About SBI Cards & Payment Services

SBI Cards & Payment Services Limited is one of India’s leading credit card issuers. It operates in the unsecured credit segment, issuing and managing credit cards, and facilitating payments. The business model depends heavily on card spends, receivables growth, fees & interest income from revolving credit, and controlling credit losses via underwriting and collection. As a part of the larger financial services ecosystem, SBI Cards’ performance is sensitive to economic cycles, consumer leverage, and regulatory / interest rate shifts.

Q1 FY26 Financial Highlights

• Total revenue rose ~12% YoY to around Rupee 5,035 crore. 
• Profit after tax fell about 6% YoY to Rupee 556 crore. 
• Return on Average Assets (RoAA) dropped to ~3.4% from ~4.1% last year. 
• Return on Average Equity (RoAE) slid to ~15.8%. 

Asset Quality & Credit Cost Trends

SBI Cards’ asset quality metrics show signs of easing from their recent peaks, but challenges remain:

• Gross NPA (GNPA) ratio held steady around 3.07%. 
• Stage-2 balances declined both QoQ and YoY. 
• Credit cost surged to ~9.6%. This was driven by a model refresh for Expected Credit Loss (ECL) and higher provisioning. 
• Management guided credit cost to remain in the ~9.0-9.6% range through FY26. 

Growth in Receivables, Spends & Market Share

• Receivables grew modestly ~7% YoY. 
• Cards-in-force (CIF) increased ~10% YoY to ~2.12 crore cards. 
• Total spends rose ~21% YoY, led by corporate spends with strong QoQ increase. Retail spends grew more slowly. 
• Market share improved slightly: cards in force ~19.1% (up from ~18.5%), spends ~16.6% (up from ~15.9%). 
• New account acquisition declined QoQ. Management is being selective in underwriting. 

Valuation & Peer Comparison

• The stock trades at ~5.7x Price to Book Value (P/B). For comparison, peer Bajaj Finance, with exposure to unsecured lending, has RoA ~4.5%, credit costs ~2%, growing faster—yet trades at ~6.2x. (Valuation premium baked in expectations.) 
• Investors seem to be pricing in optimistic scenarios: steady RoA recovery, falling credit cost, and moderate growth in receivables. Management’s guidance for receivables growth is 10-12% (reduced from earlier 12-14%) in FY26. 
• Although some metrics (like Stage-2 reduction, stable GNPA) are improving, much depends on whether delinquency / write-off flows continue to ease. 

Challenges & Risks Ahead

• High credit cost remains a drag. Even with improvement, staying at ~9-9.6% is materially elevated for business models based on unsecured credit. 
• Growth in receivables is constrained by selective underwriting, slower new customer acquisition, and macroeconomic stress. 
• The dependency on model refresh and accounting adjustments (ECL updates, data refresh) introduces some volatility in credit cost. 
• Investor expectations may be high; any slip in spends growth, or surprises in asset quality could result in earnings misses. 

Outlook & Management Guidance

• Receivables growth now guided at ~10-12% for FY26. 
• Credit cost expected to remain in the 9.0-9.6% range through FY26. 
• Net interest margin (NIM) may improve modestly via lower cost of funds, benefit from rate cuts, cheaper bank lines / CPs. 
• New account sourcing / acquisition will remain calibrated; festive season may give tailwinds. 

Is Valuation Stretched?

Given current financials and outlook, the valuation appears rich. Key indicators suggest that much of the downside risks are already known, while upside depends on asset quality improving, credit costs falling and steady receivables growth. At ~5.7× P/B, expectations are high. Unless spares of bad debts reduce substantially and growth picks up meaningfully, upside may be limited.

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Investor Takeaway

While SBI Cards shows signs of stabilisation—improving Stage-2 and Stage-3 ratios, modest market share gains and strong capital adequacy—its profitability is under pressure from high credit costs and slower receivable growth. The current valuation assumes an optimistic scenario. For investors, unless credit cost drops meaningfully and RoA rises beyond current levels, the risk-reward is skewed toward downside. A cautious “Sell” or reducing exposure seems prudent until evidence of sustained recovery is visible.

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Conclusion

SBI Cards in Q1 FY26 paints a mixed picture. On one hand, revenue and spends growth show momentum. On the other, high credit cost, slower receivables growth and selective underwriting limit how fast profitability can recover. Given current valuation metrics, much of the good news seems priced in. For investors, keeping a close eye on delinquency flows, write-off trends, and how the underwriting discipline plays out is critical.

Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Readers should conduct their own research or consult a financial advisor before taking any investment decisions. The information is based on public sources and believed to be reliable, but not guaranteed.

Tags: SBI Cards, Credit Cost, Valuation, Receivables Growth, RoA, Indian Share Tips