SBI,
SBI Cards and Payment Services, India’s second-largest credit card issuer, is anticipated to report a 23% compound annual growth rate (CAGR) in card spends in FY 23-26E by leveraging the large customer base of State Bank of India (SBI) and its extensive co-branded CAGR) should be seen. card tie-up, according to Jefferies, a global brokerage.
“As revolver mix gradually increases and rates stabilize, net interest margin (NIM) should fall in FY24-26e, leading to healthy profit growth and 23%+ ROE over FY24-26e It happens. The brokerage said, “Recent underperformance in NIM concerns likely factors for Nifty downside” while initiating coverage on SBI Cards shares, a strong credit card franchisee, with a target price of 900 per share.
“We believe that concerns regarding NIM and fee headwinds are already reflected in the underperformance of SBI Cards (-21%) over the past six months in comparison to Nifty (+1%). The main risks are from potential newcomers like BAF and UPI’s high spend share. “Key triggers are an increase in rates and an increase in revolver mix,” Jefferies stated.
“From FY23 to FY26, the top line should grow at a CAGR of 22%, led by NII growth of 24% and fee income growth of 21%. Customs duty, which accounts for 6% of duty income, has been affected by the RBI’s stricter standards for processing cross-border transactions. Phase 3 assets (2.2% 3Q) and loan costs should stabilize as asset quality pressures ease. “Key risks include the RBI’s potential cap on MDR and revolver yield; a 10 basis point change in interchange fee and revolver rates alters FY24e EPS by 10% or 3%,” it continued.
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