Private lender HDFC Bank issues record credit cards in third quarter

In the quarter gone by (Q3 of FY22), private lender HDFC Bank issued around 950,000 credit cards, its highest ever credit card issuance in any single quarter.

Since the Reserve Bank of India (RBI) revoked the embargo on it in August 2021 to issue new credit cards, the lender has issued 1.37 million credit cards. This is according to a senior bank executive, who was present in an analysts’ call after the lender’s Q3 earnings.

“In Q3, we achieved the highest ever issuance, with 950,000 card issuances. Since late August, when we recommenced issuing new cards, we have so far issued 1.37 million cards,” said Srinivasan Vaidyanathan, chi­ef financial officer (CFO), HDFC Bank, in the analyst call.

Since RBI allowed HDFC Bank to issue credit cards again, the lender had promised that it would come back with a bang in the market and look to regain its lost market share.

It had outlined a target of issuing about 300,000 cards per month following the lifting of the embargo. And beginning February, card issuances may touch 500,000 every month.

According to RBI data, at the end of August 2021, HDFC Bank’s outstanding credit card base stood at 14.74 million. And, the latest figures by the central bank show that HDFC Bank’s outstanding credit card base has grown to 15.54 million as of November 2021. The RBI has not released the data for December.

Meanwhile, the bank has seen a 24 per cent year-on-year (YoY) growth in credit card spends in the current quarter while debit card spends have grown by 14 per cent. “The spend growth reflects both increased customer engagement and improved economic environment from a consumption perspective,” said Vaidyanathan.

While the credit card spends have been robust, the credit limit utilisation has still not reached the pre-pandemic levels. Credit line utilisation is 0.8 times the pre-pandemic level.

“For card customers, the credit line utilisation is low. The spend levels are up 24 per cent and the interchange is quite robust with a good yield. But the credit line utilisation has much more to go to get back to the pre-pandemic levels,” Vaidyanathan said.

Until recently, the bank was following a conservative approach when it came to the credit limit. But it has reviewed the policy and gone back to business as usual subject to another Covid wave.

“Most of our card customers have liability relationships with us. At an aggregate level, the liability balances of the card customers were typically 4x in the pre-pandemic period and right now it is 5x, which means the customers are sitting on a good amount of deposit balances,” Vaidyanathan said.

The lender reported an 18 per cent jump in net profit in the October-December quarter (Q3 of FY22), aided by higher credit growth and lower provisions. Its profit after tax was to the tune of Rs 10,342.2 crore, in line with Street estimates, compared to Rs 8,758.29 crore in the corresponding quarter of the previous financial year (FY21).

Net interest income increased by 13 per cent to Rs 18,443.5 crore in Q3 of FY22 compared to Rs 16,317.6 crore in Q3 of FY21. Net interest margin stood at 4.1 per cent in the reporting quarter.

Asset quality of the lender improved sequentially with gross non-performing assets ratio (GNPAs) at 1.26 per cent in Q3 of FY22 compared to 1.35 per cent in the previous quarter.

“Covid restructuring has enabled our customers to tide over the uncertainty in the last few quarters. Initial indicators suggest that most of these customers are now positioned to resume their payment with minimal impact to overall quality of the advances,” he added.