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On Wednesday, Goldman Sachs increased its price target for SBI Cards and Payment Services (SBICARD:IN) to INR912 from INR893 while reiterating a Buy rating on the stock. The adjustment follows SBI Card’s robust financial performance in the third quarter of fiscal year 2025, where the company’s profit after tax (PAT) surpassed Goldman Sachs estimates (GSe) by 4%. This beat was attributed to a 2% operating profitability outperformance and stable loan loss provisions.
The company’s quarterly results highlighted significant improvements in asset quality, which had been a central concern for investors prior to the report. Notably, the proportion of stage 2 assets, which indicates potential credit risk, showed a sequential improvement due to a decrease in forward flow rates, marking the first such decline in recent quarters. Additionally, SBI Card achieved a 23% year-over-year increase in absolute recoveries. This recovery, coupled with the ongoing reduction in early delinquencies, contributed to a 3 basis point drop in gross slippages (GS3).
Goldman Sachs analyst Rahul Jain emphasized the positive shift in SBI Card’s asset quality cycle, pointing to management’s commentary which suggests an inflection point has been reached. The quality of new customers has also seen an uptick, with a greater share of salaried individuals and SBI customers who typically exhibit lower delinquency rates.
The financial institution’s earnings report and subsequent price target raise by Goldman Sachs reflect the company’s solid performance and promising outlook, as indicated by the positive trends in asset quality and customer acquisition. SBI Card’s continued focus on these areas is expected to support its growth trajectory going forward.
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