- Spend growth jumped 33% YoY in Q3FY26, outpacing peers.
- Credit cost fell sharply, unlocking a 45% YoY PAT rise.
- Analysts forecast a 28% CAGR in PAT through FY28.
- Target price implies 4.2x FY28 book value – a modest 4.5% RoA.
- Buy rating persists despite valuation pressure.
Most investors missed the credit‑cost breakthrough – you shouldn’t make that mistake again.
Why SBI Cards' Profit Explosion Beats Sector Averages
In Q3FY26, SBI Cards reported a 33% year‑on‑year rise in spend, while gross receivables grew a modest 4.5%. The real story is the dramatic dip in credit cost, which lifted net profit (PAT) by 45% YoY. Credit cost, the expense incurred from bad loans, is a critical metric for lenders; a lower rate means more earnings are retained. SBI Cards has moved from a high‑cost regime to a tighter, more disciplined credit portfolio, aligning it with the best‑in‑class peers.
Sector Trends: Payments Landscape Accelerating Post‑Pandemic
India’s digital payments ecosystem is on a 20% annual growth trajectory, driven by higher consumer adoption of cards, UPI, and BNPL solutions. Card‑linked spend, which accounts for roughly 40% of total digital transactions, is expected to grow at a compound annual growth rate (CAGR) of 15% through 2028. This macro tailwind benefits issuers that can capture market share without sacrificing asset quality.
Competitor Playbook: How Tata and Adani Are Positioning Themselves
Tata Capital’s credit card arm has focused on premium partnerships and co‑branded cards, but its credit‑cost ratio remains above 5%, limiting profit upside. Adani’s foray into payments, via its fintech arm, is still early‑stage, with spend growth lagging behind SBI Cards’ 33% pace. Both firms are chasing the same affluent consumer segment, yet SBI Cards' disciplined underwriting gives it a cost‑advantage that can translate into higher returns on assets (RoA) as the sector matures.
Historical Context: When Credit Cost Improvements Triggered Rallies
Looking back at HDFC Bank’s 2015‑2017 period, a similar credit‑cost compression preceded a 60% surge in its share price over two years. Investors who recognized the inflection point early captured outsized returns. SBI Cards appears to be at a comparable juncture, with a projected 28% PAT CAGR from FY25‑28.
Technical Snapshot: Valuation Metrics Decoded
The current target price of Rs 992 values the stock at 4.2× FY28 estimated book value, down from 4.4× FY27. A book‑value multiple below 5× is historically considered attractive for financial services firms, especially when paired with a RoA of 4.5% in FY28. In simple terms, investors are paying Rs 4.20 for every Rs 1 of net asset value, a discount that implies the market still underestimates future earnings growth.
Investor Playbook: Bull vs. Bear Cases
Bull Case: Continued spend acceleration, further credit‑cost tightening, and successful rollout of premium co‑branded cards push PAT growth beyond 30% YoY. Valuation expands to 5× FY28 BV, delivering a 15% upside.
Bear Case: Macro‑economic slowdown slows consumer spending, credit‑costs rise again, and competition erodes market share. PAT growth stalls below 10% YoY, forcing the stock back to 3.5× BV and a price correction of up to 10%.
Given the current fundamentals, the BUY recommendation with a Rs 992 target remains justified, but investors should monitor credit‑cost trends and competitive moves closely.