RBL Bank Shares Dropped ~5% After Termination of Co-Branded Credit Card Partnership

On December 02, 2024, RBL Bank’s shares fell as much as 5% in early trading. The decline followed the bank’s announcement on Friday that it had decided to mutually end its co-branded credit card partnership with Bajaj Finance.

Background of the Partnership

RBL Bank and Bajaj Finance entered into the co-branded credit card partnership in November 2016, with the first card launched in the March quarter of the 2017 financial year. Over the years, this collaboration became a significant part of RBL Bank’s credit card offerings.

In its statement on Friday, RBL Bank assured investors that it would continue servicing the existing portfolio of nearly 3.4 million co-branded credit cards. However, the bank also noted a reduction in its reliance on this partnership. The bank’s dependence on Bajaj Finance fell dramatically, from 1.26 lakh in September last year to just 37,000 in September 2024. This suggests a diminishing role of the partnership in RBL Bank’s business.

RBL Bank revealed that as of now, 64% of its credit card origination comes from direct sales and other brand partners. In contrast, Bajaj Finance’s contribution has dropped from a range of 65%-70% 18 months ago to just 36% today.

At 09:48 AM on December 02, 2024, RBL Bank shares were trading at ₹149.95, having touched an intraday low of ₹147.55. The stock’s decline was attributed to the end of the partnership, raising concerns among investors about future growth prospects.

RBL Bank’s Financial Performance in 1HFY25

Despite the setback in its co-branded partnership, RBL Bank reported a solid financial performance for the first half of FY25. The bank’s Net Interest Income (NII) grew 14% year-on-year (YoY) to ₹3,315 crore, with a Net Interest Margin (NIM) of 5.35%.

Additionally, the bank’s operating profit surged 28% YoY to ₹1,769 crore, while Net Profit grew 2% YoY to ₹594 crore. RBL Bank’s total deposits rose 20% YoY to ₹1,07,959 crore, with its CASA (Current Account Savings Account) deposits growing 13% YoY to ₹36,224 crore. The CASA ratio stood at 33.6%.

RBL Bank also saw significant growth in its granular deposits, which represent deposits of less than ₹3 crore. These deposits grew 22% YoY and 4% quarter-on-quarter (QoQ) to ₹52,223 crore, making up 48.4% of the bank’s total deposits.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.