SBI Cards and Payment Services: Slow grind toward steady state. Maintain REDUCE
By Ankur Chandra | Updated at: Jan 8, 2026 12:41 AM IST
SBI Cards and Payment Services (SBICARD) continues with its calibrated approach toward customer acquisitions amidst asset quality woes. New card issuances remained tepid during Oct’25-Nov’25, in line with FY26 trends and ~55% down compared to FY23 levels. While the pace of new card issuances remains muted, the higher share of non-salaried customers and customers from beyond Tier II locations remain a concern. SBICARD’s profitability is likely to remain subdued in the near term with gradual improvement during FY27 on the back of normalization in credit costs. However, as highlighted earlier, the new-normal RoA/RoE is likely to be significantly below the pre-Covid level. We hack our FY26E/FY27E/FY28E earnings estimates to factor in lower growth in CIF and fee income and maintain REDUCE with a revised RI-based TP of INR 690 (implying 3.4x Sep-27 ABVPS; 19x Sep-27 EPS).
Muted customer acquisitions; rebound in corporate spends: SBICARD’s CIF growth moderated further to 8.5% YoY in Nov 2025 vs. 10.2% in FY25 due to muted new card issuances, leading to a marginal drop in the CIF market share to 18.9%. While the stringent gating criteria amidst asset quality woes is a positive, higher share of self-employed and Tier II & beyond locations in incremental card sourcing remain a concern. Corporate spends has witnessed a healthy rebound following a muted FY25, driving spends market share to 17.5% in FY26 (till Nov-25) vs. 15.7% in FY25.
Earnings headwinds remain: SBICARD’s earnings continue to remain under pressure with sustained headwinds on revenue pools. The share of interest earning receivables has continued to hover ~60% since Mar-22 (56% in Q2FY26) vs. 67-70% during pre-pandemic times. Fee pools such as instance-based fees and interchange fees remain under pressure amidst competitive and regulatory headwinds (rental payments, overlimit charges, etc.). However, the wedge between other income and opex has remained favorable during FY24-FY25 and is likely to narrow gradually, with an uptick in card acquisitions and spend campaigns.
Asset quality challenges continue to persist: SBICARD’s asset quality continues to remain sub-par over the past couple of years (gross credit costs/write-offs at 8.9%/8.8% in Q2FY26). The limited visibility of meaningful credit cost normalization despite significant write-offs, tightened gating criteria, and significantly lower revolving loans portfolio continues to remain a concern.
Earnings yet to stabilize, valuations remain expensive: SBICARD’s profitability has been impacted adversely post pandemic (RoA/RoE of 2.6%/12.1% in Q2FY26 vs. 4.8%/29.1% in FY19). The structural issues around several profit pools are likely to keep profitability lower compared to pre-pandemic levels. While the stock has delivered subdued shareholder returns (3yr/5yr CAGR of 4%/-1%) with significant valuation de-rating, current valuations (4.3x Sep-27 ABVPS, 24x Sep-27 EPS) still seem expensive amidst muted financial performance and profitability outlook. Maintain REDUCE.
Financial Summary
| Y/E Mar (INR bn) | FY23 | FY24 | FY25 | FY26E | FY27E | FY28E |
| NII | 45.1 | 53.3 | 61.7 | 69.4 | 75.7 | 87.4 |
| PPOP | 51.9 | 65.2 | 74.5 | 80.0 | 88.1 | 99.1 |
| PAT | 22.6 | 24.1 | 19.2 | 22.8 | 31.5 | 37.2 |
| EPS (INR) | 23.9 | 25.3 | 20.1 | 24.0 | 33.1 | 39.1 |
| ROAE (%) | 25.7% | 22.0% | 14.8% | 15.4% | 18.3% | 18.2% |
| ROAA (%) | 5.6% | 4.6% | 3.1% | 3.4% | 4.3% | 4.5% |
| ABVPS (INR) | 100.2 | 121.9 | 136.5 | 158.9 | 187.8 | 221.4 |
| P/ABV (x) | 8.7 | 7.2 | 6.4 | 5.5 | 4.7 | 3.9 |
| P/E (x) | 36.6 | 34.5 | 43.4 | 36.4 | 26.4 | 22.4 |
Source: Company, HSIE Research
Disclaimer : This content is only for informational purpose. Do not make any investment based solely on this recommendation as the recommendation is not based on your unique risk tolerance and investment objectives. Investment in stocks is subject to market risks and other risks. There is no guarantee of the return that will be actually given.
Source: HDFC Securities Institutional Equities
To see full report and full disclaimer, click on: https://www.hdfcsec.com/hsl.docs/SBICARD%20-%20Update%20-%20Jan26%20-%20HSIE-202601061053432858730.pdf?t=61202611446246
