SBI Card shares plunge as credit card issuer fails to keep up with Street expectations in Q2

SBI Card shares gave in to selling pressure on Monday after the credit card issuer reported a weak set of financial results for Q2.

SBI Card shares reported its financial results for Q2 on October 27. | Image: SBICard.com

SBI Card shares suffered steep losses on Monday after the credit card company reported a weak set of financial results for the July-September period. The stock of SBI Card weakened by as much as Rs 59, or 7.5 per cent, to Rs 732.1 apiece in intraday trade on BSE.

SBI Card shares finished the day 5.1 per cent lower at Rs 750.5 apeice on the bourse.

SBI Card Q2 results: A summary

After market hours on Friday, SBI Card reported a 14.7 per cent year-on-year increase in net profit to Rs 603 crore and 16.1 per cent growth in net interest income (NII) to Rs 1,296.9 crore for the quarter ended September 30.

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According to Zee Business research, SBI Card was estimated to report a quarterly net profit of Rs 630 crore.

Its net interest margin (NIM), a key measure of profitability, contracted by 19 basis points (bps) sequentially to 11.31 per cent for the September quarter, according to a regulatory filing. Zee Business analysts had estimated the credit card company's net interest margin to improve on a quarter-on-quarter basis.

The credit card issuer's asset quality remained largely steady, as reflected in its gross non-performing assets (GNPAs) being at 2.43 per cent of its total loans for the September quarter as against 2.41 per cent for the June quarter.

SBI Card's net non-performing assets (NNPAs) remained unchanged sequentially at 0.89 per cent of its total loans for the quarter ended September 30.

How brokerages are viewing SBI Card after the credit card company's Q2 earnings announcement

Jefferies maintained a 'buy' rating on SBI Card after the credit card company's Q2 results but lowered its price target for the stock by Rs 80 to Rs 1,020 apiece, still implying a 28.9 per cent upside from the previous close.

HSBC retained a 'hold' call on SBI Card with a target of Rs 860 for the stock. According to the brokerage, higher credit costs and persistent pressure on the NIM front were the key negatives for SBI Card while its operating cost was in line with estimates.

Brokerage	Rating	Price target	Upside/downside vs Friday's close
JPMorgan	Neutral	Rs 900	13.8%
Jefferies	Buy	Reduced to Rs 1,020 from Rs 1,100	28.9%
Goldman Sachs	Sell	Raised to Rs 684 from Rs 675	-13.5%
HSBC	Hold	Rs 860	8.7%