Posted on April 25, 2025, by Niftynews
SBI Card shares experienced a significant drop of over 6%, hitting an intraday low of ₹872.10 on Friday, April 25, 2025, following the release of its financial results for the January–March quarter. Despite the sequential decline in credit costs, which had been a primary concern for investors, the company’s performance did not meet market expectations, leading analysts to predict a further downside for the stock.
In this article, we take a closer look at the Q4 results, the focus on credit costs, and what analysts are saying about the future of SBI Card shares.
Focus on Credit Costs and SBI Card’s Q4 Performance
Prior to the earnings announcement, the key focus for investors was credit costs, with many hoping for signs of improvement. For the quarter, SBI Card did manage to deliver a sequential decline in credit costs, which was a positive for the stock. However, the company’s management made it clear that achieving a more normalized range of 6%–7% in credit costs is still far off.
Despite this, the company posted a return on assets (RoA) of 3.4% and a return on equity (RoE) of 15.5%, supported by strong net interest income (NII) and moderated operating expenses. While these metrics were an improvement, the stock still faced downward pressure after the results, prompting a re-evaluation of its outlook by several analysts.
Analysts Predict Further Downside for SBI Card Shares
Following the disappointing Q4 results, analysts have downgraded their price targets for SBI Card shares, with some projecting further downside. Global brokerage firm Bernstein maintained an ‘Underperform’ rating on the stock and set a price target of ₹620, well below its current levels.
Morgan Stanley also revised its price target upward to ₹775 but maintained an ‘Equalweight’ rating. The firm pointed out that although bad loan formation and credit costs showed meaningful improvements, the normalized levels of these costs remain uncertain. Therefore, while the decline in credit costs is a positive sign, it’s clear that the path to normalization is still unclear.
Meanwhile, CLSA downgraded the stock to ‘Underperform,’ with a price target of ₹800. The firm noted that while SBI Card’s results were in line with expectations in terms of pre-provision operating profit (PPOP), the stock missed profit after tax (PAT) estimates due to higher-than-expected credit costs.
Challenges Ahead for SBI Card Shares
While the decline in credit costs was welcomed by investors, it’s important to note that credit costs are still significantly above historical norms. As noted by several analysts, the company’s credit costs are still running 200-300 basis points higher than typical levels. This suggests that SBI Card shares might continue to face volatility unless the company can significantly reduce these costs.
Additionally, SBI Card’s loan growth has slowed considerably, falling from 25% in FY24 to just 10% in FY25. While some analysts have noted a moderation in card stress flows, suggesting that the overall industry, and SBI Card in particular, may see a steady decline in credit costs over time, the company’s cautious stance on growth remains a concern.
The management of SBI Card has stated that it expects credit costs to improve in the coming quarters, but they have refrained from offering specific guidance due to the macroeconomic uncertainty. This uncertainty is likely to weigh on investor sentiment, making it harder for SBI Card shares to see a quick recovery.
SBI Card Shares and the Future Outlook
Despite the sharp decline in SBI Card shares, there are still some positives for investors to consider. The company’s return on equity (RoE) and return on assets (RoA) remain strong, and the moderation in credit costs does indicate some progress in risk management. Moreover, SBI Card shares have gained 30% so far in 2025, making it one of the better-performing stocks in the financial services sector this year.
However, with analysts divided on the stock’s future, it’s important for investors to keep a close eye on future credit cost trends and loan growth. As of now, the stock remains a mixed proposition, with some analysts forecasting further declines and others suggesting that the worst may be over.
Of the 28 analysts covering SBI Card shares, 10 have a ‘Buy’ recommendation, while 9 have a ‘Hold’ rating and 9 have a ‘Sell’ rating, showing the divided sentiment surrounding the stock.
Conclusion: What Should Investors Do?
For investors holding SBI Card shares, it may be wise to remain cautious, especially in light of the uncertainty surrounding the normalization of credit costs and the company’s growth trajectory. While the recent improvements in credit costs are a positive sign, the stock’s continued volatility and analysts’ bearish outlook suggest that further declines could be on the horizon.
Investors should monitor upcoming quarterly results closely for updates on credit costs, loan growth, and any changes in the company’s guidance on future performance. Until there is more clarity on these fronts, SBI Card shares may continue to face downward pressure.
