee future results, the stock's approximately 26% decline over the past year shows investor caution.

Growth Strategies and Analyst Outlook

Looking ahead, SBI Cards plans to expand its Equated Monthly Instalment (EMI) book and increase UPI-linked RuPay card usage as main growth drivers. These efforts aim to counter the impact of falling revolver balances and slower receivables growth. Management expects credit costs to fall further, projecting an average of 7.5% for FY27-28. Analysts forecast a slow improvement in Return on Assets (ROA) to around 4.5% and Return on Equity (ROE) to 20.6% by FY28. Although analyst views are mixed, with a consensus 'Hold' rating, some analysts have cut their forecasts for FY27-28 PAT. This reflects ongoing margin pressures and less clear visibility for loan growth. The company's success in adjusting its portfolio and driving profitable growth will be key to achieving further gains.