Shares of SBI Cards and Payment Services Ltd jumped as much as over 4 percent as global brokerage Morgan Stanley was overweight on the credit card firm with a higher target price of Rs 1100, suggesting an upside of well over 40 percent.
Credit card spending hit an all-time high of Rs 1.14 lakh crore in May — over 100 percent growth year-on-year and the trend might well sustain into June as well. The strong spending trends have come largely on the back of strong e-commerce spending and high-value spending on travel and tourism and discretionary purchases, as per an Axis Capital report.
"Based on daily data provided by the Reserve Bank of India (RBI), daily average spend for June (up to June 22) was 1 percent lower than daily average spend up to May 22, and 81 percent higher than spend up to June 22, 2021. Based on this, we expect actual reported spend data for the month, that will come with a lag, to be strong year-on-year (YoY)," said analysts in a research report by Morgan Stanley.
The trend has come as a booster shot for shares of credit card firms such as SBI Cards, HDFC Bank, ICICI Bank and Axis Bank, which surged on Monday.
Leading the pack, shares of SBI Cards and Payment Services Ltd jumped as much as over 4 percent as global brokerage Morgan Stanley was overweight on the credit card firm with a higher target price of Rs 1100, suggesting an upside of well over 40 percent. SBI Cards spending in May was up 8 percent month-on-month and 112 percent year-on-year.
Shares of HDFC, ICICI and Axis Banks also surged in an ascendant market as indices responded positively as worries about an aggressive interest rate hike by the US Federal Reserve eased.
Additionally, what's helping credit card firms is that RBI's regulatory stance on prepaid payment instruments (PPIs) favours banks over fintechs.
“Prepaid payment instruments cannot be loaded via credit lines, and any non-compliance would attract penal action from the regulator,” an RBI notification had said.
HDFC Securities has a buy rating on SBI Card as domestic brokerage sees RBI's move as positive for credit cards.
"Believe that RBI will not regulate anything with respect to cards. We have a buy recommendation on SBI Card. We have generally been of the belief that RBI will stay away from regulating something that's to do with credit. But then we never know," Krishnan ASV, Lead Analyst, BFS — at HDFC Securities told CNBC-TV18.
Battle of credit cards — Axis Bank hopes to improve market share in June
Among credit cards, HDFC Bank remains the market leader in market share in the number of credit cards issued despite marginally losing its market share for four months in a row.
Axis Bank has consistently gained market share for the 10th month in a row although in overall market share it trails the top three — HDFC Bank, ICICI Bank and SBI. But the bank sees the momentum to continue on new card sourcing.
"With continued momentum on new card sourcing we are expected to gain market share in June," Sanjeev Moghe — President & Head, Cards & Payments, Axis Bank told CNBC-TV18.com.
Speaking on spending patterns, Moghe said that the "bank (Axis) has seen an uptick in overall spending led by rent, health & insurance, travel, education and dining/food delivery".
Moghe also said that "rent payment is one of the fastest-growing categories with a high average transaction value and Axis Bank has also seen a similar trend".
First Published: IST