RBL Bank shares tank on Bajaj Finance co-branded card decision; here are stock price targets

Shares of RBL Bank Ltd tanked 4 per cent in Monday’s trade after the bank said it has entered into a mutual agreement with its co-branded credit card partner, Bajaj Finance Ltd, to stop issuance of new co-branded credit cards under the partnership. The key reasons it gave was the fact that Bajaj Finance was looking forward to exiting the co-branded credit card business line segment in totality.

RBL shares fell 4.06 per cent to Rs 148.70 on BSE, taking its year-to-date fall to 47.71 per cent. Analysts noted the bank has decided to go slow in terms of new card issuance — down from around 2-2.5 lakh new cards per month to around 1 lakh per month. This made the new Bajaj Finance co-branded credit card origination less economically, said Nirmal Bang Institutional Equities.

“Loan growth in near term will be impacted and so we have cut our loan growth estimate for FY25E from 15.4 per cent earlier to 13.2 per cent. With increased reliance on direct sourcing, the overall origination costs are expected to see some increase. In the long-term, attrition of customers currently having BFL-RBL Bank co-branded credit cards will be a monitorable,” the brokerage said.

The brokerage has cut its RBL Bank earnings estimates for FY25, FY26 and FY27 by 2.4 per cent, 3.4 per cent and 3.3 per cent, respectively. “In the long term however, we expect RoA and RoE to improve to 1.2 per cent and 13.1 per cent in FY27 on assumption of loan and earnings CAGRs of 15.5 per cent and 27.2 per cent over FY24-FY27E, improving cost ratios and credit costs,” Nirmal Bang said.

MOFSL said RBL Bank has made significant progress in building its credit card business over the years. The decision to end the partnership and reduce its reliance on BFL is a part of the bank’s effort to grow its business via a higher mix of direct channels as well as newer partnerships so as to have a more diversified sourcing base, it said.

“The bank does not anticipate any significant impact on profitability due to this decision and has guided to grow the card business at 10-15 per cent as it aims to recover the lost volumes by 4QFY25 itself. The management suggested that the bank is witnessing improved asset quality in this business and expects normalization in the coming quarters. We moderate our growth and margin estimates and resultantly cut our FY25/26E PAT estimates by 5 per cent/15 per cent,” MOFSL said.

This brokerage maintained ‘Neutral’ on the stock with a revised target price of Rs 170.

Nirmal Bang valued RBL Bank at 0.6 times September 2026E adjusted book value (ABV) against 0.75 times September 2026E ABV earlier, deriving a target price of Rs 174 against Rs 219 earlier.

Morgan Stanley has reportedly suggested a target price of Rs 180. It suggested that Bajaj Finance was a sizeable channel for RBL Bank in terms of credit card issuance and the fresh move may constrain RBL’s potential credit card market share over medium term. Investec reportedly suggested a target of Rs 170. It sees the headline credit growth to ease 200 basis points to 13-14 per cent YoY in FY25.