Shares of SBI Cards & Payment Services Ltd. tumbled ~6.1% intraday on July 28, 2025, reaching a 15-week low of ₹834.75, after delivering weak Q1 results and disappointing analysts, who lowered their target prices. This marks the fourth straight quarter of profit decline.
Q1 FY26 Performance: Growth Marred by Rising Credit Costs
| Metric | Q1 FY26 | YoY Change |
|---|---|---|
| Net Profit | ₹556 crore | -6.5% |
| Revenue from Operations | ₹5,035 crore | +12% |
| Gross Write-offs | ₹1,352 crore | +23% |
| Gross NPA | ~3.07% (+1 bp QoQ) | Slightly up |
| Cards-in-Force | +10% | |
| Cardholder Spending | ₹93,244 crore (+21%) |
While revenue grew robustly, elevated write‑offs and impairment costs dented the bottom line. The gross NPA metric saw a slight uptick, signaling stress in unsecured loan segments.
Analyst Downgrades Trigger Market Sell-Off
Following the results:
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Morgan Stanley downgraded the stock to Underweight with a reduced target of ₹710, citing escalating credit costs, stressed asset creation, and higher ECL provisions.
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Bernstein maintained an Underperform rating with a target of ₹690, pointing to persistently elevated provisioning needs.
Analyst sentiment is mixed across the board, with approximately 11 Hold, 11 Sell, and 7 Buy recommendations.
Macquarie, while upgrading its target slightly to ₹1,040, downgraded the rating from Outperform to Neutral, expressing concerns over slowing loan growth and limited margin expansion—valuing the stock at a conservative 5× FY27 P/B.
Market Reaction & Strategy Shifts
The steep drop in share price reflects heightened investor anxiety over SBI Card’s credit cycle and weak forward guidance. While margins have been pressured, banks and NBFCs alike face similar headwinds due to macroeconomic shifts and rising consumer indebtedness.
Investor caution intensified as key metrics—such as growth in spend and card usage—began to plateau after strong pandemic-era momentum.
Expert Commentary
“Profit misses, combined with elevated provisions, are likely to keep investors wary in the near term,” stated CA Manish Mishra.
“While loan book expansion is intact, the cost of credit is rising faster than growth, which could suppress ROA and earnings potential,” added CA Manoj Kumar Singh.
Implications for Stakeholders
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Retail Investors: Should re-evaluate positions given compressed targets and heightened near-term risk.
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Credit Card Industry: Rising delinquencies and provisioning trends may become a broader theme across comparable issuers.
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Fintech and NBFCs: As macro conditions tighten, digital lenders may also see funding stress and slower profitability growth.
Conclusion
SBI Cards’ weak Q1 performance and consequent analyst downgrades underscore a critical inflection point in India’s credit card ecosystem. Despite healthy revenue growth and cardholder engagement, credit quality issues and sluggish margin recovery may weigh on investor confidence. With consensus targets now centered around ₹700–₹840, the company faces pressure to improve underwriting and cost management in upcoming quarters.
