Amid festive season, SBI Cards sees 50% increase in credit card spends in November

While number of cards as well as spends increased in November, RBI in the same month flagged risks in unsecured consumer loans and increased risk weights to address systemic risk.

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Credit cards spends grew 40 percent year-on-year to Rs 1.6 lakh crore in November, compared to 38 percent YoY growth in October. Meanwhile, SBI Cards saw a 50 percent YoY increase in spends in the month gone by, surpassing the industry average, noted Jefferies, citing RBI data. SBI Cards' spends came in at Rs 31,400 crore for the month.

Among other key credit card players, spends market share rose for HDFC Bank (+88 basis points month-on-month) and RBL (+26 bps MoM) while it fell for ICICI Bank (-184 bps MoM) and Axis Bank (-60 bps MoM).

"Monthly spend share has been volatile for SBI Cards, however year-to-date spend share is tracking better than last year at 18.4 percent, and is now second highest next to HDFC Bank (27 percent) and better than ICICI Bank (17.7 percent)," said Jefferies.

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At 1:25 pm, SBI Cards was quoting at Rs 774.50 on the NSE, higher by 1.2 percent from previous close.

According to recent RBI data, the growth of credit cards in force (CIF) for the industry slightly slowed down, standing at 19 percent YoY, totaling 96 million as of November 23 , down from 19.3 percent in October.

SBI Cards witnessed a 17 percent YoY rise in CIF, reaching 18.3 million as of month-end. The company maintained a stable market share of CIF at 19 percent month-on-month, Jefferies added.

While number of cards as well as spends increased in November, RBI in the same month flagged risks in unsecured consumer loans and increased risk weights to address systemic risk.

Revolver mix

Card service providers benefit when more users ‘revolve’ their credit, or pay some of their outstandings in the next billing period, as they charge higher interest rates on them.

Industry receivables to trailing spends, a metric that is historically correlated with revolver mix, rose to 12.8 percent in October and is above the year-ago levels of 12.3 percent. However, SBI Cards' revolver mix has been slightly affected, said Jefferies.

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"SBI Cards management indicated revolver mix may be slightly affected due to strong festive spends, lag in conversion of these spends into revolver and increase in sourcing of customers with better credit profile," the report added.

Currently, Jefferies forecasts revolver mix of 24.5 percent in FY25, and notes 50 bps lower revolver mix can affect FY25 earnings by 1.5 percent.

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