SBI Cards shares: Brokerage sees new high for stock as credit card spend trends remain strong

“Most importantly, SBI was one of the few card players that saw its card base increasing between July 2022 and August 2022 after industry deactivated inactive cards. However, there has been some pressure on card spends for SBI in FY23 YTD with market share in spends dropping to 17.7% in FY23 YTD vs 19.2% in FY22,” the note stated.

The brokerage has Buy rating on SBI Cards shares with target price of ₹1,312 apiece. The stock is down about 20% from its highs of ₹1,160 it had hit in October last year.

Industry credit card spends continued to grow at a better-than-expected rate, at 66%/47% YoY in 1HFY23/September 2022. Growth has been driven by both increase in number of cards, up 22% YoY in August 23, and average spend per card, up 31% FY23 YTD.

“We expect 50%/25% YoY growth in industry card spends in FY23/FY24. SBI has maintained market share in number of cards, which should eventually reflect in spend market share too despite some short-term volatility,” Ambit said.

Credit card loans at the industry level are growing at 27-28% YoY and should reflect in the loan book of SBI. Tone of the Reserve Bank of India (RBI) discussion paper on credit card MDR did not suggest any sharp cut in credit card MDR, the brokerage house highlighted.

SBI Cards and Payment Services Ltd’s credit card spends in August rose by 1.2% month-on-month (m-o-m), according to the latest data from the Reserve Bank of India (RBI). This comes at a time the industry’s credit card spends have dropped by 3% from the previous month. The spends are expected to improve for the industry for September and October led by the festive season.

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