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ICICI Securities research report on SBI Cards and Payment Services

SBI Cards (SBIC) reported a disappointing FY25 with a 20% decline in PAT driven by higher credit cost (9%) and low NIMs (10.8%). While management commentary and execution have ratified possible peaking of both credit cost and cost of funds (CoF), the recovery trajectory remains to be monitored.

Outlook

Additionally, multiple events have proven to be challenges in the ecosystem over the last four years: 1) higher credit cost during Covid-19; 2) higher cost to income during BNPL surge; 3) structural decline in revolver mix; 4) higher CoF post-Covid-19; 5) credit cost surge in FY24; and 6) increase in risk weights by RBI. However, sound execution led to improvement in credit costs eventually in Q4FY25 and established a better outlook ahead. Retain HOLD with FY27E PAT of INR30bn (25% FY25–27E CAGR) with a higher multiple of 28x P/E vs. 25x earlier.

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