UBS on SBI Cards ; Neutral, TP Rs 635

2QFY27 PAT of Rs7.8bn grew 75% YoY ahead of UBSe, driven by lower credit cost, though receivables growth continues to remain tepid at 0.2% QoQ (-2.5% YoY). NII was flat YoY largely reflective of weak receivables growth. PPOP decline of 1.4% YoY was also in-line. Credit cost of Rs8.2bn or 5.6% of average receivables was down 37% YoY and also 7% lower vs UBSe. As a result, PAT of Rs7.8bn was a 9% beat vs UBSe. Retail spends grew 6% YoY and fees and commission income rose 7.4% YoY. Management expects spends and receivables to pick up from Q3, but sees limited scope for further credit cost improvement from current levels Key watchpoints are conversion of spends into interest-earning receivables and the ability to sustain margins amid rising funding costs.

SBI CARDS & PAY SER LTD

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