SBI Cards Share Price Declines Over 7% Following Q2 Results

SBI Cards Share Price Declines Over 7% Following Q2 Results

SBI Cards Share Price Declines Over 7% Following Q2 Results

SBI Cards and Payments Services share price experienced a decline of over 7% in early trading on Monday after the company reported its financial results for the second quarter of FY24. The stock fell as much as 7.45% to ₹732.05 per share on the Bombay Stock Exchange (BSE), trading below its initial public offering (IPO) price of ₹755 per share.

SBI Cards and Payments Services reported a 15% increase in net profit for Q2FY24, rising to ₹603 crore from ₹526 crore in the year-ago quarter. The company’s revenues also witnessed a 22% growth to ₹4,221 crore from ₹3,453 crore YoY.

Despite the growth in profits and revenues, elevated provisions and a margin contraction of 12 basis points sequentially to 11.3% impacted the company’s performance. The margin contracted amid a decrease in yield, while the mix of equated monthly installments (EMI) and revolver rate remained stable.

Motilal Oswal Financial Services noted that SBI Cards and Payments Services reported a muted quarter characterized by elevated provisions and further margin compression. The firm’s management indicated that the recent increase in interest rates would pressure funding costs in the coming quarters, potentially leading to further margin compression over the second half of FY24.

On the positive side, spending growth remains healthy, and the company continues to achieve strong growth in new card additions. However, the reversal in the rate cycle and lagged improvement in the revolver mix are key triggers to watch, which could support 35% earnings compound annual growth rate (CAGR) over FY24-26.

Nuvama Institutional Equities highlighted that SBI Card reported elevated credit costs and weaker net interest margins (NIM). Credit costs remained elevated at 6.7% in Q2FY24, while NIM decreased by 12 basis points quarter-on-quarter due to lower yield. The company’s management noted a rise in credit costs in newer cohorts, and the persistence of high credit costs is not in line with other large players.

Nuvama Institutional Equities maintained a “Reduce” rating on the stock and reduced the target price to ₹760 per share from ₹775.

At 9:40 am, SBI Cards and Payments Services shares were trading 7.03% lower at ₹735.40 per share on the BSE.

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