Synopsis: SBI Cards shares fell 3% despite 45% YoY PAT growth as investors focused on rising operating costs, slower customer additions, muted receivables growth, and a valuation premium. Profit growth was driven more by lower credit costs than core operating leverage.
The shares of this company, which is a non-deposit-accepting, systemically important, non-banking financial company registered with the RBI and is engaged in issuing credit cards to consumers in India, had its shares decline despite a good financial performance. In this article, we will see the possible reasons for this share price fall
With the market cap of Rs 72,876 crore, the shares of SBI Cards & Payment Services Ltd have fallen 3% and reached a low at Rs 758.90, compared to their previous day’s closing price of Rs 782.25. The shares are trading at a PE of 34.9, whereas its industry PE is at 19.
About the Q3 Result highlights
The revenue from operation for the company stood at Rs 5,127 crore when compared to Rs 4,619 crore in Q3 FY25, growing by about 11 per cent on a YoY basis and on a QoQ basis increasing by 3 per cent from Rs 4,961 crore in Q2 FY26.
The PAT grew by about 45 per cent on a YoY basis when you compare the Q3 FY26 profit at Rs 557 crore to Rs 383 crore in Q3 FY25 and on a QoQ basis has grown 25 per cent from Rs 445 crore in Q2 FY26.
Why did the share price fall?
SBI Card’s Q3 FY26 performance reveals pressure on operating efficiency despite robust headline profit growth. Total operating expenses escalated considerably by 23% YoY to Rs 2,597 crore, outpacing revenue growth of 12% to Rs 5,353 crore, raising concerns about cost management. Consequently, earnings before credit costs grew only 8% YoY to Rs 1,971 crore, hinting at restricted operating leverage and margins.
Growth ratios too indicated trend moderation. New business growth slowed to 8.64 lakh from 11.75 lakh YoY, indicating a slowdown in business growth. Although total spending escalated robustly by 33% YoY to Rs 1,14,702 crore, the receivables growth was subdued at 4% YoY to Rs 57,213 crore, hinting at reduced balance growth and monetisation of spending growth.
On the asset quality front, net NPAs inched higher to 1.28% from 1.18% YoY, despite mild stress, as gross NPAs showed improvement. Profit growth was also driven by a 7% YoY reduction in credit impairment costs to Rs 1,222 crore, instead of robust core earnings growth. This over-reliance on lower credit costs, along with an increase in operating expenses, casts doubts on the sustainability of profitability if cost pressures continue in the next few quarters. These were the reasons why the shares were affected negatively despite the overall growth in PAT.
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