Mixed Results: Strong Spending, Softer Earnings Outlook

SBI Cards reported a mixed financial picture in its latest quarterly results. While spending accelerated and net profit grew, an analyst firm has lowered earnings expectations. This move reflects ongoing challenges affecting net income and highlights the difficulty in translating top-line growth into bottom-line profits.

Operational Strength: Spending Surges, Profit Climbs

In the fourth quarter of fiscal year 2026, SBI Cards showed strong operational performance. Spending rose 31% year-over-year and 1% from the previous quarter, showing continued customer use. Net profit also increased by 13% year-over-year and 9% quarter-over-quarter. Much of this profit gain came from lower credit costs, which helps manage loan quality. However, the growth in loans (gross receivables) slowed to just 2% year-over-year. This could indicate a slowdown in acquiring new loan customers or changes in how people pay.

Analyst Concerns: Slower Loan Growth and Margin Pressure

Anand Rathi analysts have trimmed profit forecasts for SBI Cards for fiscal years 2027 and 2028 by over 7%. This revision is driven by concerns about slower growth in new loans (receivables) and a tightening of profit margins (spreads).

While SBI Cards benefits from lower credit costs now, the slower pace of receivables growth suggests challenges in expanding its customer base as quickly as anticipated. This could lead to increased competition for market share and pressure on future profit margins.

The Indian credit card market is growing rapidly, with forecasts predicting 20-25% annual growth. However, SBI Cards faces competition not only from other card companies but also from large banks like HDFC Bank, ICICI Bank, and Axis Bank, which often have lower valuations. Anand Rathi noted that SBI Cards' valuation needs recalibration, adjusting its target based on FY28 book value. The firm's previous valuation assumptions have been revised. Stock performance for SBI Cards has historically reacted to earnings, with gains from revenue growth often offset by concerns over future guidance or margins.

Analyst View: BUY Rating Maintained, Future Growth Key

Despite the revised outlook, Anand Rathi maintained a BUY rating with a target price of ₹870. The firm expects SBI Cards to achieve a 4.6% Return on Assets (RoA) by FY2028. For the stock to be re-rated higher, analysts believe the company must continue managing asset quality and credit costs effectively, alongside a recovery in card spending. Investors will watch if SBI Cards can adapt to slower growth in receivables and margins. Analyst views are divided, with some sharing Anand Rathi's cautious stance while others emphasize the strong overall growth potential of India's payment industry.