Posted on February 13, 2025, by Niftynews
Shares of SBI Cards & Payment Services surged by more than 5% in intraday trading on February 13, 2025, following an upgrade by global brokerage firm Macquarie. The SBI Card share price hit a 52-week high of ₹858 on the Bombay Stock Exchange (BSE), marking a significant positive shift in sentiment for the credit card issuer.
SBI Card shares maintained an impressive gain of 4.8%, trading at ₹856 per share, outperforming the benchmark Sensex, which saw a modest 0.55% rise. Investors reacted positively to the news that Macquarie had upgraded the stock from a ‘Neutral’ to an ‘Outperform’ rating, setting a new target price of ₹1,000, up from ₹735. This upgrade reflects growing optimism around SBI Card share price and its future prospects.
Macquarie Key Reasons for Upgrade
Macquarie’s analysts pointed to several industry-wide factors that are driving their optimistic outlook for SBI Card share price.
First, they noted that flow rates into overdue buckets for credit cards have plateaued. While analysts can’t predict a dramatic drop, this development provides comfort that delinquency levels may stabilize.
Second, vintage delinquencies for SBI Cards have been on a downward trajectory, indicating better portfolio selection. Over the past 12 months, SBI Cards has focused on issuing credit cards to borrowers with stronger credit profiles, which has improved its overall portfolio quality.
In addition, falling interest rates, easing liquidity, and income tax cuts in India provide a favorable environment for growth in consumer spending and unsecured loans. As a company with a 100% unsecured consumption loan book, SBI Cards stands to benefit from these macroeconomic factors, further supporting the rise in SBI Card share price.
SBI Card Strong Position in the Indian Market
SBI Cards is the second-largest credit card issuer in India, with an 18% market share. The company benefits from its association with State Bank of India (SBI), which provides a large customer base for cross-selling credit cards. Interestingly, more than 70% of SBI Card customers come from non-Tier-1 cities, and a large portion of them are under the age of 45, providing a robust growth potential for future card acquisitions.
According to Macquarie’s revised estimates, the expected fall in SBI Card slippages and credit costs, starting in Q4FY25, alongside increasing margins due to falling cost of funds, could trigger a significant re-rating of the SBI Card share price.
Improvement in Credit Costs and Margins
Macquarie’s analysts have reduced their estimates for credit costs, which will likely increase SBI Card sustainable return on assets (RoA) by 30 basis points to 4.5%. The reduction in cost of equity by 100 basis points to 13.5% is also expected to have a positive effect on the stock’s valuation.
The brokerage firm raised its target Price-to-Book (P/BV) valuation multiple from 3.4x to 4.8x, boosting their target price for the stock to ₹1,000. This increase in target price for SBI Card share price reflects the positive outlook from Macquarie.
SBI Card Strong Financial Performance Outlook
Despite elevated credit costs in FY25, analysts expect them to decline significantly in the following fiscal years, with a projection of 7.3% credit cost in FY26 and 7.1% in FY27. This is an improvement over the expected 8.4% credit cost in FY25, supporting the long-term positive outlook for the company and the growth in SBI Card share price.
SBI Cards has also seen a lower revolver mix, where the percentage of customers who don’t make full payments on their credit cards has fallen to 23%, indicating better credit quality. This, combined with expected increased margins due to lower interest rates, positions the company for continued growth in the coming years, which will likely support SBI Card share price.
Investor Sentiment and Market Performance
The positive Macquarie upgrade and favorable macroeconomic trends have contributed to heightened investor confidence in SBI Cards. As the company moves toward stabilizing its credit portfolio and benefitting from improved credit conditions, SBI Card share price is expected to continue rising. In the past month, SBI Card stock has gained significant momentum, making the ₹858 mark its highest level in 18 months.
Conclusion
The Macquarie upgrade for SBI Cards has provided a much-needed boost for the company, pushing the stock to new highs. The target price increase to ₹1,000 suggests further upside potential for investors, especially given the ongoing improvements in credit quality and favorable macroeconomic conditions. As SBI Cards continues to benefit from its association with State Bank of India and its strong position in the Indian credit card market, its stock remains an attractive option for investors seeking growth in the financial sector, and the SBI Card share price is poised for continued growth.
