SBI Card Share Price Fall Over 7% After Q2 FY24 Results 

In early trading on Monday, SBI Cards and Payments Services saw its share price decline by over 7% following the release of its financial results for the second quarter of fiscal year 2024 (FY24). The company's stock dropped as much as 7.45% to ₹732.05 per share on the Bombay Stock Exchange (BSE), falling below its initial public offering (IPO) price of ₹755 per share.

Financial Results Overview

SBI Cards and Payments Services reported a 15% increase in its net profit for Q2 FY24, reaching ₹603 crore compared to ₹526 crore in the same period the previous year. Revenue also showed a strong growth of 22%, reaching ₹4,221 crore from ₹3,453 crore year-on-year (YoY).

Net interest income increased by 28% to ₹1,902 crore, and net interest margin (NIM) slipped by 20 bps to 11.3% due to rising cost of funds. New account volume saw a 12% decrease to 11.42 lakh compared to the year-ago period.

SBI Card's asset quality remained relatively stable, with gross non-performing assets (GNPAs) at 2.43% of total loans for the September quarter, compared to 2.41% for the June quarter. Net non-performing assets (NNPAs) remained unchanged at 0.89% of total loans for the quarter ending on September 30.

Brokerage Reactions & Stock Performance 

Jefferies maintained a 'Buy' rating on SBI Card but lowered its price target to ₹1,020 per share. HSBC retained a 'Hold' rating on SBI Card with a target of ₹860 for the stock. HSBC pointed to higher credit costs and ongoing pressure on the NIM as key concerns, while operating costs were in line with expectations.

Goldman Sachs expressed concerns about the management commentary, which they found worrisome due to the increasing stress in unsecured loans. The global brokerage also raised alarms regarding the company's overall earnings, describing them as of "poor quality" due to the net interest margin (NIM) falling below their expectations, largely attributed to higher-than-anticipated credit costs.

HSBC has maintained its 'hold' recommendation for SBI Card with a price target of ₹860 for the company's stock. The brokerage cited elevated credit costs and continued pressure on the net interest margin (NIM) as the primary concerns regarding SBI Card. However, HSBC noted that the company's operating costs were in line with their initial estimates.

Currently, SBI Cards and Payments Services' share price is trading at ₹749, reflecting a decline of more than 6% from its previous close. Over the past month, the stock has decreased by close to 6%, including today's fall. Looking at the last six months, the share price fell by 4%, while over the past year, the stock is down by 9%.

When we broaden our analysis to the stock's performance since its entry into the financial market, it has given a negative return of 27% to its investors indicating a challenging and declining trend in the company's stock price over the long term. 

Final Words

SBI Card's Q2 FY24 results showed a rise in net profit and revenues, but challenges related to provisions, margin contraction, and rising stress levels impacted its stock price. Brokerages had mixed reactions but expressed concerns about the company's earnings and net interest margin. SBI Card's asset quality remained stable, but challenges in the unsecured loan segment raised worries about credit costs. The company faces both opportunities and challenges in the evolving credit card market.