Bandhan Bank shares plunge 9% as CEO retires; what’s ahead?

Shares of Bandhan Financial institution Ltd tanked 9 per cent in Monday’s commerce after its MD and CEO CS Ghosh resigned, a number of months earlier than the renewal of his tenure. The inventory fell 8.53 per cent to hit low of Rs 180.55 on BSE. The non-public lender had lately reported mortgage progress of 17.8 per cent YoY and deposit progress of 25.1 per cent YoY for the March quarter.

ICICI Securities mentioned the timing of the resignation is unlucky because the financial institution continues to be seeing elevated asset high quality stress whereas the 2 government administrators are pretty new to the financial institution.

“We consider the inventory value forward may tread divergently vs underlying enterprise or monetary efficiency till extra
readability emerges on MD & CEO succession. We’ve got put Bandhan Financial institution’s score and goal value under-review till additional readability,” the home brokerage mentioned.

There’s an anxiousness over the abrupt exit and clarifications are unlikely to assist the non-public lender, mentioned Kotak Institutional Equities which famous that such abrupt modifications usually are not new to the banking sector. Ujjivan SFB, RBL Financial institution Ltd, YES Financial institution Ltd and South Indian Financial institution, have seen exits previously.

Kotak mentioned the outcomes in every previous scenario had been totally different, and never occasion was an consequence of poor lending.

The discomforting scenario in Bandhan Financial institution’s case, nonetheless, has been the timing — with the approval for renewal pending solely with the RBI— and, maybe, higher succession planning would have been an appropriate consequence, it mentioned.

“The financial institution is but to completely overcome the asset-quality points put up Covid, and the current impartial work initiated by CGFMU on the claims made by the financial institution is but to be accomplished,” Kotak mentioned.

Jefferies has downgraded Bandhan Financial institution to ‘Underperform’ with a goal of Rs 170. It has lowered its progress outlook and credit score price estimates for FY25-26 and minimize its earnings per share (EPS) estimates by 10-14 per cent.

Arihant Capital Markets mentioned Bandhan Financial institution could stay below stress due to large title exits . The home brokerage mentioned it will have ‘Purchase’ on the counter if there’s 10-15 per cent correction.

In his letter, Ghosh mentioned he has indicated an curiosity in working in a broader function on the group stage. Kotak mentioned the event is an surprising one, and it has in all probability are available at an inopportune time contemplating that the financial institution is but to completely emerge from challenges on asset high quality and stability on the senior administration stage.

“We’ve got a constructive view in regards to the financial institution, however the present growth is probably to de-rate the financial institution from its present ranges,” Kotak mentioned.