Top Picks for 2023: IDBI Capital is bullish on these BFSI stocks with buy ratings

As the total number of credit cards used continued to grow on November 22nd and reached 80.7 million, up 19.4% YoY and 1.6% MoM, brokerage firm IDBI Capital is bullish on the sector. Banking, Financial Services and Insurance (BFSI).

The brokerage firm’s research analysts said in a note that “Total Credit Cards in effect continued their upward journey throughout November 22 and reached around 80.7 million (up 19, 4% year-on-year and 1.6% month-on-month). Net additional tokens for the month were 1.3 million (compared to 1.7 million on October 22). Big players like SBI (+3.9 lakh), HDFC Bank (+2.4 lakh), Axis Bank (+2.1 lakh) continue to not add new cards on a net basis, however ICICI (-1 ,1 lakh) saw a drop on November 22. Spending by Credit Card continued to surpass the 1 trillion mark for the 9th consecutive month and reached about 1.2 trillion on November 22 (up 29% y/y and down 11.2% month on month) ). The trading volume slowed down on Nov 22 and was at around 236 million (down 8% month-on-month on Nov 22 vs up 4.0% on Oct 22). Going forward, we expect card spending to decline further over the next few months as the holiday season ends and inflation hits consumer spending.”

IDBI Capital’s Top BFSI Stock Picks

Bank Rating Target price in Rs.
HDFC Bank BUYING 1,860
shaft bank BUYING 1.120
federal bank BUYING 151
indusind bank BUYING 1,450
City Union Bank. BUYING 230
NBFC Rating Target price in Rs.
Cholamandalam investment BUYING 840
Finance Manappuram BUYING 140
Finance Muthoot ORGANIZATION 1,250
HFC Rating Target price in Rs.
Repco . Family Finance BUYING 300
Source: Company; IDBI Capital Research

Commenting on the key industry highlights, the analysts said “Credit cards in effect grew at a CAGR of about 18.3% (last 5 years) on November 22 and at 14 .0% CAGR (last 3 years) while card spending increased at a CAGR of about 23.8% (last 5 years) and about 23.9% CAGR (last 3 years). HDFC Bank is planning to issue around 1 million new credit cards each month and will announce partnerships across industries from online retail to food delivery in the coming weeks to boost spending on cards. ICICI banks have digitized their entire credit card journey, reducing processing times for Existing Customers (30 seconds) and NTB Customers (30 minutes). Approximately 36% of payment (credit card) journeys are completed within 30 minutes. ICICI Bank has leveraged technology to provide instant credit to customers for credit card disputes and other matters.”

They added that “Union Bank of India is expected to double their outstanding credit card portfolio (currently around 5.5 lakh) by the end of March 23. net additions to credit card balances in effect have seen a downward trend and were at around 1.3 million on November 22 compared to a net addition of 1.7 million on October 22 Big players like SBI (3.9 lakhs), HDFC Bank (2.4 lakhs), Axis Bank (2.1 lakhs), Kotak Mahindra Bank (0.8 lakhs) have added new net positive cards to their existing portfolio of outstanding cards. Among the top 5 players, ICICI bank saw a net negative addition of credit cards in November 22nd. The number of outstanding credit cards of ICICI Bank decreased from 13.5 million on October 22 to 13.4 million on November 22 (net 1.1 lakh cards added). Compared to the previous month, SBI saw its market share of credit card outstanding increase by 17 percentage points (from 19.1% on October 22 to 19.3% on November 22) while banks ICICI and HDFC saw its market share decline by around 41 basis points and 4 basis points, respectively. Credit Card spending per card in the E-Com platform is at around Rs 8,495 (compared to 9,473 on Oct 22) compared to Debit Card spending at Rs. 190 Cards on November 22 (compared to 219 on October 22).”

Disclaimer: The views and recommendations given above are those of individual analysts or brokerage firms, not those of Mint.

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