SBI Cards shares slip below IPO price after Q2 results; one-third of the analysts have a "sell" rating

Shares of SBI Cards and Payment Services fell 7.5% on Monday below its IPO price of ₹755 after its September quarter results.

Credit costs for the company remained elevated for the 19th quarter in a row. The company's Net Interest Margin (NIMs) are the lowest ever as revolver rate remains at 24%.

Asset quality of the company also did not see a significant change from the June quarter.

Nine out of the 28 analysts that track SBI Cards have a "Sell" recommendation on the stock. 15 of them maintained their "buy" rating, while four have a "hold" call.

Goldman Sachs wrote in its note that SBI Cards reported poor quality earnings with "worrisome commentary on overall portfolio" citing stress building in unsecured loans.

The brokerage has a "sell" rating on the stock with a price target of ₹684.

HSBC has a "hold" rating on the stock with a price target of ₹860. It said that higher credit costs and persistent pressure on NIMs were the key negatives.

The management expects uncertainty regarding the NIMs, operating expenses, and credit costs may persist in the December quarter as well, the brokerage said.

However, it has increased its EPS estimates by 5%, 0.7% and 0.4% for financial year 2024, 2025 and 2026 respectively.

However, Jefferies has maintained its "buy" rating on the stock with a price target of ₹1,020. It expects credit costs to take longer to normalise due to a broader uptick in stress and unsecured loans.

Based on consensus estimates of analysts, the street is still projecting a potential upside of 19.5% on the stock over the next 12 months.

Shares of SBI Cards & Payment Services are trading 5.2% lower at Rs 749.05.