Target: ₹950

CMP: ₹854.70

SBI Cards (SBIC) reported a slight PAT miss (3 per cent) at ₹590 crore/5 per cent RoA in Q1FY24 due to lower fees and higher provisions/charge-off at 6.8 per cent as stress in the old pool (2019) emerges. Management indicates that the stress pool was on watch and is being handled, thereby the fallout provisions will be contained.

Notably, RBL too had seen slight seasonal stress in Q1. SBI Cards lost some market share in CIF/spends, possibly due to devaluation of cashback card and lower corporate spends, leaving an impact on fees as well. Share of the revolver book remains low for the industry and, hence, for SBIC at 24 per cent, but some pick-up in EMI share led to stable NIM at 11.5 per cent after a long period. SBIC retains its guidance for better NIMs in H2.

Factoring in operational softness in business/fees and NPAs, we have lowered our earnings estimates for FY24-26 by 4-8 per cent and RoA/RoE expectations to 5 per cent/24-25 per cent. Based on our ERE model, we have revised our TP to ₹950/share (from ₹1,000), implying 5.8x its Jun-25 ABV/25x EPS.

Downgrade to Hold.