Shares of RBL Bank tumbled 17% to ₹93 apiece on the BSE in Monday’s early deals after the appointment of the bank’s new managing director and chief executive officer (CEO), nearly six months after Vishwavir Ahuja stepped down from the position due to the RBI’s intervention.
The RBI has approved the appointment of Mr. R Subramaniakumar as Managing Director & CEO of the Bank for three years with effect from the date of his taking charge,” RBL Bank said in an exchange filing on Saturday, June 11, 2022.
The private sector lender on Saturday announced the appointment of veteran banker R Subramaniakumar as its new MD & CEO for three years.
Subramaniakumar is a veteran public sector banker with nearly four decades of experience. “Given his profile, he comes across as a troubleshooter with decent success at IOB/DHFL.
However, his selection as MD & CEO of a private bank, despite interim management’s assurance on asset quality and plans to reorient the bank on the path of growth, is a little surprising,” said analysts at brokerage Emkay in a note.
Last year in December, RBL’s then MD & CEO Vishwavir Ahuja went on indefinite leave. Executive director Rajeev Ahuja was appointed as the interim Managing Director & Chief Executive Officer.
Ahuja’s departure had come after the RBI appointed one of RBL’s chief general managers, Yogesh Dayal, on the lender’s board as an additional director.
In the past six months, the market price of the bank has more-than-halved (down 52 percent) against a 9 percent decline in the S&P BSE Sensex.
RBL Bank has faced multiple issues in the last couple of years on the growth front starting from the corporate book blow-up to the recent Covid impact on its microfinance institutions (MFI) and cards business.
What brokerage says
The brokerage believes that his selection by RBL and relatively swift approval by the RBI indicates possible RBI blessing throughout the process to bring stability & credibility to the bank and the new MD’s priority would be to improve portfolio quality, and strengthen compliance/risk management architecture and stabilize the bank.
Another leading brokerage, CLSA has downgraded RBL Bank stock to outperform from buying, with a target price of Rs 130, hinting at a 15 percent gain from its previous close of Rs 114.45.
“Leadership flux and liability are the key headwinds but the lender has a manageable asset quality. RBI has approved R Subramaniakumar as the new MD & CEO of the lender, despite the several questions,” it said.
Kotak Securities Maintains ‘rating suspended’ till better clarity on near-term strategy emerges. Concerns on growth strategy of the bank, employee retention and recovery in return ratios persist. Do not believe that there are any fresh asset quality concerns in the bank. Need to have more clarity on the construction of the loan mix, hiring plans, and normalization of RoE, before arriving at an investment thesis on the stock.
