The Zhitong Finance App learned that the China Merchants Securities Bank team published a research report detailing the development status, profit model and market pattern of the US credit card industry. The team believes that in the future, China's credit card business has already entered the silver era, and more attention will be paid to intensive cultivation. Looking at the medium to long term, we expect the compound growth rate of domestic credit card loans to be around 5%. The era of high growth will no longer be there. The competitive advantage of banks with stock advantages will easily continue. Focus on listed banks with good credit card business development, such as CMB, Ping An, and Societe Generale.

The development of the credit card industry in the US has gone through three stages, and has been in a period of steady development for the past 20 years. In 1950-1958, the credit card business sprang up in the US; from 1958 to the end of the 20th century, the US credit card industry developed rapidly; since the end of the 20th century, the growth of the US credit card industry has slowed, and regulations have been gradually improved. Over the past 20 years, the US credit card market has been developing steadily. The balance of credit card loans in the US in 22Q3 was US$925 billion, which declined in stages after the 2008 financial crisis and during the pandemic.

VISA leads credit card organizations, and J.P. Morgan leads card issuers. The four major credit card organizations in the US credit card industry are American Express, Discover, MasterCard, and Visa. VISA is the leading card organization, with a market share of close to 40%. Meanwhile, J.P. Morgan is the largest credit card issuer in the US. At the end of 2021, credit card loans reached 154.3 billion US dollars, ranking first in market share.

The revenue structure of credit card businesses in China and the US is similar. The main income from the US credit card business is interest income, payment processing fees, and usage fees. Interest income makes up the majority of credit card revenue, and US credit card payment fees are equivalent to merchant rebates in Chinese credit card revenue; usage fees are comprised of annual fees, late fees, and transfer fees. The cost of a credit card business in the US is similar to that in China. It mainly consists of capital costs, credit risk costs, operating costs, marketing costs, and compliance costs.

Before 2018, China's credit card industry grew rapidly; since 2018, China's credit card market growth has slowed and competition has intensified. Since the beginning of 2018, the growth rate of credit card loans in China has declined markedly. The growth rate of credit card loans in 21Q1 has declined again after recovering. The year-on-year growth rate of credit card loans in 22Q3 is only 4.3%. At the end of 2021, 800 million credit cards were issued, an increase of 2.8% over the previous year. China's credit card business is in the silver age. Taking into account population decline and increasing penetration rate, etc., there is still room for credit card loans to double in the medium to long term, but the compound growth rate may be around 5%. China's credit card market has moved from “racing and roving” to “intensive cultivation.”

Investment advice: Focus on banks with advantages in credit card business. Interest rates on US credit card loans have been higher than 10% for a long time, which is a powerful weapon for bank operations to withstand low interest rates. Looking at the medium to long term, we expect a compound growth rate of around 5% for domestic credit card loans. The era of high growth will no longer exist. The competitive advantage of banks with stock advantages will easily continue. Focus on listed banks with good credit card business development such as CMB (03968,600036.SH), Ping An (000001.SZ), and Societe Generale (601166.SH).