SBI Card loses credit card market share in July; InCred retains 'Reduce'

InCred's target price translates into 30.7 per cent downside in the share price from previous close of Rs 721.15 per share.

Credit Card spending in July: Analysts at InCred Equities have maintained their high-conviction ‘Reduce’ rating on SBI Cards, setting a target price of Rs 500, as they continue to believe that SBI Card cannot sustain its premium valuation amid declining return ratios and a volatile asset quality trend. 

“We expect SBI Card to continue to lose market share in overall spending due to its weak capital adequacy ratio and tighter risk weights. We expect the cost of funds for SBI Card to increase, despite probable monetary easing, amid an increase in risk weights,” Jignesh Shial, Meghna Luthra and Rishabh Jogani of InCred Equities said in a note. The brokerage's target price translates into 30.7 per cent downside in the share price from previous close of Rs 721.15 per share.

 

The rating comes amid signs of green shoots in credit card spending. After a period of slow spending during the June quarter of financial year 2025 (Q1FY25), analysts at the brokerage noted that July 2024 saw a remarkable rebound, with credit card spending increasing approximately 8.7 per cent month-over-month to Rs 1.73 trillion. 

Credit card spending rebounded with online transactions surging 11 per cent month-over-month (M-o-M) and Point-of-Sale (PoS) transactions increasing 4.8 per cent M-o-M. Analysts anticipate that this positive trend will continue, driven by strong consumer demand for durable goods as the festive season approaches.

“The reversal was led by the rise in online spending (over 11 per cent M-o-M) aiding growth for ICICI Bank and Axis Bank while HDFC Bank and SBI Card shed market share,” InCred Equities said in a note.

Overall, credit card spending growth remains robust, analysts said. ICICI Bank saw a 80 basis point month-over-month increase in market share, reaching 20 per cent, while SBI Card and HDFC Bank witnessed declines of 30 and 40 basis points, respectively, bringing their shares to 15.6 per cent and 25.7 per cent. 

Axis Bank also improved its market share by 70 basis points, driven by its strong online performance. Among other players, IndusInd Bank saw a slight decline of around 20 basis points to approximately 4.7 per cent, and Kotak Mahindra Bank's share fell around 40 basis points to 4 per cent.

That said, the top five credit card issuers—HDFC Bank, SBI Card, ICICI Bank, Axis Bank, and IndusInd Bank—together hold a combined market share of approximately 77.8 per cent, up from 77.2 per cent in June 2024, analysts highlighted.

Credit card issuance trend

Meanwhile, the increased scrutiny from the Reserve Bank of India (RBI) has impacted new credit card issuances, which continue to grow slowly at about 70 basis points (M-o-M).

HDFC Bank, bucking the trend, has remained aggressive in card issuance. The total number of credit cards in force reached about 104.5 million, reflecting a 0.7 per cent month-over-month increase, largely driven by greater credit card penetration in Tier-II cities and beyond. 

HDFC Bank continued to lead in new card issuances, expanding its market share by approximately 23 basis points month-over-month to about 20.8 per cent. 

Similarly, ICICI Bank also increased its market share by 2 basis points to around 16.7 per cent. 

On the other hand, SBI Card saw a reduction of 4 basis points to 18.5 per cent. Kotak Mahindra Bank saw an 8 basis point decline in its market share due to the RBI's embargo on new card issuances imposed in April 2024.

Moreover, InCred Equities reported that online transactions captured 64 per cent of the overall spending in July 2024, up from 60 per cent in April 2024. This increase was attributed to the popularity of co-branded cards and the shift towards personalised offers. 

ICICI Bank, with its partnerships with Amazon Pay and MakeMyTrip, has particularly benefited, outperforming HDFC Bank and SBI Cards in online spending and thereby gaining market share. 

ICICI Bank's success is also linked to its cashback offers, which have bolstered spending both with and without equated monthly instalments (EMI) options. In contrast, HDFC Bank’s introduction of a fee for third-party app payments, such as through Cred, has likely contributed to its loss of market share.

Lastly, analysts at InCred Equities remain optimistic about the expansion of credit cards into new markets. However, they caution that the trend in non-performing assets could remain volatile, as issues such as mis-selling have historically impacted the sector.