RBL Bank shares slump up to 5%, Bajaj Finance down 1% after ending co-branded credit card partnership

Shares of Bajaj Finance as well as RBL Bank are witnessing traction in Monday's trade after the two entities have ended their 8-year long partnership for co-branded credit cards. In early trade, shares of the private lender RBL Bank fell up to 5 per cent to the day's low of Rs 147.55, while Bajaj Finance shares declined over 1 per cent to Rs 6,493 apiece.

As per the agreement, the 2 entities shall hencemorth not issue new co-branded credit cards. Nevertheless, the previously issue cards will continue to function without any changes.

Zee Business research inputs state that Bajaj Finserv co-branded cards account for 41 per cent of the total cards issued by the private lender RBL Bank.

Why the cessation of the RBL Bank- Bajaj Finance co-branded credit card deal?

The apex lender Reserve Bank of India has raised concerns over co-branded cards. Further as per inputs, NBFCs would be mandatorily required to get RBI approval every 2 years for the co-branded cards.

Furthermore, the bank is focussing on direct channel and new partnerships in the segment and Bajaj Finance is not part of its new strategy. Bajaj Finserv's co-branded cards accounted for 25-30 per cent of monthly card issuance and the bank aims to take only 10-15 per cent from individual co-branded partners.

Brokerage's view on the development

The global brokerage is bearish on the private sector lender and maintains an underweight call with the target of Rs 180 per share. The brokerage highlighted that the Bajaj Finance accounts for the big channel for the lender's credit card business and in the medium term, its credit card market share will be impacted.

Meanwhile. for Bajaj Finance- Jefferies has continued with its 'buy' stance with a target of Rs 8,400 per share. The brokerage stated that medium-term earnings impact to be limited. Also, it sees limited risk in Flexi-loan book operations.

Improvement in asset quality & smooth succession key to re-rating, added the brokerage.

Another brokerage Morgan Stanley is overweight on the counter with a target of Rs 9,000 per share.