HDFC sees lower credit card spend

Card metrics for March show slump, says UBS report

Private sector lender HDFC Bank, the largest issuer of credit cards in the country, is witnessing reduced credit card spending in March after a steady January and February.

“Credit card spends remained healthy in January-February 2020 but have reduced in March. [The] management is currently tightening the underwriting standards for the bank,” UBS Securities wrote in a note to its clients after a conference call with the HDFC Bank management.

“People have shifted to online spending; and food delivery and online spending have increased. But in the case of a complete lockdown, the management expects a decline in customer spending,” the report noted.

The spread of COVID-19 is impacting consumer demand with some States contemplating a complete lockdown. The Maharashtra government announced on Friday that all shops, private establishments and offices in Mumbai Metropolitan Region, Pune, Pimpri-Chinchwad and Nagpur will be closed from midnight till March 31, with the exception of banks, essential services and shops selling essential commodities.

The HDFC Bank management has said that the trends in unsecured retail asset quality are stable as 80% of the unsecured loans are to salaried employees.

The bank said the SME portfolio is well diversified — geographically and industry wise — and the bank does not expect significant impact on the asset quality.

“[About] 70-75% of SME loans are secured. The bank also has accounts of promoters and employees that helps the bank in tracking the health of SMEs. The bank has low exposure to airlines. It has limited exposure to restaurants and hospitality business but believes the situation is too early to comment upon,” the report said.

HDFC Bank expects a 50 bps rate cut in the next two quarters. The lender has recently reduced fixed deposit rates but not the savings interest rates.

“The asset-liability committee is likely to take a call on the same. While some States have directed government departments to keep deposits with PSU banks, the recent RBI advisory should offset any impact,” the report said.

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