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Credit cards - Spends recovery can trigger earnings upgrades - ICICI Securities

Posted On: 2021-10-11 23:21:55 (Time Zone: IST)

Credit card (CC) spends have continued to improve gradually over Jul-Aug'21. Based on the trend witnessed in Sep'21, Q2FY22E CC spends could be up ~34%/59% on QoQ/YoY basis. Assuming market share of 19%, SBI Cards (SBIC) spends in Sep'21 could be 49%/33% higher on YoY/QoQ basis. Increase in spends, growth in receivables and reduction in RBI Re book along with controlled credit cost can drive strong growth in H2FY22 for SBIC.

  • CC spends continue to witness sequential improvement. Total CC spends rose 4% MoM in Aug'21. Aug'21 CC spends came in at Rs777bn, surpassing monthly peak spends seen in Mar'21 (Rs723bn) and Oct'19 (Rs712bn). Ratio of CC spends to debit card spends dipped marginally on MoM basis to 1.21x in Aug'21 from 1.24x in Jul'21 (this ratio was <1x in Apr-Dec'20). As per trends, credit card spends have seen a growth of 7% and 23% in Sept'21 and Oct'21-TD over Aug'21, respectively.
  • Spends market share - SBIC witnessed sequential decline in Aug'21: SBIC's market share dipped 32bps to 18.7% in Aug'21 compared to 19% in FY22-TD and 19.4% in FY21. HDFC Bank's market share stood at 26.5% / 27.7% in Aug'21 / FY22-TD.
  • Total Credit Cards in Force (CIF) increased by 0.5mn in Aug'21: Overall CIF improved sequentially to 63.9mn cards, up 11%/0.8% YoY / MoM. SBIC market share improved to 19.4% in Aug'21 vs 19.3% in Jul'21 and 18.7% in Aug'20, while that for HDFC Bank declined to 23.1% in Aug'21 vs 23.3% / 25.6% in Jul'21 / Aug'20.
  • CC spend per transaction declined 0.8% MoM in Aug'21 for industry vs 3.5% MoM decline for SBIC. This trend of decline for SBIC has continued for two months.
  • Overall CC outstanding at Rs1.15trn in Aug'21, up 4% MoM and down 1% compared to FY21: Average receivable per CIF for the industry grew 3% MoM driven by 4% MoM increase in CC outstanding and 1% increase in CIF. Aug'21 industry receivable per CIF stood at Rs18,083. On QoQ basis, industry receivable per card increased 7% while SBIC registered a decline of 4.7% in Q1FY22. This could be because of cautious stance to maintain credit cost by SBIC.
  • Can there be an upgrade in SBIC FY22 spend estimate? Considering total spends of Rs622bn till Aug'21, estimating spends of Rs153bn Sep'21 (based on 19% spend market share) and estimating a run rate of Rs150bn per month for Oct'21 - Mar'22, SBIC's FY22 annual spends can be Rs1.7trn surpassing our spends estimate of Rs1.57trn.

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