Geojit Investments has upgraded SBI Cards & Payment Services Ltd to an ACCUMULATE rating with a revised target price of Rs 950, reflecting improving profitability metrics and stabilising asset quality amid an intensely competitive credit card landscape. The company delivered double-digit growth in net interest income during Q2FY26, supported by disciplined funding, improved collections, and rising spend-based income. Lower credit costs, easing funding pressures, and steady card additions underscore a resilient operating model. While competition remains elevated, SBI Cards’ focus on co-branded partnerships, digital engagement, and AI-led underwriting positions it for sustainable long-term growth, with a measured upside of about 12% from current levels.

Geojit Upgrades SBI Cards to ACCUMULATE With Rs 950 Target

Geojit Investments has upgraded SBI Cards to ACCUMULATE from REDUCE, assigning a target price of Rs 950 over a 12-month horizon. The target implies an upside of approximately 12% from the current market price of Rs 850. The valuation is based on 4.8x FY27E book value per share, reflecting confidence in the company’s improving profitability, stable margins, and strengthening balance sheet fundamentals.

Q2FY26 Performance Signals Operational Resilience

• Net interest income maintains strong momentum.
During Q2FY26, SBI Cards reported net interest income of Rs 1,730 crore, up 15.2% year-on-year. This growth was supported by an 8.7% rise in interest income to Rs 2,490 crore, highlighting sustained traction in receivables despite a competitive pricing environment.

• Margins expand on lower funding costs.
Net interest margin improved by 60 basis points YoY to 11.2%, driven by a decline in cost of funds to 6.4% from 7.1% in Q1FY26. This improvement offset a modest moderation in portfolio yield to 16.5%, largely due to higher transactor volumes during the festive quarter.

• Profit growth remains steady.
Profit after tax rose 10% YoY to Rs 445 crore, aided by higher spend-based income, improving asset quality, and a reduction in credit costs.

Card Growth and Spending Trends Remain Supportive

• Healthy new card additions continue.
SBI Cards added 9.36 lakh new accounts during the quarter, taking cards-in-force to 2.15 crore, a 10% YoY increase. Management reiterated its intent to sustain quarterly additions of 0.9–1.0 million cards.

• Spends show festive-driven acceleration.
Total spends rose 31% YoY to Rs 1,07,063 crore, reflecting strong festive demand and deeper engagement across digital and co-branded platforms.

• Balanced sourcing ensures portfolio quality.
The company continues to source customers evenly from banca and open market channels, supporting diversification and credit discipline.

Asset Quality Improves as Credit Costs Decline

• Gross and net NPAs trend lower.
Gross NPA improved to 2.85%, down 22 basis points QoQ and 43 basis points YoY. Net NPA declined to 1.29%, reflecting better recoveries and tighter underwriting norms.

• Credit cost eases meaningfully.
Gross credit cost reduced to 9%, down 58 basis points QoQ, supported by improved collections and lower delinquencies.

• Capital adequacy remains comfortable.
The capital adequacy ratio stood at 22.5%, providing adequate headroom for growth while maintaining balance sheet stability.

Technology and Partnerships Drive Competitive Edge

• Co-branded partnerships expand reach.
SBI Cards launched new co-branded offerings with Flipkart, PhonePe, and IndiGo, deepening its presence across e-commerce, digital payments, and travel segments.

• AI-led underwriting enhances efficiency.
Management continues to invest in AI-driven underwriting and analytics to improve customer acquisition quality and optimise risk-adjusted returns.

• UPI-linked card strategy gains relevance.
The expansion of UPI-linked credit cards is expected to boost transaction volumes and improve customer stickiness over the medium term.

Financial Outlook Shows Gradual Earnings Acceleration

Geojit expects earnings growth to accelerate in FY27 as operating leverage improves and credit costs normalise further.

Stock Levels and Investment Strategy

• Current Market Price (CMP): Rs 850
• Rating: ACCUMULATE
• Target Price: Rs 950
• Upside Potential: ~12%
• Investment Horizon: 12 months

Key Technical Levels:

Immediate support: Rs 800

Strong accumulation zone: Rs 760–780

Near-term resistance: Rs 900

Breakout confirmation: Above Rs 915

Medium-term investor target: Rs 950

Geojit advises investors to accumulate the stock on declines, given its resilient earnings profile and improving risk metrics.

Key Risks to the Investment Thesis

• Rising competitive intensity.
Aggressive pricing and marketing by peers could pressure margins and customer acquisition costs.

• Regulatory or policy changes.
Any tightening of lending norms or changes in consumer credit regulations could affect growth momentum.

• Macroeconomic slowdown.
A sharp slowdown in consumption could impact card spends and asset quality.

Bottomline: Stability Over Speed in a Competitive Market

SBI Cards is navigating a fiercely competitive credit card ecosystem with disciplined execution and improving financial metrics. While near-term upside remains moderate, the company’s strong parentage, improving asset quality, and technology-driven strategy provide long-term resilience. Geojit’s upgrade to ACCUMULATE reflects a balanced view—recognising both competitive risks and the company’s ability to deliver steady, sustainable growth. For investors seeking measured exposure to India’s consumer credit expansion, SBI Cards offers a credible medium-term opportunity.