However, RBL Bank also clarified that it has reduced the dependence on co-branded credit cards from Bajaj Finance, a number which fell to 37,000 this September, compared to 1.26 lakh in September last year.
RBL Bank has also launched co-branded credit cards with M&M Finance, Indian Oil, IRCTC and TVS Finance.
So how will this move impact both the stocks?
Morgan Stanley believes that the move could constrain RBL Bank’s potential credit card market share over the medium term and that this is a net negative for the medium-term earnings growth overall.
The brokerage also said that the earnings outlook is tough, particularly due to challenges in the MFI Segment and as a result, while valuations at 0.6 times price-to-book are cheap, it does not look attractive overall.
Morgan Stanley has an “underweight” rating on RBL Bank with a price target of ₹180.
Investec believes that it expects RBL Bank’s credit growth to moderate by 200 basis points in financial year 2025, with a corresponding decline in Net Interest Income, leading to a downgrade to estimates. It only sees a revival in growth from the second half of financial year 2026.
The brokerage maintained its “hold” rating on the stock but cut its price target to ₹170 from ₹230 earlier.
On the flip side, Citi has a “buy” rating on RBL Bank with a ₹255 price target. It said that the earnings impact will be determined by how RBL Bank is able to transition the lost partnership business to direct sourcing and scaling up of its new partnerships.
For Bajaj Finance, Citi expects an earnings impact between 1% to 1.2%, assuming a Return on Assets (RoA) on co-branded credit card portfolio. It also believes that this makes the case relatively stronger for Bajaj Finance to reapply for a credit card license.
Citi also has a “buy” rating on Bajaj Finance with a price target of ₹8,150.
Jefferies said that the move reflects reduced scope of work to just origination and asset quality concerns on the mass market credit card segment.
However, the move may have a limited impact for Bajaj Finance as the loss on origination fee may be partly made up by lower costs, whiile trail or use-based fees will continue.
Shares of Bajaj Finance are down 10% so far in 2024, while those of RBL Bank have already declined 46% so far this year.
