Nomura, Nuvama say 'Buy' SBI Card shares; upgrade stock on these reasons

SBI Card share price: Nomura and Nuvama Institutional Equities have upgraded SBI Card share to 'Buy' from 'Reduce'

SBI Cards share price: SBI Cards and Payment (SBI Card) share price surged 5.1 per cent on the BSE on Monday, January 6, 2025 after global brokerage Nomura upgraded the stock to ‘Buy’.

 

At 11:30 AM, however, SBI Card stock had pared most of its gains amid an overall weakness in the markets. The stock was trading 1 per cent higher at Rs 730 per share as against a 0.85-per cent (679 points) fall in the benchmark BSE Sensex index.

 

Nomura upgrades SBI Card

Nomura, on January 6, upgraded SBI Card share to ‘Buy’ from ‘Reduce’ on rising share of top metro cities in its new card sourcing portfolio, coupled with hopes of stable asset quality going forward.

 

 

Nomura has revised SBI Card share price target to Rs 825 per share, implying an upside potential of 14 per cent from last Friday’s closing price.

 

“SBI Cards has slowed down growth to control asset quality issues. However, card addition has been picking up in the past two months which should lead to a pick-up in loan growth in FY26. Growth would be a key variable to track and failure to pick up loan growth in FY26 would limit the upside potential, in our view. We expect loan growth of 15 per cent/20 per cent in FY25/26,” it said.

 

According to Nomura, after a riskier credit card-debt mix skewed towards non-metro regions (rural/ semi-urban/ urban) between FY17-22, the share of metro region in credit card-debt has been gradually rising since FY22.

 

“This pullback in the non-metro region by lenders in the credit card segment bodes well for the company as far as asset quality trends are concerned. Our assessment is asset quality issues should stabilise in the next 1-2 quarters for SBI Cards, which will be positive for its return profile in FY26,” Nomura said.

 

Add to it, SBI Card has seen a meaningful increase in market share off late.

 

In November, 2024, SBI Card added roughly 231,000 credit cards on a net basis, its highest since December, 2023. This improved its market share in cards to 18.7 per cent, the highest since January, 2024.

 

“While it is still early days, but this might be another sign of stress stabilising. If card addition continues to rise like in the past two months, incremental spends will also start coming, leading to a bounce-back of spend/loan growth,” Nomura said.

Nuvama Institutional Equities says ‘Buy’

Domestic brokerage Nuvama Institutional Equities, too, has upgraded SBI Card to ‘Buy’ from ‘Reduce’ as it expects credit costs to stabilise here on.

 

Credit cost rose consistently for SBI Card from 5.6 per cent in Q3FY23 to 9 per cent in Q2FY25.

 

“We expect credit cost to decrease by 25–30bp in Q4FY25E and 90–100bp from the Q4 levels in FY26E as write-offs ease. At 9 per cent in Q2FY25, credit cost is higher than peers but, while peers are now seeing high delinquencies in credit cards, SBI Cards shall likely start seeing an improving trend,” Nuvama said.

 

The brokerage has assigned a share price target of Rs 850 to SBI Card stock.

 

SBI Cards is a standalone credit cards company under the State Bank of India parentage. The company has a wide credit cards’ portfolio, comprising retail cards and corporates cards. Within retail, broad categories include premium, travel and fuel, shopping, and white label cards.