SBI Cards Shares Decline As Q2 Profit Misses Estimates
SBI Cards Shares Decline As Q2 Profit Misses Estimates
SBI Cards Q2 Results 2022-23: Net profit rose 28% year-on-year but dipped sequentially on higher operating spends.
Shares of SBI Cards & Payment Services Ltd. declined as second-quarter net profit missed estimates.The company, which brands itself as SBI Card, missed estimates due to margin pressures and lower revolve rates, analysts said, but the issuer's growth prospects stay bright. With the management expecting funding costs to grow another 40 to 50 basis points sequentially, net interest margins are likely to stay under pressure going forward. SBI Card reported net profit of Rs 526 crore in the June-September quarter, a 28% rise year-on-year. However, profits dipped sequentially due to higher operating spends, lower margins and a decline in share of revolvers in the overall customer pile. With the management expecting the share of revolvers to return to normalcy going forward, SBI Card could see an improvement in its profitability but cost of funds and regulations governing transaction fees would be key factors to watch out for going forward, analysts said. SBI Card also saw a modest improvement in asset quality over the quarter with gross non-performing assets falling 10 basis points over the previous quarter to 2.14% of gross advances. Shares of SBI Card fell 5.23% to Rs 813.30 apiece as of 9:40 a.m. while the benchmark Nifty 50 gained 0.35% on the NSE.Here's what analysts expect from SBI Cards going forward:Morgan StanleyCost of funds is likely to keep moving up but yields could improve as transactor mix normalises.Due to accelerated card acquisition, operating costs could remain elevated in the near-term.Sustained earnings recovery could spark investor interest.Management expects to increase share of corporate spends to 25% but in a calibrated manner.Maintain a 'overweight' rating with a price target of Rs 1,100 apiece.Motilal OswalExpect revolver mix to increase gradually as spends mature and festive season progresses.Growth in spends likely to stay healthy.Increase in share of interest-earning assets is likely to increase, offsetting cost-of-funds pressure on the margins.Maintain a 'buy' rating with a target price of Rs 1,000 apiece.Axis CapitalGrowth signals such as increase in spends, new launches, and stable asset quality remain strong.Management in on track to achieve 30 lakh net card additions per month.Uptick in share of EMIs as part of overall receivable likely to continue over the third quarter.Slower growth in net interest margins and share of revolvers need to be watched.Revise target price to Rs 980 as opposed to Rs 1,040 earlier.Continue Reading. Read more on Markets by BloombergQuint.