Shares of SBI Cards and Payment Services Limited (SBI Card) opened 5% lower on October 28, despite the company reporting 52% growth in net profit to Rs 526 crore for the July-September quarter of the fiscal year 2022-23.

The stock fell as much as 7% to hit an intraday low of Rs 799.90 on the National Stock Exchange (NSE). SBI Card’s stock ended 46.65 points or 5.44% down at Rs 811.50. The stock has shed over 12% in 2022 so far.

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The credit card company promoted by the country’s largest lender State Bank of India (SBI) said the jump in net profit came on the back of higher income and lower provisions. The total income in the September quarter of the current financial year rose 28% to Rs 3.453 crore from Rs 2,695 crore in the year-ago period, the company said in a regulatory filing.

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Total operating cost increased by 33% at Rs 1,834 crore from Rs 1,383 crore in the second quarter. The company reported net interest income (NII) growth of 21.1% year-on-year (YoY) and 3.5% quarter-on-quarter (QoQ) at Rs 1,116 crore. Net interest margin for the quarter dropped by 90 basis points (bps) to 12.3% on a sequential basis primarily due to an increase in the cost of funds. Provisions for the quarter were down 8.1% YoY but rose 21.3% QoQ mainly due to an increase in stage 1 assets.

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Asset quality improved with gross non-performing assets (NPAs) at 2.14%, down 10 bps sequentially and 122 bps YoY. Net NPA declined 13 bps to 0.78% during the same time.

SBI Card recorded a moderate quarter with net earnings impacted due to higher provisions. The margin declined sequentially as the revolver declined to 24%, coupled with rising funding costs. Revolver is the term used for cardholders who roll over part of the bill to the next month, instead of paying off the balance in full. According to estimates, seven out of ten card holders revolve the debt and are thereby called “good or smart revolvers”.

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Global brokerage Morgan Stanley has an Overweight call on the stock with a target price of Rs 1100. “Revolver mix and higher funding costs could weigh on net interest margin. We trim forecasts for FY23-25 by 1-2 percent” the firm said.

CLSA has a Sell call on the stock with a target price of Rs 795 per share. The firm has slashed estimates by 3-5%.

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With an Outperform Call, Credit Suisse has slashed its target to Rs 1,080 from Rs 1,150. Credit Suisse analysts have cut the FY23-35 earnings per share estimate by 4% on the back of higher operating expenses and lower NIMs.