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Credit card spends rise above pre-covid levels; SBIC’s FY22 spend estimate could see an upgrade

Credit card (CC) spends have continued to improve gradually over Jun-Jul’21. Based on the trend witnessed in Aug’21 and Sep’21-TD, Q2FY22E CC spends could be up 31%/55% on QoQ/YoY basis. Assuming market share of 19%, SBI Cards (SBIC) spends in Q2FY22 could be 46%/30% higher on YoY/QoQ basis.

* CC spends continue to witness sequential improvement. Total CC spends rose 19% MoM in Jul’21. Jul’21 CC spends came in at Rs749bn, surpassing monthly peak spends seen in Mar’21 (Rs723bn) and Oct’19 (Rs712bn). Ratio of CC spends to debit card spends remained stable on MoM basis at 1.24x in Jul’21 (this ratio was <1x in Apr-Dec’20). Average CC spends per day (off–us transactions) saw continued improvement till Aug’21 but moderated in Sep’21 till now. CC spends per day improved from Rs13.8bn/12.7bn/15.9bn/18.1bn in Apr’21-Jul’21 to Rs19.2bn in Aug’21 and Rs18.1bn in Sept’21.

* Spends market share – SBIC witnessed sequential decline: SBIC market share dipped 32bps to 19.2% / 19.1% in Jul’21 / FY22-TD. HDFC Bank market share stood at 27.8% / 28.1% in Jul’21 / FY22-TD, respectively.

* Total Credit Cards in Force (CIF) increased by 0.6mn in Jul’21: Overall CIF improved sequentially to 63.4mn cards, up 10%/1% YoY / MoM. SBIC market share improved to 19.3% in Jul’21 vs 19.2% in Jun’21 and 18.6% in Jul’20, while that for HDFC Bank declined to 23.3% in Jul’21 vs 23.6% / 25.5% in Jun’21 / Jul’20. Based on average card outstanding in FY22-TD, SBIC / HDFC Bank market share stood at 19.2% / 23.7%, respectively.

* CC spend per transaction grew 1.4% MoM in Jul’21 for industry vs 0.6% MoM decline for SBIC.

* Overall CC outstanding at Rs1.1trn in Jul’21, up 8% MoM and down 4.5% compared to FY21: Average receivable per CIF for the industry has increased 7% MoM driven by 8% MoM increase in CC outstanding and 1% increase in CIF. Jul’21 industry receivable per CIF stood at Rs17,555. 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. Industry and SBIC receivables per card stood at Rs17,355 and Rs20,405, respectively, in Q1FY22.

* Can there be an upgrade to SBIC FY22 spend estimate?

Considering total spends of Rs476bn till Jul’21, estimating spends of Rs154bn / Rs157bn for Aug’21 / 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 Rs1.67trn surpassing our spends estimate of Rs1.57trn.

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