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Bandhan Bank’s entry into credit cards has received a warm response from the Street. The stock is up about 4.5% in the past two trading sessions after the lender launched four Mastercard variants on Tuesday. The timing is favourable. Credit growth in the banking industry has accelerated sharply, while unsecured lending is showing signs of recovery after the RBI’s 2023 tightening moderated growth. De-risking core Meanwhile, secured advances have risen to 56.8% of the book from 52.1% a year ago and are reportedly targeted at 60% of the book eventually. Bandhan’s credit-card, or unsecured, foray represents a parallel move: de-risking the core loan book while selectively adding higher-yielding retail products such as credit cards. The improvement in asset quality over recent quarters makes the latter easier to contemplate. Credit cost has halved year-on-year to 1.8% in Q1FY27, with management’s FY27 guidance of 1.6-1.8% leaving the door open for further improvement. Gross non-performing assets (NPA) have fallen to 3.1% from 5% in Q1FY26. Spending question But industry growth has been driven by issuances, not spending. In July, transaction volumes rose 24.5% year-on-year, more than three times the growth in spends. Average transaction value fell nearly 14% to around ₹3,440, as per ICICI Securities. Bandhan’s 32 million customer franchise can provide a ready customer base for its new cards business. Taking cues from SBI Cards’ 150-200 million addressable credit-card customer base on the bank’s 530 million customer base, Bandhan can target around 10 million credit-card customers. But that would be an aspirational target, given SBI’s much larger customer base and wider distribution network. The bigger challenge is competition for active, high-spending customers who do not require compromising underwriting standards. At 0.9 times FY28 estimated book value, per Bloomberg consensus, spending per card, customer-acquisition costs and unsecured credit risk remain key monitorables.
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