Credit card usage eases after festive surge, down 16% in Nov
Credit card usage moderated in Nov 2024, post strong festive demand in Oct 2024, reporting a ~16.1% drop month on month to ~Rs 1.7 tr.
Spending through Point-of-Sale (PoS) transactions dropped by ~14% MoM whereas online spending declined by ~17.5% MoM. (Image: Freepik)
Credit card spending moderated in November 2024, followed by strong festive demand in October 2024, reporting a ~16.1% drop month on month (MoM) to ~Rs 1.7 tr. Spending through Point-of-Sale (PoS) transactions dropped by ~14% MoM whereas online spending declined by ~17.5% MoM. This was largely on expected lines, given the high base due to festive demand, according to a market report by InCred Equities.
HDFC Bank gains market share whereas SBI Cards loses
HDFC Bank gained market share by 30 bp MoM whereas SBI Cards or SBIC lost market share by 90 bp MoM. ICICI Bank and Axis Bank witnessed a drop in market share by 20 bp and 120 bp MoM, respectively. IndusInd Bank gained market share by 50 bp. The top five credit card players (HDFC Bank, SBI Cards, ICICI Bank, Axis Bank & IndusInd Bank) witnessed MoM market share drop to ~77.4% vs. ~78.8% in Oct 2024.
HDFC Bank remains aggressive in card issuance
Total credit card issuance (Cards in Force or CIF) continued to remain moderate at ~107.2m (+0.3% mom) due to stricter scrutiny by the Reserve Bank of India (RBI). HDFC Bank has been issuing new credit cards at a more intense pace than the other players. Despite being the market leader, HDFC Bank witnessed an expansion in market share by only ~10 bp MoM to ~21.3% whereas SBIC had market share gain of 20 bp at 18.7%.
“We remain optimistic about the presence of credit cards improving across new geographies. However, considering the recent track record, the overall trend in NPAs is likely to remain volatile as mis-selling of credit cards has been a common phenomenon,” stated InCred Equities.
Asset quality trend seems to be weak
The asset quality trend seems to be weak, as seen in caution over new cards issuance by most players. There are heightened concerns about asset quality stress building in with the rise in 90+ dpd by 14 bp QoQ to 1.8%, as per TransUnion CIBIL India.
Rising defaults are being witnessed by new-to-credit (NTC) customers who are facing difficulty in paying their dues on time, specifically from Tier-2 cities and beyond. Consequently, we are observing a higher focus on premium cards by select players.
InCred Equities said, “We remain negative on SBI Cards; maintain REDUCE rating. We reiterate our high-conviction REDUCE rating on SBI Cards with a target price of Rs500. SBI Cards is witnessing rising stress in asset quality, with its gross non-performing assets or GNPAs increasing by 22bp QoQ to 3.27% and credit costs surging by 55bp QoQ to 9%.”
“We continue to believe that SBI Cards cannot sustain its premium valuation amid rising concerns over slowing growth, increase in the cost of funds and deteriorating asset quality. We expect SBI Cards to continue to lose market share in overall spending due to its weak capital adequacy ratio and tighter risk weights. We expect the cost of funds for SBI Cards to increase, despite probable monetary easing, amid an increase in risk weights,” it said.
