Gradual Signs Of Improvement Bolster Hopes Of Credit Card Issuers

Some respites and some signs of marginal improvement towards the end of the last fiscal notwithstanding, credit card issuers in India, generally, have had a tough FY25, for more reasons than one. One of the key factors has been reasons that credit card issuers have faced asset quality challenges resulting in elevated credit costs dampening earnings. Going by the latest ‘BFSI - Credit Card Business Monitor’ by Axis Securities as regards this February, the industry’s overall net card additions stood at 442K, significantly slower MoM vs 817K a month earlier. Thus, CIF growth was muted MoM at an unimpressive close to 0.4 per cent YoY and grew by nearly nine per cent YoY. A similar trend was visible on an YTD basis, with net card additions during 11MFY25 nearly halving YoY (de-growth of nearly 51 per cent vs 11MFY24), reflecting card issuers’ caution amidst persisting asset quality concerns in the segment. In 11MFY25, the industry added close to 7.5 million cards vs. nearly 15.3 million YoY, keeping the industry’s CIF growth modest at almost nine per cent YoY.

In February ’25, the credit card spends growth decelerated sharply by nearly 10 per cent MoM, while it grew by 12 per cent YoY. On an YTD basis, spends growth has been modest at 14 per cent YoY. This February, the share of online/e-commerce spends stood at nearly 62.8 per cent (vs 63.5/62.3 per cent YoY/MoM). On an YTD basis, the share of online/e-commerce spends stood at 62 per cent vs 64.5 per cent YoY. However, there were some signs of positivity towards the end from some banks. For instance, in Feb’25, SBI Cards added (net) 183K customers (+25 per cent MoM). CIF growth was steady at 10 per cent/one per cent YoY/MoM. These positive signals were, notwithstanding, the fact that spends growth decelerated and de-grew by 10 per cent MoM, largely in line with industry trends. SBIC’s new card additions during 11MFY25 have been 11 per cent lower YoY, largely owing to the tighter credit filters by the company. Quite significantly, all these facts and figures will have to be seen in the wake of the fact that private banks are continuing to dominate market share in these regards.

So much so, private banks have continued to outperform their public and foreign peers across metrics, and in the process gaining market share on a consistent note. Private banks added nearly 225K customers of the total industry additions of 442K customers (nearly 51 per cent market share of incremental customer sourcing) in February. In 11MFY25, they added a whopping 5.2 million cards from the total industry card additions of nearly 7.5 million (nearly 70 per cent mix of incremental net card additions). In Feb’25, PSU Banks, including SBI Cards, have gained market share in terms of CIF/spends/transactions by 34/21/153bps YoY, respectively, supported by better performance by SBI Cards and slower growth by private banks, while foreign banks' performance continued to remain lacklustre. So with headwinds receding and collection and incremental stress trends showing gradual signs of improvement towards the end of the last fiscal, one can expect some respite for credit card issuers, going forward. It is also expected that credit costs will decline meaningfully over the medium term, driving healthy earnings growth.