SBI Cards delivered Q4 FY26 results with improved asset quality (GNPA down 46 bps QoQ to 2.41%, credit costs improved 55 bps QoQ to 7.7%) and stable profitability (PAT ₹609 crore, up 14% YoY), though receivables growth has decelerated to just 2% YoY. Management remains cautiously optimistic for FY27 with focus on quality-led acquisition (9-10 lakh cards per quarter), installment lending growth to offset declining revolvers (22% currently with downward bias), and maintaining cost discipline amid geopolitical uncertainties.
SBI Cards reported Q4 FY26 total revenue of ₹5,187 crore (7% YoY growth) and full-year revenue of ₹20,708 crore (11% YoY). Profit after tax for Q4 was ₹609 crore (14% YoY growth) and ₹2,167 crore for FY26 (13% YoY growth). Receivables stood at ₹56,926 crore with modest 2% YoY growth. Interest earning assets comprised 54% of receivables with revolver balance at 22%. Cost of funds improved to 6.4% in Q4 (down 82 bps YoY) and 6.7% for FY26 (down 71 bps YoY). Net interest margin improved to 11.1% in Q4 versus 11% in Q3, and 11.2% for FY26 (up 31 bps YoY). Operating expenses were 22% higher YoY for FY26 primarily due to corporate spends, resulting in cost-to-income ratio of 57.2% for Q4 and 55.3% for FY26. Gross credit cost improved significantly by 55 bps QoQ to 7.7%. Stage 2 balance reduced by ₹149 crore QoQ and ₹711 crore YoY to ₹2,090 crore. Capital adequacy ratio stood strong at 25.5%. ROA for Q4 was 3.6% (up 29 bps YoY) and 3.2% for FY26 (up 11 bps YoY). ROE was 15.6% in Q4 and 14.6% for FY26. The company is retaining management overlay of ₹220 crore for ECL provisions due to geopolitical uncertainties.
Management demonstrated cautious optimism, emphasizing SBI Cards' resilience and strategic positioning as India's largest pure-play credit card player. CEO Rashmi Mohan Pandey highlighted the company's focus on quality-led acquisition over volume growth, with deliberate card addition targets of 9 lakh to 1 million per quarter. Leadership emphasized substantial progress in asset quality improvement through strengthened underwriting, enhanced collections infrastructure, and augmented risk management frameworks. Management is particularly confident about leveraging hyper-personalization, digital acquisition (SBI Card Sprint platform), and AI/ML capabilities to drive future growth. They acknowledged the challenging macroeconomic environment with geopolitical uncertainties but expressed confidence in adequate capital and provision buffers (₹220 crore management overlay retained). The tone was measured regarding growth expectations for FY27, with no specific guidance on receivables growth but commitment to disciplined profitable growth. Management repeatedly stressed monitoring of the portfolio for macroeconomic impacts while maintaining strategic investments in installment lending to offset expected decline in revolver rates.
SBI Cards faces several significant challenges. Receivables growth has decelerated sharply to just 2% YoY, indicating potential headwinds in credit expansion. The revolver mix has been declining (currently 22% with stated downward bias), which threatens NIM compression as revolvers carry much higher yields - management acknowledged 1% decline in revolvers requires larger offset from installment lending. Cost-to-income ratio deteriorated to 57.2% in Q4 (60% adjusted for one-offs) versus historical 51-52% levels, primarily due to corporate spends which carry thinner margins. Management provided no specific guidance on receivables growth for FY27, suggesting uncertainty. Geopolitical uncertainties and potential elevated energy prices pose macroeconomic risks, prompting retention of ₹220 crore management overlay. The industry is experiencing muted cards-in-force growth (mid-single digits versus historical double-digits) due to tightened underwriting across issuers. Card acquisition mix shows 54% from open market versus 46% from bank channel, with open market largely being credit-tested customers, limiting new-to-credit expansion. Cost of funds outlook remains uncertain given RBI's stance on rates amid geopolitical tensions. Management expects credit costs to moderate in FY27 but cautioned the rate depends on evolving geopolitical landscape. Competition remains intense with most new cards going to existing credit card holders rather than new customers.
Revenue Outlook: No specific revenue guidance provided; growth expected to follow card acquisition momentum
Margin Outlook: NIM expected to remain stable but at risk from significant cost of funds increase; revolver mix expected to have slight downward bias in FY27
Key Targets:
The Q&A session revealed analyst focus on three primary concerns: (1) the sharp deceleration in receivables growth to 2% YoY and lack of specific growth guidance for FY27, (2) implications of declining revolver mix on margins and profitability, and (3) elevated cost-to-income ratios. Multiple analysts probed management on how card acquisition of 9-10 lakh per quarter would translate to receivables growth, with management declining specific guidance but expressing confidence in the strategy. Significant attention was paid to the revolver decline and management's plan to offset through installment lending, though analysts noted EMI itself had declined YoY. Questions on cost structure focused on understanding the 60% adjusted cost-to-income ratio versus historical 51-52% levels, with management attributing this to corporate spend growth. Analysts also sought clarity on asset quality trajectory, provision overlays (₹220 crore retained), and cost of funds outlook given macro uncertainties. Management responses were generally measured and cautious, avoiding specific numerical guidance while emphasizing quality over growth, adequate buffers for uncertainties, and confidence in medium-term targets (4-4.5% ROA). The tone suggested analysts are concerned about growth deceleration and margin pressures, while management emphasized defensive positioning and asset quality improvements as laying foundation for sustainable future growth.