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Credit cards-in-force decline, total spends healthy: IIFL Securities

Net card additions in August 2022 were negative versus +1.53 million in July 2022; this was driven by a 1.52/1.05 million (8/11% MoM) decline for HDFC Bank/Axis Bank, respectively, due to closure of cards inactive for >1 year. IndusInd Bank/State Bank of India (SBI) added 2.6/2.0% of their opening cards in-force, respectively, followed by ICICI Bank/Kotak Mahindra Bank/RBK at 1.5/1.4/1.0%.

September 29, 2022 2:10 IST | India Infoline News Service
Key trends observed in the credit card data put out by the RBI for August 2022 are:
·         Net credit card additions in August 2022 were negative at -2.26 million versus +1.53 million cards added in July 2022, driven by closure of inactive cards, as per the RBI Circular (applicable from July 01, 2022)
·         Incremental sourcing was strong for SBI, ICICI Bank and IndusInd Bank, which had a strong MoM pick-up in card additions.
·         Monthly spends per card were flat MoM in August 2022, however, would have shown a decline if not for the lower card base.
·         SBI/HDFC Bank/Axis Bank were major gainers, in terms of total spends market share MoM, with ICICI Bank and IndusInd Bank losing share.
·         Decline in the cards-in-force for the industry has not affected card spends, given that these were inactive cards.
·         Total industry spends were 45% higher YoY in August 2022.
·         Of the total card spends in August 2022, ~60% were online (IndusInd Bank is at the higher end with ~77%). Underlying card additions momentum is expected to remain strong, going forward, with a higher focus on the unsecured retail segment, however, net additions could be low/see a decline.

Analysts at IIFL Securities expect this one-time clean-up across banks to be largely completed by Q2FY23, post which, it would be an on-going occurrence.

Card base lower MoM

The total cards in force decreased 2.8% MoM in August 2022 to 78.0 million; net card base declined by 2.26 million in August 2022 (monthly average additions of 1.66 million cards over April-July 2022). Net card additions (as a % of opening cards in force) were the highest for IndusInd Bank at 2.6%, followed by SBI at 2.0%. Among key foreign players, American Express and Standard Chartered saw further attrition, while Citibank added ~16k cards MoM in August 2022.

Industry spends lower; spends/card flat

Total card spends for the industry remained healthy at >Rs1 trillion for the sixth consecutive month - at Rs1.13 trillion, down 3.0% MoM / +44.5% YoY (total spends were higher than the average of Rs1.11 trillion over April-July 2022). Spends per card were relatively flat MoM in August 2022, to ~Rs14,500, and were ~4% higher than the Q1FY23 average of ~Rs13,900 as well.

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