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SBI Card outshines industry with 35% jump in credit card spending as festive season begins

SBI Card outshines industry with 35% jump in credit card spending as festive season begins

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By Abhishek Kothari  Sept 28, 2022 4:32:21 PM IST (Updated)

SBI Card fared better than the rest of the industry with a strong show in terms of credit spending. The stock of the credit card issuer jumped as the company saw a sequential improvement in market share.

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SBI Card shares rose on Tuesday, following four back-to-back sessions of losses, after data from the Reserve Bank of India showed that the credit card issuer fared better than the rest of the industry with a 35 percent jump in credit spending in August. This was in stark contrast to a 45 percent fall in monthly spending across the industry.
The SBI Card stock ended higher by Rs 29.5 or 3.4 percent at Rs 905 apiece on BSE.
The monthly numbers coincide with the onset of the festive season in India, which normally leads to higher consumer demand and the consequent higher spends.
"In all the key spend categories, we have seen levels have come back higher than pre-COVID levels... We are sure that this robustness will continue," Rama Mohan Rao Amara, MD and CEO of SBI Card, told CNBC-TV18.
"The industry figure for August is a bit coloured in the sense that it doesn't actually capture the net growth of cards and the impact of inactive cards, that is the cards that remain inactive for more than 12 months," he said.
Amara said SBI Card's model is based on fee-based cards, with a generally higher active rate and the inactive portfolio around at around 5-6 percent. "Even in this (inactive) portfolio, whatever a call has to be taken, we will take it in September. So for a month or two, the base may be volatile."
Analysts see a pickup in spending in September on the back of the festive season, which began on September 26.
SBI Card regained some of its market share after a decline of five straight months, according to Morgan Stanley, which has an 'overweight' rating on the stock with a target price of Rs 1,100 — implying upside potential of 21.6 percent from its closing price on Tuesday.
Credit Suisse estimates credit card spending to jump 50 percent for SBI Card in the quarter ending September 2022 compared with the corresponding period a year ago.
Analysts say the decline in average spends for the credit card industry remains cause of worry but a pickup can be expected in the coming months driven by the festive season.
CLSA — which has an 'underweight' stance on the country's payments space — likes SBI Card's business model but is of the view that the company's future is "not as rosy as the market is pricing in".
"Its market share gains story of FY17-22 is over, in our view; in fact, in the past few months, it has lost market share due to rising competition and reduced corporate spends," according to the brokerage, which initiated coverage on the payments sector in July 2022.
Meanwhile, in a separate development, SBI Card — a pure-play credit card company — lined up special offers to tap the festive season.
With more than 1,600 offers across online and offline merchants in Tier 1, Tier 2 and Tier 3 cities, SBI Card aims to make shopping experience of its customers more rewarding while adding to the festive cheer, the company said in a statement.
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